{"id": "GAO-18-373T", "url": "https://www.gao.gov/products/GAO-18-373T", "title": "Commonwealth of the Northern Mariana Islands: Recent Economic Trends and Preliminary Observations on Workforce Data", "published_date": "2018-02-06T00:00:00", "released_date": "2018-02-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Pub. L. No. 110-229, enacted in 2008, amended the U.S.-CNMI covenant to apply federal immigration law to the CNMI after a transition period. The law required the Department of Homeland Security (DHS) to establish a temporary work permit program for foreign workers. DHS is required to decrease the number of permits issued annually, reducing them to zero by the end of the transition period, scheduled for December 31, 2019.", "To implement the law, DHS established a new work permit program in 2011. Under the program, foreign workers can obtain, through their employers, nonimmigrant CW-1 status that allows them to work in the CNMI. The law was amended in August 2017 to, among other things, restrict future permits for workers in construction and extraction occupations.", "Proposed legislation\u2014Senate bill S. 2325\u2014would, among other things, extend the transition period through December 31, 2029; increase the number of available permits from the 2018 level; and set required decreases in the annual numerical limit for the permits. (See figure for past numerical limits established by DHS and future limits proposed by S. 2325.)", "This testimony discusses (1) recent trends in the CNMI economy and (2) preliminary observations about the number of approved CW-1 permits and characteristics of permit holders, drawn from GAO's ongoing work. GAO updated information about the CNMI's economy that it reported in May 2017 (see GAO-17-437 ). GAO also analyzed data and documents from U.S. agencies and the CNMI government."]}, {"section_title": "What GAO Found", "paragraphs": ["The Commonwealth of the Northern Mariana Islands' (CNMI) inflation-adjusted gross domestic product (GDP) has grown each year since 2012, according to the Bureau of Economic Analysis. In 2016, the CNMI's GDP rose by 29 percent, partly as a result of construction investment. While tourism has fluctuated in recent years, visitor arrivals in the CNMI rose by nearly a third from 2016 to 2017. After nearly a decade of annual decline, the total number of workers employed in the CNMI increased from 2013 through 2016, according to the most recent available CNMI tax data. Foreign workers made up 53 percent of those employed in 2016, compared with roughly 75 percent in 2002.", "GAO's preliminary analysis indicates that the number of approved CNMI-Only Transitional Worker (CW-1) permits for foreign workers in the CNMI grew from over 7,100 for fiscal year 2012 to nearly 13,000 for fiscal year 2017. In addition, GAO identified trends in the country of birth, occupation, and employment duration of foreign workers with CW-1 permits approved for fiscal years 2012 through 2018. Workers born in the Philippines received the highest number of CW-1 permits each year. As of January 2018, 750 CW-1 permits had been granted to construction workers for fiscal year 2018\u2014a 75 percent decline from the prior fiscal year. GAO estimated that approximately 2,350 foreign workers with approved CW-1 permits maintained continuous employment in the CNMI from fiscal year 2014 through January 2018. About 80 percent of these workers were born in the Philippines."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss preliminary observations from  our ongoing review of workforce data on the Commonwealth of the  Northern Mariana Islands (CNMI).", "The 1976 covenant defining the political relationship between the CNMI  and the United States exempted the CNMI from certain federal  immigration laws but reserved the right of the U.S. government to apply  federal law in these exempted areas without the consent of the CNMI  government.", "The Consolidated Natural Resources Act of 2008 amended the U.S.\u2013 CNMI covenant to establish federal control of CNMI immigration  beginning in 2009. The act required, among other things, that the U.S.  Department of Homeland Security (DHS) establish a temporary work  permit program for foreign workers and decrease annually the number of  permits issued, reducing them to zero by the end of a transition period  now set to occur on December 31, 2019. This program enables foreign  workers to obtain, through their employers, CNMI-Only Transitional  Worker (CW-1) permits that allow them to work temporarily in the CNMI.  Senate bill S. 2325 would modify the law by, among other things,  extending the transition period by 10 years, or through December 31,  2029, and increasing the number of available permits from the fiscal year  2018 level.", "As we reported in May 2017, the CNMI\u2019s economy is dependent on  foreign labor. Although the number of foreign workers fell by nearly two  thirds\u2014from over 36,000 to fewer than 13,000\u2014in 2001 through 2015,  foreign workers represented the majority of the CNMI workforce in 2015.  We found that the number of unemployed domestic workers in the CNMI,  estimated at nearly 2,400 in 2016, was insufficient to replace the foreign  workers who had CW-1 permits. We estimated\u2014using the CNMI\u2019s 2015  gross domestic product (GDP) and workforce information\u2014that removing  all CW-1 workers by 2019 could reduce the CNMI\u2019s 2015 GDP by  between 26 and 62 percent.", "In my statement today, I will discuss (1) recent trends in the CNMI  economy and (2) preliminary observations about the number of approved  CW-1 permits and characteristics of permit holders from our ongoing work  for a forthcoming report.", "To identify recent trends in the CNMI economy, we analyzed data from  the U.S. Department of Commerce and the CNMI government. We  updated our prior analysis of CNMI GDP data for 2002 through 2015 with  GDP data for 2016. We added CNMI tourism data for 2017 to our prior  analysis of tourism data for 1990 through 2016. To show employment  trends, we updated our prior analysis of CNMI tax records for 2001  through 2015 with tax records for 2016. We determined that the data  used in our analyses were sufficiently reliable for our purposes.", "To provide preliminary observations on the numbers of CW-1 permits  granted for fiscal years 2012 through 2018 and characteristics of foreign  workers who held them, we analyzed record-level data for fiscal years  2012 through 2018 provided by DHS\u2019s U.S. Citizenship and Immigration  Services (USCIS), which administers the CNMI-Only Transitional Worker  program (CW program). According to USCIS officials, as of January 26,  2018, USCIS was continuing to adjudicate CW-1 petitions for fiscal year  2018. To determine the reliability of the data, we interviewed cognizant  USCIS officials in Washington, D.C., and at the USCIS California Service  Center, where petitions for CW-1 permits are adjudicated. We also  discussed our methodologies and assumptions for data processing and  the results of our preliminary analysis with officials in Washington, D.C.,  who used their own methodologies to conduct a technical review of our  tables showing numbers of permits approved and permit holders\u2019  countries of birth and occupations (see tables 2, 3, and 4). We also  conducted electronic testing of the data to identify and resolve  inconsistencies in personally identifiable information for permit holders, to  ensure accuracy in tracking these individuals over time. We determined  that the USCIS CW-1 permit data were sufficiently reliable for our  purposes.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Part of the Mariana Islands Archipelago, the CNMI is a chain of 14 islands  in the western Pacific Ocean, just north of Guam and about 3,200 miles  west of Hawaii. The CNMI has a total population of 53,890, according to  the CNMI\u2019s 2016 Household, Income, and Expenditures Survey. Almost  90 percent of the population (48,200) resided on the island of Saipan,  with an additional 6 percent (3,056) on the island of Tinian and 5 percent  (2,635) on the island of Rota."], "subsections": [{"section_title": "Application of Federal Immigration Laws to the CNMI", "paragraphs": ["The Consolidated Natural Resources Act of 2008 amended the U.S.\u2013 CNMI covenant to apply federal immigration law to the CNMI after a  transition period. To provide for an orderly transition from the CNMI  immigration system to the U.S. federal immigration system under the  immigration laws of the United States, DHS established the CW program  in 2011. Under the program, foreign workers are able to obtain, through  their employers, nonimmigrant CW-1 status that allows them to work in  the CNMI for up to a year.", "The Consolidated Natural Resources Act of 2008 requires DHS to  annually reduce the number of CW-1 permits until the number reaches  zero by the end of the transition period. The act was amended in  December 2014 to extend the transition period through December 31,  2019. The act was further amended in August 2017 to, among other  things, (1) add 350 CW-1 permits to the fiscal year 2017 cap; (2) restrict  future permits for workers in construction and extraction occupations;  and (3) increase the CNMI education funding fee that employers must  pay for each permit from $150 to $200.", "DHS determines the annual cap on CW-1 permits and the terms and  conditions of the CW program. In November 2017, DHS set the cap for  CW-1 permits for fiscal year 2018 through the end of the program (see  table 1)."], "subsections": []}, {"section_title": "Proposed Legislative Changes Affecting the CW Program", "paragraphs": ["The proposed bill, the Northern Mariana Islands U.S. Workforce Act  (S. 2325), includes the following provisions, among others, that would  affect the CW program: (1) the number of permits to be allocated each  year, (2) the distribution of the permits, and (3) a new CW-3 worker  designation."], "subsections": [{"section_title": "Number of Permits Allocated", "paragraphs": ["Under the terms of S. 2325, the number of permits issued may not  exceed 13,000 during fiscal year 2019. Starting in fiscal year 2020, the  number of permits issued may not exceed a number that is 500 fewer  than the number issued during the immediately preceding fiscal year.", "Figure 1 shows the past and future numerical limits on CNMI-Only  Transitional Worker permits established by DHS and the proposed  numerical limits for permits under S. 2325. The limits shown for S. 2325 in  figure 1 assume that employers would petition for, and DHS would issue,  the maximum number of available permits for fiscal year 2019 and for  each subsequent year."], "subsections": []}]}, {"section_title": "Distribution of Permits", "paragraphs": ["Under S. 2325, as under the current law, a permit for construction and  extraction occupations would be issued only to extend a permit that was  first issued before October 1, 2015. Also, S. 2325 would require the  Secretary of Homeland Security to consider, in good faith, any comments  or advice submitted by the CNMI governor, including any  recommendation to reserve a number of permits each year for  occupational categories necessary to maintain public health or safety in  the commonwealth."], "subsections": []}, {"section_title": "CW-3 Permits", "paragraphs": ["S. 2325 proposes a new CW-3 worker designation. Foreign workers who  are otherwise admissible would be eligible for CW-3 permits if they were  admitted to the CNMI as CW-1 workers during fiscal year 2014 and every  subsequent fiscal year beginning before the date of the enactment of  S. 2325. These workers would receive a permit to remain in the CNMI for  a 3-year period beginning on the date of S. 2325\u2019s enactment. CW-3  permits could be renewed in 3-year increments during the transition  period for workers who remain outside the United States for a continuous  period of not less than 30 days during the 180-day period immediately  preceding each such renewal. CW-3 permits would count against the  numerical caps specified in S. 2325."], "subsections": []}]}, {"section_title": "Recent Trends in the the CNMI Economy", "paragraphs": ["The CNMI\u2019s inflation-adjusted gross domestic product (GDP) has grown  each year since 2012. The U.S. Department of Commerce\u2019s Bureau of  Economic Analysis (BEA) estimates that the CNMI\u2019s GDP increased by  almost 29 percent in 2016 after increasing by about 4 percent in 2015.  BEA attributes this economic growth to a significant increase in visitor  spending, particularly for casino gambling, and investment in the  construction of a casino resort in Saipan and other hotel construction.  Figure 2 shows the casino\u2019s development site in Saipan before and  during construction. The new casino opened for business on July 6, 2017."], "subsections": [{"section_title": "CNMI Tourism Trends", "paragraphs": ["Since 1990, the CNMI\u2019s tourism market has experienced considerable  fluctuation, as evidenced by total annual visitor arrivals (see fig. 3). Visitor  arrivals to the CNMI declined from a peak of 726,690 in fiscal year 1997  to a low of 338,106 in fiscal year 2011, or by 53 percent. However, since  2011, visitor arrivals have nearly doubled, reaching 653,150 in fiscal year  2017, and increased by 30 percent from 2016 to 2017.", "Data from the Marianas Visitors Authority show that the downward trend  in Japanese arrivals from 2013 to 2017 was offset by the growth in  arrivals from China and South Korea. While eligible Japanese and South  Korean visitors enter the CNMI under the U.S. visa waiver program,  Chinese visitors are not eligible for the program and are allowed to be  temporarily present in the CNMI under DHS\u2019s discretionary parole  authority, according to DHS officials. DHS exercises parole authority to  allow, on a case-by-case basis, eligible nationals of China to enter the  CNMI temporarily as tourists when there is significant public benefit,  according to DHS."], "subsections": []}, {"section_title": "CNMI Labor Market", "paragraphs": ["Following consecutive annual decreases in the total number of employed  workers from 2005 through 2013, employment has increased annually  since 2014, according to CNMI tax data. Figure 4 shows the numbers of  employed workers, both foreign and domestic, in the CNMI from 2001  through 2016. From 2013 to 2016, the number of employed workers  increased by approximately 25 percent, from 23,344 to 29,215.", "As figure 4 shows, while the number and percentage of foreign workers  fell between 2001 and 2016, foreign workers still constitute the majority of  the CNMI workforce. Of the nearly 30,000 employed workers in the CNMI  in 2016, more than half were foreign workers, according to CNMI tax  data. The number of foreign workers fell from a peak of over 38,000 in  2002\u2014roughly 75 percent of employed workers\u2014to fewer than 16,000 in  2016. In contrast, since 2002, the number of domestic workers has  fluctuated from year to year, ranging from about 10,500 to almost 13,700,  but increased by 28 percent from 2013 to 2016."], "subsections": []}]}, {"section_title": "Preliminary Observations on CW- 1 Permits for Fiscal Years 2012-2018", "paragraphs": [], "subsections": [{"section_title": "Numbers of CW-1 Permits", "paragraphs": ["The CNMI economy continues to experience growing demand for  workers. In fiscal years 2012 through 2016, the number of CW-1 permits  almost doubled, and since fiscal year 2016, the number of permits has  approached the numerical limits on permits for those years. Our  preliminary analysis indicates that the number of approved CW-1 permits  grew from 7,127 in fiscal year 2012 to more than 13,000 in fiscal year  2016. On October 14, 2016\u20142 weeks into fiscal year 2017\u2014USCIS  announced that it had received enough petitions to reach the CW-1 cap  for fiscal year 2017 and would not accept requests for new permits for  that year during the remaining 11 months. In May 2017, USCIS  announced that it had received a sufficient number of petitions to reach  the CW-1 cap for fiscal year 2018. Table 2 shows the CW-1 permit caps  and numbers of permits approved for fiscal years 2012 through 2018.", "According to USCIS officials, as of January 26, 2018, fiscal year 2018  petitions were still being adjudicated."], "subsections": []}, {"section_title": "Characteristics of Foreign Workers with CW-1 Permits", "paragraphs": ["Our preliminary analysis of USCIS CW-1 permit data for fiscal years 2012  through 2018 identified trends in CW-1 workers\u2019 country of birth,  occupation, and duration of employment."], "subsections": [{"section_title": "Country of Birth", "paragraphs": ["USCIS data showed a decline in the numbers of CW-1 permits for fiscal  years 2017 through 2018 for workers born in each of the five countries  listed most frequently on the petitions\u2014the Philippines, China, South  Korea, Bangladesh, and Japan (see table 3). As of January 17, 2018, the  number of permits approved for workers born in the Philippines, who  received the most permits for all 7 years of the CW program, had declined  by 13 percent from fiscal year 2017 to fiscal year 2018 and by 26 percent  from fiscal year 2015 to fiscal year 2018. Concurrent with construction of  the casino and other tourism infrastructure, the number of CW-1 permits  for workers born in China increased by almost 3,800 from fiscal year 2015  to fiscal year 2016 and declined by about 3,500 from fiscal year 2017 to  fiscal year 2018.", "Our preliminary analysis indicates that as of January 17, 2018, USCIS  had approved 750 CW-1 permits for construction workers for fiscal year  2018. This number represents a 75 percent decline from the nearly  3,000 permits approved for fiscal year 2017 (see table 4). This decline  reflects new restrictions on future permits for workers in construction  occupations.", "Of the 8,228 foreign workers who had been granted fiscal year 2018  permits as of January 17, 2018, 2,352 had maintained continuous  employment in the CNMI since fiscal year 2014 (see table 5).", "Of the 2,352 workers with continuous employment in fiscal years 2014  through 2018, 1,905 workers (81 percent) were born in the Philippines.", "Chairman Murkowski, Ranking Member Cantwell, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions you may have at this time."], "subsections": []}]}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For further information regarding this statement, please contact David  Gootnick, Director, International Affairs and Trade at (202) 512-3149 or  gootnickd@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Individuals making key contributions to this testimony included  Emil Friberg (Assistant Director), Julia Ann Roberts (Analyst-in-Charge),  Sada Aksartova, Andrew Kurtzman, Reid Lowe, Moon Parks, and John  Yee. Technical support was provided by Chris Keblitis, Mary Moutsos,  and Alexander Welsh.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The Department of Homeland Security issues temporary work permits to eligible foreign workers in the Commonwealth of the Northern Mariana Islands. Current U.S. law requires DHS to set annual limits on the number of permits it issues and to stop issuing them by the end of calendar year 2019. Proposed legislation would make the permits available through the end of calendar year 2029.", "We testified that the Commonwealth's economy relies on foreign workers\u2014they made up 53% of all workers in 2016\u2014and demand for these workers continues to rise. In 2016 and 2017, DHS issued about as many permits as the limits allowed."]}
{"id": "GAO-18-461", "url": "https://www.gao.gov/products/GAO-18-461", "title": "Interstate Pipeline Inspections: Additional Planning Could Help DOT Determine Appropriate Level of State Participation", "published_date": "2018-05-29T00:00:00", "released_date": "2018-05-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["PHMSA oversees the safety of interstate and intrastate natural gas and hazardous liquid pipelines. PHMSA certifies states to oversee intrastate pipelines, and some states also act as PHMSA's \u201cagents\u201d to supplement the federal inspection workforce for interstate pipelines. In recent years PHMSA has signaled a move away from using interstate agent agreements. Recent funding increases have enabled PHMSA to hire additional federal inspectors. States may receive annual grants to reimburse up to 80 percent of the cost of their pipeline safety activities.", "Congress included a provision in statute for GAO to review the federal and state responsibilities and resources used to inspect interstate pipelines. This report addresses (1) how state participation has affected interstate pipeline oversight and (2) PHMSA's assessment of the resources needed to conduct interstate pipeline inspections. GAO reviewed relevant laws and PHMSA guidance on state participation in these inspections; analyzed the most recent 6 years of PHMSA funding and inspector staffing data; and interviewed pipeline safety officials from PHMSA and 22 states selected based on level of participation in interstate inspections."]}, {"section_title": "What GAO Found", "paragraphs": ["State involvement in interstate pipeline inspections can enhance oversight, although the three types of agreements that the Pipeline and Hazardous Materials Safety Administration (PHMSA) uses to allow state participation are not used extensively. Annual interstate agent agreements \u2014held by 9 states\u2014allow states to participate in all inspection activities and can bolster interstate pipeline oversight. For instance, an inspection conducted in 2014 by New York state officials led to $61,900 in federal civil penalties. Temporary interstate agreements \u2014used in 6 states to date\u2014allow PHMSA to request states to participate in specific interstate pipeline inspections. PHMSA officials said these agreements provide the agency greater flexibility. Some current interstate agents GAO interviewed said that temporary interstate agreements are useful, but are not substitutes for interstate agent status because states do not participate in the full range of inspections. Finally, PHMSA as authorized by federal law recently established joint inspections allowing states to request to participate in interstate inspections. However, state officials were concerned that their role is limited and that they must bear the full cost to participate. PHMSA officials said they intend to clarify the state inspector role in joint inspections and acknowledged that federal grants cannot be used by states to support joint inspection activities.", "PHMSA allocated recently hired inspectors based on regional workload, but has not assessed future resource needs. From fiscal years 2012 to 2017, PHMSA's appropriations increased over 40 percent, allowing the agency to expand its inspector workforce by about 25 percent. PHMSA allocated the additional inspectors across the agency's five regions based on workload. For example, PHMSA's central region received a greater percentage of inspectors than other regions to help oversee a number of new pipeline construction projects. However, PHMSA has not planned for future workforce needs for interstate pipeline inspections. In particular, it has not assessed the resources and benefits that states can provide through the three types of agreements. Leading practices for workforce planning indicate that such forward-looking analyses are essential for effective workforce planning. Without such analyses, PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective oversight of interstate pipelines."]}, {"section_title": "What GAO Recommends", "paragraphs": ["PHMSA should develop a workforce plan for interstate pipeline inspections, considering, among other things, the additional resources and safety oversight that state pipeline officials can provide. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. energy pipeline network is composed of over 2.7 million miles of  pipeline transporting gas, oil, and other hazardous liquids both within  states (intrastate) and from one state to another (interstate). Inspections  of pipeline operator programs and facilities are key oversight activities at  both the federal and state level. At the federal level, the Pipeline and  Hazardous Materials Safety Administration (PHMSA) is responsible for  developing safety-related regulations for these pipelines. In general,  PHMSA conducts inspections and enforces regulations for interstate  pipelines, while certified states generally oversee intrastate pipelines.  Historically, PHMSA has also entered into agreements with some state  pipeline safety offices to act as \u201cagents\u201d to supplement the federal  inspection workforce for interstate pipelines. Over the years, however, the  number of interstate agents has declined from 22 in 1973 to 9 today. In  recent years, PHMSA has not accepted additional applications for  interstate agent agreements and has signaled a move away from these  agreements. Instead, PHMSA has introduced other means of participation  for states interested in pursuing an interstate agreement.", "The Protecting our Infrastructure of Pipelines and Enhancing Safety Act  of 2016 included a provision that GAO assess and report on the  resources used in carrying out interstate pipeline safety agreements.  This report examines (1) how state participation has affected interstate  pipeline oversight and (2) PHMSA\u2019s assessment of the resources it needs  to conduct future interstate pipeline inspections.", "To address both objectives, we reviewed relevant statutes, literature  related to pipeline safety agreements and PHMSA guidance on state  participation. To determine the effects of state participation in interstate  pipeline oversight, we interviewed officials from PHMSA headquarters  and 5 regional offices and 22 state pipeline safety offices. (See table 1).  For our sample, we selected the following:  Our interviews provide a range of views, but are not generalizable across  all state pipeline safety offices.", "To analyze PHMSA\u2019s assessments of interstate pipeline inspection  resources needed, we obtained information on PHMSA\u2019s appropriations  and inspector staffing levels for fiscal years 2012 through 2017. We  interviewed PHMSA officials on their data collection and verification  procedures and based on these steps determined the data was reliable  for our purposes. We also interviewed PHMSA officials about the  agency\u2019s staffing allocation analyses on inspection staff required to  conduct interstate pipeline inspections. We assessed the extent to which  PHMSA\u2019s inspector staffing activities and processes met leading  practices for workforce planning that we have identified in our prior work.", "We conducted this performance audit from June 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The U.S. pipeline network includes both interstate and intrastate  pipelines, the vast majority of which fall into the latter category:  Interstate pipelines: Interstate pipelines are primarily large-volume  transmission pipelines that carry gas or hazardous liquid\u2013sometimes  over hundreds of miles\u2014to communities and large-volume users  (e.g., factories). At the start of 2017, there were about 340,000 miles  of interstate transmission pipelines nationwide. Newly tapped  domestic gas and oil deposits have resulted in an increase in the  existing pipeline infrastructure to transport natural gas and oil.", "Intrastate pipelines: Intrastate pipelines are primarily composed of gas  distribution and some transmission pipelines that transport natural gas  pipelines to residential, commercial, and industrial customers. As of  2015, there were about 2.2 million miles of distribution pipelines  nationwide. In addition, an estimated 18,000 miles of federally  regulated gathering pipelines carry natural gas or hazardous liquids  from production areas to processing facilities where the product is  refined before continuing in transmission pipelines.", "At the federal level, PHMSA is responsible for developing regulations for  domestic interstate and intrastate natural gas and hazardous liquid  pipelines. Its regulatory programs are focused on ensuring safety in the  design, construction, operation, and maintenance of pipelines. Inspectors  from PHMSA\u2019s five regional offices and states are responsible for  inspecting nearly 3,000 companies that operate 2.7 million miles of  pipelines.", "Each year, PHMSA uses its Risk Ranking Index Model (RRIM) as one  input to determine its annual inspection priorities. RRIM categorizes each  of the nation\u2019s pipeline systems regulated by PHMSA into high, medium,  and low-risk tiers. Pipeline risk are proposedbased on a combination of  categories, such as the type of pipeline material and time since last  inspection. PHMSA\u2019s guidance specifies that high-risk pipelines should be  inspected at least once every 3 years, medium-risk pipelines every 5  years, and low-risk pipelines every 7 years. PHMSA\u2019s goal each year is to  inspect, at a minimum, pipeline systems where the time since last  inspection meets or exceeds the PHMSA guidance for the tier.", "Under federal pipeline safety laws, states may assume inspection and  enforcement responsibilities for intrastate gas and hazardous liquid  pipelines, which are primarily natural gas distribution pipelines. States  assume that responsibility by annually certifying their state pipeline safety  program to PHMSA, which PHMSA must validate. As part of a state\u2019s  certification, states must establish pipeline laws similar to federal pipeline  safety regulations for intrastate pipelines, but may also impose more  stringent pipeline safety regulations. PHMSA reimburses certified state  agencies up to 80 percent of the total cost of operating their pipeline  safety program through an annual grant.", "PHMSA may permit certified states to participate in interstate inspections  through three types of agreements. (See fig.1):  Interstate agent agreement: At PHMSA\u2019s discretion, certified states  may enter into an interstate agent agreement for either their natural  gas program, hazardous liquid program, or both on an annual basis.  As of April, 2018, nine state pipeline agencies hold these agreements.  On PHMSA\u2019s behalf, these agencies assume inspection  responsibilities for the range of interstate inspection activities, as  agreed upon by PHMSA and prioritized by PHMSA during the  agency\u2019s annual inspection planning process. States may also  propose and conduct additional inspections as they believe  necessary.  While state inspectors can identify violations, PHMSA is  ultimately responsible for enforcement of interstate pipeline  regulations and uses a range of enforcement tools from Warning  Letters to more stringent Notices of Probable Violation with either  proposed compliance orders or proposed civil penalties.", "Temporary interstate agreement: These agreements allow PHMSA to  request a state that has had its certification validated by PHMSA to  perform interstate pipeline inspections on a temporary basis.  According to PHMSA guidelines, these agreements are used typically  for new construction inspections, but may include assistance such as  inspection of specific operators, witness to repairs or testing, or  investigation of incidents. Since 2010, PHMSA has entered into  temporary interstate agreements with six states.", "Joint inspection: The Pipes Act of 2016 included a requirement for  PHMSA to allow certified states to participate in the inspection of an  interstate pipeline safety facility, if requested by the state pipeline  safety agency. As of April, 2018, no states have requested to  participate in joint inspections."], "subsections": []}, {"section_title": "State Involvement in Interstate Pipeline Inspections, While Not Extensive, Can Enhance Oversight Activities", "paragraphs": [], "subsections": [{"section_title": "Interstate Agent Agreements Can Bolster Oversight in Participating States", "paragraphs": ["According to PHMSA regional officials we met with, interstate agents  conduct high-quality inspections of interstate pipelines and provide an  important supplement to the federal inspection workforce. PHMSA  regional officials generally agreed that interstate agents have well-trained  staff and leverage their local knowledge to enhance interstate pipeline  inspections within their state. Additionally, interstate agents, if authorized  by PHMSA, may conduct inspections of interstate pipelines within their  state more frequently than PHMSA. For instance, officials in one PHMSA  region noted that an interstate agent in their jurisdiction ensured each  interstate operator was inspected once every 2 years, regardless of  PHMSA\u2019s risk ranking. Similarly, in two of 5 regions that have interstate  agents, PHMSA regional officials stated that they needed interstate  agents to supplement their current allocation of federal inspectors. For  instance, in one region, PHMSA officials said that if interstate agent  agreements were discontinued, the region would need to hire 3 to 4  additional inspectors. In another region, officials said that interstate  agents provided the equivalent of 5 to 10 additional inspectors. Officials in  one PHMSA region said that, although the region could absorb the  interstate agent workload if needed, doing so would lead to less extensive  inspections because there would more pipelines to inspect with fewer  federal inspectors.", "Interstate agents may also enhance pipeline safety oversight within their  state by going above and beyond the annual interstate inspection  activities required under their agreement with PHMSA. Specifically, as  part of the annual inspection planning process, PHMSA\u2019s regional offices  work with interstate agents to develop an annual inspection plan. While  interstate agents must prioritize PHMSA\u2019s inspection priorities, such as  participation in new construction inspections and PHMSA-led systems  inspections, they can also propose additional inspections of interstate  pipelines within their state. Officials in half of the nine states with  interstate agent agreements stated that they proposed and obtained  PHMSA\u2019s approval for additional interstate pipeline inspections that would  not otherwise have been included in PHMSA\u2019s annual inspection plan.  For instance, PHMSA\u2019s Western Region reported that between January  1, 2015 and December 31, 2016 Washington State\u2019s pipeline safety  agency\u2014which holds an interstate agent agreement\u2014proposed and  conducted 13 inspections beyond those identified in PHMSA\u2019s inspection  plans.", "During these additional inspections conducted by interstate agents, state  officials have identified violations of pipeline safety regulations. Some  violations, including the four illustrative examples below, were deemed  serious enough that PHMSA imposed civil penalties.", "In 2015, the Connecticut Department of Energy and Environmental  Protection inspected an interstate pipeline that traverses the state.  During the inspection, Connecticut inspectors found the pipeline  operator had failed to employ properly qualified welders in  constructing a section of the pipeline. As a result, PHMSA issued a  civil penalty of $26,200 to the pipeline operator. In response to the  findings, the operator ensured its welders were properly qualified and  replaced the 14 welds completed by improperly qualified welders.", "In 2014, the New York Department of Public Service\u2019s Pipeline  Division inspected an interstate pipeline that traverses the state.  During that inspection, New York inspectors identified violations  related to the operator\u2019s corrosion-control practices. Inspectors also  found that the operator failed to prepare, and follow, a manual for  conducting operations and maintenance activities, as well as for  emergency response. As a result, PHMSA issued a civil penalty of  $61,900. In response to the findings, the operator took action to  address the corrosion control-related violations and revised its  operations and maintenance manual.", "In 2011, the New York Department of Public Service\u2019s Pipeline  Division inspected an interstate pipeline that traverses the state.  During that inspection, a New York inspector identified violations  related to corrosion-control practices. As a result, PHMSA issued a  civil penalty of $78,900. PHMSA also issued a Compliance Order,  requiring the operator to remediate the identified violations, or face an  additional civil penalty.", "In 2014, Arizona\u2019s Corporation Commission\u2019s Pipeline Safety Section  inspected two interstate gas transmission lines that traverse the state.  During the inspection, PHMSA and Arizona inspectors found that the  operator had committed probable violations by not properly odorizing  its pipeline, and providing insufficient information to the public about  its pipeline odorization methods. As a result, PHMSA issued a  Notice of Probable Violation, proposed civil penalties totaling  $162,700, and issued a Proposed Compliance Order.", "Although state involvement in interstate inspections can enhance  oversight, officials from almost all of our selected states that do not  currently have an interstate agent agreement expressed little interest in  pursuing such an agreement. Specifically, some officials in we spoke with  plan to focus their limited resources on intrastate pipeline safety oversight  activities. For example, although Texas has over 50,000 miles of  interstate pipeline, officials in that state have focused exclusively on  intrastate inspection activity, citing the heavy workload of their inspection  staff, as well as challenges in recruiting and retaining additional  inspectors. In another instance, California\u2019s state pipeline safety agency  responsible for hazardous liquid oversight voluntarily withdrew from the  interstate agent program in 2013, citing staffing shortages stemming from  a difficult economic climate.", "Although PHMSA\u2019s current policy stance does not prohibit the agency  from entering into a formal interstate agent agreement if the  circumstances warrant, the agency prefers that state agencies enter into  temporary interstate agreements. PHMSA officials explained that,  historically, PHMSA has used interstate agents to supplement federal  inspection resources and that the current nine interstate agents  supplement the federal workforce by approximately 10\u201315 inspectors.  PHMSA officials stated that they do not intend to discontinue current  interstate agent agreements, but due in part to a recent staff increase the  agency has sufficient staff to meet its inspection needs without adding  additional interstate agents. PHMSA officials also told us that intrastate  pipelines pose the highest safety risk to states and, consequently, state  pipeline safety agencies should focus their efforts on intrastate pipeline  oversight rather than participating in interstate pipeline inspections.  During the last 7 years, four states that applied for an agent agreement\u2014 New Hampshire, Virginia, Maryland, and Nevada\u2014were not accepted  by PHMSA for these reasons. (See app. I.) In 2013, PHMSA decided not  to renew another state pipeline safety agency\u2019s interstate agent  agreement, citing the state agency\u2019s inability to staff its program properly,  among other things."], "subsections": []}, {"section_title": "PHMSA\u2019s Other Means of State Participation in Interstate Inspections Have Not Been Used Extensively", "paragraphs": [], "subsections": [{"section_title": "Temporary Interstate Agreements", "paragraphs": ["While temporary interstate agreements provide an opportunity to  participate in interstate pipeline oversight, officials from some state  agencies told us that the agreement\u2019s limited scope and ad hoc nature  can create obstacles to state participation. For instance, in states without  an interstate agent agreement, state inspectors\u2019 day-to-day work focuses  exclusively on intrastate pipeline oversight activities. In the event PHMSA  requested assistance with certain interstate inspections, state inspectors  may be unfamiliar with the interstate pipeline systems and operators. As a  result, some state officials said that their inspectors may have a steep  learning curve when conducting inspections under a temporary interstate  agreement. However, PHMSA officials disagreed that most interstate  agent states would have such steep learning curve because they  currently inspect intrastate transmission pipelines; the regulations for  interstate and intrastate pipelines are for the most part identical. Another  obstacle some state officials identified relates to the fact that state  pipeline safety agencies may not have sufficient inspection staff available,  when needed, to participate in ad hoc interstate inspections.", "Due to the limited state role and competing priorities, state pipeline safety  agencies rarely enter into temporary interstate agreements. According to officials in five of the 6 states that have that have entered into temporary  interstate agreements, the agreements were used for limited, ad hoc  inspections that were initiated by PHMSA. The sixth temporary interstate  agreement was initiated by PHMSA in lieu of the Virginia pipeline safety  agency\u2019s 2017 application for an interstate agent agreement for natural  gas. PHMSA offered to enter into a longer-term, temporary interstate  agreement, which would permit the state agency to inspect the installation  of two large interstate pipeline systems. The state agency accepted the  temporary interstate agreement, which may be extended annually until  the completion of the pipeline construction. To meet its new interstate  inspection obligations, the state agency told us it hired two additional  inspectors. According to state officials, those two inspectors will be  dedicated to intrastate pipeline inspection, which will allow two of the  state agency\u2019s more experienced inspectors to conduct interstate pipeline  inspections.", "Current interstate agents do not consider temporary interstate  agreements to be an adequate substitute for an interstate agent  agreement. According to officials we spoke with that are currently  interstate agents, an interstate agent agreement allows state agencies  and their inspectors to develop a strong understanding of operators and  pipelines within their state. A few state officials stressed that the greatest  benefit of interstate agent status was the ability to leverage their local  knowledge\u2014such as the proximity and familiarity with interstate pipelines  within their states\u2014to allow for quick responses to public concerns and  pipeline incidents. PHMSA officials emphasized that temporary interstate  agreements are not intended to replicate an interstate agent agreement;  instead, these agreements are designed to provide PHMSA the flexibility  to request targeted, short-term assistance from state pipeline safety  agencies with interstate pipeline inspections."], "subsections": []}, {"section_title": "Joint Inspections", "paragraphs": ["Joint inspections offer states the most limited role in interstate pipeline  inspections and may be entered into only if the state meets certain  conditions. In response to the requirement in the PIPES Act, PHMSA  created joint inspections and established certain criteria for state  participation. For instance, to ensure that participation in joint inspections  does not compromise intrastate pipeline safety, PHMSA only allows state  inspectors to participate if the state agency has accomplished the  required minimum number of inspection days during the preceding  calendar year. PHMSA also requires state agencies to bear the cost of  participating in joint inspections\u2014including travel and inspection time for  the state inspectors\u2014rather than allowing states to include this activity in  their annual pipeline safety program grant reimbursement. According to  PHMSA officials, this requirement is designed to focus limited federal  funds intended to support states\u2019 intrastate pipeline safety programs.", "While it is too early to know whether states will participate in joint  inspections over the long term, no states have participated to date.  Despite general agreement among some state pipeline safety officials  that collaborating with PHMSA on interstate pipeline inspections could be  beneficial, they noted that PHMSA\u2019s criteria reduces the incentive to  participate. For instance, a few of the state officials we spoke to generally  expressed concern over the requirement that states bear the entire cost  of their participation. Additionally, state officials perceive the current joint  inspection policy as restricting state inspectors to an observer role.  However, PHMSA officials we spoke with noted that the role of state  inspectors can vary based on the levels of training and knowledge among  state inspectors. PHMSA officials told us they intend to clarify this role for  states."], "subsections": []}]}]}, {"section_title": "PHMSA Used a Regional Workload Analysis to Allocate Inspection Resources, but Has Not Assessed Future Resource Needs", "paragraphs": [], "subsections": [{"section_title": "PHMSA Has Allocated Increased Inspection Resources Based on Regional Workload", "paragraphs": ["From fiscal year 2012 to 2017, PHMSA\u2019s funding increased by nearly 40  percent, allowing the agency to hire additional pipeline inspectors.  Specifically, PHMSA\u2019s funding increased from $110 million in fiscal year  2012 to $154 million in fiscal year 2017. PHMSA\u2019s inspection and  enforcement division received the majority of the increased funding,  allowing that division to hire additional staff. From fiscal year 2012  through 2017, the number of inspectors hired increased by over 25  percent, from 107 to 147 across the five PHMSA regions. (See fig. 2).", "In recent years, PHMSA has improved its analysis of the number of  pipeline inspectors needed to address the inspection workload in each  region. Before 2014, PHMSA allocated inspectors evenly across the  agency\u2019s five regions. Since 2014, PHMSA has used a regional workload  analysis to allocate its interstate inspectors. Unlike the previous analysis,  the regional workload analysis takes into account federal inspector  workload, pipeline construction, and the amount of pipeline mileage in  areas where the consequences of an accident are greater (such as  populated and environmentally sensitive areas) to help ensure that  PMHSA has appropriate resources in each region. For example,  PHMSA\u2019s central region received a greater percentage of inspectors than  most other regions to help oversee a number of new pipeline construction  projects. (See table 2). According to PHMSA officials, the regional  workload analysis has resulted in a better match between workforce  staffing and needs."], "subsections": []}, {"section_title": "PHMSA Lacks an Inspection Workforce Plan That Assesses Future Resource Needs for Interstate Pipeline Inspections", "paragraphs": ["While PHMSA has improved how it allocates its current inspection staff  among the regions, the agency lacks a forward-looking workforce plan for  interstate pipeline inspections. Workforce planning helps agencies take a  strategic, forward-looking approach to put the right people with the right  skills in the right places at the right time. We have previously identified  leading practices for effective strategic workforce planning. These  approaches may vary with each agency\u2019s particular needs and mission,  but share certain principles. These may include:  identifying skills and competencies to fill critical workforce gaps and  the strategies needed to recruit them; developing specific strategies that are tailored to address gaps in  number, deployment, and alignment of human capital; and monitoring and evaluating the agency\u2019s progress toward its human  capital goals.", "However, PHMSA has not developed a plan that systematically identifies  the anticipated interstate pipeline inspection workload or the number of  inspection staff needed to meet that workload. In light of the diminishing  role that interstate agents currently provide in bolstering PHMSA\u2019s  inspection workforce, a plan for conducting future interstate pipeline  inspections should also account for the reduction in resources and  expertise state inspectors can potentially provide.", "According to PHMSA officials, they have not developed a workforce plan  for interstate pipeline inspections because the agency\u2019s focus has been  on allocating and training the recently hired inspectors and ensuring that  pipeline inspections are completed. Further, the lack of an inspector  workforce plan may be symptomatic of a wider-ranging workforce  planning issue. A November, 2017 DOT Inspector General (IG) report  found that PHMSA had not developed a comprehensive workforce plan  since 2005 and recommended that PHMSA develop such a plan.  PHMSA agreed with the recommendation and anticipates completing the  plan by the end of December 2018. Of note, PHMSA\u2019s 2005 workforce  plan did not include an analysis of federal and state inspectors needed for  interstate pipeline inspections. In the absence of a workforce plan for  interstate inspections, PHMSA cannot proactively plan for future  inspection needs to ensure that federal and state resources are in place  to provide effective pipeline oversight."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["PHMSA has an important role in overseeing interstate pipelines and  operators to ensure pipeline safety, and the agency\u2019s partnership with  interstate agents has proven beneficial in fulfilling that role. Recent  increases in funding have allowed PHMSA to increase its own inspection  workforce and reduce its reliance on state agents. However, the agency  does not have an inspection workforce plan to ensure that it is making the  correct decisions regarding its mix of federal inspectors versus state  resources. Therefore, it does not have reasonable assurance that it will  be able to provide adequate oversight of interstate pipelines going  forward."], "subsections": []}, {"section_title": "Recommendation", "paragraphs": ["PHMSA should develop a workforce plan for interstate pipeline  inspections that is consistent with leading practices in workforce planning,  which should include a consideration of the additional resources and  safety oversight that state pipeline officials can provide.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided DOT with a draft of this report for review and comment. In its  comments, reproduced in appendix II, the Department of Transportation concurred with our recommendation. The Department of Transportation  also provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to relevant congressional  committees, the Secretary of Transportation, and other interested parties.  In addition, this report will also be available at no charge on GAO\u2019s  website at http://www.gao.gov  If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@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."], "subsections": []}]}, {"section_title": "Appendix I: States That Have Applied and Have Not Been Accepted for Interstate Agent Status", "paragraphs": ["In the past 7 years, four additional state pipeline safety agencies have  applied for interstate agent agreements:", "New Hampshire: In 2014, the state legislature passed a law requiring  the state\u2019s pipeline safety agency to apply for interstate agent status  on an annual basis. State pipeline safety officials cited New  Hampshire inspectors\u2019 local knowledge of interstate pipelines, as well  as concerns over the frequency of PHMSA\u2019s interstate pipeline  inspection activity, as reasons for seeking an agreement. To date,  PHMSA has not accepted the state agency\u2019s annual applications for  interstate agent status citing an increase in the federal inspection  workforce, a preference for states to focus on intrastate pipeline  oversight, and the ability for state agencies to participate in interstate  inspections through other means, such as temporary interstate  agreements.", "Virginia: In 2016, the Virginia General Assembly passed legislation  requiring the state pipeline safety agency to apply for interstate agent  status for natural gas. The state agency applied the following year,  citing the need to conduct construction inspections of the Virginia  section of two large interstate natural gas transmission pipelines.  PHMSA did not accept the state agency\u2019s application, citing  increasing federal inspection resources as well the agency\u2019s lack of  full authority over its intrastate gas operators. Instead, PHMSA  provided the state agency a temporary interstate agreement,  renewable on an annual basis, to conduct the desired inspections.", "Maryland: Maryland\u2019s pipeline safety agency applied for interstate  agent status in 2014 in response to public concern over proposed  construction of a new interstate pipeline. PHMSA did not accept the  agency\u2019s application for interstate agent status, citing an increase in  federal resources and PHMSA\u2019s preference that the state agency  focus its inspection efforts on intrastate pipelines. According to state  agency officials, public interest has waned and the state has no plans  to reapply.", "Nevada: Nevada\u2019s pipeline safety agency applied for interstate agent  status in 2011. According to state pipeline safety officials, they did so  to help retain staff, rather than as a result of pipeline safety concerns.  PHMSA did not accept the agency\u2019s request, citing a preference only  to enter into new interstate agreements when additional state support  was needed, as well as the preference for states to focus on intrastate  pipeline facilities. According to state officials, they do not plan to  reapply."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Sara Vermillion (Assistant  Director), Nick Nadarski (Analyst-in-Charge), Mike Duane, David Hooper,  Delwen Jones, Malika Rice, and Kelly Rubin made key contributions to  this report."], "subsections": []}]}], "fastfact": ["The Pipeline and Hazardous Materials Safety Administration (PHMSA) oversees the safety of natural gas and hazardous liquid pipelines. States sometimes work with PHMSA to inspect and oversee these pipelines.", "We looked into federal and state responsibilities for interstate pipeline inspections, and found that PHMSA expanded its inspector workforce by 25% between 2012 and 2017. However, the agency hasn't planned for future workforce needs\u2014for example, it hasn't assessed how states can help with pipeline inspections and safety oversight. We recommended that they do so."]}
{"id": "GAO-18-636T", "url": "https://www.gao.gov/products/GAO-18-636T", "title": "VA IT Modernization: Preparations for Transitioning to a New Electronic Health Record System Are Ongoing", "published_date": "2018-06-26T00:00:00", "released_date": "2018-06-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA provides health care services to almost 9 million veterans and their families and relies on its health information system\u2014VistA\u2014to do so. However, the system is more than 30 years old, is costly to maintain, and does not support interoperability with DOD and private health care providers. Since 2001, VA has pursued multiple efforts to modernize the system. In June 2017, VA announced plans to acquire the same system\u2014the Cerner system\u2014that DOD is implementing.", "GAO was asked to summarize preliminary observations from its ongoing review of VistA and the department's efforts to acquire a new system to replace VistA. Specifically, the statement summarizes preliminary observations regarding (1) costs incurred for the system and related activities during the last 3 fiscal years; (2) key components that comprise VistA and are to be replaced; and (3) actions VA has taken to prepare for its transition to the Cerner system. The statement also discusses common factors critical to the success of IT acquisitions that GAO has previously identified.", "GAO reviewed its prior reports on the VistA modernization and on critical success factors of major IT acquisitions. GAO also reviewed records of obligations for VistA for fiscal years 2015, 2016, and 2017; analyzed VA documentation that describes the scope of VistA, and reviewed program documentation."]}, {"section_title": "What GAO Found", "paragraphs": ["According to the Department of Veterans Affairs (VA), the Veterans Health Information Systems and Technology Architecture (VistA) and related costs, as approximated by funding obligations, were approximately $1.1 billion, $899 million, and $946 million in fiscal years 2015, 2016 and 2017, respectively. These obligations total about $3.0 billion over 3 years to support the system. As identified by the department, the obligations were to cover the costs for three programs (VistA Evolution, Interoperability, and Virtual Lifetime Electronic Record Health) and other supporting investments for activities such as networks and infrastructure sustainment. The following table provides a summary of the total VistA and VistA-related obligations.", "GAO's preliminary results indicate that VA is working to define VistA and identify system components to be replaced by the new system. However, according to VA officials, there is no single information source that fully defines the scope of VistA. This situation is partly due to differences in VistA at various facilities. In the absence of a complete definition of VistA, program officials have taken a number of steps to define the system's scope and identify the components that the new system will replace. These steps have included conducting analyses, performing preliminary site (medical facility) assessments, and planning for a detailed assessment of each site where the new system will be deployed.", "Since VA announced in June 2017 that the department would acquire the same electronic health record system as the Department of Defense (DOD), GAO's preliminary results indicate that VA has begun taking actions to prepare for the transition from VistA. These actions have included standardizing VistA, clarifying the department's approach to interoperability, establishing governance for the new program and the framework for joint governance with DOD, and preparing initial program plans. VA is early in its effort to transition from VistA to the Cerner system and the department's actions are ongoing.", "In 2011, GAO reported on nine common factors critical to the success of major IT acquisitions. Such factors include ensuring active engagement of senior officials with stakeholders and having qualified, experienced program staff. These critical success factors can serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of a new electronic health record system will be successfully achieved."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to participate in today\u2019s hearing on the  planned implementation of the Department of Veterans Affairs\u2019 (VA)  Electronic Health Record Modernization (EHRM) program.", "As you know, the use of information technology (IT) is crucial to helping  VA effectively serve the nation\u2019s veterans and, each year, the department  spends billions of dollars on its information systems and assets. Over  many years, however, VA has experienced challenges in managing its IT  projects and programs. These challenges have spanned a number of  critical initiatives related to modernizing major systems within the  department, including its electronic health information system\u2014the  Veterans Health Information Systems and Technology Architecture  (VistA).", "We have issued numerous reports on the challenges that the department  has faced in managing VistA and working to increase the interoperability  of health information. We also have ongoing work for the Committee on  Veterans\u2019 Affairs to review VistA and the department\u2019s transitional efforts  to replace the system with a new, commercial-off-the-shelf (COTS)  system that it is acquiring from Cerner Government Services, Inc.  (Cerner) under the EHRM program.", "At your request, my testimony today summarizes preliminary  observations from our ongoing review. Specifically, the statement  discusses our preliminary observations regarding (1) costs incurred for  the system and related activities during the last 3 fiscal years; (2) key  components that comprise VistA and are to be replaced; and (3) actions  VA has taken to prepare for its transition to the Cerner system. In  addition, the statement discusses critical success factors related to major  information technology acquisitions. We have previously reported that  these success factors could enhance the likelihood that the new  electronic health record system acquisition will be successful.", "In developing this testimony, we considered our previously published  reports that discussed the history of the department\u2019s VistA modernization  efforts. In addition, we relied on our prior report that discussed critical  success factors of major IT acquisitions. The reports cited throughout  this statement include detailed information on the scope and methodology  for our prior reviews.", "Further, we considered preliminary observations from our ongoing review  of VistA\u2019s costs, components, and the actions VA has taken to prepare for  transitioning from VistA to the Cerner system. With regard to the total  costs of VistA, we obtained records of obligations for VistA-related  programs for fiscal years 2015, 2016, and 2017, as tracked by the  Veterans Health Administration (VHA) and VA\u2019s Office of Information and  Technology (OI&T). We then combined the amount of those obligations  with the amount of other obligations, such as those for supporting  interoperability and infrastructure, identified by VA as being closely  related to the development and operation of VistA. We interviewed VA  officials to understand the source and relevance of the obligations  identified by the department and determined that the data were reliable  for our purposes.", "To identify the key components of VistA and the extent to which they  support health record capabilities for the department, we analyzed VA  documentation that describes the scope of the system. This  documentation included the department\u2019s Health Information System  Diagram, the VA Monograph, the VA Systems Inventory, and the VistA  Product Roadmap. We also reviewed program documentation identifying  components of VistA to be replaced by the Cerner system. We analyzed  these documents for consistency to provide a reasonable basis for our  observations.", "To summarize the actions VA has taken to prepare for its transition from  VistA to the Cerner system under the EHRM program, we reviewed  available program briefings, governance documents, and draft plans for  the EHRM program related to, for example, interoperability, data  migration, change management, and requirements. We supplemented  our analysis with information obtained through interviews with relevant VA  officials.", "The work upon which this statement is based is being or was conducted  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audits 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."], "subsections": [{"section_title": "Background", "paragraphs": ["VA\u2019s mission is to promote the health, welfare, and dignity of all veterans  in recognition of their service to the nation by ensuring that they receive  medical care, benefits, social support, and lasting memorials. In carrying  out this mission, the department operates one of the largest health care  delivery systems in the United States, providing health care services to  approximately 9 million veterans throughout the United States,  Philippines, Virgin Islands, Puerto Rico, American Samoa, and Guam.", "In 2015, we designated VA health care as a high-risk area for the federal  government, and we continue to be concerned about the department\u2019s  ability to ensure that its resources are being used cost-effectively and  efficiently to improve veterans\u2019 timely access to health care. In part, we  identified limitations in the capacity of VA\u2019s existing IT systems, including  the outdated, inefficient nature of certain systems and a lack of system  interoperability as contributors to the department\u2019s challenges related to  health care.", "Providing health care to veterans requires a complex set of clinical and  administrative capabilities supported by IT. VA\u2019s health information  system\u2014VistA\u2014has been essential to the department\u2019s ability to deliver  health care to veterans. VistA contains an electronic health record for  each patient that supports clinical settings throughout the department. For  example, clinicians can use the system to enter and review patient  information; order lab tests, medications, diets, radiology tests, and  procedures; record a patient\u2019s allergies or adverse reactions to  medications; request and track consults; enter progress notes, diagnoses,  and treatments for encounters; and enter discharge summaries.", "VistA was developed in house by clinicians and IT personnel in various  VA medical facilities and has been in operation since the early 1980s.  Over the last several decades, VistA has evolved into a technically  complex system comprised of about 170 modules that support health  care delivery at 152 VA Medical Centers and over 1,200 outpatient sites.  In addition, customization of VistA, such as changes to the modules by  the various medical facilities, has resulted in about 130 versions of the  system\u2014referred to as instances.", "According to VA, VistA modules are comprised of one or more software  applications that support various health care functions, such as providing  care coordination and mental health services. In addition to VistA, the  department has other health information systems that must interface with  VistA to send, exchange, or store related health (e.g., clinical and patient)  data.", "Since 2001, VA has identified the need for enhancements and  modifications to VistA and has pursued multiple efforts to modernize the  system. Two major efforts have included the VistA Evolution program  and, most recently, the planned acquisition of the same electronic health  record system that the Department of Defense (DOD) is acquiring.", "In 2013, VA established VistA Evolution as a joint program between OI&T  and VHA that was comprised of a collection of projects and efforts  focused on improving the efficiency and quality of veterans\u2019 health care.  This program was to modernize the department\u2019s health information  systems, increase VA\u2019s data exchange and interoperability capabilities  with DOD and private sector health care partners, and reduce VA\u2019s time  to deploy new health information management capabilities.", "In June 2017, the former VA Secretary announced a significant shift in the  department\u2019s approach to modernizing VistA. Specifically, rather than  continue to use VistA, the Secretary stated that the department planned  to acquire the same Cerner electronic health record system that DOD has  been acquiring.", "Accordingly, the department awarded a contract to Cerner in May 2018  for a maximum of $10 billion over 10 years. Cerner is to replace VistA  with a commercial electronic health record system. This new system is to  support a broad range of health care functions that include, for example,  acute care, clinical decision support, dental care, and emergency  medicine. When implemented, the new system will be expected to  provide access to authoritative clinical data sources and become the  authoritative source of clinical data to support improved health, patient  safety, and quality of care provided by VA.", "As previously mentioned, this acquisition is being managed by VA\u2019s  EHRM program. According to program documentation, EHRM is also to  deliver program management support and the infrastructure  modernization required to install and operate the new system.", "According to EHRM program documentation, the department has  estimated that an additional $5.8 billion in funding, above the contract  amount, would be needed to fund project management support and  infrastructure improvements over the 10-year period. This amount does  not fully include government employee costs.", "Deployment of the new electronic health record system at the initial sites  is planned for within 18 months of October 1, 2018, with a phased  implementation of the remaining sites over the next decade. Each VA  medical facility is expected to continue using VistA until the new system  has been deployed at that location."], "subsections": []}, {"section_title": "VA Has Reported Obligating about $3.0 Billion to VistA and Related Activities from Fiscal Years 2015 through 2017", "paragraphs": ["According to VA, the department\u2019s costs for VistA and related activities  are approximated by funding obligations of about $1.1 billion, $899  million, and $946 million in fiscal years 2015, 2016 and 2017,  respectively, for a total of about $3.0 billion over 3 years to support the  system. Specifically, VHA and OI&T reported obligations to cover the  costs for the VistA Evolution program, including costs for development,  operation and maintenance, and payroll for government employees over  the 3 fiscal years.", "Further, in their efforts to fully determine the costs associated with VistA,  VA officials also reported obligations for activities that supported VistA,  but were not included in the VistA Evolution program. These other  obligations were for investments in interoperability initiatives, such as  increasing data standardization and data sharing between VA, DOD, and  other government and non-government entities, and the Virtual Lifetime  Electronic Record Health. These obligations also include other VistA- related technology investments, such as networks and infrastructure  sustainment, continuation of legacy systems, and overall patient safety,  security, and system reliability.", "Table 1 provides a summary of the total VistA and related obligations that  VA identified for fiscal years 2015 through 2017."], "subsections": []}, {"section_title": "VA Is Working to Define VistA\u2019s Scope and Identify Components to Be Replaced by the Cerner System", "paragraphs": ["Understanding the scope of VA\u2019s current health information system is  essential to effectively planning for the new system. However, according  to VA officials, there is no single information source that fully defines the  scope of VistA. Instead, existing definitions of the system, including the  components that comprise it, are identified by multiple sources. These  sources include the VA Systems Inventory, VistA Document Library, and  VA Monograph.", "Each of these sources describes VistA from a different perspective. For  example, the VA Monograph provides an overview of VistA and non-VistA  applications used by VHA. The monograph also describes modules and  their associated business functions, but does not document all  customization at local facilities. The VA Systems Inventory is a database  that identifies current IT systems at VA, including systems and interfaces  that are related to VistA. The VA Document Library is an online resource  for accessing documentation on VA\u2019s nationally released software  applications, including VistA.", "In the absence of a complete definition of VistA, EHRM program officials  have taken a number of steps to define the system\u2019s scope and identify  the components that the Cerner system will replace. These steps have  included conducting two analyses, performing preliminary site  assessments, and planning for Cerner to perform a detailed assessment  of each site where the new system will be deployed.", "Specifically, EHRM program subject-matter experts undertook an analysis  that identified 143 VistA modules and 35 software applications as  representing the scope of the system. They then compared the  functionality provided by the VistA modules to the Cerner system\u2019s  capabilities to identify the VistA components that are expected to be  replaced by the Cerner system. The analysis identified 131 (92 percent)  of the 143 VistA modules and 32 (91 percent) of the 35 applications that  are expected to be replaced by the Cerner system. For example, the  analysis determined that the Care Management and Mental Health  modules would be replaced by the new system.", "EHRM program officials also undertook a subsequent, broader analysis to  identify, among other things, the scope of VistA, as well as the  department\u2019s other health IT systems that could also be replaced by the  Cerner system. These other systems include, for example, dentistry and  oncology applications. As part of this analysis, the department combined  data from the VA Systems Inventory, the VistA Document Library, the VA  Monograph, and other sources to identify the health information  technology environment at a typical VA medical center.", "The resulting analysis of VA\u2019s health IT environment identified a total of  330 applications that support health care delivery at a medical center, of  which 119 applications (approximately 36 percent) have been identified  as having similar functionality as a capability of the Cerner system.  Further, 128 of the 330 applications are identified as VistA applications.  Of the 128 applications designated as VistA, 58 (approximately 45  percent) have been identified as having similar functionality as a  capability of the Cerner system, including pharmacy, laboratory, and  scheduling capabilities.", "In addition to the analyses discussed above, VA has taken steps to  understand differences in VistA at individual facilities. Specifically,  according to EHRM officials, representatives from VA and Cerner have  visited 17 VA medical facilities to conduct preliminary site assessments.  The intent of these assessments is to obtain a broad perspective of the  current state of the systems, applications, integration points, reporting,  and workflows being utilized at individual facilities. These site visits  identified VistA customization that may be site specific. The identification  of such site specific customization is intended to help Cerner plan for  implementation of its system at each location. According to EHRM  program officials, full site assessments that are planned at each location  in preparation for implementation of the Cerner system are expected to  identify the full extent of VistA customization."], "subsections": []}, {"section_title": "VA\u2019s Preparations for Transitioning from VistA to the Cerner System Are Ongoing", "paragraphs": ["Since the former VA Secretary announced in June 2017 that the  department would acquire the same electronic health record system as  DOD, VA has taken steps to position the department for the transition to  the new system. These actions, which are ongoing, have included  standardizing VistA, assessing the department\u2019s approach to increasing  interoperability, establishing governance for the new program and the  framework for joint governance with DOD, and preparing initial program  plans."], "subsections": [{"section_title": "Standardizing VistA", "paragraphs": ["VA\u2019s goal is for all instances of VistA being used in its medical facilities to  be standardized where practical. Such standardization is intended to  better position the department to switch to the Cerner system. To  increase standardization, the VistA Evolution program has been focused  over the last 5 years on standardizing a core set of VistA modules related  to interoperability which, according to the department, accounts for about  60 percent of VistA.", "In addition, the program has focused on identifying software that is  common to each VistA instance. VA refers to this collection of standard  software as the gold instance. As part of its effort to standardize VistA, VA  has implemented a process to compare the system at each site with the  gold instance. Sites that are identified as having variations from the gold  instance must apply for a waiver to gain approval for continuing to  operate a non-standard VistA instance. OI&T and VHA assess the  waivers, which may be approved if a site needs non-standard functionality  that is deemed critical to that site. Alternatively, waivers are not approved  if the assessment determines that a site\u2019s needs can be met by reverting  to the gold instance of VistA."], "subsections": []}, {"section_title": "Assessing the Approach to Increasing Interoperability", "paragraphs": ["VA has identified increased interoperability as a key expected outcome of  its decision to switch from VistA to the Cerner system. To ensure that the  contract with Cerner will improve interoperability with community care  providers (i.e., non-VA and third party providers), the former VA Secretary  announced in December 2017 that the department had taken a \u201cstrategic  pause\u201d on the electronic health record acquisition process. During the  pause, an independent study was undertaken to assess the approach to  interoperability with the new acquisition. The assessment made  recommendations to improve imported data, address data rights and  patient safety risks, and improve data access for patients. VA agreed with  all of the resulting recommendations and, according to EHRM program  officials, included provisions in the contract with Cerner to address the  recommendations."], "subsections": []}, {"section_title": "Establishing a Program Office and Governance", "paragraphs": ["Our prior work has identified strong agency leadership support and  governance as factors that can increase the likelihood of a program\u2019s  success. Such leadership and governance can come from the  establishment of an effective program management organization and a  related governance structure.", "VA has taken steps to establish a program management office and  drafted a structure for technology, functional, and joint governance of the  electronic health record implementation. Specifically, in January 2018, the  former VA Secretary established the EHRM Program Executive Office  (PEO) that reports directly to the VA Deputy Secretary. According to  EHRM program officials, this office supported the contract negotiations  with the Cerner Corporation and is expected to continue to manage the  program going forward.", "Program officials stated that the office is beginning the process of hiring  full-time employees. In addition, to support the program office, the  department has awarded a contract for project management support and  has also reassigned a number of VA staff to the PEO.", "Further, VA has drafted a memorandum that describes the role of  governance bodies within VA, as well as governance intended to facilitate  coordination between DOD and VA. For example, according to the draft  memorandum, within VA, the EHRM Steering Committee is expected to  provide strategic direction for the efforts while monitoring progresses  toward goals and advising the Secretary on the progress and  performance of the EHRM efforts. This committee is to include the Deputy  Secretary, the Undersecretary for Health, and the Chief Information  Officer, among others, and is to meet quarterly or as necessary to make  its reports to the Secretary.", "Additionally, according to EHRM program documentation, VA is in the  process of establishing a Functional Governance Board, a Technical  Governance Board, and a Governance Integration Board comprised of  program officials intended to provide guidance; coordinate with DOD, as  appropriate; and inform the Steering Committee. Further, a joint  governance structure between VA and DOD has been proposed that  would be expected to leverage existing joint governance facilitated by the  DOD/VA Interagency Program Office.", "Nevertheless, while the department\u2019s plans for governance of the EHRM  program provide a framework for high-level oversight for program  decisions moving forward, EHRM officials have noted that the  governance bodies will not be finalized until October 2018."], "subsections": []}, {"section_title": "Preparing Initial Program Plans", "paragraphs": ["Program planning is an activity for ensuring effective management of key  aspects of an IT program. These key aspects include identification of the  program\u2019s scope, responsible organizations, costs, and schedules.", "VA has prepared initial program plans, including a preliminary timeline for  deploying the new electronic health record system to its medical facilities.  The department also has a proposed 90-day schedule that depicts key  program activities currently underway now that the contract has been  awarded. For example, the department\u2019s preliminary plans include an 8- year deployment schedule beginning with planned implementation at  initial sites within 18 months of October 1, 2018.", "According to the executive director for the EHRM program, the  department also intends to complete a full suite of planning and  acquisition management documents to guide the program. These  documents include, for example, a life cycle cost estimate, a data  migration plan, a change management plan, and an integrated master  schedule to establish key milestones over the life of the project. EHRM  PEO officials have stated that the department intends to complete the  development of its initial plans for the program within 30 to 90 days of  awarding the contract (between mid-June and mid-August 2018), and  intends to update those plans as the program matures. The plans are to  be reviewed during the milestone reviews identified in the department\u2019s  formal project management framework."], "subsections": []}]}, {"section_title": "Critical Factors Underlying Successful Major Acquisitions", "paragraphs": ["Our prior work has determined that successfully overcoming major IT  acquisition challenges can best be achieved when critical success factors  are applied. Specifically, we reported in 2011 on common factors critical  to the success of IT acquisitions, based on seven agencies having each  identified the acquisition that best achieved the agency\u2019s respective cost,  schedule, scope, and performance goals. These factors remain relevant  today and can serve as a model of best practices that VA could apply to  enhance the likelihood that the acquisition of a new electronic health  record system will be successfully achieved.", "Among the agencies\u2019 seven IT investments, agency officials identified  nine factors as having been critical to the success of three or more of the  seven investments. These nine critical success factors are consistent with  leading industry practices for IT acquisition. The factors are:", "Active engagement of senior officials with stakeholders.", "Qualified and experienced program staff.", "Support of senior department and agency executives.", "Involvement of end users and stakeholders in the development of  requirements.", "Participation of end users in testing system functionality prior to formal  end user acceptance testing.", "Consistency and stability of government and contractor staff.", "Prioritization of requirements by program staff.", "Regular communication maintained between program officials and the  prime contractor.", "Sufficient funding.", "Officials for all seven selected investments cited active engagement with  program stakeholders\u2014individuals or groups (including, in some cases,  end users) with an interest in the success of the acquisition\u2014as a critical  factor to the success of those investments. Agency officials stated that  stakeholders, among other things, reviewed contractor proposals during  the procurement process, regularly attended program management office  sponsored meetings, were working members of integrated project  teams, and were notified of problems and concerns as soon as  possible. In addition, officials from two investments noted that actively  engaging with stakeholders created transparency and trust, and  increased the support from the stakeholders.", "Additionally, officials for six of the seven selected investments indicated  that the knowledge and skills of the program staff were critical to the  success of the program. This included knowledge of acquisitions and  procurement processes, monitoring of contracts, large-scale  organizational transformation, Agile software development concepts,  and areas of program management such as earned value management  and technical monitoring.", "Finally, officials for five of the seven selected investments identified  having the end users test and validate the system components prior to  formal end user acceptance testing for deployment as critical to the  success of their program. Similar to this factor, leading guidance  recommends testing selected products and product components  throughout the program life cycle. Testing of functionality by end users  prior to acceptance demonstrates, earlier rather than later in the program  life cycle, that the functionality will fulfill its intended use. If problems are  found during this testing, programs are typically positioned to make changes that would be less costly and disruptive than ones made later in  the life cycle.", "Use of the critical success factors described above can serve as a model  of best practices for VA. Application of these acquisition best practices  presents opportunities for the department to increase the likelihood that  its planned acquisition of a new electronic health record system will meet  its cost, schedule, scope, and performance goals.", "In conclusion, VA continued to obligate billions of dollars for its VistA  system. Recently, the department has undertaken important analyses to  better understand the scope of the system and identify capabilities that  can be provided by the Cerner electronic health record system it is  acquiring. VA has additional key activities underway, such as establishing  program governance and EHRM program planning. Based on these  preliminary observations and as the department continues its activities to  transition from VistA to the Cerner electronic health record system, critical  success factors can serve as a model of best practices that VA could  apply to enhance the likelihood that the acquisition of the new system will  be successfully achieved. While it is early in VA\u2019s acquisition of the  Cerner system, it will be important for the department to leverage all  available opportunities to ensure that its transition to a new system is  carried out in the most effective manner possible. Our experience has  shown that challenges can successfully be overcome through using a  disciplined approach to IT acquisition management.", "Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes my prepared statement. I would be pleased to respond to  any questions that you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact David A. Powner at (202) 512-9286 or pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this testimony statement. GAO  staff who made key contributions to this statement are Mark Bird  (Assistant Director), Jennifer Stavros-Turner (Analyst in Charge), John  Bailey, Rebecca Eyler, Jacqueline Mai, Scott Pettis, and Charles  Youman.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-273", "url": "https://www.gao.gov/products/GAO-18-273", "title": "James Webb Space Telescope: Integration and Test Challenges Have Delayed Launch and Threaten to Push Costs Over Cap", "published_date": "2018-02-28T00:00:00", "released_date": "2018-02-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["JWST, a large, deployable telescope intended to be the successor to the Hubble Space Telescope, is one of NASA's most complex and expensive projects, at an anticipated cost of $8.8 billion. Congress set an $8 billion JWST development cost cap in 2011, and the remaining $837 million is for its operations costs. JWST is intended to revolutionize our understanding of star and planet formation and advance the search for the origins of our universe. With significant integration and testing planned for the remaining period until launch, the JWST project will still need to address many challenges during the remainder of integration and testing.", "Conference Report No. 112-284, accompanying the Consolidated and Further Continuing Appropriations Act, 2012, included a provision for GAO to assess the project annually and report on its progress. This is the sixth such report. This report assesses the extent to which JWST is (1) meeting its schedule commitments, and (2) able to meet its cost commitments. GAO reviewed monthly JWST reports, reviewed relevant policies, conducted independent analysis of NASA and contractor data, and interviewed NASA and contractor officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In 2017, the National Aeronautics and Space Administration's (NASA) James Webb Space Telescope (JWST) project delayed its launch readiness date by at least 5 months, and further delays are likely. The delay\u2014from October 2018 to a launch window between March and June 2019\u2014was primarily caused by components of JWST's spacecraft taking longer to integrate than planned. JWST made considerable progress toward the completion of integration and test activities in the past year. However, the project used all remaining schedule reserve\u2014or extra time set aside in the schedule in the event of delays or unforeseen risks\u2014to address technical issues, including an anomaly on the telescope found during vibration testing. Extending the launch window provided the project up to 4 months of schedule reserve. However, shortly after requesting the new launch window in September 2017, the project determined that several months of schedule reserve would be needed to address lessons learned from the initial folding and deployment of the observatory's sunshield (see image). Given remaining integration and test work ahead\u2014the phase in development where problems are most likely to be found and schedules tend to slip\u2014coupled with only 1.5 months of schedule reserves remaining to the end of the launch window, additional launch delays are likely. The project's Standing Review Board will conduct an independent review of JWST's schedule status in early 2018 to determine if the June 2019 launch window can be met.", "JWST will also have limited cost reserves to address future challenges, such as further launch delays, and is at risk of breaching its $8 billion cost cap for formulation and development set by Congress in 2011. For several years, the prime contractor has overestimated workforce reductions, and technical challenges have prevented these planned reductions, necessitating the use of cost reserves. Program officials said that existing program resources will accommodate the new launch window\u2014provided remaining integration and testing proceeds as planned without any long delays. However, JWST is still resolving technical challenges and work continues to take longer than planned to complete. As a result, the project is at risk of exceeding its $8 billion formulation and development cost cap."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made recommendations on the project in previous reports. NASA agreed with and took action on many of GAO's prior recommendations, but not on others\u2014some of which may have provided insight to the current schedule delays. For example, in December 2012, GAO recommended that the JWST project perform an updated integrated cost/schedule risk analysis."]}], "report": [{"section_title": "Letter", "paragraphs": ["The James Webb Space Telescope (JWST) is one of the National  Aeronautics and Space Administration\u2019s (NASA) most complex projects  and top priorities, which is intended to revolutionize our understanding of  star and planet formation and advance the search for the origins of our  universe. The innovative technologies within the telescope, as well as the  sheer size of some of its components\u2014such as the tennis-court-sized  sunshield\u2014illustrate some of the immense development challenges. The  project is now in the midst of a period of significant integration and test  activities for its elements and major subsystems. During this period,  unforeseen challenges could arise and affect the cost and schedule for  the project, as evidenced by a recent announcement that JWST delayed  its launch readiness date by 5 to 8 months because of technical  challenges. Until its launch, NASA and its contractors\u2019 continued ability to  identify and respond to challenges in a timely and cost-effective manner  will likely influence whether JWST can meet its cost commitments to  Congress and avoid further schedule delays.", "The on-time and on-budget delivery of JWST is also a high congressional  priority, as Conference Report No. 112-284 included a provision for GAO  to assess the JWST program annually and to report to the Committees on  Appropriations on key issues relating to program and risk management,  achievement of cost and schedule goals, program technical status, and  oversight mechanisms. This report is our sixth in response to that  provision. For this report, we assessed the extent to which (1) the JWST  project is managing technical challenges and integration risks in order to  meet its schedule commitments, and (2) technical challenges and higher- than-planned contractor workforce levels are affecting the JWST project\u2019s  ability to meet its cost commitments.", "To address these objectives, we examined the schedule, technical, and  cost performance of the project since our last report in December 2016\u2014 which also focused on the project\u2019s cost and schedule commitments. To assess the extent to which the JWST project is managing technical  challenges and integration risks in order to meet its schedule  commitments, we reviewed project and contractor schedule  documentation, and held interviews with program, project, and contractor  officials on the progress made and any challenges faced building and  integrating the different components of the observatory. We examined  and analyzed monthly project status reports to management to monitor  schedule reserve levels and usage and potential risks and technical  challenges that may impact the project\u2019s schedule, and to gain insights on  the project\u2019s progress since our last report in December 2016. Further, we  attended flight program reviews at the National Aeronautics and Space  Administration (NASA) headquarters on a quarterly basis, where the  current status of the program was briefed to NASA headquarters officials  outside of the project. We examined selected individual risks for elements  and major subsystems from monthly risk registers prepared by the project  to understand the likelihood of occurrence and impacts to the schedule  based on steps the project is taking to mitigate the risks. We examined  the project\u2019s schedule risk assessment to determine the impact of  technical challenges and schedule execution rates on the project\u2019s  planned launch readiness date. Furthermore, we interviewed project  officials at Goddard Space Flight Center, contractor officials from the  Northrop Grumman Corporation, and the Association of Universities for  Research in Astronomy\u2019s Space Telescope Science Institute concerning  technological challenges that have had an impact on schedule, and the  project\u2019s and contractor\u2019s plans to address these challenges. We also  obtained information from independent NASA reviewers on the status of  project software and challenges.", "To assess the extent to which technical challenges and higher-than- planned contractor workforce levels are affecting the JWST project\u2019s  ability to meet its cost commitments, we reviewed and analyzed program,  project, and contractor data and documentation and held interviews with  officials from these organizations. We reviewed JWST project status  reports on cost issues to determine the risks that could impact cost. We  analyzed contractor workforce plans against workforce actuals to  determine whether contractors are meeting their workforce plans. We  monitored and analyzed the status of program and project cost reserves  in current and future fiscal years to determine the project\u2019s financial  posture. We examined and analyzed earned value management data  from the project\u2019s observatory contractor to identify trends in  performance, whether tasks were completed as planned, and likely  estimates at completion.", "Our work was performed primarily at NASA headquarters in Washington,  D.C.; Goddard Space Flight Center in Greenbelt, Maryland; Northrop  Grumman Corporation in Redondo Beach, California; and the Space  Telescope Science Institute in Baltimore, Maryland. We also obtained  information from officials at the Independent Verification and Validation  facility in Fairmont, West Virginia.", "We conducted this performance audit from March 2017 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["JWST is envisioned to be a large deployable space telescope, optimized  for infrared observations, and the scientific successor to the aging Hubble  Space Telescope. JWST is being designed for a 5-year mission to find  the first stars, study planets in other solar systems to search for the  building blocks of life elsewhere in the universe, and trace the evolution of  galaxies from their beginning to their current formation. JWST is intended  to operate in an orbit approximately 1.5 million kilometers\u2014or 1 million  miles\u2014from the Earth. With a 6.5-meter primary mirror, JWST is  expected to operate at about 100 times the sensitivity of the Hubble  Space Telescope. JWST\u2019s science instruments are designed to observe  very faint infrared sources and therefore are required to operate at  extremely cold temperatures. To help keep these instruments cold, a  multi-layered tennis court-sized sunshield is being developed to protect  the mirrors and instruments from the sun\u2019s heat.", "The JWST project is divided into three major segments: the observatory  segment, the ground segment, and the launch segment. When complete,  the observatory segment of JWST is to include several elements (Optical  Telescope Element (OTE), Integrated Science Instrument Module (ISIM),  and spacecraft) and major subsystems (sunshield and cryocooler). The  hardware configuration created when the Optical Telescope Element and  the Integrated Science Instrument Module were integrated, referred to as OTIS, is not considered an element by NASA, but we categorize it as  such for ease of discussion. Additionally, JWST is dependent on software  to deploy and control various components of the telescope, and to collect  and transmit data back to Earth. The elements, major subsystems, and  software are being developed through a mixture of NASA, contractor, and  international partner efforts. See figure 1 for an interactive graphic that  depicts the elements and major subsystems of JWST.", "For the majority of work remaining, the JWST project is relying on two  contractors: Northrop Grumman Corporation and the Association of  Universities for Research in Astronomy\u2019s Space Telescope Science  Institute (STScI). Northrop Grumman plays the largest role, developing  the sunshield, the Optical Telescope Element, the spacecraft, and the  Mid-Infrared Instrument\u2019s cryocooler, in addition to integrating and testing  the observatory. STScI\u2019s role includes soliciting and evaluating research  proposals from the scientific community, and receiving and storing the  scientific data collected, both of which are services that it currently  provides for the Hubble Space Telescope. Additionally, STScI is  developing the ground system that manages and controls the telescope\u2019s  observations and will operate the observatory on behalf of NASA. JWST  will be launched on an Ariane 5 rocket, provided by the European Space  Agency.", "JWST depends on 22 deployment events\u2014more than a typical science  mission\u2014to prepare the observatory for normal operations on orbit. For  example, the sunshield and primary mirror are designed to fold and stow  for launch and deploy once in space. Due to its large size, it is nearly  impossible to perform deployment tests of the fully assembled  observatory, so the verification of deployment elements is accomplished  by a combination of lower level component tests in flight-simulated  environments; ambient deployment tests for assembly, element, and  observatory levels; and detailed analysis and simulations at various levels  of assembly."], "subsections": [{"section_title": "Schedule and Cost Reserves for NASA Projects", "paragraphs": ["We have previously reported that complex development efforts like JWST  face numerous risks and unforeseen technical challenges, which  oftentimes can become apparent during integration and testing. To  accommodate unanticipated challenges and manage risk, projects  reserve extra time in their schedules, which is referred to as schedule  reserve, and extra money in their budgets, which is referred to as cost  reserve.", "Schedule reserve is allocated to specific activities, elements, and major  subsystems in the event of delays or to address unforeseen risks. Each  JWST element and major subsystem has been allocated schedule  reserve. When an element or major subsystem exhausts schedule  reserve, it may begin to affect schedule reserve on other elements or  major subsystems whose progress is dependent on prior work being  finished for its activities to proceed. The element or major subsystem with  the least amount of schedule reserve determines the critical path for the  project. Any delay to an activity that is on the critical path will reduce  schedule reserve for the whole project, and could ultimately impact the  overall project schedule.", "Cost reserves are additional funds within the project manager\u2019s budget  that can be used to address unanticipated issues for any element or  major subsystem, and are used to mitigate issues during the development  of a project. For example, cost reserves can be used to buy additional  materials to replace a component or, if a project needs to preserve  schedule reserve, reserves can be used to accelerate work by adding  shifts to expedite manufacturing. NASA\u2019s Goddard Space Flight Center  (Goddard)\u2014the NASA center with responsibility for managing JWST\u2014 has issued procedural requirements that establish the levels of both cost  and schedule reserves that projects must hold at various phases of  development. In addition to cost reserves held by the project manager,  management reserves are funds held by the contractors that allow them  to address cost increases throughout development. We have found that  management reserves should contain 10 percent or more of the cost to  complete a project and are generally used to address various issues tied  to the contract\u2019s scope."], "subsections": []}, {"section_title": "History of Cost Growth and Schedule Delays", "paragraphs": ["JWST has experienced significant cost increases and schedule delays.  Prior to being approved for development, cost estimates of the project  ranged from $1 billion to $3.5 billion, with expected launch dates ranging  from 2007 to 2011. Before 2011, early technical and management  challenges, contractor performance issues, low level cost reserves, and  poorly phased funding levels caused JWST to delay work after cost and  schedule baselines were established, which contributed to significant cost  and schedule overruns, including launch delays. The Chair of the Senate  Subcommittee on Commerce, Justice, Science, and Related Agencies  requested from NASA an independent review of JWST in June 2010.", "NASA commissioned the Independent Comprehensive Review Panel,  which issued its report in October 2010, and concluded that the baseline  funding did not allot adequate reserves, resulting in an unexecutable  project. Following this review, the JWST program underwent a replan in  September 2011, and in November of that same year, Congress placed  an $8 billion cap on the formulation and development costs for the  project. On the basis of the replan, NASA rebaselined JWST with a life- cycle cost estimate of $8.835 billion which included additional money for  operations and a planned launch in October 2018. The revised life-cycle  cost estimate included a total of 13 months of funded schedule reserve."], "subsections": []}, {"section_title": "Previous GAO Reviews of JWST Project", "paragraphs": ["We have previously found that since the project\u2019s replan in 2011, the  JWST project has met its cost and schedule commitments. In our most  recent report in December 2016, we found that the project was still  operating within its committed schedule while in its riskiest phase of  development\u2014integration and test\u2014but had used about 3 months of  schedule reserve since our previous December 2015 report. In addition,  we found that the project was facing numerous risks and single points of  failure before launch. Finally, we found that while the project was meeting  its cost commitments despite technical and workforce challenges, the  observatory contractor had continued to maintain a larger workforce for  longer than planned in order to address technical issues. In these prior  reports, we have made recommendations with regard to improving cost  and schedule estimating, updating risk assessments, and strengthening  management oversight. NASA has generally agreed and taken steps to  implement a number of our recommendations. For example, in December  2015, we recommended that the JWST project require contractors to  identify, explain, and document anomalies in contractor-delivered monthly  earned value management reports. NASA concurred with this  recommendation and, in February 2016, directed the contractors to  implement the actions stated in the recommendation. However, NASA did  not implement some recommendations, which if implemented, may have  provided insight into the challenges it now faces. For example, in  December 2012, we recommended the JWST project update its joint cost  and schedule confidence level (JCL), a point-in-time estimate that, among  other things, includes all cost and schedule elements and incorporates  and quantifies known risks. NASA policy requires projects to establish  commitment baselines at a 70 percent confidence level. Although NASA  concurred with this recommendation, it did not take steps to implement it.  An updated JCL may have portended the current schedule delays, which  could have been proactively addressed by the project."], "subsections": []}]}, {"section_title": "Considerable Progress Made Across JWST Project, but Integration and Test Challenges Have Delayed Launch at Least 5 Months with Further Delays Likely", "paragraphs": ["While much progress on hardware integration and testing and several risk  reduction efforts have occurred over the past several months, the JWST  project also used all of its schedule reserves established at the replan in  2011 to address various technical issues, including a test anomaly on the  telescope and sunshield hardware challenges. In September 2017, the  JWST project requested a launch window at least 5 to 8 months later than  the planned October 2018 launch readiness date, based on the results of  a schedule risk assessment that showed that various components of the  spacecraft element integration were taking longer to complete than  expected. The new launch window included up to 4 months of additional  schedule reserves. However, shortly after requesting the revised launch  window from the European Space Agency (ESA), which will contribute the  launch vehicle, the project learned from Northrop Grumman that up to  another 3 months of schedule reserve use was expected, due to lessons  learned from conducting deployment exercises of the spacecraft element  and sunshield. After incorporating some schedule efficiencies, the project  now has 1.5 months of schedule reserve remaining. Given the remaining  integration and test work ahead\u2014the phase in development where  problems are most likely to be found and schedules tend to slip\u2014and  risks remaining to be reduced to acceptable levels, coupled with a low  level of schedule reserves, we believe that additional delays to the  project\u2019s launch readiness date are likely."], "subsections": [{"section_title": "JWST Project Completed Significant Integration and Test Work", "paragraphs": ["Since our last report, the JWST project has made considerable progress  toward completing its third and fourth of five total integration and test  phases for the combined optical telescope element and integrated  science instrument module (OTIS) and the spacecraft elements,  respectively. Previously, the project and Northrop Grumman completed  the Integrated Science Instrument Module and the Optical Telescope  Element integration phases in March 2016, as shown in Figure 2 below.", "OTIS progress: Hardware integration and two of three key  environmental tests\u2014acoustics and vibration\u2014were completed in  2016 and early 2017, respectively. The third key test, cryovacuum\u2014 which was conducted in a large cryovacuum chamber to ensure the  telescope can operate at the near-absolute zero cryogenic  temperatures of space\u2014began in July 2017 at Johnson Space Center  and successfully concluded in October 2017. The project identified a  technical issue with the stability of the optical mirror that affects image  quality, and by conducting some additional testing, determined that it  was caused by a test equipment setup issue and not related to the  flight hardware itself. Project officials stated that they plan to delay  shipping the completed OTIS element to the Northrop Grumman  facility in California for final integration with the spacecraft element  from late December 2017 to February 2018. According to project  officials, the delay allows the project to shift some of the work to  prepare OTIS for integration with the spacecraft\u2014such as cleaning  the mirrors\u2014to Johnson Space Center where it will not have to share  space in the crowded clean room at Northrop Grumman as sunshield  fold and stow activities are ongoing. OTIS is expected to arrive at  Northrop Grumman months ahead of its need date for integration into  the observatory.", "Spacecraft element progress: All spacecraft element hardware has  been delivered and mechanical integration of spacecraft hardware\u2014 including the five layers of the sunshield\u2014is largely complete.  Northrop Grumman has also completed a folding operation and the  first full deployment of the integrated spacecraft element. Northrop  Grumman plans to refold the sunshield and complete one more  deployment cycle, after environmental testing, in this phase of  integration and testing.", "The project and its contractors conducted risk reduction testing on OTIS  and the spacecraft elements to reduce risk for challenging environmental  tests on flight hardware. These tests allowed the project and its  contractors to practice processes and procedures for testing on flight  hardware to create a more efficient test flow and proactively address  issues before flight hardware tests commenced. For example, the second  risk reduction test on the OTIS pathfinder hardware showed that vibration  levels inside the test chamber were too high, and adjustments to the  ground support equipment were implemented to address this issue.  Additionally, Northrop Grumman officials noted that risk reduction tests on  the spacecraft element have helped demonstrate facility capability and  logistics for the upcoming tests of flight hardware.", "The project has also progressed in preparing the software and ground  systems that will operate the observatory and manage and control the  telescope\u2019s observations. According to NASA\u2019s Independent Verification  and Validation group, the overall status of JWST software development  and integration efforts is very positive with minimal development  remaining, and the group has significant confidence that the mission  software will support the mission objectives. Additionally, the Space  Telescope Science Institute has made considerable progress in preparing  JWST\u2019s ground systems, such as preparing the Mission Operations  Center and conducting the Mission Operations Review in April 2017.", "The project has made notable progress in reducing and closing numerous  tracked risks. In December 2016, we reported that the project maintained  a risk list with 73 items. Currently, the list of tracked risks has 47 items to  be closed or mitigated to acceptable levels. The completion of the OTIS  cryovacuum test enabled the project to recently close several risks. For  example, the project previously tracked a risk that the instrument module  and telescope element might have to be de-integrated if OTIS testing  revealed workmanship issues. With the successful completion of the  testing, this risk was closed in fall 2017. The project also obtained a  waiver from the Office of Safety and Mission Assurance to NASA\u2019s risk  policy for its over 300 single point failures throughout the observatory, the  majority of which are related to the sunshield. Project officials reported  that the elimination of all single point failures on the JWST Mission is not  practical or even feasible, due mainly to the large number of  deployments, and that all mitigations practical to address and minimize  them have been implemented."], "subsections": []}, {"section_title": "JWST Delayed Launch Due to Integration Challenges on the Spacecraft Element, Avoiding a Potential Launch Site Conflict", "paragraphs": ["In the summer of 2017, the JWST project conducted a schedule risk  assessment that showed that the October 2018 launch readiness date  was unachievable, primarily due to the various components of spacecraft  element integration taking longer to complete than planned. The project  performed the schedule risk assessment in order to provide ESA a  desired launch window about one year prior to the expected launch date.  The assessment took into account remaining work to be completed,  lessons learned from environmental testing, and the current performance  rates of integrating the spacecraft element. As a result of the assessment,  in September 2017 NASA requested from ESA a launch window of March  2019 to June 2019. The requested launch window represents a 5- to 8- month delay from the previously planned October 2018 launch readiness  date.", "The schedule risk assessment incorporated input from Northrop  Grumman on expected durations for remaining spacecraft and  observatory level integration activities. However, the project\u2019s analysis  determined that the expected durations provided by Northrop Grumman  were overly optimistic. As a result, the project incorporated uncertainty  factors into the analysis, which added 2 to 3 months to the schedule. The  project also estimated an additional 5 to 8 weeks would be needed  because of emerging technical issues not specifically accounted for by  the schedule risk assessment. Additionally, the project updated the  expected time required at the launch site for processing activities and  added about 1.25 months. According to project officials, the confidence in  the launch window identified is in line with that of a typical NASA JCL at  70 percent. NASA\u2019s independent Standing Review Board reviewed the  assessment and found that it was a thorough approach for reviewing the  schedule, risks, and uncertainties and that the new proposed launch  readiness range is technically feasible with reasonable risk.", "NASA\u2019s request for a March to June 2019 launch window was driven by  its own schedule and technical issues, but also avoids potential conflicts  with other mission launches. Regardless of JWST\u2019s launch readiness,  and prior to undertaking the schedule risk assessment, the project  learned in November 2016 of potential scheduling conflicts at the launch  site in French Guiana. After numerous delays, BepiColombo, a joint  ESA/Japan Aerospace Exploration Agency mission to Mercury, is  currently forecasted to have an October 2018 launch readiness date.  According to program officials, that mission could have taken precedence  over JWST given that planetary missions generally have more limited  launch windows. Additionally, Arianespace, a commercial company,  currently has a commercial launch scheduled for the December 2018  timeframe."], "subsections": []}, {"section_title": "JWST Project Consumed all of its Planned Schedule Reserve to Address Technical Challenges", "paragraphs": ["While much progress has been made since we last reported in December  2016, the project and Northrop Grumman consumed the remaining 6  months of schedule reserves established at the 2011 replan to address  technical challenges that arose during the OTIS and the spacecraft  element integration and test work, as well as additional challenges  identified by the schedule risk assessment. Specifically:  In February 2017, a vibration anomaly during OTIS vibration testing at  Goddard Space Flight Center, occurring in parallel with spacecraft  and sunshield issues, consumed 1.25 months and delayed the start of  cryovacuum testing, the final event in the OTIS integration and test  phase, by several weeks.", "In April 2017, spacecraft and sunshield issues consumed an  additional 1.25 months. Specifically, a contractor technician applied  too much voltage and irreparably damaged the spacecraft\u2019s pressure  transducers, components of the propulsion system, which help  monitor spacecraft fuel levels. The transducers had to be replaced  and reattached in a complicated welding process. At the same time,  Northrop Grumman also addressed several challenges with  integrating sunshield hardware such as the mid-boom assemblies and  membrane tensioning system, which help deploy the sunshield and  maintain its correct shape.", "Finally, in September 2017, the remaining 3.5 months of previously  planned schedule reserves was consumed as a result of the  contractor having underestimated the time required to complete  integration and test work on the spacecraft and other risks identified in  the schedule risk analysis. Specifically, execution of spacecraft  integration and test tasks, due to the complexity of work and cautious  handling given sensitivity of flight hardware, was slower than planned.  For example, the installation of numerous membrane retention  devices slowed the pace of the work. According to Northrop Grumman  officials, the sunshield is elevated off the ground for installation work  and the size and quantity of the work lifts necessary for the  technicians to access the sunshield requires more maneuvering and  prevents the technicians from working on the forward and aft  sunshield assemblies simultaneously.", "Taking into account the consumption of planned reserves and the  establishment of the revised launch window, the project expected to have  up to 4 months of schedule reserve extending to the end of the launch  window range, or June 2019. However, shortly after the project notified  ESA of the launch delay in September 2017, the project received updated  information from Northrop Grumman and determined that up to 3 months  of schedule reserve would be needed based upon lessons learned from  Northrop Grumman\u2019s initial sunshield folding operation and implications  for remaining deployment test activities. After incorporating some  schedule efficiencies, the project now has 1.5 months of schedule reserve  remaining. This level of schedule reserve is below the standards  established by Goddard Space Flight Center for a project at this stage of  development. The project is working with Northrop Grumman to  determine if any further schedule reserve can be regained by  incorporating schedule efficiencies and adjusting integration and test  plans. As shown in the figure below, Northrop Grumman\u2019s work on the  spacecraft element remains on the project\u2019s critical path\u2014the schedule  with the least amount of reserve, which determines the overall schedule  reserve for the project\u2014now with an estimated 1.5 months of schedule  reserve to the end of the launch window in June 2019."], "subsections": []}, {"section_title": "Ongoing Spacecraft Integration and Test Issues, Challenging Remaining Work, and Slow Contractor Performance Make Additional Launch Delays Likely", "paragraphs": ["Given several ongoing technical issues, and the work remaining to test  the spacecraft element and complete integration of the telescope and  spacecraft, combined with continuing slower than planned work at  Northrop Grumman, we believe that the rescheduled launch window is  likely unachievable. For example, in May 2017, Northrop Grumman found  that 8 of 16 valves in the spacecraft propulsion system\u2019s thruster modules  were leaking beyond allowable levels. The project and Northrop  Grumman were unable to definitively isolate the root cause of the leaks;  however, Northrop Grumman determined that the most likely cause is a  handling error at their facility. Specifically, the material around the valves  deteriorated due to a solvent used for cleaning. All of the thruster  modules were returned to the vendor for investigation and refurbishment.  According to project officials, the refurbished thruster modules were  returned to the contractor facility in late 2017 for reattachment. However,  reattaching the repaired modules is a challenge because of the close  proximity of electronics and other concerns. The project included about  one month in the schedule risk assessment to account for the time spent  investigating and determining the path forward for the thruster issue;  however, the full schedule impact of reattaching the thruster modules to  the spacecraft element had not yet been determined and was not  incorporated into the analysis. In November 2017, the project and  Northrop Grumman chose a reattachment method that project officials  stated is expected to require less time to complete and pose fewer risks  to the hardware than a traditional welding approach.", "In October 2017, when conducting folding and deployment exercises on  the sunshield, Northrop Grumman discovered several tears in the  sunshield membrane layers. According to program officials, a  workmanship error contributed to the tears. The tears can be repaired;  however, some schedule reserve may be required to repair them.  Additionally, during the deployment exercise, one of the sunshield\u2019s six  membrane tensioning systems experienced a snag. Northrop Grumman  is planning to implement a slight design modification to prevent the issue  from occurring again. Northrop Grumman officials have not yet  determined if the schedule will be affected as a result.", "Beyond mitigating the specific spacecraft thruster module valve leak and  sunshield issues, the project faces significant work ahead, and numerous  risks remain to be mitigated to acceptable levels. For example, the project  and Northrop Grumman must:", "Resolve lingering technical issues from the OTIS cryovacuum test and  prepare and ship OTIS to the Northrop Grumman facility in California  for integration with the spacecraft.", "Complete integration of spacecraft hardware, and conduct spacecraft  element environmental tests and remaining deployments of the  spacecraft and sunshield\u2014activities which, to date, have taken  considerably longer than planned.", "Integrate the completed OTIS element with the spacecraft element  and test the full observatory in the fifth and final integration phase,  which includes another set of challenging environmental tests.", "Mitigate approximately 47 remaining tracked hardware and software  risks to acceptable levels and continue to address the project\u2019s 300+  potential single point failures to the extent possible.", "Prepare and ship the observatory to the launch site and complete final  launch site processing, including installation of critical release  mechanisms.", "Project officials have expressed concern with Northrop Grumman\u2019s ability  to prevent further schedule erosion as the project moves through  remaining integration and test work. With the project\u2019s current low level of  schedule reserves, even a relatively minor disruption could cause the  project to miss its revised launch window. According to program officials,  the contractor has increased its daily work shifts from two to three and is  now working 24 hours per day on spacecraft integration, which further  limits schedule flexibility. In early 2018, the project\u2019s independent  Standing Review Board will review the latest schedule inputs based on  updated knowledge about spacecraft integration and test activity  durations. For example, according to project officials, by early 2018, the  contractor is expected to have completed the second of four planned fold  and stow sequences on the sunshield, which will provide more insight into  whether the current planned schedule is realistic. The Standing Review  Board will also examine the project\u2019s plans for schedule efficiencies and  potential integration and test adjustments to determine if the June 2019  launch window can be met. Project officials stated that following this  review, NASA senior management will be briefed on the Standing Review  Board\u2019s findings and will then formally identify a new launch readiness  window.", "Our prior work has shown that integration and testing is the phase in  which problems are most likely to be found and schedules tend to slip.  For a uniquely complex project such as JWST, this risk is magnified. Now  that the project is well into its complex integration and test efforts, events  are sequential in nature and there are fewer opportunities to mitigate  issues in parallel. Since the replan, the project has used about 2.5  months of schedule reserve per year to address technical issues, but, as  discussed above, it now has only approximately 1.5 months of schedule  reserve to last until the end of the revised launch window in June 2019.  Thus, past experience with technical issues in earlier integration phases  suggests that this amount of reserve will not be adequate for the  challenging work ahead, and further delays to launch readiness are likely.  We will continue to monitor the project\u2019s progress in meeting its revised  schedule as more information is available during this critical integration  and test phase."], "subsections": []}]}, {"section_title": "Higher Contractor Workforce Levels to Address Continuing Technical Challenges Places JWST at Risk of Exceeding Cost Commitments", "paragraphs": ["Northrop Grumman continued to maintain higher than planned workforce  levels in the past year and, as a result, NASA will have limited cost  reserves to address future challenges. Northrop Grumman\u2019s ability to  control costs and decrease its workforce is central to JWST\u2019s capacity to  meet its long-term cost commitments. For the past 44 months, Northrop  Grumman\u2019s actual workforce has exceeded its projections and the  company is not expected to significantly reduce its workforce until the  spring of 2019, when NASA plans to ship the completed observatory to  the launch site. Northrop Grumman had planned to reduce its workforce  in fiscal years 2016 and 2017 as work was planned to be completed, but  has needed to maintain higher workforce levels due to technical  challenges and the work taking longer than expected. Figure 6 illustrates  the difference between the workforce levels that Northrop Grumman  projected for fiscal years 2016 and 2017, and its actual workforce levels  during that period.", "As shown in figure 6, Northrop Grumman has slightly reduced its  workforce since the beginning of fiscal year 2016. However, staffing  levels remain higher than projected as a result of previously noted  technical challenges including spacecraft and sunshield integration and  test challenges, to keep specialized engineers available when needed  during final assembly, and to complete required testing activities.  Projections made at the beginning of fiscal year 2017\u2014when the  expected launch readiness date was October 2018\u2014expected workforce  levels to begin at 472 full-time equivalent staff and drop to 109 at the end  of the fiscal year. However, technical challenges and delays in completing  scheduled work did not allow for the planned workforce reduction and  Northrop Grumman reported 496 full-time equivalent staff in September  2017, or 387 more than planned. According to JWST project officials and  similar to previous years, Northrop Grumman\u2019s priority for fiscal year 2018  is to maintain schedule in order to ensure that the new launch window set  from March to June 2019 can be met. As a result, Northrop Grumman\u2019s  contractor workforce levels are expected to continue to be elevated  through JWST\u2019s final integration and test phase in fiscal year 2019 where  the spacecraft and OTIS will be integrated before shipment to the launch  site.", "Northrop Grumman submitted a cost overrun proposal to NASA in July  2016, primarily to address costs associated with sustaining its workforce  at higher levels than planned in fiscal year 2017. An overrun proposal  seeks to increase the value of a cost-reimbursement contract when the  total estimated cost is less than the contract\u2019s estimated cost to complete  the performance of the contract. In addition to higher workforce levels,  the overrun proposal replenished contractor management reserves that  had been used to address technical issues, and addressed projected  growth in the contractor\u2019s cost to complete work. NASA and the  contractor completed negotiations in September 2017 and executed a  contract modification that added $179.9 million to the value of the contract  to cover Northrop Grumman\u2019s cost overrun and additional negotiated  items, such as particle dampers. This amount was intended to cover the  cost of the remaining work through the expected launch date of October  2018. However, by September 2017 Northrop Grumman had no  remaining schedule reserves and a limited amount of cost reserves with  which to address future costs.", "Furthermore, the project determined\u2014as discussed above\u2014that the  October 2018 launch window was not feasible and established a new  launch window. According to JWST project officials, the project expects to  issue a request for proposal in early 2018 to cover the costs for the  remaining work through the new launch window. The project plans to use  a significant portion of fiscal years 2018 and 2019 program cost reserves  to address Northrop Grumman costs and unanticipated technical  challenges. According to JWST program officials, if the contractor does  not improve its schedule efficiency, the remaining reserves will be used to  offset increased cost resulting from taking longer to complete the work.", "For the sixth consecutive year, the JWST project managed spending  within its allocated budget in fiscal year 2017. However, JWST is still  resolving technical challenges and planned work continues to take longer  to complete. Prudent management of its resources allowed the project to  carry into fiscal year 2018 about a third more carry over funding than it  had projected at the beginning of the fiscal year. Program officials said  that assuming the remaining integration and tests proceed as planned  and no long delays are encountered, the existing program resources  accommodate the new launch window of March to June 2019. The project  continues to identify funding options in the event of a delay of beyond the  end of the launch window. Under the 2011 replan, Congress placed an $8  billion cap on formulation and development costs, but any long delays  beyond the new launch window\u2014which, as noted above, are likely\u2014 place the project at risk of exceeding this cap."], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We requested comments from NASA, but agency officials determined that  no formal comments were necessary. NASA provided technical  comments, which were incorporated as appropriate.", "We are sending copies of the report to NASA\u2019s Administrator and  interested congressional committees. In addition, the report is available at  no charge on GAO\u2019s website and http://www.gao.gov.", "If you or your staff have any questions on matters discussed in this report,  please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Elements and Major Subsystems of the James Webb Space Telescope (JWST) Observatory", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Richard Cederholm, (Assistant  Director); Karen Richey, (Assistant Director); Jay Tallon, (Assistant  Director); Brian Bothwell, Laura Greifner, Daniel Kuhn, Katherine Lenane,  Jose Ramos, Carrie Rogers, Sylvia Schatz, and Roxanna Sun made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The James Webb Space Telescope, the planned successor to the Hubble Telescope, is one of NASA\u2019s most complex and expensive projects.", "NASA recently announced that JWST's launch would be delayed several months, from October 2018 to no later than June 2019, because components of the telescope are taking longer to integrate than planned.", "Based on the amount of work NASA has to complete before JWST is ready to launch, we found that it's likely the launch date will be delayed again. If that happens, the project will be at risk of exceeding the $8 billion cost cap set by Congress."]}
{"id": "GAO-18-252", "url": "https://www.gao.gov/products/GAO-18-252", "title": "Next Generation 911: National 911 Program Could Strengthen Efforts to Assist States", "published_date": "2018-01-31T00:00:00", "released_date": "2018-02-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year, millions of Americans call 911 for help during emergencies. However, the nation's legacy 911 system relies on aging infrastructure that is not designed to accommodate modern communications technologies. As a result, states and localities are upgrading to NG911, which offers improved capabilities, such as the ability to process images, audio files, and video. While deploying NG911 is the responsibility of state and local entities, federal agencies also support implementation, led by NHTSA's National 911 Program, which facilitates collaboration among federal, state, and local 911 stakeholders.", "GAO was asked to review NG911 implementation nationwide. This report examines: (1) state and local progress and challenges in implementing NG911 and (2) federal actions to address challenges and planned next steps. GAO reviewed relevant statutes, regulations, and federal agency reports and plans. GAO also analyzed NHTSA's survey data on state 911 implementation for calendar year 2015, the most recent year for which data were available, and interviewed federal officials, state and local officials from nine states (selected to represent different regions and various phases of NG911 implementation), and officials from industry and advocacy groups."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Highway Traffic Safety Administration's (NHTSA) National 911 Program's most recent national survey on Next Generation 911 (NG911) implementation indicated that about half of states were in some phase of transition to NG911 in 2015, but that state and local progress varied. Specifically, 10 states reported that all 911 authorities in their state processed calls using NG911 systems; however, 18 states reported having no state or local NG911 transition plans in place\u2014which may indicate these states were in the early phases of planning for the transition to NG911 or had not yet begun. GAO spoke with state and local 911 officials in 9 states, which were in various phases of implementing NG911, and found that none of the 9 selected states were accepting images, audio files, or video. State and local 911 officials identified a number of challenges to implementing NG911. Such challenges are related to funding, evolving technology and operations, and governance. For example, officials in 3 states said that the current funding they collect from telephone service subscribers may not be sufficient to support NG911's transition costs while simultaneously funding the operation of existing 911 systems.", "Federal agencies\u2014including NHTSA, the National Telecommunications and Information Administration, the Federal Communications Commission, and the U.S. Department of Homeland Security\u2014have responsibilities to support NG911 implementation, such as through coordinating activities and administering grants, and are taking actions to assist state and local entities in addressing challenges to NG911's implementation. Such actions include developing resources, offering technical assistance, and convening stakeholders to explore emerging NG911 issues. For example, as the lead entity for coordinating federal NG911 efforts, NHTSA's National 911 Program is developing resources on NG911 topics, such as federal funding and governance structures. While the National 911 Program is taking steps to facilitate the state and local transition to NG911, the program lacks specific performance goals and measures to assess its progress. Without such goals and measures, it is not clear to what extent the program is effectively achieving its mission.", "In 2018, the National 911 Program plans to establish an interagency initiative tasked with creating a National NG911 Roadmap. This roadmap is intended to identify next steps for the federal government in supporting the creation of a national, interconnected NG911 system. While the National 911 Program is taking steps to develop a list of national-level tasks as part of its roadmap initiative, the program does not have a plan to identify: (1) roles or responsibilities for federal entities to carry out these tasks or (2) how the program plans to achieve the roadmap's objectives. Collaborating with the appropriate federal agencies to determine federal roles and responsibilities to carry out the roadmap's national-level tasks could reduce barriers to agencies effectively working together to achieve those tasks. Furthermore, developing an implementation plan that details how the roadmap's tasks will be achieved would place the National 911 Program in a better position to effectively lead interagency efforts to implement NG911 nationwide."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that NHTSA's National 911 Program develop performance goals and measures and, for the National NG911 Roadmap, determine agencies' roles and responsibilities and develop an implementation plan. NHTSA agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year, millions of Americans call 911 for help during emergencies.  According to the National Emergency Number Association, approximately  240 million calls are made to 911 in the United States each year, with  over 80 percent of these calls made from wireless devices. However, the  nation\u2019s legacy 911 systems rely on aging infrastructure that is not  designed to accommodate modern communications technologies. As a  result, states and localities\u2014the primary providers of 911 services  through approximately 6,000 call centers nationwide\u2014are working to  upgrade their 911 systems to the next generation of services, commonly  known as Next Generation 911 (NG911). Benefits of NG911 systems  include improved capabilities to communicate with callers, increased  resiliency of 911 operations, and enhanced information sharing among  911 call centers and first responders. Call centers using NG911 will be  able to receive voice calls and accept various forms of data, such as text  messages, images, video, and vehicle crash data. Such information can  help to facilitate quick and accurate dispatch of emergency responders  (such as police, firefighters, and ambulance crews) and can be beneficial  in situations where a 911 caller is unable to speak.", "The transition to NG911 includes replacing the existing legacy 911  networks\u2014which carry voice calls and limited data\u2014with NG911 systems that use Internet Protocol (IP)-based technology. As we have previously  reported, modernizing communications networks can improve customers\u2019  access and services. The Federal Communications Commission (FCC)  notes that as legacy infrastructure is retired, the transition period in which  multiple technologies may be used simultaneously raises potential  challenges for 911 services. To assist states and localities in this  transition, the Next Generation 911 Advancement Act of 2012 (2012 Act)  outlined federal agencies\u2019 roles and responsibilities related to NG911.  The 2012 Act required the National Highway Traffic Safety Administration  (NHTSA) within the U.S. Department of Transportation and the National  Telecommunications and Information Administration (NTIA) within the  U.S. Department of Commerce to create a national program to improve  coordination and communication among federal, state, and local  stakeholders. This initiative is known as the National 911 Program, which  serves as the federal point of coordination for activities among 911  stakeholders and leads the national effort to eventually connect  approximately 6,000 independently operated 911 call centers into an  interconnected, nationwide NG911 system. The 2012 Act also required  FCC\u2014which has regulatory authority over telecommunications carriers\u2014 to issue specific recommendations to support the NG911 transition,  among other responsibilities. In addition, the 2012 Act required the U.S.  Department of Homeland Security (DHS)\u2014which has responsibilities  related to ensuring the security and interoperability of emergency  communications nationwide\u2014to work with FCC, NHTSA, and NTIA on  specific NG911 activities.", "You asked us to review the status of implementation of NG911  nationwide. This report examines: (1) progress states and localities are  making to implement NG911 and the challenges they have faced and (2)  how federal agencies have addressed state and local implementation  challenges and planned next steps.", "To address these objectives, we analyzed survey data provided by  NHTSA\u2019s National 911 Program on the status of statewide 911 systems  for calendar year 2015, the most recent year for which data were  available. We also reviewed FCC\u2019s data on state collection and  distribution of 911 fees and charges for calendar year 2015. According to  our review of the survey data, relevant documentation, and conversations  with staff responsible for the data, we determined that the data were  sufficiently reliable to generally describe states\u2019 progress in implementing  NG911 and to provide background on 911 fee collection and costs.", "We also selected a non-generalizable sample of 10 states for case  studies, based upon a variety of factors, including variation in geographic  location, reported progress in implementing NG911, number of annual  911 calls, and whether states diverted 911 fees to other uses. We  requested interviews with and documentation from state and local 911  officials from the 10 selected states about NG911 implementation  progress, challenges, federal actions, and any additional assistance  needed. We obtained documentation from and interviewed officials from  nine states; one of the selected states did not respond to our requests.  While not generalizable to all states, the information obtained from our  case studies provides examples of broader issues faced by states and  localities in managing the transition to NG911.", "In addition to our case study work, we reviewed relevant statutes,  regulations, our prior reports, and documentation of federal agency  actions and plans. We also interviewed officials from federal agencies,  including NHTSA, NTIA, FCC, and DHS, and officials from national  associations representing emergency-response-technology companies,  wireless and wireline phone carriers, emergency-communications entities,  and consumer groups. We identified guidance on leading practices for  performance management, and reviewed interagency collaboration  practices from our prior work. We also applied relevant federal  standards for internal control that are key to helping agencies better  achieve their missions and desired program results. We assessed  NHTSA\u2019s efforts to set goals and achieve desired results for the National  911 Program using these standards, this guidance, and selected  collaboration practices from our prior work. A more detailed summary of  our scope and methodology appears in appendix I.", "We conducted our work from January 2017 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["As we have previously reported, 911 services have evolved from basic  911\u2014which provided Americans with a universally recognized emergency  number\u2014to Enhanced 911 which also routes calls to the appropriate call  center and provides information about the caller\u2019s location and a call back  number. NG911 represents the next evolution in 911 services by using  IP-based technology to deliver and process 911 traffic. Under NG911, call  centers will continue to receive voice calls and location information, but  will also be able to accommodate emergency communications from the  range of technologies in use today. In addition, NG911 systems provide  call centers with enhanced capabilities to route and transfer calls and  data, which could improve call centers\u2019 abilities to handle overflow calls  and increase information sharing with first responders."], "subsections": [{"section_title": "911 Communications Process", "paragraphs": ["Generally speaking, 911 communications begin when a caller dials 911  using a landline, wireless, or Voice over Internet Protocol (VoIP)  system. Once a 911 caller places an emergency call, a communications  provider receives and routes the call to the appropriate call center, along  with the caller\u2019s phone number and location (i.e., street address for a  landline caller, approximate geographic location for a wireless caller, and  the subscriber\u2019s address for VoIP). Calls and data may be routed to 911  call centers using legacy methods (i.e., routing calls across traditional  telephone networks) or NG911 methods (i.e., routing calls and other data  through IP-networks). Once the call reaches a call center, trained call  takers and dispatchers determine the nature of the emergency and  dispatch first responders, typically using a variety of equipment and  systems, including call handling systems, mapping programs, and  computer aided dispatch. Figure 1 illustrates the 911 communications  and dispatch process.", "As illustrated in figure 1, NG911 systems use IP-networks capable of  carrying voice plus large amounts of data. These emergency-services  networks are typically deployed at the state or regional level with multiple  call centers connecting to the network. However, the existence of an IP- network alone does not constitute an NG911 system. As defined by  standards developed by the emergency communications community, an  NG911 system should have the capability to, among other things: provide a secure environment for emergency communications; acquire and integrate additional data for routing and answering calls; process all types of emergency calls, including multimedia messages;  transfer calls with added data to other call centers or first  responders.", "While NG911 systems must possess certain capabilities, it is important to  note that states and localities may make decisions about which  capabilities they intend to use to best meet their needs. In addition, states  and localities have the authority to make decisions about what NG911  equipment, systems, and vendors to use; thus, the configurations of these  systems vary."], "subsections": []}, {"section_title": "NG911 Implementation", "paragraphs": ["According to a panel of experts convened by the National 911 Program,  the transition to NG911 may require a variety of technical and operational  changes to current 911 systems and processes. For example, technical  changes can include upgrades to networks or installing new hardware or  software in 911 call centers. Operational changes can include the need  for additional training or the development of new policies and procedures  (e.g., new procedures for processing or storing multimedia). These  technical and operational changes may also have effects on 911 funding  and state and local governance structures, which we will discuss in more  detail later in this report.", "According to an FCC advisory body that examined NG911 systems  architecture in 2016, while NG911 systems are implemented in a variety  of ways at the state or local level, NG911 implementation can occur  gradually and in phases. According to this model, NG911  implementation occurs on a continuum that begins with legacy 911  systems and ends with a fully deployed NG911 national end-state where  all individual 911 call centers nationwide would be connected. The NG911  implementation model identifies activities that take place as part of the  NG911 transition, many of which occur concurrently, such as: planning (e.g., conducting feasibility studies, preparing databases,  establishing governance models); acquiring, testing, and implementing NG911 system elements (e.g.,  establishing an emergency-services IP-network, location-based call  routing, processing multimedia);  connecting call centers within a jurisdiction (i.e., jurisdictional end- state in which all call centers are fully NG911 operational, supported  by agreements, policies, and procedures); and  connecting NG911 systems nationwide (i.e., national end-state in  which all call centers in the nation are fully NG911 operational,  supported by agreements, policies, and procedures).", "In addition, because 911 services provide an essential function, the  implementation of NG911 generally involves using both the legacy  system and the NG911 system simultaneously for a period of time,  according to the FCC advisory body, to ensure 911 services are not  disrupted as new system elements are tested and implemented."], "subsections": []}, {"section_title": "State and Local Roles", "paragraphs": ["Deploying and operating 911 is the responsibility of 911 authorities at the  state and local level. As we have previously reported, all 50 states and  the District of Columbia collect\u2014or have authorized local entities to  collect\u2014funding for 911 from telephone service subscribers, and methods  within each state for collecting funds vary. FCC, as required by statute,  reports to Congress annually on the states\u2019 collection and distribution of  911 fees and charges. There are approximately 6,000 call centers  nationwide that process 911 calls, often at the county or city level, and  these centers can vary greatly in size and technical sophistication. The  state and local governance structures that oversee 911 operations also  vary by location. For example, we previously reported that some states  collect fees or charges for 911 and administer a statewide 911 program.  Other states authorize local entities to collect fees or charges for 911 and  administer 911 programs at the local level. Still other states use a  combination of these approaches. According to a panel of experts  convened by the National 911 Program, historically, 911 authority has  been coordinated and maintained locally with no requirement to  coordinate with other jurisdictions. However, the transition to NG911  enables connection of 911 systems. Thus, as previously mentioned, the  NG911 transition may require technological and operational changes, as  well as changes to 911 policies and governance responsibilities for states  and localities."], "subsections": []}, {"section_title": "Federal Roles", "paragraphs": ["While deploying and operating 911 is the responsibility of entities at the  state and local level, federal agencies\u2014including NHTSA, NTIA, FCC,  and DHS\u2014have responsibilities to support state and local  implementation, including through facilitating coordination of activities  among 911 stakeholders and administering federal grants, for example:", "NHTSA houses the National 911 Program as part of its Office of  Emergency Medical Services (Office of EMS) to provide national  leadership and coordination for the NG911 transition throughout the  United States, as previously mentioned. According to NHTSA, the  fiscal year 2017 budget for the National 911 Program was $2.74  million. Among other activities, which we will discuss later in this  report, the National 911 Program surveys states on progress  implementing NG911 and reports this survey data annually.", "FCC issues orders and regulations for 911 service providers on topics  relevant to NG911, such as 911 reliability, location accuracy, and text- to-911. FCC also sponsors advisory bodies comprised of government  and industry experts that study relevant topics and provide  recommendations related to NG911, such as the Task Force on  Optimal Public Safety Answering Point Architecture and the  Communications, Security, Reliability, and Interoperability Council.", "While there are no federally mandated time frames for implementing  NG911, the Next Generation 911 Advancement Act of 2012 requires  specific actions of some federal agencies as outlined in table 1, below.", "In addition, according to the National 911 Program, as states and  localities continue to implement NG911, and begin to explore  interconnection with other states\u2019 911 systems, federal agencies may  need to take steps to help ensure state NG911 networks are  interoperable and connected. We will discuss actions taken by federal  agencies to assist states and localities to implement NG911 later in this  report."], "subsections": []}]}, {"section_title": "States and Localities Have Reported Varied Progress in Implementing NG911 and Identified Funding, Technology, and Governance Challenges", "paragraphs": [], "subsections": [{"section_title": "Reported Progress among States Varies in Implementing Next Generation 911", "paragraphs": ["According to NHTSA\u2019s most recent national survey, state and local  progress implementing NG911 varies, and about half of all states  reported being in some phase of transition to NG911 in 2015. While a  few states are well into statewide implementation, NHTSA officials told us  that no state had completely implemented all NG911 functions.  Additionally, as of the fall of 2017, none of the selected states we spoke  with were processing multimedia\u2014such as images or audio/video  recordings\u2014through their 911 systems due to concerns related to  privacy, liability, and the ability to store and manage these types of data,  among other things. The national survey data, based on responses from  45 states, measured the extent to which NG911 planning and acquisition  of NG911 equipment and services were occurring, and the extent to  which basic NG911 functions were operational at the state and local  levels in 2015.", "Planning: This measure includes state and local NG911 plans for  governance, funding, system components, and operations. In this context,  system components refer to an emergency services IP-based network,  NG911 software, system and information security, and databases, among  other things, according to NHTSA\u2019s survey. In total, 25 of 45 states  reported having a state or at least one local NG911 plan in place;  conversely, 18 states reported having no NG911 plan in place at either  the state or local level\u2014which may indicate they are in the early stages of  planning for the NG911 transition or have not yet begun the transition to  NG911.", "Acquisition: These measures identify states or local entities that have  defined their NG911 needs and awarded contracts, and then installed and  tested acquired NG911 components and services. Twenty-four states  reported awarding at least one contract at the state or local level for  NG911 components and services. Twenty-three states reported having  installed and tested NG911 components and services at either the state  or local level.", "NG911 services: This is a measure of 911 authorities that have some  basic, functioning NG911 infrastructure in place. In total, 21 states  reported having some level of basic NG911 services in place at the state  or local level. Of these 21 states, 10 reported that all 911 authorities  within the state were using NG911 technology to process emergency  calls. Another 7 of these states reported that 25 percent or less of their  state\u2019s 911 authorities were using NG911 technology to process  emergency calls."], "subsections": []}, {"section_title": "Officials Identified State and Local Funding, Technology, and Governance Challenges to Implementing NG911", "paragraphs": ["Federal officials, industry stakeholders, and state and local 911 officials  we interviewed from nine states identified a number of challenges to  implementing NG911, including challenges related to funding, evolving  technology and operations, and governance.", "Funding: State and local officials in four of nine selected states identified  insufficient funding as one of the challenges they face in implementing  NG911. Additionally, FCC, NHTSA, and industry reports noted that state  and local financing strategies are generally insufficient to fully implement  NG911. Specifically, these reports note that the need to provide new  capital for NG911 implementation while simultaneously funding legacy  operational costs during the transition can strain state and local funding.", "Limited funding: Officials in three states told us that their current  funding may not be able to support the upfront costs of infrastructure  and equipment acquisitions associated with the transition to NG911.  Further, officials said they will need to simultaneously fund both the  new NG911 and legacy 911 systems currently in operation until the  NG911 systems are fully operational. To address these challenges, a  Minnesota official told us about how the state leveraged economies of  scale to reduce overall costs through cost sharing between multiple  call centers and of call centers consolidating operations from 114 to  104 call centers. Additionally, a Virginia official told us that to cover  the upfront costs of transitioning to NG911, the state plans to borrow  from the state treasury and then repay the treasury with future-year  fee collections.", "Fee diversion: Diversion of fees intended for 911 costs to non-911  activities may affect a state\u2019s or locality\u2019s ability to cover NG911  transition costs and necessitate identifying alternative funding  sources. The FCC\u2019s 2016 annual report on 911 fees indicates that for  calendar year 2015, all but two of the states that responded to FCC\u2019s  911 fee survey affirmed that their state or jurisdiction collects fees  from phone users to support or implement 911 services. State and  local authorities also determine how these 911 fees can be used.  FCC\u2019s report also indicated that eight states and Puerto Rico reported  diverting a total of more than $220 million (or approximately 8.4  percent) of 911 fees collected to non-911 purposes. Some of these  diverted funds were directed to other public safety programs, and  others were diverted to either non-public safety or unspecified  purposes. According to one state official, had it not been for 911 fees  being diverted to non-911 purposes, funding would have been  sufficient to cover the NG911 transition without having to go to the  state legislature for additional funding. However, officials in the other  eight selected states told us that either fee diversion was not an issue  in their state or that the diversion of funds had not affected their  state\u2019s ability to implement NG911.", "Evolving technology and operations: Officials in eight states told us  that the retirement of legacy infrastructure and the transition to IP-based  systems introduces new technical and operational challenges for call  centers and states, as well as for equipment and service providers.", "Interoperability: Officials in three selected states mentioned that  connecting to neighboring networks\u2014whether within or between  states\u2014could pose challenges. For example, officials mentioned that  states and localities may have obtained different equipment, software  applications, or service providers \u2013 all of which can make  interconnections difficult. Officials in Maine and New Hampshire told  us that differences in service providers can also be a challenge to  seamlessly connecting to neighboring systems. In an instance where  two states (Minnesota and North Dakota) have worked to connect  their 911 systems, both states used the same service provider, which  officials said allowed for fewer barriers to connection.", "Cyber risks: Officials in three states told us that the transition from a  traditional system that only transmits voice traffic to an IP-based  system that transmits voice and data traffic has significantly increased  the risk of a cyber-attack. This can be a challenge because managing  cyber risks is a new and evolving role for state and local 911  authorities. Approaching the transition to NG911 without managing  these risks could result in disrupted or disabled call center operations  and ultimately a delayed response to an emergency situation.", "Multimedia: Officials in three states mentioned potential  implementation challenges related to accepting and processing  multimedia such as audio recordings, images, and videos. More  specifically, one official said they did not have procedures to manage  or store these multimedia files once received. In addition, another  official raised privacy and liability concerns.", "Call routing: One of the core services of an NG911 system is the  ability to have calls routed to the appropriate call center based on a  wireless caller\u2019s physical location, instead of the location of the  cellular tower that receives and transmits the call. An FCC-sponsored  working group reported that there are several options for achieving  this and each option has unique positive and negative aspects. One  challenge officials in two states noted was that rather than a single,  nationwide approach to routing these calls, state and local 911  authorities would need to work individually with the wireless carriers to  determine how to best implement location-based call routing.", "Governance: FCC has noted that transitioning to NG911 will likely result  in new roles and levels of coordination between state 911 authorities,  local 911 authorities, 911 call centers, and 911 service providers. Further,  relationships among authorities at the state and local level may change  as states work to interconnect NG911 systems. State and local officials  noted that these types of governance challenges can apply in a variety of  situations, including within or between states.", "Evolving roles: As previously mentioned, 911 governance structures  vary among states. These varying governance structures may pose  different challenges. For example, some states have a centralized  structure in which a single government agency is responsible for  statewide 911 system\u2019s administration and policy. Officials in two  states told us that although they faced challenges transitioning to  NG911, their states\u2019 centralized 911 structure eased the transition in  their states because there was uniformity in policy and technology,  among other things, coming from a single statewide authority. In other  states, 911 systems are primarily a local responsibility and organized  with decentralized authorities and resources. In these instances, there  may be specific challenges related to transitioning to an  interconnected NG911 system. Such challenges may include the  need for increased levels of coordination among numerous  jurisdictions with potentially disparate organizational structures, levels  of funding, and priorities. An official also noted that there are  governance challenges related to connecting states and evolving  relationships between 911 authorities and service providers.", "Informing decision makers: One of the challenges identified by  officials in two states is differing levels of experience and  understanding by state and local officials as to what NG911 priorities  should be for timely implementation. To help with this understanding,  the federal government is making efforts to educate state and local  authorities on how to facilitate policymaker understanding as well as  provide regular updates to stakeholders on recent NG911  developments. We discuss some of these efforts later in this report."], "subsections": []}]}, {"section_title": "Federal Agencies Are Addressing NG911 Implementation Challenges, but the National 911 Program Lacks Measurable Goals and Next Steps for the NG911 Roadmap Initiative", "paragraphs": [], "subsections": [{"section_title": "Federal Agencies Are Taking Actions to Address NG911 Implementation Challenges", "paragraphs": ["While state and local entities have the primary responsibility for  implementing NG911 technology and services, federal agencies are  taking actions to assist state and local 911 entities to address NG911  implementation challenges. Actions taken include developing resources,  offering technical assistance, and convening stakeholders. More  specifically, we identified selected activities that were taken by NHTSA,  NTIA, FCC, and DHS that address some of the funding, technology, and  governance challenges raised by state and local 911 stakeholders, for  example:", "Cost study: NHTSA\u2019s National 911 Program and NTIA, in  consultation with FCC and DHS, plan to issue a study of the range of  costs for 911 call centers and service providers to implement NG911  systems. According to NHTSA officials, the cost study will present a  nationwide view, rather than a state-by-state view, on the progress of  NG911 implementation and its associated costs.", "Grant program: NHTSA and NTIA are preparing to jointly administer  a $115 million grant program to improve 911 services, including the  adoption and operation of NG911 services. In September 2017,  NHTSA and NTIA issued a notice of proposed rulemaking outlining  implementing regulations for the grant program. NHTSA and NTIA  expect to award the grants in 2018.", "Technology standards: The National 911 Program issued an annual  guide in 2017 that stressed the importance of using open technology  standards for NG911 services. The guide provides a list of standards  that have been recently updated and an analysis that identifies  whether existing standards fully address NG911 processes and  protocols.", "Cybersecurity guides: DHS issued a guide in 2016 that identified  cybersecurity risks for NG911 and risk mitigation strategies.  According to DHS officials, the National 911 Program provided input  on this guide. In addition, an advisory body tasked by FCC to examine  911 call-centers\u2019 architecture issued a report in 2016 that provided a  cybersecurity self-assessment tool for call centers and guidance on  cybersecurity strategies.", "Governance plans: To address challenges related to the evolving  roles for state and local 911 authorities, the National 911 Program  issued a guide in 2016 that provided practices for states to consider  when interconnecting NG911 networks, and DHS issued a guide in  2015 for emergency communications officials for establishing,  assessing, and updating their governance structures. In addition, an  FCC advisory body issued a report in 2016 that identified NG911  governance approaches, issues, and recommendations for states,  localities, and call centers to consider when planning for the  deployment of NG911.", "In addition to federal agency efforts to assist the state and local 911  community, the National 911 Program is in the early stages of  establishing an interagency initiative to create a National NG911  Roadmap. As part of this initiative, the National 911 Program plans to  convene the 911 stakeholder community to identify tasks that need to be  completed at the national level by the federal government and other  public and private-sector organizations to support the creation of a  national, interconnected NG911 system. Additional details regarding this  planned activity are described in further detail later in this report. For  additional information on federal actions to address state and local  NG911 challenges, see appendix II."], "subsections": []}, {"section_title": "National 911 Program Lacks Goals and Performance Measures", "paragraphs": ["As the lead entity for coordinating federal NG911 activities, the National  911 Program has taken a variety of actions to assist the state and local  911 community, in collaboration with other federal agencies. However,  the program lacks goals and performance measures to assess whether  these activities are achieving desired results. National 911 Program  officials stated that they initiate program activities based on feedback  received from the 911 community. In addition, officials said the program\u2019s  activities fall within the tasks established in the Next Generation 911  Advancement Act of 2012. However, the National 911 Program does not  have a means to assess its progress toward meeting its responsibilities  established in the 2012 Act. National 911 Program officials said the Office  of EMS\u2014the office within NHTSA in which the program is housed\u2014has a  strategic plan, but it is outdated and does not contain specific goals or  performance measures related to 911 or NG911 implementation. Officials  said the Office of EMS has held preliminary discussions to begin updating  its strategic plan by January 2019 and plans to include goals and  performance measures related to 911 and NG911 services. Office of  EMS officials told us the Office of EMS strategic plan will be jointly  developed with the National 911 Program. However the Office of EMS  had not yet developed a draft strategic plan during the time of our review.", "Federal internal control standards call for management to clearly define  objectives in order to achieve desired results. According to these  standards, an entity determines its mission, establishes specific  measurable objectives, and formulates plans to achieve its objectives.  These standards state that management sets objectives in order to meet  the entity\u2019s mission, strategic plan, and goals and requirements of  applicable laws and regulations. In addition, our work on leading  practices for managing for results indicated that an agency\u2019s strategic  goals should also explain what results are expected from the agency and  when to expect those results. Further, these goals form a basis for an  entity to identify strategies to fulfill its mission and improve its operations  to support the achievement of that mission.", "As the lead entity for coordinating federal NG911 efforts, the National 911  Program faces a complex and challenging task of assisting the 911  community while the nation\u2019s 911 systems undergo a major  transformation. However, without specific goals and related performance  measures, the National 911 Program is unable to assess how well its  activities are achieving results in relation to its responsibilities identified in  the 2012 Act. As the National 911 Program and the Office of EMS  consider creating a strategic plan, ensuring that the plan includes specific  goals and related measures for the National 911 Program would help  officials better understand whether the program\u2019s activities are effectively  assisting states and localities in transitioning to a fully integrated national  NG911 system, and help identify any programmatic changes that might  be needed."], "subsections": []}, {"section_title": "National 911 Program Lacks Plans to Identify Roles and Responsibilities for the NG911 Roadmap Initiative and an Implementation Plan to Achieve Objectives", "paragraphs": ["As previously mentioned, the National 911 Program is in the early stages  of establishing an interagency initiative to create a National NG911  Roadmap. This initiative will convene the 911 stakeholder community to  identify national-level tasks that need to be completed by federal  agencies and other organizations to realize a national, interconnected  NG911 system. According to the National 911 Program, a list of the  national-level tasks needed to advance NG911 implementation  nationwide has not been created to date. In addition, state officials we  spoke with said there are certain issues related to interoperability and  cybersecurity that federal agencies need to address before states can  connect their respective state NG911 systems. To address these issues,  NHTSA\u2019s National 911 Program issued a request for proposal (RFP) in  August 2017 for managing the roadmap development process and  awarded a contract in September 2017. While the National 911 Program  is taking steps to develop a National NG911 Roadmap, the program does  not have a plan to identify: (1) roles or responsibilities for federal entities  to carry out national-level tasks or (2) how the program plans to achieve  the roadmap\u2019s objectives."], "subsections": [{"section_title": "Clarifying Roles and Responsibilities", "paragraphs": ["NHTSA\u2019s NG911 roadmap RFP specifies that by identifying a list of  national-level tasks that are developed and adopted by the 911  stakeholder community, the roadmap could serve as a blueprint to carry  out these tasks and thereby ensure the interoperability of the nation\u2019s  NG911 system. However, the National 911 Program does not have plans  for the entities participating in the development of the roadmap to be  assigned roles and responsibilities for executing the roadmap\u2019s national- level tasks. National 911 Program officials told us the National 911  Program does not plan to assign roles and responsibilities because  NHTSA does not have the authority to require or assign tasks for other  entities. Additionally, program officials view the simultaneous identification  of tasks and assignments of responsibility for those tasks as a risk to  facilitating a candid and productive discussion with entities participating in  the roadmap initiative. However, officials stated it may be appropriate for  agencies participating in the roadmap initiative to perform specific tasks  after the roadmap is finalized. We have previously examined interagency  collaborative mechanisms and identified certain key issues for federal  agencies to consider when using these mechanisms to achieve results.  Our prior work has found that following leading collaboration practices,  such as clarifying roles and responsibilities of agencies engaged in  collaboration, can enhance and sustain collaboration among agencies  and provide an understanding of who will do what in support of meeting  the aims of the collaborative group.", "As stated above, the RFP specifies that a roadmap developed by and  adopted by 911 stakeholders could serve as a blueprint to carry out the  roadmap\u2019s tasks. Securing the commitment of agencies to assigned roles  could help organize the collaborative group\u2019s joint and individual efforts  and thereby better facilitate decision making. As we have previously  found, a lack of clarity on the roles and responsibilities of agencies  participating in an interagency effort\u2014such as the execution of the  roadmap\u2019s tasks\u2014may limit agencies\u2019 abilities to effectively achieve  shared objectives. Given the complexity of the task and the number of  agencies that could be involved, following selected leading collaboration  practices for the roadmap initiative\u2014particularly with regard to  collaborating with roadmap stakeholders to clarify their roles and  responsibilities (whether during the creation of the task list or  afterwards)\u2014could reduce barriers to agencies effectively working  together to achieve the national-level tasks."], "subsections": []}, {"section_title": "Developing an Implementation Plan to Achieve Objectives", "paragraphs": ["While clarifying the roles and responsibilities of roadmap stakeholders for  the execution of the roadmap\u2019s tasks is an important collaborative step,  the National 911 Program has additional responsibilities as the lead entity  for the initiative. However, National 911 Program officials are unable to  clearly articulate how the program will proceed following the completion of  the roadmap. National 911 Program officials said without knowing the  contents of the roadmap, it would be premature to specify how the  roadmap\u2019s national-level tasks would be completed. Officials stated that  once the roadmap is completed, possible next steps may include  identification of timelines, deadlines, and a mechanism for tracking  progress, among other things, but officials stated that these steps are not  required in the roadmap RFP. As stated above, federal internal control  standards call for management to clearly define objectives in specific  terms. According to these standards, management defines what is to be  achieved, who is to achieve it, how it will be achieved, and the time  frames for achievement.", "Without a clear plan for how the National 911 Program would take next  steps to support the implementation of the roadmap\u2019s objectives and  tasks, the National 911 Program may not be prepared to take effective  action once the roadmap is completed. We have previously found that  having an implementation plan can assist agencies to better focus and  prioritize goals and objectives, and align planned activities. Once the  roadmap is completed, developing an implementation plan that details  what is to be achieved and how it will be accomplished will place the  National 911 Program in a better position moving forward to support the  completion of the national-level tasks."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The current 911 system is undergoing a historic transition. With no federal  requirement that states transition to NG911 services, federal leadership is  critical to addressing interoperability challenges and promoting the goal of  an interconnected national system. As the lead federal entity for fostering  coordination and collaboration among federal, state, and local 911  authorities, the National 911 Program plays a critical role in coordinating  NG911 implementation efforts to improve the nation\u2019s 911 services.  However, this program\u2014in collaboration with other federal agencies\u2014 faces a complex and challenging task to help move approximately 6,000  independent 911 call centers toward an interconnected national NG911  system. In addition, given that the NG911 transition is still in its early  stages and is an ongoing effort, it is difficult to assess the effectiveness of  various federal actions to assist states and localities in the transition. In  light of these challenges, without specific goals and related measures to  assess effectiveness, the National 911 Program may be hindered in  determining whether it is making progress towards its stated mission.", "Through the roadmap initiative, the National 911 Program has taken  important first steps in identifying the need for actions at the national  level, in order to fully realize the desired end-state of a national,  interconnected NG911 system. However, while identifying needed next  steps is essential, equally important to the collaborative effort\u2019s success is  (1) defining and agreeing on the roles and responsibilities of the entities  best suited to undertake these actions, and (2) developing plans for how  the National 911 Program will support implementation to achieve the  roadmap\u2019s objectives. If taken, these actions could help further NG911  implementation nationwide and help the National 911 Program and  federal agencies in assisting states and localities to improve these  lifesaving services."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the Administrator  of NHTSA regarding the National 911 Program: develop specific program goals and performance measures related to  NG911 implementation. (Recommendation 1)  in collaboration with the appropriate federal agencies, determine roles  and responsibilities of federal agencies participating in the National  NG911 Roadmap initiative in order to carry out the national-level tasks  over which each agency has jurisdiction. (Recommendation 2) develop an implementation plan to support the completion of the  National NG911 Roadmap\u2019s national-level tasks. (Recommendation  3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Transportation,  Commerce, and Homeland Security and FCC for their review and  comment. In its comments, reproduced in appendix III, the Department of  Transportation agreed with the recommendations. The Departments of  Transportation and Homeland Security also provided technical  comments, which we incorporated as appropriate. The Department of  Commerce and FCC had no comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of the Department  of Transportation, the Secretary of the Department of Commerce, the  Secretary of the Department of Homeland Security, the Managing  Director of the FCC, and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) progress states and localities are  making to implement Next Generation 911 (NG911) and the challenges  they have faced and (2) how federal agencies have addressed state and  local implementation challenges and planned next steps.", "To describe state and local progress in implementing NG911 and  background information on fee collection and costs, we analyzed select  survey data elements from the 2016 National 911 Progress Report and  the Eighth Annual Report to Congress on State Collection and  Distribution of 911 and Enhanced 911 Fees and Charges, maintained by  the National Highway Traffic Safety Administration (NHTSA) and the  Federal Communications Commission (FCC) respectively. More  specifically, we analyzed the most recent state-provided data (from  calendar year 2015) related to the planning and implementation of NG911  at the state and local levels, as well as NG911 cost and 911-related  revenue data. We assessed the reliability of these data by reviewing  relevant documents and discussing data elements with staff responsible  for collecting and analyzing the data. We also conducted our own testing  to check the consistency of the data. We found the data from both  sources to be sufficiently reliable for our purposes to describe states\u2019  progress in implementing NG911 and provide background on 911 fee  collection and costs. While these data provide the best nationwide picture  of NG911 implementation and fee collection, and are reliable for our  purposes, there are some limitations on how the data can be used. Since  we did not validate the state-reported responses, our findings based on  these data are limited to what states reported. Additionally, regarding the  2016 National 911 Progress Report data, there are limitations to (1)  making comparisons between states because states have different  approaches to implementing NG911 and (2) ascertaining year-over-year  progress because reporting is voluntary and states\u2019 response rates can  vary year to year.", "To describe implementation challenges that states and local authorities  may be encountering, we selected a non-generalizable sample of 10  states as case studies, based upon a variety of factors, including reported  progress in implementing NG911, statewide planning and coordination,  reported number of annual 911 calls, whether states diverted 911 fees to  other uses, and variation in geographic location. We selected these  states, in part, based on their responses to the two aforementioned  surveys. Based on the aforementioned criteria, we selected the following  states to include as case studies: California, Maine, Maryland, Minnesota,  Nevada, New Hampshire, North Dakota, South Dakota, Vermont, and  Virginia. We reviewed documents and interviewed state officials from all  of these states except Nevada about NG911 implementation progress,  challenges, federal actions, and any additional assistance needed. We  contacted 911 officials in Nevada but did not receive responses. We also  interviewed local officials in four of the selected states. While not  generalizable to all states, the information obtained from our case studies  provides examples of broader issues faced by states and localities in  managing the NG911 transition.", "To determine how federal agencies have addressed state and local  implementation challenges and planned next steps, we reviewed relevant  statutes, regulations, and documentation of federal agency actions and  plans, and our prior reports. We also interviewed officials from federal  agencies, including NHTSA, the National Telecommunications and  Information Administration (NTIA), FCC, and the U.S. Department of  Homeland Security (DHS), about federal actions taken and plans for next  steps. To understand planning activities undertaken by NHTSA\u2019s National  911 Program, and its planned project to develop a National NG911  Roadmap, we reviewed the National 911 Program\u2019s internal planning  documents, the program\u2019s request for proposal to develop a national  roadmap, the program\u2019s written responses to our questions, and  interviewed National 911 Program officials. In addition, we interviewed  officials from national associations representing emergency-response- technology companies, wireless and wireline phone carriers, emergency- communications entities, and groups representing deaf and hard-of- hearing consumers to gain their perspectives on federal actions taken  and next steps. We assessed the National 911 Program\u2019s strategic- planning activities against leading practices for performance management  found in our prior work on strategic planning and goal setting and federal  internal control standards. We assessed the National 911 Program\u2019s  planned activities for the national roadmap project against federal internal  control standards and selected key practices to enhance interagency  collaboration identified in our prior work.", "We conducted our work from January 2017 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Selected Federal Actions since 2013 to Address State and Local Challenges in Implementing Next Generation 911 (NG911), as of October 2017", "paragraphs": [], "subsections": [{"section_title": "Challenges Funding", "paragraphs": ["Description of challenge  State and local funding may  not be sufficient to support  costs associated with  transitioning to NG911  equipment and infrastructure.", "Transitioning from legacy  infrastructure to Internet  Protocol-based systems  presents technical and  operational challenges such  as interoperability and  cybersecurity risks.", "Federal actions  Grant resources: The National Highway Traffic Safety Administration\u2019s  (NHTSA) National 911 Program issued on its website a list clarifying which of  the fiscal year 2016 emergency-communications grants may be used for  NG911 services. Program officials said they developed this list in collaboration  with the Department of Homeland Security (DHS).  Cost study: NHTSA\u2019s National 911 Program and the National  Telecommunications and Information Administration (NTIA), in consultation  with the Federal Communications Commission (FCC) and DHS, plan to issue  a study of the range of costs for 911 call centers and service providers to  implement NG911 systems and on the nationwide progress of implementing  NG911 services.  Grant program: NHTSA and NTIA are preparing to jointly administer a $115  million grant program to improve 911 services, including the adoption and  operation of NG911 services. NHTSA and NTIA expect to award the grants in  2018.  Funding mechanisms: An advisory body tasked by FCC issued a report in  2016 that identified common costs and funding mechanisms for 911 officials to  consider. The report also introduced a 911 funding sustainment model  designed for use by 911 officials to calculate their financial needs to support a  transition to NG911 implementation.   Guides on technology standards and procurement practices: In 2017,  NHTSA\u2019s National 911 Program issued an annual guide on emergency- communications technology standards that stressed the importance of using  open technology standards for NG911 services. The National 911 Program  issued another guide in 2016 that provides information on procuring goods  and services related to NG911 such as practices for call centers to consider  when developing their request for proposals and contracts.  Examining emerging technology issues: In 2017, FCC tasked a public- private advisory council to recommend how FCC can promote the NG911  transition, enhance the reliability of NG911, and mitigate the threat of 911  outages. Prior to that tasking, the FCC advisory council issued a report in  2016 that explored location-based routing issues and discussed transition  considerations from legacy 911 to NG911.  NG911 cybersecurity guide and technical assistance: DHS, with input from  NHTSA\u2019s National 911 Program according to DHS officials, issued a guide in  2016 that identifies cybersecurity risks for NG911 and risk mitigation  strategies. In addition, DHS provides NG911 technical assistance for states  seeking assistance with strategic planning and technology integration. In a  separate effort, an advisory body tasked by FCC to examine 911 call center  architecture issued a report in 2016 that provides a cybersecurity self- assessment tool for call centers and guidance on cybersecurity strategies."], "subsections": []}, {"section_title": "Challenges Governance", "paragraphs": ["Description of challenge  States may face a range of  challenges related to  evolving roles for state and  local 911 authorities that  could hinder NG911  implementation.", "Federal actions  Guides on state and legislative planning: NHTSA\u2019s National 911 Program  issued guides on state 911 planning and legislative issues to consider for  NG911 and awarded a contract in September 2017 to update those guides. In  2016, the National 911 Program issued a guidebased on the experiences of  Iowa, Minnesota, North Dakota, and South Dakota that identifies practices to  consider for states interconnecting NG911 networks across state lines.  Exploring NG911 governance implementation issues: In 2016, an advisory  body tasked by FCC issued a report that identifies NG911 governance  approaches, issues, and recommendations for states, localities, and call  centers to consider when planning for the deployment of NG911. In 2013, FCC  also issued a report that details recommendations to Congress for  transitioning from legacy 911 to NG911 networks.  Guide on emergency communications governance structures: In 2015,  DHS and the National Council of Statewide Interoperability Coordinators  issued a guide that provides characteristics of effective governance  approaches and best practices for officials to establish, assess, and update  their governance structures."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the U.S. Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Andrew Huddleston (Assistant  Director), Jean Cook (Analyst in Charge), Camilo Flores, Steven  Rabinowitz, Malika Rice, Kelly L. Rubin, Michael Sweet, Hai Tran, Marika  Van Laan, and Michelle Weathers made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-598T", "url": "https://www.gao.gov/products/GAO-18-598T", "title": "Medicaid: Actions Needed to Mitigate Billions in Improper Payments and Program Integrity Risks", "published_date": "2018-06-27T00:00:00", "released_date": "2018-06-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Medicaid, a joint federal-state health care program overseen by CMS, is a significant component of federal and state budgets, with total estimated expenditures of $596 billion in fiscal year 2017.", "Medicaid allows significant flexibility for states to design and implement program innovations based on their unique needs. The resulting diversity of the program and its size, make the program particularly challenging to oversee at the federal level and also vulnerable to improper payments. In fiscal year 2017, estimated improper payments were $36.7 billion in Medicaid, up from $29.1 billion in fiscal year 2015. Further, the Medicaid program accounted for about 26 percent of the fiscal year 2017 government-wide improper payment estimate.", "This testimony focuses on the (1) major risks to the integrity of the Medicaid program, and (2) actions needed to manage these risks. This testimony draws on GAO's reports issued between November 2012 and May 2018 on the Medicaid program."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's work has identified three broad areas of risk in Medicaid that also contribute to overall growth in program spending, projected to exceed $900 billion in fiscal year 2025.", "1) Improper payments , including payments made for services not actually provided. Regarding managed care payments, which were nearly half (or $280 billion) of Medicaid spending in fiscal year 2017, GAO has found that the full extent of program risk due to overpayments and unallowable costs is unknown.", "2) Supplemental payments , which are payments made to providers\u2014such as local government hospitals\u2014that are in addition to regular, claims-based payments made to providers for specific services. These payments totaled more than $48 billion in fiscal year 2016 and in some cases have shifted expenditures from the states to the federal government.", "3) Demonstrations , which allow states to test new approaches to coverage. Comprising about one-third of total Medicaid expenditures in fiscal year 2015, GAO has found that demonstrations have increased federal costs without providing results that can be used to inform policy decisions.", "GAO's work has recommended numerous actions to strengthen oversight and manage program risks.", "Improve data. The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, needs to make sustained efforts to ensure Medicaid data are timely, complete, and comparable from all states, and useful for program oversight. Data are also needed for oversight of supplemental payments and ensuring that demonstrations are meeting their stated goals.", "Target fraud. CMS needs to conduct a fraud risk assessment for Medicaid, and design and implement a risk-based antifraud strategy for the program.", "Collaborate. There is a need for a collaborative approach to Medicaid oversight. State auditors have conducted evaluations that identified significant improper payments and outlined deficiencies in Medicaid processes that require resolution."]}, {"section_title": "What GAO Recommends", "paragraphs": ["As a part of this body of work, GAO has made 83 recommendations to address shortcomings in Medicaid oversight and suggested four matters for congressional consideration. The Department of Health and Human Services and CMS have generally agreed with these recommendations and have implemented 25 of them. GAO will continue to monitor implementation of the remaining recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I appreciate the opportunity to be here today to discuss areas of risk to  the Medicaid program and oversight efforts that can help prevent  improper payments and ensure the program\u2019s fiscal integrity. The  federal-state Medicaid program is one of the nation\u2019s largest sources of  funding for medical and health-related services. In fiscal year 2017, the  program covered acute health care, long-term care, and other services for  over 73 million low income and medically needy individuals. In that same  year, estimated federal and state Medicaid expenditures were $596  billion.", "Medicaid has been on our high-risk list since 2003, in part, because of  concerns about the adequacy of fiscal oversight and the program\u2019s  improper payments\u2014including payments made for people not eligible for  Medicaid or services not actually provided. The Medicaid program  accounted for 26.1 percent of the fiscal year 2017 government-wide  improper payment estimate. While efforts to reduce improper payments  have been made by the Centers for Medicare & Medicaid Services  (CMS), the agency within the Department of Health and Human Services  (HHS) that oversees Medicaid, overall improper payments continue to  increase. In fiscal year 2017, improper payments accounted for $36.7  billion of Medicaid spending, up from $29.1 billion in fiscal year 2015. Of  the $36.7 billion in improper payments, $36.4 billion were overpayments  and $283 million were underpayments.", "The size, complexity, and diversity of Medicaid make the program  particularly challenging to oversee at the federal level. Medicaid allows  significant flexibility for states to design and implement program  innovations based on their unique needs; however, our prior work has  found that these innovations have grown considerably over time, lack  complete and accurate reporting, and do not always ensure the efficient  use of federal dollars. It is critical that CMS and states take appropriate  measures to reduce improper payments and ensure the fiscal integrity of  Medicaid; as dollars wasted detract from the program\u2019s ability to ensure  that the individuals who rely on Medicaid\u2014including low-income children  and individuals who are elderly or disabled\u2014are provided adequate care.", "My testimony today will focus on  1.  major risks to the integrity of the Medicaid program, and  2.  actions needed to manage these risks.", "My remarks are based on our large body of work examining the Medicaid  program, particularly reports issued and recommendations made from  November 2012 to May 2018; these reports provide further details on our  scope and methodology. (A list of related reports is included at the end of  this statement.) For further context, my remarks also reference  information reported by state auditors and the HHS Office of Inspector  General (HHS-OIG), including information from two meetings with state  auditors and Inspectors General we hosted in March and May 2018. We  conducted all of the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Among health care programs, Medicaid is the largest as measured by  enrollment (over 73 million in fiscal year 2017) and the second largest as  measured by expenditures ($596 billion in fiscal year 2017), second only  to Medicare. The CMS Office of the Actuary projected that Medicaid  spending would grow at an average rate of 5.7 percent per year, from  fiscal years 2016 to 2025, with projected Medicaid expenditures reaching  $958 billion by fiscal year 2025. This projected growth in expenditures  reflects both expected increases in expenditures per enrollee and in  levels of Medicaid enrollment. Beneficiaries with disabilities and those  who are elderly constitute the highest per enrollee expenditures, which  are projected to increase by almost 50 percent from fiscal year 2016 to  2025. Medicaid enrollment is also expected to grow by as many as 13.2  million newly eligible adults by 2025\u2014as additional states may expand  their Medicaid programs to cover certain low-income adults under the  Patient Protection and Affordable Care Act (PPACA). (See fig. 1.)", "The partnership between the federal government and states is a central  tenet of the Medicaid program. CMS provides oversight and technical  assistance for the program, and states are responsible for administering  their respective Medicaid programs\u2019 day-to-day operations\u2014including  determining eligibility, enrolling individuals and providers, and  adjudicating claims\u2014within broad federal requirements. Federal oversight  includes ensuring that the design and operation of state programs meet  federal requirements and that Medicaid payments are made  appropriately. (See fig. 2 for a diagram of the federal-state Medicaid  partnership framework.) Joint financing of Medicaid is also a fixture of the  federal-state partnership, with the federal government matching most  state Medicaid expenditures using a statutory formula based, in part, on  each state\u2019s per capita income in relation to the national average per  capita income.", "States have flexibility in determining how their Medicaid benefits are  delivered. For example, states may (1) contract with managed care  organizations to provide a specific set of Medicaid-covered services to  beneficiaries and pay the organizations a set amount, generally on a per  beneficiary per month basis; (2) pay health care providers for each  service they provide on a fee-for-service basis; or (3) rely on a  combination of both delivery systems. Managed care continues to be a  growing component of the Medicaid program. In fiscal year 2017,  expenditures for managed care were $280 billion, representing almost  half of total program expenditures, compared with 42 percent in fiscal  year 2015. (See fig. 3.)", "States also have the flexibility to innovate outside of many of Medicaid\u2019s  otherwise applicable requirements through Medicaid demonstrations  approved under section 1115 of the Social Security Act. These demonstrations allow states to test new approaches to coverage and to  improve quality and access, or generate savings or efficiencies. For  example, under demonstrations, states have extended coverage to certain populations, provided services not otherwise eligible for federal matching funds, made incentive payments to providers for delivery system  improvements.", "As of November 2016, nearly three-quarters of states have CMS- approved demonstrations. In fiscal year 2015, total spending under  demonstrations represented a third of all Medicaid spending nationwide.  (See fig. 4.)", "In addition to other types of improper payments, Medicaid presents  opportunities for fraud, because of the size, expenditures, and  complexities of the program\u2014including the variation in states\u2019 design and  implementation. Medicaid Fraud Control Units (MFCU)\u2014state entities  responsible for investigating and prosecuting Medicaid fraud\u2014have  reported on Medicaid fraud convictions and recovered monies, in their  annual reports. For example, over the past 5 years, MFCUs have  reported an average of 1,072 yearly Medicaid fraud convictions. They  also reported about $680 million in recoveries related to fraud in fiscal  year 2017\u2014almost double the recoveries from fiscal year 2016."], "subsections": []}, {"section_title": "Three Broad Areas of Risk Threaten the Fiscal Integrity of Medicaid", "paragraphs": ["Our prior work has identified three broad areas of risk to the fiscal  integrity of Medicaid: improper payment rates, state use of supplemental  payments, and oversight of demonstration programs."], "subsections": [{"section_title": "Estimated Improper Payments Exceed 10 Percent, and Do Not Fully Account for All Program Risks", "paragraphs": ["CMS annually computes the national Medicaid improper payment  estimate as a weighted average of states\u2019 improper payment estimates  for three component parts\u2014fee-for-service, beneficiary eligibility  determinations, and managed care. The improper payment estimate for  each component is developed under its own methodology. The national  rate in fiscal year 2017 was 10.1 percent, or $36.7 billion. Since 2016,  Medicaid has exceeded the 10 percent criterion set in statute. As such,  the program was not fully compliant with the Improper Payments  Elimination and Recovery Act of 2010.", "In May 2018, we reported that the Medicaid managed care component of  the improper payment estimate does not fully account for all program  risks in managed care. We identified 10 federal and state audits and  investigations (out of 27 focused on Medicaid managed care) that cited  about $68 million in overpayments and unallowable managed care  organization costs that were not accounted for by the managed care  improper payment estimate. Another of these investigations resulted in a  $137.5 million settlement to resolve allegations of false claims. We  further noted that the full extent of overpayments and unallowable costs is  unknown, because the 27 audits and investigations we reviewed were  conducted over more than 5 years and involved a small fraction of the  more than 270 managed care organizations operating nationwide as of  September 2017.", "Some examples of the state audits that identified overpayments and  unallowable costs include the following:", "The Washington State Auditor\u2019s Office found that two managed care  organizations made $17.5 million in overpayments to providers in  2010, which may have increased the state\u2019s 2013 capitation rates.", "The Texas State Auditor\u2019s Office found that one managed care  organization reported $3.8 million in unallowable costs for advertising,  company events, gifts, and stock options, along with $34 million in  other questionable costs in 2015.", "The New York State Comptroller found that two managed care  organizations paid over $6.6 million to excluded and deceased  providers from 2011 through 2014.", "To the extent that such overpayments and unallowable costs are  unidentified and not removed from the cost data used to set managed  care payment rates, they may allow inflated future payments and  minimize the appearance of program risks in Medicaid managed care.  This potential understatement of the program risks in managed care also  may curtail investigations into the appropriateness of managed care  spending. The continued growth of Medicaid managed care makes  ensuring the accuracy of managed care improper payment estimates  increasingly important.", "In May 2018, we acknowledged that although CMS has increased its  focus on and worked with states to improve oversight of Medicaid  managed care; its efforts\u2014for example, updated regulations and audits of  managed care providers\u2014did not ensure the identification and reporting  of overpayments and unallowable costs. In May 2016, CMS updated its  regulations for managed care programs, including that states arrange an  independent audit of the data submitted by MCOs, at least once every 3  years. We found that although this requirement has the potential to  enhance state oversight of managed care; CMS was reviewing the rule  for possible revision of its requirements. We also noted that another  effort to address program risks in managed care\u2014the use of CMS  program integrity contractors to audit providers that are paid by managed  care organizations\u2014has been limited. To address the program risks that  are not measured as a part of CMS\u2019s methodology to estimate improper  payments, in May 2018 we recommended that CMS take steps to  mitigate such risks, which could include revising its methodology or  focusing additional audit resources on managed care. HHS concurred  with this recommendation.", "Our prior work on Medicaid has also identified other program risks  associated with provider enrollment and beneficiary eligibility that may  contribute to improper payments. In table 1 below, we identify some  examples of the previous recommendations we have made to address  these types of program risks, and what, if any, steps CMS has taken in  response to our recommendations."], "subsections": []}, {"section_title": "Lack of Transparency and Federal Oversight of States\u2019 Use of Supplemental Payments Increase Program Risk", "paragraphs": ["Supplemental payments are payments made to providers\u2014such as local  government hospitals and other providers\u2014that are in addition to the  regular, claims-based payments made to providers for services they  provided. Like all Medicaid payments, supplemental payments are  required to be economical and efficient.", "Supplemental payments have been growing and totaled more than $48  billion in 2016. Our prior work has identified several concerns related to  supplemental payments, including the need for more complete and  accurate reporting, criteria for economical and efficient payments, and  written guidance on the distribution of payments.", "Complete and accurate reporting. Our prior work has identified  increased use of provider taxes and transfers from local government  providers to finance the states\u2019 share of supplemental payments, which,  although allowed under federal law, effectively shift Medicaid costs from  the states to the federal government. In particular, we previously reported  in July 2014 that states\u2019 share of Medicaid supplemental payments  financed with funds from providers and local governments increased the  federal share from 57 percent in state fiscal year 2008 to 70 percent in  state fiscal year 2012. The full extent of this shift in states\u2019 financing  structure was unknown, because CMS had not ensured that states report  complete and accurate data on the sources of funds they use to finance  their share of Medicaid payments, and CMS\u2019s efforts had fallen short of  obtaining complete data. (See table 2 below for our recommendation  and actions CMS has taken.) For example, in July 2014, we reported that  in one state, a $220 million payment increase for nursing facilities  resulted in an estimated $110 million increase in federal matching funds  to the state, and a net payment increase to the facilities of $105 million.  (See fig. 5.)", "Criteria for economical and efficient payments. Our prior work has  demonstrated that CMS lacks the criteria, data, and review processes to  ensure that one type of supplemental payments\u2014non-DSH supplemental  payments\u2014are economical and efficient. For example, in April 2015, we identified public hospitals in one state that received such supplemental  and regular Medicaid payments that, when combined, were hundreds of  millions in excess of the hospitals\u2019 total Medicaid costs and tens of  millions in excess of their total operating costs\u2014unbeknownst to CMS.  Accordingly, we concluded that CMS\u2019s criteria and review processes did  not ensure that it can identify excessive payments and determine if  supplemental payments are economical and efficient. (See table 2 below  for our recommendations and actions CMS has taken.)", "Written guidance on the distribution of payments. According to CMS  policy, Medicaid payments, including supplemental payments, should be  linked to the provision of Medicaid services and not contingent on the  provision of local funds. However, in February 2016 we reported that  CMS did not have written guidance that clarifies this policy. In February  2016, we found examples of hospitals with large uncompensated costs  associated with serving the low-income and Medicaid population that  received relatively little in supplemental payments, while other hospitals  with relatively low uncompensated care costs\u2014but that were able to  contribute a large amount of funds for the state\u2019s Medicaid share\u2014 received large supplemental payments relative to those costs, raising  questions as to whether CMS policies are being followed. (See table 2  for our recommendation and actions CMS has taken.)", "Recognizing that Congress could help address some of the program risks  associated with supplemental payments, in November 2012, we  suggested that Congress consider requiring CMS to  improve state reporting of supplemental payments, including requiring  annual reporting of facility-specific payment amounts;  clarify permissible methods for calculating these supplemental  payments; and  implement annual independent certified audits to verify state  compliance with methods for calculating supplemental payments.", "Subsequent to our work highlighting the need for complete and accurate  reporting, in January 2017 a bill was introduced in the House of  Representatives that, if enacted, would require annual state reporting of  non-DSH supplemental payments made to individual facilities, require  CMS to issue guidance to states that identifies permissible methods for  calculating non-DSH supplemental payments to providers, and establish  requirements for such annual independent audits. Another bill was  introduced in October 2017 that would require states to submit annual  reports that identify the sources and amount of funds used to finance the  state share of Medicaid payments. As of May 2018, no action had been  taken on either proposed bill."], "subsections": []}, {"section_title": "Absent Better Oversight, Demonstrations May Increase Federal Fiscal Liability", "paragraphs": ["Demonstration programs, comprising about one-third of total Medicaid  expenditures in fiscal year 2015, can be a powerful tool for states and  CMS to test new approaches to providing coverage and delivering  services that could reduce costs and improve outcomes. However, our  prior work has identified several concerns related to demonstrations,  including the need for ensuring that (1) demonstrations meet the policy  requirements of budget neutrality\u2014that is, they must not increase federal  costs\u2014and (2) evaluations are used to determine whether  demonstrations are having their intended effects.", "Budget neutrality of Medicaid demonstrations. Demonstration  spending limits, by HHS policy, should not exceed spending that would  have occurred in the absence of a demonstration. In multiple reports  examining more than a dozen demonstrations between 2002 and 2017,  we have identified a number of questionable methods and assumptions  that HHS has permitted states to use when estimating costs. We found  that federal spending on Medicaid demonstrations could be reduced by  billions of dollars if HHS were required to improve the process for reviewing, approving, and making transparent the basis for spending  limits approved for Medicaid demonstrations. The following are some  examples of what we have previously found:  In August 2014, we reported that HHS had approved a spending limit  for Arkansas\u2019s demonstration\u2014to test whether providing premium  assistance to purchase private coverage through the health insurance  exchange would improve access for newly eligible Medicaid  beneficiaries\u2014that was based, in part, on hypothetical, not actual,  costs. Specifically, the spending limit was based on significantly  higher payment amounts the state assumed it would have to make to  providers if it expanded coverage under the traditional Medicaid  program, and HHS did not request any data to support the state\u2019s  assumptions. We estimated that by allowing the state to use  hypothetical costs, HHS approved a demonstration spending limit that  was over $775 million more than what it would have been if the limit  was based on the state\u2019s actual payment rates for services under the  traditional Medicaid program.", "We also reported in August 2014 that HHS officials told us it granted  Arkansas and 11 other states additional flexibility in their  demonstrations in order to increase spending limits if costs proved  higher than expected. We concluded that granting this flexibility to  the states to adjust the spending limit increased the fiscal risk to the  federal government.", "More recently, in April 2017, we reported that two states used unspent  federal funds from their previous demonstrations to expand the scope  of subsequent demonstrations by $8 billion and $600 million,  respectively. We concluded that inflating the spending limits in this  way inappropriately increased the federal government\u2019s fiscal liability  for Medicaid.", "We have previously made recommendations to improve oversight of  spending on demonstrations, and HHS recently took action that partially  responds to one of these recommendations. (See table 3 for examples of  the recommendations and actions HHS has taken.) Specifically, under a  policy implemented in 2016, HHS restricted the amount of unspent funds  states can accrue for each year of a demonstration, and has also reduced  the amount of unspent funds that states can carry forward to new  demonstrations. For 10 demonstrations it has recently approved, HHS  estimated that the new policy has reduced total demonstration spending  limits by $109 billion for 2016 through 2018, the federal share of which is  $62.9 billion. These limits reduce the effect, but do not specifically  address all, of the questionable methods and assumptions that we have  identified regarding how HHS sets demonstration spending limits.", "Evaluation of Medicaid demonstrations. In a January 2018 report, we  questioned the usefulness of both state-led and federal evaluations of  section 1115 demonstrations, particularly with regard to how these  evaluation results may inform policy decisions.", "State-led evaluations. We identified significant limitations among  selected state-led demonstration evaluations, including gaps in  reported evaluation results for important parts of the demonstrations.  (See table 4.) These gaps resulted, in part, from CMS requiring final,  comprehensive evaluation reports after the expiration of the  demonstrations rather than at the end of each 3- to 5-year  demonstration cycle. In October 2017, CMS officials stated that the  agency planned to require final reports at the end of each  demonstration cycle for all demonstrations, although it had not  established written procedures for implementing this new policy. We  concluded in January 2018 that without written procedures for  implementing such requirements, gaps in oversight could continue.", "Federal evaluations. Evaluations of federal demonstrations led by  CMS have also been limited due to data challenges and a lack of  transparent reporting. For example, delays obtaining data directly  from states, among other things, led CMS to considerably reduce the  scope of a large, multi-state evaluation, which was initiated in 2014 to  examine the impact of state demonstrations in four policy areas  deemed to be federal priorities. In our January 2018 report, we  found that although CMS had made progress in obtaining needed  data, CMS had no policy for making the results public. By not making  these results public in a timely manner, we concluded that CMS was  missing an opportunity to inform important federal and state policy  discussions.", "In light of our concerns about state-led and federal demonstration  evaluations, in January 2018, we recommended that CMS (1) establish  written procedures for requiring final evaluation reports at the end of each  demonstration cycle, (2) issue criteria for when it will allow limited  evaluations of demonstrations, and (3) establish a policy for publicly  releasing findings from federal evaluations of demonstrations. HHS  concurred with these recommendations."], "subsections": []}]}, {"section_title": "Fundamental Actions Needed to Strengthen Oversight and Manage Program Risks", "paragraphs": ["Across our body of work, we have made 83 recommendations to CMS  and HHS and suggested 4 matters for congressional consideration to  address a variety of concerns about the Medicaid program. The agencies  generally agreed with our recommendations and have implemented 25 of  these recommendations to date, and CMS still needs to take fundamental  actions in three areas\u2014having more timely, complete, and reliable data;  conducting fraud risk assessments; and strengthening federal-state  collaboration\u2014to strengthen Medicaid oversight and better manage  program risks."], "subsections": [{"section_title": "More Complete, Timely, Reliable Data for Oversight", "paragraphs": ["An overarching challenge for CMS oversight of the Medicaid program is  the lack of accurate, complete, and timely data. Our work has  demonstrated how insufficient data have affected CMS\u2019s ability to ensure  proper payments, assess beneficiaries\u2019 access to services, and oversee  states\u2019 financing strategies.", "As part of its efforts to address longstanding data concerns, CMS has  taken some steps toward developing a reliable national repository for  Medicaid data, most notably the Transformed Medicaid Statistical  Information System (T-MSIS). Through T-MSIS, CMS will collect detailed  information on Medicaid beneficiaries\u2014such as their citizenship,  immigration, and disability status\u2014as well as any expanded diagnosis  and procedure codes associated with their treatments. States are to  report data more frequently\u2014and in a timelier manner\u2014than they have  previously, and T-MSIS includes approximately 2,800 automated quality  checks. The T-MSIS initiative has the potential to improve CMS\u2019s ability  to identify improper payments, help ensure beneficiaries\u2019 access to  services, and improve program transparency, among other benefits.", "As we reported in December 2017, implementing the T-MSIS initiative  has been\u2014and will continue to be\u2014a multi-year effort. CMS has worked  closely with states and has reached a point where nearly all states are  reporting T-MSIS data. While recognizing the progress made, we noted  that more work needs to be done before CMS or states can use these  data for program oversight:", "All states need to report complete T-MSIS data. For our December  2017 report, we reviewed a sample of six states and found that none  were reporting complete data.", "T-MSIS data should be formatted in a manner that allows for state  data to be compared nationally. In December 2017, we reported that  state officials had expressed concerns that states did not convert their  data to the T-MSIS format in the same ways, which could limit cross- state comparisons.", "In our December 2017 report, we recommended that CMS take steps to  expedite the use of T-MSIS data, including efforts to (1) obtain complete  information from all states; (2) identify and share information across  states to improve data comparability; and (3) implement mechanisms by  which states can collaborate on an ongoing basis to improve the  completeness, comparability, and utility of T-MSIS data. We also  recommended that CMS articulate a specific plan and associated time  frames for using T-MSIS data for oversight. The agency concurred with  our recommendations, but has not yet implemented them.", "Our prior work has also noted areas where other data improvements are  critical to program oversight:  In July 2014, we found that there was a need for data on  supplemental payments that states make to individual hospitals and  other providers. In particular, our findings and related  recommendation from July 2014 indicate that CMS should develop a  data collection strategy that ensures that states report accurate and  complete data on all sources of funds used to finance the states\u2019  share of Medicaid payments.", "In January 2017, we found limitations in the data CMS collects to  monitor the provision of, and spending on, personal care services\u2014 services that are at a high risk for improper payments, including  fraud. In particular, data on the provision of personal care services  were often not timely, complete, or consistent. Data on states\u2019  spending on these services were also not accurate or complete. In  January 2017, we recommended that CMS improve personal care  services data by (1) establishing standard reporting guidance for key  data, (2) ensuring linkage between data on the provision of services  and reported expenditures, (3) ensuring state compliance with  reporting requirements, and (4) developing plans to use data for  oversight. The agency concurred with two recommendations and  neither agreed nor disagreed with the other two recommendations,  and has not yet implemented any."], "subsections": []}, {"section_title": "More Complete Fraud Risk Assessment and Better Fraud Targeting", "paragraphs": ["In December 2017, we examined CMS\u2019s efforts managing fraud risks in  Medicaid and compared it with our Fraud Risk Framework, which  provides a comprehensive set of key components and leading practices  that serve as a guide for agency managers to use when developing  efforts to combat fraud in a strategic, risk-based way. This framework  describes leading practices in four components: commit, assess, design  and implement, and evaluate and adapt. (See fig. 6.) The Fraud  Reduction and Data Analytics Act of 2015, enacted in June 2016,  requires the Office of Management and Budget (OMB) to establish  guidelines incorporating the leading practices from our Fraud Risk  Framework for federal agencies to create controls to identify and assess  fraud risks, and design and implement antifraud control activities. In July  2016, OMB published guidance, and among other things, this guidance  affirms that managers should adhere to the leading practices identified in  our Fraud Risk Framework.", "In a December 2017 report, we found that CMS\u2019s efforts partially aligned  with our fraud risk framework. In particular, CMS had  shown a commitment to combating fraud, in part, by establishing a  dedicated entity\u2014the Center for Program Integrity\u2014to lead antifraud  efforts, and offering and requiring antifraud training for stakeholder  groups, such as providers, beneficiaries, and health-insurance plans;  and  taken steps to identify fraud risks, such as by designating specific  provider types as high risk and developing associated control  activities.", "However, CMS had not conducted a fraud risk assessment for Medicaid,  and had not designed and implemented a risk-based antifraud strategy.  A fraud risk assessment allows managers to fully consider fraud risks to  their programs, analyze their likelihood and impact, and prioritize risks.  Managers can then design and implement a strategy with specific control  activities to mitigate these fraud risks, as well as design and implement  an appropriate evaluation. We concluded that through these actions,  CMS could better ensure that it is addressing the full portfolio of risks and  strategically targeting the most-significant fraud risks facing Medicaid. As  a result, in December 2017 we made three recommendations to CMS,  two of which were to conduct fraud risk assessments, and create an  antifraud strategy for Medicaid, including an approach for evaluation.  HHS concurred with our recommendations, but has not yet implemented  them."], "subsections": []}, {"section_title": "Greater Federal-State Collaboration to Strengthen Program Oversight", "paragraphs": ["The federal government and the states play important roles in reducing  improper payments and overseeing the Medicaid program, including  overseeing spending on Medicaid supplemental payments and  demonstrations. Our prior work shows that oversight of the Medicaid  program could be further improved through leveraging and coordinating  program integrity efforts with state agencies, state auditors, and other  partners.", "Collaborative audits with state agencies. As we have previously  reported, CMS has made changes to its Medicaid program integrity  efforts, including a shift to collaborative audits\u2014in which CMS\u2019s  contractors and states work in partnership to audit Medicaid providers. In  March 2017, we reported that collaborative audits had identified  substantial potential overpayments to providers, but barriers\u2014such as  staff burden or problems communicating with contractors\u2014had limited  their use and prevented states from seeking audits or hindered the  success of audits. We recommended that CMS address the barriers that  limit state participation in collaborative audits, including their use in  managed care delivery systems. CMS concurred with this recommendation and has taken steps to address them for a number of  states, but has not yet made such changes accessible to a majority of  states.", "State auditors and federal partners. We have found that state auditors  and the HHS-OIG offer additional oversight and information that can help  identify program risks. To that end, we routinely coordinate our audit  efforts with the state auditors and the HHS-OIG. For example, we have  convened and facilitated meetings between CMS and state audit officials  to discuss specific areas of concern in Medicaid and future opportunities  for collaboration. The state auditors and CMS officials commented on the  benefits of such coordination, with the state auditors noting that they can  assist CMS\u2019s state program integrity reviews by identifying program risks.", "State auditors also have conducted program integrity reviews to identify  improper payments and deficiencies in the processes used to identify  them. We believe that these reviews could provide insights into program  weaknesses that CMS could learn from and potentially address  nationally. Coordination also provides an opportunity for state auditors to  learn methods for conducting program integrity reviews. The following are  recent examples of reviews conducted:  In 2017, the Oregon Secretary of State Audits Division found  approximately 31,300 questionable payments to Coordinated Care  Organizations (which receive capitated monthly payments for  beneficiaries, similar to managed care organizations), based on a  review of 15 months of data. In addition, the state auditor found that  approximately 47,600 individuals enrolled in Oregon\u2019s Medicaid  program were ineligible, equating to $88 million in avoidable  expenditures.", "Massachusetts\u2019 Medicaid Audit Unit\u2019s recent annual report (covering  the time period from March 15, 2017, through March 14, 2018)  reported that the state auditor identified more than $211 million in  unallowable, questionable, duplicative, unauthorized, or potentially  fraudulent billing in the program.", "A 2017 report released by the Louisiana Legislative Auditor\u2019s Office  stated that the office reviewed Medicaid eligibility files and claims data  covering January 2011 through October 2016, and found $1.4 million  in questionable duplicate payments.", "In fiscal year 2017, the Mississippi Division of Medicaid reported that  they recovered more than $8.6 million through various audits of  medical claims paid to health care providers. The division also  referred seven cases to the state\u2019s attorney general\u2019s office, in which  the division had identified $3.1 million in improper billing.", "At a May 2018 federal and state auditor coordination meeting that we  participated in, the HHS-OIG provided examples of the financial impact of  its work related to improper payments, including one review of managed care long term services and supports that  identified $717 million potential federal savings,  three reviews of managed care payments made after beneficiaries\u2019  death that identified $18.2 million in federal funds to be recovered,  and  two reviews of managed care payments made for beneficiaries with  multiple Medicaid IDs that identified $4.3 million in federal funds to be  recovered.", "Healthcare Fraud Prevention Partnership. The Healthcare Fraud  Prevention Partnership (HFPP) is an important tool to help combat  Medicaid fraud. In 2012, CMS created the HFPP to share information with  public and private stakeholders, and to conduct studies related to health  care fraud, waste, and abuse. According to CMS, as of October 2017, the  HFPP included 89 public and private partners\u2014including Medicare\u2014and  Medicaid-related federal and state agencies, law enforcement agencies,  private health insurance plans, and antifraud and other health care  organizations. The HFPP has conducted studies that pool and analyze  multiple payers\u2019 claims data to identify providers with patterns of suspect  billing across private health insurance plans. In August 2017, we reported  that the partnership participants separately told us the HFPP\u2019s studies  helped them identify and take action against potentially fraudulent  providers and payment vulnerabilities of which they might not otherwise  have been aware, and fostered both formal and informal information  sharing.", "Chairman Johnson, Ranking Member McCaskill, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions you may have."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact Carolyn L. Yocom, who may be reached at  202-512-7114 or yocomc@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Other individuals who made key contributions to this  testimony include Leslie V. Gordon (Assistant Director), Deirdre Gleeson  Brown (Analyst-in-Charge), Muriel Brown, Helen Desaulniers, Melissa  Duong, Julianne Flowers, Sandra George, Giselle C. Hicks, Drew Long,  Perry Parsons, Russell Voth, and Jennifer Whitworth."], "subsections": []}]}, {"section_title": "Related GAO Reports", "paragraphs": ["Improper Payments: Actions and Guidance Could Help Address Issues  and Inconsistencies in Estimation Processes. GAO-18-377. Washington,  D.C.: May 31, 2018.", "Medicaid: CMS Should Take Steps to Mitigate Program Risks in  Managed Care. GAO-18-291. Washington, D.C.: May 7, 2018.", "Medicaid: Opportunities for Improving Program Oversight. GAO-18-444T.  Washington, D.C.: April 12, 2018.", "Medicaid Demonstrations: Evaluations Yielded Limited Results,  Underscoring Need for Changes to Federal Policies and Procedures.  GAO-18-220. Washington, D.C.: January 19, 2018.", "Medicaid: Further Action Needed to Expedite Use of National Data for  Program Oversight. GAO-18-70. Washington, D.C.: December 8, 2017.", "Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts  with the Fraud Risk Framework. GAO-18-88. Washington, D.C.:  December 5, 2017.", "Improper Payments: Additional Guidance Could Provide More Consistent  Compliance Determinations and Reporting by Inspectors General.   GAO-17-484. Washington, D.C.: May 31, 2017.", "Medicaid Demonstrations: Federal Action Needed to Improve Oversight  of Spending. GAO-17-312. Washington, D.C.: April 3, 2017.", "Medicaid Program Integrity: CMS Should Build on Current Oversight  Efforts by Further Enhancing Collaboration with States. GAO-17-277.  Washington, D.C.: March 15, 2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Medicaid: CMS Needs Better Data to Monitor the Provision of and  Spending on Personal Care Services. GAO-17-169. Washington, D.C.:  January 12, 2017.", "Medicaid: Program Oversight Hampered by Data Challenges,  Underscoring Need for Continued Improvement. GAO-17-173.  Washington, D.C.: January 6, 2017.", "Improper Payments: Strategy and Additional Actions Needed to Help  Ensure Agencies Use the Do Not Pay Working System as Intended.  GAO-17-15. Washington, D.C.: October 14, 2016.", "Medicaid Program Integrity: Improved Guidance Needed to Better  Support Efforts to Screen Managed Care Providers. GAO-16-402.  Washington, D.C.: April 22, 2016.", "Medicaid: Federal Guidance Needed to Address Concerns About  Distribution of Supplemental Payments. GAO-16-108. Washington, D.C.:  February 5, 2016.", "Medicaid: Additional Efforts Needed to Ensure that State Spending is  Appropriately Matched with Federal Funds. GAO-16-53. Washington,  D.C.: October 16, 2015.", "Medicaid: Service Utilization Patterns for Beneficiaries in Managed Care.  GAO-15-481. Washington, D.C.: May 29, 2015.", "Medicaid: Additional Actions Needed to Help Improve Provider and  Beneficiary Fraud Controls. GAO-15-313. Washington, D.C.: May 14,  2015.", "Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited  Data and Unclear Policy. GAO-15-322. Washington, D.C.: April 10, 2015.", "Medicaid Demonstrations: HHS\u2019s Approval Process for Arkansas\u2019s  Medicaid Expansion Waiver Raises Cost Concerns. GAO-14-689R.  Washington, D.C.: August 8, 2014.", "Medicaid Financing: States\u2019 Increased Reliance on Funds from Health  Care Providers and Local Governments Warrants Improved CMS Data  Collection. GAO-14-627. Washington, D.C.: July 29, 2014.", "Medicaid Demonstration Waivers: Approval Process Raises Cost  Concerns and Lacks Transparency. GAO-13-384. Washington, D.C.:  June 25, 2013.", "Medicaid: More Transparency of and Accountability for Supplemental  Payments Are Needed. GAO-13-48. Washington, D.C.: November 26,  2012.", "Medicaid Demonstration Waivers: Recent HHS Approvals Continue to  Raise Cost and Oversight Concerns. GAO-08-87. Washington, D.C.:  January 31, 2008.", "Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver  Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["The Medicaid program helped provide health care to an estimated 73 million people in fiscal 2017 at a cost of about $596 billion. This joint federal and state program continues to grow, and remains on our high risk list due to concerns about the adequacy of federal oversight and the program's vulnerability to fraud.", "This testimony focuses on the major risks to the integrity of Medicaid. Efforts needed to strengthen oversight include:", "expansion of a national Medicaid data system that will allow comparisons across states,", "a national anti-fraud strategy,", "greater collaboration between state and federal auditors."]}
{"id": "GAO-19-208SP", "url": "https://www.gao.gov/products/GAO-19-208SP", "title": "State and Local Governments' Fiscal Outlook: 2018 Update", "published_date": "2018-12-13T00:00:00", "released_date": "2018-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Fiscal sustainability presents a national challenge shared by all levels of government. Since 2007, GAO has published simulations of long-term fiscal trends in the state and local government sector, which have consistently shown that the sector faces long-term fiscal pressures. While most states have requirements related to balancing their budgets, deficits can arise because the planned annual revenues are not generated at the expected rate, demand for services exceeds planned expenditures, or both, resulting in a near-term operating deficit.", "This report updates GAO's state and local fiscal model to simulate the fiscal outlook for the state and local government sector. This includes identifying the components of state and local expenditures likely to contribute to the sector's fiscal pressures. In addition, this report identifies considerations related to federal policy and other factors that could contribute to uncertainties in the state and local government sector's long-term fiscal outlook.", "GAO's model uses the Bureau of Economic Analysis's National Income and Product Accounts as the primary data source and presents the results in the aggregate for the state and local sector as a whole. The model shows the level of receipts and expenditures for the sector until 2067, based on current and historical spending and revenue patterns. In addition, the model assumes that the current set of policies in place across state and local government remains constant to show a simulated long-term outlook."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's simulations suggest that the state and local government sector will likely face an increasing difference between revenues and expenditures during the next 50 years as reflected by the operating balance--a measure of the sector's ability to cover its current expenditures out of its current receipts. While both expenditures and revenues are projected to increase as a percentage of gross domestic product (GDP), a difference between the two is projected to persist because expenditures are expected to grow faster than revenues throughout the simulation period.", "GAO's simulations also suggest that growth in the sector's overall spending is largely driven by health care expenditures--in particular, Medicaid spending and spending on health benefits for state and local government employees and retirees. These expenditures are projected to grow as a share of GDP during the simulation period. GAO's simulations also suggest that revenues from personal income taxes and federal grants to states and localities will increase during the simulation period. However, revenues will grow more slowly than expenditures such that the sector faces a declining fiscal outlook.", "GAO also identified federal policy changes that could affect the state and local government sector's fiscal outlook. For example, the effects of the recently-enacted Tax Cuts and Jobs Act will likely depend on how states incorporate the Act into their state income tax rules. In addition, other factors, such as economic growth and rates of return on pension assets, could shift future fiscal outcomes for the sector."]}], "report": [{"section_title": "Letter", "paragraphs": ["Fiscal sustainability presents a national challenge shared by all levels of  government. The federal government and state and local governments  share responsibility in fulfilling important national goals and providing  essential services to citizens. State and local governments provide  primary and secondary education, health care, libraries, police and fire  protection services, social programs, roads and other infrastructure,  public colleges and universities, and more. These subnational  governments rely on the federal government for significant portions of  their revenue. Given the nature of the partnership among levels of  government in providing services, understanding potential future fiscal  conditions of the state and local government sector is important for  federal policymaking.", "To provide Congress and the public with this broader context, we  developed a fiscal model of the state and local government sector, which  we first reported on in 2007 and have regularly updated since. This  report updates our state and local fiscal model to simulate the fiscal  outlook for the state and local government sector. This includes  identifying the components of state and local expenditures that are likely  to contribute to the sector\u2019s fiscal pressures. This report also identifies  considerations related to federal policy and other factors that could  contribute to uncertainties in the state and local government sector\u2019s  fiscal outlook.", "To develop simulations of the fiscal outlook for the state and local  government sector, we use the Department of Commerce\u2019s Bureau of  Economic Analysis\u2019s (BEA) National Income and Product Accounts  (NIPA) as the primary data source and project the level of receipts and  expenditures for the sector until 2067, based on current and historical  spending and revenue patterns. Our model assumes that historical  relationships between taxes and their tax bases persist, that the federal  government continues to provide services to people at a level consistent  with current policies, and that other current policies and relationships  affecting revenues do not change. Our model also assumes that the state  and local government sector continues to provide levels of services to  each resident consistent with current government policies. The model  presents results in the aggregate for the state and local government  sector as a whole, consistent with the nature of the NIPA source data.  Because of this, the fiscal outlook for individual states and localities  cannot be identified.", "As part of our simulations, we also assess potential fiscal outcomes for  the sector using an indicator of fiscal balance called the operating  balance. The state and local government sector\u2019s operating balance is a  measure of its ability to cover expenditures in a given year using  revenues collected in the same year. Because subnational governments  are generally required to balance or nearly balance their operating  budgets, the design of our operating balance measure reflects this  characteristic of subnational governments\u2019 operating budgets. For  additional information on the model\u2019s key assumptions, see appendix I.", "To identify considerations related to federal policy that could contribute to  uncertainties in the sector\u2019s fiscal outlook, we reviewed recent legislation,  relevant legal precedents, economic literature, our prior reports, and  reports from selected think tanks that analyze aspects of fiscal federalism.  These think tanks include the Nelson A. Rockefeller Institute of  Government, the Pew Charitable Trusts, the Tax Foundation Center for  Federal Tax Policy, and the Urban Institute and Brookings Institution Tax  Policy Center. We also conducted semistructured interviews on federal  and intergovernmental policy issues and related data with associations  representing state government officials, including the National Association  of State Budget Officers, the National Conference of State Legislatures,  the National Association of State Auditors, Comptrollers and Treasurers;  specialists from credit rating agencies and their research divisions, such  as Moody\u2019s Analytics and Standard & Poor\u2019s Global Ratings; and senior officials from the Federal Reserve Bank of Chicago, BEA, and the  Congressional Budget Office (CBO). We selected these organizations  and related reports based on a literature review and our prior work on  state and local government fiscal issues. These interviews primarily  focused on tax- and health-related federal policies because of their  relevance to our simulation results. Specifically, our simulations have  continually suggested that trends in tax revenues and health care  spending have contributed to large and recurring fiscal challenges for the  sector. The policy considerations we identified are not exhaustive. That is,  we did not fully analyze every federal tax- and health-related policy that  could create uncertainties for the state and local government sectors\u2019  fiscal outlook.", "Further, to identify other factors that could contribute to uncertainties in  the sector\u2019s fiscal outlook, we developed simulations using alternative  assumptions of the growth of key model variables to describe how the  operating balance measure would respond to changes in the growth  projections of key variables over the simulation period. For additional  information on our methodology for developing these simulations, see  appendix II.", "We conducted our work for this model update from February 2018 to  December 2018 in accordance with all sections of our Quality Assurance  Framework that are relevant to our objectives. The framework requires  that we plan and perform the engagement to obtain sufficient and  appropriate evidence to meet our stated objectives, and to discuss any  limitations in our work. We believe that the information and data obtained,  and the analysis conducted, provide a reasonable basis for any findings  and conclusions in this product."], "subsections": [{"section_title": "State and Local Governments Will Need to Make Policy Changes to Maintain Long-Term Fiscal Balance", "paragraphs": ["Our simulations suggest that the sector will likely continue to face a  difference between revenue and spending during the next 50 years. This  long-term outlook is measured by the operating balance\u2014a measure of  the sector\u2019s ability to cover its current expenditures out of current  receipts. While both expenditures and revenues are projected to  increase as a percentage of gross domestic product (GDP) during the  simulation period, a difference between the two is projected to persist  because expenditures are generally expected to grow at a faster rate than  revenues. (see figure 1). Absent any policy changes by state and local  governments, revenues are likely to be insufficient to maintain the  sector\u2019s capacity to provide services at levels consistent with current  policies during the next 50 years. Our simulations suggest that state and  local governments will need to make policy changes to avoid fiscal  imbalances before then and assure that revenues are at least equal to  expenditures.", "We simulated the state and local government sector\u2019s operating balance  (the difference between the sector\u2019s operating revenues and operating  expenditures) in order to understand the sector\u2019s long-term fiscal outlook.  The sector\u2019s operating expenditures were 15.1 percent of GDP in 2017.  As shown in figure 2, these state and local government sector operating  expenditures are comprised of employee compensation, social benefit  payments, interest payments, capital outlays, and other expenditures.  The sector\u2019s operating revenues were 13.8 percent of GDP in 2017. As  shown in figure 3, these state and local government sector operating  revenues are comprised of taxes, transfer receipts, and other types of  revenues.", "One way of measuring the long-term fiscal challenges faced by the state  and local government sector is through an indicator known as the \u201cfiscal  gap.\u201d The fiscal gap is an estimate of actions\u2014such as revenue increases  or expenditure reductions\u2014that must be taken today and maintained for  each year going forward to achieve fiscal balance during the simulation  period. While we measured the gap as the amount of reductions in  expenditures needed to prevent negative operating balances, increases  in revenues, reductions in expenditures, or a combination of the two of  sufficient magnitude would allow the sector to close the fiscal gap.", "Our simulations suggest that the fiscal gap is about 14.7 percent of total  expenditures or about 2.4 percent of GDP. That is, assuming no change  in projected total revenues, eliminating the difference between the  sector\u2019s expenditures and revenues during the 50-year simulation period  would likely require action to be taken today, and maintained for each  year equivalent to a 14.7 percent reduction in the sector\u2019s total  expenditures (see figure 4). Alternatively, assuming no change in  projected total expenditures, closing the fiscal gap by increasing revenue  would also likely require actions of similar magnitude. More likely,  eliminating the difference between expenditures and revenues would  involve some combination of spending reductions and revenue  increases."], "subsections": []}, {"section_title": "Health Care Cost Growth and Other Factors Contribute to the State and Local Sector\u2019s Fiscal Imbalance", "paragraphs": [], "subsections": [{"section_title": "Medicaid and Employee Health Benefits Are Key Drivers of Long-Term Spending", "paragraphs": ["Our simulations suggest that growth in the sector\u2019s overall spending is  largely driven by health care expenditures. As shown in figure 5, these  expenditures are projected to increase from about 4.1 percent of GDP in  2018 to 6.3 percent of GDP in 2067. Two types of health care  expenditures\u2014Medicaid spending and spending on health benefits for  state and local government employees and retirees\u2014will likely constitute  a growing expenditure for state and local governments during the  simulation period. Medicaid expenditures are expected to rise, on  average, by 1 percentage point more than GDP each year.", "According to CBO, growth in Medicaid spending reflects growth in both  the number of people receiving Medicaid benefits and the cost of  Medicaid benefits each person receives. Specifically, CBO reported that  between 2019 and 2028, Medicaid spending is projected to grow at an  average rate of 5.5 percent per year\u2014nearly 5 percentage points of this  growth is due to an increase in per capita costs and about 1 percentage  point of this growth is due to an increase in enrollment. Data from CBO  and the Centers for Medicare & Medicaid Services (CMS) also suggest  that growth in Medicaid spending per capita is generally expected to  outpace GDP growth in the future\u2014referred to as excess cost growth.  Our estimates of Medicaid excess cost growth using CMS data suggest  that Medicaid spending per capita will grow, on average, about 0.5  percent faster than GDP per capita for the period from 2018 through  2067.", "Our simulations also suggest that health benefits for state and local  government employees and retirees\u2014a type of employee compensation  spending\u2014are likely to rise, on average, by 0.9 percentage points more  than GDP each year. Growth in these health benefits also reflects growth  in the projected number of employees and retirees and growth in the  projected amount of health benefits for each employee and retiree.  Growth in spending by states and local governments on health care per  capita, which includes spending on employee and retiree health benefits,  is generally expected to outpace GDP per capita. Data from CMS suggest  that national health expenditures per capita are likely to grow on average  about 0.8 percent faster than GDP per capita each year during the  simulation period from 2018 through 2067. If employee and retiree health  benefits follow trends in overall national health spending, they will likely  make up an increasingly large share of total employee compensation  going forward (see figure 6).", "While state and local government contributions to employee pension  plans\u2014another type of employee compensation spending\u2014will likely  decline as a percentage of GDP, as shown in figure 6, our simulations  nonetheless suggest that state and local governments may need to take  steps to manage their pension obligations in the future. From 1998  through 2007, state and local governments\u2019 pension contributions  amounted to about 8 percent of wages and salaries on average. In  addition, for the period from 2008 through 2017, pension contributions  amounted to about 12.3 percent of wages and salaries on average. Our  simulations suggest that those pension contributions will need to be about  12.9 percent of wages and salaries for state and local governments to  meet their long-term pension obligations. This is the case even though  pension asset values have increased in recent years, from about $2.4  trillion in 2008 to about $4.2 trillion in 2017 (adjusted for inflation and  measured in 2012 dollars). This suggests that state and local  governments may need to take additional steps to manage their pension  obligations by reducing benefits or increasing employees\u2019 contributions.", "Along with pension contributions, other types of state and local  government expenditures are projected to grow more slowly than GDP.  For example, in 2017, wages and salaries of state and local government  employees constituted a large expenditure for the sector. However, these  expenditures are projected to decline as a percentage of GDP during the  simulation period. Our simulations also suggest that state and local  governments\u2019 capital outlays\u2014which include spending on infrastructure,  such as buildings, highways and streets, sewer systems, and water  systems, as well as equipment and land\u2014 will grow more slowly than  GDP if state and local governments continue to provide current levels of  capital per resident."], "subsections": []}, {"section_title": "Growth in Medicaid Grants and Personal Income Taxes Drive Revenues", "paragraphs": ["Our simulations suggest that federal grants overall will increase as a  share of GDP, while Medicaid grants will likely grow more quickly than  other types of federal grants (see figure 7). Thus, Medicaid grants will  likely make up an increasing share of revenues in the future. Since  Medicaid is a matching formula grant program, the projected increase in  federal Medicaid grants, therefore, reflects expected increased Medicaid  expenditures that will be shared by state governments. Our simulations  also suggest that federal investment grants (i.e., grants intended to  finance capital infrastructure investments) and other federal grants  unrelated to Medicaid (i.e., grants intended to finance education, social  services, housing, and community investment) are likely to decline as a  share of GDP.", "Further, our simulations suggest that if historical relationships between  state and local governments\u2019 tax revenues and tax bases persist, total tax  revenues for the state and local government sector will increase from 8.8  percent of GDP in 2018 to 9.4 percent of GDP by the end of the  simulation period. This increase is driven largely by the growth in  personal income taxes, as shown in figure 8. Specifically, our simulations  suggest that personal income tax revenues will increase as a share of  GDP by about 1 percentage point during the simulation period. Sales  taxes and property taxes, on the other hand, are projected to remain  relatively constant as a share of GDP during the simulation period  through 2067."], "subsections": []}]}, {"section_title": "Policy Changes and Other Considerations Could Affect the State and Local Government Sector\u2019s Fiscal Outlook", "paragraphs": ["While our long-term simulations do not account for pending or future  federal policy changes that will result in changes to expenditures and  revenues, an understanding of several recent federal policy changes  related to taxes and health care are important to note because they  present sources of uncertainty for the state and local government sector\u2019s  long-term fiscal outlook. In addition, as is the case in any model that is  reliant on historical data to simulate a long-term outlook, other  considerations, such as economic growth and rates of return on pension  assets, could shift future fiscal outcomes. These policy changes and  uncertainties are discussed below and may help federal policy makers  and state and local governments consider how these changes could  affect the long-term outlook."], "subsections": [{"section_title": "Tax-and Health-Related Policies Could Affect the Sector\u2019s Long-Term Fiscal Outlook", "paragraphs": [], "subsections": [{"section_title": "Tax Policies", "paragraphs": ["Recently enacted legislation, such as Public Law 115-97, commonly  referred to by the President and administrative documents as the Tax  Cuts and Jobs Act (TCJA), could affect the sector\u2019s revenues over the  long-term. Enacted in December 2017, TCJA included significant  changes to corporate and individual tax law, with implications for state  and local government tax collections. In particular, for individual  taxpayers, for tax years 2018 through 2025, tax rates were lowered for  nearly all income levels, some deductions from taxable income were  changed (personal exemptions were eliminated, while the standard  deduction was increased), and certain credits, such as the child tax credit,  were expanded.", "The effect of TCJA on the long-term state and local fiscal outlook is still  evolving, and will likely depend on how states incorporate the law\u2019s  changes into their state income tax rules. That is, because some states  link their state income taxes to federal income tax rules, states must  decide whether to let the changes from TCJA flow through to their state  income tax systems, or establish new state income tax rules. For  example, some states have adopted the federal definition of taxable  income as a starting point for state tax calculations, while other states use  the federal definition of adjusted gross income as a starting point. The  choices states make to continue to link to these definitions could have  long-term implications for their state tax revenues. In addition, under  TCJA, the amount of the federal itemized deductions allowed for all state  and local income, sales, and property taxes (commonly referred to as the  state and local tax (SALT) deduction) is now capped at $10,000 for tax  years 2018 to 2025. The magnitude or net effect of these changes is  uncertain in that states are still working to understand the impact of the  tax laws on their revenues. It remains to be seen whether and how states  will see changes in their revenues in the future.", "Moreover, a recent U.S. Supreme Court decision involving state sales  taxes could have implications for states\u2019 ability to collect revenue.  Specifically, the court\u2019s ruling in June 2018 in South Dakota v. Wayfair,  Inc. held that states could require out-of-state sellers to collect and remit  sales taxes on purchases made from those out-of-state sellers, even if  the seller does not have a substantial physical presence in the taxing  state. Prior to this ruling, a seller that did not have a substantial physical  presence in a state could not be required to collect and remit a sales tax  on goods sold into the state. Instead, a purchaser may have been  required to pay a use tax (i.e., a tax levied on the consumer for the  privilege of use, ownership, or possession of taxable goods and services)  in the same amount to his or her state government. In 2017, we  reported that states could realize between an estimated $8.5 billion and  $13.4 billion in additional state sales tax revenue across all states if all  sellers were required to collect taxes on all remote sales at current  rates. The extent to which states realize changes in sales tax revenue  will likely depend on how they revise their state laws and enforcement  efforts in response to this June 2018 ruling."], "subsections": []}, {"section_title": "Health Care Policies", "paragraphs": ["Enacted health care legislation could also affect the long-term fiscal  position of state and local governments. As we have reported in prior  work, the effect of the Patient Protection and Affordable Care Act  (PPACA) on the long-term state and local fiscal outlook could depend on  how states implement PPACA, and on future rates of health care cost  growth. For example, consider the states that have opted, under  PPACA, to expand Medicaid program coverage to millions of lower  income adults. While the federal government is expected to cover a large  share of the costs of the Medicaid expansion, these states are ultimately  expected to bear some of the costs. Specifically, the federal government  reimbursed 100 percent of the costs of the expanded population  beginning in 2014. This reimbursement rate will decline from the 2018  reimbursement rate of 94 percent to 90 percent by 2020. As such, the  reduced federal reimbursement rate may affect those states that  expanded their Medicaid populations in recent years.", "As discussed earlier in this report, our simulations suggest that Medicaid  spending will make up an increasing share of the state and local  government sector\u2019s operating expenditures in the future. A weakening of  the economy could add to the fiscal pressures states face in funding  these Medicaid obligations. As our prior work has shown, past recessions  in 2001 and 2007 hampered states\u2019 ability to fund increased Medicaid  enrollment and maintain their existing services. Specifically, Medicaid  enrollment increased during these recessions, in part due to increased  unemployment, which led more individuals to become eligible for the  program.", "We have also reported on the use of Medicaid demonstrations, which  allow states to test new approaches to coverage to improve quality and  access, or generate savings or efficiencies. Specifically, CMS may  waive certain Medicaid requirements and approve new types of  expenditures that would not otherwise be eligible for federal Medicaid  matching funds. For example, under demonstrations, states have  extended coverage to certain populations, provided services not  otherwise eligible for Medicaid, and made payments to providers to  incentivize delivery system improvements. We previously reported that,  as of November 2016, nearly three-quarters of states have CMS- approved demonstrations. In fiscal year 2015, federal spending under  demonstrations represented a third of all Medicaid spending nationwide.  We also reported that in 10 states, federal spending on demonstrations  represented 75 percent or more of all federal spending on Medicaid.  Joint financing of Medicaid is a fixture of this federal-state partnership.  Demonstration waivers hold the potential for changing state Medicaid  spending. However, as we have reported, these demonstrations are  required, under HHS policy, to achieve budget neutrality and not raise  costs for the federal government."], "subsections": []}]}, {"section_title": "Economic Growth and Other Factors Could Affect the Sector\u2019s Fiscal Outlook", "paragraphs": ["In addition to federal tax- and health-related policy changes, a number of  other factors could affect the state and local government sector\u2019s long- term fiscal outlook. Specifically, we developed simulations using  alternative assumptions of the growth of key model variables\u2014which  include economic growth, health care excess cost growth, and the rate of  return on pension assets. We determined that changes in the growth  projections of these key variables could affect the operating balance of  state and local governments, thereby shifting future fiscal outcomes for  the sector."], "subsections": [{"section_title": "Economic Growth", "paragraphs": ["Future trends in GDP growth could affect the state and local government  sector\u2019s fiscal outlook. Data from CBO and the Board of Trustees of the  Federal Old-Age and Survivors Insurance and Federal Disability  Insurance Trust Funds (OASDI Trustees) project real GDP to grow by 1.9  percent per year on average from 2018 through 2028, and by 2.1 percent  per year on average after 2028, respectively. Using these projections,  our simulations suggest that maintaining current policies would cause the  sector\u2019s expenditures to exceed its revenues and that the difference  between revenues and expenditures would become increasingly negative  during the next several decades. However, simulations we developed  using the OASDI Trustees\u2019 alternative projections of real GDP growth  suggest that the difference between revenues and expenditures would  expand before narrowing toward the end of the simulation period if real  GDP were to grow at a faster rate\u20142.8 percent per year on average\u2014as  shown in figure 9. Our simulations also show that if GDP were to grow at  a slower rate\u20141.5 percent per year on average\u2014the difference between  revenues and expenditures would expand. This would result in an  increasingly negative operating balance during the simulation period.", "As discussed earlier in this report, excess cost growth in health care is  another key determinant of the sector\u2019s fiscal balance. Data from CBO  project Medicaid spending per capita to grow about 1.5 percent faster  than GDP per capita on average for the period from 2019 through 2028.  Data from CMS project Medicaid spending per capita to grow about 0.6  percent faster on average for the period from 2029 through 2067. Data  from CMS also project national health expenditures per capita to grow  about 0.8 percent faster than GDP per capita for the period from 2018  through 2067. Using these projections, our simulations suggest that  maintaining current policies will cause the sector\u2019s expenditures to  exceed its revenues, and that the difference between revenues and  expenditures will become increasingly negative during the next several  decades. However, simulations developed using alternative projections of  excess cost growth in Medicaid and national health expenditures suggest  that the difference between revenues and expenditures may be reduced  but not eliminated within the simulation period if excess cost growth in  health care is zero. In the scenario where excess cost growth rises  faster\u20140.7 percent on average for Medicaid for the period from 2029  through 2067 and 1 percent for national health expenditures for the period  from 2018 through 2067\u2014our simulations show that the difference  between revenues and expenditures will persist for the remainder of the  simulation period (see figure 10).", "The rate of return on pension assets could also affect the state and local  government sector\u2019s fiscal outlook. Based on an inflation-adjusted rate of  return on pension assets of 5 percent, our simulations suggest that state  and local governments will need to make pension contributions equivalent  to about 12.9 percent of their wages and salaries to meet their long-term  pension obligations. However, this estimate is sensitive to the rate of  return on state and local governments\u2019 pension assets. Simulations we  developed using a higher rate of return\u20147.5 percent\u2014suggest that  pension contributions needed to meet pension obligations would be about  3 percent of state and local government employees\u2019 wages and salaries.  In addition, under this scenario, our simulations suggest that the  difference between revenues and expenditures will be reduced, but not  eliminated within the simulation period. Alternatively, we estimated that if  the rate of return on pension assets is relatively low\u2014at 2.5 percent\u2014 required pension contributions would need to be about 23 percent of state  and local government employees\u2019 wages and salaries during the  simulation period. Under this scenario, our simulations show that the  sector\u2019s negative operating balance will continue to grow larger  throughout the simulation period. It follows therefore, that high rates of  return on pension assets are associated with an improved outlook for  state and local governments, and vice versa (see figure 11).", "This report was prepared under the direction of Michelle A. Sager,  Director, Strategic Issues, who can be reached at (202) 512-6806 or  sagerm@gao.gov, and Oliver M. Richard, Director, Center for Economics,  who can be reached at (202) 512-8424 or richardo@gao.gov if there are  any questions. GAO staff who made key contributions to this report are  listed in appendix IV."], "subsections": []}]}]}]}, {"section_title": "Appendix I: State and Local Government Fiscal Model Simulation Methodology", "paragraphs": [], "subsections": [{"section_title": "Data", "paragraphs": ["To simulate measures of fiscal balance for the state and local government  sector for the long term, we used aggregate data on the state and local  government sector and national data on other variables from the following  sources:", "Agency for Healthcare Research and Quality;", "Board of Governors of the Federal Reserve System;", "Board of Trustees of the Federal Old-Age and Survivors Insurance  and Federal Disability Insurance Trust Funds (OASDI Trustees);", "Bureau of Economic Analysis (BEA);", "Bureau of Labor Statistics;", "Centers for Medicare & Medicaid Services (CMS);", "Congressional Budget Office (CBO); and", "Federal Reserve Bank of St. Louis."], "subsections": []}, {"section_title": "Model Specification", "paragraphs": [], "subsections": [{"section_title": "Overview", "paragraphs": ["Our approach generally follows the approach used in GAO-08-317 and in  subsequent updates of that report. Specifically, we developed a model  that projects the levels of receipts and expenditures of the state and local  government sector (henceforth, the sector) in future years based on  current and historical spending and revenue patterns. We use table 3.3 of  the National Income and Product Accounts (NIPA)\u2014State and Local  Government Current Receipts and Expenditures\u2014prepared by BEA at  the U.S. Department of Commerce as an organizing framework for  developing our model of the sector\u2019s revenues and expenditures (see  table 1). In this table, current revenues are grouped in five main  categories.", "Current tax receipts. These receipts are tax payments made by  persons or businesses to state and local governments. They include  income taxes, general sales taxes, property taxes, and excise taxes.  Current taxes also include fees for motor vehicle licenses, drivers\u2019  licenses, and business licenses.", "Social insurance contributions. These contributions finance the  provision of certain social benefits to qualified persons, and include  contributions from employers and employees for temporary disability  insurance, worker\u2019s compensation insurance, and other programs.", "Income receipts from government assets. These receipts include  interest, dividends, and rental income, such as royalties paid on  drilling on the outer continental shelf. Also, state and local  governments earn interest and dividend income on financial assets.", "Current transfer receipts. Transfer receipts are receipts for which state  and local governments provide nothing of value in return. Current  transfer receipts include federal grants, fines, fees, donations, and  tobacco settlements. Also included are net insurance settlements,  certain penalty taxes, court fees, and other miscellaneous transfers.", "Current surplus of government enterprises. This surplus is a profit- type measure for state and local government enterprises, such as  water, sewer, gas, and electricity providers; toll providers; liquor  stores; air and water terminals; public transit; and state lotteries.  Some types of enterprises, such as state lotteries, consistently earn  surpluses which are used to fund general government activities. In  contrast, many enterprises run deficits, which, in turn, reduce receipts.", "State and local governments also receive income from the sale of goods  and services, such as school tuition. In the NIPAs, this income is treated  as an offset against expenditures, not revenue. This income comes from  voluntary purchases that might have been made from a private sector  provider of such services.", "In addition to current receipts, state and local governments receive capital  transfer receipts. These receipts include estate and gift taxes, and federal  government investment grants for capital such as highways, transit, air  transportation, and water treatment plants.", "State and local government current expenditures are grouped into four  main categories.", "Consumption expenditures. Generally, spending for which some value  is provided in return. State and local government consumption  spending is the sum of inputs used to provide goods and services,  including compensation of general government employees,  consumption of general government fixed capital (depreciation), and  intermediate goods and services purchased, less sales to other  sectors and own-account investment.", "Current transfer payments. Payments for which nothing of value is  provided in return. For state and local governments, current transfer  payments consist primarily of social benefits, which are payments to  persons to provide for needs that arise from circumstances such as  sickness, unemployment, retirement, and poverty. There are two  kinds of social benefits\u2014benefits from social insurance funds, such as  temporary disability insurance and workers\u2019 compensation, and other  social benefits, such as medical benefits from Medicaid and the state  Children\u2019s Health Insurance Program (CHIP), family assistance from  Temporary Assistance to Needy Families, education assistance, and  other public assistance programs. While NIPA table 3.3 also includes  other current transfer payments to the rest of the world as part of  current transfer payments, these amounts are generally equal to zero.", "Interest payments. These include actual and imputed interest and  represent the cost of borrowing by state and local governments to  finance their capital and operational costs.", "Subsidies. State and local government subsidies are largely payments  to railroads.", "State and local government spending also includes gross investment,  capital transfer payments, and net purchases of nonproduced assets.  Gross investment is spending on capital goods like structures, equipment,  and intellectual property\u2014items that are called fixed assets or capital  because of their repeated or continuous use in providing government  services for more than 1 year. Structures include residential and  commercial buildings, highways and streets, sewer systems, and water  systems. State and local government capital transfer payments include  disaster-related insurance benefits paid to the U.S. territories and the  Commonwealths of Puerto Rico and Northern Mariana Islands. Net  purchases of nonproduced assets are composed of net purchases of land  less oil bonuses (payments to states for the long-term rights to extract  oil).", "Our main indicator of the sector\u2019s fiscal balance is its operating balance  net of funds for capital expenditures (henceforth, operating balance),  which is a measure of the sector\u2019s ability to cover its current expenditures  out of current revenues. The operating balance is defined as total receipts  minus (1) capital outlays not financed by medium- and long-term debt  issuance, (2) total current expenditures less depreciation, (3) current  surplus of state and local government enterprises, and (4) net social  insurance fund balance.", "Alternative indicators of fiscal balance include net saving and net lending  or borrowing.", "Net saving is the difference between current receipts and current  expenditures. Since current expenditures exclude capital investment  but include a depreciation measure, net saving can be thought of as a  measure of the extent to which governments are covering their current  operations from current receipts.", "Net lending or borrowing is the difference between total receipts and  total expenditures, and is analogous to the federal unified surplus or  deficit. Total receipts differ from current receipts because they include  capital transfer receipts. Total expenditures differ from current  expenditures because they include capital investment, capital transfer  payments, and net purchases of nonproduced assets. However, they  exclude fixed capital consumption. The former three categories are  cash expenditures, while the latter is a noncash charge. Net lending  or net borrowing represents the governments\u2019 cash surplus or  borrowing requirement. This measure is normally negative because  governments borrow to finance their capital investment (and  sometimes to finance current operations as well).", "The following equations describe how we simulated state and local  government receipts and expenditures, as well as the intermediate  variables used in those simulations. For this update, we started with  historical data for 2017, or the most recent year available, and then  simulated each variable for each year from 2018 through 2092 (the  simulation period)."], "subsections": []}, {"section_title": "National Demographic, Macroeconomic, and Health Care Variables", "paragraphs": ["To simulate state and local government receipts and expenditures, we  use simulations of various national-level demographic, macroeconomic,  and health care variables derived from projections produced by CBO,  CMS, and the OASDI Trustees, and otherwise derived using our own  assumptions (see table 2). This approach is similar to the approach we  have used in prior model updates."], "subsections": []}, {"section_title": "State and Local Government Defined Benefit Pension Contribution Rate", "paragraphs": ["To simulate state and local government spending on defined benefit  pensions, we first estimate the contribution rate (as a fraction of state and  local government general government wages and salaries) that state and  local governments would need to make each year going forward to  ensure that their pension systems are fully funded on an ongoing basis.  Our goal is to estimate the financial commitments to employees that have  been and are likely to continue to be made by the state and local sector to  better understand the full fiscal outlook for the sector. As such, our  analysis projects the liabilities that the sector is likely to continue to incur  in the future based on simulations of future numbers of retirees receiving  pension benefits and their benefit amounts; future numbers of employees,  their wages and salaries, and their pension contributions; and assets in  state and local government defined benefit pension funds. Although we  are only interested in applying contribution rates over the simulation time  frame, we actually have to derive the contribution rate for a longer time  frame in order to find the steady-state level of necessary contributions.  This longer time frame is required because the estimated contribution rate  increases as the projection horizon increases and eventually converges  to a steady state. If the projection period is of insufficient length, the  steady-state level of contribution is not attained, and the necessary  contribution rate is understated. We simulated variables used to estimate  the pension contribution rate using the approach summarized in table 3.", "This approach is similar to the approach we have used in prior model  updates.", "Future growth in the number of state and local government retirees\u2014 many of whom will be entitled to pension and health care benefits\u2014is  largely driven by the size of the workforce in earlier years. We simulated  the number of state and local government retirees by assuming that the  growth rate in the number of retirees is a weighted average of the growth  rates in lagged general government and government enterprise  employment. We estimated the weights using a regression of the percent  change in the number of retirees on the percent change in employment 1,  6, 11, 16, 21, 26, 31, 36, and 41 years in the past. The coefficients on the  past percentage changes in employment were constrained to be non- negative and to sum to 1. For this regression, we removed cyclical swings  in employment using the Hodrick-Prescott filter.", "Similarly, future changes in the real amount of pension benefits will be a  function of past changes in real wages and salaries. As indicated in table  3, we used a weighted average of past values of the state and local  government employment cost index to simulate the employment cost  index for state and local government retirees. We chose the weights to  reflect changes in the share and average real benefit level of three  subsets of the retiree population over time: (1) new retirees entering the  beneficiary pool, (2) deceased retirees leaving the pool, and (3)  continuing retirees from the previous year.", "We simulated the weight for new retirees in a year as the number of  retirees less the number of continuing retirees divided by the number  of retirees.", "We simulated the weight for deceased retirees as the mortality rate  multiplied by last year\u2019s retirees divided by this year\u2019s retirees.", "We simulated the weight for continuing retirees as last year\u2019s retirees  divided by this year\u2019s retirees.", "Finally, we simulated the employment cost index for state and local  government retirees as the sum of the weight on new retirees multiplied  by the state and local government employment cost index and the weight  on continuing retirees multiplied by the state and local government  employment cost index 8 years prior, less the weight on deceased  retirees multiplied by the state and local government employment cost  index 21 years prior.", "As discussed above, we started with historical data for 2017, or the most  recent year available, simulated all of the variables in table 3 over the  long run, and then used the consumer price index (CPI) and the real  return on pension assets to calculate the total present value of wages and  salaries for state and local government general government and  government enterprise employees, the total present value of real pension  benefits paid to state and local government retirees, and the total present  value of state and local government employees\u2019 pension contributions.  Then, we calculated the total present value of state and local  governments\u2019 pension liabilities as the total present value of real pension  benefits paid to state and local government retirees less the total present  value of state and local government employees\u2019 pension contributions,  and the value of assets in state and local government defined benefit  pension funds in 2017. Finally, we estimated state and local governments\u2019  pension contribution rate as the ratio of the total present value of their  pension liabilities to the total present value of wages and salaries for state  and local government employees."], "subsections": []}, {"section_title": "Interest Rates on State and Local Government Financial Assets and Liabilities", "paragraphs": ["Table 4 summarizes the approach we used to simulate interest rates on  state and local government financial assets and liabilities. This approach  is similar to the approach we have used in prior model updates."], "subsections": []}, {"section_title": "State and Local Government Receipts", "paragraphs": ["Table 5 summarizes our approach to simulating state and local  government receipts. This approach is similar to the approach we have  used in prior model updates.", "These variables track state and local government receipts in table 1  above as follows:", "State and local government personal income tax revenue is the sum  of state personal income tax revenue and local personal income tax  revenue;", "State and local government personal tax revenue is the sum of  personal income tax revenue and other personal tax revenue;", "State and local government revenue from taxes on production and  imports is the sum of general sales tax revenue, excise tax revenue,  property tax revenue, and revenue from other taxes on production and  imports;", "State and local government current tax revenue is the sum of  personal tax revenue, revenue from taxes on production and imports,  and corporate income tax revenue;", "State and local government current transfer receipts are equal to  federal Medicaid grants minus Medicare Part D payments to the  federal government, plus other federal grants (excluding investment  grants), transfer receipts from businesses, and transfer receipts from  persons;", "State and local government current receipts are the sum of current tax  revenue, current transfer receipts, income on assets, social insurance  contributions, and government enterprise surplus;", "State and local government capital transfer receipts are the sum of  federal investment grants and estate and gift tax revenue; and", "State and local government total receipts are the sum of current  receipts and capital transfer receipts."], "subsections": []}, {"section_title": "State and Local Government Expenditures", "paragraphs": ["Our general approach to simulating state and local government  expenditures is to assume that state and local governments maintain the  current level of public goods and services provision per capita (see table  6). Thus, we generally assume that expenditures keep up with U.S.  population growth and some measure of inflation, where the relevant rate  of inflation varies depending on the specific type of expenditure. However,  we use alternative approaches\u2014described below\u2014to simulate  depreciation, interest payments, and social benefits for health care. This  approach is similar to the approach we have used in prior model updates.", "These variables correspond to state and local government expenditures  in table 1 as follows:", "Employee compensation is the sum of wages and salaries, pension  contributions, health benefits for current employees, health benefits  for retirees, and other compensation, for state and local government  general government employees.", "Consumption expenditures are the sum of employee compensation,  general government fixed capital consumption, and other general  government consumption expenditures.", "Social benefit payments are the sum of Medicaid benefits, non- Medicaid health benefits, and non-health social benefits.", "Current expenditures are the sum of consumption expenditures, social  benefit payments, interest payments, and subsidy payments.", "Total expenditures are the sum of current expenditures, gross  investment, capital transfer payments, and purchases of nonproduced  assets, minus general government and government enterprise fixed  capital consumption."], "subsections": []}, {"section_title": "State and Local Government Financial Assets and Liabilities", "paragraphs": ["Table 7 summarizes our approach for simulating state and local  government financial assets and liabilities. This approach is similar to the  approach we have used in prior model updates.", "Our method for simulating the sectors\u2019 short-term debt outstanding  leverages the fact that for any entity, there is a direct relationship between  budget outcomes and changes in financial position. Specifically, if  expenditures exceed receipts, the gap needs to be financed by some  combination of changes in financial assets and changes in financial  liabilities. If governments spend more than they take in, they must pay for  it by issuing debt, cashing in assets, or some combination of the two.  Conversely, if receipts exceed expenditures and the sector is a net  lender, its net financial investment (the net change in financial assets  minus the net change in financial liabilities) must equal the budget  surplus. The relationship between budget outcomes and the sector\u2019s  financial position is shown in the following accounting identity:  total receipts \u2013 total expenditures = change in financial assets \u2013  change in financial liabilities.", "The sector\u2019s financial liabilities include short-, medium-, and long-term  debt; trade payables; and loans from the federal government, so the  accounting identity can be rewritten as follows:  total receipts \u2013 total expenditures = change in financial assets \u2013  change in medium- and long-term debt \u2013 change in trade payables \u2013  change in federal government loans \u2013 change in short term debt.", "For a given difference between total receipts and total expenditures,  various combinations of changes in financial assets and changes in  financial liabilities can satisfy this identity. However, we assumed that  financial assets grow at the same rate as U.S. GDP, that medium- and  long-term debt outstanding is determined using the historical relationship  described in table 7, that federal government loans to state and local  governments are determined using the historical relationship described in  table 7, and that trade payables grow at the same rate as other state and  local government consumption spending. If the first four terms on the right  hand side of the identity are already determined, then only the fifth term\u2014 the change in short-term debt\u2014is free to satisfy this identity."], "subsections": []}, {"section_title": "State and Local Government Fiscal Balance", "paragraphs": ["As discussed above, our indicators of fiscal balance are operating  balance, net saving, and net lending or borrowing. This approach is  similar to the approach we have used in prior model updates. Recall that  we defined operating balance as follows:  operating balance = total receipts \u2013 (gross investment + capital  transfer payments + net purchases of nonproduced assets \u2013 medium-  and long-term debt issuance) \u2013 (current expenditures \u2013 consumption  of general government fixed assets) \u2013 current surplus of state and  local government enterprises \u2013 net social insurance fund balance.", "By substituting for total receipts and current expenditures using the  relationships described above and rearranging terms, we can also  calculate operating balance using a formula that more easily identifies its  revenue components\u2014the items in the first set of parentheses\u2014and  expenditure components\u2014the items in the second set of parentheses:  operating balance = (current tax revenues + estate and gift tax  revenues + social insurance fund contributions + income receipts from  assets + current transfers + federal investment grants + medium- and  long-term debt issuance) \u2013 (compensation of general government  employees + social benefit payments + interest payments + gross  investment + capital transfer payments + net purchases of  nonproduced assets + other general government consumption  expenditures + subsidy payments + net social insurance fund  balance)."], "subsections": []}]}, {"section_title": "Estimated Historical Relationships", "paragraphs": ["Some of our simulations are based on estimated historical relationships  between pairs of variables:", "Elasticity of real personal consumption expenditures less food and  services with respect to real wages and salaries;", "Elasticity of the real U.S. market value of real estate with respect to", "Relationship between effective interest rates on financial assets and", "Relationship between state and local government bond yields and 10- year Treasury rates;", "Relationship between effective interest rates on long-term state and  local government debt and federal government loans and state and  local government bond yields;", "Elasticity of real state personal income tax revenue with respect to", "Elasticity of real state and local government excise tax revenue with  respect to real wages and salaries;", "Relationship between long-term debt issuance as a fraction of gross  investment and nonproduced asset purchases in excess of federal  investment grants and the change in state and local government bond  yields; and", "Relationship between real federal government lending to state and  local governments and real U.S. GDP.", "To estimate each of these historical relationships, we used the following  approach: first, we assessed the order of integration of both variables  using unit root tests of the levels and the first differences, where a  variable is integrated of order 0 (I(0) or stationary) if we rejected the null  hypothesis of a unit root in the levels at standard significance levels, and  is integrated of order 1 (I(1) or first-order nonstationary) if we could not  reject the null hypothesis of a unit root in the levels but we could do so for  the first differences. For relationships between variables that were both  stationary, we estimated an autoregressive distributed lag model,  where y is the dependent variable, x is the independent variable, and \u03b5 is  an independent, identically distributed error term. The long-run impact on  y of a one unit change in x is given by \u2211 .", "We initially chose the number of lags based on the Bayesian Information  Criteria and then added additional lags of the dependent variable, if  needed, until the residuals were consistent with a white noise process at  standard significance levels. For relationships between variables that  were both first-order nonstationary, we used the same approach but also  used the Pesaran, Shin, and Smith bounds test for the existence of a  cointegrating (long-run equilibrium) relationship. We concluded that the  variables were cointegrated if we rejected the null hypothesis of no  relationship at standard significance levels. Tables 8 and 9 summarize  the estimated regression models as well as the results of the unit root,  white noise, and cointegration tests."], "subsections": []}, {"section_title": "Indicators of Fiscal Balance for the State and Local Government Sector", "paragraphs": ["We simulated the model for the 75-year period from 2018 through 2092,  and we used the results to calculate the operating balance for the state  and local government sector as a percentage of U.S. GDP. Our results  suggest that if the sector maintains current policy and continues to  provide current per capita levels of public goods and services, then its  operating balance will decline from about -1 percent of U.S. GDP to about  -3 percent of U.S. GDP over the next 50 years.", "To shed light on how maintaining the operating balance at or above zero  would affect the state and local government sector, we used the model to  simulate the level of total expenditures that would keep the operating  balance greater than or equal to zero. We then calculated the difference  between the present value of total expenditures simulated assuming the  sector maintains balance, and the present value of total expenditures  simulated assuming the sector maintains current policies, both as a  percentage of the present value of total expenditures assuming the sector  maintains current policies, and as a percentage of the present value of  U.S. GDP. We calculated all of the present values for the 50-year period  from 2018 through 2067, and we used a discount rate equal to the  average of the 3-month Treasury rate and the 10-year Treasury rate for  each year. Our results suggest that the difference between the present  value of total expenditures that maintain balance and the present value of  total expenditures that maintain current policies is about -14.7 percent of  the present value of total expenditures that maintain current policies, or  about -2.4 percent of the present value of U.S. GDP. That is, our  simulations suggest that maintaining balance would require the sector to  spend about 14.7 percent less than it would spend each year to maintain  current policies. We note that a similar exercise based on simulating total  revenues required to maintain the operating balance at or above zero  would generate a similar result."], "subsections": []}, {"section_title": "Caveats and Limitations", "paragraphs": ["Our approach has a number of limitations and the results should be  interpreted with caution:", "The state and local government fiscal model is not designed for  certain types of analyses. The simulations are not intended to provide  precise predictions. Even though we know that these governments  regularly make changes to tax laws and expenditures, the model  essentially holds current policy in place and analyzes the fiscal future  for the sector as if those policies were maintained because it would be  highly speculative to make any assumptions about future policy  adjustments.", "Fiscal outcomes, as related to the state and local government sector\u2019s  financial position and solvency, may not reflect all aspects of the  sector\u2019s fiscal health. Other indicators include economic indicators  that go beyond the sector\u2019s financial position to include economic  growth, income, or distributional equity, as well as indicators of the  quality of services provided by the sector, including education, health  care, infrastructure, and other public goods and services.", "Our unit of analysis is the state and local government sector as a  whole, so our results provide an assessment of the sector\u2019s fiscal  outlook. However, individual state and local governments likely exhibit  significant heterogeneity in their expenditure and revenue patterns, so  their fiscal outlooks will likely differ from that for the sector.  Nevertheless, it is informative to assess the overall fiscal outlook of  the sector because doing so reveals the outlook for the average state  or local government. In addition, aggregate data on the sector are  available on a more timely basis than data for individual state and  local governments. This allows for a better assessment of the sector\u2019s  current fiscal outlook. Our results for the sector also provide a  baseline from which to view the experiences of individual state and  local governments. Finally, assessing the fiscal outlook of the sector  as a whole can help mitigate the tendency to extrapolate from the  most visible, but potentially not representative, experiences of  individual states or localities."], "subsections": []}]}, {"section_title": "Appendix II: State and Local Government Fiscal Model Alternative Simulations", "paragraphs": ["Our baseline approach to simulating the fiscal outlook for the state and  local government sector is described in appendix I. As part of our  simulation approach, we used five variables with values for the simulation  period\u2014the period from 2018 through 2092\u2014that are projected outside  the model and that do not rely on maintaining historical relationships: U.S.  population, real U.S. gross domestic product (GDP) growth, national  health care excess cost growth, Medicaid excess cost growth, and the  real rate of return on pension assets.", "U.S. population. For our baseline simulations, we used the Board of  Trustees of the Federal Old-Age and Survivors Insurance and Federal  Disability Insurance Trust Funds\u2019 (OASDI Trustees) intermediate  population projections.", "Real U.S. GDP. For our baseline simulations, we projected real U.S.", "GDP to grow at the same rate as Congressional Budget Office (CBO)  projections for the period from 2018 through 2028 and to grow at the  same rate as the OASDI Trustees\u2019 intermediate projections of real  U.S. GDP growth for the period from 2029 through 2092.", "National health expenditures excess cost growth. For our baseline  simulations, we used Centers for Medicare & Medicaid Services\u2019  (CMS) baseline projection of national health expenditures excess cost  growth.", "Medicaid excess cost growth. For our baseline simulations, for the  period from 2029 through 2092, we used Medicaid excess cost growth  derived from CMS\u2019s baseline projections.", "Real rate of return on state and local government pension assets. For  our baseline simulations, we assumed a 5 percent real rate of return  on state and local government pension assets.", "To assess the sensitivity of our results to changes in these baseline  projections, we selected two alternative projections of each of these  variables, one associated with a faster growth rate or rate of return and  one associated with a slower growth rate or rate of return.", "U.S. population. For our alternative simulations, we used the OASDI  Trustees\u2019 high cost and low cost population projections.", "Real U.S. GDP. For our alternative simulations, we used the OASDI  Trustees\u2019 high cost and low cost projections of real U.S. GDP growth.", "National health expenditures excess cost growth. For our alternative  simulations, we used CMS\u2019s alternative projection of national health  expenditures excess cost growth. As another alternative, we  simulated the model assuming excess cost growth for national health  expenditures is zero.", "Medicaid excess cost growth. For our alternative simulations, for the  period from 2029 through 2092, we used Medicaid excess cost growth  derived from CMS\u2019s alternative projections for the period from 2029  through 2092. As another alternative, we simulated the model  assuming Medicaid excess cost growth is zero for the period from  2029 through 2092.", "Real rate of return on state and local government pension assets. For  our sensitivity analysis, we used real rates of return of 2.5 percent and  7.5 percent.", "Table 10 shows the average annual growth rate or rate of return  associated with the baseline and alternative projections of each variable  for the simulation period.", "For our simulations based on alternative assumptions about U.S.  population growth and real U.S. GDP growth, as well as simulations  based on alternative assumptions about real pension asset returns, we  simulated the model changing one variable at a time and leaving the  others fixed at their baseline values. For example, for one simulation we  used the slower assumption for real U.S. GDP growth and the baseline  assumptions for all other variables. For our simulations based on  alternative assumptions about excess cost growth for national health  expenditures and for Medicaid, we changed both variables in the same  direction and left the others fixed at their baseline values. For example,  for one simulation we used zero excess cost growth for both national  health expenditures and for Medicaid, and made the baseline assumption  for the other variables. Thus, our sensitivity analysis is in the spirit of a  partial equilibrium comparative statics analysis that sheds light on how  each of the individual variables may affect the state and local government  sector\u2019s fiscal outlook. However, these variables are likely to be  correlated so future changes in one would likely be associated with  changes in others."], "subsections": []}, {"section_title": "Appendix III: Related GAO Products", "paragraphs": ["State and Local Governments\u2019 Fiscal Outlook: December 2016 Update,  GAO-17-213SP. Washington, D.C.: Dec. 8, 2016.", "State and Local Governments\u2019 Fiscal Outlook: December 2015 Update,  GAO-16-260SP. Washington, D.C.: Dec. 16, 2015.", "State and Local Governments\u2019 Fiscal Outlook: December 2014 Update,  GAO-15-224SP. Washington, D.C.: Dec. 17, 2014.", "State and Local Governments\u2019 Fiscal Outlook: April 2013 Update,  GAO-13-546SP. Washington, D.C.: Apr. 29, 2013.", "State and Local Governments\u2019 Fiscal Outlook: April 2012 Update,  GAO-12-523SP. Washington, D.C.: Apr. 5, 2012.", "State and Local Government Pension Plans: Economic Downturn Spurs  Efforts to Address Costs and Sustainability, GAO-12-322. Washington,  D.C.: Mar. 2, 2012.", "State and Local Governments\u2019 Fiscal Outlook: April 2011 Update,  GAO-11-495SP. Washington, D.C.: Apr. 6, 2011.", "State and Local Governments: Knowledge of Past Recessions Can  Inform Future Federal Fiscal Assistance, GAO-11-401. Washington, D.C.:  Mar. 31, 2011.", "State and Local Governments: Fiscal Pressures Could Have Implications  for Future Delivery of Intergovernmental Programs, GAO-10-899.  Washington, D.C.: July 30, 2010.", "State and Local Governments\u2019 Fiscal Outlook: March 2010 Update,  GAO-10-358. Washington, D.C.: Mar. 2, 2010.", "Update of State and Local Government Fiscal Pressures, GAO-09-320R.  Washington, D.C.: Jan. 26, 2009.", "State and Local Fiscal Challenges: Rising Health Care Costs Drive Long- term and Immediate Pressures, GAO-09-210T. Washington, D.C.: Nov.  19, 2008.", "State and Local Governments: Growing Fiscal Challenges Will Emerge  during the Next 10 Years, GAO-08-317. Washington, D.C.: Jan. 22, 2008.", "Our Nation\u2019s Long-Term Fiscal Challenge: State and Local Governments  Will Likely Face Persistent Fiscal Challenges in the Next Decade,  GAO-07-1113CG. Washington, D.C.: July 18, 2007.", "State and Local Governments: Persistent Fiscal Challenges Will Likely  Emerge within the Next Decade, GAO-07-1080SP. Washington, D.C.:  July 18, 2007."], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contacts listed above, Brenda Rabinowitz and Courtney  LaFountain (Assistant Directors), David Aja, Brett Caloia, Ann  Czapiewski, Joe Silvestri, Stewart Small, Andrew J. Stephens, Frank  Todisco, Walter Vance, and Chris Woika made significant contributions to  this report."], "subsections": []}]}], "fastfact": ["What's the prognosis for the fiscal health of state and local governments across the nation?", "Our annual outlook suggests the sector will have an increasingly tough time covering their bills over the next 50 years. Our model shows both revenue and spending will increase; however, spending will rise faster. Revenues may be insufficient to sustain the amount of government service currently provided.", "Our model also suggests health care costs will largely drive the spending increases\u2014in particular, Medicaid spending and spending on health benefits for state and local government employees and retirees."]}
{"id": "GAO-18-190", "url": "https://www.gao.gov/products/GAO-18-190", "title": "Force Structure: F-22 Organization and Utilization Changes Could Improve Aircraft Availability and Pilot Training", "published_date": "2018-07-19T00:00:00", "released_date": "2018-07-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The F-22 was designed and fielded as the Air Force's premier air-to-air fighter. The small fleet of 186 F-22s is central to the Air Force's ability to accomplish its air superiority mission in high threat areas. While the Air Force has focused on other missions over the last 15 years of conflict, it is now trying to refocus on overcoming advanced threats, even as it continues to support ongoing operations. Though the recent introduction of the F-35 gives the Air Force another advanced fighter, the F-35 is primarily designed for the air-to-ground missions and so is intended to complement but not replace the F-22.", "Senate Report 114-255 included a provision for GAO to review a variety of issues related to Air Force F-22 fighter squadrons. This report examines the extent to which the Air Force's (1) organization of its F-22 fleet maximizes availability of aircraft and (2) utilization of its F-22 fleet affects pilot air superiority training. GAO reviewed Department of Defense (DOD) guidance, analyzed maintenance data and training information for the F-22, evaluated the use of F-22s during deployments, and interviewed agency officials. This is a public version of a classified report issued in April 2018. Information DOD deemed classified or sensitive has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["The Air Force's organization of its small F-22 fleet has not maximized the availability of these 186 aircraft. Availability is constrained by maintenance challenges and unit organization. For example, stealth is a central feature of the F-22 and, according to Air Force officials, maintaining the stealth coating on the outside of the aircraft is time consuming and significantly reduces the time F-22s are available for missions. Maintenance availability challenges are exacerbated by the Air Force's decision to organize the F-22 fleet into small units\u201418 or 21 primary mission aircraft per squadron and one or two squadrons per wing. Traditional fighter wings have three squadrons per wing with 24 aircraft in each squadron, which creates maintenance efficiencies because people, equipment, and parts can be shared, according to Air Force officials. Moreover, the Air Force organized F-22 squadrons to operate from a single location. However, it generally deploys only a part of a squadron, and the remaining part struggles to keep aircraft available for missions at home. Larger, traditional Air Force squadrons and deployable units provide a better balance of equipment and personnel, according to service officials. The Air Force has not reassessed the structure of its F-22 fleet since 2010. Without conducting a comprehensive assessment to identify and assess F-22 organization, the Air Force may be foregoing opportunities to improve the availability of its small yet critical F-22 fleet, and support combatant commander air superiority needs in high threat environments.", "The Air Force's utilization of its F-22 fleet has limited pilot opportunities to train for air superiority missions in high threat environments. To complete the annual training requirements for air superiority missions, F-22 pilots must train almost the entire year. However, F-22 pilots are not meeting their minimum yearly training requirements for the air superiority missions, according to Air Force training reports and service officials. Moreover, the utilization of F-22s for exercises and operational missions that do not require the F-22's unique capabilities interrupt pilot training and lead to reduced proficiency. For example, F-22 units are often directed to participate in partnership building exercises. However, during these exercises, F-22 pilots may be restricted from flying the F-22 the way they would fly it in combat\u2014due to security concerns about exposing the F-22's unique capabilities. These restrictions limit the value of the exercises and can result in pilots developing bad habits, according to Air Force officials. The Air Force also uses F-22s to support alert missions\u2014a mission that requires certain bases to have jets ready at all times to respond to threats from civil or military aviation. The alert mission does not require the advanced capabilities of the F-22, but there are no other operational Air Force fighter squadrons currently based at the F-22 locations in Alaska and Hawaii, so the alert mission falls to the F-22 units. Pilots and aircraft assigned to the alert mission cannot be used for any other purposes, including training. This limits opportunities for pilots to enhance air superiority skills. Without examining and implementing options to improve F-22 pilot training opportunities, the Air Force may be foregoing opportunities to improve its capability to address the high-end air superiority challenges it expects to face."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Air Force reassess its F-22 organizational structure to determine alternative approaches to organizing F-22 squadrons, and identify ways to increase F-22 pilot training opportunities for high-end air superiority missions. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Widely regarded as the best air superiority fighter aircraft in the world, the  F-22 is an integral part of the U.S. military\u2019s ability to defeat high-end  adversaries. Potential adversaries around the world are pursuing  technologies and strategies that are reducing the Department of  Defense\u2019s (DOD) relative advantage in a number of areas, according to  the department, including air superiority\u2014a primary mission for the Air  Force. Air superiority is established when the air and missile threat is  reduced to a degree that other operations can occur without significant  interference. As such, the Air Force considers it a precondition for  success of combat operations, and therefore a mission it must address  first. However, fourth generation fighters are increasingly unable to  operate in highly contested environments where advanced air defense  systems render them ineffective, according to the Air Force.  A linchpin  in the Air Force\u2019s ability to establish air superiority in highly contested  environments is its small fleet of F-22s. With a unique combination of  advanced stealth and maneuvering capabilities, the F-22 is designed to  achieve air superiority against the most advanced air and surface threats.  The Air Force currently uses a variety of fourth generation fighters, and  plans to use F-35s for the air superiority mission since F-22 units  constitute only 6 of the Air Force\u2019s 55 combat coded fighter squadrons.", "Over the past 15 years, U.S. air superiority has largely gone  unchallenged, so it has not been a main focus during ongoing operations.  Instead, the focus has been on attacking ground targets in support of  ground operations. With little slowdown in the pace of operations, the Air  Force finds itself in a position where it must balance ongoing operational  demands with the growing need to be prepared for current and future  threats to air superiority.", "To meet its assigned air superiority responsibility, the Air Force needs to  provide the combatant commanders with, at a minimum: 1) mission- capable aircraft, and 2) pilots who are trained to fly those aircraft in the  expected threat environments. The Senate Armed Services Committee  report accompanying a bill for the National Defense Authorization Act for  Fiscal Year 2017 questioned whether the Air Force\u2019s fleet of F-22s is  optimized to deter, and if necessary, quickly defeat increasingly capable  potential adversaries. The Senate report also included a provision for us  to review a variety of issues related to Air Force F-22 fighter squadrons.  This report evaluates the extent to which the Air Force\u2019s (1) organization  of its F-22 fleet maximizes aircraft availability, and (2) utilization of the F- 22 fleet affects pilot air superiority training.", "To address our objectives, we analyzed aircraft inventory data and  maintenance data from the Integrated Maintenance Data System from  2012 through 2016. We used that date range so that we could observe  any trends and because the force structure has been relatively stable  since 2012. We performed data reliability procedures on the information  by taking steps including comparing that information against related  documentation and testimonial evidence, performing logic checks, and  interviewing knowledgeable officials on controls over the reporting  systems. We determined that the reliability of these data were sufficient  for the purposes of describing general trends and making proximate  comparisons. We also analyzed pilot training information, including yearly  memorandums produced by the F-22 operational squadrons for years  2012 through 2016. We also conducted on-site interviews with Air Force  officials from Air Force Headquarters; Air Combat Command; Air National  Guard; Air Force Reserve Command; the four locations with operational  F-22 squadrons; the training unit; and the operational test and evaluation  unit. We discussed how unit organization affects aircraft availability and  the units\u2019 abilities to maintain their aircraft in both the short and long term,  as well as how F-22 utilization affects pilot training for the air superiority  mission. We also discussed issues regarding the need for aircraft that  play the role of adversaries for F-22 training purposes, known as  adversary air. To examine how operational utilization of the F-22 affects  the fleet\u2019s ability to support air superiority, we reviewed mission  assignments and deployment information for F-22 squadrons. We also  interviewed officials from U.S. Central Command, U.S. European  Command, U.S. Northern Command/North American Aerospace Defense  Command, and U.S. Pacific Command, regarding F-22 requirements and  utilization. Finally, we reviewed DOD and Air Force guidance as well as  reports and other documentation relevant to our review, such as Air  Superiority 2030 Flight Plan and various briefings.", "This report is a public version of a classified report that we issued on April  27, 2018. The classified report included an appendix describing current  and projected operational requirements for the F-22. DOD deemed the  information in the appendix to be classified, which must be protected from  loss, compromise, or inadvertent disclosure. Consequently, this public  version excludes that appendix. Further, this public report omits certain information that DOD deemed to be sensitive related to (1) the inventory  of F-22, F-35, F-15C, F-15E, F-16, and A-10 primary mission aircraft  (aircraft authorized to perform combat), (2) maintenance data on aircraft  availability and cannibalization rates, (3) maintenance challenges related  to the F-22\u2019s low observable coating, (4) F-22 squadron organization into  deployable units and related issues, (5) F-22 annual training sortie  standards, (6) effects on pilot training of F-22 operational deployments,  and (7) F-22 spare engine shortfalls. Although the information provided in  this report is more limited, it addresses the same objectives and uses the  same methodology as the classified report.", "The performance audit upon which this report is based was conducted  from July 2016 to April 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  worked with DOD from April 2018 to July 2018 to prepare this unclassified  version of the report for public release. This public version was also  prepared in accordance with these standards."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD guidance states that the Air Force and other services are  responsible for providing trained and ready forces to fulfill the current and  future operational requirements of the combatant commands. The Air  Force is specifically responsible for gaining and maintaining air  superiority. The Air Force Strategic Master Plan states that the Air Force  must focus clearly on the capabilities that will allow freedom of maneuver  and decisive action in highly contested spaces, including high-end air  capabilities. Fifth generation fighter capabilities and ready and trained  Airmen who are properly equipped for their missions are central  components of the Air Force\u2019s ability to provide air superiority in  contested environments.", "The F-22 is the Air Force\u2019s fifth generation, air superiority fighter that  incorporates a stealthy and highly maneuverable airframe, advanced  integrated avionics, and engines capable of sustained supersonic flight.  The F-22 is optimized for air-to-air combat, able to carry up to eight air-to- air missiles, and equipped with a 20-millimeter cannon. After development  began, the Air Force also added air-to-ground capabilities to the F-22. Air  Force officials emphasized the synergistic benefits of the F-22 to the joint  force. Specifically, the F-22\u2019s individual capabilities, like its stealth and  sensors, help it to coordinate and improve the performance of other  aircraft during operations, including fourth generation fighters. The Air  Force views the F-22 and the F-35\u2014its other fifth generation fighter\u2014as  complementary platforms with some overlapping capabilities. For  example, the F-22 is focused on, and more capable in, air-to-air missions  and the F-35 is focused on, and more capable in, air-to-ground missions.  The Air Force announced in its fiscal year 2018 budget request that it now  intends to retain the F-22 until 2060. It has also begun an effort to define  and develop the next generation of air superiority capabilities that it plans  to field in 2030 and beyond. Figure 1 shows a picture of an F-22.", "The F-22 and the F-15C are the two operational fighters in the Air Force\u2019s  Air Superiority Core Function. The Air Force assigns two primary (air-to- air focused) missions and one secondary (air-to-ground focused) mission  to the F-22. These missions are described in table 1. The Air Force  requires its pilots to be proficient in their primary missions and familiar  with their secondary missions.", "The size of the current F-22 fleet is smaller than the Air Force originally  planned. The Air Force F-22 acquisition program began in 1991 with an  intended development period of 12 years and a planned quantity of 648  aircraft. The Air Force had intended to station 40 percent of the  operational fleet outside of the United States. However, schedule delays,  cost increases, and changes to threats, missions, and requirements led  DOD to reduce the number of F-22s it eventually purchased. The Air  Force identified a requirement for 381 F-22s in 2002, but ended aircraft  production in 2012 with approximately half of that number. As of May  2018, the Air Force had a total of 186 F-22s, as shown in figure 2. The  total aircraft inventory includes primary mission aircraft in each  community\u2014those authorized to perform combat\u2014as well as aircraft that  are designated for other purposes.", "The operational portion of the F-22 fleet is organized into 6 operational  squadrons at four locations. According to Air Force officials, the small  number of F-22s provides a less than ideal fifth generation fighter  capacity until F-35 numbers grow. However, in a June 2017 report to  Congress, the Air Force stated that it would not make economic or  operational sense to reopen the F-22 production line, and reported that it  would cost approximately $50 billion to procure an additional 194 F-22s.  The Air Force is continuing to fund programs to modernize the F-22 and  make reliability improvements.", "Figure 3 shows the basing locations of the F-22 fleet, and the numbers of  aircraft at each base."], "subsections": []}, {"section_title": "F-22 Unit Size and Organizational Structure Constrain Aircraft Availability and Have Not Been Reviewed by the Air Force since 2010", "paragraphs": ["The size and structure of F-22 units diminishes the Air Force\u2019s ability to  maximize the number of F-22s available for operations and have not been  reviewed since 2010. The F-22 has sustainment issues due to the fleet\u2019s  maintenance and supply challenges. These challenges have affected  aircraft availability rates, which have remained below Air Force standards.  The small size of F-22 squadrons and wings has contributed to low  aircraft availability rates. Further, the Air Force practice of deploying a  small portion of a squadron makes it difficult for F-22 squadrons, as  currently organized, to make aircraft available for their missions at home  station. The Air Force would also face difficulties generating aircraft to  support DOD\u2019s concepts for using distributed operations in high threat  environments with its current F-22 squadron organization. Although in  2016 it assessed its future air superiority capability needs, the Air Force  has not comprehensively assessed whether the current F-22  organizational structure is optimized to support combatant commander  needs."], "subsections": [{"section_title": "Sustainment Issues Limit F-22 Aircraft Availability", "paragraphs": ["The F-22 has sustainment issues due to the fleet\u2019s maintenance and  supply challenges that have affected aircraft availability rates. In fiscal  year 2016, this resulted in the fleet having an average of 80 F-22s  available for operations, as shown in figure 4. According to the Air  Force, from fiscal year 2012 through 2016, the F-22 fleet availability rate  was below the Air Force\u2019s annual F-22 availability standard by 4 to 19  percent.", "First, the F-22 has some unique maintenance challenges, which have  affected aircraft availability rates. The maintenance demands of the F- 22\u2019s Low Observable (LO) coating, a critical component of its stealth  characteristic, reduces aircraft availability. Without the LO maintenance  issues, availability would have been significantly closer to meeting the  annual availability standard, according to the Air Force officials. Fourth  generation fighters do not have to contend with this maintenance issue.  The F-22\u2019s LO coating is actually a series of coatings that require diligent  and time-consuming application and curing, which results in extended  periods of time when the aircraft are not available, according to Air Force  officials. The F-22\u2019s LO coating is also beginning to reach the end of its  service live, requiring maintenance actions that further reduce aircraft  availability. The Air Force has begun to address these maintenance  issues by using a more durable coating and standing up additional repair  facilities.", "Second, the F-22 faces a number of supply challenges that have  contributed to reduced and unpredictable aircraft availability. Officials  from all four operational locations expressed concerns over low supply  levels and difficulties with obtaining needed parts. The F-22 fleet\u2019s small  size and resulting low demand for parts contributes to this problem.  Obtaining missing parts can be a time-consuming and costly process  because some original manufacturers no longer make the parts or are  completely out of business, according to Air Force officials. When this is  the case, the Air Force may need to find the original aircraft and parts  design plans, and obtain a new contractor to produce a small number of  parts. Officials at one operational location said a simple wiring harness  required a 30-week lead time.", "Appendix I contains additional information on F-22 maintenance and  supply issues."], "subsections": []}, {"section_title": "Small F-22 Squadrons and Wings Exacerbate Aircraft Availability Challenges", "paragraphs": ["With 18 to 21 primary mission aircraft per F-22 squadron, and 1 or 2 F-22  squadrons per wing, the Air Force has been unable to gain the  maintenance and supply efficiencies associated with its larger traditional  squadrons and wings, and this has contributed to low aircraft availability  rates. According to service officials, the Air Force has traditionally  structured its fighter wings to have 3 squadrons with 24 primary mission  aircraft per squadron to optimize maintenance efficiency and combat  power. The Air Force is planning to organize its active duty F-35 fleet into  traditional sized squadrons with 2 or 3 squadrons per wing. A RAND  study also concluded that larger squadrons and multiple squadrons per  wing create efficiencies. Larger squadrons and wings create efficiencies  because people, equipment, and parts can be shared, according to Air  Force officials. Having a multi-squadron wing is also beneficial when one  squadron deploys a portion of its aircraft, pilots, and maintenance  personnel and leaves another portion of the squadron at the squadron\u2019s  home station. In these cases, collocated squadron(s) can help backfill  shortfalls for the portion of the squadron that remained at home station.", "The Air Force recognizes that smaller F-22 operational squadrons and  wings face sustainment challenges due to their size. Facing cuts in the  total number of aircraft purchased, the Air Force decided in 2006 to  organize its F-22s into 7 operational squadrons, each with 18 primary  mission aircraft. However, in 2010, the Air Force found that this plan was  unsustainable because operational squadrons were not able to produce  adequate sorties. The Air Force then decided to eliminate 1 squadron and  used some of the aircraft from that squadron to increase the number of  primary mission aircraft to 21 in its 5 remaining active duty squadrons.  The Air Force left its one F-22 National Guard squadron with only 18  primary mission aircraft. The Air Force\u2019s intent with this restructuring was  to increase fleet sustainability while retaining enough squadrons for force  projection needs.", "F-22 aircraft availability metrics have fluctuated, but have generally been  better for operational locations with more aircraft per squadron and more  squadrons per wing. For example, table 2 shows that the operational  locations in Alaska and Virginia\u2014locations with 2 operational  squadrons\u2014have higher aircraft availability rates than the locations with  only 1 operational squadron. Although Air Force maintenance data shows  that the Florida operational squadron had a lower availability rate than the  locations with 2 operational squadrons in fiscal years 2014, 2015, and  2016, Air Force officials noted that this squadron should be able to  leverage the maintenance benefits of having the F-22 training squadron  on base. However, a major maintenance backlog for the training  squadron currently limits that benefit, according to the officials.", "The F-22 units in Alaska and Virginia are also generally able to produce  more sorties per month. Further, F-22 squadron officials in Hawaii stated  that increasing their squadron\u2014the smallest in the fleet\u2014by 4 additional  aircraft would allow the squadron to generate 32 percent more sorties. Air  Force officials cautioned that there are many factors that influence  maintenance metrics for the F-22, including the age of the aircraft, climate  and leadership. However, they agreed that larger squadrons and wings  increase maintenance performance."], "subsections": []}, {"section_title": "Partial Unit Deployments Hinder the F-22 Squadrons\u2019 Abilities to Maximize the Aircraft Available for Operations", "paragraphs": ["Further, the Air Force practice of deploying a small portion of a squadron  forward makes it difficult for F-22 squadrons as currently organized to  make aircraft available for their missions at home station, according to  officials from all four operational locations. The Air Force organizes its F- 22 squadrons and other fighter squadrons based on a model where a  squadron deploys to a single forward location, according to Air Force  officials. In order to facilitate deployments, the Air Force has for  approximately the last two decades organized squadrons into smaller  deployable pieces called Unit Type Codes (UTCs). However, the UTCs  are not the same size. For example, one of the F-22\u2019s UTCs is designed  to have only 6 of a squadron\u2019s 21 aircraft but contains almost 50 percent  of the squadron\u2019s equipment, approximately 40 percent of the squadron\u2019s  maintenance personnel and 60 percent of its operational personnel.  This organizational approach therefore creates a disproportionate split  among UTCs in terms of equipment and personnel, making it more  difficult for the underserved portions of the squadron to maintain  readiness or generate sorties.", "Furthermore, different UTCs will not only have unequal amounts of  equipment and personnel, but will also tend to unevenly apportion their  best aircraft, more experienced personnel, and critical parts, according to  Air Force officials. The officials noted that during \u201csplit operations,\u201d the  portion of the squadron remaining at home struggles to keep aircraft  available for missions. According to Air Force officials, traditional fighter  squadrons have larger UTCs, which provides a better balance in  equipment and personnel that lessens the strain of split operations."], "subsections": []}, {"section_title": "Organizing for New Operational Concepts Poses Additional Aircraft Availability Challenges", "paragraphs": ["With its current F-22 squadron organization, the Air Force would also face  difficulties generating aircraft to support DOD\u2019s concepts for using  distributed operations in high threat environments. According to DOD,  potential adversaries are increasingly capable of challenging U.S. access  to operational areas by, for example, developing cruise and ballistic  missiles that are able to reach U.S. forward air bases. In its Air Superiority  2030 Flight Plan, the Air Force states that the ability to deploy and  operate forces in non-permissive environments is essential to air  superiority. One approach for doing this is to use distributed bases.  Instead of operating from well-developed and vulnerable forward air  bases, squadrons would break up into smaller units and operate  independently from multiple locations, moving around so as to complicate  enemy targeting. The Air Force is drafting an adaptive basing concept  and implementation plan to help guide its efforts in this area.", "Sustaining and maintaining multiple independent deployable units so that  they have operational aircraft available for the combatant commander is  not possible with the current F-22 squadron structure and would require  significant investment, according to Air Force officials. F-22 squadrons  have made a number of short exercise deployments, with small numbers  of aircraft to provide forward presence and examine the units\u2019 abilities to  conduct distributed operations. These deployments showed that rapidly  deploying small numbers of F-22s for short durations is possible. The  deployments also identified a number of challenges the Air Force needs  to address if it implements a distributed operations concept, including  maintenance, logistics, spare parts, and tanker support challenges,  according to after-action reports and service officials. Furthermore,  according to the Commander of U.S. Pacific Command, distributed  operations requires a dynamic logistics system that is more responsive,  agile, and flexible than DOD is used to employing. Air Force officials told  us that the Air Force is early in the process of examining the implications  of distributed operations and has not determined the extent to which F-22  squadron organization should be adjusted to support distributed  operations."], "subsections": []}, {"section_title": "The Air Force Has Not Comprehensively Assessed F-22 Organizational Structure since 2010", "paragraphs": ["While the Air Force reviews F-22 operations and sustainment needs as  part of the annual programming and budgeting process within DOD, the  Air Force has not comprehensively assessed whether the current F-22  organizational structure is the optimal structure to support combatant  commander needs since 2010, according to Air Force officials. As  previously discussed, the Air Force found in 2010 that operational  squadrons were not able to produce adequate sorties and so eliminated 1  squadron and used some of the aircraft from that squadron to increase  the number of primary mission aircraft in its 5 remaining active duty  squadrons  DOD\u2019s Joint Publication 3-0, Joint Operations, states that risk  management is the process to identify, assess, and control hazards  arising from operational factors and make decisions that balance risk and  cost with mission benefits. It assists organizations and individuals in  making informed decisions to reduce or offset risk, thereby increasing  operational effectiveness and the probability of mission success.  Furthermore, Standards for Internal Control in the Federal Government  states that management should periodically evaluate the organizational  structure so that it meets the entity\u2019s objectives and has adapted to any  new objectives for the entity. Furthermore, management should  periodically review policies, procedures, and related control activities for  continued relevance and effectiveness in achieving the entity\u2019s objectives  or addressing related risks.", "However, the Air Force has not conducted a comprehensive assessment  of the F-22 organizational structure since 2010, according to Air Force  officials. As previously discussed, while the larger squadrons and wings  created after the 2010 restructuring have generally had higher availability  rates than smaller ones, fleet aircraft availability rates remain below the  Air Force standard for what is needed. Further, the F-22\u2019s role has also  evolved since 2010. For example, F-22s have begun participating in  combat operations in Iraq and Syria. Additionally, potential adversaries  are increasingly able to challenge U.S. air superiority, according to the Air  Force. In 2016, the Air Force examined its future air superiority capability  needs in its Air Superiority 2030 Flight Plan, but that review did not  include an assessment of organizational structure, according to officials  involved with the review. Such an assessment could consider a number  of alternatives, such as consolidating the F-22 fleet into larger squadrons  and/or wings to improve aircraft availability or revising the design of the  deployable units in squadrons to better support current deployment  practices and future operational concepts, as well as any risks associated  with those alternatives. Without conducting a comprehensive assessment  of the F-22 organizational structure that identifies and assesses  alternative approaches to organizing F-22 squadrons, the Air Force may  be forgoing opportunities to improve the availability of its small yet critical  F-22 fleet to support current and future combatant commander high-end  air superiority needs."], "subsections": []}]}, {"section_title": "Air Force Utilization of F-22s Reduces Pilot High-End Air Superiority Training Opportunities", "paragraphs": ["The Air Force\u2019s utilization of its F-22 fleet has limited its pilots\u2019  opportunities to train for their high-end air superiority missions, and  contributed to F-22 pilots not meeting their training requirements. F-22  pilots need extensive training in order to be prepared to execute their  high-end air superiority missions. However, Air Force utilization of F-22  units for exercises, the low supply of adversary air training capabilities,  and the use of F-22s to meet combatant commander needs, including the  alert mission, affects the ability of pilots to meet those requirements."], "subsections": [{"section_title": "F-22 Pilots Are Not Meeting Minimum Training Requirements Necessary for Their Air Superiority Missions", "paragraphs": ["F-22 pilots are not meeting their minimum yearly training requirements for  the air superiority missions, according to Air Force training reports and  service officials. F-22 pilots need extensive training for F-22 units to  fulfill their air superiority role. Air Force guidance notes that a key to  maintaining air superiority is trained and ready Airmen that must possess  a well-honed combat edge so that they are ready to prevail even against  the most advanced opponents. The Air Force strategy also notes that  the training of Airmen must be relevant and responsive if they are to  maintain superior agility in the future. Through its Ready Aircrew  Program, the Air Force establishes annual continuation training  requirements for F-22 pilots. These requirements focus on the training  needed to accomplish the core missions of F-22 units. They define the  minimum required mix of annual sorties, simulator missions, and training  events aircrews must accomplish to sustain combat mission readiness.  Air Force officials emphasized that the requirements outlined in the  Ready Aircrew Program are minimums and noted that some pilots may  need additional sorties to achieve proficiency.", "In 2016, GAO reported that combat fighter squadrons were unable to  meet annual training requirements across the full range of core  missions. Further, an Air Force analysis conducted in 2016 determined  that, based on current aircraft availability rates, pilots in an F-22 squadron  with 21 primary mission aircraft need 270 days of home station training  each year to meet their minimum annual continuation training  requirements. However, F-22 pilots are generally not meeting those  minimums, according to the officials, and F-22 operational squadrons  have reported numerous shortfalls. For example, one squadron identified  training shortfalls in its primary missions for four consecutive years in its  annual training reports. Another squadron identified training shortfalls in  one of its primary missions, offensive counter-air, in three of the last four  annual training reports."], "subsections": []}, {"section_title": "F-22 Pilots Benefit from Exercises, but Exercise Quality and Quantity Can Detract from Training Needs", "paragraphs": ["Although participation in exercises is an important component of F-22  pilot training, multiple exercises can interrupt pilot training cycles and  restrictions in some exercises can detract from F-22 pilot training for the  high threat environment. Exercises provide pilots an opportunity to train in  a more realistic setting. At the same time, frequent participation in  exercises can take time away from the home station training that is  required to maintain combat mission readiness for high-end air superiority  missions. Although high demand for exercise participation is causing  stress across the Air Force, the problem is particularly acute for F-22  pilots, according to a 2016 Air Force analysis. While F-22 pilots require  270 days at home each year, they are getting only 191 days on average,  according to the analysis. Pilots from other fighter aircraft, such as the F- 16 and F-15E, are also experiencing home station training shortfalls, but  not as great as those faced by F-22 pilots, according to the analysis.", "Furthermore, F-22 units are often directed to participate in exercises as  part of Air Force efforts to build relationships with partners. However, due  to security concerns regarding exposing the F-22\u2019s unique capabilities, F- 22 pilots may be restricted from flying the aircraft the way they would in  combat, according to Air Force officials. As a result, the value of the  training is reduced and these types of exercises can result in the F-22  pilots developing bad habits that must be corrected in future training,  according to Air Force officials.", "The Air Force recognizes that exercise demands on F-22 units and other  fighter units make it difficult for pilots to complete their required training.  Based on its analysis, the Air Force is planning to increase the time pilots  have available to conduct home station training, including by establishing  a goal of no more than 1 day on travel for every 5 days at home station.  As a result, the Air Force will be reducing total exercise participation and  thereby increasing the number of days F-22 pilots are at home station in  fiscal year 2018 by 8 days. However, the Air Force projects that F-22  pilots in fiscal year 2018 will still fall 71 days short of the 270 days they  need to meet their yearly training requirement, based on current aircraft  availability rates. Without exploring further reductions in exercise events  that do not contribute to high-end air superiority training, at current aircraft  availability rates F-22 pilots may not be fully prepared to effectively  support combatant commander needs against the most advanced threats."], "subsections": []}, {"section_title": "Adversary Air Demands for F-22s Detract from the Ability of Pilots to Meet Training Requirements", "paragraphs": ["F-22 pilot training requires flying against aircraft playing the role of  adversaries, but high demand and low supply of adversary air resources  have resulted in training shortfalls. Due to the F-22\u2019s unique air superiority  role and high-end capabilities, the Air Force expects F-22 pilots to face  and defeat numerically superior adversaries. This results in an annual  demand of between 145 and 171 adversary air sorties for every  operational F-22 pilot. The adversary air demand for fourth generation  fighters is much lower. For example, continuation training for the Air  Force\u2019s other air superiority fighter\u2014the F-15C\u2014results in an annual  demand of between 45 and 73 adversary air sorties. To support F-22  training requirements, the Air Force has provided two of the four  operational locations (Virginia and Florida) with a squadron of T-38s to  provide dedicated adversary air support for use in training. In Alaska, an  adversary air squadron is located at a nearby base that is able to provide  some support for F-22 training, according to officials. The F-22s in Hawaii  have no adversary air support on base or nearby. Figure 5 shows F-22  operational locations and their adversary air support.", "All F-22 operational locations report that insufficient adversary air caused  pilots to have shortfalls in their training. For example, the operational F-22  squadron in Florida, which shares an adversary air squadron with a  collocated F-22 training unit, reported that F-22 pilot training deficiencies  in fiscal year 2016 were caused in part by limited adversary air support.  Specifically, adversary air shortfalls negatively impacted the training of 83  percent of the squadron\u2019s pilots for the offensive counter-air mission and  54 percent of the pilots for the defensive counter-air mission. Operational  squadrons at other locations reported similar negative effects on training  caused in part by the limited adversary air.", "Moreover, the limited supply of dedicated adversary aircraft means that  often F-22 pilots must fly their aircraft in an adversary aircraft role to  support the training of the squadron\u2019s other F-22 pilots. For example,  according to a 2017 Air Force memo, 55 percent of all sorties generated  by F-22s based in Hawaii were dedicated to adversary air. The F-22  squadron in Hawaii reported that this practice negatively affected the  combat readiness of all of the squadron\u2019s pilots. The Air Force  categorizes adversary air sorties as useful only for maintaining basic  flying proficiency. Officials from the Virginia unit explained that F-22 pilots  flying adversary air do not fly like they would during combat missions and  so these sorties are wasteful, having no or negative training value. An  official representing the Hawaii unit indicated that the high percentage of  sorties dedicated to adversary air leads to wasteful training and declines  in readiness against potential threats. Air Force officials expect  competing demands for limited adversary air to grow as the Air Force  stands up more F-35 squadrons.", "The Air Force recognizes and is attempting to mitigate adversary air  shortfalls. For example, the Air Force has hired contractors to address  Air Force adversary air shortfalls at exercises, as we previously  reported. In addition, the Air Force has outlined a plan to provide  additional adversary air support for its fighter units, including contract  adversary air support for the F-22 training squadron in Florida and the  operational squadrons at two of the four operational locations (Virginia  and Hawaii) in the 2019 timeframe. However, the Air Force must first  complete additional analysis and finalize funding before additional  adversary support is provided to these locations, according to an August  2017 Air Force briefing on the plan. Until the Air Force explores  additional alternatives for increasing external adversary air training  support at all of the operational locations, F-22 pilots will likely continue to  face training shortfalls and use limited sorties on flying adversary air  themselves. Furthermore, this may result in the F-22 squadrons not being  fully prepared to execute the high-end air superiority missions."], "subsections": []}, {"section_title": "Current Operations Reduce F-22 Pilot High- End Air Superiority Training Opportunities", "paragraphs": ["The Air Force is providing F-22s in support of current combatant  commander needs, including alert missions and operational deployments,  but the alert mission and these operational deployments take time away  from air superiority training. Although these missions are important, they  take no or limited advantage of the unique capabilities provided by the F- 22, as figure 6 illustrates. Classified details regarding the current and  projected operational requirements for the F-22 are included in the  classified version of this report.", "DOD has an established risk-informed process to distribute the service\u2019s  operational forces to the combatant commanders. Air Force officials told  us that combatant commanders can request a general fighter capability or  a very specific capability that only an F-22 can provide. Air Force officials  also said the Air Force does not set aside F-22 units for only the most  advanced threat missions, and it does not set aside any other fighter units for unique missions. The Air Force provides F-22 units to the combatant  commands when those units address the combatant commander\u2019s  capability requirement and are available, according to service officials."], "subsections": [{"section_title": "Use of F-22s for Alert Missions Diminishes Pilots\u2019 Ability to Train for High-End Air Superiority Missions", "paragraphs": ["F-22 support for ongoing air sovereignty alert missions further reduces F- 22 pilots\u2019 abilities to train for the high-end air superiority mission. The alert  mission supports homeland defense, DOD\u2019s top priority. This mission  requires certain air bases have fully fueled, fully armed jets ready at all  times to respond to threats from civil or military aviation. Two F-22  operational locations have full time alert mission responsibilities (Alaska  and Hawaii) and one location (Virginia) performs alert missions on an as- needed basis. According to Air Force officials, the alert mission does not  require the high-end capabilities provided by the F-22 and currently F- 15C and F-16 squadrons are filling alert mission requirements in other  parts of the United States. F-35s could also conduct this mission if they  were assigned it, according to Air Force officials. The Air Force plans to  start fielding 2 F-35 squadrons in Alaska beginning in 2020. However,  there are currently no plans to use F-35s for the alert mission, according  to U.S. Northern Command. With no other operational Air Force fighter  squadrons currently based in Hawaii and Alaska, the alert mission falls to  the F-22 units.", "Dedicating F-22s to the alert mission reduces the ability of F-22 pilots to  train for their primary missions. Operational squadrons in Alaska and  Hawaii have F-22 pilots sitting alert in order to address the 24-hour per  day alert commitment. During this time they are not able to train for their  high-end air superiority missions. Further, the squadrons must dedicate a  number of mission-capable aircraft to this mission, which is more  challenging for squadrons with a smaller number of aircraft. Squadron  officials from one location estimated that they could generate hundreds of  additional training sorties on an annual basis if they could use the aircraft  that are currently dedicated to the alert mission."], "subsections": []}, {"section_title": "Operational Deployments Diminish F-22 Pilots\u2019 Ability to Train for High-End Air Superiority Missions", "paragraphs": ["The Air Force also deploys F-22s outside of the United States to address  combatant commander requirements and these deployments also reduce  the time available for F-22 pilots to conduct home station training for their  high-end air superiority missions. Since 2007, the Air Force has deployed  F-22s to a number of combatant commands to address a variety of  needs, including providing assurance to friends and allies and deterring  potential adversaries. F-22s deployed to U.S. Central Command have  also been supporting ongoing operations against ISIS in Iraq and Syria.", "F-22 pilots can gain valuable experience from deployments but their  ability to train for the high-end air superiority mission can suffer. For  example, F-22 involvement in current combat operations against ISIS  provides pilots with experience deploying for combat, integrating with  coalition forces, and conducting air-to-ground attack operations,  according to Air Force officials. Although its high-end capabilities provide  some benefits in current operations against ISIS, F-22s have primarily  been used for close air support (CAS) missions in operations against  ISIS, according to Air Force officials. However, CAS is not a primary or  secondary mission for the F-22. As such, F-22 pilot air superiority skills  degrade while on deployment because they are conducting CAS missions  and not able to train for their air superiority missions, according to Air  Force officials."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The F-22\u2019s current availability and pilot training challenges will likely  become more significant as fourth generation fighters become less  survivable and the Air Force\u2019s reliance on its small fleet of F-22s to  execute the air superiority mission grows. Limitations on F-22 availability  are due in part to maintenance challenges inherent to the F-22, including  maintaining its LO coating. It is also due in part to Air Force decisions to  organize the F-22 fleet into small wings and squadrons, resulting in lost  efficiencies that come with larger organizations. Further, F-22 squadrons,  designed to operate from one location, face challenges generating  available aircraft when they are split, as current Air Force practices and  future concepts require. The Air Force also requires well-trained pilots in  order to take full advantage of the F-22\u2019s high-end capabilities. However,  F-22 pilots\u2019 ability to train for its air superiority missions and meet  associated training requirements is constrained by factors including  adversary air limitations and participation in exercises with limited training  value. Operational use of the F-22 for missions that have no or limited  need for the F-22\u2019s unique capabilities, such as the alert mission, further  limit the ability of pilots to prepare for the high-end air superiority  challenges the nation increasingly faces.", "One option for addressing these challenges would be to purchase more  F-22s. However, the Air Force\u2019s determination that it does not make  economic or operational sense to restart F-22 production means that the  Air Force has to find other ways to improve its F-22 fleet\u2019s ability to  address high-end air superiority challenges. Air Force efforts to improve  F-22 capabilities and maintainability and wider efforts to address high  exercise demand and adversary air shortfalls are examples of positive  steps the service is taking. The Air Force has also shown a prior  willingness to consolidate its F-22 fleet. Further, the Air Force outlined its  commitment to addressing high-end air superiority challenges in its Air  Superiority 2030 Flight Plan. This effort, along with the planned fielding of  a large number of F-35s provides the Air Force with the opportunity to  more comprehensively review and, if necessary, transform how it should  best organize, posture, train, and utilize its fifth generation assets,  including the F-22. However, unless the Air Force takes steps to assess  and make necessary adjustments to the current organization and use of  its F-22s, F-22 units are likely to continue to experience aircraft  availability and pilot training rates that are below what they could be. As a  result, the Air Force may be incurring increased risks in future operations  in high threat areas."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Air Force:  The Secretary of the Air Force should conduct a comprehensive  assessment of the F-22 organizational structure that identifies and  assesses alternative approaches to organizing F-22 squadrons. The  assessment could at a minimum assess the following two alternatives:  consolidating the fleet into larger squadrons and/or wings in order to  improve aircraft availability, and revising the design of the deployable  units in squadrons to better support current deployment practices and  future operational concepts. (Recommendation 1)", "The Secretary of the Air Force should identify and assess actions to  increase F-22 pilot training opportunities for the high-end air superiority  missions. This effort could consider alternatives such as: reducing  exercise events that do not contribute to F-22 pilot high-end air superiority  training, increasing external adversary air support so all F-22 pilots can  use their available limited sorties to conduct high-end air superiority  training rather than having a significant portion of the F-22 pilots providing  training support, and finding alternatives to using F-22 units for alert  missions, and other missions that do not require the jet\u2019s unique  capabilities or prepare F-22 pilots for their primary missions.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the classified version of the report to DOD for  review and comment. That draft contained the same recommendations as  this unclassified version. In written comments (reproduced in appendix II),  DOD concurred with our recommendations and noted planned actions to  address each recommendation. DOD also provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the Senate Armed Services  Committee and the House Armed Services Committee and the Secretary  of Defense; the Chairman of the Joint Chiefs of Staff; and the Secretary of  the Air Force, 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 staffs have any questions about this report, please contact  me at (202) 512-3489 or pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: F-22 Maintenance and Supply Challenges Limit Aircraft Availability", "paragraphs": ["Maintenance demands of the F-22\u2019s unique Low Observable (LO)  coating, along with supply challenges exacerbated by the fleet\u2019s small  size, limit the number of aircraft available for missions. In part because of  these challenges, the Air Force had an average of 80 F-22s available for  operations during fiscal year 2016."], "subsections": [{"section_title": "Maintenance of the F-22\u2019s Unique Low Observable Coating Reduces Aircraft Availability", "paragraphs": ["Maintenance demands of the F-22\u2019s unique LO coating, a critical  component that gives the F-22 its stealth characteristics, reduces aircraft  availability. Without the LO maintenance issues, availability would have  been significantly closer to meeting the annual availability standard,  according to Air Force officials. Fourth generation fighters, lacking a full  LO coating, do not have to contend with this maintenance issue. The LO  coating is actually a series of coatings that require diligent and time- consuming application and curing, resulting in extended periods of time  during which aircraft are not available, according to Air Force officials.  Further, the LO coating for each F-22 requires regular and thorough  inspection to ensure that any damaged or degraded areas are identified  and repaired. If damage to the LO coating exceeds a threshold, the F-22  is considered not capable of conducting its mission. An Air Force report  summarizing fiscal year 2016 maintenance issues reported that LO  maintenance was the primary reason F-22s were not considered mission  capable due to maintenance.", "Maintaining the integrity of the LO coating complicates other F-22  maintenance actions because the LO coating must be removed and then  restored. According to Air Force officials, removing and replacing a part  on an F-22 and a fourth generation fighter, like an F-15C, could take a  similar amount of time. However, the F-22 would require additional time at  the beginning and end of the maintenance action to gain access to the  part through the LO coating and then restore the integrity of the coating,  significantly increasing the time aircraft would be unavailable due to  maintenance. The Air Force is taking steps to reduce the impact of LO  maintenance by, for example, creating panels that can be removed  without requiring a full recoating procedure and by developing a more  durable coating. Additionally, Air Force officials told us that the LO coating  for its other fifth generation fighter\u2014the F-35\u2014uses different materials  and processes and should be easier to maintain than the F-22\u2019s LO.", "The F-22\u2019s LO coating is also beginning to reach the end of its service  life, requiring maintenance actions that further reduce aircraft availability.  According to Air Force officials, the LO coating has an 8-to-10 year life  span, but environmental factors such as high temperatures, humidity, and  salinity can reduce that span by 2 to 3 years. Further, the Air Force does  not house its F-22s in climate-controlled hangars at 3 of the 4 operational  locations (Florida, Hawaii, and Virginia), thus exposing them to these LO- degrading environmental factors. The Air Force has taken action to  address maintenance challenges by using a more durable coating and  standing up additional repair facilities. The Air Force also plans to use  more durable materials to make long-term corrective repairs beginning in  calendar year 2019, but this will constitute a costly long-term effort,  according to the Air Force."], "subsections": []}, {"section_title": "The F-22\u2019s Small Fleet Size Exacerbates Spare Part Supply Challenges", "paragraphs": ["As a result of the F-22 fleet\u2019s small size and resulting low demand for  parts, the F-22 faces a number of supply challenges that have contributed  to reduced and unpredictable aircraft availability. Officials from all four  operational locations identified low supply levels and difficulty obtaining  needed parts as a concern. Obtaining parts can be a time-consuming and  costly process because some original manufacturers no longer make the  parts or are completely out of business, according to Air Force officials.  When this is the case, the Air Force may need to find the original aircraft  and parts design plans, and obtain a new contractor to produce a small  number of parts. Officials at one operational location said a simple wiring  harness required a 30-week lead time. Air Force maintenance statistics  for fiscal year 2016 show that 14 percent of the F-22 fleet was not mission  capable, and therefore not available, due to supply issues. According to  Air Force officials, the F-22 fleet\u2019s small size and resulting low demand for  parts makes this problem more acute.", "F-22 squadrons face an unenviable choice when necessary parts are not  available, according to Air Force officials: they can make the aircraft  unavailable until the spare part arrives and can be installed or they can  take the part from another aircraft that may be broken for a different  reason. The second option, called cannibalization, is an inefficient way to  conduct maintenance because it doubles the work. A good part needs to  be removed from one aircraft and put into another. Once the replacement  part arrives, it needs to be installed on the cannibalized aircraft. There is  also a chance that the cannibalized part could get damaged in the  process or just not work. Further, cannibalization could result in additional  LO repairs on the donor aircraft. An Air Force report summarizing fiscal  year 2016 maintenance issues reported that F-22 cannibalization rates  have grown by 6 percent between fiscal years 2012 and 2016.", "The F-22\u2019s small fleet size also exacerbates supply challenges it is facing  with its engines, potentially falling below minimum spare part  requirements for multiple calendar years. Further, an increase in flying  hours in 2014 resulted in engines requiring overhauls sooner than  previously anticipated. It is taking time for the engine maintenance  contractor to build up enough capacity to deal with this increased  demand. The officials said that the F-22\u2019s small fleet size contributed to  this problem because, as was the case with other parts issues, low early  demand meant that many of the vendors that built parts for those engines  no longer build the parts or are not in business. Additionally, it takes time  to find vendors and skilled people to build those parts again. The Air  Force is implementing a mitigation plan that includes increasing  production, overflying the standard engine maintenance interval, and  borrowing engines from aircraft in long-term maintenance. According to  Air Force officials, this kind of engine issue is not unique to the F-22.  They noted that there was a time when B-1s, another small fleet, had a  major engine shortfall that resulted in aircraft parked without engines in  them. An Air Force forecast shows that mitigation efforts will avoid that  problem, barring unanticipated increases in demand or maintenance  problems."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Michael Ferren, Assistant Director;  Vincent Buquicchio; Nicolaas Cornelisse, Analyst-in-Charge; Patricia  Donahue; Amie Lesser; Tamiya Lunsford; Matthew Jacobs; Travis  Masters; Richard Powelson; Walter Vance; and Nicole Volchko made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-242", "url": "https://www.gao.gov/products/GAO-18-242", "title": "Foreign Military Sales: DOD Should Take Additional Steps to Streamline Process for Assessing Potential Recovery of Certain Acquisition Costs", "published_date": "2018-01-31T00:00:00", "released_date": "2018-01-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Under the Arms Export Control Act and its implementing regulations, DOD is required to recover nonrecurring costs\u2014unique one-time program-wide expenditures\u2014for certain major defense equipment sold under the FMS program. These costs include research, development, and one-time production costs, such as expenses for testing equipment. The Act also permits those costs to be waived under certain circumstances, such as to standardize equipment with select allies or to avoid a loss of sale.", "GAO was asked to review DOD's use of nonrecurring cost waivers. This report addresses the (1) nonrecurring cost waivers approved by DOD from fiscal years 2012 through 2017, (2) factors DOD considers when reviewing waivers, and (3) efficiency of the waiver review process.", "To conduct this work, GAO analyzed DOD data of nonrecurring cost waivers for fiscal years 2012 through 2017, the most recent and complete data, to identify the value of waivers. GAO then reviewed a non-generalizable sample of 24 of these waivers that included a mix of justifications and geographic regions. GAO reviewed relevant DOD policy and interviewed DOD officials about the process to assess these waivers."]}, {"section_title": "What GAO Found", "paragraphs": ["In the past 6 years, the Department of Defense (DOD) approved waivers valued at nearly $16 billion that it might otherwise have collected from foreign governments as part of its sales of major defense equipment through the Foreign Military Sales (FMS) program. The Arms Export Control Act, as delegated, authorizes the Defense Security Cooperation Agency (DSCA) within DOD to waive nonrecurring costs under certain circumstances, such as to standardize equipment with allies. From fiscal years 2012 through 2017, DSCA reviewed 813 waivers and denied 3, resulting in an approval rate of 99 percent. As shown in the figure below, the value of approved waivers significantly increased to nearly $6 billion last year, which is due to 2 waivers totaling nearly $3.5 billion for sales of missiles and related support systems.", "Total Value of Approved Foreign Military Sales Nonrecurring Cost Waivers from Fiscal Years 2012 through 2017", "When reviewing waivers, DSCA considers foreign policy and national security factors, such as interoperability with allies, and economic factors, such as support for the U.S. defense industrial base. Agency officials stated that approving waivers helps ensure sales go through and such broader benefits are realized. DSCA's practice to approve waivers is consistent with the authority it has been delegated under the Arms Export Control Act and is influenced by these benefits.", "The process DOD has established to consider waivers is, at times, inefficient and repetitive. DSCA has final approval authority; however, multiple DOD offices must review and provide input on each waiver, with some offices reviewing waivers for the same purpose. Federal standards for internal control call for agencies to allocate resources and assign responsibilities to achieve efficiency and effectiveness. DOD has already taken steps to improve the efficiency of the waiver review process; for example, by reducing the time a few offices take to review the waivers. Nonrecurring cost waivers are one part of the larger FMS process, and continuing to streamline the waiver review process would better position DSCA and the military departments to identify opportunities to maximize efficiencies."]}, {"section_title": "What GAO Recommends", "paragraphs": ["DSCA should continue to identify opportunities to streamline the waiver review process. DSCA concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) invests billions of dollars to research,  develop, and produce defense equipment for weapons programs. Part of  DOD\u2019s investment typically includes nonrecurring research, development,  test, evaluation, and production costs, such as DOD expenditures for  testing equipment. In cases where major defense equipment, which has  nonrecurring research and development costs greater than $50 million or  total production costs greater than $200 million, is sold to foreign  governments and international organizations through the Foreign Military  Sales (FMS) program, DOD is required under the Arms Export Control  Act and its implementing regulations to recover nonrecurring costs. For  fiscal years 2012 through 2017, DOD reported sales under the FMS  program totaling over $250 billion. These sales, which include major  defense equipment, create the potential for DOD to charge and recover  billions of dollars of nonrecurring costs from foreign governments. The  Arms Export Control Act, as delegated, also authorizes DOD to waive  collection of nonrecurring costs based on one of three primary  justifications: (1) to standardize U.S. military equipment with the North  Atlantic Treaty Organization (NATO) and select U.S. allies, (2) to achieve  cost savings for the U.S. government, or (3) to avoid a loss of sale.", "Within DOD, the Defense Security Cooperation Agency (DSCA) is  principally responsible for overseeing and administering the FMS  program. In recent years, we have made recommendations to address  concerns about timeliness and other program management functions  within the FMS program. In light of these recommendations and ongoing  congressional oversight, DSCA has undertaken a number of initiatives  aimed at enhancing the FMS program. For example, DSCA adopted  digital signatures to help improve timeliness after examining its process  for reviewing requests from foreign governments to waive nonrecurring  costs.", "You asked us to review DOD\u2019s use of its authority to waive nonrecurring  costs. This report addresses the (1) nonrecurring cost waivers approved  by DOD from fiscal years 2012 through 2017, (2) factors DOD considers  when reviewing waivers, and (3) efficiency of the waiver review process.", "To address our objectives, we reviewed DSCA data on FMS nonrecurring  cost waivers requested by foreign governments from fiscal years 2012  through 2017, the years for which data are the most complete. To  determine the nonrecurring cost waivers approved by DOD during this  time frame, we analyzed the data to determine the number and dollar  value of waivers requested and approved by fiscal year and geographic  region. We also analyzed the data to determine the number of waivers  that were denied. Due to certain data limitations, we were unable to  determine the percentage of all eligible sales that included a waiver  request and the total amount of nonrecurring costs that DOD actually  waived after the waiver was approved and the sale was finalized. To  assess the reliability of the data, we compared them to waiver  documentation we obtained from DSCA and interviewed DSCA officials  responsible for the data. Based on these steps, we determined the data  were sufficiently reliable for the purposes of our reporting objectives.", "To determine the factors that DOD considers when reviewing waiver  requests, we selected a non-generalizable sample of 24 waiver requests  to identify the information the foreign government submitted as part of the  request. The sample included a mix of waiver justifications and  geographic regions. After reviewing the waiver requests, we interviewed  officials from the military departments\u2014Air Force, Army, and Navy\u2014to  discuss them. We also interviewed officials from DSCA, the Office of the  Undersecretary of Defense (OUSD) Comptroller, OUSD for Policy, and  OUSD for Acquisition, Technology, and Logistics (AT&L) to discuss the  factors they consider when reviewing nonrecurring cost waiver requests.", "To determine the efficiency of the waiver review process, we identified  offices that review waiver requests for the same or similar information and  reviewed the 24 waiver requests to identify the steps taken by these  offices during the review. In addition, we reviewed relevant DOD policy  and interviewed officials from all of the offices involved in the waiver  process to discuss the steps they take during their review. We compared  these offices\u2019 practices for reviewing the waivers with the Standards for  Internal Control in the Federal Government, which calls for agencies to  assign and delegate responsibilities in a manner that maximizes  efficiency and effectiveness. Appendix I contains additional detail on our  objectives, scope, and methodology.", "We conducted this performance audit from March 2017 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Arms Export Control Act of 1976 gives the President authority to sell  defense articles and services to eligible foreign governments and  international organizations. This Act is the basis of the FMS program,  which the U.S. government considers to be an integral component of U.S.  national security and foreign policy. Under the FMS program, foreign  governments pay the U.S. government to administer the acquisition of  defense articles and services on their behalf. Typically, defense  equipment made available for transfer or sale to foreign governments falls  under an acquisition program managed by one or more of the U.S.  military departments. Generally, this equipment has gone through  operational testing and has entered or is entering full-rate production.", "Multiple federal entities have a role in the FMS program, including DOD  and the Department of State (State). Within DOD, DSCA and the military  departments play an extensive role in administering the program and  managing FMS acquisitions, respectively. DSCA carries out key  administrative functions, such as coordinating the development and  execution of sales through the FMS program and conducting negotiations  with foreign governments. The military departments are involved early in  the development of the potential sale when the foreign government  identifies the defense equipment it needs to buy to achieve a desired  capability. Congressional oversight of the FMS program has resulted in  amendments to the Arms Export Control Act and other relevant legislation  to improve the FMS program.", "The first phase of the FMS process generally involves a foreign  government submitting a request, usually to State or DOD, to express  interest in purchasing defense articles or services. Depending on the size  and complexity of the items being purchased and the foreign  government\u2019s available budget, the process to finalize the terms of a sale  can take from a few days to years. In response to concerns that the FMS  process is slow and burdensome, Congress has increased oversight of  the program and recently passed legislation intended to improve the  timeliness of the FMS process. For example, in the National Defense  Authorization Act for Fiscal Year 2017, Congress required DOD to revise  its acquisition regulations to place new requirements on FMS contracting  and to establish a pilot program to seek ways to accelerate contracting  and pricing processes for FMS.", "According to DSCA officials, foreign governments interested in having  nonrecurring costs waived must request a waiver before DOD develops  and sends the sales agreement to the foreign government for acceptance  and signature. The sales agreement\u2014formally referred to as a letter of  offer and acceptance\u2014details the specific items, quantities, and total  estimated costs, among other things. The sales agreement, once signed,  is commonly referred to as a FMS case. For a given FMS case, DSCA\u2019s  decision regarding whether or not to waive nonrecurring costs would also  be articulated in the agreement.", "Consistent with the Arms Export Control Act and DOD policy, foreign  governments may request that nonrecurring costs be waived based on  one of three justifications:", "To achieve equipment standardization with NATO and select allies  (Australia, Israel, Japan, Jordan, New Zealand, and the Republic of  Korea). In addition to NATO itself, there are currently 34 countries that  qualify for the equipment standardization waiver justification, as  shown in figure 1.", "To avoid a potential loss of sale that could likely result from imposing  nonrecurring costs.", "To obtain cost savings through economies of scale on major defense  equipment also procured for the U.S. military that substantially offsets  the revenue that will be lost if the nonrecurring costs are waived.", "The Code of Federal Regulations states that all waiver requests should  originate with the foreign government and must specify the reasons or  justifications for the requests. A foreign government generally initiates the  process by submitting a written request to waive the nonrecurring costs  for the major defense equipment it plans to purchase. For example, a  NATO member country planning to purchase P-8A patrol aircraft would  submit a request to waive nonrecurring costs for that equipment to the  Navy, stating that the purchase would promote equipment  standardization.", "The letter of offer and acceptance the military department sends to the  foreign government states the estimated costs and the quantity of major  defense equipment for which nonrecurring costs will be waived. Once the  letter of offer and acceptance has been signed by the foreign  government, any increase in the quantity of items requires that the foreign  government submit a request to waive nonrecurring costs for the  additional equipment. If equipment quantities are reduced after the waiver  is approved, the total amount of nonrecurring costs waived will be less  than the value at the time the waiver was approved. For example, in  2013, DSCA approved a waiver for up to $799 million in nonrecurring  costs for 768 Patriot missiles. However, the foreign government reduced  its planned procurement to 248 missiles. As of December 2017, DSCA  estimated that the amount of nonrecurring costs that will be waived  decreased to $258 million\u2014about two-thirds less than was originally  approved."], "subsections": [{"section_title": "Congressional and DOD Actions Regarding Nonrecurring Costs", "paragraphs": ["The laws, regulations, and policies regarding nonrecurring costs have  been revised several times over the past 50 years. DOD has had a  process in place to recover nonrecurring research and development and  production costs on sales of major defense equipment to foreign  governments and international organizations since 1967. The requirement  to recover a proportionate amount of these costs was codified in the Arms  Export Control Act of 1976, which authorizes arms sales in furtherance of  U.S. security objectives. Significant legal, regulatory, and policy changes  regarding the justifications that can be used to waive nonrecurring costs  are summarized in figure 2."], "subsections": []}, {"section_title": "Determining Nonrecurring Costs for Sales of Major Defense Equipment under the FMS Program", "paragraphs": ["The Arms Export Control Act requires recovery of a proportionate amount  of nonrecurring research, development, and production costs for foreign  sales of major defense equipment. For example, in the F-35 Joint Strike  Fighter program, costs for production testing and tooling equipment are  considered nonrecurring costs. The military departments, as delegated  under the Code of Federal Regulations, are responsible for determining  the per-unit nonrecurring cost for each type of major defense  equipment. In practice, DOD components submit requests to establish  nonrecurring costs to DSCA, which\u2014if approved by DSCA\u2014are made  publicly available on the agency\u2019s website.", "In practice, determining what nonrecurring costs will be charged entails  the following steps:  1.  Charges are calculated by dividing total program nonrecurring costs  by the total number of planned production units. For example, the Air  Force determined that the nonrecurring costs for a sensor program  were $660 million and estimated that a total of 250,000 units would be  procured by DOD and from sales under the FMS program. Based on  these estimates, the Air Force calculated a nonrecurring cost charge  of $2,640 per unit.  2.  For each individual FMS case that includes major defense equipment,  the military department calculates the amount of nonrecurring costs  for the sale by multiplying the quantity of items by the per-unit  nonrecurring cost charge. For instance, in the example described  above, if a foreign government wants to purchase 10 sensors, a  nonrecurring cost charge of $26,400 would be added as part of the  sale."], "subsections": []}, {"section_title": "Roles and Responsibilities of DOD Offices in Reviewing Nonrecurring Cost Waiver Requests", "paragraphs": ["DOD policy requires that waivers also be reviewed on a case-by-case  basis and tied to a specific sale that defines the quantities of each item to  be procured. This policy prohibits blanket waivers, those that would waive  nonrecurring costs on all sales to a particular country or all sales  pertaining to specific equipment. For example, DSCA cannot grant a  blanket waiver for the Patriot missile that would automatically waive  nonrecurring costs on all subsequent sales of that missile.", "Within DOD, the Director of DSCA has been delegated authority to waive  nonrecurring costs for sales of major defense equipment to foreign  governments and international organizations. While DSCA has primary  responsibility for determining whether waiver requests meet all legal and  regulatory criteria, we observed that multiple DOD offices are involved in  the waiver review process, as illustrated in figure 3.", "In practice, the military departments receive waiver requests from a  foreign government or international organization and ensure that all  required information is submitted, including the equipment type and  quantity, as well as the justification for the waiver. Based on this  information, the military department determines whether or not to endorse  the waiver request. The military department then compiles a package of  relevant documentation, including calculation of the estimated total  amount of nonrecurring costs to be waived, the original waiver request,  and a memo documenting its decision regarding the waiver request. In  the course of our work, we found that, within each military department,  the offices involved in the waiver review process include:", "The U.S. Army Security Assistance Command, which initially reviews  the waiver request, and the Office of the Deputy Assistant Secretary  of the Army for Defense Exports and Cooperation, which provides the  Army\u2019s decision whether to endorse the waiver request;", "The Navy International Program Office, which reviews the waiver  request and provides the Navy\u2019s decision whether to endorse the  waiver request; and", "The Air Force Security Assistance and Cooperation Directorate, which  initially reviews the waiver request, and the Office of the Secretary of  the Air Force, International Affairs, which provides the Air Force\u2019s  decision whether to endorse the waiver request.", "Apart from DSCA, all waiver requests are reviewed by the OUSD (AT&L)  and OUSD (Comptroller), while the OUSD for Policy only reviews waivers  that cite the loss of sale justification."], "subsections": []}]}, {"section_title": "DOD Approved Nonrecurring Cost Waivers Valued at Billions of Dollars over the Past 6 Years", "paragraphs": ["From fiscal years 2012 through 2017, DOD approved nonrecurring cost  waivers valued at nearly $16 billion that it might otherwise have collected  from foreign governments as part of its major defense equipment sales.  Over this period, DSCA approved 810 of the 813 waiver requests it  received, resulting in an approval rate of more than 99 percent. However,  the dollar value of the approved waivers does not, in all instances, reflect  the total amount that will ultimately be waived once sales are finalized.  Rather, it reflects a ceiling for the nonrecurring costs that DOD could  waive. During this time frame, DSCA collected $106 million in  nonrecurring costs; however, this amount may be associated with FMS  cases prior to fiscal year 2012. We were not able to determine the exact  amount actually waived once sales agreements were finalized due to data  limitations."], "subsections": [{"section_title": "DOD Approved Nearly All Requested Nonrecurring Cost Waivers", "paragraphs": ["From fiscal years 2012 through 2017, DOD approved 99 percent of the  813 nonrecurring cost waiver requests for major defense equipment sold  through the FMS program. In our analysis of DSCA\u2019s data on waivers  requested for the 6-year period, we found that:", "DOD approved all 471 waiver requests that cited equipment  standardization submitted by 25 countries and NATO, totaling  approximately $6.7 billion.", "DOD approved all but 2 of the 340 waiver requests that cited loss of sale submitted by 34 countries, totaling almost $9.2 billion.", "DOD also approved a waiver of $460,000 for one of the two cost savings waiver requests it received.", "In total, these approved nonrecurring cost waivers amounted to nearly  $16 billion over the past 6 years. The value of approved waivers  increased more in fiscal year 2017 than in prior years, as shown in figure  4. The increase is primarily due to 2 approved waivers totaling nearly $3.5 billion for sales of missiles and related support systems.", "From fiscal years 2012 through 2017, approximately 93 percent of  nonrecurring cost waivers were approved for countries in Europe, the  Middle East, and the Pacific region. Based on our review of data obtained  from DSCA, we found that countries eligible for equipment  standardization waivers always cited this justification in their waiver  requests, with one exception. We found that only eligible countries  received a waiver for equipment standardization. All other countries that  did not qualify for equipment standardization submitted waiver requests  for loss of sale, except for 2 waiver requests that cited cost savings to the  U.S. government. As shown in figure 5, all countries that utilized the  equipment standardization justification are located in Europe and the  Pacific region, and nearly all the $9.2 billion approved loss of sale waivers  were for countries in the Middle East."], "subsections": []}, {"section_title": "Various Factors Limit Insight about the Extent of Total Nonrecurring Costs DOD Waived and Collected", "paragraphs": ["Currently, DSCA uses the Defense Security Assistance Management  System (DSAMS) to maintain records on FMS case initiation and  execution, but an official stated the system was not designed to track  nonrecurring cost data, such as data on waivers requested or actual costs  waived, for each individual FMS case. DSCA uses separate methods for  tracking data on approved waivers and the equipment that was  purchased as part of an individual FMS case. DSCA officials stated that  to calculate the amount of nonrecurring costs actually waived for each  approved waiver, they manually review DSAMS records for individual  FMS cases to identify the planned quantity of items to be purchased.  While DSCA provided data on actual costs waived, we were unable to  independently verify these calculations and, as a result, are unable to  report on the actual costs waived for waivers that were approved for fiscal  years 2012 through 2017. Other complexities make it difficult to  conclusively determine how much has been waived, including:", "Approved waivers do not have expiration dates but are tied to a  specific sale. DSCA officials stated that waivers are generally used  within 5 years, which coincides with the expiration date of the sales  agreement.", "The lag time between when a waiver is approved and when the  amount of equipment is finalized can take years.", "According to DSCA officials, nearly all nonrecurring costs are waived  rather than collected. Officials also noted that DSCA has collected  approximately $106 million in nonrecurring costs for fiscal years 2012  through 2017; however; this amount may include costs collected from  FMS cases that were finalized prior to our time frame. DSCA officials  could not confirm whether the 813 waiver requests that they received  during fiscal years 2012 through 2017 represented the universe of all  sales eligible for waivers under the FMS program, as DSAMS does not  consistently track whether an individual FMS case includes major defense  equipment and therefore would be eligible for a waiver or subject to the  collection of nonrecurring costs. According to DSCA officials, foreign  governments rarely forego submitting waiver requests and, invariably,  submission of these requests is considered a standard practice. As a  result, with few exceptions, DSCA officials said that DOD waives nearly  all nonrecurring costs associated with eligible sales in the FMS program.", "We have previously reported that DSCA has efforts underway to develop  a new system, the Security Cooperation Enterprise Solution, which is  expected to address longstanding information management challenges.  The new system is being developed with the goal of aggregating data  from multiple information management systems in order to provide  increased insight into the acquisition process, among other things. During  our current review, DSCA officials noted that the new system will include  requirements to incorporate nonrecurring cost data, but it is unclear  whether the system will automate reporting of nonrecurring costs actually  waived. We previously reported that the deployment schedule for the new  system has been delayed and is being revised. DSCA officials were  uncertain of a new deployment date as system requirements are currently  being re-validated and expected to continue through 2020."], "subsections": []}]}, {"section_title": "DOD Considers Foreign Policy, National Security, and Economic Factors When Reviewing Waiver Requests", "paragraphs": ["Our review found that DOD considers a variety of factors when reviewing  nonrecurring cost waiver requests, but, ultimately, the department wants  to ensure that sales are not jeopardized. Individually and collectively,  these sales complement various foreign policy, national security, and  economic objectives. The ability to waive nonrecurring costs assists in  keeping FMS competitive and ensuring sales are not jeopardized,  according to DSCA and other DOD officials.", "While there is a decades-old requirement to recover the U.S.  government\u2019s investment in the nonrecurring costs of major defense  equipment it develops and later sells to foreign governments, DOD is  authorized to waive collection of these costs, which it implements through  DSCA. Under the Arms Export Control Act and its implementing  regulations, DSCA has considerable latitude to approve all waivers that  meet the criteria for each justification. DSCA\u2019s approval of nearly all  waivers is in accordance with statutory requirements. When reviewing  nonrecurring cost waiver requests, DSCA, consistent with DOD guidance,  factors the legal requirements for the justification cited for a waiver  request, in addition to broader benefits to achieve foreign policy, national  security, and economic objectives, which are interrelated. DOD offices  that play a role in reviewing and deciding on waiver requests may also  consider these factors.", "Foreign policy and national security benefits: DSCA and other DOD  officials weigh the effect of equipment sales under the FMS program on  foreign policy and national security objectives. DSCA officials stated that  avoiding a potential lost sale is paramount and outweighs the benefits of  collecting nonrecurring costs, which may only be a small fraction of the  overall sale. DSCA officials added that if a waiver request is not  approved, U.S. relations with the foreign government could become  strained or otherwise be negatively affected. DSCA officials indicated that  one of the goals of the FMS program is to facilitate building and  maintaining international relationships. Further, officials added that  nonrecurring cost waivers help achieve that goal by making the FMS  program competitive.", "The precedent for waiving nonrecurring costs has existed for decades,  and foreign governments know to request waivers and expect they will be  approved, according to DOD officials. In addition, Air Force officials stated  that foreign governments seek to negotiate the price when purchasing  U.S. defense equipment. DSCA officials stated that foreign governments  view the nonrecurring cost waivers as a way to realize some form of cost  savings when purchasing defense equipment under the FMS program.  DSCA officials stated that, regardless of the amount, waiving  nonrecurring costs can be viewed as significant because it gives the  appearance of the foreign government achieving some cost savings.", "The U.S. National Military Strategy prioritizes increasing U.S.  interoperability with coalition partners. Sales of defense equipment to  U.S. allies are a means to achieve these interoperability goals. Equipment  standardization with NATO member countries and other select allies is  one of the available justifications for which a waiver can be requested and  approved. Interoperability helps strengthen relationships with allies and  advances U.S. and allied security interests in these regions. Navy officials  stated that increasing the capabilities available to U.S. allies through FMS  reduces the need to locate U.S. military forces and equipment in proximity  to these allies.", "Economic benefits: Sales through the FMS program can result in cost  savings for the U.S. government, which is also one of the permissible  justifications in the Arms Export Control Act for foregoing collection of  nonrecurring costs. Both the U.S. and foreign governments can benefit  from economies of scale where increasing the volume of defense  equipment purchased decreases the cost per unit. Navy officials also  explained that they always consider the possibility of cost savings in sales  through the FMS program, and added that they coordinate their own  procurement plans with FMS purchases to achieve cost savings.  However, DSCA officials stated that the efforts to obtain required data  and conduct analysis to quantify the amount of cost savings are  extensive. As a result, this analysis is generally only performed when  required to justify cost savings waiver requests.", "In addition to the potential for lower unit prices, the FMS program helps to  sustain the U.S. defense industrial base and allows it to remain globally  competitive. This level of competition has increased as NATO allies also  sell their military equipment. Navy officials stated there are always  competing items, since foreign governments can purchase more  equipment with less capability at a lower price from another country,  which can expand the foreign government\u2019s buying power relative to what  it can afford when buying from the United States. In addition to competing  offers, budget constraints may pose a challenge for some foreign  governments seeking to purchase U.S. defense equipment and the added  expense of paying nonrecurring costs could threaten a potential sale.  DOD officials stated that risking a lost sale if a waiver is not approved  could have potentially negative effects for the U.S. companies that  manufacture defense equipment sold under the FMS program.  Specifically, DOD officials indicated that if the sale is lost, U.S. jobs and  economic viability could be affected, particularly because some FMS  cases can be valued at billions of dollars in equipment purchases."], "subsections": []}, {"section_title": "DOD Could Take Steps to Enhance Efficiency of Waiver Review Process", "paragraphs": ["DOD\u2019s waiver review process is, at times, inefficient, includes repetitive  steps, and does not account for the value of the waiver request. Waiver  justifications are broadly defined in the Arms Export Control Act, which\u2014 as delegated\u2014gives DSCA flexibility to determine how to review requests  and grant waivers. DSCA has implemented a review process that  involves up to 12 offices including the military departments, DSCA, and  various OUSD offices. In some cases, these offices are reviewing waivers  to verify similar information, at times leading to repetitive reviews. The  same process is applied despite the amount of nonrecurring costs  requested to be waived, complexity of the case, or ease (or difficulty) in  assessing the validity of the justification cited in the waiver request. DOD  has taken steps to reduce the time for a few offices to review waivers, but  we found there are opportunities for additional efficiencies to be realized.", "For 23 of the 24 waiver requests we reviewed, on average, the military  departments determined whether to endorse requested waivers around  270 days after they were submitted by the foreign government. DSCA  then, on average, took less than 60 days to decide whether to approve  the waiver, which is consistent with its policy to respond to waiver  requests within 60 days of receipt. There is no policy regarding the time  frame for military departments to review a waiver request, as military  officials stated the review time can vary depending on whether additional  information must be obtained from the foreign government. However,  recognizing an opportunity to streamline the review process, DSCA has  worked with the Air Force to identify one office that did not add value,  reducing the Air Force review process from three offices to two. Officials  stated this action decreased the amount of time required for review.  DSCA officials also stated that they have improved their review times by  using digital signatures when concurring on waiver decisions. Our prior  work has indicated that concerns have been raised about the timeliness  of the FMS program, and a DSCA official stated that these efforts were  part of a DSCA initiative to increase efficiencies in the overall FMS  process.", "Further, we found repetitive steps in the process for assessing potential  U.S. foreign policy and national security benefits from a sale where  equipment standardization is cited as the justification for the requested  waiver. These benefits are already assessed for certain FMS cases by an  in-country team that is comprised of officials from State and the relevant  DOD combatant command that manages military operations in  designated areas of responsibility. Once the waiver is requested by the  foreign government, DSCA and OUSD (AT&L) officials review the waiver  request to assess these benefits, even though military officials stated an  assessment has already been conducted to determine how the proposed  sale will advance U.S. national security objectives within the region. In  addition, DSCA officials stated that since foreign governments are  procuring equipment also used by the U.S. military, by default, purchasing  the equipment would result in standardization. After a potential sale has  received a favorable country team assessment, the only additional  requirement is to determine whether the customer is NATO or among the  34 countries eligible for the standardization waiver. Yet while this  requirement is easily confirmed, the waiver request may still be reviewed  by as many as 11 offices within the military department and DSCA, as  well as at the OUSD level.", "However, we found, for example, DSCA did not adjust its review process  based on the value of the nonrecurring costs to be waived. In one case,  for a cost savings waiver request with estimated nonrecurring costs just  under $12,000, the Air Force took 112 days to coordinate its review and  endorsement of the waiver before submitting it to DSCA. DSCA then took  47 days to coordinate input from various OUSD offices to reach a final  decision on the requested waiver. Similarly, in another instance where the  value of the requested loss of sale waiver was substantially higher\u2014$337  million\u2014it took the Army 160 days to coordinate its review before passing  it on to DSCA, which took 29 days to finalize its decision. Other than  OUSD Policy\u2019s review of the loss of sale waiver, both of these waiver  requests required the same review process despite the substantial  difference in costs.", "For waiver requests that cite the loss of sale justification, DSCA and  military department officials told us that it is difficult to prove or disprove a  foreign government\u2019s claim that not waiving nonrecurring costs will likely  lead to a loss of sale. DOD guidance states these waiver requests should  include information on competing items and their cost, if available;  however, the guidance does not specify the type of information or level of  detail that should be provided. DSCA officials stated that they interpret  this guidance to mean this information is optional and therefore not  required. According to DOD officials, a foreign government\u2019s budget  constraints could limit its ability to pay nonrecurring costs. Of the 18 loss  of sale waiver requests that we reviewed, none included any additional  information on competing offers or spending limits, beyond the basic loss  of sale statement. Even if DOD received this type of information from the  foreign government, DSCA officials told us that corroborating this  information would be difficult. Therefore, DOD officials stated that they do  not assess the likelihood of loss of sale beyond the minimum criteria.  Although this assessment requires no additional analysis, loss of sale  waiver requests are subject to the same review process, but with OUSD  Policy as another required layer of review, bringing the possible total up  to 12 offices. DSCA and OUSD Policy officials were unsure of the origin  of the requirement for OUSD Policy to weigh in on waiver requests that  cite loss of sale. Further, OUSD Policy officials stated that they review  waiver requests for similar elements as other DOD entities, such as  whether the sale will support security objectives in the region.", "DSCA officials have acknowledged that identifying further opportunities to  streamline waiver reviews through a risk-based approach could enhance  efficiencies in the FMS program. Federal standards for internal controls  state that agencies should assign and delegate responsibilities in a  manner that maximizes efficiency and effectiveness. In light of the  significant growth in the FMS program in recent years, as well as the  resulting workload for DSCA and other cognizant DOD components,  continuing to streamline the waiver review process would better position  DSCA and the military departments in maximizing efficiencies in the FMS  process."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The FMS program is a central component of U.S. foreign policy. Our work  has shown it enhances the capabilities of our allies, fosters  interoperability with foreign militaries, helps sustain our defense industrial  base, and serves our national security interests. In 1976, Congress  codified the requirement for DOD to recoup nonrecurring costs on sales  of major defense equipment to help ensure that FMS customers pay their  share of the full cost of this equipment. At the same time, Congress  provided for waiving nonrecurring costs for specified reasons. Over the  past 6 years, DOD has prioritized the benefits of the FMS program and  has typically waived rather than collected nonrecurring costs under these  specified reasons.", "Within DOD, there are opportunities to consider streamlining the waiver  review process to eliminate efforts that are potentially repetitive or  inefficient. The review process for waiver requests requires that multiple  offices review all waiver requests, regardless of the amount of  nonrecurring costs to be waived or the complexity of the specific  circumstances. The FMS program has been criticized for being slow and  burdensome. To create efficiencies in the overall FMS program, DOD  could take additional steps to streamline the FMS waivers review  process."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to DSCA:  The DSCA Director should continue to identify opportunities to streamline  the review process for nonrecurring cost waiver requests.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. In its comments,  reproduced in appendix II, DOD concurred with our recommendation.  DOD also provided technical comments, which we incorporated, as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Defense. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or MakM@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["In this report, we addressed the (1) nonrecurring cost waivers approved  by the Department of Defense (DOD) from fiscal years 2012 through  2017, (2) factors DOD considers when reviewing waivers, and (3)  efficiency of the waiver review process.", "To address all objectives, we analyzed data from the Defense Security  Cooperation Agency (DSCA) on requests made by foreign governments  to waive nonrecurring costs on purchases of major defense equipment  under the Foreign Military Sales (FMS) program. We reviewed data for  fiscal years 2012 through 2017, as these years provided the most  complete data available to facilitate our analysis and gain insights about  the waivers requested based on the three allowable justifications within  the scope of our review\u2014equipment standardization, loss of sale  avoidance, and cost savings to the U.S. government. DSCA uses the  Defense Security Assistance Management System (DSAMS) to maintain  records on FMS case data from the time the case is initiated; however,  the system does not track nonrecurring cost data, such as data on  waivers requested or costs waived, for each individual FMS case.  Instead, DSCA provided a dataset on waivers requested that is  maintained in a spreadsheet. To assess the reliability of DSCA\u2019s data, we  tested for missing data, inconsistent coding, and compared data on  selected waiver requests to waiver documentation we obtained from  DSCA. In reviewing the documentation relative to the dataset we  obtained, we found a small amount of data that were incorrectly coded,  but these miscodings had minimal potential to affect our analysis. DSCA  corrected these miscodings when we brought the errors to their attention.  Overall, we found that the documentation for the selected waiver requests  generally matched the data DSCA provided. We interviewed DSCA  officials responsible for the data to identify the quality controls in place to  ensure the data are accurate and reliable. Based on these steps, we  determined the data were sufficiently reliable to identify the extent to  which DOD approved nonrecurring cost waivers and to select a sample of  waiver requests to review.", "To identify the extent to which DOD approved nonrecurring cost waivers  for fiscal years 2012 through 2017, we analyzed data on nonrecurring  cost waiver requests, which included: the country requesting the waiver,  the justification under which the waiver was requested, the requested  amount of the waiver, whether or not the waiver was approved, the  approved value of the waiver, and the military department responsible for  managing the procurement of the major defense equipment associated  with the requested waiver. We analyzed the data to determine the  number and dollar value of waivers requested for each waiver justification  in total and by fiscal year. We also analyzed the data to determine the  value of nonrecurring cost waivers approved by geographic region.", "DSCA has various information management systems and methods to  track data related to FMS cases. However, these systems are not  integrated and data limitations precluded certain analysis:", "A DSCA official stated that DSCA does not track which FMS cases  include major defense equipment, which impeded our ability to  conclusively report on the total universe of all eligible FMS cases  during fiscal years 2012 through 2017 for which a nonrecurring cost  waiver could have been requested, and the percentage of cases  represented by the 813 requested waivers. DSCA processes  thousands of FMS cases each year; however, not all FMS cases meet  the threshold for collecting or waiving nonrecurring costs as this  requirement only applies to FMS cases where major defense  equipment is being purchased. We interviewed DSCA officials to  obtain information on how major defense equipment is recorded in  DSAMS and the process they use to determine whether a FMS case  includes major defense equipment. To identify the universe of eligible  FMS cases would have required a manual review of thousands of  cases to match the nonrecurring cost waiver data that DSCA  maintains in a separate spreadsheet with the case data captured in  DSAMS that itemizes the equipment purchased for each individual  FMS case. Because a FMS case can have multiple waivers, there is  an added challenge to accurately match the waiver with the  corresponding case.", "While DSCA maintains internal records that track the extent to which  waivers are used to their fullest value, we were unable to fully validate  certain data elements on equipment quantities. This precluded our  ability to report on the amount of total costs waived relative to the  value of the approved waiver. DSCA officials stated that when DSCA  grants a waiver there is a ceiling on the value of the waiver, which  functions similar to a coupon in that it cannot be used to waive  nonrecurring costs that exceed the value of the approved waiver.  DSCA maintains information on the equipment quantities for each  FMS case in DSAMS. However, in order to estimate the costs waived,  DSCA officials stated that they manually review each FMS case  associated with a waiver to identify the quantities purchased, which  may change through amendments to the FMS case. DSCA provided a  dataset that compares approved waivers to costs waived; however,  we could not verify equipment quantities from DSAMS. We also  interviewed DSCA officials to gain insight about their quality control  process to ensure the data are reliable. Our ability to verify equipment  quantities made it difficult to report on actual costs waived.", "To determine the factors DOD considers when reviewing waiver requests,  we selected a non-generalizable sample of 24 waiver requests and the  related documentation and files to identify the information the foreign  government submitted as part of the request, including any information on  competing items, and how these waivers are considered as part of the  overall FMS program. We selected the sample from the dataset provided  by DSCA on the total waiver requests from fiscal years 2012 through April  2017. The sample included waiver requests citing each of the three  justifications and represented different geographical regions. To enhance  our understanding of how anomaly waivers are processed, we selected 5  waiver requests to include in our sample because of their unique  characteristics:", "The only 2 waiver requests that cited cost savings to the U.S.", "The only 2 loss of sale waiver requests that were denied.", "One waiver request from a foreign government that would have been  eligible to use the equipment standardization justification but cited the  loss of sale justification in its waiver request.", "To select the remaining 19 waivers, we set a threshold for waivers  approved where the value of the nonrecurring cost was over $20 million  to capture high-value waivers, as these waivers represented 80 percent  of the total value of approved waivers within our time frame for our  sample selection. Next, we selected at least 2 waiver requests from each  fiscal year for the 6-year period included in our review and ensured a mix  of waivers requested by various foreign governments, including those that  had the highest value of waivers approved. We also ensured that the  waivers reflected a mix of FMS cases to be managed by the Air Force,  Army, and Navy, which also review and provide input to DSCA on the  waiver requests. Our sample includes a higher number of loss of sale  justifications to provide greater insight about how DOD considers these  requests given the minimal requirements and that these requests  represent the majority of costs requested to be waived. While our findings  are based on a non-generalizable sample and cannot be used to make  inferences about all FMS nonrecurring cost waivers requested, the  sample provides insight on the specific circumstances of waiver requests  and DSCA\u2019s decision in these cases.", "We recorded the information obtained from our review of the waiver  request files in a data collection instrument. One analyst entered  information in the data collection instrument and another analyst  independently reviewed the information to ensure accuracy. After  reviewing the waiver requests, we interviewed officials from military  departments associated with the waiver request files that we reviewed to  obtain clarifying information about specific waiver requests.", "To determine the efficiency of the waiver review process, we reviewed  documentation for the 24 selected waiver requests to identify the offices  involved in the review process, and the length of time taken to review and  decide on the waiver request from the time of submission. We used the  same data collection instrument to record this information as part of the  two analysts\u2019 reviews. We compared these offices\u2019 practices to review the  waivers with the Standards for Internal Control in the Federal  Government, which calls for agencies to assign and delegate  responsibilities in a manner that maximizes efficiency and effectiveness.  In addition, we reviewed relevant DOD policy and interviewed officials  from the military departments, DSCA, the Office of the Undersecretary of  Defense (OUSD) Comptroller, OUSD for Policy, and OUSD for  Acquisition, Technology, and Logistics (AT&L) to discuss their roles in  reviewing nonrecurring cost waiver requests and the steps they take  during their review.", "We conducted this performance audit from March 2017 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Candice Wright (Assistant  Director), Jessica Karnis (Analyst-in-Charge), Emily Bond, Lorraine  Ettaro, Cale Jones, William Lamping, Miranda Riemer, and Roxanna Sun  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Foreign governments buy billions of dollars of defense equipment through the Department of Defense's foreign military sales program. They are required to reimburse DOD for certain research, development, and other one-time costs related to the equipment.", "However, governments may ask DOD to waive those costs. DOD has granted $16 billion in waivers over the last 6 years to help these sales go through.", "We found that DOD has prioritized the benefits of making sales over recouping costs, and that it serves U.S. interests to do so. We also found that the waiver review process can be repetitive, so we made a recommendation to address that."]}
{"id": "GAO-18-287", "url": "https://www.gao.gov/products/GAO-18-287", "title": "Railroad Retirement Board: Actions Needed to Improve the Effectiveness and Oversight of Continuing Disability Reviews", "published_date": "2018-02-21T00:00:00", "released_date": "2018-02-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["RRB is an independent agency that administers disability benefits for railroad workers. In fiscal year 2016, about 31,000 railroad workers with disabilities received $1.1 billion in disability benefits. RRB is generally required to periodically assess beneficiaries' medical condition or earnings through continuing disability reviews (CDRs) to verify that they remain eligible for disability benefits.", "This report examines the extent to which RRB (1) conducts medical and earnings CDRs to ensure the continued eligibility of disability beneficiaries, and (2) oversees the CDR program. GAO analyzed data provided by RRB for CDRs completed in fiscal years 2014-2016, the only years for which complete data were available. GAO also reviewed RRB's policies and procedures, a nongeneralizable random sample of 14 CDR cases that were completed in fiscal year 2016, and relevant federal laws and regulations; and interviewed RRB officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In fiscal years 2014-2016, the Railroad Retirement Board (RRB) completed continuing disability reviews (CDRs) of various types for 427 beneficiaries (see figure below), covering slightly more than 1 percent of the railroad workers who received disability benefits during that period. These reviews included:", "Scheduled Medical Reviews \u2013These are scheduled at different intervals depending on the likelihood of medical improvement. RRB data suggest that most beneficiaries are not subject to these CDRs because they are older than 54\u00bd, which RRB defines as the age at which they are unlikely to return to work. Of 43 medical CDRs that were scheduled, RRB identified 3 ineligible beneficiaries and 1 overpayment of about $28,000.", "High-Risk Reviews \u2013 In fiscal year 2015, RRB began conducting medical CDRs on cases it considered to be at high risk for fraud. It completed 166 of these reviews in fiscal years 2015 and 2016, but none identified any ineligible beneficiaries or overpayments.", "Earnings Reviews \u2013 During fiscal years 2014-2016, 163 earnings CDRs identified 47 ineligible beneficiaries and at least $970,550 in overpayments. However, RRB uses earnings information that can be up to 2 years old, thereby delaying the detection of ineligible beneficiaries and increasing the potential for lost federal dollars. Other federal agencies have access to a national federal database with more recent earnings data. Providing RRB access to these data would enable it to identify overpayments sooner.", "Medical + Earnings Reviews \u2013 In some cases, RRB conducts both a medical and earnings CDR. RRB's data do not allow GAO to attribute the outcome to either type of CDR.", "RRB oversight has primarily been limited to conducting two internal reviews of high-risk medical CDRs, one of which concluded, consistent with the above results, that these CDRs demonstrated no return on investment. Nevertheless, RRB continues to do them. RRB does not routinely compile and analyze data for all of the CDRs it conducts, which limits its ability to identify potential gaps in oversight and to monitor program performance. For example, RRB lacks data that would help it determine how many medical CDRs it should expect to conduct. RRB officials said compiling data can be challenging because it uses multiple data systems. However, by more efficiently collecting and compiling key CDR data, RRB could enhance its capability to routinely assess program performance."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider giving RRB access to the National Directory of New Hires, a national database of wage and employment information that would enable it to identify potential overpayments sooner. GAO is also making three recommendations to RRB, including that it reconsider the purpose and value of high-risk CDRs, and routinely compile and analyze CDR data to improve oversight. RRB agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Railroad Retirement Board (RRB) is responsible for  administering retirement, disability, and survivor benefits for the nation\u2019s  railroad workers and their families under the Railroad Retirement Act of  1974, as amended. RRB\u2019s disability program provides financial benefits to  workers who are unable to perform their railroad jobs. In fiscal year 2016,  about 31,000 railroad workers with disabilities received $1.1 billion in  disability benefits from RRB.", "To ensure ongoing eligibility for benefits, RRB conducts continuing  disability reviews (CDR). These reviews assess the extent to which a  beneficiary\u2019s medical condition has improved, or the extent to which a  beneficiary is earning above program limits, either of which could make  them ineligible for disability benefits. While recent reviews by our office  and RRB\u2019s Office of Inspector General (OIG), as well as an investigation  by the Department of Justice, have examined RRB\u2019s oversight and  administration of its disability program, GAO has not previously focused  on the role of CDRs in RRB\u2019s internal controls of its disability program.", "You asked us to examine the RRB\u2019s CDR processes for its disability  program. This report examines the extent to which RRB (1) conducts  medical and earnings CDRs to ensure the continued eligibility of disability  beneficiaries, and (2) oversees the CDR program.", "To address the first objective, we obtained and analyzed data from RRB  for the universe of CDRs completed for railroad workers during fiscal  years 2014-2016, the most recent data available, to determine the  number, types, and outcomes of CDRs completed. RRB also uses CDRs  to target certain disability beneficiaries whom they consider to be at high  risk of potential fraud based on several characteristics. A subset of the  CDR universe, we analyzed these high-risk CDRs to assess RRB\u2019s ability  to determine a recipient\u2019s continued eligibility for benefits and to identify  potential instances of fraud. To obtain more detail about the CDRs RRB  conducted, we analyzed CDR records for reviews completed in fiscal year  2016 from a nongeneralizable sample of 14 randomly selected case files.", "We assessed the reliability of the CDR data provided by RRB for fiscal  years 2014-2016 by reviewing existing information about the data and the  systems that produced them, interviewing knowledgeable agency  officials, performing basic electronic data testing for missing data, outliers,  or obvious errors, and tracing information for selected variables to source  documents for the nongeneralizable random sample of 14 case files. We  determined that the data were sufficiently reliable for purposes of this  report, and we describe certain limitations with the data in the report, as  applicable.", "To address the second objective, we reviewed management strategies  and tools used to oversee CDR processes and assessed them against  federal internal control standards. We also analyzed medical  improvement category data provided by RRB. We describe certain  limitations with these data in the report.", "To address both objectives, we examined prior relevant reviews by RRB,  GAO, and RRB\u2019s Office of Inspector General, and interviewed managers  and staff in RRB headquarters. We also reviewed relevant federal laws,  regulations, and guidance as well as agency policies and procedures for  conducting CDRs. To provide information on RRB\u2019s finances, we  examined detailed internal financial records of RRB revenues and  expenditures from fiscal years 2007 to 2016.", "We conducted our work from May 2016 to February 2018 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["RRB administers retirement, survivor, disability, unemployment, and  sickness benefits for railroad workers and their families under the  provisions of the Railroad Retirement Act of 1974, as amended (RRA)  and the Railroad Unemployment Insurance Act of 1938, as amended  (RUIA). Individuals who work for railroads engaged in interstate commerce, for railroad associations, and for railroad labor organizations  are among those covered by RRB\u2019s benefits system instead of Social  Security or the federal-state unemployment insurance system. During  fiscal year 2016, RRB received approximately $12 billion in funding, about  half of which came from payroll taxes levied on railroad workers and their  employers. Almost all of the funding was used to pay benefits, including  unemployment benefits. In addition, RRB administers Medicare coverage  for railroad workers.", "The railroad retirement system and Social Security system are separate  but linked with regard to benefit payments and taxes. Railroad workers  and their employers pay the same payroll taxes as other workers covered  by Social Security for comparable retirement, disability, unemployment  insurance, and Medicare benefits. RRB also collects taxes to cover  additional benefits. A financial interchange between the two systems  allows funds to be transferred between RRB and Social Security accounts  based on the amount of Social Security benefits that workers would have  received if they were covered by Social Security, as well as the payroll  taxes that would have been collected if the railroad workers were covered  by Social Security instead of their own system. According to RRB data,  the railroad retirement, survivor, and disability system is projected to  remain solvent over at least the next 25 years."], "subsections": [{"section_title": "Railroad Retirement Act Disability Benefits", "paragraphs": ["Under the RRA, RRB provides two distinct disability benefits for railroad  workers\u2014total and permanent (T&P) disability and occupational disability.  For T&P disability, RRB makes determinations about railroad workers\u2019  disability claims independent of but using the same general criteria that  the Social Security Administration (SSA) uses to administer its Disability  Insurance program. That is, a worker must have a medically determinable  physical or mental impairment that (1) has lasted (or is expected to last)  at least 1 year or is expected to result in death, and (2) prevents them  from engaging in substantial gainful activity, defined as work activity that  involves significant physical or mental activities performed for pay or  profit. In other words, these workers are essentially deemed unable to  engage in any regular employment. According to RRB\u2019s 2017 Annual  Report, at the end of fiscal year 2016, the agency was paying 10,300 T&P  disability beneficiaries an average of $1,911 each per month for a total of  about $236 million annually. In fiscal year 2016, data provided by RRB  indicate that the agency approved about 78 percent of the 843  applications for T&P disability benefits it received.", "Occupational disability is a unique benefit for railroad workers. RRB  provides these benefits to workers who have physical or mental  impairments that prevent them from performing their specific railroad job,  even though they may be able to perform other kinds of work. For  example, a railroad engineer who cannot frequently climb, bend, or reach,  as required by the job, may be found to be occupationally disabled. To be  eligible for occupational disability benefits, workers must meet certain  labor- and management-negotiated disability criteria as well as certain  age and service requirements. Railroad workers age 60 and older with at  least 10 years of service are eligible to apply, as well as workers of any  age with at least 20 years of service. Workers determined to be eligible  for occupational disability benefits may be able to return to the workforce,  but generally not to their original occupation. According to RRB, at the  end of fiscal year 2016, the agency was paying 21,000 occupational  disability beneficiaries an average of $3,053 each per month for a total of  about $769 million annually. In fiscal year 2016, data provided by RRB  indicate that the agency approved about 98 percent of the 984  applications for occupational disability benefits it received."], "subsections": []}, {"section_title": "Continuing Disability Reviews", "paragraphs": ["Federal law generally requires RRB to conduct CDRs to determine if  beneficiaries continue to meet the disability requirements of the law.  RRB conducts two overall types of CDRs: medical and earnings. In a  medical CDR, disability examiners review a beneficiary\u2019s medical records  and may order additional examinations to determine whether the  individual\u2019s medical condition has improved to the point where it is no  longer considered disabling. In an earnings CDR, disability examiners  review earnings to determine whether beneficiaries are earning income  that exceeds program limits, which could make them ineligible for  benefits. If the agency, while conducting an earnings review, obtains  information that indicates the beneficiary\u2019s medical condition has  improved, RRB can initiate a medical CDR as well. Similarly, if RRB  discovers earnings above program limits while developing evidence for a  medical review, the agency may initiate an earnings CDR."], "subsections": [{"section_title": "Medical Continuing Disability Reviews", "paragraphs": ["RRB generally conducts medical reviews with a frequency determined by  the beneficiary\u2019s likelihood of medical improvement, which may fall into  one of three categories: medical improvement expected (MIE)\u2014when a beneficiary\u2019s  impairment demonstrates medical improvement, when improvement is  unpredictable, or when medical intervention may change the  impairment\u2019s severity, among other reasons; medical improvement possible (MIP)\u2014when a beneficiary\u2019s disability  may improve, or the likelihood of medical improvement within 3 years  is not probable; or medical improvement not expected (MINE)\u2014when a beneficiary\u2019s  impairment meets certain listings such as blindness or hearing loss  and generally when a beneficiary has attained 54 \u00bd years of age.", "If a beneficiary\u2019s disability is classified as MIE, RRB generally reviews the  beneficiary\u2019s continuing eligibility for disability benefits at intervals from 6  months to 18 months. For MIP cases, RRB mails a questionnaire at least  once every 3 years that asks a beneficiary to update medical and  earnings information. If the self-reported information indicates medical  improvement or a return to work, RRB may conduct a CDR. For MINE  cases, RRB\u2019s regulations state that it will not routinely review the  beneficiary\u2019s continuing eligibility. (See fig. 1.) According to RRB\u2019s  guidance, factors such as age and work experience may also affect how  and when RRB classifies a beneficiary as MINE, or whether it should  schedule (or \u201cdiary\u201d) a CDR. RRB maintains a list of scheduled CDRs in  its CDR Call-Up program. It uses this program to both identify CDRs that  require completion and to schedule CDRs based on the likelihood of  medical improvement.", "RRB also started conducting CDRs in 2015 that target cases at high risk  of potential fraud and which officials said could result in the termination of  benefits."], "subsections": []}, {"section_title": "Earnings Continuing Disability Reviews", "paragraphs": ["In addition to medical reviews, RRB conducts earnings CDRs for  beneficiaries detected with earnings that exceed disability program  limits. Most earnings CDRs are triggered by unreported earnings  detected through RRB\u2019s policing operation. Policing for earnings involves  an annual data match by SSA in which it uses RRB\u2019s disability beneficiary  database and Internal Revenue Service (IRS) earnings data to detect  unreported earnings. (See fig. 2.) In this process, RRB provides SSA with  a record of all disability beneficiaries, and SSA matches these  beneficiaries against IRS earnings data. For those cases in which  earnings are identified, RRB has an earnings reconciliation process to  determine which beneficiaries may be excluded from an earnings CDR  and which should receive one. For example, RRB considers whether a  beneficiary has any disability-related work expenses, such as the cost of  special transportation or medication, which are deducted from any  earnings, or if the beneficiary has reached full retirement age. (See fig.  2.) In addition, a beneficiary who returns to work or has earnings from  employment is required to report that information to RRB, and the agency  may initiate a CDR depending on the circumstances. If a potential  overpayment is identified as a result of a CDR, the Disability Benefits  Division refers the case to another division within RRB to calculate the  overpayment amount."], "subsections": []}]}]}, {"section_title": "Most Beneficiaries Are Not Subject to Medical CDRs, and Data Used to Identify Unreported Earnings and Potential Overpayments Are Outdated", "paragraphs": [], "subsections": [{"section_title": "RRB Completed CDRs for Slightly More Than 1 Percent of Disability Beneficiaries in Fiscal Years 2014-2016", "paragraphs": ["Over the 3 years for which RRB was able to provide us with complete  data, the agency completed 427 CDRs. This number represents CDRs  for slightly more than 1 percent of the railroad workers who received  disability benefits during that period, an average of about 35,000,  including both occupational and T&P beneficiaries. Most of the reviews it  completed from fiscal years 2014 through 2016 were medical CDRs, but  earnings CDRs identified most of the ineligible beneficiaries and  overpayments. Of the 427 CDRs completed, 209 were medical CDRs and  163 were earnings CDRs. In 55 cases, both a medical and an earnings  CDR were completed.", "Forty-three of the scheduled medical CDRs completed were based on  medical improvement criteria. Another 166 of the medical CDRs  completed were based on \u201chigh-risk\u201d selection criteria that were  developed after fraudulent activities came to light among Long Island Rail  Road (LIRR) beneficiaries in the late 1990s through 2008. RRB uses the  high-risk selection criteria to target occupational disability beneficiaries  who share certain characteristics that are common to the employees who  participated in the LIRR fraud scheme. Overall, RRB determined that  about 86 percent of beneficiaries remained eligible for benefits as a result  of all of the CDRs completed in fiscal years 2014-2016. (See fig. 3.)"], "subsections": []}, {"section_title": "Medical CDRs Identified Few Ineligible Beneficiaries and Overpayments", "paragraphs": ["During fiscal years 2014-2016, RRB completed a total of 43 medical  CDRs for beneficiaries\u2013about 0.1 percent of disability beneficiaries\u2013that  were scheduled based on beneficiaries\u2019 medical improvement category.  Our analysis of RRB\u2019s data and policies suggests that RRB completes  few medical CDRs relative to the total number of disability beneficiaries  because it has a high percentage of older disability beneficiaries who may  not be subject to a medical CDR. According to the data provided by RRB,  about 90 percent of individuals who received a disability payment in fiscal  year 2016 were age 55 or older (see fig. 4), and RRB\u2019s Disability Claims  Manual states that at age 54\u00bd, a combination of medical and vocational  factors, such as medical condition, age, and work experience, may  preclude a return to work. More specifically, the manual instructs  disability examiners to classify beneficiaries over age 54\u00bd as \u201cmedical  improvement not expected\u201d because of the remote likelihood that they will  be able to engage in medium or heavy work.", "Scheduled medical CDRs resulted in few terminations and identified few  overpayments. Data provided by RRB indicate that of the 43 medical  CDRs completed during fiscal years 2014-2016, 3 ineligible beneficiaries  were identified and 1 overpayment of $28,000 was identified and  calculated. RRB determined that 40 of the 43 beneficiaries (93 percent)  continued to meet the appropriate disability criteria for occupational or  T&P disability, as applicable, and qualify for benefits (see sidebar). These  results largely mirror RRB\u2019s initial approval rates for disability benefits. In  fiscal year 2016, 89 percent of all disability applicants were approved for  benefits."], "subsections": []}, {"section_title": "RRB Developed Criteria for Conducting Additional Medical CDRs to Target Cases at Risk for Fraud, but These CDRs Identified No Ineligible Beneficiaries in Two Years", "paragraphs": ["In fiscal year 2015, RRB expanded the use of medical CDRs to include  certain high-risk occupational disability cases that would previously only  have been selected for a CDR if RRB received a report of medical  recovery or identified earnings that could affect entitlement to benefits. As  part of its Disability Program Improvement Plan, RRB developed selection  criteria to target cases at high risk for potential fraud that could result in  termination of benefits. According to RRB officials, the criteria for  targeting these cases are based on characteristics common to the  employees who participated in the LIRR fraud scheme. In order to fall  within the high-risk group, a beneficiary must (1) have an occupational  disability, (2) have an orthopedic or psychological impairment, (3) be  under age 55, and (4) not have a disability freeze.", "Despite these targeted criteria, the 166 high-risk CDRs completed in  fiscal years 2015 and 2016 identified no ineligible beneficiaries and no  overpayments. According to a senior RRB official, the agency is not yet  ready to abandon its high-risk CDR effort, and it continues to consider  these reviews as potentially effective. However, high-risk CDR outcomes  raise questions about the value and benefit of RRB dedicating resources  to conduct these additional reviews."], "subsections": []}, {"section_title": "Earnings CDRs Identified the Greatest Number of Ineligible Beneficiaries and Overpayments, but Outdated Earnings Information Limits Their Effectiveness", "paragraphs": ["Earnings CDRs resulted in a higher percentage of terminations and  identified more overpayments than scheduled and high-risk medical  CDRs combined. During fiscal years 2014-2016, RRB completed 163  earnings CDRs. Most of these earnings CDRs (127) were initiated as a  result of RRB\u2019s annual earnings policing effort, in which RRB\u2019s beneficiary  database is matched against Internal Revenue Service earnings data.  Other CDRs were initiated as a result of self-reported earnings  information from beneficiaries. Over this 3-year period, earnings CDRs  identified 47 ineligible beneficiaries and terminated their benefits. During  this same time period, earnings CDRs identified at least $970,550 in  overpayments that had been calculated for CDRs completed during fiscal  years 2014-2016.", "However, earnings CDRs that were conducted may identify additional  overpayments but RRB is slow to calculate overpayments. We  determined that the overpayment data RRB provided for CDRs completed  during 2014-2016 were incomplete. For example, a case file review of six  randomly selected earnings CDRs completed in fiscal year 2016 found  that in three of the cases, the Retirement and Survivor Benefits Division (RSBD), the office responsible for calculating overpayments, had not  calculated the overpayments identified by those 2016 reviews as of July  2017. RRB officials acknowledged delays of a year or more in calculating  overpayments for disability beneficiaries identified by CDRs, and that  RRB lacks a standard time frame for doing so. The officials attributed the  delays to competing priorities and staffing shortages within RSBD. RRB  has no plans to establish a standard time frame for processing  overpayments identified through CDRs.", "Identifying and calculating overpayments in a timely manner are important  to RRB\u2019s long-term performance goal related to payment accuracy, as  outlined in its strategic plan. Further, federal internal control standards  state that transactions should be recorded promptly to maintain their  relevance and value to management in controlling operations.", "In addition, although RRB\u2019s annual earnings policing effort has identified  numerous beneficiaries with earnings over program limits as well as  overpayments, the data RRB uses for its policing effort can be up to 2  years old. The data RRB uses to identify unreported earnings and  determine whether it should initiate a CDR are based on outdated IRS  earnings information. For example, income earned in calendar year 2014  that is filed with the IRS in 2015 would not become available for earnings  policing until 2016.", "Further, the earnings discovered during the course of a CDR may be  even older than 2 years. Our review of the six earnings CDRs completed  in fiscal year 2016 found the earned income in question ranged from 2011  through 2013. RRB officials acknowledged that the data it currently uses  for its policing effort cause delays in identifying earnings. When  overpayments are not identified in a timely manner, RRB\u2019s ability to  detect when a beneficiary is not eligible for benefits is hindered, thereby  increasing the potential for lost federal dollars. In addition, the delay may  also cause larger overpayments since undetected overpayments can  accrue over several years.", "We previously recommended that RRB explore options to obtain more  timely earnings data for use in making disability benefit eligibility  determinations, which includes CDRs. In response, RRB officials said  one step they have recently taken is to use The Work Number, which  includes payroll data from over 5,500 employers nationwide, on a case- by-case basis for CDRs to obtain more recent earnings information from  employers for a specific beneficiary. In addition, RRB contacts  employers directly to obtain earnings information needed for CDRs.  However, according to a RRB official, IRS earnings data are currently the  only source to which RRB has access for earnings policing that includes  all of its disability beneficiaries.", "RRB has considered conducting earnings policing using the Department  of Health and Human Services\u2019 quarterly earnings data from the National  Directory of New Hires, which includes the most recent eight quarters of  wages reported from all states. In its budget submissions for fiscal years  2017-2019, RRB included a legislative proposal seeking access to these  quarterly earnings data, since access is limited by statute. Several federal  agencies, including the Departments of the Treasury, Education, Housing  and Urban Development, and the Social Security Administration, are  currently authorized by law to use data from the National Directory of New  Hires to verify program eligibility and detect and prevent overpayments.  Providing RRB with similar access to more recent earnings data would  enable it to identify potential overpayments sooner than is currently  possible.", "SSA has legal authority to access quarterly wage data from the National  Directory of New Hires for the purpose of making disability benefit  eligibility determinations, which includes CDRs. In March 2017, SSA  implemented the Quarterly Earnings Project in which it matched certain  Social Security Disability Insurance beneficiaries against these earnings  data with the goal of reducing overpayments. According to SSA officials,  the project identified beneficiaries with substantial earnings, on average,  1 year earlier when using quarterly wage data instead of earnings data  from the IRS\u2014the data RRB currently uses to conduct its annual earnings  match. SSA officials project that the Quarterly Earnings Project will  achieve an estimated $10.3 million in savings and benefit terminations in  22 percent of the roughly 10,000 cases selected for review in fiscal year  2017."], "subsections": []}]}, {"section_title": "RRB\u2019s Oversight of Its CDR Program Has Focused on High- Risk Reviews Rather Than Overall Program Data", "paragraphs": [], "subsections": [{"section_title": "RRB Has Reviewed High- Risk CDRs, but Outcomes Call This Effort into Question", "paragraphs": ["RRB\u2019s Program Evaluation and Management Services (PEMS), which is  tasked with conducting reviews to ensure efficient program performance,  has conducted two internal reviews of the high-risk medical CDRs since  they were first implemented in 2015. PEMS concluded in its 2016 report  that conducting high-risk CDRs based solely on the likelihood of medical  improvement demonstrated no return on investment. PEMS officials  recommended that the Disability Benefits Division focus its resources on  investigating non-reported work and earnings rather than on developing  medical evidence; however, RRB continues to dedicate resources to  developing medical evidence for high-risk CDRs, and a senior RRB  official said the agency is not ready to abandon its high-risk CDR effort.  RRB officials said they plan to track certain annual measures for high-risk  CDRs, such as the number of cases referred to the OIG for potential  fraud, CDR outcomes (continuances, suspensions, and terminations),  and any overpayments identified.", "Our findings and PEMS\u2019s 2016 conclusions indicate that these high-risk  medical CDRs have not been effective in identifying ineligible  beneficiaries, or identifying potential fraud. High initial approval rates for  occupational disability benefits\u2014over 96 percent for fiscal years 2008- 2016\u2014may be an indication that high-risk CDRs for occupational  beneficiaries would result in most beneficiaries continuing to qualify for  benefits, since the same disability criteria are used to evaluate medical  condition for initial decisions and CDRs. By continuing to conduct high- risk CDRs, RRB may be expending resources that could be used for  other purposes that are more effective in identifying ineligible  beneficiaries."], "subsections": []}, {"section_title": "RRB Does Not Routinely Compile and Analyze CDR Program Data for All CDRs", "paragraphs": ["Aside from RRB\u2019s efforts to oversee its high-risk medical reviews, it does  not routinely analyze program data for its CDR operations as a whole.  The lack of routine data collection and analysis limits its ability to identify  potential gaps in oversight and monitor program performance. RRB  officials said compiling comprehensive information for the CDR program  can be challenging because CDR data are housed in multiple systems,  some of which use outdated software and are not compatible with each  other. For example, information related to CDR overpayments is housed  in at least three separate systems. Further, according to RRB officials,  some case information is only available in paper files.", "RRB has taken some steps to improve its ability to access information,  such as converting its paper files to electronic images, but the information  in the images cannot easily be analyzed. RRB was able to compile data  for fiscal years 2014-2016 for our review that made it possible for us to  analyze different aspects of the CDR program, such as the number of  medical and earnings CDRs completed each year, the amount of  overpayments identified as a result of CDRs, and CDR outcomes.  However, RRB was unable to provide complete historical data for CDRs  completed before fiscal year 2014. If RRB routinely compiled and  analyzed these data for its own purposes, it could better monitor CDR  program performance. This would be consistent with federal internal  control standards, which state that management should use program data  for effective program monitoring.", "Routinely compiling and analyzing CDR program data would also allow  RRB to identify potential gaps in oversight. For example, our analysis of  the data provided by RRB indicated that 10 percent of the 427 cases for  which it completed a CDR during fiscal years 2014-2016 lacked a valid  initial medical improvement category\u2014medical improvement expected,  possible, or not expected\u2014which is assigned when beneficiaries are first  awarded benefits. Since RRB schedules medical CDRs based on medical  improvement category information, and we found that medical  improvement category data are incomplete for 10 percent of the CDRs  completed during fiscal years 2014-2016, this raises questions as to  whether RRB is scheduling and conducting medical CDRs for everyone it  should be. RRB officials said the only way to verify a beneficiary\u2019s  medical improvement category is to perform an individual query in the  CDR Call-Up program or check the paper files, which could be very time- consuming and labor-intensive to do for all beneficiaries.", "RRB also lacks data on the total number of beneficiaries currently in each  medical improvement category. Without these data, RRB cannot  anticipate how many medical CDRs it should expect to conduct and  when. Federal internal control standards state that management should  use quality information to make informed decisions, and that quality  information is current, complete, and accurate.", "RRB\u2019s ability to monitor the performance of its CDR program is also  limited because it does not track all costs or benefits of conducting CDRs.  For example, RRB officials told us they do not analyze certain program  data, such as administrative costs and recovered overpayments for  CDRs. Analyzing these program data would enable RRB to compare any  savings produced by CDRs against the cost of administering them. RRB\u2019s  strategic plan states that the agency measures the efficiency of its  agency-wide program integrity efforts by comparing any savings they  produce against the cost of administering the activities. According to the  plan, program integrity efforts that can identify savings include computer  matching to prevent payments to deceased beneficiaries and referring  suspected fraud to the OIG. In its fiscal year 2017 Performance and  Accountability Report, RRB reported a return on investment of $4.18 for  each dollar spent on combined program integrity efforts in fiscal year  2016. However, we do not know how CDRs contributed to this return on  investment or the savings resulting from CDRs specifically."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As a steward of tax dollars, it is important that RRB take all necessary  steps to operate and manage its disability program effectively and  efficiently, while minimizing overpayments. RRB\u2019s continued reliance on  outdated earnings information to identify beneficiaries who, at the time a  CDR is conducted, may no longer be eligible for benefits, increases the  likelihood of making improper benefit payments and having to try to  recover the money in the future. In addition, even for those overpayments  that RRB identifies, it lacks a standard for processing them in a timely  manner, which increases the potential loss of federal dollars.  Furthermore, despite a RRB report that high-risk medical CDRs have not  been effective, the agency expends resources on these reviews that  could be used for other purposes that are more effective in identifying  ineligible beneficiaries.", "RRB\u2019s lack of routine data collection and analysis hampers its ability to  monitor program performance and determine what changes, if any,  should be made to improve the CDR program, including determining the  number of beneficiaries in each medical improvement category and the  costs and benefits of conducting the various types of reviews. While  paper files and disparate data systems present challenges to collecting  and analyzing program data and may hinder oversight efforts, RRB could  be doing more with the data it has to identify potential gaps in oversight."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["To improve RRB\u2019s ability to make accurate disability benefit eligibility  determinations, including CDRs, and to decrease the potential for making  improper payments, Congress should consider granting RRB access to  the Department of Health and Human Services\u2019 quarterly earnings  information from the National Directory of New Hires database. (Matter for  Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To enhance RRB\u2019s ability to manage and oversee its CDR program, we  are making the following three recommendations to the Railroad  Retirement Board:  RRB should develop a standard for the timely processing of disability  program overpayments identified through CDRs. (Recommendation 1)", "RRB should consider whether to reallocate resources used for high-risk  CDRs to other CDR efforts that produce more effective outcomes.  (Recommendation 2)", "RRB should routinely compile and analyze CDR program data, such as  the number of cases selected for review, the number of beneficiaries in  each medical improvement category, outcomes, and the costs and  benefits of conducting CDRs, to improve program oversight.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to RRB for review and comment. RRB  provided written comments, which are reproduced in appendix II. The  agency also provided additional technical comments, which have been  incorporated as appropriate. RRB agreed with all three of the  recommendations and noted that it has already taken initial steps to  implement them.", "We are sending copies of this report to the appropriate congressional  committees, the Railroad Retirement Board, and other interested parties.  In addition, the report will be will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Railroad Retirement Board Funding and Expenditures, Fiscal Years 2007 Through 2016", "paragraphs": [], "subsections": [{"section_title": "Railroad Retirement Board (RRB) Funding", "paragraphs": ["In fiscal years 2007 through 2016, RRB received, on average,  approximately $11.6 billion annually from multiple sources to fund its  programs. RRB\u2019s budget in fiscal year 2016, the most recent year for  which data are available, was $12.4 billion. (See table 1.)", "Railroad retirement, survivor, disability, unemployment, and sickness  benefit payroll taxes are the primary funding source for RRB and totaled  $5.9 billion in fiscal year 2016. In fiscal years 2007-2016, these taxes  averaged $5.2 billion annually. Railroad employers and employees pay  Tier I taxes, which are the same as taxes levied on Social Security- covered employers and workers. The taxes fund benefits similar to Social  Security retirement and disability. Employers and employees also pay  Tier II taxes to finance additional railroad retirement benefits. According to  RRB data, Tier I and Tier II taxes for fiscal year 2016 amounted to $2.8  billion and $3.1 billion, respectively. Railroad employers also paid  approximately $117.2 million in unemployment insurance taxes in fiscal  year 2016.", "The second major source of RRB funding consists of transfers from the  Social Security trust funds under a financial interchange between the two  systems. The financial interchange is intended to place the Social  Security Old-Age and Survivors Insurance Trust Fund and the federal  Hospital Insurance Trust Fund in the same condition they would have  been in had railroad employees been covered by the Social Security Act  and Federal Insurance Contributions Act, and the Railroad Retirement Act  had not been enacted. The financial interchange calculation involves  computing the amount of Social Security taxes that would have been  collected on railroad employment and computing the amount of benefits  which Social Security would have paid to railroad retirement beneficiaries  during the same fiscal year. When benefit reimbursements exceed payroll  taxes, the difference, with an allowance for interest and administrative  expenses, is transferred from the Social Security Trust Funds to RRB. If  taxes exceed benefit reimbursements, which has not happened since  1951, a transfer would be made in favor of the Social Security Trust  Funds. According to RRB data, the net financial transfer to the Social  Security Equivalent Benefit Account during fiscal year 2016 amounted to  about $4.1 billion; in fiscal years 2007-2016, these transfers averaged  $4.0 billion annually.", "The third major source of RRB funding is transfers from the National  Railroad Retirement Investment Trust, the trust fund that holds assets to  help pay a portion of RRB benefits. The Trust was established pursuant  to Section 105 of the Railroad Retirement and Survivors\u2019 Improvement  Act of 2001, and is the vehicle for investing RRB retirement benefit  assets in non-government securities. Under the Trust\u2019s investment  guidelines, assets are invested in both government securities and private  equities, unlike the Social Security Trust Funds, which are only invested  in government securities. The Trust also provided for the transfer of  excess RRB retirement, survivor, and disability benefit payroll taxes that  are not needed to pay benefits to the Trust for investment, and for  transfers from the Trust to the Treasury to assist the RRB in meeting its  benefit obligations. The Trust has not received transfers from the RRB  since the end of fiscal year 2004. During fiscal year 2016, however, the  Trust transferred a total of $1.4 billion to the Treasury for payment of RRB  benefit obligations; for fiscal years 2007-2016, these transfers averaged  $1.6 billion annually. According to RRB data, the value of Trust-managed  assets at the end of fiscal year 2016 was $25.1 billion.", "The fourth major source of RRB funding is appropriations. According to  RRB officials, most of these appropriations are derived from the taxation  of railroad retiree benefits and primarily fund benefit payments. These  appropriations also fund specific efforts such as administrative costs. In  fiscal year 2016, RRB received $790.6 million in federal appropriations;  for fiscal years 2007-2016, RRB\u2019s annual appropriation averaged $655.4  million."], "subsections": []}, {"section_title": "Railroad Retirement Board Expenditures", "paragraphs": ["In fiscal years 2007-2016, RRB expended, on average, approximately  $11.6 billion annually to fund its programs. (See table 2.)", "RRB\u2019s expenditures in fiscal year 2016, the most recent year for which  data are available, were $12.8 billion, which included approximately $12.5  billion for benefit payments, $156.0 million for salaries and expenses, and  $98.0 million for interest expenses due to borrowing from Treasury for the  financial interchange."], "subsections": []}, {"section_title": "Railroad Retirement System Solvency", "paragraphs": ["By law, RRB is required to prepare an annual report to the President and  Congress containing a 5-year projection on revenues to and payments  from the Railroad Retirement Account (RRA). In its June 2017 report,  RRB projected that cash flow problems would not occur during the 25- year projection period (calendar years 2017-2041). The report also  recommended no change in employer and employee tax rates and no  diversion of taxes from the RRA to the Railroad Unemployment Insurance  Account (RUIA)."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Railroad Retirement Board", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mark Glickman (Assistant  Director), Arthur T. Merriam Jr. (Analyst-In-Charge), Meredith Moore, and  Jill Yost made significant contributions to this report. Also contributing to  this report were Daniel Concepcion, Erin Godtland, Joel Green, Nicole  Jarvis, David Lehrer, Emei Li, Olivia Lopez, Sheila McCoy, Phillip  McIntyre, Jean McSween, Mimi Nguyen, James Rebbe, Anjali  Tekchandani, Frank Todisco, and Kathleen van Gelder."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Social Security Disability: SSA Could Increase Savings by Refining Its  Selection of Cases for Disability Review. GAO-16-250. Washington, D.C.:  February 11, 2016.", "Railroad Retirement Board: Actions Needed to Reduce Continued Risk of  Fraud and Improper Payments. GAO-15-535T. Washington, D.C.: May 1,  2015.", "Railroad Retirement Board: Total and Permanent Disability Program at  Risk of Improper Payments. GAO-14-418. Washington, D.C.: June 26,  2014.", "Use of the Railroad Retirement Board Occupational Disability Program  across the Rail Industry. GAO-10-351R. Washington, D.C.: February 4,  2010.", "Railroad Retirement Board: Review of Commuter Railroad Occupational  Disability Claims Reveals Potential Program Vulnerabilities.  GAO-09-821R. Washington, D.C.: September 9, 2009."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-408T", "url": "https://www.gao.gov/products/GAO-18-408T", "title": "Coast Guard: Actions Needed to Improve Data Quality and Transparency for Reporting on Mission Performance and Capital Planning", "published_date": "2018-03-07T00:00:00", "released_date": "2018-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Coast Guard, a component of DHS, serves as the principal federal agency responsible for maritime safety, security, and environmental stewardship in U.S. ports and waterways. To ensure that the Coast Guard is effectively fulfilling its missions, agency managers must have accurate information and base decisions on sound analyses for effective program management.", "This statement discusses Coast Guard actions needed to (1) improve the quality of data used for program management and (2) improve the transparency of its data for reporting on mission performance and planning.", "This statement is based on relevant products GAO issued from June 2014 through December 2017 on Coast Guard strategic planning and management issues, as well as related recommendation follow-up conducted through February 2018. GAO reviewed applicable laws, regulations, policies and guidance. GAO also interviewed Coast Guard officials responsible for administering these programs and obtained information on how they used data to inform decisionmaking. GAO interviewed a range of stakeholders, including federal and industry officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's prior work recommended multiple actions to improve the Coast Guard's program management by improving the quality of data it uses to manage and report on its mission performance. Specifically, GAO recommended actions such as collecting more complete data and clarifying the data limitations to facilitate more effective program management. For example, in December 2017, GAO found that more information is needed to calculate vessel safety statistics that could enhance the Coast Guard's knowledge about accident, injury, and fatality trends involving commercial fishing vessels. Having more complete information could be useful to carrying out its marine safety mission, and GAO recommended, among other things, that the Coast Guard ensure that data collected during commercial fishing vessel incident investigations is accurately captured. In 2018, the Coast Guard reported taking initial steps to capture more accurate data.", "GAO's prior work also identified areas where the Coast Guard could improve the transparency of the data it uses for reporting on its mission performance as well its capital planning purposes. For example, in an October 2017 report on performance goals, GAO found the Coast Guard's Annual Performance Report (APR) has not been released publicly since 2011. Consequently, there has not been full visibility over performance across all of the Coast Guard's missions. Coast Guard officials stated that a decision by Department of Homeland Security (DHS) leadership to limit the number of performance goals shared publicly had deterred the Coast Guard from public release of its APR. GAO recommended that APRs be available on the Coast Guard's website; the Coast Guard plans to publicly release future APRs. In addition, previous GAO reports found that the Coast Guard's annual 5-year capital investment plan, which projects acquisition funding needs for the upcoming 5 years, did not consistently reflect current total cost estimates or the effects of tradeoffs made as part of the annual budget cycle. GAO made recommendations to help the Coast Guard plan for future acquisitions and the difficult trade off decisions it will face given funding constraints. The Coast Guard agreed, but it is unclear when it will complete the 20-year plan."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making new recommendations in this statement but has made them to the Coast Guard and DHS in the past on improving its program management through, among other things, better quality and more transparent data. DHS and the Coast Guard agreed with these recommendations and reported actions or plans to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss U.S. Coast Guard (Coast  Guard) actions that could improve its program management by improving  the quality and transparency of the data it uses to manage its mission  performance and capital planning. The Coast Guard, within the  Department of Homeland Security (DHS), serves as the principal federal  agency responsible for maritime safety, security, and environmental  stewardship in U.S. ports and waterways. The Coast Guard\u2019s 11 primary  statutory missions identified in the Homeland Security Act of 2002, as  amended, encompass the agency\u2019s important roles and responsibilities.  For example, as part of its marine safety mission, the Coast Guard  performs mandatory safety inspections, conducts accident investigations,  and promotes accident prevention involving vessels at sea, including for  commercial fishing vessels.", "To ensure that the Coast Guard is effectively fulfilling its missions, agency  managers must have accurate and reliable mission performance  information to monitor and track the progress the agency is making  toward achieving its goals. We have previously reported that evaluation  can play a key role in strategic planning and program management, and  that findings supported by sound analyses strengthen decision making.  Our findings are consistent with Office of Management and Budget (OMB)  guidance on assessing an agency\u2019s performance, which emphasizes the  need for frequent, data-driven reviews, including data analyses, and  identifying steps necessary to increase agency performance. However,  we have previously raised questions about whether annual performance  goals and reported performance information accurately reflect the extent  to which the Coast Guard is accomplishing its mission goals. We have  also raised concerns about the Coast Guard\u2019s management of its capital  asset acquisitions given the impact these assets can have on the Coast  Guard\u2019s ability to conduct some of its missions.", "In 2014, we reported that better information on performance and  funding was needed to address Coast Guard acquisition shortfalls.", "In 2016, we reported that the Coast Guard did not provide field units  with realistic strategic goals to allocate their limited resources, and  testified on Coast Guard actions to improve its asset allocation  process.", "In 2017, we issued five reports and testimonies that collectively  underscore the importance of collecting good data and addressing its  limitations and being transparent about it for the benefit of  congressional decisionmakers and the public.", "My testimony today describes some of the findings and recommendations  from these reports. Specifically, I will discuss Coast Guard actions  needed to (1) improve the quality of data used for program management  and (2) improve the transparency of data used for reporting on its mission  performance and capital planning.", "This statement is based on eight products we issued from June 2014  through December 2017 on Coast Guard strategic planning and  performance management, and recommendation follow-up activities  conducted through February 2018. To perform the work for our previous  reports, among other things, we reviewed applicable laws, regulations,  policies and guidance for selected performance goals. We interviewed  Coast Guard officials responsible for administering these programs and  obtained information on their processes for ensuring data reliability,  including performing electronic testing for obvious errors in accuracy and  completeness. We determined that data were sufficiently reliable for  reporting some information, but in other instances, data reliability  limitations precluded us from reporting information, which we describe  later in this statement. We also conducted site visits and interviewed a  range of other stakeholders, including federal officials and industry  representatives. Further details on the scope and methodology for the  previously issued reports are available within each of the published  products. In addition, after the issuance of our reports and through  February 2018 we contacted the Coast Guard to obtain updated  information and documentation, as appropriate, on the status of  recommendations we made.", "We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe the evidence obtained provides  a reasonable basis for our findings and conclusions based on our audit  objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["With a staff of over 47,000 members, the Coast Guard operates a  multimission fleet of 201 fixed and rotary-wing aircraft and over 1,400  boats and ships. Operational control of surface and air assets is divided  into two geographic Areas (Pacific and Atlantic), within which are nine  Districts consisting of 37 sectors and the stations within them. The Coast  Guard\u2019s program oversight, policy development, and personnel  administration are carried out at the Coast Guard\u2019s headquarters. As  shown in table 1, the Coast Guard is responsible for 11 statutory missions  identified in the Homeland Security Act of 2002, as amended. The  Coast Guard manages these missions through six mission programs, also  listed in table 1. As part of its marine safety mission, for example, the  Coast Guard conducts, among other activities, safety inspections and  vessel accident investigations, including those involving commercial  fishing vessels, which are part of an industry with one of the highest death  rates of any industry in the United States.", "For each of its 11 missions, the Coast Guard has developed goals and  targets to assess and communicate agency performance. The Coast  Guard\u2019s performance assessment process also includes identifying  performance gaps and implementing corrective actions to address unmet  performance goals. As part of its process, the Coast Guard is to establish  targets for the current and subsequent 2 fiscal years, according to Coast  Guard officials. Each target is set by the Coast Guard, but according to  the Coast Guard\u2019s Annual Performance Report (APR), some are derived  from external factors. For example, DHS requires that Coast Guard set a  100 percent target for the percent of people in imminent danger saved in  the maritime environment. Further, several of the Coast Guard\u2019s assets  used to conduct these missions are approaching the end of their intended  service lives. As part of its efforts to modernize its assets used to carry  out various missions, the Coast Guard has begun acquiring new vessels,  such as the National Security Cutter, the Fast Response Cutter as well as  other assets. However, concerns surrounding the affordability of this effort  remain as the Coast Guard continues to pursue multiple new acquisitions  without long-term planning to guide the affordability of its acquisition  portfolio. Figure 1 shows the Coast Guard\u2019s Fast Response Cutter and  National Security Cutter."], "subsections": []}, {"section_title": "Coast Guard Actions that Could Improve Data Quality", "paragraphs": ["We previously reported on actions the Coast Guard could take to ensure  that, among other things, it addresses limitations posed by incomplete  data, the use of unrealistic asset performance data, and limitations with  its performance goal data, for more effective program management.  Examples of data limitations that we have recommended that the Coast  Guard take action on are below.", "Improve completeness of mission data. In December 2017, we found  that several different federal agencies play a role in overseeing and  promoting commercial fishing vessel safety, including the Coast Guard.  As part of its marine safety activities, the Coast Guard conducts, among  other activities, safety inspections and vessel accident investigations.  Commercial fishing has one of the highest death rates of any industry in  the United States and vessel disasters are the leading cause of fatalities  among fishers, according to the National Institute for Occupational Safety  and Health. However, our December 2017 review found that more  information is needed to calculate vessel safety statistics that could  enhance the Coast Guard\u2019s knowledge about accident, injury, and fatality  trends involving commercial fishing vessels.", "The Coast Guard collects some data on commercial fishing vessels that  operate in federal waters\u2014including a vessel\u2019s length and construction  date\u2014but data on the population of the active U.S. commercial fishing  vessel fleet are not complete. Between 2006 and 2015, the Coast Guard  investigated 2,101 commercial fishing vessel accidents that were  identified as occurring in federal waters. While the number of accidents  generally increased over this time period, the number of injuries and  fatalities declined over the same 10-year period. However, we could not  assess the number of accidents, injuries, and fatalities by fishery\u2014 meaning the area in which a certain type of fish (e.g., shrimp, salmon,  crab) is caught\u2014because the Coast Guard\u2019s data is not complete.  Further, we were unable to calculate the rates of commercial fishing  vessel accidents, injuries, and fatalities, because reliable data on certain  information needed to do so\u2014including the total number of vessels that  are actively fishing and the fishery or region in which the vessel  operates\u2014are either not maintained or are not collected by the Coast  Guard or other federal agencies. Having this information could be useful  to carrying out the Coast Guard\u2019s marine safety mission, which includes  enforcing laws to prevent death, injury and property loss in the marine  environment.", "We recommended in our December 2017 report that the Coast Guard  ensure that data it collects during commercial fishing vessel incident  investigations is accurately captured. We also recommended that the  Coast Guard work with stakeholders to form a working group to determine  an efficient means to establish a reliable estimate of the population of  active commercial fishing vessels. The Coast Guard agreed with both  recommendations, and in February 2018 informed us that it is in the  process of developing additional data fields to capture more information,  such as the fishery in which the commercial fishing is involved, and is  engaging stakeholders to establish an appropriate working group. We will  continue to monitor these actions.", "Use more realistic asset performance data. In our May 2016 report on  Coast Guard strategic planning, we found that the Coast Guard did not  provide field units with realistic goals for allocating assets, by mission.  We reported that the Coast Guard\u2019s strategic allocations of assets were  based on unrealistic assumptions about the performance capacity of its  assets and did not reflect asset condition and unscheduled maintenance.  This was due, in part, to the Coast Guard not including information from  its field units on the actual performance of its assets. For example,  agency officials noted that one of its classes of cutters was 50 years old  and these cutters were hampered by mechanical failures requiring  emergency dry dock repairs, which resulted in reduced availability to  carry out their missions during the year. In another example, a field unit  stated that based on historical use, it planned for 575 hours per vessel for  one type of cutter instead of the 825 hours performance capacity.", "Because actual asset use has consistently fallen below asset  performance capacities, there is not a direct alignment between the Coast  Guard\u2019s strategic operational goals and its prospects for achieving those  goals. As a result, the headquarters\u2019 strategic intent, which is based on  asset capacity rather than actual performance, did not provide the field  with strategic, realistic goals for allocating assets by mission. Agencies  should use quality information that is appropriate, current, complete,  accurate, accessible, and timely to achieve objectives and address  related risks. We recommended that the Coast Guard incorporate field  unit input, such as information on assets\u2019 actual performance, to inform  more realistic asset allocation decisions. The Coast Guard concurred with  this recommendation, and in February 2018 informed us that it plans to  address this recommendation through changes to two process  documents that are under revision, with an expected completion date in  March 2018.", "Improve performance goal data. In our October 2017 review of Coast  Guard performance goals, we reported that the Coast Guard and DHS  identified limitations with two of the seven selected performance goals we  reviewed, including the five year average number of recreational boating  deaths and injuries. In particular, officials believe that many recreational  boating injuries that do not require hospitalization are not reported to the  Coast Guard. These officials believe that the amount of underreporting  may vary over time due to changes in industry trends, making it difficult to  accurately determine actual injury rates and program performance. We  determined that the data for this performance goal was not sufficiently  reliable for the purposes of our reporting objectives due to these likely  limitations. We found that the Coast Guard did not report the possible  extent of these limitations with this performance goal in its fiscal year  2016 APR.", "For the other performance goal, the Coast Guard and DHS identified  limitations with the number of detected incursions of foreign fishing  vessels violating U.S. waters, which is publicly reported in DHS\u2019s APR.  DHS\u2019s review of this performance goal, reported in August 2015, raised  questions about the validity of this goal\u2014that is, whether it provides a  useful measure of the Coast Guard\u2019s performance. Specifically, the  review noted that this performance goal is intended to measure a  deterrence effect, but doing so is inherently difficult and may lead to  contradictory interpretations of performance. In October 2017, we found  that the data for this performance goal was sufficiently reliable for our  reporting objective purposes, but questions remain about its validity.  Reliable data is not a useful indication of performance unless it is also a  valid representation of the goal being addressed. DHS officials reported  that they did not include a discussion of the limitations for this  performance goal in DHS\u2019s fiscal year 2015 APR because the  performance goal met the minimum threshold for data reliability despite  the goal\u2019s limitations. Coast Guard officials reported they were aware of  these limitations and were working with DHS and OMB to improve the  performance goal and implement corrective actions within 1 to 2 years.  We recommended that the Coast Guard assess the extent to which  documentation on performance data reliability contains appropriate  information on known data reliability limitations and update these  documents, as needed, based on the results of the assessment. The  Coast Guard concurred and in February 2018, informed us that it had  taken initial actions to address our recommendation. However, our  preliminary review of these actions indicates that further action will be  needed to fully address our recommendation, such as documenting and  reporting the limitations of performance data."], "subsections": []}, {"section_title": "Coast Guard Actions that Could Improve Transparency of Data for Reporting on Its Mission Performance and Capital Planning", "paragraphs": ["Our previous reports have identified areas in which the Coast Guard  could improve the transparency of its data used for reporting on its  mission performance and planning.", "Improve transparency of data on mission performance. In our  October 2017 report on performance goals, we found that the Coast  Guard\u2019s APR has not been released publicly since 2011 due to a previous  DHS leadership decision. Consequently, there has not been full visibility  over performance across all of the Coast Guard\u2019s missions. For  example, one of the Coast Guard\u2019s missions\u2014defense readiness\u2014has  no goals that are publicly reported or shared with Congress, even though  measures related to defense readiness are included in the Coast Guard\u2019s  APR.", "Coast Guard officials stated that they could see the benefit of publicly  releasing their APR; however, DHS\u2019s decision to limit the number of  performance goals shared publicly has so far deterred the Coast Guard  from pursuing the public release of its APR. DHS officials told us that the  department is concerned about conflicting information that a component\u2019s  APR might present because it is vetted and produced separately from the  DHS APR. However, the lack of transparency regarding performance  data shared publicly and with Congress can result in an incomplete  picture of mission performance and can limit effective oversight of Coast  Guard operations. As a result, the public and Congress may be unable to  determine the extent to which the Coast Guard is meeting its missions.  We recommended that future Coast Guard APRs be available on the  Coast Guard\u2019s public website. The Coast Guard concurred with this  recommendation and in February 2018, the Coast Guard informed us that  it had completed its 2017 APR and are determining an appropriate  approach for making it publicly available.", "Improve capital planning transparency. In our previously issued work  on the Coast Guard\u2019s annual 5-year capital investment plan (CIP), we  found that the CIP does not consistently reflect current total cost  estimates or the effects of tradeoffs that are made as part of the annual  budget cycle. We made several recommendations in recent years  intended to help the Coast Guard plan for future acquisitions and the  difficult tradeoff decisions it will likely face. The Coast Guard generally  concurred with these recommendations and is in various stages of  implementation. For example, in 2017 we reported that we have made  recommendations that DHS and the Coast Guard take several actions to  gain an understanding of what the Coast Guard needs to meet its mission  within its likely acquisition funding levels. These recommended actions  included the Coast Guard: (1) conducting a comprehensive portfolio  review across all its acquisitions to develop revised baselines that meet  mission needs and reflect realistic funding scenarios and (2) developing a  20-year plan that identifies all necessary recapitalization efforts and any  fiscal resources likely necessary to complete these efforts. For example,  in 2014 we recommended the Coast Guard develop a 20-year fleet  modernization plan that identifies all acquisitions needed to maintain the  current level of service and the fiscal resources needed to acquire them.  Without these efforts, the Coast Guard will continue, as it has in recent  years, to plan its future acquisitions through the annual budgeting  process, an approach that has led to delayed and reduced capabilities.", "In 2016, the Coast Guard revised its 2005 Mission Needs Statement,  which provides a basic foundation for long-term investment planning that  is to serve as the basis for evaluating the effectiveness of various fleet  mixes, and inform the Coast Guard\u2019s CIP. However, the 2016 Mission  Needs Statement did not identify specific assets the Coast Guard needs  to achieve its missions, nor did it update the annual hours it needs from  each asset class to satisfactorily complete its missions. The Coast  Guard has stated it is developing a 20-year Long-term Major Acquisition  Plan, but it has not stated when the plan will be completed or what will be  included in this plan, such as potential trade-offs that could be made  across the Coast Guard\u2019s portfolio of acquisitions to better meet mission  needs within realistic funding levels. A long-term plan with a tradeoff  analysis would facilitate a full understanding of the affordability challenges  facing the Coast Guard while it builds the Offshore Patrol Cutter. DHS  concurred with our 2014 recommendation, but it is unclear when the  Coast Guard plans to complete the 20-year plan.", "Chairman Hunter, Ranking Member Garamendi, and members of the sub- committee, this completes my prepared statement. I would be happy to  respond to any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions about this testimony,  please contact Nathan Anderson at (202) 512-3841 or  andersonn@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Other individuals making key contributions to this work, and  the underlying reports on which it is based, include Dawn Hoff (Assistant  Director); Andrew Curry (Analyst-in-Charge); Chuck Bausell; David Bieler;  Richard Cederholm; John Crawford; Timothy J. DiNapoli; Michele Fejfar;  Laurier R. Fish; Peter Haderlein; Eric Hauswirth; Laura Jezewski; Tracey  King; Benjamin Licht; Marie A. Mak; Gary Malavenda; Diana Moldafsky;  Heidi Nielson; Meg Ullengren; and Kayli Westling.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["In the past, we've reported on ways to improve Coast Guard programs, performance, and capital planning by increasing data quality and transparency.", "For example, in December 2017, we found that the Coast Guard needs more information to calculate commercial fishing vessel safety statistics. Knowing more about related accidents, injuries, and fatalities could help the Coast Guard accomplish its maritime safety mission.", "We testified before Congress on this and other data issues affecting the Coast Guard."]}
{"id": "GAO-18-318", "url": "https://www.gao.gov/products/GAO-18-318", "title": "Nuclear Regulatory Commission: Additional Action Needed to Improve Process for Billing Licensees", "published_date": "2018-03-08T00:00:00", "released_date": "2018-03-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NRC is responsible for regulating the commercial nuclear industry, including nuclear power plants. NRC provides services, such as inspections, for regulated entities that hold licenses\u2014that is, licensees. NRC recovers the costs for these services by assessing fees and billing licensees quarterly. In fiscal year 2016, NRC collected about $321 million in service fees. From 2006 to 2016, audits of NRC's fees identified problems with NRC's billing process. For example, a 2012 audit identified about $24 million in unbilled fees from fiscal years 2011 and 2012.", "GAO was asked to review NRC's billing process for service fees. This report examines (1) the actions NRC is taking to address problems with its billing process identified by internal reviews and (2) the challenges selected licensees identified with NRC's billing process and the extent to which NRC's actions are addressing them.", "GAO reviewed audits of NRC's billing process and other documents related to this process. GAO also interviewed NRC staff and a nongeneralizable sample of 13 licensees, selected based on the amount of service fees charged from October 2015 through July 2017, and compared NRC's actions against criteria on internal controls and project planning."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of the Inspector General for the Nuclear Regulatory Commission (NRC) and internal reviews conducted by NRC identified several problems with the agency's billing process, and NRC has implemented or plans to implement several changes to address the recommendations. For example, the codes that NRC staff use to record their work hours on time cards\u2014referred to as activity codes\u2014did not describe the work and did not have a consistent naming convention, which increased the risk of staff charging their time to the wrong activity codes. This could lead, in some cases, to billing errors. To address these problems, NRC created a standard naming convention for activity codes that provides more information about the activity. See the figure below for the steps in NRC's billing process for work that NRC or contractor staff performed.", "Some of the 13 licensees that GAO interviewed identified challenges with NRC's billing process, including its method for delivering paper invoices by mail. For example, two of these licensees stated that with invoices taking up to 10 days to arrive in the mail, they sometimes do not have sufficient time to properly review charges and remit payment to NRC within the 30-day deadline for paying the invoice. One licensee said that delays in receiving an invoice resulted in late fees. NRC is undertaking an initiative to transition to electronic billing, which may address the challenges the licensees identified and, according to NRC staff, improve the agency's billing process. However, NRC has not developed planning documents for this initiative and, according to staff, the planning phase is already past its original deadline of October 2017. The Project Management Institute has identified standards related to project management processes, including project planning. By developing a project management plan that is consistent with best practices and includes steps for involving licensees in system development and assessing results of the project, NRC would have reasonable assurance that it can better manage its electronic billing initiative."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that NRC develop a project management plan for its electronic billing initiative that follows project management standards and includes steps for involving licensees and assessing results. NRC agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Nuclear Regulatory Commission (NRC) is the federal agency  responsible for regulating the commercial nuclear industry\u2014including  nuclear power plants and other civilian uses of radioactive material\u2014 through licensing, inspection, and enforcement of its regulations. NRC  provides licensing services, including conducting inspections, reviewing  applications for new licenses, and renewing licenses, to regulated entities  that hold a license or are applying for a license, referred to as licensees  and applicants, respectively. NRC recovers the full costs for providing  these services by assessing fees to licensees and applicants\u2014called  service fees\u2014and billing licensees and applicants each quarter using a  billing process that includes aggregating all the charges to be billed;  reviewing the charges and correcting errors, if any; mailing quarterly  invoices; and then addressing disputes from licensees and applicants, if  any. In fiscal year 2016, NRC collected about $321 million in service fees  from licensees and applicants. Since 2006, internal audits of NRC\u2019s  revenue from fees have identified problems with the agency\u2019s billing  process, some of which resulted in significant billing errors to licensees.  In fiscal year 2012, for example, an internal NRC audit identified  approximately $24 million in unbilled fees from fiscal years 2011 and  2012 that went undetected by NRC staff involved in the agency\u2019s billing  process.", "The Omnibus Budget Reconciliation Act of 1990, as amended, requires  NRC to annually assess and collect fees totaling about 90 percent of its  annual budget authority. To reach this amount, NRC assesses two types  of fees\u2014service fees and annual fees\u2014that are set through an annual  rulemaking process. Service fees encompass reimbursable contract  costs and reimbursable NRC staff time costs, which include time spent  performing work for a specific licensee and certain overhead costs. In  cases where NRC hires a contractor to perform work related to a specific  licensee, NRC pays the contractor for the work and then bills the licensee  for reimbursement. NRC assesses service fees for agency staff time by  establishing an hourly rate to recover the full cost of specific regulatory  services. In cases where the cost of an activity will change very little from  licensee to licensee, NRC has established flat service fees based on the  hourly rate. For service fees, charges on the invoice are to recover the  costs for work completed in the previous quarter up to the date of the  invoice and invoices are mailed to licensees quarterly via the U.S. Postal  Service to collect service fees. NRC assesses annual fees to recover  regulatory costs that are not otherwise recovered through service fees in  order to meet the 90 percent statutory requirement. Licensees\u2019 payments  for service and annual fees are due to NRC within 30 days of the invoice  date so licensees can avoid paying interest on the charges. This report  focuses on the billing process for service fees assessed to licensees.", "You asked us to review NRC\u2019s process for billing licensees for service  fees. This report examines (1) the actions NRC is taking to address  problems with its billing process identified by internal reviews and (2) the  challenges selected licensees identified with NRC\u2019s billing process and  the extent to which NRC\u2019s actions address these challenges.", "To determine what actions NRC is taking to address problems with its  billing process for service fees, we reviewed agency documents and  interviewed NRC staff. Specifically, we reviewed assessments of NRC\u2019s  billing process from 2006 to 2016, including two audits by NRC\u2019s Office of  the Inspector General (OIG) and NRC\u2019s Business Process Improvement  Project, which was an internal review completed in March 2014 that  focused on eliminating or greatly reducing billing errors for service fees  and improving overall efficiency and effectiveness of the billing process.  We also reviewed NRC\u2019s planning documents related to the actions it is  taking to address the problems, and NRC policy and guidance related to  its billing process. We interviewed NRC staff in the Office of the Chief  Financial Officer who are working on projects and initiatives that are  designed to address problems with NRC\u2019s billing process. We also  interviewed NRC staff in the agency\u2019s four regional offices (Region 1 near  Philadelphia, Pennsylvania; Region 2 in Atlanta, Georgia; Region 3 near  Chicago, Illinois; and Region 4 in Arlington, Texas) and eight offices  (Advisory Committee on Reactor Safeguards; Atomic Safety and  Licensing Board Panel; and the Offices of General Counsel, New  Reactors, Nuclear Material Safety and Safeguards, Nuclear Reactor  Regulation, Nuclear Security and Incident Response, and Nuclear  Regulatory Research) that are responsible for reviewing charges as part  of the billing process, including staff who review contractor charges.", "To determine the challenges licensees have with NRC\u2019s billing process  and the extent to which NRC is addressing them, we reviewed agency  documents related to its billing process; interviewed a stratified,  nongeneralizable sample of 13 non-federal licensees; and interviewed  NRC staff. To select licensees for our sample, we used service fee- collection data produced by NRC\u2019s financial management system, called  the Financial Accounting and Integrated Management Information  System. From seven of NRC\u2019s nine fee classes, we selected to interview  the 2 licensees that held the licenses that were assessed the highest  amount of service fees from October 2015 through July 2017. However,  one of the seven fee classes had only 1 licensee that was assessed  service fees in that class during this established period. Also, two fee  classes were excluded from our sample. Our selection process resulted  in 13 licensees of varying size and scope, including 1 holding multiple  licenses that was assessed service fees of almost $28 million during the  established period, and another holding a single license that was  assessed service fees of almost $420,000 during the same period. If a  licensee meeting our selection criteria was unwilling or unable to  participate, we elected to interview the licensee that held the license that  was assessed the next highest amount of service fees during this period.  We interviewed licensees using a standard set of questions to collect  consistent information. We analyzed licensee responses to our standard  set of questions to identify key themes and grouped their responses into  common categories. We interviewed NRC staff and reviewed related  documentation to determine whether the agency\u2019s recent or planned  actions to address problems with its billing process could address  licensees\u2019 challenges. We compared NRC\u2019s current billing practices  against the agency\u2019s Organizational Values and Standards for Internal  Control in the Federal Government, as applicable. We also identified  leading practices for project planning in the Project Management  Institute\u2019s A Guide to the Project Management Body of Knowledge.", "We conducted this performance audit from March 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["NRC is an independent agency established by the Energy Reorganization  Act of 1974 to license and regulate civilian uses of nuclear materials in  the United States for commercial, industrial, medical, and academic  purposes. Under the Atomic Energy Act of 1954, as amended, NRC is  responsible for issuing licenses for civilian uses of radioactive material  and conducting oversight activities under such licenses to protect the  health and safety of the public, among other things. NRC regulates  commercial nuclear power plants; research, test, and training reactors;  nuclear fuel cycle facilities; the transport, storage, and disposal of  radioactive materials and waste; and the use of radioactive materials in  medical, academic, and industrial settings. NRC is authorized to  conduct inspections and investigations; enforce regulatory requirements  by, among other things, issuing orders and imposing civil (monetary)  penalties; and revoke licenses. NRC is headed by a five-member  Commission, with members appointed by the President and confirmed by  the Senate; one commissioner is designated by the President to serve as  the Chair and official spokesperson of the Commission. NRC staff from  headquarters and the four regional offices implement the agency\u2019s  programs for developing regulations, licensing, inspection, enforcement,  and emergency response, among other responsibilities. NRC\u2019s Office of  the Chief Financial Officer establishes, maintains, and oversees the  implementation and interpretation of the agency\u2019s regulatory user fee  policies and regulations, among other responsibilities.", "The Office of the Chief Financial Officer is responsible for assessing  service fees to licensees for each license they hold and sending licensees  invoices quarterly. The quarterly invoices for service fees may include  costs in the following three categories:", "NRC staff work. NRC staff record their time related to services, such  as licensing, inspections, special projects, and license reviews, which  is then billed to licensees to recover the full cost of these services. To  calculate the cost of work performed by NRC staff, NRC applies an  hourly rate\u2014as established during the agency\u2019s annual rulemaking  process\u2014to the number of staff hours spent on work that is directly  attributable to a specific licensee.", "Overhead costs for project managers and resident inspectors.", "Some licensees work with an NRC project manager or resident  inspector, and NRC allocates the overhead costs for these NRC  staff to the licensees. Overhead costs cover the costs of these staff  doing tasks that are not assigned to a specific licensee, but that  benefit licensees, such as training, according to NRC staff. Project  manager and resident inspector overhead costs are calculated for  each relevant licensee as 6 percent of the licensee\u2019s total NRC staff  time charges for the quarter.", "Contractor charges. NRC sometimes hires a commercial contractor  or other federal agency, such as the Department of Energy (referred  to collectively as contractors), to perform services that are directly  attributable to a licensee, such as reviewing license applications. In  these cases, NRC pays the contractor for the work and then bills the  licensee for reimbursement of the contractor\u2019s charges.", "NRC\u2019s billing process for service fees begins by identifying work that can  be billed to a specific licensee and ends when the licensee pays the  quarterly invoice. Once NRC determines that billable work needs to be  done, the agency follows the steps in the billing process shown in  figure 1.", "The steps in NRC\u2019s billing process are described in more detail below.", "NRC assigns activity code: After billable work is identified, NRC  assigns an activity code, which is a project code to which NRC  employees charge time for billable work performed.", "NRC performs work: NRC staff perform work that is billable to a  licensee and record their time biweekly in electronic time cards in  NRC\u2019s time and labor management system. If NRC staff discover that  they have recorded time incorrectly in a previous pay period, such as  by charging time to an incorrect activity code, they can correct the  error by making a prior-period adjustment. Adjustments that are made  within 6 weeks of the date of the error can be made directly in the time  and labor management system; adjustments made 6 weeks or more  after the date of the error require a memo with justification from the  employee\u2019s office director to NRC\u2019s Controller.", "Supervisors review hours: At the end of each 2-week pay period,  NRC supervisors review and approve the time cards for the staff they  supervise, including the hours charged to activity codes.", "Contractor performs work: If work is done by a contractor, the  contractor submits a status report and invoice to NRC each month.  Each monthly status report includes a description of the work done,  the planned completion date, the total charges for the current invoice,  the cumulative charges to date, and an estimate of future charges.", "NRC reviews charges: NRC staff responsible for managing the  agency\u2019s contracts review the monthly status reports and invoices and  must approve invoices before paying the contractor. After paying a  contractor\u2019s invoice, NRC bills the licensee for reimbursement of the  amount NRC paid to the contractor. Contractor charges are included  on a licensee\u2019s quarterly invoice, and NRC may bill a licensee for  contractor charges after the quarter in which the work was performed.", "NRC aggregates charges: NRC\u2019s financial management system  aggregates all NRC staff hours and charges from contractors biweekly  for each licensee. The financial management system obtains data on  staff hours from NRC\u2019s time and labor management system.  Contractor charges are entered manually into the financial  management system.", "NRC validates charges: NRC regional and program offices review  and certify all charges to licensees after the end of each quarter. To  accomplish this, the Office of the Chief Financial Officer produces  quarterly validation reports\u2014one for staff charges and one for  contractor charges\u2014from NRC\u2019s financial management system.", "NRC invoices licensees: NRC creates invoices each quarter and  sends them to licensees via the U.S. Postal Service. Licensees\u2019  payments are due to NRC within 30 days of the invoice date to avoid  paying interest on the charges.", "Licensee reviews and pays invoice: Licensees review the invoice  and may pay the invoice, request that NRC review the fees assessed,  or dispute the fees. These billing disputes generally start informally  with the licensee contacting NRC. According to NRC staff, most  disputes are handled informally and generally entail explanations of  the agency\u2019s billing or licensing policies. If NRC staff are unable to  resolve a licensee\u2019s concern informally, the licensee can write a letter  to the Chief Financial Officer, which begins a formal dispute process.  According to NRC staff, to address a licensee\u2019s concerns with the  charges, the Office of the Chief Financial Officer reviews the charges  on the invoice and may involve the relevant regional or program  offices to determine whether the charges are valid for the work  performed. Additionally, NRC\u2019s Office of the General Counsel may be  included in disputes regarding NRC\u2019s fee policy. After the dispute is  resolved, the licensee pays the invoice.", "NRC\u2019s OIG and internal reviews conducted by NRC in the last 5 years  identified problems with the agency\u2019s billing process. In 2012 and 2015,  for example, OIG audits identified problems with NRC\u2019s management and  review of billable charges and recommended changes to the agency\u2019s  internal processes and procedures\u2014called internal controls\u2014to improve  the accuracy of invoices. In 2013, NRC launched the Business Process  Improvement Project to determine the root causes of billing errors, many  of which were discovered during the quarterly validation step of the billing  process. The project was completed in 2014 and made recommendations  focused on strengthening internal controls and improving efficiency and  effectiveness of the billing process. Additionally, in 2016 NRC requested  feedback from the public, including licensees and other stakeholders, on  the general communications the agency provides about its fees, intending  to use the feedback to improve the transparency of its fees development  and invoicing practices. Following this effort, NRC launched its Fees  Transformation initiative to improve transparency of its fee-setting and  billing processes."], "subsections": []}, {"section_title": "NRC Has Taken Action in Four Main Areas to Improve Its Billing Process", "paragraphs": ["NRC has recently implemented or plans to implement changes in four  main areas of its billing process to address problems identified by NRC\u2019s  OIG and NRC internal reviews: controls over activity codes, guidance and  training for NRC staff, quarterly validation of charges, and charging  licensees for billable overhead costs."], "subsections": [{"section_title": "Controls over Activity Codes", "paragraphs": ["NRC\u2019s OIG and internal reviews found problems with NRC\u2019s internal  controls over activity codes, which affected the quality of data used for  billing and other agency processes. The management of activity codes  was decentralized, meaning that staff in NRC\u2019s offices generated the  codes and each office followed its own policies and procedures regarding  the setup and use of these codes. NRC also did not have a standardized  set of activity codes to be used across the agency. Activity codes were  instead linked to specific licensees, meaning that identical work activities  for two licensees would require two different activity codes. These  conditions resulted in an excessive number of activity codes in the  agency\u2019s time and labor management system. According to an internal  NRC review, the decentralized management and absence of  standardized activity codes weakened internal controls and put NRC at  risk for incomplete or inaccurate billing. Further, there was no consistent  naming convention, and activity code titles often lacked the specificity  necessary for NRC staff to readily identify the correct code for the work  activity performed, according to the OIG. NRC staff could also search  and access the entire inventory of activity codes, including those  unrelated to their work. According to the OIG, these conditions increased  risk for staff to inadvertently select the wrong activity codes when  recording their time; in such cases, the wrong licensee could be billed for  the work.", "Starting in fiscal year 2016, the Office of the Chief Financial Officer began  taking responsibility for overseeing and managing activity codes,  including establishing, maintaining, and closing activity codes available in  the agency\u2019s time and labor management system. Further, NRC  developed a set of standardized activity codes with titles related to the  specific work activities completed. The transition to centralized activity  code management and standardized activity codes was completed in  October 2017, according to NRC staff. Also in October 2017, the agency  implemented controls that prevent a staff member from charging time to  an activity code unless a project manager has granted that staff member  access to the code."], "subsections": []}, {"section_title": "Guidance and Training", "paragraphs": ["NRC\u2019s OIG and internal reviews found problems with staff\u2019s  understanding of their roles and responsibilities for accurate time and  labor reporting and management of billable contracts, which, according to  NRC documents, contributed to avoidable time card errors and billing  errors. To address these problems, NRC provided training and updated  guidance for staff covering the following two areas:", "Time and labor reporting. According to an internal NRC review, staff  were making avoidable data entry errors in time cards that  supervisors who approved the timecards were not identifying,  meaning incorrect time cards were sent to the Office of the Chief  Financial Officer for billing. In late fiscal year 2015, NRC provided  training to all agency staff to emphasize the importance of accurate  time reporting, the process for selecting correct activity codes, and the  relationship of time card entry to billing. According to NRC officials,  the agency also provided specialized training to staff in offices where  errors were common. Additionally, the agency updated its time and  labor reporting guidance and provided supplemental guidance to staff  related to time and labor reporting. Furthermore, in preparation for  changes to activity codes that were implemented in October 2017,  NRC provided additional training to staff on the new activity code  structure and making corrections to their time cards.", "Management of contracts. According to an internal NRC review,  approximately one-third of the billing errors identified during the  quarterly validation step of the billing process resulted from  administrative errors in managing contracts. NRC\u2019s OIG also found  that agency guidance related to the invoice review process was  outdated and did not provide staff with sufficient criteria for verifying  information contained in contractor invoices. Without such criteria,  NRC could not ensure that it was evaluating contractor charges  consistently and appropriately before billing those charges to  licensees. In 2015, NRC provided training to staff who manage  contracts, which, according to NRC officials, resulted in an immediate  decrease in associated billing errors. NRC also revised its guidance to  clarify responsibilities, procedures, and instructions for reviewing and  approving contractor invoices."], "subsections": []}, {"section_title": "Quarterly Validation", "paragraphs": ["NRC\u2019s OIG and internal reviews identified conditions that made the  quarterly validation step in the billing process challenging for staff to  perform and that led to inconsistent validation procedures among  program and regional offices. NRC has taken or plans to take the  following two actions to address these problems:  Improving validation reports. According to NRC documents, the  quarterly validation reports contained billing data for all program and  regional offices\u2014sometimes amounting to more than 4,000 pages of  data\u2014and the reports did not have the sorting functionality or  querying capability that would allow NRC staff to extract relevant  information. Staff in program and regional offices instead relied on  manually generated reports to compile information they needed.  Additionally, according to the OIG, the quarterly validation reports did  not include sufficient detail on contractor charges for NRC\u2019s staff to  properly review them. To address these problems, in 2014 NRC  started providing the quarterly validation report in electronic  spreadsheet format, which gave staff the sorting and filtering  capabilities needed to extract data relevant to their respective reviews  and eliminated the need for manually generated reports, according to  NRC staff. Further, NRC began providing validation information for  contractor charges in a separate report. The new validation report for  contractor charges has more detailed information and specific  instructions for NRC staff for verifying the accuracy of the charges.", "Standardizing the quarterly validation process. According to NRC,  the current quarterly validation process is not standardized across the  regional and program offices and there is no agency guidance to  ensure that staff in different offices conduct the process consistently.  Further, there is currently no way to ensure that an adequately trained  person in each program or regional office is conducting the validation,  according to NRC staff. To address these problems, NRC is planning  to standardize the quarterly validation process and to establish clear  roles and responsibilities for staff participating in the process. One key  change NRC is planning is to have the individual leading the work  validate the accuracy of the charges. According to NRC\u2019s planning  documents\u2014dated August 2017\u2014NRC expects to pilot the new  validation process in June 2018 and to implement it agency-wide by  October 2018."], "subsections": []}, {"section_title": "Charging for Billable Overhead Costs", "paragraphs": ["At the end of fiscal year 2012, an internal NRC audit identified  approximately $24 million in unbilled overhead hours. NRC staff  explained that the hours went unbilled because project managers and  resident inspectors charged billable overhead time to nonbillable activity  codes, rather than to the billable activity codes associated with licensees.", "According to an internal NRC review, these errors accounted for  approximately two-thirds of the billing errors identified during the quarterly  validation process. At the beginning of fiscal year 2016, NRC started  billing this overhead time as a separate fee on invoices that is calculated  as 6 percent of all NRC billable hours on an invoice, which eliminated the  billing errors related to overhead. However, NRC analyzed this billing  method again in fiscal year 2017 and determined that eliminating the  percentage charge and having staff charge their billable overhead time to  billable activity codes would be more equitable. NRC intends to  implement a new process for charging billable overhead time at the start  of fiscal year 2019. According to NRC staff, the agency has made  administrative changes to address the factors that contributed to project  managers and resident inspectors incorrectly charging overhead time in  the past."], "subsections": []}]}, {"section_title": "Licensees We Interviewed Identified Several Challenges with NRC\u2019s Billing Process, and NRC\u2019s Recent and Planned Changes May Not Fully Address Them", "paragraphs": ["Licensees we interviewed identified challenges with the amount of  information available about NRC\u2019s billable work, and NRC\u2019s recent  changes have made more information available, but some licensees are  not aware of the information. Licensees also identified challenges with  NRC\u2019s method of delivering paper invoices by mail, and although NRC\u2019s  recent and planned changes may help address these challenges, NRC\u2019s  plans are incomplete."], "subsections": [{"section_title": "Licensees Identified Challenges with the Information Available about NRC\u2019s Billable Work, and NRC Has Made More Information Available, but Some Licensees Are Not Aware of It", "paragraphs": ["Licensees we interviewed identified challenges with the amount of  information available about NRC\u2019s billable work, including challenges  related to planning and budgeting for NRC work and verifying charges on  invoices. NRC has recently implemented changes that may address  some of the challenges."], "subsections": [{"section_title": "Planning and Budgeting for NRC Work", "paragraphs": ["Licensees we interviewed identified challenges with planning for future  work and budgeting to pay future costs because NRC does not provide  certain information about the agency\u2019s billable work. Specifically, NRC  does not formally provide information on timeframes for completing  billable work, customized cost estimates for projects, or the status of  ongoing work. Eleven of the 13 licensees we interviewed indicated that  having timeframes, cost estimates, status reports, or a combination of  these would be useful. One licensee explained that when it receives an  invoice for work that NRC staff have performed, the licensee does not  know how much work remains and cannot budget for future expenses.", "This challenge may be addressed, in part, by NRC\u2019s Fees Transformation  initiative. Under this initiative, NRC began reporting on its public website  in September 2017 resource estimates for various licensing actions, such  as site permitting, design certifications, inspections, license amendments,  and license renewals, among others. These resource estimates include  the low, high, and average number of NRC staff hours billed for each  action, as well as some estimates for contractor charges for certain tasks.  These resource estimates are based on historical expenses and were  calculated using a sample of licensing and oversight actions, though they  may still be useful to licensees to help plan and budget for future NRC  costs. According to NRC\u2019s website, the agency will update most of the  resource estimates every 2 years."], "subsections": []}, {"section_title": "Verifying Charges on Invoices", "paragraphs": ["Licensees we interviewed said that they have challenges verifying  charges on their invoices because NRC\u2019s invoices do not provide enough  information on work that NRC staff or contractors perform. For NRC staff  work, invoices include the total hours charged by NRC staff for each  activity code. However, activity codes often cover broad topics rather than  specific work activities. Also, activity codes have a 120-character limit,  according to NRC staff, and NRC uses some of those characters to list  each licensee\u2019s name and other identifying information, which means that  there is limited remaining space to identify the specific work activity. Nine  of the 13 licensees we interviewed explained that more descriptive activity  codes on invoices would be helpful. One licensee said that it is difficult to  know what project it is being billed for because the activity code  descriptions are cryptic and sometimes nondescript. In addition, all 13  licensees we interviewed indicated that having NRC staff names or their  positions would be helpful in verifying the accuracy of charges. For  example, 2 of these licensees explained that they are familiar with the  NRC staff who consistently work on their projects, so they could consider  questioning charges if the invoice showed a new person working on a  project.", "Additionally, licensees said that it is difficult to verify charges on their  invoices because NRC\u2019s invoices also do not contain detailed information  on contractor charges. Invoices indicate that work was done by a  contractor and provide the total cost of the work, but they do not include  the contractor\u2019s name or describe the work performed. Five of the  licensees we interviewed said that invoices do not have enough  information about the contractor and the work performed. Additionally, 4  of these licensees stated that they cannot determine whether the  amounts charged were accurate or reasonable without more information.", "Challenges related to verifying charges may be addressed by some of  NRC\u2019s recent changes to its billing process, which include updating  invoices. NRC is updating its invoices to include (1) standardized activity  codes that have titles describing the specific work activity completed, (2)  the names of the NRC staff charging time to the licensee, and (3) the  name of the contractor that performed the work for which the licensee is  being billed. NRC staff expected to issue the updated invoices to  licensees in January 2018, after we completed our audit work. Therefore,  we could not assess licensees\u2019 satisfaction with the updated invoices.  According to a planning document for some of NRC\u2019s recent changes, the  agency intends to solicit feedback from licensees in fiscal year 2018 on  whether the updated invoices have addressed licensees\u2019 challenges.  However, NRC staff told us that they are not certain when the agency will  solicit feedback.", "In addition to updating invoices, NRC can provide supplemental  information to licensees to help them verify the accuracy of the following  charges:", "NRC staff charges: NRC created biweekly reports on staff charges  that it sends to licensees, when requested. These biweekly reports  provide more frequent cost data and include a level of detail that is not  provided on the quarterly invoices. For example, the biweekly reports  include NRC staff names and the charges, by employee, for that 2- week period. Three of the 13 licensees we interviewed that receive  the biweekly reports said that they use the reports to check the  quarterly invoice for accuracy by adding up the costs from the  biweekly reports and comparing them to the quarterly invoice. For  example, a licensee told us that if the biweekly reports and quarterly  invoice have similar totals, it does not raise any questions about the  charges.", "Contractor charges: NRC has supplemental contractor information  that it can provide to licensees. NRC receives monthly status reports  from contractors on charges that are ultimately billed to licensees on  their quarterly invoices. These monthly status reports include current  work performed and associated charges, as well as remaining work to  be performed and an estimate of future charges. In 2015, NRC  developed a process to review and provide to licensees certain  information from the monthly status reports when licensees request it.", "Although this supplemental information on staff charges and contractor  charges is available, not all licensees know it is available. Specifically, 6  of the 13 licensees we interviewed told us that the biweekly reports would  be useful, but did not know the reports are available and can be  requested. Also, 10 of the 13 licensees we interviewed told us that  detailed information on contract work would be useful, but 9 of them did  not know this information is available and can be requested.", "Not all licensees know the supplemental information is available because,  according to NRC staff in the Office of the Chief Financial Officer, the  agency has not instituted a formal process to inform all licensees of its  availability. These staff added that the agency has announced the  availability of this supplemental information at industry conferences or has  told individual licensees about it. NRC staff explained that the agency is  meeting statutory requirements for issuing invoices and provides the  supplemental information as a courtesy to licensees, but is not required to  do so. According to NRC staff in the Office of the Chief Financial Officer,  the agency has not formally notified all licensees about the availability of  this supplemental information because it is time-consuming to provide it  to licensees. These staff also said that they have found that not all  licensees may need this information. This is consistent with information  from the licensees we interviewed. For example, 2 licensees told us that  they do not need biweekly reports; one said that it operates on a fixed  annual budget, so additional information on biweekly costs would not be  useful. In contrast, NRC staff noted that licensees with more complex  invoices\u2014such as multiple sites and multiple inspections and licensing  actions\u2014may find the supplemental information useful. Standards for  Internal Control in the Federal Government explains that management  should communicate quality information externally so that external parties  can help the entity achieve its objectives and address related risks.  Furthermore, being open and transparent in communications is part of  NRC\u2019s Organizational Values, which guide every action it takes, how it  performs administrative tasks, and how it interacts with stakeholders.  Communicating to licensees about what information is available could  help improve the transparency of NRC\u2019s invoices, in accordance with the  agency\u2019s values.", "Additionally, 2 licensees told us that they requested information on work  being done by a contractor but NRC staff told them that the information  could not be provided. NRC staff in the Office of the Chief Financial  Officer acknowledged that some NRC project managers may not be  aware that licensees can request contract information because there is no  policy or guidance to instruct NRC staff on what information they can  provide or how to do so. Standards for Internal Control in the Federal  Government states that agency management should clearly document\u2014 in management directives, administrative policies, or operating manuals\u2014 the processes it uses to ensure that it is achieving its objectives. By  developing a policy and guidance for NRC staff, the agency could help  ensure that staff are aware of the agency\u2019s processes and provide quality  information consistently."], "subsections": []}]}, {"section_title": "Licensees Identified Challenges with NRC\u2019s Method for Delivering Invoices, and NRC\u2019s Recent and Planned Changes May Address These Challenges, but Its Plans Are Incomplete", "paragraphs": ["Licensees we interviewed said that NRC\u2019s method for delivering paper  invoices by mail created challenges related to the format and timeliness  of the invoice, though NRC\u2019s recent and planned changes may help  address these challenges. For example, one licensee told us that, without  the sorting and filtering capabilities of an electronic spreadsheet, this  licensee is not able to verify the accuracy of charges for specific  components of the work that NRC is doing. Another licensee told us that it  is difficult to track costs of projects to completion without an electronic  spreadsheet of charges. NRC now provides biweekly reports in an  electronic spreadsheet format, which may help address the challenges  these licensees cited. However, as discussed above, NRC does not  provide these biweekly reports unless they are requested, and some  licensees do not know that they are available.", "Licensees also cited challenges with the timeliness of invoices they  receive via mail. For example, 2 licensees stated that, with invoices taking  up to 10 days to arrive in the mail, licensees sometimes do not have  sufficient time to conduct a proper review of charges and remit payment  to NRC within the 30-day deadline. According to one licensee we  interviewed, delays in receiving the invoices have resulted in late fees. To  address the challenge of timeliness, NRC will, upon request from a  licensee, e-mail a copy of the invoice to the licensee after the hardcopy  invoice has been mailed. This practice allows the licensee to begin  reviewing its charges while waiting for the mailed copy to arrive. However,  of the 11 licensees that told us an e-mailed copy of the invoice would be  useful, 4 of them did not know this option was available.", "NRC staff said the agency intends to transition to electronic billing\u2014that  is, sending invoices in electronic format via e-mail or providing licensees  with web access to review and pay invoices. According to NRC staff, the  agency\u2019s transition to electronic billing is being done to improve efficiency  and internal controls in NRC\u2019s billing process. However, doing so may  also help address challenges that some licensees experience with the  format and timeliness of invoices. For example, 11 of the 13 licensees we  interviewed affirmed that receiving electronic invoices or periodic  statements of charges electronically would be beneficial.", "In October 2016, NRC\u2019s Commission directed NRC staff to examine  opportunities to accelerate the transition to an electronic billing system.  The agency has indicated its intent to complete the planning phase by  October 2017 and fully implement a new system by October 2019.  However, according to NRC staff, the planning phase was not completed  because the agency needed to fully implement the recent changes to its  billing process before planning for the transition to electronic billing. As a  result, the agency has not yet developed any planning documents to help  ensure that it meets its deadlines, achieves its goal of increasing  efficiency, or addresses licensees\u2019 challenges. NRC staff in the Office of  the Chief Financial Officer said that they recognize there could be delays  in planning, but still expect to implement electronic billing by October  2019.", "We have previously found that federal information technology projects too  frequently incur cost overruns and schedule slippages, but that proper  planning\u2014including incorporating best practices for project planning and  scheduling\u2014may help mitigate these effects. The Project Management  Institute\u2019s A Guide to the Project Management Body of Knowledge  identifies standards related to project management processes, including  project planning. In particular, the guide explains that the project plan is  a comprehensive document that defines the basis of all project work and  describes how the project will be executed, monitored, and controlled.  The project plan integrates and consolidates plans for project  components, such as plans for managing the project\u2019s scope, schedule,  cost, quality, and risk, among others. Among other things, the project  management plan may also include requirements and techniques for  communication among stakeholders and key reviews by management. By  developing a project management plan that is consistent with best  practices, NRC would have more reasonable assurance that it is better  managing its transition to electronic billing.", "Furthermore, Standards for Internal Control in the Federal Government  also states that, in deciding what information is required to achieve  objectives, management should consider the needs of both internal and  external users. Additionally, we have previously identified common factors  critical to successful information technology acquisitions. Among these  factors are (1) involving end users and stakeholders in developing  requirements and (2) including end users in testing of system functionality  prior to formal end user acceptance testing. As NRC develops a project  management plan, by involving licensees in developing system  capabilities for electronic billing, which includes soliciting and considering  licensees\u2019 information needs, the agency would have better assurance of  a successful transition to electronic billing.", "Additionally, Standards for Internal Control in the Federal Government  states that management should design control activities to achieve  objectives. Control activities may include establishing performance measures and indicators and management reviews that compare actual  performance to planned or expected results and analyze significant  differences. As NRC develops a project management plan, including  steps to assess the results of implementing electronic billing, which  includes comparing actual performance of the new electronic billing  system to planned results, would provide the agency more reasonable  assurance that the project meets desired outcomes."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["NRC has recently implemented or plans to implement a number of  changes to its billing process that\u2014if implemented as intended\u2014could  address challenges that licensees identified in our interviews. However,  additional steps could enhance NRC\u2019s efforts to improve its billing  process. Licensees told us that they could use more detailed information,  more timely information, and information in an electronic format. NRC has  made more detailed information on staff charges available in biweekly  reports and has developed a process to provide detailed information on  contractor work, upon request from a licensee. NRC is also providing  invoices in electronic format to some licensees, when requested.  However, some licensees that would find the information on staff and  contractor charges useful do not know that it is available, and some NRC  staff are not aware that they can provide it or how to do so. Until NRC  communicates to all licensees about what information is available and  develops a policy and guidance for agency staff, the agency cannot  ensure that it is providing quality information consistently.", "Further, NRC intends to take additional action toward improving its billing  process and invoices by transitioning to electronic billing. As NRC moves  forward with this project, developing a project management plan that is  consistent with best practices, to include establishing plans for the  project\u2019s schedule and cost, as well as involving licensees in developing  the plan and assessing the results of implementation, will give the agency  more reasonable assurance that it is better managing its transition to  electronic billing and could help ensure that the project meets desired  outcomes."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to NRC:  The Chief Financial Officer of NRC should formally communicate to all  licensees that supplemental billing information\u2014including biweekly  reports and monthly status reports on contractor charges\u2014is available  and how to request it. Formal communication that would reach all  licensees could include adding information to their quarterly invoices.  (Recommendation 1)", "The Chief Financial Officer of NRC should develop agency policy and  guidance for staff on what billing information related to contractor charges  NRC staff can provide to licensees and how it should be provided.  (Recommendation 2)", "As NRC plans its transition to electronic billing, the Chief Financial Officer  of NRC should develop a project plan that incorporates standards for  project management, which includes establishing plans for schedule and  cost. (Recommendation 3)", "In developing the project plan for electronic billing, the Chief Financial  Officer of NRC should include steps to involve licensees in developing  system capabilities, which includes soliciting and considering licensees\u2019  information needs. (Recommendation 4)", "In developing the project plan for electronic billing, the Chief Financial  Officer of NRC should include steps to assess the results of implementing  electronic billing, which includes comparing the actual performance to  intended outcomes. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to NRC for review and comment. NRC  provided written comments, which are reproduced in appendix I. In its  written comments, NRC agreed with our findings and recommendations.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Chairman of the Nuclear Regulatory  Commission, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or ruscof@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Nuclear Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Hilary Benedict (Assistant  Director), Wyatt R. Hundrup (Analyst in Charge), and Breanna Trexler  made key contributions to this report. Also contributing to this report were  Ellen Fried, Cindy Gilbert, Heather Keister, Benjamin Licht, Laurel Plume,  Dan C. Royer, and Barbara Timmerman."], "subsections": []}]}], "fastfact": ["The Nuclear Regulatory Commission inspects and licenses nuclear power plants and other civilian uses of radioactive material. It charges licensees to recover the cost of these efforts. In fiscal 2016, for example, it collected about $321 million in related fees.", "We reviewed NRC's billing process and found it is taking steps to address problems that earlier audits and some licensees identified, such as a paper billing process that did not allow sufficient review time.", "We recommended, among other things, that NRC follow best practices to establish electronic billing and more fully communicate to licensees what billing information is available."]}
{"id": "GAO-18-75", "url": "https://www.gao.gov/products/GAO-18-75", "title": "F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency", "published_date": "2017-10-26T00:00:00", "released_date": "2017-10-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The F-35 aircraft represents the future of tactical aviation for the U.S. military, and is DOD's most expensive weapon system, with sustainment costs alone estimated at more than $1 trillion over a 60-year life cycle. As the F-35 program approaches full-rate production, DOD is working to deliver an affordable sustainment strategy that is able to meet the needs of the military services. This strategy is being tested as DOD stands up military depots, trains personnel, and supports its first operational squadrons\u2014with plans to establish multi-year, performance-based contracts by 2020.", "The National Defense Authorization Act for fiscal year 2017 includes a provision for GAO to review the F-35 program's sustainment support structure. This report assesses (1) the status of DOD's efforts to sustain the F-35 fleet and any challenges it has faced; (2) the extent to which DOD is positioned to enter into multi-year, performance-based F-35 sustainment contracts; and (3) the progress, if any, DOD has made toward reducing F-35 sustainment costs and the extent to which costs are transparent. GAO reviewed DOD and contractor documentation, analyzed data, and interviewed relevant officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) is sustaining over 250 F-35 aircraft (F-35) and plans to triple the fleet by the end of 2021, but is facing sustainment challenges that are affecting warfighter readiness (see table). These challenges are largely the result of sustainment plans that do not fully include key requirements or aligned (timely and sufficient) funding. DOD is taking steps to address some challenges, but without more comprehensive plans and aligned funding, DOD risks being unable to fully leverage the F-35's capabilities and sustain a rapidly expanding fleet.", "DOD's plan to enter into multi-year, performance-based F-35 sustainment contracts with the prime contractor has the potential to produce costs savings and other benefits, but DOD may not be well positioned to enter into such contracts by 2020. To date, DOD has not yet achieved its desired aircraft performance under pilot (i.e., trial) performance-based agreements with the prime contractor. In addition, the level of performance DOD has contracted for is generally below what the services desire (see figure 2 for Marine Corps example). Also, the three performance metrics DOD is using to incentivize the contractor under these pilot agreements may not be the appropriate metrics to achieve desired outcomes, in part because they are not fully reflective of processes for which the contractor has control. This can make it difficult for DOD to hold the contractor accountable. Further, due to system immaturity, DOD does not have full information on F-35 sustainment costs and technical characteristics such as reliability and maintainability, which could hinder its ability to effectively negotiate performance-based contracts with the contractor by 2020. Without examining whether it has the appropriate metrics to incentivize the contractor or a full understanding of the actual costs and technical characteristics of the aircraft before entering into multi-year, performance-based contracts, DOD risks overpaying the contractor for sustainment support that does not meet warfighter requirements.", "DOD has taken actions to reduce F-35 sustainment costs, but estimated life cycle costs have increased and are not fully transparent to the military services (see figure 3). Specifically, the services do not fully understand how the costs they are being charged by the program office are linked to the capabilities they are receiving, citing unexplained cost increases and difficulty in tracking their requirements to contracts. For example, the Marine Corps received an initial funding requirement for fiscal year 2017 sustainment of $293 million, which then increased to $364 million in the execution year. This lack of transparency is due in part to insufficient communication between the program office and the services, and it puts the services in a difficult position as they consider critical trade-offs that may make F-35 sustainment more affordable. Without improving communication with the services about the costs they are being charged, the services may not be able to effectively budget for long-term sustainment."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD revise sustainment plans, re-examine metrics and ensure that it has sufficient knowledge of costs and technical characteristics before entering into performance-based contracts, and improve communication with the services about sustainment costs. DOD concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The F-35 Lightning II aircraft (F-35) represents the future of tactical  aviation for the Department of Defense (DOD), and is intended to replace  a variety of legacy fighter aircraft in the Air Force, Navy, and Marine  Corps. The F-35 is also DOD\u2019s most ambitious and costly weapon system  in history, with sustainment costs alone for the three U.S. military services  estimated at $1.12 trillion over a 60-year life cycle. These sustainment  costs provide for requirements such as a supply chain for the delivery of  spare parts, technical data to perform maintenance, engineering support,  and other functions critical to support the fleet. The sustainment contract  signed in fiscal year 2017 to support such requirements amounted to  almost $1.1 billion. Because DOD has pursued a highly concurrent  acquisition strategy for the F-35 with significant overlap among  development, testing, and manufacturing activities, it must stretch its  resources to meet the needs of continued system development and  production while at the same time sustaining the more than 250 aircraft it  has already fielded. As the F-35 program approaches planned milestones  such as operational testing in 2018 and full-rate production in 2019, DOD  is working to deliver a sustainment strategy that will be both affordable  and able to meet the needs of the military services, its international  partners, and the nearly 3,200 F-35 aircraft expected to be fielded  globally over the life cycle of the program. This strategy is now being  tested as DOD stands up military depots, trains personnel, and supports  the first three operational F-35 squadrons, with an eye toward  establishing multi-year, performance-based contracts with the prime  contractor and rapidly expanding its fleet.", "In 2014, we reported that annual F-35 operating and support costs were  estimated to be considerably higher than the combined annual costs of  several legacy aircraft, and that while DOD had begun some cost-savings  efforts and established sustainment affordability targets, DOD did not use  the military services\u2019 budgets to set these targets. In 2016, we found that  DOD faced risks that could affect the F-35\u2019s Autonomic Logistics  Information System (ALIS)\u2014a complex system supporting operations,  mission planning, supply-chain management, maintenance, and other  processes. We recommended that DOD develop affordability constraints  linked to the military services\u2019 budgets, develop a plan to address ALIS  risks, and improve its sustainment cost estimates, among other things.  The department generally concurred with our recommendations, and has  taken some actions in response. See the Related GAO Products page at  the end of this report for a list of our previous F-35 products.", "The National Defense Authorization Act for Fiscal Year 2017 includes a  provision for us to review the sustainment support structure of the F-35  program. This report assesses (1) the status of DOD\u2019s efforts to sustain  the F-35 fleet and any challenges it has faced; (2) the extent to which  DOD is positioned to enter into multi-year performance-based F-35  sustainment contracts; and (3) the progress, if any, DOD has made  toward reducing F-35 sustainment costs, and the extent to which costs  are transparent to the military services.", "In support of these objectives, we gathered various data related to F-35  sustainment, such as supply chain and repair data and aircraft  performance data. To determine the reliability of these data, we collected  information on how the data were collected, managed, and used through  a questionnaire and interviews with relevant DOD officials and the prime  contractor. In our assessment, we identified some limitations in the way  that certain data are collected and reported, such as data related to  aircraft performance, aircraft that are not mission-capable due to supply  issues, and parts cannibalization rates that could potentially result in  inaccuracies. However, these data come from the program\u2019s data  systems of record, and are the same data used by the program office and  prime contractor to monitor the health of the supply chain and assess  aircraft performance against contract requirements and program  objectives. As such, they are the best source of data available to provide  information on the progress and challenges within the program. We  determined that the data presented in our findings were sufficiently  reliable for how we reported them. Specifically, the parts cannibalization  rates that we reported are consistent with the trends observed across  other key data elements within the program, and with the testimonial  evidence provided to us by the units with whom we met during our review,  and they are sufficiently reliable to report as a data trend relative to  program objectives. All other performance data presented in our report  are sufficiently reliable to present as specific data points, in order to  describe the status of sustainment requirements and measured aircraft  performance across key metrics as reported by the prime contractor and  DOD.", "To assess the status of DOD\u2019s efforts to sustain the F-35 fleet and any  challenges it has faced, we reviewed DOD and contractor plans,  briefings, and schedules to determine the current status of key  requirements and decision points necessary to establish F-35  sustainment capabilities and compared actual data about F-35 repair and  supply chain capabilities with DOD\u2019s objectives for these capabilities to  identify areas of challenge for the program. Specifically, we obtained data  on aircraft that were not mission-capable due to supply issues from  January 2017 through August 7, 2017, and on average repair times as of  May 2017, in order to provide the most recently available information  about the health of the supply chain. As discussed above, we determined  that these data were sufficiently reliable to present as specific data points.  In addition, we identified key acquisition program management practices  that can improve program outcomes if implemented, and we assessed  DOD\u2019s sustainment planning efforts against these criteria.", "To assess the extent to which DOD is positioned to enter into multi-year  performance-based F-35 sustainment contracts, we reviewed  documentation related to DOD\u2019s pilot\u2014or trial\u2014 performance-based  agreements for F-35 sustainment, reviewed performance management  guidance and processes, and interviewed officials to determine how  performance data were being collected and assessed. We also obtained  aircraft performance data from the Sustainment Performance  Management System for the 2016 pilot performance-based agreement  (March 2016 \u2013 December 2016) and the 2017 pilot performance-based  agreement (March 2017\u2013June 2017) to the extent available at the time  we completed our audit work. These time periods are the only time  periods for which the program office has assessed contractor  performance under these pilot arrangements. As discussed above, we  determined that these data were sufficiently reliable to present as specific  data points. In addition, we reviewed aircraft maturity, reliability, and  maintainability data, reviewed documentation related to cost visibility  issues, and spoke to relevant officials to determine DOD\u2019s level of  understanding of the costs and technical characteristics that will affect  future sustainment support. Further, we reviewed DOD guidance and best  practices to identify attributes of ideal performance metrics and effective  performance-based agreements, and we used those attributes as a basis  for determining whether DOD has the appropriate metrics to achieve  desired outcomes, and the necessary information to effectively negotiate  multi-year, fixed-price, performance-based contracts with the prime  contractor by 2020, as planned.", "To assess the progress, if any, DOD has made toward reducing F-35  sustainment costs and the extent to which costs are transparent to the  military services, we reviewed documentation related to cost-reduction  efforts, sustainment contracts, F-35 cost-sharing rules, and budget  documentation from both the program office and the military services. We  also reviewed F-35 Joint Program Office sustainment cost estimates from  fiscal year 2012 through fiscal year 2016 in order to identify changes  made to the estimate since the program\u2019s sustainment cost baseline was   established in 2012. The fiscal year 2016 sustainment cost estimate is the  most current cost estimate conducted by the program office. In addition,  we interviewed relevant officials from the program office and military  services to discuss how the program office informs the military services of  F-35 sustainment costs, and the degree to which the services understand  these costs and the sustainment capabilities provided. We compared this  information with program guidance, and with key operating principles for  programs that involve multiple government customers identified in our  prior work, in order to assess the transparency of F-35 sustainment costs  for the military services. Appendix I describes our objectives, scope, and  methodology in greater detail, including more information about our data  reliability assessment and a complete list of the organizations with whom  we met during this review.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The F-35 Lightning II program, also known as the Joint Strike Fighter  program, is a joint, multinational acquisition intended to develop and field  a family of next-generation strike fighter aircraft for the U.S. Air Force,  Navy, and Marine Corps (hereinafter referred to as the services), eight  international partners, and foreign military sales customers. There are  three F-35 variants and each will be a multi-role, stealthy strike aircraft  replacement for or complement to legacy fighter aircraft, as seen in   figure 1."], "subsections": [{"section_title": "F-35 Milestones and Stakeholders", "paragraphs": ["DOD initiated the F-35 program in October 2001, and it is nearing the end  of system development and preparing for operational testing. DOD has  also been concurrently fielding and operating a growing fleet of aircraft as  part of low-rate initial production. As of August 2017, 253 aircraft have  been fielded and are flying from nine locations in the United States and  three international locations. The Marine Corps and Air Force declared  initial operational capability in 2015 and 2016, respectively, and the Navy  is scheduled to declare initial operational capability in 2018. In 2019,  DOD plans to begin full-rate production of the aircraft. See figure 2 for a  timeline of major events and anticipated fleet growth in the F-35 program.", "By full-rate production, DOD would generally be required to establish  adequate sustainment and support systems for the F-35. Per DOD  guidance for weapon system acquisitions, these sustainment and support  systems should be defined in a support concept that is incorporated into a  sustainment strategy. For the F-35, this concept should comprise the  necessary plans to conduct operations, maintenance, and sustainment  throughout the system\u2019s life cycle, with the F-35 Life Cycle Sustainment  Plan serving as the principal document governing F-35 sustainment.  According to F-35 operational requirements, this concept must provide  warfighting and peacetime capability with the lowest cost of ownership,  and all variants must be able to deploy rapidly, sustain high mission  reliability, and sustain a high sortie-generation rate.", "Sustainment for the F-35 aircraft is a large and complex undertaking with  many stakeholders. The F-35 Joint Program Office is responsible for  managing and overseeing the support functions required to field and  maintain the readiness and operational capability of the F-35 aircraft  across the enterprise. The F-35 program currently relies heavily on  contractors to provide sustainment support and has two product support  integrators. As the product support integrator for the aircraft system,  Lockheed Martin is charged with integrating sustainment support for the  system, including that for the F-35 supply chain, depot maintenance, and  pilot and maintainer training, as well as providing engineering and  technical support. Currently, DOD is contracting for sustainment support  with Lockheed Martin largely through annual contracts, and according to  F-35 program officials, plans to transition to 5-year, fixed-price,  performance-based sustainment contracts in 2020.", "DOD has established a Hybrid Product Support Integrator organization\u2014 a collaboration of government and contractor organizations tasked with  managing product support to meet the F-35 strategy and performance  outcomes. This organization was initially established in 2016 as a part of  the F-35 Joint Program Office, and is expected to be fully implemented by  2019. According to program officials, the establishment of the Hybrid  Product Support Integrator is an acknowledgement that DOD needs to  take a more significant role in providing sustainment support for the F-35.  In addition, the U.S. Air Force, Navy, and Marine Corps have each  established an F-35 integration office or cell focused on how the services  will operate and afford the F-35, among other things."], "subsections": []}, {"section_title": "The F-35 Global Support Solution", "paragraphs": ["DOD is planning to meet the sustainment requirements of its F-35  customers by providing a common, global support solution. As part of this  common solution, participants share critical aspects of sustainment  support, some of which are discussed below, and which are in various  stages of implementation to support the growing fleet.", "Depot maintenance: The F-35 sustainment strategy has a two-level  maintenance concept, consisting of organizational-level maintenance  performed by squadron-level personnel, and depot-level maintenance.  Depot-level maintenance includes structural repair, software  upgrades, engine system overhaul and repair, component repair, and  other activities that require specialized skills, facilities, or tooling to  conduct the repairs. DOD is establishing modification and repair  capabilities at six military service depots in the United States and  additional repair facilities overseas.", "Supply chain: All F-35 customers, including the U.S. military services  and international partners, share a global pool of spare parts, which is  managed by Lockheed Martin. According to program officials, these  pooled assets are unique to the F-35 and include consumable and  repairable spare parts for the airframe, support equipment, pilot flight  equipment, and training devices. The services and international  partners can also purchase packages of spare parts that are tailored  to their individual deployment and shipboard operational  requirements.", "Training: Currently, the F-35 program is conducting pilot and  maintainer training at Eglin Air Force Base, Luke Air Force Base,  Marine Corps Air Station Beaufort, and Naval Air Station Lemoore.  The F-35 program\u2019s training system includes pilot and maintenance  training devices and courseware that are tailored to multiple variants  and services.", "Infrastructure: F-35 customers are responsible for setting up their  own F-35 facilities\u2014hangars, training facilities, and depots, among  other things\u2014and the program office works with them in a supporting  role. Sustainment infrastructure requirements to support the F-35 are  defined in a series of facility requirement documents that are updated  and provided to all customers annually."], "subsections": []}, {"section_title": "F-35 Costs and Technical Characteristics", "paragraphs": ["Many of the costs of F-35 sustainment\u2014also known as operating and  support costs\u2014are allocated across the military services and international  partners based upon a number of factors, including the number of aircraft  that each customer owns and their operational requirements. Such  operating and support costs consist of sustainment costs incurred from  the initial system deployment through the end-of-system operations, and  they include all costs of operating, maintaining, and supporting a fielded  system. The Office of the Director for Cost Assessment and Program  Evaluation develops independent cost estimates for F-35 operating and  support costs, which are reported in DOD\u2019s annual F-35 Selected  Acquisition Report as the official operating and support cost estimates for  the program. Additionally, the program office develops an annual estimate  for the operating and support costs of maintaining and supporting the F- 35 over its 60-year life cycle, which can differ from the estimate  conducted by the Office of the Director for Cost Assessment and Program  Evaluation, due in part to differences in assumptions between the two  estimates. Additionally, there are numerous factors that will affect life- cycle operating and support costs for the F-35, including aspects of the F- 35 program that are still maturing. These include the following:", "Reliability and maintainability: Reliability and maintainability data  measure aircraft performance to determine how often the aircraft  experiences failures and how much time it takes to repair those  failures. These data are monitored through a series of metrics that  measure the intended performance of the aircraft in meeting its  requirements as it progresses toward maturity at a cumulative  200,000 flight hours, with at least 75,000 flight hours each for the F- 35A and F-35B, and 50,000 flight hours for the F-35C. Reliability and  maintainability drive sortie-generation rates and the size of the  logistics footprint for the F-35, as well as inform program operating  and support costs, which are tied to the performance of the system at  maturity.", "Technical data: Technical data for weapon systems include the  details necessary to ensure the adequacy of performance, as well as  instruction, maintenance, and other actions needed to support  weapon systems. Technical data constitute an important part of a  weapon system program, such as the F-35. Identifying technical data  needs, costs, and ownership are essential for DOD to effectively  consider and maximize competition for future product support of F-35  sustainment."], "subsections": []}]}, {"section_title": "DOD Is Currently Sustaining More Than 250 F-35 Aircraft, but Insufficient Planning Has Led to Significant Challenges That Pose Risk to Its Growing Fleet", "paragraphs": [], "subsections": [{"section_title": "DOD Is Sustaining More Than 250 F-35 Aircraft, but Faces Significant Challenges That Are Affecting Readiness", "paragraphs": ["DOD has currently fielded and is sustaining more than 250 F-35 aircraft,  and the number is expected to triple by the end of 2021 and keep growing  as the program moves into full-rate production. DOD has also supported  significant F-35 milestones such as the initial operational capability  declarations of the Marine Corps and Air Force in 2015 and 2016,  respectively, and the transfer of an operational squadron to Japan in early  2017. As a fifth generation aircraft, the F-35 is intended to improve  situational awareness through sensor fusion and will enhance the ability  of legacy aircraft to conduct various missions while flying together with  it. The F-35 was also designed with increased stealth capabilities, the  capacity to carry weapons internally instead of externally to reduce drag  and enable stealth, and advanced sensor systems. In particular, the  aircraft is designed to execute missions in high-threat areas, requiring  fewer support assets and possessing a greater survivability rate as  compared with fourth generation aircraft such as the Air Force\u2019s F-16s  and the Navy\u2019s and Marine Corps\u2019 F/A-18s. Squadron officials at multiple  F-35 locations that we visited expressed enthusiasm for the unique  capabilities of the aircraft, such as the increased situational awareness  that the F-35 provides pilots relative to legacy aircraft and the relative  ease with which pilots are able to learn how to employ its tactical  capabilities. They also noted improvement in the performance of the  aircraft as it has been continuously developed.", "However, DOD is facing several key sustainment challenges that pose  risks to its ability to meet current and future warfighter readiness  requirements, and these could limit the ability of the military services to  fully leverage the capabilities of the aircraft. Table 1 summarizes these  challenges, which are largely attributable to insufficient planning, as  discussed in more detail below.", "Repair capacity: DOD does not have enough capacity to repair F-35  aircraft parts because the establishment of repair capabilities at the  military depots is 6 years behind schedule. There are many different  components of the F-35 aircraft that DOD plans to repair at the six military  depots within the United States, as documented in an F-35 Depot  Implementation Plan. Repair capabilities at the military depots were  originally planned to be completed by 2016, but program officials told us  that some capabilities have now been delayed until 2022. Program  officials in part attributed these delays to the military services not  providing enough funding for depot requirements; however, service  officials told us that the program office did not clearly identify some depot  requirements in a timely manner necessary for the services to fund those  requirements.", "In addition, DOD did not plan for and fund the stocks of material needed  to repair parts at the depots\u2014referred to as \u201clay-in material.\u201d Program  officials said that they had incorrectly assumed that lay-in material would  be included as part of the contracts for establishing repair capabilities at  the military depots. As a result, DOD has had to fund and negotiate  additional contracts with the prime contractor for the lay-in material.  Currently, moreover, due in part to the late identification of requirements  and funding, the lay-in material to support repairs for more than a dozen  different aircraft components is not expected to be delivered to the depots  until months\u2014or in some cases, years\u2014after the technical capabilities to  conduct the repairs have been established. As seen in figure 3, for certain  F-35 parts, these delays have resulted in repair times that are significantly  longer than those the program had projected, leading to repair backlogs.  According to prime contractor officials, because of these capacity  shortfalls, DOD is currently relying on the original equipment  manufacturers to repair parts, but the capacity of these manufacturers is  already strained by requirements to produce the parts needed to support  aircraft production.", "Program officials said that establishing the depot repair capabilities is now  the F-35 Joint Program Office Product Support Manager\u2019s top priority.  As such, the program is working to implement several different initiatives  to accelerate the development of repair capabilities, including trying to  better align lay-in material requirements with the activation of repair  capabilities, prioritizing the establishment of certain repair capabilities to  align with the readiness requirements of the fleet, and looking at options  to decrease the amount of time that it takes to establish repair capabilities  for each component line. However, program officials said that plans are  still preliminary, and that they are unsure how much funding will be  available to implement these initiatives.", "Spare parts: DOD is experiencing shortages of spare parts in the F-35  supply chain, resulting in lower than expected readiness. From January  through August 7, 2017, the prime contractor reported that the average  percentage of time that F-35 aircraft were unable to fly because they were  awaiting parts was about 22 percent\u2014more than double that of DOD\u2019s  objective of 10 percent, as seen in figure 4.", "According to program office and contractor officials, the shortages of  spare parts are due in part to the delays in the establishment of depot  repair capabilities, incomplete plans and funding that did not account for  the long lead time for parts, insufficient amounts of service funding, and  poor reliability of certain parts. For instance, 19 percent of F-35 parts  have a lead time of more than 2 years. The 2 to 3 years that it takes to  procure these parts includes both a lengthy period for contracting and a  period for the production of the parts once contracts have been  established. However, program office and military service officials told us  that the timing of prior service funding authorizations and contract awards  did not account for this long lead time to procure parts, resulting in parts  that were late to meet the military services\u2019 operational needs. According  to DOD officials, the parts within the F-35 global pool of spare parts are  unique to the F-35 system and generally cannot be obtained from other  sources.", "The program office and prime contractor have identified steps needed to  increase the availability of spare parts to prevent these challenges from  worsening as the number of aircraft in the fleet grows, such as improving  the production and repair capacity of suppliers and aligning the timing of  the military services\u2019 funding authorizations with the required lead time for  parts. However, according to DOD documentation, planned funding and  contract awards for fiscal years 2018 and 2019 are still forecasted to be  later than needed to meet demand for new parts, and the program\u2019s  ability to accelerate this timeline is uncertain. Thus, parts shortages are  expected to continue for several years and may worsen if DOD and the  contractor are not able to fully implement these actions."], "subsections": [{"section_title": "DOD Has Not Fully Defined Future Technical Data Needs, and Some Technical Data Are Immature", "paragraphs": ["DOD has not fully defined all of the technical data it needs from the prime  contractor to maximize the potential for future competition of contracts  among providers for sustainment requirements, nor does it know the  associated costs of these data. In 2014, we recommended that the  program office develop a long-term Intellectual Property Strategy to  include the identification of all critical technical data needs and their  associated costs. As of September 2017, the program has taken some  steps to develop an Intellectual Property Strategy, but it has not identified  all critical needs and their associated costs. Program officials said that  they are currently working with the prime contractor to develop a list of  technical data requirements. Program officials said that once this effort is  complete, DOD will be in position to begin prioritizing and negotiating for  specific data rights that the program needs to facilitate its sustainment  plans. Officials acknowledged, however, that there is risk associated with  efforts to obtain required technical data rights for F-35 sustainment to  promote increased competition because the contractors may not be  willing to provide these rights, or the costs may be too high. They also  told us that the program office deals with such risks on a case-by-case  basis, and that if a data right needed by the program office to implement  the sustainment strategy cannot be obtained, then plans will have to be  adjusted accordingly. Program officials said that, in some cases, they will  likely have to make legal claims against the prime contractor\u2019s technical  data rights assertions, based on government funding of such products.", "Moreover, the technical data needed to repair F-35 aircraft, such as  maintenance instructions, are still not fully developed. According to  contractor officials, the contractor and DOD have developed and verified  more than 84 percent of the unit-level technical data needed to address  known maintenance requirements, such as instructions for how to replace  specific parts on the aircraft. However, according to program and  contractor officials, the technical data needed for maintainers to  troubleshoot issues with the aircraft are lagging behind planned  development. Such data are intended to help maintainers when the  source of a maintenance issue is unclear, by providing guidance on the  actions needed to isolate the most likely problems. In the absence of  troubleshooting instructions, maintainers sometimes incorrectly identify  what needs to be fixed on the aircraft. For instance, officials from one  squadron said that the troubleshooting data are sometimes insufficient to  pinpoint the issue with the aircraft, which can lead the maintainer to  remove a component, order a new part from the contractor, and  subsequently find that the new part does not fix the issue\u2014a scenario  that is both inefficient and costly. According to program and contractor  officials, the immaturity of technical data for troubleshooting maintenance  issues could be contributing to the high rate of parts that the F-35  squadrons are sending to the depots for repair that do not actually need  to be repaired, resulting in inefficiencies at the depots. For example,  officials at one depot we visited said that 68 percent of the parts they  receive from F-35 squadrons do not need to be repaired and that the  process for testing such parts usually takes nearly 10 hours to complete,  which is both inefficient and can add to repair backlogs."], "subsections": []}, {"section_title": "DOD Has Not Developed a Plan for Intermediate-level Maintenance Capabilities", "paragraphs": ["The Navy and Marine Corps require intermediate-level maintenance  capabilities for shipboard deployments because it is more difficult and  time-consuming to obtain spare parts, or to send parts to the depots for  repair, when onboard a ship. DOD has been conducting analyses to  support the requirement and has recently identified the initial  intermediate-level repair capabilities that it plans to implement, including  select avionics, support equipment, and hydraulic repairs. These  decisions will trigger other requirements and related costs that must be  planned for\u2014such as for personnel, technical data, support equipment,  and updates to policies governing the maintenance of spare parts\u2014 before the capability can be implemented. For example, program officials  told us that once determinations are made about intermediate-level  maintenance, the program will have to develop a plan that specifies what  technical data rights are needed, and when, to facilitate intermediate-level  maintenance, and will then have to negotiate with the contractor to obtain  those technical data rights. In August 2017, the program office identified  new funding requirements for DOD to implement initial intermediate-level  maintenance capabilities for fiscal years 2019 through 2023. However,  these requirements are not currently funded in DOD\u2019s budget, leaving a  projected shortfall of $267 million over this time period.", "Because a funded plan for intermediate-level maintenance is not yet in  place, the Marine Corps will not have the desired level of intermediate- level maintenance capabilities for its initial shipboard deployments  planned for 2018. Accordingly, it will be highly reliant on the currently  challenged F-35 supply chain and depot repair capabilities for support,  and will likely experience degraded readiness. In addition, without such a  plan, it is unclear whether such capabilities will be available to support the  Navy\u2019s first planned F-35 shipboard deployments in 2021."], "subsections": []}, {"section_title": "DOD Faces Delays in Required ALIS Development, and Its Development Plan Is Not Fully Funded", "paragraphs": ["Central to F-35 sustainment is the Autonomic Logistics Information  System (ALIS)\u2014a complex system supporting operations, mission  planning, supply-chain management, maintenance, and other processes.  However, ALIS is in continuous development, with planned updates that  support required sustainment capabilities for years to come. For example,  future versions of ALIS are intended to improve data collection and  reporting, and to provide capabilities to support intermediate-level  maintenance. Historically, ALIS has experienced delays. For instance, an  ALIS version that was initially planned to be completed for testing in 2010,  is now being tested in 2017. In 2016 we found that DOD did not have a  plan to ensure that ALIS was fully functional as key program milestones  approached, and we recommended that DOD develop a plan to prioritize  and address ALIS risks. Since that time, the program office has  implemented this recommendation through the development of an ALIS  Technical Roadmap to plan for these requirements. However, emerging  requirements, such as to address cyber security vulnerabilities and  system obsolescence, will likely lead to changes in the Roadmap that  could further delay the date when these sustainment capabilities are  provided. Furthermore, the requirements and associated timelines for  ALIS development that are identified in this plan may not be realistic  because the requirements are not fully funded in upcoming service  budgets, resulting in additional risks to the program\u2019s plan."], "subsections": []}]}, {"section_title": "DOD\u2019s Sustainment Plans Do Not Fully Include Key Requirements, Associated Timelines, and Aligned Funding, but Some Initial Steps Are Being Taken", "paragraphs": ["As discussed above, DOD\u2019s challenges are due in large part to  sustainment plans that do not fully include key requirements, associated  timelines, and aligned (that is, timely and sufficient) funding to support  those requirements. F-35 program stakeholders have long recognized the  program\u2019s need for more comprehensive and detailed planning  documents to identify the key activities and decision points necessary to  establish sustainment capabilities and guide the F-35 sustainment  strategy. For instance, in 2009 an Independent Logistics Assessment  team recommended, among other things, that DOD develop a program- wide integrated master schedule that includes key governmental activities  and tasks necessary to establish F-35 logistics capabilities required  through full-rate production, but the program did not develop such a tool.  In 2014 the program office identified the need to establish a road map  with clear decision points to prepare the F-35 enterprise for long-term  sustainment. Finally, in December 2016 the Under Secretary of Defense  for Acquisition, Technology, and Logistics directed the program office to  submit an integrated master schedule for the deployment of global F-35  sustainment capabilities by January 2017, which is not yet completed.", "Program officials said that they are now developing an integrated master  schedule, and that this schedule will incorporate major sustainment  milestones required to implement the program\u2019s sustainment strategy.  DOD is also updating sustainment strategy documents, including the F-35  Life Cycle Sustainment Plan and Acquisition Strategy, to include an  Intellectual Property Strategy. However, the timeframes for completion of  these documents are uncertain, in part due to ongoing DOD efforts to  refine its follow-on modernization plans for the F-35, which will affect the sustainment plans. Thus, the scope and the degree to which these  updates will address the challenges that DOD is facing are unclear. For  instance, an Office of the Secretary of Defense official charged with  reviewing these plans said that there is still significant work to be done by  the military services and the program office to identify and align  sustainment requirements with funding in order to support the fiscal year  2019 budget process, which will ultimately be necessary to inform these  plans. Military service headquarters officials told us that, as customers of  the program, they need to better understand from the program office  when sustainment capabilities\u2014such as military depots\u2014will be  established, and when associated funding is needed to support that  schedule. In August 2017, the program office identified some specific  funding requirements for the military services, beyond what they have  already budgeted for F-35 sustainment, which are needed to address  some of the sustainment challenges discussed above\u2014including spare  parts shortages, gaps in depot lay-in material, and ALIS development.  While this is a positive step by the program office, it also demonstrates  that DOD faces a funding shortage of approximately $1.5 billion between  fiscal years 2018 and 2023 for F-35 sustainment, as well as significant  readiness risks associated with this lack of alignment between  requirements and funding.", "The different elements of F-35 sustainment support are highly integrated,  and challenges or delays in one area can significantly affect outcomes in  other areas. For example, the delays in established repair capacity at the  depots constitute one of the reasons why the program has an insufficient  supply of spare parts. Procurement decisions can also significantly affect  sustainment outcomes. The Air Force and Marine Corps are considering  an acceleration of their purchases of F-35 aircraft, thus creating more  demand on the already strained sustainment enterprise, for which DOD  has not always provided timely funding (for example, funding for spare  parts).", "Our prior work on acquisition program management has identified a  number of key program management practices that can improve program  outcomes if implemented, such as clearly establishing well-defined  requirements, developing realistic cost estimates and schedules, and  securing stable funding that matches resources to requirements. As  DOD prepares for the growth of the fleet and attempts to address existing  sustainment challenges, its effort to develop an integrated master  schedule is a positive step. Such a schedule, if comprehensive and  realistic, could be a critical tool to guide the revision of DOD\u2019s  sustainment plans to better ensure that the plans that form the basis of its  strategy are sufficient to meet warfighter requirements. Ultimately,  however, without plans that include all key requirements and decision  points with aligned funding, the F-35 program will likely face continual  challenges in providing timely sustainment support to the warfighter, and  may have difficulties in fully implementing its F-35 sustainment strategy in  time to meet the needs of a growing fleet. Further, as the services  consider accelerating their purchases of F-35 aircraft, DOD risks  purchasing aircraft that the program and the services are not ready to  sustain."], "subsections": []}]}, {"section_title": "DOD Is Testing Agreements with the Contractor but May Not Be Well Positioned to Enter into Multi-year, Performance-based Sustainment Contracts by 2020", "paragraphs": [], "subsections": [{"section_title": "DOD Is Testing Performance-based Agreements to Incentivize the Prime Contractor", "paragraphs": ["DOD is conducting pilot\u2014or trial\u2014performance-based agreements with  the prime contractor as a part of its annual cost-reimbursable sustainment  contracts, in order to test metrics and performance-management  processes. According to F-35 program officials, DOD plans to transition  to multi-year, fixed-price, performance-based contracts in fiscal year  2020. Performance-based logistics is a support strategy that emphasizes  performance in contracts, rather than delivery of goods and services, and  payment is related to the degree to which performance meets contracted  standards. In 2012, the Under Secretary of Defense for Acquisition,  Technology, and Logistics directed an increased use of performance- based logistics agreements, stating that such agreements can yield  significant cost and performance benefits if effectively implemented.", "DOD has developed a series of performance objectives to provide insight  into the level of sustainment support that the prime contractor is providing  to the military services. From these objectives, DOD has selected three  system-level metrics, listed below, to incentivize the contractor under the  pilot performance-based agreements:", "Air Vehicle Availability (AVA): measures the percentage of total  time during which aircraft are safe to fly, available for use, and able to  perform at least one tasked mission;", "Full Mission Capable (FMC): measures the percentage of time  during which aircraft are fully capable of accomplishing all tasked  missions;", "Mission Effectiveness (ME): measures the extent to which the F-35  components and mission systems affected the successful completion  of each assigned mission.", "In these pilot agreements, DOD and the contractor together negotiated  minimum and objective targets against which the performance of the  aircraft\u2014and the support provided by the contractor to enable that  performance\u2014is measured. For fiscal years 2016 and 2017, these  agreements were 1-year, cost-reimbursable contracts with potential incentives for the contractor based on assessed performance of the  aircraft across the three system-level metrics. According to F-35  program officials and documentation we reviewed, DOD plans to  establish a 2-year contract for fiscal years 2018 through 2019, with select  elements that are performance-based, in preparation to transition to a 5- year, fixed-price, performance-based contract for the 2020\u20142024 time  period. Program officials said that this 5-year contract is planned to  include 2 base years and 3 pre-negotiated option years."], "subsections": []}, {"section_title": "DOD Has Not Achieved Most of Its Performance Targets for the Pilot Agreements and May Not Be Using the Appropriate Metrics to Achieve Desired Outcomes", "paragraphs": [], "subsections": [{"section_title": "DOD Has Not Achieved Most of Its Performance Targets", "paragraphs": ["DOD did not achieve most of the performance targets that it set for the  pilot performance-based agreements for the 2016 sustainment contract.  Subsequently, DOD negotiated lower targets for some metrics in the 2017  sustainment contract. As of June 2017, DOD was meeting several of the  minimum targets established in the 2017 sustainment contract, but none  of the objective targets. According to program and contractor officials, the  failure to meet these targets is largely due to the sustainment challenges  that we discussed previously in this report. For example, the limited  availability of spare parts within the F-35 supply chain is contributing to  lower than expected AVA and FMC rates. Figure 5 below shows the  actual fleet performance results for the 2016 and 2017 (through June  2017) pilot performance-based agreements. The 2016 pilot performance- based agreement began in March 2016 and spanned a 10-month period,  through December 2016. The 2017 agreement began in March 2017, and  program officials said that it is expected to continue through February  2018.", "Furthermore, the performance targets established in the sustainment  contracts for the pilot performance-based agreements are lower than the  desired aircraft performance targets that the services have identified for  their aircraft. As part of the pilot performance-based agreements, each of  the military services has established individual agreements with the  program office that identify their respective required levels of minimum  and objective aircraft performance for their units, across key metrics.  Program officials said that while they try to meet the services\u2019  performance requirements when negotiating the contracts, the  agreements with the services are not binding. The performance targets  that have been negotiated on the sustainment contracts are generally  lower than those required by the services. For instance, the Marine Corps  established a minimum performance target for non-deployed units of 60  percent FMC aircraft for 2017, but the minimum target established in the  contract for that same metric was 14 percent. Similarly, the Air Force  identified a minimum performance target for non-deployed units of 65  percent AVA, but the minimum target established in the contract for that  same metric was 52 percent. Program officials said that the costs of  meeting the services\u2019 performance requirements would be too high given  the current supply chain challenges across the fleet. Figure 6 shows the  differences between the performance targets required by the Marine  Corps and those that DOD was able to negotiate under the pilot  performance-based agreement in 2017.", "DOD may not be using the appropriate metrics under the pilot  performance-based agreements to achieve desired outcomes. DOD  guidance states that optimal performance-based contracts use objective,  measurable, and manageable metrics that accurately assess the support  provider\u2019s performance against the delivery of targeted warfighter  outcomes. It also defines ideal metrics as those that are, among other  things: (1) reflective of processes over which the contractor has control,  and (2) able to motivate desired behavior. We found the following:", "The contractor does not have full control over the performance  outcomes for which it is paid: The system-level metrics that the  prime contractor is being assessed against are not fully reflective of  processes over which the contractor has control, because actions that  the F-35 squadrons take when maintaining or operating the aircraft  affect the metric outcomes being measured. For example, a  contractor official at one site that we visited cited an instance when a  military service maintainer towed an aircraft into a hangar and broke a  surface panel, resulting in the aircraft not being able to fly for 60 days  because there was no surface panel replacement available in the  supply chain. Thus, the contractor could be held accountable for a  lack of performance that the customer created. Conversely, to keep  aircraft flying, military service maintainers have taken actions that  mask contractor failures to provide support\u2014for example,  cannibalizing parts from other aircraft at rates significantly higher than  DOD intends, based on data provided by the prime contractor and  shown in figure 7. Because the contractor does not fully control the  outcomes for which it is being assessed, prime contractor and military  service officials said that contentious negotiations have occurred at  times about how to assign responsibility for performance. This  ultimately makes it difficult for DOD to hold the contractor  accountable. Further, one of the three system-level metrics\u2014Mission  Effectiveness\u2014is assessed by pilots subjectively after each flight.  Some pilots and service officials whom we spoke to said that different  pilots may make differing determinations about the effectiveness of  the mission, which could affect the measured performance outcomes.", "DOD has established performance review groups to review and reconcile  data in instances where the contractor does not believe that it should be  held responsible for certain metric outcomes, but this process requires  both DOD and the contractor to make subjective determinations about the  root causes of particular performance failures in order to determine  whether the contractor or the military services are to blame. Figure 8  shows how this reconciliation process can result in adjustments to the  measured performance data when assessing the level of support  provided by the contractor. Under the pilot performance-based  agreements, the reconciled data points serve as the basis for calculating  contractor incentive fees.", "Additionally, DOD is working to implement agreements that define lower- level metrics for which the military services will be held responsible, such  as defining how long it should take for maintainers to conduct  maintenance, but these agreements have not yet been fully implemented.  Ultimately, service officials told us that the complexity of these  adjudication efforts indicates that DOD may not be holding the contractor  accountable for the appropriate metrics.", "Current metrics may not motivate the desired behaviors from all  stakeholders. The current metrics may not consistently motivate the  necessary behaviors from all stakeholders to either achieve desired  warfighter outcomes or meet the current metrics on contract. For  example, DOD has established AVA as its primary metric, and it  provides greater incentive fees to the contractor for meeting the AVA  targets as compared with the other two metrics. However, Marine  Corps and Navy officials told us that FMC aircraft are more important  for operational deployments, as they represent aircraft that are ready  for war. DOD\u2019s performance-based logistics guidance states that it is  important to exercise caution when selecting a combination of metrics,  to ensure that they do not create undesirable conflicts. The  achievement of the AVA and FMC metrics may at times be in conflict  with one another. For instance, according to contractor and program  officials, an aircraft is still considered to be available if its low  observable\u2014or stealth\u2014systems are not working, but for it to be  considered a fully-mission capable aircraft, a military service would  have to ground the aircraft for several days to repair the low  observable system. Contractor officials have also expressed concern  that the metrics they are being paid for may not be as important to the  services as other factors\u2014such as achievement of flying hours or the  ability to train pilots\u2014and that this could affect whether the services  will take all necessary actions to meet the targets for which the  contractor is paid. Officials from a training unit we visited said that  they were focused on training pilots, not on achieving the metric  targets identified in the contract. This unit was able to exceed its  required flight hours to support pilot training in April 2017, even  though the performance of its aircraft fell well below desired Marine  Corps performance levels for AVA and FMC.", "Program office and contractor officials noted that pilot performance-based  agreements were put in place to gather lessons learned and ensure that  DOD has the appropriate metrics before entering into 5-year, fixed-price  contracts. However, contractor officials said that the performance review  process does not include a step to review how the metrics are driving  behaviors or to determine whether DOD has the appropriate metrics in  place, and they suggested that a more robust effort to consider lessons  learned from the pilot agreements is needed. Service officials have  suggested that incentivizing simpler metrics that focus on individual  aspects of F-35 sustainment for which the contractor has more control\u2014 such as supply chain responsiveness or depot-level repair\u2014instead of  system-level performance metrics may be more appropriate. Without  reexamining the metrics to ensure that they are objectively measurable,  reflective of processes that the contractor can control, and able to  motivate desired behaviors, DOD may not be well positioned to  accurately assess contractor performance or achieve optimal outcomes  across future performance-based sustainment contracts that will likely  cost tens of billions of dollars."], "subsections": []}]}, {"section_title": "DOD Does Not Yet Have Full Information on F-35 Sustainment Costs or Technical Aircraft Characteristics", "paragraphs": ["DOD does not yet have full information on F-35 sustainment costs or  technical characteristics such as reliability and maintainability, and this  could pose risks to its ability to effectively negotiate 5-year, fixed-price  performance-based contracts with the prime contractor by 2020. Although  DOD has fielded more than 250 aircraft, the aircraft system remains  immature. DOD has established a target for system maturity of 200,000  total flight hours, with minimum flight hours for each variant. DOD  reached 100,000 total F-35 flight hours in July 2017, and it does not  expect to reach its maturity targets for all variants until fiscal year 2024.", "Specifically, we found that DOD does not have full visibility into the actual  costs for some key sustainment requirements that are considered cost- drivers within the program, such as the actual costs of parts and repairs.  Given the immaturity of the system, DOD has relied on projected parts  reliability and pricing to formulate cost estimates, but officials said that  actual costs are needed to improve both their confidence in the estimates  and their understanding of how cost is related to performance. There is  potential for the actual costs of sustainment requirements to change  significantly from initial projections. For instance, the costs of initial spare  parts over the life cycle increased by $447 million in the program\u2019s  estimate from the 2014 estimate to the 2015 estimate, due largely to  increases in unit prices from those initially projected. According to  program officials, their understanding of actual costs is limited in part  because of the immaturity of the system. Program officials said that they  are taking steps to obtain more actual cost information as the aircraft  matures, and to determine how much repairs should cost, in order to  better position themselves for contract negotiations. However, in addition  to system immaturity, program officials said that they are experiencing  challenges in obtaining important details about existing cost data needed  to inform their cost models from the contractor, such as the costs of the  individual parts and repairs that the contractor purchases from its  suppliers.", "Further, we found that there are a number of technical aspects of the  aircraft that are immature or uncertain. While the F-35 is meeting  expectations for some measurements of reliability and maintainability,  other measurements are still lagging behind operational requirements.  For example, aircraft are experiencing failures that result in the loss of a  capability to perform a mission-essential function at more than twice the  rate expected across all variants. Mean repair times for critical  components that fail are also more than twice as long as the operational  requirements dictate. Additionally, the significant software releases  required to complete F-35 system development\u2014referred to as Block  3F\u2014are planned to be tested and released in 2017. However in April  2017 we reported that the program\u2019s schedule for completion of Block 3F  and associated testing would likely be delayed due in part to software  issues and system instability. Additionally, as of June 2017, the DOD  Office of the Director for Operational Test and Evaluation predicted that  required initial operational test and evaluation for Block 3F would likely  not begin until late 2018 or early 2019. According to operational testing  officials, such software releases can lead to different reliability and  maintainability issues than were previously known, as the aircraft  becomes capable of flying at higher speeds and altitudes. According to  these officials, there would be inherent risk in signing a fixed-price,  performance-based contract before the reliability and maintainability data  for Block 3F are more fully known, as those data will influence how much  aircraft performance should cost at maturity.", "DOD guidance states that in order for performance-based arrangements  to be effective, the government must clearly understand program  requirements, costs, and technical characteristics; and that systems  should achieve a level of maturity and design stability. Program officials  said they believe that DOD can gain sufficient knowledge of the costs and  technical characteristics of the aircraft prior to 2020, and that they will  seek to write options into the multi-year, performance-based contract if  there are still risks that need to be mitigated. However, program officials  said that the program office has not established criteria addressing the  extent of the cost and technical data that it will require prior to entering  into the planned agreements. While the program still has a few years until  that date, program officials said that the process to develop this contract  is expected to begin in late 2017. In April 2017 we reported on the risks of  moving forward with additional F-35 program development before DOD  has a full understanding of the aircraft\u2019s baseline Block 3F capabilities,  specifically citing difficulties in presenting a sound business case for  soliciting contractor proposals without such knowledge. The program  office could face similar challenges preparing for a fixed-price,  performance-based sustainment contract amid existing uncertainty.", "Without a full understanding of F-35 costs and technical characteristics at  maturity, DOD may not be well positioned to accurately determine how  much fleet performance should cost over a 5-year, fixed-price,  performance-based contract, and thus may be at risk of overpaying the  contractor while not receiving the expected level of sustainment support."], "subsections": []}]}, {"section_title": "DOD Has Taken Some Actions Aimed at Reducing F-35 Sustainment Costs, but These Costs Continue to Rise and Are Not Fully Transparent to the Military Services", "paragraphs": [], "subsections": [{"section_title": "DOD Has Undertaken Some Initiatives to Reduce Rising F-35 Sustainment Costs but Has Not Established Affordability Constraints Based on the Military Services\u2019 Budgets", "paragraphs": ["DOD has taken some actions to try to reduce estimated sustainment  costs for F-35 operating and support, which, according to the program  office\u2019s fiscal year 2016 cost estimate, are projected to cost $1.06 trillion  in then-year dollars (see figure 9 below). For example, the program  office has established a Cost War Room to identify and implement cost- reduction initiatives with the goal of reducing the program office\u2019s 2012  operating and support cost estimate by 30 percent by 2022. These  initiatives include updating assumptions about fuel usage, among others.  According to program documentation, such efforts are projected to result  in a cost avoidance of $60.7 billion. The program office also has an effort  targeted at improving reliability and maintainability of F-35 components.  As of May 2017, the program office had completed 38 improvement projects that are expected to result in $1.7 billion in operating and support  cost avoidance. However, at the same time, the projected operating and  support costs estimated by the program office have increased from fiscal  year 2012 to fiscal year 2016, due to an increase in projected flying  hours, an extension of the aircraft\u2019s life cycle from 56 to 60 years, and  refinements to the cost models, among other factors. Figure 9 shows the  increase to the program office\u2019s life cycle operating and support cost  estimate since fiscal year 2012.", "In addition, DOD has not established affordability constraints for the F-35  program that are linked to the military services\u2019 budgets, as we  recommended in September 2014. In our prior work, we found that the  program\u2019s affordability targets may not be reflective of what the services  can actually afford because it did not use the military services\u2019 budgets to  establish the targets. At that time, the annual F-35 operating and support  costs were estimated to be considerably higher than the combined annual  costs of several legacy aircraft, and according to DOD officials, the  sustainment strategy was not affordable. We recommended that DOD  establish affordability targets linked to the services\u2019 budgets, because  without such targets DOD cannot be sure whether the cost savings they  are pursuing will lead to an affordable sustainment strategy. The  department concurred with this recommendation but has not taken  specific action on it at the program level. We made this a priority  recommendation for DOD in July 2017. The Senate Armed Services  Committee also directed DOD to provide it with a plan for improving the  transparency and affordability of the F-35 sustainment strategy, to include  identifying affordability constraints linked to, and informed by, the military  services\u2019 budgets. The Marine Corps has recently taken steps to  develop budget-based affordability targets for their portion of F-35  sustainment costs. The Marine Corps identified the need to reduce  steady-state sustainment costs per aircraft by at least 20 percent through  cost modeling efforts and budget analysis, and Marine Corps officials said  they believe that such a reduction would make the program affordable for  the Marine Corps. Marine Corps officials stated that to achieve such  reductions, they are exploring options to reduce costs\u2014such as  transitioning maintenance tasks from depots to operational units, and  revising sustainment support personnel requirements\u2014in coordination  with the program office and prime contractor. The program office could  use this service target to inform the establishment of program-level  affordability constraints.", "As previously discussed, the program is experiencing sustainment  challenges due in part to some requirements not being fully funded, and  this could present a continued risk going forward if sustainment for the F- 35 is not affordable within the services\u2019 budgets. Program officials also  told us that if the services cannot fully fund sustainment requirements,  DOD will have to prioritize funding and defer requirements to later years.  However, given the F-35\u2019s global sustainment strategy of providing  support across the military services and the international partners through  shared pools of funding, a single customer that cannot fully fund  requirements may affect the ability of DOD and the contractor to provide  adequate sustainment support across the global F-35 fleet."], "subsections": []}, {"section_title": "Actual F-35 Sustainment Costs Are Not Fully Transparent to the Military Services", "paragraphs": ["F-35 actual sustainment costs that are being charged by the program  office to the military services, as well as the capabilities associated with  those costs, are not fully transparent to the services. In addition to  estimating projected costs for F-35 sustainment over the aircraft\u2019s life  cycle as described above, the program office also calculates the actual F- 35 sustainment costs that will be charged to the military services on an  annual basis. To determine these actual sustainment costs, the military  services first submit their F-35 sustainment capability requirements to the  program office for approval. The program office approves requirements  as a basis for its annual life-cycle operating and support cost estimate,  which is used to provide each of the military services with an estimate for  their respective portion of F-35 sustainment costs to support the services\u2019  budget planning process. The program office then negotiates with the  prime contractor the level of support the contractor will provide to meet  service sustainment requirements. It is at this point that the program  office informs the services of the actual costs that they will be charged for  contracted sustainment. According to program officials, the contracted  level of support may not include all the requirements initially submitted by  the military services for a given contract period, and the associated costs  of the contract services may not align with initial estimates given to the  military services, because support is negotiated between the program  office and the prime contractor.", "Air Force, Navy, and Marine Corps officials told us that they do not fully  understand how the actual costs that they are charged by the program  office for F-35 sustainment are clearly linked to the capabilities that they  are receiving. They cited issues related to unexplained cost increases,  difficulty in tracking their requirements to the contracts, and concerns  about how to track their dollars to shared pools of sustainment assets, as  discussed in detail below.", "Unexplained or unexpected growth in actual sustainment costs:  Service headquarters officials cited concerns about unexplained or  unexpected growth in sustainment costs, particularly between the cost  estimate that they were quoted for budget planning purposes and  what they are actually charged by the program office in the budget  execution year. For example, according to program documentation,  the Marine Corps was initially given a funding requirement for fiscal  year 2017 sustainment support of $293 million, which then increased  to $364 million in the execution year, largely due to increases in  contractor personnel costs. Marine Corps officials said that the  reasons behind this growth in personnel costs were not clearly  substantiated for the Marine Corps by the program office. In order to  afford these increased costs for sustainment support, Marine Corps  officials said that the Marine Corps had to reduce its planned flying  hours. In another instance, documents provided by the Navy show  that the program office increased the cost of the Navy\u2019s and Marine  Corps\u2019 combined spare parts requirements for fiscal year 2017 from  an original estimate of $261 million to $402 million over the course of  the execution year. In addition, service officials told us that they  sometimes become aware of the growth in sustainment costs late in  the services\u2019 budgeting process, making it difficult for them to find  additional funding for such changes.", "Tracking requirements to negotiated contract services and  costs: Officials from two of the services told us that they have had  difficulty in tracking their respective services\u2019 requirements to the  costs being charged by the program and the capabilities that are  negotiated on the contract. For instance, Air Force officials stated that  the Air Force specified a desired performance level for AVA of 65  percent to the program office as a minimum target for its squadrons,  but ultimately the program office contracted for a target of 52 percent.  Air Force officials said they were not aware of this change until after  the contract was negotiated. Similarly, Navy officials also told us that  the program office does not notify the Navy of changes from the  estimated costs to the actual contract costs or the requirements that  are included during negotiations for sustainment contracts, even when  the requirements differ from what the Navy intended. As a result,  officials said that the services often have limited visibility into the  support that the contractor will provide along with the actual costs for  which the services are responsible, until after the contract is signed.", "Shared pools of F-35 sustainment assets: These transparency  concerns are complicated by the fact that the services are paying into  shared pools for F-35 sustainment, and the costs they are being  charged for some requirements\u2014such as for spare parts\u2014cannot be  directly tracked to an item that the services own or support that is  specifically provided to an individual service. Service officials said that  the funds they have contributed to the shared sustainment support  have not resulted in the expected sustainment support. Specifically,  Air Force officials questioned why key performance points in the  program\u2014such as depot repair capabilities and supply availability\u2014 are lagging by several years in some instances, and said that they  need better accounting from the program office on how the money the  Air Force has contributed to the program has been spent, and why  those funds have not resulted in improved performance. Furthermore,  Air Force officials raised questions about whether all program  participants are paying for their required shares of F-35 sustainment  costs, and said that they have not been able to obtain such  information from the program office.", "This lack of transparency is due in part to insufficient communication  between the program office and the services, particularly as requirements  and costs change. Program officials have acknowledged that the program  office has not always provided the services with the level of detail and  clarity around costs that the services would like, but said that recently the  program has been more focused on communicating with the military  services. Program officials also told us that the services are free to  contact the program office should they have any concerns regarding F-35  sustainment costs and how they are shared. However, given the  consistent concerns expressed to us across the services, it appears that  this level of dialogue has not been adequate to facilitate the services\u2019  understanding of sustainment costs. Two of the services have requested  organizations external to the F-35 program to conduct reviews of the  program to better understand their respective portions of F-35  sustainment costs and, in some cases, identify potential opportunities for  cost savings. While these studies will likely provide valuable information  to the services and the program office, they also add costs to an already  expensive weapon system. For example, according to program officials,  the contract for the study requested by the Marine Corps has cost the  program office at least $2.7 million. Further, reliance on one-time studies  by external organizations to help program participants understand their F- 35 sustainment costs and associated capabilities is not a practical  substitute for the effective communication needed in a program of this  magnitude.", "F-35 program guidance has emphasized the need to ensure that costs  are transparent to stakeholders. Further, our prior work examining  programs with multiple governmental customers found that when  customers understand how costs and underlying assumptions are  determined, they can better anticipate potential changes to those  assumptions, identify their effects on costs, and incorporate that  information into their budget plans. Without better communication on the  relationship between the costs and the associated capabilities delivered  for F-35 sustainment support, the military services may not be able to  appropriately plan for sustainment costs over the life cycle of the F-35 or  to make affordability trade-offs between requirements, as they try to  prioritize funding within their budgets."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD\u2019s F-35 program is at a critical juncture. With aircraft development  nearing completion within the next few years, DOD must now shift its  attention and resources to sustaining the growing F-35 fleet. While  production accelerates, DOD\u2019s reactive approach to planning for and  funding the capabilities needed to sustain the F-35 has resulted in  significant readiness challenges\u2014including multi-year delays in  establishing repair capabilities and spare parts shortages. There is little  doubt that the F-35 brings unique capabilities to the U.S. military, but  without revising sustainment plans to include the key requirements and  decision points needed to fully implement the F-35 sustainment strategy,  and without aligned funding plans to meet those requirements, DOD is at  risk of being unable to leverage the capabilities of the aircraft it has  recently purchased. Furthermore, until it improves its plans, DOD faces a  larger uncertainty as to whether it can successfully sustain a rapidly  expanding fleet.", "DOD\u2019s plan to enter into multi-year, performance-based contracts with the  prime contractor has the potential to produce cost savings and other  benefits. However, important lessons are emerging from its pilot  agreements with the contractor that are intended to inform the upcoming  multi-year contract negotiations. To date, DOD has not achieved the  desired aircraft performance under the pilot agreements, but it continues  to move quickly toward negotiating longer-term contracts\u2014which are  likely to cost tens of billions of dollars\u2014by 2020. Without examining  whether it has the appropriate metrics to incentivize the contractor or a  sufficient understanding of the actual costs and technical characteristics  of the aircraft before entering into multi-year, performance-based  contracts, DOD could find itself overpaying for sustainment support that is  not sufficient to meet warfighter requirements.", "Finally, on a broader level, DOD\u2019s projected costs to sustain the F-35 fleet  over its life cycle have risen since 2012 despite the department\u2019s  concerted efforts to reduce costs. Already the most expensive weapon  system in DOD\u2019s history, these rising costs are particularly concerning  because the military services do not fully understand what they are  paying for. This puts them in a precarious position as they consider  critical trade-offs that might make F-35 sustainment more affordable.  Without improving communication with the services to help them better  understand how the sustainment costs they are being charged relate to  the capabilities that they receive, the services may not be able to  effectively budget for the F-35 over the long term."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DOD.", "The Under Secretary of Defense for Acquisition, Technology, and  Logistics, in coordination with the F-35 Program Executive Officer,  should revise sustainment plans to ensure that they include the key  requirements and decision points needed to fully implement the F-35  sustainment strategy and aligned funding plans to meet those  requirements. (Recommendation 1)", "The Under Secretary of Defense for Acquisition, Technology, and  Logistics, in coordination with the F-35 Program Executive Officer,  should re-examine the metrics that it will use to hold the contractor  accountable under the fixed-price, performance-based contracts to  ensure that such metrics are objectively measurable, are fully  reflective of processes over which the contractor has control, and  drive desired behaviors by all stakeholders. (Recommendation 2)", "The Under Secretary of Defense for Acquisition, Technology, and  Logistics, in coordination with the F-35 Program Executive Officer,  should, prior to entering into multi-year, fixed-price, performance- based contracts, ensure that DOD has sufficient knowledge of the  actual costs of sustainment and technical characteristics of the aircraft  after baseline development is complete and the system reaches  maturity. (Recommendation 3)", "The Under Secretary of Defense for Acquisition, Technology, and  Logistics, in coordination with the F-35 Program Executive Officer,  should take steps to improve communication with the services and  provide more information about how the F-35 sustainment costs they  are being charged relate to the capabilities received.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix II, DOD concurred with our  recommendations and identified actions that it would take in response.", "We are sending copies of this report to appropriate congressional  committees; the Secretary of Defense; the Under Secretary of Defense  for Acquisition, Technology, and Logistics; the F-35 Program Executive  Officer; the Secretaries of the Air Force and Navy; and the Commandant  of the Marine Corps. 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) 512-5431 or russellc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Staff members making key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["For each of our objectives, we reviewed relevant sustainment plans,  guidance, and program documentation, and collected information by  interviewing officials from the Office of the Assistant Secretary of Defense  (Logistics and Materiel Readiness), the F-35 Joint Program Office, the  U.S. Air Force, the U.S. Navy, the U.S. Marine Corps, and the prime  contractor, Lockheed Martin. To interview officials and observe F-35  operations, maintenance, and training, we conducted visits to two F-35  operational locations\u2014Hill Air Force Base, Utah, and Marine Corps Air  Station Iwakuni, Japan; two F-35 training locations\u2014Eglin Air Force Base,  Florida, which also includes a Navy F-35 training squadron, and Marine  Corps Air Station Beaufort, South Carolina; and two F-35 maintenance  depots\u2014Ogden Air Logistics Complex, Utah, and Fleet Readiness Center  Southeast, Florida. A full listing of organizations with whom we met is  provided later in this appendix.", "We also gathered various data related to F-35 sustainment, such as  supply chain and repair data and aircraft performance data. To determine  the reliability of these data, we collected information on how the data  were collected, managed, and used through a questionnaire and  interviews with cognizant Department of Defense (DOD) officials and the  prime contractor. In our assessment, we identified some limitations in the  way that certain data are collected and reported, such as data related to  aircraft performance (Air Vehicle Availability, Full Mission Capable, and  Mission Effectiveness metrics), data related to aircraft that are not  mission capable due to supply issues, and parts cannibalization rates that  could potentially result in inaccuracies. However, these data come from  the program\u2019s data systems of record, and are the same data used by the  program office and prime contractor to monitor the health of the supply  chain and assess aircraft performance against contract requirements and  program objectives. As such, they are the best source of data available to  provide information on the progress and challenges within the program.  We determined that these data presented in our findings are sufficiently  reliable for the way in which we report them. Specifically, the parts  cannibalization rates are consistent with the trends observed across other  key data elements within the program, and with the testimonial evidence  provided to us by the units with whom we met during our review, and are  sufficiently reliable to report as a data trend relative to program  objectives. All other performance data presented in our report are  sufficiently reliable to present as specific data points, in order to describe  the status of sustainment requirements and measured aircraft  performance across key metrics as reported by the prime contractor and  DOD.", "To assess the status of DOD\u2019s efforts to sustain the F-35 fleet and any  challenges it has faced, we reviewed DOD and contractor plans,  briefings, and schedules to determine the current status of key  requirements and decision points necessary to establish F-35  sustainment capabilities, such as depot and other maintenance  capabilities, the supply chain, technical data, and development of key  software systems, among other things, and spoke with cognizant officials  about these issues. We also compared actual data obtained about F-35  repair and supply chain capabilities with DOD\u2019s objectives for these  capabilities to identify areas of challenge for the program. Specifically, we  obtained data on aircraft that were not mission capable due to supply  issues from January 2017 through August 7, 2017 and average repair  times as of May 2017, in order to provide the most recently available  information about the health of the supply chain. As discussed above, we  determined that these data are sufficiently reliable to present as specific  data points. In addition, we identified key acquisition program  management practices that can improve program outcomes if  implemented\u2014such as clearly establishing well-defined requirements,  developing realistic cost estimates and schedules, and securing stable  funding that matches resources to requirements\u2014and assessed DOD\u2019s  sustainment planning efforts against these criteria.", "To assess the extent to which DOD is positioned to enter into multi-year  performance-based F-35 sustainment contracts, we reviewed  documentation related to DOD\u2019s pilot\u2014or trial\u2014 performance-based  agreements for F-35 sustainment, such as sustainment contracts,  readiness data provided by the military services, metric taxonomies, and  agreements between the program office and the military services that  identify the services\u2019 desired performance targets. We also obtained  aircraft performance data from the Sustainment Performance  Management System for the 2016 pilot performance-based agreement  (March 2016 \u2013 December 2016) and the 2017 pilot performance-based  agreement (March 2017 \u2013 June 2017) to the extent available at the time  we completed our audit work. As discussed above, we determined that  these data are sufficiently reliable to present as specific data points.  These time periods are the only time periods for which the program office  has assessed contractor performance under these pilot arrangements.  We also reviewed performance-management guidance and processes  and interviewed officials to determine how performance data are being  collected and assessed. In addition, we reviewed aircraft maturity,  reliability, and maintainability data, and documentation related to cost- visibility issues, and we spoke with cognizant officials about these issues  to determine DOD\u2019s level of understanding of the costs and technical  characteristics that will affect future sustainment support. In addition, we  obtained cannibalization data from March 2016 to March 2017 in order to  review and report recent trends in cannibalization rates over a time in  which the program has introduced a significant amount of aircraft to the  fleet. As discussed above, we determined that these data are sufficiently  reliable to present as trend data relative to the program objective. Further,  we reviewed DOD guidance and best practices related to performance- based agreements to identify attributes of ideal performance metrics and  effective performance-based agreements. We then compared these  attributes with the information described above to determine whether  DOD has the appropriate metrics to achieve desired outcomes and the  necessary information to effectively negotiate multi-year, fixed-price,  performance-based contracts with the prime contractor by 2020, as  planned.", "To assess the progress, if any, DOD has made toward reducing F-35  sustainment costs, and the extent to which costs are transparent to the  military services, we reviewed F-35 Joint Program Office sustainment- cost estimates from fiscal year 2012 to fiscal year 2016 in order to identify  changes to the estimate since the program\u2019s sustainment cost baseline  was established in 2012; documentation related to program office and  service cost-reduction efforts; sustainment contracts; F-35 cost-sharing  rules; and budget documentation from both the program office and the  military services. The fiscal year 2016 sustainment-cost estimate is the  most current cost estimate conducted by the program office. In addition,  we interviewed cognizant officials from the F-35 Joint Program Office and  military services to discuss how the program office informs the military  services of F-35 sustainment costs, and the degree to which the services  understand these costs and the sustainment capabilities provided for  those costs. We compared this information with program guidance and  with key operating principles for programs that involve multiple  governmental customers identified in our prior work in order to assess  the transparency of F-35 sustainment costs for the military services.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.", "We met with officials from the following Department of Defense (DOD)  and contractor organizations during our review. We selected these  organizations based on their oversight, planning, and execution roles in  support of F-35 sustainment and operations."], "subsections": [{"section_title": "DOD Organizations", "paragraphs": [], "subsections": []}, {"section_title": "Other Organizations", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Alissa Czyz (Assistant Director),  Vincent Buquicchio, Kasea Hamar, Jeff Hubbard, Amie Lesser, Sean  Manzano, Carol Petersen, Clarice Ransom, Michael Silver, Maria  Staunton, Cheryl Weissman, and Delia Zee made key contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["F-35 Joint Strike Fighter: DOD\u2019s Proposed Follow-on Modernization  Acquisition Strategy Reflects an Incremental Approach Although Plans  Are Not Yet Finalized. GAO-17-690R. Washington, D.C.: August 8, 2017.", "F-35 Joint Strike Fighter: DOD Needs to Complete Developmental  Testing Before Making Significant New Investments. GAO-17-351.  Washington, D.C.: April 24, 2017.", "F-35 Joint Strike Fighter: Continued Oversight Needed as Program Plans  to Begin Development of New Capabilities. GAO-16-390. Washington,  D.C.: April 14, 2016.", "F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its  Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016.", "F-35 Joint Strike Fighter: Preliminary Observations on Program Progress.  GAO-16-489T. Washington, D.C.: March 23, 2016.", "F-35 Joint Strike Fighter: Assessment Needed to Address Affordability  Challenges. GAO-15-364. Washington, D.C.: April 14, 2015.", "F-35 Sustainment: Need for Affordable Strategy, Greater Attention to  Risks, and Improved Cost Estimates. GAO-14-778. Washington, D.C.:  September 23, 2014.", "F-35 Joint Strike Fighter: Slower Than Expected Progress in Software  Testing May Limit Initial Warfighting Capabilities. GAO-14-468T.  Washington, D.C.: March 26, 2014.", "F-35 Joint Strike Fighter: Problems Completing Software Testing May  Hinder Delivery of Expected Warfighting Capabilities. GAO-14-322.  Washington, D.C.: March 24, 2014.", "F-35 Joint Strike Fighter: Restructuring Has Improved the Program, but  Affordability Challenges and Other Risks Remain. GAO-13-690T.  Washington, D.C.: June 19, 2013.", "F-35 Joint Strike Fighter: Program Has Improved in Some Areas, but  Affordability Challenges and Other Risks Remain. GAO-13-500T.  Washington, D.C.: April 17, 2013.", "F-35 Joint Strike Fighter: Current Outlook Is Improved, but Long-Term  Affordability Is a Major Concern. GAO-13-309. Washington, D.C.: March  11, 2013.", "Joint Strike Fighter: DOD Actions Needed to Further Enhance  Restructuring and Address Affordability Risks. GAO-12-437. Washington,  D.C.: June 14, 2012.", "Joint Strike Fighter: Restructuring Added Resources and Reduced Risk,  but Concurrency Is Still a Major Concern. GAO-12-525T. Washington,  D.C.: March 20, 2012.", "Joint Strike Fighter: Implications of Program Restructuring and Other  Recent Developments on Key Aspects of DOD\u2019s Prior Alternate Engine  Analyses. GAO-11-903R. Washington, D.C.: September 14, 2011.", "Joint Strike Fighter: Restructuring Places Program on Firmer Footing, but  Progress Is Still Lagging. GAO-11-677T. Washington, D.C.: May 19,  2011.", "Joint Strike Fighter: Restructuring Places Program on Firmer Footing, but  Progress Still Lags. GAO-11-325. Washington, D.C.: April 7, 2011.", "Joint Strike Fighter: Restructuring Should Improve Outcomes, but  Progress Is Still Lagging Overall. GAO-11-450T. Washington, D.C.:  March 15, 2011."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-652", "url": "https://www.gao.gov/products/GAO-18-652", "title": "Indian Health Service: Considerations Related to Providing Advance Appropriation Authority", "published_date": "2018-09-13T00:00:00", "released_date": "2018-09-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IHS, an agency within the Department of Health and Human Services (HHS), receives an annual appropriation from Congress to provide health care services to over 2 million American Indians and Alaska Natives (AI/AN) who are members of 573 tribes. IHS generally provides services through direct care at facilities such as hospitals and health centers. Some tribes receive IHS funding to operate their own health care facilities. Tribal representatives have sought legislative approval to provide IHS advance appropriation authority stating that it would facilitate planning and more efficient spending. Experts have reported that agencies can use the authority to prevent funding gaps, and avoid uncertainties associated with receiving funds through CRs.", "House Report 114-632 included a provision for GAO to review the use of advance appropriations authority and applications to IHS. Among other things, this report (1) describes advance appropriation authority considerations identified by stakeholders for providing IHS-funded health care services, and (2) identifies other considerations for policymakers related to providing the authority to IHS. GAO reviewed its prior reports related to IHS, VA, government shutdowns, and CRs, and interviewed officials from IHS, several tribes and other organizations representing AI/AN interests, the Office of Management and Budget, VA and other experts.", "GAO provided a draft of this report to HHS, which had no comments; to VA, which provided general comments; and to tribal representatives, which provided technical comments that were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Indian Health Service (IHS), like most federal agencies, must use appropriations in the year for which they are enacted. However, there has been interest in providing IHS with advance appropriation authority, which would give the agency authority to spend a specific amount 1 or more fiscal years after the fiscal year for which the appropriation providing it is enacted. Currently, the Department of Veterans Affairs (VA) is the only federal provider of health care services to have such authority.", "Stakeholders interviewed by GAO, including IHS officials and tribal representatives, identified effects of budget uncertainty on the provision of IHS-funded health care as considerations for providing IHS with advance appropriation authority. Budget uncertainty arises during continuing resolutions (CR)\u2014temporary funding periods during which the federal government has not passed a budget\u2014and during government shutdowns. Officials said that advance appropriation authority could mitigate the effects of this uncertainty. IHS officials and tribal representatives specifically described several effects of budget uncertainty on their health care programs and operations, including the following:", "Provider recruitment and retention. Existing challenges related to the recruitment and retention of health care providers\u2014such as difficulty recruiting providers in rural locations\u2014are exacerbated by funding uncertainty. For example, CRs and government shutdowns can disrupt recruitment activities like application reviews and interviews.", "Administrative burden and costs. Both IHS and tribes incur additional administrative burden and costs as IHS staff calculate proportional allocations for each tribally operated health care program and modify hundreds of tribal contracts each time a new CR is enacted by Congress to conform to limits on available funding.", "Financial effects on tribes. Funding uncertainty resulting from recurring CRs and from government shutdowns has led to adverse financial effects on tribes and their health care programs. For instance, one tribe incurred higher interest on loans when the uncertainty of the availability of federal funds led to a downgraded credit rating, as it was financing construction of a health care facility.", "GAO identified various considerations for policymakers to take into account for any proposal to change the availability of the appropriations that IHS receives. These considerations include operational considerations, such as what proportion of the agency's budget would be provided in the advance appropriation and under what conditions changes to the funding provided through advance appropriations would be permitted in the following year. Additionally, congressional flexibility considerations arise because advance appropriation authority reduces what is left for the overall budget for the rest of the government. Another consideration is agency capacity and leadership, including whether IHS has the processes in place to develop and manage an advance appropriation. GAO has reported that proposals to change the availability of appropriations deserve careful scrutiny, an issue underscored by concerns raised when GAO added IHS to its High-Risk List in 2017."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Indian Health Service (IHS), an agency within the Department of  Health and Human Services (HHS), receives an annual appropriation  from Congress to provide certain health care services to over 2 million  American Indians and Alaska Natives (AI/AN) who are members of  federally recognized tribes. IHS services are generally provided through  direct care at IHS facilities such as hospitals and health centers, and  when services are unavailable at these facilities, the facilities may pay for  patients to obtain services, including specialty care, from external  providers. In addition to federally operated IHS facilities, some federally  recognized tribes choose to operate their own health care facilities, for  which they receive at least partial support through IHS funding.", "IHS, like most federal agencies, receives appropriations through annual  appropriations acts and the appropriations become available upon  enactment, not at some future date. However, there has been interest in  providing IHS with advance appropriation authority\u2014an appropriation of  new budget authority that becomes available one or more fiscal years  after the fiscal year for which the appropriation providing it is enacted.  Organizations representing AI/AN people have advocated for Congress to  provide IHS with advance appropriation authority, stating that advance  appropriations would allow for greater planning, more efficient spending,  and higher quality of care for AI/AN individuals. Although not commonly  provided for federal programs, experts have reported that advance  appropriations have implications for agencies\u2019 ability to manage during  periods of budget uncertainty, in terms of preventing funding gaps, and  avoiding issues associated with receiving short-term funds through  continuing resolutions (CR). The Department of Veterans Affairs (VA) is  the only federal agency that currently receives advance appropriations for  its health care program, which is administered by its Veterans Health  Administration (VHA).", "House Report 114-632 included a provision for us to report on the use of  advance appropriation authority for health care programs across the  federal government, and applications to IHS. This report  1.  describes the advance appropriation authority that VA has for its  2.  describes the advance appropriation authority considerations  identified by stakeholders for providing IHS-funded health care  services; and  3.  identifies other considerations for policymakers related to providing  advance appropriation authority to IHS.", "To describe the advance appropriation authority that VA has for its health  care program, we reviewed statutes related to VA\u2019s specific advance  appropriation authority and interviewed VHA officials, including  headquarters officials from the Office of Finance and the Office of Rural  Health. In addition, we interviewed officials from the Office of  Management and Budget (OMB) who work with VA in planning for  advance appropriations. We also reviewed our prior reports examining  VHA budget processes and experience with advance appropriations.", "To describe the advance appropriation authority considerations identified  by stakeholders for providing IHS-funded health care services, we  reviewed our prior reports that examined the effects of CRs and  government shutdowns on federal agencies, and interviewed IHS officials  and tribal representatives. Specifically, we interviewed IHS officials and  tribal representatives about their perceptions of the potential advantages  or disadvantages of advance appropriations for IHS, including their  perceptions of the effects of budget uncertainty on the provision of IHS- funded health care. IHS officials we interviewed included individuals from  the Office of the Director, the Office of Finance and Accounting, the Office  of Direct Service and Contracting Tribes, the Office of Tribal-Self  Governance, and the Division of Acquisition Policy, among others.", "Additionally, we interviewed tribal officials, including those who currently  serve as co-chairs for IHS\u2019s National Tribal Budget Formulation  Workgroup (who collectively represent multiple individual tribes and  groups of tribes). We selected tribal officials to interview to help ensure a  range of experiences and different types of funding agreements with IHS.  We also obtained information from representatives of several additional  tribes and tribal organizations. Our interviews and other information  obtained from representatives of these tribes and tribal organizations are  not generalizable to all federally recognized tribes. We also interviewed  officials from associations representing tribal and AI/AN interests,  including the National Indian Health Board and the National Council of  Urban Indian Health. For context, we also spoke with VA officials from  two regional networks\u2014Veterans Integrated Service Networks (VISN)\u2014 about their experience with advance appropriations; VA officials indicated  that these VISNs have extensive experience in serving rural populations,  including AI/AN veterans.", "To identify other considerations for Congress and agency officials related  to providing advance appropriation authority to IHS, we reviewed  materials documenting past efforts to obtain advance appropriation  authority for IHS\u2014including proposed legislation and documents from  advocacy groups such as the National Indian Health Board, as well as our  prior work related to the consideration of advance appropriations for VA.  For context, we also reviewed our past reports and those from the  Congressional Research Service on various aspects of IHS\u2014including  budgeting processes. We interviewed IHS officials regarding their  processes for budget planning and VA officials regarding their  experiences planning for advance appropriations. In addition, we  interviewed officials from OMB, the Congressional Research Service, and  the Congressional Budget Office.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "IHS Health Care System and Tribal Health Care", "paragraphs": ["IHS was established within the Public Health Service in 1955 to provide  certain health services to members of federally recognized AI/AN tribes,  primarily in rural areas on or near reservations. IHS provides services  directly through a network of hospitals, clinics, and health stations  operated by IHS, and also funds services provided at tribally operated  facilities.", "As of October 2017, IHS, tribes, and tribal organizations operated 168  service units, 48 hospitals, and 560 ambulatory care centers\u2014including  health centers, school health centers, health stations, and Alaska village  clinics. See table 1.", "According to IHS officials, the agency provides services almost  exclusively in locations designated as Health Professional Shortage  Areas, with most locations identified as extreme shortage areas. In  addition, IHS data indicate that about 35 percent of certain IHS facilities,  including four hospitals, were identified as isolated hardship posts in  2016.", "IHS oversees its health care facilities through a decentralized system of  12 area offices, which are led by area directors; 10 of these 12 IHS areas  have federally operated IHS facilities. IHS\u2019s headquarters office is  responsible for setting health care policy, helping to ensure the delivery of  quality comprehensive health services, and advocating for the health  needs and concerns of AI/AN people. The IHS area offices are  responsible for distributing funds to the facilities in their areas, monitoring  their operation, and providing guidance and technical assistance.", "IHS\u2019s estimated budget authority for fiscal year 2018 is over $5.6 billion,  an increase of almost $580 million from its enacted budget authority of  just over $5 billion in fiscal year 2017. IHS has agreements with tribes  and tribal organizations by which it transfers a substantial portion of its budget authority to tribes and tribal organizations. For example, in 2017,  the agency transferred approximately 54 percent of its total budget  authority to tribes and tribal organizations to operate part or all of their  own health care programs through self-determination contracts and self- governance compacts.", "Self-determination contracts: IHS had 373 self-determination  contracts in place with 220 tribes in 2017.", "Self-governance compacts: IHS had 98 self-governance compacts in  place\u2014including 124 funding agreements\u2014with 360 tribes in 2017.  See figure 1 for the percentage of IHS\u2019s total budget authority  transferred to tribes in fiscal year 2017.", "According to IHS officials, over the last few years an increasing number of  tribes have sought to enter into contracts and compacts with IHS to  assume responsibility for some or all of their health care programs, and  thereby receive funding from IHS."], "subsections": []}, {"section_title": "Federal Budget Environment", "paragraphs": ["Unless otherwise specified in law, funding included in annual  appropriation acts is available for obligation during a single fiscal year,  after which it expires. For this reason, the continuation of normal  government operations depends upon the enactment each fiscal year of a  new appropriations act. Any lapse in appropriations\u2014a funding gap\u2014 causes most government functions to shut down. To avert a  government shutdown, Congress may enact one or more CRs. CRs are  spending bills that provide funds to allow agencies to operate during a  specified period of time while Congress works to pass an annual  appropriations act. Relevant aspects of the federal budget environment  include the following.", "Frequency of CRs and shutdowns. In all but 4 of the last 40 fiscal  years\u2014including fiscal year 2018\u2014Congress has enacted CRs. Since  fiscal year 1999, CRs have varied greatly in their number and duration\u2014 the number of CRs enacted in each year ranged from 2 to 21, and the  duration of CRs has ranged from 1 to 187 days. Regarding lapses in  appropriations that resulted in government shutdowns, in January 2018  the government partially shut down for 3 calendar days after the CR in  place expired. Other shutdowns have lasted longer\u201416 calendar days in  October 2013 and 21 calendar days in December 1995 through January  1996. We have previously reported on the effects of CRs and shutdowns  for federal agencies.", "Budget authority during a CR. CRs provide \u201csuch amounts as may be  necessary\u201d to maintain operations consistent with the prior fiscal year\u2019s  appropriations and authorities. To control spending in this manner, CRs  generally prohibit agencies from initiating new activities and projects for  which appropriations, funds, or other authorities were not available in the  prior fiscal year. They also require agencies to take the most limited  funding actions necessary to maintain operations at the prior fiscal year\u2019s  level.", "Budget authority during a funding gap. Certain federal health care  programs have various budget authorities that can allow for continued  operations during a funding gap. For example, VA\u2019s advance  appropriations authority for its health care programs allows operations to  continue after one appropriation expires, using the previously enacted  budget for the next year. Although IHS does not have this authority,  Congress has enacted longer periods of availability for certain IHS  appropriations that would allow the activities they support to continue  during a funding gap, assuming the appropriation has not run out. For  example, IHS\u2019s appropriation for Indian health facilities remains available  until expended, in contrast to its appropriation for Indian health services,  which is generally available for a single fiscal year.", "In this regard, funds for Indian health services that IHS transfers to tribes  and tribal organizations during the 1-year period of availability are  deemed to be obligated at the time of the award and thereafter remain  available to the tribes to operate their own health care programs without  fiscal year limitation. Thus, to the extent sufficient funding remained  available from federal or other sources during a lapse in appropriations, a  tribe could continue to operate its own health care programs during a  shutdown. To operate IHS\u2019s health care system on an emergency basis  during a funding gap, IHS would need to determine what programs and  activities qualified for an emergency exception under the law.", "Contingency planning for government shutdowns. Federal agencies  must determine what activities and programs they are permitted or  required to continue prior to a potential shutdown. This includes  designating certain employees as \u201cexcepted\u201d employees who would be  expected to continue to work during the shutdown and who would be paid  upon the enactment of an appropriation. Employees who are not  \u201cexcepted\u201d would be subject to furlough."], "subsections": []}, {"section_title": "Interest in Advance Appropriation Authority for IHS", "paragraphs": ["Citing funding uncertainty associated with continued use of CRs, AI/AN  advocacy groups such as the National Indian Health Board have  requested that Congress grant IHS advance appropriation authority;  legislation to provide IHS this authority has been introduced more than  once. The most recent such legislation, H.R. 235, introduced in January  2017 (not enacted), would have provided IHS with 2-year fiscal budget  authority for its Indian health services and Indian health facilities  accounts, similar to the authority that VA currently has for its health care  appropriation accounts. HHS, on behalf of IHS, has not requested that  IHS be granted advance appropriation authority during its annual budget  submissions to Congress."], "subsections": []}]}, {"section_title": "VA\u2019s Advance Appropriation Authority for Health Care", "paragraphs": ["VA, through the VHA, operates one of the nation\u2019s largest health care  systems, with 171 VA medical centers, more than 1,000 outpatient  facilities, and total health care budget authority of about $69 billion in  fiscal year 2017. VA provided health care services to about 6.8 million  veterans in fiscal year 2017, and the agency forecasts that demand for its  services is expected to grow in the coming years.", "VA was granted advance appropriation authority for specified medical  care accounts in the Veterans Health Administration in 2009. Currently,  VA\u2019s annual appropriations for health care include advance  appropriations that become available in the fiscal year after the fiscal year  for which the appropriations act was enacted. Under this authority, VA  receives advance appropriations for VHA\u2019s Medical Services, Medical  Support and Compliance, Medical Facilities, and Medical Community  Care appropriations accounts and is required to provide Congress with  detailed estimates of funds needed to provide its health care services for  the fiscal year for which advance appropriations are to be provided.  According to VA officials, veterans service organizations were the primary  advocates who sought advance appropriation authority for VA\u2019s health  care program.", "In its health care budget proposal each year, VA submits a request for the  upcoming fiscal year, as well as an advance appropriation request for the  following year. In early 2018, for example, VA submitted a request for  fiscal year 2019, as well as a fiscal year 2020 advance appropriation  request. According to VA, more than 90 percent of its budget request is  developed using an actuarial model that is based in part on VA\u2019s actual  health care utilization data from prior years; for example, the 2020  advance appropriation request used fiscal year 2016 data. VHA officials  said that the agency calculates its advance appropriation request to fund  needed care as estimated by its actuarial model, with less funding  requested for other expenses (such as non-recurring maintenance) and  officials told us this is consistent with direction provided by OMB. OMB  officials told us that the amount provided in the advance appropriation is  intended to provide VA with some assurances that it will be able to  continue health care operations seamlessly across fiscal years.", "In the subsequent year (the year during which the advance appropriation  can be used), VA may request an adjustment to the amount previously  provided through advance appropriations\u2014referred to by agency officials  as a \u201csecond bite\u201d\u2014an arrangement that is intended by design to help  respond to more recent policy changes or significant events. For  example, VA requested a \u201csecond bite\u201d increase of $2.65 billion for fiscal  year 2018, to the $66.4 billion initially provided to its VHA accounts  through its advance appropriation. Both OMB and VHA officials said this  \u201csecond bite\u201d provides an opportunity to make an adjustment to VA\u2019s  advance appropriation using updated utilization data. VHA officials told us  that changes in policy (such as determining which veterans or what health  benefits can be covered) sometimes drive changes from the initial budget  request. For example, policy changes can include adding an additional  presumptive condition\u2014such as health conditions associated with Agent  Orange exposure\u2014resulting in a new health benefit, or a costly new drug  treatment, as in the case of the addition to the drug formulary of a new  Hepatitis C drug treatment.", "Despite having advance appropriation authority, VA has faced challenges  in budget formulation, in addition to the general management and  oversight challenges we cited in adding VA to our High-Risk List in  2015. Specifically, we reported in our 2017 update to the High-Risk List  that VA faces challenges regarding the reliability, transparency, and  consistency of its budget estimates for medical services, as well as  weaknesses in tracking obligations for medical services and estimating  budgetary needs for future years. These challenges were evident in  June 2015, when VA requested authority from Congress to move funds  from another appropriation account because agency officials projected a  fiscal year 2015 funding gap of about $3 billion in its medical services  appropriation account."], "subsections": []}, {"section_title": "Budget Uncertainty Effects on the Provision of IHS- Funded Health Care That Were Cited by Stakeholders", "paragraphs": ["IHS officials, tribal representatives, and other stakeholders we spoke with  described how budget uncertainty resulting from CRs and government  shutdowns can have a variety of effects on the provision of IHS-funded  health care services for AI/ANs. The following summarizes these  effects, along with the views of IHS officials, tribal representatives, and  other stakeholders on how advance appropriation authority could mitigate  them, and VA\u2019s related experiences:  Provision of health care services. IHS officials said that, in general,  most health care services would be expected to continue at IHS-operated  facilities during a shutdown, as health care providers would be deemed  \u201cexcepted\u201d personnel under the agency\u2019s contingency plan. However,  officials noted some health care procedures could be delayed, as  determined on a case-by-case basis at the local level. IHS officials also  acknowledged that tribal health care programs may not have access to  furloughed IHS staff who do not work during a shutdown, such as support  staff at local IHS area offices, who may carry out administrative duties on  their behalf. For example, tribal representatives told us that during a  previous government shutdown, finance employees from the local IHS  area offices were furloughed (and thus not permitted to work), which  created challenges for tribal health care operations that depended on  these IHS employees to process payments and agreements.", "IHS officials stated they believe advance appropriations could help  ensure continuity of health care services through certainty of funding. IHS  officials also said that while lapses in appropriations do not halt patient  care, they do create complications\u2014such as the determination of  excepted personnel as described above\u2014that could be eliminated by  funding provided through advance appropriations. Tribal representatives  said the certainty of funding that would come with IHS having advance  appropriations would create a sense of stability in tribal health care  programs as well.", "VA VISN officials we spoke to said having advance appropriations has  improved their ability to manage resources for continuity of services and  allowed them to avoid the substantial additional planning that occurs  before a potential government shutdown when agencies are determining  which providers and staff would be deemed excepted. According to the  VISN officials, knowing that funding is coming\u2014as opposed to having  less certainty\u2014would allow an agency to plan and prioritize its services  more efficiently.", "Health care program planning. Tribal representatives said operating  health care programs with short-term funding provided through a series of  CRs\u2014and facing potential government shutdowns\u2014rather than a full  year\u2019s apportionment hinders their ability to plan for new programs and for  improvements that need to be carried out across budget years or that  require large up-front investments, such as an electronic medical records  system or other significant information technology purchases. Tribal  representatives said there are often plans that they have to set aside  because they don\u2019t have enough funds to start a project during a CR,  and\u2014if there are multiple CRs\u2014there is not enough time left in the  budget year to start bigger projects once an annual appropriation is  passed. Tribal representatives also told us that they believe that advance  appropriations would help tribal health care programs plan for current and  future needs. For example, one tribal official told us advance  appropriations would allow tribes to plan for long-term health initiatives.  The official\u2019s specific tribe has a gestational diabetes program in  conjunction with a local university that the tribe could plan to take full  responsibility for if they had more funding stability.", "VA VISN officials we interviewed provided several examples of how they  believe advance appropriations facilitate their planning. For example,  VISN officials told us advance appropriations allow them to plan  strategically for equipment purchases: if they need to buy a CT scanner,  they would plan to do site preparation in one year\u2014for example,  reconfiguring the space for the new equipment by moving walls, electrical  rewiring, etc.\u2014and buy the scanner in the next year. With advance  appropriations, they know they are going to have funds for an expensive  equipment purchase available the next year; without an advance  appropriation, they would not be sure, and could spend funds on  preparation and then ultimately not have the funds to make the equipment  purchase. These officials also said having advance appropriations gave  them confidence in making current plans to provide the new shingles  vaccine for their over-50 population in 2019, including the ability to secure  an adequate supply of the vaccine from the manufacturer.", "Provider recruitment and retention. IHS officials and tribal  representatives said existing challenges related to their recruitment and  retention of health care providers\u2014many of which are related to the rural  and remote locations of many of IHS\u2019s facilities\u2014are exacerbated by  funding uncertainty resulting from CRs or potential government  shutdowns. IHS officials said CRs and government shutdowns can  disrupt recruitment activities such as IHS marketing efforts, job  advertisements, application review, interviews, and candidate site visits.  Additionally, when recruiting health care providers, IHS officials said CRs  and potential government shutdowns create doubt about the stability of  employment at IHS amongst potential candidates, which may result in  reduced numbers of candidates or withdrawals from candidates during  the pre-employment process. IHS officials said that many providers in  rural and remote locations are the sole source of income for their families,  and the potential for delays in pay resulting from a government shutdown  can serve as a disincentive for employees considering public service in  critical shortage areas that do not offer adequate spousal employment  opportunities. Tribal representatives said CRs create challenges for tribes  in funding planned pay increases\u2014such as cost-of-living adjustments\u2014 for health care staff at their facilities, and they may, as a result, defer  increases.", "IHS officials and tribal representatives stated they believe advance  appropriations could mitigate these challenges. For example, IHS officials  said that with advance appropriations, recruitment and outreach activities  could continue without disruption, and selected candidates could be  brought on board as scheduled. One tribal representative stated that  advance appropriations could help with recruitment by providing  perceived job stability that is similar to VA or the private sector.", "According to VA VISN officials, the agency\u2019s experience with advance  appropriation authority suggests that advance appropriations can facilitate  physician recruitment, including hiring. If, for example, they were far along  in the hiring process at the end of a fiscal year, but could not finalize the  hire before the end of the year, having advance appropriations for the  next fiscal year provides the certainty that they will be able to make the  hire in the new fiscal year.", "Commercial contracts and vendor negotiations. IHS officials and tribal  representatives said budget uncertainty can lead to vendor reluctance to  provide services to IHS and tribally operated facilities. IHS officials said  they have heard from vendors\u2014who are typically Indian- or veteran- owned small businesses in the communities being served by IHS\u2014that  they lose trust in IHS and federally-funded tribal health care programs  when they are affected by budget uncertainty. One tribal organization told  us delays in receiving full funding because of CRs has inhibited its ability  to pay invoices for pharmaceuticals in a timely manner, which has  harmed its relationship with its vendors.", "VISN officials told us that advance appropriations can provide an element  of stability to agency funding that may serve to reassure potential  vendors. According to VISN officials, vendors can be hard to find in  remote and rural areas, and their perception of funding certainty can play  a role in encouraging their participation as government contractors. As  contracting with the federal government can be burdensome, particularly  for smaller vendors, VISN officials said, any measures\u2014such as advance  appropriations\u2014that could enhance the stability of agency contracting  could make these vendors more likely to participate in government  contracting.", "Administrative burden and costs. IHS officials and tribal  representatives said the agency and tribes incur additional administrative  burden and costs when the government is funded through multiple CRs,  due to the high proportion of IHS funding that is transferred to tribes  through contracts and compacts. Specifically, IHS officials said there is  an additional administrative burden generated by each CR that results in  the distribution of funds to tribes. For each CR period, IHS headquarters  staff generate proportional funding allotments, which they provide to  individual area offices, which then also conduct processing activities to  generate payments from these allotments to the tribes in their areas. As  part of this process, IHS officials said they modify hundreds of tribal  contracts and make amendments to funding agreements associated with  tribal compacts, and those efforts represent a significant administrative  burden for IHS staff. Tribal representatives also described administrative  burden associated with CRs. As one representative of a group  representing several tribes told us, each CR requires the same  processing and manpower for each partial payment as for a full  apportionment, and moreover, CRs require tracking and reconciliation  that is not necessary for a single, full apportionment. IHS officials and  tribal representatives noted that time and money spent on these  additional administrative activities detract from other priorities, including  patient care.", "IHS officials said that advance appropriations would reduce this  administrative burden, and added that having advance appropriations  would allow for more efficiency in processing payments to tribes. IHS  officials suggested that the agency would have to do less administrative  work overall, because currently, under a single year appropriation (with  recurrent CRs), they may modify or amend agreements 7 or 8 times  within a fiscal year. Although acknowledging that advance appropriation  authority would entail the additional burden of preparing budget requests  for more than one fiscal year, they expect this administrative burden to be  less than those under repeated CRs.", "Financial effects on tribes. According to tribal representatives we spoke  with, funding uncertainty from recurring CRs and from government  shutdowns has led to particular adverse financial effects on tribes that  operate their own health care programs with funding from IHS. For  example, according to tribal representatives,", "Funding uncertainty surrounding a CR results in more expensive  commercial loans (with higher interest rates) to finance construction of  new health care facilities. Specifically, a tribal representative said the  uncertainty of the availability of funds due to a CR resulted in a  downgrading of the tribe\u2019s credit rating, and hence higher interest  rates, as it was planning a clinic expansion.", "During a government shutdown, some tribes must redistribute funds  from other budget categories to replace health care funding from IHS  in order to continue providing health care services. Some tribes have  economic development activities that provide additional funding and  facilitate this redistribution, but others do not. For example, one tribal  organization said that during the 2013 government shutdown, it had to  take out loans and maintain a line of credit in order to pay for services  and make payroll. Subsequently, that tribal organization had to pay  interest on those loans, causing greater financial hardship.", "Tribes attempt to mitigate the challenge of not knowing their final  annual payment from IHS under recurrent CRs by keeping extra funds  in reserve for emergencies, which limits the remaining funds available  for providing health care services.", "Short-term funding under CRs or delayed funding after a lapse in  appropriations can limit the ability of tribes and tribal organizations to  invest funds from IHS and generate interest that can be reinvested in  tribal health care programs.", "CRs have affected the ability of tribes to reduce costs by planning for  bulk purchases at favorable rates. For example, some tribes in Alaska  prefer to make bulk purchases of heating oil during \u201cbarge season\u2019\u2019\u2014 when waterways are still navigable and not frozen. If they do not have  enough money for a bulk purchase because of a CR\u2019s limited funding,  they must purchase fuel in smaller quantities, which is ultimately  significantly more expensive. Tribal representatives told us one  beneficial financial effect of advance appropriations for tribes could be  providing opportunities for longer term contracts with vendors, which  could result in cost savings that could be used for tribal health care  programs."], "subsections": []}, {"section_title": "Considerations for Policymakers Related to Providing Advance Appropriation Authority to IHS", "paragraphs": ["We identified three types of considerations for policymakers related to  providing advanced appropriation authority to IHS\u2014operational,  congressional flexibility, and agency capacity and leadership  considerations. We identified these considerations based on a review of  our 2009 testimony that examined considerations for granting VA  advance appropriation authority, in which we identified key questions that  would be applicable to any agency being granted such authority, and our  interviews with VA, IHS, and other officials. In our 2009 testimony, we  noted that proposals to change the availability of the appropriations for  VA deserved careful scrutiny, given the challenges the agency faces in  formulating its health care budget and the changing nature of health  care. Similar consideration would apply to IHS.", "Operational considerations. If Congress were to grant IHS advance  appropriation authority, it would need to make operational decisions  regarding what amount of IHS funding would be provided in advance  appropriations, with input from OMB and IHS as appropriate. Specifically,  Congress could consider the following questions:  (1) What proportion of IHS\u2019s estimated budget would be provided in  the advance appropriation\u2014the full amount, or less (as is the case for  VA)? Which appropriations accounts would be included? Further,  would funds intended for transfer to tribes be handled differently?  (2) Under what conditions, if any, would there be changes to funding  provided through advance appropriations during the next budget  cycle? For example, would Congress expect to adjust the advance  appropriation amount through a \u201csecond bite,\u201d as is the case with VA?", "Congressional flexibility considerations. We reported in 2009 that  consideration of any proposal to change the availability of the  appropriations VA receives for health care should take into account the  impact of any change on congressional flexibility and oversight. These  same considerations hold merit regarding potential changes to the  appropriation status of any federal agency, including IHS. Specifically,  advance appropriation authority reduces flexibility for congressional  appropriators, because it reduces what is left for the overall budget for the  rest of the government\u2014meaning the total available for appropriations for  a budget year is reduced by the amount of advance appropriations for  that year, when budgets have caps.", "Agency capacity and leadership considerations. IHS officials told us  they believe the agency\u2019s current budget planning processes would be  adequate for estimating advance appropriation budget requests, because  IHS begins planning for its budget request 3 years in advance. Officials  added that IHS plans its budget so far in advance to have sufficient time  to work with tribes in formulating recommendations for its budget request.  IHS officials said that a downside to planning so far in advance is that  they do not necessarily have the most current information while  formulating the budget request. In addition, we noted prior to VA receiving  advance appropriation authority that advance appropriation authority  could potentially exacerbate existing challenges when developing or  managing a budget, generally, due in part to the higher risk of uncertainty  when developing estimates that are an additional 12 months out from the  actual budget year (e.g., 30 months out instead of 18 months).", "We raised certain capacity and leadership concerns based on our  previous work when we added IHS to our High-Risk List in 2017.  Further, in June 2018, we found that while IHS had taken some actions to partially address these concerns, additional progress was needed to fully  address these management weaknesses. For example, IHS still does  not have permanent leadership\u2014including a Director of IHS\u2014which is  necessary for the agency to demonstrate its commitment to improvement.  Additionally, while the agency has made some progress in demonstrating  it has the capacity and resources necessary to address the program risks  we identified in our reports, there are still vacancies in several key  positions, including in the Office of Finance and Accounting. While not  directly related to consideration of advance appropriations, IHS\u2019s high-risk  designation and continuing challenges in mitigating the deficiencies in its  program point to questions about the agency\u2019s capacity to implement  such a change to its budget formulation process."], "subsections": []}, {"section_title": "Agency Comments and Third-Party Views", "paragraphs": ["We provided a draft of this report to HHS and VA for review and  comment. HHS did not have any comments. We received general  comments from VA that are reprinted in appendix I.", "We also provided relevant draft portions of this report to NIHB, which  represents tribal and AI/AN interests. NIHB provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the Secretaries of the Department  of Health and Human Services and the Department of Veterans Affairs,  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) 512-7114 or farbj@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kathleen M. King (Director),  Karen Doran (Assistant Director), Julie T. Stewart (Analyst-in-Charge),  Kristen J. Anderson, and Leonard S. Brown made key contributions to  this report. Also contributing were Sam Amrhein, George Bogart,  Christine Davis, and Vikki Porter."], "subsections": []}]}], "fastfact": ["The Indian Health Service (IHS) funds health care for over 2 million American Indians and Alaska Natives. Currently, IHS receives its funding as part of the annual fiscal year appropriations cycle.", "Delays in passing appropriations create uncertainty and disrupt operations. For example, tribal representatives told us that such delays have led them to pay invoices late\u2014hurting their relationship with a pharmaceutical vendor.", "We identified issues and questions for policymakers to consider when deciding whether to give IHS an uncommon type of budget authority that would fund an additional year."]}
{"id": "GAO-18-566T", "url": "https://www.gao.gov/products/GAO-18-566T", "title": "Information Technology: Continued Implementation of High-Risk Recommendations Is Needed to Better Manage Acquisitions Operations and Cybersecurity", "published_date": "2018-05-23T00:00:00", "released_date": "2018-05-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government plans to invest almost $96 billion in IT in fiscal year 2018. Historically, IT investments have too often failed or contributed little to mission-related outcomes. Further, increasingly sophisticated threats and frequent cyber incidents underscore the need for effective information security. As a result, GAO added two areas to its high-risk list: IT security in 1997 and the management of IT acquisitions and operations in 2015.", "This statement summarizes agencies' progress in improving IT management and ensuring the security of federal IT. It is primarily based on GAO's prior reports issued between February 1997 and May 2018 (and an ongoing review) on (1) CIO responsibilities, (2) agency CIOs' involvement in approving IT contracts, (3) data center consolidation efforts, (4) the management of software licenses, and (5) compliance with cybersecurity requirements."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Management and Budget (OMB) and federal agencies have taken steps to improve the management of information technology (IT) acquisitions and operations and ensure the security of federal IT through a series of initiatives. As of May 2018, agencies had fully implemented about 61 percent of the approximately 800 IT management-related recommendations that GAO made from fiscal years 2010 through 2015. Likewise, since 2010, agencies had implemented about 66 percent of the approximately 2,700 security-related recommendations as of May 2018. Even with this progress, significant actions remain to be completed.", "Chief Information Officer (CIO) responsibilities . Laws such as the Federal Information Technology Acquisition Reform Act (FITARA) and related guidance assigned 35 key IT management responsibilities to CIOs to help address longstanding challenges. However, in a draft report on CIO responsibilities, GAO's preliminary results suggest that none of the 24 selected agencies have policies that fully address the role of their CIO, as called for by federal laws and guidance. GAO intends to recommend that OMB and each of the selected 24 agencies take actions to improve the effectiveness of CIO's implementation of their responsibilities.", "IT contract approval . According to FITARA, covered agencies' CIOs are required to review and approve IT contracts. Nevertheless, in January 2018, GAO reported that most of the CIOs at 22 selected agencies were not adequately involved in reviewing billions of dollars of IT acquisitions. Consequently, GAO made 39 recommendations to improve CIO oversight over IT acquisitions.", "Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers, which was codified and expanded in FITARA. According to agencies, data center consolidation and optimization efforts have resulted in approximately $3.9 billion of cost savings through 2018. Even so, additional work remains. GAO has made 160 recommendations to OMB and agencies to improve the reporting of related cost savings and to achieve optimization targets; however, as of May 2018, 80 of the recommendations have not been fully addressed.", "Managing software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that better management of licenses was needed to achieve savings, and made 135 recommendations to improve such management. Four years later, 78 of the recommendations remained open.", "Improving the security of federal IT systems . While the government has acted to protect federal information systems, agencies need to improve security programs, cyber capabilities, and the protection of personally identifiable information. Over the last several years, GAO has made about 2,700 recommendations to agencies aimed at improving the security of federal systems and information. These recommendations identified actions for agencies to take to strengthen their information security programs and technical controls over their computer networks and systems. As of May 2018, about 800 of the information security-related recommendations had not been implemented."]}, {"section_title": "What GAO Recommends", "paragraphs": ["From fiscal years 2010 through 2015, GAO made about 800 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. Since 2010, GAO also made about 2,700 recommendations to federal agencies to improve the security of federal systems. These recommendations include those to improve the implementation of CIO responsibilities, the oversight of the data center consolidation initiative, software license management efforts, and the strength of security programs and technical controls. Most agencies agreed with these recommendations, and GAO will continue to monitor their implementation."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to provide an update on federal agencies\u2019  efforts to address our high-risk areas on improving the management of  information technology (IT) acquisitions and operations, as well as  ensuring the security of federal IT. The federal government has spent  billions of dollars on failed and poorly performing IT investments, which  often suffered from ineffective management. Consequently, we added  improving the management of IT acquisitions and operations to our high- risk areas for the federal government in February 2015. We recently  noted that, while progress has been made in addressing the high-risk  area of IT acquisitions and operations, significant work remains to be  completed.", "With regard to cybersecurity, the increasingly sophisticated threats and  frequent cyber incidents underscore the continuing and urgent need for  effective information security. Consequently, we first identified federal IT  security as a government-wide high-risk area in 1997. Subsequently, in  2003, we expanded this area to include computerized systems  supporting the nation\u2019s critical infrastructure and, in 2015, we further  expanded this area to include protecting the privacy of personally  identifiable information. We continued to identify federal information  security as a government-wide high-risk area in our February 2017 high- risk update report.", "My statement today provides an update on agencies\u2019 progress in  improving the management of IT acquisitions and operations and the  security of federal IT. The statement is based on our prior reports issued  between February1997 and May 2018 that discuss federal agencies\u2019 (1)  implementation of Chief Information Officer (CIO) responsibilities, (2)  fulfillment of CIO IT acquisition review requirements, (3) data center  consolidation efforts, (4) management of software licenses, and (5)  compliance with federal cybersecurity requirements. A more detailed  discussion of the objectives, scope, and methodology for this work is  included in each of the reports that are cited throughout this statement. In  addition, we have included preliminary results from our ongoing work  reviewing the authorities of federal CIOs. The draft report related to this  work is currently being reviewed by the agencies and we expect to issue  it in June 2018.", "We conducted the work upon which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["According to the President\u2019s budget, the federal government plans to  invest more than $96 billion for IT in fiscal year 2018\u2014the largest amount  ever budgeted. Despite such large IT expenditures, we have previously  reported that investments in federal IT too often result in failed projects  that incur cost overruns and schedule slippages, while contributing little to  the desired mission-related outcomes. For example:", "The tri-agency National Polar-orbiting Operational Environmental  Satellite System was disbanded in February 2010 by the White  House\u2019s Office of Science and Technology Policy after the program  spent 16 years and almost $5 billion.", "The Department of Homeland Security\u2019s (DHS) Secure Border  Initiative  Network program was ended in January 2011, after the  department obligated more than $1 billion for the program.", "The Department of Veterans Affairs\u2019 Financial and Logistics  Integrated Technology Enterprise program was intended to be  delivered by 2014 at a total estimated cost of $609 million, but was  terminated in October 2011.", "The Department of Defense\u2019s Expeditionary Combat Support System  was canceled in December 2012 after spending more than a billion  dollars and failing to deploy within 5 years of initially obligating  funds.", "The United States Coast Guard (Coast Guard) decided to terminate  its Integrated Health Information System project in 2015. As reported  by the agency in August 2017, the Coast Guard spent approximately  $60 million over 7 years on this project, which resulted in no  equipment or software that could be used for future efforts.", "Our past work has found that these and other failed IT projects often  suffered from a lack of disciplined and effective management, such as  project planning, requirements definition, and program oversight and  governance. In many instances, agencies had not consistently applied  best practices that are critical to successfully acquiring IT.", "Such projects have also failed due to a lack of oversight and governance.  Executive-level governance and oversight across the government has  often been ineffective, specifically from CIOs. For example, we have  reported that some CIOs\u2019 roles were limited because they did not have  the authority to review and approve the entire agency IT portfolio.", "In addition to failures when acquiring IT, security deficiencies can  threaten systems once they become operational. As we previously  reported, in order to counter security threats, 23 civilian Chief Financial  Officers Act agencies spent a combined total of approximately $4 billion  on IT security-related activities in fiscal year 2016. Even so, our  cybersecurity work at federal agencies continues to highlight information  security deficiencies. The following examples describe the types of risks  we have found at federal agencies.", "In November 2017, we reported that the Department of Education\u2019s  Office of Federal Student Aid did not consistently analyze privacy  risks for its electronic information systems, and policies and  procedures for protecting information systems were not always up to  date.", "In August 2017, we reported that, since the 2015 data breaches, the  Office of Personnel Management (OPM) had taken actions to prevent,  mitigate, and respond to data breaches involving sensitive personal  and background investigation information. However, we noted that  the agency had not fully implemented recommendations made to  OPM by DHS\u2019s United States Computer Emergency Readiness Team  to help the agency improve its overall security posture and improve its  ability to protect its systems and information from security breaches.", "In July 2017, we reported that IT security at the Internal Revenue  Service had weaknesses that limited its effectiveness in protecting the  confidentiality, integrity, and availability  of financial and sensitive  taxpayer data. An underlying reason for these weaknesses was that  the Internal Revenue Service had not effectively implemented  elements of its information security program.", "In May 2016, we reported that the National Aeronautics and Space  Administration, the Nuclear Regulatory Commission, OPM, and the  Department of Veteran Affairs did not always control access to  selected high-impact systems, patch known software vulnerabilities,  and plan for contingencies. An underlying reason for these  weaknesses was that the agencies had not fully implemented key  elements of their information security programs.", "In August 2016, we reported that the IT security of the Food and Drug  Administration had significant weaknesses that jeopardized the  confidentiality, integrity, and availability  of its information systems and  industry and public health data."], "subsections": [{"section_title": "FITARA Increases CIO Authorities and Responsibilities", "paragraphs": ["Congress and the President have enacted various key pieces of reform  legislation to address IT management issues. These include the federal  IT acquisition reform legislation commonly referred to as the Federal  Information Technology Acquisition Reform Act (FITARA). This  legislation was intended to improve covered agencies\u2019 acquisitions of IT  and enable Congress to monitor agencies\u2019 progress and hold them  accountable for reducing duplication and achieving cost savings. The  law includes specific requirements related to seven areas:", "Agency CIO authority enhancements. CIOs at covered agencies  have the authority to, among other things, (1) approve the IT budget  requests of their respective agencies and (2) review and approve IT  contracts.", "Federal data center consolidation initiative (FDCCI). Agencies  covered by FITARA are required, among other things, to provide a  strategy for consolidating and optimizing their data centers and issue  quarterly updates on the progress made.", "Enhanced transparency and improved risk management. The  Office of Management and Budget (OMB) and covered agencies are  to make detailed information on federal IT investments publicly  available, and agency CIOs are to categorize their investments by  level of risk.", "Portfolio review. Covered agencies are to annually review IT  investment portfolios in order to, among other things, increase  efficiency and effectiveness and identify potential waste and  duplication.", "Expansion of training and use of IT acquisition cadres. Covered  agencies are to update their acquisition human capital plans to  support timely and effective IT acquisitions. In doing so, the law calls  for agencies to consider, among other things, establishing IT  acquisition cadres (i.e., multi-functional groups of professionals to  acquire and manage complex programs), or developing agreements  with other agencies that have such cadres.", "Government-wide software purchasing program. The General  Services Administration is to develop a strategic sourcing initiative to  enhance government-wide acquisition and management of software.  In doing so, the law requires that, to the maximum extent practicable,  the General Services Administration should allow for the purchase of  a software license agreement that is available for use by all executive  branch agencies as a single user.", "Maximizing the benefit of the Federal Strategic Sourcing  Initiative. Federal agencies are required to compare their  purchases of services and supplies to what is offered under the  Federal Strategic Sourcing Initiative.", "In June 2015, OMB released guidance describing how agencies are to  implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls to meet the law\u2019s  requirements, while providing agencies with flexibility to adapt to  unique agency processes and requirements; strengthen the relationship between agency CIOs and bureau CIOs; strengthen CIO accountability for IT costs, schedules, performance,  and security.", "The guidance identifies a number of actions that agencies are to take to  establish a basic set of roles and responsibilities (referred to as the  common baseline) for CIOs and other senior agency officials; and thus, to  implement the authorities described in the law. For example, agencies are  to conduct a self-assessment and submit a plan describing the changes  they intend to make to ensure that common baseline responsibilities are  implemented.", "In addition, in August 2016, OMB released guidance intended to, among  other things, define a framework for achieving the data center  consolidation and optimization requirements of FITARA. The guidance  directs agencies to develop a data center consolidation and optimization  strategic plan that defines the agency\u2019s data center strategy for fiscal  years 2016, 2017, and 2018. This strategy is to include, among other  things, a statement from the agency CIO indicating whether the agency  has complied with all data center reporting requirements in FITARA.  Further, the guidance indicates that OMB is to maintain a public  dashboard to display consolidation-related costs savings and optimization  performance information for the agencies."], "subsections": []}, {"section_title": "Congress Has Undertaken Efforts to Continue Selected FITARA Provisions and Modernize Federal IT", "paragraphs": ["Congress has recognized the importance of agencies\u2019 continued  implementation of FITARA provisions, and has taken legislative action to  extend selected provisions beyond their original dates of expiration.  Specifically, Congress and the President enacted laws to:  remove the expiration date for enhanced transparency and improved  risk management provisions, which were set to expire in 2019;  remove the expiration date for portfolio review, which was set to  expire in 2019; and extend the expiration date for FDCCI from 2018 to 2020.", "In addition, Congress and the President enacted a law to authorize the  availability  of funding mechanisms to help further agencies\u2019 efforts to  modernize IT. The law, known as the Modernizing Government  Technology (MGT) Act, authorizes agencies to establish working capital  funds for use in transitioning from legacy IT systems, as well as for  addressing evolving threats to information security. The law also creates  the Technology Modernization  Fund, within the Department of the  Treasury, from which agencies can \u201cborrow\u201d money to retire and replace  legacy systems, as well as acquire or develop systems.", "Further, in February 2018, OMB issued guidance for agencies to  implement the MGT Act. The guidance was intended to provide  agencies additional information regarding the Technology Modernization  Fund, and the administration and funding of the related IT working capital  funds. Specifically, the guidance allowed agencies to begin submitting  initial project proposals for modernization on February 27, 2018. In  addition, in accordance with the MGT Act, the guidance provides details  regarding a Technology Modernization Board, which is to consist of (1)  the Federal CIO; (2) a senior official from the General Services  Administration; (3) a member of DHS\u2019s National Protection and Program  Directorate; and (4) four federal employees with technical expertise in IT  development, financial management, cybersecurity and privacy, and  acquisition, appointed by the Director of OMB."], "subsections": []}, {"section_title": "FISMA Establishes Responsibilities for Agencies to Address Federal Cybersecurity", "paragraphs": ["Congress and the President enacted the Federal Information Security  Modernization Act of 2014 (FISMA) to improve federal cybersecurity  and clarify government-wide responsibilities. The act addresses the  increasing sophistication of cybersecurity attacks, promotes the use of  automated security tools with the ability to continuously monitor and  diagnose the security posture of federal agencies, and provides for  improved oversight of federal agencies\u2019 information security programs.", "Specifically, the act clarifies and assigns additional responsibilities to  entities such as OMB, DHS, and the federal agencies. Table 1 describes  a selection of OMB, DHS, and agency responsibilities."], "subsections": []}, {"section_title": "The Current Administration Has Undertaken Efforts to Improve, Modernize, and Strengthen the Security of Federal IT", "paragraphs": ["Beyond the implementation of FITARA,  FISMA,  and related actions, the  current administration has also initiated other efforts intended to improve  federal IT. Specifically, in March 2017, the administration established the  Office of American Innovation,  which has a mission to, among other  things, make recommendations to the President on policies and plans  aimed at improving federal government operations and services. In doing  so, the office is to consult with both OMB and the Office of Science and  Technology Policy on policies and plans intended to improve government  operations and services, improve the quality of life for Americans, and  spur job creation.", "In May 2017, the Administration also established the American  Technology Council, which has a goal of helping to transform and  modernize federal agency IT and how the federal government uses and  delivers digital services. The President is the chairman of this council,  and the Federal CIO and the United States Digital Service Administrator  are among the members.", "In addition, on May 11, 2017, the President signed Executive Order  13800, Strengthening the Cybersecurity of Federal Networks and Critical  Infrastructure. This executive order outlined actions to enhance  cybersecurity across federal agencies and critical infrastructure to  improve the nation\u2019s cyber posture and capabilities against cyber security  threats. Among other things, the order tasked the Director of the  American Technology Council to coordinate a report to the President  from the Secretary of DHS, the Director of OMB, and the Administrator of  the General Services Administration, in consultation with the Secretary of  Commerce, regarding the modernization of federal IT. As a result, the  Report to the President on Federal IT Modernization was issued on  December 13, 2017, and outlined the current and envisioned state of  federal IT. The report focused on modernization efforts to improve the  security posture of federal IT and recognized that agencies have  attempted to modernize systems but have been stymied by a variety of  factors, including resource prioritization, ability to procure services  quickly, and technical issues. The report provided multiple  recommendations intended to address these issues through the  modernization and consolidation of networks and the use of shared  services to enable future network architectures.", "Further, in March 2018, the Administration issued the President\u2019s  Management Agenda, which lays out a long-term vision for modernizing  the federal government. The agenda identifies three related drivers of  transformation\u2014IT modernization; data, accountability, and transparency;  and the workforce of the future\u2014that are intended to push change across  the federal government.", "The Administration also established 14 related Cross-Agency Priority  goals, many of which have elements that involve IT. In particular, the  Cross-Agency Priority goal on IT modernization states that modern IT  must function as the backbone of how government serves the public in  the digital age and provides three priorities that are to guide the  Administration\u2019s efforts to modernize federal IT: (1) enhancing mission  effectiveness by improving the quality and efficiency of critical services,  including the increased utilization of cloud-based solutions; (2) reducing  cybersecurity risks to the federal mission by leveraging current  commercial capabilities and implementing cutting edge cybersecurity  capabilities; and (3) building a modern IT workforce by recruiting,  reskilling, and retaining professionals able to help drive modernization  with up-to-date technology.", "Most recently, on May 15, 2018, the President signed Executive Order  13833, Enhancing the Effectiveness of Agency Chief Information Officers.  Among other things, this executive order is intended to better position  agencies to modernize their IT systems, execute IT programs more  efficiently, and reduce cybersecurity risks. The order pertains to 22 of  the 24 Chief Financial Officer Act agencies: the Department of Defense  and the Nuclear Regulatory Commission are exempt.", "For the covered agencies, the executive order strengthens the role of  agency CIOs by, among other things, requiring to report directly to their  agency head; to serve as their agency head\u2019s primary IT strategic  advisor; and to have a significant role in all management, governance,  and oversight processes related to IT. In addition, one of the  cybersecurity requirements directs agencies to ensure that the CIO works  closely with an integrated team of senior executives, including those with  expertise in IT, security, and privacy, to implement appropriate risk  management measures."], "subsections": []}]}, {"section_title": "Agencies Have Not Fully Addressed the IT Acquisitions and Operations High-Risk Area", "paragraphs": ["In the February 2017 update to our high-risk series, we reported that   agencies still needed to complete significant work related to the  management of IT acquisitions and operations  We stressed that OMB  and federal agencies should continue to expeditiously implement FITARA  and OMB\u2019s related guidance, which include enhancing CIO authority,  consolidating data centers, and acquiring and managing software  licenses.", "Our update to this high-risk area also stressed that OMB and agencies  needed to continue to implement our prior recommendations in order to  improve their ability to effectively and efficiently invest in IT. Specifically,  from fiscal years 2010 through 2015, we made 803 recommendations to  OMB and federal agencies to address shortcomings in IT acquisitions and  operations. In addition, in fiscal year 2016, we made 202 new  recommendations, thus, further reinforcing the need for OMB and  agencies to address the shortcomings in IT acquisitions and operations.", "As stated in the update, OMB and agencies should demonstrate  government-wide progress in the management of IT investments by,  among other things, implementing at least 80 percent of our  recommendations related to managing IT acquisitions and operations  within 4 years. As of May 2018, OMB and agencies had fully implemented  489 (or about 61 percent) of the 803 recommendations. Figure 1  summarizes the progress that OMB and agencies have made in  addressing our recommendations as compared to the 80 percent target.", "Overall, federal agencies would be better positioned to realize billions in  cost savings and additional management improvements if they address  these recommendations, including those aimed at implementing CIO  responsibilities, review of IT acquisitions; improving data center  consolidation; and managing software licenses."], "subsections": [{"section_title": "Agencies Need to Address Shortcomings and Challenges in Implementing CIO Responsibilities", "paragraphs": ["In all, the various laws, such as FITARA, and related guidance assign  35 IT management responsibilities to CIOs in six key areas. These areas  are: leadership and accountability, budgeting, information security,  investment management, workforce, and strategic planning.", "In a draft report on CIO responsibilities that we have provided to the  agencies for comment and plan to issue in June 2018, our preliminary  results suggest that none of the 24 agencies we reviewed had policies  that fully addressed the role of their CIO, as called for by federal laws and  guidance. In this regard, a majority of the agencies fully or substantially  addressed the role of their CIOs for the area of leadership and  accountability. In addition, a majority of the agencies substantially or  partially addressed the role of their CIOs for two areas: information  security and IT budgeting. However, most agencies partially or minimally  addressed the role of their CIOs for two areas: investment management  and strategic planning. These preliminary results are shown in figure 2.", "Despite these shortfalls, most agency officials stated that their CIOs are  implementing the responsibilities even if the agencies do not have  policies requiring implementation.", "Nevertheless, the CIOs of the 24 selected agencies acknowledged in  responses to a survey that we administered for our draft report that they  were not always very effective in implementing the six IT management  areas. Specifically, our preliminary results show that at least 10 of the  CIOs indicated that they were less than very effective for each of the six  areas of responsibility. We believe that until agencies fully address the  role of CIOs in their policies, agencies will be limited in addressing  longstanding IT management challenges.", "Figure 3 depicts that extent to which the CIOs reported their effectiveness  in implementing the six areas of responsibility.", "Beyond the actions of the agencies, however, our preliminary results  indicate that shortcomings in agencies\u2019 policies also are partially  attributable to two weaknesses in OMB\u2019s FITARA  implementation  guidance. First, the guidance does not comprehensively address all CIO  responsibilities, such as those related to assessing the extent to which  personnel meet IT management knowledge and skill requirements, and  ensuring that personnel are held accountable for complying with the  information security program. Correspondingly, the majority of the  agencies\u2019 policies did not fully address nearly all of the responsibilities  that were not included in OMB\u2019s guidance.", "Second, OMB\u2019s guidance does not ensure that CIOs have a significant  role in (1) IT planning, programming, and budgeting decisions and (2)  execution decisions and the management, governance, and oversight  processes related to IT, as required by federal law and guidance. In the  absence of comprehensive guidance, CIOs will not be positioned to  effectively acquire, maintain, and secure their IT systems.", "Based on our preliminary results, 24 agency CIOs also identified a  number of factors that enabled and challenged their ability to effectively  manage IT. As shown in figure 4, five factors were identified by at least  half of the 24 CIOs as major enablers and three factors were identified by  at least half of the CIOs as major challenges. Specifically, most agency  CIOs cited five factors as being enablers to effectively carry out their  responsibilities: (1) NIST guidance, (2) the CIO\u2019s position in the agency  hierarchy, (3) OMB guidance, (4) coordination with the Chief Acquisition  Officer (CAO), and (5) legal authority. Further, three factors were cited by  CIOs as major factors that have challenged their ability to effectively carry  out responsibilities: (1) processes for hiring, recruiting, and retaining IT  personnel; (2) financial resources; and (3) the availability  of  personnel/staff resources.", "As our draft report states, although OMB has issued guidance aimed at  addressing the three factors that were identified by at least half of the  CIOs as major challenges, the guidance does not fully address those  challenges. Further, regarding the financial resources challenge, OMB  recently required agencies to provide data on CIO authority over IT  spending; however, its guidance does not provide a complete definition of  the authority. We believe that in the absence of such guidance, agencies  have created varying definitions of CIO authority. Further, until OMB  updates its guidance to include a complete definition of the authority that  CIOs are to have over IT spending, it will be difficult for OMB to identify  any deficiencies in this area and to help agencies make any needed  improvements.", "In order to address challenges in implementing CIO responsibilities, we  intend to include in our draft report recommendations to OMB and each of  the selected 24 federal agencies to improve the effectiveness of CIOs\u2019  implementation of their responsibilities for each of the six IT management  areas."], "subsections": []}, {"section_title": "Agencies Need to Ensure That IT Acquisitions Are Reviewed and Approved by CIOs", "paragraphs": ["FITARA includes a provision to enhance covered agency CIOs\u2019 authority  through, among other things, requiring agency heads to ensure that CIOs  review and approve IT contracts. OMB\u2019s FITARA implementation  guidance expanded upon this aspect of the legislation in a number of  ways. Specifically, according to the guidance:", "CIOs may review and approve IT acquisition strategies and plans,  rather than individual IT contracts;", "CIOs can designate other agency officials to act as their  representatives, but the CIOs must retain accountability;", "CAOs are responsible for ensuring that all IT contract actions are  consistent with CIO-approved acquisition strategies and plans; and", "CAOs are to indicate to the CIOs when planned acquisition strategies  and acquisition plans include IT.", "In January 2018, we reported that most of the CIOs at 22 selected  agencies  were not adequately involved in reviewing billions of dollars of  IT acquisitions. For instance, most of the 22 agencies did not identify all  of their IT contracts. In this regard, the agencies identified 78,249 IT- related contracts, to which they obligated $14.7 billion in fiscal year 2016.  However, we identified 31,493 additional contracts with $4.5 billion  obligated, raising the total amount obligated by these agencies to IT  contracts in fiscal year 2016 to at least $19.2 billion. Figure 5 reflects the  obligations that the 22 selected agencies reported to us relative to the  obligations we identified.", "The percentage of additional IT contract obligations we identified varied  among the selected agencies. For example, the Department of State did  not identify 1 percent of its IT contract obligations. Conversely, 8  agencies did not identify over 40 percent of their IT contract obligations.", "Many of the selected agencies that did not identify these IT contract  obligations did not follow OMB guidance. Specifically, 14 of the 22  agencies did not involve the acquisition office in their process to identify  IT acquisitions for CIO review, as required by OMB. In addition, 7  agencies did not establish guidance to aid officials in recognizing IT. We  concluded that until these agencies involve the acquisitions office in their  IT acquisition identification processes and establish supporting guidance,  they cannot ensure that they will identify all IT acquisitions. Without  proper identification of IT acquisitions, these agencies and CIOs cannot  effectively provide oversight of these acquisitions.", "In addition to not identifying all IT contracts, 14 of the 22 selected  agencies did not fully satisfy OMB\u2019s requirement that the CIO review and  approve IT acquisition plans or strategies. Further, only 11 of 96  randomly selected IT contracts at 10 agencies that we evaluated were  CIO-reviewed and approved as required by OMB\u2019s guidance. The 85 IT  contracts not reviewed had a total possible value of approximately $23.8  billion.", "We believe that until agencies ensure that CIOs are able to review and  approve all IT acquisitions, CIOs will continue to have limited visibility and  input into their agencies\u2019 planned IT expenditures and will not be able to  use the increased authority that FITARA\u2019s contract approval provision is  intended to provide. Further, agencies will likely miss an opportunity to  strengthen CIOs\u2019 authority and the oversight of IT acquisitions. As a  result, agencies may award IT contracts that are duplicative, wasteful, or  poorly conceived.", "As a result of these findings, we made 39 recommendations in our  January 2018 report. The recommendations included that agencies  ensure that their acquisition offices are involved in identifying IT  acquisitions and issuing related guidance, and that IT acquisitions are  reviewed in accordance with OMB guidance. OMB and the majority of the  agencies generally agreed with or did not comment on the  recommendations."], "subsections": []}, {"section_title": "Agencies Have Made Progress in Consolidating Data Centers, but Need to Take Action to Achieve Planned Cost Savings", "paragraphs": ["In our February 2017 high-risk update, we stated that OMB and agencies  needed to demonstrate additional progress on achieving data center  consolidation savings in order to improve the management of IT  acquisitions and operations. Further, data center consolidation efforts are  key to implementing FITARA. Specifically, OMB established the FDCCI in  February 2010 to improve the efficiency, performance, and environmental  footprint of federal data center activities. The enactment of FITARA in  2014 codified and expanded the initiative.", "In a series of reports that we issued from July 2011 through August 2017,  we noted that, while data center consolidation could potentially save the  federal government billions of dollars, weaknesses existed in several  areas, including agencies\u2019 data center consolidation plans, data center  optimization, and OMB\u2019s tracking and reporting on related cost savings.  In these reports, we made a total of 160 recommendations to OMB and  24 agencies to improve the execution and oversight of the initiative. Most  agencies and OMB agreed with our recommendations or had no  comments. As of May 2018, 80 of these 160 recommendations remained  unimplemented.", "Further, we recently reported in May 2018 that the 24 agencies  participating in OMB\u2019s Data Center Optimization Initiative  (DCOI) had  communicated mixed progress toward achieving OMB\u2019s goals for closing  data centers by September 2018. Over half of the agencies reported  that they had either already met, or planned to meet, all of their OMB- assigned goals by the deadline. This would result in the closure of 7,221  of the 12,062 centers that agencies reported in August 2017. However, 4  agencies reported that they do not have plans to meet all of their  assigned goals and 2 agencies are working with OMB to establish revised  targets. With regard to agencies\u2019 progress in achieving cost savings, 24  agencies reported $3.9 billion in cost savings through 2018.", "The 24 agencies also reported limited progress against OMB\u2019s five data  center optimization targets for server utilization and automated  monitoring, energy metering, power usage effectiveness, facility  utilization, and virtualization. As of August 2017, 1 agency reported that it  had met four targets, 1 agency reported that it had met three targets, 6  agencies reported having met either one or two targets, and 14 agencies  reported meeting none of the targets.", "Further, as of August 2017, most agencies were not planning to meet  OMB\u2019s fiscal year 2018 optimization targets. Specifically, 4 agencies  reported plans to meet all of their applicable targets by the end of fiscal  year 2018; 14 agencies reported plans to meet some of the targets; and 4  reported that they did not plan to meet any targets. Figure 6 summarizes  agency-reported plans to meet or exceed the OMB\u2019s data center  optimization targets, as of August 2017.", "In 2016 and 2017, we made 81 recommendations to OMB and the 24  DCOI agencies to help improve the reporting of data center-related cost  savings and to achieve optimization targets. As of May 2018, 71 of these  81 recommendations have not been fully addressed."], "subsections": []}, {"section_title": "Agencies Need to Better Manage Software Licenses to Achieve Savings", "paragraphs": ["In our 2015 high-risk report\u2019s discussion of IT acquisitions and operations,  we identified the management of software licenses as an area of concern,  in part because of the potential for cost savings. Federal agencies  engage in thousands of software licensing agreements annually. The  objective of software license management is to manage, control, and  protect an organization\u2019s software assets. Effective management of these  licenses can help avoid purchasing too many licenses, which can result in  unused software, as well as too few licenses, which can result in  noncompliance with license terms and cause the imposition of additional  fees.", "As part of its PortfolioStat initiative, OMB has developed policy that  addresses software licenses. This policy requires agencies to conduct an  annual, agency-wide IT portfolio review to, among other things, reduce  commodity IT spending. Such areas of spending could include software  licenses.", "In May 2014, we reported on federal agencies\u2019 management of software  licenses and determined that better management was needed to achieve  significant savings government-wide. Of the 24 selected agencies we  reviewed, only 2 had comprehensive policies that included the  establishment of clear roles and central oversight authority for managing  enterprise software license agreements, among other things. Of the  remaining 22 agencies, 18 had policies that were not comprehensive, and  4 had not developed any policies.", "Further, we found that only 2 of the 24 selected agencies had established  comprehensive software license inventories, a leading practice that would  help them to adequately manage their software licenses. The inadequate implementation of this and other leading practices in software license  management was partially due to weaknesses in agencies\u2019 policies. As a  result, we concluded that agencies\u2019 oversight of software license  spending was limited or lacking, thus potentially leading to missed  savings. However, the potential savings could be significant considering  that, in fiscal year 2012, 1 major federal agency reported saving  approximately $181 million by consolidating its enterprise license  agreements, even when its oversight process was ad hoc.", "Accordingly, we recommended that OMB issue a directive to help guide  agencies in managing software licenses. We also made 135  recommendations to the 24 agencies to improve their policies and  practices for managing licenses. Among other things, we recommended  that the agencies regularly track and maintain a comprehensive inventory  of software licenses and analyze the inventory to identify opportunities to  reduce costs and better inform investment decision making.", "Most agencies generally agreed with the recommendations or had no  comments. As of May 2018, 78 of the 135 recommendations had not  been implemented. Table 2 reflects the extent to which the 24 agencies  implemented the recommendations in these two areas."], "subsections": []}]}, {"section_title": "Agencies Need to Address Shortcomings in Information Security Area", "paragraphs": ["Since information security was added to the high-risk list in 1997, we  have consistently identified shortcomings in the federal government\u2019s  approach to cybersecurity. We have previously testified that, even  though agencies have acted to improve the protections over federal and  critical infrastructure information and information systems, the federal  government needs to take the following actions to strengthen U.S.  cybersecurity:", "Effectively implement risk-based entity-wide information security  programs consistently over time. Among other things, agencies  need to (1) implement sustainable processes for securely configuring  operating systems, applications, workstations, servers, and network  devices; (2) patch vulnerable systems and replace unsupported  software; (3) develop comprehensive security test and evaluation  procedures and conduct examinations on a regular and recurring  basis; and (4) strengthen oversight of contractors providing IT  services.  Improve its cyber incident detection, response, and mitigation  capabilities. DHS needs to expand the capabilities and support wider  adoption of its government-wide intrusion detection and prevention  system. In addition, the federal government needs to improve cyber  incident response practices, update guidance on reporting data  breaches, and develop consistent responses to breaches of  personally identifiable information.", "Expand its cyber workforce planning and training efforts. The  federal government needs to (1) enhance efforts for recruiting and  retaining a qualified cybersecurity workforce and (2) improve  cybersecurity workforce planning activities.", "Expand efforts to strengthen cybersecurity of the nation\u2019s critical  infrastructures. The federal government needs to develop metrics to  (1) assess the effectiveness of efforts promoting the National Institute  of Standards and Technology\u2019s (NIST) Framework for Improving  Critical Infrastructure Cybersecurity and (2) measure and report on  the effectiveness of cyber risk mitigation activities and the  cybersecurity posture of critical infrastructure sectors.", "Better oversee protection of personally identifiable information.  The federal government needs to (1) protect the security and privacy  of electronic health information, (2) ensure privacy when face  recognition systems are used, and (3) protect the privacy of users\u2019  data on state-based health insurance marketplaces.", "As we have previously noted, in order to take the preceding actions and  strengthen the federal government\u2019s cybersecurity posture, agencies  should implement the information security programs required by FISMA.  In this regard, FISMA  provides a framework for ensuring the effectiveness  of information security controls for federal information resources. The law  requires each agency to develop, document, and implement an agency- wide information security program. Such a program includes risk  assessments; the development and implementation of policies and  procedures to cost-effectively reduce risks; plans for providing adequate  information security for networks, facilities, and systems; security  awareness and specialized training; the testing and evaluation of the  effectiveness of controls; the planning, implementation, evaluation, and  documentation of remedial actions to address information security  deficiencies; procedures for detecting, reporting, and responding to  security incidents; and plans and procedures to ensure continuity of  operations.", "Since 2010, we have made 2,733 recommendations to agencies aimed at  improving the security of federal systems and information. These  recommendations have identified actions for agencies to take to  strengthen technical security controls over their computer networks and  systems. They also have included recommendations for agencies to fully  implement aspects of their information security programs, as mandated  by FISMA.  Nevertheless, many agencies continue to be challenged in  safeguarding their information systems and information, in part because  many of these recommendations have not been implemented. As of May  2018, 793 of information security-related recommendations we have  made have not been implemented."], "subsections": [{"section_title": "Agencies\u2019 Inspectors General Are to Identify Information Security Program Weaknesses", "paragraphs": ["In order to determine the effectiveness of the agencies\u2019 information  security programs and practices, FISMA  requires that federal agencies\u2019  inspectors general conduct annual independent evaluations. The  agencies are to report the results of these evaluations to OMB, and OMB  is to summarize the results in annual reports to Congress.", "In these evaluations, the inspectors general frame the scope of their  analysis, identify key findings, and detail recommendations to address the  findings. The evaluations also are to capture maturity model ratings for  their respective agencies. Toward this end, in fiscal year 2017, the  inspector general community, in partnership with OMB and DHS, finalized  a 3-year effort to create a maturity model for FISMA  metrics that align to  the five function areas in the NIST Framework for Improving Critical  Infrastructure Cybersecurity (Cybersecurity Framework): identify, protect,  detect, respond, and recover. This alignment is intended to help  promote consistent and comparable metrics and criteria and provides  agencies with a meaningful independent assessment of their information  security programs.", "This maturity model is designed to summarize the status of agencies\u2019  information security programs on a five-level capability maturity scale.  The five maturity levels are defined as follows:", "Level 1 Ad-hoc: Policies, procedures, and strategy are not formalized;  activities are performed in an ad-hoc, reactive manner.", "Level 2 Defined: Policies, procedures, and strategy are formalized  and documented but not consistently implemented.", "Level 3 Consistently Implemented: Policies, procedures, and strategy  are consistently implemented, but quantitative and qualitative  effectiveness measures are lacking.", "Level 4 Managed  and Measurable: Quantitative and qualitative  measures on the effectiveness of policies, procedures, and strategy  are collected across the organizations and used to assess them and  make necessary changes.", "Level 5 Optimized: Policies, procedures, and strategy are fully  institutionalized, repeatable, self-generating, consistently implemented  and regularly updated based on a changing threat and technology  landscape and business/mission needs.", "In March 2018, OMB issued its annual FISMA  report to Congress, which  showed the combined results of the inspectors general\u2019s fiscal year 2017  evaluations. Based on data from 76 agency inspector general and  independent auditor assessments, OMB determined that the  government-wide median maturity model ratings across the five NIST  Cybersecurity Framework areas did not exceed a level 3 (consistently  implemented). Table 3 shows the inspectors general\u2019s median ratings for  each of the NIST Cybersecurity Framework areas."], "subsections": []}, {"section_title": "OMB Requires Agencies to Meet Targets for Cybersecurity Metrics", "paragraphs": ["In its efforts toward strengthening the federal government\u2019s cybersecurity,  OMB also requires agencies to submit related cybersecurity metrics as  part of its Cross-Agency Priority goals. In particular, OMB developed the  IT modernization goal so that federal agencies will be able to build and  maintain more modern, secure, and resilient IT. A key part of this goal is  to reduce cybersecurity risks to the federal mission through three  strategies: manage asset security, protect networks and data, and limit  personnel access. The key targets supporting each of these strategies  correspond to areas within the FISMA  metrics. Table 4 outlines the  strategies and their associated targets.", "In conclusion, FITARA and FISMA  present opportunities for the federal  government to address the high-risk areas on improving the management  of IT acquisitions and operations, and ensuring the security of federal IT,  thereby saving billions of dollars. Most agencies have taken steps to  execute key IT management and cybersecurity initiatives, including  implementing CIO responsibilities, requiring CIO review of IT acquisitions,  realizing data center consolidation cost savings, managing software  assets, and complying with FISMA  requirements. The agencies have also  continued to address the recommendations that we have made over the  past several years. However, further efforts by OMB and federal agencies  to implement our previous recommendations would better position them  to improve the management and security of federal IT. To help ensure  that these efforts succeed, we will continue to monitor agencies\u2019 efforts  toward implementing these recommendations.", "Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly,  and Members of the Subcommittees, this completes my prepared  statement. I would be pleased to respond to any questions that you may  have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact David A. Powner, Director, Information Technology, at (202) 512- 9286 or pownerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Kevin Walsh (Assistant Director), Chris Businsky, Rebecca Eyler,  Meredith Raymond, and Jessica Waselkow (Analyst in Charge).", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-126", "url": "https://www.gao.gov/products/GAO-18-126", "title": "Nuclear Weapons: NNSA Should Clarify Long-Term Uranium Enrichment Mission Needs and Improve Technology Cost Estimates", "published_date": "2018-02-16T00:00:00", "released_date": "2018-02-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NNSA has several mission needs for enriched uranium, including providing LEU to fuel a nuclear reactor that produces tritium\u2014a key isotope used in nuclear weapons. NNSA has a pressing defense need for unobligated LEU to fuel this reactor, meaning the uranium, technology and equipment used to produce the LEU, must be U.S. in origin. Because the United States lost its only source of unobligated LEU production in 2013, the supply is finite.", "A House Armed Services Committee report included a provision for GAO to assess NNSA's plans to manage tritium and enriched uranium. This report examines (1) the actions NNSA is taking to extend its existing LEU inventories to address near-term tritium needs; (2) the extent to which NNSA's plan to analyze long-term options for supplying enriched uranium is consistent with DOE directives; and (3) NNSA's preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates. GAO analyzed NNSA plans on costs, schedules, and risks; compared them with its guide on best practices in cost estimating; and interviewed NNSA and other officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy (DOE), is taking or plans to take four actions to extend inventories of low-enriched uranium (LEU) that is unobligated, or carries no promises or peaceful use to foreign trade partners until about 2038 to 2041. Two of the actions involve preserving supplies of LEU, and the other two involve diluting highly enriched uranium (HEU) with lower enriched forms of uranium to produce LEU. GAO reviewed these actions and found the actual costs and schedules for those taken to date generally align with estimates. NNSA and GAO have identified risks associated with two of these actions. One of these risks has been resolved; NNSA is taking steps to mitigate another, while others, such as uncertainty of future appropriations, are unresolved.", "NNSA's preliminary plan for analyzing options to supply unobligated enriched uranium in the long term is inconsistent with DOE directives for the acquisition of capital assets, which state that the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. The scope of the mission need statement that NNSA has developed can be interpreted to meet two different mission needs: (1) a need for enriched uranium for multiple national security needs, including tritium, and (2) a specific need for enriched uranium to produce tritium. The DOE directives also state that mission need should be independent of and not defined by a particular solution. However, NNSA is showing preference toward a particular solution\u2014building a new uranium enrichment capability\u2014and the agency has not included other technology options for analysis. Without (1) revising the scope of the mission need statement to clarify the mission need it seeks to achieve and (2) adjusting the range of options it considers in the analysis of alternatives process, NNSA may not consider all options to satisfy its mission need.", "Although the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium enrichment technology options\u2014the large and small centrifuge\u2014that the agency considers to be the most feasible. However, these estimates are limited in scope and do not fully meet best practices for reliable cost estimates. Based on GAO's review of NNSA documents, NNSA appears to favor an incremental approach to reestablishing an enrichment capability that could ultimately meet all national security needs for enriched uranium. The estimates' scope is limited, however, in that they reflect only the costs of the first increment\u2014producing LEU for tritium\u2014and do not reflect the full costs of building a uranium enrichment facility that could meet the range of enriched uranium needs. GAO's cost guide\u2014which provides cost estimating best practices\u2014states that the scope of preliminary cost estimates should reflect full life-cycle costs. Also, NNSA's estimates for the two options minimally or partially met best practice characteristics for reliable cost estimates even when assessed for the more limited mission scope. For example, the estimates excluded certain costs and did not describe the calculations used. NNSA officials said that the cost estimates are preliminary and will be revised. By developing reliable cost estimates that are aligned with the revised mission need statement and consistent with best practices, NNSA will reasonably ensure that it has reliable information to make a decision about which option to select."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, including that NNSA revise the scope of its mission need statement and ensure that the scope of its cost estimates are aligned with the revised statement while developing estimates consistent with best practices. NNSA described actions planned and in process to address both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The National Nuclear Security Administration (NNSA), a separately  organized agency within the Department of Energy (DOE), is responsible  for the management and security of the nation\u2019s nuclear weapons, as well  as nonproliferation programs and the Naval Nuclear Propulsion program,  which supports reactor design and production for the U.S. nuclear- powered naval fleet. Uranium, at various levels of enrichment, is  important for the achievement of all of these missions. Specifically,  NNSA has identified several national security and other needs for  enriched uranium, including: (1) producing tritium which is a necessary  component of nuclear weapons, through an existing process in a  Tennessee Valley Authority (TVA) reactor that uses low enriched  uranium (LEU) as fuel; (2) supplying highly enriched uranium (HEU) to  meet the U.S. Navy\u2019s needs for its nuclear powered aircraft carriers and  submarines; and (3) providing \u201chigh assay\u201d LEU for medical isotope  production and research reactor fuel. According to DOE, only unobligated  uranium can be used to achieve NNSA\u2019s national security missions. All  uranium is considered unobligated when neither the uranium nor the  technology or equipment used to enrich it carries an \u201cobligation\u201d to a  foreign country. These obligations are established under international  agreements that describe the conditions for civilian nuclear cooperation  between the United States and foreign partners. Uranium or uranium- related technology subject to peaceful-use obligations under such  agreements cannot be used for military purposes by the United States.  The United States lost its sole supplier of unobligated enrichment  services when the last operating enrichment plant using U.S. technology  ceased enriching uranium in May 2013. As a result, NNSA\u2019s supply of  unobligated LEU is finite and becoming increasingly scarce. In May 2014,  NNSA projected that its inventory of unobligated LEU fuel for tritium  production would last through 2027.", "In 2014 and 2015, Congress required NNSA to submit analyses of its  options to meet tritium and enriched uranium needs for national security  purposes. In October 2015, NNSA released its Tritium and Enriched  Uranium Management Plan Through 2060, which presented several  actions\u2014along with their projected costs, schedules, and risks\u2014to extend  its existing inventories of enriched uranium to address its near-term need  for tritium. In addition, NNSA identified technical and other options to  ensure an adequate long term supply of tritium and enriched uranium in  support of national security and other needs.", "The House Armed Services Committee report accompanying H.R. 4909,  a bill for the National Defense Authorization Act for Fiscal Year 2017  included a provision for GAO to assess NNSA\u2019s October 2015 plan and  subsequent actions to manage tritium and enriched uranium. This report examines: (1) the actions NNSA is taking to extend its existing inventories  of enriched uranium to address near term tritium needs and the costs,  schedules, and risks of those actions; (2) the extent to which NNSA\u2019s plan  to analyze options for supplying enriched uranium in the long term is  consistent with DOE directives; and (3) NNSA\u2019s preliminary cost  estimates for long-term uranium enrichment technology options and the  extent to which they meet best practices for reliable estimates.", "To address all three objectives, we analyzed NNSA planning  documents\u2014as well as other key agency strategies and implementation  plans\u2014and interviewed officials from NNSA and DOE, the Department of  Defense (DOD), the Department of State (State), TVA, and private  companies that play a role in the production of enriched uranium. We also  visited DOE\u2019s Oak Ridge National Laboratory (ORNL), where work  continues on uranium enrichment technology; NNSA\u2019s Y-12 National  Security Complex in Tennessee, which is involved in the management of  enriched uranium; and the American Centrifuge demonstration plant in  Ohio, where an advanced uranium enrichment technology was in  development until 2016, to understand the technical and policy issues  that affect the current LEU inventory and that may affect the future supply  of unobligated LEU.", "To examine the actions that NNSA is taking to extend its existing  inventories of enriched uranium to address its near-term tritium needs  and the costs, schedules, and risks of those actions, we reviewed agency  documents pertaining to these actions. We also obtained and analyzed  NNSA information on actual costs and schedules for each action, where  available, and compared that information against estimated costs and  schedules. We identified risks associated with each action by reviewing  NNSA documentation and interviewing NNSA and TVA officials and a  representative of a private company involved in the actions.", "To examine the extent to which NNSA\u2019s plan to analyze options for  supplying enriched uranium in the long term is consistent with DOE  directives, we reviewed NNSA and ORNL documentation and interviewed  federal officials from NNSA and the State Department as well as ORNL  and NNSA contractor representatives regarding efforts NNSA has taken  to identify potential options and preliminarily assess their feasibility. We  evaluated NNSA\u2019s plan against DOE directives, such as DOE Order  413.3B Program and Project Management for the Acquisition of Capital  Assets and associated guidance, such as G 413.3-4A Technology  Readiness Assessment Guide, and G 413.3-17 Mission Need Statement  Guide.", "To examine NNSA\u2019s preliminary cost estimates for long-term uranium  enrichment technology options and the extent to which they meet best  practices for reliable estimates, we reviewed NNSA and contractor  planning, analysis, and cost documents. We compared the information in  those documents to GAO\u2019s Cost Estimating and Assessment Guide (cost  guide), which is a compilation of best practices for federal cost estimating  organizations and industry to use, develop, and maintain reliable cost  estimates throughout the life of an acquisition program. According to the  cost guide, reliable cost estimates feature four characteristics\u2014 comprehensive, well-documented, accurate, and credible. These best  practices apply to cost estimates throughout a project\u2019s life cycle,  including early, rough-order-of-magnitude estimates developed at or  before project initiation. We interviewed an NNSA official and a  representative from the contractor who prepared the preliminary cost  estimates about their methodologies and the results that were used to  support the preliminary cost estimates. We assessed the information we  gathered against best practices and shared our preliminary analysis with  NNSA officials to obtain their perspectives and identify reasons for any  observed shortfalls compared with cost-estimating best practices. We  reviewed their comments and any additional information they provided  and incorporated them to finalize our assessment. See appendix I for  additional information on our objectives, scope, and methodology.", "We conducted this performance audit from August 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Nuclear Fuel Production and Uranium Enrichment Technologies", "paragraphs": ["Uranium is a naturally occurring radioactive element that is enriched to  fuel nuclear power plants and that can also be used to meet certain  national security purposes. Natural uranium is comprised of  approximately 99.3 percent of the uranium-238 isotope and 0.7 percent of  the uranium-235 isotope\u2014which undergoes fission to release energy.  Uranium enrichment is the process of increasing the concentration of  uranium-235 in a quantity of natural uranium to make LEU to fuel nuclear  power plants, or to make HEU, which is used in nuclear weapons and as  fuel by the U.S. Navy. Generally, to produce enriched uranium, uranium is  extracted or mined from underground deposits, converted from a solid to  a gas, enriched to increase its concentration of uranium-235, and then  fabricated into fuel elements, such as rods for commercial nuclear  reactors, appropriate for their ultimate use. These steps make up the  nuclear fuel cycle (see fig. 1). After the fuel has been irradiated in a  nuclear power reactor, it is considered \u201cspent\u201d nuclear fuel. Spent fuel can  be chemically reprocessed, and the enriched uranium recycled for reuse.  The United States used to reprocess spent nuclear fuel but has not done  so since the mid-1970s, primarily to discourage other countries from  pursuing reprocessing because of concerns over nuclear proliferation, as  we have previously reported. Currently, in the United States, spent fuel is  stored as waste.", "LEU can also be produced by downblending HEU to LEU. This involves  mixing HEU with a \u201cdiluent\u201d or other forms of uranium\u2014such as natural  uranium\u2014to reduce the concentration of the uranium-235 isotope in the  uranium and produce an overall lower level of enrichment.", "Until 2013, uranium was enriched in the United States both for national  security and commercial purposes. Beginning in the 1940s, DOE and its  predecessor agencies provided uranium enrichment services\u2014first for  national security purposes and later for the emerging commercial nuclear  power industry\u2014using government-owned gaseous diffusion plants. In  1992, the U.S. government established the United States Enrichment  Corporation (USEC) as a government corporation to take over operations  of DOE\u2019s enrichment facilities and to provide uranium enrichment  services for the U.S. government and utilities that operate nuclear power  plants. In 1998, the corporation was privatized under the USEC  Privatization Act. From 1998 until 2013, DOE relied exclusively on USEC  to obtain enrichment services for the production of LEU needed to  produce tritium. In May 2013, USEC ceased enrichment at its last  commercially active enrichment plant in Paducah, Kentucky, which it had  leased from DOE since the time of USEC\u2019s establishment. USEC has  been the only company to enrich uranium with U.S. technology.", "Gas centrifuge technology, rather than gaseous diffusion technology, is  currently used around the world to enrich uranium. Gas centrifuges work  by spinning uranium hexafluoride in a gas form inside a centrifuge rotor at  an extremely high speed. The rotation creates a strong centrifugal force,  which separates the lighter uranium-235 molecules from the heavier  uranium-238 molecules. The enrichment achieved by a single gas  centrifuge is not sufficient to achieve the desired assay, so a series of  centrifuges are connected together in a configuration called a cascade. In  the United States, URENCO\u2014a European enrichment consortium\u2014 operates a gas centrifuge enrichment plant in New Mexico.", "The obligations governing the use of foreign uranium enrichment  technology and nuclear material in the United States are established  under international agreements between the United States and foreign  partners. These agreements generally impose certain terms and  conditions on transfers of nuclear material and equipment, including,  among other things, requiring peaceful use of the material and  equipment. The agreements\u2019 peaceful-use provisions generally state that  material, equipment, and components subject to the agreements will not  be used for any nuclear explosive device, for research on or development  of any nuclear explosive device, or for any military purposes."], "subsections": []}, {"section_title": "National Security and Other Uses for Enriched Uranium", "paragraphs": ["This section discusses national security and other uses for enriched  uranium, such as tritium production, highly enriched uranium, and high- assay low enriched uranium.", "Tritium is a key isotope used in nuclear weapons. NNSA needs an  assured source of tritium to maintain the capabilities of the nuclear  stockpile and has called tritium a \u201cpressing\u201d defense need. However,  tritium has a relatively short half-life of 12.3 years and decays at a rate of  about 5.5 percent per year. It must be periodically replenished to  maintain the designed capability of the weapons. Some tritium may be  recycled from dismantled weapons, but the inventory must also be  replenished through the production of new tritium.", "At present, NNSA produces tritium through the use of one of TVA\u2019s  electricity-producing nuclear reactors fueled with unobligated LEU. Small  quantities of tritium are the normal by-products of electricity-producing  nuclear power plants, such as those owned and operated by TVA. To  produce more tritium than usual and later collect it, specially designed  targets\u2014called tritium-producing burnable absorber rods (TPBAR)\u2014are  loaded with the unobligated LEU and irradiated in TVA\u2019s Watts Bar 1  reactor. Irradiated TPBARs are unloaded during normal fuel reloading  and shipped to NNSA\u2019s Tritium Extraction Facility at the Savannah River  Site in South Carolina. There the tritium is extracted and prepared for use  in nuclear warheads and bombs (see fig. 2 for NNSA\u2019s tritium production  process).", "Prior to the use of TVA\u2019s reactor, the United States used other  government-owned reactors to produce tritium (see sidebar). In 1999,  TVA signed an interagency agreement with DOE to produce tritium at its  Watts Bar and Sequoyah commercial nuclear reactors. Since 2003,  TVA has been producing tritium for NNSA at its Watts Bar 1 reactor. TVA  does not have plans to use the Sequoyah reactors for tritium production  in the near term, according to a TVA document.", "History of U.S. Tritium Production   From 1954 until 1988, the United States  produced the majority of its tritium using  nuclear reactors at the Savannah River Site in  South Carolina. Smaller amounts of tritium  were also produced using nuclear reactors at  the Department of Energy\u2019s (DOE) Hanford  Site in Washington. When the site\u2019s last  operating reactor\u2014known as K Reactor\u2014was  shut down due to safety concerns in 1988, the  United States lost its capability to produce  tritium for the nuclear weapons stockpile.", "The amount of tritium that NNSA needs changes based on national  security requirements. In fiscal year 2015, NNSA conducted a review of  the tritium inventory and anticipated future demand. At that time, NNSA  determined that to meet future tritium demand a second TVA reactor  would be required to irradiate TPBARs and produce additional tritium.  Using a second TVA reactor would increase the amount of unobligated  LEU needed for tritium production using this process, according to NNSA  documents.", "NNSA also supplies HEU for national security and other missions. NNSA  provides HEU to fuel reactors for the U.S. Navy\u2019s aircraft carriers and  submarines. NNSA recovers HEU from excess dismantled nuclear  weapons. According to NNSA\u2019s October 2015 plan, HEU from these  sources will meet naval reactors\u2019 demand through 2060. After this time,  NNSA will need additional sources of HEU for naval nuclear reactors. To  satisfy non-defense demands, NNSA also supplies HEU to, among other  things, fuel research reactors for medical isotope production and other  research applications.", "In 1998, the Secretary of Energy announced  that DOE would turn to commercial light water  reactors as the sole means of meeting the  future demand for tritium. From 1988 to 1998,  DOE was able to meet its tritium requirements  by harvesting and recycling it from dismantled  nuclear warheads, as the United States  decreased the size of its nuclear arsenal.  However, because of tritium\u2019s short half-life,  DOE could not meet its long-term tritium  needs in this manner indefinitely. Since 2003,  the Tennessee Valley Authority (TVA) has  been producing tritium for National Nuclear  Security Administration (NNSA) at its Watts  Bar 1 commercial nuclear power reactor.", "NNSA\u2019s nonproliferation mission requires \u201chigh assay\u201d LEU\u2014meaning  LEU enriched in the uranium-235 isotope to below 20 percent but above  the standard 3 to 5 percent used in most commercial reactors\u2014for  research and isotope production reactor fuel. Since there are no  commercial uranium enrichment facilities licensed to produce high-assay  LEU, it must be produced by downblending HEU. According to NNSA  documents, the HEU inventory allocated for research and isotope  production reactors using high-assay LEU is projected to be exhausted by  around 2030. After this time, a new supply of high-assay LEU for  research and isotope production reactors will need to be identified."], "subsections": []}, {"section_title": "DOE Project Management", "paragraphs": ["NNSA has initiated a process to determine a long-term solution for  obtaining enriched uranium and tritium. DOE\u2019s Order 413.3B, Program  and Project Management for the Acquisition of Capital Assets, governs  how NNSA acquires capital assets with total project costs greater than  $50 million, which could include a new uranium enrichment capability or  other new capability to produce tritium. The stated goal of the order is to  deliver fully capable projects within the planned cost, schedule, and  performance baseline.", "Order 413.3B also establishes DOE\u2019s critical decision (CD) process.  This process divides the capital asset acquisition into five project phases  that progress from a broad statement of mission need, to requirements  that guide project execution, through design and construction, and  concludes with an operational facility. Each phase ends with a major  approval milestone\u2014or \u201ccritical decision\u201d\u2014that marks the successful  completion of that phase.", "A key activity during CD-0, the preconceptual design phase is the  preparation of a mission need statement. A mission need statement  identifies the capability gap between the current state of a program\u2019s  mission and the mission plan. DOE\u2019s Order 413.3B provides direction for  preparing a mission need statement, including that it be independent of a  particular solution, and that it should not be defined by equipment, facility,  technological solution, or physical end-item. This approach is to allow the  agency the flexibility to explore a variety of approaches and not  prematurely limit potential solutions.", "Under Order 413.3B, an analysis and selection of alternatives\u2014which  builds off the mission need\u2014should be conducted during the CD-1 phase,  the conceptual design phase. In addition to the requirements of Order 413.3B, DOE has guidance for identifying, analyzing, and selecting  alternatives that is found throughout the seven guides associated with the  order. Conducting the analysis of alternatives is a key first step to help  ensure that the selected alternative best meets the agency\u2019s mission  need and that this alternative is chosen on the basis of selection criteria,  such as safety, cost, or schedule. Figure 3 illustrates when DOE conducts  the analysis of alternatives as part of its project management process for  capital asset projects.", "In October 2016, NNSA approved a mission need statement for long-term  capability to supply unobligated enriched uranium for tritium production  and presented a preliminary set of options to meet that need. In  December 2016, DOE approved CD-0 to begin the acquisition of such a  capability. Consistent with direction in DOE Order 413.3B, NNSA has  begun conducting an analysis of alternatives that is to identify the option  that would best meet the mission need for a domestic uranium  enrichment capability. In August 2017, DOE and NNSA officials stated  that the analysis of alternatives will be completed by the end of 2019.", "Also, under DOE Order 413.3B, DOE\u2019s technology readiness levels (TRL)  are incorporated into the CD process. TRLs are used by federal agencies  and industry to assess the maturity of evolving technologies. TRLs are  measured along a scale of 1 to 9, beginning with TRL 1 (or basic  principles observed and reported) and ending with TRL 9 (or actual  system operated over the full range of expected mission conditions). DOE  guidance states that a TRL of 4\u2014system or component validation at  laboratory scale\u2014is recommended for CD-1 (conceptual design process).  Projects are encouraged to achieve a TRL of 7\u2014full scale demonstration  of a prototypical system in a relevant environment\u2014prior to CD-3 (final  design phase)."], "subsections": []}, {"section_title": "Best Practices for Project Cost Estimating", "paragraphs": ["In March 2009, we issued our cost guide to provide assistance to federal  agencies with preparing cost estimates, among other things. Drawing  from federal cost estimating organizations and industry, the cost guide  describes best practices for ensuring development of high-quality\u2014that  is, reliable\u2014cost estimates. A reliable cost estimate helps ensure that  management is given the information it needs to make informed  decisions. The cost guide identifies four characteristics of a reliable cost  estimate: (1) comprehensive, (2) well documented, (3) accurate, and (4)  credible. DOE\u2019s Order 413.3B states, among other things, that its cost  estimates shall be developed, maintained, and documented in a manner  consistent with methods and best practices identified in our cost guide,  DOE guidance, and applicable acquisition regulations and Office of  Management and Budget guidance.", "Our cost guide can be used to evaluate the reliability of rough-order-of- magnitude estimates. Rough-order-of-magnitude estimates are typically  used to support \u201cwhat-if\u201d analyses and are helpful in examining initial  differences in alternatives to identify which are most feasible. However,  the nature of a rough-order-of-magnitude estimate means that it is not as  robust as a detailed, budget-quality, life-cycle estimate and, according to  the guide, its results should not be considered or used with the same  level of confidence. Further, the cost guide states that because this  estimate is developed from limited data and in a short time, it should  never be considered a budget-quality cost estimate."], "subsections": []}]}, {"section_title": "NNSA Is Taking or Plans to Take Four Actions to Extend Existing Inventories of Enriched Uranium to Address its Near-term Tritium Needs", "paragraphs": ["NNSA is taking or plans to take four actions to extend its existing  inventories of unobligated enriched uranium to address its near-term  need for tritium and has generally identified the costs, schedules, and  risks for these actions. These actions would together extend the supply of  unobligated LEU from 2027 until approximately 2038 to 2041, according  to NNSA documents. NNSA first identified the actions to extend its  unobligated LEU supply based on an analysis completed by the DOE  Uranium Inventory Working Group, which was convened by NNSA in  September 2014 to analyze the department\u2019s uranium inventory and  identify material and options to provide unobligated LEU for tritium  production reactors. These actions were later presented in NNSA\u2019s  October 2015 plan.", "Of the four actions NNSA is taking or plans to take, two actions involve  nuclear material accounting practices that help preserve supplies of  unobligated LEU, and two of the actions involve downblending HEU.  NNSA has generally identified the costs and schedules for these actions.", "Specifically, NNSA estimated in its October 2015 plan that the total cost  of the four actions would be approximately $1.1 billion from fiscal years  2016 through 2025 and would provide additional quantities of unobligated  LEU for TVA to meet NNSA\u2019s tritium needs through 2038 to 2041. Based  on our review, the actual costs and schedules through October 2017  generally align with the estimates in NNSA\u2019s October 2015 plan. NNSA  and GAO have identified some risks associated with two of these actions.  One of these risks has been resolved; NNSA is taking steps to mitigate  another; while other risks, such as the uncertainty of future  appropriations, are unresolved.", "The following are the four actions, and their costs, schedules, and risks."], "subsections": [{"section_title": "Book Storage of TVA LEU", "paragraphs": ["Book storage is an industry-wide nuclear material accounting practice,  where a nuclear material supplier\u2014such as a uranium enrichment plant  or nuclear fuel fabricator\u2014can record in its accounts, or books, the  amount of enriched uranium in its inventory belonging to a customer,  such as a nuclear power plant operator, and hold that material for future  delivery to the customer. TVA has entered into contracts with two nuclear  fuel suppliers to conduct book storage to preserve unobligated LEU for  TVA on behalf of NNSA. This practice effectively parks the unobligated  LEU into a separate account so that the material is not inadvertently  loaded into a non-tritium producing reactor. Book storage helps TVA  preserve limited quantities of unobligated LEU for the future; it will  eventually be used for tritium production at the Watts Bar reactor.  According to agency officials, a key benefit of using book storage for LEU  is that TVA does not have to physically store the material. According to  these officials, book storage is significantly less expensive than paying to  set up a physical storage facility.", "The terms of TVA\u2019s book storage contracts, including the parties involved,  schedules, and values, are proprietary and business sensitive, according  to TVA officials. Based on our analysis, the actual fees paid by TVA under  its book storage contracts align with NNSA\u2019s projected costs for book  storage in its October 2015 plan. NNSA is reimbursing TVA for the book  storage fees it is paying. According to NNSA, the obligations preserved  from using book storage for unobligated LEU through these contracts  extend the LEU fuel need date by 3 years. NNSA\u2019s October 2015 plan did  not identify any specific risks for these existing book storage contracts."], "subsections": []}, {"section_title": "Obligation Exchanges of LEU", "paragraphs": ["Obligation exchanges are another industry-wide nuclear material  accounting practice, which involves the transfer of obligations on nuclear  material\u2014such as LEU\u2014between two entities without physically moving  the material. Similar to book storage, TVA may conduct obligation  exchanges on behalf of NNSA to increase the inventory of unobligated  LEU available for tritium production. According to NNSA\u2019s October 2015  plan, TVA may conduct additional obligation exchanges in the future on  behalf of NNSA. According to NNSA and TVA officials, at least one future  obligation exchange is anticipated but has not been scheduled. According  to these officials, there are no specific costs associated with transferring  the obligations on LEU between entities. In addition, if additional  inventories of unobligated LEU are identified, NNSA officials told us they  will encourage TVA to conduct additional obligation exchanges to  preserve the material. NNSA\u2019s October 2015 plan did not identify any  specific risks for obligation exchanges."], "subsections": []}, {"section_title": "Repurposed Excess Uranium (REU) Downblending", "paragraphs": ["NNSA\u2019s first downblending action involves downblending 10.4 metric tons  of HEU that was previously declared excess to national security needs.  NNSA initiated the 3-year REU program in 2015 and, according to NNSA  officials, the last shipment of HEU for downblending is expected in  December 2018. According to these officials, close-out and final  operations of the contract will end in early 2019. The REU downblending  is being performed through a contract between NNSA and WesDyne,  which subcontracts with another company, Nuclear Fuel Services,  according to DOE documents we reviewed and officials we interviewed.", "According to NNSA documents, NNSA is the sole customer for this  downblending effort. The estimated costs for the REU downblending  program are $373 million, according to NNSA\u2019s October 2015 plan.  According to NNSA and contractor officials, the fixed price of the contract  is $333.8 million, and the invoiced costs for the REU downblending  program through October 2017 are $141.4 million, which aligns with the  terms of the contract. According to an NNSA official, NNSA is paying for  the REU program through a combination of funds provided through  annual appropriations and what the parties refer to as a \u201cbarter\u201d  arrangement, according to NNSA officials and documents. Under this  arrangement, NNSA is compensating the downblending contractor by  transferring title of the derived LEU to WesDyne, which will be retained as  unobligated LEU and eventually sold to TVA for tritium production  purposes. The REU downblending program will generate approximately  five reactor reloads of unobligated fuel for TVA, and will likely be used in  the early to mid-2030s, according to NNSA documents.", "Regarding the risks for the REU program, NNSA identified the uncertainty  of whether NNSA would be able to continue to conduct barters of derived  LEU to pay for downblending services. For example, the 2015 plan notes  that, while such transactions had worked well for previous downblending  campaigns, declining markets values for enriched uranium in recent years  had reduced industry\u2019s interest in being compensated for services with a  portion of the derived LEU. In addition, NNSA officials identified a lawsuit  challenging the legality of barters as a risk. This suit was dismissed in  July 2016. As a result, this specific risk no longer affects the  Department,  and according to NNSA officials, the agency anticipates  being able to continue compensating Nuclear Fuel Services with derived  LEU for the duration of the REU program."], "subsections": []}, {"section_title": "Downblending Offering for Tritium (DBOT)", "paragraphs": ["NNSA\u2019s second downblending action, which is planned to begin in 2019,  will involve HEU mainly composed of undesirable scrap, primarily in the  form of oxides, left over from uranium processing activities. NNSA  estimates that the planned DBOT program will generate approximately 10  reloads of unobligated fuel for TVA, likely to be used in the mid-2030s.  According to an NNSA document, the program is expected to run for a 6- year period from 2019 through 2025. However, the schedule for HEU  downblending under the DBOT action has not yet been finalized.  According to NNSA officials, as of January 2018 the agreement is still  being negotiated, but NNSA officials told us they anticipate that TVA will  manage Nuclear Fuel Services\u2019 down-blending activities in support of the  DBOT program as well as the resulting unobligated LEU and its  associated flags. NNSA\u2019s estimated costs for the DBOT downblending  program are $770 million, according to NNSA\u2019s October 2015 plan.  NNSA plans to pay for the DBOT program solely with funds provided  through annual appropriations. NNSA does not currently plan to transfer  any LEU resulting from this downblending program as payment to the  contractor and will instead keep all the LEU for future tritium production.", "The DBOT program has not been initiated, so we could not assess  whether the program\u2019s actual costs and schedule align with the estimates  in NNSA\u2019s October 2015 plan. However, NNSA officials said they have  confidence in the projected costs for the DBOT program since the estimates are based on previous downblending programs that NNSA has  conducted over the past decade.", "NNSA identified two risks, and we identified one additional risk, facing the  DBOT program. First, NNSA\u2019s October 2015 plan identified the  uncertainty of annual appropriations in the amount of $770 million to  support this program. In addition, NNSA\u2019s October 2015 plan identified a  second risk associated with the availability of material for the DBOT  program. The DBOT material will consist largely of scrap oxide left over  from weapons production processes, some to be generated in future  years. Because the schedules for those processes may change, the  amounts of material available for DBOT and the dates when it will be  available are subject to some uncertainty. Furthermore, we identified an  additional risk to the DBOT program that is not addressed in NNSA\u2019s  October 2015 plan. Specifically, NNSA did not indicate which nuclear fuel  cycle company would be used for the book storage of the LEU resulting  from the DBOT program, and there is no guarantee that a company would  be willing to engage in book storage for NNSA. A senior NNSA official  stated that this detail will be worked out once the DBOT contract is  finalized. NNSA and TVA officials noted that other fuel cycle facilities  have previously been uninterested in conducting book storage for NNSA,  so options may be limited. According to NNSA officials, if book storage  was unavailable in the future, NNSA could pay for the physical storage of  the LEU for the DBOT program. Since the costs of physically storing LEU  for the DBOT program are not included in NNSA\u2019s cost estimates, this  could increase the overall costs of the program."], "subsections": []}]}, {"section_title": "NNSA\u2019s Preliminary Plan to Analyze Options to Supply Enriched Uranium in the Long Term is Inconsistent with DOE Directives", "paragraphs": ["NNSA\u2019s preliminary plan\u2014as outlined in its domestic uranium enrichment  mission need statement\u2014to analyze options for supplying enriched  uranium in the long term is inconsistent with DOE directives. This is  because the scope of the mission need statement can be interpreted to  fulfill multiple mission needs, which is inconsistent with DOE directives  that such a statement should be a clear and concise description of the  gap between current capabilities and the mission need. Under either  interpretation of the mission need statement, NNSA is not complying with  these directives because it is showing preference toward a particular  solution\u2014building a new uranium enrichment capability\u2014and the agency  has not included other options for analysis. In the mission need  statement, NNSA has preliminarily identified two uranium enrichment  technologies as the most feasible options for reestablishing a uranium  enrichment capability, but both face deployment challenges."], "subsections": [{"section_title": "NNSA\u2019s Domestic Uranium Mission Need Statement Can Be Interpreted to Fulfill Multiple Mission Needs, Making it Inconsistent with DOE Directives", "paragraphs": ["NNSA\u2019s preliminary plan\u2014as outlined in its domestic uranium enrichment  mission need statement\u2014for analyzing options to supply enriched  uranium in the long term is unclear because the scope of the mission  need statement can be interpreted to fulfill more than one mission need,  and this is inconsistent with DOE directives. Specifically, NNSA\u2019s October  2016 mission need statement\u2014developed by NNSA\u2019s Office of Domestic  Uranium Enrichment\u2014identified two mission needs: (1) a need for  enriched uranium for a range of national security and other missions,  including LEU for tritium production, HEU for the U.S. Navy, and high- assay LEU for research needs; and (2) a specific need for tritium.  Because the mission need is not clearly stated, it is not clear whether  NNSA intends to identify a future source of enriched uranium that could  meet a range of mission needs, or only meet the specific mission need for  tritium. According to DOE guidance for the mission need statement, the  mission need statement should be a clear and concise description of the  gap between current capabilities and the mission need. A senior NNSA  official acknowledged that the mission need statement was ambiguously  written because there are a range of mission needs for enriched uranium,  and the ultimate mission need that the analysis of alternatives process  will meet is unclear. Under either interpretation of the intent of the mission  need statement, the document does not fully comply with DOE directives.  According to DOE Order 413.3B, the mission need should be  independent of a particular solution and should not be defined by the  equipment, facility, technological solution, or physical end-item. This  approach allows the Office of Domestic Uranium Enrichment the flexibility  to explore a variety of solutions and not limit potential solutions.", "Under the first interpretation of NNSA\u2019s mission need statement (which  appears to be its preferred interpretation, according to NNSA documents),  NNSA needs a future source of enriched uranium for a range of  missions\u2014initially LEU to produce tritium, but later also to produce high- assay LEU for research needs and HEU for the U.S. Navy. Specifically,  the document states that if the United States decided to reestablish a  domestic uranium enrichment capability, it \u201ccould meet several national  security missions.\u201d Further, it states that \u201cfuture demand for additional  enrichment assays and volumes should be considered in the selection of  the enrichment capacity to meet national security needs.\u201d This suggests  that NNSA may be missing opportunities to consider options for providing  additional enriched uranium that do not entail reestablishing a uranium  enrichment plant.", "For example, while the mission need statement discusses some policy  options that would provide NNSA with a new source of enriched uranium  without building a new enrichment capability, it excludes at least one  policy option that was originally identified in NNSA\u2019s October 2015 plan\u2014 reprocessing DOE-owned spent nuclear fuel to recover HEU (which could  also be downblended to produce LEU). Reprocessing spent nuclear fuel  could provide a significant quantity of enriched uranium without the need  for a new enrichment capability. It is not clear why NNSA excluded this  option from the mission need statement at this early point in the  development of alternatives. See appendix II for a discussion of other  options NNSA includes in its mission need statement that could provide  NNSA with a new source of enriched uranium without building a new  enrichment capability.", "Under the second, narrower interpretation of the mission need statement,  NNSA would need to obtain LEU solely to meet its mission need for  tritium. However, contrary to DOE directives that a mission need  statement be independent of a particular solution and not be defined by  equipment, facility, technological solution, or physical end-item, NNSA is  showing preference for a particular end-item\u2014enriched uranium\u2014to  continue the tritium production mission. The mission need statement  indicates a preference for using enriched uranium to continue the tritium  production mission, as it only identifies options to obtain additional  enriched uranium. This approach would exclude consideration of certain  technology options, such as one that may have the potential to produce  tritium without the need for enriched uranium. Specifically, during our  review, we identified a technology capable of producing tritium that does  not require enriched uranium and is being developed by Global Medical  Isotope Systems (GMIS). This technology was not included in NNSA\u2019s  mission need statement as an option to help NNSA meet its tritium  production requirements. An NNSA office separate from the Office of  Domestic Uranium Enrichment\u2014the Office of Nuclear Materials  Integration\u2014has funded the GMIS technology in a demonstration effort to  determine whether it can produce tritium in sufficient quantities to support  NNSA\u2019s needs.", "The GMIS technology is currently at a low TRL, and the tritium production  estimates have not been independently verified, but a senior NNSA  official and GMIS representatives told us that it produced \u201cappreciable  amounts of tritium\u201d during the demonstration. However, another senior  NNSA official stated that it would be more appropriate to consider the  GMIS technology in a process being conducted by another NNSA office\u2014 the Tritium Sustainment Office\u2014which is currently examining potential  options to meet tritium needs in 2055 and beyond, when TVA\u2019s Watts Bar  reactors may no longer be operating. This official, however, told us that  the program office has no plans to update its last technology evaluation  from 2014, which did not include consideration of the GMIS technology.  If the purpose of NNSA\u2019s mission need statement is to meet tritium  requirements, then NNSA may be missing the opportunity to assess a  technology that could meet the mission need without the need for  enriched uranium. Without revising the scope of the mission need  statement to clarify which mission need it seeks to achieve and adjusting,  as appropriate, the range of preliminary options being considered in the  analysis of alternatives, NNSA may not consider all options that could  satisfy its ultimate mission need."], "subsections": []}]}, {"section_title": "NNSA Has Identified Two Uranium Enrichment Technologies as Most Feasible for Reestablishing a Uranium Enrichment Capability, but Both Face Challenges", "paragraphs": ["The mission need statement identifies six potential enrichment technology  options for reestablishing an unobligated uranium enrichment capability.  The technology selected could be used first to produce LEU to support  the tritium production mission, and potentially later used to produce high- assay LEU for research needs and HEU for the U.S. Navy, according to  NNSA documents. According to NNSA\u2019s mission need statement, these  six technologies were identified by a team of federal, national laboratory,  and contractor experts in uranium enrichment technologies in December  2014, later presented in the October 2015 plan, and then included in the  mission need statement.", "Among the six technologies, four\u2014restart of the Paducah Gaseous  Diffusion Plant, electromagnetic isotope separation, atomic vapor laser  isotope separation, and separation of isotopes by laser excitation\u2014are  unlikely to be feasible, according to NNSA documents (app. III provides  additional information on these four enrichment technologies). Some of  these technologies have produced enriched uranium in the past, but  extraordinary technical or financial barriers, past research failures, or  peaceful-use restrictions would likely preclude further consideration by  NNSA, according to NNSA documents.", "According to NNSA documents, NNSA has preliminarily identified the two  remaining uranium enrichment technologies as the most feasible options  to supply unobligated LEU for tritium production: the AC100 (\u201clarge\u201d)  centrifuge and a \u201csmall\u201d centrifuge design. However, both of these options  face challenges to deployment.", "Of the identified options, the AC100, or large centrifuge, is the technology  that is furthest along in development. Centrus Energy Corp.\u2014the private  company known as USEC Inc. prior to its bankruptcy in 2014\u2014developed  a large (about 40 feet tall) advanced centrifuge for uranium enrichment.  From June 2012 through September 2015, DOE invested approximately  $397 million to financially support a research, development, and  demonstration program for the large centrifuge technology at Centrus\u2019  demonstration facility\u2014the American Centrifuge Plant\u2014in Ohio (See fig.  4). However, in September 2015, DOE announced that it would not  continue funding the demonstration plant in Ohio past the end of that  month. According to a September 2015 DOE memorandum, the  department had obtained the testing data it needed and determined that  there was \u201cminimal incremental value\u201d in continuing demonstration  operations. Centrus was unable to continue operation of the  demonstration plant without further government support and, in February  2016, announced its intent to demobilize it. Appendix IV provides  additional information on the development of Centrus\u2019 AC100 large  centrifuge technology.", "According to NNSA\u2019s October 2015 report, at the conclusion of DOE\u2019s  support, Centrus had successfully demonstrated that the large centrifuge  technology had achieved a TRL of 7 to 8\u2014or the generally successful demonstration of a test facility. DOE has continued funding, at a lower  level, Centrus\u2019 further development of the large centrifuge technology at a  test facility in Oak Ridge, Tennessee, through September 2018. The  October 2016 mission need statement estimated that it would take 2 to 5  years to complete development of the technology. According to a senior  DOE official, though DOE has discontinued the majority of its funding, the  department has taken two actions to preserve the large centrifuge  technology\u2014preserving the intellectual property for this technology and  hiring some former Centrus employees\u2014to ensure that the technology  can be deployed if it is selected in the analysis of alternatives.", "However, we identified several challenges that could complicate future  efforts to deploy the large centrifuge technology\u2014challenges related to  the preservation of intellectual property, royalty costs for commercial  deployment, and the weakening of Centrus\u2019 U.S. supplier and knowledge  base.", "Intellectual property. A senior DOE official stated that there were two  issues with DOE\u2019s Office of Nuclear Energy original preservation of the  information. First, preservation of the schematics began before certain  technical issues with the demonstration plant were discovered, and  consequently, Centrus\u2019 proposed resolution of those issues was not  included in the documentation, according to DOE and NNSA officials.  Second, a DOE official and Centrus representatives stated that DOE\u2019s  contract with Centrus did not specify how the schematics were to be  preserved. Rather than preserving the schematics in an electronic  engineering format, Centrus preserved them in a different format that will  require them to be reconstructed in an engineering program, according to  the DOE official. NNSA officials acknowledged there were issues with the  2014 preservation effort and stated that negotiations were under way to  contract with Centrus for a second preservation effort that would include  updated schematics in the correct format and the documentation on the  proposed resolution of the technical issues.", "Royalty costs. Although DOE owns the intellectual property, by  agreement, Centrus is owed royalties if the large centrifuge technology is  deployed for commercial purposes. According to a June 2002 agreement  between DOE and USEC, these royalties would be capped at $665  million. In a January 2017 request for information from industry, NNSA  expressed interest in obtaining enriched uranium through a federal  government-private industry partnership. In January 2017, NNSA officials  said that they were not sure how royalties might affect such a partnership.  It is possible that if a private industry partner was only interested in  producing enriched uranium for the government alongside a commercial  operation, the royalties could discourage such a partnership, or that some  of the costs might be passed on to the government. However, the  royalties may be less than the cost of developing a new enrichment  capability, so such an arrangement may also attract partners interested in  entering the market but not in developing new technology.", "Supplier base. Centrus representatives told us that Centrus assembled  an extensive domestic supplier base during the demonstration program to  show that enrichment services could be unobligated. According to  Centrus representatives and a Centrus document, the company had  sourced components for the demonstration plant from over 900 different  suppliers and manufacturers in 28 states, and that following its closure,  many of these companies would go out of business or lose the capability  to produce the necessary parts. As a result, if the large centrifuge option  is selected, a domestic supplier base will have to be rebuilt, according to  Centrus representatives. NNSA officials acknowledged that\u2014as NNSA  conducts the analysis of alternatives process\u2014Centrus\u2019 supplier and  manufacturing base will continue to diminish.", "Knowledge base. Centrus representatives have raised concerns that the  closure of the American Centrifuge Plant and associated layoffs of  qualified workers may make it difficult to re-hire experienced centrifuge  workers in the future. According to a cost estimate review prepared by a  contractor for NNSA, the American Centrifuge Plant employed 370 full- time equivalent workers during the demonstration program. However, as  of January 2017, it employed approximately 117 staff, according to a  Centrus document. NNSA officials acknowledged that the loss of skilled  workers is a concern and stated that, as a mitigating measure, ORNL has  hired knowledgeable former Centrus personnel for further centrifuge  research projects at ORNL.", "The second most feasible option to supply unobligated LEU for tritium  production is the design for a small centrifuge technology. NNSA is  funding an experiment to develop a centrifuge design that it anticipates  will be smaller (from 6 to 14 feet tall), simpler, and potentially less  expensive to build and maintain than the large centrifuge, according to an  NNSA document. The experiment began at ORNL in 2016 and is based  on prior ORNL experience with centrifuges. According to NNSA and  ORNL documents, the small centrifuge experiment will take 3.5 years to  achieve a TRL of 3 to 4\u2014successful validation at laboratory scale\u2014and  cost approximately $42 million for this validation effort. During our visit to  ORNL in December 2016, laboratory representatives told us that  prototypes had not yet been constructed and showed us their preliminary  design work and initial construction of their facility. As of December 2017,  the first prototype of three or four planned sizes had been built and  tested, according to NNSA officials and ORNL representatives. Following  completion of the experiment, the mission need statement estimates that  it could take another 4 to 7 years to bring the technology to a TRL of 9  (ready to deploy).", "Like the large centrifuge technology, the small centrifuge technology  faces challenges that could complicate its deployment. For example,  according to NNSA officials and ORNL representatives, the small  centrifuge experiment is on an aggressive testing schedule to  demonstrate results and potential scalability to meet NNSA\u2019s planned  2019 deadline to select a preferred alternative in the analysis of  alternatives process. Further, according to NNSA officials and ORNL  representatives, if the small centrifuge design is selected, ORNL would  not build and operate the plant because it is focused on research and  development. Instead, NNSA would have to identify and contract with  another entity to license, transfer, and deploy the technology, according  to NNSA officials and ORNL representatives. NNSA officials also stated  that there will be challenges in establishing a U.S. manufacturing base of  suppliers for the small centrifuge and associated equipment."], "subsections": []}, {"section_title": "NNSA\u2019s Preliminary Cost Estimates for the Most Feasible Uranium Enrichment Technologies Are Limited in Scope and Do Not Fully Meet Best Practices", "paragraphs": ["Though the scope of the mission need statement is unclear, NNSA has  prepared preliminary cost estimates for the two uranium technologies it  considers most feasible: the large and small centrifuge. These estimates  are limited in scope and the estimate for the large centrifuge was  premised on assumptions that were no longer valid. In addition, even  when assessed for a more limited scope\u2014producing LEU for tritium\u2014the  cost estimates do not fully meet best practices for reliable estimates  applicable to all cost estimates."], "subsections": [{"section_title": "NNSA\u2019s Preliminary Cost Estimates for the Uranium Enrichment Technologies it Considers Most Feasible Are Limited in Scope, and One Is Premised on Invalid Assumptions", "paragraphs": ["Though the scope of the mission need statement is unclear, NNSA\u2019s  preliminary cost estimates for the two uranium technologies it considers  most feasible\u2014the large and small centrifuge\u2014are limited in scope, and  the estimate for the large centrifuge was premised on assumptions that  were no longer valid. Specifically, the limited scope of the cost estimates  mean that they do not reflect the full costs of building a uranium  enrichment facility that could eventually provide the capacity to enrich  enough uranium to meet multiple needs, not just tritium. As previously  noted, NNSA identified two mission needs: (1) a need for enriched  uranium for a range of national security and other missions, including  LEU for tritium production, HEU for the U.S. Navy, and high-assay LEU  for research needs; and (2) a specific need for tritium.", "According to DOE and NNSA documents and NNSA officials, NNSA  appears to favor an incremental approach to reestablishing a domestic  uranium enrichment capability. This incremental approach would start  with the selection of an enrichment technology in an enrichment plant  capable of meeting tritium production requirements but could be  expanded to meet the other governmental enriched uranium needs over  time, according to our review of NNSA documents. Best practices for  cost estimating state that programs following such an approach should  clearly define the characteristics of each increment of capability so that a  rigorous life cycle cost estimate can be developed. In addition, we have  recommended that agencies conducting incremental acquisitions  consider establishing each increment of increased capability with its own  cost and schedule baseline. However, the scope of NNSA\u2019s cost  estimates for the large and small centrifuges are limited only to an  enrichment plant capable of meeting the tritium production requirements, according to DOE and NNSA documents. The cost estimates do not  estimate the incremental costs of the additional enrichment capacity  necessary to meet additional enriched uranium needs such as HEU.  NNSA officials stated that the cost estimates were preliminary in nature  and that they anticipate developing more in-depth cost estimates as  NNSA progresses further in the analysis of alternatives process. By  limiting the scope of the cost estimates to one mission need\u2014LEU for  tritium\u2014and not addressing the additional costs to meet other enriched  uranium mission needs, NNSA\u2019s cost estimates may be underestimating  the life cycle costs of the technology options under evaluation\u2014which  could lead the agency to select a less cost-effective technology option.", "We also found that NNSA relied on a Centrus-provided scenario for the  large centrifuge cost estimate that was premised on assumptions that  were no longer valid, rather than using a scenario that more accurately  reflected conditions at the demonstration plant at the time of the analysis.  We found that the large centrifuge cost estimate had not been  substantially updated since fall 2014. According to DOE documents,  NNSA officials, and Centrus representatives, the estimate was originally  prepared by Centrus in the fall of 2014, and NNSA and its contractor  made minimal updates to this estimate in January 2015 and again in fall  2016. However, this meant that NNSA officials used a scenario that  assumed conditions that were no longer accurate as of October 2016, the  date of the mission need statement.", "This scenario, for example, assumed that the demonstration plant would  be left intact for 5 years\u2014in a cold standby state\u2014followed by a restart of  operations. However, in February 2016, Centrus had already publicly  announced that it would begin decontamination and decommissioning the  demonstration plant in spring 2016. An alternate scenario\u2014complete  demobilization of the demonstration plant followed by a restart of  operations after 10 years\u2014may have more closely reflected conditions at  the time. According to a December 2014 estimate provided by Centrus to  DOE and NNSA, this scenario presented the most risk, as it meant that  the site, staff, and supplier base would all have to be reconstituted after a  significant break\u2014which could be very difficult. According to this estimate,  the cost of the alternate scenario would likely be $2.6 billion greater.  NNSA officials stated that they had used the scenario that they thought  best fit the conditions at the time, and Centrus officials agreed that cold  standby was an appropriate scenario to use. However, by using the cold  standby scenario rather than the demobilization scenario, NNSA appears  to have underestimated the costs to build an enrichment facility by  several billion dollars. A senior NNSA official noted that, for the large  centrifuge, they intend to create a new estimate that does not rely on  Centrus."], "subsections": []}, {"section_title": "NNSA\u2019s Preliminary Cost Estimates for the Uranium Enrichment Technologies it Considers Most Feasible Do Not Fully Meet Best Practices for Reliable Estimates", "paragraphs": ["Even when assessed for a more limited scope\u2014producing LEU for  tritium\u2014NNSA\u2019s preliminary cost estimates for the two uranium  enrichment technology options that the agency considers to be the most  feasible\u2014the large and small centrifuge technologies\u2014do not fully meet  best practices for reliable cost estimates, including those for early stages  of acquisition. Our cost guide\u2014which presents best practices for cost  estimates\u2014states that high-quality, or reliable, cost estimates\u2014including  preliminary and rough-order-of-magnitude estimates\u2014must meet four  characteristics: they must be comprehensive, well-documented, accurate,  and credible. DOE Order 413.3B states that cost estimates must be  developed, maintained, and documented in a manner consistent with the  methods and best practices identified in, among other things, our cost  guide. Reliable cost estimates are crucial tools for decision makers,  according to best practices. According to the cost guide best practices,  cost estimates are considered reliable if each of the four characteristics is  substantially or fully met. If any of the characteristics is not met, minimally  met, or partially met, then the estimates cannot be considered to be  reliable. Office of Management and Budget guidance notes the  importance of reliable cost estimates at the early stages of project  initiation, stating that early emphasis on cost estimating during the  planning phase is critical to successful life cycle management\u2014in short,  determining whether benefits outweigh costs.", "NNSA\u2019s mission need statement presented rough-order-of-magnitude  cost estimates of $7.5 to $14 billion to build a national security enrichment  plant using the large centrifuge technology, and an estimate of $3.8 to  $8.3 billion to build such a plant using the small centrifuge technology.  We found that the large centrifuge cost estimate only partially met the  characteristics of being comprehensive and credible, and minimally met  the characteristics of being well-documented and accurate. The small  centrifuge cost estimate only partially met the characteristic of being  comprehensive, and minimally met the characteristics of being well- documented, accurate, and credible. Because the large and small  centrifuge cost estimates do not fully meet the best practices  characteristics of reliable cost estimates, we concluded that they are not  reliable. We shared our assessments with NNSA officials and a  representative from an NNSA contractor and discussed the findings. We  reviewed their comments and any additional information they provided  and incorporated them to finalize our assessments. NNSA officials  explained that the cost estimates are preliminary and are intended only to  be rough-order-of-magnitude estimates since the process is only in the  early stages and will be revised as the analysis of alternatives process  moves forward. NNSA officials stated that they are aware of the  limitations of the preliminary large and small centrifuge cost estimates. By  developing reliable cost estimates consistent with best practices, NNSA  will reasonably ensure that it has reliable information to make an informed  decision about its options. The following is a summary of our  assessments.", "Comprehensive. Best practices state that\u2014to be considered  comprehensive\u2014a cost estimate should include both government and  contractor costs of the project over its full life cycle, from \u201ccradle to  grave.\u201d This includes costs from the inception of the project through  design, development, deployment, and operation and maintenance, to  retirement of the project. A life cycle cost estimate can support  budgetary decisions, key decision points, milestone reviews, and  investment decisions. DOE Order 413.3B does not specifically require  a life cycle cost estimate at CD-0. Nonetheless, according to best  practices, having a complete life cycle cost estimate helps ensure that  all costs are fully accounted for and that resources are efficiently  allocated to support the project.", "We found that the cost estimate to build a large centrifuge facility  partially met the comprehensive characteristic because it included a  high-level description of the work to be performed, and presented a  brief summary description of the schedule, number of machines, and  activities. However, the estimate was not a life cycle cost estimate  because it excluded certain costs, such as retirement and close-out  costs. In addition, other than noting a government oversight fee, the  documentation does not specify whether the estimated costs are  government or contractor costs. The estimate contains a 17 percent  add-on, which an NNSA contractor told us accounts for DOE and  contractor oversight costs, but the estimate does not specify how  those costs are allocated.", "We found that the cost estimate to build a small centrifuge facility also  partially met the comprehensive characteristic. We found that the  estimate included costs for manufacturing, design, testing of the  centrifuges, and 11 years of operations but, similar to the large centrifuge  facility estimate, did not include retirement and close-out costs.", "Well-documented. Best practices state that data are the foundation  of every cost estimate and that the quality of the data affects an  estimate\u2019s overall credibility. Thus, the supporting documentation for  an estimate should capture in writing the source data used, an  assessment of the reliability of the data, and how the data were  normalized to make them consistent with and comparable to other  data used in the estimate. The documentation should describe in  sufficient detail the calculations performed and the estimating  methodology used to derive each project element\u2019s cost such that any  cost analyst could understand what was done and replicate it. Without  good documentation, management may not be convinced that the  estimate is credible; supporting data will not be available for creating a  historical database; questions about the approach or data used to  create the estimate cannot be answered; lessons learned and a  history for tracking why costs changed cannot be recorded; and the  scope of the analysis cannot be thoroughly defined.", "We found that the cost estimate to build a large centrifuge facility  minimally met this characteristic. NNSA\u2019s contractor adjusted  estimates previously provided by Centrus for inflation and added an  estimate for DOE\u2019s oversight and fees. The documentation does not  provide any of the supporting cost data or include descriptions of  adjustments or normalization made to the data. We found that the  estimate\u2019s supporting documentation does not provide a description of  the specific calculations and presents methodologies in only broad  terms. The documentation does not describe the steps taken to  develop the estimates and does not provide enough information or  supporting data to enable an analyst unfamiliar with the program to  replicate the cost estimates. We were unable to trace the calculations  to assess the accuracy and suitability of the methodology.", "Similarly, we found the cost estimate to build a small centrifuge facility  minimally met this characteristic. We found that the supporting  documentation does not include information about the supporting data  underlying the cost estimate. The sources of the data are not  documented, and no information is included about how the data were  normalized to make them comparable to other data used in the  estimate. We found that it would be difficult to recreate this estimate  because no supporting data or electronic cost models were  documented.", "Accurate. According to best practices, a cost estimate should provide  results that are unbiased; that is, the estimate should not be overly  conservative or optimistic. An estimate is accurate when, among other  things, it is based on an assessment of most likely costs, adjusted  properly for inflation, and contains few, if any, mathematical mistakes.  Best practices state that unless an estimate is based on an  assessment of the most likely costs and reflects the degree of  uncertainty given all of the risks considered, management will not be  able to make good decisions. Not adequately addressing risk,  especially risk that is outside the estimator\u2019s control or that were never  conceived to be possible, can result in point estimates that give  decision makers no information about their likelihood of success or  give them meaningless confidence intervals.", "We found the cost estimate to build a large centrifuge facility  minimally met this characteristic. We could not determine whether the  estimate is unbiased because no risk and uncertainty analysis had  been performed. Portions of the work breakdown structure\u2019s elements  are based on historical costs, but neither the historical data were  provided, nor was there a thorough description of how those historical  costs were adjusted or used. The contractor applied a 2 percent  inflation factor but did not document the source of this factor; a  representative of NNSA\u2019s contractor stated that another DOE office  recommended using that factor. We found no mathematical mistakes  in the overall calculations, but the model was not available to evaluate  the methodologies used.", "For the small centrifuge, we found the cost estimate minimally met  this characteristic. We found that no risk or uncertainty analysis had  been performed. The estimate uses a 2.4 percent inflation factor, but  there is no documentation about the origin of this factor. An  independent cost review performed by DOE\u2019s Office of Project  Management Oversight and Assessments stated that this inflation  factor was overly optimistic and recommended the use of a 4 percent  factor. We did not detect any mathematical errors in the overall  calculations, but the model was not available to evaluate the  methodologies.", "Credible. The credible characteristic reflects the extent to which a  cost estimate can be trusted, according to our cost guide. For  example, to be considered credible, the cost estimate should include  a sensitivity analysis that examines how changes to key assumptions,  parameters, and inputs affect the estimate. This analysis helps ensure  that a range of possible costs are identified, as well as risks and their  effects that may affect those costs. In addition, major cost elements  should be cross-checked by the estimator to validate the results, and  an independent cost estimate should be conducted by an outside  group. The absence of a sensitivity analysis increases the chance that  decisions will be made without a clear understanding of the impacts  on costs, and the estimate will lose credibility.", "The cost estimate to build a large centrifuge facility partially meets this  characteristic. NNSA presents several case studies rather than  conducting a sensitivity analysis. These case studies only differ in one  key assumption\u2014schedule\u2014but do not differ in any other major  assumptions. The cost estimate documentation identified some major  cost elements as cost drivers, but no cross-check information had  been documented. DOE performed cross-checks in an independent  cost review.", "The cost estimate to build a small centrifuge facility minimally meets  this characteristic. There is no evidence in the supporting  documentation that a sensitivity analysis was completed. Some  programmatic risks were identified in the documentation. No cross- check information had been documented. DOE performed an  independent cost review which adjusted the project management cost  to make it consistent with the large centrifuge project management  cost estimate.", "Regarding the large centrifuge, an NNSA official said that the agency had  requested the supporting documentation that formed the basis of the  estimate Centrus prepared in 2014, but that Centrus did not provide the  information, stating that it was proprietary. However, according to Centrus  representatives, Centrus offered to provide updated cost estimates and  supporting data\u2014provided that they were appropriately protected\u2014but  NNSA declined the offer. According to an NNSA official, the agency has  not made a renewed effort to obtain this information because Centrus is  still a publicly-traded company that would like to commercialize the large  centrifuge technology.", "Regarding the small centrifuge, an NNSA official told us that the agency  did not have sufficient data to create a reliable preliminary cost estimate  because the small centrifuge experiment is still in the preliminary design  and development stages. In the absence of such data, ORNL based its  estimate on its decades-long expertise and experience with centrifuges,  as well as on the cost structure of the large centrifuge, according to  NNSA documents. NNSA and DOE officials stated that they expect to  have data by mid-2019 that would support a reliable cost estimate for  inclusion in the analysis of alternatives process, which is expected to  conclude in 2019. The officials said that they are still developing the  technology and intend to create a new cost estimate."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Tritium is a key isotope used in U.S. nuclear weapons, and the United  States requires an ongoing supply of tritium to sustain the nuclear  stockpile. Since 2013, the United States has not had a supplier of  unobligated LEU, which under the current approach is necessary to  power the TVA reactor that produces tritium. NNSA recognizes that its  unobligated LEU inventory is finite and declining and has taken actions to  extend existing supplies of unobligated LEU in the near term. These  actions have effectively bought the agency some time while it initiates an  analysis of alternatives process to develop a long-term solution.", "However, the scope of the mission need statement underpinning the  analysis of alternatives is unclear because it can be interpreted to fulfill  more than one mission, which is inconsistent with DOE directives that  such a statement should be a clear and concise description of the gap  between current capabilities and the mission need. The mission need  statement is also inconsistent with the directives\u2019 requirement that the  mission need should be independent of a particular solution and not be  defined by a technological solution or physical end-item. In addition, the  mission need statement indicates a preference for using enriched  uranium to continue the tritium production mission and excludes  consideration of certain technology options, such as one that may have  the potential to produce tritium without the need for enriched uranium.  Without revising the scope of the mission need statement to clarify which  mission need it seeks to achieve and adjusting, as appropriate, the range  of options being considered in the analysis of alternatives, NNSA may not  consider all options that could satisfy its ultimate mission need.", "Further, the preliminary cost estimates developed by NNSA for the large  centrifuge and small centrifuge technology options were limited in  scope\u2014sized for a capacity to enrich uranium only for tritium  production\u2014and do not reflect the full costs of building a uranium  enrichment facility that could eventually meet a range of enriched uranium  mission needs. By ensuring that the scope of the cost estimates address  additional costs that align with other mission needs that the enrichment  capability may be intended to fulfill, NNSA can select a more effective  option. In addition, we found that the cost estimates produced for this  more limited scope do not fully meet the best practice characteristics of  reliable cost estimates. By developing reliable cost estimates consistent  with best practices, NNSA will ensure that it has quality information to  make an informed decision about which option to select."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to NNSA:  The NNSA Administrator should revise the scope of the mission need  statement to clarify which mission need it seeks to achieve and, as  appropriate, adjust the range of options considered in the analysis of  alternatives process. (Recommendation 1)", "The NNSA Administrator should\u2014following clarification of the scope of  the mission need statement\u2014ensure that the agency\u2019s cost estimates for  whichever options it considers going forward are aligned with the scope of  the mission need that the enrichment capability is intended to fulfill and  that they are developed consistent with best practices. (Recommendation  2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided drafts of this report to NNSA, State, DOD, and TVA for  review and comment. In written comments, which are summarized below  and reproduced in appendix V, NNSA neither agreed nor disagreed with  our recommendations. However, NNSA stated that it will take future  actions consistent with our recommendations. NNSA also provided  technical comments, which we considered and incorporated as  appropriate. The State Department provided technical comments, which  we incorporated as appropriate. The Department of Defense stated that it  did not have any written or technical comments and TVA did not provide  written or technical comments. We also provided a technical statement of  facts to the following entities: Centrus, ConverDyn, GMIS, and URENCO.  We received technical comments and incorporated them, as appropriate.", "In its written comments, NNSA clarified that its mission need statement is  written to support a range of requirements, the most urgent of which is  LEU for tritium production. Further, NNSA stated that it will evaluate a  broader range of options to meet its mission need during the analysis of  alternatives process, which has begun and which NNSA has targeted for  completion by December 2019. Because the analysis and selection of  alternatives in the CD-1 phase builds off of the mission need statement,  we believe NNSA\u2019s clarification of its mission need statement is positive  and will help result in an analysis of alternatives that does not limit  potential solutions.", "NNSA also stated that it will produce higher fidelity cost estimates leading  up to the CD-1 phase, which we agree is consistent with our  recommendation. NNSA stated that the preliminary cost estimates it  developed do not include the full life cycle cost of building an enrichment  facility to meet the range of enriched uranium missions it has now clarified  as its mission need, but it stated that such estimates are neither required  nor cost beneficial at this early stage. As we noted, best practices\u2014which  can be used to evaluate preliminary cost estimates\u2014recommend having  complete life cycle cost estimates even at this early stage because they  help ensure that all costs are considered to support decision-making and  that resources are efficiently allocated to support the project. As NNSA  develops its higher fidelity estimates, following cost estimating best  practices\u2014such as, by ensuring that the cost estimates for the  alternatives being evaluated align with the broad range of uranium  mission needs that those alternatives are intended to address, and that  full life cycle cost estimates are developed for each option\u2014would better  position NNSA to select an option going forward.", "We are sending copies of this report to the appropriate congressional  committees, Secretary of Energy, Secretary of State, Secretary of  Defense, Vice President for Government Relations of TVA, and other  interested parties. In addition, this report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or at bawdena@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to assess (1) the actions the National  Nuclear Security Administration (NNSA) is taking to extend its existing  inventories of enriched uranium to address near-term tritium needs and  the costs, schedules, and risks of those actions; (2) the extent to which  NNSA\u2019s plan to analyze options for supplying enriched uranium in the  long term is consistent with Department of Energy (DOE) directives; and  (3) NNSA\u2019s preliminary cost estimates for long-term uranium enrichment  technology options and the extent to which they meet best practices for  reliable estimates.", "To inform all three objectives, we analyzed NNSA planning documents,  such as NNSA\u2019s October 2015 Tritium and Enriched Uranium  Management Plan Through 2060 and other documents from NNSA and  DOE pertaining to the management of enriched uranium and tritium. We  also interviewed officials from NNSA, DOE, the Department of Defense  (DOD), the Department of State (State), the Tennessee Valley Authority  (TVA) and representatives of companies participating in different stages  of the nuclear fuel cycle. We conducted site visits to the Oak Ridge  National Laboratory (ORNL), the Y-12 National Security Complex in Oak  Ridge, Tennessee, and the American Centrifuge Plant, in Piketon, Ohio,  to understand the technology and nonproliferation policy issues that affect  the current inventory and future supply of unobligated enriched uranium.", "To describe the actions NNSA is taking or plans to take to extend its  existing inventories of enriched uranium to address near-term tritium  needs and the costs, schedules, and risks of those actions, we reviewed  and analyzed agency documents pertaining to NNSA\u2019s estimates of the  costs, schedules, and risks for the actions. Namely, we analyzed NNSA\u2019s  October 2015 Tritium and Enriched Uranium Management Plan Through  2060 and other NNSA strategies and implementation plans, including a  2014 Uranium Inventory Working Group assessment of near-term NNSA  actions to extend the supply of unobligated LEU. We interviewed NNSA  and TVA officials to validate the cost and schedule information for the  action NNSA is taking to extend its LEU inventory. To compare the  estimated costs to the actual costs for the actions NNSA is taking or plans  to take to extend the unobligated LEU fuel supply for tritium production,  we analyzed contracts between TVA and fuel cycle facilities for book  storage and associated documentation. We then spoke with  representatives from NNSA\u2019s downblending contractor, and compared  that information to the costs that had been invoiced through July 2017. To  identify risks of the options that NNSA has identified, we reviewed NNSA  documents and interviewed NNSA officials.", "To assess the extent to which NNSA\u2019s plan to analyze options for  supplying enriched uranium in the long term is consistent with DOE  directives, we reviewed DOE and NNSA documents including: documents  associated with DOE\u2019s critical decision process, such as the uranium  enrichment mission need statement, project requirements, and the CD-0  approval memo; DOE memos on the department\u2019s uranium management  strategy; and an intellectual property transfer contract between DOE and  the United States Enrichment Corporation (USEC). We compared these  documents to DOE directives, including DOE Order 413.3B Program and  Project Management for the Acquisition of Capital Assets and 413. 3-4A  Technology Readiness Assessment Guide, and associated guidance,  such as DOE 413.3-17 Mission Need Statement Guide.", "ORNL and its subcontractor manage the contracts to develop and  preserve the large centrifuge technology (AC100), and the contract to  develop the small centrifuge technology; therefore, we also reviewed  ORNL documents including a uranium enrichment production technology  study, project management plans for the large and small centrifuge  projects, and large centrifuge experiment test results.", "We interviewed DOE officials and ORNL representatives regarding efforts  to assess the feasibility of other technology options identified in NNSA\u2019s  October 2015 plan\u2014large centrifuge, small centrifuge, Atomic Vapor  Laser Isotope Separation (AVLIS), Electromagnetic Isotope Separation  (EMIS), Separation of Isotopes by Laser Excitation (SILEX), and the  Paducah Gaseous Diffusion Plant. We also reviewed documents and  interviewed representatives from Centrus and Global Laser Enrichment  (GLE)\u2014a joint venture that developed SILEX\u2014regarding the  development of the large centrifuge, AVLIS, and SILEX technologies. In  addition, we reviewed industry responses to NNSA\u2019s request for  information regarding proposals for meeting NNSA\u2019s future enriched  uranium needs. We also interviewed NNSA and DOE officials, and  industry representatives, to learn about any recent alternative tritium  production technology developments. We conducted a site visit to an  isotope production facility in Henderson, Nevada, to observe a NNSA- funded demonstration project with Global Medical Isotope Systems that is  currently testing an alternative tritium production technology. To review  the feasibility of policy and other options that NNSA is evaluating, we  analyzed NNSA planning documents, and interviewed officials from  NNSA and State to determine the extent to which the costs, schedules,  and risks for these options were known.", "To examine NNSA\u2019s preliminary cost estimates for long-term uranium  enrichment technology options\u2014the large and small centrifuges\u2014and the  extent to which they meet best practices for reliable estimates we  compared these estimates to GAO\u2019s Cost Estimating and Assessment  Guide (cost guide), which is a compilation of best practices that federal  cost estimating organizations and industry use to develop and maintain  reliable cost estimates throughout the life of an acquisition program.  According to the cost guide\u2019s best practices, four characteristics make up  reliable cost estimates\u2014they are comprehensive, well-documented,  accurate, and credible. To develop our assessments, we interviewed an  NNSA official and a representative of an NNSA contractor who prepared  the cost estimates about their methodologies and the findings that were  used to support the cost estimates presented in NNSA\u2019s mission need  statement. We analyzed the cost estimating practices used by NNSA  against the four characteristics of reliable cost estimates. We performed a  summary analysis because NNSA\u2019s cost estimates were at the rough- order-of-magnitude level. After conducting our initial analyses, we shared  them with NNSA officials to provide them an opportunity to comment and  identify reasons for observed shortfalls in cost estimating best practices.  We took their comments and any additional information they provided and  incorporated them to finalize our assessment. While rough-order-of- magnitude estimates should never be considered high-quality estimates,  rough-order-of-magnitude estimates can be considered reliable by fully or  substantially meeting industry best practices. For example, we have  found that other rough-order-of-magnitude estimates substantially or fully  met various characteristics of a reliable cost estimate, such as cost  estimates prepared by the DOD and the U.S. Customs and Border  Protection within the Department of Homeland Security. Moreover,  DOE\u2019s cost guidance states that, \u201cregardless of purpose, classification, or  technique,\u201d the agency\u2019s cost estimates should demonstrate quality  sufficient for its intended use, be complete, and follow accepted  standards such as our cost guide. DOE\u2019s cost guidance also describes good cost estimates as including a full life-cycle cost estimate, among  other things. These best practices should result in reliable and valid cost  estimates that management can use for making informed decisions.", "We conducted this performance audit from August 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Other Options for Obtaining Enriched Uranium without Acquiring a New Uranium Enrichment Capability", "paragraphs": ["The National Nuclear Security Administration (NNSA) has identified other  options for obtaining enriched uranium to evaluate in its analysis of  alternatives process, but these options pose significant challenges and  are likely to be eliminated during this process, according to NNSA and  Department of State (State) officials. These options may require changes  in policy and could have significant costs, risks, or technical challenges,  according to NNSA and State officials. These options include revising  domestic policy and international agreements to allow the use of foreign- obligated enriched uranium and technology for producing tritium;  obtaining low enriched uranium (LEU) through the Mutual Defense  Agreement between the United States and the United Kingdom;  downblending highly enriched uranium (HEU) from the defense programs  inventory; and reprocessing spent U.S. nuclear fuel. NNSA officials stated  that they do not plan to pursue these options at this time."], "subsections": [{"section_title": "Revising Domestic Policy and International Agreements to Allow the Use of Foreign-Obligated Uranium and Technology for Producing Tritium", "paragraphs": ["Over the years, questions have been raised as to whether using foreign- obligated material and technology to produce LEU, which produces tritium  that can be harvested for weapons, when irradiated in a power reactor,  constitutes a peaceful use. However, according to DOE, it has been the  agency\u2019s long-standing practice to use only unobligated material for  tritium production. NNSA\u2019s mission need statement includes the option to  revise domestic policy and seek to renegotiate international agreements  to allow foreign-obligated LEU\u2014that is, LEU either sourced from foreign  countries or produced using non-U.S. equipment or technology\u2014for  tritium production for nuclear weapons.", "Specifically, NNSA discussed three variations of the option of using  foreign-obligated LEU for tritium production for use in nuclear weapons:", "Using obligated LEU from URENCO\u2014a European enrichment  consortium operating an enrichment plant in New Mexico. The LEU  produced by URENCO is enriched using foreign technology and is  subject to a peaceful use provision in an international agreement  between the United States and Germany, the Netherlands, and the  United Kingdom.", "Loading TVA reactor cores with a mix of unobligated and obligated  LEU fuel proportional to the extent that the reactor core is used for  tritium production for commercial electricity production.", "Renegotiating international agreements to allow the use of foreign  technologies to produce LEU for tritium production.", "According to NNSA and State Department officials, longstanding U.S.  policy will likely preclude the use of these options. A 1998 interagency  review\u2014led by DOE\u2014considered the nonproliferation issues associated  with establishing a new means for tritium production. The 1998 review  concluded that DOE should exclusively use LEU that is unobligated by  peaceful-use restrictions to preserve the \u201cmilitary/civilian dichotomy.\u201d  Since that time, NNSA has adhered to this policy and used only  unobligated LEU for tritium production, as we reported in 2015. Various  U.S. interagency policy committees\u2014which provide national security  policy analysis within the National Security Council\u2014met several times  between 2014 and 2016 to reexamine the policy and consider whether to  allow obligated LEU to be used for tritium production for nuclear  weapons. However, the committees concluded that this is not permissible  either by the United States or partner countries under applicable  international agreements. Revising the policy and agreements would  have significant repercussions on U.S. nonproliferation policy as well as  on international agreements, according to NNSA and State officials. In  addition, according to the mission need statement, U.S. partners have  repeatedly requested assurances that materials supplied to the United  States not be used for tritium production.", "In addition, NNSA and State officials stated that using only unobligated  LEU for national security purposes supports U.S. nonproliferation policy  goals by, for example, avoiding setting a precedent for other countries  that may seek to use U.S. obligated LEU for military purposes. State  officials stated that even using a mix of unobligated and obligated LEU  fuel would still essentially be asking a foreign partner for the use of its  material for tritium production for nuclear weapons. Revising policy to  allow for the use of obligated LEU in tritium production could \u201cblur the  line\u201d between using LEU for peaceful energy purposes and national  security purposes, according to these officials."], "subsections": []}, {"section_title": "Mutual Defense Agreement", "paragraphs": ["NNSA also considered obtaining LEU from the United Kingdom under our  mutual defense agreement with that country. The agreement provides for  the transfer of special nuclear material between the two countries. In  2014, the Senate Armed Services Committee directed DOE to evaluate  whether it would be possible to obtain LEU for the purposes of tritium  production from the United Kingdom under the mutual defense  agreement. According to State officials, the mutual defense agreement  does not preclude the United States from obtaining LEU directly from the  United Kingdom for the purposes of tritium production. However, this  option is not likely to be pursued by the federal government, according to NNSA officials. Aside from the mutual defense agreement, State officials  said that they are not aware of any other such agreements that would  potentially allow the United States to obtain tritium from another country."], "subsections": []}, {"section_title": "Downblending of HEU from the Strategic Reserve", "paragraphs": ["NNSA\u2019s October 2015 plan identifies a Strategic Reserve of HEU  maintained by NNSA as a potential source of HEU for downblending to  obtain unobligated LEU for use in tritium production. The Strategic  Reserve consists of HEU metal and HEU in nuclear weapon components  that are held as a backup for weapons in the U.S. nuclear stockpile.  According to the October 2015 plan, this option could provide unobligated  LEU for tritium production for many years. However, the October 2015  plan states that changing the quantity of HEU held in the Strategic  Reserve inventory would require presidential approval.", "NNSA officials indicated that the agency is assessing the costs and risks  of this option. According to these officials, pursuing this option would  involve significant costs and risks associated with lowering the material in  the Strategic Reserve, as well as accelerating the dismantlement of  nuclear weapons and the disassembly of their components. While this  option is currently being assessed for costs and risks, NNSA officials  noted that there is currently \u201cno plan\u201d to access material from the  Strategic Reserve.", "Finally, the United States\u2019 inventory of HEU is finite; the United States has  not had a domestic capability to produce HEU since 1992 and instead  meets national security needs using an inventory of HEU that was  enriched prior to 1992. Using this inventory for HEU downblending would  consume HEU that could be used to meet other national security  missions, such as providing HEU fuel for the U.S. Navy\u2019s propulsion  reactors. Consequently, this option could accelerate the date when a new  enrichment capability for HEU production would be needed."], "subsections": []}, {"section_title": "Reprocessing Spent U.S. Nuclear Fuel", "paragraphs": ["In its October 2015 plan, NNSA identified an option of reprocessing spent  U.S. nuclear fuel to obtain unobligated HEU that could be downblended to  LEU and used for tritium production. However, this option was not  ultimately included in NNSA\u2019s October 2016 mission need statement.  This material is spent reactor fuel from the U.S. Navy and other sources,  and represents a potentially significant source of unobligated LEU that  could be used for tritium production. DOE maintains a large inventory of  such fuel, which includes both aluminum-clad and non-aluminum clad  fuel, such as zirconium-clad fuel. Most of the aluminum-clad fuel is  stored at the Savannah River Site, in South Carolina, while most of the  zirconium-clad fuel is stored at the Idaho National Laboratory.", "Options for recovering HEU from either type of spent fuel are limited. The  United States can only process and recover HEU from aluminum-clad  spent nuclear fuel using the Savannah River Site\u2019s H-Canyon facility,  which is the only hardened nuclear chemical separations plant still in  operation in the United States. There is a small amount of aluminum- clad fuel at the Idaho National Laboratory that would need to be shipped  to the Savannah River Site. However, according to NNSA officials, it  would be expensive to transport the material from the Idaho National  Laboratory to the Savannah River Site, and the costs to operate H- Canyon to process the material would be high. Further, receipts of all  nuclear material at H-Canyon have been halted by Savannah River Site\u2019s  management and operations contractor due to the facility\u2019s degraded  conditions and seismic risks. Even if H-Canyon were to resume  operations, NNSA officials stated that processing aluminum-clad spent  fuel would yield relatively small quantities of LEU usable for tritium  production, as a considerable portion of the spent fuel is encumbered  under a 1994 Presidential declaration. Therefore, NNSA officials  reported that this is considered a long-term option due to the high costs  and risks involved.", "DOE\u2019s Office of Nuclear Energy is researching a process that could  recover HEU from the zirconium-clad spent naval reactor fuel. In May  2017, Idaho National Laboratory completed a study examining the  feasibility of processing a portion of its zirconium-clad spent fuel inventory  through a new process called \u201cZIRCEX.\u201d The report concluded that  ZIRCEX showed promise; however, it also noted that pilot-scale testing  was needed to prove that it can be used effectively at production scale.  According to DOE officials, a pilot-scale demonstration is planned using  ZIRCEX, with limited testing planned in fiscal year 2018. DOE officials  told us the costs and schedules to implement a full-scale production plant  using ZIRCEX to recover HEU from zirconium clad spent fuel are not  known. Furthermore, additional processing and downblending would be  needed to produce unobligated LEU. DOE considers recovering  unobligated HEU for tritium production for use in nuclear weapons  through the ZIRCEX process a long-term possibility that could be re- evaluated as the technology matures."], "subsections": []}]}, {"section_title": "Appendix III: Other Uranium Enrichment Technologies", "paragraphs": ["In addition to the large and small centrifuges, four other enrichment  options were presented in the National Nuclear Security Administration\u2019s  (NNSA) October 2015 plan and its October 2016 mission need statement.  However, these options are unlikely to be pursued, according to NNSA  documents. Some of these options have produced enriched uranium in  the past, but extraordinary technical or financial barriers, past research  failures, or peaceful use restrictions will likely preclude further  consideration by NNSA, according to agency documents. These options  include:", "Restart of the Paducah Gaseous Diffusion Plant (GDP). Gaseous  diffusion was the first uranium enrichment technology used for both  national security and commercial enriched uranium needs in the  United States, and involves passing uranium hexafluoride in a  gaseous form through a series of filters that is then cooled into a solid.  The Paducah GDP produced low enriched uranium (LEU) from the  mid-1950s until 2013. It was originally operated by the Department of  Energy (DOE), but leased to the United States Enrichment  Corporation (USEC) beginning in 1993. Gaseous diffusion facilities  used very large amounts of electricity, making them costly to operate.  According to DOE, by May 2012, it became clear that USEC was no  longer in a financial position to continue enrichment activities at the  Paducah GDP, and\u2014through a series of transactions\u2014DOE  transferred enough material to keep it operating long enough to  produce an additional 15-year supply of LEU for future tritium  production. In May 2013, USEC ceased enrichment at the Paducah  GDP citing the high costs of maintaining and operating an aging  plant. In October 2014, the Paducah GDP was returned to DOE, and  DOE is currently deactivating the plant in preparation for  decontamination and decommissioning, while it continues to complete  environmental cleanup that began in the late 1980s.", "In April 2015, when NNSA produced a technical evaluation of uranium  enrichment technology options, restarting the Paducah GDP was still  a hypothetical possibility. At that time, NNSA estimated that the  technology readiness level (TRL) for this option rated 7-8 on the TRL  scale. Restarting the Paducah GDP was advantageous, according to  NNSA, because of the facility\u2019s high production rate. For example,  according to DOE officials, if it had been operated for a relatively brief  period of time after May 2013, a significant stockpile of unobligated  LEU could have been produced to support tritium production for a  number of years. Since 2015, the plant and equipment have  significantly deteriorated, and restart of the Paducah GDP is no longer  a feasible option, according to NNSA documents and Oak Ridge  National Laboratory (ORNL) representatives. Due to degradation of  the equipment, the expected rate of equipment failure, a lack of  replacement parts, the dispersion of trained and qualified personnel,  and ongoing decontamination and demolition activities, a major effort  would be required to reconstitute the plant, according to NNSA\u2019s 2015  technical evaluation and the 2015 plan. NNSA\u2019s 2015 evaluation  estimated that it would cost $425 million to $797 million to restart the  plant, and between $554 million to $1 billion annually to operate it. In  addition, even if the Paducah GDP were successfully restarted  without major failures, the plant could likely operate at full capacity for  only 1 to 3 years before incurring additional significant costs for  repairs, and obtaining replacement parts for critical process  equipment would be difficult. According to NNSA\u2019s April 2015  evaluation, operating the Paducah GDP beyond 1 to 3 years would  require major investments in the plant\u2019s facilities and infrastructure.", "Electromagnetic Isotope Separation (EMIS). Electromagnetic  isotope separation was used in the United States to enrich uranium  for the Manhattan Project, but was abandoned in favor of the then- less-costly gaseous diffusion technology. Electromagnetic separation  used magnetic and electronic forces to manipulate and separate  charged isotopes. An updated EMIS machine has been developed by  ORNL that was successful at the laboratory scale, and which had a  TRL of 7, according to NNSA documents and ORNL representatives.  However, when scaled to production levels, NNSA estimated that an  enrichment facility using EMIS would require over 60,000 machines  and cost approximately $150 billion to construct. Due to the exorbitant  estimated costs, this option is unlikely to be pursued by NNSA,  according to agency documents.", "Atomic Vapor Laser Isotope Separation (AVLIS). Lawrence  Livermore National Laboratory and later, USEC, developed the AVLIS  technology from 1973 through 1999. This technology relies on the  phenomenon that different isotopes of uranium absorb laser light at  different wavelengths. Because lasers can be finely tuned, the ability  to separate the uranium-235 isotope from the uranium-238 isotope is  potentially much greater than with gaseous diffusion or the gas  centrifuge process. However, despite the federal government  spending $1.7 billion on the technology, and USEC investing an  additional $100 million, it was not successful at the pilot scale stage  and USEC ended research and funding in 1999. According to NNSA\u2019s  October 2015 plan, AVLIS\u2019 TRL was estimated to be 5-6. If  development were restarted, AVLIS could reach a TRL of 9\u2014 ready to  deploy\u2014in 5 to 15 years, according to NNSA\u2019s October 2015 plan.  However, this would likely be too late to meet NNSA\u2019s 2038 to 2041  need date for additional unobligated LEU, and there is no estimate for  the cost of such a plant, according to agency documents. According to  NNSA\u2019s 2015 plan, there is no current effort to develop the AVLIS  technology.", "Separation of Isotopes by Laser Excitation (SILEX). Global Laser  Enrichment (GLE)\u2014a joint venture between General Electric, Hitachi,  and Cameco\u2014is developing this uranium enrichment technology that  also uses lasers to separate isotopes. The technology is proprietary  and was developed, in part, by an Australian company. In November  2016, DOE reached an agreement to sell its depleted uranium tails to  GLE for re-enrichment to natural uranium. According to a senior  SILEX official, GLE intends to build an enrichment plant by 2025  adjacent to the site of the former Paducah GDP to re-enrich these  tails. However, we previously found that the SILEX agreement  between the United States and Australia likely prohibits using LEU  produced using GLE\u2019s process for the subsequent production of  tritium, and the executive branch has long interpreted it as such."], "subsections": []}, {"section_title": "Appendix IV: Centrus\u2019 Centrifuge Development", "paragraphs": ["The AC100 centrifuge (large centrifuge) design was developed by USEC  Inc. (now Centrus), based off Department of Energy (DOE) centrifuge  research that was terminated in the 1980s. Standing about 40 feet tall,  its size means that it can produce more separative work units (SWU) per  centrifuge than other centrifuge designs\u2014making it the most advanced  centrifuge design in the world, according to Centrus. In contrast to  European and Japanese centrifuge designs, which are relatively small (2  to 4 meters long) and have separative work capacities in the range of 5  SWU per year to 100 SWU per year, the AC100 demonstrated a SWU  production rate greater than 340 per year.", "When it leased a DOE site at Piketon, Ohio, for its American Centrifuge  demonstration plant starting in 2004, USEC originally intended to build a  3.8 million SWU commercial uranium enrichment plant at that site with  enough land nearby to expand the facility to meet total U.S. low enriched  uranium (LEU) demand, including enough to meet national security  needs. The planned facility would have included over 14,400 centrifuges  in a facility covering over 2 million square feet. In 2010, and again in  2012, DOE and USEC signed cooperative agreements to share the cost  of supporting a research, development, and demonstration program for  the large centrifuge technology. DOE provided $280 million, or 80 percent  of the investment in the program, with the remaining $70 million, or 20  percent, provided by USEC. With this support, USEC began operating a  120-machine commercial demonstration cascade in October 2013.", "In the wake of significant adverse uranium market impacts resulting from  the Fukushima Daiichi accident in Japan in 2011, and in light of difficulties  in securing DOE loan guarantees for deploying a commercial plant,  USEC declared bankruptcy in March 2014 and later emerged as Centrus.  In April 2014, following the conclusion of the cooperative agreement, the  Secretary of Energy stated that DOE\u2019s Oak Ridge National Laboratory  would place Centrus under contract to operate the demonstration plant  and technology with a focus on meeting national security needs. In May  2014, Centrus entered into a contract with UT-Battelle\u2014DOE\u2019s contractor  for Oak Ridge National Laboratory\u2014to run a program to preserve and  further advance the technology readiness of the AC100 technology. Also,  since 2002, Centrus has maintained a lease on a smaller test research  facility, K-1600, at Oak Ridge, Tennessee, from DOE. According to a  DOE document, centrifuges can be assembled and balanced at K-1600,  and the test facility allows verification of centrifuge operations beyond  what was possible at the demonstration plant. The K-1600 facility is  located near Centrus\u2019 manufacturing hub, the American Centrifuge  Technology & Manufacturing Center, also in Oak Ridge, Tennessee.", "Because the May 2014 contract was set to expire in September 2015,  Centrus and UT-Battelle began negotiating a new contract to support  operations at the demonstration plant, the Technology and Manufacturing  Center, and K-1600 in early 2015. UT-Battelle and Centrus agreed to an  extension of research operations at K-1600 and the Technology and  Manufacturing Center until September 2016 for $35 million annually. In  addition, the Centrus lease of K-1600 was renewed until the end of  calendar year 2017. However, the parties were unable to agree on further  funding for the demonstration plant. On September 11, 2015, DOE  announced that it would not fund the demonstration plant in Piketon,  Ohio, after September 30 of that year. Centrus\u2014unable to operate the  demonstration plant without further government support\u2014announced its  intention to demobilize the plant in February 2016. Decontamination and  decommissioning of the demonstration plant began in April 2016. As part  of this work, Centrus is removing all of the equipment\u2014including the  centrifuges\u2014from the demonstration plant, and will finish disposing of the  machines at a secure government facility in October 2017, according to  Centrus officials. However, according to DOE officials, DOE has  preserved a number of the centrifuges and associated components at the  Technology & Manufacturing Center. Centrus documents anticipate that  the decontamination and decommissioning work will be substantially  complete by the end of 2017. According to NNSA officials, Centrus has  given verbal notice to DOE that it intends to terminate its American  Centrifuge demonstration plant site lease in 2019.", "An August 2015 DOE memo states that technical issues with the existing  centrifuges, peaceful-use restrictions on key components and DOE\u2019s  acquisition timeline meant that there was limited value in continuing to  support the demonstration cascade after 2015. Specifically, during  operation of the demonstration cascade, two technical issues were  identified that made the existing centrifuges undesirable for future use.  Rehabilitation of the centrifuges would have been cost prohibitive,  according to NNSA officials. In addition, key components of the existing  machines were constructed using foreign-sourced materials, which were  subject to peaceful-use restrictions. According to an August 2015 DOE  memo, the second cooperative agreement with Centrus did not require  that Centrus use unobligated materials, and Centrus initially assumed it  would use those machines in a larger commercial plant and not for  national security. Centrus representatives and DOE officials told us that  the company had since identified U.S. suppliers or workarounds for these  components. However, to be used in a national security facility, these  components would need to be remanufactured using those suppliers,  since not all components in the demonstration cascade were unobligated.  Further, under NNSA\u2019s timeline for a domestic uranium enrichment  capability, it could take until 2027 to begin construction of a uranium  enrichment plant. Thus, according to an August 2015 memo, DOE  concluded that it would not be economical to keep the demonstration  cascade operational, and that, after the passage of so much time, parts of  the centrifuges and the balance of the plant would also need to be  replaced during construction."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Energy / National Nuclear Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Shelby S. Oakley, Director;  William Hoehn, Assistant Director; Eric Bachhuber, Analyst in Charge;  Julia Coulter; and Katrina Pekar-Carpenter made key contributions to this  report. Also contributing to this report were Antoinette C. Capaccio, Jeff  Cherwonik, Jennifer Echard, Robert S. Fletcher, Ellen Fried, Cindy  Gilbert, Amanda K. Kolling, Jason Lee, Jennifer Leotta, Dan C. Royer,  Anne Stevens, and Kiki Theodoropoulos."], "subsections": []}]}], "fastfact": ["The National Nuclear Security Administration manages U.S.-origin enriched uranium for certain needs such as for the production of tritium, which is used in nuclear weapons. After losing its last source of U.S.-origin enriched uranium in 2013, NNSA projected that its supply would run out in 2027.", "We found that NNSA has extended its supply through 2038 but it has not clearly defined longer term enriched uranium needs. We also found that NNSA's preliminary cost estimates for building a new enrichment capability are not reliable.", "We recommended that NNSA clarify the scope of its mission need statement and create new cost estimates."]}
{"id": "GAO-18-61", "url": "https://www.gao.gov/products/GAO-18-61", "title": "Sunscreen: FDA Reviewed Applications for Additional Active Ingredients and Determined More Data Needed", "published_date": "2017-11-15T00:00:00", "released_date": "2017-11-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Using sunscreen as directed with other sun protective measures may help reduce the risk of skin cancer\u2014the most common form of cancer in the United States. In the United States, sunscreen is considered an over-the-counter drug, which is a drug available to consumers without a prescription. Some sunscreen active ingredients not currently marketed in the United States have been available in products in other countries for more than a decade. Companies that manufacture some of these ingredients have sought to market them in the United States by applying to add the ingredients to the sunscreen monograph, which lists ingredients that can be used in sunscreens without FDA's premarket approval. FDA reviews the applications and corresponding safety and effectiveness data for the ingredients.", "The Sunscreen Innovation Act includes a provision for GAO to examine FDA's implementation of the act. This report examines (1) the extent to which FDA implemented requirements for reviewing applications for sunscreen active ingredients within mandated time frames, and (2) the status of the sunscreen applications. GAO reviewed FDA regulations and guidance documents, Federal Register notices, and FDA and sponsor documents for all eight sunscreen applications. GAO also interviewed FDA officials; sponsors of sunscreen applications; and stakeholders with interests in sunscreen, including health care providers, researchers, and industry groups. Stakeholders were selected based on knowledge of the monograph process and sunscreen active ingredients. The perspectives of these stakeholders are not generalizable."]}, {"section_title": "What GAO Found", "paragraphs": ["The Food and Drug Administration (FDA), within the Department of Health and Human Services, implemented requirements for reviewing applications for sunscreen active ingredients within time frames set by the Sunscreen Innovation Act, which was enacted in November 2014. For example, the agency issued a guidance document on safety and effectiveness testing in November 2016.", "As of August 2017, all applications for sunscreen active ingredients remain pending after the agency determined more safety and effectiveness data are needed. By February 2015, FDA completed its initial review of the safety and effectiveness data for each of the eight pending applications, as required by the act. FDA concluded that additional data are needed to determine that the ingredients are generally recognized as safe and effective (GRASE), which is needed so that products using the ingredients can subsequently be marketed in the United States without FDA's premarket approval. To make a GRASE determination, FDA requested that the application sponsors provide additional data, including human clinical studies, animal studies, and efficacy studies.", "Sponsors of some of the sunscreen applications and some stakeholders GAO interviewed questioned FDA's requests, stating, for example, that the agency's recommended absorption test has never been conducted on sunscreen ingredients and there is a lack of knowledge on how to conduct it. At the same time, other stakeholders support the additional testing FDA requested. FDA reports that the increase in the amount and frequency of sunscreen usage, coupled with advances in scientific understanding and safety evaluation methods, has informed the agency's perspective that it needs additional data to determine that sunscreen active ingredients are GRASE. However, none of the sponsors reported current plans to provide the requested information\u2014that is, they are either still considering whether to conduct the additional tests or they do not plan to do so. They cited the following reasons:", "Return on investment. The testing FDA requested is extensive, would cost millions of dollars, or take several years to conduct, according to sponsor representatives. Some stakeholders and sponsor representatives said that sponsors are currently working to develop newer sunscreen ingredients and are therefore reluctant to invest in the testing FDA requested for the older ingredients covered by the pending applications.", "Alternatives not accepted. Some sponsor representatives and stakeholders said that when they proposed alternative testing methods for absorption, for example, the agency rejected the alternatives.", "Animal testing. One stakeholder and some sponsor representatives reported concerns about the effect that the animal testing requested by FDA may have on companies' marketing of sunscreen products worldwide. Additionally, one stakeholder and representatives from one sponsor expressed concern that sunscreen manufacturers may face backlash from animal rights groups and shareholders if animal testing is conducted.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["With nearly 5 million people treated each year, skin cancer is the most  common form of cancer in the United States and rates are rising. To help  reduce the risk of skin cancer, the U.S. Surgeon General and other  authorities recommend using sunscreen in conjunction with other  preventive measures. Given this recommendation, there is interest in  ensuring Americans have access to the most effective sunscreen  products. Furthermore, authorities encourage people to apply sunscreen  liberally and frequently when out in the sun; and Americans are using  sunscreen more often and in larger quantities than in the past. However,  heightened concerns about possible adverse effects from absorbing  sunscreen ingredients through the skin have accompanied this increase  in sunscreen use.", "Some sunscreen active ingredients not currently marketed in the United  States have been available in products in other countries for more than a  decade, and companies that manufacture some of these sunscreen  ingredients have sought to bring these ingredients to the U.S. market. In  the United States, sunscreen is considered an over-the-counter (OTC)  drug, which is a drug available to consumers without a prescription. The  Federal Food, Drug, and Cosmetic Act authorizes the Food and Drug  Administration (FDA), an agency within the Department of Health and  Human Services, to ensure that OTC drugs, such as sunscreens, are  safe and effective in order to be marketed in the United States. There are  two routes that can be used to market an OTC drug:", "One route is through FDA\u2019s OTC monograph process, which focuses  on the conditions, such as active ingredients, dosage forms, and  labeling for OTC drug products. Under the OTC monograph process,  FDA reviews active ingredients and other conditions to determine  whether they are generally recognized as safe and effective (GRASE)  for use in an OTC drug, such as sunscreen. If FDA finds an active  ingredient to be GRASE for use in a particular category of OTC drugs,  OTC drug products that contain such ingredients do not need  individual preapproval from FDA to be marketed, assuming  compliance with applicable regulations.", "The other route is through the new drug application (NDA) process,  under which FDA determines the safety and effectiveness of an  individual drug product. FDA must review and approve an NDA before  a product can be marketed.", "For active ingredients that have previously been marketed only in other  countries or in drug products individually approved for the U.S. market  through an NDA, FDA\u2019s time and extent application (TEA) process  provides a pathway for FDA to determine whether an ingredient is  GRASE and can be marketed under the OTC monograph process. To be  eligible for review under the TEA process, an active ingredient must be  shown to have been marketed for a material time and material extent in  an OTC product, as described in FDA regulations. Once the agency  determines that a TEA is eligible for review, sponsors\u2014such as the  manufacturers of these ingredients\u2014and other interested parties may  submit safety and effectiveness data for FDA to review and make a  GRASE determination.", "Sponsors submitted TEAs for eight sunscreen active ingredients between  2002 and 2009. Amid concerns that these TEAs had been pending with  FDA for several years, Congress enacted the Sunscreen Innovation Act  (SIA) in November 2014. SIA altered the process FDA uses to determine  whether a sunscreen active ingredient is GRASE and established time  frames for the agency\u2019s review. The act also included requirements for  the agency related to this new process, such as developing guidance.  Additionally, the act included a provision for GAO to report on FDA\u2019s  implementation of the act. This report examines  1.  the extent to which FDA has implemented requirements for reviewing  applications for sunscreen active ingredients within mandated time  frames, and  2.  the status of FDA\u2019s review of applications for sunscreen active  ingredients.", "This report also describes information about the steps FDA has taken to  review TEAs for non-sunscreen active ingredients. (See app. I.)", "To examine the extent to which FDA has implemented requirements for  reviewing applications for sunscreen active ingredients (sunscreen  applications) within mandated time frames, we reviewed the Federal  Food, Drug, and Cosmetic Act (as amended by SIA), applicable FDA  regulations, and agency guidance related to the TEA process and  sunscreen active ingredients. We also reviewed agency documentation  regarding SIA implementation, such as a May 2016 report to Congress  required by SIA, and interviewed agency officials.", "To examine the status of FDA\u2019s review of applications for sunscreen  active ingredients, we reviewed documentation associated with each  sunscreen application from regulations.gov and FDA. This documentation  included the TEA submitted by each sponsor of a sunscreen active  ingredient, Federal Register notices of eligibility, feedback letters, and  minutes from meetings between FDA and sponsors, when applicable. We  also reviewed applicable FDA regulations and guidance, and interviewed  FDA officials. Additionally, we interviewed representatives from five  sponsors, which represent all eight sunscreen applications submitted to  FDA (all of which were submitted prior to the enactment of SIA). We also interviewed nine stakeholders with interest in sunscreens, including  industry groups, researchers, and health care providers. We identified  stakeholders through our interviews with and review of key documents  from FDA, sponsors, and other stakeholders. We selected stakeholders  knowledgeable with the OTC monograph process for sunscreen active  ingredients, including stakeholders who commented on FDA draft  guidance and participated in FDA advisory committee and SIA  implementation meetings. These selected stakeholder organizations  provided their own insights on these issues, and their perspectives are  not generalizable.", "To examine the steps FDA has taken to review TEAs for non-sunscreen  active ingredients, we reviewed SIA, applicable FDA regulations and  guidance, and other relevant documentation associated with the non- sunscreen TEAs. We also interviewed FDA officials and representatives  of the sponsors associated with the six non-sunscreen TEAs submitted  prior to the enactment of SIA in 2014.", "We conducted this performance audit from December 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Skin Cancer and Sunscreen", "paragraphs": ["How Sunscreen Works  Most sunscreen products work by absorbing,  reflecting, or scattering sunlight. Sunscreen  contains chemicals that interact with the skin  to protect it from ultraviolet (UV) rays. UV rays  are an invisible form of radiation from the sun,  tanning beds, and sunlamps that can  penetrate the skin and change skin cells.", "The most common kinds of skin cancer, including the deadliest kind of  skin cancer (melanoma), are associated with exposure to ultraviolet (UV)  light. Sunscreen is one of the most common methods of protection  against UV exposure used by Americans. To lower the risk of skin cancer,  the Centers for Disease Control and Prevention and FDA recommend  that consumers use broad spectrum sunscreens with a sun protection  factor (SPF) of 15 or more as directed and in conjunction with other sun- protective measures, such as seeking shade and wearing protective  clothing, hats, and sunglasses. Current recommendations also state that  sunscreen should be reapplied every 2 hours and after swimming,  sweating, and toweling off. When used incorrectly, sunscreen may  provide a false sense of protection, which can ultimately lead to increased  UV exposure."], "subsections": []}, {"section_title": "FDA Regulation of Sunscreens and Other OTC Drugs", "paragraphs": ["Because sunscreens are intended to help prevent sunburn and, in some  cases, decrease the risks of skin cancer and early skin aging caused by  the sun, these products are considered drugs under the Federal Food,  Drug, and Cosmetic Act. Sunscreens are regulated as OTC (i.e.,  nonprescription) drugs, which are drugs considered to be safe for use by  consumers without the intervention of a health care professional, such as  a physician.", "Broad Spectrum Sunscreen and Sun  Protection Factor (SPF)  There are two types of ultraviolet (UV)  radiation from which one needs protection\u2014 UVA and UVB. UVA radiation penetrates the  skin more deeply and can cause skin cancer  and other skin damage. UVB radiation can  cause sunburn and result in skin damage.  Broad spectrum sunscreens provide  protection against both UVA and UVB rays.  Products labeled as \u201cbroad spectrum\u201d have  been tested for both UVA and UVB protection.  Sunscreens are made in a wide range of  SPFs. The SPF value indicates the level of  sunburn protection provided by the sunscreen  product. Higher SPF values (up to 50) provide  greater sunburn protection. Because SPF  values are determined from a test that  measures protection against sunburn, SPF  values primarily indicate a sunscreen\u2019s UVB  protection.", "Most OTC drugs, including nearly all sunscreen products, are marketed in  the United States by following the OTC monograph process. An OTC  monograph is a regulation that specifies the active ingredients that may  be used to treat certain diseases or conditions without a prescription, and  the appropriate dose and labeling for use, among other things. OTC  drugs that meet a monograph\u2019s requirements may be marketed without  FDA\u2019s prior approval, assuming compliance with all other applicable  regulations.", "FDA regulations designate categories of OTC drugs, including antacids,  cough and cold products, and sunscreens, to be covered by OTC  monographs. OTC drug products that do not fit under an existing  monograph must be approved under an NDA to be marketed, which is an  application also used for new prescription drugs. See table 1 for a  summary of the differences between marketing an OTC drug product,  such as a sunscreen product, under the OTC monograph process  compared to under an NDA. According to FDA officials, more than  100,000 OTC drugs are marketed under the OTC monograph process,  and about 400 are approved to be marketed under NDAs.", "The sunscreen monograph currently includes 16 active ingredients. The  last active ingredients (avobenzone and zinc oxide) were added to the  sunscreen monograph in the late 1990s. FDA issued a final sunscreen  OTC monograph in 1999; before it could go into effect, however, FDA  stayed its effective date indefinitely, because the agency had not yet  established UVA/broad spectrum testing and labeling requirements for  sunscreen products. To date, the sunscreen monograph is not in effect.", "While the sunscreen monograph\u2019s effective date is stayed, FDA has  indicated that it will not take enforcement action against the marketing of  sunscreens using the 16 active ingredients included in the stayed final  monograph or some combination thereof, provided the products are  marketed in compliance with other applicable regulations and consistent  with FDA\u2019s 2011 draft guidance."], "subsections": []}, {"section_title": "TEA Process", "paragraphs": ["In 2002, FDA created a two-part process, referred to as the TEA process,  by which an active ingredient that was not included in OTC drugs  marketed in the United States prior to the beginning of the monograph  process in the 1970s can be considered for marketing under the OTC  monograph process by receiving a GRASE determination.", "Part 1: Eligibility determination. To be eligible for review under the TEA  process, the sponsor must submit an application showing that the active  ingredient has been marketed in OTC drugs for a material time and to a  material extent, as shown by, for example a minimum of 5 continuous years in the same country, or multiple  countries outside the United States, or in an OTC product with an  approved NDA in the United States; and a sufficient quantity as measured by the total number of dosage units  or weight of active ingredient sold, and in a population reasonably  extrapolated to the population of the United States.", "For ingredients found to meet the eligibility requirements, FDA publically  posts this determination in the Federal Register and requests safety and  effectiveness data to be submitted for the agency\u2019s review.", "Part 2: GRASE determination. FDA reviews the safety and  effectiveness data submitted by sponsors and other interested parties to  determine whether the ingredient is generally recognized as safe and  effective for OTC use. Standards for GRASE determinations are  established in FDA regulations.", "General recognition is based upon published studies, which may be  corroborated by unpublished studies and other data.", "Safety means a low incidence of adverse reactions or significant side  effects under adequate directions for use and warnings against  unsafe use, as well as low potential for harm, which may result from  abuse that can occur when the drug is widely available.", "Effectiveness means a reasonable expectation that, in a significant  proportion of the target population, the pharmacological effect of the  drug, when used under adequate directions for use and warnings  against unsafe use, will provide clinically significant relief of the type  claimed.", "Based on its review, FDA may initially determine that the active ingredient  is GRASE or not GRASE for OTC use; a not GRASE determination could  result from FDA\u2019s determination that the safety and effectiveness data  submitted are insufficient. FDA issues its initial GRASE determination in  the Federal Register and provides a period of time for public comments.  The agency then reviews any comments received and issues its final  GRASE determination in the Federal Register.", "SIA altered the process FDA is required to use for its review of sunscreen  active ingredients and established time frames for the agency\u2019s review. It  also established a process for convening the agency\u2019s Nonprescription  Drugs Advisory Committee to review and provide recommendations  regarding sunscreen applications at certain points in the process, and  created a mechanism for sponsors to request FDA\u2019s Office of the  Commissioner to review sunscreen applications. At the time SIA was  enacted in November 2014, FDA had received TEAs for eight sunscreen  active ingredients. For all eight of these ingredients, FDA had deemed the  applications eligible for review under the TEA process (that is, the  sponsors demonstrated that the ingredients had been marketed for a  material time and to a material extent), and the agency had requested  data to demonstrate safety and effectiveness."], "subsections": []}]}, {"section_title": "FDA Implemented SIA Requirements for Reviewing Applications for Sunscreen Active Ingredients within Mandated Time Frames", "paragraphs": ["FDA implemented requirements for reviewing applications for sunscreen  active ingredients within the time frames required by SIA. For example, by  November 2016, FDA issued final guidance for applications for sunscreen  active ingredients, such as guidance on safety and effectiveness testing  standards and on convening the Nonprescription Drugs Advisory  Committee to discuss sunscreen active ingredients. In May 2016, FDA  also issued its first required report to Congress on specific performance  metrics, such as the number of sunscreen applications with pending  GRASE determinations. In addition to requiring FDA to issue two  additional reports to Congress in 2018 and 2020, SIA requires FDA to  finalize the sunscreen monograph by November 26, 2019. See table 2  for the status of FDA\u2019s implementation of SIA requirements and  corresponding time frames.", "FDA also implemented changes to the process for reviewing sunscreen  applications as required by SIA.", "Administrative orders. SIA changed the process for issuing initial  and final GRASE determinations for sunscreen applications to  administrative orders. FDA officials stated that this approach is more  efficient than rulemaking. Agency officials noted that administrative  orders are not subject to multiple-stage rulemaking procedures, and  generally undergo fewer levels of review outside of FDA.", "Time frames. SIA established time frames for each step in the review  process for sunscreen applications. For example, the agency is  required to determine whether a new application for a sunscreen  active ingredient is eligible for review and notify the sponsor within 60  days of receipt by the agency. These time frames only include FDA\u2019s  review, and do not include the time for the sponsor or other interested  parties to prepare and submit safety and effectiveness data, or  respond to additional FDA requests.", "Filing determination. SIA added a step, known as a filing  determination, in which FDA reviews the safety and effectiveness data  to determine whether it is sufficiently complete for the agency to begin  its more substantive review to determine whether an active ingredient  is GRASE. If FDA determines that the data are sufficiently complete to  determine whether the active ingredient is GRASE, the agency will file  the application and further analyze the data. If FDA determines that  the data are not sufficiently complete, the agency can refuse-to-file  the application, which involves notifying the sponsor and providing  reasons for the refusal. Sponsors can protest FDA\u2019s decision to  refuse-to-file the application, known as \u201cfile over protest,\u201d in which  case FDA will proceed with its more substantial review to determine if  the active ingredient is GRASE.", "Office of the Commissioner review. SIA established a mechanism  for sponsors to request the Office of the Commissioner to issue  GRASE determinations if FDA does not meet required time frames.  The mechanism has not been employed to date, because, as of  August 2017, FDA had met its required time frames for reviewing and  initially responding to sunscreen applications.", "Figure 1 illustrates the post-SIA process for FDA\u2019s review of pending and  new applications for sunscreen active ingredients, including time frames."], "subsections": []}, {"section_title": "All Eight Sunscreen Active Ingredient Applications Pending After FDA Determined More Safety and Effectiveness Data Needed; Sponsors Questioned Need for Additional Data", "paragraphs": ["FDA completed its review of the safety and effectiveness data for each of  the eight sunscreen active ingredient applications that it received prior to  the enactment of SIA. The agency concluded that the ingredients were  not GRASE because the data were insufficient and additional safety and  effectiveness data are needed to determine otherwise. Sponsors  questioned FDA\u2019s request for additional data and no data have been  provided."], "subsections": [{"section_title": "FDA\u2019s Review of Sunscreen Active Ingredient Applications Determined Additional Safety and Effectiveness Data Needed, and Most Took More than 8 Years", "paragraphs": ["As of February 2015, FDA completed its review of the safety and  effectiveness data\u2014that is, the initial GRASE determination\u2014for each of  the eight sunscreen applications submitted between the creation of the  TEA process in 2002 and SIA\u2019s enactment in 2014. FDA\u2019s review  concluded that the eight sunscreen active ingredients were not GRASE,  because the data were insufficient to make a determination, and that  additional data are needed to determine otherwise. (See fig. 2.)", "For all eight pending sunscreen applications, FDA requested additional  safety and effectiveness data to support a GRASE determination. The  data FDA requested include", "Human clinical safety studies including skin irritation, sensitization,  and photosafety studies, as well as human pharmacokinetic tests  (which measure the amount of absorption of a drug into the body).  Among other studies, FDA specifically recommends that sponsors  conduct a Maximal Usage Trial (MUsT), a type of human  pharmacokinetic study, to support an adequate assessment of  safety.", "Human safety data from adverse event reports and other safety- related information from marketed products that contain the active  ingredient. This includes a summary of all available reported adverse  events potentially associated with the ingredient, all available  documented case reports of serious side effects, any available safety  information from studies of the safety and effectiveness of sunscreen  products containing the ingredient in humans, and relevant medical  literature describing adverse events.", "Nonclinical animal studies that characterize the potential long-term  dermal and systemic effects of exposure to the active ingredient.  These tests include dermal and systemic carcinogenicity studies, as  well as toxicokinetic tests (to help determine the relationship between  exposure in toxicology studies in animals and the corresponding  exposure in humans). In most cases, FDA also recommended  developmental and reproductive toxicity studies to evaluate the  potential effects of the active ingredient on developing offspring.  FDA\u2019s guidance states that if the ingredient is not absorbed into the  body past an identified threshold, some of these studies will not be  needed.", "Effectiveness data from at least two SPF studies showing that the  active ingredient prevents sunburn. FDA stated these studies should  demonstrate protection at an SPF of 2 or higher.", "FDA\u2019s 2016 guidance on safety and effectiveness data for sunscreen  states that its approach for evaluating the safety of sunscreen active  ingredients is based on the agency\u2019s current scientific understanding of  topical products for chronic use. According to FDA, the standard for  determining GRASE has remained the same over time. However, FDA  reports that the increase in the amount and frequency of sunscreen  usage, coupled with advances in scientific understanding and safety  evaluation methods, has changed the agency\u2019s perspective on what it  needs to determine if sunscreen active ingredients are GRASE. As a  result, the agency stated that these additional tests, such as the MUsT,  are necessary to determine whether a sunscreen active ingredient is safe  for chronic use. FDA reported that the studies it is requesting are not  novel and are consistent with the requirements for chronically used  topical drug products approved through the NDA process.", "For the eight sunscreen applications FDA received since 2002, FDA took  between approximately 6 and 13 years to issue initial GRASE  determinations starting from the date that the application was submitted.  For six of the eight sunscreen applications, it took FDA more than 8 years  to issue an initial GRASE determination. (See table 3.) Sponsors or other  parties may submit safety and effectiveness data after FDA determines  the application is eligible for review. From the most recent date that safety  and effectiveness data were submitted for each application, the range of  time for FDA to issue an initial GRASE determination was between about  4 and 11 years.", "According to FDA officials, the delays in reviewing sunscreen applications  can be attributed to inadequate resources to carry out the agency\u2019s OTC  drug responsibilities and a lengthy multi-step rulemaking process, which  the applications were subject to prior to SIA. The officials added that the  delays in FDA\u2019s review of sunscreen applications are indicative of the  larger issues affecting the OTC monograph process more generally. For  example, though the OTC monograph process began over 40 years ago,  FDA officials said that the agency has still not been able to complete  many monographs, or make timely changes based on emerging safety  issues and evolving science, because of the burdensome regulatory  process and inadequate resources. FDA officials estimate that as of  October 2017 approximately one third of the monographs are not yet  final, and several hundred active ingredients, including those used in  sunscreen products, do not have a final GRASE determination.", "Some stakeholders and sponsor representatives said that one effect  associated with SIA was that FDA took action on the sunscreen  applications that had been pending for many years. Without the act, some  of them questioned whether FDA would have reviewed the sunscreen  applications or provided feedback to the sponsors. Though the agency  has made an initial GRASE determination, the timing of FDA\u2019s final  GRASE determination for each of the eight sunscreen active ingredients  will be determined, in part, by when each ingredient\u2019s sponsor provides  FDA with the additional safety and effectiveness data the agency  requested."], "subsections": []}, {"section_title": "Sponsors Questioned FDA\u2019s Request for Additional Safety and Effectiveness Data; No Additional Data Have Been Provided", "paragraphs": ["Sponsor representatives and some stakeholders questioned the  additional safety and effectiveness data requested by FDA citing the  following reasons", "Requested test not previously conducted on sunscreen. Some of  the sponsor representatives and stakeholders we interviewed stated  that they were not aware of one of the tests FDA requested, the  MUsT, ever being conducted on sunscreen active ingredients. Some  of these sponsor representatives and stakeholders said there is a lack  of knowledge by sponsors and testing laboratories on how to conduct  this test, as well as a lack of testing protocols. Further,  representatives from some of the sponsors said that the thresholds  set by FDA for these test results, which affects whether FDA will  recommend additional testing, were unreasonably low or unrealistic.  FDA officials stated that a MUsT is a fairly recent term for a  pharmacokinetic test under maximum use, which is a test that has  been used for dermal products since the 1990s. They added that the  threshold FDA established for this test is considered by the agency to  minimize risk, and that at or above this threshold, the risk for cancer  may increase. According to agency officials, FDA\u2019s draft guidance on  conducting a MUsT is expected to be issued in 2018.", "Equal to or more rigorous than NDA testing requirements. Some  of the sponsor representatives and stakeholders said that the  additional safety and effectiveness data FDA requested are equal to  or more rigorous than what are submitted for an NDA. In particular, a  stakeholder noted that FDA requested additional safety and  effectiveness testing for an application to market the ingredient under  the OTC monograph process from a company that already had an  approved NDA for a product containing the same active ingredient  (ecamsule). FDA officials indicated that active ingredients under  consideration for inclusion in an OTC monograph may require some  studies to demonstrate that the ingredient is GRASE for OTC use that  would not be required for approval of an individual drug product  through an NDA. Specifically, FDA officials said such studies may  be needed because once an ingredient is found to be GRASE it can  be formulated in many ways (in accordance with the monograph) and  marketed in multiple sunscreen products without further agency  review. Additionally, the combination of sunscreen active ingredients  with other inactive ingredients in a sunscreen spray, for example, may  affect the absorption of the sunscreen active ingredient, according to  FDA officials. In contrast, NDAs are product-specific and once  approved, further changes to the products require FDA approval.", "Raising the bar. Some of the sponsor representatives and  stakeholders said that FDA\u2019s requests for additional safety and  effectiveness data equate to FDA raising the bar or otherwise  changing what is required to demonstrate GRASE for additional active  ingredients in sunscreen. Some stakeholders noted that sunscreen  active ingredients that are currently marketed are not subject to this  level of scrutiny. According to FDA officials, given the increased  usage of sunscreen, coupled with increased knowledge of how drugs  are absorbed into the skin, the agency has changed its perspective on  what it needs to determine if sunscreen active ingredients are  GRASE. FDA officials said that when the OTC monographs first  started in the 1970s, it was thought that topical products would remain  on the skin rather than be absorbed, but science has shown that  some topical drugs, including some active ingredients used in  sunscreens, are absorbed through the skin. Because of this  knowledge, FDA officials said that the agency now considers potential  dermal absorption for every topically applied drug.", "Lack of access to some requested data. In some cases, the  sponsor or another interested party submitted a study\u2019s summary  results or summary information on adverse events associated with an  active ingredient, but FDA requested more detailed data behind the  study or detailed data on adverse events. However, some sponsor  representatives and stakeholders said that the sponsor may not have  access to this level of detail if it had not conducted the study itself or  received the associated adverse event reports. For example, if the  sponsor is the company that manufactures the active ingredient, it  would not necessarily have access to adverse event reports for  specific sunscreen products, because these reports would instead be  submitted to the company that manufactures the actual sunscreen  product used by consumers. One stakeholder also questioned why  FDA has not attempted to obtain relevant adverse event data directly  from regulatory agencies in other countries. FDA officials said that the  agency does not generally have access to adverse event reports from  foreign regulatory agencies, and that the agency relies on sponsors to  provide adequate information to support a GRASE determination.", "Some stakeholders supported FDA\u2019s request that sponsors provide  additional safety and effectiveness data to determine if an active  ingredient is GRASE for use in sunscreens. In particular, some of the  stakeholders we interviewed stated that FDA is justified in requesting  additional safety and effectiveness data from the sponsors given that  science has evolved and the recommended use of sunscreen has  changed over time.", "As of October 2017, FDA officials said that the agency has not received  any of the additional safety and effectiveness data requested for the eight  sunscreen active ingredients seeking a GRASE determination. According  to sponsor representatives we spoke with, the sponsors are either still  considering whether to conduct the additional tests FDA requested or  they do not plan to do so. The reasons cited by the sponsor  representatives and stakeholders included", "Return on investment. Sponsor representatives said the testing FDA  requested is extensive, would cost millions of dollars, or take several  years to conduct. Some of the stakeholders said the profit margins for  these types of products can be low, and other stakeholders and  sponsors said that once an active ingredient is determined to be  GRASE and added to the OTC monograph, then anyone can market  products using that active ingredient, as there is no period of market  exclusivity granted to sponsors. Additionally, some stakeholders and  sponsors added that the sponsors are reluctant to spend money on  additional testing, because many of these sunscreen active  ingredients have been on the market in other countries for many  years. Instead, according to one sponsor representative, sponsors  may choose to devote their resources into developing a newer  generation of sunscreen active ingredients.", "Alternatives not accepted. Some sponsor representatives and  stakeholders said that when alternative testing methods were  proposed to FDA in place of the MUsT and other tests recommended  by the agency, FDA rejected the alternatives. Further, when a sponsor  asked the agency if the ingredient\u2019s experience being marketed in  other countries could be used to waive some of the carcinogenicity  studies requested by FDA, the agency said that marketing experience  can guide the design of studies, but it is not sufficient to appropriately  assess carcinogenicity. The main purpose of carcinogenicity studies,  according to FDA, is to detect the potential for cancer risks associated  with lifelong exposure to the active ingredient, which are difficult to  detect through the adverse event data associated with marketing  experience.", "Animal testing. Some sponsor representatives and one stakeholder  mentioned concerns about conducting tests on animals, because of  the effect it may have on a company\u2019s ability to market products  worldwide. For example, European regulations prohibit cosmetics,  including sunscreens, from being tested on animals, though they  would not prohibit such testing as required by other countries.  Additionally, one sponsor and one stakeholder expressed concern  that sunscreen manufacturers may face backlash from animal rights  groups and shareholders if animal testing is conducted.", "Uncertainty if more tests will be requested by FDA in the future.", "One sponsor representative said that there is uncertainty whether  FDA may request additional studies in the future based on the  outcomes of the FDA-recommended tests. According to one  stakeholder, there is concern that sponsors may spend additional time  and money on conducting the tests requested by FDA and the  sunscreen active ingredient may still not be determined to be GRASE.", "Sponsor representatives for the pending sunscreen applications and most  stakeholders said that the sponsors and FDA are essentially at a  standstill about adding more sunscreen active ingredients to the U.S.  market through the OTC monograph process. Sponsor representatives  acknowledged that they could have submitted an NDA to market a new  sunscreen product instead of seeking a GRASE determination for a  sunscreen active ingredient. However, some sponsor representatives and  a stakeholder said that NDAs are impractical for sunscreen products,  because the formulations are continually changing; for example,  sunscreen products may have a new fragrance based on the season.  Additionally, many of the sponsors that submitted sunscreen applications  manufacture the active ingredient, but not the finished sunscreen  products; yet, it is the finished products that receive approval through the  NDA process.", "Though FDA stated that it needs additional resources to complete its  work related to the OTC monograph process\u2014and most stakeholders  agree\u2014additional resources alone will not lead to additional sunscreen  active ingredients on the U.S. market. Movement on sunscreen active  ingredients will also depend on sponsors and other interested parties  submitting data that FDA determines are sufficient for a GRASE  determination. Some stakeholders said that they agree with FDA on the  need for testing to ensure the safety and effectiveness of sunscreen  ingredients, but some of them said the agency should also consider the  potential benefit of preventing skin cancer if new ingredients\u2014which  could offer better protection against UVA rays\u2014become available for the  U.S. market."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Health and Human  Services for review and comment. The department provided technical  comments, which we incorporated as appropriate.", "We are sending copies of this report to the Secretary of the Department  of Health and Human Services, appropriate congressional committees, as  well as other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If your staff have any questions about this report, please contact me at  (202) 512-7114 or crossem@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."], "subsections": []}]}, {"section_title": "Appendix I: Steps the FDA Has Taken To Review Applications for Non-Sunscreen Active Ingredients", "paragraphs": ["To examine the steps the Food and Drug Administration (FDA) has taken  to review time and extent (TEA) applications for non-sunscreen active  ingredients, we reviewed the Sunscreen Innovation Act (SIA), applicable  FDA regulations and guidance, and other relevant documentation  associated with the non-sunscreen TEAs. We also interviewed FDA  officials and representatives of the sponsors associated with the six non- sunscreen TEAs submitted prior to the enactment of SIA in 2014."], "subsections": [{"section_title": "SIA Requirements and FDA Implementation", "paragraphs": ["SIA included requirements related to FDA\u2019s review of non-sunscreen  TEAs. Specifically, SIA required FDA to provide sponsors of certain non-sunscreen TEAs submitted prior to  the enactment of SIA, upon request, with the opportunity to select  from among different options for FDA\u2019s review (called a review  framework), including corresponding time frames;  issue regulations establishing time frames for reviewing non- sunscreen TEAs submitted after SIA was enacted, as well as metrics  for tracking the extent to which the time frames are met; and  submit a letter to Congress that includes a report on the status of  FDA\u2019s review of non-sunscreen TEAs that were pending before SIA\u2019s  enactment.", "FDA implemented these requirements associated with non-sunscreen  TEAs by November 2016. For example, FDA provided each sponsor that  requested review framework options with the ability to select the process  and corresponding time frames to be applied to its pending TEA. The  review framework options included FDA using an administrative order or  rulemaking process, with or without a filing determination. The time  frames FDA established to initially respond to the pending non-sunscreen  TEAs ranged from 90 days (when an option with a filing determination is  selected) to 3.5 years (when an option without a filing determination is  selected) from the date the sponsor selected a review framework. For  example, when a sponsor chooses to receive a filing determination with  the administrative order process, FDA is to determine within 90 days  whether the safety and effectiveness data provided by the sponsor or  other interested party are sufficiently complete for the agency to begin its  substantive review and issue a filing determination. If FDA determines  that the application can be filed, the agency then has 2 years after the  filing date to issue a proposed order determining whether the ingredient is  generally recognized as safe and effective (GRASE). When a sponsor  chooses to not receive a filing determination with the rulemaking process,  FDA has 3.5 years to issue a proposed rule with the GRASE  determination.", "Additionally, FDA issued a final rule in November 2016 outlining the  process and time frames by which the agency will review and take action  on new non-sunscreen TEAs submitted after the enactment of SIA,  including time frames for each step in the review process. (See fig. 3.) In  establishing these time frames, FDA noted that it considered the agency\u2019s  public health priorities and available resources, as required by SIA, and  accounted for the anticipated variations in the content, complexity, and  format of submissions, as permitted by SIA. The overall time frames for  FDA\u2019s review are estimated to be about 6 years from the date FDA  receives a TEA to the date a final GRASE determination is issued.  Specifically, the approximately 6 years consists of 180 days for an  eligibility determination, 90 days for a filing determination, 1,095 days for  an initial GRASE determination, and 912 days for a final GRASE  determination. These time frames only include FDA\u2019s review, and do not  include time for the sponsor or other interested parties to submit safety  and effectiveness data, respond to additional FDA requests, or request  meetings with the agency before such filing.", "FDA also established metrics for tracking the extent to which the agency  meets the time frames set forth in the regulations, and sent a letter to  Congress reporting on the status of the non-sunscreen TEAs submitted  prior to SIA. These metrics are included in FDA\u2019s regulation for non- sunscreen TEAs. The metrics include the number of non-sunscreen TEAs  that have been submitted post SIA, and the number and percent of these  TEAs to which FDA has responded within its required time frames.  Agency officials said that FDA has not received any additional non- sunscreen TEAs as of August 2017 beyond the six that were submitted  prior to the enactment of SIA, and therefore has not publicly reported  metrics for non-sunscreen TEAs. Lastly, FDA submitted a letter to  Congress in May 2016 describing the status of the six non-sunscreen  TEAs submitted prior to SIA, including the review framework selected by  each sponsor, when applicable."], "subsections": []}, {"section_title": "Non-Sunscreen Active Ingredient TEAs Submitted before SIA Was Enacted", "paragraphs": ["As of August 2017, FDA had not issued a GRASE determination for any  of the six TEAs for non-sunscreen active ingredients that were submitted  before SIA was enacted. FDA has not made a GRASE determination  because", "FDA refused to file the applications. Two non-sunscreen TEAs  were determined by FDA to contain insufficient information to be filed  for review in 2016. FDA requested that the sponsors for these  applications provide a detailed chemical description of the active  ingredients, assessments of carcinogenicity, and safety and efficacy  data, among other things. Representatives of sponsors for both  ingredients said they do not plan on conducting the additional tests  that FDA requested, because of concerns about return on investment.  According to FDA officials, the sponsors of these applications did not  elect to \u201cfile over protest.\u201d", "Sponsors withdrew their applications. Three non-sunscreen TEAs  were withdrawn in 2016. Representatives of the sponsors of these  three applications said the companies did so because of increased  regulatory scrutiny of the active ingredient, and the additional safety  and effectiveness data requested by FDA.", "TEA is still pending FDA\u2019s initial GRASE determination. One non- sunscreen TEA that was submitted in 2004 to add an anti-dandruff  ingredient to the over-the-counter monograph was pending FDA  review as of August 2017. The sponsor for this application did not  request to select a review framework from the agency and so the  application is subject to the regulations that FDA issued in November  2016. In accordance with the time frames established in the  regulations, FDA officials expect to issue a proposed rule with a  GRASE determination for this TEA in 2019\u2014within 1,095 days (3  years) of when the regulation was finalized. This date is nearly 15  years after the application was originally submitted.", "For those two non-sunscreen TEAs for which FDA refused to file the  applications, FDA\u2019s determination came about 8 and 13 years after the  TEA was originally submitted. Sponsors that withdrew the three non- sunscreen TEAs did so 11 or more years after submitting the application.  (See table 4.)"], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kim Yamane (Assistant Director),  Rebecca Hendrickson (Analyst-in-Charge), Kristin Ekelund, and Toni  Harrison made key contributions to this report. Also contributing were  George Bogart, Karen Howard, Drew Long, and Vikki Porter."], "subsections": []}]}], "fastfact": ["Some sunscreen active ingredients are not used in products marketed in the United States, although they have been available in other countries for more than a decade. Companies that manufacture some of these sunscreen ingredients have sought to bring them to the U.S. market by submitting applications to FDA between 2002 and 2009.", "We looked at the status of the applications and found that, as of August 2017, all remain pending after FDA determined that more data are needed to determine that the ingredients are safe and effective. Some of the companies questioned FDA\u2019s requests for more data, and no additional data have been provided."]}
{"id": "GAO-19-228", "url": "https://www.gao.gov/products/GAO-19-228", "title": "Federal Housing Administration: Opportunities Exist to Improve Defaulted Single-Family Loan Sales", "published_date": "2019-07-03T00:00:00", "released_date": "2019-08-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HUD insures single-family mortgage loans and is authorized to sell defaulted loans under the National Housing Act. In fiscal years 2010\u20132016, FHA auctioned off approximately 111,000 loans to private purchasers under DASP. DASP helped reduce a backlog of federally insured defaulted loans stemming from the 2007\u20132011 financial crisis and was intended to protect the MMI Fund by paying insurance claims before the costly foreclosure process.", "GAO was asked to evaluate DASP. This report examines, among other things, certain DASP procedures, including verifying loan eligibility criteria, and documentation; FHA's evaluation of the identified outcomes of sold loans and how these compare with similar, unsold loans; and the potential effects that changes to DASP might have on the MMI Fund. GAO reviewed FHA policies, contracts, and reports, and interviewed FHA officials, selected servicers and purchasers based on sales participation, and other stakeholders. GAO also conducted a statistical analysis comparing outcome data for sold loans and similar loans that remained FHA-insured and analyzed the effect of loan pool characteristics on bidder participation."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) uses multiple entities to check loan eligibility for the Distressed Asset Stabilization Program (DASP)\u2014in which FHA accepts assignment of eligible, defaulted single-family loans from servicers in exchange for claim payments and sells the loans in competitive auctions. After servicers submit loans for sale, FHA and its contractors concurrently check loan data for completeness, validity, and eligibility. FHA relies on servicers to check eligibility a few weeks before and again after the bid date. The status of delinquent loans can be fluid, and a change in eligibility status close to this date may not be detected. GAO's analysis of fiscal year 2016 default data indicates about 2.67 percent of loans that FHA sold were ineligible based on length of delinquency or loss mitigation status. Without checking loan eligibility closer to bidding, FHA risks selling ineligible loans, and borrowers could lose access to benefits.", "FHA does not evaluate outcomes for sold loans against similar unsold loans. GAO found that, in aggregate, sold defaulted loans were more likely to experience foreclosure than comparable unsold defaulted loans (see figure). However, GAO's analysis identified varying outcomes by purchasers and sales. For example, some purchasers' loans had higher probabilities of avoiding foreclosure, with borrowers making regular payments again by 24 months after the transfer of loans. Also, loans sold in 2016 sales were less likely to experience foreclosure compared to unsold loans. HUD policy states that the agency's evaluations isolate program effects from other influences. Evaluating outcomes for sold loans against similar unsold loans could help FHA determine whether DASP is meeting its objective of maximizing recoveries to the Mutual Mortgage Insurance Fund (MMI Fund) and understand the extent to which DASP helps borrowers.", "Changing some of FHA's auction processes may help the MMI Fund. FHA could increase participation and MMI Fund recoveries in its auctions by communicating upcoming sales earlier. One purchaser said that additional notice would allow it time to plan for the capital needed to bid. Also, FHA set reserve prices (minimum acceptable price) based on the amount it expected to recover after loans completed foreclosure\u2014yet GAO estimates that some of these loans will avoid foreclosure (see figure). As a result, FHA risks recovering less for the MMI Fund in loan sales than if the loans had not been sold."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making nine recommendations to FHA, including establishing specific time frames to check loan eligibility, evaluating loan outcome data, and changing auction processes to help protect the MMI Fund. FHA generally agreed with seven recommendations, and neither agreed nor disagreed with two. GAO maintains that all the recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Housing and Urban Development\u2019s (HUD) Federal  Housing Administration (FHA) helps to broaden homeownership by  insuring single-family mortgage loans with less strict underwriting  standards and lower down payments compared with conventional loans.  The mortgage insurance allows FHA-approved private lenders to provide  qualified borrowers with mortgages and generally compensates them for  nearly all of the losses incurred on such loans. The Mutual Mortgage  Insurance Fund (MMI Fund), which covers almost all FHA single-family  mortgages, is statutorily required to maintain at least a 2 percent capital  ratio, defined as the economic value of the fund divided by the amortized  insurance-in-force.", "The housing crisis of 2007\u20132011 resulted in historic rates of mortgage  defaults and foreclosures. Since the beginning of the crisis, the federal  government has directly or indirectly supported more than two-thirds of  the value of new mortgage originations in the single-family housing  market. For example, many of these defaulted mortgages were insured  by FHA or securitized by the government-sponsored enterprises (the  enterprises) Fannie Mae and Freddie Mac. FHA sold pools of defaulted  loans in auctions through the Distressed Asset Stabilization Program  (DASP). DASP is a program in which FHA accepts assignment of  eligible, defaulted single-family mortgage loans in exchange for claim  payments to servicers\u2014which cover the unpaid mortgage balance and  associated costs\u2014and terminates FHA insurance. FHA then sells the  loans in competitive auctions to qualified purchasers. DASP has helped to  reduce FHA\u2019s backlog of defaulted loans and was intended to help  maximize recoveries to the MMI Fund by avoiding the costly foreclosure  process. According to a HUD Office of Inspector General (OIG) report,  from 2010 through 2016 FHA used DASP to sell approximately 111,000  defaulted mortgage loans with an unpaid principal balance of about $19  billion. Insurance claims for sales from 2013 through 2016 accounted for  about 20 percent of FHA claims to lenders over the period.", "You asked us to review DASP. This report examines (1) the changes  FHA has made to the program over time; (2) certain DASP procedures,  including those associated with loan eligibility, and documentation; (3)  FHA\u2019s evaluation of the identified outcomes for loans that have been sold  through DASP and how these compare with similar, unsold loans; and (4)  the potential effects that changes to DASP might have on the MMI Fund.", "To address all of the objectives, we reviewed relevant laws, FHA policies,  contracts, and agency reports. We interviewed officials of FHA and its  contractors, the Federal Housing Finance Agency (FHFA), and the  enterprises, as well as representatives of companies that service or  purchase mortgages and other industry stakeholders. To address the first  objective, we examined Participating Servicer Agreements (servicer  agreements) and Conveyance, Assignment, and Assumption Agreements  (purchaser agreements) from 2010 through 2016\u2014the last year in which  a DASP sale was held; HUD\u2019s OIG Reports on DASP; and press releases  on HUD\u2019s website regarding changes to the program. We also  interviewed FHA staff and asked them to provide us with a list of changes  to the program from 2010 through 2016.", "To address the second objective, we reviewed agreements between FHA  and mortgage servicers and statements of work for FHA\u2019s contractors to  identify procedures in place to monitor loan eligibility. We analyzed the  default status data for loans sold in 2016 at the submission and bid dates  to determine whether loans had eligible status for sale. To assess the  reliability of the default status data, we performed electronic checks for  consistency and validity. We found the data to be sufficiently reliable for  determining default status and length of delinquency. Additionally, we interviewed FHA and contractor officials to discuss their procedures for  monitoring loan eligibility.", "To address the third objective, we used multiple FHA data sources to  match loans sold through DASP to similar, unsold loans and compare  outcomes across the groups. Specifically, we identified a comparison  group of unsold loans that closely resembled sold loans on characteristics  that could affect the likelihood of foreclosure. To compare outcomes, we  identified common categories of possible outcomes for sold and unsold  loans. Using postsale reports from purchasers for sold loans and default  status reports from servicers for unsold loans, we tracked the outcomes  at monthly intervals. To assess the reliability of loan and outcome status  data, we performed various electronic tests on the logic of the data. We  excluded a small percentage of loans with invalid data and found the  remaining data to be sufficiently reliable for matching sold loans to unsold  loans and comparing outcomes. We also evaluated the loan modifications  offered by individual purchasers from the 2013\u20132016 DASP sales. We  obtained pre- and postmodification payment data from FHA and  calculated the change in borrowers\u2019 monthly mortgage payments. To  assess the reliability of the modification data, we checked for missing and  invalid data entries across different modification fields. We found the data  to be sufficiently reliable for the purpose of assessing the modifications.", "To address the fourth objective, we identified key characteristics that may  make loan pools attractive to certain purchasers from interviews with  industry stakeholders. We built regression models to determine the extent  to which loan pool characteristics were associated with bidder  participation for FHA loan sales and the enterprises\u2019 defaulted loan sales.  We obtained data from FHA and the enterprises on bids and the timing of  sales. We generated FHA pool characteristics from loan level data in the  Aggregate Loan Database (submitted loan database) and supplemented  them with FHA default status data. For the enterprises, we used pool  characteristics from a published FHFA report. This report provided a  range of characteristics to compare to those of FHA\u2019s pools. To assess  the reliability of the FHA data, we performed reasonableness checks,  which resulted in the removal of 4 percent of FHA\u2019s pools. We determined  that data for the remaining pools were sufficiently reliable for the  purposes of examining association with bidder participation. To calculate  pool reserve prices, we obtained FHA quarterly loss severity data by  disposition method for 2013\u20132016. Using our results from the outcomes  comparison analysis, we calculated pool-level reserve prices and  compared them to the winning pool-level bids.", "To assess the effect that changing FHA\u2019s auction design could have on  the MMI Fund, we reviewed economics literature on auction structures  and auction descriptions in business and commercial literature. We  developed a detailed description of FHA\u2019s current auction structure and  participants and assessed the benefits and drawbacks of various auction  design details. We interviewed DASP stakeholders about potential  changes to FHA auctions. We interviewed purchasers on their potential  interest in these changes and examined FHA sale data following an  instance of a single purchaser winning all the pools in a sale. In addition,  we compared FHA\u2019s DASP auction structure against key characteristics  of successful auctions that we identified in economics and business  literature. Appendix I provides additional details about our objectives,  scope, and methodology, and appendix V provides more information on  our matching and outcomes analysis.", "We conducted this performance audit from January 2017 to July 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of the Distressed Asset Stabilization Program", "paragraphs": ["The National Housing Act authorized HUD\u2019s Office of Housing to accept  assignment of and sell defaulted single-family mortgage loans.  Additionally, Office of Management and Budget (OMB) Circular No. A-11  (2016) states that under the Debt Collection Improvement Act of 1996,  credit agencies with over $100 million in loan assets are expected to sell  defaulted loan assets that are more than 1 year delinquent, with some  exceptions. The OMB Circular further states that the agency may not be  required to sell loan assets if a serious conflict exists between selling  loans and policy goals. In 2017, FHA insured over $1 trillion in single- family mortgage loans, including more than 200,000 loans in default.", "Consistent with the National Housing Act and OMB Circular, FHA uses  DASP to reduce its backlog of defaulted loans by selling loans that are  severely delinquent. As of 2016, loans must be at least 8 months  delinquent to be eligible for sale through DASP. In addition, servicers  must evaluate borrowers for all FHA loss mitigation options in order for  loans to be eligible for sale through DASP.", "FHA has called its single-family forward loan sales program by different  names over the years, but it became known as DASP beginning with  FHA\u2019s third loan sale in 2012. We use DASP throughout this report to  refer to FHA loan sales, regardless of the timing or the program name.  Between 2010 and 2016, FHA held a total of 16 sales, with between one  and four sales annually. As seen in figure 1, the number of loans sold  varied significantly among the sales.", "Figure 2 shows the extent to which FHA has sold defaulted loans in each  state in 2013-2016. The map also indicates states with longer expected  foreclosure timelines. The foreclosure process is governed by state laws  and differs across states. FHA establishes expected timelines for  completing foreclosure and acquiring title to the property in each state. As  discussed later, the foreclosure process involves a number of costs,  which may be higher in states with longer expected foreclosure timelines.  Additional information on the loans sold through DASP can be found in  appendix II."], "subsections": []}, {"section_title": "Loan Delinquency, Loss Mitigation, and Costs to the Mutual Mortgage Insurance Fund Associated with Different Loan Disposition Methods", "paragraphs": ["A loan becomes delinquent after the borrower misses a single payment  and goes into default after it is at least 31 days\u2014two full payments\u2014past  due, including when a borrower may miss payments sporadically over  time without repaying the missed amount. Loan servicers\u2014which can  be large mortgage finance companies or commercial banks\u2014are  responsible for accepting payments from borrowers and managing  mortgages. FHA requires the servicers to provide monthly reports on  each loan with one or more missed payments through its Single Family  Default Monitoring System (default monitoring system). Before initiating  foreclosure actions, FHA requires servicers to contact the borrower,  collect information on the borrower\u2019s finances, and evaluate the borrower  using the following ordered steps, referred to as the waterfall of loss  mitigation priorities:  informal forbearance through an oral agreement allowing for reduced  or suspended payments for a period of 3 months or less;  formal forbearance with written repayment plans, which combine a  suspension or reduction in monthly mortgage payments with a  repayment period;  special forbearance of up to 12 months for borrowers who are  unemployed;", "FHA-Home Affordable Modification Program (HAMP), which works to  get a borrower to return to making regular payments (reperforming);  FHA-HAMP offers qualified borrowers a loan modification that results  in an affordable monthly payment amount that does not exceed 40  percent of the borrower\u2019s gross monthly income by reamortizing the  debt for a new 30-year term at a fixed interest rate at or below the  market rate and, under certain circumstances, deferring the payment  of principal through the use of a partial claim; and non-retention disposition methods, including a preforeclosure sale  (also known as a short sale) in which the borrower sells a property  and the mortgage is satisfied for less than the amount that is owed, or  deed-in-lieu of foreclosure in which the borrower voluntarily transfers  a property to FHA to release all mortgage obligations; FHA may also  provide move-out incentive payments to borrowers for short sales and  deeds-in-lieu of foreclosure.", "To qualify for most of these actions, borrowers must be in default. A  servicer must evaluate a borrower for the loss mitigation options monthly,  but a borrower may not qualify for any option. However, a borrower\u2019s  circumstances are fluid and eligibility can change. For example,  borrowers who previously did not qualify for any loss mitigation options  could be eligible to be evaluated for loss mitigation options again after  starting a new job. FHA provides servicers with incentive payments of  varying size for taking certain loss mitigation actions.", "FHA generally requires servicers to either use a loss mitigation option for  which a borrower qualifies or initiate foreclosure within 6 months of the  default date, but a loan also may become eligible for disposition through a  DASP sale when loss mitigation has been exhausted and it meets other  eligibility criteria. FHA provides servicers with a list of loan eligibility  criteria in the servicer agreement for each sale. Servicers use the criteria  to identify which loans are eligible for a DASP sale. For example,  eligibility criteria include that a loan must be FHA-insured, have no more  than four dwelling units, and have an unpaid principal balance (amount  owed) greater than $20,000. Other criteria relate to length of delinquency,  loan-to-value (LTV) ratio, and the condition of the property. Loans that  qualify for loss mitigation or have a foreclosure date scheduled or  completed during the sale period are not eligible for DASP. Information  on changes to loan eligibility criteria throughout the history of the program  can be found later in this report.", "Each of the disposition methods FHA uses when loss mitigation on  defaulted loans is exhausted has different costs to FHA\u2019s MMI Fund (see  table 1). For the nonretention disposition methods of short sale, deed-in- lieu of foreclosure, third-party sale, or foreclosure\u2014which we refer to as  \u201cout of home\u201d methods\u2014FHA pays a claim to the servicer in the amount  of the unpaid mortgage balance and other expenses. In addition, for a  deed-in-lieu of foreclosure or foreclosure\u2014in which the property enters  HUD\u2019s inventory of real estate owned (REO) property\u2014FHA also incurs  costs associated with maintaining, repairing, and selling the property.  This generally results in a greater loss to the MMI Fund. In the case of a  DASP sale, FHA avoids interest and servicing costs during the  foreclosure period as well as REO-related expenses, but incurs the cost  of the difference between the unpaid balance and expenses and the  amount FHA receives for the loan it sells."], "subsections": []}, {"section_title": "Process of the Distressed Asset Stabilization Program", "paragraphs": ["The loan sale process has three distinct phases: presale, due diligence  and bid, and postsale (see figs. 3, 4, and 5, respectively). FHA  contractors (the transaction specialist, the compliance analytics  contractor, and the program financial advisor) facilitate and perform  various tasks throughout these phases. The summary below reflects the  process according to 2016 sales documents (the most recent DASP sales  documents available), other supplemental information, and interviews  with FHA officials and contractors.", "Figure 3 shows the presale phase. During this phase, FHA or its  contractor notifies interested servicers and communicates loan eligibility  criteria to servicers through the servicer agreement. Servicers that plan  to participate in the sale identify a list of eligible loans, certify the accuracy  and eligibility of the loans, and provide the list to FHA for review through  the Claim Submission Report. The servicer uploads information on the  loans submitted to FHA. FHA creates the submitted loan database, which  includes each accepted loan\u2019s current unpaid balance, payment history,  and an estimate of the underlying property value. According to FHA  staff, FHA reviews the eligible loans submitted by servicers and, with the  advice of its transaction specialist contractor, groups them into pools  based on geography and other factors. FHA sells loans in national pools  or Neighborhood Stabilization Outcome (NSO) pools, for which  purchasers must meet specific neighborhood stabilization outcomes for  50 percent or more of the properties in the pool.", "Next, an FHA contractor notifies prospective purchasers about the  upcoming sale via email, and notices are posted in the Federal Register,  industry publications, and newspapers. Purchasers can include private  equity firms, hedge funds, rental housing companies, and nonprofit  organizations. Prospective purchasers must submit to FHA a  Confidentiality Agreement and a Qualification Statement. FHA reviews  the documentation to determine whether the purchaser qualifies to  participate in the sale.", "Figure 4 depicts the due diligence and bid phase of a DASP sale. During  this phase, prospective purchasers receive access to the data room\u2014a  shared data website\u2014to review materials including the loan information  provided by servicers (due diligence materials); bid instructions; and sale  agreement that describes representations, warranties, and postsale  requirements, among other things. The servicer, FHA staff, and FHA  contractors continue to verify the eligibility of the loans. Prospective  purchasers place bids on each loan in a pool and deposit a percentage of  their total bid amount. FHA evaluates the bids and selects the highest  bidder for each pool based on the total of the loan-level bids. FHA then  notifies that bidder and provides an executed purchaser agreement that  describes postsale servicing and reporting requirements. Purchasers  must agree to follow the terms of the purchaser agreement including  avoiding finalizing foreclosures for 6 or 12 months (depending on whether  the sale occurred prior to July 2015), evaluating borrowers for loan  modification, and reporting outcomes to FHA.", "Figure 5 depicts the postsale phase. During the postsale phase, FHA  provides the list of sold loans to the servicer and winning purchaser,  which together determine servicing transfer dates. After bid day, servicers  verify that loans continue to meet eligibility criteria for the sale and begin  submitting insurance claims to FHA. Purchasers pay FHA for the loans  that are sold, and servicers transfer loan information and complete  mortgage files to the purchasers. When servicers submit claims to FHA  for sold loans, they must report the reason any loans are not transferred.  For example, a loan might not be transferred due to ongoing loss  mitigation activity or another reason, such as no longer meeting  delinquency eligibility criteria, and would remain with the servicer and  FHA insured. Following the final transfer of loan documentation, servicing  is transferred from the servicer to the purchaser. The servicer notifies the  borrowers of the transfer of servicing and termination of their FHA  mortgage insurance. Following the transfer, the purchaser sends the  borrowers a similar notice of transfer and any required disclosures.", "Following the final settlement date, the purchaser submits the first of 16  quarterly reports on the status of the sale portfolio using the format  provided in FHA\u2019s Post-Sale Reporting tool. If a purchaser demonstrates  a pattern of failing to report, FHA may disqualify the purchaser from future  sales. During the first 12 months of the reporting period, purchasers must  evaluate borrowers for a HAMP modification or a substantially similar  modification. Additionally, the purchaser must avoid foreclosure for 12  months unless the home is vacant or there are extenuating  circumstances.", "The purchaser agreement allows the purchaser 10 months starting with  the servicing transfer date to notify HUD of any alleged breach of FHA\u2019s  representations and warranties on purchased loans. For example, a  breach could be that a loan does not meet eligibility requirements, is not  covered by a valid hazard insurance policy, or has an outstanding  mechanic\u2019s lien. After notifying the original servicer and reviewing any  response, FHA determines whether there is a breach and the appropriate  remedy. The breach remedy can include a cure of the breach (such as by  the servicer paying an outstanding lien), reduction in claim payment, or  repurchase by the servicer. The servicer has 60 days to comply with the  remedy. If a breach results in the repurchase of the loan by the original  servicer, the purchaser will transfer servicing back to the original servicer."], "subsections": []}]}, {"section_title": "Program Requirements and Processes for DASP Have Changed over Time", "paragraphs": ["FHA made changes to DASP by adding borrower protections and made  efforts to increase the participation of nonprofit organizations. FHA also  changed loan eligibility criteria and bidding processes to increase  recoveries to the MMI Fund. Other changes included automating and  streamlining processes."], "subsections": [{"section_title": "Some Changes Responded to Concerns about Borrower Protections and Nonprofit Participation", "paragraphs": ["FHA has added to DASP protections for borrowers and requirements to  help stabilize neighborhoods in response to concerns raised by various  stakeholders. For example, borrower protections included extending the  moratorium on foreclosures from 6 months to 12 months and requiring the  purchaser to offer a HAMP or substantially similar modification to qualified  borrowers beginning with its July 2015 loan sale. In September 2016,  FHA also added payment shock protection, which limited increases in a  borrower\u2019s interest rate to 1 percent per year following a 5-year reduced  rate period. In an effort to stabilize neighborhoods, FHA added a  requirement in 2016 prohibiting purchasers from walking away from  vacant properties. In a hearing before the House Committee on  Financial Services in July 2016, the HUD Secretary stated that the  changes that FHA made to the program in 2015 and 2016 were designed  with input from a broad range of stakeholders and were assessed for how  well the changes would fulfill the agency\u2019s goal of strengthening  neighborhoods.", "In 2015, FHA made several outreach efforts to expand the participation of  nonprofit organizations in DASP. These efforts included offering nonprofit  organizations a \u201cfirst look\u201d at vacant REO properties, allowing purchasers  to resell to nonprofit organizations, and conducting a webinar to educate  and encourage the participation of nonprofit organizations. These efforts  came about following a September 2014 report from the Center for  American Progress and suggestions from other stakeholders that FHA  make it easier for nonprofit organizations to participate in DASP. In  2016, FHA set a target that 10 percent of bids come from nonprofit  organizations and local governments, including offering loans in targeted  distressed areas. In 2015 and 2016, FHA offered nine pool sales directed  at nonprofit organizations only. Some members of Congress expressed  concern over FHA\u2019s efforts to encourage participation of nonprofit  organizations, stating that FHA would likely get lower bids than it would  normally receive from private companies."], "subsections": []}, {"section_title": "Changes to Loan Eligibility Criteria and Bidding Were Intended to Increase Recoveries", "paragraphs": ["According to FHA officials, FHA changed its loan eligibility criteria for  inclusion in DASP sales in order to decrease losses to the MMI Fund and  to give servicers more time to work with borrowers on loss mitigation.  FHA lists the eligibility criteria to qualify loans for FHA\u2019s loan sale program  in each servicer agreement. Our analysis of the servicer agreements from  2010 through 2016 showed that some criteria remained the same during  the period, such as the requirement that servicers must have evaluated  borrowers for all loss mitigation actions in accordance with FHA  regulations or that loans in certain types of bankruptcy were ineligible.  Other criteria changed during that period, including the following  examples:", "Delinquency requirements for eligible loans changed from six full  payments past due to eight full payments past due beginning with the  first DASP sale in 2016; and", "FHA changed its eligible LTV ratio. Between the 2010 sale and the  second DASP sale in 2012, FHA set a minimum LTV ratio for loan  sales at 85 percent or higher\u2014meaning that to qualify for sale, the  ratio of the amount owed on the loan to the estimated value of the  property was required to be 85 percent or higher. Beginning with the  first DASP sale in 2015, FHA set minimum eligible LTV ratios by  state\u201470 percent in New York and New Jersey and 85 or 100 percent  for other states, with about half the states in each percentage  category.", "FHA officials said that they analyzed loan-level bid amounts and found  that they had greater recoveries relative to REO disposition on loans with  shorter delinquencies and higher LTV ratios. According to the officials,  this was because these loans had a higher probability of modification by  purchasers. Further, they said that the changes in eligibility criteria related  to delinquency and LTV ratio were intended to decrease losses to the  MMI Fund.", "In addition, FHA lowered limits on loan-level bid pricing to minimize the  potential negative effects of ineligible loans being removed from sales  after bidding. Purchasers could use loan-level bid pricing to strategically  take advantage of the expected removal of ineligible loans after bidding.  Because a purchaser pays only for the loans that are actually transferred  and some loans are removed from sales due to ineligibility, such as due  to changes in loss mitigation or foreclosure status, FHA receives less in  actual returns on the sale than the winning\u2014highest\u2014bid. For selected  loan pools in the second sale in 2013 and the first sale in 2014, FHA  analyzed the bid amounts of loans that became ineligible after purchasers  had bid. Before the 2015 sale, FHA lowered its maximum purchasers\u2019  loan-level bid amount from 200 to 175 percent of the unpaid balance of a  loan."], "subsections": []}, {"section_title": "Other Changes Included Automating and Streamlining Processes", "paragraphs": ["FHA contractors deployed tools in 2015 and 2016 to automate previously  manually intensive processes of collecting data and emails from about 30  different purchasers and tracking the status of sold loans. FHA,  contractors, and purchasers we interviewed said that these processes  improved data quality, efficiency, and communication among parties.", "A postsale reporting tool and data repository enables the contractor to  send mass emails and target email reminders of upcoming due dates,  including report deadlines, to purchasers that have not submitted  required documents. In addition, the tool validates data by checking  for logic and data type.", "A loan sale system conducts automated checks of data in the  submitted loan database for completeness and accurate file layout.  The system also checks whether all required documents are included  on the shared data website that purchasers use to perform due  diligence and determine bid amounts. The system automatically  generates a report of errors that is sent to servicers.", "A web-based breach tracking tool that streamlines and centralizes  tracking of loans that breach\u2014that is, were transferred to purchasers  but did not meet eligibility standards. The tool allows the purchasers  to submit breach requests, notifies servicers automatically about  pending breaches, and allows auction stakeholders to review  breaches and update the status of the loan."], "subsections": []}]}, {"section_title": "FHA Lacks Specific Time Frames for Its Loan Eligibility Checks, Criteria for Holding Sales, and Documentation of Key Procedures and Performance Measures", "paragraphs": [], "subsections": [{"section_title": "Multiple Entities Check Loan Eligibility, but the Timing of FHA\u2019s Checks May Allow Ineligible Loans to Be Sold", "paragraphs": ["Servicers identify eligible loans for inclusion in a DASP sale, certify  eligibility, and update loan information and remove ineligible loans prior to  bid day. FHA staff and contractors described the various checks they  conduct to generally verify a loan\u2019s continued eligibility by reviewing the  loan\u2019s default status in FHA\u2019s default monitoring system and in some  cases other servicer data before a sale. Specifically, both FHA staff and  the compliance analytics contractor conduct eligibility tests by checking  each submitted loan\u2019s default status. The transaction specialist contractor  told us it conducts automated checks of the loan submission and related  data that servicers submit to check for data completeness and valid  formatting. Additionally, this contractor also checks that the loans match  eligibility criteria and that all required documents were submitted. Starting  in 2015, FHA officials told us that FHA and its three primary contractors  began to verify that all loans submitted for sale had an eligible default  status as part of their quality-control process. FHA officials said that any  updates or changes servicers make to the status of submitted loans  require the program financial advisor contractor to repeat its quality- control procedures.", "In addition, servicers are expected to ensure that loans meet eligibility  criteria until the loan is sold and servicing responsibilities are transferred  to the purchaser. The servicer agreement states that an eligible mortgage  loan meets all eligibility criteria as of the date it is submitted for sale and  continues to meet all such requirements as of the claim date. FHA  officials said that servicers check eligibility at the loan submission date,  approximately 3 weeks prior to the bid day when they update loan  information, and at the claim date. Servicers should remove ineligible  loans from the sale. In 2014, FHA required servicers to self-certify the  accuracy of the default status of loans. FHA officials told us that it also  has absolute discretion to exclude one or more loans from the sale.", "According to FHA officials, FHA has two different provisions in place to  correct when a loan should not have been sold. One provision, as  described earlier, allows the purchaser to initiate the breach process and  the servicer either corrects the reason for the breach or FHA repurchases  the loan. Another provision is the \u201cclaw-back\u201d provision. Under this  provision, FHA or the former servicer can require the purchaser to return  the loan to FHA in exchange for the amount the purchaser paid for the  loan.", "However, we found examples of potentially ineligible loans that were  submitted for sale and were sold in DASP auctions. Of the 12,210 loans  sold in 2016, a small percentage of loans (about 2.65 percent) did not  meet eligibility criteria based on their default status on the date loans  were submitted. The error rate was similar at the bid date for the 12,210  loans sold in 2016. In particular, about 2.67 percent of these loans did not  meet eligibility criteria based on their default status on the bid date.  These loans were ineligible for varied reasons, including because they did  not meet FHA\u2019s length of delinquency requirement, were involved in  certain types of bankruptcy, or were undergoing loss mitigation and  therefore should have remained under FHA insurance protection.", "Ineligible loans may have been sold because the status of loans changed  after the servicer and FHA completed their eligibility checks. FHA\u2019s staff  and contractors conduct multiple eligibility checks concurrently during the  presale and due diligence and bid phases\u2014about 12 to 14 weeks before bid day according to FHA officials. These early checks conducted by  FHA\u2019s staff and contractors do not necessarily occur in a specific order or  according to specific timelines. FHA officials told us that FHA relies on the  servicers to perform eligibility checks a few weeks before bid day and  again after the sale when the servicer submits the claim. However, the  status of delinquent loans can be very fluid. According to our analysis of  FHA data, 23 percent of loans from 2010 to 2016 were removed between  the bid date and the claim date. FHA officials told us that servicers  remove loans after FHA\u2019s reviews to maintain compliance with  representations and warranties under the servicer agreement. FHA  officials also explained that loan removal was due to changes in loans\u2019  eligibility status, such as entering into loss mitigation or the scheduling of  a foreclosure sale.", "We reviewed a nongeneralizable sample of 10 loans that appeared to be  ineligible and interviewed FHA officials about these loans. We found that  some changes in the eligibility of loans could be missed due to the length  of time between eligibility checks and data updates. The status of loans  can change multiple times during a sale process. FHA requires servicers  to self-report the status of defaulted loans on a monthly basis to the  default monitoring system, usually within the first 5 days of the month, but  servicers may report changes throughout the month if a loan\u2019s status  changes. However, FHA officials told us that the system updates once a  month. FHA\u2019s eligibility checks may have occurred before the updates  were posted to the default monitoring system. FHA officials told us that  FHA relies on the controls in place and contractual agreements with the  servicers that require them to ensure that loans are eligible when  submitted to FHA for sale and when they file a claim with FHA. As a  result, FHA may not be aware of a change in loan eligibility that was  reported in the default monitoring system after its eligibility checks were  completed.", "Federal internal control standards require that management design  control activities to achieve objectives and respond to risks. Control  activities can be either preventive or detective. A preventive control  activity prevents an entity from failing to achieve an objective or address a  risk. Although FHA has implemented a number of controls to prevent  ineligible loans from being sold, these controls may miss loans that  change status after the eligibility check because FHA staff and  contractors do not have a designated time in the process to conduct the  eligibility check. Without spacing the timing of the various checks  throughout the process, including some checks that occur closer to the  bid date, FHA staff and contractors do not have the most reliable and  updated data from which to make decisions regarding loan eligibility, and  FHA could be selling some ineligible loans. If FHA sells a loan that is  ineligible to be sold because of ongoing loss mitigation, it pays a claim for  a loan that may become reperforming and never require a claim.  Likewise, borrowers could lose access to benefits such as reevaluation  for the suite of FHA loss mitigation options."], "subsections": []}, {"section_title": "FHA Has Not Documented All of Its Policies", "paragraphs": ["FHA has begun to centralize its existing written guidance, but policies for  when program changes should be evaluated are not documented in this  guidance. A July 2017 report from the HUD OIG found that HUD did not  develop formal guidance or procedures for its single-family note sales  program and recommended that the agency develop and implement  formal procedures and guidance for DASP. FHA responded to the OIG  that the operations of the DASP sales were documented in a series of  procedures used internally by staff and externally by stakeholders.", "In May 2018, FHA officials told us that in response to the OIG\u2019s  recommendation, they were consolidating their current written procedures  and guidance into one Asset Sales Handbook to centralize the  information for internal and external stakeholders. (See app. III for a  description of these documents.) FHA officials told us the key documents  governing a DASP sale include the servicer agreement, purchaser  agreement, detailed instructions for bid day, and specific requirements for  qualified servicers.", "However, we found that if FHA were to compile these existing documents  into an Asset Sales Handbook, it would still be missing some important  program policies. As of February 2019, FHA officials confirmed that they  had no written policies documenting when program changes should be  evaluated. When FHA described its process for evaluating program  changes, officials stated that the informal practice was to consider  changes when planning for a new sale. However, as stated earlier, FHA  made a number of changes in 2015 and 2016 but has not held a DASP  sale since 2016. FHA officials said the date of the next DASP sale is  unknown. FHA also experienced another period when no sales were  conducted between 2005 and 2009.", "Federal internal control standards require that management implement  control activities through policies. This includes documenting in policies  the internal control responsibilities of the organization and periodically  reviewing policies, procedures, and related control activities for continued  relevance and effectiveness in achieving the entity\u2019s objectives. For  example, the standards state that if there is a significant change in an  entity\u2019s process, management reviews the process in a timely manner  after the change to determine that the control activities are designed and  implemented appropriately. However, FHA officials told us that they had  not evaluated whether the most recent program changes were effective or  should be revised because they were not planning a new sale yet. With  several years between sales, written policies for regular consideration  and review of program changes can help to ensure that FHA is reviewing  the effectiveness of previous changes and controls and considering  potential new changes in a timely manner."], "subsections": []}, {"section_title": "FHA Has Not Provided Clear Objectives or Measurable Performance Targets for DASP", "paragraphs": ["FHA has a DASP program objective of maximizing recoveries to the MMI  Fund and has some specific targets to assess whether it is meeting this  objective. On a quarterly basis, FHA measures how recovery for asset  sales compares to foreclosure with REO dispositions and other  disposition types, such as short sales and claims without conveyance of  title. FHA officials explained that they maximize recovery by holding open  and competitive auctions for nonperforming single-family loans, with the  highest bidder as the winner. In addition, the Office of Risk develops a  reserve price\u2014an estimate of the expected REO recovery value of each  loan in a sale and a benchmark for comparison with the bids received\u2014to  minimize the risk that FHA will not get the best recovery for the loan. In  the past, when FHA received a bid below the reserve price, it opted to not  sell the pool. As a result, the reserve price serves as a critical target in the  agency\u2019s determination of whether to sell.", "In contrast, FHA has not developed specific targets for meeting what  appear to be additional DASP objectives, based on a variety of program  documents and recent program changes. In 2016, for example, the HUD  Secretary testified before Congress that DASP has a dual goal\u2014 \u201dsupport recoveries to the  Fund while preserving  homeownership and help stabilize neighborhoods.\u201d Similarly, in  HUD\u2019s 2016 Post-Sale Report to the FHA Commissioner, HUD explained  that it designed DASP \u201cto maximize recoveries to the , and  when possible, help keep borrowers\u2014otherwise headed to foreclosure\u2014 in the home.\u201d HUD\u2019s recent changes to DASP likewise appear to  recognize program objectives in addition to maximizing recoveries to the  MMI Fund. When HUD extended the prohibition against foreclosure from  6 months to 12 months in 2015, for instance, a HUD press release stated  that such changes \u201cnot only strengthen the program but help to ensure it  continues to serve its intended purposes of supporting the MMI Fund and  offering borrowers a second chance at avoiding foreclosure.\u201d And when  HUD changed DASP in 2016 to prohibit purchasers from abandoning low- value properties in high-foreclosure neighborhoods, it declared that this  was done to help stabilize neighborhoods.", "Despite these repeated department statements that DASP has a \u201ctwo- fold\u201d goal and multiple \u201cintended purposes,\u201d FHA officials told us that  preserving homeownership and stabilizing neighborhoods are \u201cancillary  benefits\u201d\u2014positive consequences that flow from DASP\u2019s objective of  maximizing recoveries for the MMI Fund\u2014but not objectives  themselves. Because FHA does not consider homeownership  preservation and neighborhood stabilization to be program objectives, the  agency has not developed targets to meet them. FHA officials explained  that they measure and monitor the extent to which purchasers meet  requirements for NSO pools, for instance, by collecting loan outcome data  from purchasers for 4 years. These purchasers must have no less than  50 percent of the loans in each NSO pool achieve outcomes such as  keeping borrowers in their homes and properties occupied through  rentals. However, FHA does not have a similar target for national pools,  which represent about 80 percent of the sold loans. FHA requires  purchasers of national pools to report on borrower outcomes quarterly for  4 years, but does not measure the extent to which these outcomes meet  a specific target and are achieving program objectives.", "Prior GAO work identified key attributes of successful performance  measures and indicated that performance measures should be clear,  have measurable numerical targets, and demonstrate results. In  addition, according to federal internal control standards, management  should define objectives clearly to enable the identification of risks and  define risk tolerances. This includes, for example, defining objectives in  specific and measurable terms to allow for the assessment of  performance toward achieving objectives. Although FHA officials told us  that DASP has one objective with resulting \u201cancillary benefits,\u201d it also  cited these same benefits as additional program goals and purposes in  the recent past. Without clarifying the program\u2019s objectives in light of  relevant laws, regulations, and agency statements and setting  measurable targets to achieve these objectives, particularly for national  pools, FHA cannot ensure that DASP is achieving optimal results."], "subsections": []}, {"section_title": "The Timing of DASP Sales Is Not Informed by Performance Data", "paragraphs": ["FHA has not used performance data to establish criteria for the timing of  DASP sales. FHA officials said they have not set criteria for when to hold  sales, such as the size of the portfolio of defaulted loans or other  considerations. In contrast, Fannie Mae estimates the number of defaulted loans needed to be sold to achieve its goals and assesses  market conditions to produce a detailed schedule of sales for the year.  Our analysis of FHA\u2019s default monitoring system data shows that several  years after the housing crisis, FHA continues to insure a backlog of  defaulted loans with six or more missed payments (see fig. 6). FHA  officials stated that, in July 2018, FHA had about 300,000 defaulted loans,  which is similar to the number of loans as in years when the DASP  program was active. Most servicers we talked to told us that they  preferred selling defaulted loans through DASP rather than taking them  through the REO disposition process due to the servicing responsibility  and costs associated with foreclosure. However, FHA officials told us that  they did not know when the next sale would be.", "The GPRA Modernization Act of 2010 established an expectation that  agencies use evidence and performance data in decision making.", "Specifically, the act changed agency performance management roles,  planning and review processes, and reporting to ensure that agencies  use evidence and performance data in decision making. Our prior work  has stated that although the act\u2019s requirements apply at the agency-wide  level, they can also serve as leading practices at other organizational  levels, such as component agencies, offices, programs, and projects.", "Because specific criteria for when to hold sales are not in place, FHA\u2019s  timing of and decisions to hold DASP sales were inconsistent. FHA held  16 DASP sales between 2010 and 2016. These sales occurred at  varying frequencies. For example, FHA held between one and four sales  per year, and the number of months between sales ranged from 2 to 10  months. Officials stated that DASP should be used to address a large  buildup of defaulted loans and because of its lower loss severity  compared with REO dispositions. Officials also told us they have not  developed criteria because FHA operates DASP as a pilot program and  continues to make changes after each sale. However, without analyzing  the performance data of the portfolio of defaulted loans to identify criteria  for the timing of DASP sales\u2014even as a pilot program\u2014FHA cannot  make fully informed decisions about when to hold sales and may not be  optimizing its use of the program in achieving its objectives."], "subsections": []}]}, {"section_title": "FHA Does Not Evaluate Loan Outcomes, and Sold Loans Experienced Foreclosure at a Higher Rate Than Unsold Loans in Some Cases", "paragraphs": ["FHA does not evaluate loan outcomes for loans sold through DASP and  does not monitor the modifications offered by individual purchasers. Our  analysis of FHA outcome data found that in aggregate, sold loans were  less likely to avoid foreclosure than similar, unsold loans. However, our  analysis also found that for some sales and some purchasers, sold loans  were more likely to avoid foreclosure compared to unsold loans. A  number of factors may contribute to differences in outcomes between  sold and unsold loans by sale and purchaser, including increased  postsale servicing and reporting requirements and the types of  modifications offered by individual purchasers."], "subsections": [{"section_title": "FHA Does Not Compare Outcomes for Sold Defaulted Loans to Similar, Unsold Loans", "paragraphs": ["FHA does not use the data it collects to evaluate outcomes for loans sold  through DASP compared to outcomes for similar, unsold loans. We  reviewed a contractor report and FHA\u2019s periodic reports on DASP  outcomes and found that they lacked critical outcome information.  Specifically, in 2017, a contractor analyzed home equity preserved as a  result of the foreclosures avoided through DASP, and then estimated the  effect of avoided foreclosures on surrounding areas. However, the  contractor did not estimate the effect of foreclosure avoidance relative to  unsold loans. Borrowers with unsold loans may also avoid foreclosure, for  example, if their circumstances change and they become eligible for  foreclosure mitigation options again. FHA\u2019s periodic reports on outcomes  also do not compare outcomes between sold and unsold loans.", "FHA officials told us they had not conducted such a comparison because  they expect all loans eligible for sale to be foreclosed. A foreclosed  mortgage with an REO property disposition results in the greatest losses  to the MMI Fund. However, our analysis of FHA data does not support  these claims. When we compared loans sold through DASP to unsold  loans with similar characteristics, we found that some unsold loans  achieved an outcome other than foreclosure\u201421 to about 34 percent at  various times within a 4-year period.", "FHA officials also told us that they evaluate loan outcomes by tracking the  extent to which purchasers are meeting NSO requirements. However,  because about 80 percent of loans were not sold through NSO pools,  FHA\u2019s evaluation covers only about 20 percent of DASP loans. In  addition, FHA\u2019s NSO requirements are targeted toward achieving specific  outcomes for a property or community\u2014such as donating the property to  a land bank\u2014rather than an individual loan or borrower. Our analysis  indicates that sold loans had higher foreclosure rates than unsold loans  regardless of whether they were sold through national or NSO pools. estimated current loan-to-value ratio, and", "The matched comparison attempted to  minimize differences between sold and  unsold loans across these factors in order to  isolate the effect on outcomes of being sold  out of FHA\u2019s insurance program.", "We have previously found that evaluations often involve creating a  comparison group. Furthermore, HUD policy states that its evaluations  use methods that isolate to the greatest extent possible the effects of the  program from other influences. FHA could use loans not sold through  DASP to estimate what outcomes would have been observed in the  absence of the program and the associated losses to the MMI Fund. A  process to evaluate outcomes for sold loans relative to similar, unsold  loans could help FHA determine whether DASP is meeting its financial  objective of maximizing recoveries to the MMI Fund and understand the  extent to which DASP is helping struggling homeowners."], "subsections": []}, {"section_title": "FHA Does Not Monitor the Modifications Offered by Individual Purchasers or Collect All Data Needed to Evaluate Their Sustainability", "paragraphs": ["In its reports on DASP outcomes, FHA periodically reports at an  aggregate level the change in monthly payments resulting from the  modifications offered by purchasers. However, FHA does not track or  report the change in payments by individual purchasers. A 2016 white  paper prepared by the Department of the Treasury in conjunction with  HUD and FHFA defined loss mitigation sustainability as offering solutions  that work the first time. It further stated that modifications that provide  meaningful payment reduction will decrease the chance of a homeowner  redefaulting. Additionally, we reported in 2012 that the change in a  borrower\u2019s monthly mortgage payment is among the factors that can  significantly influence the success of a modification. Since 2015, FHA  has required purchasers to offer eligible borrowers HAMP-like  modifications or substantially similar modifications designed to lower  borrowers\u2019 monthly payments to an affordable and sustainable amount.", "However, FHA does not monitor the extent to which individual purchasers  complied with the requirement to offer payment-lowering modifications to  eligible borrowers. We found that while the majority of the modifications  offered to borrowers whose loans were sold in 2015 or later decreased  monthly payments by more than 20 percent, about 8 percent of  modifications increased or did not result in a change in payment. Not all  borrowers are eligible for a payment-lowering modification, and,  according to FHA officials, some modifications could increase monthly  payments for borrowers with a large number of missed payments. As  discussed later, our analysis found that outcomes can vary greatly by  purchaser, and purchasers may not offer comparable modification  options. See appendix IV for information on the types of modifications  purchasers have used.", "Furthermore, FHA may not have the data it needs to evaluate whether  payment-lowering modifications offered by purchasers remain  sustainable. In the second 2016 sale, FHA began requiring that modified  interest rates be fixed for at least 5 years and thereafter that they not  increase by more than 1 percent per year. FHA also began requiring  purchasers to report data related to interest rates for modified loans,  including the modified interest rate and the number of years it would  remain fixed. However, based on our review of reported modification  information, none of the purchasers from this sale reported these data.  Additionally, about 22 percent of the modifications offered to borrowers  whose loans were sold in the 2015 sale or later included a deferment.  Under deferment, borrowers are allowed to temporarily stop making  payments toward some or all of their principal balance, interest, or other  indebtedness, and deferment may result in a balloon payment at a later  date. Other than type of deferment, FHA does not require purchasers to  report details of the deferment or the effect on payments following the  deferral period. As a result, we could not determine the long-term effect  on monthly payments for many modifications offered by purchasers.  Some advocacy group representatives we spoke with expressed  concerns about purchasers offering unsustainable modifications. For  example, one advocacy group representative told us that some  purchasers may offer modifications that initially lower monthly payments  but later adjust to levels that are higher than what they were prior to  modification.", "FHA requires purchasers to report some information that would allow it to  determine the types of modifications offered by individual purchasers as  well as the sustainability of these modifications. As mentioned previously,  FHA officials said they expect all loans eligible for sale to be foreclosed  and consider any nonforeclosure outcome achieved by purchasers to be  an improvement. This expectation may deter FHA from evaluating the  modifications offered by individual purchasers or the sustainability of  modifications. Federal internal control standards state that management should use quality information to achieve its objectives, which includes  identifying information requirements needed to achieve the objectives,  evaluating the data it receives from internal and external sources to  ensure they are sufficiently reliable for use in making informed decisions,  and using the data for effective monitoring. Without monitoring individual  purchasers\u2019 modifications or collecting key data elements, FHA cannot  determine whether purchasers are meeting the postsale requirements or  the extent to which eligible homeowners obtain sustainable modifications."], "subsections": []}, {"section_title": "Sold Loans Were More Likely to Experience Foreclosure Than Unsold Loans in the Aggregate, but Not for Later Sales and Some Purchasers", "paragraphs": ["Our analysis showed that sold loans were more likely to experience  foreclosure than similar, unsold loans overall within a 48-month period  after servicing transfer (see fig. 7). In the aggregate, the probability of  experiencing foreclosure was greater overall for sold loans compared to  unsold loans. For example, the probability of foreclosure 24 months after  the servicing transfer date was 43 percent for sold loans and about 36  percent for unsold loans, a statistically significant difference.  Additionally, we analyzed the probability that a borrower reperformed,  received a temporary action such as forbearance or a trial modification, or  received a short sale or deed-in-lieu of foreclosure\u2014foreclosure  avoidance outcomes. In the aggregate, the probability that sold loans  avoided foreclosure ranged from about 15 to 24 percent at various times  within a 3-year period beginning 12 months after the servicing transfer  date. Foreclosure avoidance rates for unsold loans were higher, ranging  from 21 to about 34 percent during this period.", "We found that sold loans were less likely to result in owners staying in  their homes compared to unsold loans due to out-of-home actions (see  fig. 8). The probability of reperforming was greater overall for unsold  loans compared to sold loans. Additionally, unsold loans were more likely  to receive an in-home temporary action. In contrast, sold loans were  more likely to result in a short sale or a deed-in-lieu of foreclosure,  through which borrowers avoid foreclosure but lose the title to their  homes. See appendix VI for a comparison of reperforming, short sale or  deed-in-lieu of foreclosure, and temporary action outcomes between sold  loans and unsold loans.", "Although we found that sold loans were more likely to experience  foreclosure in aggregate, for later sales, after about 12 months, rates of  avoiding foreclosure were similar or greater for sold loans compared to  unsold loans, and for some purchasers rates of foreclosure were similar  or smaller for sold loans compared to unsold loans. For the second  2013 sale through the 2015 sale, we found that sold loans were less likely  to avoid foreclosure compared to unsold loans (see fig. 9). In the 2016  sales, however, after about 12 months the sold loans were more likely to  avoid foreclosure compared to similar unsold loans. Further, after an  additional 12 months\u201424 months after the servicing transfer date\u2014loans  sold in the first sale in 2016 avoided foreclosure at a rate that was 5  percentage points greater than unsold loans. Loans sold in the second  sale in 2016 were also consistently less likely to foreclose compared to  unsold loans. We discuss potential explanations for these differences  among sales in the section that follows.", "We also found differences in the rates of foreclosure and some outcomes  that avoid foreclosure achieved by different purchasers (see fig. 10). For  example, the probability of a loan reperforming 24 months after the  servicing transfer date ranged from about 0.2 to about 25 percent for  selected DASP purchasers. While most of these purchasers fell below the  reperforming estimate of 18 percent for similar, unsold loans, one  purchaser exceeded this rate. Foreclosure and short sale or deed-in-lieu  of foreclosure probabilities 24 months after the servicing transfer date  also differed among these purchasers, ranging from 31 to about 90  percent and from 8 to about 30 percent, respectively. These rates  generally exceeded the foreclosure and short sale or deed-in-lieu of  foreclosure estimates for similar, unsold loans (34 and about 9 percent,  respectively).", "Purchasers told us that the outcome they pursue for a loan depends in  part on the borrower\u2019s preference. According to purchasers, for borrowers  who want to keep their homes, the best option is to try to modify the loan  and achieve reperformance status. Purchasers also said that for  borrowers who do not want a modification or for whom a modification is  not possible, they may pursue a short sale or deed-in-lieu of foreclosure,  which have a less negative effect on borrowers\u2019 credit than a foreclosure.  Representatives of a consumer advocacy group and a research  organization told us that foreclosure has the most negative effect on the  borrower\u2019s credit. A Fair Isaac Corporation (FICO) study found that, in  some cases, foreclosure had a more negative effect on comparable  borrowers\u2019 credit profiles than a short sale or deed-in-lieu of foreclosure.", "FHA officials, purchasers, and servicers said that purchasers have more  flexibility and are in a better position than FHA servicers to provide more  generous mitigation options. A senior FHA official emphasized that  purchasers have more financial flexibility because they generally buy the  defaulted loans at a discount from FHA (that is, less than the unpaid  principal balance). According to different DASP stakeholders, purchasers  can  forgive a portion of the principal, offer a deferment that is greater than 30 percent of unpaid principal extend the term of a loan beyond 30 years,  reduce the interest rate below the current market rate, offer more than one modification in a 2-year period, and offer more generous terms for deeds-in-lieu of foreclosure and short  sales.", "In contrast, FHA is restricted in the loss mitigation options it can offer.  FHA officials told us that it does not offer debt forgiveness, but may defer  a limited amount of principal through a partial claim. FHA officials also  said they generally set loan term ranges to meet requirements for  securitization in the secondary mortgage market, including a fixed interest  rate and a 30-year term. In addition, FHA\u2019s loss mitigation alternatives to  foreclosure, such as short sales and deeds-in-lieu of foreclosure, are  restricted or approved by FHA based on their chance of success and the  associated financial effect on the MMI Fund.", "However, representatives of some advocacy groups told us that  borrowers generally benefit from their loans remaining insured and unsold  because FHA\u2019s loss mitigation process is more transparent. They said  that information on the loss mitigation process under FHA is publicly  available, while it can be difficult to access information about some  purchasers\u2019 loss mitigation processes. Also, starting in 2012, FHA policies  attempted to provide a more consistent loss mitigation process for  borrowers across all FHA servicers. In contrast, purchasers can have  varying processes for offering loss mitigation options."], "subsections": []}, {"section_title": "Various Factors May Contribute to Differences in Outcomes by DASP Sale and Purchaser", "paragraphs": ["A number of factors may contribute to differences in outcomes between  sold and unsold loans by DASP sale and purchaser, such as increased  postsale servicing and reporting requirements, variations in purchaser  participation across sales, and differences in the modifications offered by  purchasers."], "subsections": [{"section_title": "FHA Has Expanded Postsale Requirements and Use of NSO Pools", "paragraphs": ["Changes in postsale servicing requirements may account for higher  reperforming rates for sold loans in the 2016 sales. As discussed  previously, FHA introduced additional servicing requirements in 2015  aimed at offering additional protections to borrowers whose loans were  sold through DASP. For example, FHA began requiring purchasers to  evaluate borrowers for HAMP or substantially similar modifications aimed  at lowering borrowers\u2019 monthly payments and offer these modifications to  eligible borrowers.", "Further, the share of loans sold through NSO pools relative to national  pools has increased, which may also account for higher reperforming  rates for sold loans in the 2016 sales. As noted previously, NSO and  nonprofit pools have additional postsale outcome requirements. We  compared outcomes for loans sold in NSO pools to outcomes for loans  sold in national pools and found that loans sold in NSO pools were more  likely to reperform, possibly due to higher occupancy rates in NSO pools  compared with national pools. As shown in figure 11, the share of loans  sold through NSO and nonprofit pools relative to loans sold through  national pools increased between 2013 and 2016, from about 12 percent  of the total loans in our scope for the 2013 sales to about 45 percent of  loans in the 2016 sales.", "In addition, FHA introduced a reporting requirement in 2015 that  purchasers continue reporting the outcome status of loans even after  selling them to new buyers, as opposed to reporting the loans as resold  with no further outcome updates. Purchasers may have returned these  loans to performing status before selling them because performing loans  are more profitable, but the performing status would not have been  reported before 2015. The use of resales as a status was substantially  lower in the second sale in 2016 compared to the first sale in 2013\u20140.04  percent of reported statuses compared to 29 percent of reported  statuses. This change could be reflected in the higher reperforming  outcomes we observed for sold loans in 2016."], "subsections": []}, {"section_title": "Purchasers Varied across Individual Sales and May Not Have Offered Comparable Modifications", "paragraphs": ["Our analysis indicated that individual purchasers did not consistently buy  loans across sales and the share of loans bought by individual  purchasers varied. For example, about 42 percent of the purchasers in  our scope bought loans in one sale, while about 27 percent of purchasers  bought loans in three or more sales. The share of loans bought by  individual purchasers has also varied by sale (fig. 12). For example, one  purchaser bought about 4 percent of the loans sold in the second sale in  2013 but about 82 percent of the loans sold in the first sale in 2016. This  purchaser had higher reperforming and lower foreclosure outcomes  compared to other purchasers.", "In addition, purchasers may not consistently offer modification options.  Approximately 18 percent of the sold loans in our scope received one or  more modifications. However, individual purchasers offered modifications  at varying rates, from no modifications to 46 percent of the loans they  purchased. Our analysis also indicates that the type of modifications offered may differ by purchaser. For example, we found that about 88  percent of the modifications that had decreased monthly payments by 30  percent or more were offered by two of the 25 purchasers that reported  modifying loans. In addition, the share of modifications offered by  individual purchasers that resulted in no payment change or an increase  in payment varied. For example, eight purchasers reported either no  change or an increase in payment in 51 to 75 percent of the modifications  they offered. In contrast, three other purchasers reported either no  change in payment or an increase in payment in less than 10 percent of  their modifications.", "Purchasers\u2019 investment goals and expertise could affect borrower  outcomes. DASP purchasers include investment firms, rental housing  companies, and nonprofit organizations with varying investment goals.  In interviews, purchasers cited various goals for purchased loans. For  example, an executive of a nonprofit organization said its primary goal  was to help borrowers avoid foreclosure, while representatives of an  investment firm told us that their goal was to maximize the return for each  purchased loan. A representative of one advocacy group told us that  purchasers\u2019 different areas of expertise could make different foreclosure  and foreclosure avoidance options more or less profitable for them. For  example, purchasers with an extensive background in loan servicing may  be able to offer modifications at a lower cost, while rental companies may  consider DASP as a source for inventory for properties to rent if loss  mitigation fails.", "Additionally, purchasers can have varying levels of success in contacting  borrowers to discuss modifications or disposition options for the loans  they purchased. Most purchasers noted that it was often difficult to make  contact with borrowers because houses were vacant or borrowers  avoided contact. For example, one purchaser said it was unable to reach  about 25 percent of borrowers for the loans it purchased. Another  purchaser said it was unable to reach about half of the borrowers.  Furthermore, while several purchasers said they primarily contacted  borrowers via the notice of servicing transfer and by phone, one  purchaser also said that a more successful outreach method involved in- person visits to borrowers\u2019 homes, but that such visits may not always be  feasible due to resource constraints."], "subsections": []}]}]}, {"section_title": "FHA\u2019s Current Practices May Not Optimize Savings to the MMI Fund, and the Effect of Some Changes Is Unclear", "paragraphs": [], "subsections": [{"section_title": "FHA May Be Recovering Less for the MMI Fund Than It Could Due to Its Scheduling and Reserve Pricing Practices", "paragraphs": [], "subsections": [{"section_title": "Scheduling", "paragraphs": ["FHA announces bid dates in the Federal Register and industry  publications but does not communicate long-range notice of upcoming  sales. FHA held multiple sales in 2011, 2012, 2013, 2014, and 2016, but  the sales were not held at set intervals or at set dates throughout the  years. FHA has not held any DASP sales since September 2016, and  officials stated that they do not know when FHA will hold another sale.", "Our interviews indicate that communicating long-range notice of sales  could help keep participation robust and increase bid amounts. One  purchaser told us that it was eager for FHA to restart DASP sales.  However, purchasers would like to receive additional notice of sales. One  purchaser told us that additional notice of FHA sales would allow it the  time to plan or raise additional capital needed to participate in a DASP  sale. Another purchaser said that, without knowledge of when another  sale will occur, it will invest elsewhere. Losing bidders to other entities\u2019  sales could affect bid amounts in DASP sales. According to economic  literature, increasing the number of bidders in an auction generally should  increase bid amounts\u2014a financial objective for the program.", "Federal internal control standards state that management should  externally communicate the necessary quality information so that external  parties can help the entity achieve its objectives and address related  risks. For example, although Fannie Mae does not publish an annual  schedule, market participants know when to expect Fannie Mae sales  because it has held them multiple times a year. In contrast, FHA does not  hold regular sales or signal to the market when it will hold its next sale  through its outreach because DASP remains a pilot program. FHA  officials said they change program parameters with each sale, so it is  difficult to schedule sales in advance. We previously noted that, even  implementing DASP as a pilot program, FHA could use performance data  to establish criteria for the timing of sales and to help optimize the use of  the program to achieve its objectives. Similarly, by communicating long- range notice of upcoming sales to market participants, FHA could  encourage bidder participation and potentially help meet its objective of  maximizing recoveries to the MMI Fund. As discussed in appendix VII,  characteristics of successful auctions include attracting sufficient interest  in the auction and in designing the auction to meet its objectives. Without  communicating long-range notice, FHA may be recovering less than it  could for the MMI Fund."], "subsections": []}, {"section_title": "Reserve Pricing", "paragraphs": ["FHA sets reserve prices\u2014a minimum amount that it is willing to accept as  the winning bid\u2014to help ensure that the MMI Fund is minimally affected  by the sale. FHA generates a reserve price for each loan and adds those  prices together to generate a pool reserve price. If FHA does not receive  a bid on a pool that is at or above its reserve price, FHA may choose not  to sell the pool. Any amount of the bid above the reserve price  represents additional potential proceeds to the MMI Fund.", "FHA officials stated that they expect that all DASP loans would be  foreclosed and the properties placed in its REO inventory had they not  been sold. FHA officials stated that they establish each loan\u2019s reserve  price considering the percentage of the unpaid balance FHA expects to  recover through foreclosure and REO disposition. A recent HUD OIG  report found that for loans sold in 2015 and 2016, FHA experienced a 3  percent lower loss rate compared with similar loans that were foreclosed  and the associated property placed into FHA\u2019s REO inventory. Loss  estimates have varied over time and by location of the property  associated with the loan, but generally an REO disposition results in the  greatest loss to the MMI Fund. For example, FHA\u2019s Office of Risk  estimated that from fiscal year 2013 through the first quarter of 2017, FHA  lost 61 percent (recovering about 39 percent) of the unpaid balance on  REO dispositions compared to about 46 percent (recovering 54 percent)  of the unpaid balance on other nonloan sale dispositions.", "FHA officials stated that unsold defaulted loans would likely result in  foreclosure and being placed in the REO inventory. However, our  analysis of outcomes showed that comparable unsold loans resulted in a  range of outcomes, not just foreclosure and REO disposition. Specifically,  our analysis of outcomes in sales between 2013 and 2016 showed that  about 66 percent of unsold loans with characteristics similar to sold loans  resulted in foreclosure or remained unresolved. The remaining 34  percent of these unsold loans resulted in a range of nonforeclosure  outcomes (including returning the loan to performing status), all of which  could produce smaller losses to the MMI Fund compared with REO  disposition. Further, our analysis found that about 14 percent of the loans  returned to performing status or were terminated as paid in full, thereby  generating very little to no loss to the MMI Fund.", "FHA may be setting its reserve prices too low in some cases. FHA sets a  loan\u2019s reserve price considering the percentage of the unpaid balance it  expects to recover through an REO disposition to guarantee the minimum  recovery proceeds to the MMI Fund. However, when the expected losses  to the MMI Fund for some loans are smaller\u2014such as in the case of a  different disposition method or a terminated loan\u2014the reserve price  would need to be higher to guarantee the minimum recovery proceeds to  the MMI Fund. If FHA could recover more of the unpaid loan balance  through a non-REO disposition method, setting the reserve price at the  expected recovery of the unpaid balance from an REO disposition would  be too low. See figure 13 for an illustrative example of how reserve prices  could be affected based on different expectations of loan dispositions.", "The extent to which the MMI Fund could be negatively affected depends  on how reserve prices compare to the actual winning bids. In figure 13,  if FHA set the reserve price of pool A at $3,900,000, FHA would sell the  pool to the highest bidder that bid at least $3,900,000. If the highest bid  was less than $3,900,000, FHA may not sell the pool. If the highest bid for  the pool was at least $3,900,000 but less than $5,054,000, the MMI Fund  would be negatively affected because FHA could have recovered more by  not selling the pool. If the highest bid was at least $5,054,000, the MMI  Fund may not be negatively affected by the sale. Using a simplified  method to calculate reserve prices that does not consider differences in  local housing markets, we estimate that 31 percent of the loan pools FHA  sold in its 2013\u20132016 sales had winning bids greater than FHA reserve  prices but less than our calculated reserve prices. For about 14 percent  of the pools, our calculated reserve price was 10 percent or more below  the winning bid, and for 7 percent of the pools, our calculated reserve  price was 25 percent or more below the winning bid.", "Federal internal control standards state that management should use  quality information to achieve the entity\u2019s objectives. This includes  designing a process that uses the entity\u2019s objectives and related risks to  identify the information requirements needed to achieve the objectives  and address the risks. However, FHA is not considering information on  the range of potential outcomes for loans in setting its reserve pricing  because it expects all sold loans to result in foreclosure and REO  disposition. Without considering other disposition methods in its reserve  pricing, FHA risks recovering less for the MMI Fund in loan sales than if  the loans had not been sold and risks not meeting its objective."], "subsections": []}]}, {"section_title": "FHA Does Not Analyze Key Information before Setting Eligibility Criteria", "paragraphs": ["FHA\u2019s eligibility criteria specify the characteristics of the loans that can be  selected for a loan sale, but FHA does not analyze its portfolio to identify  loan characteristics for which DASP would be the lowest-cost disposition  method or consider market information before setting the criteria. FHA  has analyzed bid amounts from previous sales and made changes to  eligibility criteria related to length of delinquency and LTV ratio, in part,  intended to increase MMI Fund recoveries. For example, using analysis  of its 2014 sales, FHA determined the LTV ratios that produced the  highest loan-level recoveries relative to REO dispositions and changed  the loan eligibility criteria for the minimum LTV ratios by state for its 2015  sale. According to FHA, this change was intended to make more loans  eligible for disposition through DASP sales in certain states that had long  foreclosure processes.", "However, FHA does not analyze its portfolio of defaulted loans to identify  characteristics of loans that, if sold, would minimize the loss to the MMI  Fund relative to all other disposition methods to inform eligibility criteria  for sales. FHA may have missed an opportunity to evaluate when loan  sales would be the most effective disposition method to maximize  recoveries to the MMI Fund\u2014a financial objective of the program. FHA  contracted with CoreLogic in 2016 to develop a tool to determine the  lowest-cost disposition for defaulted loans in FHA\u2019s portfolio but did not  include loan sales as a potential disposition method. The tool is intended  to generate estimates of property values and holding costs and determine  the lowest cost disposition method for a given loan at a given time. Used  broadly, this information could help FHA identify loan criteria for which  DASP sales would be the most effective disposition method and set loan  eligibility criteria for DASP loans. However, FHA excluded DASP  because, according to the contractor, the data on DASP had been too  inconsistent to be reliably included in the CoreLogic tool. Therefore, FHA  cannot use the tool to identify loan characteristics for which DASP could  be the lowest-cost disposition method or to inform its decisions in setting  loan eligibility criteria.", "Further, FHA determines eligibility criteria before considering current  market information. FHA\u2019s transaction specialist gathers market  information before the sale, but FHA does not consider it before setting  eligibility criteria and soliciting eligible loans from servicers. The  transaction specialist analyzes the market and develops a sales strategy  report using the loans submitted by the servicers. The report contains  information on available capital for key purchasers, the number and type  of loans purchasers are interested in buying, other entities\u2019 upcoming  sales, and potential pooling strategies for the loans submitted. FHA uses  the information to develop pools intended to maximize the sale proceeds,  but not to identify characteristics of loans meeting purchasers\u2019  preferences and inform decisions in setting eligibility criteria.", "FHA\u2019s current approach risks setting criteria that may not maximize  recovery to the MMI Fund because it may be selling loans that could  result in a smaller loss to the MMI Fund than if they had remained under  FHA insurance. FHA generally analyzes how to maximize sales proceeds  after setting loan eligibility criteria and reviewing the servicers\u2019 submitted  loans because servicers select the loans, voluntarily participate, and may  not submit all eligible loans. Further, setting loan eligibility criteria that  increase servicers\u2019 cost to identify loans may reduce servicer  participation. In addition, FHA does not use current market information  because, according to officials, they use data from past sales to  determine market preferences and their primary concern is the effect on  the MMI Fund. However, FHA has not held a sale since 2016, so market  preferences may have changed. Additionally, purchaser participation may  decline if loans do not match their preferences. Generally, fewer bidders  indicate less interest in the pools and could result in decreased prices,  which would reduce returns to the MMI Fund.", "By implementing DASP, HUD intended to maximize recoveries to the  MMI Fund. Without analyzing its loan portfolio to identify when loan sales  would be the most cost-effective disposition method and considering  market information before setting loan eligibility criteria, FHA cannot  appropriately calibrate its loan eligibility criteria to maximize recovery to  the MMI Fund."], "subsections": []}, {"section_title": "The Effects on the MMI Fund of Changes to Auction Structure and Pooling Strategies Are Unclear", "paragraphs": [], "subsections": [{"section_title": "Auction Structure", "paragraphs": ["Based on our analysis of comparable mortgage industry auctions, FHA\u2019s  auction structure mirrors the industry standards of pooled, highest bidder,  sealed bid auctions. Other auction structures we examined, such as  single loan sales and adding a winner-take-all option, would involve  tradeoffs. For example, an analysis by DebtX, a loan sale advisor,  showed that FHA would have earned higher proceeds in a prior DASP  sale if it had awarded based on single-loan bids rather than the pool-level  bids. However, our interviews with FHA officials and purchasers  revealed uncertainty in how proceeds from single-loan bids would  compare to bids for pooled loans. For example, FHA officials said they  benefit from economies of scale when offering larger pools and that  administrative costs associated with servicing transfers would be higher if  FHA sold loans individually. Furthermore, purchasers may decline to bid  on individual loans. Purchasers we interviewed expressed interest in sets  of loans rather than individual loans, in part to manage risk. When  asked about smaller pools, FHA officials stated that they have used small  pools to attract nonprofit bidders, but we found that these pools had a low  number of bidders and many were not traded.", "The effect on the MMI Fund of adding a winner-take-all option to FHA\u2019s  auction structure is uncertain. Such a structure could result in increased  bid amounts. In a winner-take-all option, each bidder would choose to  either participate at the sale level or pool level in the winner-take-all  option. In either case, the bidder would place loan-level bids that would  be rolled up to the pool or sale level. If a winner-take-all bid exceeds the  aggregate of the highest pool-level bid for each pool, all pools are  awarded to the winner-take-all bidder. By definition, if a winner-take-all  bidder won the auction, the resulting bid would increase FHA\u2019s overall  sale proceeds.", "However, a winner-take-all structure could discourage bidder  participation, which could lead to reduced bid amounts. Smaller entities  and larger nonwinning bidders may be less likely to participate in future  sales because of the costs associated with participating. According to  auction theory, the higher the cost of performing due diligence and  qualifying for and participating in the auction, the more bidder  participation will be discouraged. Although the extent of purchasers\u2019 due  diligence checks differed, all the purchasers we interviewed told us that  they expend funds to purchase property valuations on at least a sample  of loans to check whether the valuations listed in the servicer data were  reasonable. Some purchasers also expend funds to examine servicing  records or perform legal searches related to the loans. Additionally,  bidders are required to submit deposits with their bids that FHA will return  if the bidder is not awarded the pool or pools. One purchaser told us it  was reluctant to spend the money on due diligence if it did not have a  reasonable chance at winning the pool or pools. According to economic  literature, having fewer bidders in an auction generally results in  decreased prices and an increased opportunity for bidders to form  strategic partnerships that would decrease competition.", "See appendix VII for more information on auction structures."], "subsections": []}, {"section_title": "Pooling Strategy", "paragraphs": ["It is unclear whether changes to FHA\u2019s pooling strategy\u2014that is, its  approach for selecting loans to include in its loan sale pools\u2014would result  in more bidders or higher bid amounts. We compared the pooling  practices and pool-level data of FHA with those of Freddie Mac and  Fannie Mae (the enterprises) to determine whether pooling strategy  affected the number of bids. The enterprises started selling defaulted  loans in 2015\u2014much later than FHA\u2014and have continued to do so, with  Freddie Mac and Fannie Mae both holding sales in October 2018. FHA  held three DASP sales in fiscal years 2015 and 2016 that overlapped with  the time frame of the enterprises\u2019 sales. FHA and enterprise pools had  different financial characteristics\u2014loans in FHA pools were less  delinquent, the properties were more likely to be occupied, and the loans  had lower underlying property values compared to loans in enterprise  pools (see fig. 14). Nonetheless, FHA received similar numbers of bids  and bid amounts relative to the estimated property values as the  enterprises. Generally, the number of bidders for FHA and the enterprises  was between three and six, and bid amounts were typically between 58  and 71 percent of the underlying estimated property value. Many of the  purchasers of FHA\u2019s DASP loan pools also purchased the enterprises\u2019  pools of defaulted loans.", "It is unclear whether adjusting the pooling strategy to focus on specific  loan characteristics would increase the number of bidders for FHA.  Enterprise officials told us that they pool by geography, occupancy, and  LTV ratio and also try to create loan pools such that all loans have the  same servicer. Unlike the enterprises, FHA does not pool loans by similar  characteristics, and pools frequently have loans from more than one  servicer. FHA officials told us they primarily use geography and pool size  to pool loans. However, FHA officials also told us they try to include  loans to make the pools attractive to different types of purchasers. Loans  may be valued differently by bidders with unique strengths\u2014such as  strong default servicing infrastructures or experience rehabilitating  properties\u2014that would make the loans more profitable to them compared  to other bidders. FHA officials stated that they encourage higher, outlier  bids by structuring pools to attract different types of bidders.", "We found differences in the extent to which loan-pool characteristics were  associated with bidder participation for FHA\u2019s and the enterprises\u2019  defaulted loan sales. Our multiple variable regression analyses of how  loan-pool characteristics predict the number of bidders showed the  following:", "Pools with a higher percentage of occupied properties were  associated with an increase in the number of bidders in FHA pools but  a decrease in the number of bidders in enterprise pools.", "Average LTV ratio was not associated with the number of bidders for  FHA or the enterprises.", "National pools were associated with more bidders for FHA. This  result may be due to fewer FHA postsale requirements for national  pools.", "For FHA pools, more servicers was associated with fewer bidders,  possibly due to higher transaction costs. Although 86 percent of  FHA pools had fewer than five servicers, the number of servicers for  FHA pools ranged from one to 21. In contrast, all enterprise pools  were single-servicer pools, except for four out of 101 pools (about 4  percent) that each had two servicers.", "See appendix I for a detailed description of these analyses.", "Setting aside pools for nonprofit organizations has not significantly  expanded bidder participation in FHA loan sales. FHA performs market  outreach to educate potential purchasers about the DASP process, but  barriers to entry exist in terms of qualifications and the underlying capital  required. In its 2015 sale, FHA began offering nonprofit-only pools. In  2016, FHA established a goal of selling 10 percent of assets to nonprofits  and local governments. In 2015\u20132016, FHA offered nine pools exclusively  to nonprofits, of which five (about 56 percent) received bids at or above  FHA\u2019s reserve price and were traded. Each pool received between one  and three bids. Despite heavy marketing, all traded pools were awarded  to two organizations, including one first-time purchaser. In comparison,  from 2010\u20132016, FHA offered 191 national and NSO pools, and 185  (about 97 percent) received bids at or above FHA\u2019s reserve price and  were traded. Several stakeholders told us that most nonprofit  organizations do not have the capacity to service delinquent loans, but  they may be able to participate in the program in a different capacity. For  example, two purchasers partnered with nonprofit organizations to  perform outreach to borrowers."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Since 2002, FHA has used loan sales intermittently to reduce its backlog  of defaulted mortgages and preserve the financial health of the MMI  Fund. In addition, some homeowners have received additional  opportunities to modify their loans and retain their homes through the  program. Yet, our review found several areas where FHA can improve its  management of DASP through more formalized procedures and  analyses, as follows.", "Improving controls. By evaluating eligibility at various points throughout  the 3-month period prior to the sales, including after the servicer update,  FHA could better prevent the sale of ineligible loans. Additionally, as FHA  finalizes its comprehensive procedures, it can better ensure that it is  considering the effects of previous changes on the program by including  procedures for reviewing and documenting program changes in a timely  manner.", "Using performance data. FHA has not developed key performance  measures for DASP. Without measurable targets related to clear program  objectives, FHA is not well-positioned to assess the effectiveness of  DASP\u2014which is still considered a pilot program\u2014in achieving its  objectives. Furthermore, by using performance data to determine the  optimal timing of DASP sales, FHA could help the program achieve  higher recoveries.", "Evaluating outcomes. FHA has not conducted an analysis that  compares the extent to which sold loans help avoid foreclosure, as  compared to similar, unsold loans. Such an analysis would help assess  DASP\u2019s effectiveness in meeting a program objective.", "Monitoring and evaluating purchasers\u2019 modifications. FHA does not  monitor purchasers of defaulted loans to ensure they are complying with  FHA\u2019s requirement to offer payment-lowering modifications to eligible  borrowers. Additionally, FHA may not collect the data it needs to evaluate  whether modifications offered by purchasers remain sustainable. With  better monitoring, FHA could determine whether individual purchasers are  meeting these requirements.", "Maximizing benefits of loan sales. FHA has opportunities to make  changes in how loan sales are held and structured that could enhance  bidder participation and better meet the DASP objective of maximizing  recoveries to the MMI Fund\u2014which are two characteristics of successful  auctions. Providing better advance notice to prospective bidders, setting  reserve prices based on realistic expectations, and setting loan eligibility  requirements that encourage more bidding could improve the results of  DASP sales and thereby reduce losses to the MMI Fund."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following nine recommendations to FHA:  The Commissioner of FHA should ensure that its eligibility checks are  conducted throughout the DASP sale process, such as by establishing a  schedule to check for eligibility at certain milestones. (Recommendation  1)", "In formalizing procedures for DASP, the Commissioner of FHA should  document processes for timely consideration and review of program  changes. (Recommendation 2)", "The Commissioner of FHA should clearly define DASP objectives and  develop measurable targets for all program objectives. (Recommendation  3)", "The Commissioner of FHA should use performance data to develop  criteria for when to hold DASP sales. (Recommendation 4)", "The Commissioner of FHA should evaluate loan outcomes under DASP  compared to outcomes for similar, unsold loans. (Recommendation 5)", "The Commissioner of FHA should monitor individual purchasers\u2019  compliance with FHA\u2019s modification requirements and ensure the  purchasers submit the data needed to evaluate the sustainability of  modifications. (Recommendation 6)", "The Commissioner of FHA should communicate long-range notice to  prospective bidders of upcoming DASP sales. (Recommendation 7)", "The Commissioner of FHA should develop a methodology to assess the  range of possible outcomes for loans when setting DASP reserve prices.  (Recommendation 8)", "The Commissioner of FHA should analyze FHA\u2019s loan portfolio and  market information before setting loan eligibility criteria.  (Recommendation 9)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to HUD and  FHFA. HUD provided written comments, which have been reproduced in  appendix VIII, that communicate FHA\u2019s response to the report. Both HUD  and FHFA provided technical comments, which we have incorporated, as  appropriate.", "In its written response, FHA\u2019s management generally agreed that  opportunities exist for improvement to single-family loans through more  formalized procedures and analyses, as the defaulted loan disposition  option transitions to a permanent disposition alternative. FHA generally  agreed with seven recommendations and did not explicitly agree or  disagree with two recommendations.", "FHA neither agreed nor disagreed with our recommendation that FHA  should ensure that its eligibility checks are conducted throughout the  DASP sale process, such as by establishing a schedule to check for  eligibility at certain milestones. FHA stated that it works with the servicers  and relies on them to determine eligibility throughout the DASP sale  process. FHA also stated that its management agrees to include a  schedule of eligibility checks in its procedures. We acknowledge that  servicers check loan eligibility throughout the process, as stated in the  report. However, we maintain that FHA and its contractors should also  space their own checks throughout the process, specifically scheduling  some closer to the bid date, and not rely exclusively on the servicers for  this function at the end of the sale process.", "FHA neither agreed nor disagreed with our recommendation that FHA  should clearly define DASP objectives and develop measurable targets  for all program objectives. FHA management stated that it believes it  already has clear objectives and performance management in place for  its DASP objective to maximize recoveries to the MMI Fund and that it  measures whether it is meeting this objective. We acknowledge that  FHA\u2019s objective to maximize recoveries to the MMI Fund is clear and that  it has a measureable target. However, as stated in the report, agency  documents and program changes reflect additional program objectives  related to preserving homeownership, helping to stabilize neighborhoods,  and offering borrowers a second chance at avoiding foreclosure that do  not have measurable targets. We maintain that FHA should clarify its  program\u2019s objectives in agency documents, whether that be one objective  or several, and ensure that each objective has a measurable target.", "FHA also took issue with aspects of our comparison of sold and unsold  loans in its written response and technical comments.", "In its written response, FHA noted that the unsold loans in our  analysis are invalid for comparison to sold loans because these  unsold loans had not been deemed by servicers as having completed  all applicable loss mitigation activities prior to being included in the  analysis the way sold loans had. We attempted to minimize  differences between the sold and unsold loans by matching loans  across several variables that could affect the likelihood of foreclosure  or foreclosure avoidance. We found a high rate of similarity between  the two groups and indirectly controlled for any differences in the  extent of loss mitigation by including length of delinquency as one of  the matching variables. According to the FHA servicing handbook,  servicers are generally required to either use a loss mitigation option  for which a borrower qualifies or initiate foreclosure within 6 months of  the default date.", "In its technical comments, FHA also noted that our matching of  comparison loans omitted important variables. In particular, FHA  noted that the analysis did not hold constant several factors related to  the risk of foreclosure, including default risk as measured by FICO  scores, debt-to-income ratios, home price appreciation, and loan  amount and term. However, we indirectly controlled for loan term and  home prices by matching loans by origination years and indirectly  controlled for loan amount and home prices by matching on  categories of LTV ratios. We did not control for debt-to-income ratios  or FICO scores, but FHA\u2019s data systems did not contain them for  unsold loans and FHA does not include them as criteria for DASP  eligibility. Further, these variables may not be substantially different  between the sold and unsold loans because the loans in both groups  are severely delinquent. We revised the report to clarify that we  estimated the LTV ratio at the time of the DASP sale. We calculated  the LTV ratio using the outstanding loan amount and estimating  current property values by adjusting the original sale values for  regional changes in home prices over time.", "In addition, FHA stated in technical comments that our comparison  group is invalid because 100 percent of loans in DASP sales would  end in foreclosure if they were not included in a sale. FHA stated that  the only loans eligible for sale are those for which the only alternative  remaining to the borrower is foreclosure. However, we disagree that  all sold loans would have ended in foreclosure had they not been  sold. As discussed in the report, unsold loans with characteristics  similar to sold loans experience a range of outcomes, including up to  34 percent experiencing outcomes other than foreclosure following  sales. In addition, the status of delinquent loans can be very fluid  throughout the sale process, even after purchasers place bids on  them, and borrowers who previously did not qualify for a loss  mitigation option could become eligible to be evaluated again (and  their loan could become ineligible for sale) if their circumstances  change. For example, our analysis of FHA data found that from 2010  through 2016 about 23 percent of loans were removed from sales  between the bid and claims dates due to, among other things, loans  entering into loss mitigation. Furthermore, we found that for five  individual loan pools, more than half of the loans were removed from  the sales between the bid and claims dates. These results argue  against the validity of FHA\u2019s presumption that all loans selected for  sales would have ended in foreclosure.", "Although our matching process does not capture all potential foreclosure  risk characteristics and our results should be interpreted accordingly, our  analysis supports our assumption that the pools of sold and unsold loans  are generally comparable and describes relationships between DASP  participation and loan outcomes. We maintain that our approach is  reasonable using the available data and forms a sound basis for the  findings and recommendations in the report. As FHA considers actions in  response to our recommendations about evaluating loan outcomes and  assessing its methodology for setting reserve prices, we encourage it to  further enhance the robustness of these analytical methods. .  As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of HUD, the Director of FHFA,  and other interested parties. In addition, this report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our report were to examine (1) the changes the Federal  Housing Administration (FHA) has made to the Distressed Asset  Stabilization Program (DASP) over time; (2) certain DASP procedures,  including those associated with loan eligibility, and documentation; (3)  FHA\u2019s evaluation of the identified outcomes for loans that have been sold  through DASP and how these compare with similar, unsold loans; and (4)  the potential effects that changes to DASP might have on the Mutual  Mortgage Insurance Fund (MMI Fund)."], "subsections": [{"section_title": "Databases Used in Analyses throughout the Report", "paragraphs": ["To conduct the data analyses discussed in the sections below, we used  the FHA data sets listed in table 2. (We discuss the use and reliability of  these data sets in the sections that follow this table.)"], "subsections": []}, {"section_title": "Document Review and Interviews", "paragraphs": ["To address all the objectives, we reviewed relevant laws, agency  documents, and agreements. We reviewed the National Housing Act,  Department of Housing and Urban Development (HUD) program  evaluation policy and sale notices in the Federal Register, and Office of  Management and Budget (OMB) Circular A-11. We reviewed HUD\u2019s  contractual agreements with servicers and purchasers for each DASP  sale from 2010 to 2016, which are called, respectively, Participating  Servicer Agreements (servicer agreements) and Conveyance,  Assignment, and Assumption Agreements (purchaser agreements). We  also reviewed other agency documents, including HUD\u2019s Fiscal Year  2017 Annual Performance Report, FHA\u2019s DASP sale results, FHA\u2019s  Actuarial Reports, HUD\u2019s Reports to the Commissioner on Post Sale  Reporting, and the Federal Housing Finance Agency\u2019s (FHFA) Enterprise  Non-performing Loan Sales Reports. We also reviewed prior GAO work  on related topics.", "We interviewed officials from multiple offices within HUD, including the  Offices of Asset Sales, Single Family Asset Management, Risk  Management and Assessment, Finance and Budget, and the National  Servicing Center. We also interviewed HUD\u2019s three primary contractors  for DASP at the time of our review\u2014transaction specialist: Verdi  Consulting; compliance analytics: SP Group; and program financial  adviser: NOVAD Management Consulting. We interviewed officials from  FHFA and the government-sponsored enterprises (enterprises)\u2014Freddie  Mac and Fannie Mae\u2014as they also auction defaulted loans. We  interviewed and reviewed reports from selected consumer advocacy  organizations and industry stakeholders that included five servicers,  seven purchasers, and two loan-sale advisory firms. In interviews, we  generally discussed with participants the following topics: changes to  DASP over time; what works well and what could be improved in DASP;  foreclosure avoidance options that purchasers offer; the effectiveness of  FHA\u2019s 2015 and 2016 DASP reforms; communication to borrowers whose  loans are selected for a DASP sale; and the auction process and effect of  alternative auction structures on the MMI Fund.", "To select servicers and purchasers to interview, we analyzed the bid day  pool-level data and postsale data, respectively. We selected and  interviewed five servicers from a universe of 56 servicers based on high  and low participation in terms of number of sales, loans sold, and the  unpaid balance of the loans and type of institution (bank and nonbank).  We selected and interviewed seven purchasers from a universe of 29  purchasers based on participation, postsale foreclosure rate, and type of  institution (for-profit and nonprofit). The views and practices of the  servicers and purchasers we selected may not represent those of the  servicers or purchasers not selected."], "subsections": []}, {"section_title": "Identifying and Mapping Loans Sold through DASP", "paragraphs": ["To identify a complete list of the loans sold through DASP (sold loans), as  described in the background section of the report and used in analyses  throughout, we obtained and analyzed postsale reporting data. Per the  purchaser agreements, purchasers are required to report the outcome  status of sold loans on a quarterly basis for 4 years following the transfer  of loan servicing responsibilities. The quarterly postsale reports did not  always include data for every purchased loan. We therefore compared  the number of loans included in each quarterly postsale report for each  pool and used the quarterly reports with the highest loan count to develop  a complete list of the loans sold through DASP.", "To develop the map showing the concentration of sold loans by state, we  used data from the Single Family Default Monitoring System (default  monitoring system) to calculate the ratio of loans sold through DASP to  FHA-insured, defaulted loans with six or more missed payments in July of  each year. We then categorized states into five ratio categories based on  the distribution of ratios across states. We limited our review of  participants and characteristics to the loans included in our comparison  analysis of outcomes to provide descriptive context for this analysis.", "To assess the reliability of the data sources above, we interviewed FHA  officials about how the data were collected, processed, and accessed.  We also identified the sold loans that were not reported in the default  monitoring system at the time servicers submitted the loans to FHA for sale. We found that less than 0.1 percent of the sold loans in our scope  were not reported as delinquent by servicers and determined that, due to  their small percentage, excluding these loans would not bias our results.  Based on our interviews and review of unreported loans, we concluded  that servicers generally reported sold loans in the default monitoring  system, and we found the data to be sufficiently reliable for the purpose of  identifying and describing sold loans."], "subsections": []}, {"section_title": "Examining DASP\u2019s Current Process and How It Changed over Time", "paragraphs": ["To describe the DASP process and changes to the program over time, we  reviewed FHA documentation, legislation, and other reports. To describe  how DASP currently works, we analyzed the 2016 servicer and purchaser  agreements and interviewed FHA officials and servicers. To describe how  the program changed over time and the type of changes that FHA made,  we reviewed HUD\u2019s authorizing legislation to accept assignment and sell  loans, program requirements under OMB Circular No. A-11, and HUD  press releases that announced the program\u2019s initiation and changes. To  identify changes in servicer agreements and purchaser agreements since  2010, we performed a content analysis identifying differences from sale- to-sale (one servicer agreement and one purchaser agreement for each  sale between 2010 and 2016). One analyst performed the review, and a  second analyst verified the selected content. To gather additional  background information on the program and the changes over time, we  reviewed reports issued by the HUD Office of Inspector General (OIG)  and consumer advocacy and other research organizations such as the  National Consumer Law Center, Center for American Progress, and  Urban Institute. To corroborate our information on the program and  changes, we asked FHA to provide us a list of changes to the program  between 2010 and 2016, and we interviewed FHA officials in HUD  headquarters and at the National Servicing Center. We further  corroborated our understanding of DASP through interviews with the  servicers and purchasers."], "subsections": []}, {"section_title": "Evaluation of Certain DASP Procedures and Documentation", "paragraphs": ["To identify FHA\u2019s procedures for monitoring loan eligibility, we examined  procedures identified in the servicer agreements and contracts and  statements of work for entities assisting in oversight of DASP sales. We  assessed the extent to which these procedures existed and were working  effectively by reviewing status codes from FHA\u2019s default monitoring  system and examining relevant findings from HUD OIG audit reports. We  found limited information in agency documentation on steps conducted to  verify loan eligibility and had to rely on discussions with FHA staff and  contractors on monitoring processes. We also interviewed servicers on  their process for selecting loans and certifying loan eligibility for DASP.  We further corroborated this information by providing a combined list of  steps to FHA officials to verify accuracy.", "To assess whether FHA\u2019s procedures for assessing loan eligibility were  working, we determined the extent to which FHA\u2019s sold loans appeared to  be ineligible in its 2016 sales. To identify the ineligible loans, we  compared the eligibility criteria listed in the 2016 servicer agreements to  the data in the default monitoring system. We obtained the default  information for sold loans for the period 2 months prior to the bid date\u2014 the period when servicers generally submit loans for sale\u2014and at the bid  date. We limited our analysis to loans sold in 2016 because FHA\u2019s loan  eligibility criteria changed from sale to sale and 2016 was the most recent  year a sale occurred. We selected a nongeneralizable sample of 10 loans  with ineligible default codes in the default monitoring system as of the bid  date. To determine why FHA sold loans that appeared to be ineligible, we  provided list of sold loans with ineligible codes to FHA staff for them to  research and provide their explanations.", "We followed up in interviews with officials from FHA\u2019s Office of Asset  Sales to further clarify their responses. We also interviewed FHA officials  regarding data reliability and to ensure that our understanding of the  default codes and their corresponding eligibility or ineligibility for sale was  accurate. We also performed electronic checks for consistency and  validity and found the data to be sufficiently reliable for the purpose of  determining default status, length of delinquency, and the extent to which  loans that FHA sold in 2016 appeared to be ineligible."], "subsections": []}, {"section_title": "Analysis of Loan Modifications", "paragraphs": ["To assess whether DASP purchasers offered borrowers payment- lowering modifications, we evaluated the loan modifications offered by  individual purchasers by comparing borrowers\u2019 monthly mortgage  payments prior to being modified to their monthly payments after being  modified. We obtained postmodification payment data from the postsale  reports and premodification payment data from the submitted loan  database. Using the most recent postsale record for each modified loan,  we calculated the change in payment resulting from the modifications  offered by DASP purchasers. To confirm that we used the appropriate  data sources and variables for our analysis, we contacted FHA\u2019s Program  Financial Advisor, who collects postsale reporting data and reports some  information on modifications. Our analysis included all loans sold in DASP  sales that occurred between 2013 and 2016, with some exceptions, in  line with the scope of our comparison analysis of outcomes. We selected  this scope because it represented the period for which FHA was generally  able to provide consistent postsale quarterly reports.", "In addition, to assess the sustainability of the modifications offered by  DASP purchasers, we used data on modification type from the postsale  reports to calculate the number of modifications that included a  deferment. We identified loan modification characteristics from prior GAO  work. We also reviewed the purchaser agreements and postsale reports  to examine the information available on modified interest rates. Our  analysis was limited to modifications that were reported using the more  expansive list of characteristic codes introduced in 2016, which  accounted for about 95 percent of the modifications in our scope.", "To assess the reliability of the modification data, we checked for missing  or invalid data entries across different modification fields, including  modification date, modification type, and monthly payment before and  after a modification. We found that purchasers generally reported  consistent information on modifications for loans sold in DASP sales that  occurred between 2013 and 2016 and determined the data to be  sufficiently reliable for the purpose of calculating payment change and  assessing the sustainability of modifications."], "subsections": []}, {"section_title": "Comparison Analysis of Outcomes for Sold Loans and Unsold Loans", "paragraphs": [], "subsections": [{"section_title": "Scope of the Data", "paragraphs": ["We used multiple FHA data sources to match sold loans to similar unsold  loans and compare outcomes across the groups. We used data from  FHA\u2019s default monitoring system and integrated database to obtain  information on loan-level characteristics for both sold and unsold loans,  such as length of delinquency. However, FHA data did not contain loans\u2019  current property value or current loan-to-value (LTV) ratio. To calculate  the current property value, we generated property values for sold and  unsold loans based on data in the integrated database, including property  value at origination, date of origination, and location information. We then  aged the property values to the matching month and year using FHFA\u2019s  House Price Index data, which considers geography. We calculated the  LTV ratio for sold and unsold loans by dividing the current unpaid  principal balance obtained from the default monitoring system by the  calculated current property value. To identify the loans sold through  DASP and to determine their outcomes, we used postsale reporting data  reported by DASP purchasers. To determine monthly outcome statuses  for unsold loans, we used FHA\u2019s default monitoring system and integrated  database.", "Our analysis generally included loans sold in DASP sales that occurred  between 2013 and 2016, but we excluded some sales and pools for  various reasons. We excluded loans sold in the DASP sales that occurred  from 2010 through 2012 because FHA could not provide semiannual or  quarterly postsale reports for these loans. We excluded loans sold in  Neighborhood Stabilization Outcome (NSO) pools in the first sale in 2013  because FHA had not yet implemented reporting requirements for more  detailed information on loan status for NSO pools. We excluded Direct  Sales, through which FHA directly transfers loans to government entities,  as well as Aged Delinquent Portfolio Loan Sales, because these sales do  not follow normal DASP procedures. Lastly, we excluded loans in pools  that were offered for sale but not traded and loans that dropped out  before transfer and were never sold. FHA was generally able to provide  quarterly reports for the remaining sales and pools within the required  reporting time frame."], "subsections": []}, {"section_title": "Data Preparation and Reliability", "paragraphs": ["We took a number of steps to prepare and ensure the reliability of the  data used to match sold loans to similar, unsold loans and compare  outcomes. We generated seven datasets corresponding to the seven  DASP sales in our scope. Each dataset was made up of the records in  the default monitoring system 2 months prior to the bid date for the  corresponding DASP sale\u2014the time servicers submit eligible loans for sale to FHA, according to FHA officials. We eliminated duplicate case  numbers as well as erroneous submissions, and we added sale and pool  variables to identify sold loans based on the master list of sold loans. We  also excluded unsold loans that were ineligible for sale at the time of  matching. Specifically, we reviewed FHA\u2019s servicer agreements and  developed criteria for excluding unsold loans from matching based on  sale eligibility requirements outlined in these agreements. We interviewed  FHA officials to ensure that our understanding of the default status codes  and their corresponding ineligibility for sale was accurate. We then used  this information to identify and exclude ineligible loans.", "We performed a variety of electronic checks to test the completeness,  consistency, and logic of outcome statuses for sold and unsold loans as  reported by servicers. We excluded or corrected, where possible, a small  percentage of sold and unsold loans (2 percent excluded and about 11  percent corrected) that had invalid or illogical reported statuses. We also  excluded loans with invalid case numbers, loans erroneously reported as  sold by purchasers, and other problem records. These exclusions  accounted for less than 1 percent of the sold loans in our scope.", "We found that three pools were missing more than half of the expected  number of postsale reports. Because these pools accounted for less than  2 percent of the sold loans in our scope, we decided to keep these pools  in our analysis as they provided additional data points for estimating  outcome probabilities, and including them would not significantly bias our  results.", "Finally, when assessing data reliability, we consulted relevant  documentation on the default monitoring system, integrated database,  and postsale reporting systems and the specific fields used from these  systems. We also interviewed officials knowledgeable about how data  from these systems were collected, maintained, and accessed. Based on  these steps, we determined that the data were sufficiently reliable for the  purpose of matching sold loans to similar, unsold loans and comparing  outcomes."], "subsections": []}, {"section_title": "Matching Analysis", "paragraphs": ["We used statistical matching methods to identify a comparison group of  unsold loans that closely resembled sold loans on loan characteristics that could affect the likelihood of foreclosure. Unsold loans were matched  to sold loans for each sale, resulting in seven groups of unsold loans  corresponding to loans sold in the seven DASP sales that occurred in  2013\u20132016. We matched unsold to sold loans 2 months prior to the bid  date across the following characteristics:", "Length of delinquency. Number of missed payments at matching.", "Occupancy status. Whether property was occupied or vacant at  matching.", "Location. Location of the property, based on latitude and longitude.", "Servicer. FHA-approved, mortgage servicer.", "Loan-to-Value (LTV) ratio category. Value of the property relative to  the outstanding unpaid balance on the loan at matching.", "Loan origination. Year of the loan\u2019s origination.", "We excluded modification status from the matching criteria. While there is  some indication that loans that have been modified once are more likely  to redefault in the future, this is largely dependent on the quality of the  modification. However, modification quality could not be determined  based on the FHA data we received.", "Our analysis did not seek to conduct a definitive evaluation of the causal  effects on outcomes of being sold through DASP. Instead we sought to  improve on simple comparisons of outcomes between sold and unsold  loans by constructing a comparison group of unsold loans that were  similar to sold loans on loan-level characteristics known to affect the  likelihood of foreclosure. For example, matching sold and unsold loans by  location minimized variation in neighborhood characteristics and local  housing markets that could be associated with a higher or lower likelihood  of foreclosure. We selected these factors based on our previous work on  foreclosure mitigation and on consultations with subject-matter experts  within GAO. See appendix V for more information on our statistical  matching analysis."], "subsections": []}, {"section_title": "Outcome Analysis", "paragraphs": ["To compare outcomes for sold and unsold loans, we identified outcomes  using postsale reporting data dictionaries in FHA\u2019s purchaser agreements  as well as FHA\u2019s status codes used in its default monitoring system and  integrated database data dictionaries. We grouped the outcomes into six  outcome categories. To assign sold loans to a category, we used FHA\u2019s  postsale reporting data, and to assign unsold loans to a category, we  used FHA\u2019s default monitoring system and integrated database data. The  outcome categories were as follows:", "Foreclosure. Loans terminated with foreclosure.", "Reperforming. Loans restored to performing status either under the  original mortgage terms or through a permanent modification. In this  outcome, the borrower retains ownership of the home.", "Temporary Action. Loans with temporary action that allow the  borrower to retain ownership of the home\u2014for example, an  agreement for paying the loan balance or restoring it to performing  status has been reached but has not met FHA\u2019s time requirement to  meet FHA\u2019s definition of performing. This category may also include  other interventions that have the intent of keeping the borrower in the  home, such as forbearance.", "Short sale/deed-in-lieu of foreclosure. Loans that avoid foreclosure  through short sales and deeds-in-lieu of foreclosure. In this outcome  the borrower loses ownership of the home.", "Unresolved. Loans remaining in default status and whose outcomes  were unresolved.", "Other. Loans whose outcomes do not fit into these other categories.", "A number of sold loans were reported by purchasers as resold, with no  further outcome updates, and we decided to categorize these separately.  Purchasers had the option of reporting on loans as resold until 2015,  when FHA introduced a reporting requirement that purchasers continue  reporting the outcome status of loans even after selling them to new  buyers. For the loans in our scope, the percentage of postsale reports  that included a status of resold ranged from 7 to 35 percent for the 2013  and 2014 sales, before dropping to less than 1 percent beginning with the  2015 sale. Purchasers may have returned resold loans to performing  status before selling them because performing loans are more profitable,  and, by categorizing these loans separately, we may have undercounted  performing loans for the earlier DASP sales. While we considered  classifying loans reported as resold as performing, our review of status  sequences for loans with at least one resold status showed that  purchasers reported a range of nonperforming outcomes before and after  the resold status, indicating that not all resold loans were performing. We  therefore determined that categorizing resold loans separately would  result in more reliable estimates for sold loans.", "Using data from the default monitoring system to classify outcomes for  the matched, unsold loans in our analysis required us to make some  assumptions that may have resulted in overcounting performing, unsold  loans. Because the default monitoring system only contains data on  delinquent loans and does not include status information on performing  loans, our classification of performing, unsold loans was based on  whether or not a servicer reported the loan in the default monitoring  system in a given month. As a result, we assumed that unreported loans  were performing. However, a missing report could also be the result of a  reporting omission by the servicer, rather than an indication of a  performing status. To mitigate the risk of overcounting performing, unsold  loans, we used a variable indicating the length of a loan\u2019s current default  episode to help us distinguish between performing loans and servicer  omissions. Specifically, we counted unsold loans as performing only if the  default episode length in the most recent default monitoring system report  was less than the reported episode length in the default monitoring  system report preceding the period of no reporting. We assumed that a  lower default episode length in the most recent default monitoring system  report meant that the borrower was making payments during the period of  no reporting. Otherwise, we classified periods of no reporting as  missing.", "We compared monthly outcomes for sold loans and unsold loans after  servicing transferred to the purchaser. We set the origin of the  observation period to the latest servicing transfer date in each pool of sold  loans and their associated matched unsold loans. Because the latest  servicing transfer date varied across these groups, the number of  observations and the associated dates varied across pools and sales. We  measured outcomes for up to a maximum of 48 months, from January  2013 through December 2017, the most recent full quarter of postsale  reporting data available at the time of our review. The follow-up periods  ranged from the full, 4-year reporting period required by FHA for loans  sold in the 2013 sales to 1 year for loans sold in the second sale in 2016.  See appendix V for more information on our statistical analysis of  outcomes for sold loans and unsold loans."], "subsections": []}]}, {"section_title": "Potential Effects of Changes to DASP on the MMI Fund", "paragraphs": [], "subsections": [{"section_title": "Association of Pool-Level Characteristics with Bidder Participation", "paragraphs": ["To examine the extent to which loan-pool characteristics were associated  with bidder participation for FHA loan sales and the enterprises\u2019  nonperforming loan sales, we built regression models. We identified from  interviews key characteristics (independent variables) that may make loan  pools attractive to certain bidders, such as having a single servicer or low  vacancy. We obtained bid-day data from FHA and the enterprises that  included the number of bidders (dependent variable) and the winning bid  amounts, as well as the timing of the sale. We generated FHA pool  characteristics from the loan level data in FHA\u2019s submitted loan database  and supplemented  it with FHA default status data (see table 2 above for  further information about FHA\u2019s data sets). For the enterprises, we  obtained pool characteristics from a published FHFA report. This report  provided a range of characteristics to compare to those of FHA\u2019s pools.", "See table 3 for our regression estimates of the relationship between pool  characteristics and the number of bidders in FHA\u2019s DASP sales and the  enterprises\u2019 sales. The associated p-values are presented in  parentheses, and *, **, and *** denote significance at 10 percent, 5  percent, and 1 percent or better, respectively. In the report body we use  the 95 percent confidence level as indicating significance of the  regression estimates.", "To assess the reliability of the FHA data, we performed reasonableness  checks that resulted in the removal of FHA\u2019s 2010 sale due to a large  number of invalid case numbers and two additional pools from later sales,  we also removed pools based on missing or invalid date\u2014in total 4  percent of FHA\u2019s pools. We did not independently verify the data in the  FHFA reports, but we interviewed the FHFA staff that generated the  report about the reliability of the data. Some limitations stem from the  differences between FHA\u2019s and the enterprises\u2019 pools and the underlying  loans as well as the data available on the pools. For example, we use  data from FHA sales from 2011\u20132016 and from sales in 2015\u20132017 for  the enterprises. We use the time variables to control for housing market  differences as well as the defaulted loan sale market. Additionally, we  included FHA\u2019s nontraded pools but not the enterprises\u2019 nontraded pools  because the FHFA reports did not present data on these pools. We  showed the differences and similarities across the entities in figure 14 in  the report. We determined that data for the remaining pools were  sufficiently reliable for examining the association of pool characteristics  with bidder participation and for comparison between the enterprises\u2019 and  FHA\u2019s sales.", "To calculate pool reserve prices, we obtained FHA data on quarterly loss  severity by disposition method for 2013\u20132016. Using our results from the  outcomes comparison analysis, we calculated pool-level reserve prices  and compared them to winning pool-level bids."], "subsections": []}, {"section_title": "Auction Structure Analysis", "paragraphs": ["To assess the effect that changing FHA\u2019s auction design could have on  the MMI Fund and to identify elements of a successful auction structure,  we reviewed economic literature on auction structures and auction  descriptions in business and commercial literature. To compare the DASP  auction structure with the enterprises as well as mortgage auctions in the  private market, we analyzed agency and enterprise documents and  interviewed market participants. We developed a detailed description of  FHA\u2019s and the enterprises\u2019 current auction structures, including  information about the nature of the loan pools being auctioned; about  sellers, purchasers, and other auction stakeholders; and about the  benefits and drawbacks of the auction design.", "In interviews, we received suggestions about aspects of FHA auctions  that, if changed, may increase bidder participation. To examine these  aspects, we interviewed purchasers on their potential interest in these  changes and examined FHA sale data following an instance of a single  purchaser winning all the pools in a sale. To assess the DASP auction  structure, we compared it to selected characteristics of successful  auctions and determined the extent to which the characteristics were  used by FHA.", "We conducted this performance audit from January 2017 to July 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."], "subsections": []}]}]}, {"section_title": "Appendix II: DASP Servicers, Purchasers, and Characteristics of Sold Loans", "paragraphs": ["This appendix includes descriptive information about the Federal Housing  Administration\u2019s (FHA) Distressed Asset Stabilization Program (DASP)  servicers, purchasers, and sold loans. The information presented is  generally based on loans sold in DASP sales that occurred between 2013  and 2016."], "subsections": [{"section_title": "DASP Servicers and Purchasers", "paragraphs": ["Thirty-two servicers participated in DASP sales between fiscal years 2013  and 2016, with the largest participating servicer offering 48 percent (more  than 44,000) of the loans sold. As seen in figure 15, the number of  servicers increased from nine in the first sale in 2013 to 22 in the second  sale in 2016. During this same period, 26 purchasers participated in the  DASP sales, with the largest participating purchaser buying 27 percent  (about 25,000) of the loans sold.", "The share of loans offered by individual servicers also varied over time  and by sale. One or two servicers offered the majority of sold loans in  earlier sales, but more servicers offered a greater share of the loans sold  in later sales (see fig. 16). For example, one servicer offered 89 percent  of the loans sold in the first sale in 2013, about 51 percent of the loans  sold in the second sale in 2014, and about 8 percent of the loans sold in  the second sale in 2016. During this time, new servicers began offering  loans for sale, and servicers that had offered a smaller share of the loans  sold in earlier sales began offering a larger share of loans for sale."], "subsections": []}, {"section_title": "Characteristics of Loans Sold through DASP", "paragraphs": ["Occupancy status. The majority of properties sold through DASP were  occupied by the borrower, with a smaller portion having been vacated  (see fig. 17). DASP purchasers told us that their ability to contact and  engage borrowers is one determinant in whether they are able to offer  loss mitigation options to avoid foreclosure. One purchaser noted that in  cases where it is unable to contact the borrower, which may indicate that  the property is vacant, it tries to foreclose as quickly as possible.", "Delinquency. The majority of loans sold through DASP had missed 12 or  more payments (see fig. 18). As discussed earlier, a loan becomes  delinquent after a borrower misses a single payment, and goes into  default after it is two payments past due. Generally, servicers must utilize  a loss-mitigation option or initiate foreclosure within 6 months of default.  As we previously reported, serious delinquency is among the factors  associated with an increased likelihood of foreclosure.", "Loan-to-Value (LTV) ratio. About 18 percent of sold loans had an LTV  ratio of 110 or greater (see fig. 19). The LTV ratio represents the unpaid  principal balance of a loan as a percentage of the current property value.  As we previously reported, negative equity or a high LTV ratio is among  the factors associated with an increased likelihood of foreclosure.", "Origination. As figure 20 shows, sold loans were more likely to have  originated at the peak of the housing crisis in 2008 and 2009. FHA  officials told us that they used DASP to reduce the significant backlog of  defaulted loans they were faced with following the housing crisis."], "subsections": []}]}, {"section_title": "Appendix III: Federal Housing Administration Documents Guiding the Distressed Asset Stabilization Program", "paragraphs": ["In this appendix, we describe the documents the Federal Housing  Administration (FHA) uses to guide the Distressed Asset Stabilization  Program. The documents listed in table 4 represent the current written  procedures and guidance that FHA planned, as of May 2018, to  incorporate into a single document\u2014the Asset Sales Handbook\u2014to  centralize the information for internal and external stakeholders."], "subsections": []}, {"section_title": "Appendix IV: Reported Postsale Modification Actions", "paragraphs": ["We examined the different types of actions purchasers have used to  modify loans they purchased through the Distressed Asset Stabilization  Program (DASP) and the expected effect of each type of action on  borrowers\u2019 payments. Table 5 summarizes our findings on postsale  modification actions. Our analysis was limited to modifications reported  using reporting codes introduced in the purchaser agreement for the first  sale in 2016, and included loans sold between fiscal years 2013 and  2016. We found that the Federal Housing Administration (FHA) may not  have the data it needs to determine whether payment-lowering  modifications offered by purchasers were sustainable\u2014for example, a  modification in which a low payment was later adjusted to higher than  what it was prior to modification. Therefore, we could not determine the  long-term effect on payment for many modifications offered by  purchasers, as noted by \u201cunclear\u201d in the last column of table 5."], "subsections": []}, {"section_title": "Appendix V: Additional Information on Matching and Outcomes Analysis", "paragraphs": ["This appendix provides additional methodological details on our analysis  to compare outcomes between loans sold through the Distressed Asset  Stabilization Program (DASP) and a comparison group of similar unsold  loans. The analysis consisted of two parts: (1) applying statistical  methods for constructing matched comparison groups and (2) estimating  a statistical model of loan outcomes using the matched sample of loans."], "subsections": [{"section_title": "Additional Information on Matching Analysis", "paragraphs": ["We matched one unsold loan to each sold loan, using exact and  Mahalanobis distance matching methods. We matched exactly on  occupancy status, state, and loan servicer, and we matched the  distributions of loan delinquency period, loan-to-value ratio (divided into  five categories), geographic coordinate, and origination year. Unsold  loans could be matched multiple times in order to maximize the degree of  similarity between the sold and unsold loans, given constrained sample  sizes of potential comparison loans. (That is, we used one-to-one  matching with replacement.) Matching occurred separately for each loan  sale in order to measure the matching variables 2 months before each  sale occurred. We assessed the quality of candidate matched samples by  consulting univariate empirical-QQ plots, descriptive statistics, and  multivariate Kolmogorov-Smirnov tests of equal distributions for each of  the matching variables, as implemented in the \u201cMatching\u201d package for the  statistical software, R, version 3.5.1.", "We attempted to match exactly within the smallest geographical area that  sample sizes allowed. Location is important for the outcomes of Federal  Housing Administration (FHA) loans and is potentially correlated with  many unobserved variables, such as local housing market conditions.  After experimenting with multiple geographic areas, such as the census  tract and county, we chose a strategy of matching exactly on state and  matching in distribution on latitude, longitude, and product. This ensured  that the comparison loans were in the same states as the sold loans,  which held constant differences in foreclosure processes and other  political and legal differences. Although the matched loans were  potentially in different counties or municipalities than the sold loans,  generally they were still close to each other, as measured by the  geographic coordinates.", "We obtained a similar matched sample of comparison loans for each loan  sale, as summarized in table 6 and figures 21 and 22. Although we  conducted the matching separately for each sale (exactly matched), we  combined the sales and their matched comparison loans for the purpose  of summarizing their similarity across the matching variables."], "subsections": []}, {"section_title": "Additional Information on Outcome Analysis", "paragraphs": ["We used statistical modeling methods designed for longitudinal time-to- event or \u201cduration\u201d data to compare outcomes for sold and matched  unsold loans. Conventional duration methods, such as \u201ccompeting risks\u201d  models, would estimate the probability that a loan experienced one or  more terminal outcomes by a certain follow-up time. These methods  assume that event times are observed exactly, and that no outcome can  occur more than once. These assumptions were not realistic for our  analysis. Loans could transition among several nonterminal outcomes  over time, such as reperforming or temporary action, before experiencing  a terminal outcome, such as foreclosure. Our data sources measured the  status of unsold loans monthly and sold loans quarterly. However, events  could occur on any date, in continuous time, so the status of each loan  was unknown between pairs of reporting times (or interval-censored).", "We used Multi-State Markov models to account for these features of the  data. Our models assumed a directed graphical structure for how loans  could transition among events between observed follow-up times, as  described in figure 23. We developed our model of possible transitions  based on FHA\u2019s typical process for managing unsold delinquent loans  and DASP program rules for managing sold delinquent loans. To simplify  the model, we did not allow paths for transitions that were infrequently  observed, illogical, or inconsistent with prior knowledge about loan  management. These unusual transitions in the data may reflect  misclassified outcomes or transitions through unobserved outcomes  between observation times. Table 7 gives the sample counts of the  transitions in the matched sample of loan-month observations.", "The graphical version of our model implied a matrix of modeled  transitions among outcomes, with transition probabilities set to 0 for paths  between outcomes not shown in the graph. Specifically, we defined the  loan outcomes at time t, Y, as a stochastic process, taking values  according to an underlying model of transition probabilities from time 0 to  t:  where r and s denoted two outcomes from the set of outcomes above in  table 7, such as unresolved and reperforming. Consistent with existing  literature, we assumed that the outcome process was a time- homogenous Markov chain. This assumption made the model  mathematically tractable, but required the transition probability at any  follow-up time to be independent of prior outcomes and constant over the  observation period. (We estimated versions of the model that relaxed this  assumption, as described below.) Under this assumption, we modeled the  transition hazard rate from outcome r to s as:  where x and \u03b2rs were vectors of covariates and transition-specific  parameters (excluding an intercept) and qrs was an unspecified  proportional baseline hazard. All covariates were time-invariant  characteristics of the loans measured at baseline, 2 months prior to the  loan\u2019s bid date, used to create the matched sample. We estimated \u03b2rs  using maximum likelihood estimation methods, as implemented by the  \u201cmsm\u201d package in R 3.5.1.", "The body of this report provides estimated transition probabilities for  various groups of loans, including loans that were sold or unsold. We  estimated the probability of a loan\u2019s transitioning from unresolved at t = 0  to some other outcome at t using the estimated parameters and the  matrix exponential P(t) = exp(tQ), where P and Q are the matrices of  transition probabilities and hazards, respectively, for all outcomes r and  s. We used Monte Carlo simulation from the fitted multivariate normal  distribution of the parameters to estimate 95 percent confidence intervals  for the transition probabilities, using 1,000 draws. In appendix VI, we  provide more detailed estimates of these transition probabilities and their  confidence intervals for key findings discussed in the body of this report.", "Our models estimated the difference in transition probabilities between  sold and unsold loans in the matched sample by including an indicator for sold status in x. We estimated transition probabilities for certain  subpopulations of loans, like specific purchasers or loan sales, by  estimating separate models for each subpopulation. This approach  allowed the models to be fully stratified and reduced computational  burdens associated with estimating many parameters using a sample of 1  million or more observed transitions, as a fully interactive specification  between sold status and the subpopulation variables would have  required. However, this approach prevented us from estimating the partial  interactions between sold loan status and the subpopulation variables.", "We conducted several validation and robustness checks of the analyses  reported in the body of this report. These included the following:", "Predictive fit. We did not design our models to predict future  outcomes but rather to make inferences about the difference in  transition probabilities between sold and matched unsold loans.  However, to identify substantial problems with model fit, we compared  the observed prevalence of each outcome to the estimated  prevalence expected under our models. Figure 24 shows the  predictive fit for models with a covariate in x for sold status and a  piecewise-constant indicator for the period after month 12. The  estimated and observed prevalence are generally close for most  outcomes before month 40. After that month, the model  underestimates the prevalence of foreclosure and overestimates the  prevalence of unresolved. This lack of fit late in the observation period  may reflect the substantial effect of sales cohort, which we modeled  through separate models stratified by sale rather than as a covariate.  In any case, the model fit was acceptable, given our nonpredictive use  of the model and the limitations of using observed outcome  prevalence rates to validate predictions of a process with interval  censoring.", "Time-inhomogenous models. We relaxed our assumption that the  transition intensities were constant throughout the observation period  by including indicators in x for whether the observation fell before or  after 12 months. FHA changed DASP rules before the 2015 sales to  extend the moratorium on foreclosures from 6 months to 12 months.  Outcome transition estimates from a model including these time  indicators plus a sold indicator appear in table 8, along with our base  estimates from a time-homogenous model with only the sold indicator.  Although Akaike Information Criterion values showed that the  piecewise model improved the fit, the estimated transition probabilities  generally supported the same substantive conclusions. The piecewise  model estimated that sold loans were somewhat more likely to  transition to a short sale or deed-in-lieu outcome, and somewhat less  likely to transition to reperforming, but the direction of the association  was the same as in the time-homogenous model. We used the time- homogenous model to provide results in the body of this report and in  appendix VI, due to the considerable computing time required to  estimate models with piecewise-constant covariates."], "subsections": []}]}, {"section_title": "Appendix VI: Data for Selected Outcome Figures and Additional Outcome Estimates", "paragraphs": ["In this appendix, we provide data for selected borrower outcome figures  presented in this report. We also provide additional outcome figures and  data, as well as outcome data for sold loans and unsold loans by some  loan-level characteristics. These figures and data are based on the  statistical matching and modeling analysis of loans sold through the  Distressed Asset Stabilization Program (DASP) and similar, unsold loans  described in appendix I and appendix V of this report."], "subsections": [{"section_title": "Data for Outcome Figures", "paragraphs": ["Tables 9\u201312 present data for selected outcome figures shown in the  report. Table 9 presents estimates of foreclosure and foreclosure  avoidance outcome rates for sold loans and similar, unsold loans, based  on statistical models (fig. 7). Table 10 presents these estimates for out-of- home and in-home outcomes (fig. 8). Figure 9 in the body of this report  shows the foreclosure and foreclosure avoidance outcomes by DASP  sale, and tables 11 and 12 present these estimates for all outcomes by  DASP sale, 12 and 24 months following the servicing transfer date,  respectively."], "subsections": []}, {"section_title": "Additional Outcomes", "paragraphs": ["As discussed in appendix I, to compare foreclosure and foreclosure  avoidance outcomes for sold and unsold loans, we assigned loans to one  of six outcome categories. Figure 25 and table 13 present the outcome  figures and associated data for sold and unsold loans across all six  categories."], "subsections": []}, {"section_title": "Loan-Level Characteristics", "paragraphs": ["Figures 26\u201329 compare specific outcomes for sold and unsold loans  across different loan characteristics. We selected characteristics and  outcomes that showed clear patterns or differences between sold and  unsold loans. Our analysis showed that the loan-to-value (LTV) ratio was  less strongly associated with reperforming rates for sold loans compared  to similar, unsold loans (see fig. 26). For example, while the probability of  reperforming varied across different LTV ratio categories for unsold loans,  the probability varied less for sold loans.", "Our analysis of outcomes by different delinquency categories showed that  length of delinquency was less strongly associated with reperforming  rates for sold loans compared to similar, unsold loans (see fig. 27). For  example, while the probability of reperforming 12 months after the  servicing transfer date ranged from 8 to 29 percent across different  delinquency lengths for unsold loans, this range was smaller for sold  loans\u2014about 9 to about 16 percent.", "Our analysis of outcomes by year of loan origination showed that length  of delinquency was less strongly associated with reperforming rates for  sold loans compared to similar, unsold loans (see fig. 28). For example,  the year of loan origination did not affect the probability of reperforming  for sold loans. However, for unsold loans the probability of reperforming  was lowest for loans originating in 2007\u20132008 at the beginning of the  housing crisis.", "Our analysis of outcomes by occupancy showed that, for occupied  properties, sold loans were more likely to experience foreclosure  compared with similar, unsold loans (see fig. 29). However, for vacant  properties, sold loans experience foreclosure at equal or smaller rates  compared to similar, unsold loans."], "subsections": []}]}, {"section_title": "Appendix VII: Additional Auction Structure Information and Evaluation", "paragraphs": ["The Federal Housing Administration (FHA) uses a pooled, highest-bidder,  sealed-bid auction structure to sell its single-family defaulted residential  mortgages through the Distressed Asset Stabilization Program (DASP).  This auction structure is consistent with industry standards and private  market practices for selling these mortgages and includes many  characteristics of a successful auction. We identified characteristics of  successful auctions by reviewing economics literature on auction  structures and auction descriptions in business and commercial literature,  and we obtained information about the nature of the loans being  auctioned, about sellers, purchasers and other auction stakeholders, and  about the benefits and drawbacks to each of various details of the auction  design. Table 14 shows some auction characteristics and an evaluation of  FHA\u2019s DASP design."], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jill Naamane (Assistant Director),  Rhonda Rose (Analyst in Charge), Abigail Brown, Stephen Brown, Karen  Jarzynka-Hernandez, John Karikari, May Lee, Ned Malone, Paulina  Maqueda-Escamilla, John McGrail, Samuel Portnow, Tovah Rom, Jena  Sinkfield, Anne Stevens, Jeff Tessin, Jim Vitarello, Sarah Wilson, and  Elisa Yoshiara made key contributions to this report. Also contributing to  this report were DuEwa Kumara and Jason Rodriguez."], "subsections": []}]}], "fastfact": ["The Federal Housing Administration helps increase homeownership by insuring mortgage loans that have less strict standards and lower down payments than conventional loans. The housing crisis of 2007-2011 led to historic rates of mortgage defaults, many of which were insured by FHA.", "FHA can sell these loans in order to limit its losses from defaults. We found that the defaulted loans FHA sold were more likely to go into foreclosure than the defaulted loans FHA kept. In addition, about 3% of the loans FHA sold were not actually eligible for sale.", "We made 9 recommendations, including that FHA establish a schedule for its eligibility checks.", "[Map updated to correct the legend.]"]}
{"id": "GAO-18-630", "url": "https://www.gao.gov/products/GAO-18-630", "title": "Broadband Internet: FCC's Data Overstate Access on Tribal Lands", "published_date": "2018-09-07T00:00:00", "released_date": "2018-09-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Broadband furthers economic development, educational attainment, and public health and safety; however, residents of tribal lands have lower levels of broadband access relative to the U.S. population. Congress has prioritized identifying and targeting funds to unserved areas. FCC uses data from broadband providers to develop maps and reports depicting broadband availability in the United States, with specific information on tribal lands. GAO was asked to review FCC's efforts to collect broadband data for tribal lands.", "This report examines the extent to which: (1) FCC's approach to collecting broadband data accurately captures broadband access on tribal lands and (2) FCC obtains tribal input on the data. GAO interviewed stakeholders from 25 tribal governments or tribally owned providers, and visited nine tribal lands. The selected tribes varied geographically and in levels of broadband availability, among other characteristics. GAO also reviewed FCC's rulemakings on broadband data and interviewed other tribal stakeholders, FCC officials, and 13 non-tribal broadband providers selected to include a diversity of technologies. Provider and tribal interviews were based on non-generalizable samples."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Communications Commission (FCC) collects data on broadband availability from providers, but these data do not accurately or completely capture broadband access on tribal lands. Specifically, FCC collects data on broadband availability; these data capture where providers may have broadband infrastructure. However, FCC considers broadband to be \u201cavailable\u201d for an entire census block if the provider could serve at least one location in the census block. This leads to overstatements of service for specific locations like tribal lands (see figure). FCC, tribal stakeholders, and providers have noted that this approach leads to overstatements of broadband availability. Because FCC uses these data to measure broadband access, it also overstates broadband access\u2014the ability to obtain service\u2014on tribal lands.", "Additionally, FCC does not collect information on several factors\u2014such as affordability, quality, and denials of service\u2014that FCC and tribal stakeholders stated can affect the extent to which Americans living on tribal lands can access broadband services. FCC provides broadband funding for unserved areas based on its broadband data. Overstatements of access limit FCC's and tribal stakeholders' abilities to target broadband funding to such areas. For example, some tribal officials stated that inaccurate data have affected their ability to plan their own broadband networks and obtain funding to address broadband gaps on their lands. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be better able to target federal broadband funding to tribal areas that need it the most and to more accurately assess FCC's progress toward its goal of increasing all Americans' access to affordable broadband.", "FCC does not have a formal process to obtain tribal input on the accuracy of provider-submitted broadband data. In the National Broadband Plan , FCC highlighted the need for a targeted approach to improve broadband availability data for tribal lands. As outlined in the plan, such an approach would include working with tribes to ensure that information is accurate and useful. About half of the tribal stakeholders GAO interviewed raised concerns that FCC relies solely on data from providers, and most stated FCC should work with tribes to improve the accuracy of FCC's data. Establishing a formal process to obtain input from tribal governments on the accuracy of provider-submitted broadband data could help improve the accuracy of FCC's broadband data for tribal lands."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to FCC, including that it collect and report data that accurately measure tribal broadband access as well as develop a process to obtain tribal input on the accuracy of the data. FCC agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Broadband infrastructure is critical for economic development,  educational and job opportunities, and public health and safety. In 2016,  we reported that tribal lands are generally in remote and rugged areas  and that broadband access can help residents develop online  businesses, access telemedicine services, and use online educational  tools. However, residents of tribal lands have lower levels of broadband  access than residents of non-tribal lands; a reflection of what is often  called the \u201cdigital divide,\u201d or disparate levels of broadband access among  different socioeconomic, racial, or rural groups. According to the Federal  Communications Commission (FCC), as of December 2016, 35.4 percent  of Americans residing on tribal lands lacked access to fixed broadband  services, compared to 7.7 percent of all Americans. FCC has reported  that the lack of service in tribal lands presents impediments to the efforts  of tribal nations related to self-governance, economic opportunity,  education, public safety, and cultural preservation.", "One barrier to increasing access to broadband on tribal lands is the cost  of deploying infrastructure to tribal lands located in rugged, sparsely  populated areas. In an attempt to address this and other issues, the  federal and some state governments have administered a number of  programs to incentivize companies to build broadband infrastructure in  unserved and underserved areas. In addition, policy makers have noted  the need for accurate information in order to target these programs to the  areas lacking access, and FCC has identified the need to work with tribes  to ensure such data are accurate for tribal lands. However, in 2016 we  reported that tribal and federal officials had concerns that the federal map  of broadband availability at the time (the National Broadband Map) did not  accurately depict broadband availability on tribal lands.", "The federal government has not updated the National Broadband Map  since April 2015, with the last update containing data as of June 30,  2014. Currently, the primary source of information regarding where broadband is and is not available is the FCC, which collects this  information from broadband providers. You asked us to review FCC\u2019s  efforts to collect broadband data for tribal lands. This report examines:  the extent to which FCC\u2019s approach to collecting broadband  availability data accurately captures the ability of Americans living on  tribal lands to access broadband Internet services, and  the extent to which FCC obtains tribal input on the accuracy of  provider-submitted broadband data for tribal lands.", "To address both objectives, we analyzed FCC\u2019s December 2016\u2014the  most recent data at the time of our review\u2014fixed and mobile broadband- availability data for federally recognized tribal lands. Providers currently  report this information to FCC by filing a Form 477, twice a year. We also  used 2010 U.S. Census data to identify census blocks on tribal lands. To  assess the reliability of FCC and Census data, we reviewed a previous  GAO reliability assessment and performed additional work, such as  electronic testing of the data and interviews with agency officials. Based  on the results of our analysis, we determined the data to be reliable for  our purposes, which were to (1) inform our selection of tribal governments  and providers for interviews and visits and (2) develop maps of fixed and  mobile broadband availability for the 9 tribal lands we selected for visits,  in order to obtain tribal representatives\u2019 feedback on the accuracy of the  data. For both objectives, we also reviewed FCC documents regarding  the Form 477 process and interviewed FCC officials as well as  stakeholders representing tribal governments and broadband providers.  These interviews included representatives from 25 tribal governments or  tribally owned providers, including visits to 9 tribal lands. When we  selected these tribes, we considered variation in location, level of  broadband deployment according to FCC, land mass, and population size  and density. The results of our interviews are not generalizable to all tribal  governments or tribally owned broadband providers. In addition to tribal  governments and tribally owned providers, we interviewed six  organizations that include tribal entities and four stakeholders who work  with tribes on broadband issues. For reporting purposes, we developed  the following series of indefinite quantifiers to describe the tribal  responses from the 35 entities representing tribal stakeholders we  interviewed.", "3 to 7 is defined as \u201ca few.\u201d", "8 to 15 is described as \u201csome,\u201d", "16 to 20 is described as \u201cabout half,\u201d", "21 to 27 is described as \u201cmost\u201d; and", "28 to 34 is described as \u201calmost all.\u201d", "Further, to obtain industry perspectives, we reviewed public comments  submitted by providers and industry associations in relevant FCC  rulemaking proceedings and interviewed 10 non-tribally owned fixed and  mobile broadband providers and three industry associations. We selected  providers to reflect a range of carrier size, as well as the technologies  used to provide broadband service. In addition, we interviewed  representatives from other government entities, as well as private  companies that collect and report broadband data. The results of these  interviews are not generalizable. A full list of the stakeholders we  interviewed can be found in appendix I.", "In addition, to identify the extent to which FCC\u2019s approach to collecting  broadband data accurately captures Americans\u2019 ability to access  broadband Internet services on tribal lands, we identified factors that  affect broadband access by interviewing tribal stakeholders, as described  above, and reviewing FCC documents and previous GAO work. We also  reviewed relevant statutes and FCC\u2019s proceedings, plans, and broadband  deployment and progress reports. We compared the Form 477 process  to FCC\u2019s strategic goals and to factors affecting broadband access to  determine the extent to which the Form 477 collects information on those  factors and aligns with FCC\u2019s goals. We further evaluated this information  against the Government Performance and Results Act (GPRA), as  enhanced by the GPRA Modernization Act of 2010 (GPRAMA) and  Standards for Internal Control in the Federal Government.", "To determine the extent to which FCC obtains tribal input on the accuracy  of provider-submitted broadband data for tribal lands, we reviewed FCC\u2019s  policies for working with tribal governments and interviewed tribal  stakeholders, among other entities. We compared this information to  recommendations from FCC\u2019s National Broadband Plan, and Standards  for Internal Control in the Federal Government. For additional details on  our scope and methodology, see appendix II.", "We conducted this performance audit from June 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government has recognized 573 Indian tribes as distinct,  independent political communities with tribal sovereignty. There are  different categories of tribal lands, with differing implications with respect  to ownership and administration. Reservations are defined geographic  areas with established boundaries recognized by the United States.  Tribal lands vary in size, demographics, and location. For example, those  lands smallest in size are less than one square mile, and the largest, the  Navajo Nation, is more than 24,000 square miles (the size of West  Virginia). Tribal land locations can range from extremely remote, rural  locations to urban areas. Figure 1 shows tribal lands in the United States  according to the 2010 Census.", "The term \u201cbroadband\u201d commonly refers to Internet access that is high  speed and provides an \u201calways-on\u201d connection, so users do not have to  reestablish a connection each time they access the Internet. Broadband  service may be \u201cfixed\u201d\u2014that is, providing service to a single location,  such as a customer\u2019s home\u2014or \u201cmobile,\u201d that is, providing service  wherever a customer has access to a mobile wireless network, including  while on the move, through a mobile device, such as a smartphone. Fixed  and mobile broadband providers deploy and maintain infrastructure to  connect consumers to the Internet.", "Providers offer fixed Internet service through a number of technologies,  such as copper phone lines, fiber-optic lines, coaxial cables, wireless  antennas, satellites, or a mix of technologies (see fig. 2). To install fixed  or wireless infrastructure, providers must obtain permits from government  entities with jurisdiction over the land or permission from public utilities to  deploy infrastructure on existing utility poles.", "The federal government has emphasized the importance of ensuring  Americans have access to broadband, and a number of agencies,  including FCC, currently provide funding to subsidize broadband  deployment in areas in which the return on investment has not attracted  private investment. The Communications Act of 1934, as amended by the  Telecommunications Act of 1996, specifies that consumers in \u201crural,  insular, and high-cost areas\u201d should have access to telecommunication  services and rates that are \u201creasonably comparable\u201d to consumers in  urban areas. To achieve this goal, FCC administers the High-Cost  program, which provides subsidies to providers of phone service in rural,  insular, and other remote areas.", "In 2011, FCC launched a series of reforms to its High-Cost program,  including adding support for broadband services, and created the  Connect America Fund, which provides subsidies to fixed and mobile  providers of telecommunications and broadband services in rural, insular,  and other remote areas where the costs of providing service is high. To  be eligible for Universal Service Fund support from FCC, a provider must  be designated an Eligible Telecommunications Carrier by the appropriate  state or by FCC and must meet certain service obligations. The Connect  America Fund has distributed approximately $4.5 billion per year, and has  separate funding mechanisms targeted to specific goals. For example,  there are funds for fixed-phone and broadband service and funds for  mobile service, including a Tribal Mobility Fund (Phase 1) that awarded  nearly $50 million in 2014 for the provision of 3G and 4G service to  unserved tribal areas.", "In addition to FCC, a number of other agencies provide funding for  broadband deployment in unserved or underserved areas. For example,  the United States Department of Agriculture\u2019s Community Connect  Program, which provides grants to rural communities to provide high- speed Internet service to unserved areas.", "The American Recovery and Reinvestment Act of 2009 (Recovery Act)  mandated the development of a nationwide map of broadband  availability. To implement the act, the National Telecommunications &  Information Administration (NTIA)\u2014an agency within the Department of  Commerce\u2014established a grant program to enable U.S. states and  territories to collect state-level broadband mapping data. NTIA used these  data to launch the National Broadband Map (www.broadbandmap.gov) in  February 2011. As the funding for the NTIA\u2019s program came to an end in  2014, NTIA stopped collecting data to update the map and, according to  FCC officials, created a memorandum of understanding with FCC through  which FCC agreed to maintain public access to the last version of the  map. FCC issued rules in 2013 to begin collecting broadband deployment  data, in addition to the broadband subscription data it had collected from  providers since 2000. FCC sought, but did not receive, $3 million to  update the National Broadband Map in its fiscal year 2015 and fiscal year  2016 budgets. In 2018, Congress directed FCC to develop a report by  March 23, 2019, evaluating broadband coverage in certain tribal lands (to  include an assessment of areas that have adequate broadband coverage,  as well as an assessment of unserved areas), and to complete a  proceeding to address unserved areas by September 23, 2020.  Currently, FCC requires broadband providers to report on their broadband  deployment by filing a form twice a year (Form 477).", "Fixed broadband providers submit a list of the census blocks in which  their broadband service is available, and mobile providers submit \u201cshapefiles\u201d\u2014a geospatial depiction of the  coverage area, which FCC refers to as \u201cpolygons\u201d\u2014of their coverage  areas.", "FCC uses providers\u2019 477 data to develop a statutorily mandated annual  report on advanced telecommunications capability. In addition, in 2016,  FCC began publishing its own maps of broadband deployment, using the  information from providers\u2019 Form 477 filings. In February 2018, FCC  launched an updated map of fixed broadband deployment  (https://broadbandmap.fcc.gov/#/). This map allows users to search for  broadband deployment by address and provides summary-level statistics  regarding broadband deployment in specific tribal lands (see fig. 3).  According to FCC officials, this new map format will support more  frequent data updates.", "FCC also provides national maps of mobile LTE coverage; these maps do  not allow users to access data at the same level of granularity as the  maps of fixed broadband (see fig. 4)."], "subsections": []}, {"section_title": "FCC Collects Data on Broadband Availability but Lacks Accurate and Complete Data on Broadband Access on Tribal Lands", "paragraphs": ["FCC collects and uses data that capture broadband availability to  measure broadband access on tribal lands, leading to overstatements of  broadband access on tribal lands. Specifically, FCC\u2019s method of  collecting mobile and fixed broadband data from providers (the Form 477)  does not accurately or completely capture broadband access on tribal  lands because it (1) captures nationwide broadband availability data\u2014 areas where providers may have broadband infrastructure\u2014but does so  in a way that leads to overstatements of availability, and (2) does not  capture information on factors that FCC and tribal stakeholders have  stated can affect broadband access on tribal lands, such as affordability,  service quality, and denials of service. Nonetheless, FCC uses its Form  477 broadband availability data in annual broadband deployment reports  to measure the percentage of Americans living on tribal lands with or  without access to broadband, and to measure progress toward FCC\u2019s  strategic goal of increasing all Americans\u2019 access to affordable  broadband. By using broadband availability data to measure broadband  access on tribal lands, FCC overstates broadband access on tribal lands."], "subsections": [{"section_title": "FCC Collects Broadband Availability Data, but Its Collection Method Leads to Overstatement of Availability on Tribal Lands", "paragraphs": ["FCC\u2019s Form 477, its primary method of collecting nationwide broadband  data, collects information on broadband availability, which identifies  where providers have broadband infrastructure and could potentially  provide broadband services but not where consumers can actually  access those services. Moreover, the Form 477\u2019s mobile broadband data- collection methods are not standardized, and its fixed broadband data- collection methods are not sufficiently granular to provide information  about broadband availability on tribal lands."], "subsections": [{"section_title": "Mobile Broadband Data Collection", "paragraphs": ["FCC\u2019s Form 477 requires mobile broadband providers to report their  coverage areas by submitting geospatial data depicting the areas in  which consumers could expect to receive the minimum advertised  speed. FCC has previously noted the importance of collecting nationally  standardized, uniform broadband data from providers to assess  broadband availability and allow for easy comparison across providers.  However, the Form 477 does not require that providers use a  standardized method with defined technical parameters (such as signal  strength, or amount of interference) when determining their coverage  area, resulting in data that cannot be meaningfully compared across  providers, according to FCC. To map their coverage areas, providers may  use predictive models based on different measurement methods and a  variety of factors known to affect mobile broadband service such as  topography, tree cover, and buildings, among other factors.", "Providers and tribal stakeholders have expressed concern with the  accuracy of FCC\u2019s mobile broadband data, and FCC has acknowledged  concerns that the lack of a standardized method resulted in data that  were unreliable for the purposes of determining mobile broadband  coverage for specific geographic areas, such as tribal lands. About half of  the tribal government representatives we interviewed told us that they  believe FCC\u2019s data overstate mobile LTE broadband availability on their  lands. For example, a few representatives expressed concerns with the  accuracy of the mobile data in areas with varied terrain, such as  mountains and valleys. In comments to FCC, broadband providers have  also raised concerns regarding the accuracy of the mobile coverage data  generated by the Form 477 for the purposes of identifying areas eligible  for funding through FCC\u2019s Mobility Fund Phase II program, which  provides federal funding to increase mobile broadband services in  unserved areas. In 2017, in response to such concerns, FCC reversed  its prior decision to use the Form 477 data to identify specific areas  eligible for federal funding through the Mobility Fund Phase II program.  Instead, FCC undertook a one-time special data collection, for which it  required providers to measure their coverage based on a common set of  standards, in order to better identify unserved areas that would be  presumptively eligible for funding. FCC plans to allow parties, including  tribal governments, to challenge the data where they believe the data  overstate mobile broadband coverage through August, 2018.  Additionally, in an August 2017 Notice of Proposed Rulemaking, FCC  requested comment on potential changes to modernize its Form 477 data  collection, including whether it should require all providers to use a  standardized method when submitting mobile coverage data on the form.  FCC officials told us that they do not have a timeline for the development  of a final rule, and as of August 2018, FCC had not yet issued a final rule  on modernizing the Form 477."], "subsections": []}, {"section_title": "Fixed Broadband Data Collection", "paragraphs": ["The Form 477 collects fixed broadband data that are not sufficiently  granular to accurately depict broadband availability on tribal lands.  Specifically, FCC directs fixed broadband providers to submit a list of  census blocks where service is available on the Form 477. FCC defines  \u201cavailable\u201d as whether the provider does\u2014or could, within a typical  service interval or without an extraordinary commitment of resources\u2014 provide service to at least one end-user premises in a census block.  Thus, in its annual reports and maps of fixed broadband service, FCC  considers an entire block to be served if a provider reports that it does, or  could offer, service to at least one household in the census block. FCC  does not define a typical service interval or an extraordinary commitment  of resources in its Form 477 instructions. However, FCC officials stated  that providers should not report service in areas in which major  construction would be required to provide service. A few providers told us  that the lack of clear guidance from FCC regarding how to determine  where broadband is available has led different providers to interpret the  Form 477 directions in different ways, which can affect the accuracy and  consistency of reporting from provider to provider. For example, in a filing  with FCC, one provider stated that it had misapplied the definition of  \u201cavailable\u201d and, as a result, overstated the availability of its services by  almost 3,000 census blocks.  As shown in figure 5, FCC\u2019s definition of  availability leads to overstatements of fixed broadband availability on  tribal lands by: (1) counting an entire census block as served if only one  location has broadband, and (2) allowing providers to report availability in  blocks where they do not have any infrastructure connecting homes to  their networks if the providers determine they could offer service to at  least one household. Almost all the providers and private companies, and  most of the representatives of tribal governments and organizations we  spoke with told us that due to these issues, FCC\u2019s definition of availability  results in data that overstate broadband availability.", "According to FCC officials, FCC requires providers to report fixed  broadband availability where they could provide service within a \u201ctypical  service interval\u201d and without \u201can extraordinary commitment of resources\u201d  in order to: (1) ensure that it captures instances in which a provider has a  network nearby but has not installed the last connection to the homes,  and (2) identify where service is connected to homes, but homes have not  subscribed. FCC officials also told us that FCC measures availability at  the census block level because sub-census block data may be costly to  collect. In 2013, FCC considered collecting more granular nationwide  data on broadband deployment but decided against collecting these data  because it determined that the burden would outweigh the benefit.", "However, FCC, tribal stakeholders, and providers have noted that FCC\u2019s  approach leads to overstatements of availability. For example, in its 2017  Notice of Proposed Rulemaking on modernizing the Form 477 data  collection, FCC acknowledged that by requiring a provider to report where  it could provide service, it is impossible to tell whether the provider would  be unable or unwilling to take on additional subscribers in a census block  it lists as served. According to FCC, this limits the value of the data to  inform FCC policies. In addition, several providers and tribal stakeholders  we interviewed said that some \u201cdigital subscriber line\u201d (DSL) and fixed  wireless providers may overstate their service areas on the Form 477  because they may not take into account technological or terrain  limitations that would affect their ability to actually provide service. FCC  has also recognized that by measuring availability at the census block  level, not every person will have access to broadband in a block that the  data show as served, and FCC has noted that in rural areas, such as  tribal lands, census blocks can be large and providers may only deploy  service to a portion of the census block. A few representatives for tribal  governments and organizations noted that the use of census blocks may  uniquely overstate broadband availability on tribal lands when census  blocks contain both tribal and non-tribal areas, because availability in the  non-tribal portion of the block can result in the tribal area of the census  block also being counted as served.", "FCC is considering requiring providers to report whether they are willing  and able to serve additional customers in a census block and collecting  sub-census block data in its 2017 proposed rulemaking on modernizing  the Form 477. About one-third of the parties that commented on FCC\u2019s  proposals were not in favor of FCC collecting these more granular data  on the Form 477, stating that the data would be less accurate and more  burdensome for providers to collect and report, among other reasons, and  questioned whether more detailed information on nationwide broadband  availability is necessary. We heard similar concerns from a few of the  providers and trade associations we interviewed. However, about one- third of the parties that commented on FCC\u2019s proposals were in favor of  collecting more granular data, stating that such data would be more  useful for policymakers and more accurate. Additionally, a few tribally owned and non-tribal providers we interviewed told us that providers  already maintain data for business purposes that would allow them to  report more granular information on broadband availability. One  stakeholder we spoke with pointed out that, as the federal government  and states work to ensure the last remaining unserved areas\u2014rural, low- population density areas including tribal lands\u2014have service, sub- census-block-level data are needed to ensure that governments are  making wise and accurate investments."], "subsections": []}]}, {"section_title": "FCC Does Not Collect Data on Several Factors That Affect Broadband Access on Tribal Lands", "paragraphs": ["FCC does not collect information on several factors that FCC and tribal  stakeholders have stated can affect broadband access. FCC and tribal  stakeholders have noted that broadband access can be affected by  factors such as the affordability and quality of the broadband services  being offered, and the extent to which providers deny service to those  who request it. By collecting and using data on factors that can affect  broadband access, FCC would have more complete information on the  extent to which Americans living on tribal lands have access to  broadband Internet services.", "Affordability: FCC has noted that affordability of broadband services  can affect broadband access but does not collect information on the  cost of broadband service on tribal lands on the Form 477. For  example, in the National Broadband Plan, FCC cited affordable  access to robust broadband service as a long-term goal, and in its  Strategic Plan 2018\u20132022, FCC acknowledged that affordability is an  important factor affecting broadband access and a key driver of the  digital divide. Moreover, most of the representatives of tribal  governments and organizations we spoke to told us that the  affordability of broadband services is an important factor for  understanding whether or not people on tribal lands could realistically  access broadband services. Tribal government officials from one  tribe we spoke with told us that residents on their lands cannot access  broadband because it is too costly. For example, a provider that  advertises services on the tribe\u2019s land charges $130 per month for  broadband services, approximately one-and-a-half times the average  rate providers charge for comparable services in urban areas,  according to FCC (see fig. 6).", "In the 2018 Broadband Deployment Report, FCC acknowledged that  affordability can influence a consumer\u2019s decision on whether to purchase  broadband, but FCC did not consider cost in its assessment of broadband  access on tribal lands, stating that pricing does not go to the  congressional requirement to assess deployment and availability in  conducting its inquiry as required by Congress under section 706 of the  Telecommunications Act and also citing a lack of reliable comprehensive  data on this issue. In addition, FCC officials we interviewed  acknowledged that while broadband service may be technically available,  it may be prohibitively expensive for some, which may make availability  alone an incomplete indicator of broadband access.", "Quality of Service: In the Telecommunications Act of 1996 Congress  recognized the importance of service quality by defining advanced  telecommunications capability as any technology that enables users  to originate and receive high-quality voice, data, graphics, and video  telecommunications. In keeping with this legislation, FCC has  consistently set thresholds for speeds that qualify as broadband  services and has stated that \u201clatency\u201d and consistency of service  figure prominently into whether a broadband service is able to provide  advanced capabilities and thus whether users can access high-quality  telecommunications. Likewise, almost all of the representatives for  tribal governments or organizations we interviewed told us that quality  of service is a key component of access to broadband and that routine  outages, slow speeds, and high latency keep people on tribal lands  from consistently accessing the Internet. Most tribal stakeholders and  a few providers we interviewed told us that factors such as terrain,  weather, and type of technology can all affect the quality of service an  end user receives and, ultimately, the subscribers\u2019 ability to access  the Internet (see fig. 7). For example, some representatives of tribal  governments and organizations told us issues like oversubscription\u2014 when a provider signs up more customers than its equipment can  handle\u2014and outdated or limited infrastructure result in low-quality  services that cannot support advanced and, in some cases, basic  functions.", "Though FCC uses the Form 477 to collect some data on advertised  speeds from providers, FCC does not collect data on actual speeds,  service outages, and latency on the form. In its 2018 Broadband  Deployment Report, FCC stated that it did not consider FCC data on  actual speed, latency, or consistency of service when evaluating  broadband access due to the lack of appropriate data. FCC noted that the  lack of Form 477 data on actual speeds in particular constrained  evaluation of mobile broadband access.", "Service Denials: FCC has recognized that information on denials of  service is pertinent to understanding actual broadband access but  does not collect data on service denials in the Form 477. Specifically,  in the National Broadband Plan, FCC recommended that FCC collect  data to determine whether broadband service is being denied to  potential residential customers based on the income of the residents  in a particular geographic area. Some representatives of the tribal  governments or organizations told us that that they were aware of a  provider denying service to residents of tribal lands, despite the  provider reporting broadband availability on at least a portion of those  lands, according to our analysis of the Form 477 data. These  representatives told us that they believed service was denied because  of disputes with the tribal government, low demand for service, or the  high costs of extending services to the home on tribal lands. Some  representatives of tribal governments or organizations we spoke with  also told us that providers may have denied service because their  equipment was at capacity and could not accommodate new users  (see fig. 8).", "For example, on three of the tribal lands we visited, we observed fiber  optic cable located close to government and residential structures that did  not have broadband access via fiber. According to tribal government  officials, despite the physical proximity of the fiber optic cable, the tribal  government and residents could not access it because the provider was  not offering service or was unwilling or unable to build to the structures. A  few providers we interviewed stated that they may not provide services to  individuals who request them because of high-costs, administrative  barriers, or technical limitations. However, FCC does not collect data on  service denials on the Form 477."], "subsections": []}, {"section_title": "FCC Uses Broadband Availability Data to Measure Broadband Access on Tribal Lands, Overstating Access on Tribal Lands", "paragraphs": ["In its Strategic Plan 2018\u20132022 and the National Broadband Plan, FCC  identified increasing all Americans\u2019 access to affordable broadband as a  long-term, strategic goal. Congress has similarly directed FCC to  develop policies and programs aimed at increasing access to affordable  broadband in all regions of the United States, including tribal lands, and  required FCC to report annually on its progress. According to the  Government Performance and Results Act (GPRA), as enhanced by the  GPRA Modernization Act of 2010 (GPRAMA), agencies should use  accurate and reliable data to measure progress toward achieving their  goals. Additionally, Standards for Internal Control in the Federal  Government state that agencies should use quality information\u2014 information that is complete, appropriate, and reliable\u2014to inform  decision-making processes and evaluate the agency\u2019s performance in  achieving goals. According to these standards, agencies should also  communicate quality information externally to achieve the agency\u2019s goals.", "However, FCC has used its Form 477 data, which do not accurately or  completely measure broadband access on tribal lands, as its primary  source to evaluate progress toward FCC\u2019s strategic goal of increasing  broadband access and to develop maps and reports intended to depict  broadband access on tribal lands. For example, in its 2018 Broadband  Deployment Report, FCC found that 64.6 percent of Americans residing  on tribal lands have access to fixed broadband services. By using these  data, FCC has overstated the extent to which Americans living on tribal  lands can actually access broadband Internet services and FCC\u2019s  progress toward increasing broadband access. As a result, the digital  divide may appear less significant as a national challenge, and FCC and  tribal stakeholders working to target broadband funding to unserved or  underserved tribal lands will be limited in their ability to make informed  decisions. This increases the risk that residents living on tribal lands will  continue to lack broadband access. Some tribal officials stated that  inaccurate data have affected their ability to plan their own broadband  networks and obtain federal broadband funding, and most of the tribal  stakeholders we interviewed identified a pressing need for accurate data  on the gaps in broadband access on tribal lands in order to ensure that  tribes can qualify for federal funding and to effectively target the areas  that need it most. For example, representatives for one tribal government  that is providing broadband services said the government will not be able  to use a federal grant to build broadband infrastructure in areas of their  reservation that lack access, because the Form 477 data overstate actual  access on the tribe\u2019s land. As more than three quarters of the tribal  governments we spoke to are working to provide broadband services on  their lands in some capacity, overstating broadband access on tribal  lands could affect the ability of a number of tribes to access federal  funding to increase broadband access on their lands.", "As previously discussed, FCC is considering proposals to modify its Form  477 data collection as part of a 2017 Notice of Proposed Rulemaking, but  FCC officials told us that the Commission does not have a timeline for  issuance of a final rule. While some of FCC\u2019s proposals could help  address some of the limitations identified above by, for example,  collecting more granular nationwide broadband availability data, FCC has  not addressed specifically the collection of more accurate and complete  data on broadband access for tribal lands in this proceeding. FCC has  identified the need to improve broadband data for tribal lands in particular,  and as previously noted, in 2018 Congress directed FCC to develop a  report evaluating broadband coverage in certain tribal lands and initiate a  proceeding to address the unserved areas identified in the report. FCC  officials told us that FCC has not determined how it will address this  requirement, but it is currently considering its options, including potentially  addressing the requirement as part of its ongoing proposed rulemaking  on modernizing the Form 477 data collection. An evaluation of broadband  coverage on tribal lands that relies on the current Form 477 data would  be subject to the limitations described above, including the overstatement  of broadband access on tribal lands.", "Additionally, FCC has demonstrated that it is possible in some  circumstances to collect more granular data when such data collection is  targeted to a specific need or area. For example, in 2017 FCC began  requiring certain providers that receive funding through the Connect  America Fund to report the latitude and longitude of locations where  broadband is available, and FCC has noted that these more granular data  are extremely useful to the Commission, especially for rural areas where  census blocks can be quite large. A few large providers and trade  associations similarly stated in public comments on FCC\u2019s proposed  rulemaking to modernize the Form 477 process that FCC should target its  collection of more granular broadband data to areas where the data are  most likely to be overstated\u2014specifically, large, rural census blocks with  low population densities, such as those on tribal lands. Additionally, as  discussed above, FCC undertook a one-time special data collection for  Mobility Fund II to ensure that the mobile broadband data it collected  would be reliable for the intended use. By developing and implementing  methods for collecting and reporting accurate and complete data on  broadband access specific to tribal lands, FCC would be able to better  identify tribal areas without access to broadband and to target federal  broadband funding to the tribal areas most in need."], "subsections": []}]}, {"section_title": "FCC Does Not Have a Formal Process to Obtain Tribal Input on Its Broadband Data, and Tribal Stakeholders Reported a Lack of Provider Engagement", "paragraphs": [], "subsections": [{"section_title": "FCC Does Not Have a Formal Process to Obtain Tribal Input on Its Broadband Data", "paragraphs": ["FCC uses data submitted by broadband providers via the Form 477  process to develop maps and datasets depicting broadband services  nationwide, and in specific locations, such as tribal lands, but does not  have a formal process to obtain input from tribes on the accuracy of the  broadband data. FCC\u2019s 2010 National Broadband Plan noted the need for  the federal government to improve the quality of data regarding  broadband on tribal lands and recommended that FCC work with tribes to  ensure that any information collected is accurate and useful. It also noted  that tribal representatives should have the opportunity to review mapping  data about tribal lands and offer supplemental data or corrections.  Similarly, federal internal control standards note the need for federal  agencies to communicate with external entities, such as tribal  governments, and to enable these entities to provide quality information  to the agency that will help it achieve its objectives. FCC officials told us  that they address questions and concerns regarding provider coverage  claims submitted to the Office of Native Affairs and Policy, which will work  with tribal governments to help them identify inaccurate broadband data  for tribal lands, and share tribal questions and concerns with the  appropriate FCC bureaus. However, FCC does not have a formal  process for tribes (or other governmental entities) to provide input to  ensure that the broadband data FCC collects through the 477 process, or  the resulting maps that FCC creates to depict broadband on tribal lands,  are accurate. Similarly, FCC does not use other methods to verify provider-submitted Form 477 data on tribal lands against other sources of  information, such as on-site tests or data collected by other agencies.", "When discussing the lack of a formal process for tribal representatives or  other governmental entities to provide feedback on the accuracy of the  477 broadband data, FCC officials noted that if consumers and local  officials have information on individual locations that lack broadband  service, such information does not indicate that the entire census block  lacks broadband service. Additionally, FCC officials noted that providers  attest to the accuracy of the data and that FCC staff validate the data by  conducting internal checks to identify possible errors, such as unlikely  changes in a providers\u2019 coverage area, and may follow-up with a provider  to discuss such changes. However, these checks do not include soliciting  input from tribes.", "About half of the tribal stakeholders we spoke to raised concerns that  FCC\u2019s broadband deployment data rely solely on unverified information  submitted by providers. Additionally, most tribal stakeholders we  interviewed told us that consistent with the recommendations in the  National Broadband Plan, FCC should work directly with tribes to obtain  information from them to improve the accuracy of its broadband  deployment data for tribal lands. These stakeholders identified several  ways in which FCC could work with tribes on this issue, including:  conducting on-site visits with tribal stakeholders to observe the extent  to which broadband infrastructure and services are present;  conducting outreach and technical assistance for tribal stakeholders  to raise awareness and use of FCC\u2019s broadband data; and providing opportunities for the tribes to collect their own data or submit  feedback regarding the accuracy of FCC\u2019s data.", "FCC\u2019s National Broadband Plan notes the importance of supporting tribal  efforts to build technical expertise with respect to broadband issues, and  federal internal control standards state that federal agencies should  obtain quality information from external entities. Officials we interviewed  in FCC\u2019s Office of Native Affairs and Policy told us that they provide some  outreach and technical assistance to tribal officials at regional and  national workshops, and FCC officials stated that they conducted specific  outreach to tribal entities regarding the Mobility Fund Phase II challenge  process, while, about half of the tribal representatives we spoke to  stated that they were not aware of the Form 477 data or corresponding  maps, or raised concerns about a lack of outreach from FCC to inform  tribes about the data. Some tribal stakeholders stated that if FCC were to  solicit tribal input as part of its verification of the broadband data and  maps, technical training and assistance could help tribes use and provide  feedback on the data, or improve the collection and submission of their  own data. A few of the stakeholders we interviewed noted that tribes can  face difficulties when they attempt to challenge FCC\u2019s broadband  availability data. For example, in 2013, prior to the auction that distributed  Tribal Mobility Fund Phase 1 support, FCC allowed interested parties to  challenge FCC\u2019s preliminary determinations regarding which census  blocks lacked 3G or better service and would be eligible for support in the  auctions. However, all of the tribal entities that challenged the accuracy  of FCC\u2019s data were unsuccessful in increasing the number of eligible  areas. According to FCC officials, the tribal entities did not provide  sufficient or sufficiently verifiable information to support their challenges.  A few tribal stakeholders provided varying reasons for this, one of which  was the need for more technical expertise to help the tribe meet FCC\u2019s  requirements.", "Because FCC lacks a formal process to obtain tribal input on its  broadband data, FCC is missing an important source of information  regarding areas in which the data may overstate broadband service on  tribal lands. Tribal stakeholders are able to provide a first-hand  perspective on the extent to which service is available within their lands  and the extent to which factors like affordability, service quality, and  service denials affect residents\u2019 ability to access broadband. FCC plans to  award nearly $2 billion in support from the Connect America Fund to  areas that it has identified as lacking broadband, including tribal lands.  Any inaccuracies in its broadband data could affect FCC\u2019s funding  decisions and the ability of tribal lands to access broadband in the  future. Additionally, in its 2017 report on tribal infrastructure, the  National Congress of American Indians stressed the importance of  including tribal governments in a leadership role with respect to collecting  data on local infrastructure needs. Specifically, it stressed the need for  the federal government to invest in tribal data systems and researchers to  generate useful, locally specific data that can inform the development and  implementation of infrastructure development projects and assess the  effectiveness of those projects over time. By establishing a process to  obtain input from tribal governments on the accuracy of provider- submitted broadband data that includes outreach and technical  assistance, as recommended in the National Broadband Plan, FCC could  help tribes develop and share locally specific information on broadband  access, which would in turn improve the accuracy of FCC\u2019s broadband  data for tribal lands. The success of such an effort may rely on the tribes\u2019  knowledge of, and technical ability to participate in, the process."], "subsections": []}, {"section_title": "Half of the Tribal Stakeholders We Interviewed Reported a Lack of Provider Engagement", "paragraphs": ["When discussing the need to improve data regarding broadband on tribal  lands, FCC\u2019s 2010 National Broadband Plan recommended that FCC  develop a process for tribes to receive information from providers about  broadband services on tribal lands. In 2011, FCC required that Eligible  Telecommunications Carriers (providers receiving Universal Service  Funds from FCC) serving tribal lands meaningfully engage with tribes  regarding communications services (including broadband). Specifically,  the providers must file an annual report documenting that this  engagement included a discussion of, among other things, a needs  assessment and deployment planning for communications services,  including broadband. FCC\u2019s 2012 guidance on fulfilling the engagement  obligations, which FCC officials confirmed is still in effect, noted that the  stated goal of the engagement requirement was to benefit tribal  government leaders, providers, and consumers by fostering a dialogue  between tribal governments and providers that would lead to improved  services on tribal lands. The guidance further noted that the tribal  engagement process \u201ccannot be viewed as simply another \u2018check the  box\u2019 requirement by either party,\u201d and states that a provider should  \u201cdemonstrate repeated good faith efforts to meaningfully engage with the  tribal government.\u201d Finally, FCC noted in its 2012 guidance that the  guidance would evolve over time based on the feedback of both tribal  governments and broadband providers and that FCC would develop  further guidance and best practices. This approach is consistent with  federal internal control standards, which call for agencies to communicate  with, and obtain quality information from, external parties.", "About half of the tribal stakeholders we interviewed raised concerns about  difficulties accessing information from providers regarding broadband  deployment on their tribe\u2019s lands, a key part of the provider engagement  process, according to FCC\u2019s guidance. For example, a representative  from one tribe stated that a provider declined his requests to meet more  than once a year to discuss the provider\u2019s deployment of broadband  services on the tribe\u2019s land. A representative from another tribal  government stated that some providers are very focused and transparent  about their broadband plans and work with the tribe, while other providers  treat tribal engagement as a \u201cbox to check\u201d and send the tribe broadband  deployment information that is not useful because it is redacted. Similarly,  some tribal stakeholders stated that providers heavily redacted  deployment information (which providers may consider proprietary) or  required the tribe sign non-disclosure agreements to access deployment  data. According to one tribal stakeholder, these non-disclosure  agreements could possibly require tribes to waive tribal sovereign  immunity in order to view the data.", "Some of the industry stakeholders we interviewed stated that they  attempt to engage with tribes but the level of responsiveness from tribes  varies. For example, some stakeholders stated that they send letters and  do not hear back from tribes. One stakeholder stated that they make  repeated attempts to contact tribes when they do not hear back after their  initial contact, while another stated that a provider meets regularly with  some tribes.", "Although FCC stated in its 2012 guidance that it would update the tribal  engagement guidance and develop best practices based on feedback  from tribal governments and broadband providers, it has taken limited  steps to obtain such feedback from providers and tribal governments to  determine whether its guidance is enabling meaningful tribal engagement.  Additionally, FCC has not updated the guidance or issued best  practices. Thus, FCC has limited information regarding whether its tribal  engagement requirement is fulfilling its intended purpose. FCC officials  we interviewed said that the Office of Native Affairs and Policy (ONAP)  provided information and, in some cases, held training sessions about the  tribal engagement obligation during workshops with tribal representatives,  and encouraged representatives to contact ONAP with any concerns.  ONAP officials also noted that they handle complaints from tribes  regarding a lack of provider engagement and reach out to providers to  address tribal concerns. ONAP officials stated that they have had internal  discussions about whether the guidance is clear or needs revision, but  this has not gone beyond internal discussions. A few of the tribal  stakeholders provided examples of the benefits of providers engaging  with tribes to ensure tribal representatives have access to information  regarding broadband availability on their lands. For example, one  representative stated that this information could help the tribes plan  deployments by focusing on areas that they know the provider does not  plan to serve. Another representative stated that tribal engagement could  help improve the accuracy of FCC\u2019s broadband maps. By obtaining  feedback from both tribal stakeholders and providers on the effectiveness  of FCC\u2019s tribal engagement guidance to determine whether changes are  needed, FCC would be better positioned to ensure that tribal  governments and providers are sharing information in a manner that will  lead to improved services on tribal lands."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FCC has collected data and developed maps and reports depicting  broadband on tribal lands and has noted the lower levels of broadband  access on tribal lands, in comparison to other areas. However, limitations  in FCC\u2019s existing process for collecting and reporting broadband data  have led FCC to overstate broadband access on tribal lands. By taking  steps to address these limitations and to collect data that more accurately  and completely depict broadband access on tribal lands, FCC would have  greater assurance that it is making progress on reducing the digital divide  on tribal lands and targeting broadband funding to tribal lands most in  need. Without taking these steps, FCC increases the risk that residents  living on tribal lands will continue to lack broadband access.", "Compounding the limitations in FCC\u2019s data collection process is FCC\u2019s  lack of a formal process to obtain tribal input on the accuracy of provider- submitted broadband data for tribal lands. By developing a process to  solicit tribal input and ensuring that tribes know about the process and are  equipped with the technical skills and abilities necessary to provide this  information, FCC would be better able to ensure the accuracy of its  broadband data for tribal lands. Moreover, FCC would be able to obtain  firsthand, locally specific information on broadband access that could  inform FCC\u2019s policies and funding decisions and help FCC achieve its  goal of increasing broadband access for all Americans, including those  living on tribal lands. Finally, by obtaining feedback from providers and  tribal stakeholders on the effectiveness of FCC\u2019s tribal engagement  guidance, FCC would be better positioned to assess whether its guidance  is helping providers meet requirements and ultimately whether providers\u2019  engagement is fulling its intended purpose of fostering a dialogue  between tribal governments and providers that would lead to improved  services on tribal lands."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following three recommendations to the Chairman of  the Federal Communications Commission.", "The Chairman of the Federal Communications Commission should  develop and implement methods\u2014such as a targeted data  collection\u2014for collecting and reporting accurate and complete data on  broadband access specific to tribal lands. (Recommendation 1)", "The Chairman of the Federal Communications Commission should  develop a formal process to obtain tribal input on the accuracy of  provider-submitted broadband data that includes outreach and  technical assistance to help tribes participate in the process.  (Recommendation 2)", "The Chairman of the Federal Communications Commission should  obtain feedback from tribal stakeholders and providers on the  effectiveness of FCC\u2019s 2012 statement to providers on how to fulfill  their tribal engagement requirements to determine whether FCC  needs to clarify the agency\u2019s tribal engagement statement.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FCC for review and comment. In  written comments provided by FCC (reproduced in appendix III), FCC  agreed with our findings and recommendations. In its written comments,  FCC described efforts, some of which are already under way, that it felt  would address each recommendation and stated its intent to build upon  those efforts. For example, FCC explained that it is exploring methods to  collect more granular broadband deployment data and noted the need to  balance the burden on Form 477 filers. FCC also noted that it is starting  work to address a statutorily-required evaluation of broadband coverage  on certain tribal lands. We agree that increasing the granularity of  deployment data is helpful in addressing data accuracy issues, but we  also note that it is important to collect data related to factors that affect  broadband access on tribal lands.", "FCC also described informal efforts to collect tribal feedback on providers\u2019  broadband data and stated it would explore options for a formal process  to collect feedback. Regarding our recommendation related to providers\u2019  engagement efforts, FCC outlined its existing methods by which tribal  stakeholders can provide feedback on providers\u2019 engagement efforts and  agreed that seeking additional feedback from tribal stakeholders and  providers would be desirable. We agree that improving feedback in these  ways could help FCC determine whether it needs to clarify its tribal  engagement statement. FCC also provided technical comments, which  we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Chairman of the Federal Communications Commission,  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) 512-2834 or GoldsteinM@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: List of Interviewees", "paragraphs": ["Appendix I: List of Interviewees Representatives from tribal governments or tribally owned broadband providers  Choctaw Nation of Oklahoma (OK)", "Confederated Tribes of the Colville Reservation (WA)", "Fond du Lac Band of Lake Superior Chippewa (MN)", "Fort Belknap Indian Community (MT)", "Gila River Telecommunications, Inc. (AZ)", "Hopi Telecommunications, Inc. (AZ)", "Jamestown S\u2019Klallam Tribe (WA)", "Karuk Tribe (CA)", "Leech Lake Band of Ojibwe (MN)", "Makah Tribe (WA)", "Navajo Tribal Utility Authority (AZ, NM, UT)", "Nez Perce Tribe (ID)", "Osage Nation (OK)", "Pueblo of Acoma (NM)", "Pueblo of Pojoaque (NM)", "Pueblo of San Ildefonso (NM)", "Taos Pueblo (NM)", "Red Spectrum Communications (Coeur d\u2019Alene Tribe (ID))", "Saint Regis Mohawk Tribe and Mohawk Networks, LLC (NY)", "San Carlos Apache Telecommunications Utility, Inc. (AZ)", "Southern California Tribal Chairmen\u2019s Association - Tribal Digital Village Network (CA)", "Spokane Tribe of Indians and Spokane Tribe Telecom Exchange (WA)", "Standing Rock Telecommunications, Inc. (ND, SD)", "Warm Springs Telecommunications Co. (OR)", "Yurok Tribe and Yurok Connect (CA)  Representatives from tribal associations/consortiums that include tribes  Affiliated Tribes of Northwest Indians  Middle Rio Grande Pueblo Consortium  National Congress of American Indians  Native American Finance Officers Association (NAFOA)", "REDINet  Representatives from companies/academic groups that work with tribes  AMERIND Risk  Arizona State University, American Indian Policy Institute and School of Public Affairs   Turtle Island Communications  Representatives from providers/trade associations (non-tribally owned)  AT&T  Representatives from companies that collect broadband data  Alexicon  Connected Nation  Government Agencies (non-tribal)  Census Bureau  U.S. Department of Agriculture\u2019s Rural Utilities Service  Department of Interior\u2019s Bureau of Indian Affairs  National Telecommunications and Information Administration  Minnesota Office of Broadband Development  One broadband provider we interviewed did not want to be included in this appendix."], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report discusses the extent to which: (1) the Federal  Communications Commission\u2019s (FCC) approach to collecting broadband  availability data accurately captures the ability of Americans living on  tribal lands to access broadband Internet services and (2) FCC obtains  tribal input on the accuracy of provider-submitted broadband data for  tribal lands.", "To address both objectives, we analyzed FCC\u2019s December 2016 fixed  and mobile broadband availability data\u2014the most recent data at the time  of our review\u2014to identify the speeds, technologies, and availability  providers reported for federally recognized tribal lands. Providers  currently report this information to FCC by filing a \u201cForm 477,\u201d twice a  year. We also used 2010 U.S. Census data to identify census blocks  completely or partially on tribal lands. To assess the reliability of FCC\u2019s  data and 2010 U.S. Census data, we reviewed a previous GAO reliability  assessment, and for FCC\u2019s data we conducted electronic testing and  analysis of the data, reviewed FCC guidance and documentation, and  interviewed FCC officials. Based on the results of our analysis, we  determined the data to be reliable for our purposes, which were: (1) to  inform our selection of tribal governments and providers for interviews  and visits, as described below, and (2) to develop maps depicting fixed  and mobile broadband availability for the nine tribal lands we selected for  visits, in order to obtain tribal representatives\u2019 feedback on the data.  Specifically, we mapped;  fixed broadband data according to speed and technology, and mobile data for long-term evolution (LTE) services by provider for  each tribal land.", "We used those maps during our visits to discuss the accuracy of the data  with representatives for each tribal government or tribally owned provider.  Though we analyzed all up and download speeds that providers reported  in the Form 477, for the purposes of this report we defined \u201cbroadband\u201d  as fixed Internet service reaching at least 25 megabits per second (Mbps)  download and 3 Mbps upload speeds, in accordance with FCC\u2019s  advanced telecommunications capability benchmark in its 2018  Broadband Deployment Report. We also report on the availability of  mobile broadband, which, for the purposes of this report, does not have a  speed threshold and refers to long-term evolution (LTE) services.", "To address both objectives and obtain tribal government representatives\u2019  feedback on the accuracy of FCC\u2019s broadband data for their lands, we  interviewed representatives from 25 tribal governments or tribally owned  providers, including visits to 9 tribal lands. We considered a range of  factors when we selected tribal governments and tribally owned providers  for interviews, including our analysis of Form 477 data, recommendations  from tribal, industry, or government stakeholders regarding tribal and non- tribal representatives familiar with broadband data issues, and  demographic and geographic characteristics, among others. For example,  we considered demographic characteristics such as unemployment rate  from the 2011\u2013 2015 American Community Survey data, and geographic  characteristics such as rurality from the United States Department of  Agriculture (USDA) Rural-Urban Commuting Area Codes data. The tribes  included in our review vary with respect to location, level of broadband  availability according to FCC, land mass, and population size and density.  The results of our interviews are not generalizable to all tribal  governments or tribally owned broadband providers. In addition to tribal  governments and tribally owned providers, we interviewed six tribal  organizations and four stakeholders who work with tribes on broadband  issues. For reporting purposes, we developed the following series of  indefinite quantifiers to describe the tribal responses from the 35 entities  representing tribal stakeholders we interviewed:", "3 to 7 is defined as \u201ca few;\u201d", "8 to 15 is described as \u201csome;\u201d", "16 to 20 is described as \u201cabout half;\u201d", "21 to 27 is described as \u201cmost;\u201d and", "28 to 34 is described as \u201calmost all.\u201d", "A full list of the tribal stakeholders we interviewed can be found in  appendix I.", "Further, to obtain industry perspectives, we reviewed public comments  submitted by providers and industry associations in FCC\u2019s ongoing 2017  Notice of Proposed Rulemaking on Modernizing the Form 477 Data  Program. We also interviewed 10 non-tribally owned fixed and mobile  broadband providers and three industry associations to understand  providers\u2019 views on the Form 477 and how providers interact with tribal  governments. When selecting providers for interviews, we included  providers that reported serving the lands of tribal governments we  interviewed and selected providers that varied in the percentage of tribal  lands they reported serving. The providers we interviewed represent  large, nationwide carriers as well as small, local carriers, and offer  broadband via a variety of technologies, including fiber optics, digital  subscriber line (DSL), fixed wireless, and mobile LTE. The results of our  interviews with providers are not generalizable to all broadband providers.  In addition, to address both objectives, we interviewed representatives  from other government entities, as well as private companies that collect  and report broadband data. A full list of the industry stakeholders we  interviewed can be found in appendix I.", "To identify the extent to which FCC\u2019s approach to collecting broadband  availability data reflects the ability of Americans living on tribal lands to  actually access broadband Internet services, we reviewed documentation  of the Form 477 process, including submission guidance, and FCC\u2019s  proposals and public comments in its 2017 Notice of Proposed  Rulemaking on Modernizing the Form 477 Data Program and Mobility  Fund Phase II proceedings. We also interviewed FCC officials, industry  stakeholders, and tribally owned broadband providers to understand  FCC\u2019s current process for collecting broadband data. To understand the  purpose of the Form 477 data collection process and FCC\u2019s strategic  goals, we reviewed relevant statutes, and FCC documents, including  FCC\u2019s Strategic Plan 2018\u2013\u20132022, the National Broadband Plan, and  FCC\u2019s broadband deployment and progress reports. Given the  importance placed on broadband access in these documents, we  interviewed tribal stakeholders, as described above and reviewed FCC  documents to identify factors affecting the ability of Americans living on  tribal lands to access broadband Internet services. We also reviewed  previous GAO work that identified barriers to broadband access on tribal  lands. We compared the Form 477 process to FCC\u2019s strategic goals and  to factors affecting broadband access to determine the extent to which  the Form 477 was designed to collect information on those factors and to  meet FCC\u2019s goals. We further evaluated this information against the  Government Performance and Results Act, as enhanced by the GPRA  Modernization Act of 2010 and Standards for Internal Control in the  Federal Government. We also reviewed documentation for other FCC  data collection programs, including the Measuring Broadband America  program and the Urban Rate Survey, to determine the extent to which  FCC collected data on factors affecting broadband access outside of the  Form 477 process.", "To determine the extent to which FCC obtains tribal input on the accuracy  of provider-submitted broadband data for tribal lands, we interviewed  FCC officials and analyzed FCC documents regarding the collection procedures for the Form 477 data and FCC\u2019s policies for working with  tribal governments, as well as Connect America Fund documents  regarding requirements for providers to share information with tribal  governments. We also reviewed documents on past FCC Universal  Service Fund processes to challenge broadband data and identified prior  instances in which tribal governments or tribally owned providers  challenged FCC\u2019s broadband data and the outcomes of those challenges.  Additionally, we interviewed tribal stakeholders, as described above, to  understand the extent to which: (1) FCC involves tribal governments and  other stakeholders in the validation of Form 477 broadband data, (2) tribal  governments can access broadband data from FCC or providers, and (3)  FCC\u2019s Form 477 data accurately reflected broadband access on their  lands. For the nine tribal lands we visited, we asked tribal governments or  tribally owned providers to identify where the data do or do not accurately  reflect broadband access on maps of FCC\u2019s data. Further, to identify how  providers complied with FCC\u2019s tribal engagement requirement and obtain  their perspectives, we interviewed providers and industry associations.  We compared FCC\u2019s data validation procedures and tribal stakeholders\u2019  feedback on the process to FCC\u2019s policies for working with tribal  governments, FCC recommendations from the National Broadband Plan  and Standards for Internal Control in the Federal Government. We also  interviewed and received written comments from officials from other  federal agencies that have broadband programs, including USDA Rural  Utilities Service, the National Telecommunications and Information  Administration (NTIA), and others, in addition to a state agency and three  private companies that collect and report broadband data to understand  how other entities collect and validate broadband data.", "We conducted this performance audit from June 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Comments from the Federal Communications Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Mark L. Goldstein, (202) 512-2834 or GoldsteinM@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Keith Cunningham (Assistant  Director); Crystal Huggins (Analyst in Charge); Katherine Blair; Lilia  Chaidez; Camilo Flores; Adam Gomez; Serena Lo; Jeffery Malcolm; John  Mingus; Joshua Ormond; Jay Spaan; James Sweetman, Jr.; Elaine  Vaurio; and Michelle Weathers made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Federal Communications Commission collects data on where broadband (high-speed) Internet access is available in the U.S. This access aids economic growth and education.", "Residents of tribal lands have lower levels of broadband Internet access relative to the U.S. as a whole, but the digital divide may be greater than currently thought. FCC data overstated tribes' broadband availability and access to broadband service. These overstatements limit FCC and tribal users' ability to target broadband funding to tribal lands.", "We made three recommendations to FCC to improve the accuracy of its broadband data and better engage tribes."]}
{"id": "GAO-18-467", "url": "https://www.gao.gov/products/GAO-18-467", "title": "Defense Contracts: DOD Should Develop a Strategy for Assessing Contract Award Time Frames", "published_date": "2018-07-16T00:00:00", "released_date": "2018-07-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD's contracting process is designed to protect taxpayers' interests, among other things, and can take time. DOD leadership and contractors have expressed concern about the length of time to award contracts and DOD has proposed reducing that time.", "GAO was asked to evaluate the length of time to award weapon systems contracts. This report examines (1) DOD's efforts to determine the time it takes to award contracts; (2) data on the time interval from solicitation to contract award for selected contracts; and (3) factors identified as contributing to contract award time frames.", "GAO used the Federal Procurement Data System-Next Generation to identify new weapon systems-related contracts awarded in fiscal years 2014 through 2016, valued over $5 million, among other factors. GAO selected a nongeneralizable sample of 129 contracts at four DOD components with the highest total dollar value and highest number of contracts from those fiscal years for further analysis. GAO analyzed contract documentation and surveyed contracting officials on a subset of contracts to determine the factors affecting the time between solicitation issuance and award."]}, {"section_title": "What GAO Found", "paragraphs": ["Although the Department of Defense (DOD) has proposed reducing the time it takes to award contracts related to weapon systems, the department has a limited understanding of how long it currently takes and therefore lacks a baseline to measure success. The DOD components GAO reviewed\u2014Air Force, Army, Defense Logistics Agency, and Navy\u2014collect data on their time frames for awarding contracts. However, they do so in different ways in the absence of a DOD-wide strategy for what information should be collected. For example, the Air Force measures the time to award beginning with solicitation issuance, while the other components use a different starting point. As a result, information the components collect is not comparable and is of limited use for understanding contract award time frames department-wide. Determining what information is needed to monitor time taken to award contracts consistently across components should help DOD assess its progress toward reducing the time.", "GAO analyzed the time from solicitation issuance to award for 129 weapon systems-related contracts and found it ranged from less than a month to over 4 years. Although some DOD and industry officials stated that contract value could affect contract award time frames, GAO observed a wide range of time intervals and did not observe any patterns based on this characteristic. (See figure below.)", "According to DOD contracting officials GAO surveyed, factors that can help reduce\u2014or, alternatively lengthen\u2014the time between when a solicitation is issued to when a contract is awarded include a decision to make the contract award an office priority and how quickly contractors respond to requests for additional information after initial proposals are received."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD develop a strategy that identifies the information it needs to collect and how it will use the information to assess contract award time frames. DOD concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) uses contracts to procure many  different types of supplies and services\u2014including weapon systems.  Because DOD spends billions of dollars annually to support the  warfighter\u2019s missions, having an efficient contract award process is  critical. DOD leadership, as well as contractors, has expressed concern  about the length of time it takes to award contracts, and Congress has  directed DOD to take steps to define and report on these times. DOD  leadership has also proposed reducing that time.", "You asked us to review the time frames involved in awarding weapon  systems-related contracts. This report examines (1) DOD\u2019s efforts to  determine the time it takes to award weapon systems contracts; (2) what  available data show regarding the time between solicitation issuance and  award for selected weapon systems-related contracts; and (3) factors  identified as contributing to contract award time frames. For the purposes  of our review, we considered the time it takes to award contracts as the  time from solicitation issuance through contract award.", "To examine DOD\u2019s efforts to determine the time it takes to award  contracts, we selected four DOD components (Air Force, Army, Defense  Logistics Agency, and Navy) based on the highest total number of  contracts awarded and highest total contract value. We analyzed DOD  and component-level guidance, policies, memorandums, and studies on  the contract award process. We interviewed acquisition officials at DOD  and the selected components regarding data related to the time to award  contracts, such as quarterly or monthly management briefings.", "To examine what available data show regarding the time between  solicitation issuance and award, we used the Federal Procurement Data  System-Next Generation (FPDS-NG) to identify newly awarded DOD  weapon systems-related contracts from fiscal years 2014 through 2016,  with a contract value of $5 million or more, among other factors. From  the selected components, we selected contracts from the largest  commands (Air Force Materiel Command, the Army Contracting  Command, Defense Logistics Agency-Aviation, the Naval Air Systems  Command, and the Naval Sea Systems Command) based on the highest  total number and highest total value of the contracts awarded. We  identified a nongeneralizable selection of 129 new contracts awarded at  these five commands. We verified the contract data in the contract  documentation based on value, extent competed, and contract type, and  compared the data reported in FPDS-NG. We determined that the FPDS- NG data were sufficiently reliable for identifying and analyzing the  nongeneralizable sample of contracts.", "To identify factors that affected the time it took DOD commands to award  weapon systems-related contracts, we randomly selected a  nongeneralizable sample of 60 contracts, which is a sub-set of the 129  selected contracts, for a more in-depth web-based survey of contracting  officials, such as contracting officers or contracting specialists. Our  analysis is based on 37 eligible responses from the 60 contracts we  surveyed. We then selected 7 of the 37 surveyed contracts as case  studies to assess how the various factors affected the contract award  time frames. For the 7 case studies, we reviewed contract documentation  and conducted interviews with available contracting officials, program  office officials, and contractor representatives. For additional information  on our scope and methodology, see appendix I.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD\u2019s contracting process\u2014governed by laws and regulations\u2014seeks to  promote competition, be transparent in conducting business and  ultimately satisfy DOD users in terms of cost, quality, and timeliness to  protect taxpayers\u2019 interests. DOD\u2019s acquisition process begins at the point  when agency needs are established; it includes requirements  development and acquisition planning, a process for awarding contracts,  and contract administration. While we recognize that requirements  development and acquisition planning can affect the time it takes to  award a contract, this review focuses on the time from solicitation  issuance to contract award. An overview of competition in contracting,  contract phases, and DOD initiatives follows."], "subsections": [{"section_title": "Competition", "paragraphs": ["Federal statutes and the Federal Acquisition Regulation (FAR) generally  require that federal agencies award contracts through full and open  competition, but recognize that such competition is not always feasible or  desirable, and authorize the use of other than full and open competition  under certain conditions. The exceptions include: only one responsible source exists and no other supplies or services  will satisfy agency requirements; unusual and compelling urgency exists; or when authorized or required by statute (for example, statutorily  allowed sole-source awards to small businesses).", "Even when using other than full and open competition, agencies must  solicit offers from as many potential sources as is practicable. Generally,  contracts awarded using other than full and open competition must be  supported by written justifications and approvals that contain sufficient  facts and rationale to justify the use of the specific exception to full and  open competition. The approval level for these types of contracts varies  according to the dollar value of the procurement."], "subsections": []}, {"section_title": "Contract Phases We Identified", "paragraphs": ["The acquisition planning phase includes pre-solicitation activities such as  market research and defining requirements, among others. We identified  four contract phases subsequent to acquisition planning: solicitation,  initial evaluation, discussion/negotiation, and contract award. See figure  1.", "Solicitation: Agencies solicit offers from prospective contractors by  issuing a request for proposals. The request for proposals informs the  prospective contractors of the government\u2019s requirements, the  anticipated terms and conditions that will apply to the contract, the  information required in a proposal and, in a competitive acquisition,  the factors used to evaluate proposals and their relative importance.  Those who wish to respond must submit their proposal to the  government office in the time and manner stated in the request for  proposals. We consider the solicitation phase to begin with solicitation  issuance and end at the deadline to submit the initial proposals.", "Initial Evaluation: Proposal evaluation is an assessment of the  proposals and the offerors\u2019 ability to perform the prospective contract  successfully. For example, proposals undergo technical evaluation to  determine offerors\u2019 ability to meet the technical requirements and cost  or price evaluation to determine whether the price is fair and  reasonable. Agencies also evaluate proposals when using other than  full and open competition as part of agency preparation for negotiation  with the offerors. We consider the evaluation phase to begin when  contractors submit initial proposals and to end once government  contracting personnel receive approval to enter into negotiations or  discussions.", "Discussion/Negotiation: Negotiations are exchanges, in either a  competitive or sole-source environment, between the government and  offerors that are undertaken with the intent of allowing the offerors to  revise the proposals. Negotiations allow the offerors to address any  concerns with the proposals or provide additional information on  relevant past performance, among other things. We consider this  phase to start when the contracting officer receives approval to enter  into negotiations and end when contracting personnel receive  approval to award the contract.", "Contract Award: We consider the contract award phase to start  when the approval to award the contract is given and end when the  contracting officer signs the contract."], "subsections": []}, {"section_title": "DOD Initiatives: Source Selection Procedures and Peer Reviews", "paragraphs": ["The following DOD initiatives identify certain tasks that contracting  officials should address between solicitation issuance and contract award:", "Source Selection Procedures: DOD updated its source selection  procedures in April 2016 to help standardize the process to deliver  products at the best value. These procedures outline a common set  of principles and procedures for conducting acquisitions in  accordance with applicable statutes and regulations. Unless waived,  the source selection procedures apply to all acquisitions conducted as  part of a major system acquisition and all competitively negotiated  acquisitions with an estimated value of more than $10 million.", "Peer Reviews: The Office of Defense Procurement and Acquisition  Policy is responsible for all pricing, contracting, and procurement  policy matters within DOD and has required peer reviews of certain  DOD acquisitions since 2009. The office currently conducts peer  reviews for all procurements with an estimated value of over $1 billion  and for noncompetitive procurements for new contract actions valued  at $500 million or more. The office generally conducts peer reviews  prior to issuance of the solicitation, prior to request for final proposal  revisions, and prior to contract award, as well as periodic post-award  reviews. Peer review teams include contracting officials from the  military departments and defense agencies as well as legal advisors.  For acquisitions below $1 billion, the military components must  establish their own policies for conducting reviews based on expected  acquisition value and the extent of competition."], "subsections": []}]}, {"section_title": "DOD Components Have Taken Steps to Track the Time Frames for Awarding Contracts, but DOD Does Not Have a Strategy for Assessing the Information", "paragraphs": ["DOD components in our review have efforts underway to track and  reduce the time to award contracts, but these efforts are not coordinated  across the department. The DOD components collect information on the  time to award contracts, but differ on what information they collect and  how they use it. DOD is taking a number of actions to understand the  information the components collect such as determining what events are  tracked, but DOD does not have a department-wide strategy for collecting  and assessing the components\u2019 information. DOD has proposed reducing  how long it takes to award contracts."], "subsections": [{"section_title": "DOD Components Collect Varying Levels of Information about the Time Frames for Awarding Contracts", "paragraphs": ["Each component we reviewed collected information on the length of time  to award certain contracts, but the information varied. The differences  include: (1) the types of contract actions tracked; (2) the start of the  period measured; (3) whether components track interim dates between  solicitation issuance and award; and (4) how goals to reduce the length of  time are determined. For example, the Air Force limits its scope to  discrete contract value ranges while the other components include  broader dollar ranges. The components also use different starting points  to measure the time frames. For example, the Army Contracting  Command currently tracks time starting from the submission of an  adequate requirements package to contracting officials, which occurs  before solicitation issuance. The Air Force, however, tracks how long it  takes to award a contract starting from solicitation issuance. The selected  components in our review also differ in collecting data for interim phases  of the contract award process\u2014such as evaluation or negotiation. Both  Navy commands capture multiple data points, such as when negotiations  begin, among other events, but there is no common practice for including  certain data across the commands that is provided to DOD. Table 1  shows the broad categories of information collected.", "Concerns within the Air Force about the length of time taken to award  contracts led to a process, begun in 2014, for tracking award times for  sole-source contracts, including identifying practices and procedures that  contributed to the time, according to Air Force contracting officials. The  officials stated that this effort helped to reduce the average time to award  sole-source contracts between $50 million and $500 million from about 16  months in fiscal year 2014 to about 12 months in fiscal year 2017. Air  Force officials attributed the reductions in time to various streamlining  initiatives, such as asking for contractors\u2019 feedback on draft solicitations  and clarifying as needed.", "Beginning with new contracts awarded in fiscal year 2014, the Air  Force collected information on sole-source contracts between $50  million and $500 million. In early fiscal year 2018, the Air Force  expanded its data collection to include competitive contracts from $50  million to $1 billion.", "The Air Force tracks the time starting from solicitation issuance to  contract award. It also tracks interim phases of contract awards such  as the start of evaluation or negotiation.", "According to Air Force officials, they establish fiscal year goals to  measure progress based on the average of schedule dates.", "The data for both the sole-source contracts and now the competitive  contracts are collected through a manual data call and are entered  into a spreadsheet. The data are reported to the Office of the  Assistant Secretary of the Air Force for Acquisition."], "subsections": [{"section_title": "Army", "paragraphs": ["In November 2017, the Deputy Assistant Secretary of the Army  (Procurement) called for the formation of an Army-wide team to examine  approaches for improving procurement time frames similar to one already  underway at the Army Contracting Command. The command began  tracking the lengths of time to award contracts in 2015, and expanded the  effort across the command in January 2017. The Army Contracting  Command:", "Tracks all procurements based on dollar thresholds, dividing the  contracts by competitive and non-competitive actions.", "Tracks the time from the receipt of the requirements package to  contract award. The process does not capture interim phases of  contract award such as the start of evaluation or negotiation.", "Establishes goals by averaging historical data. For instance, a  competitively awarded contract between $50 million and $250 million  is estimated to take 600 days. Army officials stated that they track  actual performance against their goals on a quarterly basis.", "Collects data through its Virtual Contracting Enterprise system, which  includes electronic contract files that can be used to obtain contract  data such as solicitation issuance date. The command computes  averages by aggregating the data by dollar threshold, contracting  organization, and portfolios\u2014such as weapon systems or services  contracts."], "subsections": []}, {"section_title": "Defense Logistics Agency", "paragraphs": ["In November 2014, the Defense Logistics Agency examined awards from  2011 to 2013 to determine areas to focus on to make the contract award  process more efficient. Defense Logistics Agency contracting officials  stated that they have reduced the award time since they began their  assessment by streamlining their procedures. The agency:", "Collects contract data for all of its procurements.", "Measures the time period from receipt of purchase requirement  package to contract award, but not the phases in between solicitation  and contract award\u2014such as evaluation or negotiation.", "Establishes a goal based on historical averages for the various  contract types, such as long-term contracts or delivery orders, in order  to aggregate contracts with similar characteristics. The agency varies  the goals according to the kind of contract, such as those using  simplified acquisition procedures or larger value contracts. For  example, the Aviation command\u2019s goal is to award contracts that  require certified cost or pricing data with a period of performance that  exceeds 3 years within 315 days for fiscal year 2018. For those  contracts that do not require certified cost or pricing data, the goal is  215 days.", "Collects contract data using its contract management systems,  continues to assess whether it is meeting timeliness goals on a  monthly basis, and revises goals each fiscal year to reflect changes in  trends and volume of contract actions."], "subsections": []}, {"section_title": "Navy", "paragraphs": ["Starting in May 2015, the Navy contracting commands presented data  quarterly on execution of contracts and areas for improvement within the  contract award process to the Office of the Assistant Secretary of the  Navy, (Research, Development, and Acquisition) in response to concerns  about the length of time for contract awards. The Navy commands we  selected have made efforts to identify bottlenecks within the contract  award process. For example, their analysis of the data highlighted the  timeliness and quality of the procurement request as a common issue  among the Navy contracting commands as well as the justification and  approval cycle for sole-source awards. The analyses also included areas  for improvement during the process, such as improving guidance and  training for technical evaluation teams and exploring opportunities to  streamline or waive some peer reviews.", "Naval Air Systems Command piloted the Procurement Management  Tool in fiscal year 2013. The Procurement Management Tool is an  electronic system to collect information on contracts, which allows  contracting officials to forecast and manage procurement time frames.  The system:", "Maintains data from all of the Naval Air Systems Command\u2019s  contracts, starting from acquisition planning (pre-solicitation  efforts), in addition to various interim dates such as proposal  receipt. The tool allows contracting officials to compare planned,  revised, and actual dates.", "Tracks the overall length of time to award contracts. Navy  contracting officials said they use the planned dates as the  baseline to compare to the actual dates to determine the variance.  Their goal is to reduce the variance between the dates.", "Uses data from the Command\u2019s contract writing systems, but  updates are done manually. Data are made available to Naval Air  Systems Command officials and provide them a high-level view of  the cost and cycle time drivers that may be selected for further  investigation. Reports can be generated at any time, on an as- needed basis.", "Naval Sea Systems Command, starting in 2005, conducted analyses  on the contract award phases that were used to identify problem  areas that added time beyond what was anticipated. The analyses  also capture data from entities outside of the contracting office, such  as program offices. Naval Sea Systems Command has used the  analyses to implement streamlining initiatives as well as establish  performance measures to assess progress on a quarterly basis. A  Naval Sea Systems Command official told us that the command has  reduced the average length of time to award contracts above  $750,000. Specifically, for competitive contracts, the average was  reduced from 467 days to 387 days (about 18 percent), and for sole- source contracts the average was reduced from 336 to days to 278  days (about 18 percent) from fiscal year 2013 through fiscal year  2017.", "The Naval Sea Systems Command tracks its contracts valued at  $750,000 or greater using an electronic data base\u2014E-milestone\u2014 to collect contract information. The data base collects information  starting from pre-solicitation efforts, which includes the purchase  request to contract award. The system includes interim dates  within the contract award process, such as the beginning of  evaluation.", "Contracting officials are responsible for capturing both planned  and actual dates in the system. Analysis of the variation between  the planned and actual dates can be used to identify areas where  difficulties occur.", "Command officials stated that their goal is to reduce the variance  between the planned and actual dates. The system reports  performance metrics monthly to program executive offices as well  as to higher offices. The metrics the command collects reveal  acquisition process bottlenecks and facilitate corrective action and  acquisition streamlining."], "subsections": []}]}, {"section_title": "DOD Has Proposed Reducing the Length of Time to Award Contracts but Does Not Yet Have a Strategy for Assessing the Information Components Collect", "paragraphs": ["According to Defense Procurement and Acquisition Policy officials, DOD  is taking steps to address its concerns about the time to issue sole-source  contract awards for major weapon systems. DOD has proposed reducing  this time by 50 percent over a 3-year period, as measured from the  receipt of the requirements to contract award. DOD officials also plan to  expand this effort to include competitively awarded contracts.", "While DOD has proposed reducing the length of time to award contracts  by as much as 50 percent, according to DOD officials, it does not have a  department-wide strategy for the information components are to collect  and report because it has not defined what is to be measured. Internal  control standards for the federal government state that management  should use relevant information to make informed decisions and evaluate  an agency\u2019s performance in achieving key objectives and establish a  baseline as a measure to assess progress in achieving its goals.", "As discussed above, DOD components have made some efforts to collect  information to understand the length of time to award contracts for their  own management purposes. Since the components differ on when they  start measuring the time to award contracts and whether they collect data  on interim dates between solicitation issuance and contract award, it is  difficult for DOD to ensure that the data from the various components are  comparable and comprehensive. This issue was highlighted in the  National Defense Authorization Act for Fiscal Year 2018, which contained  a provision for DOD to develop a definition of \u201cprocurement administrative  lead time\u201d to be used throughout the department and a plan for  measuring and publicly reporting data on procurement administrative lead  time. DOD proposed a definition for the procurement administrative lead  time as the time between the date on which DOD issues the initial  solicitation for a contract or task order and the date of the award in a  February 2018 notice in the Federal Register. The proposed definition  applies to DOD contracts and task orders above the Simplified Acquisition  Threshold. In addition to issuing the Federal Register notice, Defense  Procurement and Acquisition Policy officials have started working with the  military components (Army, Navy, and Air Force) to understand the  information they have on the time frames for awarding contracts. Further,  DOD officials stated that they are starting to identify events common  across the components, relative to contract award time frames. According  to DOD officials, DOD plans to include pre-solicitation events and some  interim events between solicitation issuance and contract award in its  DOD-wide data collection efforts. Because DOD\u2019s efforts are in the early  stages, they have not established which specific events to measure and  how they will use the information collected. Without a strategy for data  collection and assessment, DOD will be limited in its ability to assess  progress toward achieving its proposed goal and addressing challenges  across components."], "subsections": []}]}, {"section_title": "Most of the Selected Weapon Systems- Related Contracts Were Awarded within a Year", "paragraphs": ["Our review of a nongeneralizable selection of 129 weapon systems- related contracts had a wide range of time intervals from solicitation  issuance to award. The time intervals from solicitation to award ranged  from less than a month to more than 4 years, with a median of about 9  months. Based on our analysis, 88 of the 129 contracts were awarded  less than a year from the solicitation issuance date, while 38 were  awarded between 1 and 2 years. The remaining 3 selected contracts took  more than 2 years to award. We analyzed the time taken to award  contracts based on three characteristics identified by some DOD officials  and contractor representatives that may affect the time taken to award  contracts: contract value, extent competed, and contract type. We did not  observe any patterns based on these characteristics. The results of our  analysis are as follows."], "subsections": [{"section_title": "Contract Value", "paragraphs": ["We found a wide range of time intervals for the 129 contract awards we  reviewed, which ranged from about $5 million to over $12 billion. We  observed that both shortest and the longest time intervals from solicitation  to contract award were for contracts valued under $50 million. One of the  two contracts that were awarded within 20 days had a contract value of  about $7 million for commercial software services. Figure 2 summarizes  information on the time interval based on contract value."], "subsections": []}, {"section_title": "Extent Competed", "paragraphs": ["DOD contracting officials and industry representatives we interviewed  stated that contracts awarded using full and open competition could have  a longer time interval than contracts awarded using other than full and  open competition due to the need to evaluate proposals from multiple  offerors. Twenty-seven of the 129 contracts in our review used full and  open competition, and the remaining 102 contracts used other than full  and open competition. Based on our analysis, roughly two-thirds of the  selected contracts in either group took less than 1 year to award.  Specifically:", "Eighteen of the 27 selected contracts awarded using full and open  competition were awarded within a year of solicitation issuance, and  the remaining 9 were awarded between 1 and 2 years.", "Seventy of the 102 selected contracts awarded using other than full  and open competition were awarded within a year and 29 of the 102  were awarded between 1 and 2 years."], "subsections": []}, {"section_title": "Contract Type", "paragraphs": ["DOD contracting officials and industry representatives we interviewed  asserted that firm-fixed-priced contracts would generally take a shorter  amount of time to award. For example, Navy contracting officials told us  that other than firm-fixed-priced contracts\u2014such as contracts with award  or incentive fees\u2014could take longer to award because the government  would need to negotiate the fee structure with the contractor. We found a  wide range of time intervals based on contract type. Roughly two-thirds of  the 129 selected contracts were awarded in less than 1 year regardless of  contract type. Specifically:", "Thirty-eight of the 53 firm-fixed-price contracts were awarded within a  year of when the solicitation was issued and 50 of the 76 other  contracts were awarded within a year of solicitation issuance."], "subsections": []}]}, {"section_title": "Survey Respondents Identified Several Factors Affecting the Time Frame for Awarding Contracts", "paragraphs": ["The results of our survey of contracting officials for 37 contracts showed  that contracting officials cited a number of factors\u2014such as the quality of  the proposal\u2014that helped reduce or increase the time to award the  selected contracts. They did not identify any one factor that consistently  affected the time to award. Officials for more than half of the contracts  reported needing more time to award the contracts than they initially  anticipated."], "subsections": [{"section_title": "Survey Respondents Reported that Most of the Contracts Took Longer than Anticipated to Award and Identified Various Factors That Affected Overall Length of Time to Award Contracts", "paragraphs": ["DOD contracting officials we surveyed for 23 of 37 contracts reported  needing more time to award their contract than anticipated at the time  they issued their solicitation. Table 2 summarizes how respondents in  our survey characterized differences between the anticipated contract  award date and the actual date.", "DOD contracting officials cited the decision to make the award an office  priority and contractor responsiveness as factors helping to decrease the  overall time. In addition, contracting officials for four contracts awarded  using full and open competition cited receiving waivers or deviations from  relevant federal and service-level acquisition regulations as a factor that  reduced the time. In case study interviews, contracting officials for two  of these four contracts added that peer review waivers and delegation of  the decision authority level to a lower level helped decrease the overall  time. According to these contracting officials, they received these waivers  because the procurements were considered low risk since the  requirements that the offerors needed to meet were straightforward. DOD  policy officials said peer review waivers are infrequently requested and  granted on case-by-case bases. According to these officials, as of March  2018, 14 peer review waivers had been requested since fiscal year 2016  and all of them were granted.", "In contrast, contracting officials responding to our survey cited several  factors that lengthened the time for contracts that were awarded later  than anticipated. For example, in the solicitation phase, contracting  officials for contracts awarded using full and open competition cited the  lack of quality of the solicitation as a factor that lengthened the time  needed, while contracting officials for contracts awarded using other than  full and open competition cited the contractor\u2019s inability to provide a timely  proposal and government changes in requirements. In an Air Force  cost-plus-award-fee contract awarded using other than full and open  competition for a ballistic missile-related system valued over $400 million,  a contracting official noted that the government changed some of the  requirements after solicitation issuance. This resulted in amendments to  the solicitation and revisions to the contractor\u2019s proposal, which increased  the time needed in the solicitation phase, and led to the contract being  awarded later than anticipated."], "subsections": []}, {"section_title": "Various Factors Affected Specific Phases from Solicitation Issuance to Contract Award", "paragraphs": ["Based on survey responses, we also found variation in the factors that  shortened or lengthened the time needed in the different phases\u2014  solicitation, initial evaluation, and negotiation. Contracting officials  pointed out, however, that additional time needed in one phase could  result in less time being needed in other phases."], "subsections": [{"section_title": "Solicitation Phase", "paragraphs": ["Contracting officials cited factors related to the quality of the solicitation  and whether there were government changes in requirements as  shortening or lengthening the time in this phase.", "Contracting officials for contracts awarded using other than full and  open competition cited the contractor\u2019s inability to provide a timely  proposal as a factor that lengthened this phase. For an Army sole- source contract for aircraft maintenance and sustainment support,  contracting officials told us that the solicitation phase took longer than  anticipated. This phase took over 10 months from the solicitation  issuance to when the contractor submitted a proposal. According to  the contractor, after solicitation issuance, the government made some  changes to the requirements, including the quantities of items. During  that period, labor rates had changed, which increased the time  needed to submit a proposal so that these changes could be  incorporated."], "subsections": []}, {"section_title": "Evaluation Phase", "paragraphs": ["Some of the factors cited by contracting officials as shortening or  lengthening the evaluation phase included those related to the quality of  the proposal, the acquisition workforce, or the staff performing  evaluations or approving the analyses. Technical and cost or price  evaluations, among others, assess the offerors\u2019 ability to perform  successfully, ensure that offerors\u2019 proposals meet the requirements listed  in the solicitation, and establish that the price is fair and reasonable.  Contracting officials we surveyed cited different factors based on the cost  or price evaluation, technical evaluations, and the extent competed.", "Contracting officials with contracts awarded using full and open  competition cited the number and quality of the proposals\u2014whether  they needed revisions or not\u2014as shortening or lengthening the time  needed to complete technical evaluations. For cost or price  evaluations, they cited the number of proposals received and the  completeness of the information provided by the contractor.", "Contracting officials with contracts awarded using other than full and  open competition cited contractor responsiveness to requests for  additional information as a factor regardless of the time needed to  complete both types of evaluations. For cost or price evaluations,  contracting officials cited factors related to the proposal, such as its  quality and timeliness, as among the factors that helped shorten the  time. In a case study involving a Navy sole-source research and  development contract valued over $1 billion for the Next Generation  Jammer, contracting and program officials said it took the contractor  about 4 months after submitting the initial proposal to provide the  contracting office a complete proposal due to delays in getting  subcontractor information. According to these officials, despite the  delay, they did not need more time in this phase since they were able  to start evaluating the initial proposal consisting of the prime  contractor\u2019s technical and cost information, and incorporate analyses  for the subcontractor information once they received it.", "Contracting officials that used other than full and open competition also  cited requesting audit assistance from the Defense Contract Audit Agency  as a factor that lengthened the time needed for cost or price  evaluations. For example, in a Navy firm-fixed-price contract that was  awarded using other than full and open competition for radar engineering  services valued at $221 million, an audit took longer than anticipated\u2014 about 5 months\u2014due in part to a complex pricing model and delays in  receiving subcontractor pricing data. While the Defense Contract Audit  Agency and the contractor communicated on the pricing data and cost  structure, the agency was unable to complete its audit without the  subcontractor data."], "subsections": []}, {"section_title": "Negotiation Phase", "paragraphs": ["In addition to agreeing on the price of a contract, the negotiation phase  also includes any additional evaluations of revised proposals.  Contracting officials cited the need for subsequent evaluations due to  revised proposals as a factor that lengthened this phase. Among other  factors, contracting officials cited the contract approval authority level and  the approving authority\u2019s availability or responsiveness as factors that  shortened this phase. In contrast, contracting officials also cited bid  protests or agreement on fees as factors that lengthened it.", "A contracting official for an Air Force contract awarded using full and  open competition cited pre-award bid protests as a factor that  lengthened the discussion phase. One of the offerors protested the  evaluation of its proposal, which was found technically unacceptable.  The offeror\u2019s protest was denied because it was found that the  evaluation of the proposal was reasonable and consistent with the  terms of the solicitation. In addition, the offeror initially selected for  award of the approximately $17 million contract was the lowest priced  proposal that was found technically acceptable. However, the  contracting officer subsequently found the offeror nonresponsive due  to several challenges. These challenges and the pre-award bid  protest resulted in a longer than anticipated discussion phase, and the  award was made to the next lowest priced offeror.", "Contracting officials for 2 contracts awarded using other than full and  open competition cited obtaining agreement on profit or fee as a factor  that lengthened the negotiation phase. For example, in an Army  contract for spares, maintenance, and overhaul of an airframe, the  government and the contractor disagreed over the profit margin.  Negotiations for the approximately $54 million contract stalled until the  issue was elevated to higher levels at both the contractor and the  government. This contract took about 22 months from solicitation  issuance to contract award, with the negotiations phase taking about  8 months from approval to enter into negotiations to approval for  contract award.", "For additional information on the survey results, see appendix II."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["DOD has proposed reducing the time to award contracts in order to  address concerns that it is taking too long. To measure progress against  its goal, DOD will need relevant information about the time frames  involved. DOD components are collecting information on the length of  time to award contracts, but their efforts differ. DOD does not have a  comprehensive strategy to use the component information already  available or to collect other information that may be needed to assess  contract award time frames. Having a DOD-wide strategy could enable  DOD to consistently and comprehensively track contract award time,  assess the factors contributing to this time, leverage the various efforts  that the components have taken, identify any best practices, and measure  progress toward any goals for reducing the time to award contracts.  Currently, DOD does not define the events that should be measured  occurring prior to solicitation or those that occur between solicitation  issuance and contract award. While the military components collect  various information about the length of time to award contracts based on  their specific needs and organizational structures, at a minimum, DOD  should have relevant information for its own management purposes. As  DOD implements provisions in the National Defense Authorization Act for  Fiscal Year 2018, the department has an opportunity to identify what  data, if any, beyond just the overall procurement administrative lead time  should be collected and reported. Identifying the information that is to be  collected is a necessary first step for DOD to assess its progress in  reducing the time taken to award contracts."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Secretary of Defense direct the Director,  Defense Procurement and Acquisition Policy to develop a strategy  regarding contract award time frames that identifies:  the information the department needs to collect; and how the department will use the information to assess the time it takes  to award contracts.", "The strategy should seek to communicate the department\u2019s goals related  to contract award time frames, seek to leverage ongoing data collection  efforts by the various components, and specify the events prior to  solicitation and between solicitation issuance and contract award that the  department believes should be tracked. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. DOD concurred  with the recommendation. DOD provided written comments which have  been reproduced in appendix III. DOD also provided technical comments  which we incorporated as appropriate.", "We are sending copies of this report to the Secretary of Defense; the  Under Secretary of Defense for Acquisition, Technology and Logistics;  the Secretaries of the Army, Navy, and Air Force; the Director, Defense  Logistics Agency; appropriate congressional committees; and other  interested parties. This report will also be available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by e-mail at woodsw@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Key contributors to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["We were asked to evaluate the length of time taken to award weapon  systems-related contracts. This report examines (1) the Department of  Defense\u2019s (DOD) efforts to determine the time it takes to award weapon  systems contracts; (2) what available data show regarding the time  between solicitation issuance and award for selected weapon systems- related contracts; and (3) factors identified as contributing to contract  award time frames.", "To understand the procedures DOD follows to award contracts and  DOD\u2019s efforts to determine the time it takes to award contracts, we  reviewed relevant sections of the Federal Acquisition Regulation (FAR),  such as Part 6: Competition Requirements, and Part 15: Contracting by  Negotiation, and relevant sections of the Defense Federal Acquisition  Regulation Supplement. In addition, we analyzed DOD-level and  component-level guidance, policies, memorandums, and training  materials on the contract award process. We also reviewed Standards for  Internal Control in the Federal Government and prior GAO reports.", "To determine the extent DOD components (Air Force, Army, Navy and  the Defense Logistics Agency) collected and analyzed data and how they  are managing the time from solicitation issuance to contract award, we  analyzed relevant documentation, such as monthly or quarterly  management reviews and briefings. We interviewed acquisition officials at  DOD and the components regarding studies or analysis conducted  related to the time to award contracts. We selected the components  based on the highest total number of contracts and highest total contract  value. We discussed contract award time frames included in studies or  analysis to determine the selected components\u2019 or commands\u2019 reasons  for conducting the analysis, any challenges identified, actions taken to  address those challenges, and ongoing efforts to reduce the time needed  to complete the contract award process. We also discussed their data  collection and verification process, but we did not independently verify the  data that were reported in the studies and analyses. We determined that  the data reported by the military components were reliable for the  purposes of describing data collection and analyses done by DOD  components. We also met with industry associations for their perspective  regarding the length of time to award weapon systems-related contracts."], "subsections": [{"section_title": "Identifying Weapon Systems-Related Contracts", "paragraphs": ["To understand the length of time taken to award DOD weapon systems- related contracts, and how contract value, extent competed, and contract  type relate to that time, we analyzed contract data for a nongeneralizable  sample of weapon systems-related contracts from the Federal  Procurement Data System-Next Generation (FPDS-NG). We used FPDS- NG to identify DOD weapon systems-related contracts that were newly  awarded from fiscal year 2014 through fiscal year 2016, with a contract  value of $5 million or more. To include weapon systems-related contracts,  we initially selected major defense weapon systems contracts as  identified by DOD and identified the supplies or service codes (Product  Service Code and North American Industry Classification Systems  codes). We then compared the list of contracts with contract information  in FPDS-NG to identify the contracts that contain the same codes to  identify similar supplies and services. We narrowed the number of  contracts using the DOD acquisition program field in FPDS-NG as a  proxy to identify weapon systems-related contracts. For multiple award  contracts, we selected the first contract awarded among those that were  awarded under the same solicitation as indicated by the contract number.  We excluded contracts that were awarded under specific circumstances  that use different acquisition procedures, such as contracts awarded  under simplified acquisition procedures. In addition, we excluded basic  ordering agreements; blanket purchase agreements; orders of any type,  including task and delivery orders; and extensions of existing contracts.  We excluded undefinitized contract actions and contracts that included  foreign funds or foreign military sales because of the peculiarities  associated with these procurements. We also excluded contracts coded  as Ballistic Missile Defense Organization in FPDS-NG because this field  was used broadly to include contracts for both weapon systems and non- weapon systems.", "We further limited our selection of contracts to selected military  components\u2014Air Force, Army, Navy and the Defense Logistics Agency  based on the highest number of contracts and highest total contract  value. We then identified the largest commands within these components  also based on the number of contracts and total contract value.", "Air Force- Air Force Materiel Command,", "Army- Army Contracting Command", "Defense Logistics Agency- Aviation", "Navy- Naval Air Systems Command", "Navy- Naval Sea Systems Command  Defense Logistics Agency-Aviation, Air Force Materiel Command, and the  Army Contracting Command awarded the higher number of contracts and  the highest total value within their respective components. For Navy, the  Naval Air Systems Command awarded the higher number of contracts,  but the Naval Sea Systems Command awarded a higher total value, so  we included both.", "For multiple award contracts, we selected the first contract awarded  among those that were awarded under the same solicitation as indicated  by the contract number. We excluded contracts that were awarded under  specific circumstances that use different acquisition procedures, such as  contracts awarded under simplified acquisition procedures. In addition,  we excluded basic ordering agreements; blanket purchase agreements;  orders of any time, including task and delivery orders; and extensions of  existing contracts. We excluded undefinitized contract actions and  contracts that included foreign funds or foreign military sales because of  the peculiarities associated with these procurements. We also excluded  contracts coded as Ballistic Missile Defense Organization in FPDS-NG  because this field was used broadly to include contracts for both weapon  systems and non-weapon systems. As a result, we initially identified a  nongeneralizable sample of 145 contracts. In addition, we used the  information contracting officials reported in our web-based survey to  confirm whether the 60 contracts we surveyed met our selection criteria,  and excluded those that did not. These exclusions resulted in a  nongeneralizable selection of 129 weapon systems-related contracts.", "To assess FPDS-NG data reliability, we compared the FPDS-NG data to  the contract documentation that we obtained for the solicitation issuance  and contract award dates to verify the dates. We verified the contract  value, extent competed, and contract type by comparing the data  reported in FPDS-NG, such as the contract number and award value, to  information in the contract documentation. We also verified the solicitation  and contract award dates using contract documentation. We determined  that the FPDS-NG data was reliable for the purposes of identifying a  nongeneralizable sample of contracts and analyzing time between  solicitation and contract award dates, contract value, extent competed,  and contract type."], "subsections": []}, {"section_title": "Survey Methodology", "paragraphs": ["To obtain information on the factors that helped or hindered the length of  time to award contracts, we conducted a web-based survey of contracting  officials\u2014such as contracting officers or contract specialists\u2014for 60  contracts. The survey collected information from contracting officials on  the start and end dates of the solicitation, initial evaluation, discussion or  negotiation, and contract award phases. We also collected information on  factors that helped mitigate the time interval or hindered contracting  officials from completing the solicitation, initial evaluation, and discussion  or negotiation phases. For the survey, we additionally screened out  contracts awarded using sealed bidding. We also did not include the  Defense Logistics Agency-Aviation as part of the survey because it is a  combat support agency providing weapon systems parts for the military  services. From 145 of the 171 selected weapon systems-related  contracts, we randomly selected 20 contracts from the Air Force Materiel  Command, 20 from the Army Contracting Command, 10 from the Naval  Air Systems Command, and 10 from the Naval Sea Systems Command  for a nongeneralizable survey sample.", "For the survey, we identified the time to award contracts by phases, from  solicitation issuance to contract award. These phases are based on  discrete events found in the FAR or component-specific guidance as  necessary steps in awarding a contract by negotiation.", "The 4 phases we identified are:", "Solicitation: from solicitation issuance to solicitation closing date or  Initial Evaluation: from solicitation closing date or receipt of initial  proposal to when contracting personnel receive approval to enter into  discussion or negotiation", "Discussions/negotiations: from approval to enter into discussion or  negotiation to approval to award the contract", "Contract award: from approval to award the contract to the date the  contract was signed by the contracting officer.", "We conducted a total of eight telephone pre-tests on the contents and  format of the survey with officials from the Air Force Materiel Command,  Army Contracting Command, Naval Air Systems Command, and Naval  Sea Systems Command to determine if the questions were  understandable and answerable, in addition to verifying that the  terminology used in the survey was accurate, and that the survey was  unbiased. As a result of the pre-tests, we refined the survey as  appropriate. We emailed a link to the web-based survey to contracting  officials for the 60 selected weapon systems-related contracts on October  19, 2017. To encourage respondents to complete the survey, we sent  reminder emails and made telephone calls to contracting officials after the  initial email was sent. We closed the survey on January 10, 2018. Of the  60 contracts we surveyed, we excluded 18 contracts that did not meet our  selection criteria based on the responses from the contracting officials.  These included contracts that were not newly awarded, used sealed bid  procedures, or contained foreign funding or foreign military sales. Of the  42 remaining contracts, we received responses from contracting officials  for 37 contracts, for an overall response rate of 88 percent.", "The survey included event dates, which differentiate between the phases.  We did not verify the start and end dates of the phases reported in the  survey and relied on contracting officials\u2019 responses. We did, however,  verify the dates for solicitation issuance and contract award against the  FPDS-NG reported data and contract documentation as part of the  verification process for the 129 selected contracts. We emailed  contracting officials in certain instances where we needed clarification on  survey responses. For example, we followed-up on responses that  differed from FPDS-NG reported data and responses that indicated that a  contract was awarded using both full and open and other than full and  open competition, among others. We made corrections to the data as  needed."], "subsections": []}, {"section_title": "Case Study Methodology", "paragraphs": ["For more in-depth information on the factors and circumstances that  affected the time from solicitation issuance to contract award, we selected  7 contracts from the survey for further analysis. To obtain a variety of  contract characteristics, we selected the case studies based on certain  criteria including: (1) representation of different DOD components; (2) a  range of longer and shorter time intervals between solicitation and  contract award date; (3) contracts with larger contract value; and (4) the  extent the contracts were competed. We selected 4 contracts awarded  using other than full and open competition and 3 awarded using full and  open competition. For the purposes of our report, full and open  competition after exclusion of sources is considered to be full and open  competition. We did not select contracts from the Naval Sea Systems  Command as part of our case study because the extent of competition  was not confirmed at the time of selection.", "For these 7 contracts, we reviewed the survey results, analyzed contract  file documentation, and conducted interviews with available contracting  officials and program office officials, as well as contractor representatives  to obtain their perspectives on the factors that helped or hindered the time  from solicitation issuance to contract award.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Supplemental Survey Results for Selected Questions from GAO\u2019s Survey of Factors Affecting the Length of Time to Award Contracts", "paragraphs": ["We distributed a web-based survey to a random sample of contracting  officials for 60 weapon systems-related contracts and reviewed  responses for 37 contracts. The survey results presented in tables 4  through 13 are nongeneralizable. For more information on our  methodology for designing and distributing the survey, see appendix I."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Penny Berrier (Assistant  Director), Peter Anderson, David Ballard, Sonja Bensen, Lorraine Ettaro,  Kurt Gurka, Gina Hoover, Julia Kennon, Carol Mebane, Anh Nguyen,  Bonita Oden, Jenny Shinn, Abby Volk, and Robin Wilson made major  contributions to this report."], "subsections": []}]}], "fastfact": ["Department of Defense leadership and defense contractors have expressed concerns about the length of time it takes to award contracts, and DOD has proposed reducing that time.", "We found DOD does not know how long it currently takes to award contracts and therefore does not have a baseline to measure progress in reducing time frames. DOD components\u2014for example, the Air Force\u2014collect some data on award time frames. But varying scopes and methods limit the usefulness of those data across DOD.", "We recommended that, to assess time frames for awarding contracts, DOD determine what information it should collect and how to use that information."]}
{"id": "GAO-18-269", "url": "https://www.gao.gov/products/GAO-18-269", "title": "Federal Health Insurance Exchange: CMS Needs to Ensure Complete Accurate Data on Terminations of Coverage for Nonpayment of Premiums", "published_date": "2018-03-09T00:00:00", "released_date": "2018-04-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CMS has noted that it is important for enrollees to maintain continuous health insurance coverage to ensure the stability of the FFE. Certain rules allow for enrollment flexibilities\u2014such as special enrollment periods and a 3-month grace period that is allowed before coverage is terminated for recipients of federal income-based subsidies who default on their premiums. However, some issuers have stated that these rules could be misused, resulting in non-continuous coverage. There are little data on the extent to which enrollees maintain continuous coverage during a year and, more specifically, on the extent to which coverage is terminated for nonpayment of premiums.", "GAO examined (1) the extent to which FFE enrollees maintained coverage in 2015 and (2) the extent to which CMS has reliable data on termination of enrollees' coverage for nonpayment of premiums. GAO analyzed CMS's 2015 FFE enrollment data (the most recent year of available data); interviewed CMS officials and selected issuers; and reviewed applicable laws and guidance from CMS."]}, {"section_title": "What GAO Found", "paragraphs": ["In 2015, 9.2 million individuals enrolled in the federal health insurance exchange in 37 states. Eligible individuals (e.g., U.S. citizens or those lawfully present in the United States) are able to enroll in health coverage during the annual open enrollment period. Outside of open enrollment, eligible individuals may enroll in coverage or change their coverage selection during special enrollment periods. Individuals may enroll under a special enrollment period if, for example, they lost their coverage from another source, such as Medicaid or an employer, or due to relocation. Under federal regulations, enrollees may not sign up for coverage under a special enrollment period citing loss of coverage if the coverage was lost due to nonpayment of premiums.", "About half (53 percent) of the 2015 federally facilitated exchange (FFE) enrollees maintained continuous health insurance coverage throughout the year\u2014that is, they began coverage between January 1 and March 1, 2015, and maintained it through December 31, 2015. These individuals had an average of 11.6 months of coverage. The remaining 47 percent of FFE enrollees started their coverage later or ended it during the year; they averaged 5.0 months of coverage. Enrollees could have voluntarily ended coverage\u2014due to gaining other coverage, for example\u2014or have had it terminated by the Centers for Medicare & Medicaid Services (CMS) or the issuers of coverage for valid reasons, including losing eligibility for exchange coverage or for nonpayment of premiums.", "CMS does not have reliable data on issuer-generated terminations of coverage for enrollees' nonpayment of premiums. Although CMS and issuers share data on the terminations each generates and reconcile their data on a monthly basis to ensure data accuracy, the agency does not require issuers to consistently report data on the reasons for terminations. Officials told us they do not track these data because they are not critical to ensure the accuracy of the federal subsidy amounts\u2014which is the main function of the monthly reconciliation process. Further, CMS lacks a transparent process to ensure the accuracy of these data, as the monthly reconciliation files transmitted between CMS and issuers do not include a place to capture data on termination reasons. Issuers said that they are therefore unable to ascertain whether data they provide on the reasons for termination match CMS's data, and thus they cannot make corrections where necessary.", "The agency's lack of reliable data on terminations for nonpayment limits its ability to effectively oversee certain federal regulations. For example, because CMS is not systematically tracking these data, it cannot tell whether enrollees applying for coverage under a special enrollment period had lost their coverage for nonpayment of premiums\u2014in which case they would be ineligible for the special enrollment period per federal regulations. CMS could capitalize on its existing process, already familiar to issuers, by adding a variable that captures data on termination reasons to the monthly reconciliation file. By taking this step, in addition to requiring issuers to report these data, CMS could help ensure it has reliable and transparent data on terminations of enrollee coverage for nonpayment of premiums, and it could use these data to assess the effects of CMS policies and the overall stability of the exchange."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS ensures it has (1) complete data on terminations of coverage for nonpayment of premiums; and (2) a transparent process to reconcile discrepancies and ensure the accuracy of these data. The Department of Health and Human Services concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Patient Protection and Affordable Care Act (PPACA) required,  beginning in 2014, the establishment of exchanges (or marketplaces) in  each state where eligible consumers can directly compare and select  among a variety of qualified health plans offered by participating private  issuers. The Centers for Medicare & Medicaid Services (CMS)\u2014the  agency within the Department of Health and Human Services (HHS) that  oversees the federally facilitated exchange (FFE) in 39 states that elected  to use the FFE in 2017\u2014has noted that, while consumers enrolled in  health insurance need to maintain continuous coverage for the entire year  to ensure a stable and affordable marketplace, exchange rules should  also allow individuals the flexibility to make changes to their enrollment in  response to life circumstances. However, some issuers offering health  insurance plans in the FFE have noted that certain of these rules could  also undermine enrollees\u2019 incentives to maintain continuous coverage.", "Specifically, issuers have raised concerns about enrollment that occurs  outside of the open enrollment period (OEP), which generally runs near  the start of the coverage year, and about enrollees ending their coverage  before the end of the year. Individuals may use special enrollment periods  (SEP) to sign up for coverage outside of open enrollment if they  experience a triggering event, such as losing coverage from another  source including Medicaid or an employer. However, issuers have noted  that an SEP could be misused if individuals, instead of signing up during  OEP, delayed enrollment until they were sick and had imminent health  care costs to be covered. Some issuers also noted that CMS could be  allowing individuals whose coverage was terminated due to nonpayment  of premiums to re-enroll under an SEP due to loss of coverage although,  under federal regulations, this is not allowed. Finally, some issuers have  stated that enrollees receiving Advance Premium Tax Credits (APTC),  which reduce the cost of coverage for eligible individuals, may  intentionally stop paying their premiums before the end of the year to take  advantage of the 3-month coverage grace period allowed by law while still  meeting requirements for PPACA\u2019s individual mandate.", "There is, however, little data about the extent to which these specific  problems have occurred. Further, enrollees may stop paying premiums  and terminate their coverage for valid reasons including unexpected  reductions in household income or gaining other government or  employer-sponsored coverage, and other research has found that short  periods of coverage were common in the individual market even prior to  PPACA. Officials from both CMS and issuers indicated that individuals  often do not provide notification that they are ending their coverage due to  a change of circumstance. Instead, they stop paying premiums and let  their exchange policies \u201cpassively\u201d terminate.", "You asked us to examine the extent to which exchange enrollees  maintained coverage and paid their premiums during the plan year. This  report: 1.  describes the extent to which enrollees who purchased health  insurance coverage through the FFE in 2015 maintained their  coverage during the plan year; and  2.  evaluates the extent to which CMS has reliable data on the rate at  which enrollees in the FFE are terminated from coverage due to  nonpayment of premiums.", "To describe the extent to which enrollees who purchased health  insurance coverage through the FFE in 2015 maintained their coverage  during the plan year, we obtained and analyzed enrollment and  demographic data from CMS. According to CMS officials, 2015 was the  most recent full year of data available at the time of our review.  Specifically, CMS provided us with data from its centralized enrollment  system, the Multidimensional Insurance Data Analytics System, for each  enrollee who obtained health insurance coverage\u2014that is, selected a  plan and paid their first premium\u2014through the FFE for coverage year  2015. These data included, among other information, the enrollees\u2019  coverage start and end dates; type of plan, premium, and any APTC  amounts; and demographic information reported by enrollees, including  gender, state of residence, and household income. We used these to  analyze the extent to which enrollees maintained continuous FFE  coverage throughout 2015\u2014which we defined as coverage that began  from January 1, 2015, to March 1, 2015, and ended on December 31,  2015. We compared the demographic and coverage characteristics of  enrollees who maintained continuous coverage throughout 2015 with  those of all other enrollees. We also examined the demographic and  coverage characteristics of all FFE enrollees in 2015. Further, CMS  provided us with FFE enrollment data for the time period of January 1,  2016, through June 30, 2016, which we used to analyze the extent to  which the 2015 FFE enrollees re-enrolled for coverage year 2016. We  assessed the reliability of the data provided by CMS in several ways,  including discussing the reliability of the data with CMS officials, reviewing  relevant CMS data manuals and other documentation, performing manual  and electronic tests of the data to identify any outliers or anomalies, and  comparing the data with data from published sources. We also  interviewed representatives from a small selection of issuers to discuss  the reliability of relevant issuer-reported data maintained in CMS\u2019s  centralized enrollment system. We determined that the data were  sufficiently reliable for the purposes of our reporting objectives.", "To evaluate the extent to which CMS has reliable data on the rate at  which FFE enrollees are terminated from coverage due to nonpayment of  premiums, we examined data from CMS\u2019s enrollment system on the  reported reasons for termination of enrollee coverage in 2015. For a small  selection of enrollees identified by CMS as having their coverage  terminated for nonpayment, we examined the termination reasons listed  in issuer data. We also interviewed officials from CMS, industry stakeholders, and selected issuers to learn about how the data on  termination reasons are collected. In addition, we reviewed relevant  PPACA provisions and federal regulations and guidance, including  technical guidance from CMS governing the transfer of information  between CMS and issuers participating in the FFE, and determined  whether the agency\u2019s relevant policies and procedures are consistent with  standards for internal control in the federal government.", "We conducted this performance audit from July 2016 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The exchanges (including the FFE and those operated by individual  states) provide a seamless, single point of access for eligible individuals  to enroll in qualified health plans. For the FFE, CMS established a  website\u2014Healthcare.gov\u2014as the public portal through which individuals  may apply for coverage and select and enroll in health plans, which are  offered at different levels of coverage, or \u201cmetal tiers\u201d\u2014bronze, silver,  gold, and platinum\u2014that reflect the percentage of covered medical  expenses estimated to be paid by the insurer. The data that individuals  provide in their application is stored in the FFE\u2019s centralized enrollment  system, which is maintained by CMS.", "Although CMS oversees the centralized enrollment system, both CMS  and issuers have shared responsibility for enrollment and coverage  functions once individuals apply for coverage:", "CMS is responsible for determining an individual\u2019s eligibility for  coverage and income-based federal subsidies, enrolling the  individual, and processing subsequent coverage changes or  terminations. For example, individuals may change their existing  coverage by signing up under an SEP due to the birth of a child or  relocation, or they may voluntarily terminate their coverage, or CMS  may terminate coverage if the agency is unable to verify key  information such as citizenship status. CMS is also responsible for  making payments for APTCs and determining whether an enrollee is  eligible for any cost-sharing reductions that lower enrollees\u2019 out-of- pocket costs for expenses, such as deductibles and copayments.", "Issuers are responsible for, among other things, collecting premiums  from enrollees, arranging for coverage through provider networks, and  paying claims. Issuers are also responsible for processing, and  notifying CMS of, terminations related to nonpayment of premiums or  fraud.", "As a result of this shared responsibility, CMS and issuers notify each  other of coverage updates by transferring data back and forth through  electronic files known as \u201ctransaction files.\u201d It is critical that both issuers  and CMS have consistent, accurate, and current information on enrollees,  because monthly APTC payments are based on enrollment data in CMS\u2019s  centralized system. Federal regulations require CMS to reconcile  enrollment information with issuers on at least a monthly basis.  Accordingly, CMS and issuers reconcile certain key data elements on a  monthly basis through an automated enrollment reconciliation process, in  which issuer and CMS data are compared and discrepancies are  resolved. Through this process, APTC amounts and their effective dates  are compared and reconciled. CMS\u2019s data system is considered to be  correct when considering discrepancies on overall enrollment counts or  with key data elements, such as coverage start and end dates between  issuer and CMS data. Therefore, CMS will not change the APTC  payments based on issuers\u2019 data that may differ from CMS\u2019s data unless  there are significant discrepancies.", "There are several specific steps involved in transferring data between  CMS and issuers for initial enrollment, subsequent updates, and  reconciliation (see fig. 1 for a high-level overview of the data transfer  process):  Initial enrollment: CMS forwards an outbound electronic transaction  file to the issuer with information on the applicant, the plan selection,  the premium, and the APTC amount. Once the issuer receives the  initial premium payment, the issuer sends an inbound electronic  transaction file back to CMS to confirm the enrollment. Issuers may  not refuse to issue coverage to an individual CMS has deemed  eligible once that individual has made the initial premium payment.  Transaction files are transmitted electronically on a daily basis.", "Subsequent changes/terminations: Subsequent changes to the  individual\u2019s coverage may be initiated by enrollees, CMS, or issuers.  For example, enrollees may request changes to their coverage  through the portal if they experience a change in circumstance (such  as needing to enroll under an SEP due to the birth of a child, or to  terminate their coverage if they move to a different state); CMS may  terminate coverage if the agency cannot verify key eligibility  information (such as citizenship status); or issuers may terminate  coverage if enrollees fail to pay their premiums. If CMS initiates  changes in coverage, it notifies issuers through subsequent outbound  transaction files, and similarly, if issuers initiate changes they notify  CMS through subsequent inbound transaction files.", "Monthly reconciliation: CMS sends issuers a snapshot of key  elements of the enrollment data in its centralized enrollment system in  an outbound reconciliation file. Issuers compare the data from the file  to their enrollment systems and identify missing enrollments or other  discrepancies. Issuers make updates as necessary and send CMS an  inbound reconciliation file with information about current enrollees,  cancellations, and terminations in their systems. CMS then performs an automated comparison of the data in the inbound reconciliation  files with its centralized enrollment system and identifies any further  discrepancies that may need to be resolved either by CMS or issuers.  If necessary, CMS makes further updates to its data.", "In an April 2017 final rule, CMS implemented several actions that, in part,  responded to issuer concerns about special enrollment periods and  stability of enrollment. Specifically, CMS stated that the agency would  require documentation from all individuals applying to enroll in coverage  under an SEP to verify their eligibility for the SEP prior to enrollment.  CMS also stated that, starting in June 2017, it would allow issuers,  subject to state law, to apply a new premium payment to an individual\u2019s  past due payments before applying that premium towards a new  enrollment. CMS stated that issuers would be allowed to refuse to  provide coverage to an enrollee applying under an SEP due to loss of  existing coverage if the issuer had previously terminated the enrollee\u2019s  coverage for nonpayment of premiums, unless the enrollee paid the past  due premiums. CMS further stated that this provision was intended to  encourage individuals to maintain continuous coverage rather than start  and stop coverage (and thereby avoid incurring past due premiums)."], "subsections": []}, {"section_title": "Just over Half of FFE Enrollees Maintained Continuous Coverage throughout 2015; Length of Coverage Varied by Enrollee Characteristics", "paragraphs": ["Approximately 4.9 million enrollees (53 percent of the 9.2 million FFE  enrollees in 2015) maintained continuous coverage throughout the year\u2014 that is, their coverage began between January 1 and March 1, 2015, and  lasted through December 31, 2015. These individuals therefore had 10 or  more months of continuous coverage, with an average length of coverage  of 11.6 months. Most of these enrollees (83 percent) re-enrolled in  coverage by June 2016.", "The remaining 4.3 million enrollees (47 percent of the FFE enrollees in  2015) did not maintain continuous FFE coverage throughout the year, as  defined above. The average length of coverage for these enrollees was  about 5.0 months and, for most (72 percent), coverage ended prior to the  end of the year. (See fig. 2 for information on enrollee length of  coverage.)", "Of the 4.3 million enrollees, 38 percent re-enrolled in exchange coverage  for 2016, although enrollees that held coverage through the end of the  year\u2014regardless of their length of coverage\u2014were far more likely to have  re-enrolled than enrollees whose coverage ended prior to the year\u2019s  end.", "In general, we did not find notable differences in attributes of enrollees\u2019  coverage (for example, by benefit level of selected plan or monthly  premium after APTC) or enrollee demographics when comparing the two  groups of enrollees\u2014those who maintained continuous coverage  throughout 2015, and those who did not. (For data on coverage and  demographics of FFE enrollees who did maintain continuous coverage  throughout 2015 and those who did not, see app. I.)", "However, in examining the demographic and coverage characteristics of  all FFE enrollees, we found that enrollees with certain characteristics  tended to remain covered for a longer period of time in 2015 compared to  other enrollees. For example:", "Enrollment period. Enrollees who enrolled during the open  enrollment period had a higher average length of coverage than  enrollees who enrolled through an SEP\u20149.1 months compared to 5.2  months (see fig. 3). However, more individuals who enrolled through  an SEP remained enrolled through December 31, 2015, compared to  individuals who enrolled during open enrollment\u201472 percent  compared to 64 percent.", "Age. Enrollees aged 55 or older had the highest average length of  coverage, while those aged 25 to 34 had the lowest\u20149.2 months  compared to 7.8 months.", "Reported household income. APTC-eligible enrollees who reported  having a household income between 301 and 400 percent of the  federal poverty level had the highest average length of coverage,  while those who reported having a household income less than, or  equal to, 100 percent of the federal poverty level had the lowest\u20148.9  months compared to 8.0 months.", "Eligibility for APTC. Enrollees who were eligible for APTC had a  higher average length of coverage than enrollees who were not  eligible for APTC\u20148.6 months compared to 7.8 months", "Benefit level of selected plan. Enrollees who selected higher- benefit, gold plans had the highest average length of coverage, while  enrollees who selected lower-benefit catastrophic, plans had the  lowest\u20148.8 months compared to 6.7 months. Enrollees who selected  silver plans\u2014the most common plan selection\u2014had an average  length of coverage of 8.6 months.", "State of residence. Enrollees residing in Maine had the highest  average length of coverage, while enrollees residing in Mississippi  had the lowest\u20149.4 months compared to 8.0 months.", "See appendix II for additional data on the average length of coverage for  enrollees by various characteristics."], "subsections": []}, {"section_title": "CMS Lacks Complete and Transparent Data on Terminations of Enrollee Coverage for Nonpayment of Premiums", "paragraphs": ["CMS\u2019s data on terminations of enrollee coverage due to nonpayment of  premiums are not complete and accurate. CMS officials told us that they  collect some information from issuers on their terminations of enrollee  coverage for nonpayment of premiums. When issuers terminate policies,  the inbound transaction files they send to CMS must include, among  other elements, a revised coverage end date taking the termination into  account. CMS uploads these data into its centralized FFE enrollment  system. However, while the issuers may also include codes that  designate the reasons for the terminations, there is no requirement for  them to consistently do so. Data on termination codes may therefore not  be consistently reported by issuers. CMS officials told us that data on  reasons for termination are not tracked because they are not critical to  ensure the accuracy of APTC payments\u2014which is the main function of  the reconciliation process. Officials stated that key essential variables that  CMS does track are whether coverage is effectuated (that is, whether the  first premium payment has been made), whether the enrollee is eligible  for APTC payments, and whether coverage was terminated.", "In addition, when issuers do report termination reason codes, these data  are not always accurate. Specifically, CMS told us that, historically,  issuers may have incorrectly used the nonpayment termination code for  other types of terminations, and two issuers we interviewed  acknowledged having done so. We compared data on terminations for  nonpayment from CMS\u2019s centralized enrollment system with data we  obtained from three issuers for a small selection of enrollees. We found  that for one large issuer operating in multiple states, the CMS data  indicated that coverage for 18 of the 26 enrollees that we examined had  been terminated for nonpayment of premiums, while the issuer data  indicated that coverage had been terminated for other reasons, in most  cases because it had expired at the end of the year. The issuer indicated  that it likely reported these year-end terminations to CMS incorrectly as  terminations for nonpayment of premiums.", "CMS has recently taken actions that may improve the reliability of data on  terminations for nonpayment, but these actions do not ensure the data  are consistently reported and recorded by CMS. Specifically, in July 2017,  CMS indicated that it would add new codes to the transaction files for  issuers to use to help prevent inaccurate reporting of the nonpayment  termination code. CMS told us that it expects issuers to begin using the  new codes in 2018. CMS\u2019s data on terminations for nonpayment therefore  may be more reliable beginning in 2018. However, CMS has not required  issuers to report the termination reasons in the transaction files because,  according to CMS officials, these data are not essential to tracking the  accuracy of APTC payments. The agency also does not have plans in the  near future to use the data in tracking trends in enrollment and  termination of enrollee coverage in the FFE to assess the overall stability  of the exchange.", "Further, CMS does not have a transparent, systematic process for issuers  to ensure that data on terminations they initiate due to nonpayment are  complete and accurate in the CMS system. Issuers we interviewed told us  that they are unable to ascertain whether CMS is correctly updating the  FFE enrollment system with the termination reason codes issuers provide  when policies are terminated. While issuers can determine from the  monthly reconciliation files whether CMS has updated certain issuer data  for enrollees whose coverage was terminated (for example, the revised  coverage end date), the files do not capture data on reasons for  termination. Therefore, issuers are unable to determine if the CMS FFE  data on termination reason codes matches theirs and make corrections  where necessary. Some issuers told us they had requested that CMS  add a variable to capture data on termination reasons in the monthly  reconciliation files sent to issuers. CMS officials stated that the agency is  in the initial stages of exploring whether this would be feasible for CMS  and issuers, but that it will require significant resources and time to  develop.", "Although CMS\u2019s recent changes may improve its data, they do not ensure  the agency will have complete and transparent data on terminations for  nonpayment of premiums. According to federal internal control standards,  federal agencies should obtain and use relevant, reliable data to achieve  their objectives. Without complete and accurate data, CMS may be  allowing enrollees who lost exchange coverage for nonpayment of  premiums to re-enroll under SEPs although, under federal regulations,  these individuals are ineligible to do so. Issuers reported that this had  occurred. CMS officials told us that the agency is exploring options to  have its system automatically prevent certain enrollees with prior  terminations for nonpayment from enrolling in coverage under an SEP for  loss of existing coverage, but noted that this functionality would depend  on receiving reliable data on terminations for nonpayment from issuers.  Further, without reliable data, CMS may not be able to assess the effects  of its April 2017 policy allowing issuers to apply enrollees\u2019 new premium  payments toward unpaid premiums over the past 12 months. This is  because the agency lacks the complete and accurate data that would be  necessary to ensure that issuers are correctly identifying enrollees  terminated for nonpayment."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["In its role as administrator of the FFE, it is important for CMS to assess  the overall stability of the exchange by, among other things, tracking  trends in enrollment and termination of enrollee coverage and addressing  issuers\u2019 concerns, where appropriate, to ensure their continued  participation in the exchange. Issuers have raised concerns that the SEP  regulations potentially allow individuals to enroll in coverage despite  having their coverage terminated for nonpayment of premiums. However,  CMS does not have the data needed to determine the extent of these  problems. While CMS has made some efforts to improve the accuracy of  the agency\u2019s data on terminations for nonpayment, it has not indicated  whether the agency will require issuers to consistently and accurately  report these data. Moreover, CMS has no way to ensure the reliability and  transparency of the data, because the existing process\u2014the exchange of  monthly reconciliation files between CMS and issuers\u2014does not have a  place to capture these data. CMS could capitalize on this existing  process, already familiar to issuers, by adding a variable that captures  data on termination reasons to the monthly reconciliation file and tracking  its accuracy. By taking this step, in addition to requiring issuers to report  these data, CMS could help ensure it has reliable and transparent data on  terminations of enrollee coverage for nonpayment of premiums, and it  could use these data to assess the effects of CMS policies and the overall  stability of the exchange."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following two recommendations to CMS:", "The Administrator of CMS should ensure that CMS has complete data  on terminations of enrollee coverage for nonpayment of premiums by  requiring issuers to report these data. (Recommendation 1)", "The Administrator of CMS should provide a transparent process for  issuers and CMS to systematically reconcile discrepancies in their  data on terminations of enrollee coverage for nonpayment of  premiums. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS. HHS provided written  comments, which are reprinted in appendix III. HHS concurred with our  first recommendation to require issuers to report data on terminations of  enrollee coverage for nonpayment of premiums. HHS noted that it  currently collects information on termination reasons on enrollment  transactions with issuers, and that it would review the requirements for  collection of these data to identify possible improvements. HHS also  concurred with our second recommendation to ensure a transparent  process for issuers and CMS to systematically reconcile discrepancies in  their data on terminations of enrollee coverage for nonpayment of  premiums. HHS stated that it would consider how to incorporate  reconciliation of these data into its existing monthly data reconciliation  process with issuers, balancing issuer and agency burdens against the  benefits of doing so.", "As agreed with your office, unless you publically announce the contents  of the report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services 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) 512-7114 or dickenj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Demographic and Coverage Characteristics of Federally Facilitated Exchange Enrollees, 2015", "paragraphs": ["Table 1 provides information on demographic characteristics for federally  facilitated exchange (FFE) enrollees that maintained continuous coverage  throughout 2015\u2014defined as beginning coverage by March 1, 2015, and  maintaining it without any gaps through December 31, 2015\u2014and for all  other 2015 FFE enrollees. Table 2 provides information on the  characteristics of these enrollees\u2019 coverage. Table 3 provides the extent  to which enrollees maintained continuous coverage throughout 2015 by  their state of residence."], "subsections": []}, {"section_title": "Appendix II: Average Length of Coverage for Federally Facilitated Exchange Enrollees, 2015", "paragraphs": ["Table 4 provides information on average length of coverage for all 9.2  million federally facilitated exchange enrollees in 2015 by various  demographic characteristics. Table 5 provides information on average  length of coverage for these enrollees by characteristics of the enrollees\u2019  coverage. Table 6 provides information on average length of coverage for  enrollees by their state of residence."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, William Hadley (Assistant  Director), Iola D\u2019Souza (Analyst in Charge), Richard Lipinski, Peter Mann- King, and Priyanka Sethi Bansal made key contributions to this report.  Also contributing were Muriel Brown, Laurie Pachter, and Emily Wilson."], "subsections": []}]}], "fastfact": ["The Affordable Care Act federal health insurance exchange allows people to enroll outside of the annual open enrollment period under certain circumstances, such as losing coverage from an employer.", "Insurers are concerned that some people are misusing this flexibility by reenrolling after their coverage was terminated for nonpayment of premiums. Not only is this against the rules, but it undermines the stability of the exchange.", "The Centers for Medicare & Medicaid Services doesn't collect complete data that would allow it to gauge the extent of the problem. We recommended gathering data on coverage terminations for nonpayment of premiums."]}
{"id": "GAO-18-112", "url": "https://www.gao.gov/products/GAO-18-112", "title": "International Mail: Information on Changes and Alternatives to the Terminal Dues System", "published_date": "2017-10-12T00:00:00", "released_date": "2017-10-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2016, USPS handled over 1 billion pieces of international mail\u2014both inbound (received from other countries) and outbound (sent to other countries). International mail is governed by the UPU, which is comprised of over 190 member countries, including the United States. The UPU establishes remuneration rates, called terminal dues, for certain types of international mail exchanged between member countries. Questions have been raised about how current and future planned rates for terminal dues affect USPS and other stakeholders that are involved in international mail. GAO was asked to review the terminal dues system.", "Among other issues, this report examines the financial effects of: (1) the current UPU rates for terminal dues and (2) the planned changes to those rates on USPS and mail stakeholders. GAO analyzed USPS's mail data for fiscal years 2012\u20132016; USPS's, the Postal Regulatory Commission's (PRC), and UPU's policies and documents; and applicable U.S. statutes. GAO interviewed USPS, PRC, and Department of State officials, and mail stakeholders, including U.S. companies, such as FedEx and UPS, and consultants. These stakeholders were identified through public comments made to PRC on proposals related to terminal dues. While not generalizable, the views provide illustrative examples.", "This is a public version of a sensitive but unclassified report issued in August 2017. Information related to USPS's revenues, costs, and volumes for international mail that USPS has deemed proprietary has been omitted from this report."]}, {"section_title": "What GAO Found", "paragraphs": ["The Universal Postal Union (UPU), a specialized agency of the United Nations, created the terminal dues system so that designated postal operators in member countries could compensate designated postal operators in other countries for delivering mail in those countries. GAO found that it is not possible to quantify the financial effects of the terminal dues system on various U.S. mail stakeholders because the data needed to conduct such an analysis are not readily available. However, stakeholders GAO spoke with and literature GAO reviewed described differing impacts of the terminal dues system on U.S. stakeholders. For example,", "Analysis by the United States Postal Service (USPS)\u2014the U.S. designated postal operator\u2014found that the rates for inbound international terminal dues mail does not cover its costs for delivering that mail in the United States. As a result, USPS's net losses on this type of mail more than doubled between 2012 and 2016. In contrast, USPS analysis indicates that the rates for outbound international terminal dues mail has resulted in net positive revenues for USPS, which offset the losses from inbound terminal dues mail.", "U.S. businesses that send outbound terminal dues mail may benefit to the extent that their costs to mail items to certain countries through USPS may be lower than the actual mail delivery costs in those countries.", "U.S. consumers who receive imported products may pay lower mailing costs for products originating from low terminal dues rate countries.", "Express consignment operators such as FedEx and the United Parcel Service said the terminal dues system creates a competitive disadvantage for them. Representatives from these companies said that they have difficulty competing for some international mail business because they cannot offer pricing as low as the postage based on the terminal dues rates offered by designated postal operators.", "The UPU adopted increased terminal dues rates for member countries starting in 2018. GAO found that these planned changes could affect U.S. stakeholders differently, but the effects are also difficult to quantify because of limited information and forecasting variability. Nevertheless, stakeholders identified examples of the potential effects that the planned changes could have on them. For example:", "For USPS, an increase in inbound terminal dues rates should reduce related losses for delivering this mail; although USPS's costs may increase from paying higher terminal dues rates to countries where USPS sends most of its outbound terminal dues mail.", "U.S. businesses that send outbound terminal dues mail may have to pay higher postage to USPS to cover the increase in terminal dues rates to send mail to other countries, thus increasing costs to them.", "U.S. consumers who receive lower-priced imported products may experience a reduced benefit because of the higher terminal dues rates for inbound mail.", "The increased rates for inbound terminal dues mail may allow rates offered by express consignment operators to become more competitive as they may be able to offer their mail products at more comparable costs."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2016, the United States Postal Service (USPS) handled  over 1 billion pieces of international mail\u2014either \u201cinbound\u201d mail that was  sent to the United States from foreign countries or \u201coutbound\u201d mail that  was sent to foreign countries. The movement of international mail is  facilitated by the Universal Postal Union (UPU), a specialized agency  within the United Nations that includes over 190 member countries. UPU  member countries designate postal operators, which must collect, receive  and deliver mail to and from other countries at set rates. These rates for  letter mail are called \u201cterminal dues.\u201d", "Questions have been raised regarding these dues and the overall effect  of the UPU\u2019s terminal dues system on USPS and other U.S. stakeholders,  such as domestic e-commerce businesses and consumers. Specifically,  some have argued that the current terminal dues rates USPS receives  from other countries may not cover USPS\u2019s costs to deliver some mail  from certain countries or may be less than the postage charged to a  domestic U.S. customer for similarly sized mail. For these reasons, some  argue that this system may create competitive disadvantages for some  businesses such as:  1.  express consignment operators (ECO)\u2014such as FedEx and the  United Parcel Service (UPS), which compete with USPS and  designated postal operators for some international business\u2014and  2.  U.S. businesses that compete with foreign businesses that send mail  under the terminal dues system (or \u201cterminal dues mail\u201d).", "While UPU terminal dues rates will increase starting in 2018, some  stakeholders have questioned if these changes will be sufficient to  address the competitive disadvantages created by the terminal dues  system. Not all international mail is subject to the terminal dues system.  Mailers can use alternatives, such as USPS expedited mail for inbound  and outbound international mail.", "You asked us to review issues related to the UPU\u2019s terminal dues system.  This report describes the financial effects on domestic stakeholders of the  following: (1) the rates under the current UPU terminal dues system, (2)  planned changes to those rates, and (3) alternatives to the terminal dues  system.", "To describe the effects of the current UPU terminal dues system on  stakeholders, we first identified the relevant stakeholders affected by  terminal dues based on our reviews of comments submitted to the Postal  Regulatory Commission (PRC) on proposals related to terminal dues for  the 2016 UPU congress, as well as interviews with USPS, PRC,  Department of State (State), and industry consultants. We reviewed six  economic models and analyses that estimated effects of the current  terminal dues system on various stakeholders. We determined that each  of these analyses appropriately include, though with certain limitations,  the key elements of an economic analysis.", "To determine the current rates under the UPU\u2019s terminal dues system  and the effects of these rates on selected stakeholders, we analyzed  USPS data and reports on inbound and outbound international mail,  including volume, weight, costs and revenue from fiscal years 2012  through 2016 and UPU information on the current terminal dues system.  We assessed the reliability of USPS\u2019s data on the volume, costs and  revenue for international mail by reviewing documentation related to how  the data are collected and processed. We found these data to be  sufficiently reliable for the limited purpose of presenting this descriptive  information. We reviewed federal statutes, PRC reports, USPS and UPU  mail manuals, and other studies on international mail and terminal dues  impacts. We also interviewed stakeholders such as USPS officials,  representatives from ECOs and U.S. businesses, and consultants.", "To assess the effect of planned changes to the current terminal dues  system on domestic stakeholders, we analyzed UPU documents detailing  the planned changes to the terminal dues system. We reviewed  estimates of the financial effects of the planned changes to the terminal  dues system prepared by USPS and others. USPS based its estimates  on information from the UPU on the changes and USPS\u2019s historical  revenues, costs, and volume of terminal dues mail.", "To describe alternatives to the terminal dues system and estimate the  effects of those alternatives on domestic stakeholders, we reviewed  USPS documents, such as:", "USPS\u2019s international mail manual,", "USPS\u2019s agreements with other designated postal operators, and", "PRC\u2019s documentation of its reviews of USPS\u2019s bilateral and  multilateral agreements and of USPS\u2019s international mail products.", "Likewise, we analyzed USPS\u2019s revenue, cost, and volume information  from fiscal years 2012 through 2016 on alternatives to the terminal dues  system. We assessed the reliability of USPS\u2019s information on the  volume, costs and revenue associated with its alternatives to the terminal  dues system for international mail by reviewing documentation related to  how the data are collected and processed. We found this information to  be sufficiently reliable for the limited purpose of presenting this descriptive  information.", "For all of our objectives, we interviewed USPS, PRC and Department of  State (State) officials, representatives of nine U.S. businesses or  business associations affected by terminal dues, and three consultants  for their views. We selected the businesses and consultants based on  published reports documenting their knowledge of international mail and  terminal dues issues, recommendations from stakeholders interviewed  and comments submitted to PRC dockets soliciting public comments prior  to the 2016 UPU congress. The views of these interviewees are not  generalizable but illustrative of the issues faced by stakeholders affected  by the terminal dues system. We also applied standard economic  principles to describe effects on domestic stakeholders. For more details  on our scope and methodology, see appendix I.", "The performance audit on which this report is based was conducted from  May 2016 to August 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with USPS from June to October 2017 to prepare  this public version of the original sensitive report. This public version was  also prepared in accordance with these standards.", "This is a public version of GAO-17-571SU that we issued in August 2017.  This report excludes information that was deemed to be proprietary by  USPS and that must be protected from public disclosure. Therefore, this  report omits proprietary information and certain data related to USPS\u2019s  revenues, costs and volumes for international mail. Although the  information provided in this report is more limited in scope, it addresses  the same objectives as the sensitive report and the methodology used for  both reports is the same."], "subsections": [{"section_title": "Background", "paragraphs": ["In fiscal year 2016, USPS handled over 1 billion pieces of international  mail, which included over 976 million pieces of letter mail. According to  USPS statistics, about 371 million pieces of letter mail (38 percent) was  sent to other countries or \u201coutbound\u201d mail, while the majority of  international letter mail, 605 million pieces (62 percent), was sent to the  United States from other countries or \u201cinbound\u201d mail.", "UPU member nations agree to provide a \u201csingle postal territory\u201d for  international mail, meaning designated postal operators must deliver  inbound international mail to the recipient in their own country (i.e.,  provide universal service). The UPU created the terminal dues system in  1969 to establish a means for paying destination countries\u2019 designated  postal operators for the cost of delivering the mail that originated in  another UPU member country. UPU member countries vote every 4 years  on the annual payment rates.", "The current terminal dues system was designed as a single rate structure  for the delivery of letter mail, regardless of shape (i.e., letters, flats or  packets). The system takes into account that this rate varies based on  UPU\u2019s estimation of each nation\u2019s postal cost structure and economic  development. As such, the UPU divides its member countries into country  groups based on the UPU\u2019s \u201cpostal development indicator,\u201d which is  largely based on gross national income per capita and attempts to factor  in the cost to deliver a letter based on statistics from the United Nations,  the World Bank, and the UPU. Designated postal operators from  transitional (formerly called \u201cdeveloping\u201d) countries generally pay a lower  terminal dues rate for their mail to be delivered by designated postal  operators in target (formerly called \u201cindustrialized\u201d) countries (see app. II  for a list of the countries in each UPU country group). UPU limits the rates  through caps and floors to minimize year-over-year variability.", "In addition to USPS, numerous domestic stakeholders are affected by the  terminal dues system, for example:", "ECOs, such as FedEx and UPS, that collect, transport, and deliver  documents and packages sent to the United States from other  countries. As they are not designated postal operators under the  UPU, ECOs are not part of the terminal dues system and do not have  access to terminal dues rates.", "Some U.S. businesses that compete with foreign companies for U.S.  customers, including large e-commerce businesses, such as Amazon,  and much smaller e-commerce related businesses, as well as U.S.  businesses that obtain goods from other countries via international  mail.", "U.S. businesses that send mail to other countries\u2014such as business  correspondence, advertisements, or e-commerce packages\u2014and that  have an interest in paying the lowest postage rate.", "U.S. consumers\u2014mainly individuals who send or receive  correspondence, gifts, or commercial goods through international  mail.", "Government also plays a role in the terminal dues system. The  Department of State (State) represents the United States to the UPU, and  State officials participate in the negotiations at the UPU congress, held  every 4 years, that determine terminal dues rates. State also solicits input  on terminal dues and other international postal issues through a Federal  Advisory Committee on international mail that consists of USPS and PRC  officials, other federal agencies with jurisdiction over related issues (e.g.,  the U.S. Department of Commerce), and representatives from affected  businesses.", "PRC also has a role in international mail issues including terminal dues,  USPS bilateral agreements, and USPS international mail products. First,  State is required by statute to request PRC\u2019s views on terminal dues  proposals before they are adopted by the UPU every 4 years to ensure  that the U.S. positions on the relevant UPU proposals are consistent with  PRC\u2019s standards and criteria for regulating USPS rates (or if not  consistent, provide a foreign policy or national security interest  justification). State then is required to ensure that the terminal dues  proposals for market-dominant mail are consistent with PRC\u2019s views  unless there is a foreign policy or national security concern. Second,  PRC is required by statute to review USPS proposals for international  mail products to ensure compliance with legal requirements, such as  requirements relating to cost coverage. Third, PRC has also sponsored  studies on terminal dues issues in recent years.", "USPS officials stated that designated postal operators send mail to USPS  for delivery to U.S. addresses under the UPU\u2019s Universal Postal  Convention. Designated postal operators pay for the collection and  transportation of mail to the United States and hand off mail to USPS at a  USPS International Service Center (ISC) for sorting and final delivery  (see fig. 1). USPS presents the inbound mail to U.S. Customs and Border  Protection (CBP) for inspection at the ISC. Once the mail clears CBP  inspection, the mail enters USPS\u2019s domestic mail stream for delivery. The  process is reversed for outbound international mail collected by USPS for  delivery to foreign addresses."], "subsections": []}, {"section_title": "Current Terminal Dues Rates Benefit USPS despite Revenue Losses on Inbound Mail and Have Mixed Effects on Other U.S. Stakeholders", "paragraphs": [], "subsections": [{"section_title": "The Current Rates Benefit USPS, as Increasing Gains from Outbound Mail Outweigh the Increasing Losses on Inbound Mail", "paragraphs": ["According to USPS analysis, USPS has generated positive net revenue  from all terminal dues mail, which has increased from fiscal year 2012 to  fiscal year 2016. This occurred even though losses from inbound mail  more than doubled from $66 million to $135 million from fiscal year 2012  to fiscal year 2016 (see fig.2). Net revenue for outbound terminal dues  mail increased during the same time period.", "To understand this trend of declining net revenue for inbound terminal  dues mail, it is important to understand the differences in inbound versus  outbound mail. As USPS is the designated postal operator for the United  States responsible for ensuring universal service under UPU agreements,  it is required to accept and deliver all mail tendered to it from other  designated postal operators (inbound mail), including mail sent under the  terminal dues rates adopted by the UPU."], "subsections": [{"section_title": "Losses on Inbound Terminal Dues Mail", "paragraphs": ["USPS\u2019s recent losses on inbound terminal dues mail are due in part to  the shift in this mail from primarily letters and flats to more packets (which  are more costly for USPS to handle and deliver)\u2014which outpaced the  corresponding terminal dues revenue earned by USPS (see fig. 3).", "These losses are exacerbated by the rising volume of inbound terminal  dues mail. According to USPS, there has been an 86 percent increase in  all inbound terminal dues mail between fiscal year 2012 and 2016\u2014 including a 19 percent increase between fiscal year 2015 and 2016  alone\u2014with much of the increase attributable to international e- commerce. E-commerce mail consists mainly of packets that are  heavier and irregular (see fig. 4 for examples). Most inbound letter mail to  the United States in fiscal year 2016 was \u201cpackets,\u201d defined by the UPU  as small packages that weigh no more than 2 kilograms (about 4.4  pounds), often generated by e-commerce. USPS officials stated that  packets generate higher costs as USPS\u2019s delivery and processing costs  for packets are higher than they are for letters. The current terminal dues  system does not distinguish mail based on shape, and there is no  separate rate for packets. A recent report commissioned by PRC found  that the current terminal dues system, by reducing the price of  international packet mail below what it would be without the system, is  responsible for increasing the demand (and hence volume) of packets  sent through USPS. According to the report, this increase in terminal  dues packets reduces the demand for other types of international mail  and ECOs.", "As mentioned above, losses occur because USPS\u2019s costs to deliver  inbound terminal dues mail are higher than the terminal dues revenues  for that mail. Specifically, PRC has recognized that terminal dues have  not covered USPS\u2019s costs to deliver inbound letter mail since fiscal year  1998 and has reiterated this recently. USPS recently stated that the  failure to cover USPS\u2019s costs for inbound mail was caused by the terminal  dues system. For example, currently, USPS is paid between $1.13 and  $1.87 in terminal dues to deliver a 10-ounce packet from a developing  country, an amount that does not include any additional surcharges for  tracking and other features. Conversely, USPS officials told us that the  published domestic rates for a 10-ounce piece of mail range from $1.61 to  the highest commercial rate of $3.46. However, comparing these  products is complicated, because they offer different features. According  to USPS officials, packets sent under the terminal dues system do not  include any tracking and have a delivery time of up to 3 weeks from some  countries, while all USPS domestic mail products include tracking and  have delivery times from as short as one day to an average of 2 to 3  days. In addition, 85 percent of USPS domestic mail receives discounted  rates for mail that is entered in bulk and prepared in a way that reduces  USPS\u2019s costs, including barcoding, presorting, and being entered into  USPS\u2019s system closer to its final destination."], "subsections": []}, {"section_title": "Net Revenue Increases for Outbound Terminal Dues Mail", "paragraphs": ["USPS reports show that net revenue for outbound terminal dues mail  increased from fiscal year 2012 to fiscal year 2016. The increased net  revenue allowed USPS to more than offset its losses from inbound  terminal dues mail. The increase in net revenue came despite a decrease  in outbound terminal dues mail volume over the same period."], "subsections": []}]}, {"section_title": "The Current Terminal Dues System Also Benefits U.S. Businesses That Rely on Outbound International Mail and U.S. Consumers", "paragraphs": ["According to stakeholders we interviewed as well as our economic  analysis, businesses that send outbound international mail and U.S.  consumers also benefit from the current terminal dues system similar to  USPS (see table 1).", "These stakeholders benefit for the following reasons:", "U.S. businesses that send outbound terminal dues mail, for example,  e-commerce shippers or magazine publishers, may pay lower postal  rates than what would be set by the destination country\u2019s designated  postal operator to deliver that mail. This is the case for mail sent to  many developed countries, such as in Europe, where most U.S.  outbound international mail is sent. In this case, the postage charged  by USPS to the business reflects the relatively low terminal dues rate  paid by USPS to those designated postal operators, rather than a  higher rate that better reflects the designated postal operator\u2019s  delivery costs.", "U.S. consumers also benefit from the current terminal dues system.", "As described above, U.S. consumers have spurred a significant  increase in inbound international mail, especially from Asia where  terminal dues rates are lower than USPS\u2019s costs, which contributes to  low shipping prices for U.S. consumers. For example, the USPS\u2019s  Office of Inspector General (OIG) conducted a case study in 2015 that  found that five low-cost items shipped from China cost about $1.60  per item in shipping charges, while equivalent published domestic  postage for the same items cost between $2.04 and $2.22 per item,  depending on their exact weight. Studies by the USPS OIG and  WIK-Consult GmbH (WIK Consultants) have found similar benefits for  consumers from the current terminal dues system. U.S. consumers  may also see the same kind of benefit from lower mailing prices as do  U.S. businesses that send terminal dues mail to certain outbound  countries, such as in Europe, that have higher delivery costs than the  terminal dues paid to them by USPS."], "subsections": []}, {"section_title": "Current Terminal Dues System Results in Competitive Disadvantages for Some Stakeholders", "paragraphs": ["Despite creating some benefits for some U.S. stakeholders, the current  terminal dues system also creates competitive disadvantages for other  U.S. stakeholders (see table 2).", "The terminal dues system puts ECOs at a disadvantage because  according to representatives from ECOs we spoke with, their volume for  international items that are similar to those currently shipped at terminal  dues rates is low, and they cannot compete on price with designated  postal operators. Instead, they compete using other features such as  tracking and delivery speed. Businesses overseas, like e-commerce  companies such as Alibaba, can use the terminal dues system as a low- cost alternative to ECO service for items which have much slower  delivery standards than offered by ECOs. This disadvantage is especially  pronounced when ECOs compete with designated postal operators for  business from countries with relatively low terminal dues rates, such as  many countries in Asia.", "U.S. businesses that compete with foreign companies that use inbound  terminal dues mail are also disadvantaged by the current terminal dues  system. Foreign businesses that send products from countries with low  terminal dues to U.S. consumers through USPS may have a competitive  advantage over domestic businesses, which may have to pay a higher  domestic postage. Representatives from two small U.S. businesses we  spoke with stated that the disparity between postage charges available to  foreign mailers under the terminal dues system versus the domestic  postage available to them was a significant factor in reduced sales in  recent years, although the disparity between postage charges is not the  only disadvantage they faced from foreign competition. We found this  outcome may be less of a competitive disadvantage for larger  businesses, such as Amazon, which may be able to obtain discounts on  the domestic mailing prices from USPS based on volume, presorting, and  other worksharing arrangements while smaller domestic mailers may not  be able to secure such discounts. Even with discounting, the domestic- mailing price may still be higher than the foreign-mailing price charged by  a designated postal operator a price that is based on, in part, a lower  terminal dues rate. However, USPS officials cautioned that such  comparisons are complicated because:  1.  Terminal dues rates do not include other costs, such as the cost of  collection, international transportation, and other costs that may be  included in the price charged to the foreign mailer by the designated  postal operator.  2.  Significant amounts of international mail are sent in large quantities  from foreign designated postal operators to USPS, making this mail  not analogous to USPS\u2019s single-piece mail rates.  3.  U.S. commercial customers may pay non-published rates established  in negotiated service agreements that may be lower than USPS\u2019s  single-piece published rates.", "While we described above how different stakeholders are affected by the  terminal dues system, it is not possible to quantify the system\u2019s impacts.  For example, according to USPS officials, while the current system has a  single rate for three shapes of terminal dues mail, USPS has over 3,000  rates for domestic mail, making rate comparisons of terminal dues mail  products to domestic mail products imprecise. In addition, the terminal  dues rate is a payment between designated postal operators, not the  price paid by the foreign mailer. This price information may not be publicly  available as designated postal operators in other countries might also  have non-published prices."], "subsections": []}]}, {"section_title": "Planned Changes to Terminal Dues Rates Should Reduce USPS\u2019s Losses and Could Affect Other Stakeholders", "paragraphs": [], "subsections": [{"section_title": "Changes Should Reduce USPS\u2019s Losses from Terminal Dues System", "paragraphs": ["Based on our analysis of the changes to the terminal dues system  recently adopted by the UPU and of USPS\u2019s estimates of the financial  impact of those changes, increased terminal dues rates should help  reduce USPS\u2019s losses for inbound mail. All terminal dues rates will  increase for inbound mail starting on January 1, 2018\u2014especially for  certain countries, which will increase by 13 percent per year specifically  for packets. By 2021, all but the least developed countries will have the  same terminal dues rates for packets. As the majority of terminal dues  mail handled by USPS is inbound, the increase in revenue resulting from  higher terminal dues may likely more than offset the increase in USPS\u2019s  costs that will result from increases in terminal dues rates to the countries  where most USPS outbound terminal dues mail is sent.", "The UPU also created a new rate category for packets, in addition to a  new tracked-packet surcharge, which will increase USPS\u2019s revenue. As  described previously, the current terminal dues rates do not distinguish  between letters, flats, or packets\u2014even though packets are more  expensive to handle and deliver due to their irregular size and heavier  weight. This change should lead to higher terminal dues revenue for  USPS. In addition, the UPU adopted the Integrated Product Plan (IPP) at  the 2016 UPU congress; that, among other things, will require commercial  goods to be sent under the terminal dues system as packets. According  to USPS officials, this change could also increase terminal dues  revenues, as all commercial items will be sent via packets, which will  have higher terminal dues rates starting in 2018. However, decisions on  other aspects of the IPP are expected to be made at a special UPU  congress in 2018.", "According to USPS projections, USPS will start earning positive net  revenues for inbound terminal dues mail as a result of these changes. As  terminal dues rates increase, USPS projections show that USPS will  cover costs for inbound terminal dues mail from the 15 countries that sent  most of the inbound terminal dues mail to the United States in fiscal year  2015. The State Department official who coordinated the U.S.  delegation to the 2016 UPU congress stated that these changes will  achieve the government\u2019s goal of dramatically improving USPS\u2019s cost  coverage for the delivery of inbound terminal dues mail, such as packets,  from China and other developing countries, when the changes take effect  in 2018.", "However, other stakeholders we spoke with disagree on the extent of  improvement. While PRC staff officials stated that the UPU has made  some progress in closing the gap between terminal dues rates and  domestic rates for equivalent domestic mail, they also stated that there is  still a way to go to make the rates equivalent to each other. Similarly,  PRC\u2019s Chairman stated that while the changes will improve USPS\u2019s cost  coverage, they will not eliminate the negative impacts of the current  terminal dues system and may in fact exacerbate them over the 2018\u2013 2021 period. In addition, he stated that while USPS projected that  terminal dues proposals in 2008 and 2012 would increase USPS\u2019s cost  coverage for inbound terminal dues mail, the improvement was negligible,  casting doubt on the accuracy of USPS\u2019s projections for the planned  changes for the 2018\u20132021 period. A consultant who has experience in  international mail issues stated that, given some assumptions about  changes in international mail volume, the terminal dues increases will still  not be equal to the delivery costs for domestic postage for inbound  terminal dues mail to countries such as the United States. He estimated  that the difference between the new terminal dues rates and equivalent  domestic postage for packets will be reduced from about 57 to 73 percent  (depending on the sending country) in 2016 to about 50 percent by 2021."], "subsections": []}, {"section_title": "Changes Could Affect U.S. Stakeholders Differently, but Effects Are Difficult to Quantify", "paragraphs": ["According to stakeholders we interviewed as well as our analysis of  UPU\u2019s terminal dues rates, the projected increase in terminal dues rates  caused by the planned changes to the terminal dues system may  negatively affect U.S. businesses that send outbound terminal dues mail  and U.S. consumers (see table 3). U.S. businesses and U.S. consumers  that send mail to other countries will pay higher postage rates for terminal  dues mail, to the extent that USPS increases its prices to reflect the  higher terminal dues USPS must pay to designated postal operators.  However, increased terminal dues rates may still be less than the cost to  deliver that mail for designated postal operators in relatively high cost  countries, such as Norway and Germany. U.S. businesses and  consumers benefit from this disparity as the postage they pay USPS to  send mail to those countries is based on the terminal dues rates to those  countries, not the delivery costs, which may be higher. U.S. consumers  may also see shipping prices increase for inbound terminal dues mail, for  example e-commerce packets, to the extent that any increases in postage  charged to foreign mailers resulting from increased terminal dues rates  are passed along to U.S. consumers.", "ECOs and U.S. businesses affected by inbound terminal dues mail  should become more cost-competitive due to the planned increased  terminal dues rates, although the planned changes may not eliminate all  of the existing competitive disadvantages (see table 4). A State  Department official stated that these new rates may still not fully cover the  cost of delivery in some countries with very high postal delivery costs,  potentially impacting ECOs\u2019 competitiveness in those countries. A  representative from a small business that competes with overseas e- commerce businesses for U.S. consumers stated that any increase in  terminal dues would make his business more price-competitive with  foreign competitors. However, a representative from one small business  affected by inbound terminal dues mail we spoke with stated that his  business had already suffered due to the terminal dues system. He added  that other factors also make it harder to compete and therefore it would  be harder to recover even with higher terminal dues rates.", "While these changes may have different effects on U.S. stakeholders, it is  difficult to quantify the future effects because of limited information and  forecasting variability. As a result, it remains to be seen what the effects  of these changes to this system will be on domestic stakeholders. USPS,  USPS OIG, PRC, and others have developed or adapted models and  analyses that try to show the economic impacts of the terminal dues  system on different stakeholders and estimate the impact of any changes  to that system. We analyzed six recent models and analyses\u2014including  the USPS\u2019s, USPS OIG\u2019s, and PRC\u2019s models\u2014that describe either  different effects of the terminal dues system on USPS, all designated  postal operators, or other stakeholders. Some of these studies also try  to measure how terminal dues rate increases may affect these  stakeholders. Our review determined that these models and analyses can  help inform stakeholders about the different overall effects of terminal  dues. However, we also found that the analyses are limited in how they  can predict or describe the effect of the terminal dues system, in part due  to a lack of complete information on the following issues:  the volume of mail, including its type and weight, that flows between  each UPU member country; equivalent domestic postage rates that would be charged to domestic  mailers for service equivalent to inbound terminal dues mail;  the presence of alternative international mail agreements, such as  bilateral and multilateral agreements;  the number of U.S. businesses and consumers that receive or send  international mail covered by terminal dues rates;  the number and market characteristics of U.S. businesses that  currently compete with imported products that are sent under terminal  dues; how terminal dues rates and changes in those rates would affect  supply chains between businesses in the U.S. and other countries;  and,  the share of postage costs of U.S. businesses for outbound mail that  is covered by the terminal dues system and the proportion of total  business costs; how important postage and shipping costs are to total  costs of doing business, domestically and globally.", "Our analysis also found that some of the models and analyses we  reviewed did not make adjustments to factor in some or all of these  potential mail-related changes, such as changes in:  volume of international mail reimbursed by terminal dues changes in  response to increases in terminal dues rates or changes in other  international mail products offered by USPS or express consignment  operators; monetary exchange rates, as all terminal dues are denominated in  Special Drawing Rights, a combination of five major currencies, which  all vary over time, introducing uncertainty to any projection of terminal  dues rates; and, other international trade issues, such as customs duties, tariffs, labor  costs, other shipping costs, and regulatory costs.", "In the absence of models or analyses that take these factors into account,  it is difficult to quantify the impact of terminal dues rate increases on other  domestic stakeholders."], "subsections": []}]}, {"section_title": "Alternatives to the Terminal Dues System Mainly Benefit USPS, While the Effects on Other Stakeholders Are Unclear", "paragraphs": [], "subsections": [{"section_title": "USPS Offers Several Alternatives to the Terminal Dues System for International Mail", "paragraphs": ["Not all international mail is sent through the terminal dues system. USPS  officials and mail stakeholders told us and USPS data indicate that  mailers send a significant portion of U.S. inbound and outbound  international mail using the following alternatives: bilateral and multilateral  agreements, parcels, express mail service, and direct entry. USPS data  show that that while terminal dues as a percentage of inbound  international mail volume increased from about 50 percent in fiscal year  2012 to about 60 percent in fiscal year 2016, a significant portion of  international mail comes into the United States via these alternatives.", "Each of these alternatives is described in greater detail below.", "USPS negotiates bilateral and multilateral agreements for a  number of countries, wherein USPS and other designated postal  operators both pay higher rates for different mail products (inbound  and outbound) with desirable features not available for terminal dues  mail, such as tracking and faster delivery. For example, USPS is  party to the multilateral PRIME agreement, which gives priority  delivery and performance bonuses (paid in addition to terminal dues)  to mail from 31 countries. According to USPS officials, bilateral and  multilateral agreements have improved USPS\u2019s financial position. In  reviewing these agreements, PRC has found that they improve  USPS\u2019s financial position relative to what it would have been in the  absence of these agreements.", "USPS offers products that provide UPU parcel service for both  inbound and outbound mail, which includes tracking, liability  insurance, and signature confirmation at delivery. Parcels are sent  under UPU parcel rates, which are higher than what USPS would  receive under the terminal dues system for comparable letter mail.  USPS also offers \u201ce-Commerce Parcel,\u201d a new parcel service  established by the UPU in 2016. The e-Commerce Parcel product is  aimed at the e-commerce marketplace and provides tracking, but no  liability or signature confirmation. Under e-Commerce Parcel,  designated postal operators determine the inbound delivery rates,  which are expected to be lower than parcel service due to the service  limitations. USPS officials stated that they are implementing the e- Commerce parcel service and reviewing its pricing strategy.", "USPS also provides Express Mail Service (also referred to as EMS)  for both inbound and outbound international mail. Express Mail  Service products provide express delivery of documents and  merchandise, which take priority over other postal services and  include signature confirmation and liability insurance for damaged or  lost mail. Express Mail Service rates for inbound products can be set  by bilateral agreements or determined by the receiving designated  postal operator. During fiscal year 2016, inbound Express Mail  Service products included shipments from 149 countries, including  China, Japan, Korea, Canada, and France. Express Mail Service  products for outbound U.S. mail include Priority Mail Express  International service, a high-speed USPS mail service available to  certain countries and available at designated USPS facilities, and  Global Express Guaranteed service, a USPS international expedited  delivery service provided through an alliance with FedEx.", "Mailers use direct entry as a way of accessing USPS domestic mail  services from foreign countries without sending the item through a  foreign designated postal operator. Under USPS\u2019s Global Direct Entry  Wholesaler Program, third party companies, such as foreign e- commerce businesses selling products in the United States, send the  items to the United States as cargo that bypasses designated postal  operators, circumventing the terminal dues system entirely. Once the  items clear customs, they are entered to USPS\u2019s system at domestic  postage rates. Some of these items are entered into USPS\u2019s system  outside of USPS\u2019s Global Direct Entry Wholesaler Program. For  example, we spoke with a representative of a U.S. company that  provides direct entry services for foreign mailers, preparing items for  easier entry through customs, for example by labeling items with  barcodes that describe the product, and for USPS by applying U.S.  domestic postage. The company representative stated that once the  items clear customs, the company transports the items to one of 140  USPS distribution points (i.e. USPS\u2019s domestic mail processing  facilities) to facilitate timely and efficient delivery.", "As we discuss in more detail later, these alternatives may offer various  benefits and disadvantages to customers that may choose them based on  a combination of price, available features, and speed of delivery."], "subsections": []}, {"section_title": "Alternatives to the Terminal Dues System Mainly Benefit USPS and U.S. Consumers, While the Effects on Other Stakeholders Are Unclear and Difficult to Quantify", "paragraphs": ["USPS officials stated that alternatives to the terminal dues system earn  increased net revenue for USPS, for example,", "Rates negotiated as part of bilateral and multilateral agreements, UPU  parcel rates, and Express Mail Service product rates set by USPS are  higher than terminal dues rates; this difference means negotiated  rates provide better cost coverage and generate higher net revenues  than terminal dues rates.", "Direct entry mail generates greater net revenue for USPS, because  shippers enter the mail directly into USPS\u2019s domestic mail stream at  domestic postal rates. USPS also realizes operational efficiencies  from these alternatives due to mail entry and preparation  requirements, leading to lower USPS costs. Direct entry mail is  subject to the same preparation requirements as domestic mail  entered in bulk quantities, such as being presorted and entered close  to its final destination.", "Although alternatives to the terminal dues system account for a significant  portion of international mail handled by USPS, terminal dues mail  continues to grow at a higher rate. From fiscal year 2012 to fiscal year  2016, the volumes of (1) USPS terminal dues mail, (2) mail covered by  bilateral and multilateral agreements, and (3) parcels increased, while  Express Mail Service volume decreased.", "U.S. consumers may also benefit from all four alternatives due to faster  delivery than under the terminal dues system and from special features  such as tracking, especially for higher-value items. However, U.S.  consumers may pay more to use these alternatives given the special  features they offer.", "The effects of the alternatives on ECOs are unclear. Representatives  from ECOs told us that USPS bilateral and multilateral agreement mail  products and Express Mail Service products enjoy certain advantages,  such as easier customs clearance, that make USPS\u2019s products more  attractive to customers. However, the representatives added that the  effects of USPS bilateral agreements on their business are unclear,  because USPS considers the rates to be proprietary information that is  not publicly available. The representatives also noted that they did not  believe their products are able to compete directly with USPS bilateral  and multilateral mail products because the rates for these products are  based on comparatively low terminal dues rates. A 2015 USPS OIG study  found that ECOs\u2019 rates are generally much higher than rates for USPS  bilateral agreement and direct entry products, therefore ECOs\u2019 products  are not price competitive with USPS\u2019s products. Express Mail Service  and parcel products are priced higher than terminal dues rates and offer  special features similar to those offered by ECOs, such as priority  shipping and tracking, making those products more attractive for higher  value and time sensitive items, and thus may compete with ECOs\u2019  products.", "The effects of the alternatives on other international mail stakeholders,  such as U.S. businesses that are affected by inbound or outbound  international mail, are also unclear. For example, USPS bilateral  agreements may increase mailer options by providing faster service and  more product features, all at a lower price that discourages competition  from ECOs. However, the full effects of bilateral agreements are unclear,  in part because these rates are not public. The extent that U.S.  businesses related to outbound mail have access to and use direct entry  options into other countries is also unclear. In addition, other non-postal  related factors such as monetary exchange rates and product prices  affect the competitiveness of U.S. businesses that are affected by  inbound or outbound mail could be more important than mailing prices to  their international competitiveness.", "It is also difficult to quantify the effects of alternatives to the terminal dues  system because of limited information. The information needed to  determine the effects on domestic stakeholders from Express Mail  Service products and bilateral agreements are not publicly available, as  USPS regards this information as business proprietary. Effects on  stakeholders from direct entry mail are also unclear, in part because this  type of inbound mail may be difficult to distinguish from other domestic  USPS mail, and information on direct entry mail is not collected by USPS.  Use of alternatives also depends on terminal dues rates and other  factors, such as overall mail volume trends, and the models and analyses  we reviewed do not take these alternatives into account when modeling  international mail trends. For example, none of the models and analyses  we reviewed took into account bilateral agreements due to the lack of  publicly available information."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to USPS, PRC, and the Department of  State for their review and comment. In USPS\u2019s comments, reproduced in  appendix IV, USPS generally agreed with our findings, described the  impact of upcoming terminal dues changes, and emphasized that USPS  has been taking efforts to improve its cost coverage and collect more  revenue for international mail. In PRC\u2019s comments, reproduced in  appendix V, PRC generally agreed with our findings. State did not provide  any formal comments. USPS also provided technical comments, which  we incorporated as appropriate. PRC and State did not provide any  technical comments.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report describes the financial effects on domestic stakeholders of the  following: (1) the rates under the current UPU terminal dues system, (2)  planned changes to those rates, and (3) alternatives to the terminal dues  system. For all of our objectives, we interviewed officials at the U.S.  Postal Service (USPS), the Department of State (State), U.S. Customs  and Border Protection (CBP), and the Postal Regulatory Commission  (PRC); industry consultants; and selected mail stakeholders affected by  terminal dues. We selected stakeholders affected by terminal dues based  on our reviews of comments submitted to PRC on proposals related to  terminal dues for the 2016 UPU congress, as well as interviews with  USPS, PRC, State officials, and industry consultants.", "To obtain background information and provide context for this report, we  reviewed relevant federal statutes and U.S. policies; documentation from  the UPU, State, USPS, USPS Office of Inspector General (USPS OIG);  and knowledgeable consultants. Relevant legal sources that we reviewed  include Title 39 of the U.S. Code and the 2006 Postal Accountability and  Enhancement Act. In addition, we reviewed the UPU constitution, UPU  general regulations, and UPU agreements reached at the 2016 UPU  congress, which define the terminal dues system. We reviewed  documents of State\u2019s Advisory Committee on International Postal and  Delivery Services under the Federal Advisory Committee Act, including  minutes and proposals, and USPS and USPS OIG reports on terminal  dues and international mail flows. We also reviewed related studies by  third parties, including PRC-sponsored reports by Copenhagen  Economics on the economic impacts of terminal dues and other terminal  dues related reports. In addition, we reviewed GAO reports on related  postal issues, as well as relevant academic literature, industry journals,  books, and other publications, including news articles. We analyzed  available USPS information for fiscal years 2015 and 2016 on  international mail to and from the United States and to and from UPU- designated target and transitional countries to determine the most  significant mail flows. USPS information for inbound and outbound  international mail by country was only available beginning in fiscal year  2015.", "To determine the current rates under the UPU terminal dues system and  the effects of these rates on selected stakeholders, we reviewed and  analyzed UPU documentation on terminal dues rates, and we identified  and interviewed affected domestic mail stakeholders to obtain their views  on the potential impacts of the current terminal dues system. We  judgmentally selected stakeholders through interviews with USPS, State,  PRC, and industry group officials and consultants and our review of mail  stakeholder comments submitted to PRC pursuant to PRC proceedings  on terminal dues and international mail related proposals and  agreements. In addition, to select business and consultant stakeholders,  we also reviewed published reports documenting their knowledge of  international mail and terminal dues issues. We interviewed USPS and  CBP officials and observed international mail processing by USPS and  CBP at two USPS International Service Centers (ISC). We applied  standard economic principles to describe effects of the current terminal  dues system on domestic stakeholders.", "To describe the effects of the current terminal dues system on USPS  specifically, we reviewed USPS position papers, analyses, and reviewed  and analyzed terminal dues models and analyses showing the effects of  terminal dues, and reviewed UPU documents describing the terminal  dues system, relevant USPS OIG reports, and PRC proceedings and  Annual Compliance Determination Reports. We analyzed USPS  information and reports on inbound and outbound international mail,  including volume, costs, and revenue from fiscal years 2012 to 2016 and  UPU information describing the terminal dues system and rates from  2014 to 2017. We assessed the reliability of USPS\u2019s information on the  volume, costs, and revenue for international mail by reviewing  documentation related to how the data are collected and processed. We  found this information to be sufficiently reliable for the limited purpose of  presenting this descriptive information. We also visited the Chicago  O\u2019Hare International Airport and the New York John F. Kennedy  International Airport International Service Centers to observe how USPS  processes inbound and outbound international mail and how USPS  interacts with CBP to clear international mail for delivery to U.S.  addressees. We selected the Chicago O\u2019Hare International Airport and  the New York John F. Kennedy International Airport International Service  Centers because they process most inbound international mail volume,  as well as their location and interviews with USPS and CBP officials.", "To determine planned changes to UPU terminal dues rates, we reviewed  UPU documents that described the changes to the terminal dues system  resulting from the 2016 UPU congress, including the 2018 through 2021  terminal dues rate structure. We also reviewed USPS and State  proposals to the 2016 UPU congress and stakeholder comments  submitted to PRC on proposals to the 2016 UPU congress. We applied  standard economic principles to describe effects of the planned changes  on domestic stakeholders.", "We reviewed six economic models and analyses estimating different  effects of the current and future terminal dues system on global postal  flows and on various stakeholders. We selected the six models and  analyses for analysis based on how current they were and whether they  produced empirical findings related to the effects of terminal dues or  changes in terminal dues. These models and analyses were taken from  the published academic literature, economic papers, government reports,  and government analyses. The studies used a range of methodologies  from simulation modeling to experimental methods, in part due to the  paucity of data on a number of variables such as trade flows or how  terminal dues affect certain stakeholders, such as consumers and  businesses. Our overall review of the studies was based on economic  criteria and GAO guidance which included: the purpose of the model, the  assumptions used, the data or lack of data, model validation methods,  transparency of the model and data, sensitivity analysis, and peer review.  Where appropriate, we also compared the results of the models or  analyses to other similar modeling results. The analyses we assessed  address different questions relating to various mail stakeholders. We  determined that these analyses appropriately include, though with certain  limitations, the key elements of an economic analysis. Our overall  assessment is that while these models and analyses include limitations  and caveats, they still inform decision-makers and stakeholders about the  different economic effects of terminal dues.", "To determine the alternatives to the terminal dues system used by U.S.  mail stakeholders and the implications of those alternatives for  stakeholders, we interviewed USPS, PRC, and State officials,  representatives from mailing industry companies, express consignment  operators and other selected stakeholders affected by the terminal dues  system, international mail consultants, and freight shipping and  forwarding firms. We analyzed USPS information and reports on inbound  and outbound international mail from fiscal year 2012 through fiscal year  2016, including volume, cost, and revenue data. We assessed the  reliability of USPS\u2019s information on the volume, costs, and revenue for  international mail by reviewing documentation related to how the data are  collected and processed. We found this information to be sufficiently  reliable for the limited purpose of presenting this descriptive information.  We selected the four alternatives offered by USPS to the terminal dues  system, including USPS bilateral and multilateral agreements with other  designated postal operators, Express Mail Service products, parcels, and  direct entry mail.", "To describe these alternatives and determine their implications for mail  stakeholders, we reviewed and analyzed USPS bilateral agreements with  other designated postal operators, stakeholder comments on proposed  bilateral agreements, PRC decisions on the proposed agreements, and  USPS and USPS OIG documents and reports describing our selected  alternatives. We reviewed USPS\u2019s bilateral agreements with China Post,  Canada Post, Hong Kong Post, Korea Post, and Royal PostNL in the  Netherlands, which were in force during the course of our work.", "We applied standard economic principles to describe effects of these  alternatives on domestic stakeholders.", "The performance audit on which this report is based was conducted from  May 2016 to August 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with USPS from June to October 2017 to prepare  this public version of the original sensitive report. This public version was  also prepared in accordance with these standards.", "This is a public version of GAO-17-571SU that we issued in August 2017.  This report excludes information that was deemed to be proprietary by  USPS and that must be protected from public disclosure. Therefore, this  report omits proprietary information and certain data related to USPS\u2019s  revenues, costs and volumes for international mail. Although the  information provided in this report is more limited in scope, it addresses  the same objectives as the sensitive report and the methodology used for  both reports is the same."], "subsections": []}, {"section_title": "Appendix II: List of Countries by Universal Postal Union\u2019s (UPU) Country Groups from 2014\u20132017 and from 2018\u20132021", "paragraphs": ["The UPU divides its member countries into country groups based on the  UPU\u2019s \u201cpostal development indicator,\u201d which is largely based on gross  national income per capita and attempts to factor in the cost to deliver a  letter based on statistics from the United Nations, the World Bank, and  the UPU. The UPU uses the country groups to, among other things, apply  terminal dues rates to international letter mail sent between member  countries. The UPU consolidated its five country groups for the 2014\u2013 2017 period into four country groups for the 2018\u20132021 period: Group I  includes the most developed countries, Groups II and III include  developing countries, and Group IV includes the least developed  countries."], "subsections": []}, {"section_title": "Appendix III: Average Annual Rate-Cap Increases of the Universal Postal Union\u2019s (UPU) Terminal Dues", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the United States Postal Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Postal Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Derrick Collins (Assistant  Director); Greg Hanna (Analyst-in-Charge); Barbara El Osta; Camilo  Flores; Kenneth John; Mike Mgebroff; Malika Rice; and Amy Rosewarne  made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-700T", "url": "https://www.gao.gov/products/GAO-18-700T", "title": "Drinking Water: Status of DOD Efforts to Address Drinking Water Contaminants Used in Firefighting Foam", "published_date": "2018-09-26T00:00:00", "released_date": "2018-09-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to health experts, exposure to elevated levels of PFOS and PFOA could cause increased cancer risk and other health issues in humans. DOD has used firefighting foam containing PFOS, PFOA, and other PFAS since the 1970s to quickly extinguish fires and ensure they do not reignite. EPA has found elevated levels of PFOS and PFOA in drinking water across the United States, including in drinking water at or near DOD installations.", "This statement provides information on actions DOD has taken to address elevated levels of PFOS and PFOA in drinking water at or near military installations and to address concerns with firefighting foam.", "This statement is largely based on a GAO report issued in October 2017 ( GAO-18-78 ). To perform the review for that report, GAO reviewed DOD policies and guidance related to PFOS and PFOA and firefighting foam, analyzed DOD data on testing and response activities for PFOS and PFOA, reviewed the four administrative orders issued by EPA and state regulators to DOD on addressing PFOS and PFOA in drinking water, visited seven installations, and interviewed DOD and EPA officials. This statement also includes updated information based on two 2018 DOD reports to Congress\u2014one on PFOS and PFOA response and one on firefighting foam\u2014as well as discussions with DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO reported in October 2017 that the Department of Defense (DOD) had initiated actions to address elevated levels of perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA) in drinking water at or near military installations. PFOS and PFOA are part of a larger class of chemicals called per- and polyfluoroalkyl substances (PFAS), which can be found in firefighting foam used by DOD. In May 2016, the Environmental Protection Agency (EPA) issued nonenforceable drinking water health advisories for those two chemicals. Health advisories include recommended levels of contaminants that can be present in drinking water at which adverse health effects are not anticipated to occur over specific exposure durations.", "In response to those health advisories, DOD's military departments directed their military installations to (1) identify locations with a known or suspected release of PFOS and PFOA and address any releases that pose a risk to human health, which can include people living outside DOD installations, and (2) test for PFOS and PFOA in installation drinking water and address any contamination above the levels in EPA's health advisories. For example:", "As of August 2017, DOD had identified 401 active or closed military installations with known or suspected releases of PFOS or PFOA.", "The military departments had reported spending approximately $200 million at or near 263 installations for environmental investigations and responses related to PFOS and PFOA, as of December 2016. According to DOD, it may take several years for the department to determine how much it will cost to clean up PFOS and PFOA contamination at or near its military installations.", "DOD reported taking actions (such as providing alternative drinking water and installing treatment systems) as of August 2017 to address PFOS and PFOA levels exceeding those recommended in EPA's health advisories for drinking water for people (1) on 13 military installations in the United States and (2) outside 22 military installations in the United States.", "In addition to actions initiated by DOD, GAO reported in October 2017 that the department also had received and responded to four orders from EPA and state regulators that required DOD to address PFOS and PFOA levels that exceeded EPA's health advisory levels for drinking water at or near four installations.", "GAO also reported in October 2017 that DOD was taking steps to address health and environmental concerns with its use of firefighting foam that contains PFAS. These steps included restricting the use of existing foams that contain PFAS; testing foams to identify the amount of PFAS they contain; and funding research on developing PFAS-free foam that can meet DOD's performance requirements, which specify how long it should take for foam to extinguish a fire and keep it from reigniting. In a June 2018 report to Congress, DOD stated that no commercially available PFAS-free foam has met DOD's performance requirements and that research to develop such a PFAS-free foam is ongoing."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss our report on  the Department of Defense\u2019s (DOD) attention to drinking water  contaminants, part of our body of work on the federal government\u2019s  environmental liabilities. The federal government is financially liable for  cleaning up areas where federal activities have contaminated the  environment. Today\u2019s hearing addresses federal liability for and  procurement of per- and polyfluoroalkyl substances (PFAS), a large group  of man-made chemicals that include perfluorooctane sulfonate (PFOS)  and perfluorooctanoic acid (PFOA). PFOS, PFOA, and other PFAS can  be found in firefighting foam used by DOD since the 1970s for training  and emergency response activities to put fires out quickly while also  ensuring that they do not reignite.", "Exposure to elevated levels of PFOS and PFOA could cause increased  cancer risk and other health issues in humans, according to the Agency  for Toxic Substances and Disease Registry. The Environmental  Protection Agency (EPA) has found PFOS and PFOA in drinking water  across the United States, including in drinking water at or near DOD  installations. EPA has not regulated PFOS and PFOA in drinking water,  but EPA did issue nonenforceable drinking water health advisories for  these contaminants in May 2016, which we discuss further in this  statement. Addressing PFOS and PFOA contamination represents a  potentially significant environmental liability for DOD because the  regulatory requirements are still evolving, the scientific community is still  developing the underlying science, and the scope of work needed for  cleanup is not yet known.", "In our statement today, we discuss actions DOD has taken to address  elevated levels of PFOS and PFOA in drinking water at or near military  installations and to address concerns with DOD\u2019s firefighting foam. This  statement is largely based on our October 2017 report on DOD\u2019s efforts  to manage contaminants in drinking water. To perform our review for the  October 2017 report, we reviewed DOD policies and guidance related to  PFOS and PFOA and firefighting foam; analyzed DOD data on testing  and response activities for PFOS and PFOA; reviewed four administrative  orders issued by EPA and state regulators; visited seven installations;  and interviewed DOD and EPA officials. More detailed information on the  scope and methodology for that work can be found in the issued report.  This statement also includes updated information since our October 2017  report, based on our review of two 2018 DOD reports to Congress\u2014a  March 2018 report on the department\u2019s response to PFOS and PFOA  contamination and a June 2018 report on firefighting foam alternatives\u2014 and on our discussions with DOD officials about these issues and their  actions in September 2018.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["EPA regulates drinking water contaminants by issuing legally enforceable  standards under the Safe Drinking Water Act that generally limit the levels  of these contaminants in public water systems. EPA has issued such  regulations for approximately 90 drinking water contaminants. Public  water systems, including the DOD public water systems that provide  drinking water to about 3 million people living and working on military  installations, are required to comply with EPA and state drinking water  regulations.", "While EPA has not issued legally enforceable standards for PFAS in  drinking water, the agency has monitored water systems in the United  States for six types of PFAS chemicals\u2014including PFOS and PFOA\u2014in  order to understand the nationwide occurrence of these chemicals. This  monitoring effort was part of a larger framework established by the Safe  Drinking Water Act to assess unregulated contaminants. Under this  framework, EPA is to select for consideration from a list (called the  contaminant candidate list) those unregulated contaminants that present  the greatest public health concern, establish a program to monitor  drinking water for unregulated contaminants, and decide whether or not to  regulate at least 5 such contaminants every 5 years (called a regulatory  determination).", "EPA\u2019s regulatory determinations are to be based on the following three  broad statutory criteria, all of which must be met for EPA to decide that a  drinking water regulation is needed:  the contaminant may have an adverse effect on the health of persons; the contaminant is known to occur or there is a substantial likelihood that the contaminant will occur in public water systems with a frequency and at levels of public health concern; and in the sole judgment of the EPA Administrator, regulation of such contaminant presents a meaningful opportunity for health risk reduction for persons served by public water systems.", "To date, PFOS and PFOA are unregulated because EPA has not made a  positive regulatory determination for these chemicals.", "Even when EPA has not issued a regulation, EPA may publish drinking  water health advisories. In contrast to drinking water regulations, health  advisories are nonenforceable. Health advisories recommend the  amount of contaminants that can be present in drinking water\u2014\u201chealth  advisory levels\u201d\u2014at which adverse health effects are not anticipated to  occur over specific exposure durations. Most recently, in May 2016 EPA  issued lifetime health advisories for PFOS and PFOA. These advisories  set the recommended health advisory level for each contaminant\u2014or  both contaminants combined\u2014at 70 parts per trillion in drinking water.  According to DOD, the department also considers information in these  health advisories when determining the need for cleanup action at  installations with PFOS and PFOA contamination."], "subsections": []}, {"section_title": "DOD Has Initiated Actions to Address Elevated Levels of PFOS and PFOA in Drinking Water and Concerns with Firefighting Foam", "paragraphs": [], "subsections": [{"section_title": "DOD Has Initiated Actions to Identify, Test, Address, and Respond to Orders from Regulators Regarding PFOS and PFOA in Drinking Water", "paragraphs": ["We reported in October 2017 that, following the release of EPA\u2019s lifetime  health advisory for PFOS and PFOA in May 2016, each of the military  departments directed their installations to  identify locations with any known or suspected prior release of PFOS and PFOA and to address any releases that pose a risk to human health\u2014which can include people living outside DOD installations; and test for PFOS and PFOA in their drinking water and address any contamination above EPA\u2019s lifetime health advisory level.", "We further reported that, as of December 2016, DOD had identified 393  active or closed military installations with any known or suspected  releases of PFOS or PFOA. Since we issued our report, DOD has  updated that number to 401 active or closed installations, according to  August 2017 data provided in a March 2018 report to Congress on the  department\u2019s response to PFOS and PFOA contamination.", "We stated in our October 2017 report that the military departments had  reported spending approximately $200 million at or near 263 installations  for environmental investigations and response actions, such as installing  treatment systems or supplying bottled water, as of December 2016.", "The Air Force had identified 203 installations with known or suspected releases of PFOS and PFOA and had spent about $153 million on environmental investigations and response actions (accounting for about 77 percent of what the military departments had spent on PFOS and PFOA activities as of December 2016). For example, the Air Force reported spending over $5 million at Peterson Air Force Base in Colorado. During our visit to that installation in November 2016, officials showed us the current and former fire training areas that they were investigating to determine the extent to which prior use of firefighting foam may have contributed to PFOS and PFOA found in the drinking water of three nearby communities. Additionally, the Air Force had awarded a contract for, among other things, installing treatment systems in those communities.", "The Navy had identified 127 installations with known or suspected releases of PFOS and PFOA and had spent about $44.5 million on environmental investigations and response actions (accounting for about 22 percent of what the military departments had spent on PFOS and PFOA activities as of December 2016). For example, the Navy reported spending about $15 million at the former Naval Air Station Joint Reserve Base Willow Grove in Pennsylvania. During our visit to that installation in August 2016, officials told us that the Navy was investigating the extent to which PFOS and PFOA on the installation may have contaminated a nearby town\u2019s drinking water. At the time, the Navy had agreed to pay for installing treatment systems and connecting private well owners to the town\u2019s drinking water system, among other things.", "The Army had identified 61 installations with known or suspected releases of PFOS and PFOA and had spent about $1.6 million on environmental investigations (accounting for less than 1 percent of what the military departments had spent on PFOS and PFOA  activities as of December 2016), but had not yet begun any response  actions. At the time of our October 2017 report, the Army had not yet  completed testing its drinking water for PFOS and PFOA.", "DOD\u2019s March 2018 report to Congress provided updated information on  actions taken (such as providing alternative drinking water or installing  treatment systems) to address PFOS and PFOA in drinking water at or  near military installations in the United States, as shown in figure 1 below.  Specifically, DOD reported taking action as of August 2017 to address  PFOS and PFOA levels exceeding those recommended in EPA\u2019s health  advisories for drinking water for people (1) on 13 military installations and  (2) outside 22 military installations.", "We reported in October 2017 that, in addition to actions initiated by DOD,  the department also took action in response to state and federal  regulators. DOD responded to four administrative orders requiring that  DOD address PFOS and PFOA levels that exceeded EPA\u2019s health  advisory levels for drinking water. One order was issued by the Ohio  Environmental Protection Agency at Wright-Patterson Air Force Base in  Ohio, and three orders were issued by EPA at the former Pease Air Force  Base in New Hampshire; Horsham Air Guard Station in Pennsylvania;  and the former Naval Air Warfare Center Warminster in Pennsylvania.  For example, at Wright-Patterson Air Force Base, levels of PFOS and  PFOA that exceeded EPA\u2019s lifetime health advisory levels were found at  two wells on the installation in 2016. In response to the order from the  Ohio Environmental Protection Agency, the Air Force closed drinking  water wells, installed new monitoring wells, and provided bottled water to  vulnerable populations on the installation. Additional details on each order  and examples of actions by DOD to address the orders were reported on  in our October 2017 report.", "According to DOD, it may take several years for the department to  determine how much it will cost to clean up PFOS and PFOA  contamination at or near its military installations. Additionally, DOD  officials told us in September 2018 that they believe a legally enforceable  EPA drinking water cleanup standard would ensure greater consistency  and confidence in their cost estimates because such a standard would  give them a consistent target to clean up to. In a January 2017 report on  environmental cleanup at closed installations, we recommended that  DOD include in future annual reports to Congress best estimates of the  environmental cleanup costs for contaminants such as PFOS and PFOA  as additional information becomes available. DOD implemented this  recommendation by including in its fiscal year 2016 environmental report  to Congress (issued in June 2018) an estimate of the costs to respond to  PFOS and PFOA."], "subsections": []}, {"section_title": "DOD Has Taken Steps to Address Health and Environmental Concerns with Its Firefighting Foam", "paragraphs": ["In our October 2017 report, we found that DOD was taking steps to  address health and environmental concerns with its use of firefighting  foam that contains PFAS. These steps included restricting the use of  existing foams that contain PFAS, testing DOD\u2019s current foams to identify  the amount of PFAS they contain, and funding research into the future  development of PFAS-free foam that can meet DOD\u2019s performance and  compatibility requirements (see table 1). Some of these steps, such as  limiting the use of firefighting foam containing PFAS, were in place.  Others, such as researching potential PFAS-free firefighting foams, were  in progress at the time of our review.", "DOD\u2019s military specification for firefighting foam, which outlines  performance and compatibility requirements, also requires that firefighting  foam purchased by the department contain PFAS. We reported in  October 2017 that, according to DOD, there was no PFAS-free firefighting  foam that could meet DOD\u2019s performance and compatibility requirements.  As a result, the Navy\u2014which is the author of the military specification\u2014 had no plans to remove the requirement for firefighting foam to contain  PFAS. However, Navy officials told us during our review that if a PFAS- free foam were to be developed that could meet DOD performance and  compatibility requirements the Navy would make any necessary revisions  to the military specification at that time. Navy officials also said during our  review that they were planning to revise the military specification to set  limits for the amount of PFAS that are allowed in firefighting foam,  following their testing on the amounts of PFOS, PFOA, and other PFAS  found in foam used by DOD.", "In June 2018, DOD reported to Congress that its military specification for  firefighting foam was amended to set a maximum level of PFOS and  PFOA (800 parts per billion). DOD officials told us in September 2018  this maximum level applies to the amount of those chemicals in  firefighting foam concentrate before it is mixed and diluted with water to  create firefighting foam. The DOD officials also said that 800 parts per  billion is the lowest level of PFOS and PFOA that can be detected in  firefighting foam concentrate by current testing methods and  technologies, but DOD is working with foam manufacturers and  laboratories to achieve lower detection limits. According to the June 2018  report, DOD plans to establish lower limits for PFOS and PFOA in  firefighting foam in late 2018. The June 2018 report reiterated that,  according to DOD, no commercially available PFAS-free foam has met  the performance requirements of the military specification, and the report  also stated that DOD-funded research efforts to develop a PFAS-free  foam that can meet performance requirements are still ongoing.", "Chairman Paul, Ranking Member Peters, and Members of the  Subcommittee, this completes our prepared statement. We would be  pleased to respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this report, please contact  us at Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov or J. Alfredo  G\u00f3mez, (202) 512-3841 or gomezj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. Other individuals who made key  contributions to this statement include Maria Storts (Assistant Director),  Diane B. Raynes (Assistant Director), Michele Fejfar, Karen Howard,  Richard P. Johnson, Mae Jones, Amie Lesser, Summer Lingard-Smith,  Felicia Lopez, and Geoffrey Peck.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The firefighting foam DOD has used for decades contains chemicals that, at elevated exposure levels, can increase risks of cancer or other health issues. As a result, DOD:", "spent about $200 million on investigations and response (as of December 2016)", "identified 401 installations with known or potential releases of these chemicals", "took actions, like providing alternative drinking water, at 32 locations (as of August 2017)", "This testimony is largely based on our report on DOD's response to such contamination in drinking water, and is a part of our body of work on the federal government\u2019s environmental liabilities, an issue on our High Risk list."]}
{"id": "GAO-18-245", "url": "https://www.gao.gov/products/GAO-18-245", "title": "Commercial Real Estate Lending: Banks Potentially Face Increased Risk; Regulators Generally Are Assessing Banks' Risk Management Practices", "published_date": "2018-03-15T00:00:00", "released_date": "2018-03-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2006, federal banking regulators jointly issued guidance that described their expectations for sound risk management practices for banks with CRE concentrations. The guidance includes two CRE thresholds that regulators use to identify banks that are potentially exposed to significant CRE concentration risk and could be subject to greater supervisory scrutiny. Concentrations in CRE loans at U.S. banks have been steadily increasing\u2014raising safety and soundness concerns. In December 2015, the regulators jointly issued a public statement to remind banks of the 2006 CRE guidance.", "In light of the joint 2015 statement and GAO's ongoing monitoring of regulatory efforts to identify and respond to emerging threats to the banking system, GAO examined (1) trends in the CRE lending market, including changes in risk, and (2) actions taken by regulators to help ensure that banks with CRE concentrations are effectively managing the related risks. To address these issues, GAO analyzed CRE-related data; reviewed agency policies and guidance; and reviewed a nongeneralizable sample of 54 bank examinations conducted from 2013 through 2016 based on the banks' CRE concentrations, total assets, primary regulator, and geographic location. GAO also interviewed officials from the federal banking regulators."]}, {"section_title": "What GAO Found", "paragraphs": ["While the commercial real estate (CRE) sector has recovered since the 2007\u20132009 financial crisis, GAO's trend and econometric analyses generally indicate that risk in CRE lending by banks has increased over the past several years. Since the early 2000s, community banks have tended toward providing CRE loans more than other kinds of loans. Indicators of CRE market conditions and loan performance have been improving since 2011. At the same time, GAO's analyses of changes in CRE underwriting standards, property prices, and other data suggest that credit and concentration risks have increased in bank CRE lending. For example, the number of banks with relatively high CRE concentrations\u2014measured by the ratio of a bank's CRE loans to its total capital\u2014has been increasing. In addition, commercial property prices have been increasing rapidly, and property valuations also have risen in recent years. Similarly, GAO's predictive econometric models of CRE loan performance suggest that risk has increased, based largely on the simultaneous increase in bank CRE lending and CRE prices observed over the last several years, but is lower than the level associated with the 2007\u20132009 financial crisis.", "GAO found that federal banking regulators subjected banks with relatively high CRE concentrations to greater supervisory scrutiny based on its review of a nongeneralizable sample of 54 bank examinations covering 40 banks done by the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, and Office of the Comptroller of the Currency from 2013 through 2016. Of the 54 examinations that GAO reviewed, 41 of them covered banks with relatively high CRE concentrations. In all of these examinations, regulators examined whether the banks had adequate risk management practices and capital to manage their CRE concentration risk. In 26 of the 41 examinations, regulators did not find any risk management weaknesses. However, in 15 of the 41 examinations, regulators found the banks had weaknesses in one or more risk management areas, such as board and management oversight, management information systems, or underwriting. The regulators generally communicated their findings to the banks in the reports of examination and directed the banks to correct their risk management weaknesses."]}], "report": [{"section_title": "Letter", "paragraphs": ["Concentrations in commercial real estate (CRE) loans at U.S. banks have  been steadily increasing, raising safety and soundness concerns because  of the potential for such concentrations to make the banks more  susceptible to failure. As an asset class, CRE is prone to volatility and  cyclical behavior, as illustrated by the sharp downturn in the CRE market  generally following the 2007\u20132009 financial crisis. A bank\u2019s CRE  concentration can be measured by its ratio of CRE loans to its total  capital. Since the early 2000s, community banks have trended toward  providing CRE loans more than other kinds of loans. Following this trend,  the Federal Deposit Insurance Corporation (FDIC), the Board of  Governors of the Federal Reserve System (Federal Reserve), and Office  of the Comptroller of the Currency (OCC) jointly issued guidance in 2006  (hereafter referred to as the 2006 CRE guidance) that described their  expectations for sound risk management practices for banks with  concentrations in CRE loans. In December 2015, the federal banking  regulators jointly issued a public statement to remind banks of the 2006  CRE guidance. According to the statement, the regulators observed that  (1) many CRE asset and lending markets were experiencing substantial  growth; and (2) certain risk management practices at some banks were  causing concern, including a greater number of underwriting policy  exceptions and insufficient monitoring of market conditions to assess the  risks associated with these concentrations.", "In our prior work, federal banking regulators told us that they have taken  steps intended to improve their ability to identify and respond to emerging  risks based on lessons learned from past banking crises. Our review of  failed banks also found that regulators frequently identified weak  management practices at banks involved in higher-risk activities early on  in each crisis and before the banks began experiencing declines in  capital. However, regulators were not always effective in directing bank  management to address underlying problems before bank capital began  to decline, and it was often too late to avoid failure. We have incorporated  these and other regulatory lessons learned into a framework for  monitoring federal banking regulators\u2019 efforts to identify and respond to  emerging risks to the banking system. Through such monitoring, we  identified CRE for a targeted assessment of the federal banking  regulators\u2019 supervisory efforts.", "We prepared this report under the authority of the Comptroller General to  assist Congress with its oversight responsibilities. Given the federal  banking regulators\u2019 joint 2015 statement on CRE lending and our ongoing  monitoring of their efforts to identify and respond to emerging threats to  the banking system, this report examines  trends in the CRE lending markets, including changes in the level of  credit and concentration risk in the markets, and actions taken by federal banking regulators through their  examinations to help ensure that banks with CRE concentrations are  effectively managing the related risks.", "To address our objective on trends in the CRE lending markets, we  reviewed academic literature and prior GAO work, analyzed FDIC,  Federal Reserve, and other data on CRE markets and lending, and  interviewed officials from federal banking agencies and CRE data  providers. We evaluated trends in these data and used a subset of these  data to estimate several predictive models of aggregate losses on bank  CRE loans. For more information on our predictive models, see appendix  II.", "To address our objective on actions taken by federal banking regulators,  we analyzed Consolidated Reports of Condition and Income (Call Report)  data from SNL Financial for the period from 2011 through 2016 to  calculate banks\u2019 construction and land development (CLD) and CRE  concentrations and identify banks whose concentrations exceeded, in full  or in part, the 2006 CRE guidance during part or all of the period. Using  such analysis, we selected a nongeneralizable sample of 40 banks that  underwent full-scope examinations from 2013 through 2016 based on  their CLD and total CRE concentrations, total assets, primary regulator,  and geographic location. More specifically, we selected 20 FDIC- supervised banks, 10 Federal Reserve-supervised banks, and 10 OCC- supervised banks. We requested from FDIC the reports of examination  and related workpapers that covered its full-scope examinations of the 20  banks conducted in 2013 or 2014 (20 examinations). We requested from  the Federal Reserve and OCC the reports of examination and related  workpapers that covered their two consecutive full-scope examinations of  the 20 banks conducted from 2013 through 2016 (40 examinations).  Although we requested a total of 60 bank examinations, we reviewed 54  because 6 were not applicable to our review. We also interviewed  officials from FDIC, Federal Reserve, and OCC regarding the CRE  regulatory guidance and oversight by the federal banking regulators.", "For the data that we used in our analyses under both of our objectives,  we assessed the reliability of the data by, among other things,  interviewing knowledgeable officials, reviewing relevant documentation,  and corroborating trends across multiple data sources. We determined  the data were sufficiently reliable for our reporting objectives. For more  information on our scope and methodologies, see appendix I.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Banking Supervision", "paragraphs": ["The purpose of federal banking supervision is to help ensure that banks  throughout the financial system are operating in a safe and sound manner  and are complying with banking laws and regulations in the provision of  financial services. Banks in the United States are supervised by one of  the following three federal regulators:", "FDIC supervises all FDIC-insured state-chartered banks that are not  members of the Federal Reserve System and insured state savings  associations and insured state chartered branches of foreign banks.", "The Federal Reserve supervises commercial banks that are state- chartered and members of the Federal Reserve System.", "OCC supervises federally chartered national banks and savings  associations (also known as federal thrifts).", "FDIC, the Federal Reserve, and OCC are required to conduct a full- scope, on-site examination of each of their supervised banks at least  once during each 12-month period. The regulators may extend the  examination interval to 18 months, generally for banks and thrifts that  have less than $1 billion in total assets and that meet certain conditions,  such as satisfactory ratings, are well capitalized, and are not being  subject to a formal enforcement action. As part of a full-scope  examination, examiners review a bank\u2019s risk exposure within a number of  components using the Uniform Financial Institutions Rating System,  which also is referred to as the CAMELS rating system (capital adequacy,  asset quality, management, earnings, liquidity, and sensitivity to market  risk). Evaluations of CAMELS components consider a bank\u2019s size and  sophistication, the nature and complexity of its activities, and its risk  profile.", "The end result of a full-scope, on-site examination is a report of  examination, which includes the CAMELS ratings and other findings and  is provided to the bank\u2019s management and board of directors. A report of  examination may include deficiencies or other issues that examiners  found and that a bank is expected to address within specific time frames.  Such issues generally are called supervisory recommendations by FDIC,  supervisory findings by the Federal Reserve, and supervisory concerns  by OCC. For purposes of this report, we collectively refer to such issues  as supervisory concerns. Supervisory concerns may be designed to  correct practices that deviate from sound risk management principles or  noncompliance with laws and regulations. Supervisory concerns that  involve more significant issues are brought to the attention of a bank\u2019s  board of directors and senior management in the report of examination as matters requiring immediate attention (MRIA) or matters requiring  attention (MRA) under the Federal Reserve\u2019s policies, matters requiring  board attention (MRBA) under FDIC\u2019s policies, and MRAs under OCC\u2019s  policies. If a bank were to fail to address a supervisory concern, its  regulator could subject the bank to enhanced supervision, downgrade of  a component or composite rating, or other supervisory actions, such as  informal or formal enforcement actions."], "subsections": []}, {"section_title": "CRE Lending and Associated Risks", "paragraphs": ["Under their 2006 guidance, regulators define CRE loans to include  construction loans, loans to finance CRE that are not secured by CRE,  loans secured by multifamily property, and loans secured by nonfarm,  nonresidential property in which the primary source of repayment derives  from the rental income associated with the property or the proceeds of the  sale, refinancing, or permanent financing of the property. CRE loans in  which the primary source of repayment is not the property itself are called  owner-occupied loans and can include loans to businesses for working  capital purposes that use real estate as collateral. For example, a line of  credit for a business\u2019s operating expenses might be secured in part by  commercial property, such as an office.", "Construction and land development (CLD) loans generally are considered  to be the riskiest class of CRE, due to their long development times and  because they can include properties (such as housing developments or  retail space in a shopping mall) that are built before having firm  commitments from buyers or lessees. In addition, by the time the  construction phase is completed, market demand may have fallen, putting  downward pressure on sales prices or rents\u2014making this type of loan  more risky."], "subsections": []}, {"section_title": "Regulatory Guidance on CRE Concentrations and Risk Management Practices", "paragraphs": ["Based on concerns about the increase in CRE concentrations at  community banks and the risks associated with such concentrations,  FDIC, the Federal Reserve, and OCC jointly issued guidance in  December 2006 on CRE concentrations and sound risk management  practices. The guidance described the regulators\u2019 expectations for  sound risk management practices for banks with concentrations in CRE  loans. Specifically, the guidance identified seven key elements, or internal  control areas, that a bank\u2019s risk management practices should address to  identify, monitor, and control its CRE concentration risk (see fig. 1).", "The 2006 CRE guidance also sets forth three criteria to identify banks  with CRE loan concentrations that could be subject to greater supervisory  scrutiny. According to the guidance, a bank that has experienced rapid  growth in CRE lending, has notable exposure to a specific type of CRE,  or is approaching or exceeds the following supervisory criteria may be  identified for further supervisory analysis of the level and nature of its  CRE concentration risk:", "CLD concentration threshold: CLD loans represent 100 percent or  more of a bank\u2019s total capital.", "Total CRE concentration threshold: Total nonowner-occupied CRE  loans (including CLD loans) represent 300 percent or more of a  bank\u2019s total capital and total CRE lending increased by 50 percent or  more during the previous 36 months.", "According to the guidance, the CLD and CRE thresholds do not constitute  limits on a bank\u2019s CRE lending activity but rather serve as high-level  indicators to identify banks potentially exposed to CRE concentration risk.", "In 2011, we reported on how the federal banking regulators had  responded to the potential risks of growing CRE concentrations at  community banks, including by jointly issuing the 2006 CRE concentration  guidance. We recommended that the regulators should enhance or  supplement the 2006 CRE guidance and take steps to better ensure that  such guidance is consistently applied. The regulators have taken steps to  address our recommendation.", "Out of the approximately 5,900 banks that had a CRE loan portfolio as of  the end of June 2017, a total of 504 banks exceeded either 100 percent in  CLD loans as a percentage of total risk-based capital, or 300 percent in  CRE loans as a percentage of total-risk based capital and had seen 50  percent CRE portfolio growth during the previous 36 months. Of these  504 banks, a total of 69 banks exceeded both the CLD criteria and the  total CRE criteria (including the growth component).", "In December 2015, federal banking regulators issued a joint statement to  remind banks of the 2006 regulatory guidance on prudent risk  management practices for CRE lending activity through economic cycles.  The regulators noted, among other trends, that many banks\u2019 CRE  concentration levels had been rising. According to the statement,  regulators would continue to pay special attention to potential risks  associated with CRE lending during 2016. Specifically, the regulators stated that when conducting examinations that include a review of CRE  lending activities, they would focus on banks\u2019 implementation of the  prudent principles in the 2006 CRE guidance and other applicable  guidance relative to identifying, measuring, monitoring, and managing  concentration risk in CRE lending activities.", "According to officials from FDIC, the Federal Reserve, and OCC, their  agencies use a variety of formal and informal processes to monitor the  condition of banks and identify risks, including CRE concentration risk.  For example, The Federal Reserve has a National Risk Council and FDIC  and OCC have National Risk Committees that meet routinely to identify  and evaluate risks facing banks and are supported by a number of other  committees or other groups. FDIC officials told us that analysis done by  FDIC\u2019s Regional Risk Committees identified growth in CRE  concentrations in 2015 and brought the issue to the National Risk  Committee\u2019s attention. OCC began actively monitoring CRE loan growth  in the middle of 2014 and began focusing on CRE concentration risk  management during bank examinations in 2015. OCC officials also stated  that CRE concentration risk has been a key risk issue for the agency\u2019s  National Risk Committee since early 2016. Federal Reserve officials told  us that the agency, including the Federal Reserve banks, began to  monitor bank CRE concentrations more closely around mid-2013 after  identifying an increase in CRE concentrations. According to FDIC,  Federal Reserve, and OCC officials, they met together in early 2015 to  discuss CRE lending growth and the rise in bank CRE loan  concentrations and held subsequent meetings throughout the year, in part  to discuss policy options for helping to ensure that banks were  appropriately managing their CRE concentration risks. One of the  outcomes of such interagency coordination was the December 2015 joint  statement on CRE concentrations."], "subsections": []}]}, {"section_title": "Credit and Other Risks Related to Bank CRE Lending Have Increased over the Past Several Years", "paragraphs": ["Although the CRE sector has recovered since the 2007\u20132009 financial  crisis, our trend and econometric analyses generally indicate that credit  and other risks related to bank CRE lending have increased over the past  several years.", "Based on indicators of CRE market conditions and loan performance, the  CRE sector has recovered from the 2007\u20132009 financial crisis. For  example, spending on CRE construction projects\u2014a source of demand  for bank financing\u2014has rebounded. Vacancy rates for apartments, office  buildings, and other CRE properties have declined. Similarly, as shown in  figure 2, delinquency and charge-off rates on bank CRE loans have fallen  from their post-crisis peaks and are at or below their lowest levels since  2002. Although these rates provide information on the current  performance of bank CRE loans, they provide little or no information  about potential future risks faced by banks. For example, high-risk loans  made to less creditworthy borrowers could perform well when property  markets and the economy are doing well but may perform poorly when  property markets or the economy begin to slow.", "At the same time, our analyses of other market, underwriting, and lending  data and forecasts from predictive econometric models we developed  suggest that banks\u2019 credit and concentration risks related to their CRE  lending have increased. As shown in figure 3, according to a Federal  Reserve survey, banks lowered their CRE loan underwriting standards\u2014 terms and conditions under which banks extend loans\u2014after the financial  crisis, but more banks began to tighten their underwriting standards since  late 2015. In general, tightening underwriting standards may indicate  that loan officers are reevaluating the degree of risk in CRE markets  served by banks. According to Federal Reserve data, a larger share of  banks has tightened underwriting standards on multifamily properties,  such as apartments.", "CRE property prices, particularly for multifamily properties, have  increased rapidly in recent years, and CRE property valuations have  similarly increased. For example, as shown in figure 4, capitalization rates  (the ratio of income generated by a property to the property\u2019s price) on  CRE properties have trended downward since around 2010\u2014indicating  that borrowers (i.e., property owners) may be earning less of a return on  their CRE properties. Capitalization rates can be indicative of expected  future price changes\u2014for example, low capitalization rates may reflect  expectations of future price increase, but can also be driven by investor  sentiment not associated with fundamental aspects of properties.", "In addition, as shown in figure 5, the number of banks with concentrated  portfolios in CLD or total CRE loans has been gradually increasing since  around 2014. Greater concentrations in a particular lending sector (e.g.,  commercial real estate, residential real estate, or business lending) leave  banks more vulnerable to a sectoral downturn, all else equal.", "To further assess risk in bank CRE lending, we developed and estimated  several predictive models of aggregate losses on bank CRE loans. The  models incorporate measures of CRE property prices, bank lending, and  underwriting standards. The models generally found that, historically,  higher future losses are predicted when CRE lending and prices are  simultaneously high relative to gross domestic product, and when banks  are tightening underwriting standards. Based largely on the simultaneous  increase in bank CRE lending and CRE prices observed over the last  several years, these models suggest that credit risk has increased,  though it remains lower than the level of risk associated with the 2007\u2013 2009 financial crisis. As we noted earlier, high property valuations and  substantial increases in lending can simultaneously weaken collateral  protections and indicate lower borrower quality, both of which can raise  the risk of losses should the economy or CRE sector weaken. (See app. II  for additional information on our models.)"], "subsections": []}, {"section_title": "Regulators Examined Risk Management Practices of Banks with CRE Concentrations", "paragraphs": ["We found that regulators generally subjected banks with relatively high  concentrations in CRE loans to greater supervisory scrutiny in  comparison to banks with relatively lower concentrations in CRE loans in  our review of 54 examinations for 40 banks conducted from 2013 through  2016. In all of these examinations, the regulators specifically assessed  whether each bank had adequate risk management practices and capital  for managing its CRE concentration risk and generally found that the  banks had adequate risk management practices and capital. In a few  examinations, regulators differed in how they addressed supervisory  concerns about a bank\u2019s CRE-related risk management practices."], "subsections": [{"section_title": "Regulators Examined Whether Banks with Relatively High CRE Concentrations Had Adequate Practices and Capital to Manage Their CRE Concentration Risk", "paragraphs": ["In our review of a nongeneralizable sample of 54 examinations conducted  from 2013 through 2016, we found that FDIC, Federal Reserve, and OCC  subjected banks with relatively high concentrations in CRE loans to  greater supervisory scrutiny. In both their 2006 CRE guidance and 2015  CRE statement, the regulators indicated that banks with relatively high  CLD or total CRE concentrations should maintain risk management  practices commensurate with the level and nature of their concentration  risk. The 2006 CRE guidance recognized that the sophistication of a  bank\u2019s CRE risk management practices depends on, among other things,  the level and nature of its CRE concentrations and associated risk. As  noted earlier, the guidance notes that a bank\u2019s risk management  practices should address seven internal control areas: (1) board and  management oversight; (2) portfolio management; (3) management  information systems; (4) market analysis; (5) credit underwriting  standards; (6) portfolio stress testing and sensitivity analysis; and (7)  credit risk review function. Based on our analyses, we found that the 2006  CRE guidance\u2019s risk management framework is adequately designed to  help ensure that banks effectively identify, measure, monitor, and control  their CRE concentration risk. For example, the guidance is consistent with  credit and concentration risk principles issued by international standard- setting bodies.", "Of the 54 reports of examination that we reviewed, 41 of them covered  banks whose CLD or total CRE concentrations exceeded the CLD  concentration threshold, total CRE concentration threshold, or both  thresholds set forth in the 2006 guidance. In all of these examinations, we  found that FDIC, Federal Reserve, and OCC examiners generally  assessed whether each bank had implemented adequate risk  management practices to manage their concentration risk. As shown in  figure 6, in 26 of the 41 examinations, FDIC, Federal Reserve, and OCC  examiners did not find any weaknesses in the banks\u2019 CRE risk  management practices across the seven internal control areas, but did  find weaknesses in the remaining 15 examinations.", "In 15 of the 41 examinations we reviewed, FDIC, Federal Reserve, and  OCC examiners found the banks had CRE-related risk management  weaknesses in at least one of the seven internal control areas. Examiners  most frequently found risk management weakness in three internal  control areas: board and management oversight (11 instances),  management information systems (8 instances), and stress testing (7  instances). To a slightly lesser extent, examiners found weaknesses in  portfolio management, credit underwriting standards, and credit risk  review function. Examiners communicated their supervisory concerns to  these 15 banks in their reports of examinations.", "In 12 of the examinations, examiners included MRAs, MRBAs, or  MRIAs in their reports of examination that directed the banks to  correct their risk management weaknesses.", "In the other three examinations, examiners included  recommendations or other notes in their reports of examination that  generally directed the banks to correct their risk management  weaknesses.", "Consistent with the 2006 CRE guidance, we found that examiners  generally did not use the CLD or total CRE concentration thresholds as  limits on bank CRE lending. With two exceptions, examiners did not  direct banks that exceeded the CLD or CRE threshold to reduce their  concentrations but rather focused on ensuring that the banks\u2019 risk  management practices were commensurate with the nature and level of  their concentration risk. In the two exceptions, examiners found the  banks\u2019 practices and capital inadequate for managing their CLD or CRE  concentration risk and directed the banks to reduce their concentrations  and improve their risk management practices.", "We found that FDIC, Federal Reserve, and OCC examiners varied in the  extent to which they documented\u2014in the reports of examination and  supporting workpapers\u2014the scope of their review of banks\u2019 CRE-related  risk management practices and findings. For example, we were not  always able to determine whether examiners found a bank\u2019s practices  adequate in one or more of the seven internal control areas based on our  review of the report of examination and, if available, supporting  workpapers. According to the regulators, reports of examinations are  used primarily to document practices found to be inadequate and not  practices found to be adequate. Moreover, the regulators told us that their  examiners recently have been required to use a CRE examination  module to document their assessment and findings of banks with  concentrations exceeding the CLD or CRE threshold."], "subsections": [{"section_title": "Capital and Concentration Risk", "paragraphs": ["In the 41 examinations we reviewed where banks exceed one of the  concentration thresholds, FDIC, Federal Reserve, and OCC examiners  assessed whether the banks generally had capital commensurate with their CRE concentration risk. In 34 of the examinations, examiners  determined that the banks\u2019 capital levels were adequate for managing  their CLD or total CRE concentration risk. In 7 of the examinations,  examiners determined that the banks\u2019 capital levels were inadequate. For  six of the seven banks, examiners directed the banks in the reports of  examination to reduce or manage their CRE concentrations in light of  inadequate capital. In the case of one bank, examiners required the bank  to comply with a previous formal enforcement action that addressed the  need for the bank to adhere to its board-approved capital plan."], "subsections": []}]}, {"section_title": "Review of CRE-Related Risk Management Practices in Subsequent Examination Cycles", "paragraphs": ["For banks with relatively high CLD or total CRE concentrations, we found  that Federal Reserve and OCC examiners assessed the banks\u2019 CRE- related risk management practices in subsequent examinations. In our  review of 41 examinations of banks that exceeded the CLD or CRE  threshold, 26 of them covered two examination cycles of 13 banks  conducted from 2013 through 2016. We found that examiners assessed  the banks\u2019 practices for managing their concentration risk in both  examinations.", "In 14 examinations (covering 7 banks), examiners found that the  banks had adequate risk management practices in both examinations.", "In six examinations (covering three banks), examiners found aspects  of the banks\u2019 risk management practices to be inadequate in their  2013 or 2014 examination and noted their supervisory concerns in the  reports of examination. In the subsequent examinations, the  examiners found that the banks had adequately addressed the  previously identified risk management weaknesses.", "In six examinations (covering three banks), examiners found the  banks\u2019 practices for managing their CRE concentration risk to be  adequate in the 2013 or 2014 examinations but inadequate in the  subsequent examinations. The examiners issued the banks MRAs or  MRIAs or took an informal enforcement action."], "subsections": []}, {"section_title": "Regulators Generally Did Not Examine CRE-Related Risk Management Practices of Banks with Concentrations below the CLD or Total CRE Threshold", "paragraphs": ["For banks with concentrations below the CLD or total CRE threshold, we  found that regulators generally did not examine the banks\u2019 CRE-related  risk management practices. Thirteen of the 54 examinations we reviewed  covered banks that did not exceed the CLD or CRE thresholds. Although  the banks did not exceed either threshold, OCC examiners assessed the  banks\u2019 CRE-related risk management practices in 3 of the  examinations. In 1 examination, examiners determined that the bank\u2019s  CRE-related risk management practices were adequate. The other 2  examinations covered subsequent cycle examinations of the same bank.  In the first examination, examiners found that the bank had adequate  practices for managing risk associated with its CRE loans but directed the  bank through an MRA to incorporate stress testing of the loan portfolio  into its monitoring. In the subsequent examination, the examiners found  that the bank had addressed the MRA. In the other 10 examinations,  FDIC, Federal Reserve, and OCC examiners did not mention in the report  of examination the banks\u2019 practices for managing the risk associated with  their CRE loans.", "FDIC, Federal Reserve, and OCC officials told us that examiners use  their professional judgment in determining whether to review a bank\u2019s  CRE-related risk management practices if the bank\u2019s concentration is  below the CLD and CRE threshold. This approach is consistent with the  overall risk-based supervisory process used by the regulators, which  focuses examiner resources on assessing bank management\u2019s ability to  identify and control risks. For example, FDIC\u2019s examination guidelines  note that examiners should focus their resources on a bank\u2019s highest risk  areas when assessing risk management programs, financial conditions,  and internal controls. According to the guidance, the exercise of  examiner judgment to determine the scope and depth of review in each  functional area is crucial to the success of the risk-focused supervisory  process."], "subsections": []}, {"section_title": "Regulators Differed in How They Addressed a Few Supervisory Concerns about Banks\u2019 CRE-Related Risk Management Practices", "paragraphs": ["In a few examinations, we found differences across regulators in how  they addressed supervisory concerns about banks\u2019 CRE-related risk  management practices because of differences in the regulators\u2019 policies.  In our nongeneralizable sample of 54 examinations, Federal Reserve,  FDIC, and OCC examiners included CRE-related supervisory concerns,  such as recommendations, MRAs, or MRBAs, in 22 of the reports of  examinations. Although the regulators have policies for identifying and  communicating supervisory concerns, their policies use different criteria.  For example, OCC\u2019s policies instruct examiners to use MRAs to describe  practices that a bank must implement or correct to address a deficiency  and not to use MRAs to require enhancements to bank practices that  meet acceptable standards. However, the Federal Reserve\u2019s and  FDIC\u2019s policies do not expressly include such criteria. Consistent with  their policies, OCC examiners included MRAs in the reports of  examination that we reviewed only when they found a bank\u2019s CRE-related  risk-management practices to be inadequate. In contrast, in 2 reports of  examination, we found that FDIC examiners did not find the banks\u2019 CRE- related risk management practices to be inadequate but included MRBAs  to direct the banks to enhance or sustain certain CRE-related risk  management practices. Similarly, in 1 report of examination, Federal  Reserve examiners found that the bank\u2019s risk management practices and  capital were adequate for its CRE concentrations but included an MRA to  require the bank to enhance its capital plan to include concentration risk  considerations."], "subsections": []}, {"section_title": "FDIC, Federal Reserve, and OCC Have Recently Taken Formal Enforcement Actions against Banks for Not Adequately Managing Their CRE Concentration Risk", "paragraphs": ["In addition to their examinations, federal banking regulators have taken  informal and formal enforcement actions against banks for not adequately  managing their CRE concentration risk. In general, initial consideration  and determination of whether informal or formal action is required usually  results from examination findings. Unlike informal enforcement actions,  formal enforcement actions are published or publicly available. From  2013 through 2016, FDIC, the Federal Reserve, and OCC took formal  enforcement actions against banks for not adequately managing risks  related to their CRE concentrations, including those outlined in the jointly  issued 2006 CRE guidance.", "FDIC took 22 formal enforcement actions against banks for matters  related to their CRE concentrations during this period.", "The Federal Reserve took 2 formal enforcement actions against  banks for matters related to their risk management of CRE lending.", "OCC took 11 formal enforcement actions against banks for matters  related to their CRE concentrations during this same period.", "The majority of these formal enforcement actions discussed the 2006  CRE guidance and directed the banks to improve their practices for  managing their CRE concentration risk. For example, in a number of  formal enforcement actions, the regulators ordered the banks to revise  their written concentration risk management programs for identifying,  monitoring, and controlling risks associated with concentrations of credit,  consistent with the 2006 CRE guidance."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FDIC, the Federal Reserve, and,  OCC for review and comment. The agencies provided technical  comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and FDIC, the Federal Reserve, and OCC. This report will  also be available at no charge on our website at http://www.gao.gov.", "Should you or your staff have questions concerning this report, please  contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives in this report were to examine: (1) trends in the  commercial real estate (CRE) lending markets, including changes in the  level of credit and concentration risk in the markets, and (2) actions  federal banking regulators took through their examinations to help ensure  that banks with CRE concentrations are effectively managing the related  risks.", "To examine trends in the CRE lending markets, we reviewed academic  literature and prior GAO work and interviewed officials from the federal  banking regulators and private data providers. Specifically, we  interviewed officials at the Board of Governors of the Federal Reserve  System (Federal Reserve), the Federal Deposit Insurance Corporation  (FDIC), and the Office of the Comptroller of the Currency (OCC) to help  identify potential indicators of risk in CRE markets. To further inform our  assessment of risk, we reviewed prior GAO work on the lessons learned  from prior banking crises and the use of early warning models for  monitoring the financial system. We also reviewed academic research on  early warning models of banking and real estate-related crises.", "To report trends and assess risk, we reviewed and analyzed a range of  data that we considered to be reflective of various aspects of risk in CRE  lending markets. Specifically, we reviewed and analyzed commercial  property vacancy data from REIS (a private commercial real estate data  provider); commercial property construction data from the U.S. Census  Bureau; data on delinquencies and charge-offs on bank CRE loans from  the Federal Reserve; data on commercial property prices and  capitalization rates from Real Capital Analytics (a private commercial real  estate data provider); FDIC data on bank CRE lending; and Federal  Reserve data on underwriting standards. We evaluated trends in these  data and used a subset of these data to estimate several predictive  models of aggregate losses on bank CRE loans. (See app. II for more  information on our predictive models.)", "To examine actions taken by federal regulators to help ensure that banks  with high CRE concentrations are effectively managing the related risks,  we reviewed and analyzed their relevant guidance and regulations on  bank CRE lending, examination policies and procedures (e.g.,  examination manuals and modules), studies and other publications on  risks in the banking industry, and formal enforcement actions taken from  2013 through 2016 for CRE-related matters. In addition, we analyzed  Consolidated Reports of Condition and Income data from SNL Financial  for the period from 2011 through 2016 to calculate banks\u2019 construction  and land development (CLD) and CRE concentrations during the period.  Specifically, we used the concentration formulas in the 2006 CRE  concentration guidance (jointly issued by the federal banking regulators)  to calculate banks\u2019 CLD and CRE concentrations and identify banks  whose CRE concentrations exceeded, in full or in part, the guidance\u2019s  CRE concentration thresholds during part or all of the time frame.  Based  on whether the banks\u2019 CRE concentrations exceeded the thresholds and  other criteria discussed below, we selected a nongeneralizable sample of  40 banks overseen by FDIC, the Federal Reserve, or OCC. For the banks  in our sample, we requested from the regulators copies of the reports of  examination and, if available, related workpapers prepared by the  regulators based on their full-scope examinations of the banks done from  2013 through 2014, and from 2015 through 2016.", "In addition to using banks\u2019 CRE concentrations as a basis to select  examinations, we judgmentally selected a nonprobability sample of banks  based on the following criteria:", "Total asset size: We considered the size of the banks based on their  total assets and selected banks from each of the following three  ranges: (1) banks with $1 billion or more in total assets, (2) banks with  $100 million or more but less than $1 billion in total assets, and (3)  banks with less than $100 million in total assets.", "Primary regulator: We considered the primarily regulator of the  banks and selected a sample of 40 banks that resulted in a total of 20  examinations to review from each regulator.", "Geographic distribution: We selected banks to ensure that at least  one bank was from each of the four regions of the U.S. Census and  each of the nine divisions within those regions.", "Based on the 40 banks we selected, we reviewed and analyzed 54  reports of examination and, if available, the related workpapers. We  analyzed the examinations using criteria or other requirements specified  in the 2006 CRE guidance jointly issued by the regulators and their  examination policies and procedures. We did not review six examinations  of banks supervised by the Federal Reserve. We also interviewed  officials from FDIC, Federal Reserve, and OCC, and from a national  banking association about bank CRE lending and applicable CRE  guidance and requirements.", "For the data we analyzed under both of our objectives, we took a number  of steps to assess the reliability of the data, including interviewing data  providers; corroborating trends across multiple data sources; reviewing  related documentation; inspecting data for missing values, outliers, or  other errors; and reviewing relevant, prior GAO work. We determined that  these data were sufficiently reliable for our reporting objectives.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Predictive Models of Aggregate Losses on Bank Commercial Real Estate Loans", "paragraphs": ["We developed and estimated several models of aggregate losses on  bank commercial real estate (CRE) loans. These models attempt to  predict future aggregate charge-offs using contemporary indicators of  potential risks. We incorporated indicators of risk based on the cross- country research literature on early warning models of banking risk and  prior GAO work on identifying early warning models as tools that could  assist financial regulators in assessing risk. One study summarized the  overall intuition for models of this class in the following way: \u201cimbalances  manifest themselves in the coexistence of unusually rapid cumulative  growth in private sector credit and asset prices.\u201d Our results were  consistent with this concept and extend the aggregate early warning  model literature to a sectoral model. As such, our models incorporate  measures of CRE property prices, bank lending volumes, and bank loan  underwriting standards.", "The models predict charge-offs 2\u20133 years into the future (the dependent  variable is the average charge-off rate for 8 through 11 quarters into the  future), using commercial bank charge-off rates from the Board of  Governors of the Federal Reserve System (Federal Reserve), first quarter  1991 to second quarter 2017. (See below for an illustrative regression  equation for one of these models.)", "We began with two model variations, one based on the levels of key  variables and the other based on their growth rates, using the following  independent variables, respectively:  \u201cLevel\u201d model: Level of CRE prices to gross domestic product (GDP),  level of bank CRE lending to GDP, the interaction of the level of CRE  prices and lending, and the net percentage of banks tightening  underwriting standards on CRE loans.  \u201cGrowth\u201d model: Growth rate of CRE prices over the last year, growth  rate of bank CRE lending over the last year, interaction of price and  lending growth, and the net percentage of banks tightening  underwriting standards on CRE loans.", "By inspection, the model based on levels also captured key aspects of  the evolution of aggregate losses on bank CRE loans in recent  decades\u2014for example, low charge-offs prior to the crisis, the rapid  increase during crisis, and very low charge-offs in recent years. In this  model higher losses are predicted by tightening underwriting standards,  and the interaction of (i.e., simultaneous increase in) the level of CRE  prices and the level of CRE lending. The bulk of the explanatory power of  the model appears to come from the interaction of the level of CRE prices  and the level of CRE lending\u2014consistent with Borio and Drehmann\u2019s  view that the coexistence of rapidly increasing credit and prices is  associated with greater risk. These results are also consistent with a  more general theory, for example, that periods of economic stability  induce greater risk-taking over time, bidding up asset prices and  loosening underwriting standards until ultimately increased valuations  become unsustainable, prices fall, and borrowers begin to default.", "We estimated a number of additional models for robustness, to determine  if goodness-of-fit and forecasts could be improved markedly, and to  assess the degree of forecast uncertainty. For example we estimated a  model with a censored dependent variable and used information criteria  to select models that combined elements from our initially separate  models based on growth rates and levels as well as a model that includes  current charge-offs. In figure 7, we report the general trend in expected  future charge-offs as well as convey forecast uncertainty based on  differences in the forecasts of three of these models.", "In figure 8, we convey forecast uncertainty based on the 75 percent  confidence interval for a combined model that we selected based on  information criteria.", "Implicit in this exercise is the assumption that the data-generating  process is reasonably stable\u2014as a result, structural change associated  with new financial products, new risk management tools, and new legal  and regulatory frameworks could reduce the stability of the data- generating process. We interpret our results and forecasts in light of  these potential limitations. Specifically, we do not interpret model results  as concrete, precise predictions of aggregate commercial real estate  losses but rather as an additional, general indication of the degree of risk  in bank CRE lending.", "We mitigate risks associated with estimating this type of model with  appropriate diagnostics, out-of-sample testing, and by developing the  model in the context of the well-established early warning literature. That  said, some inevitable limitations remain, including the potential omission  of important risk factors and other approximations associated with our  specification (e.g., our choice of a linear functional form). In addition,  diagnostics for detecting nonstationary time series are imperfect,  especially with small sample sizes, which may inflate our measures of  statistical significance and traditional goodness-of-fit measures like r- squared. These biases may be present, however, in models that still  generate useful predictions. In this \u201csmall data\u201d context there is also risk  of fitting (or over-fitting) the model to predict a particular credit event\u2014 though, again, this risk is mitigated somewhat in the context of the broad  cross-country early warning literature and the use of out-of-sample  testing."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Richard Tsuhara (Assistant  Director), Tarek Mahmassani (Analyst in Charge), Abigail Brown, Tarik  Carter, M\u2019Baye Diagne, Michael Hoffman, Risto Laboski, Marc Molino,  Jessica Sandler, Jennifer Schwartz, and Andrew Stavisky made  significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-232", "url": "https://www.gao.gov/products/GAO-19-232", "title": "Disaster Recovery: Better Monitoring of Block Grant Funds Is Needed", "published_date": "2019-03-25T00:00:00", "released_date": "2019-03-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The 2017 hurricanes (Harvey, Irma, and Maria) caused an estimated $265 billion in damage, primarily in Texas, Florida, Puerto Rico, and the U.S. Virgin Islands. As of February 2019, Congress had provided over $35 billion to HUD for CDBG-DR grants to help communities recover. Communities may use these funds to address unmet needs for housing, infrastructure, and economic revitalization. GAO was asked to evaluate the federal government's response to the 2017 hurricanes. In this initial review of CDBG-DR, GAO examined, among other things, (1) the status of the 2017 grants, (2) HUD's review of the initial steps grantees have taken and its plans for future monitoring, and (3) challenges HUD and grantees face in administering grants.", "GAO reviewed documentation from the four largest 2017 CDBG-DR grantees and HUD. GAO also reviewed prior work on CDBG-DR and interviewed officials from HUD and the four grantees."]}, {"section_title": "What GAO Found", "paragraphs": ["As of September 2018, the four states and territories that received the most 2017 Community Development Block Grant Disaster Recovery (CDBG-DR) funds had signed grant agreements with the Department of Housing and Urban Development (HUD). Before signing the agreements, HUD certified the grantees' financial processes and procedures. It also approved the grantees' assessments of their capacity to carry out the recovery and of unmet needs (losses not met with insurance or other forms of assistance). Before funding begins to reach disaster victims, the grantees need to take additional steps, such as finalizing plans for individual activities. As of January 2019, Texas had drawn down about $18 million (of $5 billion) for administration and planning only, and Florida had drawn down about $1 million (of $616 million) for administration, planning, and housing activities. Puerto Rico and the U.S. Virgin Islands had not drawn down any of the $1.5 billion and $243 million, respectively, they had been allocated.", "HUD lacks adequate guidance for staff reviewing the quality of grantees' financial processes and procedures and assessments of capacity and unmet needs, and has not completed monitoring or workforce plans. The checklists used to review grantees' financial processes and procedures and assessments ask the reviewer to determine if the grantee included certain information, such as its procurement processes, but not to evaluate the adequacy of that information. In addition, the checklists, which include a series of \u201cyes\u201d or \u201cno\u201d questions, do not include guidance that the HUD reviewer must consider. HUD also does not have a monitoring plan that identifies the risk factors for each grantee and outlines the scope of monitoring. Further, HUD has not developed a workforce plan that identifies the critical skills and competencies HUD needs and includes strategies to address any staffing gaps. Adequate review guidance, a monitoring plan, and strategic workforce planning would improve HUD's ability to oversee CDBG-DR grants.", "Without permanent statutory authority and regulations such as those that govern other disaster assistance programs, CDBG-DR appropriations require HUD to customize grant requirements for each disaster in Federal Register notices\u2014a time-consuming process that has delayed the disbursement of funds. In a July 2018 report, the HUD Office of Inspector General found that as of September 2017, HUD used 61 notices to oversee 112 active CDBG-DR grants. Officials from one of the 2017 grantees told us that it was challenging to manage the multiple CDBG-DR grants it has received over the years because of the different rules. CDBG-DR grantees have faced additional challenges such as the need to coordinate the use of CDBG-DR funds with other disaster recovery programs that are initiated at different times and administered by other agencies. HUD officials said that permanently authorizing CDBG-DR would allow HUD to issue permanent regulations for disaster recovery. Permanent statutory authority could help address the challenges grantees face in meeting customized grant requirements for each disaster, such as funding lags, varying requirements, and coordination with multiple programs. The expected increase in the frequency and intensity of extreme weather events underscores the need for a permanent program to address unmet disaster needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider permanently authorizing a disaster assistance program that meets unmet needs in a timely manner. GAO also makes five recommendations to HUD, which include developing guidance for HUD staff to use in assessing grantees, developing a monitoring plan, and conducting workforce planning. HUD generally agreed with three recommendations and partially agreed with two, which GAO clarified to address HUD's comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["Three historic hurricanes made landfall in the United States in 2017 and  affected nearly 26 million people. Hurricanes Harvey and Irma marked the  first time two Category 4 hurricanes hit the continental United States  during the same season, and Hurricane Maria was the first Category 4  hurricane to make landfall on the main island of Puerto Rico in 85 years.  The National Oceanic and Atmospheric Administration has estimated the  total cost of these three major 2017 hurricanes at $265 billion, placing  them among the top five costliest hurricanes on record in the United  States, along with Hurricanes Katrina and Sandy.", "In response to the damage caused by the 2017 hurricanes, Congress has  provided $35.4 billion in supplemental appropriations through the  Department of Housing and Urban Development\u2019s (HUD) Community  Development Block Grant (CDBG) program to help affected communities  recover. Communities are allowed to use their CDBG Disaster Recovery  (CDBG-DR) grants to address a wide range of unmet recovery needs\u2014 losses not met with insurance or other forms of assistance, including  federal disaster assistance\u2014related to housing, infrastructure, and economic revitalization. Congress also appropriated funds for agencies  such as the Federal Emergency Management Agency (FEMA) and the  Small Business Administration (SBA) to provide grants and loans for  disaster recovery.", "The 2017 hurricanes caused the most damage in Puerto Rico, Texas, the  U.S. Virgin Islands, and Florida. As of February 2019, HUD had awarded  approximately $19.9 billion of the CDBG-DR funds to Puerto Rico, $9.8  billion to Texas, $1.9 billion to the U.S. Virgin Islands, and $1.3 billion to  Florida. Congress required that HUD certify, in advance of making a  grant, that the designated grantees had sufficient financial controls,  procurement processes, and procedures to prevent duplication of  benefits. Some questions have been raised about the administration of  CDBG-DR funds for prior disasters, including grantees\u2019 capacity to  administer the funds and ability to adhere to procurement requirements.", "You asked us to review the federal government\u2019s response to the 2017  hurricanes. This is our first report on CDBG-DR funds in response to your  request, and it focuses primarily on the early stages of the grant process  for the four largest 2017 CDBG-DR grants. Specifically, this report  examines (1) the status of the 2017 CDBG-DR grants; (2) the steps the  2017 CDBG-DR grantees have taken to establish financial processes and  procedures, build capacity, and estimate unmet needs; (3) the extent to  which HUD has reviewed the steps that grantees have taken and  developed plans for future monitoring; and (4) the challenges HUD and  grantees have faced in administering grants.", "To determine the status of the 2017 CDBG-DR grants, we reviewed  relevant laws and the Federal Register notices allocating the CDBG-DR  funds and interviewed HUD officials to determine the steps grantees were  required to take before signing a grant agreement and expending their  2017 CDBG-DR funds. We reviewed documents, such as action plans  describing how grantees planned to use their funds, to determine when  they were submitted and approved. To determine how much CDBG-DR  funding the 2017 grantees had drawn down, we examined data from the  Disaster Recovery Grant Reporting system, a HUD database of CDBG- DR funding, reported expenditures, and other information. We reviewed  data as of January 2019 (the most recent month available during our  review). To assess the reliability of these data, we reviewed relevant  documentation on the system and interviewed HUD officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for reporting CDBG-DR draw down information.", "To determine the steps the 2017 CDBG-DR grantees have taken to  establish financial processes and procedures, build capacity, and  estimate unmet needs, we reviewed grantees\u2019 documents, such as their  organizational charts and capacity assessments, to determine how  grantees plan to administer the CDBG-DR grants. To determine how  grantees calculated their unmet housing needs for homeowners and  renters, we reviewed grantees\u2019 descriptions of their methodologies in their  approved action plans and interviewed grantee officials. Although we did  not conduct an extensive review of the grantees\u2019 methodologies, we  compared their methodologies to HUD\u2019s methodology (described in  Federal Register notices), identifying any differences. We also visited  Puerto Rico and Texas\u2014the 2017 grantees that received the largest  amounts of CDBG-DR funds\u2014and conducted phone interviews with  officials from the U.S. Virgin Islands and Florida.", "To examine the extent to which HUD has reviewed the steps that  grantees have taken and developed plans for future monitoring, we  reviewed HUD documents, such as the completed checklists it used to  review grantees\u2019 documentation. We compared these checklists against  relevant statutory and regulatory requirements and federal internal control  standards. To determine how HUD planned to monitor the CDBG-DR  grantees, we reviewed HUD documents, such as its monitoring handbook  and monitoring schedule for fiscal year 2019. We also interviewed HUD  officials about their resource needs, hiring plans, and plans to monitor the  2017 CDBG-DR grants. We compared HUD\u2019s monitoring guidance  against internal control standards and its hiring plans against key  principles we developed for workforce planning.", "To determine the challenges that HUD and grantees have faced in  administering grants, we conducted a literature search for GAO, HUD  Office of Inspector General (OIG), and other reports on CDBG-DR funds  used to recover from the 2005 Gulf Coast hurricanes and Hurricane  Sandy and reviewed relevant reports. We also interviewed HUD officials and the 2017 CDBG-DR grantees to obtain their perspectives on the  challenges in administering the 2017 grants. Appendix I describes our  objectives, scope, and methodology in greater detail.", "We conducted this performance audit from January 2018 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of Federal Disaster Response", "paragraphs": ["Federal agencies can respond to a disaster when effective response and  recovery are beyond the capabilities of the affected state and local  governments. In such cases, the Robert T. Stafford Disaster Relief and  Emergency Assistance Act (Stafford Act) permits the President to declare  a major disaster in response to a request by the governor of a state or  territory or by the chief executive of a tribal government. Such a  declaration is the mechanism by which the federal government becomes  involved in funding and coordinating response and recovery activities.", "At least 30 federal agencies administer disaster assistance programs and  activities. Under the National Response Framework, which governs any  type of federal disaster or emergency response, the Department of  Homeland Security (DHS) is the federal department with primary  responsibility for coordinating disaster response. Within DHS, FEMA  has lead responsibility and provides three principal forms of funding for  disaster recovery\u2014Individual Assistance, Public Assistance, and Hazard  Mitigation.", "The Individual Assistance Program provides financial assistance  directly to survivors for expenses that cannot be met through  insurance or low-interest loans, such as temporary housing,  counseling, unemployment compensation, or medical expenses.", "The Public Assistance Program provides federal disaster grant  assistance to state, local, tribal, and territorial governments and  certain types of nonprofit organizations for debris removal, emergency  protection, and the restoration of facilities.", "The Hazard Mitigation Program is designed to help communities  prepare for and recover from future disasters. It funds a wide range of  projects, such as purchasing properties in flood-prone areas, adding  shutters to windows, and rebuilding culverts in drainage ditches.", "The Small Business Act also authorizes SBA to make direct loans to help  businesses, nonprofit organizations, homeowners, and renters repair or  replace property damaged or destroyed in a federally declared disaster.  HUD uses data from FEMA and SBA to make decisions on the amount of  CDBG-DR funding to allocate to affected communities."], "subsections": []}, {"section_title": "History of CDBG-DR", "paragraphs": ["The Housing and Community Development Act of 1974 created the  CDBG program to develop viable urban communities by providing decent  housing and a suitable living environment and by expanding economic  opportunities, principally for low- and moderate-income persons.  Program funds can be used for housing, economic development,  neighborhood revitalization, and other community development activities.  Because the CDBG program already has a mechanism to provide federal  funds to states and localities, the program is widely viewed as a flexible  solution to disburse federal funds to address unmet needs in emergency  situations. When disasters occur, Congress often appropriates additional  CDBG funding (CDBG-DR) through supplemental appropriations. These  appropriations often provide HUD the authority to waive or modify many  of the statutory and regulatory provisions governing the CDBG program,  thus providing states with greater flexibility and discretion to address  recovery needs. Eligible activities that grantees have undertaken with  CDBG-DR funds include relocation payments to displaced residents,  acquisition of damaged properties, rehabilitation of damaged homes,  rehabilitation of public facilities such as neighborhood centers and roads,  and hazard mitigation.", "In numerous appropriations from fiscal year 1993 to 2018, Congress  provided more than $86 billion in CDBG-DR funds to help states recover  from federal disasters. For example, Congress directed CDBG-DR  funds toward recovery and rebuilding efforts in the Gulf Coast after  Hurricanes Katrina, Rita, and Wilma in 2005; New York after the  September 11th terrorist attacks in 2001; North Dakota, South Dakota,  and Minnesota after the floods in 1997; Oklahoma City after the 1995  bombing of the Alfred Murrah Building; Southern California after the 1994  Northridge earthquake; and Florida after Hurricane Andrew in 1992. As of  January 2019, HUD was overseeing 106 CDBG-DR grants totaling more  than $54 billion."], "subsections": []}, {"section_title": "CDBG-DR Funds Allocated to 2017 Grantees", "paragraphs": ["Once Congress appropriates CDBG-DR funds, HUD publishes notices in  the Federal Register to allocate the funding appropriated to affected  communities based on unmet need, and to outline the grant process and  requirements for the grantees\u2019 use of the funds. In 2018, HUD allocated  the vast majority of the 2017 funds to four agencies: Puerto Rico\u2019s  Department of Housing (Departamento de la Vivienda), the Texas  General Land Office, the U.S. Virgin Islands Housing Finance Authority,  and Florida\u2019s Department of Economic Opportunity. Table 1 shows the  CDBG-DR funding that HUD had allocated to the 2017 grantees as of  February 2019 and the remaining funds to be allocated. The funding was  allocated in two portions, one in February 2018 and one in August 2018.", "The nearly $33 billion in funding that Puerto Rico, Texas, the U.S. Virgin  Islands, and Florida are to receive for recovery from Hurricanes Harvey,  Irma, and Maria is almost 60 times more than the total amount of  traditional CDBG funds they received in the last 5 years (see table 2).", "The 2017 CDBG-DR funding that Puerto Rico, Texas, and Florida  received also greatly exceeded their most recent prior CDBG-DR  grants. In 2008, Puerto Rico was allocated approximately $30 million in  CDBG-DR funds in response to Hurricane Ike. Between 2016 and 2017,  Texas was allocated approximately $313.5 million in CDBG-DR funds in  response to floods that occurred in 2015 and 2016. In 2016, Florida was  allocated approximately $117.9 million in CDBG-DR funds in response to  Hurricanes Hermine and Matthew. The U.S. Virgin Islands had not  previously received CDBG-DR funds."], "subsections": []}, {"section_title": "Administration of CDBG- DR Funds", "paragraphs": ["HUD\u2019s Office of Community Planning and Development (CPD)  administers the traditional CDBG program and CDBG-DR funds. Before  2004, existing CPD staff administered CDBG-DR. In 2004, HUD  established the Disaster Recovery and Special Issues Division within  CPD\u2019s Office of Block Grant Assistance to manage large CDBG-DR  grantees with allocations of $500 million or more. CPD field office staff  generally manage all other grantees.", "Other HUD officials are also involved with CDBG-DR, including the  Departmental Enforcement Center and Office of Policy Development and  Research. The Departmental Enforcement Center works with several of  HUD\u2019s program areas, including CPD, to ensure that federally funded  programs operate according to program guidelines and regulations. For  example, center staff help CPD review grantees\u2019 financial processes and  procedures. The Office of Policy Development and Research maintains  current information on housing needs, market conditions, and existing  programs and conducts research on community development issues. Its  staff use this information to help CPD award CDBG-DR funds."], "subsections": []}]}, {"section_title": "All Grantees Have Signed Grant Agreements but Need to Take Additional Steps before Funds Reach Disaster Victims", "paragraphs": ["As of January 2019, all four grantees had entered into grant agreements  with HUD for their initial 2017 CDBG-DR funds, but they needed to take  additional steps before disbursing funds to individuals affected by the  2017 hurricanes. According to the February 2018 Federal Register notice  allocating the initial $7.4 billion in CDBG-DR funds, grantees were  required to take a number of steps before they could enter into a grant  agreement with HUD and begin expending funds (see fig.1). These  steps had associated deadlines, which the four grantees generally met.", "The steps grantees were required to take before they could enter into a  grant agreement included the following:", "Financial processes and procedures. Grantees were required to  document their financial controls, procurement processes, and grant  management procedures (including those for preventing the  duplication of benefits, ensuring timely expenditures, and preventing  and detecting fraud, waste, and abuse). By the end of September  2018, HUD had certified that all four grantees had proficient financial  controls, procurement processes, and grant management procedures.", "Implementation plan. Grantees were required to submit an  implementation plan that describes their capacity to carry out the  recovery and how they will address any capacity gaps. By the end of  September 2018, HUD had approved the implementation plans and  capacity assessments of all four grantees.", "Action plan. Finally, grantees were required to submit an action plan  for disaster recovery that includes an assessment of unmet needs for  housing, infrastructure, and economic revitalization and a description  of activities intended to meet these needs. By the end of July 2018,  all four grantees had approved action plans.", "Once these steps were completed, HUD and the grantees could sign  grant agreements, and the grantees could begin drawing down funds. All  four of the grantees had signed grant agreements with HUD by the end of  September 2018. The February 2018 Federal Register notice required  grantees to begin drawing down funds by August 13, 2018, but a HUD  official told us that the grantees were unable to meet this requirement  because HUD had not yet finalized an agreement with three grantees by  that date and had just entered into a grant agreement with Florida.", "The grant agreements require grantees to expend their entire CDBG-DR  allocations on eligible activities within 6 years of signing their grant  agreements. According to HUD officials, this requirement has been  included in grant agreements since 2015 to help speed up the  expenditure of funds. (As discussed in the last section of this report, some  CDBG-DR grantees have been slow to expend their funds.) As of January  2019, the grantees had generally not drawn down funds for individuals  affected by the 2017 hurricanes because they were designing and setting  up the activities to assist these individuals. Specifically, as of January  2019, Texas had drawn down approximately $18 million and Florida had  drawn down approximately $1 million of their allocations generally for  administrative and planning expenses. The other two grantees had not  drawn down any of their February 2018 allocations (see table 3).", "As of the end of 2018, the grantees were taking steps to design and set  up the activities approved in their action plans and planned to implement  activities in stages.", "Florida. On September 24, 2018, Florida opened the registration  period for a program that provides rehabilitation or replacement  assistance to owner-occupied homes and rental properties impacted  by Hurricane Irma. According to Florida officials, residents have until  March 29, 2019, to register. The purpose of the registration process is  for Florida to evaluate the potentially eligible population. According to  Florida officials, Florida began taking applications from registrants on  November 27, 2018, and staff were conducting eligibility reviews on  completed applications as of late December 2018.", "Puerto Rico. Puerto Rico officials said they planned to stagger the  implementation of their approved CDBG-DR activities. They would  begin with activities they considered to be critical such as providing  assistance for the rehabilitation, reconstruction, or relocation of  owner-occupied units and gap financing for properties being  developed with Low-Income Housing Tax Credits. Officials said they  planned to begin taking applications by the end of calendar year 2018  or early 2019 but that the start dates depended on HUD\u2019s approval of  the activities\u2019 policies and procedures.", "Texas. On July 23, 2018, Texas began taking applications for a  program that provides assistance for the rehabilitation, reconstruction,  and new construction of affordable multifamily rental housing. Texas  officials said they expected to begin signing agreements with selected  developers early in calendar year 2019. In addition, on November 27,  2018, Texas began taking applications for a program that provides  assistance for the rehabilitation and reconstruction of owner-occupied  single-family homes. In late December 2018, Texas officials told us  they were reviewing the more than 1,500 completed applications for  program eligibility.", "U.S. Virgin Islands. The U.S. Virgin Islands planned to first  implement two housing programs that provide assistance for the  rehabilitation or reconstruction of storm-damaged residential owner- occupied units and for the construction of new homes for first-time  homebuyers. U.S. Virgin Islands officials stated that as of November  2018, they were working on policies and procedures for the  subrecipients that will help administer these programs and that they  planned to launch both programs early in calendar year 2019. The  U.S. Virgin Islands also planned to provide assistance for the  rehabilitation or construction of affordable rental housing units but did  not provide information on when it planned to implement this activity.  In addition, officials said they anticipate funding some infrastructure  projects in early 2019."], "subsections": []}, {"section_title": "Grantees Have Taken Some Steps to Establish Financial Processes and Assess Capacity and Unmet Needs", "paragraphs": [], "subsections": [{"section_title": "Grantees Generally Used Existing Financial Processes and Procedures for Certification", "paragraphs": ["To meet the requirement for certification of financial controls,  procurement processes, and grant management procedures (financial  processes and procedures), all four 2017 grantees told us that they  generally used processes and procedures that were already in place to  administer prior CDBG-DR grants or other HUD funds. For example,  Texas and Florida asked HUD to generally rely on the certification and  supporting documentation of financial processes and procedures that  they had submitted for previous CDBG-DR grants. U.S. Virgin Islands  officials told us they generally relied on the financial processes and  procedures they have in place for the administration of the traditional  CDBG program. Similarly, Puerto Rico officials told us that they relied on  existing financial processes and procedures they have in place for other  federal funds, including other HUD and FEMA funds.", "We and the HUD OIG have ongoing or completed work on controls over  CDBG-DR funds. We have ongoing work examining, among other things, HUD\u2019s internal control plan for the 2017 appropriated disaster funds,  including CDBG-DR funds. In response to a congressional request, the  HUD OIG reviewed the ability of the grantees in Texas and Florida to  follow applicable federal regulations and requirements. In its reports on  Texas and Florida, the HUD OIG identified concerns with grantees\u2019  financial processes and procedures.", "Texas. In a May 2018 report, the HUD OIG stated that Texas had  prior audit findings related to procurement that the agency should  avoid repeating. For example, for a prior CDBG-DR grant, the HUD  OIG found that Texas did not show how its procurement process was  equivalent to federal requirements. Among other things, the HUD  OIG recommended that HUD require Texas to ensure that its  procurement and expenditure policies and procedures are  implemented and working as designed. Texas responded that it would  clarify the procurement processes in its financial submission if  needed.", "Florida. In September 2018, the HUD OIG found weaknesses in  Florida\u2019s controls over its drawdown of funds and classification of  costs. For example, it found that for a prior CDBG-DR grant, Florida  drew down more funds than it expended on administrative and  planning costs, and that the grantee charged $30,000 to a prior  CDBG-DR grant that should have been charged to its 2017 CDBG-DR  grant. The report acknowledged that Florida had taken steps to  address this concern, but the OIG recommended, among other things,  that the grantee establish adequate financial controls to ensure that its  disaster funds are properly classified and allocated to the correct  grant. Florida agreed with the recommendation, noting that it had  corrected the discrepancy the HUD OIG identified during the audit and  stating that it would continue to improve its internal controls. In  addition, Florida officials told us that they have worked with HUD staff  to ensure that financial and programmatic staff are trained to correctly  classify costs and verify that they are accurately allocated and  recorded.", "According to HUD OIG officials, they plan to begin similar reviews of  Puerto Rico and the U.S. Virgin Islands in early calendar year 2019."], "subsections": []}, {"section_title": "Grantees Made Organizational Changes to Increase Capacity and Identified Significant Staffing Needs", "paragraphs": ["The February 2018 Federal Register notice required grantees to assess  staff capacity and identify necessary personnel for the administration of  CDBG-DR funds. To increase their capacity to manage the 2017  CDBG-DR funds, grantees made changes to their organizational  structure.", "Florida. The Florida Department of Economic Opportunity created a  disaster recovery office to administer the 2017 CDBG-DR grants  because, according to Florida officials, the grants were significantly  larger than its traditional CDBG grant and prior CDBG-DR grants.", "Puerto Rico. The Puerto Rico Department of Housing, which had not  administered prior CDBG or CDBG-DR funding, created a disaster  recovery division to manage its CDBG-DR allocation.", "Texas. The Texas General Land Office, the lead state agency for  long-term disaster recovery, established a single point of contact for  its subrecipients and created a planning team.", "Authority, which administers the territory\u2019s traditional CDBG program,  created a division to manage its CDBG-DR allocation.", "Grantees still need to fill many vacant positions to administer the 2017  CDBG-DR funds. All of the grantees planned to hire more in-house staff  (see table 4). As of December 2018, about 48 percent of the needed full- time equivalent positions at the four grantees were vacant\u2014with  vacancies at individual grantees ranging from about 15 percent for Texas  to about 78 percent for Puerto Rico. These positions will be funded with  CDBG-DR funds.", "All four 2017 grantees also planned to use contractors to help fill gaps in  expertise and operational capacity.", "Florida. According to Florida officials, Florida had hired three vendors  to help administer its CDBG-DR funds as of December 2018. They  stated that the first vendor employed two staff to conduct an  organizational study for Florida to help improve staffing efficiencies,  the second vendor had 250 staff working to implement Hurricane Irma  programs and activities, and the third vendor supplied five project  management staff to support CDBG-DR activities. The officials also  stated Florida plans to procure third-party monitoring services,  contract staff services, and additional support to meet audit and  compliance requirements.", "Puerto Rico. Puerto Rico hired two contractors to help it set up the  grant. Specifically, 20 contract staff assisted Puerto Rico with  development of its action plan. Puerto Rico also planned to hire  vendors to help administer the territory\u2019s CDBG-DR activities, but they  had not yet determined the number of contract staff needed.", "Texas. According to Texas officials, Texas hired eight vendors to,  among other things, administer the state\u2019s housing assistance  activities and track the progress of its CDBG-DR activities. As of  December 2018, these vendors had 192 staff.", "U.S. Virgin Islands. According to a U.S. Virgin Islands official, the  U.S. Virgin Islands hired a contractor to help set up the grant,  including assisting with the development of its action plan. The official  also told us that the U.S. Virgin Islands planned to hire contractors to  help support the implementation of its CDBG-DR activities but it had  not yet determined the number of contract staff needed.", "The HUD OIG has raised concerns about the capacity of two of the 2017  CDBG-DR grantees. In a May 2018 report, the HUD OIG found that  Texas did not have enough staff to adequately administer its 2017 CDBG- DR funds. At the time of its review, the HUD OIG found that 37 percent  of the grantee\u2019s full-time positions were vacant. Texas responded that it  had been actively determining optimal staffing levels and hiring  timeframes, but did not have a reserve budget to hire staff before  receiving its 2017 allocation. Similarly, in a September 2018 report, the  HUD OIG recommended that Florida continue to fill its vacancies and  assess staffing resources as it prepared for additional disaster funds.  Florida accepted the recommendation and stated that it was taking steps  to assess and address staffing needs. As discussed in the last section of  this report, building the capacity needed to manage large grants has  historically been a challenge for CDBG-DR grantees."], "subsections": []}, {"section_title": "Grantees Generally Used the Same Data as HUD to Estimate Unmet Housing Needs, but Their Methodologies Varied", "paragraphs": ["Grantees were also required to submit an action plan for disaster  recovery that includes an assessment of unmet needs in housing,  infrastructure, and economic revitalization. The purpose of these unmet  needs assessments was to help grantees understand the type and  location of community needs and to target their CDBG-DR funds to those  areas with the greatest need. We focused on grantees\u2019 estimates of  unmet housing needs because the February 2018 Federal Register notice  required grantees to primarily use their initial CDBG-DR allocation to  address their unmet housing needs."], "subsections": [{"section_title": "HUD\u2019s Estimation of Unmet Needs", "paragraphs": ["Before grantees developed their unmet needs assessments, HUD  estimated their unmet needs to allocate the appropriated CDBG-DR  funds. HUD calculated unmet housing needs as the number of housing  units with unmet needs times the average estimated cost to repair those  units less repair funds already provided by FEMA and SBA. HUD relied  on FEMA Individual Assistance data to estimate the number of affected  owner-occupied and rental units and used SBA data on disaster loans to  estimate repair costs. HUD developed five damage categories to  determine the level of damage housing units sustained: minor-low, minor- high, major-low, major-high, and severe. Because both acts that  appropriated the CDBG-DR funds require HUD to allocate funding to the  \u201cmost impacted and distressed areas,\u201d the agency only included owner- occupied and rental units that had major or severe damages in its  estimate of unmet housing needs.", "To determine the average cost of repairs for owner-occupied and rental  units in each damage category, HUD used SBA data rather than FEMA  data. HUD said SBA damage assessments better reflect the full cost to  repair a unit because the assessments are based on the total physical  loss to the unit. In contrast, FEMA assesses damage based on the cost to  make the unit habitable, and therefore its estimates are generally lower  than SBA\u2019s estimates. To estimate unmet needs, HUD then multiplied the  number of units it identified as having major-low, major-high, and severe  damage by corresponding SBA average cost-of-repair amounts (see table  5).", "To estimate the needs of owner-occupied and rental units for their unmet  needs assessments, the four grantees generally used FEMA and SBA  data but used different methodologies to analyze these data. Below is  an overview of the methodology each of the 2017 CDBG-DR grantees  used to estimate housing needs for owner-occupied and rental units.", "Florida. Florida included all SBA applicants and FEMA applicants  with units that incurred minor damage as defined by HUD\u2019s two lowest  damage categories, neither of which was included in HUD\u2019s estimate.  Florida did not use HUD repair estimates; instead, it developed its  own estimates using SBA data.", "Puerto Rico. Like Florida, Puerto Rico included all SBA applicants  and FEMA applicants with minor damage. Puerto Rico also included  an estimate of units with \u201cpotential unmet needs.\u201d Puerto Rico  calculated its own cost-of-repair estimates based on SBA data.", "Texas. Texas\u2019 methodology was the same as HUD\u2019s methodology.", "Specifically, Texas included FEMA applicants with major and severe  damage and used the repair estimates HUD provided in the February  2018 Federal Register notice.", "U.S. Virgin Islands. The U.S. Virgin Islands included units that FEMA  did not inspect and units with minor damage, neither of which HUD  included in its estimate. The U.S. Virgin Islands used estimates HUD  provided in an April 2018 memorandum to determine the repair costs.", "Because three of the grantees tailored their unmet needs estimates for  their individual planning purposes, aggregating these estimates would not  be appropriate because the estimates do not provide comparable  measures of unmet housing needs. Although we did not conduct an  extensive assessment of the estimates, we performed some limited  analysis to illustrate the impact of some of the grantees\u2019 methodological  decisions. The three grantees\u2019 decisions expanded the definition of unmet  housing needs, which resulted in higher estimates compared to HUD\u2019s  methodology.", "Including FEMA applicants with minor damage. Florida, Puerto  Rico, and the U.S. Virgin Islands included FEMA applicants with minor  damages that fell into HUD\u2019s two lowest categories of damage.  Including these applicants increased the needs estimate for the U.S.  Virgin Islands by approximately $431 million. Our analysis showed  that including these applicants increased Puerto Rico\u2019s needs  estimate by at least $1.5 billion. Grantees said that including FEMA  applicants with the two lowest levels of damages provided a more  accurate representation of the needs for owner-occupied and rental  units. For example, Puerto Rico\u2019s action plan states that these  applicants were unlikely to receive other federal or local assistance to  repair their homes, and therefore would have needs. HUD officials  told us that grantees have the discretion to use allocated funds to  assist applicants with less severe damage as long as those  individuals have unmet needs.", "Including SBA applicants that were denied assistance. Florida  and Puerto Rico included SBA applicants whose units were not  inspected because they were denied disaster loans, although the  extent to which these units sustained damages was unknown. Florida  estimated approximately $1.8 billion and Puerto Rico approximately  $1.5 billion in housing needs for these SBA applicants. Florida and  Puerto Rico officials told us that they included these applicants  because being denied did not necessarily mean that these applicants  did not experience losses. For example, SBA applicants can be  denied loan assistance based on their inability to repay, despite  potentially having unmet needs. Similarly, HUD officials explained that  they consider applications that SBA has denied as a potential  indicator of unmet needs.", "Including FEMA applicants without verified losses. Florida  included FEMA applicants without verified losses and the U.S. Virgin  Islands included units that FEMA did not inspect. Absent verified  losses and inspections, they assumed the FEMA applicants had some  level of unmet needs. Florida\u2019s action plan states that it included  FEMA applicants without verified losses, but the plan did not include  the number of such applicants or their associated housing needs. The  U.S. Virgin Islands\u2019 action plan states that it included 3,774 such  FEMA applicants in its estimate of damaged homes, but the plan did  not include the associated repair costs. According to Florida and  Virgin Islands officials, they included these applicants to account for  what they determined was underrepresentation of impacted  populations. According to HUD officials, grantees typically conduct  their own inspections or rely on SBA inspections in an effort to capture  more comprehensive damage estimates.", "Including owner-occupied and rental units with \u201cpotential unmet  needs.\u201d Puerto Rico included an estimate of \u201cpotential unmet housing  needs\u201d to account for owners and renters that did not apply to FEMA  and FEMA applicants without verified losses. Absent applications or  verified losses, Puerto Rico assumed that nonapplicants and  applicants without verified losses had some level of unmet needs.  Puerto Rico estimated these potential unmet needs to be  approximately $5.8 billion. HUD officials told us that there were a  significant number of FEMA applicants who were denied in Puerto  Rico due to an inability to prove property ownership.", "In general, HUD officials stated that the methodologies HUD and  grantees used to develop unmet needs estimates did not need to be the  same. This is because HUD\u2019s estimate of unmet needs was used to  allocate funds to grantees and grantees\u2019 estimates were used to target  their funding. They also noted that there was more than one way to  determine unmet needs and that it was acceptable for grantees to use  different methodologies to reflect their local circumstances. Although  grantees\u2019 estimates of unmet needs do not affect the amount of CDBG- DR funds that they are allocated, the flexibility grantees have in defining  unmet needs increases the importance of HUD\u2019s review of these  estimates. As discussed in the next section of this report, HUD\u2019s review of  these estimates was limited."], "subsections": []}]}]}, {"section_title": "HUD\u2019s Review of Grantees\u2019 Initial Steps Was Limited, and It Has Not Developed Monitoring or Workforce Plans", "paragraphs": [], "subsections": [{"section_title": "HUD Does Not Have Adequate Guidance for Reviewing Financial Processes and Procedures and Assessments of Capacity and Unmet Needs", "paragraphs": ["HUD lacks adequate guidance for its staff to use when determining the  adequacy of a grantee\u2019s financial processes and procedures and  assessments of its capacity and unmet needs.", "Financial processes and procedures. HUD staff use a checklist to  assess a grantee\u2019s financial controls, procurement processes, and  procedures for prevention of duplication of payments to detect fraud,  waste, and abuse of funds (financial certification checklist). The  questions on this checklist focus on whether certain information required  in the February 2018 Federal Register notice was included. For  example, as figure 2 shows, the financial certification checklist asks HUD  staff to determine whether a grantee has attached its procedures for  preventing duplication of benefits and verifying all sources of disaster  assistance received. However, it does not ask HUD staff to assess the  adequacy of the grantee\u2019s approach for verifying all sources of disaster  assistance. In addition, the financial certification checklist, which is  framed as a series of \u201cyes\u201d or \u201cno\u201d questions, does not include guidance  that the HUD reviewer must consider. For example, the certification  checklist asks whether the grantee has standards to maintain \u201cadequate  control\u201d over all CDBG-DR funds but does not define what it means to  maintain adequate control. HUD officials told us that HUD reviewers do  assess the quality of grantees\u2019 submissions during their reviews. They  stated that they request additional information from grantees if they deem  the information initially submitted to be incomplete or unclear. However, in  the absence of additional guidance for HUD staff, it is unclear how they  assess quality on a consistent basis.", "Capacity assessments. HUD\u2019s checklist for reviewing management  capacity (capacity checklist) assesses whether the grantee included  certain information required in the February 2018 Federal Register  notice. For example, the capacity checklist asks whether a grantee  provided a timeline for addressing the gaps it identified in its capacity  assessment. However, it does not require the reviewer to evaluate the  adequacy of the assessment or the timeline (see fig. 3). Similarly, the  capacity checklist asks whether the grantee planned to designate  personnel for program management, procurement, monitoring, and other  functions but does not require the reviewer to assess the adequacy of the  number of personnel. One question asks whether the personnel will be \u201cin  proportion to applicant population\u201d but does not cite the required  proportion. As discussed above, HUD officials told us that HUD reviewers  do assess the quality of grantees\u2019 submissions during their reviews, but in  the absence of additional guidance for staff, it was unclear how they  determine that documents are adequate.", "Unmet needs assessments. HUD staff also use a checklist to assess  the grantees\u2019 action plans, including their assessments of unmet needs  (see fig. 4). The questions ask the reviewer to determine whether the  needs assessment covers housing, infrastructure, and economic  revitalization and to estimate the portion of those three areas to be funded  from other sources, as required in the February 2018 Federal Register  notice. However, the reviewer is not required to evaluate the reliability of  the grantees\u2019 assessments or estimates, and HUD does not provide  additional guidance for staff to help assess the reliability of the  information provided.", "HUD officials said they have other documentation that supplements the  checklists. However, we found that documentation lacked sufficient  information for assessing the submissions. For example:", "February 2018 Federal Register notice. According to HUD officials,  the notice is the primary source of guidance for HUD reviewers.  They stated that the notice defines \u201cproficient financial processes and  procedures.\u201d However, the February 2018 notice states that grantees  must submit certain audits, financial reports, and their financial  standards but does not describe how HUD reviewers should assess  the quality of those financial standards. In addition, the vague  language in the checklist often mirrors the February 2018 notice. For  example, neither document tells staff how to determine whether \u201cthe  overall effect of the  standards provide for full  and open competition.\u201d", "Regulations for the traditional CDBG program. According to HUD  officials, reviewers can consult existing federal regulations governing  the development and review of plans required under the traditional  CDBG program when reviewing grantees\u2019 action plans, including  unmet needs assessments. However, both the February 2018 and  August 2018 Federal Register notices waive the requirement for an  action plan under the CDBG regulation. The notices instead require  CDBG-DR grantees to submit an action plan for disaster recovery  specifically that includes an unmet needs assessment.", "Another reason HUD cited for not having additional guidance is the  reviewers\u2019 years of professional experience. A senior HUD official said  the staff members who reviewed Florida and Texas\u2019 submissions were  senior CPD staff who had been CDBG-DR grant managers since at least  2014. The same senior official, a CPD specialist since 1998, told us that  she reviewed the submissions from Puerto Rico and the U.S. Virgin  Islands. However, experienced staff may leave their positions, while the  guidance for reviewing grantees\u2019 submissions would remain.", "The acts appropriating CDBG-DR funds for the 2017 disasters require  HUD to certify that a grantee has proficient financial controls, processes,  and procedures. In addition, both acts require grantees to submit action  plans to the HUD Secretary. The February 2018 Federal Register notice  requires that grantees demonstrate that they have capacity to effectively  manage the CDBG-DR funds and that their action plans include an  assessment of unmet needs. Further, federal internal control standards  state that management should use quality information to achieve the  entity\u2019s objectives. For example, management is to obtain relevant data  from reliable internal and external sources in a timely manner based on  the identified information requirements. Federal internal control standards  also state that management should (1) internally communicate the  necessary quality information to achieve the entity\u2019s objectives and (2)  establish and operate monitoring activities to monitor the internal control  system and evaluate the results.", "As discussed in the last section of this report, prior grantees\u2019 lack of  adequate financial processes and procedures and capacity led to  challenges, such as improper payments and the need to acquire  additional expertise. Further, all four grantees\u2019 initial assessments  showed that their CDBG-DR allocations will not meet their unmet needs.  Having reliable estimates of unmet needs that will not be met with the  appropriated $35.4 billion is important because Congress could use these  estimates to determine if further appropriations are necessary. Further,  grantees need accurate information to appropriately address unmet  needs. Without additional guidance for HUD staff to use in assessing the  quality of grantees\u2019 submissions, HUD cannot provide reasonable  assurance that its reviews of these submissions are thorough and  consistent."], "subsections": []}, {"section_title": "HUD Lacks Documentation Supporting Its Conclusion That Grantees\u2019 Submissions Were Sufficient", "paragraphs": ["In their reviews of the 2017 grantees\u2019 financial processes and procedures  and assessments of capacity and unmet needs, HUD\u2019s reviewers did not  document their conclusions. According to a HUD official, the final  completed checklists are the official records of the agency\u2019s certification  of grantees\u2019 financial processes and procedures and its review of capacity  and unmet needs assessments. However, the checklists do not require a  description of the basis for answering \u201cyes\u201d to a question. The checklists  require HUD reviewers to describe the basis for their conclusion for \u201cno\u201d  answers only. As a result, the final checklists that we reviewed, which  showed a \u201cyes\u201d to each question, did not explain how the reviewer  concluded that grantees\u2019 submissions were sufficient.", "A HUD official told us that outside of the official administrative record,  there is documentation on the agency\u2019s communication with grantees.  However, because this documentation was not readily available for all  four grantees, HUD provided examples of written feedback given to one  grantee. Our review of this documentation showed variation in the extent  to which the reviewer requested information about the quality of the  information provided. In written feedback that HUD provided to the  grantee on its capacity assessment, the HUD reviewer asked for more  comprehensive analysis of staffing needs and to include a rationale for  the number of staff to be assigned to each function. Yet, other feedback  HUD provided focused on whether certain information was included  rather than on the quality of the information. For example, when reviewing  the grantee\u2019s financial processes and procedures, the reviewer pointed  out that the grantee had not shown that it had addressed prior audit  findings. In another instance, the reviewer asked the grantee to include  additional information in the section of its action plan on unmet needs, but  did not focus on the grantee\u2019s methodology.", "According to a HUD official, this documentation was not readily available  for each grantee because it is not part of the official administrative record.  Even if readily available, such documentation likely would not  substantiate HUD\u2019s conclusions that grantees\u2019 submissions and estimates  were sufficient. CPD\u2019s monitoring handbook states that staff must  document the basis for their conclusions during a monitoring review  because \u201cmonitoring conclusions must be clear to persons unfamiliar with  the participant, program, or technical area.\u201d In addition, federal internal  control standards require management to design control activities to  achieve objectives in response to risk. One example of a control activity  is clearly documenting transactions and other significant events in a  manner that allows the documentation to be readily available for  examination.", "According to a HUD official, documentation is limited and not readily  available because CPD staff have many responsibilities in addition to the  review of grantees\u2019 submissions, such as assisting in the monitoring of  prior CDBG-DR grants. However, it is important that HUD prioritize the  documentation of its reviews. Without documenting the basis for its  conclusions when reviewing grantees\u2019 submissions, stakeholders and  decision makers lack information on why HUD concluded that grantees\u2019  financial processes and procedures and capacity and unmet needs  assessments were adequate. HUD also misses an opportunity to  leverage this information later to mitigate risk and inform its monitoring of  grantees."], "subsections": []}, {"section_title": "HUD Does Not Have a Comprehensive Monitoring Plan for the 2017 CDBG-DR Grants", "paragraphs": ["HUD determined that the 2017 CDBG-DR grants posed high risk due to  the size of the grants, but did not have a comprehensive plan to monitor  these grants. First, HUD had not identified any unique risk factors  associated with the 2017 grants that required additional attention. For  example, HUD had not analyzed the potential risk of awarding a large  grant to an entity that had little or no experience administering CDBG-DR  funds. The agency also had not used any potential risks identified during  its reviews of grantees\u2019 financial processes and capacity assessments to  inform its monitoring. Second, although HUD had plans to conduct onsite  monitoring, it had not defined the scope of this monitoring. HUD provided  a monitoring schedule that showed that the agency intended to conduct  two monitoring visits and two technical assistance visits each to Florida,  Texas, and the U.S. Virgin Islands in fiscal year 2019. Although the  schedule shows only one monitoring visit for Puerto Rico, HUD officials  told us that they also plan to conduct two monitoring visits and two  technical assistance visits to Puerto Rico. Regarding the scope of  monitoring visits, HUD officials said that staff consider where the CDBG- DR grantee is in the recovery process when identifying areas to be  reviewed during monitoring. For example, they said that they tend to  focus on grantees\u2019 efforts to hire staff and develop policies and  procedures during the first year and on grantees\u2019 implementation of  specific activities in the second year. Although HUD had these tentative  plans for the early years of the grants, the agency had not documented  them.", "According to HUD officials, as of November 2018 HUD had not developed  a comprehensive monitoring plan because it had not yet completed the  annual risk analysis process that it uses to determine the extent of  monitoring for programs such as CDBG and CDBG-DR. According to  HUD officials, this process is undertaken during the first quarter of each  fiscal year. HUD guidance states that the purpose of this analysis is to  provide the information needed for HUD to effectively target its resources  to grantees that pose the greatest risk to the integrity of CDBG-DR,  including identification of the program areas to be covered and the depth  of the review. In comments on the draft report, HUD stated that it had  completed its risk analysis and updated its monitoring schedule to include  all the grantees it planned to visit in fiscal year 2019. HUD also stated that  it had begun identifying monitoring strategies for all monitoring reviews  that would occur from March 2019 through May 2019 and would develop  the remaining strategies after the initial monitoring reviews.", "However, the risk analysis is of limited usefulness for new CDBG-DR  grants because, based on HUD guidance, the risk analysis assumes that  the grant has been active for several years. For example, a reviewer is to  select the high-risk category if, within the past 3 grant years, the grantee  had received two or more findings that are open, overdue, and  unresolved; sanctions have been imposed on the grantee; or the grantee  had not been monitored\u2014all considerations that currently are moot for the  2017 grantees. Further, the risk analysis does not formally incorporate  information HUD gleaned from its reviews of grantees\u2019 financial  processes and capacity assessments. For example, the risk analysis  worksheet does not include questions about the extent to which HUD\u2019s  review of a grantee\u2019s procurement processes and procedures raised any  concerns.", "According to the February 2018 Federal Register notice, HUD will  undertake an annual risk analysis and conduct on-site monitoring.  Further, federal internal control standards state that management should  establish and operate monitoring activities and evaluate results. The  standards suggest that as part of monitoring, management identify  changes that have occurred or are needed because of changes in the  entity or environment. However, HUD does not have a monitoring plan  that identifies the specific risk factors for each grantee and outlines the  scope of its monitoring. A comprehensive monitoring plan would help  HUD ensure that its oversight of grantees\u2019 compliance with grant  requirements focused on grantees\u2019 areas of greatest risk."], "subsections": []}, {"section_title": "HUD Has Not Conducted Workforce Planning to Determine the Staff It Needs to Oversee CDBG- DR", "paragraphs": ["HUD has not conducted workforce planning to determine the number of  staff it needs to monitor the large 2017 CDBG-DR grants and other  outstanding grants. The growth in the number and dollar amount of  CDBG-DR grants has created workforce challenges for HUD. The more  than $35 billion in CDBG-DR funds Congress appropriated for the 2017  hurricanes was almost as much as HUD\u2019s entire budget for fiscal year  2018. In addition, Congress appropriated more CDBG-DR funds to help  with recovery from the 2018 Hurricanes Florence and Michael, and will  likely appropriate more. As of October 2018, CPD\u2019s Disaster Recovery  and Special Issues Division had 24 permanent full-time staff. However,  division officials told us that staffing had not increased at a rate  commensurate with the increase in CDBG-DR grants due to budget  constraints. Although the 2017 grants would be their priority for  monitoring, they said that they still had a responsibility to oversee other  grants.", "HUD officials told us that they planned to hire additional staff for the  Disaster Recovery and Special Issues Division but that they had not  finalized their hiring plans. In October 2018, a CPD official told us that in  fiscal year 2018 HUD approved the hiring of 17 limited-term hires to be  paid with supplemental disaster funds appropriated for HUD salaries and  expenses. Division officials also told us that HUD had approved two  permanent hires in fiscal year 2018, a financial analyst and a team leader  for oversight of the Puerto Rico grantee. For fiscal year 2019, the CPD  official said HUD was considering hiring five additional permanent staff for  the division but that if approved, the division had estimated that it would  need five more staff. In November 2018, division officials said that the  number of additional staff we were told had been approved for fiscal year  2018 seemed high and that as of November 2018, HUD had not finalized  its hiring plans for the division. In comments on the draft report, HUD  stated that the division had developed a staffing plan to address long- term oversight and management of the CDBG-DR portfolio and, as of  March 1, 2019, expected to fill 14 positions over the next 3 months. In  addition, it stated that the agency had identified an approach to secure 20  additional positions to support CDBG-DR, and expected the agency\u2019s  financial and human capital officials to approve it in the next few weeks.", "Federal internal control standards state that management should design  control activities, including management of human capital, to achieve  objectives and respond to risks. Management is to continually assess  the knowledge, skills, and ability needs of the entity so that the entity is  able to obtain a workforce that has the required knowledge, skills, and  abilities to achieve organizational goals. In previous work on human  capital, we identified key principles for effective strategic workforce  planning, including determining the critical skills and competencies  needed to achieve current and future programmatic results and  developing strategies that are tailored to address gaps in number,  deployment, and alignment of human capital approaches for enabling and  sustaining the contributions of all critical skills and competencies.", "However, as of March 1, 2019, HUD had not hired any additional staff;  provided documentation showing that the number of staff it planned to  hire would be sufficient to oversee current CDBG-DR funds and funds  appropriated for Hurricanes Florence and Michael; or determined that  staff have the needed knowledge, skills, or abilities. HUD did not have  this information because it had not conducted strategic workforce  planning. According to HUD officials, they were in the process of  evaluating the division\u2019s organizational structure. Without strategic  workforce planning that determines if the number of staff HUD plans to  hire is sufficient to oversee the growing number of CDBG-DR grants,  identifies the critical skills and competencies needed, and includes  strategies to address any gaps, HUD will not be able to identify the  staffing resources necessary to oversee CDBG-DR grants."], "subsections": []}]}, {"section_title": "HUD and CDBG-DR Grantees Face Challenges with Program Design and Administration", "paragraphs": ["Due to the lack of permanent statutory authority for CDBG-DR, CDBG-DR  appropriations require HUD to customize grantee requirements for each  disaster. The ad hoc nature of CDBG-DR has created challenges for  CDBG-DR grantees, such as lags in accessing funding and varying  requirements. CDBG-DR grantees have also experienced administrative  challenges not related to the lack of permanent statutory authority, such  as challenges with grantee capacity, procurement, and improper  payments."], "subsections": [{"section_title": "Lack of Permanent Statutory Authority Has Led to Challenges Such as Lags in Accessing Funding and Varying Requirements", "paragraphs": ["Although Congress has used CDBG to meet unmet disaster recovery  needs since 1993, it has not established permanent statutory authority for  CDBG-DR. Because of its flexibility, Congress has relied on CDBG and  provided numerous supplemental appropriations for more than $86 billion  in CDBG-DR funds to HUD. When Congress appropriates CDBG-DR  funds, it also grants HUD broad authority to waive CDBG program  requirements and establish alternative requirements for CDBG-DR funds  via Federal Register notices. For example, in consecutive notices for  disasters that occurred from 2001-2016, HUD waived the requirement  that 70 percent of CDBG funds received by the state over a 1- to 3-year  period be for activities that benefit persons of low and moderate income.", "For disasters from 2004-2017, it issued a waiver permitting states to  directly administer CDBG-DR funds, rather than distributing all funds to  local governments as is required under the traditional CDBG program.  Also, since 2001 HUD has waived the requirement for CDBG action plans  and instead required grantees to submit to HUD an action plan for  disaster recovery.", "Because CDBG-DR is not a permanently authorized program, HUD  officials stated that they have not established permanent regulations.  Legislation was proposed in the 115th Congress that would have  permanently authorized the CDBG-DR program, but was not enacted.  According to HUD officials, they provided technical drafting assistance on  this bill. As of February 2019, Congress had not permanently authorized  CDBG-DR or any other program to meet unmet disaster needs.", "Unlike CDBG-DR, other federal disaster assistance programs, such as  those administered by FEMA and SBA, are permanently authorized. In  1988, the Stafford Act created permanent statutory authority for much of  the disaster assistance system in place today. Under this act, FEMA has  multiple mechanisms for providing assistance. For example, FEMA\u2019s  Individual Assistance program provides various forms of help following a  disaster, such as financial assistance for housing, unemployment, and  crisis counseling assistance. In the late 1950s, the Small Business Act  permanently authorized the SBA Disaster Loan Program, which provides  low-interest direct loans to businesses, homeowners, and renters to  repair or replace property.", "A recent report on climate change supports a growing need for a  permanent program to address unmet disaster needs. According to a  2018 report from the U.S. Global Change Research Program, the  frequency and intensity of extreme weather and climate-related events  are expected to increase. The report noted that as hurricane damage  can be attributed to warmer atmosphere and warmer, higher seas, there  is a need to rebuild to more resilient infrastructure and develop new  frameworks for disaster recovery.", "In part because Congress has not established permanent statutory  authority for CDBG-DR or some other program to address unmet needs,  GAO, the HUD OIG, and some of the 2017 grantees have cited a number  of challenges. These include lags in accessing funding and varying  requirements.", "Lags in accessing funding. For earlier hurricanes, it took at least a  month for HUD to issue the Federal Register notices that outlined the  CDBG-DR requirements for each disaster. For the 2017 disasters, it took  longer. As noted previously, these notices lay out the steps that grantees  must take before they can enter into grant agreements with HUD and  begin expending funds. As shown in figure 5, it took 45 days for HUD to  issue the requisite Federal Register notice after the first appropriation for  the 2005 Gulf Coast hurricanes, 35 days after the first appropriation for  Hurricane Sandy, and 154 days (or 5 months) after the first appropriation  for the 2017 hurricanes. According to HUD officials, they delayed  issuance of the first notice for the 2017 hurricanes because they expected  a second appropriation and wanted to allocate those funds in the same  notice. After HUD issued the Federal Register notices, it generally took  the grantees months to complete all of the required steps to enter into  grant agreements. For example, it took each of the 2017 grantees over 6  months to execute grant agreements with HUD.", "Two 2017 grantees that we interviewed suggested that the CDBG-DR  process could be shortened if there were an established set of rules for  states to follow instead of waiting months for a new Federal Register  notice to be published for each allocation. One grantee told us that  CDBG-DR should be codified as a formal program with basic rules in  place so that grantees do not have to wait months for a notice to be  published before they begin planning. In a May 2018 hearing on CDBG- DR, a 2017 grantee testified that disaster recovery could be greatly  expedited if HUD had written regulations that governed CDBG-DR  allocations. The official stated that states would not have to wait for the  Federal Register notice to be published to begin designing activities and  developing action plans.", "Similarly, for our January 2010 report on the Gulf Coast hurricanes, HUD  officials told us that a permanently authorized CDBG-DR program would  allow HUD to issue permanent regulations and require less need for  Federal Register notices and the use of waivers after each disaster,  thereby allowing funds to be available for providing assistance sooner.  As part of our current review, HUD officials reiterated that a permanently  authorized CDBG-DR program would allow HUD to issue permanent  regulations. They stressed that for a permanently authorized CDBG-DR  program to be effective, Congress would need to provide HUD the  flexibility to waive traditional CDBG statutory requirements and adopt  alternative requirements to help address recovery needs.", "Varying requirements. CDBG-DR grant requirements vary from notice to  notice. In a July 2018 report, the HUD OIG found that as of September  2017, HUD used 61 notices to oversee 112 active disaster recovery  grants totaling more than $47.4 billion, and would issue additional notices  for funding provided in 2017 and 2018. The HUD OIG also noted that as  of February 2017, Louisiana had seven open grants and had to follow 45  Federal Register notices, and that Texas had 6 open grants and had to  follow 48 Federal Register notices. Officials from one of the 2017  grantees we interviewed said it was challenging to manage seven  different CDBG-DR grants, each with different rules. As an example, they  noted that 2015 grant funds cannot be used on levees, while funds from  other years can be. To help manage these different requirements, they  stated that they must tie each grant to the relevant public law in their  grant management system. To further ensure compliance with the various notices, their legal department prepares a new template for the  agreement that the states signs with subrecipients for each public law.  Officials from another 2017 grantee stated that it was difficult to build an  infrastructure for the management of current and future CDBG-DR funds,  as the rules often could be different for each allocation. They also noted  that variations across different allocations can make it more difficult for  grantees to manage and comply with differing requirements. According to  HUD officials, the requirements have varied due to differences in  appropriations language and policies across administrations and changes  made in response to input from the HUD OIG.", "In addition, the July 2018 HUD OIG report identified 59 duplicative or  similar requirements in most of the notices that could benefit from a  permanent framework. For example, the following rules or waivers were  consistently repeated: allowing states to directly administer grants and  carry out eligible activities, requiring grantees to submit an action plan,  requiring grantees to review for duplication of benefits, allowing states to  use subrecipients, and allowing flood buyouts. The HUD OIG  recommended that the Office of Block Grant Assistance work with its  Office of General Counsel to codify CDBG-DR in regulations. HUD  disagreed with this recommendation, stating that it lacked statutory  authority to create a permanent CDBG-DR program. In commenting on  the report, HUD acknowledged that the current process of changing  appropriations requirements, which results in waivers and alternative  requirements, can be challenging. It further stated that congressional  direction would be needed for a more standard, regulation-governed  program.", "Further, we and others have cited four additional challenges that could be  addressed in a statute permanently authorizing CDBG-DR or another  disaster assistance program for unmet needs.", "Lag between a disaster and appropriation of CDBG-DR funds. In a  July 2015 report on Hurricane Sandy, we found that the unpredictable  timing of the appropriation for CDBG-DR challenged grantees\u2019 recovery  planning. As shown in figure 6, the first CDBG-DR supplemental  appropriation for the Gulf Coast hurricanes was enacted 4 months after  the first Gulf Coast hurricane occurred. Less time elapsed between  Hurricane Sandy and Hurricane Harvey (the first of the 2017 hurricanes)  and Congress\u2019 appropriation of funds, 3 months and 2 weeks,  respectively. In contrast, a presidential disaster declaration activates the  provision of funds from FEMA\u2019s Disaster Relief Fund. The SBA Disaster  Loan Program is also activated by a presidential disaster declaration.  Congress funds both programs through annual appropriations.", "Lag in spending funds once grant agreements have been signed.  Once grantees have entered into grant agreements with HUD, it can take  years for them to implement activities and expend all of their CDBG-DR  funds. There is no consensus on the amount of time it should take  grantees to expend their funds. Congress has established obligation and  expenditure deadlines, such as through a provision in the Disaster Relief  Appropriations Act, 2013. In that act, which applies to 47 grants, grantees  are required to spend the funds within 24 months of obligation unless the  Office of Management and Budget (OMB) provides a waiver. Similarly,  the appropriations for the 2017 disasters also must be expended within  24 months of the date of obligation, and OMB is authorized to provide a  waiver of this requirement. In addition, legislation has been proposed  that would require funds to be expended within 6 years, with the  possibility of an extension up to 3 years upon a waiver by OMB.", "Since 2015, HUD has imposed a requirement that grantees expend their  funds within 6 years of signing a grant agreement. According to HUD  officials, they chose 6 years because their research showed that most  expenditure activity occurs within the first 6 years of the grant. However,  of the 50 grants awarded in fiscal years 2012 and 2013 that are at or  approaching the original 6-year mark, 9 grantees (18 percent) had  expended less than half of the funds. Some of these grantees have  received extensions that allow their grants to remain open until  September 2022. According to HUD, a number of factors can delay  recovery efforts, including subsequent disasters, litigation, and limited  constructions seasons due to weather. See appendix III for more  information on these grants.", "Housing programs that are not aligned with unmet needs. In past  work, we found that CDBG-DR grantees are not required to align their  housing activities with the needs of the affected communities. In a  January 2010 report on the Gulf Coast hurricanes, we found that states  used their broad discretion and additional flexibility to decide what  proportion of their CDBG-DR funds went to homeowner units and rental  units. In Louisiana and Mississippi, more homeowner units were  damaged than rental units, but the proportional damage to rental stock  was generally greater. However, 62 percent of damaged homeowner  units were assisted and 18 percent of rental units were assisted. We  recommended that Congress consider providing more specific direction  regarding the distribution of disaster-related CDBG assistance that states  are to provide for homeowners and renters. Since the Gulf Coast  hurricanes, Congress has appropriated funding for subsequent disasters;  however, as of February 2019, no appropriations had addressed this  issue.", "Coordination with multiple federal agencies. In our July 2015 report on  Hurricane Sandy, we found that different federal disaster response  programs are initiated at different times, making it challenging for state  and local officials to determine how to use federal funds in a  comprehensive manner. In response to a survey that we conducted for  that report, 12 of 13 states and cities reported that navigating the multiple  funding streams and various regulations was a challenge that affected  their ability to maximize disaster resilience opportunities. For example,  state officials we interviewed for that report noted the redundancy of  some federal requirements for receiving disaster assistance such as the  duplication of environmental reviews, which are required by both HUD  and FEMA. In our January 2010 report on the Gulf Coast hurricanes, we  noted that a Department of Homeland Security study indicated that  experts should discuss how challenges associated with the different  federal efforts that provide disaster recovery assistance\u2014such as CDBG- DR and those administered by FEMA\u2014could be addressed. The study  also suggested that experts explore new methods for delivering  assistance.", "In our June 2009 report on CDBG-DR, we also found that guidance for  the Gulf Coast disaster recovery was insufficient and that conflicting  federal decisions hindered coordination of CDBG-DR and FEMA\u2019s Hazard  Mitigation Grant Program funds. We recommended that HUD coordinate  with FEMA to ensure that new guidance clarified the potential options,  and limitations, available to states when using CDBG disaster assistance  funds alongside other disaster-related federal funding streams. HUD  issued the guidance, and the recommendation was closed in November  2011.", "Without permanent statutory authority for a disaster assistance program  that meets verified unmet needs, grantees will likely continue to  encounter the challenges associated with needing customized grant  requirements for each disaster, such as funding lags and varying  requirements. Permanent statutory authority could also improve  coordination among federal agencies that administer disaster funds."], "subsections": []}, {"section_title": "Grantees Have Faced Administrative Challenges, Such as Building Capacity and Avoiding Improper Payments", "paragraphs": ["In addition to the challenges experienced because CDBG-DR is not  permanently authorized, reports on prior disasters cited CDBG-DR  administrative challenges such as building capacity, avoiding improper  payments, and following procurement processes.", "Grantee capacity. Grantees have experienced difficulties establishing  the necessary capacity to manage large CDBG-DR grants. An Urban  Institute testimony described constraints on grantees\u2019 comprehensive  capacity building. Specifically, it noted levels of expertise and program  management as a repeated source of challenges, citing limitations on the  availability of skilled staff. In addition, a paper on large-scale disaster  recovery reported that large-scale CDBG-DR programs are significantly  larger than traditional CDBG programs, and that many grantees need to  hire private contractors to fill gaps in expertise and operational capacity.", "We also found in our June 2009 report on Gulf Coast disaster recovery  that Louisiana and Mississippi lacked sufficient capacity to administer and  manage CDBG-DR programs of such unprecedented size. As  discussed previously, the 2017 grantees plan to hire more staff to  administer CDBG-DR funds. However, officials of one grantee and HUD  officials said they are all competing for the same small pool of potential  applicants with CDBG-DR expertise. HUD officials said grantees in  Puerto Rico and the U.S. Virgin Islands face the additional challenge of  relocating potential candidates, and in the case of Puerto Rico finding  bilingual candidates.", "Improper payments. Our prior reports and those of the HUD OIG have  identified improper payments as an ongoing challenge for HUD and  CDBG-DR grantees. In February 2015, we found that HUD\u2019s policies and  procedures did not address all key requirements for estimating improper  payments for Hurricane Sandy CDBG-DR funds. To help ensure that  HUD produced reliable estimates of its improper payments, we  recommended that HUD revise its policies and procedures by (1)  requiring payments to federal employees to be included in populations for  testing as required by the Improper Payments Information Act of 2002, as  amended, and (2) including steps to assess the completeness of the  population of transactions used for selecting the samples to be tested.  HUD concurred with our recommendation and has since updated its  policies and procedures to require that payments to federal employees be  included in the improper payment testing for the program. However,  because it has not yet taken steps to ensure that all grantee files are  included in the population for testing improper payments, this  recommendation remained open as of February 2019.", "The HUD OIG also has conducted numerous audits of the internal  controls of prior CDBG-DR grantees, a number of which resulted in  findings related to improper payments. For example, in an August 2017  report on the State of New Jersey, the OIG found that the state disbursed  Sandy CDBG-DR funds to homebuyers who did not meet all of the  program eligibility requirements. It also found in a December 2016  report that the City of New York disbursed more than $18.2 million in  CDBG-DR funds for state sales tax on program repairs and maintenance  services that the city was not legally required to pay under New York  state law. In a July 2016 report on the administration of SBA and  CDBG-DR disaster assistance, the Congressional Research Service  noted that the availability and timing of disaster assistance from different  sources can result in agencies providing duplicative assistance. In  addition, according to SBA data we reviewed for our July 2010 report on  the Gulf Coast hurricanes, SBA determined that 76 small businesses  approved for loans under Louisiana\u2019s Business Recovery Grant and Loan  Program, funded by CDBG-DR, received duplicate benefits under SBA\u2019s  Disaster Loan Program.", "In the appropriations acts for the 2017 disasters, Congress required  federal agencies, including HUD, to submit their plans for ensuring  internal control over disaster relief funding to Congress, among others.  HUD submitted its plan to Congress on November 2, 2018. As previously  noted, we are conducting a separate review on, among other things,  HUD\u2019s internal control plan.", "Procurement. The HUD OIG has issued nearly 20 audits on disaster  recovery grantees that contained findings related to procurement,  including reviews of grantees that received funds to recover from the Gulf  Coast hurricanes and Hurricane Sandy. In a September 2017 report, the  HUD OIG found that HUD did not provide sufficient guidance and  oversight to ensure that state disaster grantees followed proficient  procurement processes. The OIG focused on whether HUD staff had  ensured that the grantee had adopted federal procurement standards or  had a procurement process that was equivalent to those standards. It  made four recommendations to help ensure that products and services  are purchased competitively at fair and reasonable prices in future  disaster allocations.", "In a September 2016 report, the HUD OIG described the results of an  initiative by the Council of the Inspectors General on Integrity and  Efficiency to review funds provided by the Disaster Relief Appropriations  Act, 2013. This review was conducted by the HUD OIG and the OIGs  for seven other agencies that received funds for Hurricane Sandy and  other disasters under the act. The HUD OIG pointed out a range of  contracting issues that HUD grantees faced, including that they billed  outside the scope of work, lacked competitive procedures or full and open  competition, and had unsupported labor costs. It attributed these  challenges to HUD and the grantees (1) not understanding federal  contracting regulations and cost principles and (2) lacking internal  controls over procurement processes. As a result, the HUD OIG stated  that HUD and grantees did not know whether they received the best value  and greatest overall benefit from their various disaster relief procurement  contracts, amendments, and change orders. The OIG concluded that the  Council of the Inspectors General on Integrity and Efficiency should work  with HUD to ensure the agency, grantees, and contractors complied with  federal contracting requirements.", "The HUD OIG also recommended in a May 2018 report that Texas  adhere more closely to federal procurement regulations in applying for  and expending CDBG-DR grants. It recommended that HUD require  the grantee to (1) ensure that its procurement and expenditure policies  and procedures are implemented and working as designed and (2)  ensure that warnings about false statements and false claims are  included in all of its contract-related forms. Texas responded that it would  continue to strengthen its current program structure.", "Monitoring. In our June 2009 report on CDBG-DR guidance for the Gulf  Coast disaster recovery, we found that in addition to HUD\u2019s four to five  on-site monitoring and technical assistance visits per year, a number of  state officials needed clarification of federal regulations, environmental  requirements, and waivers related to the use of CDBG-DR funds in  disaster recovery. Although HUD had field offices in both Louisiana and  Mississippi, the CDBG-DR grant management responsibilities were  handled by HUD headquarters staff. Grantees in both states emphasized  that an additional onsite presence from HUD would have been beneficial  to their recovery efforts. In addition, in a May 2018 report on CPD\u2019s  monitoring of grantees\u2019 compliance with requirements contained in the  Disaster Relief Appropriations Act, 2013, the HUD OIG found a lack of  monitoring of grantees\u2019 drawdown transactions. The OIG  recommended that CPD monitor these transactions to ensure that  grantees appropriately record transactions. HUD agreed to open an  investigation to review the transactions before responding to the  recommendation."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["CDBG has been widely viewed as a convenient, expedient, and  accessible tool for meeting needs in disaster-impacted communities that  are not met by other federal and private sources, but CDBG-DR has  proven to be slow for HUD and grantees to implement. Over a year after  Congress first appropriated CDBG-DR funds for recovery from the 2017  hurricanes, grantees have generally not drawn down these funds to aid  disaster hurricane victims because they continue to plan and design their  activities. While it is important to provide disaster assistance promptly,  HUD also needs to ensure that grantees are well positioned to administer  the funds.", "Before expending funds, HUD required grantees to submit planning  documentation, but its review of this documentation was limited.  Specifically, HUD did not have adequate guidance for staff to use when  assessing the adequacy of grantees\u2019 financial controls, procurement  processes, and grant management procedures and of their capacity and  unmet needs assessments. HUD also did not maintain documentation to  substantiate staff\u2019s conclusions that the grantees\u2019 submissions were  sufficient. By developing additional guidance for staff to use in evaluating  the quality of grantees\u2019 financial processes and procedures and capacity  and unmet needs assessments, HUD can provide better assurance that  its reviews are thorough and consistent. Further, without documenting the  basis for its conclusions when reviewing future grantees\u2019 submissions,  stakeholders and decision makers lack information on why HUD  concluded that grantees\u2019 financial processes and procedures and  capacity and unmet needs assessments were adequate. HUD also  misses an opportunity to leverage this information later to mitigate risk  and inform its monitoring of grantees.", "HUD\u2019s monitoring of the 2017 grantees will be critical given challenges  that the HUD OIG has identified with grantees\u2019 procedures and our  concerns about HUD\u2019s reviews of grantees\u2019 initial submissions. But HUD  did not have a monitoring plan that reflected the specific risk factors of  each grantee and outlined the scope of its monitoring. A comprehensive  monitoring plan would help HUD ensure that its oversight of grantees\u2019  compliance with grant requirements focused on grantees\u2019 areas of  greatest risks. Further, HUD did not yet have the staff in place to  effectively oversee CDBG-DR funds. Without strategic workforce planning  that determines if the number of staff the agency will be able to hire is  sufficient to oversee the growing number of CDBG-DR grants, identifies  the critical skills and competencies needed, and includes strategies to  address any gaps, HUD will not be able to identify the staffing resources  necessary to oversee CDBG-DR grants.", "Finally, if the federal government continues to use the CDBG program for  federal disaster assistance, grantees will likely encounter many of the  same challenges they have in the past\u2014including lags in accessing  funding, requirements that may vary for each disaster, and difficulties  coordinating with multiple federal agencies. Establishing permanent  statutory authority for a disaster assistance program that meets verified  unmet needs in a timely manner would provide a consistent framework for  administering funds for unmet needs going forward. The program could  be administered either by HUD or another agency that had authority to  issue associated regulations. Such a statute and regulations could create  consistent requirements for grantees and specify how the program would  fit into the federal government\u2019s disaster assistance framework. The  importance of establishing permanent statutory authority for such a  program is underscored by the expected increase in the frequency and  intensity of extreme weather and climate-related events."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider legislation establishing permanent statutory  authority for a disaster assistance program administered by HUD or  another agency that responds to unmet needs in a timely manner and  directing the applicable agency to issue implementing regulations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to HUD:  The Assistant Secretary for Community Planning and Development  should develop additional guidance for HUD staff to use when assessing  the adequacy of the financial controls, procurement processes, and grant  management procedures that grantees develop. (Recommendation 1)", "The Assistant Secretary for Community Planning and Development  should develop additional guidance for HUD staff to use when assessing  the adequacy of the capacity and unmet needs assessments that  grantees develop. (Recommendation 2)", "The Assistant Secretary for Community Planning and Development  should require staff to document the basis for their conclusions during  reviews of grantees\u2019 financial controls, procurement processes, and grant  management procedures and capacity and unmet needs assessments.  (Recommendation 3)", "The Assistant Secretary for Community Planning and Development  should develop and implement a comprehensive monitoring plan for the  2017 grants. (Recommendation 4)", "The Assistant Secretary for Community Planning and Development  should conduct workforce planning for the Disaster Recovery and Special  Issues Division to help ensure that it has sufficient staff with appropriate  skills and competencies to manage a growing portfolio of grants.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HUD for comment. In written  comments, which are summarized below and reproduced in appendix IV,  HUD partially agreed with two of our recommendations and generally  agreed with the remaining three.", "HUD partially agreed with the draft report\u2019s first recommendation to  develop standards for HUD staff to use when assessing the adequacy of  the financial controls, procurement processes, and grant management  procedures that grantees develop. HUD disagreed that it needed to  develop standards for financial processes and procedures, stating that  such standards already exist. Specifically, HUD pointed to the February  2018 Federal Register notice, which states that a grantee has proficient  financial policies and procedures if it submitted to HUD certain  information for its review. In the draft report, we acknowledged that the  notice required grantees to submit information such as certain audits,  financial reports, and their financial standards. However, we concluded  that the notice does not describe how HUD reviewers should assess the  quality of those financial standards. HUD agreed that providing additional  guidance to staff on defining the specific conditions that must exist within  these documents would improve its proficiency determination. This was  the intent of the recommendation included in the draft report. However, to  avoid confusion, we revised the recommendation and related report  language to further clarify our intent by substituting \u201cadditional guidance\u201d  for \u201cstandards.\u201d", "HUD also partially agreed with our second recommendation to develop  standards for HUD staff to use when assessing the adequacy of grantees\u2019  capacity and unmet needs assessments. Similar to our first  recommendation, HUD stated that the standards for HUD staff to use  when assessing the adequacy of these assessments are included in the  February 2018 Federal Register notice. Specifically, HUD noted that it  states that HUD will determine the grantee\u2019s implementation plan, which  contains its capacity assessment, to be adequate if it addresses the items  required in the notice. HUD also stated that the notice directed  grantees to develop a needs assessment to understand the type and  location of community needs and to target limited resources to those  areas with the greatest need.", "In the draft report, we acknowledged that the notice required grantees to  submit (1) an implementation plan that describes, among other things,  their capacity to carry out the recovery and how they will address any  capacity gaps for HUD and (2) an action plan for disaster recovery that  includes an assessment of unmet needs to help grantees understand the  type and location of community needs and to target their CDBG-DR funds  to those areas with the greatest need. However, we concluded that the  notice does not describe how HUD reviewers should assess the  adequacy of these assessments. HUD agreed that providing additional  guidance to HUD staff on defining the specific conditions that must exist  within the documents grantees submit to HUD would improve the review  of grantee capacity. HUD also agreed that there was an opportunity to  improve the consistency of HUD\u2019s review of grantees\u2019 action plans,  including their unmet needs assessments. Because providing additional  guidance to HUD staff was the intent of the recommendation in the draft  report, we revised the recommendation and related report language to  clarify our intent by substituting \u201cadditional guidance\u201d for \u201cstandards.\u201d", "HUD generally agreed with our remaining three recommendations.", "HUD agreed with our third recommendation to document the basis for  conclusions during reviews of grantees\u2019 financial controls,  procurement processes, and grant management procedures and  capacity and unmet needs assessments, stating that it will require  staff to better document their analysis.", "HUD also agreed with our fourth recommendation to develop and  implement a comprehensive monitoring plan for the 2017 grants,  stating that such a plan is necessary to effectively manage the  growing portfolio of CDBG-DR grants. It provided a monitoring  schedule for fiscal year 2019 that it characterized as a monitoring  plan, and noted that it had begun identifying monitoring strategies for  all monitoring reviews that would occur from March 2019 through May  2019. It also said it would develop the remaining strategies after the  initial monitoring reviews. However, HUD still needs to develop a plan  that identifies the specific risk factors of each grantee and outlines the  scope of its monitoring.", "Similarly, HUD agreed with our fifth recommendation to conduct  workforce planning for the Disaster Recovery and Special Issues  Division. It stated that the division had developed a staffing plan to  address long-term oversight and management of the CDBG-DR  portfolio and, as of March 1, 2019, expected to fill 14 positions over  the next 3 months. In addition, it stated that it had identified an  approach to secure 20 additional positions to support CDBG-DR and  expected to finalize this approach in the next few weeks once it was  approved by HUD\u2019s financial and human capital officials. We added  this updated information to the report. While developing a staffing plan  is a good first step, HUD still needs to conduct workforce planning to  determine if the number of staff they will be able to hire is sufficient to  oversee the growing number of CDBG-DR grants, identify the critical  skills and competencies needed, and develop strategies for  addressing any gaps.", "HUD also provided the following comments on our findings.", "Regarding the discussion of unmet needs assessments, HUD noted  that the draft report does not acknowledge that the second  appropriation for 2017 disasters directed HUD to provide a minimum  of $11 billion for Puerto Rico and the U.S. Virgin Islands for unmet  needs, which made HUD\u2019s standard methodology for determining the  allocation based on unmet needs data moot. HUD stated that this  information is critical to understanding the allocation of funds toward  unmet needs associated with 2017 disasters. Our review of the unmet  needs assessments focused on the first CDBG-DR appropriation of  $7.4 billion, for which HUD used its standard methodology to allocate  the funds. We focused on this initial allocation because HUD had  reviewed and approved the grantees\u2019 unmet need estimates for these  funds. In response to HUD\u2019s comment, we added language to the  report that $11 billion was to be allocated to Puerto Rico and the U.S.  Virgin Islands where we make reference to the second CDBG-DR  appropriation of $28 billion.", "Regarding the discussion of our prior work that found that CDBG-DR  grantees are not required to align their housing activities with the  needs of the affected communities, HUD stated the agency had  implemented requirements that directed grantees to ensure that  CDBG-DR funding allocations are reasonably proportionate to the  total remaining unmet needs for housing, infrastructure, and economic  revitalization. It also noted that the February 2018 Federal Register  notice directs grantees to propose an allocation of CDBG-DR funds  that primarily considers unmet housing needs. The focus of our  discussion was the status of our recommendation that Congress  consider providing more specific direction on the distribution of  CDBG-DR funds. Although we acknowledged in the draft report that  HUD instructed the 2017 grantees to primarily use their initial CDBG- DR allocation to meet unmet housing needs, we did not do so in the  section of the draft report that discussed this prior work. In response  to HUD\u2019s comment, we added similar language in that section.", "Regarding our discussion of prior HUD OIG reports on grantee  procurement practices, HUD said there has been a protracted  disagreement between HUD and the HUD OIG regarding the  procurement requirements that may be imposed on CDBG-DR  recipients, specifically the definition of \u201cequivalent.\u201d HUD stated that  the most recent resolution of this disagreement came in a January 10,  2017, decision memorandum from the former HUD Deputy Secretary,  supported by a legal opinion from HUD\u2019s Office of General Counsel.  According to HUD, these documents supported CPD\u2019s position that  states have the authority to follow their own procurement standards.  However, according to the HUD OIG\u2019s December 2018 semiannual  report, the HUD OIG disagreed with this assessment and referred this  issue to the Deputy Secretary on March 31, 2017. The report noted  that, as of the end of fiscal year 2018, the HUD OIG had not received  a decision. We revised the report to state that HUD and the HUD OIG  have an ongoing disagreement.", "Regarding a HUD OIG report on Florida that we cited, HUD said it  was evident that the state\u2019s financial policies and capacities were  functioning effectively because the state independently corrected a  bookkeeping error prior to the HUD OIG audit. However, the HUD  OIG noted in the report that Florida corrected the error the OIG  identified during the audit. Florida agreed with the finding and  accepted the recommendation. Therefore, we made no change to the  report. Further, HUD noted that the draft report cites  recommendations from a number of prior HUD OIG audits that had  been closed or where fundamental disagreement existed between  HUD and the HUD OIG. In the few instances where we did not  provide the status of HUD OIG recommendations to HUD, we added  their status to the report.", "Regarding our analysis of the status of 2012 and 2013 CDBG-DR  grants, HUD stated that the draft report included a simplified analysis  of CDBG-DR grant performance that dismissed HUD\u2019s determination  that disbursements from a CDBG-DR grant are substantially  completed 6 years after the effective date of the agreement. It noted  that our analysis excluded grants that were closed out and included  grants that should not have been included because they had a  contract-effective date of mid-2015 or later. However, our analysis  that HUD commented on draws from its own publicly available  monthly report entitled \u201cMonthly CDBG-DR Grant Financial Report.\u201d  Based on HUD\u2019s comments, the report appears to be missing key  information on the timing of the grants\u2014namely, some grants  identified as 2012 and 2013 grants had effective dates of 2015 or  later. Further, many of the grants that HUD said were unfairly included  in our analysis were designated as \u201cslow spenders\u201d in HUD\u2019s own  monthly report. We reviewed the additional documentation HUD  provided and updated our analysis.", "HUD also provided technical comments, which we incorporated as  appropriate. We considered three comments to be more than technical in  nature.", "First, HUD stated that the draft report (1) was critical of grantee  capacity challenges, implying that the varying requirements in the  numerous Federal Register notices further tax a grantee\u2019s capacity,  and (2) suggested that permanent regulatory authority for CDBG-DR  would begin to address these issues. However, the draft report  identified grantee capacity as an administrative challenge that CDBG- DR grantees face that is not related to the lack of permanent statutory  authority.", "Second, HUD stated that the primary cause of the \u201cad hoc nature\u201d of  the CDBG-DR program and grantee capacity challenges is the  unpredictability of disasters and the uniqueness of each recovery  effort, not the lack of permanent statutory authority. It said that each  congressional appropriation includes unique statutory provisions  aimed at making incremental program improvements that can only be  implemented through a new Federal Register notice. We recognize  that each disaster is unique, but as our past work and that of the HUD  OIG has shown, there are certain challenges associated with meeting  customized grant requirements for each disaster\u2014such as funding  lags, varying requirements, and coordination with multiple programs\u2014 that could be addressed if Congress considered permanently  authorizing a disaster assistance program that meets unmet needs.", "Third, HUD stated that CDBG-DR funds are distinct from FEMA and  SBA response and recovery resources because FEMA and SBA  disaster programs have a narrower scope. HUD noted that CDBG-DR  funds aid in a community\u2019s long-term recovery from a catastrophic  disaster, which requires substantial time for planning the community- wide recovery effort. We recognize that long-term recovery takes time,  but we maintain that this does not prohibit Congress from considering  legislation establishing permanent statutory authority for a disaster  assistance program that responds to unmet needs.", "Because we believe the draft report adequately addressed the various  issues HUD raised, we made no changes in response to these  comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Housing and Urban Development, 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) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) the status of the 2017 Community  Development Block Grant Disaster Recovery (CDBG-DR) grants; (2) the  steps the 2017 CDBG-DR grantees have taken to establish financial  processes and procedures, build capacity, and estimate unmet needs; (3)  the extent to which the Department of Housing and Urban Development  (HUD) has reviewed the steps that grantees have taken and developed  plans for future monitoring; and (4) the challenges that HUD and grantees  have faced in administering grants. We focused our review on the states  of Florida and Texas and the U.S. territories of Puerto Rico and the U.S.  Virgin Islands\u2014the states and territories most directly affected by  Hurricanes Harvey, Irma, and Maria and that received over $1 billion in  CDBG-DR funds to address unmet recovery needs.", "For all of our objectives, we visited Puerto Rico and Texas to interview  officials at the Puerto Rico Department of Housing and Texas General  Land Office, respectively, which are the 2017 CDBG-DR grantees in  those jurisdictions. During our visit to Puerto Rico, we also met with  Puerto Rico\u2019s Central Office of Recovery, Reconstruction and Resilience,  which was created to provide administrative oversight of all programs  related to disaster recovery. We visited these two grantees because they  were the 2017 grantees that received the largest amounts of CDBG-DR  funds. We also conducted telephone interviews with officials from the  U.S. Virgin Islands Housing Finance Authority and the Florida Department  of Economic Opportunity, the 2017 CDBG-DR grantees in those  jurisdictions.", "To determine the status of the 2017 CDBG-DR grants, we reviewed  relevant laws and the Federal Register notices allocating the CDBG-DR  funds and interviewed HUD officials to determine the steps grantees were  required to take before signing a grant agreement and expending their  2017 CDBG-DR funds. We reviewed key documents\u2014such as  documentation on financial processes and procedures, implementation  plans, and action plans\u2014to determine when they were submitted and  approved. To determine how much CDBG-DR funding the 2017 grantees  had drawn down, we examined data from the Disaster Recovery Grant  Reporting system as of January 2019 (the most recent month available  during our review). To assess the reliability of these data, we reviewed  relevant documentation on the system and interviewed officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for the purpose of reporting CDBG-DR draw down  information.", "To determine the steps the 2017 CDBG-DR grantees have taken to  establish financial processes and procedures, build capacity, and  estimate unmet needs, we reviewed grantees\u2019 documents, such as their  organizational charts and capacity assessments, to determine how  grantees plan to administer the CDBG-DR grants. In addition, we  identified and reviewed relevant HUD Office of the Inspector General  (OIG) reports to determine whether the office had previously identified  concerns about these grantees\u2019 financial processes and procedures and  capacity.", "To determine how grantees calculated their unmet housing needs for  homeowners and renters, we determined how HUD calculated grantees\u2019  unmet needs by reviewing the methodology outlined in the Federal  Register notices allocating the CDBG-DR funds and interviewing HUD  officials. We focused on the calculation HUD used to determine unmet  housing needs because the February 2018 Federal Register notice  required grantees to primarily use their initial CDBG-DR allocation to  address their unmet housing needs. We further focused on the housing  needs of homeowners and renters because they constituted the largest  portion (ranging from 47 percent in Texas to 99 percent in Florida) of  grantees\u2019 total estimates of housing needs. To determine how grantees  calculated the housing needs estimates of homeowners and renters and  the activities grantees planned to fund with the CDBG-DR grants, we  reviewed grantees\u2019 descriptions of their methodologies in the action plans  they were required to develop for their initial CDBG-DR allocation.  Although we did not conduct an extensive review of the grantees\u2019  methodologies for estimating the unmet housing needs of homeowners  and renters, we compared their methodologies to HUD\u2019s methodology  (described in Federal Register notices), identifying any differences.", "To examine the extent to which HUD has reviewed the steps that  grantees have taken and developed plans for future monitoring, we  reviewed HUD documents such as the completed checklists it used to  review (1) documentation grantees submitted for certification of their  financial controls, procurement processes, and grant management  procedures, (2) grantees\u2019 implementation plans, which contained a  capacity assessment, and (3) grantees\u2019 action plans for disaster recovery,  including their unmet needs assessments. We compared these  checklists against relevant statutory and regulatory requirements and  internal control standards. In addition, we reviewed examples of  unofficial working documents that HUD provided, such as a grantee\u2019s  response to HUD questions on the documentation that it had submitted.  Further, to determine HUD\u2019s monitoring of the 2017 CDBG-DR grantees,  we reviewed HUD documents such as the Office of Community Planning  and Development\u2019s monitoring handbook and monitoring schedule for  fiscal year 2019 and interviewed HUD officials. We compared HUD\u2019s  monitoring policies and procedures against relevant internal control  standards. Finally, we interviewed HUD officials about their resource  needs, hiring plans, and plans to monitor current and future CDBG-DR  grants. We compared HUD\u2019s hiring plans against relevant internal control  standards and best practices for workforce planning we have previously  identified.", "To determine the challenges that HUD and grantees have faced in  administering grants, we conducted a literature search for reports on  CDBG-DR funds used to recover from the 2005 Gulf Coast hurricanes  (Katrina, Rita, and Wilma) and Hurricane Sandy. We focused on these  hurricanes because Katrina, the costliest of the three Gulf Coast  hurricanes, and Sandy were among the top five costliest hurricanes on  record in the United States. We searched for GAO, HUD OIG, and Congressional Research Service reports and other literature such as  government reports, peer-reviewed journals, hearings and transcripts,  books, and association publications.", "To identify GAO reports, we used the search engine on GAO\u2019s public  website and searched for relevant terms such as \u201ccommunity  development block grant,\u201d \u201cSandy,\u201d \u201cKatrina,\u201d and \u201cGulf Coast\u201d from  August 2005 (the month of the 2005 hurricanes) to April 2018 (the  date of the search).", "To identify HUD OIG reports, we reviewed disaster-related reports the  HUD OIG made available on its public webpages titled \u201cDisaster  Oversight Highlights,\u201d \u201cSuperstorm Sandy,\u201d and \u201cHurricane Katrina.\u201d", "To identify Congressional Research Service reports, we used its  public website\u2019s search engine and searched for the terms  \u201ccommunity development block grant\u201d and \u201cdisaster.\u201d", "To identify the other literature sources, we searched the following:  ABI/INFORM\u00ae, Econ Lit, National Technical Information Service, and  20 other databases through GAO\u2019s ProQuest subscription; Nexis; and  Congressional Quarterly. We used terms such as \u201cCommunity  Development Block Grant,\u201d \u201cCDBG,\u201d \u201cdisaster,\u201d \u201cKatrina,\u201d \u201cSandy,\u201d  \u201cchallenge,\u201d and \u201cbarrier\u201d and limited the publication date range to  between 2005 and 2018.", "Our searches initially yielded 157 sources. We screened out 23 based on  their abstracts and an additional 103 sources after reviewing their full  content. We excluded studies that related to the traditional CDBG  program rather than CDBG-DR and those that provided general  background on CDBG-DR. We determined that the remaining 31 sources  were relevant for our purposes and reviewed them to determine if they  identified any challenges that HUD and CDBG-DR grantees faced in  administering prior CDBG-DR funds. Specifically, we considered any  description of concerns with the administration and oversight of CDBG- DR to be a challenge. Using a standard form, one analyst reviewed each  source, identified relevant challenges, and assigned the relevant  challenges to a category. A second analyst reviewed the identification  and categorization. Where there were differences in the review of the first  and second analyst, the two conferred and entered a final decision. We  also interviewed HUD officials and the 2017 CDBG-DR grantees to obtain  their perspectives on the challenges in administering the 2017 grants.", "To determine the time it took grantees to receive CDBG-DR funds (one of  the challenges we identified through our literature review), we reviewed  information from the Disaster Recovery Grant Reporting system, HUD  notices, and other sources to obtain the dates for the appropriations,  allocations, and grant agreement for the Gulf Coast hurricanes, Hurricane  Sandy, and the 2017 hurricanes. To determine the time it took grantees to  expend their CDBG-DR funds (another challenge we identified through  our literature review), we analyzed expenditure data in the Disaster  Recovery Grant Reporting system for grants made in fiscal years 2012  and 2013, as of January 1, 2019. We selected these grants because  HUD officials told us that grantees generally expend the majority of their  CDBG-DR funds within 6 years of signing a grant agreement, and the  2012 and 2013 grantees are approaching this milestone. To assess the  reliability of the Disaster Recovery Grant Reporting system data, we  reviewed relevant documentation on the system and interviewed officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for the purpose of reporting grant agreement dates  and CDBG-DR expenditures.", "We conducted this performance audit from January 2018 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Approved Community Development Block Grant Disaster Recovery Activities of the Four Largest 2017 Grantees", "paragraphs": ["The February 2018 Federal Register notice allocating the initial $7.4  billion in Community Development Block Grant Disaster Recovery  (CDBG-DR) funds appropriated for the 2017 disasters requires grantees  to use the funds primarily to address unmet housing needs. The initial  action plans for the four largest 2017 CDBG-DR grantees\u2014Florida,  Texas, Puerto Rico, and the U.S. Virgin Islands\u2014outline the various  activities they plan to implement to address unmet needs. These include  home buyout and rehabilitation programs to address unmet housing  needs, workforce training and business recovery grants to address unmet  economic revitalization needs, and the provision of matching funds for  FEMA-assisted infrastructure projects to address unmet infrastructure  needs."], "subsections": [{"section_title": "Florida\u2019s Approved CDBG- DR Activities", "paragraphs": ["Florida focused its February 2018 CDBG-DR allocation on addressing  unmet housing and economic revitalization needs (see table 6)."], "subsections": []}, {"section_title": "Texas\u2019 Approved CDBG- DR Activities", "paragraphs": ["Texas allocated approximately 45 percent of its February 2018 CDBG-DR  allocation to the City of Houston and Harris County to directly administer  their own CDBG-DR housing and infrastructure activities. Texas plans to  use the majority of the remaining funds to address unmet housing needs  in other areas affected by Hurricane Harvey (see table 7)."], "subsections": []}, {"section_title": "Puerto Rico\u2019s Approved CDBG-DR Activities", "paragraphs": ["Puerto Rico plans to use over 75 percent of its February 2018 CDBG-DR  allocation to address unmet housing and economic revitalization needs  (see table 8)."], "subsections": []}, {"section_title": "U.S. Virgin Islands\u2019 Approved CDBG-DR Activities", "paragraphs": ["The U.S. Virgin Islands\u2019 plans to use about 42 percent of its February  2018 CDBG-DR allocation to address unmet housing and economic  revitalization needs (see table 9)."], "subsections": []}]}, {"section_title": "Appendix III: Status of 2012 and 2013 Community Development Block Grant Disaster Recovery Grants", "paragraphs": ["Congress appropriates Community Development Block Grant Disaster  Recovery (CDBG-DR) funds to help states recover from federally  declared disasters. Once Congress appropriates CDBG-DR funds, the  Department of Housing and Urban Development (HUD) is responsible for  allocating the funds to designated grantees in affected areas. According  to HUD officials, most expenditure activity in CDBG-DR grants occurs  within the first 6 years of the grant. As shown in table 10, of the 50 grants  at or approaching the 6-year mark, 9 grantees had expended less than  half of the funds."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Paige Smith (Assistant Director),  Josephine Perez (Analyst in Charge), Meredith Graves, Raheem Hanifa,  Joe Maher, John McGrail, Marc Molino, Tovah Rom, and Michael Silver  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Use of the $35 billion in federal Community Development Block Grant Disaster Recovery funds for the 2017 hurricanes has been slow.", "Over a year after the first funds were appropriated, much of the money remains unspent because grantees in Florida, Puerto Rico, Texas, and the U.S. Virgin Islands are still in planning phases. Also, the Department of Housing and Urban Development doesn't have the review guidance and monitoring plans it needs for good grantee oversight.", "We recommended ways to improve the oversight of disaster funding and better meet disaster recovery needs."]}
{"id": "GAO-19-162", "url": "https://www.gao.gov/products/GAO-19-162", "title": "Aviation Security: TSA Uses a Variety of Methods to Secure U.S.-bound Air Cargo, but Could Do More to Assess Their Effectiveness", "published_date": "2018-11-28T00:00:00", "released_date": "2018-11-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to TSA, the federal agency responsible for securing the nation's civil aviation system, the introduction of explosive devices in air cargo shipments is a significant threat. To mitigate this threat, TSA is to review the security procedures carried out by all air carriers with U.S.-bound flights and at foreign airports servicing those air carriers. In addition, TSA assesses the commensurability of foreign countries' air cargo security programs.", "GAO was asked to evaluate TSA's progress in assessing and mitigating air cargo security risks. This report addresses (1) steps TSA takes to help ensure that U.S-bound air cargo is secure, (2) the status of TSA's efforts to recognize and monitor foreign governments' air cargo security programs, and (3) the extent to which TSA measures the effectiveness of its efforts to secure U.S.-bound air cargo. GAO reviewed TSA policies and procedures, analyzed TSA program data, observed a nongeneralizable sample of 17 air carrier inspections at two foreign airports (selected based on high air cargo volume and other factors), and interviewed TSA, foreign government, and air carrier representatives."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration (TSA) inspects air carriers and assesses foreign airports to help ensure the security of U.S.-bound air cargo.", "Air carrier inspections . GAO observed 17 air carrier inspections and found that TSA inspectors consistently followed TSA procedures. Further, GAO's analysis of TSA data found air carriers were in full compliance with cargo security requirements in 84 percent of the nearly 5,000 cargo inspections conducted during fiscal years 2012 through 2017. TSA officials were able to resolve a majority of the violations identified during the inspection process.", "Foreign airport assessments . GAO analysis of TSA data found that about 75 percent of the foreign airport assessments that TSA conducted during fiscal years 2012 through 2017 fully complied with international air cargo security standards. As of the end of 2017, foreign officials had addressed about 40 percent of the non-compliance issues. TSA continues to work with foreign officials to address the remaining non-compliance issues.", "As of June 2018, TSA had recognized the national cargo security programs (NCSP) of the European Union and 12 other countries as commensurate with TSA's, and TSA uses a variety of mechanisms to monitor NCSP implementation. TSA's process for NCSP recognition, which is voluntary, involves comparing air cargo security requirements to TSA's and conducting visits to the countries to validate their use. Once TSA determines a program is commensurate with TSA's, it monitors NCSP implementation through regular air carrier inspections, foreign airport assessments, and dialog with government officials. TSA may decide not to recognize a country's NCSP but, instead, make recommendations for improving air cargo security. In countries where TSA has not recognized their NCSP, all U.S.-bound cargo is subject to TSA security requirements.", "TSA's performance measures do not allow it to specifically determine the effectiveness of its efforts to secure U.S.-bound air cargo. For example, TSA measures whether foreign airports take actions to address all noncompliance issues identified during airport assessments, but such a broad measure could obscure progress made in resolving cargo-specific vulnerabilities. Similarly, TSA officials stated that they are developing a measure to gauge the effectiveness of air carrier inspections, but they do not plan to differentiate efforts to secure air cargo from those for securing passengers. Developing and monitoring outcome-based performance measures that separately account for cargo noncompliance issues and violations could help TSA better determine the extent to which its foreign airport assessments and air carrier inspections improve the security of U.S.-bound air cargo. In addition, TSA measures the number of countries it has recognized in the NCSP Recognition Program, but this metric does not address the effectiveness of the program. Developing and monitoring outcome-based performance measures for the NCSP Recognition Program would help TSA better determine whether the resources invested are yielding the intended results. This is a public version of a sensitive report issued in October 2018. Information that TSA deemed to be sensitive is omitted from this report."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that TSA develop and monitor outcome-based performance measures to assess the effectiveness of (1) the cargo portion of foreign airport assessments, (2) air carrier cargo inspections, and (3) the NCSP Recognition Program. TSA concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2010, al-Qaeda attempted to conceal explosives in printer cartridges  on a U.S.-bound flight from Yemen to Chicago. In July 2017, a terrorist  group shipped partially-assembled components of a bomb from Turkey to  Australia with plans to detonate the assembled device on a passenger  flight. According to the Transportation Security Administration (TSA), the  security threat posed by terrorists introducing explosive devices in air  cargo shipments remains significant.", "TSA, a component within the Department of Homeland Security (DHS), is  the federal agency responsible for securing the nation\u2019s civil aviation  system and it has programs in place to help ensure the security of  passengers and property, including cargo, transported on U.S.-bound  flights. TSA\u2019s responsibilities with respect to cargo transported on U.S.- bound flights include establishing security requirements governing U.S.  and foreign-flagged air carrier operations and overseeing implementation  of such requirements, which it does through conducting air carrier  inspections and security assessments of foreign airports, among other  things. Foreign governments also establish national cargo security  programs (NCSP) and may impose their own security requirements on air  cargo operations within their jurisdictions\u2014including screening  requirements that may differ from TSA-established requirements\u2014that  apply to cargo bound for the United States from their airports. Through its  NCSP recognition process, TSA analyzes the air cargo security programs  of its foreign counterparts and determines if a country\u2019s security program  is commensurate with the level of security required under U.S. air cargo  security programs.", "You requested that we evaluate TSA\u2019s progress in assessing and  mitigating air cargo security risks. This report (1) describes steps TSA  takes to help ensure that U.S-bound air cargo is secure, (2) describes the  status of TSA\u2019s efforts to recognize and monitor foreign governments\u2019 air  cargo security programs, and (3) analyzes the extent to which TSA  measures the effectiveness of its efforts to secure U.S.-bound air cargo.", "This report is a public version of a sensitive report that we issued in  October 2018.TSA deemed some of the information in our October  report to be Sensitive Security Information, which must be protected from  public disclosure. Therefore, this report omits sensitive information about  TSA\u2019s risk methodology, the standards that TSA uses to assess foreign  airports, the specific results of TSA\u2019s air carrier inspections and foreign  airport assessments, and information on the types of NCSP recognition  TSA has granted to other countries. Although the information provided in  this report is more limited, the report addresses the same objectives as  the sensitive report and uses the same methodology.", "To describe the steps TSA takes to help ensure that U.S-bound air cargo  is secure, we reviewed relevant laws and regulations, TSA security  policies and procedures, and screening program requirements. We also  reviewed annual air carrier inspection and airport assessment Master  Work Plans for fiscal years 2012 through 2018\u2014which TSA uses to track  its overseas air carrier inspection and foreign airport assessment  schedule\u2014to better understand how TSA schedules inspections and  assessments and the types of inspections it conducts. In addition, we  conducted site visits to two foreign airports\u2014one in South America and  one in Asia\u2014to observe TSA inspectors conducting air carrier cargo  inspections. At one airport, we also observed the cargo portion of an  airport assessment. We selected these locations based on their  designation by TSA as airports of relatively high risk level, as well as high  volume of U.S.-bound air cargo, TSA\u2019s inspection schedule, and  geographic dispersion. We also chose airports in these countries because  it would allow us to observe an inspection in one country where TSA has  recognized the NCSP and one country where TSA has not recognized the  NCSP. Further, we obtained data on and analyzed the results of all air  carrier cargo inspections (close to 5,000) and assessments at airports  that are last points of departure for cargo bound for the United States  (about 570) conducted by TSA inspectors and then entered by them into  TSA\u2019s databases. We analyzed TSA data from fiscal years 2012 through  2017, to cover the period since our previous air cargo security review and  to include the 5 most recent years for which data were available at the  time of our review. We also analyzed fiscal years 2012 through 2017  TSA data on the status of noncompliance issues TSA inspectors  identified during foreign airport assessments. To assess the reliability of  TSA\u2019s air carrier and airport assessment data, we reviewed program  documentation on system controls, interviewed knowledgeable TSA  officials, and analyzed TSA\u2019s data for any potential gaps and errors. We  concluded that TSA\u2019s data on air carrier inspections and foreign airport  assessments were sufficiently reliable to provide a general indication of  the level of compliance for TSA\u2019s air carrier inspections and foreign  airport assessments over the period of our analysis. In addition, we  interviewed TSA headquarters and field officials to discuss TSA\u2019s efforts  to ensure the security of U.S.-bound air cargo prior to being transported  to the United States. We also interviewed other stakeholders, such as  representatives from 11 air carriers\u2014selected based on the relatively high  volume of U.S.-bound cargo they transport; their operation of flights at the  foreign airports we visited; and to obtain a range of coverage regarding  geographical regions of operation, passenger and all-cargo air carriers,  and U.S. and foreign-flagged air carriers\u2014and officials at the European  Commission (EC) and from the civil aviation authority from the country in  Asia that we visited to discuss their experiences in coordinating with TSA  on air cargo security issues. Results from these meetings are not  generalizable, but provided us with information on stakeholders\u2019  experiences and perspectives regarding air cargo security issues.", "To describe the status of TSA\u2019s efforts to recognize and monitor foreign  governments\u2019 air cargo security programs, we reviewed TSA\u2019s policies  and procedures for its NCSP Recognition Program. For example, we  reviewed TSA memos from 2012, 2013, and 2016 that documented the  recognition standards and any subsequent revisions to the NCSP  Recognition Program, as well as TSA\u2019s process for monitoring NCSP  recognition requirements. Further, we analyzed letters that TSA provided  since 2012 to governments it determined had commensurate air cargo  security programs and NCSP information TSA officials compiled  specifically for our review to better understand TSA\u2019s terms of recognition  with each government and the timeframes for revalidating NCSP  recognition. We also analyzed data from TSA\u2019s Security Policy and  Industry Engagement Policy Inventory to determine how the level of  NCSP participation has changed over time. Specifically, we reviewed the  number of air carriers participating in the NCSP Recognition Program  from fiscal year 2012\u2014when the NCSP Recognition Program began\u2014 through fiscal year 2017, which is the most recent complete fiscal year  available at the time of our review. Finally, we conducted interviews with  TSA and foreign government officials from two countries, and with  representatives of the 11 air carriers described previously to better  understand TSA\u2019s ongoing efforts to recognize and monitor foreign  governments\u2019 air cargo security programs. We also confirmed the status  of countries\u2019 NCSP recognition, as of June 2018, with TSA officials.", "To analyze the extent to which TSA measures the effectiveness of its  various efforts to secure U.S.-bound air cargo, we reviewed documents  that contain information on TSA\u2019s air cargo security objectives, goals, and  performance measures, including (1) information in annual budget  documents from fiscal years 2014 through 2019, and (2) TSA\u2019s Global  Strategies directorates\u2019 Operational Implementation Plans from fiscal  years 2014 through 2018\u2014the most recent years available at the time of  our review. These plans include annual objectives and milestones for  U.S.-bound air cargo security programs. We also reviewed the measures  in the annual budget documents and Operational Implementation Plans  and compared them with requirements in TSA\u2019s Global Strategies\u2019 Fiscal  Year 2016 Strategy and Fiscal Year 2018 Strategy Program and  applicable laws governing performance reporting in the federal  government, including the Government Performance and Results Act of  1993 (GPRA), as updated and expanded by the GPRA Modernization Act  of 2010 (GPRAMA). For example, we assessed whether the  performance measures provide information on the effectiveness of TSA\u2019s  various air cargo security efforts. Further, we assessed TSA\u2019s  performance measures against DHS and TSA risk management  principles. We obtained additional information on how TSA measures the  performance of its air cargo security efforts during our interviews with  TSA headquarters officials. See appendix I for more information on our  objectives, scope, and methodology.", "The performance audit upon which this report is based was conducted  from July 2017 to October 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with TSA from September 2018 to November 2018  to prepare this public version of the original sensitive report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "U.S.-bound Air Cargo and the Air Cargo Supply Chain", "paragraphs": ["In fiscal year 2017, about 13 billion pounds of cargo was transported on  aircraft to the United States\u2014over 5 billion pounds was transported on  passenger aircraft (e.g., Delta and United Airlines), and about 8 billion  pounds was transported on all-cargo aircraft (e.g., FedEx and United  Parcel Service)\u2014from over 300 foreign airports, according to our analysis  of Bureau of Transportation Statistics data. U.S.-bound air cargo can  vary widely in size and include such disparate items as electronic  equipment, automobile parts, clothing, medical supplies, fresh produce,  and cut flowers.", "The international air cargo shipping process involves a complex network  of business entities that include individual shippers, manufacturers,  transportation companies, freight forwarders, warehouses and air  carriers. Entities within the supply chain may provide all services  (warehousing, consolidation, and loading of air cargo, for example) or  only certain services. The standards set by the International Civil Aviation  Organization (ICAO) focus on four primary types of entities: known and  unknown consignors (i.e., individual shippers, manufacturers, other  shipping entities), regulated agents (i.e., freight forwarders, handling  agents), and commercial air carriers. Various other air cargo supply  chain entities also have responsibilities for applying specific types of  security controls in accordance with the international standards. Figure 1  shows an illustrative example of the flow of U.S.-bound air cargo and  where in the supply chain the cargo can be secured."], "subsections": []}, {"section_title": "TSA and Air Carrier Responsibilities for Ensuring the Security of U.S.-Bound Air Cargo", "paragraphs": ["The Aviation and Transportation Security Act (ATSA), enacted into law  shortly after the September 11, 2001 terrorist attacks, established TSA  and gave it responsibility for securing all modes of transportation,  including the nation\u2019s civil aviation system, which includes U.S. and  foreign-flagged air carrier operations to, from, within, or overflying the  United States, as well as the foreign point-to-point operations of U.S.- flagged carriers. Among other things, ATSA requires, in general, that  TSA provide for the screening of all passengers and property, including  cargo transported by air carriers. ATSA further requires that a system  be in operation to screen, inspect, or otherwise ensure the security of the  cargo transported by all-cargo aircraft to, from, and within the United  States, but did not establish a firm deadline for the implementation of  such a system. Further, to help enhance civil aviation security, the  Implementing Recommendations of the 9/11 Commission Act of 2007  (9/11 Commission Act), mandated that DHS establish a system within 3  years of enactment (enacted August 3, 2007) to screen 100 percent of air  cargo transported on all passenger aircraft operated by an air carrier  traveling to, from, within, or overflying the United States. TSA reported  that it met the mandate to screen 100 percent of domestic air cargo  transported on passenger aircraft in August 2010 and U.S.-bound air  cargo transported on passenger aircraft from foreign airports in August  2013.", "There is no comparable 100 percent screening requirement in statute for  cargo transported to the United States on all-cargo air carriers. However,  TSA requires that all cargo transported on U.S.-bound flights be screened  or subjected to security controls that prevent the introduction of  explosives, incendiaries, or other destructive devices. If the cargo comes  from known consignors or regulated agents, TSA\u2019s all-cargo security  program does not require any additional screening unless the cargo piece  exceeds a certain weight. On the other hand, all-cargo air carriers must  screen all cargo that they accept from unknown consignors or  nonregulated agents.", "Air carriers are responsible for implementing TSA security requirements  predominantly through TSA-approved security programs that describe the  security policies, procedures, and systems the air carriers are to  implement and maintain in order to comply with TSA security  requirements. These requirements include measures related to the  acceptance, handling, and screening of cargo; training of employees in  security and cargo screening procedures; testing employee proficiency in  cargo screening; and access to cargo areas and aircraft. If threat  information or events indicate that additional security measures are  needed to better secure the aviation sector, TSA may issue revised or  new security requirements in the form of security directives or emergency  amendments when more immediate action on behalf of air carriers is  necessary. Air carriers must implement the requirements set forth in  applicable security directives or emergency amendments (unless  otherwise approved by TSA to implement alternative security measures)  in addition to requirements already imposed and enforced by TSA in  order to remain compliant with their respective security programs.", "Under TSA regulations, air carriers are responsible for ensuring the  security of the air cargo they transport, and TSA requirements specify  methods and technologies that may be used to secure U.S-bound air  cargo through screening procedures. Specific screening methods outlined  in the 9/11 Commission Act, for example, include X-ray systems,  explosives detection systems (EDS), explosives trace detection  (ETD), explosives detection canine teams certified by TSA, and physical  search together with manifest verification. The 9/11 Commission Act,  however, requires that screening involve a physical examination or non- intrusive method of assessing whether cargo poses a threat to  transportation security and not solely performing a review of information  about cargo contents or verifying the identity of the cargo\u2019s shipper, when  not performed in conjunction with the screening methods outlined above."], "subsections": []}, {"section_title": "Air Carrier Inspections and Foreign Airport Assessments", "paragraphs": ["To assess whether air carriers properly implement security regulations,  TSA conducts regulatory compliance inspections of U.S. and foreign- flagged air carriers at all foreign airports with U.S.-bound flights. During  these inspections, a TSA inspection team is to examine air carriers\u2019  implementation of applicable security requirements, including their TSA- approved security programs, any amendments or alternative procedures  to these security programs, and applicable security directives or  emergency amendments. In general, following a risk-informed approach,  TSA attempts to inspect all air carriers with TSA-approved security  programs at each foreign airport where they operate flights to the United  States either annually or semiannually depending on the risk level of the  airport. Compliance inspections can include reviews of documentation,  such as screening logs; interviews of air carrier personnel; and direct  observations of air cargo operations.", "Consistent with the ATSA, and in accordance with existing statutory  requirements, TSA also assesses the effectiveness of security measures  at foreign airports using select ICAO security standards and  recommended practices. These standards and recommended practices  include ensuring that passengers and cargo are properly screened and  that unauthorized individuals do not have access to restricted areas of the  airport. TSA uses a risk-informed approach to schedule foreign airport  assessments, generally every 1 to 3 years, with high risk airports  assessed more frequently than medium and low risk airports. Although  TSA is authorized under U.S. law to conduct foreign airport assessments  at intervals it considers necessary, it may not perform an assessment of  security measures at a foreign airport without permission from the host  government. TSA also does not have authority to impose or otherwise  enforce security requirements at foreign airports. Instead TSA must work  with host government civil aviation officials to schedule airport visits to  conduct airport assessments (as well as air carrier inspections) and  improve upon existing conditions when deficiencies are identified. Table  1 highlights the roles and responsibilities of certain TSA positions within  Global Strategies that are responsible for implementing the air carrier  inspection and foreign airport assessment programs."], "subsections": []}, {"section_title": "NCSP Recognition", "paragraphs": ["In addition to conducting air carrier inspections and foreign airport  assessments, TSA has also developed the NCSP Recognition Program,  for which TSA compares and assesses foreign air cargo security  programs and standards to determine if those programs provide a level of  security that is commensurate with TSA\u2019s air cargo security standards.  The NCSP recognition process involves comparing foreign countries\u2019 air  cargo security program requirements to TSA air cargo security  requirements and conducting visits to the foreign countries to observe the  security programs in operation and determine if they can be validated as  commensurate with TSA\u2019s. The recognition decision is based on whether  the other country\u2019s NCSP is commensurate in six pillars of cargo supply  chain security that TSA has identified, which are:", "Facility Security. Procedures and mechanisms to prevent  unauthorized entry to facilities where cargo is screened, prepared,  and stored.", "Chain of Custody/Transit Procedures. Methods or procedures to  prevent and deter unauthorized access to cargo while stored or in  transit between facilities prior to loading onboard aircraft.", "Screening. Screening of cargo through the application of technical or  other means that are intended to identify weapons or explosives.", "Personnel Security. Processes to vet individuals with unescorted  access to air cargo at any point in the air cargo supply chain.", "Training. Training of personnel who screen, handle screened cargo,  or perform other duties related to air cargo screening, preparation, or  storage.", "Compliance and Oversight Activities. Clearly established  requirements that regulated entities must satisfy in order to participate  in the security program, and routine audits of such entities for  compliance by appropriate authorities.", "TSA first approved the NCSP recognition process for passenger aircraft  operations in fiscal year 2011 and made subsequent changes to the  process in fiscal year 2013. According to TSA, the NCSP Recognition  Program increases its visibility into recognized governments\u2019 air cargo  security requirements and air cargo supply chains, facilitates the  identification of air cargo industry vulnerabilities, and is a key component  of TSA\u2019s efforts to achieve 100 percent screening of U.S.-bound air cargo  and enhance global supply chain security. Within Global Strategies, the  Mitigation Plans and Programs Directorate is responsible for the NCSP  Recognition Program."], "subsections": []}, {"section_title": "GAO\u2019s 2012 Air Cargo Security Review", "paragraphs": ["Air Cargo Advance Screening (ACAS)  The Department of Homeland Security\u2019s  (DHS) U.S. Customs and Border Protection  (CBP) and the Transportation Security  Administration (TSA) initiated the ACAS pilot  in December 2010 to more readily identify  high risk cargo for additional screening prior to  all-cargo and passenger aircraft departing  from foreign airports to the United States.  Unlike TSA, which focuses on aviation  security, to include the security of air cargo  prior to loading on aircraft at last point of  departure airports, CBP focuses on identifying  persons and cargo that  may violate U.S. law  and are, therefore, prohibited from entry into  the United States. The aim of the pilot was to  determine whether it was feasible for air  carriers to submit air cargo manifest data to  CBP prior to departure from all foreign last  point of departure airports. This would allow  CBP to analyze, target, and, if needed, for  DHS to issue instructions to air carriers to  provide additional cargo information or take  additional security measures before such  cargo is loaded onto U.S.-bound aircraft. DHS  determined that the pilot was successful.", "In 2012, we reported on the actions TSA took to enhance the security of  U.S.-bound air cargo after the October 2010 discovery of explosive  devices in packages on all-cargo aircraft bound for the United States from  Yemen. We recommended, among other things, that DHS assess the  costs and benefits of requiring all-cargo carriers to report U.S.-bound air  cargo screening data. DHS agreed with our recommendation and TSA  reported that, although all-cargo air carriers submit data to TSA as part of  the Air Cargo Advance Screening (ACAS) pilot, the all-cargo air carriers  do not need to report on the number of shipments screened for  explosives. Nevertheless, TSA reported that it will be able to utilize ACAS  data to determine the percentage of shipments transported to the United  States on all-cargo aircraft that carriers must screen for explosives."], "subsections": []}]}, {"section_title": "TSA Conducts Overseas Inspections and Assessments to Help Ensure Screening of U.S.- bound Air Cargo and Compliance with Security Requirements", "paragraphs": ["To help ensure compliance with cargo security requirements and  international standards, TSA inspects air carriers and assesses certain  known consignors and regulated agents. TSA also inspects cargo  security procedures during foreign airport assessments. Further, DHS has  also implemented requirements to obtain advance information on air  cargo shipments through ACAS that it uses to perform targeted risk  assessments."], "subsections": [{"section_title": "TSA Inspects Air Carriers and Assesses Other Supply Chain Entities to Help Ensure Compliance with Cargo Security Requirements", "paragraphs": ["TSA inspects air carriers and assesses certain known consignors and  regulated agents to help ensure compliance with cargo security  requirements. However, certain factors can limit TSA\u2019s ability to conduct  inspections or observe various security measures, including cargo  screening."], "subsections": [{"section_title": "TSA Inspects Air Carriers", "paragraphs": ["TSA uses a multistep process to plan, conduct, and record air carrier  cargo inspections. To plan inspections, TSA develops an annual Master  Work Plan that regional operations centers use to schedule air carrier  inspections each fiscal year. Based on our review of TSA work plans for  fiscal years 2012 through 2018 and discussions with TSA officials at all  six regional operations centers, TSA separately plans for passenger  inspections and cargo inspections of both all-cargo air carriers as well as  passenger air carriers that transport cargo bound for the United States  from foreign airports.", "To conduct air cargo inspections, TSA inspectors are to use  standardized, cargo-specific job aids that assess air carriers against  security program requirements in all six pillars of supply chain security.  According to TSA officials, they update the cargo inspection job aids, as  needed, to ensure they reflect changes to TSA requirements and the  current threat environment. For example, the cargo inspection job aids  prompt TSA inspectors to inquire about the transportation of cargo from  certain high risk countries. TSA inspectors we spoke with at all six  regional operations centers stated that they use the cargo inspection job  aids, and inspectors we spoke with at five regional operations centers  stated that they are helpful.", "We observed 17 air carrier cargo inspections at airports in two different  countries and found that TSA inspectors consistently used the cargo  inspection job aids to assess the air carriers against TSA requirements.  These inspectors observed air carriers\u2019 implementation of security  measures (such as cargo screening), interviewed security officials, and  reviewed air carrier records (including cargo screening and training logs).  Officials at all six regional operations centers and the air carriers we met  with confirmed these methods are routine practices. Further, officials  representing 10 of the 11 air carriers we met with confirmed that TSA  regularly inspects their cargo operations at foreign airports to ensure  compliance with screening and other security requirements.", "After completing an air carrier inspection, TSA inspectors are to enter air  carrier cargo inspection results into PARIS. TSA supervisors and  managers are to review the inspection reports for quality and track their  completion. TSA officials we interviewed at TSA headquarters and all six  regional operations centers confirmed the quality review process is in  place and that they use it. In addition, TSA headquarters cargo experts  are to review a sample of air carrier cargo inspections.", "Based on our analysis of PARIS data, TSA conducted close to 5,000 air  carrier cargo inspections (including both passenger air carriers and all- cargo air carriers) from fiscal year 2012 through fiscal year 2017 and  found air carriers in full compliance with applicable security requirements  in 84 percent of these inspections. TSA reported at least one instance of  noncompliance, or violation, for the remaining 16 percent of cargo  inspections. Based on the TSA data, the percentage of inspections with  violations has generally trended downward during this time period. TSA  officials attributed this downward trend to a number of factors including:  (1) TSA\u2019s emphasis on assisting air carriers (through its international  industry representative) in implementing new air cargo security  requirements after the 2010 printer ink cartridge plot; (2) increases in the  number of TSA inspectors to ensure compliance; (3) TSA\u2019s outreach to  foreign governments for improved cargo security under the NCSP  Recognition Program; and (4) TSA efforts to engage with air carriers,  including regional industry summits that included a cargo security focus.", "According to TSA officials, if a TSA inspector finds that an air carrier is  not in compliance with any applicable security requirements, additional  steps are to be taken to correct and record those specific violations,  which can include providing on-the-spot counseling for minor violations or  opening an investigation if the violation is potentially more serious. Upon  conclusion of the investigation, TSA is to make a determination whether  to issue a warning notice, letter of correction, or notice of proposed civil  penalty. For example, based on TSA data, we determined that TSA  inspectors provided counseling (specific guidance) in certain instances  when they found that an air carrier had failed to obtain multiple views of  cargo screened using an X-ray machine. According to the TSA data, the  air carrier took immediate corrective actions and implemented the correct  procedures on-the-spot. From the data provided by TSA, we also  identified potentially more serious violations. Examples of such violations  included instances in which TSA inspectors initiated an investigation  when they found that an air carrier was not screening 100 percent of the  cargo as required under its approved security program.", "According to TSA officials, TSA relies on a system of progressive  enforcement and carefully considers whether a civil penalty is warranted  based, in part, on the history of an air carrier\u2019s inspections. TSA officials  added that they may consider options other than civil penalties, since  their objective is to encourage compliance through capacity-building  efforts with air carriers, not to generate revenue. For example, TSA will  sometimes settle a civil penalty by allowing the air carrier responsible for  the violation to invest the agreed upon penalty into improved security  measures or screening processes.", "According to TSA data, TSA inspectors identified 1,128 air carrier cargo  security violations during fiscal years 2012 through 2017 for the 16  percent (781) of air carrier inspections where they found at least one  violation. For these violations, TSA took the following actions:", "TSA inspectors resolved 580 of the violations (approximately half)  through counseling and referred the remaining 548 violations for  investigation since they were each potentially serious enough to  warrant an enforcement action.", "TSA conducted investigations covering the 548 potentially more  serious violations, which resulted in about 220 administrative actions,  nearly 50 civil penalties, and over 30 instances where no action was  taken. According to TSA, TSA inspectors recommended total civil  penalties of approximately $23.5 million, $22.2 million of which  consisted of penalties proposed for one air carrier."], "subsections": []}, {"section_title": "TSA Assesses Known Consignors and Regulated Agents in Recognized Countries", "paragraphs": ["During air carrier inspection visits, the TSA inspection team may also  conduct assessments of known consignors and regulated agents in  countries with recognized NCSPs. According to TSA data, TSA  conducted assessments of 38 known consignors and regulated agents in  fiscal year 2017. While conducting a site visit to a foreign airport in an  NCSP country in March 2018, we observed TSA inspectors conduct  assessments of two regulated agents and the inspectors covered all of  the required questions. The assessments were primarily interviews along  with some observations that included warehouse security and limited  cargo screening. Record reviews were not part of the assessment  because that is the purview of the foreign government\u2019s civil aviation  authority, according to the TSA inspectors. Foreign government civil  aviation authority officials attended the assessments of the two regulated  agents to observe and take notes of the visit and discussions.", "According to the TSA inspectors who conducted the assessments in the  NCSP country we visited, meeting with regulated agents is invaluable  because regulated agents, not air carriers or their authorized  representatives, conduct almost all air cargo screening in that country.  The inspectors added that having the opportunity to meet with regulated  agents during foreign site visits provides them with insights regarding the  extent to which screening of U.S.-bound cargo is being conducted at  foreign last point of departure airports. In countries without a recognized  NCSP, air carriers are required under their TSA-approved security  programs to screen all cargo at the airport."], "subsections": []}, {"section_title": "Certain Factors Can Limit TSA\u2019s Ability to Conduct Inspections or Observe Cargo Screening", "paragraphs": ["TSA inspectors are not always able to observe certain security measures  during air carrier cargo inspections or airport assessments because of  foreign government sovereignty and air cargo logistics. For example,  regional operations center officials told us that they are not always able to  observe cargo screening because of restrictions placed on them by  foreign governments, such as the number of days they are given to  complete an inspection or assessment, the hours they are allowed to  work, or the size of the TSA inspection team. TSA officials also stated  that the transportation of air cargo occurs at all hours of the day and  night, and TSA inspectors must sometimes choose which security  measures to observe. For example, the TSA officials stated that  screening may occur many hours prior to the loading of that cargo on an  aircraft. At both foreign airports we visited, we observed TSA inspectors  working late night or early morning hours to observe air carriers\u2019 cargo  operations.", "Out of the 17 air carrier cargo inspections we observed at the two foreign  airports we visited, TSA inspectors were not able to observe cargo  acceptance procedures for 11 air carriers and cargo screening for 9 air  carriers because these carriers did not receive or screen cargo during the  time of the inspections or the inspectors were busy conducting other  inspections. Because regulated agents screen the vast majority of the  cargo before transporting it to the airport in the NCSP country we visited,  TSA did not observe cargo screening in eight of the nine air carrier cargo  inspections they conducted at that airport. For inspections where TSA  inspectors cannot observe security measures, we observed (and TSA  inspectors confirmed) that they rely on interviews with officials  responsible for cargo security and screening and document reviews (such  a reviewing cargo screening logs) to determine whether air carriers are  complying with TSA air cargo security requirements. At the request of  TSA, air carriers must provide evidence of compliance with applicable  security requirements and its security programs, including copies of  records.", "TSA inspectors also do not inspect air carriers at all foreign airports from  which air carriers transport U.S.-bound cargo. As we reported in May  2018, challenges prevent TSA from completing 100 percent of required  air carrier inspections in Cuba at the frequency established in its standard  operating procedures, including external factors, such as foreign  government requests to reschedule TSA inspections, and limitations in  the data TSA uses to schedule inspections. Further, TSA officials stated  that most all-cargo carriers do not have scheduled flights. Instead, they  wait until they have sufficient cargo to ship and then complete their  routes, which can make it difficult for TSA to schedule inspections\u2014 planned 3 months in advance\u2014during times that the carrier will be flying  cargo to the United States. According to the vice president of security at  one all-cargo carrier, TSA does not always inspect all last point of  departure routes used by the airline.", "TSA is taking steps to better understand air carriers\u2019 schedules. For  example, in response to our 2018 review addressing TSA\u2019s efforts to  ensure the security of air carrier operations between the United States  and Cuba, TSA reported that it began developing a tool in August 2017  that is designed to analyze aggregate flight data and validate or identify  last point of departure service to the United States from international  locations."], "subsections": []}]}, {"section_title": "TSA Inspectors Assess Foreign Airports from which U.S-bound Cargo is Shipped to Help Ensure Proper Cargo Security Procedures Are in Place", "paragraphs": ["In addition to conducting air carrier cargo inspections, TSA inspection  teams conduct assessments of foreign airports that provide passenger  and/or cargo service to the United States to determine if these airports  are maintaining and carrying out effective security measures. TSA  inspectors generally use the same process to plan, conduct, and record  airport assessments as air carrier inspections, according to TSA  headquarters and regional operations centers officials. Specifically, TSA  inspection teams assess the foreign airports using 44 ICAO standards  and recommended practices, including nine standards or practices that  are specific to the transport of cargo and mail. These standards include  measures for the acceptance, screening, and protection of air cargo. At  the end of each foreign airport assessment, TSA inspectors are to  prepare a report detailing findings on the airport\u2019s overall security posture  and security measures that may also contain recommendations for  corrective actions.", "We observed TSA inspectors conducting the cargo portion of an airport  assessment at one airport we visited and confirmed their use of this  process. Inspectors used the results of the air carrier cargo inspections  conducted earlier in the site visit to inform the cargo portion of the airport  assessment and complete the associated job aid. The TSA inspectors  obtained additional information specific to the assessment during an  interview with airport officials and an international mail facility in the  country we visited. The inspectors stated that they corroborated the  information obtained during interviews with documentation provided by  airport officials and the foreign government in advance of the visit.", "TSA conducted about 570 assessments of foreign airports with U.S- bound cargo shipments from fiscal year 2012 through fiscal year 2017, and TSA inspectors determined that the airports were fully compliant with  the cargo-related ICAO standards and recommended practices in about  430 of these assessments (75 percent), according to our analysis of TSA  data. However, TSA inspectors found at least one instance of cargo  noncompliance in about 140 airport assessments (25 percent). Based  on TSA data, the percentage of airport assessments in which TSA  inspectors identified cargo noncompliance issues has generally trended  upward during fiscal years 2012 through 2017. TSA officials attributed this  upward trend to the introduction of a new ICAO standard in 2014 for  ensuring that all cargo shipments designated as higher-risk undergo  enhanced screening.", "TSA assigns a vulnerability score to each ICAO standard and  recommended practice assessed using a rating system, ranging from a  category \u201c1,\u201d which represents full compliance with ICAO standards and  recommended practices, to a \u201c5,\u201d which involves the most serious or  egregious issues. For example, in a fiscal year 2017 foreign airport  assessment, TSA inspectors recorded an instance of noncompliance of  ICAO standard 4.6.3 (that requires protection of cargo from the point of  screening until departure of the aircraft) as a \u201c3\u201d when they identified  holes in a facility perimeter barrier allowing direct access to secured  cargo. Further, during a 2014 airport assessment, TSA inspectors  assessed an instance of noncompliance of the same standard as a \u201c5\u201d  when they observed two unescorted individuals in a security restricted  area without airport identification. Based on the results of TSA\u2019s foreign  airport assessments conducted during fiscal years 2012 through 2017,  TSA inspectors assessed most noncompliance issues identified as a \u201c2\u201d  or \u201c3.\u201d", "As of December 2017, TSA officials reported that certain foreign airports  took corrective actions to address noncompliance issues. As a result,  TSA closed out approximately 40 percent of the fiscal year 2012 through  2017 deficiencies identified in its assessments. According to our analysis  of TSA data, for the remaining 60 percent of noncompliance issues, the  airports have not yet taken sufficient action to fully address TSA\u2019s  concerns, or TSA inspectors have not yet verified whether the actions  foreign airports reported that they have taken are sufficient for addressing  the noncompliance issues. The majority of unaddressed noncompliance  issues pertain to issues identified in fiscal year 2016 or 2017  assessments.", "In our 2017 review of TSA\u2019s foreign airport assessments, we reported that  TSA assists foreign airports in addressing identified noncompliance  issues (security deficiencies) in various ways, but noted that TSA could  enhance data management. As part of assisting foreign airports, TSA  inspectors educate foreign airport officials on how to mitigate identified  airport security deficiencies. Specifically, TSA provides on-the-spot  counseling, training, technical assistance, security consultations, and  security equipment. In addition, TSA representatives\u2014the primary  liaisons between the U.S. government and foreign governments on  transportation security issues\u2014are responsible for monitoring the  progress made by foreign officials in addressing security deficiencies  identified during TSA airport assessments. Our 2017 review found,  however, that TSA representatives did not always update key information  in TSA\u2019s database for tracking the resolution status of security  deficiencies, including the security deficiencies\u2019 root causes and  corrective actions. To help strengthen TSA\u2019s analysis and decision  making, we recommended that TSA fully capture and specifically  categorize data on the root causes of security deficiencies and the status  of corrective actions to be taken. TSA concurred with our  recommendations and is taking steps to address them, as discussed  below. In addition to working with foreign airports to address deficiencies,  TSA sometimes requires air carriers to adopt security procedures through  security directives or emergency amendments to compensate for serious  vulnerabilities that TSA identified during the foreign airport assessment.  For example, at one airport in Africa, passenger air carriers must hold all  cargo for 24 hours prior to transport.", "In response to our 2017 recommendations, TSA officials told us that they  are in the process of developing a vulnerability resolution tool to capture  the vulnerabilities associated with a specific location, such as a foreign  country or airport. According to TSA officials, the tool will be used to  identify and categorize root causes of vulnerabilities identified during air  carrier inspections and foreign airport assessments, as well as  incorporate other country specific information. TSA officials added that,  once completed, TSA hopes to be able to use the tool to develop  vulnerability mitigation options to, among other things, address security  vulnerabilities identified during air carrier inspections and foreign airport  assessments. For example, if TSA inspectors identify a cargo screening  vulnerability during an air carrier inspection or airport assessment, they  may determine that the root cause is a lack of national-level training  courses. In an example such as this, although TSA does not have the  authority to require a foreign government to take corrective actions, TSA  officials may develop a training curriculum that foreign governments could  deploy, if they choose, to address the identified vulnerability. According to  TSA officials, TSA inspectors and TSA representatives would  subsequently determine whether the training resolved the vulnerability  and, if necessary, consider what additional measures may be appropriate.  TSA expects to have the tool in place and staff trained to use it by the  beginning of fiscal year 2019."], "subsections": []}, {"section_title": "DHS Has Taken Steps to Obtain Advance Air Cargo Information to Perform Targeted Risk Assessments of U.S.- Bound Flights", "paragraphs": ["DHS has taken steps to require advance information on air cargo  shipments in order to conduct targeted risk assessments and help ensure  the cargo is secure before air carriers transport it to the United States. As  previously discussed, in December 2010, U.S. Customs and Border  Protection (CBP) began collecting cargo data from certain air carriers  before they loaded U.S.-bound cargo as part of the voluntary ACAS pilot  program. In response to a terrorist plot in July 2017, TSA issued  security directives and emergency amendments in September 2017  requiring air carriers transporting cargo to the United States from last  point of departure airports in Turkey to submit advance cargo data to  CBP. Further, in January 2018, TSA imposed similar requirements for  foreign air carriers operating out of certain high risk countries in the  Middle East. DHS subsequently published the ACAS interim final rule,  which requires all air carriers to submit advance air cargo information as  of June 12, 2018.", "TSA and CBP identify high risk cargo based on, among other things, the  advance information air carriers submit and may require them to take  additional actions before loading the cargo onto U.S.-bound flights.  Before implementation of the ACAS interim final rule, air carriers not  participating in the ACAS pilot were required to submit manifest data to  CBP no later than 4 hours before the flight\u2019s arrival in the United States,  or no later than the time of departure from locations in North America, the  Caribbean, Central America, and parts of South America north of the  Equator. However, under ACAS, a subset of the manifest data must be  provided prior to loading the cargo onto U.S.-bound aircraft. After  reviewing the data, DHS can mandate that an air carrier (1) provide  additional information on a particular cargo shipment, (2) perform  enhanced screening before loading the cargo, or (3) not transport the  cargo to the United States.", "TSA officials are beginning to track whether air carriers have conducted  the required ACAS screening as a part of their international compliance  activities. TSA officials stated that inspectors review air carrier screening  and manifest logs during air carrier cargo inspections at foreign airports to  verify compliance with ACAS. In addition, TSA plans to fully develop the  process of assessing air carrier compliance with ACAS requirements,  according to TSA officials."], "subsections": []}]}, {"section_title": "TSA Has Recognized the Air Cargo Security Programs of the European Union and 12 Other Countries and Monitors Their Implementation", "paragraphs": [], "subsections": [{"section_title": "TSA Has Increased the Number of Countries Recognized, as well as the Scope of Its Recognition Program", "paragraphs": ["As of June 2018, TSA has recognized the passenger air cargo security  programs of the European Union, which covers the 28 European Union  member states, and 12 other countries. NCSP recognition is a voluntary  agreement between TSA and a foreign government. TSA\u2019s NCSP  recognition process involves three phases: (1) a technical review and  analysis of a foreign country\u2019s air cargo security program\u2019s requirements  with TSA requirements to determine if the programs align on basic  principles; (2) validation visits to the foreign country to determine if the air  cargo security program aligns with TSA practices; and (3) a decision on  whether to recognize the foreign government\u2019s air cargo security program  as commensurate with TSA\u2019s air cargo security requirements. The  recognition decision is based on whether the foreign government\u2019s NCSP  is commensurate with TSA requirements across TSA\u2019s six pillars of cargo  supply chain security, and the potential outcomes are as follows:", "Recognition with no caveats. TSA may determine that the foreign  government\u2019s NCSP is fully commensurate with all of TSA\u2019s air cargo  security requirements across all six supply chain security pillars or  TSA may find there are slight variations in air cargo security  requirements that nonetheless provide a commensurate level of  security and give the country\u2019s NCSP recognition with no caveats. As  of June 2018, TSA had recognized the NCSPs of Canada, Israel, and  Norway without any caveats.", "Recognition with caveats. TSA may decide to recognize a  government\u2019s NCSP, but with certain caveats based on specific  variations within a country\u2019s national requirements. According to TSA  officials, in this instance, TSA requires air carriers in that country to  continue to implement specific TSA requirements on U.S.-bound air  cargo to account for the variation. As of June 2018, TSA had issued  at least one caveat with nine NCSP recognized countries and the  European Union. For example, in these nine recognized countries  and the European Union, TSA requires air carriers to rescreen cargo  originating from specific third party countries according to TSA  standards before transporting it to the United States.", "No recognition, but provides recommendations. TSA may  determine that a foreign government\u2019s NCSP is not commensurate  with TSA requirements in many areas and make recommendations to  that government on how to improve its air cargo security program to  better align with TSA and global air cargo security requirements. For  example, after reviewing one country\u2019s air cargo security program  requirements, TSA determined that its NCSP was not commensurate  and provided written recommendations on ways to improve its NCSP,  as discussed below. According to TSA officials, under such  circumstances they will continue to engage with the foreign  government. If the foreign government implements the  recommendations, TSA may reconsider the foreign government for  NCSP recognition. Notably, TSA recognized another country\u2019s air  cargo security program only after its civil aviation authority  implemented TSA\u2019s recommendations to improve certain procedures,  including screening of staff with access to air cargo. Where NCSP  recognition is not applicable, air carriers transporting air cargo into the  United States from last point of departure airports must continue to  apply their TSA-approved security program requirements pertaining to  cargo.", "TSA originally developed the NCSP Recognition Program for passenger  air cargo security programs in fiscal year 2011, and TSA expanded the  scope of the program in fiscal year 2013 to include all-cargo operations.  As a result of this expansion, foreign governments may choose to engage  with TSA on NCSP recognition for passenger operations, all-cargo  operations, or both. According to TSA\u2019s NCSP memo authorizing the  change, by including all-cargo operations in its evaluation of other  countries\u2019 NCSPs, TSA can gain a greater understanding of the  international air cargo supply chain. As of June 2018, TSA had  recognized the all-cargo operations of the European Union and six other  countries. Figure 2 provides information about the foreign government  NCSPs that TSA had recognized as of June 2018.", "According to TSA data, air carrier participation in the NCSP Recognition  Program has increased in recent years. Specifically, as of June 2018, 130  air carriers participate in the NCSP Recognition Program\u2014an increase  from about 50 in fiscal year 2015 when TSA last recognized a foreign  government\u2019s NCSP. After TSA has recognized a foreign government\u2019s  NCSP, air carriers can request amendments to their TSA-approved  security programs to allow them to follow a recognized country\u2019s air cargo  security program instead of having to follow both the recognized country\u2019s  security program and separate requirements in their TSA-approved  security programs. Representatives from all 11 air carriers we met with  stated that they have submitted requests to TSA to amend their security  programs in order to implement the foreign government\u2019s NCSP instead  of TSA requirements when operating in those countries that have NCSP  recognition. According to representatives from all 11 air carriers and TSA  officials we met with, air carriers benefit from NCSP recognition.  Specifically, they and the stakeholders in their supply chains can learn  and use the host country\u2019s set of air cargo security requirements (and  without a need to know and implement TSA requirements for cargo  transported on U.S.-bound flights from that country).", "TSA officials stated that, as of June 2018, apart from the European Union  and the 12 other countries that have NCSP programs, no additional  foreign governments are close to achieving NCSP recognition. However,  TSA NCSP Recognition Program officials continue to coordinate with  foreign governments on air cargo security issues when requested and as  TSA resources allow. According to information provided by TSA, as of  June 2018, TSA had coordinated with 21 additional foreign governments  interested in NCSP recognition that are not yet recognized. In non- recognized countries, air carriers transporting U.S.-bound air cargo must  follow the measures required by the foreign governments in addition to  their TSA-approved security programs."], "subsections": []}, {"section_title": "TSA Uses a Variety of Mechanisms to Monitor and Revalidate Recognized Governments\u2019 NCSP Implementation", "paragraphs": ["Once TSA determines a foreign government\u2019s NCSP is commensurate  with TSA requirements, it monitors NCSP implementation through air  carrier cargo inspections, foreign airport assessments, ongoing  engagements with foreign government officials, and revalidation of NCSP  recognition (see fig. 3). Each of these monitoring mechanisms is  discussed in greater detail below.", "According to TSA officials, results from air carrier inspections and foreign  airport assessments provide TSA valuable information in determining  whether to revalidate a foreign government\u2019s NCSP recognition because  TSA inspectors are able to verify a recognized government\u2019s NCSP  implementation in person. We analyzed TSA data from fiscal years  2015 through 2017 and confirmed that TSA conducted air carrier cargo  inspections and assessments of foreign airports with U.S-bound cargo  shipments that covered all recognized NCSPs. Representatives from 10  of the 11 air carriers we met with and the two foreign governments we  met with confirmed that TSA conducts air carrier inspections in  recognized countries.", "According to our analysis of TSA data for fiscal years 2015 through 2017,  TSA inspectors identified more air carrier violations and lower rates of  compliance with cargo-related standards and recommended practices at  foreign airports located in non-NCSP countries than in NCSP countries.  In addition to identifying lower rates of compliance in non-NCSP  countries, TSA officials also determined that the noncompliance issues in  non-NCSP countries were more serious than noncompliance issues in  NCSP countries, according to our data analysis.", "According to TSA officials, TSA inspectors identified fewer violations  during air carrier cargo inspections in NCSP countries because air  carriers only need to implement one air cargo security program (the host  government\u2019s) and, therefore, were less likely to make errors.  Additionally, TSA inspectors identified fewer noncompliance issues in  NCSP countries because TSA officials meet with foreign officials in  recognized countries on a regular basis, and this helps to improve  compliance. Representatives from 10 air carriers we met with confirmed  that they are less likely to violate air cargo security requirements in NCSP  countries because (1) the foreign government conducts regular  compliance inspections (a component of the oversight and compliance  security pillar TSA requires foreign governments implement to obtain  NCSP recognition), or (2) screeners are less likely to make errors  screening cargo because they only need to implement the foreign  government\u2019s NCSP, which reduces confusion. For example, one air  carrier representative told us that cargo screeners do not need to  determine which security measures (TSA\u2019s or the host government\u2019s) to  implement for a particular flight."], "subsections": [{"section_title": "Annual Meetings and TSA Representative Engagement with Foreign Government Officials", "paragraphs": ["TSA and foreign government officials also discuss changes in a foreign  government\u2019s NCSP on a regular basis, according to our review of TSA\u2019s  documents and interviews with TSA and foreign government officials. For  example, TSA\u2019s memos authorizing the NCSP Recognition Program and  11 of 12 letters of recognition provided to foreign governments express an  intent for TSA to hold in-person, annual meetings with officials in  countries with a recognized NCSP program to discuss issues related to  NCSP recognition. TSA officials generally held or planned to hold such  meetings in fiscal years 2017 and 2018, according to our review of TSA\u2019s  NCSP Recognition Program fiscal year 2018 work plan. In addition, TSA  officials stationed at U.S. embassies are to meet with their foreign  government counterparts on a regular basis, according to TSA officials  and the two recognized governments with whom we met. For example,  the TSA representative who coordinates with the European Commission  in Brussels, Belgium, told us that he meets with European Commission  officials multiple times each month. He stated that these conversations  can cover regulatory and legislative changes pertaining to air cargo  security with European Commission officials and he informs TSA  headquarters and the Frankfurt Regional Operations Center of changes  that could affect NCSP recognition in Europe. TSA headquarters and  European Commission officials confirmed that these meetings occur."], "subsections": []}, {"section_title": "Revalidation of NCSP Recognition", "paragraphs": ["TSA revalidates recognized NCSPs using the results of its air carrier  inspections, airport assessments, ongoing engagement with foreign  government officials, and additional site visits to the foreign country, if  needed. According to our analysis of TSA NCSP recognition letters and  NCSP information compiled by TSA officials, TSA has revalidated all  recognized NCSP countries at least once since fiscal year 2012. Further,  this analysis shows that TSA has generally revalidated the NCSPs of  recognized countries every 3 years, as required by the TSA memos that  established and revised the NCSP recognition process. However, in  2016, TSA authorized a change to the revalidation process that allows for  continuous NCSP recognition because, according to TSA officials and  NCSP memos, the monitoring mechanisms TSA has in place (e.g., air  carrier inspections, foreign airport assessments, and ongoing dialogue  with foreign government officials) provide sufficient information to validate  that foreign governments\u2019 recognized NCSPs and continue to provide a  commensurate level of security to TSA\u2019s. TSA\u2019s 2016 NCSP memo states  that TSA can revoke continuous recognition at any time, and TSA may  not grant continuous recognition to a country if TSA determines that  additional oversight is warranted. For example, TSA officials stated that  they may only recognize a country\u2019s NCSP on a time-limited basis if they  experience communication or access issues or have concerns about  implementation of the NCSP. As of June 2018, TSA had granted  continuous recognition to the European Union and 10 other countries and  had not revoked any government\u2019s continuous recognition, according to  summary NCSP information provided by TSA officials."], "subsections": []}]}]}, {"section_title": "TSA\u2019s Existing Performance Measures Do Not Allow It to Specifically Determine the Effectiveness of Its Efforts to Secure U.S.-Bound Air Cargo", "paragraphs": ["TSA has taken steps to broadly measure the effectiveness of its air  carrier inspections and foreign airport assessments, but these efforts do  not allow TSA to specifically determine the effectiveness of the cargo  portions of such inspections or assessments. In addition, TSA has not  developed measures for determining the effectiveness of its NCSP  Recognition Program."], "subsections": [{"section_title": "TSA Has Not Evaluated the Effectiveness of its Air Carrier Cargo Inspections or the Cargo Portions of Foreign Airport Assessments", "paragraphs": ["TSA tracks data on the results of air carrier inspections and foreign airport  assessments, and it broadly measures the effectiveness of its foreign  airport assessment program and is developing a similar measure for its  air carrier inspection program. However, TSA\u2019s performance measures do  not allow it to specifically determine the effectiveness of its air carrier  cargo inspections or the cargo portions of foreign airport assessments.  For example, in fiscal year 2017, TSA developed a new performance  measure to track the extent to which foreign airports take actions to  address noncompliance issues identified by TSA inspectors during  foreign airport assessments. The target for this performance measure is  for 70 percent of foreign airports to implement corrective actions or other  mitigation strategies. However, that performance measure does not allow  TSA to determine the effectiveness of the cargo portions of airport  assessments because it does not separately account for cargo and  noncargo noncompliance issues. Specifically, the current measure does  not capture noncompliance issues by category, to allow TSA to determine  which noncompliance issues specifically pertain to cargo. Such a broad  measure of the effectiveness of foreign airport assessments could  obscure progress made (or lack thereof) in resolving cargo-specific  vulnerabilities. According to our analysis of TSA fiscal year 2017 foreign  airport assessment data, TSA could meet its 70 percent target if foreign  airports take actions to address noncompliance issues unrelated to  cargo\u2014including passenger and carry-on baggage screening and access  controls\u2014without taking any actions to address identified noncompliance  issues for cargo.", "TSA officials stated that they are coordinating with the Office of  Management and Budget to develop a performance measure to gauge  the effectiveness of air carrier inspections. However, TSA officials also  stated that they have no plans to differentiate the extent to which air  carriers correct violations TSA inspectors identify related to cargo from  those identified related to passengers as they develop this measure.  Notably, TSA has regularly included a goal to secure air cargo and the  supply chain in annual operational implementation plans, but TSA has no  associated performance measures that show the effectiveness of efforts  taken to meet this goal.", "TSA\u2019s Office of Global Strategies Fiscal Year 2016 Strategy states that all  strategic goals and objectives will have corresponding, relevant  performance indicators that measure organization effectiveness in those  areas. Further, DHS and TSA guidance state that it is important to  measure the effectiveness of risk management priorities. For example,  the DHS National Infrastructure Protection Plan and Transportation  Systems Sector-Specific Plan state that setting goals and measuring the  effectiveness of risk management efforts against these goals are key  elements of a risk management framework. We have also previously  reported on the importance of developing outcome-based performance  measures\u2014measures that address the results (effectiveness) of products  and services.", "According to TSA officials, they have not developed outcome-based  performance measures that are specific to cargo security because they  believe that measuring the results of air carrier inspections and foreign  airport assessments holistically is sufficient to provide them with  information on air cargo vulnerabilities. However, as previously  discussed, TSA inspectors are identifying some potentially serious cargo  vulnerabilities during air carrier cargo inspections and the cargo portions  of airport assessments, including cargo that was not properly screened.  Given TSA\u2019s assessment that the security threat in air cargo is significant,  developing and monitoring an outcome-based performance measure  specific to the cargo portions of foreign airport assessments\u2014along with  differentiating the extent to which air carriers correct violations related to  cargo from those related to passengers as it develops and monitors  outcome-based performance measures for its air carrier inspection  program\u2013could help TSA better determine the effectiveness of these  efforts and whether they are improving the security of U.S.-bound air  cargo. Such cargo-specific outcome-based performance measures could  include differentiating the percentage of cargo-related violations that TSA  has verified air carriers have addressed (as opposed to passenger- related violations) and measuring the progress that foreign airport  authorities, foreign governments, or TSA have made to address  vulnerabilities specific to ICAO\u2019s cargo-related standards."], "subsections": []}, {"section_title": "TSA Has Not Evaluated the Effectiveness of its NCSP Recognition Program", "paragraphs": ["TSA does not measure the effectiveness of its NCSP Recognition  Program. Specifically, TSA budget documents and annual performance  reports do not include measures for gauging the success of its NCSP  Recognition Program. TSA operational implementation plans for fiscal  years 2014 through 2017 addressed program recognition\u2014including  working toward recognition efforts with countries based on a list of  priorities and holding annual in-person meetings with each recognized  government\u2014but TSA has not evaluated the impact of these actions. In  addition, while TSA\u2019s operational implementation plans include  milestones to measure outputs of the NCSP Recognition Program, TSA  has not measured outcomes of its NCSP recognition efforts. For example,  TSA has not measured the extent to which non-recognized countries  implement recommendations that TSA has made to them during the  NCSP recognition process. TSA officials stated that such a measure  would help them determine the effect of the NCSP Recognition Program  on air cargo security. According to TSA officials, in the absence of formal  performance measures, the primary metric used to measure the  performance of the NCSP Recognition Program is the number of  countries TSA has recognized. However, this metric does not address the  effectiveness of the NCSP Recognition Program because it does not  measure how the program improves air cargo security.", "We have previously reported on the importance of measuring program  performance. Our prior reports and guidance have stated that  performance measures should evaluate both processes (outputs) and  outcomes related to program activities. Specifically, we have noted that  output measures address the type or level of program activities  conducted, such as the number of countries recognized, while outcome- based measures address the results of products and services, such as  how recognition programs facilitate the identification of air cargo industry  vulnerabilities or contribute to improved air cargo security. Further, as  discussed earlier, TSA strategy documents and leading practices  encourage the development of relevant performance indicators that  measure program effectiveness.", "TSA officials stated that TSA has not developed performance measures  associated with the NCSP Recognition Program because TSA has  reorganized and different directorates within TSA have had responsibility  for NCSP program recognition over time. TSA officials also stated that  developing NCSP Recognition Program performance measures has been  secondary to other tasks, such as developing the ACAS program.  Developing and monitoring output and outcome-based performance  measures for its NCSP Recognition Program will help TSA better assess  the effectiveness of the program and whether the resources it has  invested are yielding their intended results."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Air carriers transport billions of pounds of cargo into the United States  from foreign airports each year, and the threat posed by terrorists  attempting to conceal explosive devices in air cargo shipments remains  significant, according to TSA. TSA has taken steps to ensure that U.S- bound air cargo is secure by, for example, conducting air carrier cargo  inspections overseas, performing assessments of foreign airports that  transport cargo to the United States using ICAO cargo-related standards  and recommended practices, and evaluating and recognizing the NCSPs  of foreign countries. Although TSA tracks cargo compliance data  collected during its air carrier inspections and foreign airport assessments  and is developing a vulnerability resolution tool, TSA has not developed  outcome-based performance measures for determining the effectiveness  of its air cargo security compliance efforts. Developing and monitoring an  outcome-based performance measure for the cargo portions of airport  assessments and differentiating the extent to which air carriers correct  violations related to cargo from those related to passengers as it develops  and monitors outcome-based performance measures for its air carrier  inspection program could help TSA better assess the effectiveness of  these efforts and whether they are improving air cargo security. For  example, TSA could measure the percentage of cargo-related violations  that TSA has verified air carriers have addressed. Further, developing  and monitoring output and outcome-based performance measures for its  recognition programs will help TSA better determine the effectiveness of  the NCSP Recognition Program and whether the resources TSA has  invested are yielding their intended results. For example, TSA could  measure the extent to which non-recognized countries implement  recommendations that TSA has made to them during the NCSP  recognition process."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to TSA:", "The Administrator of TSA should instruct Global Strategies to develop  and monitor outcome-based performance measures for determining  the effectiveness of the cargo portion of its foreign airport  assessments. (Recommendation 1)", "The Administrator of TSA should instruct Global Strategies to  differentiate the extent to which air carriers correct violations related to  cargo from those related to passengers as it develops outcome-based  performance measures for its air carrier inspection program, and  monitor any measure it develops. (Recommendation 2)", "The Administrator of TSA should instruct Global Strategies to develop  and monitor output and outcome-based performance measures for  determining the effectiveness of its NCSP Recognition Program.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["In August 2018, we provided a draft of the sensitive version of this report  to the Department of Homeland Security for its review and comment. In  written comments, which are included in appendix IV, DHS stated that it  concurred with the recommendations and plans to develop cargo-specific  performance measures to help determine the effectiveness of its air  carrier inspections, foreign airport assessments, and the NCSP  Recognition Program. DHS also provided technical comments, which we  have incorporated into the report, as appropriate.", "We are sending copies of this report to interested congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact Nathan Anderson at (202) 512-3841 or andersonn@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report: (1) describes steps the Transportation Security Administration  (TSA) takes to help ensure that U.S-bound air cargo is secure, (2)  describes the status of TSA\u2019s efforts to recognize and monitor foreign  governments\u2019 air cargo security programs, and (3) analyzes the extent to  which TSA measures the effectiveness of its efforts to secure U.S.-bound  air cargo.", "This report is a public version of a sensitive report that we issued in  October 2018.TSA deemed some of the information in our October  report to be Sensitive Security Information, which must be protected from  public disclosure. Therefore, this report omits sensitive information about  TSA\u2019s risk methodology, the standards that TSA uses to assess foreign  airports, the specific results of TSA\u2019s air carrier inspections and foreign  airport assessments, and information on the types of NCSP recognition  TSA has granted to other countries. Although the information provided in  this report is more limited, the report addresses the same objectives as  the sensitive report and uses the same methodology.", "To describe the steps TSA takes to help ensure that U.S-bound air cargo  is secure, we reviewed relevant laws and regulations, TSA security  policies and procedures, screening program requirements, and security  directives and emergency amendments relevant to air cargo. For  example, we reviewed relevant air carrier security programs and  associated cargo inspection job aids that TSA transportation security  specialists (inspectors) are to use during each air carrier cargo inspection  to ensure that requirements for air carrier security programs are fully  evaluated during each inspection. We also reviewed fiscal years 2012  through 2018 air carrier inspection and airport assessment Master Work  Plans\u2014which TSA uses to track its overseas air carrier inspection and  foreign airport assessment schedule\u2014to better understand how TSA  schedules inspections and assessments and the types of inspections it  conducts. We chose these fiscal years because they cover the time  period since our previous air cargo security review. In addition, we  conducted site visits to two foreign airports that operate flights that  transport air cargo directly to the United States\u2014one in South America  and one in Asia\u2014to observe a nongeneralizable sample of TSA  inspectors conducting a total of 17 air carrier cargo inspections. At one  airport, we also observed the cargo portion of an airport assessment. We  selected these locations based on their designation by TSA as airports of  relatively high risk level, as well as high volume of U.S.-bound air cargo;  TSA\u2019s air carrier inspection schedule; and geographic dispersion. We also  chose these countries to allow us to observe an inspection in one country  where TSA has recognized the NCSP and one country where TSA has  not recognized the NCSP. In addition, we reviewed the final reports TSA  inspectors completed for the air carrier cargo inspections and airport  assessment we observed.", "Further, we obtained and analyzed the results of all air carrier cargo  inspections (close to 5,000) and assessments at foreign airports that are  last points of departure for cargo bound for the United States (about 570)  conducted by TSA inspectors and then entered by them into TSA\u2019s  databases. The Performance and Results Information System (PARIS)  database contains security compliance information on TSA-regulated  entities, including air carriers, and the Global Risk Analysis and Decision  Support (GRADS) system vulnerability tracking sheet contains the results  of foreign airport assessments. We analyzed PARIS and GRADS data  from fiscal years 2012 through 2017, to cover the period since our  previous air cargo security review and to include the 5 most recent years  for which data were available at the time of our review. Specifically, we  analyzed the frequency with which air carriers and foreign airports  complied with TSA air cargo security requirements and select cargo- related International Civil Aviation Organization (ICAO) aviation security  standards and recommended practices, including the seriousness of  ICAO noncompliance issues TSA inspectors identified. TSA also uses GRADS to populate the Open Standards and Recommended Practices  Finding Tool (OSFT), which tracks efforts taken by TSA and host  governments to address noncompliance issues identified during foreign  airport assessments. We analyzed fiscal years 2012 through 2017 OSFT  data to determine the status of noncompliance issues TSA inspectors  identified. We also reviewed 2017 PARIS data on the number of known  consignor and regulated agent assessments TSA inspectors conducted.", "To assess the reliability of TSA\u2019s air carrier and airport assessment data  captured in PARIS and GRADS tracking sheet and OSFT, we reviewed  program documentation on system controls, interviewed knowledgeable  TSA officials, and analyzed TSA\u2019s data for any potential gaps and errors.  During our assessment, we found some inconsistencies in the tool TSA  uses to follow up on airport noncompliance issues. We rounded airport  compliance information to the nearest 10 for reporting purposes. We also  aggregated ICAO standards and recommended practices within the  Measures Related to Cargo, Mail, and Other Goods category for reporting  purposes because their numbering has changed over time. We  concluded that TSA\u2019s data on air carrier inspections and foreign airport  assessments were sufficiently reliable to provide a general indication of  the level of compliance for TSA\u2019s air carrier inspections and foreign  airport assessments over the period of our analysis.", "In addition, we conducted interviews with TSA officials, foreign  government representatives, and air cargo industry stakeholders, as  follows:", "We interviewed senior TSA officials, inspectors, TSA representatives  stationed overseas, and international industry representatives located  at TSA headquarters and in the field. For example, we met with the  Director of Global Compliance as well as managers and inspectors  from all six TSA regional operations centers who are responsible for  planning and conducting air carrier inspections and assessments of  foreign airports. During our interviews with TSA staff, we discussed  TSA\u2019s efforts to ensure the security of U.S.-bound air cargo prior to  being transported to the United States and air carriers are in  compliance with the applicable TSA cargo security requirements.", "We also interviewed officials at the European Commission (EC) and  from the civil aviation authority in the country in Asia that we visited to  discuss air cargo security standards and their experiences in  coordinating with TSA. We judgmentally selected these foreign  government entities because they (1) aligned with TSA\u2019s inspection  site visit in the country in Asia that we observed and (2) represent  different models of recognition (i.e., TSA recognizes both the  passenger and all-cargo portions of the European Union national  cargo security program (NCSP) but only passenger operations in the  NCSP for the country in Asia that we visited).", "Further, we met with representatives from 2 aviation associations and  11 air carriers that include U.S. and foreign-flagged air carriers, as  well as passenger and all-cargo carriers. One of the international  aviation associations includes air carriers that comprise over 80  percent of the world\u2019s air traffic and the other aviation association  includes the 5 air carriers that transported the largest individual  amounts of U.S.-bound air cargo, by tonnage, in fiscal year 2017. We  based our selection of the 11 air carriers on the relatively high volume  of U.S.-bound cargo they transport; their operation of flights at the  foreign airports we visited; and to obtain a range of coverage  regarding their geographical regions of operation, passenger and all- cargo air carriers, and U.S. and foreign-flagged air carriers.", "Results from these meetings with foreign governments and aviation  industry officials are not generalizable, but provided us with information  on stakeholders\u2019 experiences and perspectives regarding air cargo  security issues.", "To describe the status of TSA\u2019s efforts to recognize and monitor foreign  governments\u2019 air cargo security programs, we reviewed TSA\u2019s policies  and procedures for its NCSP Recognition Program. For example, we  reviewed TSA memos from 2012, 2013, and 2016 that documented the  recognition standards and any subsequent revisions to the NCSP  Recognition Program; as well as TSA\u2019s process for monitoring NCSP  recognition requirements. Additionally, we analyzed letters that TSA  provided since 2012 to the 13 governments it determined had  commensurate air cargo security programs and NCSP information TSA  officials compiled specifically for our review to better understand TSA\u2019s  terms of recognition with each government and the timeframes for  revalidating NCSP recognition. We also reviewed letters TSA provided to  governments it had determined did not have commensurate air cargo  security programs, which provided us with insights into the recognition  process and the criteria applied to TSA\u2019s reviews. Further, we reviewed  the NCSP Recognition Program\u2019s fiscal years 2017 and 2018 work plans,  as well as summaries of TSA\u2019s annual meetings with foreign governments  to better understand TSA\u2019s efforts to engage with recognized  governments.", "We also analyzed the air carrier cargo inspection and airport assessment  data discussed above to determine the number of cargo inspections and  assessments TSA completed in recognized countries from fiscal years  2015 through 2017. We chose this time period because it represents the  3 most recent complete fiscal years, and TSA last recognized a country\u2019s  NCSP in 2015. We also analyzed data from TSA\u2019s Security Policy and  Industry Engagement Policy Inventory on the number of air carriers  participating in the NCSP Recognition Program from fiscal year 2012\u2014 when the NCSP Recognition Program began\u2014through fiscal year 2017\u2014 the most recent complete fiscal year available at the time of our review\u2014 to determine how the level of participation has changed over time. In  addition, we analyzed fiscal year 2017 Department of Transportation  Bureau of Transportation Statistics T-100 data bank, which contains data  on U.S.-bound departures from foreign airports, among other things, to  determine the percentage of overall U.S.-bound air cargo shipped from  NCSP countries. To assess the reliability of the T-100 data, we reviewed  documentation on system controls, interviewed knowledgeable officials  from the Bureau of Transportation Statistics, and analyzed the data for  any potential gaps and errors. We determined that the T-100 data were  sufficiently reliable for our intended purposes. Finally, we conducted  interviews with TSA and foreign government officials from two countries,  and with representatives of the 11 air carriers described previously to  better understand TSA\u2019s ongoing efforts to recognize and monitor foreign  governments\u2019 air cargo security programs. We also confirmed the status  of countries\u2019 NCSP recognition, as of June 2018, with TSA officials.", "To analyze the extent to which TSA measures the effectiveness of its  various efforts to secure U.S.-bound air cargo, we reviewed documents  that contain information on TSA\u2019s air cargo security objectives, goals, and  performance measures, including (1) information reported to the Office of  Management and Budget in annual budget documents from fiscal years  2014 through 2019, and (2) TSA\u2019s Global Strategies directorates  Operational Implementation Plans from fiscal years 2014 through 2018\u2014 the most recent years available at the time of our review. These plans  include annual objectives and milestones for U.S.-bound air cargo  security programs. We also reviewed the measures in the annual budget  documents and Operational Implementation Plans and compared them  with requirements in TSA\u2019s Global Strategies\u2019 Fiscal Year 2016 Strategy  and Fiscal Year 2018 Strategy Program and applicable laws governing  performance reporting in the federal government, including the  Government Performance and Results Act of 1993 (GPRA), as updated  and expanded by the GPRA Modernization Act of 2010 (GPRAMA). For  example, we assessed whether the performance measures provide  information on the effectiveness of TSA\u2019s various air cargo security  efforts. Although GPRA and GPRAMA requirements apply to those goals  reported by departments (e.g., DHS), we have previously reported that  they can serve as leading practices at other organizational levels, such as  component agencies (e.g., the TSA) for performance management.  Further, we assessed TSA\u2019s performance measures against risk  management principles in the DHS National Infrastructure Protection Plan  and the Transportation Systems Sector-Specific Plan. In addition, we  obtained additional information on how TSA measures the performance of  its air cargo security efforts during our interviews with TSA headquarters  officials.", "The performance audit upon which this report is based was conducted  from July 2017 to October 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with TSA from September 2018 to November 2018  to prepare this public version of the original sensitive report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": []}, {"section_title": "Appendix II: Transportation Security Administration (TSA) Processes for Conducting Air Carrier Cargo Inspections", "paragraphs": ["Air carrier cargo inspections are conducted by a team of Transportation  Security Administration (TSA) security specialists (inspectors) at foreign  airports who review passenger and all-cargo air carriers\u2019 implementation  of requirements in their TSA-approved security programs, any  amendments or alternative procedures to these security programs, and  applicable security directives or emergency amendments. The frequency  of air carrier cargo inspections at each airport depends on a risk-informed  approach and is influenced, in part, by the airport\u2019s vulnerability to  security breaches, since the security posture of each airport varies,  according to TSA. In general, TSA procedures require TSA to inspect air  carriers with TSA-approved security programs at each airport annually or  semiannually depending on the vulnerability level of the airport, with some  exceptions. The inspection teams\u2014based out of TSA regional operations  centers\u2014generally include one team leader and one team member and  typically take 1 or 2 days, but can involve more inspectors and take  longer to complete depending on the extent of service by the air carrier.  TSA inspectors may spend several days at a foreign airport inspecting air  carriers if there are multiple air carriers serving the United States from  that location. During air carrier cargo inspections, TSA inspectors are to  review applicable security manuals, procedures, and records; interview  air carrier personnel; and are to observe security measures, such as  cargo acceptance and screening, among other activities. Air carriers are  subject to inspection in six key areas of cargo supply chain security, as  described in table 2.", "After completion of an air carrier inspection, TSA inspectors are to record  the results into TSA\u2019s Performance and Results Information System  (PARIS), a database containing security compliance information on TSA- regulated entities. If an inspector finds that an air carrier is in violation of  any applicable security requirements, the inspector is to take additional  steps to record the specific violation(s) and, in some cases, pursue them  with further investigation. For example, TSA inspectors may choose to  resolve violations that are minor or technical in nature, such as an  employee not displaying their identification, through on-the-spot feedback  and instruction, referred to as \u201ccounseling.\u201d For more serious violations,  such as inadequate screener training, TSA inspectors may pursue  administrative actions, including issuing a warning notice, or initiating an  investigation and requiring air carriers to inform TSA of the specific steps  they will take to address the issue. For more egregious violations, such  as failure to screen cargo, TSA inspectors may recommend a civil  penalty. In extreme cases, TSA may withdraw its approval of an air  carriers\u2019 security program and suspend the air carriers\u2019 operations.  According to TSA officials, they rely on a system of progressive  enforcement and carefully consider whether a civil penalty is warranted  based on the compliance history of an air carrier, among other factors."], "subsections": []}, {"section_title": "Appendix III: Transportation Security Administration (TSA) Processes for Conducting Foreign Airport Assessments", "paragraphs": ["Through its foreign airport assessment program, TSA determines whether  foreign airports that provide passenger or all-cargo air carrier service to  the United States are maintaining and carrying out effective security  measures. To determine the frequency of foreign airport assessments,  TSA uses a risk-informed approach to categorize airports into three risk  tiers, with high risk airports assessed more frequently than medium and  low risk airports. TSA\u2019s assessments of foreign airports are generally  scheduled during the same site visit as air carrier inspections for a certain  location, and the same team of inspectors generally conducts both the  airport assessment and air carrier inspections. According to TSA, it  generally takes 3 to 7 days to complete a foreign airport assessment.  However, the amount of time and number of team members required to  conduct an assessment varies based on several factors, including the  size of the airport and the threat level to civil aviation in the host country.", "TSA uses a multistep process to plan and conduct assessments of  foreign airports. Specifically, TSA must obtain approval from the host  government to conduct an airport assessment, and schedule the date for  the on-site assessment. After conducting an entry briefing with host  country and airport officials, the TSA team conducts an on-site visit to the  airport. During the assessment, the team of inspectors uses several  methods to determine a foreign airport\u2019s level of compliance with 39  International Civil Aviation Organization (ICAO) standards and five ICAO  recommended practices, to include conducting interviews with airport  officials, examining documents pertaining to the airport\u2019s security  measures, and conducting a physical inspection of the airport. ICAO  standards and recommended practices address operational issues at an  airport, such as ensuring that passengers and cargo are properly  screened and that unauthorized individuals do not have access to  restricted areas of an airport. ICAO standards and recommended  practices also address non-operational issues, such as whether a foreign  government has implemented a national civil aviation security program for  regulating security procedures at its airports and whether airport officials  that are responsible for implementing security controls are subject to  background investigations, are appropriately trained, and are certified  according to the foreign government\u2019s national civil aviation security  program.", "At the close of an airport assessment, TSA inspectors are to brief foreign  airport and government officials on the results. TSA inspectors also  prepare a report in TSA\u2019s Global Risk Analysis and Decision Support  System (GRADS) detailing their findings on the airport\u2019s overall security  posture and security measures, which may contain recommendations for  corrective actions and must be reviewed by TSA field and headquarters  management. As part of the report, TSA assigns a vulnerability score to  each ICAO standard and recommended practice assessed, as well as an  overall vulnerability score for the airport, which corresponds to the level of  compliance for each ICAO standard and recommended practice TSA  assesses. Further, according to TSA officials, cargo experts in TSA  headquarters review the cargo portion of each airport assessment before  the assessment report is finalized. Afterward, TSA shares a summary of  the results with the foreign airport and host government officials. In some  cases, TSA requires air carriers to implement security procedures, such  as requiring air carrier employees to guard the aircraft while on the  tarmac, to address any deficiency that TSA identified during a foreign  airport assessment through the issuance of security directives and  emergency amendments. If the Secretary of Homeland Security  determines that an airport does not maintain and carry out effective  security measures, he or she shall, after advising the Secretary of State,  take action, which generally includes notification to the appropriate  authorities of the country of security deficiencies identified, notification to  the general public that the airport does not maintain effective security  measures, and modification of air carrier operations at that airport."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Nathan Anderson, (206) 287-4804 or andersonn@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Christopher Conrad (Assistant Director),  Paul Hobart (Analyst-in-Charge), Hiwotte Amare, Charles Bausell,  Dominick Dale, Pamela Davidson, Wendy Dye, Mike Harmond, Eric  Hauswirth, Ryan Lester, Benjamin Licht, and Tom Lombardi made key  contributions."], "subsections": []}]}], "fastfact": ["How does the TSA ensure that explosives aren't hidden in the cargo holds of commercial aircraft? One part of the effort is inspecting passenger and cargo airlines, for example, to see how they screen cargo. Another is assessing security at foreign airports.", "Our analysis of 2012-2017 data shows TSA found violations related to air cargo security in", "16% of its airline inspections", "25% of its foreign airport assessments", "TSA has taken actions to resolve most of the violations and is working on the remainder. We recommended that TSA establish measures to better assess the effectiveness of its efforts."]}
{"id": "GAO-18-682", "url": "https://www.gao.gov/products/GAO-18-682", "title": "Tribal Broadband: Few Partnerships Exist and the Rural Utilities Service Needs to Identify and Address Any Funding Barriers Tribes Face", "published_date": "2018-09-28T00:00:00", "released_date": "2018-09-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2018, FCC estimated that 35 percent of Americans living on tribal lands lack broadband service compared to 8 percent of Americans overall. Various federal programs support increasing broadband deployment in unserved areas, including tribal lands. Tribes can form partnerships with private sector companies and others to deploy broadband infrastructure on tribal lands. GAO was asked to provide information on these partnerships.", "This report discusses (1) examples and outcomes of tribal partnership arrangements, (2) the amount of federal funding provided to tribal entities for broadband deployment, and (3) stakeholder-identified barriers that tribes face in obtaining federal funding and the extent to which federal agencies have addressed those barriers. GAO identified partnerships by reviewing federally funded broadband projects that included a partnership component; analyzed federal funding dedicated to broadband deployment; interviewed agency and tribal government officials, tribal associations, tribally owned broadband providers, and industry stakeholders; and assessed RUS's efforts to address the regulatory funding barriers tribes may face. The information presented is illustrative and is not generalizable to all tribes or all partnerships."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identified some partnership arrangements between tribes and other entities to increase broadband access on tribal lands. Among the seven examples GAO identified, tribes partnered with different types of entities including private broadband providers, a community access network provider, an electric cooperative, a regional consortium, and tribally owned broadband providers. According to the tribes participating in the partnerships, almost all of the partnerships improved broadband service on tribal lands.", "The Federal Communications Commission (FCC) and the Rural Utilities Service (RUS) are the primary sources of federal funding to deploy broadband infrastructure where the cost of providing service is high, including on tribal lands. GAO reviewed funding for four programs, three in FCC and one grant program in RUS, and found that in total, less than 1 percent has gone directly to tribes or to tribally owned broadband providers to expand broadband service. GAO found that 14 tribal entities received federal funding from FCC and RUS to increase broadband deployment for 2010\u20132017.", "The tribal officials, tribal associations, and tribally owned broadband providers GAO contacted cited several barriers tribes face in obtaining federal funding to deploy broadband service on tribal lands. For example, they said tribes face regulatory barriers in applying for RUS's grant funding, including (1) preparing existing and proposed network design, (2) demonstrating financial sustainability of the broadband project within 5 years, and (3) obtaining matching funds. An interagency council recently recommended that federal agencies identify and address regulatory barriers that may unduly impede broadband deployment. Although RUS conducts some outreach with tribes, it has not undertaken a formal assessment to identify and address the regulatory barriers that tribes may face in obtaining RUS's funding for broadband deployment. RUS officials told GAO that they do not have the resources to do so. Nevertheless, lacking such an assessment, tribes may continue to face regulatory barriers in obtaining RUS funding for broadband deployment on their lands. By identifying and addressing any regulatory barriers that impede tribal entities' access to RUS funding, RUS could help tribes obtain funding to expand broadband deployment on tribal lands."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that RUS identify and address regulatory barriers that impede tribal entities from obtaining RUS funding for broadband deployment. RUS neither agreed nor disagreed with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Broadband service provides users with many opportunities to improve  communications, including enhancements in e-commerce, telemedicine,  and education tools. In 2018, the Federal Communications Commission  (FCC) estimated that 35 percent of Americans living on tribal lands lack  broadband service, compared to 8 percent of Americans overall.  According to FCC, the gap in broadband access between rural areas and  rural tribal lands is even larger. Further, when including mobile broadband  service, FCC reported that nearly 60 percent of Americans living in rural  tribal lands nationwide lack broadband access, compared to about 31  percent of rural Americans overall. This large difference is due, in part, to  the relatively high proportion of tribal lands that are located in rural areas  with rugged terrain and low population density, which decreases business  incentives to invest in broadband infrastructure in these areas. According  to FCC, this lack of service on tribal lands could impede efforts by Indian  tribes to achieve self-governance and promote economic opportunity,  education, public safety, and cultural preservation.", "Currently, the federal government has programs that support increasing  broadband deployment in rural and unserved areas (including tribal  lands). Most notably, Congress has tasked FCC with encouraging the  deployment of advanced telecommunications capability in a reasonable  and timely fashion to all Americans, including those in rural areas and on  tribal lands. To accomplish this requirement, FCC is responsible for  implementing Universal Service Fund programs, one of which, the  Connect America Fund, provides approximately $4.5 billion annually to  support broadband service in underserved and unserved areas. The  Rural Utilities Service (RUS), a component agency of the U.S.  Department of Agriculture, also has the Community Connect Program  that provides grant funding to improve broadband service. Tribes as well  as partnerships between tribes and other entities may apply for such  funding in order to expand service on tribal lands.", "You asked us to examine several issues related to broadband access on  tribal lands, including the use of partnership arrangements between tribal  entities\u2014that is, tribal governments and telecommunications providers  owned by tribes\u2014and other entities. This is the second report we are  issuing in response to your request. This report discusses (1) examples  of partnership arrangements that tribal entities have used to increase  broadband deployment on tribal lands and the outcomes of those  partnerships, (2) the amount of funding provided to tribal entities for  broadband deployment from key federal programs, and (3) stakeholder- identified barriers that tribal entities face in obtaining federal funding for  broadband deployment and the extent to which federal agencies have  taken action to address those barriers. In this report, we use the term  \u201cpartnerships\u201d to refer to when an Indian tribe works with another entity to  design, build, or operate infrastructure assets to improve or enhance  broadband access.", "To address these objectives, we reviewed the Communications Act of  1934, as amended, the National Broadband Plan, and relevant literature  identified through a literature search of tribal partnerships for broadband  deployment. In addition, we reviewed documentation and interviewed  officials from FCC, RUS, and the Department of Commerce\u2019s National  Telecommunications and Information Administration (NTIA).", "To identify examples of tribal broadband partnerships for our review, we  first interviewed agency officials, tribes, private providers, and tribal  associations to determine if they were aware of any partnerships focused  on broadband deployment on tribal lands. We then identified any  broadband projects with a tribal partnership component by reviewing  financial information from 2010 to 2017 for the following federal programs:  (1) FCC\u2019s Universal Service Fund high-cost program and Connect  America Fund (including the Mobility Fund Phase I (Auction 901) and  Tribal Mobility Fund Phase I (Auction 902)); (2) RUS\u2019s Community  Connect Grant Program; (3) RUS\u2019s Broadband Initiatives Program; and  (4) NTIA\u2019s Broadband Technology Opportunities Program. While there  may be other tribal partnerships that exist, through these efforts we found  seven tribal partnership examples that we discuss in this report. The  identified tribal broadband partnerships are intended to be illustrative  examples and, accordingly, are not generalizable to others that may exist.", "To determine the amount of funding from key federal programs provided  to tribal entities for broadband deployment, we first identified the federal  programs that provide broadband funding from NTIA\u2019s Guide to Federal  Funding of Broadband Projects. The guide lists 17 federal programs that  fund broadband infrastructure. Of those federal programs, we focused our  review on four programs\u2014three in FCC and one grant program in RUS\u2014 selected because they provide the most directly relevant funding for  broadband deployment in unserved areas, which includes tribal lands.  We compiled total funding data for these four federal programs and the  amount of funding provided to tribes and tribal entities for broadband  deployment projects for 2010 to 2017. We took steps to assess the  reliability of the data, such as cross-checking the data, following up with  agency officials, and reviewing documentation, and found the data were  sufficiently reliable for the purposes of summarizing total funding and the  amount provided to tribes and tribal entities. Because we relied upon titles  or names of grant recipients to identify those grants awarded to tribes and  tribally owned providers, our analysis may not include some grants  awarded to broadband providers that deploy infrastructure to larger  service areas that may also include tribal lands.", "We obtained stakeholder views on barriers that tribal entities face in  obtaining federal funding and federal government efforts to address those  barriers by interviewing FCC and RUS officials and 17 tribal government  officials, 9 tribally owned broadband providers, and 5 tribal associations.  We selected tribal governments to interview to include variation in  geographic location, level of broadband deployment, and population  density. We visited six tribes in Idaho, New Mexico, and Washington  State. We also interviewed other stakeholders selected to represent a  range of views and those with experience working with Indian tribes and  broadband service. These stakeholders included 10 private broadband  providers and associations; 2 regional consortium; 2 community access  providers; an academic institution; and a cooperative. The views obtained  from the interviews are not generalizable to all tribes, all broadband  providers, or all industry stakeholders. We reviewed a report from the  Broadband Opportunity Council recommending that agencies identify and  address regulatory barriers that may unduly impede broadband  deployment and assessed RUS\u2019s efforts to address the regulatory  barriers tribes may face in attempting to obtain RUS funding for  broadband deployment. Appendix I describes our scope and  methodology in greater detail.", "We conducted this performance audit from September 2017 to  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government has recognized 573 Indian tribes as distinct,  independent political communities with inherent powers of a limited  sovereignty, which has never been extinguished. These tribes can vary  significantly in regard to tribal size, population, and ownership status of  land. For instance, some tribal lands include reservations\u2014land set aside  by treaty, federal law, or executive order for the residence or use of an  Indian tribe. Some tribal lands include parcels with different ownership;  parcels may be held in trust by the federal government for the benefit of a  tribe or an individual tribal citizen. Trust and restricted lands can affect a  tribe\u2019s ability to use their land as collateral to obtain a loan. In addition,  the size of a tribe\u2019s land base can range from less than one square mile  to more than 24,000 square miles (the size of West Virginia). Some tribes  are located in extremely remote, rural locations and others are located in  urban areas.", "The term \u201cbroadband\u201d commonly refers to Internet access that is high  speed and provides an \u201calways-on\u201d connection, so users do not have to  reestablish a connection each time they access the Internet. Broadband  providers deploy and maintain infrastructure to connect consumers to the  Internet and provide Internet service through a number of technologies.  Broadband infrastructure may include burying fiber-optic or copper  cables, stringing cable on existing poles, or erecting towers for wireless  microwave links, which relay wireless Internet connections from tower to  tower. Figure 1 illustrates some of the options for broadband deployment  infrastructure. To install this infrastructure, providers must obtain permits  from government entities with jurisdiction over the land or permission from  public utilities to deploy infrastructure on existing utility poles.", "The federal government has emphasized the importance of ensuring  Americans have access to broadband, and a number of agencies,  including FCC and RUS, currently provide funding to subsidize  broadband deployment in areas in which the return on investment has not  attracted private investment. FCC funds a number of programs through  the Universal Service Fund, which may increase broadband deployment  on tribal lands. One program is the high-cost program (renamed the  Connect America Fund (CAF) in 2011), which provides financial support  to both wireline and wireless telecommunications carriers that provide  telecommunications services (referred to as providers in this report) to  supplement their operating costs to serve consumers in rural or remote  areas, where the cost of providing service is high. From 2010 to 2017, a  total of $34.5 billion in annual and standalone Universal Service Fund  high-cost support was disbursed to providers, as follows:  In total, the high-cost program and Connect America Fund provided  $34.1 billion from 2010 to 2017 in financial support to providers,  consisting of annual disbursements between $3.7 and $5 billion.", "The Mobility Fund Phase I provided $300 million in 2012 in one-time  support to providers to expand broadband service in areas where  service was not available, including tribal lands.", "The Tribal Mobility Fund Phase I provided $49.8 million in 2014 in  one-time support to providers to deploy broadband service to  unserved tribal lands.", "To be eligible to receive for Universal Service Fund program support, a  provider must be designated an eligible telecommunications carrier (ETC) by the appropriate state or by FCC. Under FCC rules, which many state  programs mirror, ETCs must meet certain service obligations as  described below: provide a 5-year plan showing how program support will be used to  improve its coverage, service quality, or capacity in each service area  where it seeks designation; demonstrate its ability to remain functional in emergency situations; demonstrate that it will satisfy consumer protection and service quality offer local usage plans comparable to those offered by the incumbent  carrier in the areas for which it seeks designation; and acknowledge that it may be required to provide equal access to other  providers within the service area if all other ETCs in the designated  service area relinquish their designations.", "In addition to FCC\u2019s funding, RUS has a current program and had a prior  program and NTIA had a prior program that provided funding to improve  broadband service in unserved or underserved areas. The RUS and  NTIA prior programs were authorized by the American Recovery and  Reinvestment Act of 2009 (Recovery Act) to expand high-speed Internet  service in unserved areas, and there is no current funding for these  programs.", "RUS\u2019s Community Connect program currently provides grants to rural  communities to provide high-speed Internet service to unserved  areas. The Community Connect program is significantly smaller than  FCC\u2019s programs, with $95.2 million awarded to 36 recipients from  2010 to 2017. The purpose of the RUS Community Connect  program is to provide financial assistance to eligible applicants that  will provide broadband service that fosters economic growth and  delivers enhanced educational, healthcare, and public-safety benefits.  In addition, RUS previously administered the Broadband Initiatives  Program (BIP), authorized by the Recovery Act to expand high-speed  Internet service in unserved areas. BIP funding included $2.2 billion  dedicated to deploy broadband infrastructure. Through the program,  RUS funded a total of 247 infrastructure projects with the requirement  that all projects be fully completed by June 30, 2015. In addition to the  infrastructure awards, 12 technical assistance grants went to tribal  communities to develop regional plans to provide broadband service  in rural areas that remain critically unserved.", "NTIA administered a prior program also authorized by the Recovery  Act called the Broadband Technology Opportunities Program (BTOP).  NTIA made available $3.1 billion in BTOP funding to deploy  broadband infrastructure. Through the program, NTIA awarded a total  of 116 infrastructure grants with the requirement that all projects be  fully complete within 5 years of the award date."], "subsections": []}, {"section_title": "Selected Tribes Partnered with Various Entities to Increase Broadband Deployment and Outcomes Varied", "paragraphs": ["Although we identified some partnership arrangements between tribes  and other entities to increase broadband deployment on tribal lands using  prior authorized funding, based on our review, these arrangements are  not being used under currently available programs. As previously noted,  there are greater costs associated with deploying broadband on unserved  tribal lands because the unserved areas are generally rural, with possibly  rugged terrain, and have low population densities. Because of these  greater costs, there may be little to no private sector incentive to deploy  broadband or enter into a partnership arrangement to do so.", "During our review, we did not find any partnership arrangements that  leveraged currently available federal funding from FCC\u2019s CAF or RUS\u2019s  Community Connect Program. The seven partnership examples we  identified were ones that obtained federal funding under past programs,  namely BIP and BTOP that were funded by the Recovery Act. Among  these examples, tribes partnered with several different types of entities  that were eligible to receive federal grants, including (1) private providers;  (2) a community access network provider; (3) an electric cooperative; (4)  a regional consortium; and (5) tribally owned telecommunications  companies (which we will refer to as tribally owned providers). These  types of arrangements are explained below. Outcomes of these  partnership arrangements varied, as reported by tribal officials and other  stakeholders we interviewed, but these stakeholders did not always agree  on the outcomes."], "subsections": [{"section_title": "Private Providers", "paragraphs": ["Private providers can partner with a tribe to deploy broadband  infrastructure on tribal lands. We found two instances in which a tribe  partnered with private providers to improve broadband service.", "Pine Telephone Company and Choctaw Nation. With the land the  tribe has jurisdiction over covering over 10 counties across 12,000  square miles in Oklahoma, the Choctaw Nation\u2019s lands encompasses  about 15 percent of the State of Oklahoma\u2019s total area\u2014an area  larger than the entire state of Maryland. According to the Oklahoma  Department of Transportation, the Choctaw Nation is the largest  employer in the southeastern Oklahoma region and its businesses are  key contributors to the state\u2019s economy. However, a tribal official told  us that the tribal government has struggled to meet the tribe\u2019s  broadband needs. According to the Choctaw Nation official, Pine  Telephone Company (Pine), a privately owned company, has a  history of partnering with the Choctaw Nation. In 2010, Pine received  a BTOP grant of $9.5 million to deploy broadband infrastructure to  underserved areas of Southeastern Oklahoma, including Choctaw  Nation lands.", "According to tribal officials and representatives from Pine, the  partnership enabled tribal government agencies and buildings\u2014 including public schools, public safety agencies, fire and police  departments, and a health clinic\u2014to get broadband service. The  partnership also improved broadband service for the Choctaw Nation.  Additionally, Pine had been proactive in partnering with the Choctaw  Nation to secure federal grants and assist with land use and rights-of- way issues, according to a tribal official. Pine representatives told us  that partnering with the Choctaw Nation had been beneficial based on  their common interest to increase broadband service to the area.", "Inland Cellular, First Step, and Nez Perce. The Nez Perce Tribe\u2019s  reservation consists of 750,000 acres located in north central Idaho.  Tribal officials told us that the terrain on the reservation makes  broadband deployment challenging because it has very large hills and  deep valleys; additionally the reservation is sparsely populated. Tribal  officials told us that prior to 2010, there was no broadband service  available on the Nez Perce reservation. In 2010, the tribe received a  BTOP grant of $1.6 million for the Nez Perce Broadband  Enhancement Project; the project was completed in 2013. The tribe  used that federal grant to deploy 216 miles of broadband (wireless)  infrastructure across its reservation to provide broadband service in  four northern Idaho counties. As part of the project, the tribe partnered  with two private providers, Inland Cellular and First Step, to expand  broadband service on the reservation. The tribe used BTOP funding  for infrastructure buildout in areas in need of connectivity, while Inland  Cellular and First Step focused their efforts on infrastructure buildout  in more populated areas.", "According to Nez Perce and Inland Cellular officials, the partnership  resulted in broadband service being provided to previously  underserved rural communities and 17 community institutions,  including schools and public safety organizations. Because the  partners each own towers on the reservation, the officials told us they  could collocate equipment on each other\u2019s towers, an approach that  resulted in more reliable service. Further, Nez Perce officials and  Inland Cellular representatives told us that their partnership was  complementary, in that Inland Cellular offered voice services and the  tribe\u2019s enterprise offered data services."], "subsections": []}, {"section_title": "Community Access Network Provider", "paragraphs": ["Community access network providers are typically owned and operated  by public entities rather than by a private corporation. All profits are  reinvested to operate, maintain, and expand the community network.  Community access networks focus on building broadband infrastructure  that allows multiple Internet service providers to offer their services to  customers. For example, rather than having one choice for Internet  service, community access network providers will allow several service  providers to compete for customers.", "Northwest Open Access Network (NoaNet). NoaNet, a utility network  that offers communities access to broadband infrastructure, has  deployed infrastructure in rural areas of Washington State, including  on tribal lands. NoaNet received two BTOP grants in 2010\u2014one grant  for $84 million and the other for $54 million\u2014to enhance existing  infrastructure and improve broadband service in unserved areas.  NoaNet representatives told us that over the course of several years,  NoaNet deployed 2,300 miles of fiber-optic cable across tribal lands in  Washington State and partnered with several Indian tribes and  nations, including the Kalispel Indian Community of the Kalispel  Reservation, Lower Elwha Tribal Community, and Yakama Nation, to  deploy broadband infrastructure. For example, NoaNet  representatives told us they partnered with Yakama Nation and  exchanged a NoaNet-owned asset for access to a power source and  the right to install fiber-optic lines on Yakama tribal land.", "According to NoaNet representatives, NoaNet\u2019s infrastructure buildout  improved broadband services and created new economic  development opportunities for several tribes in Washington State. For  example, they said NoaNet collaborated with Yakama Nation  Networks\u2014a wireless network and tribal enterprise serving the tribe\u2014 to provide faster broadband service to the reservation. Further, the  NoaNet representatives said the availability of broadband service  created new technical jobs with professional growth opportunities on  the reservation. NoaNet representatives added that NoaNet enabled  high-speed Internet service to the Makah Tribe\u2019s health clinic,  government offices, school, and library, where they previously had no  Internet service at all. Moreover, they told us that partnerships are  beneficial in helping tribes gain telecommunications experience.  Similarly, according to a tribal representative from Jamestown  S\u2019Klallam Tribe, NoaNet\u2019s infrastructure buildout helped the tribe  obtain broadband services for its library and also helped create  economic opportunities for the tribe."], "subsections": []}, {"section_title": "Electric Cooperative", "paragraphs": ["Rural electric cooperative networks typically serve areas that have low  population density where traditional providers do not want to serve  because of limited opportunities for financial return on investment.", "Kit Carson Electric Cooperative and Taos Pueblo. Kit Carson Electric  Cooperative (KCEC) is a member-owned, nonprofit electric  distribution cooperative that operates a fiber-optic broadband network.  In 2010, KCEC received $64 million in grant funding from RUS\u2019s BIP  to create a 2,400-mile broadband network in northern New Mexico  and provide broadband service to businesses and homes, including  those on the Taos Pueblo and Picuris Pueblo.", "In an August 2016 presentation to the New Mexico state legislature,  KCEC stated that that the project connected tribal members and  community institutions, created job opportunities, and improved public  safety by improving emergency communications services. According  to Taos Pueblo officials, the impetus to work with KCEC was to  improve broadband service to meet immediate economic, education,  health service, and public safety needs of the tribe. However, based  on our meetings with both KCEC representatives and Taos Pueblo  officials they have different perspectives about the success of this  partnership at delivering broadband service to the tribe. For example,  KCEC representatives told us that the cooperative constructed the  fiber-optic network and connected the government buildings and  homes of Taos Pueblo and Picuris Pueblo members as promised, and  that KCEC has responded to service interruptions when they occurred  on tribal lands. On the other hand Taos Pueblo officials told us, that  KCEC did not deploy broadband infrastructure to enable service to all  homes and buildings on tribal lands as the tribe had expected.  Similarly, KCEC representatives told us that they worked regularly  with the Taos and Picuris tribal governments and had good  relationships with them; they noted that they meet with tribal  leadership every quarter to maintain effective communications and  address any issues. In contrast, according to Taos Pueblo officials,  KCEC did not solicit tribal input when building out the fiber-optic  network, and only met with Taos Pueblo officials about once a year  and did not follow up on the issues the tribe raised. Further, according  to KCEC representatives, in its federal funding application, KCEC  made a commitment that the Taos and Picuris tribal lands would be  the first areas targeted for building out the network, and the  representatives said that KCEC completed 100 percent of the  construction and connected the tribal governments as promised. Taos  Pueblo officials, however, said that their tribe was the last to receive  service and that KCEC did not complete the broadband construction,  including service to the homes of some of its members, because  KCEC exhausted its BIP funding."], "subsections": []}, {"section_title": "Regional Consortium", "paragraphs": ["We have previously reported that regional consortium, which are typically  formed by groups to undertake an enterprise beyond the resources of any  one member, can sponsor regional networks that focus on building  broadband networks and providing broadband services to schools,  medical providers, public safety agencies, and other community  institutions.", "North Central New Mexico Economic Development District. Located in  northern New Mexico, the Pueblo of Pojoaque, Santa Clara Pueblo,  Tesuque Pueblo, and Ohkay Owingeh partnered with local  governments to establish the North Central New Mexico Economic  Development District (the District), a regional consortium, to address  the socio-economic needs of its members. In 2008, regional planners  and government officials identified broadband as the region\u2019s number- one infrastructure priority because rural north central New Mexico  relied significantly on dial-up Internet service and lacked affordable  service to small businesses, libraries, schools, and other community  institutions. In 2010, the District received a BTOP grant of $10.6  million to build a community-owned broadband network, known as  REDI Net. The District sought the BTOP grant to improve rural  healthcare services, make public and higher education more  accessible, and improve local government services, like public safety.  REDI Net\u2019s construction included upgrading existing infrastructure and  deploying 136 miles of new fiber-optic cable across the region and on  pueblo lands to replace low-performing dial-up service with faster,  more affordable broadband service.", "According to the project\u2019s progress report submitted to NTIA, the  partnership enabled broadband infrastructure to be deployed across  the four participating lands and connect 110 community institutions.  The project\u2019s description stated that REDI Net was being used to  deliver telemedicine services, distance-learning applications, and  critical communications for emergency first-responders. According to  REDI Net representatives, in 2017, REDI Net became a standalone  organization, separate from the District, and currently charges a  monthly fee for the pueblos to use the broadband network. A REDI  Net representative told us that the biggest outcome of the partnership  has been the improved relationships and collaboration among the  Pueblo of Pojoaque, Santa Clara Pueblo, Tesuque Pueblo, and  Ohkay Owingeh and other local municipalities."], "subsections": []}, {"section_title": "Tribally Owned Providers", "paragraphs": ["Some tribes have created their own telecommunications companies to  provide broadband access to their communities. Based on the examples  we identified, a tribe may create its own telecommunications or  broadband company or a tribe may partner with an existing tribal  enterprise such as an electrical utility to provide broadband services.", "Navajo Nation and Navajo Tribal Utility Authority. The Navajo  Nation\u2014which spans across Arizona, New Mexico, and Utah\u2014  partners with a tribally owned entity, the Navajo Tribal Utility Authority  (NTUA), to provide broadband service to residents and households.  According to a NTUA representative, the Navajo Nation has diverse,  challenging terrain\u2014which includes canyons, valleys, timber forest,  desert, and mountains\u2014making it difficult to provide broadband  service to tribal residents. In 2010, NTUA received a BTOP grant of  $32 million to deploy broadband infrastructure covering 15,000 square  miles across the three states. According to the project\u2019s progress  report submitted to NTIA, by 2013, NTUA leveraged BTOP funding to  deploy 570 miles of fiber-optic cable and 775 miles of wireless  infrastructure resulting in a total of 1,345 new network miles.", "According to NTUA representatives, the partnership between the  Navajo Nation and NTUA increased broadband deployment on the  nation and created new opportunities for NTUA to partner with other  private providers to further expand broadband services. For example,  NTUA representatives said NTUA partnered with a private broadband  provider, Commnet, to deploy wireless broadband infrastructure that  enabled tribal citizens to receive 4G LTE service. NTUA and  Commnet representatives told us NTUA\u2019s relationship with Navajo  Nation represented an attractive business opportunity for Commnet  because of NTUA\u2019s established rights-of-ways on the Navajo Nation\u2019s  tribal lands.", "Saint Regis Mohawk Tribe and Mohawk Networks. The Saint Regis  Mohawk Tribe, located in the northern region of New York, received a  $10.5 million BIP grant in 2010 to complete a large broadband project  expanding access to unserved areas. According to tribal officials and  Mohawk Networks representatives, the tribe completed a $15 million  broadband infrastructure project laying 68 miles of fiber and  connecting 1,500 tribal households and community institutions. Upon  completion of the BIP broadband project, the tribal officials said the  tribe launched its tribally owned broadband provider, Mohawk  Networks, LLC in 2015, to respond to tribal residents\u2019 need for  reliable, cost-effective broadband service. Tribal officials said Mohawk  Networks currently provides high-speed Internet to tribal homes and  businesses.", "According to tribal officials, in addition to providing broadband service  to tribal residents for the first time, the partnership between Saint  Regis Mohawk Tribe and its tribally owned broadband provider  created new jobs and opportunities to expand broadband services.  For example, the officials said the partnership resulted in the creation  of a tribal subsidiary, North Country Broadband Services, Inc., to  deploy wireless infrastructure to neighboring counties, thus generating  new revenue for Mohawk Networks."], "subsections": []}]}, {"section_title": "Few Federal Funds Were Provided to Tribal Entities to Increase Broadband Deployment from 2010 to 2017", "paragraphs": ["FCC and RUS are the primary sources of federal funding to deploy  broadband infrastructure in rural and remote areas where the cost of  providing service is high, including tribal lands. Based on our review of  the funding provided by four federal programs targeted to increase  deployment in unserved areas, very little has gone directly to tribes or to  tribally owned broadband providers. Specifically, from 2010 to 2017, we  found that less than 1 percent of FCC funding and about 14 percent of  RUS funding went directly to tribes and tribally owned providers.  Combined, FCC and RUS funding totaled $34.6 billion during that time  period and tribes and tribally owned providers received $235 million, or  about 0.7 percent.", "While the majority of the funding from the four programs we reviewed  from both agencies is provided to deploy broadband to rural, unserved, or  underserved areas, only one source of funding, FCC\u2019s Tribal Mobility  Fund Phase I, is dedicated specifically to deploying broadband on tribal  lands.", "The National Broadband Plan stated in 2010 that tribes needed  substantially greater financial support than was available to them at the  time and that accelerating tribal broadband deployment would require  increased funding. Furthermore, the National Congress of American  Indians expressed concerns that the needs for federally funded  broadband projects are greater on tribal lands but tribes do not receive  the appropriate share of federal funding aimed at increasing broadband  deployment.", "Through our analysis we found that 14 tribal entities received federal  funding from FCC and RUS to increase broadband deployment from  2010-2017 (see fig. 2). Of the four main programs we reviewed, tribes  and tribally owned providers received the following funds:", "Connect America Fund: Nine tribally owned providers received high- cost support funding totaling $218.1 million.", "Mobility Fund Phase I: One tribally owned provider received support  totaling $3.3 million.", "Tribal Mobility Fund Phase I: No tribal providers received funding.", "RUS Community Connect Grants: Four tribal entities received $13.5  million."], "subsections": []}, {"section_title": "Stakeholders Cited Barriers for Tribes to Obtain Federal Funding and Federal Agencies Have Taken Few Actions to Address the Barriers", "paragraphs": ["The tribal officials, tribal associations, and tribally owned broadband  providers we interviewed cited several barriers that tribes may face when  seeking federal funding for broadband deployment. The two primary  barriers these interviewees cited were (1) the statutory requirement for  ETC designation and (2) grant application requirements."], "subsections": [{"section_title": "Statutory Requirement for ETC Designation", "paragraphs": ["FCC\u2019s Connect America Fund (CAF) is the largest source of federal  funding for broadband deployment in unserved and underserved areas;  however, very few tribes are currently eligible for this source of funding.  At the time of our review, FCC officials told us there were 11 tribes that  have providers that are designated as ETCs and therefore would be  eligible to receive CAF funding. Although FCC adopted rules in 2011 to  create CAF and modernize the program so that it could support  broadband capable networks, FCC officials told us that most ETCs are  the telephone companies that were in existence when Congress passed  the Telecommunications Act of 1996. According to FCC officials, FCC  has explored whether it has authority to allow non-ETC providers to  receive CAF support payments but determined that the statute is clear  that only ETCs can receive program support. Between 2012 and 2017,  FCC officials said FCC received nine ETC applications, four of which  were from tribally owned providers. Of those four, only one tribally owned  provider was designated an ETC. Three tribes we contacted said they  would like the opportunity to receive CAF support to deploy broadband on  tribal lands, but they realize they are not eligible to receive funding unless  they have the ETC designation. Moreover, officials from two tribes and a  tribal association stated that while they want to provide broadband  services in their communities, they did not seek the ETC designation  because of the ETC service obligations described above.", "The Leech Lake Band of Ojibwe applied for ETC status in 2013. We met  with tribal officials who told us that the tribe was providing broadband  service in its community through its own, tribally chartered  telecommunications company and at the time of our visit, they had been  waiting several years for a decision from FCC on their ETC application.  The tribal officials told us that if FCC did not make a decision soon, the  tribal government would need to shut down the broadband network, as  the tribe\u2019s original decision to fund the network assumed there would be a  CAF subsidy to help defray the costs. The Leech Lake reservation is rural  with low population density and is surrounded by the Chippewa National  Forest. Subsequent to our meeting with the tribe in November 2017, the  tribe withdrew its application in March 2018, noting that it was ceasing its  attempt to run its telecommunications company specifically \u201cdue to  inaction\u201d by FCC.", "According to representatives from a tribal association we contacted, FCC  has provided ETCs with billions of dollars to deploy service to unserved  areas through the Universal Service Fund programs, but FCC\u2019s efforts  have not always been successful in the hardest to reach areas,  particularly tribal lands. The representatives noted that FCC\u2019s competitive  market approach does not work where competition cannot be supported  and that there needs to be a different approach. Similarly, tribal officials  from Idaho told us that rural service providers are able to operate due to  CAF support, but the tribe is not eligible to receive those subsidies.  Officials said although the provider in their area has received millions of  dollars in CAF subsidies, it has not deployed broadband on the tribal  lands. Other tribal officials from Washington State told us that although  private providers received CAF subsidies to deploy broadband service to  their reservation, the private providers told the tribe it would be years  before they offer service on tribal lands.", "In 2014, FCC conducted its Rural Broadband Experiment to open up  eligibility for CAF funding to non-ETC providers. FCC made $100 million  available for the experiment and applicants included a diverse group of  entities, including competitive providers, electric utilities, wireless Internet  service providers, and others. However, while this experiment opened the  application process to non-ETC providers, it did not remove the ETC  requirement. CAF support awarded through this experiment was  provisional pending the broadband providers\u2019 obtaining ETC status.  According to FCC documentation, there were 181 applicants for the  experiment, but only 16 ended up meeting all the requirements to receive  funding. None of those 16 entities was tribal."], "subsections": []}, {"section_title": "Grant Application Requirements", "paragraphs": ["Stakeholders we interviewed said tribes may face barriers completing  federal grant applications to obtain funding for broadband deployment. In  particular, two community access providers, five tribally owned providers,  and one regional consortium we contacted said that meeting the  application requirements was difficult. Representatives from eight of the  tribes we contacted told us that in general, the language included in the  federal grant applications is difficult to understand or the administrative  requirements of federal grants are burdensome. Another tribal  representative told us he would only recommend applying for RUS\u2019s  Community Connect program if the tribe has an entire team of dedicated  people to manage the grant process. Some of the tribal officials we  contacted cited difficulties preparing required application materials  between the time a grant announcement was made and the submission  deadline. For example, tribal officials we contacted from New Mexico and  Oklahoma stated that the constrained time frames prevented them from  effectively preparing a comprehensive application package. In some  cases, the narrow application windows prevented the tribes from applying  at all. Furthermore, tribal officials, tribal associations, and tribally owned  broadband providers told us that complying with the following regulatory  requirements for RUS Community Connect grants could be challenging  for tribes:", "Preparing existing and proposed network design: RUS\u2019s Community  Connect program requires applicants to submit information on the  network\u2019s design that contains all the technical information on the  applicant\u2019s existing (if applicable) and proposed network. The network  design is typically completed by a licensed engineer. Tribal officials in  Washington State told us that conducting analyses of existing  infrastructure and what improvements are needed can be cost- prohibitive for some tribes because it requires financial resources that  the tribe may not have before applying for the grant. Many of these  costs are related to the expense of bringing in outside experts or  consultants who are needed to perform the technical studies. Another  tribal representative told us since the tribe has no way of knowing if  the grant will be approved, spending money to complete the  application is a large risk. According to RUS officials, the Community  Connect program is not authorized to fund pre-planning activities.", "Demonstrating financial sustainability within 5 years: The RUS  Community Connect grant application requires a \u201cfinancial forecast\u201d  that includes the applicant\u2019s existing operations and the proposed  project and must be supported by a detailed narrative that explains  the methodology and assumptions used to develop the projections,  including the number of subscribers projected to take the applicant\u2019s  service. The financial forecast must cover at least 5 years, and it is  used by RUS to determine whether the proposed project is financially  sustainable. However, tribal officials from Idaho told us that it is not  feasible for tribes to show financial sustainability (a return on  investment) in 5 years in high cost areas. They noted that a period of  15 years may be needed to produce a return on investment in those  areas, and this requirement prevents tribes from qualifying for  Community Connect grants.", "Obtaining matching funds required to apply for federal grants: RUS\u2019s  Community Connect program requires grant applicants to provide  matching funds of at least 15 percent from non-federal sources and  does not accept in-kind contributions of goods or services. The  matching fund requirement can be difficult for some tribes to obtain.  For example, officials from RUS and the tribal entities we contacted  told us that tribes often times do not have the upfront cash to meet the  matching requirement. According to a tribal association we contacted,  obtaining credit is a serious problem for some tribes. In general, tribes  cannot collateralize tribal property, and therefore often times are  unable to get bank loans for infrastructure projects.", "The National Broadband Plan recommended that federal agencies  facilitate tribal access to broadband funding opportunities. Furthermore,  recognizing the need to reduce barriers to expand broadband  deployment, the Broadband Opportunity Council, established in March  2015, issued a report stating that federal agencies should use all  available and appropriate authorities to identify and address regulatory  barriers that may unduly impede either broadband deployment or the  infrastructure to augment broadband deployment. RUS officials said  they have held a number of external training and outreach events, such  as workshops and seminars, with tribes over the past 5 years to provide  information about RUS\u2019s broadband programs. For example, in April  2018, before the 2018 Community Connect grant\u2019s application deadline,  RUS hosted a webinar on various requirements for grant applications.  RUS officials told us that RUS\u2019s outreach efforts generally focus on  specific programs and instructing potential applicants on program  requirements and how to complete application packages.", "However, beyond these outreach efforts, RUS officials said they have not  undertaken a formal assessment to identify and address the regulatory  barriers that tribes may face in obtaining RUS funding for broadband  deployment. When we asked RUS officials about the feasibility of doing  so, they said that they have limited resources and multiple competing  priorities for those resources. RUS officials also noted that BIP authorized  and provided funding for technical assistance for applicants, funding that  enabled RUS to address some of the barriers tribes face. Nevertheless,  lacking such an assessment, tribes may continue to face the regulatory  barriers described above in obtaining RUS funding for broadband  deployment on their lands. According to the National Broadband Plan,  local entities (including tribal, state, regional, and local governments)  decide to offer broadband services when no providers exist that meet  local needs, and local entities do so after trying to work with established  carriers to meet local needs. Several of the tribes we visited told us they  were trying to deploy broadband infrastructure or offer service because  the private providers were not building out on their lands. For example,  one tribe stressed that unlike private providers, they would prioritize tribal  areas needing broadband service, but they need federal funding to do so."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["An estimated 35 percent of Americans living on tribal lands lack  broadband service, which could hinder tribal efforts to promote self- governance, economic opportunity, education, public safety, and cultural  preservation. However, little federal funding aimed at increasing  broadband service actually goes to tribal entities, even though the  National Broadband Plan stressed that tribes needed substantially greater  financial support and recommended that federal agencies facilitate tribal  access to broadband funding opportunities. Tribes may face barriers in  obtaining federal funds to deploy broadband, and the Broadband  Opportunity Council recognized the need for federal agencies to reduce  the barriers that are impeding broadband deployment. However, RUS has  not taken steps to identify or address the barriers tribes face when  applying for RUS grant funding. By identifying and addressing any  regulatory barriers that impede tribal entities\u2019 access to RUS funding,  RUS could help tribes obtain funding to expand broadband deployment  on tribal lands."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Agriculture should direct the Administrator of RUS to  undertake an assessment to identify any regulatory barriers that may  unduly impede efforts by tribes to obtain RUS federal grant funds for  broadband deployment on tribal lands and implement any steps  necessary to address the identified barriers. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FCC, RUS, and NTIA for comment.  FCC and RUS provided technical comments, which we incorporated as  appropriate; NTIA did not have any comments. A Department of  Agriculture official indicated in an e-mail message that RUS neither  agreed nor disagreed with the recommendation. RUS\u2019s technical  comments noted that RUS has and will continue to work with tribes to  facilitate broadband deployment, whether tribes have the desire and  capacity to provide the service or whether another provider is able to  bring that service to tribal areas.", "We are sending copies of this report to the appropriate congressional  committees, the Chairman of FCC, the Secretary of Agriculture, the  Secretary of Commerce, 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) 512-2834 or goldsteinm@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report discusses (1) examples of partnership arrangements that  tribal entities have used to increase broadband deployment on tribal lands  and the outcomes of those partnerships, (2) the amount of funding  provided to tribal entities for broadband deployment from key federal  programs, and (3) stakeholder-identified barriers that tribal entities face in  obtaining federal funding for broadband deployment and the extent to  which federal agencies have taken action to address those barriers.", "To address these objectives, we reviewed relevant federal statutes,  including the Communications Act of 1934, as amended, and Federal  Communications Commission\u2019s (FCC) regulations, orders, and policy  statements including FCC\u2019s Statement of Policy on Establishing a  Government-to-Government Relationship with Indian Tribes. In addition,  we reviewed documentation and interviewed officials from FCC, including  officials from the Office of Native Affairs and Policy; U.S. Department of  Agriculture\u2019s Rural Utilities Service (RUS); U.S. Department of  Commerce\u2019s National Telecommunications and Information  Administration (NTIA); and U.S. Department of Housing and Urban  Development\u2019s Office of Native American Programs.", "To gather information on partnership arrangements that tribes have  entered to increase broadband deployment on tribal lands and their  outcomes, we conducted a review of relevant published literature that  included government reports, industry articles, and publications from  associations, non-profits, and public policy research organizations.  Although we were not able to identify an industry-accepted definition of partnerships, we used the term partnerships to refer to instances in which  a tribal nation or tribal government works with another entity to design,  build, or operate infrastructure assets, or other capital assets to improve  or enhance broadband service. This also included partnerships between  a tribe and its tribally owned broadband provider. To identify examples of  tribal broadband partnerships for our review, we first interviewed agency  officials, tribes, private providers, and other stakeholders such as tribal  associations. We also identified broadband projects with a tribal  partnership component by reviewing reports from 2010 to 2017 for the  following federal programs: (1) FCC\u2019s Universal Service Fund high-cost  program and Connect America Fund (including the Mobility Fund Phase I  (Auction 901) and Tribal Mobility Fund Phase I (Auction 902)); (2) RUS\u2019s  Community Connect Program; (3) RUS\u2019s Broadband Initiatives Program;  and (4) NTIA\u2019s Broadband Technology Opportunities Program. While  there may be other tribal partnership examples that exist, through these  efforts we identified seven broadband projects with a tribal partnership  component completed within the last 5 years (2013 to 2017). We  interviewed tribal leaders and officials from the seven tribes that were  involved in the selected partnerships, and visited six tribes in Idaho, New  Mexico, and Washington State. When meeting with tribal leaders and  officials, we used the same semi-structured interview questions for all  tribes; however, tribal officials may not have answered all questions.  Because we limited our review to these seven selected partnership  examples, our findings are not generalizable.", "To determine the amount of funding from key federal programs provided  to tribal entities for broadband deployment, we first identified the federal  programs that provide broadband funding from NTIA\u2019s Guide to Federal  Funding of Broadband Projects. The guide lists 17 federal programs that  fund broadband infrastructure. Of those federal programs, we focused our  review on four programs, three in FCC and one grant program in RUS,  selected because they provide the most directly relevant funding for  broadband deployment in unserved areas, which includes tribal lands. We  first identified federal agencies and programs that provide grants or loans  to tribal and non-tribal entities to buildout broadband infrastructure on  tribal lands including: FCC, RUS, U.S. Department of Commerce  Economic Development Administration (EDA), and NTIA. We interviewed  federal agency officials to identify any additional federal programs that  provided funding in the last 7 years. We excluded federal loan programs  because they may require letters of credit and or assets as collateral,  which is often not a feasible option for tribes given land ownership issues.  We also considered but excluded those federal programs that are not  directly related to broadband expansion and deployment, such as the  Department of Housing and Urban Development\u2019s Choice Neighborhoods  Program, whose primary purpose is housing related. We compiled total  funding data for these four federal programs and the amount of funding  provided to tribes and tribal entities for broadband deployment projects for  2010 to 2017. We took steps to assess the reliability of the data\u2014such as  cross-checking the data, following up with agency officials, and reviewing  documentation\u2014and found the data were sufficiently reliable for the  purposes of summarizing total funding and the amount provided to tribes  and tribal entities. Because we relied upon titles or names of grant  recipients to identify those grants awarded to tribes and tribally owned  providers, our analysis may not include some grants awarded to  broadband providers that deploy infrastructure to larger service areas that  may also include tribal lands.", "To determine stakeholder-identified barriers that tribal entities face in  obtaining federal funding for broadband deployment and federal  government efforts to address those barriers, we interviewed FCC and  RUS officials and the tribal government officials, tribally owned broadband  providers, and tribal associations listed in table 1. We interviewed  representatives from 17 tribes in different locations with varying  population sizes and levels of broadband deployment. Additionally, we  interviewed officials from 9 tribally owned and 7 private broadband  providers operating on tribal lands. We selected these broadband  providers to interview because they received federal support to serve on  tribal lands or because they were a designated eligible  telecommunications carrier (ETC) serving tribal interests. Furthermore,  we identified and interviewed industry stakeholders such as research  groups and telecommunications associations on their views regarding  barriers to obtaining federal program assistance for broadband  deployment on tribal lands. These stakeholders were selected based on  their exposure to broadband issues on tribal lands such as representing  tribally owned broadband providers. The views obtained from these  interviews are not generalizable to all tribes, all broadband providers, or  all industry stakeholders. We also reviewed a report from the Broadband  Opportunity Council directing agencies to identify and address regulatory  barriers that may unduly impede broadband deployment and assessed  RUS\u2019s efforts to address the regulatory barriers tribes may face in  attempting to obtain RUS funding for broadband deployment. For a  complete list of entities we interviewed see table 1.", "We conducted this performance audit from September 2017 to  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sally Moino (Assistant Director);  Tina Paek (Analyst in Charge); Rose Almoguera; Sharon Dyer; Hannah  Laufe; Serena Lo; Cheryl Peterson; Malika Rice; Amy Rosewarne; Jay  Spaan; James Sweetman, Jr.; Hai Tran; and Jade Winfree made key  contributions to this report."], "subsections": []}]}], "fastfact": ["About 35% of Americans living on tribal lands lack access to broadband service. This can limit tribes' economic opportunity, education, public safety, and more.", "Tribes can partner with private broadband providers, regional consortiums, and others to increase access, but such partnerships are rare. Tribes can also apply for federal funding for broadband projects, but often have trouble meeting requirements such as completing feasibility studies or getting matching funds.", "We recommended that the Rural Utilities Service, which provides broadband funding, identify barriers to funding access and help tribes overcome them."]}
{"id": "GAO-18-380", "url": "https://www.gao.gov/products/GAO-18-380", "title": "VA Health Care: Progress Made Towards Improving Opioid Safety, but Further Efforts to Assess Progress and Reduce Risk Are Needed", "published_date": "2018-05-29T00:00:00", "released_date": "2018-05-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Comprehensive Addiction and Recovery Act of 2016 and Senate Report 114-57 included provisions for GAO to report on VHA's OSI and the opioid prescribing practices of its health care providers.", "This report examines, among other issues, (1) the extent to which VHA has met OSI goals established in 2014 and (2) the extent to which VHA providers adhere to key opioid risk mitigation strategies. To do this work, GAO reviewed data and documents related to OSI efforts and goals and interviewed VHA officials. In addition, GAO reviewed a random, nongeneralizable selection of medical records for 103 veterans who were prescribed opioids at five selected VHA medical facilities from March 2016 through March 2017. GAO selected the facilities to obtain diversity in geography and rates of opioid prescribing. At the selected facilities, GAO reviewed facility data and documents related to opioid safety and interviewed officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Veterans Health Administration (VHA) has made progress improving opioid safety through its Opioid Safety Initiative (OSI). Launched in 2013, the OSI aims to help ensure that veterans are prescribed opioids in a safe and effective manner. Since the OSI began, VHA has seen reductions in opioid prescribing rates. For example, from the fourth quarter of fiscal year 2013 to the first quarter of fiscal year 2018, the percentage of patients dispensed an opioid decreased from about 17 percent to about 10 percent, or by about 267,000 veterans. Also, available evidence suggests VHA has accomplished six of nine OSI goals established in 2014; however, it is unclear whether the remaining three goals have been fully met. For example, in the case of OSI goal four (establishing safe and effective regional tapering programs for patients on opioids and benzodiazepines), GAO found that VHA lacked documentation that its regional networks established these programs. VHA also did not establish measures of safety or effectiveness under this goal. These limitations prevent VHA from fully evaluating progress and accurately determining the extent to which its efforts to help ensure safe and effective prescribing of opioids have been successful.", "In a review of a nongeneralizable sample of 103 veterans' medical records at five selected VHA medical facilities, GAO found that VHA providers did not always adhere to key opioid risk mitigation strategies, which are required by VHA policy or relevant to OSI goals. For example, among 53 veterans who were prescribed long-term opioid therapy (defined as a 90-day supply in the last 6 months), GAO found that", "40 veterans did not have their names queried in a state-run prescription drug monitoring program database. The databases are used to identify patients who are receiving multiple prescriptions that may place them at greater risk for misusing opioids or overdosing;", "21 veterans did not have a urine drug screening within the year prior to having their prescription filled. The screenings are used to determine whether veterans are taking their opioid medications as prescribed; and", "12 veterans did not provide written informed consent. Informed consent is a formal acknowledgement that the veteran has been educated on the risks and benefits of opioid use prior to initiating long-term opioid therapy.", "GAO found several factors that may have contributed to inconsistent adherence to key opioid risk mitigation strategies at the selected VHA facilities. For example, four of the five selected facilities did not have a pain champion (a primary care position required by VHA that can help providers adhere to opioid risk mitigation strategies), and not all facilities had access to academic detailing, a program in which trained clinical pharmacists work one-on-one with providers to better inform them about evidence-based care related to the appropriate treatment of relevant medical conditions. In addition, three of the five facilities did not consistently review veterans' medical records to ensure provider adherence to these strategies. To the extent that these factors affect all VHA facilities, VHA will continue to face challenges ensuring that its providers prescribe opioids in a safe and effective manner."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations to VHA, including that it document actions and develop measurable outcomes related to its OSI goals, ensure that providers are adhering to opioid risk mitigation strategies, and ensure that all its regional networks have implemented academic detailing programs and that all VHA medical facilities have a designated primary care pain champion, as required. The Department of Veterans Affairs concurred with GAO's recommendations and described steps it will take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States is in the midst of an unprecedented opioid epidemic.  According to 2016 data from the Substance and Mental Health Services  Administration, nearly 12 million people age 12 or older misused opioids  in the previous year. In addition, Centers for Disease Control data show  that over 42,000 people died as a result of an opioid overdose in 2016\u2014 either from prescription opioids or illicit opioids such as heroin\u2014a fivefold  increase since 1999. According to the Department of Veterans Affairs\u2019  (VA) Veterans Health Administration (VHA), veterans are twice as likely to  die from an accidental overdose when compared to the non-veteran  population.", "VHA has found that in its primary care settings, more than 50 percent of  male veterans report having chronic pain, and the incidence among  female veterans may be higher. To help ensure that veterans are  prescribed and use opioid pain medications in a safe and effective  manner, VHA launched its national Opioid Safety Initiative (OSI) in 2013.  In 2014, VHA established a number of goals and requirements under the  OSI aimed at improving the safety and care of veterans who are  prescribed opioids for pain. In addition, in 2017, VA, along with the  Department of Defense (DOD), updated its clinical practice guidelines  related to opioid therapy for chronic pain to increase providers\u2019  awareness of evidence-based pain management practices.", "The Comprehensive Addiction and Recovery Act (CARA) of 2016  requires VA to implement a number of efforts aimed at improving opioid  safety for veterans. CARA also includes a provision for GAO to assess  VHA\u2019s recent efforts under the OSI as well as the opioid prescribing  practices of VHA health care providers. In addition, a Senate Report  accompanying H.R. 2029, enacted as the 2016 Consolidated  Appropriations Act, included a provision for GAO to review the  effectiveness of the OSI and overall opioid prescribing patterns  throughout VHA. In this report, we  1.  describe key efforts VHA has undertaken since 2013 as a part of the  2.  examine the extent to which VHA has met its OSI goals established in  2014 and implemented certain provisions of CARA related to  monitoring veterans who are prescribed opioids; and  3.  examine the extent to which VHA providers adhere to selected opioid  risk mitigation strategies and clinical practice guideline  recommendations related to prescribing opioids.", "To describe key efforts VHA has undertaken since 2013 as a part of the  OSI, we reviewed VHA documents and interviewed VHA Central Office  officials regarding OSI efforts, including VHA efforts to monitor and  address opioid prescribing patterns. We also analyzed data VHA collects  under the OSI on four metrics related to rates of opioid prescribing and  urine drug screening among certain veterans from the fourth quarter of  fiscal year 2013 (roughly when the national OSI began at VHA) to the first  quarter of fiscal year 2018, the most current quarter of data available at  the time of our review. We also analyzed VHA data from its academic  detailing programs on the frequency with which program representatives  consulted with VHA providers on issues related to opioid safety. We  assessed the reliability of the data sources by reviewing relevant  documentation, interviewing knowledgeable agency officials, and  reviewing the data for missing values and outliers. Through these steps,  we determined that the data were sufficiently reliable for the purposes of  this reporting objective.", "To examine VHA\u2019s progress on its 2014 OSI goals, we reviewed VHA  documents and data relevant to OSI goals, including VHA opioid safety  training data and OSI metric data. We also interviewed VHA Central  Office officials, selected Veteran Integrated Service Network (VISN)  officials, and VHA medical facility officials from 5 of 170 VHA medical  facilities that we selected for our review. We selected the 5 VHA medical  facilities based on variation in geography and to reflect the full range of  variation in the rate of change over time in the percentage of veterans  who have been prescribed an opioid. Our findings from the selected  facilities are not generalizable to all VHA medical facilities. We examined  VHA\u2019s progress on its OSI goals in the context of federal internal control  standards for documentation requirements and the establishment and  review of performance measures and indicators. We assessed the  reliability of the data sources by reviewing relevant documentation,  interviewing knowledgeable agency officials, and reviewing the data for  missing values and outliers. Through these steps, for the purposes of this  reporting objective, we determined that the VISN-level opioid safety  training assignment data were not reliable; however, all other data  sources we analyzed were sufficiently reliable. To assess whether VHA is  meeting certain provisions of CARA related to monitoring veterans who are prescribed opioids, we interviewed VHA Central Office officials and  reviewed documents related to these provisions.", "To examine the extent to which VHA providers adhere to selected opioid  risk mitigation strategies and clinical practice guideline recommendations  related to prescription opioid therapy, we focused on three key VHA  opioid risk mitigation strategies and three VA/DOD clinical practice  guideline recommendations\u2014all of which, generally speaking, are strong  evidence-based strategies for reducing the potential health risks  associated with opioid use. The three opioid risk mitigation strategies  are the following: an annual urine drug screening for patients on long-term opioid  therapy (defined by VHA as having had a 90-day supply in the last 6  months; increasing these screenings is an explicit goal of the OSI; a VHA-required annual query of a prescription database maintained  by a state prescription drug monitoring program when prescribing  controlled substances, including opioids, to check for whether patients  are receiving multiple prescriptions; and obtaining written informed consent from patients on the use of opioids  so that they have an informed understanding of the medications\u2019 risks  and benefits, as required by VHA policy.", "The three clinical practice guideline recommendations are the following:  the use of non-pharmacological treatments (such as cognitive  behavioral therapy and yoga) in addition to or in lieu of opioid therapy;  the prescribing of naloxone to help reverse opioid overdoses; and appropriate follow-up visits with a provider after an opioid is  prescribed and after an opioid prescription is changed.", "To assess adherence to these opioid risk mitigation strategies and  guideline recommendations, we reviewed a random, nongeneralizable  sample of medical records for 103 veterans who had received long-term  opioid therapy between March 1, 2016 and March 31, 2017. The 103  records we reviewed included a minimum of 20 records each from our  five selected facilities. The sample of records also included records for 50  veterans at a greater risk of adverse events due to opioid use, including  25 veterans who received benzodiazepines concurrently with an opioid  and another 25 veterans who were categorized as \u201cvery high\u201d risk in  VHA\u2019s opioid safety monitoring tool, the Stratification Tool for Opioid Risk  Mitigation (STORM), during the summer and fall of 2017 when the  medical record review was conducted. As part of our work, we also  reviewed relevant documents and interviewed officials from the five  selected VHA medical facilities, the VISNs associated with the facilities,  and VHA Central Office.", "We conducted this performance audit from November 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["To help ensure that veterans are prescribed and use opioid pain  medications in a safe and effective manner, VHA launched its OSI  nationally in 2013. VHA established nine OSI goals in a December 2014  memorandum. For each of the goals, VHA directed its VISNs and their  associated VHA medical facilities to take specified actions to meet the  goals. (See table 1.)", "VHA has also developed opioid risk mitigation strategies for its providers  to follow when prescribing opioid pain medications to veterans. These key  strategies include one whose increased use is an explicit goal for the OSI  and two that are requirements in VHA policy.  1.  Annual urine drug screening for veterans on long-term opioid therapy.", "Providers should generally ensure that a urine drug screening has  been conducted for veterans who are on long-term opioid therapy at  least once in the 365 days prior to initiating or renewing an opioid  prescription. Urine drug screening allows providers to monitor the  types of drugs that are in a veteran\u2019s system, including controlled and  illicit substances. Increasing the use of urine drug screening is OSI  goal two.  2.  Annual prescription drug monitoring program (PDMP) query. PDMPs  are state-run electronic databases used to track the prescribing and  dispensing of prescriptions for controlled substances, identify  suspected misuse or diversion (i.e., channeling drugs into illegal use),  and identify trends in drug utilization. In 2016, VHA began requiring in  policy that providers query state PDMPs at least once annually when  prescribing opioids to determine whether their patients have received  prescriptions for opioid medications or other controlled substances  from non-VA providers.  3.  Informed consent for long-term opioid therapy. In 2014, VHA began  requiring in policy that providers educate their patients on the risks  associated with the use of prescription opioids and to obtain veterans\u2019  formal acknowledgment of these risks in writing prior to initiating long- term opioid therapy."], "subsections": [{"section_title": "Clinical Practice Guidelines for the Treatment of Chronic Pain", "paragraphs": ["In 2010, in coordination with DOD, VA developed clinical practice  guidelines for its providers to use when prescribing opioids for chronic  pain. These guidelines were updated in 2017. While clinical practice  guidelines contain evidence-based recommendations, they are not  required to be followed in all clinical situations; therefore, variations in  practice may occur based on individual patient needs subject to the  discretion of the provider.", "The 2017 VA/DOD clinical practice guidelines related to opioid therapy for  chronic pain generally complement VHA\u2019s OSI goals. For example, the  guidelines recommend a conservative use of opioids for chronic pain and  emphasize strategies to mitigate the risk of using opioids. The evidence- based clinical practice guideline recommendations include the following:  1.  Use of non-pharmacological treatments. The guidelines advise not  initiating opioid therapy for chronic pain. They also recommend  alternatives to opioid therapy, such as non-opioid medications and  non-pharmacological treatments. Non-pharmacological treatments for  chronic pain include, for example, cognitive behavioral therapy and  yoga.  2.  Naloxone prescribing. Naloxone is a highly effective, potentially life- saving intervention for reversing opioid overdoses, and it can be  prescribed to veterans as a preventive measure. Veterans who are  prescribed naloxone can use it when experiencing an overdose or a  family member can administer it on their behalf. According to the  clinical practice guidelines, naloxone should be offered as an antidote  to all patients at risk for an opioid overdose, including those who are  in the process of tapering from opioids. The guidelines describe  several significant risk factors which can indicate the prescribing of  naloxone, including the duration and dose of opioids, current or  history of depression or substance use disorder, and suicidality.  3.  Appropriate follow-up visits with a provider. According to the  guidelines, follow-up pain management visits should be scheduled at  least every 1-4 weeks after any change in medication regimen and at  least once every 1-3 months for the duration of the therapy to help  ensure that the treatment plan is optimized."], "subsections": []}]}, {"section_title": "Under Its OSI, VHA Tracks Opioid Prescribing Patterns, Identifies Prescribing Outliers, and Educates Prescribers", "paragraphs": ["VHA officials told us that the main focus of the OSI is changing the  prescribing patterns of providers to better align with evidence-based  practices. We found that this has been carried out by VHA through three  key efforts: tracking opioid prescribing rates and other trends, identifying  irregular prescribing patterns, and educating providers on best practices  through academic detailing.", "Tracking Opioid Prescribing Patterns. Under the OSI, VHA uses quarterly  data derived from VHA\u2019s electronic medical record system to monitor  prescription opioid use among veterans, the related prescribing patterns  of VHA providers, and the rates of urine drug screening for veterans  receiving long-term opioid therapy. Specifically, VHA tracks the  following four clinical indicators, known as the OSI metrics, for each of its  medical facilities:  1.  the percentage of patients dispensed an opioid,  2.  the percentage of patients dispensed an opioid and a benzodiazepine,  3.  the percentage of patients on long-term opioid therapy who received a  urine drug screen within the previous year of having their prescription  filled, and  4.  the percentage of patients dispensed greater than or equal to 100  morphine milligram equivalents per day.", "Our analysis of quarterly OSI metric data shows that since the beginning  of the OSI in the fourth quarter of fiscal year 2013 to the first quarter of  fiscal year 2018 (the most recent data available at the time of our review),  the percentage of veterans dispensed an opioid has decreased by 7  percentage points, or roughly 267,000 veterans, while the rate of urine  drug screening for veterans on long-term opioid therapy increased  significantly\u2014by over 47 percentage points. The increase in the  percentage of patients receiving a urine drug screening was driven more  by a reduction in the total number of patients on long-term opioid therapy  (about 197,000 veterans) than an increase in the number of patients  receiving the screening (about 27,000 veterans). (See table 2.)", "Identifying Irregular Prescribing Patterns. As part of its monitoring of the  OSI metrics, VHA Central Office has periodically identified VHA medical  facilities and VHA providers who deviate from average prescribing rates  across VHA. For example:", "Facilities. In 2014, VHA Central Office identified 39 of 140 medical  facilities across 12 VISNs with relatively higher rates of opioid  dispensing as outliers based on the OSI metric percentage of  veterans dispensed an opioid. VHA Central Office notified the VISNs  of these facilities and required each facility to submit a corrective  action plan to VHA Central Office outlining the actions they would take  to reduce opioid prescribing. Based on our analysis of VHA  documents, we found that the identified facilities in the five VISNs  selected for our review submitted information in response to VHA  Central Office\u2019s request.", "Providers. In February 2017, VHA Central Office identified 320  outliers out of 8,351 providers at 94 VHA medical facilities based on  the relatively high proportion of their patients who were prescribed  opioids. VHA Central Office directed the VHA medical facilities  associated with these outlier providers to review their prescribing  rates in the context of their clinical practice, and to report back with  any feedback given or actions taken. According to officials from the  five facilities in our review, outlier providers tended to be surgeons,  pain management specialists, or physical rehabilitation providers who  might be expected to prescribe opioids at a higher-than-average rate  due to the nature of their specialty and the types of patients they treat.  According to a VHA Central Office progress report, the facilities  provided feedback and follow-up actions for 319 out of 320 outlier  providers. In May 2017, VHA identified a second round of 303  outliers out of 8,505 providers; 187 of these providers were previously  identified as outliers in February 2017. According to one VHA  Central Office official, as of September 2017, VHA was reviewing  these outlier data and will evaluate whether VHA facilities will be  asked to conduct further reviews of these prescribers.", "Educating Providers through Academic Detailing. To help change the  prescribing patterns of providers, VHA has also implemented a system- wide academic detailing program to educate providers and improve the  delivery of evidence-based health care at facilities. In 2015, VHA required  each VISN to establish such a program to improve performance on all  OSI metrics. According to VHA Central Office officials, academic  detailers are responsible for reviewing facility-level data on the  prescribing patterns of providers and identifying potential areas of  improvement. Detailers can educate providers with higher-than-average  prescribing rates\u2014such as those outliers identified in February and May  2017 by VHA Central Office\u2014to help ensure providers are delivering safe  and effective care for pain.", "According to VHA, as of January 2018, academic detailers have  conducted over 20,000 opioid-related visits to VHA providers. According  to VHA officials, their data also show that academic detailing results in  greater patient safety for veterans taking opioids. For example, compared with those who did not receive academic detailing visits, providers who  did receive such visits experienced (1) greater reductions in the  proportion of their patients on high-dose opioids, (2) reductions in their  patients\u2019 average morphine milligram equivalent daily dosage, and (3)  increases in their naloxone prescribing rates."], "subsections": []}, {"section_title": "VHA Has Made Progress on OSI Goals, but Performance Measurement Limitations Exist for Some Goals and Certain CARA Provisions Have Not Been Fully Implemented", "paragraphs": [], "subsections": [{"section_title": "VHA Has Made Progress on Many 2014 OSI Goals, but for Some Goals, Performance Measurement Limitations Prevent an Accurate Determination of their Completion", "paragraphs": ["Based on our analysis of VHA information, we found evidence suggesting  that the agency has accomplished six of the nine 2014 OSI goals. For  example, the agency has seen increases in the use of urine drug  screening for veterans on long-term opioid therapy, and it has developed  provider tools to identify veterans at a higher risk for adverse events while  using opioids. For several goals, although VHA did not implement the  actions required in all those instances, the agency provided us with  information or data demonstrating that the goals had effectively been met.  However, for three OSI goals, it is unclear if the goal has been fully met  because VHA lacks documentation showing that it has implemented the  required action under the goal or the required action is still in progress.  (See table 3.)  (See appendix I for a more detailed description of VHA\u2019s known efforts  and data related to each goal).", "When asked about the lack of documentation for two of its OSI goals  (goals four and seven), VHA officials told us that relevant documentation  could not be produced. This lack of documentation is inconsistent with  federal internal control standards. Specifically, according to federal  internal control standards, management should evaluate and document  the results of monitoring. By not documenting the actions it is taking  under each of its OSI goals, VHA lacks assurance that these actions have  been implemented by the VISNs or VHA medical facilities. As a result,  VHA does not know whether it has fully met these OSI goals.", "Moreover, for the OSI goal related to establishing safe and effective VISN  tapering programs for veterans using opioids and benzodiazepines (goal  four), VHA officials told us that they addressed this goal by issuing  national tapering guidance, including a provider reference guide in 2014,  an opioid taper decision tool in 2016, and the VA/DOD clinical practice  guidelines in 2017. However, these actions do not appear to be sufficient  for meeting the goal as it is currently written, because issuing national  guidance alone does not ensure that safe and effective tapering programs  are established. Furthermore, VHA did not specify how safety and  effectiveness within a tapering program would be measured, nor did the  agency specify a deadline for the required action as described in  December 2014. According to federal internal control standards relating  to the establishment and review of performance measures and indicators,  government agencies should use appropriate information to adequately  assess performance, including establishing milestones or numerical  targets, as appropriate. Without clearly defined and measurable  outcomes, VHA cannot fully assess its progress towards meeting this OSI  goal."], "subsections": []}, {"section_title": "VHA Has Not Implemented Certain CARA Requirements Related to Monitoring Veterans Prescribed Opioids", "paragraphs": ["We also found that VHA has not implemented two CARA requirements  intended to improve opioid safety for veterans. First, CARA requires that  VHA\u2019s Opioid Therapy Risk Report (OTRR) have the ability to determine  whether a provider has prescribed opioids to a veteran without checking  that veteran\u2019s information in the OTRR. Available to providers through  VHA\u2019s electronic medical record system, OTRR is a clinical tool that  provides information on any opioid and concurrent benzodiazepine  prescriptions a veteran is receiving, the veteran\u2019s current and prior health  conditions, recent and upcoming appointments, and whether any opioid  risk mitigation strategies have been employed (such as urine drug  screening or PDMP query). However, we found that VHA Central Office  cannot track the extent to which VHA providers use OTRR because this  tool does not have this tracking capability. VHA officials said that adding  tracking capabilities to OTRR is not a high priority for the agency due to  limited resources and competing priorities. Instead, according to a draft  memorandum, VHA Central Office is planning to address this CARA  provision by requiring VHA providers to document the use of OTRR in a  standardized way that VHA can monitor. However, as of March 2018,  VHA has not established this requirement or outlined the process for  monitoring providers\u2019 use of OTRR. Without the ability to track the use of  OTRR, VHA cannot sufficiently monitor whether providers are using the  tool to help reduce the likelihood of opioid-related adverse events  occurring among veterans receiving care through VHA.", "CARA also requires that VHA modify its electronic medical record system  so that any provider who accesses the record of a veteran will be notified  whether that veteran is receiving opioid therapy and has a history of  substance abuse disorder or prior instances of overdose; has a history of  opioid abuse; or is at risk of developing an opioid use disorder. However,  we found that VHA does not plan to modify its electronic medical record  system to implement this capability. When asked about this provision in  CARA, VHA officials said that VHA\u2019s medical record currently has real- time alerts to inform providers about veterans\u2019 existing opioid  prescriptions and that any patient exposed to an opioid could be at risk of  developing an opioid use disorder. Additionally, they said that an alert  regarding current or past history of opioid use disorder could have an  unintended consequence of discouraging veterans from reporting their  medical history due to the stigma surrounding drug use disorders."], "subsections": []}]}, {"section_title": "VHA Providers Do Not Always Adhere to Required Opioid Safety Risk Mitigation Strategies and Guideline Recommendations for Prescribing Opioids in a Safe Manner", "paragraphs": [], "subsections": [{"section_title": "VHA Providers at Selected Medical Facilities Do Not Consistently Follow Opioid Risk Mitigation Strategies", "paragraphs": ["Our review of selected VHA medical facilities shows that providers do not  always follow three key opioid risk mitigation strategies, two of which are  required under VHA policy. Specifically, increasing the use of urine drug  screening is an explicit goal of the OSI, and providers should generally  ensure that an annual urine drug screening has been conducted. VHA  policy requires providers to 1) query state PDMPs at least annually when  prescribing opioids to determine if the veteran has obtained opioid  medications or other controlled substances from a non-VA provider and  2) obtain written informed consent from patients about the risks of  initiating long-term opioid therapy. These strategies are intended to help  ensure that patients at VHA medical facilities are safely prescribed opioid  medications. Overall, based on our review of 103 veterans at five  selected facilities, we found that 75 percent of the veterans in our sample  had an annual urine screening, 26 percent had their names queried in a  PDMP, and 70 percent provided informed consent.", "Provider Adherence to Three Veterans Health Administration (VHA) Opioid Risk Mitigation Strategies at Five Selected  Medical Facilities, March 2016 through March 2017 Increasing the use of urine drug screening is an explicit goal of VHA\u2019s Opioid Safety Initiative (OSI), and providers should generally  ensure that an annual urine drug screening has been conducted. VHA policy requires providers to (1) query state prescription drug  monitoring programs (PDMP) at least annually when prescribing opioids to determine if the veteran has obtained opioid medications  or other controlled substances from a non-VA provider, and (2) obtain written informed consent from patients about the risks of  initiating long-term opioid therapy. However, our review of medical records for a random nongeneralizable selection of 103 veterans  subject to these risk mitigation strategies found that  Of the 53 veterans who received long-term opioid therapy:  32 veterans received an annual urine drug screening, which allows providers to monitor the types of medications in a  veteran\u2019s system, including controlled and illicit substances;  13 veterans had their names queried annually in a state PDMP to see if they had received prescriptions for controlled  substances, including opioids from non-VHA prescribers; and  41 veterans had provided informed consent indicating that they had been educated on the risks and benefits of opioid use.", "Of the 25 veterans prescribed an opioid and benzodiazepine concurrently:  17 veterans received an annual urine drug screening;  8 veterans had an annual PDMP query; and  22 veterans had provided informed consent.", "Of the 25 veterans with the highest risk of an adverse event, such as a suicide, overdose, fall, or accident, based on their Stratified  Tool for Opioid Risk Mitigation (STORM) risk score:  24 veterans received an annual urine drug screening;   5 veterans had an annual PDMP query; and  11 veterans had provided informed consent.", "We identified a number of factors that may have contributed to the  inconsistent adherence to the three key opioid risk mitigation strategies at  our selected VHA medical facilities. These factors may impede providers\u2019  ability to consistently follow these strategies for all applicable patients at  these facilities. To the extent that these factors are present across other  facilities, VHA\u2019s ability to ensure that all veterans are prescribed opioids in  a safe and effective manner may be limited.", "PDMP access issues. Officials at four of the five selected medical  facilities faced PDMP access issues. Officials at two facilities told us that  not all facility staff can access state PDMPs due to state laws and  regulations that do not allow access to all types of providers, such as  nurses and pharmacists. Officials at one of these selected facilities  explained that nurse practitioners in that state cannot access the state\u2019s  PDMP, so they must rely on other providers to obtain information from the  PDMP about their patients. In addition, in some states, only providers  licensed in the state may access the state\u2019s PDMP. Because providers at  VHA facilities may not be licensed in the state where the VHA facility is  located but licensed in another state, these providers may be unable to  access the state\u2019s PDMP. Officials at two selected facilities also  described difficulties accessing PDMPs in neighboring states that are part  of the catchment area for the facility and where the veteran may reside.  The low rates of adherence we identified may also be attributed to the  fact that VHA did not require providers to query the PDMP until October  2016, 7 months into our review of patients from March 2016 to March  2017.", "CARA directed VA to ensure access by VHA providers to information on  controlled substances prescribing through state PDMPs, including by  seeking to enter into memoranda of understanding with states to allow  shared access of such information between states and the VA. According  to VHA officials, VHA Central Office has not taken steps to develop  memoranda of understanding with states, nor has it developed any  related guidance. Officials said this issue is likely being addressed by  individual VISNs and medical facilities. In addition, VHA officials told us  they have communicated with Members of Congress and the National  Governors Association to address issues related to VHA provider access  to the state PDMPs.", "Lack of required staff to support providers. We also found that not all of  the selected medical facilities and their respective VISNs had filled  required staff positions that can help ensure provider adherence to opioid  risk mitigation strategies\u2014specifically, academic detailers and pain  champions.", "At the time of our review, not all facilities had access to VISN  academic detailing services, which, according to VHA, can help  ensure that providers follow opioid risk mitigation strategies. While  VHA officials said that most VISNs across VHA had implemented an  academic detailing program as required by VHA policy, two of the five  VISNs for the selected facilities in our review had not. Nationally, as  of March 2018, four VISNs had not implemented an academic  detailing program. Additionally, 11 facilities across VHA had not  received a visit from a detailer.", "At the time of our review, four of five selected facilities did not have a  Pain Champion as required by VHA policy beginning in March 2015.  Pain champions are generally primary care providers knowledgeable  about pain care who can serve as a resource for other primary care  providers by promoting safe and effective pain care. According to  VHA officials, pain champions play a critical role in opioid safety and  can help providers remedy gaps in pain care management for  individual patients, such as incomplete opioid risk mitigation  strategies.", "Lack of clinical opioid safety alerts. Another factor that may limit  adherence to the opioid risk mitigation strategies is the fact that none of  the selected facilities employ electronic reminders to help remind primary  care nurses of strategies that have not been completed. Primary care  nurses are typically responsible for ensuring adherence to these  strategies, and VHA facilities often employ electronic alerts to notify  providers when certain tasks need to be completed, such as regular  screenings for depression and traumatic brain injury. Although VHA  facilities are not required to develop these alerts, according to some  primary care nurses we interviewed, it would be helpful to receive a  reminder when a veteran is due for a PDMP query, urine drug screening,  or has not given long-term opioid use informed consent. According to the  nurses, such an alert could be issued through the electronic medical  record system.", "Limited facility monitoring. We found that facilities\u2019 monitoring of provider  adherence to the opioid risk mitigation strategies was limited across the  five selected facilities in our review, which could hinder identification of  non-adherence to these strategies. Specifically, while we found that all  five medical facilities and VISNs in our review have an active pain  management committee, facility officials told us that three of five facility  committees do not conduct regular medical record reviews, which VHA  encourages under its pain management directive to improve pain  management. The directive states that facility pain management  committees should monitor the pain management practices at their  facility. For example, the pain management committee could monitor  providers\u2019 care plans for individual veterans, which are to be documented  in the veterans\u2019 medical records. These types of medical record reviews  could help identify providers who are not adhering to VHA\u2019s opioid safety  requirements."], "subsections": []}, {"section_title": "Some VHA Providers Do Not Consistently Follow Clinical Practice Guideline Recommendations Related to Opioid Safety", "paragraphs": ["We also found that some VHA providers at selected facilities do not  consistently follow selected clinical practice guideline recommendations  related to opioid safety. Our findings are based on our review of a random  selection of medical records for 103 veterans prescribed opioids between  March 2016 and March 2017. These guidelines recommend, for example,  that providers consider using non-pharmacological treatments, such as  acupuncture and yoga, for chronic pain and prescribe naloxone, a  potentially lifesaving drug, as warranted. The guidelines provide  evidence-based recommendations designed to assist in provider  decision-making; however, they are not VHA requirements and variations  in practice will occur based on provider discretion and the needs of  individual patients. Overall, we found that, 20 percent of veterans in our  sample were prescribed a non-pharmacological therapy, 23 percent of the  veterans were prescribed naloxone, 54 percent had appropriate  maintenance follow-up visits with a provider while prescribed opioids, and  17 percent had appropriate follow-up visits with a provider after a change  in their opioid prescription.", "Provider Adherence to Selected Clinical Practice Guideline Recommendations for Management of Opioid Therapy for  Chronic Pain at Five Selected Veterans Health Administration (VHA) Medical Facilities, March 2016 through March 2017 Clinical practice guidelines provide evidence-based recommendations designed to assist in provider decision-making; however, they  are not VHA requirements and variations in practice will occur based on provider discretion and the needs of individual patients. Our  review of medical records for a random, nongeneralizable selection of 103 veterans subject to the recommendations found that   Of the 53 veterans who had been prescribed long-term opioids:  11 veterans were prescribed a non-pharmacological therapy, such as yoga, or cognitive behavioral therapy;  13 veterans were prescribed naloxone, which is a highly effective intervention for reversing an overdose;  29 veterans had a maintenance follow-up visit at least once every 30-180 days for the duration of the veteran\u2019s opioid  therapy; and  3 of 21 veterans who had a change in their opioid medication during the time of our review had a follow-up visit between 14  and 28 days following the change.", "Of the 25 veterans prescribed a concurrent opioid and benzodiazepine:  6 veterans were prescribed a non-pharmacological therapy;  4 veterans were prescribed naloxone;  11 veterans had a maintenance follow-up visit; and  0 of 9 veterans who had a change in their opioid medication during the time of our review had a follow-up visit between 14  and 28 days following the medication change.", "Of the 25 veterans with the highest risk of an adverse event, such as a suicide, overdose, fall, or opioid-induced respiratory  depression, based on their Stratified Tool for Opioid Risk Mitigation (STORM) risk score:  4 veterans were prescribed a non-pharmacological therapy;  7 veterans were prescribed naloxone;  16 veterans had a maintenance follow-up visit; and  5 of 17 veterans who had a change in their opioid medication during the time of our review had a follow-up visit between 14  and 28 days following the medication change.", "There are a variety of reasons that VHA providers may not always follow  clinical practice guideline recommendations. For example, the availability  of these non-pharmacological therapies may be limited, according to  officials at all five selected VHA medical facilities. Officials at some  facilities noted that the availability of these therapies can be particularly  challenging for facilities in rural areas.", "VHA officials explained that the biggest barrier to providing naloxone is  educating providers, so that they consistently consider prescribing  naloxone for their patients receiving opioid therapy. According to  officials, an education course for providers on naloxone prescribing  became available in December 2015, and naloxone education efforts are  a key focus of academic detailing programs. According to VHA data,  since fiscal year 2014, naloxone distribution has increased. Specifically,  as of March 2018, the agency has dispensed almost 142,000 naloxone  kits to veterans, an increase of about 58 percent since June 2017."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["VHA is taking important steps under the OSI to help ensure that veterans  receive safe care. For example, VHA has begun tracking and publicly  reporting data on four key metrics related to opioid prescriptions, and  these data show that opioid prescription rates have decreased since  2013. In addition, our review also found that VHA has made progress on  most of its 2014 OSI goals. However, for two goals, VHA lacks  documentation showing whether VISNs and medical facilities have  completed required relevant actions, and in one case, VHA has not  specified measurable outcomes, which makes it challenging to determine  whether these goals have been accomplished. Without sufficient  documentation and measurable outcomes, VHA cannot determine  whether these OSI goals to help ensure safe and effective care for  veterans prescribed opioids have been fully successful.", "Our review also shows that VHA needs to do more to ensure that its  providers are following three key opioid risk mitigation strategies when  prescribing an opioid medication to a veteran: conducting an annual urine  drug screening, querying a PDMP, and obtaining written informed  consent from the veteran on the benefits and risks of using opioid  medications.", "VHA has several means at its disposal for improving adherence to these  strategies\u2014at a minimum it should ensure that each VISN has a fully  staffed academic detailing program and that each facility has a  designated primary care pain champion, as VHA policy requires. In  addition to enforcing these requirements, VHA should direct its facilities to  strengthen monitoring efforts to help ensure providers\u2019 adhere to the  opioid risk mitigation strategies. These efforts include regular reviews of  veterans\u2019 medical records and creating electronic alerts reminding  providers when these risk mitigation strategies have not been completed.  Academic detailers and pain champions would also help educate  providers further about evidence-based clinical practice guideline  recommendations, such as non-pharmacological alternatives to opioid  therapy and prescribing naloxone. Without these efforts to improve  adherence to key opioid risk mitigation strategies, VHA\u2019s ability to ensure  that all veterans are prescribed opioids in a safe and effective manner  may be limited."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to VA:", "The Undersecretary for Health should ensure that Central Office,  VISNs, and medical facilities document the actions they take towards  achieving OSI goals. (Recommendation 1)", "The Undersecretary for Health should ensure that any OSI goals that  have not been met have clearly defined, measurable outcomes,  including milestones or numerical targets, as appropriate, and  timeframes. (Recommendation 2)", "The Undersecretary for Health should track the use of the OTRR (or  any subsequent tool) by providers prior to initiating opioid therapy.  (Recommendation 3)", "The Undersecretary for Health should ensure that all VISNs have  implemented an academic detailing program that supports all medical  facilities in the VISN and that all VHA medical facilities have a  designated primary care pain champion as required.  (Recommendation 4)", "The Undersecretary for Health should require VHA medical facilities to  take steps to ensure provider adherence to opioid risk mitigation  strategies, including querying PDMPs, obtaining written informed  consent, and conducting urine drug screening. For example, these  steps could include creating alerts in the electronic medical record  system to remind primary care teams when these actions should be  completed or strengthening facility monitoring of providers.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for comment. While VA was  reviewing a draft of this report, it requested further specificity in  recommendation two; as a result, we revised the recommendation to be  clearer. In its written comments, which are reproduced in appendix II, VA  concurred with our recommendations and provided technical comments,  which we have incorporated as appropriate.", "In its comments, VA agreed that clarifying ongoing priorities and plans  and filling in gaps in implementation will help facilitate progress in its  opioid safety efforts.  VA stated that it will establish a workgroup to review  all OSI goals and ensure that the goals have clearly defined measurable  outcomes and timelines, and that documentation requirements are  established. VA also informed us that in March 2018 it published a notice  requiring VHA clinicians to conduct and document a data-based risk  review using one of VHA\u2019s clinical decision support tools for opioid  management, such as STORM, prior to initiating opioid therapy. VA also  stated that it will take actions to ensure that academic detailing programs  are fully implemented and primary care pain champions are in place  across the system. To improve its clinicians\u2019 adherence to opioid risk  mitigation strategies, VA stated that it will establish a workgroup to review  and develop methods for increasing adherence. VA expects to complete  all these actions by April 2019 or earlier.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, the Undersecretary for  Health, and other interested parties. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or clowersa@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Known Efforts and Data Related to the Veterans Health Administration\u2019s (VHA) Opioid Safety Initiative (OSI) 2014 Goals, July 2013-December 2017", "paragraphs": ["Description of known related efforts and data  According to VHA training system data, 13 of 21 VISNs  developed at least one education course addressing the  use of urine drug screening from January 1, 2015 through  April 29, 2017. Ten of the 13 VISNs developed at least  one course by the deadline (December 31, 2014) as  required. Further, 6 of the 13 VISNs had at least one  course with 30 or fewer providers completing it. Because  we found the VISN course assignment data unreliable, we  could not determine the completion rates for these  courses. However, we found that, in response to a 2015  White House memorandum that required all federal  employee opioid prescribers to complete training on the  appropriate prescribing of opioids (which included  discussion of urine drug screening) by April 15, 2017, of  20,231 prescribers who were identified and assigned the  course, 19,242 completed it, for a completion rate of  about 95 percent, according to VHA data from January 1,  2015 through April 29, 2017.", "Urine drug screening targets based on  previous urine drug screening rates for  all VHA facilities must be reached by  2nd quarter, fiscal year 2015 (March 31,  2015)", "According to VHA data, 151 of 157 facilities met or  exceeded their urine drug screening target by the  deadline (March 31, 2015) as required.  In addition, VHA OSI metric data also show that there has  been a 47 percentage point increase nationally in the  percentage of patients on long-term opioid therapy who  received a urine drug screen from the 4th quarter of fiscal  year 2013 to the 1st quarter of fiscal year 2018. The  increase in the percentage of patients receiving a urine  drug screening was driven more by a reduction in the total  number of patients on long-term opioid therapy rather  than an increase in the number of patients receiving the  screening.", "VHA Central Office lacks certifications from all VISNs that  programs were established. Although officials at the five  VISNs in our review told us they had supported training  efforts on the use of PDMPs, only one VISN in our review  provided documentation that it had established a program  by the deadline (March 31, 2015) as required.  However, in October 2016, VHA issued a directive  requiring providers to query state PDMPs for patients  prescribed opioids and also issued guidance on how  PDMPs should be accessed and how these efforts should  be documented in VA\u2019s electronic health record system.  In addition, according to VHA officials, querying the  PDMP was added to the 2015 White House-required  opioid safety training, as described earlier. According to  VHA data, there has been a 22 percent increase in the  querying of PDMPs by providers from 4th quarter, fiscal  year 2016 to 3rd quarter, fiscal year 2017.", "Description of known related efforts and data  VHA Central Office lacks documentation from all VISNs  regarding VISN-specific protocols and implementation  plans. Only one of the five VISNs in our review provided  documentation regarding a VISN-specific protocol relating  to patients on opioids and benzodiazepines, which was  developed in 2013. Four of the five VISNs did not provide  documentation of a VISN-specific protocol or  implementation plans.  However, VHA officials told us that they addressed this  goal by issuing national tapering guidance including a  provider reference guide in 2014, an opioid taper decision  tool in 2016, and the VA/DOD clinical practice guideline in  2017. VHA officials said that the issuance of this guidance  made the VISN-required action irrelevant. In addition,  VHA OSI metric data show that there has been a 6.6  percentage point decrease nationally in the percentage of  patients dispensed an opioid and benzodiazepine from  the fourth quarter of fiscal year 2013 to the first quarter of  fiscal year 2018.", "In 2016, VHA released its opioid risk stratification toolkit in  the form of an opioid safety monitoring tool called the  Stratification Tool for Opioid Risk Mitigation. In addition,  VHA updated its pain management opioid safety  education guide and quick reference guide for providers  in July 2017.", "VHA Central Office lacks documentation from all VISNs  regarding VISN-specific protocols and implementation  plans. Only one of the five VISNs in our review provided  documentation regarding a VISN-specific protocol relating  to patients on opioids and benzodiazepines, which was  developed in 2013. Four of the five VISNs did not provide  documentation of a VISN-specific protocol or  implementation plans.", "VHA-required action(s)   Each VISN must certify that the  treatment of all patients with a daily dose  of greater than 200 morphine milligram  equivalents has been reviewed by 2nd  quarter, fiscal year 2015 (March 31,  2015)", "Description of known related efforts and data  VHA Central Office lacks certifications from all VISNs that  reviews were conducted. Although officials at the five  VISNs in our review told us they had completed these  reviews, only one VISN provided us with documentation  to conclude that its facilities completed their review.  However, VHA OSI metric data show that there has been  a 2.1 percentage point decrease nationally in the  percentage of patients dispensed greater than or equal to  100 morphine milligram equivalents per day from the  fourth quarter of fiscal year 2013 to the first quarter of  fiscal year 2018.", "Each facility must provide evidence that  at least two evidence-based  behavioral/psychological treatments or  approved complementary or alternative  modalities can be provided by 2nd  quarter, fiscal year 2015 (March 31,  2015)", "According to VHA 2nd quarter, fiscal year 2015 data, all  VHA medical facilities located in the United States  provided at least one psychosocial service and at least  one complementary and integrative health service.", "In February 2016, VHA began a pilot to implement a  model of care known as the Collaborative Chronic Care  Model into existing Behavioral Health Interdisciplinary  Program teams at nine VHA medical facilities. According  to a VHA document, the pilot will provide facilitation  support to enhance existing Behavioral Health  Interdisciplinary Program teams by incorporating  evidence-based Collaborative Care Model elements,  which can include a care manager to proactively monitor  care and progress as well as other tools intended to  improve communication between primary care and  specialty care. In fiscal year 2017, efforts were expanded  to 30 additional VHA medical facilities. According to one  VHA official, the pilot is expected to be completed no  earlier than August 2019.", "VISNs are regional networks that manage the VHA medical facilities located in their area. In October  2015, VHA began to implement a realignment of its VISN boundaries which resulted in the number of  its VISNs decreasing from 21 to 18.  One VISN provided evidence of one VHA medical facility\u2019s tapering recommendations for patients on  opioids and benzodiazepines.  Based on information we obtained from VHA relative to this goal, \u201cpsychosocial\u201d services refer to  \u201cbehavioral/psychological\u201d treatments, and \u201cintegrated health\u201d is a term that may be used to refer to  \u201ccomplementary and alternative\u201d modalities. According to a VHA official, the VHA facility in Manila,  the Philippines did not offer at least one psychosocial service and at least one integrative health  service for this time period."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia A. Mann, Assistant  Director; Stella Chiang, Analyst-in-Charge; Emily Binek, Krister Friday,  Diona Martyn, and Michael Rose made key contributions to this report.  Also contributing were Zhi Boon and Emily Wilson."], "subsections": []}]}], "fastfact": ["The VA has been working to address opioid safety for veterans and has made progress in reducing opioid prescriptions. For example, VA has started a program to educate providers on best practices related to pain management and the optimal use of opioids.", "However, we found that VA has not fully met all of its opioid safety goals. Its health care providers also are not consistently adhering to evidence-based opioid risk mitigation strategies (such as annual urine drug screenings).", "We made a number of recommendations to help the VA improve opioid safety."]}
{"id": "GAO-18-274T", "url": "https://www.gao.gov/products/GAO-18-274T", "title": "Veterans Affairs Contracting: Improvements in Buying Medical and Surgical Supplies Could Yield Cost Savings and Efficiency", "published_date": "2017-12-07T00:00:00", "released_date": "2017-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA spends hundreds of millions of dollars annually on medical supplies to meet the health care needs of about 7 million veterans. To provide a more efficient, cost-effective way for its medical centers to order supplies, the VA established the MSPV-NG program.", "The program's goals include involving clinicians in requirements development, leveraging buying power when making competitive awards, and consolidating supplies used across medical centers. VA began developing requirements in early 2015 and launched the program in December 2016.", "This testimony summarizes key information contained in GAO's November 2017 report, GAO-18-34 . Specifically, it addresses the extent to which VA's implementation of MSPV-NG has been effective in meeting program goals. GAO analyzed VA's requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also met with contracting and clinical officials at six medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation did not have an overarching strategy, stable leadership, and workforce capacity that could have facilitated medical center buy-in for the change. VA also developed requirements for a broad range of MSPV-NG items with limited clinical input. Further, starting in June 2015, VA planned to award competitive contracts, but instead, 79 percent of the items available for purchase under MSPV-NG were added through non-competitive agreements. (See figure).", "As a result, the program did not meet the needs of medical centers, and usage remained below VA's 40 percent target. (See figure.)", "VA has taken steps to address some deficiencies and is developing a new approach to the program. However, VA will likely continue to face challenges in meeting its goals until it fully addresses these existing shortcomings."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made 10 recommendations in its November 2017 report, including that VA develop an overarching strategy, expand clinician input in requirements development, and establish a plan for awarding future competitive contracts. VA agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In December 2016, the Department of Veterans Affairs (VA) launched the  Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program as  its primary means for purchasing supplies, such as bandages and  scalpels, for 170 VA medical centers. These supplies are intended to  meet the health care needs of about 7 million veterans. In fiscal year  2015, VA obligated $465 million for these types of supplies, and, in 2016,  it stated that it planned to achieve $150 million in cost avoidance through  a supply chain transformation effort, which includes MSPV-NG. This  transition represents a significant change to how medical and surgical  supplies are purchased, which has raised questions about whether  MSPV-NG will appropriately balance medical needs with logistical  efficiency, and whether VA can achieve its planned cost avoidance.  Effective supply chain management is an essential part of delivering  quality health care to veterans\u2014for instance, an April 2017 interim report  issued by the VA Inspector General detailed supply management issues  at the District of Columbia VA Medical Center that posed risks to patient  care.", "My remarks today are based on our recently issued report on the MSPV- NG program, and I will summarize a few key findings from that report.  Specifically, I will address the extent to which VA\u2019s implementation of  MSPV-NG has been effective in meeting program goals.", "As part of our work for our November 2017 report, we reviewed VA policy,  communications, briefings, and other documents, prior GAO reports on  best practices for organizational transformation, and internal control  standards. We interviewed Veterans Health Administration (VHA)- and  VA-wide procurement leaders, program office managers, and members of  three integrated product teams who helped develop the product  descriptions for supply items (known as requirements). We also  interviewed supply chain managers from four leading hospital networks  regarding their medical supply management practices and compared  them to those used by VA when implementing the MSPV-NG program.  To assess VA\u2019s MSPV-NG contracting process, we analyzed the contents  of the formulary (a list of specific items that medical centers are allowed  to purchase) to determine what acquisition instrument was used to add  the items. We determined that the MSPV-NG formulary data were  sufficiently reliable by tracing data to a sample of source documents,  among other steps. We selected three VHA regional networks based on  those with the highest total contract obligations in fiscal years 2014  through 2016, geographic diversity, and other factors. We conducted site  visits to six medical centers within these three regional networks,  interviewing contracting and clinical officials. Finally, we obtained and  analyzed data on VA\u2019s metrics for the program and determined the data  were sufficiently reliable for our purpose of measuring utilization by  interviewing officials responsible for maintaining the data and other  measures.", "More detailed information on our objectives, scope, and methodology for  our work can be found in our November 9, 2017 report. We conducted  the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "MSPV-NG Program", "paragraphs": ["For over a decade, each of VA\u2019s 170 medical centers used VHA\u2019s legacy  MSPV program to order medical supplies, such as bandages and  scalpels. Many of those items were purchased using the Federal Supply  Schedules, which provided medical centers with a great deal of flexibility.  However, as we reported in 2016, this legacy program prevented VHA  from standardizing items used across its medical centers and affected its  ability to leverage its buying power to achieve greater cost avoidance.  Standardization is a process of narrowing the range of items purchased to  meet a given need, such as buying 10 varieties of bandages instead of  100, in order to improve buying power, simplify supply chain  management, and provide clinical consistency. In part because of the  legacy MSPV program\u2019s limited standardization, VHA decided to  transition to a new iteration, called MSPV-NG.", "The transition to MSPV-NG has been a major effort, involving the MSPV- NG program office, stakeholders from the VHA\u2019s Procurement and  Logistics Office and VA\u2019s Strategic Acquisition Center (SAC)\u2014a VA-wide  contracting organization\u2014and logistics and clinical personnel at every  medical center. The program also includes hundreds of new contracts  with individual supply vendors and a new set of prime vendor contracts to  distribute the supplies.", "VA\u2019s goals for the MSPV-NG program include (1) standardizing  requirements for supply items for greater clinical consistency; (2)  demonstrating cost avoidance by leveraging VA\u2019s substantial buying  power when making competitive awards; (3) achieving greater efficiency  in ordering and supply chain management, including a metric of ordering  40 percent of medical centers\u2019 supplies from the MSPV-NG formulary;  and (4) involving clinicians in requirements development to ensure  uniform clinical review of medical supplies.", "VHA launched the MSPV-NG program in December 2016, but allowed a  4-month transition period. After April 2017, medical centers could no  longer use the legacy program. MSPV-NG now restricts ordering to a  narrow formulary. VHA policy requires medical centers to use MSPV- NG\u2014as opposed to other means such as open market purchase card  transactions\u2014when purchasing items that are available in the formulary."], "subsections": []}, {"section_title": "Supply Chain Practices Identified by Selected Leading Hospital Networks", "paragraphs": ["Leading hospital networks we spoke with have similar goals to VA in  managing their supply chains, including clinical standardization and  reduced costs. These hospital networks reported they analyze their  spending to identify items purchased most frequently, and which ones  would be the best candidates to standardize first to yield cost savings.  The hospitals\u2019 supply chain managers reported establishing consensus  with clinicians through early and frequent collaboration, understanding  that clinician involvement is critical to the success of any effort to  standardize their medical supply chain. By following these practices,  these hospital networks have reported they have achieved significant cost  savings in some cases, and the potential for improved patient care, while  maintaining buy-in from their clinicians."], "subsections": []}]}, {"section_title": "VHA\u2019s Implementation of MSPV-NG Program Has Not Yet Achieved Its Goals", "paragraphs": ["VHA\u2019s implementation of the MSPV-NG program\u2014from its initial work to  identify a list of supply requirements in early 2015, through its roll-out of  the formulary to medical centers in December 2016\u2014was not executed in  line with leading practices. Specifically, VHA lacked a documented  program strategy, leadership stability, and workforce capacity for the  transition that, if in place, could have facilitated buy-in for the change  throughout the organization. Further, the initial requirements development  process and tight time frames contributed to ineffective contracting  processes. As a result, VHA developed an initial formulary that did not  meet the needs of the medical centers and has yet to achieve utilization  and cost avoidance goals. VA made some changes in the second phase  of requirements development to address deficiencies identified in the  initial roll out. Key among these was to increase the level of clinical  involvement, that is, to obtain input from the doctors and nurses at VA\u2019s  individual medical facilities. Despite changes aimed at improving  implementation, the agency continues to face challenges that prevent the  program from fully achieving its goals."], "subsections": [{"section_title": "VA\u2019s Lack of an Overarching Strategy and Leadership Instability Were Obstacles to Effective Implementation of MSPV-NG", "paragraphs": ["VA did not document a clear overall strategy for the MSPV-NG program  at the start and has not done so to date. About 6 months after our initial  requests for a strategy or plan, a VHA official provided us with an October  2015 plan focusing on the mechanics of establishing the MSPV-NG  formulary. However, this plan was used only within the VHA Procurement  and Logistics Office and had not been approved by VHA or VA  leadership. Leading practices for organizational transformation state that  agencies must have well-documented plans and strategies for major  initiatives (such as MSPV-NG) and communicate them clearly and  consistently to all involved\u2014which included VHA headquarters, the SAC,  and all 170 medical centers. Without such a strategy, VA could not  reasonably ensure that all stakeholders understood VHA\u2019s approach for  MSPV-NG and worked together in a coordinated manner to achieve  program goals. In our November 2017 report, we recommended that the  Director of the MSPV-NG program office should, with input from SAC,  develop, document, and communicate to stakeholders an overarching  strategy for the program, including how the program office will prioritize  categories of supplies for future phases of requirement development and  contracting. VA agreed with this recommendation and reported it would  have a strategy in place by December 2017.", "Leadership instability and workforce challenges also made it difficult for  VA to execute its transition to MSPV-NG. Our work has shown that  leadership buy-in is necessary to ensure that major programs like MSPV- NG have the resources and support they need to execute their missions.  Due to a combination of budget and hiring constraints, and lack of  prioritization within VA, the MSPV-NG program office has never been fully  staffed and has experienced instability in its leadership. As of January  2017, 24 of the office\u2019s 40 positions were filled, and program office  officials stated that this lack of staff affected their ability to implement  certain aspects of the program within the planned time frames. In  addition, since the inception of MSPV-NG, the program office has had  four directors, two of whom were acting and two of whom were fulfilling  the director position while performing other collateral duties. For instance,  one of the acting MSPV-NG program office directors was on detail from a  regional health network to fulfill the position, but had to abruptly leave and return to her prior position due to a federal hiring freeze. In our November  2017 report, we recommended that VHA prioritize the hiring of a MSPV- NG program director on a permanent basis. VA agreed with this  recommendation and indicated a vacancy announcement will be posted  by the end of 2017."], "subsections": []}, {"section_title": "The MSPV-NG Initial Requirements Development Process Had Limited Clinician Involvement and Did Not Prioritize Categories of Supplies", "paragraphs": ["The MSPV-NG program office initially developed requirements for items  to be included in the formulary based almost exclusively on prior supply  purchases, with limited clinician involvement. The program office  concluded in its October 2015 formulary plan that relying on data from  previous clinician purchases would be a good representation of medical  centers\u2019 needs and that clinician input would not be required for  identifying which items to include in the initial formulary. Further, rather  than standardizing purchases of specific categories of supplies\u2014such as  bandages or scalpels\u2014program officials told us they identified medical  and surgical items on which VA had spent $16,000 or more annually and  ordered at least 12 times per year, and made those items the basis for  the formulary. Officials said this analysis initially yielded a list of about  18,000 items, which the program office further refined to about 6,000  items by removing duplicate items or those that were not considered  consumable commodities, such as medical equipment. This approach to  requirements development stood in sharp contrast to those of the leading  hospital networks we met with, which rely heavily on clinician input to help  drive the standardization process and focus on individual categories of  supplies that provide the best opportunities for cost savings."], "subsections": []}, {"section_title": "Requirements Development and Tight Time Frames Contributed to Ineffective Contracting Practices for Initial Formulary", "paragraphs": ["Based on the requirements developed by the program office, SAC began  to issue competitive solicitations for the 6,000 items on the initial  formulary in June 2015. Medical supply companies had responded to  about 30 percent of the solicitations as of January 2016. As a result,  according to SAC officials, they conducted outreach and some of these  companies responded that VHA\u2019s requirements did not appear to be  based on clinical input and instead consisted of manufacturer-specific  requirements that favored particular products instead of broader  descriptions. Furthermore, SAC did not solicit large groups of related  items, but rather issued separate solicitations for small groups of supply  items\u2014consisting of three or fewer items. This is contrary to industry  practices of soliciting large groups of related supplies together. Therefore,  according to SAC officials, some medical supply companies told them  that submitting responses to SAC\u2019s solicitations required more time and  resources than they were willing to commit.", "By its April 2016 deadline for having 6,000 items on the formulary, SAC  had been working on the effort for over a year and had established  competitive agreements for about 200 items, representing about 3  percent of the planned items. Without contracts for the items on the  formulary in place, VA delayed the launch of the MSPV-NG program until  December 2016 and SAC began establishing non-competitive  agreements in the last few months before the launch of MSPV-NG. As  shown in figure 1, these non-competitive agreements accounted for  approximately 79 percent of the items on the January 2017 version of the  formulary. While this approach enabled the MSPV-NG program office to  establish the formulary more quickly, it did so at the expense of one of the  primary goals of the MSPV-NG program\u2014leveraging VA\u2019s buying power  to obtain cost avoidance through competition."], "subsections": []}, {"section_title": "Initial Formulary Did Not Meet Medical Center Needs, Resulting in Low Utilization of MSPV-NG and a Missed Opportunity to Leverage VA\u2019s Large Buying Power", "paragraphs": ["Once VA\u2019s MSPV-NG initial formulary was established in December  2016, each medical center was charged with implementing it. According  to logistics officials we spoke with at selected medical centers, they had  varying levels of success due, in part, to incomplete guidance from the  program office. Without clear guidance, many medical centers reported  they were unable to find direct matches or substitutes on the MSPV-NG  formulary for a substantial number of items they routinely used, which  negatively impacted utilization rates for the initial formulary. In our  November 2017 report, we recommended that the Director of the MSPV- NG program office provide complete guidance to medical centers for  matching equivalent supply items. VA agreed with this recommendation  and indicated it would provide this guidance to medical centers by  December 2017.", "According to SAC, as of June 2017, only about a third of the items on the  initial version of the formulary were being ordered in any significant  quantity by medical centers, indicating that many items on the formulary  were not those that are needed by medical centers. Senior VHA  acquisition officials attributed this mismatch to shortcomings in their initial  requirements development process as well as with VA\u2019s purchase data.", "VA had set a target that medical centers would order 40 percent of their  supplies from the MSPV-NG formulary, but utilization rates were below  this target with a nationwide average utilization rate across medical  centers of about 24 percent as of May 2017. Specifically, Chief Supply  Chain Officers\u2014who are responsible for managing the ordering and  stocking of medical supplies at six selected medical centers\u2014told us that  many items they needed were not included in the MSPV-NG formulary.  As such, we found that these six medical centers generally fell below  VA\u2019s stated utilization target. As shown in figure 2, among the six selected  medical centers we reviewed, one met the target, while the remaining five  were below 25 percent utilization.", "Instead of fully using MSPV-NG, the selected medical centers are  purchasing many items through other means, such as purchase cards or  new contracts awarded by their local contracting office, in part, because  they said the formulary does not meet their needs. These approaches run  counter to the goals of the MSPV-NG program and contribute to VA not  making the best use of taxpayer dollars.", "Greater utilization of MSPV-NG is essential to VA achieving the cost  avoidance goal of $150 million for its supply chain transformation effort.  Under the legacy MSPV program, the National Acquisition Center tracked  cost avoidance achieved by comparing prices for competitively-awarded  MSPV supply contracts with prices available elsewhere. However, VHA  officials stated that they are not currently tracking cost avoidance related  specifically to MSPV-NG. In our November 2017 report, we  recommended that the VHA Chief Procurement and Logistics Officer, in  coordination with SAC, should calculate cost avoidance achieved by  MSPV-NG on an ongoing basis. VA agreed with this recommendation  and reported it would develop a new metric to measure cost avoidance by  June 2018."], "subsections": []}, {"section_title": "VA Continues to Encounter Requirements Development and Contracting Challenges as It Works to Address MSPV-NG Shortcomings", "paragraphs": ["In Phase 2 of MSPV-NG, the program office has taken some steps to  incorporate greater clinical involvement in subsequent requirements  development, but both its requirements development and SAC\u2019s  contracting efforts have been hampered by staffing and schedule  constraints. In the fall of 2016, the program office began to establish  panels of clinicians to serve on MSPV-NG integrated product teams (IPT)  assigned to the task of developing updated requirements for the second  phase of the formulary. Program officials said they had difficulty recruiting  clinicians to participate. We found that slightly more than half (20 of the  38) of the IPTs had begun their work to review items and develop  updated requirements by the time the MSPV-NG program launched in  December 2016. Staff on the IPTs had to complete their responsibilities  by the end of March 2017 while simultaneously managing their regular  workload as physicians, surgeons, or nurses.", "By early March 2017, the IPTs still had about 4,200 items to review.  Faced with meeting this unrealistic time frame, the MSPV-NG program  office had 9 IPT members travel to one location\u2014with an additional 10  members participating virtually\u2014to meet for 5 days to review the  remaining items. Members told us that this time pressure limited the  extent to which they were able to pursue the goal of standardizing  supplies, and that their review ended up being more of a data validation  exercise than a standardization review. VHA ultimately met this  compressed timeline, but in a rushed manner that limited the impact of  clinician involvement.", "In our November 2017 report, we recommended that the VHA Chief  Procurement and Logistics Officer use input from national clinical  program offices to prioritize its requirements development and  standardization efforts beyond Phase 2 to focus on supply categories that  offer the best opportunity for standardization and cost avoidance. VA  agreed with this recommendation and stated it is in the process of  finalizing guidance that will detail the importance of involving the national  clinical program offices in MSPV-NG requirements development and  standardization efforts.", "The SAC plans to replace the existing Phase 1 non-competitive  agreements with competitive awards based on the Phase 2 requirements  generated by the IPTs, but it may not be able to keep up with expiring  agreements due to an unrealistic schedule. Because they were made  on a non-competitive basis, the Phase 1 agreements were established for  a period of 1 year. In order to keep the full formulary available, the SAC  director said the staff must award 200 to 250 contracts before the Phase  1 agreements expire later this year. SAC officials acknowledged that it is  unlikely that they will be able to award the contracts by the time the  existing agreements expire. According to SAC officials, they are in the  process of hiring more staff to deal with the increased workload. Further,  the SAC division director told us that they canceled all outstanding Phase  2 solicitations in September 2017 due to low response rates, protests  from service-disabled veteran-owned small businesses, and changes in  overall MSPV-NG strategy.", "In our November 2017 report, we recommended that the MSPV-NG  program office and SAC should establish a plan for how to mitigate the  potential risk of gaps in contract coverage while SAC is still working to  make competitive Phase 2 awards, which could include prioritizing supply  categories that are most likely to yield cost avoidance. VA agreed with  this recommendation and indicated it has developed a plan to mitigate the  risk of gaps in contract coverage with short- and mid-term procurement  strategies to ensure continued provision of medical and surgical supplies  to VHA facilities. The department also stated that it plans to replace the  current MSPV-NG contract and formulary process with a new approach  where the prime vendor would develop the formulary. However, VA will  likely face challenges in this new approach until it fully addresses the  existing shortcomings in the MSPV-NG program.", "Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes my prepared statement. I would be pleased to respond to  any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact Shelby S. Oakley at 202-512-4841 or OakleyS@gao.gov. In  addition, contact points for our Offices of Congressional Relations and  Public Affairs may be found on the last page of this statement. Individuals  who made key contributions to the report on which this testimony is based  are Lisa Gardner, Assistant Director; Emily Bond; Matthew T. Crosby;  Lorraine Ettaro; Michael Grogan; Jeff Hartnett; Katherine Lenane; Teague  Lyons; Roxanna Sun; and Colleen Taylor.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The VA launched a new program last year, MSPV-NG, to streamline the way its medical centers buy supplies for treating 7 million vets.", "As with any organizational transformation, the program's success depended on having a strong strategic plan, stable leadership, good communication, and stakeholder buy-in. But as we testified here, the VA was missing these elements when it launched the program; as a result, the program has yet to achieve key cost savings and efficiency goals.", "In the report on which this testimony is based, we made 10 recommendations on how the VA can better manage future phases of the program and improve its purchasing."]}
{"id": "GAO-18-264", "url": "https://www.gao.gov/products/GAO-18-264", "title": "Data Center Optimization: Continued Agency Actions Needed to Meet Goals and Address Prior Recommendations", "published_date": "2018-05-23T00:00:00", "released_date": "2018-05-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In December 2014, Congress enacted federal IT acquisition reform legislation that included provisions related to ongoing federal data center consolidation efforts. OMB's Federal Chief Information Officer launched DCOI to build on prior data center consolidation efforts; improve federal data centers' performance; and establish goals for inventory closures, cost savings and avoidances, and optimization performance.", "The 2014 legislation also included a provision for GAO to annually review agencies' data center inventories and strategies. Accordingly, GAO reviewed agencies' data center closures to date and plans for further closures; evaluated agencies' progress in achieving consolidation savings and described their plans for future savings; and assessed agencies' progress against OMB's data center optimization targets. To do so, GAO assessed the 24 DCOI agencies' data center inventories as of August 2017; reviewed their reported cost savings documentation; evaluated their data center optimization strategic plans; and assessed 22 agencies' progress against OMB's established optimization targets. Two agencies did not have a basis to report planned optimization milestones.", "OMB and the 24 DCOI agencies provided mixed responses to GAO's findings on the progress made towards initiative goals. GAO continues to believe that implementation of the recommendations made previously will help the agencies meet OMB's targets for cost savings and optimization of performance."]}, {"section_title": "What GAO Found", "paragraphs": ["The 24 agencies participating in the Office of Management and Budget's (OMB) Data Center Optimization Initiative (DCOI) reported mixed progress toward achieving OMB's goals for closing data centers by September 2018. Over half of the agencies reported that they had either already met, or planned to meet, all of their OMB-assigned goals by the deadline. This would result in the closure of 7,221 of the 12,062 centers that agencies reported in August 2017. However, 4 agencies reported that they do not have plans to meet all of their assigned goals and 2 agencies are working with OMB to establish revised targets.", "With regard to agencies' progress in achieving cost savings, 20 agencies reported, as of August 2017, that they had achieved $1.04 billion in cost savings for fiscal years 2016 and 2017. In addition, the agencies' DCOI strategic plans identify an additional $0.58 billion in planned savings\u2014for a total of $1.62 billion for fiscal years 2016 through 2018. This total is approximately $1.12 billion less than OMB's DCOI savings goal of $2.7 billion (see figure). This shortfall is the result of 12 agencies reporting less in planned cost savings and avoidances in their DCOI strategic plans, as compared to the savings targets established for them by OMB.", "The 24 agencies reported limited progress against OMB's five data center optimization targets for server utilization and automated monitoring, energy metering, power usage effectiveness, facility utilization, and virtualization. As of August 2017, 1 agency had met four targets, 1 agency had met three targets, 6 agencies had met either one or two targets, and 14 agencies reported meeting none of the targets. Further, as of August 2017, most agencies were not planning to meet OMB's fiscal year 2018 optimization targets. Specifically, 4 agencies reported plans to meet all of their applicable targets by the end of fiscal year 2018; 14 reported plans to meet some of the targets; and 4 reported that they do not plan to meet any targets.", "In 2016 and 2017, GAO made a number of recommendations to OMB and the 24 DCOI agencies to help improve the reporting of data center-related cost savings and to achieve optimization targets. As of March 2018, 74 of these 81 recommendations had not been fully addressed."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government\u2019s demand for information technology (IT) is ever  increasing. In recent years, as federal agencies have modernized their  operations, put more of their services online, and improved their  information security profiles, their need for computing power and data  storage resources has grown. Accordingly, this growing demand led to a  dramatic rise in the number of federal data centers and a corresponding  increase in operational costs.", "To reduce data center duplication and costs, the Office of Management  and Budget\u2019s (OMB) Federal Chief Information Officer (CIO) launched  two initiatives. The first, launched in 2010, was the Federal Data Center  Consolidation Initiative (FDCCI), which aimed to reduce the number of  data centers that were outdated or duplicative. The second initiative\u2014the  Data Center Optimization Initiative (DCOI)\u2014was launched in August 2016  and superseded FDCCI. This initiative shifted the focus to optimizing  agencies\u2019 remaining data centers by requiring, among other things, that  agencies consolidate inefficient infrastructure, optimize existing facilities,  and transition to more efficient infrastructure, such as cloud services.", "Further, Congress has recognized the importance of reforming the  government-wide management of IT and, in December 2014, enacted  Federal Information Technology Acquisition Reform provisions  (commonly referred to as FITARA) as a part of the Carl Levin and Howard  P. \u2018Buck\u2019 McKeon National Defense Authorization Act for Fiscal Year  2015. Among the requirements related to federal data center  consolidation, the law requires:", "Covered departments and agencies (agencies) to annually report to  OMB about federal data center inventories and strategies to achieve  consolidation, including yearly calculations of investment and cost  savings.", "OMB to develop goals for the amount of planned cost savings and  optimization improvements that agencies are to achieve through  FDCCI. OMB is to make the goals publicly available and compare  progress against the goals.", "In addition to these requirements, FITARA included a provision for GAO  to annually review and verify the quality and completeness of covered  agencies\u2019 federal data center inventories and strategies for consolidation.  Accordingly, our specific objectives were to (1) review agencies\u2019 data  center closures to date and plans for further closures, (2) evaluate  agencies\u2019 progress in achieving data center consolidation savings and  describe plans for future savings, and (3) assess agencies\u2019 progress  against OMB\u2019s data center optimization targets.", "On November 13, 2017, we briefed congressional committee staff on the  results of our work. This report officially transmits the results of our review  to the committees.", "To review agency closures to date and plans, we obtained and analyzed  August 2017 data center inventory documentation from the 24 DCOI  agencies. We compared information on the agencies\u2019 completed and  planned data center closures to OMB\u2019s fiscal year 2018 consolidation  goals, as documented in its August 2016 memorandum (M-16-19). We  determined the number of data center that had been closed by adding the  closures from fiscal year 2010 through August 2017, as reported by the  agencies. We identified future closures by counting data centers that  agencies reported as planned closures, as of August 2017 through fiscal  year 2019.", "To verify the quality, completeness, and reliability of the agencies\u2019 data  center inventories, we compared the information on completed and  planned data center closures to similar information reported on OMB\u2019s IT  Dashboard\u2014a public website that provides information on federal  agencies\u2019 major IT investments. We determined that the data were  sufficiently reliable to report on agencies\u2019 consolidation progress and  planned closures.", "In order to evaluate agencies\u2019 progress in and plans for achieving data  center cost savings, we reviewed August 2017 cost savings and  avoidance documentation submitted by the 24 DCOI agencies in  response to OMB\u2019s March 2013 and August 2016 memorandums. This  documentation included the agencies\u2019 quarterly reports of cost savings  and avoidances posted to their digital services websites and discussed in  their DCOI strategic plans. We determined cost savings achieved by  adding agencies\u2019 reported savings and avoidances from the start of fiscal  years 2012 through August 2017, as found in the August 2017 quarterly  reports posted to their digital services websites. We identified future  planned savings by totaling the agencies\u2019 projected savings and  avoidances from fiscal years 2016 through 2018, as reported in their  DCOI strategic plans.", "To assess the quality, completeness, and reliability of each agency\u2019s data  center consolidation cost savings information, we used the latest version  of each agency\u2019s update of the August 2017 quarterly cost savings report  and DCOI strategic plan. We also reviewed the quarterly reports and  DCOI strategic plans for missing data and other errors, such as missing  cost-savings information. In addition, we compared agencies\u2019 reported  cost savings and avoidances with data from our most recently issued  report on data center consolidation. Further, we obtained written  responses from agency officials regarding the steps they took to ensure  the accuracy and reliability of their cost savings data. As a result, we  determined that the data were sufficiently reliable to report on agencies\u2019  data center consolidation cost-savings information.", "To assess agencies\u2019 progress against OMB\u2019s data center optimization  targets, we obtained the August 2017 data center optimization progress  information of 22 DCOI agencies, as reported on the IT Dashboard. We  then compared the agencies\u2019 optimization progress information to OMB\u2019s  fiscal year 2018 optimization targets, as documented in its August 2016  memorandum.", "To assess the reliability of agencies\u2019 optimization progress information on  OMB\u2019s IT Dashboard, we reviewed the information for errors or missing  data, compared agencies\u2019 optimization progress information across  multiple reporting quarters to identify any inconsistencies in agencies\u2019  reported progress, and discussed with OMB and agency officials the  steps they took to ensure the accuracy and reliability of the reported  optimization progress. We determined that the data were sufficiently  reliable to report on agencies\u2019 optimization progress.", "In addition, to assess the reliability of the DCOI strategic plans, we  reviewed agencies\u2019 documentation to identify any missing or erroneous  data. We also compared the planned data center optimization milestones  contained in agencies\u2019 documentation against current optimization  progress information obtained from the IT Dashboard; we then discussed  any discrepancies or potential errors that we identified with agency  officials to determine the causes or request additional information. As a  result of these efforts, we determined that the agencies\u2019 strategic plan  information was sufficiently reliable for reporting on plans to meet or not  meet OMB\u2019s fiscal year 2018 optimization targets. Appendix I provides  greater details regarding our objectives, scope, and methodology.", "We conducted this performance audit from July 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government\u2019s increasing demand for IT has led to an  increase in the number of federal data centers and a corresponding  increase in operational costs. According to OMB, the federal government  had 432 data centers in 1998, 2,094 in July 2010, and 9,995 in August  2016.", "Operating such a large number of centers has been, and continues to be,  a significant cost to the federal government. For example, in 2007, the  Environmental Protection Agency (EPA) estimated that the electricity  costs to operate federal servers and data centers across the government  were about $450 million annually. According to the Department of Energy  (Energy), a typical data center has 100 to 200 times the energy use  intensity of a commercial building. In 2009, OMB reported that server  utilization rates as low as 5 percent across the federal government\u2019s  estimated 150,000 servers were a factor driving the need to establish a  coordinated, government-wide effort to improve the efficiency,  performance, and environmental footprint of federal data center  activities."], "subsections": [{"section_title": "OMB and the Federal CIO Established FDCCI", "paragraphs": ["Concerned about the size of the federal data center inventory and the  potential to improve the efficiency, performance, and the environmental  footprint of federal data center activities, OMB\u2019s Federal CIO established  FDCCI in February 2010. This initiative\u2019s four high-level goals were to  reduce the overall energy and real estate footprint of government data  centers; reduce the cost of data center hardware, software, and  operations; increase the overall IT security posture of the government;  and shift IT investments to more efficient computing platforms and  technologies.", "In February 2010, OMB required all of the agencies participating in the  FDCCI to submit a data center inventory and a consolidation plan. In  October 2010, OMB also clarified the definition of a data center and noted  that, for the purposes of FDCCI, a data center was to be defined as any  room used for the purpose of processing or storing data that is larger than  500 square feet and meets stringent availability requirements. Under this  definition, OMB reported that agencies had identified 2,094 data centers  as of July 2010.", "However, in 2011, the Federal CIO expanded the definition to include a  facility of any size and OMB published its revised definition in March  2012. Based on the revised definition, OMB estimated that there were a  total of 3,133 federal data centers in December 2011. In addition, its goal  was to consolidate approximately 40 percent, or 1,253 of these data  centers, for a savings of approximately $3 billion by the end of 2015.  Figure 1 provides an example of data center server racks at the Social  Security Administration\u2019s (SSA) National Support Center.", "The number of federal data centers reported by agencies has continued  to grow since 2011. In March 2016, we reported that agencies had  collectively identified a total of 10,584 data centers as of November  2015\u2014an increase of about 7,500 data centers compared to OMB\u2019s  October 2011 estimate. According to the Federal CIO, the increase in  the number of data centers was primarily due to the expanded definition  of a data center and improved inventory reporting by the agencies.", "Further, OMB placed greater emphasis on data center optimization when  it issued memorandum M-13-09 in March 2013. Specifically, OMB  stated that, to more effectively measure the efficiency of an agency\u2019s data  center assets, agencies would also be measured by the extent to which  their primary data centers are optimized for total cost of ownership by incorporating metrics for data center energy, facility, labor, and storage,  among other things. Subsequently, in May 2014, OMB issued  memorandum M-14-08, which established a set of data center  optimization metrics to measure agency progress, along with target  values for each metric. All agencies were expected to achieve the target  values by the end of fiscal year 2015."], "subsections": []}, {"section_title": "IT Acquisition Reform Law Enhanced Data Center Consolidation and Optimization Efforts", "paragraphs": ["Recognizing the importance of reforming the government-wide  management of IT, Congress enacted FITARA in December 2014.  Among other things, the law required agencies to:", "Submit to OMB a comprehensive inventory of the data centers owned,  operated, or maintained by or on behalf of the agency.", "Submit, by the end of fiscal year 2016, a multi-year strategy to  achieve the consolidation and optimization of the agency\u2019s data  centers. The strategy was to include performance metrics that were  consistent with the government-wide data center consolidation and  optimization metrics.", "Report progress towards meeting government-wide data center  consolidation and optimization metrics on a quarterly basis to OMB\u2019s  Administrator of the Office of Electronic Government.", "In addition, according to FITARA, the Office of Electronic Government at  OMB was to:", "Establish metrics applicable to the consolidation and optimization of  data centers (including server efficiency), ensure that agencies\u2019  progress toward meeting government-wide data center consolidation  and optimization metrics is made publicly available, review agencies\u2019  inventories and strategies to determine whether they are  comprehensive and complete, and monitor the implementation of  each agency\u2019s strategy.", "Develop and make publicly available not later than December 19,  2015, a goal broken down by year, for the amount of planned cost  savings and optimization improvements to be achieved through  FDCCI and, for each year thereafter until October 1, 2020, compare  reported cost savings and optimization improvements against those  goals."], "subsections": []}, {"section_title": "OMB Established DCOI", "paragraphs": ["In August 2016, OMB issued memorandum M-16-19, which established  DCOI and included guidance on how to implement the data center  consolidation and optimization provisions of FITARA. Among other  things, the guidance required agencies to consolidate inefficient  infrastructure, optimize existing facilities, improve their security posture,  and achieve cost savings. For example, each agency was required to  maintain a complete inventory of all data center facilities owned,  operated, or maintained by or on its behalf, and measure progress toward  defined optimization performance metrics on a quarterly basis as part of  its data center inventory submission.", "OMB\u2019s memorandum also directed each agency to develop a DCOI  strategic plan that defined its data center strategy for fiscal years 2016  through 2018. Among other things, this strategy was to include a timeline  for agency consolidation and optimization activities with an emphasis on  cost savings and optimization performance benchmarks that the agency  could achieve between fiscal years 2016 and 2018. For example, each  agency was required to develop cost savings targets due to consolidation  and optimization actions and report any realized cost savings. OMB  required each agency to publicly post its DCOI strategic plan to its  agency-owned digital strategy website by September 30, 2016, and to  post subsequent strategic plan updates by April 14, 2017 and April 13,  2018.", "Further, the memorandum stated that OMB was to maintain a public  dashboard (referred to as the IT Dashboard) to display government-wide  and agency-specific progress in areas such as planned and achieved  data center closures, consolidation-related cost savings, and data center  optimization performance information. In this regard, OMB began  including data center consolidation and optimization progress information  on the IT Dashboard in August 2016.", "OMB\u2019s memorandum also provided new guidance for the classification of  a physical data center, expanding the definition of a data center.  According to the revised definition, a room with at least one server that  provides services (whether in a production, test, staging, development, or  any other environment) should be considered a data center, while a room  containing only print servers, routing equipment, switches, security  devices (such as firewalls), or other telecommunication components, was  not to be considered a data center.", "In light of this new definition, OMB directed each agency to perform a  comprehensive review of its data centers and maintain a complete and  updated data center inventory. Further, OMB directed each agency to  categorize each of its data centers as either a tiered data center or a non- tiered data center. OMB\u2019s memorandum defined a tiered data center as  one that uses each of the following: a separate physical space for IT infrastructure; an uninterruptible power supply; a dedicated cooling system or zone; and a backup power generator for a prolonged power outage.", "According to the memorandum, all other data centers are to be  considered non-tiered.", "Moreover, OMB guidance included a series of performance metrics in the  areas of data center closures, cost savings, and optimization progress.", "Data center closures: Agencies are expected to close at least 25  percent of tiered data centers government-wide, excluding those  approved as inter-agency shared services providers, by the end of  fiscal year 2018. Further, agencies are to close at least 60 percent  of non-tiered data centers government-wide by the end of fiscal year  2018. OMB\u2019s guidance further notes that, in the long term, all  agencies should continually strive to close all non-tiered data centers,  noting that server rooms and closets pose security risks and  management challenges and are an inefficient use of resources.", "Cost savings: Agencies are expected to reduce government-wide  annual costs attributable to physical data centers by at least 25  percent, resulting in savings of at least $2.7 billion for fiscal years  2016 through 2018.", "Data center optimization: Agencies are expected to measure progress  against a series of new data center performance metrics in the  areas of server utilization, energy metering, power usage, facility  utilization, and virtualization. Further, OMB\u2019s guidance established  target values for each metric that agencies are to achieve by the end  of fiscal year 2018.", "OMB\u2019s guidance further noted that agency progress against these  performance metrics is to be measured by OMB on a quarterly basis,  using agencies\u2019 data center inventory submissions and OMB-defined  closures, cost savings, and optimization targets."], "subsections": []}, {"section_title": "Agencies Have Taken Limited Action to Address GAO Recommendations from Prior Reports on Agencies\u2019 Consolidation and Optimization Efforts", "paragraphs": ["Since the enactment of FITARA in December 2014, we have annually  reviewed and verified the quality and completeness of each covered  agency\u2019s inventory and DCOI strategy. We have also published reports  documenting the findings from each of these reviews. In addition, we  have examined and reported on agencies\u2019 efforts to optimize their data  centers, as well as the challenges encountered and successes  achieved.", "In a report that we issued in March 2016, we noted that agencies had  reported significant data center closures\u2014totaling more than 3,100  through fiscal year 2015\u2014with the Departments of Agriculture  (Agriculture), Defense (Defense), the Interior (Interior), and the Treasury  (Treasury) accounting for 84 percent of the total. Although agencies fell  short of OMB\u2019s fiscal year 2015 consolidation goal, their plans identified  about 2,100 additional centers planned for closure through fiscal year  2019.", "Agencies also reported significant consolidation cost savings and  avoidances\u2014totaling about $2.8 billion through fiscal year 2015, and  expected to increase to over $8.0 billion in future years. The Departments  of Commerce (Commerce), Defense, Homeland Security (DHS),  Transportation (Transportation), and the Treasury accounted for 96  percent of the total planned savings. However, we pointed out that many  agencies lacked complete cost savings goals for the next several years  despite having closures planned.", "In addition, we reported that 22 agencies had made limited progress  against OMB\u2019s fiscal year 2015 data center optimization performance  metrics, such as the utilization of data center facilities. Accordingly, we  recommended that the agencies take actions to complete their cost  savings targets and improve optimization progress. Of the 24 agencies to  which we made recommendations, 14 agreed with our recommendations,  4 did not state whether they agreed or disagreed, and 6 stated that they  had no comments. As of March 2018, 26 of the 32 recommendations from  this report had yet to be fully addressed.", "In May 2017, we reported that the agencies continued to report significant  data center closures\u2014totaling more than 4,300 through August 2016\u2014 with Agriculture, Defense, Interior, and the Treasury accounting for 84  percent of the total. The agencies\u2019 plans for 2016 had identified more  than 1,200 additional centers planned for closure through fiscal year  2019.", "Agencies also reported significant consolidation and optimization cost  savings and avoidances, which totaled about $2.3 billion through August  2016. However, reductions in the amount of achieved savings reported to  OMB, particularly by the Treasury, resulted in a net decrease of more  than $400 million in these savings, compared to amounts we previously  reported in 2015.", "Further, our report noted that, as of December 2016, agencies\u2019 total  planned cost savings of about $656 million were more than $3.3 billion  less, compared to the amounts that we reported in 2015, and more than  $2 billion less than OMB\u2019s fiscal year 2018 cost savings goal of $2.7  billion. This reduction in planned savings was the result of eight agencies  reporting less in planned cost savings and avoidances in their DCOI  strategic plans compared to the savings amounts previously reported to  us in November 2015. The reduction also reflected the absence of cost  savings information for one agency (Defense) that did not submit its  strategic plan in time for our review.", "In addition, our May 2017 report identified weaknesses in agencies\u2019 DCOI  strategic plans. Of the 23 agencies that had submitted their strategic  plans at the time of our review, 7 agencies\u2014Agriculture, the Department  of Education (Education), DHS, and the Department of Housing and  Urban Development (HUD); the General Services Administration (GSA);  the National Science Foundation (NSF); and the Office of Personnel  Management (OPM)\u2014had addressed all five required elements of a  strategic plan, as identified by OMB (such as providing information related  to data center closures and cost savings metrics). The remaining 16  agencies that submitted their plans either partially met or did not meet the requirements. We also pointed out that there were inconsistencies in the  reporting of cost savings in the strategic plans of 11 agencies.", "Given these findings, we recommended that OMB improve its oversight of  agencies\u2019 DCOI strategic plans and their reporting of cost savings and  avoidances. We also recommended that 16 agencies and Defense (which  did not submit a plan in time for our review) complete the missing  elements in their strategic plans, and that 11 agencies ensure the  reporting of consistent cost savings and avoidance information to OMB.  Of the 25 agencies (including OMB) to which we made recommendations,  12 agreed with our recommendations, 2 disagreed, and 11 did not state  whether they agreed or disagreed. As of March 2018, 29 of the 30  recommendations had not been fully addressed.", "In a subsequent report that we issued in August 2017, we noted that 22 of  the 24 agencies required to participate in the OMB DCOI collectively had  reported limited progress against OMB\u2019s fiscal year 2018 performance  targets for the five optimization metrics. The 2 remaining agencies,  Education and HUD, did not have agency-owned data centers and,  therefore, did not have a basis to report on progress. Specifically, for  each of the five targets, no more than 5 agencies reported that they had  met or exceeded that specific target. This limited progress against OMB\u2019s  optimization targets was due, in part, to agencies not fully addressing our  prior recommendations in this area.", "In addition, we noted in the report that most agencies had not yet  implemented automated monitoring tools to measure server utilization, as  required by the end of fiscal year 2018. Specifically, 4 agencies reported  that they had fully implemented such tools, 18 reported that they had not  yet done so, and 2 did not have a basis to report on progress because  they did not have agency-owned data centers.", "We also noted that, although federal standards emphasize the need to  establish plans to help ensure goals are met, none of the 18 agencies  had fully documented plans for implementing automated monitoring tools.  Accordingly, we recommended that OMB formally document a  requirement for agencies to include plans, as part of existing OMB  reporting mechanisms, to implement automated monitoring tools at their  agency-owned data centers. We also recommended that the 18 agencies  without fully documented plans take action, within existing OMB reporting  mechanisms, to complete plans describing how they intend to achieve  OMB\u2019s requirement to implement automated monitoring tools at all  agency-owned data centers by the end of fiscal year 2018. Of the 19  agencies (including OMB) to which we made recommendations, 10  agreed with our recommendations, 3 partially agreed, and 6 did not state  whether they agreed or disagreed. As of March 2018, none of the 19  recommendations had been fully addressed."], "subsections": []}]}, {"section_title": "Agencies Report Mixed Results Relative to Achieving OMB\u2019s Data Center Closure Targets", "paragraphs": ["As previously mentioned, in August 2016, OMB established a goal to  close at least 25 percent of each agency\u2019s tiered data centers and at least  60 percent of each agency\u2019s non-tiered data centers by the end of fiscal  year 2018. Related to doing so, agencies\u2019 August 2016 inventories  reported a total of 9,995 data centers and, in August 2017, 14 agencies  reported an additional 2,067 facilities, for a total of 12,062 data centers.  Based on this revised inventory, agencies will need to close 6,306 data  centers (665 tiered and 5,641 non-tiered) to meet OMB\u2019s goals by the end  of fiscal year 2018.", "Toward this end, the 24 agencies participating in DCOI collectively have  made progress on their data center closure efforts. Specifically, as of  August 2017, the agencies reported that they had closed 5,805 tiered and  non-tiered centers (48 percent). Figure 2 provides a summary of the total  number of federal data centers and closures reported from 1998 to  August 2017.", "Figure 3 provides a further breakdown of agencies\u2019 data center  inventories, as of August 2017, in terms of the total number of data  centers that were closed, planned for closure, or not planned for closure.", "Nevertheless, while the agencies collectively had made progress toward  OMB\u2019s closure goals, the 24 agencies\u2019 individual reported progress and  plans showed mixed results when compared with OMB\u2019s goal for each  agency to close at least 25 percent of tiered data centers and at least 60  percent of non-tiered centers. Specifically, as of August 2017, 13  agencies reported that they had already met the goal of closing 25  percent of their tiered data centers, another 4 agencies reported that they  plan to meet the goal by the end of fiscal year 2018, and 5 agencies  reported that they do not currently plan to meet the goal.", "Further, as of August 2017, 7 agencies reported having already met the  goal for closing 60 percent of their non-tiered centers, 6 agencies  reported that they planned to meet the goal by the end of fiscal year  2018, and 10 agencies reported that they did not plan to meet the goal.  Table 1 displays a breakdown of the number of reported tiered and non- tiered data centers and completed and planned closures by agency, as of  August 2017.", "As shown in the table, the reported closures of Agriculture (2,233 data  centers), Defense (834), and Treasury (1,713) together accounted for  4,780 (or 82 percent) of the 5,805 data center closures. However, no  other agency accounted for more than 187 (or 3 percent) of those  closures. In addition, the remaining 1,416 planned closures are to be  carried out across 20 agencies. Further, among the agencies, 7 reported  that they do not plan to meet one of their tiered or non-tiered closure  goals, and 4 reported that they do not plan to meet either of the goals by  the end of fiscal year 2018.", "Officials from these 11 agencies that do not plan to meet one or both of  their goals provided various reasons for why they currently do not plan to  do so. For example, officials in USAID\u2019s Office of the Chief Information  Officer stated that their agency had reported a number of server closets in  overseas locations as non-tiered data centers to comply with OMB\u2019s data  center definition provided in its August 2016 guidance. The officials said  that, as long as USAID maintains those locations, the agency needs the  services provided in those server closets and will not be able to close  them to meet OMB\u2019s goal. However, the officials also said that the agency  is exploring ways to replace the server closets using cloud services.", "Several agencies that viewed their goals as unattainable indicated that  they were seeking revised closure goals. Specifically, officials from  Interior\u2019s Office of the Chief Information Officer stated that a number of  the department\u2019s non-tiered data centers were either mission critical or  not cost effective to close. Thus, the officials said Interior was working  with OMB to establish a revised closure goal. Similarly, Transportation\u2019s  Director for IT Compliance stated that the department was working with  OMB to establish a revised closure goal. The department reported having  186 tiered data centers in Federal Aviation Administration control towers  that it believes should be excluded from its count of data centers when  OMB sets the department\u2019s goal for closures.", "Further, our analysis determined that it may not always be realistic for an  agency to meet OMB\u2019s targets. For example, NSF, which does not have  any tiered data centers, reported that it plans to close one (50 percent) of  its two non-tiered data centers. However, the only way to meet OMB\u2019s 60  percent threshold would be for the agency to close both of its non-tiered  centers, which may not be an option, depending on the services provided  by that one remaining center.", "Although OMB\u2019s stated time frame for closing data centers currently  remains as the end of fiscal year 2018, the recent extension of FITARA\u2019s  data center consolidation and optimization provisions through fiscal year  2020 provides agencies additional time to work toward meeting OMB\u2019s  closure targets. However, in some cases, these efforts may require  significant restructuring of an agency\u2019s business operations, or, as  reported by several agencies, a revision of OMB\u2019s goals in consideration  of the agencies\u2019 specific needs.", "Given that agencies had been working toward OMB\u2019s DCOI goals for  approximately one year as of August 2017, and because the extension of  FITARA\u2019s data center provisions pushes the sunset for these efforts out  through fiscal year 2020, we are not making any related  recommendations to those agencies that have not met the closure goals  at this time. We plan to continue to monitor the agencies\u2019 progress toward  meeting the goals in our future work."], "subsections": []}, {"section_title": "Agencies\u2019 Planned Savings Are Not Expected to Meet OMB\u2019s Goal", "paragraphs": ["Since 2013, federal agencies have been required to report on data center  cost savings. In this regard, OMB provided guidance regarding how  agencies were to report cost savings and avoidances. Specifically, it  required agencies to report both data center consolidation cost savings  and avoidances, among other areas, as part of a quarterly data collection  process known as the integrated data collection. FITARA also called for  each agency to submit a multi-year strategy for achieving the  consolidation and optimization of data centers that includes year-by-year  calculations of investment and cost savings through fiscal year 2018,  which has now been extended to 2020.", "In addition, in August 2016, OMB M-16-19 provided guidance on how  agencies should implement the requirements of FITARA. Specifically,  agencies were to develop a strategic plan that included information on  historical cost savings and avoidances due to data center consolidation  and optimization through fiscal year 2015. This guidance stated that  agency strategic plans were also to include year-by-year calculations of  target and actual agency-wide spending and cost savings on data centers  from fiscal years 2016 through 2018. Further, the guidance established a  DCOI government-wide cost savings goal of $2.7 billion for all federal  agencies to achieve from fiscal years 2016 through 2018. This overall  goal is then broken down into agency-specific targets on the IT  Dashboard.", "As of August 2017, 20 agencies had reported through the integrated data  collection that they had achieved $1.04 billion in cost savings for fiscal  years 2016 and 2017, while 4 agencies reported that they had not  achieved any savings. Further, the 20 agencies\u2019 DCOI strategic plans  identified an additional $0.58 billion, for a total of $1.62 billion in planned  savings from fiscal years 2016 through 2018. Nevertheless, this total is  about $1.12 billion below OMB\u2019s goal of $2.7 billion for DCOI savings.  Figure 4 provides a comparison of the 24 agencies\u2019 total reported savings  for fiscal years 2016 and 2017, and the planned savings through 2018,  against OMB\u2019s DCOI savings goal for fiscal years 2016 through 2018.", "Among the 24 participating DCOI agencies that reported achieving about  $1.04 billion in savings, Commerce ($594.28 million), Defense ($141.36  million), and DHS ($106.51 million) were responsible for approximately  $842 million (about 81 percent) of that total. No other agency reported  saving more than $54.40 million. Table 2 provides specific data related to  each agency\u2019s planned and achieved savings for fiscal years 2016 and  2017, as of August 2017.", "In addition, the 24 agencies reported that they have planned an additional  $0.58 billion in DCOI cost savings (for a total of $1.62 billion) through  fiscal year 2018. However, as noted earlier, this total is approximately  $1.12 billion below OMB\u2019s $2.7 billion goal for the initiative. Table 3  provides a more detailed comparison between each agency\u2019s planned  savings, as reported in its DCOI strategic plan, and OMB\u2019s agency- specific targets, as reported on the IT Dashboard.", "As shown in table 3, 6 agencies identified planned savings that are  expected to meet or exceed their OMB targets, while 2 agencies that did  not have an OMB target also identified planned savings. In contrast, 12  agencies reported that they are not currently planning to meet their  targets, and 4 agencies did not have a savings target and are not  planning any savings.", "These findings align with what we reported in March 2016, when we  noted that 10 agencies had not established planned cost savings goals  for fiscal years 2016 through 2018, even though they had closures  planned during that time period. Accordingly, in that report, we  recommended that these agencies complete their planned data center  cost savings targets for fiscal years 2016 through 2018. Most of the  agencies agreed with the recommendations or had no comments.  Nonetheless, agencies continued to be challenged in identifying and  reporting their cost savings. As of August 2017, 5 of the agencies had  implemented our recommendations in this area.", "In the absence of consistent and full reporting of fiscal years 2016  through 2018 planned savings in agencies\u2019 DCOI strategic plans, as  required by FITARA and OMB, agencies\u2019 total planned savings will likely  continue to be understated. With less than a year for agencies to meet  OMB\u2019s current planned savings targets, we are re-emphasizing the need  for agencies to implement our prior recommendations related to  establishing and meeting their planned data center cost savings targets."], "subsections": []}, {"section_title": "Agencies Continue Reporting Limited Progress against OMB\u2019s Data Center Optimization Metrics", "paragraphs": ["FITARA required OMB to establish metrics to measure the optimization of  data centers, including server efficiency, and ensure that agencies\u2019  progress toward meeting the metrics is made public. Pursuant to FITARA,  OMB\u2019s August 2016 memorandum established a set of five data center  optimization metrics intended to measure agencies\u2019 progress in the areas  of server utilization and automated monitoring, energy metering, power  usage effectiveness, facility utilization, and virtualization. According to  OMB, while the server utilization and automated monitoring metric applies  to agency-owned tiered and non-tiered data centers, the four remaining  metrics apply only to agency-owned tiered centers.", "OMB\u2019s memorandum also established a target value for each of the five  metrics, which agencies are expected to achieve by the end of fiscal year  2018. OMB measures agencies\u2019 progress against the optimization targets  using the agencies\u2019 quarterly data center inventory submission and  publicly reports this progress information on its IT Dashboard. Table 4  provides a description of the five data center optimization metrics and  target values.", "As of August 2017, 22 of the 24 DCOI agencies continued to report  limited progress in meeting OMB\u2019s fiscal year 2018 data center  optimization targets identified on the IT Dashboard. As noted earlier, the  remaining 2 agencies\u2014Education and HUD\u2014reported that they did not  have any agency-owned data centers in their inventory and, therefore, did  not have a basis to measure and report optimization progress.", "With regard to the data center optimization targets, the most progress  was reported for the power usage effectiveness and virtualization metrics,  with 5 and 6 agencies, respectively, reporting that they had met OMB\u2019s  targets. However, only 3 agencies or fewer reported meeting the energy  metering, facility utilization, and server utilization and automated  monitoring metrics. Figure 5 summarizes the 24 agencies\u2019 progress in  meeting each optimization target, as of August 2017.", "As of August 2017, SSA and EPA reported the most progress among the  22 agencies with a basis to report against OMB\u2019s metrics targets\u2014 meeting 4 and 3 targets, respectively. Six agencies met either one or two  targets, and 14 agencies reported meeting none of the targets.", "Further, of the 22 agencies, 9 were not able to report any progress  against either the server utilization metric or power usage effectiveness  metric, or both, because their data centers lacked the required monitoring  tools to measure progress in these areas. OMB began requiring the  implementation of these monitoring tools in August 2016; however, as of  August 2017, these 9 agencies had not reported that they had  implemented the tools at any data centers. The remaining 13 agencies  reported that they had implemented the tools in at least one data center.  Table 5 depicts the agencies and whether they met or did not meet each  OMB target.", "Agencies\u2019 limited progress against OMB\u2019s optimization targets is due, in  part, to not fully addressing our prior recommendations in this area. As  discussed earlier, in March 2016, we reported on weaknesses in  agencies\u2019 data center optimization efforts, including that 22 agencies did  not meet OMB\u2019s fiscal year 2015 optimization targets. We noted that  this was partially due to the agencies facing challenges in optimizing their  data centers, including their decentralized organizational structures that  made consolidation and optimization difficult, and competing priorities for  resources. In addition, consolidating certain data centers was problematic  because the volume or type of information involved required the data  center to be close in proximity to the users. Accordingly, we  recommended that the agencies take action to improve optimization  progress, to include addressing any identified challenges. Most agencies  agreed with our recommendations or had no comments.", "In response to our recommendation, 19 of the 22 agencies submitted  documentation to us that described steps they intended to take to  improve their data center optimization efforts. The planned steps included  completion dates ranging between April 2016 and September 2019.  Among the steps described by the agencies was developing internal  scorecards to track and report on optimization progress, including  progress at their component agencies, and launching more aggressive  efforts to optimize data centers using virtualization and cloud computing  solutions. However, as of February 2018, only 1 of the 22 agencies  (Education) had fully addressed our recommendation."], "subsections": [{"section_title": "Agencies\u2019 Planned Optimization Progress Will Not Meet OMB\u2019s Fiscal Year 2018 Targets", "paragraphs": ["In addition to reporting current optimization progress on the IT  Dashboard, OMB requires agencies\u2019 DCOI strategic plans to include,  among other things, planned performance levels for fiscal years 2017 and  2018 for each optimization metric.", "However, according to the 24 agencies\u2019 DCOI strategic plan information  as of August 2017, most are not planning to meet OMB\u2019s optimization  targets by the end of fiscal year 2018. More specifically, of the 24  agencies, only 4\u2014Commerce, EPA, NSF, and USAID\u2014reported plans to  fully meet their applicable targets by the end of fiscal year 2018. Of the  remaining agencies, 14 reported plans to meet some, but not all, of the  targets; 4 reported that they do not plan to meet any targets; and\u2014as  already discussed\u2014Education and HUD do not have a basis to report planned optimization milestones because they do not report having any  agency-owned data centers. Figure 6 summarizes agencies\u2019 progress,  as of August 2017, in meeting OMB\u2019s optimization targets and planned  progress to be achieved by September 2018.", "The limited progress made by agencies in optimizing their data centers,  combined with the lack of established plans to improve progress, makes it  unclear whether agencies will be able to achieve OMB\u2019s optimization  targets by the end of fiscal year 2018. Considering that OMB is expecting  at least $2.7 billion in cost savings from agencies\u2019 optimization efforts, the  ability of agencies to meet the optimization targets will be critical to  meeting this savings goal. However, only four agencies are planning to  meet all of their applicable targets. If the remaining agencies take steps to  implement the prior recommendations we have made in this area, it  should increase the likelihood that DCOI can achieve the expected  benefits of optimization and the resulting cost savings."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We requested comments on a draft of this report from OMB and the 24  other agencies that we reviewed. Of these, 5 agencies indicated that they  agreed with our report and 20 acknowledged receiving the draft, but did  not state whether they agreed or disagreed with the report. Agencies also  offered various comments in support of the DCOI effort and actions taken  to improve performance. Additionally, multiple agencies provided  technical comments, which we have incorporated, as appropriate.", "The following five agencies agreed with our report:  In emails received from Agriculture, Energy, VA, and NRC, the  agencies agreed with the findings in the draft report. In written  comments, SSA agreed with the draft report\u2019s characterization of the  agency\u2019s DCOI efforts. SSA\u2019s comments are reprinted in appendix II.", "In addition, the following 20 agencies did not state whether they agreed or  disagreed with the report and offered other comments:   In written comments, HUD and Transportation did not agree or  disagree with the draft report. The departments\u2019 comments are  reprinted in appendices III and IV, respectively.", "In emails received from Commerce, Defense, Education, HHS, DHS,  Justice, Labor, State, Treasury, EPA, NASA, NSF, OPM, SBA, and  USAID, the agencies did not agree or disagree with the draft report.", "In written comments, Interior did not agree or disagree with the draft  report\u2019s findings.", "In addition, Interior provided a technical comment related to our  calculation of the department\u2019s achieved optimization savings for  fiscal years 2016 and 2017. Specifically, the department provided  updated savings figures for those years, which were based on  Interior\u2019s February 2018 quarterly submission to OMB.", "However, the effective date of the updated data (February 2018) is  outside the scope of our review, which relied solely on data reported  in August 2017, as detailed in appendix I. While we recognize the  department\u2019s efforts to ensure that its past reporting is updated and as  accurate as possible, our report only presents data as reported by  agencies in August 2017. Consequently, we believe that the achieved  cost savings for Interior accurately reflect what the department  reported at the time of our review. The department\u2019s comments are  reprinted in appendix V.", "In an e-mail received on March 27, 2018, GSA did not agree or  disagree with the draft report\u2019s findings, and provided comments  questioning the methodology we used to determine the number of  data center closures. Specifically, GSA stated that, by including  facilities that are now closed in our reporting of the federal  government\u2019s inventory of 12,062 data centers, our report gives the  impression that the government is currently operating 12,062 open  data centers. GSA also asserted that we should include in our counts  facilities identified as using cloud computing providers.", "In our report, we consistently state that the 12,062 data centers reflect  the overall count of federal facilities identified since the launch of  FDCCI in 2010. Further, we clearly identify the portion of the overall  count of data centers that have since closed, or that are planned to  close. By doing so, we provide a perspective of consolidation  progress against the overall inventory over the past 8 years.", "Further, in regard to facilities using cloud providers, OMB\u2019s August  2016 guidance specifically states that such facilities are not to be  considered data centers. As such, we did not include them in our  totals. Accordingly, we maintain that our methodology is reasonable  and continue to believe that our report accurately reports the status of  federal data center consolidation efforts.", "GSA also suggested that we confirm with OMB our statement that the  FITARA Enhancement Act of 2017\u2019s extension of the sunset provides  agencies with an additional 2 years to accomplish the goals of DCOI.  It is true that OMB has not issued guidance that extends the existing  August 2018 DCOI deadlines. However, it is appropriate to note that  the 2017 law extends the DCOI sunset date for the data center  requirements that govern agencies.", "Finally, GSA expressed concern that the data on optimization metrics  that we drew from the IT Dashboard were not representative of the  data provided by agencies in their August 2017 quarterly submissions  to OMB. Further, GSA noted that such a selection of mixed data  sources may present an incomplete and inaccurate picture and  recommended that we note the date on which we accessed the IT  Dashboard data, note that those data are frequently updated, and  specify the date of other sources of data that we used for our analysis.", "In this report, we present an analysis of agencies\u2019 progress against  OMB\u2019s data center optimization metrics, using data that were taken  from the IT Dashboard. These data are posted to the Dashboard after  being automatically calculated from agencies\u2019 quarterly submissions  to OMB. For the purposes of this report, we pulled the data from the  Dashboard a week after agencies\u2019 August 2017 submissions were  due to OMB. We then confirmed with the agencies that the data we  collected were consistent with their August 2017 submissions to OMB  and we labeled the data as being effective as of August 2017.", "We also analyzed other data from the agencies\u2019 August 2017  quarterly submissions, such as the status of data center closures and  associated cost savings, and showed the effective date of our  analysis as being August 2017. Based on these actions, which are  also discussed in the description of the scope and methodology of our  audit work found in app. I, we believe that our presentation of the data  on optimization metrics is accurate, appropriately labeled, and  correctly reflects the status of agency efforts at a specific moment in  time.", "In an e-mail received on April 18, 2018, OMB did not agree or  disagree with our report, but offered several comments on our  findings. Specifically, OMB noted that some agencies may be  reporting their planned savings incorrectly in their DCOI strategic  plans in that agencies may be reporting annual savings figures  instead of the required cumulative figures. OMB further described  plans to update the IT Dashboard in the near future to more  accurately reflect planned DCOI savings and added that, as a result,  the data in our report likely will not match the data OMB intends to  publish.", "In conducting our analysis, on two occasions, we requested and  received agencies\u2019 validation of the results of our analysis of their  planned cost savings. This process resulted in minor technical  changes to some agencies\u2019 data. We believe that our continued  efforts to validate these data provide reasonable assurance as to the  accuracy of the agency reported information that we analyzed. The  implementation of OMB\u2019s proposed changes to the IT Dashboard  should provide yet another tool that can be used to improve how  agencies report their cost savings\u2014an important measure of DCOI\u2019s  success.", "Additionally, the comments noted that GAO and OMB use a different  basis to calculate agencies\u2019 data center closure targets, with OMB  using a baseline inventory from the beginning of DCOI in 2016, which  does not recognize changes in agencies\u2019 inventories since that point.  OMB asserted that, because GAO\u2019s calculations account for changes  in agencies\u2019 inventories since the beginning of DCOI, OMB\u2019s targets  differ from GAO\u2019s calculations.", "We recognize the difference in approach for calculating data center  closures that we used, as compared to that used by OMB. As detailed  in our report, when DCOI was launched in August 2016, agencies  reported an overall inventory of 9,995 data centers. One year later, in  August 2017, agencies reported more than 2,000 additional facilities,  for a total of 12,062 centers.", "Because OMB\u2019s closure targets required agencies to close a certain  percentage of their data centers, basing agency goals on an outdated  inventory (that did not include the additional facilities) does not give a  true picture of progress towards consolidation of data centers.  Conversely, our methodology (detailed in app. I) takes into account  inventory growth and uses the same percentage-based closure goals  defined in OMB\u2019s guidance. Our methodology presents a more  accurate status of progress based on the growth of the inventory over  time. Consequently, we believe that our methodology allows us to  present a reasonable status of agencies\u2019 progress against OMB\u2019s  goals.", "We are sending copies of this report to interested congressional  committees, the Director of OMB, the secretaries and heads of the  departments and agencies addressed in this report, and other interested  parties. In addition, the report will be available at no charge on GAO\u2019s  website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-9286 or pownerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives for this engagement were to: (1) review agencies\u2019 data  center closures to date and plans for further closures, (2) evaluate  agencies\u2019 progress in achieving data center consolidation savings and  describe plans for future savings, and (3) assess agencies\u2019 progress  against the Office of Management and Budget\u2019s (OMB) data center  optimization targets.", "To address the first objective, we obtained and analyzed August 2017  data center inventory documentation from the 24 departments and  agencies (agencies) that participate in OMB\u2019s Data Center Optimization  Initiative (DCOI). To determine data center closures to date, we totaled  agency reported closures from fiscal year 2010 through August 2017 and,  to identify future closures, we totaled agency reported planned closures  through fiscal year 2019. We also compared agencies\u2019 completed and  planned closures to OMB\u2019s fiscal year 2018 consolidation goals, as  documented in its August 2016 memorandum (M-16-19).", "To verify the quality, completeness, and reliability of the agencies\u2019 data  center inventories, we compared information on completed and planned  data center closures to similar information reported on OMB\u2019s Information  Technology (IT) Dashboard\u2014a public website that provides information  on federal agencies\u2019 major IT investments. We also checked for missing  data and other errors, such as missing closure status information.  Further, we obtained written responses from agency officials regarding  actions taken to ensure the reliability of their inventory data, and  discussed any discrepancies or potential errors identified to determine the  causes or to request additional information. We determined that the data  were sufficiently complete and reliable to report on agencies\u2019  consolidation progress and planned closures.", "For the second objective, we obtained and analyzed cost savings and  avoidance documentation from the 24 DCOI agencies. This  documentation is required by OMB\u2019s March 2013 and August 2016  memorandums and included the agencies\u2019 quarterly reports of cost  savings and avoidances posted to their digital services websites and their  DCOI strategic plans. To determine cost savings achieved, we totaled  agencies\u2019 reported savings and avoidances from the start of fiscal years  2012 through August 2017, as found in the August 2017 quarterly reports  posted to the agencies\u2019 digital services websites. To identify future  planned savings, we totaled the agencies\u2019 projected savings and  avoidances from fiscal years 2016 through 2018, as reported in their  DCOI strategic plans.", "To assess the quality, completeness, and reliability of each agency\u2019s data  center consolidation cost savings information, we used the latest version  of each agency\u2019s update of the August 2017 quarterly cost savings report  and DCOI strategic plan. We also reviewed the quarterly reports and  DCOI strategic plans for missing data and other errors, such as missing  cost-savings information. In addition, we compared agencies cost savings  and avoidances with data from our most recent data center consolidation  report. Further, we obtained written responses from agency officials  regarding the steps taken to ensure the accuracy and reliability of their  cost savings data. As a result, we determined that the data were  sufficiently complete and reliable to report on agencies data center  consolidation cost-savings information.", "For our third objective, we analyzed the August 2017 data center  optimization progress information of the 24 DCOI agencies. This progress  information was obtained from the IT Dashboard\u2014an OMB public website  that provides information on federal agencies\u2019 major IT investments. We  then compared the agencies\u2019 optimization progress information against  OMB\u2019s fiscal year 2018 optimization targets, as documented in its  August 2016 memorandum. Although OMB\u2019s memorandum establishes  a single optimization target value for the server utilization and automated  monitoring metric, the IT Dashboard displays agencies\u2019 progress for  tiered and non-tiered data centers separately. To report consistently with  OMB\u2019s implementation memorandum, we combined the progress  information for tiered and non-tiered data centers into a single  assessment in this report.", "To assess the reliability of agencies\u2019 optimization progress information on  OMB\u2019s IT Dashboard, we reviewed the information for errors or missing  data, such as progress information that was not available for certain  metrics. We also compared agencies\u2019 optimization progress information  across multiple reporting quarters to identify any inconsistencies in  agencies\u2019 reported progress. We discussed with staff from OMB\u2019s Office  of the Federal Chief Information Officer any discrepancies or potential  errors identified to determine the causes.", "In addition, we interviewed OMB officials to obtain additional information  regarding the steps taken to ensure the reliability of and validate the  optimization data on the Dashboard. Moreover, we obtained written  responses from agency officials regarding the steps taken to ensure the  accuracy and reliability of the reported optimization progress. We  discussed with agency officials any discrepancies or potential errors  identified during our reviews to determine the causes or request  additional information. We determined that the data were sufficiently  reliable to report on agencies\u2019 optimization progress.", "To assess the reliability of the DCOI strategic plans, we reviewed  agencies\u2019 documentation to identify any missing data or errors. We also  compared the planned data center optimization milestones in agencies\u2019  documentation against current optimization progress information obtained  from the IT Dashboard. In addition, we discussed with agency officials  any discrepancies or potential errors identified during our reviews of the  DCOI strategic plans to determine the causes or request additional  information. As a result of these efforts, we determined that the agencies\u2019  strategic plan information was sufficiently reliable for reporting on plans to  meet or not meet OMB\u2019s fiscal year 2018 optimization targets.", "We conducted this performance audit from July 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals making contributions  to this report included Dave Hinchman (Assistant Director), Justin Booth  (Analyst-in-Charge), Chris Businsky, Nancy Glover, Linda Kochersberger,  and Jonathan Wall."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-363T", "url": "https://www.gao.gov/products/GAO-18-363T", "title": "Coast Guard Health Records: Timely Acquisition of New System Is Critical to Overcoming Challenges with Paper Process", "published_date": "2018-01-30T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2010, the Coast Guard initiated an effort\u2014known as IHiS\u2014to replace its aging EHR system with a new system that was to modernize various health care services for its nearly 50,000 military members. However, in October 2015, the Coast Guard announced that the modernization project would be canceled.", "GAO was asked to summarize its report that is being released today on the Coast Guard's actions related to its EHR modernization initiative. GAO's testimony specifically addresses Coast Guard's (1) reasons for deciding to terminate further IHiS development; (2) management and oversight actions for the discontinued project and whether lessons learned were identified; (3) current process for managing health records and the challenges it is encountering; and (4) plans for effectively implementing a new EHR system and the current status of its efforts.", "In preparing the report on which this testimony is based, GAO reviewed IHiS project expenditures; analyzed key project management documentation; surveyed Coast Guard's Regional Managers and clinical staff; and interviewed key staff."]}, {"section_title": "What GAO Found", "paragraphs": ["Financial, technical, schedule, and personnel risks led to the United States Coast Guard's (Coast Guard) decision to terminate the Integrated Health Information System (IHiS) project in 2015. According to the Coast Guard (a military service within the Department of Homeland Security), as of August 2017, $59.9 million was spent on the project over nearly 7 years and no equipment or software could be reused for future efforts. In addition, the Coast Guard could not fully demonstrate the project management actions taken for IHiS, lacked governance mechanisms, and did not document lessons learned for the failed project.", "In the absence of an electronic health record (EHR) system, the Coast Guard currently relies on a predominately paper health record management process to document health care services. Currently, the Coast Guard's clinical staff perform various manual steps to process each paper health record. Coast Guard Regional Managers and clinic and sick bay administrators informed GAO of the many challenges encountered in returning to a paper process. These challenges include the inability for some clinics to adequately track vital information such as medications\u2014potentially causing harm to members if they take medications that have dangerous interactions.", "To help alleviate several of these challenges, the Coast Guard has developed alternative work-around processes. However, these alternative processes may not provide sustained solutions to overcoming these challenges.", "In February 2016, the Coast Guard initiated the process for acquiring a new EHR system. As of November 2017, agency officials had conducted research and recommended a solution based on performance, risk, cost, and schedule advantages. However, 2 years after canceling IHiS and moving toward a predominately manual process, the agency has not yet made a final determination on this. Successfully and quickly implementing an EHR system is vital to overcoming the challenges the Coast Guard currently faces in managing paper health records. The expeditious implementation of such a system can significantly improve the quality and efficiency of care to the thousands of Coast Guard active duty and reserve members that receive health care."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In the report being released today, GAO is recommending that the Coast Guard (1) expeditiously and judiciously pursue a new EHR system, and in doing so (2) ensure key processes are implemented; (3) establish project governance boards; and (4) document lessons learned from the IHiS project. The Department of Homeland Security concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to participate in your hearing on the United  States Coast Guard\u2019s (Coast Guard) electronic health record (EHR)  system. As part of its mission, the Coast Guard is tasked with providing  health care to active duty and reserve members and ensuring the  availability of quality, cost-effective health care for all eligible  beneficiaries. To assist with this task, the agency has historically relied on  EHR systems to perform such functions as scheduling patient  appointments, documenting patient consults and referrals, and tracking  prescribed medications.", "In 2010, the Coast Guard\u2019s Health Safety and Work-Life Directorate  (HSWL) initiated an effort to replace the agency\u2019s aging EHR systems  with a new system called the Integrated Health Information System (IHiS).  This system was to modernize various health care services and provide  additional functionality, such as a document management system, which  was previously lacking. The project consisted of various contracts with 25  different vendors and was estimated to cost approximately $56 million to  implement. However, in October 2015, the Coast Guard announced that  the modernization project would be canceled.", "As requested, my statement summarizes our report that is being released  today on the Coast Guard\u2019s actions related to its EHR modernization  initiative and its current health records management process.  Specifically, the statement addresses the Coast Guard\u2019s (1) reasons for  deciding to terminate further IHiS development and how much it spent on  the project; (2) management and oversight actions for the discontinued  EHR modernization project and whether lessons learned were identified;  (3) current process for managing health records and the challenges it is  encountering; and (4) plans for effectively implementing a new EHR  system and the current status of its efforts.", "Among other steps, in conducting our work, we reviewed IHiS project  expenditures; analyzed key project management documentation;  surveyed Regional Managers and clinical staff regarding challenges they  face in managing paper health records and any mitigation strategies; and  interviewed knowledgeable staff about the project. Our related report  includes a detailed explanation of the scope and methodology for our  work.", "We conducted the work on which this testimony is based 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."], "subsections": [{"section_title": "The Coast Guard Attributed IHiS Termination to Financial and Other Risks, after Spending Approximately $60 Million on the Project", "paragraphs": ["According to the Director of HSWL, who was appointed to the position in  August 2015, financial, technical, schedule, and personnel risks led the  Coast Guard\u2019s Executive Oversight Council to decide to terminate the  IHiS project in October 2015:", "Financial risks. Internal investigations were initiated in January 2015  and May 2015 to determine whether the HSWL Directorate had  violated the Antideficiency Act by using incorrect funding sources and  incorrect fiscal year funds for the IHiS project. The Coast Guard  ordered project management and contractor staff to cease work on  IHiS until a determination was made regarding the antideficiency  violation.", "Technical risks. IHiS lacked an independent security assessment  and full interface testing to ensure security and data integrity. In  addition, key functionality for the system, such as user verification,  had not been completed.", "Schedule risks. The HSWL Director stated that she requested that  the Department of Defense\u2019s (DOD) Defense Health Agency Solution  Delivery Information Technology (IT) team independently validate the  IHiS timelines and the status of the project in 2015 because of the  identified technical risks and concerns as to whether the system  would be ready to be piloted in the fall of 2015. According to the  Director, the Defense Health Agency team projected the timeline for  the first clinic implementation to be approximately 1 year later than  originally estimated due, in part, to incomplete interfaces and  workflows.", "Personnel risks. Although HSWL staff had been managing the IHiS  project since it was initiated in 2010, Command, Control,  Communications, Computers, and Information Technology (C4&IT)  was directed to assume the oversight responsibilities for IHiS  implementation in May 2015. This action was due to concerns about  the project\u2019s adherence to established governance processes raised  by the internal investigators looking into the potential Antideficiency  Act violations. By August 2015, the key HSWL project management  personnel that had overseen the project since 2010 had been  removed. As a result of the changes in staff, one vendor noted that it  was unclear as to who were the stakeholders, responsible parties,  and decision makers.", "According to an analysis conducted by the Coast Guard, which included  obligations and expenditures from September 2010 to August 2017, the  agency had obligated approximately $67 million for the IHiS project and,  of that amount, had spent approximately $59.9 million at the time of its  cancelation. In addition, over 2 years after the project\u2019s cancelation, the  Coast Guard continued to pay vendors. In this regard, it paid  approximately $6.6 million to vendors between November 2017 and  February 2018 to satisfy existing contractual obligations for services such  as leased equipment that was damaged or missing; software licensing  and support; a data storage center; and removal and shipment of  equipment. Further, according to staff in Coast Guard\u2019s Office of Budget  and Programs, no equipment or software from the IHiS project could be  reused for future efforts."], "subsections": []}, {"section_title": "The Coast Guard Could Not Demonstrate Effective Project Management, Lacked Governance Mechanisms, and Did Not Document Lessons Learned for the IHiS Project", "paragraphs": ["The Coast Guard could not demonstrate that it effectively managed and  oversaw the IHiS project prior to its discontinuance, and did not document  and share valuable lessons learned from the failed project. Specifically,  although the Coast Guard was to follow its System Development Life  Cycle (SDLC) Practice Manual to guide its management and oversight of  the project, the agency could not provide complete evidence that it had  addressed 15 of the 30 SDLC practices we selected for evaluation. For  example, the Coast Guard could not demonstrate that it had conducted  IHiS system testing, although the agency granted an authority to operate  (ATO) and indicated in the ATO memorandum that the system had  undergone some form of testing. The Coast Guard\u2019s SDLC specifies that  system testing is to take place prior to the issuance of an ATO.", "Project team members provided inconsistent explanations regarding  whether or not documentation existed to demonstrate the actions taken to  manage and oversee the project. The absence of the various documents  and other artifacts that would support the required SDLC activities raises  doubts that the Coast Guard took the necessary and appropriate steps to  ensure effective management of the IHiS project.", "Further, although the Coast Guard developed charters for various  governance boards to provide project oversight and direction, the boards  were not active and the Chief Information Officer (CIO) was not included  as a member of the boards. Taking steps to fully implement governance  boards that include the CIO will be important to the Coast Guard\u2019s  oversight efforts in implementing a future EHR system and may decrease  the risk of IT project failure.", "Lastly, although Coast Guard officials stated that lessons learned had  been identified throughout the process of developing IHiS, as of 2 years  after its cancelation, the agency had not documented and shared any  lessons learned from the project and did not have established plans for  doing so. Until the Coast Guard takes steps to document and share  identified lessons learned with individuals charged with developing and  acquiring its IT systems, opportunities to protect future systems against  the recurrence of mistakes that contributed to the failure of IHiS will likely  be missed."], "subsections": []}, {"section_title": "The Coast Guard Is Managing Health Records Using a Predominately Paper Process, but Many Challenges Hinder Service Delivery", "paragraphs": ["In the absence of an EHR system, the Coast Guard is relying on a  predominately paper health record management process to document  health care services for its nearly 50,000 military members. Currently, the  Coast Guard\u2019s clinical staff perform various manual steps to process each  paper health record. For example, clinical staff schedule appointments for  patients using Microsoft Outlook\u2019s calendar feature and provide the  patient with paper forms for completion upon his or her arrival. In addition,  clinical staff must handwrite clinical notes in the paper health record  during the appointment, as well as handwrite prescriptions, among other  manual processes.", "In response to our survey, the 12 HSWL Regional Managers identified a  number of challenges that clinics and sick bays in their regions had  experienced in managing and maintaining paper health records. These  challenges were grouped into 16 categories. Further, the 120 clinic and  sick bay administrators that subsequently responded to a separate survey  reported varying degrees to which they viewed each category as  challenging. Figure 1 provides the clinic and sick bay respondents\u2019  views of the top four challenges.", "With regard to these top four challenges to managing and maintaining  paper health records, clinic and sick bay respondents offered the  following examples:  Incomplete records. Ninety-eight (82 percent) of the respondents  reported incomplete records as challenging. In this regard, 34 of the  survey respondents reported that not all records from the Coast Guard  legacy EHR systems were printed out and included in patients\u2019 paper  health records as required before the systems were retired. Thus, they  had no way to ensure the patients\u2019 paper records were complete.", "Penmanship. Among the 91 (76 percent) survey respondents that  reported penmanship as challenging, several respondents noted that it is  difficult for staff to read illegible handwritten medical notes. This, in turn,  results in difficulty determining the accurate diagnosis, the required  prescription, or a referral.", "Tracking medications. According to 89 (76 percent) of the respondents,  it is challenging to track medications without an EHR. For example, one  administrator stated that staff members rely heavily on patients to  remember what medications they are taking\u2014potentially causing harm if  patients cannot remember what medications they are taking and the  medications have dangerous interactions.", "Amount of time to manage records. According to 86 (72 percent) of the  respondents, managing paper health records is challenging and requires  more time for staff to complete and file paperwork. Several respondents  stated that the size of the paper health records has increased, resulting in  additional time required to review and file records.", "The responding clinic and sickbay administrators described a range of  alternative work-around processes that they have developed to help  alleviate several of the challenges. Specifically, they reported having  developed additional forms, tracking methods, and alternative processes,  as well as having notified Coast Guard HSWL management of the  challenges they face. However, these alternative processes may not  provide sustained solutions to overcoming these challenges. Until Coast  Guard implements a new EHR solution, the challenges inherent in a  predominantly paper process will likely remain."], "subsections": []}, {"section_title": "The Coast Guard Intends to Acquire a New EHR System, but Has Not Yet Chosen a Solution", "paragraphs": ["The Coast Guard has begun taking steps to acquire a new EHR system  referred to as the Electronic Health Record Acquisition (eHRa). The  Coast Guard plans to manage and oversee the acquisition of eHRa  through its non-major acquisition process (NMAP), as described in its  Non-Major Acquisition Process (NMAP) Manual. NMAP requires formal  approval reviews at three discrete knowledge points called acquisition  decision events (ADE) and includes three phases to assess the readiness  and maturity of the acquisition.", "The Coast Guard formally identified the need for a new EHR system on  February 1, 2016, and obtained approval for the first of three ADE\u2019s on  February 13, 2016. It subsequently initiated market research activities by  collecting cost, schedule, and capabilities information from commercial  and government solution providers, including DOD and the Department of  Veterans Affairs.", "The Coast Guard used the providers\u2019 responses to develop an  alternatives analysis report that was completed in October 2017. The  report recommended a solution based on performance, risk, cost, and  schedule advantages. The report indicated that the Coast Guard plans to  use the results of the alternatives analysis to refine the acquisition  strategy, and to support the development of artifacts which are required to  successfully achieve the ADE-2 milestone. Staff within the Acquisitions  Directorate stated that they were also in the process of finalizing a life  cycle cost estimate and a project plan for eHRa\u2014documents necessary  for ensuring that appropriate business decisions will be made regarding  eHRa\u2019s logistics, affordability, and resources, among other things.", "As of December 2017, the Coast Guard had not yet made a final  determination as to which option would be chosen as the solution for the  eHRa acquisition."], "subsections": [{"section_title": "Implementation of Our Recommendations Should Better Position Coast Guard to Overcome Challenges with Paper Health Records", "paragraphs": ["Our report that is being released today contains four recommendations to  the Coast Guard. Specifically, we recommend that the Coast Guard: expeditiously and judiciously pursue the acquisition of a new EHR ensure established processes required for the future acquisition or  development of an EHR are effectively implemented and adequately  documented; direct the Chief Information Officer and the Chief Acquisition Officer to  establish and fully implement project governance boards for the future  EHR effort that include the Chief Information Officer; and document any lessons learned from the discontinued IHiS project,  share them with the new project management team, and ensure  lessons learned are utilized for the future EHR effort.", "The Department of Homeland Security concurred with our four  recommendations and identified actions being taken or planned to  implement them. If the Coast Guard fully and effectively implements our  recommendations, many of the challenges faced by its clinics and sick  bays and the thousands of Coast Guard members utilizing its health  services could be diminished.", "In summary, given the numerous challenges inherent with managing and  maintaining paper health records, it will be important for the Coast Guard  to prioritize obtaining an EHR for its thousands of members. Until a  solution for its EHR system is chosen and successfully implemented, the  agency is likely to continue to face these challenges. In addition, ensuring  established project management and governance processes are  effective, as well as documenting and sharing lessons learned, will be  essential in avoiding past mistakes and helping to ensure a successful  implementation of a future EHR solution at the Coast Guard.", "Chairman Hunter, Ranking Member Garamendi, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contact and Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact David A. Powner, Director, Information Technology Management  Issues, at (202) 512-9286 or pownerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony statement. GAO staff who made key  contributions to this statement are Nicole Jarvis (Assistant Director),  Ashfaq Huda (Analyst in Charge), Sharhonda Deloach, Rebecca Eyler,  Monica Perez-Nelson, and Scott Pettis.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-643", "url": "https://www.gao.gov/products/GAO-18-643", "title": "Washington Metropolitan Area Transit Authority: Assessing Fiscal Risks and Improving Workforce Management Would Help Achieve Strategic Goals", "published_date": "2018-09-10T00:00:00", "released_date": "2018-09-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["WMATA transports more than 1 million rail and bus passengers each weekday in the nation's capital and surrounding areas. However, recent safety incidents and declines in ridership and revenues have focused public attention on how WMATA manages its workforce and associated costs.", "GAO was asked to review WMATA's workforce management. This report examines, among other things, (1) how WMATA's workforce costs have changed from fiscal years 2006 through 2017 and factors contributing to those changes, and (2) how WMATA has designed and implemented its employee performance management systems. GAO reviewed WMATA's annual financial statements and budgets from fiscal years 2006 through 2017, and compared WMATA's workforce cost and performance management efforts to leading practices and internal control and actuarial principles. GAO also reviewed a non-generalizable sample of employee performance evaluations selected to include occupations with the highest number of evaluations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Washington Metropolitan Area Transit Authority's (WMATA) workforce costs\u2014including wages, salaries, and benefits for employees and retirees\u2014increased on average by about 3 percent annually from fiscal years 2006 through 2017. This increase was largely driven by the cost of employee and retiree benefits. Specifically, the amount WMATA was required to contribute to its pension plans increased by an annual average of about 19 percent during this period. Due to their relative size, proportion of retirees compared to active members, and investment decisions, these pension plans pose significant risk to WMATA's financial operations, yet WMATA has not fully assessed the risks. Without comprehensive information on the risks facing its pension plans, WMATA may not be prepared for economic scenarios that could increase its required contributions to an extent that might jeopardize its ability to provide some transit service.", "WMATA has implemented two employee performance management systems that cover all employees, but these systems lack some key elements of an effectively designed and implemented performance management system. For example, WMATA's performance management systems are not designed to make meaningful distinctions in performance, a key element of an effective system. This design is due in part to WMATA's lack of comprehensive policies and procedures for its performance management systems. In addition, WMATA lacks sufficient controls to ensure that supervisors complete required performance evaluations accurately and on-time. For example, in 10 of 50 performance evaluations we reviewed, we found scoring errors where employees were assigned a performance rating inconsistent with the supporting review. Without comprehensive policies and procedures or sufficient controls over its performance management systems, WMATA lacks tools and information to move employees toward achieving WMATA's strategic goals."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations to WMATA, including that it develop a comprehensive assessment of risks posed by its pension plans, comprehensive policies and procedures for its employee performance management systems, and controls to ensure supervisors complete required performance evaluations, among other actions.", "WMATA agreed with four recommendations and neither agreed nor disagreed with the fifth."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Washington Metropolitan Area Transit Authority (WMATA) transports  more than 1 million rail and bus passengers each weekday, making it  critical to the mobility and productivity of the nation\u2019s capital and  surrounding areas. Safety lapses such as a January 2015 smoke incident  at the L\u2019Enfant Plaza Metro Station that resulted in the death of one  person and injured 91 others, and multiple electrical fires and derailments  since then, have focused public attention on the management and  performance of WMATA\u2019s workforce. For example, in 2015, the Federal  Transit Administration (FTA) identified deficiencies in WMATA\u2019s staffing,  training, and procedures for its rail traffic controllers that FTA found could  compromise the safety of the Metrorail system. In 2017, WMATA reported  that it had fired 21 rail inspectors and supervisors\u2014about one third of its  inspection staff\u2014for allegedly falsifying inspection reports. Further,  Metrorail has experienced significant losses in ridership and revenues  due in part to persistent reliability problems and planned outages during  its year-long SafeTrack rail rehabilitation program, completed in June  2017. That year, WMATA announced plans to reduce its workforce by  eliminating 6 percent of its 13,000 positions to help bridge a $290 million  gap in its 2018 operating budget.", "You asked that we review WMATA\u2019s management of its workforce,  including its workforce costs, planning, and performance. This report  assesses: (1) how WMATA\u2019s workforce costs have changed from fiscal  year 2006 through 2017 and factors contributing to those changes; (2)  how WMATA identifies and addresses its current and future workforce  needs; and (3) how WMATA has designed, implemented, and monitored  its employee performance management systems.", "To assess how WMATA\u2019s workforce costs have changed, we used data  from WMATA\u2019s annual budgets and audited financial statements from  fiscal years 2006 through 2017 on the amounts expensed by WMATA on wages and salaries, employee and retiree benefits, and contracted  services, and on the amounts WMATA contributed to its pension plans  and retiree health benefits. We selected 2006 to account for any  potential effects of the 2007-2009 financial crisis on pension or other  costs and because WMATA began contributing to its largest pension plan  again in 2006 after a 6-year period of not contributing to this plan.", "We reviewed data WMATA provided on operating and capital overtime  costs and the most recent actuarial reports for each of WMATA\u2019s five  pension plans. To assess the reliability of WMATA\u2019s budget data and  other data WMATA provided, we interviewed WMATA officials on  practices used to assemble these data. We found these data to be  sufficiently reliable for our purposes. We also analyzed characteristics of  WMATA\u2019s five pension plans in consultation with our Chief Actuary and in  relation to actuarial principles and recent literature. To identify factors  contributing to changes in workforce costs, we interviewed WMATA  officials and reviewed information from WMATA\u2019s annual budgets and  annual financial statements on the total number of authorized staff,  changes in overtime costs, changes in pension-related costs, and other  factors that could influence workforce cost changes since fiscal year  2006.", "To evaluate how WMATA identifies and addresses its workforce needs,  we compared WMATA\u2019s workforce planning and workforce development  efforts to leading practices we previously identified and to internal control  standards of the Committee of Sponsoring Organizations of the Treadway  Commission (COSO), which WMATA follows. We reviewed WMATA\u2019s  2017-2019 individual department business plans and 2013\u20132025  strategic plan, and interviewed WMATA officials, to assess how WMATA  identifies its short- and long-term workforce needs. We also obtained  and reviewed WMATA information on the positions WMATA eliminated in  fiscal years 2017 and 2018, including the number that were vacant or  occupied. Lastly, we compared WMATA\u2019s workforce planning approach to  those at five U.S. transit agencies selected based on similarity in size,  age, unions, and stakeholder recommendations.", "To evaluate WMATA\u2019s performance management systems, we  interviewed WMATA officials and reviewed documentation on WMATA\u2019s  two employee performance management systems\u2014\u201dPERFORMetro\u201d and  \u201cPerformance Conversations.\u201d PEFORMetro applies to staff represented  by (1) the Office and Professional Employees International Union Local 2  (administrative and clerical personnel), (2) the Fraternal Order of Police  (Metro Transit Police), (3) International Brotherhood of Teamsters Local  639 (Metro Special Police), and (4) staff not represented by a union  (management and administrative personnel). Performance Conversations  applies to staff represented by the Amalgamated Transit Union Local 689  or International Brotherhood of Teamsters Local 922 (bus and rail  operations personnel). We compared these performance management  systems to WMATA\u2019s strategic goals in its 2013-2025 strategic plan, key  performance management practices we have previously identified, and to  the COSO internal control standards.", "We also assessed whether WMATA had management controls in place to  ensure timely, complete and accurate submissions of performance  evaluations by initially reviewing a selection of 60 PERFORMetro  evaluations from the most recently-completed evaluation cycle at the time  of our review. We selected 20 files from each of the three employee  groups included in the PERFORMetro system (employees not  represented by a union, employees represented by the Office and  Professional Employees International Union Local 2, and law  enforcement officers represented by the Fraternal Order of Police or Teamsters Local 639). Due to inconsistencies in the Teamsters Local 639  evaluation forms, we excluded 10 of the 60 evaluations from our  selection, leaving 50 evaluations. The performance evaluation forms we  reviewed are not generalizable to all performance evaluations submitted  to WMATA\u2019s human resources department or completed by WMATA  supervisors, but they provide illustrative examples of some completed  performance evaluations. We could not review any Performance  Conversation forms because WMATA does not routinely collect or retain  these forms and WMATA did not have any Performance Conversation  forms available for us to review. Finally, we interviewed officials from the  FTA, WMATA, and union leadership from four of the five unions  representing WMATA employees. A more detailed summary of our  scope and methodology appears in appendix I.", "We conducted our work from July 2017 to September 2018 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["WMATA operates the nation\u2019s second largest heavy rail transit system  (Metrorail) and fifth largest bus system (Metrobus), accounting for about  1.1 million passenger trips per weekday. Metrorail runs 6 train lines  connecting the District of Columbia to various locations in Maryland and  Virginia. A portion of the latest addition, the Silver Line, was opened in  2014. WMATA was created in 1967 through an interstate compact\u2014 matching legislation passed by the District of Columbia, the state of  Maryland, and the Commonwealth of Virginia, and then ratified by  Congress\u2014to plan, develop, finance, and operate a regional  transportation system in the National Capital area. A board of eight  voting directors and eight alternate directors governs WMATA. The  directors are appointed by the District of Columbia, Virginia, Maryland,  and the federal government, with each appointing two voting and two  alternate directors."], "subsections": [{"section_title": "Operating Revenues", "paragraphs": ["WMATA\u2019s operating revenues from rider fares, parking fees, and paid  advertisements, do not cover its annual costs, so it relies on year-to-year  funding commitments from Maryland, Virginia, and the District of  Columbia, and various forms of federal funding to cover gaps in its capital  and operating budgets. WMATA\u2019s operating budget covers personnel  costs and contracted services; in fiscal year 2017 about 75 percent of its  $1.8 billion operating budget went to personnel costs. WMATA\u2019s capital  budget, which covers short-term maintenance and long-term capital  projects, totaled $1.2 billion in fiscal year 2017. In 2018, Maryland,  Virginia, and the District of Columbia each passed legislation to provide  additional recurring annual funding to WMATA generally for capital  purposes, totaling $500 million annually across the 3 jurisdictions."], "subsections": []}, {"section_title": "Service Levels and Ridership", "paragraphs": ["In recent years, WMATA added new rail service while also experiencing  declines in ridership. From fiscal years 2006 through 2017, WMATA  increased Metrorail service about 23 percent as measured in total railcar  revenue service miles, or the miles traveled when the vehicle is in  revenue service; WMATA increased Metrobus service slightly, by about 4  percent. Over this same time, ridership declined\u2014by about 17 percent on  Metrorail and 12 percent on Metrobus. (See fig. 1).", "WMATA attributes this ridership decline to multiple factors, including  growth in telecommuting, the expansion of alternative transportation  options, and a decline in service quality and reliability. In addition,  between June 2016 and June 2017, WMATA completed SafeTrack, a  large-scale accelerated maintenance program that suspended service on  portions of Metrorail, resulting in delays and additional ridership  declines."], "subsections": []}, {"section_title": "Workforce and Employee Groups", "paragraphs": ["WMATA\u2019s workforce is composed of bus and rail operations staff, as well  as managers, administrators, law enforcement, and others. In September  2017, after reducing its workforce by eliminating 6 percent of its 13,000  positions, WMATA reported that it had 12,217 employee positions across  6 different employee groups, of which 11,341 were filled. Most WMATA  employees\u201483 percent\u2014are represented by one of WMATA\u2019s five  unions, depending on the employees\u2019 positions. The Amalgamated  Transit Union Local 689 is the largest union, representing 67 percent of  WMATA employees (see table 1). Each union negotiates its own terms on  wages, salaries, hours, working conditions, and pensions or retirement,  and generally documents these terms in its collective bargaining  agreement."], "subsections": []}, {"section_title": "Employee and Retiree Benefits", "paragraphs": ["WMATA provides a defined benefit pension for almost all of its  represented employees and for non-represented employees hired before  January 1, 1999. In these pension plans, the benefit a retiree receives is  generally based on the retiree\u2019s age and/or years of service and  compensation, which may include overtime wages for represented  employees. WMATA\u2019s annual contributions to its pension plans are  invested in portfolios that include stocks, bonds, and real estate to fund  future pension benefits. The Local 689 pension plan is WMATA\u2019s largest,  and covered 80 percent of all WMATA pension plan members in fiscal  year 2017. Each of the five pension plans is governed by a separate  group of trustees responsible for administering the plan. The trustees  are composed of a mix of members selected by WMATA and by the  respective union or employee group. For example, the trustees for the  Local 689 plan include three appointed by WMATA and three by Local  689.", "WMATA makes payments for four defined benefit retiree health plans.  These plans generally cover Local 689 employees, Local 2 employees,  Metro Transit Police, and Metro Special Police, in addition to non- represented employees. According to WMATA officials, WMATA\u2019s four  retiree health plans are \u201cpay-as-you-go,\u201d meaning WMATA pays for  benefits as they become due each year, and funds necessary for future  benefits are not accumulated."], "subsections": []}]}, {"section_title": "Increases in WMATA\u2019s Workforce Costs since Fiscal Year 2006 Are Largely Driven by the Cost of Benefits, with Pensions Posing Particular Risk", "paragraphs": ["WMATA\u2019s total workforce costs\u2014composed of wages, salaries, and  benefits for current and retired employees\u2014increased modestly in  inflation-adjusted dollars (on average by about 3 percent annually) from  fiscal years 2006 through 2017. This modest increase reflected small  increases in wage and salary costs and substantial increases in  employee and retiree benefit costs. In particular, WMATA\u2019s required  annual contributions to its pension plans increased by an annual average  of almost 19 percent and were WMATA\u2019s fastest growing workforce cost  component from fiscal years 2006 through 2017. The possibility of further  increases in the costs of WMATA\u2019s pension plans poses significant risk to  the agency\u2019s financial operations, yet WMATA has not fully assessed  these risks."], "subsections": [{"section_title": "Since 2006, WMATA Wages and Salaries Increased Modestly While Contract Costs More Than Doubled", "paragraphs": ["WMATA\u2019s total workforce costs increased by about 3 percent annually on  average between fiscal years 2006 and 2017 in inflation-adjusted fiscal  year 2017 dollars, with wages and salaries increasing an average 1.1  percent per year, from $645 million in 2006 to $728 million in 2017. These  costs grew at a slower rate than the costs of contracted services (7.3  percent annually on average) and employee and retiree benefits (5.6  percent annually on average), as discussed below (see table 2).", "The total number of employees WMATA budgeted for each year  (authorized positions) grew slightly faster than wages and salaries\u2014about  2 percent per year on average\u2014increasing from 10,451 in 2006 to 13,032  in 2017, with similar growth in the number of occupied positions. Wages  and salaries increased at a slower rate than WMATA\u2019s workforce in part  because, according to WMATA officials, non-union employees did not  receive a salary increase for several of these years. In contrast,  employees represented by one of WMATA\u2019s five unions generally  received annual wage and salary increases, as laid out in their collective  bargaining agreements. WMATA officials also estimated that since 2008,  between about 10 and 14 percent of its annual wage and salary costs  were composed of operating overtime. WMATA officials stated that  operating overtime is used to fill gaps in schedules or staffing in positions  that have high vacancy rates, such as Metro Transit Police.", "While wage and salary costs increased modestly, the cost of WMATA\u2019s  contracted services more than doubled from fiscal years 2006 through  2017. During this time contracted services costs increased more than 7  percent per year on average, from $123 million in fiscal year 2006 to $267  million in fiscal year 2017. WMATA officials reported large increases  during this period in repair and maintenance, custodial services,  professional and technical services such as attorneys and management  consultants, and WMATA\u2019s MetroAccess contract that provides  paratransit door-to-door service for riders unable to use bus or rail.  WMATA officials attributed these increases to several factors. First, they  stated that paratransit service ridership and the contractor cost per trip  have increased. The officials estimated that providing paratransit service  currently costs WMATA about $50 per passenger trip. Second, WMATA  officials said adding five new Silver Line stations resulted in increases in contract costs because some of the services already provided by  contractors, including custodial services and some track work, were  extended to the new stations. Third, WMATA officials said they have been  using more contractors in recent years to control costs and improve  efficiency. For example, they stated they may use contracts to address  problems such as a backlog of track inspections because they can  procure contractors to complete the work more quickly than they could  with current WMATA staff who would have to be pulled away from other  duties or new WMATA staff who would have to be hired and trained."], "subsections": []}, {"section_title": "WMATA\u2019s Employee and Retiree Benefit Costs Increased Substantially since 2006, but WMATA Has Not Fully Assessed Risks Posed by Its Pension Plans", "paragraphs": ["From fiscal years 2006 through 2017, WMATA\u2019s annual costs for its  employee and retiree benefits increased substantially in inflation-adjusted  fiscal year 2017 dollars. Employee and retiree benefit costs\u2014which  include benefits for current employees, such as health care and vacation,  and benefits for retired employees such as pensions and health care\u2014 increased at an average annual rate of 5.6 percent, from $327 million to  $593 million (see table 2 above). These cost increases are reflective of  substantial increases in the amount WMATA contributed to its pension  plans. These costs increased by an average of 18.9 percent annually,  from $25 million in fiscal year 2006 to $168 million in fiscal year 2017.  WMATA payments for retiree health benefits increased less dramatically,  on average 2.7 percent per year from fiscal years 2008 through 2017($39  million to $49 million). (See fig. 2). WMATA officials attributed increases  in employee and retiree benefit contributions to multiple factors including  market losses to pension assets incurred after the 2007\u20132009 financial  crisis and an increase in the cost of providing healthcare benefits.", "Despite paying more for its retiree pension and health plans since 2006,  in fiscal year 2017 WMATA had large unfunded retiree health and  pension liabilities. Unfunded liabilities are the estimated value of the  amount of additional assets, beyond any existing plan assets, that would  be required to fully fund accrued liabilities of a plan. The assets of  WMATA\u2019s pensions largely consist of investments in stocks, bonds, and  real estate. Unfunded liabilities are similar to other kinds of debt because  they constitute a promise to make a future payment or provide a benefit.", "According to WMATA\u2019s fiscal year 2017 Comprehensive Annual Financial  Report, WMATA\u2019s pension plans were underfunded by $1.1 billion for  fiscal year 2017, of which $814 million was attributed to WMATA\u2019s largest  pension plan\u2014Local 689. In contrast, WMATA\u2019s four retiree health  plans were pay-as-you-go during fiscal years 2006 through 2017,  meaning WMATA\u2019s annual plan contributions were benefit payments for  retirees each year in that period. Since WMATA did not make  contributions to prefund retiree health benefits, funds necessary for future  benefits were not accumulated as assets. As a result, the entire accrued  liability was an unfunded liability, and WMATA\u2019s four retiree health plans  were unfunded by over $1.8 billion in fiscal year 2017.", "WMATA officials said they have made several changes to reduce  unfunded pension and retiree health liabilities through negotiations with  WMATA\u2019s unions. For example, in 2014, Local 689 employees began  contributing a portion of their compensation (1 percent) to the Local 689  pension plan. This amount increased to 3 percent in 2015. Local 689  employee contributions reported for fiscal year 2017 were about $22  million, which was about 17 percent of the $127.5 million reported for  WMATA\u2019s contribution to their pension plan for that year. In addition,  according to WMATA\u2019s fiscal year 2017 Comprehensive Annual Financial  Report, non-represented and Local 2 employees hired on or after January  1, 1999 are not eligible for the defined benefit pension plan. WMATA also  reported that Local 689 and Local 2 employees hired on or after January  1, 2010, Metro Special Police hired after February 25, 2016, and non- represented employees hired after January 1, 2017 are not eligible for  retiree health benefits. Most recently, WMATA created a trust to fund  WMATA\u2019s retiree health benefits and invested $3 million in the trust.", "WMATA\u2019s pension plans, due to their relative size and maturity and  investment decisions, pose a particular risk to WMATA\u2019s financial  operations:", "Relative size and maturity: The size of WMATA\u2019s pension plans and  the overall maturity of the plans\u2019 participants pose a combined  financial risk to WMATA. WMATA\u2019s pension plans assets and  liabilities are large relative to its business operations. For example, in  fiscal year 2017, WMATA\u2019s pension assets ($3.6 billion) were about 5  times more, and its pension liabilities ($4.7 billion) about 6.5 times  more than its annual wages and salaries ($728 million). Because of  their relative size, changes in the value of these assets or liabilities\u2014 for example, as a result of underperforming investments or revisions  to actuarial assumptions\u2014could significantly affect WMATA\u2019s  operations. In addition, WMATA\u2019s pension plans are considered  \u201cmature\u201d by actuarial measures, meaning, for example, that they have  a high proportion of retirees compared to active members. A 2017  WMATA Board of Directors Pension Subcommittee report indicated  that if WMATA\u2019s assumed rate of return across all five plans  decreased from 7.66 percent to 7 percent, WMATA\u2019s required annual  pension contribution would increase $42 million, a 26 percent  increase, from 22 percent of wages and salaries ($160.7 million) to  about 28 percent of wages and salaries ($203 million).", "Investment decisions: WMATA\u2019s pension plans assume higher rates  of return than state and local pension plans generally do, according to  a recent National Association of State Retirement Administrators  report. For the 2017 plan year, WMATA\u2019s largest pension plan had  an assumed rate of return of 7.85 percent per year, and the weighted  average assumed rate of return for WMATA\u2019s five plans combined  was 7.66 percent. The average assumed rate of return among the  largest state and local government plans was 7.52 percent in 2017,  and dropped to a planned 7.36 percent for fiscal year 2018. If  WMATA\u2019s pension plan assets return significantly less than assumed,  WMATA\u2019s unfunded liabilities will be higher than anticipated,  potentially resulting in a spike in required contributions, as occurred in  the years following the 2007-2009 financial crisis (see fig. 2 above).", "WMATA\u2019s pension plans are largely invested in the stock market,  which also poses risk. For example, according to a November 2017  report to WMATA\u2019s Board of Directors Pension Subcommittee, 69  percent of WMATA\u2019s plan assets across all five pension plans were  invested in the stock market, and only 18 percent in fixed income or  cash. Investing in assets such as stocks may increase expected  investment returns, but it also increases risk because stock returns  are more volatile than investments in high quality bonds that provide a  more stable rate of return. In addition, with its mature plans,  WMATA faces a shorter time horizon before benefits for its retirees  and older workers will become due, leaving less time to recover from  investment shortfalls. According to literature on challenges facing U.S.  pension plans, plans should take on less risk as they become more  mature. This is because investment losses\u2014and corresponding  required increases in contributions\u2014can potentially be a high  percentage of wage and salary costs, with less time to make  adjustments. As described above, WMATA\u2019s pension plans are  considered mature, yet they still have a high percentage allocated to  risky assets.", "Although WMATA recently hired a consultant to complete a high-level  review of its pensions, it has not fully assessed the risks of its five  pension plans to the agency\u2019s financial operations. In 2016 and 2017  WMATA hired a consultant to provide an overview of its five pension  plans, including reviewing the plans\u2019 funding strategies and performance.  However, the stated purpose of these reports did not include an  assessment of risk, and the reports included only limited analysis of the  various risks facing WMATA from the plans, for example forecasting  WMATA\u2019s pension contributions over the next 10 years, but only under  one scenario. In addition, WMATA provided us with analyses conducted  by an actuary for each of its five pension plans, which included some  limited risk analysis for three of the five pension plans, and no risk  analysis for the other two plans, including the Local 689 plan\u2014WMATA\u2019s  largest. Neither WMATA nor the trustees for the Local 689 plan have fully  assessed the risks of that plan. WMATA\u2019s Office of Internal Compliance  has developed a process to periodically assess risks across the agency,  known as an Enterprise Risk Management Program, and reported that  pension risks could be assessed within this framework. However,  WMATA has not yet assessed the fiscal risks from its pension plans  within this program. WMATA officials said they are in the process of  identifying risks to include in this program for 2019.", "The internal control standards WMATA follows state that organizations  should identify, analyze, and respond to risks related to achieving their  objectives. Further, a Society of Actuaries Blue Ribbon Panel reported  that it is important for stakeholders\u2014such as trustees, funding entities,  plan members, union officials, and, in WMATA\u2019s case, its Board of  Directors\u2014to have comprehensive information about the current and  expected future financial position of pension plans and the extent of risks  facing pension plans. According to the Blue Ribbon Panel, this  information should include, among other things, \u201cstress testing,\u201d which  projects a plan\u2019s financial outcomes under adverse scenarios.", "WMATA officials told us that WMATA has not fully assessed pension  risks because WMATA\u2019s management does not have control over  decisions related to the risks its pension plans take. For example,  WMATA officials told us that given that both asset-allocation and  investment-return assumptions are the purview of plan trustees who are  required to act independently, WMATA has left the decision to determine  if risk analysis is necessary to the individual plans\u2019 trustees. WMATA  officials stated that even if they were to identify risks, there are not many  actions WMATA management could take to change them because  trustees have ultimate control over the plans\u2019 investment decisions.  However, the investment risks taken by the pension plans\u2019 trustees  ultimately affect the amount that WMATA is required to contribute, and  assessing those risks could help WMATA better anticipate its required  future pension contributions.", "Without a comprehensive assessment of these risks, WMATA and its  stakeholders\u2014such as its Board of Directors\u2014are limited in their ability to  prepare for economic scenarios that could ultimately increase the amount  WMATA is required to contribute to its pension plans. In addition, if  disappointing market returns were the result of a broader economic  downturn, WMATA\u2019s revenues\u2014such as those from local jurisdictions\u2014 could decline at the same time as higher pension contributions were  required. For example, as noted earlier, if WMATA\u2019s pension plans\u2019  assets of $3.6 billion return significantly less than assumed, WMATA  could experience a spike in required contributions, as it did in the years  following the 2007\u20132009 financial crisis. Such a spike would further  constrain WMATA\u2019s operating budget, and potentially jeopardize its ability  to pay for pension contributions or provide transit service. Moreover,  without a comprehensive assessment of these risks under various  scenarios, WMATA may lack useful information to develop risk mitigation  efforts and to inform its collective bargaining negotiations about pay and  benefits. Such information would also be useful to WMATA to inform its  Board of Directors, and the jurisdictions that fund WMATA, about the  impact that adverse economic scenarios could have on WMATA\u2019s ability  to provide future service at anticipated funding levels."], "subsections": []}]}, {"section_title": "WMATA Lacks a Strategic Process to Identify and Address Future Workforce Needs", "paragraphs": ["WMATA identifies the staffing levels it needs each year through its annual  budgeting process, but does not have a strategic process to identify and  address its long-term workforce needs to meet the agency\u2019s goals. For  example, in preparing the annual budget request for the Board of  Directors, WMATA officials identify the number of staff needed in  individual departments the following fiscal year. However, WMATA does  not have a process for identifying and addressing agency-wide workforce  needs beyond one year or in relation to agency-wide goals, contrary to  leading practices. In addition, WMATA has some workforce development  programs, including some that are piloted or planned, but these programs  are not based on an agency-wide assessment of the skills the agency  needs to meet its strategic goals. Instead, WMATA\u2019s workforce  development programs are directed to short-term needs such as filling  vacancies."], "subsections": [{"section_title": "WMATA Identifies Short- Term Staffing Levels for Its Annual Budget but Has Not Set a Direction for its Long-Term Workforce Needs", "paragraphs": ["WMATA officials identify staffing levels needed by individual departments  annually, in preparation for WMATA\u2019s annual budget. The annual budget,  once approved by WMATA\u2019s Board of Directors, sets a ceiling for the  number of positions WMATA can employ in the next fiscal year. For  example, in fiscal year 2016, WMATA was authorized to fill up to 13,032  positions in fiscal year 2017. WMATA officials told us that each  department, such as Rail Services or Bus Services, estimates the number  of positions they will need to meet their mission the following fiscal year.  According to WMATA officials, this estimation is based in large part on  the number of positions allotted to them in the previous fiscal year.  WMATA officials said the budget office assembles this department-level  data into WMATA\u2019s agency-wide budget request for the board of  directors.", "WMATA\u2019s recent restructuring of its workforce was also guided by the  annual budget process. Beginning in June 2016 in preparation for the  fiscal year 2018 budget proposal, WMATA eliminated 800 positions, most  of which were vacant. To identify these positions, WMATA\u2019s General  Manager directed department heads to help identify any positions that  were redundant or obsolete. WMATA officials reported that 637 of the 800  positions eliminated were already vacant, and of the 163 occupied  positions most were reassigned to other existing positions. Ultimately,  WMATA terminated 62 employees during this time for an estimated  savings of $7.3 million (about $116,000 per employee in salary and  benefits).", "Although WMATA estimates departmental staffing needs annually,  WMATA officials said the agency does not have a process for identifying  the agency\u2019s long-term workforce needs. Instead, officials said that each  department typically completes a 3-year business plan through which it  may identify the number of employees needed over that period. However,  none of the 8 department business plans that we reviewed for calendar  years 2017 through 2019 identified the number of employees needed.  Further, WMATA\u2019s Chief Operating Office business plan identified the  lack of long-term workforce planning as a risk to the office\u2019s ability to meet  its core organizational goals. WMATA\u2019s four organizational goals are  creating a safety culture and system, delivering quality service, improving  regional mobility, and ensuring financial stability and investing in people.", "According to leading human capital practices we have previously  identified, agencies should have a strategic workforce planning process  that identifies the workforce, including full-time, part-time, and contracts,  needed to meet the agency\u2019s strategic goals now and in the future.  Strategic workforce planning helps an agency align its human capital  program with its current and emerging mission and ensures that it will  have the workforce it needs to accomplish its goals. According to these  leading practices, the first step of strategic workforce planning is for top  management to set a strategic direction for the agency\u2019s workforce  planning efforts, and to involve employees and other stakeholders in the  development and communication of these efforts.", "WMATA does not have a strategic workforce planning process that would  address its workforce needs beyond the next fiscal year because it has  not prioritized that effort. WMATA officials told us they were interested in  creating a strategic workforce plan, and had made previous plans to do  so. Specifically, WMATA\u2019s 2013\u20132025 Strategic Plan reported that the  agency was creating a \u201cStrategic Human Capital Plan\u201d that would have  developed long-term workforce planning strategies. However, WMATA  officials told us that the Strategic Human Capital Plan was never  completed due to other, competing priorities such as filling vacant  positions and addressing other workforce issues in the upcoming budget.", "Without a strategic workforce planning process to establish a long-term  direction for its workforce, WMATA does not have a clear plan for how it  will acquire, develop, and retain the workforce needed to achieve its  strategic goals of creating a safety culture, delivering quality service,  improving regional mobility, and financial stability. Further, without such a  process, WMATA lacks reasonable assurance that its short-term annual  budget requests for staff, including the recent restructuring, will move the  agency toward these strategic goals."], "subsections": []}, {"section_title": "WMATA\u2019s Workforce Development Programs Are Not Based on an Agency-wide Assessment of Gaps in Critical Skills and Competencies", "paragraphs": ["WMATA officials told us they have some established workforce  development programs, and others piloted or planned. For example,  WMATA currently has three specialized recruitment programs to identify  qualified veterans, Latinos, and persons with disabilities for WMATA  positions. WMATA also provides targeted training for employees such as  \u201cprinciples of supervision\u201d for all new supervisors. WMATA officials told us  the agency is also developing a \u201cPeople Strategy,\u201d which will include  multiple workforce development programs for certain entry-level workers  and managers to improve their skills and help them to advance in the  agency. One component of the People Strategy will be to establish a  program to identify and train \u201chigh-potential\u201d staff for leadership positions.", "Although WMATA has some limited workforce development programs,  these programs are not based on an agency-wide assessment of skill and  competency gaps. According to the COSO internal control standards and  leading practices we have previously identified, once an organization\u2019s  leadership sets a strategic direction for workforce planning efforts, it  needs to conduct a \u201cworkforce gap analysis\u201d\u2014a data-driven assessment  of the critical skills and competencies the agency will need to achieve its  current and future goals. Agencies can use different approaches for this  analysis. One example is using information on retirements and attrition to  identify future gaps in staffing or skills. Another is \u201cscenario planning\u201d in  which an agency identifies how its activities might change in scope and  volume in the next 5 years, and then identifies gaps in skills and  competencies needed to fill the likely scenarios, rather than planning to  meet the needs of a single view of the future. An agency can then  develop strategies that are tailored to address any gaps between the  skills and competencies they need and the ones they already have.", "WMATA officials reported that they identify workforce gaps by tracking  vacancy rates (percentage of budgeted positions that are vacant) and  consulting department leaders about employees departing or retiring.  However, WMATA officials said they do not monitor trends in agency- wide retirements and had not projected the number of employees eligible  to retire in the future\u2014essential components of a data-driven workforce  gap analysis. In comparison, officials from four of the five similar transit  agencies we interviewed project the percentage of staff who are eligible  to retire in the future, ranging from 3 to 10 years.", "WMATA officials said the agency has not conducted an agency-wide  assessment of its skill and competency needs because it has been more  reactive than proactive in response to attrition and retirements and relied  on promoting staff to higher-level positions to fill vacancies. For example,  until 2017, WMATA had a Superintendent Succession Planning Program,  which was designed to prepare bus and rail employees for management  roles. WMATA officials reported that this program was initiated in 2009  but is currently on hold as the agency develops its People Strategy.  WMATA officials said they plan to implement a different succession  planning program, which will offer financial incentives for some managers  to transfer knowledge to staff before they retire, as part of the People  Strategy. However, without conducting a data-driven assessment of the  critical skills and competencies WMATA needs to fill any gaps and  achieve its strategic goals, WMATA lacks complete information on where  the gaps in its workforce lie, and if its workforce development programs  are addressing those gaps or ultimately moving the agency closer to its  strategic goals."], "subsections": []}]}, {"section_title": "WMATA Lacks Some Key Elements of an Effective Performance Management System and Sufficient Controls to Ensure Accurate and Timely Performance Reviews", "paragraphs": ["WMATA has implemented two performance management systems to  cover its various employee groups, but these systems lack some key  elements of an effective performance management system.   Specifically, WMATA has linked employee performance to pay for some  employees; however, WMATA\u2019s performance management systems do  not (1) consistently align employee and agency goals or assign  responsibilities, (2) make meaningful distinctions in performance, or (3)  consistently use competencies to identify the behaviors individual  employees need to contribute to strategic goals. In addition, WMATA  does not have sufficient controls to ensure that performance reviews are  complete, accurate, and submitted within established timeframes and  does not use performance management information to track progress  towards strategic goals."], "subsections": [{"section_title": "WMATA\u2019s Performance Management Systems Cover All Employees but Design Lacks Some Key Elements", "paragraphs": ["WMATA has implemented two performance management systems that  cover all employees: PERFORMetro for non-represented staff and staff  represented by Local 2, Fraternal Order of Police, or Local 639; and  Performance Conversations for staff represented by Local 689 or  Teamsters Local 922. The features of the PERFORMetro and  Performance Conversations systems vary somewhat in terms of the  frequency of performance reviews, the use of objectives to assess  performance, and other characteristics (see table 3).", "WMATA links pay increases to positive performance for some employees  under PERFORMetro, a key element of effective performance  management. For example, Metro Special Police must earn a solid  performer or better rating to be eligible for salary increases. We have  previously noted that high-performing organizations seek to create pay  systems that clearly link to employee contributions. WMATA does not  link pay to performance for employees who fall under Performance  Conversations. Pay increases for these employees\u2014who are represented  by two of the largest unions at WMATA\u2014are determined by years of  service as described in the collective bargaining agreements. WMATA  officials said they had considered linking some pay to performance in the  past, but had not pursued this since they believe any changes to how pay  is awarded would have to be negotiated between WMATA and each  respective bargaining unit.", "Although WMATA has linked individual performance to pay for some  employees, the design of WMATA\u2019s performance management systems  lacks three additional key elements of an effective performance  management system as identified in our prior work and internal control  standards followed by WMATA. Those key elements are: aligning employee and agency goals and identifying responsibilities making meaningful distinctions in performance, and using tailored competencies to define needed skills and behaviors.", "Aligning employee and agency goals and identifying responsibilities:  PERFORMetro is not designed to align individual employee performance  with all of its strategic goals. While Performance Conversation forms  guide supervisors to discuss the employees\u2019 performance in relation to  each of WMATA\u2019s four strategic goals, supervisors under PERFORMetro  are required to evaluate employees on individual performance objectives  that are aligned with three of these goals. Supervisors under  PERFORMetro are not required to evaluate employees on a performance  objective aligned with WMATA\u2019s fourth strategic goal\u2014improving regional  mobility. WMATA officials told us it is up to individual supervisors to  determine whether to evaluate an employee on the fourth strategic goal.  Of the 50 performance reviews we assessed, we observed one that  aligned an employee\u2019s performance objectives with the organizational  goal of improving regional mobility. According to leading performance  management practices we previously identified, aligning individual  performance objectives with organizational goals helps individuals see  the connection between their daily activities and the organization\u2019s  goals. Without a mechanism in place to do this for PERFORMetro staff,  WMATA may not know how these employees are contributing to  increasing regional mobility, and employees may not know how they are  performing relative to this goal.", "In addition, WMATA has not consistently identified how its performance  management systems support its overarching strategic goals or assigned  responsibilities for implementing these systems. While WMATA issued a  staff memo in April 2016 that identified a goal for Performance  Conversations\u2014to ensure that employees understand how their  performance supports Metro\u2019s strategic goals\u2014WMATA has not done so  for PERFORMetro. In addition, none of the performance management  documents we reviewed clearly assigned authority or defined  responsibilities for implementing either PERFORMetro or Performance  Conversations. According to the COSO internal control standards, setting  program goals is a key part of the management process, and program- level goals should cascade from agency-level goals. Additionally, these  standards include establishing policies and procedures that effectively  document a program\u2019s design, delegation of authorities, and assignments  of responsibilities.", "Making meaningful distinctions: WMATA\u2019s performance management  systems are not designed to make meaningful distinctions in  performance. According to leading performance management practices,  the organization\u2019s leadership should make meaningful distinctions  between acceptable and outstanding performance of individuals.", "However, both of WMATA\u2019s performance management systems lack  clear definitions for supervisors and employees to use in assessing  performance. For example, WMATA leaves it up to employees and their  supervisors to identify and define many of the objectives on which  employees under PERFORMetro are evaluated. WMATA officials said  this provides supervisors some flexibility to account for the responsibilities  of employees in different positions. However, the result is that two  employees performing the same functions may be evaluated on different  objectives, making it difficult to distinguish their performance. Further,  under PERFORMetro supervisors are required to rate employees on each  objective as \u201cmet,\u201d \u201cdid not meet,\u201d and \u201cexceeded,\u201d but WMATA does not  provide definitions for these categories for each objective. As a result, two  employees rated under PERFORMetro could receive different ratings for  comparable performance. In addition, for employees under the  Performance Conversations system, WMATA does not require  supervisors to rate employee performance. Rather, officials told us that  WMATA implemented Performance Conversations as a way to  encourage more positive, performance-based interactions between  employees and management that expanded beyond discipline. WMATA  has a discipline-based program for most employees under Performance  Conversations (Local 689 bus and rail operations employees and Local  922 bus operators) that establishes standards of conduct these  employees must adhere to, and identifies penalties if they do not. This  discipline-based program lays out the penalties for violations of employee  standards of conduct such as speeding or failing to stop at a red signal.  The penalties for conduct violations range from written warnings, to  suspensions, to termination.", "Using competencies tailored to each position: WMATA\u2019s performance  management systems do not consistently use competencies to identify  the behaviors individual employees are expected to contribute to strategic  goals. Although WMATA has established competencies as part of its  PERFORMetro system, these competencies are defined in a uniform  manner that does not reflect the varied job responsibilities of its  employees. Inclusion of such competencies tailored to each position\u2019s  responsibilities is a leading practice for an effective performance  management system. Competencies, which define the skills and  supporting behaviors that individuals are expected to exhibit to carry out  their work effectively can provide a fuller picture of an individual\u2019s  performance. WMATA defines four competencies for all employees under PERFORMetro\u2014\u201dfocuses on safety,\u201d \u201cserves customers,\u201d  \u201caccountability,\u201d and \u201cteamwork.\u201d However, these competencies are  defined in the same way for all employees under PERFORMetro and are  not based on the job responsibilities of each position. For example,  WMATA assesses the performance of individuals performing different job  functions\u2014such as administrative staff and police officers\u2014by the same  competencies and without consideration for how skills and behaviors vary  by job function. As such, some portions of the competency descriptions  are not applicable to all employees. For example, all PERFORMetro  employees are evaluated on the extent that they wear required personal  protective equipment and/or clothing, but this may not apply to someone  in accounting or human resources. WMATA officials said they are aware  of this, and that supervisors choose which portions of the competency  descriptions to apply to their employees. Finally, WMATA officials said  they do not include competencies for employees under Performance  Conversations because Performance Conversations are intended to  promote performance discussions, not to evaluate employee  performance. However, without competencies tailored to employees\u2019  positions, supervisors are limited in their ability to assess employee  performance.", "WMATA\u2019s performance management systems lack key elements of an  effective performance management system in part because the agency  has not established comprehensive policies and procedures, as called for  by COSO, for its performance management systems. Instead, the agency  relies on piecemeal documents\u2014such as staff memos and training\u2014and  individual supervisors to define and carry out performance management.  By establishing comprehensive policies and procedures that document  key elements, such as defined objectives and rating categories, WMATA  would be better positioned to assess staff performance and ensure  performance management is consistently implemented across  supervisors. Additionally, WMATA would be better positioned to use its  performance management systems to move employees toward achieving  its strategic goals."], "subsections": []}, {"section_title": "Better Controls Could Improve the Completeness, Accuracy, and Timeliness of WMATA\u2019s Employee Performance Reviews", "paragraphs": ["We found that, in implementing its most recent performance evaluation  cycle, WMATA\u2019s reviews of employee performance were often  incomplete, inaccurate, or untimely. First, officials said that they do not  routinely collect or retain the forms for its Performance Conversations and  that accordingly, WMATA does not know the extent to which these  reviews were completed. Second, in our review of a non-generalizable  sample of 50 PERFORMetro performance evaluations for fiscal year  2016, we found that WMATA supervisors frequently submitted  evaluations that were incomplete, inaccurate, or not submitted within  established timeframes. Specifically:", "25 of the 50 selected files we reviewed were missing either the  employee\u2019s or supervisor\u2019s signature required on the initial  expectations setting portion of the form; 3 of those 25 files were also  missing a required signature on the final review portion of the  evaluation form, which provides assurance that the performance  evaluation was completed;", "10 of the 50 selected files we reviewed were scored incorrectly and  thus assigned a performance rating inconsistent with the supporting  review. WMATA determines an employee\u2019s final rating based on  scores tabulated by supervisors for an employee meeting his or her  objectives and demonstrating competencies. Specifically, employees  receive separate ratings for objectives and competencies, which are  then combined together to yield a final overall rating of \u201crole model,\u201d  \u201csolid performer,\u201d or \u201cimprovement required\u201d. We found tabulation  errors in 10 of the files where, for example, a \u201csolid performer\u201d was  given a \u201crole model\u201d rating. Without accurate information about  employee performance, WMATA may not be able to recognize  employees\u2019 achievements or address potential performance  challenges.", "22 of the 50 selected files we reviewed were not submitted on time  according to timeframes established in a 2016 WMATA staff notice  and a 2017 agreement between WMATA and one of its unions. This  includes 9 files of employees not represented by a union, 5 law  enforcement staff files, and 8 Local 2 staff files. Local 2 officials told  us they filed a grievance following delayed performance reviews for its  members. Pursuant to the grievance, Local 2 officials signed an  agreement with WMATA that if a supervisor does not submit a  scheduled performance evaluation within 30 calendar days of a Local  2 employee\u2019s anniversary date, that employee will receive an  automatic solid performer rating and any associated pay or step  increase.", "COSO internal control standards state that management should establish  control activities, such as policies and procedures, to achieve its goals.  Examples of control activities include management reviews and controls  over information processing, among other things. A specific type of  control activity is a \u201ctransaction control,\u201d which helps management ensure  that all transactions (in this case, performance reviews) are completely  captured, accurate, and timely. Transaction controls may include  authorizations or approvals by a higher level of management, or  verifications to compare transactions to a policy and then follow-up if the  transaction is not consistent with the policy. In the case of WMATA\u2019s  performance reviews, this could include comparing a list of employees  who should have received a performance review per WMATA policy to a  list of the reviews that were submitted to the human resources office.", "We found that WMATA does not have sufficient controls in place to  ensure that supervisors accurately complete performance reviews and  submit them to the human resources department within established  timeframes. WMATA human resources officials said that for the 2016  review cycle, they emailed a report to supervisors listing year-end  performance reviews that were due within 90 days, but did not  subsequently ensure that they were completed correctly and on time.  Officials said that once supervisors emailed these reviews to the human  resources department, human resources staff manually recorded these  reviews into WMATA\u2019s personnel information system. WMATA officials  told us that human resources staff examined the performance reviews for  completion and accuracy. Despite this process, WMATA officials could  not provide us reliable information on the number of 2016 performance  reviews that were completed, and as previously mentioned, said they did  not routinely collect or retain Performance Conversations forms. WMATA  officials said they have plans to upgrade their current performance  management information technology system, but descriptions of the  upgrade that WMATA provided to us do not identify how the upgrade will  address the issues we identified. Without controls to ensure that  supervisors submit complete, accurate, and timely performance reviews,  WMATA lacks information on the performance of its workforce, and  employees lack information needed to improve performance."], "subsections": []}, {"section_title": "WMATA Does Not Have a Process to Use Employee Performance Information to Monitor Progress toward Strategic Goals", "paragraphs": ["WMATA officials told us that they do not have a process to use  information from their performance management systems to identify  performance gaps, or pinpoint improvement opportunities. We have  previously identified that routinely using performance information to track  individual contributions to organizational priorities, and then requiring  follow-up actions to address gaps, are key performance management  practices. This approach allows an agency to use its employee  performance information to monitor progress towards its strategic goals.  Officials from two transit agencies we spoke to told us they use  information from their performance management systems to track  performance gaps related to strategic goals. For example, Chicago  Transit Authority officials told us that they evaluate employees on  competencies related to the organization\u2019s strategic goals of safety,  customer service, and teamwork, and then aggregate performance review  information to assess the organization\u2019s performance on these goals.  WMATA does not make use of employee performance information in part  because it has not developed a process to do so. Without a documented  process to use employee performance management information to  monitor progress on its strategic goals, WMATA may miss opportunities  to identify and follow-up on performance gaps and to make full use of the  information collected through its performance management systems."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["WMATA transports more than 1 million passengers each weekday,  making it central to the mobility and productivity of the nation\u2019s capital.  Recent safety incidents and declines in ridership place additional  pressure on WMATA to effectively manage its most expensive resource\u2014 its workforce. If increases in WMATA\u2019s workforce pension costs continue  to outpace increases in WMATA\u2019s other workforce costs, WMATA will be  under greater pressure to manage its costs and balance competing  priorities. A comprehensive assessment of the fiscal risks these pension  investments could pose to WMATA could help it prepare for various  economic scenarios and ensure that it can continue to provide benefits to  its employees without having to compromise future service to riders to  pay for these benefits.", "Effective workforce planning could also help WMATA by ensuring that  WMATA has the people and skills it needs to achieve its goals of safety,  customer service, financial stability, and regional mobility now and in the  future. Establishing a strategic workforce planning process that involves  employees and other stakeholders, and that uses data on WMATA\u2019s  workforce to assess competency and skill gaps would provide WMATA  with critical information that could help it address any identified gaps and  ultimately move it closer to its strategic goals. With effective employee  performance management, WMATA also would be better positioned to  achieve its goals by explicitly aligning them with the daily tasks of its  employees. By establishing comprehensive policies and procedures for  its performance management systems that align employee performance  objectives with WMATA\u2019s strategic goals and define performance  objectives, rating categories, and competencies, WMATA will be better  able to steer employees towards behaviors that support the agency\u2019s  goals and away from behaviors that do not. Further, establishing controls  for supervisors to submit complete, accurate, and timely performance  reviews would help ensure that staff receive information needed to  improve their performance. Finally, a documented process to make use of  the performance information WMATA collects could help it track progress  in meeting its organizational goals and identify and address performance  gaps. In light of WMATA\u2019s uncertain financial future, improvements in  WMATA\u2019s workforce planning and performance management could better  position WMATA to navigate that future."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following five recommendations to WMATA:  1.  WMATA\u2019s General Manager should conduct a comprehensive  assessment of the financial risks to which WMATA is exposed from its  pension plans and communicate the results to its pension plan  trustees and other stakeholders, such as its Board of Directors. This  assessment should include information about WMATA\u2019s current and  potential future required payments and unfunded liabilities, including  under potentially adverse economic scenarios. (Recommendation 1)  2.  WMATA\u2019s General Manager should develop a strategic workforce  planning process that (1) sets a strategic direction for WMATA\u2019s  workforce planning and involves employees and other stakeholders in  developing and communicating the process, and (2) includes a data- driven assessment of the critical skill and competencies WMATA  needs to fill any gaps. (Recommendation 2)  3.  WMATA\u2019s General Manager should establish comprehensive policies  and procedures for both of its performance management systems that  document the goals of the systems and individuals\u2019 responsibilities for  implementing these systems; align employee performance objectives  with all of WMATA\u2019s strategic goals; and define performance  objectives, rating categories, and competencies tailored to individual  positions\u2019 responsibilities. (Recommendation 3)  4.  WMATA\u2019s General Manager should establish controls to ensure  supervisors fully and accurately complete employee performance  reviews and submit them to human resources within established  timeframes. (Recommendation 4)  5.  WMATA\u2019s General Manager should develop a documented process to  use employee performance management information to monitor  progress toward WMATA\u2019s strategic goals. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to WMATA and DOT for review and  comment. WMATA provided written comments, which we have reprinted  in appendix II, and technical comments, which we incorporated as  appropriate throughout our report.", "Regarding our first recommendation that WMATA conduct a  comprehensive assessment of the financial risks to which it is exposed  from its pension plans, WMATA concurred but stated that the agency has  already completed such an assessment and does not believe that any  additional assessment would add value. As stated in our report, WMATA  hired a consultant in 2016 and 2017 to provide an overview of its five  pension plans, including reviewing the plans\u2019 funding strategies and  performance. However, the stated purpose of these reports did not  include an assessment of risk, and the reports included only limited  analysis of the various risks WMATA is facing from the plans, and only  considered a single scenario for estimating WMATA\u2019s future pension  obligations. As such we concluded that these reports did not constitute a  comprehensive assessment of risks facing WMATA from its pension  plans. Given the plans\u2019 large size relative to WMATA\u2019s business  operations, high proportion of retirees compared to active members, high  percentage allocation to risky assets, and high assumed rates of return,  WMATA\u2019s pension plans pose significant risk to its financial operations.  Without a comprehensive risk assessment, WMATA and its Board of  Directors are limited in their ability to prepare for economic scenarios that  could compromise WMATA\u2019s ability to provide future service. Thus, we  continue to believe that our recommendation is valid and that WMATA  should fully implement it.", "Regarding our second recommendation that WMATA develop a strategic  workforce planning process, WMATA concurred and described actions it  has underway to address the recommendation.", "Regarding our third recommendation that WMATA develop  comprehensive policies and procedures for both of its performance  management systems, WMATA concurred and stated that it is in the  process of hiring a consultant to evaluate and redesign WMATA\u2019s  performance management systems for fiscal year 2020. WMATA also  noted that the agency published a performance management handbook  and guide in July 2018 that, among other things, provides definitions and  indicators for behaviors assessed in performance evaluations. As part of  our recommendation follow up process, we will obtain and review the  handbook to determine whether it fully addresses our recommendation.", "Regarding our fourth recommendation that WMATA establish controls to  ensure that supervisors complete and submit employee performance  reviews to human resources within established timeframes, WMATA  concurred and described actions it plans to take in response.", "Regarding our fifth recommendation that WMATA develop a documented  process to use employee performance management information to  monitor progress towards WMATA\u2019s strategic goals, WMATA neither  agreed nor disagreed. WMATA stated that it already ties individual  employee performance to the agency\u2019s strategic goals, but is open to  considering improvements through the third-party consultant it plans to  hire to review its performance management systems. In our report we  note that WMATA\u2019s PERFORMetro performance management system is  not designed to align individual employee performance with all of its  strategic goals. Specifically, supervisors under PERFORMetro are  required to evaluate employees on individual performance objectives that  are aligned with three of WMATA\u2019s strategic goals, but not with WMATA\u2019s  fourth strategic goal\u2014improving regional mobility. Further, WMATA  officials told us that they do not have a process to use information from  their performance management systems to identify performance gaps, or  pinpoint improvement opportunities. Thus, we continue to believe that our  recommendation is valid and WMATA should fully implement it.", "We are sending copies of this report to the General Manager of WMATA,  the Secretary of Transportation, and the appropriate congressional  committees. We provided a draft of this report to WMATA and DOT for  review and comment.", "If you or your staff have any questions about this report, please contact  Mark Goldstein at (202) 512-2834 or goldsteinm@gao.gov or Frank  Todisco at (202) 512-2700 or todiscof@gao.gov. Mr. Todisco meets the  qualification standards of the American Academy of Actuaries to address  the actuarial issues contained in this report. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Major contributors are listed in Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report assesses (1) how the Washington Metropolitan Area Transit  Authority\u2019s (WMATA) workforce costs have changed from fiscal years  2006 through 2017 and factors contributing to those changes; (2) how  WMATA identifies and addresses its current and future workforce needs;  and (3) how WMATA has designed, implemented, and monitored its  employee performance management systems.", "To assess how WMATA\u2019s workforce costs have changed since 2006, we  used data from WMATA\u2019s annual budgets and annual audited financial  statements from fiscal years 2006 through 2017 on the amounts  expensed by WMATA on wages and salaries, employee and retiree  benefits, contracted services, and other information on WMATA\u2019s pension  and retiree medical plans. We selected 2006 to account for any potential  effects of the 2007-2009 financial crisis on pension or other costs, and  because WMATA began contributing to its largest pension plan again in  2006 after a 6-year period of not contributing to this plan. To adjust  WMATA\u2019s costs for inflation, we used quarterly data on the GDP price  index, which we obtained from the Bureau of Economic Analysis. Inflation  adjustment factors are calculated to align with the definition of WMATA\u2019s  fiscal year, which begins on July 1 and ends on June 30 of the following  calendar year. Our calculations adjust nominal values for inflation to find  real values are expressed in fiscal year 2017 dollars, where fiscal year  refers to WMATA\u2019s fiscal year. We also reviewed data WMATA provided  on operating and capital overtime costs, and the most recent actuarial  reports for each of WMATA\u2019s five pension plans for more information on  WMATA\u2019s pension obligations. Additionally, we analyzed characteristics  of WMATA\u2019s five pension plans in consultation with GAO\u2019s Chief Actuary  and in relation to actuarial principles and recent literature. Further, we  consulted with GAO\u2019s Chief Actuary for assistance in interpreting  information about WMATA\u2019s pension and retiree medical plans.", "To assess WMATA\u2019s pension costs, we reviewed pension expense\u2014  which reports WMATA\u2019s expense for its pension plans during a year, as  measured in accordance with pension accounting standards for financial  reporting purposes\u2014and pension contributions, which reports the amount  WMATA paid into its pension plans during a year. Both pension expense  and pension contributions increased substantially from fiscal years 2006  through 2017. While pension expense is the pension component of  WMATA\u2019s employee and retiree benefit cost data described above,  changes in pension accounting reporting standards in 2014 resulted in  pension expense being reported differently before and after 2014. As  such, we relied on pension contributions as our primary measure of  growth of WMATA\u2019s annual pension costs. To assess the reliability of  WMATA\u2019s budget data, and other data WMATA provided, we interviewed  WMATA officials on practices used to assemble these data. We found  these data to be sufficiently reliable for our purposes. To identify factors  contributing to changes in workforce costs, we interviewed WMATA  officials and reviewed WMATA\u2019s annual budgets, annual financial  statements, and actuarial statements for information on the total number  of authorized represented and non-represented staff, changes in  operating overtime costs, changes in pension-related costs, and other  factors that could influence workforce cost changes since fiscal year  2006.", "To evaluate how WMATA identifies and addresses its workforce needs,  we compared WMATA\u2019s workforce planning and workforce development  efforts to leading practices we previously identified and the Committee of  Sponsoring Organizations of the Treadway Commission (COSO) internal  control standards, which WMATA follows. We previously developed  these leading strategic workforce planning practices based on a review of  documents from (1) organizations with government-wide responsibilities  for or expertise in workforce planning models and tools, such as the  Office of Personnel Management and the National Academy of Public  Administration, and (2) federal agencies recommended as having  promising workforce planning programs. Additionally, to identify these  practices we reviewed our prior reports and testimonies on human capital  issues and met with officials from the aforementioned organizations  concerning existing workforce planning models and lessons learned from  workforce planning experiences.", "In addition to comparing WMATA\u2019s workforce planning efforts to leading  practices and COSO standards, we reviewed WMATA\u2019s 2017\u20132019  individual department business plans and 2013\u20132025 strategic plan to  describe how WMATA identifies its short- and long-term workforce  needs. Furthermore, we obtained and reviewed WMATA information on  the positions WMATA eliminated in fiscal years 2017 and 2018, including  the number of positions that were vacant or occupied. Lastly, we  compared WMATA\u2019s workforce planning approach to those at a non- generalizable sample of five similar U.S. transit and rail agencies,  selected based on similarity in size, age, unions representing agency  staff, and stakeholder recommendations. Agency size was measured  according to unlinked passenger trips and passenger miles data in the  American Public Transportation Association\u2019s 2016 Public Transportation  Fact Book, the most recent issue available at the time of selection.  System age and union status were determined by a review of publicly  available information about each transit system such as academic papers  and transit agency websites. With input from industry, federal, WMATA,  and union stakeholders, we selected the following peer agencies: (1)  Chicago Transit Authority, (2) Los Angeles County Metropolitan  Transportation Authority, (3) San Francisco Bay Area Rapid Transit  District, (4) Southeastern Pennsylvania Transportation Authority, and (5)  Metropolitan Transportation Authority, Metro-North Commuter Railroad.", "To evaluate how WMATA designed, implemented, and monitored its  performance management systems, we reviewed documentation on  WMATA\u2019s two employee performance management systems\u2014 \u201dPERFORMetro\u201d for non-represented, Office and Professional Employees  International Union Local 2, Fraternal Order of Police, and International  Brotherhood of Teamsters Local 639 employees; and \u201cPerformance  Conversation\u201d for Amalgamated Transit Union Local 689 and International  Brotherhood of Teamsters Local 922 employees. We compared these  systems to leading performance management practices we have  previously identified and to the COSO internal control standards. We  previously identified these key practices for modern, effective, and  credible performance management systems by synthesizing information  contained in its previous performance management work. These  practices were also provided for comments to officials from the Office of  Personnel Management, the Senior Executives Association and the  Center for Human Resources Management at the National Academy of  Public Administration. In addition to comparing WMATA\u2019s performance  management systems to key practices and COSO internal control  standards, we also reviewed WMATA\u2019s 2013\u20132025 strategic plan, which  outlines WMATA\u2019s four strategic goals: (1) build and maintain a premier  safety culture and system, (2) meet or exceed expectations by  consistently delivering quality service, (3) improve regional mobility and  connect communities, and (4) ensure financial stability and invest in our  people and assets.", "To assess how WMATA implemented its performance management  systems, including what management controls it had in place to track the  completion of required annual employee performance reviews, we  interviewed WMATA human resources officials and assessed the data  they collected on the number of 2016 PERFORMetro year-end reviews  that were required and submitted by supervisors. WMATA officials could  not tell us how many PERFORMetro reviews or Performance  Conversation forms were required over the period we requested. WMATA  officials said that they had data on the number of 2016 PERFORMetro  reviews submitted to human resources, but did not collect any data on  Performance Conversation forms. As such, we requested the list of  submitted 2016 PERFORMetro reviews. WMATA human resources  management sent an email to all supervisors asking them to send the  reviews they had conducted in the 2016 performance period if they had  not already done so. While this information met our purposes for  performing a non-generalizable review of selected completed  performance reviews, data on the number of employees who were  required to have a performance review under PERFORMetro in the 2016  performance period and the number of those employees who received a  review were not reliable for reporting purposes. WMATA officials agreed  with our assessment that these data were not reliable for reporting  purposes.", "From the list of PERFORMetro reviews we received, we selected an initial  non-generalizable sample of 60 files to assess based on employee group  (non-represented, Local 2, and Metro Transit Police) and job title. We  selected 20 files from each of the three employee groups\u201410 files each  from the two job titles within each employee group with the highest  number of identified reviews. We selected the 60 files by assigning  random numbers to each file within the six selected job titles and  selecting the first 10 files in the sorted, randomized list. We adjusted our  random selection as needed to ensure our selection included  performance reviews completed by multiple supervisors. Our final  selection included the following performance review files:", "Non-represented employees (20 files total)", "Rail Operations Supervisor (10 files)", "Transit Field Operations Supervisor (10 files)", "Local 2 employees (20 files total)", "Training and Safety Instructor (10 files)", "Central Control Supervisor (10 files)", "METRO Transit Police Department (20 files total)", "METRO Police S (10 files)", "Special Police Series (10 files)", "While conducting our file review, we found that the Special Police Series  evaluation forms were significantly different than the other files and did  not align with the data collection instrument we had designed. As a result,  we did not include these 10 files, leaving us with 50 files included in our  final analysis. Lastly, as discussed in our report, we did not review any  Performance Conversation files as WMATA officials told us that they do  not track the completion of these forms and therefore did not have any  data on the number of Performance Conversation year-end reviews that  were completed in fiscal year 2017, the first year Performance  Conversations were implemented. Finally, we interviewed officials from  the FTA and union leadership from four of the five unions representing  WMATA employees.", "We conducted our work from July 2017 to September 2018 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Washington Metropolitan Area Transit Authority", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Matt Barranca (Assistant  Director), Sarah Farkas (Analyst in Charge); Namita Bhatia Sabharwal;  Lacey Coppage; Tom Gilbert; Josh Ormond; Steve Rabinowitz; Michelle  Weathers; Hannah Weigle; and Elizabeth Wood made key contributions  to this report."], "subsections": []}]}], "fastfact": ["In recent years, Washington, D.C.'s Metro transit system has had serious safety problems and has lost revenue during lengthy maintenance. These conditions put pressure on Metro to effectively manage its most expensive resource\u2014its workforce.", "We found:", "Metro's pension costs are increasing faster than other workforce costs, which could make it hard to continue providing employee benefits without compromising future service.", "Metro's workforce management policies and processes don't help it achieve safety and customer service goals.", "We recommended fully assessing Metro's pension risks and improving workforce planning and performance management."]}
{"id": "GAO-18-592", "url": "https://www.gao.gov/products/GAO-18-592", "title": "Defense Management: DOD Needs to Address Inefficiencies and Implement Reform across Its Defense Agencies and DOD Field Activities", "published_date": "2018-09-06T00:00:00", "released_date": "2018-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD spends billions of dollars annually to maintain business functions that support the warfighter. Many of these functions are performed by the DAFAs\u2014DOD's 19 defense agencies and 8 field activities intended to provide department-wide consolidated support functions. GAO has previously identified instances of fragmentation, overlap, and duplication among the DAFAs.", "Senate Report 115-125, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018, included a provision that GAO review the DAFAs. This report evaluates the extent to which (1) DOD has assessed the continuing need for each DAFA; (2) any overlap or fragmentation among the DAFAs that provide human resources services has affected service delivery; and (3) DOD has monitored and evaluated the results of its efficiency initiatives that affect the DAFAs. GAO reviewed legal requirements, assessed prior DOD reports, and analyzed DOD's human resources activities and documentation tracking past efficiency initiatives."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) does not comprehensively or routinely assess the continuing need for its defense agencies and DOD field activities (DAFAs). DOD was statutorily required to review the services and supplies each DAFA provides to ensure there is a continuing need for each and that the provision of services and supplies by each DAFA, rather than by the military departments, is more effective, economical, or efficient. A DOD directive requires the recording of the review. DOD previously issued biennial reports to Congress to record its review. Since 2012, DOD has relied on existing processes to fulfill the requirement; such as the annual budget process and the day-to-day management of the DAFAs. However, DOD did not provide sufficient evidence that these processes satisfy the statute. For example, while DOD reviews the DAFAs during the budget process, it does not specifically review the provision of services by the DAFAs rather than the military departments. Further, DOD does not have internal guidance that provides clear direction for conducting and recording its response to the statutory requirement. Without such guidance, DOD is limited in its ability to clearly define or target the scope of its reviews and any resulting reports. As such, DOD and congressional decision makers may not have reasonable assurance of a continuing need for the DAFAs, or that the provision of services and supplies is effective, economical, and efficient.", "There is fragmentation and overlap within the DAFAs that provide human resources services to other defense agencies or organizations within DOD. At least six DOD organizations, including three DAFAs, perform human resources services for other parts of the department. One DAFA receives human resources services from all six organizations. This has resulted in negative effects, such as inconsistent performance information regarding hiring, fragmented information technology systems, and inefficiencies associated with overhead costs. For example, DOD officials stated that there are over 800 fragmented information technology systems used to store and record training records across the department, which are costly to maintain. DOD established a reform team to reduce inefficiencies within this business function. However, the team lacks comprehensive information on overhead costs that could guide reform and does not have time frames or deliverables for completing certain reform initiatives. With consistent human resource performance information, comprehensive information on overhead costs, and clear time frames in place, the team would be better positioned to thoroughly assess the department's system for human resources service delivery and develop and implement long-term solutions for better coordination or consolidation of this function.", "DOD has taken some steps to monitor and evaluate the results of key efficiency initiatives that affect the DAFAs. However, DOD has not always established baselines or performed ongoing monitoring of its initiatives. Further, DOD has focused on whether steps have been taken, rather than outcomes achieved. For example, DOD did not evaluate whether a prior efficiency initiative called the Core Business Process Review achieved any of its intended savings or led to expected efficiencies. Without ensuring that efficiency initiatives are fully monitored and evaluated against established baselines over time, DOD lacks a systematic basis for evaluating whether its various initiatives have improved the efficiency or effectiveness of its programs or activities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including for DOD to develop internal guidance to conduct and record its reviews of DAFAs; collect consistent performance information and comprehensive overhead cost information; establish time frames and deliverables for key reform efforts; and ensure routine and comprehensive monitoring and evaluation of ongoing efficiency initiatives. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) maintains military forces with  unparalleled capabilities; however, it continues to confront organizational  and management challenges that hinder collaboration and integration  across the department. Further, DOD spends billions of dollars each year  to maintain the business functions designed to support the warfighter,  such as managing finances, information systems, contracts, and weapon  systems. DOD is in the midst of significant management reorganization  and reform intended to address long-standing weaknesses in its business  operations. As part of this reorganization, the newly established Chief  Management Officer (CMO) is responsible for improving the quality and  productivity of the business operations of the department. The defense  agencies and DOD field activities (DAFAs) play a critical role in  supporting the department\u2019s business operations. DOD\u2019s 19 defense  agencies and 8 field activities are intended to perform consolidated  supply and service functions on a department-wide basis. According to a  November 2017 DOD memo, 22 DAFAs were funded at more than $106  billion for fiscal year 2017.", "In prior work, we have identified numerous instances of fragmentation,  overlap, and duplication and have recommended actions to increase  coordination or consolidation to address related inefficiencies that affect  the DAFAs. For example, we previously recommended that DOD should  minimize unnecessary overlap among the eight organizations that  account for missing persons from past conflicts and improve the  effectiveness of that mission. Subsequently, DOD addressed this  fragmentation and reorganized the mission into one defense agency, the  Defense POW/MIA Accounting Agency.", "Senate Report 115-125 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 included a provision that we review  the DAFAs. This report evaluates the extent to which (1) DOD has  assessed the continuing need for each DAFA; (2) any overlap or  fragmentation among the DAFAs that provide human resources services  has affected the delivery of those services; and (3) DOD has monitored  and evaluated the results of its efficiency initiatives that affect the DAFAs.", "For our first objective, we reviewed DOD\u2019s efforts to fulfill a statutory  requirement that the department periodically review the continuing need  for its DAFAs and the associated provision of services and supplies. As  such, we reviewed the biennial reports that DOD issued on the DAFAs to  address the statute from 1987, the first year after enactment of the  requirement, through 2012, the most recent year of DOD\u2019s reporting. We  also interviewed officials from the Office of the CMO (OCMO) regarding  DOD\u2019s current processes for reviewing and recording their assessment of  the DAFAs, and we evaluated DOD\u2019s current response against the  relevant statute. Further, we reviewed the most recent DOD reports on  combat support agencies, issued in 2016 and 2017, as there is a  comparable statutory requirement for DOD to review this subset of the  DAFAs, and we interviewed relevant Joint Staff officials regarding the  processes used to develop those reports. We compared DOD\u2019s biennial  reports and combat support agency reports with key elements of quality  evaluations, which we identified in prior work and compiled as part of this  review.", "For our second objective, we selected one business function of the  department\u2014the provision of human resources services\u2014and reviewed  the department\u2019s implementation of this function to identify any potential  inefficient fragmentation or overlap in the services provided. For  example, we reviewed the client bases serviced by each DAFA to identify  any inefficient duplication or overlap, and we reviewed the performance  measures used by each DAFA to examine for any fragmentation in their  respective approaches to performance measurement. We compared  DOD\u2019s provision of human resources by DAFAs against statutory  requirements that DOD\u2019s DAFAs provide services in a manner that is  effective, economical, or efficient. Further, we assessed DOD\u2019s provision  of human resources, using our fragmentation, overlap, and duplication  evaluation guide. We also interviewed relevant DOD and DAFA officials  about the provision of human resources and current plans to reform this  business function.", "For our third objective, we selected and assessed DOD\u2019s monitoring and  evaluation of department-wide efficiency initiatives. Specifically, we selected a subset of efficiency initiatives that affected DAFAs and that we  have reported on since 2014. We obtained documentation and spoke with  officials from the OCMO, and we selected DAFAs regarding DOD\u2019s  monitoring, assessing, and tracking of the selected reform initiatives. We  also obtained information and documentation from the OCMO regarding  DOD\u2019s ongoing reform efforts, including plans for monitoring and  assessing efforts, and we evaluated this information using Standards for  Internal Control in the Federal Government, which states that  management should establish and operate monitoring activities and  evaluate the results. See appendix I for additional details.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD\u2019s 19 defense agencies and 8 DOD field activities are defense  organizations separate from the military departments. They are intended  to provide a common supply or service across more than one DOD  organization. The services and supplies provided by the DAFAs are  broad; they range from intelligence to human resources services, to  providing secure networks and buildings, to developing cutting edge  research and technological advancements, to missile defense, to  providing groceries for military families. DOD estimates that the DAFAs  employ more than 380,000 military and civilian personnel across the  department, not including contractors.", "Each head of a DAFA reports to a principal staff assistant within the  Office of the Secretary of Defense, who in turn reports directly to the  Deputy Secretary of Defense or the Secretary of Defense. The principal  staff assistants who provide oversight to the DAFAs include the CMO, the  Chief Information Officer, the heads of DOD\u2019s Offices of General Counsel  and Public Affairs, and all of the Under Secretaries within the department,  depending on the mission of the DAFA. In addition to providing advice to  the Secretary on assigned matters, each principal staff assistant plays an  important role in the development and review of key aspects of the  DAFA\u2019s submissions as part of DOD\u2019s annual budget process, called the  Planning, Programming, Budgeting, and Execution process.", "A subset of the DAFAs consists of the combat support agencies, which  have, in addition to their other functions, focused missions to support the  combatant commands. These eight agencies are jointly overseen by their  respective principal staff assistants and the Chairman of the Joint Chiefs  of Staff. Figure 1 details the organizational structure and reporting  relationships of the DAFAs, including the eight combat support agencies."], "subsections": [{"section_title": "DOD\u2019s CMO Reorganization and Related Reform Efforts", "paragraphs": ["Section 901 of the Fiscal Year 2017 National Defense Authorization Act  established a CMO within DOD, effective on February 1, 2018, and the  Secretary established the position, as directed, on that date. The Fiscal  Year 2018 National Defense Authorization Act, Section 910, clarified the  role and expanded the responsibilities of the DOD CMO. Further, it  elevated the position to take precedence in the department after the  Secretary of Defense and the Deputy Secretary of Defense. This  section also gave the CMO authority to direct the secretaries of the military departments and the heads of other defense organizations with  regard to business operations and department-wide shared services. The  expanded authority of the CMO includes oversight, direction, and control  over DAFAs providing shared business services for the department, to be  determined by the Secretary of Defense or the Deputy Secretary of  Defense. In January 2019 the CMO will assume some of the Chief  Information Officer responsibilities, duties, and powers related to business  systems or management, including the management of the enterprise  business operations and shared services of the department, as required  by law. Additionally, the CMO will serve as the DOD performance  improvement officer."], "subsections": []}, {"section_title": "Fragmentation, Overlap, and Duplication", "paragraphs": ["Since 2011, we have issued annual reports on opportunities to reduce or  better manage fragmentation, overlap, and duplication, as well as to  achieve cost savings and enhance revenue for the federal government.  The federal government faces a long-term, unsustainable fiscal path  based on an imbalance between federal revenues and spending. Figure  2 defines fragmentation, overlap, and duplication."], "subsections": []}]}, {"section_title": "DOD Has Not Comprehensively or Routinely Assessed the Continuing Need for Its DAFAs", "paragraphs": [], "subsections": [{"section_title": "DOD\u2019s Past and Current Efforts to Assess the DAFAs Have Limitations", "paragraphs": ["Although DOD has taken some steps to assess the continuing need for  the DAFAs, we found that these steps have been neither comprehensive  nor routine, especially since 2012. At the time of our review, section  192(c) of title 10 of the United States Code required the Secretary of  Defense to review the services and supplies each DAFA provides to  ensure that (1) there is a continuing need for each DAFA; and (2) the  provision of services and supplies by each DAFA, rather than by the  military departments, is a more effective, economical, or efficient manner  of providing those services and supplies or of meeting the requirements  for combat readiness.", "From 1987 to 2012, DOD issued biennial reports to Congress to record its  response to this statute, but the methodology and quality of those reports  varied. Regarding the methodology of the past reports, for the first five  biennial reports, from 1987 to 1995, DOD relied on a research team to  identify findings and provide recommendations on the structure and  composition of the DAFAs. The four reports issued from 1997 to 2004  relied on a survey of the DAFAs\u2019 customers across DOD. From 2005 to  2010, DOD issued three reports that alternated between a senior  management assessment of the DAFAs and the customer survey  approach. In addition, the 2009-2010 report recorded activities relevant to  the statutory review requirement, with a focus on a major DOD efficiency  initiative that was ongoing at that time.", "Regarding quality, we found that the most recent report, dated 2012,  generally did not reflect key elements of quality evaluations, which we  identified in our prior work and compiled as part of this review. Table 1  below details these key elements.", "We found that some key elements were included in the most recent  report, but other key elements were not reflected. We reviewed that report  against all elements and found that the report\u2019s purpose was aligned with  the relevant statutory requirements, which is a key element. Further, the  report relied on data obtained from appropriate sources for the evaluation,  to include survey information from the DAFA directors and military  department officials. However, we found that the report did not assess the  reliability of the data used, define key terms, clearly state criteria used for  analysis, or make recommendations. For example, OCMO officials  familiar with the report told us that some DAFAs and military departments  surveyed for the report provided more detail and information in their  responses than others, but there was no assessment of the reliability of  this information. Overall, OCMO officials acknowledged that the report  was more of a collection of information, rather than an in-depth  assessment.", "At the time of our review, section 192(c) of title 10, United States Code,  did not explicitly require that DOD develop and issue a written report as  part of the required periodic review. According to DOD officials, they  discontinued issuing biennial reports in 2012 because the reports were  not a leadership priority, given the resources required to produce them. In  addition, OCMO officials acknowledged that the department does not  currently record fulfillment of the statutory requirement through a  centralized process, such as the development of a report that responds to  the requirement. However, a DOD directive tasks the former Director of  Administration and Management, whose functions have now been  integrated into the CMO office, to oversee the biennial review of the  DAFAs and to record the fulfillment of that review. Further, Standards  for Internal Control in the Federal Government states that documentation  is a necessary part of an effective internal control system and is required  for effective operations. OCMO officials told us that they are considering  renewing the issuance of biennial reports, but that there are no firm plans  to do so at this time, nor are there any associated time frames.", "In the absence of biennial reports, OCMO officials stated that since 2012  they have relied on existing departmental processes to address the  statutory requirement to review the DAFAs. Senior level OCMO officials  expressed some disagreement about which of these existing processes  ensure that they have fulfilled the statutory requirement. When we  assessed the processes, we determined that DOD did not provide  sufficient evidence that it has met the statutory requirement. These  processes include the following:", "Annual budget process: Some OCMO officials stated that DOD\u2019s  annual budget process is a means of addressing the statutory  requirement to review the DAFAs, but one senior official from the  OCMO disagreed. Although DOD reviews the budget proposals for  each DAFA, DOD could not provide evidence that the annual budget  process includes a specific review of the continuing need for each  DAFA, or that the use of the DAFAs ensures the most efficient  provision of services across DOD.", "Day-to-day management of the DAFAs: One OCMO official stated  that day-to-day management of the DAFAs provides a means of  addressing the statutory requirement to review the DAFAs. However,  we found that the documentation provided by OCMO officials does not  demonstrate that a review and recording of DAFA services and  supplies takes place through day-to-day management of the  department. Moreover, some OCMO officials stated that the day-to- day management activities of a large organization can actually detract  from leadership\u2019s ability to focus on needed reviews and reform.", "Reform or efficiency initiatives: Some OCMO officials stated that prior  reform efforts that were focused on the DAFAs exemplify the  department\u2019s response to the statute. However, although certain  reform initiatives, such as the Business Process and Systems  Reviews, affected the DAFAs, we found that the stated purposes of  these reform initiatives, discussed in more detail later in this report, do  not reference the continuing need for DAFAs or examine whether  services should be performed instead by the military departments.  Further, some OCMO officials acknowledged that prior reform efforts  did not examine the continuing need for DAFAs.", "DAFA reorganizations: OCMO officials cited certain reorganizations of  the department as evidence that they review the DAFAs. However,  the examples they cited were congressionally mandated  reorganizations, such as the replacement of the Under Secretary of  Defense for Acquisition, Technology, and Logistics with two new  Under Secretary positions. As these were congressionally mandated  reorganizations and therefore required, we found that they do not  demonstrate that changes resulted from an internal comprehensive  assessment of the continuing need for the DAFAs or their provision of  services and supplies.", "Management of services through executive agents: Finally, OCMO  officials stated that the existence of executive agents throughout the  department shows that DOD focuses on ensuring efficient delivery of  services and supplies. Multiple heads of DAFAs serve as  designated executive agents. However, OCMO officials did not  provide documentation that these executive agents assess the  continuing need for the DAFAs. Further, we have previously reported  on weaknesses in the use of DOD executive agents in management  arrangements. For example, we previously reported that DOD had not  defined continued need, currency, effectiveness, or efficiency in  satisfying requirements for executive agents."], "subsections": []}, {"section_title": "DOD Has Established Guidance That Results in Quality Evaluations of Its Combat Support Agencies but Lacks Guidance for Its Review of All DAFAs", "paragraphs": ["Under a separate statute, 10 U.S.C. \u00a7 193(a), DOD is required to  periodically report on the responsiveness and readiness of the eight  combat support agencies, a subset of the DAFAs. In contrast to DOD\u2019s  biennial reports on DAFAs for 10 U.S.C. \u00a7 192(c), we found that the DOD  combat support agency reports for 10 U.S.C. \u00a7 193(a) we reviewed  generally reflect key elements of quality evaluations that we identified.  For example, the most recent combat support agency reports we  reviewed generally have clear evaluation questions, use sufficient and  appropriate data, and support conclusions with data and analysis. Last,  all of the DOD combat support agency reports we reviewed contain  actionable recommendations.", "Recommendations from the Joint Staff included in combat support  agency reports resulted in reported efficiencies. For example, in response  to the findings and recommendations of a combat support agency report,  officials from the Defense Information Services Agency created a new  office to serve as a single point of contact for its customers. These  officials reported that the office has reduced paperwork and helped to  build relationships with customers. Joint Staff officials reported a variety  of other positive results from combat support agency report  recommendations. These results include an increase in the speed of  specific deliveries from the Defense Logistics Agency (DLA) to DOD  customers outside the continental United States; improved navigational  charts provided by the National Geospatial Intelligence Agency to the  Combatant Commands to ensure safety; and the establishment of clear  policy related to fuel additives, including the clarification of specific roles  and responsibilities.", "OCMO officials stated that the statutory requirement for combat support  agency reports is more specific and smaller in scope than the statutory requirement to review the DAFAs. As a result, the officials told us that  they have not been able to conduct targeted and potentially more useful  analysis for DAFAs, such as the evaluations they conduct of the combat  support agencies. However, we found that while the statutes differed in  some ways\u2014for example, a report is specifically required for the combat  support agencies, but was not for the DAFAs\u2014both statutes prescribed  broad requirements for the review processes.", "While each statute requires a periodic assessment, we found differences  in the direction that DOD provides to guide the department\u2019s response to  these statutes. Specifically, a Joint Staff Instruction describes  requirements for the combat support agency reports and provides  direction for the associated process. In many cases, the Joint Staff  Instruction requirements reflect the key elements for evaluations that we  identified. For example, the instruction provides general guidance on the  criteria that reports should use, as well as specific examples. To ensure  data reliability, the instruction requires validation of findings, issues,  recommendations, and observations. Further, the instruction describes  key terms included in the statute, such as responsiveness, readiness, and  operating forces. In contrast, DOD has not issued internal guidance that  details requirements for the required review of DAFAs.", "The Joint Staff has also developed a strategy for scoping and timing its  combat support agency reviews to make the work manageable and the  outcome of the reviews useful to the combatant command. Specifically,  the Joint Staff focuses each report on one combat support agency at a  time, rotating the focus so that each agency is reviewed every several  years. Joint Staff officials stated that the focus areas of the reports also  vary depending on the needs of warfighter, senior leader direction, and  actions taken as a result of the previous assessments. Additionally, when  conducting its reviews, the Joint Staff primarily assesses the combat  support missions within each combat support agency, rather than all  functions implemented by the agency.", "Conversely, DOD has not developed any internal guidance for a similar  process that would allow for a more manageable approach to the  requirement to review the DAFAs. As a result, previous biennial reviews  examined all services and supplies of all DAFAs in each report, an  approach that CMO officials acknowledged prohibited more detailed  analysis. Through the development of internal guidance that provides  clear direction for conducting and recording DOD\u2019s response to the  required review of the DAFAs, the department could more clearly define  or target the scope of those reviews and any resulting reports to make  effective use of the resources devoted to that process. For example, DOD  could choose to follow a risk-based approach, focus on the department\u2019s  key priorities for reform, or rotate the focus of each report as the Joint  Staff does with the combat support agency reports.", "Without clear internal guidance that defines the requirements for a high- quality review of its DAFAs and the associated recording of the results of  those reviews, DOD and congressional decision makers may not have  reasonable assurance that there is a continuing need for the DAFAs and  that the provision of services and supplies is effective, economical, and  efficient. Such information could assist decision makers when  considering any future reorganizations of the DAFAs, or the realignment  of functions among the DAFAs or other defense organizations, or when  seeking greater efficiencies."], "subsections": []}]}, {"section_title": "Fragmentation and Overlap among the DAFAs That Provide Human Resources Services Have Negative Effects, and Related Reform Efforts Have Limitations", "paragraphs": [], "subsections": [{"section_title": "Fragmentation and Overlap Occur among the DAFAs That Provide Human Resources Services", "paragraphs": ["DOD currently has a service delivery model in which there are numerous  human resources providers offering varying levels of quality and  transparency of costs. Section 191 of title 10, United States Code,  states that the Secretary of Defense may provide for the performance of a  supply or service activity that is common to more than one military  department by a single agency of DOD when it would be more effective,  economical, or efficient. Nevertheless, at least six organizations within  DOD, including three DAFAs and the three military departments, provide  human resources services to other defense agencies or organizations.  Specifically, DLA, the Defense Finance and Accounting Service (DFAS),  and the Washington Headquarters Service (WHS) perform human  resources services for other organizations, such as other DAFAs; offices  within the Office of the Secretary of Defense; or parts of the military  departments. All perform the same types of human resources services,  such as those related to civilian workforce hiring across DOD.  Additionally, the Departments of the Army, Navy, and Air Force each has  a human resources command or personnel center.", "Below is a count of the number of customers served by the DOD  agencies providing human resources services as of May 2018, as  reported by agency officials.", "DLA provides human resources services for about 70,000 customers,  including 25,000 of its own employees and 45,000 civilians from  across DOD outside of DLA.", "DFAS provides human resources services for about 26,000 DOD  civilians, including 12,000 DFAS employees and about 14,000  customers from across DOD.", "WHS performs nearly all types of human resources services for some  DAFAs, such as the Defense POW/MIA Accounting Agency and the  Defense Legal Services Agency, as well as all senior executives and  presidential appointees across the department, totaling about 170,000  individuals. However, WHS performs only certain human resources  services for its own employees, such as recruitment and training.  WHS pays DLA to perform other types of human resources services,  such as personnel action processing, pre-employment drug testing,  and the processing of certain travel orders and allowances, among  other functions, for more than 7,000 WHS employees.", "Through our assessment of documents detailing the human resources  service customer bases of DFAS, DLA, and WHS, we found that there is  overlap in the human resources services that they provide. For example,  DOD officials reported that three DAFAs and the military departments  provide human resources servicing to personnel employed by the  Defense Security Cooperation Agency, depending on the location, rank,  or other characteristics of the staff (see figure 3). Moreover, although  each military department has its own human resources command or  personnel center, we have identified some instances of DAFAs providing  human resources services to military department civilian employees or  servicemembers. For example, the Army pays DFAS to provide broad  human resources support to the Army\u2019s Financial Management  Command, even though it could use its own human resources servicing  organization. Additionally, WHS officials stated that the agency provides  certain human resources services to all presidential appointee civilian  positions across the military departments, rather than having the  appointees\u2019 military departments\u2019 own human resources commands or  personnel centers do so. Also, DLA provides human resources services  to the military department civilians and servicemembers assigned to DLA."], "subsections": []}, {"section_title": "Inefficient Overlap and Fragmentation Have Resulted in Negative Effects to the Department", "paragraphs": ["The fragmentation and overlap among the DAFAs that provide human  resources services to other defense offices or organizations have resulted  in negative effects, such as inconsistent performance information,  inefficiencies resulting from fragmented information technology (IT)  systems, and inefficiencies related to overhead costs."], "subsections": [{"section_title": "Inconsistent Performance Information", "paragraphs": ["In the current service delivery model with multiple human resources  service providers, DOD agencies choose a human resources provider.  DFAS, DLA, and WHS differ in how they measure and report their  performance data, which results in inconsistent information and limits  customers\u2019 ability to make informed choices about selecting a human  resources service provider to meet their needs. DFAS, DLA, and WHS  submit data in department-wide information systems, as required. This  information is used to develop an overall DOD time-to-hire measure of the  department\u2019s performance against the government-wide goal of 80 days  to fill a job opening. However, the ways in which each DAFA develops  this measure, and other measures to assess its own performance, differ.  For instance, one DAFA measures 12 different phases of the entire  process to fill a job opening, with a different measure for each of the 12  phases. Other DAFAs choose to begin or end their measurement process  at different points within the hiring process. As such, the measures used  by human resources providers to determine the timeliness and quality of  the services provided to customers are not consistent across the  providers. The inconsistent performance data do not allow DOD  customers to make fully informed comparisons in selecting a service  provider.", "Table 2 shows the differences among the respective reported time-to-hire  averages of the three DAFAs that provide human resources services for  civilians who are hired by the three military departments. The averages  range from 65 days to 120 days, which shows a considerable variance in  performance. However, as described previously, these reported averages  were not calculated in a consistent manner across the department\u2019s  human resources providers. In addition, these time-to-hire averages do  not reflect the quality of the hiring or reflect that some types of positions  are difficult to fill, which could affect results. For example, DOD reports  that it takes an average of 118 days to fill a civilian intelligence and  counterintelligence position department-wide.", "With more consistent information, DOD leadership could better assess  what changes, if any, need to be made to improve hiring practices. As  DOD officials told us, delays in hiring can result in failing to hire the best  candidates and can negatively affect program success. Further, DOD  organizations could better weigh decisions on obtaining human resources  services."], "subsections": []}, {"section_title": "Fragmented Information Technology (IT) Systems", "paragraphs": ["Each human resources provider within DOD uses a common IT system,  called the Defense Civilian Personnel Data System, to store and process  civilian human resources data. However, each uses a separate  connection to the system, resulting in some inefficiency. For example,  when an employee in a defense agency serviced by multiple human  resources providers transfers to a different part of the same agency or  another part of DOD, the employee is treated as if he or she has been  newly hired. The employee\u2019s personnel data must be re-entered through  a different connection to the data system, and other administrative steps  are re-performed, such as providing the employee a new Common  Access Card, the department\u2019s identification badge used for facility and  computer system access.", "Additionally, DOD officials stated that there are more than 800 learning  management systems employed across the department, which are used  to deliver training to personnel and store and record training records.  DAFA and OCMO officials stated that these fragmented learning  management IT systems are duplicative in nature and are costly to the  department to maintain, although officials were not able to provide an  estimate of those costs.", "In January 2018, DOD officials stated that all human resources providers  were expected to move to a common connection to the IT system by  October 2018, which was expected to eliminate redundant data entry and  other duplicative administrative inefficiencies. However, as of June 2018,  DOD officials stated that this effort is on hold, as the department is  currently reexamining the best strategy to provide IT solutions for human  resources. According to officials, that strategy might be to use a cloud- based solution, as opposed to changes to the legacy system of the  Defense Civilian Personnel Data System."], "subsections": []}, {"section_title": "Inefficiencies Resulting from Multiple Providers Charging Overhead", "paragraphs": ["We found that defense agencies or other organizations that use more  than one human resources service provider are paying overhead costs  charged by each provider, which results in unnecessary expenses and  inefficiencies. DOD officials agreed that the fragmented system of service  delivery with multiple providers allows for possibly redundant overhead  charges, and that a more consolidated service delivery model could  reduce expenses associated with overhead. The DAFAs that charge  human resources customers by using a fee-for-service structure apply a  certain percentage of the total cost as a \u201cgeneral and administrative cost\u201d  or \u201cnon-labor costs\u201d to each customer. Agency officials stated that these  overhead costs pay for management salaries, other personnel-related  costs, and administrative costs, such as IT support and facilities costs.  These overhead costs are separate from the \u201cdirect labor\u201d costs that  represent the personnel and other expenses required to perform the  service requested. For example, DFAS officials stated that about 7  percent of the fees charged by DFAS to human resources service  customers goes for \u201cgeneral and administrative costs\u201d that are separate  from the direct labor expense required to perform services. Similarly,  about 20 percent of the costs charged to DLA\u2019s human resources  customers covers indirect costs. As such, organizations pay overhead  and administrative expenses for several human resources providers,  thereby using financial resources that could be diverted to higher priority  needs. According to DOD officials, using one provider would likely reduce  inefficient expenses for human resources services paid by defense  organizations. However, according to those officials, more comprehensive  information and analysis is needed to determine the extent of inefficient  overhead costs that occur. Comprehensive information about the extent  of these and other possibly redundant or otherwise inefficient expenses  would help identify a human resources service delivery model that is  effective, economical, and efficient."], "subsections": []}]}, {"section_title": "DOD\u2019s Efforts to Reform Human Resources Have Some Limitations", "paragraphs": ["In January 2018, the Deputy Secretary of Defense established a Human  Resources Management Reform Team to initiate key reform efforts within  the department.  This team is one of nine cross-functional teams  established by the Deputy Secretary of Defense to drive reform  throughout the department. The human resources management reform  team is led by a senior DOD human resources official and comprised of  representatives from DFAS; DLA; WHS, the Departments of the Army, Air  Force, and Navy; and the OCMO, among others. According to the  team\u2019s charter, the team will work to modify human resources processes  and move toward enterprise service delivery of human resources  services, which is expected to reduce costs. Team members told us that  their initial focus is to carry out projects focusing on high-priority  challenges, such as pursuing the optimal IT systems for DOD human  resources services department-wide and identifying legislative and  regulatory changes needed to streamline processes and procedures.  After progress is made in these areas, the team plans to review service  delivery across the department and determine the most effective and  efficient system. Senior leaders from the human resources directorates of  DFAS, DLA, and WHS all stated that increased consolidation was  possible, if properly reviewed and implemented, especially for tasks such  as entering personnel data and other hiring-related tasks, which could be  conducted through a shared service model. This work may lead to  increased coordination among, or consolidation of one or more,  organizations.", "DOD has not assessed or identified the most effective, economic, or  efficient provision of this business function. DOD officials stated that  assessing the provision of human resources in the department has not  previously been a priority of senior leadership. A memorandum from the  Deputy Secretary of Defense that established the human resources  management reform team required that the team move the department  toward a shared service delivery model. Specifically, this required a \u201ctime- phased way forward,\u201d with outcomes and time frames for converting the  mission to an enterprisewide service delivery model. The new reform  team reflects a commitment from senior leaders within the department to  address longstanding problems in the human resources area. However,  we identified limitations in how the human resources management reform  team is planning and managing its work.", "First, one goal of the reform team is to reduce the time-to-hire averages  across the department and determine a method to measure the quality of  hiring. DOD officials stated that performance measure improvements are  an important focus of their efforts and that they will share best practices  for time-to-hire and will require a standard measure of quality of hiring.  However, team plans we reviewed do not include steps for ensuring that  the DAFAs and military departments adopt standardized processes to  develop a consistent time-to-hire measure. Standardized quality  information would be valuable in determining which organizations may be  best placed to provide department-wide human resources service  delivery, and without this information DOD may not have assurance that  its hiring practices are effective and efficient. Standards for Internal  Control in the Federal Government emphasizes that managers should  identify the information required and obtain it from relevant and reliable  sources.", "Second, the team has not set clear time frames for some of its work. As  we reported in July 2018, agency reform efforts should have  implementation plans with key milestones and deliverables to track  implementation progress, and clear outcome-oriented goals and  performance measures for the proposed reforms. While one of the  team\u2019s projects is to determine the best strategy for providing IT solutions  for human resources, the team has not identified time frames for  completing the assessments needed to inform a new strategy, or  deliverables for finalizing and implementing the IT strategy. DOD officials  stated that they will develop project plans for completing assessments  needed and identify time-frames with the reform team focused on broader  department-wide IT. The human resources management reform team has  also not set clear time frames or deliverables for developing and moving  toward an optimal service delivery model for the department, which may  be a long-term effort that goes beyond the expected 2 year duration of the  reform team. Draft documents of the team we reviewed discussed  obtaining relevant data in 2018, reviewing the effects of policy changes in  2019, and pursuing undefined pilot projects in 2020. However, DOD  officials told us that the team plans to begin focusing on assessing  optimal service delivery models possibly in 2019. No specific time frames  for completion of this effort have been identified, and team members  stated that completion of IT efforts and regulatory reforms takes  precedence. Further, it is unclear how implementation of long-term efforts  will be managed.", "Third, although one of the team\u2019s charges is to determine the optimal  model for department-wide delivery of human resources services, team  members are not considering key pieces of information that would be  useful in doing so. For example, team members we contacted were not  aware that some DOD organizations were making potentially redundant  and inefficient payments to the DAFAs for human resources services as  overhead charges collected by multiple providers. As discussed  previously, Standards for Internal Control in the Federal Government  emphasizes the importance of quality performance information. When  we raised the issue of overhead charges with team members, they noted  that if such redundant payments are occurring, that would occur only  within the department\u2019s \u201cFourth Estate,\u201d and that they are initially focusing  on issues that affect the department as a whole. However, considering  the size and scope of the Fourth Estate, which DOD reported includes  more than $100 billion in funding annually, identifying comprehensive  information regarding the extent of inefficient overhead costs would be  important information for the reform team to consider in addressing  inefficiencies and pursuing enterprise-wide solutions to determine the  most effective, economical, and efficient model of service delivery.", "With consistent human resources performance information, clear time  frames in place, and comprehensive information on overhead costs, the  team would be better positioned to thoroughly assess the department\u2019s  system for human resources service delivery, and to develop and  implement long-term solutions for better coordination or consolidation of  this function. Further, DOD decision-makers would have assurance that  any changes they make, such as consolidation of certain organizations or  functions, would be based on sound and complete analysis."], "subsections": []}]}, {"section_title": "DOD Has Not Consistently Monitored and Evaluated the Results of Its Efficiency Initiatives That Affect the DAFAs", "paragraphs": [], "subsections": [{"section_title": "DOD Has Implemented Several Previous Efficiency Initiatives Related to the DAFAs", "paragraphs": ["DOD has undertaken several efficiency initiatives since 2011 that are  intended to improve the efficiency of headquarters organizations,  including the DAFAs, and to identify related cost savings. These initiatives  include the Secretary Gates Efficiencies, the More Disciplined Use of  Resources, the Core Business Process Review, the Business Process  and Systems Reviews, and a series of initiatives related to the savings  required by the National Defense Authorization Act for Fiscal Year 2016.  Table 3 describes each efficiency initiative we assessed as part of this  review and includes an estimated cost savings that the department  expected to achieve for each initiative."], "subsections": []}, {"section_title": "DOD Has Taken Some Steps to Monitor its Efficiency Initiatives but Does Not Consistently Establish a Baseline and Evaluate Results", "paragraphs": ["DOD has taken some steps to monitor and evaluate the results of its  efficiency initiatives, but it has not consistently done so. For some of the  efficiency initiatives, DOD ensured that there was ongoing monitoring and  worked to evaluate results. For example, as part of the former Secretary  Gates Efficiencies initiative, the military departments and the Special  Operations Command were required to prepare briefings on the status of  initiatives, and the offices of the then Deputy CMO and Comptroller  directed them to enter information regarding their efficiency initiatives into  a database designed to capture performance management data.  Officials stated that this information was designed to allow them to track  the progress of the initiatives, including milestones, risk assessments,  and the roles and responsibilities of those implementing the initiatives.", "While implementing its More Disciplined Use of Resources initiative, DOD  took some ad hoc steps to evaluate the effect of some of the efforts, such  as establishing performance measures to assess their effect on achieving  desired outcomes. An official in the office of the Under Secretary of  Defense (Comptroller) later issued a memorandum that established a  requirement to report on the initiatives, including performance goals,  measures, and accomplishments. This memorandum was issued based  on a recommendation we made in a prior report that the military  departments and the Special Operations Command develop approaches  for evaluating the effect of their efficiency initiatives, such as establishing  performance measures or other indicators, collecting related performance  information, and using this information to measure progress in achieving  intended outcomes associated with their initiatives until implemented.", "However, for other efficiency initiatives, DOD did not consistently ensure  that the agency established a baseline from which to measure progress,  use ongoing monitoring, or evaluate results. For example, in the case of  DOD\u2019s Core Business Process Review initiative, DOD has not evaluated  whether the effort achieved any of its intended savings or led to expected  efficiencies. According to OCMO officials, DOD ultimately concluded that  potential savings opportunities identified as part of this review could not  entirely be achieved through these means. As a result, it is unclear what  savings, if any, the department achieved. DOD\u2019s Business Process and  Systems Reviews ended with a briefing to the Deputy Secretary of  Defense and Vice Chairman of the Joint Chiefs of Staff that included a  summary of how the organizations would measure progress toward  outcomes. While the office of the then Deputy CMO and the principal staff  assistants were responsible for monitoring the effort up to the briefing,  officials from the Deputy CMO\u2019s office stated that following the briefing  any monitoring that occurred would be the responsibility of the principal  staff assistants. However, not all principal staff assistants continued  monitoring. For example, although the CMO is the principal staff assistant  for two of the agencies reviewed\u2014WHS and the Pentagon Force  Protection Agency\u2014OCMO officials were unable to provide a list of  initiatives related to each agency and the status of those initiatives.", "DOD also did not consistently ensure that the agency monitored and  evaluated efforts associated with the National Defense Authorization Act  for Fiscal Year 2016 requirement to save at least $10 billion from  headquarters, administrative, and support activities for fiscal years 2015  through 2019. One of the efforts that DOD took pursuant to this  requirement was for DAFAs to review their service contracts and present  recommendations for cuts to a Senior Review Panel. Under this initiative,  called the Service Requirement Review Boards, the panel either  approved the proposed cuts or directed alternative reductions, and  DCMO then monitored the organizations to ensure that the cuts were  taken. However, other efforts DOD took pursuant to the requirement  were not well monitored. For example, as part of the required savings,  DOD identified approximately $5.3 billion that it later determined to be  \u201cnot auditable\u201d because the baseline for the reductions had not been  established. Congress mandated DOD to report on its efforts with its  budget submissions for fiscal years 2017 through 2019. DOD submitted  its first report on May 22, 2018, and it included the $5.3 billion in savings  that it had deemed \u201cnot auditable.\u201d", "According to Standards for Internal Control in the Federal Government,  agencies should monitor and evaluate the quality of performance over  time. As part of this effort, agencies should establish a baseline from  which to measure progress, use ongoing monitoring, and evaluate  results. Further, the GPRA Modernization Act of 2010 requires agencies  to regularly monitor their progress in achieving goals. Our previous work  has noted that having a process with written guidance for monitoring  achieved savings from efficiency initiatives can help organizations  evaluate actual performance against planned results. We have also  previously noted that without guidance that clearly outlines the  information to be provided for evaluation, DOD cannot be assured that  senior leaders are getting complete information needed to enhance their  visibility over the status of efficiency initiatives.", "Although DOD has not consistently ensured that the agency established a  baseline from which to measure progress, use ongoing monitoring, or  evaluate results, OCMO officials stated that the department is working to  do so. The officials stated that previous efforts to track reform had been  more focused on assessing whether steps had been taken, rather than on  measuring progress and evaluating the results. In its most recent budget  request, DOD emphasized the importance of using goals and  performance measures to assess the benefit and value of reforms, along  with the importance of relevant, accurate, and timely data. In addition,  the chartering documents for DOD\u2019s reform teams highlight the  importance of monitoring and evaluation, and senior DOD officials are  echoing this point. We recently reported that outcome-oriented goals and  performance measures and an implementation plan with key milestones  and deliverables are important when considering agency reform. While  the reform teams\u2019 focus on monitoring and evaluation is a positive step,  officials stated that the teams are expected to exist for approximately 2  years, and monitoring and evaluating results of some reform efforts may  take a significant amount of time to appropriately assess the effects of the  reform. In addition, OCMO officials have not provided evidence of plans  to fully monitor efforts that began before the reform teams were created  and should still be in process. These efforts include savings related to the  requirement to save at least $10 billion from headquarters, administrative,  and support activities for fiscal years 2015 through 2019. Without  ensuring that efficiency initiatives are fully monitored and evaluated  against established baselines over time, DOD lacks a systematic basis for  evaluating whether its various initiatives have improved the efficiency or  effectiveness of its programs or activities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While DOD has long been required to periodically review the DAFAs to  ensure, among other things, that the provision of their services and  supplies are economical, efficient, and effective, it has relied on existing  processes to fulfill this requirement, rather than with comprehensive and  routine assessment. Without internal guidance that results in quality  evaluations of the DAFAs, DOD decision makers remain limited in the  information they have about what efficiencies the DAFAs could pursue  and how they could cut costs. With establishment of the new CMO  position, the department has an opportunity to address long-standing  weaknesses in its business operations, including those performed by the  DAFAs. The department\u2019s effort to establish reform teams that can drive  change, as well as a senior-level reform management group to direct and  oversee these efforts, is a positive step forward. Having comprehensive  and quality information would help the CMO and other senior leaders  make important decisions regarding the direction of reform efforts and to  assess whether efforts are achieving desired results. However, the  human resources management reform team has not collected  comprehensive information, such as performance information on hiring  time frames and overhead costs for providing human resources services  and time frames for these efforts, which would enable the department to  best address inefficiencies among the DAFAs that provide human  resources services. Moreover, DOD has not consistently ensured that the  agency established a baseline from which to measure progress, used  ongoing monitoring, or evaluated results. While OCMO officials are  focused on the reform teams, full monitoring is necessary for all efficiency  initiatives. Without routinely and comprehensively monitoring and  evaluating ongoing efficiency initiatives across all of its reform efforts,  DOD cannot have assurance as to whether its efforts have achieved  desired outcomes, are saving resources, and are improving effectiveness."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making five recommendations to DOD.", "The Secretary of Defense should ensure that the CMO develops internal  guidance that defines the requirements and provides clear direction for  conducting and recording reviews of the DAFAs in response to10 U.S.C.  \u00a7 192(c). This guidance, which could be similar to the guidance that exists  for assessments of the combat support agencies, should reflect the key  elements of quality evaluations. (Recommendation 1)", "The Secretary of Defense should ensure that the CMO, with input from  the human resources management team, requires that all DOD human  resources providers adopt consistent time-to-hire measures, as one  process for assessing performance. (Recommendation 2)", "The Secretary of Defense should ensure that the CMO, through the  human resources management reform team, identifies time frames and  deliverables for identifying and adopting optimal IT solutions for human  resources and fully assessing, identifying, and implementing the most  effective and efficient means of human resources service delivery.  (Recommendation 3)", "The Secretary of Defense should ensure that the CMO, through the  human resources management reform team, collects information on the  overhead costs charged by all DOD human resources service providers  to assist in determining the most effective, economical, and efficient  model of human resources service delivery within the department.  (Recommendation 4)", "The Secretary of Defense should ensure that the CMO routinely and  comprehensively monitors and evaluates ongoing efficiency initiatives  within the department, including those related to the reform teams. This  monitoring should include establishing baselines from which to measure  progress, periodically reviewing progress made, and evaluating results.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. DOD  concurred with our five recommendations and noted planned actions to  address each recommendation. In its written comments, DOD stated that  the National Defense Authorization Act for Fiscal Year 2019 gives the  CMO additional specific authorities; substantially rewrites the  requirements of section 192(c); and addresses the findings and  recommendations in our report. Further, DOD stated the department is on  track to achieve substantial savings through its reform team efforts and  CMO emphasis on strong management practices, integrated processes,  and best value business investments. DOD\u2019s comments are reprinted in  their entirety in appendix II. DOD also provided technical comments,  which we incorporated into the report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and DOD\u2019s Chief Management  Officer. In addition, the report is available at no charge on our website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report evaluates the extent to which (1) the Department of Defense  (DOD) has assessed the continuing need for each defense agency and  DOD field activity (DAFA); (2) any overlap or fragmentation among the  DAFAs that provide human resources services has affected the delivery  of those services; and (3) DOD has monitored and evaluated the results  of its efficiency initiatives that affect the DAFAs.", "For our first objective, we reviewed DOD\u2019s biennial reports on the DAFAs  from 1987, the first year after enactment of the requirement, through  2012, the most recent year of DOD\u2019s reporting. We also interviewed  officials from the Chief Management Officer\u2019s (CMO) office regarding  DOD\u2019s current processes for reviewing and recording its assessment of  the DAFAs. Further, we reviewed the most recent DOD reports on  combat support agencies, as there is a comparable statutory requirement  for DOD to review this subset of the DAFAs, and the corresponding Joint  Staff Instruction that guides those reports. We also spoke to relevant  Joint Staff officials regarding the processes used to develop those  reports. We compared DOD\u2019s biennial reports and combat support  agency reports against key elements of quality evaluations, which we  identified in prior work and compiled as part of this review, as specified  below.", "To analyze the quality of biennial reports and combat support agency  reports, we identified and selected key elements of quality evaluations  and compared reports against these key elements. We took four  major steps to identify and select key elements. First, we identified  criteria that assess the quality of agency evaluations and resulting  reports based on a review of relevant GAO reports and discussions  with a methodologist. Second, in collaboration with a methodologist,  we assessed the appropriateness of identified criteria for this analysis,  and we concluded that no single assessed criterion met the needs of  this review. Third, we identified relevant areas of overlap across the  criteria, and we excluded topics not relevant for our purposes, such as  statistical modeling for technical evaluations. Fourth, we selected a  set of elements encompassing relevant areas of overlap, and we  discussed and revised these elements in collaboration with a  methodologist.", "For the analysis of reports against key elements, we gathered and  recorded evidence related to each question from a variety of DOD  sources including DOD reports, statements from DOD officials  representing the research team, and relevant DOD guidance related  to the reports. One analyst assessed the extent to which the reports  reflected the key elements, and a second analyst reviewed their  assessment. Where there was disagreement in the assessment,  analysts discussed their analysis and reached a consensus.", "Last, for the first objective, we assessed DOD\u2019s response to the statutory  requirement that it periodically review the continuing need for its DAFAs,  and whether the provision of services and supplies by the DAFAs, rather  than by the military departments, is more effective, economical, and  efficient. We interviewed Office of the Chief Management Officer  (OCMO) officials about the existing departmental processes that they  stated addressed the statute, and we reviewed associated documentation  provided by the OCMO officials, such as budget materials.", "For our second objective, we reviewed the business functions of selected  DAFAs to identify possible inefficient duplication, overlap, or  fragmentation in the services provided by those selected DAFAs to other  organizations within the department. For our selection from the 27 DAFAs  within DOD, we excluded DAFAs that have been previously identified as  focus areas from our body of work on duplication, overlap, and  fragmentation. We selected 7 DAFAs that are larger in size and budget  than others and that focus on the traditional business areas of DOD, such  as logistics or financial management. From those 7 DAFAs we reviewed  the chartering directives for each of those agencies and DOD\u2019s most  recent biennial report on DAFAs to identify terms and phrases that  appeared duplicative or repetitive in nature. Using that strategy, we  selected human resources as the business line of effort for the focus of  our review.", "We reviewed the provision of human resources services by DAFAs to  identify any potential inefficient duplication, overlap, or fragmentation. For  example, we reviewed the client bases serviced by each DAFA to identify  inefficient duplication or overlap and reviewed the performance measures  used by each DAFA to examine for fragmentation in approach to  performance measurement. Pursuant to 10 U.S.C. \u00a7 191 , whenever the  Secretary of Defense determines that it would be more effective,  economical, or efficient to provide for the performance of a supply or  service common to multiple military departments by a single agency, then  the Secretary can create a DAFA to provide that supply or service.  Further, at the time of our review, section 192(c) of title 10, United States  Code, required, among other things, that the Secretary of Defense  periodically ensure that the provision of services and supplies by the  DAFAs, rather than by the military departments, is more effective,  economical, and efficient. As such, we assessed DOD\u2019s provision of  human resources by DAFAs against GAO\u2019s Duplication Evaluation Guide  to assess DOD\u2019s provision of human resources. We interviewed officials  from DOD\u2019s CMO office, the 3 DAFAs that provide human resources  services for the department (DFAS, DLA, and WHS), and the lead and  members of DOD\u2019s human resources management reform team, and we  reviewed documents such as DOD\u2019s human capital operating plan and  documents provided by the DAFAs that detailed their human resources  business functions.", "For our third objective, we selected efficiency initiatives that affect  DAFAs, and that we have previously reported on since 2011. We  reviewed a selection of reform initiatives because DOD does not have a  comprehensive listing of the reform initiatives it has undertaken. For the  purposes of this review, we define \u201cefficiency\u201d as maintaining federal  government services or outcomes using fewer resources (such as time  and money) or improving or increasing the quality or quantity of services  or outcomes while maintaining (or reducing) resources. We obtained  documentation and spoke with officials from CMO and the DAFAs  selected for the second objective of this report regarding DOD\u2019s  monitoring, assessing, and tracking of the selected reform initiatives. We  obtained information and documentation from CMO officials regarding  DOD\u2019s ongoing reform efforts, including plans for monitoring and  assessing these efforts. We compared this information and  documentation against Standards for Internal Control in the Federal  Government, which states that management should establish a baseline  from which to measure progress, use ongoing monitoring, and evaluate  results.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Margaret Best (Assistant  Director), Miranda Cohen, Alexandra Gonzalez, Amanda Manning,  Richard Powelson, Suzanne Perkins, Andrew Stavisky, Amie Lesser,  Sarah Veale, and Cheryl Weissman made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-220", "url": "https://www.gao.gov/products/GAO-19-220", "title": "Department of State: Integrated Action Plan Could Enhance Efforts to Reduce Persistent Overseas Foreign Service Vacancies", "published_date": "2019-03-06T00:00:00", "released_date": "2019-03-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["State staffs Foreign Service employees to more than 270 embassies and consulates worldwide to advance U.S. foreign policy and economic interests. In 2009 and 2012, GAO identified ongoing Foreign Service staffing gaps.", "GAO was asked to review State's Foreign Service staffing. This report examines (1) vacancies in State's Foreign Service staffing at overseas posts, (2) reported effects of Foreign Service vacancies on diplomatic readiness, and (3) State's efforts to address Foreign Service vacancies. To address these objectives, GAO analyzed State's Global Employment Management System data as of March 2018. The system includes information on Foreign Service and Civil Service positions, including the total number of authorized Foreign Service positions and whether each position is filled or vacant. GAO also reviewed its relevant prior reports and State workforce planning documents. In addition, GAO interviewed State staff at 10 overseas posts, selected on the basis of large numbers of Foreign Service vacancies and diversity in the types of Foreign Service positions that were vacant at these posts, among other factors."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of State's (State) data show persistent Foreign Service vacancies at overseas posts since 2008. According to the data, 13 percent of overseas Foreign Service positions were vacant as of March 2018. This percentage is similar to the percentages GAO reported for 2008 and 2012, when 14 percent of these positions were vacant. In addition, State's data show persistent vacancies at overseas posts in generalist positions that help formulate and implement U.S. foreign policy and in specialist positions that support and maintain the functioning of overseas posts. State's data also show persistent Foreign Service vacancies at overseas posts with State's highest foreign policy priorities and in regions with security risks that could threaten U.S. foreign policy interests.", "According to staff at overseas posts, Foreign Service vacancies adversely affect State's ability to carry out U.S. foreign policy. Staff at overseas posts told us that vacancies increase workloads, contributing to low morale and higher stress for Foreign Service staff and that vacancies in Political and Economic positions\u201420 percent and 16 percent, respectively\u2014limit the reporting on political and economic issues that posts are able to provide to State headquarters. Notably, officials also stated that vacancies in specialist positions may heighten security risks at overseas posts and disrupt post operations. For instance, some overseas post staff said that vacancies in Information Management positions had increased the vulnerability of posts' computer networks to potential cybersecurity attacks and other malicious threats.", "State described various efforts\u2014implemented by multiple offices in the department \u2014to help address overseas Foreign Service vacancies, but these efforts are not guided by an integrated action plan to reduce persistent vacancies. An example of State's efforts is the \u201cHard-to-Fill\u201d program, which allows Civil Service staff an opportunity to fill a Foreign Service vacancy on a single overseas tour. According to GAO's 2017 High-Risk Series report, an agency should design and implement an action plan\u2014integrated across its relevant offices\u2014that defines the root causes of all skills gaps and suggests corrective measures. However, State has not developed such an action plan for reducing persistent overseas Foreign Service vacancies. Without developing an integrated action plan, overseas Foreign Service vacancies may persist. As a result, State's ability to achieve U.S. foreign policy goals and help ensure secure and efficient operations could be adversely impacted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State develop an integrated action plan that defines the root causes of persistent Foreign Service vacancies at overseas posts and suggests corrective measures to reduce such vacancies. State concurred with our recommendation and noted that it will take steps to develop an integrated action plan."]}], "report": [{"section_title": "Letter", "paragraphs": ["To advance U.S. foreign policy and economic interests, the Department  of State (State) had staffed Foreign Service employees to about 9,850  overseas positions at more than 270 overseas posts worldwide as of  March 31, 2018. Those Foreign Service employees play a critical role in  achieving U.S. foreign policy goals. However, as we reported in 2009  and 2012, State has faced challenges in meeting its overseas staffing  needs, resulting in Foreign Service staffing gaps that put diplomatic  readiness at risk.", "We were asked to review staffing for State\u2019s Foreign Service at overseas  posts. In this report, we examine (1) vacancies in State\u2019s Foreign Service  staffing at overseas posts, (2) reported effects of Foreign Service  vacancies on diplomatic readiness, and (3) State\u2019s efforts to address  Foreign Service vacancies.", "To address these objectives, we analyzed State\u2019s personnel data on  Foreign Service staffing at overseas posts from State\u2019s Global  Employment Management System (GEMS) as of March 2018. We also  interviewed State officials from the Bureau of Human Resources and the  Bureau of Consular Affairs, as well as State officials representing the  Offices of the Executive Director for State\u2019s six regional bureaus. In  addition, we interviewed staff at 10 overseas posts. We conducted  interviews in person with staff at 3 of these posts\u2014the U.S. Embassy in  Beijing, China; the U.S. Consulate in Shanghai, China; and the U.S.  Embassy in New Delhi, India\u2014and conducted telephone interviews with  staff at the other 7 posts\u2014the U.S. Embassies in Abuja, Nigeria; Bogota,  Colombia; Kinshasa, Democratic Republic of the Congo; Kabul,  Afghanistan; Mexico City, Mexico; and N\u2019Djamena, Chad; and the U.S.  Consulate in Frankfurt, Germany. We also reviewed State workforce  planning documents and budget documents, such as State\u2019s Five Year  Workforce and Leadership Succession Plan: Fiscal Years 2016-2020  and Quadrennial Diplomacy and Development Review. We did not  assess whether the total number of authorized overseas Foreign Service  positions was appropriate or met State\u2019s needs.", "In addition, we reviewed State Office of Inspector General (OIG) reports  as well as our 2012 and 2009 reports on human capital challenges at  State and effective strategic human capital management across the  federal government. In particular, our 2017 report High-Risk Series:  Progress on Many High-Risk Areas, While Substantial Efforts Needed on  Others states that strategic human capital management is a high-risk  issue across the federal government, and lists five key elements as a  road map for agency efforts to improve and ultimately address such  issues. For our third objective, we assessed whether State\u2019s efforts to  address vacancies were guided by a corrective action plan that identifies  the root causes of persistent Foreign Service vacancies at overseas posts  and suggests corrective measures to reduce such vacancies. Appendix I  contains a more detailed description of our objectives, scope, and  methodology.", "We conducted this performance audit from August 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["State is the lead agency involved in implementing American foreign policy  and representing the United States abroad. According to State and  USAID\u2019s joint strategic plan for fiscal years 2018 through 2022, State\u2019s  goals are to (1) protect America\u2019s security at home and abroad, (2) renew  America\u2019s competitive advantage for sustained economic growth and job  creation, (3) promote American leadership through balanced  engagement, and (4) ensure effectiveness and accountability to the  American taxpayer.", "State\u2019s Foreign Service employees serve in a variety of functions at  overseas posts as either generalists or specialists. Foreign Service  generalists help formulate and implement U.S. foreign policy and are  assigned to work in one of five career tracks: consular, economic,  management, political, or public diplomacy. Generalists at overseas posts  collect information and engage with foreign governments and citizens of  foreign countries and report the results of these interactions back to State  headquarters in Washington, D.C., among other functions. Foreign  Service specialists abroad support and maintain the functioning of  overseas posts and serve in one of 25 different skill groups, in positions  such as security officer or information management. Specialists at  overseas posts play a critical role in ensuring the security and  maintenance of the posts\u2019 facilities, computer networks, and supplies as  well as the protection of post staff, their family members, and local staff,  among other functions.", "State may require Foreign Service employees to be available for service  anywhere in the world, as needed, and State has the authority to direct  Foreign Service employees to any of its posts overseas or to its  headquarters in Washington, D.C. However, as noted in our 2012  report, State generally does not use this authority, preferring other means  of filling high-priority positions, according to State officials. The process  of assigning Foreign Service employees to their positions typically begins  when they receive a list of upcoming vacancies for which they may  compete. Foreign Service employees then submit a list of positions for  which they would like to be considered, known as bids, to the Office of  Career Development and Assignments and consult with their career  development officer. The process varies depending on an officer\u2019s grade  and functional specialty, and State uses a variety of incentives to  encourage Foreign Service employees to bid on difficult-to-fill posts.", "State groups countries of the world\u2014and corresponding U.S. overseas  posts in these countries\u2014into areas of responsibility under six geographic  regional bureaus:", "Bureau of African Affairs", "Bureau of East Asian and Pacific Affairs", "Bureau of European and Eurasian Affairs", "Bureau of Near Eastern Affairs", "Bureau of South and Central Asian Affairs", "Bureau of Western Hemisphere Affairs  Overseas posts report to State headquarters through their respective  regional bureaus. For example, because the Bureau of African Affairs has  responsibility for developing and managing U.S. policy concerning parts  of the African continent, U.S. overseas posts in Nigeria report through the  bureau to State headquarters.", "According to State officials, State maintains personnel data on State  employees in its GEMS database. GEMS includes information on Foreign  Service and Civil Service positions; in particular, it shows the total number  of authorized Foreign Service positions at State and whether each  position is currently filled or vacant. As displayed in figure 1, the GEMS  data show that the majority of Foreign Service employees (73 percent)  work in positions at overseas posts. However, some Foreign Service staff  (27 percent) are assigned to positions in the United States, where they  may complete required language or other training, serve as desk officers  for the regional bureaus, or work in other functions at State headquarters."], "subsections": [{"section_title": "Overseas Foreign Service Vacancies Have Persisted over Time While Overseas Foreign Service Staffing Has Increased, Staffing Gaps Persist", "paragraphs": ["According to State data, the number of both staffed and vacant overseas  Foreign Service positions increased between 2008 and 2018. As shown  in figure 2, the number of positions staffed grew from 6,979 in 2008 to  8,574 in 2018\u2014a more than 20 percent increase. Despite the increase in  the number of positions staffed, our analysis found that as of March 31,  2018, overall, 13 percent of State\u2019s overseas Foreign Service positions  were vacant. This vacancy percentage is similar to the percentages of  vacancies in overseas Foreign Service positions that we reported in 2012  and 2008. In 2012, we reported that 14 percent of State\u2019s overseas  Foreign Service positions were vacant as of October 31, 2011, and we  reported that the same percentage of overseas Foreign Service  positions\u201414 percent\u2014were vacant as of September 30, 2008.", "According to State officials, State\u2019s ability to hire Foreign Service  employees to fill persistent vacancies has been affected by factors such  as reduced appropriations. For instance, according to State officials and  State\u2019s Five Year Workforce Plan, because of funding cuts enacted in  fiscal year 2013, State could only hire one employee for every two leaving  the Foreign Service. From fiscal years 2014 to 2016, funding for State\u2019s  annual appropriations supported hiring to replace Foreign Service  employees projected to leave the agency, according to State officials.  These officials indicated, however, that Foreign Service hiring was again  impacted from January 2017 through May 2018 by a hiring freeze. As a  result, State hired below levels required to replace full projected attrition  of Foreign Service employees."], "subsections": []}, {"section_title": "State\u2019s Data Show Higher Vacancy Rates in Foreign Service Specialist Positions Compared to Foreign Service Generalist Positions", "paragraphs": ["While State\u2019s data show persistent vacancies in both generalist and  specialist positions at overseas posts, specialist positions remain vacant  at a higher rate. State\u2019s data show that 12 percent (680 of 5,660) of  overseas Foreign Service generalist positions were vacant as of March  31, 2018, a slight decrease from the 14 percent of overseas Foreign  Service generalist positions that we reported vacant in 2012. State\u2019s  data also show that 14.2 percent (594 of 4,188) of all overseas Foreign  Service specialist positions were vacant, close to the 14.8 percent  vacancy rate that we reported in 2012."], "subsections": [{"section_title": "Foreign Service Generalists", "paragraphs": ["State\u2019s data show persistent vacancies in Foreign Service generalist  positions responsible for analysis, engagement, and reporting at overseas  posts. As shown in table 1, among Foreign Service generalist career  tracks, the political, economic, and \u201cother\u201d tracks had the largest  percentage of vacant positions, with, respectively, 20 percent, 16 percent,  and 14 percent of positions vacant as of March 31, 2018. Our 2012 report  noted vacancies in the same three career tracks. Political officers at  overseas posts are responsible for collecting and analyzing information  on political events, engaging with foreign governments, and reporting  back to State headquarters. Economic officers at overseas posts work  with foreign governments and other U.S. agencies on technology,  science, economic, trade, and environmental issues. The \u201cother\u201d  generalist career track includes positions designated as \u201cExecutive\u201d or  \u201cInternational Relations,\u201d which, according to State officials, may be filled  by generalists from any of State\u2019s five career tracks.", "State\u2019s data show persistent vacancies in Foreign Service specialist  positions that support and maintain the functioning of overseas posts.  Among the 10 largest Foreign Service specialist skill groups, security  officer, office management specialist, and information management had  the largest percentages of vacant positions. As shown in figure 3, in these  three groups, respectively, 16 percent, 16 percent, and 14 percent of  positions were vacant. The vacancies in these three specialist skill groups  are persistent; in 2012, we reported that the same three groups had the  largest numbers of vacant positions. Security officers are typically  responsible for responding to various threats to the physical security of  overseas posts and for ensuring the protection of post staff, their family  members, and local staff. Office management specialists provide  professional management and administrative support. Information  management staff are typically responsible for maintaining and ensuring  the security of State\u2019s computer networks and communications systems  at overseas posts."], "subsections": []}]}, {"section_title": "State Faces Challenges Recruiting Personnel to Fill Some Foreign Service Specialist Positions That Often Require Specialized Skills and Competencies", "paragraphs": ["State officials said that State has had difficulty in recruiting and hiring  Foreign Service employees to fill specialist positions in some skill groups  at overseas posts. According to State officials and staff at overseas posts,  some vacant specialist positions are more difficult to fill than others  because candidates for these positions must often possess skills in fields  such as medicine or information technology that tend to be highly sought  after in the private sector. According to staff at overseas posts, it is not  uncommon for specialist candidates in these fields to choose higher- paying jobs in the private sector rather than specialist positions in the  Foreign Service. Additionally, in some circumstances, State must  compete with other federal agencies to recruit specialists from the same  limited pool of talent. Consequently, according to State officials, State has  been unable to attract and retain personnel with the skills necessary to fill  some Foreign Service specialist positions, which has led to persistent  vacancies in specialist positions.", "Vacancies in Foreign Service specialist positions at overseas posts  present additional challenges because specialized skills and  competencies are often required to perform the work of these positions.  According to State officials, because Foreign Service generalists may be  assigned to work outside of their career tracks, in some circumstances,  State has more flexibility in filling a generalist vacancy than a specialist  vacancy. For example, generalists outside the consular career track can  serve as a consular officer for one or more tours of duty. However,  specialist positions often require specialized skills or experience that  generalists may not possess. In addition, according to staff at overseas  posts, it is generally not possible for a Foreign Service specialist from one  skill group to perform the work of a Foreign Service specialist from a  different skill group. For instance, a Foreign Service specialist assigned  to the medical section at a post will not be able to help address the  workload of a vacant position in the information management section.  Thus, according to staff at overseas posts, vacancies in specialist  positions at the posts may create greater challenges than vacancies in  generalist positions."], "subsections": []}, {"section_title": "State\u2019s Data Show Persistent Foreign Service Vacancies at Overseas Posts with State\u2019s Highest Foreign Policy Priorities", "paragraphs": ["According to State\u2019s data, as of March 31, 2018, overseas posts with  State\u2019s highest foreign policy priorities had the highest percentages of  vacant Foreign Service positions. Using its Overseas Staffing Model  process, State assigns each embassy to one of seven categories based  primarily on the level and type of work required to pursue the U.S.  government\u2019s diplomatic relations with the host country at post. As we  previously reported, the rankings are closely associated with the  department\u2019s foreign policy priorities; the higher the category, the greater  the resources needed to conduct the work of the overseas post and the  higher the post\u2019s foreign policy priority. For example, the highest-level  category, level 5+, includes the largest, most comprehensive full-service  posts, where the host country\u2019s regional and global role requires  extensive U.S. personnel resources. The lowest-level category includes  small embassies with limited requirements for advocacy, liaison, and  coordination in the host country\u2019s government. As shown in table 2,  according to State\u2019s data, as of March 31, 2018, overseas posts in the  \u201cEmbassy 5+\u201d category had the highest percentage of vacant positions.  The results of this analysis were similar to those we reported in 2012."], "subsections": []}, {"section_title": "State\u2019s Data Show Higher Vacancy Rates in Regions with Security Risks That Could Threaten U.S. Foreign Policy Interests", "paragraphs": ["While State has Foreign Service vacancies worldwide, as of March 31,  2018, the highest percentages of vacancies were in the South and  Central Asian Affairs Bureau (SCA) and Near Eastern Affairs Bureau  (NEA)\u2014bureaus representing regions with heightened security risks that  could threaten U.S. foreign policy interests, according to State. SCA,  which includes countries such as Afghanistan, Pakistan, and India, faces  a host of security and stability challenges that could threaten U.S.  interests, according to a February 2018 report from State\u2019s Office of  Inspector General. NEA includes countries, such as Egypt, Iraq, and  Saudi Arabia, which have faced numerous security threats in recent years  that could also threaten U.S. interests overseas.", "As shown in figure 4, among State\u2019s regional bureaus, as of March 31,  2018, SCA and NEA had the highest percentages of overseas Foreign  Service vacancies at 21 percent (238 of 1,115 positions) and 18 percent  (234 of 1,279 positions), respectively. In 2012, we reported that these  two bureaus also had the highest percentages of overseas Foreign  Service vacancies among regional bureaus."], "subsections": []}, {"section_title": "Overseas Foreign Service Vacancies Have Adverse Effects on State\u2019s Diplomatic Readiness Vacancies in Overseas Foreign Service Positions Increase Workloads and Affect Employee Morale, According to Staff at Overseas Posts", "paragraphs": ["Vacancies in Foreign Service positions at overseas posts increase  workloads and adversely affect the morale of Foreign Service employees.  According to State officials in headquarters and staff at overseas posts,  when a Foreign Service position at an overseas post is vacant, Foreign  Service employees at that post are generally responsible for covering the  workload of the vacant position. Further, Foreign Service employees at  some posts\u2014particularly posts with fewer Foreign Service staff\u2014may be  responsible for covering the workload of multiple vacant positions. For  example, at two African posts we heard examples of Foreign Service  employees covering the workload of multiple vacant Foreign Service  positions. As a result of increased workloads, Foreign Service employees  are also more likely to have less time available to perform some important  functions, according to staff at overseas posts. According to staff at  overseas posts, such functions include training and supervising entry- level Foreign Service employees, local staff, and eligible family members  (EFM); reducing the risk of fraud, waste, and abuse; improving and  innovating processes at post that could reduce inefficiencies; initiating  and implementing projects that could enhance various diplomatic efforts;  and conducting maintenance of systems.", "In addition, according to staff at overseas posts, vacancies adversely  affect staff morale. Staff at multiple posts said that vacancies and the  resulting increased workloads had created substantial stress and  increased \u201cburnout\u201d of Foreign Service employees at the posts. They  noted that these levels of stress and burnout had contributed to Foreign  Service employees\u2019 ending their overseas assignments early for medical  or personal reasons. These curtailments, in turn, had increased the  overall vacancies and their effects at overseas posts."], "subsections": []}, {"section_title": "Vacancies in Overseas Foreign Service Generalist Positions, Especially in the Political and Economic Career Tracks, Adversely Affect State\u2019s Diplomatic Readiness", "paragraphs": ["According to staff at overseas posts, vacancies in Foreign Service  generalist positions at overseas posts adversely affect State\u2019s diplomatic  readiness. Among Foreign Service generalist career tracks, the political  and economic career tracks had the two largest percentages of vacant  positions\u201420 percent and 16 percent, respectively\u2014as of March 31,  2018.", "According to staff at overseas posts, vacancies in political and economic  positions at overseas posts\u2014particularly posts with fewer Foreign Service  employees\u2014limit the amount of reporting on political and economic  developments that posts are able to submit back to State headquarters.  For example, Foreign Service employees from three posts in Africa told  us that persistent, long-term vacancies in those posts\u2019 political and  economic positions had constrained their abilities to provide full reporting  on political and economic developments in their host countries. According  to staff at overseas posts, reporting on political and economic  developments in other countries\u2014submitted by overseas posts back to  State headquarters\u2014is essential for State to make informed foreign policy  decisions. Foreign Service employees from two posts in large countries in  East and South Asia also told us that vacancies in these sections had  limited their capacity to engage with host government officials on  important, strategic issues for the United States, such as reducing nuclear  proliferation or enhancing trade and investment relationships with the  United States. Vacancies in the political and economic career tracks at  overseas posts could adversely affect State\u2019s ability to achieve two of the  goals in State and USAID\u2019s joint strategic plan for fiscal years 2018  through 2022\u2014(1) renew America\u2019s competitive advantage for sustained  economic growth and job creation and (2) promote American leadership  through balanced engagement."], "subsections": []}, {"section_title": "Vacancies in Overseas Foreign Service Specialist Positions May Heighten Security Risks at Overseas Posts and Disrupt Post Operations", "paragraphs": ["According to staff at overseas posts, vacancies in Foreign Service  specialist positions at overseas posts may heighten the level of security  risk at the posts and disrupt post operations. Among Foreign Service  specialist skill groups with the highest number of vacant positions,  security officer, office management specialist, and information  management had the largest percentages of vacant positions\u201416  percent, 16 percent, and 14 percent, respectively\u2014as of March 31, 2018."], "subsections": [{"section_title": "Security Officer", "paragraphs": ["According to staff at overseas posts, vacancies in security officer  positions at overseas posts reduce the amount of time that security staff  can spend identifying, investigating, and responding to potential security  threats to the post. Security officers are also responsible for identifying  and analyzing host-country intelligence-gathering efforts at their  respective overseas posts\u2014and post staff told us that, because of  vacancies in these positions, some security officers had been unable to  complete this work for their posts, potentially increasing the risk of foreign  government officials gaining access to sensitive information. Also, post  staff told us that security officer vacancies limit the amount of time that  security officers present at posts can devote to important security  oversight activities, including regular training, drilling, and supervising of  local guard forces and security contractors. Post staff noted, for example,  that security officers at overseas posts should conduct regular training  and drilling exercises to evaluate their local guard force\u2019s effectiveness in  searching a vehicle entering the post compound for explosive devices.  According to post staff, when these important security oversight activities  are not properly and regularly conducted, the level of security risk at  these overseas posts may increase."], "subsections": []}, {"section_title": "Information Management", "paragraphs": ["According to State officials in headquarters and staff at overseas posts,  as well as reporting by State\u2019s OIG, vacancies in information  management positions at overseas posts have increased the vulnerability  of posts\u2019 computer networks to potential cybersecurity attacks and other  malicious threats. State officials told us that the Foreign Service had  faced chronic shortages of information management staff available to fill  these positions worldwide. According to State officials, because of  ongoing information management vacancies, some required tasks\u2014such  as conducting planned network maintenance\u2014were performed  infrequently or not at all. In another example, staff at overseas posts said  that because of vacancies, information management staff had been  unable to regularly check their computer system logs to ensure that  security breaches had not taken place. Post staff added that, if a breach  did occur, vacancies could increase the amount of time needed to identify  an attack and deploy countermeasures, further increasing the risks to  posts\u2019 computer networks. Inspections conducted by State\u2019s OIG from fall  2014 to spring 2016 found that information management staff at 33  percent of overseas posts had not performed various required information  management duties. According to State\u2019s OIG, neglect of these duties  may leave the department vulnerable to increased cybersecurity attacks."], "subsections": []}, {"section_title": "Office Management Specialist", "paragraphs": ["According to staff at overseas posts, the office management specialist  position at overseas posts has evolved considerably over time; these  specialists increasingly play a critical role in ensuring that the work of  overseas posts is effectively completed. Post staff said that office  management specialists provide administrative and other support  services to other Foreign Service employees and are assigned to various  sections of post. For example, staff at one post noted that office  management specialists assigned to the Security Officer sections at  overseas posts reduce the workload of security officers by completing  more routine security tasks and allowing the security officers to focus on  more challenging or involved tasks necessary to secure overseas posts.  Post staff told us that vacancies in office management specialist positions  reduce the amount of work that can be completed by other Foreign  Service employees at overseas posts. For example, when office  management specialist positions assigned to the Security Officer or  Information Management sections of posts are vacant, these vacancies  further exacerbate the higher number of vacancies that already exist in  these sections. According to staff at overseas posts, higher numbers of  office management specialist vacancies require other Foreign Service  employees to spend a significant amount of time on administrative tasks,  reducing the amount of time these staff can spend on mission-critical  activities."], "subsections": []}]}]}, {"section_title": "State Described Various Efforts to Address Overseas Foreign Service Vacancies, but These Efforts Are Not Guided by an Integrated Action Plan to Reduce Persistent Vacancies State Officials Described Various Efforts to Help Address Vacancies", "paragraphs": ["Officials in headquarters and at overseas posts described various State  efforts to help address overseas Foreign Service vacancies. According to  State officials, Foreign Service vacancies at overseas posts are a  complex problem that multiple offices within State address on an  individual basis."], "subsections": [{"section_title": "State\u2019s Efforts to Address Overseas Foreign Service Vacancies Are Not Guided by an Integrated Action Plan to Reduce Persistent Vacancies", "paragraphs": ["State\u2019s various efforts to address overseas Foreign Service vacancies are  not guided by an integrated action plan to reduce persistent vacancies.  Our 2017 High-Risk Series report calls for agencies to, among other  things, design and implement action plan strategies for closing skills  gaps. The action plan should (1) define the root cause of all skills gaps  within an agency and (2) provide suggested corrective measures,  including steps necessary to implement solutions. This report also  emphasizes the high risk that mission-critical skills gaps in the federal  workforce pose to the nation.", "While various State offices have implemented the efforts we identified,  State lacks an action plan that is integrated\u2014or consolidated\u2014across its  relevant offices to guide its efforts to address persistent overseas Foreign  Service vacancies. Moreover, some staff at overseas posts  acknowledged that the efforts State has taken to help address vacancies  have not reduced persistent Foreign Service vacancies, notably in  specialist positions. In response to our inquiry about an action plan, State  officials said that the agency does not have a single document that  addresses Foreign Service staffing gaps at overseas posts. Instead, State  officials directed us to State\u2019s Five Year Workforce Plan: Fiscal Years  2016-2020, stating that it was the most comprehensive document that  outlines State\u2019s efforts to address Foreign Service vacancies at overseas  posts. The workforce plan notes that it provides a framework to address  State\u2019s human capital requirements and highlights State\u2019s challenges and  achievements in recruiting, hiring, staffing, and training Foreign Service  staff. However, in reviewing the portions of the workforce plan that State  indicated were most relevant, we found that the workforce plan does not  include an integrated action plan that defines the root causes of the  persistent overseas Foreign Service vacancies we identified or suggest  corrective measures to reduce vacancies in these positions, including  steps necessary to implement solutions.", "State officials also noted that they frequently meet to discuss and address  workforce issues. For example, they said they convene a multi-bureau  planning group that meets biweekly to discuss strategic workforce issues  such as hiring needs based on attrition and other issues. However,  according to State officials, this group has not developed an action plan to  reduce persistent Foreign Service vacancies at overseas posts.", "State lacks an integrated action plan to guide its efforts to address  persistent Foreign Service vacancies that includes corrective measures to  address the root causes of the vacancies. Without defining the root  causes of persistent Foreign Service vacancies at overseas posts and  identifying appropriate corrective measures, overseas vacancies may  persist and continue to adversely affect State\u2019s ability to achieve U.S.  foreign policy goals."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Foreign Service generalists and specialists at overseas posts are critical  to advancing U.S. foreign policy and economic interests abroad.  However, for at least a decade, the Foreign Service has had persistent  vacancies in both generalist and specialist positions at overseas posts. In  particular, large numbers of vacant positions have persisted over time in  certain overseas Foreign Service positions, such as information  management and security officer positions. These vacancies in critical  positions at overseas posts have adversely affected State\u2019s ability to carry  out its mission effectively and threaten State\u2019s ability to ensure the  security and safety of its employees, their families, and post facilities.  While State has made some efforts to address Foreign Service  vacancies, addressing chronic vacancies in critical positions at overseas  posts requires a thoughtful, coherent, and integrated action plan that  defines the root causes of persistent Foreign Service vacancies at  overseas posts along with suggested corrective measures to reduce such  vacancies, following what was called for in our 2017 High-Risk Series  report. Developing such an action plan would help State address its  persistent staffing gaps, improve its ability to achieve U.S. foreign policy  goals, and help ensure secure and efficient operations."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of State should develop an integrated action plan that  defines the root causes of persistent Foreign Service vacancies at  overseas posts and provides suggested corrective measures to reduce  such vacancies, including steps necessary to implement solutions.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to State for review and comment. In its  comments, reproduced in appendix III, State concurred with our  recommendation. State also noted that it has taken actions and identified  some causes of vacancies, but acknowledged that it lacks an integrated  action plan and will take steps to develop such a plan. State also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, 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 IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) vacancies in the Department of State\u2019s (State)  Foreign Service staffing at overseas posts, (2) reported effects of Foreign  Service vacancies on diplomatic readiness, and (3) State\u2019s efforts to  address Foreign Service vacancies.", "To address these three objectives, we interviewed State officials from the  department\u2019s Bureau of Human Resources and Bureau of Consular  Affairs as well as State officials representing the Offices of the Executive  Director for State\u2019s six regional bureaus. We also interviewed staff at 10  overseas posts. We conducted in-person interviews with staff at 3 of  these posts\u2014the U.S. Embassy in Beijing and the U.S. Consulate in  Shanghai, China, and the U.S. Embassy in New Delhi, India. We  conducted telephone interviews with staff at the other 7 posts\u2014the U.S.  Embassies in Abuja, Nigeria; Bogota, Colombia; Kinshasa, Democratic  Republic of the Congo; Kabul, Afghanistan; Mexico City, Mexico; and  N\u2019Djamena, Chad; and the U.S. Consulate in Frankfurt, Germany. We  used the following criteria to select overseas posts for interviews: (1)  posts with larger numbers of Foreign Service vacancies; (2) posts with  diversity in the types of Foreign Service positions that were vacant; (3)  posts with higher relative importance to U.S. economic, national security,  and other foreign policy interests; and (4) posts in a range of geographic  locations by State region.", "To examine vacancies in State\u2019s Foreign Service staffing at overseas  posts, we analyzed State\u2019s personnel data on Foreign Service staffing at  overseas posts from the department\u2019s Global Employment Management  System (GEMS), as of March 2018. Our analysis of the GEMS data  includes Foreign Service positions filled by permanent Foreign Service  employees as well as positions filled by nonpermanent Foreign Service  employees, such as Consular Fellows. This analysis does not include the  number of staffed and vacant positions at overseas posts in Libya, Syria,  and Yemen, which, at the time of our review, were in suspended  operations status, as well as U.S. Mission Somalia, which was operating  under special circumstances at a different location.", "To calculate vacancy rates, we divided the total number of positions by  the number of positions listed as vacant in GEMS. For example, a post  with 10 positions and 2 vacancies would have a vacancy rate of 20  percent. We calculated vacancy rates for each of the following categories:  type (i.e., generalist or specialist), function (e.g., consular or information  management), regional bureau (i.e., Bureau of African Affairs or Bureau  of Western Hemisphere Affairs), and embassy and nonembassy rankings  from State\u2019s Overseas Staffing Model (i.e., Embassy 3+ or 5).", "According to State officials, the data in GEMS have a number of  limitations:", "The number of vacant positions at overseas posts listed in GEMS  may be overstated, because State has not yet decided to remove  some of these positions from its database.", "Some of the vacancies in GEMS are short-term or temporary. Foreign  Service employees periodically rotate out of their positions at their  overseas posts, sometimes creating temporary vacancies until the  positions are filled by incoming Foreign Service employees.", "The GEMS data show larger numbers of vacant Foreign Service  positions at posts in Afghanistan, Iraq, and Pakistan than actually  were unstaffed at these posts. According to State officials, this  discrepancy results from State\u2019s relying heavily on shorter-term  assignments to fill Foreign Service positions at these locations. These  shorter-term assignments are not reflected in GEMS, and the  positions therefore appear vacant.", "The GEMS data may not reflect Foreign Service employees who have  been temporarily reassigned from one overseas post to another.", "The GEMS data may show positions as filled although the Foreign  Service employee filling the position has not yet arrived at post.", "To assess the reliability of the GEMS database, we asked State officials  whether State had made any major changes to the database since our  2012 report, when we assessed the GEMS data to be sufficiently reliable.  State officials indicated that no major changes had been made. We also  tested the data for completeness, confirmed the general accuracy of the  data with officials at selected overseas posts, and interviewed  knowledgeable officials from State\u2019s Office of Resource Management and  Organizational Analysis concerning the data\u2019s reliability. We found the  GEMS data to be reliable for the purpose of determining the numbers and  percentages of vacant Foreign Service positions at overseas posts. We  did not validate whether the total number of authorized overseas Foreign  Service positions was appropriate or met State\u2019s needs.", "We also reviewed State workforce planning documents and budget  documents, such as State\u2019s Five Year Workforce and Leadership  Succession Plan: Fiscal Years 2016-2020 and Quadrennial Diplomacy  and Development Review. In addition, we reviewed State Office of  Inspector General reports as well as our previous reports on human  capital challenges at State and effective strategic human capital  management across the federal government. In particular, our report  High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others notes that strategic human capital management  is a high-risk issue across the federal government and lists five key  elements as a road map for agency efforts to improve and ultimately  address such issues. For our third objective, we assessed whether  State\u2019s efforts to address vacancies were guided by a corrective action  plan that identifies the root causes of persistent Foreign Service  vacancies at overseas posts and suggests corrective measures to reduce  such vacancies, including steps necessary to implement solutions.", "We conducted this performance audit from August 2017 to March 2019 in  accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Analysis of Vacant Foreign Service Positions at Overseas Posts in Various Categories as of March 31, 2018", "paragraphs": [], "subsections": [{"section_title": "Management 10 largest specialist skill groups at overseas posts Security Officer", "paragraphs": [], "subsections": []}, {"section_title": "Staffed positions at overseas posts Overseas posts by Overseas Staffing Model category Embassy 1 or 2 655", "paragraphs": ["The \u201cEconomic\u201d generalist career track includes positions from the \u201cScience Officer\u201d staffing skill  group in the GEMS data.  170 Foreign Service employees were not staffed to one of the six regional bureaus."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Godwin Agbara (Assistant  Director), Ian Ferguson (Analyst-in-Charge), Anthony Costulas, Natalia  Pena, Debbie Chung, Chris Keblitis, Reid Lowe, Justin Fisher, and  Alexander Welsh made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of State's Foreign Service staff at posts around the world provide a range of services, such as processing visa applications and promoting U.S. interests abroad.", "Since 2008, State has had trouble filling some positions at these posts, notably in information management and security, but State doesn't have a plan to address this issue. Chronic vacancies increase Foreign Service staff workloads, raise stress, and lower morale. Without identifying and addressing persistent vacancies, the work and security of overseas personnel suffer.", "We recommended that State develop a plan to define the causes of and reduce persistent vacancies."]}
{"id": "GAO-18-275T", "url": "https://www.gao.gov/products/GAO-18-275T", "title": "Department of Justice: Continued Action Needed To Address Incarceration Challenges and Offenders' Reentry", "published_date": "2017-12-13T00:00:00", "released_date": "2017-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["BOP's rising costs and offender recidivism present incarceration challenges to both DOJ and the nation. For example, BOP's operating costs have generally increased over time, and in fiscal year 2017 amounted to more than $6.9 billion, or 24 percent of DOJ's total discretionary budget. In addition, from 1980 through 2013, BOP's prison population increased by almost 800 percent, from 24,640 to 219,298. While the prison population began to decline in 2013, DOJ has continued to identify prison crowding as a critical issue. GAO has examined a number of DOJ efforts to slow the growth of the prison population and to reduce recidivism through the use of reentry programs to help offenders successfully return to the community.", "This statement summarizes findings and recommendations from recent GAO reports that address (1) DOJ's incarceration reduction initiatives, and (2) BOP reentry programs.", "This statement is based on prior GAO products issued from February 2012 through June 2016, along with updates on the status of recommendations obtained as of December 2017. For the updates on DOJ's progress in implementing recommendations, GAO analyzed information provided by DOJ officials on actions taken and planned."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Justice (DOJ) has fully addressed two of six GAO recommendations related to its incarceration reduction initiatives . In June 2015 and June 2016, GAO reported that to help address challenges associated with incarceration, DOJ had, among other things, taken steps to reduce the prison population by pursuing initiatives to use alternatives to incarceration for low-level nonviolent crimes. GAO made six recommendations to DOJ related to these efforts. As of December 2017, DOJ has implemented two of the six recommendations and has not fully addressed the remaining four. Specifically, to enhance efforts to measure program outcomes, DOJ issued guidance on proper data entry and began tracking data on different types of pretrial diversion programs that allow certain offenders to avoid incarceration if they satisfy program requirements. In addition, as of December 2017, DOJ has taken steps to partially implement GAO's recommendation to address unnecessary delays in reviewing inmates' petitions to commute their sentences.", "DOJ has not taken action to address recommendations to better assess the results of pretrial diversion programs or another effort to prioritize prosecutions and reform sentencing to eliminate unfair disparities, among other goals. Further, in December 2017, DOJ noted there had been policy changes since GAO made a recommendation related to enhancing measures to monitor prioritizing prosecution and sentencing reform. Although DOJ reported taking some actions to implement GAO's recommendation, these actions did not include establishing measures that incorporate key elements of successful performance measurement systems.", "DOJ has addressed two of four GAO recommendations related to its reentry programs . As part of its mission to protect public safety, DOJ's Federal Bureau of Prisons (BOP) provides reentry programming that aims to facilitate offenders' successful return to the community and reduce recidivism (a return to prison or criminal behavior). These reentry efforts include programs offered in BOP facilities as well as contractor-managed residential reentry centers (RRC)\u2014also known as halfway houses\u2014and home confinement services that allow inmates to serve the final months of their sentences in the community. GAO issued three reports in February 2012, June 2015, and June 2016 and made four recommendations to BOP in this area.", "As of December 2017, DOJ has implemented two of the four recommendations and has begun to take action to address one of the remaining two. Specifically, to implement one of GAO's recommendations, DOJ established a plan to evaluate the effectiveness of all the 18 reentry programs it offers to inmates in BOP facilities. To implement another GAO recommendation to improve cost management, DOJ began requiring contractors to submit separate prices for RRC beds and home confinement services. As of December 2017, DOJ noted it has taken initial steps to address a recommendation to track outcome data for its RRC and home confinement programs; however, it has not taken action to develop measures to assess the performance of these programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made 10 recommendations to DOJ in prior reports to help improve performance measurement and resource management. DOJ generally concurred and has addressed or taken steps to address several. GAO continues to believe all of these recommendations should be fully implemented."]}], "report": [{"section_title": "Letter", "paragraphs": ["I appreciate the opportunity to participate in today\u2019s hearing to discuss our  prior work on ways in which the Department of Justice (DOJ) can better  assess incarceration reduction initiatives and reentry efforts. This  statement reflects prior GAO products issued from February 2012 through  June 2016, along with recent updates on the status of our  recommendations.", "As of December 2017, DOJ\u2019s Federal Bureau of Prisons (BOP) was  responsible for about 184,000 federal inmates and operating 122  institutions (prisons) across the country. BOP\u2019s rising costs and offender  recidivism present incarceration challenges to both DOJ and the nation.  For example, BOP\u2019s operating costs have generally increased over time,  and in fiscal year 2017 amounted to more than $6.9 billion, or 24 percent  of DOJ\u2019s total discretionary budget. In addition, from 1980 through 2013,  BOP\u2019s prison population increased by almost 800 percent, from 24,640 to  219,298. While the prison population began to decline in 2013, DOJ has  continued to identify prison crowding as a critical issue, particularly in high  security institutions. Further, while BOP reports that recidivism rates have  declined over the past two decades, the U.S. Sentencing Commission  found that of federal offenders released in 2005, 49 percent were  rearrested, 32 percent were reconvicted, and 25 percent were  reincarcerated during the eight year follow-up period.", "During the course of our prior work, DOJ was taking steps to slow the  growth of the federal prison population by pursuing alternatives to  incarceration at various stages of the criminal justice process for  nonviolent, low-level offenders, in part to help reduce the size and related  costs of the federal prison population. Knowing the outcomes of these  efforts can help BOP adjust its policies and procedures, and ultimately  optimize their benefits.", "My testimony today is based on our work examining DOJ\u2019s efforts to  manage the federal prison system. This statement addresses two key areas in which we have issued reports and highlights our  recommendations to DOJ to enhance program performance  measurement and resource management. Specifically, this statement  addresses (1) DOJ\u2019s incarceration reduction initiatives and (2) BOP\u2019s  reentry programs.", "This statement is based on several reports we issued from February 2012  through June 2016, and includes updates on selected aspects of these  reports as of December 2017. For our prior work, we reviewed relevant  laws and DOJ and BOP policies, and analyzed documentation and data  on the use of incarceration alternatives at or before sentencing. In  addition, we interviewed DOJ and BOP headquarters and district officials,  and conducted site visits to selected BOP institutions (which were chosen  to cover a range of characteristics, including but not limited to inmate  gender and presence of relevant BOP programs). More information about  the scope and methodology of our prior work can be found in those  reports.", "To update the status of DOJ\u2019s efforts to address the recommendations we  made in these reports, we collected and analyzed information from DOJ  and BOP program officials on actions they have taken or planned in  response. We conducted our work in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Key Stakeholders in the Federal Criminal Justice Process", "paragraphs": ["Various DOJ and federal judiciary stakeholders play key roles in the  federal criminal justice process, and as such, they can also have key  roles in considering whether to use incarceration alternatives for a given  offender or inmate. For example, in the course of the federal criminal  justice process, a U.S. attorney is involved in the process of investigating,  charging and prosecuting an offender, among other responsibilities.  Federal defenders are called upon to represent defendants who are  unable to financially retain counsel in federal criminal proceedings. The  U.S. Probation and Pretrial Services Office (PPSO), an office within the  judiciary, also has responsibilities including supervising an offender  pretrial or after conviction. Federal judges are responsible for determining  an offender\u2019s sentence, and, in the case of incarceration, BOP is  responsible for caring for the inmate while in custody."], "subsections": []}, {"section_title": "Federal Criminal Justice Process", "paragraphs": ["Federal laws and guidelines determine what, if any, incarceration is  appropriate for offenders. The Sentencing Reform Act of 1984  established the independent U.S. Sentencing Commission (USSC) within  the judicial branch and charged it with, among other things, developing  federal sentencing guidelines. The guidelines specify sentencing  guideline ranges\u2014a range of time (in months) that offenders should serve  given the nature of their offense and other factors\u2014but also permit  sentences to depart upward or downward from guideline ranges because  of aggravating or mitigating circumstances. In 2005, the Supreme Court  found the sentencing guidelines, which had previously been binding for  federal judges to follow in sentencing criminal defendants, to be advisory  in nature. Regardless of the guidelines\u2019 advisory nature, judges are still  required to calculate sentences properly and to consider the guideline  ranges as well as the nature and circumstances of the offense, the  defendant\u2019s history, and the need for deterrence, among other sentencing  goals.", "As we reported in June 2016, alternatives to incarceration were available  at various steps in the federal criminal justice process, from charging and  prosecution through incarceration (see figure 1).", "For instance, at the front-end of the criminal justice process, there are  pretrial diversion programs that can provide offenders an opportunity to  avoid prosecution or incarceration if they satisfy program requirements. In  addition, toward the end of inmates\u2019 periods of incarceration, BOP may  place inmates in residential reentry centers (RRC, also known as halfway  houses), in which inmates are housed outside of a prison environment  prior to their release in the community. During their time in RRCs, inmates  are authorized to leave for approved activities, such as work; are  monitored 24 hours a day, such as through sign-out procedures; are  required to work or be actively seeking work; and are required to pay a  percentage of their salaries as a subsistence fee to cover some of their  expenses at the RRC.", "In addition, BOP may place inmates in home confinement toward the end  of their sentences. While in home confinement, inmates are required to  remain in their homes when not involved in approved activities, such as  employment, and are supervised and monitored, such as through  curfews, random staff visits, or electronic monitoring. RRC staff may  provide the supervision of inmates in home confinement. Through an  interagency agreement, BOP and the PPSO also established the Federal  Location Monitoring Program, through which PPSO officers provide  supervision for BOP inmates on home confinement under certain  conditions. Among other things, to qualify inmates ordinarily must be  classified as minimum security level; seek and maintain employment; and  pay for all or part of the costs of the Federal Location Monitoring  Program."], "subsections": []}, {"section_title": "Overview of BOP\u2019s Institutions and Role in Transitioning Offenders into Society", "paragraphs": ["BOP is responsible for the custody and care of federal inmates. As of  December 2017, there were a total of about 184,000 federal inmates,  according to BOP. According to BOP data, 83 percent of these inmates  are in the 122 institutions managed by BOP. The remainder are confined  in secure privately managed or community-based facilities, local jails, or  in home confinement.", "BOP has a role to help ensure that offenders properly transition into  society and avoid a return to prison or criminal behavior (recidivism) after  they have completed their terms of incarceration. Among other activities,  BOP provides reentry services to inmates within federal prisons that may  include drug treatment programs, education and vocational training, and  psychology services. BOP also is to facilitate the transfer of inmates into  RRCs, which provide assistance as inmates transition into communities,  to include home confinement. RRCs provide employment counseling and  job placement assistance, financial management assistance, and  substance abuse treatment or counseling as well as other services, which  may vary by facility. According to BOP, approximately 180 RRCs provide  housing for over 7,500 federal offenders prior to release into their  communities."], "subsections": []}, {"section_title": "Federal Collateral Consequences Can Affect Reentry", "paragraphs": ["As we reported in September 2017, individuals convicted of a crime may  have limitations placed upon them that can affect their reentry.  Individuals convicted of a crime generally face a sentence, which can  include fines, probation, and incarceration in jail or prison. In addition to  the sentence, individuals may also face collateral consequences\u2014 penalties and disadvantages, other than those associated with a  sentence, which can be imposed upon an individual as a result of a  conviction. For example, collateral consequences may prohibit people  who committed crimes involving a sex offense or offense involving a child  victim from working in a child care facility. Collateral consequences can  be contained in federal and state laws and regulations. Notably, federal  collateral consequences can serve various functions, such as enhancing  public safety or protecting government interests. In 2012, the American  Bar Association began compiling the first nationwide inventory of  collateral consequences, known as the National Inventory of the  Collateral Consequences of Conviction (NICCC). As of December 31,  2016, the NICCC contained roughly 46,000 collateral consequences  established through federal and state laws and regulations.", "We reported on collateral consequences contained in federal laws and  regulations (i.e., federal collateral consequences) that can be imposed  upon individuals with nonviolent drug convictions (NVDC). Our review of  the NICCC found that, as of December 31, 2016, there were 641  collateral consequences in federal laws and regulations that can be  triggered by NVDC. The NICCC data indicated that these 641 collateral  consequences can limit many aspects of an individual\u2019s life, such as  employment, business licenses, education, and government benefits. For  example, individuals may be ineligible for certain professional licenses,  federal education loans, or federal food assistance. Moreover, we found  that the NICCC identified that 78 percent of these 641 collateral  consequences can potentially last a lifetime.", "We also reported on selected stakeholders\u2019 views. We spoke to 14  individuals who were leaders of organizations representing judges,  victims of crime, and states, among others\u2014on actions the federal  government could consider to mitigate these collateral consequences.  Most of the stakeholders that we interviewed\u201413 of 14\u2014said it was  important for the federal government to take action to mitigate federal  collateral consequences for NVDC. Thirteen stakeholders said that  mitigating federal collateral consequences could potentially reduce the  likelihood that individuals with NVDC reoffend. Similarly, 11 stakeholders  said that mitigation could potentially increase the likelihood that  individuals with NVDC successfully reenter the community after jail or  prison. The text box below identifies some of the statements made by  stakeholders during our interviews from our prior work regarding federal  collateral consequences for NVDC.", "Stakeholder Perspectives on Federal Collateral Consequences for Nonviolent Drug Convictions, as Reported in GAO-17-691 \u201cThe breadth of federal collateral consequences for nonviolent drug convictions is so massive and affects so many aspects of a  person\u2019s life, such as family life, immigration, jury service, housing, employment, and voting, that they contribute to an underclass  of people.\u201d   \u201cMany instances wherein the federal collateral consequences for nonviolent drug convictions end up making it hard for people to  live a law abiding life. For example, they may not be able to live in public housing or may be barred from getting an occupational  license or doing a particular job. This may push them to turn back to committing crimes to make some money.\u201d   \u201c\u2026some federal collateral consequences for nonviolent drug convictions are sensible and appropriate. If we abolish  exist  you could imperil public safety\u2026\u201d   \u201cWe can\u2019t just say we\u2019re going to err on the side of public safety and implement a wide range of collateral consequences strictly  across the board. The problem is that public safety is undermined by making it impossible for individuals to move on from the  criminal offense.\u201d   \u201cIt is important not to assume that nonviolent means that there is no victim.\u201d", "Since 1980, the federal prison population increased from about 25,000 to  about 184,000, as of December 2017. In June 2015 and June 2016, we  reported that in part to help address challenges associated with  overcrowding in certain institutions and related costs of incarceration,  DOJ had taken steps to reduce the prison population by pursuing  initiatives to: use alternatives to incarceration for low-level nonviolent  crimes; prioritize prosecutions to focus on serious cases; and commute,  or reduce, sentences of qualified federal inmates. In these reports, we  highlighted potential areas for continued oversight of these initiatives and  made six recommendations. DOJ concurred with five of these  recommendations and partially concurred with the other. As of December  2017, DOJ has implemented two of the six recommendations and had not  fully addressed the remaining four.", "DOJ could better measure effectiveness of pretrial diversion  alternatives. In June 2016, we reported that DOJ had taken steps to  pursue alternatives to incarceration for certain offenders, but could  improve data collection and efforts to measure outcomes resulting from  the use of pretrial diversion alternatives. Our review examined two  pretrial diversion programs on the front-end of the criminal justice process  that provided offenders an opportunity to avoid incarceration if they satisfy  program requirements. Title 9 of the U.S. Attorneys\u2019 Manual permits U.S.  Attorneys\u2019 Offices to divert, at the discretion of a U.S. Attorney, certain  federal offenders from prosecution into a program of supervision and  services administered by the PPSO. Under the Title 9 diversion program,  if the offender fulfills the terms of the program, the offender will not be  prosecuted, or, if the offender has already been charged, the charges will  be dismissed.", "In addition to the Title 9 Pretrial Diversion Program, federal criminal  justice stakeholders within some judicial districts have voluntarily  established court-involved pretrial diversion practices. Court-involved  pretrial diversion allows certain federal offenders the opportunity to  participate in supervised programs or services, such as a drug court to  address criminal behavior that may be linked to addiction to drugs or  alcohol. Program participants are to meet regularly with court officials  including a judge and pretrial services officer to discuss their progress in  the program. If the offender satisfies program requirements, the offender  may not be prosecuted, charges may be dismissed, or the participant  may receive a reduced sentence.", "While DOJ had collected some data on the use of pretrial diversion, we  found that the data were of limited usefulness and reliability because its  case management system did not distinguish between the different types  of diversion and DOJ had not provided guidance to U.S. Attorneys\u2019  Offices as to when and how pretrial diversion cases are to be entered into  the system. In addition, we found that DOJ had not measured the  outcomes or identified the cost implications of its pretrial diversion  programs. To address these deficiencies, we made four  recommendations to DOJ. The first two relate to tracking and entering  pretrial diversion data, while the second two relate to assessing outcomes  based on the data. Specifically, we recommended that DOJ (1) separately  identify and track the different types of pretrial diversion programs, (2)  provide guidance to its attorneys on the appropriate way to enter data, (3)  identify, obtain, and track data on the outcomes and costs of pretrial  diversion programs, and (4) develop performance measures to assess  diversion program outcomes. DOJ concurred with all four of our  recommendations.", "In October 2016, DOJ took actions to fully implement the first two  recommendations. Specifically, in September 2016, DOJ provided  guidance to staff in its U.S. Attorneys\u2019 Offices that outlines (1) the use of  two new pretrial diversion codes\u2014one for Title 9 pretrial diversion and  another for court-involved diversion and (2) the appropriate entries to  create and dispose of each type of pretrial diversion. Attorneys were  instructed to use the codes starting on October 1, 2016. However, as of  December 2017, DOJ has not implemented the third and fourth  recommendations. We continue to believe that by obtaining data on the  costs and outcomes of pretrial diversion programs and establishing  performance measures, DOJ would gain multiple advantages in its ability  to manage these programs and optimize their outcomes and cost  implications.", "DOJ could better assess initiatives to address prison overcrowding  and costs. In June 2015, we reported that DOJ could better measure the  efficacy of two incarceration initiatives designed to address challenges  related to overcrowding and rising costs. One of these was the Smart on  Crime initiative, announced in August 2013 as a comprehensive effort to: prioritize prosecutions to focus on the most serious cases;  reform sentencing to eliminate unfair disparities and reduce  overburdened prisons; pursue alternatives to incarceration for low-level nonviolent crimes;  improve reentry to curb repeat offenses and re-victimization; and  surge resources to prevent violence and protecting most vulnerable  populations.", "In our report, we found that DOJ had established indicators that were  well-linked to these goals; however, the indicators lacked other key  elements of successful performance measurement systems, such as  clarity, a measurable target, or context. For example, none of the  indicators had numerical targets by which to assess whether overall goals  and objectives are achieved. To address this deficiency, we  recommended that DOJ modify its Smart on Crime indicators to  incorporate key elements of successful performance measurement  systems. DOJ partially concurred with the recommendation, and agreed  to continually refine and enhance the indicators to improve their clarity  and context. However, DOJ did not agree that establishing measurable  targets for its indicators was appropriate. We recognized that it might not  be appropriate to create targets for every indicator. Nevertheless, we  maintained that measurable performance targets that are properly  developed, communicated, and managed, can aid Department leadership  in the admittedly challenging task of assessing progress in the Smart on  Crime Initiative.", "In March 2017, DOJ noted that, due to a change in administration, the  status of the Smart on Crime Initiative was uncertain. In May 2017, the  Attorney General issued a new charging and sentencing policy to all  federal prosecutors that effectively rescinded any previous policy of DOJ  that is inconsistent with the new charging and sentencing policy, including  certain aspects of the Smart on Crime Initiative. In December 2017,  DOJ stated it would start to collect data on and monitor the  implementation of this new policy. However, DOJ did not provide  information on how it plans to modify its indicators to incorporate key  elements of successful performance measurement systems. To the  extent that DOJ continues to implement other aspects of the Smart on  Crime initiative, such as improving reentry and surging resources to  prevent violence we continue to believe this recommendation is valid.", "The second initiative we addressed in our June 2015 report was the  Clemency Initiative, which encourages nonviolent, low-level federal  offenders to petition to have their sentences commuted, or reduced, by  the President. Commutation of sentence, as we reported, has long been  considered to be an extraordinary remedy that is rarely granted.  According to DOJ, in 2013, then-President Obama expressed a desire to  review more petitions, and DOJ pledged to expedite the review of such  petitions in order to provide them to the President for consideration.  However, we found that DOJ had not adequately assessed the extent to  which the Clemency Initiative is expeditiously identifying meritorious  petitions because it had not tracked how long it takes for petitions to clear  each step in its review process or identified and addressed any processes  that may contribute to unnecessary delays. We made a recommendation  to DOJ to address this deficiency. DOJ concurred, but in March 2017  DOJ stated that it had no standard review process to evaluate. In  December 2017, DOJ reported to us that it has taken steps to accelerate  the review of commutation cases, such as assigning two attorneys to  spend additional time on commutation cases. Although DOJ\u2019s actions are  consistent with our recommendation, DOJ has not tracked how long it  takes for petitions to clear each step in its review process. This makes it  unclear whether DOJ\u2019s actions are addressing the processes that  contribute to unnecessary delays."], "subsections": []}]}, {"section_title": "DOJ Has Addressed Two of Four GAO Recommendations Related to its Reentry Programs", "paragraphs": ["As part of its mission to protect public safety, BOP provides reentry  programming that aims to facilitate offenders\u2019 successful return to the  community and reduce recidivism. These reentry efforts include programs  offered in BOP facilities, as well as RRC and home confinement services  that allow inmates to serve the final months of their sentences in the  community. In our February 2012, June 2015, and June 2016 reports we  highlighted potential areas for continued oversight and made four  recommendations to BOP. As of December 2017, BOP has implemented  two of the four recommendations and has taken action to address one  other recommendation.", "BOP has developed a plan to evaluate its reentry programs. In June  2015, we reported that BOP had 18 reentry programs available to  inmates in BOP institutions in the areas of inmate treatment and  education. We found that while BOP had plans to evaluate the  performance of some of its reentry programs, it did not have a plan in  place to prioritize evaluations across all of these programs. As a result,  we recommended that BOP include, as part of its current evaluation plan,  all 18 of BOP\u2019s national reentry programs, and prioritize its evaluations by  considering factors such as resources required for conducting  evaluations. In May 2016, BOP provided to us an evaluation plan that  was consistent with our recommendation. BOP has continued to update  the evaluation plan to reflect changes in priority. For example, the most  recent plan, updated in July 2017, lists BOP\u2019s Mental Health Step Down  Unit program as its top priority, with a target evaluation date of fiscal year  2018. According to BOP, this reflects the need for analysis of services for  seriously mentally ill inmates.", "BOP has taken steps to assess costs of home confinement services.  In February 2012, we reported that BOP did not know the actual cost of  home confinement services. To facilitate inmates\u2019 reintegration into  society, BOP may transfer eligible inmates to community corrections  locations for up to the final 12 months of their sentences. Inmates may  spend this time in a RRC and in confinement in their homes for up to 6  months. BOP contracts with private organizations to manage the RRCs  and monitor inmates in home confinement. At the time of our review,  BOP was paying a rate of 50 percent of the overall per diem rate  negotiated with the RRC for each inmate in home confinement. For  example, if BOP paid a contractor the average community corrections per  diem rate of $70.79 for each inmate housed in a RRC, BOP would pay  $35.39 per day for that contractor\u2019s supervision of each inmate in home  confinement. However, according to BOP, the agency did not require  contractors to provide the actual costs for home confinement services as  part of their contract and therefore did not know the cost of home  confinement. To help BOP better manage its costs, we recommended  that BOP establish a plan for requiring contractors to submit separate  prices of RRC beds and home confinement services. BOP implemented  this recommendation and determined that all new solicitations as of  February 1, 2013, will have separate line items for RRC in-house beds  and home confinement services. According to BOP, as of November  2017, 184 solicitations with separate RRC bed and home confinement  service line items have been issued since February 2013.", "BOP could better measure the outcomes of RRCs and home  confinement. In June 2016, we reported that BOP was not positioned to  track the information it would need to help measure the outcomes of  inmates placed in RRCs and home confinement and did not have  performance measures in place. Specifically, we found that, as part of  its strategic plan, BOP had two measures\u2014one to track the number of  inmates placed into RRCs, and another to track the number of inmates  placed in home confinement. However, these measures did not help  assess the outcomes of RRCs and home confinement, such as how  these programs may or may not affect the recidivism rates of inmates. To  address this deficiency, we made two recommendations to BOP to (1)  identify, obtain, and track data on the outcomes of the RRC and home  confinement programs; and (2) develop performance measures by which  to help assess program outcomes. DOJ concurred with these  recommendations.", "As of December 2017, BOP has taken steps to implement our  recommendation to identify, obtain, and track data on the outcomes of  RRCs and home confinement. In particular, BOP reported to us that it has  developed a revised Statement of Work for use with its RRC contractors  that requires the contractors to track and report quarterly to BOP on,  among other things, the number of placements into and releases from  RRCs and home confinement; revocations from RRCs or home  confinement; and RRC and home confinement residents that have  secured full, part-time, or temporary employment. BOP plans to compile  these data to track contractor performance and program outcomes.  Further, BOP reported to us that it has developed a voluntary survey that  asks RRC residents about their RRC experiences, including the amount  of help they received in finding and keeping a job, and finding a place to  live. These actions are in line with our recommendation and we will  continue to monitor their implementation. However, as of December 2017,  BOP has not provided evidence to us that it has developed performance  measures by which to help assess program outcomes. We continue to  believe BOP should do so.", "Chairman Gowdy, Ranking Member Cummings, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions that you may have."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For further information about this statement, please contact Diana Maurer  at (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Other individuals who made key contributions to this  statement include Brett Fallavollita (Assistant Director), David Alexander,  Pedro Almoguera, Joy Booth, Billy Commons, III, Tonnye\u2019 Connor-White,  Jessica Du, Lorraine Ettaro, Michele Fejfar, Christopher Hatscher, Susan  Hsu, Tom Jessor, Matt Lowney, Heather May, and Jill Verret. Key  contributors for the previous work on which this testimony is based are  listed in each product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-421", "url": "https://www.gao.gov/products/GAO-18-421", "title": "Small Business Loans: Additional Actions Needed to Improve Compliance with the Credit Elsewhere Requirement", "published_date": "2018-06-05T00:00:00", "released_date": "2018-06-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SBA's 7(a) program is required to serve creditworthy small business borrowers who cannot obtain credit through a conventional lender at reasonable terms. The Joint Explanatory Statement of the Consolidated Appropriations Act, 2017 includes a provision for GAO to review the 7(a) program.", "This report discusses, among other things, (1) how SBA monitors lenders' compliance with the credit elsewhere requirement, (2) the extent to which SBA evaluates trends in lender credit elsewhere practices, and (3) lenders' views on the credit elsewhere criteria for 7(a) loans.", "GAO analyzed SBA data on 7(a) loans approved for fiscal years 2007\u20132016, the latest available, and reviewed literature on small business lending; reviewed standard operating procedures, other guidance, and findings from SBA reviews performed in fiscal year 2016; and interviewed lender associations and a nonrepresentative sample of 7(a) lenders selected that concentrated on larger lenders."]}, {"section_title": "What GAO Found", "paragraphs": ["For its 7(a) loan program, the Small Business Administration (SBA) has largely delegated authority to lenders to make 7(a) loan determinations for those borrowers who cannot obtain conventional credit at reasonable terms elsewhere. To monitor lender compliance with the \u201ccredit elsewhere\u201d requirement SBA primarily uses on-site reviews conducted by third-party contractors with SBA participation and oversight, and other reviews. According to SBA guidance, lenders making 7(a) loans must take steps to ensure and document that borrowers meet the program's credit elsewhere requirement. However, GAO noted a number of concerns with SBA's monitoring efforts. Specifically, GAO found the following:", "Over 40 percent (17 of 40) of the on-site lender reviews performed in fiscal year 2016 identified lender noncompliance with the requirement.", "On-site reviewers identified several factors, such as weakness in lenders' internal control processes that were the cause for lender noncompliance.", "Most on-site reviewers did not document their assessment of lenders' policies or procedures, because SBA does not require them to do so. As a result SBA does not have information that could help explain the high noncompliance rate.", "Federal internal control standards state that management should design control activities, including appropriate documentation, and use quality information to achieve the entity's objectives. Without better information on lenders' procedures for complying with the documentation requirement, SBA may be limited in its ability to promote compliance with requirements designed to help ensure that the 7(a) program reaches its target population.", "SBA does not routinely collect or analyze information on the criteria used by lenders for credit elsewhere justifications. SBA recently began collecting some information on lenders' use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders' practices. Federal internal control standards state that management should use quality information to achieve the entity's objectives. Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and identify patterns of use by certain lenders that place them at a higher risk of not reaching borrowers who cannot obtain credit from other sources at reasonable terms.", "In general, representatives from 8 of 11 lenders that GAO interviewed stated that SBA's credit elsewhere criteria are adequate for determining small business eligibility for the 7(a) program. These criteria help them target their lending to small businesses that would otherwise have difficulty obtaining conventional credit because they are often new businesses or have a shortage of collateral. However, they also said that other factors\u2014such as lender policies and economic conditions\u2014can affect their decisions to offer 7(a) loans. In January 2018, SBA issued revised guidance for the 7(a) program and has provided training on this new guidance to lenders and trade associations. Lenders told GAO they are still in the process of understanding the new requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that SBA (1) require its on-site reviewers to document their assessment of lenders' policies and procedures related to the credit elsewhere documentation requirement, (2) collect information on lenders' use of credit elsewhere criteria, and (3) analyze that information to identify trends. SBA generally agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In recent years, the Small Business Administration\u2019s (SBA) 7(a)  program\u2014SBA\u2019s largest loan guarantee program for small businesses\u2014 has grown considerably. The program is required to serve creditworthy  small business borrowers who cannot obtain credit through a  conventional lender at reasonable terms\u2014commonly referred to as the  \u201ccredit elsewhere\u201d requirement. In July 2015, SBA was forced to  suspend 7(a) lending after the program hit its $18.75 billion annual loan  ceiling with more than 2 months left in the fiscal year. Congress  subsequently raised the loan ceiling to $23.5 billion and further to $27.5  billion in fiscal year 2017. In response to this growth, members of  Congress have raised concerns about guaranteed loans going to  borrowers that are able to obtain conventional credit at reasonable terms  and whether the criteria currently used to satisfy the credit elsewhere  requirement provide reasonable assurance that guaranteed loans are  approved for only qualified borrowers.", "The Joint Explanatory Statement of the Consolidated Appropriations Act,  2017, includes a provision for us to conduct a study of the credit  elsewhere requirement, including the sufficiency of the credit elsewhere  criteria. This report discusses (1) 7(a) lending to selected categories of  small business borrowers from fiscal years 2007 through 2016; (2) how  SBA monitors lenders\u2019 compliance with the credit elsewhere requirement;  (3) the extent to which SBA evaluates trends in lender practices related to  the credit elsewhere requirement; and (4) lenders\u2019 views on the criteria  used to determine eligibility for 7(a) loans and other issues related to the  7(a) program.", "To determine 7(a) lending to selected categories of small business  borrowers, we identified the characteristics of small business borrowers  that receive SBA-guaranteed loans through the 7(a) program. To do so,  we analyzed loan-level data from SBA on the characteristics of small  businesses that received 7(a) loans from fiscal years 2007 through 2016,  the most current information available at the time of our review, including  whether businesses were women-owned or minority-owned and their  geographic location. To assess the reliability of loan-level data from SBA,  we interviewed SBA officials, reviewed related documentation, and tested  the data for missing or erroneous values. We determined the data we  used were sufficiently reliable for purposes of describing the  characteristics of borrowers who received 7(a) loans.", "To examine how SBA conducts oversight of 7(a) lenders\u2019 compliance with  the credit elsewhere requirement, we reviewed SBA\u2019s standard operating  procedures and other guidance, interviewed SBA officials, and reviewed  reports of SBA\u2019s on-site reviews, corrective actions, and targeted lender  reviews related to the credit elsewhere requirement conducted in fiscal  year 2016. To assess the extent to which SBA evaluates trends in lender  practices related to the credit elsewhere requirement, we interviewed  SBA officials and reviewed documentation for SBA\u2019s online portal for loan  origination. To obtain lenders\u2019 views on the adequacy of the criteria SBA  uses to determine eligibility for 7(a) loans and other issues related to the  7(a) program, we interviewed representatives from industry groups and a  nonrepresentative, nongeneralizable sample of 11 lenders, of which 9  lenders were selected using a random process that concentrated on  larger lenders and two additional lenders we interviewed that represented  an industry group. Appendix I describes our objectives, scope, and  methodology in greater detail.", "We conducted this performance audit from August 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Under SBA\u2019s 7(a) loan program, SBA guarantees loans made by  commercial lenders to small businesses for working capital and other  general business purposes. These lenders are mostly banks, but some  are non-bank lenders, including small business lending companies\u2014  lenders whose lending activities are not subject to regulation by any  federal or state regulatory agency, but were previously licensed by SBA  and authorized to provide 7(a) loans to qualified small businesses. The  guarantee assures the lender that if a borrower defaults on a loan, the  lender will receive an agreed-upon portion (generally between 50 percent  and 85 percent) of the outstanding balance. For a majority of 7(a) loans,  SBA relies on lenders with delegated authority to approve and service  7(a) loans and to ensure that borrowers meet the program\u2019s eligibility  requirements. To be eligible for the 7(a) program, a business must be an  operating for-profit small firm (according to SBA\u2019s size standards) located  in the United States and must meet the credit elsewhere requirement.", "Because the 7(a) program is required to serve borrowers who cannot  obtain conventional credit at reasonable terms, lenders making 7(a) loans  must take steps to ensure that borrowers meet the program\u2019s credit  elsewhere requirement. Because SBA relies on lenders with delegated  authority to make these determinations, SBA\u2019s oversight of these lenders  is particularly important. However, we found in a 2009 report that SBA\u2019s  lack of guidance to lenders on how to document compliance with the  credit elsewhere requirement was impeding the agency\u2019s ability to  oversee compliance with the credit elsewhere requirement. To improve SBA\u2019s oversight of lenders\u2019 compliance with the credit elsewhere  requirement, we recommended in 2009 that SBA issue more detailed  guidance to lenders on how to document their compliance with the credit  elsewhere requirement. As a result, SBA revised its standard operating  procedure to state that each loan file must contain documentation that  specifically identifies the factors in the present financing that meet the  credit elsewhere test, which we believe met the spirit of our  recommendation.", "SBA\u2019s current credit elsewhere criteria for determining 7(a) loan eligibility  include the following factors:  1.  the business needs a longer maturity than the lender\u2019s policy permits;  2.  the requested loan exceeds the lender\u2019s policy limit regarding the  amount that it can lend to one customer;  3.  the collateral does not meet the lender\u2019s policy requirements;  4.  the lender\u2019s policy normally does not allow loans to new businesses or  businesses in the applicant\u2019s industry; or  5.  any other factors relating to the credit which, in the lender\u2019s opinion,  cannot be overcome except for the guarantee.", "When the 7(a) program was first implemented, borrowers were generally  required to show proof of credit denials from banks that documented,  among other things, the reasons for not granting the desired credit.  Similar requirements remained in effect until 1985, when SBA amended  the rule to permit a lender\u2019s certification made in its application for an  SBA guarantee to be sufficient documentation. This certification  requirement remained when the rule was rewritten in 1996. SBA stated  that it believed requiring proof of loan denials was demoralizing to small  businesses and unenforceable by SBA.", "SBA and lender roles vary among 7(a) program categories\u2014including  regular 7(a), the Preferred Lenders Program, and SBA Express. Under  the regular (nondelegated) 7(a) program, SBA makes the loan approval  decision, including the credit determination. Under the Preferred Lenders  Program and SBA Express, SBA delegates to the lender the authority to  make loan approval decisions, including credit determinations, without  prior review by SBA. For each 7(a) program category, lenders are  required to ensure that borrowers meet the credit elsewhere requirement  for all 7(a) loans. The maximum loan amount under the SBA Express  program is $350,000, as opposed to $5 million for other 7(a) loans. The  program allows lenders to utilize, to the maximum extent possible, their  own credit analyses and loan underwriting procedures. In return for the  expanded authority and autonomy provided by the program, SBA Express  lenders agree to accept a maximum SBA guarantee of 50 percent. Other  7(a) loans generally have a maximum guarantee of 75 percent or 85  percent, depending on the loan amount. In fiscal year 2016, 1,991 lenders  approved 7(a) loans, of which 1,321 approved at least one loan with  some form of delegated authority.", "SBA\u2019s Office of Credit Risk Management is responsible for overseeing  7(a) lenders, including those with delegated authority. SBA created this  office in fiscal year 1999 to help ensure consistent and appropriate  supervision of SBA\u2019s lending partners. The office is responsible for  managing all activities regarding lender reviews; preparing written reports;  evaluating new programs; and recommending changes to existing  programs to assess risk potential. Generally, the office oversees SBA  lenders to identify unacceptable risk profiles using its risk rating system  and enforce loan program requirements. According to SBA\u2019s standard  operating procedures, one of the agency\u2019s purposes of its monitoring and  oversight activities is to promote responsible lending that supports SBA\u2019s  mission to increase access to capital for small businesses.", "In the federal budget, the 7(a) program is generally required to set fees  that it charges to lenders and borrowers at a level to cover the estimated  cost of the program associated with borrower defaults (in present value  terms). To offset some of the costs of the program, such as default costs,  SBA assesses lenders two fees on each 7(a) loan. First, depending on  the term of the loan, the guarantee fee must be paid by the lender within  either 90 days of loan approval or 10 business days of the SBA loan  number being assigned. This fee is based on the amount of the loan  and the level of the guarantee, and lenders can pass the fee on to the  borrower. Second, the servicing fee must be paid annually by the lender  and is based on the outstanding balance of the guaranteed portion of the  loan.", "The 7(a) program accounts for a small portion of total small business  lending. According to a May 2017 report by the Consumer Financial  Protection Bureau, the total debt financing available to small businesses  was estimated to be $1.4 trillion. Of that amount, the Consumer Financial  Protection Bureau estimated that about 7 percent was SBA loans,  including 7(a) loans.", "SBA and some other researchers have suggested that there may be  disparities in credit access among small businesses, based on  characteristics of the borrower and firm. SBA lists as a strategic objective  to \u201censure inclusive entrepreneurship by expanding access and  opportunity to small businesses and entrepreneurs in communities where  market gaps remain.\u201d In 2007, we reported that some studies had noted  disparities among some races and genders in the conventional lending  market, but the studies did not offer conclusive evidence on the reasons  for those differences. Much of the research we reviewed in 2007 relied  on the Board of Governors of the Federal Reserve System\u2019s Survey of  Small Business Finance, which was last implemented in 2003. Although  this survey is no longer available, recently the 12 Federal Reserve Banks  conducted the Small Business Credit Survey. In a series of reports  based on the more recent survey, researchers found disparities in credit  availability based on gender, the age of the firm, and minority status."], "subsections": []}, {"section_title": "Businesses That Were New, Women- Owned, or Located in Distressed Areas Received a Majority of 7(a) Loan Dollars over the Past 10 Years", "paragraphs": ["From fiscal years 2007 through 2016, a majority of loan dollars  guaranteed under the 7(a) program went to small businesses that were  new, partially or wholly owned by women, or located in a distressed  area. As previously mentioned, recent studies we reviewed by the  Federal Reserve Banks and other researchers suggest that certain small  business borrowers\u2014including businesses that are new or owned by  women\u2014have difficulty obtaining conventional small business loans,  which may put them at a disadvantage. As shown in figure 1, almost  two-thirds of loan dollars guaranteed under the 7(a) program for this  period went to small businesses that were in these two categories or  located in a distressed area. The remaining 37 percent of 7(a) loan  dollars went to businesses that were established, solely male-owned, and  not located in economically distressed areas. See appendixes II and III for  additional data on 7(a) loans, such as the total volume, percentage of  lending provided by year and by state, and other borrower characteristics,  including SBA\u2019s loan- and lender-level Small Business Risk Portfolio  Solutions score (predictive score) information.", "In the following figures, we present more detailed data on 7(a) loans to  small businesses based on their status as a new business; gender of  ownership; location relative to economically distressed areas; and  minority ownership for fiscal years 2007 through 2016.", "New businesses. As shown in figure 2, the percentage of 7(a) loans that  went to new businesses decreased from 36 percent in fiscal year 2007 to  23 percent in fiscal year 2011 before increasing to 35 percent by 2016.", "Gender. From fiscal years 2007 through 2016, the share of the total value  of approved 7(a) loans by gender of owner remained fairly consistent (see  fig. 3). An average of 70 percent of the total loan value went to male- owned businesses, and the remaining 30 percent went to businesses that  were majority (more than 50 percent) or partially (50 percent or less)  owned by women.", "Economically distressed areas. SBA did not provide data on whether  7(a) loans go to businesses located in economically distressed  neighborhoods. However, we used data from the American Community  Survey for 2011 through 2015, the most recent version available at the  time of our analysis, along with zip code information provided by SBA to  determine the average poverty rate by zip code (see fig. 4). From fiscal years 2007 through 2016, the proportion of the total value of 7(a) loans  approved that went to borrowers in economically distressed areas  remained between 23 percent and 26 percent. We defined distressed  areas as zip codes where at least 20 percent of the households had  incomes below the national poverty line.", "Minority/Nonminority status of borrower. From fiscal years 2007  through 2016, the proportion of the total value of 7(a) loans approved that  went to minority borrowers decreased overall\u2014from 43 percent to 30  percent\u2014with the lowest share at 24 percent in fiscal year 2010 (see fig.  5). The share of approved loan dollars that went to nonminority  borrowers varied, increasing to 69 percent in fiscal year 2010 before  decreasing to 56 percent in fiscal year 2016. Notably, the share of the  total value of loans approved that went to borrowers whose race/ethnicity  was categorized as undetermined increased from 5 percent in fiscal year  2007 to 13 percent in fiscal year 2016. This increase does not fully  account for the declined share for minority borrowers. However,  according to SBA officials, borrowers voluntarily provide self-reported  information on race and ethnicity and therefore the associated trend data  should be viewed with caution."], "subsections": []}, {"section_title": "SBA Has Processes in Place to Evaluate Lender Compliance, but Its Lender Reviews Do Not Document Reasons for Noncompliance", "paragraphs": [], "subsections": [{"section_title": "SBA Conducts On-site and Targeted Lender Reviews to Evaluate Lender Compliance with the Credit Elsewhere Documentation Requirement", "paragraphs": ["SBA relies on on-site reviews as its primary mechanism for evaluating  lenders\u2019 compliance with the credit elsewhere requirement. The reviews  are performed by third-party contractors with SBA staff participation and  additional oversight from SBA. According to SBA\u2019s standard operating  procedures, these reviews are generally conducted every 12 to 24  months for all 7(a) lenders with outstanding balances on the SBA- guaranteed portions of their loan portfolios of $10 million or more,  although SBA may conduct on-site reviews of any SBA lender at any time  as it considers necessary. In fiscal year 2016, SBA conducted 40 on-site  reviews of 7(a) lenders, representing approximately 35 percent of SBA\u2019s  total outstanding 7(a) loan portfolio.", "As part of SBA\u2019s on-site reviews, reviewers judgmentally selected a  sample of approximately 30 to 40 loan files using a risk-based approach.  These loan files accounted for approximately 6 percent to 19 percent of  each lender\u2019s total gross SBA dollars in fiscal year 2016. For each  lender, approximately 70 percent to 90 percent of the loan files in the  sample were reviewed to evaluate compliance with the credit elsewhere  requirement. According to SBA\u2019s contractors, loans that were selected  for other reasons, such as issues related to liquidation, were not required  to be reviewed for credit elsewhere compliance.", "SBA requires lenders to provide a narrative to support the credit  elsewhere determination in the credit memorandum included in each loan  file. SBA\u2019s standard operating procedures state that lenders must  substantiate that credit is not available elsewhere by (1) discussing the  criteria that demonstrate an identifiable weakness in a borrower\u2019s credit  and (2) including the specific reasons why the borrower does not meet  the lender\u2019s conventional loan policy requirements.", "In keeping with SBA\u2019s documentation requirement, third-party contractors  and SBA staff who conduct on-site reviews are supposed to assess  whether lenders have adequately documented the credit elsewhere  criteria and provided specific reasons supporting the criteria in the credit  memorandum. According to SBA\u2019s contractors, adequate documentation  of the credit elsewhere determination in the credit memorandum would  include not just which of the criteria a borrower met but also a discussion  of the basis or justification for the decision. For example, if a lender  determined that a borrower needed a longer maturity, the lender should  explain in the credit memorandum the reasons why a longer maturity was  necessary. SBA\u2019s contractors also told us that they carefully review a  lender\u2019s loan policies in preparation for on-site reviews and refer to a  lender\u2019s policies throughout the reviews. Reviewers do not attempt to  verify the evidence given in support of the credit elsewhere reason  beyond the information provided in the credit memorandum.", "Based on our review of fiscal year 2016 reports, on-site reviews can  result in three levels of noncompliance response:", "Finding: This is the most severe result and is associated with a  corrective action for the lender to remedy the issue.", "Observation: This is a deficiency recorded in the review\u2019s summary  but may not warrant a corrective action for the lender.", "Deficiency Noted: This is the lowest level of response. It is a  deficiency noted as part of the review that is not included in the  review\u2019s summary and also may not warrant a corrective action.", "According to SBA officials, SBA\u2019s policy has been that any  noncompliance with SBA loan program requirements results in a finding.  However, according to SBA officials and our review of the fiscal year  2016 on-site review reports, if a single instance of noncompliance was  identified in fiscal year 2016, SBA generally would not issue a finding.  Instead, SBA\u2019s contractors said they would attempt to determine whether  that instance was an inadvertent error, such as by examining additional  loan files.", "Lenders that are subject to corrective actions are generally required to  submit a response to SBA within 30 days to document how they have  addressed or plan to address the identified issues. SBA subsequently  asks for documentation to show that the lender has remedied the issue,  and in some cases will conduct another review that usually includes an  assessment of 5 to 10 additional loan files to determine whether the credit  elsewhere reason has been adequately documented. According to SBA  officials, SBA may also review lenders\u2019 compliance with corrective actions  from recent on-site reviews during targeted reviews (discussed below)  and delegated authority renewal reviews (for lenders with delegated  authority).", "In addition to on-site reviews, SBA also monitors lenders\u2019 compliance with  the credit elsewhere requirement through targeted reviews (performed  on- or off-site). Targeted reviews of a specific process or issue may be  conducted for a variety of reasons at SBA\u2019s discretion, including  assessing a lender\u2019s compliance with the credit elsewhere requirement. In  fiscal year 2016, SBA conducted 24 targeted reviews that included an  examination of lenders\u2019 compliance with the credit elsewhere  documentation requirement. For these reviews, SBA examined loan files  for 5 judgmentally selected loans that were provided to SBA  electronically, as well as copies of the credit elsewhere reasoning (among  other underwriting documentation) for 10 additional recently-approved  loans.", "SBA also conducts periodic off-site reviews that use loan- and lender- level portfolio metrics to evaluate the risk level of lenders\u2019 7(a) portfolios.  According to agency officials, SBA also began using off-site reviews to  evaluate lenders\u2019 compliance with the credit elsewhere requirement in  fiscal year 2016. In that year, SBA conducted off-site reviews of 250  lenders and required these lenders to report the credit elsewhere  justification for a sample of 10 loans per lender that were identified by  SBA\u2019s selection process. Lenders were not required to provide  supporting documentation, and SBA did not follow up with lenders or  review loan files to ensure the validity of the self-reported reasons.  According to SBA, off-site reviews followed the same procedures in fiscal  year 2017 as in 2016 and that the agency planned to use the same  procedures for these reviews in the future. According to the agency, it  also routinely evaluates and revises its review processes and procedures.", "In addition, SBA\u2019s Loan Guaranty Processing Center and National  Guaranty Purchase Center conduct Improper Payments Elimination and  Recovery Act and quality control reviews at the time of loan approval and  at the time of guaranty purchase, respectively. These reviews examine  the credit elsewhere requirement, among other issues. Lastly, since 2014  SBA\u2019s Office of Inspector General has also examined whether high-dollar  or early-defaulted 7(a) loans were made in accordance with rules;  regulations; policies; and procedures, including the credit elsewhere  requirement."], "subsections": []}, {"section_title": "SBA\u2019s Lender Reviews in 2016 Identified a High Rate of Noncompliance with the Credit Elsewhere Documentation Requirement", "paragraphs": ["Our review of the on-site reviews conducted in fiscal year 2016 found that  17 of the 40 reviews\u2014more than 40 percent\u2014identified compliance  issues with the credit elsewhere documentation requirement. Of those 17  reviews,", "10 reviews resulted in a Finding (all with associated corrective", "3 reviews resulted in an Observation (none with associated corrective  actions or requirements), and", "4 reviews resulted in a Deficiency Noted (one with an associated  requirement).", "For all of the 17 on-site reviews that identified an instance of  noncompliance, the issue was related to the lender\u2019s documentation of  the credit elsewhere criteria or justification. For example, one review  found that the lender\u2019s \u201cregulatory practices demonstrate material  noncompliance with SBA Loan Program requirements regarding  documentation of the Credit Elsewhere Test.\u201d Another review found that  the lender \u201cfailed to demonstrate with adequate documentation that credit  was not available elsewhere on reasonable terms and conditions.\u201d For 2  of the 17 reviews, the issue was partly related to a discrepancy between  the credit elsewhere justification used for some of the sample loan files  and the lender\u2019s own loan policy limits.", "With regard to SBA\u2019s targeted reviews, 7 of 24 reviews (29 percent)  conducted in fiscal year 2016 found a compliance issue with the credit  elsewhere requirement. Of those 7 reviews,", "6 reviews resulted in a Finding (all with associated corrective actions),", "1 review resulted in an Observation (without an associated corrective no reviews resulted in a Deficiency Noted.", "For all of the 7 targeted reviews that identified a compliance issue, the  issue was wholly related to the lender\u2019s documentation of the credit  elsewhere reason or justification. For example, 4 reviews found that for at  least one loan reviewed, \u201cthe Lender failed to document justification that  credit was unavailable elsewhere.\u201d Another review found that for \u201cthree  SBA Express loans and one Small Loan Advantage loan   reported \u201cother factors relating to the credit that in the lender\u2019s opinion  cannot be overcome except for the guaranty\u2019 without specific identification  of the factors.\u201d"], "subsections": []}, {"section_title": "Lack of Internal Controls Led to Lender Noncompliance, but Were Not Documented by SBA\u2019s Reviews", "paragraphs": ["Based on our review of on-site review reports and an interview with one  reviewer, the key factors underlying lenders\u2019 high rate of noncompliance  with the credit elsewhere documentation requirement were lenders\u2019 lack  of proper internal controls and procedures and lack of awareness of the  credit elsewhere documentation requirement. In fiscal year 2016, SBA\u2019s  corrective actions related to the credit elsewhere requirement required the  lenders to establish or strengthen their policies; procedures; underwriting  processes; or internal controls. In addition, contractors conducting the on- site reviews with whom we spoke stated that some lenders appeared to  be unfamiliar with SBA\u2019s standard operating procedures or were unclear  on how to interpret them.", "For the 11 on-site reviews conducted in 2016 that included corrective  actions, SBA generally required lenders to improve controls or  procedures. For example, one lender was required to \u201ccorrect its policy,  modify its procedure, and amend its internal controls to ensure that its  consideration and documentation of credit unavailable elsewhere  identifies the specific fact(s) which are applicable to the specific loan and  the determination is rendered and accurate for each individual SBA loan  that it originates.\u201d Another lender was required to \u201cimprove underwriting  processes and controls to ensure that the borrower meets the [credit  elsewhere] requirement\u201d and to \u201cdocument the loan file with the reasons  for the determination.\u201d", "Similarly, for the six targeted reviews in 2016 that included corrective  actions, SBA issued a general requirement for the lender to \u201cidentify the  causes for the Findings and implement corrective actions.\u201d Based on our  review of these targeted reviews, lenders generally remedied or intended  to remedy the issue by amending their internal controls or procedures.  For example, one lender stated that the \u201cCredit Elsewhere test will be  incorporated into the Credit Department process.\u201d Another lender stated  that it would \u201ccentralize all SBA underwriting and has developed an SBA  addendum that will be utilized for all SBA-guaranteed loans.\u201d", "Although some of SBA\u2019s on-site reviews for fiscal year 2016 identified  factors leading to noncompliance, they generally did not document  reviewers\u2019 assessment of lenders\u2019 policies and practices for complying  with the credit elsewhere documentation requirement. SBA\u2019s standard  operating procedures state that the on-site reviewers should determine  whether or not lenders\u2019 policies and practices adhere to the requirement,  but they do not require them to document their assessment of these  policies and practices. Only 4 of the 40 fiscal year 2016 review reports  that we examined included such an assessment. As a result, although  SBA required corrective actions by the lender to address deficiencies,  there usually was no record of the underlying factors that resulted in the  lender\u2019s noncompliance.", "Federal internal control standards state that management should design  control activities to achieve objectives and respond to risks, including  appropriate documentation of transactions and internal control. Because  SBA does not require reviewers to document their assessment of lenders\u2019  policies and practices for complying with the credit elsewhere  documentation requirement, the agency does not have good information  to help explain why so many lenders are not in compliance. This hinders  SBA\u2019s ability to take informed and effective actions to improve lender  compliance with the requirement and ensure that the program is reaching  its intended population."], "subsections": []}]}, {"section_title": "SBA Collects Limited Data on Criteria Used for Credit Elsewhere Justifications and Does Not Analyze Patterns in Lender Practices", "paragraphs": [], "subsections": [{"section_title": "SBA Collects Limited Data on Criteria Used for Credit Elsewhere Justifications", "paragraphs": ["SBA does not routinely collect information on the criteria lenders use in  their credit elsewhere justifications. As previously discussed, lenders are  required to maintain documentation of borrower eligibility (including the  credit elsewhere justification) in each loan file for loans approved through  lenders\u2019 delegated authority. However, SBA cannot readily aggregate  information on lenders\u2019 credit elsewhere justifications for both delegated  and nondelegated loans:", "For delegated loans, lenders are required to certify the loan\u2019s credit  elsewhere eligibility on E-Tran, SBA\u2019s online portal for origination of  delegated and nondelegated loans. However, lenders are only  required to check a box to certify that the loan file contains the  required credit elsewhere justification and are not required to submit  any additional information, including which of the criteria was used to  make the determination. According to SBA officials, delegated loans  account for loans approved by approximately 70 percent of lenders.", "For nondelegated loans, lenders are required to submit credit  elsewhere documentation to be reviewed by SBA\u2019s Loan Guaranty  Processing Center. For these loans, which comprise loans approved  by the remaining 30 percent of lenders, SBA might maintain paper  records of data on borrowers\u2019 eligibility but does not compile such  data electronically and thus cannot readily aggregate the data for  analysis.", "Instead, SBA relies on on-site reviews or lender-reported information to  review lenders\u2019 credit elsewhere justifications and collects limited data  from these reviews. For its on-site reviews, SBA does not collect sample  data on lenders\u2019 use of the credit elsewhere criteria. For its off-site  reviews, SBA collected sample data on lenders\u2019 use of the credit  elsewhere criteria based on 250 such reviews conducted in fiscal year  2016. For these reviews, SBA asked lenders to self-report a short  description of the credit elsewhere justifications used for an SBA-selected  sample of 10 loans. However, as discussed earlier, SBA did not request  or examine loan files as part of these off-site reviews and did not follow  up with lenders or review loan files to ensure the validity of the self- reported reasons.", "One reason why SBA does not routinely collect complete information on  lenders\u2019 use of the credit elsewhere criteria is that SBA\u2019s loan origination  system, E-Tran, is not equipped to record or tabulate this information. In  addition, according to an SBA official, on-site reviews do not collect data  on the credit elsewhere criteria because the loans reviewed are  judgmentally selected and would not accurately represent the larger  population.", "Federal internal control standards state that management should use  quality information to achieve the entity\u2019s objectives. To do so,  management should identify the information needed to achieve the  objectives and address the risks, obtain relevant data from reliable  internal and external sources in a timely manner, and process the  obtained data into quality information. More robust information on  lenders\u2019 credit elsewhere justifications, including the credit elsewhere  criteria, would allow SBA to evaluate patterns in lender practices related  to the credit elsewhere requirement and, in turn, help the agency ensure  compliance with the requirement. In this context, generalizable data,  which can be collected through random sampling, or complete data  through required reporting for every loan would allow SBA to better  understand patterns in lender practices across the 7(a) program. Further,  nongeneralizable data, which are available through SBA\u2019s current off- and  on-site review processes, would allow SBA to examine specific groups of  lenders and could help SBA determine if it is necessary to collect  additional data."], "subsections": []}, {"section_title": "SBA Has Not Conducted Analysis to Determine If There Are Any Patterns of Noncompliance or Identified Lenders That May Be at Risk", "paragraphs": ["SBA does not analyze the limited data it collects to help it monitor  lenders\u2019 compliance with the credit elsewhere requirement. According to  agency officials, SBA has not performed lender-level analyses of the  criteria lenders use for their credit elsewhere justifications. Additionally,  SBA has not analyzed 7(a) lenders\u2019 use of the \u201cother factors\u201d criterion\u2014 that is, factors not specified in the other criteria that, in the lender\u2019s  opinion, cannot be overcome except for the guarantee\u2014for example, by  collecting data on the frequency of its use or examining why lenders rely  on it. While some 7(a) lenders told us they avoided relying on the \u201cother  factors\u201d criterion because it was vague and open to interpretation, some  lenders have used it when a borrower\u2019s profile did not meet any of the  other criteria. For example, one lender stated that this criterion was used  for a borrower who was no longer a start-up but had experienced  fluctuations in cash flow due to relocation or change in ownership.  Another lender stated that the criterion was used more frequently during  the 2007-2009 financial recession to extend financing to borrowers whose  owners had experienced a home foreclosure but were otherwise sound.", "Federal internal control standards state that management should  establish and operate monitoring activities to monitor the internal control  system and evaluate the results. Analyzing data on lenders\u2019 use of the  credit elsewhere criteria as part of its monitoring procedures could help  SBA determine whether there are patterns in lender practices related to  the criteria that could predict lender noncompliance. For example, SBA  could analyze lenders\u2019 use of the criteria along with lender review results  and other data on loan characteristics and performance to determine  whether certain patterns indicate that a lender might be applying the  requirement inconsistently. Additionally, such analysis could inform SBA\u2019s  selection of which lenders to review by improving its ability to identify  lenders at risk of noncompliance with the credit elsewhere requirement.  Better selection criteria for its lender reviews could, in turn, improve  identification and remediation of such noncompliance, helping ensure that  the 7(a) program serves its target population."], "subsections": []}]}, {"section_title": "Lenders Generally View Credit Elsewhere Criteria as Adequate, and SBA Has Implemented New Procedures for Reviewing Eligibility", "paragraphs": [], "subsections": [{"section_title": "Lenders Said Credit Elsewhere Criteria are Generally Adequate for Determining Borrower Eligibility", "paragraphs": ["Representatives at 8 of the 11 lenders that we contacted said they  believed that SBA\u2019s current credit elsewhere criteria are adequate in  targeting small business borrowers who cannot obtain credit at  reasonable terms. Representatives of these lenders also agreed that  the criteria generally serve the types of small businesses that would  otherwise have trouble obtaining conventional credit, such as new  businesses or those with a shortage of collateral. One lender  representative told us its most commonly used criterion related to the  overall time in business because of the higher risk of failure. Another  lender representative cited the lack of collateral as the most common  criterion used. Additionally, representatives at an industry association told  us that one of the most commonly used criteria was the one related to  loan maturity and many small businesses seek 7(a) loans because they  offer repayment terms of up to 10 years, compared to 1 to 3 years for  conventional loans.", "Representatives of two other lenders suggested that the credit elsewhere  criteria should not be overly prescriptive, which could limit lenders\u2019 ability  to make 7(a) loans to some businesses. For example, one representative  said the credit elsewhere criteria should remain flexible because banks  have different lending policies.", "In addition, representatives at three lenders indicated that they were  hesitant to use the \u201cother factors\u201d criterion. One lender believed the  requirement was open to interpretation and could be used inappropriately  with lenders determining their own individual conventional loan policies.  Another lender commented that the criterion was vague and rarely used  by his institution, noting that SBA should provide some additional  guidance on its use."], "subsections": []}, {"section_title": "Factors Such as Lender Policies and Economic Conditions Also Affect Lenders\u2019 Decisions to Offer a SBA 7(a) Loan", "paragraphs": ["Lenders consider multiple factors in determining whether to offer small  businesses a conventional loan or a 7(a) loan, according to stakeholders  with whom we spoke. For example, representatives at an industry  association stated that a bank goes through several analyses to  determine what loan product to offer the borrower. These representatives  stated that the credit elsewhere requirement is embedded in the analysis  a bank performs, such as whether the borrower qualifies for a loan and  has a financial need for an SBA loan and whether the 7(a) program is  right for that borrower.", "Representatives at two other lenders also stated that many small  businesses have already been turned down for conventional loans before  they seek a 7(a) loan. One representative noted that the \u201creasonable  rates and terms\u201d component of the 7(a) program was important as it  allows lenders to look more broadly at a borrower\u2019s needs. For instance,  the representative explained, lenders can assess whether repayment  terms are reasonable given a particular borrower\u2019s situation and the  resources the borrower will have to repay the loan.", "Economic conditions also affect lending policies, including whether  borrowers qualify for a conventional loan, according to representatives at  seven lenders with whom we spoke. For example, during the recent  economic downturn, banks tightened their underwriting standards for  small businesses and were less willing to lend without a government  guarantee, according to one lender representative."], "subsections": []}, {"section_title": "SBA Has Issued New Procedures for Reviewing Liquidity of Small Business Borrowers, and Additional Lender Training Is Underway", "paragraphs": ["SBA has issued revised primary operational guidance for the 7(a)  program, effective January 1, 2018. As discussed previously, lenders  are required to make a determination that the desired credit is not  available to the applicant from nonfederal sources. Under the previous  guidance, the lender had to determine that some or the entire loan was  not available from nonfederal sources or the resources of the applicant  business. However under the revised guidance, the scope of nonfederal  sources a lender must review was further defined to include sources both  related and unrelated to the applicant. The updated guidance states that  lenders must consider:", "Nonfederal sources related to the applicant, including the liquidity of  owners of 20 percent or more of the equity of the applicant, their  spouses and minor children, and the applicant itself; or", "Nonfederal sources unrelated to the applicant, including conventional  lenders or other sources of credit.", "Representatives of five lenders told us they have been determining how  to interpret the new procedures with a few stating they would like  additional guidance, including what information to retain in the file.  Representatives of two lenders stated that there is some ambiguity in how  to determine nonfederal resources and how to assess whether small  business owners have too many available liquid resources to qualify for a  7(a) loan. One representative said that lenders can have different  interpretations of what constitutes \u201cavailable resources,\u201d which is not  specified in the new SOP. As a result, he said, there may be some  confusion about how to assess family members of the borrower who have  high net worths and whether the borrower should decline a family  member contribution to qualify for an SBA loan. A representative of one  lender stated that lenders will not know what SBA expects until loans are  approved under the new procedures, default, and are then reviewed.  Another lender\u2019s representative suggested additional guidance on  documentation, such as whether the bank must obtain a personal  financial statement for each owner of the business.", "A SBA staff told us SBA has provided multiple training presentations to  SBA staff, lenders, and trade associations on the statutory changes to the  credit elsewhere requirements and standard operating procedure  updates. These have included a presentation at a trade association  conference, four monthly conference calls for SBA staff, and two  conference calls for SBA lenders. SBA staff said SBA also plans to hold  monthly training sessions with SBA field offices, quarterly training  sessions with the industry, and at least four training sessions in 2018 at  lender trade conferences. Additionally, a representative from an industry  association told us it is providing industry training on SBA\u2019s revised  procedures, including the credit elsewhere liquidity requirement."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["SBA\u2019s 7(a) loan program is required to serve creditworthy small business  borrowers who cannot obtain credit through a conventional lender at  reasonable terms, and SBA largely relies on lenders with delegated  authority to make credit elsewhere determinations. However, although  there is a high rate of lender noncompliance with the credit elsewhere  documentation requirement, SBA does not require its reviewers to  document their assessment of the policies and procedures lenders use to  meet the requirement. Without better information from lender reviews on  how lenders are implementing the requirement to document their credit  elsewhere decisions, SBA may be limited in its ability to promote  compliance with requirements and, in turn, use such information to help  ensure that 7(a) loans are reaching their target population.", "Furthermore, SBA does not routinely collect or analyze information on the  criteria used for credit elsewhere justifications to evaluate patterns in  lender practices. SBA recently began collecting some information on  lenders\u2019 use of the criteria, but this information is limited, and SBA does  not analyze the information that it does collect to better understand  lenders\u2019 practices. Without more robust information and analysis, SBA  may be limited in its ability to understand how lenders are using the credit  elsewhere criteria and whether 7(a) loans are reaching borrowers who  cannot obtain credit from other sources at reasonable terms."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to SBA.", "The Administrator of SBA should require reviewers to consistently  document their assessments of a lender\u2019s policies and practices.  (Recommendation 1)", "The Administrator of SBA should use its on-site and off-site reviews to  routinely collect information on lenders\u2019 use of credit elsewhere criteria as  part of its monitoring of lender practices related to the credit elsewhere  requirement. (Recommendation 2)", "The Administrator of SBA should analyze information on lenders\u2019 use of  credit elsewhere criteria obtained from its reviews to identify lenders that  may be at greater risk of noncompliance and to inform its selection of  lenders for further review for credit elsewhere compliance.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment. SBA\u2019s written  comments are reprinted in appendix IV. SBA generally agreed with the  recommendations. SBA also provided additional comments on certain  statements in the draft report, which are summarized below with our  responses.", "SBA noted that the draft Highlights did not discuss how credit  elsewhere is determined for nondelegated loans. We have not revised  the Highlights in response to this comment because our review  focused on delegated lenders. In the body of the report we note that  approximately 70 percent of 7(a) loans are approved under delegated  authority. We also refer to SBA\u2019s nondelegated loans in the report for  additional context.", "According to SBA, the statement on our draft Highlights did not fully  reflect its monitoring of lender compliance. SBA identified a variety of  reviews it uses in addition to on-site reviews by third party contractors,  which we discuss in the body of the report. We have modified the  Highlights to reflect these other reviews.", "Also in reference to the draft Highlights, SBA stated that it provides  oversight on every on-site lender review and that an SBA employee is  present as a subject-matter expert on every review. We revised the  Highlights by adding that SBA provides oversight to the on-site  reviews conducted by third-party contractors.", "In response to a statement in our draft report that SBA guarantees  loans to small businesses for working capital and other general  business purposes, SBA commented that working capital generally is  not the primary purpose for SBA-guaranteed loans. We did not revise  the statement because SBA\u2019s SOP 50 10 5 (version J) specifies that  SBA\u2019s 7(a) loan proceeds may be used for permanent working capital  and revolving working capital, among other things.", "In relation to a footnote in our report that mentions two lender reviews  for which we did not receive documentation, SBA stated that on  February 15, 2018, it provided documentation to us related to the  reviews and that we had confirmed its receipt. However, the text in the  footnote in question refers to two targeted lender reviews from 2016  that included corrective actions. The information SBA provided to us  on February 15, 2018, was related to on-site reviews conducted in  2016. As a result, we did not revise the footnote.", "SBA\u2019s letter also contained technical comments that we incorporated as  appropriate.", "We are sending copies of this report to congressional committees,  agencies, and other interested parties. In addition, this report will be  available at no charge on our website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report discusses (1) 7(a) lending to selected categories of small  business borrowers from fiscal years 2007 through 2016; (2) how the  Small Business Administration (SBA) monitors lenders\u2019 compliance with  the credit elsewhere requirement; (3) the extent to which SBA evaluates  trends in lender practices related to the credit elsewhere requirement; and  (4) lenders\u2019 views on the criteria used to determine eligibility for 7(a) loans  and other issues related to the 7(a) program.", "For background on the 7(a) program and the credit elsewhere  requirement, we reviewed the legislative history of the 7(a) program and  our previous reports. We also interviewed officials from SBA\u2019s Office of  Credit Risk Management on guidance provided to 7(a) lenders.", "For background on constraints in the small business credit market, we  reviewed recent academic literature on the characteristics of small  businesses that historically have had more difficulty accessing credit. In  addition, we reviewed recent studies published by the Federal Reserve  Banks of Atlanta; Cleveland; Kansas City; and New York.", "To describe the population of borrowers served by the 7(a) program, we  selected characteristics (such as gender, minority status, and percentage  of new business) that we used in our 2007 report and that were the  subject of the recent studies by Federal Reserve Banks. We obtained  and analyzed SBA loan-level data to describe 7(a) loans and borrowers.  Specifically, SBA provided us with 581,393 records from its administrative  data systems, which contained information on all loans approved and  disbursed in fiscal years 2007 through 2016. The SBA data included  various types of information describing each loan, including the total  gross approval amount; the amount guaranteed by SBA; the loan term;  and the interest rate; delivery method; and status of the loan. The SBA  data also included information on borrower characteristics:", "Age of business. Firms were classified as new (less than 2 years in  operation) or existing.", "Gender. Firms were classified as 100 percent male-owned; 50  percent or greater women owned; 50 percent or less women-owned;  or \u201cunknown.\u201d Information on gender was voluntarily provided by  borrowers.", "Economically distressed area. We identified borrowers in  economically distressed areas by matching borrower zip codes  provided by SBA to those in the 2011 through 2015 American  Community Survey. We defined distressed areas as zip codes where  at least 20 percent of households had incomes below the national  poverty line. In about 1 percent of the cases, we were unable to  classify a lender because a zip code had changed or had insufficient  population to report a poverty rate. We consider 1 percent of  unmatched cases to be low by data reliability standards.", "Race/ethnicity. Borrowers were placed in one of nine categories of  race/ethnicity, including an \u201cunknown\u201d category. We aggregated these  to create minority, nonminority, and undetermined categories. The  minority category included all borrowers who reported being a  race/ethnicity other than white. The nonminority category included  borrowers who reported being white. Information on race was  voluntarily provided by borrowers.", "Industry. Firms were assigned a North American Industrial  Classification code. These six-digit codes begin with a two-digit sector  code that we used to draw more general conclusions about  industries.", "Geographic information. The data provided the state where the  borrower is located.", "In addition, we obtained information from SBA on loan- and lender-level  Small Business Risk Portfolio Solution scores (predictive scores) provided  by Dunn & Bradstreet and Fair Isaac Company, for loans approved in  fiscal year 2016, the latest available. We were able to obtain predictive  scores for approximately 81 percent of the loans for which SBA had  provided other information. According to SBA, some loans may not have been disbursed at the time we obtained the predictive scores and, as a  result, we do not have scores associated with these loans. We analyzed  the information to determine the range of predictive scores and the range  of average predictive scores by lender.", "To assess the reliability of loan-level data on borrower and loan  characteristics and predictive scores we received from SBA, we  interviewed agency officials knowledgeable about the data and reviewed  related documentation. We also conducted electronic testing, including  checks for outliers, missing data, and erroneous values. We determined  that the data were sufficiently reliable for the purposes of describing the  characteristics of borrowers who received 7(a) loans and the distribution  of predictive scores.", "To assess how SBA monitors lenders\u2019 compliance with the credit  elsewhere requirement and criteria, we reviewed SBA\u2019s standard  operating procedures and other guidance on 7(a) program regulations  and lender oversight. Specifically, we reviewed SOP 50 10 5 (versions I  and J) on Lender and Development Company Loan Programs, SOP 50  53(A) on Lender Supervision and Enforcement, and SOP 51 00, On-Site  Lender Reviews/Examinations, as well as information and policy notices  related to the credit elsewhere requirement. Additionally, we interviewed  representatives including those at SBA\u2019s Office of Capital Access and  Office of Credit Risk Management on lender oversight and lender review  processes. We reviewed all the on-site lender review reports (40  reviews), including corrective actions or requirements related to the credit  elsewhere requirement (documentation for 11 lenders), and targeted  review reports that had credit elsewhere findings (7 reviews) that SBA  conducted in fiscal year 2016. We also interviewed officials and reviewed  recent reports from SBA\u2019s Office of Inspector General.", "To assess the extent to which SBA evaluates trends in lender practices  related to the credit elsewhere requirement, we interviewed SBA officials  and reviewed documentation for SBA\u2019s online portal for loan origination.  We also incorporated information from interviews with a  nongeneralizable, nonrepresentative sample of 7(a) lenders, which we  discuss below.", "To obtain lenders\u2019 views on the criteria used to determine eligibility for  7(a) loans and other program-related issues, we interviewed SBA staff  including from the Office of Capital Access, and representatives of the  National Association of Government Guaranteed Lenders; American  Bankers Association; Independent Community Bankers Association; and  National Federation of Independent Businesses. We also interviewed 11  banks (one bank provided written responses) in order to obtain the lender  perspective of credit elsewhere. Nine of the banks were selected by us  using a random process that concentrated on larger lenders. These nine  lenders selected by us represent about 13 percent of the loans approved  and 16 percent of the dollars approved in 2016. In addition, we  interviewed two additional banks that represented an industry group \u2013  one larger bank and one small bank. Although we partially selected at  random, the lenders we interviewed should not be considered  generalizable because of the small number.", "We conducted this performance audit from August 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Selected Characteristics of 7(a) Lending, Fiscal Years 2007\u20132016", "paragraphs": ["In this appendix, we provide information on the total amount and number  of approved 7(a) loans and the top eight industry sectors receiving 7(a)  loans. Data are also presented on fiscal year 2016 loan volume by state  and per capita. As shown in figure 6 below, the total amount of approved  7(a) loans decreased during the period associated with the Great  Recession (2007 through 2009). From fiscal year 2009 on, the total  amount of approved 7(a) loans increased until a decline in fiscal year  2012. During this timeframe, the American Recovery and Reinvestment  Act of 2009 and the Small Business Jobs Act of 2010 provided fee relief  and higher guaranties. The Small Business Jobs Act of 2010 also  provided a temporary increase in Small Business Administration (SBA)  Express loan limits to $1 million (instead of $350,000). These programs  have since expired.  7(a) Loans by North American Industry Classification System  (NAICS) code. Table 1 shows the largest eight industrial sectors by  proportion of the total amount of 7(a) loans approved, using the NAICS  code. The combined share of the top eight sectors declined slightly from  85 percent to 80 percent of the total lending from fiscal years 2007  through 2016, with an average of 82 percent. During this period, the  Accommodation and Food Services sector had the largest average share  of total loan amount at 17 percent, followed by the Retail Trade sector at  15 percent.", "Approved loan amount and per capita dollars by state. As shown in  figure 7, California; Texas; Florida; Georgia; and New York received the  highest total of approved loan dollars in fiscal year 2016. The average  approval amount across all loans was $380,619. Georgia and Arkansas  had the largest average approval amount in 2016. Also, during this  period, Utah; Colorado; Georgia; California; and Washington received the  highest per capita approved loan dollars."], "subsections": []}, {"section_title": "Appendix III: Information on Borrower Characteristics Based on SBA\u2019s Predictive Scores", "paragraphs": ["In fiscal-year 2016, creditworthiness varied widely among 7(a) program  borrowers. We analyzed creditworthiness using the Small Business  Administration\u2019s (SBA) Small Business Risk Portfolio Solution score  (predictive score), which ranges from 70 to 300, with 300 indicating the  least risky loan. According to SBA, loans with scores above 180 are  considered \u201clower risk,\u201d scores between 140 and 179 are considered  \u201cmoderate risk,\u201d and scores 139 and lower are considered \u201chigher risk.\u201d  There did not appear be differences in score based on the gender of the  borrower or the age of the business. While SBA relies on the Predictive  Score data to identify lenders that may pose excessive risk to the SBA  7(a) portfolio, the data also provide potential insights related to lender  implementation of the credit elsewhere requirement.", "Variation. We found that some 7(a) borrowers were much more  creditworthy than others. In 2016, the only year for which we obtained  data, the predictive score at origination varied widely among  borrowers. In 2016, the scores of borrowers ranged from a low of 91  to a high of 246. However, most scores were between 171 and 203,  and the median score was 188.", "Race/ethnicity. We found that there were slight differences in  creditworthiness by race/ethnicity, with median scores ranging from  180 to 189 depending on the category. Specifically, loans to African  Americans in 2016 had a median score of 180, and loans to Hispanics  had a median score of 183. In contrast, loans to whites had a median  score of 188, and loans to Asian and Pacific Islanders had a median  score of 189.", "Lender size. We found that lenders with larger numbers of SBA loans  tended to have slightly more creditworthy borrowers. The top 5  percent of lenders had a median average score of 187, whereas the  bottom 75 percent of lenders had a median average score of 182.5.  Among the top 5 percent of lenders (with 374 loans per lender on  average, collectively representing about 70 percent of the loans  approved), the average score ranged from 171 to 195. Among all  lenders, the average score ranged from 116 to 233. However,  because many lenders only approved one or two loans in 2016, the  average may reflect very few borrowers for that lender, making it  difficult to tell whether the scores reflect a real difference between  lenders."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Harry Medina (Assistant  Director); Janet Fong (Analyst in Charge); Benjamin A. Bolitzer; Gita  DeVaney; David S. Dornisch; Amanda D. Gallear (intern); Marc W.  Molino; Jennifer W. Schwartz; and Tyler L. Spunaugle made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-107", "url": "https://www.gao.gov/products/GAO-18-107", "title": "Afghan and Iraqi Special Immigrants: More Information on Their Resettlement Outcomes Would Be Beneficial", "published_date": "2018-02-20T00:00:00", "released_date": "2018-03-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Certain Afghan or Iraqi nationals who worked for the U.S. government and may have experienced serious threats due to this work may qualify for an SIV. An SIV allows them and eligible family members to resettle in the United States, and since 2008 over 60,000 SIV holders (principal holder and family members) have done so. Upon arrival, they are eligible for resettlement assistance from State and HHS. GAO was asked to review SIV holders' resettlement outcomes and challenges. This report examines (1) available data on SIV holders' employment and other outcomes, (2) challenges affecting their resettlement, and (3) federal efforts to help address challenges. GAO analyzed the most recent federal data (State: 2010-2016; and HHS: 2016) on SIV holders' outcomes; interviewed officials from nine national resettlement agencies; and visited three states (CA, TX, and VA) where over half of SIV holders resettled. In these states, GAO interviewed the states' refugee coordinators and, for two local areas with relatively high levels of SIV resettlement, interviewed local resettlement agency officials and conducted focus groups with SIV holders. GAO also reviewed relevant federal laws and policies and interviewed federal officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Since fiscal year 2011, about 13,000 Afghan and Iraqi nationals (excluding family members) have resettled in the United States under special immigrant visas (SIV), but limited data on their outcomes are available from the Department of State (State) and the Department of Health and Human Services (HHS). State collects data on SIV holders' resettlement outcomes once\u201490 days after they arrive. GAO's analysis of State's data from October 2010 through December 2016 showed that the majority of principal SIV holders\u2014those who worked for the U.S. government\u2014were unemployed at 90 days, including those reporting high levels of education and spoken English. Separately, HHS collects data on about one-third of resettled SIV holders (those in one HHS grant program). According to HHS's fiscal year 2016 data (the only year available), most of these SIV holders were employed and not receiving cash assistance 6 months after arrival; however, these data are not representative of all SIV holders. GAO did not identify any outcome data for SIV holders beyond 6 months after arrival. HHS annually surveys refugees up to 5 years after arrival, but does not do so for SIV holders. However, it has occasionally used its survey of refugees to analyze selected groups at no additional reported cost. Such analysis could provide valuable information on whether SIV holders have achieved longer-term assimilation, consistent with HHS' mission and program goals.", "Stakeholders GAO interviewed reported several resettlement challenges, including capacity issues in handling large numbers of SIV holders, difficulties finding skilled employment, and SIV holders' high expectations. Officials from local resettlement agencies in Northern Virginia reported capacity challenges for their agencies and the community due to the large increase of SIV holders. In almost all of GAO's focus groups with principal SIV holders, participants expressed frustration at the need to take low-skilled jobs because they expected that their education and prior work experience would lead to skilled work.", "State and HHS have taken steps to address some resettlement challenges. For example, in 2017 State placed restrictions on where SIV holders could resettle and HHS announced a new grant to support career development programs for SIV holders, refugees, and others. In addition, State provides information to prospective SIV holders about resettlement. However, the information is general, and lacks detail on key issues such as housing affordability, employment, and available government assistance. Providing such specifics could lead to more informed decisions by SIV holders on where to resettle and help them more quickly adapt to potential challenges once in the United States."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that 1) HHS consider including SIV holders in its annual survey on refugees' longer-term outcomes, and that 2) State provide more detailed information on key issues to prospective SIV holders. Both agencies agreed with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Afghan and Iraqi nationals who were employed by or on behalf of the U.S.  government in Afghanistan or Iraq and have experienced ongoing serious  threats as a consequence of such employment, or who worked directly  with the U.S. Armed Forces or under chief of mission authority as a  translator or interpreter, may apply for a special immigrant visa (SIV) to  the United States. Upon securing a visa, the principal SIV holder and his  or her eligible dependents may resettle in the United States and are  granted lawful permanent resident status upon admission into the United  States. Since fiscal year 2008, over 60,000 individuals\u2014about 20,000  principal SIV holders and their families\u2014have been admitted under SIVs  and received federal resettlement assistance upon arrival.", "SIV holders are authorized to receive resettlement assistance from the  Departments of State (State) and Health and Human Services (HHS), as  well as federal public benefits, to the same extent and for the same  periods of time as refugees. In fiscal year 2016, SIV holders accounted for about 13 percent of all individuals served by State\u2019s resettlement  program, which totaled $228 million in federal obligations for all  individuals served. For the same year, SIV holders accounted for about 8  percent of the total individuals served by HHS\u2019s refugee resettlement  programs, which totaled $656 million in federal obligations for all  individuals served. Some of these resettlement programs are  administered through nine national voluntary resettlement agencies and  their network of over 200 local affiliates. State and local social service  offices may also be involved in administering resettlement assistance.  This assistance is generally provided for 6 to 8 months after an  individual\u2019s arrival in the United States, and individuals are expected to be  self-sufficient as soon as possible.", "Although SIV holders make up a relatively small number of individuals  receiving assistance from these programs, in light of the vital services  they provided to U.S. interests overseas, policymakers and others have  sought information about meeting SIV holders\u2019 needs when they resettle  in the United States. GAO was asked to report on challenges faced by  SIV holders when resettling in the United States and how they fare in  employment and other outcomes. In this review, we examined the  following research objectives:  (1)  What do available resettlement data show regarding employment  and other outcomes for SIV holders?  (2)  What factors or challenges affect SIV holders\u2019 resettlement, as  reported by resettlement agencies, SIV holders, and others?  (3)  To what extent have State and HHS helped resettlement agencies  and others address SIV holders\u2019 resettlement challenges?", "To address our first research objective, we examined available data from  State and HHS. Specifically, we analyzed individual record-level data  from State\u2019s Bureau of Population, Refugees, and Migration (PRM) for  fiscal year 2011 through the first quarter of fiscal year 2017 (i.e., October  2010 through December 2016) that provide information on recipients of  State\u2019s resettlement program, the Reception and Placement (R&P)  program. The R&P information we examined included data on recipients\u2019  employment status and other household income sources at 90 days after  arrival in the United States. Additionally, we reviewed PRM data on  recipients\u2019 background characteristics, such as education level and  spoken English ability, that PRM collects during the application and  screening process prior to an individual\u2019s resettlement in the United  States. PRM collected both the background and the R&P data in a way  that allowed SIV holders to be examined separately from resettled  refugees. We also did analyses with the same variables for resettled  refugees from the same general timeframe. We reviewed the data from  PRM for missing data and internal inconsistencies, and interviewed PRM  officials knowledgeable about the data to resolve identified issues. We  determined that the data were sufficiently reliable for our purposes of  reporting employment rates, income sources, and receipt of services at  90 days, as well as broad categories of education and spoken English  levels, for SIV holders and, in some cases, refugees.", "We also examined summary-level data from HHS\u2019s Office of Refugee  Resettlement (ORR), which administers the refugee assistance programs,  on the Matching Grant program\u2014the one ORR program that collects  information in a way that allowed us to identify outcomes for SIV holders  separately from all other program participants. We examined SIV  outcome data from ORR for the Matching Grant program for fiscal year  2016, the only year such data were available. About one-third of SIV  holders participate in the Matching Grant program, which is also available  to refugees and other eligible individuals. Matching Grant outcomes, such  as whether participants are employed at the end of 6 months or have  enough earned income to no longer need cash assistance, are not  representative of SIV holders, who may participate in other cash  assistance programs, as we discuss further in the report. Based on our  review of the data, program and reporting documentation, and interviews  and communication with ORR and resettlement agencies, we determined  that the 2016 data were sufficiently reliable for our purposes of reporting  on the program\u2019s employment and self-sufficiency outcome measures for  participating SIV holders and for all Matching Grant participants for that  fiscal year.", "To address our second research objective, we interviewed officials who  represent national and local organizations that assist refugees and SIV  holders with resettlement, and conducted focus groups with SIV holders.  We interviewed officials at all nine national resettlement agencies, and  several national advocacy or service provider groups. We also  conducted site visits in three states\u2014California, Texas, and Virginia\u2014 which represent the resettlement locations for over half of SIV holders in  the country. For each of these states, we interviewed the state\u2019s refugee  coordinator (or equivalent official) and officials at local resettlement  agencies and social service offices in two local areas with high or medium  concentrations of SIV holders to better understand factors affecting their  resettlement. Specifically, we conducted site visits in Oakland and  Sacramento, California; Dallas and Fort Worth, Texas; and Arlington and  Falls Church, Virginia. Overall, our selected site visit locations varied in  median housing costs and the presence of SIV holders from both  Afghanistan and Iraq. In each state, we also conducted three to four focus  groups with SIV holders (principals and female spouses) to better  understand resettlement factors or challenges from their perspectives,  conducting a total of 11 focus groups and speaking with a total of 86  participants. (We conducted 8 focus groups with all or mostly male  principal SIV holders, and 3 focus groups with primarily female spouses.)  We also distributed short anonymous surveys to participants at the end of  each focus group. The information gathered from interviews and focus  groups conducted on our site visits is not generalizable and is meant to  provide illustrative examples.", "To address our third research objective, we reviewed relevant federal  laws, regulations, and other agency documentation, and interviewed  officials from State\u2019s PRM and Consular Affairs, as well as ORR. To  assess federal agency efforts, we reviewed program and agency goals,  and compared with federal internal control standards. We also asked  officials we interviewed from national and local resettlement agencies and  other stakeholder groups about their perspectives on federal efforts to  address challenges or factors related to SIV holders\u2019 resettlement. (For  more information on our methodologies for our analysis of State data and  on our focus groups with SIV holders, see appendix I.)", "We conducted this performance audit from October 2016 through  February 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "SIV Overview", "paragraphs": ["SIV holders become lawful permanent residents upon admission to the  United States under one of three special visa programs. The first, created  in 2006, is for certain Afghans and Iraqis who have worked directly with  U.S. Armed Forces, or under chief of mission authority, for at least one  year as translators or interpreters. It is currently capped at 50 visas  (excluding spouses and children) per year and is a permanent program.  The other two SIV programs for certain Iraqis and Afghans who worked  for or on behalf of the U.S. government, and as a consequence  experienced or are experiencing an ongoing serious threat, have had  larger numbers of visas allocated but are temporary in nature and require  legislation to extend the programs. The SIV program for Iraqis who  worked for or on behalf of the U.S. government stopped accepting new  applications after fiscal year 2014. The SIV program for Afghans who  worked for or on behalf of the U.S. government continued to accept new  applications as of November 2017, and most recently, was allocated  additional visas in December 2017.", "For all of these SIV programs, prospective special immigrants must go  through multiple steps as required by the particular program to which they  are applying, such as (1) providing a letter of recommendation from the  direct U.S. citizen employment supervisor, (2) a statement describing the  threats the applicant has received as a result of his or her U.S.  government employment, and (3) forms and documents for all family  members applying for visas. Additionally, applicants must have an in- person interview with a consular officer and have fingerprints taken at a  U.S. embassy or consular office, among other steps in the process. The  Iraqi and Afghan SIV application process has been subject to criticism  due in part to the length of time it has taken some applications to be  processed. Legislation was enacted to require State and the Department  of Homeland Security to complete SIV applications within a specified  period of time and to report on the efficiency of the application process."], "subsections": []}, {"section_title": "SIV Resettlement in the United States and Resettlement Assistance", "paragraphs": ["Afghan and Iraqi special immigrants are treated like refugees for  purposes of federal public assistance, including receipt of resettlement  assistance. Over time, SIV holders have accounted for an increasing  percent of the total number of individuals receiving resettlement  assistance in the United States. SIV holders accounted for about 1  percent of the total number of individuals who received resettlement  assistance upon arrival in fiscal year 2008 (the first year they were eligible  for this assistance), 13 percent in fiscal year 2016, and about 26 percent  in fiscal year 2017, with a reduction that year in total refugee arrivals (see  fig. 1).", "During the application process overseas, SIV holders may elect to receive  resettlement assistance upon arrival in the United States. If they indicate  on their visa application that they have a tie in the United States and  would like to be placed nearby, in most cases PRM will do so. SIV  holders are then served by the local resettlement agencies in that area.  (This is also true for refugees who indicate they have U.S. ties.) Most SIV  holders travel to the United States in the same way as refugees, with  travel booked by the International Organization for Migration (an inter- governmental organization). In this case, resettlement agencies know in  advance of SIV holders\u2019 arrival. However, some SIV holders elect to book  their own travel to the United States for various reasons, such as when  they may be in immediate danger in their home countries. These SIV  holders must contact a local resettlement agency as soon as possible  after they arrive to receive initial resettlement assistance through the R&P  program, generally within 30 days of arrival. SIV holders who arrange  their own travel and elect to receive resettlement assistance after they  arrive in the United States are often known by resettlement agencies as  walk-in SIV holders.", "Various federal programs provide resettlement assistance for which SIV  holders are eligible (see table 1). The R&P program provides initial  resettlement assistance for the first 30 to 90 days and is administered  through agreements PRM has with the nine national resettlement  agencies and their network of local resettlement agencies. The R&P  cooperative agreement outlines what resettlement agencies must do for a  newly arrived individual or family, including picking up people at the  airport; providing initial housing, furniture, food, and clothing; helping  children enroll in school or adults enroll in language programs; and  developing a resettlement plan, which focuses on early employment for  employable adults. Under the R&P agreement, PRM provides a fixed per  capita grant to national resettlement agencies for individuals served  ($2,075 in fiscal year 2017), of which a specified amount must be given in  cash or spent directly on each individual served through the R&P program  ($925 in fiscal year 2017). These grant amounts and standards are the  same nationally.", "ORR\u2019s programs generally provide short-term assistance after the initial  resettlement period. Several of ORR\u2019s key refugee assistance programs,  such as cash and medical assistance and social services, are  administered through grants to refugee coordinators (or equivalent) in  each state. These coordinators are, in many cases, staffed by state  agencies (e.g., departments of social services), but in some cases are  staffed by private organizations. At the local level, service providers may  be county social services offices, local affiliates of the nine national  resettlement agencies, or other community service providers. In contrast,  ORR\u2019s Matching Grant program is administered through the national  resettlement agencies and not the state refugee coordinators. This  program provides cash assistance, employment services, and case  management for up to 6 months. In some cases a household also may  receive Temporary Assistance for Needy Families (TANF) or Medicaid  instead of refugee cash and medical assistance, depending on state  eligibility rules and the characteristics of any given household. In addition,  because SIV holders, like refugees, are eligible to receive public benefits,  they may also be eligible for other types of assistance, such as food  assistance from the Supplemental Nutrition Assistance Program."], "subsections": []}]}, {"section_title": "Available Data Provide Limited Information on SIV Holders\u2019 Short-Term Outcomes and No Information on Long- Term Outcomes", "paragraphs": ["Limited data from PRM from fiscal year 2011 through part of fiscal year  2017 showed that most principal SIV holders were unemployed and relied  on cash assistance for income 90 days after arrival to the United States.  Available data from ORR for one of its programs, the Matching Grant  program, provide slightly longer-term information, but only cover a portion  of SIV holders and are not representative. ORR\u2019s Matching Grant data for  fiscal year 2016 (the only year available) showed that most SIV holders  were employed 6 months after arrival and no longer reliant on cash  assistance. Although ORR regularly surveys the general refugee  population up to 5 years after resettlement in order to examine their  longer-term outcomes, it has never surveyed SIV holders for such  information."], "subsections": [{"section_title": "Limited State Department Data Collected 90 Days After Arrival Showed the Majority of Principal SIV Holders Were Unemployed", "paragraphs": ["About 60 percent of all principal SIV holders participating in the R&P  program who arrived to the United States in fiscal years 2011 through the  first quarter of 2017 were unemployed 90 days after arriving, according to  data that PRM collects from resettlement agencies on R&P recipients.  Based on our analyses of these data, principal SIV holders from Iraq  tended to be unemployed at somewhat higher rates than those from  Afghanistan. With respect to English speaking skills, the majority who  reported their level of spoken English as \u201cgood\u201d were unemployed,  though they had considerably higher employment rates at 90 days than  those reporting English levels of \u201csome\u201d or \u201cnone.\u201d In contrast,  employment rates were relatively comparable among principal SIV  holders with different levels of education, although those with post- secondary levels of education had somewhat lower employment than  those at the secondary level (see fig. 2).", "Additionally, almost all SIV households relied on cash assistance at 90  days in order to cover expenses such as housing costs. Even among  households that had earnings from employment, most also relied on  some form of cash assistance, according to our analysis of the R&P  data. Of those SIV households receiving earnings from employment, 89  percent were also receiving income through Refugee Cash Assistance,  Matching Grant, or TANF programs, which is slightly higher than the rate  of the overall refugee population who received one of these types of cash  assistance (82 percent). These were the most common types of cash  assistance that SIV households received, with slightly less than a third  also relying on personal assets (see fig. 3).", "SIV holders also received non-cash assistance and services within 90  days of arrival, based on our analysis of the R&P data. For example,  nearly all SIV households received food assistance, the most common  type of non-cash assistance. Other common forms of assistance include  employment services and case management, which were provided to  both principal SIV holders and spouses (mostly wives) at comparable  rates (see fig. 4). To a lesser degree, principal SIV holders and spouses  also received health services and access to English as a Second  Language (ESL) courses, among other types of assistance."], "subsections": []}, {"section_title": "HHS Data on About One- Third of SIV Holders Show Most Are Employed 6 Months After Arrival, but Federal Agencies Do Not Collect Longer-Term Data", "paragraphs": ["The most recent data from the Matching Grant program, which is one  cash assistance program in which selected SIV holders might participate  during and after their initial 90 days in the United States, and the one  such ORR program for which SIV outcomes could be identified, showed  that the majority of SIV program participants were employed and no  longer relying on cash assistance at end of the 180 day (or 6 month)  benefit period. Specifically, about two-thirds of SIV holders in the  Matching Grant program were employed at 180 days, a rate slightly lower  than the rate for all Matching Grant participants, which include refugees,  asylees, and other specified groups, according to data for fiscal year 2016  (see fig. 5). However, SIV holder participants had slightly higher rates of  full-time employment and a slightly higher average wage of about $12 per  hour compared with all Matching Grant participants. The relatively low  wages may reflect, among other contributing factors, the general need for  Matching Grant participants to accept the first available employment  opportunity, including entry level jobs, as a requirement of the program  and the length of the program, which ends at 180 days. About 80 percent  of participating SIV households, as well as all participating households in  the Matching Grant program in fiscal year 2016, were considered \u201cself- sufficient,\u201d defined by the program as having sufficient earnings to cover  basic expenses without the need for cash assistance.", "About one-third of SIV households overall participate in the Matching  Grant program. Findings on SIV holders participating in this program are  not representative of all SIV holders, given program design elements.  For instance, the Matching Grant program has limited enrollment slots,  and resettlement agencies may have an incentive to select more  \u201cemployable\u201d candidates. In contrast, Refugee Cash Assistance and  TANF, the other main cash assistance programs in which SIV holders  may participate, generally serve all eligible clients based on income and  other eligibility requirements. Additionally, unlike Refugee Cash  Assistance or TANF, the benefit amount for the Matching Grant program  is generally not reduced or terminated based on earnings, which may  create additional incentives to find work and potentially increase the  likelihood of employment at 90 days for Matching Grant participants.  Our analysis of PRM\u2019s data from the R&P program show that principal  SIV holders participating in the Matching Grant program have a higher  employment rate 90 days after arrival than those receiving cash  assistance from ORR\u2019s Refugee Cash Assistance program or state TANF  programs.", "Additionally, although Matching Grant data provide some additional  information beyond what is collected for the R&P program, the data still  provide relatively limited insight on individuals\u2019 employment and other  outcomes. First, the Matching Grant data are collected at 6 months after  arrival, which is a few months beyond the 90-day reporting period for the  R&P program. The focus on 6-month outcomes aligns with the Matching  Grant program\u2019s goal of immediate self-sufficiency and employment  before the end of cash assistance; however, the short timeframe  precludes any understanding of participants\u2019 progress in job security,  wage growth, or career advancement over the longer-term. Second,  while the Matching Grant data do include information on full-time or part- time employment status and average wage\u2014information not captured in  the R&P data\u2014they do not provide information on type of employment,  career or wage progression, or the amount earnings exceed expenses for  those households considered self-sufficient. Moreover, ORR\u2019s guidelines  for the Matching Grant program encourage resettlement agencies to work  with participants with specialized, advanced skills or vocations who have  been placed in entry-level work to obtain job upgrades or recertification  programs as appropriate. However, ORR does not collect any information  on the extent that this occurs or results in positive employment outcomes,  such as wage increases.", "While ORR\u2019s program data focus on short-term self-sufficiency, ORR  regularly gathers information on the longer-term outcomes of the general  refugee population through its Annual Survey of Refugees. ORR  conducts its Annual Survey of Refugees to comply with a statutory  reporting requirement. It also uses its annual survey to provide  Congress and the public information as to whether refugees are  successfully resettling in the United States through its programs, in line  with the agency\u2019s overall mission to link the populations it serves to the  right resources to help them become successfully assimilated members  of American society over the longer term. The survey provides  information on a sample of refugees each year after resettlement in the  United States, up to 5 years. It reports on a range of outcomes, including  wage progression, educational attainment, home ownership, and the  receipt of public assistance (including non-cash assistance), among other  things. Although ORR has typically surveyed the refugee population  overall, it has in previous years used its annual survey to conduct  supplements on special populations, including Iraqi refugees, Hmong  refugees, and the Lost Boys of Sudan. These populations were selected  based on ORR leadership\u2019s policy priorities and their inclusion in the  survey, through the use of oversampling techniques, was cost-neutral,  according to ORR officials.", "ORR, however, has never used its Annual Survey of Refugees to  examine long-term outcomes for SIV holders. HHS, in October 2017,  awarded a research contract focused on redesigning its Annual Survey of  Refugees, the first such redesign since 1993. The goal of this effort is to  better understand medium- to long-term resettlement outcomes for  refugees and related populations through improved data collection, but  the contract does not mention examining the outcomes of any special  populations, such as SIV holders. Agency officials stated that ORR plans  to explore potential costs and benefits of including special populations  (such as SIV holders) in its survey redesign efforts. However, at the time  of our review, ORR officials did not yet know whether such an effort would  be cost neutral, as with other prior efforts examining special populations;  and if not, whether they could obtain long-term outcome information about  SIV holders through future surveys or in other ways.", "Standards for Internal Control state that management needs quality  information to make decisions and achieve its objectives. Accordingly,  one of ORR\u2019s policy objectives is to improve data collection in order to  make data-driven decisions to better support the populations it serves.  Similarly, a primary goal of HHS\u2019 redesign of the Annual Survey of  Refugees is to maximize the effectiveness of ORR\u2019s policies and  programs in promoting successful integration for its populations. Without  longer-term data or other in-depth research, neither ORR nor  policymakers have information as to whether SIV holders have  progressed beyond the immediate goal of basic self-sufficiency toward  improved economic security and cultural integration over the longer term."], "subsections": []}]}, {"section_title": "Reported Challenges Include the Capacity of Resettlement Agencies in Certain Locations, Barriers to Skilled Employment, and Housing", "paragraphs": ["SIV holders faced a variety of challenges while resettling in the United  States, according to representatives of 13 local resettlement agencies we  interviewed and SIV holders who participated in 11 focus groups. Among  local resettlement agencies, the two in Northern Virginia reported  significant challenges with their capacity to assist the large numbers of  SIV holders in the area, while agencies in other locations we visited  reported fewer capacity challenges. SIV holders also experienced  challenges finding skilled employment, which did not align with their  expectations of resettlement in the United States. Additionally, securing  affordable and suitable housing, and female spouses\u2019 assimilation to U.S.  culture were reported challenges. Officials we interviewed from some  resettlement agencies reported taking steps to address some of these  issues."], "subsections": [{"section_title": "Large Numbers of SIV Holders Created Capacity Challenges for Resettlement Agencies in Northern Virginia", "paragraphs": ["Of the 13 local resettlement agencies in three states at which we  interviewed officials, officials from the 2 agencies in Northern Virginia  reported the greatest impact from high numbers of SIV holders, creating  capacity challenges at both local resettlement agencies as well as in the  community. The number of SIV holders in the Northern Virginia area  increased more than tenfold since fiscal year 2013 and almost doubled  from fiscal years 2015 through 2016, according to data provided by  Virginia\u2019s state refugee coordinator. Officials from one of the two local  resettlement agencies in Northern Virginia reported that SIV holders also  increased as a percentage of their total caseload in recent years, and  now make up almost 90 percent. In addition to large numbers of SIV  holders scheduled to arrive at local resettlement agencies, many also  arrived as walk-ins, which meant the agencies could not predict how  many individuals they would need to assist at a given time, according to  Virginia\u2019s state refugee coordinator.", "Both of the Northern Virginia local resettlement agencies reported  challenges related to capacity. Staff from one agency said that a case  manager would normally have three to four families a month to resettle  but now might regularly be dealing with five families in a week and, in an  extreme case, 70 families in a month. The large influx created great  challenges in finding affordable housing for SIV holders, according to staff  from the two agencies, especially because the area has one of the most  expensive housing costs in the state (see fig. 6). Additionally, officials  from the agencies and Virginia\u2019s state refugee coordinator reported that  the influx caused significant delays in getting SIV holders needed social  services, such as health screenings for children, which then resulted in  school enrollment delays. Due to the significant increase in SIV holder  arrivals, two national resettlement agencies opened temporary offices in  the area under PRM\u2019s approval and encouragement.", "SIV holders may have originally been drawn to Northern Virginia by the  hope of finding work at nearby federal government offices, according to  officials from one national resettlement agency and one local resettlement  agency. Local resettlement agency staff added that over time, SIV  holders may have moved to the area to be near an established  community of SIV holders. According to PRM data, 83 percent of SIV  holder cases in Virginia reported having U.S. ties, although 66 percent of  these were ties to friends (not relatives). In all three focus groups  conducted in Northern Virginia, SIV holders reported that their U.S. ties  were sometimes distant friends or acquaintances who were helpful in the  resettlement process, including with providing transportation and  navigating life in the United States.", "Officials from local resettlement agencies in other areas we visited  expressed fewer capacity challenges. In Sacramento, officials from the  three local resettlement agencies and a local service provider reported  that they faced some capacity challenges, as their local area had among  the highest number of SIV holder arrivals in the United States, according  to our analysis of PRM data. However, so far officials we interviewed in  Sacramento reported that have been able to find ways to manage service  provision to address the high caseloads. For instance, to address rising  housing costs and difficulties securing affordable housing, officials from  one local resettlement agency reported that they started securing housing  farther from the central SIV holder community, although this was not  always preferred by SIV holders they resettled. Officials from Sacramento  County\u2019s health department said to address backlogs for health  screenings caused by increased SIV holder arrivals, they increased the  number of full-time staff. In addition, Sacramento, when compared with  Northern Virginia, had more local resettlement agencies to manage  arrivals (four versus two), which may have helped local agencies address  capacity challenges. In the Dallas/Fort Worth area, officials we  interviewed from all six local resettlement agencies reported no significant  capacity challenges with respect to resettling SIV holders. These six  agencies had fewer SIV holder arrivals, and SIV holders represented a  smaller percentage of their total caseload than other sites we visited.  Generally, securing affordable housing that meets requirements was not  reported as a major challenge, although housing prices were rising in  Dallas, according to local resettlement agency staff and the Dallas/Fort  Worth regional designee."], "subsections": []}, {"section_title": "SIV Holders Experienced Barriers to High-Skilled Employment, Which Did Not Align with Their Expectations of Resettlement", "paragraphs": ["According to officials from national and local resettlement agencies,  officials from advocacy groups, and SIV holder participants in all 8 focus  groups conducted with principal SIV holders, principal SIV holders faced  challenges obtaining employment in their previous fields or that matched  their skill level. These challenges occurred even though they had worked  for the U.S. government, tended to have completed secondary education  or more, and reported good levels of spoken English. Several factors may  account for these challenges, some of which may also be applicable to  skilled refugees or immigrants who are not SIV holders. These include:", "Limited opportunities for federal employment in the United States: SIV  holders had limited opportunities for federal employment because  most positions required U.S. citizenship as well as background  investigations or security clearances that are available only to citizens,  as we reported in 2010. In 6 of the 8 focus groups we conducted  with principal SIV holders, some participants said that they expected  to be able to get jobs similar to the ones they had in Afghanistan or  Iraq, such as with the federal government, because they had  previously worked for U.S. organizations. Based on the surveys they  completed at the end of our focus groups, principal SIV holders  reported that they had a range of jobs in Afghanistan and Iraq,  including interpreter, information technology worker, security guard,  project manager, and engineer. In one of our focus groups  conducted in Northern Virginia, some participants expressed  frustration with being ineligible for security clearances for federal  employment in the United States because they were able to obtain  clearance to work in Afghanistan, and they now had to wait 5 years to  apply for U.S. citizenship, which is required for a U.S. security  clearance.", "SIV holders\u2019 previous work may not help with U.S. employment: Some  officials we interviewed from advocacy groups and local resettlement  agencies said that while principal SIV holders\u2019 ability to speak English  with a high level of proficiency enabled them to work for the U.S.  government overseas, they may not always have the writing skills  needed for professional work in the United States. Officials from a  career development organization that works directly with highly skilled  immigrants, including SIV holders, to help them re-enter their fields in  the United States said that SIV holders may sometimes be hindered in  re-entering their original professional fields because during the time  they worked as interpreters, translators, or other positions for the U.S.  government, they may not have been actively employed in their  original fields.", "Barriers to foreign degree and credential recognition: While SIV  holders and others may be able to get their foreign degrees or other  credentials assessed for U.S. equivalency, these processes can be  costly or time consuming, according to officials we interviewed from  one national and two local resettlement agencies. Staff from two  national resettlement agencies said that degree recognition could be  particularly challenging for Afghan SIV holders because the nature of  conflict in Afghanistan made it harder for evaluators to connect with  universities there. Other research we reviewed identified the  complexities of the licensing process and of available career paths as  challenges for highly skilled and educated immigrants in the United  States in general.", "Officials we interviewed from about half of the local resettlement agencies  said that because principal SIV holders were often unable to find  employment in their prior profession, many took \u201csurvival\u201d or low-skilled  jobs in order to cover basic expenses. Officials from local resettlement  agencies, as well as participants in our focus groups, reported that  common jobs for principal SIV holders included drivers for ride-sharing  services like Uber and Lyft, airport workers such as luggage handling and  food service, security guards, low-level information technology workers  such as cell phone assembly or temporary technician, or warehouse  workers such as inventory or stocking. One principal SIV holder we spoke  to in our focus groups said he worked as a civil engineer for 6 years in  Afghanistan, but was assembling cell phones in the United States, which  was disappointing for him given his years of experience and education. In  almost all of our focus groups with principal SIV holders, participants  expressed frustration about the barriers to re-entering their professional  fields and the need to take low-skilled jobs.", "These employment-related challenges did not align with the expectations  of principal SIV holders, who thought that their education and prior work  experience with the U.S. government would enable them to find skilled  work, according to many national and local resettlement agency officials  we interviewed and SIV holders who participated in our focus groups. All  3 state refugee coordinators, representatives of 7 of 9 national  resettlement agencies, and representatives of 10 of 13 local resettlement  agencies we spoke to said that SIV holders tend to have high, unrealistic  expectations about employment or about life in general after they arrive.  As one principal SIV holder from one of our focus groups in California  stated: \u201cI thought I would not need to worry about anything in the U.S. for  years and they will take care of me and my family because I worked for  their government.\u201d SIV holders in our focus groups also expected more  assistance in obtaining high-skilled employment than they generally  received. In all 8 of our focus groups conducted with principal SIV  holders, some participants expected more assistance getting back into  their fields of interest, but said that local resettlement agencies did not  always have the technical skills or resources needed to assist them.  Similarly, in 4 of the 8 focus groups with principal SIV holders, some  participants reported that they expected to receive sufficient government  assistance to cover expenses while they adapted to life in the United  States, spent time getting retrained or recertified, or searched for  employment.", "Because of these high expectations, the reality of starting over was  frustrating or shocking, and made the initial resettlement process  challenging, according to both staff from local resettlement agencies and  SIV holders from our focus groups. Officials from a number of national  and local resettlement agencies said that SIV holders\u2019 expectations  tended to be higher than other clients they served, such as refugees.  Officials we interviewed from a number of national and local resettlement  agencies agreed that they would have liked to do more for SIV holders,  given their sacrifice in working for the U.S. government, but that they treat  all of their clients in the resettlement program the same, in accordance  with PRM\u2019s cooperative agreements. Staff from one national resettlement  agency and one local resettlement agency agreed that while they would  like to assist SIV holders and other highly-skilled clients to obtain better or  more skilled jobs, they did not have the resources or capacity to provide a  significant amount of specialized help over a longer term.", "False expectations about resettlement may have come through word of  mouth or other sources, according to resettlement agency staff and SIV  holders we interviewed. Some local resettlement agency staff said SIV  holders\u2019 high expectations may be due in part to inaccurate information  from the SIV holder community through social media or word of mouth.  Staff from one local resettlement agency reported that managing SIV  holders\u2019 high expectations was time-consuming for staff because there  was a \u201cmountain of misinformation\u201d within the community. Principal SIV  holders may have also received false hope from their overseas U.S.  military colleagues, who may not understand the challenges of  resettlement. For example, one principal SIV holder we spoke to in our  focus groups said that his American co-workers in Afghanistan told him it  would be easy to find a good job in the United States because of his  skills, but he said finding employment in his previous field was  challenging and he is now working for a warehouse packing department.", "The Virginia Refugee Resettlement Program  Manual states that the STEP program  provides highly-skilled participants with  specialized services that include professional  assessments and assistance in accessing  training, certifications, and courses related to  prior careers. STEP participants are selected  based on an employment assessment of all  participants enrolled in Virginia\u2019s refugee  social service employment program, which is  available to those who have had a refugee  eligible status for less than 5 years and are  over age 16. Many STEP beneficiaries in  Northern Virginia are special immigrant visa  (SIV) holders, according to the Virginia State  Refugee Coordinator. The STEP program is  funded through the Office of Refugee  Resettlement\u2019s Refugee Social Services and  Targeted Assistance funds, and services are  provided by local resettlement agencies. programs: Officials we interviewed at local resettlement agencies in  Texas and Virginia said they used ORR funding to support career  development programs for SIV holders and other clients. For  example, officials from Catholic Charities Dallas said they used ORR\u2019s  Refugee Social Services funds to offer clients training and  certifications in technical occupations, such as clinical nurse or forklift  operator. Officials we interviewed from other organizations said they  also relied on programming or funds provided under the Workforce  Innovation and Opportunity Act (WIOA) for career development  programs that could serve SIV holders. For example, officials from the  International Rescue Committee\u2019s national office said that some of  their local offices used WIOA\u2019s American Job Center system to help  SIV holders and other skilled clients with good English skills access  training opportunities or other job search resources. Officials from the  Sacramento Employment Training Agency told us they recently  utilized WIOA and other funding to launch an English Language  Learner Workforce Navigator pilot that will emphasize assisting SIV  holders and refugees because of large populations of these groups in  Sacramento County. The program aims to provide participants with  additional entry points to employment and training opportunities, as  well as case management and supportive services.", "California Law on In-state Tuition for SIV  Holders and Refugees  In October 2017, California enacted Assembly  Bill 343, which provides certain special  immigrant visa (SIV) holders and refugees  admitted to the United States and who settle  in California with in-state tuition at California  Community Colleges for the minimum time  necessary to become a resident. (Students  generally need to live in California for more  than one year and meet other requirements to  qualify for in-state tuition.) The legislature\u2019s  finding, as stated in the bill, was that access  to institutions of higher education will ensure  that SIV holders are \u201cable to pursue their  educational goals and rebuild and improve  their lives and the lives of their families.\u201d", "Upwardly Global officials describe their work  as eliminating employment barriers for special  immigrant visa (SIV) holders, immigrants and  refugees who were professionals in their  home countries. They work to help these  newcomers re-enter their career fields after  moving to the United States, according to staff  we interviewed and other information. The  organization offers career development  programming including training on the U.S.  job search, specialized training opportunities,  and recertification services. It provides these  services to job seekers in-person at physical  locations (Chicago, New York, San Francisco,  and Silver Spring, Maryland), as well as  virtually through online services, training  modules, or other job resources. Since 2009,  the organization has placed 69 individuals  with SIVs (of 236 served) into new  employment with an average annual salary of  about $54,000 at placement, according to  data from Upwardly Global. SIV holders most  commonly placed in jobs in technology,  engineering, or finance and accounting,  according to staff we interviewed. career development: Officials from Catholic Charities Fort Worth, for  example, said they recruited retirees who were former professionals  to voluntarily work one-on-one with clients on job readiness skills,  such as interviews, resume writing, and general career planning.  Officials we interviewed from several national and local resettlement  agencies or county service providers also reported that they  sometimes refer clients to outside organizations with career  development programming for highly-skilled immigrants, such as  Upwardly Global (see sidebar)."], "subsections": []}, {"section_title": "Housing Issues and Integration of Female Spouses Were Other Challenges", "paragraphs": [], "subsections": [{"section_title": "Housing", "paragraphs": ["While housing challenges were common among both SIV holders and  refugees, SIV holders tended to have high expectations, according to  staff from some local resettlement agencies. Officials from national and  local resettlement agencies, as well as SIV holders from our focus  groups, described several housing related challenges:", "Local resettlement agencies faced barriers to securing housing: SIV  holders, like refugees, lack rental or credit histories and Social  Security numbers when they arrive in the United States, which limits  the housing options available to local resettlement agencies who must  secure their housing. Local resettlement agency staff said that they  had built relationships with landlords who were willing to forego these  requirements; accordingly, some staff reported that SIV holders and  refugees were often housed in certain apartment complexes.", "SIV holders in our focus groups expected better housing: In 10 of 11  focus groups we conducted, SIV holders reported that sometimes the  apartments they lived in were not of high quality, they experienced  problems with infestation, or had concerns about safety. The SIV  holders in our focus groups who had problems with infestation or  other issues said that they reported them to the landlord or local  resettlement agency and the issues were generally addressed, but not  always to their satisfaction. Additionally, according to staff from  national and local resettlement agencies, as well as SIV holders in 5  of our 11 focus groups, SIV holders often expected better housing or  to be placed in certain locations near the main SIV holder community;  however, this was not always possible due to limited availability of  affordable housing. SIV holders in some of our focus groups also  reported that they could not afford to move to nicer apartments.", "Affordable housing was limited: Housing affordability was also cited as  a major challenge, especially by local resettlement agency staff and  SIV holder participants in 5 of our focus groups in Northern Virginia  and Oakland, California. In Alameda County, where the city of  Oakland is located, and in the city of Alexandria, where most SIV  holders from our 3 focus groups in Northern Virginia lived, the median  rental cost for a one-bedroom apartment in 2016 was about $1,400,  according to U.S. Census Bureau data. In Sacramento and Dallas,  rising housing costs were cited as growing challenges by staff from  some local resettlement agencies and SIV holders in 3 of our 4 focus  groups in those cities. While there are no national guidelines for  affordability, officials from one national resettlement agency said that  their general rule is to find housing that a family could afford on their  expected income and have extra for other expenses.", "Some groups we spoke with used strategies to help address housing  challenges. For example, Catholic Charities Dallas had a dedicated  housing specialist whose primary job was to find and place clients into  suitable housing and whose work included conducting outreach to new  apartment complexes to ensure that they knew of the agency and the  benefits of renting to SIV holders and refugee clients. Officials from  Catholic Charities of the East Bay in Oakland described their church  sponsorship program in which a local church is matched with a family to  help subsidize rent and support the family in other areas, often for 6  months or more. Also, officials from one advocacy and service  organization, No One Left Behind, said they assisted local resettlement  agencies with finding housing for SIV holders, and had established  agreements with local resettlement agencies in some cities, including  Rochester, New York and Pittsburgh, Pennsylvania to secure housing  and provide furnishings for all SIV holder families they resettled."], "subsections": []}, {"section_title": "Integration of Female Spouses", "paragraphs": ["Officials we interviewed from all 9 national resettlement agencies and 12  of 13 local resettlement agencies reported that female SIV spouses  experienced specific barriers to assimilation. These include:", "Female SIV spouses experienced cultural adjustment challenges:  Officials from national and local resettlement agencies reported that  the gap between male principal SIV holders and their spouses in  terms of English proficiency, education, work experience, or exposure  to American culture, could be large and created challenges for  women\u2019s integration, especially for Afghan women, a few officials  noted. Accordingly, male principal SIV holders may be able to more  quickly integrate, while female SIV spouses may be less likely to  participate in programs, struggle to integrate, or feel isolated,  according to officials from national and local resettlement agencies.  Officials noted that this gap tended to be larger than between refugee  husbands and wives, who may be more evenly matched. Our analysis  of PRM data confirmed that differences in education and spoken  English levels were larger between principal SIV holders and spouses  than with refugee principals and spouses. According to our analysis  of PRM data on SIV spouses, 42 percent reported speaking no  English, with those from Afghanistan much less likely to speak any  English than those from Iraq. Afghan SIV spouses were also about  one-third as likely to have reported completing postsecondary  education as Iraqi SIV spouses, based on available data. In  contrast, in our focus groups some female SIV spouses and some  female principal SIV holders had prior work experience and high  levels of education. For example, about one-third of the female SIV  spouses in our focus groups (9 of 27) reported on their participant  surveys that they had prior work experience in their home countries,  including as teachers and journalists.", "Lack of childcare and limited transportation options: Officials we  interviewed from local resettlement agencies and SIV spouses in two  of our focus groups said that barriers around childcare and  transportation made it challenging for female SIV spouses to leave the  house for classes or employment. For example, in one of our  Sacramento focus groups, several female SIV spouses reported that  they wanted to take English classes and find work, but the cost of  childcare and lack of public transportation, including school buses for  their children, were prohibitive.", "National and local resettlement agency officials also reported that female  SIV spouses may take longer to assimilate and feel isolated because of  families\u2019 expectations about female spouses staying home. Officials from  one national resettlement agency said that prior to arrival, many SIV  holders and their families lived comfortably on one income, and therefore  female spouses were often not initially willing to work, which strained  finances and made self-sufficiency difficult. In all three of our focus  groups with female SIV spouses, participants said that they would like to  work, but needed to wait until their children were older or needed to learn  English first.", "Officials we interviewed from several resettlement agencies described  their efforts to address some of the challenges related to the integration of  female spouses. They include:", "Engaged SIV women independent from their spouses: Staff from two  local resettlement agencies reported providing intake for men and  women separately so that they ensure that women had a connection  to resettlement agency staff independent of their husbands. Other  agencies reported that they started making sure that an interpreter  was provided for the female spouse rather than having her husband  act as an interpreter, so that they could ensure everyone received the  same information and that such information was not filtered through  the husband. Staff we spoke to at one local resettlement agency  acknowledged that their employment services had previously been  primarily focused on the male clients in each household, but that they  had since created a separate curriculum for women to ensure that all  adult clients received job readiness training.", "Mitigated barriers faced by female SIV spouses to attend English  classes and to work: To address childcare and transportation barriers,  staff we spoke to at three local resettlement agencies said they  offered English language classes at apartment complexes with many  SIV holder families, with childcare provided. Several local  resettlement agencies also used volunteers to provide in-home  English classes and mentoring for SIV women. Officials from two local  resettlement agencies said they provided women\u2019s empowerment  programming to overcome isolation and other issues. For example,  officials from International Rescue Committee Dallas told us that they  offered a women\u2019s empowerment class that met two times per week  to discuss varying topics, including public transit, job readiness, and  sewing.", "Officials from Opening Doors Sacramento, an  affiliate of Church World Service, told us that  they assist women who are special immigrant  visa (SIV) holders and refugees convert their  homes into home-based childcare centers.  Opening Doors utilizes funds from the Office  of Refugee Resettlement\u2019s grant on micro- finance and partners with a local social  service agency to help the women start a  business plan and get licensed. As of April  2017, over 50 women have received their  license through this program, many of whom  are from Afghanistan, according to officials  from Opening Doors.", "State\u2019s PRM has taken several steps to address the capacity challenges  reported by resettlement agencies in Northern Virginia. First, in May  2017, PRM placed limitations on SIV holders\u2019 resettlement in that area in  response to concerns raised by local resettlement agencies and the state  refugee coordinator, and in consultation with national resettlement  agencies, advocacy groups, and ORR. The policy generally restricts SIV  holders from being placed in Northern Virginia unless they have close  family ties there. Second, in June 2017, PRM issued another new policy  that gives SIV holders more resettlement options. Under this new policy,  SIV holders can choose to be placed in one of 25 cities without having a  U.S. tie (see table 2). This option did not exist previously, as SIV holders,  like refugees, were typically placed near a specified U.S. tie or in a  location primarily determined by resettlement agencies. According to  PRM officials, by providing a choice to SIV holders, they aimed to  increase the likelihood of successful resettlement in these alternative  areas and mitigate secondary migration (when people leave their initial  placement to move to desired locations). PRM officials said that they  considered various factors in developing the list of 25 cities, including the  presence of existing SIV communities, sufficient capacity to resettle new  arrivals among local resettlement agencies, and housing availability and  employment opportunities based on information from local resettlement  agencies. In finalizing its list of cities, PRM also sought input from national  resettlement agencies, advocacy organizations, and ORR.", "To inform SIV holders about resettlement prior to arrival and to better  manage their expectations, PRM has developed informational materials  specifically for SIV holders. All individuals served through the R&P  program must receive cultural orientation training once they arrive in the  United States, according to R&P guidelines, and many refugees also take  this training overseas. In contrast, SIV holders generally do not take  overseas cultural orientation training because they typically receive their  visas in locations where there are no facilities to provide such training.  PRM officials said providing special cultural orientation training sessions  for SIV holders, such as at the U.S. embassy in Kabul, would be  logistically difficult and potentially result in additional security risks for SIV  holders. In lieu of overseas cultural orientation trainings, PRM provides a  Dari-translated version of its manual on U.S. resettlement, Welcome to  the United States: A Guidebook for Refugees, for distribution by the U.S.  embassy in Kabul. It has also developed several other types of  informational materials specifically for SIV holders, including documents  such as \u201c19 Things You Need to Know About Resettling in the United  States\u201d and \u201cFrequently Asked Questions (FAQs) About Resettlement  Benefits for Iraqi and Afghan Recipients of Special Immigrant Visas,\u201d as  well as short videos aimed specifically at SIV holders (see sidebar). SIV  holders can access informational materials on State\u2019s Refugee  Processing Center\u2019s website, and links to this website are included at the  end of emails from PRM staff when communicating with SIV holders,  according to PRM officials. Additionally, PRM officials noted that they  have also worked with advocacy groups who may be communicating with  SIV holders while overseas, to disseminate information, such as the  challenges of resettling in high cost-of-living areas. Officials said that their  efforts to inform SIV holders about resettlement before they come to the  United States have been ongoing for several years.", "However, officials we interviewed from many national and local  resettlement agencies, as well as those from some state refugee  coordinator offices and advocacy groups, said that State could do more to  inform SIV holders about resettlement while they were still overseas,  given their often false expectations about resettlement. For instance,  officials from a number of these entities said that PRM\u2019s informational  materials for SIV holders are general and lack specific details or more in- depth information on issues, such as housing affordability, employment,  or the type of government assistance they will or are likely to receive. This  type of information could provide them a better sense of what to expect  when they resettle in the United States, according to officials.", "Based on our review, we found that while the materials discuss  resettlement challenges generally, such as difficulties associated with  relocating in certain high-cost areas or the likelihood that SIV holders will  need to take an entry-level job instead of one in their professional field,  they do not contain specific details, examples, or links to specific  information. For example, the materials do not provide information on  area housing costs in popular resettlement areas or common jobs or  average wages among SIV holders (or refugees). They provide minimal  information on the amounts people may receive in government assistance  or the extent to which they can expect assistance with such things as  longer-term training or education. PRM\u2019s new list of 25 cities, for instance,  includes a link to each city\u2019s municipal government website, but such  websites are unlikely to provide easy access to information, such as area  housing costs, that could help inform people\u2019s resettlement choices. PRM  officials stated that they are wary of providing specific details because  these may vary for SIV families, depending on the state where they  reside, the assistance programs in which they participate, their particular  household situation, or other factors. Such differences can be a source of  misinformation among those in the SIV community, according to PRM  officials, as well as some resettlement agencies we interviewed.   Accordingly, officials noted that they would not want to be in a position to  defend information that may be inaccurate or not applicable to SIV  holders. Officials we interviewed from two resettlement agencies also  noted that it could be challenging to provide specific details, such as on  government benefit amounts, as these may vary greatly across  households.", "Yet, officials we interviewed from other resettlement agencies and  advocacy groups noted that illustrative details, examples, or more in- depth discussion on key issues would provide SIV holders more  understanding of what they may experience and inform their decision- making. Providing web links to relevant information or additional  information from official sources may also help SIV holders gather  information from more credible sources and counter some of the  misinformation they may receive through word of mouth, according to a  state refugee coordinator and officials at two local resettlement agencies  we interviewed. Similarly, participants in 5 of our 11 focus groups said  that getting additional cultural orientation or more information about life in  the United States, such as from State, would have been useful. Some  said they did not always get an accurate picture of resettlement from their  U.S. ties. One principal SIV holder we spoke to said getting additional  information about resettlement while still overseas would have been  useful for SIV holders since it can be difficult to learn all this information  once they have arrived in the United States, as they are in \u201cculture shock\u201d  and \u201coverwhelmed\u201d by all they have to do. In contrast, participants in  three focus groups said that access to more resettlement information  overseas would not have been useful: People\u2019s primary focus at that time  is on simply getting their visa and leaving the country.", "In addition to the lack of specificity in the information provided to  prospective SIV holders, some of State\u2019s efforts to disseminate existing  information are also incomplete. For instance, we learned of some  instances of miscommunication between PRM and Consular Affairs  regarding information provided to SIV holders at embassies. While PRM  officials told us they understood that the embassies in Kabul and  Baghdad provided SIV holders with hard copies of Welcome to the United  States, and played the informational videos for SIV holders on a loop,  officials from Consular Affairs told us that the Bagdad embassy no longer  provided hard copies of guides due to costs, and neither embassy played  the videos due to space and other issues. Officials we interviewed from  a few resettlement agencies and advocacy groups suggested that there  may be additional opportunities for State to disseminate information, such  as making the \u201c19 Things to Know\u201d document available at more touch  points. The links to such SIV-specific informational documents are directly  available on State\u2019s Refugee Processing Center website and through the  form SIV holders complete to elect to receive resettlement benefits.  However, they are not directly accessible on State\u2019s Consular Affairs\u2019  websites that describe the steps to apply for a SIV. Further, these SIV- specific documents are also not offered at embassies or mailed to SIV  holders in their visa packages, according to Consular Affairs officials.  Moreover, in several of our focus groups, some participants stated that  they did not remember receiving any or much information on resettlement  in the United States while in their home country, including information  aimed specifically at SIV holders.", "Federal internal controls state that management should externally  communicate necessary quality information to achieve objectives,  considering audience, nature of information, availability of information,  and costs in doing so. Because State\u2019s current information to SIV  holders overseas is general and the agency may miss opportunities to  disseminate or otherwise make individuals aware of the information, SIV  holders may be hampered in their ability to make well-informed decisions  on where to resettle in the United States, as well as in their ability to  prepare and adapt to potential challenges as quickly as possible upon  arrival."], "subsections": []}]}, {"section_title": "ORR\u2019s New Grant Provides More Targeted Assistance on Working with Skilled Immigrants", "paragraphs": ["Although ORR does not provide specific support or assistance for SIV  holders, ORR\u2019s funding and technical assistance for refugees and other  eligible clients can be used to support programming for highly skilled  clients, including SIV holders. For example, states can use Refugee  Social Services and Targeted Assistance Grant funds to develop  specialized programs aimed at higher skilled immigrants, if they choose.  Among our selected states, Virginia used these funds to support its  career development program. ORR also uses a technical assistance  provider, Higher, to provide support related to employment and self- sufficiency. Higher makes various employment resources available that  resettlement agencies or other service providers can use, including those  that can help serve highly skilled clients, such as webinars or postings on  educational or career development opportunities. Higher has also  developed online training modules, recertification guides, and other  resources that refugees, SIV holders, or other clients can directly access  through its website, in addition to posting links to other providers\u2019  services, such as those from Upwardly Global, which are directly  accessible by clients.", "In addition, in June 2017, ORR posted a new $3 million competitive grant  announcement for the Refugee Career Pathways program that aims to  address the challenges experienced by highly skilled refugees, SIV  holders, or other eligible populations in moving beyond low-skilled work  into professional fields with career advancement opportunities (see text  box). The grant announcement states that this program will utilize a  \u201ccareer pathways\u201d approach, as defined by WIOA, which is a combination  of training, education, and services to help people obtain short-term and  long-term career opportunities in specific fields that align with state or  regional economic needs. Possible types of assistance that could be  provided to participants include case management, training and technical  assistance, mentoring, or financial assistance for educational or  certification programs. This ORR grant aligns with the desire for more  targeted assistance and information for skilled immigrants, such SIV  holders, which was expressed by officials we interviewed at a number of  national and local resettlement agencies and SIV holders in our focus  groups.", "Goals of Office of Refugee Resettlement\u2019s new Refugee Career Pathways Program  \u201cThe Refugee Career Pathways (RCP) program is a new program established by the Office of Refugee Resettlement (ORR) to  address the obstacles faced by resettled refugees in initiating professional careers in their new communities. While many refugees  have previous professional experience in their country of origin, they often lack the degrees, certifications, and knowledge specific to  the U.S. job environment needed to attain professional employment after resettlement. Even highly-skilled refugees are often required  to take low-skilled jobs with little opportunity for advancement or skill development. This in turn limits refugees\u2019 potential to achieve  economic self-sufficiency and to benefit their communities by making full use of the skills and experience they bring to their new home.  The goal of the RCP program is to support refugees in attaining the knowledge and resources needed to begin a professional career  in their new community. Existing job training programs for refugees often focus on supporting initial job placement, which may not be  adequate to secure long-term self-sufficiency. The RCP program will assist refugees to begin professional careers that provide not  only a salary but also greater job security and the possibility of career advancement.\u201d", "SIV holders resettle in the United States in most cases to escape  endangerment\u2014a result of their work for the U.S. government in Iraq or  Afghanistan. After their resettlement, however, no outcome information  exists beyond whether SIV holders are minimally self-sufficient within  their first 6 months. SIV holders are a small group compared to the larger,  general population of refugees. Yet ORR faced and overcame similar  constraints in conducting studies on other special populations in the past,  such as the Lost Boys of Sudan, responding to the focus and concern of  policymakers about those populations at the time. Although ORR could  leverage its existing methodologies to examine SIV holders\u2019 longer-term  outcomes in further research, similar to what it did for other groups, it has  not yet fully explored the feasibility of doing so or other possibilities to  obtain information about the SIV holder population. ORR\u2019s new survey  redesign efforts, aimed at improving its understanding of the long-term  outcomes of refugees and related populations, provide the agency an  opportunity to do this. Until then, policymakers have no information as to  whether SIV holders\u2014a population of special interest and one with an  increasing presence in the federal refugee resettlement programs\u2014are  successfully resettling in the United States.", "While many of the resettlement challenges related to employment,  housing, or cultural integration are outside of State\u2019s control, they may be  exacerbated by SIV holders\u2019 own high expectations about resettlement.  These expectations are often cultivated before they arrive from overseas.  State\u2019s efforts to inform SIV holders about resettlement have been  ongoing for years and, to some extent, help overcome the logistical  difficulties of not being able to provide SIV holders with cultural orientation  training before they come. However, the persistent gap among SIV  holders\u2019 expectations and their experiences, as described by many of the  SIV holders and officials we interviewed from national and local  resettlement agencies and advocacy groups, and other stakeholders,  suggests that these efforts are falling short. While State has made efforts  to disseminate the information through various touchpoints, there are  missed opportunities for distribution, such as at embassies. When  coupled with the lack of examples or details in State\u2019s informational  materials for SIV holders, these missed opportunities may contribute to  SIV holders\u2019 ongoing false expectations of resettlement.", "Finding additional ways to deliver information to SIV holders about the  realities of resettlement could help them make more informed decisions  about where they choose to resettle\u2014decisions which may be predicated  on their ability to access additional information about important factors  such as employment opportunities or area housing costs. Such  information, while not a panacea for the real resettlement challenges SIV  holders face, can at least help them make decisions that better align their  personal situation with the economic realities of resettlement in the United  States. Additional information could also mitigate SIV holders\u2019 surprise  and frustration once they arrive, better enable them to quickly orient to  their new lives, as well as help refugee agencies facilitate that transition."], "subsections": []}]}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations, including one to ORR and one to  PRM:  1.  The Director of the Office of Refugee Resettlement (ORR) should  consider including SIV holders in its Annual Survey of Refugees.  (Recommendation 1)  2.  The Assistant Secretary of the Bureau of Population, Refugees, and  Migration (PRM) should identify and implement additional ways to  deliver information to prospective SIV holders about resettlement to  assist with adjustment and expectations after arrival in the United  States, including providing more detailed or in-depth information on  key issues. PRM, working with Consular Affairs as needed, should  also identify and address potential gaps in disseminating relevant  information to SIV holders, such as at embassies. (Recommendation  2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of our report to HHS and State for review and  comment. Both agencies agreed with our recommendations. In its  response, HHS stated that while it did not believe including SIV holders in  the Annual Survey of Refugee was feasible under the current contract  due to costs, it would continue to look for cost-effective ways to include  SIV holders in its survey redesign efforts and in future contracts. HHS  stated that it would also explore ways to capture more information on SIV  holders through its administrative program data, including on employment  outcomes. State, in its response, said that PRM has developed new  guidance for the Refugee Processing Center\u2019s SIV unit regarding the  distribution of additional information to SIV holders and that staff from this  unit plan to include additional links to cultural orientation information in all  their correspondences with SIV applicants. Additionally, State noted that  Embassy Baghdad will distribute copies of the Welcome Guide to Iraqi  SIV holders and that PRM will work with Consular Affairs to identify other  ways to provide information to SIV applicants. HHS and State also  provided technical comments, which we incorporated into the report as  appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, Secretaries of Health and Human Services  and State, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Additional Methodological Details", "paragraphs": ["This appendix provides additional information on our methodologies for  our analysis of data from the Department of State (State) and on our  focus groups with special immigrant visa (SIV) holders."], "subsections": [{"section_title": "Analysis of State Data", "paragraphs": ["We analyzed individual record-level data from State\u2019s Bureau of  Population, Refugees, and Migration (PRM) for fiscal years 2011 through  the first quarter of 2017 (i.e., October 2010 through December 2016) that  provide information on recipients of State\u2019s resettlement program, the  Reception and Placement (R&P) program. Fiscal year 2011 was the first  year of the R&P program\u2019s current reporting requirements, and December  2016 was the most current data available at the time of our review.  Overall, this timeframe accounted for about 40,000 individual SIV holders  (principal SIV holders and their family members) and 14,000 cases, or  households, before we excluded instances of missing data. In our  analysis and reported results, we excluded instances of missing data,  such as when SIV holders migrated from their initial placements before  resettlement agencies could collect 90-day outcome information, or, in the  case of employment rates, when principal SIV holders were considered  exempt from seeking employment for various reasons. This resulted in  about 38,000 individuals and 13,000 cases.", "The R&P information we examined included data on recipients\u2019  employment status and other household income sources at 90 days after  arrival, such as from earnings or common cash assistance programs.  Most of the R&P data are provided as \u201cyes\u201d or \u201cno\u201d responses, such as  whether an individual is employed or whether the household has income  that exceeds expenses. R&P data are collected by national and local  resettlement agencies on all individuals served through the R&P program,  and reported to PRM at one-point in time\u201490 days after individuals\u2019  arrival in the United States. Per R&P reporting requirements, some data  are collected at the case or household level, such as whether the  household has sufficient income to meet expenses, while other data, such  as employment status, are collected on each individual in a case.", "Additionally, we reviewed PRM data on recipients\u2019 background  characteristics, such as education level and spoken English ability,  collected by PRM during the application and screening process prior to an  individual\u2019s resettlement in the United States. PRM tracks information on  all individuals applying to the U.S. Refugee Admissions Program,  including those with SIVs, using its data repository known as the  Worldwide Refugee Admissions Processing System. Some of the  background information on SIV holders, including education level and  spoken English level, are self-reported and provided on SIV application  forms. PRM collected both the background and the R&P data in a way  that allowed SIV holders to be examined separately from resettled  refugees. We also did analyses with the same variables for resettled  refugees from the same general timeframe. We reviewed the data from  PRM for missing data and internal inconsistencies, and interviewed PRM  officials knowledgeable about the data to resolve identified issues. We  determined that the data were sufficiently reliable for our purposes of  reporting employment rates, income sources, and receipt of services at  90 days, as well as broad categories of education and spoken English  levels, for SIV holders and, in some cases, refugees."], "subsections": []}, {"section_title": "Focus Groups with SIV Holders", "paragraphs": ["In each of our selected states (California, Texas, and Virginia), we  conducted three to four focus groups with principal SIV holders and SIV  spouses to better understand resettlement factors or challenges from  their perspectives. In total, we conducted 11 focus groups and spoke with  86 participants from both Afghanistan and Iraq. Specifically, we  conducted eight focus groups with all or mostly principal SIV holders.  (Participants in seven of these groups were all male principal SIV holders;  participants in one group included four male principal SIV holders and two  female spouses.) We also conducted three focus groups with primarily  female spouses. (All participants in these three groups were females;  however, in two groups, one participant was the principal SIV holder.)", "To supplement the information we gathered through our focus group  discussions, we also distributed short anonymous surveys to participants  at the end of each session. Among other basic questions, we asked  participants whether they were currently employed and, if so, the type of  work they did. We also asked principal SIV holders what type of work they  did for the U.S. government, and SIV spouses whether they worked in  their home country and the type of work. Almost all participants submitted  a survey (84 of 86). However, some participants (particularly SIV  spouses) appeared to have difficulty understanding the questions,  although we had translation assistance during our focus groups. In our  report, we discussed survey findings on principal SIV holders\u2019 prior work  for the U.S. government and the prevalence of prior work among SIV  spouses. Overall, these responses had few blanks, and the responses  themselves seemed to indicate general understanding of the questions.", "The information gathered from interviews and focus groups from our site  visits is not generalizable and is meant to provide illustrative examples."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Janet Mascia (Assistant Director),  Theresa Lo (Analyst-in-Charge), Cristina Norland, and Rachel Pittenger  made key contributions to this report. Also contributing to this report were  James Bennett, Kathryn Bernet, Pamela Davidson, Holly Dye, Sara  Edmondson, Cynthia Grant, Marissa Jones, James Rebbe, and  Rosemary Torres Lerma."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-388", "url": "https://www.gao.gov/products/GAO-18-388", "title": "2017 Lobbying Disclosure: Observations on Lobbyists' Compliance with Disclosure Requirements", "published_date": "2018-03-30T00:00:00", "released_date": "2018-03-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The LDA, as amended, requires lobbyists to file quarterly disclosure reports and semiannual reports on certain political contributions. The law also includes a provision for GAO to annually audit lobbyists' compliance with the LDA. GAO's objectives were to (1) determine the extent to which lobbyists can demonstrate compliance with disclosure requirements, (2) identify challenges to compliance that lobbyists report, and (3) describe the resources and authorities available to USAO in its role in enforcing LDA compliance, and the efforts USAO has made to improve enforcement. This is GAO's 11th report under the provision.", "GAO reviewed a stratified random sample of 98 quarterly disclosure LD-2 reports filed for the third and fourth quarters of calendar year 2016 and the first and second quarters of calendar year 2017. GAO also reviewed two random samples totaling 160 LD-203 reports from year-end 2016 and midyear 2017. This methodology allowed GAO to generalize to the population of 45,818 disclosure reports with $5,000 or more in lobbying activity, and 30,594 reports of federal political campaign contributions. GAO also met with officials from USAO to obtain status updates on its efforts to focus resources on lobbyists who fail to comply.", "GAO is not making any recommendations in this report. GAO provided a draft of this report to the Department of Justice for review and comment. The Department of Justice provided technical comments, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["For the 2017 reporting period, most lobbyists provided documentation for key elements of their disclosure reports to demonstrate compliance with the Lobbying Disclosure Act of 1995, as amended (LDA). For lobbying disclosure (LD-2) reports and political contributions (LD-203) reports filed during the third and fourth quarter of 2016 and the first and second quarter of 2017, GAO estimates that", "87 percent of lobbyists filed reports as required for the quarter in which they first registered; the figure below describes the filing process and enforcement;", "99 percent of all lobbyists who filed (up from 83 percent in 2016) could provide documentation for income and expenses; and", "93 percent filed year-end 2016 LD-203 reports as required.", "These findings are generally consistent with prior reports GAO issued for the 2010 through 2016 reporting periods. However, in recent years GAO's findings showed some variation in the estimated percentage of reports with supporting documentation. For example, an estimated increase in lobbyists who could document expenses is notable in 2017 and represents a statistically significant increase from 2016.", "As in GAO's other reports, some lobbyists were still unclear about the need to disclose certain previously held covered positions, such as paid congressional internships or certain executive agency positions. GAO estimates that 15 percent of all LD-2 reports may not have properly disclosed previously held covered positions. On the other hand, over the past several years of reporting on lobbying disclosure, GAO found that most lobbyists in the sample rated the terms associated with LD-2 reporting as \u201cvery easy\u201d or \u201csomewhat easy\u201d to understand.", "The U.S. Attorney's Office for the District of Columbia (USAO) stated it has sufficient resources and authority to enforce compliance with the LDA. USAO continued its efforts to bring lobbyists into compliance by reminding them to file reports or by applying civil penalties."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Honest Leadership and Open Government Act of 2007 (HLOGA)  amended the Lobbying Disclosure Act of 1995 to require lobbyists to file  quarterly lobbying disclosure reports and semiannual reports on certain  political contributions. HLGOA also increased civil penalties and added  criminal penalties for failure to comply with lobbying disclosure  requirements. In addition, HLOGA includes a provision for us to annually  audit the extent of lobbyists\u2019 compliance with the Lobbying Disclosure Act  of 1995, as amended (LDA) by reviewing publicly available lobbying  registrations and other matters. This is our 11th report under this  provision.", "As with our prior reports, our objectives were to (1) determine the extent  to which lobbyists can demonstrate compliance with the requirements for  registrations and reports filed under the LDA; (2) identify any challenges  and potential improvements to compliance by lobbyists, lobbying firms,  and registrants; and (3) describe the resources and authorities available  to the U.S. Attorney\u2019s Office for the District of Columbia (USAO) in its role  in enforcing LDA compliance and the efforts it has made to improve that  enforcement.", "To determine the extent to which lobbyists can demonstrate compliance,  we examined a stratified random sample of 98 quarterly lobbying  disclosure (LD-2) reports with income and expenses of $5,000 or more  filed during the third and fourth quarters of calendar year 2016, and the  first and second quarters of calendar year 2017. We selected the  randomly sampled reports from the publicly downloadable database  maintained by the Clerk of the House of Representatives (Clerk of the  House). This methodology allows us to generalize some elements to the  population of LD-2 reports. We then contacted each lobbyist or lobbying  firm in our sample. We asked them to provide written documentation for  key elements of their LD-2 reports. This documentation included the  amount of income reported for lobbying activities, the amount of  expenses reported, the houses of Congress or federal agencies lobbied,  lobbying issue areas, and the names of lobbyists listed in the report. We  also reviewed whether lobbyists listed on the LD-2 reports properly  disclosed prior covered official positions, and whether the lobbyists filed  the semiannual report of federal political contributions. Two lobbying firms  in our sample, Fierce Government Relations and Cardinal Infrastructure,  declined to meet with us following our initial letter, sent in September  2017. After multiple follow up contacts in October and November 2017,  we informed both firms that because they declined to meet, we would  supply their names to Congress, as provided for in HLOGA. Both  acknowledged understanding this provision. A complete description of our  methodology can be found in appendix I. Appendix II contains a list of  lobbyists and clients whose LD-2 reports we randomly selected for our  review.", "To determine whether lobbyists reported their federal political  contributions as required by the LDA, we analyzed stratified random  samples of year-end 2016 and midyear 2017 semiannual political  contributions (LD-203) reports. The samples contain 80 LD-203 reports  that have contributions listed and 80 LD-203 reports that list no  contributions. We selected the randomly sampled reports from the  publicly downloadable contributions database maintained by the Clerk of  the House (see appendix III for a list of lobbyists and lobbying firms  randomly selected for our review of LD-203 reports). We then checked  the contributions reported in the Federal Election Commission\u2019s (FEC)  database against the contributions identified in our sample. This helped  us determine whether all contributions reported in the FEC database were  also reported on the LD-203s as required. We contacted lobbyists and  asked them to provide documentation to clarify differences we observed.  This methodology allows us to generalize to the population of LD-203  reports both with and without contributions.", "To determine whether lobbyists were meeting the requirement to file an  LD-2 report for the quarter in which they registered, we compared new  registrations (LD-1) filed in the third and fourth quarters of 2016, and the  first and second quarters of 2017 to the corresponding LD-2 reports on  file with the Clerk of the House.", "To assess the reliability of the data used, we reviewed available  documentation and interviewed knowledgeable officials. We found the  data to be sufficiently reliable for our purposes. The details of the data  reliability assessments are in appendix I.", "To identify challenges and potential improvements to compliance, we  used a structured web-based survey to obtain views from lobbyists  included in our sample of reports.", "To describe the resources and authorities available to USAO and its  efforts to improve LDA enforcement, we interviewed USAO officials and  obtained information about their system\u2019s capabilities to track  enforcement and compliance trends and referral data that it receives from  the Secretary of the Senate and the Clerk of the House.", "The mandate does not require us to identify lobbyist organizations that  failed to register and report in accordance with LDA requirements. The  mandate also does not require us to determine whether reported lobbying  activity or political contributions represented the full extent of lobbying  activities that took place.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The LDA requires lobbyists to register with the Secretary of the Senate  and the Clerk of the House and to file quarterly reports disclosing their  respective lobbying activities. Lobbyists are required to file their  registrations and reports electronically with the Secretary of the Senate  and the Clerk of the House through a single entry point. Registrations and  reports must be publicly available in downloadable, searchable databases  from the Secretary of the Senate and the Clerk of the House. No specific  statutory requirements exist for lobbyists to generate or maintain  documentation in support of the information disclosed in the reports they  file. However, guidance issued by the Secretary of the Senate and the  Clerk of the House recommends that lobbyists retain copies of their filings  and documentation supporting reported income and expenses for at least  6 years after they file their reports.", "The LDA requires that the Secretary of the Senate and the Clerk of the  House guide and assist lobbyists with the registration and reporting  requirements and develop common standards, rules, and procedures for  LDA compliance. The Secretary of the Senate and the Clerk of the House  review the guidance semiannually. It was last revised January 31, 2017,  to (among other issues) update the registration threshold to reflect  changes in the Consumer Price Index, and clarify the identification of  clients and covered officials and issues related to rounding income and  expenses. The guidance provides definitions of LDA terms, elaborates on registration and reporting requirements, includes specific examples of  different scenarios, and provides explanations of why certain scenarios  prompt or do not prompt disclosure under the LDA. The offices of the  Secretary of the Senate and the Clerk of the House told us they continue  to consider information we report on lobbying disclosure compliance  when they periodically update the guidance. In addition, they told us they  e-mail registered lobbyists quarterly on common compliance issues and  reminders to file reports by the due dates.", "The LDA defines a lobbyist as an individual who is employed or retained  by a client for compensation, who has made more than one lobbying  contact (written or oral communication to covered officials, such as a high  ranking agency official or a Member of Congress made on behalf of a  client), and whose lobbying activities represent at least 20 percent of the  time that he or she spends on behalf of the client during the quarter.  Lobbying firms are persons or entities that have one or more employees  who lobby on behalf of a client other than that person or entity. Figure 1  provides an overview of the registration and filing process.", "Lobbying firms are required to register with the Secretary of the Senate  and the Clerk of the House for each client if the firms receive or expect to  receive more than $3,000 in income from that client for lobbying  activities. Lobbyists are also required to submit an LD-2 quarterly report  for each registration filed. The LD-2s contain information that includes:  the name of the lobbyist reporting on quarterly lobbying activities;  the name of the client for whom the lobbyist lobbied; a list of individuals who acted as lobbyists on behalf of the client  during the reporting period; whether any lobbyists served in covered positions in the executive or  legislative branch such as high-ranking agency officials or  congressional staff positions, in the previous 20 years;  codes describing general issue areas, such as agriculture and  education; a description of the specific lobbying issues; houses of Congress and federal agencies lobbied during the reporting  reported income (or expenses for organizations with in-house  lobbyists) related to lobbying activities during the quarter (rounded to  the nearest $10,000).", "The LDA also requires lobbyists to report certain political contributions  semiannually in the LD-203 report. These reports must be filed 30 days  after the end of a semiannual period by each lobbying firm registered to  lobby and by each individual listed as a lobbyist on a firm\u2019s lobbying  report. The lobbyists or lobbying firms must:  list the name of each federal candidate or officeholder, leadership  political action committee, or political party committee to which he or  she contributed at least $200 in the aggregate during the semiannual  period;  report contributions made to presidential library foundations and  presidential inaugural committees;  report funds contributed to pay the cost of an event to honor or  recognize an official who was previously in a covered position, funds  paid to an entity named for or controlled by a covered official, and  contributions to a person or entity in recognition of an official, or to pay  the costs of a meeting or other event held by or in the name of a  covered official; and  certify that they have read and are familiar with the gift and travel  rules of the Senate and House and that they have not provided,  requested, or directed a gift or travel to a member, officer, or  employee of Congress that would violate those rules.", "The Secretary of the Senate and the Clerk of the House, along with  USAO, are responsible for ensuring LDA compliance. The Secretary of  the Senate and the Clerk of the House notify lobbyists or lobbying firms in  writing that they are not complying with the LDA reporting. Subsequently,  they refer those lobbyists who fail to provide an appropriate response to  USAO. USAO researches these referrals and sends additional  noncompliance notices to the lobbyists or lobbying firms, requesting that  they file reports or terminate their registration. If USAO does not receive a  response after 60 days, it decides whether to pursue a civil or criminal  case against each noncompliant lobbyist. A civil case could lead to  penalties up to $200,000 for each violation, while a criminal case\u2014usually  pursued if a lobbyist\u2019s noncompliance is found to be knowing and  corrupt\u2014could lead to a maximum of 5 years in prison."], "subsections": []}, {"section_title": "Lobbyists Filed Disclosure Reports as Required for Most New Lobbying Registrations", "paragraphs": ["Generally, under the LDA, within 45 days of being employed or retained  to make a lobbying contact on behalf of a client, the lobbyist must register  by filing an LD-1 form with the Secretary of the Senate and the Clerk of  the House. Thereafter, the lobbyist must file quarterly disclosure (LD-2)  reports detailing the lobbying activities. Of the 3,433 new registrations we  identified for the third and fourth quarters of 2016 and the first and second  quarters of 2017, we matched 2,995 of them (87.2 percent) to  corresponding LD-2 reports filed within the same quarter as the  registration. These results are consistent with the findings we have  reported in prior reviews. We used the House lobbyists\u2019 disclosure  database as the source of the reports. We also used an electronic  matching algorithm that allows for misspellings and other minor  inconsistencies between the registrations and reports. Figure 2 shows  lobbyists filed disclosure reports as required for most new lobbying  registrations from 2010 through 2017."], "subsections": [{"section_title": "For Most LD-2 Reports, Lobbyists Provided Documentation for Key Elements, Including Documentation for Their Income and Expenses", "paragraphs": ["For selected elements of lobbyists\u2019 LD-2 reports that can be generalized  to the population of lobbying reports, our findings have generally been  consistent from year to year. Most lobbyists reporting $5,000 or more in  income or expenses provided written documentation to varying degrees  for the reporting elements in their disclosure reports. Figure 3 shows that  for most LD-2 reports, lobbyists provided documentation for income and  expenses for sampled reports from 2010 through 2017. However, in  recent years our findings showed some variation in the estimated  percentage of lobbyists who have reports with documentation for income  and expense supporting lobbying activities. Specifically, our estimate for  2017 (99 percent) represents a statistically significant increase from  2016.", "Figure 4 shows that for some LD-2 reports, lobbyists did not round their  income or expenses as the guidance requires. In 2017, we estimate 25  percent of reports did not round reported income or expenses according  to the guidance. We have found that rounding difficulties have been a  recurring issue on LD-2 reports from 2010 through 2017. As we  previously reported, several lobbyists who listed expenses told us that  based on their reading of the LD-2 form they believed they were required  to report the exact amount. While this is not consistent with the LDA and  the guidance, this may be a source of some of the confusion regarding  rounding errors. In 2016, the guidance was updated to include an  additional example about rounding expenses to the nearest $10,000. In  2017, 11 percent of lobbyists reported $10,000 or more in income or  expenses.", "The LDA requires lobbyists to disclose lobbying contacts made with  federal agencies on behalf of the client for the reporting period. This year,  of the 98 LD-2 reports in our sample, 51 reports disclosed lobbying  activities at federal agencies. Of those, lobbyists provided documentation  for all lobbying activities at executive branch agencies for 34 LD-2  reports. Figures 5 through 8 show that lobbyists for most LD-2 reports  provided documentation for selected elements of their LD-2 reports from  2010 through 2017."], "subsections": []}, {"section_title": "For Most Lobbying Disclosure Reports (LD-2), Lobbyists Filed Political Contribution Reports (LD- 203) for All Listed Lobbyists", "paragraphs": ["Lobbyists for an estimated 93 percent of LD-2 reports filed year-end 2016  for all lobbyists listed political contributions on the report as required.  Figure 9 shows that lobbyists for most lobbying firms filed contribution  reports as required in our sample from 2010 through 2017. All individual  lobbyists and lobbying firms reporting lobbying activity are required to file  LD-203 reports semiannually, even if they have no contributions to report,  because they must certify compliance with the gift and travel rules."], "subsections": []}, {"section_title": "For Some LD-2 Reports, Lobbyists May Have Failed to Disclose Their Previously Held Covered Positions", "paragraphs": ["The LDA requires a lobbyist to disclose previously held covered positions  in the executive or legislative branch, such as high ranking agency  officials and congressional staff, when first registering as a lobbyist for a  new client. This can be done either on a new LD-1 or on the quarterly LD- 2 filing when added as a new lobbyist. This year, we estimate that 15  percent of all LD-2 reports may not have properly disclosed previously  held covered positions as required. As in our other reports, some  lobbyists were still unclear about the need to disclose certain covered  positions, such as paid congressional internships or certain executive  agency positions. Figure 10 shows the extent to which lobbyists may not  have properly disclosed one or more covered positions as required from  2010 through 2017."], "subsections": []}, {"section_title": "Some Lobbyists Amended Their Disclosure Reports after We Contacted Them", "paragraphs": ["Lobbyists amended 15 of the 98 LD-2 disclosure reports in our original  sample to change previously reported information after we contacted  them. Of the 15 reports, 7 were amended after we notified the lobbyists of  our review, but before we met with them. An additional 8 of the 15 reports  were amended after we met with the lobbyists to review their  documentation. We consistently find a notable number of amended LD-2  reports in our sample each year following notification of our review. This  suggests that sometimes our contact spurs lobbyists to more closely  scrutinize their reports than they would have without our review. Table 1  lists reasons lobbying firms in our sample amended their LD-1 or LD-2  reports."], "subsections": []}, {"section_title": "Most LD-203 Contribution Reports Disclosed Political Contributions Listed in the Federal Election Commission Database", "paragraphs": ["As part of our review, we compared contributions listed on lobbyists\u2019 and  lobbying firms\u2019 LD-203 reports against those political contributions  reported in the Federal Election Commission (FEC) database to identify  whether political contributions were omitted on LD-203 reports in our  sample. The sample of LD-203 reports we reviewed contained 80 reports  with contributions and 80 reports without contributions. We estimate that  overall for 2017, lobbyists failed to disclose one or more reportable  contributions on 12 percent of reports. Additionally, ten LD-203 reports  were amended in response to our review. For this element in prior  reports, we reported an estimated minimum percentage of reports based  on a one-sided 95 percent confidence interval rather than the estimated  proportion as shown here. Estimates in the table have a maximum margin  of error of 11 percentage points. The year to year differences are not  statistically significant.", "Table 2 illustrates that from 2010 through 2017 most lobbyists disclosed  FEC reportable contributions on their LD-203 reports as required."], "subsections": []}]}, {"section_title": "Most Lobbying Firms Found it Easy to Comply with Disclosure Requirements and Understood Lobbying Terms", "paragraphs": ["As part of our review, 88 different lobbying firms were included in our  2017 sample of LD-2 disclosure reports. Consistent with prior reviews,  most lobbying firms reported that they found it \u201cvery easy\u201d or \u201csomewhat  easy\u201d to comply with reporting requirements. Of the 88 different lobbying  firms in our sample, 34 reported that the disclosure requirements were  \u201cvery easy,\u201d 40 reported them \u201csomewhat easy,\u201d and 13 reported them  \u201csomewhat difficult\u201d or \u201cvery difficult\u201d (see figure 11).", "Most lobbying firms we surveyed rated the definitions of terms used in  LD-2 reporting as \u201cvery easy\u201d or \u201csomewhat easy\u201d to understand with  regard to meeting their reporting requirements. This is consistent with  prior reviews. Figures 12 through 16 show what lobbyists reported as  their ease of understanding the terms associated with LD-2 reporting  requirements from 2012 through 2017."], "subsections": []}, {"section_title": "U.S. Attorney\u2019s Office for the District of Columbia Actions to Enforce the LDA", "paragraphs": [], "subsections": [{"section_title": "U.S. Attorney\u2019s Office\u2019s Resources and Authorities to Enforce LDA Compliance", "paragraphs": ["U.S. Attorney\u2019s Office (USAO) officials stated that they continue to have  sufficient personnel resources and authority under the LDA to enforce  reporting requirements. This includes imposing civil or criminal penalties  for noncompliance. Noncompliance refers to a lobbyist\u2019s or lobbying firm\u2019s  failure to comply with the LDA. However, USAO noted that the number of  assigned personnel has decreased due to attrition.", "USAO officials stated that lobbyists resolve their noncompliance issues  by filing LD-2, LD-203, or LD-2 amendments, or by terminating their  registration, depending on the issue. Resolving referrals can take  anywhere from a few days to years, depending on the circumstances.  During this time, USAO creates summary reports from its database to  track the overall number of referrals that are pending or become  compliant as a result of the lobbyist receiving an e-mail, phone call, or  noncompliance letter. Referrals remain in the pending category until they  are resolved. The pending category is divided into the following areas:  \u201cinitial research for referral,\u201d \u201cresponded but not compliant,\u201d \u201cno  response/waiting for a response,\u201d \u201cbad address,\u201d and \u201cunable to locate.\u201d  The USAO attempts to review and update all pending cases every six  months.", "USAO focuses its enforcement efforts primarily on the \u201cresponded but not  compliant\u201d and the \u201cno response/waiting for a response\u201d groups. Officials  told us that, if the USAO, after several unsuccessful attempts, has been  unsuccessful in contacting the non-compliant firm or its lobbyist, USAO  confers with both the Secretary of the Senate and the Clerk of the House  to determine whether further action is needed.", "In the cases where the lobbying firm is repeatedly referred for not filing  disclosure reports but does not appear to be actively lobbying, USAO  suspends enforcement actions. USAO officials reported they will continue  to monitor these firms and will resume enforcement actions if required."], "subsections": []}, {"section_title": "Status of LD-2 Enforcement Efforts", "paragraphs": ["USAO received 3,213 referrals from both the Secretary of the Senate and  the Clerk of the House for failure to comply with LD-2 reporting  requirements cumulatively for filing years 2009 through 2015. Table 4  shows the number and status of the referrals received and the number of  enforcement actions taken by USAO to bring lobbying firms into  compliance. Enforcement actions include USAO attempts to bring  lobbyists into compliance through letters, e-mails, and calls. About 45  percent (1,450 of 3,213) of the total referrals received are now compliant  because lobbying firms either filed their reports or terminated their  registrations. In addition, some of the referrals were found to be compliant  when USAO received the referral. Therefore, no action was taken. This  may occur when lobbying firms respond to the contact letters from the  Secretary of the Senate and the Clerk of the House after USAO received  the referrals. About 55 percent (1,752 of 3,213) of referrals are pending  further action because USAO could not locate the lobbying firm, did not  receive a response from the firm after an enforcement action, or plans to  conduct additional research to determine if it can locate the lobbying firm.  The remaining 11 referrals did not require action or were suspended  because the lobbyist or client was no longer in business or the lobbyist  was deceased."], "subsections": []}, {"section_title": "Status of LD-203 Referrals", "paragraphs": ["LD-203 referrals consist of two types: (1) LD-203(R) referrals represent  lobbying firms that have failed to file LD-203 reports for their lobbying firm  and (2) LD-203 referrals represent the lobbyists at the lobbying firm who  have failed to file their individual LD-203 reports as required. USAO  received 2,255 LD-203(R) referrals (cumulatively from 2009 through  2015) and 3,716 LD-203 referrals (cumulatively from 2009 through 2014  from the Secretary of the Senate and the Clerk of the House for lobbying  firms and lobbyists for noncompliance with reporting requirements). LD- 203 referrals are more complicated than LD-2 referrals because both the  lobbying firm and the individual lobbyists within the firm are each required  to file a LD-203. Lobbyists employed by a lobbying firm typically use the  firm\u2019s contact information and not the lobbyists\u2019 personal contact  information. This makes it difficult to locate a lobbyist who is not in  compliance and may have left the firm.", "USAO officials reported that, while many firms have assisted USAO by  providing contact information for lobbyists, they are not required to do so.  According to officials, USAO has difficulty pursuing LD-203 referrals for  lobbyists who have departed a firm without leaving forwarding contact  information with the firm. While USAO utilizes web searches and online  databases, including social media, to find these missing lobbyists, it is not  always successful. Table 5 shows the status of LD-203 (R) referrals  received and the number of enforcement actions taken by USAO to bring  lobbying firms into compliance. A little more than 44 percent (998 of  2,255) of the lobbying firms referred by the Secretary of the Senate and  Clerk of the House for noncompliance from calendar years 2009 through  2015 are now considered compliant because firms either filed their  reports or terminated their registrations. About 56 percent (1,251 of  2,255) of the referrals are pending further action.", "Table 6 shows that USAO received 3,716 LD-203 referrals from the  Secretary of the Senate and Clerk of the House for lobbyists who failed to  comply with LD-203 reporting requirements for calendar years 2009  through 2014. It also shows the status of the referrals received and the  number of enforcement actions taken by USAO to bring lobbyists into  compliance. In addition, table 6 shows that about 47 percent (1,741 of  3,716) of the lobbyists had come into compliance by filing their reports or  are no longer registered as a lobbyist. About 53 percent (1,966 of 3,716)  of the referrals are pending further action because USAO could not locate  the lobbyist, did not receive a response from the lobbyist, or plans to  conduct additional research to determine if it can locate the lobbyist.", "Table 7 shows that USAO received LD-203 referrals from the Secretary of  the Senate and the Clerk of the House for 4,991 lobbyists who failed to  comply with LD-203 reporting requirements for any filing year from 2009  through 2014. It also shows the status of compliance for individual  lobbyists listed on referrals to USAO. About 51 percent (2,526 of 4,991) of  the lobbyists had come into compliance by filing their reports or are no  longer registered as a lobbyist. About 50 percent (2,465 of 4,991) of the  referrals are pending action because USAO could not locate the  lobbyists, did not receive a response from the lobbyists, or plans to  conduct additional research to determine if it can locate the lobbyists.", "USAO officials said that many of the pending LD-203 referrals represent  lobbyists who no longer lobby for the lobbying firms affiliated with the  referrals, even though these lobbying firms may be listed on the lobbyist\u2019s  LD-203 report."], "subsections": []}, {"section_title": "Status of Enforcement Settlement Actions", "paragraphs": ["According to USAO officials, lobbyists and lobbying firms who repeatedly  fail to file reports are labeled chronic offenders and referred to one of the  assigned attorneys for follow-up. USAO also receives complaints  regarding lobbyists who are allegedly lobbying but never filed an LD-203.  USAO officials added that USAO monitors and investigates chronic  offenders to ultimately determine the appropriate enforcement actions,  which may include settlement or other civil actions.", "In regards to the four active cases involving chronic offenders they  reported to us in 2016, USAO officials noted that the agency is  investigating one case, negotiating a resolution that will include a civil  penalty in another case, and closing two other investigations without  further action. In addition, USAO is reviewing its records to identify  additional chronic offenders for further action due to noncompliance."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Justice for review  and comment. The Department of Justice provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the Attorney General, Secretary of  the Senate, Clerk of the House of Representatives, and interested  congressional committees and members. In addition, this report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2717 or jonesy@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["Our objectives were to determine the extent to which lobbyists are able to  demonstrate compliance with the Lobbying Disclosure Act of 1995, as  amended (LDA) by providing documentation to support information  contained on registrations and reports filed under the LDA; to identify  challenges and potential improvements to compliance, if any; and to  describe the resources and authorities available to the U.S. Attorney\u2019s  Office for the District of Columbia (USAO), its role in enforcing LDA  compliance, and the efforts it has made to improve LDA enforcement.", "We used information in the lobbying disclosure database maintained by  the Clerk of the House of Representatives (Clerk of the House). To  assess whether these disclosure data were sufficiently reliable for the  purposes of this report, we reviewed relevant documentation and  consulted with knowledgeable officials. Although registrations and reports  are filed through a single web portal, each chamber subsequently  receives copies of the data and follows different data-cleaning,  processing, and editing procedures before storing the data in either  individual files (in the House) or databases (in the Senate). Currently,  there is no means of reconciling discrepancies between the two  databases caused by the differences in data processing. For example,  Senate staff told us during previous reviews they set aside a greater  proportion of registration and report submissions than the House for  manual review before entering the information into the database. As a  result, the Senate database would be slightly less current than the House  database on any given day pending review and clearance.", "House staff told us during previous reviews that they rely heavily on  automated processing. In addition, while they manually review reports  that do not perfectly match information on file for a given lobbyist or client,  staff members approve and upload such reports as originally filed by each  lobbyist, even if the reports contain errors or discrepancies (such as a  variant on how a name is spelled). Nevertheless, we do not have reasons  to believe that the content of the Senate and House systems would vary  substantially. Based on interviews with knowledgeable officials and a  review of documentation, we determined that House disclosure data were  sufficiently reliable for identifying a sample of quarterly disclosure reports  (LD-2) and for assessing whether newly filed lobbyists also filed required  reports. We used the House database for sampling LD-2 reports from the  third and fourth quarters of 2016 and the first and second quarters of  2017, as well as for sampling year-end 2016 and midyear 2017 political  contributions reports (LD-203). We also used the database for matching  quarterly registrations with filed reports. We did not evaluate the Offices  of the Secretary of the Senate or the Clerk of the House, both of which  have key roles in the lobbying disclosure process. However, we did  consult with officials from each office. They provided us with general  background information at our request.", "To assess the extent to which lobbyists could provide evidence of their  compliance with reporting requirements, we examined a stratified random  sample of 98 LD-2 reports from the third and fourth quarters of 2016 and  the first and second quarters of 2017. The sample size of 98 LD-2  reports for this year\u2019s review represents an increase from the sample size  selected for the 2015 and 2016 reviews, and is a return to the sample  size selected in reviews prior to 2015. We increased the sample size  because, in 2016, we observed a change in the estimate of the  percentage of reports that had documentation of income and expenses  (83 percent down from 92 percent in 2015). At that time, we were unable  to state that this was a statistically significant change because, in part, the  reduced sample size of 80 did not give us enough power to detect and  report on the change of that size. We excluded reports with no lobbying  activity or with income or expenses of less than $5,000 from our sampling  frame. We drew our sample from 45,818 activity reports filed for the third  and fourth quarters of 2016 and the first and second quarters of 2017  available in the public House database, as of our final download date for  each quarter.", "Our sample of LD-2 reports was not designed to detect differences over  time. However, we conducted tests of significance for changes from 2010  to 2017 for the generalizable elements of our review. We found that  results were generally consistent from year to year and there were few  statistically significant changes after using a Bonferroni adjustment to  account for multiple comparisons. For this year\u2019s review, we identified  that the estimated change in the percent of LD-2 reports that provided  written documentation for the income and expenses from 2016 to 2017 is  notable. In recent years, our findings show some variation in the estimate  percentage of reports with documentation. Specifically, our estimate for  2017 (99 percent) represents a statistically significant increase from 2016.  These changes are identified in the report. The inability to detect  significant differences from year to year in our results may be related to  sampling error alone or the nature of our sample, which was relatively  small and was designed only for cross-sectional analysis.", "Our sample is based on a stratified random selection and is only one of a  large number of samples that we may have drawn. Because each sample  could have provided different estimates, we express our confidence in the  precision of our particular sample\u2019s results as a 95 percent confidence  interval. This interval would contain the actual population value for 95  percent of the samples that we could have drawn. The percentage  estimates for LD-2 reports have 95 percent confidence intervals of within  plus or minus 12 percentage points or fewer of the estimate itself.", "We contacted all the lobbyists and lobbying firms in our sample and,  using a structured web-based survey, asked them to confirm key  elements of the LD-2 and whether they could provide written  documentation for key elements in their reports, including  the amount of income reported for lobbying activities;  the amount of expenses reported on lobbying activities;  the names of those lobbyists listed in the report;  the houses of Congress and federal agencies that they lobbied, and  the issue codes listed to describe their lobbying activity.", "After reviewing the survey results for completeness, we interviewed  lobbyists and lobbying firms to review the documentation they reported as  having on their online survey for selected elements of their respective LD- 2 report.", "Prior to each interview, we conducted a search to determine whether  lobbyists properly disclosed their covered position as required by the  LDA. We reviewed the lobbyists\u2019 previous work histories by searching  lobbying firms\u2019 websites, LinkedIn, Leadership Directories, Legistorm, and  Google. Prior to 2008, lobbyists were only required to disclose covered  official positions held within 2 years of registering as a lobbyist for the  client. The Honest Leadership and Open Government Act of 2007  amended that time frame to require disclosure of positions held 20 years  before the date the lobbyists first lobbied on behalf of the client. Lobbyists  are required to disclose previously held covered official positions either on  the client registration (LD-1) or on an LD-2 report. Consequently, those  who held covered official positions may have disclosed the information on  the LD-1 or a LD-2 report filed prior to the report we examined as part of  our random sample. Therefore, where we found evidence that a lobbyist  previously held a covered official position, and that information was not  disclosed on the LD-2 report under review, we conducted an additional  review of the publicly available Secretary of the Senate or Clerk of the  House database to determine whether the lobbyist properly disclosed the  covered official position on a prior report or LD-1. Finally, if a lobbyist  appeared to hold a covered position that was not disclosed, we asked for  an explanation at the interview with the lobbying firm to ensure that our  research was accurate.", "In previous reports, we reported the lower bound of a 90 percent  confidence interval to provide a minimum estimate of omitted covered  positions and omitted contributions with a 95 percent confidence level.  We did so to account for the possibility that our searches may have failed  to identify all possible omitted covered positions and contributions. As we  have developed our methodology over time, we are more confident in the  comprehensiveness of our searches for these items. Accordingly, this  report presents the estimated percentages for omitted contributions and  omitted covered positions, rather than the minimum estimates. As a  result, percentage estimates for these items will differ slightly from the  minimum percentage estimates presented in prior reports.", "In addition to examining the content of the LD-2 reports, we confirmed  whether the most recent LD-203 reports had been filed for each firm and  lobbyist listed on the LD-2 reports in our random sample. Although this  review represents a random selection of lobbyists and firms, it is not a  direct probability sample of firms filing LD-2 reports or lobbyists listed on  LD-2 reports. As such, we did not estimate the likelihood that LD-203  reports were appropriately filed for the population of firms or lobbyists  listed on LD-2 reports.", "To determine if the LDA\u2019s requirement for lobbyists to file a report in the  quarter of registration was met for the third and fourth quarters of 2016  and the first and second quarters of 2017, we used data filed with the  Clerk of the House to match newly filed registrations with corresponding  disclosure reports. Using an electronic matching algorithm that includes  strict and loose text matching procedures, we identified matching  disclosure reports for 2,995, or 87.2 percent, of the 3,433 newly filed  registrations. We began by standardizing client and lobbyist names in  both the report and registration files (including removing punctuation and  standardizing words and abbreviations, such as \u201ccompany\u201d and \u201cCO\u201d).  We then matched reports and registrations using the House identification  number (which is linked to a unique lobbyist-client pair), as well as the  names of the lobbyist and client.", "For reports we could not match by identification number and standardized  name, we also attempted to match reports and registrations by client and  lobbyist name, allowing for variations in the names to accommodate  minor misspellings or typos. For these cases, we used professional  judgment to determine whether cases with typos were sufficiently similar  to consider as matches. We could not readily identify matches in the  report database for the remaining registrations using electronic means.", "To assess the accuracy of the LD-203 reports, we analyzed stratified  random samples of LD-203 reports from the 30,594 total LD-203 reports.  The first sample contains 80 reports of the 9,474 reports with political  contributions and the second contains 80 reports of the 20,335 reports  listing no contributions. Each sample contains 40 reports from the year- end 2016 filing period and 40 reports from the midyear 2017 filing period.  The samples from 2017 allow us to generalize estimates in this report to  either the population of LD-203 reports with contributions or the reports  without contributions to within a 95 percent confidence interval of within  plus or minus 11 percentage points or fewer. Although our sample of LD- 203 reports was not designed to detect differences over time, we  conducted tests of significance for changes from 2010 to 2017 and found  no statistically significant differences after adjusting for multiple  comparisons.", "While the results provide some confidence that apparent fluctuations in  our results across years are likely attributable to sampling error, the  inability to detect significant differences may also be related to the nature  of our sample, which was relatively small and designed only for cross- sectional analysis. We analyzed the contents of the LD-203 reports and  compared them to contribution data found in the publicly available  Federal Elections Commission\u2019s (FEC) political contribution database. We  consulted with staff at FEC responsible for administering the database.  We determined that the data are sufficiently reliable for the purposes of  our reporting objectives.", "We compared the FEC-reportable contributions on the LD-203 reports  with information in the FEC database. The verification process required  text and pattern matching procedures so we used professional judgment  when assessing whether an individual listed is the same individual filing  an LD-203. For contributions reported in the FEC database and not on  the LD-203 report, we asked the lobbyists or organizations to explain why  the contribution was not listed on the LD-203 report or to provide  documentation of those contributions. As with covered positions on LD-2  disclosure reports, we cannot be certain that our review identified all  cases of FEC-reportable contributions that were inappropriately omitted  from a lobbyist\u2019s LD-203 report. We did not estimate the percentage of  other non-FEC political contributions that were omitted because they tend  to constitute a small minority of all listed contributions and cannot be  verified against an external source.", "To identify challenges to compliance, we used a structured web-based  survey and obtained the views from 88 different lobbying firms included in  our sample on any challenges to compliance. The number of different  lobbying firms is 88, which is less than our original sample of 98 reports  because some lobbying firms had more than one LD-2 report included in  our sample. We calculated responses based on the number of different  lobbying firms that we contacted rather than the number of interviews.  Prior to our calculations, we removed the duplicate lobbying firms based  on the most recent date of their responses. For those cases with the  same response date, the decision rule was to keep the cases with the  smallest assigned case identification number. To obtain their views, we  asked them to rate their ease with complying with the LD-2 disclosure  requirements using a scale of \u201cvery easy,\u201d \u201csomewhat easy,\u201d \u201csomewhat  difficult,\u201d or \u201cvery difficult.\u201d In addition, using the same scale we asked  them to rate the ease of understanding the terms associated with LD-2  reporting requirements.", "To describe the resources and authorities available to the U.S. Attorney\u2019s  Office for the District of Columbia (USAO) and its efforts to improve its  LDA enforcement, we interviewed USAO officials. We obtained  information on the capabilities of the system officials established to track  and report compliance trends and referrals and on other practices  established to focus resources on LDA enforcement. USAO provided us  with reports from the tracking system on the number and status of  referrals and chronically noncompliant lobbyists and lobbying firms.", "The mandate does not require us to identify lobbyists who failed to  register and report in accordance with the LDA requirements, or  determine for those lobbyists who did register and report whether all  lobbying activity or contributions were disclosed. Therefore, this was  outside the scope of our audit.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: List of Lobbyists and Clients for Sampled Lobbying Disclosure Reports", "paragraphs": ["The random sample of lobbying disclosure reports we selected was  based on unique combination of House ID, lobbyist, and client names  (see table 8)."], "subsections": []}, {"section_title": "Appendix III: List of Sampled Lobbying Contribution Reports with and without Contributions Listed", "paragraphs": ["See table 9 for a list of the lobbyists and lobbying firms from our random  sample of lobbying contribution reports with contributions. See table 10  for a list of the lobbyists and lobbying firms from our random sample of  lobbying contribution reports without contributions."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Clifton G. Douglas Jr. (Assistant  Director), Shirley Jones (Assistant General Counsel) and Ulyana  Panchishin (Analyst-In-Charge) supervised the development of this  report. James Ashley, Ann Czapiewski, Krista Loose, Kathleen Jones,  Amanda Miller, Sharon Miller, Stewart W. Small, and Kayla L. Robinson  made key contributions to this report.", "Assisting with lobbyist file reviews were Justine Augeri, Matthew Bond,  James A. Howard, Jesse Jordan, Sherrice Kerns, Dalton Matthew  Lauderback, Alexandria Palmer, Alan Rozzi, Shane Spencer, Jessica  Walker, Ralanda Winborn, and Kate Wulff."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with New  Disclosure Requirements. GAO-08-1099. Washington, D.C: September  30, 2008.  2008 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-09-487. Washington, D.C: April 1, 2009.  2009 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-10-499. Washington, D.C: April 1, 2010.  2010 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-11-452. Washington, D.C: April 1, 2011.  2011 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-12-492. Washington, D.C: March 30,  2012.  2012 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-13-437. Washington, D.C: April 1, 2013.  2013 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-14-485. Washington, D.C: May 28, 2014.  2014 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-15-310. Washington, D.C.: March 26,  2015.  2015 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-16-320. Washington, D.C.: March 24,  2016.  2016 Lobbying Disclosure: Observations on Lobbyists\u2019 Compliance with  Disclosure Requirements. GAO-17-385. Washington, D.C.: March 31,  2017."], "subsections": []}], "fastfact": ["The Lobbying Disclosure Act requires lobbyists to regularly file reports on their activities, which must be available for public review. GAO audits compliance.", "Lobbyists are required to disclose certain previously held covered positions, such as certain executive agency and congressional staff posts. We estimate 15 percent of the reports may not have properly disclosed this information.", "We reviewed a sample of 98 of the 45,818 quarterly reports filed in the last half of 2016 and first half of 2017 with expenses of $5,000 or more. We then contacted those who filed the reports. Lobbyists amended these forms in 15 cases after we contacted them."]}
{"id": "GAO-18-369", "url": "https://www.gao.gov/products/GAO-18-369", "title": "Summer Meals: Actions Needed to Improve Participation Estimates and Address Program Challenges", "published_date": "2018-05-31T00:00:00", "released_date": "2018-07-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The SFSP, a federal nutrition assistance program, is intended to provide food to children in low-income areas during periods when area schools are closed for vacation. In the last decade, federal expenditures for SFSP have increased as the program has expanded, according to USDA data. GAO was asked to review the SFSP.", "This report examines (1) what is known about SFSP participation, (2) other programs that help feed low-income children over the summer, and (3) challenges, if any, in providing summer meals to children and the extent to which USDA provides assistance to address these challenges. GAO reviewed relevant federal laws, regulations, and guidance; analyzed USDA's SFSP data for fiscal years 2007 through 2016; surveyed state agencies responsible for administering the SFSP in 50 states and the District of Columbia; visited a nongeneralizable group of 3 states and 30 meal sites, selected based on Census data on child poverty rates and urban and rural locations; analyzed meal site data from the 3 states; and interviewed USDA, state and national organization officials, and SFSP providers, including sponsors and site operators."]}, {"section_title": "What GAO Found", "paragraphs": ["Nationwide, the total number of meals served to children in low-income areas through the Summer Food Service Program (SFSP) increased from 113 to 149 million (about 32 percent) from fiscal year 2007 through 2016. The U.S. Department of Agriculture (USDA) directs states to use the number of meals served, along with other data, to estimate the number of children participating in the SFSP. However, participation estimates have been calculated inconsistently from state to state and year to year. In 2017, USDA took steps to improve the consistency of participation estimates, noting they are critical for informing program implementation and strategic planning. However, GAO determined that the method USDA directs states to use will continue to provide unreliable estimates of participation, hindering USDA's ability to use them for these purposes.", "Other federal and nonfederal programs help feed low-income children over the summer to some extent, according to states GAO surveyed and SFSP providers and others GAO interviewed. For example, in July 2016, USDA data indicate about 26 million meals were served through a separate federal program that allows school meal providers to serve summer meals. Some children also received summer meals through nonfederal programs operated by faith-based organizations and foodbanks, though GAO's state survey and interviews with providers and national organizations indicate the reach of such efforts is limited.", "States and SFSP providers reported challenges with meal sites, participation, and program administration; USDA has taken steps to address these areas. Specifically, in GAO's survey, a majority of states reported challenges with availability and awareness of meal sites, as well as limited program participation and administrative capacity. National, state, and local officials have taken steps to address these issues, such as increasing outreach and offering activities to attract participation. In addition, 17 states in GAO's survey and providers in the states GAO visited reported a challenge with ensuring meal sites are in safe locations. To address this safety issue, USDA has granted some states and sponsors flexibility from the requirement that children consume meals on-site. However, USDA has not broadly communicated the circumstances it considers when granting this flexibility. Further, some states and sponsors that have requested this flexibility reported difficulty obtaining data to show these circumstances exist, hampering their ability to ensure safe meal delivery."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that USDA improve estimates of children's participation in SFSP and communicate the circumstances it considers when granting flexibilities to ensure safe meal delivery. USDA generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2016, the U.S. Department of Agriculture (USDA) spent  $478 million to provide more than 150 million meals to children through  the Summer Food Service Program (SFSP). As a federal nutrition  assistance program, the primary purpose of the SFSP is to provide food  service to children in low-income areas during periods when area schools  are closed for vacation. USDA\u2019s Food and Nutrition Service (FNS)  oversees the SFSP, which is administered by the states and operated by  a variety of public and private nonprofit organizations and government  entities that sponsor meals at sites such as schools, camps, parks,  churches, and libraries. In the last decade, federal expenditures have  increased as the program has expanded, according to FNS data. As  Congress considers proposals intended to modify child nutrition  programs, you asked that we examine issues related to the SFSP.  1.  What is known about participation in the Summer Food Service  Program and how it has changed in the last 10 years?  2.  What other programs help feed low-income children over the  summer?  3.  What challenges exist, if any, in providing summer meals to children,  and to what extent does FNS provide assistance to states and  sponsors to address these challenges?", "To address our first objective about participation in the SFSP, we  analyzed FNS\u2019s national data on SFSP meals served for fiscal years  2007 through 2016. For context on these trends, we analyzed, and  compared to the SFSP data, FNS\u2019s data on lunches served through the  National School Lunch Program (NSLP), the largest child nutrition  assistance program, for the same time period. To assess the reliability of  SFSP and NSLP data, we (1) performed electronic testing of relevant  data elements, (2) reviewed existing information about the data and the  system that produced them, and (3) interviewed agency officials  knowledgeable about the data. We determined that these data were  sufficiently reliable to identify the number of meals served in each  program and assess change over time.", "We also reviewed FNS\u2019s method for estimating the number of children  participating in the SFSP using these data and discuss the reliability of  this method in the body of the report. From our three selected states, we  also analyzed site-level data on meals served and days of operation for 2  months during the summer of 2016, including the month with the largest  number of SFSP meals served in each state. We assessed the reliability  of these data by (1) performing electronic testing of relevant data  elements, (2) reviewing existing information about the data and the  system that produced them, and (3) interviewing agency officials  knowledgeable about the data. We determined these data to be  sufficiently reliable for the purposes of this report.", "To obtain information specific to our second objective on other programs  that help feed children in the summer, we also analyzed FNS data on  meals served through the NSLP and School Breakfast Program (SBP) in  July 2016 because FNS used these data to estimate meals served  through the Seamless Summer Option in summer 2016. To assess the  reliability of these data, we (1) performed electronic testing of relevant  data elements, (2) reviewed existing information about the data and the  system that produced them, and (3) interviewed agency officials  knowledgeable about the data. We determined that these data were  sufficiently reliable to describe the number of meals served through the  Seamless Summer Option.", "In addition, we relied on several methods to address all three objectives.  At the federal level, we reviewed relevant federal laws, regulations, and guidance, and interviewed FNS officials in headquarters and its seven  regional offices. We also surveyed the state agencies responsible for  administering the SFSP in the 50 states and District of Columbia. We  administered our web-based survey between August and October 2017  and received a 100 percent response rate. Further, we visited three  selected states\u2014Arizona, Illinois, and Massachusetts\u2014between June  and July 2017. In each state, we interviewed state agency officials  responsible for administering the SFSP, as well as selected SFSP  providers, and we observed SFSP meal service at a total of 30 meal  sites. We selected states and local areas within those states based on a  high proportion of children in poverty, a mix of urban and rural densities, a  mix of sponsor and site types, and diverse locations in the country. We  visited a wide variety of site locations including, but not limited to,  schools, parks, community recreation areas, and libraries. To gather  additional information, we interviewed a broad range of regional and  national organizations involved in the SFSP, such as the Boys and Girls  Club of America, Catholic Charities, and Feeding America. Additional  information on the report\u2019s scope and methodology is included in  appendix I.", "We conducted this work from January 2017 through May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Created in 1968, the SFSP is authorized under the Richard B. Russell  National School Lunch Act and generally provides free meals to children  age 18 and under in low-income areas during certain periods when  school is not in session. Specifically, the SFSP operates during school  summer vacation periods between May through September, vacation  periods in any month for programs operating on a continuous school  calendar, and certain other times for areas affected by an unanticipated  school closure, such as for a natural disaster. However, the majority of  SFSP meals are served to children during the summer months.", "In fiscal years 2007 through 2016, federal expenditures on SFSP  increased, according to FNS data, though there was a slight decrease  between fiscal years 2015 and 2016 (see fig. 1)."], "subsections": [{"section_title": "SFSP Program Administration", "paragraphs": ["The SFSP is administered at the federal level by FNS through its national  and regional offices. FNS is responsible for issuing regulations,  instructions, and guidance; reviewing states\u2019 program management and  administration plans; overseeing program administration; and reimbursing  states for meals served that meet program requirements. At the state  level, the program is administered by state agencies and locally operated  by state-approved sponsors, such as school districts, local government  entities, or private nonprofit organizations. State agencies are  responsible for approving, providing training to, and inspecting and  monitoring sponsors and meal sites. Sponsors, in turn, are responsible for  monitoring their SFSP meal sites, managing the meal service, and  providing training to administrative staff and site operators. A sponsor  may operate one site or multiple sites. Sites are physical locations in the  community where children receive and consume meals in a supervised  setting. According to FNS guidance, sites may be located in a variety of  settings, including schools, parks, community centers, health clinics,  hospitals, apartment complexes, churches, and migrant camps."], "subsections": []}, {"section_title": "SFSP Program Requirements", "paragraphs": ["States may approve different types of SFSP meal sites, including open  sites, closed enrolled sites, and camps. Open sites operate in an area  where at least half of the children are eligible for free or reduced-price  school meals (referred to as \u201carea eligible\u201d), according to data from  entities such as schools or the U.S. Census Bureau. Children are  generally eligible for free or reduced-price school meals if their  households have incomes at or below 185 percent of federal poverty  guidelines. At open sites, meals are made available to all children in the area, and all meals served that meet program requirements are  reimbursable. Closed enrolled sites, on the other hand, are open only to  enrolled children, as opposed to the community at large. At closed  enrolled sites, meals served to all children in attendance are reimbursable  as long as at least half of the enrolled children are eligible for free or  reduced-price school lunch. Unlike other types of sites, camps are  reimbursed only for meals served to children who have been individually  determined to be eligible for free or reduced-price school meals.", "SFSP meals must meet certain requirements in order to be eligible for  federal reimbursement; for example, the meals must be served and  consumed on-site at an approved site. Federal reimbursements for  summer meals are provided for each breakfast, lunch, supper, or snack  served to an eligible child at an eligible site that also meets federal  requirements for menu components, scheduled meal times, and  nutrition. For example, to meet nutritional requirements, a lunch or a  supper must, at a minimum, include four components: 2 ounces of meat  or a comparable serving of a meat alternate, 3/4 cup of fruits and/or  vegetables (at least two kinds), a slice of bread or a comparable serving  of another grain, and a cup of milk. In 2017, the federal reimbursement  rate was $3.83 or $3.77 for each eligible SFSP lunch or supper served,  depending on the type of meal site. Each site may serve up to two  meals or one meal and one snack per day.", "Some flexibilities are available to FNS in implementing the SFSP  program, under its waiver and demonstration authorities. Specifically, the  National School Lunch Act authorizes the Secretary of Agriculture to  waive, upon request of a state or eligible service provider, certain  program requirements established under the National School Lunch Act  or the Child Nutrition Act of 1966, as amended, including some for the  SFSP. In order to grant a waiver request, the Secretary must determine  that the waiver would facilitate the state or service provider\u2019s ability to  carry out the purpose of the program, and that the waiver will not increase  the overall cost of the program to the federal government, among other  things. In the event a waiver request is submitted, the Secretary is  required to act promptly and state in writing whether the waiver request is  granted or denied, and why. The Secretary is also required to periodically  review the performance of waiver recipients, and submit an annual report  to Congress summarizing the use of waivers and their effectiveness,  among other details.", "In addition to this waiver authority, the Secretary is also authorized to  carry out demonstration projects to develop and test methods of providing  access to summer meals for low-income children in urban and rural  areas, to reduce or eliminate the food insecurity and hunger of low-income children and improve their nutritional status. The Secretary is  required to provide for an independent evaluation of the demonstration  projects carried out under this authority, and submit an annual report to  Congress on the status of each project and the results of the  evaluations."], "subsections": []}]}, {"section_title": "Number of SFSP Meals Served Has Generally Increased since 2007, but Estimates of Children Participating in the SFSP Are Unreliable", "paragraphs": [], "subsections": [{"section_title": "Number of SFSP Meals Served Has Increased by 32 Percent since Fiscal Year 2007", "paragraphs": ["The total number of SFSP meals served nationwide during the summer\u2014 one indicator of program participation\u2014increased from 113 million meals  in fiscal year 2007 to 149 million meals in fiscal year 2016, or by 32  percent, according to our analysis of FNS data. The number of SFSP  meals served has generally increased from year to year over this 10-year  period. Most recently, meals decreased by 6 percent from 156 million  meals in summer 2015 to 149 million meals in summer 2016, according to  our analysis of FNS data (see fig. 2). Factors that may have affected  year-to-year fluctuations include changes in funding for summer  programs, sponsor participation, weather, and the number of weekdays  available for sites to serve meals within a given summer, according to  FNS and state agency officials we interviewed. For example, state  agency officials in one of the three selected states we visited said they  believe that reductions in state and local funding for summer programs  that also provide meals, and turnover of sponsors, including losing one of  the state\u2019s largest sponsors in a recent summer, affected the total number  of SFSP meals served in their state in 2016.", "According to our analysis of FNS data, SFSP lunches served in the  summer months increased by over 17 million from fiscal year 2007  through fiscal year 2016, accounting for almost half of the total increase in  the number of SFSP meals served in that period. However, when  comparing across each of the meal types, supper and breakfast had the  largest percentage increases over the 10-year period, 50 and 48 percent,  respectively (see table 1). In comparison, the number of SFSP lunches  served increased by 26 percent from fiscal years 2007 through fiscal year  2016.", "From fiscal year 2007 through fiscal year 2016, there were increases in  the numbers of meals served in both SFSP and NSLP, the largest child  nutrition assistance program. Specifically, SFSP lunches served in July  increased from 32 million to 40 million, or 24 percent, from fiscal year  2007 to 2016, and NSLP lunches served in March increased from 328  million to 376 million meals, or 15 percent, according to our analysis of  FNS data. Although the programs generally serve similar populations,  different factors likely affected the number of meals served by each  program, in part because NSLP serves children in schools during the  school year and SFSP serves children in a variety of settings during the  summer months."], "subsections": []}, {"section_title": "Estimates of Children Participating in SFSP Have Been Calculated Inconsistently and Are Unreliable", "paragraphs": ["Although states report the actual number of SFSP meals served to FNS,  they estimate the number of children participating in SFSP, and  information obtained from our state survey and FNS indicate that these  participation estimates have been calculated inconsistently. FNS  instructs state agencies on how to calculate a statewide estimate of  children\u2019s participation in the SFSP, referred to as average daily  attendance (ADA), using sponsor-reported information on the number of  meals served and days of operation in July of each year. However,  states\u2019 methods for calculating ADA have differed from state to state and  from year to year, according to our review of states\u2019 survey responses  and FNS documents. For example, although FNS directed states to  include the number of meals served in each site\u2019s primary meal service\u2014 which may or may not be lunch\u2014some states, according to our survey  and FNS data, were calculating ADA using only meals served at lunch.  FNS officials told us that these states were therefore not following the  agency\u2019s instructions. Further, some states have changed their methods  for calculating ADA over time\u2014five states reported in our survey that the  method they used to calculate ADA in fiscal year 2016 differed from the  one they used previously.", "While FNS clarified its instructions in May 2017 to help improve the  consistency of states\u2019 ADA calculations moving forward, ADA remains an  unreliable estimate of children\u2019s daily participation in SFSP for at least  two reasons, according to our analysis. (See sidebar for the revised ADA  calculation instructions.) First, ADA is based on summary data that does  not account for existing variation in site days of operation, and second, it  is based on July data, which does not reflect the month with the greatest  number of meals served in every state.", "According to our analysis, ADA is an unreliable estimate of children\u2019s  participation in SFSP because it currently does not account for  existing variation in the number of days that each site serves meals to  children. Specifically, because FNS\u2019s instructions indicate that sites\u2019  ADAs are to be combined to provide a statewide ADA estimate,  differences in the number of days of meal service are disregarded. As  a result, ADA does not reflect the average number of children served  SFSP meals daily throughout the month. Our analysis of site-level  data from one of the selected states illustrates this limitation. In this  state, multiple sites reported an ADA of 60 for July, yet two of those  sites served meals to children on only 1 day of the month and another  site served meals to children on 20 days. Although 120 children  were served SFSP meals only 1 day in July across two of these sites,  the combined ADA across all three sites, which we calculated  following FNS\u2019s instructions, inaccurately suggests an average of 180  children were participating in SFSP at these sites on a daily basis in  July.", "According to our analysis, ADA is also an unreliable estimate of  children\u2019s participation in SFSP because it currently does not account  for state variation in the month with the greatest number of SFSP  meals served, potentially leading to an underestimate. According to  FNS officials, the agency instructs states to calculate ADA for July  because officials identified this as the month with the largest number  of meals served nationwide. However, because of reasons such as  state variations in school calendars, July is not the month with the  largest number of meals served in every state. In one of the selected  states, Arizona, using July to calculate ADA cuts the estimate almost  in half. Specifically, we followed FNS\u2019s instructions and calculated  that Arizona\u2019s ADA was 14,987 in July 2016 compared to 26,772 in  June 2016. Nationwide, in summer 2016, 26 states served more  SFSP meals in June or August than in July, according to our analysis  of FNS data. However, without site level data on meals served and  operating days, the extent to which these states had higher ADAs in  June or August as compared to July is unknown.", "In its May 2017 memo to states revising the ADA calculation instructions,  FNS said that it is critical that the agency\u2019s means of estimating children\u2019s  participation in the SFSP is as accurate as possible because it helps  inform program implementation at the national level and facilitates  strategic planning and outreach to areas with low participation. In  addition, Standards for Internal Control in the Federal Government state  that agencies should maintain quality data and process it into quality  information that is shared with stakeholders to help achieve agency  goals.", "Although FNS has also collected information on other data that states  collect on the SFSP, the agency has not yet used this information to help  improve its estimate of children\u2019s participation in the program. In 2015,  FNS published a Request for Information, asking whether states or  sponsors collect any SFSP data that are not reported to FNS. While  FNS received responses from only 15 states, these responses suggest  that some states collect additional data, such as site-level data that may  allow for an improved estimate of children\u2019s SFSP participation,  potentially addressing the issues we found in our analysis. In response to  the information FNS received, they followed up with up to 9 of the 15  states in 2016 and 2017 to explore the feasibility of collecting additional  data and improving estimates of children\u2019s participation. Although they  took these steps, FNS officials told us they are cognizant of the burden on  states and site operators that would be associated with additional  reporting requirements. At this time, the agency has not taken further  action to improve the estimate, such as addressing the reliability issues  caused by variation in the number of operating days of meal sites and in  the months with the greatest number of meals served by state. As a  result, FNS\u2019s understanding of children\u2019s participation in the SFSP  remains limited, which impairs its ability to both inform program  implementation and facilitate strategic planning and outreach to areas  with low participation."], "subsections": []}]}, {"section_title": "Other Federal and Nonfederal Programs Help Feed Low- Income Children over the Summer to Some Extent", "paragraphs": [], "subsections": [{"section_title": "Other Federal Programs Provide Meals and Nutrition Assistance Benefits over the Summer", "paragraphs": ["Other federal programs that operate solely in the summer, as well as  those operating year-round, help feed low-income children in the summer  months. These programs include the NSLP Seamless Summer Option,  which provides nutrition assistance benefits solely in the summer, and  several federal programs that operate year-round.", "In July 2016, in addition to the 70 million meals provided through the  SFSP, 26 million meals were provided to low-income children through  school food authorities participating in the NSLP\u2019s Seamless Summer  Option, according to FNS data. The Seamless Summer Option was  established in 2004, and according to FNS, streamlines administrative  requirements to encourage school food authorities providing free or  reduced-price meals during the school year under the NSLP and SBP to  continue providing meals to low-income children when school is not in  session. For example, officials from a national organization involved in  summer meals told us the Seamless Summer Option makes it easier for  school food authorities to provide summer meals because they continue  working with the same state agency, reporting the same information to  the state, and operating without having to transition to a separate  program. Nonetheless, school food authorities can choose to provide free  summer meals to children through either the SFSP or Seamless Summer  Option, and the majority of states (34) reported in our survey that a  greater proportion of school food authorities participated in the SFSP than  the Seamless Summer Option in summer 2016. According to FNS and  selected state officials, this may be related to the generally lower meal  reimbursement rates school food authorities participating in the Seamless  Summer Option receive compared to the rates received by those  participating in the SFSP.", "In summer 2016, the Seamless Summer Option added to the geographic  availability of summer meal sites in two of the three states we visited as  part of our review. School food authorities provided summer meals  through the Seamless Summer Option in Arizona and Illinois, but not in  Massachusetts, based on our analysis of data provided by these states.  In Arizona and Illinois, school food authorities participating in the  Seamless Summer Option added 643 and 298 summer meal sites,  respectively, in the month with the largest number of SFSP meals served  in each state (see fig. 3). In addition, some of the Seamless Summer  Option sites in these two states provided meals to children in areas where  there were no SFSP sites. For example, Seamless Summer Option sites  provided meals in areas near the northeastern and southwestern corners  of Arizona that lacked nearby SFSP sites.", "In addition to the SFSP and the Seamless Summer Option, the Summer  Electronic Benefit Transfer for Children (Summer EBT) demonstration  provided nutrition assistance benefits to 209,000 low-income children in  summer 2016 in select areas across 6 states and 2 Indian Tribal  Organizations, according to FNS officials. Since the summer of 2011,  Summer EBT benefits have been provided to eligible households on an  electronic benefits transfer card, which households use to purchase  eligible foods at authorized retailers. Specifically, the demonstration has  provided monthly benefits of $30 or $60 per eligible child to households  with children in areas with a perceived high level of need, based on the  demonstration grantees\u2019 assessments of the percentage of children  eligible for free or reduced-price school meals and the availability of the  SFSP. Consistent with this, three of the states that participated in  Summer EBT in 2016 reported through our survey that these benefits  helped children who were unable to access summer meals through the  SFSP or the Seamless Summer Option. Further, according to an FNS- funded evaluation, Summer EBT improved food security among low- income children who participated in the demonstration. Specifically, the  evaluation found the receipt of these benefits reduced the number of  children in the demonstration experiencing very low food security  between 2011 and 2013 by one-third.", "Some low-income children also receive nutrition assistance in the  summer through federal programs that operate year-round. According to  FNS data, in June 2016, 5.8 million infants and children participated in the  Special Supplemental Nutrition Program for Women, Infants, and  Children (WIC) and 3 million children participated in the Child and Adult  Care Food Program (CACFP). In addition, an average of 19.2 million  children participated each month in the Supplemental Nutrition Assistance  Program (SNAP) in fiscal year 2016, according to FNS data. These  benefits are provided year-round, including when school is in session and  children may also be eligible to receive school meals. In our previous  work on federal domestic food assistance programs, we reported that no  one program alone is intended to meet a household\u2019s full nutritional  needs. At that time, several officials and providers told us that the  variety of food assistance programs offers eligible individuals and  households different types of assistance and can help households fill the  gaps and address the specific needs of individual members. For example,  a mother with two children may rely on SNAP for her household\u2019s basic  groceries, the NSLP to feed a school-age child during the school year,  and WIC to obtain supplemental foods for herself and an infant."], "subsections": []}, {"section_title": "Nonfederal Programs Also Help Feed Low-Income Children in the Summer, but States and Local Organizations Reported That These Have Limited Reach", "paragraphs": ["Some low-income children also receive summer meals through  nonfederal programs, according to our state survey and interviews with  organizations involved in summer meals. Twenty-seven states reported in  our survey that they were aware of other state- or non-state-funded  programs that provided children of low-income households with meals in  their states during the summer months.", "According to our analysis of state survey responses, local faith-based  organizations and foodbanks were the most common types of entities  operating these types of programs. Similarly, officials from FNS and two  regional organizations we interviewed said they were aware of children  receiving summer meals through nonfederal programs operated by faith- based and other community organizations. In addition, SFSP site  operators at 6 of the 30 meal sites we visited in the selected states told us  nearby foodbanks and faith-based organizations may also be providing  children with free meals to some extent. For example, one of the meal  sites we visited was operated by a foodbank that, in addition to the SFSP,  provided food boxes to those in need and distributed food to other local  community organizations to provide to persons in need of immediate  assistance, including families with children.", "Although FNS and the majority of states do not collect data on nonfederal  programs, results from our state survey and interviews with SFSP  providers and organizations involved in summer meals indicate the reach  of nonfederal programs is limited. In our survey, states reported that the  geographic coverage of these nonfederal programs varied by state, with  11 states indicating that they operated in some portions of the state\u2014the  most common state response. In addition, 16 states reported that they were not aware of any nonfederal programs providing summer meals to  children in their state (see fig. 4). Similarly, SFSP site operators at 24 of  the 30 meal sites we visited were unaware of nonfederal programs  providing meals to children in the areas in which they operated. In  addition, officials from several national organizations involved in summer  meals told us children have very few options for receiving summer meals  beyond the federal summer meals programs. Specifically, officials from  one national organization explained that food is often a significant part of  the cost of a summer activity program for children and suggested that is  one reason why organizations choose to participate in the SFSP.", "Although the SFSP provides for federal reimbursement of eligible meals  and certain administrative and operating costs, nonfederal programs that  provide children with summer meals may choose not to participate in the  SFSP for several reasons, according to officials we interviewed from  several organizations involved in summer meals. For example, some  nonfederal program providers may not participate in the SFSP because  they are unaware the program exists. Additionally, some nonfederal  program providers may be aware of the SFSP, but choose not to  participate because they do not want to follow certain program  requirements, such as the nutrition or meal pattern standards. In addition,  some providers may not participate in the program because they do not  think they can handle certain aspects of the administrative workload  associated with the SFSP. For example, a state official we interviewed  told us the administrative workload associated with the SFSP can be  particularly challenging, especially for smaller sponsors. Similarly, officials  from a regional organization involved in summer meals told us one of the  providers they work with who operated 10 meal sites chose to leave the  SFSP because the paperwork required to operate the sites was too  administratively burdensome for their volunteer site operators."], "subsections": []}]}, {"section_title": "States and SFSP Providers Face Challenges with Meal Sites, Participation, and Program Administration, and FNS Actions Have Addressed Some, but Not All Areas", "paragraphs": ["States and SFSP providers reported challenges with meal sites,  participation, and administration, though federal, state, and local entities  have taken steps to improve these areas. Half or more of states reported  in our survey that SFSP issues related to meal site availability, such as in  rural areas, increasing children\u2019s participation, and program  administration were moderately to extremely challenging (see fig. 5).  Overall, 41 states reported facing at least one challenge with the SFSP,  while 9 reported facing none."], "subsections": [{"section_title": "Challenges with the Availability of Meal Sites", "paragraphs": [], "subsections": [{"section_title": "Rural Areas", "paragraphs": ["Availability of transportation, low population density, and limited meal  sites pose challenges for SFSP in rural areas, according to states we  surveyed, selected national organizations, and state and local officials in  the three selected states we visited. More than two-thirds of states in our  survey reported they faced a moderate to extreme challenge with limited  options in rural areas to transport children to summer meal sites (37), as  well as with the distance to summer meal sites in rural areas resulting in  low child turnout that affects the financial viability of site sponsorship (36).  As officials from one national organization explained, it may not be cost- effective for sponsors to operate in remote or rural areas if there are not  enough meal sites or children participating in the program. Similarly, a  sponsor in one of the selected states indicated that there are large parts  of the state where the distances between meal sites are substantial, and  travel between them takes several hours. An official from one of the  selected states said transportation challenges can lead to underserved  rural areas, including Indian reservations. Of the three states we  reviewed, each had rural areas with few or no federally funded meal sites  in summer 2016. However, a majority of the children in some of those  areas were eligible for free or reduced price school meals, according to  Census data provided by FNS, and would therefore be \u201carea eligible\u201d for  the purposes of SFSP. For example, as shown in figure 6, \u201carea eligible\u201d  locations in rural western parts of Arizona did not have any SFSP or  Seamless Summer Option meals sites in June 2016, the month with the  greatest number of summer meals served in that state.", "States and SFSP providers have responded to challenges with meal sites  in rural areas by using other meal delivery approaches\u2014efforts that FNS  has supported through information sharing and grants. For example,  according to one national organization involved in summer meals, some  SFSP providers offer vans or buses to transport children to meal sites or  partner with local bus authorities to give children free rides to meal sites.  Instead of transporting children to sites, other sponsors transport meals to  children through mobile meal delivery, an alternative summer meal model  used in 48 states according to our survey. In this model, sponsors deliver  meals by bus, using a route with state-approved stops in a community,  and children consume the meal at the stop under a supervised setting.  According to FNS officials and representatives from national  organizations, this approach can be particularly helpful for providing  summer meals to children in rural areas. State officials in two selected  states told us they use mobile meal delivery to help fill gaps in meal  service and help children overcome the lack of transportation or  resources in their community. To serve children in very remote areas  with limited resources, a sponsor in one of the selected states reported  piloting a model involving delivering frozen meals every other week to  such areas and supplying equipment, such as freezers and microwaves,  to support meal service. To help sponsors address challenges related to  meal sites in rural areas, FNS has shared information on alternative  delivery models through its SFSP toolkit and webinars and has also  provided related grant funding. For example, in summer 2011 and 2012,  FNS funded the Meal Delivery demonstration project to provide meals to  children in rural areas where low population density, long distances, and  transportation issues made it difficult for children to get to SFSP sites,  making site and sponsor operation financially unsustainable. The  demonstration project funded meals to children in rural areas of  Delaware, Massachusetts, and New York, providing food delivery to  homes or drop-off sites near homes of eligible children."], "subsections": []}, {"section_title": "Area Eligibility", "paragraphs": ["More than half the states (30) in our survey reported they faced a  moderate to extreme challenge reaching low-income children in  communities that are not area eligible. Areas in which fewer than 50  percent of children qualify for free or reduced-price meals during the  school year are not eligible to have open summer meal sites at which all  children who come to the site can receive a free meal. As a result, some  children who are eligible for free and reduced-price meals during the  school year do not have open summer meal sites located in close  proximity to their residences, according to several national organization  officials and SFSP providers. Eligible children in these areas may instead  be limited to other types of SFSP sites, such as closed enrolled summer  meal sites, or nonfederal programs providing meals, if available. For  example, in one of the selected states, a sponsor of SFSP sites funded  meals without federal support at one site that they operated as an open  site in order to serve low-income children residing in low-income housing.  These children did not otherwise have access to a federally funded  summer meals site, according to these officials, because the broader  area was part of a school district that had a greater than 50 percent  proportion of children from higher-income families.", "Recognizing that some children may reside in an area that is not area  eligible but is immediately adjacent to such an area, FNS has allowed  additional flexibility in establishing area eligibility for open meal sites.  Specifically, in 2014 and 2016 policy memos, FNS expanded the ways in  which states and sponsors can use Census data to establish area  eligibility. For example, FNS has allowed states and sponsors to average  Census data across adjacent geographic areas to determine area  eligibility. FNS noted that these additional flexibilities help ensure meal  sites can be located in more areas in which poor economic conditions  exist."], "subsections": []}, {"section_title": "Limited Days of Operation", "paragraphs": ["Nearly all states (50) reported in our survey that the availability of meal  sites throughout the summer months was a factor critical to the success  of the SFSP, yet more than half the states (27) also reported they faced a  moderate to extreme challenge with limited meal site days of operation.  Nineteen of the 40 states that provided information about site days of  operation reported 1 day as the shortest length of operation for SFSP  sites in their state in fiscal year 2016. Limited meal site days of  operation was a significant challenge in one of the three selected states  we visited, as almost one-quarter of sites operated for only 1 to 2 weeks  across a 2-month period in summer 2016, and an additional half of sites  operated for 3 to 4 weeks across that same period, according to our  analysis of state data. In contrast, in the other two selected states, the  majority of sites (64 and 76 percent, respectively) operated for 5 or more  weeks during a 2-month period. SFSP sites may have limited days of  operation for various reasons, such as constraints with program  administration and costs, according to interviews with a national  organization official and a sponsor in one of the selected states.", "Some SFSP providers and national organizations involved in summer  meals have responded to these challenges by working to extend the days  of operation of meal sites\u2014efforts that FNS has supported through  related grant funding. Officials from one meal site located at a school in  one of the selected states told us that 2017 was the first year the site  stayed open an additional 4 weeks after summer school classes ended in  an effort to expand participation, an extension made possible through  support from an experienced sponsor. In addition, officials from a national  organization involved in sponsoring summer meals told us they  encourage their local sites to operate in August\u2014a month where there  are generally fewer summer meal service offerings\u2014to meet children\u2019s  needs. At the federal level, under its demonstration authority, FNS funded  the Extending Length of Operation Incentive project, a grant which  provided an additional 50-cent reimbursement for all lunch meals served  at sites in Arkansas in 2010 that offered meals for 40 or more days."], "subsections": []}]}, {"section_title": "Challenges with Children\u2019s Participation", "paragraphs": [], "subsections": [{"section_title": "Awareness of the SFSP Program and Meal Sites", "paragraphs": ["Two-thirds of states (34) reported through our survey that they also faced  a moderate to extreme challenge with a lack of awareness of summer  meal sites among children and families, a challenge also mentioned by  SFSP providers in the selected states. Meal site operators in one  selected state noted that making families aware that all children may  receive a meal for free at open sites can be a challenge. For example,  one sponsor operating a meal site in a school said the perception among  some is that the meal program is only for children attending summer  school, and not for others in the community. Although that site had  outside banners and advertising to help address that misperception,  another SFSP provider explained that having sufficient funds to market  the SFSP and increase awareness among families is also a challenge.", "To address these challenges, state agencies, some SFSP providers, and  FNS have taken steps to help promote awareness of the SFSP. For  example, nearly all states (47) reported in our survey that they have  increased their outreach efforts for the SFSP in the last 5 years. More  than half of states (36) also reported increases in overall SFSP  participation during that time, which they believe were related to their  outreach efforts. The majority of states in our survey reported conducting  outreach on the SFSP to groups including children, parents and  guardians, and schools, among others, using methods such as flyers,  email, newspapers, and social media (see fig. 7). Further, state agency  officials and sponsors in the selected states reported that they have  developed partnerships with state and local advocacy groups and  community leaders, among others, to promote the SFSP. For example,  one state agency official said they partner with local advocacy  organizations to field calls from parents seeking information about  summer meal sites through their hunger hotline. FNS has promoted the  use of such partnerships, as well as traditional and social media, to raise  awareness of the SFSP. In addition, FNS developed the Summer Meals  Site Finder, an online mapping tool that provides information on summer  meal sites nationwide.", "Attracting children of all ages to SFSP meal sites can also be a challenge,  according to states and SFSP providers. More than half of the states (31)  reported in our survey that they faced a moderate to extreme challenge  with limited youth and teen participation at summer meal sites, and an  official from a national organization involved in the SFSP explained that it  is difficult to attract children to a meal site when the site is focused solely  on food. Similarly, 46 states in our survey reported that providing age- appropriate programming and enrichment activities for children at  summer meal sites is a factor critical to the success of the SFSP.  However, some meal sites may lack the resources to add activities,  according to some SFSP providers in the selected states as well as FNS  and national organization officials. Attracting teens can be particularly  challenging, in part because of meal service time periods, a lack of age- appropriate activities, and stigma, according to national organizations and  providers we interviewed. For example, early morning meal sites  generally attract younger kids as teens may be apt to sleep later in the  summer, and teens may also perceive a stigma in participating in a free  meal program and may face peer pressure not to eat. In addition, meal  offerings at SFSP sites may also present challenges to teen participation.  Specifically, because FNS bases minimum portion size requirements for  meals on the needs of younger children, meals are not always adequate  to meet the nutritional needs of teens, according to one sponsor we  interviewed. Across the 30 meal sites in the 3 states we visited in  summer 2016, we observed variety in the meals served during different  meal services. (see fig. 8.)", "States and SFSP providers have collaborated with others and sought  specific types of sites to help provide enrichment activities and attract  certain age groups\u2014efforts that FNS has supported through information  sharing and related grant funding. Sponsors in the selected states said  they have focused on partnerships with groups such as those focused on  youth development, churches, libraries, and police or fire departments, to  offer age-appropriate activities for children (see fig. 9). For example,  programs with local police departments, such as Cops N Kids in one  selected state, or libraries in two selected states, provided meal services  in combination with youth development or other enrichment activities.  (See sidebar for highlights on the Cops N Kids program.) One national  organization official said activities at SFSP sites can help take away the  stigma around the program because children are not just there for the  meal. Efforts to rebrand the SFSP as a community event where entire  families can participate at the meal site also can have this effect, which is  why some sponsors in the selected states said they partnered with  foodbanks to donate meals for adults. In addition, a sponsor in one  selected state told us they adjusted their meal offerings to match the  needs of children of different age groups, for example, by serving meals  to younger children earlier in the day and meals to teens later in the  day. To support participation from children of all ages, FNS has shared  information on age-appropriate activities through its SFSP toolkit and  provided related grant funding. For example, in 2010, FNS funded the  Activity Incentive demonstration project, in which sponsors in Mississippi  were provided with mini-grants to increase enrichment and recreational  activities, such as education, tutoring, sports and games, arts and other  activities, to draw children to meal sites.", "More than half the states reported in our survey that they faced a  moderate to extreme challenge with limited state agency staffing (27), a  limited amount of federal funding for SFSP administration (27), as well as  ensuring sponsor participation to meet needs (28). In addition, 28 states  reported in our survey that they faced a moderate to extreme challenge  with sponsors not following program requirements. Limited staffing can  affect a state agency\u2019s ability to conduct efforts aimed at increasing  participation, identifying potential sponsors, and reviewing and monitoring  sponsors, according to national organization and state officials we  interviewed. For example, increases in sponsors and sites requires  additional staff and time to conduct pre-approval visits, sponsor and site  reviews, vendor reviews, and technical assistance visits, which directly  affects the amount of funding needed to support staff salaries and travel  reimbursement, according to one state in our survey. However, because  the SFSP administrative funds FNS provides to states are based on the  number of meals served in the previous year, increasing the number of  staff to help increase SFSP participation is difficult, according  to a national organization official we interviewed. States reported a  moderate to extreme challenge with the following issues related to  ensuring sponsor participation: a lack of sponsors to meet summer meal  needs, a lack of awareness of the summer meal program among potential  sponsors or sites, completing federal requirements for monitoring of  SFSP sponsors, and identifying potential sponsors.", "State agencies responsible for administering the SFSP reported relying  on other resources and partners to help with program administration\u2014 strategies that FNS has supported through information sharing and its  online tools. As discussed earlier, all three selected state agencies we  interviewed told us they partner with advocacy groups to help expand and  conduct outreach on the SFSP. Additionally, more than half the states in  our survey reported several factors\u2014which may ease the administrative  burden on states\u2014as critical to the success of the SFSP, including  partnerships with SFSP sponsors (49) and retaining sponsors and sites  over multiple summers (51). To support states\u2019 use of alternative funding  sources to help administer the SFSP, FNS has shared information on  federal, state, and private funding and grant opportunities. FNS also  developed the online Capacity Builder tool, which 35 states reported in  our survey was moderately to extremely useful in identifying or confirming  meal site eligibility in fiscal year 2017."], "subsections": []}]}, {"section_title": "States and SFSP Providers Also Reported Challenges with Meal Site Safety and Duplicative Paperwork, and FNS\u2019s Efforts to Address These Areas Are Limited", "paragraphs": ["Seventeen states reported in our survey that ensuring summer meal sites  are in safe locations was moderately to very challenging, a challenge that  some states and SFSP providers have taken steps to help address.  State officials and SFSP providers in the selected states reported that  when crime has occurred near a site, there are concerns about ensuring  children\u2019s safety while they are consuming meals at the site, as well as  the safety of site staff delivering meals. Some sponsors noted, in  particular, parents\u2019 concerns for the safety of their children at meal sites in  light of criminal activities in the surrounding area. To ensure children  continue to have access to meals, some sponsors noted that in the event  of an immediate threat at an outdoor meal site, site staff are sometimes  able to bring children to a nearby indoor space instead. States and SFSP  provider officials in two selected states told us they have also used other  strategies, including partnerships with local law enforcement agencies, to  help address safety concerns during the meal service and ensure children  have access to meals. For example, national organizations involved in  summer meals and sponsor officials in the selected states said they  encourage partnerships with local police departments to use police  escorts at meal sites or to follow mobile meal routes in situations where  safety at the meal site is a concern. When violence or crime has occurred  near a site, some states and SFSP sponsors have also sought flexibility  from FNS with respect to the federal requirement that children consume  summer meals on site, according to state and local officials.", "FNS has used its available authorities to grant some states and sponsors  flexibility with respect to the requirement that children consume summer  meals on site, such as when safety at the site is a concern; however, FNS  has not clearly communicated to all states and sponsors the  circumstances it considers when deciding whether to grant this  flexibility. According to our review of letters FNS sent to multiple states  approving their requests for this type of flexibility, the agency identified a  consistent set of circumstances that needed to be met for it to grant this  flexibility. These circumstances were described in the letters the agency  sent to states and generally included verification that violent crime  activities occurred within both a 6-block radius of the meal site and 72  hours prior to the meal service. FNS\u2019s letters to states indicate that  when documentation was provided to the agency showing that these  circumstances existed at a summer meals site on a particular day or  days, meals consumed by children off site on those days were eligible for  federal reimbursement. Although FNS has issued guidance on the  general processes for requesting flexibility from program requirements  under its waiver and demonstration authorities, these guidance  documents do not detail the specific circumstances that the agency  considers when deciding whether to grant flexibility from the on-site  requirement due to safety concerns. FNS has communicated this  information only in its responses to specific state and sponsor requests,  and it has not communicated these circumstances more broadly to all  states and sponsors. FNS officials explained that they review state and  sponsor requests for flexibility due to safety concerns on a case-by-case  basis. However, they also acknowledged that the set of circumstances  used for approval of state and sponsor requests for flexibility, which we  identified in their letters to states, has been used repeatedly.", "Further, states and sponsors reported challenges obtaining the specific  data needed for approval of a site for this type of flexibility, hampering  some providers\u2019 efforts to ensure safe delivery of meals. For example,  state agency and sponsor officials in one selected state said obtaining the  crime data needed to qualify for the flexibility can be an administrative  burden on sponsors, and these data are not consistently available in a  timely manner. According to state agency and sponsor officials in one of  the selected states, daily crime statistics are not available in all areas,  and while a sponsor can sometimes access current data on crime in a  city, the most recent available data on crime in suburban areas are  sometimes one year old. FNS is aware of state and local challenges  obtaining the necessary crime data, according to our discussions with  FNS officials. FNS officials acknowledged that while they have granted  some state and sponsor requests to allow children to consume meals off  site in certain areas where violence or crime has occurred, some  sponsors were unable to implement the flexibility because they could not  obtain the necessary crime data.", "To help achieve agency objectives and address related risks, the  Standards for Internal Control in the Federal Government state that  agencies should communicate key information to their internal and  external stakeholders. Although FNS officials told us they do not have  one set of circumstances under which they approve these requests, our  review found only one set of circumstances under which this type of  flexibility has been approved. However, FNS has not broadly  communicated the circumstances it considers in deciding whether to  approve requests for flexibility with respect to the requirement that  children consume summer meals on site in areas with violence or crime.  Unless FNS shares this information with all states and sponsors, states  and sponsors will likely continue to be challenged to use this flexibility,  hindering its usefulness in ensuring safe summer meal delivery to  children.", "In addition, FNS has issued reports to Congress evaluating some of its  demonstration projects, as required under its statutory authorities, but the  agency has not issued any such reports to Congress specifically on the  use of flexibilities with respect to the on-site requirement in areas where  safety is a concern. As previously discussed, the agency is required to  annually submit certain reports to Congress regarding the use of waivers  and evaluations of projects carried out under its demonstration  authority. Furthermore, Standards for Internal Control in the Federal  Government state that management should use quality information to  make informed decisions and evaluate the entity\u2019s performance in  achieving key objectives and addressing risks. Yet, FNS has not  evaluated nor reported on the use of waivers and demonstration projects  in cases where safety was a concern. Although FNS requests reports  from state agencies or sponsors that have received flexibility with summer  meals delivery under FNS\u2019s demonstration and waiver authorities, FNS  officials told us they have not assessed whether their use of these  flexibilities to address safety issues has been effective in ensuring safe  meal delivery. FNS officials told us that they have not evaluated or  reported on these flexibilities, in part, because they have limited  information on their outcomes. Without understanding the impact of its  use of these flexibilities, neither FNS nor Congress knows whether these  flexibilities are helping provide meals to children.", "In addition to the challenges with safety at meal sites, sponsors also  sometimes face administrative challenges when participating in multiple  child nutrition programs that are operated by different state agencies or  divisions within the same agency, according to officials from national and  regional organizations and sponsors we interviewed. For example,  officials from national organizations involved in summer meals told us the  management of each child nutrition program and processes related to  applications, funding, and oversight are fragmented in many states. For  example, a sponsor in one of the selected states told us aspects of the  SFSP and CACFP sponsor applications are highly duplicative and  estimated it took 42 hours last year to complete duplicative paperwork.  Another sponsor that provides school meals during the school year told  us they had to fill out 60 additional pages of paperwork to provide  summer meals, which coupled with having a state contact for the SFSP  that was different from the one they worked with for the NSLP, was a  significant burden for them. Officials from one national organization told  us a lack of interoperability of some state agencies\u2019 data systems has  caused challenges and administrative burden for some sponsors. For  example, in some states, different agencies oversee child nutrition  programs, yet are unable to share data on sponsor approval, and  therefore, sponsors are required to submit similar information to both,  according to these officials. Duplicative paperwork can be particularly  burdensome for some SFSP providers, as national organization officials  and SFSP providers in the selected states said completing SFSP  application paperwork can be especially challenging when a sponsor has  staff shortages or no dedicated SFSP staff.", "Some selected states have worked with SFSP sponsors to help minimize  the administrative burden. For example, state agency officials from one of  the selected states said they have connected less-experienced sponsors  to more-experienced sponsors in the community to help them with  program administration. In one case, an experienced SFSP sponsor  partnered with a small sponsor new to the program to help with SFSP  administration, including helping them understand program rules and  paperwork requirements. One SFSP sponsor also noted that their state  agency took additional steps to ease administrative burden, such as  making the forms for the CACFP more consistent with those for the SFSP  and streamlining certain requirements for large and experienced  sponsors, which the sponsor found helpful.", "At the federal level, FNS has established program and policy  simplifications to help lessen the administrative burden on sponsors  participating in multiple child nutrition programs, though the persistence of  these challenges indicate that information about these simplifications has  not reached all relevant state agencies. While FNS officials told us that  some of the duplicative requirements may be a function of differences in  statute, FNS provided guidance to states in 2011 and 2014 on simplified  application procedures for institutions participating in CACFP that also  wish to apply for SFSP. FNS noted in its guidance that in states where  CACFP and SFSP are administered by different state agencies, state  agencies are encouraged to work together to share information and  streamline the application and agreement process as much as possible.  FNS also addressed these simplifications in a state agency meeting in  November 2017. Additionally, FNS provided guidance to states in 2012  on simplified application and review procedures for school food  authorities participating in the NSLP that wish to also participate in the  SFSP. Although FNS has shared this information with states in an  attempt to make them aware of streamlining options, FNS officials noted  that some states may choose not to implement them.", "Standards for Internal Control in the Federal Government state that  management should externally communicate the necessary quality  information to achieve the entity\u2019s objectives, as well as periodically  evaluate the methods of communication to ensure communication is  effective and appropriate. FNS\u2019s existing guidance addresses options  for streamlining administrative requirements for sponsors participating in  multiple child nutrition programs. However, information on program and  policy simplifications available for sponsors participating in both NSLP  and SFSP has not been shared with states recently, and challenges in  this area persist, indicating this information has not reached all relevant  state agencies. Without further efforts from FNS to disseminate  information on current options for streamlining administrative  requirements across child nutrition programs, overlapping and duplicative  administrative requirements may limit children\u2019s access to meals by  discouraging sponsor participation in child nutrition programs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The purpose of the SFSP is to continue to provide children in low-income  areas with nutritious meals over the summer when school is no longer in  session, and to that end, the program provided 149 million SFSP meals to  children in fiscal year 2016. Although meals served are one indicator of  participation, FNS\u2019s current estimates of children participating in SFSP  are unreliable. Without additional understanding of children\u2019s participation  in the SFSP, FNS lacks information critical for informing program  implementation, strategic planning, and outreach.", "The majority of states nationwide and SFSP providers in the three states  we visited reported experiencing a number of challenges with the SFSP,  and FNS has taken important steps to address these challenges. Two key  challenges identified by officials in the selected states and national  organizations we interviewed are ensuring summer meal sites are in safe  locations, and meeting administrative requirements when participating in  multiple child nutrition programs. FNS has taken steps to address these  challenges by providing flexibilities in how meals are delivered to children  and streamlining options for those providers participating in more than  one child nutrition program. However, a lack of clarity concerning the  circumstances under which FNS grants flexibilities in areas of violence  and crime, and a lack of information on its use of these flexibilities and  their impact on program administration, hinder efforts to ensure program  goals are met. Furthermore, absent a reminder to states regarding  existing options for streamlining administration across multiple nutrition  programs, some providers may continue to be discouraged from  participating in these programs due to duplicative and burdensome  administrative requirements, which may ultimately limit the provision of  nutritious meals to children."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to FNS:  The Administrator of FNS should improve its estimate of children\u2019s  participation in the SFSP by focusing on addressing, at a minimum, data  reliability issues caused by variations in the number of operating days of  meal sites and in the months in which states see the greatest number of  meals served. (Recommendation 1)", "The Administrator of FNS should communicate to all SFSP stakeholders  the circumstances it considers in approving requests for flexibility with  respect to the requirement that children consume SFSP meals on-site in  areas that have experienced crime and violence, taking into account the  feasibility of accessing data needed for approval, to ensure safe delivery  of meals to children. (Recommendation 2)", "The Administrator of FNS should evaluate and annually report to  Congress, as required by statute, on its use of waivers and demonstration  projects to grant states and sponsors flexibility with respect to the  requirement that children consume SFSP meals on-site in areas  experiencing crime or violence, to improve its understanding of the use  and impact of granting these flexibilities on meeting program goals.  (Recommendation 3)", "The Administrator of FNS should disseminate information about existing  flexibilities available to state agencies to streamline administrative  requirements for sponsors participating in the SFSP and other child  nutrition programs to help lessen the administrative burden. For example,  FNS could re-distribute existing guidance to state agencies that explains  available flexibilities and encourage information sharing.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretary of the USDA for review  and comment. FNS officials provided technical comments, which we  incorporated as appropriate. In addition, in oral comments, FNS officials,  including the Deputy Administrator for Child Nutrition Programs, generally  agreed with the recommendations in the report.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  USDA and interested congressional committees. The report will also be  available at no charge on the GAO website at www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This appendix discusses in detail our methodology for addressing three  research objectives: (1) What is known about participation in the Summer  Food Service Program (SFSP) and how has it changed in the last 10  years? (2) What other programs help feed low-income children over the  summer? and (3) What challenges exist, if any, in providing summer  meals to children, and to what extent does the U.S. Department of  Agriculture\u2019s (USDA) Food and Nutrition Service (FNS) provide  assistance to states and sponsors to address these challenges? In  addition to the methods we discuss below, to address all three research  objectives, we reviewed relevant federal laws, regulations, and guidance;  interviewed FNS officials in its headquarters and seven regional offices;  and interviewed a broad range of regional and nationwide organizations  involved in the SFSP. In addition, we coordinated with officials in USDA\u2019s  Office of Inspector General on their ongoing work in this area."], "subsections": [{"section_title": "Summer and School Meals Data", "paragraphs": ["To address our first objective about participation in the SFSP, we  analyzed FNS data on meals served for fiscal years 2007 through 2016.  Specifically, we analyzed the total number of meals served nationwide  through the SFSP from fiscal year 2007 through fiscal year 2016. Each  month, states report to FNS the number of meals served by meal type  (breakfast, lunch, snack, and supper) and the number of meals served by  meal and sponsor type (e.g., government, nonprofit, etc.) using the FNS- 418 form. To add context on these trends, we also analyzed and  compared the number of SFSP lunches served in July with the number of  free and reduced-price lunches served to children in March through the  National School Lunch Program (NSLP), the largest child nutrition  assistance program, from fiscal year 2007 through fiscal year 2016.  Each month, states report to FNS the number of meals served through  the NSLP using the FNS-10 form. To assess the reliability of SFSP and  NSLP data, we (1) performed electronic testing of relevant data elements,  (2) reviewed existing information about the data and the system that  produced them, and (3) interviewed agency officials knowledgeable about  the data. Electronic testing included, but was not limited to, checks for  missing data elements, duplicative records, and values outside a  designated range or valid time period. We determined that these data  were sufficiently reliable to identify the number of SFSP meals served and  assess change over time.", "To further examine what is known about participation in the SFSP, we  also reviewed FNS\u2019s data on estimates of children\u2019s participation in the  program and determined that these estimates have been calculated  inconsistently and are unreliable. To assess the reliability of these data,  we reviewed documentation about the estimates, interviewed FNS  officials, and asked states about the estimate calculation in our survey. As  described in our findings, FNS does not collect data on the number of  children participating in the SFSP. Instead, FNS relies on states\u2019  estimates of children\u2019s participation, which are based on other data  reported by sponsors, such as the number of meals served and meal  service days in July.", "To address our second objective about other programs that help feed  children in the summer, we reviewed FNS\u2019s estimate of the number of  meals served through the NSLP\u2019s Seamless Summer Option in fiscal year  2016. FNS does not collect data on the number of meals served through  the Seamless Summer Option. Instead, FNS annually estimates the  number of Seamless Summer Option meals served nationally by  aggregating the number of free and reduced-price breakfasts, lunches,  and snacks served through the School Breakfast Program (SBP) and  NSLP in July. As previously noted, states report these data monthly to  FNS. Although FNS does not know the actual number of meals served  through the Seamless Summer Option, agency officials told us they  believe the number of summer meals provided through the NSLP is small  relative to the number of meals served through the Seamless Summer  Option during the summer months. They noted that their use of July  NSLP data to estimate the Seamless Summer Option meals likely  overestimates the number of these meals for July and underestimates the  number of these meals for the entire summer. To assess the reliability of  the July NSLP data, we (1) performed electronic testing of relevant data  elements, (2) reviewed existing information about the data and the  system that produced them, and (3) interviewed agency officials  knowledgeable about the data. Electronic testing included, but was not  limited to, checking for missing data and data that fell outside of a  reasonable range or date for the specific time period (July). We  determined that these data were sufficiently reliable to describe the  number of meals served.", "In addition to the data FNS requires states to report, some states collect  summer meals data at the meal site level and we used such data from the  three selected states to address all three objectives. For objective one, to  examine the number of meals served and days of operation at each  summer meals site, we analyzed site-level data for 2 months from  summer 2016, including the month with the largest number of SFSP  meals served in each selected state: Arizona (June and July 2016),  Illinois (July and August 2016), and Massachusetts (July and August  2016). Each state also provided us with data on the number and types of  meals served at each SFSP site, the site location, and the duration of  time each site operated over the summer. Using the data provided by the  states, we calculated the average daily attendance (ADA) for each meal  site based on FNS\u2019s instructions and examined the variation in ADA  across sites and months. For our second objective on other programs,  these selected states provided similar site level data for the state\u2019s  Seamless Summer Option sites, if applicable. We assessed the reliability  of these data by (1) performing electronic testing of relevant data  elements, (2) reviewing existing information about the data and the  system that produced them, and (3) interviewing agency officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for the purposes of this report.", "For both our second objective on other programs and third objective  about challenges in providing summer meals to children, we also  examined meal site availability in the three selected states by mapping  the locations of meal sites. On the maps, we included fiscal year 2016  area eligibility data from FNS\u2019s Capacity Builder mapping tool, as  provided by FNS. The site area eligibility data from FNS\u2019s Capacity  Builder is based on the U.S. Census Bureau\u2019s 5-Year American  Community Survey (ACS) estimates of children ages 0-12 and 0-18  eligible for free and reduced-price meals by Census block group and  tract. According to FNS officials, FNS obtains 5-Year ACS estimates  annually from the U.S. Census Bureau and updates its site area eligibility  in the Capacity Builder accordingly. For fiscal year 2016, FNS used 2009- 2013 ACS data to identify and include site area eligibility in its Capacity  Builder."], "subsections": []}, {"section_title": "Survey", "paragraphs": ["To help inform all of our research objectives, we conducted a survey of  the state agencies that oversee the SFSP in the 50 states and the District  of Columbia. We administered our web-based survey between August  and October 2017 and received 100 percent response rate. The survey  included questions about participation in the SFSP, factors critical to the  overall success of the SFSP, outreach efforts, federal technical  assistance, barriers and challenges in providing summer meals,  alternative summer feeding models, the NSLP\u2019s Seamless Summer  Option and the federal Summer Electronic Benefit Transfer for Children  demonstration, and nonfederal programs that provide children of low- income households with meals during the summer months. The survey  also requested data on SFSP sites participating in the program in fiscal  year 2016 and the method state agencies used to calculate ADA in SFSP  on the FNS-418 form in fiscal year 2016.", "Because this was not a sample survey, there are no sampling errors.  However, the practical difficulties of conducting any survey may introduce  nonsampling errors, such as variations in how respondents interpret  questions and their willingness to offer accurate responses. We took  steps to minimize nonsampling errors, including pretesting draft  instruments and using a web-based administration system. Specifically,  during survey development, we pretested draft instruments with SFSP  staff from four states (Michigan, New Mexico, North Carolina, and South  Dakota) in May 2017. We selected the pretest states based on  information provided by officials from FNS\u2019s regional offices and national  organizations involved in summer meals about state administration of  summer meals programs, with the goal of selecting a group of states with  varied experiences. In the pretests, we were generally interested in the  clarity, precision, and objectivity of the questions, as well as the flow and  layout of the survey. For example, we wanted to ensure definitions used  in the surveys were clear and known to the respondents, categories  provided in close-ended questions were complete and exclusive, and the  ordering of survey sections and the questions within each section were  appropriate. We revised the final survey based on pretest results. Another  step we took to minimize nonsampling errors was using a web-based  survey. Allowing respondents to enter their responses directly into an  electronic instrument created a record for each respondent in a data file  and eliminated the need for and the errors associated with a manual data  entry process. We did not fully validate specific information that states  reported through our survey."], "subsections": []}, {"section_title": "Site Visits", "paragraphs": ["To help inform all of our objectives and gather information about the  SFSP directly at the local-level, we conducted 30 site visits in three  states: Arizona (12 sites), Illinois (8 sites), and Massachusetts (10 sites)  between June and July 2017, and interviewed organizations involved with  the SFSP in each site visit state. We used U.S. Census Bureau data to  select states and local areas within those states based on a high  proportion of children in poverty, a mix of urban and rural locations, as  well as a mix of sponsor and site type and diverse locations. We visited a  wide variety of site locations including, but not limited to, schools, parks,  community recreation areas, and libraries.", "At each SFSP site, we gathered information on local level factors related  to SFSP participation and administration by interviewing the organization  sponsoring the site, the site operators and staff, and those participating at  the site using semi-structured questions. While interviewing SFSP  sponsor organizations, we collected information on the sponsors\u2019 roles in  the SFSP, characteristics of the sites the organizations sponsored,  outreach efforts, any challenges or barriers to SFSP administration and  any efforts to address such challenges, relationships with the state  agencies that administer the SFSP, relationships with FNS (national and  regional offices), and the availability of nonfederally funded programs that  provide meals to low-income children over the summer. During the  interviews with site operators and staff, we collected information about  site operation (e.g., site operating days, meals offered, etc.), any  challenges to providing SFSP meals to children and any efforts to  address such challenges, outreach efforts, and the proximity of the next  closest meal site. The information we collected from those participating at  the sites included their perspectives on the SFSP food, site food  consumption habits, ease of travel to the site, and access to other SFSP  sites. At each site, we made observations as to how the food was  provided to the children, food consumption and waste, the approximate  age range of the children being served, and availability of programs or  activities (e.g., recreational sports).", "Using semi-structured questions, we also interviewed the state agencies  responsible for administering the SFSP in the site visit states to gather  further information on how the SFSP is administered in each state,  statewide participation in the program, related data collection activities,  any challenges to administering the program and any efforts to address  such challenges, related outreach efforts, alternative meal delivery  models being employed by SFSP sponsors, FNS guidance or technical  assistance, and the availability of nonfederally funded programs that  provide meals to low-income children over the summer."], "subsections": []}]}, {"section_title": "Appendix II: Select Questions and Responses from GAO\u2019s Summer Food Service Program (SFSP) Survey", "paragraphs": [], "subsections": [{"section_title": "Prompt", "paragraphs": ["For states that indicated there were other challenge(s), we provided an open-ended question that  requested a description of the challenge(s) and 14 states provided descriptions of other challenges,  not shown here."], "subsections": []}, {"section_title": "Prompt", "paragraphs": [], "subsections": []}, {"section_title": "Prompt", "paragraphs": ["For states that indicated there were other challenge(s), we provided an open-ended question that  requested a description of the challenge(s) and 8 states provided descriptions of other challenges,  not shown here."], "subsections": []}]}, {"section_title": "Appendix III: Area Eligibility and Summer Meal Sites in Selected States", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rachel Frisk (Assistant Director),  Claudine Pauselli (Analyst-in-Charge), Melissa Jaynes, and Matthew  Nattinger made key contributions to this report. Also contributing to this  report were Susan Aschoff, Sarah Cornetto, Ying Long, Jean McSween,  Mimi Nguyen, Almeta Spencer, and Ashanta Williams."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-561", "url": "https://www.gao.gov/products/GAO-18-561", "title": "Columbia River Basin: Additional Federal Actions Would Benefit Restoration Efforts", "published_date": "2018-08-24T00:00:00", "released_date": "2018-08-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Basin is one of the nation's largest watersheds and extends mainly through four Western states and into Canada. Activities such as power generation and agricultural practices have impaired water quality in some areas, so that human health is at risk and certain species, such as salmon, are threatened or extinct. In December 2016, Congress amended the Clean Water Act by adding Section 123, which requires EPA and OMB to take actions related to restoration efforts in the Basin.", "GAO was asked to review restoration efforts in the Basin. This report examines (1) efforts to improve water quality in the Basin from fiscal years 2010 through 2016; (2) approaches to collaboration that entities have used for selected efforts; (3) sources of funding and federal funding expenditures; and (4) the extent to which EPA and OMB have implemented Clean Water Act Section 123. GAO reviewed documentation, including laws, policies, and budget information; surveyed federal, state, tribal, and nongovernmental entities that GAO determined had participated in restoration efforts; and conducted interviews with officials from most of these entities."]}, {"section_title": "What GAO Found", "paragraphs": ["Various entities, including federal and state agencies and tribes, implemented restoration efforts to improve water quality in the Columbia River Basin from fiscal years 2010 through 2016, according to GAO survey results. Entities implemented a range of restoration efforts. Efforts included activities to improve surface water quality and restore and protect habitat. For example, the Kootenai Tribe of Idaho implemented projects on the Kootenai River to restore and maintain conditions that support all life stages of native fish.", "Entities used various collaborative approaches . Entities' approaches to collaboration for selected water quality-related efforts in the Basin varied. For example, the Environmental Protection Agency (EPA) sought various entities' voluntary involvement to coordinate toxics reduction efforts in the Basin.", "Total federal expenditures could not be determined . Entities reported using a mix of federal and nonfederal funding sources for restoration efforts in the Basin, but total federal expenditures could not be determined, in part because there is no federal funding dedicated to restoring the Basin.", "EPA and Office of Management and Budget ( OMB) have not yet implemented Section 123. According to EPA officials, the agency has not yet taken steps to establish the Columbia River Basin Restoration Program, as required by the Clean Water Act Section 123. EPA officials told GAO they have not received dedicated funding appropriated for this purpose; however, EPA has not yet requested funding to implement the program or identified needed resources. By developing a program management plan that identifies actions and resources needed, EPA would have more reasonable assurance that it can establish the program in a timely manner. Also, an interagency crosscut budget has not been submitted. According to OMB officials, they have had internal conversations on the approach to develop the budget but have not requested information from agencies. A crosscut budget would help ensure Congress is better informed as it considers funding for Basin restoration efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that EPA develop a program management plan for implementing the Columbia River Basin Restoration Program and that OMB compile and submit an interagency crosscut budget. EPA agreed with its recommendation. OMB did not comment, and GAO maintains its recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Columbia River Basin (Basin) is one of North America\u2019s largest  watersheds, covering approximately 259,000 square miles, of which  about 219,400 are in the United States and 39,500 in Canada. The Basin  extends predominantly through the states of Idaho, Montana, Oregon,  and Washington and into the Canadian province of British Columbia; it  encompasses mountains, forests, rivers and tributaries, rangeland, and  Pacific Ocean coastline. The Basin has environmental, cultural, and  economic significance, and its health is critical to the survival of hundreds  of fish and wildlife species and to the well-being and livelihoods of the  approximately 8 million people who inhabit and work in the Basin.", "Historically, the Basin has constituted the largest salmon-producing river  system in the world, with potentially up to 16 million salmon returning to  the Basin each year for spawning purposes. The Basin is also integral to  the region\u2019s shipping network, with ports lining the Columbia River and its  tributaries as far upstream as Lewiston, Idaho, the furthest inland seaport  in the western United States. However, hydroelectric power generation,  agricultural practices, and other human activities have impaired water  quality in some areas of the Basin to the point where historic salmon and  steelhead stocks and human health are at risk. Many Columbia River  tributaries, as well as the Columbia River mainstem and its estuary, have  been deemed \u2018impaired\u2019 under Section 303(d) of the Clean Water Act.", "Historically, restoration and monitoring efforts in the Basin have focused  predominantly on recovering fish species\u2014such as salmon\u2014listed as  threatened or endangered under the Endangered Species Act. For  example, restoration efforts have included protecting riverside land  through acquisitions and conservation easements and adding material to  stream beds to create fish spawning and rearing habitat. Over time, these  efforts have increased in scope to include a focus on water quality-related  concerns\u2014such as reducing river and stream temperatures\u2014because  impairments to water quality negatively affect fish populations, among  other species.", "More recently, public and scientific concern about the Basin has  broadened to include a focus on improving water quality by reducing the  presence of toxic contaminants\u2014including mercury and the banned  manufacturing chemical polychlorinated biphenyls (PCB)\u2014and  contaminants of emerging concern found in the Basin\u2019s fish, wildlife,  water, and sediment. Further, certain entities are increasingly  recognizing that their investments to restore and maintain fish and wildlife  habitat may not be fully realized if the water in those habitats remains  contaminated.", "In 1987, Congress amended the Clean Water Act to establish the  National Estuary Program to, among other things, identify nationally  significant estuaries that are threatened by pollution, development, or  overuse, and promote comprehensive management to restore them.  Since then, the U.S. Environmental Protection Agency (EPA) has  designated 28 estuaries of national significance, including the lower  Columbia River and its related tributaries. In addition, in 2006, EPA  recognized the Columbia River Basin as one of the 10 key \u201clarge aquatic  ecosystems\u201d in the nation.", "Multiple entities are involved with water quality-related restoration efforts  in the Basin, including federal agencies\u2014such as the Bonneville Power  Administration (BPA), EPA, the National Oceanic and Atmospheric  Administration\u2019s (NOAA) National Marine Fisheries Service (NMFS), the  U.S. Army Corps of Engineers, and the U.S. Forest Service\u2014states,  tribes, and nongovernmental entities. These entities may engage in  restoration efforts based on their specific mission or, for example,  requirements under federal laws such as the Clean Water Act and the  Endangered Species Act. They may also collaborate with other entities in  their efforts to restore various aspects of the Basin. For example, in 1995,  the Lower Columbia Estuary Partnership was established under the  National Estuary Program to better coordinate restoration efforts  throughout the estuary of the Basin (approximately 7 percent of the  Basin\u2019s overall area). In 2005, EPA established the Columbia River  Toxics Reduction Working Group to coordinate toxics reduction work and  share information among federal, state, tribal, local, and nongovernmental  entities throughout the Basin that are engaged in such efforts. In 2016,  Congress amended the Clean Water Act by adding Section 123, which  requires EPA to establish a Columbia River Basin Restoration Program.  Section 123 also requires the Office of Management and Budget (OMB)  to prepare an interagency crosscut budget related to federal agencies\u2019  efforts to protect and restore the Columbia River Basin.", "You asked us to review restoration efforts in the Columbia River Basin,  especially efforts intended to improve water quality. This report examines  (1) restoration efforts to improve water quality in the Columbia River  Basin from fiscal years 2010 through 2016; (2) approaches to  collaboration that entities have used for selected efforts, including factors  they identified that enabled or hindered collaboration in the Basin; (3) the  sources of funding and federal funding expenditures; and, (4) the extent  to which EPA and OMB have implemented Clean Water Act Section 123.", "To examine water quality-related restoration efforts implemented in the  Basin from fiscal years 2010 through 2016, we obtained documentation  from and conducted interviews with entities throughout the Basin,  including federal agencies, state agencies responsible for managing  water quality in their state, federally and non-federally recognized tribes,  tribal organizations, and nongovernmental entities. In May 2017, we  developed, pretested, and distributed a survey to 41 entities we  determined had implemented water quality-related efforts in the Basin  from fiscal years 2010 through 2016. We asked the entities to provide  information on each program\u2019s primary and secondary purposes, one or  two key examples of the activities conducted as part of the program,  whether the entity was the only entity responsible for implementing the  program, whether they received any federal funding to support  implementation of the program, and the sources of the federal funding,  among other topics.", "To examine the approaches to collaboration entities utilized for select  water quality-related restoration efforts, we selected five efforts for more  in-depth review. Based on the responses to our survey on efforts in the  Basin from fiscal years 2010 through 2016, we selected a limited number  of efforts that were among the broadest in scope based on their  geographic coverage and the number and type of entities involved. In  addition, we selected efforts, in part, to highlight collaborative approaches  for efforts implemented by a variety of entity types and with different  primary purposes. We conducted interviews with officials and  representatives from these efforts on the collaborative approaches they  used to plan or implement their efforts and requested related  documentation for review. In addition, we separately emailed questions to  the 11 federal agencies with water quality-related restoration efforts in the  Basin and that responded to our initial survey; in those emails, we  solicited agency officials\u2019 opinions on practices that may have enabled or  hindered collaboration on efforts their respective agencies planned or  implemented. We also asked officials and representatives from the five  selected efforts and officials from the 11 federal agencies for their  opinions about challenges they experienced with collaboration in  implementing restoration efforts in the Basin, as well as their suggestions  for increasing collaboration on such efforts. In addition, to determine  whether there was an existing mechanism for basin-wide collaboration on  water quality-related restoration efforts, we reviewed existing legislation  and interviewed agency officials.", "To examine the sources of funding and federal funding expenditures in  the Basin, we obtained budget documents, interviewed agency officials,  reviewed responses to funding questions included in our survey, and  requested expenditure data for five federal efforts for fiscal years 2014  through 2016. Initially, we intended to use a second survey to collect  comprehensive expenditures data for each water quality-related  restoration effort that entities identified in response to our initial survey.  However, in pretests with agency officials, we identified significant  concerns with the accuracy and completeness of the information that we  would gather through this approach, thereby limiting our ability to  compare expenditure data across agencies and efforts. Given the degree  of variability, uncertainty, and lack of detail in the information agencies  could provide on their water quality-related restoration expenditures, we  concluded that the data would not be reliable for the purpose of  estimating expenditures of federal funding for water-quality related  restoration efforts in the Basin. To provide some information on  expenditures, we distributed a second survey to 5 agencies\u2014BPA,  Corps, EPA, Forest Service, and the United States Geological Survey  (USGS)\u2014and requested expenditures information for a specified  restoration effort along with questions about the sources and processes  the agencies followed in compiling the information. Based on our review  of these responses, we determined that the expenditure information for  these specific restoration efforts were sufficiently reliable for purposes of  reporting on sources of funding and federal expenditures.", "To examine the extent to which EPA and OMB have implemented Clean  Water Act Section 123, we reviewed the law and its legislative history. We  also requested documentation from, and conducted interviews with,  officials at EPA and OMB as the federal entities responsible for  implementing the law. We identified program management leading  practices in the Project Management Institute\u2019s The Standard for Program  Management and as discussed in our prior reports. For additional  information about our objectives, scope, and methodology, see appendix  I.", "We conducted this performance audit from October 2016 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Columbia River Basin", "paragraphs": ["The Columbia River Basin is the fourth largest river basin in the United  States and covers parts of seven states and British Columbia, Canada. It  provides drainage for hundreds of rivers, creeks, and streams. More than  6 million acres of the Basin are irrigated agricultural land, and the  Columbia River and its tributaries produce more hydroelectric power than  any other North American river. The Columbia has 12 major tributaries,  with the longest being the Snake River. The Columbia River itself flows  more than 1,200 miles from its source in the Canadian Rockies to the  Pacific Ocean, with the last 300 miles forming the border between the  states of Oregon and Washington. The Basin has myriad dams and  reservoirs\u2014more than 250 reservoirs and approximately 150 other  hydroelectric projects, including more than 35 major federal and  nonfederal dams on the Columbia River and its major tributaries in the  United States. For more details, see figure 1.", "The Basin provides environmental, economic, and social benefits to many  public and private interests and is vital to many industries in the Pacific  Northwest, including sport and commercial fisheries, agriculture, forestry,  transportation, recreation, and electrical power generation. However,  activities from these industries have affected the environment in the Basin  and, among other impacts, impaired water quality in some areas to the  point where human health is at risk and historic salmon and steelhead  stocks are at risk or extinct. Under the Clean Water Act, states have  identified many Columbia River tributaries, the Columbia River itself, and  its estuary as impaired. Major sources of impairment to water quality  include pollutant run-off from agricultural activities and storm-water on  impermeable surfaces (e.g., paved parking lots and roads); habitat  modification due to the hydroelectric dams and their associated  reservoirs; legacy toxic contaminants, such as mercury and PCBs; and  contaminants of emerging concern, such as discarded pharmaceuticals.  In addition, EPA Superfund sites are located throughout the Basin and  may have negatively impacted water quality in locations such as Portland  Harbor in Oregon, the Hanford Site in Washington, and the Upper  Columbia River at Lake Roosevelt in Washington. Figure 2 shows some  sources that may lead to impairment of the Basin, including point and  nonpoint sources of pollution.", "In the early to mid-1990s, the states of Washington and Oregon  sponsored monitoring studies that identified dozens of sites in the lower  reaches of the Columbia River where contaminants exceeded water  quality standards for the presence of pesticides, toxic metals, and  cyanide, among other findings. Further, in 1992, an EPA survey of  contaminants in fish reported a potential health threat to tribal members  and other people who eat fish from the Basin. More recently, a 2009  EPA report summarized findings contained in studies by USGS and  NMFS (in conjunction with the University of California-Davis). The report  noted that significant levels of toxic chemicals were found in fish and the  waters they inhabit, including toxics banned from use since the 1970s,  such as dichlorodiphenyltrichloroethane (commonly known as DDT)   and PCBs, as well as emerging contaminants, such as chemicals used  for flame retardants. This has led states to periodically issue fish, and in  some cases shellfish, advisories throughout the Basin warning the public  not to consume more than specified quantities of contaminated aquatic  species or, in some cases, at all. In addition to potential human health  impacts, other studies have found that some contaminants have negative  impacts on fish and wildlife populations in the Basin. Since the 1990s,  fewer sites in the Basin have been monitored for water quality, and  investment in such monitoring has decreased, according to an EPA  official. For example, according to staff from the Lower Columbia Estuary  Partnership, monitoring sites on the mainstem lower Columbia River have  decreased over time and currently one site is being monitored for toxics."], "subsections": []}, {"section_title": "Selected Legislation Related to Water Quality in the Columbia River Basin", "paragraphs": ["The Clean Water Act and Endangered Species Act are the primary  federal statutes driving many of the restoration efforts in the Columbia  River Basin. A range of other laws, treaties, court decisions, and  authorities also serve to create requirements for entities to implement  restoration efforts in the Basin.", "Clean Water Act: The Clean Water Act was enacted in 1972 to \u201crestore  and maintain the chemical, physical, and biological integrity of the  nation\u2019s waters.\u201d It establishes the basic structure for establishing  surface water quality standards, as well as regulating discharges of  pollutants into the waters of the United States, and provides various  regulatory and non-regulatory tools for doing so. Under the Clean Water  Act, EPA may allow states under certain circumstances to implement their  own clean water programs and to enforce their requirements. EPA  establishes by regulation the requirements for state enforcement  authority, such as the authority to seek injunctive relief and civil and  criminal penalties.", "National Estuary Program: In 1987, amendments to the Clean Water  Act added Section 320, which established the National Estuary Program  to promote comprehensive planning for, and conservation and  management of, nationally significant estuaries, among other things. EPA  oversees the program and has designated 28 estuaries as being of  national significance, including the Lower Columbia Estuary. Based on  this designation, in 1995 EPA and the governors of Washington and  Oregon established the Lower Columbia Estuary Partnership. The  Partnership works with federal, state, tribal, local, and nongovernmental  entities to improve the lower Columbia River and its estuary by protecting  and restoring ecosystems and enhancing clean water for current and  future generations of fish, wildlife, and people. Under Clean Water Act  Section 320, as the management conference for the estuary, the Lower  Columbia Estuary Partnership is required to develop and implement a  comprehensive conservation and management plan (CCMP) to restore  and maintain the chemical, physical, and biological integrity of the  estuary, including water quality. The CCMP for the lower Columbia  River estuary covers the lower 146 miles of the Columbia River and its  associated tributaries, or about 7 percent of the Basin overall, and is  intended to reflect a scientific characterization of, and stakeholder  concerns about, the estuary, including its water quality, habitats for  animal and plant life, and other resource challenges. Figure 3 shows the  area covered by the Lower Columbia Estuary Partnership\u2019s CCMP.", "Clean Water Act Section 123 on Columbia River Basin Restoration:  The Water Infrastructure Improvements for the Nation Act of 2016  amended the Clean Water Act by adding Section 123 on Columbia River  Basin Restoration. The law requires EPA to establish the Columbia  River Basin Restoration Program, which is to be a collaborative  stakeholder-based program for environmental protection and restoration  activities through the Basin. Legislation calling for establishment of a  Columbia River Basin restoration program within EPA was introduced in  2010. According to a Congressional committee report accompanying  the bill, a main finding was that while EPA in 2006 recognized the  Columbia River Basin as one of the nation\u2019s large aquatic ecosystems  and had in place an organizational structure to manage restoration efforts  being implemented in the lower Columbia River estuary, there was no  congressionally authorized program or dedicated appropriations to  support the water quality restoration and toxic reduction efforts throughout  the Basin. Section 123 directs EPA to assess trends in water quality in  the Basin, collect and assess data on potential causes of water quality  problems, develop a program to provide grants to various entities, and  establish a voluntary interagency Columbia River Basin Restoration  Working Group (Working Group). The law also requires the President\u2019s  annual budget submission to include an interagency crosscut budget  prepared by OMB that displays, for each federal agency involved in the  protection and restoration of the Columbia River Basin, funding amounts  obligated for those purposes in the preceding fiscal year, the estimated  budget for the current fiscal year, and the proposed budget for the next  fiscal year for related activities at each agency. Figure 4 shows the  requirements of Clean Water Act Section 123.", "Endangered Species Act: Enacted in 1973, the purpose of the  Endangered Species Act is to protect and recover imperiled species and  the ecosystems upon which they depend. It is jointly administered by  the U.S. Fish and Wildlife Service (FWS) and NMFS. Generally, the FWS  manages land and freshwater species, and NMFS manages marine  species and anadromous fish, such as salmon. Under the Endangered  Species Act, species may be listed as either endangered or threatened.  In the Basin, numerous species have been listed, including 13 species of  salmon and steelhead. Under Section 7 of the act, federal agencies are to  ensure that any actions they authorize, fund, or carry out, whether on  federal or private lands, do not jeopardize listed species. To fulfill this  responsibility, the agencies often must formally consult with FWS or  NMFS, which issues a biological opinion assessing whether the agency  action is likely to jeopardize the continued existence of the species or  result in destruction or adverse modification of critical habitat. For  example, three federal agencies\u2014the Corps, BPA, and Bureau of  Reclamation\u2014operate and manage federal dams and other hydroelectric  facilities that comprise the Federal Columbia River Power System under a  biological opinion NMFS issued in 2008.The biological opinion includes,  among other measures, performance standards for the survival rate of  fish migrating upstream or downstream past the associated dams and  reservoirs. Additional required mitigation actions include those related to  habitat restoration, predation management, and hatchery management to  mitigate for the adverse effects of the system, as well as numerous  research, monitoring, and evaluation actions to support and inform  adaptive management decisions.", "Large Aquatic Ecosystems: EPA has designated specific areas around  the country as \u201clarge aquatic ecosystems.\u201d Such ecosystems comprise  multiple small watersheds and water resources within a large geographic  area. Over the years, EPA has worked with other federal agencies, state  and local governments, tribes, and others to develop specific geographic- based programs to protect and restore these areas, including the  Chesapeake Bay and the Great Lakes. In 2006, EPA recognized the  Columbia River Basin as a large aquatic ecosystem to help promote the  development of new cooperative initiatives and efforts to improve water  quality, remove contaminated sediments, restore native fish species, and  preserve and restore aquatic habitat and ecosystems throughout the  Basin. In 2008, EPA\u2019s Office of Water established a national Council of  Large Aquatic Ecosystems to work within the agency and better support  and promote efforts being implemented by the geographic-based  programs to protect these large aquatic ecosystems. EPA incorporated  strategic goals and objectives for most large aquatic ecosystems into its  strategic plan for fiscal years 2006 through 2011 and into its national  water program guidance. Over time, for the majority of these large  aquatic ecosystems\u2014such as the Chesapeake Bay, Great Lakes, Long  Island Sound, and Puget Sound\u2014EPA formally established dedicated  program offices and received congressional appropriations specifically for  restoration efforts in each large aquatic ecosystems geographic area.  See figure 5 for the large aquatic ecosystems designated by EPA  throughout the United States."], "subsections": []}, {"section_title": "Entities Involved in Water Quality-Related Restoration Efforts in the Basin", "paragraphs": ["Multiple entities conduct activities related to restoration efforts in the  Basin, including federal agencies, state agencies, federally and non- federally recognized tribes, tribal organizations, and nongovernmental  entities. Along with their primary water, power, resource, and other  management and regulatory responsibilities, federal, state, and tribal  entities are responsible under various laws, treaties, executive orders,  and court decisions for protecting, mitigating, and enhancing fish and  wildlife resources in the Basin, among other things.", "Eleven federal agencies, within six departments, are involved with water  quality-related restoration efforts in the Basin. The departments and  agencies, and their respective roles, include:", "U.S. Department of Agriculture", "Forest Service: Manages national forests and grasslands under  the principles of multiple use and sustained yield.", "Natural Resources Conservation Service (NRCS): Assists  farmers, ranchers, and other landowners in developing and  carrying out voluntary efforts to protect the nation\u2019s natural  resources.", "U.S. Department of Commerce", "NMFS: Conserves, protects, and manages living marine  resources to ensure their continuation as functioning components  of marine ecosystems and to afford economic opportunities;  implements the Endangered Species Act for marine and  anadromous species; and supports on-the-ground habitat  restoration projects with funding and technical assistance.", "U.S. Department of Defense", "Corps: Designs, builds, and operates hydroelectric civil works  projects in the Basin to provide electric power, navigation, flood  control, and environmental protection.", "U.S. Department of Energy: Addresses U.S. energy, environmental,  and nuclear challenges through science and technology solutions,  including clean-up of the former Hanford plutonium production site for  nuclear weapons in Washington.", "Bonneville Power Administration (BPA): BPA provides power  and transmission services and markets the electricity generated  by the Corps and Reclamation dams comprising the Federal  Columbia River Power System.", "U.S. Department of the Interior", "Bureau of Land Management: Administers public lands and  subsurface mineral resources under the principle of multiple use  and sustained yield.", "FWS: Manages wildlife refuges; conserves, protects, and  enhances fish, wildlife, and plants; and implements the  Endangered Species Act for terrestrial species, migratory birds,  certain marine mammals, and certain fish.", "Reclamation: Designs, constructs, and operates water projects  for multiple purposes, including irrigation, hydropower production,  municipal and industrial water supply, flood control, recreation,  and fish and wildlife.", "USGS: Conducts objective scientific studies and provides  information to address problems dealing with natural resources,  geologic hazards, and the effects of environmental conditions on  human and wildlife health.", "EPA: Protects human health and safeguards the natural environment  by protecting the air, water, and land, including administration of the  Clean Water Act."], "subsections": []}]}, {"section_title": "Various Entities Implemented a Range of Restoration Efforts for Improving Water Quality in the Columbia River Basin from Fiscal Years 2010 through 2016", "paragraphs": ["In response to our survey, various entities\u2014federal and state agencies,  tribes and tribal organizations, and nongovernmental entities\u2014identified a  range of restoration efforts they implemented related to improving water  quality in the Columbia River Basin from fiscal years 2010 through 2016.  Although there have been some plans to guide certain restoration efforts  for parts of the Basin, there is no overall plan to guide water quality- related restoration efforts throughout the Columbia River Basin or a  requirement for a federal agency or others to develop such a plan.", "We found that entities implemented their restoration efforts under a range  of authorities and programmatic missions. At the federal and state levels,  many of the restoration efforts were implemented as part of programs  with a broader geographic scope than the Basin. For example, many of  EPA\u2019s efforts are part of programs that have a nationwide focus, such as  the Clean Water Act Section 106 Water Pollution Control Grant Program,  which provides grants to states, territories, interstate agencies, and  eligible tribes to establish and administer water pollution control programs  for the prevention, reduction, and elimination of pollution. Conversely,  other restoration efforts have been implemented exclusively in the  Columbia River Basin. For example, the Shoshone-Bannock Tribe\u2019s  Yankee Fork Restoration Program works to improve the floodplain and  riparian zones along dredged sections of the Yankee Fork Salmon  River. Appendix II provides a list of the restoration efforts implemented  in the Columbia River Basin from fiscal years 2010 through 2016, based  on entities\u2019 responses to our survey. See table 1 for examples of a range  of restoration efforts implemented by various entities in the Basin from  fiscal years 2010 through 2016.", "Based on responses to our survey, we found that entities implemented  restoration efforts in the Columbia River Basin for a variety of purposes,  such as improving surface water quality or reducing toxic pollutants.  Specifically, our survey listed five purposes and asked entities to identify  whether each was a primary purpose, secondary purpose, or not a  purpose of the respective restoration effort. Overall, the most common  primary purposes identified were improving surface water quality and  restoring and protecting habitat. For example, the Forest Service  identified monitoring surface water quality as the sole purpose for its  Pacific Northwest Region Aquatic Inventory and Monitoring effort, which  inventories and monitors watershed and stream habitat conditions to  provide information and feedback to improve resource protection and  restoration programs. Similarly, FWS identified restoring and protecting  habitat as the primary purpose of its National Fish Habitat Partnership  Pacific Region effort. This effort\u2014part of a nationwide program\u2014focuses  on restoring aquatic habitat important to fish species of regional  significance in the Columbia River Basin. See table 2 for the purposes  identified in our survey and examples of associated restoration efforts.", "In addition, we found that restoration efforts implemented in the Columbia  River Basin can directly or indirectly support improving water quality. For  example, some restoration efforts directly support improving water quality,  such as efforts whose primary purpose included monitoring surface water  quality. Other restoration efforts indirectly support improving water quality.  For example, NRCS\u2019 Conservation Stewardship Program\u2019s primary  purpose is helping agricultural producers, ranchers, and forest  landowners expand their conservation activities to enhance natural  resources while simultaneously improving their operations. These efforts  do not directly focus on improving water quality, but activities  implemented through these efforts may indirectly improve water quality in  the Columbia River Basin."], "subsections": []}, {"section_title": "Entities Used Various Collaborative Approaches for Selected Restoration Efforts", "paragraphs": ["We found that entities\u2019 approaches to collaboration for selected water  quality-related restoration efforts in the Basin from fiscal years 2010  through 2016 varied based on the specific circumstances of the given  effort. This was in part because there is no overall coordinating body to  guide water quality-related restoration efforts throughout the Columbia  River Basin or a requirement prior to the enactment of Section 123 for  federal agencies or others to develop such a body. For example, certain  efforts are required by law or regulation to use specific types of  collaborative approaches (e.g., stakeholder review of proposed program  plans), and other efforts that are voluntary in nature may use different  approaches to engaging and maintaining collaborative efforts among  relevant entities. For example, the Washington State Department of  Ecology and others developed the dissolved oxygen total maximum daily  load (TMDL) for the Spokane River and Lake Spokane through a  regulatory process that included public review and comment. In  contrast, entities such as the Lower Columbia Estuary Partnership and  the Columbia River Toxics Reduction Working Group sought the  voluntary involvement of other entities through their mutual interest in a  common outcome, in this case restoring the lower Columbia River estuary  and reducing toxics in the Basin, respectively.", "In addition, based on responses to our survey, the majority of restoration  efforts in the Basin involved multiple entities. Specifically, for restoration  efforts implemented in the Basin from fiscal years 2010 through 2016,  respondents reported that approximately 71 percent of the efforts  involved more than one entity and that approximately 29 percent were  implemented solely by a lead entity.", "To highlight examples of collaborative approaches entities used for water  quality-related restoration efforts, we selected five efforts for review.  While these efforts are not generalizable to all restoration efforts in the  Basin, they highlight specific collaborative approaches entities used for  individual restoration efforts, as follows:", "Effort 1: The Corps Northwestern Division Reservoir Control  Center Water Quality Program (2008-present) is a federally led  effort designed to implement the 2008 Federal Columbia River Power  System biological opinion, and collaboration is enabled through  coordination meetings, facilitated by a neutral third party, to manage  Corps project operations affecting water quality. For example,  according to Corps guidelines, day-to-day coordination of Corps  operations (e.g., voluntary water spill over dams) to meet the  biological opinion\u2019s requirements and comply with water quality  standards occurs through biweekly or more frequent meetings of its  operational-level interagency Technical Management Team. The  team operates under institutionalized collaboration procedures that  provide guidance for, among other things, membership, member roles  and responsibilities, and procedures for meetings and decision  making. According to agency documentation, meetings of the  Technical Management Team are facilitated by an impartial  contracted facilitator whose position is designed to enable team  members the opportunity to fully participate in discussions and help  members resolve conflicts as they arise.", "Effort 2: Washington State\u2019s Spokane River & Lake Spokane  Dissolved Oxygen TMDL (2004-present) is a state-led effort,  regulatory in nature, and collaboration is enabled through an  associated Foundational Concepts guiding document. Under the  Clean Water Act, Washington State was required to develop a TMDL  and associated water quality improvement plan for the Spokane River  and Lake Spokane because the state identified several segments of  these water bodies as having impaired water quality. In a 2004 draft  TMDL, the state proposed phosphorus discharge requirements  necessary for the river to meet the state\u2019s water quality standards.  However, not all responsible for point source pollution discharges  believed that well-established technology existed that could achieve  these requirements, according to the Foundational Concepts  document. The state developed the document specifically to enhance  and further enable a collaborative approach among the regulatory  agencies and the pollution dischargers involved in revising and  finalizing the TMDL, according to Washington State officials. The final  TMDL document, issued in 2010, noted that technology was available  that could bring current discharges much closer to the levels required  by water quality standards, and that Washington State could develop  a plan, approved by EPA, that would provide reasonable assurance  that the standards could be achieved within 10 years.", "Effort 3: The Columbia River Toxics Reduction Working Group  (2005-present) is an EPA-led effort, voluntary in nature, and  collaboration is enabled by a joint signed executive statement signed  in 2011. EPA developed the group\u2014in conjunction with other  relevant federal, state, tribal, local, and nonprofit partners\u2014to better  coordinate toxics reduction efforts in the Basin and to share related  information within the context of each organization\u2019s own roles and  responsibilities. Executives from the partner agencies, tribes, and  organizations demonstrated their leadership commitment for the  Columbia River Toxics Reduction Working Group\u2019s efforts by signing  the joint statement. The executive statement was designed to publicly  highlight their commitment to be partners involved with the Columbia  River Toxics Reduction Working Group toward the collaborative  efforts necessary to reduce toxics in the Basin.", "Effort 4: The Lower Columbia Estuary Partnership (1995-present)  is an effort led by a nongovernmental organization, voluntary in  nature, and collaboration is enabled through a management plan.  The Partnership\u2019s organizational purpose is to facilitate restoration  efforts in the lower Columbia River estuary portion of the Basin by  building on existing efforts, providing a regional framework for action,  and filling gaps in understanding and planning, among other things.  The Partnership\u2019s CCMP guides the collaborative efforts of the  Partnership and its associated stakeholders and identifies what the  Partnership should be doing concerning regional coordination  activities, as well as how such coordination should be pursued.", "Effort 5: The Confederated Tribes of the Umatilla Indian  Reservation Fisheries Habitat Sub-Program (1987-present) is a  tribal effort, sovereign in nature, and collaboration is enabled through  the sub-program\u2019s Umatilla River Vision guiding document. This  fisheries habitat effort is designed to provide for sustainable harvest  opportunities of aquatic species traditionally consumed by the  Umatilla through protection, conservation, and restoration of related  aquatic habitats, according to Umatilla tribal officials. The vision  articulated by the tribe\u2019s Fisheries Program is that the Umatilla Basin  includes a healthy Umatilla River capable of providing sufficient  quantities of the First Foods (i.e., water, salmon, deer, cous, and  huckleberry) necessary to sustain the continuity of the tribe\u2019s  culture. The Umatilla tribes developed the Umatilla River Vision to  help identify existing gaps in knowledge and the work that must be  accomplished to reestablish a healthy watershed and restore fisheries  habitat on the Umatilla Reservation. Umatilla tribal officials we  interviewed stated that the document is applicable to all Umatilla  aboriginal lands and guides all their restoration efforts and  coordination with other entities, including federal and state officials  and funding partners.", "In addition, we obtained the views of officials from 11 federal agencies on  factors that may enable and hinder collaboration in the Basin. In  identifying factors that enabled collaboration in their implementation of  specific restoration efforts, officials from the 11 federal agencies most  often identified the following: (1) having pre-existing relationships with  partners, such as through participation in interagency bodies; (2) having  clearly defined roles and responsibilities and common outcomes for  restoration efforts across partners; and (3) identifying resource needs and  the sources of resources to be used for such efforts. The officials also  identified potential actions that could enhance basin-wide collaboration for  restoration efforts beyond their individual efforts. For example, one official  responded that collaboration could be improved by involving senior- level  officials in discussing and establishing priorities for basin-wide restoration,  so that each entity could then implement efforts across the Basin in a  manner consistent with the priorities agreed to by the senior leaders.  Other officials noted that implementing this action would require individual  agencies and entities to provide staff time and needed resources to  enable collaboration on broader basin-wide priorities, consistent with  each agency\u2019s individual missions and goals. An official also suggested,  to enhance collaboration on basin-wide restoration, proactively involving  relevant entities through presentations and document reviews to allow the  entities to offer their suggestions and identify any objections they may  have for a given effort. In addition, a different official suggested  implementing basin-wide restoration monitoring and evaluation to  determine which efforts are working well, which are not, and how any  given effort may need to change to more efficiently or effectively restore  the Basin.", "The officials from the 11 federal agencies most often identified the  following factors that hindered collaboration in their implementation of  specific restoration efforts: (1) lack of sufficient resources, (2)  incompatibility of policies and procedures across agencies, and (3) lack of  clearly defined common outcomes for restoration efforts across  partners. The officials also identified challenges to collaboration for  basin-wide restoration beyond their individual efforts. Among other things,  one federal official identified as a challenge the variability of missions,  authorities, and priorities among various agencies and entities pursuing  restoration efforts in the Basin. According to officials, these factors make  it difficult to establish mutually agreeable end-goals and means for  restoration because various entities have potentially competing interests  based on each organization\u2019s primary mission. Specifically, prioritizing  certain restoration efforts over others\u2014as may occur through adoption of  a basin-wide restoration strategy or plan\u2014may lead some entities to not  participate in basin-wide restoration activities. According to other officials,  this is because an entity is most likely to prioritize its own efforts, not the  efforts of other entities. Other challenges to basin-wide collaboration  officials cited included the litigation surrounding restoration efforts in the  Basin (e.g., lawsuits regarding salmon and steelhead recovery under the  Endangered Species Act) and the associated potentially adversarial  relationships among entities, as well as limited staff time and resources  for collaborating with other entities."], "subsections": []}, {"section_title": "Entities Reported Using a Mix of Federal and Nonfederal Sources of Funding to Implement Restoration Efforts, but Total Federal Expenditures Could Not Be Determined", "paragraphs": ["Entities responding to our survey reported that most of the restoration  efforts they implemented in the Basin were supported through a mix of  federal and nonfederal funding sources. For several reasons, we could  not determine total federal expenditures to implement the restoration  efforts identified through our survey. Instead, we collected data from five  federal agencies (BPA, Corps, EPA, Forest Service, and USGS) to  provide illustrative examples of federal water quality-related restoration  expenditures in the Basin."], "subsections": [{"section_title": "Entities Reported Most of their Restoration Efforts in the Basin Were Implemented with a Mix of Federal and Nonfederal Funding Sources", "paragraphs": ["Entities responding to our survey reported that most of their restoration  efforts in the Basin were supported through a mix of federal and  nonfederal funding sources. With respect to federal funding, responses to  our survey indicated that nearly all of the restoration efforts identified  through our survey received some level of federal funding. This includes  funding appropriated to federal agencies for mission-driven activities that  may have a primary purpose other than improving water quality and  restoring the Basin. For example, according to agency officials, while  improving water quality is not a primary mission of the Corps\u2019 and  Reclamation\u2019s hydropower projects, maintaining compliance with water  quality standards is a component of the operation and maintenance of  these projects. Similarly, multiple federal agencies are involved in efforts  to recover species protected under the Endangered Species Act and  restore habitats that have been affected by operations of the Federal  Columbia River Power System, particularly eliminating barriers to fish  passage, operating fish hatcheries, and monitoring water temperatures to  promote fish survival rates; those efforts indirectly benefit water quality.", "Several of the federal efforts we identified in our review do not directly  implement restoration activities but provide financial and technical  assistance to support other entities\u2019 implementation of restoration efforts.  These efforts include:", "EPA\u2019s Clean Water Act Section 319 Nonpoint Source Implementation  Grants Program, under which EPA provides grants to states to  implement programs and fund programs that address nonpoint source  pollution;", "NRCS\u2019s Regional Conservation Partnership Program, which provides  financial incentives and technical assistance for eligible partners, such  as agricultural producers, to implement voluntary conservation  measures that address a range of natural resource management  concerns, including water quality degradation and loss of fish and  wildlife habitat;", "NMFS\u2019s Community-Based Restoration Program, which awards funds  and provides technical assistance to national and regional partners  and local grassroots organizations to restore habitat; and", "FWS\u2019s Partners for Fish and Wildlife Program, which provides  financial and technical assistance to private landowners to protect or  restore wetlands, uplands, and riparian and instream habitats.", "For example, in fiscal year 2016, NMFS\u2019s Community-Based Restoration  Program awarded about $900,000 in grant funds to The Nature  Conservancy to support its restoration of 330 acres of floodplain habitat at  the confluence of two forks of the Willamette River. This effort provides a  range of benefits, including improved water quality, improved fish  passage, and increased hydrologic connectivity.", "In addition, more than half of the restoration efforts identified through our  survey were implemented with a mix of federal and nonfederal funding  sources, including most of the state efforts. These sources include  support through direct financial awards or indirect support through in-kind  services. For example, Reclamation\u2019s Pacific Northwest Water Quality  Program provided cost-reimbursable services and technical support to  stakeholders, such as state agencies and watershed councils, in the  design and implementation of water quality improvement plans. Similarly,  the Lower Columbia Estuary Partnership\u2019s 2017 annual report noted that  for each $1 in federal funding the partnership received from EPA, the  partnership raised an additional $9 in funding solicited from other federal,  state, and private sources. In 2017, the partnership brought in $7.6  million in direct funding, most of which supported projects implemented by  local organizations and businesses to restore habitat, monitor restoration  work, and support outdoor education initiatives. The partnership also  estimated that in 2017, it received in-kind services from a range of  contributors, such as scientists, technical experts, and community  members who volunteered more than 18,000 hours of their time to  implement various partnership activities. The partnership valued these in- kind services at nearly $430,000.", "Some programs, such as the Corps\u2019 Aquatic Ecosystem Restoration  program, do not provide funding to other entities but include specific cost- sharing requirements for project sponsors to secure contributions of  nonfederal funding. For example, nonfederal project sponsors are  required to provide 35 percent of the construction costs for projects  implemented through the Corps\u2019 program, which can include land  easements, rights-of-way, and necessary relocations. Other programs,  such as NRCS\u2019s Regional Conservation Partnership Program, do not  include matching requirements for nonfederal funding but work with  partners to identify other funding sources to supplement federal funding  awards."], "subsections": []}, {"section_title": "Total Federal Expenditures for Basin Restoration Efforts Could Not Be Determined", "paragraphs": ["While we were able to collect information about the general sources of  funding that supported implementation of the restoration efforts in the  Basin respondents identified in our survey, we could not determine the  total amounts of federal expenditures for these efforts for several  reasons. First, unlike efforts to restore other large aquatic ecosystems,  there was no congressionally authorized program to protect and restore  the Basin prior to 2016 or federal funding dedicated specifically for this  purpose, according to EPA officials. In the absence of dedicated federal  funding or a congressionally authorized program focused on restoring the  Basin, agency data on water quality-related restoration expenditures in  the Basin is not readily available. Second, because some of the efforts  are supported with funding from national and statewide programs that  have a broader geographic scope than the Basin, it can be difficult to  identify the portion of program expenditures that were for activities  located within the Basin. This includes national-level programs, such as the Forest Service\u2019s National Best Management Practices Program and  EPA\u2019s Clean Water Act grant programs, as well as statewide water quality  permit programs. For instance, officials we interviewed from the  Washington State Department of Ecology explained that, because the  state typically do not track expenditures by region or location, it would be  difficult to provide consistent and comparable estimates of expenditures  for their statewide programs because of the various methodologies they  use to compile the information. Third, it can be difficult to determine how  much of a program\u2019s expenditures were for water quality-related  restoration when the effort was implemented primarily for a different  purpose or multiple purposes that may indirectly contribute to improving  water quality. Several entities that responded to our survey indicated that  they do not track expenditures by activity and that it would be difficult to  estimate the portion of spending on restoration-related efforts. For  example, Forest Service officials told us that for its Integrated Resource  Restoration program, it is difficult to track expenditures for specific  restoration activities in which the funding goes towards multiple  objectives, such as vegetation management and wildlife species, in  addition to water quality and aquatic resources.", "While data on total federal expenditures for restoring the Basin could not  be determined, we collected expenditures from five federal agencies to  provide illustrative examples of their spending on the restoration efforts  they conducted across the Basin. Using responses to our initial survey,  we selected efforts that respondents identified as being implemented for a  variety of restoration purposes and for which information on expenditures  would be available. As shown in table 3, we collected data on  expenditures for fiscal years 2014 through 2016 for specific efforts  implemented by the Corps, BPA, EPA, Forest Service, and USGS.", "The following examples provide more detailed information about each  effort for which we collected information on federal expenditures:", "Corps\u2019 Ecosystem Restoration Programs. The Corps implements  several ecosystem restoration programs under various authorities for  the purposes of restoring and protecting aquatic habitats and  environmental quality throughout the Basin. Through the Aquatic  Ecosystem Restoration Program and the Project Modifications for  Improvement of the Environment program, the Corps is authorized to  carry out cost-effective restoration projects at facilities it operates  throughout the Basin. Under the Lower Columbia River Basin  Restoration Program, the Corps conducts studies and ecosystem  restoration projects to protect, monitor, and restore fish and wildlife  habitat in the Lower Columbia River Estuary. Collectively, for fiscal  years 2014 through 2016, the Corps reported expending  approximately $15.6 million in federal funding to conduct 25 aquatic  ecosystem restoration projects across the Basin; this amount included  costs for program coordination. For example, the Corps partnered  with the City of Portland on the Westmoreland Park Ecosystem  Restoration project to remove barriers to fish passage for endangered  salmon swimming in Crystal Springs Creek on their way to the  Willamette River (see figure 6). For fiscal years 2014 through 2016,  the Corps reported about $1.4 million in total expenditures for the  project, which included activities such as restoring a stream channel  and surrounding wetland vegetative zone along with replacing three  small culverts with wider, natural bottom fish-friendly culverts to  improve water quality and restore fish passage upstream.", "BPA\u2019s Columbia River Basin Fish and Wildlife Program.", "According to BPA, this is one of the largest fish and wildlife protection  programs in the country, annually funding hundreds of projects  implemented in the Columbia River Basin by a wide range of federal,  state, local, tribal, academic, and nongovernmental entities across  four states. The program is implemented in partnership with the  Northwest Power and Conservation Council, which makes  recommendations on projects that should be funded and reviews the  program at least every 5 years to develop updates as needed. BPA  reported that from fiscal years 2014 through 2016, it provided an  average of about $90 million per year in funding for projects that  directly or indirectly benefitted water quality-related restoration efforts  in the Basin, including projects to restore damaged fish habitat,  improve hatchery practices, research, monitoring and evaluation, and  water rights acquisitions. For example, in 2015, the program awarded  $180,000 to fund habitat restoration actions to improve ecological  functions, including water quality, as part of the Buckmire Slough  Phase #1 project located near Vancouver Lake in southwest  Washington (see figure 7). This restoration project reconnected  about 65 acres of shallow water salmon habitat by removing two  earthen berms and collapsed culverts and installed a channel- spanning pedestrian bridge to maintain trail access. According to BPA  officials, the removal of the barriers helped improve fish passage and  water flow through Buckmire Slough to the larger watershed that  includes Vancouver Lake, the Lake River, and the Columbia River.", "EPA\u2019s Lower Columbia Estuary Partnership. EPA reported that the  Lower Columbia Estuary Partnership had total expenditures of about  $37 million in federal funding from fiscal years 2014 through 2016.  The funding supported a range of efforts and restoration objectives for  the lower portion of the Columbia River Basin, including habitat  restoration; long-term monitoring strategy for sediment, fish tissue,  and water quality; outdoor education programs; and citizen and  professional involvement. According to EPA officials, the Lower  Columbia Estuary Partnership has received about $600,000 annually  in funding through Clean Water Act Section 320, which primarily  supports the administrative and management functions of the  partnership, including work to solicit funding from other federal and  nonfederal sources to implement restoration projects throughout the  estuary.", "Additionally, from fiscal years 2014 through 2016, the Lower Columbia  Estuary Partnership received approximately $3.4 million in funding  from BPA and other federal partners to support implementation of a  long-term monitoring strategy for sediment, fish tissue, and water  quality in the lower Columbia River and estuary. The funding helped  support the Partnership\u2019s scientific and coordination staff as well as  support sub-awards to outside experts in project design, data  acquisition, and data analysis. The Partnership also received about  $10 million in funding from BPA and other federal entities to fund  multi-year projects, implemented by the Partnership and other local  governments and nonprofit organizations, that contributed to the goal  of restoring and protecting 25,000 acres of habitat to help the  recovery of threatened and endangered salmon in the lower Columbia  River and estuary.", "Forest Service\u2019s Region 6 (Pacific Northwest) Watershed and  Aquatic Restoration Program. According to Forest Service officials,  this program includes all required inventory, assessment, planning  and design, and permitting needed to implement watershed protection  and restoration projects in the agency\u2019s Pacific Northwest Region.  Examples of the types of projects implemented through this program  include: restoring fish passage and hydrologic connectivity at road- stream crossings; upgrading roads that are needed and  decommissioning roads that are no longer needed; and protecting and  restoring riparian areas to protect and restore stream temperatures.  Forest Service reported expenditures of about $92 million in fiscal  years 2014 through 2016 for these types of aquatic restoration  projects implemented in national forests that contribute water flow to  the Columbia River Basin. This includes about $4.6 million in funding  received from other federal agencies, such as BPA, the Corps,  Reclamation, FWS, Bureau of Land Management, and the Federal  Highway Administration. It also includes approximately $19 million in  funding provided to other federal, state, tribal, nongovernmental, and  local entities to support implementation of their restoration-related  projects in the Basin.", "USGS\u2019s National Water Quality Programs. USGS reported total  expenditures of about $40 million from fiscal years 2014 through 2016  for Columbia River Basin water quality-related restoration efforts. This  includes funding through appropriations, matching funds, and cost- reimbursable activities for projects and studies implemented through  its national programs and Idaho, Oregon, Washington, and Wyoming- Montana regional Water Science Centers. This includes around $12  million in expenditures for National Water Quality Program activities,  which provide an understanding of whether water quality conditions  are improving or worsening over time, and how natural features and  human activities affect those conditions. One of the efforts  implemented through this program during this time frame was a  regional study, the Pacific Northwest Stream Quality Assessment;  USGS expenditures for this effort were about $3.3 million. The  objectives of the regional study included determining the status of  stream quality across the region by assessing various water quality  factors that are stressors on aquatic life\u2014such as contaminants,  toxicity, and streamflow\u2014and evaluating their relative influence on  biological communities."], "subsections": []}]}, {"section_title": "EPA and OMB Have Not Yet Implemented Clean Water Act Section 123", "paragraphs": ["EPA and OMB have not yet implemented actions required under Clean  Water Act Section 123, which was enacted in 2016. Specifically, EPA has  not yet established the Columbia River Basin Restoration Program,  including its associated Working Group. In addition, OMB has not yet  prepared and submitted as part of the President\u2019s annual budget request  an interagency crosscut budget on federal agencies\u2019 budgets for and  spending on environmental protection and restoration efforts in the Basin."], "subsections": [{"section_title": "EPA Has Not Yet Established the Columbia River Basin Restoration Program", "paragraphs": ["According to EPA officials we interviewed, the agency has not yet taken  steps to establish the Columbia River Basin Restoration Program,  including the Columbia River Basin Restoration Working Group, as  directed by Clean Water Act Section 123. In addition, agency officials  told us that they were not currently planning to do so, as the agency has  not received dedicated funding appropriated for this purpose. These  officials acknowledged, however, that the agency has not yet requested  funding to implement the program nor initiated any studies or  assessments to identify what resources it may need to establish the  program.", "We have previously reported that the Project Management Institute\u2019s The  Standard for Program Management provides generally recognized  leading practices for program management. It provides an overview of a  program\u2019s three life cycle phases and associated actions with each  phase. The primary purpose of the first phase\u2014program definition\u2014is  to progressively elaborate the goals and objectives to be addressed by  the program, define the expected program outcomes and benefits, and  seek approval for the program. This phase has two distinct but  overlapping sub-phases:", "Program formulation: involves development of the business case for  the program, including initiating studies and estimates of scope,  resources, and cost.", "Program planning: commences upon formal approval of the program  and leads to the formation of a program team to develop the program  management plan.", "Upon completion of this first phase, an entity is to prepare a program  management plan and, with final approval, the program commences.", "Consistent with the practices established in The Standard for Program  Management, a program management plan would include, among other  components, a schedule of the actions an entity is to take, as well as the  resources and funding needed to establish a program. By developing a  program management plan that includes a schedule of the actions the  entity will take and the resources and funding needed to establish and  implement the program and submitting this plan to the appropriate  congressional authorizing committees as part of the fiscal year 2020  budget process, EPA will have more reasonable assurance that it can  establish the program in a timely manner. Further, in establishing the  program under Section 123, EPA will need to also establish the Working  Group, which is to recommend and prioritize projects and actions and  review the progress and effectiveness of restoration projects and actions  implemented throughout the Basin."], "subsections": []}, {"section_title": "OMB Has Not Yet Submitted an Interagency Crosscut Budget on Federal Agencies\u2019 Spending for Environmental Protection and Restoration Efforts in the Columbia River Basin", "paragraphs": ["According to OMB officials we interviewed, the agency has not yet  submitted an interagency crosscut budget or requested that federal  agencies provide information on their budgets and spending for Columbia  River Basin environmental protection and restoration efforts as directed  by Clean Water Act Section 123. Specifically, the President\u2019s budget is  to include an interagency crosscut budget displaying amounts budgeted  and obligated by each federal agency involved with environmental  protection and restoration projects, programs, and studies relating to the  Basin. While OMB officials acknowledged the agency is responsible for  preparing the interagency crosscut budget for the Basin, they told us that  the agency has only had preliminary internal discussions about the best  approach for implementing the requirement, including whether to develop  guidance that would define key terms and the processes agencies should  follow in compiling the requested information. The officials, however,  could not identify a time frame for when the agency anticipated finalizing  any guidance or when it would begin requesting federal agencies provide  OMB the information it needs to include in the interagency crosscut  budget submission to Congress. Federal standards for internal control  calls for an agency to design control activities to achieve objectives and  respond to risks, such as by clearly documenting internal controls in a  manner that allows the documentation to be readily available for  examination (e.g., the documentation may appear in management  directives, administrative policies, or operating manuals). By developing  and providing guidance on the types of projects and activities that  agencies should include in their reports, as well as what processes they  should follow in compiling the related budget and spending information,  OMB would have more reasonable assurance that the agencies provide  comparable information about their restoration efforts.", "According to a 2011 Congressional Research Service report, an  interagency crosscut budget is often used to present budget information  from two or more agencies whose activities are targeted at a common  policy goal or related policy goals. As outlined in a 2015 federal report,  an interagency crosscut budget can help facilitate federal agency  coordination and collaboration for restoration activities that can benefit  from an integrated approach, and it can help increase cost  effectiveness. That report also noted that collecting budget information  from the agencies involved can help identify high-level trends in  restoration-related funding over time. We recognize that agencies will  differ in their budget and account management practices as well as the  complexities of the federal budget process. However, as the 2011  Congressional Research Service report concluded, by providing agencies  guidance and criteria that they can use to determine which projects and  programs will be tracked across agencies, the process for developing an  interagency crosscut budget can account for the differences in how  agencies fund and implement their restoration-related efforts. The report  also noted that crosscut budgets can help make data from multiple  agencies more understandable and could be used to inform  congressional oversight committees, participating agencies, and other  entities implementing an ecosystem initiative. By directing each federal  agency involved in the protection and restoration of the Basin to collect  the information needed for the interagency crosscut budget and to submit  this information to OMB for inclusion in the President\u2019s budget request for  fiscal year 2020, OMB can better inform Congress as it considers funding  for restoration efforts in the Basin as part of the annual budget process."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Federal agencies and other entities have undertaken a wide range of  water quality-related restoration efforts in the Columbia River Basin for  many years. The Water Infrastructure Improvements for the Nation Act of  2016 amended the Clean Water Act by adding Section 123 on Columbia  River Basin Restoration, which requires the EPA Administrator to  establish the Columbia River Basin Restoration Program, including its  associated Working Group. This collaborative stakeholder-based program  is to oversee and help coordinate environmental protection and  restoration activities implemented throughout the Columbia River Basin.  However, because EPA has not yet established the Program and  Working Group, entities do not currently use a basin-wide collaborative  approach to coordinate water quality-related restoration efforts being  implemented throughout the Basin. Furthermore, EPA does not have a  program management plan for this effort. By developing a program  management plan for the effort, consistent with The Standard for Program  Management, EPA will have more reasonable assurance that it can  implement Clean Water Act Section 123 in a timely and effective manner.  Furthermore, by establishing the Columbia River Basin Restoration  Program, including the associated Working Group, EPA will be better  positioned to carry out its responsibilities, which include prioritizing and  evaluating the progress and effectiveness of environmental protection  and restoration projects and actions implemented throughout the  Columbia River Basin as required by law.", "In addition, Clean Water Act Section 123 requires the President\u2019s budget  to include an interagency crosscut budget displaying amounts budgeted  and obligated by each federal agency involved with environmental  protection and restoration projects, programs, and studies relating to the  Columbia River Basin. Such a crosscut budget would include amounts  obligated for the preceding fiscal year; an estimated budget for the  current fiscal year; and a proposed budget for the next fiscal year for the  Basin. Given the difficulties we identified in determining federal  expenditures for water quality-related restoration efforts implemented in  the Columbia River Basin, by developing definitions and guidance on the  types of projects, programs, and studies federal agencies should include  in their reports and processes to follow in compiling their budgets, OMB  could help ensure that they provide consistent and comparable  information that OMB needs for the crosscut budget submission to  Congress. Having consistent and comparable information on federal  agency expenditures and budgets is critical to helping ensure that  Congress and the relevant appropriating committees can make informed  decisions about funding Columbia River Basin restoration efforts in their  annual budget deliberations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations, one to EPA and two to  OMB. Specifically:  The Administrator of the EPA should develop a program management  plan that includes a schedule of the actions EPA will take and the  resources and funding it needs to establish and implement the Columbia  River Basin Restoration Program, including formation of the associated  Columbia River Basin Restoration Working Group, and submit this plan to  the appropriate congressional authorizing committees as part of the fiscal  year 2020 budget process. (Recommendation 1).", "The Director of OMB should develop and provide guidance on the types  of projects and activities that agencies involved in the protection and  restoration of the Columbia River Basin should include in their reports, as  well as the processes they should follow in compiling the related budget  and spending information. (Recommendation 2).", "The Director of OMB should direct each federal agency involved in the  protection and restoration of the Columbia River Basin to collect the  information OMB needs for the interagency crosscut budget and to submit  this information to OMB for inclusion in the interagency crosscut as part of  the President\u2019s budget request for fiscal year 2020. (Recommendation 3)."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to EPA, OMB,  and the departments of Agriculture, Commerce, Defense, Energy, and the  Interior. We also provided a draft of the report to the Idaho Department of  Environmental Quality, Montana Department of Environmental Quality,  Oregon Department of Environmental Quality, and Washington State  Department of Ecology. EPA provided written comments, which are  reproduced in appendix IV, and stated that it agreed with the conclusions  and recommendation in our report. The Department of Agriculture also  provided written comments, which are reproduced in appendix V. The  departments of Defense and the Interior and the Washington State  Department of Ecology responded by email that they did not have  comments on the draft report. The departments of Commerce and Energy  and the Idaho Department of Environmental Quality provided technical  comments, which we incorporated as appropriate. OMB, the Montana  Department of Environmental Quality, and the Oregon Department of  Environmental Quality did not provide any comments.", "In its written comments, EPA stated that it agrees with our  recommendation to develop a program management plan that includes  schedule of the action it will take and the resources and funding needed  to establish and implement the Columbia River Basin Restoration  Program and associated Working Group as required under Clean Water  Act Section 123. EPA stated that it will work with its partners within the  existing governance structures to begin discussions on the development  of a program management plan. As an initial step, the agency will  reconvene the Columbia River Toxics Reduction Working Group to initiate  discussion for how to approach implementation of Section 123. Further,  EPA stated it stands ready to work with OMB on an interagency cross cut  budget after OMB provides guidance on the types of projects and  activities necessary to develop the budget.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Agriculture, Commerce, Defense, Energy,  and the Interior; the Administrator of EPA; the Director of OMB; and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) restoration efforts to improve water quality in the  Columbia River Basin from fiscal years 2010 through 2016; (2)  approaches to collaboration that entities have used for selected efforts,  including factors they identified that enabled or hindered collaboration in  the Basin; (3) the sources of funding and federal funding expenditures;  and, (4) the extent to which the Environmental Protection Agency (EPA)  and the Office of Management and Budget (OMB) have implemented  Clean Water Act Section 123.", "For all four objectives, we reviewed relevant laws, including the Clean  Water Act. We also conducted interviews and reviewed documentation  from entities around the Basin, including federal agencies, state agencies  responsible for managing water quality in their state, federally and non- federally recognized tribes and tribal organizations, and nongovernmental  organizations. We also conducted a site visit to Portland, Oregon to meet  with officials from federal agencies, a tribal organization, and a  nongovernmental entity regarding their activities related to restoration  efforts in the Columbia River Basin. We limited the scope of our review to  the United States, specifically to the four states with the largest square  mileage in the Columbia River Basin: Idaho, Oregon, Montana, and  Washington.", "To examine restoration efforts to improve water quality in the Columbia  River Basin implemented from fiscal years 2010 through 2016, we  administered a survey to entities that implement restoration efforts in the  Basin (see app. III for a blank copy of the survey). The survey asked  each entity to individually list any water quality-related programs they  implemented in the Basin from fiscal years 2010 through 2016. The  survey included maps of the Columbia River Basin to provide  respondents a common point of reference. For each program, we asked  respondents to identify:  the program\u2019s primary and secondary purposes; one or two key examples of the activities conducted as part of the whether the entity was the only entity responsible for implementing whether the entity was the lead entity responsible for implementing what other entities, if any, were involved with implementing the  the primary authorities under which the entity implemented the  program;  the state(s) and area(s) within the Basin in which the program was  implemented; a website containing primary source documents and other relevant  information on the program; whether the entity received any federal funding to support  implementation of the program;  the sources of the federal funding, if any; whether the entity tracks expenditures of federal funding specifically  for which fiscal years, if any, from fiscal years 2010 through 2016 the  entity would be able to provide information on the annual amount of  federal funding expended for this program; whether the entity would be able to provide actual expenditures,  estimated expenditures, or neither for the annual amount of federal  funding the entity expended on the program; how the entity collected expenditure data; any nonfederal sources of funding that supported the entity\u2019s  implementation of the program; and a primary point of contact for any follow-up questions on the program.", "We conducted telephone pretests of the survey with 4 entities and revised  it in response to their comments. During this process, we sought to  ensure that (1) the questions were clear and unambiguous, (2) we used  terminology correctly, (3) the survey did not place an undue burden on  respondents, and (4) respondents had sufficient information to answer the  questions.", "We identified and sent the survey to 41 entities based on the following  criteria: federal agencies whose missions relate to restoration efforts in  the Basin, state agencies responsible for water quality issues for the four  states within our scope, federally and non-federally recognized tribes,  tribal organizations, and nongovernmental entities involved with  restoration efforts within the Basin. We emailed the survey in an attached  pdf form that respondents could return electronically after marking  checkboxes or entering responses into open-answer boxes. We sent the  survey with a cover letter on May 31, 2017. After 2 weeks, we sent a  reminder email, attaching an additional copy of the survey, to entities who  had not responded. After 4 weeks, we telephoned all respondents who  had not returned the survey and asked them to participate.", "We received responses from the entities listed in Table 4. We received 32  completed surveys from all of the 16 federal and state agencies that we  contacted and we received responses from 16 of the 25 federally and  non-federally recognized tribes, tribal organizations, and  nongovernmental entities that we contacted. Because we did not survey  every entity implementing restoration efforts in the Basin, the results from  our analysis may not include all restoration efforts implemented in the  Columbia River Basin from fiscal years 2010 through 2016.", "To assess the accuracy and completeness of the responses, we reviewed  and analyzed each completed survey. In particular, we contacted each  respondent at least once to follow-up on their responses and allowed  respondents to review, correct, and edit their responses if necessary.  During this follow-up, we asked questions to ensure that the responses to  each survey were complete, comparable, and accurate and to clarify  ambiguous responses. After we completed this follow-up, we analyzed  the list of compiled restoration efforts to assess whether each listed  restoration effort met general criteria. For example, we assessed the  responses to make sure the efforts represented a similar level of  aggregation, specifically at a program level. As part of our assessment,  we reviewed prior interviews and agency\u2019s or entity\u2019s documents and  websites. For example, in some instances the name of a restoration effort  listed in the survey did not match the name of the effort on the agency\u2019s  website. We recognize that despite implementation of our criteria, some  ambiguity may remain about the programs included in the catalog. Based  on our assessment, we further refined the list of restoration efforts and  developed the final list as presented in Appendix II.", "To examine approaches to collaboration that entities\u2014including federal  agencies, states, tribes, and nongovernmental entities\u2014have used for  select efforts, we selected five case examples for in depth review. We  used selection criteria to yield a limited number of efforts in the Columbia  River Basin that were among the broadest in scope with regards to their  geographic coverage and/or the number and type of entities involved  (e.g., interstate vs. intrastate programs, entities from multiple levels of  government) based on the survey responses we received. In addition, we  selected these efforts, in part, to highlight collaborative practices for  efforts implemented by a variety of entity types and with different primary  purposes (i.e., improving or monitoring surface water quality, reducing  toxic pollutants, recovering threatened or endangered species, or  restoring and protecting habitat). We conducted interviews with officials  from these five case example efforts on the collaborative practices they  used to plan and implement their programs and requested related  documentation for review. We derived the questions we used for the case  interviews from our prior reports on practices that may enable  collaboration. For example, we asked interviewees about mechanisms  they used for their given effort to define intended outcomes and roles and  responsibilities, identify resource needs (e.g., funding, staff) and their  sources, and ensure the compatibility of policies and procedures across  entities. Our prior reporting served as the conceptual framework for  understanding the collaborative practices used by officials leading these  case example efforts. We highlight in our report a single illustrative  collaborative practice used for each effort.", "In addition, we separately emailed four questions to each of the 11  federal agencies with water quality-related restoration efforts and that  responded to our survey, to solicit agency officials\u2019 opinions on practices  that may have enabled or hindered collaboration for efforts planned and  implemented by their respective agency. We sent these emails to the  same agency points of contact to which we sent the first survey designed  to identify restoration efforts in the Basin or to other officials the agency  identified as the relevant point of contact. We derived questions we  emailed from our prior reporting on factors that may enable collaboration.  We asked interviewees to consider efforts for which their agency had their  most and least successful experiences in collaborating with other  organizations on water quality-related restoration activities and to  systematically rank factors, from a list we provided, that enabled or  hindered their collaboration with the other organizations. We received  written responses from all 11 agencies. Our prior reports served as the  conceptual framework for developing the list of factors that we provided to  the respondents and from which they selected those that applied to their  agency\u2019s experience. We highlight the most commonly identified  collaboration enablers and hindrances.", "We systematically asked officials from the five case efforts and the 11  federal agencies that received the four questions we emailed for their  perspectives on the most significant challenges, if any, to enhancing  collaboration among entities involved in restoration efforts to improve  water quality in the Basin. We also systematically asked the same  officials for their suggestions, if any, for steps that could be taken to  enhance collaboration among entities involved in restoration efforts to  improve water quality in the Basin. We highlight some of the challenges  and suggestions respondents offered. Last, to determine whether a  mechanism exists for basin-wide collaboration on water quality-related  restoration programs, we reviewed existing legislation and interviewed  agency officials.", "To examine the sources of funding and federal funding expenditures in  the Columbia River Basin, we interviewed agency officials, reviewed  budget documents, analyzed responses to funding questions included in  our initial survey, and analyzed expenditure data for selected federal  efforts for fiscal years 2014 through 2016. Initially, we intended to use a  second survey to collect comprehensive data on expenditures for each  restoration effort that entities identified in response to our initial survey.  However, in pretests with agency officials, we identified significant  concerns with respect to the accuracy and completeness of information  that we would gather through this approach that would limit our ability to  compare expenditure data across agencies and efforts. Given the degree  of variability, uncertainty, and lack of detail in the information agencies  could provide, we concluded that the data would not be reliable for the  purposes of estimating their expenditures of federal funding for their  water-quality related restoration expenditures throughout the Columbia  River Basin.", "To provide some information on expenditures, we decided to modify our  comprehensive approach by shortening the time frame to fiscal years  2014 through 2016 and limiting the request to one restoration effort for  each of the 11 federal agencies. We selected the 11 restoration efforts  based on our review of the agencies\u2019 responses to questions in our initial  survey relating to the primary purpose(s) of the program and availability of  expenditure data. We then conducted interviews with agency officials to  learn more about the selected efforts and the availability and reliability of  expenditure data. Based on these interviews, we determined that for 6 of  the 11 programs, the efforts had limited activities in the Basin during this  time frame or the agencies would only be able to provide limited  information or would not be able to provide sufficiently reliable  expenditure data for the selected effort.", "We then distributed a second survey to 5 agencies\u2014 Bonneville Power  Administration (BPA), U.S. Army Corps of Engineers, EPA, U.S. Forest  Service, and U.S. Geological Survey. In this survey, we requested  expenditures information for a specified restoration effort and asked about  the sources and processes the agencies followed in compiling the  information. Based on our review of these responses, we determined that  the expenditure information for these specific restoration efforts was  sufficiently reliable for purposes of our reporting objective.", "To examine the extent to which EPA and OMB have implemented Clean  Water Act Section 123, we reviewed the law and legislative history. We  also requested documentation from and conducted interviews with  knowledgeable officials at EPA and OMB. We also identified program  management leading practices reported by the Project Management  Institute\u2019s The Standard for Program Management and discussed in our  prior reports. For example, we considered the applicable leading  practices for schedule and cost estimates, as well as other practices such  as the development of program management plans."], "subsections": []}, {"section_title": "Appendix II: Catalog of Columbia River Basin Water Restoration Efforts, Fiscal Years 2010 through 2016", "paragraphs": ["Table 5 provides a list of 188 Columbia River Basin water quality-related  restoration efforts identified by 11 federal agencies, 4 state agencies, 4  nongovernmental organizations, and 11 tribes and tribal entities in their  responses to our May 2017 survey, along with a brief description of each  effort and the restoration purpose(s) it supported. This list is primarily  based on the survey responses. The survey included definitions of key  terms including program, implement, and purposes of the programs. After  we received survey responses, we conducted multiple reviews of the  information, including asking the entities to review and edit the  information they provided. In some cases we supplemented their  responses with additional information available through other sources,  such as interviews with officials and reviews of agency documents, as  appropriate.", "Given the size of the Basin and number of entities involved, for our survey  we specifically requested respondents report the restoration efforts at a  programmatic level. In some instances, we decided to consolidate certain  efforts that appeared to be part of the same overall program and exclude  other efforts that appeared to be project-level efforts. Although we made  every attempt to gather a comprehensive list of restoration efforts  implemented by the entities listed below, including verifying the  information with the respective entities, this list may not capture all of the  relevant restoration efforts they implemented in the timeframe covered by  our review. Further, entities may have not have listed all of their relevant  efforts. We also acknowledge that the list does not reflect restoration  efforts in the Columbia River Basin that were implemented by other  entities not included within the scope of our review."], "subsections": []}, {"section_title": "Appendix III: Survey Distributed to Entities in the Columbia River Basin", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["J. Alfredo G\u00f3mez, (202) 512-3841 or gomezj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Barbara Patterson (Assistant  Director), Heather Dowey (Analyst in Charge), Stephen Betsock, Mark  Braza, John Delicath, Carol Henn, Karen Howard, Vondalee Hunt, David  Lysy, Jeff Malcolm, Michael Meleady, Dan C. Royer, Kiki  Theodoropoulos, and Sarah Veale made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Puget Sound Restoration: Additional Actions Could Improve Assessments  of Progress. GAO-18-453. Washington, D.C.: July 19, 2018.", "Long Island Sound Restoration: Improved Reporting and Cost Estimates  Could Help Guide Future Efforts. GAO-18-410. Washington, D.C.: July  12, 2018.", "Great Lakes Restoration Initiative: Improved Data Collection and  Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.:  July 21, 2015.", "Great Lakes Restoration Initiative: Further Actions Would Result in More  Useful Assessments and Help Address Factors That Limit Progress.  GAO-13-797. Washington, D.C.: September 27, 2013.", "Chesapeake Bay: Restoration Effort Needs Common Federal and State  Goals and Assessment Approach. GAO-11-802. Washington, D.C.:  September 15, 2011.", "Recent Actions by the Chesapeake Bay Program Are Positive Steps  Toward More Effectively Guiding the Restoration Effort, but Additional  Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008.", "South Florida Ecosystem: Restoration Is Moving Forward but Is Facing  Significant Delays, Implementation Challenges, and Rising  Costs.GAO-07-520. Washington, D.C.: June 4, 2007.", "Chesapeake Bay Program: Improved Strategies Are Needed to Better  Assess, Report, and Manage Restoration Progress. GAO-06-96.  Washington, D.C.: October 28, 2005.", "Great Lakes: Organizational Leadership and Restoration Goals Need to  Be Better Defined for Monitoring Restoration Progress. GAO-04-1024.  Washington, D.C.: September 28, 2004.", "Columbia River Basin: A Multilayered Collection of Directives and Plans  Guides Federal Fish and Wildlife Activities. GAO-04-602. Washington,  D.C.: June 4, 2004.", "Great Lakes: An Overall Strategy and Indicators for Measuring Progress  Are Needed to Better Achieve Restoration Goals. GAO-03-515.  Washington, D.C.: May 21, 2003.", "Columbia River Basin Salmon and Steelhead: Federal Agencies\u2019  Recovery Responsibilities, Expenditures and Actions. GAO-02-612.  Washington, D.C.: July, 26, 2002.", "South Florida Ecosystem Restoration: Substantial Progress Made in  Developing a Strategic Plan, but Actions Still Needed. GAO-01-361.  Washington, D.C.: May 27, 2001.", "Comprehensive Everglades Restoration Plan: Additional Water Quality  Projects May be Needed and Could Increase Costs. GAO/RCED-00-235.  Washington, D.C.: September 14, 2000."], "subsections": []}], "fastfact": ["Activities, such as hydropower and agricultural practices, have impaired water quality in parts of the Columbia River Basin. This has put human health at risk and threatened the existence of some species, such as salmon.", "Federal and state agencies, tribes and others have taken steps to improve Basin water quality. However, the U.S. Environmental Protection Agency and the Office of Management and Budget have yet to take actions required under a 2016 amendment to the Clean Water Act. EPA, for example, has not begun a program to oversee and help coordinate restoration efforts.", "We recommended these agencies take actions specified in the law.", "This page was updated to include a link to the recommendations in this report."]}
{"id": "GAO-18-84", "url": "https://www.gao.gov/products/GAO-18-84", "title": "Water Pollution: Some States Have Trading Programs to Help Address Nutrient Pollution, but Use Has Been Limited", "published_date": "2017-10-16T00:00:00", "released_date": "2017-10-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Nutrient pollution\u2014caused by excess nitrogen and phosphorus entering water bodies\u2014poses significant risks to the nation's water quality. Nutrients can enter water bodies from point sources and nonpoint sources. The Clean Water Act establishes the basic structure for regulating discharges of pollutants, including excess nutrients. Under the act, authorized states\u2014assisted and overseen by EPA\u2014set limits on nutrients impairing a water body and limits on point source discharges. EPA encourages states to use nutrient credit trading to address nutrient pollution. According to EPA, trading allows a point source to meet nutrient discharge limits by buying pollutant credits from a source that has reduced its discharges more than required.", "GAO was asked to examine nutrient credit trading programs. This report describes (1) the extent to which nutrient credit trading programs have been used and what the outcomes of the programs have been, (2) how states and EPA oversee nutrient credit trading programs, and (3) what key factors stakeholders view as affecting participation in nutrient credit trading. GAO reviewed EPA documents and interviewed EPA officials to gather information on trading programs. GAO then selected a nongeneralizable sample of three programs with the most trades in 2014 (based on the most recent available data); reviewed program documents; and interviewed EPA, state, and program officials and other stakeholders about the programs."]}, {"section_title": "What GAO Found", "paragraphs": ["In 2014, 11 states had 19 nutrient credit trading programs, and trading provided flexibility for some point sources, such as wastewater treatment plants, to meet nutrient discharge limits, according to Environmental Protection Agency (EPA) data and officials. The majority of nutrient credit trading during 2014 occurred in three state programs\u2014programs in Connecticut, Pennsylvania, and Virginia. A review of trading data from these programs showed that most point sources participating in the three state programs did not purchase credits in 2014 to meet their discharge limits, which are established in National Pollutant Discharge Elimination System (NPDES) permits under the Clean Water Act. For the point sources that did purchase credits in 2014, state officials in the three states told GAO that the total amount in pounds of nutrients that point sources purchased as credits was generally small. Nevertheless, state officials explained that nutrient credit trading was useful because it allowed point sources to manage risk, reduce the cost of compliance, and better manage the timing of upgrades of nutrient removal technology.", "States oversee nutrient credit trading programs, and EPA helps ensure that programs are consistent with the act. States oversee nutrient credit trading programs by approving and verifying the generation of credits to ensure that credits represent real reductions in nutrient pollution. A state's approval and verification process varies depending on whether the credit generator is a point or nonpoint source, such as runoff from agricultural and urban areas. For point sources, the states GAO reviewed followed a process for verifying credits that is based on the existing oversight process for NPDES permits. Because nonpoint sources do not have NPDES permits, states use a separate process to approve and verify that nonpoint sources' pollution reduction activities have generated credits for trading. When questions or concerns arise, EPA uses its oversight authority to ensure that trades and trading programs are fully consistent with the act. EPA officials told GAO that they conduct oversight primarily through the regional offices, which (1) review NPDES permits, (2) review and comment on state regulatory frameworks for trading, (3) conduct periodic on-site inspections, and (4) provide national-level guidance and training to state programs and stakeholders.", "According to stakeholders, two key factors have affected participation in nutrient credit trading\u2014the presence of discharge limits for nutrients and the challenges of measuring the results of nonpoint sources' nutrient reduction activities. Officials from the three states GAO reviewed and other stakeholders cited the importance of discharge limits for nutrients as a driver to create demand for trading. Without such a driver, point sources have little incentive to purchase nutrient credits. The challenges of measuring nutrient reductions by nonpoint sources create uncertainties about the value of credits generated by nonpoint sources. In part, because of these uncertainties, the states GAO reviewed either did not allow nonpoint sources to trade or created special rules for nonpoint sources. State officials and stakeholders also told GAO that even if a program allows nonpoint sources to trade, point sources often prefer to trade with other point sources because they have similar permit and monitoring requirements."]}], "report": [{"section_title": "Letter", "paragraphs": ["Nutrient pollution, caused by excess nitrogen and phosphorus entering  the environment, poses significant risks to the nation\u2019s water quality and  presents a growing threat to public health and local economies. Excess  nutrients can enter water bodies from point sources, such as industrial  facilities and wastewater treatment plants, and from nonpoint sources,  such as runoff from agricultural and urban areas. Nutrient pollution  contributes to a trend of increasing numbers of harmful algal blooms in  surface waters. These blooms can release toxins that can contaminate  drinking water sources and adversely affect recreation, tourism, and  fisheries. For example, in 2014, about 500,000 residents of Toledo, Ohio,  lost access to public drinking water for 4 days because of algal toxins in  the city\u2019s drinking water. The National Aquatic Resource Surveys,  conducted by the Environmental Protection Agency (EPA) and state and  tribal partners, have shown that nutrient pollution is a widespread issue  affecting the nation\u2019s waters. The 2012 survey of lakes, issued in  December 2016, found that 40 percent of the nation\u2019s lakes had high  levels of phosphorus and 35 percent had excessive levels of nitrogen  associated with harmful ecological impacts.", "The Clean Water Act, enacted in 1972, establishes the basic structure for  regulating discharges of pollutants, including excess nutrients, into the  waters of the United States and regulating quality standards for surface  waters. The act requires states to establish water quality standards that  protect public health and the environment and consider aquatic wildlife  and human consumption and recreation, among other uses. The act also  requires EPA to maintain and improve water quality by assisting and  overseeing states\u2019 efforts, among other responsibilities. States are  required to monitor and assess the conditions of water bodies, and those  that do not meet state water quality standards are considered impaired.  The Clean Water Act generally requires states to develop a pollutant  budget, known as a \u201ctotal maximum daily load\u201d (TMDL), for each pollutant  impairing a water body. In the case of nutrient impairment to a water  body, a TMDL would reflect the maximum amount of that nutrient that the  water body could contain and still be considered in compliance with water  quality standards.", "The act also made it unlawful to discharge any pollutant except in  compliance with law, which requires that point sources must obtain a  permit before discharging into navigable waters. Through its National  Pollutant Discharge Elimination System (NPDES) program, EPA requires  every point source to hold a permit limiting pollutant discharges, including  discharges of nutrients where appropriate. Under the act, EPA can  authorize state, tribal, and territorial governments to implement the  NPDES program, enabling them to develop NPDES permits and enact  other administrative and enforcement aspects of the NPDES program.  Currently, 46 states and one territory are authorized to administer and  enforce the NPDES program. For these entities, EPA retains oversight  responsibilities at multiple levels across the agency, including its  headquarters and 10 regional offices, and carries out those  responsibilities by establishing monitoring requirements, enforcement  provisions, and reporting requirements.", "Unlike point sources, nonpoint sources are not subject to regulation under  the Clean Water Act. Nonpoint source pollution, including pollution from  nutrients, remains a leading cause of impairment of the nation\u2019s waters,  according to EPA. In 1987, Congress amended the Clean Water Act,  adding section 319 to explicitly address nonpoint source pollution through  a cooperative, grant-based program with states, which funds projects to  reduce nonpoint source pollution and restore impaired water bodies.  Through this program EPA awards federal funds to states to develop and  implement nonpoint source management programs.", "In recent years, EPA has called on states and stakeholders to take further  actions that support or enhance the agency\u2019s efforts to reduce nutrient  pollution\u2019s effects on public health. As part of this effort, EPA has  continued to support water quality trading as an approach to help address  nutrient pollution. Water quality trading can address water quality  impairments from sediments and temperature, but most often trading is  used to address nutrients; specifically, total nitrogen and total  phosphorus. This type of water quality trading is also known as nutrient  credit trading and is the focus of this report. According to EPA, nutrient  credit trading allows a point source to meet its obligations for compliance  with a nutrient discharge permit limit by purchasing pollutant reductions,  or credits, created by another source or sources that achieved nutrient  reductions beyond what was required often through a market-based  approach. In their role as NPDES permitting authorities, states take the  lead in developing nutrient credit trading programs. Sellers of nutrient  credits may be point or nonpoint sources, depending on the framework of  an individual trading program. In 1992, when we last reported on water  quality trading to address water pollution, we identified four trading  programs nationwide, with only one trade made at the time of the report\u2019s  issuance. The limited activity in water quality trading nationwide was  attributed largely to uncertainties surrounding the use of trading. Since  2003, EPA has developed policy and guidance to facilitate the  development of water quality trading programs. In 2013, EPA and the  U.S. Department of Agriculture (USDA) signed a partnership agreement  to implement and coordinate policies and programs encouraging water  quality trading.", "You asked us to review issues related to nutrient credit trading. This  report (1) examines the extent to which nutrient credit trading programs  have been used and what the outcomes of the programs have been, (2)  describes how states and EPA oversee nutrient credit trading programs,  and (3) describes what key factors stakeholders view as affecting  participation in nutrient credit trading.", "To examine the extent to which nutrient credit trading programs have  been used and what the outcomes of the programs have been, we first  reviewed an internal EPA list of water quality trading programs and  estimated trades for 2014, the most recent data available at the time we  conducted our review. EPA officials explained that the data reported by  states to EPA varied somewhat in completeness and consistency. For  example, not all programs reported data on the number of trades for  calendar year 2014. To gather additional information about EPA\u2019s list of  programs, we emailed or interviewed officials from all 10 EPA regions to  obtain confirmation on the presence or absence of trading programs in  each state in 2014. We identified 7 EPA regions that had some form of  water quality trading program in one or more of the states in their regions.  We interviewed EPA regional officials to determine which of the programs  (1) included point sources with NPDES permits that allowed for water  quality trading and (2) were established for the specific purpose of trading  nutrient credits (i.e., nutrient credit trading programs). From this list of  nutrient trading programs, we then selected a nongeneralizable sample of  three programs to examine in more detail. We selected three programs  that in 2014 had the most trades and the most participating point sources.  Because these programs were judgmentally selected, the results of our  review of these programs cannot be generalized. To gather information  about the establishment and structure of the programs, number and type  of trades in 2014, and outcomes of the programs, we reviewed program  documents. Specifically, we reviewed state laws and regulations, NPDES  permits, watershed implementation plans, program rules and policies,  annual summaries of nutrient credit purchases and sales, and  assessments of state trading programs when available. We also  interviewed state and program officials and other stakeholders  knowledgeable about these programs.", "To describe how states and EPA oversee nutrient credit trading  programs, we reviewed relevant federal laws, regulations, and EPA  policies and guidance related to nutrient credit trading. We also  interviewed agency officials from EPA\u2019s Office of Water and the 7 EPA  regions with nutrient credit trading programs. In addition, we reviewed  documents and interviewed state and program officials and other  stakeholders for our nongeneralizable sample of three nutrient credit  trading programs.", "To describe what key factors stakeholders view as affecting participation  in nutrient credit trading, we spoke with officials from EPA\u2019s Office of  Water, officials from the 7 EPA regions with nutrient credit trading  programs, and officials and stakeholders from the nongeneralizable  sample of three nutrient credit trading programs. We also reviewed  documents and interviewed officials for one nongeneralizable multi-state  trading program to provide an additional example of the key factors and  how they affect participation in nutrient credit trading programs. Finally,  we interviewed representatives of stakeholder groups, such as those  representing wastewater treatment facilities, national organizations for  water issues, and agricultural conservation districts. Appendix I contains  more detailed information on the objectives, scope, and methodology of  our review.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides a brief background into nutrient pollution, federal  and state activities to address water pollution, and nutrient credit trading."], "subsections": [{"section_title": "Nutrient Pollution", "paragraphs": ["According to EPA, nutrient pollution is one of America\u2019s most widespread,  costly, and challenging environmental problems. Nutrients are natural  parts of aquatic ecosystems that support the growth of algae and aquatic  plants, which provide food and habitat for fish, shellfish, and smaller  organisms that live in water. However, when too many nutrients enter the  environment, often as the direct result of human activities, the air and  water can become polluted. The primary sources of nutrient pollution are  fertilizer, animal manure, wastewater treatment plants, power plants,  storm water runoff, cars, detergents, failing septic tanks, and pet waste.  (See fig. 1.)", "Too much nitrogen and phosphorus in surface waters can cause algae to  grow faster than ecosystems can handle. Significant increases in algae  can harm water quality and habitats. Large growths of algae, called algal  blooms, can severely reduce or eliminate oxygen in the water, leading to  the illnesses and death of large numbers of fish. Some algal blooms are  harmful to humans because they produce elevated levels of toxins and  bacteria that can make people sick if they come into contact with or drink  contaminated water or consume tainted fish or shellfish. According to a  2016 memorandum from EPA, nutrient pollution contributes to a trend of  increasing numbers of harmful algal blooms in surface waters and  consequentially a growing threat to public health and local economies.  For instance, in 2016, algal blooms occurred along U.S. coastlines from  Alaska to Florida, closing beaches, affecting tourism and local  economies, and resulting in a state of emergency declaration in four  coastal counties in Florida and more than 250 health advisories  nationwide."], "subsections": []}, {"section_title": "Federal and State Activities to Address Water Pollution", "paragraphs": ["The Clean Water Act establishes a nationwide approach improving and  maintaining the quality of rivers, streams, lakes, and other surface water  bodies. Under this approach, states\u2014overseen by EPA\u2014are to set water  quality standards, monitor water quality, and assess water quality against  the applicable standards. Water quality standards define the water quality  goals of a water body, or portion thereof, by designating the use or uses  to be made of the water and by setting criteria necessary to protect the  uses. These standards establish an additional legal basis for controlling  pollution entering the waters of the United States from point sources,  such as wastewater treatment plants. Water quality standards include  the following, among other things: designated uses of the water body, such as the protection and  propagation of fish, shellfish, and wildlife;  criteria to protect designated uses, such as specific criteria or levels  for toxic or nutrient pollutants that could harm aquatic life; anti-degradation requirements that describe the conditions under  which water quality may be lowered in surface waters while still  protecting existing uses and high quality waters; and other general policies to address implementation issues.", "To protect a water body\u2019s designated uses, a state must establish  numeric criteria, or, where numeric criteria cannot be established or as a  supplement to them, narrative or biomonitoring criteria. EPA has  encouraged states to incorporate numeric criteria into water quality  standards and TMDLs for water bodies with nutrient impairments because  they require less interpretation to implement than narrative criteria.  Numeric criteria express precise, measurable levels of particular  chemicals or conditions allowable in a water body. In contrast, narrative  criteria express in a qualitative form how to protect a designated use of a  water body. Narrative criteria often describe the desired conditions of a  water body as being \u201cfree from\u201d certain negative conditions. For instance,  to protect a designated use, narrative criteria could require that a  particular water body be free from floating non-petroleum oils of vegetable  or animal origin. According to EPA, under most circumstances, water  quality criteria that limit specific toxic pollutants are expressed  numerically. However, according to EPA officials, most water quality  criteria that limit nutrient pollutants are expressed narratively. EPA has  provided support to states on how to develop numeric criteria through  written guidance, webinars, and workshops. According to EPA officials  and data, however, there has been limited state progress in developing  numeric criteria for nutrients. As of 2017, six states had at least one  statewide numeric criterion for either nitrogen or phosphorus for some  water bodies.", "Through the monitoring and assessment process, states are to identify  water bodies that do not meet established water quality standards and  are therefore considered to be impaired. The Clean Water Act generally  requires\u2014for each water body that a state has identified as impaired\u2014 that the state develop a TMDL for each pollutant impairing the water  body. A TMDL reflects the calculation of the maximum amount of a pollutant that a water body can receive, while meeting and continuing to  meet water quality standards for that particular pollutant. A TMDL  determines a pollutant reduction target and allocates load reductions  necessary to meet that target to both point and nonpoint source(s) of the  pollutant, although under the Clean Water Act only point sources can be  required to reduce pollutants. For a point source, legal discharge limits  based on the targets identified in the TMDL are incorporated into an  NPDES permit. An NPDES permit can be issued as an individual permit  to a single facility, written to reflect site-specific conditions of that facility,  or as a general permit for multiple facilities with similar operations and  types of discharges. For example, Connecticut uses a general permit to  implement the Long Island Sound TMDL. This permit authorizes 79  wastewater treatment facilities to discharge nitrogen into the sound and  includes a specific nitrogen limit for each facility.", "Under the Clean Water Act and EPA\u2019s regulations, states or EPA can  typically determine the most appropriate geographic area and pollutants  for each TMDL. The Chesapeake Bay TMDL is the largest TMDL that  EPA has developed. This TMDL identifies the necessary nutrient pollution  reductions across the bay jurisdictions, which encompass seven states in  a 64,000-square-mile watershed, and comprise 276 smaller TMDLs for 92  individual Chesapeake Bay tributaries. Similarly, the Long Island Sound  TMDL identifies the necessary nitrogen pollution reductions for parts of  Connecticut and New York that discharge into the sound. In contrast,  many TMDLs cover a single water body, such as a lake or a segment of a  river.", "Unlike its approach for point sources, the Clean Water Act\u2019s approach to  curtailing nonpoint source pollution is largely voluntary. One of the  primary ways that EPA addresses nonpoint source nutrient pollution is  with the section 319 program. Through this grant-based program, EPA  funds voluntary projects aimed at reducing nonpoint source pollution,  particularly runoff from agricultural production. Grants from this program  support a wide variety of activities including the development and  implementation of best management practices (BMP), which are used to  reduce or eliminate the introduction of pollutants into receiving waters.  Some common agricultural BMPs include planting strips of trees or  shrubs along stream banks to serve as buffers or planting cover crops,  such as clover, in fields near water bodies to reduce nutrient runoff."], "subsections": []}, {"section_title": "Nutrient Credit Trading", "paragraphs": ["EPA also encourages states to use nutrient credit trading to help address  nutrient pollution. Nutrient credit trading programs are designed to allow a  point source to purchase pollutant reduction credits from another point  source or a nonpoint source in the same watershed with the intent of  meeting the discharge limits established in an NPDES permit. These  limits establish a baseline that credit generators must discharge below  before they can sell credits. According to EPA guidance, point sources  that exceed their discharge limit can buy credits to be compliant with their  permits, and point sources that have discharged below their limits can sell  credits. Because the Clean Water Act does not require nonpoint sources  to meet nutrient reduction targets established in a TMDL, there is no  demand to buy credits. However, nonpoint sources can sell credits in  some programs once these sources have reduced pollution below the  targets established in the TMDL for the watershed or geographic area. To  provide states with guidance on developing and implementing trading  programs, EPA issued its Water Quality Trading Policy in 2003 and its  Water Quality Trading Toolkit for Permit Writers in 2007. According to  the EPA toolkit, states have the flexibility to structure a trading program to  meet state needs including the type of entities allowed to trade; the types  of pollutants traded, such as nutrients; and the mechanism for carrying  out the trades. Additionally, the legal and policy framework for trading  programs can vary.", "The Clean Water Act does not explicitly identify trading as an option to  comply with NPDES permits. According to EPA\u2019s guidance, however, the  act provides authority for EPA and states to develop a variety of programs  and activities to control pollution; including trading programs, provided  that these programs are consistent with the act. For instance, trading  must not violate any of the act\u2019s provisions, such as the anti-degradation  policy, which maintains and protects the existing uses of water bodies, or  the anti-backsliding policy, which prohibits the modification of existing  NPDES permits with less stringent standards than those established in  the previous permit."], "subsections": []}]}, {"section_title": "Eleven States Had Nutrient Credit Trading Programs in 2014, and Trading Provided Flexibility for Some Point Sources to Meet Nutrient Discharge Limits in the 3 States We Reviewed", "paragraphs": ["According to EPA data and interviews with EPA officials, in 2014, a total  of 19 nutrient credit trading programs existed in 11 states. The majority of  nutrient credit trades occurred in 3 states\u2014Connecticut, Pennsylvania,  and Virginia. Most point sources participating in these 3 state programs in  2014 did not purchase credits. However, EPA and state officials and  stakeholders told us that trading provided point sources with flexibility that  allowed them to manage risk, reduce the cost of compliance, and better  manage the timing of upgrades of their nutrient removal technology."], "subsections": [{"section_title": "Eleven States Had a Total of 19 Trading Programs in 2014, and 3 States Accounted for the Majority of Trades, According to EPA", "paragraphs": ["In 2014, a total of 19 nutrient credit trading programs existed in 11 states,  according to EPA data and interviews with EPA officials. These 11 states  were California, Connecticut, Florida, Georgia, Idaho, Minnesota, North  Carolina, Ohio, Pennsylvania, South Carolina, and Virginia. Three of the  states\u2014Georgia, Minnesota, and North Carolina\u2014had more than one  nutrient credit trading program. Each program covered a specific  watershed, portion of a watershed, municipality, or permit holder (see fig.  2). See appendix II for a list of the 19 programs.", "EPA documents and officials indicated that trading may be less viable in  some locations than in others. EPA\u2019s documentation discusses factors  that can affect the viability of trading. For example, trading should occur  within an area\u2014such as a watershed\u2014that is appropriately defined to  ensure that trades will maintain water quality standards within that area.", "In a 2008 evaluation of water quality trading, EPA identified other  location-specific conditions that influence whether trading occurs,  including the regulatory environment, the nature of participants, and  watershed characteristics. EPA officials in Region 9 explained, for  example, that they do not see strong demand for nutrient credit trading in  their region because there are not many nutrient impaired watersheds  with a favorable combination of point sources that need credits and willing  credit generators.", "Trading activity varied among the 19 programs. According to EPA data,  not every state with a trading program had trades in 2014. According to  EPA data and officials, the majority of nutrient credit trades occurred in 3  states\u2014Connecticut, Pennsylvania, and Virginia\u2014which were also the  largest programs in terms of the number of participating point sources.  According to state data and officials, the number of trades in these states  in 2014 ranged from 31 to 151. (See table 1.)", "Under EPA guidance, each state has the flexibility to establish or approve  a nutrient credit trading program or programs to meet its own situation.  The three programs we reviewed are each structured somewhat  differently. Specifically, see the following:", "Connecticut adopted legislation for a nutrient trading program in  2001. The state also issued a general permit in 2002 that allows 79  point sources in the Long Island Sound watershed to trade nitrogen  credits. Connecticut\u2019s program does not allow nonpoint sources to  generate credits. All nutrient credit trades are automatically processed  annually by the state credit exchange, known as Connecticut\u2019s  Nitrogen Credit Exchange Program. Connecticut state officials  explained that, at the end of the year, the exchange compares each  point source\u2019s total pounds of nitrogen discharged to its discharge  limit. Each point source that discharges less than its limit receives a  payment from the exchange. Each point source that discharges more  than its limit\u2014and thus would be out of compliance with the general  permit if it failed to secure credits in a timely manner\u2014is billed for the  credits needed to bring it into compliance with its discharge limits.  Because these transactions are conducted annually, the number of  trades reported for Connecticut in 2014 is the same as the number of  participating point sources that purchased credits in 2014.", "Pennsylvania established its trading policy and guidance in 2005.", "The state issues individual NPDES permits to point sources that allow  for trading both nitrogen and phosphorus credits in the Chesapeake  Bay watershed. In this program, both point sources and nonpoint  sources may generate credits to sell to point sources for compliance  with permit limits. Like Connecticut, Pennsylvania has an exchange  for buying and selling credits, which is called PENNVEST. Unlike  Connecticut, the exchange does not automatically conduct trades at  the end of the year. Instead, point sources and nonpoint sources can  choose whether to use the exchange to buy or sell credits, or whether  to conduct sales outside the exchange. Pennsylvania officials told  us that sales typically occur outside the exchange. According to  Pennsylvania officials, the proportion of trades going through the  exchange has been less than 10 percent annually since 2014.", "Virginia established its trading program through state legislation in  2005. The state uses a general NPDES permit that allows point  sources within the Virginia portion of the Chesapeake Bay watershed  to trade nitrogen and phosphorus credits. The general permit does not  normally allow point sources to use credits generated by nonpoint  sources for compliance with the general permit. Point sources  covered under this permit generally trade with each other through the  Virginia Nutrient Credit Exchange Association, although there can be  a handful of bilateral trades, according to Virginia officials and state  data."], "subsections": []}, {"section_title": "Most Point Sources Participating in the Three State Programs We Reviewed Did Not Purchase Credits, but Trading Provided Flexibility, According to Officials", "paragraphs": ["In the three states we reviewed, most point sources participating in the  trading programs did not purchase credits to meet nutrient discharge  limits, according to state data and officials. Officials from each state  explained that many point sources have upgraded their nutrient removal  technology in order to help them meet discharge limits. For example, from  2002, when Connecticut\u2019s trading program began, through 2014, 53 of  the 79 point sources in Connecticut\u2019s trading program had invested in  new technology to improve nutrient removal, according to state  documents. As a result, many of those point sources generate nutrient  reductions that they can sell as credits and do not usually need to  purchase credits, according to state data and officials. Most point sources  in the three states we reviewed did not purchase credits in 2014. (See  table 2.)", "The percentage of point sources in those trading programs that did  purchase credits to meet discharge limits ranged from 14 to 49 percent,  depending on the state. Specifically, see the following:  In Virginia, 14 percent of point sources in the trading program  purchased credits in 2014\u2014the lowest percentage in the states we  reviewed. Virginia officials told us that few point sources purchased  credits because many point sources upgraded their nutrient removal  technology before implementing the TMDL in anticipation of the  stricter discharge limits and were able to meet discharge limits without  purchasing credits.", "In Pennsylvania, 29 percent of point sources in the trading program  purchased credits in 2014. Officials in Pennsylvania told us, however,  that the demand for credits has continued to drop as point sources  upgrade their nutrient removal technology. They said that most point  sources that were planning to upgrade have done so.", "In Connecticut, 49 percent of point sources in the trading program  purchased credits in 2014\u2014the highest percentage of the states we  reviewed. According to Connecticut\u2019s 2014/2015 program report, the  number of point sources that bought credits in 2014 was due to (1)  increased discharges from three large wastewater treatment facilities  that were under construction that year and (2) cold weather that  affected the ability of point sources to remove nutrients from their  discharges using biological processes. For comparison, 35 percent of  point sources bought credits in Connecticut in 2015. A member of the  Nutrient Credit Exchange Advisory Board in Connecticut told us that  since the program began in 2002, the number of point sources that  have needed to buy credits has generally decreased over time as  these facilities have upgraded their nutrient removal technology. State  officials expect this trend to continue in the future as more point  sources complete their technology upgrades.", "For the point sources that did purchase credits in 2014, state officials in  the three states we reviewed told us that the total amount (in pounds) of  nutrients that point sources purchased as credits to meet their individual  discharge limits was generally small relative to the aggregate discharge  limits (see table 3). In addition, the number of credits purchased by point  sources was generally much less than the number of credits generated  (see table 4). However, because the three programs collect data  differently, we could not make comparisons across all three states for  both measures. Specifically, for two of the states\u2014Connecticut and  Virginia\u2014we were able to compare the amount (in pounds) of nutrients  purchased to the aggregate discharge limit, but we did not have  comparable data for Pennsylvania. For the number of credits purchased  relative to the number of credits available, we were able compare the  data for Pennsylvania and Virginia, but we could not make the  comparison for Connecticut. Nevertheless, the available state data show  that the amount (in pounds) of nutrient credits purchased in these three  programs in 2014 was generally small.", "The state data for 2014 showed that the amount of nutrient credits  purchased in these three programs was generally small. Specifically, see  the following:", "Point sources participating in Connecticut\u2019s nutrient credit trading  program in 2014 purchased about 645,000 pounds of nitrogen credits  to meet individual discharge limits. In total, point sources in the  program had an aggregate discharge limit of about 3.3 million pounds  for nitrogen. Point sources in Connecticut purchased the most pounds  relative to the aggregate discharge limit among the states we  reviewed\u2014about 20 percent. However, in 2014, point sources  removed far more nutrients\u20145.3 million pounds of nitrogen\u2014than the  645,000 pounds purchased.", "Point sources participating in Virginia\u2019s nutrient credit trading program  in 2014 purchased about 164,000 pounds of nitrogen credits and  35,000 pounds of phosphorus credits to meet individual discharge  limits. In total, point sources in the program had an aggregate  discharge limit of about 19 million pounds for nitrogen and 1.6 million  pounds for phosphorus. Therefore, the pounds of nitrogen and  phosphorus traded in Virginia in 2014 represented about 1 percent  and 2 percent, respectively, of the aggregate discharge limit for these  nutrients. In addition, the number of credits purchased by point  sources in Virginia was less than the number of credits generated.  Specifically, point sources in Virginia purchased about 164,000  nitrogen credits out of 6 million nitrogen credits generated, and about  35,000 phosphorus credits out of 797,000 phosphorus credits  generated.", "Officials in Pennsylvania told us that the amount of nutrients traded in  their program was small relative to the aggregate discharge limits, but  they could not provide data in terms of pounds that we could use to  make the comparison. However, data from Pennsylvania show that  the number of credits purchased by point sources was generally much  less than the number of credits generated. Specifically, point sources  in Pennsylvania purchased about 805,000 nitrogen credits out of 1.9  million nitrogen credits generated, and about 85,000 phosphorus  credits out of 111,000 phosphorus credits generated.", "In the three states we reviewed, most credits sold were generated by  point sources, not nonpoint sources. As previously discussed,  Pennsylvania was the only state we reviewed that allowed nonpoint  sources to generate and sell credits. Of the credits sold in Pennsylvania,  a relatively small percentage was sold by nonpoint sources. Specifically,  nonpoint sources sold 36 percent of all nitrogen credits purchased in  2014 and 11 percent of all phosphorus credits. According to state  officials, there were seven nonpoint source sellers of credits, including at  least four sellers that aggregate credits generated by multiple agricultural  operations.", "Although most point sources in these states did not buy credits in 2014,  EPA officials, state officials, and point source stakeholders told us that  nutrient credit trading was important because it gave point sources  flexibility in meeting nutrient discharge limits. According to officials and  stakeholders, this flexibility allowed point sources to manage risk, reduce  the cost of compliance, and better manage the timing of upgrades of point  sources\u2019 nutrient removal technology. Specifically, see the following:", "Managing risk. Although each point source\u2019s permit contains specific  discharge limits, a point source\u2019s actual discharge varies from year to  year. For example, an official from the Virginia Nutrient Credit  Exchange Association explained that point sources will forecast their  anticipated discharge over a 5-year period. However, there can be  considerable variance from the forecast for any given year because  of, for example, unpredictable weather, which can upset biological  nutrient removal processes. Therefore, nutrient trading gives point  sources insurance against unexpectedly high discharges by allowing  them to \u201ctrue up\u201d at the end of the year by buying credits from point  sources that discharged below their limits. This reduces the risk that  an individual point source faces noncompliance with its permitted limit.", "Reducing the cost of compliance. Stakeholders said that upgrading  nutrient removal technology to meet discharge limits is economically  feasible for some point sources but is potentially unaffordable for point  sources with fewer financial resources and smaller economies of  scale. For example, one point source credit buyer in Connecticut told  us that the buyer\u2019s facilities had invested in upgrading nutrient  removal technology, but any additional upgrades to meet the  discharge limits would not be economically feasible. The buyer  explained that, within a trading program, those point sources with  lower pollution control costs can generate additional reductions in  pollution, which they can use to generate credits to sell to those point  sources with higher pollution control costs. As a result, trading can  make nutrient reduction efforts more cost-efficient system-wide.", "Managing the timing of upgrades. Trading helps point sources  better manage the timing of upgrades to their nutrient removal  technology, according to state officials and point source stakeholders.  For example, a point source stakeholder in Virginia told us that it  would have been difficult for all point sources to upgrade at once to  meet the new discharge limits established in the NPDES permit under  the TMDL, since there was a limited pool of engineers and  construction companies that could install these upgrades, and that  trading gave point sources time to schedule upgrades over several  years. Additionally, in Pennsylvania, a point source credit buyer  explained that the point source planned to complete a multi-year $34  million upgrade of its facilities in 2017 to meet discharge limits that  came into effect in October 2012. To meet discharge limits in the  meantime, the point source developed a program to purchase  nitrogen credits from local nonpoint sources that would implement  cover crop conservation practices to generate the necessary  reductions. Therefore, trading allowed the point source to meet  discharge limits during the period it was planning and completing the  upgrade.", "Although nutrient credit trading has provided point sources with flexibility  in meeting discharge limits, trading is not responsible for reducing nutrient  pollution, according to EPA, state, and other stakeholders. These  stakeholders told us that pollution reduction largely results from nutrient  discharge limits in permits and the nutrient removal technology that point  sources invest in to meet or reduce below those limits."], "subsections": []}]}, {"section_title": "States Oversee Nutrient Credit Trading Programs by Approving and Verifying Credit Generation, and EPA Reviews Permits That Allow for Trading", "paragraphs": ["States oversee nutrient credit trading programs by approving and  verifying credit generation to ensure that credits represent real nutrient  pollution reductions. EPA reviews permits, conducts periodic evaluations  of point source facilities to ensure that trading is consistent with the Clean  Water Act, and issues national-level guidance for nutrient credit trading."], "subsections": [{"section_title": "States Approve and Verify Credit Generation", "paragraphs": ["States oversee nutrient credit trading programs by approving and  verifying credit generation to ensure that credits represent real nutrient  pollution reductions. A state\u2019s approval and verification process varies  depending on whether the credit generator is a point or nonpoint source.  For point sources, the states we reviewed followed a process for verifying  credits that is based on the existing oversight process for NPDES  permits. Because nonpoint sources do not have NPDES permits, states  use a separate process to approve and verify that nonpoint sources\u2019  pollution reduction activities have generated credits for trading."], "subsections": [{"section_title": "Process for Approving and Verifying Point Source Credits", "paragraphs": ["States we reviewed approve credit generation by point sources by  including language that allows for trading in point sources\u2019 individual or  general NPDES permits. In Connecticut and Virginia, point sources  covered under the states\u2019 general permits are automatically approved to  generate nutrient credits for trading. In Pennsylvania, point source  facilities with language that allows for trading in their individual permits  and that meet requirements in the state\u2019s watershed implementation plan  are approved to generate credits. In all three states, the language that  allows for trading in these permits includes the individual discharge limit  for each point source, which is called a baseline, for trading purposes.  An approved point source is able to generate credits when it reduces its  discharge below its baseline.", "To verify point source credits, the states we reviewed each use an  oversight process based on its NPDES authority to oversee permits that  include discharge monitoring and reporting, and inspections. Federal  regulations require point sources with NPDES permits to periodically  monitor compliance with the effluent limitations established in their  permits and report the results to the permitting authority. Specific  monitoring and reporting requirements, including the frequency of  monitoring, are included in each permit. State officials in the three states  we reviewed all told us that they use discharge monitoring reports to  determine how many credits a point source has generated. For example,  according to the terms of the general permit for nutrient discharges in  Virginia, point sources must sample nitrogen and phosphorus from one  time per month to three times per week, depending on the volume of  discharge. By February 1 of each year, point sources must submit total  annual nitrogen and phosphorus discharges to the Virginia Department of  Environmental Quality using a discharge monitoring report, which covers  discharges during the previous calendar year. State officials in Virginia  told us that they review these reports for data quality and determine which  point sources generated credits and which point sources must buy credits  to meet discharge limits. Any credits that point sources intend to use for  compliance during the previous calendar year must be purchased by  June 1.", "In addition, state officials in all three states told us that they conduct  periodic inspections of point source facilities to ensure that facilities are  appropriately monitoring and reporting nutrient discharges as required  under their permits. For example, officials in Pennsylvania told us that for  point sources, the state\u2019s Department of Environmental Protection  conducts periodic inspections of point sources to ensure that they are  meeting requirements that allow them to generate credits. These officials  said that they generally inspect each facility at least once per year."], "subsections": []}, {"section_title": "Process for Approving and Verifying Nonpoint Source Credits", "paragraphs": ["In Pennsylvania, according to state officials and program documents,  such as state regulations, a nonpoint source that seeks to generate  credits must submit a request for credit certification. The request includes  a description of how the nonpoint source intends to reduce nutrient  pollution, such as through a BMP, and information about steps the  nonpoint source will take to verify the credits including any relevant  calculations, maps, and photographs. State officials review the request for  technical acceptability and consistency with program requirements before  approving credit generation.", "To verify nonpoint source credits after the credit-generating activity has  taken place, officials in Pennsylvania told us that they review information  about the performance of that activity, such as a BMP. According to the  Pennsylvania Department of Environmental Protection\u2019s website, officials  review documentation to ensure that the credit-generating activity was  implemented as described in the verification plan submitted with the  certification request, and that all program requirements are met. In  addition to reviewing documentation, officials may conduct activities such  as monitoring the credit-generating activity, inspecting sites, and  performing compliance audits. For example, as part of the verification  process, a nonpoint source credit generator official told us that they had  to provide before and after photos of the cover crop that was intended to  prevent nutrient pollution in a local water body. They said that they  provided documentation that the crops were planted at a certain time and  were the appropriate types of crops. In addition, they provided  calculations related to the crops planted and types of soil they were  planted in, before the credits could be verified."], "subsections": []}]}, {"section_title": "EPA Reviews Permits and Conducts Periodic Evaluations of Point Source Facilities to Ensure That Trading Is Consistent with the Clean Water Act", "paragraphs": ["EPA oversees trading programs as part of its oversight of NPDES to  ensure that they are fully consistent with the Clean Water Act and its  implementing regulations, in particular when questions or concerns arise,  according to EPA policy. EPA officials told us that they conduct oversight  primarily through the regional offices, which (1) review NPDES permits;  (2) review and comment on state regulatory frameworks for trading; and  (3) evaluate point source facilities by collecting discharge information and  conducting periodic on-site inspections to ensure, for example, that  sampling and record keeping practices are in order. Additionally, EPA  headquarters provides national-level guidance and training to state  programs and stakeholders."], "subsections": [{"section_title": "Review of NPDES Permits", "paragraphs": ["According to EPA officials, EPA\u2019s regional offices review NPDES permits  that allow for trading to ensure that these permits meet the standards of  the Clean Water Act and are consistent with EPA\u2019s policy and guidance  on trading. The regional offices can object to these permits, if necessary.  EPA can request changes to permits to ensure that they align with federal  requirements. Although EPA does not review every NPDES permit, it will  generally review permits that allow for trading because these permits  could be considered more complicated, controversial, or challenging,  according to EPA officials.", "In the states we reviewed, officials told us that EPA has reviewed NPDES  permits that allow for trading and has at times requested that states make  changes to the permits. For example, officials in Pennsylvania told us that  EPA has reviewed 180 permits from large facilities in the state\u2019s trading  program and objected to 14 of them, requiring state officials to modify  those permits. Officials in Virginia said that EPA has reviewed its general  permit that allows for nutrient credit trading. Virginia officials said that,  during the most recent EPA review, the agency issued a formal objection  to the permit and asked the state to increase the sampling frequency in  the permit\u2019s monitoring guidelines. As a result, Virginia modified the  permit to satisfy EPA\u2019s request."], "subsections": []}, {"section_title": "Review of State Regulatory Frameworks for Trading and Evaluation of Facilities", "paragraphs": ["In addition to reviewing NPDES permits, EPA regional officials told us that  they review and comment on states\u2019 regulatory frameworks for trading.  Officials said that they review these frameworks to identify any issues in  developing and implementing the programs and that they request that  state permitting agencies make changes when necessary. For example,  in 2012, EPA Region 3 completed reviews of all six states and the District  of Columbia in the Chesapeake Bay watershed, including the trading  programs for both Virginia and Pennsylvania. After reviewing  Pennsylvania\u2019s trading program, EPA raised concerns about the state\u2019s  calculation of the baseline for nonpoint source credit generation. In  response to EPA\u2019s concerns, officials in Pennsylvania told us that they  made changes in the way nonpoint source credits are calculated.", "EPA\u2019s involvement in reviewing state trading frameworks can vary,  according to EPA and state officials. For example, because of specific  authorities written into the Chesapeake Bay TMDL, EPA Region 3 plays a  very active role in reviewing state trading programs, according to officials  from Region 3. By comparison, Connecticut state officials told us that  since EPA Region 1 granted its initial approval of Connecticut\u2019s trading  program, there has been little direct involvement by EPA in overseeing  the program.", "Stakeholders in the states we reviewed and EPA regional officials told us  that EPA conducts periodic evaluations of point source facilities by  collecting discharge monitoring data and conducting inspections.  Officials at EPA Region 3 told us that they conduct inspections of  facilities, review records and sampling procedures, and evaluate credit  generators. A nutrient credit generator in Pennsylvania told us that EPA  has audited the facility\u2019s process for converting nutrient-rich manure into  energy, mineral products, and nutrient credits. State officials in Virginia  and Connecticut told us that they report nutrient discharge data to EPA  for review."], "subsections": []}]}]}, {"section_title": "EPA Provides National-Level Oversight", "paragraphs": ["In addition to oversight activities conducted by the regions, EPA conducts  some oversight of nutrient credit trading at the national level. EPA\u2019s  oversight at the national level involves: (1) setting national guidance for  trading, (2) offering training on nutrient credit trading to state officials and  stakeholders, and (3) periodically collecting some data on nutrient credit  trading programs. Specifically, see the following:", "Guidance. EPA has issued three documents that provide guidance to  states to assist them in developing and implementing nutrient credit  trading programs: EPA\u2019s 2003 Water Quality Trading Policy; the 2004  Water Quality Trading Assessment Handbook; and the 2007 Water  Quality Trading Toolkit for Permit Writers, which EPA updated in  2009.", "Training. EPA has offered training for NPDES permit writers to help  them better understand how to write NPDES permits that incorporate  provisions for nutrient credit trading, according to EPA officials. EPA  and USDA also sponsored a 3-day water quality trading workshop in  September 2015 in Lincoln, Nebraska, on a range of different subjects  related to water quality trading. According to the workshop\u2019s summary  document, over 200 attendees participated, including water resource  professionals; third-party environmental market makers; academics;  representatives of federal, state, and local governments;  representatives of non-governmental organizations; and agricultural  and environmental stakeholders.", "Data collection. According to EPA officials, there is no requirement  for permittees to report data about trading programs at a national level  and EPA has no systematic way to collect this information. However,  EPA manually collects some trading data, such as the names of  programs with permits that allow for trading, which provides the  agency with a general understanding of the extent to which trading is  being used nationally. Officials told us that they plan to update  national trading data at least every 2 years and make them available  online in the fall of 2017."], "subsections": []}, {"section_title": "The Presence of Discharge Limits and the Challenges of Measuring Nonpoint Sources\u2019 Nutrient Reductions Affect Participation in Trading Programs, According to Stakeholders", "paragraphs": ["Stakeholders cited two key factors that have affected participation in  nutrient credit trading\u2014the presence of discharge limits for nutrients and  the challenges of measuring nutrient reductions resulting from nonpoint  sources\u2019 implementation of BMPs.", "First, officials from the three states we reviewed, and other stakeholders  we interviewed, cited the importance of discharge limits for nutrients as a  driver to create demand for nutrient credit trading. Without such a driver,  point sources have little incentive to purchase nutrient credits. According  to EPA guidance, discharge limits\u2014most commonly established in a  TMDL\u2014are the leading driver for nutrient credit trading markets. For the  Pennsylvania and Virginia programs, the nutrient discharge limits are  established in the Chesapeake Bay TMDL. For the Connecticut program,  nutrient discharge limits are established in the Long Island Sound TMDL.  The TMDL nutrient discharge limits are ultimately translated into  discharge limits in the NPDES permits for point sources.", "Pennsylvania officials explained how discharge limits serve as a driver for  trading. Officials stated that although the state established its nutrient  trading program in 2005, the TMDL for Chesapeake Bay was not  established until 2010. Officials noted that in the first years of the  program, little trading took place because point sources did not have to  meet nutrient discharge limits. Once EPA established the TMDL for the  Chesapeake Bay\u2014and Pennsylvania established discharge limits for  point sources in the NPDES permits\u2014demand for nutrient credit trading  increased, according to Pennsylvania officials. Officials explained that if  point sources had not yet upgraded their nutrient removal technology, and  could not meet the NPDES permit discharge limits, they could buy  nutrient credits to comply with discharge limits. EPA officials added that  demand for trading could increase over the long term because of  economic or population growth.", "In addition to programs in the three states, we also reviewed a program in  the Ohio River Basin where nutrient credit trading activity has been  limited, according to program officials. This multi-state trading program  allows point and nonpoint sources in Ohio, Indiana, and Kentucky to  generate and sell nutrient credits, and was designed as a pilot to test  nutrient credit trading in case discharge limits were established. Program  officials told us that while some credits have been generated and sold,  participation in the program has been limited because there is no  requirement\u2014in either a TMDL or numeric water quality standards\u2014for  the point sources in these states to meet discharge limits. As the program  is currently implemented, they said that credits are not purchased by point  sources to comply with discharge limits but rather by corporations to meet  internal sustainability goals or by philanthropists who want to invest in  BMPs that address nutrient pollution in the Ohio River Basin.", "Unlike point sources, the Clean Water Act does not require nonpoint  sources to meet nutrient discharge limits established in TMDLs or  numeric water quality standards, and as a result, EPA said there is no  federal regulatory driver creating demand for nonpoint sources to  participate in nutrient credit trading programs.", "The second factor affecting participation in trading programs relates to the  challenges of measuring nutrient reductions that result from nonpoint  sources\u2019 implementation of BMPs. According to EPA officials and  guidance, federal and state agencies typically do not directly monitor  nonpoint source pollution or the effectiveness of BMPs because the  diffuse nature of nonpoint source pollution makes monitoring costly and  impractical. Instead, agencies and other stakeholders rely on models to  estimate the amount of pollution discharged by nonpoint sources and the  effectiveness of BMPs. These models incorporate information about  variables such as land use, soil type, and precipitation to estimate the  amount of nutrients that will be reduced as the result of implementing a  specific BMP. Even with these models, EPA guidance recommends that  the programs use a rule that calls for nonpoint source credit generators to  generate credits at a greater than a one-to-one basis to account for  uncertainties in modeling. According to this guidance, the rule can also  mitigate other uncertainties such as how well BMPs are designed and  maintained and the risk of a BMP failing to produce the expected results.", "In part because of this uncertainty, two of the states we reviewed did not  allow nonpoint sources to generate credits in their programs. State  officials in Connecticut told us that it was easier for Connecticut to  implement nutrient trading with point sources, as their discharges are  easy to quantify. State officials in Virginia told us that point source to  nonpoint source trading is complicated and they felt that they could meet  their TMDL reduction goals solely with point source reductions.", "Pennsylvania does allow nonpoint sources to generate and sell credits  but the state has developed a rule to help address some of these  uncertainties. Specifically, Pennsylvania implemented a rule in 2016  requiring nonpoint sources to generate three nutrient credits for every  nutrient credit sold. This rule was developed as an interim step to address  EPA\u2019s concern that the state\u2019s calculation of the baseline for nonpoint  source credit generation was not consistent with the reductions needed to  meet the Chesapeake Bay TMDL goals. Pennsylvania\u2019s rule, however,  appears to have reduced the use of nonpoint source credits. State  program data show that in 2016 approximately 115,000 nitrogen credits were available from nonpoint sources after the implementation of the rule,  almost one-third the approximately 381,000 nitrogen credits that were  available in 2014. An official at a wastewater treatment facility in south  central Pennsylvania told us that the rule increased the cost to generate  nonpoint source credits and reduced the number of nonpoint source  credits available in Pennsylvania\u2019s trading program. Specifically, to meet  its discharge limits in 2014, this facility purchased approximately 75,000  nitrogen credits, 52,000 of which were generated from local farmers who  installed BMPs on their land. In 2016, after the rule was implemented, the  same facility purchased 95,000 nitrogen credits, only 5,000 of which were  generated from local farmers. According to the point source officials, they  could no longer rely solely on purchasing credits generated from local  farmers because there were fewer nonpoint source credits available to  purchase in 2016. To meet the discharge limit, this facility purchased the  remaining credits they needed from other point sources because nonpoint  source credits were not available. Pennsylvania officials told us that the  decline in the number of nonpoint source credits is mostly due to the new  rule. However, they said that other factors such as the low price of credits  have also decreased the incentive to generate nonpoint source credits.", "According to EPA officials, the program should implement a stricter  baseline, based on the pollution reduction targets established in the  Chesapeake Bay TMDL. Pennsylvania officials told us that if they make  the baseline requirements stricter, there may be no incentive for nonpoint  sources to generate credits because it would be much more difficult to  meet the minimum requirements and the cost of generating credits would  be prohibitive.", "State officials and stakeholders also told us that even if a program allows  nonpoint sources to trade, point sources often prefer to trade with other  point sources because they have similar permit and monitoring  requirements and are both legally liable for meeting discharge limits.  Trading between point sources provides buyers with the assurance that  the credits they purchase represent actual reductions and can be used for  compliance with an NPDES permit."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["On September 12, 2017, we provided a draft of this report to EPA for  review and comment. On September 29, 2017, EPA responded by email  stating that its Office of Water had reviewed the draft report and EPA had  no comments.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of the Environmental Protection Agency,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff members who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) examines the extent to which nutrient credit trading  programs have been used and what the outcomes of the programs have  been, (2) describes how states and the Environmental Protection Agency  (EPA) oversee nutrient credit programs, and (3) describes what key  factors stakeholders view as affecting participation in nutrient credit  trading.", "To examine the extent to which nutrient credit trading programs have  been used and what the outcomes of the programs have been, we first  spoke with EPA headquarters and EPA regional officials and reviewed  EPA data. EPA does not have a formal definition for water quality trading  programs, of which nutrient credit trading is a subcategory, and is not  required to keep information on these programs. EPA periodically gathers  some limited information on trading programs, including the type of  trading program, location, facilities participating, and estimated trades.  The most recent data EPA had at the time we conducted our review were  for 2014. EPA officials explained that the completeness and consistency  of the data reported by states to EPA varied somewhat. For example, not  all programs reported trading data for calendar year 2014. To verify the  accuracy of EPA\u2019s list of trading programs, we interviewed or e-mailed  officials from all 10 EPA regions to confirm the presence or absence of  trading programs in each state in 2014. For the 7 EPA regions with some  form of trading program in their regions, we interviewed regional officials  to gather more information about the type of trading conducted and  whether there was trading activity in 2014.", "Using EPA\u2019s information as a starting point, we developed a modified list  of nutrient credit trading programs that existed in 2014. For our modified  list, we excluded two programs, one from Region 5 and one from Region  10, from EPA\u2019s data that did not trade nutrient credits. Based on our  discussion with EPA officials, we also excluded trading programs that let  residential septic system owners \u201ctrade\u201d credits to encourage wastewater  treatment facilities to take their systems online. We also excluded one  program that included three states\u2014the Ohio River Basin Interstate  Water Quality Trading Project \u2014because none of the participating states  have discharge limits in their permits. In the process of interviewing EPA  regions, we also added one program from Region 4 and two programs  from Region 5 that EPA officials told us had been inadvertently left off  EPA\u2019s 2014 list.", "From this list, we then selected a nongeneralizable sample of the three  nutrient credit trading programs\u2014Connecticut, Pennsylvania, and  Virginia\u2014which appeared to have done the most trading and had the  most participating point sources in 2014 for a more detailed examination.  Because these programs were judgmentally selected, the results of our  review of these programs cannot be generalized. For these three  programs, we reviewed state laws and regulations, National Pollutant  Discharge Elimination System (NPDES) permits, watershed  implementation plans, program rules and policies, annual summaries of  nutrient credit purchases and sales, and assessments of state trading  programs when available. We also interviewed state and program officials  and other stakeholders, such as point source and nonpoint source credit  generators and buyers, to gather information on the programs, including  structure, participants, number and type of trades, authorizing  mechanisms, and outcomes.", "Specifically, to determine the number of trades we asked each state for  its official list of trades from 2014, the most recent year for which we  could get complete data from all programs. We counted each time a point  source purchased credits as one trade. In addition, we asked states to  provide us the number of point sources that purchased credits and the  number of point sources in the trading programs, which we used to  determine the percentage of point sources that purchased credits. The  states post the number of point sources that purchased credits online,  and the number of point sources in the program is identified in state  documents.", "We also asked the states for the number of credits purchased and the  aggregate discharge limit for point sources to determine the percentage  of credits purchased in pounds of nutrients relative to the aggregate limit.  The aggregate discharge limit is the maximum allowable discharge for  point sources in the program. Because this limit represents the maximum  amount of pollution allowable to meet water quality standards, it served  as a point of reference for comparing the amount of discharge that was  traded. We took these numbers from state records, and they are derived  from the total maximum daily load, according to EPA policy. According to  Virginia and Connecticut officials, in their programs one credit is equal to  one equalized or delivered pound of pollution\u2014that is, a pound of  pollution after accounting for the delivery ratio. Pennsylvania could not  provide us the number of pounds purchased. According to Pennsylvania  officials, a nutrient credit does not equal a pound of pollution in their  program because they use trading ratios, such as delivery ratios. This  means that credits generated from different sources represent different  nutrient reductions depending on where they are relative to the polluted  water body. However, the aggregate discharge limit does not represent  the pounds of nutrients that could have been traded, since the volume of  trading was limited by the supply of credits, which was less than the  aggregate discharge limit in Virginia and Pennsylvania. Specifically, to  show this, we used state data on the number of credits generated and  compared them with the number of credits purchased. Connecticut does  not have data on the number of credits available. To assess the reliability  of the state data, we visually reviewed the data for completeness and  interviewed state officials responsible for collecting and using data about  their quality assurance protocols and their confidence in the data. We  found the data to be sufficiently reliable for our purposes and confirmed  all final numbers with state officials.", "We interviewed state program officials in all three states to better  understand the extent to which nutrient credit trading programs have  been used and what the outcomes have been. During these interviews,  we discussed the management of the programs, reviewed state trading  data, and discussed the benefits and challenges of nutrient credit trading.  We visited Pennsylvania to meet with program officials and stakeholders.  Specifically, we met a representative of a credit aggregator that buys and  sells credits from nonpoint source generators and toured a wastewater  treatment facility that generates credits and a facility that generates  nutrient credits by processing chicken manure into energy. We also spoke  with buyers and sellers of nutrient credits in Connecticut and officials from  the nutrient credit exchange in all three states. We did not audit these  state trading programs or analyze their effectiveness or efficiency in  meeting discharge limits or water quality standards.", "We also conducted a literature review of academic and economic  journals. We searched peer-reviewed journals for articles published from  2011 through 2016 discussing water quality trading or nutrient credit  trading. We did not find any additional trading programs in the United  States that had not already been identified.", "To describe how states and EPA oversee nutrient credit programs, we  reviewed relevant federal laws, regulations, and EPA policies and  guidance related to nutrient credit trading. We reviewed state  requirements for implementing the NPDES program, under the Clean  Water Act and implementing regulations, which defines responsibilities  applicable to states that serve as permitting authorities for overseeing  point source permittees\u2019 monitoring and reporting. These same authorities  are used by states to oversee state trading programs. The Clean Water  Act does not specifically authorize water quality trading, according to EPA  officials; however, EPA has developed trading guidance for states  interested in developing trading programs. We reviewed this guidance,  specifically, EPA\u2019s 2003 Water Quality Trading Policy and 2007 Water  Quality Trading Toolkit for Permit Writers. We also reviewed state  documents, such as watershed implementation plans, that identify trading  program rules, and interviewed state officials and other stakeholders for  our nongeneralizable sample of three nutrient credit trading programs. In  our interviews we asked state officials how they oversee their trading  programs. In particular, we asked how they approve point and nonpoint  sources to generate credits, verify that a credit represents a real reduction  in nutrient pollution, and monitor the buying and selling of credits to  ensure that permit obligations are met. We also interviewed officials from  EPA\u2019s Office of Water and the 7 EPA regions with nutrient credit trading  programs and asked them to describe EPA\u2019s oversight role at the regional  and national level.", "To describe what key factors stakeholders view as affecting participation  in nutrient credit trading, we spoke with officials from EPA\u2019s Office of  Water, the 7 EPA regions with nutrient credit trading programs, and  officials and stakeholders from the nongeneralizable sample of three  nutrient credit trading programs. In addition, we reviewed documents and  interviewed officials for one nongeneralizable multi-state trading program  in the Ohio River Basin. We reviewed this program to better understand  the key factors that can affect participation in nutrient trading programs.  We interviewed officials from the institute that developed the program and  corresponded with state officials from Kentucky and Ohio, two of the  states involved in the Ohio Basin program. Finally, we interviewed  representatives of stakeholder groups, such as those representing  wastewater treatment facilities, national organizations for water issues,  and agricultural conservation districts to get a broad perspective on the  key factors that affect participation in nutrient credit trading programs."], "subsections": []}, {"section_title": "Appendix II: Nutrient Credit Trading in the United States in 2014", "paragraphs": ["We identified 19 nutrient credit trading programs in 11 states and seven  Environmental Protection Agency regions, in 2014.The 11 states that  had programs are: California, Connecticut, Florida, Georgia, Idaho,  Minnesota, North Carolina, Ohio, Pennsylvania, South Carolina, and  Virginia (see table 5)."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Janet Frisch (Assistant  Director), Chuck Bausell, Mark Braza, Ellen Fried, Patrick Harner, Karen  Howard, Greg Marchand, Emily Ryan, Jason Trentacoste, and Daniel Will  made key contributions this report.  ."], "subsections": []}]}], "fastfact": ["Nitrogen and phosphorus naturally occur in water bodies such as rivers and lakes. Wastewater from factories and runoff from streets and farms can add more of these nutrients to water bodies, degrading water quality.", "Some states limit the amount of nutrients that certain pollution sources can discharge. Eleven states have \"credit trading\" programs that allow sources to meet their limits by buying credits from sources that are below their limits.", "While few pollution sources have traded credits, the programs offered flexibility to some sources to meet their limits until they can upgrade their pollution removal technology."]}
{"id": "GAO-18-526", "url": "https://www.gao.gov/products/GAO-18-526", "title": "Aviation Security: Actions Needed to Better Identify and Track U.S.-Bound Public Charter Operations from Cuba", "published_date": "2018-07-12T00:00:00", "released_date": "2018-07-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["On August 31, 2016, as part of a shift in U.S. policy toward Cuba, air carriers resumed scheduled commercial flights between the United States and Cuba, a route previously only open to public and private charter carrier operations. In June 2017, travel restrictions were revised to require U.S. travelers going to Cuba to travel as part of a licensed group. TSA, the agency responsible for securing the nation's civil aviation system, assesses Cuban airports and inspects air carriers operating U.S-bound flights to ensure they have effective security measures in place.", "GAO was asked to review TSA's assessments of Cuban aviation security. This report examines (1) the extent to which TSA followed its standard operating procedures when assessing aviation security at Cuban airports in fiscal years 2012 through 2017; (2) the results of TSA's Cuban airport assessments in fiscal years 2012 through 2017; and (3) the results of TSA's air carrier inspections for Cuba in fiscal years 2016\u2014when commercial scheduled air service between the United States and Cuba resumed\u2014and 2017. GAO reviewed TSA policies and procedures, observed TSA air carrier inspections in Cuba, and compared TSA data on assessments and inspections to data from the Department of Transportation."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration (TSA) generally followed its standard operating procedures when documenting and resolving findings from its foreign airport assessments and air carrier inspections at Cuban airports in fiscal years 2012 through 2017. However, TSA did not perform all the required inspections of air carriers operating U.S.-bound public charter flights from Cuba. Specifically, GAO found that for the five air carriers selected for analysis, TSA performed approximately half of air carrier inspections in Cuba at the frequency established in its standard operating procedures in fiscal years 2012 through 2016. Of the inspections TSA did not perform, over half were not performed because TSA was not able to identify or reliably track U.S.-bound public charter operations from Cuba. Improving TSA's ability to identify public charters requiring inspection in Cuba and implementing a tool it is currently developing that more reliably tracks air carrier operations would better position TSA to meet its goal of inspecting all air carriers operating U.S.-bound public charter flights from Cuba at the frequency established in its standard operating procedures.", "Several of the Cuban airports TSA assessed in fiscal years 2012 through 2017 were fully compliant with International Civil Aviation Organization Standards at the time of assessment. The remaining airport assessments reported instances of noncompliance within the five categories: access control, quality control, aircraft and inflight security, passenger and baggage screening, and fencing.", "The majority of air carrier inspections TSA performed for Cuba in fiscal years 2016 and 2017 resulted in no findings, meaning that TSA determined air carriers operating these flights fully implemented all requirements in their TSA-approved security program at the time of inspection. The remaining inspections resulted in findings, which TSA closed after air carriers took corrective action.", "This is a public version of a sensitive report issued in May 2018. Information that TSA deemed to be sensitive is omitted from this report."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that TSA improve its ability to identify all public charters requiring inspection in Cuba and develop and implement a tool that more reliably tracks public charter operations between the United States and Cuba. TSA concurred with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["On August 31, 2016, as part of a major shift in U.S. policy toward Cuba,  air carriers resumed operating scheduled commercial flights between the  United States and Cuba, a route which was previously only open to public  and private charter carrier operations. In June 2017, President Trump  announced travel restrictions to again generally require U.S. persons to  travel to Cuba as part of a licensed group. Since these travel restrictions  did not directly affect civil aviation, air carriers continue to operate public  charter and scheduled commercial flights between both countries and the  security of these flights is an important priority to ensure that travelers  and critical infrastructure are protected. The Department of Homeland  Security\u2019s (DHS) Transportation Security Administration (TSA) has two  key programs to ensure the security of U.S. passengers and property on  U.S.-bound flights: (1) the foreign airport assessment program, which  assesses security practices at foreign airports, and (2) the air carrier  inspection program, which monitors air carriers\u2019 implementation of their  TSA-approved security program.", "You asked us to examine TSA\u2019s efforts to ensure the security of air carrier  operations between the United States and Cuba, and report the results of  TSA\u2019s foreign airport assessments and air carrier inspections in Cuba.  This report examines: (1) the extent to which TSA followed its standard  operating procedures when assessing aviation security operations at  Cuba\u2019s airports in fiscal years 2012 through 2017; (2) the results of TSA\u2019s  foreign airport assessments for Cuba in fiscal years 2012 through fiscal  year 2017; and (3) the results of TSA\u2019s air carrier inspections for Cuba in  fiscal years 2016\u2014when scheduled commercial air service between the  United States and Cuba resumed\u2014and 2017.", "This report is a public version of a prior sensitive report that we provided  to you in May 2018. The sensitive report included part of an objective  related to how the results of TSA\u2019s foreign airport assessments for Cuba  compared to others in the Caribbean region. TSA deemed some of the  comparison results related to this objective to be sensitive, which must be  protected from public disclosure. This public report also omits certain  information that TSA deemed to be sensitive related to the specific  number of airport assessments and air carrier inspections performed by  TSA in Cuba, results of those assessments and inspections, and TSA\u2019s  risk-based approach in identifying U.S.-bound public charter operations  from Cuba, among others. To provide context regarding the scale and  magnitude of our findings, without disclosing sensitive information, we  characterized specific numbers as some, many, or several. Although the  information provided in this report is more limited in scope, as it excludes  such sensitive information, it addresses the same overall objectives and  uses the same overall methodology as the sensitive report.", "To address these objectives, we reviewed relevant laws and regulations  and met with senior TSA officials at headquarters to discuss TSA\u2019s  assessments of Cuban airports\u2019 aviation security and inspections of air  carriers providing flights between Cuba and the United States. We also  reviewed TSA documents on program management and strategic  planning, including TSA\u2019s process for scheduling foreign airport  assessments and air carrier inspections.", "To determine the extent to which TSA followed its standard operating  procedures when assessing aviation security in Cuba, we examined  documentation for all foreign airport assessments TSA conducted in fiscal  years 2012 through 2017 and all air carrier inspections TSA conducted in  fiscal years 2016 and 2017 in Cuba for completeness and errors. We  also examined whether TSA performed Cuban airport assessments and  air carrier inspections at the frequency established in TSA\u2019s standard  operating procedures. To determine whether TSA conducted Cuban  airport assessments at the frequency established in TSA\u2019s standard  operating procedures, we analyzed TSA data for all airport assessments  in fiscal years 2012 through 2017. To determine whether TSA conducted  air carrier inspections at the established frequency, we selected a non- probability sample of 5 of the 18 air carriers operating U.S.-bound flights  from Cuba that TSA had inspected over this period. We compared TSA  data for all inspections of these carriers in fiscal years 2012 through  2016\u2014which include 5 years of public charter and 2 months of scheduled  commercial flights\u2014to U.S.-bound flight traffic data from each Cuban  airport from the Department of Transportation\u2019s Bureau of Transportation  Statistics T-100 data bank, which contains data on U.S.-bound departures  from foreign airports, among other things. In addition, we conducted site  visits to TSA\u2019s Miami Regional Operations Center, which is responsible  for performing airport assessments and air carrier inspections in Cuba,  and observed four air carrier inspections at two airports in Cuba.", "To report on the results of Cuban airport assessments and air carrier  inspections in Cuba, we reviewed and analyzed Cuban airport  assessment reports for fiscal years 2012 through 2017 and air carrier  inspection reports for Cuba for fiscal years 2016\u2014when scheduled  commercial service between the United States and Cuba resumed\u2014and  2017. Lastly, to obtain air carriers\u2019 perspectives on aviation security in  Cuba, we interviewed representatives from three air carriers that the  Department of Transportation licensed to operate scheduled commercial  flights between the United States and Cuba. See appendix I for more  information on our objectives, scope, and methodology.", "The performance audit upon which this report is based was conducted  from February 2017 through May 2018 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with TSA from May 2018 to July  2018 to prepare this nonsensitive version of the original sensitive report  for public release. This public version was also prepared in accordance  with these standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of Civil Aviation between the United States and Cuba", "paragraphs": ["In January 1961, the United States severed diplomatic relations with  Cuba, followed by a total economic embargo declared by President  Kennedy in February 1962. The resulting restrictions, including  prohibitions on civil aviation between the United States and Cuba,  remained in place over the subsequent 37 years until the Clinton  Administration announced the start of public and private charter air  service operations between the United States and Cuba in 1999. Charter  service was the exclusive means of air transport between the United  States and Cuba from the time these flights were announced in 1999 until  August 2016. In February 2016, United States and Cuban officials signed  a memorandum of understanding reestablishing regularly scheduled  commercial air service between the two countries. Specifically, this  memorandum of understanding allowed U.S. air carriers to operate 20  daily scheduled round trip flights between the United States and Havana  and 10 daily round trip flights between the United States and each of the  8 other Cuban airports, as shown in figure 1.", "The reestablishment of scheduled commercial flights between the United  States and Cuba followed a March 2016 Obama Administration change to  Office of Foreign Assets Control (OFAC) travel regulations with regards to  educational travel. While travel to Cuba for tourist purposes is prohibited,  U.S. persons may be authorized to travel to Cuba for certain activities  including family visits and educational activities. Specifically, this  change allowed individuals traveling under the educational category to  create their own schedule of travel and interaction with the Cuban people  rather than being required to travel under this category only through a  licensed group. On August 31, 2016, U.S. airlines began offering  regularly scheduled commercial flights to Cuba.", "In June 2017, President Trump directed the Department of Treasury  through OFAC to revise various categories of travel, and OFAC revised  the categories in November 2017 to again generally require U.S. persons  to travel to Cuba as part of a licensed group. The revised categories do  not change the ability of public charter and scheduled commercial flights  between both countries to operate. However, since these changes to the  travel categories were announced, four air carriers that had been  awarded scheduled round-trip flights between the United States and  Cuba returned all or some of their allotted flights, citing lack of market  demand. See figure 2 for further detail on the history of civil aviation  between the United States and Cuba."], "subsections": []}, {"section_title": "DHS Responsibilities for Ensuring the Security of U.S.-Bound Flights from Cuba", "paragraphs": ["Consistent with the Aviation Transportation Security Act and in  accordance with existing statutory requirements, TSA assesses the  effectiveness of security measures at foreign airports (1) served by a U.S.  air carrier, (2) from which a foreign air carrier operates U.S.-bound flights,  (3) that pose a high risk of introducing danger to international air travel,  and (4) that are otherwise deemed appropriate by the Secretary of  Homeland Security. The Secretary of DHS delegated to the TSA  Administrator the responsibility for conducting foreign airport  assessments, but retained responsibility for making the determination  whether a foreign airport does not maintain and carry out effective  security measures. In carrying out this function, the statute identifies  measures that the Secretary must take in the event that he or she  determines that an airport is not maintaining and carrying out effective  security measures based on TSA assessments which can include, in  some cases, revoking the authority of U.S. carriers to operate at the  airport. In addition, TSA is to conduct inspections of U.S. air carriers and  foreign air carriers operating U.S.-bound flights from foreign airports to  ensure that they meet applicable security requirements. Currently, the  Global Compliance Directorate, within TSA\u2019s Office of Global Strategies,  is responsible for conducting foreign airport assessments and air carrier  inspections.", "TSA began performing foreign airport assessments and air carrier  inspections in Cuba in 2007, when only charter carriers operated flights  between the United States and Cuba. The first foreign airport assessment  after regularly scheduled commercial air service resumed was conducted  in Sierra Maestra Airport in Manzanillo, Cuba on October 19, 2016, and  the first air carrier inspection after scheduled commercial service  commenced was conducted for an American Airlines flight on October 24,  2016, at Juan Gualberto Gomez International Airport in Varadero."], "subsections": []}, {"section_title": "TSA\u2019s Process for Conducting Foreign Airport Assessments", "paragraphs": ["TSA assesses the effectiveness of security measures at foreign airports  including those airports in Cuba offering U.S.-bound public charter and  scheduled commercial flights using select aviation security standards and  recommended practices adopted by International Civil Aviation  Organization (ICAO), a United Nations organization representing 192  countries. ICAO is a specialized agency of the United Nations with a  primary objective to provide for the safe, orderly, and efficient  development of international civil aviation. ICAO member nations (i.e.,  contracting states) agree to cooperate with other contracting states to  meet standardized international aviation security measures. ICAO  standards and recommended practices address operational issues at an  airport, such as ensuring that passengers and baggage are properly  screened and that unauthorized individuals do not have access to  restricted areas of an airport. ICAO standards also address non- operational issues, such as whether a foreign government has  implemented a national civil aviation security program for regulating  security procedures at its airports and whether airport officials  implementing security controls are subject to background investigations,  are appropriately trained, and are certified according to a foreign  government\u2019s national civil aviation security program.", "TSA utilizes 44 ICAO standards and recommended practices it sees as  most critical in conducting its foreign airport assessments, which cover  broad categories, including: passenger and cabin baggage security; and quality control.", "TSA uses a risk-informed approach to schedule foreign airport  assessments across all foreign locations, including Cuba. TSA defines  risk as a function of threat, vulnerability, and consequence. The agency  uses various data sources to assess the likelihood of a location being  targeted by bad actors, the protective measures in place to prevent an  attack, and the impact of the loss from a potential attack. TSA categorizes  airports into three risk tiers, with high risk airports assessed more  frequently than moderate and low risk airports.", "TSA\u2019s assessments of foreign airports are conducted by a team of  inspectors, which generally includes one team leader and one team  member. According to TSA, it generally takes 3 to 7 days to complete a  foreign airport assessment. However, the amount of time and number of team members required to conduct an assessment varies based on  several factors, including the size of the airport and the threat level to civil  aviation in the host country.", "At the close of an airport assessment, inspectors brief foreign airport and  government officials on the results as well as any recommendations for  corrective actions and prepare an internal report. As part of the report,  and as shown in table 1, TSA assigns a vulnerability score to each ICAO  standard and recommended practice assessed as well as an overall  vulnerability score for each airport, which corresponds to the level of  compliance for each ICAO standard and recommended practice that TSA  assesses.", "If the Secretary of Homeland Security determines that an airport does not  maintain and carry out effective security measures, he or she shall, after  advising the Secretary of State, take secretarial action. This generally  includes notification to the appropriate authorities of security deficiencies  identified, notification to the general public that the airport does not  maintain effective security measures, publication of the identity of the  airport in the Federal Register, and, when appropriate, modification of air  carriers operations at that airport. According to TSA officials, no  secretarial actions have been issued for Cuban airports since the  resumption of public charter flights between the United States and Cuba  in 1999 and scheduled commercial flights in 2016."], "subsections": []}, {"section_title": "TSA\u2019s Process for Conducting Air Carrier Inspections", "paragraphs": ["Along with conducting airport assessments, the same TSA inspection  teams also conduct air carrier inspections in foreign locations. During  these inspections, a TSA inspection team examines each air carrier\u2019s  implementation of applicable security requirements, including their TSA- approved security programs, any amendments or alternative procedures  to these security programs, and applicable security directives or  emergency amendments. The frequency of air carrier inspections at  each airport depends on a risk-informed approach and is influenced, in  part, by the airport\u2019s vulnerability to security breaches, since the security  posture of each airport varies. In general, TSA\u2019s procedures require it to  conduct air carrier inspections at each airport on an annual or semi- annual basis depending on the airport\u2019s vulnerability level, with some  exceptions.", "At the close of an air carrier inspection, results are recorded into TSA\u2019s  Performance and Results Information System (PARIS) database. If an  inspector finds that an air carrier is not in compliance with any applicable  security requirements, additional steps are taken to correct and record  those specific violations ranging from on-the-spot counseling for minor  violations to sending a warning notice and/or a letter of correction, to  issuing notices of civil penalties for more egregious violations. In  extreme cases, TSA may withdraw its approval of an air carrier\u2019s security  program or suspend the air carrier\u2019s operations."], "subsections": []}]}, {"section_title": "TSA\u2019s Assessments and Inspections in Cuba Generally Followed Standard Operating Procedures, but Improvements Can Help Ensure they Occur at the Established Frequency", "paragraphs": [], "subsections": [{"section_title": "TSA\u2019s Foreign Airport Assessments and Air Carrier Inspections in Cuba Followed Standard Operating Procedures", "paragraphs": ["During fiscal years 2012 through 2017, TSA inspectors generally followed  standard operating procedures for documenting foreign airport  assessment results as required by TSA\u2019s 2010 and 2016 Foreign Airport  Assessment Program Standard Operating Procedures and Global Risk  Analysis and Decision Support (GRADS) Business Rules. Similarly, TSA  inspectors generally followed standard operating procedures for  documenting air carrier inspection results in fiscal years 2016 and 2017  as required by the PARIS Business Rules. TSA also resolved reported  deficiencies in a timely manner, and conducted foreign airport  assessments at established intervals as required by TSA\u2019s 2010 and  2016 procedures.", "Documentation: We found that data in most of the assessment reports  TSA created in fiscal years 2012 through 2017 were generally complete  with some reports missing some required information. Specifically:", "One airport assessment report did not answer required questions  about training for aircraft pre-flight security checks and whether or not  passenger screening met the requirements of Cuba\u2019s national civil  aviation program.", "Another airport assessment report did not indicate which security  measures were being used to screen checked baggage, which is  typically included in TSA\u2019s airport profile report.", "A third airport assessment report did not have complete information  regarding unescorted access to restricted areas.", "TSA officials explained that although inspectors did not document this  information in the appropriate data fields within the report, they did record  this information elsewhere within assessment documentation.", "We also found that data in air carrier inspection reports were generally  complete and error-free. However, TSA was unable to provide full  documentation for some of the air carrier inspections it conducted in Cuba  in fiscal years 2016 and 2017. TSA officials attributed these missing  documents to human error. We also identified errors or missing data  fields in most of the air carrier inspections reports with complete  documentation. For example:  In reviewing air carriers\u2019 compliance with a TSA security requirement  for air carriers to notify U.S.-bound passengers that loaded firearms  are prohibited in checked baggage, some inspection reports indicated  that air carriers were simultaneously in compliance and not in  compliance.", "Inspectors failed to document air carriers\u2019 compliance with a TSA  security requirement to prohibit unauthorized access to checked  baggage during some air carrier inspections.", "The errors and missing data we identified constituted a relatively small  proportion of the data in each inspection report, which include information  on air carriers\u2019 implementation of various TSA security requirements. TSA  attributed these to human error and has since issued guidance and  updated its air carrier inspection report template designed to better  ensure that air carrier inspections are fully documented and less likely to  contain such errors or missing data fields.", "Recording, Tracking, and Resolving Findings: We found that TSA  generally followed procedures to record and track deficiencies identified  during assessments at foreign airports and whether they have been  resolved by the host government during subsequent visits. Among the  foreign airport assessments conducted in Cuba in fiscal years 2012  through 2017, TSA recorded findings in several of them. In nearly all of  the reports with findings, TSA followed its SOPs by recording findings and  their root causes in an internal document and tracking the status of host  country action to resolve each finding. In one report, TSA failed to record  the root cause of a deficiency. This issue has been identified in a prior  GAO report, and TSA is taking steps to resolve the issue by better  documenting the root cause of each deficiency.", "We also found that TSA followed procedures to record, track, and resolve  findings from air carrier inspections. Among the air carrier inspections  TSA performed in fiscal years 2016 and 2017, TSA recorded several  violations. In each instance, TSA recorded the root cause of each  violation in PARIS, resolved each violation with on-the-spot counseling or  investigation, and closed all air carrier findings in fiscal years 2016 and  2017 after air carriers took corrective action.", "Timeliness: During fiscal years 2012 through 2017, TSA generally  completed foreign airport assessments in Cuba within the scheduled time  frames per TSA\u2019s policy. However, TSA explained that lapses can occur  and that such deferments often take place worldwide due to scheduling  conflicts, logistical issues, and operational concerns."], "subsections": []}, {"section_title": "TSA Inspections of Air Carriers Did Not Always Occur at the Established Frequency", "paragraphs": ["Our analysis of TSA air carrier inspection data from fiscal years 2012  through 2016\u2014a period in which public charter flights accounted for  nearly all commercial air traffic between the United States and Cuba\u2014 revealed that TSA did not always inspect air carriers operating U.S.- bound flights from Cuba each fiscal year at frequencies established in  TSA\u2019s standard operating procedures. In general, public charter flights  are operated by air carriers but arranged or sponsored by a charter  operator. Consistent with scheduled service, TSA requires air carriers  operating U.S.-bound public charters to adopt and implement a TSA- approved security program. For inspection purposes, TSA does not  differentiate between scheduled service and public charter service and  inspects these operations to the same TSA security program  requirements.", "According to TSA\u2019s Operational Implementation Plans for fiscal years  2012 through 2016, TSA\u2019s stated objective was to inspect 100 percent of  air carriers operating U.S.-bound flights from foreign locations at the frequency established in its standard operating procedures. Specifically,  depending on an airport\u2019s vulnerability rating, TSA\u2019s standard operating  procedures provide that air carriers are to be inspected on either an  annual or semi-annual basis. However, our analysis of TSA inspection  data during fiscal years 2012 through 2016 identified that among the air  carriers we selected for our analysis, TSA conducted little over half of the  required inspections in Cuba at the frequency established in its standard  operating procedures. For example, our analysis revealed that TSA  inspected an air carrier in September 2013 and April 2015, but did not do  so in fiscal year 2014\u2014a year in which this air carrier operated a total of  127 U.S.-bound flights.", "In response to our analysis, TSA officials explained that host government  requests to reschedule inspections and the flight schedule data used to  track public charter flights hinder TSA\u2019s efforts to inspect 100 percent of  air carriers operating U.S.-bound public charter flights in Cuba. Among  the air carriers we selected for our analysis, TSA officials told us that 10  of the required air carrier inspections were not conducted at the  established frequency due to external factors, including host government  requests to reschedule TSA inspections. The officials told us that when  planned air carrier inspections are deferred, TSA works with the host  government to reschedule the inspection as close as possible to the  original inspection date. In some instances, TSA has been unable to  reschedule air carrier inspections within the specified time frame based  on their risk level, and as a result, did not conduct the air carrier  inspection at the established frequency.", "For example, TSA officials told us that the Cuban Government deferred  air carrier inspections planned for June 2015 at one airport to November  2015 (in fiscal year 2016). Although TSA completed these inspections as  rescheduled, the inspections were not conducted at this airport in fiscal  year 2015, as required by its standard operating procedures. In another  example, the officials told us that TSA did not conduct air carrier  inspections at an airport in fiscal year 2014 because of deferrals and  logistical challenges that hampered its attempt to reschedule. As a result,  TSA did not conduct air carrier inspections at this airport\u2014originally  planned for July 2014\u2014until 9 months later.", "Further, the flight schedule data TSA uses do not reliably identify and  track public charter operations in Cuba. In an effort to conduct 100  percent of air carrier inspections due for completion each fiscal year, TSA  develops an annual Master Work Plan which it uses to schedule air  carrier inspections in Cuba and other foreign locations at the start of each  fiscal year. According to TSA officials, TSA inspectors develop the Master  Work Plan by collecting flight schedule data from a variety of sources,  including past plans, past inspection data, Wikipedia, Secure Flight data,  bi-annual flight schedules provided by air carriers, and airline and airport  websites, among others, to identify the universe of air carriers requiring  inspection in the upcoming fiscal year and track flight schedules.", "However, TSA officials told us that these flight schedule data are not  always reliable and provide limited visibility into the universe of air carriers  operating U.S-bound public charter flights from Cuba. For example, the  flight schedule data TSA currently uses may fail to identify that an air  carrier is operating U.S.-bound flights from a specific Cuban airport. In  one such instance, TSA officials told us that during a planned air carrier  inspection at one Cuban airport, TSA inspectors learned that the air  carrier they intended to inspect had contracted with a different air carrier  to operate the flight on its behalf. TSA was previously unaware that the air  carrier contracted to operate the flight was operating U.S.-bound flights  from that Cuban airport and proceeded to inspect it.", "Although external factors, including host government deferrals and flight  schedule data, are outside of TSA\u2019s control, TSA officials acknowledged  that a tool that better corroborates and validates the flight schedule data it  uses to track air carriers requiring inspection each fiscal year would  improve the reliability of these data and help TSA ensure air carrier  inspections in Cuba occur at the frequency established in its standard  operating procedures. As of January 2018, TSA officials told us they were  developing a new tool intended to more reliably track flight schedules  worldwide. Specifically, TSA officials told us that this tool is intended to  analyze the aggregate flight data it currently uses and corroborate and  validate flight schedule information. According to TSA officials, the tool  may help improve the reliability of the flight schedule data TSA uses to  track air carriers requiring inspection each fiscal year. However, since this  tool is still under development, TSA has yet to demonstrate whether it will  ultimately improve the reliability of flight schedule data among public  charters in Cuba. Further, since the tool relies on the data sources TSA  already uses, the tool is unlikely to provide TSA with improved visibility  into the universe of U.S.-bound public charters requiring inspection  beyond those operations of which TSA is already aware.", "Without the ability to reliably identify and track U.S.-bound public charter  operations in Cuba, TSA will be at risk of continuing to fall short of its  stated goal of completing 100 percent of required air carrier inspections  and, therefore, cannot ensure that all air carriers are implementing TSA  security requirements for U.S.-bound flights departing Cuba. Developing  and implementing a tool that corroborates and validates the data TSA  currently uses can help TSA improve its ability to track flight schedules  and schedule inspection visits to coincide with air carrier operations.  Taking additional steps to better identify the universe of air carriers  operating U.S.-bound flights from Cuba can provide TSA with greater  assurance that it is accurately identifying all air carriers operating U.S.- bound flights from Cuba that require inspection. These steps can better  position TSA to meet its goal of inspecting all air carriers operating U.S.- bound public charter flights from Cuba to the United States at least once  per year\u2014as established in its standard operating procedures\u2014and help  them ensure that these air carriers are implementing TSA security  requirements."], "subsections": []}]}, {"section_title": "TSA Assessments of Cuban Airport Security Found Mixed Levels of Compliance", "paragraphs": [], "subsections": [{"section_title": "TSA Found Mixed Levels of Compliance with ICAO Standards and Recommended Practices at Cuban Airports", "paragraphs": ["TSA found mixed levels of compliance with ICAO standards and  recommended practices at Cuban airports during fiscal years 2012  through 2017. Specifically, of the Cuban airport assessments TSA  conducted during this period, several resulted in no findings\u2013meaning that  TSA inspectors determined the airport was fully compliant with each  ICAO standard and recommended practice the airport was assessed  against. Of the remaining foreign airport assessments that did result in  findings, TSA inspectors found that most of the airports were fully  compliant with all but one or two of the ICAO standards and  recommended practices. The instances of noncompliance fall within the  following five categories:  Access Control: During an assessment at one airport, TSA inspectors  observed that a section of fencing along the perimeter had deteriorated  and needed repair. TSA inspectors subsequently recommended that the  fencing be repaired and, during a follow-up visit, TSA inspectors found  that the perimeter fence had been repaired. During an assessment at  another airport, TSA inspectors found that a checked baggage conveyor  belt door was left open and unsecured. During subsequent visits, TSA  inspectors observed that the baggage conveyor belt door was properly  secured.", "Quality Control: During assessments at two airports, TSA inspectors  observed that a comprehensive audit of these airports had not been  conducted, in accordance with ICAO standards. TSA officials stated that if  non-compliant findings such as these remain open, TSA will follow up on  the finding until a TSA official is able to reassess the finding during a  subsequent assessment.", "Aircraft and Inflight Security: During assessments at two airports, TSA  inspectors found that airport officials did not have a formal oversight  process in place to monitor air carriers to ensure that they performed an  aircraft cabin search prior to departure. TSA officials stated they will  follow up on such findings and look to ensure, for example, that corrective  actions asserted by airport officials have been taken\u2014in these cases, by  ensuring trained security coordinators to conduct aircraft security  searches have been assigned.", "Passenger and Baggage Security: During an assessment at one  airport, TSA inspectors observed an issue with passenger screening.  During a follow up visit, TSA inspectors observed passenger screening  and determined the issue had been resolved.", "Fencing: During an assessment at one airport, inspectors found that the  concrete perimeter wall was not topped with barbed wire, and during  another assessment at a different airport, inspectors determined the  perimeter fence needed to be augmented in height and manner of  construction to increase its effectiveness. TSA officials stated that they  plan to follow up on these findings during their next scheduled  assessments. At another airport, TSA observed that excessive vegetation  potentially compromised a section of airport perimeter fencing. TSA  subsequently recommended that the issue be addressed and aviation  authorities stated their intention to make necessary repairs."], "subsections": []}]}, {"section_title": "Most Inspections Showed Air Carriers Fully Implemented All TSA Security Requirements and Cuban Personnel Continue to Oversee Security Measures for Each U.S.-bound Flight", "paragraphs": [], "subsections": [{"section_title": "Most Inspections Showed Air Carriers Fully Implemented All TSA Security Requirements", "paragraphs": ["TSA\u2019s air carrier inspection results show that, among the air carriers  operating U.S.-bound scheduled commercial and public charter flights  from Cuba that TSA inspected in fiscal years 2016 and 2017, more than  two-thirds of these inspections resulted in no findings. A result of no  findings means that TSA inspectors determined that air carriers operating  these flights fully implemented all requirements in their TSA-approved  security program at the time of inspection. For example, air carriers fully  implemented security requirements such as access controls, area  security, and checked baggage screening. TSA also found that air  carriers generally implemented requirements concerning signs and  notifications, passenger screening, and aircraft search at the time of  inspection. For the one-third of inspections where air carriers had not fully  implemented requirements, issues ranged from failure to notify U.S.- bound passengers that carry-on items and checked baggage are subject  to search to inadequate aircraft searches. TSA subsequently closed each  finding after the respective air carriers took corrective actions. These  findings include:  Bilingual Signs/Notifications: TSA inspectors discovered that air  carriers at several airports failed to properly notify U.S.-bound passengers  that all carry-on items and checked baggage are subject to search. TSA  inspectors resolved each violation with on-the-spot counseling and  recommended that Cuba\u2019s airport security agency, the Empresa Cubana  de Aeropuerto y Servicios Aeron\u00e1uticos (ECASA), post signs at the ticket  counters or verbally advise U.S.-bound passengers that their property is  subject to search and subsequently closed each finding. Figure 3 shows  an example of bilingual signage, posted by ECASA in response to a  violation, listing prohibited items at a Cuban airport."], "subsections": []}, {"section_title": "TSA-Approved Amendments to Air Carriers\u2019 Security Programs Allow Carriers to Use Cuban Personnel to Oversee Security Measures for Each U.S.- bound Flight", "paragraphs": ["To implement their TSA-approved security programs, air carriers  operating U.S.-bound flights from Cuba requested, and TSA approved, an  amendment regarding the fulfillment of Ground Security Coordinator  (GSC) roles and responsibilities at Cuban airports that went into effect in  December 2017. In general, air carriers are required to designate a  trained GSC for each U.S.-bound scheduled and public charter flight.  Each designated GSC serves as the air carrier\u2019s authorized  representative for all security-related matters and must be present at the  airport from the time the air carrier opens the first ticket counter for the  day until the air carrier\u2019s last flight scheduled for that day departs. For  each U.S.-bound flight, designated GSCs are responsible for reviewing  the implementation of relevant security requirements, including those  outlined in each air carrier\u2019s TSA-approved security program, such as the  screening of passengers and checked baggage, aircraft security, and the  prevention of unauthorized access to secure areas of the airport. Air  carrier officials we spoke with told us that they generally contract with  locally based GSCs or directly employ GSCs at foreign locations to serve  as their authorized representatives and oversee security matters for each  U.S.-bound flight.", "However, air carriers operating at Cuban airports have been unable to  designate their own GSCs to review security matters for U.S.-bound  flights for two reasons. First, the Government of Cuba controls most  sectors of the economy and employs the majority of the Cuban workforce.  As a result, according to an airline official we spoke with, there are no  private security firms or trained GSCs in Cuba that air carriers can  contract with to serve as their authorized representatives and review  security matters for each U.S.-bound flight at Cuban airports. Second,  TSA officials told us that the Government of Cuba employs Aviation  Security Technicians (AST) to review security matters for each U.S.- bound flight at Cuban airports. According to these officials, ASTs undergo  a training regimen similar to that of a GSC and can execute GSC roles  and responsibilities. As a result, the Government of Cuba has not allowed  air carriers to permanently station air carrier-employed GSCs at Cuban  airports because, according to TSA officials, it believes ASTs already  provide for these roles and responsibilities.", "Prior to the resumption of regularly scheduled commercial service  between the United States and Cuba in August 2016, TSA responded to  this issue by approving amendments to each air carrier\u2019s security  program. These amendments allowed air carriers operating in Cuba to  utilize Cuban ASTs instead of their own designated GSCs to oversee  security matters for each U.S.-bound flight at Cuban airports, provided  ASTs are trained to execute all GSC functions in accordance with TSA  requirements. Under these amendments, according to TSA officials,  Cuban ASTs were responsible for overseeing security measures  including Secure Flight prescreening as well as passenger and checked  baggage screening, among others, whereas the air carriers were  responsible for performing security measures aboard the aircraft,  including cabin searches and preventing unauthorized access to the  aircraft, among others. An official from one air carrier we spoke with  stated that they found AST performance to be at least equivalent in  quality to the performance of GSCs they contract with at other foreign  airports.", "TSA officials anticipated that once regularly scheduled commercial  service between the United States and Cuba commenced in August,  2016, the Government of Cuba would permit air carriers to designate their  own GSCs to review security matters for each U.S.-bound flight at Cuban  airports. As a result, TSA determined that it would not renew the existing  amendments, but would permit both U.S.-bound scheduled commercial  and public charters to operate under the existing amendment until it  expired in September 2017. However, TSA officials told us that during a  meeting in Havana in October 2016, the Government of Cuba informed  TSA and air carriers that ASTs would continue to perform GSC functions  at Cuban airports and that air carrier personnel were not authorized to  perform GSC functions within Cuba. In August 2017, the Government of  Cuba reiterated that it would not permit air carriers to designate GSCs at  Cuban airports and that Cuban ASTs would continue executing these  functions. In light of the situation, TSA decided in September 2017 to  renew the amendments to air carriers\u2019 programs allowing them to  continue utilizing ASTs instead of their own designated GSCs at Cuban  airports. These new amendments will expire in September 2019, at which  point TSA, air carriers, and the Government of Cuba may revisit the GSC  issue."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since 2007, TSA\u2019s air carrier inspections have played a vital role in  ensuring that air carriers operating U.S.-bound flights from Cuba meet  security requirements designed to further ensure civil aviation security  keep passengers out of harm\u2019s way. These inspections allow TSA to  identify security deficiencies and help air carriers address them through,  for example, on-the-spot counseling. Exemplifying the importance of  these inspections, TSA aims to inspect each air carrier operating flights  from Cuba to the United States at each airport from which flights operate,  in accordance with its standard operating procedures. However, for the  air carriers selected for our analysis, many of the inspections in fiscal  years 2012 through 2016 did not take place within the established time  frames.", "While delays in inspections can occur due to deferments from host  governments, our analysis revealed that many air carrier inspections that  did not occur within the required time frames were because the flight  schedule data TSA uses do not reliably identify or track public charter  operations\u2014which account for the majority of flights between the United  States and Cuba in fiscal years 2012 through 2016. Without the ability to  reliably identify and track U.S.-bound public charter operations in Cuba,  TSA will be at risk of continuing to fall short of its stated goal of  completing 100 percent of required air carrier inspections and, therefore,  cannot ensure air carriers are implementing TSA security requirements  for U.S.-bound flights departing Cuba. TSA has a tool under development  that if successfully implemented, may help corroborate and validate the  flight schedule data TSA uses and assist TSA in more reliably tracking  U.S.-bound public charters from Cuba. Taking steps to better identify the  universe of all public charters requiring inspection in Cuba would also  help better position TSA to ensure that these air carriers are meeting  essential security requirements."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following recommendation to TSA:", "The Administrator of TSA should instruct the Office of Global  Strategies to improve TSA\u2019s ability to identify all public charter  operations requiring inspection in Cuba and develop and implement a  tool that corroborates and validates flight schedule data to more  reliably track air carriers\u2019 public charter operations between the United  States and Cuba. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of our report to DHS for its review and comment. In  June 2018, DHS provided written comments, which are noted below and  reproduced in full in appendix II. DHS and the Department of  Transportation provided technical comments in the prior sensitive report,  which we also incorporated as appropriate in this report. DHS concurred  with our recommendation in the report. The Department of State did not  comment on the report.", "DHS concurred with our recommendation to develop and implement a  tool that corroborates and validates flight schedule data to more reliably  track air carriers\u2019 public charter operations between the United States and  Cuba. In its response letter, DHS described the challenges it faces in  scheduling inspections for air carriers that have entered into lease or  codeshare agreements with other carriers. We acknowledge the  challenges TSA faces in identifying the correct flights and responsible  regulated parties when scheduling inspections under the conditions  described and are encouraged by TSA\u2019s planned steps to better identify  public charter flight operations and shared flights.", "DHS\u2019s response letter describes steps that TSA is taking to develop a tool  that aims to better analyze flight data to use in scheduling inspections and  prompts manual confirmation of flight information when the automated  system identifies lower confidence of flight operations. During the course  of our review, TSA described this concept and explained how it plans to  use it to better identify scheduled flights for air carrier inspections.  However, as DHS indicates in its response letter, TSA is still exploring  how to best integrate public charter flights into this tool. DHS also  described planned improvement to TSA\u2019s Master Work Plan (MWP) to  corroborate and validate flight schedule data. While DHS does not specify  what these improvements include and how they will lead to more reliable  tracking of air carriers\u2019 public charter operations between the United  States and Cuba, we agree that improving the scheduling tool that is used  to plan inspections is a good place to start.", "DHS also described planned updates to the rules that guide the  management of data in its MWP. Specifically, TSA plans to record  anomalies in operations identified before, during, and after visits, such as  trip dates that were changed or air carriers that were scheduled to be  inspected, but were not, as well as the reason why. Our analysis  discovered some of these anomalies and explaining them required TSA  to engage in a lengthy process of tracking down historical information that  was not readily available. These improvements, if implemented, will be a  helpful step in providing better historical information to track and validate  carrier operations. Finally, DHS described TSA\u2019s plans to work with  aircraft operators, foreign air carriers, and U.S. Government agencies to  directly obtain flight information.", "These efforts, if implemented as planned, represent a positive step for  TSA in corroborating and validating flight schedule data to more reliably  track air carriers\u2019 public charter operations between the United States and  Cuba. DHS acknowledges that these efforts are underway with an  estimated completion date of March 2019. We will continue to monitor  TSA\u2019s progress in implementing these planned actions.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Homeland Security, the  Secretary of the Department of State, and the Secretary of the  Department of Transportation. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact William Russell at (202) 512-6360 or RussellW@gao.gov. Key  contributors to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines: (1) the extent to which the Transportation Security  Administration (TSA) complied with its standard operating procedures  (SOP) when assessing aviation security at Cuban airports in fiscal years  2012 through 2017, 2) the results of TSA\u2019s Cuban airport assessments in  fiscal years 2012 through 2017 and how these results compare to those  for airports in the Caribbean region, and 3) the results of TSA\u2019s air carrier  inspections for Cuba in fiscal years 2016\u2014when commercial scheduled  air service between the U.S. and Cuba resumed\u2014and 2017.", "This report is a public version of a prior sensitive report that we provided  to you in May 2018. The sensitive report included part of an objective  related to how the results of TSA\u2019s foreign airport assessments for Cuba  compared to others in the Caribbean region. TSA deemed some of the  comparison results related to this objective to be sensitive, which must be  protected from public disclosure. This public report also omits certain  information that TSA deemed to be sensitive related to the specific  number of airport assessments and air carrier inspections performed by  TSA in Cuba, results of those assessments and inspections, and TSA\u2019s  risk-based approach in identifying U.S.-bound public charter operations  from Cuba, among others. To provide context regarding the scale and  magnitude of our findings, without disclosing sensitive information, we  characterized specific numbers as some, many, or several. Although the  information provided in this report is more limited in scope, as it excludes  such sensitive information, it addresses the same objectives and uses the  same overall methodology as the sensitive report.", "To collectively address all three objectives, we reviewed the relevant laws  and regulations pursuant to which TSA conducts foreign airport  assessments and air carrier inspections. We also reviewed various TSA  documents on program management and strategic planning, including  TSA\u2019s master work plans for scheduling air foreign airport assessments  and air carrier inspections. Specifically, we reviewed TSA\u2019s 2016  standard operating procedures, which prescribes program and  operational guidance for assessing security measures at foreign airports  and inspecting air carriers and inform TSA personnel at all levels of what  is expected of them in the implementation of the program. We also  reviewed TSA\u2019s Operational Implementation Plans, which establish  program goals. In addition, we reviewed the job aids that TSA inspectors  use during each assessment and inspection, which are intended to  ensure that the TSA-specified International Civil Aviation Organization  (ICAO) aviation security standards and recommended practices and air  carrier implementation of TSA security requirements are fully evaluated  during each assessment and inspection.", "To understand how TSA assesses and manages its Cuban airport and air  carrier risk information, we obtained and reviewed documents on TSA\u2019s  methodology for assigning individual risk rankings (called tier rankings) to  each Cuban airport it assesses. We also, interviewed TSA officials  located at headquarters and in the field and interviewed other federal  stakeholders, such as the Department of State and the Department of  Transportation (DOT). Lastly, to obtain air carriers\u2019 perspectives on  aviation security in Cuba, we interviewed representatives from three air  carriers that DOT licensed to operate scheduled commercial flights  between the United States and Cuba. While the information obtained from  these interviews cannot be generalized to all air carriers DOT licensed,  these interviews provided insights into the carriers experiences. We  outline the specific steps taken to answer each objective below.", "To determine the extent to which TSA followed its standard operating  procedures when assessing aviation security in Cuba in fiscal years 2012  through 2017, we examined documentation for each of the foreign airport  assessments conducted during the entire period and all air carrier  inspections conducted in fiscal years 2016 and 2017 in Cuba for  completeness and errors. For each finding resulting from Cuban airport  assessments and air carrier inspections we reviewed, we examined the  extent to which TSA followed its SOPs when following up and closing  findings. We also analyzed Cuban airport assessment and air carrier inspection data to determine if TSA performed each assessment and  inspection at the frequency established in its SOPs. Lastly, we met with  TSA officials at headquarters and in the field to discuss how TSA  inspectors apply their SOPs when assessing Cuban airports and  inspecting air carriers in Cuba.", "To determine the completeness of TSA\u2019s Cuban airport assessments in  fiscal years 2012 through 2017, we analyzed and compared these  assessment reports to TSA\u2019s SOPs and the job aids which instruct  inspectors on how to complete their assessments. In performing this  analysis, we reviewed whether TSA inspectors followed their SOPs when  assessing and documenting each Cuban airport\u2019s compliance with  applicable ICAO standard and recommended practices and the extent to  which these documents contained missing data fields. Similarly, we  reviewed documentation for each air carrier inspection TSA performed in  fiscal years 2016 and 2017 for errors and completeness by analyzing and  comparing these documents to TSA\u2019s SOPs. In performing this analysis,  we reviewed whether TSA inspectors followed their SOPs when  inspecting and documenting each air carriers\u2019 implementation of  requirements in their TSA-approved security program and the extent to  which these documents contained errors or missing data fields. When  we identified discrepancies in the documentation for TSA\u2019s Cuban airport  assessments or air carrier inspections in Cuba, we met with TSA officials  to discuss the cause of the discrepancies.", "To determine whether TSA inspectors followed their SOPs when  recording, tracking, and resolving findings discovered during Cuban  airport assessments and air carrier inspections in Cuba, we reviewed  TSA\u2019s SOPs governing finding follow up, closure and documentation of  each finding, the status of each finding, and the actions TSA took to close  findings. Specifically, we reviewed TSA findings discovered during Cuban  airport assessments in fiscal years 2012 through 2017 by analyzing  TSA\u2019s Open Standards and Recommended Practices Finding Tool  (OSFT), which TSA uses to monitor and track a foreign airport\u2019s progress  in resolving security deficiencies identified by TSA inspectors during  previous assessments. To determine whether TSA inspectors followed  their SOPs in response to a finding resulting from air carrier inspections in  fiscal years 2016 through 2017, we reviewed TSA documentation of each  finding and documentation on TSA\u2019s findings response, follow-up, and  closure, including air carrier inspection reports and enforcement  investigative reports.", "To determine whether TSA performed Cuban airport assessments and air  carrier inspections at the frequency established in TSA\u2019s SOPs, we  analyzed TSA data for all airport assessments from fiscal years 2012  through 2017. We also analyzed TSA air carrier inspection data from  fiscal years 2012 through 2016 for a non-probability sample of 5 of the 18  air carriers operating U.S.-bound flights from Cuba that TSA inspected  during this period along with flight traffic data for Cuba for these air  carriers from the Department of Transportation\u2019s Bureau of Transportation  Statistics T-100 data bank, which contains data on all U.S.-bound  departures from foreign airports, among other things. To assess the  reliability of the T-100 data, we reviewed documentation on system  controls and interviewed knowledgeable officials from the Bureau of  Transportation Statistics. After determining that the T-100 data were  sufficiently reliable for our intended use, we compared these data against  inspection data for select air carriers. To assess the reliability of TSA\u2019s  assessment and inspection frequency data, we reviewed program  documentation on system controls, interviewed knowledgeable officials  from TSA and checked TSA\u2019s frequency data for any potential gaps and  errors. To select air carriers for our analysis, we identified air carriers (five  in total) operating public charters flights\u2014which accounted for the  majority of flights from Cuba to the U.S. in fiscal years 2012 through  2016\u2014that:  1) Operated at least 4 U.S.-bound flights in a single month or greater than  25 U.S.-bound flights within a fiscal year from one or more Cuban  airports, and  2) DOT licensed to operate scheduled commercial flights following the  policy change under the Obama Administration.", "Since we selected a non-probability sample of air carriers, the results of  our analysis cannot be generalized to all air carriers that operated U.S.- bound flights from Cuban airports during this period, but did provide us  with insights about TSA\u2019s adherence to the frequency of air carrier  inspections in accordance with its SOPs.", "To determine how TSA inspectors apply their SOPs when assessing  Cuban airports and inspecting air carriers in Cuba, we interviewed  officials at TSA headquarters and conducted site visits to TSA\u2019s Miami  Regional Operations Center (ROC) in Florida and in Cuba. During our site  visit at the Miami ROC, which is responsible for conducting airport  assessments and air carrier inspections in the Caribbean and South  America, we met with the ROC manager and the TSA inspectors who  conducted foreign airport assessments and air carrier inspections in  Cuba. During these meetings, we discussed TSA\u2019s assessments and  inspections in Cuba, how they follow the SOPs when performing these  assessments and inspections, and their perspectives on Cuban aviation  security compared to other locations. On our visit to Cuba, we observed  TSA inspectors from the Miami ROC conduct four air carrier inspections  at Frank Pais Airport in Holguin and Antonio Maceo Airport in Santiago de  Cuba.", "To describe the results of TSA\u2019s Cuban airport assessments and air  carrier inspections in Cuba, we obtained and analyzed relevant program  documents and interviewed TSA officials on the results of its evaluations  in Cuba. Specifically, we reviewed documentation for all Cuban airport  assessments performed in fiscal years 2012 through 2017. We also  analyzed TSA\u2019s foreign airport assessment program vulnerability tracker,  which TSA uses to record and track the vulnerability scores it assigns to  each Cuban airport. Specifically, the tracking sheet contains vulnerability  scores for each ICAO standard and recommended practice used in each  assessment, as well as overall vulnerability scores of 1 through 5  assigned to each airport after each assessment. This overall airport  vulnerability score is a representation of compliance or noncompliance  with all ICAO standards and recommended practices against which TSA  assesses Cuban airports. To describe air carrier inspection results in  Cuba in fiscal years 2016\u2014when scheduled commercial service between  the U.S. and Cuba resumed\u2014and 2017, we analyzed inspection data  from all air carrier inspections TSA performed in Cuba during this period  and reviewed each air carrier\u2019s compliance with requirements in its TSA- approved security program, such as aircraft search and passenger  screening. We also interviewed TSA managers and inspectors about their  roles and responsibilities in determining and documenting inspection  results in Cuba.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We subsequently worked with  TSA from May 2018 to July 2018 to prepare this nonsensitive version of  the original sensitive report for public release. This public version was  also prepared in accordance with these standards."], "subsections": []}, {"section_title": "Appendix II: Comment from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Kevin Heinz (Assistant Director);        Josh Diosomito (Analyst-in-Charge); David Alexander; Bruce Crise;  Taylor Hadfield; Eric Hauswirth; Tom Lombardi; Heidi Nielson, and    Kevin Reeves made key contributions to this report."], "subsections": []}]}], "fastfact": ["Did the Transportation Security Administration (TSA) follow its procedures to ensure the security of U.S.-bound aircraft from Cuba?", "TSA generally followed its security procedures for airport assessments and air carrier inspections in Cuba in fiscal years 2012 through 2017. However, TSA did not inspect all the required aircraft from Cuba in the established time frames, in part because TSA was not able to identify or reliably track U.S.-bound public charter flights from Cuba.", "We recommended that TSA develop a tool to reliably track air carriers' public charter operations between the U.S. and Cuba."]}
{"id": "GAO-18-453", "url": "https://www.gao.gov/products/GAO-18-453", "title": "Puget Sound Restoration: Additional Actions Could Improve Assessments of Progress", "published_date": "2018-07-19T00:00:00", "released_date": "2018-07-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Puget Sound is the nation's second-largest estuary and serves as an important economic engine in Washington State, supporting millions of people, major industries, and a wide variety of species. However, according to the CCMP, human use and development have degraded water quality and habitats and harmed critical species such as salmon.", "GAO was asked to review efforts to restore Puget Sound. This report examines, among other objectives, (1) Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016, (2) how federal and nonfederal entities coordinate their restoration efforts, and (3) the framework for assessing progress toward Puget Sound restoration. GAO reviewed restoration plans and other documentation, conducted a two-phase survey of the more than 25 federal and state entities that GAO determined had participated in restoration efforts, conducted discussion groups with tribal and local representatives, and interviewed representatives from these federal and nonfederal entities."]}, {"section_title": "What GAO Found", "paragraphs": ["Through its survey of federal and Washington State entities, GAO identified numerous federal and state efforts that, in whole or in part, supported Puget Sound restoration from fiscal years 2012 through 2016. The efforts involved a variety of activities, including habitat protection, water quality improvement, and monitoring. Some of these efforts focused exclusively on Puget Sound restoration, while others had a broader geographic or programmatic scope. Funding for these efforts came from a variety of sources, such as the Environmental Protection Agency (EPA), which reported expending about $142 million for activities in Puget Sound through the National Estuary Program and the Puget Sound Geographic Program during this time frame. However, total expenditures for all efforts are unknown, in part because of difficulties isolating expenditures specific to Puget Sound. A 2017 state audit recommended that two state agencies develop a plan to create a more complete inventory of restoration efforts and related funding. The state agencies concurred and have plans to develop this inventory by August 2019.", "Federal and nonfederal entities coordinate restoration efforts through two primary interagency groups. First, the state-led Puget Sound Management Conference has developed a comprehensive conservation and management plan (CCMP), approved by EPA under the National Estuary Program, that serves as the primary planning document for Puget Sound restoration. Second, the Puget Sound Federal Task Force complements the work of the management conference by coordinating the efforts of federal agencies to support the CCMP, including by developing a draft Federal Action Plan that identifies priority federal actions to protect and restore Puget Sound.", "The CCMP lays out a framework for assessing restoration progress, including 6 goals, 47 indicators, and recovery targets for 31 of the indicators. In 2017, the Puget Sound Partnership, a state agency, reported that progress had been made in some areas, but many key indicators had not shown improvement. For example:", "One indicator that showed improvement was acres of harvestable shellfish beds, which the Partnership reported increased from 2007 to 2016.", "One indicator that showed no improvement was the abundance of Puget Sound Chinook salmon populations, which the Partnership reported remained below desired levels.", "The Partnership also reported that most of the 31 recovery targets that the management conference has adopted for 2020 are not likely to be attained. However, the Partnership's ability to assess progress has been limited in some instances, in part because the management conference has not developed targets for 16 of the 47 indicators. GAO has identified measurable targets as a key attribute of successful performance measures. By working with the management conference to help ensure that measurable targets are developed where possible for the highest priority indicators currently lacking such targets, EPA would better position the Partnership to assess progress toward restoration goals."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, including that EPA work with the management conference to help ensure that measurable targets are developed where possible for the highest priority indicators currently lacking such targets. EPA agreed with GAO's recommendations and highlighted steps the agency has begun taking and plans to take to address the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Washington State\u2019s Puget Sound is the second-largest estuary in the  United States and supports a wide variety of fish, birds, and marine  mammals, including economically and culturally important species such  as salmon, killer whales, and different types of shellfish. The Puget  Sound basin extends north into Canada, encompassing a complex  landscape featuring mountains, rivers, forests, farmlands, urban  development, and about 2,500 miles of shoreline. More than 4.5 million  people live in the Puget Sound basin, and the region is home to large  ports, industries, and critical military installations. The Sound and the  surrounding region serve as an important economic engine and include  metropolitan areas that accounted for more than $365 billion in gross  domestic product in 2016.", "However, human use and development have contributed to the  degradation of habitats and water quality in Puget Sound. For example,  an estimated 70 percent of important habitats\u2014including estuaries, salt  marshes, and eelgrass beds\u2014have been damaged or lost over the past  125 years. In addition, stormwater runoff contaminated with toxic  chemicals and other pollutants threatens wildlife in Puget Sound, and  several species in the Sound are listed as endangered or threatened  under the Endangered Species Act. The U.S. Environmental Protection  Agency (EPA) has designated Puget Sound as one of the 28 estuaries of  national significance under the National Estuary Program.", "A large number of federal, state, local, tribal, and nongovernmental  entities play important roles in Puget Sound restoration efforts.  Washington State has provided much of the high-level leadership for the  restoration efforts, and in 2007 the state legislature created a state  agency, the Puget Sound Partnership, to oversee the restoration of the  Sound\u2019s environmental health. Other state agencies, such as the  Washington State Conservation Commission and the Departments of  Ecology, Fish and Wildlife, and Natural Resources, help fund and carry  out restoration-related work in the Puget Sound basin. At the federal  level, numerous agencies directly and indirectly support restoration efforts  by, for example, funding restoration projects, conducting research,  providing technical expertise to other entities, enforcing applicable laws  and regulations, and managing lands, such as national forests, that  provide habitat for salmon and other species. Local governments, tribal  entities, and nongovernmental organizations also support Puget Sound  restoration in various ways, such as by funding and implementing  restoration projects. In addition, Canadian agencies have been involved  in efforts to restore the broader Salish Sea\u2014of which Puget Sound is a  part\u2014including some joint efforts with federal and state agencies in the  United States.", "You asked us to review federal and nonfederal efforts to restore Puget  Sound. This report examines (1) Puget Sound restoration efforts and  related expenditures for fiscal years 2012 through 2016; (2) how federal  and nonfederal entities coordinate their restoration efforts and their views  on this coordination; (3) the framework for assessing progress toward  Puget Sound restoration; and (4) key factors, if any, federal and  nonfederal entities identified that may limit the success of Puget Sound  restoration.", "To examine Puget Sound restoration efforts and related expenditures for  fiscal years 2012 through 2016, we used the first phase of a two-phase  survey to identify federal and state efforts that supported Puget Sound  restoration during this time frame. We selected this period to allow us to  obtain information on a range of restoration efforts carried out in recent  years. In addition, we used the first phase of the survey to obtain  information on the availability of expenditure data for the federal and state  efforts and to help determine whether any limitations existed that would  affect the reliability of such data. In June 2017, we sent the first phase of  the survey to the 15 federal and 11 state entities that we determined had  participated in restoration efforts, and all of them responded. We used  the survey results in part to develop catalogs of federal and state efforts  that supported Puget Sound restoration from fiscal years 2012 through  2016. To obtain additional information about these efforts, we reviewed  documentation, such as agency websites and reports, and interviewed  agency officials.", "Based on the results of the first phase of the survey and additional follow- up interviews with agency officials, we determined that we would be  unable to collect sufficiently reliable data encompassing all federal and  state efforts to enable us to report on the total amount of expenditures  that have supported Puget Sound restoration. In particular, we  determined that data limitations, such as difficulties isolating expenditures  within the geographic boundaries of Puget Sound for some efforts, would  have made it difficult for us to collect consistent, reliable, and comparable  expenditure data across all of the federal and state entities. As a result of  the data limitations we identified, we limited our collection of expenditure  data to a nongeneralizable sample of three federal programs and one  state program to provide examples of the diversity in funding approaches  used to support Puget Sound restoration. We considered the following  factors in selecting these efforts: 1) the programs\u2019 prominence in Puget  Sound restoration, 2) variations in the federal and state entities involved  in carrying out these programs, 3) variations in their size, and 4) evidence  of reliable expenditure data. In addition, to help illustrate how funds are  used at the project level, we obtained expenditure data for two recently  completed restoration projects and conducted two site visits to observe  the outcomes of these projects. We assessed the reliability of the  expenditure data for the selected programs and projects by comparing  the data we obtained with data from other sources where possible,  reviewing agency documentation, and interviewing knowledgeable  agency officials. We found the data to be sufficiently reliable for our  purposes.", "To examine how federal and nonfederal entities coordinate their  restoration efforts and their views on this coordination, we reviewed  agency documentation, interviewed agency officials, and used the second  phase of our survey of federal and state entities to obtain their views on  steps taken to coordinate restoration efforts. To obtain additional views,  we interviewed representatives from conservation, agricultural, and  fishing industry organizations and obtained written responses from two  Canadian agencies. We also held six moderated telephone discussion  groups with representatives from 15 tribal entities and 20 local entities.  We selected these tribal and local entities because of their involvement in  implementing restoration projects. We compared the information we  obtained on the coordination of Puget Sound restoration efforts with  selected leading collaboration practices that we have previously identified  and that were most relevant based on our initial audit work, such as  leadership, bridging organizational cultures, and the inclusion of relevant  participants.", "To examine the framework for assessing progress toward Puget Sound  restoration, we reviewed laws, regulations, and key restoration planning  documents. We obtained additional views on this topic from federal and  nonfederal entities through the second phase of our survey and  interviews described above. We compared this information with agency  guidance and leading practices for performance measurement and  reporting to determine whether efforts to assess Puget Sound restoration  progress have followed leading practices.", "To determine key factors, if any, federal and nonfederal entities identified  that may limit the success of Puget Sound restoration, we used the  second phase of our survey of federal and state entities and our  discussion groups to obtain views on factors that may pose a risk to the  success of restoration efforts. We also reviewed agency documentation  and used our interviews with the federal and nonfederal entities described  above to obtain additional views on limiting factors. Appendix I contains a  more detailed description of our objectives, scope, and methodology.", "We conducted this performance audit from October 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Puget Sound basin\u2014the southern half of the transboundary Salish  Sea\u2014consists of about 19 major watersheds, according to EPA, and  spans much of western Washington State and portions of British  Columbia, Canada, as shown in figure 1. The basin covers more than  10,000 square miles, including about 2,800 square miles of inland marine  waters and thousands of rivers and streams. The Puget Sound basin  features a wide variety of land uses, including highly urbanized areas,  agricultural lands, large swaths of commercial forests, and areas that are  largely protected from development, such as national parks and wildlife  refuges.", "The Puget Sound Partnership has identified numerous environmental  stressors that threaten Puget Sound and that have impaired water quality.  In particular, the Partnership has reported that nonpoint sources of  pollution, such as polluted stormwater runoff from roads and agricultural  fields, are the biggest threats to Puget Sound water quality. Polluted  stormwater runoff can also threaten sources of drinking water and carries  toxic chemicals, nutrients, sediment, and bacteria into Puget Sound,  where these pollutants can harm aquatic life. For instance, a 2017 study  found that toxic stormwater runoff is linked to the high rates of adult coho  salmon mortality that have been observed in some urban streams in  central Puget Sound. Moreover, fish, shellfish, and other species that  are contaminated by toxic chemicals and other pollutants in Puget Sound  may subsequently pose a threat to other marine wildlife and to humans  that consume them. For example, in 2017 the Partnership reported that  approximately 16 percent of the roughly 225,000 acres managed for  commercial shellfish harvesting in Puget Sound were closed because of  water pollution caused by fecal bacteria from sources such as failing  septic systems and agricultural runoff. Such closures have economic  impacts, as Washington State is the country\u2019s leading producer of farmed  oysters, clams, and mussels, and much of this production comes from the  Puget Sound region. In addition, contaminated shellfish may pose  potential health threats to people who consume it, including tribes that  rely on shellfish for subsistence and ceremonial uses.", "Human activities have also degraded habitats that salmon and other  marine species depend on for survival. The Partnership has reported that  some of the primary threats to Puget Sound habitats include hardened  shorelines (such as shorelines that have been armored with seawalls),  filled estuaries, channelized rivers, and altered floodplains. These  threats affect habitats in various ways. For example, according to a 2018  Washington State report, seawalls interfere with natural coastal  processes and cause beaches to erode, which in turn can decrease and  degrade habitat for fish, birds, and wildlife. The report states that about  27 percent of the shoreline in Puget Sound has been armored by  structures such as seawalls. Figure 2 illustrates the sources of water  quality impairment and habitat degradation in the Puget Sound basin.", "Federal laws, including the Clean Water Act and the Endangered Species  Act, play a role in addressing water quality issues and habitat degradation  in Puget Sound. The Clean Water Act\u2019s objective is to restore and  maintain the chemical, physical, and biological integrity of the nation\u2019s  waters. A 1987 amendment to the act created the National Estuary  Program to, among other things, identify nationally significant estuaries  that are threatened by pollution, development, or overuse, and promote  comprehensive planning for, and conservation and management of, such  estuaries. The National Estuary Program calls for management  conferences to be convened for designated estuaries of national  significance to, among other things, develop a comprehensive  conservation and management plan (CCMP). The current CCMP for  Puget Sound is The 2016 Action Agenda for Puget Sound, a document  developed to meet both federal and state requirements. By federal  statute, when selecting estuaries and convening management  conferences, EPA is to give priority consideration to certain named  estuaries, including Puget Sound. Under the act, EPA also works with  Washington State to regulate water quality.", "The Endangered Species Act was enacted to, among other things,  provide a means to conserve the ecosystems upon which endangered  and threatened species depend and to provide a program for the  conservation of such species. Several species in the Puget Sound basin  are listed as endangered or threatened, including bull trout, Chinook  salmon, Southern Resident Killer Whales (a population that spends  spring, summer, and fall months in the Salish Sea, including Puget  Sound), northern spotted owl, and steelhead trout.", "In addition to environmental laws that relate to Puget Sound waters and  species, tribal treaty rights play an important role in restoration efforts  within the basin\u2019s watersheds. In particular, 19 federally recognized tribes  are within the Puget Sound basin, and many of them have explicit treaty  rights to the fish in Puget Sound waters. In 1974, a federal court held that  the treaty tribes had the right to take up to 50 percent of the harvestable  fish in areas where fishing rights had been reserved, an allocation upheld  by the Supreme Court in 1979. In 1994, a federal court stated that tribes  were also entitled to take half of the harvestable shellfish on most  Washington beaches. According to several federal officials we  interviewed, considerations relating to tribal treaty fishing rights have  served as an important catalyst for some federal agencies\u2019 restoration  activities, particularly with regard to restoring and protecting habitat."], "subsections": []}, {"section_title": "Federal and State Entities Carried Out Numerous Efforts that Supported Puget Sound Restoration Using a Variety of Funding Sources, but Total Expenditures Are Unknown", "paragraphs": ["Federal and state entities we surveyed identified numerous federal and  state efforts that, in whole or in part, supported Puget Sound restoration  from fiscal years 2012 through 2016. Some of these efforts focused  exclusively on restoration activities in the Puget Sound basin, while others  had a broader national, regional, or statewide focus or had a broader  scope of work that did not center directly on restoration activities. These  efforts were supported by a variety of federal and nonfederal funding  sources, such as EPA\u2019s National Estuary Program and Puget Sound  Geographic Program, which together expended about $142 million for  activities in Puget Sound during this time frame according to EPA data.  However, total expenditures across all restoration efforts are unknown, in  part because of data limitations such as difficulties isolating expenditures  specific to the Puget Sound basin for some efforts."], "subsections": [{"section_title": "Federal and State Entities Carried Out Numerous Restoration Efforts that Varied in Geographic and Programmatic Scope", "paragraphs": ["Through their responses to the first phase of our survey, officials from  federal and state entities identified numerous efforts that supported Puget  Sound restoration from fiscal years 2012 through 2016. Specifically,  respondents from federal entities identified 73 federal efforts, and  respondents from state entities identified 80 state efforts that, in whole or  in part, supported Puget Sound restoration during this period. Appendix II  lists the restoration efforts identified by federal entities, and appendix III  lists the restoration efforts identified by state entities. According to the  survey responses, the federal and state entities often worked with local  governments, tribal entities, and nongovernmental organizations to carry  out these efforts. These efforts primarily involved six types of restoration  activities (see table 1).", "The federal and state restoration efforts carried out during this time period  varied in geographic scope. Some of the efforts survey respondents  reported focused exclusively on the Puget Sound basin, such as  Washington State\u2019s Puget Sound Acquisition and Restoration Fund.  According to agency fact sheets, this fund has helped state agencies,  local governments, and others carry out projects that address high-priority  salmon habitat protection and restoration needs in Puget Sound. Other  efforts that supported restoration activities in Puget Sound during the time  frame we reviewed have a broader national, regional, or statewide focus.  For example, EPA\u2019s section 319 nonpoint source management program  is a nationwide program that supports state and tribal efforts to address  nonpoint sources of pollution. Within Puget Sound, EPA\u2019s data show  that the section 319 program has supported activities such as carrying out  projects that target nonpoint source pollution from urban areas,  agricultural lands, and marinas.", "The federal and state restoration efforts survey respondents identified  also varied in programmatic scope, with some efforts focusing exclusively  on restoration-related activities and other efforts supporting such activities  within a broader scope of work. Through the U.S. Fish and Wildlife  Service\u2019s National Coastal Wetland Conservation Grant Program,  Washington State carried out activities specifically aimed at restoring  wetlands, estuaries, and marshes in Puget Sound. In contrast, some  efforts survey respondents cited had a broader scope of work that did not  center directly on restoration but included some activities that also  benefited Puget Sound restoration. One such effort was the Natural  Resources Conservation Service\u2019s Environmental Quality Incentives  Program, which helps farmers carry out conservation practices on  agricultural land. According to agency documentation, such as the  program\u2019s website, some of these practices, such as those that reduce  the amount of sediment and nutrients entering waterways, can also help  improve water quality in the Puget Sound basin."], "subsections": []}, {"section_title": "A Variety of Federal and Nonfederal Funding Sources Support Restoration Efforts, but Total Expenditures Are Unknown", "paragraphs": ["Funding for Puget Sound restoration efforts has come from a wide variety  of federal and nonfederal entities. At the federal level, some agencies,  such as EPA and the National Oceanic and Atmospheric Administration  (NOAA), supported restoration efforts by providing funds to other federal  or nonfederal entities to carry out restoration projects. In contrast, other  agencies, such as the U.S. Army Corps of Engineers, directly carried out  restoration activities in Puget Sound, sometimes working in conjunction  with nonfederal entities. Based on our analysis of survey responses and  interviews with agency officials, we selected the following examples of  federal programs to show the diversity in federal funding approaches in  support of Puget Sound restoration and to illustrate how federal funds  have been leveraged to obtain nonfederal contributions in support of  restoration efforts.", "EPA\u2019s National Estuary Program. According to EPA\u2019s website, this  program aims to protect and restore the water quality and ecological  integrity of designated estuaries of national significance, such as  Puget Sound. EPA Region 10 officials stated that the agency uses  funds from this program in conjunction with funds from EPA\u2019s Puget  Sound Geographic Program to support restoration efforts. According  to data provided by EPA, these programs together expended about  $142 million for activities in Puget Sound from fiscal years 2012  through 2016. EPA provided most of these funds through grants to  state and tribal entities. According to EPA Region 10 officials we  interviewed, EPA requires an overall dollar-for-dollar nonfederal  match for these grants, and the officials stated that the National  Estuary Program funds have been leveraged to obtain significant  nonfederal funding support for Puget Sound restoration efforts. For  example, the Floodplains by Design program, a joint effort led by The  Nature Conservancy and state agencies to restore natural floodplain  functions, has used National Estuary Program funds to help leverage  nonfederal funding support, according to the EPA officials.", "NOAA\u2019s Pacific Coastal Salmon Recovery Fund. Under this  program, NOAA awards funds through grants to state and tribal  entities to carry out salmon recovery activities in five western states.  In Washington State, NOAA provided funds to the Washington State  Recreation and Conservation Office and the Northwest Indian  Fisheries Commission for use in Puget Sound and other areas.  According to data and estimates provided by NOAA, as of November  2017 these entities had expended or allocated about $59 million from  this program for activities in the Puget Sound basin from fiscal years  2012 through 2016. This program requires a 33 percent match from  state agencies, such as the Washington State Recreation and  Conservation Office, that receive funds, and NOAA officials we  interviewed said that Washington State usually exceeds this matching  requirement. For example, a 2015 NOAA report cites a habitat  restoration project in Puget Sound that received about $117,000 from  the Pacific Coastal Salmon Recovery Fund and secured an additional  $1.75 million in matching and other funds.", "Corps\u2019 Puget Sound and Adjacent Waters Restoration Program.  Under this program, the Corps carries out habitat restoration projects  in Puget Sound in conjunction with nonfederal entities, such as cities.  In 2000, Congress created this program and authorized $40 million to  be appropriated to carry out the program. As of November 2017, the  Corps had expended approximately $12 million over the life of the  program on five restoration projects, according to data provided by the  Corps. This program includes a cost-sharing requirement for the  participating nonfederal entity to contribute at least 35 percent of the  total project costs.", "Survey respondents cited nonfederal funds as the exclusive source of  funding for about one-third of the state efforts presented in appendix III.  For example, Washington State\u2019s Puget Sound Acquisition and  Restoration Fund, which the Partnership and the Washington State  Recreation and Conservation Office jointly manage, has been a  significant source of nonfederal funding for habitat restoration projects.  According to expenditure data provided by the Partnership, the Puget  Sound Acquisition and Restoration Fund expended approximately $100  million on restoration projects throughout Puget Sound from state fiscal  years 2012 through 2016. In its response to our survey, the Recreation  and Conservation Office stated that these projects included culvert  replacements, levee setbacks, and acquisition of important habitat,  among other things.", "When carrying out specific restoration projects in Puget Sound, federal  and nonfederal officials we interviewed said that project managers may  need to secure funds from multiple federal and nonfederal sources, such  as the federal and state programs discussed above. According to tribal  and local participants in our discussion groups, their experiences carrying  out restoration projects has similarly shown a need to piece together  multiple sources of funding for some projects. The discussion group  participants said that this need commonly arises with expensive and  complex projects that take a long time to complete, as reflected in the  project examples below that involved tribal and local entities.", "Qwuloolt Estuary Restoration Project. According to a project fact  sheet and officials, this project restored more than 350 acres of  estuary habitat in the Snohomish River Delta that had previously been  converted into farmland. By breaching existing levees and taking  other actions to reestablish natural stream channels and allow for tidal  inundation of the historic floodplain, this project aimed to restore  salmon habitat and improve water quality in the estuary (see fig. 3). In  2016, NOAA reported that this project had led to improvements in  salmon abundance, productivity, and diversity. The Tulalip Tribes of  Washington served as the overall project manager and worked with  numerous federal, state, and local partners to complete this project,  which took more than 20 years and ended in 2015. According to tribal  data, this project cost about $21 million and received funding from  more than 20 federal, state, tribal, and local sources. Federal funds  accounted for a little more than half of this amount; the Corps  contributed the largest amount, around $5 million, using funds from  the Puget Sound and Adjacent Waters Restoration Program.", "Seahurst Park Shoreline Restoration Project, Phase II. This phase  of the project lasted from 2007 to 2014 and included removing about  1,800 feet of seawall, creating a small wetland, and restoring  shoreline habitat at a coastal park in Burien, Washington (see fig. 4).  Through these actions, this project aimed to improve nearshore  marine habitat for salmon and other species, restore natural  sedimentation processes, and improve recreational access to Puget  Sound. The city of Burien led this effort in conjunction with the Corps.", "According to documentation provided by the city and the Corps, this  phase of the project cost about $10 million and received funding from  at least seven federal, state, and local sources, including EPA\u2019s  National Estuary Program, the Corps\u2019 Puget Sound and Adjacent  Waters Restoration Program, and Washington State\u2019s Puget Sound  Acquisition and Restoration Fund.", "As shown in the program and project examples above, we obtained  expenditure information for a selection of programs and projects to help  illustrate how federal and nonfederal funds have been used to support  Puget Sound restoration. However, we found that the total amount of  expenditures incurred for Puget Sound restoration across all federal and  nonfederal efforts for fiscal years 2012 through 2016 is unknown. We  identified two primary barriers to determining the total amount of  expenditures. First, data limitations present challenges to obtaining  accurate and consistent expenditure data across entities. For example,  federal and state agency officials said that for some national and  statewide programs, it is difficult to isolate expenditures specific to the  Puget Sound basin or to quantify expenditures related to staff time that  supported restoration-related activities. Second, no comprehensive  database of Puget Sound restoration activities and expenditures exists.  This issue was identified by the Washington State Joint Legislative Audit  and Review Committee in its 2017 audit of the Puget Sound Partnership,  which recommended that the Partnership and the Washington State  Office of Financial Management develop a plan to create a more  complete inventory of restoration efforts and related funding. Both  agencies concurred with the recommendation, and the Partnership  reported in December 2017 that a more complete inventory of efforts and  funding would significantly enhance the agency\u2019s ability to prioritize  actions and recommend strategic investments. The Partnership reported  that it plans to develop such an inventory by August 2019."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Entities Have Taken Steps to Coordinate Restoration Efforts and Identified Both Benefits and Challenges to Interagency Coordination", "paragraphs": ["Federal and nonfederal entities have established two primary interagency  groups, the Puget Sound Management Conference and the Puget Sound  Federal Task Force, to coordinate Puget Sound restoration efforts at the  strategic level. Coordination also occurs at the project level and,  according to our discussion group participants, has been most effective  under certain circumstances, such as when written plans and agreements  are in place to help entities work together across their normal  jurisdictions. Federal and nonfederal entities provided their views on the  benefits produced by the management conference and the federal task  force as well as challenges that could limit the effectiveness of these  groups, such as not having had continuous national-level leadership for  the federal task force."], "subsections": [{"section_title": "Federal and Nonfederal Entities Coordinate Restoration Efforts at the Strategic Level through Two Primary Interagency Groups", "paragraphs": ["Federal and nonfederal entities coordinate at the strategic level to, among  other things, identify goals, develop strategies to achieve the goals, and  set priorities for action. This coordination primarily occurs through two  main interagency groups: the state-led Puget Sound Management  Conference, which started in its current form in 2007, and the Puget  Sound Federal Task Force, which started in 2016. Each group has  developed a planning document to guide its efforts. Figure 5 provides an  overview of each group\u2019s structure and planning document.", "The management conference serves as the governance structure for  Puget Sound restoration under the National Estuary Program and helps  set the general direction for the restoration effort. To do so, the management conference brings together federal and nonfederal entities  under a common planning process led by the Partnership to develop and  periodically update the CCMP. EPA\u2019s Region 10 office then works with  EPA\u2019s National Estuary Program national office to review and approve  any new or updated CCMPs developed by the management conference.  The CCMP serves as the primary planning document for Puget Sound  restoration and identifies proposed near-term actions to help restore the  Sound, nearly all of which are to be carried out by nonfederal entities.  For example, one of the proposed near-term actions calls for a local  university to sample contaminants of emerging concern in regional waters  to help characterize risks and prioritize follow-up actions.", "The Puget Sound Federal Task Force complements the work of the  management conference by coordinating the efforts of federal agencies in  support of the CCMP and by helping these agencies work together to  fulfill federal trust responsibilities to the tribes as they relate to The Puget  Sound Federal Task Force Action Plan (Fiscal Years 2017-2021) (Federal  Action Plan). The task force was created through a memorandum of  understanding signed by nine federal agencies as of October 2016, and  in January 2017 the task force released its Federal Action Plan, which is  currently in draft form. The federal task force consists of a national-level  leadership group\u2014which focuses on higher-level policy, oversight, and  coordination issues\u2014and regional leadership and implementation teams  that perform much of the on-the-ground implementation and coordination  work of the task force. The national-level group is co-chaired by the  Council on Environmental Quality (CEQ) and a co-chair that rotates  among the other agencies. The task force\u2019s regional teams are led by  EPA\u2019s Region 10 and a co-chair that rotates among the other agencies.", "According to EPA Region 10 officials, the draft Federal Action Plan  developed by the task force is not intended to be a strategic plan with its  own overarching restoration objectives. Instead, the federal task force  used the priorities established in the CCMP and tribal documents, as well  as salmon recovery priorities, as the basis for developing its draft Federal  Action Plan, which identifies priority federal actions to help protect and  restore Puget Sound. For example, to support the habitat-related priorities  established in the 2016 CCMP and elsewhere, the draft Federal Action  Plan identifies more than 40 priority federal actions that focus on  protecting and restoring habitats, such as by removing fish passage  barriers and implementing projects to restore estuaries."], "subsections": []}, {"section_title": "Federal and Nonfederal Entities Coordinate at the Project Level in Various Ways", "paragraphs": ["Based on our interviews with federal and nonfederal officials and the local  and tribal discussion groups, federal and nonfederal entities coordinate at  the project level to plan, secure funding for, and carry out specific  restoration actions, such as projects to improve water quality or restore  habitat in a particular location. According to federal officials, federal  involvement at the project level varies and may range from providing  funding to being more directly involved in project planning and  implementation. Participants in our discussion groups said that local and  tribal entities often lead the on-the-ground planning and implementation of  restoration projects, including coordinating with other participating entities  throughout a project\u2019s lifecycle. For example, the Qwuloolt Estuary  Restoration Project we previously discussed was largely led by a local  tribe that coordinated the involvement of numerous federal, state, local,  and nongovernmental entities throughout project planning, permitting, and  implementation.", "The management conference recognizes nine local integrating  organizations\u2014local groups made up of various local, tribal, and other  nonfederal participants\u2014to, among other things, guide the  implementation of the CCMP\u2019s priorities at a local scale in specific  geographic areas of Puget Sound. In addition, 15 salmon recovery lead  entities, which are local watershed-based organizations that develop local  salmon habitat recovery strategies and manage projects to implement the  strategies, are active in the Puget Sound region. Representatives from  these local integrating organizations, salmon recovery lead entities, and  tribal entities participated in our moderated discussion groups and  identified several factors that have helped to facilitate effective  collaboration among entities on restoration projects. Some of the factors  discussion group participants commonly cited were consistent with key  features that we have previously identified as benefiting interagency  collaboration, including:  Involving all relevant participants. Discussion group participants  highlighted the importance of ensuring that the appropriate entities are  involved to bring together a broad range of knowledge, skills, and  expertise in support of restoration projects. For example, one  discussion group participant commented that his local organization\u2019s  ability to partner with both government and nongovernmental entities  and harness their talents has enhanced its efficiency in carrying out  restoration projects. Other participants stated that an important part of  successfully involving all relevant participants has been early  engagement with members of the local community to identify priorities  and vet projects. In addition, several participants described projects  that could not have been carried out without the financial, technical,  and political support of diverse partners. Ensuring that the appropriate  entities are involved is consistent with our previous work on  interagency collaboration, which found that it is important to ensure  that all relevant participants have been included in collaborative  efforts, including federal agencies, state and local entities, and  organizations from the private and nonprofit sectors.", "Bridging organizational cultures to build trust. Discussion group  participants cited the long-standing relationships that have been built  over time among different restoration partners as critical to developing  the level of trust needed for project-level collaboration to succeed  across organizational boundaries. For example, one participant said  that having long-standing collaborative relationships with other  partners has helped her local organization identify, secure funding for,  and carry out good restoration projects. Another participant described  a separate example of a local watershed council that has met monthly  for 30 years, explaining that these meetings have developed a level of  trust among the key partners that helps them work toward common  goals and deal with difficult issues. We have previously reported that  different agencies participating in any collaborative mechanism bring  diverse organizational cultures to it. Accordingly, it is important to  address these differences to enable a cohesive working relationship  and to create the mutual trust required to enhance and sustain the  collaborative effort. We have also reported that positive working  relationships among participants from different agencies help to  bridge organizational cultures, build trust, and foster communication,  which then facilitates collaboration.", "Having written plans and agreements. Discussion group  participants also described the benefits that have resulted from having  local plans and agreements in place to help entities work together  across their normal jurisdictions on restoration projects. For example,  according to one local discussion group participant, the decades-old  formal agreement among the local governments within his watershed  was a fundamental reason for the restoration successes they  achieved. The participant explained that this agreement has helped  the local governments look beyond their immediate jurisdictions and  think more broadly about priorities for the entire watershed. We have  previously reported that agencies that articulate their agreements in  formal documents can strengthen their commitment to working  collaboratively."], "subsections": []}, {"section_title": "According to Federal and Nonfederal Entities, the Steps Taken to Coordinate Restoration Efforts Have Yielded Benefits, but Challenges Remain that May Limit Effectiveness", "paragraphs": ["Federal and nonfederal entities we surveyed and interviewed identified  benefits produced by the steps taken to coordinate restoration efforts,  including the development of the management conference, the federal  task force, and their respective planning documents. Federal and  nonfederal officials generally described the management conference as  having provided an effective forum for different entities to share their  diverse views and work collaboratively to address priority restoration  issues in Puget Sound. Moreover, officials said that the management  conference has helped Puget Sound restoration by enabling federal and  nonfederal entities to identify common goals and develop strategies to  achieve the goals, among other things.", "These benefits are consistent with our previous work on interagency  collaboration, which found that defining and articulating common  outcomes and establishing strategies to achieve them are practices that  can enhance and sustain collaboration. Federal officials credited the  federal task force, and in particular the task force regional teams, with  having helped to improve communication and coordination of efforts  among federal agencies by bringing together a broad group of agencies  to focus on issues surrounding Puget Sound restoration and tribal treaty  rights. Other benefits of the task force that survey respondents identified  include providing national-level awareness of restoration activities and  providing a forum for nonfederal entities to engage with federal agencies  on restoration or species-related issues.", "Federal and nonfederal entities also identified strengths of the key  planning documents that the management conference and federal task  force developed to help coordinate Puget Sound restoration efforts,  based on our interviews and our analysis of survey responses. For example, 8 of the 27 federal and state entities that responded to our  survey said the 2016 CCMP provides a clear blueprint or road map for the  restoration of Puget Sound that helps guide restoration efforts in a  common direction. In the case of the draft Federal Action Plan, survey  respondents from 7 of the 27 federal and state entities said that one of  the plan\u2019s primary strengths is that it clearly defines a list of priority  federal actions and identifies roles and responsibilities for implementing  them. This is consistent with our previous work on interagency  collaboration, which found that agreeing on roles and responsibilities is a  leading practice that can help enhance and sustain collaborative efforts.  In addition, one federal survey respondent credited the development of  the draft Federal Action Plan with helping to raise awareness among  federal agencies of each other\u2019s efforts, which the respondent said has  led to improved coordination.", "Federal and nonfederal entities also identified challenges the  management conference faces that could limit its effectiveness as an  interagency coordinating group. For example, according to Partnership  officials we interviewed, within the management conference there are  differing views and disagreements about how to balance local versus  regional perspectives and decision-making authorities. In addition, some  federal and nonfederal entities described the planning process to produce  the CCMP as overly burdensome and frustrating. The Joint Legislative  Audit and Review Committee\u2019s 2017 audit of the Partnership similarly  reported on frustration and planning fatigue among the entities they  interviewed that stemmed from the frequency of plan updates, which state  law had required take place every 2 years. In 2017, Washington State  amended the law to extend the required planning cycle to every 4 years,  which the Partnership said should result in a more effective use of time  for the agency and its partners.", "We also found, through our analysis of agency documents and interviews  with federal officials, that the federal task force faced an additional  challenge that it has since addressed. Specifically, the federal task force  did not have continuous leadership at the national level because the task  force\u2019s national leadership group was inactive for more than a year  beginning in January 2017. During this time, CEQ, the permanent co- chair of the national-level task force leadership group, did not convene  the group for meetings, and there was uncertainty about who would  represent some agencies after the change in administration and  subsequent changes in agency personnel, according to officials from the  task force agencies. EPA Region 10 officials said that the federal task  force\u2019s regional implementation team remained active during this period  and facilitated continued engagement among federal agencies and  nonfederal partners at the regional level. Nevertheless, without an active  national-level leadership group in place, the federal agencies did not have  a fully functioning task force and were not in a position to fulfill some of  the task force\u2019s responsibilities under the memorandum of understanding,  such as approving a federal action plan.", "In April 2018, a senior CEQ official informed us that CEQ had taken  action in response to our discussions with CEQ staff about this challenge  and convened a meeting of the national-level task force group on April 4,  2018. In addition, according to the CEQ official, the task force agencies  have committed to working together going forward and plan to continue  meeting. By working with the other federal agencies to hold this meeting  and secure this commitment, CEQ has taken an important step toward  addressing the challenge we identified and ensuring that national-level  leadership is in place for the federal task force."], "subsections": []}]}, {"section_title": "The CCMP Lays Out a Framework for Assessing Progress toward Puget Sound Restoration, but Assessment of Progress Has Been Limited in Some Instances", "paragraphs": ["The CCMP lays out the primary framework for assessing progress toward  Puget Sound restoration, including six high-level goals created by state  law and a variety of associated indicators and targets. The Partnership  leads the management conference\u2019s efforts to assess restoration  progress under this framework, but its assessments have been limited  because of insufficient data and because targets have not been  established for all indicators. In addition, we found that the federal task  force has limited ability to assess how the implementation of the Federal  Action Plan, which is currently in draft form, contributes to overall  restoration progress under the CCMP\u2019s framework, because the task  force has not clearly linked the plan\u2019s priority federal actions to the  framework\u2019s goals, indicators, and targets."], "subsections": [{"section_title": "The CCMP\u2019s Framework for Assessing Progress Includes Goals, Indicators, and Targets", "paragraphs": ["The CCMP lays out the primary framework for assessing progress toward  Puget Sound restoration, including goals, indicators, and targets. In  2007, the Washington State legislature established six high-level goals for  Puget Sound restoration that continue to guide the CCMP, with an  overarching directive to strive to achieve the goals by 2020. The six  high-level goals are:", "Healthy human population. A healthy human population supported  by a healthy Puget Sound that is not threatened by changes in the  ecosystem.", "Vibrant human quality of life. A quality of human life that is  sustained by a functioning Puget Sound ecosystem.", "Thriving species and food web. Healthy and sustaining populations  of native species in Puget Sound, including a robust food web.", "Protected and restored habitat. A healthy Puget Sound where  freshwater, estuary, nearshore, marine, and upland habitats are  protected, restored, and sustained.", "Abundant water. An ecosystem that is supported by groundwater  levels as well as river and streamflow levels sufficient to sustain  people, fish, and wildlife, and the natural functions of the environment.", "Healthy water quality. Fresh and marine waters and sediments of a  sufficient quality so that the waters in the region are safe for drinking,  swimming, shellfish harvest and consumption, and other human uses  and enjoyment, and are not harmful to the native marine mammals,  fish, birds, and shellfish of the region.", "The CCMP identifies 25 categories of measures, called vital signs, used  to gauge the health of Puget Sound. Each vital sign is designed to  support one of the six high-level goals. For example, the CCMP has  assigned four vital signs\u2014marine water quality, freshwater quality, marine  sediment quality, and toxics in fish\u2014to collectively assess progress  toward the goal of healthy water quality. According to the CCMP, most  vital signs are represented by one or more specific measures, called  indicators, for a total of 47 indicators. Based on our analysis of  Partnership data, more than half of these indicators have measurable  recovery targets set for the year 2020, and some of the indicators also  have measurable interim targets to assess incremental progress. Figure 6  provides an example of the relationship among goals, vital signs,  indicators, and targets for 1 of the 47 indicators.", "To achieve the CCMP\u2019s recovery targets, the Partnership, supported by  other members of the management conference, has initiated an effort to  develop implementation strategies that will outline, among other things,  specific approaches, actions, and program and policy changes that are  needed. According to the Partnership\u2019s implementation strategy  guidelines, each implementation strategy will focus on the recovery  targets for indicators under a particular vital sign or a set of related vital  signs. The guidelines state that the implementation strategies are to also  estimate the costs of achieving recovery targets, including the cost- effectiveness of specific activities to inform decisions about priority  investments and expectations for progress. Officials from EPA and the  Partnership said no official estimates have yet been developed for the  total costs to restore the Sound, but EPA Region 10 officials stated that  investments on the order of tens of billions of dollars, if not more, will  likely be necessary. According to EPA Region 10 officials, the  implementation strategies will help more directly link investments to  restoration progress, a step consistent with our previous reporting on  enhancing the use of performance information. Specifically, in September  2005 we reported that linking cost with performance information brings  performance concerns into planning and budgetary deliberations,  prompting agencies to reassess their performance goals and strategies  and to more clearly understand the cost of performance."], "subsections": []}, {"section_title": "The Partnership Has Taken Steps to Assess Restoration Progress under the CCMP\u2019s Framework, but Its Assessment of Progress Has Been Limited in Some Instances", "paragraphs": ["The Partnership leads the management conference\u2019s efforts to assess  Puget Sound restoration progress and has taken steps to do so under the  CCMP\u2019s framework. In particular, the Partnership created the Puget  Sound Ecosystem Monitoring Program to help monitor the effectiveness  of restoration actions and assess restoration progress. The Puget Sound  Ecosystem Monitoring Program includes representatives from federal  entities, such as EPA, and nonfederal entities, such as state and local  agencies. The Partnership uses information from the Puget Sound  Ecosystem Monitoring Program and other sources to assess and report  on restoration progress in a biennial State of the Sound report, which was  most recently published in November 2017. The Partnership has  assessed two primary aspects of restoration progress for the CCMP\u2019s 47  indicators: (1) progress relative to baseline conditions and (2) progress  toward the 2020 recovery targets."], "subsections": [{"section_title": "Assessments of Progress Relative to Baseline Conditions", "paragraphs": ["The 2017 State of the Sound reported the general results of assessments  of progress relative to baseline conditions for 29 of the 47 indicators, with  additional details available on the Partnership\u2019s website. According to the  State of the Sound, progress was made in some areas but many key  indicators did not show improvement, as reflected below:", "Ten indicators improved compared to baseline data. For example,  one of the indicators reported as improved was acres of harvestable  shellfish beds, which is associated with the goal of a healthy human  population. According to the Partnership\u2019s website, from 2007 to 2016  the number of acres of harvestable shellfish beds increased by  approximately 4,800 acres.", "Fifteen indicators showed mixed results or no improvement relative to  baseline data. For example, one indicator reported as showing no  improvement was the abundance of Puget Sound Chinook salmon  populations, which is associated with the thriving species and food  web goal. According to the Partnership\u2019s website, these populations  remain below desired levels.", "Four indicators worsened compared to baseline data. For example,  another indicator for the thriving species and food web goal tracks the  number of Southern Resident Killer Whales. According to the  Partnership\u2019s website, from 2010 to September 2017, the number of  Southern Resident Killer Whales declined.", "However, the State of the Sound was unable to report on assessments of  progress relative to baseline conditions for 18 of the 47 indicators  because of data limitations. Specifically, the State of the Sound reported  that there were insufficient data or no data available to assess progress  relative to baseline conditions for these indicators. Based on our analysis  of information on the Partnership\u2019s website, the most common reason for  these data insufficiencies is that the data for many indicators are in the  early stages of collection and more time is needed to obtain enough data  to assess progress. For example, the Partnership plans to assess nine  indicators under the healthy human population and vibrant quality of life  goals using new data collected through a survey, which the website  states should allow the Partnership to assess progress within several  years. According to a senior Partnership official, in addition to needing  more time to collect data and assess progress for some indicators,  resource limitations have posed a challenge to addressing some of the  data gaps."], "subsections": []}, {"section_title": "Assessments of Progress toward Recovery Targets", "paragraphs": ["The 2017 State of the Sound reported general information on the  progress made toward recovery targets, with additional details available  on the Partnership\u2019s website. Based on our analysis of Partnership data,  we found that the management conference has adopted measurable  2020 recovery targets for 31 of the 47 indicators. According to the State  of the Sound, most indicators have not met their interim targets, and most  of the 2020 targets are not likely to be attained, as reflected in the  examples below.", "The Partnership reported that the indicator for restoration of  floodplains showed some progress toward its 2020 target to restore  15 percent of degraded floodplain acreage in Puget Sound, but the  2020 target was still far from being met.", "According to the Partnership\u2019s website on the Southern Resident  Killer Whales indicator, the 2016 interim target of an end-of-year  census of 91 whales was not met, and as of September 2017 the  number of Southern Resident Killer Whales was well below the 2020  target of 95 whales.", "However, the overall ability to assess progress toward recovery targets  has been limited because the management conference, led by the  Partnership, has not established recovery targets for all indicators.  Specifically, according to our analysis of Partnership data, recovery  targets have not been established for 16 of the 47 indicators. We have  previously reported on the importance of using performance measures to  track progress in achieving goals and have identified key attributes of  successful performance measures, such as having measurable targets.  More specifically, a measurable target should have a numerical goal,  without which it is difficult to tell whether performance is meeting  expectations.", "Partnership officials we interviewed said that recovery targets have not  been established for all indicators because they first focused on  developing targets for indicators about which more information was  known. The officials said they have not had sufficient resources to fully  develop all of the indicators and associated recovery targets to assess  progress, and that additional information and expertise are needed to develop targets for some indicators. According to EPA Region 10 officials  we interviewed, developing targets for the remaining indicators would be  useful, but given limited resources, it may be necessary to prioritize  indicators for which to develop targets.", "We recognize that developing measurable recovery targets can take time  and resources and that prioritizing among the remaining 16 indicators for  the development of targets is important. The management conference  plans to issue an updated CCMP in December 2018, with another update  scheduled for 2022, according to Partnership officials. EPA officials said  that EPA\u2019s Region 10 office will be responsible for reviewing and  approving these updated CCMPs in conjunction with EPA\u2019s National  Estuary Program national office. Partnership officials we interviewed said  that the management conference intends to reexamine and, as  appropriate, revise the indicators and targets during the development of  the 2022 CCMP. EPA\u2019s National Estuary Program guidance directs EPA  regions to work with management conferences to ensure that revisions of  the CCMP contain all the appropriate content, including quantitative  performance measures where possible. By working with the  management conference on future updates to the CCMP to help prioritize  among the indicators that currently lack measurable targets and ensure  that such targets are developed for the highest priority indicators where  possible, EPA would better position the Partnership to assess progress  toward restoration goals."], "subsections": []}]}, {"section_title": "The Federal Task Force Has Limited Ability to Assess How the Implementation of the Federal Action Plan Contributes to Overall Restoration Progress under the CCMP\u2019s Framework", "paragraphs": ["The federal task force has limited ability to assess how the  implementation of its Federal Action Plan, currently in draft form,  contributes to overall restoration progress under the CCMP\u2019s framework,  according to our analysis of agency documents and interviews. We found  that except in a small number of cases, the federal task force has not  clearly linked the priority federal actions identified in the draft Federal  Action Plan to the CCMP\u2019s goals, vital signs, indicators, or recovery  targets. For example, one of the plan\u2019s priority federal actions is to  replace or remove culverts that pose a barrier to fish passage on Forest  Service roads. However, the plan does not specify how the expected  outcome of this action will contribute to the CCMP\u2019s goals, vital signs,  indicators, or recovery targets.", "The federal task force\u2019s memorandum of understanding calls for the  integration of federal efforts with those of nonfederal entities in the  implementation of the CCMP. According to EPA Region 10 officials we  interviewed, one of the primary purposes of the federal task force is to  support the CCMP as the strategic plan for Puget Sound restoration,  which includes the overarching goals and targets for the restoration effort.  The federal task force\u2019s regional implementation team is responsible for  annually evaluating the Federal Action Plan and making any necessary  modifications. As the permanent co-chair of the regional implementation  team, EPA\u2019s Region 10 office leads the effort to track and report  information on the progress made in implementing the action plan,  according to Region 10 officials. EPA has developed a tool to track the  implementation of each priority federal action in the plan and has started  to collect initial information from the other task force members, according  to the Region 10 officials. The tracking tool documents the  implementation status of each of the priority federal actions, but similar to  the action plan, the tracking tool does not show how the actions are linked  to the CCMP\u2019s goals, vital signs, indicators, or recovery targets.", "We have previously reported on the importance of interagency  collaborative efforts, such as federal task forces, to track and monitor  progress toward their desired outcomes. In addition, we have reported  that agencies can increase the value of their performance reporting by  linking annual performance information with their goals, a leading practice  for performance reporting.", "According to an EPA official involved in leading the regional  implementation team, the draft Federal Action Plan did not link the priority  federal actions to the CCMP\u2019s framework for assessing restoration  progress because the task force had focused on higher-level alignment  between the organization of the action plan and the CCMP\u2019s strategic  initiatives, which focused on habitat, stormwater, and shellfish. In  addition, the EPA official said that the tracking tool does not include such  linkages because the tool has focused more narrowly on tracking the  progress made in carrying out the priority federal actions.", "According to the EPA official, better documenting the linkage between the  priority federal actions and the CCMP\u2019s goals, vital signs, indicators, and targets would be helpful for assessing progress. The official said that he  sees value in making these linkages more explicit, and that one  opportunity to do so would be to add more detail in the tracking tool on  how some of the key federal actions connect to the various elements of  the CCMP\u2019s framework for assessing progress. Similarly, some federal  and state survey respondents reported that more explicitly linking the  information in the Federal Action Plan to the CCMP would be helpful,  based on our analysis of narrative responses about shortcomings to the  draft Federal Action Plan and the plan\u2019s alignment with the CCMP. By  working with the appropriate members of the regional implementation  team to clearly link, such as through the tracking tool, the plan\u2019s priority  federal actions to the CCMP\u2019s framework for assessing progress toward  Puget Sound restoration, EPA would better position the federal task force  to assess the impact of its efforts and the implementation of the draft\u2014 and, if applicable, final\u2014action plan."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Entities Identified Several Factors, Including Population Growth and Climate Change, that May Limit the Success of Puget Sound Restoration", "paragraphs": ["Federal and state respondents to our survey and tribal and local  participants in our discussion groups identified a number of factors that  may limit the long-term overall success of Puget Sound restoration  efforts. Federal and nonfederal entities have control over some of these  factors, such as coordination, but entities in the region may have less  ability to influence other factors, such as climate change. To obtain views  from federal and state agency officials, we asked survey respondents to  rate the level of risk that 10 factors could pose to the long-term overall  success of Puget Sound restoration efforts. We identified these factors  based on our review of key restoration documents, such as the CCMP,  and our interviews with federal and nonfederal entities. Figure 7 illustrates  the number of survey respondents that identified each of the factors as  posing a great risk.", "Through our analysis of the survey results, discussion group transcripts,  federal and nonfederal documentation, and agency interviews, we found  that federal and nonfederal entities consistently identified certain key  factors as posing significant risks that may limit the success of Puget  Sound restoration, including:", "Effects of population growth and increased development.", "According to estimates in the CCMP, the population of the Puget  Sound region is projected to increase from roughly 4.5 million in 2016  to 7 million people by 2040. Survey respondents and discussion group  participants explained that population growth and the associated  increase in development threaten restoration efforts in a variety of  ways. For example, population growth and development contribute to  new habitat loss and water quality degradation and may contribute to  increases in property values that can raise the costs of restoration  projects that involve land acquisitions. Nearly all of the survey  respondents rated this factor as posing a great risk, and the majority  of survey respondents identified this factor as the single greatest risk  to the long-term overall success of Puget Sound restoration efforts.", "Effects of climate change and ocean acidification. According to  the CCMP, climate change and ocean acidification could affect many  aspects of Puget Sound\u2019s ecosystem and natural resources. In  addition, a 2015 University of Washington report stated that projected  increases in sea surface temperatures associated with climate change  could harm salmon populations and increase the magnitude and  frequency of harmful algal blooms in Puget Sound. Moreover,  according to a report from the Washington State Blue Ribbon Panel  on Ocean Acidification, more than 30 percent of Puget Sound\u2019s  marine species\u2014including oysters, clams, mussels, and crabs\u2014are  believed to be vulnerable to ocean acidification because of its  corrosive effects on some shelled organisms. According to a  December 2017 report by the Washington Marine Resources Advisory  Council, Washington\u2019s waters are considered to be among the most  highly affected by ocean acidification in the world. A variety of  actions are under way in Washington State to respond to this threat,  including the implementation of stormwater and nutrient reduction  programs to reduce the severity of acidifying conditions and research  on kelp cultivation to absorb carbon dioxide to improve seawater  conditions.", "Funding constraints. Funding constraints cited by federal and  nonfederal entities included concerns about securing funds for future  restoration efforts and the administrative challenges associated with  combining multiple sources of funding to carry out projects. According  to Partnership officials we interviewed, many of the near-term actions  called for in the CCMP are at risk of not being carried out because  funding has not been secured for these actions. Discussion group  participants also cited difficulties securing funds as a barrier for  project implementation and stated that the challenges associated with  having to cobble together funds from multiple sources can delay or  threaten the success of restoration projects. The participants  explained that managing the requirements of multiple funding sources  can increase administrative burden and project complexity. Moreover,  discussion group participants explained that the single-year funding  cycles for some programs and the restrictions that are sometimes  placed on how funds can be used present additional challenges, as  they are not always compatible with the needs of more complex multi- year restoration projects. Participants in the discussion groups noted  a critical need for predictable, consistent, multi-year funding to  adequately and efficiently plan and carry out restoration activities.", "The factors identified by federal and nonfederal entities as posing a risk to  the success of Puget Sound restoration efforts are consistent with some  of our prior work on large-scale ecosystem restoration efforts in other  parts of the country. Specifically, we previously reported that similar  factors\u2014including population growth, the effects of climate change, and  funding constraints\u2014may limit restoration efforts in the Great Lakes and  Chesapeake Bay."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Restoring Puget Sound is a large, complex, and potentially costly  endeavor that involves many federal, state, local, tribal, and  nongovernmental partners, and it faces a number of factors that may limit  long-term success. Federal and nonfederal entities have made progress  in coordinating the numerous restoration efforts underway by establishing  the Puget Sound Management Conference and the Puget Sound Federal  Task Force and by developing the CCMP and the draft Federal Action  Plan. The Partnership, through its plans to develop a more complete  inventory of restoration efforts and related funding, can make important  information available for coordinating the management of the efforts  moving forward. In addition, the Partnership has led the management  conference\u2019s efforts to assess restoration progress under the framework  laid out in the CCMP, reporting in 2017 that while progress had been  made in some areas, many key indicators had not shown improvement.  However, these assessments have been limited by insufficient data,  resources, and the lack of measurable targets, which have not been  established for 16 of the 47 indicators. By working with the management  conference on future updates to the CCMP to help prioritize among the  indicators that currently lack measurable targets and ensure that such  targets are developed for the highest priority indicators where possible,  EPA would better position the Partnership to assess progress toward  restoration goals.", "In addition, the federal task force has made progress by coordinating its  actions through the Federal Action Plan and can continue to make  progress as it takes steps to implement the draft plan\u2014and, if applicable,  any final version of the plan that is approved. However, the task force has  limited ability to assess how the implementation of its plan contributes to  overall restoration progress because neither the plan nor the tracking tool  developed by EPA\u2019s Region 10 clearly link the plan\u2019s priority federal  actions to the goals, vital signs, indicators, or recovery targets that make  up the CCMP\u2019s framework. By working with the appropriate members of  the regional implementation team to clearly link, such as through the  tracking tool, the plan\u2019s priority federal actions to the CCMP\u2019s framework  for assessing progress toward Puget Sound restoration, EPA would better  position the federal task force to assess the impact of its efforts and the  implementation of the draft\u2014and, if applicable, final\u2014action plan."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to EPA:  The EPA Region 10 Administrator should work with the management  conference on future updates to the CCMP to help prioritize among the  indicators that currently lack measurable targets and ensure that such  targets are developed for the highest priority indicators where possible.  (Recommendation 1)", "The EPA Region 10 Administrator should work with the appropriate  members of the federal task force regional implementation team to clearly  link, such as through the tracking tool, the Federal Action Plan\u2019s priority  federal actions to the CCMP\u2019s framework for assessing progress toward  Puget Sound restoration. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Third-Party Views", "paragraphs": ["We provided a draft of this report for review and comment to CEQ; the  Departments of Agriculture, Commerce, Defense, Homeland Security, the  Interior, and Transportation; EPA; and the Puget Sound Partnership. EPA  provided written comments, which are reproduced in appendix IV, and  stated that it generally agrees with the conclusions and recommendations  in our report. The Departments of Commerce, Defense, Homeland  Security, and the Interior responded by email that they did not have  comments on the draft report. CEQ, the Department of Agriculture, and  the Department of Transportation provided technical comments, which we  incorporated as appropriate. The Partnership also provided written  comments, which are reproduced in appendix V, and stated that our  report does a good job describing a complex landscape. The  Partnership\u2019s comments included one technical comment, which we  incorporated as appropriate, and highlighted several points that we made  in the report, including the lack of targets for some indicators and other  barriers to success, the importance of obtaining more comprehensive  information on restoration expenditures, and the importance of linking the  work of the federal task force to the CCMP.", "In its written comments, EPA stated that it appreciated the work we  performed to understand the scope and intricacies of restoration efforts in  Puget Sound and our coordination with multiple federal and nonfederal  entities in developing our report. EPA agreed with our recommendation to  work with the management conference to help prioritize among the  indicators that currently lack measurable targets and ensure that such  targets are developed for the highest priority indicators where possible.  The agency stated that it has begun working with the Partnership and  other management conference partners to identify this as a priority for the  next review of the CCMP, as well as to develop a clear plan for advancing  this priority. EPA also stated that progress has been made to evaluate the  current set of indicators and vital signs as a result of a 2017 project led by  the Partnership and that recommendations from that project will inform  both adjustments to the current set of indicators and future target setting.", "In addition, EPA agreed with our recommendation to work with the  appropriate members of the federal task force regional implementation  team to clearly link the Federal Action Plan\u2019s priority federal actions to the  CCMP\u2019s framework for assessing progress, and the agency highlighted  steps it will take to do so. EPA stated that it has already met with the  federal task force\u2019s regional leadership and implementation teams and  reached agreement to review the Federal Action Plan and specify how  each action connects to the vital signs and other elements of the CCMP.  EPA stated this this crosswalk process will begin in January 2019 after  the updated CCMP is approved.", "We are sending copies of this report to the appropriate congressional  committees; the Chair of CEQ; the Secretaries of Agriculture, Commerce,  Defense, Homeland Security, the Interior, and Transportation; the  Administrator of EPA; the Executive Director of the Puget Sound  Partnership; and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) Puget Sound restoration efforts and related  expenditures for fiscal years 2012 through 2016; (2) how federal and  nonfederal entities coordinate their restoration efforts and their views on  this coordination; (3) the framework for assessing progress toward Puget  Sound restoration; and (4) key factors, if any, federal and nonfederal  entities identified that may limit the success of Puget Sound restoration.  To help us understand the legal framework supporting restoration efforts  across these four objectives, we reviewed selected relevant federal and  state laws, including the Clean Water Act, the Endangered Species Act,  and Washington State law governing Puget Sound water quality  protection and establishing the Puget Sound Partnership.", "To examine Puget Sound restoration efforts and related expenditures for  fiscal years 2012 through 2016, we used the first phase of a two-phase  survey to identify federal and state efforts that supported Puget Sound  restoration during this time frame. We selected this period to allow us to  obtain information on a range of restoration efforts carried out in recent  years. In addition, we used the first phase of the survey to obtain  information on the availability of expenditure data for the federal and state  efforts and to help determine whether any limitations existed that would  affect the reliability of such data. As part of developing the first phase of  the survey, we conducted a pretest with the Partnership to check that the  questions were clear and used terminology correctly and to ensure that  we could obtain the requested information without placing an undue  burden on agency officials. We sent the first phase of the survey to 15  federal and 11 state entities in June 2017, and all of them responded. We  identified the 15 federal entities based on their participation in the Puget  Sound Federal Caucus, a group formed of regional federal entities in  2007 to help coordinate federal restoration efforts in Puget Sound. The  federal entities were the Bureau of Indian Affairs, Federal Emergency  Management Agency, Federal Highway Administration, Federal Transit  Administration, National Oceanic and Atmospheric Administration,  National Park Service, Natural Resources Conservation Service, U.S.  Army Corps of Engineers, U.S. Army Joint Base Lewis-McChord, U.S.  Coast Guard, U.S. Environmental Protection Agency (EPA), U.S. Fish and Wildlife Service, U.S. Forest Service, U.S. Geological Survey, and  the U.S. Navy. We identified the 11 Washington State entities based on  our review of the comprehensive conservation and management plan  (CCMP)\u2014called The 2016 Action Agenda for Puget Sound\u2014and our  discussions with federal and state officials. The state entities were the  Office of Financial Management, Puget Sound Partnership, Recreation  and Conservation Office, Washington State Conservation Commission,  and the Washington Departments of Agriculture, Commerce, Ecology,  Fish and Wildlife, Health, Natural Resources, and Transportation.", "In the first phase of our survey, we requested specific information on  federal and state efforts to support Puget Sound restoration. Table 2  summarizes the questions we are reporting on from the first phase of the  survey. We also asked other questions that we do not specifically report  on to provide additional context for the survey responses. For example,  we asked the respondents whether their agency managed each effort on  its own or jointly with other entities, and we asked whether their agency  had provided funding from each effort to other entities.", "We used the first-phase survey results in part to develop catalogs of  federal and state efforts that supported Puget Sound restoration from  fiscal years 2012 through 2016. To obtain additional information about the  federal and state efforts identified in the survey responses, we reviewed  documentation, such as agency websites and reports, and interviewed  agency officials. We incorporated this additional information as  appropriate in the catalogs, and we then asked each entity to verify the  accuracy of the information presented in the catalogs. Appendix II  presents the catalog of federal efforts, and appendix III presents the  catalog of state efforts.", "Based on the results of the first phase of the survey and additional follow- up interviews with agency officials, we determined that we would be  unable to collect sufficiently reliable data to report on the total amount of  expenditures that have supported Puget Sound restoration. In particular,  we identified data limitations that would make it difficult for us to collect  consistent, reliable, and comparable expenditure data across all of the  federal and state entities\u2019 efforts. These limitations included difficulties  isolating expenditures within the geographic boundaries of Puget Sound  for some efforts, difficulties isolating expenditures that supported  restoration activities as opposed to other purposes, and difficulties  quantifying administrative expenses, such as staff salaries and travel  expenses, associated with specific efforts.", "As a result of these limitations, we limited our collection of expenditure  data to a nongeneralizable sample of three federal programs and one  state program to provide examples of the diversity in funding approaches  used to support Puget Sound restoration. We considered the following  factors in selecting these efforts: 1) their prominence in Puget Sound  restoration, 2) variations in the federal and state entities involved in  carrying them out, 3) variations in their size, and 4) evidence of reliable  expenditure data. In addition, to help illustrate how federal and nonfederal  funds are used together at the project level, we interviewed agency  officials and obtained expenditure data for two recently completed  restoration projects. We selected these projects because they had  received funding from a variety of federal and nonfederal sources and  illustrated how federal and nonfederal entities work together to carry out  restoration projects. We also conducted two site visits to observe the  outcomes of these projects. We assessed the reliability of the expenditure  data for these program and project examples by comparing the data we  obtained with data from other sources where possible, reviewing agency  documentation, and interviewing knowledgeable agency officials. We  found the data to be sufficiently reliable for our purposes.", "To examine how federal and nonfederal entities coordinate their  restoration efforts in Puget Sound and their views on this coordination, we  identified two key groups that coordinate among federal, state, local,  tribal, and nongovernmental entities: the state-led Puget Sound  Management Conference and the Puget Sound Federal Task Force,  which replaced the Puget Sound Federal Caucus in 2016. We analyzed  key restoration-related documentation, including the CCMP developed by  the management conference and the federal task force\u2019s draft The Puget  Sound Federal Task Force Action Plan (Fiscal Years 2017-2021) (Federal  Action Plan). We also interviewed officials from EPA and the Council on  Environmental Quality about the implementation of the federal task force.  In August 2017, we sent the second phase of our survey to the 15 federal  and 11 state entities that had received the first phase, as well as to the  Washington State Governor\u2019s Office, to obtain their views on the  coordination of restoration efforts and we received responses from all of  the entities. The second phase of the survey featured, among other  things, a series of open-ended and closed-ended questions about the role  of the management conference and the federal task force in helping to  coordinate restoration efforts and about the strengths and shortcomings  of the CCMP and the draft Federal Action Plan. We refined the second  phase of the survey based on pretests we conducted with two federal  agencies and two state agencies to ensure that the questions were clear  and used terminology correctly and that we could obtain the requested  information without placing an undue burden on agency officials.", "Table 3 summarizes the questions we are reporting on from the second  phase of the survey. We also asked other questions that we do not  specifically report on to provide additional context for the survey  responses. For example, we asked the respondents to identify what  steps, if any, could be taken to improve the management conference and  the federal task force, and we asked whether any entities were missing  from these groups that should be included.", "We also held six moderated discussion groups, three with tribal  representatives and three with local representatives, to obtain their views  on factors that have helped and hindered their ability to implement  restoration projects, including factors related to coordination. We selected  the tribal and local entities to participate in the discussion groups because  of their involvement in implementing restoration projects. We invited all 19  federally recognized tribes in the Puget Sound basin to participate in our  discussion groups, as well as two tribal consortia that support restoration  efforts. Representatives from 15 of these tribal entities participated in the  tribal discussion groups. For the three local discussion groups, we  invited all 9 local integrating organizations and all 15 salmon recovery  lead entities within the Puget Sound basin to participate.  Representatives from 7 of the local integrating organizations and 13 of  the salmon recovery lead entities participated in the three local discussion  groups.", "We conducted the six moderated discussion groups over the telephone in  May and June 2017. During each discussion group, the GAO moderator  asked participants to list factors that, in their experience, had helped their  tribal or local entity implement restoration projects in Puget Sound, as well as factors that hindered their ability to do so. The moderator then  asked participants to elaborate on how the factors had helped or hindered  the implementation of restoration projects. When necessary, the  moderator asked probing questions to further clarify participants\u2019  comments. Two or three analysts transcribed each session and combined  and reconciled notes to develop transcripts for each of the discussion  groups. We analyzed the transcripts from the six discussion groups using  qualitative analysis software to categorize the factors that helped and  hindered the implementation of restoration projects. Prominent factors  identified in the discussion groups that we discuss in the body of the  report include factors related to administration and management,  coordination, and resources. Other factors, such as laws and regulations,  public awareness, and science were also raised to a lesser extent, and  we do not discuss these in the body of the report.", "To obtain additional views on the coordination of Puget Sound restoration  efforts, we interviewed federal and state agency officials as well as  representatives from conservation, agricultural, and fishing industry  organizations. We also obtained written responses from two Canadian  agencies about their coordination of restoration activities with entities in  the United States. We compared the information we obtained on the  coordination of Puget Sound restoration efforts with selected leading  collaboration practices that we previously identified and that were most  relevant based on our initial audit work, such as leadership, bridging  organizational cultures, and the inclusion of relevant participants. We  also assessed federal entities\u2019 implementation of the memorandum of  understanding that established the federal task force.", "To examine the framework for assessing progress toward Puget Sound  restoration, we reviewed laws, regulations, and key documents, such as  the CCMP and the draft Federal Action Plan. We also reviewed the  Partnership\u2019s documentation on the results of its assessments of  restoration progress. We identified some limitations associated with these  results and noted those in our report where appropriate. We obtained  additional views on efforts to assess progress from federal and  nonfederal entities through the second phase of our survey and  interviews described previously. For example, in the second phase of the  survey, we asked the federal and state entities about their views on  efforts to assess progress under the CCMP and the draft Federal Action  Plan and about their views on the sufficiency of monitoring efforts in  Puget Sound. We compared the information obtained through these steps  with EPA\u2019s National Estuary Program guidance and with leading practices  for performance measurement and reporting to determine whether efforts  to assess Puget Sound restoration progress have followed leading  practices.", "To determine key factors, if any, federal and nonfederal entities identified  that may limit the success of Puget Sound restoration, we used the  second phase of our survey, which we described above, and our  discussion groups to obtain views on factors that may pose a risk to the  success of restoration efforts. We also reviewed the CCMP and other  documentation and used our interviews with the federal and nonfederal  entities described above to obtain views on limiting factors. In addition,  we reviewed our prior work on large-scale ecosystem restoration efforts in  other parts of the country, such as in the Great Lakes and Chesapeake  Bay, to compare the key factors we identified in Puget Sound with factors  that may limit restoration efforts that we identified in our past reports.", "We conducted this performance audit from October 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Catalog of Efforts Identified by Federal Entities that Supported Restoration Activities in Puget Sound", "paragraphs": ["As part of our first objective to examine Puget Sound restoration efforts,  we surveyed 15 federal entities and asked them to provide information  about their efforts that have supported Puget Sound restoration  activities. Based on our research and discussions with federal and state  officials, we identified six general categories of restoration activities:", "Habitat restoration \u2013 projects or other activities intended to restore  degraded habitats.", "Habitat protection \u2013 projects or other activities intended to protect  high-quality habitats from future degradation.", "Water quality improvement \u2013 projects or other activities intended to  improve the physical, chemical, or biological characteristics of waters  within the Puget Sound basin by, for example, reducing stormwater  runoff and other sources of water pollution.", "Monitoring \u2013 projects or other activities intended to monitor the  physical, chemical, or biological characteristics of waters within the  Puget Sound basin, including monitoring for the purposes of  establishing baselines, identifying trends, and assessing the  effectiveness or results of restoration activities.", "Research \u2013 research projects, studies, or other related activities  intended to support Puget Sound restoration activities.", "Education and outreach \u2013 projects or other activities intended to  educate the public about the state of Puget Sound and the pressures  facing the basin or to elicit community support for restoration activities  (e.g., by recruiting volunteers).", "Table 4 presents a catalog of applicable federal efforts from federal fiscal  years 2012 through 2016 based on the survey responses from each  federal entity. The table includes a wide range of efforts, including some  efforts that focused exclusively on restoration-related activities and other  efforts that had a broader scope of work that in some cases did not center  directly on restoration. We further developed some information presented  in the table based on information obtained from other sources, such as  agency websites and documentation, and follow-up communications with  the federal entities. We did not evaluate whether each entity had included  all relevant efforts in their responses."], "subsections": []}, {"section_title": "Appendix III: Catalog of Efforts Identified by State Entities that Supported Restoration Activities in Puget Sound", "paragraphs": ["As part of our first objective to examine Puget Sound restoration efforts,  we surveyed 11 state entities and asked them to provide information  about their efforts that have supported Puget Sound restoration  activities. We used the same six general categories of restoration  activities as in the catalog of federal efforts in appendix II:  Table 5 presents a catalog of applicable state efforts from state fiscal  years 2012 through 2016 based on the survey responses from each state  entity. The table includes a wide range of efforts, including some efforts  that focused exclusively on restoration-related activities and other efforts  that had a broader scope of work that in some cases did not center  directly on restoration. We further developed some information presented  in the table based on information obtained from other sources, such as  agency websites and documentation, and follow-up communications with  the state entities. We did not evaluate whether each entity had included  all relevant efforts in their responses."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Puget Sound Partnership", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["J. Alfredo G\u00f3mez, (202) 512-3841 or gomezj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Janet Frisch (Assistant  Director), Susan Iott (Assistant Director), Joshua Wiener (Analyst in  Charge), Chuck Bausell, Stephen Betsock, Mark Braza, Ellen Fried, Jack  Granberg, Carol Henn, Gina Hoover, Karen Howard, Vondalee Hunt,  Benjamin T. Licht, Jeffery Malcolm, John Mingus, Patricia Moye, Dan C.  Royer, Sara Sullivan, Sarah Veale, and Arvin Wu made key contributions  to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Great Lakes Restoration Initiative: Improved Data Collection and  Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.:  July 21, 2015.", "Great Lakes Restoration Initiative: Further Actions Would Result in More  Useful Assessments and Help Address Factors That Limit Progress.  GAO-13-797. Washington, D.C.: September 27, 2013.", "Chesapeake Bay: Restoration Effort Needs Common Federal and State  Goals and Assessment Approach. GAO-11-802. Washington, D.C.:  September 15, 2011.", "Recent Actions by the Chesapeake Bay Program Are Positive Steps  Toward More Effectively Guiding the Restoration Effort, but Additional  Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008.", "Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could  Help Guide Future Restoration and Protection. GAO-08-130. Washington,  D.C.: December 14, 2007.", "South Florida Ecosystem: Restoration Is Moving Forward but Is Facing  Significant Delays, Implementation Challenges, and Rising Costs.  GAO-07-520. Washington, D.C.: May 31, 2007.", "Chesapeake Bay Program: Improved Strategies Are Needed to Better  Assess, Report, and Manage Restoration Progress. GAO-06-96.  Washington, D.C.: October 28, 2005.", "Great Lakes: Organizational Leadership and Restoration Goals Need to  Be Better Defined for Monitoring Restoration Progress. GAO-04-1024.  Washington, D.C.: September 28, 2004.", "Great Lakes: An Overall Strategy and Indicators for Measuring Progress  Are Needed to Better Achieve Restoration Goals. GAO-03-515.  Washington, D.C.: April 30, 2003."], "subsections": []}], "fastfact": ["Puget Sound is the nation's second largest estuary, supporting millions of people and a wide variety of species. Development and use, however, have degraded its water quality and habitat, and harmed critical species like salmon and killer whales.", "Federal and nonfederal entities have established two main interagency groups to coordinate restoration efforts. However, it's difficult to assess the amount of progress these groups have made, in part because they lack measurable targets for a number of indicators.", "We recommended that these groups improve their ability to assess the progress of Puget Sound restoration efforts."]}
{"id": "GAO-18-161T", "url": "https://www.gao.gov/products/GAO-18-161T", "title": "Space Exploration: Improved Planning and Communication Needed for Plutonium-238 and Radioisotope Power Systems Production", "published_date": "2017-10-04T00:00:00", "released_date": "2017-10-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's September 2017 report, entitled Space Exploration: DOE Could Improve Planning and Communication Related to Plutonium-238 and Radioisotope Power Systems Production Challenges ( GAO-17-673 )."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Aeronautics and Space Administration (NASA) selects radioisotope power systems (RPS) for missions primarily based on the agency's scientific objectives and mission destinations. Prior to the establishment of the Department of Energy's (DOE) Supply Project in fiscal year 2011 to produce new plutonium-238 (Pu-238), NASA officials said that Pu-238 supply was a limiting factor in selecting RPS-powered missions. After the initiation of the Supply Project, however, NASA officials GAO interviewed said that missions are selected independently of decisions on how to power them. Once a mission is selected, NASA considers power sources early in its mission review process. Multiple factors could affect NASA's demand for RPS and Pu-238. For example, high costs associated with RPS and missions can affect the demand for RPS because, according to officials, NASA's budget can only support one RPS mission about every 4 years. Expected technological advances in RPS efficiency could reduce NASA's demand for RPS and Pu-238.", "DOE has made progress in reestablishing Pu-238 production to meet NASA's future demand to fuel RPS and has identified challenges to meeting its production goals. Specifically, since the start of the Supply Project, DOE has produced 100 grams of Pu-238 and expects to finalize production processes and produce interim quantities by 2019. However, DOE has also identified several challenges to meeting the Supply Project goal of producing 1.5 kilograms (kg) of new Pu-238 per year by 2026. DOE officials GAO interviewed said that DOE has not perfected the chemical processing required to extract new Pu-238 from irradiated targets to meet production goals. These officials also said that achieving the Pu-238 production goal is contingent on the use of two reactors, but only one reactor is currently qualified for Pu-238 production while the second reactor awaits scheduled maintenance. Moreover, while DOE has adopted a new approach for managing the Supply Project and RPS production\u2014based on a constant production approach\u2014the agency has not developed an implementation plan that identifies milestones and interim steps that can be used to demonstrate progress in meeting production goals and addressing previously identified challenges. GAO's prior work shows that plans that include milestones and interim steps help an agency to set priorities, use resources efficiently, and monitor progress in achieving agency goals. By developing a plan with milestones and interim steps for DOE's approach to managing Pu-238 and RPS production, DOE can show progress in implementing its approach and make adjustments when necessary. Lastly, DOE's new approach to managing the Supply Project does not improve its ability to assess the potential long-term effects of challenges DOE identified, such as chemical processing and reactor availability, or to communicate these effects to NASA. For example, DOE officials did not explain how the new approach would help assess the long-term effects of challenges, such as those related to chemical processing. Under Standards for Internal Control in the Federal Government , agencies should use quality information to achieve objectives and to communicate externally, so that external parties can help achieve agency objectives. Without the ability to assess the long-term effects of known challenges and communicate those effects to NASA, DOE may be jeopardizing NASA's ability to use RPS as a power source for future missions."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent work on radioisotope  power systems. The National Aeronautics and Space Administration  (NASA) has long used radioisotope power systems (RPS) to generate  reliable electrical power and heat energy for long-duration space  missions. RPS can operate where solar panels or batteries would be  ineffective or impossible to use, such as in deep space or in shadowed  craters, by converting heat from the natural radioactive decay of  plutonium-238 (Pu-238) into electricity. The Department of Energy (DOE)  and its predecessor agencies have been providing Pu-238 and fabricating  RPS for NASA and other federal agencies for more than 5 decades.", "In 2011, with funding provided by NASA, DOE initiated the Pu-238 Supply  Project (Supply Project) to reestablish the capability to domestically  produce Pu-238. According to DOE documents and agency officials,  DOE currently maintains about 35 kilograms (kg) of Pu-238 isotope  designated for NASA missions, about half of which currently meets the  power specifications for spaceflight. However, given NASA\u2019s current  plans for solar system exploration, this supply could be exhausted within  the next decade. Specifically, NASA plans to use about 3.5 kg of Pu-238  isotope for one RPS to power the Mars 2020 mission. NASA may also  use an additional 10.5 kg of Pu-238 isotope for its New Frontiers #4  mission if three RPS are used. If DOE\u2019s existing Pu-238 supply is used  for these two missions, NASA would be forced to eliminate or delay future  missions requiring RPS until DOE produces or acquires more Pu-238.", "My remarks today are based on our recent report on NASA\u2019s use of  radioisotope power systems that are powered by plutonium 238, which  we are releasing today. Our report examined (1) how NASA selects RPS  for missions and what factors affect NASA\u2019s demand for RPS and Pu- 238; and (2) DOE\u2019s progress in meeting NASA\u2019s RPS and Pu-238  demand, and what, if any, challenges DOE faces in meeting the demand.  Today, I will discuss the key findings and recommendations from that  report.", "For our report, we reviewed documentation on how NASA considered  mission requirements during the agency\u2019s planning for recent missions  that considered or used RPS as a power source. We also interviewed  officials from the Planetary Science Division (PSD) of NASA\u2019s Science  Mission Directorate and from the Human Exploration and Operations  Mission Directorate. In addition, we reviewed documentation related to  DOE\u2019s efforts to develop the Supply Project and DOE\u2019s RPS production  process. We also interviewed officials from DOE\u2019s Office of Nuclear  Energy as well as officials involved in RPS work at three DOE national  laboratories\u2014Idaho National Laboratory (INL), Los Alamos National  Laboratory (LANL), and Oak Ridge National Laboratory (ORNL)\u2014and  conducted site visits to ORNL and INL. More detailed information on the  objectives, scope, and methodology of our work can be found in the  September report. The work upon which this statement is based was  conducted in accordance with generally accepted government auditing  standards.", "In summary, we found that NASA selects RPS for missions based  primarily on scientific objectives and that several factors may affect  NASA\u2019s demand for RPS and Pu-238. For example, RPS have been  typically used on NASA\u2019s most expensive and highest priority missions.  Based on expected funding levels, NASA can only support two or three of  these missions per decade. We also found that DOE has made progress  meeting NASA\u2019s demand for RPS and Pu-238, but the agency faces  some challenges in reaching full production goals. For example, DOE  does not maintain a comprehensive system for tracking RPS production  risks. In addition, DOE\u2019s management approach does not allow for the  agency to adequately communicate long-term production challenges to  NASA. We made several recommendations to DOE to address these  issues. DOE agreed with our recommendations and outlined actions it  planned to take to address them."], "subsections": [{"section_title": "Background", "paragraphs": ["RPS are long-lived sources of spacecraft electrical power and heating  that are rugged, compact, highly reliable, and relatively insensitive to  radiation and other effects of the space environment, according to NASA  documentation. Such systems can provide spacecraft power for more  than a decade and can do so billions of miles from the sun. Twenty-seven  U.S. missions have used RPS over the past 5 decades. The current RPS  design, the Multi-Mission Radioisotope Thermoelectric Generator  (MMRTG), converts heat given off by Pu-238 into about 120 watts of  electrical power at the beginning of its life\u2014a 6 percent power conversion  efficiency. One MMRTG contains 32 general purpose heat source  (GPHS) fuel clads in the form of pressed Pu-238 pellets encapsulated in  iridium.", "NASA\u2019s PSD science portfolio includes a wide array of missions that seek  to address a variety of scientific objectives and answer many questions  about the solar system, from how life began to how the solar system is  evolving. Scientific and mission objectives influence the types of  equipment needed for the mission, including the mission\u2019s power source.  According to NASA officials we interviewed, missions in NASA\u2019s PSD  portfolio are generally classified in three ways:", "Flagship. Flagship missions are the largest and most expensive class  of NASA\u2019s missions, costing $2 billion or more, and are given the  highest priority for resources, including funding, infrastructure, and  launch support. Past Flagship missions that have used RPS include  the Galileo, Cassini, and Curiosity missions. NASA\u2019s Mars 2020  mission is a planned Flagship mission using RPS.", "New Frontiers. New Frontiers missions focus on enhancing our  understanding of the solar system and have a development cost cap  of $850 million. To date, there has been one New Frontiers mission  using RPS (New Horizons).", "Discovery. Missions in the Discovery program have a development  cost cap of $450 million to $500 million and have shorter development  time frames, according to NASA officials and documentation. No  Discovery mission has been powered by RPS.", "DOE oversees the design, development, fabrication, testing, and delivery  of RPS to meet NASA\u2019s overall systems requirements, specifications, and  schedules. DOE\u2019s goal under its Supply Project is to reach a full Pu-238  production rate of 1.5 kg per year by 2023, at the earliest, with a late  completion date of 2026. DOE also established an interim production rate  of 300 to 500 grams per year by 2019, to ensure an adequate supply of  Pu-238 for NASA\u2019s near-term missions, before the full production rate  goal is achieved. The Supply Project involves a number of steps across  several DOE national laboratories, including the use of two DOE research  reactors\u2014the High Flux Isotope Reactor at ORNL, and the Advanced  Test Reactor at INL.", "NASA began fully funding DOE\u2019s Supply Project in 2011, and since 2014,  has been responsible for funding all aspects of RPS production  operations, according to NASA documents. NASA funds DOE\u2019s efforts to  build, test, and fuel RPS, as well as to update equipment and sustain  staffing levels associated with RPS production between missions. Since  2014 NASA has provided, on average, approximately $50 million per year  to support DOE\u2019s ongoing operations and maintenance of RPS  production equipment. Since its inception until early 2017, DOE has used  a short-term and incremental segmented management approach to  manage the Supply Project."], "subsections": []}, {"section_title": "NASA Selects RPS for Missions Based Primarily on Scientific Objectives, and Several Factors May Affect NASA\u2019s Demand for RPS and Pu-238", "paragraphs": ["NASA selects RPS to power its missions primarily based on scientific  objectives and mission destinations. According to NASA officials we  interviewed, the need for RPS is usually apparent based on the mission\u2019s  scientific objectives and destination. For instance, an RPS is more likely  to be needed for a mission to a distant planet, where minimal sunlight  reduces the effectiveness of solar power. NASA officials we interviewed  stated that, consistent with the National Space Policy, the agency uses  RPS when they enable or significantly enhance a mission, or when  alternative power sources, such as solar power, might significantly  compromise mission objectives. NASA prioritizes mission selection  based on missions identified in the National Academy of Sciences\u2019  decadal survey report, which represents the highest priorities of the  scientific community and includes many missions that require the use of  RPS.", "Prior to the establishment of DOE\u2019s Supply Project in fiscal year 2011,  NASA officials we interviewed stated that mission selections were  influenced by the limited amount of available Pu-238. These same  officials told us that missions are now selected independently from  decisions about how they will be powered. However, projected availability  of Pu-238 is factored into whether an RPS is available for a specific  mission opportunity.", "In addition to the scientific objectives of planned and potential space  exploration missions, several other factors may affect NASA\u2019s demand for  RPS and Pu-238:", "Costs associated with missions that typically require RPS.", "According to NASA officials, RPS have typically been used on  Flagship missions that cost $2 billion or more. NASA can support no  more than one mission using RPS about every 4 years\u2014or two to  three missions per decade\u2014based on expected agency funding  levels.", "Cost of RPS relative to mission costs. According to NASA officials,  New Frontiers missions may be good candidates to use RPS;  however, given the cost cap for this mission class, one RPS would  account for about 9 percent of the mission\u2019s budget, while three RPS  would account for almost 14 percent. For Discovery missions, for  which the cost of using RPS would represent a large portion of a  Discovery mission budget, a single RPS would represent more than  17 percent of a mission\u2019s development cap.", "DOE\u2019s production capability. According to DOE officials we  interviewed, it can take up to 6 years to acquire, fuel, test, and deliver  a new RPS for a NASA mission. According to DOE and NASA officials  we interviewed, given the current floor space dedicated to RPS  development at INL and limits on staff exposure to radiation at LANL,  DOE only has the capacity to produce three to four RPS at one time.  To accommodate DOE\u2019s current RPS production capability, NASA  officials we interviewed said they will not select two consecutive  missions requiring RPS.", "Technological advances may reduce the demand for Pu-238 and thus  RPS. For example, according to NASA officials, advances in solar power  technology have realistically expanded the ability to use solar power for  missions for which it would not have been considered before, and these  advances could help address low levels of light intensity for deep space  missions. NASA also is developing new RPS technologies that may  reduce its demand for Pu-238 and thus RPS. For example, NASA officials  told us that they plan to invest in dynamic RPS technology that could  increase RPS efficiency and require less RPS to achieve mission power.  NASA research indicates that dynamic RPS designs could be more than  four times as efficient as the current MMRTG design.", "The Supply Project goal of producing 1.5 kg of Pu-238 per year was  established to support two to three PSD missions using RPS each  decade, and NASA does not anticipate other potential users to affect  demand for RPS or Pu-238, according to NASA and DOE officials and  documentation we reviewed. DOE planning documents and NASA  officials we interviewed stated that current RPS and Pu-238 production  levels expected from the Supply Project are intended to only meet PSD\u2019s  demand. NASA officials said that they did not account for potential  demand from other potential users within NASA, the national security  community, or commercial sectors when establishing current Pu-238  production goals."], "subsections": []}, {"section_title": "DOE Has Made Progress Meeting NASA\u2019s RPS and Pu- 238 Demand, but Faces Challenges Reaching Full Production Goals", "paragraphs": ["DOE has made progress meeting NASA\u2019s future demand for Pu-238 to  fuel RPS. A chronology of key DOE planned RPS and Pu-238 production  activities, and NASA\u2019s mission-related activities, are shown in figure 1.", "DOE demonstrated a proof of concept for new Pu-238 production, and  has made approximately 100 grams of new Pu-238 isotope under its  Supply Project, since the project\u2019s inception in 2011. However, given  DOE\u2019s Supply Project and RPS production schedule, and NASA\u2019s current  space exploration plans to use up to four RPS for its Mars 2020 and New  Frontiers #4 missions, DOE\u2019s existing Pu-238 supply will be exhausted by  2025.", "Moreover, DOE officials we interviewed from INL, LANL, and ORNL  identified several challenges, including perfecting and scaling up chemical  processing and the availability of reactors, that need to be overcome for  DOE to meet its projected Supply Project goal of producing 1.5 kg per  year of Pu-238 by 2026, at the latest. If these challenges are not  overcome, DOE could experience delays in producing Pu-238 to fuel RPS  for future NASA missions.", "DOE\u2019s ability to meet its production goal and support future NASA  missions is at risk if certain steps for chemical processing necessary for  the production of Pu-238 are not improved and scaled up. According to  DOE officials we interviewed, DOE is still in the experimental stage and  has not perfected certain chemical processing measures required to  extract new Pu-238 isotope from irradiated targets, creating a bottleneck  in the Supply Project and putting production goals at risk.", "In addition, reactor availability will be necessary for DOE to achieve its  Pu-238 production goals. Officials we interviewed at INL and ORNL said  that achieving 1.5 kg of Pu-238 per year is contingent on the availability of  positions within both the High Flux Isotope Reactor (HFIR) and the  Advanced Test Reactor (ATR) to irradiate neptunium targets for  conversion to Pu-238 isotope. DOE officials said HFIR can produce  approximately 600 grams of Pu-238 isotope and they plan to use  positions within ATR to achieve full production goals; however, ATR has  not been qualified for Supply Project work. In addition, DOE officials said  that ATR\u2019s availability for the Supply Project may be limited due to  competition from other users. DOE officials said that they will be unable to  meet full Pu-238 production goals if positions in ATR, which are already  over-utilized, are not available for Pu-238 isotope production and that  they do not have a plan to address this challenge.", "These and other challenges identified in our September 2017 report may  place DOE\u2019s RPS and Pu-238 production goals at risk, in part, because of  the short-term and incremental segmented management approach DOE  had used to manage the Supply Project since its inception in 2011  through early 2017. In March 2017, DOE officials we interviewed said that  the agency anticipated moving to a constant GPHS production rate  approach to help provide funding flexibility and stabilize RPS production  staffing levels between NASA missions. In June 2017, DOE officials we  interviewed said that implementing a constant GPHS production rate  approach would also address other previously identified challenges  associated with RPS production and the Supply Project and therefore  decided to discontinue its short-term and incremental segmented  management approach.", "However, DOE officials we interviewed did not describe how the new  constant GPHS production rate approach would help them address some  of the longer-term challenges previously identified by the agency, such as  scaling up and perfecting chemical processing. We found that DOE has  yet to develop an implementation plan for the new approach, with defined  tasks and milestones, that can be used to show progress toward  assessing challenges, demonstrate how risks are being addressed, or  assist in making adjustments to its efforts when necessary. Our previous  work has shown that without defined tasks and milestones, it is difficult for  agencies to set priorities, use resources efficiently, and monitor progress  toward achieving program objectives.", "In our September 2017 report, we recommended that DOE develop a  plan that outlined interim steps and milestones that would allow the  agency to monitor and assess the implementation of its new approach for  managing Pu-238 and RPS production. DOE agreed with our  recommendation and noted it was in the process of implementing an  approach for the RPS supply chain that was more responsive to NASA\u2019s  needs, among other things. DOE also noted that it was developing an  integrated program plan to implement and document the agency\u2019s new  approach and expected this to be completed in September 2018. We  believe that the development of an integrated program plan is an  important step and that any such plan should include defined tasks and  milestones, so that DOE can demonstrate progress toward achieving its  RPS supply chain goals.", "In addition, in our September 2017 report we identified another factor that  could undermine DOE\u2019s ability to inform NASA about previously identified  challenges to reach its full Pu-238 production goal. We found that DOE  does not maintain a comprehensive system for tracking RPS production  risks and, instead, relies on individual laboratories to track and manage  risks specific to their laboratories. Standards for Internal Control in the  Federal Government call for agency management to identify, analyze,  and respond to risks related to achieving defined objectives. We  recommended that DOE develop a more comprehensive system to track  systemic risks, beyond the specific technical risks identified by individual  laboratories. Doing so would better position DOE to assess the long-term  effects of the challenges associated with its Pu-238 and RPS production  objectives. DOE agreed with our recommendation and stated that the  agency would include steps to ensure that its risk assessment system  would include comprehensive programmatic risks.", "Finally, in our September 2017 report we found that DOE\u2019s new approach  to managing RPS and Pu-238 production does not allow for DOE to  adequately communicate long-term challenges to NASA. It is also unclear  how DOE will use its new management approach to communicate to  NASA challenges related to Pu-238 production. As a result, NASA may  not have adequate information to plan for future missions using RPS.  Standards for Internal Control in the Federal Government call for agency  management to use quality information to achieve agency objectives and  communicate quality information externally through reporting lines so that  external parties can help achieve agency objectives and address related  risks. In our September 2017 report, we recommended that DOE assess  the long-term effects that known challenges may have on Pu-238  production quantities, time frames, and required funding, and  communicate these potential effects to NASA. DOE stated that it agreed  with our recommendation and would work with NASA to identify, assess,  and develop plans to address known challenges. DOE also stated that  the agency expected to complete this effort in September 2019.", "Chairman Babin, Ranking Member Bera, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact Shelby Oakley at (202) 512-3841 or OakleyS@gao.gov. In  addition, contact points for our Offices of Congressional Relations and  Public Affairs may be found on the last page of this statement. Individuals  who made key contributions to the report on which this testimony is based  are Jonathan Gill (Assistant Director); Samuel Blake, Kevin Bray, John  Delicath, Jennifer Echard, Cindy Gilbert, Timothy Guinane, John Hocker,  Michael Kaeser, Jason Lee, Tim Persons, Danny Royer, Aaron Shiffrin,  Kiki Theodoropoulos, Kristin VanWychen, and John Warren.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Radioisotope power systems enable NASA to conduct space exploration missions where solar or other power sources are not feasible (such as in deep space). These systems convert heat generated by the plutonium 238 (Pu-238), a scarce resource, into electricity.", "In 2015, the Department of Energy produced new Pu-238 for the first time since 1988. However, this process is highly technical and the department faces challenges meeting NASA's expected need for Pu-238.", "In the report on which this testimony is based, we recommended that the department improve its planning and communication about the challenges it faces in producing Pu-238."]}
{"id": "GAO-19-71", "url": "https://www.gao.gov/products/GAO-19-71", "title": "Document Services: DOD Should Take Actions to Achieve Further Efficiencies", "published_date": "2018-10-11T00:00:00", "released_date": "2018-10-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD has reported printing costs that totaled about $608 million, on average, during fiscal years 2010 through 2015. DLA Document Services has key DOD-wide responsibilities for (1) printing and reproduction, (2) print device procurement, and (3) electronic content management (e.g., digital document repositories). Other DOD components, including the military services, also maintain some document services capabilities at various locations.", "House Report 115-200 accompanying a bill for the National Defense Authorization Act for fiscal year 2018 included a provision for GAO to examine DOD's document services. This report evaluates (1) the progress DOD has made in achieving efficiencies in its document services and opportunities, if any, to achieve further efficiencies, and (2) the extent to which DOD reports accurate financial information about its document services to key stakeholders. GAO reviewed documents and interviewed officials regarding DOD's efficiency initiatives, including DLA Document Services' transformation plan; reviewed print device procurement contracts and pricing information; and analyzed DOD budget data for fiscal years 2012 through 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has taken steps to achieve efficiencies in its document services, including implementing a transformation plan to consolidate existing Defense Logistics Agency (DLA) Document Services facilities. However, GAO identified four areas where further gains may be possible:", "Managing fragmentation in printing and reproduction services. DOD has designated DLA Document Services as the single manager for printing and reproduction services, but DOD customers, citing concerns with DLA's services, have also obtained these services directly from the Government Publishing Office and via in-house print facilities (see fig.). DOD has not assessed DLA's performance in this role or whether additional efficiencies may be possible in light of DLA's transformation plan.", "Reducing overlap in procuring print devices. GAO found that DOD components used at least four different contract sources to acquire print devices. DOD has not assessed which acquisition approach represents the best value; doing so might better position DOD to further reduce its costs.", "Meeting goals to reduce the number of print devices. DOD and the military services have not demonstrated that they achieved established goals for reducing the number of print devices. Additional controls and assignment of oversight responsibilities to monitor progress could better enable DOD to achieve its cost savings goals, estimated to be millions of dollars annually.", "Consolidating DLA facilities. DLA is closing or consolidating 74 of its 112 facilities in the United States. However, GAO found that for four of seven types of specialty services, DLA plans to retain facilities that are responsible for less than 5 percent of the total revenue for each of those specialties, which suggests that further consolidations are possible.", "DOD includes the cost of non-printing activities, such as the purchase of advertising time for recruiting, within its budget materials for printing and reproduction. It does not include costs to acquire print devices and for electronic content management. As a result, DOD and the Congress lack the oversight into total document services costs needed to make informed decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that DOD evaluate options to achieve additional cost savings and other efficiencies in its document services and report more accurate budget data. DOD generally agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) reported spending an annual average  of $608 million on document services, such as printing, copying, and  related activities, during fiscal years 2010 through 2015. In recent years,  congressional committees have expressed concerns about these costs.  For example, in 2015, the Senate Committee on Appropriations reported  concerns over wasteful printing practices and the lack of clear printing  policies within DOD and recommended that DOD reduce its printing and  reproduction costs by 34 percent.", "The Defense Logistics Agency\u2019s (DLA) Document Services organization  has key department-wide responsibilities for document services. It is  designated as DOD\u2019s \u201csingle manager\u201d for printing and high-speed, high- volume duplication and \u201cpreferred provider\u201d for document conversion and  automation services. DOD document services generally encompass  three broad categories: (1) printing and reproduction (e.g., copying), (2)  print device procurement, and (3) electronic content management (e.g.,  digital document repositories and records management). In addition, DOD  components, which include the military services, maintain some  document service capabilities at various locations.", "Due in part to congressional concerns, DOD has implemented initiatives  to reduce the number of print devices and increase the use of electronic  content management practices. DLA Document Services has also taken  steps to implement a transformation plan to better accomplish its mission.  The objective of this plan is to transition DOD to online services by  transforming the way customers, the workforce, and in-house facilities  operate. DLA Document Services plans to consolidate existing brick and  mortar facilities, leverage existing partnerships with the Government  Publishing Office (GPO), and shift to digital services. An internal analysis  of the transformation plan estimated that, once the plan is fully  implemented in fiscal year 2019, DLA Document Services can expect  annual savings of 20 percent of its fiscal year 2017 operating costs.", "House Report 115-200 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 included a provision for us to  examine DOD\u2019s document services and assess opportunities to achieve  greater efficiencies and cost savings. This report evaluates (1) the  progress DOD has made in achieving efficiencies in its document  services and opportunities, if any, to achieve further efficiencies and (2)  the extent to which DOD reports accurate financial information about its  document services to key stakeholders.", "For our first objective, we reviewed DOD documents and interviewed  DOD officials to understand how each military service obtains document  services and identify department-wide and military service-specific  efficiency initiatives for document services. We focused our review on  DLA and the military services, which accounted for an average of about  92 percent of DOD\u2019s total document service costs reported by DLA  Document Services in fiscal years 2010 through 2015. We also reviewed  DLA\u2019s and the military services\u2019 document services activities and  compared them with a DOD statutory periodic review, DOD Instructions,  and other guidance; OMB guidance; internal control standards; and  best practices for efficiency initiatives\u2014such as consolidations\u2014and  strategic sourcing to identify any potentially inefficient duplication,  overlap, or fragmentation; and any opportunities for greater efficiencies.  For specific efficiency initiatives identified by DOD officials or in DOD  documents, we interviewed DOD officials regarding their progress in  implementing and meeting the goals of these initiatives.", "We also compared the cost of print devices offered by DLA Document  Services, the Army, and the Air Force. Specifically, we gathered and  analyzed data on (1) the monthly price of multifunction devices offered by  DLA Document Services, (2) the estimated average monthly cost for the  Army, based on quotes provided by vendors through the Army\u2019s  mandatory source for print devices, and (3) the estimated average monthly cost, based on the standard pricing included in the Air Force\u2019s  2018 catalog for print devices. We compared costs for similar devices  based on device specifications, including print speeds, monthly volumes,  and paper capacities. This analysis did not account for other differences  in device specifications, approaches to obtaining devices, or the types of  associated maintenance services and supplies that were included. As a  result, this analysis does not allow us to conclude which sources provide  the greatest value, but it illustrates differences in the cost of print devices  across sources.", "For our second objective, we analyzed DOD\u2019s operation and maintenance  (O&M) budget justification materials and DLA data for fiscal years 2012  through 2016, which provided us with 5 fiscal years of data to determine  any trends in document services obligations. We interviewed officials  from the services to determine how they reported their costs for document  services. We assessed the information against federal accounting  standards on how information should be recorded and communicated to  management and others.", "To determine the reliability of the data provided to us by DOD, we  collected information through interviews with and questionnaires to  relevant officials on how the data were collected, managed, and used. We  determined that the data presented in our findings were sufficiently  reliable for the purposes of this report. Appendix I provides further details  on our scope and methodology.", "We conducted this performance audit from August 2017 to October 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Categories of Document Services", "paragraphs": ["Document services at DOD are generally encompassed by three broad  categories, shown in figure 1.", "Printing and reproduction includes the high-speed, high-volume  reproduction of printed documents, as well as the distribution of those  products. Documents are printed internally by DOD components, which  include the military services, or printing is procured through an  organization such as DLA Document Services, the Government  Publishing Office (GPO), or a commercial vendor. Device procurement  covers the acquisition of all office-level and production-level equipment.  Office-level equipment includes printers; copiers; multi-function devices  (MFDs), which perform multiple functions\u2014printing, copying, scanning,  and faxing\u2014in one device; and all other devices that produce documents  on-site and in low volume. Production-level equipment can include offset  printers, digital presses, and other devices that are capable of high- speed, high-volume production of documents. Electronic content  management is the digitization of printed documents and the creation and  management of electronic content management systems, such as  databases and automation services."], "subsections": []}, {"section_title": "Roles and Responsibilities for Document Services", "paragraphs": ["The Under Secretary of Defense for Acquisition and Sustainment is the  principal staff assistant and advisor to the Secretary of Defense on  document services policies and programs and provides policy guidance  regarding the operation and management of document services. DOD\u2019s  Instruction on document services also designates DLA Document  Services as DOD\u2019s single manager for printing and high-speed, high- volume duplication. This includes both the operation of DOD\u2019s in-house  print facilities and the procurement of such services from outside DOD. It  also establishes DLA Document Services as the preferred provider of  document conversion and automation services within DOD. DOD is in the  process of revising its instruction on document services and is  considering changes to DLA\u2019s single manager role. DLA Document  Services customer service network is comprised of a headquarters  located in New Cumberland, Pennsylvania and 132 production facilities  worldwide.", "Each military service also provides internally some document services of  the type assigned to DLA. Service-level implementing guidance governs  how each military service will provide document service-related activities  to its components, commands, and organizations, such as through the  Army Publishing Directorate, the Navy\u2019s Chief Information Officer, and the  Marine Corps Publishing and Logistics Systems Management Section.  The Air Force\u2019s major commands operate their own printing operations,  according to a service official."], "subsections": []}, {"section_title": "Funding of Document Services", "paragraphs": ["DLA funds document services through the Defense-wide Working Capital  Fund, which covers DLA\u2019s costs for purchasing various commodities and  providing services. DOD components and other customers, such as other  federal agencies, reimburse the Defense-wide Working Capital Fund  through the purchase of these commodities and services. In obtaining  document services from DLA, DOD components\u2014including the military  services\u2014use annual appropriations and their own working capital funds  to reimburse the Defense-wide Working Capital Fund. DLA Document  Services\u2019 primary customers, by sales, are shown in table 1. DOD  components can also fund document services outside of DLA Document  Services with annual appropriations."], "subsections": []}, {"section_title": "Efforts to Increase Efficiencies in Providing Document Services", "paragraphs": ["Beginning in 2011, Congress, the federal government, and DOD initiated  efforts to increase efficiencies in various areas involving document  services. For example, Executive Order 13589 directed agencies to  pursue steps to reduce administrative costs across the federal  government by setting reduction goals for certain areas, such as printing  and employee use of IT devices. According to DOD, it set\u2014and  achieved\u2014a goal of a 20 percent reduction in fiscal year 2013 spending  in these areas. Following this effort, in 2015, the Senate Committee on  Appropriations recommended that DOD work with the Office of  Management and Budget to reduce costs for printing and reproduction by 34 percent. DOD issued a report in December 2016 that identified the  reductions it would make to achieve this goal. The plan focused on two  main areas: emphasizing electronic content management over a reliance  on printed materials and reducing the number of print devices. Starting in  fiscal year 2015, DLA Document Services undertook a separate but  complementary effort to further increase efficiencies and better  accomplish its mission of providing document services to DOD and the  military services. Figure 2 provides a time line of efficiency initiatives  related to DOD\u2019s document services. We discuss the status of these  efforts later in this report."], "subsections": []}]}, {"section_title": "DOD Has Made Progress toward Achieving Efficiencies in its Document Services, but Opportunities May Exist for Further Gains", "paragraphs": ["DOD has taken steps toward achieving efficiencies in its document  services, including implementing a transformation plan for DLA Document  Services, taking steps to reduce the cost and number of office print  devices, and increasing its use of electronic content management.", "However, we identified four areas where further gains may be possible:  better managing fragmentation in printing and reproduction services,  reducing overlap in procuring print devices, meeting goals to reduce the  number of print devices, and consolidating locations that provide mission  specialty printing."], "subsections": [{"section_title": "DOD Has Taken Steps toward Achieving Efficiencies", "paragraphs": [], "subsections": [{"section_title": "Implementing DLA Document Services\u2019 Transformation Plan", "paragraphs": ["In fiscal year 2015, DLA Document Services developed and, starting in  fiscal year 2017, began implementing a transformation plan to further  increase efficiencies and better accomplish its mission of providing  document services to DOD and the military services. The objective of this  transformation plan is to transition DOD from on-site printing to digital,  online services by transforming the way customers, the workforce, and in- house facilities operate. Based on the plan, DLA Document Services is  closing or consolidating 74 of its 112 brick and mortar facilities in the  continental United States over the course of fiscal years 2018 and 2019,  bringing its footprint to 38 facilities. An internal analysis of the  transformation plan, conducted by DLA, estimates annual savings of 20  percent compared to DLA Document Services\u2019 fiscal year 2017 operating  costs once the plan is fully implemented in fiscal year 2019. Figure 3  shows DLA Document Services\u2019 facility footprint prior to the  implementation of its transformation plan and the locations it intends to  retain following completion of the plan in fiscal year 2019.", "The transformation plan also calls for DLA Document Services to adjust  the size and composition of its workforce by the plan\u2019s completion in fiscal  year 2019. For example, DLA Document Services intends to reduce its  total number of full-time equivalent positions from about 600 to about 400,  mainly through Voluntary Early Retirement Agreements and Voluntary  Separation Incentive Payments. According to officials, DLA Document  Services is also in the process of converting existing positions and hiring  staff as customer relations specialists at each of the consolidated  facilities. These officials noted that these positions are intended to help  customers learn about and access the full range of services offered by  DLA Document Services, including printing and reproduction services,  office print devices, and electronic content management services. The  goal of establishing these positions, officials stated, is to help facilitate the  increased use of technology to meet customers\u2019 needs, because DLA  Document Services intends to transition customers to using an online  portal to fulfill their printing needs. According to DLA, it is hiring many of  the customer relations specialists from current DLA Document Services  locations, and the planned reduction in its total full-time equivalent  positions is a net reduction that accounts for the hiring of, and conversion  of existing positions to, these customer relations specialists.", "DLA Document Services also plans to use and expand its existing public  and private sector partnerships to support an increased emphasis on  online services as it implements its transformation plan. For example,  DLA Document Services currently works in partnership with GPO\u2019s  GPOExpress, an online portal for fulfilling printing and reproduction  services in cooperation with FedEx Office. For those customer orders that  DLA Document Services is unable to fulfill in-house, whether due to  workload or lack of capability, GPO and GPOExpress meet these needs.  According to a GPO official, GPOExpress will also serve customers  located in areas where DLA Document Services has closed or  consolidated 74 of its 112 U.S. facilities.", "We found that DLA Document Services\u2019 transformation plan generally  reflects leading practices for initiatives to consolidate physical  infrastructure or management functions. For example, DLA Document  Services identified goals for its transformation plan, ensured top  leadership engagement, dedicated an implementation team, and  established metrics that it is using to track progress toward the plan\u2019s  goals. As of June 2018, DLA Document Services is ahead in its goals for  overall personnel reductions and for hiring customer service  representatives and is behind on its goal for closing facilities, as shown in  table 2.", "According to DLA Document Services officials, delays in reducing  facilities have been due to a variety of factors, including earlier delays in  hiring customer service representatives, equipment removal, and  administrative delays at installations. There have also been delays as  DLA Document Services has sought to minimize the effect of the  consolidations on affected employees by offering buyout packages or  transfers. DLA Document Services officials told us they anticipate that  their efforts to consolidate facilities and reduce the overall number of  employees will begin to achieve savings by fiscal year 2020."], "subsections": []}, {"section_title": "Reducing the Cost and Number of Print Devices", "paragraphs": ["DOD, including the military services, has also taken steps to reduce the  cost and number of office-level print devices, including identifying goals  for reducing the number of print devices and plans for each military  service to establish a mandatory source (e.g., one particular contract or  organization) for obtaining print devices. The Army and Air Force have  each established their own service-wide contracts for obtaining print  devices and have mandated their use, while the Department of the Navy  has mandated that the Navy and Marine Corps use DLA Document  Services to obtain these devices. Military service officials told us that  consolidating purchases with a single service-wide source reduces the  cost of these devices by taking advantage of economies of scale,  because vendors can offer better pricing for larger numbers of customer  orders. Our previous work on strategic sourcing\u2014a process that moves  agencies away from numerous individual purchases to an aggregate  approach\u2014shows that such practices can allow agencies to better  manage acquisitions and reduce costs.", "In addition, DOD and the military services have identified reducing the  number of print devices as an opportunity for significant savings and have  established guidance on reducing the number of these devices. DOD\u2019s  Chief Information Officer (CIO) issued a memorandum in 2012 on, among  other things, reducing the number of print devices to one per office space  of 12 or fewer users and assessing the ratio of printers to employees in  larger spaces. In response to this memorandum and to Army Audit  Agency findings of excessive user-to-printer ratios, the Secretary of the  Army issued guidance in fiscal year 2013, requiring all Army commands,  organizations, and activities to assess print capacity and plan for  reductions, if necessary, based on the results of those assessments,  which the Army last completed in fiscal year 2014. The Department of  the Navy, in adopting DLA Document Services as the exclusive source for  acquiring and sustaining print devices for the Navy and Marine Corps,  also directed Department of the Navy officials to work with DLA  Document Services to conduct assessments and develop a phased  execution plan regarding the number and type of print devices Navy and  Marine Corps organizations require. DLA began conducting these  assessments for the Navy and Marine Corps in fiscal year 2014. In  conducting these assessments, DLA Document Services reviews the  inventory, cost, and use of output devices within an organization and then  conducts an analysis that results in recommendations. According to DLA  Document Services, its recommendations are designed to optimize an  organization\u2019s equipment to meet the organization\u2019s needs, while  reducing cost by shifting from single-function, or standalone devices, to  shared, multifunction devices."], "subsections": []}, {"section_title": "Increasing the Use of Electronic Content Management", "paragraphs": ["Led by DLA Document Services, DOD has also made greater use of  electronic content management, with the objective of reducing the volume  and cost of printed materials. DLA Document Services is using a number  of electronic content management systems, including its Document  Automation and Content Services, and has deployed those systems for a  number of DOD customers, such as DLA Distribution and U.S.  Transportation Command. According to DLA Document Services  officials, because Document Automation and Content Services functions  as one large system with separate libraries for individual customers, and  costs for the system are shared, increasing adoption of the system will  reduce costs for each organization using the system."], "subsections": []}]}, {"section_title": "Opportunities May Exist to Achieve Further Efficiency Gains", "paragraphs": ["DOD\u2019s document services initiatives have gained efficiencies, but we  identified four areas where further gains may be possible, including (1)  managing fragmentation in printing and reproduction services, (2)  reducing overlap in procuring print devices, (3) meeting goals to reduce  the number of print devices, and (4) consolidating locations that provide  mission specialty printing."], "subsections": [{"section_title": "Managing Fragmentation in Printing and Reproduction Services", "paragraphs": ["Our review found that DOD components, including the military services,  use multiple approaches to obtain printing and reproduction services.  These approaches include (1) using DLA Document Services to obtain  printing and reproduction services, which, in turn, can outsource the work  to GPO; (2) obtaining these services directly from GPO and its network of  private sector vendors without first involving DLA Document Services;  and (3) providing these services at in-house print locations, as shown in  figure 4.", "For example, according to DLA Document Service officials, the Army  Publishing Directorate, which is responsible for obtaining print services for  the Department of the Army and local commands in the Washington, D.C.  region, has been given authority by DLA Document Services to obtain  printing and reproduction services directly from GPO under a contract that  DLA Document Services established for that purpose. In contrast, the  Army Marketing and Research Group (AMRG), which is responsible for  developing and distributing printed materials for recruitment, obtains  services directly from GPO without the involvement of DLA Document  Services. Finally, some DOD components, such as the Navy, Marine  Corps, and National Guard Bureau, also operate their own in-house print  facilities.", "In our interviews with military service officials, they stated that they  obtained services outside of DLA Document Services because of  concerns regarding the cost, quality, and timeliness of its work, including  inefficiencies that can result from using DLA Document Services to obtain  printing services that are ultimately outsourced to GPO. For example, an  analysis by the Army Publishing Directorate found that ordering directly  through GPO results in savings of 35 percent, compared to fulfilling the  same orders in house through DLA Document Services. In addition,  headquarters officials with the Army and Navy stated that there have  been significant delays in obtaining services through DLA Document  Services, including cases where GPO ultimately fulfilled the orders. Navy  officials also said that there were issues with the quality of DLA Document  Services\u2019 work, including orders they had to return repeatedly because of  quality issues. Further, Army officials\u2014as well as DLA Document  Services\u2014acknowledged that certain print jobs, including some bulk  printing or magazine- and advertising-quality printing, are beyond DLA  Document Services\u2019 capabilities to provide in house.", "According to DLA Document Services officials, DLA Document Services  offers value as a single manager for printing and reproduction services,  including when GPO fulfills printing and reproduction orders. For  example, DLA Document Services may be able to identify different  options that allow customers to reduce costs, such as different contract  options that GPO may not identify. Officials also said that DLA provides  administrative support, such as centralized billing and record keeping,  that the military services would have to replicate in their absence. These  officials also stated that they were unaware of any persistent problems  with the quality or timeliness of DLA Document Services\u2019 work, and that  they work with customers to resolve such issues when they arise.", "As noted above, DOD is in the process of revising DOD Instruction  5330.03, and a draft of the revision continues to assign DLA as the single  manager for printing and reproduction services within DOD. However,  despite the concerns expressed by some military service officials, DOD  has not assessed the extent to which DLA Document Services is fulfilling  its duties in accordance with DOD Instruction 5330.03 when considering  any revisions to the instruction. Specifically, DOD has not assessed  whether the products and services DLA Document Services provides are  based on \u201cbest value,\u201d as determined by quality, price, and delivery time,  in accordance with the instruction.", "According to both DLA Document Services officials and the official at the  office of the Under Secretary of Defense for Acquisition and Sustainment  who is responsible for document services policy, the office of Acquisition  and Sustainment has had minimal involvement in ensuring that DLA  Document Services is fulfilling its duties in accordance with the  instruction. For example, DOD\u2019s last formal report on defense agencies  and DOD field activities, including DLA Document Services, was  completed in 2013, before DLA Document Services began implementing  its transformation plan. Because it has not assessed DLA Document  Services\u2019 provision of document services since 2013, DOD has not  ensured that DLA Document Services is providing the best value in an  efficient and effective way.", "In light of changes such as DLA Document Services\u2019 transformation plan,  DOD has also not determined whether DLA\u2019s single manager role as it is  currently constituted is the most effective and efficient model for providing  printing and reproduction services, or whether additional efficiencies may  be possible. For instance, as a part of its transformation plan, DLA  Document Services is increasing its use of GPO to fulfill customer orders,  in lieu of using its in-house print facilities. As previously discussed, DLA  Document Services can provide certain arrangements\u2014such as  establishing term contracts with GPO for certain customers while still  providing administrative support for those customers\u2014which may allow  for greater efficiencies in printing and reproduction services. However, the  draft revision to DOD Instruction 5330.03 does not address how DLA  Document Services might use or expand these more flexible  arrangements in light of its transformation plan. DOD Instruction 5025.01  requires that, when revising DOD issuances\u2014such as DOD  Instructions\u2014the relevant Office of the Secretary of Defense component  head will ensure that each assignment of authority or responsibility is  verified to be a current requirement and is appropriately assigned.  Without assessing whether DLA\u2019s single manager role as it is currently  constituted is the most effective and efficient model for providing printing and reproduction services in light of the current transformation plan, DOD  may miss opportunities to gain additional efficiencies and better manage  fragmentation when obtaining these services."], "subsections": []}, {"section_title": "Reducing Overlap in Procuring Print Devices", "paragraphs": ["Our review found that DOD has not implemented a department-wide  approach for acquiring print devices, and DOD components use at least  four different sources to acquire them, with costs that vary widely for  similar devices. For example, as one of its services, DLA Document  Services provides print devices, as well as associated maintenance and  supplies, to DOD components. The Department of the Navy has adopted  DLA Document Services as the exclusive source for acquiring and  sustaining print devices for the Navy and Marine Corps. In addition, both  the Army and Air Force have established their own contracts for print  devices. Further, the Defense Information Systems Agency\u2019s Joint  Service Provider delivers print devices to organizations in the Pentagon  and the national capital region, including the headquarters organizations  of some of the military services, and officials noted that they use a  government-wide contract managed by the National Aeronautics and  Space Administration.", "Based on DLA Document Services\u2019 assessments of customers\u2019 print  device requirements, its print device procurement service resulted in  savings of between 33 and 45 percent compared to the customers\u2019 prior  costs for devices, primarily because of reductions in unnecessary devices  and efficiencies that are gained through the economies of scale of a  single organization procuring these devices. More specifically, DLA  Document Services, as a part of its print device procurement service,  assesses customers\u2019 device requirements, which officials told us  generally results in reducing the number of devices and the associated  costs. In addition, DLA Document Services is pursuing, with the support  of the General Services Administration, a \u201cbest-in-class\u201d designation for  its print device procurement service as a part of an effort to reduce costs  by using multi-agency and government-wide acquisition vehicles.", "Army and Air Force officials told us that they had established their own  print device procurement sources primarily because they believed that  these sources are less expensive than using DLA Document Services.  This is primarily because DLA Document Services charges administrative  and overhead costs to support its operations, such as facility and  maintenance costs, whereas the services\u2019 own contracts do not require  any additional fees, according to these officials. However, service officials  were unable to provide any analyses or other documentation to support  these determinations, and some service officials have been reassessing  their approach to obtaining devices. For example, Air Force officials told  us they recognize that print procurement services like those provided by  DLA Document Services can result in savings, and these officials plan to  issue guidance instructing commands to use either DLA Document  Services or a similar service offered through the General Services  Administration. Conversely, the Marine Corps official responsible for  implementing the Department of the Navy\u2019s policy on print devices told us  that two installations had reported that the mandated use of DLA  Document Services for print device procurement had not yielded savings.  That official told us that the office plans to survey additional Marine Corps  installations and may make recommendations on the current policy as a  result.", "Our analysis found differences in cost among the contracts for similar  devices and associated services (see fig. 5). However, we were unable to  determine which sources provided the greatest value, because of  differences in device specifications (such as handling different paper  sizes or the capability to be used on classified networks), approaches to  obtaining devices, and whether associated maintenance services and  supplies were included. We analyzed DLA Document Services\u2019 standard  pricing for customers, contractor quotes for the Army\u2019s mandatory source,  and standard pricing for the Air Force\u2019s mandatory source for devices with  similar capabilities offered by two or more of the sources, and we found  that prices varied widely. For example, we found that DLA Document  Services offered customers high capacity color multifunction devices for  between $280 and $315 a month, including maintenance and supplies.  Vendor quotes we reviewed for similar devices through the Army\u2019s  mandatory source were for between $185 and $479 a month, not  including maintenance and supplies, while the cost under the Air Force\u2019s  mandatory source was between $92 and $145, including maintenance but  excluding supplies.", "Our prior work on strategic sourcing\u2014an approach to procurement that  moves away from numerous individual procurements to a broader  aggregate approach\u2014has found that this approach can result in  considerable savings. OMB has also promoted category management\u2014 an approach that includes strategic sourcing as well as improving data  analysis and more frequently using private sector (as well as government)  best practices. OMB also encourages the use of multi-agency and  government-wide approaches to acquiring goods and services. Our work  has further found that collecting and using transactional data\u2014information  generated when the government purchases goods or services from a  vendor, including specific details such as descriptions, part numbers,  quantities, and prices paid for the items purchased\u2014can help ensure that  the benefits of strategic sourcing are maintained.", "The proposed revisions to DOD Instruction 5330.03 would designate the  DLA Director as DOD\u2019s single manager for procuring print devices. The  current version of the Instruction designates DLA Document Services as  the preferred provider for document conversion and automation services,  which includes print device procurement services. Further consolidation  of print device procurement, such as under DLA Document Services,  might reduce costs. However, it is unclear what approach represents the  best value to the government. This is because DOD has not conducted  an analysis to establish which approach\u2014or approaches\u2014to obtaining  print devices would be most cost effective, according to officials from  DOD, DLA, and the military services. By assessing which approach to  acquiring print devices represents the best value to the department, DOD  would be better positioned, as it revises DOD Instruction 5330.03, to  establish a policy that consolidates print device procurements and further  reduces its costs."], "subsections": []}, {"section_title": "Meeting Goals to Reduce the Number of Print Devices", "paragraphs": ["Beginning in fiscal year 2012, the DOD CIO and some of the military  services established goals for reducing the number of print devices,  which\u2014according to internal DOD analyses\u2014would save millions of  dollars annually. DOD\u2019s Chief Information Officer (CIO) issued a  memorandum in 2012, which instructed DOD components, including the  military services, to issue guidance to, among other things, reduce the  number of print devices to one per office space of 12 or fewer users and  assess the ratio of printers to employees in larger spaces. However, the  services have not demonstrated that they have achieved their goals for  print device reductions. Specifically, we found the following:", "Army: The Secretary of the Army issued guidance in 2013, requiring  all Army commands, organizations, and activities to assess print  device capacity and plan for reductions if necessary based on the  results of those assessments. The guidance noted that those  reductions could save millions of dollars annually. The guidance also  included a requirement for biannual reporting by all Army commands,  organizations, and activities on their print device inventory, number of  printing devices required, and annual costs for printing device  acquisitions. In June 2014, Army commands reported an average of 5  users for each single function printer, compared to an industry  standard of 7 users per device and a DOD goal of one print device per  office space of 12 or fewer users and assessing the ratio of printers to  employees in larger spaces. According to Headquarters, Department  of the Army officials, however, Army commands objected to the  workload associated with this reporting requirement and discontinued  issuing the reports. As a result, the Army did not follow through with  enforcing the reporting, which limited the ability of Army officials to  ensure that Army commands achieved the planned reductions.", "Navy and Marine Corps: The Department of the Navy established  guidance in 2013, directing Department of the Navy officials to work  with DLA Document Services to conduct assessments and develop a  phased execution plan for the number and type of print devices Navy  and Marine Corps organizations require. The guidance also directed  Department of the Navy officials to develop policy requiring that the  acquisition of new devices be exclusively through DLA Document  Services. DLA subsequently conducted these assessments and found  that the Navy and Marine Corps had an average of one device for  every seven users. DLA Document Services recommended further  reductions in the number of print devices across the Navy and Marine  Corps, which it estimated could save over $63 million annually.  However, Department of the Navy officials were unable to provide us  with data on the total number of Navy and Marine Corps print devices  that would indicate whether these device reductions and savings had  occurred.", "Air Force: The Air Force did not issue any guidance based on the  CIO memorandum. In response to our review, the Air Force  developed draft guidance on print device management, which  includes a goal of increasing the ratio of users to devices from 4 users  per device to 12 users per device. The draft guidance also includes  requirements for quarterly reporting by the Air Force Information  Technology Business Analytics Office on the number of devices and  related metrics to monitor progress. According to an Air Force  analysis, doing so would achieve savings of over $67 million as it  replaces or retires devices. As of July 2018, the Air Force had not fully  implemented this guidance.", "Efforts by the military services to demonstrate that they have achieved  print device reduction goals have been limited because they have not  monitored the actions they have taken to reduce the number of print  devices. Military service officials we interviewed said they were unaware  of any efforts by the DOD CIO to ensure that device reductions occurred  and that DOD components achieved their planned savings, such as  providing information to the CIO on the status of their efforts to implement  the guidance in the memorandum or data on reductions in the number of  devices. Standards for internal control state that management should  implement control activities through policies that use quality information to  achieve an entity\u2019s objectives, monitor the internal control system, and  evaluate the results of the system.", "Efforts to implement the memorandum to achieve print device reduction  goals have also been limited because responsibility for implementation  was not clearly assigned. According to a DOD CIO official, the  responsibility for the memorandum is not clearly assigned to a member of  the CIO staff. This official also stated that because of the consolidation of  information technology services in the Pentagon and the national capital  region, the Defense Information Systems Agency\u2019s Joint Service Provider  assumed responsibility for implementing the memorandum. According to  Joint Service Provider officials, however, they were only responsible for  implementing the memorandum for the customers they serve in the  Pentagon and the national capital region, and not for other DOD  components outside those areas, such as military services. Standards for  internal control state that management should ensure that key roles in  operating the internal control system are clearly assigned. In the  absence of these controls, such as reporting procedures to monitor  actions to reduce the number of print devices and establishing clear  responsibility for implementing the CIO memorandum, DOD has been  unable to ensure that it is achieving any estimated savings, which could  represent tens of millions of dollars annually."], "subsections": []}, {"section_title": "Consolidating Locations That Provide Mission Specialty Printing", "paragraphs": ["DLA Document Services may be able to realize additional savings from  further consolidating facilities beyond those already identified, but it does  not currently plan to do so, and it does not have the complete data it  would need to make those determinations. As a part of its transformation  plan, DLA Document Services identified 38 of its 112 facilities in the  continental United States that it would retain. DLA Document Services  officials stated that they considered a number of factors in determining  whether to consolidate or retain facilities, including the number of staff  and customers and the facilities\u2019 workloads, but that they generally  consolidated or retained facilities based on whether the facility provided  \u201cmission specialty\u201d services. These mission specialties are services that  DLA Document Services officials believe cannot be easily outsourced,  such as printing and reproduction of classified and sensitive documents  and on-demand printing and distribution of certain technical materials.", "However, our analysis of DLA Document Services data found that some  facilities retained for certain mission specialties were responsible for a  relatively small share of business for those specialties in fiscal year 2016  (the last full year for which data were provided), which suggests that  further consolidations are possible. For example, for each of the four  mission specialties for which DLA Document Services provided us with  revenue data, the bottom quartile (25 percent) of the facilities retained for  each specialty were responsible for less than 5 percent of the total  revenue for that specialty, as shown in figure 6. We also found some  cases in which DLA Document Services retained facilities that reported  less revenue for a given specialty than facilities that it did not retain.  According to officials, DLA Document Services took a number of factors  into consideration in deciding on consolidations, including the complexity  of the work at a facility and whether nearby sites could fulfill the orders.  According to these officials, this allowed them to consolidate some  facilities even if those facilities had greater revenue from a given mission  specialty than other facilities.", "DOD Instruction 5330.03 requires DLA Document Services to provide  effective and efficient document services support to DOD components.  Our key practices for efficiency initiatives also note the importance of  targeting both short-term and long-term efficiency initiatives. DLA  Document Services officials stated that they would consider additional  consolidations of facilities, but they have not conducted any analysis or  planning to gain further efficiencies and do not currently have plans to do  so. These officials stated they are committed to implementing the current  transformation plan as announced. Officials also stated that they want to  have a better sense of the results from the current transformation,  including how workloads may change among facilities as consolidations  occur, before considering additional consolidations. DLA Document  Services\u2019 current transformation plan includes the possible consolidation  of facilities outside the continental United States following the  implementation of its current plan (which only addressed facilities inside  the continental United States); it does not have any plans for further  consolidations within the continental United States.", "We also found that DLA Document Services did not have revenue data  on all of its mission specialties to inform any future decisions on facility  consolidations. Standards for internal control state that entities\u2019  management should use quality information to achieve the entities\u2019  objectives. However, DLA Document Services could not provide  revenue data on three specific mission specialties\u2014sensitive, classified,  and Naval Nuclear Propulsion Information\u2014for which it retained 30 of its  facilities, including some that it retained exclusively for those specialties.  According to DLA Document Services officials, they did not collect  revenue data for these mission specialties because the facilities  responsible for processing this type of information were generally  retained, regardless of the revenue they produced, due to the sensitive  nature of this work. As noted above, our analysis of available mission  specialty data found that some facilities that DLA retained for certain  mission specialties did a relatively small share of business for those  specialties, indicating that there may be opportunities for additional facility  consolidations. DLA Document Services officials told us that they had  consulted with managers at the facilities about the amount of sensitive  and classified they conducted. Because of these consultations, DLA  Document Services is closing some facilities that handled sensitive and  classified information. However, DLA Document Services does not  routinely collect these data as it does for other mission specialties. By  collecting and analyzing more complete revenue data on its mission  specialties and using those data to evaluate opportunities for further  consolidations, DLA Document Services would be better positioned to  determine if opportunities exist to achieve additional cost savings."], "subsections": []}]}]}, {"section_title": "DOD Does Not Report Accurate Financial Information about Its Document Services", "paragraphs": ["DOD reports some financial information regarding its document services,  but this information does not accurately capture the scope of its document  services mission. We reviewed the O&M obligations for printing and  reproduction in fiscal years 2012 through 2016 that were reported to  Congress by the military services. The total obligations ranged from about  $534 million to about $736 million annually for the 5-year period (see fig.  7).", "Our analysis found that DOD\u2019s O&M budget materials for printing and  reproduction are inaccurate in two ways. First, the budget materials  include obligations that are primarily for non-printing activities, such as  the purchase of advertising and radio and television time. DOD and  military service financial management officials prepare budget justification  materials for their O&M funding requests on an annual basis. DOD and  the services report printing and reproduction costs in the Summary of  Price and Program Changes budget exhibit (the \u201cOP-32\u201d). It contains  information by line item, detailing, among other items, printing and  reproduction and related operations performed by the military services,  DLA, or GPO. It also contains elements of expenses for purchases  related to document services that are provided by DLA. The OP-32  exhibits are provided to Congress with the budget justification materials  accompanying the President\u2019s annual budget request.", "Officials from AMRG told us that, in accordance with Army guidance,  printing and reproduction obligations are coupled with other obligations,  including the purchase of advertising space and radio and television time  for recruiting activities. Data provided by these officials show that in fiscal  year 2016, AMRG\u2019s obligations for printing and reproduction accounted  for only about $2 million, or 2 percent, of the Army\u2019s total fiscal year 2016  obligations included in the printing and reproduction line of the OP-32.  Obligations for the publication of notices, advertising, and radio and  television time accounted for about $78 million, or 63 percent, of the  obligations reported for printing and reproduction. According to officials,  the Navy, Air Force, and Marine Corps also follow their respective  guidance on reporting printing and reproduction obligations together with  these other obligations.", "Second, the budget justification information does not represent the full  scope of the military services\u2019 document services mission. Specifically,  we found that the military services\u2019 annual budget requests do not provide  distinct information on two areas of their document services mission\u2014 print device procurement and electronic content management. Data we  reviewed indicate that the military services obligate a considerable  amount of resources in these areas. For example, according to DLA  Document Services, sales to DOD and the military services for its print  device services are comparable to sales for its printing and reproduction  services. According to DLA data, in fiscal year 2017, it received in  revenue about $108 million for print device and about $105 million for  printing and reproduction services. Officials from the military services told  us that obligations for these activities are included within the budget  requests for various IT procurement categories. For example, Army  Budget Office officials noted that the budget request for IT procurement  and office supplies would include estimates associated with the purchase  and sustainment of devices, but those line items would include other,  non-printing obligations as well. According to these officials, the Army has  made efforts to standardize the procurement of information technology,  including collecting better data on spending for these types of devices.  They told us that these efforts will result in shifts in how those obligations  are reported in budget justification materials.", "The accuracy and completeness of DOD\u2019s financial information about its  document services can affect the allocation of budgetary resources, and  inaccurate or incomplete information can hamper initiatives to gain further  efficiencies. The Handbook of Federal Accounting Standards states that  its managerial cost accounting concepts and standards are aimed at  agencies providing reliable and timely information on the full costs of their  federal programs that congressional and executive decision makers can  use in making decisions about allocating federal resources and program  managers can use in making decisions to improve operating economy  and efficiency. DOD\u2019s Financial Management Regulation lays out the  structure of the budget exhibits that the military services develop during  the department\u2019s budget process. According to a DOD Comptroller  official, DOD has historically reported its budget requests following the  format prescribed by the Financial Management Regulation, and it follows  this format in its reporting of printing and reproduction costs that are  coupled with non-printing costs.", "Although the department has followed this format, the House Armed  Services Committee has expressed concern about the military services\u2019  printing budgets, noting that they were excessive and that portions of the  budgets should be realigned to address unfunded readiness priorities.  Further, as we discussed earlier in this report, DOD has outlined specific  steps it intends to take to achieve a recommended goal of 34 percent  reduction in spending on its printing and related activities. Without quality  information on the scope of its document services mission, DOD will lack  the information it needs to assess whether it is achieving this goal. To  assess its progress toward achieving this goal, it will be critical for  decision makers to have accurate financial information. According to a  DOD Comptroller official, the Financial Management Regulation provides  flexibility in how obligations are categorized and reported internally and to  Congress, but DOD has not evaluated options to report more accurate  funding information on its document services. Unless DOD evaluates  options to report more accurate funding information and takes steps to  improve the accuracy of its budgetary and financial information reporting,  DOD and Congress will not have the full visibility over these costs that  they need to make informed decisions."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["DOD is taking important steps to address congressional concerns about  its spending on document service activities. Most notably, DOD is  implementing its plan to transform its DLA Document Services mission  and has taken certain steps to reduce the number and cost of print  devices. These efforts have begun to produce results, but DOD can do  more to build on these gains. By better managing fragmentation in  printing and reproduction services, DOD could ensure that DLA  Document Services is providing the best value in obtaining document  services. DOD could further reduce overlap in print device procurement  by assessing the various approaches employed by DLA and the military  services to determine what constitutes the most cost-effective approach  for the department.", "DOD has set goals intended to reduce the number of print devices and  realize tens of millions of dollars in savings each year, but it has not  demonstrated that it has achieved these savings, because of limitations in  internal controls. Additional efforts aimed at collecting and analyzing  information to examine areas for further consolidation of DLA Document  Services\u2019 mission specialty locations might provide DOD with additional  cost savings. DOD\u2019s O&M budget materials for printing and reproduction  activities include information on non-printing activities that make up a  much larger portion of its reported spending than printing does. In  addition, these O&M budget materials omit information that would capture  the full scope of DOD\u2019s document services mission, such as device  procurement and electronic content management, which are included with  information technology budget materials. By providing more accurate  costs for its document services activities, DOD would ensure that  Congress and departmental leaders have the insight needed to make  informed decisions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of six recommendations to DOD.", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Acquisition and Sustainment assesses whether DLA  Document Services\u2019 single manager role for printing and reproduction  provides the best value to the government\u2014as determined by quality,  price, and delivery time and in light of DLA Document Services\u2019  transformation plan\u2014and whether any additional efficiencies are possible,  and use the results of that assessment to inform the revision of DOD  Instruction 5330.03. (Recommendation 1)", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Acquisition and Sustainment assesses whether DOD\u2019s  current approach to obtaining print devices represents the best value to  the government or whether other approaches, such as further  consolidations under DLA Document Services as a proposed single  manager for print device procurement, would be more cost effective.  (Recommendation 2)", "The Secretary of Defense should ensure that the DOD CIO implements  controls, such as reporting procedures, to routinely monitor actions to  reduce the number of print devices, consistent with department-wide  goals for reducing the number of print devices that are included in the  CIO\u2019s 2012 memorandum. (Recommendation 3)", "The Secretary of Defense should ensure that the DOD CIO assigns  responsibility for implementing the CIO\u2019s 2012 memorandum on  optimizing the use of employee information technology devices.  (Recommendation 4)", "The Secretary of Defense should ensure that the Director, DLA, in  coordination with the Director, DLA Document Services and following  implementation of the current transformation plan, gathers data on  workload revenue at retained facilities and all mission specialties and  evaluate whether additional opportunities for consolidation exist based on  those data. (Recommendation 5)", "The Secretary of Defense should ensure that the Under Secretary of  Defense (Comptroller), in consultation with the military services and DLA,  evaluates options to report more accurate funding information and takes  steps to improve the accuracy of its budgetary and financial information  reporting on document services internally and to Congress, including  making distinctions between printing and non-printing-related costs and  information on device procurement and electronic content management.  This information could be provided as part of DOD\u2019s annual O&M budget  justification materials. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, DOD concurred with five recommendations and  identified specific actions and time frames for addressing them, and it  partially concurred with the remaining recommendation. DOD\u2019s written  comments are reprinted in their entirety in appendix II. DOD also provided  technical comments, which we incorporated into the report, where  appropriate.", "DOD partially concurred with our recommendation that the Under  Secretary of Defense (Comptroller), in consultation with the military  services and DLA, evaluate options to report more accurate funding  information and take steps to improve the accuracy of budgetary and  financial information reporting on document services internally and to  Congress, including making distinctions between printing and non- printing-related costs and information on device procurement and  electronic content management. Our recommendation noted that this  information could be provided as part of DOD\u2019s annual O&M budget  justification materials. DOD stated that the budget materials it submits to  Congress are in compliance with OMB Circular A-11\u2019s definitions of  printing and reproduction and equipment. It further noted that Working  Capital Fund exhibits provided with each annual budget include a  breakout, by service, of the appropriated and Working Capital Fund  activities and a detailed accounting of unit cost and pricing for all sub- activities of DLA Document Services.", "As we noted in our report, a DOD Comptroller official told us that the  Financial Management Regulation provides DOD with flexibility in  categorizing and reporting obligations internally and to Congress.  However, we found that, based on this flexibility, DOD\u2019s O&M budget  materials reported obligations for printing and reproduction that were  primarily for non-printing activities, such as the purchase of advertising  and radio and television time. This budget information did not represent  the full scope of DOD\u2019s document services mission, since it omitted  obligations for print device procurement and electronic content  management. We also reported that DOD had not evaluated options to  report more accurate funding information on its document services.  DOD\u2019s comments did not include plans to address this recommendation.  We continue to believe that by providing more accurate costs for its  document services activities, DOD would ensure that Congress and  departmental leaders have the insight needed to make more informed  decisions.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the DOD Chief Information Officer,  the Under Secretary of Defense (Comptroller), the Under Secretary of  Defense for Acquisition and Sustainment, the Director, Defense Logistics  Agency, the Secretaries of the Army, Navy, and Air Force, and the  Commandant of the Marine Corps. 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) 512-2775 or fielde1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to evaluate (1) the progress the Department of  Defense (DOD) has made in achieving efficiencies in its document  services and opportunities, if any, for further efficiencies, and (2) the  extent to which DOD reports accurate financial information about its  document services to key stakeholders.", "For our first objective, we reviewed DOD documents and interviewed  DOD officials in order to understand how each military service obtains  document services and identify department-wide and military service  efficiency initiatives for these services. We also reviewed the Defense  Logistics Agency\u2019s (DLA) and the military services\u2019 document services  activities and compared them with a DOD statutory periodic review; DOD  Instructions and other guidance; Office of Management and Budget  (OMB) guidance; internal control standards; and best practices for  consolidation initiatives, efficiency initiatives, and strategic sourcing to  identify any potentially unnecessary duplication, overlap, or fragmentation  and any opportunities for greater efficiencies. For specific efficiency  initiatives identified by DOD officials or in DOD documents, we  interviewed DOD officials regarding their progress in implementing and  meeting the goals of these initiatives.", "To evaluate DLA Document Services\u2019 transformation plan, we interviewed  DLA Document Services officials, reviewed DLA Document Services  documents regarding the plan, and assessed that plan based on leading  practices for consolidation and efficiency initiatives. To assess the plan  against these practices, one analyst reviewed the testimony and  documents provided and compared it to our key questions to consider  when evaluating proposals to consolidate physical infrastructure and  management functions. A second analyst reviewed and concurred with  the first analyst\u2019s assessments. In any cases where there was a  disagreement, the analysts discussed any discrepancies. If they were not  resolved, a third analyst reviewed the assessments.", "To assess the extent to which there may be additional opportunities for  facility consolidations, we obtained DLA Document Services data on  revenue reported by each facility, which DOD Document Services officials  told us they used in determining which facilities to consolidate as a part of  their transformation plan. We analyzed the share of mission specialty  revenue reported by facilities that (1) were retained by DLA Document  Services for a given mission specialty, (2) were retained but not for a  given specialty, and (3) were not retained. We further divided those  facilities retained for a given specialty into quartiles to better understand  the concentration of revenue in those facilities. To assess the reliability of  these data, we interviewed DLA Documents Services officials regarding  how the data were gathered, analyzed, reported, and used. We found that  these data were reliable for the purpose of analyzing the shares of  mission specialty revenue represented by each facility or group of  facilities.", "To compare the cost of print devices offered by DLA Document Services,  the Army, and the Air Force, we gathered and analyzed data on the  monthly cost of multifunction devices with comparable specifications. We  compared costs for similar devices based on device specifications  including print speeds, monthly volumes, and paper capacities. Because  Army and Air Force costs are estimated and there might be other  differences in device specifications, approaches to obtaining devices, and  which associated services were included, this analysis does not allow us  to conclude which sources provide the greatest value. However, it  illustrates differences in the cost of print devices across sources.", "For DLA Document Services, we used DLA Document Services\u2019  standard monthly pricing for 2018 for various categories of  multifunction devices.", "For the Army, Army officials were unable to provide data on the cost  of multifunction devices purchased by Army customers. Instead, they  provided us with documentation of vendor responses to requests for  quotes from the Army\u2019s mandatory source for print devices from April  2017 through January 2018. We reviewed those documents and  assigned each device to a DLA Document Services category, based  on the device\u2019s specifications as identified in the documentation. We  then estimated the monthly cost for each device. For leased devices,  we used the monthly cost of the lease. For purchased devices, we  used the total cost of the device divided by an estimated service life  for the device. We estimated this service life using some indication  available in the documentation, such as the length of time a  maintenance agreement or extended warranty was provided for the  device. Army officials provided 183 quotes for devices. Of those, we  were able to include 24 in our analysis. We excluded the other 159  because either we could not determine the cost for individual devices  in a quote, there was not enough information on a device\u2019s  specifications, there was no DLA Document Services equivalent for  the device, or we were unable to estimate a service life based on the  information provided. Because the information included all vendor  quotes provided and not just those that were selected by a customer,  the costs may not represent the actual costs of devices to the  customer.", "For the Air Force, we used an estimated average monthly cost based  the standard pricing included in the Air Force\u2019s 2018 catalog for print  devices. We reviewed the catalog and assigned each multifunction  device offered to a DLA Document Services category, based on the  devices\u2019 specifications. The Air Force\u2019s catalog contained 32 devices;  we were able to determine the equivalent DLA Document Services  category for 13 of those devices. All devices in the Air Force\u2019s catalog  are available for purchase and include a 4-year maintenance  agreement; therefore, we estimated the average monthly cost as the  purchase price divided by 48.", "To evaluate the extent to which DOD reports accurate and complete  financial information to key stakeholders to manage its document  services, we analyzed DOD\u2019s operation and maintenance (O&M) budget  justification materials for fiscal years 2012 through 2016 and Defense  Logistics Agency data on its document services mission. We focused our  review on O&M obligations reported by DLA and the military services,  which accounted for an average of about 92 percent of DOD\u2019s total  document service costs reported by DLA Document Services in fiscal  years 2012 through 2016. We interviewed officials, including officials  from the Office of the Under Secretary of Defense (Comptroller), DLA  Document Services, and the military services to determine how they  reported costs for document services. We assessed the information we  collected against federal accounting standards on how information should  be recorded and communicated to management and others. To  determine the reliability of the O&M budget justification data provided to  us by DOD, we obtained information on how the data were collected,  managed, and used through interviews with relevant officials. We  determined that the data were sufficiently reliable to represent the military  services\u2019 total O&M obligations for document services for fiscal years  2012 through 2016.", "We interviewed officials and, where appropriate, obtained documentation,  from the following organizations:", "Office of the Under Secretary of Defense for Acquisition, Technology", "Office of the Under Secretary of Defense (Comptroller)", "Department of Defense Chief Information Officer", "Defense Logistics Agency \u2013 Chief Information Officer", "Defense Logistics Agency \u2013 Document Services", "Defense Information Systems Agency \u2013 Joint Service Provider", "Army Chief Information Officer", "Army Publishing Directorate", "Army Marketing Research Group", "Army 7th Signal Command", "Headquarters Air Force \u2013 Chief Information Officer", "Department of the Navy \u2013 Chief Information Officer", "Headquarters Marine Corps Command, Control, Communications,", "Headquarters Marine Corps Publishing and Logistics", "Headquarters Marine Corps Budget and Execution", "Marine Corps Combat Camera", "Marine Corps Reprographic Equipment Management Program  We conducted this performance audit from August 2017 to October 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Matthew Ullengren (Assistant  Director), Adam Hatton (Analyst in Charge), Adam Brooks, Joanne  Landesman, Amie Lesser, Daniel Ramsey, Carter Stevens, and Walter  Vance made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-383T", "url": "https://www.gao.gov/products/GAO-18-383T", "title": "Intellectual Property: CBP Can Enhance Information Sharing with the Private Sector to Address Changes in the Counterfeits Market", "published_date": "2018-03-06T00:00:00", "released_date": "2018-03-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's January 2018 report, entitled Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market , ( GAO-18-216 )."]}, {"section_title": "What GAO Found", "paragraphs": ["Changes in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights (IPR). Specifically, growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products. For example, 20 of 47 items GAO purchased from third-party sellers on popular consumer websites were counterfeit, according to testing by the products' rights holders (see table), highlighting potential risks to consumers. The changes in the market for counterfeit goods can also pose challenges to the private sector\u2014for example, the challenge of distinguishing counterfeit from authentic goods listed for sale online\u2014and complicate the enforcement efforts of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE).", "CBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so. CBP's and ICE's IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U.S. ports, engaging with international partners, and undertaking localized pilot programs or port-led initiatives. CBP and ICE have collected some performance data for each of the eight activities GAO reviewed, and ICE has taken some steps to understand the impact of its efforts. However, CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities.", "CBP and ICE generally collaborate on IPR enforcement, but according to private sector representatives, restrictions on CBP's information sharing limit private sector enforcement efforts. GAO found that CBP and ICE have undertaken efforts that align with selected key practices for interagency collaboration, such as participating in developing a national IPR enforcement strategy and agreeing on roles and responsibilities. However, sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives. CBP officials said they share information to the extent allowed under current regulations, but CBP has not completed an assessment of what, if any, additional information would be beneficial to share with private sector entities. Without such an assessment, CBP will not know if sharing additional information requires regulatory or legal changes."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here to discuss the results of our review of U.S.  agencies\u2019 efforts to address changes in the market for counterfeit goods  and their work with the private sector. Intellectual property is an important  component of the U.S. economy, and the United States is an  acknowledged global leader in its creation. Infringement of intellectual  property rights (IPR) through the illegal importation and distribution of  counterfeit goods harms the U.S. economy by stifling innovation, slowing  economic growth, weakening the competitiveness of U.S. employers, and  threatening American jobs. IPR infringement can also threaten the health  and safety of American consumers. The Department of Homeland  Security\u2019s U.S. Customs and Border Protection (CBP) and U.S.  Immigration and Customs Enforcement (ICE)\u2014two of the many agencies  involved in IPR enforcement\u2014are responsible for IPR enforcement at  U.S. borders. CBP leads enforcement activity at the border by detecting  and seizing counterfeit goods that enter the United States through its  more than 300 ports of entry and by assessing penalties against IPR  infringers. CBP coordinates its efforts with ICE, which investigates IPR  violations for federal prosecution.", "My testimony today summarizes the findings from our January 2018  report, which was released on February 27, 2018, on CBP\u2019s and ICE\u2019s  IPR enforcement at U.S. borders. This testimony addresses (1) what is  known about counterfeit goods entering the United States and the  challenges they present, (2) efforts CBP and ICE have undertaken to  enhance IPR enforcement and the extent to which they have assessed  the results of these efforts, and (3) the extent to which CBP and ICE  collaborate on IPR enforcement as well as ways in which they coordinate  with the private sector in enforcing IPR.", "For our report, we analyzed CBP seizure data for fiscal years 2012  through 2016 and reviewed documents and reports from CBP, ICE, other  U.S government entities, and international organizations. We interviewed  CBP and ICE officials in Washington, D.C., and at selected port locations  in Chicago, Illinois; Los Angeles, California; Miami, Florida; and New  York, New York. We also interviewed representatives of IPR-holding  companies (rights holders) and popular consumer websites that offer  platforms for third-party sellers. We used undercover identities to  purchase selected products from third-party sellers on popular consumer  websites and subsequently asked the rights holders for the selected  products to test their authenticity. More detailed information on our  objectives, scope, and methodology for this work can be found in the  issued report. We conducted the work on which this statement is based in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work in accordance with investigation standards prescribed  by the Council of the Inspectors General on Integrity and Efficiency."], "subsections": [{"section_title": "Accelerated by E- Commerce, Changes in the Counterfeits Market Present Challenges to U.S. Agencies, Consumers, and the Private Sector", "paragraphs": [], "subsections": [{"section_title": "E-Commerce Has Contributed to a Shift in the Market for Counterfeit Goods", "paragraphs": ["The rise of e-commerce has contributed to a fundamental change in the  market for counterfeit goods, according to our analysis of documents from  CBP, ICE, and international organizations and our interviews with CBP  and ICE officials. U.S. agencies and international organizations have  observed a shift in the sale of counterfeit goods from \u201cunderground\u201d or  secondary markets, such as flea markets or sidewalk vendors, to primary  markets, including e-commerce websites, corporate and government  supply chains, and traditional retail stores. Whereas secondary markets  are often characterized by consumers who are knowingly purchasing  counterfeits, primary markets involve counterfeiters who try to deceive  consumers into purchasing goods they believe are authentic.", "This shift has been accompanied by changes in the ways in which  counterfeit goods are sold. In the past, consumers could often rely on  indicators such as the location of sale or the goods\u2019 appearance or price  to identify counterfeit goods in the marketplace. However, counterfeiters  have now adopted new ways to deceive consumers. For example, as  consumers increasingly purchase goods online, counterfeiters may  exploit third-party online marketplaces to gain an appearance of  legitimacy and access to consumers. When selling online, counterfeiters  may post pictures of authentic goods on the websites where they are  selling counterfeits and may post pseudonymous reviews of their  products or businesses in order to appear legitimate. Additionally, by  setting the price of a counterfeit at, or close to, the retail price of a  genuine good, counterfeiters may deceive consumers, who will pay the  higher price because they believe the goods are real or who believe that  they are getting a slight bargain on genuine goods."], "subsections": []}, {"section_title": "CBP Data Indicate Changes in Several Key Characteristics of Counterfeit Goods Seized", "paragraphs": ["According to CBP seizure data and CBP officials, the volume, variety, and  methods of shipment of counterfeit goods seized by CBP and ICE have  changed in recent years. CBP reports indicate that the number of IPR  seizures increased by 38 percent in fiscal years 2012 through 2016.  According to CBP data, approximately 88 percent of IPR seizures made  during this period were shipped from China and Hong Kong. The variety  of products being counterfeited has also increased, according to CBP  officials. CBP and ICE officials noted that, while many consumers may  think of luxury handbags or watches as the most commonly counterfeited  goods, counterfeiting occurs in nearly every industry and across a broad  range of products. In addition, according to CBP data we reviewed and  officials we spoke to, the methods of importing counterfeit goods into the  United States have changed in recent years. Specifically, express carriers  and international mail have become the predominant form of  transportation for IPR-infringing goods entering the United States,  constituting approximately 90 percent of all IPR seizures in fiscal years  2015 and 2016, according to CBP data."], "subsections": []}, {"section_title": "Twenty of 47 Items Purchased from Third- Party Sellers on Popular E-Commerce Websites Were Counterfeits, Highlighting Potential Risks to Consumers", "paragraphs": ["In an attempt to illustrate the risk that consumers may unknowingly  encounter counterfeit products online, we purchased a nongeneralizable  sample of four types of consumer products\u2014shoes, travel mugs,  cosmetics, and phone chargers\u2014from third-party sellers on five popular  e-commerce websites. According to CBP data we reviewed and officials  we spoke to, CBP often seizes IPR-infringing counterfeits of these types  of products. As table 1 shows, the rights holders for the four selected  products we purchased determined that 20 of the 47 items were  counterfeit.", "We did not identify any clear reasons for the variation among the  counterfeit and authentic items that we purchased based on the products  that they represented, the e-commerce websites where we bought the  items, or the third-party sellers from whom we bought them. For three of  the four product types, at least one item we purchased was determined to  be counterfeit, with results varying considerably by product.  Representatives of the rights holders also could not provide a specific  explanation for the variation among authentic and counterfeit goods that  we received. They noted that the results of covert test purchases can  fluctuate depending on enforcement activities and the variety of goods and sellers on a particular website on a given day. Rights-holder testing  also showed that we purchased at least one counterfeit item and one  authentic item from each of the five e-commerce websites. In addition,  our analysis of the customer ratings of third-party sellers from whom we  bought the items did not provide any clear indications that could warn  consumers that a product marketed online may be counterfeit. For  example, we received both counterfeit and authentic items from third- party sellers with ratings that were less than 70 percent positive as well  as sellers with ratings that were up to 100 percent positive.", "Rights holders were able to determine that items we purchased were not  authentic on the basis of inferior quality, incorrect markings or  construction, and incorrect labeling. Some counterfeit items we  purchased were easily identifiable as likely counterfeit once we received  them. For example, one item contained misspellings of \u201cAustin, TX\u201d and  \u201cMade in China.\u201d Other items could be more difficult for a typical  consumer to identify as counterfeit. For example, the rights holder for a  cosmetic product we purchased identified one counterfeit item on the  basis of discrepancies in the color, composition, and design of the  authentic and counterfeit items\u2019 packaging. Counterfeit goods may also  lack key elements of certification markings and other identifiers. For  example, on a counterfeit phone charger we purchased, the UL  certification mark did not include all components of the authentic mark.  Figure 1 shows examples of these counterfeit items.", "The risks associated with the types of counterfeit goods we purchased  can extend beyond the infringement of a company\u2019s IPR. For example, a  UL investigation of counterfeit iPhone adapters found a 99 percent failure  rate in 400 counterfeit adapters tested for safety, fire, and shock hazards  and found that 12 of the adapters tested posed a risk of lethal  electrocution to the user. Similarly, according to a rights holder  representative, counterfeits of common consumer goods, such as Yeti  travel mugs, may contain higher-than-approved concentrations of  dangerous chemicals such as lead, posing health risks to consumers.  According to ICE, seized counterfeit cosmetics have been found to  contain hazardous substances, including cyanide, arsenic, mercury, lead,  urine, and rat droppings.", "Representatives of rights holders and e-commerce websites whom we  interviewed reported taking independent action to try to protect IPR within  their areas of responsibility. For example, both rights holders and e- commerce websites maintain IPR protection teams that work with one  another and with law enforcement to address infringement issues. E- commerce websites may also take a variety of steps to block and remove  counterfeit items listed by third-party sellers. These efforts rely on data  collected through a variety of means, including consumer reporting of  counterfeits, rights-holder notifications of IPR infringement, and corporate  efforts to vet potential third-party sellers, according to private sector  representatives.", "Our January 2018 report includes information on steps that consumer  protection organizations and government agencies recommend  consumers take to limit the risk of purchasing counterfeits online. These  steps include, for example, buying only from authorized retailers online,  avoiding prices that look \u201ctoo good to be true,\u201d and reporting counterfeit  purchases."], "subsections": []}, {"section_title": "Changes in the Marketplace Can Pose Challenges to U.S. Agencies and the Private Sector", "paragraphs": ["We identified a number of key challenges that the changes in the market  for counterfeit goods can pose to CBP and ICE as well as to the private  sector. First, the increasing sophistication of counterfeits can make it  difficult for law enforcement officers to distinguish between legitimate and  counterfeit goods. Second, as the range of counterfeit goods expands,  CBP has a wider variety of goods to screen, which requires CBP officials  to have in-depth knowledge of a broad range of products and of how to  identify counterfeits. Third, counterfeiters may break up large shipments  into multiple smaller express carrier or mail packages to decrease the risk  of losing significant quantities of merchandise to a single seizure. This  shift toward smaller express shipments of counterfeit goods to the United  States poses challenges to CBP and ICE because, according to CBP  officials, seizure processing requires roughly the same amount of time  and resources regardless of shipment size or value.", "The changing marketplace also presents challenges to the private sector,  according to representatives from rights holders and e-commerce  websites. For example, it is more difficult for rights holders and e- commerce websites to identify and investigate individual counterfeit  cases, because e-commerce websites face a growing inventory from a  larger registry of sellers. Tracking goods from known counterfeiters  through various website fulfillment and delivery mechanisms is also a  significant challenge for the private sector. Furthermore, the growth of e- commerce has accelerated the pace at which counterfeiters can gain  access to consumers or reinvent themselves if shut down."], "subsections": []}]}, {"section_title": "CBP and ICE Engage in Activities to Enhance IPR Enforcement, but CBP Has Not Fully Evaluated the Results of Its Activities", "paragraphs": ["CBP and ICE engage in a number of activities to enhance IPR  enforcement; however, while ICE has assessed some of its efforts, CBP  has taken limited steps to do so. CBP\u2019s and ICE\u2019s IPR enforcement  activities broadly include detecting imports of potentially IPR-infringing  goods, conducting special operations at U.S. ports, engaging with  international partners, and undertaking localized pilot programs or port- led initiatives. CBP and ICE have collected some performance data on  activities we reviewed, and ICE has taken some steps to better  understand the impact of its efforts, such as creating a process to track  cases it deems significant. However, we found that CBP has conducted  limited evaluation of its efforts to enhance IPR enforcement.  Consequently, we concluded that CBP may lack information needed to  ensure it is investing its resources in the most efficient and effective  activities. We recommended in our report that CBP take steps to evaluate  the effectiveness of its IPR enforcement efforts; CBP concurred with this  recommendation."], "subsections": []}, {"section_title": "CBP and ICE Generally Collaborate on IPR Enforcement, but CBP Is Restricted in Sharing Information with the Private Sector", "paragraphs": ["Our analysis showed that CBP and ICE interagency collaboration on IPR  enforcement is generally consistent with the following selected key  practices for effective interagency collaboration: (1) define and articulate  a common outcome; (2) establish mutually reinforcing or joint strategies;  (3) identify and address needs by leveraging resources; (4) agree on  roles and responsibilities; and (5) establish compatible policies,  procedures, and other means to operate across agency boundaries. For  example, the agencies may leverage resources by collocating staff or  sharing their expertise. CBP and ICE have also issued guidance and  developed standard operating procedures to clarify roles and  responsibilities. CBP and ICE also coordinate with the private sector in a  variety of ways, such as obtaining private sector assistance to determine  whether detained goods are authentic and to conduct training.", "Representatives of rights holders and e-commerce websites noted that  information shared by law enforcement entities is critical to private sector  IPR enforcement, such as pursuing civil action against a counterfeiter or  removing counterfeit items from websites. In the Trade Facilitation and  Trade Enforcement Act of 2015, Congress provided CBP with explicit  authority to share certain information with trademark and copyright  owners before completing a seizure. CBP officials stated that they share  information about identified counterfeits with e-commerce websites and  rights holders to the extent possible under current regulations. However,  according to private sector representatives we spoke to, restrictions on  the amount and type of information about seized items shared by CBP  limit the ability of rights holders and e-commerce websites to protect IPR.  CBP officials noted that there are legal limitations to the amount and type  of information they can share, particularly if the e-commerce website is  not listed as the importer on forms submitted to CBP.", "Several private sector representatives stated that receiving additional  information from CBP would enhance their ability to protect IPR.  Representatives of one website noted that information on the exterior of  seized packages, such as business identifiers on packages destined for  distribution centers, would be helpful for identifying groups of counterfeit  merchandise from the same seller. However, according to CBP officials,  CBP cannot provide such information to e-commerce websites.  Representatives of one e-commerce website noted that ICE sometimes  shares information related to an investigation, but that ICE\u2019s involvement  in the enforcement process begins only after CBP has identified and  seized counterfeit items. Representatives of two e-commerce websites  stated that, because of the limited information shared by CBP, they may  not be aware of IPR-infringing goods offered for sale on their websites,  even if CBP has seized related items from the same seller.", "According to CBP officials, CBP is reviewing options for sharing additional  information with rights holders and e-commerce websites and is  assessing what, if any, additional information would be beneficial to share  with private sector entities. CBP officials stated that they have not yet  determined whether changes to the amount and types of information  provided to e-commerce websites would require regulatory changes or  additional legal authorities. These officials also said that they have  discussed differences in CBP\u2019s and ICE\u2019s information sharing with ICE  officials. In our report, we recommended that CBP, in consultation with  ICE, assess what, if any, additional information would be beneficial to  share with the private sector and, as appropriate, take action to enhance  information sharing where possible. CBP concurred with this  recommendation.", "Chairman Hatch, Ranking Member Wyden, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  answer any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Kimberly Gianopoulos, Director, International Affairs and Trade,  at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this testimony are Joyee Dasgupta, Kara Marshall, Katie Bassion, Kristen  Timko, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez, Helina  Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James  Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Counterfeit goods harm the U.S. economy and can pose a threat to consumers. But these products can be hard to spot and may be offered online next to authentic goods. For example, we testified that manufacturers determined that 20 of 47 items we purchased from third-party sellers on popular sites were counterfeit.", "Customs and Border Protection leads efforts to stop imported counterfeit goods at the border, and Immigration and Customs Enforcement conducts investigations. In the report on which this testimony is based, we made recommendations to improve oversight of CBP's efforts and enhance information sharing with the private sector."]}
{"id": "GAO-18-254", "url": "https://www.gao.gov/products/GAO-18-254", "title": "Financial Technology: Additional Steps by Regulators Could Better Protect Consumers and Aid Regulatory Oversight", "published_date": "2018-03-22T00:00:00", "released_date": "2018-03-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Advances in technology and the widespread use of the Internet and mobile communication devices have helped fuel the rise of traditional financial services provided by non-traditional technology-enabled providers, often referred to as fintech.", "GAO was asked to provide information on various aspects of fintech activities. This report addresses fintech payment, lending, wealth management, and other products. GAO assesses 1) fintech benefits, risks, and protections for users; 2) regulatory oversight of fintech firms; 3) regulatory challenges for fintech firms; and 4) the steps taken by domestic and other countries' regulators to encourage financial innovation within their countries. GAO reviewed available data, literature, and agency documents; analyzed relevant laws and regulations; and conducted interviews with over 120 federal and state regulators, market participants, and observers, and regulators in 4 countries with active fintech sectors and varying regulatory approaches."]}, {"section_title": "What GAO Found", "paragraphs": ["Fintech products\u2014including payments, lending, wealth management, and others\u2014generally provide benefits to consumers, such as convenience and lower costs. For example, fintech robo-advisers offer low cost investment advice provided solely by algorithms instead of humans. Fintech products pose similar risks as traditional products, but their risks may not always be sufficiently addressed by existing laws and regulations. Also, regulators and others noted that fintech activities create data security and privacy concerns and could potentially impact overall financial stability as fintech grows. The extent to which fintech firms are subject to federal oversight of their compliance with applicable laws varies. Securities regulators can oversee fintech investment advisers in the same ways as traditional investment advisers. Federal regulators may review some activities of fintech lenders or payment firms as part of overseeing risks arising from these firms' partnerships with banks or credit unions. In other cases, state regulators primarily oversee fintech firms, but federal regulators could take enforcement actions. Regulators have published consumer complaints against fintech firms, but indications of widespread consumer harm appear limited. The U.S. regulatory structure poses challenges to fintech firms. With numerous regulators, fintech firms noted that identifying the applicable laws and how their activities will be regulated can be difficult. Although regulators have issued some guidance, fintech payment and lending firms say complying with fragmented state requirements is costly and time-consuming. Regulators are collaborating in various ways, including engaging in discussions on financial protections for customers that may experience harm when their accounts are aggregated by a fintech firm and unauthorized transactions occur. Market participants disagree over reimbursement for such consumers, and key regulators are reluctant to act prematurely. Given their mandated consumer protection missions, regulators could act collaboratively to better ensure that consumers avoid financial harm and continue to benefit from these services. GAO has identified leading practices for interagency collaboration, including defining agency roles and responsibilities and defining outcomes. Implementing these practices could increase the effectiveness of regulators' efforts to help resolve this conflict.", "Regulators abroad have taken various approaches to encourage fintech innovation. These include establishing innovation offices to help fintech firms understand applicable regulations and foster regulatory interactions. Some use \u201cregulatory sandboxes\u201d that allow fintech firms to offer products on a limited scale and provide valuable knowledge about products and risks to both firms and regulators. Regulators abroad also established various mechanisms to coordinate with other agencies on financial innovation. While some U.S. regulators have taken similar steps, others have not due to concerns of favoring certain competitors or perceived lack of authority. While these constraints may limit regulators' ability to take such steps, considering these approaches could result in better interactions between U.S. regulators and fintech firms and help regulators increase their understanding of fintech products. This would be consistent with GAO's framework calling for regulatory systems to be flexible and forward looking to help regulators adapt to market innovations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making numerous recommendations related to improving interagency coordination on fintech, addressing competing concerns on financial account aggregation, and evaluating whether it would be feasible and beneficial to adopt regulatory approaches similar to those undertaken by regulators in jurisdictions outside of the United States. In written comments on a draft of this report, the agencies stated that they concurred with GAO's recommendations and would take responsive steps."]}], "report": [{"section_title": "Letter", "paragraphs": ["Advances in technology and the widespread use of the Internet and  mobile communication devices have helped fuel the rise of financial  services provided by nonfinancial firms, including large and small  technology firms. Often referred to as fintech, these firms are offering  payment services, loans to consumers and businesses, advice on  investments or other financial activities, and other services. While  typically offering their services through mobile devices or the Internet with  little or no face-to-face interaction, these fintech firms also often  incorporate the use of traditional financial products, such as debit or credit  cards, or partner with existing financial institutions to provide their  services.", "The products and services offered by fintech firms provide benefits to  consumers and businesses but also can present risks. The extent to  which some fintech firms or their activities are regulated can also vary.  While some fintech products and services are being offered by U.S. firms,  fintech activities are also occurring in other places, including in the United  Kingdom and Asia. In April 2017, we issued a report providing an  overview of fintech activities and their oversight.", "You asked us to provide information on the various aspects of fintech  activities. This report addresses four types of fintech activities, payments,  lending, wealth and financial advice, and distributed ledger  technologies\u2014some of which are known as blockchain\u2014that are being  used to track financial asset ownership or other purposes. Specifically for  these four fintech sectors, we report on (1) their benefits, risks, and extent  of legal or regulatory protections for users; (2) the efforts by U.S.  regulators to oversee fintech activities; (3) challenges that the regulatory  environment poses to fintech firms; and (4) the steps taken by domestic  and other countries\u2019 regulators to encourage financial innovation within  their countries.", "To address these objectives, we reviewed available data on transaction  volumes; prior GAO reports; and academic papers, reports, and studies  by other organizations on fintech activities. We analyzed relevant financial  laws and regulations to determine the extent to which fintech activities  were covered by their protections. We also reviewed guidance, final  rulemakings, initiatives, and enforcement actions from agencies.", "We conducted over 120 interviews with representatives of relevant  organizations, including fintech providers; financial institutions; related  trade associations; law firms; and consumer groups. These interviews  also included federal financial regulators in the United States, including  staff from the federal depository institution prudential regulators: the  Federal Deposit Insurance Corporation (FDIC); the Board of Governors of  the Federal Reserve System (Federal Reserve); the Office of the  Comptroller of the Currency (OCC); and the National Credit Union  Administration (NCUA); as well as staff from the Commodity Futures  Trading Commission (CFTC); the Consumer Financial Protection Bureau  (CFPB); the Department of the Treasury (Treasury); the Federal  Communications Commission (FCC); the Federal Trade Commission  (FTC); the Financial Industry Regulatory Authority (FINRA); the Securities  and Exchange Commission (SEC); and the Small Business  Administration.", "To obtain state-level perspectives, we interviewed representatives of  associations representing state attorneys general and state regulators for  banks, credit unions, money transmitters, and securities entities as well  as staff from relevant state regulatory agencies in three states with active  fintech firms and regulatory activities\u2014California, Illinois, and New York.  We also interviewed representatives of fintech providers, trade  associations, and regulators in other jurisdictions with active fintech  sectors and that were pursuing various potentially innovative regulatory  activities, which included Canada; Hong Kong; Singapore; and the United  Kingdom. (See app. I for a more detailed discussion of our scope and  methodology for this report.)", "We conducted this performance audit from August 2016 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Fintech\u2014originally short for financial technology\u2014refers to the use of  technology and innovation to provide financial products and services. For  purposes of this report, fintech firms are nontraditional technology- enabled providers, such as start-ups or more established technology  firms, such as Apple or Google, that are offering traditional financial  products or services to consumers. Fintech products or services are  typically provided\u2014sometimes exclusively\u2014through the Internet or via  mobile devices, such as smartphones, rather than being provided through  face-to-face visits to financial institution branches.", "The products and services that fintech firms offer include: payments between individuals, and between individuals and  loans to consumers and businesses; advice on wealth management or general financial activities; and distributed ledger technology used to make payments, record and  track asset ownership, and other purposes."], "subsections": [{"section_title": "Fintech Payments", "paragraphs": ["Various fintech firms offer ways for individuals to make payments and  transfer value, including for purchasing goods or services or for  transferring money to individuals domestically or internationally. The  payments offered by these providers are often conducted using  applications (apps) on smartphones or other mobile devices. Often these  fintech payments involve the use of accounts linked to existing debit or  credit cards and are processed through the existing networks and  channels for these types of payments. In some cases, fintech providers  may also route their payments through the Automated Clearing House  networks, which have traditionally been used to facilitate automatic bill  paying to utilities or other merchants or funds transfers between banks.  Fintech payments can also be made by charging a consumer\u2019s phone bill.  For example, consumers can send charity contributions via text or charge  in-app purchases to their mobile phone bill.", "One common fintech payment method involves mobile wallets, or  electronic versions of consumers\u2019 wallets, which offer consumers the  convenience of conducting transactions without having to enter credit or  debit card information for each transaction. Using a mobile wallet,  consumers can store payment card information and other information on  their mobile devices that is often needed to complete a purchase.  Generally, mobile wallets replace sensitive information with random  values\u2014a process called tokenization\u2014to provide greater security when  making a payment, and transmit this information using existing credit and  debit card networks. A variety of fintech firms provide mobile wallets,  including Apple, Google, and Samsung.", "Consumers may use mobile wallets to make payments to other  consumers or to businesses; in mobile applications; through mobile  browsers; or in-person at a store\u2019s point-of-sale terminal. Some providers,  such as Paypal and Venmo, allow individuals to create accounts on  mobile devices to make payments funded by debit or credit cards, as well  receive and store funds sent to the account owner that can be used to  make payments to others or buy goods from merchants. Figure 1  illustrates how a mobile wallet enables the payment information to be  transferred by allowing compatible devices to exchange data when placed  in very close proximity to each other using various technologies, such as  wireless communication.", "Regarding the total volume of payments by fintech providers, the  association representing state banking supervisors estimated that fintech  payment firms were likely used to facilitate payments or currency  exchanges of up to $189 billion in the first 2 quarters of 2017. In a 2016  report on consumers\u2019 use of mobile financial services, the Federal  Reserve\u2019s survey of more than 2,220 respondents found that over 30  percent of consumers aged 18-44 had made payments using mobile  phones sometime during 2015. According to a report by the Smart  Payment Association, 200,000 locations accepted Apple Pay when it was  launched in September 2014, but by February 2016, this number had  reached 2 million. According to Paypal, it had 218 million active  customer accounts at the end of the third quarter of 2017 and processed  over 6 billion payments valued at more than $354 billion in 2016."], "subsections": []}, {"section_title": "Fintech Lending", "paragraphs": ["Fintech lenders\u2014often referred to as marketplace lenders and which  operate almost exclusively online \u2014offer a variety of loan types and may  use different sources of funds than traditional lenders. The types of loans  offered by fintech providers include consumer and small business loans.  While these lenders may use traditional means of assessing borrowers\u2019  creditworthiness, such as credit scores, they also may analyze large  amounts of additional or alternative sources of data on other aspects of  borrower characteristics, such as information from bank accounts, to  determine creditworthiness.", "Fintech lenders can follow various models. For example, some conduct  person-to-person lending in which loans are financed by individual  investors. In other cases, the funds for these loans can come from  institutional investors such as hedge funds, financial institutions, or from  notes sold to individual investors. In some cases, funding for loans is  obtained by securitizing previously-made loans and selling securities  backed by the cashflows from the underlying loans. The fintech lenders  that use external capital are referred to as direct lenders and include such  firms as SoFi and Earnest. Figure 2 below shows the flow of funds for  typical direct lenders.", "Other fintech lenders include lenders that partner with depository  institutions\u2014including banks or credit unions\u2014to originate loans that are  then purchased by the lender or by another investor. Examples of lenders  partnered with depository institutions include LendingClub Corporation,  Prosper, and Upstart. Figure 3 shows the flow of funds for such lenders.  Some lenders, such as OnDeck, have now developed hybrid models,  selling some whole loans to institutional investors while retaining servicing  responsibilities.", "One firm that tracks fintech activities reported that the volume of lending  by 13 of the most significant lenders had reached about $61 billion as of  the end of September 2016, and other market monitors estimate that  fintech lending volumes could grow to as much as $90 billion to $122  billion by 2020."], "subsections": []}, {"section_title": "Fintech Wealth Management and Financial Advice", "paragraphs": ["Fintech firms are also offering wealth management or other financial  advice, some with minimal or no human interaction. For example, new  firms called robo-advisers are offering investors advice using algorithms  based on these investors\u2019 data and risk preferences to provide advice on  recommended asset holdings and allocations. Fintech firms offering these  advice services include Betterment, Personal Capital, and Wealthfront.  Figure 4 illustrates a typical case of a consumer using a fintech wealth  management adviser.", "One research firm estimated in July 2017 that robo-adviser firms would  have as much as $1 trillion in assets under management by 2020 and as  much as $4 trillion by 2022.", "In addition, some fintech firms\u2014referred to as financial account  aggregators\u2014allow consumers to aggregate the information from their  various financial accounts, including their assets in bank accounts and  brokerage accounts, to enable them to better see their financial health  and receive advice on alternative ways to save money or manage their  finances. Consumers can access this combined information either online  or on mobile devices. Account aggregator firms offering this type of  advice on savings and other activities include Mint and HelloWallet."], "subsections": []}, {"section_title": "Distributed Ledger Technologies", "paragraphs": ["Distributed ledger technology (DLT) is a secured way of conducting  transfers of digital assets in a near real-time basis potentially without the  need for a central authority. DLT involves a distributed database  maintained over a network of connected computers that allows network  participants to share and retain identical cryptographically secured  records. Such networks can consist of individuals, financial entities, or  other businesses.", "Blockchain is one type of DLT. A blockchain is a shared digital ledger that  records transactions in a public or private network. Distributed to all  members in the network, the ledger permanently records, in a sequential  chain of cryptographically secured blocks, the history of transactions that  take place among the participants in the network. DLT products can have  different types of access control. For example, some may be  \u201cunpermissioned\u201d (public) ledgers that are open to everyone to contribute  data to the ledger and have no central control, while others may be  \u201cpermissioned\u201d (private) ledgers that allow only certain participants to add  records and verify the contents of the ledger.", "The financial services industry has identified various potential uses for  DLT. These include tracking international money transfers or tracking  the changes of ownership of various financial assets, such as or  securities like bonds or stocks or derivatives like swaps contracts. In  addition, DLT is being used to track ownership of bitcoin, a virtual  currency, specifically using a blockchain.", "Some companies are using DLT to raise funds. According to a recent  bulletin by U.S. securities regulators, these virtual coins or tokens are  being created and then disseminated using DLT as part of offerings  known as token sales or initial coin offerings. As part of these token  sales, purchasers may use fiat currency (e.g., U.S. dollars) or virtual  currencies to buy these virtual coins or tokens. Currently, the capital  raised from the sales may be used to fund development of a digital  platform, software, or other project; or, the virtual tokens or coins may be  used to access the platform, use the software, or otherwise participate in  the project. After they are issued, in some cases the virtual coins or  tokens may be resold to others in a secondary market on virtual currency  exchanges or other platforms."], "subsections": []}, {"section_title": "Various Regulators May Oversee Fintech Activities", "paragraphs": ["A variety of federal and state regulatory bodies may oversee fintech firms  or their activities to the extent these firms provide a regulated payment;  lending; wealth management; or distributed ledger technology service or  activity. Table 1 explains the basic functions of the relevant federal  regulators.", "In addition to the federal regulators above, various state entities also  conduct regulatory activities over fintech firms operating within their  jurisdictions. According to the association representing state regulators,  state financial services regulators license and supervise activities, such  as money transmission, consumer lending, and debt collection,  irrespective of technology deployed. Nonbank financial service providers  that offer services directly to consumers are likely subject to state  oversight. In addition to state financial services regulators, state securities  regulators, state entities that oversee corporate activities, and state  attorneys general have jurisdiction over certain fintech firms. In general,  these entities may have authority to license or register firms, conduct  exams, and take enforcement actions for violations of state laws or  regulatory requirements."], "subsections": []}]}, {"section_title": "Fintech Activities Can Provide Benefits and Pose Risks to Consumers and the Broader Financial System", "paragraphs": ["Fintech products in payments; lending; wealth management; and  distributed ledger technology can provide consumers and the broader  financial system with various benefits but may also pose risks similar to  those of traditional products. While existing laws apply to fintech products  and services in most cases, some products pose additional risks that may  not be sufficiently covered by existing laws."], "subsections": [{"section_title": "Fintech Products Can Provide Various Consumer Benefits", "paragraphs": ["According to our prior work, literature we reviewed, and stakeholders we  interviewed, consumer benefits of fintech products include greater  convenience; lower cost; increased financial inclusion; faster services;  and improved security.", "Greater convenience: Consumers can use fintech products and  services on their mobile device to make payments; transfer money;  easily obtain payment for shared expenses; obtain loans; or to receive  investment advice without the time and expense of visiting a financial  service provider\u2019s physical location. They can also access these  services outside of standard business hours. In addition, the ability to  see information from all of their financial accounts together in a single  dashboard provided by an account aggregator is more convenient  than reviewing information from each account on separate  statements.", "Lower cost: Innovations in payments, including the use of DLT, could  reduce the cost of payments for consumers. For example, one fintech  firm uses DLT to reduce the operational and liquidity costs traditionally  incurred with some international payments. Some fintech providers  do not charge fees for payments, so consumers save by avoiding  paying for checks or incurring automated teller machine fees. In  addition, because fintech providers often do not have overhead costs  associated with physical locations and use automation instead of  relying on large staffs to provide services, they may be able to pass  these cost savings on to consumers. For example, according to a  Treasury report, automated loan processing, underwriting, and  servicing may allow fintech lenders to offer lower rates or fees on their  loans because they have to hire fewer loan officers. Similarly,  automation in robo-advising could allow consumers to obtain  investment advice at a lower cost than if they obtained services from a  firm that relied more heavily upon human advisers.", "Increased financial inclusion: Using alternative data may allow  fintech lenders to offer loans to consumers whose traditional credit  history may have been insufficient for banks to extend them credit.  CFPB officials stated that using alternative data\u2014including bill  payment history as a proxy for debt repayment\u2014could expand  responsible access to credit, particularly to some consumers who are  among the estimated 45 million people who lack traditional credit  scores. Similarly, a study by FDIC staff noted that fintech accounts  may also enable consumers whose traditional accounts are closed  due to lack of profitability for the provider or other reasons to continue  to have access to financial services. Also, robo-advising services  can make investment advice more accessible to consumers who  cannot meet account minimums at traditional advisers by offering  lower account minimums.", "Faster services: Automation may reduce transaction times for  services like loan approval or investment advice. Stored payment data  in fintech providers\u2019 mobile wallets may reduce transaction time for  online purchases because consumers do not need to reenter billing  information. Further, such data may reduce transaction time for in- store purchases because transactions using contactless payments  are faster than transactions using card readers and cash. Peer-to- peer payments made via mobile wallets may transfer money faster  than checks. Also, using DLT may greatly reduce settlement times for  currency, derivatives, and securities transactions by improving  processes or reducing the number of entities involved in a transaction.  For example, one firm is using DLT to reduce settlement for securities  from 2 days to the same day.", "Improved security: While credit and debit transactions have  traditionally transmitted sensitive information that can be hacked and  used to make fraudulent transfers, fintech providers\u2019 mobile wallets  generally replace this sensitive information with randomly generated  numbers that mitigate the risk that transaction information can be  used fraudulently (tokenization), according to the Federal Reserve\u2019s  Mobile Payments Industry Workgroup. Similarly, while lost or stolen  credit and debit cards can be used to make fraudulent payments, a  lost or stolen mobile device can have security features that protect a  mobile wallet from unauthorized use. For example, according to FTC,  mobile device features such as device passwords, fingerprint readers,  and face recognition software can help protect consumer accounts  from unauthorized access. Additionally, FCC notes in a consumer  guide that consumers\u2019 ability to disable their mobile devices remotely  can help prevent fraudulent use of a consumer\u2019s fintech provider  accounts if their mobile devices have been lost or stolen. Further,  mobile device Global Positioning System (GPS) data can help identify  suspicious activity in consumer accounts or to ensure that a mobile  phone being used at a particular merchant is actually at that location,  according to the Federal Reserve\u2019s Mobile Payments Industry  Workgroup and others."], "subsections": []}, {"section_title": "Fintech Products Generally Pose Consumer Risks Similar to Those of Traditional Products", "paragraphs": ["The literature we reviewed and stakeholders we interviewed also  identified potential risks fintech products pose to consumers, including  fraud, discrimination, and unsuitable advice. In general, these risks are  similar to those posed by traditional financial products. While laws that  apply to traditional products also apply to fintech products in most cases,  some fintech products pose additional risks that may not be sufficiently  addressed by existing laws. While the legal framework for consumer  protection applies to many of the risks associated with fintech products,  the extent to which consumers benefit from these protections is a function  of the existing regulatory framework and its coverage of fintech activity.  We discuss the regulatory framework for fintech products in greater detail  later in this report."], "subsections": [{"section_title": "Fintech Payments", "paragraphs": ["Consumers face the risk of unauthorized transactions regardless of  whether they use a traditional or fintech firm to make payments. CFPB  officials we interviewed told us that some fintech products, such as mobile  wallets, increase the number of firms involved in a transaction, which may  increase the risk of unauthorized transactions. However, when  consumers fund their mobile wallets by linking to traditional funding  sources\u2014debit or credit cards or bank accounts\u2014consumer protection  laws such as the Electronic Fund Transfer Act and the Truth in Lending  Act generally apply. These acts and their implementing regulations  provide that consumers can dispute charges to these accounts and  liability for losses may be limited to $0 if disputes are made within  specified time frames.", "Consumer protection laws, such as the Electronic Fund Transfer Act,  which apply to traditional funding sources, do not yet cover payments  funded by mobile wallet balances or mobile carrier billing. To address this  gap in protections for mobile wallet funds, CFPB issued a final rule on  prepaid accounts that will extend protections for error resolution and  liability for unauthorized transfers to prepaid account and mobile wallet  balances. This rule had previously been scheduled to become effective in  April 2018, but in January 2018, CFPB delayed the effective date of the  rule to April 1, 2019. However, fintech firms we interviewed told us that  even when certain consumer protections are not required by statute or  regulation, they voluntarily provide similar protections and disclose these  protections in their terms of service.", "Agencies have also issued tips for consumers to safeguard their mobile  devices and identify fraudulent payments. Similarly, wireless carriers  have taken steps to mitigate fraudulent billing in response to enforcement  actions, including offering services that prevent third parties from adding  charges to consumer bills without consumers\u2019 knowledge or permission\u2014 a practice known as \u201ccramming.\u201d However, FCC has found that fraudulent  billing continues to be a problem. FCC\u2019s July 2017 proposed cramming  rule seeks to codify the agency\u2019s existing prohibition against fraudulent  billing through language explicitly prohibiting wireless carriers from  placing third-party charges on consumers\u2019 bills without consumer  verification. In addition, FCC and FTC have issued tips for consumers  and firms publicizing practices that help avoid cramming.", "Consumers also face the risk their funds could be lost due to the failure of  their payment provider. Although consumers with funds in a bank account  have protection from this risk through federal deposit insurance up to  $250,000, consumers with funds in a mobile wallet may not be similarly  protected. To address this risk, some fintech firms deposit consumers\u2019  mobile wallet balances into an FDIC-insured bank or savings association,  resulting in the funds being insured by FDIC up to the applicable deposit  insurance limit in the event of the failure of the bank or savings  association. Other fintech firms voluntarily disclose to consumers in their  terms and conditions that any mobile wallet balances they hold are not FDIC insured. However, according to the Conference of State Bank  Supervisors (CSBS), 49 states have laws that require fintech firms  engaged in money transmission or stored value to self-insure through  bonding, holding investments against funds held or transmitted, and  meeting minimum net worth requirements.", "Further, consumers face the risk that their mobile wallet balances will not  be accessible in a timely manner. Under the Expedited Funds Availability  Act, banks are required to make customers\u2019 deposited funds available to  them within prescribed time frames. For example, banks are typically  required to make funds a customer receives through an electronic  transfer available by the next business day. However, as nonbanks,  fintech firms are not subject to this act\u2019s requirements and therefore do  not have to make mobile wallet balances available under the same time  frames. For example, one fintech firm we interviewed told us that most  transfers from mobile wallets to bank accounts make funds available by  the next business day, but certain circumstances, such as suspicious  account activity, may cause the firm to delay transfers a few days.  Another fintech firm we interviewed told us that transfer amounts are  limited based on anti-money laundering requirements. However, fintech  firms we spoke with voluntarily disclose the availability of funds and any  limits on access in the terms and conditions provided to customers when  they create their accounts. However, FTC recently settled with a fintech  payment provider for delays in fund accessibility experienced by its  users.  In its complaint, FTC charged that the firm had failed to disclose  that these funds could be frozen or removed based on the results of the  firm\u2019s review of the underlying transaction. As a result, consumers  complained that at times, the firm delayed the withdrawal of funds or  reversed the underlying transactions after initially notifying them that the  funds were available."], "subsections": []}, {"section_title": "Fintech Lending", "paragraphs": ["Consumers face risks associated with unclear terms and conditions  regardless of whether they borrow from a traditional or fintech lender. For  example, consumers could have difficulty understanding their repayment  obligations or how those terms compare to terms offered by other  lenders. However, the Truth in Lending Act requires lenders to provide  consumers with standardized, easy-to-understand information about the  terms of the loan and enables consumers to make claims against lenders  for violating Truth in Lending Act requirements.", "Consumers also face risk of discrimination and unfair credit practices  regardless of whether they borrow from a traditional or fintech lender.  However, these risks may not be fully understood with fintech lenders that  use alternative underwriting standards and consumer data\u2014such as  information on rent payments and college attended. For example, fintech  firms assessing applicants\u2019 creditworthiness with criteria highly correlated  with a protected class\u2014such as race or marital status\u2014may lead to a  disproportionate negative effect. As with traditional lenders, federal fair  lending laws, such as the Equal Credit Opportunity Act, apply to fintech  lenders. In addition, some fintech lenders have taken steps that aim to  address this risk. For example, one fintech lender said it monitors the  effect any changes to their underwriting models may have on fair lending  risk.", "Consumers face risk of harm due to inaccurate credit assessments, but  these risks are also less understood with fintech lenders that use  alternative data to underwrite loans. For example, inaccurate data or  models used by a fintech lender could classify borrowers as higher credit  risks than they actually are. This could result in those borrowers paying  unnecessarily high interest rates and increasing their risk of default or  could result in creditworthy borrowers being denied credit. Whereas the  Fair Credit Reporting Act requires that borrowers have an opportunity to  check and correct inaccuracies in credit reports, borrowers could face  more challenges in checking and correcting alternative data that some  fintech lenders use to make underwriting decisions because alternative  data are not typically reflected in credit reports. However, the Equal  Credit Opportunity Act requires lenders, including fintech lenders, that  deny credit to applicants to disclose the specific reasons for denial.  Alternatively, if the fintech lender\u2019s underwriting is too lax, loans could be  made to borrowers who lack the ability to repay them. Borrowers who  default under these circumstances then face limited access to and higher  prices for credit in the future."], "subsections": []}, {"section_title": "Fintech Wealth Management", "paragraphs": ["Consumers face risks of receiving unsuitable investment advice  regardless of whether they obtain advice from a traditional or robo- adviser. While a human adviser may be able to mitigate this risk by  probing consumers for more information to assess needs, risk tolerance,  or other important factors, a robo-adviser\u2019s ability to mitigate this risk may  be based on a discrete set of questions to develop a customer profile. In  addition, advisers could make inaccurate or inappropriate economic  assumptions, perhaps due to a failure to factor in changing economic  conditions, which could result in flawed investment recommendations.  While human advisers may be able to mitigate this risk to some degree  based on their ability to adjust to economic conditions, a robo-adviser\u2019s  ability to mitigate this risk is based on whether its algorithm has been  updated to reflect the most recent economic conditions. Because, as we  discuss below, robo-advisers generally are required to comply with the  same requirements as traditional investment advisers, customers of robo- advisers and traditional advisers receive the same protection from these  risks.", "Consumers who use fintech services that provide an aggregated view of  their accounts at other financial institutions could potentially be more  exposed to losses due to fraud. If a consumer authorizes an account  aggregator to access their financial accounts and grants the aggregator  authority to make transfers, the consumer may be liable for fraudulent  transfers made. CFPB is studying risks associated with entities that rely  on access to consumer financial accounts and account-related  information, and has issued a related request for information (we address  this issue later in this report)."], "subsections": []}, {"section_title": "Distributed Ledger Technology", "paragraphs": ["DLT can be used to issue and distribute digital assets known as tokens to  consumers and investors. Virtual currencies\u2014tokens that are digital  representations of value that are not government-issued legal tender\u2014 could pose some unique risks to consumers. For example, the ability of  virtual currency users to recover funds lost due to fraud or errors may be  more limited than that of customers using traditional products like  payment cards or bank transfers to make payments. Whereas traditional  transactions can be reversed to correct fraud or errors, many virtual  currency transactions are designed to be irreversible. Also, unlike  storing dollars in a bank account, if a consumer stores their virtual  currency in a mobile wallet, their wallet provider may disclaim  responsibility for replacing virtual currency that is stolen. Further, CFPB\u2019s  prepaid accounts rule, which will extend consumer protections to prepaid  cards and mobile wallets with stored value, explicitly does not extend  consumer protections to virtual currencies. However, firms that transmit,  exchange, hold, or otherwise control virtual currency may be subject to  state consumer protection law.", "In addition to fraud and errors, consumers who use virtual currencies may  face other risks of loss. Federal deposit insurance does not apply to  virtual currency balances. As a result, according to FDIC staff, consumers  could face losses if they store their virtual currencies with a mobile wallet  firm that goes out of business unless the firm offers private insurance.  Further, if consumers store their virtual currency on their own and  misplace or forget their account access information, they may lose access  to their funds. Unlike bank accounts for which users can reset passwords  or usernames, some wallets do not offer a way to reset such information.  To help consumers address these risks, federal agencies and state  regulators have issued documents publicizing practices that may help  consumers use virtual currency more safely.", "Tokens\u2014which may also function similarly to a security\u2014could pose  some unique risks to investors, and some investor protections may not be  available. Token sales, sometimes known as initial coin offerings or ICOs,  are being used by firms to raise capital from investors and may pose  investor risks, including fraud and theft. For example, one firm allegedly  promised investors it would invest its token sale earnings in real estate,  but instead allegedly defrauded investors of their investments. Fraud  and theft are risks of other securities offerings, and investors receive  protections from these risks under the Securities Act of 1933 and the  Securities Exchange Act of 1934 for token sales that meet SEC\u2019s  definition of a security. However, these protections do not apply to  investors who participate in token sales that do not meet the definition of  a security. In December 2017, SEC issued a cease-and-desist order to  one firm for failure to register their token sale with SEC. In addition,  SEC has reported that an investor\u2019s ability to recover funds may be  limited if key parties to token sales are located overseas or operating  unlawfully. To help investors address these risks, SEC and FINRA have  issued documents publicizing risks of token sale investment.", "Tokens traded on a platform may also be considered commodities and  may pose investor risks including fraud and theft. Platforms that facilitate  leveraged, margined, or financed trading of tokens may be subject to a  requirement to register with the CFTC. To help investors understand  tokens, CFTC has issued a report publicizing potential risks of virtual  currencies and clarifying cases in which investors may be at risk because  CFTC does not have oversight authority. For example, virtual currency  and token exchanges that conduct certain spot or cash market  transactions but do not use leverage, margin, or financing are not  required to follow all of the rules that regulated exchanges are required to  follow.", "DLT applications may pose other unknown risks compared to the  technologies and processes they replace, given that the technology is in  the early stages of development. For example, CFTC and the Federal  Reserve have identified cybersecurity and operational risks as potential  risks of DLT. FDIC officials said that finality of a transaction under a DLT  settlement may potentially raise legal challenges. Also, applications of  DLT that depend on consensus for validating transactions are vulnerable  to a \u201c51 percent attack,\u201d which could defraud consumers by revising their  transactions or sending fraudulent payments. However, according to  market observers, such an attack is unlikely and has not been carried out."], "subsections": []}]}, {"section_title": "Fintech Products Can Pose Other Risks to Consumers; Risks to the Broader Financial System Are Unclear", "paragraphs": ["Consumers face the risk of financial loss due to data breaches regardless  of whether they use a traditional or fintech firm, and these breaches could  undermine the financial system by eroding consumer trust in financial  institutions. Similar to traditional products and services that collect  sensitive consumer information and are connected to the Internet, fintech  products and services may be vulnerable to cyberattack and can pose  data security risks. In addition, one market observer we interviewed told  us that hackers may target these new fintech firms before their security  systems are mature.", "However, according to literature we reviewed and fintech firms and  market observers we interviewed, some fintech firms have adopted  technologies or practices designed to mitigate security risks. For  example, new fintech firms can use the latest information technology  systems to secure their products instead of having to update older  systems. Additionally, as discussed above, some fintech firms use new  techniques and leverage mobile device features to enhance data security,  and one fintech firm said that it also uses technology that contacts clients  if a data breach issue arises. Like traditional financial institutions, rules  and guidelines implementing the Gramm-Leach-Bliley Act (GLBA)  generally require fintech firms to secure customer information. In  addition, some regulators have issued guidance to consumers publicizing  practices that help avoid security problems when using fintech products.  Regulators have also issued guidance to businesses including fintech  firms that recommends that they adopt policies and procedures that  address the prevention and detection of, and response to, cybersecurity  threats. For example, the New York State Department of Financial  Services requires regulated entities to meet cybersecurity requirements  outlined in regulation.", "Some fintech firms may also pose privacy concerns because they may  collect more consumer data than traditional firms. For example, fintech  lenders that use alternative data in underwriting may have sensitive  information about consumers\u2019 educational background, mobile phone  payments, or other data. One fintech firm we spoke with requires  consumers to provide additional data, such as what a payment is for, in  order to make peer-to-peer payments. Some data aggregators may hold  consumer data without disclosing what rights consumers have to delete  the data or prevent the data from being shared with other parties. A leak  of these or other data held by fintech firms may expose characteristics  that people view as sensitive. GLBA generally requires fintech firms and  traditional financial institutions to safeguard nonpublic personal  information about customers. According to literature we reviewed and  fintech firms and market observers we interviewed, as with data security,  some fintech firms use new technologies or mobile device features to  mitigate data privacy risks. In addition, some regulators have issued  guidance to consumers publicizing practices that help maintain privacy  when using online products and services, including those provided by  fintech firms. Regulators have also issued GLBA guidance to  businesses including fintech firms recommending that they adopt policies  and procedures to prevent, detect, and address privacy threats.", "Similar to traditional products and services, fintech products may be used  to facilitate illicit activities, including money laundering, terrorist financing,  and evading sanctions program requirements. For example, in 2015, the  Financial Action Task Force (FATF) reported that new payment methods  pose an emerging terrorist finance vulnerability because users can  access these methods from anywhere in the world and it is difficult for  enforcement agencies to identify the beneficiary. However, FATF found  that the extent to which terrorist groups actually exploit these  technologies is unclear and said that enforcement agencies should  monitor these risks for developments. Further, FATF has stated that  fintech innovations provide an opportunity to bring anti-money laundering  efforts into the 21st century by reducing dependency on cash and  informal systems and making it easier for authorities to detect and follow  illicit financial flows. Relevant laws that prohibit financial crimes apply to  fintech products. For example, the Bank Secrecy Act (which established  reporting, recordkeeping, and other anti-money laundering requirements)  and economic sanctions programs (which create economic penalties in  support of U.S. policy priorities) apply to all financial firms that transmit  money regardless of whether they use traditional or fintech products.", "Finally, market observers have questioned whether fintech activities could  create risks to overall financial stability, but many have said such risks are  relatively minimal due to fintech firms\u2019 small market presence. While  direct or indirect linkages between large financial institutions could lead  financial problems at one firm to create similar problems for other firms  that can undermine financial stability, studies by regulators in various  countries and international organizations found that fintech firms have not  generally reached a level of interconnectedness where their financial  distress would threaten the stability of other financial system  participants. For example, the Bank for International Settlements and  the Financial Stability Board reported that in 2015 fintech accounted for 2  percent of new credit in the United States. Additionally, after assessing  virtual currencies, the European Central Bank concluded in a November  2017 report that virtual currencies were not a threat to financial stability  due to their limited connection with the real economy, their low volume  traded, and the lack of wide user acceptance.", "However, the Financial Stability Board and other market observers have  noted that fintech firms could potentially affect financial stability in both  positive and negative ways as the activities and firms evolve. For  example, fintech firms could help decentralize and diversify the financial  services market, and they could diversify exposure to risk by increasing  access to financial services for consumers and small businesses. On the  other hand, providers could potentially also increase risks to financial  stability. For example, robo-advisers could amplify swings in asset prices  if their risk models rely on similar algorithms, making the portfolio  allocation methods of robo-advisers more highly correlated than those of  traditional advisers, although according to the Financial Stability  Oversight Council, this risk could also arise if traditional advisers follow  similar allocation strategies. Similarly, according to the Financial Stability  Board, fintech lenders could potentially amplify swings in credit availability  if the investors that fund many marketplace lending products are more  willing to fund loans during market upturns or less willing to fund loans  during market downturns. To help balance these potential benefits and  risks, the Financial Stability Board recommended that international bodies  and national authorities continue to monitor the issues and consider the  effects of fintech in their risk assessments and regulatory frameworks."], "subsections": []}]}, {"section_title": "Fintech Firms\u2019 Compliance with Applicable Laws Is Subject to Varied Federal Oversight", "paragraphs": ["The extent to which fintech firms are subject to federal oversight of their  compliance with applicable consumer or other laws varied. Fintech firms  that offer investment advice typically register with and are subject to  examinations by federal securities regulators. Some fintech firms  providing payments or loans that have partnered with federally regulated  banks or credit unions may receive indirect oversight from federal  financial regulators as part of their efforts to ensure that their regulated  entities are adequately managing the risks of these arrangements.  Nonpartnered fintech firms would not typically be subject to routine  examinations by a federal financial regulator but would instead be subject  to state regulatory oversight and enforcement. While fintech firms and  financial institutions are subject to different degrees of routine federal  oversight, we found that indications of fintech firms causing widespread  harm were limited as they were subject to fewer complaints than large  financial institutions."], "subsections": [{"section_title": "Fintech Firms Providing Investment Advice Are Subject to the Same Oversight as Traditional Financial Institutions", "paragraphs": ["Fintech robo-advisers offering wealth management advice would  generally be subject to the same federal and state oversight as traditional  investment advisers. Under the Investment Advisers Act of 1940 and  state securities laws, any entity or individual that offers investment advice  for compensation generally must register as an investment adviser\u2014with  SEC or states\u2014and adhere to various reporting and conduct  requirements. When providing advice, investment advisers\u2014traditional  or fintech\u2014are considered fiduciaries to their clients, which means they  owe a duty of care and loyalty to their clients, and they must disclose all  actual or potential conflicts of interest, and act in their clients\u2019 best  interest. To review for compliance with this standard and other applicable  requirements, staff from SEC and state securities regulators conduct  examinations of registered investment advisers. Specifically, state  regulators are responsible for conducting examinations of investment  advisers that operate in fewer than 15 states and hold client assets under  management of less than $100 million. However, according to staff from  the North American Securities Administrators Association\u2014a membership  organization for state, provincial, and territorial securities administrators in  the United States, Canada, and Mexico\u2014no robo-adviser firms were  solely regulated by the states as of October 2017."], "subsections": []}, {"section_title": "Fintech Firms That Partner with Financial Institutions May Be Subject to Indirect Federal Financial Regulator Oversight", "paragraphs": ["Some fintech firms may be subject to indirect federal oversight as part of  relationships they have entered into with regulated financial institutions. If  fintech firms partner with federally-regulated financial institutions, such as  a bank or credit union, federal financial regulators may conduct  examinations of the regulated financial intuition that could include some  review of the extent to which the fintech firm may affect the partner  financial institution\u2019s adherence to relevant regulations through the  services provided to the financial institution. Regulators conduct these  examinations in order to assess the risk to the regulated institution  because the failure of the fintech firm to follow such laws could expose  the bank or credit union to financial or other risks.", "As part of the indirect oversight of fintech firms, the financial institution  would be expected by its regulators, under various third-party guidance  issuances by these regulators, to ensure that any risks to the institution  resulting from the relationship with the fintech firm are assessed and  mitigated. Among other things, banks and credit unions should conduct  due diligence on potential third-party partners, including having a process  within the institution for managing the risks posed to their institution by the  third party. For example, OCC third-party guidance states that banks  should adopt risk management processes that are commensurate with  the level of risk and complexity of the third-party relationship. These  processes include establishing risk-mitigating controls, retaining  appropriate documentation of the bank\u2019s efforts to obtain information on  third parties, and ensuring that contracts meet the bank\u2019s compliance  needs.", "Although fintech firms partnering with federally regulated institutions  would be expected to follow the practices in this guidance, the extent to  which they would be overseen by a federal financial regulator was limited.  For example, FDIC and OCC staff told us that they had examined a  fintech firm that provides financial account aggregation services to  regulated institutions. This review focused on the fintech firm\u2019s data  security rather than its activities with consumers. FDIC staff also said they  conducted exploratory discussions with some fintech lenders, but these  firms were not part of their technology service provider examination  program. However, as of November 2017, FDIC and OCC staff noted that  they had not completed examinations of fintech firms within our scope.  NCUA staff noted that NCUA does not have authority to examine services  provided to credit unions by third-party service providers. In order to  examine any services provided to credit unions, NCUA must rely on credit  unions voluntarily providing information on the third-party service  provider. However, NCUA\u2019s staff noted some of their examiners had  accompanied state regulators in an examination that involved a credit  union\u2019s partnership with a fintech payments firm."], "subsections": []}, {"section_title": "Other Fintech Firms Are Not Routinely Overseen by Federal Financial Regulators, but Are Subject to State Oversight", "paragraphs": ["Fintech firms not providing investment advice or partnered with federally- regulated financial institutions would be subject to routine oversight by a  federal regulator only under certain circumstances. For example, CFPB  could examine some fintech firms as a result of its examination  authorities. Specifically, it has supervisory authority over certain  nondepository institutions, including mortgage lenders and servicers,  payday and student loan providers, and \u201clarger participants\u201d in consumer  financial product and service markets, which could include fintech  providers. CFPB has conducted or plans to conduct examinations of  fintech firms that meet the agency\u2019s definition of \u2018\u201clarger participants\u201d in  sectors for which they have designated such participants. For example,  according to CFPB staff, it has conducted a stand-alone examination of a  fintech payments company that provides international remittances, and it  has scheduled an examination of a fintech lender that provides student  loans. As of October 2017, it had not defined other \u201clarger participants\u201d  specifically for other markets in which fintech firms may be active, but it is  considering a proposed rule to supervise larger participants in the  personal loan markets, which might include larger fintech lenders. CFPB  may also conduct examinations of individual companies that it determines  pose risks to consumers, as identified in public orders. Furthermore,  CFPB\u2019s supervisory authority also extends to third-party service providers  of nondepository institutions overseen by the agency.", "Fintech firms may also be subject to examinations related to their  compliance with anti-money laundering laws and related requirements.  FinCEN, which is responsible for administering federal anti-money  laundering laws, has authority to examine any fintech firms conducting  money transmission, according to Treasury officials. These firms would  be required to comply with the applicable anti-money laundering and  counter-terrorist financing requirements, including registering with  FinCEN, establishing anti-money laundering programs, and reporting  suspicious activities to FinCEN. However, FinCEN delegates routine anti- money laundering examinations of federally-chartered or registered  financial institutions to the federal financial institution regulators. In other  cases, firms subject to anti-money laundering requirements, including  fintech payments or lending firms, could be examined by state regulators  and the Internal Revenue Service.", "Fintech firms not subject to routine federal supervisory oversight would  instead generally be subject to state oversight. As of October 2017, 49  states, as well as the District of Columbia, Guam, Puerto Rico, and the  U.S. Virgin Islands, required entities that provide money transfer  services\u2014which may include some fintech payments firms\u2014to obtain  licenses to conduct such activities in their jurisdictions according to  documents from state regulator associations and CSBS staff. In  addition, all states and the District of Columbia required lending licenses  for consumer lenders operating in their states, according to CSBS staff.", "Furthermore, some states have created or provided guidance on licensing  statutes in order to include virtual currencies. For example, in 2015 New  York finalized a new license for virtual currency businesses under New  York\u2019s financial services law.", "State regulators in these jurisdictions conduct examinations of the firms  that hold licenses to assess their compliance with safety and soundness  and various other requirements. In addition, CSBS staff stated that as of  February 2018, approximately 37 states authorize state regulators to  examine banks\u2019 third-party service providers\u2014which could include fintech  companies.", "According to state regulators we interviewed in Illinois, New York, and  California, their agencies use the same approach to regulate and  examine fintech firms and traditional financial institutions providing similar  services. Furthermore, according to state regulatory associations and  some state regulatory agencies, fintech firms such as money transmitters  undergo regular supervision through on-site examinations to monitor  compliance with federal and state capital, liquidity, and consumer  protection requirements. For example, Money Transmitters Regulators  Association staff said that state regulators examine MSBs at least every 3  years depending on risk assessment and previous examination record,  and that state examinations cover federal and state laws, including data  security and anti-money laundering requirements. Similarly, staff from one  state regulator noted that they conduct consumer protection examinations  of direct lenders and take enforcement action if they identify potential  violations. CSBS staff noted that state requirements do not differ for  fintech firms because the requirements and examinations are activity- based. For example, most states have anti-money laundering  requirements within their money transmitter license laws. Due to state  anti-money laundering examination cycles, CSBS staff stated that MSBs  licensed in 40 or more total states experience an examination at least  once every 14 months."], "subsections": []}, {"section_title": "Fintech Firms Can Be Subject to Enforcement Actions by Federal and State Regulators", "paragraphs": ["Outside of examinations, fintech firms that violate federal and state  regulations can be subject to enforcement actions by federal and state  agencies with such authorities. The OCC, Federal Reserve, and FDIC  may have enforcement jurisdiction over fintech firms when the fintech firm  is an \u201cinstitution affiliated party\u201d under the Federal Deposit Insurance Act  or a service provider under the Bank Service Company Act. In addition,  CFPB can take enforcement action against institutions under its  jurisdiction for noncompliance with federal consumer protection laws. For  example, in 2016, CFPB used its unfair, deceptive, or abusive acts or  practices authorities to investigate and issue a consent order against a  fintech firm operating an online payment system, which CFPB determined  had made deceptive data security claims to customers. FTC can also  take enforcement actions against fintech firms not registered or chartered  as a bank for violations of any federal consumer laws FTC enforces,  including the FTC Act\u2019s prohibition against unfair or deceptive acts or  practices. For example, in 2015, FTC took action against the providers of a smartphone application, alleging that they deceived consumers and  installed hidden malicious software code to generate virtual currencies for  the providers without consumer permission. It can also bring  enforcement action against non-bank service providers that maintain or  process customer information under its GLBA authority.", "Other federal entities can pursue enforcement action against fintech  firms. The Department of the Treasury\u2019s Office of Foreign Assets Control  can take action against fintech firms that violate U.S. sanctions  regulations. In addition, FinCEN can also pursue enforcement measures  against fintech firms that transmit funds\u2014such as certain fintech payment  and lending firms\u2014due to its authority to enforce compliance with the  Bank Secrecy Act\u2019s anti-money laundering and prevention of terrorist  financing provisions. For example, FinCEN took enforcement action in  May 2015 against the fintech firm Ripple\u2014a company that allows users to  make peer-to-peer transfers in any currency using a DLT-enabled  process\u2014for violating anti-money laundering requirements through its  sale of virtual currency. In 2016, CFTC brought an enforcement action  against a Hong Kong-based fintech firm for offering illegal off-exchange  financed retail commodity transactions in bitcoin and other  cryptocurrencies, and for failing to register as a futures commission  merchant.", "Finally, state regulators can also take enforcement action against  financial institutions and fintech firms that violate state data security or  consumer protection laws. In addition, state attorneys general may bring  actions against fintech companies through consumer protection and  deceptive trade practice acts, according to the National Association of  Attorneys General."], "subsections": []}, {"section_title": "In Some Cases, Fintech Firms May Not Be Subject to Financial Regulator Oversight", "paragraphs": ["Some fintech companies may not be subject to any federal or state  financial oversight if they do not meet federal or state definitions of a  money service or other regulated business. For example, some fintech  payments firms\u2014such as certain mobile wallet providers\u2014might not be  subject to state or federal money service business requirements because  their role in the payment process does not specifically involve transmitting  money, according to state and federal regulators. One mobile wallet  provider claimed that it is not subject to federal financial regulatory  oversight because it does not transfer funds or authorize transactions, but  instead facilitates the transfer of customer data as part of the credit card  or debit card networks; it also does not retain any of its consumers\u2019  personal data, including data on purchase content, location, or dollar  amount."], "subsections": []}, {"section_title": "Indications of Fintech Activities Creating Widespread Consumer Harm Appear Limited Compared to Traditional Providers", "paragraphs": ["Available regulatory data show that the number of consumer complaints  against fintech activities appears modest compared to traditional  providers. For example, although our analysis of the CFPB\u2019s consumer  complaint database has limitations in assessing risk, the number of  published complaints submitted against several prominent fintech firms  from April 2012 through September 2017 included in this database was  generally low, when compared to select large financial institutions. Our  analysis showed that for 13 large firms offering fintech payments, lending,  investment advice, financial account aggregation, or virtual currencies,  only 5 of the firms had complaints in the CFPB database, with 4 having  received fewer than 400 complaints. The largest number of published  complaints had been submitted against a large fintech payment provider  with over 3,500 published complaints. Further, the number of published  complaints submitted against the fintech payment provider was relatively  small compared to the number of published complaints submitted against  other, often larger financial institutions. For example, our analysis showed  that 10 large financial institutions each received between approximately  14,300 and 67,300 total complaints April 2012 through September  2017.", "In addition, various federal regulators, including CFPB and FTC, can  address the risk of consumer harm by taking actions against fintech firms  for deceptive or unfair acts or practices when warranted. For example, in  2016, FTC reached a settlement with a firm that sold machinery designed  to create virtual currencies\u2014a process known as mining\u2014and allegedly  had been deceiving its customers about the availability and profitability of  the machinery. As noted earlier, FTC also settled with a fintech payment  provider in February 2018 over complaints by thousands of consumers  the company had received regarding confusion over its funds availability  practices. Additionally, in 2016 CFPB assessed a $100,000 civil penalty  against a fintech payments firm for deceiving consumers about its data  security practices and the safety of its online payment system."], "subsections": []}]}, {"section_title": "The U.S. Regulatory Environment Poses Various Challenges to Fintech Firms", "paragraphs": ["Fintech firms can find that the complexity of the U.S. financial regulatory  system creates challenges in identifying the laws and regulations that  apply to their activities, and that complying with state licensing and  reporting requirements can be expensive and time-consuming for mobile  payment providers and fintech lenders. Also, federal agencies could  improve collaboration and clarify issues related to financial account  aggregation by making sure that interagency efforts dedicated to fintech  include all relevant participants and incorporate other leading practices. In  addition, because banks are liable for risks posed by third parties, fintech  firms may face delays in entering into partnerships with banks."], "subsections": [{"section_title": "Challenges with Complexity of Financial Regulatory Structure", "paragraphs": ["The complex U.S. financial regulatory structure can complicate fintech  firms\u2019 ability to identify the laws with which they must comply and clarify  the regulatory status of their activities. As noted in our past reports,  regulatory oversight is fragmented across multiple regulators at the  federal level, and also involves regulatory bodies in the 50 states and  other U.S. jurisdictions. Fintech firms and other stakeholders we  interviewed told us that it was difficult for fintech firms to navigate this  structure. In particular, understanding the laws and regulations that may  apply to fintech firms was not easy because existing regulations were  sometimes developed before the type of product or service they are now  offering existed. In addition, the cost of researching applicable laws and  regulations can be particularly significant for fintech firms that begin as  technology start-ups with small staffs and limited venture capital funding.  Fintech payments and DLT firms and other market participants told us  that navigating this regulatory complexity can result in some firms  delaying the launch of innovative products and services\u2014or not launching  them in the United States\u2014because the fintech firms are worried about  regulatory interpretation. For example, staff from one U.S. firm that  developed a DLT payments technology told us that they and their peers  only work with foreign customers due to the fragmented U.S. financial  regulatory structure and lack of unified positions across agencies on  related topics.", "However, several U.S. regulators have issued rules and guidance to help  fintech firms understand where their products and services may fit within  the complex financial regulatory structure, as shown in the following  examples.", "In December 2017, the Federal Reserve\u2019s Consumer Compliance  Outlook newsletter included an article that offered financial institutions  and fintech firms general guideposts for evaluating unfair and  deceptive practices and fair lending risk related to fintech, with a focus  on alternative data. Also, in 2016, a special edition of Consumer  Compliance Outlook focused on fintech, including summarizing  relevant federal laws, regulations, and guidance that may apply to  mobile payments, fintech lending, and digital wealth management.  For example, the newsletter listed laws and regulations related to  credit, privacy, and data security; anti-money laundering  requirements; and consumer and investor protection.", "In 2016, CFPB issued a final rule that will extend wide-ranging  protections to consumers holding prepaid accounts, including peer-to- peer payments and mobile wallets that can store funds. Also, in  2015, CFPB issued a set of nonbinding consumer protection  principles for new faster payment systems, which outline CFPB  expectations for payment services providers.", "In February 2017, SEC issued updated guidance on robo-advisers  that addresses the substance and presentation of disclosures  provided to clients on the robo-adviser and the investment advisory  services it offers, the obligation to obtain information from clients to  ensure that recommended investments are suitable, and the need to  implement effective compliance programs reasonably designed to  address the unique nature of providing automated advice. Similarly,  in March 2016, FINRA issued a report on effective practices related to  digital investment advice and reminded FINRA-registered broker- dealers of their obligations under FINRA rules.", "In 2013, FinCEN issued guidance that clarified the applicability of anti- money laundering and related regulations to participants in certain  virtual currency systems, and in 2014 FinCEN issued administrative  rulings that further clarified the types of market participants to which  the 2013 guidance applies.", "In October 2017, CFTC issued a report on virtual currencies that  explains that it considers virtual currencies to be commodities,  outlines related examples of permissible and prohibited activities, and  cautions investors and users on the potential risks of virtual  currencies.", "In July 2017, SEC issued a report on DLT token sales, which cautions  market participants that sales with certain characteristics may be  subject to the requirements of federal securities laws. In general,  the report uses one company\u2019s token sale as an example to illustrate  how SEC could consider a token sale to be a securities offering, and  why companies offering such products would have to register the  offering with SEC or qualify for an exemption. In August 2017, FINRA  also issued an investor alert on DLT token sales, which includes  questions for investors to ask before participating in such sales.", "In January 2017, FINRA issued a report on DLT uses more broadly,  which outlines key regulatory considerations for firms that want to use  DLT in equity, debt, and derivatives markets. For example, the  report outlines securities-related regulatory considerations for DLT  applications that could alter securities clearing arrangements, be used  for recordkeeping by broker-dealers, or change the equity or debt  trading process, among other things."], "subsections": []}, {"section_title": "Challenges Complying with Numerous State Regulatory Requirements", "paragraphs": ["As mentioned previously, although federal oversight applies to some  fintech firms, fintech payments and lending firms not subject to routine  federal oversight must typically obtain state licenses based on their  activities. Banks can choose to be chartered at the state level or as a  national bank, which generally exempts them from state licensing  requirements and examination. In contrast, fintech payment providers  operating as MSBs\u2014including those using DLT\u2014and fintech firms  offering consumer loans must typically hold licenses in each state in  which they operate. Similarly, as mentioned above, small robo-advisers  would generally have to be licensed in states in which they wish to  operate.", "State regulators and other market observers we interviewed told us that  they believe state regulation of fintech firms provides benefits. Several  market participants and observers said that states understand the needs  of their local economies, consumers, and market participants and can use  their authorities to craft tailored policy and regulation. For example, New  York regulators created a special license for virtual currency firms. New  York regulators told us that they did so because of New York\u2019s status as a  financial and innovation hub, as well as activities and concerns of virtual  currency firms operating within their jurisdiction. In addition, state  regulators may complement the federal oversight structure by dedicating  additional resources to helping educate fintech firms on regulatory  requirements and making sure that firms follow these requirements. For  example, two state regulators told us that they work closely with many  fintech start-ups to help educate them on regulatory requirements before  they apply for licenses or begin operations, and a state regulatory  association told us that fintech firms and state regulators often meet to  discuss regulatory concerns. Representatives of a state regulatory  association told us that federal agencies also rely increasingly on state  examinations to ensure compliance with anti-money laundering  requirements.", "Similarly, an industry association and state regulators told us that they  believe states are very responsive to consumer complaints. For example,  one state regulator told us that they investigate hundreds of consumer  complaints per month and believed they often resolved consumer  complaints more quickly than their federal consumer protection  counterparts, although CFPB staff told us that CFPB handles thousands  of complaints per month. California regulators also told us they have  initiated their own investigations into the extent to which fintech lenders  comply with state lending and securities laws, and risks that fintech  lenders may pose to consumers and to markets.", "However, complying with fragmented state licensing and reporting  requirements can be expensive and time-consuming for mobile payment  providers and fintech lenders. For example, stakeholders we interviewed  said that obtaining all state licenses generally costs fintech payments  firms and lenders $1 million to $30 million, including legal fees, state  bonds, and direct regulatory costs. Also, market participants and  observers told us that fintech firms may spend a lot of time on state  examinations because state exam requirements vary and numerous  states may examine a fintech firm in 1 year. For example, staff from a  state regulatory association said that states may examine fintech firms  subject to coordinated multistate exams 2 or 3 times per year, and as  many as 30 different state regulators per year may examine firms that are  subject to state-by-state exams.", "Although these challenges are not unique to fintech firms, they may be  more significant for fintech firms than for other MSBs and lenders. For  example, some MSBs and lenders operate in a limited geographic area  that can require them to be licensed by one state only. Other firms  operate in multiple states or nationwide, but may have started with a  license in one state and then obtained additional licenses and spread  these compliance costs as they grew over time. In contrast, fintech firms  are generally online-only businesses that likely seek to operate  nationwide from their inception, which immediately requires licenses in all  states and generates higher up-front compliance costs that may strain  limited venture capital funding. For example, one firm we interviewed that  funds fintech start-ups told us that one of their fintech firms spent half of  the venture capital funds it had raised obtaining state licenses. As a  result, some firms may choose not to operate in the United States. For  example, one DLT provider we interviewed told us that although they are  based in the United States, they operate abroad exclusively because  state licensing costs are prohibitively expensive.", "Bank partnerships and specialized operating charters offered by federal  and state banking regulators may help fintech firms more easily operate  nationwide by generally preempting state licensing requirements. For  example, some fintech payments firms and fintech lenders have chosen  to partner with nationally chartered and state-chartered banks, which  allows them to operate nationwide without having to obtain individual  state licenses. Also, two fintech lenders have applied for an Industrial  Loan Corporation (ILC) charter, an FDIC-supervised state banking  charter, which commercial firms other than regulated financial institutions  can obtain in certain states to operate nationally. Such ILCs would also  be overseen by FDIC if they obtain FDIC deposit insurance.", "In addition, in December 2016, OCC announced its intent to consider  applications for special-purpose national bank charters from fintech firms  such as lenders, which would allow such firms to operate nationally under  a single national bank charter if finalized. However, OCC officials we  interviewed told us that this special-purpose national bank charter is on  hold because they are still reviewing whether to go forward with the  proposal, and CSBS has filed a lawsuit against OCC challenging the  fintech charter. Some fintech lending firms and an industry association  representing payments firms have expressed interest in applying for this  special charter, but other stakeholders we interviewed told us that the  proposed fintech charter may not be a good option for small fintech firms  if the capital requirements are the same as those for banks.", "In addition, state regulators are taking steps to make it easier for fintech  firms seeking to operate across multiple states. For example, CSBS staff  we interviewed told us that states leverage the Nationwide Multistate  Licensing System\u2014which enables firms to submit one application with  information that fulfills most of the licensing requirements of each state  that participates in this system. Staff from CSBS, some fintech firms,  and an industry observer we interviewed said that although the multistate  licensing system has reduced administrative requirements somewhat,  firms still have to make additional filings to address certain requirements  unique to some states. In February 2018, seven state regulators also  agreed to standardize key elements of the MSB licensing process and  mutually accept licensing findings. Additionally, in 2013, state  regulators established the Multi-State MSB Examination Taskforce, which  coordinates and facilitates multistate supervision of MSBs.  CSBS staff  told us that multistate exams have made the state MSB exam process  more efficient for state regulators and MSBs.", "In May 2017, the CSBS also announced they would be expanding efforts  to modernize state regulation of fintech firms. For example, under this  initiative, officials we interviewed told us they plan to redesign their multistate licensing system to provide a more  streamlined licensing process for new applicants and shift state  resources to higher-risk cases by 2018; plan to harmonize multistate supervision by establishing model  approaches to key aspects of nonbank supervision, making  examinations more uniform, identifying and reporting violations at the  national level, and creating a common technology platform for  examinations by 2019; and have formed a fintech industry advisory panel\u2014with sub-groups on  payments, lending, and banking\u2014to identify licensing and regulatory  challenges."], "subsections": []}, {"section_title": "Challenges with Interagency Collaboration", "paragraphs": ["Although a few fintech market participants and observers we interviewed  told us that they thought regulatory collaboration on fintech was sufficient,  the majority of market participants and observers we interviewed who  commented on interagency collaboration said that it could generally be  improved. Some also cited additional areas in which better interagency  collaboration could facilitate innovation:", "Use of alternative data and modeling in fintech lending. Fintech  lenders may face challenges because agencies with authorities  related to consumer protection and fair lending have not issued  guidance on the use of alternative data and modeling. For example,  one fintech lender we interviewed told us that they discussed using  alternative data to assess creditworthiness with FDIC and FTC, but  they do not understand what each agency might consider to be an  unfair, deceptive, or abusive practice because the agencies have not  coordinated positions. Staff we interviewed from two consulting firms  that advise on fintech told us that lack of clarity or coordination on fair  lending and use of alternative data and modeling creates uncertainty  for fintech lenders. This has led some fintech lenders to forgo use of  alternative data for underwriting purposes since they do not know if it  will produce outcomes that violate fair lending laws and regulations.  However, FDIC staff told us that FDIC applies the same standards as  FTC in determining whether an act or practice is unfair or deceptive  and that existing guidance on fair lending applies broadly to traditional  and nontraditional modeling techniques and data sources.", "OCC special-purpose national bank charter. A few market  participants and observers we interviewed told us that fintech  payment providers and lenders may face challenges because OCC  has not sufficiently coordinated with the Federal Reserve and FDIC on  OCC\u2019s special-purpose national bank charter. Despite OCC  discussion with the Federal Reserve, the charter proposal does not  specify whether recipients could access the Federal Reserve  payments system. Federal Reserve officials have said that the  Federal Reserve will likely not take any policy positions or make any  legal interpretations about the proposed charter until OCC finalizes  the charter\u2019s terms and a firm applies for a charter. Officials have said  that this is their position because the potential policy and legal  interpretation issues that could arise related to membership and  access to Federal Reserve services will require a case-by-case, fact- specific inquiry unique to any firm that moves forward with an  application. One fintech lender we interviewed told us that obtaining  consistent and complete information from OCC and the Federal  Reserve on the specific rights this charter would grant a fintech lender  had been challenging, and that this lack of consistency and clarity  could discourage fintech firms from applying for the charter. However,  OCC staff we interviewed told us that the charter is not yet final and  that they facilitate communication between fintech firms that are  interested in the special charter and the Federal Reserve. Also, OCC  staff said that they briefed FDIC staff on the special charter, but will  coordinate further if appropriate.", "Differing regulatory interpretation of consumer protection  requirements. As discussed above, fintech firms may be subject to  CFPB oversight and limited federal financial regulatory oversight if  they also partner with financial institutions. In addition, FTC and CFPB  can also take enforcement actions against fintech firms not registered  or chartered as a bank for violations of any federal consumer  protection laws they enforce. Fintech firms we spoke with said that  this can cause challenges because firms are concerned that  regulators may have different interpretations of what conduct might  merit consumer protection enforcement actions, and a research and  consulting firm we interviewed that works with fintech start-ups told us  that this is one of the industry\u2019s biggest challenges. Similarly, the  potential for differing regulatory interpretation may limit the  effectiveness of agency efforts to innovate. For example, fintech firms  can apply for a CFPB No Action Letter, which is intended to reduce  regulatory uncertainty for financial products or services that promise  substantial consumer benefit but face uncertainty regarding consumer  protection requirements. However, some entities we spoke with said  that few firms have applied, in part because a letter provided by CFPB  may not preclude prudential regulators or FTC from taking  enforcement actions in cases where they have jurisdiction.", "Although stakeholders indicated that agencies could improve interagency  collaboration on other fintech issues, federal agencies said that they  already collaborate through a variety of informal and formal channels at  the domestic and international levels. Domestically, in addition to informal  discussions and participation in fintech events hosted by other agencies,  some agencies have coordinated examinations of third-party service  providers and enforcement actions. For example, in 2014 and 2015,  CFPB, FCC, FTC, and state regulators coordinated on enforcement  actions related to unauthorized mobile carrier billing charges. Also, U.S.  agencies have had informal discussions regarding fintech with their  foreign counterparts. For example, Treasury staff have discussed  regulations designed to counter money laundering and terrorist financing  with officials from countries such as France and the United Kingdom. In  addition, federal agencies have begun to collaborate on fintech regulatory  issues through formal interagency working groups that are primarily  concerned with other financial regulatory issues. For example, at the  domestic level, U.S. prudential regulators have discussed issues related  to potential risks of fintech lending and DLT through the Financial Stability  Oversight Council. At the international level, the Federal Reserve  represents the United States at the Bank for International Settlements,  which has published papers on fintech topics including payments, fintech  lending, and DLT. For more information on these efforts and others, see  appendix II.", "Further, federal agencies said that they have recently organized the  following interagency collaborative groups dedicated to fintech, as  detailed in appendix II:  In March 2017, the Federal Reserve convened the Interagency  Fintech Discussion Forum, an informal group which meets  approximately every 4 to 6 weeks and aims to facilitate information  sharing among consumer compliance staff from the federal banking  regulators on fintech consumer protection issues and supervisory  outcomes. Discussion topics have included account aggregation,  alternative data and modeling techniques, and third-party oversight.", "In 2016, Treasury created the Interagency Working Group on  Marketplace Lending, which was active over the course of fiscal year  2016, meeting 3 times. This group shared information among  industry participants and public interest groups, and discussed issues  from a Treasury report on benefits and risks associated with online  marketplace lending.", "In 2010, the Federal Reserve Banks of Atlanta and Boston created  the Mobile Payments Industry Workgroup to facilitate discussions  among industry stakeholders about how a successful mobile  payments system could evolve in the United States. This group also  functions as an interagency collaboration mechanism through biennial  meetings between industry stakeholders and relevant regulators that  update industry on regulatory concerns, identify potential regulatory  gaps, and educate regulators on mobile payment technologies.", "However, we found that these groups do not include all relevant  participants. For example, NCUA was not included in the Interagency  Fintech Discussion Forum or the Interagency Working Group on  Marketplace Lending, and FCC has not participated in the biennial  regulator meetings of the Mobile Payments Industry Workgroup since  2012. Federal Reserve staff said that they did not include NCUA in the  Interagency Fintech Discussion Forum because NCUA is not a bank  regulator. Treasury staff noted that staff who could explain why NCUA  had not been invited to participate in the Interagency Working Group on  Marketplace Lending were no longer with the agency. Similarly, FCC staff  could not recall why they had not participated in recent biennial regulator  meetings of the Mobile Payments Industry Workgroup.", "However, NCUA has experiences and perspectives that would make it a  relevant participant in the Interagency Fintech Discussion Forum, and  NCUA officials said that they would participate in these interagency  efforts if invited. NCUA would be a relevant participant because, although  it does not oversee banks, it oversees credit unions that have entered into  partnerships with fintech lenders and virtual currency exchanges, and  could enter into partnerships with other fintech firms. Similar to fintech  partnerships with banks, these partnerships could create risks related to  safety and soundness and consumer protection. Further, NCUA\u2019s 2018\u2013 2022 draft strategic plan includes fintech as a key risk to the credit union  system because fintech could provide a competitive challenge to credit  unions or take advantage of differences in how credit unions and fintech  firms are regulated, among other things.", "Likewise, as Federal Reserve staff have acknowledged, FCC could be a  relevant participant in biennial regulators meetings of the Mobile  Payments Industry Workgroup because FCC could share valuable insight  on regulatory concerns related to mobile device security with other  regulators and industry participants. Specifically, FCC has facilitated and  encouraged industry efforts to improve security of mobile devices, on  which consumers make fintech payments, and has conducted related  consumer education efforts. FCC staff said they would consider  participating in future biennial regulator meetings of the Mobile Payments  Industry Workgroup if the topics discussed aligned with FCC\u2019s work on  mobile device security.", "Our past work has identified key practices relating to collaborative  mechanisms among agencies that increase their effectiveness, such as  including participants with the appropriate knowledge, skills, and  abilities. In addition, these key practices also state that an interagency  group should continue to reach out to potential participants who may have  a shared interest in order to ensure that opportunities for achieving  outcomes are not missed.", "However, we found that interagency collaborative efforts dedicated to  fintech issues were not fully leveraging relevant agency expertise. Lack of  NCUA participation in the Interagency Fintech Discussion Forum may  preclude NCUA and the other participating agencies from sharing  information that could be useful in efforts to oversee the risks that fintech  poses to their regulated institutions. Similarly, lack of FCC participation in  the biennial regulators meetings of the Mobile Payments Industry  Workgroup could preclude industry participants from receiving updates on  FCC regulatory concerns related to mobile device security and could  preclude FCC from learning about new risks that fintech payments  products pose to mobile device security.", "Furthermore, OCC and international bodies have identified fintech as an  area where collaboration among agencies can be helpful. For example,  OCC has stated that collaboration among supervisors can promote a  common understanding and consistent application of laws, regulations,  and guidance through steps such as establishing regular channels of  communication. At the international level, the Bank for International  Settlements has recommended that bank supervisors in jurisdictions  where responsibilities related to fintech are fragmented among a number  of regulators with overlapping authorities should collaborate with other  relevant agencies to develop standards and regulatory oversight for  fintech, as appropriate. Similarly, the Financial Stability Board has  suggested that responsible agencies further open lines of communication  to address cross-cutting fintech issues."], "subsections": []}, {"section_title": "Industry Disagreements on Aggregation of Consumer Financial Account Information Create the Need for Stronger Collaboration", "paragraphs": ["Among other consumer protection issues related to financial account  aggregation, market participants do not agree about whether consumers  using account aggregators will be reimbursed if they experience  fraudulent losses in their financial accounts. While some account  aggregators negotiate contracts with the financial institutions that hold the  consumer accounts that are being aggregated, other account aggregators  have no relationship with the financial institutions holding the consumer  accounts that they access on behalf of those consumers. Officials from at  least one large bank have made public statements that they may not  reimburse losses from consumer accounts if the consumer provided his  or her account credentials to an account aggregator and fraudulent  activity subsequently occurs in the consumer\u2019s account. In contrast, some  account aggregators and consumer protection groups have argued that  consumer protection law establishes that banks retain the obligation to  reimburse losses due to transactions not authorized by the consumers.", "To date, CFPB and the Federal Reserve have taken varying public  positions on this disagreement among market participants, and some  regulators told us that they have held related discussions with market  participants and observers. In October 2017, CFPB issued principles for  consumer-authorized financial data sharing and aggregation that stated  that consumers should have reasonable and practical means to dispute  and resolve instances of unauthorized transactions. However, CFPB\u2019s  principles are not binding and federal financial regulators have not issued  guidance or rules to clarify this issue. As previously mentioned, CFPB  also issued a request for information studying these topics to various  industry members, observers, and consumers in November 2016. A  member of the Board of Governors of the Federal Reserve System has  publicly stated that industry stakeholders will need to come to agreement  on which party bears responsibility for unauthorized transactions. Also,  Federal Reserve staff told us that some financial institutions and account  aggregators are negotiating contractual arrangements that could address  this issue on a case-by-case basis. In addition, staff from FDIC, the  Federal Reserve, and OCC said that they have discussed related issues  with market participants and observers.", "The financial regulators have recently begun to hold collaborative  information sharing discussions on consumer compliance issues  surrounding financial account aggregation, but this collaboration has not  resulted in any coordinated public outcomes on the issues. In May 2017,  the federal financial regulators\u2014CFPB, the Federal Reserve, FDIC,  NCUA, and OCC\u2014and representatives of state financial regulators began  to share information on account aggregation and related consumer  compliance issues through the Federal Financial Institutions Examination  Council (FFIEC) Task Force on Supervision and the FFIEC Task Force  on Consumer Compliance. The regulators are collaborating through  FFIEC because they acknowledge that account aggregation issues cross  agency jurisdictions. According to participating agency officials, FFIEC  discussions have covered responsibilities for consumer reimbursement  due to fraudulent charges and access to consumer data, generated an  internal paper on consumer compliance issues, and previewed CFPB\u2019s  principles for consumer-authorized financial data sharing and aggregation  prior to publication. However, as of November 2017, these efforts have  not generated public outcomes to guide market participants.", "The federal financial regulators\u2019 missions include ensuring that  consumers are protected. CFPB\u2019s primary mission is to protect  consumers in the financial marketplace, including ensuring that markets  for consumer financial products and services operate transparently and  efficiently to facilitate access and innovation. Similarly, according to their  mission and vision statements, the banking and credit union regulators  help protect consumer rights by supervising financial institutions to help  ensure compliance with consumer protections.", "However, some of the regulators told us that they have not taken more  steps to resolve the disagreements surrounding financial account  aggregation because they are concerned over acting too quickly. For  example, Federal Reserve staff we interviewed told us that premature  regulatory action could be detrimental to the negotiations between  individual financial institutions and financial account aggregators.  Similarly, OCC staff we interviewed told us that OCC staff does not  recommend publishing guidance or rules while the account aggregation  industry is evolving because regulation should not constantly change.  Nonetheless, the financial regulators could take additional steps to  address these issues without prematurely issuing rules or regulations.  Further, the FFIEC IT Examination Handbook on e-Banking\u2019s appendix  on aggregation services, which the financial regulators use in their  examinations of banks, indicates that the financial regulators have been  aware since at least 2003 that regulatory requirements related to  consumer protection responsibilities of financial account aggregators are  not clear.", "Incorporating leading practices on collaboration could strengthen the  efforts that regulators are making to address financial account  aggregation issues. As discussed previously, our prior work has  developed interagency collaboration principles that make efforts among  agencies more likely to be effective. These principles find that  collaborative efforts should define the short-term and long-term outcomes  that the collaboration is seeking to achieve and clarify the roles and  responsibilities of the participating agencies, among other things.  Although banking regulators and CFPB have discussed issues related to  account aggregation within FFIEC, these discussions have not yet  defined outcomes or produced any public outcomes to help guide fintech  firms and traditional financial institutions which could help lead to market- based solutions, or defined agency roles and responsibilities. In addition,  market participants, CSBS staff, and a member of the Board of Governors  of the Federal Reserve System have said that additional collaboration on  financial account aggregation issues\u2014including reimbursement for  unauthorized transactions\u2014would be beneficial. Similarly, in its 2017  annual report, the Financial Stability Oversight Council encouraged  financial regulators to monitor how fintech products affect consumers and  regulated entities and to coordinate regulatory approaches, as  appropriate.", "Acting collaboratively to help address consumer compliance issues  related to financial account aggregation could help financial regulators  better meet their consumer protection missions. Improved collaboration  could help regulators and market participants resolve disagreements over  account aggregation and related consumer compliance issues more  quickly and in a manner that balances the competing interests involved.  Taking steps now, while the discussion on financial account aggregation  is in its relatively early stages, could help federal regulators better  address these needs over the long term. Until regulators coordinate and  assist the industry in clarifying and balancing the valid interests on both  sides, consumers could have to choose between facing potential losses  or not using what they may find to be an otherwise valuable financial  service, and fintech firms providing useful services to consumers will face  barriers to providing their offerings more broadly."], "subsections": []}, {"section_title": "Challenges Involving Fintech Partnerships with Banks", "paragraphs": ["Partnerships between fintech firms and financial institutions are  increasingly common because such partnerships offer benefits to both  parties involved. According to literature we reviewed and market  participants and observers we interviewed, the benefits to banks can  include the ability to meet consumer demand by providing their customers  with access to innovative products that provide good user experiences  without having to dedicate extensive internal time or resources. Market  observers and Federal Reserve staff we interviewed told us that this  benefit may be particularly important for small banks and credit unions,  which have fewer staff and fewer financial resources for research and  development. Similarly, the benefits to fintech firms can include access to  banking services and networks, customer acquisition, and assistance with  regulatory compliance. Some fintech firms enter contractual agreements  to partner with banks through white-labeling, a type of partnership where  the bank markets the fintech firm\u2019s product as its own when soliciting  customers. Other fintech firms enter contractual partnerships with banks  as stand-alone third-party relationships. For example, some fintech  lenders make loans to customers and partner with a bank that originates  or purchases loans sourced through the fintech lender.", "However, because banks are liable for risks posed by third parties as  discussed above, fintech firms may face delays in entering into  partnerships with banks. Financial regulators have issued guidance on  risk management for financial institutions\u2019 relationships with third  parties. Among other things, this guidance explains that financial  institutions are expected to conduct proper due diligence in selecting  partners and to monitor the activities conducted by third parties for  compliance with relevant laws, rules, and regulations, considering areas  such as consumer protection, anti-money laundering/counter-terrorist  financing, and security and privacy requirements. Banks, fintech firms,  and market observers we interviewed told us that banks may interpret this  guidance conservatively. Large banks may also spend significant time  conducting due diligence on the practices and controls in place at the  fintech firms seeking to partner with them in order to prevent unnecessary  compliance or operational risks, while a banking association told us that  small banks with fewer resources to dedicate to due diligence may be  unwilling to risk partnering with fintech firms. Banks, fintech firms, and  market observers we interviewed told us that bank due diligence can also  lead to lengthy delays in establishing partnerships, which can put fintech  firms at risk of going out of business if they do not have sufficient funding  and are not able to access new customers through a bank partner. For  example, officials we interviewed from one bank told us that it takes about  18 months to launch a partnership with a fintech firm, and acknowledged  that this is too slow to align with venture capital funding cycles that many  fintech providers rely upon."], "subsections": []}]}, {"section_title": "Consideration of Regulatory Approaches Abroad Could Benefit Fintech Regulation and Innovation", "paragraphs": ["Regulators abroad have addressed the emergence of financial innovation  through various means, including establishing innovation offices;  establishing mechanisms for allowing fintech firms to conduct trial  operations; holding innovation competitions; providing funding for firms  through business accelerators; and using various methods to coordinate  with other regulators domestically and internationally. While certain U.S.  regulators have adopted similar efforts, further adoption of these  approaches by U.S. regulators could facilitate interactions between  regulators and fintech firms and improve regulators\u2019 knowledge of fintech  products. However, some initiatives may not be appropriate for the U.S.  regulatory structure. For example, adopting certain initiatives could raise  concerns about U.S. agencies picking winners, in which firms that  participate in these programs may be better positioned to succeed than  other firms. Further, particular initiatives may not align with agencies\u2019  legal authorities or missions."], "subsections": [{"section_title": "Regulators in the U.S. and Abroad Have Developed Approaches to Improve Interaction with Firms and Help Them Identify Applicable Regulatory Requirements", "paragraphs": ["Citing the complexity of the U.S. financial regulatory system, fintech firms  and industry observers noted having difficulty identifying which  regulations they were subject to or which regulators would oversee their  activities. Further, one fintech firm noted that when they were able to  identify their regulators, they had difficulty finding a point of contact at the  regulators. Officials from three regulators that we interviewed also noted  that they had been contacted by fintech firms that were confused about  their regulatory status and did not fall under the agency\u2019s regulatory  authority, but were subject to oversight by other regulators.", "Regulators in the U.S. and abroad have taken steps to better facilitate  interactions with fintech firms, including by establishing innovation offices  with dedicated staff to serve as a front door for start-up firms or  innovators to find information on regulation and to contact the agency.  These innovation offices generally maintain a webpage hosted on the  agencies\u2019 websites, a dedicated e-mail address, or dedicated staff.  Through these innovation offices, some agencies offer services including  office hours during which regulatory staff are available to meet and  provide informal guidance. For example, CFPB officials said that, as of  August 2017, they had met with approximately 115 companies in four  such events in New York and San Francisco, under the agency\u2019s Project  Catalyst. Similarly, OCC officials noted that through their Office of  Innovation, they have been able to answer regulatory questions for  fintech firms and connect firms to relevant OCC offices. Since the launch  of LabCFTC, CFTC\u2019s innovation office, in May 2017, CFTC officials have  met with more than 100 entities through office hour sessions in New York,  Chicago, and Washington, D.C.", "In addition to office hours, several regulators have held fintech events  through their innovation offices. For example, FTC has held three fintech  forum events comprising panel discussions with industry experts,  covering topics such as marketplace lending and distributed ledger  technology. Several regulators have also issued publications on various  fintech topics, which are posted to the dedicated webpages for those  agencies with innovation offices.", "Some regulators from other jurisdictions also facilitated regular interaction  with firms through their innovation offices. For example, through its  Innovation Hub, the United Kingdom\u2019s (UK) Financial Conduct Authority  offers informal regulatory guidance to individual firms directly and through  posted publications; operates its regulatory sandbox, described below;  and engages with industry participants through various events. Similarly,  through a program called Looking Glass, the Monetary Authority of  Singapore offers fintech firms training and consultation on regulation and  provides a space for fintech firms to give product demonstrations to  regulators and banks. Regulators and fintech firms we interviewed abroad  said that these innovation offices have helped firms better understand  their regulatory obligations and help regulators identify and address risks  early. For example, representatives of a robo-adviser firm we interviewed  in Hong Kong said that their interactions with the Hong Kong Securities  and Futures Commission\u2019s innovation office\u2014known as the Fintech  Contact Point\u2014made identifying and obtaining guidance from the  appropriate regulatory officials easier, which helped the firm more  efficiently develop a product compliant with applicable regulations.", "Some fintech firms and industry observers stated that U.S. regulators\u2019  innovation offices have helped fintech firms by offering a point of contact  for new entrants in the industry. Additionally, in a 2009 report, we created  a framework that identified characteristics of an effective financial  regulatory system. One of the characteristics was that regulators  should oversee new products as they come onto the market to take action  as needed to protect consumers and investors, without unnecessarily  hindering innovation. Figure 5 summarizes efforts that we reviewed by  regulators in the U.S. and abroad to implement initiatives to improve  interactions with fintech firms.", "However, FDIC and NCUA have not established innovation offices for  various reasons. For example, FDIC staff said that, although the agency  has not formally evaluated establishing an innovation office, they have  met with fintech firms to discuss deposit insurance applications.  Associated with the deposit application process, the agency has  established central points of contact for all interested parties, not only  fintech firms. NCUA said that its lack of legal authority over third-party  service providers limited the usefulness of an innovation office, since  fintech providers are often third-party service providers. However, by not  dedicating specific staff, as occurs with the establishment of an innovation  office, these regulators could be less able to interact with fintech firms in  their sectors and fintech firms that partner with their regulated entities.  Other regulators who, similar to FDIC and NCUA, generally do not directly  oversee third-party providers, though they may have such authority, have  noted benefits from establishing innovation offices. For example, OCC,  which has a similar mission to these two regulators, has formed such an  office and OCC staff said that the agency has benefited by learning about  industry trends involving fintech and by improving interactions with fintech  firms and banks. Similarly, Federal Reserve officials we interviewed said  that efforts through its innovation office have helped staff better  understand fintech issues and have particularly helped its examiners  better understand banks that partner with fintech companies.  Consideration of establishing innovation offices, as many U.S. regulators  have recently done, could help FDIC and NCUA better enable new firms  to become familiar with regulatory requirements and could better facilitate  interaction between the agencies and fintech service providers."], "subsections": []}, {"section_title": "Regulators Abroad Use Various Approaches to Learn about and Enable Development of New Fintech Products, and U.S. Regulators Could Consider Taking Similar Steps", "paragraphs": ["Internationally, some regulators have taken various approaches that help  educate their staff on emerging products and help innovators develop  products in limited-risk environments (see fig. 6). Based on interviews  with regulators and firms abroad and a literature review, initiatives that we  studied include regulatory sandboxes, proofs-of-concepts, innovation  competitions or awards, and agency-led accelerators. Regulatory  sandboxes that we studied were agency-led programs that allow firms to  test innovative products; services; business models; or delivery  mechanisms in a live environment, subject to agreed-upon testing  parameters. The proofs of concept that we reviewed were similar to  sandboxes, but for these programs regulators issued a request for  proposals to industry to develop a product that is conceptual; that is, an  idea for a product that is not yet on the market. In the fintech competitions  that we studied, regulators invited firms to develop solutions to problem  statements drafted by agencies or financial institutions. Accelerators that  we reviewed provided funding; access to regulators and mentors;  connections to outside funding sources; potential clients; and working  space to fintech firms and start-ups.", "One approach regulators abroad were using to learn about fintech  activities was regulatory sandboxes. While a few U.S. regulators have  undertaken efforts that are similar to regulatory sandboxes, most have  not. Two regulators that we interviewed stated that tools already exist,  such as the comment process, to fulfill the role of a sandbox by helping  them better understand innovation and assist in the development of rules  and guidance. However, other U.S. regulators said that creating  regulatory sandboxes by using tools such as No Action Letters could  benefit regulators and firms. Based on our analysis of selected  jurisdictions\u2019 efforts, regulatory sandbox programs generally may include  the following elements:  firms apply to participate;  firms and regulators agree on the parameters of how products or  services will be tested, such as the number of consumers or  transactions included in the test, the required product disclosures, or  the time frame of the test;  firms secure the appropriate licenses, if applicable; and  firms and regulators interact regularly.", "In some cases, the sandbox may include limited regulatory relief. For  example, UK regulators we interviewed noted that they can waive or  modify a rule, issue a \u201cno enforcement action\u201d letter, or provide a  restricted license for a firm participating in the sandbox. However, these  tools are used on a case-by-case basis for the duration of the sandbox  test, are not used for every participating firm, and would not limit any  consumer protections. Further, UK regulators we interviewed said that  while waiving or modifying rules is possible, they are only used on an  exceptional basis. Similarly, Singapore regulators said that they can relax  specific legal and regulatory requirements, such as capital requirements,  on a case-by-case basis for firms while they are participating in the  sandbox. Also, Hong Kong regulators allow firms to operate without full  regulatory compliance for the limited product offerings within the sandbox.  Similar to UK and Singapore regulators, Hong Kong regulators we  interviewed said that they have put safeguards in place to protect  consumers from and manage the risk of the regulatory relief. For a more  detailed description of the Hong Kong, Singapore, and UK sandboxes,  see appendix III.", "Regulators and market participants we interviewed abroad said that these  fintech sandboxes have helped regulators better understand products and  more effectively determine appropriate regulatory approaches while  limiting the risk that the failure of a fintech firm could pose to consumers.  Some participating firms we interviewed told us they benefited by being  able to test products with customers, make changes to their business  model, and understand how their products would be regulated. Moreover,  two participating firms and a regulator we interviewed said that firms are  able to introduce their products to the market more quickly because they  are able to test their products in the market while becoming compliant  with laws and regulations. One fintech firm that participated in the UK  sandbox pointed out that the UK regulators better understood their firm\u2019s  technology and business model because of interactions in the sandbox.  For example, although the company and regulatory officials had  previously disagreed on whether the firm\u2019s product needed to be  regulated, after gaining a better understanding of the company\u2019s business  model through interactions in the sandbox, the regulatory officials agreed  that the product did not require regulatory oversight. Similarly, Singapore  regulators we interviewed noted that their sandbox provides them a  hands-on approach to learning about new technologies and how the  technologies align with regulatory requirements.", "Some U.S. regulators have programs that share some characteristics with  sandboxes. As shown in figure 6, CFPB, SEC, and CFTC have issued No  Action Letters in which agency staff state that they do not intend to  recommend certain regulatory action against the firms if they offer the  products in the way described in a request letter to the regulator. The  issuance of such letters could assist fintech firms in cases in which the  applicability of existing regulations to their product is unclear. However,  similar to sandboxes abroad, CFPB officials stated that No Action Letters  do not provide safe harbor for companies taking actions that are clearly  not allowed under U.S. consumer regulations. As of March 6, 2018, CFPB  had issued one No Action Letter to Upstart Network, a company that uses  alternative data to assess creditworthiness and underwrite loans. As a  condition of the No Action Letter, Upstart will regularly report lending and  compliance information to CFPB to mitigate risk to consumers and inform  CFPB about the impact of alternative data on lending decisions.", "In addition, CFPB officials we interviewed said that they can use a similar  tool known as trial disclosure waivers, which allow industry participants to  seek CFPB approval to test an innovative disclosure or way of delivering  a disclosure to consumers that includes a safe harbor provision during  which the industry participant may be exempted from statutory or  regulatory requirements. As of March 6, 2018, CFPB had not issued  any trial disclosure waivers.", "Through its Project Catalyst, CFPB has also established a research pilot  program where it collaborates with firms that are testing innovative  products to understand consumer use and policy implications of  innovative products. CFPB officials said that research pilots have similar  elements to sandboxes, including participant application, agreement of  testing parameters, and regular meetings between CFPB and the participating firm. Four firms have concluded research pilots with CFPB  and three other firms are currently participating in pilots. Similarly, OCC  officials said that they are considering developing a pilot program, which  will allow banks or fintech firms partnering with banks to test innovative  products with the involvement and interaction of OCC staff. OCC officials  said that they have not set a date for determining whether to go forward  or implement the program."], "subsections": [{"section_title": "Proofs of Concept", "paragraphs": ["Another approach regulators abroad were using to learn about fintech  activities was establishing proofs of concept. The proofs of concept that  we studied are similar to sandboxes in that the regulator has regular  interaction with the company to better understand the product or  technology, but the product is not introduced into the market during the  proof of concept period. For example, the Bank of England, through its  Accelerator program, uses proofs of concept to have firms develop  technology that can help the agency improve its operations, according to  agency officials. The Hong Kong Monetary Authority, which, among other  things, regulates banks in its jurisdiction, uses proofs of concept to allow  industry participants to develop products that are conceptual and not  ready for market implementation. A firm we interviewed that participated  in a proof of concept with Hong Kong Monetary Authority said that it  offered the regulator the opportunity to gain a working understanding of  the technology, while providing a test environment for the company to  tailor the technology to adhere to regulatory requirements.", "CFTC officials noted that they are exploring the ability to conduct proofs  of concept through LabCFTC. CFTC officials noted that the agency would  be well positioned to conduct proofs of concept because they already  collect large amounts of market data that could potentially be leveraged  for such projects. However, CFTC officials expressed concerns that  receiving services as part of proofs of concept may violate gift or  procurement laws. The Federal Reserve Bank of Boston participates in  a collaborative effort called Hyperledger, which serves a similar purpose  as a proof of concept for the Federal Reserve Bank. Hyperledger is a  collaborative effort involving public and private entities created to advance the use of blockchain technologies across various sectors. As observers  in the Hyperledger, Federal Reserve Bank staff have gained hands-on  experience with blockchain technology by experimenting with uses of the  technology. None of the other regulators with whom we spoke said that  they planned to conduct proofs of concept."], "subsections": []}, {"section_title": "Innovation Competitions or Awards", "paragraphs": ["Another approach used by regulators abroad for learning about fintech  activities was establishing fintech competitions or awards to encourage  financial innovation. Winning firms receive recognition, contracts, or cash  prizes. For example, the Monetary Authority of Singapore operated an  international competition called Hackcelerator to crowdsource innovative  solutions to problems that Singaporean financial institutions identified,  including insurance, customer identification, and data analytics, according  to officials. Singapore regulators have also established FinTech Awards,  which provide ex-post recognition to FinTech solutions that have been  implemented. CFTC officials said that they are seeking public input to  establish prize competitions and intend to launch such competitions in  2018. FTC officials said that in 2017, the agency challenged participants  to create a technical solution, or tools, that consumers could use to guard  against security vulnerabilities in software found on the Internet of Things  devices in their homes. FINRA staff noted that the agency holds  internal innovation competitions, called CREATEathons, in which FINRA  staff compete to develop solutions to various problems identified internally  by staff. While external parties do not participate in these competitions,  teams can consult with firms. Some U.S. regulators pointed out that while  some regulators abroad are mandated to promote competition, no such  mandate exists among most U.S. financial regulators."], "subsections": []}, {"section_title": "Agency-led Incubator or Accelerator", "paragraphs": ["Two governments we studied abroad were also learning about fintech by  establishing incubators or accelerators to encourage the development of  a country\u2019s fintech industry and talent pool. The accelerators provide  funding, access to regulators and mentors, connections to outside funding sources, potential clients, and working space to fintech firms and start- ups. For example, officials we interviewed from SG Innovate, Singapore\u2019s  government led accelerator, said that the agency helps Singaporean  businesses expand overseas, bring companies to Singapore, and  connect start-ups to regulators and funding, among other things. None of  the U.S. regulators we interviewed said that they planned to establish  such accelerator programs. Regulators from the U.S. and abroad pointed  out that the U.S. fintech industry is more developed than those of other  jurisdictions with many fintech firms, large talent pools, and significant  amounts of private funding or privately run accelerators.", "Regulators and market participants we interviewed abroad said that these  knowledge-building initiatives have helped regulators learn about new  products and business models and have allowed firms to test products.  Although CFTC and SEC can issue No Action Letters, those agencies  have not adopted other approaches similar to these knowledge-building  initiatives described above. Further, FDIC, the Federal Reserve, and  NCUA have not adopted any of these approaches. U.S. regulators said  that these initiatives could raise concerns about favoring certain  competitors over others and also noted that they may not have the  authority to initiate these programs. However, despite similar potential  constraints with regard to competition and authority limitations, CFPB and  OCC have formally evaluated undertaking relevant knowledge-building  initiatives, through conversations with regulators abroad, general  research, and documentation of their efforts; and they have begun  developing similar approaches, according to agency officials.", "A characteristic of an effective financial regulatory system we identified in  our 2009 framework was that a regulatory system should be flexible and  forward looking, which would allow regulators to readily adapt to market  innovations and changes. Consideration by U.S. regulators of adopting  approaches taken by regulators abroad, where appropriate, could result  in the implementation of initiatives that help improve their overall ability to  oversee fintech and how it affects the entities they currently regulate.  While constraints may limit the ability or willingness of regulators to fully  adopt these practices, opportunities exist to assess ways to tailor them to  the U.S context."], "subsections": []}]}, {"section_title": "Regulators in the U.S. and Abroad Have Adopted Approaches to Facilitate Coordination on Financial Innovation", "paragraphs": ["Regulatory coordination is less of an issue for regulators abroad because  most jurisdictions have fewer financial regulators. For example, the UK  has 3 agencies involved in financial regulation, Singapore has 1 financial  regulator, and Hong Kong has 4 financial regulators, compared to the 10  federal agencies involved in the regulation of fintech in some capacity in  the United States. However, regulators abroad have undertaken efforts to  bolster coordination among domestic regulators\u2014as applicable\u2014as well  as regulators abroad and industry representatives (see fig. 7). These  collaborative efforts include advisory councils and steering committees  dedicated to fintech issues; and fintech-specific cooperation agreements.", "In the jurisdictions we examined, two agencies have established fintech  advisory councils or steering committees of industry participants and  government officials. Fintech advisory councils and steering committees  may provide a valuable connection to industry, through which U.S.  regulators could gain insight into industry developments. For example, the  Hong Kong securities regulator has established an advisory council  comprised of members with knowledge and experience of various parts of  Hong Kong\u2019s fintech industry. Officials of this agency told us that the  advisory council provides valuable market data, a forum that offers firms a  preliminary check for interpretation of their rules and updates on  emerging issues. Advisory council members said that the council gives  this regulator a cross-functional perspective from industry experts and  enables the agency to learn about emerging issues and related regulatory  challenges early in their development.", "Selected U.S. regulators have established formal advisory committees  dedicated to fintech issues, as shown in figure 7.", "FINRA has established a Fintech Industry Committee through which  FINRA member and nonmember firms are provided a platform for  ongoing dialogue and analysis of fintech developments related to  FINRA\u2019s purview. FINRA officials said that the agency has also  established the FinTech Advisory Group, a forum to identify and  prioritize FinTech topics and coordinate appropriate regulatory  approaches with key stakeholders.", "CFTC staff noted that the agency restarted its Technology Advisory  Committee in late 2017 to explore a range of fintech topics and  augment the work of LabCFTC.", "FDIC officials noted that the agency has a Fintech Steering  Committee, which aims to help FDIC understand fintech  developments by identifying, discussing, and monitoring fintech trends  through reports from the staff working groups that the steering  committee has established. The Fintech Steering Committee had not  made any formal recommendations as of March 13, 2018.", "As previously mentioned, U.S regulators we interviewed said that they  have coordinated with other regulators and industry through various  mechanisms, as the following examples illustrate. (For additional  information on interagency collaborative efforts, see app. II).", "The Federal Reserve has coordinated with relevant industry  participants and other regulators including CFPB, FDIC, FTC, NCUA,  OCC, Treasury, and CSBS through its Mobile Payments Industry  Working Group and its Faster Payments Task Force.", "FTC solicits insight from industry participants, observers, and  regulators through its fintech forums.", "Regulators have also coordinated with each other through domestic  and international interagency financial regulatory bodies, as well as a  recently organized interagency collaborative group dedicated to  fintech, the prudential regulators\u2019 Interagency Fintech Discussion  Forum."], "subsections": [{"section_title": "Cooperation Agreements", "paragraphs": ["Some regulators abroad have cooperation agreements with other  regulators abroad to share information and to help fintech firms begin  operations in other jurisdictions. For example, Singapore regulatory staff  told us that the regulator has 16 such agreements with entities from 15  regions that typically consist of (1) referrals to regulatory counterparts for  firms attempting to operate in a new country, (2) guidance to firms on  regulation in the firm\u2019s new country of operation, and (3) information  exchange among regulators and between regulators and fintech firms. UK  regulators said that these agreements outline how the agencies in each  country pledge to assist each other\u2019s fintech firms seeking to operate in  their country with business-to-business contacts, office space, and other  assistance. For example, regulators can discuss trends related to their  authorities and share information on fintech firms seeking to expand  operations in the other country. A fintech firm we interviewed said that  because much financial innovation is international in scope, sharing  information across borders with cooperation agreements is important for  regulators to understand the new technologies and to be responsive to  risks. On February 19, 2018, CFTC and UK Financial Conduct Authority  signed a cooperation agreement, which, according to CFTC officials, will  focus on information sharing and facilitate referrals of fintech companies  interested in entering the other regulator\u2019s market. None of the other U.S.  regulators that we interviewed had fintech-specific cooperation  agreements with regulators abroad. Most of them said that existing  memoranda of understanding were sufficient to facilitate information  sharing. One regulator we interviewed abroad noted that establishing  fintech-specific cooperation agreements with U.S. regulators is difficult  because no direct regulatory counterpart exists since the U.S. financial  regulatory structure is significantly different from those of other  jurisdictions."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The emergence of various fintech products has produced benefits to  consumers and others. Fintech products often pose risks to those of  traditional financial products, although in some cases fintech products  pose additional risks. While existing consumer protection and other laws  apply to some fintech products and services, in some cases fintech  transactions may not be covered by such protections. The extent to which  the activities of fintech providers are subject to routine federal oversight  varies, but fintech firms not overseen by a federal body generally are  subject to oversight by state regulators. While limited evidence of  widespread problems has surfaced to date, as the prevalence of fintech  products grows, risks posed by segments of the industry that regulators  do not routinely examine could correspondingly grow. Therefore, efforts  regulators by regulators to monitor developments and risks posed by  these firms and their financial innovations remains a sound approach.", "With fintech products spanning across financial sectors and jurisdictions  of the numerous U.S. regulatory bodies, many parties have called for  improved regulatory coordination. While regulators have taken steps to  collaborate, opportunities remain to improve collaboration in line with  GAO\u2019s leading practices. For example, the Interagency Fintech  Discussion Forum and the biennial meetings of the Federal Reserve  Mobile Payments Industry Workgroup do not include NCUA and FCC,  respectively, agencies that could add valuable perspectives. Without  these agencies, these efforts are not fully leveraging relevant agency  expertise, and NCUA and FCC may be precluded from learning about  risks that are relevant to their authorities.", "Among other consumer protection issues related to financial account  aggregation, market participants do not agree about whether consumers  using account aggregators will be reimbursed if they experience  fraudulent losses in their financial accounts. Until regulators coordinate  and assist the industry in clarifying and balancing the valid interests of  consumers, financial account aggregators, and financial institutions,  consumers could have to choose between facing potential losses or not  using what they may find to be an otherwise valuable financial service.  Although regulators have been reluctant to act too quickly in light of  related industry efforts, they could increase collaboration to address key  issues such as consumer reimbursement for unauthorized transactions.  Aligning ongoing collaborative efforts with leading practices could help  regulators and market participants resolve disagreements over financial  account aggregation and related consumer compliance issues more  quickly and in a manner that balances the competing interests involved.", "With our past work finding that an effective financial regulatory system  needs to be flexible and forward looking to allow regulators to more  readily adapt and oversee new products, U.S. regulators could potentially  improve their oversight of innovative fintech activities by considering  adoption of some of the efforts already being successfully used by  regulators abroad. While constraints may limit the ability or willingness of  regulators to fully adopt these practices, opportunities exist to assess  ways to tailor them to the U.S. context. Some U.S. regulators have  established innovation offices that can help fintech providers more easily  obtain needed information from relevant regulators; however, FDIC and  NCUA have not established such offices, which could help facilitate these  regulators\u2019 interactions with fintech firms and with the entities they  regulate. Also, initiatives such as regulatory sandboxes or proofs-of- concept that provide fintech firms the opportunity to operate and share  information with appropriate regulators have helped regulators abroad  educate their staff and thereby improve their oversight capacities.  However, the Federal Reserve, CFTC, FDIC, NCUA, and SEC have not  initiated such programs due to concerns about favoring certain  competitors over others or that they may not have the authority to initiate  these programs. While constraints may limit the ability or willingness of  regulators to fully adopt these practices, additional consideration by these  regulators of some of the approaches taken by regulators abroad could  assist U.S. regulators in learning more about new financial technologies  that could provide useful knowledge for their own regulatory activities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of sixteen recommendations.", "The Chair of the Board of Governors of the Federal Reserve System  should invite NCUA to participate in the Interagency Fintech Discussion  Forum. (Recommendation 1)", "The Chairman of the Federal Communications Commission (FCC) should  discuss with the Presidents of the Federal Reserve Banks of Atlanta and  Boston whether the topics of the 2018-2019 biennial regulators meeting  of the Federal Reserve\u2019s Mobile Payments Industry Working Group would  make FCC participation beneficial to the FCC or the group, and take  steps accordingly. (Recommendation 2)", "The President of the Federal Reserve Bank of Atlanta should discuss with  the Chairman of the FCC and the President of the Federal Reserve  Banks of Boston whether the topics of the 2018-2019 biennial regulators  meeting of the Federal Reserve\u2019s Mobile Payments Industry Working  Group would make FCC participation beneficial to the FCC or the group,  and take steps accordingly. (Recommendation 3)", "The President of the Federal Reserve Bank of Boston should discuss with  the Chairman of the FCC and the President of the Federal Reserve  Banks of Atlanta whether the topics of the 2018-2019 biennial regulators  meeting of the Federal Reserve\u2019s Mobile Payments Industry Working  Group would make FCC participation beneficial to the FCC or the group,  and take steps accordingly. (Recommendation 4)", "The Director of the Consumer Financial Protection Bureau should engage  in collaborative discussions with other relevant financial regulators in a  group that includes all relevant stakeholders and has defined agency  roles and outcomes to address issues related to consumers\u2019 use of  account aggregation services. (Recommendation 5)", "The Chair of the Board of Governors of the Federal Reserve System  should engage in collaborative discussions with other relevant financial  regulators in a group that includes all relevant stakeholders and has  defined agency roles and outcomes to address issues related to  consumers\u2019 use of account aggregation services. (Recommendation 6)", "The Chairman of the Federal Deposit Insurance Corporation should  engage in collaborative discussions with other relevant financial  regulators in a group that includes all relevant stakeholders and has  defined agency roles and outcomes to address issues related to  consumers\u2019 use of account aggregation services. (Recommendation 7)", "The Chairman of the National Credit Union Administration should engage  in collaborative discussions with other relevant financial regulators in a  group that includes all relevant stakeholders and has defined agency  roles and outcomes to address issues related to consumers\u2019 use of  account aggregation services. (Recommendation 8)", "The Comptroller of the Currency should engage in collaborative  discussions with other relevant financial regulators in a group that  includes all relevant stakeholders and has defined agency roles and  outcomes to address issues related to consumers\u2019 use of account  aggregation services. (Recommendation 9)", "The Chairman of the Federal Deposit Insurance Corporation should  formally evaluate the feasibility and benefit of establishing an office of  innovation or clear contact point, including at least a website with a  dedicated email address. (Recommendation 10)", "The Chairman of the National Credit Union Administration should formally  evaluate the feasibility and benefit of establishing an office of innovation  or clear contact point, including at least a website with a dedicated email  address. (Recommendation 11)", "The Chair of the Board of Governors of the Federal Reserve System  should formally evaluate the feasibility and benefits to their regulatory  capacities of adopting certain knowledge-building initiatives related to  financial innovation. (Recommendation 12)", "The Chairman of the Commodity Futures Trading Commission should  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 13)", "The Chairman of the Federal Deposit Insurance Corporation should  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 14)", "The Chairman of the National Credit Union Administration should formally  evaluate the feasibility and benefits to their regulatory capacities of  adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 15)", "The Chairman of the Securities and Exchange Commission should  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 16)"], "subsections": []}, {"section_title": "Agency Comments and Our Response", "paragraphs": ["We provided a draft of this report to CFPB; CFTC; FCC; FDIC; the  Federal Reserve; FTC; NCUA; OCC; SEC; and Treasury, as well as  CSBS and FINRA. We received written comments from all of these  agencies except for Treasury and FINRA; the comments are reprinted in  appendixes IV through XII, respectively. Agencies to which we directed  recommendations agreed with our recommendations, as detailed below.  All of these agencies except FCC and NCUA also provided technical  comments, which we incorporated as appropriate.", "In response to our recommendation that CFPB engage in collaborative  discussions that incorporate leading practices with other financial  regulators on financial account aggregation issues, CFPB stated in its  letter that it concurred. CFPB stated that it has taken steps to address  related issues independently. CFPB also noted that it has participated in  related ongoing collaborative discussions and that it would continue to do  so.", "CFTC concurred with our recommendation that it formally evaluate  adopting knowledge-building initiatives related to financial innovation.  CFTC also noted that it is either using or exploring the use of some of the  knowledge-building initiatives identified in the report. However, the  agency also raised concerns that, without targeted legislative changes,  some of those initiatives may violate federal procurement laws and gift  prohibitions.", "In its letter, FCC agreed with our recommendation that it should discuss  with the Presidents of the Federal Reserve Banks of Atlanta and Boston  whether the topics of the 2018\u20132019 biennial regulator meeting of the  Federal Reserve\u2019s Mobile Payments Industry Working Group would make  FCC participation beneficial to FCC or the group, and take steps  accordingly. FCC noted that it will reach out to the Federal Reserve  Banks of Atlanta and Boston to determine whether FCC participation  would be beneficial.", "Regarding our recommendation that FDIC engage in collaborative  discussions that incorporate leading practices with other financial  regulators on financial account aggregation issues, FDIC stated in its  letter that it recognizes the benefits of engaging in collaborative  discussions with other relevant regulators. It noted that it has been  involved in ongoing collaborative discussions about such issues and that  it would continue to do so, particularly regarding liability for unauthorized  transactions and consumer reimbursement. Regarding our  recommendation that FDIC formally evaluate the feasibility and benefit of  establishing an Office of Innovation or clear contact point, FDIC stated  that it would conduct such an evaluation, and acknowledged that it has a  long history of engaging in open dialogue with any party interested in  discussing matters related to FDIC\u2019s mission and responsibilities.  Regarding our recommendation that it formally evaluate adopting  knowledge building initiatives related to financial innovation, FDIC stated  that it recognizes the importance of knowledge building and has  developed a framework and implemented initiatives to facilitate this. It  also noted that it will continue ongoing efforts to build knowledge related  to financial innovation and will consider other relevant knowledge building  initiatives, as appropriate.", "In response to our recommendations that the Federal Reserve include  NCUA and FCC in relevant working groups, the Federal Reserve stated  in its letter that its Board staff would seek NCUA\u2019s participation and that  staff from the Reserve Banks in Atlanta and Boston would discuss FCC\u2019s  participation in relevant working groups. Regarding our recommendation  that the Federal Reserve engage in collaborative discussions that  incorporate leading practices with other financial regulators regarding  financial account aggregation issues, the Federal Reserve acknowledged  the importance of working together to ensure that consumers were  protected, and noted a variety of ways it already coordinates on such  issues, and noted that it will continue to engage in such discussions to  address the important issues surrounding reimbursement for consumers  using these services. Regarding our recommendation that it formally  evaluate adopting knowledge-building initiatives related to financial  innovation, the Federal Reserve noted that it recognizes the importance  of such efforts and has recently organized a team of experts to ensure  that fintech-related information is shared across its organization.", "NCUA stated in its letter that it concurred with our recommendations to  engage in collaborative discussions that incorporate leading practices  with other financial regulators on financial account aggregation issues,  formally evaluate the feasibility and benefit of establishing an office of  innovation or clear contact point, and formally evaluate the feasibility and  benefits to their regulatory capacities of adopting certain knowledge- building initiatives related to financial innovation. NCUA noted that  evaluations of fintech activities are challenging for NCUA because it does  not have vendor authority like the other federal banking regulators. We  have previously raised NCUA\u2019s lack of vendor authority as a matter for  congressional consideration. NCUA stated it will continue to monitor risks  posed by fintech firms to the credit union industry by working with the  banking regulators.", "Regarding our recommendation that OCC engage in collaborative  discussions that incorporate leading practices with other financial  regulators on financial account aggregation issues, OCC stated in its  letter that it recognizes the importance of this recommendation. It noted  that it has been involved in ongoing collaborative discussions about such  issues and that it would continue to do so.", "SEC stated in its letter that it concurred with our recommendation to  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. SEC also stated that it will coordinate with other agencies as  appropriate during its assessment.", "In its letter, CSBS drew connections between steps that state regulators  have taken and those that we are recommending to federal agencies.  CSBS also provided additional information regarding state licensing  requirements, which we incorporated into our report. Additionally, CSBS  expressed support for our recommendations on federal interagency  collaboration and stated that it would support related efforts that  respected the role of state regulators. In addition, CSBS said that these  efforts could benefit from the participation of state regulators and that it  would be willing to participate if invited. Similarly, CSBS expressed  support for our recommendations that certain federal agencies formally  evaluate the feasibility and benefit of establishing an office of innovation  or clear contact point and formally evaluate the feasibility and benefit of  adopting knowledge-building initiatives related to financial innovation.  However, CSBS also cautioned that knowledge-building initiatives should  not preempt state consumer protection and licensing laws for fintech  payment providers or fintech lenders.", "As agreed with your offices, we are sending this report to the appropriate  members of Congress; CFPB; CFTC; FCC; FDIC; the Board of  Governors of the Federal Reserve; FTC; NCUA; OCC; SEC; and  Treasury, as well as CSBS and FINRA. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) fintech benefits, risks, and extent of legal or  regulatory protections for users; (2) efforts by U.S. regulators to oversee  fintech activities; (3) challenges that the regulatory environment poses to  fintech firms; and (4) the steps taken by domestic and other countries\u2019  regulators to encourage financial innovation within their countries.", "While fintech does not have a standard definition, for the purposes of this  report we focused on products and services leveraging technological  advances offered by financial institutions; nonbank financial companies;  and technology companies within the payment, lending, and wealth  management sectors, as well as products or services operating under  distributed ledger technology (DLT). Within these four identified sectors,  we examined particular products and services. In the payments  technologies sector we limited our scope to mobile wallets, peer-to-peer  payments, and peer-to-business payments products and services. To  identify these four sectors, we conducted background research and  reviewed prior GAO reports on fintech, person-to-person lending, and  virtual currencies. In the fintech lending sector, we focused on consumer  lending\u2014including credit card and home improvement loans\u2014and small  business lending services from direct and platform lending models;  however, we did not include mortgage lending in our scope, due to the  significant amount of regulation within the subsector. In the digital wealth  management sector, we examined firms that exclusively offer advice  using algorithms based on consumers\u2019 data and risk preferences to assist  or provide investment recommendations and financial advice directly to  consumers. We also examined issues relating to fintech account  aggregation companies that consolidate and display data from  consumers\u2019 accounts across financial institutions to help consumers more  easily see their overall financial health. For DLT, we focused on providers  that used DLT in payments and securities processing and token sales.  We also included information on the use of DLT in virtual currencies, such  as bitcoin and Ethereum. We also reviewed available data on transaction  volumes for the payments, lending, and robo advising sectors.", "To identify the benefits provided and risks posed to consumers by fintech  services, we conducted a literature review of agency, industry participant,  and industry observer documents that analyzed developments within  fintech. Using ProQuest, Scopus, SSRN, and Nexis.com databases in the  literature review, we identified over 500 relevant articles out of over 1,100  search results by using search terms associated with the four fintech  subsectors mentioned above. Our search included articles from 2011 to  October 2017. To determine the usefulness of the studies for inclusion,  we conducted a review of search results involving multiple content  reviews by GAO analysts to determine which relevant articles could (1)  provide credible sources of information to help address our researchable  questions, or (2) help identify knowledgeable persons or groups to  interview. We excluded documents based on the following criteria that  eliminated articles that were (1) duplicated; (2) related to countries  outside our review; (3) about virtual currencies; (4) categorized as  \u201cmarginally relevant\u201d by analysts based on the article\u2019s title, publication  date, and source; (5) less recent documents from each author or source;  (6) from news outlets or nonauthoritative sources; or (7) deemed  irrelevant or not useful.", "To obtain the financial services and fintech stakeholder perspectives on  fintech benefits and risk, we reviewed academic papers, reports, and  studies by other organizations on fintech activities we identified through a  literature search. We also conducted over 120 interviews with financial  regulators; banks; fintech providers; consumer groups; trade  associations; academics; think tanks; and consulting and law firms. We  identified potential interviewees by conducting Internet research;  reviewing literature search results; reviewing recommended interviewees  from our initial interviews; and selecting interviewees based on their  relevance to the scope of our review. We selected fintech firms and  financial intuitions, industry observers, and federal agencies based on the  product or service conducted by the firm, expertise of the industry  observers, and oversight authority of the federal agencies. We identified  fintech benefits and risk by speaking with relevant regulators and other  knowledgeable parties including: the Board of Governors of the Federal  Reserve System (Federal Reserve); the Federal Deposit Insurance  Corporation (FDIC); the National Credit Union Administration (NCUA); the  Office of the Comptroller of the Currency (OCC); the Commodity Futures  Trading Commission (CFTC); the Bureau of Consumer Financial  Protection, known as the Consumer Financial Protection Bureau (CFPB);  the Department of the Treasury (Treasury); the Federal Communications  Commission; Federal Trade Commission (FTC); the Financial Industry  Regulatory Authority (FINRA), the Securities and Exchange Commission  (SEC); and the Small Business Administration.", "To obtain state-level perspectives we interviewed representatives of the  Conference of State Bank Supervisors (CSBS), National Association of  Attorneys General, Money Transmitter Regulators Association, National  Association of State Credit Union Supervisors, and the North American  Securities Administrators Association. We also interviewed staff from  three state financial regulatory agencies in states with active fintech firms  and regulatory activities: California, Illinois, and New York.", "To assess the regulatory environment and various challenges faced by  fintech firms, we identified relevant laws and regulations pertaining to  fintech companies within our scope by reviewing prior GAO reports on  financial regulation and fintech, interviewed agency staff and industry  participants, and analyzed relevant agency documents, including relevant  laws and regulations. We also reviewed guidance; final rulemakings;  initiatives; and enforcement actions from agencies. To obtain federal  regulatory perspectives, we interviewed staff from the Federal Reserve,  FDIC, NCUA, OCC, CFTC, CFPB, Treasury, FTC, FINRA, SEC, and  SBA.", "To determine the steps taken by domestic and other countries\u2019 regulators  to encourage financial innovation in their countries, we conducted  fieldwork\u2014including interviews with regulatory agencies, fintech firms,  and industry observers, as well as, observations of fintech programs\u2014in  the United Kingdom, Singapore, and Hong Kong. We also conducted  interviews with a regulatory organization and fintech firms operating in  Canada. We identified and selected countries for our fieldwork through  criteria that focused on the extent to which these locations had significant  (1) financial services activities, (2) fintech activities, and (3) fintech  regulatory approaches. We conducted Internet research, literature  searches, and interviews to identify relevant foreign regulators within the  selected fieldwork sites. To obtain other countries\u2019 regulator perspectives,  we interviewed and analyzed agency documents on regulatory efforts and  views on fintech innovations within their financial markets from regulators  in Hong Kong, Singapore, and the United Kingdom. To obtain the  perspective of fintech firms operating in the selected fieldwork sites, we  conducted Internet research, literature searches, and interviews to  determine relevant fintech firms and foreign trade associations, including  recommendations from domestic industry participants and observers.", "We conducted this performance audit from initiation August 2016 to  March 2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Interagency Collaborative Efforts That Have Addressed Fintech Issues", "paragraphs": ["In this appendix, we present interagency working groups (including task  forces and other interagency collaborative bodies) that have discussed  fintech issues, and in some cases, taken specific actions. This list  includes interagency groups that are dedicated exclusively to fintech as  well as those that may discuss fintech as part of their broader financial  regulatory focus. Also, it includes interagency groups that operate at both  the domestic and international levels (see tables 2 and 3). This list is  based on information we obtained from the federal financial regulatory  agencies we met with and is not intended to be an exhaustive list."], "subsections": []}, {"section_title": "Appendix III: Regulatory Sandbox Examples", "paragraphs": [], "subsections": [{"section_title": "UK Financial Conduct Authority\u2019s Regulatory Sandbox", "paragraphs": ["According to officials, the purpose of the Financial Conduct Authority\u2019s  (FCA) sandbox is to allow firms to test innovative products, services, or  business models in a live market environment, while ensuring that  appropriate protections are in place. FCA has stated that its sandbox has  (1) reduced the time and cost of getting innovative ideas to market; (2)  facilitated access to finance for innovators; (3) enabled products to be  tested and introduced to the market; and (4) helped the agency build  appropriate consumer protection safeguards into new products and  services. The characteristics of the FCA sandbox, according to the  agency, are listed below.", "Eligible Participants: Currently regulated firms as well as  unregulated firms.", "Eligibility Criteria: Firms submit an application outlining how they  meet the eligibility criteria for testing, which are (1) carrying out or  supporting financial services business in the UK; (2) genuinely  innovative; (3) identifiable consumer benefit; (4) need for sandbox  testing; and (5) ready to test.", "Testing Parameters: If a firm is unauthorized it must obtain  authorization or restricted authorization prior to participation in the  sandbox. Prior to participating in the sandbox a firm must design, and  obtain agreement on, the parameters of the sandbox test, including  the duration; customer selection; customer safeguards; disclosures;  data; and testing plans.", "FCA has four ways that it can help firms operate more easily in its  sandbox. First, it can provide restricted authorizations that are a tailored  authorization process for firms accepted into the sandbox. Any  authorization or registration is restricted to allow firms to test only their  ideas as agreed upon with agency staff, which is intended to make the  process easier for firms to meet requirements and reduce the cost and  time to initiate the test, according to the agency. Second, FCA provides  individual guidance to firms in the sandbox that are unclear on how the  agency\u2019s rules apply, whereby FCA will interpret the regulatory  requirements in the context of the firm\u2019s specific test. Third, in some  cases, FCA may be able to waive or modify an unduly burdensome rule  for the purposes of the sandbox test, but it cannot waive national or  international laws. Finally, FCA can issue no enforcement action letters in  cases where they cannot issue individual guidance or waivers but they  believe regulatory relief is justified for the circumstances of the sandbox.  According to the agency, no enforcement action letters are offered only  during the duration of the sandbox test to firms that keep to the agreed- upon testing parameters and that treat customers fairly. Also, no  enforcement action letters only apply to FCA disciplinary action and do  not limit any liabilities to consumers. Officials we interviewed noted that  rule waivers and no enforcement action letters are rarely used tools. As of  January 2018, FCA had received more than 200 sandbox applications.  Eighteen firms had successfully graduated from the first cohort, 24 firms  were preparing to test in the second cohort, and 18 other firms were  accepted to test in the third cohort."], "subsections": []}, {"section_title": "Monetary Authority of Singapore\u2019s Regulatory Sandbox", "paragraphs": ["Recognizing that when lack of clarity over whether a new financial service  complies with legal and regulatory requirements could cause some  financial institutions or start-ups to choose not to implement an  innovation, the Monetary Authority of Singapore\u2019s (MAS) purpose in  establishing its sandbox was to encourage such experimentation so that  promising innovations could be tested in the market and have a chance  for wider adoption, according to the agency. In addition, the agency  stated that sandbox tests include safeguards to contain the  consequences of failure and maintain the overall safety and soundness of  the financial system. The characteristics of the MAS sandbox, according  to MAS, are listed below.", "Eligible Participants: Firms that are looking to apply technology in  an innovative way to provide financial services that are regulated by  MAS, including financial institutions, fintech firms, and professional  services firms partnering with such firms.", "Eligibility Criteria: Firms submit an application outlining how they  meet the eligibility criteria for testing, which are that (1) the product  uses new technology or existing technology in an innovative way, (2)  the product benefits consumers or industry, and (3) the firm intends to  deploy the product in Singapore on a broader scale after exiting the  sandbox.", "Testing Parameters: Firms must define the following testing  parameters prior to participating in the sandbox: (1) clearly defined  test scenarios and expected outcomes must be established; (2)  boundary conditions that facilitate meaningful experiments while  sufficiently protecting the interests of consumers and maintaining the  safety and soundness of the industry must be in place; (3) the firm  assesses and mitigates significant associated risks; and (4) an  acceptable exit and transition strategy must be defined.", "MAS stated that it will consider relaxing various regulatory requirements  for the duration of the sandbox test. However, they emphasized that their  sandbox is not intended and cannot be used as a means to circumvent  legal and regulatory requirements. MAS staff determines the specific legal  and regulatory requirements that they may be willing to relax on a case- by-case basis. According to MAS, some of the regulatory requirements  that could be relaxed included maintenance of certain levels of financial  soundness, solvency, capital adequacy, and credit ratings as well as  licensing fees, board composition requirements, and management  experience requirements, among others. However, MAS has also laid out  some requirements that it will not consider relaxing, including those  regarding consumer information confidentiality, anti-money laundering,  and countering terrorist financing. MAS officials said that all firms in the  sandbox will receive some form of regulatory relaxation. As of November  2017, MAS had received more than 30 sandbox applications. One firm  had successfully graduated, and a few other firms were testing or were in  the process of initiating a sandbox test."], "subsections": []}, {"section_title": "Hong Kong Monetary Authority\u2019s Fintech Supervisory Sandbox", "paragraphs": ["According to the Hong Kong Monetary Authority (HKMA), the purpose of  the HKMA sandbox is to enable banks and technology firms to gather  data and user feedback so that they can make changes to their  innovations, thereby expediting the launch of new products and reducing  development costs. HKMA officials stated that the sandbox allows banks  and their partnering technology firms to conduct pilot trials of their fintech  initiatives involving a limited number of participating customers without  the need to achieve full compliance with HKMA\u2019s supervisory  requirements. The characteristics of the HKMA sandbox, according to the  agency, are listed below.", "Eligible Participants: Regulated banks and their partnering  technology firms.", "Eligibility Criteria: Fintech initiatives that are intended to be  launched by banks in Hong Kong are eligible for the sandbox.", "Testing Parameters: Participating firms must (1) define the scope,  phases, timing, and termination of the sandbox test; (2) establish  customer protection measures, including disclosures, complaint  handling, and compensation for consumer loss; (3) establishing risk  management controls; and (4) establish a monitoring program for the  sandbox test.", "Similar to MAS, HKMA stated that its sandbox should not be used as a  means to bypass applicable supervisory requirements; however, HKMA  will relax regulatory requirements on a case-by-case basis. As of  November 2017, nine banks had participated in 26 HKMA sandbox tests.  Twelve of these tests had been completed and banks collaborated with  fintech firms in 15 of the tests."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Consumer Financial Protection Bureau", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Commodity Futures Trading Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Conference of State Bank Supervisors", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Federal Communications Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Federal Deposit Insurance Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Board of Governors of the Federal Reserve System", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the National Credit Union Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comments from the Office of the Comptroller of the Currency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: Comments from the Securities and Exchange Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Lawrance L. Evans, Jr., (202) 512-8678 or evansl@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Cody Goebel (Assistant Director);  Chloe Brown (Analyst-in-Charge); Chris Ross; Davis Judson; Ian P.  Moloney; and Bethany Benitez made key contributions to this report. Also  contributing to this report were Joanna Berry; Timothy Bober; Richard  Hung; Pamela Davidson; Tovah Rom; Cynthia Saunders; and Jena  Sinkfield."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-326", "url": "https://www.gao.gov/products/GAO-18-326", "title": "DOD Major Automated Information Systems: Adherence to Best Practices Is Needed to Better Manage and Oversee Business Programs", "published_date": "2018-05-24T00:00:00", "released_date": "2018-05-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD's MAIS programs are intended to help the agency sustain its key operations. In April 2017, recognizing that MAIS programs met different mission needs, DOD categorized its MAIS programs into business and non-business systems.", "The National Defense Authorization Act for Fiscal Year 2012 includes a provision for GAO to select, assess, and report on DOD's MAIS programs annually through March 2018. GAO's objectives, among others, were to (1) assess DOD's policies for managing and overseeing MAIS programs and (2) describe the extent to which selected MAIS programs have changed their planned cost and schedule estimates and met technical performance goals. To address these objectives, GAO compared DOD's policies for managing and overseeing all 34 MAIS programs (24 non-business programs and 10 business programs) to leading IT management practices. GAO also compared 15 selected programs' initial cost, schedule, and performance baselines to their current acquisition program estimates."]}, {"section_title": "What GAO Found", "paragraphs": ["The strength of Department of Defense's (DOD) policies for managing and overseeing major automated information system (MAIS) programs varies. Specifically, the policy for managing 24 non-business MAIS programs adheres to leading information technology (IT) management practices, but the policy for managing 10 MAIS business programs does not always do so (see table).", "When DOD categorized 10 of the 34 MAIS programs as MAIS business programs, it also directed these programs to adhere to DOD's business systems policy (DOD Instruction 5000.75). However, the department directed those programs to use a policy for the management and oversight of MAIS business programs that was not fully comprehensive. Until DOD updates its business systems policy to address gaps in establishing performance information such as baseline estimates on program cost and schedule goals, identifying thresholds to identify high risk, and requiring periodic reports to be provided to stakeholders at regular intervals, stakeholders will likely not have all the information they need to manage and oversee MAIS business programs.", "While all 15 business and non-business MAIS programs had either increased or decreased their planned cost estimates and the majority had delays in their planned schedule estimates, the majority of the 9 programs that had performance targets met those performance goals. Specifically, the decreases and increases in cost estimates ranged from a decrease of $1.6 billion (-41 percent) to an increase of $1.5 billion (163 percent). The decreases in planned cost were largely due to scope reduction, while cost increases were due to underestimating levels of effort and contracting issues. The slippages in schedule estimates ranged from a delay of 5 years to 5 months; these delays were caused by unrealistic expectations or unplanned changes. Six of the 9 programs that had performance targets met all of them, while the other 3 met several but not all of their performance targets. The other 6 programs were in the early stages of system development and had not begun performance testing."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that DOD update its policy for managing MAIS business programs to include baseline estimates. DOD partially concurred with this recommendation, and fully concurred with the other two recommendations. GAO continues to believe that all the recommendations are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) is one of the largest and most  complex organizations in the world. To meet its mission to protect the  security of our nation and to deter war, it relies heavily on the use of  information technology (IT) and information systems to support  warfighters. In this regard, according to DOD\u2019s IT investment portfolio for  fiscal year 2017, the department spent approximately $33.4 billion for IT  investments. Of this amount, approximately $2.5 billion was spent on  major automated information system (MAIS) programs, which include  business and non-business information systems that help the department  sustain its key operations in communications and command and control,  and provide it with access to information to organize, plan, and monitor  mission operations.", "A DOD IT investment that falls within one of the following categories is  designated as a MAIS program when: (1) program costs in any single  year exceed $40 million, (2) total program acquisition costs exceed $165  million, or (3) total life-cycle costs exceed $520 million. The Secretary of  Defense could also use discretion to designate a program as a MAIS  program if it did not meet these cost thresholds.", "The National Defense Authorization Act for Fiscal Year 2012 includes a  provision that we select, assess, and report on DOD MAIS programs  annually through March 2018. GAO satisfied the statutory mandate by  submitting a draft of the report to congressional committees on March 29,  2018. This final version of the report is the sixth and last report in the  series of annual mandated assessments. Our specific objectives for this  review were to (1) assess DOD\u2019s policy for the management and  oversight of MAIS programs; (2) describe the extent to which selected  MAIS programs have changed their planned cost and schedule estimates  and met performance targets; and (3) assess the extent to which selected  MAIS programs have used leading IT acquisition practices, including  requirements and risk management.", "To address the first objective, we assessed DOD\u2019s memorandums and  policies for managing MAIS programs. To evaluate DOD\u2019s approach in  managing and overseeing MAIS programs, we identified leading IT  management practices in GAO\u2019s Information Technology Investment  Management guide and compared DOD\u2019s policies to those practices. We  also interviewed an acquisition official responsible for the department\u2019s  plan to update its policies for administering how MAIS programs are to be  managed and monitored.", "To address the second objective, we used DOD\u2019s official list of 34 MAIS  programs, as of April 18, 2017, to establish a basis for selecting  programs. From this list, we identified those MAIS programs based on our  criteria that programs must be unclassified and have a first acquisition  program baseline that could be used as a reference point for evaluating  cost, schedule, and technical performance characteristics. Based on  these criteria, we selected 15 of the 34 MAIS programs for our review.", "We then compared each program\u2019s cost (in then-year dollars) and  schedule estimates established in the first acquisition baseline to the  latest total life-cycle cost and schedule estimates. In addition, to  determine whether system performance targets were met, we identified  nine MAIS programs that had conducted performance tests. We then  compared each program\u2019s initial and most recent baseline performance  targets.", "To address the third objective, we selected three programs that had not  been included in our last assessment, while seeking to ensure that we  had representation from at least one military service and at least one  defense agency. Using these criteria, we selected the Navy\u2019s  Consolidated Afloat Networks and Enterprise Services; Defense Logistics  Agency\u2019s Defense Agencies Initiative, Increment 2; and Defense Health  Agency\u2019s Department of Defense Healthcare Management System  Modernization.", "We then identified requirements and risk management practices in the  Software Engineering Institute\u2019s Capability Maturity Model\u00ae Integration  for Acquisition (CMMI\u00ae-ACQ) and assessed each of the three programs  against these criteria. Specifically, regarding risk management practices,  we analyzed each program\u2019s key documents, such as the risk register  logs, risk management plans, and other artifacts, and compared them to  the leading practices. Regarding requirements management, we  compared requirements documents, such as the requirements  management plan, traceability matrix, and procedural tools to the leading  practices. We also conducted follow-up interviews with project officials  regarding the management practices of each program.", "To assess the reliability of the data we used to support the findings in this  report, we corroborated program office responses with relevant program  documentation and interviews with agency officials. We determined that  the data were sufficiently reliable for our reporting purposes. Since we  selected a nonprobability sample of MAIS programs, the results of our  analysis are not generalizable to all MAIS programs. See appendix I for a  more detailed discussion of our objectives, scope, and methodology.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD\u2019s organizational structure includes the Office of the Secretary of  Defense, the Joint Chiefs of Staff, the military departments, numerous  defense agencies and field activities, and various unified combatant  commands that contribute to the oversight of DOD\u2019s acquisition  programs. Prior to February 2018, the former Under Secretary of Defense  for Acquisition, Technology, and Logistics also served as the principal  acquisition official of the department and was the acquisition advisor to  the Secretary of Defense.", "The former Under Secretary also served as the Defense Acquisition  Executive and was the official responsible for supervising the acquisition  of MAIS programs. The former Under Secretary\u2019s authority included  directing the military services and defense agencies on acquisition  matters and making milestone decisions for MAIS and other programs.  This official also had policy and procedural authority for the defense acquisition system, which establishes the steps that DOD programs  generally take to plan, design, acquire, deploy, operate, and maintain the  department\u2019s information systems.", "However, as of February 2018, the department changed the way it  conducts business and operations with the statutory elimination of the  Office of the Under Secretary of Defense for Acquisition, Technology, and  Logistics. The statute contains a provision that required DOD to establish  a new Office of the Under Secretary of Defense for Research and  Engineering to be responsible for driving innovation and acceleration of  the advancement of warfighting capability. In addition, a new Office of the  Under Secretary of Defense for Acquisition and Sustainment was created  to focus on delivering proven technology more quickly. The creation of  these offices within the department is intended to shift the principal focus  of the Office of the Secretary of Defense from a role of program oversight  to that of directing major department investments. Further, the statutory  creation of a Chief Management Officer to replace the former Deputy  Chief Management Officer is intended to improve the quality and  productivity of the department\u2019s business operations."], "subsections": [{"section_title": "DOD\u2019s Acquisition Guidance and Framework for Managing MAIS Acquisitions", "paragraphs": ["In January 2015, DOD updated its guidelines that outline the framework  for MAIS programs. This framework consists of six models for acquiring  and deploying a program, including two hybrid models that each describe  how a program may be structured based on the type of product being  acquired (e.g., software-intensive programs and hardware-intensive  programs). A generic acquisition model that shows all of the program life- cycle phases and key decision points is depicted in figure 1 and  described below.", "Materiel solution analysis: Refine the initial system solution (concept)  and create a strategy for acquiring the solution. A decision\u2014referred to as  Milestone A\u2014is made at the end of this phase to authorize entry into the  technology maturation and risk reduction phase.", "Technology maturation and risk: Determine the preferred technology  solution and validate that it is affordable, satisfies program requirements,  and has acceptable technical risk. A decision\u2014referred to as Milestone  B\u2014is made at the end of this phase to authorize entry of the program into  the engineering and manufacturing development phase and award  development contracts. An acquisition program baseline is first  established at the Milestone B decision point. A program\u2019s first acquisition  program baseline contains the original life-cycle cost estimate (which  includes acquisition and operations and maintenance costs), the schedule  estimate (which consists of major milestones and decision points), and  performance parameters that were approved for that program by the  milestone decision authority. The first baseline is established after the  program has refined user requirements and identified the most  appropriate technology solution that demonstrates that it can meet users\u2019  needs.", "Engineering and manufacturing development: Develop a system and  demonstrate through testing that the system meets all program  requirements. A decision\u2014referred to as Milestone C\u2014is made during  this phase to authorize entry of the system into the production and  deployment phase or into limited deployment in support of operational  testing.", "Production and deployment: Achieve an operational capability that  meets program requirements, as verified through independent operational  tests and evaluation, and implement the system at all applicable  locations.", "Operations and support: Operationally sustain the system in the most  cost-effective manner over its life cycle."], "subsections": []}, {"section_title": "Leading Practices for Managing IT Investments and Acquisition Programs", "paragraphs": ["We have developed and identified leading practices for governing IT  investments to help guide organizations to better manage and oversee  their projects. GAO\u2019s Information Technology Investment Management  guide states that good performance data and stakeholder oversight are  elements that can lead to positive outcomes, such as helping to ensure a  project is keeping to its initial cost, schedule, and performance goals. The  guide also states that projects should be reviewed at regular intervals to  monitor performance so that stakeholders can be aware of and review  any differences between actual outcomes and goals.", "In addition, we and other entities, such as the Software Engineering  Institute at Carnegie Mellon University, have identified leading practices  to help guide organizations to effectively plan and manage their  acquisitions of major IT systems. Our prior reviews have shown that  proper implementation of such practices can significantly increase the  likelihood of delivering promised system capabilities on time and within  budget. These practices include, but are not limited to:  Requirements management: Requirements establish what the system is  to do, how well it is to do it, and how it is to interact with other systems.  Appropriate requirements management involves eliciting and developing  customer and stakeholder requirements, and analyzing them to ensure  that they will meet users\u2019 needs and expectations. It also consists of  validating requirements as the system is being developed to ensure that  the final systems to be deployed will perform as intended in an  operational environment.", "Risk management: Risk management is a process for anticipating  problems and developing plans to take appropriate steps to mitigate risks  and minimize their impact on program commitments. It involves  identifying and documenting risks, categorizing them based on their  estimated impact, prioritizing them, developing risk mitigation strategies,  and tracking progress in executing the strategies."], "subsections": []}]}, {"section_title": "DOD\u2019s Policies for Managing MAIS Programs Do Not Always Adhere to Leading IT Management Practices", "paragraphs": ["According to GAO\u2019s Information Technology Investment Management  guide, leading practices for managing IT projects include:  instituting the investment board, which is the process for creating and  defining the membership, guiding policies, operations, roles,  responsibilities, and authorities within the organization;  identifying decision authorities for making important acquisition  decisions; providing oversight whereby the organization monitors each project on  its performance progress (e.g., establishing and tracking baseline  estimates on cost and schedule goals, and thresholds to identify high  risk on cost and schedule); and  capturing and providing performance information about a particular  investment (project) to decision makers at regular intervals (e.g.,  quarterly and annually).", "To align MAIS programs with the functions they perform, DOD recently  made changes in how it characterizes its MAIS programs and, as a result,  different programs must follow different management policies.  Specifically, in April 2017, DOD identified 10 of 34 total MAIS programs  as business programs and the Director, Acquisition Resources and  Analysis announced that these programs would adhere to DOD\u2019s  Instruction 5000.75 policy for management and oversight. Further, in  November 2017, the former Under Secretary of Defense for Acquisition,  Technology, and Logistics announced that non-business MAIS  programs would adhere to DOD\u2019s Instruction 5000.02 policy for  management and oversight.", "However, the policies used for MAIS business programs are not  consistent in their adherence to leading IT management practices. For  example, while the policy for non-business MAIS programs is consistent  in its adherence to all four of the leading IT management practices, the  policy for MAIS business programs is consistent in its adherence to only  two of the four practices. Table 1 shows our analysis of DOD\u2019s policies for  non-business MAIS programs and MAIS business program and their  adherence to the leading IT management practices.", "As shown in the table, DOD\u2019s policy for non-business MAIS programs  adheres to all four leading IT management practices. For example, the  policy requires non-business MAIS programs to report the status of each  program\u2019s cost, schedule, and technical performance information  quarterly and annually. The policy also designates specific decision  makers who are responsible for monitoring and overseeing the progress  of non-business system MAIS programs. Further, the policy requires each  program to establish and report their initial baseline estimates and current  estimates on cost and schedule so their performance can be tracked and  monitored. In addition, to identify when programs may be at risk of  significant cost or schedule increases, the policy requires programs to  predetermine cost and schedule threshold estimates as an early warning  indicator on when programs reach the point where they are at increased  risk.", "In contrast, DOD\u2019s policy for MAIS business programs policy only  adheres to two of the four practices. Specifically, the policy adheres to the  practice of instituting an investment board with processes for creating and  defining the membership, policies, operations, roles, responsibilities, and  authorities within the organization. In addition, the policy identifies  decision authorities for making important executive-level acquisition  decisions. However, the policy does not specify the establishment of  initial and current baseline estimates on cost and schedule, and does not  specify the reporting of threshold cost and schedule estimates to identify  the point when programs may be at high risk. In addition, the policy does  not adhere to leading practices requiring the periodic (quarterly and  annual) reporting of performance information to stakeholders.", "To help address the need for improved guidance, the former Under  Secretary of Defense for Acquisition, Technology and Logistics  established a cross-functional team that is to examine the future of non- business MAIS programs and MAIS business programs from a policy,  organization, management, and reporting perspective. The team was  expected to provide its recommendations to the Under Secretary of  Defense for Acquisition and Sustainment by March 15, 2018. However,  because no final decisions had been made by the Under Secretary as of  that date, it is unclear what specific actions the department will take  regarding its policy recommendations, among other recommendations, to  improve the management of non-business MAIS programs and MAIS  business programs.", "Until DOD updates its policy for MAIS business programs to adhere to  leading practices on the establishment of baseline estimates on cost and  schedule to include threshold estimates on cost and schedule to identify  when programs may be at high risk, stakeholders may not have the  information they need to manage and oversee MAIS business programs.  Further, unless the department updates its policy for MAIS business  programs to adhere to the leading practice for periodically (quarterly and  annually) reporting essential performance information, stakeholders may  not have the information they need to make informed decisions for  managing and overseeing MAIS business programs."], "subsections": []}, {"section_title": "All Selected MAIS Programs Had Changes in Cost and Schedule Estimates, and Most Programs Had Met Performance Targets", "paragraphs": ["All of the 15 selected MAIS programs had either increased or decreased  their planned cost estimates, and 10 of them had delays in their planned  schedule estimates when comparing the first acquisition program  baseline to the most recent acquisition program baseline estimates. The  changes in the cost estimates ranged from a decrease of $1.6 billion (-41  percent) to an increase of $1.5 billion (163 percent), and slippages in the  schedule estimates ranged from a delay of 5 years to a delay of 5  months.", "Further, 9 of the 15 selected programs had conducted testing in which we  could report on the number of performance targets met for each  program. Of those 9, 6 programs reported that they had met all of their  performance targets. The remaining 3 programs reported that they met  several but not all performance targets. The following table shows the  extent of changes in planned cost and schedule estimates for the  selected MAIS programs since the first baseline estimate, as well as the  number of performance targets met."], "subsections": [{"section_title": "All Selected MAIS Programs Had Either Increases or Decreases in Their Planned Cost", "paragraphs": ["All 15 selected MAIS programs had experienced increases or decreases  in their planned cost estimates when comparing the initial, or first,  baseline estimate to the current estimate. Specifically, 10 programs had  decreases in their cost estimates that ranged from $1.2 million (less than  -1 percent) for the Defense Agencies Initiative, Increment 2 program to  $1.6 billion (-41 percent) for the Air Force\u2019s Base Information Transport  Infrastructure Wired program.", "Program officials reported that reductions in planned cost estimates were  due to changes in program scope. Specifically, the reasons for reduction  in cost include:", "Program scope changes. Officials for the Air Force\u2019s Joint Space  Operations Center Mission System Increment 2 program reported that  its 12 percent cost decrease was due to a reduction in its estimate for  operations and support that was changed from 20 years to 10 years.  Officials for the Defense Information Systems Agency\u2019s Global  Combat Support System\u2013Joint Increment 8 program reported that its  20 percent cost decrease was due to a reduction in the program\u2019s  scope for the number of development hours required to meet the  logistics and operational needs. In addition, officials for the Defense  Information Systems Agency\u2019s Teleport Generation 3 program  reported that its 22 percent cost decrease was due to a revised scope  in terms of what is needed at the Milestone C decision point for low  rate production.", "Design reconfiguration. Officials for the Air Force\u2019s Base Information  Transport Infrastructure Wired program reported that its 41 percent  cost decrease was due to a reduction in the program\u2019s scope when  they changed from a base network system to a critical core  configuration.", "In addition, 5 of the programs had experienced cost increases. These  cost increases ranged from $2.9 million (less than 1 percent) for the  Army\u2019s Logistics Modernization Program Increment 2 to $1.5 billion (163  percent) for the Army\u2019s Tactical Mission Command program. Program  officials reported a variety of reasons for the increases in planned cost  estimates. These reasons included the following:", "Underestimating schedule. Officials for the Air Force\u2019s Defense  Enterprise Accounting and Management System Increment 1 program  attributed its 60 percent cost increase to underestimating the level of  effort that was needed to develop the system within the estimated  schedule. For example, the program did not account for software  upgrades and, when this effort was added to the schedule to account  for the work, the cost increased.", "Contractor issues. Officials from the National Security Agency\u2019s Key  Management Infrastructure Increment 2 program attributed its cost  increase of 14 percent to schedule delays caused by the contractor  and, as a result, increased funding at the Milestone C decision point.", "Underestimating development and test efforts. Officials from the  Army\u2019s Tactical Mission Command program attributed the cost  increase of 163 percent to higher than expected costs to conduct  research and developmental tests."], "subsections": []}, {"section_title": "Ten Selected MAIS Programs Had Delays in Their Planned Schedule Estimates", "paragraphs": ["Ten of the 15 selected MAIS programs had experienced changes in their  planned schedule estimates, and 5 programs had no changes to their  schedule estimates. The changes consisted of schedule slippages that  ranged from 5 months for both the Army\u2019s Logistics Modernization  Program Increment 2 and the Defense Health Agency\u2019s Department of  Defense Healthcare Management System program, to 5 years for the  Defense Enterprise Accounting and Management System Increment 1  program.", "Program officials reported that delays in the planned schedule estimates  were due to unplanned budget reductions or unrealistic expectations  regarding project milestones. Specifically, the reasons for these schedule  slippages included:", "Aggressive schedule, funding reduction, and contract issues.  Officials for the Air Force\u2019s Joint Space Operations Center Mission  System Increment 2 program attributed its schedule slippage of 2  years and 11 months to funding reductions of $18.9 million in fiscal  years 2013 and 2014. In addition, the officials noted that an  aggressive schedule for a Milestone B decision, contracting issues in  the earlier acquisition phase, and longer than expected time to obtain  personnel had contributed to the slippage.", "Longer than expected time to reach deployment. Officials for the  Air Force\u2019s Defense Enterprise Accounting and Management System  Increment 1 program reported that its schedule slippage of 5 years  occurred because of a change in the approach to deliver the system  in multiple increments, thereby increasing the amount of time it would  take to reach the deployment decision milestone. Also, officials for the  Defense Information Systems Agency\u2019s Teleport Generation 3  program reported a 3-year and 2-month slip. This schedule delay was  due to the program\u2019s inability to develop the mobile user and system  interface capability by the estimated deployment milestone. Further,  program officials for the Navy\u2019s Consolidated Afloat Networks and  Enterprise Services program attributed its schedule slip of 2 years and  6 months to a longer than expected maintenance period for the test  platform and to a lengthy budget approval process, resulting in a  slippage in the deployment date.", "Unplanned procurement fund reduction. Officials for the Army\u2019s  Global Combat Support System-Army program reported that its  schedule delay of 11 months was due, in part, to a $16 million dollar  decrease to the fiscal year 2016 budget. This unplanned reduction in  procurement fund affected their ability to field the system as originally  planned.", "Contractor staffing issues. Officials for the National Security  Agency\u2019s Key Management Infrastructure Increment 2 program  reported significant schedule delays due to the contractor\u2019s inability to  staff the program with software developers that had the required  security clearances. As a result, a critical change was reported in  January 2012 that led to a new independent cost estimate, which  extended program development by 10 months. The new estimate  included additional time to improve the governance structure, such as  increasing discipline across the oversight process, adding more  stakeholder interaction, and improving the use of metrics."], "subsections": []}, {"section_title": "Six of Nine MAIS Programs Had Met All Performance Targets", "paragraphs": ["Among other information, DOD uses key performance parameters as a  metric to report on programs\u2019 progress toward meeting system  performance targets. This information includes a description of the  performance characteristics, the objective and threshold value for each  target and, importantly, whether the target has been met in demonstrating  performance.", "Of the nine programs we evaluated, six programs reported that they met  all of their performance targets. For example, the Navy\u2019s Common  Aviation Command and Control System, Increment 1 program reported in  May 2017 that both of its technical performance targets had been met.  According to the program, these targets were related to the readiness of  the system to fully support all operational activities and satisfy all  technical requirements for military operations and the fusion of all kinds of  data onto any workstation.", "In another example, the Army\u2019s Logistics Modernization Program  Increment 2 program reported in June 2017 that all seven of its  performance targets had been met. According to the program, these  targets were related to the system\u2019s ability to support military operations,  exchange information in the network, provide system and information  assurance in a disaster recovery scenario, and be operationally available.", "Further, three programs reported that they met several, but not all, of their  performance targets. For example, the Navy\u2019s Consolidated Afloat  Networks and Enterprise Services program reported that it met eight of  nine performance targets. According to program officials, the remaining  target (i.e., network shall fully support joint critical operational activities)  had not been met because the program lacked an operational platform  that was required to demonstrate its performance.", "The Defense Information Systems Agency\u2019s Teleport Generation 3  program reported that it met 8 of 12 performance targets. According to  programs officials, the remaining 4 targets (i.e., coverage to allow  warfighter communications, capacity to provide 100 percent of the  required services, and interoperability with military and commercial  frequencies and wave forms) had not been met because the program  needed to field multiple systems and perform solution testing, which they  expect to be completed in fiscal year 2018. Further, the Air Force\u2019s  Defense Enterprise Accounting and Management System Increment 1  program officials reported that it met 3 of 4 targets (i.e., compliance with  requirements, network ready, and sustainment to ensure materiel  availability). The officials reported that the program did not meet the  remaining target because it was waiting for an evaluation of cyber test  results before proceeding."], "subsections": []}]}, {"section_title": "Selected Programs Fully Implemented Most, but Not All, of the Leading Practices for Managing Requirements and Risk", "paragraphs": ["According to the Software Engineering Institute\u2019s Capability Maturity  Model Integration\u00ae for Acquisition (CMMI\u00ae-ACQ), an appropriate  requirements management process involves establishing an agreed-upon  set of requirements, ensuring traceability between requirements and work  products, and managing any changes to the requirements in collaboration  with stakeholders. Likewise, an effective risk management process  identifies potential problems before they occur, so that risk-handling  activities may be planned and invoked, as needed, across the life of the  project in order to mitigate the potential for adverse impacts.", "Leading requirements management practices help organizations to better  manage the design, development, and delivery of systems within  established cost and schedule time frames. These practices include developing an understanding with the requirements providers of the  meaning of the requirements, obtaining commitment to requirements from project participants, managing changes to requirements as they evolve during the project, maintaining bidirectional traceability among requirements and work, ensuring that project plans and work products remain aligned with  requirements.", "An effective risk management process includes the following leading  practices determining risk sources and categories; defining parameters used to analyze and categorize risks and to  control the risk management effort; establishing and maintaining the strategy to be used for risk  identifying and documenting risks; evaluating and categorizing each identified risk using defined risk  categories and parameters, and determining its relative priority; developing a risk mitigation plan in accordance with the risk monitoring the status of each risk periodically and implementing the  risk mitigation plan as appropriate.", "The three selected MAIS programs that we evaluated had fully  implemented most, but not all, of the five leading practices for managing  requirements and the seven leading practices for managing risks.  Specifically, two of three programs implemented all of the requirements  management practices, while one program implemented most, but not all,  of the practices.", "Further, one of three programs implemented all of the risk management  practices, while two programs implemented most, but not all of the  practices. Table 3 shows the extent to which practices were implemented  by the three selected programs."], "subsections": [{"section_title": "Two Programs Fully and One Program Partially Implemented Leading Practices for Managing Requirements", "paragraphs": ["Two of the three programs had fully implemented the requirements  management practices. The other program had partially implemented two  practices and fully implemented three practices.", "Navy \u2014 Navy Consolidated Afloat Networks and Enterprise Services  The Navy had fully implemented the five requirements management  practices for the Consolidated Afloat Networks and Enterprise Services  program. For example, the program developed an understanding with  requirements providers of the meaning of the requirements. Specifically,  there was a plan for documenting, managing, and controlling changes to  requirements throughout the system lifecycle. This plan served as the  primary guidance for integrating the management of all specified and  derived requirements for the Consolidated Afloat Networks and Enterprise  Services system program.", "In addition, the program had established criteria for determining  requirements providers. Specifically, roles and responsibilities for  requirements management had been identified. Further, the program  managed changes to requirements as they evolved during the project.  For example, the program provided evidence that it maintains a  requirements change history, including the rationale for changes.", "Defense Logistics Agency \u2014 Defense Agencies Initiative, Increment  2  The Defense Logistics Agency had fully implemented the five  requirements management practices for the Defense Agencies Initiative,  Increment 2. For example, the program had established objective criteria  for the evaluation and acceptance of requirements. Specifically, there was  a process in place to develop and finalize deliverables in support of the  business requirements identified by the stakeholders, ensure that  requirements management activities were performed in a timely manner  throughout the life of the project, and review and approve requirements  deliverables. Further, throughout the process, the requirements manager  tracked requirements changes and maintained traceability of end user  needs to the system performance specification.", "The Defense Health Agency had fully implemented three and partially  implemented two of the five requirements management practices for the  Defense Healthcare Management System Modernization program. For  example, the program had established objective criteria for the evaluation  and acceptance of requirements. Specifically, any new or updated  requirements were presented to a Configuration Steering Board for  review and approval prior to any changes being made. Further,  throughout the process, the requirements manager tracked requirements  changes and maintained traceability to ensure they were documented.", "The program has not developed an understanding with the requirements  providers on the specific meaning of the requirements. For example,  although the program had developed a requirements management plan  which provided guidance in this area, according to program officials, the  plan was not signed and approved based on the recent shift of the  program from a non-business MAIS program to a MAIS business program  operating under DOD Instruction 5000.75. Program officials stated that  the requirements management plan is not expected to be complete until  final guidance is provided by the Office of the Secretary.", "Regardless of this recent shift, the program should have already had an  approved requirements management plan in place since program  initiation. In the absence of an approved plan, the program lacks  assurance that it can effectively communicate and manage requirements  practices.", "Further, the program had not demonstrated that it identified any changes  that should be made to plans and work products resulting from changes  to the requirements baseline. Programs officials stated that efforts to  review modifications to the plan due to requirements changes had not  been conducted, but they expected the review and approval to be done at  some future date. However, they could not provide a specific time frame.  According to CMMI\u00ae-ACQ, until project plans and work products are  updated to coincide with changes in requirements, the program will not be  able to effectively identify inconsistencies between requirement changes  and project plans and work products, and initiate corrective actions to  resolve them."], "subsections": []}, {"section_title": "One Program Fully and Two Programs Partially Implemented Applicable Risk Management Leading Practices", "paragraphs": ["One program had fully implemented the risk management practices, while  two had fully implemented all but one practice.", "Navy \u2014 Navy Consolidated Afloat Networks and Enterprise Services  The Navy had fully implemented six and partially implemented one risk  management practice for the Consolidated Afloat Networks and  Enterprise Services system program. For example, the program\u2019s risks  defined consistent criteria for evaluating and quantifying risk likelihood  and severity levels. Specifically, the program provided a risk exposure  (e.g., a risk source used to examine and oversee changes that impact the  project), which is the value that is given to a risk event, a product, or the  overall program based on the analysis of the probability and  consequences of the event. Further, the program\u2019s Risk Management  Guide outlined risk performance, cost, and schedule criteria. In addition,  the program demonstrated that it included the cost and benefits of  implementing risk mitigation plans. Specifically, a risk\u2019s description  provided the cost impacts associated with the risk, which in turn provided  evidence that cost and benefits were considered during risk evaluation.", "However, the Navy partially implemented one practice. Specifically,  although the program provided its failover/recovery plan that is intended  to return the program to a state of readiness after a failure, the plan did  not explicitly identify environmental elements. A program official stated  that environmental factors, such as risks that could negatively affect their  work, is understood, but these factors had not been documented in the  plan. Further, the official stated that the program should update the plan  accordingly, but did not provide a time frame to complete this effort. Until  all potential issues, hazards, threats, and vulnerabilities that could  negatively affect work efforts have been identified in the plan, successful  risk management cannot be ensured.", "Defense Logistics Agency\u2014Defense Agencies Initiative, Increment 2  The Defense Logistics Agency had fully implemented all seven risk  management practices for the Defense Agencies Initiative, Increment 2.  For example, the program identified program risks, including risk sources,  categories, and stakeholders. In addition, Defense Agencies Initiative,  Increment 2 risks followed consistent criteria for evaluating and  quantifying risk likelihood and severity levels. Specifically, risk level was  based on a combination of factors to include both likelihood and  consequence. In all instances, consensus on the risk levels was required  between the risk owner and the customer counterpart. Further, the  program\u2019s contingency plan provided guidance when outages fell into one  of three disaster categories including natural disasters, man-made  disasters, and technological disasters.", "Defense Health Agency\u2014Defense Healthcare Management System  Modernization  The Defense Health Agency had fully implemented six and partially  implemented one of the seven risk management practices for the  Defense Healthcare Management System Modernization program. For  example, the program\u2019s risks followed consistent criteria for evaluating  and quantifying risk likelihood and severity levels. Specifically, the  program\u2019s Risk and Issue Management Plan described how to assess the  impact level in each risk area (performance, project and program  schedules, and cost). Further, the program prioritized risks for mitigation.  For example, risks were categorized and charted as low, medium, or  high, and grouped accordingly in the program\u2019s risk register. Further, the  program\u2019s Disaster Recovery Plan provides processes that allowed rapid  support recovery for critical operations during a disaster, including  environmental disasters such as tornadoes.", "Regarding the partially implemented practice, the program provided an  example of a risk mitigation plan. However, the program indicated that  costs and benefits were not quantified within the program-level risk  mitigation plans. According to CMMI\u00ae-ACQ, risk mitigation activities  should be examined for benefits they provide versus resources they will  expend. Just like any other design activity, alternative plans may need to  be developed and costs and benefits of each alternative assessed.", "However, the program does not require that costs and benefits be  included as part of its risk mitigation planning efforts. As a result, the  information for making an informed decision on cost and benefits of risk  mitigation solutions is limited. Program officials did not indicate whether  they have plans to implement this practice, and did not provide an  explanation as to why they are unable to provide this information. Until  the program quantifies costs and benefits, it will not be able to effectively  select the most appropriate risk mitigation plan to address each risk."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While DOD\u2019s policy for non-business MAIS programs adheres to all four  leading IT management practices, the department\u2019s policy for MAIS  business programs does not adhere to two leading practices on  establishing initial and current baseline estimates on cost and schedule  and predetermining threshold estimates, as well as reporting periodically  on performance information to stakeholders. Until DOD adheres to these  practices in its policies that govern MAIS business programs, it cannot  ensure that stakeholders will have the information they need to manage  and oversee their investments.", "Following leading IT acquisition practices on requirements and risk  management is essential to help programs effectively plan and direct their  development and acquisition efforts. All of the leading IT acquisition  practices for requirements and risk management had been fully or  partially implemented by three programs that we reviewed. However, the  Defense Health Agency\u2019s Defense Healthcare Management System  Modernization has not finalized its requirements management plan nor  has it identified changes that should be made to plans and work products  resulting from changes to the requirements baseline. Until the program  addresses these practices, it will lack a comprehensive plan for managing  its requirements and it may not be able to effectively identify  inconsistencies and initiate corrective actions.", "Further, the Navy Consolidated Afloat Networks and Enterprise Services  program did not fully identify and document risks that could negatively  affect work efforts. In addition, the Defense Health Agency\u2019s Defense  Healthcare Management System Modernization did not quantify costs  and benefits of risk mitigation within its program-level risk mitigation  plans. As a result, successful risk management for avoiding, reducing,  and controlling the probability of risk occurrence cannot be ensured."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the Secretary of  Defense to direct:", "The Under Secretary of Defense for Acquisition and Sustainment to  update the policy or guidance for MAIS business programs.  Specifically, the update should include the following elements: establishment of initial and current baseline cost and schedule predetermined threshold cost and schedule estimates to identify  the point when programs may be at high risk, and quarterly and annual reports on the performance of programs to  stakeholders. (Recommendation 1)", "The Director of the Defense Health Agency to direct the program  manager for the Defense Healthcare Management System  Modernization program to:  finalize and approve its requirements management plan,  identify and document changes that should be made to plans and  work products resulting from changes to the requirements  baseline, and quantify costs and benefits of risk mitigation within its program- level risk mitigation plans. (Recommendation 2)", "The Secretary of the Navy to direct the program manager for the Navy  Consolidated Afloat Networks and Enterprise Services program to:  identify and document, in the failover/recovery plan, all potential  external environmental issues, such as hazards, threats, and  vulnerabilities that could negatively affect work efforts.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DOD provided written comments on a draft of this report, which are  reproduced in appendix II. In its comments, the department partially  concurred with our first recommendation and concurred with the two other  recommendations.", "DOD partially concurred with the first recommendation on updating the  policy or guidance for MAIS business programs. Specifically, the Under  Secretary of Defense for Acquisition and Sustainment stated that  regarding establishing baselines, the DOD Instruction 5000.75 requires  establishment of cost, schedule, and performance parameters for each  release before development or delivery. The 5000.75 also requires  consideration of program progress against baselined cost, schedule, and  performance as a criterion at the limited deployment and full deployment  decision points. A baseline requirement thus exists in DOD Instruction  5000.75 but it is not described as an acquisition program baseline, which  may be familiar to readers of DOD Instruction 5000.02. However, the  Under Secretary added that the Army\u2019s implementation guidance includes  guidance that states each increment must have an acquisition program  baseline with its own set of threshold and objective values set by the  user.", "While we agree that the existing policy requires such parameters to be  captured and included in the department\u2019s decision making process, we  found the policy to be vague in its discussion of these parameters and to  not clearly define what a baseline is, or which baselines are to be used or  reported for comparison purposes. For example, the policy does not  make a distinction between the initial acquisition program baseline,  current baseline, and baseline deviations. Yet, such information is  important because it provides a basis for decision makers to identify the  extent to which a program may have deviated from its initial cost,  schedule, or technical performance baseline. By making these  distinctions in the policy, the department\u2019s policy for its MAIS business  programs will be more consistent with its other policy for non-business  MAIS programs with regard to the way an acquisition program baseline is  defined and the elements that should be captured and reported to its  decision makers. In turn, the program managers who prepare these  reports and the decision makers who rely on them will have information  that is consistently and succinctly prepared for making credible decisions.", "Regarding adding provisions in its policy for the establishment of  predetermined thresholds, the Under Secretary stated that the 5000.75  states that the milestone decision authority is responsible for delivery  within cost, schedule, and performance parameters, and the milestone  decision authority is to do this by establishing oversight controls for  programs, including procedures to report and address variances. The  Under Secretary added that the 5000.75 does not suggest the practice of  establishing a predetermined threshold for the variance, and DOD will  consider the addition of this feature to the 5000.75 update.", "Finally, regarding providing periodic annual and quarterly reports to the  department\u2019s leadership, the Under Secretary stated that such a periodic  report would add value only if there had been no recent communication of  program status from the program office to the leadership or stakeholders  communities. While such communication is expected to occur frequently,  its regularity is not specified in current policy or guidance. The Under  Secretary stated that DOD will consider adding a provision for a report to  leadership and functional stakeholder if such communication has not  occurred within the past 3 or 4 months.", "DOD concurred with the second and third recommendations related to the  department\u2019s implementation of selected IT management practices.  Regarding the second recommendation, the Under Secretary of Defense  for Acquisition and Sustainment agreed to direct the Defense Healthcare  Management System Modernization program manager to update and  approve the requirements management plan, identify and document  changes to the requirements baseline, and quantify the costs and benefits  in the risk mitigation plans. Further, regarding the third recommendation,  the Secretary of the Navy agreed to direct the program manager to  identify and document all potential external environmental issues that  could negatively affect work efforts for the Navy\u2019s Consolidated Afloat  Networks and Enterprise Services program. By taking these steps, these  programs should be better positioned to effectively identify  inconsistencies in managing changes to their requirements, and be more  responsive to the potential for environmental issues.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, Navy,  and Air Force; the Under Secretary of Defense for Acquisition and  Sustainment; the Director of the Defense Health Agency; and other  interested parties. This report also is available at no charge on the GAO  website at http://www.gao.gov.", "Should you or your staffs have any questions on information discussed in  this report, please contact me at (202) 512-4456 or harriscc@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2012 mandated  that we select, assess, and report on selected major automated  information systems (MAIS) programs annually through March 2018.  GAO satisfied the statutory mandate by submitting a draft of this report to  the congressional committees on March 29, 2018. This final version of the  report is the sixth and last report in the series of annual mandated  assessments.", "Our objectives were to: (1) assess the Department of Defense\u2019s (DOD)  policy for the management and oversight of MAIS programs; (2) describe  the extent to which selected MAIS programs have changed their planned  cost and schedule estimates and met performance targets; and (3)  assess the extent to which selected MAIS programs have used leading  information technology (IT) acquisition practices, including requirements  and risk management.", "To address the first objective, we identified four leading IT management  practices in GAO\u2019s Information Technology Investment Management  guide and compared DOD\u2019s policy adherence to those practices. These  leading practices are:  instituting the investment board, which is the process for creating and  defining the membership, guiding policies, operations, roles,  responsibilities, and authorities within the organization;  identifying decision authorities for making important acquisition  decisions; providing oversight whereby the organization monitors each project on  its performance progress (e.g., establishing and tracking baseline  estimates on cost and schedule goals, and thresholds to identify high  risk on cost and schedule); and  capturing and providing performance information about a particular  investment (project) to decision makers at regular intervals (e.g.,  quarterly and annually).", "We then compared DOD\u2019s policies used to manage and oversee the  department\u2019s non-business MAIS programs and MAIS business programs against these leading IT management practices. The department\u2019s policy  documents for managing and overseeing non-business MAIS programs  and MAIS business programs include the:", "Memorandum by the Under Secretary of Defense for Acquisition,  Technology, and Logistics, dated November 17, 2017, regarding the  regulatory response to the repeal of title 10, United States Code,  Chapter 144A, Major Automated Information System Programs.", "Memorandum by the Under Secretary of Defense for Acquisition,  Technology, and Logistics, dated April 24, 2017, regarding the  transition of programs to business system categories.", "DOD Instruction 5000.75, Business Systems Requirements and  Acquisition, effective February 2, 2017.", "DOD Instruction 5000.02, Operation of the Defense Acquisition  System, effective February 2, 2017.", "We also interviewed an official from the former Office of the Under  Secretary of Defense for Acquisition, Technology, and Logistics, who was  responsible for the development of plans and policy for the administration  regarding the management and monitoring of non-business MAIS  programs and MAIS business programs  To address the second objective, we used DOD\u2019s official list of 34  business and non-business MAIS programs, as of April 18, 2017, to  establish a basis for selecting programs. Of the 34 programs, we selected  the 15 business and non-business MAIS programs that met our criteria:  programs must be unclassified and have an initial acquisition program  baseline that could be used as a reference point for evaluating cost,  schedule, and technical performance characteristics.", "We then collected and analyzed key documents, reports, and artifacts for  each program and summarized the information on estimated cost,  schedule, and technical performance goals, including their latest program  status in meeting those estimated goals. Next, we analyzed and  compared each selected program\u2019s first acquisition program baseline cost  estimate to the latest estimate to determine the extent to which planned  program costs had changed. Specifically, we used the total life-cycle cost  estimate and analyzed and compared them to the latest estimate to  determine the extent to which planned program costs had changed.  Similarly, to determine the extent to which these programs changed their  planned schedule estimates, we compared each program\u2019s first  acquisition program baseline schedule to the latest schedule.", "To determine whether the selected programs met their performance  targets, we analyzed each program\u2019s self-identified system performance  targets and compared them against actual system performance metrics  and latest test reports. We also reviewed additional information on each  program\u2019s cost, schedule, and performance, including program  documentation, such as DOD\u2019s MAIS annual and quarterly reports,  acquisition program baselines, system test reports, and our prior reports.  We then aggregated and summarized the results of these analyses  across the programs.", "To address the third objective, we started with the list of the 15 programs  from the second objective as a basis for selecting three MAIS programs  as case studies. We used a combination of the following criteria to select  the MAIS programs to review.", "Programs used in a most recent MAIS review were eliminated from  consideration.", "The program was not designated as classified.", "The program had a baseline.", "Based on these criteria, we chose the following systems:", "Navy Consolidated Afloat Networks and Enterprise Services;", "Defense Logistics Agency\u2019s Defense Agencies Initiative, Increment 2;", "Defense Health Agency\u2019s Defense Healthcare Management System  Modernization.", "We then analyzed each selected program\u2019s IT acquisition documentation  and compared it to key requirements and risk management and leading practices\u2014including Software Engineering Institute\u2019s Capability Maturity  Model\u00ae Integration for Acquisition (CMMI- ACQ) practices\u2014to determine  the extent to which the programs were implementing these practices. In  particular, the requirements management practices we reviewed were: develop an understanding with the requirements providers on the  meaning of the requirements, obtain commitment to requirements from project participants, manage changes to requirements as they evolve during the project, maintain bidirectional traceability among requirements and work, and ensure that project plans and work products remain aligned with  requirements.", "Specifically, we analyzed program requirements documentation, including  requirements management plans, requirements traceability matrices,  requirements change forms, technical performance assessments, and  requirements board meeting minutes. Additionally, we interviewed  program officials to obtain additional information about their requirements  management practices. The conclusions reached for this objective are not  generalizable to the larger population of 34 business and non-business  MAIS programs.", "We also reviewed the following risk management practices: determine risk sources and categories; define parameters used to analyze and categorize risks and to control  the risk management effort; establish and maintain the strategy to be used for risk management;  identify and document risks; evaluate and categorize each identified risk using defined risk  categories and parameters, and determine its relative priority; develop a risk mitigation plan in accordance with the risk management  strategy; and monitor the status of each risk periodically and implement the risk  mitigation plan as appropriate.", "Specifically, we analyzed program risk documentation, including risk  reports, risk-level assignments, risk management plans, risk mitigation  plans, and risk board meeting minutes. Additionally, we interviewed  program officials to obtain additional information about their risks and risk  management practices.", "To assess the reliability of the data of these programs we used to support  the findings in this report, we corroborated program office responses with  relevant program documentation and interviews with agency officials. We  found no data reliability issues and determined that the data used in this  report were sufficiently reliable for our reporting purposes. We have also  made appropriate attribution indicating the sources of the data.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, the following staff also made key  contributions to this report: Eric Winter (Assistant Director), John Ortiz  (Analyst in Charge), Alex Bennett, Neha Bhatt, Chris Businsky, and  Rebecca Eyler."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-629T", "url": "https://www.gao.gov/products/GAO-18-629T", "title": "Coast Guard: Improved Acquisition Portfolio Management Could Help Address Aging Assets and Capability Gaps", "published_date": "2018-07-24T00:00:00", "released_date": "2018-07-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Coast Guard, a component within DHS, is spending billions of dollars to acquire assets, such as cutters and aircraft. This portfolio of major acquisition programs is intended to help the Coast Guard accomplish its missions\u2014including interdicting illegal drugs and search and rescue missions. GAO's extensive prior work on Coast Guard acquisitions has found that the Coast Guard's reliance on its annual budget process to manage its portfolio is a major management challenge. In the report issued today, GAO discusses particular challenges with the Coast Guard's approach in managing its acquisition portfolio, such as not performing a collective assessment of the portfolio to ensure affordability.", "This statement addresses the challenges the Coast Guard faces in (1) managing its overall acquisition portfolio, and (2) sustaining aging assets. This statement is based on GAO's extensive body of published and ongoing work examining the Coast Guard's acquisition efforts over several years."]}, {"section_title": "What GAO Found", "paragraphs": ["The Coast Guard's approach of relying on the annual budget process and the 5-year Capital Investment Plan (CIP) to manage its acquisition portfolio does not provide the best basis for making decisions to develop a more balanced and affordable portfolio in the long term. Specifically, the Coast Guard's annual budget-driven trade-off approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. Further, Coast Guard officials have told GAO the CIP reflects trade-off decisions made as part of the annual budget process, but it does not describe the effects of those trade-offs because including such information is not statutorily required. This short-term approach has also left the Coast Guard with a bow wave of near-term unfunded acquisition programs, putting future missions at risk. Until these trade-offs are transparent to all stakeholders and decision makers, the effectiveness of Coast Guard's long-term acquisition portfolio planning is limited.", "Until new assets being acquired become available, the Coast Guard plans to rely on aging assets, many of which are already past their intended service lives\u2014the time an asset is expected to operate. For example, the Coast Guard plans to replace the Medium Endurance Cutters (see figure) with the Offshore Patrol Cutters beginning in 2023, but the Medium Endurance Cutters exhausted their intended service lives in 2014.", "The Coast Guard plans to extend service lives for some of the Medium Endurance Cutters to keep them operating longer; however, maintenance for these vessels is becoming more expensive, and some systems are obsolete. GAO will continue to monitor the maintenance effort for the Medium Endurance Cutter and the Offshore Patrol Cutter acquisition in an annual review of Department of Homeland Security (DHS) major acquisition programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["The report on which this statement is primarily based ( GAO-18-454 ) recommends that the Coast Guard work with Congress to include in its annual CIP a discussion of how trade-off decisions could affect other acquisition programs. DHS agreed with this recommendation. GAO has also made other recommendations in this area in the past, as discussed in this testimony."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss key challenges the Coast Guard  faces as it seeks to modernize its aging assets, a process referred to as  Coast Guard recapitalization, including the management of the overall  Coast Guard acquisition portfolio. The Coast Guard continues to rely on  the annual budget process and its 5-year Capital Investment Plan (CIP)  for long-term acquisition planning, processes which we found have  contributed to capability gaps and funding shortfalls. For example, as the  Coast Guard continues this short-sighted approach, it is currently  experiencing a gap in its polar icebreaking capability, because the Coast  Guard does not have assets available to conduct its missions in both the  Arctic and Antarctic regions year round. The Coast Guard identified a  need for three heavy and three medium icebreakers in 2010, but to date it  has only one active heavy and medium icebreaker. Exacerbating this  capability gap is the condition of the Coast Guard\u2019s only operating heavy  polar icebreaker, the Polar Star, which we found has experienced longer  than expected maintenance periods in 2016 and 2017 to prepare for its  annual mission to Antarctica.", "My statement today will address challenges in the (1) management of the  overall Coast Guard acquisition portfolio, and (2) sustainment of certain  aging assets. This statement is based on our extensive body of work  examining the Coast Guard\u2019s acquisition efforts spanning the past several  years, including our report on Coast Guard acquisitions released today in  conjunction with this statement. We also include preliminary information based on our ongoing review of the Coast Guard\u2019s heavy polar icebreaker  acquisition.", "For the reports cited in this statement, among other methodologies, we  analyzed Coast Guard guidance, data, and documentation, and  interviewed Coast Guard officials at its headquarters and field units to  determine the total cost of the Coast Guard\u2019s acquisition portfolio and  how the Coast Guard manages its acquisition portfolio. Further detailed  information on our scope and methodology can be found in the reports  cited in this statement. For our ongoing work on the polar icebreaker, we  assessed the status of the Coast Guard\u2019s efforts to recapitalize its heavy  polar icebreaking fleet.", "We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe the evidence obtained provides  a reasonable basis for our findings and conclusions based on our audit  objectives."], "subsections": [{"section_title": "Coast Guard Faces Challenges in Effectively Managing its Acquisition Portfolio", "paragraphs": [], "subsections": [{"section_title": "Short-term Prioritization through the Annual Budget Process and the 5-Year Capital Investment Plan Limit Effective Planning", "paragraphs": ["We found in September 2012, and in our July 2018 review, that the Coast  Guard\u2019s approach of relying on the annual budget process and the 5-year  CIP to manage portfolio affordability does not provide the best basis for  making decisions to develop a more balanced and affordable portfolio in  the long term. Further, in June 2014, we found that there is no evidence  that short-term budget decisions will result in a good long-term strategy,  and the Coast Guard\u2019s annual budget-driven trade-off approach creates  constant churn as program baselines must continually re-align with  budget realities instead of budgets being formulated to support program  baselines. This situation results in trade-off decisions between capability  and cost being pushed into the future. For example, since 2010, the  Coast Guard has a stated requirement for three medium polar  icebreakers, but it has only one operational medium icebreaker, the  Healy, which has an expected end of service life\u2014the total period for  which an asset is designed to operate\u2014in 2029. Despite the requirement  for three medium polar icebreakers, Coast Guard officials said they are  not currently assessing acquisition of the medium polar icebreakers  because they are focusing on the heavy icebreaker acquisition and plan  to assess the costs and benefits of acquiring medium polar icebreakers at  a later time.", "As required by statute, the Coast Guard has, since 2012, prepared a 5- year CIP that it is required to update and submit annually with the  administration\u2019s budget request. The 5-year CIP is the Coast Guard\u2019s  key acquisition portfolio planning tool. However, in our July 2018 review,  we found that shortcomings of that plan that limit its effectiveness.  Specifically, we found that the Coast Guard\u2019s 5-year CIPs continue to  demonstrate a pattern of certain ineffective planning practices, such as  not identifying priorities or trade-offs between acquisition programs and  not providing information about the effect of current decisions on the  overall affordability of the acquisition portfolio.", "These shortcomings limit the Coast Guard\u2019s ability to manage the  affordability of its acquisition portfolio. Coast Guard officials said the CIP  reflects the highest priorities of the department within the given top  funding level and that prioritization and trade-off decisions are made as  part of the annual budget cycle. However, the reasoning behind these  decisions, and the resulting impacts on affected programs, are not  articulated in the CIPs. While the Coast Guard is not required under  statute to identify the effects of trade-off decisions in the CIP, failing to  show which acquisitions would take on more risk\u2014such as delays to  certain recapitalization efforts\u2014so other acquisitions can be prioritized  and adequately funded within budget parameters also makes it difficult for  Congress and other stakeholders, such as Department of Homeland  Security (DHS) and the Office of Management and Budget (OMB), to  understand any other options the Coast Guard considered. GAO\u2019s Cost  Estimating and Assessment Guide states that comparative analyses  showing facts and supporting details among competing alternatives, such  as budget priorities, should consider trade-offs needed to identify  solutions and manage risk. In the report we issued today, we  recommended that the Coast Guard work with Congress to include a  discussion of the acquisition programs it prioritized and describe how  trade-off decisions made could affect other acquisition programs in the  Coast Guard\u2019s annual 5-year CIP. DHS agreed with our recommendation  and plans to include additional information in future CIP reports to  address how trade-off decisions could affect other major acquisition  programs. The Coast Guard plans to implement this recommendation by  March 2020.", "In June 2014, we found that the Coast Guard needed to take a more  strategic approach in managing its acquisition portfolio. We  recommended that the Coast Guard develop a 20-year fleet  modernization plan that would identify all acquisitions necessary for  maintaining at least its current level of service and the fiscal resources  necessary to build these assets. DHS concurred with this  recommendation and the Coast Guard is in the process of developing a  20-year Long-Term Major Acquisitions Plan to guide and manage the  affordability of its acquisition portfolio, but DHS has not yet approved the  plan. Such an analysis would facilitate a fuller understanding of the  affordability challenges facing the Coast Guard while it builds the  Offshore Patrol Cutter, among other major acquisitions.", "The lack of a long-term plan and continuing to determine priorities and  make trade-off decisions based on the annual budget have rendered the  Coast Guard\u2019s acquisition planning reactive. We found that reactive  planning and the Coast Guard\u2019s constrained budget environment have  created a bow wave of near-term unfunded acquisitions, negatively  affecting future acquisition efforts and potentially affecting future  operations. This bow wave consists of new acquisition programs and  recapitalization efforts, as well as high-cost maintenance projects that use  the same acquisition construction and improvements account, which  continue to put pressure on available resources. These projects include  some that are not currently identified in the 5-year CIP. For instance, the  Coast Guard\u2019s 87-foot patrol boats are forecast to require recapitalization  beginning in 2023. Additionally, the ocean-going 175-foot coastal buoy  tenders are past the point in their service lives when a midlife  maintenance availability would normally have been conducted. In July  2018, we found that that the Coast Guard has historically operated  vessels well past their expected end of service life, and it will likely need  to do so with these assets given limited available acquisition funding."], "subsections": []}, {"section_title": "Executive Oversight Council Has Not Conducted Annual Reviews of All Acquisitions Collectively", "paragraphs": ["The Coast Guard has a management body\u2014the Executive Oversight  Council\u2014in place to conduct oversight of its major acquisition programs;  however, this management body has not conducted oversight across the  entire acquisition portfolio using a comprehensive, collective approach.  Among the Coast Guard\u2019s three cross-directorate groups that have roles  in the acquisition process, we found in July 2018 that the Executive  Oversight Council is best positioned to oversee the portfolio collectively  and has the potential to implement key portfolio-wide management  practices, including conducting formal reviews and issuing reports. This  council has cross-directorate senior-level management representation,  access to information on acquisition programs, and support from the other  two cross-directorate groups (the Systems Integration Team and the  Resource Councils). However, this council has not carried out these  portfolio-wide practices.", "In 2014, the Coast Guard updated the Executive Oversight Council\u2019s  charter, in response to our September 2012 recommendation, adding the  responsibility for portfolio-wide oversight to include conducting an annual  review to assess and oversee acquisitions collectively. However, in our  July 2018 review, we found that the Coast Guard revised the council\u2019s  charter in June 2017, removing this responsibility. According to  Executive Oversight Council officials, this responsibility was removed  from the 2017 charter because the council did not conduct these annual  reviews. Instead, Executive Oversight Council officials indicated that the  council facilitates a balanced and affordable portfolio of acquisition  programs through the individual program-level reviews. Best practices  states that successful organizations assess product investments in  aggregate, rather than as independent projects products or programs.  For example, by considering the requirements, acquisition, and budget  processes collectively, it helps organizations prioritize their product  investments.", "Further, we found that the Executive Oversight Council has not engaged  in overseeing or reporting on the acquisition portfolio collectively and  annually. OMB\u2019s 2017 Capital Programming Guide outlines a capital  programming process, including how agencies should effectively and  collectively manage a portfolio of capital assets. This OMB guidance  states that a senior-level executive review committee should be  responsible for reviewing the agency\u2019s entire capital asset portfolio on a  periodic basis and for making decisions or priorities on the proper  composition of agency assets needed to achieve strategic goals and  objectives within the budget limits. In the case of the Coast Guard, only  the Executive Oversight Council has members at the senior-level  executive level and has the responsibility for oversight of its major  acquisition programs. Without conducting comprehensive, collective  portfolio reviews at the senior management level, the Coast Guard does  not have sufficient cross-directorate information to determine needed  trade-offs in the major acquisitions realm, considering budget realities. It  is also limiting its ability to make strategic decisions on future  requirements and capability gaps in a timely manner within the acquisition  portfolio. In our July 2018 report on Coast Guard recapitalization efforts,  we recommended that the Commandant of the Coast Guard should  require the Executive Oversight Council, in its role to facilitate a balanced  and affordable acquisition portfolio, to annually review the acquisition  portfolio collectively, specifically for long-term affordability. DHS  disagreed with our recommendation stating that other bodies within the  Coast Guard, such as the Investment Board, Deputies Council, and  Investment Review Board\u2014are responsible for making decisions  regarding out-year funding, while the Executive Oversight Council works  outside of the annual budget process. DHS also stated that, to meet the  spirit of our recommendation, the Coast Guard will update the Executive  Oversight Council\u2019s charter to require a review of the collective acquisition  portfolio, specifically evaluating long-term planning. We believe that  updating the Executive Oversight Council\u2019s charter to include long-term- planning is a positive step. However, we continue to believe that in  addition to long-term planning, the Executive Oversight Council should  include the major acquisition portfolio\u2019s budget realities faced by the  Coast Guard in its reviews, or long-term affordability. If the planning  accounts for long-term funding considerations to achieve the Coast  Guard\u2019s acquisition goals and objectives, we believe the intent of our  recommendation would be met."], "subsections": []}, {"section_title": "Coast Guard\u2019s Heavy Polar Icebreaker Program\u2019s Optimistic Schedule Is Driven by Capability Gap Rather Than Knowledge-Based Analysis", "paragraphs": ["The Coast Guard\u2019s short-term planning focus has, in part, driven the  acquisition of its heavy polar icebreaker program to its current situation\u2014 trying to meet a highly optimistic schedule. The heavy polar icebreaker  program is intended to field three new icebreakers to replace the Coast  Guard\u2019s sole operational heavy polar icebreaker, the Polar Star. The  Polar Star is expected to reach the end of its service life between 2020  and 2023 while the first heavy polar icebreaker is expected to be  delivered in fiscal year 2023, with the second and third icebreakers  expected to be delivered in 2025 and 2026, respectively. Figure 1 shows  the potential icebreaking capability gap.", "We are currently conducting a review of the heavy polar icebreaker  acquisition, and, preliminarily, we have found that the Coast Guard set an  optimistic schedule baseline for the delivery dates for new polar  icebreakers based on the ice-breaking capability gap rather than an  analysis of what is realistic and feasible. Rather than building a schedule  based on knowledge\u2014such as determining realistic schedule targets and  analyzing how much time to include in the schedule to buffer against  potential delays, and comprehensively assessing schedule risks\u2014the  Coast Guard used the estimated end date of the Polar Star\u2019s service life  as the primary driver to set the lead icebreaker\u2019s objective (or target)  delivery date of September 2023 and threshold (latest acceptable)  delivery date of March 2024. Design study information provided by  several shipbuilders estimated that it could take up to 3.5 years to build  the lead icebreaker, but the Coast Guard is planning for a more optimistic  estimate of 2.5 years for the delivery date. Our best practices for  developing project schedules state that estimating how long an activity  takes should be based on the effort required to complete the activity and  the resources available and not driven by a specific completion date.", "In addition, preliminary findings indicate the Coast Guard did not conduct  analysis to identify a reasonable amount of margin or time to include in  the program schedule baseline to account for any delays in the program.  The current heavy polar icebreaker\u2019s schedule includes only 6 months of  margin between the Coast Guard\u2019s target and latest acceptable delivery  dates. However, our analysis of recent shipbuilding acquisitions shows  that longer schedule delays, whether they are in the program\u2019s control or  not, should be expected. For example, among the 12 selected  shipbuilding acquisition programs active in the last 10 years that we  analyzed, the Navy and the Coast Guard have delayed delivery of all but  one lead ship from their original planned delivery dates, with delays  ranging from 9 to 75 months. We have found in our past shipbuilding work  that delays have resulted from a number of issues, including redesign  work to address discoveries during pre-delivery testing, and key system  integration problems, and design quality issues among others. However,  Coast Guard officials told us such risks are not accounted for in the  Heavy Polar Icebreaker schedule. We plan to issue a report on the Coast  Guard\u2019s heavy polar icebreaker acquisition this summer. In addition, we  will continue to review this program in our annual assessment of major  acquisition programs."], "subsections": []}]}, {"section_title": "Coast Guard Faces Sustainment Challenges for the Polar Star and 270- foot Medium Endurance Cutters", "paragraphs": ["We found in July 2018 that the Coast Guard\u2019s heavy polar icebreaker  Polar Star and the Medium Endurance Cutters are currently either  approaching or operating beyond the end of their design service lives.  These cutters are in need of major maintenance overhauls\u2014or Service  Life Extension Projects (SLEP)\u2014in order to continue providing  capabilities to operators. According to Coast Guard officials, SLEPs are  necessary because the Coast Guard does not have the funds available to  initiate a new major acquisition program to recapitalize these assets in the  short term, or because a significant amount of maintenance work is  required to keep these assets operational until replacements are fielded.  These planned SLEPs involve several risks including scheduling and  funding."], "subsections": [{"section_title": "Heavy Icebreaker Polar Star has Required More Maintenance than Planned to Remain Operational", "paragraphs": ["After being placed in a nonoperational status in 2006 due to equipment  problems, the Coast Guard conducted reactivation work on the Polar Star  from 2010 to 2013, and the icebreaker resumed its primary mission for  the annual deployment to the National Science Foundation\u2019s McMurdo  Research Facility in Antarctica in 2014. Further, our July 2018 review  indicated that the Coast Guard is planning a SLEP on the Polar Star to  keep it operational until the first and second new heavy polar icebreakers  are delivered in order to bridge a potential operational gap. This  approach, according to Coast Guard officials, would allow the Coast  Guard to operate a minimum of two heavy icebreakers once the first polar  icebreaker is delivered and provide the Coast Guard with a self-rescue  capability\u2014the ability for one icebreaker to rescue the other if it became  incapacitated while performing icebreaking operations.", "However, we found that the Coast Guard\u2019s plans to conduct this SLEP  during its annual depot-level maintenance periods\u2014that is, maintenance  that is beyond the capability of the crew of a cutter or other asset\u2014may  not be feasible given the amount of maintenance already required on the  cutter. Specifically, the Polar Star\u2019s mission capable rating (an asset\u2019s  availability to conduct operations) has been decreasing in recent years  and reached a low point of 29 percent\u2014well below the target of 41  percent\u2014from October 2016 to September 2017. Based on mission  capable data, we found this was mostly due to additional time spent in  depot-level maintenance, which has increased in recent years from about  6 months in 2015 to more than 8 months in 2017. Additionally, the Polar  Star has required extensions of about 3 months for its annual dry dock  periods\u2014the period of time when a cutter is removed from the water so  that maintenance can be conducted\u2014in 2016 and 2017 to complete  required maintenance activities. These dry docks were originally planned  to last between 2 1/2 months and 4 months. We found in July 2018 that  these delays and extensions are likely to continue as the cutter ages.  According to Coast Guard officials, the Polar Star\u2019s SLEP work will be  conducted during the annual dry dock periods by adding an additional 1  or 2 months to the annual dry docks. However, if the work is unable to be  completed during this timeframe, it could force the Coast Guard to miss  its commitment to conduct its annual Antarctica mission. Coast Guard  maintenance officials stated that until the Polar Star completes the SLEP,  its repairs will likely continue to get more expensive and time consuming.", "As we found in July 2017, the Polar Star SLEP effort has a rough-order  cost estimate of $75 million, which is based on the reactivation work  completed in 2013. However, we found this estimate may be unrealistic  based on assumptions the Coast Guard used, such as that it would  continue to use parts from the Coast Guard\u2019s other heavy polar  icebreaker, the Polar Sea, which has been inactive since 2010. The  Coast Guard\u2019s recent assessment of the Polar Star\u2019s material condition\u2014 the physical condition of the cutter, which includes the hull structure,  habitability, major equipment systems, and spare parts availability\u2014was  completed in January 2018. The material assessment stated that many  of the available parts from the Polar Sea have already been removed and installed on the Polar Star. As a result of the finite parts available from the  Polar Sea, the Coast Guard may have to acquire new parts for the Polar  Star that could increase the $75 million SLEP estimate. The Polar Star\u2019s  recent material assessment will form the basis to determine which  systems will be overhauled during the SLEP and for a more detailed cost  estimate. The Coast Guard expects the Polar Star SLEP to begin by June  2020, at which time the Polar Star could reach the end of its current  useful service life (currently projected to be between 2020 to 2023). This  timeline contains risk that the Polar Star could be rendered inoperable  before the cutter is able to undergo a SLEP. We will continue to monitor  the Polar Star\u2019s SLEP through our annual review of DHS programs."], "subsections": []}, {"section_title": "Coast Guard Is Developing Plans to Extend Medium Endurance Cutters\u2019 Service Lives", "paragraphs": ["The Coast Guard operates two fleets of Medium Endurance Cutters (270- foot and 210-foot cutters) and both are either approaching or have  exceeded their design service lives. According to Coast Guard officials,  there are no plans to extend the service lives of the 210-foot Medium  Endurance Cutters due to the age of the vessels (some of the cutters will  be over 60 years old when they are expected to be removed from  service). However, we found in July 2018 that, according to Coast Guard  maintenance officials, the primary problem facing the 270-foot Medium  Endurance Cutters is obsolescence of parts. The cutters have several  systems that are no longer manufactured, and in many cases the original  manufacturer no longer makes parts for the systems, such as the  generators, fire pumps, and main diesel engines. To sustain the 270-foot  Medium Endurance Cutters until the replacement cutters\u2014the Offshore  Patrol Cutters\u2014are delivered, the Coast Guard is planning to conduct a  SLEP. Coast Guard officials stated they are evaluating how many of the  13 270-foot cutters will undergo the SLEP.", "According to Coast Guard officials, the Offshore Patrol Cutter acquisition  program is on track to meet its cost and schedule goals. The Coast Guard  is in the process of completing the design of the cutter before starting  construction, which is in-line with GAO-identified shipbuilding best  practices. In addition, Coast Guard officials stated that the program is  using state-of-the-market technology that has been proved on other ships  as opposed to state-of-the-art technology, which lowers the risk of the  program. The Coast Guard expects to start construction of the first  Offshore Patrol Cutter in fiscal year 2019 and procure a total of 25 ships,  with plans to initially fund one cutter per year and eventually two cutters  per year until all 25 cutters are delivered. Further, Coast Guard officials  have stated that if the Offshore Patrol Cutter program experiences any  delays, it will likely decrease the Coast Guard\u2019s operational capacity  because the legacy Medium Endurance Cutters will likely require  increased downtime for maintenance and other issues, reducing their  availability. As we indicated earlier, short-term planning limits the Coast  Guard\u2019s ability to identify and consider tradeoffs with its acquisition  portfolio.", "The Coast Guard is evaluating how long the 270-foot Medium Endurance  Cutters should remain in service. According to Coast Guard officials, this  decision is at least partially dependent on the delivery of the Offshore  Patrol Cutters\u2014specifically the shipbuilder\u2019s ability to deliver 2 cutters per  year, which is expected to start in fiscal year 2024 with the 4th and 5th  cutters. Officials stated that the Coast Guard does not plan to operate any  Medium Endurance Cutters once all 25 Offshore Patrol Cutters are  operational, yet the fiscal year 2018 through 2022 CIP report indicates  that 7 of the 270-foot Medium Endurance Cutters will still be in service  when all 25 Offshore Patrol Cutters are delivered and operational.  Officials said this is a contingency plan in case not all Offshore Patrol  Cutters are delivered on time. Figure 2 shows the planned delivery dates  for the Offshore Patrol Cutters and the proposed decommissioning dates  for the legacy Medium Endurance Cutters.", "The fiscal year 2018 through 2022 CIP shows that there is little, if any,  gap between when the 210-foot and 270-foot Medium Endurance Cutters  will be removed from service and when the Offshore Patrol Cutters will be  operational. However, both Medium Endurance Cutter classes will be well  past their end of service lives by the time they are decommissioned. For  instance, in our July 2012 report, we found that the 210-foot Medium  Endurance Cutter Dependable reached its end of service life in 2006.  Nevertheless, based on the fiscal year 2018 through 2022 CIP, we found  that the Coast Guard plans for the cutter to operate for an additional 23  years (until 2029) without any major sustainment work to extend its  service life. While it is not unusual for the Coast Guard to operate cutters  for longer than originally planned, the lack of a more comprehensive,  collective portfolio management approach, in part, will result in some of  the Medium Endurance Cutters operating over 60 years, which is 30  years beyond their original design service lives.", "In addition, the Coast Guard\u2019s own assessments indicate likely  challenges. For instance, the Coast Guard\u2019s February 2017 Sustainability  Assessment of the 210-foot Medium Endurance Cutters, it rated 5 of the  14 cutters as a high risk for sustainability, which reflects either a poor  material condition or high maintenance costs. Moreover, the most  recent material condition assessments for the Medium Endurance  Cutters, completed in 2015, found that", "210-foot Medium Endurance Cutters cannot be expected to meet  operational requirements using the normal depot-level maintenance  funding levels due to the time required to complete maintenance and  the increased maintenance costs in recent years; and mission effectiveness of the 270-foot Medium Endurance Cutters will  continue to degrade without a near-continuous recapitalization of  older sub-systems.", "In July 2012, we found that as assets age beyond their design service  lives, they can negatively affect the Coast Guard\u2019s operational capacity to  meet mission requirements as the cutters require more maintenance.", "We will continue to monitor the Medium Endurance Cutters\u2019 SLEP and  the Offshore Patrol Cutter acquisition in our annual review of major  acquisition programs.", "In conclusion, as the Coast Guard continues modernizing its fleet and  sustaining existing assets for longer than planned, it is important that it  develops a more strategic and comprehensive approach for managing its  portfolio so that future requirements and capability gaps can be  addressed in a timely manner. The Coast Guard has a history of using its  annual budgets to plan its acquisition portfolio, which leads to ever  changing priorities and creates deferred acquisitions and a bow wave of  future funding requirements. This bow wave has begun and the Coast  Guard will continue to add to it until it begins to have a longer-term focus,  such as with the creation of the 20-year Long Term Major Acquisition  Plan that we recommended in 2014. The Coast Guard has an opportunity  with this plan to lay the foundation for the success of the future acquisition  portfolio by showing what assets are needed and how much it is expected  to cost, and it will position itself to provide decision makers with critical  knowledge needed to prioritize its constrained acquisition funding. In the  meantime, the Coast Guard would benefit from describing in the 5-year  CIP how the annual trade-off decisions that are made could affect other  acquisition programs. This would help decision makers understand the  needs of the Coast Guard so that they can know how to better allocate  taxpayer dollars as they invest in new more capable Coast Guard assets.", "Chairman Hunter, Ranking Member Garamendi, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition,  contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Individuals who  made key contributions to this testimony include Rick Cederholm,  Assistant Director; Peter W. Anderson; John Crawford; Claire Li; Roxanna  Sun; and David Wishard.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The Coast Guard is modernizing its fleets of aircraft, cutters, and other assets, but it continues to lack a long-term plan to guide these efforts. Instead, it relies on a short-term focus of yearly budgets and its 5-year plan. This has led to unpredictable funding and capability gaps.", "For example, the Coast Guard has identified a need for three heavy and three medium icebreakers, but has only one of each.", "In the report on which our testimony is based, we recommended that, in its annual reports to Congress, the Coast Guard describe how budget trade-off decisions will affect the other programs in its acquisition portfolio."]}
{"id": "GAO-18-580", "url": "https://www.gao.gov/products/GAO-18-580", "title": "Indian Health Service: Agency Faces Ongoing Challenges Filling Provider Vacancies", "published_date": "2018-08-15T00:00:00", "released_date": "2018-08-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IHS is charged with providing health care to AI/AN people who are members or descendants of 573 tribes. According to IHS, AI/AN people born today have a life expectancy that is 5.5 years less than all races in the United States, and they die at higher rates than other Americans from preventable causes. The ability to recruit and retain a stable clinical workforce capable of providing quality and timely care is critical for IHS. GAO was asked to review provider vacancies at IHS.", "This report examines (1) IHS provider vacancies and challenges filling them; (2) strategies IHS has used to recruit and retain providers; and (3) strategies IHS has used to mitigate the negative effects of provider vacancies. GAO reviewed IHS human resources data for the provider positions that the agency tracks. GAO also reviewed policies, federal internal control standards, and legal authorities related to providers in federally operated IHS facilities. GAO interviewed IHS officials at the headquarters and area level and at selected facilities. GAO selected facilities based on variation in their number of direct care outpatient visits and inpatient hospital beds in 2014."]}, {"section_title": "What GAO Found", "paragraphs": ["Indian Health Service (IHS) data show sizeable vacancy rates for clinical care providers in the eight IHS geographic areas where the agency provides substantial direct care to American Indian/Alaska Native (AI/AN) people. The overall vacancy rate for providers\u2014physicians, nurses, nurse practitioners, certified registered nurse anesthetists, certified nurse midwives, physician assistants, dentists, and pharmacists\u2014was 25 percent, ranging from 13 to 31 percent across the areas.", "IHS officials told GAO that challenges to filling these vacancies include the rural location of many IHS facilities and insufficient housing for providers. Officials said long-standing vacancies have a negative effect on patient access, quality of care, and employee morale.", "IHS uses multiple strategies to recruit and retain providers, including offering increased salaries for certain positions, but it still faces challenges matching local market salaries. IHS also offers other financial incentives, and has made some housing available when possible. In addition, IHS uses strategies, such as contracting with temporary providers, to maintain patient access to services and reduce provider burnout. Officials said these temporary providers are more costly than salaried employees and can interrupt patients' continuity of care. However, IHS lacks agency-wide information on the costs and number of temporary providers used at its facilities, which impedes IHS officials' ability to target its resources to address gaps in provider staffing and ensure access to health services across IHS facilities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that IHS obtain, on an agency-wide basis, information on temporary provider contractors, including their associated cost and number of full-time equivalents, and use this information to inform decisions about resource allocation and provider staffing.", "IHS concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Indian Health Service (IHS), an agency within the Department of  Health and Human Services (HHS), is charged with providing health care  services to the approximately 2.2 million American Indian and Alaska  Native (AI/AN) people who are members or descendants of 573 federally  recognized tribes. According to IHS, its agency-wide goal is to ensure  comprehensive, culturally acceptable personal and public health services  are available and accessible to AI/AN people. One of the agency\u2019s  priorities is to recruit, develop, and retain a dedicated, competent  workforce that provides health care services in IHS\u2019s 12 geographic areas  either directly through a system of federally operated IHS facilities or  through facilities that are operated by tribes or others. Federally operated  IHS facilities are located in ten of these geographic areas, which are  mostly in rural areas, and are overseen by IHS area offices. In the  remaining two geographic areas, all facilities are tribally operated.  According to IHS, AI/AN people born today have a life expectancy that is  5.5 years less than all races in the United States, and they die at higher  rates than other Americans from many preventable causes, including  diabetes, suicide, chronic liver disease and cirrhosis, and chronic lower  respiratory diseases. Such health outcomes underscore the importance of  a strong clinical workforce capable of providing quality and timely health  care for AI/AN people.", "Over the past several years, we and others have expressed concern  about IHS\u2019s ability to ensure it has the appropriate clinical workforce to  meet the current and future needs of AI/AN people. In 2016, we reported  that, according to IHS, an insufficient workforce was the biggest  impediment to ensuring patients\u2019 access to timely primary care. In  addition, that same year, HHS\u2019s Office of Inspector General reported that  vacancies at IHS, as well as the agency\u2019s use of acting positions,  sometimes limited the availability of services and decreased continuity of  care. According to Healthy People 2020\u2014HHS\u2019s 10-year national  objectives for improving the health of Americans\u2014improving access to  health care services depends in part on ensuring people have a usual  and ongoing source of care, and people with a usual source of care  experience better health outcomes and fewer disparities.", "You asked us to review IHS staffing issues. This report examines  1.  IHS provider vacancies and challenges filling them;  2.  strategies IHS has used to recruit and retain providers; and  3.  strategies IHS has used to mitigate the negative effects of provider  vacancies.", "To examine employee vacancies for provider positions at IHS and  challenges in filling those vacancies, we analyzed data collected by IHS  as of November 2017, on the eight provider positions that the agency  tracks\u2014physicians, nurses, dentists, pharmacists, nurse practitioners,  certified registered nurse anesthetists (CRNA), certified nurse midwives,  and physician assistants. These data include the number of positions for  each of these types of providers in federally operated IHS facilities, the  number of those positions that were vacant, and the number that were  filled by either civilians or Public Health Service Commissioned Corps  officers\u2014referred to throughout this report as Commissioned Corps  officers\u2014who have taken permanent positions with IHS. We interviewed  IHS officials about these data and conducted manual and electronic tests  to identify any data anomalies. We did not independently verify the  number of reported positions or whether they were filled, nor did we  assess IHS\u2019s method for calculating the total number of positions. We  determined these point-in-time data were sufficiently reliable for our  purposes. Through our initial analysis, we determined that 4 of the 12 IHS  areas had relatively few positions for these provider types\u201430 or fewer in  total, compared to 166 to 1,567 in the other 8 areas. We therefore limited  our analyses of vacancies to the 8 IHS areas where IHS has substantial  direct care responsibilities\u2014Albuquerque, Bemidji, Billings, Great Plains,  Navajo, Oklahoma City, Phoenix, and Portland. In addition, we  interviewed officials from IHS headquarters and all 12 area offices about  the causes of IHS provider vacancies and the challenges associated with  filling these positions.", "To examine steps IHS has taken to recruit and retain providers and to  mitigate the negative effects of provider vacancies, we reviewed federal  laws, the Indian Health Manual, IHS guidance, prior GAO reports, and  documentation of area governing board meetings. We also interviewed  officials from IHS headquarters\u2014including officials from IHS\u2019s Office of  Human Resources\u2014and senior officials from all 12 area offices and all 5  regional human resources offices, who assist the area offices in recruiting  and hiring providers. We asked these officials about how the agency has  assessed its vacancy rates, and steps it has taken at the headquarters,  area, and facility-levels to recruit and retain providers. In addition, we  visited 7 federally operated facilities in three different IHS areas and  interviewed staff about steps taken to address provider vacancies. In  addition to geographic diversity, we selected these facilities based on  variation in their number of direct care outpatient visits and inpatient  hospital beds in 2014, the most recent data available. We evaluated steps  taken to address IHS provider vacancies against relevant standards for  internal control in the federal government. In addition, we interviewed  officials from three facilities operated by the Veterans Health  Administration (VHA) and officials from three tribes\u2014entities that also  provide direct health care services\u2014that are located near our selected  IHS facilities to obtain information on strategies they use to fill selected  clinical positions. Our findings are not generalizable to other IHS, VHA,  or tribal facilities. We also interviewed officials from groups representing  AI/AN tribes and their members about strategies used by tribally operated  facilities to recruit and retain providers.", "We conducted this performance audit from January 2017 through August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  the evidence obtained provides a reasonable basis for our findings and  conclusions on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Indian Health Service", "paragraphs": ["IHS was established within the Public Health Service in 1955 to provide  health services to members of AI/AN tribes, primarily in rural areas on or  near reservations. IHS provides these services directly through a network  of hospitals, clinics and health stations, while also providing funds to  tribally operated facilities. These federally and tribally operated facilities  are located primarily in service areas that are rural, isolated, and  underserved. In fiscal year 2017, IHS allocated about $1.9 billion for  health services provided by federally and tribally operated facilities.  Federally operated IHS facilities, which received over 5.2 million  outpatient visits and over 15,000 inpatient admissions in 2016, provide  mostly primary and emergency care, as well as some ancillary and  specialty services in 26 hospitals, 55 health centers, and 21 health  stations. According to IHS, federally operated IHS hospitals range in size  from 4 to 133 beds and generally are open 24 hours a day for emergency  care needs; health centers offer a range of care, including primary care  services and some ancillary services, such as pharmacy, laboratory, and  X-ray services, and are open for at least 40 hours a week; and health  stations offer only primary care services on a regularly scheduled basis  and are open fewer than 40 hours a week.", "The 12 IHS area offices are responsible for distributing funds to the  facilities in their areas, monitoring their operation, and providing guidance  and technical assistance (see fig. 1). In addition, five human resources  regional offices assist the area offices in the recruitment and hiring of  providers.", "IHS federally operated facilities employ both federal civil service  personnel and Commissioned Corps officers. IHS may pay higher  salaries for certain federal civil service providers through the development  and implementation of special pay tables, which specify the ranges of  salaries that these certain providers can receive. According to IHS  officials, the Commissioned Corps officers follow the same process for  applying for positions at IHS as federal civil service employees. However,  the Commissioned Corps officers are uniformed health professionals  whose pay and allowances are different. IHS also supplements its  workforce capacity with both temporary and long-term contracts with  individual physicians or a medical staffing company.", "IHS downloads information on all funded and active positions from the  Capital Human Resource Management System, an HHS data system  used for personnel and payment transactions that IHS began using in  2016 to track all employee vacancies. According to IHS officials, the  accuracy of the data is verified quarterly by regional human resources  officers. As the IHS health care workforce also includes Commissioned  Corps officers\u2014who have a separate personnel system\u2014the information  on Commissioned Corps officers assigned to IHS are entered into the  Capital Human Resource Management System manually, according to  IHS officials."], "subsections": []}, {"section_title": "Rural Health Care Delivery Challenges", "paragraphs": ["According to the National Rural Health Association, the challenges of  rural health care delivery are different than those in urban areas. These  challenges include those related to more complex patient health status  and poorer socioeconomic conditions, as well as physician workforce  shortages. According to the Agency for Healthcare Research and Quality,  compared with their urban counterparts, residents of rural counties are  older, poorer, more likely to be overweight or obese, and sicker. Those  living in rural areas also have greater transportation difficulties reaching  health care providers, often traveling great distances to reach a doctor or  hospital. Exacerbating these challenges is a relative scarcity of medical  providers in rural areas compared to urban areas. For example, the  National Center for Health Statistics reported the primary care physician- to-patient ratio in rural areas in 2012 was 39.8 physicians per 100,000  people, compared to 53.3 physicians per 100,000 in urban areas."], "subsections": []}]}, {"section_title": "IHS Data Show Sizeable Provider Vacancies and Officials Identified Various Challenges to Filling Them IHS Data Demonstrate Sizeable Provider Vacancies", "paragraphs": ["IHS data demonstrate large percentages of vacancies for providers in the  8 areas in which IHS has substantial direct care responsibilities. As of  November 2017, the overall percentage of vacancies for physicians,  nurses, nurse practitioners, CRNAs, certified nurse midwives, physician  assistants, dentists, and pharmacists in these areas was 25 percent,  ranging from 13 to 31 percent across the areas. (See fig. 2)", "However, variation in vacancy rates existed among provider types across  IHS areas. For example, while the overall percentage of vacancies for  physicians, nurses, nurse practitioners, dentists, and physician assistants  each exceeded 25 percent, the vacancy rate for pharmacists was less  than 25 percent. In addition, for certain provider types in some areas,  more than one-third of the positions were vacant. For example, although  29 percent of the total positions for physicians across these 8 areas were  vacant, the vacancy rate ranged from 21 percent in the Oklahoma City  area to 46 percent in the Bemidji and Billings areas. (See fig. 3.)", "As another example, although 27 percent of the total positions for nurses  across these 8 areas were vacant, the vacancy rate ranged from 10  percent in the Oklahoma City area to 36 percent in the Albuquerque and  Bemidji areas. (See fig. 4.)", "Similarly, across these 8 areas", "32 percent of the total positions for nurse practitioners were vacant,  ranging from 12 percent in the Oklahoma City area to 47 percent in  the Albuquerque area;", "27 percent of the total positions for dentists were vacant, ranging from  14 percent in the Phoenix area to 39 percent in the Bemidji area; and", "30 percent of the total positions for physician assistants were vacant,  and although 4 of the areas had few such positions (the Albuquerque,  Bemidji, Oklahoma City, and Portland areas each had 7 or fewer  positions), the percentage of vacancies in the 4 areas with 15 or more  such positions ranged from 21 percent in the Phoenix area to 40  percent in the Billings area.", "In contrast, 13 percent of the total positions for pharmacists were vacant,  ranging from 3 percent in the Bemidji area to 17 percent in the  Albuquerque area. For more information about the vacancies for specific  clinical positions, see appendix I.", "While sizeable vacancies existed across provider types and areas, the  majority of positions in all eight areas were occupied by civilians, and  about 13 percent were filled by Commissioned Corps officers who are  fulfilling assignments with a minimum 2-year term. The percentages of  positions by IHS area that were vacant, filled by civilians, and filled by  Commissioned Corps officers as of November 2017 are shown in figure  5."], "subsections": [{"section_title": "IHS Officials Identified Challenges to Filling Provider Vacancies, As Well As Negative Effects of Vacancies on Patient Care and Provider Satisfaction", "paragraphs": ["IHS officials told us they have experienced considerable challenges in  filling vacancies for providers\u2014as well as negative effects on patient care  and provider satisfaction when positions are vacant. According to IHS  officials, the rural locations and geographic isolation of some IHS facilities  create recruitment and retention difficulties. IHS data indicate that 36 of  the 102 IHS facilities, including four hospitals, are identified as isolated  hardship (ISOHAR) posts. Agency documentation describes ISOHAR  posts as \u2018\u2018unusually difficult, which may present moderate to severe  physical hardships for individuals assigned to that geographic location,\u2019\u2019  and states that physical hardships may include crime or violence,  pollution, isolation, a harsh climate, scarcity of goods on the local market,  and other problems. In addition, IHS has reported that insufficient  housing, substandard schools, lack of entertainment opportunities, and  shopping centers located more than three hours away are all typical not  only of ISOHAR posts, but also of many other IHS facility locations.  Officials stated that, especially for job candidates and employees with  families, these can be critical factors in choosing whether or not to accept  or stay in a position. For example, officials from the Portland Area office  told us the Colville Service Unit has experienced challenges recruiting  physicians because the service unit is 110 miles away from Spokane, and  many of the smaller towns nearby have limited amenities\u2014including  limited employment opportunities for spouses and school systems that  may not meet the expectations of some prospective employees.", "In addition to hardships generally associated with rural locations, IHS  facilities can experience additional challenges specific to recruiting and  retaining providers for facilities on tribal lands. For example, Navajo area  officials told us that providers who are non-native or are not married to a  tribal member generally must go off the reservation to find housing if it is  not provided by IHS. According to IHS, the Navajo Nation is one of the  largest Indian reservations in the United States, consisting of more than  25,000 contiguous square miles and three satellite communities, and  extending into portions of Arizona, New Mexico, and Utah. Living off the  reservation can result in long commutes, contributing to a difficult work- life balance. Furthermore, IHS officials noted, public transportation such  as buses or trains do not exist in proximity to most IHS facilities.", "IHS facility staff told us long-standing vacancies have a direct negative  effect on patient access to quality health care, as well as employee  morale. Officials from multiple facilities we visited told us they have had to  cut certain patient services due to ongoing provider vacancies. For  example, officials from the Phoenix Area office told us the Nevada Skies  Youth Wellness Center, an adolescent substance abuse treatment center,  decreased the number of beds available due to staffing vacancies.  Similarly, officials from the Rosebud Hospital stated the facility has  diverted obstetrics patients to other facilities since July 2016 due to a  shortage of physicians, nurses, and nurse anesthetists. During the  diversion, those patients were referred to other hospitals in Valentine,  Nebraska, and Winner, South Dakota\u2014about 45 miles away. An official  from the Sioux San Hospital said that because of vacancies in the  diagnostic testing laboratory, the hospital stopped conducting Chlamydia  tests in-house and instead sends specimens out to another laboratory for  testing. As a result, the official stated it takes about a week longer to get  the test results, which can delay treatment. In addition facility staff we  interviewed told us the increased stress and fatigue of providers working  to make up for staffing shortages results in decreased employee morale.  These staff stated that, in some cases, this stress and fatigue has caused  providers to leave IHS. One doctor we spoke with described this dynamic  of vacancies begetting additional vacancies as a \u201cnever-ending cycle\u201d for  the facility."], "subsections": []}]}, {"section_title": "IHS Uses Multiple Strategies to Recruit and Retain Providers", "paragraphs": ["In an effort to recruit and retain permanent employees, IHS has used  strategies that are similar to strategies used by VHA and tribal facilities in  our review. Specifically, IHS has provided financial incentives,  professional development opportunities, and some access to housing.  The agency has also taken steps to recruit students and connect with  potential applicants through webinars, career fairs, and conferences."], "subsections": [{"section_title": "Salaries and Other Financial Incentives", "paragraphs": ["IHS offers increased special salary rates for certain health care positions,  as well as other financial incentives, such as recruitment and retention  bonuses. IHS also offers student loan repayments, in return for health  professionals\u2019 commitment to work at IHS for a specified period of time.", "Special salary rates. IHS offers special higher salary rates for  physicians, dentists, nurses, CRNAs, certified nurse midwives, nurse  practitioners, optometrists, pharmacists, and physician assistants.  IHS officials stated that special salary rates are an important  recruitment and retention tool for providers, and that without them,  federally operated IHS facilities would be at a competitive  disadvantage with the private sector, VHA, and tribally operated  facilities. In 2015 IHS reported that recruiting and retaining CRNAs  was \u201can ongoing problem for IHS\u2014mostly due to pay,\u201d and the  agency rarely had \u201ca sufficient applicant pool.\u201d IHS reported \u201cCRNA  services were integral to IHS operations\u201d and without the ability to  recruit and retain these providers, IHS was \u201cat risk of having to curtail  services to clients.\u201d As a result, according to IHS officials, the  agency developed special salary rates for CRNAs, which became  effective on December 31, 2015. As of November 2017, IHS had no  CRNA vacancies.", "However, according to IHS officials, the agency has only developed  seven national special pay tables and two local special pay tables for  Alaska, as of January 2018, due to a lack of human resources personnel  trained in this process. Officials told us only one human resources staff  person at IHS is experienced with developing special pay tables, which  takes a substantial amount of work. However, they stated that this task is  only one of her job responsibilities, and she can complete about one  special pay table each year. In comparison, according to an official, VHA  has developed and regularly revises over 3,000 special salary rates  based on local market conditions. For example, IHS officials stated that  Phoenix Indian Medical Center cannot offer salaries that are competitive  with VHA because salaries for providers in the Phoenix area are relatively  high compared to national salaries, and IHS has not developed local  salary rates in the Phoenix market. For example, using pay rates effective  January 7, 2018, a nurse just starting a career in the Phoenix area could  make $63,871 at VHA (local pay table), versus $44,835 at IHS (national  pay table).", "Although offering increased salaries is an important strategy that IHS  uses for recruitment, IHS still experiences challenges in offering  competitive salaries. Officials from two area offices told us the maximum  amount for a physician salary or certain nursing salaries were not enough  for some potential hires, who sought employment elsewhere. While IHS  may seek approval from HHS to exceed the maximum salary of certain  pay tables, IHS officials said the approval process can be lengthy, which  has resulted in the loss of promising candidates\u2014including emergency  medicine, general surgery, radiology, and anesthesiologist providers.  Similarly, officials from one area office stated that federally operated IHS  facilities have experienced challenges competing with other health care  systems in recruiting local health care providers, including tribally  operated facilities. For example, officials from the Oklahoma City area  office told us their area has four of the largest American Indian tribes in  the country running their own health systems. According to these officials,  in addition to IHS funds, these tribes use money from other sources to  pay health care salaries. IHS officials explained that, as a result, tribes  can pay higher salaries and may be able to offer other incentives that IHS  is unable to provide.", "Recruitment, relocation, and retention incentives. IHS may offer  recruitment, relocation, and retention incentives. Specifically, for  positions that are difficult to fill or for individuals who are unlikely to  accept the position without an incentive, IHS may offer potential  employees a recruitment incentive up to 25 percent of their annual  salary. IHS may also pay a relocation incentive for a current employee  who must relocate for a position that would otherwise be difficult to  fill.  In addition, IHS may pay a retention incentive of up to 25  percent of an employee\u2019s current salary if he or she (1) has unusually  high or unique qualifications or if there is a special need of the  agency, which makes retention essential, or (2) is likely to leave IHS  without the retention incentive. Officials from the Phoenix area office  told us IHS facilities use the retention bonuses extensively for nursing  staff, in particular, to help match the market pay. IHS also analyzed  the recruitment and retention of nurses and, as a result of this  analysis, requested an exception to the 25 percent limit on  recruitment, relocation, and retention incentives, from the Office of  Personnel Management (OPM). In December, 2017, OPM approved  IHS\u2019s request to offer incentives up to 50 percent, and IHS officials  told us that they are currently reviewing implementation options.", "Loan repayment. IHS\u2019s Loan Repayment Program pays provider  education loans in exchange for an initial two-year service  commitment to practice in health facilities serving AI/AN  communities. Recipients agree to serve two years in exchange for  up to $20,000 per year in loan repayment funding and up to an  additional $5,000 per year to offset tax liability, which IHS pays  directly to the Internal Revenue Service. Loan repayment recipients  can extend their initial two-year contract on an annual basis until their  original approved educational loan debt is paid. In fiscal year 2017, a  total of 1,267 providers\u2014about 8 percent of the federal IHS  workforce\u2014were receiving IHS loan repayments. This included 434  new two-year contracts, 396 one-year extension contracts, and 437  providers starting the second year of their fiscal year 2016 two-year  contract. However, IHS\u2019s Loan Repayment Program is not able to pay  for the loans of all providers who request it due to limited funding.  According to officials in one area office, this has caused providers to  either decline a job offer or leave IHS. According to IHS\u2019s fiscal year  2019 budget justification, in fiscal year 2017, 412 providers employed  by IHS who applied for loan repayment, did not receive one. An  additional 376 applicants either declined a job offer because they did  not receive loan repayment funding or were unable to find a suitable  assignment meeting their personal or professional needs. Officials in  the Billings Area Office told us several physicians stated during exit  interviews that they were leaving because they did not receive the  loan repayment funding they hoped to receive. According to area  office officials, the Billings area lost 5 physicians in 2 weeks because  they were not awarded loan repayments.", "In addition to its own loan repayment program, IHS has worked with  HHS\u2019s Health Resources and Services Administration (HRSA) to increase  opportunities for providers to apply for loan repayment through the  National Health Service Corps. Specifically, IHS worked with HRSA to  increase the number of facilities deemed medically underserved and  therefore designated Health Professional Shortage Areas. According to  IHS, this resulted in 684 health care delivery sites for placement of  National Health Service Corps providers, and the number of placements  increased to 443 providers as of August 2016. As of January 2018,  according to IHS officials, there were 499 providers serving at 797 eligible  sites. Applicants cannot receive loan repayment from more than one  program concurrently."], "subsections": []}, {"section_title": "Professional Development Opportunities", "paragraphs": ["Officials from several facilities told us they provide access to professional  development opportunities for IHS employees as a retention tool. For  example, Northern Navajo Medical Facility (Shiprock) officials said they  are sending nurse managers and two to three potential future leaders to  the American Organization of Nurse Executive trainings. Officials told us  this training allows the nurses to network with private executives and look  at fellowships. In addition, Chinle Comprehensive Health Care Facility  officials told us they paid for a 2-year residency at University of Texas  Health Science Center so one of their dentists could obtain additional  training in pediatric dentistry. Officials told us that, in return, the dentist  agreed to stay at the Chinle Comprehensive Health Care Facility for 6  years. In addition, Shiprock service unit officials told us they have offered  their providers, through a partnership with the University of New Mexico,  an online Masters of Science in Public Health program in health  management."], "subsections": []}, {"section_title": "Housing", "paragraphs": ["When housing is limited near IHS facilities, IHS has made some housing  available to assist with recruitment and retention of providers. Area  officials told us federally operated IHS facilities in the Albuquerque, Great  Plains, Phoenix, Billings, and Navajo areas provide some government- subsidized housing for providers and their families. At four of the seven  facilities we visited\u2014the Kayenta Health Center, Chinle Comprehensive  Health Care Facility, Rosebud Hospital, and Pine Ridge Hospital\u2014we  observed some staff housing.", "Kayenta Health Center. Officials from Kayenta Health Center told us  that they provide 158 housing units, from 1 bedroom to 4 bedrooms.  In addition, the facility has a 19-unit building, similar to a hotel (fully  furnished), for temporary contract providers. Officials said they are  considering opening units in this building to permanent employees.", "Chinle Comprehensive Health Care Facility. Officials from Chinle  Comprehensive Health Care Facility told us there are 264, 1 to 4  bedroom housing units available for providers both on its campus and  nearby. IHS officials also told us they provide access to 19 parking  spaces for camping vehicles.", "Rosebud Hospital. Officials from Rosebud Hospital stated they  provide 150 housing units and are also constructing a 19-unit hotel- style building. They said that most, if not all, candidates from outside  of the area ask about housing unit availability when deciding whether  to accept a position.", "Pine Ridge Hospital. Officials from Pine Ridge Hospital told us that  IHS also provides 105 housing units for its employees. IHS officials  explained the housing is a necessity for on-call providers because  staff without on-site housing are required to commute extreme  distances in very harsh environments to locate housing outside of  reservation boundaries.", "See figure 6 for examples of government-subsidized provider housing  near the Kayenta Health Center, Chinle Comprehensive Health Care  Facility, Rosebud Hospital, and Pine Ridge Hospital. See appendix II for  information about housing provided by one selected tribe.", "However, there is a greater demand for housing than IHS can provide.  During our site visit, Chinle Health Care Facility officials stated that  government-subsidized housing availability to meet employee demand is  severely limited at all of their three facilities, and the availability of private  housing in the community is \u201cnon-existent.\u201d As a result, IHS officials from  Chinle told us that some providers commute 60 to 90 minutes to work  one-way each day. IHS officials told us that, after conducting a needs  assessment in 2016, they determined the unmet need for housing at IHS  facilities was 1,100 units. According to these officials, the needs  assessment also helped them identify some of the greatest needs for  housing. The President\u2019s fiscal year 2017 budget proposal for IHS  requested $12 million to build new staff housing units \u201cin isolated and  remote locations for healthcare professionals to enhance recruitment and  retention.\u201d  According to agency officials, based on its needs  assessment, HHS provided $24 million to build new staff housing units at  the Rosebud and Pine Ridge hospitals in the Great Plains area, at the  Crownpoint and Chinle health care facilities in the Navajo areas, and at  the Supai clinic in the Phoenix area."], "subsections": []}, {"section_title": "Student Recruitment Efforts", "paragraphs": ["IHS has also taken steps to recruit future providers by providing  scholarships, externships, internships, and residency rotations to health  professional students.", "Scholarships. IHS\u2019s scholarship program provides financial support  to qualified AI/AN candidates in exchange for a minimum 2-year  service commitment within an Indian health program. Nearly 7,000  AI/AN students have received scholarship awards since the program  started in 1978. The awards include (1) scholarships for candidates  enrolled in preparatory or undergraduate prerequisite courses in  preparation for entry to a health professions school, (2) pre-graduate  scholarships for candidates enrolled in courses leading to a bachelor\u2019s  degree, including pre-medicine, pre-dentistry, and pre-podiatry, and  (3) health professions scholarships for candidates who are enrolled in  an eligible health profession degree program. According to IHS, in  fiscal year 2017, there were 805 new scholarship applications  submitted. After evaluating the applications, 331 applications were  deemed eligible for funding, and the program was able to fund 108  new awards. The IHS Scholarship program also reviewed applications  from previously awarded scholars who were continuing their  education. In fiscal year 2017, 154 continuation awards were funded.  In addition to the scholarship program, according to IHS officials, the  agency funds two medical students enrolled at the Uniformed Service  University of the Health Sciences each year. Each graduate agrees to  a 10-year obligation to IHS after medical school graduation and  completion of training. In future years, IHS endeavors to fund two  additional medical students at the Uniformed Service University of  Health Sciences.", "Externships and internships. IHS provides scholarship recipients  with opportunities to receive clinical experience in IHS facilities. In  fiscal year 2017, the agency funded 94 students, who were employed  for 30 to 120 workdays per calendar year. In addition, IHS provides  externships to students temporarily called to active duty as  Commissioned Corps officers through the Commissioned Officer  Student Training and Extern Program (COSTEP). IHS officials said  that the agency funded about 60-70 students in COSTEP in 2016.  IHS also offers a Virtual Internship program through a partnership with  the Department of State. Virtual interns spend 10 hours a week from  September through May working remotely on their projects, which  have included producing bilingual Navajo and English videos for rural  health clinics, developing Navajo-specific health education materials  on palliative care, improving behavioral health data collection  methods, and creating social media strategies and campaigns for  health promotion. For the 2017-2018 academic year, about 15  students are participating in virtual internships with IHS.", "Residency rotations. IHS service units offer rotation opportunities for  medical, nursing, optometry, dental, and pharmacy residents as a  recruitment tool because research shows students are likely to stay  and practice medicine in the area where they studied. For example,  the Oklahoma City area has a Memorandum of Agreement with the  Oklahoma State College of Medicine, which permits area officials to  annually recruit up to two residents from the current year\u2019s residency  class to become federal employees while completing their residency  program. For every year that IHS sponsors the residents\u2019 position at  the university, the resident has a one-year service obligation. In  addition, IHS officials from Chinle stated that the service unit  participates in educational agreements with numerous universities  and residency programs to host medical students, nursing students,  and medical residents for rotations. According to officials, recent  graduates from residency programs applying for permanent positions  with the Chinle Comprehensive Health Care Facility often cite prior  rotations at the service unit, or word of mouth from students or  residents who have rotated through the service unit, as a reason for  applying. The IHS Pharmacy Resident Program is another recruitment  program that offers residency training to pharmacists who are willing  to serve in high-need locations. Pharmacy residents who are  Commissioned Corps officers are required to complete 2 years of  service at an IHS federal or tribal facility. Twenty-six Commissioned  Corps and civilian pharmacists participate in the Pharmacy Residency  Program. See app. II for information on residency programs at tribally  operated facilities."], "subsections": []}, {"section_title": "Connecting with Potential Applicants", "paragraphs": ["IHS officials said they have conducted webinars and career fairs in an  attempt to connect with health professional students. For example, in  2016, IHS conducted two informational webinars to recruit Commissioned  Corps applicants to facilities in the Great Plains area with critical clinical  vacancies. According to IHS officials, approximately 60 applicants  attended the two webinars, resulting in 15 nurse hires. In addition,  Nashville area officials stated that the area office conducted a marketing  campaign at the National Congress of American Indians Conference.", "Officials explained that the area office provided information about  desirable aspects of living in the Nashville area and collected e-mail  addresses and areas of interest from potential job candidates. IHS\u2019s  Office of Human Resources also partners with HRSA\u2019s Bureau of Health  Workforce by participating in nationwide virtual career fairs to promote the  National Health Service Corps scholarship and loan repayment  opportunities.", "IHS has also worked with the Office of the Surgeon General to increase  the recruitment and retention of Commissioned Corps officers. In May  2017, the Office of the Surgeon General gave IHS priority access to new  Commissioned Corps leads\u2014meaning IHS has at least 30 days to make  contact with potential applicants to the Commissioned Corps before other  agencies have the opportunity to contact them. According to IHS officials,  since being given priority access to Commissioned Corps leads, the  agency has made 20 direct clinical care selections, of which 15 have  entered on duty."], "subsections": []}]}, {"section_title": "IHS Uses Strategies to Maintain Patient Access to Services and Reduce Provider Burnout When Positions Are Vacant, But Lacks Agency- wide Data on Use of Temporary Providers Providing Telehealth Services", "paragraphs": ["In addition to its recruitment and retention strategies, IHS uses strategies  to mitigate the negative effects of vacancies by helping to maintain patient  access to services, and helping to reduce provider burnout when  positions are vacant. Specifically, IHS provides telehealth services;  implements alternative staffing models, including hiring nurse  practitioners and physician assistants in lieu of physicians; temporarily  assigns Commissioned Corps officers to alternate duty stations as  needed; and contracts with temporary providers.", "IHS\u2019s telehealth services include two agency-wide programs that provide  teleophthalmology and telebehavioral health services.", "Teleophthalmology. The IHS Joslin Vision Network (IHS-JVN)", "Teleophthalmology Program provides annual diabetic eye exams to  AI/AN patients in almost all IHS areas with federally operated  facilities. According to IHS, patients\u2019 retinal images are scanned  locally and sent to a reading center where doctors interpret the  images and report back. Officials told us the IHS-JVN program  examined 22,000 patients in 2016.", "Telebehavioral health. The Telebehavioral Health Center of  Excellence provides direct care services through video conferencing  to patients at remote facilities from providers at IHS facilities that are  able to provide the services. These services are provided in all IHS  areas with federally operated facilities, and more than 5,800 patient  visits occurred in 2016. Additionally, officials told us there are regional  telebehavioral health programs, such as in the Oklahoma City area  that, combined with the Telebehavioral Health Center of Excellence,  saw over 10,000 patients in 2016. IHS officials stated that patients  appreciate the telebehavioral services in their communities, because  they are the only behavioral health services available in many  communities. The IHS psychiatrist who provides services is located in  Oklahoma City because, according to IHS officials, it is easier to  recruit providers to a more urban location.", "In addition to these agency-wide telehealth programs, IHS officials  identified multiple other local telehealth arrangements that facility staff  have developed to help maintain patient access to medical services. For  example, there is a diabetes consultant for the Portland area who  conducts telenutrition services. There is also a teledermatology program  for the Phoenix Area federal facilities operated out of the Phoenix Indian  Medical Center. Additionally, several service units\u2014including Pine Ridge  Hospital, Rosebud Hospital, and the Sioux San Medical Center\u2014have  contracts for emergency department telehealth services. Figure 7 shows  telehealth equipment in the Rosebud Hospital emergency department."], "subsections": [{"section_title": "Implementing Alternative Staffing Models", "paragraphs": ["Staff from multiple facilities told us they have implemented alternative  staffing models to focus on hiring for non-physician practitioner positions  because these positions are slightly easier to fill. For example, Northern  Navajo Medical Center officials told us the facility, facing an emergency  department physician shortage, hired physician assistants and nurse  practitioners instead. These officials said they converted two physician  positions into four physician assistant and nurse practitioner positions. In  addition, Chinle officials stated that they added two physician assistants  to the urgent care department due to complaints about patient wait times,  and patient wait times have decreased as a result. Officials also  mentioned dental therapists as an additional type of clinical professional  who may be added to the Chinle Health Care Facility staffing model  because the service unit has been unable to recruit and retain enough  dentists to meet patient need."], "subsections": []}, {"section_title": "Commissioned Corps Deployments and Temporary Duty Assignments", "paragraphs": ["IHS officials stated that they have worked with the Office the Surgeon  General to deploy Commissioned Corps officers, mainly to the Great  Plains area, and have also coordinated voluntary temporary duty  assignments of Commissioned Corps officers (within IHS and from other  agencies) to temporarily fill staffing shortages or meet other mission- critical needs. IHS officials stated that Commissioned Corps officers  may also be temporarily assigned to an IHS site to provide services, such  as behavioral health support during a suicide cluster."], "subsections": []}, {"section_title": "Temporary Contract Providers", "paragraphs": ["IHS officials from 9 of the 10 geographic areas with federally operated  facilities and all seven facilities in our review told us they regularly use  temporary contract providers\u2014such as through locum tenens contracts  and contracts with university fellowship programs\u2014to maintain patient  access to care when positions are vacant.", "Locum tenens. Officials from the Kayenta Health Center said they  contract with temporary providers to compensate for vacancies, and  the facility contracts with about 9 providers who rotate to fill 3 vacant  emergency department positions. Officials from the Portland area  stated that they use temporary providers when there is a staffing  shortage with providers. They explained that the Portland area has  provider vacancies that have been open for years, and temporary  providers fill these vacancies for an extended period of time, usually  with a rotating series of providers. Chinle Health Care Facility officials  said temporary providers, when of sufficiently high quality, have been  recruited to join the permanent corps of civilian service staff. However,  they told us locum tenens can cost between $50,000-$200,000 more  annually than permanent physicians\u2019 salaries, exclusive of benefits,  depending on the specialties and hourly rates associated with the  contracts. They said they are finding that increasingly higher hourly  rates are needed to ensure a sufficient supply of high-quality  temporary providers.", "IHS officials at all levels of the agency told us they prefer to hire  permanent providers, rather than use locum tenens contracts. Facility  officials explained that persistent turnover in temporary staff may  jeopardize continuity of care. For example, Sioux San Medical Center  officials expressed concern about the quality of the care provided by  temporary contractors, as well as the consistency of the care provided  because the contractors rotate frequently. IHS officials told us that  many providers prefer to be on contract due to the higher  compensation rates as a contractor, even when taking federal benefits  into account.", "University physicians. IHS officials explained that area offices may  also contract with university fellowship programs to provide visiting  providers. For example, according to IHS, the Chinle Health Care  Facility has entered into long-term contractual agreements with two  academic fellowship programs\u2014University of California-San  Francisco Health Program and the University of Utah Global Health  Fellowship. Officials told us these programs provide U.S. residency- trained, board certified physicians interested in global health to work  6-month assignments alternating with another fellow at an  international site. In addition, IHS officials stated that the Navajo area  office is collaborating with the University of California-San Francisco  and its global health fellowship to assign global health fellows to a  Navajo Area site for 6 months out of each year. The officials explained  that 24 fellows were placed in Navajo-area facilities in 2017 at costs  substantially lower than that of locum tenens contracts. According to  IHS, the Great Plains area office has collaborated with the University  of Washington\u2019s global health fellowship program to assign global  health fellows in Internal Medicine to Pine Ridge Hospital for 11- month placements.", "Agency-wide information on the extent to which facilities use these  temporary providers, and the amount spent on them, is not readily  available to IHS leadership. While IHS has agency-wide information on  vacancies through the Capital Human Resource Management System,  IHS delegates the acquisitions process for temporary provider contracts  to the head of each area-level Contracting Office. Therefore, agency-wide  information on the number of full-time equivalent employees that are  temporary providers working at IHS facilities, as well as the cost of these  providers, is not readily available. As discussed, officials we spoke with  at IHS facilities told us that temporary providers can cost more depending  on the specialties and hourly rates. Without agency-wide information on  the extent to which such providers are used, IHS is not fully informed  about facilities\u2019 reliance and expenditures on temporary providers or their  potential effect on patient care, which is inconsistent with federal internal  control standards regarding the availability of relevant information to  facilitate management decision making and performance monitoring.  Specifically, federal internal controls standards state that agency  management should obtain, process, and use quality information to make  informed decisions and evaluate the agency\u2019s performance in achieving  key objectives and addressing risks. IHS\u2019s lack of agency-wide  information on the costs and number of temporary providers used at its  facilities impedes its ability to make decisions about how best to target its  resources to address gaps in provider staffing and ensure that health  services are available and accessible across IHS facilities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Maintaining a stable clinical workforce capable of providing quality and  timely care is critical for IHS to ensure that comprehensive health  services are available and accessible to American Indian/Alaska Native  people. However, despite efforts to recruit and retain providers, IHS  continues to face considerable challenges to overcome its long-standing  struggle to fill sizeable provider vacancies, including geographic isolation  and limited amenities. Although IHS is authorized to offer recruitment and  retention incentives, such as loan repayments and subsidized housing,  the demand for these incentives has been greater than the agency can  meet due to resource constraints. However, more complete information  on contract providers could help IHS officials make decisions on where to  better target its limited resources to address gaps in provider staffing and  ensure that health services are available and accessible to American  Indian/Alaska Native people across IHS facilities."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to IHS:  The Director of IHS should obtain, on an agency-wide basis, information  on temporary provider contractors, including their associated cost and  number of full-time equivalents, and use this information to inform  decisions about resource allocation and provider staffing.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS and the Department of Veterans  Affairs (VA) for review and comment. We received written comments from  HHS that are reprinted in appendix III. HHS concurred with our  recommendation.", "In its comments, HHS stated that IHS plans to update its policies by  December 2018 to include a centralized reporting mechanism  requirement for all temporary contracts issued for providers. HHS also  stated that, upon finalization of the policy, IHS will broadly incorporate  and implement the reporting mechanism agency-wide and maintain it on  an annual basis. HHS also provided technical comments, which we  incorporated as appropriate.", "VA provided comments on a draft of this report in an email, stating that  VA officials continue to work to improve recruitment and retention of  providers at VHA to ensure that they have the correct number of  providers with the appropriate skills.", "We are sending copies of this report to HHS, the Department of Veterans  Affairs, and appropriate congressional committees. In addition, the report  will be available at no charge on GAO\u2019s website at http://www.gao.gov/.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or farbj@gao.gov. Contact points for our Office of  Congressional Relations and Office of Public Affairs can be found on the  last page of this report. Other major contributors to this report are listed in  appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Provider Vacancies with the Indian Health Service (IHS)", "paragraphs": ["Appendix I: Provider Vacancies with the Indian  Health Service (IHS)", "IHS data collected in November 2017, included the number of positions  and vacancies for several types of providers, including physicians,  nurses, dentists, pharmacists, nurse practitioners, certified registered  nurse anesthetists, certified nurse midwives, and physician assistants.  Most of these positions are in the 8 of 12 IHS areas in which IHS has  substantial direct care responsibilities. Vacancies for nurse practitioners,  nurse midwives, dentists, pharmacists, and physician assistants are  provided in this appendix.", "Nurse practitioners. Nationwide, 97 of 303 positions were vacant in  November 2017, and vacancy rates in the 8 areas in which IHS has  substantial direct care responsibilities ranged from 12 percent in the  Oklahoma City area to 47 percent in the Albuquerque area. (See fig. 8)", "Certified nurse midwives. Nationwide, 8 of 55 positions were vacant in  November 2017. See table 1.", "Dentists. Nationwide, 81 of 306 positions were vacant in November 2017  and vacancy rates in the 8 areas in which IHS has substantial direct care  responsibilities ranged from 14 percent in the Phoenix area to 39 percent  in the Bemidji area. (See fig. 9.)", "Pharmacists. Nationwide, 80 of 637 positions were vacant in November  2017 and vacancy rates in the 8 areas in which IHS has substantial direct  care responsibilities ranged from 3 percent in the Bemidji area to 17  percent in the Albuquerque area. (See fig. 10.)", "Physician assistants. Nationwide, 37 of 125 positions were vacant in  November 2017. See table 2."], "subsections": []}, {"section_title": "Appendix II: Tribal Strategies of Housing Units and Physician Residency Programs to Recruit and Retain Healthcare Providers", "paragraphs": ["Tribal officials from the Chickasaw Nation and Choctaw Nation described  their use of strategies to address vacancies, which were very similar to  strategies used by the Indian Health Service (IHS). Like the IHS, one  tribe uses the availability of housing units near its medical facility as a  recruitment tool for health care providers. Both tribes that described their  strategies to recruit and retain providers told us they use their physician  residency program in Family Medicine as a recruitment tool.", "Availability of housing units near the medical facility. Tribal  officials from the Choctaw Nation told us the tribe uses housing  units\u201458 housing units that range from studio apartments to multi- room houses\u2014as a recruitment strategy for providers. The provider  housing units are occupied by physicians, as well as by physician  residents who need housing during their residency or for medical  students doing clinical rotations through the facility. According to tribal  officials, a factor they considered in making housing units available for  providers was the location of its hospital in a rural area of Oklahoma,  in a town with a population of about 1,000, which lacks sufficient  housing.", "In September 2017, tribal officials told us all the available housing units  were occupied, and the tribe was in the process of constructing at least  two 4-bedroom houses. See fig. 11 for photos of a completed multi-room  house and one under construction. Offering the housing units to provider  staff is also part of the tribe\u2019s overall strategy of offering quality-of-life  benefits to attract and retain providers.", "Implementing Accredited Physician Residency Programs. Tribal  officials we interviewed noted that they developed physician training  programs\u2014specifically graduate medical education, commonly known  as residency training\u2014which they use as an important recruitment  tool for physicians. One tribe has implemented its Family Medicine  residency program, while the other tribe intends for its Family  Medicine residency program to be operational in July 2018. Both  residency programs are accredited by the American Osteopathic  Association, in addition to the American College of Osteopathic  Family Practice for one tribe and the American Council for Graduate  Medical Education for the other tribe. One program is accredited for 3  resident physicians per year for a total of 9 physician residents at a  time, while the other program is accredited for 4 resident physicians  per year.", "We previously found that physicians may practice in geographic areas  similar to those where they complete their residency training. Tribal  officials with the implemented Family Medicine residency program told us  it is successful in that they hired 7 of the 9 residents who completed the  residency program. There is also a retention benefit\u2014current providers  have the opportunity to stay up-to-date on the latest medical treatment  methods by serving as either mentors or as faculty for the residents."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kathleen M. King (Director), Ann  Tynan (Assistant Director), Kelly DeMots (Assistant Director/Analyst-in- Charge), Sam Amrhein, Kristen Anderson, Muriel Brown, Kaitlin  Farquharson, Peter Mann-King, Maria Ralenkotter, Lisa Rogers, and  Jennifer Whitworth made key contributions to this report."], "subsections": []}]}], "fastfact": ["Indian Health Service clinics don\u2019t have enough doctors or nurses to provide quality and timely health care to American Indian and Alaska Native people. IHS data show an average vacancy rate for physicians, nurses, and other care providers of 25%.", "IHS uses multiple strategies to recruit and retain providers, including offering financial incentives and housing. However, IHS has trouble matching local market salaries and does not have enough housing to meet the demand. One way the agency tries to fill vacancies is by hiring temporary providers, although officials said this is more costly and may result in less continuity of care."]}
{"id": "GAO-18-106", "url": "https://www.gao.gov/products/GAO-18-106", "title": "Central States Pension Fund: Investment Policy Decisions and Challenges Facing the Plan", "published_date": "2018-06-04T00:00:00", "released_date": "2018-06-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Multiemployer plans are collectively bargained pension agreements often between labor unions and two or more employers. CSPF is one of the nation's largest multiemployer defined benefit pension plans, covering about 385,000 participants. Since 1982, the plan has operated under a court-enforceable consent decree which, among other things, requires that the plan's assets be managed by independent parties. Within 7 years, CSPF estimates that the plan's financial condition will require severe benefit cuts. GAO was asked to review the events and factors that led to the plan's critical financial status and how its investment outcomes compare to similar plans.", "GAO describes (1) what is known about the factors that contributed to CSPF's critical financial condition; (2) what has been CSPF's investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how CSPF's investments have performed over time, particularly compared to similar pension plans.", "GAO reviewed relevant federal laws and regulations; interviewed CSPF representatives, International Brotherhood of Teamsters officials and members, federal officials, and knowledgeable industry stakeholders; reviewed CSPF documentation including investment policy statements and board of trustee meeting minutes; and analyzed investment returns and fees from required, annual pension plan filings and from consultant benchmarking reports."]}, {"section_title": "What GAO Found", "paragraphs": ["The Central States, Southeast and Southwest Areas Pension Fund (CSPF) was established in 1955 to provide pension benefits to trucking industry workers, and is one of the largest multiemployer plans. According to its regulatory filings, CSPF had less than half the estimated funds needed to cover plan liabilities in 1982 at the time it entered into a court-enforceable consent decree that provides for oversight of certain plan activities. Since then, CSPF has made some progress toward achieving its targeted level of funding; however, CSPF has never been more than 75 percent funded and its funding level has weakened since 2002, as shown in the figure below.", "Stakeholders GAO interviewed identified numerous factors that contributed to CSPF's financial condition. For example, stakeholders stated that changes within the trucking industry as well as a decline in union membership contributed to CSPF's inability to maintain a healthy contribution base. CSPF's active participants made up about 69 percent of all participants in 1982, but accounted for only 16 percent in 2016. The most dramatic change in active participants occurred in 2007 when the United Parcel Service, Inc. (UPS) withdrew from the plan. At that time, UPS accounted for about 30 percent of the plan's active participants (i.e. workers). In addition, the market declines of 2001 to 2002 and 2008 had a significant negative impact on the plan's long-term investment performance. Stakeholders noted that while each individual factor contributed to CSPF's critical financial condition, the interrelated nature of the factors also had a cumulative effect on the plan's financial condition.", "Both CSPF's investment policy and the process for setting and executing it have changed several times since the consent decree was established in 1982. The original consent decree gave an independent asset manager\u2014called a named fiduciary\u2014exclusive authority to set and change the plan's investment policies and manage plan assets, and prohibited CSPF trustees from managing assets or making investment decisions. Initially, the named fiduciaries sold the troubled real estate assets acquired during the pre-consent decree era. Subsequent changes include the following:", "In 1993, the named fiduciaries started to increase investment in equities, and their policies continued to direct that asset allocations be weighted toward equities until early 2017.", "Between 2003 and 2010, the court approved three plan decisions to move a total of 50 percent of CSPF's assets into passively-managed accounts (passive management typically seeks to match the performance of a specific market index and reduce investment fees).", "An early-2017 investment policy change precipitated by CSPF's deteriorating financial condition will continue to move plan assets into fixed income investments ahead of projected insolvency, or the date when CSPF is expected to have insufficient assets to pay promised benefits when due. As a result, assets will be gradually transitioned from \u201creturn-seeking assets\u201d\u2014such as equities and emerging markets debt\u2014to high-quality investment grade debt and U.S. Treasury securities with intermediate and short-term maturities. The plan is projected to become insolvent on January 1, 2025. CSPF officials and named fiduciary representatives said these changes are intended to reduce the plan's exposure to market risk and volatility, and provide participants greater certainty prior to projected insolvency.", "GAO found that CSPF's investment returns and expenses were generally in line with similarly sized institutional investors and with demographically similar multiemployer pension plans. For example, GAO's analysis of returns using the peer group measure used by CSPF known as the Wilshire Associates' Trust Universe Comparison Service (TUCS), showed that CSPF's annual investment returns since 1995 were above the median about as many times as they were below. Similarly, comparing CSPF's returns to a peer group of similar multiemployer defined benefit plans using federally required annual reports found that CSPF's annual investment returns were in line with those of its peers. Specifically, CSPF's annual returns were above the median nine times and below it six times\u2014and CSPF's overall (dollar-weighted) average annual return from 2000 through 2014 was close to that of the peer median average return of 4.8 percent.", "In addition, GAO found that CSPF's investment fees and other administrative expenses have also been in line with other large multiemployer plans. For example:", "CSPF's investment fees as a percentage of assets were about 9 percent lower than the median of large defined benefit multiemployer plans over the 2000 through 2014 period\u2014though much of that difference is accounted for by a relative reduction in investment fees since 2007. CSPF's investment fees as a percentage of assets were, on average, about 34 basis points (or 0.34 percent).", "CSPF's administrative expenses related to the day-to-day operations of the plan have also been in line with other large multiemployer plans. CSPF's administrative expenses per participant were below the median for large defined benefit multiemployer plans for 12 of the 15 years over the 2000 through 2014 period. As of 2014, CSPF's administrative expense was $98 per participant, which is about 16 percent less than the median for large defined benefit multiemployer plans."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Established in 1955 to provide pension benefits to trucking industry  workers, the Central States, Southeast and Southwest Areas Pension  Fund (CSPF) is one of the nation\u2019s largest multiemployer pension plans,  with $15.3 billion in assets at the end of 2016. About 1,400 employers are  obligated to contribute to CSPF, and the plan covers almost 385,000  participants. Since 1982, the plan has operated under a court- enforceable consent decree which, among other things, requires it to  obtain approval from the U.S. District Court for the Northern District of  Illinois, Eastern Division, for certain plan activities and requires  independent asset managers to manage the plan\u2019s investments.  Currently, CSPF is projected to become insolvent within 7 years and is  classified as a \u201ccritical and declining\u201d plan under the Employee  Retirement Income Security Act of 1974 (ERISA), as amended by  subsequent laws, including the Multiemployer Pension Reform Act of  2014 (MPRA). In addition to causing financial hardship for hundreds of  thousands of CSPF retirees who are at risk of severe benefit cuts,  CSPF\u2019s projected insolvency is also likely to coincide with the projected  insolvency of the multiemployer insurance program managed by the  Pension Benefit Guaranty Corporation (PBGC). The insolvency of  PBGC\u2019s multiemployer program would significantly impact the level of  PBGC-guaranteed benefits to current and future beneficiaries in all  multiemployer plans receiving PBGC assistance. CSPF\u2019s critical and declining status has sparked interest in understanding the broad factors  that have caused the plan\u2019s decline and what role, if any, the plan\u2019s  investment policies have played in contributing to this condition. In light of  these issues, you asked us to review the events and factors that led to  CSPF\u2019s critical financial condition and how it compares to similar plans.", "In this report, we reviewed (1) what is known about the factors that  contributed to CSPF\u2019s critical financial condition; (2) what has been  CSPF\u2019s investment policy, and the process for setting and executing it,  since the consent decree was established; and (3) how CSPF\u2019s  investments have performed over time, particularly compared to similar  pension plans.", "We used several methodologies in developing our findings. For all  objectives, we reviewed CSPF and U.S. Department of Labor (DOL)  documentation and available literature; reviewed relevant federal laws  and regulations; and interviewed CSPF officials, federal officials, and  other knowledgeable industry stakeholders. To describe the major  factors that led to CSPF\u2019s critical financial condition, we conducted 23  semi-structured interviews with federal agency officials and other  stakeholders knowledgeable about unions, participants and retirees, the  trucking industry, collective bargaining agreements, and multiemployer  pension plans. We also interviewed three stakeholders with actuarial  expertise to specifically understand actuarial standards and procedures.  In our semi-structured interviews we asked about key factors affecting the  plan and the broader regulatory and financial environment in which  multiemployer plans operate. We selected knowledgeable stakeholders  based on a review of literature and prior GAO work, and  recommendations from other stakeholders. Additionally, we selected  stakeholders whose expertise coincided with the scope of our objectives  and who would be able to provide a broad range of perspectives. We also  collected actuarial, financial, and other data on current and historical  measures of plan assets, liabilities, investment performance, and other  factors, and performed our own analyses of these data. The data and  documentation collected were generally from the plan or agencies that  oversee pensions. We determined the information to be generally reliable  for the purposes of our objectives.", "To describe CSPF\u2019s investment policy and the process for setting and  executing it since the consent decree was established, we reviewed  CSPF\u2019s investment policy statements, performance reports from the  plan\u2019s named fiduciaries, select board of trustee meeting minutes, and  select correspondence between CSPF and DOL. We also interviewed  CSPF and federal officials about a recent investment policy change. To  analyze CSPF\u2019s performance, we examined its investment returns in  comparison to a customized Wilshire Associates\u2019 (Wilshire) Trust  Universe Comparison Service benchmark of trusts with $3 billion or more  in assets. CSPF provided these data, and they also included these data  in the independent special counsel reports. Wilshire provided  supplemental data using the same benchmark specifications. We also  analyzed investment returns and fee and expense data from the Form  5500, the government\u2019s primary source of information about pension  plans. We used this Form 5500 data to examine CSPF\u2019s investment  returns and fees and expenses in comparison to groups of similar  multiemployer pension plans. The Internal Revenue Service (IRS), DOL,  and PBGC jointly developed the Form 5500-series returns for employee  benefit plans to satisfy annual reporting requirements under ERISA and  the Internal Revenue Code. We primarily relied on PBGC\u2019s Form 5500  research database as the agency takes several steps to correct and  update the raw electronic data. We also took steps to assess the  reliability of the PBGC data and checked data fields and made  appropriate corrections. In addition, we performed computer analyses of  the data and identified inconsistencies and other indications of error and  took steps to correct inconsistencies or errors. A second analyst checked  all computer analyses. After these processes, we determined the data to  be sufficiently reliable for our purposes. For more information on our  objectives, scope, and methodology, see appendix I.", "We conducted this performance audit from July 2016 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CSPF is a defined benefit multiemployer pension plan. Multiemployer  plans are often created and maintained through collective bargaining  agreements between labor unions and two or more employers, so that  workers who move from job to job and employer to employer within an  industry can continue to accrue pension benefits within the same plan  over the course of their careers. Multiemployer plans are typically found in  industries with many small employers such as trucking, building and  construction, and retail food sales. In 2017, there were about 1,400  defined benefit multiemployer plans nationwide covering more than 10  million participants."], "subsections": [{"section_title": "Multiemployer Plan Administration, Funding, and Benefits", "paragraphs": [], "subsections": [{"section_title": "Administration", "paragraphs": ["Most multiemployer plans are jointly administered and governed by a  board of trustees selected by labor and management. The labor union  typically determines how the trustees representing labor are chosen and  the contributing employers or an employer association typically  determines how the trustees representing management are chosen. The  trustees set the overall plan policy, direct plan activities, and set benefit  levels (see fig. 1).", "Multiemployer plans are \u201cprefunded,\u201d or funded in advance, primarily by  employer contributions. The employer contribution is generally  negotiated through a collective bargaining agreement, and is often based  on a dollar amount per hour worked by each employee covered by the  agreement. Employer contributions are pooled in a trust fund for  investment purposes, to pay benefits to retirees and their beneficiaries,  and for administrative expenses. Multiemployer plan trustees typically  decide how the trust fund should be invested to meet the plan\u2019s  objectives, but the trustees can use investment managers to determine  how the trust fund should be invested. Multiemployer plan trust funds  can be allocated among many different types of assets, any of which can  generally be passively- or actively-managed, domestically or  internationally based, or publicly or nonpublicly traded (see table 1).", "A plan\u2019s funded percentage is its ratio of plan assets to plan liabilities.  Because the amount needed to pay pension benefits for many years into  the future cannot be known with certainty due to a variety of economic  and demographic factors, including the potential volatility of asset values,  estimates of a plan\u2019s funded percentage may vary from year to year.  Defined benefit pension plans use a \u201cdiscount rate\u201d to convert projected  future benefits into their \u201cpresent value.\u201d The discount rate is the interest  rate used to determine the current value of estimated future benefit  payments and is an integral part of estimating a plan\u2019s liabilities. The  higher the discount rate, the lower the plan\u2019s estimate of its liability.  Multiemployer plans use an \u201cassumed-return approach\u201d that bases the  discount rate on a long-term assumed average rate of return on the  pension plan\u2019s assets. Under this approach, the discount rate depends on  the allocation of plan assets. For example, a reallocation of plan assets  into more stocks and fewer bonds typically increases the discount rate,  which reduces the estimated value of plan liabilities, and therefore,  reduces the minimum amount of funding required.", "Looking at the entire \u201cmultiemployer system\u201d\u2014the aggregation of  multiemployer plans governed by ERISA and insured by PBGC\u2014shows  that while the system was significantly underfunded around 2001 and  2009, its funded position has improved since 2009. Specifically,  analyses published by the Center for Retirement Research at Boston  College and the Society of Actuaries used plan regulatory filings to  calculate the funded status for the system and determined that it was  approaching 80 percent funded by 2014 after falling during the 2008  market downturn. However, some observers have noted that while  many plans are making progress toward their minimum targets, a subset  of plans face serious financial difficulties."], "subsections": []}, {"section_title": "Benefits", "paragraphs": ["Multiemployer retirement benefits are generally determined by the board  of trustees. The bargaining parties negotiate a contribution rate and the  trustees adopt or amend the plan\u2019s benefit formulas and provisions.  Decisions to increase benefits or change the plan are also typically made  by the board of trustees. Benefit amounts are generally based on a  worker\u2019s years of service and either a flat dollar amount or the worker\u2019s  wage or salary history, subject to further adjustment based on the age of  retirement."], "subsections": []}]}, {"section_title": "The Central States, Southeast and Southwest Areas Pension Fund (CSPF)", "paragraphs": ["CSPF was established in 1955 to provide pension benefits to  International Brotherhood of Teamsters union members (Teamsters) in  the trucking industry, and it is one of the largest multiemployer plans. In  the late 1970s, CSPF was the subject of investigations by the IRS within  the U.S. Department of the Treasury (Treasury), and by DOL and the  U.S. Department of Justice (DOJ). The DOL investigation ultimately  resulted in the establishment of a federal court-enforceable consent  decree in 1982 that remains in force today. CSPF held more than $4.3  billion in Net Assets at the end of 1982 after the consent decree was  established. The plan\u2019s Net Assets peaked at nearly $26.8 billion at the  end of 2007 and declined to about $15.3 billion at the end of 2016 (see  fig. 2). As of 2016, CSPF reported that it had about 1,400 contributing  employers and almost 385,000 participants.", "The number of active CSPF participants has declined over time. In 2016,  16 percent of about 385,000 participants were active, i.e., still working in  covered employment that resulted in employer contributions to the plan.  In comparison, CSPF reported in 1982 that 69 percent of more than  466,000 participants were active participants. Since the 1980s, CSPF\u2019s  ratio of active to nonworking participants has declined more dramatically  than the average for multiemployer plans. By 2015, only three of the  plan\u2019s 50 largest employers from 1980 still paid into the plan, and for each  full-time active employee there were over five nonworking participants,  mainly retirees. As a result, benefit payments to CSPF retirees have  exceeded employer contributions in every year since 1984. Thus, CSPF  has generally drawn down its investment assets. In 2016, CSPF withdrew  over $2 billion from investment assets (see fig. 3.).", "CSPF has historically had fewer plan assets than were needed to fully  fund the accrued liability\u2014the difference referred to as unfunded liability.  In 1982, we reported that CSPF was \u201cthinly funded\u201d\u2014as the January 1,  1980, actuarial valuation report showed the plan\u2019s unfunded liability was  about $6 billion\u2014and suggested that IRS should closely monitor CSPF\u2019s  financial status. In 2015, the plan\u2019s actuary certified that the plan was in  \u201ccritical and declining\u201d status. The plan has been operating under an  ERISA-required rehabilitation plan since March 25, 2008, which is  expected to last indefinitely. As of January 1, 2017, the plan was funded  to about 38 percent of its accrued liability. In September 2015, CSPF  filed an application with Treasury seeking approval to reduce benefits  pursuant to provisions in the Multiemployer Pension Reform Act of 2014  (MPRA), which is fully discussed later in this section. The application was  denied in May 2016 based, in part, on Treasury\u2019s determination that the  plan\u2019s proposed benefit suspensions were not reasonably estimated to  allow the plan to remain solvent. In 2017, CSPF announced it would no  longer be able to avoid the projected insolvency. (See app. II for a  timeline of key events affecting CSPF.)"], "subsections": []}, {"section_title": "The Consent Decree", "paragraphs": ["As previously mentioned, CSPF was the subject of investigations in the  1970s by IRS, DOL, and DOJ. DOL\u2019s investigation focused on  numerous loan and investment practices alleged to constitute fiduciary  breaches under ERISA, such as loans made to companies on the verge  of bankruptcy, additional loans made to borrowers who had histories of  delinquency, loans to borrowers to pay interest on outstanding loans that  the fund recorded as interest income, and lack of controls over rental  income. As a result of its investigation, DOL filed suit against the former  trustees of CSPF and, in September 1982, the parties entered into a  consent decree, which remains in force today. The consent decree  provides measures intended to ensure that the plan complies with the  requirements of ERISA, including providing for oversight by the court and  DOL, and prescribes roles for multiple parties in its administration. For  example, certain plan activities must be submitted to DOL for comment  and to the court for approval, including new trustee approvals and some  investment manager appointments. According to DOL, to prevent  criminal influence from regaining a foothold of control over plan assets,  the consent decree generally requires court-approved independent asset  managers\u2014called \u201cnamed fiduciaries\u201d\u2014to manage CSPF\u2019s investments.  CSPF\u2019s trustees are generally prohibited from managing assets; however,  they remain responsible for selecting, subject to court approval, and  overseeing named fiduciaries and monitoring plan performance. To focus  attention on compliance with ERISA fiduciary responsibility provisions, the  consent decree provides for a court-appointed independent special  counsel with authority to observe plan activities and oversee and report  on the plan. (See app. III for additional detail on the key provisions of the  consent decree.)"], "subsections": []}, {"section_title": "Legal Framework", "paragraphs": [], "subsections": [{"section_title": "Employee Retirement Income Security Act of 1974", "paragraphs": ["In 1974, Congress passed ERISA to protect the interests of participants  and beneficiaries of private sector employee benefit plans. Among other  things, ERISA requires plans to meet certain requirements and minimum  standards. DOL, IRS, and PBGC are generally responsible for  administering ERISA and related regulations.", "DOL has primary responsibility for administering and enforcing the  fiduciary responsibility provisions under Part 4 of Title I of ERISA, which  include the requirement that plan fiduciaries act prudently and in the sole  interest of participants and beneficiaries.", "Treasury, specifically the IRS, is charged with determining whether a  private sector pension plan qualifies for preferential tax treatment under  the Internal Revenue Code. Additionally, the IRS is generally  responsible for enforcing ERISA\u2019s minimum funding requirements, among other things. ERISA generally requires that multiemployer plans meet  minimum funding standards, which specify a funding target that must be  met over a specified period of time. The funding target for such plans is  measured based on assumptions as to future investment returns, rates of  mortality, retirement ages, and other economic and demographic  assumptions. Under the standards, a plan must collect a minimum level of  contributions each year to show progress toward meeting its target, or the  plan employers may be assessed excise taxes and owe the plan for  missed contributions plus interest. Minimum contribution levels may vary  from year to year due to a variety of economic and demographic factors,  such as addressing differences between assumed investment returns and  the plan\u2019s actual investment returns.", "To protect retirees\u2019 pension benefits in the event that plan sponsors are  unable to pay plan benefits, PBGC was created by ERISA. PBGC is  financed through mandatory insurance premiums paid by plans and plan  sponsors, with premium rates set by law. PBGC operates two distinct  insurance programs: one for multiemployer plans and another for single- employer plans. Each program has separate insurance funds and  different benefit guarantee rules.", "The events that trigger PBGC intervention differ between multiemployer  and single-employer plans. For multiemployer plans, the triggering event  is plan insolvency, the point at which a plan begins to run out of money  while not having sufficient assets to pay the full benefits that were  originally promised when due. PBGC does not take over operations of an  insolvent multiemployer plan; rather, it provides loan assistance to pay  administrative expenses and benefits up to the PBGC-guaranteed level.  According to PBGC, only once in its history has a financial assistance  loan from the multiemployer pension insurance program been repaid. In  2017, PBGC provided financial assistance to 72 insolvent multiemployer  plans for an aggregate amount of $141 million. For single-employer plans  the triggering event is termination of an underfunded plan\u2014generally,  when the employer goes out of business or enters bankruptcy. When this  happens, PBGC takes over the plan\u2019s assets, administration, and  payment of plan benefits (up to the statutory limit).", "The PBGC-guaranteed benefit amounts for multiemployer plans and the  premiums assessed by PBGC to cover those benefit guarantees are  significantly lower than those for single-employer plans. Each insured  multiemployer plan pays flat-rate insurance premiums to PBGC based on  the number of participants covered. The annual premium rate for plan  years beginning in January 2017 was $28 per participant and it is  adjusted annually based on the national average wage index. (See app.  II for the PBGC premium rates that have been in effect since the consent  decree was established in 1982.) When plans receive financial  assistance, participants face a reduction in benefits. For example, using  2013 data, PBGC estimated 21 percent of more than 59,000 selected  participants in insolvent multiemployer plans then receiving financial  assistance from PBGC faced a benefit reduction. The proportion of  participants facing reductions due to the statutory guarantee limits is  expected to increase. About 51 percent of almost 20,000 selected  participants in plans that PBGC believed would require future assistance  were projected to face a benefit reduction.", "Since 2013, the deficit in PBGC\u2019s multiemployer program has increased  by nearly 700 percent, from a deficit of $8.3 billion at the end of fiscal year  2013 to $65.1 billion at the end of fiscal year 2017. PBGC estimated that  at of the end of 2016, the present value of net new claims by  multiemployer plans over the next 10 years would be about $24 billion, or  approximately 20 percent higher than its 2015 projections. The program  is projected to become insolvent within approximately 8 years. If that  happens, participants who rely on PBGC guarantees will receive only a  very small fraction of current statutory guarantees. According to PBGC,  most participants would receive less than $2,000 a year and in many  cases, much less.", "We have identified PBGC\u2019s insurance programs as high-risk. This  designation was made in part because multiemployer plans that are  currently insolvent, or likely to become insolvent in the near future,  represent a significant financial threat to the agency\u2019s insurance program.  We designated the single-employer program as high-risk in July 2003,  and added the multiemployer program in January 2009. Both insurance  programs remain on our high-risk list."], "subsections": []}, {"section_title": "Key Amendments to ERISA Affecting Multiemployer Plans", "paragraphs": ["Multiemployer Pension Plan Amendments Act of 1980  Among other things, the Multiemployer Pension Plan Amendments Act of  1980 (MPPAA) made employers liable for a share of unfunded plan  benefits when they withdraw from a plan, unless otherwise relieved of  their liability, and strengthened certain funding requirements. An  employer that chooses to withdraw from a multiemployer plan may be  required to continue to contribute if the plan does not have sufficient  assets to cover the plan\u2019s current and known future liabilities at the time  the employer withdraws; however, these payments may not fully cover  the withdrawing employer\u2019s portion of the plan\u2019s liabilities. In such  cases, the employers remaining in the plan may effectively assume the  remaining liability.", "The Pension Protection Act of 2006  The Pension Protection Act of 2006 (PPA) was intended to improve the  funding of seriously underfunded multiemployer plans, among other  things. It included provisions that require plans in poor financial health to  take action to improve their financial condition over the long term and  established two categories of troubled plans: (1) \u201cendangered status\u201d or  \u201cyellow zone\u201d plans (this category also includes a sub-category of  \u201cseriously endangered\u201d), and (2) more seriously troubled \u201ccritical status\u201d  or \u201cred zone\u201d plans. PPA further required plans in the endangered and critical zones to develop written plans to improve their financial condition,  such as by revising benefit structures, increasing contributions, or both,  within a prescribed time frame. Multiemployer plans in yellow or red  zone status must document their remediation strategies in a written plan,  notify plan participants, and report annually on whether scheduled  progress has been made. Since the 2008 market decline, the number of  participants in endangered and critical plans has generally been  decreasing (see fig. 4).", "The Multiemployer Pension Reform Act of 2014  In response to the funding crisis facing PBGC and multiemployer pension  plans, the Multiemployer Pension Reform Act of 2014 (MPRA) made  changes to the multiemployer system that were intended to improve its  financial condition. Key changes included:", "Creation of critical and declining status. MPRA created a new  category, \u201ccritical and declining,\u201d for plans in critical status projected to  become insolvent during the current plan year or within any of the 14  succeeding plan years, or in certain circumstances, within any of the  19 succeeding plan years. In 2017, PBGC reported that more than  100 multiemployer plans (more than 7 percent of plans) representing  approximately 1 million participants (about 10 percent of participants)  have been determined to be \u201ccritical and declining.\u201d", "Permitted reduction of accrued benefits. MPRA permits plans to  reduce participants\u2019 and beneficiaries\u2019 accrued retirement benefits if  the plan can demonstrate such action is necessary to remain solvent.  Plans apply to Treasury for the authority to reduce benefits. Treasury,  in consultation with PBGC and DOL, reviews the applications and  determines whether the proposed changes would enable the plan to  remain solvent.", "Increased PBGC premiums. MPRA also increased the PBGC  premiums for multiemployer plans from $12 to $26 (per participant per  plan year) in 2015 and from $26 to $28 in plan year 2017. The annual  premium in subsequent years is indexed to changes in the national  average wage index.", "Creation of new framework of rules for partition. Partition allows a  multiemployer plan to split into two plans\u2014the original and a  successor. Partitions are intended to relieve stress on the original plan  by transferring the benefits of some participants to a successor plan  funded by PBGC and to help retain participant benefits in the plans at  levels higher than the PBGC-guaranteed levels."], "subsections": []}]}]}, {"section_title": "CSPF\u2019s Critical Financial Condition Is a Result of Factors That Reflect Challenges Experienced by the Multiemployer System", "paragraphs": [], "subsections": [{"section_title": "CSPF Has Been Underfunded Since the Consent Decree Was Established", "paragraphs": ["At the time the consent decree was established in 1982, CSPF had less  than half the estimated funds needed to cover plan liabilities (and to pay  associated benefits over the lifetime of participants) and it has not  attained 100 percent of its estimated funding need since then, according  to regulatory filings. CSPF\u2019s 1982 Form 5500 we reviewed shows that the  plan was less than 40 percent funded prior to the consent decree  becoming effective. Over the next two decades, the plan generally made  progress toward achieving its targeted level of funding but was never  more than 75 percent funded, and funding has generally deteriorated  since its 2002 filing (see fig. 5). Overall, the plan\u2019s unfunded liability  increased by approximately $11.2 billion (in inflation-adjusted dollars)  between January 1983 and January 2016. As a consequence,  participant benefits were never fully secured by plan assets over this  period, as measured by ERISA\u2019s minimum funding standards, and the  plan consistently needed to collect contributions in excess of those  needed to fund new benefit accruals to try to make up for its underfunded  status."], "subsections": []}, {"section_title": "Stakeholders Described Multiple Factors That Contributed to CSPF\u2019s Critical Financial Condition, Many of Which Have Been Experienced by Other Multiemployer Plans", "paragraphs": ["CSPF officials and other stakeholders identified several factors that  contributed to CSPF\u2019s critical financial condition and reflect the  challenges faced by many multiemployer plans. For example, like CSPF,  many multiemployer plans have experienced financial difficulties due to a  combination of investment losses and insufficient employer contributions.  In addition to being underfunded prior to the consent decree going into  effect, stakeholders identified other specific factors that contributed to  CSPF\u2019s critical financial condition, such as trends within the national  trucking industry and its workforce, funding challenges and common  investment practices of multiemployer plans, and the impact of market  downturns on long-term investment performance. Stakeholders also  described the effects of the 2007 withdrawal of a key employer, United  Parcel Service (UPS), on CSPF\u2019s critical financial condition."], "subsections": [{"section_title": "Key Industry Specific Workforce Trends", "paragraphs": ["Stakeholders we interviewed said changes to the workforce, such as  declining union membership rates and changes resulting from industry  deregulation, affected CSPF and some other multiemployer plans by  reducing the number of workers able to participate in their plans. While  the multiemployer structure distributes bankruptcy risk across many  employers, for any particular multiemployer plan employers are often  concentrated in the same industry, making the plans vulnerable to  industry- specific trends and risks. For example, stakeholders noted the  impact that the Motor Carrier Act of 1980 had on the trucking industry.  Specifically, deregulation of the trucking industry reduced government  oversight and regulation over interstate trucking shipping rates. The  trucking industry became increasingly dominated by nonunion trucking  companies resulting in the bankruptcy of many unionized trucking  companies, according to stakeholders. New trucking companies typically  did not join multiemployer plans because their labor force was not  unionized and this, coupled with the bankruptcy of many contributing  employers, contributed to a decrease in active participant populations for  many plans serving the industry. As the total number of active participants  in a plan declines, the resources from which to collect employer  contributions declines proportionally. Stakeholders also said these  changes were unforeseeable. Limitations on a plan\u2019s ability to increase  contributions mean that a plan has less capacity to recover from an  underfunded position or to make up for investment returns that fall short  of expectations.", "A decline in the number of active workers can also accelerate plan  \u201cmaturity,\u201d as measured by the ratio of nonworking to working  participants. Plan maturity has implications for a plan\u2019s investment  practices and the time frame over which the plan must be funded.  According to PBGC\u2019s data for the multiemployer plans it insures, there  were approximately three active participants for every nonworking  participant in 1980 (3:1); by 2014, the ratio was approximately one active  worker for every two nonworking participants (1:2). Figure 6 shows the  change in the percentages of active and nonworking participants for the  multiemployer plans that PBGC insures.", "CSPF saw an even more dramatic change in its active to nonworking  participant ratio from 1982 through 2015. In 1982, there were more than  two active workers for every nonworking participant (2:1) and by 2016  that ratio had fallen to approximately one active worker for every five  nonworking participants (1:5) (see fig. 7). Because CSPF\u2019s contributing  employers were largely trucking companies, stakeholders said this made  the fund especially vulnerable to industry-wide shocks. Like the industry  as a whole, CSPF was unable to attract new employers to replace exiting  employers, in part because of the lack of new unionized employers.", "CSPF officials said that changes to the trucking industry and its workforce  also led to other challenges for the plan. For example, contributions to the  plan declined with the shrinking number of active workers. CSPF officials  told us they could not significantly increase the contribution rate paid by  remaining employers because of the financial hardship it would cause,  and as a result, the plan\u2019s ability to recover from its underfunded position  was limited. CSPF officials said that this increased the plan\u2019s reliance on  investment returns to try to close the gap between its assets and  liabilities."], "subsections": []}, {"section_title": "Funding Challenges and Investment Practices", "paragraphs": ["Stakeholders we interviewed cited challenges inherent in multiemployer  plans\u2019 funding and investment practices, and described how the  challenges may have contributed to the critical financial condition of some  plans, including CSPF.", "Stakeholders said that CSPF and many other multiemployer plans have  been challenged by employer withdrawals. An employer withdrawal  reduces the plan\u2019s number of active worker participants, thereby reducing  its contribution base and accelerating plan maturity. A withdrawing  employer generally must pay a share of any unfunded benefits.  Stakeholders identified several ways in which the withdrawal liability  framework could result in a withdrawing employer underpaying its share  of an unfunded liability. We have previously reported on the challenges  associated with withdrawal liability, including: withdrawal liability assessments are often paid over time, and  payment amounts are based on prior contribution rates rather than the  employer\u2019s actual withdrawal liability assessment. withdrawal liability payments are subject to a 20-year cap, regardless  of whether an employer\u2019s share of unfunded benefits has been fully  paid within this 20-year timeframe; plans often did not collect some or all of the scheduled withdrawal  liability payments because employers went bankrupt before  completing their scheduled payments; and  fears of withdrawal liability exposure increasing over time could be an  incentive for participating employers to leave a plan and a disincentive  for new employers to join a plan;  Stakeholders we interviewed also added that the calculation used to  determine withdrawal liability may use an investment return assumption  that inherently transfers risk to the plan.", "When exiting employers do not pay their share of unfunded benefits, any  remaining and future employers participating in the plan may effectively  assume the unpaid share as a part of their own potential withdrawal  liability as well as responsibility for the exiting employer\u2019s \u201corphaned\u201d  participants. Participating employers may negotiate a withdrawal if they  perceive a risk that the value of their potential withdrawal liability might  grow significantly over time.", "In its MPRA application, CSPF cited employer withdrawals and  bankruptcies as a significant challenge for the plan. CSPF reported that  after deregulation, the number of contributing employers dropped by over  70 percent. While some of the drop could be due to the consolidation of  trucking companies after deregulation, CSPF officials cited several cases  in which employers went bankrupt or withdrew from the plan, which  reduced the plan\u2019s contribution base and accelerated its maturity.  Additionally, when employers went bankrupt, they often did not pay their  full withdrawal liability. For example, CSPF said two of its major  contributing employers left the plan between 2001 and 2003, and left  $290 million of more than $403 million in withdrawal liability unpaid after  they went bankrupt.", "Stakeholders identified funding timeframes as a factor that contributed to  the challenges facing many multiemployer plans, including CSPF.  ERISA\u2019s minimum funding standards have historically allowed  multiemployer plans to amortize, or spread out the period of time for  funding certain events, such as investment shortfalls and benefit  improvements. For example, CSPF began a 40-year amortization of  approximately $6.1 billion in underfunding on January 1, 1981, giving the  plan until the end of 2021 to fully fund that amount. Longer amortization  periods increase the risk of plan underfunding due to the number and  magnitude of changes in the plan\u2019s environment that may occur, such as  a general decline in participants or deregulation of an industry. The  Pension Protection Act of 2006 shortened amortization periods for single- employer plans to 7 years and the amortization periods for multiemployer  plans to 15 years. Shorter amortization periods provide greater benefit  security to plan participants by reducing an unfunded liability more  rapidly. In addition, shorter amortization periods can be better aligned  with the projected timing of benefit payments for a mature plan. However,  shorter periods can be a source of hardship for plans with financially  troubled contributing employers because they may require higher  contributions. According to CSPF officials, CSPF requested and received  an additional 10-year amortization extension from the IRS in 2005 after  relating that contribution requirements could force participating employers  into bankruptcy. One CSPF representative said an amortization extension  can also help avoid subjecting the plan\u2019s employers to IRS excise taxes  for failing to make required minimum contributions.", "Stakeholders we interviewed said that certain common investment  practices may have played a role in the critical financial condition of  CSPF and other mature and declining plans. In general, multiemployer  plans invest in portfolios that are expected, on average, to produce higher  returns than a low-risk portfolio, such as one composed entirely of U.S.  Treasury securities. Stakeholders also stated that these investment  practices may have been too risky because returns can be more volatile,  and the higher expected returns might not be achieved. In addition, the  Congressional Budget Office has reported that if \u201cplans had been  required to fund their benefit liabilities\u2014at the time those liabilities were  accrued\u2014with safer investments, such as bonds, the underfunding of  multiemployer plans would have been far less significant and would pose  less risk to PBGC and beneficiaries.\u201d", "Stakeholders also told us that for mature plans like CSPF, these  investment practices can pose further challenges. Mature plans, with  fewer active employees, have less ability to recoup losses through  increased contributions and have less time to recoup losses through  investment returns before benefits must be paid. Market corrections, such  as those that occurred in 2001 through 2002 and in 2008, can be  particularly challenging to mature plans and their participants, especially if  a mature plan is also significantly underfunded. Mature plans could  mitigate these risks by investing more conservatively, however, the  resulting lower expected returns from more conservative investing  necessitates higher funding targets and contribution rates, which could be  a hardship for employers in an industry with struggling employers.  Alternatively, a plan that invests more conservatively may provide lower  promised benefits to accommodate the level of contributions it can collect.  Lower investment returns from a more conservative investment policy  would cost employers more in contributions and could potentially result in  employers leaving the plan. Further, investing in a conservative portfolio  would be relatively unique among multiemployer plans, and stakeholders  said plan managers may feel they are acting in a prudent fashion by  investing similarly to their peers. Underfunded plans like CSPF may not  see conservative investment as an option if they cannot raise the  contributions necessary to fully fund their vested benefits. Officials from  CSPF told us that, because they lacked the ability to significantly increase  revenue or decrease accrued benefits, the named fiduciaries sought  incrementally higher investment returns to meet funding thresholds  required by the amortization extension they received in 2005.", "On the other hand, there are challenges associated with risk bearing  investments. In our prior work, we reported that multiemployer plans  generally develop an assumed average rate of investment return and use  that assumption to determine funding targets, required contributions, and  the potential cost of benefit improvements. Experts we interviewed for  that report told us that using a portfolio\u2019s expected return to value the cost  of benefits increases the risk that insufficient assets could be on hand  when needed. They also told us that using the portfolio\u2019s expected return  to calculate liabilities could incentivize plans to invest in riskier assets and  to negotiate higher benefit levels because the higher returns expected  from riskier portfolios can result in lower reported liabilities.", "Plan Terms Set through Collective Bargaining  Stakeholders we interviewed said that plan terms, such as contribution  rates, which are set through the collective bargaining process, can create  an additional challenge for multiemployer plans. Employers in  multiemployer plans generally are not required to contribute beyond what  they have agreed to in collective bargaining, and these required employer  contributions generally do not change during the term of a collective  bargaining agreement. CSPF officials said that up until the early 2000s,  plan officials did not request modifications to collective bargaining  agreements, such as reallocating contribution dollars, to respond to  adverse investment returns."], "subsections": []}, {"section_title": "Investment Performance and Market Downturns", "paragraphs": ["Stakeholders highlighted the effects of market downturns on  multiemployer plan assets as another contributing factor to CSPF\u2019s critical  financial condition and that of other multiemployer plans. Failure to  achieve assumed returns has the effect of increasing unfunded liabilities.  For the multiemployer system in aggregate, the average annual return on  plan assets over the 2002 to 2014 period was about 6.1 percent, well  short of typical assumed returns of 7.0 or 7.5 percent in 2002.", "Many multiemployer plans were especially impacted by the 2008 market  downturn. PBGC estimated that from 2007 to 2009, the value of all  multiemployer plan assets fell by approximately 24 percent, or $103  billion, after accounting for contributions to and payments from the  plans. Although asset values recovered to some extent after 2009,  some plans continued to be significantly underfunded, and stakeholders  said this could be due to the contribution base not being sufficient to help  recover from investment shortfalls.", "CSPF\u2019s investment performance since 2000 has reflected performance  similar to other multiemployer plans and the plan went from 73 percent  funded in 2000 to about 38 percent funded in 2017. While the plan used  an assumed rate of return of 7.5 to 8.0 percent per year between 2000  and 2014, our analysis of the plan\u2019s regulatory filings shows that the  plan\u2019s weighted-average investment return over this period was about 4.9  percent per year. CSPF officials said the 2008 downturn significantly  reduced CSPF\u2019s assets and it was unable to sufficiently recoup those  losses when the market rebounded in 2009. Plan assets declined from  $26.8 billion at the beginning of 2008 to $17.4 billion at the beginning of  2009, with $7.5 billion of the decline attributable to investment losses.  Despite reporting a 26 percent return on assets during 2009, CSPF had  only $19.5 billion in assets at the end of 2009 because benefits and  expenses exceeded the contributions it collected and because it had  fewer assets generating returns for the plan. By the end of 2009, CSPF\u2019s  funding target was $35.9 billion but the fund had less than $20 billion that  could be used to generate investment returns. If CSPF\u2019s portfolio had  returned 7.5 percent per year over the 2000-2014 period, instead of the  approximately 4.9 percent we calculated, we estimate that the portfolio  value would have exceeded $32.0 billion at the end of 2014, or 91  percent of its Actuarial Accrued Liability."], "subsections": []}, {"section_title": "Effect of UPS Withdrawal", "paragraphs": ["In addition to the factors mentioned that affected many multiemployer  plans, stakeholders we interviewed also noted the unique effect of the  UPS withdrawal on CSPF. In 2007, UPS negotiated with the International  Brotherhood of Teamsters for a withdrawal from CSPF and paid a  withdrawal liability payment of $6.1 billion. This payment was invested  just prior to the 2008 market downturn. Moreover, the loss of UPS,  CSPF\u2019s largest contributing employer, reduced the plan\u2019s ability to collect  needed contributions if the plan became more underfunded. A UPS  official said that, following the market decline of 2001-2002, the company  considered whether it should withdraw from all multiemployer plans  because it did not want to be the sole contributing employer in any plan.  According to this official, UPS considered the large number of UPS  employees in CSPF and the plan\u2019s demographics\u2014such as an older  population and fewer employers\u2014in its decision to withdraw. CSPF  officials said they did not want UPS to withdraw because its annual  contributions accounted for about one-third of all contributions to the plan.  CSPF officials also told us that, prior to the UPS withdrawal, they had  expected the population of active UPS workers in the plan to grow over  time.", "UPS\u2019 withdrawal of 30 percent of CSPF\u2019s active workers, in combination  with the significant market downturn just after UPS withdrew, reflected the  loss of working members and investment challenges on a large scale.  Additionally, stakeholders noted that although each of the factors that  contributed to CSPF\u2019s critical financial condition individually is important,  their interrelated nature also had a cumulative effect on the plan. Industry  deregulation, declines in collective bargaining, and the plan\u2019s significantly  underfunded financial condition all impaired CSPF\u2019s ability to maintain a  population of active workers sufficient to supply its need for contributions  when investment shortfalls developed. Given historical rules for plan  funding and industry stresses, CSPF was unable to capture adequate  funding from participating employers either before or after they withdrew  from the plan. The plan\u2019s financial condition was further impaired when  long-term investment performance fell short of expectations. For an  underfunded, mature plan such as CSPF, the cumulative effect of these  factors was described by some stakeholders as too much for CSPF to  overcome."], "subsections": []}]}]}, {"section_title": "CSPF\u2019s Investment Policy Since 1982 Generally Increased Allocation to Equities, but Shifted Toward Fixed Income in 2017, Ahead of Projected Insolvency", "paragraphs": ["There have been three distinct periods related to CSPF\u2019s investment  policy after the original consent decree took effect:  the early period, from the consent decree\u2019s effective date in  September 1982 through October 1993, during which named  fiduciaries set different investment policies and sold many of CSPF\u2019s  troubled assets\u2014mostly real estate; a middle period from November 1993 through early 2017, during  which CSPF\u2019s investment policies were consistently weighted towards  equities and its asset allocation varied, with notable equity allocation  increases occurring from year-ends 1993-1995 and 2000-2002; and  the current period, starting in January 2017, during which named  fiduciaries and CSPF trustees are moving assets into fixed income  ahead of insolvency.", "Appendix I has a detailed timeline that includes changes to CSPF\u2019s  investment policies since the consent decree was established in 1982."], "subsections": [{"section_title": "Early Period: September 1982\u2013October 1993", "paragraphs": ["The original consent decree placed exclusive responsibility for controlling  and managing the plan\u2019s assets with an independent asset manager,  called a named fiduciary. Additionally, the original consent decree  prohibited CSPF trustees from managing assets or making investment  decisions and gave a single named fiduciary the authority to set and  change the plan\u2019s investment objectives and policies, subject to court  approval (see fig. 8).", "During this period, two successive named fiduciaries\u2014first Equitable Life  Assurance Society of the United States (Equitable) and then Morgan  Stanley\u2014set and executed the plan\u2019s investment objectives using similar  investment philosophies, but differing investment return goals and target  asset allocations (see fig. 9). Both named fiduciaries planned to sell the  plan\u2019s troubled real estate assets from the pre-consent decree era. They  also limited nonpublicly traded investments to 35 percent of the plan\u2019s  assets and set broad allocation targets for new real estate, fixed income,  and equity assets. In 1984, Morgan Stanley considered a dedicated bond  portfolio in its capacity as the plan\u2019s named fiduciary, but after review,  Morgan Stanley decided similar results could be obtained through other  investment strategies.", "In executing these policies, the plan\u2019s asset allocation varied from year to  year. Starting in 1987 and in subsequent years during the early period,  Morgan Stanley invested a majority of the plan\u2019s assets in fixed income  assets\u2014more than half of which were passively managed\u2014and all equity  assets were allocated to domestic equity through 1992. By 1989, CSPF  officials reported that nearly all troubled real estate assets had been sold  and Morgan Stanley\u2019s responsibilities and risk of potential fiduciary  liability were reduced, permitting a concomitant reduction in fees paid to  the named fiduciary (see fig. 10)."], "subsections": []}, {"section_title": "Middle Period: November 1993\u2013January 2017", "paragraphs": [], "subsections": [{"section_title": "CSPF\u2019s Investment Policy", "paragraphs": ["During the middle period, CSPF\u2019s investment policy was broad and  consistently directed that asset allocations be weighted toward equities.  In 1993, Morgan Stanley revised its investment policy statement for CSPF  to eliminate asset allocation targets for each asset class and instead  specified that the plan invest a majority of assets in equity or equity-type  securities and no more than 25 percent in nonpublicly traded assets. After  1999, CSPF\u2019s investment policy under other, successive named  fiduciaries continued to be broad and generally specified that the plan  should invest a majority of assets in equity or equity-type securities.  Specifically J.P. Morgan\u2019s and Northern Trust\u2019s consecutive investment  policies for part of the plan\u2019s assets continued to specify that a majority of  the plan\u2019s assets be invested in equity or equity-type securities and no  more than 15 percent be invested in nonpublicly traded assets.  Goldman Sachs\u2019 investment policy for another part of the plan\u2019s assets  did not specify asset allocation details but indicated slightly higher  tolerance for risk in conjunction with its equity portfolio. CSPF trustees  said that named fiduciaries considered investing in alternative assets, but  instead chose to increase the plan\u2019s allocation to equity assets.", "The named fiduciaries\u2019 investment policies did not vary significantly over  this period because CSPF officials said that the plan\u2019s overarching  investment objective of achieving full funding did not change, even though  there were key changes to the plan\u2019s investment management structure  during this time period. Specifically, starting in 1999, the plan  temporarily shifted to a dual named fiduciary structure and increased its  use of passively-managed accounts\u2014both described in detail below\u2014 changing the named fiduciary structure that had been in place since the  original consent decree (see fig. 11).", "More specifically, the two key changes to the plan\u2019s investment  management structure were:", "A temporary shift to a dual named fiduciary structure. Effective in  1999, CSPF proposed and the court approved allocating plan assets  between two named fiduciaries instead of one in order to diversify  CSPF\u2019s investment approach, among other things. Both named  fiduciaries were in charge of setting and executing separate policies  for plan assets they managed\u2014called \u201cGroup A\u201d and \u201cGroup B\u201d  assets\u2014irrespective of the other named fiduciary\u2019s allocations. During  this time, the two named fiduciaries were J.P. Morgan/Northern Trust  and Goldman Sachs. Specifically, J.P. Morgan was named fiduciary  between 2000 and 2005 and Northern Trust between 2005 and 2007  for \u201cGroup A\u201d assets. Goldman Sachs was named fiduciary for \u201cGroup  B\u201d assets between 2000 and 2010. In 2010, an investment consultant  found the performance of two named fiduciaries under the dual  named fiduciary structure had been similar and more expensive than  it would be under a proposed move back to a single named  fiduciary. Accordingly, CSPF officials proposed, and the court  approved, consolidation of all assets allocated to named fiduciaries in  August 2010, with Northern Trust as the plan\u2019s single named  fiduciary.", "An increased use of passively-managed accounts. Between 2003  and 2010, the portion of assets that named fiduciaries managed  declined as the plan moved 50 percent of its assets into three  passively-managed accounts. Specifically, in 2003, 20 percent of  CSPF\u2019s assets were transitioned into a passively-managed domestic  fixed income account to lower the plan\u2019s investment management  fees. In addition, both of the named fiduciaries reported that they had  not outperformed the industry index for the domestic fixed income  assets they managed after they were approved as named fiduciaries  in 1999 and 2000 through February 2003. Similarly, in 2007 and  2010, CSPF officials said that two more passively-managed accounts  were created to further reduce plan fees. Specifically, in 2007, 20  percent of plan assets were moved into a passively-managed  domestic equity account. Then, in 2010, an additional 10 percent of  the plan\u2019s assets were allocated to passively-managed accounts\u20145  percent were allocated to a new passively-managed international  equity account and 5 percent were added to the passively-managed  domestic equity account.", "CSPF officials and named fiduciary representatives also said that the  plan\u2019s investment policies did not change in response to a couple of the  events that contributed to CSPF\u2019s critical financial condition. For example,  when UPS withdrew from the plan in December 2007, it paid $6.1 billion  in a lump sum to fulfill its withdrawal liability. Consistent with the named  fiduciaries\u2019 investment policies during this time period, the majority of this  withdrawal payment was invested in equity assets. Specifically, the court  approved the UPS withdrawal liability payment to be allocated: $1 billion  to Northern Trust to be invested primarily in short-term fixed income  assets, $0.9 billion to the passively-managed domestic fixed income  account, and $4.2 billion to partially fund the newly created passively- managed domestic equity account. As a result of the 2008 market  downturn, the balance of each of CSPF\u2019s accounts\u2014Northern Trust\u2019s  named fiduciary account, the passively-managed domestic fixed income  and domestic equity accounts, and Goldman Sachs\u2019 named fiduciary  account\u2014declined because of investment losses or withdrawals from  investment assets to pay benefits and expenses. Some of the declines in  each account were reversed by investment gains in 2009."], "subsections": []}, {"section_title": "Process for Setting and Executing CSPF\u2019s Investment Policy", "paragraphs": ["Although the changes made to CSPF\u2019s investment management structure  did not lead to investment policy changes during the middle period, they  altered the process by which the policy was set and executed. In  particular, trustee responsibilities in the policy process grew after CSPF  trustees became responsible for developing investment policy statements  and selecting and overseeing managers of the passively-managed  accounts, subject to court approval. In addition, CSPF officials said the  addition of passively-managed accounts between 2003 and 2010 had the  effect of creating broad bounds within which the named fiduciary could  set the plan\u2019s asset allocation. For example, when the plan moved 20  percent of total plan assets into the passively-managed domestic fixed  income account in 2003, this placed an upper bound on the plan\u2019s total  equity allocation at 80 percent. Similarly, since 2010 the 30 percent of  total plan assets in passively-managed equity accounts has placed a  lower bound on the plan\u2019s total equity allocation at 30 percent (see fig.  12).", "Nevertheless, named fiduciaries maintained the largest role in setting and  executing CSPF\u2019s investment policy throughout the middle period. From  1993 to 2003, named fiduciaries managed all of the plan\u2019s investment  assets, and from 2003 to 2009, when the plan added two of the current  passively-managed accounts, named fiduciaries still held the majority of  the plan\u2019s assets. It has only been since 2010 that the assets in  passively-managed accounts equaled those managed by the named  fiduciary. Furthermore, Northern Trust representatives said they  considered the plan\u2019s allocations to passively-managed accounts when  developing the objectives and target asset allocations for the assets they  managed. Northern Trust representatives also said they discussed the  plan\u2019s overall asset allocation with trustees, but the trustees, and  ultimately the court, were responsible for the decision to move 50 percent  of the plan\u2019s assets into passively-managed accounts."], "subsections": []}, {"section_title": "Asset Allocation under CSPF\u2019s Investment Policy", "paragraphs": ["After the 1993 policy change that specified the plan would invest a  majority of assets in equity or equity-type securities, CSPF\u2019s asset  allocation changed significantly. For example, during the middle period  the plan\u2019s allocation to equities increased from 37 percent at the end of  1993 to 69 percent at the end of 2002, and its allocation to cash plus fixed  income decreased from 63 percent at the end of 1993 to 27 percent at the  end of 2002. In particular, Morgan Stanley increased the plan\u2019s  allocation to equity assets from 37 percent at the end of 1993 to 63  percent at the end of 1995, with the percentage in equities almost or  above 50 percent through the end of 1999. From 1993 through 1999,  Morgan Stanley generally decreased the plan\u2019s allocation to fixed income  assets and increased its allocation to international equity (reaching a high  of about 28 percent of the plan\u2019s assets in 1995), an asset class in which  the plan had not previously invested (see fig. 13).", "After 1999, the plan\u2019s asset allocation continued to be weighted towards  equities. After the market downturn in 2001, CSPF trustees told us that  J.P. Morgan and Goldman Sachs explicitly increased the equity allocation  in an attempt to generate higher investment returns and increase the  plan\u2019s funded ratio\u2014the plan\u2019s overarching investment objective.  Between 2000 and mid-2010, when the plan had two named fiduciaries,  equity assets increased from about 58 percent at the end of 2000 to  between 66 and 70 percent at the end of 2001 and each year thereafter  until the end of 2009, mostly based on the named fiduciaries\u2019 decisions to  increase the plan\u2019s allocation to domestic equity assets. When Northern  Trust became the sole named fiduciary in 2010, the proportion of equity  assets declined from almost 72 percent at the end of 2010 to almost 63  percent at the end of 2016. During this time, Northern Trust generally  decreased the plan\u2019s allocation to domestic equity assets, increased the  allocation to actively-managed fixed income, and started investing in  global infrastructure assets. Northern Trust representatives said CSPF\u2019s  recent portfolio had been kept relatively aggressive in an attempt to  achieve the returns the plan would need to become fully funded while  balancing risk (see fig. 14)."], "subsections": []}]}, {"section_title": "Current Period: January 2017 \u2013 Present", "paragraphs": ["CSPF\u2019s deteriorating financial condition precipitated a recent investment  policy change that will move plan assets into fixed income and cash  equivalent investments ahead of projected insolvency. In early 2017,  Northern Trust representatives revised the plan\u2019s investment policy  because they, in consultation with the trustees, believed the plan had no  additional options to avoid insolvency (see textbox). This change to the  plan\u2019s outlook led to a significant change in the plan\u2019s investment  objective, from a goal of fully funding the plan to instead forestalling  insolvency as long as possible while reducing the volatility of the plan\u2019s  funding. Northern Trust representatives and CSPF officials revised  applicable plan investment policy statements and started to gradually  transition the plan\u2019s \u201creturn seeking assets\u201d\u2014such as equities and high  yield and emerging markets debt\u2014to high quality investment grade debt  and U.S. Treasury securities with intermediate and short-term  maturities. Northern Trust\u2019s new investment policy specified the assets  under its control would not be invested in nonpublicly traded securities, in  order to manage risk and provide liquidity.", "CSPF Has Limited Options to Achieve Solvency  As of March 2018, the Central States, Southeast and Southwest Areas  Pension Fund (CSPF) was projected to be insolvent on January 1, 2025.   As of July 2017, CSPF officials said that the following measures   (in isolation) could help the plan avoid insolvency:", "18 percent year-over-year investment returns (infinite horizon), or", "250 percent contribution increases (with no employer attrition), or", "46 percent across-the-board benefit cut.", "However, CSPF officials said that investment returns and contribution  increases of these magnitudes were untenable, and CSPF\u2019s application to  reduce accrued benefits under the Multiemployer Pension Reform Act of   2014 (MPRA) was denied in 2016.", "CSPF officials and Northern Trust representatives said these asset  allocation changes are intended to provide participants greater certainty  regarding their benefits and reduce the plan\u2019s exposure to market risk and  volatility until it is projected to become insolvent on January 1, 2025 (see  fig. 15).", "Northern Trust is expected to continue to manage 50 percent of the plan\u2019s  investment assets until the plan becomes insolvent. While the total  amount of assets in the passively-managed accounts will continue to  constitute 50 percent of the plan\u2019s assets, the trustees plan to transfer  assets from the passively-managed domestic and international equity  accounts into the passively-managed domestic fixed income account,  which will be gradually transitioned to shorter-term or cash-equivalent  fixed-income securities sometime before the end of March 2020 (see fig.  16).", "CSPF officials said the changes will reduce the amount of fees and  transaction costs paid by the plan. Specifically, investment management  fees are expected to generally decrease as the plan moves into shorter  duration fixed income assets. In addition, Northern Trust\u2019s plan is  designed to reduce transaction costs in two ways: (1) in the near term,  Northern Trust plans to liquidate \u201creturn-seeking assets\u201d so the cash it  receives can be used directly to pay benefits, and (2) it plans to  synchronize the fund\u2019s benefit payments with the maturity dates of fixed  income assets it purchases so cash received can be used directly to pay  benefits. Both of these design features are intended to eliminate the need  to reinvest assets, which might entail additional transaction costs."], "subsections": []}]}, {"section_title": "Available Data Show That CSPF Investment Returns and Fees Were Generally Comparable to Similar Plans", "paragraphs": ["Our analysis of available data from several different sources shows the  returns on CSPF\u2019s investments and the fees related to investment  management and other plan administration activities appear generally in  line with similar pension plans or other large institutional investors of  similar size."], "subsections": [{"section_title": "CSPF\u2019s Investment Return History is in Line with Other Funds and Plans", "paragraphs": [], "subsections": [{"section_title": "CSPF Investment Returns Compared to Other Large Institutional Funds", "paragraphs": ["The annual returns on CSPF\u2019s investments in recent decades have  generally been in line with the annual returns of a customized peer group  provided by the investment consultant Wilshire. The comparison group  data is from Wilshire\u2019s Trust Universe Comparison Service (TUCS)\u2014a  tool used by CSPF to compare its investment returns to a group of  peers. Over the 22 years covered by our analysis, CSPF\u2019s returns were  above the median in 12 years and below the median the other 10. Figure  17 illustrates how CSPF\u2019s annual investment returns compare to CSPF\u2019s  customized peer group of master trusts with over $3 billion in assets.", "CSPF\u2019s annual investment returns tended to fluctuate relative to the  annual median of the TUCS peer group over the 1995 through 2016  period. For example, in 14 of the 22 years analyzed, its annual return  was in the highest or lowest 25 percent of returns (7 years each). Further,  in 3 years, its investment returns fell either within the top 5 percent of  returns (1996, 2009) or bottom 5 percent (1998). In 8 of the 22 years,  CSPF\u2019s annual return was within the middle 50 percent of its TUCS peer  group.", "The TUCS data we analyzed also included median portfolio allocations  for the group of CSPF\u2019s peers. Table 2 compares CSPF\u2019s asset  allocations for selected asset categories to the median allocations of its  TUCS comparator group.", "In 1996, compared to the TUCS medians, CSPF had relatively lower  proportions of its assets in both equities and fixed income and a relatively  higher proportion in real estate. Twenty years later (2016), CSPF had  relatively higher proportions of its assets in both equities and fixed income  (about 15 and 7 percentage points, respectively) than the respective  medians for its peer group. However, the relatively large difference  between CSPF\u2019s 2016 equity allocation and the median allocation of its  peer group may be a result of the peers moving into different asset  classes. For example, there is a relatively large difference, in the other  direction, in the allocation to alternative investments (see table 2). We  did not identify an alternative asset category in CSPF\u2019s asset reports for  2016, but the TUCS comparator group median asset allocation in that  year is 11.8 percent of assets."], "subsections": []}, {"section_title": "CSPF Investment Returns Compared to Other Similar Multiemployer Plans", "paragraphs": ["Similar to our findings when comparing the returns on CSPF\u2019s  investments to a customized peer group of other large institutional funds,  the annual returns on CSPF\u2019s investments in recent decades have also  generally been in line with the annual returns for a group of similar  multiemployer pension plans. To create a group of comparable plans, we  selected plans that had a similar degree of \u201cmaturity\u201d to CSPF in 2000, as  such plans may face similar cash flow challenges to those facing  CSPF. This comparator group ultimately consisted of 15 plans in  addition to CSPF. Relative to less mature plans, mature plans generally  have a greater proportion of liabilities attributable to retired participants  receiving benefit payments and a lower proportion attributable to active  participants (i.e., workers) earning benefits. Mature plans may have  limited capacity to make up for insufficient investment returns through  employer contributions.", "Similar to the comparison against other large institutional fund returns  based on TUCS data, our comparison against other mature  multiemployer plan returns based on Form 5500 data shows that CSPF\u2019s  annual returns fluctuate relative to the median annual return for the  mature plan comparator group (see fig. 18). For example, in 12 of the  15 years, CSPF\u2019s annual return was in the highest or lowest 25 percent of  returns (7 times high and 5 times low). In 3 of the 15 years analyzed,  CSPF\u2019s annual return fell within the middle 50 percent of the peer group.  Overall, from 2000 to 2014, CSPF\u2019s annual return was above the group  median return in 9 of the 15 years\u2014and lower than the median return in  the other 6 years. Relative to its peers, CSPF\u2019s annual returns performed  worst during economic downturns and best in years coming out of such  downturns. CSPF\u2019s annual investment return was in the bottom 10  percent of returns in 2001, 2002, and 2008. Alternatively, its annual return  was in the top 10 percent of returns from 2003 to 2006, in 2009, and in  2012.", "Additionally, the dollar-weighted average annual return for CSPF over the  2000 through 2014 period was roughly the same as the median for the  mature plan comparison group. Specifically, the dollar-weighted average  annual return over this period for CSPF was roughly 4.9 percent, while  the median dollar-weighted average annual return over this period among  the comparison plans with continuous data was 4.8 percent.", "Our analysis of investment returns for mature plans compares investment  returns for a set of peers that includes only multiemployer defined benefit  plans. However, as with the comparison against other large institutional  funds, the comparisons against other mature plans are not measures of  over- or under-performance relative to an index or benchmark. Similarly,  as with the earlier comparison, the analysis does not account for  variations in the levels of investment risk taken by the plans."], "subsections": []}]}, {"section_title": "Fees and Expenses Paid by CSPF Were Similar to Other Large Multiemployer Plans", "paragraphs": ["Our analysis of Form 5500 data shows CSPF\u2019s investment fees and  administrative expenses were in line with other large multiemployer  plans. Plan investment fees and administrative expenses are often paid  from plan assets so many plans seek to keep these fees and expenses  low. Additionally, investment fees are likely to be related to the value of  assets under management, and plans with greater asset values tend to  be able to negotiate more advantageous fee rates. According to a  pension consultant and a DOL publication, investment management fees  are typically a large defined benefit plan\u2019s largest category of expense,  but a pension plan also incurs a number of lesser expenses related to  administering the plan. Administrative expenses (other than investment  fees) may include those for: audit and bookkeeping/accounting services;  legal services to the plan (opinions, litigation and advice); administrative services provided by contractors; plan staff salaries and expenses; plan overhead and supplies; and other miscellaneous expenses.", "These administrative expenses relate to plan operations beyond the  management of the assets, including the day-to-day expenses for basic  administrative services such as participant services and record keeping.  Furthermore, some of these expenses can vary based on the number of  participants in the plan. To compare CSPF\u2019s fees and expenses against  similarly sized plans, we tallied various investment fee-related and other  administrative expenses and compared CSPF to a group of  multiemployer defined benefit plans that were among the 19 largest plans  in terms of assets as of January 1, 2014.", "According to CSPF\u2019s 2014 Form 5500, CSPF spent about $46.5 million  on investment fees (or $47.6 million in 2016 dollars) and had about $17.4  billion in assets (or $17.8 billion in 2016 dollars) as of the end of the  year\u2014resulting in an investment fee expense ratio of about 27 basis  points, or 0.27 percent. Over the 2000 to 2014 period, CSPF\u2019s  average annual investment fee expense ratio was 34 basis points (0.34  percent) while the median of the averages for our large plan comparison  group was 37 basis points (0.37 percent). While CSPF\u2019s average  investment fee expense ratio was below the median for its comparison  group over the period we examined, the relationship of CSPF\u2019s annual  ratio to the annual median changed over time. CSPF\u2019s annual  investment-fee expense ratio was consistently at or above the median  from 2000 through 2006, but was below the median thereafter. In  addition, CSPF\u2019s average investment fee expenses over the period that  followed 2006 were 26 percent less than the average over the period  before 2007. (They averaged 39 basis points, or 0.39 percent, from 2000  through 2006 and 29 basis points, or 0.29 percent, from 2007 through  2014.) Two events may have contributed to this change. First, CSPF  introduced the passively-managed accounts beginning in 2003\u2014as noted  earlier, and CSPF moved certain assets to those accounts in an effort to  reduce fees. Second, the change back to a single named fiduciary,  which was suggested as an expense saving move, occurred in the middle  of the 2007 to 2014 period analyzed. Figure 19 illustrates how CSPF\u2019s  investment fee expense ratio compares to other large plans.", "Our analysis uses investment fee data reported in the Form 5500 that  does not include details about the sources of the fees. Investment fees  may be sensitive to a plan\u2019s particular investment strategy and the way  assets are allocated. For example, with CSPF, a named fiduciary has  responsibility for executing the investment strategy and allocations.  According to a representative from Northern Trust\u2014the current named  fiduciary\u2014CSPF pays a fee of about 5 basis points for named fiduciary  services, and this, combined with investment management fees, is in line  with investment fees for other clients (though the overall fees depend on  the types of asset allocations and investment strategies).", "Figure 20 shows how CSPF\u2019s administrative (or non-investment)  expenses compare to those of other large plans on a per participant  basis. According to CSPF\u2019s 2014 Form 5500, CSPF spent about $38  million on administrative expenses ($39 million in 2016 dollars)\u2014the third  most among the 20 peer plans. However, when these expenses are  expressed relative to the number of plan participants, CSPF had per  participant expenses of $98 in 2014, which is about 16 percent less than  the median of the large comparator group, $117. Over the period studied,  CSPF\u2019s administrative expenses per participant were at or above the  large comparator median in 3 years (2001, 2004, and 2005), but lower  than the median in all other years of the 2000 to 2014 period.", "CSPF\u2019s administrative expenses were also in line with a broader group of  comparators. For example, PBGC reported on 2014 administrative  expenses of a population of large multiemployer plans (plans with more  than 5,000 participants). By closely replicating the methodology of that  study, we found CSPF\u2019s expenses of $98 per participant in 2014 fell  below the median expense rate of $124 dollars per participant but above  the lowest quartile of this group of large multiemployer plans. In comparing administrative expenses as a percentage of benefits paid, we  found CSPF\u2019s administrative expenses were among the lowest 5 percent  of this group of large multiemployer plans. We performed a similar  comparison against the peer group of large plans. CSPF had the  lowest administrative expense rate among the large plan peer group in  2014, paying administrative expenses at a rate of 1.4 percent of benefits  paid. In addition, CSPF\u2019s annual administrative expenses as a  percentage of benefits were below the median of our peer group of large  plans in all years we reviewed.", "Our analysis of administrative expenses is highly summarized and does  not account for possibly unique sources of administrative expenses.  Plans may have unique organizational structures and attribute expenses  differently. For example, one plan may contract a significant portion of  administrative duties with a third-party, while another plan may administer  the plan in-house. According to an actuary we interviewed, most  multiemployer plans are administered by a third-party, but the plan\u2019s in- house staff will still retain a number of duties. Additionally, the amount of  individual administrative expenses could vary significantly by plan  depending on the importance of the related administrative function in the  plan\u2019s organization."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the report to the U.S. Department of Labor, U.S.  Department of the Treasury, and the Pension Benefit Guaranty  Corporation for review and comment. We received technical comments  from the U.S. Department of Labor and the Pension Benefit Guaranty  Corporation, which we incorporated as appropriate. The U.S. Department  of the Treasury provided no comments.", "We will send copies to the appropriate congressional committees, the  Secretary of Labor, the Secretary of the Treasury, Director of the Pension  Benefit Guaranty Corporation, and other interested parties. This report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Charles Jeszeck at (202) 512-7215 or jeszeckc@gao.gov or Frank  Todisco at (202) 512-2700 or todiscof@gao.gov. Mr. Todisco meets the  qualification standards of the American Academy of Actuaries to address  the actuarial issues contained in this report. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to review: (1) what is known about the factors that  contributed to the Central States, Southeast and Southwest Areas  Pension Fund\u2019s (CSPF) critical financial condition; (2) what has been  CSPF\u2019s investment policy, and the process for setting and executing it,  since the consent decree was established; and (3) how has CSPF  performed over time, particularly compared to similar pension plans.", "For all objectives, we reviewed relevant federal laws and regulations,  literature, and documentation the U.S. Department of Labor (DOL) and  CSPF officials provided, including reports prepared by the court- appointed independent special counsel. We interviewed knowledgeable  industry stakeholders, participant advocates, CSPF officials, International  Brotherhood of Teamsters officials and members, and federal officials\u2014 including officials from the Pension Benefit Guaranty Corporation  (PBGC), DOL, and the U.S. Department of the Treasury (Treasury).", "To describe the major factors that led to CSPF\u2019s critical financial  condition, we conducted semi-structured interviews and reviewed CSPF  documentation, relevant scholarly materials, trade and industry articles,  government reports, conference papers, research publications, and  working papers. We also collected actuarial, financial, and other data on  current and historical measures of plan assets, liabilities, investment  performance, and other factors, and performed our own analyses of these  data. The data and documentation collected were generally from the plan  or agencies that oversee pensions. We determined the information to be  generally reliable for the purposes of our objectives.", "To describe CSPF\u2019s investment policy and the process by which it was  set and executed we (1) reviewed CSPF\u2019s investment policy statements,  court orders and consent decree amendments, and other documentation  provided by CSPF officials; (2) interviewed CSPF officials, including  pension plan staff, the board of trustees, and the investment advisor, and  representatives of the named fiduciary serving the plan at the time of our  review; and (3) summarized certain aspects of CSPF\u2019s assets using year- end performance reports prepared by the named fiduciaries.", "To describe how CSPF has performed over time compared to similar  pension plans, we analyzed investment and fee data from DOL\u2019s Form  5500, the government\u2019s primary source of pension information. We also  examined CSPF\u2019s investment returns in comparison to a customized  Wilshire Associates\u2019 (Wilshire) Trust Universe Comparison Service  (TUCS) benchmark of trusts with $3 billion or more in assets. CSPF  provided these data and the data are included in the independent special  counsel reports. Wilshire provided supplemental data using the same  benchmark specifications."], "subsections": [{"section_title": "CSPF and DOL Document Reviews", "paragraphs": ["We reviewed three types of documentation provided by CSPF for  changes in named fiduciaries; changes in investment policy, strategy, and  asset allocation; major issues that affected funding; and how these issues  affected CSPF\u2019s investment strategy and policy.", "Select independent special counsel reports. CSPF officials  provided 4th quarter reports for each year from 1982 through 2002  and available quarterly reports from 2003 through 2007. We  downloaded all available quarterly reports from 2008 through 2017  from CSPF\u2019s website.", "Select board of trustee meeting minutes. We requested board of  trustee meeting minutes from 1983, 1994-95, 1998-2005, 2007-2010,  and 2016 so we could review trustee discussions from the first full  year the plan was covered by the 1982 consent decree, the most  recent full year; periods that included a recession and/or when the  plan\u2019s assets performed poorly; and periods that preceded a change  or reappointment of the named fiduciary. CSPF officials selected  portions of the trustee meeting minutes from those years that  pertained to the following topics: named fiduciary reports concerning  investment performance; discussions relating to the amortization  extension the Internal Revenue Service (IRS) granted to the plan and  the contribution rate increases the plan required of participating  employers in an effort to comply with funding targets required as  condition of the IRS-approved amortization extension; major  amendments to the plan; significant reports concerning the plan\u2019s  financial condition; amendments to the consent decree; discussions  relating to any inquiries or issues DOL raised; discussions of named  fiduciary appointments or resignations; discussions of particularly  significant contributing employer delinquencies, bankruptcies, and  settlements; and discussions relating to the independent special  counsel. In addition to the board of trustee meeting minutes, CSPF  officials provided select documentation on similar topics a former  secretary of the board of trustees retained (1995 through 2008).", "Select correspondence between CSPF and DOL. CSPF officials  provided select correspondence with DOL from 1987 through 2017  relating to DOL\u2019s oversight of the plan. CSPF officials said they  provided all records of those communications that related to  significant, substantive, and nonroutine issues. The correspondence  excluded other documents, such as periodic reports concerning asset  rebalancing and correspondence related to fairly noncontroversial  motions to the consent decree.", "In addition, DOL provided documentation throughout the course of our  engagement, including documentation it provided between September  and October 2017 that it had not previously identified as being relevant to  our review. We completed an on-site file review at DOL in September  2017, and DOL sent us additional electronic documentation in September  and October 2017. Overall, we reviewed extensive documentation from  DOL\u2014spanning over 10,000 pages of paper-based and electronic files\u2014 and spent substantial time cataloging and categorizing it. However, DOL  officials reported that certain documentation related to CSPF was no  longer available because it had only been retained for the time specified  in the records retention policy of the relevant office."], "subsections": []}, {"section_title": "Semi-structured Interviews", "paragraphs": ["We conducted 23 semi-structured interviews with federal agency officials  and other stakeholders, including affected parties, and persons  knowledgeable about unions, participants and retirees, the trucking  industry, collective bargaining agreements, and multiemployer pension  plans. We also interviewed three stakeholders with actuarial expertise to specifically understand actuarial standards and procedures. We selected  knowledgeable stakeholders based on review of literature and prior GAO  work, and recommendations from other stakeholders. We judgmentally  selected stakeholders whose expertise coincided with the scope of our  objectives and who would be able to provide a broad range of  perspectives. In our semi-structured interviews we asked about key  factors affecting the plan, the broader regulatory and financial  environment in which multiemployer plans operate, and solvency options  for plans like CSPF."], "subsections": []}, {"section_title": "Investment Policy Statement Review", "paragraphs": ["We reviewed CSPF\u2019s investment policy statements after CSPF entered  into a consent decree in 1982, most of which are documented in the  consent decree or other court orders. Seven of the investment policy  statements were developed by named fiduciaries in consultation with the  plan\u2019s board of trustees and four were developed by the trustees. (See  fig. 21.)", "From each investment policy statement, we compiled relevant information  on: (1) investment philosophy and plan characteristics considered in  developing it, (2) investment return benchmarks, (3) asset allocation, and  (4) strategies and assets. See table 3 for select asset allocation  information."], "subsections": []}, {"section_title": "Asset Summary", "paragraphs": ["To describe how CSPF\u2019s investment policy was executed, we compiled  information from performance reports prepared by named fiduciaries. We  reported CSPF\u2019s asset allocation generally based on the aggregate asset  allocation categories CSPF\u2019s named fiduciaries assigned in those reports.  CSPF provided these reports for the end of each year 1984 through  2016\u2014except 1992 and 1995, for which it provided reports as of the end  of November. Information we compiled included the plan\u2019s: account breakdown (i.e., assets in named fiduciary and passively- asset allocation; and  investment assets withdrawn to pay benefits and administrative  expenses.", "When possible, we checked the information from year-end performance  reports against that in other sources. Specifically, to ensure we captured  the vast majority of the plan\u2019s assets in our asset summary we compared  the total amount of plan assets named fiduciaries reported with Net  Assets reported in CSPF\u2019s Form 5500 filings, available from 1982 through  2016. We generally found these totals to be similar for each year\u2014in  most years the difference was about or under 1 percent. Also, named  fiduciary performance reports included information on withdrawals from  investment assets to meet pension and administrative expense  obligations as of the end of each year, except for 1995 and 1999-present.  For 1995 through 2016, we compiled this information from independent  special counsel reports. For years in which we had overlapping  information, 1996 through 1998, we found the reported totals were  similar\u2014no more than about 0.6 percent difference in each of those  years. Based on our review we believe that the differences were  insignificant to our overall analysis and did not impact our findings."], "subsections": []}, {"section_title": "Form 5500 Data Analysis", "paragraphs": ["To determine investment returns, investment fees, and administrative  expenses for CSPF and related comparator group multiemployer defined  benefit plans, we analyzed electronic Form 5500 information, the primary,  federal source of private pension data. We analyzed information from  2000 through 2014, the most current and complete year at the time we  performed our analysis. We began our analysis with 2000 data as data on  investment returns and plan fees is primarily found in the Schedule H.  Schedule H information was first collected in 1999. But we begin our  analysis with 2000 data as electronic data became more reliable the year  after the schedule was introduced.", "We have previously reported on the problems associated with the  electronic data of the Form 5500. To mitigate problems associated with  the data, we used Form 5500 research data from PBGC. PBGC analysts  routinely and systematically correct the raw 5500 data submitted by  plans, and PBGC\u2019s Form 5500 research data are thought to be the most  accurate electronic versions. Although we did not independently audit the  veracity of the PBGC data, we took steps to assess the reliability of the  data and determined the data to be sufficiently reliable for our purposes.  For example, we performed computer analyses of the data and identified  inconsistencies and other indications of error and took steps to correct  inconsistencies or errors. A second analyst checked all computer  analyses."], "subsections": [{"section_title": "Funded Status", "paragraphs": ["Funded status is a comparison of plan assets to plan liabilities. One  measure of funded status is the funded percentage, which is calculated  by dividing plan assets by plan liabilities. Another measure of funded  status is the dollar amount of difference between plan assets and plan  liabilities; the excess of plan liabilities over plan assets is the unfunded  liability (or surplus if assets exceed liabilities). In this report, we measured  funded status using the Actuarial Value of Assets and the Actuarial  Accrued Liability, which are the basic measures used to determine the  annual required minimum contribution for multiemployer plans under  ERISA. We chose these measures because of the consistent availability  of data for these measures. There are other ways to measure plan assets  and plan liabilities. The Actuarial Value of Assets can be a \u201csmoothed\u201d  value that differs from the market value of plan assets. The Actuarial  Accrued Liability depends on the choice of actuarial cost method and  discount rate, and on whether it is determined on an ongoing plan basis  or a plan close-out basis. While different measures of plan assets and  liabilities will produce different measures of funded status at any particular  point in time, we found that our use of the Actuarial Value of Assets and  the Actuarial Accrued Liability was sufficient for our purposes, which  included examining the plan\u2019s progress relative to statutory funding  standards as well as its trend over time."], "subsections": []}, {"section_title": "Comparator Group Construction", "paragraphs": ["We developed multiple comparison groups for our analysis. The general  rationale behind these comparator groups is to identify plans with similar  fundamental characteristics, such as plan size or plan maturity, for  purposes of investment return and fee and expense comparisons. We  created the following two comparator groups:  1.  Large plans (in terms of assets). We ordered multiemployer defined  benefit plans by descending 2014 plan assets (line 2a of the 2014 of  the Schedule MB). Because one of our key analyses of the data  involves comparing investment returns across plans, we also limited  the comparable plans to those that share a common plan year to  CSPF (specifically if they have the same plan year-end of December  31). We selected the 20 plans that had the largest plan asset values.  This includes CSPF, which was the second largest multiemployer plan  as of the beginning of 2014. Because these comparator plans are  among the largest, they should have similar cost advantages. For  example, for investment management services, they should have  similar advantages in obtaining lower fees and thus garner greater net  returns due to the more favorable fee structures.  2.  Mature plans (in terms of retiree liability proportions). We ordered  multiemployer defined benefit plans by their similarity to CSPF\u2019s ratio  of retiree to total liabilities as of the beginning of calendar year 2000.  The ratio of retiree to total liabilities is defined as line 2(b)1(3) of the  2000 Schedule B divided by total liabilities of line 2(b)4(3) of the 2000  Schedule B. To compare retiree to total liability ratios, we created a  variable for the absolute value of the difference between CSPF\u2019s ratio  and that of a given plan. We ordered the plans by ascending  differences in the ratios (excluding any with missing differences).  CSPF was the top plan because its difference is zero by definition.  Because one of our key analyses of the data involved comparing  investment returns across plans, we also limited the comparable plans  to those that shared a common plan year with CSPF (specifically if  they have the same plan year-end of December 31). Of the plans that  had the same plan year as CSPF and assets over $300 million, we  selected the 20 plans (including CSPF) that had the smallest absolute  difference from CSPF in the retiree-to-total liability ratio. Plans with a  high ratio of liabilities attributable to retirees will have a relatively large  portion of future benefit payments attributable to those that are older  and retired. By selecting plans that were similarly mature to CSPF  (and had $300 million in assets as of the beginning of 2000), we  identified plans that may have had a similar basis for their plan  investments, similar cash flow characteristics, or similar potential  deviations between time-weighted and dollar-weighted average  investment returns over time (see section below entitled \u201cCalculation  of Average Investment Return over Multiple Years\u201d). That is, these  plans should have roughly similar cost advantages and similar  considerations in their investment objectives such as the balance of  cash flows into and out of the fund and the plans\u2019 investment  horizons. Similarity in the balance of cash flows is important because  it helps to mitigate the influence of plan maturity on the weighted  average investment return over multiple years. The year 2000 was  used to select the group because the primary purpose of this group is  comparison of investment returns for plans that are similarly situated  at the beginning of the period being analyzed."], "subsections": []}, {"section_title": "Calculations of Annual Investment Returns", "paragraphs": ["Our calculation of investment returns is based on the investment return  calculation expressed in the Form 5500 instructions for the Schedule MB.  Specifically the instructions of the 2014 Schedule MB state:  Enter the estimated rate of return on the current value of plan  assets for the 1-year period ending on the valuation date. (The  current value is the same as the fair market value\u2014see line 1b(1)  instructions.) For this purpose, the rate of return is determined by  using the formula 2I/(A + B \u2013 I), where I is the dollar amount of the  investment return, A is the current value of the assets 1 year ago,  and B is the current value of the assets on the current valuation  date. Enter rates to the nearest .1 percent. If entering a negative  number, enter a minus sign (\u201c - \u201c) to the left of the number.", "After preliminary analysis of the variable and consultation with a GAO  senior actuary, we determined that Form 5500, Schedule H contains all  the information necessary to derive the calculation for years prior to  2008\u2014as far back as 1999 when the Schedule H first came into  existence. Additionally, we made adjustments for the timing of cash flows,  to the extent indicated by the data. For example, employer and employee  contributions that were considered receivable at the end of the prior year  and thus included in the Schedule MB calculation were instead included  in the year when the plan received the cash for the contribution. Thus, our  calculation of annual rate of return is expressed as line items of the 2014  Schedule H to be:  2 *  / [[{item1(f)a} \u2013 {item  1(b)1(a)} - {item 1(b)2(a)} - {item 1j(a)}] + [{item1(f)b} \u2013 {item  1(b)1(b)} - {item 1(b)2(b)} - {item 1j(b)}] \u2013 [{item 2d} - {item 2a(3)} \u2013  {item 2c}]]  Or expressed with expository names as:  (2 * (TLINCOME - TOTLCON - OTHERINCOMEW)) /  ((TASSTSBY - (ERCONBOY + EECONBOY +  OTHER_LIAB_BOY_AMT)) + (TASSTSEY - (ERCONEOY +  EECONEOY + OTHER_LIAB_EOY_AMT)) - (TLINCOME -  TOTLCON - OTHERINCOMEW))", "For purposes of data reliability and validation of our results, we ran  permutations of the calculation to see how, if at all, certain items could  influence the calculation. In two permutations, we changed the timing of  net asset transfers to or from other plans. (This occurs when, for  example, there is a plan merger.) A senior actuary determined whether  the calculations with/without net asset transfers affected our calculation. If  the timing of the net transfer caused the investment return calculation to  vary by more than 0.1 percent, we excluded the data for that particular  plan in that particular year. We also ran another calculation that did not  include \u201cother\u201d income so we could estimate the impact of not adjusting  for such information."], "subsections": []}, {"section_title": "Calculation of Average Investment Return over Multiple Years", "paragraphs": ["Historical average investment returns over multiple years can be  calculated in at least two different ways. One measure is the \u201ctime- weighted\u201d average return, calculated as a geometric average of the  annual returns during the period. A time-weighted average measures  average investment performance without regard to the order of the annual  returns or the impact of different plan circumstances over time. Another  measure is the \u201cdollar-weighted\u201d average return\u2013also known as the  \u201cinternal rate of return\u201d (and also referred to as the \u201ccash flow weighted\u201d  return in this report)\u2014which reflects the impact of the plan\u2019s cash flow  pattern. The dollar-weighted average return is the rate that, when applied  over time to the asset value at the beginning of the period and to each  year\u2019s net cash flow into or out of the plan over the period, reproduces the  asset value at the end of the period.", "We calculated dollar-weighted average returns (along with some time- weighted returns for comparison), for both CSPF and for the  multiemployer system as a whole, as discussed in the report. We used a  market value of plan assets for this purpose. The dollar-weighted average  captures the impact of negative cash flow on average investment return.  For example, with negative cash flow, investment results in an earlier  year can have a bigger impact than investment results in a later year  because more money is at stake in the earlier year.", "Using the same beginning-of-period asset value, and subsequent annual  net cash flows into or out of the plan, used in calculating the dollar- weighted average return, we also performed a hypothetical calculation of  what CSPF\u2019s end-of-period asset value would have been if the plan had  earned 7.5 percent per year instead of its actual return."], "subsections": []}, {"section_title": "Calculation of Fees and Expenses", "paragraphs": ["Conceptually, there are multiple ways to express investment fees, but our  analysis used the following two methods for calculating them:  Investment fee ratio. Investment fees [line 2i(3) of the 2014  Schedule H] divided by end-of-year net assets [line 1l(b) of the 2014  Schedule H] less receivables [line 1b(1)(b); line 1b(2)(b); and line  1b(3)(b) of the 2014 Schedule H].", "Investment fees per participant. Investment fees [line 2i(3) of the  2014 Schedule H] divided by total (end-of-year) participants [line 6f of  the 2014 main form]."], "subsections": []}]}, {"section_title": "Administrative Expense Calculations", "paragraphs": ["We define administrative expenses as all other expenses besides  investment fees. In part, we used this definition of administrative  expenses as it represents the expenses that remain after excluding  investment fees. In addition, according to a PBGC analyst, this is the unit  of analysis that they also used in their study of administrative expenses.", "Administrative expense to benefits paid. This is administrative  expenses (professional, contract and other) divided by benefits paid.  For administrative expenses we derived the value by taking total  expenses  less investment fees  . For benefits paid, we used the 2014  Schedule H, line 2e(1), \u201cBenefit payment and payments to provide  benefits directly to participants or beneficiaries, including direct  rollovers.\u201d However, if the benefit payment value for such payments is  missing or zero, we used the 2014 Schedule H, line 2e(4) \u201cTotal  Benefit Payments\u201d since the plan may be expressing their benefit  payments on another line.", "Administrative expense per participant. Administrative expenses  (professional, contract and other) divided by total (end-of-year)  participants . For administrative  expenses we derived the value by taking total expenses [line 2i(5) of  the 2014 Schedule H] less investment fees [line 2i(3) of the 2014  Schedule H].", "PBGC Study on Administrative Expenses  PBGC has reported on administrative expenses and included various  breakouts of these data in past data book supplements. The  calculations of administrative expenses in this report are similar to those  used by PBGC. Certain differences may exist because our calculation did  not include certain multiemployer plans that reported missing data.  Additionally, our population of multiemployer plans included only those  plans exclusively associated with defined benefit features. The table  below compares our results for plans with 5,000 or more participants,  which is a subset of plans analyzed in the PBGC study.", "Our results used a sample that includes three fewer plans than the PBGC  study, but our distributional results were within one-tenth percent for the  administrative expense ratio and within $5 of the administrative expenses  per participant (see table 4).", "Comparing the administrative expenses across reports using other  statistics such as the minimum, maximum and standard deviation shows  similar results for the PBGC and our analysis (see table 5). The mean  administrative expenses per participant differ by $2.47. This difference is  1.5 percent lower than the PBGC estimate and could be a result of the  difference in sample size.", "We also performed additional analyses as summarized below.", "We compared CSPF\u2019s annual returns against plans that have the largest  assets among multiemployer defined benefit plans (with the same plan  year as CSPF) and CSPF\u2019s results against these plans were broadly  similar to results for the mature plans (see fig. 22).", "We compared CSPF\u2019s administrative expenses as a percentage of  benefit paid against other large plans. As noted in this report, CSPF has  the lowest relative administrative expenses among the comparators in  2014 with administrative expenses at 1.4 percent of benefits (see fig. 23).", "In addition, CSPF\u2019s administrative expenses as a percentage of benefits  were consistently below the median."], "subsections": []}, {"section_title": "Analysis of Wilshire TUCS Data", "paragraphs": ["For our analysis of Wilshire TUCS data, we used two sources of data.  Data from 1999 through 2016 was provided by CSPF. CSPF provided  reports of their TUCS custom comparison group, master trusts with  greater than $3 billion in assets. These data also included the year-end  return results for the total fund (also known as the combined fund) as well  as returns by subcategory such as a specific named fiduciary or fund. For  example, subcategories listed for year-end 2006 included the results for  both named fiduciaries (Goldman Sachs and Northern Trust) as well as  the passively-managed accounts (then known as the CSSS fund).", "The custom comparison groups for the 1999 through 2016 data were  determined each year in early-February of the year following the  December 31 return results for the prior year. Thus, over time more  master trusts were added (or subtracted) depending on the level of assets  for the master trusts in that year. For example, the return results for year- end 1999 are determined as of February 10, 2000 and the group of  master trusts with more than $3 billion contains 62 observations. The  number of trusts in the custom group of master trusts with more than $3  billion generally grew over time with the number peaking with the return  results for year-end 2014 (determined as of February 9, 2015), which  contains 124 observations.", "The TUCS data from 1995 through 1998 was provided by Wilshire. The  comparison group for these data were not selected each year, but,  instead, selected retrospectively. For example, the comparison group of  master trusts with more than $3 billion from 1995 through 1998 was  selected as of January 9, 2017. There were 99 reported observations in  1995 and 132 observations in 1998. In addition, the 1995 through 1998  TUCS data did not include specific returns for CSPF. We were able to  find the annual year-end return in the December (i.e. year-end)  management report, which for these years was provided by the named  fiduciary, Morgan Stanley."], "subsections": []}]}, {"section_title": "Appendix II: Selected Events Affecting the Central States, Southeast and Southwest Areas Pension Fund", "paragraphs": ["Below is a list of selected events that have affected the Central States,  Southeast and Southwest Areas Pension Fund (CSPF) as identified  through a review of relevant documentation and interviews with  stakeholders and agency officials. It is not intended to be an exhaustive  list of the events that have impacted CSPF, nor is it intended to include  comprehensive descriptions of each event."], "subsections": []}, {"section_title": "Appendix III: Key Provisions of the Central States, Southeast and Southwest Areas Pension Fund\u2019s Consent Decree", "paragraphs": [], "subsections": [{"section_title": "Brief History and Current Status of Consent Decree", "paragraphs": ["On September 22, 1982, the Department of Labor (DOL) entered into a  court-enforceable consent decree with the Central States Southeast and  Southwest Areas Pension Fund (CSPF) to help ensure the plan\u2019s assets  were managed for the sole benefit of the plan\u2019s participants and  beneficiaries as required by the Employee Retirement Income Security  Act of 1974 (ERISA). The consent decree has been amended several  times and currently remains in effect, as amended, under the jurisdiction  of the Federal Court for the Northern District of Illinois, Eastern Division.  Below is a description of the key parties to and their primary  responsibilities under the consent decree."], "subsections": []}, {"section_title": "Key Parties and Their Primary Roles under Consent Decree", "paragraphs": ["The consent decree defines roles and responsibilities for its parties,  including the court, the court-appointed independent special counsel,  DOL, the plan and its Board of Trustees, and the independent asset  manager, which is called the named fiduciary."], "subsections": [{"section_title": "Court", "paragraphs": ["The primary role of the court is to oversee and enforce the consent  decree. Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days\u2019  notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent  good cause shown by DOL why the consent decree should continue  in effect."], "subsections": []}, {"section_title": "Independent Special Counsel", "paragraphs": ["The court-appointed independent special counsel is intended to serve the  court by assisting in identifying and resolving issues that arise in  connection with the plan\u2019s compliance with the consent decree and Part 4  of Title I of ERISA, and to report on the plan to the court. Specifically, the  independent special counsel: has full authority to examine the plan\u2019s activities and oversee and  report on the plan\u2019s performance of the undertakings of the consent  decree; may, with court approval, employ attorneys, accountants,  investigators, and others reasonably necessary and appropriate to aid  him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and  information of whatever type or description in the possession,  custody, or control of the plan; may attend meetings of the plan, including meetings of the board of  trustees and any meetings at which plan-related matters are  discussed or considered;  can petition the court to compel the plan to cooperate with the  independent special counsel in the performance of his duties and  responsibilities; may consult with DOL, the Internal Revenue Service, and other  agencies, as appropriate, but must provide access to DOL upon its  request to any documents prepared by the independent special  counsel within the exercise of his power;  is required to file quarterly reports, as well as any other reports the  independent special counsel deems necessary or appropriate, with  the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may  later determine are appropriate; and  cannot be discharged or terminated during the duration of the consent  decree except for leave of court, and upon the termination, discharge,  death, incapacity, or resignation of an independent special counsel,  the court will appoint a successor."], "subsections": []}, {"section_title": "Department of Labor", "paragraphs": ["Under the consent decree, DOL has an oversight role and may object to  certain proposed plan changes. Specifically, DOL: may request and review certain reports provided by the plan and any  documents prepared by the independent special counsel in the  exercise of his authority; may object to the appointment of proposed trustees, named  fiduciaries, investment managers of the passively-managed accounts,  and asset custodians;  receives notice of proposed changes to the plan\u2019s investment policy  statements from the plan; and may object to the dissolution of the consent decree."], "subsections": []}, {"section_title": "CSPF (including Board of Trustees and Internal Audit Staff)", "paragraphs": ["The plan must operate in full compliance with the consent decree, with  ERISA, and with any conditions contained in determination letters it  receives from the Internal Revenue Service. Specifically, CSPF, its  board of trustees, and its internal audit staff must meet certain  requirements.  is required to use an independent asset manager known as the  named fiduciary; must rebid the named fiduciary role at least once within every 6 years,  with the option to extend the appointment for 1 calendar year; may remove a named fiduciary without cause shown on 6 months\u2019  written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the  performance of his duties and responsibilities and with DOL in its  continuing investigation and enforcement responsibilities under  ERISA;  is required to recommend to the court three replacement candidates,  agreeable to DOL, to replace an outgoing independent special  counsel; and  is required to maintain a qualified internal audit staff to monitor its  affairs.  is required to appoint, subject to court approval, the investment  managers of the passively-managed accounts;  is prohibited from authorizing any future acquisitions, investments, or  dispositions of plan assets on a direct or indirect basis unless  specifically allowed by the consent decree; and  is required to comply with ERISA fiduciary duties, such as monitoring  the performance of the assets of the plan, under Part 4 of Title I of  ERISA.  is required to review benefit administration, administrative  expenditures, and the allocation of plan receipts to investments and  administration; and  is required to prepare monthly reports setting forth any findings and  recommendations, in cooperation with the executive director of the  plan, and make copies available to the independent special counsel  and, upon request, to DOL and the court."], "subsections": []}, {"section_title": "Named Fiduciaries", "paragraphs": ["The independent asset managers, known as named fiduciaries, are  appointed by the plan\u2019s trustees, subject to court approval, and have  exclusive responsibility and authority to manage and control all assets of  the plan allocated to them. Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees,  and implement investment policy statements for the assets they  manage, giving appropriate regards to CSPF\u2019s actuarial  requirements."], "subsections": []}]}]}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above David Lehrer (Assistant  Director), Charles J. Ford, (Analyst-in-Charge), Laurel Beedon, Jessica  Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani,  Margaret J. Weber, Adam Wendel, and Miranda J. Wickham made key  contributions to this report. Also contributing to this report were Susan  Aschoff, Deborah K. Bland, Helen Desaulniers, Laura Hoffrey, Jennifer  Gregory, Sheila McCoy, Mimi Nguyen, Jessica Orr, Monica P. Savoy, and  Seyda Wentworth."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Central States Pension Fund: Department of Labor Activities under the  Consent Decree and Federal Law. GAO-18-105. Washington, D.C.: June  4, 2018.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Pension Plan Valuation: Views on Using Multiple Measures to Offer a  More Complete Financial Picture. GAO-14-264. Washington, D.C.:  September 30, 2014.", "Private Pensions: Clarity of Required Reports and Disclosures Could Be  Improved. GAO-14-92. Washington, D.C.: November 21, 2013.", "Private Pensions: Timely Action Needed to Address Impending  Multiemployer Plan Insolvencies. GAO-13-240. Washington, D.C.: March  28, 2013.", "Private Pensions: Multiemployer Plans and PBGC Face Urgent  Challenges. GAO-13-428T. Washington, D.C.: March 5, 2013.", "Pension Benefit Guaranty Corporation: Redesigned Premium Structure  Could Better Align Rates with Risk from Plan Sponsors. GAO-13-58.  Washington, D.C.: November 7, 2012.", "Private Pensions: Changes Needed to Better Protect Multiemployer  Pension Benefits. GAO-11-79. Washington, D.C.: October 18, 2010.", "Private Pensions: Long-standing Challenges Remain for Multiemployer  Pension Plans. GAO-10-708T. Washington, D.C.: May 27, 2010.", "The Department of Labor\u2019s Oversight of the Management of the  Teamsters\u2019 Central States Pension and Health and Welfare Funds.  GAO/HRD-85-73. Washington, D.C.: July 18, 1985.", "Investigation to Reform Teamsters\u2019 Central States Pension Fund Found  Inadequate. HRD-82-13. Washington, D.C.: April 28, 1982."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-382", "url": "https://www.gao.gov/products/GAO-18-382", "title": "K-12 Education: Lead Testing of School Drinking Water Would Benefit from Improved Federal Guidance", "published_date": "2018-07-05T00:00:00", "released_date": "2018-07-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["No federal law requires testing of drinking water for lead in schools that receive water from public water systems, although these systems are regulated by the EPA. Lead can leach into water from plumbing materials inside a school. The discovery of toxic levels of lead in water in Flint, Michigan, in 2015 has renewed awareness about the danger lead exposure poses to public health, especially for children.", "GAO was asked to review school practices for lead testing and remediation. This report examines the extent to which (1) school districts are testing for, finding, and remediating lead in drinking water; (2) states are supporting these efforts; and (3) federal agencies are supporting state and school district efforts. GAO administered a web-based survey to a stratified, random sample of 549 school districts, the results of which are generalizable to all school districts. GAO visited or interviewed officials with 17 school districts with experience in lead testing, spread among 5 states, selected for geographic variation. GAO also interviewed federal and state officials and reviewed relevant laws and documents."]}, {"section_title": "What GAO Found", "paragraphs": ["An estimated 43 percent of school districts, serving 35 million students, tested for lead in school drinking water in 2016 or 2017, according to GAO's nationwide survey of school districts. An estimated 41 percent of school districts, serving 12 million students, had not tested for lead. GAO's survey showed that, among school districts that did test, an estimated 37 percent found elevated lead (lead at levels above their selected threshold for taking remedial action.) (See figure.) All school districts that found elevated lead in drinking water reported taking steps to reduce or eliminate exposure to lead, including replacing water fountains, installing filters or new fixtures, or providing bottled water.", "According to the Environmental Protection Agency (EPA), at least 8 states have requirements that schools test for lead in drinking water as of 2017, and at least 13 additional states supported school districts' voluntary efforts with funding or in-kind support for testing and remediation. In addition, the five states GAO visited provided examples of technical assistance to support testing in schools.", "EPA provides guidance and other resources to states and school districts regarding testing and remediating lead in drinking water, and the Department of Education (Education) provides some of this information on its websites. School district officials that used EPA's written guidance said they generally found it helpful. Although EPA guidance emphasizes the importance of addressing elevated lead levels, GAO found that some aspects of the guidance, such as the threshold for taking remedial action, were potentially misleading and unclear, which can put school districts at risk of making uninformed decisions. In addition, many school districts reported a lack of familiarity with EPA's guidance, and their familiarity varied by region of the country. Education and EPA do not regularly collaborate to support state and school district efforts on lead in drinking water, despite agreeing to do so in a 2005 memorandum of understanding. Such collaboration could encourage testing and ensure that more school districts will have the necessary information to limit student and staff exposure to lead."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that EPA update its guidance on how schools should determine lead levels requiring action and for EPA and Education to collaborate to further disseminate guidance and encourage testing for lead. EPA and Education agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The discovery of toxic levels of lead in drinking water in Flint, Michigan in  2015 has renewed awareness about the risks that lead poses to public  health. Exposure to lead can result in elevated blood lead levels and  negative health effects. Children are at particular risk, because their  growing bodies absorb more lead than adults, so protecting them from  lead is important to lifelong good health. According to the Centers for  Disease Control and Prevention (CDC), elevated blood lead levels have  been linked to anemia, kidney and brain damage, learning disabilities,  and decreased growth. As a result of widespread human use, lead is  prevalent in the environment; for example, it can be found in paint and  soil, and can leach into drinking water from lead-containing plumbing  materials, such as faucets and drinking fountains.", "Lead in school drinking water is a concern because it is a daily source of  water for over 50 million children enrolled in public schools. The pattern of  school schedules\u2014including time off over weekends, holidays, and  extended breaks\u2014can contribute to standing water in the school\u2019s  plumbing system. If there is lead in the plumbing system, the potential for  it to leach into water can increase the longer the water remains in contact  with the plumbing. Other factors also influence the extent to which lead  enters the water, such as the chemistry of the water, the amount of lead  that comes into contact with the water, and the presence of protective  scales or coatings inside plumbing materials.", "While there is no federal law requiring testing of drinking water for lead in  schools that receive water from public water systems, these water  systems themselves are regulated by the Environmental Protection  Agency (EPA) under the Lead and Copper Rule (LCR), as required by the  Safe Drinking Water Act (SDWA). Because the LCR regulates public  water systems, it does not directly address individual schools that are  served by a public water system. The federal government\u2014including  EPA, the Department of Education (Education), and CDC\u2014has a limited  role in addressing lead in school drinking water. These agencies, along  with other organizations, signed a memorandum of understanding in 2005  encouraging lead testing and remediation in schools, and they provide  information and guidance to stakeholders, such as state officials and  school districts. Several states and school districts have taken steps to  test for lead in school drinking water. States and school districts that  choose to test generally set their own threshold, or \u201caction level,\u201d of lead  found in drinking water that requires action, such as replacing a water  fountain or installing a filter. We use the term elevated lead in this report  to mean lead at levels above a selected action level.", "You asked us to study the testing and remediation practices used to  protect children from lead. This report builds upon a separate 2017 review  that addresses schools with their own water source that are therefore  subject to federal requirements for lead testing and remediation under the  LCR. In this review, our objectives were to examine (1) the extent to  which school districts are testing for, finding, and remediating lead in  school drinking water; (2) the extent to which states require or support  testing for and remediating lead in school drinking water by school  districts; and (3) the extent to which federal agencies are supporting state  and school district efforts to test for and remediate lead.", "To address our first objective, we drew a stratified, random sample of 549  school districts, administered a web-based survey from July to October  2017 asking whether they had tested for, found, or remediated lead in the  past 12 months, and achieved a 68 percent response rate. Based on the  design and response rate, estimates generated from these survey results  are generalizable to the population of public school districts. We also  conducted site visits to or interviewed officials with 17 school districts with  experience testing for lead in drinking water and selected to vary in  population density. These districts were located in five states\u2014Georgia,  Illinois, Massachusetts, Oregon, and Texas\u2014which were selected to vary  in geographic location and because they varied in the extent to which  they required school-based lead testing and remediation. To address our  second and third objectives, we used site visit information, requested  information about state requirements from selected state officials, and  interviewed officials in EPA\u2019s headquarters and in all 10 regional offices,  and at Education and CDC. We reviewed relevant documents, such as  the 2005 memorandum of understanding and EPA guidance, as well as  relevant federal and state laws and regulations. For the states with testing  requirements, we reviewed relevant laws, regulations and policy  documents and confirmed our understanding of state testing  requirements with state officials. We provided the information about state  requirements to appropriate state officials for their review and  confirmation. We evaluated federal efforts to support lead testing and  remediation in schools against the actions prescribed in the memorandum  and federal standards for internal control, which call for agencies to  provide effective communication to external parties, among other things.  Appendix I contains a more detailed description of our objectives, scope,  and methodology.", "We conducted this performance audit from October 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Elementary and Secondary Education School Facilities", "paragraphs": ["According to Education, 50.3 million students were enrolled in more than  98,000 public elementary and secondary schools nationwide in the 2014- 2015 school year. These individual public schools are overseen by  approximately 16,000 local educational agencies (referred to in this report  as school districts) which are, in turn, overseen and supported by state  educational agencies. School districts can range in size from one school  (for example, in rural areas) to hundreds of schools in large urban and  suburban areas. For example, the 100 largest districts in the United  States together have approximately 16,000 schools and enroll about 11  million students. In addition, charter schools are public schools created to  achieve a number of goals, such as encouraging innovation in public  education. Oversight of charter schools can vary, with some states  establishing charter schools as their own school district and other states  allowing charter schools to be either a distinct school district in  themselves or part of a larger district. Charter schools are often  responsible for their own facilities; these may be located in non-traditional  school buildings, and may lease part or all of their space.", "Typically, state educational agencies are responsible for administering  state and federal education laws, disbursing state and federal funds, and  providing guidance to school districts and schools across the state. State  educational agencies frequently provide funds for capital improvements to  school facilities, which school districts may use to address issues related  to lead in school drinking water, among other things. Different state  agencies, including agencies for education, health, and environmental  protection, may provide school districts with guidance on testing and  remediation of lead in school drinking water. Within a school district,  responsibility for water management may be held by individuals in  different positions, such as facilities managers or environmental  specialists."], "subsections": []}, {"section_title": "Health Effects of Lead", "paragraphs": ["Lead is a neurotoxin that can accumulate in the body over time with long- lasting effects, particularly for children. According to the CDC, lead in  drinking water can cause health effects if it enters the bloodstream and  causes an elevated blood lead level. Lead in a child\u2019s body can slow  down growth and development, damage hearing and speech, and lead to  learning disabilities. For adults, lead can have detrimental effects on  cardiovascular, renal, and reproductive systems and can prompt memory  loss. In pregnant women, lead stored in bones (due to lead exposure prior  to and during pregnancy) can be released as maternal calcium used to  form the bones of the fetus, reduce fetal growth, and increase risk of  miscarriage and stillbirth. The presence of lead in the bloodstream can  disappear relatively quickly, but bones can retain the toxin for decades.  Lead in bones may be released into the blood, re-exposing organ  systems long after the original exposure. The concentration of lead, total  amount consumed, and duration of exposure influence the severity of  health effects. The health consequences of lead exposure can differ from  person to person and are affected by the cumulative dose of lead and the  vulnerability of the individual person regardless of whether the lead  exposure is from food, water, soil, dust, or air. Although there are medical  therapies to remove lead from the body, they cannot undo the damage it  has already caused. For these reasons, EPA, CDC, and others  recommend the prevention of lead exposure to the extent possible,  recognizing that lead is widespread in the environment."], "subsections": []}, {"section_title": "The Safe Drinking Water Act", "paragraphs": ["The SDWA authorizes EPA to set standards for drinking water  contaminants in public water systems. For a given contaminant the act  requires EPA to first establish a maximum contaminant level goal, which  is the level at which no known or anticipated adverse effects on the health  of persons occur and which allows an adequate margin of safety. EPA  must then set an enforceable maximum contaminant level as close to the  maximum contaminant level goal as is feasible, or require water systems  to use a treatment technique to prevent known or anticipated adverse  effects on the health of persons to the extent feasible. Feasible means  the level is achievable using the best available technology or treatment  technique.", "In 1991 EPA issued the LCR, which it revised in 2000 and 2007,  establishing regulations for water systems covered by the SDWA. Lead  concentration in water is typically measured in micrograms of lead per  liter of water (also referred to as \u201cparts per billion\u201d or ppb). The rule  established a maximum contaminant level goal of zero, because EPA  concluded that there was no established safe level of lead exposure. EPA  decided not to establish an enforceable maximum contaminant level,  concluding that any level reasonably close to the goal would result in  widespread noncompliance, and therefore was not feasible. Instead, the  rule established an \u201caction level\u201d of 15 micrograms of lead per liter (15  ppb) in a one liter sample of tap water, a level that EPA believed was  generally representative of what could be feasibly achieved at the tap.  The action level is a screening tool for determining when certain follow-up  actions are needed, which may include corrosion control treatment, public  education, and lead service line replacement. Sample results that exceed  the lead action level do not by themselves constitute violations of the rule.  If the lead action level is exceeded in more than 10 percent of tap water  samples collected during any monitoring period (that is, if the 90th  percentile level is greater than the action level), a water system must take  actions to reduce exposure.", "Several amendments to the SDWA are relevant to testing for lead in  school drinking water. In 1988, the SDWA was amended by the Lead  Contamination Control Act (LCCA), which banned the manufacture and  sale of drinking water coolers with lead-lined tanks containing more than  8 percent lead; the statute defined a drinking water cooler as containing 8  percent lead or less as \u201clead-free.\u201d The LCCA also required states to  establish testing and remediation programs for schools. However, in  1996 a federal circuit court held that this requirement was  unconstitutional. In 2011, Congress passed the Reduction of Lead in  Drinking Water Act, which amended the SDWA by lowering the maximum  allowable lead content in \u201clead-free\u201d plumbing materials such as pipes.  This provision became effective on January 4, 2014. In 2016, Congress  passed the Water Infrastructure Improvements for the Nation Act which,  among other things, amended the SDWA, to establish a grant program for  states to assist school districts in voluntary testing for lead contamination  in drinking water at schools. As a condition of receiving funds, school  districts are required to test for lead using standards that are at least as  stringent as those in federal guidance for schools. In March 2018,  Congress appropriated $20 million to EPA for this grant program."], "subsections": []}, {"section_title": "Lead in School Drinking Water", "paragraphs": ["Lead can enter drinking water when service lines or plumbing fixtures that  contain lead corrode, especially where the water has high acidity or low  mineral content. According to EPA, lead typically enters school drinking  water as a result of interaction with lead-containing plumbing materials  and fixtures within the building. Although lead pipes and lead solder  were not commonly used after 1986, water fountains and other fixtures  were allowed to have up to 8 percent lead until 2014, as previously  mentioned. Consequently, both older and newer school buildings can  have lead in drinking water. Some water in a school building is not for consumption, such as water from a janitorial sink or garden hose, so lead  in these water sources presents less risk to students. (See fig. 1.) The  best way to know if a school\u2019s water is contaminated with lead is to test  the water after it has gone through a school\u2019s pipes, faucets, and other  fixtures."], "subsections": []}, {"section_title": "EPA Guidance for Schools", "paragraphs": ["To facilitate testing efforts, EPA suggests that schools implement  programs for reducing lead in drinking water and developed the 3Ts for  Reducing Lead in Drinking Water in Schools: Revised Technical  Guidance (3Ts guidance) in 2006, which provides information on:  (1) training school officials about the potential causes and health  effects of lead in drinking water;  (2) testing drinking water in schools to identify potential problems  and take corrective actions as necessary; and  (3) telling students, parents, staff, and the larger community about  monitoring programs, potential risks, the results of testing, and  remediation actions.", "The purpose of the 3Ts guidance is to help schools minimize students\u2019  and staffs\u2019 exposure to lead in drinking water. The guidance provides  recommendations and suggestions for how to address lead in school  drinking water, but does not establish requirements for schools to follow.  According to the guidance, if school districts follow the procedures  described in guidance, they will be assured their facilities do not have  elevated levels of lead in their drinking water. The guidance recommends  taking 250 milliliter samples of water from every drinking water source in  a school building and having the samples analyzed by an accredited  laboratory. Based on the test results of the samples, the guidance  recommends remedial action if the samples are found to have an  elevated concentration of lead, which is identified by using an action level.  While school districts may have discretion to set their own action level,  the 3Ts guidance strongly recommends taking remedial action if a school  district finds lead at or above 20 ppb in a 250 milliliter sample of water.", "School districts can take a variety of actions including replacing pipes,  replacing fixtures, running water through the system before consumption  (known as flushing), or providing bottled water. However, since the  amount of lead in school drinking water may change over time for a  variety of reasons\u2014for example, the natural aging of plumbing materials  or a disturbance nearby, such as construction\u2014the results obtained by  one test are not necessarily indicative of results which may be obtained in  the future."], "subsections": []}, {"section_title": "Roles and Responsibilities of Federal Agencies", "paragraphs": ["With no federal law requiring testing for lead in school drinking water,  federal agencies play a limited role:", "Education\u2019s mission includes fostering educational excellence and  promoting student achievement, and the agency disseminates  guidance to states and school districts about lead in school drinking  water, but does not administer any related grants.", "EPA\u2019s Office of Ground Water and Drinking Water provides voluntary  guidance to schools on how to test for and remediate lead in school  drinking water, as part of EPA\u2019s mission to inform the public about  environmental risks. In addition, EPA\u2019s Office of Children\u2019s Health  Protection is responsible for working with EPA\u2019s 10 regional offices via  their healthy schools coordinators, who communicate with schools  and help to disseminate the 3Ts guidance.", "CDC administers the School Health Policies and Practices Study, a  periodic survey to monitor national health objectives that pertain to  schools and school districts. The 2016 data, the most recent  available, provide information on the number of school districts that  periodically test for lead in their drinking water.", "Under the 2005 memorandum signed by these three agencies to  encourage lead testing and remediation in schools, Education\u2019s role  includes working with EPA and other groups to encourage testing, and  disseminating materials to schools. EPA agreed to update guidance for  schools, and provide tools to facilitate testing for lead in school drinking  water. CDC\u2019s role includes identifying public health organizations to work  with and facilitating dissemination of materials to state health  organizations."], "subsections": []}]}, {"section_title": "An Estimated 43 Percent of School Districts Reported Testing for Lead in Drinking Water and About a Third of These Districts Reported Finding Elevated Levels of Lead", "paragraphs": ["Lead in School Drinking Water Survey Results at a Glance", "An estimated 43 percent of school districts tested for lead in  school drinking water, but 41 percent did not, and 16 percent did  not know.  o  Some districts tested drinking water in all sources of  consumable water in all of their schools, while other  school districts tested only some sources.  o  Among the reasons for not testing, school districts said  they either did not identify a need to test or were not  required to do so.", "Of those that tested, an estimated 37 percent of school districts  found elevated  lead levels\u2014levels of lead above the district\u2019s  threshold for taking remedial action\u2014in school drinking water.  o  School districts varied in terms of the threshold they used,  with some using 15 ppb or 20 ppb and others using a  lower threshold.", "School districts varied in whether they tested for lead in school  drinking water and whether they discovered elevated levels of  lead. For example, an estimated 88 percent of the largest 100  school districts tested compared with 42 percent of other school  districts.", "All school districts that found elevated lead reported taking steps  to reduce or eliminate the lead, including replacing water  fountains or providing bottled water."], "subsections": [{"section_title": "An Estimated 43 Percent of School Districts Reported Testing for Lead in Drinking Water in the Last 12 Months, but 41 Percent Have Not Tested", "paragraphs": ["Nationwide, school districts vary in terms of whether they have tested for  lead in school drinking water, with many not testing. According to our  survey of school districts, an estimated 43 percent tested for lead in  school drinking water in at least one school in the last 12 months, while  41 percent had not tested. An estimated 35 million students were  enrolled in districts that tested as compared with 12 million students in  districts that did not test. An estimated 16 percent of school districts,  enrolling about 6 million students, reported that they did not know whether  they had tested or not. (See fig. 2.)", "Of school districts that tested for lead in school drinking water, some  tested all consumable water sources in all of their schools, while others  may have only tested some sources in all schools or all sources in some  schools. Among the reasons provided by survey respondents for not  testing in all schools, some said the age of the building was the primary  consideration. For example, an official in one school district we visited  told us they began testing in buildings constructed before 1989, but after  receiving results that some water sources had elevated lead levels, the  district decided to test all of their school buildings. Other reasons reported  for testing some, but not all, schools included testing schools only when a  complaint about discolored water was received or testing only new  schools or schools that were renovated. In addition, school districts varied  in whether they sampled from every consumable water source, or just  some of the sources, in their schools. For example, one district official  told us they took one sample from each type of water fountain in each  school, assuming that, if a sampled fountain was found to have an  elevated level of lead, then all of the other fountains of that type would  also have elevated lead levels. However, EPA\u2019s 3Ts guidance  recommends that every water source that is regularly used for drinking or  cooking be sampled. Further, stakeholders and environmental and  educational officials we interviewed said that results from one water  fountain, faucet, or any other consumable water source cannot be used to  predict whether lead will be found in other sources."], "subsections": [{"section_title": "Cost of Testing", "paragraphs": ["In our survey, the median amount spent by school districts to test for lead  in school drinking water during the past 12 months varied substantially,  depending on the number of schools in which tests were conducted (see  table 1). School districts may have paid for services such as collecting  water samples, analyzing and reporting results, and consultants. For  example, an official in a small, rural school district\u2014with three schools  housed in one building\u2014told us his district spent $180 to test all eight  fixtures. In contrast, officials in a large, urban school district told us they  spent about $2.1 million to test over 11,000 fixtures in over 500 schools.  Some school districts, especially larger ones, incurred costs to hire  consultants to advise them and help design a plan to take samples,  among other things.", "EPA\u2019s 3Ts guidance recommends determining how to communicate  information about lead testing programs with parents, governing officials,  and other stakeholders before testing. Of school districts that reported  testing for lead in school drinking water in our survey, an estimated 76  percent informed their local school board and 59 percent informed  parents about their plans to test; similar percentages provided information  about the testing results. We identified a range of approaches to  communicating testing efforts in the 17 school districts we interviewed.  Some school districts reported issuing press releases, putting letters in  multiple languages in students\u2019 backpacks, sending emails to parents,  holding public meetings, and releasing information through social media.  Before testing, one district created a website with a list of dates when it  planned to test the drinking water in every one of its schools. In contrast,  other school districts communicated with parents and the press only upon  request. Officials in one district we visited said they did not post lead  testing results on their website, because they wanted to avoid causing  undue concern, adding that \u201cmore information isn\u2019t necessarily better,  especially when tests showed just trace amounts of lead.\u201d"], "subsections": []}, {"section_title": "Plans to Conduct Testing on a Recurring Basis", "paragraphs": ["School districts generally have discretion to determine how frequently  they test for lead in school drinking water except when prescribed in state  law, and most school districts responding to our survey had no specific  schedule for recurring testing. Specifically, an estimated:", "27 percent of school districts plan to test \u201cas needed,\u201d", "25 percent have no schedule to conduct recurring tests, and", "15 percent do not know.", "The remaining school districts reported a range of frequencies for  conducting additional tests or said they were developing a schedule to  conduct tests on a recurring basis. School district officials and  stakeholders we interviewed told us that it is important to test for lead in  drinking water on a recurring basis, because lead can leach into school  drinking water at any time."], "subsections": []}, {"section_title": "Reasons School Districts Reported for Not Testing", "paragraphs": ["In our survey, we asked school districts reporting that they had not tested  for lead in school drinking water in the last 12 months (41 percent of  districts) to provide us with one or more reasons why they had not  tested. Of these school districts, an estimated 53 percent reported that  they did not identify a need to test and 53 percent reported they were not  required to test (see fig. 3)."], "subsections": []}]}, {"section_title": "An Estimated 37 Percent of School Districts That Reported Testing Found Elevated Levels of Lead in Drinking Water", "paragraphs": ["Of school districts that reported testing for lead in school drinking water,  an estimated 37 percent of districts found elevated levels of lead in school  drinking water, while 57 percent of districts did not find lead (see fig. 4).  Of those that found lead in drinking water, most found lead above their  selected action level in some of their schools, while some districts found  lead above their action level in all of their schools. For example, officials  in one large school district told us they tested over 10,000 sources of  water, including drinking fountains and food preparation fixtures, and  found that over 3,600 water sources had lead at or above the district\u2019s  action level of 15 parts per billion (ppb). The findings resulted in extensive  remediation efforts, officials said.", "Further, district officials reported different action levels they used to  determine when to take steps such as replacing a water fountain or  installing a filter. School districts generally may select their own action  level, resulting in different action levels between districts. Of school  districts that reported testing for lead in school drinking water, an  estimated 44 percent set an action level between 15 ppb and 19 ppb.  The action levels chosen by the rest of the school districts ranged from a  low of 1 ppb whereby action would be taken if any lead at all was  detected to a high 20 ppb where action would be taken if lead was found  at or above 20 ppb. (See appendix II for the estimated percentage of  school districts that set other action levels.)"], "subsections": []}, {"section_title": "School Districts\u2019 Lead Testing Efforts and Discovery of Elevated Lead Levels Varied Based on the Size, Population Density, and Location of the District", "paragraphs": ["Though fewer than half of school districts reported testing for lead in  school drinking water, our analysis of school districts\u2019 survey responses  shows that these estimates varied depending on the size and population  density of the district as well as its geographic location. For example,  among the largest 100 school districts, an estimated 88 percent reported  they had tested for lead in school drinking water in at least one school in  the last 12 months compared with 42 percent of all other districts  nationwide. An estimated 59 percent of the largest 100 school districts  that tested discovered elevated levels of lead compared to 36 percent of  all other districts that tested (see table 2).", "In addition, an estimated 86 percent of school districts in the Northeast  region of the United States tested for lead in school drinking water,  compared to less than half of school districts in other geographic regions.  Similarly, about half of school districts in the Northeast and about 8  percent in the South found elevated levels of lead, compared to their  selected action level. (See fig. 5.)"], "subsections": []}, {"section_title": "All School Districts with Elevated Lead in Drinking Water Reported Taking Action, Such as Replacing Water Fountains or Flushing Pipes", "paragraphs": ["In our survey, every school district that reported finding lead in school  drinking water above their selected action level reported taking steps to  reduce or eliminate the lead. For example, an estimated 71 percent said  they replaced water fountains, 63 percent took water fountains out of  service without replacing them, and 62 percent flushed the school\u2019s water  system (see fig. 6).", "School districts officials we interviewed told us they took a range of  remedial actions generally consistent with those reported to us in our  survey. For example, an official in one district told us that 129 of the 608  fixtures tested above the district\u2019s action level of \u201cany detectable level.\u201d  He said they installed filters on all of the 106 sink faucets with elevated  lead and replaced all of the 23 drinking fountains with elevated lead.  The district official explained that they re-tested fixtures after the filters  and new fountains were installed, and did not detect any lead in their  drinking water. Officials in another school district told us that  approximately 3,600 of their fixtures were found to have lead above their  action level of 15 ppb. They told us the district turned off the water at the  affected fixtures as an interim measure and provided bottled water to  students and staff. Though they had not yet finalized their plans at the  time of our interview, they said they were planning to replace the fixtures  and replace old pipes with new pipes. District officials said they plan to  pay for their remediation efforts using local capital improvement funds  from a recently-approved bond initiative.", "Similar to the cost of testing, the median amount spent by school districts  to remediate lead in school drinking water during the past 12 months  varied substantially, depending on the number of schools in which a  district took action to remediate lead (see table 3). The median  expenditure for school districts taking action in one to four schools was  $4,000 compared to a median expenditure for school districts taking  action in 51 or more schools of $278,000."], "subsections": []}]}, {"section_title": "Several States Require School Districts to Test for Lead in Drinking Water and Additional States Provide Funding and Technical Assistance", "paragraphs": [], "subsections": [{"section_title": "At Least Eight States Require School Districts to Test for Lead as of 2017, According to EPA", "paragraphs": ["EPA regional officials provided examples of eight states that have  requirements for schools to test for lead in drinking water as of  September 2017: California, Illinois, Maryland, Minnesota, New Jersey,  New York, Virginia, and the District of Columbia. State requirements  differ in terms of which schools are included, testing protocols,  communicating results, and funding. (See fig. 7.) (For a list of testing  components for the eight states, see appendix IV.)", "According to stakeholders we interviewed, most state legislation on  testing for lead in school drinking water has been introduced in the past 2  years. Of the eight states, three states have completed one round of  required testing, while other states are in the early stages of  implementation or have not yet begun, according to state officials. School  districts in Illinois, New Jersey, and New York completed a round of  testing for lead in school drinking water by December 2017. Testing in the  District of Columbia was in progress as of April 2018. Minnesota requires  school districts to develop a plan to test by July 2018 and California  requires that water systems sample all covered public schools in their  service area by July 2019. According to state officials, schools in  Maryland must test by July 2020. In Virginia, no timeline for testing is  indicated in the requirement.", "In addition, requirements in these eight states vary in terms of covered  schools and frequency of testing. For example, in Maryland, all schools,  including charter and private schools, are required to test their water for  lead by July 2020 and must re-test every 3 years. After regulations were  approved in July 2016, New Jersey required testing within a year in all  traditional public schools, charter schools, and certain private schools,  and re-testing every 6 years, according to state officials. Illinois\u2019  requirement is for public and private elementary schools constructed  before 2000 to test their drinking water for lead, and does not mandate re- testing. Seven of the eight states include at least some charter schools in  their testing requirements (New York does not).", "State testing requirements also differ in terms of action level, sample  sizes, and number of samples, according to state documents. States can  choose their own lead threshold or action level for remediation, and the  eight states have chosen levels ranging from any detectable level in  Illinois to 20 ppb in Maryland. Six of the eight states have chosen to use  250 milliliter samples of water, while California is using a one liter sample  size, and Virginia delegates to school districts to choose their action level  and sample size. Some states specify that all drinking water sources in  a building must be tested, such as in New York and New Jersey, or allow  a smaller number of samples to be tested, such as in California, which  recommends that water systems take between one and five samples per  school. To implement its testing requirement, the District of Columbia has  installed filters in all school drinking water sources, and plans to test the  filtered water from each fixture for elevated lead annually.", "The responsibility for the costs of testing and remediation also differ by  state. According to state officials, in Minnesota, the costs of testing may  be eligible for reimbursement from the state, and in the District of  Columbia, the Department of General Services is responsible for the  cost. California requires that public water systems cover the cost of testing for all public schools in their jurisdiction. In all other states we  looked at, schools or school districts are at least partially responsible for  the costs of testing. Additionally, most schools or school districts are  responsible for the costs of remediation, although Minnesota, New York,  and the District of Columbia will provide funds to help with the costs of  remediation as well.", "Seven of the eight state requirements have a provision for communicating  the results of lead sampling and testing in schools. For example,  Minnesota requires all test results be made public and New York requires  that results be communicated to students\u2019 families. Maryland and New  Jersey require that results above the action level be reported to the  responsible state agency, such as the Department of the Environment or  the Department of Education, and that sample results that find elevated  levels of lead be communicated to students\u2019 families. Illinois requires that  all results be made available to families and that individual letters to  families also be sent if lead levels over 5 ppb are found. In contrast,  Virginia does not include a provision to communicate testing results in its  testing requirement for schools.", "According to stakeholders and state officials we interviewed, states have  several other common issues to consider in implementing a state testing  and remediation program. First, states need to ensure that their efforts,  which can be significant given the thousands of schools that operate in  each state, can be completed with limited resources and by a legislated  deadline. Second, coordination between relevant state agencies, which  will vary by state, may be challenging. Because of the nature of testing for  lead in school drinking water, multiple government agencies may be  involved, necessitating a balance of responsibilities and information- sharing between these state agencies. Finally, state officials told us that  imposing requirements without providing funding to implement them may  be a challenge for schools in complying with testing and remediation  requirements."], "subsections": []}, {"section_title": "Additional States Provided Funding and Technical Assistance to Support School District Efforts to Test for and Remediate Lead", "paragraphs": ["Apart from the states with requirements to test for lead in school drinking  water discussed in this report, at least 13 additional states had also  provided funding or in-kind support to school districts to assist with  voluntary lead testing and remediation, according to EPA regional offices.  Those states are Arizona, Colorado, Idaho, Indiana, Maine,  Massachusetts, Michigan, New Mexico, Ohio, Oregon, Rhode Island,  Vermont, and Washington. In Massachusetts, for example, officials told  us the state used $2.8 million from the state Clean Water Trust to fund a  voluntary program for sampling and testing for all participating public  schools in 2016 and 2017. Massachusetts contracted with a state  university to assist schools with testing for lead in drinking water. When  the program completed its first round of testing in February 2017, 818  schools throughout the state had participated, and the state has begun a  second round of sampling with remaining funds from the Clean Water  Trust.  In Oregon, officials told us the state legislature provided funding  for matching grants of up to $8 million to larger school districts for  facilities improvements, and made $5 million of emergency funds  available to reimburse school districts for laboratory fees associated with  drinking water testing as part of the state\u2019s efforts to address student  safety.", "States can also provide technical assistance to support school districts in  their efforts to test for and remediate lead in drinking water. The five  states we visited provided a range of technical assistance to school  districts. For example, to implement the voluntary assistance program in  Massachusetts, the contracted university told us they hired 15 additional  staff and assisted schools in designing sampling plans, taking samples,  and sending them for testing. University officials told us they oversaw the  sampling of all drinking water sources in each participating school and  sent the sample to state certified laboratories for analysis. State officials  encouraged schools to shut off all fixtures in which water tested at or  above the action level of 15 ppb and provided guidance on actions to  take, such as removing and replacing fixtures, using signage to indicate  fixtures not to be used for drinking water, and implementing a flushing  program. The state developed an online reporting tool so that all test  results could be publicly posted. State officials also supported schools in  communicating lead testing results to parents and the community.", "Other states we visited provided technical assistance to school districts  through webinars, guidance documents, in-person presentations, and  responding to inquiries. In Oregon, the state Department of Education  and the state Health Authority collaborated in 2016 to provide guidance to  schools on addressing lead in drinking water. The Governor issued a  directive requesting all school districts test for lead in their buildings and  the Health Authority requested that districts send them the results. In  Texas, officials at the Commission for Environmental Quality have made  presentations to schools on water sampling protocols and provided  templates for school districts to communicate results. Officials told us that  an increased number of school districts have contacted them in the past  year seeking guidance, and, in response, they directed districts to EPA\u2019s  3Ts guidance and a list of accredited laboratories. In Illinois, state officials  partnered with the state chapter of the American Water Works  Association to provide a guidance document for drinking water sampling  and testing to assist schools in complying with new testing requirements.  In Georgia, officials at the Department of Natural Resources told us they  promote the 3Ts guidance on their website and have offered themselves  as a resource on school testing at presentations with local water  associations."], "subsections": []}]}, {"section_title": "EPA Provides Several Resources on Lead, but EPA and Education Should Provide More Information to Support States and School Districts and Improve Collaboration", "paragraphs": [], "subsections": [{"section_title": "EPA Provides Guidance, Training, and Technical Assistance on Lead Testing and Remediation, but States and School Districts Need Updated Guidance", "paragraphs": ["EPA provides several voluntary resources, such as guidance, training,  and technical assistance, to states and school districts regarding testing  for and remediation of lead in school drinking water, but some school  districts we surveyed and officials we interviewed said more information  would be helpful. The Lead Contamination Control Act of 1988 (LCCA)  required EPA to publish a guidance document and testing protocol to  assist schools in their testing and remediation efforts. EPA\u2019s Office of  Ground Water and Drinking Water issued its 3Ts guidance which  provides information on training school officials, testing drinking water in  schools, and telling the school and broader community about these  efforts. Of the school districts that reported in our survey using the 3Ts  guidance to inform their lead testing efforts, an estimated 68 percent  found the guidance extremely or very helpful for conducting tests. The  Office of Ground Water and Drinking Water also developed an additional  online resource\u2014known as the 3Ts guidance toolkit\u2014to further assist  states and school districts with their lead in drinking water prevention  programs by providing fact sheets and brochures for community  members, among other things. Some states have used the 3Ts  guidance as a resource for their state programs, according to EPA  officials. For example, a New York regulation directs schools to use the  3Ts guidance as a technical reference when implementing their state- required lead testing and remediation programs.", "The Office of Ground Water and Drinking Water provides training to  support states and school districts with their lead testing and remediation  programs. In June 2017, EPA started a quarterly webinar series to  highlight school district efforts to test for lead. These webinars include  presentations from school officials and key partners that conducted lead  testing and remediation. For example, on June 21, 2017, officials from  Denver Public Schools and Denver Water presented on their efforts to  test for lead in the public school system.", "EPA\u2019s approach to providing guidance and technical assistance to states  and school districts is determined by each of the 10 EPA regional offices.  Some EPA regional offices provide the 3Ts guidance to school districts  upon request and others conduct outreach to share the guidance,  typically through their healthy schools coordinator when discussing other  topics, such as indoor air quality and managing chemicals. EPA regional  offices also provide technical assistance by request, typically through  phone consultations with school districts that have questions regarding  the 3Ts guidance, according to EPA headquarters officials. Officials also  indicated that the agency has received more requests for technical  assistance from schools over the past few years regarding lead in  drinking water. Officials in EPA Regions 1 in Boston and 2 in New York  City told us they provided technical assistance to school districts by  conducting lead testing and analysis in school facilities and Region 9 in  San Francisco provided technical assistance by reviewing school district  testing protocols. For example, EPA Region 2 officials said between  2002 and 2016 they worked with one to two school districts per year to  assist with their lead testing efforts. As part of this effort, the regional  office provided funding for sampling and analysis. Officials said they  prioritized school districts based on population size and whether the  community had elevated blood lead levels. Other EPA regional office  approaches included identifying resources and guidance for relevant state  agencies and facilitating information sharing by connecting districts that  have tested for lead with districts that are interested in doing so.  However, most EPA regional offices do not provide technical assistance  in the form of testing, analysis, or remediation to school districts, and  some do little or no outreach to communicate the importance of testing for  and remediating lead in school drinking water. According to federal  standards for internal control, management should externally  communicate the necessary quality information to achieve the entity\u2019s  objectives.", "Each EPA regional office\u2019s approach to providing resources to states and  school districts varies based on differing regional priorities and available  resources, according to EPA headquarters officials. Additionally, officials  said that this decentralized model of providing support and technical  assistance related to lead testing and remediation in schools is  appropriate because of the number of schools across the United States.  However, based on our survey we found school district familiarity with the  3Ts guidance varied by geographic area (see fig. 8). An estimated 54  percent of school districts in the Northeast reported familiarity with the  3Ts guidance, compared with 17 percent of districts in the South.  Furthermore, the Northeast was the only geographic area with more  school districts reporting that they were familiar with the 3Ts guidance  than not. This awareness corresponds with the efforts made by the state  of Massachusetts and EPA\u2019s regional offices in the Northeast to distribute  the 3Ts guidance and conduct lead testing and remediation in school  districts.", "By promoting further efforts to communicate the importance of lead  testing to schools to help ensure that their lead testing programs are in  line with good practices included in the 3Ts guidance, EPA regional  offices that have not focused on this issue could leverage the recent  efforts of other regional offices to provide technical assistance and  guidance, and other forms of support.", "EPA\u2019s 3Ts guidance emphasizes the importance of taking action to  remediate elevated lead in school drinking water, but the agency\u2019s  guidance on a recommended action level for states and school districts is  not current and contains elements that could be misleading. Although the  guidance recommends that school districts prioritize taking action if lead  levels from water fountains and other outlets used for consumption  exceed 20 ppb (based on a 250 milliliter water sample), EPA officials told  us when the guidance was originally developed in response to the 1988  LCCA requirement, the agency did not have information available to  recommend an action level specifically designed for schools.  Furthermore, EPA officials told us that the action level in the 3Ts  guidance is not a health-based standard. However, there are statements  in the guidance that appear to suggest otherwise. For example, the  guidance states that EPA strongly recommends that all water outlets in all  schools that provide water for drinking or cooking meet a \u201cstandard\u201d of 20  ppb lead or less and that school officials who follow the steps included in  the document, including using a 20 ppb action level, will be \u201cassured\u201d that  school facilities do not have elevated lead in the drinking water. The use  of the terms \u201cstandard\u201d and \u201cassured\u201d are potentially misleading and  could suggest that the 20 ppb action level is protective of health.", "Further, state and school district officials may be familiar with the 15 ppb  action level (based on a 1 liter water sample) for public water systems  aimed at identifying system-wide problems under the LCR, which may  also create confusion around the 20 ppb action level included in the 3Ts  guidance. According to our survey, an estimated 67 percent of school  districts reported using an action level less than the 20 ppb recommended  in the 3Ts guidance. We found that nearly half of school districts used  action levels between 15 ppb and 19 ppb. Although these action levels\u2014 the 20 ppb from the 3Ts guidance and the 15 ppb from the LCR\u2014are  intended for different purposes, the difference creates confusion for some  state and school district officials. Also, according to our survey, an  estimated 56 percent of school districts reported they would find it helpful  to have clearer guidance on what level of lead to use as the action level  for deciding to take steps to remediate lead in drinking water. In  addition, officials we interviewed in four of the five states we visited said  there is a need for clearer guidance on the action level. EPA officials  agreed that the difference between the two action levels creates  confusion for states and school districts.", "In addition to wanting clearer guidance on choosing lead action levels,  about half of the school districts we surveyed said they would also like  additional information to help inform their lead testing and remediation  programs. Specifically, school districts reported that they want information  on a recommended schedule for lead testing, how to remediate elevated  lead levels, and information associated with testing and remediation costs  (see fig. 9). For example, an estimated 54 percent of school districts  responded that they would like additional information on a testing  schedule, as did officials in 10 of the 17 school districts and one of the  five states we interviewed. EPA\u2019s 3Ts guidance does not include  information to help school districts determine a schedule for retesting their  schools. Officials in one school district told us they need information for  determining retesting schedules for lead in their school drinking water,  and that\u2014without guidance\u2014they chose to retest every 5 years,  acknowledging that this decision was made without a clear rationale.  Further, an estimated 62 percent of school districts reported wanting  additional information on remedial actions to take to address elevated  lead. For example, officials from the Massachusetts Department of  Environmental Protection told us that they would like additional guidance  on evaluating remedial actions to address elevated lead in the fixtures or  the plumbing system. Officials with EPA\u2019s Office of Ground Water and  Drinking Water hold quarterly meetings with regional officials to obtain  input on potential improvements to the 3Ts guidance, but have not made  any revisions.", "EPA has not substantially updated the 3Ts guidance since October 2006  and does not have firm plans or time frames for providing additional  information, including on the action level and other key topics such as a  recommended schedule for testing. EPA officials said that they may  update the 3Ts guidance before the LCR is updated, but did not provide a  specific time frame for doing so.  EPA has efforts underway to reconsider  the action level for the LCR, which may include a change in the action  level from one that is based on technical feasibility, to one that also  considers lead exposure in vulnerable populations such as infants and  young children, which EPA refers to as a health-based benchmark. EPA  anticipates issuing comprehensive revisions to the LCR by February  2020. While the 3Ts guidance is not contingent on the LCR, EPA officials  told us they would consider updates to the 3Ts guidance, including the 20  ppb action level, as they consider revisions to the LCR. By updating the 3Ts guidance to include an action level for school districts that  incorporates available scientific modeling regarding vulnerable population  exposures, EPA could have greater assurance that school districts are  able to limit children\u2019s exposure to lead.", "EPA has emphasized the importance of addressing elevated lead levels  in school drinking water through its 3Ts guidance, but has not  communicated necessary information about action levels and other key  topics consistent with the external communication standard under federal  standards for internal control. According to EPA, CDC, and others,  eliminating sources of lead before exposure can occur is considered the  best strategy to protect children from potential adverse health outcomes.  EPA officials also told us that clear guidance is important because testing  for lead in drinking water requires technical expertise. But without  providing interim or updated guidance to help school districts choose an  action level for lead remediation EPA will continue to provide schools with  confusing information regarding whether to remediate, which may not  adequately limit potential lead exposure to students and staff.  Furthermore, without important information on key topics, such as a  recommended schedule for lead testing, how to remediate elevated lead  levels, and information associated with testing and remediation costs  school districts are at risk of making misinformed decisions regarding  their lead testing and remediation efforts."], "subsections": []}, {"section_title": "Education Has Not Played a Significant Role in Lead Testing and Remediation in Schools or Collaborated with EPA on These Efforts", "paragraphs": ["Education has not played a significant role in supporting state and school  districts efforts to test for and remediate lead in school drinking water, and  there has been limited collaboration between Education and EPA,  according to officials. In 2005, Education, EPA, CDC, and other entities  involved with drinking water signed the Memorandum of Understanding  on Reducing Lead Levels in Drinking Water in Schools and Child Care  Facilities (the memorandum) to encourage and support schools\u2019 efforts to  test for lead in drinking water and to support actions to reduce children\u2019s  exposure to lead. According to the memorandum, Education\u2019s role is to  identify the appropriate school organizations with which to work and  facilitate dissemination of materials and tools to schools in collaboration  with EPA. In addition, EPA\u2019s role is to update relevant guidance  documents for school districts\u2014resulting in the production of the 3Ts guidance in 2006\u2014raising awareness, and collaborating with other  federal agencies and associations, among other things. Education  officials told us that the agency does not have any ongoing efforts related  to implementing the memorandum. However, Education and EPA officials  were not aware of the memorandum being terminated by either agency  and told us the memorandum remains in effect.", "Although Education does not have any ongoing efforts related to  implementing the memorandum, the agency\u2019s websites, including the  Readiness and Emergency Management for Schools Technical  Assistance Center (REMS TA Center) website, and the Green Strides  portal, provide links to EPA guidance and webinars on lead testing and  remediation. The REMS TA Center website, which is largely focused on  emergency management planning, includes a link to EPA\u2019s 3Ts guidance  and other resources on lead exposure and children, but does not provide  information regarding the importance of testing for lead in school drinking  water. Education\u2019s Green Strides portal includes a link to a number of  EPA\u2019s webinars on lead in school drinking water, but does not include all  of the quarterly webinars started in June 2017 to highlight school district  efforts to test for lead. An Education official told us that these EPA  webinars are identified by Education without coordinating with EPA  officials. Further, when searching on Education\u2019s website for lead in  school drinking water, the 3Ts guidance does not show up. Education  officials acknowledged that information regarding lead testing and  remediation is difficult to find on Education\u2019s website and they could take  steps to make federal guidance on lead in school drinking water more  accessible.", "The federal government has developed guidelines to help federal  agencies improve their experience with customers through websites. One  such resource is Guidelines for Improving Digital Services developed by  the federal Digital Services Advisory Group. It states that federal  agencies should take steps to make guidance easy to find and  accessible. Making guidance easy to find and accessible such as by  clarifying which links contain guidance; highlighting new or important  guidance; improving their websites\u2019 search function; and categorizing  guidance on Education\u2019s websites could help raise school district  awareness of the guidance, which is currently low in most areas of the  country.", "Many school districts are not familiar with EPA guidance related to lead  testing and remediation. Specifically, an estimated 60 percent of school  districts reported in our survey that they were not familiar with the EPA\u2019s  3Ts guidance. Most school district officials from our site visits told us they  did not have contact with EPA prior to or during their lead testing and  some said they would not have thought to go to EPA for guidance.  Likewise, EPA officials reported they had received feedback from school  district officials indicating that they do not know where to go for  information about testing for and remediating lead in drinking water.  Rather, school district officials may look to their state educational agency  or Education for guidance on lead testing and remediation, as they might  do when looking for guidance on other topics.", "Education and EPA do not regularly collaborate to support state and  school districts\u2019 efforts related to lead in school drinking water, according  to EPA and Education officials. Education officials said the agency does  not have a role in ensuring safe drinking water in schools, and that the mitigation of environmental health concerns in school facilities is a state  and local function. Therefore, the agency does not collaborate with EPA  to disseminate the 3Ts guidance beyond posting links to related guidance  on their websites and newsletters. EPA officials told us they do not know  which office they should collaborate with at Education. EPA regional  officials also said they do not collaborate with Education to disseminate  the guidance to states and school districts. However, in the 2005  memorandum, EPA and Education agreed to work together to encourage  school districts to test drinking water for lead; disseminate results to  parents, students, staff, and other interested stakeholders; and take  appropriate actions to correct elevated lead levels.", "There are many school districts that have not tested for lead in school  drinking water, and some conducted testing without the assistance of  federal guidance\u2014although the large majority (68 percent) of school  districts who use the guidance reported finding it helpful. Officials in 11 of  17 school districts we interviewed that had conducted lead testing told us  they were familiar with the 3Ts guidance and 9 of those districts said they  found it helpful for designing their lead testing programs. Increased  encouragement and dissemination of EPA resources about lead in school  drinking water by Education and EPA could help school districts test for  and remediate lead in drinking water using good practices and reduce the  potential risk of exposure for students and staff."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Children are particularly at risk of experiencing the adverse effects of lead  exposure from a variety of sources, including drinking water. While there  is no federal law requiring lead testing for drinking water in most schools,  some states and school districts have decided to test for lead in the  drinking water to help protect students. However, there are a number of  school districts that have not tested for lead and some that do not know if  they have tested for lead in their drinking water, according to our  nationwide survey. Even in states and school districts that have opted to  test, officials may choose different action levels to identify elevated lead  and may choose different testing protocols that do not test all fixtures in  all schools.", "EPA has developed helpful guidance\u20143Ts\u2014and webinars for states and  school districts to support efforts to test and remediate lead in school  drinking water. However, some EPA regional offices have not  communicated the importance of testing for and remediating lead to  states and school districts. By promoting further efforts to communicate  the importance of lead testing to school districts to help ensure that their  lead testing programs are in line with good practices, including the 3Ts  guidance, regional offices that have not focused on this issue could build  on the recent efforts of other regional offices to provide technical  assistance and guidance and other forms of support.", "State and school district officials can use EPA\u2019s 3Ts guidance to help  ensure that their drinking water testing and remediation efforts are in line  with good practices and said that it has been helpful for establishing their  programs. However, statements in the guidance\u2014which has not been  updated in over a decade\u2014that suggest the action level described will  ensure that school facilities do not have elevated lead in their drinking  water are misleading. In addition, state and school district officials told us  that additional guidance\u2014including information on a recommended  schedule for retesting as well as on costs associated with testing and  remediation\u2014could help school districts make more informed decisions  regarding their testing and remediation efforts. Without providing interim  or updated guidance, EPA is providing schools with confusing and out of  date information, which can increase the risk of school districts making  uninformed decisions. EPA officials said they would consider updates to  the 3Ts action level while the revisions to the LCR are being completed.  However, the longer school districts are without the additional information  they need to conduct their efforts in line with good practices and continue  to rely on confusing and misleading information, the more challenges they  will face in trying to limit children\u2019s exposure to lead. After EPA revises  the LCR, the agency would have greater assurance that school districts  are limiting children\u2019s exposure to lead by considering whether to  develop, as part of its guidance, a health-based level for schools that  incorporates available scientific modeling regarding vulnerable population  exposures.", "Finally, although Education provides information to states and school  districts on lead testing and remediation through the agency\u2019s websites,  that information is difficult to find. Further, Education\u2019s website does not  include all of EPA\u2019s quarterly webinars to highlight school district efforts to  test for lead. By making guidance accessible, Education could improve  school district awareness of EPA resources about lead in school drinking  water. In addition, EPA and Education should improve their collaboration  to encourage and support lead testing and remediation efforts by states  and school districts. EPA has the expertise to develop guidance and  provide technical assistance to states and school districts, while  Education, based on its mission to promote student achievement, should  collaborate with EPA to disseminate guidance and raise awareness of  lead in drinking water as an issue that could impact student success.  Although over one-third of districts that tested found elevated levels of  lead, many districts have still not been tested. Unless EPA and Education  encourage additional school districts to test for lead, many students and  school staff may be at risk of lead exposure."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of seven recommendations, including five to EPA  and two to Education:", "The Assistant Administrator for Water of EPA\u2019s Office of Water should  promote further efforts to communicate the importance of testing for  lead in school drinking water to address what has been a varied  approach by regional offices. For example, the Assistant Administrator  could direct those offices with limited involvement to build on the  recent efforts of several regional offices to provide technical  assistance and guidance, and other forms of support.  (Recommendation 1)", "The Assistant Administrator for Water of EPA\u2019s Office of Water should  provide interim or updated guidance to help schools choose an action  level for lead remediation and more clearly explain that the action  level currently described in the 3Ts guidance is not a health-based  standard. (Recommendation 2)", "The Assistant Administrator for Water of EPA\u2019s Office of Water  should, following the agency\u2019s revisions to the LCR, consider whether  to develop a health-based level, to include in its guidance for school  districts, that incorporates available scientific modeling regarding  vulnerable population exposures and is consistent with the LCR.  (Recommendation 3)", "The Assistant Administrator for Water of EPA\u2019s Office of Water should  provide information to states and school districts concerning  schedules for testing school drinking water for lead, actions to take if  lead is found in the drinking water, and costs of testing and  remediation. (Recommendation 4)", "The Assistant Secretary for Elementary and Secondary Education  should improve the usability of Education\u2019s websites to ensure that  the states and school districts can more easily find and access federal  guidance to address lead in school drinking water, by taking actions  such as clarifying which links contain guidance; highlighting new or  important guidance; improving their websites\u2019 search function; and  categorizing guidance. (Recommendation 5)", "The Assistant Administrator for Water of EPA\u2019s Office of Water and  the Director of the Office of Children\u2019s Health Protection should  collaborate with Education to encourage testing for lead in school  drinking water. This effort could include further dissemination of EPA  guidance related to lead testing and remediation in schools or sending  letters to states to encourage testing in all school districts that have  not yet done so. (Recommendation 6)", "The Assistant Secretary for Elementary and Secondary Education  should collaborate with EPA to encourage testing for lead in school  drinking water. This effort could include disseminating EPA guidance  related to lead testing and remediation in schools or sending letters to  states to encourage testing in all school districts that have not yet  done so. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to EPA, Education, and CDC for review  and comment. EPA and Education provided written comments that are  reproduced in appendixes VII and VIII respectively. EPA also provided  technical comments, which we incorporated as appropriate. CDC did not  provide comments. We also provided relevant excerpts to selected states  and incorporated their technical comments as appropriate.", "In its written comments, EPA stated that it agreed with our  recommendations and noted a number of actions it plans to take to  implement them. For example, EPA said its Office of Ground Water and  Drinking Water is holding regular meetings with regional offices and other  EPA offices to obtain input on improving the 3Ts guidance. Potential  revisions include updates to implementation practices, the sampling  protocol, and the action level, including clarifying descriptions of different  action levels and standards. Also, EPA said that while it has not yet  determined the role of a health-based benchmark for lead in drinking  water in the revised LCR, it sees value in providing states, drinking water  systems, and the public with a greater understanding of the potential  health implications for vulnerable populations of specific levels of lead in  drinking water. EPA said it would continue to reach out to states and  schools to provide information, technical assistance, and training and will  continue to make the 3Ts guidance available. EPA also said it would work  with Education to ensure that school districts and other stakeholders are  aware of additional resources EPA is developing.", "In its written comments, Education stated that it agreed with our  recommendations and noted a number of actions it plans to take to  implement them. In response to our recommendation to improve  Education\u2019s websites, Education said it would identify and include an  information portal dedicated to enhancing the usability of federal  resources related to testing for and addressing lead in school drinking  water. Also, Education said it is interested in increasing coordination  across all levels of government and it shares the view expressed in our  report that improved federal coordination, including with EPA, will better  enhance collaboration to encourage testing for lead in school drinking  water. Education said it would develop a plan for disseminating relevant  resources to its key stakeholder groups and explore how best to  coordinate with states to disseminate EPA\u2019s guidance on lead testing and  remediation to school districts.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to interested congressional  committees, the Administrator of the Environmental Protection Agency,  the Secretary of Education, the Director of the Centers for Disease  Control and Prevention, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  us at (617) 788-0580 or nowickij@gao.gov or (202) 512-3841 or  gomezj@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.", "GAO staff who made key contributions to this report are listed in appendix  IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we examined three objectives: (1) the extent to which  school districts are testing for, finding, and remediating lead in school  drinking water; (2) the extent to which states require or support testing for  and remediating lead in school drinking water by school districts; and (3)  the extent to which federal agencies are supporting state and school  district efforts to test for and remediate lead. To address these objectives,  we conducted a web-based survey of school districts, interviews with  selected state and school district officials, a review of applicable  requirements in selected states, a review of relevant federal laws and  regulations, and interviews with federal agency officials and  representatives of stakeholder organizations.", "We conducted this performance audit from October 2016 through July  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Web-based Survey of School Districts", "paragraphs": ["To examine the extent to which school districts are testing for and  remediating lead in school drinking water, we designed and administered  a generalizable survey of a stratified random sample of U.S. local  educational agencies (LEA), which we refer to as school districts  throughout the report. The survey included questions about school  district efforts to test for lead in school drinking water, such as the number  of schools in which tests were conducted, the costs of testing, and  whether parents or others were notified about the testing efforts. We also  asked questions about remediation efforts, such as whether lead was  discovered in school drinking water, the specific remediation efforts that  were implemented, and whether parents or others were notified about the  remediation efforts. Further, we asked about officials\u2019 familiarity with the  Environmental Protection Agency\u2019s (EPA) guidance entitled 3Ts for  Reducing Lead in Drinking Water in Schools, (3Ts guidance) whether the  guidance was used, and the extent to which it was helpful in conducting  tests, remediating lead, and communicating with parents and others. We  directed the survey to school district superintendents or other cognizant  officials, such as facilities directors. See appendix II which includes the  survey questions and estimates.", "We defined our target population to be all school districts in the 50 U.S.  states and the District of Columbia that are not under the jurisdiction of  the Department of Defense or Bureau of Indian Education. We used the  LEA Universe database from Department of Education\u2019s (Education)  Common Core of Data (CCD) for the 2014-2015 school year to our  sampling frame. For the purpose of our survey, our sample was limited to  school districts that: were located in the District of Columbia or the 50 states; had a LEA type code of 1, 2, 4, 5, 7, and 8; had one or more schools and one or more students; and were not closed according to the 2014-2015 School Year.", "The resulting sample frame included 16,452 school districts and we  selected a stratified random sample of 549 school districts. We stratified  the sampling frame into 13 mutually exclusive strata based on urban  classification and poverty classification. We further stratified the school  districts classified as being in a city by charter status. We selected the  largest 100 school districts with certainty. We determined the minimum  sample size needed to achieve precision levels of plus or minus 12  percentage points or fewer, at the 95 percent confidence level. We then  increased the sample size within each stratum for an expected response  rate of 70 percent.", "We defined the three urban classifications based on the National Center  for Education Statistics (NCES) urban-centric locale code. To build a  general measure of the poverty level for each school district we used the  proportion of students eligible for free or reduced-price lunch (FRPL) as  indicated in the CCD data and classified these into the following three  groups:", "High-poverty \u2013 More than 75 percent of students in the school district  were eligible for FRPL;", "Mid-poverty \u2013 Between 25.1 and 75.0 percent of students in the  school district were eligible for FRPL; and", "Low-poverty \u2013 25 percent or fewer students in the school district were  eligible for FRPL.", "We assessed the reliability of the CCD data by reviewing existing  documentation about the data and performing electronic testing on  required data elements and determined they were sufficiently reliable for  the purpose of our report.", "We administered the survey from July to October 2017 (the survey asked  school districts to report information based on the 12 months prior to their  completing the survey.) To obtain the maximum number of responses to  our survey, we sent reminder emails to nonrespondents and contacted  nonrespondents over the telephone. We identified that four of the 549  sampled school districts were closed and one was a \u201ccyber-school\u201d with  no building, so these were removed from the sample. Of the remaining  544 eligible sampled school districts, we received valid responses from  373, resulting in an unweighted response rate of 68 percent.", "We conducted an analysis of our survey results to identify potential  sources of nonresponse bias using a multivariate logistic regression  model. We examined the response propensity of the sampled school  districts by several demographic characteristics. These characteristics  included poverty, urbanicity, and charter status. We did not find any other  population characteristics significantly affected survey response  propensity except those used in stratification (charter schools and the  largest 100 school districts). Based on the response bias analysis and the  68 percent response rate across stratum, we determined that estimates  based on adjusted weights reflecting the response rate are generalizable  to the population of eligible school districts and are sufficiently reliable for  the purposes of this report.", "We took steps to minimize non-sampling errors, including pretesting draft  instruments and using a web-based administration system. As we began  to develop the survey, we met with officials from seven school districts to  explore the feasibility of responding to the survey questions. We then  pretested the draft instrument from April to June 2017 with officials in  eight school districts\u2014including one charter school district\u2014in cities and  suburbs in different states. In the pretests, we asked about the clarity of  the questions and the flow and layout of the survey. The EPA also  reviewed and provided us comments on a draft version of the survey.  Based on feedback from the pretests and EPA\u2019s review, we made  revisions to the survey instrument. To further minimize non-sampling  errors, we used a web-based survey, which allowed respondents to enter  their responses directly into an electronic instrument. Using this method  automatically created a record for each respondent and eliminated the  errors associated with a manual data entry process.", "We express the precision of our particular sample\u2019s results as a 95  percent confidence interval (for example, plus or minus 10 percentage  points). This is the interval that would contain the actual population value  for 95 percent of the samples we could have drawn. As a result, we are  95 percent confident that each of the confidence intervals in this report  will include the true values in the study population.", "To analyze differences in the percentages of school districts that reported  they tested for lead in school drinking water and those that discovered  lead, we compared weighted survey estimates generated for school  districts in different levels of the following subgroups:", "Poverty: low poverty, mid poverty, and high poverty;", "Racial composition: majority-minority and majority white;", "Region: Northeast, South, Midwest, and West;", "Population density: urban, suburban, and rural/town;", "Urban charter school: in urban areas, charter district and non-charter", "Largest 100: largest 100 districts (based on student enrollment) and  all other districts.", "For each subgroup, we produced percentage estimates and standard  errors for each level and used these results to confirm the significance of  the differences between weighted survey estimates."], "subsections": []}, {"section_title": "Site Visits to School Districts and Interviews with State and School District Officials", "paragraphs": ["To examine school districts\u2019 testing and remediation efforts and state  support of those efforts, we conducted site visits in five states\u2014Georgia,  Illinois, Massachusetts, Oregon, and Texas\u2014from February to October  2017. We selected these states because they varied in the extent to  which they required testing of school drinking water for lead and they are  located in geographic areas covered by different EPA regional offices.  Within these states, we selected 17 school districts that had tested for  lead in school drinking water and to achieve variation in the size and  population density (urban, suburban, and rural) of the district as well as  including one charter school district.", "Site visits generally consisted of interviews with officials in state agencies  and school districts and officials in the local EPA regional office:", "State interviews: We interviewed officials in state environment,  education, and health agencies, depending on whether they had  information related to school district testing for lead in school drinking  water in their state. The topics we discussed were the agencies\u2019 roles  and responsibilities related to testing for and remediation of lead in  school drinking water, any related state requirements, policies, and  guidance, communication and public notification about testing and  remediation efforts and, as appropriate, coordination among multiple  state agencies. We also discussed similar topics related to lead-based  paint. In Massachusetts, we interviewed representatives with the  University of Massachusetts, because of their role in implementing the  state\u2019s program to support school district efforts to test for lead in  school drinking water.", "School Districts: Within the five site visit states, we interviewed  officials in 14 school districts in person and in three school districts by  phone (because we were not able to meet with them in person). We  also selected one charter school that functions as its own school  district which had conducted tests for lead in school drinking water.  Similar to our school district survey, the interview topics we discussed  with district officials included testing for and remediation of lead in  school drinking water, use of guidance (such as the 3Ts guidance)  and efforts to communicate or coordinate with any federal, state, or  local agencies, including any other school districts. Within 13 of the  school districts, we visited at least one school in which the district had  tested for lead in drinking water and, as needed, took remedial action  in order to gain an in-depth understanding of their testing and  remediation efforts.", "EPA Regional Offices: We interviewed officials in all 10 EPA Regional  offices. We met in-person with officials in the regional offices 1, 4, 5,  and 6 and conducted phone interviews with officials in regional offices  2, 3, 7, 8, 9, and 10. We generally discussed EPA officials\u2019 roles and  responsibilities related to testing for lead in school drinking water and  paint and efforts in states and school districts in their region.", "Information we gathered from these interviews, while not generalizable,  represents the conditions present in the states and school districts at the  time of our interviews and may be illustrative of efforts in other states and  school districts."], "subsections": []}, {"section_title": "Review of State Requirements", "paragraphs": ["As part of our effort to examine school districts\u2019 testing and remediation  efforts and state support of those efforts, we reviewed related state  requirements. To determine whether states had related requirements, we  asked all EPA regional offices if states in their region had requirements  related to testing for lead in school drinking water. EPA provided  examples of eight states (California, Illinois, Maryland, Minnesota, New  Jersey, New York, Virginia, and the District of Columbia that had such  requirements. We reviewed relevant laws, regulations, and policy  documents for these states. We then confirmed the details of the related  requirements with the appropriate state officials via structured  questionnaires. Also, we used available documentation to corroborate  and verify the testing requirements of the states that EPA identified. GAO  did not conduct an independent search of state laws."], "subsections": []}, {"section_title": "Review of Federal Laws and Regulations, and Interviews with Federal Agency Officials", "paragraphs": ["To examine the extent to which federal agencies have collaborated in  supporting state and school district efforts to test for and remediate lead,  we reviewed relevant federal laws, including the Water Infrastructure  Improvements for the Nation Act of 2016, Reduction of Lead in Drinking  Water Act of 2011, the Safe Drinking Water Act of 1974, as amended,  and the Lead Contamination Control Act of 1988; regulations, such as the  Lead and Copper Rule; and guidance, such as the 3Ts guidance. We  also reviewed documentation including the", "Memorandum of Understanding on Reducing Lead Levels in Drinking  Water in Schools and Child Care Facilities signed in 2005 by EPA,  Education and the Centers for Disease Control and Prevention (CDC);", "Federal Partners in School Health Charter;", "EPA training webinar information; and other relevant guidance including the 3Ts guidance tool kit.", "We interviewed officials from EPA\u2019s Office of Ground Water and Drinking  Water and Office of Children\u2019s Health Protection and officials in all 10 of  EPA regional offices regarding their approach to providing support to  states and school district on lead testing and remediation. We interviewed  officials from Education\u2019s Office of Safe and Healthy Students and  officials from the CDC. During these interviews, we interviewed officials  about the Memorandum of Understanding and about the Federal Partners  in School Health initiative, both of which represent collaborative efforts  that address lead in school drinking water, among other topics.", "We evaluated federal efforts to collaborate and support lead testing and  remediation in schools against federal standards for internal control,  which call for agencies to communicate quality information to external  parties, among other things. We also evaluated federal efforts against  the Memorandum of Understanding, in which EPA, Education, and CDC  agreed to encourage testing drinking water for lead and communicate  with key stakeholders, among other things."], "subsections": []}, {"section_title": "Interviews with Stakeholder Organizations", "paragraphs": ["To inform all of our research objectives, we interviewed representatives  with the National Conference of State Legislatures, National Center for  Healthy Housing, National Alliance of Public Charter Schools, the DC  Public Charter School Board, and the 21st Century School Fund. We also  attended a workshop entitled \u201cEliminating Lead Risks in Schools and  Child Care Facilities\u201d in December 2017."], "subsections": []}]}, {"section_title": "Appendix II: Survey of Lead Testing and Remediation Efforts", "paragraphs": ["The questions we asked in our survey of local educational agencies  (referred to in this report as school districts) are shown below. Our survey  was comprised of closed- and open-ended questions. In this appendix,  we include all survey questions and aggregate results of responses to the  closed-ended questions; we do not provide information on responses  provided to the open-ended questions. Estimates noted with superscript  \u201ca\u201d are based on 20 or fewer responses and were not included in our  findings. For a more detailed discussion of our survey methodology, see  appendix I.  1. Do any schools in your local educational agency (LEA) obtain  drinking water from a public water system such as a city or  municipal water plant? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "No (Skip to 20)", "Don\u2019t know (Skip to  20)", "Section B: Testing for Lead in School Drinking Water  2. Is there a requirement that the drinking water in your LEA\u2019s  schools be tested for lead? (Please answer \u201cYes\u201d regardless of  whether that requirement comes from your state, municipality, local  educational agency or any other governmental entity.) (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "3. Regardless of whether your LEA is required to test for lead in  school drinking water, have tests been conducted for lead in the  drinking water in at least one of your schools in the past 12 months?  (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If yes to 3:  3A. What is the number of schools in which tests were conducted in  the past 12 months?", "Estimated Number  (Mean)", "95 percent  confidence interval \u2013  lower bound  (number)", "95 percent  confidence interval \u2013  upper bound  (number) (Respondent reported  number)", "3B. About how many samples were taken from sources of drinking  water such as water fountains and sinks in each school? (Check  one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "3C. Did any of the following develop the sampling plan, draw the  samples of water, and analyze the samples? (Check all that apply.)", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "3D. What size samples were taken? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018other\u2019 to 3D: What sample size was used?  3E: To the best of your knowledge, did the personnel drawing or  analyzing samples follow a testing protocol that offers guidance on  developing the sampling plan, drawing samples of water, or  analyzing samples? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "No (Skip to 3F)", "Don\u2019t know (Skip to 3F)", "If \u2018yes\u2019 to 3E: a. To the best of your knowledge, were any of the  following entities involved in developing the protocol? (Check one  per row.)", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "Contractor / water  testing company  EPA or another  federal government  agency  A local government  agency (aside from  your LEA)", "If \u2018other\u2019 to 3Eh: What other entities were involved in developing the  protocol?  3F. If tests were conducted in some schools in your LEA in the past  12 months\u2014but were not conducted in every school\u2014how was it  determined which schools would be tested?  (Check one per row.)", "Not applicable: tests were conducted in every school (Skip to 3G)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "If \u2018other\u2019 to 3Fe: In what other ways did your LEA use to determine  which schools would be tested?  3G. How much do you estimate your LEA has spent on testing for  lead in school drinking water in the past 12 months? (Please answer  this question for lead testing only; the survey asks about  expenditures to address concerns identified through testing later.  Also, please include materials, labor, and any other expenditures  related to lead testing in your estimate.)", "Estimated Number  (Median)", "95 percent  confidence interval \u2013  lower bound  (number)", "95 percent  confidence interval \u2013  upper bound  (number) (Respondent reported  number)", "3H. Did your LEA use any of the following sources of funding for the  testing in the past 12 months? (Check one per row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "If \u2018other\u2019 to 3H: What other sources of funding did your LEA use?  3I. In the past 12 months, did your LEA notify the following groups  that it was planning to test for lead in school drinking water before  conducting the tests? (Check one per row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "General public (e.g.,  media)", "If \u2018other\u2019 to 3I: What other groups did your LEA notify that it was  planning to test for lead in school drinking water before conducting  the tests?  3J. In the past 12 months, did your LEA report the testing results to  the following groups after completing the tests? (Check one per  row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "General public (e.g.,  media)", "If \u2018other\u2019 to 3J: To what other groups did your LEA report the testing  results?  3K. If \u2018no\u2019 to 3: Were any of the following a reason your LEA did not  conduct any tests in any schools in the last 12 months? (Check one  per row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "If \u2018other\u2019 to 3K: For what other reasons did your LEA not conduct  any tests in any schools in the last 12 months?  4. Does your LEA have a schedule for recurring tests to determine  the amount of lead in the drinking water in your schools within any  of the following time frames? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "Section C: Remediation of Lead in School Drinking Water  5. Has your LEA discovered any level of lead in the drinking water of  any of your schools (as a result of testing) in the last 12 months?  (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "5A. What lead concentration (measured in \u201cparts per billion\u201d or  \u201cppb\u201d) did your LEA use to initiate remedial action? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018other\u2019 to 5A: What lead concentration did your LEA use to initiate  remedial action?  5B. In the last 12 months, how many schools had at least one test  result\u2013including as few as one sample in one school\u2013greater than  the lead level your LEA used to initiate action? (Please answer  regardless of whether these results were discovered in the first of  multiple rounds of testing.)  5C.To address lead discovered in school drinking water, has your  LEA taken any of the following actions in any of your schools in the  past 12 months?", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "5D. If \u2018no\u2019 to every item in 5C: What are the reasons why your LEA  has not taken actions in any of your schools in the past 12 months?  5E. If \u2018yes\u2019 to any item in 5C: How much do you estimate your LEA  has spent on taking actions in the past 12 months? (Please include  materials, labor, and any other expenditures related to lead  remediation in your estimate.)", "Estimated Number  (Median)", "95 percent  confidence interval \u2013  lower bound  (number)", "95 percent  confidence interval \u2013  upper bound  (number) (Respondent reported  number)", "5F. Did your LEA use any of the following sources of funding to take  actions in the past 12 months? (Check one per row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "If \u2018other\u2019 to 5F: What other sources of funding did your LEA use to  take actions in the past 12 months?  5G. Did your LEA notify the following groups about its actions in the  past 12 months? (Check one per row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "General public (e.g.,  media)", "If \u2018other\u2019 to 5G: What other groups has your LEA notified about its  remedial actions in the past 12 months?  6. Does your LEA have a schedule to flush the water system as a  result of concerns about lead in drinking water in at least one of  your schools within any of the following time frames? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "7. Does your LEA have plans to take actions to eliminate or reduce  lead in school drinking water (for example, replace drinking water  fountains, replace pipes) in at least one of your schools? (Check  one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018according to a schedule\u2019 to 7: how would you describe the  schedule that your LEA has developed?", "Section D: Guidance Regarding Lead Testing and Remediation  8. Prior to receiving this survey, were you familiar with guidance  issued by the U.S. Environmental Protection Agency entitled \u201c3Ts  for Reducing Lead in Drinking Water in Schools\u201d? (Please answer  \u201cYes\u201d if you had read or used the\u201d3Ts\u201d prior to receiving this  survey.) (Check one.)", "95 percent confidence  interval \u2013 lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018yes\u2019 to 8: did your LEA (or a contractor working on behalf of your  LEA) follow or refer to \u201c3Ts\u201d during your efforts to test for or  remediate lead in school drinking water? (Check one.)", "95 percent confidence  interval \u2013 lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018yes\u2019 to 8A: How helpful was 3Ts for conducting tests for lead in  your schools\u2019 drinking water? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018yes\u2019 to 8A: How helpful was 3Ts for remediating lead in your  schools\u2019 drinking water? (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "If \u2018yes\u2019 to 8A: How helpful was 3Ts for communicating with parents  and other stakeholders about lead in your schools\u2019 drinking water?  (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "What else, if anything, would make 3Ts more helpful?  9. Did your LEA (or a contractor working on behalf of your LEA) use  any other guidance (for example, best practices, manuals, protocols,  webinars) in your LEA\u2019s efforts to test for lead in your schools\u2019  drinking water, take remedial actions, or for notification purposes?  (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)", "95 percent  confidence interval \u2013  upper bound  (percentage)", "What other guidance was used?  10. Would your LEA find any of the following helpful? (Check one  per row).", "95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "Clearer guidance on  a level of lead in  school drinking  water at which we  should take action  Additional guidance  on determining a  schedule for  41  95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage) regularly testing for  lead in school  drinking water  Additional guidance  on actions to take if  lead is found in  school drinking  water  Information on the  costs of testing for  lead in school  drinking  water  Information on the  costs of remediating  lead in school  drinking water  18  95 percent  confidence  interval \u2013 lower  bound  (percentage)", "95 percent  confidence  interval \u2013 upper  bound  (percentage)", "If \u2018other guidance or information\u2019 to 10: What other guidance or  information would be helpful?", "Section E: Inspecting Schools for Lead Based Paint  Section F: Remediation of Lead Based Paint in Schools  Section G: Other Questions  16. How many schools are owned or operated by your LEA?", "Estimated Number  (Mean)", "95 percent  confidence interval \u2013  lower bound  (number)", "95 percent  confidence interval \u2013  upper bound  (number) (Respondent reported  number)", "17. How many schools in your LEA were built before 1986? (If a  building has additions, we mean the original structure/the original  part of the building.)", "Estimated Number  (Mean)", "95 percent  confidence interval \u2013  lower bound  (number)", "95 percent  confidence interval \u2013  upper bound  (number) (Respondent reported  number)", "18. How many schools in your LEA were built before 1978? (If a  building has additions, we mean the original structure/the original  part of the building.)", "Estimated Number  (Mean)", "95 percent  confidence interval \u2013  lower bound  (number)", "95 percent  confidence interval \u2013  upper bound  (number) (Respondent reported  number)", "19. Is there anything else you would like to share with us regarding  lead testing, inspection, or remediation efforts in your school or LEA  (drinking water or paint)?  20. What is the name, title, e-mail address, and telephone number of  the person responsible for completing this survey?", "Section H: Completion  21. Please check one of the options below. Clicking on \u201cCompleted\u201d  indicates that your answers are official and final. Your answers will  not be used unless you have done this. (Check one.)", "95 percent  confidence interval \u2013  lower bound  (percentage)"], "subsections": []}, {"section_title": "Appendix III: Lead Testing and Remediation in Charter School Districts", "paragraphs": ["Charter schools comprise a small but growing group of public schools. In  contrast to most traditional public schools, many charter schools are  responsible for financing their own buildings and other facilities. As a  result, charters schools vary in terms of whether they own their own  building or pay rent, and whether they operate in buildings originally  designed as a school or in buildings which have been redesigned for  educational purposes. Sometimes charter schools may also share space  in their building with others, such as non-profit organizations. In addition  to differences in facility access and finance, charter school governance  also varies. In some states, charter schools function as their own school  district, while in other states, charter schools have the option to choose  between being a distinct school district or part of a larger school district.", "To determine the extent to which charter school districts were testing for  lead in school drinking water and finding and remediating lead, our survey  included charter school districts in two ways: our sampling design  included three strata specifically for charter school districts in urban  areas; in addition, charter school districts were retained in the sampling  population, such that they could be randomly selected in our other strata.  While we generally received too few responses from charter school  districts to report their data separately, we are able to estimate that about  36 percent of charter school districts tested for lead in school drinking  water.", "To learn more about experiences of charter schools, we visited one  charter school district and interviewed representatives of the DC Public  Charter School Board (DC PCSB).", "The charter school district we visited consisted of one charter school  in a building it leased. The school had 10 sources of consumable  water, all of which were tested in 2016 and were found to have lead  below the district\u2019s selected action level of 15 parts per billion. Before  testing, district officials met with the building owner who agreed to  cover the cost of any remediation.", "Officials with the DC PCSB told us that it paid to have tests conducted  in every charter school in the District of Columbia. According to DC  PCSB officials, between March and June 2016, 95 charter schools  were tested, and lead above their action level of 15 parts per billion  was discovered in 20 schools. Officials estimated their testing costs to  be about $100,000, which was subsequently reimbursed by the  District of Columbia\u2019s Office of State Superintendent of Education.  They also said that charter schools were responsible for taking steps  to remediate the lead and recommended schools flush their water  systems and use filters."], "subsections": []}, {"section_title": "Appendix IV: Testing Components for Eight States That Require School Districts to Test for Lead in Drinking Water", "paragraphs": [], "subsections": [{"section_title": "Action level and sample size Not specified", "paragraphs": ["Communication  of results  Not specified 5 ppb in a 250  ml sample  (from filtered  fixture)"], "subsections": []}]}, {"section_title": "Appendix V: EPA Guidance to the Public on Reducing Lead in Drinking Water", "paragraphs": ["The Environmental Protection Agency (EPA) provides information on its  website for the public on lead in drinking water. EPA\u2019s website includes,  among other documents, a December 2005 brochure for the public and  school districts entitled \u201c3Ts for Reducing Lead in Drinking Water in  Schools\u201d (see fig.10)."], "subsections": []}, {"section_title": "Appendix VI: Memorandum of Understanding between EPA, Education, CDC, and Related Associations on Reducing Lead in School Drinking Water Effective June 2005", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individuals named above, Diane Raynes (Assistant  Director), Scott Spicer (Assistant Director), Jason Palmer (Analyst-in- Charge), Amanda K. Goolden, Rich Johnson, Grant Mallie, Jean  McSween, Dae Park, James Rebbe, Sarah M. Sheehan, and Alexandra  Squitieri made significant contributions to this report. Also contributing to  this report were Susan Aschoff, David Blanding, Mimi Nguyen, Tahra  Nichols, Dan C. Royer, Kiki Theodoropoulos, and Kim Yamane."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Lead Paint in Housing: HUD Should Strengthen Grant Processes,  Compliance Monitoring, and Performance Assessment. GAO-18-394.  Washington, D.C.: June 19, 2018.", "Drinking Water: Additional Data and Statistical Analysis May Enhance  EPA\u2019s Oversight of the Lead and Copper Rule. GAO-17-424.  Washington, D.C.: September 1, 2017.", "Environmental Health: EPA Has Made Substantial Progress but Could  Improve Processes for Considering Children\u2019s Health. GAO-13-254.  Washington, D.C.: August 12, 2013.", "Lead in Tap Water: CDC Public Health Communications Need  Improvement. GAO-11-279. Washington, D.C.: March 14, 2011.", "Environmental Health: High-level Strategy and Leadership Needed to  Continue Progress toward Protecting Children from Environmental  Threats. GAO-10-205. Washington, D.C.: January 28, 2010.", "Drinking Water: EPA Should Strengthen Ongoing Efforts to Ensure That  Consumers Are Protected from Lead Contamination. GAO-06-148.  Washington, D.C.: January 4, 2006."], "subsections": []}], "fastfact": ["We surveyed school districts across the country on testing for lead in drinking water in 2017. Based on our nationally generalizable survey, we estimate that:", "41% of districts, serving 12 million students, had not tested for lead in the 12 months before completing our survey.", "43% of districts, serving 35 million students, tested for lead. Of those, 37% found elevated levels and reduced or eliminated exposure.", "16% did not know if they had tested.", "At least 8 states require schools to test for lead, and many others assist with voluntary testing.", "We made 7 recommendations to promote testing and improve guidance for school districts.", "(We updated this text to clarify the number of states requiring testing or assisting with voluntary testing.)"]}
{"id": "GAO-18-113", "url": "https://www.gao.gov/products/GAO-18-113", "title": "Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce Requirements", "published_date": "2018-04-11T00:00:00", "released_date": "2018-04-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Fighter pilots operate aircraft that are critical to achieving and maintaining air dominance during combat operations. The military services invest significant time and funding to train, compensate, and retain fighter pilots. According to Air Force officials, it costs between $3-$11 million and takes approximately 5 years to develop an individual fighter pilot to lead combat missions.", "Senate Report 114-255 included a provision for GAO to review the Department of Defense's (DOD) management of the fighter pilot workforce. GAO's report (1) assesses the extent to which the military services had differences in the number of fighter pilots compared to authorizations, and describes any contributing factors as well as initiatives to address the differences, and (2) assesses the extent to which the military services had reevaluated squadron requirements for the number of fighter pilots needed, including consideration of UAS pilot requirements.", "GAO analyzed military service personnel data, documentation on service initiatives to address factors contributing to fighter pilot shortages, and service documentation of requirements; met with a non-generalizable sample of fighter pilots at seven locations; and interviewed DOD and service officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Air Force, the Navy, and the Marine Corps had gaps between the actual numbers of fighter pilots and authorizations (i.e. funded positions) in fiscal years (FY) 2013 through 2017. In FY 2017 the Air Force's gap was the widest at 27 percent of authorizations (see fig. below) and is projected to continue through FY 2023. The Marine Corps' gap grew from 6 percent in FY 2006 to 24 percent in FY 2017; it is concentrated in fighter pilots below the rank of major. While the Navy did not have comparable data, it had a gap at fighter pilots' first operational tours that grew from 12 percent in FY 2013 to 26 percent in FY 2017, and Navy officials stated it could increase through mid-2019. Service officials attributed these gaps to aircraft readiness challenges, reduced training opportunities, and increased attrition of fighter pilots due to career dissatisfaction. To help increase fighter pilot numbers, the military services are taking actions, including increasing the amounts of financial incentives to retain pilots.", "The military services have not recently reevaluated squadron requirements to reflect increased fighter pilot workload and the emergence of unmanned aerial systems (UAS). According to service guidance, squadron requirements are to be reviewed on a 2-year schedule and to be updated as conditions change (in June 2017 the Navy revised its guidance to extend its schedule from 2 years to 5 years). However, service officials acknowledged that they have not updated all squadron requirements within the last 2 years. These officials stated that the requirements have not been reevaluated because existing conditions do not warrant the change. However, fighter pilots and squadron leaders interviewed at locations GAO visited consistently stated that the typical workload has significantly increased in recent years due to, among other things, changes in fighter aircraft tactics and technology and reductions to administrative support in squadrons. Further, the military services have not assessed the effect of increased reliance on UAS on fighter pilot requirements. The Air Force's vision for UAS notes that systems will work in tandem with cockpit-operated aircraft and that autonomous technologies will potentially lead to personnel efficiencies. Without re-evaluating squadron requirements to reflect current and emerging conditions, the nature of the gap may be inaccurate and thus make it difficult for the military services to target strategies to meet their personnel needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Air Force, the Navy, and the Marine Corps reevaluate fighter pilot squadron requirements. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) relies on fighter pilots to perform an  array of missions that are critical to its ability to successfully execute its  national security mission. Developing fighter pilots requires a significant  investment of time and funding. According to Air Force officials, a fighter  pilot requires approximately 5 years of training to be qualified to lead  flights, at a cost of between about $3 million to $11 million depending on  the specific type of aircraft. Retaining qualified pilots is important not only  to ensure that operational requirements can be met, but also to recoup  the substantial investments the military services make in training their  pilots.", "Since 2001, we have identified the strategic management of human  capital as a high-risk issue because of the mission-critical skills gaps  within the federal workforce that pose a high risk to the nation by  impeding the government from cost-effectively serving the public and  achieving results. In 2017, we reported that the military services  implemented retention bonuses differently for pilots of different types of  aircraft, and that their implementation approaches generally varied from  year to year. We recommended that DOD clarify guidance regarding the  extent to which personnel performance should be incorporated into  retention decisions\u2014including the use of bonuses to retain pilots. DOD  concurred with the recommendation, but as of December 2017 had not  yet implemented changes in response.", "Senate Armed Services Committee Report 114-255, accompanying a bill  for the National Defense Authorization Act for Fiscal Year 2017, included  a provision for us to review DOD\u2019s management of the fighter pilot  workforce. For our report, we (1) assessed the extent to which the  military services had differences in the number of fighter pilots compared  to authorizations, and described any contributing factors as well as  initiatives to address the differences and (2) assessed the extent to which  the military services had reevaluated squadron requirements for the  number of fighter pilots needed, including consideration of unmanned  aerial system (UAS) pilot requirements.", "For objective one, we compared \u201cauthorizations\u201d\u2014specifically, those  positions authorized and funded by Congress for fighter pilots in the  active and reserve components of the Air Force, the Navy, and the  Marine Corps\u2014with the corresponding staffing levels (i.e., the actual  number of pilots available to staff those positions) in those military  services. For each of the military services, we also compared  authorizations with staffing levels of all fixed-wing, cockpit-operated  communities (hereafter referred to as fixed-wing communities). We did  not include the Army in our review because it does not operate fighter  aircraft.", "For the Air Force and the Marine Corps, we compared fighter pilot staffing  levels for the active and reserve components to authorized positions for  fiscal years 2006 through 2017, and we also obtained and analyzed  projections for these data for fiscal years 2018 through 2023. We also  compared fighter pilot staffing levels for Air Force and Marine Corps  active components with operational authorized positions. The Navy does  not separate non-operational fighter pilot authorizations from  authorizations for other pilots, and therefore we were unable to compare  Navy fighter pilot staffing levels with authorizations as we did for the Air  Force and the Marine Corps. We instead analyzed staffing levels for Navy  fixed-wing communities in the active component for fiscal years 2011  through 2017, and compared pilot staffing levels to authorizations for the  three career milestones that Navy officials told us they use to monitor and  manage their fixed-wing pilot communities for fiscal years 2013 through  2017. These milestones are first operational tour, mid-career Department  Head, and Command. We also analyzed differences between staffing  targets and staffing levels for the Navy Reserve fighter pilot community  for fiscal year 2017, the only year of data available. We also analyzed  Navy retention data for mid-career pilots eligible for Department Head  assignments in the same communities for fiscal years 2013 through  2017.", "To assess the reliability of the data we obtained, we reviewed  corroborating documentation, analyzed the data for inconsistencies, and  interviewed service officials about the reliability of the data. We  determined that the data were sufficiently reliable to describe the trends in  personnel staffing levels and authorizations for the time period included in  our scope.", "To discuss factors that may have contributed to differences in the number  of fighter pilots compared to authorizations, we met with DOD and service  officials and reviewed service documentation regarding the factors  officials identified. We also held discussion groups with a non- generalizable sample of fighter pilots and squadron leaders to obtain their  views on the factors that they believe have contributed to low numbers of  fighter pilots. To identify any initiatives the military services had taken or  planned to address factors contributing to low numbers of fighter pilots,  we interviewed service officials and reviewed documentation related to  relevant military service initiatives.", "For objective two, we reviewed Air Force, Navy, and Marine Corps  guidance to determine the frequency that fighter pilot squadron  requirements are to be reviewed. We then reviewed service  documentation and interviewed service officials to determine the extent to  which these requirements had been reviewed on schedule. We also  reviewed service documentation regarding the planned mix of aviation  platforms for future operations and discussed with service officials the  extent to which these plans are incorporated into forecasts of fighter pilot  squadron requirements. Our scope and methodology is described in  detail in appendix I.", "We conducted this performance audit from November 2016 to April 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Role of Fighter Pilots", "paragraphs": ["Fighter pilots staff both operational and non-operational positions, and  fighter pilots alternate between these positions throughout their career.  Operational positions include both flying (i.e., combat pilot or instructor  pilot positions) and non-flying positions, such as a close air support duty  officer in an Air Operations Center or an air controller in a ground infantry  unit. In flying positions, fighter pilots operate aircraft that are critical to  achieving and maintaining air dominance during combat operations and  include Air Force, Navy, and Marine Corps fixed-wing fighter and attack  aircraft with air-to-air, air-to-ground, and electronic warfare missions.  These aircraft operate during the first days of a conflict to penetrate  enemy air space, defeat air defenses, and achieve air dominance,  allowing follow-on ground, air, and naval forces freedom to operate within  the battle space. Once air dominance is established, fighter aircraft  continue to strike ground targets for the remainder of the conflict. Some  fighter aircraft are also essential to protecting the homeland by  responding to potential airborne and ground-based threats.", "Fighter pilots are assigned a variety of tasks when they are in an  operational squadron. As well as studying for flights, flying, and  debriefing, fighter pilots must also perform other squadron duties, such as  coordinating squadron travel to external training locations, scheduling  daily flights, or overseeing squadron maintenance departments. In  addition to these duties, fighter pilots are required to complete common  military training (i.e., training that is required for all military personnel and  is not linked to a particular occupation). In May 2017, we reported that  common military training comprises more than half of mandatory training  requirements in the military services (not including additional training that  the military services may require for specific groups of servicemembers,  such as fighter pilots).", "Non-operational positions are generally non-flying positions and include  assignments to headquarters or combatant command positions. Certain  non-operational positions can only be filled by qualified pilots. For  example, certain positions require fighter pilots due to the need for  specialized technical knowledge, such as writing operational manuals for  fighter aircraft. Other non-operational positions are more general in nature  and are divided among officer communities in a military service. For  example, Navy officials told us that certain shore assignments\u2014positions  that do not involve deployment\u2014can be staffed by officers from aviation,  submarine, or surface warfare communities."], "subsections": []}, {"section_title": "Aircraft Operated by Fighter Pilots", "paragraphs": ["DOD\u2019s current fighter aircraft fleet is comprised of both legacy and new  aircraft (see fig. 1). The legacy aircraft include Air Force F-16, F-15, A-10,  and F-22A and Navy and Marine Corps F/A-18A-D, EA-6B, and AV-8B.  Most of these aircraft were purchased in the 1970s and 1980s and are  more than 25 years old on average. DOD has been recapitalizing this  aging legacy fleet by acquiring and fielding new aircraft, namely the  Navy\u2019s F/A-18E/F and EA-18G and the joint service F-35. The  Departments of the Air Force and the Navy are operating many of their  fixed-wing aircraft well beyond their original designed service lives, and  some of these legacy aircraft are confronted with sustainment challenges  that affect their availability. In 2017, senior Air Force and Navy officials  testified before the House Armed Services Committee regarding, among  other things, the maintenance and sustainment issues relating to aging  aircraft that are affecting the readiness of their forces."], "subsections": []}, {"section_title": "Processes for Determining and Staffing Fighter Pilot Authorizations", "paragraphs": ["According to Air Force, Navy, and Marine Corps guidance, the military  services are to determine personnel requirements for military units.  Service officials told us that this process includes squadron  requirements\u2014that is, the number of operational positions in a fighter  pilot squadron that a military service has determined should be staffed by  a qualified fighter pilot. Squadron requirements are primarily based on the  missions the squadrons are expected to fulfill, and the military services  use a variety of inputs to determine fighter pilot squadron requirements.  These inputs include the projected operations of fighter squadrons,  analyses of the amount of workload in the squadrons, the number of  aircraft assigned to the squadrons, and the planned ratio of fighter pilots  to aircraft. The military services are to determine the required number of  fighter pilots to staff squadrons and meet operational mission needs and  to document these in squadron staffing documents. The military  services also determine the rank that pilots should have when staffing  specific positions in a squadron\u2014for example, Marine Corps F/A-18  squadron staffing documents specify the rank that should be held by  pilots leading specific departments such as those for safety, operations,  and maintenance. According to service officials, the military services then  staff squadron requirements to the extent possible based on the number  of those requirements funded by Congress and the number of trained and  qualified personnel available to be staffed to those positions (see fig. 2).  We refer to these funded positions as authorizations. Military service  workforce planning documents acknowledge that, after this process, a  squadron\u2019s staffing level may be lower than the established squadron  requirements\u2014a readiness risk that the military services manage by  assigning a higher priority to the staffing of certain positions, such as  those in deployed squadrons.", "The military services vary in how they define when gaps between  authorizations and staffing levels become a shortage. Specifically, fighter  pilot staffing levels of 85 to 99 percent of authorizations could be  considered a shortage, depending on the military service. For example,  Air Force officials told us that their established practice is that pilot  communities with less than 100 percent of authorizations are considered  to be insufficiently staffed. Navy officials told us that they have a shortage  when they are unable to fully staff deploying squadrons. Marine Corps  personnel documents reflect that Marine Corps communities with less  than 85 percent of authorizations are considered \u201cunhealthy.\u201d", "The process of staffing fighter pilots is managed in the Air Force by the  Air Force Personnel Center, in the Navy by the Navy Personnel  Command, and in the Marine Corps by the Deputy Commandant for  Manpower and Reserve Affairs. According to service guidance, the  Secretaries are to review squadron requirements, and this review is  required every 2 years for the Air Force and the Marine Corps and every  5 years for the Navy. Further, DOD guidance states that staffing  requirements are driven by workload and shall be established at the  minimum levels necessary to accomplish mission and performance  objectives."], "subsections": []}]}, {"section_title": "The Military Services Had Fewer Fighter Pilots Than Authorizations Due to a Variety of Contributing Factors; Initiatives Are Underway to Increase Fighter Pilot Staffing Levels", "paragraphs": ["According to Air Force, Navy, and Marine Corps data, each military  service had fewer fighter pilots than authorizations from fiscal years 2013  through 2017, and the Air Force and the Marine Corps project that these  gaps will continue for several years. According to service officials,  because of low numbers of fighter pilots, the military services are unable  to staff all operational fighter pilot positions. According to the military  services, deploying squadrons have been fully staffed with fighter pilots,  due to staffing approaches that include extending deployments and  augmenting deployed squadrons with fighter pilots from other squadrons.  Service officials identified multiple factors that have led to low numbers of  fighter pilots, including challenges in training and retaining fighter pilots.  To increase fighter pilot numbers, the military services are taking a variety  of actions."], "subsections": [{"section_title": "The Air Force, the Navy, and the Marine Corps Had Fewer Fighter Pilots Than Authorizations", "paragraphs": ["According to Air Force, Navy, and Marine Corps data, each military  service had fewer fighter pilots than authorizations (i.e., funded positions)  from fiscal years 2013 through 2017. Specifically, the Air Force and the  Marine Corps had fewer fighter pilots than authorizations for most years  from fiscal years 2006 through 2017. The magnitude of these gaps has  grown since fiscal year 2006 and is projected to continue through at least  fiscal year 2023. The Navy had fewer fighter pilots than authorizations in  fiscal years 2013 through 2017. According to service officials, these gaps  between fighter pilot numbers and authorizations have prevented the  military services from fully staffing operational positions, including in non- deployed squadrons and training units."], "subsections": [{"section_title": "The Air Force Generally Had Fewer Fighter Pilots Than Authorizations Since Fiscal Year 2006, Including for Operational Positions Since Fiscal Year 2014", "paragraphs": ["According to Air Force pilot staffing level and authorizations data for fiscal  years 2006 through 2017, the Air Force had fewer fighter pilots than  authorizations for 11 of 12 years from fiscal years 2006 through 2017.  This gap grew from 192 fighter pilots (5 percent of authorizations) in fiscal  year 2006 to 1,005 (27 percent) in fiscal year 2017. According to briefing  documents prepared by the Air Force, this gap is concentrated among  fighter pilots with fewer than 8 years of experience. The Air Force  forecasts that the fighter pilot gap will persist over time, even as the Air  Force takes steps to train more fighter pilots and improve retention.  Figure 3 shows the Air Force fighter pilot staffing levels and  authorizations for fiscal years 2006 through 2017. For information on  trends for all Air Force fixed-wing aircraft pilot communities, see appendix  II.", "According to Air Force data, the Air Force generally had sufficient fighter  pilots to staff operational positions for fighter pilots for fiscal years 2006  through 2013. Air Force officials added that during that period, Air Force  fighter pilot gaps were generally limited to non-operational positions, such  as staff assignments at Air Force headquarters or combatant commands.  However, our analysis found that the Air Force has been unable to fully  staff operational positions since fiscal year 2014. The gap between  staffing levels and operational positions increased from 39 fighter pilots (1  percent of authorizations) in fiscal year 2014 to 399 (13 percent) in fiscal  year 2017."], "subsections": []}]}, {"section_title": "The Navy Had Fewer Fighter Pilots Than Authorizations for Operational Positions in Fiscal Years 2013 through 2017", "paragraphs": ["According to Navy fighter pilot staffing levels and authorizations data for  fiscal years 2013 through 2017, the Navy had fewer fighter pilots than  authorizations for each of these fiscal years. Specifically, in fiscal year  2013 the Navy had a gap of 57 fighter pilots (12 percent) at the first tour  milestone (i.e., a fighter pilot\u2019s first operational tour at sea completed  between 3 and 6 years of service), and this gap grew to 136 fighter pilots  (26 percent) in fiscal year 2017 (see fig. 4). Navy officials told us that  they believe current gaps in the fighter pilot community could increase  through mid-2019. For information on trends for all Navy fixed-wing  aircraft pilot communities, see appendix III.", "According to Marine Corps pilot staffing levels and authorizations data for  fiscal years 2006 through 2017, the Marine Corps had fewer fighter pilots  than authorizations during that time frame. This gap grew from 63 fighter  pilots (6 percent of authorizations) in fiscal year 2006 to 262 (24 percent)  in fiscal year 2017. Further, according to Marine Corps data, the gap is  concentrated in the Marine Corps\u2019 junior fighter pilot population (i.e.,  those fighter pilots below the rank of Officer-4\u2014a major). The Marine  Corps forecasts that the fighter pilot gap will decrease over time as the  Marine Corps phases out legacy aircraft and takes steps to improve  retention. Figure 5 shows the Marine Corps active component fighter pilot  staffing levels and authorizations for fiscal years 2006 through 2017. For  information on trends for all Marine Corps fixed-wing aircraft pilot  communities, see appendix IV.", "In addition, Marine Corps data showed that the Marine Corps was unable  to fully staff fighter pilot operational positions since fiscal year 2016. The  gap between staffing levels and operational positions increased from 12  fighter pilots (1 percent of authorizations) to 57 (7 percent) in fiscal years  2016 through 2017."], "subsections": [{"section_title": "The Military Services Used Various Staffing Approaches to Mitigate the Impact of Low Numbers of Fighter Pilots on Deploying Squadrons", "paragraphs": ["Although all of the military services had fewer fighter pilots than  authorizations in fiscal years 2013 through 2017, service officials stated  that deploying squadrons have been fully staffed with fighter pilots.  Service officials reported using various approaches to continue to fully  staff deploying fighter squadrons, including (1) prioritizing staffing fighter  pilots to flying positions that require fighter pilot-specific technical skills;  (2) using senior pilots to staff junior positions; and (3) having pilots deploy  for longer and more frequently than planned, including on deployments  with other squadrons. For example, Navy officials told us that  approaches such as extending fighter pilots\u2019 deployments allowed them to  reduce the fiscal year 2017 first tour fighter pilot gap from 136 pilots (26  percent) to 75 pilots (15 percent).", "However, squadron leaders and fighter pilots told us that these  approaches are having a negative impact on the fighter pilot workforce.  Specifically, squadron leaders and fighter pilots told us that the high pace  of operations for senior fighter pilots has limited their availability to train  junior pilots, which has constrained the military services\u2019 ability to  increase the number of pilots with specific qualifications. In addition,  fighter pilots told us that increased frequency of individual deployments  cause instability for their families and lead to career dissatisfaction.  Additionally, as we have previously reported, a high tempo of operations  has increased the challenge of aviation squadrons to rebuild readiness.  For example, according to Air Force officials, high deployment rates for  Air Force squadrons have resulted in less time for squadrons to complete  their full training requirements because high deployment rates mean that  there are fewer aircraft available for training at home stations.", "Service officials report that they can also mitigate low numbers of fighter  pilots by leveraging surpluses in other pilot communities. For example, as  outlined in Air Force documents supporting pilot retention bonuses, the  Air Force has staffed mobility pilots (i.e., cargo transport and aerial  refueling pilots) to instructor pilot positions for certain basic flying training  that would otherwise be staffed by fighter pilots. The Navy can also staff  certain Department Head positions designated for fighter pilots with non- pilot aviators from that community. According to military service data,  fighter pilot communities generally have the largest gaps among all  military fixed-wing pilot communities. For example, in fiscal year 2017 the  Air Force had 73 percent of the fighter pilots it needed, while the bomber  community, which had the second largest gap among Air Force fixed- wing pilot communities, had 85 percent of the pilots it needed."], "subsections": []}]}, {"section_title": "Service Officials Cited Multiple Factors That Have Contributed to Low Numbers of Fighter Pilots", "paragraphs": ["According to service officials, squadron leaders, and fighter pilots,  multiple inter-related factors have reduced each military service\u2019s number  of fighter pilots. Factors cited include reductions to active duty end  strength, aircraft readiness challenges, and declining retention."], "subsections": [{"section_title": "Reductions to Active Duty Military End Strength", "paragraphs": ["Reductions to active duty military end strength have contributed to  reductions in fighter pilot staffing levels. Service officials told us that  reductions to military service end strength targets as part of the 2008  drawdown of forces in Iraq and Afghanistan and funding reductions  related to the Budget Control Act of 2011 led to reductions in the fighter  pilot workforce. For example, the Air Force offered 54 fighter pilots early  retirement incentives in fiscal years 2014 through 2015, while the Marine  Corps offered 49 fighter pilots early retirement options between fiscal  years 2013 through 2016. Further, as we have previously reported, the  Air Force used fighter pilots to meet the initial demand for UAS  operators. Air Force officials told us that they removed 206 of those  pilots from the fighter pilot community in fiscal years 2011 through 2012.  Reduced force structure has also decreased the opportunities for fighter  pilots to gain experience in their aircraft. For example, the Air Force  reported that the number of total Air Force fighter squadrons (including  the reserve components) declined from 134 in fiscal year 1989 to 55 in  fiscal year 2017 (a 59-percent decrease), and as such fewer squadrons  are available to provide newly trained fighter pilots with flying experience."], "subsections": []}, {"section_title": "Aircraft Readiness Challenges", "paragraphs": ["Reduced aircraft availability has affected fighter pilots\u2019 ability to meet flight  hour targets. Service leaders told us that this has resulted in delays in  training new pilots with the necessary qualifications to participate in  certain missions. Specifically, according to November 2017 testimony, Air  Force, Navy, and Marine Corps leaders reported that fighter pilots do not  meet military service flight hour targets\u2014in part due to reduced aircraft  availability. For example, Navy and Marine Corps leaders testified that  Navy and Marine Corps F/A-18 pilots average 13.5 and 12.7 flight hours  per month, respectively, compared with goals of 20.1 and 15.7 hours per  month. A senior Air Force leader testified before Congress that Air  Force fighter pilots average about 16 flight hours per month. In June  2017 we reported on readiness challenges in Air Force and Marine Corps  aviation squadrons.", "The military services have trained fewer fighter pilots than targeted over  the last decade. In fiscal years 2007 through 2016, the Air Force trained  12 percent fewer new fighter pilots than the targeted amount, while the  Navy and the Marine Corps each trained 8 percent fewer new fighter  pilots than the targeted amount. Fighter pilots told us that the need to  prioritize the staffing of experienced pilots to deploying squadrons has  limited the number of experienced personnel available to train newer  pilots at home stations.", "Recent Safety Concerns Regarding  Onboard Systems in Naval Aircraft  In April 2017, the Navy paused all basic flight  training on the T-45 aircraft due to safety  concerns regarding the oxygen supply and  atmospheric pressurization systems aboard  the training aircraft. The Navy and the Marine  Corps share basic flight training resources,  including training for fixed-wing aircraft pilots  on T-45 aircraft. Navy and Marine Corps  officials told us that if these basic training  squadrons are unable to produce newly  trained fighter pilots on schedule, this can  lead to a decreased number of new fighter  pilots in both military services. The F/A-18 has  also been affected by problems with onboard  oxygen supply systems leading to hypoxia,  which can occur when aircrews receive  insufficient or contaminated oxygen on board  the aircraft. In August 2017 the Navy  established a team to lead its effort to  research and prevent these problems in fixed- wing aircraft. numbers of trained pilots. In addition, aircraft readiness challenges led the  Navy to pause flight training on the T-45 training aircraft in April 2017 due  to safety concerns regarding the oxygen supply systems aboard the  training aircraft. Navy officials reported that gaps in first tour operational  positions designated for all fixed-wing aircraft pilot communities could  grow from 86 pilots in fiscal year 2017 to about 100 in fiscal year 2019."], "subsections": []}, {"section_title": "Fighter Pilot Retention Challenges", "paragraphs": ["Declining retention has also contributed to low fighter pilot numbers. Our  analysis of Air Force and Navy bonus retention data shows that retention  of experienced fighter pilots has declined in recent years.", "We found that the number of Air Force fighter pilots that have signed  retention contracts decreased from 63 percent in fiscal year 2013 to 35  percent in fiscal year 2017 (see fig. 6). This decline has continued even  as the Air Force increased its maximum aviation bonus contract from  $125,000 in fiscal year 2012 to $225,000 beginning in fiscal year 2013,  the highest amount offered by any of the military services.", "According to Navy retention data, the Navy pool of fighter pilots eligible  for the Department Head milestone (i.e., a mid-career operational  leadership tour for different aspects of squadron management for pilots  with between about 11 and 13 years of service) has shrunk over time.  Navy officials told us that, as a result, the percentage of fighter pilots  selected for the Department Head milestone has increased. For example,  the Department Head selection rate for Navy F/A-18 pilots increased from  49 percent in fiscal year 2012 to 100 percent in fiscal year 2017.", "Further, the Navy did not meet its goals for fighter pilots signing retention  bonuses at the Department Head milestone in fiscal years 2013 through  2017. For example, the Navy fell short of its retention bonus target of 73  fighter pilots by 38 pilots (48 percent of the target) for fiscal year 2017. In  comparison, the surveillance and transport pilot community met or  exceeded its target of pilots who signed a bonus contract 2 out of 5 years  during that same period, while the maritime patrol pilot community met or  exceeded its target 4 out of 5 years. Figure 7 shows the Navy Department  Head active component fixed-wing pilot retention bonus take rate for  fiscal years 2013 through 2017.", "Squadron leaders and fighter pilots we met with attributed declining  retention to the staffing approaches being used by the military services to  mitigate fighter pilot gaps and fully staff deployed squadrons. For  example, squadron leaders told us that assigning senior fighter pilots to  junior positions hurts retention by reducing leadership opportunities  believed to be necessary for promotion. Fighter pilots also told us that  quality of life has decreased as a result of longer and more frequent  deployments. Further, fighter pilots told us that understaffing fighter pilots  in operational units has resulted in an increased workload per pilot and  lower quality of service for non-deployed fighter pilots in those units."], "subsections": []}]}, {"section_title": "The Air Force Has Implemented Initiatives to Help Increase Fighter Pilot Numbers and the Navy and the Marine Corps Are Formulating Initiatives to Address Overall Retention Concerns", "paragraphs": ["The Air Force has developed and implemented initiatives to help increase  fighter pilot numbers, and the Navy and the Marine Corps are developing  initiatives to address overall retention concerns. The Air Force  established a dedicated team to identify and develop initiatives  specifically to address its reported fighter pilot shortage, and this effort  has resulted in over 35 implemented initiatives. The Navy and the Marine  Corps have not formulated initiatives specifically for fighter pilots, but  have identified actions to address retention concerns. Navy and Marine  Corps officials stated that, because the military services can still staff  authorizations for deployed squadrons, they do not believe their staffing  levels of fighter pilots have reached a critical shortage. However, Navy  and Marine Corps personnel management officials we met with told us  that they are closely monitoring trends in fighter pilot retention, and they  believe that decreased retention in the near future may exacerbate fighter  pilot gaps in their military services. The military services\u2019 initiatives are  summarized below.", "The Air Force established a dedicated effort to address fighter pilot  workforce challenges, and many initiatives from this effort have been  implemented. Specifically, in March 2016, the Chief of Staff of the Air  Force directed the initiation of an effort to address the Air Force fighter  pilot shortage. The Air Force created a Fighter Enterprise Tiger Team  in March 2016, and began formulating initiatives to address the fighter  pilot shortage that the Air Force identified. For example, as the result  of one initiative, 126 contractors have been placed in fighter  squadrons to assist with administrative tasks and reduce workload for  fighter pilots, and additional contractor support is in the process of  being added. Also, in the fall of 2016 the Air Force reinstated its  award program to recognize fighter pilots for superior performance.  According to a member of the Air Force\u2019s Fighter Enterprise Tiger  Team, the awards are non-monetary, but because they are merit- based they can help fighter pilots to be more competitive when being  assessed for promotion.", "In February 2017, the Air Force effort was expanded from a focus on  fighter pilots to include all rated personnel and renamed the Aircrew  Crisis Task Force. The 37 initiatives implemented by the Air Force  as of November 2017 as a result of the Fighter Enterprise Tiger Team  and Aircrew Crisis Task Force efforts are presented in appendix V.", "The Navy is formulating a service-wide strategy\u2014referred to as Sailor  2025\u2014which includes over 40 initiatives to address retention issues  throughout the Navy. We identified 10 initiatives from Sailor 2025 that  may address some of the retention issues raised in our discussion  groups with fighter pilots\u2014such as dissatisfaction with the  assignments and promotion processes. For example, Navy officials  told us they are developing staffing software to manage assignments  and make the process more transparent and flexible. The Navy is also  testing a new performance evaluation system to more accurately  evaluate sailor performance. In addition, the Navy has adjusted the  existing aviation bonus program by increasing the maximum bonus  amount for fighter pilots from $25,000 to $30,000 per year for fiscal  year 2018. To increase the number of available fighter aircraft, the  Navy has also established a Rhino Readiness Recovery team\u2014 referring to the Navy\u2019s term for the F/A-18 E-F Super Hornet aircraft\u2014 to identify and address readiness challenges in that community. Navy  officials told us they believe their approaches are sufficient to address  any potential future Navy fighter pilot gaps.", "In November 2017, the Marine Corps reinstated the aviation bonus  program last offered by the Marine Corps in fiscal year 2011. The  Marine Corps is offering 2-year contracts totaling $40,000 to fighter  pilots who have completed their service obligation\u2014except for those  fighter pilots assigned to the EA-6B aircraft. However, the Marine  Corps is not in the process of developing any non-monetary initiatives  to address pilot retention. Rather, the Marine Corps is addressing  aircraft readiness challenges\u2014an issue consistently raised by fighter  pilots in our discussion groups\u2014by establishing four lines of effort to  increase the number of available fighter aircraft for fighter squadrons.  Marine Corps officials told us that they have begun implementing  multiple initiatives for those lines of effort. For example, one initiative  is focused on improving availability of aircraft spare parts by  increasing their funding and modernizing the spare parts supply chain.  Another initiative is focused on growing the maintenance workforce  and retaining experienced aircraft maintainers. Specifically, the  Marine Corps is offering retention bonuses to experienced aircraft  maintainers."], "subsections": []}]}, {"section_title": "The Military Services Have Not Reevaluated Fighter Pilot Squadron Requirements to Reflect Changing Conditions, Increased Workload, and Emerging UAS Requirements", "paragraphs": ["Fighter pilots and squadron leaders told us that the fighter pilot  occupation has significantly changed in recent years, but the military  services have not reevaluated fighter squadron requirements. Fighter  pilots and squadron leaders from each of the military services consistently  told us that the fighter pilot occupation has significantly changed in recent  years due to changes in fighter aircraft tactics and technology, additional  training requirements, and the removal of administrative support positions  from squadrons. The fighter pilots added that these changes have led to  an unsustainable increase in workload. As discussed earlier, squadron  requirements\u2014the number of fighter pilots needed to meet operational  mission needs\u2014are calculated by the military services using a variety of  inputs, including workload. Once these requirements are funded by  Congress, they are an \u201cauthorization.\u201d Service guidance requires  squadron requirements to be reevaluated on a 2-year schedule (5 years  for the Navy) and to be updated as conditions change.", "For the Air Force, guidance defines staffing requirements as the staffing  needed to accomplish a job, mission, or program, and notes that staffing  should be sized to reflect the minimum essential level to accomplish the  required workload. The Office of the Administrative Assistant to the  Secretary of the Air Force (Resources), along with Major Command  manpower staffs establish staffing standards and, at a minimum, by policy  are to reevaluate these standards for applicability and updates every 2  years, or earlier if dictated by significant workload or mission changes.  The Air Force Manpower Analysis Agency determines staffing resource  requirements and provides staffing and management consultation  services to Air Force functional communities for improved resource  utilization and enhanced mission effectiveness and efficiency.", "The Air Force could not provide specifics on the most recent updates to  squadron requirements, because such data were stored in a database  that managed requirements on a position-by-position basis, rather than  aggregated by squadron. Air Force pilots and squadron leaders  consistently told us that changing conditions in fighter squadrons, such as  a higher pace of changes to tactics and technology, increased training requirements, and reduced administrative support, have increased fighter  pilot workload. However, Air Force officials told us that metrics that inform  squadron requirements (i.e., crew ratios, the targeted ratio of pilots to  aircraft) have not been increased because the Air Force is instead  prioritizing the effort to recapitalize its fleet of fighter aircraft. Separately  from reevaluating squadron requirements, Air Force officials told us that  they have implemented changes to address workload concerns cited by  fighter pilots\u2014such as adding contractor staff in squadrons to provide  administrative support, as part of initiatives to address fighter pilot  shortages they have identified. According to Air Force officials, the Air  Force is currently reassessing non-operational requirements for fighter  pilots (i.e., non-flying positions at headquarters organizations). Air Force  officials told us that this reassessment is focused on determining which  non-operational requirements currently assigned to fighter pilots could be  assigned to other types of officers or pilots, to reduce the overall number  of fighter pilot requirements.", "For the Navy, squadron requirements are dependent on the current  wartime requirements developed by the Navy, referred to as the Required  Operational Capability and Projected Operational Environment of a  particular squadron, aircraft configuration, specified operating profile,  computed workload, and established doctrinal constraints. The June  2017 update to the relevant Navy guidance reduced the frequency of the  reviews of these requirements from every 2 years to every 5 years, with  updates as required by those officials responsible for specific units.", "Navy officials told us that reviews are to be completed every 2 years, but  updates are only made to squadron staffing documents if specific events  occur, such as additional aircraft being assigned to a squadron. Navy  officials added that they believe squadron requirements are accurate and  updated with sufficient frequency. However, Navy pilots and squadron  leaders consistently told us that changing conditions in fighter squadrons,  such as a higher pace of changes to tactics and technology, increased  training requirements, and more frequent individual deployments, have  increased fighter pilot workload. However, the Navy has not recently  updated squadron requirements to reflect such changes. Specifically,  Navy fighter pilot squadron requirements are outlined in 15 Navy  squadron staffing documents, and as of November 2017, 9 out of 15 of  those documents had not been updated within the last 2 years.", "For the Marine Corps, guidance states that reviews to optimize force  structure will be conducted every 2 years, taking into consideration new  and emerging requirements. Marine Corps pilots and squadron leaders  consistently told us that changing conditions in fighter squadrons, such as  a higher pace of changes to tactics and technology, reduced aircraft  availability, and more frequent individual deployments, have increased  fighter pilot workload. However, the Marine Corps has not updated  squadron requirements to reflect such changes. Specifically, Marine  Corps fighter pilot squadron requirements are outlined in four fighter  squadron staffing documents, and, as of November 2017, none had been  updated within the last 2 years.", "Marine Corps squadron leaders and fighter pilots told us that updates to  squadron requirements are not being conducted for squadrons of legacy  aircraft, but added that they believe updates are warranted due to the  continued delays in fielding the F-35 and resulting extensions to the  planned service of legacy platforms. Marine Corps officials told us that  they have not updated squadron requirements because (1) Marine Corps  fighter pilot authorizations and staffing levels are below squadron  requirements, so any increase to squadron requirements would require a  significant increase to fighter pilot authorizations, and (2) the Marine  Corps has faced challenges obtaining technical assistance to conduct  workload assessments in fighter squadrons. The Navy Manpower  Analysis Center conducts workload reviews of squadrons, based on  specific events such as changes to the amount of time needed for  maintaining the specific type of aircraft. Navy and Marine Corps fighter  pilots we met with told us that they have had difficulties maintaining  fighter jets in their squadrons, and Navy and Marine Corps leaders have  made similar statements in congressional testimony. Further, Marine  Corps officials told us that they have had difficulty utilizing the Navy  Manpower Analysis Center to update workload analyses for their fighter  squadrons, as they believed the center prioritizes work for Navy organizations. Navy Manpower Analysis Center officials told us that there  is no formal requirement for their organization to conduct analyses for the  Marine Corps, but that they respond to such requests on an ad-hoc basis.  They added that the Marine Corps Combat Development Command has  formal responsibility for updating Marine Corps workload analyses. We  have previously reported that the size and data collection capacity of the  Navy Manpower Analysis Center has limited the Navy\u2019s capacity to carry  out periodic workload reassessments, which may be a contributing factor  to chronic under-staffing of ship crews."], "subsections": [{"section_title": "The Military Services Have Not Incorporated Plans for Increased Reliance on UAS into Fighter Pilot Workforce Projections", "paragraphs": ["According to a DOD planning document, funding for UAS platforms was  expected to grow by 17 percent in fiscal years 2014 through 2018.  Moreover, in 2015, the Secretary of the Navy directed the establishment  of a Deputy Assistant Secretary of the Navy for Unmanned Systems  and announced that the F-35 will likely be the last cockpit-operated strike  fighter aircraft the Department of the Navy will buy or fly. The Chief of  Naval Operations announced in 2017 that the future of the Navy includes  UAS systems as an integral part of the future fleet and must be  purchased in large numbers to expand naval presence in key areas. For  example, the Navy is developing a UAS platform\u2014the MQ-25 Stingray\u2014 which is intended to replace that portion of the F/A-18 fighter aircraft\u2019s  mission set that involves re-fueling other F/A-18 aircraft.", "Also, in 2015 the Secretary of the Air Force stated that UAS pilots were  flying on average about four times more hours than pilots in cockpit- operated aircraft. Further, a document outlining the Air Force\u2019s vision for  UAS for fiscal years 2009 through 2047 notes that systems will work in  tandem with cockpit-operated aircraft, for example to attack air-defense  systems, and that autonomous technologies will potentially allow one pilot  to direct multiple aircraft, leading to personnel efficiencies.", "Although the impact of UAS on the fighter pilot workforce appears to be  significant, the Air Force, the Navy, and the Marine Corps have not  accounted for the planned increased use of UAS to complete missions  similar to those carried out by fighter aircraft, and the potential impact of  these changes on fighter pilot requirements. Specifically, Air Force and  Navy officials told us that their military services have not conducted an  assessment of the impact of future UAS operations on fighter pilot  requirements. While the UAS platforms that are expected to overlap  with fighter aircraft missions will not be fielded until the mid-2020s, the  length of time required to develop an experienced fighter pilot compels  the military services to begin incorporating these planned changes to  fighter pilot requirements promptly. For example, Navy fighter pilots who  are entering initial training in 2018 will not have completed their active  duty service obligation (currently 8 years after Navy pilots complete flight  training) when the MQ-25 Stingray system is expected to be fielded in  2026.", "A key tenet of human capital planning is determining existing and future  skills and competencies, and associated workforce gaps. Without steps  by the military services, to include reevaluating workload and taking into  account the impact that the planned use of UAS will have on the fighter  pilot workforce, the military services will not fully know the extent and  nature of gaps between fighter pilot numbers and authorizations and how  to best target actions to address these gaps."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Fighter pilots are critical to achieving and maintaining air dominance  during combat operations. To achieve that mission, the military services  must have appropriate numbers of qualified fighter pilots. Service officials  report that no unit is deploying without 100 percent of its fighter pilots, and  they believe that they will continue to be able to meet their operational  missions. Nevertheless, the Air Force, the Navy, and the Marine Corps,  are reporting fewer fighter pilots than authorizations, and they project that  these gaps will continue through at least fiscal year 2023. Without re- evaluating fighter pilot requirements, it will be difficult for the military  services to accurately determine the number of fighter pilots needed to  complete missions and help ensure success in combat. Specifically,  without updating squadron requirements to reflect the growing  administrative burden on fighter pilots in non-deployed squadrons, the  currently identified differences between fighter pilot numbers and  authorizations may be understated. By contrast, without updating future  fighter pilot requirements to take into account changing roles and  missions\u2014in particular the increasing role of UAS in combat operations\u2014 forecasted fighter pilot gaps may be overstated. In short, reevaluating  fighter pilot requirements is a key first step to help the military services  clearly determine the magnitude of the gaps and target strategies to meet  their personnel needs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations:", "The Secretary of the Air Force should ensure that the Director of  Operations and the Air Force Manpower Analysis Agency reevaluate  fighter pilot squadron requirements, to include updating current  assumptions of fighter pilot workload, and assessing the impact of  future incorporation of UAS platforms into combat aviation.  (Recommendation 1)", "The Secretary of the Navy should ensure that the Chief of Naval  Operations reevaluate fighter pilot squadron requirements, to include  updating current assumptions of fighter pilot workload, and assessing  the impact of future incorporation of UAS platforms into combat  aviation. (Recommendation 2)", "The Secretary of the Navy should ensure that the Commandant of the Marine Corps and the Deputy Commandant for Aviation reevaluate fighter pilot squadron requirements. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. We  had initially recommended that the Marine Corps also assess the impact  of UAS platforms on fighter pilot squadron requirements, but removed  that portion of the third recommendation because Marine Corps officials  told us that Marine Corps UAS squadrons will continue to be resourced  with operators through the accession process and Marine Corps UAS  operator requirements do not affect either pilot inventories or fighter pilot  workload. In its written comments, reproduced in appendix VI, DOD  concurred with our recommendations, citing its commitment to addressing  manpower, personnel, and training challenges for the fighter pilot  community and broader aviation and aviation support capabilities. DOD  also provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to appropriate congressional  committees; the Secretary of Defense; the Secretary of the Air Force; the  Secretary of the Navy; and the Commandant of the Marine Corps. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To assess the extent to which the military services had differences in the  number of fighter pilots compared to authorizations, as well as  contributing factors and service initiatives to address the differences, we  obtained and analyzed data on authorizations designated for pilots and  corresponding staffing levels of pilots for all fixed-wing, cockpit-operated  (hereafter referred to as fixed-wing) aircraft communities in the Air Force,  the Navy, and the Marine Corps. We did not include the Army in the  scope of our review because the Army does not operate fighter aircraft.", "For the Air Force and the Marine Corps active component, we compared  pilot staffing levels with authorizations for all fixed-wing aircraft  communities for fiscal years 2006 through 2017. We obtained and  analyzed projected authorizations and staffing levels for the same pilot  communities for fiscal years 2018 through 2023. We further obtained and  reviewed Marine Corps data on fighter pilot operational position staffing  targets and staffing levels for fiscal year 2017 and similar Air Force data  for fiscal year 2018. We also compared Air Force and Marine Corps  reserve component fighter pilot staffing levels with authorizations for fiscal  years 2006 through 2017.", "For the Navy, we obtained and analyzed data on authorizations  designated for active and reserve component pilots for fiscal years 2006  through 2017, and staffing levels for all Navy fixed-wing aircraft  communities in the active component for fiscal years 2011 through 2017.  However, the Navy\u2019s authorization data did not specify how many fighter  pilots were assigned to non-flying assignments because the Navy does  not fully assign non-flying authorizations to specific communities, unlike  the Air Force and the Marine Corps. Therefore, we were unable to  conduct an analysis comparing total Navy fighter pilot staffing levels with  authorizations, as we did for the Air Force and the Marine Corps. We  instead obtained and analyzed Navy data on differences between  authorizations and pilot staffing levels for first operational tour,  Department Head, and Command positions for all fixed-wing aircraft pilot  communities in the active component. We also obtained and analyzed  Navy data on differences between staffing targets and pilot staffing levels  for the Navy Reserve for fiscal year 2017, the only year of data available.  We also obtained and analyzed Navy retention data for pilots eligible for  Department Head assignments, a mid-career milestone in fixed-wing  communities for fiscal years 2011 through 2017. Retention data for the  Department Head milestone are made available in annual aviation  continuation pay reports to Congress. Fiscal year 2018 retention data will  be available in fiscal year 2019. We further obtained and analyzed the  number of fighter pilots the Air Force, the Navy, and the Marine Corps  trained in fiscal years 2007 through 2016.", "To assess the reliability of the data we obtained, we reviewed  corroborating documentation, analyzed the data for inconsistencies, and  interviewed service officials about the reliability of the data. We  determined that the data we used were sufficiently reliable to describe the  trends in personnel staffing levels and authorizations for the time period  included in our scope.", "We met with DOD and service officials to discuss the results of our  analysis and factors that may have contributed to low numbers of fighter  pilots. We also collected and reviewed service documentation regarding  the factors they identified. We interviewed service officials and reviewed  documentation to identify any initiatives taken or planned to increase  fighter pilot numbers.", "In addition, we selected a non-generalizable sample of locations where  fighter pilots are stationed (see table 1). We selected these locations  based on geographic diversity (one location for each military service in  both the eastern and western portions of the contiguous United States), a  diversity of types of fighter aircraft, and a mix of squadron types at the  locations (i.e., operational squadrons, training squadrons, and reserve  component squadrons). In selecting locations we also considered the  availability of pilots due to conflicts with deployment or training events. At  each location, we moderated one to two discussion groups with fighter  pilots for a total of 13 discussion groups ranging from between 3 and 20  pilots per group. We held separate sessions with junior and senior pilots  at all locations, except for at Naval Air Station Oceana, Marine Corps Air  Station Cherry Point, and Marine Corps Air Station Miramar, due to pilot  availability. We also interviewed unit leadership at these locations (i.e.,  wing and squadron commanders and executive officers) to obtain their  perspective on the status of the fighter pilot workforce. While these  discussion groups and interviews allowed us to learn about many  important aspects of the fighter pilot workforce from the perspective of  fighter pilots and squadron leaders, they were designed to provide  anecdotal information and not results that would be representative of all  the department\u2019s more than 5,000 fighter pilots as of fiscal year 2017.", "To assess the extent to which the military services have reevaluated  squadron requirements for the number of fighter pilots needed, including  the consideration of UAS pilot requirements, we reviewed service  guidance to determine the frequency with which elements of fighter pilot  squadron requirements are to be reevaluated, reviewed service  documentation, and interviewed service officials to determine the extent  to which these elements had been reevaluated on schedule, reviewed  service documentation regarding the planned mix of cockpit-operated and  remotely-operated aviation platforms for future operations, and discussed  with service officials the extent to which these plans are incorporated into  forecasts of fighter pilot squadron requirements.", "We conducted this performance audit from November 2016 to April 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comparison of Air Force Pilot Staffing Levels and Authorizations for Fixed- Wing, Cockpit-Operated Aircraft", "paragraphs": ["The Air Force uses pilots from both the active and reserve components to  staff fixed-wing, cockpit-operated (hereafter referred to as fixed-wing)  aircraft pilot positions that Congress authorizes and funds through  appropriations. These Air Force pilots staff a mix of operational and non- operational positions. Operational positions include both flying (e.g.,  combat pilot or instructor pilot positions) and non-flying positions (e.g.,  close air support duty officer positions in an Air Operations Center) that  directly support combat operations. Non-operational positions are  generally non-flying, and include assignments to headquarters or  combatant command positions, some of which can be staffed by other  types of Air Force officers. This appendix compares Air Force pilot  staffing levels with authorizations for operational and non-operational  positions for all fixed-wing aircraft communities for fiscal years 2006  through 2017.", "Air Force fixed-wing community pilots operate fighter, bomber, mobility,  surveillance, and special operations aircraft. Fighter pilots operate tactical  aircraft that engage in air-to-air and air-to-surface attacks and include the  A-10, F-15, F-16, F-22A, and F-35 aircraft. Bomber pilots operate aircraft  to deliver munitions and include the B-1, B-2, and B-52 aircraft. Mobility  pilots operate aircraft used for aerial refueling and troop and cargo  transport and include the C-17 and KC-135 aircraft. Surveillance pilots  operate aircraft used for surveillance and reconnaissance to support  ground troops and include the E-8 and U-2 aircraft. Special operations  pilots operate aircraft that provide close-air support for ground troops,  including the AC-130.", "Air Force officials report that they can staff certain operational positions  designated for fighter pilots with pilots from other pilot communities that  have surpluses. For example, Air Force officials told us they can staff  mobility or surveillance pilots (communities which both had a surplus of  pilots in fiscal year 2017) to certain basic flying training instructor pilot  positions that would otherwise be staffed by fighter pilots. Figure 8 shows  the Air Force active component fixed-wing aircraft community pilot staffing  levels and authorizations for fiscal year 2017.", "According to Air Force data for the active component, the Air Force had  fewer fighter pilots than authorizations in 11 of 12 years from fiscal year  2006 through fiscal year 2017. This gap grew from 192 fighter pilots (5  percent of authorizations) in fiscal year 2006 to 1,005 (27 percent of  authorizations) in fiscal year 2017. Figure 9 shows the comparison of the  Air Force\u2019s active component fighter pilot staffing levels with  authorizations for fiscal years 2006 through 2017.", "According to Air Force data for the reserve components the Air National  Guard and the Air Force Reserve, the Air Force had fewer fighter pilots  than authorizations every fiscal year from fiscal year 2006 through 2017.  For example, the Air Force reported that the reserve components had a  gap of 271 fighter pilots (17 percent of authorizations) in fiscal year 2017.  Figure 10 illustrates the gap between staffing levels and authorizations for  Air Force fighter pilots in the reserve components for fiscal years 2006  through 2017.", "According to Air Force data for the active component, the Air Force had  fewer bomber pilots than authorizations in fiscal years 2014 through  2017. This gap grew from 11 bomber pilots (1 percent of authorizations)  in fiscal year 2014 to 135 (15 percent of authorizations) in fiscal year  2017. Figure 11 shows the comparison of the Air Force\u2019s active  component bomber pilot staffing levels with authorizations for fiscal years  2006 through 2017.", "According to Air Force data for the active component, the Air Force had  more mobility pilots than authorizations from fiscal year 2006 through  fiscal year 2017. This surplus peaked at 1,637 mobility pilots (132 percent  of authorizations) in fiscal year 2011, and declined to 264 (105 percent of  authorizations) in fiscal year 2017. Figure 12 shows the comparison of the  Air Force\u2019s active component mobility pilot staffing levels with  authorizations for fiscal years 2006 through 2017.", "According to Air Force data for the active component for fiscal years 2006  through 2017, the Air Force had fewer surveillance pilots than  authorizations in fiscal years 2012 and 2013. In fiscal year 2017, the  surplus was 220 surveillance pilots (128 percent of authorizations). Figure  13 shows the comparison of the Air Force\u2019s active component  surveillance pilot staffing levels with authorizations for fiscal years 2006  through 2017.", "According to Air Force data for the active component, the Air Force had  fewer special operations pilots than authorizations from fiscal year 2006  through fiscal year 2017. Special operations pilot staffing levels and  authorizations have increased substantially from fiscal year 2009 through  fiscal year 2017. Further, the gap between the staffing levels and  authorizations decreased from 342 special operations pilots (29 percent  of authorizations) in fiscal year 2009 to 227 (14 percent of authorizations)  in fiscal year 2017. Figure 14 shows the comparison of the Air Force\u2019s  active component special operations pilot staffing levels with  authorizations for fiscal years 2006 through 2017."], "subsections": []}, {"section_title": "Appendix III: Comparison of Navy Pilot Staffing Levels and Authorizations for Fixed- Wing, Cockpit-Operated Aircraft", "paragraphs": ["The Navy uses pilots from both the active and reserve component to staff  fixed-wing, cockpit operated (hereafter referred to as fixed-wing) aircraft  pilot positions that Congress authorizes and funds through appropriations.  These Navy pilots staff a mix of operational and non-operational  positions. Operational positions include both flying (i.e., combat pilot or  instructor pilot) and non-flying positions that directly support combat  operations. Non-operational positions are generally non-flying positions,  and include assignments to positions at headquarters or in the combatant  commands that can be staffed by other types of Navy officers.", "The Navy does not separate non-operational fighter pilot authorizations  from authorizations for other pilots. As a result, this appendix only  presents Navy pilot staffing levels for those communities for fiscal years  2011 through 2017, and compares Navy pilot staffing levels to specific  operational positions. Specifically, we compared authorizations and pilot  staffing levels for Navy first operational tour, Department Head, and  Command positions for all fixed-wing, cockpit-operated aircraft  communities in the active component for fiscal years 2013 through 2017.", "Navy fixed-wing community pilots operate fighter, surveillance and  transport, and maritime patrol aircraft. Navy fighter pilots operate tactical  aircraft for air defense and support. Fighter aircraft include both legacy  and Super Hornet variants of the F/A-18, as well as newer tactical  aircraft such as the EA-18G developed for electronic warfare and the F- 35. Surveillance and transport pilots operate turboprop aircraft, including  the E-2D for surveillance and airborne early warning missions and the C- 2A for troop and cargo transport between aircraft carriers and shore  bases. Maritime patrol pilots operate jet aircraft for missions including  anti-submarine warfare and anti-surface warfare, and include aircraft such  as the P-8A.", "According to Navy personnel data, Navy fighter pilot staffing levels  decreased from 1,707 fighter pilots in fiscal year 2015 to 1,548 (a 9- percent decrease) in fiscal year 2017. Figure 15 compares changes in the  Navy fighter, surveillance and transport, and maritime patrol pilot staffing  levels for fiscal years 2011 through 2017.", "According to Navy fixed-wing pilot staffing levels and authorizations data  for the first tour milestone (i.e., pilots\u2019 first operational tours at sea for  pilots generally with between 3 and 6 years of service), the Navy was  unable to fully staff fighter pilot, surveillance and transport, and maritime  patrol operational positions from fiscal years 2013 through 2017. The  fighter pilot gap grew from 57 fighter pilots (12 percent of authorizations)  in fiscal year 2013 to 136 fighter pilots (26 percent) in fiscal year 2017.  The surveillance and transport pilot gap varied from 29 pilots (20 percent  of authorizations) in fiscal year 2013 to 30 pilots (23 percent) in fiscal year  2017, while the maritime patrol community pilot gap decreased from 112  pilots (23 percent of authorizations) in fiscal year 2013 to 4 pilots (1  percent) in fiscal year 2017. Figure 16 compares the Navy active  component fighter pilot, surveillance and transport, and maritime patrol  communities\u2019 first tour staffing levels and authorizations for operational  positions for fiscal years 2013 through 2017.", "According to Navy fixed-wing aviator staffing levels and authorizations  data for the Department Head milestone (i.e., a mid-career operational  leadership tour for different aspects of squadron management for pilots  with between about 11 and 13 years of service), the military service had  more fighter, surveillance and transport, and maritime patrol aviators than  authorizations for fiscal years 2013 through 2017. However, the surplus of  fighter aviators compared with authorizations decreased from 68 aviators  (133 percent of authorizations) in fiscal year 2013 to 28 aviators (114  percent) in fiscal year 2017. Figure 17 compares the Navy active  component fighter, surveillance and transport, and maritime patrol aviator  communities\u2019 Department Head staffing levels and authorizations for  operational positions for fiscal years 2013 through 2017.", "According to Navy fixed-wing aviator staffing levels and authorizations  data for the Command milestone (i.e., a leadership tour for Commanders,  including squadron commander, for aviators with between about 17 and  19 years of service) the number of fighter, surveillance and transport, and  maritime patrol aviators compared with authorizations increased from  fiscal years 2013 through 2017. For example, while the fighter pilot  community had fewer aviators than authorizations in fiscal year 2013 (a  gap totaling 2 percent of authorizations), it had a surplus of aviators in  fiscal year 2017 (2 percent above authorizations). Figure 18 compares  the Navy active component fighter, surveillance and transport, and  maritime patrol aviator communities\u2019 Command milestone staffing levels  and authorizations for fiscal years 2013 through 2017."], "subsections": []}, {"section_title": "Appendix IV: Comparison of Marine Corps Pilot Staffing Levels and Authorizations for Fixed-Wing, Cockpit Operated Aircraft", "paragraphs": ["The Marine Corps uses pilots from both the active and reserve  components to staff fixed-wing, cockpit-operated (hereafter referred to as  fixed-wing) aircraft pilot positions that Congress authorizes and funds  through appropriations. These Marine Corps pilots staff a mix of  operational and non-operational positions. Operational positions include  both flying (e.g., combat pilot or instructor pilot positions) and non-flying  positions (e.g., air controller in a ground infantry unit) that generally  support combat operations. Non-operational positions are generally non- flying and include assignments to headquarters or combatant command  positions, some of which can be staffed by other types of Marine Corps  officers. This appendix compares Marine Corps pilot staffing levels with  authorizations for operational and non-operational positions for all fixed- wing aircraft communities for fiscal years 2006 through 2017.", "Marine Corps fixed-wing community pilots operate fighter, tiltrotor, and  tanker aircraft. Fighter pilots operate tactical aircraft for air defense and  close air support and attack missions, and include the EA-6B, AV-8B,  F/A-18, and F-35. Tiltrotor pilots operate the MV-22\u2014an aircraft that  operates as a helicopter for takeoffs and landings and, once airborne,  converts to a turboprop aircraft\u2014and is used to transport combat troops  and equipment. Tanker pilots operate the KC-130, an aircraft used for in- flight refueling and transport of troops and equipment.", "According to Marine Corps data for the active component, the Marine  Corps had fewer pilots than authorizations in all of its fixed-wing  communities in fiscal year 2017. The Marine Corps forecasts this gap will  persist through at least fiscal year 2023. Figure 19 shows the Marine  Corps active component fixed-wing pilot staffing levels and authorizations  for fiscal year 2017.", "According to Marine Corps data for the active component, the Marine  Corps had fewer fighter pilots than authorizations from fiscal year 2006  through fiscal year 2017. This gap grew from 63 fighter pilots (6 percent  of authorizations) in fiscal year 2006 to 322 fighter pilots (24 percent) in  fiscal year 2017. Figure 20 shows the comparison of the Marine Corps\u2019  active component fighter pilot staffing levels and authorizations for fiscal  years 2006 through 2017.", "According to Marine Corps data for the active component, the Marine  Corps had fewer fighter pilots than operational positions in fiscal years  2016 and 2017. Figure 21 shows the comparison of the Marine Corps\u2019  active component fighter pilot staffing levels with operational positions for  fiscal years 2006 through 2017.", "According to Marine Corps data for the reserve component, the Marine  Corps Reserve, a community that the Marine Corps uses to augment its  available staffing levels of active duty pilots, had more fighter pilots than  authorizations for 8 of 12 years in fiscal years 2006 through 2017. The  Marine Corps had a gap of seven reserve component fighter pilots (6  percent of authorizations) for fiscal year 2017. Figure 22 shows the  Marine Corps Reserve fighter pilot staffing levels and authorizations for  fiscal years 2006 through 2017.", "According to Marine Corps data for the active component, the Marine  Corps had fewer junior fighter pilots\u2014those pilots between grades  Officer-1 and Officer-3\u2014than authorizations from fiscal year 2006 through  fiscal year 2017. Marine Corps officials told us that, as a result, the  Marine Corps assigns pilots at the Officer-4 grade to staff positions  designated for junior pilots. For example, in fiscal year 2017 the Marine  Corps needed an additional 309 junior fighter pilots (48 percent of  authorizations) to fill all authorizations. Figure 23 shows the comparison  of the Marine Corps active component junior and senior fighter pilot  staffing levels and authorizations for fiscal year 2017.", "According to Marine Corps data for the active component, the Marine  Corps had fewer tiltrotor pilots than authorizations from fiscal year 2006  through fiscal year 2017. Tiltrotor pilot staffing levels and authorizations  have increased substantially from fiscal year 2006 through fiscal year  2017. Further, the gap between the staffing levels and authorizations has  decreased from 137 tiltrotor pilots (70 percent of authorizations) in fiscal  year 2006 to 322 tiltrotor pilots (34 percent of authorizations) in fiscal year  2017. Figure 24 shows the comparison of the Marine Corps active  component tiltrotor pilot staffing levels and authorizations in fiscal years  2006 through 2017.", "According to Marine Corps active component data, the Marine Corps had  fewer tanker pilots than authorizations from fiscal year 2006 through fiscal  year 2017. This gap decreased from 86 tanker pilots in fiscal year 2006  (22 percent of authorizations) to 18 tanker pilots (5 percent of  authorizations) in fiscal year 2017. Figure 25 shows the comparison of the  Marine Corps active component tanker pilot staffing levels and  authorizations for fiscal years 2006 through 2017."], "subsections": []}, {"section_title": "Appendix V: Initiatives Implemented by the Air Force to Address Reported Fighter Pilot Shortages", "paragraphs": ["In March 2016, the Chief of Staff of the Air Force created the Fighter  Enterprise Tiger Team to address the fighter pilot shortage that the Air  Force identified. In February 2017, the Air Force effort was expanded to  include all rated personnel and renamed the Aircrew Crisis Task Force.  According to Air Force officials, the task force has focused on the  following areas to improve fighter pilot retention: work/life balance, quality  of service, and monetary compensation. In August 2017 the Aircrew  Crisis Task Force held a Dedicated Aircrew Retention Team Summit that  included organizing discussion groups with pilots to obtain information on  retention challenges. According to Air Force officials, in September 2017,  the task force presented 25 of the 44 recommendations developed at the  summit to the Chief of Staff of the Air Force and as of November 2017 the  Chief of Staff had decided to implement 2 of them immediately and  conduct additional analysis on the other 23. The recommendations being  analyzed include reducing the length and number of deployments for  fighter pilots and converting some non-flying fighter pilot positions to UAS  pilot positions. As of November 2017, these efforts had resulted in 37  implemented initiatives (see table 2)."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Lori Atkinson, Assistant Director; Vincent Buquicchio, Timothy Carr,  Mae Jones, Foster Kerrison, Amie Lesser, Michael Silver, and Nell  Williams."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Military Personnel: Actions Needed to Better Position the Navy and the  Marine Corps to Support Expanding Unmanned Systems Operations.  GAO-18-162. Washington, D.C.: February 6, 2018.", "Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "DOD Training: DOD Has Taken Steps to Assess Common Military  Training. GAO-17-468. Washington, D.C.: May 23, 2017.", "Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.", "High Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Military Compensation: Additional Actions Are Needed to Better Manage  Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.:  February 3, 2017.", "Unmanned Aerial Systems: Air Force and Army Should Improve Human  Capital Planning for Pilot Workforces. GAO-17-53. Washington, D.C.:  January 31, 2017.", "Unmanned Aerial Systems: Further Actions Needed to Fully Address Air  Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington,  D.C.: March 16, 2016.", "Unmanned Aerial Systems: Actions Needed to Improve DOD Pilot  Training. GAO-15-461. Washington, D.C.: May 14, 2015.", "Air Force: Actions Needed to Strengthen Management of Unmanned  Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014.", "Tactical Aircraft: DOD\u2019s Ability to Meet Future Requirements Is Uncertain,  with Key Analyses Needed to Inform Upcoming Investment Decisions.  GAO-10-789. Washington, D.C.: July 29, 2010.", "Unmanned Aircraft Systems: Comprehensive Planning and a Results- Oriented Training Strategy Are Needed to Support Growing Inventories.  GAO-10-331. Washington, D.C.: March 26, 2010.", "Human Capital: Key Principles for Effective Strategic Workforce Planning.  GAO-04-39. Washington, D.C.: December 11, 2003.", "Military Personnel: Actions Needed to Better Define Pilot Requirements  and Promote Retention. GAO/NSIAD-99-211. Washington, D.C.: August  20, 1999."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-130", "url": "https://www.gao.gov/products/GAO-19-130", "title": "Federal Student Aid: Actions Needed to Evaluate Pell Grant Pilot for Incarcerated Students", "published_date": "2019-03-05T00:00:00", "released_date": "2019-04-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Incarcerated students are generally prohibited from receiving Pell grants, which provide need-based federal financial aid to low-income undergraduate students. However, Education has the authority to waive specific statutory or regulatory requirements for providing federal student aid at schools approved to participate in its experiments. Accordingly, the department initiated the multi-year Second Chance Pell pilot in 2015 to test whether allowing incarcerated individuals to receive Pell grants increases their participation in higher education programs and influences their academic and life outcomes, or creates any obstacles to schools' administration of federal financial aid programs.", "GAO was asked to review the Second Chance Pell pilot. This report examines (1) actions Education, schools, and other stakeholders have taken to implement the pilot; (2) experiences participating schools are having as they implement the pilot; and (3) how Education is monitoring and evaluating the pilot and whether opportunities for improvement exist.", "GAO analyzed summary-level Education data from the 2016-2017 and 2017-2018 school years and interviewed a non-generalizable sample of 12 schools (and associated prison partners) that were selected for variation in type of school (i.e., public and private nonprofit), type of prisons served, and other variables. GAO also interviewed Education officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Education (Education) selected 64 schools across 26 states to participate in the Second Chance Pell pilot, and participating schools collaborated with prisons and other stakeholders to implement the pilot. Across the pilot's first 2 years, schools awarded approximately $35.6 million in Pell grants to about 8,800 incarcerated students.", "Officials from the 12 schools GAO interviewed reported experiencing some challenges implementing the pilot. First, school officials said they experienced challenges establishing incarcerated applicants' eligibility for Pell grants, since some applicants had not registered for Selective Service and some had an existing federal student loan in default. However, many applicants were able to complete the necessary steps\u2014such as making a set number of payments on their defaulted loans\u2014to reestablish eligibility. Second, obtaining documents from incarcerated applicants to support verification\u2014which helps the department's efforts to reduce improper payments of federal student aid\u2014was another challenge officials reported. School officials also said that providing college classes in prisons required them to develop new processes and creative solutions to overcome technology limitations, space limitations, and the transfer of students to other prisons. Officials from 8 of 12 schools told GAO they hired additional staff or developed new approaches in response to their pilot efforts.", "Incarcerated College Students inside New York's Sing Sing Correctional Facility", "Education monitors the pilot by collecting data from participating schools, but had not established how it intended to evaluate Second Chance Pell or measure the pilot's performance against its objectives. Education is required to review and evaluate experiments under the Experimental Sites Initiative\u2014of which Second Chance Pell is a part\u2014and make recommendations, as appropriate, to improve the delivery of federal student aid. In its comments on the draft report, Education stated that it was planning to evaluate the pilot, consistent with the pilot's objectives, and described a number of steps it was taking to do so. Completing this evaluation can help ensure policymakers have the information needed to make decisions about the future of Pell grants for incarcerated students."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Secretary of Education complete its evaluation of the pilot to report on its findings and conclusions. Education concurred, with clarification, and stated that it had actions underway to evaluate the pilot."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal Pell grant program provides low-income undergraduate  students with financial aid for postsecondary education. However,  incarcerated students have been generally prohibited from receiving Pell  grants since 1994. In 2015, the Department of Education (Education)  initiated the Second Chance Pell pilot program. The pilot program allows  incarcerated students who meet all other Pell eligibility requirements to  receive Pell grants for use at selected colleges and universities. The  program has a particular focus on those students who are likely to be  released within 5 years. The objectives of the pilot are to test whether  awarding Pell grants to incarcerated students increases their participation  in higher education programs and influences their academic and life  outcomes, and to examine whether the pilot creates any challenges or  obstacles to a school\u2019s administration of federal financial aid programs.  Education has not set an end date for the Second Chance Pell pilot, but  stated that experiments under the initiative typically run 3 to 4 years. The  pilot began its third school year in July 2018.", "You asked us to review the Second Chance Pell pilot. This report  examines the following questions:  1.  What actions have Education, schools, and other stakeholders  taken to implement the Second Chance Pell pilot?  2.  What experiences are participating schools having as they  implement the Second Chance Pell pilot?  3.  How is Education monitoring and evaluating the pilot, and what  opportunities, if any, exist for improvement in these areas?", "To determine what actions Education and other stakeholders have taken  to implement the pilot, we reviewed summary-level data from Education  regarding the schools and individuals that participated in the first 2 years  of the pilot. To ensure the reliability of these data, we reviewed agency  documentation about the data and the system that produced them and  interviewed officials from Education responsible for collecting and  validating the data. We found the data to be sufficiently reliable for our  purposes. To further identify the actions taken to implement the pilot, we  interviewed officials from the Department of Justice, as well as  Education\u2019s Office of Federal Student Aid, on the actions taken to prepare  for the pilot and the guidance and support provided to participants, among  other topics. We also interviewed representatives from three research  groups\u2014the Urban Institute, the Vera Institute of Justice (Vera), and New  America\u2014in order to gain additional insight on the effects of  postsecondary correctional education as well as the design and  implementation of the Second Chance Pell pilot.", "To understand schools\u2019 actions and experiences implementing the pilot,  we interviewed officials from a non-generalizable sample of 12  participating schools (and associated prison partners) that were selected  for variation in type of schools (i.e. public and private nonprofit), degrees  awarded, type of prisons served, and other variables. As part of these  interviews, we also interviewed officials from seven correctional facilities  who partnered with the participating schools. We also visited three  prisons that partnered with the selected schools (Jessup Correctional  Institution in Maryland, Mission Creek Corrections Center for Women in  Washington State, and Sing Sing Correctional Facility in New York) and  one school\u2019s campus (City University of New York) in order to observe  classrooms and student resources such as libraries and study spaces  and to talk with individuals selected by the schools about their  experiences participating in the pilot. These sites were selected for  variation in experience delivering college classes in prisons, number of  students served, and to allow us to observe both men\u2019s and women\u2019s  prison facilities. To further understand schools\u2019 experiences as they  implement the pilot, we attended the third-annual convening of Second  Chance Pell partners, which was a 2-day conference for participating  schools, their correctional partners, and other stakeholders, hosted by  Vera.", "To assess how Education is monitoring and evaluating the pilot, we  reviewed Education\u2019s documentation on the pilot\u2019s objectives (including  any evaluation objectives), analyzed the data collection instruments  Education uses to monitor the pilot, and compared Education\u2019s efforts to  leading practices we have identified for effective pilot design and  evaluation. Our complete scope and methodology can be found in  appendix I.", "We conducted this performance audit from January 2018 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Pell Grant Program", "paragraphs": ["First authorized in 1972, the Pell Grant Program awards federally-funded  grants to low-income undergraduate and certain post-baccalaureate  students who are enrolled in a degree or certificate program (which can  include vocational programs) and have federally-defined financial need.  Education\u2019s Office of Federal Student Aid administers the Pell Grant  program and other federal student aid programs\u2014grants, loans, and  work-study\u2014authorized under Title IV of the Higher Education Act of  1965, as amended. Students are eligible to receive Pell grants for no  more than 12 semesters (or the equivalent). The maximum allowable Pell  grant for the 2018-2019 school year was $6,095.", "The amount a student receives is based on a formula that compares the  estimated cost to attend a particular school with a student\u2019s expected  family contribution toward that cost. A student\u2019s expected family  contribution is determined by considering his or her income and assets, or  for students who are dependent or independent students who are  married, their income and assets as well as that of their parents or  spouses. Students are eligible for federal need-based aid if their cost of  attending a school is more than their expected family contribution.  Students incarcerated in federal or state penal institutions have been  ineligible for Pell grants since the enactment of the Violent Crime Control  and Law Enforcement Act of 1994. Beginning in the 2016-2017 school  year, the Second Chance Pell pilot has allowed a limited number of  students to receive Pell grants despite their incarceration."], "subsections": []}, {"section_title": "Federal Student Aid Eligibility", "paragraphs": ["In general, to be eligible to receive federal student aid (including Pell  grants), Department of Education guidance states that an applicant must: be a citizen or eligible noncitizen of the United States; have a valid Social Security Number; have a high school diploma or a General Education Development  certificate, or have completed homeschooling; be enrolled in an eligible program as a regular student seeking a maintain satisfactory academic progress; not owe a refund on a federal student grant or be in default on a  federal student loan;  register (or already be registered) with the Selective Service System,  if the person is a male and not currently on active duty in the U.S.  Armed Forces; and not have a conviction for the possession or sale of illegal drugs for an  offense that occurred while the person was receiving federal student  aid (such as grants, work-study, or loans).", "For the Pell grant program, an applicant must also demonstrate financial  need and not have obtained a bachelor\u2019s degree or a first professional  degree."], "subsections": []}, {"section_title": "Applying for Financial Aid", "paragraphs": ["In the 2016-2017 school year, more than 18.6 million prospective  students applied for federal student aid by submitting the Free Application  for Federal Student Aid (FAFSA). The FAFSA consists of more than 100  questions that collect information ranging from basic contact information  to the current value of assets. Several questions ask for financial  information, which could require applicants (and their parents and  spouses, if they are dependent or married) to rely upon information  located on tax returns, as well as information from bank, business, and  investment records. Incarcerated individuals in the Second Chance Pell  pilot are required to apply for financial aid using the same process as  students in the non-incarcerated population.", "After Education processes an applicant\u2019s FAFSA, a report is sent to the  applicant or made available online. This report includes the applicant\u2019s  expected family contribution, the types of federal aid for which the  applicant qualifies, and information about any errors\u2014such as questions  the applicant did not complete\u2014that Education identified during FAFSA  processing. Schools send applicants award letters after admission,  providing students with types and amounts of federal, state, and  institutional aid, should the student decide to enroll."], "subsections": []}, {"section_title": "Education\u2019s FAFSA Verification Process", "paragraphs": ["Education uses a process called \u201cverification\u201d to help identify and correct  erroneous or missing information in students\u2019 FAFSAs, which helps the  department\u2019s efforts to reduce improper payments of federal student aid.", "Education selects approximately 30 percent of FAFSAs for verification  each academic year and schools are required to work with the selected  students to confirm the accuracy of the information provided on their  FAFSAs. A student is responsible for gathering the necessary  documentation\u2014such as prior years\u2019 tax returns or proof of having  obtained a high school diploma\u2014and providing it to the school financial  aid office, which compares the information submitted in the FAFSA to the  student\u2019s supporting documentation. If there is a difference between the  student\u2019s documentation and what he or she submitted on the FAFSA,  the FAFSA information may need to be corrected.", "When selecting FAFSAs for verification, Education aims to select those  FAFSAs with the highest statistical probability of error and the impact of  such error on award amounts. Education\u2019s specific criteria for selecting  FAFSAs for verification is not public information; however, the department  periodically refines its process for selecting FAFSAs to reduce the burden  of verification on applicants, their families, and schools while maintaining  the integrity of the federal student aid programs.", "Education publishes a list of potential verification items for each award  year in the Federal Register. The items that schools are required to  verify for a given application are selected by Education from that list. For  the 2018-2019 school year, the items for verification are shown below:", "Adjusted gross income,", "U.S. income tax paid,", "Untaxed portions of Individual Retirement Arrangement distributions,", "Untaxed portions of pensions,  Individual Retirement Arrangement deductions and payments,", "Tax-exempt interest income,  Income earned from work,", "Household size,", "Number of household members in college,", "High school completion status,", "Education credits, and  Identity and statement of educational purpose."], "subsections": []}, {"section_title": "Research on the Effects of Participating in Education while Incarcerated", "paragraphs": ["The body of literature on prisoners\u2019 participation in educational programs  while incarcerated suggests there may be benefits for participants, the  facilities in which they are housed, and taxpayers. However, positive  benefits attributed to postsecondary correctional education are not always  clear because the students who would have done better post-release may  have been more willing or motivated to participate in the program anyway.  See appendix II for a summary of selected research on correctional  education. See appendix III for additional information on the educational  attainment of the prison population."], "subsections": []}]}, {"section_title": "Education, Participating Schools, and Other Stakeholders Took Several Actions to Implement the Second Chance Pell Pilot", "paragraphs": [], "subsections": [{"section_title": "Education Selected 64 Schools to Participate in the Second Chance Pell Pilot", "paragraphs": ["In response to an August 2015 Federal Register notice announcing the  pilot, Education officials reported receiving applications from over 200  schools seeking to participate. The officials said they selected schools  for the pilot that varied along several characteristics, including location  and size, as well as ensuring that selected schools did not have a history  of compliance issues or other problems delivering federal student aid.  Education selected 64 schools to participate in the pilot and officially  notified schools in June of 2016 that Pell-funded courses could begin as  early as July 1 of that year. The 64 schools are located across 26 states  and include public and private nonprofit 2- and 4-year schools. Figure 1  below shows the locations and numbers of the 64 schools selected to  participate in the pilot and figure 2 includes additional information on 3  schools participating in the pilot that were included our sample. Appendix  IV includes a complete list of the schools Education selected to  participate in the pilot and select characteristics of those schools."], "subsections": []}, {"section_title": "Education, Schools, Prisons, and Others Collaborated to Prepare for and Implement the Pilot", "paragraphs": ["To prepare for the pilot, Education took a number of actions. For  example, Education hosted four webinars for officials at schools selected  to participate in the pilot. The first two webinars occurred in September  2015, during which Education officials discussed the pilot\u2019s objectives and  strategies for establishing effective partnerships between schools and  prisons. The third webinar took place in July 2016 and covered how to  navigate the federal financial aid application process and the information  Education planned to collect from schools, among other topics. Education  held the final webinar in August 2016 in collaboration with the Department  of Justice. The webinar contained information on how schools and their  prison partners could develop shared goals, roles, expectations, policies,  and procedures, and how these might be incorporated into a  memorandum of understanding. Education also developed a Frequently  Asked Questions page on its website and responded to questions  submitted by school officials via email. In addition, Education hosted  breakout sessions for Second Chance Pell schools at its annual Federal  Student Aid Training Conference in 2016, 2017, and 2018.", "School officials reported working with a variety of stakeholders to prepare  for and to implement the pilot. For instance, officials from 7 of 12 schools  we interviewed said they collaborated with one or more additional  stakeholders within the school, such as individuals working in academic  departments, financial aid, the registrar, the bursar, and academic  advising. For example, officials from one school said administrators  partnered with the bursar and the registrar to ensure that incarcerated  students were not unenrolled from classes if their Pell grants took longer  to be disbursed than those for non-incarcerated students. Officials from  10 of 12 schools we interviewed talked about the importance of  coordinating with staff at the prison, and officials from 9 schools said  coordinating with their states\u2019 departments of corrections was important  for implementing the pilot. For example, officials from one school said  their state Department of Corrections demolished a wall at one  participating prison in order to provide more classroom and study space  for the program.", "Finally, schools described collaborating with organizations that help  facilitate college courses in prisons. For example, officials from all 12  schools we interviewed said that Vera provided technical assistance, such as information-sharing and opportunities to network with other pilot  schools. Officials from one school also noted that they partner with  Hudson Link, an organization that recruits students for postsecondary  correctional education programs and supports students\u2019 reentry upon  release, among other activities."], "subsections": []}, {"section_title": "Almost 8,800 Incarcerated Students Received a Pell Grant in the Pilot\u2019s First 2 Years", "paragraphs": ["Across the pilot\u2019s first 2 years, 59 Second Chance Pell schools disbursed  approximately $35.6 million in Pell grants to a total of 8,769 individual  students. See table 1 for a comparison between the first and second  school years.", "Not all of the 64 schools selected for the pilot began offering Pell-funded  classes at the start of year one. Specifically, 11 of the 64 selected schools  were unable to offer classes in the pilot\u2019s first year and 5 of the 64  selected schools did not offer classes in the second year. Education  officials told us that some schools needed additional time to stand up their  programs, as the department allowed, for a number of reasons. For  example, officials said:", "Some schools with new correctional education programs faced delays  obtaining accreditation for those programs.", "Some schools needed additional time to work out operational details,  such as obtaining credentials or security clearances in order for  faculty and staff to enter the prison.", "Some schools needed additional time to build relationships with  correctional partners.", "Figure 3 shows incarcerated students taking college classes inside two  New York prisons."], "subsections": []}]}, {"section_title": "Officials from Selected Schools Reported Experiencing Some Challenges Implementing the Pilot, but Developed New Approaches to Address these Challenges", "paragraphs": [], "subsections": [{"section_title": "School Officials Reported Challenges in a Few Areas Required to Establish Incarcerated Applicants\u2019 Eligibility for Pell Grants", "paragraphs": ["School officials we interviewed said that they experienced some  challenges establishing incarcerated applicants\u2019 eligibility for aid,  including establishing an applicant\u2019s citizenship or eligible non-citizenship  and providing accurate Social Security Numbers or Alien Registration  Numbers. For example, officials from 6 of the 12 schools we interviewed  said that some of their incarcerated applicants did not know or have  access to their Social Security Number. The two most commonly- identified reasons applicants were initially ineligible for Pell grants were  (1) some applicants had not registered for Selective Service, and (2)  some had an existing federal student loan in default status. Schools and  applicants faced challenges addressing these reasons.", "Selective Service. Generally, to be eligible to receive Pell grants,  applicable male students must have registered with the Selective  Service. However, for male students who have not registered,  institutions may determine that the student is not ineligible for a Pell grant  if the student can demonstrate by submitting evidence to the institution  that (1) he was unable to present himself for registration because of  reasons beyond his control\u2014such as hospitalization, incarceration, or  institutionalization\u2014or (2) he is over 26 and when he was between the  ages of 18 to 26, he did not knowingly and willfully fail to register with the  Selective Service.", "Education data showed that about 15 percent of the FAFSAs submitted in  the pilot\u2019s first year were from applicants who had not registered for  Selective Service. In comparison, 2 percent of FAFSAs in the overall  population were submitted by applicants who had not registered. School  officials said that many applicants had been continuously incarcerated  between ages 18 to 26, but that obtaining documentation to demonstrate  this was difficult in some circumstances. For example, officials from one  school reported that obtaining records from juvenile correctional facilities  was challenging and officials at another school said that applicants did  not always know or have access to their exact dates of incarceration.", "Men over age 26 who had not been continuously incarcerated but who  wished to apply for federal financial aid must obtain an official response  from the Selective Service System confirming that the individual did not  register, but should not be denied federal benefits. To obtain this official  response, the student can write or call the Selective Service System with  a detailed description of the circumstances he believed prevented him  from registering at the required time. The individual would then provide  the official written response from the Selective Service System to his  school financial aid office, which would evaluate whether his failure to  register was knowing or willful. Officials from 7 of the 12 schools we  interviewed said the process to obtain documentation from the Selective  Service System was difficult or time-consuming.", "Student Loan Default. Applicants are generally ineligible for Pell grants if  they have a prior federal student loan in default status. Education data  showed that about 10 percent of FAFSAs in the first year of the pilot were submitted by applicants with an existing federal student loan in default  status. In comparison, about 2 percent of FAFSAs in the overall  population were submitted by applicants with an existing loan in default  status. Officials from all 12 schools we interviewed said at least some of  their incarcerated applicants had existing federal student loans in default  status. There are options, however, for individuals to remove default  status from their loans, potentially regaining eligibility for Pell grants. For  example, borrowers may rehabilitate their student loans by entering into  and completing a written agreement that requires the borrower to make  nine on-time monthly payments within 10 consecutive months. These  income-driven payments can be as low as $5 per month.", "According to school officials, however, removing default status from loans  can be challenging for incarcerated individuals. For example, officials  from one school we interviewed said applicants generally cannot make  phone calls to set up loan repayment plans and instead have to rely on  postal mail for completing the necessary paperwork. Also, officials from  another school we interviewed said that for applicants who must rely on  family members outside the prison to make the required payments, there  is no guarantee that the family will do so. Additionally, borrowers may  rehabilitate a loan only once. Despite these challenges, officials from  five schools said they had applicants who were working to rehabilitate  their loans, such as by paying from wages earned through prison work or  by having family members make payments on their behalf. Officials from  two of those schools said they had one or more applicants who  successfully rehabilitated their loans and were able to enroll in the pilot."], "subsections": []}, {"section_title": "School Officials Reported Challenges Verifying Incarcerated Applicants\u2019 Income and Assets", "paragraphs": ["According to school officials we interviewed, verifying incarcerated  applicants\u2019 income and assets was challenging, in particular, because of  circumstances unique to applicants being in prison. Communication  between the applicant, the applicant\u2019s family, and the school\u2019s financial  aid office is limited by virtue of the applicant\u2019s confinement. For example,  incarcerated applicants were typically unable to be reached via phone or  email to answer questions, according to school officials we interviewed,  and completing verification paperwork sometimes required multiple trips  to the prison, which in some cases was more than an hour away. Further,  incarcerated applicants sometimes did not have access to their personal  files or records and faced difficulties obtaining documentation, such as  copies of high school transcripts and tax records, which may be required  for financial aid officers in the event the applicant is chosen for  verification. Education guidance indicates that under certain  circumstances, the school may accept alternate forms of documentation  from the correctional facility if that documentation provides the information  the school has requested. For example, the school may accept  documentation from the correctional facility that shows an individual was  incarcerated for the entire corresponding tax year, rather than requiring  the applicant to obtain a letter of non-filing from the Internal Revenue  Service.", "School officials said that some dependent and married students had  trouble providing the school financial aid office with income  documentation for others, such as a parent or spouse. According to  Education data, approximately 2 percent of incarcerated applicants in the  first year of the pilot were dependent, and nearly 11 percent were  married. If an applicant selected for verification is dependent or married,  he or she is required to provide the school with documentation to verify  household income. Officials from 7 of the 12 schools we interviewed said  that sometimes an applicant had trouble securing required documents  from a parent or spouse. If an applicant cannot provide the required  documentation of the income and assets of his parent or spouse, the  school cannot verify the individual\u2019s FAFSA information and cannot award  a Pell grant.", "School officials indicated that these challenges were compounded by the  selection of a high percentage of Second Chance Pell FAFSAs for  verification. Education uses a number of criteria to select FAFSAs for  verification, which the department does not share publicly. However,  Education officials said that being eligible for a Pell grant and reporting no  income are two such criteria. As a result, schools that serve more Pell- eligible applicants are likely to have more of their applicants\u2019 FAFSAs  selected for verification than schools that serve fewer Pell-eligible  applicants. Accordingly, 76 percent and 59 percent of pilot FAFSAs  were selected for verification in the 2016-2017 and 2017-2018 school  years, respectively. Education\u2019s verification selection rate for non- incarcerated, Pell-eligible applicants was 53 percent in the 2017-2018  school year. Figure 4 below shows Education\u2019s verification selection rates  for non-incarcerated Pell-eligible applicants and incarcerated applicants in  these first two school years."], "subsections": []}, {"section_title": "Schools Hired Staff and Developed New Approaches to Address Challenges", "paragraphs": ["Officials from 8 of the 12 schools we interviewed reported hiring additional  staff or allocating more staff hours to help manage the increased  administrative workload. For example,", "Officials from one school said their school added six full-time  employees to process financial aid for their pilot students.", "A financial aid officer from another school stated that her workload  has increased since the pilot began, and she has taken on additional  tasks, such as training other staff to fill in when she could not travel to  the prison.", "Officials from another school said they have added positions in the  academic, administrative, and financial aid departments to handle the  additional administrative workload.", "In addition, officials from 9 of 12 schools said they developed new  approaches to address challenges related to processing FAFSAs  submitted by incarcerated applicants. For example:", "Start Early: Officials from one school reported collecting FAFSAs  earlier in the second year than they had in the first year to allow for  additional time to collect documentation for applicants who may be  selected for verification. An incarcerated student we spoke with  echoed this challenge when he spoke of difficulties locating prior  years\u2019 tax returns. See sidebar for additional experiences shared by  incarcerated students we met with. Officials from two schools reported  having applicants complete verification-related paperwork, such as  requests for supporting documentation from federal entities like the  Internal Revenue Service, at the same time they completed their  FAFSA. The officials said this approach reduced the number of visits  the officials had to make to the prison and helped school officials and  incarcerated applicants keep track of the required paperwork.", "Pre-screen Applicants: Officials from two schools reported pre- screening their incarcerated applicants for common issues that affect  financial aid eligibility so that they could work with applicants to begin  to correct these issues (such as helping applicants learn how to make  payments to rehabilitate loan default status). Other schools used pre- screening to reduce the school\u2019s workload, since they were able to  exclude ineligible applicants before they submitted a FAFSA.", "Track and Report on Status: Officials from one school said their  information technology department developed a system that  generates a report on the documentation that incarcerated applicants  have provided and the documentation that remains outstanding. The  report also contains notes from staff members on their document  requests with the Selective Service System, Internal Revenue  Service, and other agencies."], "subsections": []}, {"section_title": "Officials from Selected Schools Reported Logistical Challenges in Providing Prison-based Classes, but Many Schools Developed New Approaches to Address Them", "paragraphs": ["School officials we interviewed reported that providing college courses in  prisons required them to develop new processes and generate creative  solutions to help overcome technology limitations, space limitations, and  the transfer of students to other prisons, among other limitations. For  example, officials from 9 of the 12 schools said that limited technology in  prisons, especially limited access to the Internet, presented a challenge.  An official from one school said that classroom discussions were  enhanced by the low-technology setting. To overcome technology  limitations, officials from one school said that it partnered with the state  libraries to develop a solution to deliver research materials to students.  Specifically, an incarcerated student mails a research request to a state  library. Once received, a librarian will locate the requested articles and  electronically send the material to the prison\u2019s secure printer. A prison  staff member will then deliver the material to the student. default status and could not access a  prior year\u2019s tax return, making the process  take longer.", "Officials from 9 of the 12 schools we interviewed said that space and  scheduling limitations in prisons also presented a challenge. School  officials told us they must compete for classroom space with other  programming that is offered\u2014or in some cases required by law, such as  GED education\u2014to inmates. Officials from two schools said they hold  night and weekend classes to address such limitations. Officials from one  school also reported that prison staff changed incarcerated students\u2019  schedules (such as meal times and other scheduled activities) to  accommodate their academic needs. Additionally, some prison officials  reported relocating all the student inmates into the same housing unit to  help create a positive learning environment. helps inmates be less idle and therefore  less likely to engage in negative behavior.  elevates the status of students in the  prison, and the younger people look up to  him and his college-going peers.", "Officials from 7 of the 12 schools we interviewed said at least one  incarcerated student was either transferred to another prison or was  released during the pilot. To address the issue of students being  transferred to a different prison, officials from three schools said they  developed an agreement with their state\u2019s department of corrections that  students participating in the pilot would not be transferred to other  facilities until the end of the academic term. and open a nonprofit organization serving  youth.", "December 2018. He plans to work toward  becoming a home inspector and attend  classes at the main campus, where he  has applied for an academic scholarship.  released by the end of 2018, was proud to  be leaving prison with a college degree.  He plans to start a business and mentor  young men to pursue education.  year sentence. He plans to start a  business upon release and had  developed a business plan as part of his  studies. He also plans to work with at-risk  young men to steer them away from crime  and towards education.", "To monitor Pell dollars spent and other aspects of the pilot, Education  systematically collects data from participating schools. Education requires  schools to report data monthly, to complete an annual report, and to  respond to a survey each academic year. Education officials said they  use schools\u2019 monthly reporting\u2014which is limited to the participating  students\u2019 Social Security Numbers and last names\u2014to monitor Pell grant  disbursements. Education requires schools to report annually on the  students who completed FAFSAs, including the number of credits that  students attempted and earned and the dollar amount students were  assessed for tuition and fees, for example. Education officials reported  that they will follow up with schools that are not reporting data to  determine if the school either has no data to report or needs further  assistance from the department.", "As part of its annual survey to schools, Education asks officials to  describe any challenges their schools faced when implementing the pilot,  such as the roles and responsibilities of schools and corrections partners  for helping incarcerated applicants complete FAFSAs, as well as how  academic programs were determined. In addition, Education asks schools  to share examples of any challenges their schools faced when  implementing the pilot. Education sent its first annual survey to Second  Chance Pell schools in August 2018, in which it asked school officials to  reflect on the pilot\u2019s first year (2016-2017 school year). Education officials  reported that all schools had completed the required reporting for the first  year of the pilot (2016-2017) and that as of November 2018, 47 schools  had completed their reporting for the second year of the pilot (2017- 2018). Specific data elements collected by Education for the pilot are  presented in appendix V."], "subsections": []}, {"section_title": "Education Has Not Yet Evaluated Pilot Results", "paragraphs": ["A key component of the Experimental Sites Initiative\u2014of which Second  Chance Pell is a part\u2014is rigorous evaluation of whether experiments  achieve their stated objectives. Education is directed to review and  evaluate the experiences of schools participating in its experimental sites  and report biennially on the findings and conclusions reached regarding  each of the experiments conducted. Further, the department is directed  to make recommendations for amendments to improve and streamline  the Higher Education Act, which includes the delivery of federal student  financial aid, based on the results of the experiments. However,  Education has not established how it intends to evaluate Second Chance  Pell or measure the pilot\u2019s performance against its objectives.", "During the course of our review, Education officials provided us with  several reasons as to why they were not planning to evaluate the pilot.  First, officials said there was no dedicated funding set aside for an  external evaluation of the pilot. Second, Education officials said they did  not intend to make recommendations regarding changes to federal  student financial aid eligibility based on the results of the pilot. Rather  than conducting an evaluation, they explained, Education intends to  report descriptive information on the pilot, such as the number of students  served and the amount of aid disbursed, as it has done in prior reports on  its experimental sites. In Education\u2019s most recent report on the  experimental sites (of the 2010-2011 school year), the department  reported that it aggregated outcome measures (such as numbers of  students in each experiment) and reviewed comments submitted by  participating schools. However, the report noted that this type of  anecdotal information could not be used to determine whether  experiments were ultimately successful.", "The purpose of a pilot is generally to inform a decision on whether and  how to implement a new approach in a broader setting. In this context,  leading practices for effective pilot design state that agencies should  evaluate the final results of a pilot in order to draw conclusions on  whether, how, and when to integrate pilot activities into overall efforts.  As noted above, Education is required to review and evaluate  experiments under the Experimental Sites Initiative and make subsequent  recommendations, as appropriate, for amendments to improve and  streamline the Higher Education Act, which includes the delivery of  federal student financial aid. In this context, we inquired about steps  Education could take now, should an evaluation of Second Chance Pell  be pursued (including an evaluation limited to an internal effort using  existing resources). Education officials agreed that even without funding  for an external evaluation, they could use the data they are already  collecting to internally evaluate the pilot. In its comments on the draft  report, Education stated that it was now planning to evaluate the pilot,  consistent with the objectives set out in the Federal Register, and  described a number of steps it was taking to do so. We are pleased to  see the Department taking these important steps to determining the pilot\u2019s  impact. An evaluation of Second Chance Pell can help provide  policymakers with the information needed to make decisions about the  future of Pell grants for incarcerated students."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Pell grants help open the door to a college education for millions of low- income students every school year. However, over the past 24 years,  incarcerated students have been generally ineligible for Pell grants.  Education\u2019s Second Chance Pell pilot presents an opportunity for policy  makers and others to see whether participation in postsecondary  educational opportunities increases when Pell grants are again made available, and to determine what impacts a college education has on an  incarcerated person\u2019s academic and life outcomes. These impacts may  be consistent with past research, which suggests possible benefits to  formerly-incarcerated individuals, prisons, and local communities. Second  Chance Pell, by the end of its second year of implementation, has  allowed thousands of incarcerated students to receive financial aid for  college. Evaluating the pilot can help assure Education and Congress  have the information needed to make decisions about the future of Pell  grants for incarcerated students."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to Education:", "The Secretary of Education should complete its evaluation of Second  Chance Pell in order to report on the pilot\u2019s findings and conclusions  reached."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a copy of this report to Education and DOJ for review and  comment.  Education provided written comments, which are reproduced  in full in appendix VI. DOJ did not provide written comments.", "Regarding our recommendation to evaluate Second Chance Pell and  report on its findings, Education concurred, with clarification. Education  stated that it is already taking a number of actions to evaluate the pilot,  including gathering information from participating schools and other  sources. Education also stated that it will be analyzing the data it is  collecting to report on the pilot\u2019s objectives. Education, accordingly,  suggested the recommendation should be worded that the Department  \u201ccontinue to\u201d evaluate Second Chance Pell. We describe Education\u2019s  data collection efforts in our report; however, at the time of our review  Education was not able to provide evidence that it was evaluating the pilot  and stated on more than one occasion that it planned to report descriptive  information about the pilot\u2019s outcomes (such as the amount of Pell dollars  disbursed), because it did not have funding for an evaluation. We are  pleased to see that the Department is now planning to evaluate the pilot  and report on the pilot\u2019s objectives, and accordingly, we revised our report  and recommendation to state that Education should complete its  evaluation. An evaluation of Second Chance Pell that goes beyond  summarizing descriptive information can help provide policymakers with  the information needed to make decisions about the future of Pell grants  for incarcerated students.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Education,  Attorney General, 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) 512-8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff members that made key  contributions to this report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To identify the actions Education and other stakeholders took to  implement the Second Chance Pell pilot, we reviewed summary-level  data from the Department of Education (Education) regarding the first two  years of the pilot\u2014school years 2016-2017 and 2017-2018\u2014on the  schools that participated in the pilot, the number of incarcerated  individuals who applied for and received Pell grants, and other aspects of  the pilot. To ensure the reliability of these data, we reviewed agency  documentation about the data and the system that produced them and  interviewed officials from Education responsible for collecting and  validating the data. We found the data to be sufficiently reliable for our  purposes. To further identify the actions taken, we reviewed Education\u2019s  published guidance on implementing the Second Chance Pell pilot,  including the department\u2019s webinars, action plans, and Frequently Asked  Questions document. Additionally, we interviewed officials from the  Department of Justice, as well as Education\u2019s Office of Federal Student  Aid, on the actions taken to prepare for the pilot and the guidance and  support provided to participants, among other topics. We also interviewed  representatives from three research groups\u2014the Urban Institute, the Vera  Institute of Justice (Vera), and New America\u2014in order to gain additional  insight on the effects of postsecondary correctional education as well as  the design and implementation of the Second Chance Pell pilot.", "To further identify what actions schools and correctional facilities took to  implement the pilot, we interviewed officials from a non-generalizable  sample of 12 schools participating in the pilot. We also interviewed  officials from seven correctional facilities who partnered with the  participating schools. We used a sampling procedure in which we  selected participating schools with particular characteristics to capture  both common experiences and important variations among those with  differing characteristics. We selected schools to represent a range of  characteristics, including public and private nonprofit schools; schools  with existing postsecondary correctional education programs and those  with programs launched for the pilot; and schools with a varying number  of correctional institution partners (ranging from 1 to 18 partners). We  selected schools that offered bachelor\u2019s degrees to students participating  in the pilot as well as those that offered certificates and associate\u2019s  degrees. We included one school serving a women\u2019s prison, one school  that is classified as one of the Historically Black Colleges and  Universities, and four schools that are classified as Hispanic Serving  Institutions in our sample. Results from nonprobability samples cannot be  used to make inferences about a population. Although our findings cannot  be generalized to all schools that are participating in the pilot, they do  provide useful insight into the experiences of pilot participants.", "To describe the experiences that participating schools are having as they  implement the Second Chance Pell pilot, we interviewed officials from the  non-generalizable sample of schools (and correctional partners) we  described above. Additionally, we visited three prisons (Jessup  Correctional Institution in Maryland, Mission Creek Corrections Center for  Women in Washington State, and Sing Sing Correctional Facility in New  York) and one school campus (City University of New York) in order to  observe classrooms and student resources such as libraries and study  spaces and to talk with selected individuals about their experiences  participating in the pilot. Specifically, one of the prisons for men that we  visited identified five Second Chance Pell students for us to interview.  Each interview was conducted in a private classroom setting with one  student and two of our staff members. Each interview lasted between 5  and 10 minutes. Each student was asked the same set of questions about  his experience applying for and participating in the Second Chance Pell  Pilot Program. Although these interviews were only conducted at one site  and are therefore not generalizable to all students participating in the pilot  program, they provide insight about the students\u2019 experiences. We also  observed a pilot-funded class in session at that prison. On one college  campus, we interviewed a student who participated in the pilot while he  was incarcerated and who was now released and continuing his  education on campus. These sites were selected for variation in  experience delivering college classes in prisons, number of students  served, and to allow us to observe both men\u2019s and women\u2019s prison  facilities. To further understand schools\u2019 experiences as they implement  the pilot, in June 2018 we attended the third-annual convening of Second  Chance Pell partners, which was a 2-day conference for participating  schools, their correctional partners, and other stakeholders, hosted by  Vera.", "To assess how Education is monitoring and evaluating the pilot, and what  opportunities, if any, exist for improvement, we reviewed Education\u2019s  documentation on the pilot\u2019s objectives (including any evaluation  objectives), and analyzed the data collection instruments Education uses  to monitor the pilot. We met with Office of Federal Student Aid officials to  discuss the department\u2019s plans for evaluating and reporting on the pilot\u2019s  results. We compared Education\u2019s efforts to leading practices we  identified for effective pilot design and evaluation. We interviewed officials  knowledgeable in the area of evaluation and prison education, including  officials from the Urban Institute, Vera, the Washington State Board of  Community and Technical Colleges, and New America. Finally, we asked  officials from our purposive sample of schools about their experiences  with Education\u2019s reporting requirements, perspectives on what additional  information Education could collect to demonstrate the outcomes of the  pilot, and how schools themselves were measuring the performance of  their programs apart from what they were reporting to Education.", "We conducted this performance audit from January 2018 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Research on the Effects of Participating in Education while Incarcerated", "paragraphs": [], "subsections": [{"section_title": "Our Method to Select Research Literature", "paragraphs": ["To determine what is known about the effects of participation in  postsecondary correctional education, we conducted a literature search  for studies that analyzed the relationship between inmate participation in  postsecondary educational programs while incarcerated and outcomes  both while in prison and after release. Our literature search identified 221  published studies for review using a three-stage process. We:  (1)  Searched 16 authoritative bibliographic databases such as SCOPUS,  ERIC, PsychINFO, and ProQuest\u2019s Dissertations and Theses  Professional using relevant search terms, such as \u201cpostsecondary  correctional education,\u201d \u201cpostsecondary education,\u201d and \u201cprison,\u201d  (2)  Identified citations in the studies detailed above that appeared  germane to our research interests and did not already appear in our  list of studies, and  (3)  Identified several organizations with subject matter expertise, based  on mentions in the studies detailed above and organizations identified  in our prior work. We consulted the website of each organization for  any studies on the effects of correctional education.", "To assess each study\u2019s methodological rigor, we obtained information  about each study\u2019s methodology. We based our assessments on  generally accepted social science standards. We eliminated studies that  met any of the following criteria: (1) published prior to 2000; (2)  considered the education level of inmates, rather than participating in  education while incarcerated; (3) did not include postsecondary  educational programs; (4) did not use appropriate statistical methods to  adjust, or control, for group differences; or (5) involved a comparison  group that was not applicable to our research interests, such as juveniles.  In the first stage of the review, we examined the study abstracts.  Following the first stage of the review, 42 studies remained. In the second  stage, we read the full description of the study\u2019s methodology. Following  the second stage, 20 studies remained for our in-depth review."], "subsections": []}, {"section_title": "Research Findings", "paragraphs": ["Based on our review of the literature described above, studies found that  inmates who participated in a correctional education program while  incarcerated generally achieved more positive outcomes after release  (e.g. higher employment, lower recidivism) than inmates who did not  participate in a correctional education program while incarcerated. In  2013, RAND Corporation published a meta-analysis of 58 studies and  found that inmates who participated in correctional education had 43  percent lower odds of recidivating than non-participants, and 13 percent  higher odds of obtaining employment. Many studies we reviewed that  tested impacts on one or more measures of recidivism have also found  that incarcerated students who participated in a postsecondary program  or earned a postsecondary degree while in prison were less likely to be  re-arrested or re-incarcerated than those who did not participate. Some  research, however, has found that program completion may lead to  positive effects more than participation alone. For example, in one study,  researchers found completion of a postsecondary program while in prison  was associated with significantly and substantively lower odds of  returning to prison for either a new crime or a parole violation, but  participation in a postsecondary program without completion offered no  benefit relative to not having participated at all. Additionally, not all  researchers have observed positive effects in all study settings. In one  three-state study, researchers found that those who participated in a correctional education program were less likely to be re-arrested, re- convicted, and re-incarcerated in two states; in the third state, there were  no significant differences between participants and non-participants.", "Additionally, some research suggests incarcerated students who  participated in a postsecondary program while in prison were more likely  to find employment after release, work more hours, or earn higher wages  than those who did not participate, but this was not always found. For  example, in one study, earning a postsecondary credential while  incarcerated was associated with an increase in total hours worked and  total wages earned in the first 2 years after release; however, it was not  associated with an increase in the odds of finding employment.  Additionally, one study of inmates in three states found no statistically  significant difference in post-release employment in the 3-year follow-up  among participants in a correctional education program compared to non- participants.", "Several studies found that correctional education had positive outcomes  for taxpayers due to lower re-incarceration costs. For example, the RAND  Corporation estimated that for every dollar spent on correctional  education, five dollars are saved on three-year re-incarceration costs.  Another cost analysis in Washington State found that correctional  education had a return-on-investment of $19.62 for participants and  taxpayers for each dollar spent, and vocational education in prison had a  return-on-investment of $13.21 for each dollar spent.", "A few studies focused on outcomes for participants while they were still in  prison, and these generally suggest positive effects. For example, one  qualitative study found that participants in a postsecondary correctional  education program reported experiencing increased self-esteem and  motivation to reach their goals. A few other studies suggested that  participation in education programming reduced misconduct. In one  study, participants in college programs (but not other education  programs) reported receiving fewer tickets for misconduct. A 2006  meta-analysis, however, found that participating in an educational or  vocational program was not as effective at reducing misconduct as were  other types of programming."], "subsections": []}, {"section_title": "Research Limitations", "paragraphs": ["The research we identified on correctional education has several  limitations. First, the identified studies often measure dependent and  independent variables in a variety of ways, which makes comparison of  outcomes across studies difficult. For example, some studies define  \u201crecidivism\u201d as rearrest within 3 years, while others measure it as re- arrest or reincarceration within 1 year. Another example is that many  studies define \u201cparticipation in education\u201d as participation in a vocational,  secondary, or postsecondary program, while others define it as  participation specifically in a postsecondary program. Second, of the  studies we reviewed all but one include a small, geographically limited, or  otherwise non-generalizable sample. Third, many of the studies we  reviewed do not examine whether and how characteristics of facilities or  implementation procedures may have influenced\u2014negatively or  positively\u2014outcomes among participants. We identified nine articles that  specifically discuss implementation and facility characteristics; however,  none employ robust methodologies to test whether and how these  characteristics lead to better outcomes among participants. A fourth  limitation is selection bias, which is the possibility that incarcerated  students who choose to take classes are meaningfully different from  those who choose not to enroll, and that difference is the underlying  cause of their positive outcomes. For example, it is possible that  incarcerated people who take educational classes are already at the  lowest risk of recidivating and have the highest motivation to succeed  after release. If this is the case, then lower rates of recidivism and higher  rates of employment may be an effect of these characteristics rather than  an effect of taking classes while incarcerated. While some of the studies  we reviewed took methodological steps to reduce selection bias, not all  did."], "subsections": []}]}, {"section_title": "Appendix III: Select Characteristics and Educational Attainment Levels of the Incarcerated Population", "paragraphs": ["The United States had an estimated 6.6 million prisoners under the  jurisdiction of state and federal correctional authorities as of December  31, 2016 (year-end), according to the Bureau of Justice Statistics.  According to an analysis of 2009 American Community Survey data,  Black, Hispanic, and other non-white individuals make up about 32  percent of the total household population but are about 64 percent of the  male prison population. Further, 23 percent of incarcerated men had  received some postsecondary education, compared to about 56 percent  of men in the household (non-incarcerated) population as shown below in  figure 5.", "Among the incarcerated population, the analysis also found differences in  educational attainment by race. Specifically, for men age 18-24, about 10  percent of black men and about 11 percent of Hispanic men had  completed at least some college, compared to about 17 percent of white  (non-Hispanic) men.", "The educational characteristics of incarcerated women were similar to  that of men. Specifically, incarcerated women have lower levels of  educational attainment compared to women living in households;  however, incarcerated women had overall higher levels of educational  attainment compared to incarcerated men. Fifty-eight percent of women  in the household population had some postsecondary education  compared to about 31 percent of incarcerated women, as shown below in  figure 6."], "subsections": []}, {"section_title": "Appendix IV: Selected Characteristics of Schools Education Selected to Participate in the Second Chance Pell Pilot", "paragraphs": [], "subsections": [{"section_title": "Table 2. Selected Characteristics of Schools Education Selected to Participate in the Second Chance Pell Pilot", "paragraphs": [], "subsections": []}, {"section_title": "Institution Name **Mercy College", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix V: Data Items Collected by the Department of Education for the Second Chance Pell Pilot", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Melissa Emrey-Arras (Director),  Brett Fallavollita (Assistant Director), Charlotte Gamble (Analyst in  Charge), Sarah Williamson, Marissa Jones Friedman, Billy Commons,  Elizabeth Dretsch, Eric Hauswirth, Debra Prescott, Kevin Reeves, and  Ben Sinoff made key contributions to this report."], "subsections": []}]}], "fastfact": ["Federal Pell grants help open the door to a college education for millions of low-income students every year. However, students in prison are generally ineligible for the grants.", "The Department of Education is experimenting with changing that in its Second Chance Pell pilot. Since 2015, 59 schools participating in the pilot have awarded about $35 million in Pell grants to about 8,000 incarcerated students.", "The department collects data from participating schools but hasn't determined how to evaluate the pilot\u2014which could help decide the future of Pell grants for students in prison. We recommended evaluating and reporting on the pilot."]}
{"id": "GAO-18-322", "url": "https://www.gao.gov/products/GAO-18-322", "title": "Department of Health and Human Services: Office of Inspector General's Use of Agreements to Protect the Integrity of Federal Health Care Programs", "published_date": "2018-04-03T00:00:00", "released_date": "2018-05-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HHS-OIG has the authority to exclude providers and other entities that have committed certain acts, such as submitting false or fraudulent claims, from participation in federal health care programs. However, HHS-OIG can enter into agreements\u2014CIAs and IAs\u2014with providers and other entities as an alternative to exclusion. HHS-OIG is responsible for negotiating such agreements\u2014which it typically does at the same time the Department of Justice (DOJ) is negotiating a legal settlement to resolve related allegations\u2014and then monitoring the entities' compliance with them.", "GAO was asked to review HHS-OIG's use of these agreements. This report describes (1) the number of agreements and their general characteristics; (2) the circumstances that may lead to an agreement and the standard provisions of agreements; and (3) monitoring efforts and actions taken, if any, in response to noncompliance with the agreements.", "GAO examined agreements entered into from July 2005 (when HHS-OIG created its database) through July 2017 (most current at the time of GAO's analyses) and used HHS-OIG data to describe agreements' characteristics and actions to address noncompliance. GAO reviewed HHS-OIG documentation, including agreement templates and a selection of agreements to identify standard provisions. GAO also interviewed HHS-OIG and DOJ officials.", "GAO provided a draft of this report to HHS and DOJ. The agencies provided technical comments, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["To help improve adherence to federal health care program requirements by entities that have allegedly engaged in certain acts, such as submitting false or fraudulent claims, the Department of Health and Human Services' Office of Inspector General (HHS-OIG) entered into 652 agreements with those entities from July 2005 to July 2017. Since 2010, two types of agreements have been used: Corporate Integrity Agreements (CIA) and Integrity Agreements (IA). The more commonly used CIAs apply to larger entities, compared to IAs, which apply to individual practitioners or small businesses. From July 2005 through July 2017, about half of all agreements were with 3 types of entities\u2014individual or small group practices, hospitals, and skilled nursing facilities.", "For new agreements since July 2005, the most common initial allegations that led to an entity entering into an agreement included billing for services not provided and providing medically unnecessary services. When negotiating agreements, HHS-OIG uses one of six templates that address the different types of entities or conduct involved. Across agreements the provisions are generally similar\u2014for example, requirements to provide training on specified topics or to hire a compliance officer.", "HHS-OIG uses multiple strategies to oversee agreements, such as requiring periodic reports from the entities that demonstrate compliance and assigning a monitor to review these reports and conduct site visits. HHS-OIG can also take certain actions to address noncompliance. For example, for new agreements from July 2005 through July 2017, HHS-OIG imposed monetary penalties 41 times, ranging from $1,000 to more than $3 million (median of $18,000), and excluded 4 entities from participation in federal health care programs."]}], "report": [{"section_title": "Letter", "paragraphs": ["For federal health care programs like Medicare and Medicaid to function  effectively, the many providers and other entities who participate must  comply with federal health care program requirements. If an entity is  found to have committed certain acts, such as submitting false or  fraudulent claims, the Department of Health and Human Services\u2019 Office  of Inspector General (HHS-OIG) has the authority to exclude them from  future participation in Medicare, Medicaid, and other federal health care  programs. This permissive exclusion authority applies to certain acts,  such as those prohibited by the False Claims Act, Anti-Kickback statute,  and Stark law, among others.", "As an alternative to exercising its authority to exclude an entity, HHS-OIG  often negotiates and enters into corporate integrity agreements (CIAs)  and integrity agreements (IAs) with health care providers and other  entities, such as pharmaceutical manufacturers. CIAs apply to larger  corporations, and IAs apply to individual practitioners, small physician  groups, or businesses with a small number of employees, a single  location, or a limited corporate structure. These agreements typically last  either three or five years, depending on the type of agreement, and  include provisions that focus on the entity\u2019s implementation of compliance  measures or the development of a compliance program. For example, the  agreements generally require entities to implement training programs or  to hire outside reviewers to audit claims billed to Medicare and other  federal health care programs. Such measures are intended to help  promote adherence to applicable laws and program requirements and  protect the integrity of federal health care programs.", "The Office of Counsel to the Inspector General within HHS-OIG is  responsible for negotiating the agreements. HHS-OIG officials often  negotiate the agreements at the same time that officials at the  Department of Justice (DOJ) are separately negotiating a settlement of  legal claims against the entity for related false claims allegations. The  Office of Counsel to the Inspector General is also responsible for  monitoring compliance with the terms of the agreements once they take  effect. If an entity fails to comply with the obligations specified in its  agreement, HHS-OIG can use the enforcement provisions in the  agreement, which range from the ability to impose monetary penalties\u2014 referred to as stipulated penalties\u2014to potential exclusion from federal  health care programs for material breaches of a repeated or flagrant  nature.", "Both CIAs and IAs are key tools in the government\u2019s efforts to promote  compliance with applicable laws and program requirements and to ensure  the integrity of federal health care programs. Concerns have been raised  that there is limited information available to the public regarding HHS- OIG\u2019s implementation of CIAs and IAs. You asked us to review issues  related to HHS-OIG\u2019s use and oversight of these agreements. This report  examines  1.  the number of agreements HHS-OIG has entered into since July 2005  and their general characteristics;  2.  the circumstances that may lead HHS-OIG to seek an agreement with  an entity and the standard provisions of agreements; and  3.  how HHS-OIG monitors agreements and the actions HHS-OIG has  taken, if any, in response to any entity\u2019s noncompliance with  agreement terms since July 2005.", "To determine the number of agreements HHS-OIG has entered into since  July 2005 and their characteristics, we primarily relied on a database  created and maintained by HHS-OIG to track agreements. We examined  all agreements entered into by HHS-OIG from July 14, 2005\u2014the date  the agency created its database\u2014to July 26, 2017, the date we obtained  an electronic copy of the database. We analyzed data on the number of  agreements, type of agreements, and the type of entities involved. We  also analyzed features of any related legal settlements with DOJ that  were in HHS-OIG\u2019s database, including settlement amounts and whether  cases were brought by DOJ, or by a private individual under the  whistleblower, or qui tam, provisions of the False Claims Act. We also  interviewed HHS-OIG officials with relevant policy and technical  expertise.", "To determine the reliability of HHS-OIG\u2019s agreement database, we  reviewed supporting documentation, and we discussed the accuracy of  the data, and the controls in place for entering and updating the data, with  knowledgeable HHS-OIG officials. We also reviewed the data to identify  any data fields that were blank or that had other anomalies and clarified  with HHS-OIG any corrections that were needed. On this basis, we  determined that the data were sufficiently reliable for the purposes of our  reporting objectives.", "To examine the circumstances that may lead HHS-OIG to seek an  agreement with an entity, we analyzed HHS-OIG\u2019s data for all  agreements entered into from July 2005 through July 2017 regarding the  initial allegations in the investigations associated with the HHS-OIG  agreements during that time. To describe the standard provisions of  agreements, we reviewed the different agreement templates that HHS- OIG officials use to guide development of the agreements. In addition, we  reviewed 32 agreements that HHS-OIG had entered into from January  2010 through July 2017\u2014a 10 percent sample of all agreements during  this time. We selected agreements from January 2010 through July 2017,  because the purpose of our review was to identify current agreement  provisions, and prior to 2010 other agreement types were used that have  been phased out and are not currently used. We used this review to  identify examples of standard provisions and to gain a broad  understanding of how actual agreements compare to HHS-OIG\u2019s  templates. Although our sample was not generalizable, we used  agreement type (e.g., CIA or IA) and type of entity (e.g., hospital or  individual practitioner) as selection criteria to ensure that we selected  agreements that were representative of the proportion that each  agreement type and entity type represented of total agreements. We  analyzed HHS-OIG\u2019s data to understand the number and type of reviews,  such as reviews of Medicare claims, which have been required in  agreements from July 2005 through July 2017. We also interviewed HHS- OIG officials about the agency\u2019s exclusion authority, the agency\u2019s  negotiation of agreements, and the standard provisions included in  agreements. Finally, we interviewed DOJ officials regarding the DOJ legal  settlement process and how, if at all, it relates to HHS-OIG\u2019s agreements.", "To examine how HHS-OIG monitors agreements and addresses  noncompliance, we reviewed relevant documentation, including  agreement templates, which outline the conditions in which an entity  would be considered in breach or default of its agreement. We also  analyzed data from HHS-OIG\u2019s database on the actions HHS-OIG has  taken for identified noncompliance, including the amounts of any  stipulated penalties that HHS-OIG demanded from entities and the  number of exclusion letters HHS-OIG issued, that were associated with  any agreements that HHS-OIG entered into from July 2005 through July  2017. Finally, we interviewed HHS-OIG officials about their process for  monitoring agreements and the potential actions that officials can take if  they find that an entity is not in compliance with the terms of its  agreement.", "We conducted this performance audit from March 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "HHS-OIG Exclusion Authority", "paragraphs": ["HHS-OIG has the authority to exclude providers and other entities that  have committed certain acts from participation in federal health care  programs. According to HHS-OIG guidance, exclusion is a remedial  measure designed to protect federal health care programs from any entity  whose participation constitutes a risk to the programs or to program  beneficiaries. Federal health care programs will not pay for any items or  services furnished, ordered, or prescribed by excluded entities.  Exclusions are mandatory under certain circumstances and permissive in  others. In particular, mandatory exclusion applies to offenses that result  in convictions relating to patient abuse or neglect and other crimes related  to federal health care programs. When these offenses occur, but there  is no criminal conviction, HHS-OIG may exercise its permissive exclusion  authority.", "In certain circumstances where HHS-OIG can exercise its permissive  exclusion authority, it evaluates each situation and decides what action to  take based on its assessment of the future risk the entity poses to federal  health care programs. Actions that HHS-OIG can consider taking  include the following:", "Exclusion. HHS-OIG will exclude the highest-risk entities from  participation in federal health care programs.", "Require the entity to enter into an agreement. HHS-OIG can  require an entity to enter into a CIA or IA in exchange for a release of  HHS-OIG\u2019s exclusion authority. According to HHS-OIG guidance, the  goals of these agreements are to strengthen an entity\u2019s compliance  program and promote compliance so that any issues in the future can  be prevented or identified, reported and corrected.", "Heightened scrutiny. According to HHS-OIG officials, heightened  scrutiny is reserved for situations in which the agency determined that  an agreement was warranted but the entity was uncooperative. In  such situations, HHS-OIG considers what other unilateral monitoring  steps it can take to impose greater scrutiny. For example, according  to HHS-OIG guidance, the agency has audited, evaluated, or  investigated entities after fraud settlements when the entity would not  enter into an agreement with HHS-OIG and it has made referrals to  the Centers for Medicare & Medicaid Services for claims reviews.", "Reserve exclusion authority. For certain entities, HHS-OIG may  reserve its exclusion authority and take \u201cno further action,\u201d meaning  that HHS-OIG will not exclude the entity at that time and will not  require the entity to enter into an agreement.", "Release of exclusion authority. In certain circumstances, HHS-OIG  will release its exclusion authority without imposing additional  requirements. Specifically, HHS-OIG may do this in situations in which  the entity has self-disclosed the fraudulent conduct to HHS-OIG or  has agreed to integrity obligations with a state or the DOJ that HHS- OIG has determined are sufficient."], "subsections": []}, {"section_title": "Agreement Negotiation and Monitoring", "paragraphs": ["In situations in which HHS-OIG is evaluating whether to exercise its  permissive exclusion authority, DOJ is often separately negotiating a  settlement of the civil and/or criminal case against the entity on behalf of  the federal government. Typically, such settlements resolve allegations  that the entity is liable under the False Claims Act for submitting false  claims to federal health care programs. According to both HHS-OIG and  DOJ officials, if there is a related DOJ civil or criminal case and HHS-OIG  officials are also negotiating an agreement with the entity in lieu of  exclusion, the DOJ and HHS-OIG negotiations often occur at the same  time or \u201con a parallel track.\u201d However, according to these officials, while  HHS-OIG and DOJ officials share information as needed, each engage in  separate negotiations with the entity. According to HHS-OIG officials,  there are also situations in which HHS-OIG enters into an agreement  when there is not a related DOJ legal settlement.", "The Office of Counsel to the Inspector General within HHS-OIG is  responsible for negotiating agreements and for monitoring them once  they take effect. All agreements include provisions that identify the  enforcement actions HHS-OIG can take when it finds that an entity has  not complied with the terms of its agreement. These enforcement  provisions outline the monetary penalties, referred to in the agreements  as stipulated penalties, which HHS-OIG will demand if it identifies that the  entity has failed to comply with certain agreement terms. The  enforcement provisions also outline what constitutes a material breach of  the agreement and indicate that exclusion can result if the entity is found  to have materially breached its agreement. Examples of a material breach  of the agreement include repeated violations of any of the agreement\u2019s  obligations and the failure to respond to a demand letter from HHS-OIG  concerning the payment of stipulated penalties."], "subsections": []}]}, {"section_title": "From 2005 through 2017, HHS-OIG Entered into Dozens of New Agreements Each Year, the Majority of Which Applied to Three Types of Entities", "paragraphs": ["From July 2005 through July 2017, HHS-OIG entered into 652 new  agreements\u2014an average of about 50 agreements per year\u2014ranging from  a high of 83 to a low of 37. The agreements were almost exclusively  CIAs, which apply to larger corporations, and IAs, which apply to  individual practitioners and entities such as small physician groups. HHS- OIG has used CIAs and IAs exclusively since 2010. From 2010 to July  2017, 74 percent of agreements have been CIAs and 26 percent of  agreements have been IAs. See figure 1 for more information on the  number and types of agreements since July 2005.", "HHS-OIG officials said that the agency transitioned away from other  agreement types because of certain limitations that made them less  useful than CIAs and IAs. For example, one historical agreement type\u2014 Certification of Compliance Agreements\u2014did not provide sufficient  opportunities for oversight, yet it required significant resources to create,  officials said. Another discontinued agreement type\u2014Settlement  Agreement with Integrity Provisions\u2014was negotiated as part of the DOJ  settlement, such that HHS-OIG needed to work through DOJ if there was  a need to take action for noncompliance. Although HHS-OIG and DOJ  negotiate their agreements and settlements separately now, the majority  of CIAs and IAs, are still associated with a DOJ legal settlement. Of the  652 agreements from July 2005 through July 2017, 619 were paired with  a DOJ settlement, while 33 were the result of HHS-OIG independently  exercising its exclusion authority.", "The total number of agreements in effect each year for the period we  reviewed, which includes new agreements and ongoing agreements from  past years, has decreased. Between 2006 and 2016 (the earliest and  latest full years included in HHS-OIG\u2019s database), the number of  agreements in effect for any part of the calendar year decreased by 44  percent (see fig. 2). According to HHS-OIG officials, this is because, over  time, the agency has increasingly focused its resources on entities that  present the highest risk of potential fraud. Specifically, HHS-OIG officials  said that in 2006 they first imposed a monetary threshold for damages  caused to federal health care programs, above which the agency would  pursue an agreement. HHS-OIG officials told us that they initially set this  threshold at $100,000, but that in 2014 the agency increased it to  $500,000 for smaller entities (i.e., those eligible for IAs) and $1 million for  larger entities (i.e., those eligible for CIAs). HHS-OIG officials added that  the monetary threshold is one factor that triggers pursuit of an agreement,  and that risk of beneficiary harm may also cause the agency to seek an  agreement, even when damages are low. HHS-OIG, in using these  criteria, said that it is foregoing pursuing agreements with low-damage,  lower-risk entities, instead taking no further action but reserving its  exclusion authority.", "HHS-OIG entered into agreements with a wide range of entities, but most  were concentrated among a few types of entities. Specifically, HHS-OIG  entered into agreements with 30 different types of entities from July 2005  through July 2017, though slightly more than half of the agreements were  with 3 types\u2014individual/small group practices, hospitals, and skilled  nursing facilities. Another quarter of the agreements were with medical  group practices, pharmaceutical manufacturers, clinics, medical device  manufacturers, and ambulance companies. (See fig. 3.)", "HHS-OIG officials stated that it is rare for the agency to enter into multiple  agreements with the same entity, adding that the few entities that have  had multiple agreements were generally large corporations with multiple  divisions or sites, and that the agreements applied to different areas of  the firms\u2019 business. Our analysis of HHS-OIG data showed that 15  entities had more than one agreement from July 2005 through July 2017.  In other situations, HHS-OIG extended an ongoing agreement, rather  than entering a new agreement with the same entity, in light of new  allegations that arose during the time the agreement was in effect. From  July 2005 through July 2017, the time periods for five agreements were  extended beyond the standard five years to reflect new settlements with  DOJ.", "Almost all of the agreements we reviewed were negotiated by HHS-OIG  at the same time DOJ was negotiating a legal settlement with the entity to  resolve related allegations under the False Claims Act. Many of these  allegations resulted from cases filed by a whistleblower under the False  Claims Act\u2019s qui tam provisions\u2014commonly referred to as qui tam  cases. Slightly more than half of HHS-OIG agreements are with entities  who settled qui tam cases. From July 2005 through July 2017,  agreements imposed by HHS-OIG as a result of claims alleged by a  whistleblower in a qui tam case increased in prevalence compared to  agreements that were not associated with a qui tam case. (See fig. 4.)", "The DOJ-negotiated settlement amounts associated with qui tam cases,  among those entities that also entered into an agreement with HHS-OIG,  greatly exceeded the settlement amounts negotiated for non-qui tam  cases and make up most of the total settlement amounts. From July 2005  through July 2017, total settlement amounts, among those entities that  also entered into an agreement with HHS-OIG, were $16.1 billion for qui  tam cases and $3.1 billion for all others. A spike in settlement amounts in  2012 reflects two settlements, one of $2 billion and another of $800  million, with two pharmaceutical manufacturers. (See fig. 5.)", "Although pharmaceutical manufacturers accounted for about 6 percent of  entities subject to an agreement with HHS-OIG from July 2005 through  July 2017, they represent a large share of the settlement amounts DOJ  negotiated with those entities: $11.8 billion out of $19.2 billion (62  percent). The next largest shares of settlement amounts DOJ negotiated  were with hospitals at $2.5 billion and medical device manufacturers at  almost $900 million. Most of the pharmaceutical settlements associated  with HHS-OIG agreements were qui tam cases (31 of 37 agreements),  and a third of all qui tam settlement amounts were associated with just 4  pharmaceutical qui tam cases."], "subsections": []}, {"section_title": "HHS-OIG Considers Risk Factors, Such As an Entity\u2019s Conduct, When Evaluating Whether to Exercise its Exclusion Authority and in Negotiating Agreements", "paragraphs": [], "subsections": [{"section_title": "HHS-OIG Has Criteria to Determine Whether to Pursue Exclusion or Enter into an Agreement; Certain Initial Allegations Were Common among Entities That Entered Into Agreements", "paragraphs": ["HHS-OIG guidance includes the criteria that agency officials said they  follow to determine whether to exercise the agency\u2019s permissive  exclusion authority, or take an alternate action, such as entering into an  agreement with an entity. According to HHS-OIG officials and agency  guidance, each situation is evaluated on a risk continuum and the course  of action chosen is based on the agency\u2019s assessment of the future risk  the entity poses to federal health care programs. HHS-OIG has four  broad categories of criteria that it applies in deciding where an entity falls  on the risk continuum and which action to take. These four categories are  (1) the nature and circumstances of the conduct; (2) conduct during the  government\u2019s investigation; 3) whether the entity has made efforts to  improve its conduct; and 4) the entity\u2019s history of compliance. According  to HHS-OIG officials, the agency will exclude the highest-risk entities, and  since fiscal year 2011, under its permissive exclusion authority, HHS-OIG  has excluded 65 entities that were the subject of a related DOJ legal  settlement. However, HHS-OIG guidance states that HHS-OIG often  concludes that exclusion is not necessary, so long as the entity will enter  into an agreement with the agency.", "For new agreements from July 2005 through July 2017, our review of  HHS-OIG data showed that there were four main types of initial  allegations that resulted in the entity entering into an agreement with  HHS-OIG. This included: billing for services not rendered - 194 agreements (about 30 percent); provision of medically unnecessary services - 136 agreements (about acts prohibited under the Anti-Kickback statute - 135 agreements  (about 21 percent); and misrepresentation of services and/or products \u2013 131 agreements  (about 20 percent).", "The majority of agreements (about 63 percent) were associated with one  initial allegation. However, some agreements were associated with more  than one initial allegation: about 23 percent of agreements from July 2005  through July 2017 were associated with two initial allegations and about  15 percent were associated with three or more initial allegations."], "subsections": []}, {"section_title": "Agreements Included Standard Provisions with Some Variation to Address Risks Specific to the Entities", "paragraphs": ["We compared the provisions required in selected agreements to those  outlined in HHS-OIG\u2019s current agreement templates and found that the  provisions were generally similar. All of HHS-OIG\u2019s templates and the  agreements we reviewed were organized into the same broad sections.  For example, all of the templates and agreements contained sections  detailing the information entities were required to submit to HHS-OIG in  an initial implementation report and in annual reports, and all agreements  had a section that outlined the enforcement provisions for the agreement.  In addition, there generally was a standard term for agreements of either  three or five years depending on the type of agreement. All 23 of the CIAs  we reviewed had a term of five years, and of the nine IAs we reviewed,  five had a 5-year term and four had a 3-year term. The IAs with a longer  5-year term generally were older agreements from 2010 or 2011.  According to HHS-OIG officials, the current practice is to negotiate 3-year  terms for IAs and 5-year terms for CIAs.", "HHS-OIG has developed agreement templates that include standard  provisions to address the risks an entity\u2019s noncompliance could pose to  federal health care programs. Additionally, in some templates, provisions  are included to address the specific types of conduct that gave rise to the  agreement. HHS-OIG has four templates for use in negotiating CIAs and  two for negotiating IAs, and HHS-OIG officials said that they will use one  of the six templates as a starting point when drafting an agreement.  HHS-OIG officials told us that the terms included in agreements are  similar across CIAs and IAs because certain provisions are non- negotiable. For example, officials said that they always include provisions  requiring an entity to hire a compliance officer, submit annual reports, and  provide HHS-OIG with access to the entity when requested. Across the  various types of templates, there are similar standard provisions, and our  review of selected agreements found many of the same provisions. For  example, among the 32 agreements we reviewed:", "All 32 agreements required the entity to engage an independent  review organization to perform the agreement\u2019s required reviews,  including claims reviews. Entities have retained a variety of individuals  and businesses as their independent review organization, ranging  from small regional consulting firms to large national consulting or  accounting firms. For agreements HHS-OIG has entered into from  July 2005 through July 2017, our review of the agency\u2019s data found  that there were 173 unique associated independent review  organizations.", "All 32 agreements had training and education requirements, although  the specifics of the required training, such as the number of hours or  the specific topics, varied across agreements.", "28 of the 32 agreements reviewed required the entity to have a  compliance officer. The four agreements that did not require this were  two IAs for small group practices, one for a medical group practice,  and one for a clinic that named an individual practitioner as a party to  the agreement.", "Although agreements shared many standard provisions, some provisions  were unique to either CIAs or IAs. Many of the CIAs that we reviewed  included provisions detailing specific responsibilities for the entity\u2019s board  of directors (18 of 23 CIAs) and requirements for certain high-level  employees to annually certify that they were in compliance with federal  health care program requirements and the provisions of the agreement  (12 of 23 CIAs). None of the nine IA\u2019s we reviewed included these  provisions. On the other hand, all nine IAs we reviewed (and one CIA)  had provisions regarding third-party billing. If the provider subject to the  agreement contracted with a third-party billing company to submit claims  on the provider\u2019s behalf, these agreements required the provider to certify  that they did not have an ownership or controlling interest in the third- party billing company.", "In addition to agreement type, provisions also varied due to the nature of  the conduct that led to the agreement or the type of entity entering into  the agreement. For example, some agreements included provisions  intended to ensure compliance with the Anti-Kickback statute and Stark  law (8 of 32). HHS-OIG officials told us that specific provisions related to  the Anti-Kickback statute and Stark law would only be present in  agreements when the conduct that had led to the agreement involved  acts prohibited under those statutes, such as prohibited kickbacks or  improper referral arrangements. Other agreements include provisions  specific to monitoring quality of care issues. For example, one of the  agreements we reviewed was a quality of care CIA that required the entity  to retain an independent monitor to examine, among other things, the  entity\u2019s internal quality control systems and its response to quality of care  issues. In addition, 2 of the 32 agreements we reviewed were with  pharmaceutical manufacturers and contained provisions not in other  agreements because they would only be relevant to a pharmaceutical  manufacturer. For example, both agreements we reviewed had a  requirement that the manufacturers, within 30 days, provide HHS-OIG  with a copy of any written communication with the Food and Drug  Administration that materially discussed the actual or potential unlawful or  improper promotion of the manufacturer\u2019s product.", "According to HHS-OIG data, most of the 652 agreements entered into  from July 2005 through July 2017 (about 95 percent) required the entity to  perform at least one review as part of the agreement. The most common  types of required reviews captured in HHS-OIG\u2019s database during this  time were reviews of health care claims, unallowable costs, and  arrangements. Slightly more than half of the agreements (19 of 32) we  reviewed required the entity to perform a claims review. Fifteen of these  were annual claims reviews and four were quarterly claims reviews. In  addition, slightly more than a quarter of agreements we reviewed (9 of 32)  required an unallowable costs review. Finally, a quarter of the  agreements (8 of 32) required the entity to perform an arrangements  review. The eight agreements requiring an arrangements review were the  same agreements that included a section with provisions related to  compliance with the Anti-Kickback statute and Stark law. A few  agreements had required reviews that were not common across the  agreements we reviewed and usually related to the types of services that  the entity provided. For example, three agreements we reviewed required the entity to conduct a cardiac catheterization procedures review,  described as an evaluation and analysis of the medical necessity and  appropriateness of interventions performed either in the entity\u2019s cardiac  catheterization lab or by the provider."], "subsections": []}]}, {"section_title": "HHS-OIG Uses Multiple Strategies to Ensure Compliance with Terms of Agreements and Imposes Certain Penalties When Noncompliance Is Identified", "paragraphs": [], "subsections": [{"section_title": "HHS-OIG Reviews Required Reports, Communicates with Entities, and Conducts Site Visits to Monitor Entities\u2019 Compliance with Agreements", "paragraphs": ["According to HHS-OIG officials, the agency assigns a monitor to each  agreement\u2014an HHS-OIG staff attorney or program analyst\u2014who, for the  duration of the agreement, oversees the entity\u2019s compliance with the  terms of its agreement. Per officials and what is outlined in internal  agency documents that describe how to monitor agreements, the  monitors\u2019 responsibilities include:", "Reviewing the information that entities provide in their initial  implementation report, annual reports, and any other reports required  under the agreement within the time frames established by internal  HHS-OIG guidance.", "Communicating with entities to provide assistance to those who need  help in understanding the requirements or to request additional  information when a required report has missing or incomplete  information.", "Reviewing and responding to periodic correspondence received from  entities, including notifications required by the agreement, reportable  event disclosures, and other communications from the entity.", "Drafting any letters that are sent to the entity, if noncompliance is  identified, including letters demanding the payment of penalties\u2014 referred to as stipulated penalty demand letters.", "Conducting site visits to verify that the entities are complying with the  agreements properly. According to internal HHS-OIG guidance,  monitors are to select sites primarily based on concerns that they may  have with specific entities, as well as other factors, such as the type of  provider, the size or complexity of the entity, length of the agreement,  and the severity or complexity of the offenses that resulted in the  agreement.", "According to internal HHS-OIG guidance regarding site visit protocol and  agency officials we spoke to, during site visits, HHS-OIG officials may  conduct document reviews of training records, policies and procedures, or  other documents; hold meetings with the compliance officer or board  members; or tour the facility, among other activities. Officials said that two  HHS-OIG officials typically conduct the site visit\u2014the agreement\u2019s  monitor and one other official\u2014and the site visits typically last about one  day to a day-and-a-half. For agreements entered into from July 2005  through July 2017, we found that HHS-OIG officials conducted 211 site  visits that were associated with 155 agreements. Thirty of these  agreements were associated with more than one site visit ranging from 2  to 10 visits. The majority of the 211 site visits were for CIAs (about 87  percent). During the full calendar years from 2006 through 2016, HHS- OIG completed an average of 18 site visits each year."], "subsections": []}, {"section_title": "HHS-OIG Works with Entities to Ensure Compliance but May Impose Monetary Penalties or Exclude Entities for Noncompliance in Some Cases", "paragraphs": ["Although most entities comply with the provisions of their agreements,  according to HHS-OIG officials, when noncompliance occurs, the most  common issue is the late submission of required reports or reviews.  According to HHS-OIG officials, other types of noncompliance range from  falsely certifying the accuracy of reported information to submitting  reports that do not include the required elements. According to officials  and as outlined in agreements, HHS-OIG addresses noncompliance  through a series of escalating steps, which, in rare instances, may result  in the HHS-OIG imposing penalties on an entity as laid out in the  agreement (stipulated penalties) or even exclusion of an entity from  federal health care programs. Steps HHS-OIG takes to address  noncompliance may include:", "Working with the entity before taking official action. For example,  officials told us that monitors typically request additional  documentation or information from providers when they identify  potential issues rather than imposing stipulated penalties immediately.", "Demanding that the entity pay stipulated penalties. HHS-OIG will send  a stipulated penalties demand letter to an entity in accordance with  the breach and default terms of the agreement. The stipulated penalty  amounts for noncompliance with the different provisions are specified  in the agreement. According to officials, the stipulated penalty  amounts in agreements are non-negotiable and the amounts  associated with noncompliance with specific provisions do not change  across agreements. The stipulated penalties in agreements range  from $1,000 to $50,000 per violation. For example, for each day an  entity fails to submit a complete annual report to HHS-OIG by the  submission deadline, the stipulated penalty is $2,500 for CIAs and  $1,500 for IAs. In addition, for all agreements, each false certification  submitted by or on behalf of the entity results in a stipulated penalty of  $50,000.", "For agreements entered into from July 2005 through July 2017, our  review of HHS-OIG data found that HHS-OIG issued 41 letters  demanding stipulated penalties (between 0 and 7 letters per year) for  actions such as the failure to submit annual reports and employing  individuals excluded from participation in federal health care  programs. In total, HHS-OIG collected about $5.4 million in  stipulated penalties during this time. Penalty amounts demanded in  each letter ranged from $1,000 to over $3 million, with a median of  $18,000. According to HHS-OIG, the stipulated penalty of over $3  million was a record penalty for failure to comply with an agreement.  This penalty, according to HHS-OIG, resulted from the entity\u2019s failure  to correct improper billing processes and poor claims submission  practices that had led to error rates and overpayments to the  company by Medicare for hospice services. These issues were  uncovered through the claims reviews required under the agreement  and HHS-OIG\u2019s site visits to the company\u2019s facilities.", "Determining that the entity is in material breach of the agreement. As  defined in agreements, this determination may result from repeated or  flagrant violations of agreement obligations; failure to notify HHS-OIG  of certain reportable events; failure to take corrective actions or make  appropriate refunds; failure to respond to a stipulated penalties  demand letter; or failure to engage an independent review  organization. From July 2005 through July 2017, HHS-OIG issued 10  material breach letters to entities informing them that HHS-OIG  intended to exclude them. However, the 10 material breach letters  were associated with only 6 agreements, and 5 of the 10 material  breach letters issued were to the same entity. These five letters were  issued to the entity between March 2012 and January 2014 for a  series of alleged material breaches of its agreement including, among  other things, a failure to report serious quality of care reportable  events or to perform training required under the terms of its  agreement. This entity, which was a national chain of clinics that  primarily provided dental services to children on Medicaid, was  ultimately excluded in September 2014 from participation in federal  health care programs, including Medicaid, for a period of five years.", "Excluding an entity from participation in federal health care programs.", "For agreements entered into from July 2005 through July 2017, we  found that HHS-OIG has issued five exclusion letters to entities for  failing to adhere to their agreements. These exclusion letters were  associated with four agreements\u20142 CIAs and 2 IAs. According to  HHS-OIG\u2019s data, these exclusions occurred in 2007 (1), 2014 (1), and  2015 (2). The four entities that were excluded included a durable  medical equipment provider, a national chain of clinics, a practice  management company, and a medical group practice. An agreement  affords the entity the opportunity to respond to a material breach letter  prior to the issuance of a notice of exclusion. However, an HHS-OIG  official said that, given the multiple steps involved in the breach and  default process, it is unlikely that a breach would be addressed  satisfactorily by the entity at this stage in the process. Of the four  entities that HHS-OIG excluded, three had also previously received a  notice of material breach from HHS-OIG."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS and DOJ for review and  comment. These departments provided technical comments, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of HHS, the  Attorney General, and the Inspector General of HHS. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or kingk@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 I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karen Doran (Assistant Director),  Alison Goetsch (Analyst-in-Charge), and Perry Parsons made key  contributions to this report. Also contributing were Sam Amrhein, Muriel  Brown, Dan Ries, Jennifer Rudisill, and Merrile Sing."], "subsections": []}]}], "fastfact": ["What happens if a doctor bills Medicare or Medicaid for services that could be considered fraud\u2014because they're medically unnecessary, or because the doctor didn't actually provide the services? Federal law prohibits these and other abuses of federal health care programs.", "When health care providers break these laws, the Department of Health and Human Services can prevent them from billing federal programs. Or, it can negotiate agreements with them instead\u2014for example, requiring them to have their billing records audited.", "We reviewed HHS's use of the agreement option and found that it made 652 agreements between July 2005 and July 2017."]}
{"id": "GAO-17-799", "url": "https://www.gao.gov/products/GAO-17-799", "title": "DHS Financial Management: Better Use of Best Practices Could Help Manage System Modernization Project Risks", "published_date": "2017-09-26T00:00:00", "released_date": "2017-09-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To help address long-standing financial management system deficiencies, DHS initiated its TRIO project, which has focused on migrating three of its components to a modernized financial management system provided by IBC, an OMB-designated, federal SSP. House Report Number 3128 included a provision for GAO to assess the risks of DHS using IBC in connection with its modernization efforts.", "This report examines (1) the extent to which DHS and the TRIO components followed best practices in analyzing alternatives, and the key factors, metrics, and processes used in their choice of a modernized financial management system; (2) the extent to which DHS managed the risks of using IBC for its TRIO project consistent with risk management best practices; and (3) the key factors and challenges that have impacted the TRIO project and DHS's plans for completing remaining key priorities. GAO interviewed key officials, reviewed relevant documents, and determined whether DHS followed best practices identified by GAO as necessary characteristics of a reliable, high-quality AOA process and other risk management best practices."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security's (DHS) TRIO project represents a key effort to address long-standing financial management system deficiencies. During 2012 and 2013, the TRIO components\u2014U.S. Coast Guard (Coast Guard), Transportation Security Administration (TSA), and Domestic Nuclear Detection Office (DNDO)\u2014each completed an alternatives analysis (AA) to determine a preferred alternative for modernizing its financial management system. GAO found that DNDO's AA substantially met the four characteristics\u2014well-documented, comprehensive, unbiased, and credible\u2014that GAO previously identified for a reliable, high-quality analysis of alternatives (AOA) process. However, Coast Guard's and TSA's AAs did not fully or substantially meet three of these characteristics, and DHS guidance for conducting AAs did not substantially incorporate certain best practices, such as identifying significant risks and mitigation strategies and performing an independent review to help validate the AOA process. Based on these analyses and other factors, the TRIO components determined that migrating to a federal shared service provider (SSP) represented the best alternative, and in 2014, DHS selected the Department of the Interior's Interior Business Center (IBC) as the federal SSP for the project. However, because Coast Guard's and TSA's AAs did not fully or substantially reflect all of the characteristics noted above, they are at increased risk that the alternative selected may not achieve mission needs.", "DHS also did not fully follow best practices for managing project risks related to its use of IBC on the TRIO project. Specifically, DHS followed three of seven risk management best practices, such as determining risk sources and categories and establishing a risk management strategy. However, it did not fully follow four best practices for defining risk parameters, identifying risks, developing risk mitigation plans, and implementing these plans largely because its guidance did not sufficiently address these best practices. For example, although DHS created joint teams with IBC and provided additional resources to IBC to help address risk mitigation concerns, it did not always develop sufficiently detailed risk mitigation plans that also included contingency plans for selected critical risks. As a result, although IBC's capacity and experience for migrating large agencies the size of Coast Guard and TSA was identified as a risk in July 2014, a contingency plan working group to address this concern was not established until January 2017. By not fully following risk management best practices, DHS is at increased risk that potential problems may not be identified or properly mitigated.", "DHS, IBC, Office of Management and Budget (OMB), and other federal oversight agencies identified various challenges that have impacted the TRIO project and contributed to a 2-year delay in the implementation of Coast Guard's and TSA's modernized solutions. These challenges include the lack of sufficient resources, aggressive schedule, complex requirements, increased costs, and project management and communication concerns. To help address these challenges, DHS and IBC established review teams and have taken other steps to assess potential mitigating steps. In May 2017, DHS determined that migrating the solution from IBC to a DHS data center represented the best option and initiated discovery efforts to further assess this as its path forward for the TRIO project."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DHS more fully follow best practices for conducting an AOA process and managing risks. DHS concurred with GAO's recommendations and described actions it will take, or has taken, in response."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since the Department of Homeland Security\u2019s (DHS) creation in 2003,  significant internal control and financial management system deficiencies  have hampered its ability to manage operations and to reasonably assure  effective financial management. DHS received a clean audit opinion on  its financial statements for 4 consecutive years\u2014fiscal years 2013, 2014,  2015 and 2016\u2014in which it reported assets totaling $98 billion as of  September 30, 2016. However, according to DHS\u2019s financial statement  auditors, these financial management deficiencies have persisted, and  accordingly, DHS faces long-term challenges in sustaining a clean audit  opinion on its financial statements and providing reliable, timely, and  useful financial data to support operational decision making. These  deficiencies contributed to our decision to designate DHS\u2019s management  functions, including financial management, as high risk. As noted in our  2017 high-risk report, until remediated, these deficiencies will continue to  hamper DHS\u2019s ability to establish effective internal controls over financial  reporting and comply with financial management system requirements.", "In 2013, we reported on challenges related to DHS\u2019s previous attempts to  implement a department-wide integrated financial management system.  DHS subsequently adopted a decentralized approach to upgrade or  replace legacy financial management systems. DHS has been evaluating  various options for modernizing its systems, including the use of shared  service providers (SSP). As part of this effort, DHS initiated three projects  for modernizing the systems of selected DHS components, including its  TRIO modernization project. The TRIO project has focused on migrating  the Domestic Nuclear Detection Office (DNDO), Transportation Security  Administration (TSA), and U.S. Coast Guard (Coast Guard), the TRIO  components, to a modernized financial management system solution  provided by the Department of the Interior\u2019s Interior Business Center  (IBC). As of May 2017, significant challenges have also impacted the  TRIO project, including a 2-year delay in Coast Guard\u2019s and TSA\u2019s  expected migrations to a modernized financial management system.", "In May 2014, the Office of Management and Budget (OMB) and the  Department of the Treasury (Treasury) designated IBC as one of four  federal SSPs for financial management to provide core accounting and  other services to federal agencies. In addition, Treasury\u2019s Office of  Financial Innovation and Transformation\u2019s (FIT) responsibilities related to  the governance and oversight of federal SSPs were subsequently  transferred to the Unified Shared Services Management office (USSM)  after USSM was established in October 2015 as an entity within the  General Services Administration.", "Recognizing the cost and performance risks associated with DHS\u2019s  efforts to transition to a SSP, the House report accompanying H.R. 3128,  a bill for DHS appropriations for fiscal year 2016, included a provision for  GAO to assess the risks of DHS using IBC in connection with DHS\u2019s  financial management system modernization efforts. Our objectives were  to determine (1) the extent to which DHS and the TRIO components  followed best practices in analyzing alternatives, and the key factors,  metrics, and processes used in their choice of a modernized financial  management system; (2) the extent to which DHS managed the risks of  using IBC for its TRIO project consistent with risk management best  practices; and (3) the key factors and challenges that have impacted the  TRIO project according to DHS, IBC, OMB, FIT, and USSM and DHS\u2019s  plans for completing the remaining key priorities.", "To determine the extent to which DHS and TRIO components followed  best practices in analyzing alternatives, we reviewed documentation  developed by the TRIO components and evaluated the TRIO  components\u2019 alternatives analyses (AA) processes against GAO\u2019s  identified 22 best practices for conducting an analysis of alternatives  (AOA) process. Based on this assessment, we determined an overall  score for the TRIO components\u2019 AA process as compared to the AOA  best practices in four summary characteristics\u2014(1) well-documented,   (2) comprehensive, (3) unbiased, and (4) credible\u2014for a reliable, high- quality AOA process. We provided our preliminary assessment to DHS  and the TRIO components for review and revised our assessment, as  needed, based on any additional information they provided. In addition,  we reviewed DHS\u2019s guidance for conducting AOAs and AAs against  GAO\u2019s identified AOA best practices.", "To determine the key factors, metrics, and processes used by DHS\u2019s  TRIO components in developing and evaluating DHS\u2019s alternative  solutions and final choice for financial system modernization, we reviewed  each component\u2019s AA, including a description of (1) the alternatives  considered, (2) the market research conducted, (3) the alternatives  evaluated, (4) the selection criteria used and how the criteria were  weighted, (5) how each alternative scored against the selection criteria,  and (6) the alternative that scored the best according to the components\u2019  evaluations.", "To determine the extent to which DHS managed the risks of using IBC  consistent with risk management best practices, we reviewed DHS\u2019s and  the TRIO components\u2019 risk management guidance and other  documentation supporting their risk management efforts, including risk  registers, mitigation plans, status reports, and risk management meeting  minutes. We also met with officials to gain an understanding of the key  processes and documents used for managing and reporting on TRIO  project risks. We compared the documentation and information we  obtained to best practices published by the Software Engineering Institute  (SEI) for preparing for risk management, identifying and analyzing risks,  and mitigating identified risks.", "To identify the key factors and challenges that have impacted the TRIO  project and DHS\u2019s plans for completing its remaining key priorities, we  met with the parties involved in the TRIO project consisting of DHS, IBC,  FIT, and USSM officials, as well as OMB staff to obtain their perspectives.  In addition, we reviewed documentation related to the TRIO project,  including status reports and memorandums, leadership briefings, and  other presentations.", "We conducted this performance audit from March 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Appendix I provides  additional details on our scope and methodology."], "subsections": [{"section_title": "Background", "paragraphs": ["Since DHS\u2019s creation in 2003, significant internal control and financial  management system deficiencies have hampered its ability to reasonably  assure effective financial management and to manage operations. These  deficiencies contributed to our decision to designate DHS\u2019s management  functions, including financial management, as high risk. To help address  these deficiencies, DHS initiated a decentralized approach to upgrade or  replace legacy financial management systems and has been evaluating  various options for modernizing them, including the use of SSPs. DHS  initiated three projects for modernizing the systems of selected DHS  components, including its TRIO modernization project. The TRIO project  has focused on migrating the financial management systems of Coast  Guard, DNDO, and TSA to a modernized solution provided by IBC. DHS\u2019s  efforts to effectively assess and manage risks associated with this project  are essential to DHS\u2019s realizing its modernization goals.", "In 2013, OMB issued a memorandum directing agencies to consider  federal SSPs as part of their AAs. Also, in May 2014, Treasury and  OMB designated IBC as one of four federal SSPs for financial  management to provide core accounting and other services to federal  agencies. This designation was based on Treasury and OMB\u2019s evaluation  of the four service providers\u2019 ability to assist federal agencies in meeting  their accounting and financial management needs, including experience  with implementing financial management systems and providing other  financial management services to customers, cost of services provided,  compliance with financial management and internal control requirements,  commitment to shared services, capacity, and long-term growth strategy.  FIT\u2019s responsibilities related to the governance and oversight of federal  SSPs were subsequently transferred to USSM after USSM was  established in October 2015."], "subsections": [{"section_title": "TRIO Modernization Project", "paragraphs": ["Because of concerns that its Core Accounting System (CAS) Suite was  outdated, inefficient, and did not reliably meet requirements, Coast Guard  completed an AA in January 2012 to assist in developing a path forward  for modernizing its financial management system. In August 2012, Coast  Guard established its CAS Replacement project team to further evaluate  two of the alternatives considered in its AA and develop a recommended  course of action. In addition, Coast Guard determined that hosting,  owning, operating, and managing a financial management system were  not among its core competencies. Because TSA and DNDO also relied  on CAS as their primary accounting system, they also conducted AAs to  identify the best alternative for transitioning to a modernized financial  management system solution.", "The AAs conducted by the TRIO components during 2012 and 2013  considered the use of federal and commercial SSPs and other options. In  addition, Coast Guard completed additional market research including  further analysis of commercial SSPs in June 2013. In July 2013, the TRIO  components determined that migrating to a federal SSP was the best  course of action and subsequently conducted discovery phase efforts with  IBC from November 2013 through May 2014 to further explore the  functional requirements for procurement, asset, and financial  management services. Based on these efforts, in July 2014, the TRIO  components recommended that they proceed with implementation of the  IBC shared services solution. In August 2014, FIT and OMB concurred  with this recommendation, and DHS entered into an interagency  agreement (IAA) with IBC for implementation. Figure 1 shows a timeline  of these key events.", "The IAA for implementation and related performance work statement  included a description of the services that IBC is to provide and the roles  and responsibilities of DHS, the TRIO components, and IBC. The IAA  also required IBC to prepare a detailed project management plan  describing how the requirements would be managed and updated and an  integrated master schedule (IMS) for identifying tasks to be completed,  duration, percentage completed, dependencies, critical path, and  milestones.", "According to the February 2015 project management plan, DNDO, TSA,  and Coast Guard were expected to go-live on the IBC solution in the first  quarter of fiscal years 2016, 2017, and 2018, respectively. However, in  May 2016, DHS and IBC determined that TSA\u2019s and Coast Guard\u2019s  planned implementation dates were not viable because of various  challenges impacting the TRIO project and recommended a 1-year delay  for their respective implementation dates. Figure 2 summarizes planned  and completed key implementation events for the TRIO project as of May  2016."], "subsections": []}, {"section_title": "Best Practices for Conducting Analysis of Alternatives and Managing Risks", "paragraphs": ["GAO, SEI, and other entities have developed and identified best practices  to help guide organizations in effectively planning and managing various  activities, including acquisitions of major information technology systems.  These include GAO\u2019s identified best practices for the AOA process and  best practices identified by SEI for risk management.", "GAO-identified best practices for AOA process. GAO identified 22  best practices for a reliable, high-quality AOA process that can be  applied to a wide range of activities in which an alternative must be  selected from a set of possible options, as well as to a broad range of  capability areas, projects, and programs. These practices can provide  a framework to help ensure that entities consistently and reliably  select the project alternative that best meets mission needs. Not  conforming to these best practices may lead to an unreliable process,  and the entity will lack assurance that the preferred alternative best  meets the mission needs. Appendix II provides additional details on  GAO\u2019s identified AOA process best practices and how they can be  applied to a wide range of activities in which an alternative must be  selected from a set of possible options, as well as to a broad range of  capability areas, projects, and programs.", "SEI\u2019s risk management practices. SEI\u2019s practices for the risk  management process area call for the identification of potential  problems before they occur so that risk-handling activities can be  planned throughout the life of a project to mitigate adverse impacts on  achieving objectives. These practices are determining risk sources and categories, defining parameters used to analyze and categorize risks and to  control the risk management effort, establishing and maintaining the strategy to be used for risk  identifying and documenting risks, evaluating and categorizing each identified risk using defined risk  categories and parameters and determining its relative priority, developing a risk mitigation plan in accordance with the risk monitoring the status of each risk periodically and implementing the  risk mitigation plan as appropriate."], "subsections": []}]}, {"section_title": "DHS Did Not Always Follow Best Practices for Analyzing Alternatives for TRIO Components\u2019 Choice of Modernized Financial Management System", "paragraphs": ["Although the TRIO components conducted AAs to identify the preferred  alternative for modernizing their financial management systems, their  efforts did not always follow best practices. For example, Coast Guard\u2019s  and TSA\u2019s AAs supporting their selection of migrating to a federal SSP for  modernizing their financial management systems did not fully or  substantially meet all four characteristics of a reliable, high-quality AOA  process. In addition, we found that DHS guidance did not fully or  substantially incorporate five of GAO\u2019s identified best practices for  conducting an AOA process. The TRIO components\u2019 AAs included  descriptions of the key factors, such as scores for each alternative  against the selection criteria used to assess it. Based on these AAs, DHS  and the TRIO components selected the federal SSP alternative as their  preferred choice and subsequently selected IBC as their federal SSP.  However, because Coast Guard\u2019s and TSA\u2019s AAs did not fully or  substantially meet all four characteristics of a reliable, high-quality AOA  process, they are at increased risk regarding their decision on the solution  that represents the best alternative for meeting their mission needs."], "subsections": [{"section_title": "DNDO Substantially, and Coast Guard and TSA Partially, Met Best Practices for Conducting AOAs", "paragraphs": ["Based on the extent to which the DHS TRIO components followed the  GAO-identified 22 best practices for conducting an AOA process, we  found that DNDO\u2019s AA process substantially met the four characteristics  of a reliable, high-quality AOA process while the Coast Guard and TSA  AA processes both substantially met one and partially met three of these  four characteristics. For example, we found that TSA\u2019s AA partially met  the \u201cwell-documented\u201d characteristic, in part, because risk mitigation  strategies, assumptions, and constraints associated with each alternative  were not discussed in its AA. In addition, we found that Coast Guard\u2019s AA  partially met the \u201ccredible\u201d characteristic, in part, because there was no  indication that it contained sensitivity analyses, an evaluation of the  impact of changing assumptions on its overall costs or benefits analyses.  Our overall assessment is summarized in table 1. Appendix III provides  additional details on our assessment of the TRIO components\u2019 AAs for  each of the GAO-identified 22 AOA best practices.", "Further, in comparing DHS AOA and AA guidance to the GAO-identified  22 AOA process best practices, we found that although DHS\u2019s guidance  for conducting both AOAs and AAs fully or substantially incorporated 17  of the identified best practices, the guidance did not fully or substantially  incorporate 5 of these practices. For example, although the guidance  addressed risk management in general terms, it did not detail the need to  document risk mitigation strategies for each alternative. Not documenting  the risks and related mitigation strategies for each alternative prevents  decision makers from performing a meaningful trade-off analysis  necessary to choose a recommended alternative. In addition, while DHS  guidance describes the need for an AA or AOA review, it describes  reviews conducted within the organizational chain of command and does  not address the need for an independent review\u2014one of the most reliable  means to validate an AOA process. Further, although the guidance noted  that weights for selection criteria may become more subjective when they  cannot be derived analytically, additional guidance on weighting selection  criteria was limited. Our overall assessment is summarized in table 2.", "Because of these limitations in guidance, and because Coast Guard and  TSA did not fully adhere to the GAO-identified best practices, Coast  Guard\u2019s and TSA\u2019s AAs did not fully or substantially reflect all four  characteristics of a reliable, high-quality AOA process. As a result, Coast  Guard and TSA increased their risk of selecting a solution that may not  represent the best alternative for meeting their mission needs."], "subsections": []}, {"section_title": "TRIO Components Used Key Factors, Metrics, and Processes to Analyze Alternatives and Related Results", "paragraphs": ["Documentation supporting TRIO components\u2019 AA efforts included  descriptions of the key factors, metrics, and processes involved in  conducting their analyses, including the (1) alternatives considered,   (2) market research conducted, (3) three alternatives evaluated,   (4) selection criteria used by each and how the criteria were weighted,   (5) scores for each alternative against the selection criteria, and   (6) alternatives that scored the best under the AOA evaluation.", "The TRIO components conducted market research to develop reasonable  alternative solutions for consideration. For example, through its market  research, TSA identified OMB-designated federal SSPs and commercial  entities as potential alternatives for hosting and implementing a  modernized and integrated financial management system. According to  its AA, TSA was able to gain an understanding of the offerings,  capabilities, and related costs associated with these alternatives through  reviews of documentation and interviews.", "After developing a diverse range of financial system modernization  alternatives for consideration, each of the TRIO components assessed  them for viability using various factors\u2014such as measures of  effectiveness, cost, risk, and value\u2014and identified the three top-rated  alternatives for further evaluation. For example, Coast Guard identified  nine alternatives for consideration and analyzed, scored, and ranked  them to determine its top three alternatives for further analysis:  incrementally improve the current CAS Suite and remove certain  outdated components, host the financial management system internally using software and  tools already owned, and use an SSP to host the financial management system.", "Each component identified its three alternatives for further evaluation and  used defined selection criteria to rate them. For example, DNDO\u2019s  selection criteria included four categories of operational effectiveness that  were weighted according to their level of importance. Based on their  evaluations, each component identified the best alternative for its  respective financial management system needs.", "According to Coast Guard\u2019s November 2012 decision memorandum,  Coast Guard further narrowed the alternatives it focused on to (1) using  an SSP to host its financial management system and (2) hosting the  system internally using already-owned software and tools, and it also  gathered rough order of magnitude cost estimates for both alternatives.  Based on its evaluation, Coast Guard determined that the two alternatives  were comparable. According to this memorandum, Coast Guard further  determined that owning, hosting, operating, and managing a financial  management system were not among its core competencies. Based on  this determination, OMB direction to agencies to use (with limited  exceptions) shared services, and other factors, Coast Guard decided that  migrating to an SSP was the best alternative. TSA found in its February  2013 analysis that the differences between federal and commercial SSP  alternatives were not significant and, as a result, recommended that a  competitive procurement be conducted to better evaluate each  alternative. However, DHS officials told us that TSA subsequently  determined that a competitive procurement was not warranted and chose  to migrate to a federal SSP. This determination was based on additional  OMB guidance issued in March 2013 directing agencies to consider  federal SSPs as part of their AAs and stating that commercial SSPs are  an appropriate solution and would be funded by OMB only in instances in  which the agency\u2019s business case demonstrates that a commercial SSP  can provide a better value for the federal government. In addition,  DNDO determined that migrating to a federal SSP was its best alternative  in May 2013.", "Because its preliminary research focused primarily on the federal SSP  marketplace, Coast Guard conducted additional market research to  include a more robust analysis of commercial SSPs. Coast Guard\u2019s June  2013 market research report described the results of this effort, including  its evaluation of responses from 11 commercial SSPs. Coast Guard  reported that none of the commercial SSPs that responded could meet all  44 specific financial management system requirements and the extent to  which they could meet them varied significantly. Based on these results,  Coast Guard determined that there was a lack of maturity in the  commercial SSP market for federal financial management. According to  the report, this overall assessment was based on various considerations  of information provided by commercial SSP respondents, including  the wide variety of proposed configurations, solutions, prices, and  implementation schedules, the lack of federal experience and service  for agency-wide capabilities, and insufficient length of service to  establish positive trends in audit performance;  the lack of similar offerings that implied a lack of strong competition  between comparable products that would exert downward pressure  on cost; and  the lack of like product offerings, which increases the likelihood of  higher switching costs in the case of poor performance because of  increased difficulty in moving from one \u201cturnkey\u201d service to another.", "In July 2013, the TRIO components and DHS selected the federal SSP  alternative as their preferred choice and subsequently selected IBC as  their federal SSP. DHS officials told us that IBC was selected based on  (1) DHS\u2019s reliance on OMB and Treasury\u2019s designation of IBC as a  federal SSP, (2) OMB guidance to consider the use of federal SSPs, and  (3) a review of the availability of the four federal SSPs indicating that IBC  was the only one available to meet the requirements and implementation  schedule at that time. In August 2013, DHS notified OMB that the TRIO  components had performed extensive market research and finalized their  respective AAs and independently concluded that migrating to a federal  SSP was in the best interests of the government. Also, in August 2013,  FIT notified OMB regarding the TRIO components\u2019 AA efforts and that the  TRIO components would proceed to the discovery phase with IBC.  According to FIT\u2019s notification memorandum to OMB, the TRIO  components\u2019 AAs demonstrated that migrating to a federal SSP was the  best value to the federal government and that the components identified  IBC as a suitable partner based on the results of their market research  into federal SSPs."], "subsections": []}]}, {"section_title": "DHS Met Three and Partially Met Four Best Practices for Managing the Risks of Using IBC for the TRIO Project", "paragraphs": ["Risk management best practices call for the identification of potential  problems before they occur so that risk-handling activities can be planned  throughout the life of the project to mitigate adverse impacts on achieving  objectives. These best practices involve (1) preparing for risk  management, (2) identifying and analyzing risks, and (3) mitigating  identified risks. Preparing for risk management involves determining risk  sources and categories and developing risk mitigation techniques.  Identifying and analyzing risks includes determining those that are  associated with cost, schedule, and performance and evaluating identified  risks using defined risk parameters. Mitigating risks includes determining  the levels and thresholds at which a risk becomes unacceptable and  triggers the execution of a risk mitigation plan or contingency plan;  determining the costs and benefits of implementing the risk mitigation  plan for each risk; monitoring risk status; and providing a method for  tracking open risk-handling action items to closure.", "Based on our evaluation, we found that DHS processes generally  reflected three of seven specific risk management best practices and  partially reflected the remaining four practices. Table 3 summarizes the  extent to which DHS followed these seven best practices for managing  TRIO project risks. Additional details on DHS and TRIO component  efforts to address these practices are summarized following this table.", "Prepare for risk management. Key aspects of processes established by  DHS and TRIO components related to the three best practices associated  with preparing for risk management:", "Determine risk sources and categories. This practice calls for a basis  for systematically examining circumstances that affect the ability of  the project to meet its objective and a mechanism for collecting and  organizing risks. DHS and the TRIO components established  processes that met this best practice. For example, DHS reviewed the  integrated master schedule that IBC prepared to identify sources of  risk and defined risk categories in TRIO project policies.", "Define risk parameters. Risk parameters are used to provide common  and consistent criteria for comparing risks to be managed. The best  practice includes defining criteria for evaluating and quantifying risk  likelihood and severity levels and defining thresholds for each risk  category to determine whether risk is acceptable or unacceptable and  to trigger management action. DHS partially met this best practice.  DHS\u2019s risk management program defined rating scales to provide  consistent criteria for evaluating and quantifying risk likelihood and  severity levels. However, DHS\u2019s Risk Management Planning  Handbook and related template for developing risk management  plans for projects did not address the need for thresholds relevant to  each category of risk to facilitate review of performance metrics in  order to determine when risks become unacceptable or to invoke  selected risk-handling options when monitored risks exceed defined  thresholds.", "Establish a risk management strategy. A risk management strategy  addresses specific actions and the management approach used to  apply and control the risk management program, including identifying  sources of risk, the scheme used to categorize risks, and parameters  used to evaluate and control risks for effective handling. DHS met this  best practice. DHS and IBC established risk management policies and  plans for the TRIO project based on DHS acquisition guidance, which  provided a framework for a risk management program. Collectively,  these policies and plans constitute a risk management strategy. DHS  and IBC have periodically updated these documents to maintain the  scope of the risk management effort; the methods and tools to be  used for risk identification, risk analysis, risk mitigation, risk  monitoring, and communication; the prioritization of risks; and the  allocation of resources for risk mitigation.", "Identify and analyze risks. Key aspects of processes established by  DHS and the TRIO components related to the two best practices  associated with identifying and analyzing risks:  Identify risks. Risk identification should be an organized, thorough  process to seek out probable or realistic risks to achieving objectives.  This practice recognizes that risks should be identified and described  understandably before they can be analyzed and managed properly.  Using categories and parameters developed in the risk management  strategy and identified sources of risk guides the identification of risks  associated with cost, schedule, and performance. To identify risks,  best practice elements include reviewing the work breakdown  structure (WBS) and project plan to help ensure that all aspects of  the work have been considered. Best practices for documenting risks  include documenting the context, conditions, and potential  consequences of each risk and identifying the relevant stakeholders  associated with each risk.", "DHS partially met this best practice. DHS\u2019s July 2016 risk register  contained a wide range of risks associated with defined risk  categories. It also reflected DHS\u2019s review of the TRIO project\u2019s  integrated master schedule that IBC prepared based on the WBS and  work plans that IBC also developed. The risk register documented  the context, conditions, potential consequences, and relevant  stakeholders associated with each risk. However, DHS\u2019s documented  risk management processes did not identify all significant risks or  reflect its efforts to revisit risks that had previously been closed. For  example, DHS officials told us that IBC was unable to provide  sufficient, reliable cost and schedule information for project  monitoring; however, a risk reflecting these concerns was not included  on its July 2016 risk register. Further, the risk register included certain  closed risks related to the need for a governance structure and  strategy for ensuring that IBC met performance, cost, and schedule  objectives. Although DHS had ongoing concerns about its ability to  ensure that IBC met these objectives, the risk register did not reflect  efforts to revisit these risks to determine whether their status needed  revision or if other risks should be included on the risk register to  address its accountability concerns. In addition, DHS did not always  take timely action to document its consideration of risks identified by  its independent verification and validation (IV&V) contractor for  potential inclusion on its risk register. For example, the IV&V  contractor identified a risk related to inefficiencies in DHS\u2019s document  review process in June 2015 that was not included on DHS\u2019s risk  register until February 2016. DHS officials indicated that a crosswalk  between the DHS risk register and IV&V contractor risk management  observations was performed weekly; however, results of these weekly  reviews were not documented.", "Evaluate, categorize, and prioritize risks. Risk assessment uses  defined categories and parameters to determine the priority of each  risk to assist in determining when appropriate management attention  is required. Best practices for analyzing risks include categorizing  risks according to defined risk categories, evaluating identified risks  using defined risk parameters, and prioritizing risks for mitigation.  DHS\u2019s processes met this practice. For example, the documented risk  management program included application of defined risk categories  and parameters for all identified risks, providing a means for reviewing  risks and determining the likelihood and severity of risks being  realized. The TRIO project\u2019s Joint Risk Management Integrated  Project Team provided consistency to the application of parameters  by reviewing risk assessments when risks were first identified. By  determining exposure ratings for each identified risk, DHS prioritized  risks for monitoring and allocation of resources for risk mitigation.", "Mitigate risks. Key aspects of processes established by DHS and the  TRIO components related to the two best practices associated with  mitigating risks:", "Develop risk mitigation plans. Risk mitigation plans are developed in  accordance with the risk management strategy and include a  recommended course of action for each critical risk. The risk  mitigation plan for a given risk includes techniques and methods used  to avoid, reduce, and control the probability of risk occurrence; the  extent of damage incurred should the risk occur; or both. Elements of  this practice include determining the levels and thresholds that define  when a risk becomes unacceptable and triggers the execution of a  risk mitigation plan or contingency plan, identifying the person or  group responsible for addressing each risk, determining the costs and  benefits of implementing the risk mitigation plan for each risk,  developing an overall risk mitigation plan for the work to orchestrate  the implementation of individual risk mitigation plans, and developing  contingency plans for selected critical risks in the event impacts  associated with the risks are realized.", "DHS partially met this best practice. DHS\u2019s risk management program  documentation reflected the development of risk response plans for  most risks, including all those determined to be of medium and high  exposure level. DHS identified those responsible for addressing each  risk. However, DHS and IBC did not always develop sufficiently  detailed risk mitigation plans including specific risk-handling action  items, determination of the costs and benefits of implementing the risk  mitigation plan for each risk, and developing contingency plans for  selected critical risks in the event that their impacts are realized. For  example, a risk associated with IBC\u2019s capacity and experience for  migrating large agencies the size of Coast Guard and TSA was  identified in July 2014. Although DHS developed plans to help  mitigate this risk, a contingency plan was not developed prior to  realizing the adverse impact of not implementing Coast Guard and  TSA on IBC\u2019s modernized solution. Rather, a contingency plan  working group (CPWG) to address this and other concerns was  established in January 2017, over 2 years after the risk was initially  identified. Further, thresholds were not used within the risk  management program to define when a risk becomes unacceptable,  triggering the execution of a risk mitigation plan or contingency plan.", "Implement risk mitigation plans. Risk mitigation plans are  implemented to facilitate a proactive program to regularly monitor  risks and the status and results of risk-handling actions to effectively  control and manage risks during the work effort. Best practice  elements include revisiting and reevaluating risk status at regular  intervals to support the discovery of new risks or new risk-handling  options that can require reassessment of risks and re-planning of risk  mitigation efforts. Elements also include providing a method for  tracking open risk-handling action items to closure, establishing a  schedule or period of performance for each risk-handling activity,  invoking selected risk-handling options when monitored risks exceed  defined thresholds, and providing a continued commitment of  resources for each risk mitigation plan.", "DHS partially met this best practice. Risk monitoring of the TRIO  project consisted of reviews performed by DHS and TRIO component  officials responsible for risk management and oversight functions.  These reviews considered significant risks, risks approaching  realization events, and the effect of management intervention on the  resolution of risks. These reviews also relied, in part, on data  contained in DHS\u2019s risk register, which represents the official  repository of TRIO project risks and information on the status of risks  and related risk mitigation efforts.", "However, other aspects of DHS\u2019s efforts to implement risk mitigation  plans did not fully adhere to certain elements associated with this best  practice. For example, we identified certain issues that raised  questions concerning the accuracy of data contained in the risk  register, such as (1) the lack of clear markings indicating when the  accuracy of data on each risk was last confirmed, including risk  records that had not been modified in the previous 3 months, and   (2) certain risks for which the estimated risk impact date had already  occurred but its status risk according to DHS\u2019s risk register did not  reflect that it had been realized and become an issue. In addition,  DHS officials stated that IBC did not provide sufficiently detailed,  reliable cost and schedule information that could have been used to  monitor TRIO project risks more effectively. DHS\u2019s ability to monitor  cost, schedule, and other performance metrics was also limited  because of the lack of thresholds for management involvement, as  noted above. DHS\u2019s implementation of risk monitoring plans was  further limited by other issues, including (1) a period of performance  for each risk-handling activity, which includes a start date and  anticipated completion date to control and monitor risk mitigation  efforts, was not always established and (2) an inability to fully track  open risk-handling action items to closure existed because of the lack  of sufficient detail on specific risk-handling activities in the DHS risk  register.", "According to DHS officials, DHS relied heavily on IBC to manage risks  associated with the TRIO project and, in particular, those for which IBC  was assigned as the risk owner. They also acknowledged DHS\u2019s  responsibility for overseeing IBC\u2019s TRIO project risk management efforts  and described various actions taken to address growing concerns  regarding IBC\u2019s efforts. For example, DHS created the Joint Risk  Management Integrated Project Team, in part, to provide a forum in which  IBC could obtain assistance in developing risk responses and discuss  DHS\u2019s risk mitigation concerns. Further, to help reduce exposure of  underlying risks, DHS offered assistance to IBC\u2019s project management  functions, such as developing the integrated master schedule and  performing quality control checks on project deliverables. Despite these  efforts, DHS officials stated that challenges associated with the IAA  structure and terms of the performance work statement with IBC on the  TRIO project limited DHS\u2019s visibility into IBC\u2019s overall cost, schedule, and  performance controls and ability to oversee IBC\u2019s risk management  efforts. For example, they stated that the performance work statement did  not specify the level of reporting to be provided by IBC on cost, schedule,  and performance in sufficient detail to effectively monitor progress on  achieving key project objectives.", "Further, the limitations to managing risks related to the best practices we  assessed as partially met were largely attributable to limitations in DHS  and TRIO project guidance and policies. For example, DHS\u2019s Risk  Management Planning Handbook and related template for developing risk  management plans for projects does not address the need to define  thresholds to facilitate review of performance metrics to determine when  risks become unacceptable. Also, TRIO project policies did not address  the need to periodically revisit consideration of risk sources other than  IMS-related milestones, specify periods of performance for specific risk- handling activities, or define an interval for updating and certifying risk  statuses. In addition, DHS guidance and TRIO project policies did not  describe the need to consider and document risks specifically related to  the lack of sufficient, reliable cost and schedule information to properly  manage and oversee the project or for timely disposition of risks that its  IV&V contractor identified. Further, TRIO project risk management  policies and management tools used to implement them address best  practice elements such as determination of the costs and benefits of  implementing risk mitigation plans, developing contingency plans, and  developing specific risk-handling action items. However, these policies do  not require, and the risk register was not designed to specifically capture,  these elements in documented risk mitigation plans. By not adopting  important elements of risk management best practices into project  guidance, DHS and the TRIO components increase the risk that potential  problems would not be identified before they occur and that activities to  mitigate adverse impacts would not be effectively planned and initiated."], "subsections": []}, {"section_title": "Key Factors and Challenges Impacting the TRIO Project and DHS\u2019s Path Forward", "paragraphs": ["Although DHS has taken various actions to manage the risks of using IBC  for the TRIO project, including some that were consistent with best  practices, the TRIO project has experienced challenges raising concerns  regarding the extent to which its objectives will be achieved. In connection  with these challenges, the TRIO components notified DHS during April  2016 through January 2017 that certain baseline cost and schedule  objectives had not been, or were projected to not be, achieved as  planned. According to these notifications and DHS officials we  interviewed, several key factors and challenges significantly impacted  DHS\u2019s and IBC\u2019s ability to achieve TRIO project objectives as intended. In  addition, IBC, FIT, and USSM officials identified similar issues impacting  the TRIO project. In connection with these challenges, DHS and IBC  began contingency planning efforts in January 2017 to identify and  assess viable options for improving program performance and addressing  key TRIO project priorities. Plans for DHS\u2019s path forward on the TRIO  project, as of May 2017, involve significant changes, such as transitioning  away from using IBC and a 2-year delay in completing Coast Guard and  TSA\u2019s migration to a modernized solution."], "subsections": [{"section_title": "Key Factors and Challenges Impacting the TRIO Project", "paragraphs": ["We grouped the key factors and challenges impacting the TRIO project  that DHS, IBC, FIT, and USSM officials and OMB staff identified into five  broad categories: (1) project resources, (2) project schedule, (3) complex  requirements, (4) project costs, and (5) project management and  communications. The key factors and challenges related to each category  are summarized below.", "Project resources: Concerns about IBC\u2019s experience and its capacity to  handle a modernization project involving agencies the size of Coast  Guard and TSA were identified as significant risks in July 2014, resulting  from discovery phase efforts completed prior to DHS and IBC\u2019s entering  the implementation phase in August 2014. According to DHS officials,  status reports, and other documentation, key TRIO project challenges  related to resources included concerns that (1) IBC encountered federal  employee hiring challenges and was unable to ramp up and deploy the  resources necessary to meet required deliverables, and (2) IBC  experienced significant turnover of key stakeholders which adversely  impacted its ability to achieve TRIO project objectives.", "In connection with DHS\u2019s decision to use IBC for the TRIO project, DHS  officials told us that DHS relied heavily on OMB and Treasury\u2019s  designation of IBC as a federal SSP and their related assessment of  IBC\u2019s capacity and experience. DHS officials also told us that DHS relied  on FIT\u2019s federal agency migration evaluation model during discovery  phase efforts that focused on assessing the functionality of the software  rather than assessing IBC\u2019s (1) capacity, experience, and capability;   (2) ability to address more complex software configurations and interfaces  associated with large agencies; and (3) cost, schedule, and performance  metrics. DHS officials stated that issues related to IBC\u2019s capacity and  experience represented the most significant challenge impacting the  TRIO project.", "IBC officials acknowledged that IBC was unable to ramp up its resources  until after the project had begun and that the IBC project team  experienced significant turnover in key leadership and TRIO project  positions over the course of the project. IBC officials also acknowledged  that during its early efforts on the TRIO project, assigned IBC staff lacked  the experience and expertise necessary for managing large-scale  projects and, as a result, many of the risks initially identified were not  effectively addressed. FIT and USSM officials and OMB staff also  acknowledged that resource challenges significantly impacted the TRIO  project. A FIT official acknowledged that assessing software functionality,  rather than implementation, was emphasized during the discovery  process. Although DHS relied on OMB and Treasury\u2019s designation of IBC  as a federal SSP, this FIT official also told us that because agencies\u2019  specific needs can vary significantly, agencies are responsible for  conducting sufficient due diligence to assess a federal SSP\u2019s ability to  meet their requirements.", "Project schedule: DHS, IBC, FIT, and USSM officials acknowledged that  migrating the TRIO components to IBC within original time frames was a  significant challenge given the overall magnitude and complexity of the  TRIO project. According to DHS officials and TRIO project  documentation, DHS identified delays in completing various tasks and  milestones including providing design phase technical documentation and design processing proposed change requests; meeting proposed baseline schedules for implementing Coast Guard  and TSA on the modernized IBC solution; and achieving initial operating capability requirements and stabilizing the  production environment after DNDO\u2019s migration to IBC because of  various issues related to reporting, invoice payment processing,  contract management processes, and resolving help desk tickets in a  timely manner.", "DHS officials also stated that IBC did not consistently update the IMS to  ensure that it accurately reflected all required tasks, the completion  status, and the resources required to complete them. Concerns related to  meeting milestones and updating the IMS were discussed during periodic  status update meetings that included DHS, IBC, OMB, FIT, and USSM  officials. IBC and DHS officials acknowledged that processes for  communicating and resolving issues were not always efficient and  contributed to schedule delays. In addition, in November 2016, USSM  noted several concerns based on its review of a draft IMS supporting  TSA\u2019s re-planning efforts to go-live in October 2017. USSM\u2019s concerns  included an incomplete project scope and schedule and need for additional  discovery to determine cost and level of effort, an extremely aggressive schedule with very limited contingencies for  the lack of interim checkpoints or oversight on tasks exceeding 30  days,  the need for a resource-loaded IMS that incorporates an appropriate  level of detail, and  the need for an expedited program governance strategy and  escalation path that DHS and IBC leadership could use to make  program decisions within the time allotted on the schedule.", "Complex requirements: DHS, IBC, FIT, and USSM officials  acknowledged the overall complexity of the TRIO project and that the lack  of a detailed understanding of the components\u2019 requirements earlier in the  project impacted IBC\u2019s and DHS\u2019s ability to satisfy the requirements as  planned. For example, USSM and FIT officials told us that under the  shared services model, the approach for onboarding new customers  usually involves migrating to a proven configuration of a solution that is  already being used by the provider\u2019s existing customers. However, rather  than taking this approach, DHS and IBC agreed to implement a more  recent version of Oracle Federal Financial software (version 12.2) with  integrated contract life cycle and project modules. Under this approach,  IBC\u2019s plans included migrating other existing customers to this upgraded  environment. USSM officials told us that migrating TRIO components to a  new solution that required configuring new software and related  applications and developing related interfaces introduced additional  complexities that contributed to issues on the TRIO project. According to  a FIT official, the functionality of this more recent version of software is  very different than that of the version IBC\u2019s existing customers used. This  official stated that IBC did not have the needed government personnel  with knowledge and experience associated with this new software, a  condition that likely contributed to the challenges experienced on the  TRIO project. IBC officials acknowledged that IBC\u2019s lack of familiarity with  Oracle 12.2 increased the complexity of the TRIO project.", "In addition, DHS and IBC perspectives on the need for changes differed  because of the lack of clarity regarding TRIO project requirements. DHS  officials told us that many change requests on the TRIO project reflected  the need for required functionality based on previously stated  requirements. They also told us that they did not consider DNDO-related  requirements to be overly complex when compared to those associated  with IBC\u2019s similarly sized customers. However, DHS officials stated that  as of June 2017, IBC has not yet met DNDO\u2019s needs to deliver a  functioning travel system interface and other requirements. According to  IBC officials, TRIO project change requests to address components\u2019  requirements were extensive and included significant customizations to  meet unique requirements that were not aligned with the federal shared  service model. IBC officials noted additional challenges in addressing  TRIO project requirements related to DHS\u2019s efforts to address certain  organizational change management and business process reengineering  responsibilities. According to IBC officials, in some instances, the TRIO  components provided conflicting requirements related to the same  process that would have been more consistent had DHS completed more  of its business process reengineering efforts prior to providing them to  IBC.", "Project costs: According to the July 2014 discovery report, proposed  implementation costs for the TRIO project totaled $89.9 million. However,  according to DHS officials and TRIO project documentation, estimated  costs significantly increased because of schedule delays, unanticipated  complexities, and other challenges. In January 2017, DHS prepared a  summary of estimated TRIO project implementation costs associated with  its IAA with IBC. According to this summary, estimated IBC-related TRIO  project implementation costs through fiscal year 2017 increased by  approximately $42.8 million (54 percent) from the $79.2 million provided  in the original August 2014 IAA with IBC as a result of modifications  required, in part, to address challenges impacting the project. DHS  officials also expressed concerns regarding increases in estimated  operations and maintenance costs for the IBC solution. For example,  according to a December 2016 memorandum to DHS on action items  associated with failing to meet the baseline schedule date for initial  operational capability, DNDO stated that IBC\u2019s updated projected costs of  operations and maintenance of its system were unaffordable. In  connection with these costs, DHS officials also stated that IBC  determined that separate, rather than shared, help desk resources were  required to support the TRIO project because it was significantly different  from the solution that IBC\u2019s existing customers used. As a result, the  officials indicated that these costs were more than originally expected.  However, IBC officials told us that a portion of the increase in help desk- related costs was also due to DNDO employees not using the system  properly because they were not sufficiently trained on it before it was  implemented. In addition, challenges impacting the TRIO project have  contributed to significant changes in the path forward on the project; as a  result, the extent to which overall TRIO project modernization costs will  be impacted going forward has not yet been determined.", "Project management and communication: According to DHS officials,  various program management-related challenges impacted the TRIO  project. For example, they expressed concerns regarding the  effectiveness of IBC\u2019s project management efforts including cost,  schedule, and change management as well as IBC\u2019s allocation of  resources and slow decision-making process. They also stated that DHS  provided significant time and resources to make up for fundamental  project management activities that were under IBC\u2019s control and not  performed. In addition, DHS officials identified limitations associated with  (1) poorly defined service level agreements and program performance  metrics, (2) poor quality control plan, and (3) the lack of mechanisms for  measuring delivery and addressing concerns regarding IBC\u2019s  performance. DHS officials told us that although various mechanisms can  be used to hold commercial vendors accountable\u2014such as cure notices,  quality assurance surveillance plans, and incentives or disincentives to  monitor performance\u2014few mechanisms are available to hold federal  agency service providers accountable for performance concerns.", "DHS officials also acknowledged challenges in their project management  and communication efforts and identified lessons learned to help improve  future efforts, including the need to establish a performance-based contract to determine objective and  enforceable activity level metrics; be more prepared for organizational changes;  improve vendor, project, and schedule management efforts; better understand SSP resource plans and monitor SSP efforts to  help ensure that sufficient resources are secured timely; and  centralize program management for financial system modernization  functions, rather than continuing with the structure used on the TRIO  project\u2014for example, the TRIO project\u2019s program management  structure consisted of program management offices at the component  level performing cost, schedule, and technical monitoring activities  with DHS headquarters\u2019 involvement focused on governance and  oversight, resulting in duplicate efforts across components.", "IBC officials acknowledged challenges concerning IBC\u2019s lack of sufficient  resources and turnover, as described above. However, they told us that  DHS\u2019s approach to project management often resulted in duplicative  meetings and a lengthy decision-making process involving several  officials and multiple review and approval processes. According to USSM  officials, the TRIO project team focused an unbalanced portion of its  efforts on the delivery of technology at the expense of organizational  change management, communication management, and other project  management areas. For example, the failure to incorporate lessons  learned from DNDO\u2019s deployment adversely affected subsequent TRIO  project implementation efforts, as change management activities did not  address previously encountered risks. An OMB staff member concurred  with the lessons learned that DHS identified, including those indicating  the need for stronger project management. While the project is ongoing,  the OMB staff member noted the importance of DHS having well-defined  requirements for the project and better coordination to achieve the  desired outcomes."], "subsections": []}, {"section_title": "Significant TRIO Project Changes Resulting from Challenges and Steps Implemented for the Path Forward", "paragraphs": ["In connection with TRIO project challenges, DHS officials told us that IBC  notified DHS in April 2016 that it would not be able to meet the planned  October 2016 implementation date for TSA. In response, DHS and IBC  established the TSA Replan Tiger Team to perform a detailed  assessment of potential courses of action. According to DHS officials,  DHS and IBC subsequently took various actions to help address these  and other challenges impacting the TRIO project, as summarized below.", "May 2016: IBC requested additional funding for fiscal year 2016 for 14  additional IBC and contractor personnel to strengthen program  coordination and management support. According to DHS officials, DHS  provided this requested funding along with additional funding to establish  a business integration office to help strengthen cross organizational  communication. DHS determined that plans for migrating TSA and Coast  Guard to IBC during the first quarter of fiscal years 2017 and 2018,  respectively, were not viable. As a result, their planned migrations were  each extended an additional year.", "June 2016: DHS and IBC developed a comprehensive remediation plan  to track progress on efforts to resolve numerous issues associated with  DNDO\u2019s production environment that continued to hamper its stability  since going live in November 2015. According to DHS officials, these  issues related to invoice payment and interest accruals, contract life cycle  management, reporting, and other activities and have required numerous  work-arounds to execute business processes.", "August to October 2016: DHS, Coast Guard, and IBC determined that a  similar replanning effort was needed for Coast Guard\u2019s successful  migration to IBC. According to DHS officials, IBC indicated that it was  unable to simultaneously provide DNDO production and TSA  implementation support while also addressing the complexities related to  Coast Guard. DHS officials told us that another Tiger Team established to  address Coast Guard issues failed to complete the scope of its charter,  and as a result, Coast Guard was forced to assume a minimum of a 2- year delay (rather than the 1-year delay previously determined in May  2016) and that this significantly increased program costs. They further  stated that some of the team\u2019s deliverables have not been initiated or  remain outstanding as of June 2017.", "December 2016: IBC communicated to DHS that it cannot support the  discovery phase with DHS\u2019s CUBE modernization project. In addition,  DHS approved the establishment of a Joint Program Management Office  to serve as the overarching program management for DHS financial  systems modernization projects. According to DHS officials, using a  department-wide approach will enable DHS to more effectively leverage  the resources and expertise across all modernization projects.", "January 2017: IBC communicated to DHS that it cannot support Coast  Guard implementation in October 2018, and DHS and IBC established a  joint CPWG to assess viable options for improving program performance  and addressing stakeholder concerns and key TRIO project priorities.", "February 2017: DHS and IBC issued a joint memorandum to provide an  update on contingency planning discussions. DHS and IBC shared  commitments and determinations included (1) stabilizing the DNDO  production environment and executing TSA implementation activities,   (2) delivering the best value for the government and ensuring mutual  success to the greatest extent possible, (3) preserving and protecting the  current investment, and (4) making TSA implementation the first priority.  In addition, DHS and IBC presented two options as representing the best  opportunities for success in improving program performance and  addressing stakeholder concerns: (1) continue with the status quo plan  for Coast Guard implementation in October 2019, with significant  improvements to program management and overall support capability and  capacity, or (2) platform replacement. Platform replacement was  presented as the preferred path toward meeting the needs of both DHS  and IBC. Under this option, DHS and IBC would proceed with TSA  implementation and work toward an orderly transition of TRIO  components to an alternate service provider, hosting location, or both.", "March 2017: According to DHS officials, DHS, IBC, and USSM officials  met to review certain critical success criteria for TSA\u2019s implementation.  Based on these discussions, it was determined that TSA would not go live  with IBC in fiscal year 2018 given the high-risk schedule and critical  criteria involved and the Coast Guard implementation would also be  delayed accordingly. Further, TSA release 3.0 would be delivered in  October 2017 or as soon as possible thereafter. In addition, the CPWG  would continue working to identify an alternative path forward, and DHS  and IBC would identify and evaluate critical transition activities and  timelines.", "April 2017: The CPWG recommended moving away from IBC to a  commercial service provider leveraging the cloud as the best course of  action to complete TRIO project implementation and as the most fiscally  responsible approach from a long-term sustainment and cost perspective.  The CPWG\u2019s recommendation was based on its analysis of six options  and proposed a transition timeline, including key activities, as shown in  figure 3.", "May 2017: During its May 3, 2017 briefing of the Financial Systems  Modernization Executive Steering Committee, DHS indicated that two of  the options that the CPWG considered were no longer viable, including  the CPWG\u2019s recommendation to transition to a commercial cloud service  provider because the software was not yet cloud-ready. DHS ranked the  remaining four options using 13 OMB risk factors as selection criteria and  determined that migrating the solution to a DHS data center represented  the best option going forward. In addition, DHS decided to move forward  with discovery efforts related to this option. According to its briefing  presentation and DHS officials, the notional timeline of planned key  events for the TRIO project included various items, as shown in figure 4.", "DHS officials indicated that DHS expects to present the findings and  recommendations resulting from discovery efforts associated with this  new path forward to USSM and OMB for concurrence. As of August 2017,  results of this effort were under review by DHS leadership."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The TRIO project represents a key element of DHS\u2019s efforts to address  long-standing deficiencies in its financial management systems and  further improve financial management. Following best practices to  manage risks effectively can help provide increased assurance that large,  complex projects\u2014such as the TRIO project\u2014will achieve planned  objectives. DNDO\u2019s AA process substantially met the four characteristics  of a reliable, high-quality AOA process. However, Coast Guard\u2019s and  TSA\u2019s AAs substantially met one and partially met three of these four  characteristics. Further, DHS did not always follow best practices for  managing the risks of using IBC for the TRIO project. As a result, TRIO  components faced an increased risk that the solution they chose would  not represent the best alternative for meeting their mission needs and that  the risks impacting the TRIO project would not be effectively managed to  mitigate adverse impacts. In addition, significant challenges have  impacted the TRIO project, raising concerns about the extent to which  objectives will be achieved as planned. Plans for DHS\u2019s path forward on  the TRIO project, as of May 2017, involve significant changes, such as  transitioning away from IBC and a 2-year delay in completing Coast  Guard\u2019s and TSA\u2019s migration to a modernized solution. Without greater  adherence to best practices for analyzing alternatives and managing  project risks, DHS continues to face increased risk that its financial  management system modernization project will not provide reasonable  assurance of achieving its mission objectives."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DHS:  The DHS Under Secretary for Management should develop and  implement effective processes and improve guidance to reasonably  assure that future AAs fully follow AOA process best practices and reflect  the four characteristics of a reliable, high-quality AOA process.  (Recommendation 1)", "The DHS Under Secretary for Management should improve the Risk  Management Planning Handbook and other relevant guidance for  managing risks associated with financial management system  modernization projects to fully incorporate risk management best  practices, including defining thresholds to facilitate review of performance metrics to  determine when risks become unacceptable;  identifying and analyzing risks to include periodically reconsidering  risk sources, documenting risks specifically related to the lack of  sufficient, reliable cost and schedule information needed to help  properly manage and oversee the project, and timely disposition of  IV&V contractor-identified risks; developing risk mitigation plans with specific risk-handling activities,  the costs and benefits of implementing them, and contingency plans  for selected critical risks; and  implementing risk mitigation plans to include establishing periods of  performance for risk-handling activities and defining time intervals for  updating and certifying the accuracy and completeness of information  on risks in DHS\u2019s risk register. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to DHS and the Department of the  Interior for comment. In its comments, reprinted in appendix IV, DHS  concurred with our recommendations and provided details on its  implementation of the recommendations as discussed below. In addition,  DHS provided technical comments, which we incorporated as  appropriate. The Department of the Interior only provided technical  comments, which we incorporated as appropriate.", "DHS stated that it remains committed to its financial system  modernization program. Specifically, regarding our first recommendation  to develop and implement effective processes and improve guidance to  reasonably assure that future AAs fully follow AOA process best practices  and reflect the four characteristics of a reliable, high-quality AOA process,  DHS stated that it agrees that effective processes and guidance are  necessary to assure best practices. DHS also stated that it is important to  note that the GAO-identified best practices were published more than 2  years after the TRIO components\u2019 AAs were completed. While this is the  case, as discussed in our report, these best practices are based on long- standing, fundamental tenets of sound decision making and economic  analysis and were identified by compiling and reviewing commonly  mentioned AOA policies and guidance that are known to and have been  used by government and private sector entities.", "DHS also stated that it has already implemented this recommendation  through its issuance of guidance and instructions in 2016 and that a copy  of this additional guidance and instructions was provided to GAO.  However, the documentation provided by DHS does not fully address our  recommendation. As part of our recommendation follow-up process, we  will coordinate with DHS to obtain additional information on its efforts to  address our recommendation.", "With regard to our second recommendation to improve the Risk  Management Planning Handbook and other relevant guidance, DHS  stated that it concurred and agreed that the Risk Management Planning  Handbook required updating to fully incorporate risk management best  practices. In addition, DHS described actions it will take, and has taken,  to revise and publish an updated handbook.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Homeland Security, the DHS Under  Secretary for Management, the Acting DHS Chief Financial Officer, the  Secretary of the Interior, and the Director of the Interior Business Center.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-9869 or khana@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To determine the extent to which the Department of Homeland Security  (DHS) followed best practices in analyzing the alternatives used in  choosing the preferred alternative for modernizing TRIO components\u2019  financial management systems, we reviewed information that the TRIO  components provided as part of their alternatives analysis (AA) process,  referred to as the AA body of work, which includes the AA and other  supporting documentation that is not specifically included in the AA. In  addition, we discussed the DHS AA process with the TRIO components  and DHS officials. We evaluated each TRIO component\u2019s AA body of  work and assessed this information against the GAO-identified 22  analysis of alternatives (AOA) process best practices. We then scored  each AA against those best practices. In appendix II, these GAO- identified best practices are described in detail.", "Our evaluation comprised the following steps: (1) two GAO analysts  separately examined the AA information received for each component,  providing a score for each of 18 best practices; (2) a third GAO analyst  resolved any differences between the two analysts\u2019 initial scoring; and   (3) a GAO specialist on AOA best practices, independent of the audit  team, reviewed the team\u2019s AA documentation, scores, and analyses for  consistency. The GAO specialist also assessed the four best practices  related to cost estimating.", "We used the average scores for each best practice to determine an  overall score for four summary characteristics\u2014well-documented,  comprehensive, unbiased, and credible\u2014of a reliable, high-quality AOA  process at each TRIO component. Next, we shared our preliminary  analysis with the TRIO components and DHS, and requested their  technical comments and any additional information for our further  consideration. For those characteristics of the AA process that received a  score of partially met or below, we met with TRIO component and DHS  officials to discuss potential reasons that an AA did not always conform to  best practices. Finally, using the same methodology and scoring process  explained above, we performed a final assessment based on our  preliminary analysis and the comments and additional information  received. The best practices were not used to determine whether DHS  made the correct decision in selecting Department of the Interior\u2019s Interior  Business Center (IBC) to implement the financial management systems  modernization solution or whether the TRIO project would have arrived at  a different conclusion had it more fully conformed to these best practices.", "We also reviewed DHS guidance for conducting AOAs and AAs against  the GAO-identified 22 AOA process best practices using the same  methodology described above for reviewing the TRIO components\u2019 AAs.  In the course of applying these best practices to a TRIO component\u2019s AA  and to DHS guidance for the AA process, we assessed the  reasonableness of the information we collected. We determined that the  information from the DHS AA process was sufficiently reliable to use in  assessing the TRIO components\u2019 AAs and DHS guidance against these  22 best practices.", "To determine the key factors, metrics, and processes used by the TRIO  components in developing and evaluating DHS\u2019s alternative solutions and  final choice for financial system modernization, we reviewed each  component\u2019s AA, including a description of (1) the alternatives  considered, (2) the market research conducted, (3) the three alternatives  evaluated, (4) the selection criteria used and how the criteria were  weighted, (5) how each alternative scored against the selection criteria,  and (6) the alternative that scored the best according to the component\u2019s  evaluation.", "To determine the extent to which DHS managed the risks of using IBC  consistent with risk management best practices, we reviewed DHS\u2019s and  TRIO components\u2019 risk management guidance and other documentation  supporting their risk management efforts, including risk registers,  mitigation plans, status reports, and risk management meeting minutes.  We also met with officials to gain an understanding of the key processes  and documents used for managing and reporting on TRIO project risks.  We assessed the processes against best practices that the Software  Engineering Institute (SEI) identified. The practices we selected are  fundamental to effective risk management activities. These practices are  identified in SEI\u2019s Capability Maturity Model\u00ae Integration (CMMI\u00ae) for  Acquisition, Version 1.3.", "In particular, the key best practices for preparing for risk management are determine risk sources and categories, define risk parameters, and establish a risk management strategy.", "The key best practices for identifying and analyzing risks are evaluate, categorize, and prioritize risks.", "The key best practices for mitigating identified risks are develop risk mitigation plans and  implement risk mitigation plans.", "We applied the criteria from the CMMI risk management process area to  determine the extent to which the expected practices were implemented,  or future activities were planned for, by the program office. The rating  system we used is as follows: (1) meets, or generally satisfies all  elements of the specific practice; (2) partially meets, or generally satisfies  a portion of specific practice elements; and (3) does not meet, or does not  satisfy specific practice elements.", "In the context of the best practices methodology, we assessed the  reliability of TRIO project risk data contained in DHS\u2019s risk register. We  interviewed officials on how the risk register was developed and  maintained, including key control activities used to provide reasonable  assurance of the accuracy of the information reported in the register. We  reviewed DHS\u2019s July 2016 risk register and minutes from risk  management committee meetings (one meeting per quarter, randomly  selected). Of 120 TRIO project risks on the July 2016 risk register, we  found 13 risks with missing data. Of 47 active risks identified, 28 risk  records had not been modified in the previous 3 months and the register  did not indicate when their accuracy was last confirmed and 35 risks were  beyond their indicated impact dates but had not been marked as issues.  We concluded that the pervasiveness of these data reliability problems  decreased the usefulness of the risk register in connection with managing  TRIO project risks.", "To determine the key factors or challenges that have impacted the TRIO  project and DHS\u2019s plans for completing remaining key priorities, we met  with DHS, IBC, Office of Financial Innovation and Transformation, and  Unified Shared Services Management office officials and Office of  Management and Budget staff to obtain their perspectives. In addition, we  reviewed documentation provided by these officials, including TRIO  project status reports and memorandums, leadership briefings, and other  presentations.", "We conducted this performance audit from March 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Best Practices for the Analysis of Alternatives Process", "paragraphs": ["Many guides describe an approach to an analysis of alternatives (AOA);  however, there is no single set of practices for the AOA process that has  been broadly recognized by both the government and private sector  entities. GAO has previously identified 22 best practices for an AOA  process by (1) compiling and reviewing commonly mentioned AOA  policies and guidance used by different government and private sector  entities and (2) incorporating experts\u2019 comments on a draft set of  practices to develop a final set of practices. These practices are based  on longstanding, fundamental tenets of sound decision making and  economic analysis.", "In addition, these practices can be applied to a wide range of activities in  which an alternative must be selected from a set of possible options, as  well as to a broad range of capability areas, projects, and programs.  These practices can provide a framework to help ensure that entities  consistently and reliably select the project alternative that best meets  mission needs. The guidance below is an overview of the key principles  that lead to a successful AOA process and not as a \u201chow to\u201d guide with  detailed instructions for each best practice identified.", "The 22 best practices that GAO identified are grouped into the following  five phases:  1.  Initialize the AOA process: Includes best practices that are applied  before starting the process of identifying, analyzing, and selecting  alternatives. This includes determining the mission need and  functional requirements, developing the study time frame, creating a  study plan, and determining who conducts the analysis.  2.  Identify alternatives: Includes best practices that help ensure that  the alternatives to be analyzed are sufficient, diverse, and viable.  3.  Analyze alternatives: Includes best practices that compare the  alternatives to be analyzed. The best practices in this category help  ensure that the team conducting the analysis uses a standard,  quantitative process to assess the alternatives.  4.  Document and review the AOA process: Includes best practices  that would be applied throughout the AOA process, such as  documenting all steps taken to initialize, identify, and analyze  alternatives and to select a preferred alternative in a single document.  5.  Select a preferred alternative: Includes a best practice that is  applied by the decision maker to compare alternatives and to select a  preferred alternative.", "The five phases address different themes of analysis necessary to  complete the AOA process, and comprise the beginning of the AOA  process (defining the mission needs and functional requirements) through  the final step of the AOA process (selecting a preferred alternative).", "We also identified four characteristics that relate to a reliable, high-quality  AOA process\u2014that the AOA process is well-documented,  comprehensive, unbiased, and credible. Table 4 shows the four  characteristics and their relevant AOA best practices.", "Conforming to the 22 best practices helps ensure that the preferred  alternative selected is the one that best meets the agency\u2019s mission  needs. Not conforming to the best practices may lead to an unreliable  AOA process, and the agency will not have assurance that the preferred  alternative best meets mission needs."], "subsections": []}, {"section_title": "Appendix III: GAO Assessment of TRIO Components\u2019 Alternatives Analyses", "paragraphs": ["The Department of Homeland Security\u2019s TRIO components\u2014the U.S.  Coast Guard (Coast Guard), Transportation Security Administration  (TSA), and Domestic Nuclear Detection Office (DNDO)\u2014conducted  alternatives analyses (AA) during 2012 and 2013 to determine the best  alternative for transitioning to a modernized financial management system  solution. We evaluated the TRIO components\u2019 AA processes against  analysis of alternatives (AOA) best practices GAO identified as necessary  characteristics of a reliable, high-quality AOA process (described in app.  II).", "GAO\u2019s assessment of the extent to which Coast Guard\u2019s, TSA\u2019s, and  DNDO\u2019s AAs met each of the 22 best practices is detailed in tables 5, 6,  and 7."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, James Kernen (Assistant  Director), William Brown, Courtney Cox, Eric Essig, Valerie Freeman,  Matthew Gardner, Jason Lee, Jennifer Leotta, and Madhav Panwar made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-201", "url": "https://www.gao.gov/products/GAO-19-201", "title": "Security Assistance: U.S. Agencies Should Establish a Mechanism to Assess Caribbean Basin Security Initiative Progress", "published_date": "2019-02-27T00:00:00", "released_date": "2019-02-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Caribbean region, which shares geographic proximity and common interests with the United States, faces high rates of crime and violence. In 2010, the United States and Caribbean countries formally launched CBSI, which aims to increase citizen safety. GAO was asked to examine U.S. assistance through CBSI. This report (1) discusses U.S. funding for CBSI activities, (2) examines the extent to which there is a planning and reporting process for CBSI, and (3) examines the extent to which State and USAID have established objectives and performance indicators to measure progress of their CBSI activities. GAO analyzed State and USAID data; assessed government strategies and performance reports; selected a non-generalizable sample of 25 CBSI activities and analyzed State and USAID documentation related to those activities; interviewed relevant officials; and conducted fieldwork in Barbados, Dominican Republic, and Jamaica, which are the countries generally receiving the most CBSI funding."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. agencies have allocated more than $560 million for the Caribbean Basin Security Initiative (CBSI) from fiscal years 2010 through 2018 for activities related to the three pillars of CBSI\u2014reduce illicit trafficking (such as in narcotics and firearms), improve public safety and security, and promote social justice. For example, State Department's (State) Bureau of International Narcotics and Law Enforcement Affairs (INL) has ongoing activities such as advisory programs and equipment procurements, while the U.S. Agency for International Development (USAID) has activities aimed at increasing economic opportunities for at-risk youth and improving the skills of prosecutors.", "The U.S. government has undertaken some planning and reporting of CBSI activities, but State has not created an initiative-wide planning and reporting mechanism. Agencies individually set strategic goals and priorities with CBSI countries and plan and report on their CBSI activities on a country-specific basis. However, State has not created an initiative-wide planning and reporting mechanism that facilitates interagency coordination or establishes consistent performance indicators across agencies, countries, and activities\u2014key elements for effectively aligning foreign assistance strategies. Without such a planning and reporting mechanism, overall progress of the initiative cannot be assessed.", "State and USAID have established objectives and performance indicators for selected CBSI activities, and INL is taking steps to improve identified weaknesses in its program monitoring. State and USAID had established objectives and performance indicators for the 25 activities in our sample. However, INL cannot ensure the reliability of its program monitoring data because collection and maintenance of this data is conducted differently in each country and there is no centralized data storage system. INL recently contracted to improve and standardize its program monitoring data for Western Hemisphere activities, but according to INL officials, data challenges remain\u2014in particular, how to collect standardized data from each of the embassies and how to build a data management system that is compatible with State requirements. Without reliable data, INL may continue to struggle with program monitoring of CBSI activities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State (1) create an initiative-wide planning and reporting mechanism for CBSI that includes the ability to monitor, evaluate, and report the results of collaborative efforts, and (2) ensure that INL develops and implements a data management system for centrally collecting reliable CBSI data. State agreed with the recommendations, noting that it plans to develop an updated Results Framework for initiative-wide planning and reporting and to improve centralized data collection through an enhanced data management system."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States has long recognized the importance of the Caribbean  region to the overall stability of the Western Hemisphere. Sometimes  referred to as the \u201cthird border,\u201d the Caribbean region shares geographic  proximity, common interests, and societal ties with the United States.  However, this region also faces security threats that jeopardize its  economic growth and development. Situated between drug production  sources in South America and consumer markets in North America and  Europe, the Caribbean is a major transit zone for illicit narcotics. The  United Nations Office on Drugs and Crime, the World Bank, and the Inter- American Development Bank have identified drug trafficking as a primary  driver of homicide and other violent crime in the region. Caribbean  countries suffer from some of the highest per-capita murder rates in the  world, and many countries lack the ability to counter these threats. In  2010, the United States, Caribbean Community member nations, and the  Dominican Republic formally launched the Caribbean Basin Security  Initiative (CBSI) to help Caribbean countries develop the capacity to  respond to these threats.", "You asked us to review assistance provided through CBSI. In this report,  we (1) provide information on U.S. funding for CBSI activities, (2)  examine the extent to which the U.S. Department of State (State) and  U.S. Agency for International Development (USAID), in conjunction with  other agencies, have implemented a planning and reporting process for  CBSI, and (3) examine the extent to which State and USAID have  established objectives and performance indicators to measure the  progress of their CBSI activities.", "To provide information on U.S. funding for CBSI, we analyzed State and  USAID data on allocations, unobligated balances, unliquidated  obligations, and disbursements by fiscal year, funding account, and  country for fiscal years 2010 through 2018. We compared the data to  those previously reported and determined that they were reliable for the  purpose of reporting them according to these categories. We also  obtained illustrative examples of the types of activities funded through  CBSI.", "To examine the extent to which State and USAID have implemented a  planning and reporting process for the initiative, we obtained relevant  CBSI planning and reporting documents, including those related to the  Caribbean-U.S. Security Cooperation Dialogue and strategy documents  such as Integrated Country Strategies and Country Development  Cooperation Strategies, and interviewed relevant State and USAID  officials. We compared the planning and reporting procedures in place to  the key elements for effectively aligning foreign assistance strategies in  situations where multiple agencies work together to deliver foreign  assistance.", "To examine the extent to which State and USAID have established  objectives and performance indicators to measure progress of their CBSI  activities, we selected three case study countries\u2014Barbados, the  Dominican Republic, and Jamaica. We selected these three countries  because they receive the greatest amount of CBSI funding and because  they have program officials from State and USAID in their embassies. For  each country, we requested lists of all ongoing and completed CBSI  activities from State and USAID and used the lists to select a non- generalizable sample of activities, 15 implemented by State and 10  implemented by USAID, which were selected to provide a range of  activity costs, implementing partners, types of activity, and location. We  reviewed State and USAID documentation related to performance  management for these activities, specifically focusing on the use of  activity objectives and performance indicators, which are used to set and  measure progress toward activity goals. Specifically, we examined  contracts and agreements and program monitoring and progress reports,  as well as country-level and regional-level reporting that encompassed  these activities. The objectives and performance indicators in place for  these activities do not represent those in place for all CBSI activities, but  offer illustrative examples. We compared the performance management  practices in place for the sample activities to State and USAID policies  related to program management, found in the Foreign Affairs Manual  (FAM) and Automated Directives System (ADS), respectively. We also  interviewed officials from State, USAID, the Department of Defense  (DOD), the Department of Justice, the Department of Homeland Security,  and other implementing partner officials in Washington, D.C.; Barbados;  the Dominican Republic; and Jamaica; and conducted site visits in these  countries to determine the types of performance indicators tracked for  each project.", "We conducted this performance audit from November 2017 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Economic, Security, and Illicit Drug Trafficking Challenges in the Caribbean", "paragraphs": ["The countries of the Caribbean are diverse in size, culture, and level of  development, and face various interrelated economic and security  challenges. According to a recent International Monetary Fund report,  Caribbean countries have recently fallen into a pattern of low growth and  high debt, and those with tourism-intensive economies are characterized  by high rates of unemployment. They have endured frequent natural  disasters that reduced economic output and imposed reconstruction  costs, as well as deep macroeconomic, financial, and structural  challenges that have resulted in lower-than anticipated rates of economic  growth, according to the same report.", "Recent reports emphasize that crime and violence in the Caribbean have  inflicted widespread costs, generating a climate of fear for citizens and  diminishing economic growth. These reports note that Caribbean  countries have some of the highest per-capita murder rates in the world,  with assault rates that are significantly above the world average, and high  crime rates have stretched the capacity of their criminal justice systems,  which are small and largely characterized as weak and ineffective.", "Because of their location between drug production sources in South  America and consumer markets in North America and Europe, Caribbean  countries have become a major transit zone for illicit drugs, particularly  drugs destined for the United States. With long coastlines that are difficult  to comprehensively patrol, and limited air and sea capabilities to support  interdictions, the Caribbean countries often struggle to control territorial  waters and stem the flow of drugs northwards."], "subsections": []}, {"section_title": "Establishment of CBSI", "paragraphs": ["Over the years, the United States has created several initiatives to  engage with the countries of the Caribbean Basin region to address  economic and political issues. In May 2010, the United States, Caribbean  Community member states, and the Dominican Republic formally launched CBSI to strengthen regional cooperation on security. At its  inception in 2010, CBSI\u2019s aim was to increase citizen safety through  provision of U.S. foreign assistance to CBSI partner countries to reduce  illicit trafficking, improve public safety and security, and promote social  justice; these three \u201cpillars\u201d remain the overall goals of CBSI.", "There are thirteen CBSI partner countries\u2014Antigua and Barbuda,  Bahamas, Barbados, Dominica, the Dominican Republic, Grenada,  Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the  Grenadines, Suriname, and Trinidad and Tobago (see fig. 1)."], "subsections": []}, {"section_title": "U.S. Government Agencies Involved in Funding and Implementing CBSI Activities", "paragraphs": ["The U.S. agencies and offices currently funding CBSI activities are  State\u2019s Bureau of International Narcotics and Law Enforcement Affairs  (INL), State\u2019s Bureau of Political-Military Affairs (PM), and USAID (see fig.  2). State\u2019s Bureau of Western Hemisphere Affairs (WHA) plays a  coordinating role for CBSI. To implement CBSI activities, State and  USAID partner with nongovernmental and multilateral organizations as  well as other government agencies, such as DOD and the Departments of  Homeland Security, Justice, and Treasury."], "subsections": []}]}, {"section_title": "U.S. Government Agencies Have Allocated More Than $560 Million in CBSI Funds from Fiscal Years 2010 through 2018 to Support Various Security Activities", "paragraphs": ["From fiscal years 2010 through 2018, U.S. agencies have allocated more  than $560 million in funding for CBSI activities. Since fiscal year 2012,  annual allocations have remained relatively constant, ranging between  $56.6 million and $63.5 million. Of the 13 CBSI partner countries, U.S.  agencies have provided the most CBSI funding to the Dominican  Republic, Jamaica, and the countries covered by the Eastern Caribbean  embassy. State and USAID disbursed funds to support activities in  partner countries that improve law enforcement and maritime interdiction  capabilities, support activities to train and otherwise improve the  capabilities of national security institutions, prevent crime and violence,  and deter and detect border criminal activity. These activities are  generally aligned with the three pillars of CBSI."], "subsections": [{"section_title": "State and USAID Allocated More Than $560 Million to CBSI from Various Foreign Assistance Accounts", "paragraphs": ["From fiscal years 2010 through 2018, State and USAID allocated more  than $560 million in funding for CBSI activities. Of that amount, U.S.  agencies have disbursed or committed approximately $361 million for  CBSI activities in the 13 CBSI partner countries and for region-wide  activities. Funding for CBSI activities comes from a combination of U.S.  foreign assistance accounts\u2014mostly through INCLE, ESF, and FMF, with  a small amount of funding provided through NADR and DA (see textbox).", "U.S. Foreign Assistance Accounts That Have Been Used to Fund  Caribbean Basin Security Initiative (CBSI) Activities  International Narcotics Control and Law Enforcement (INCLE): The  Department of State (State)\u2019s Bureau of International Narcotics and Law  Enforcement Affairs (INL) manages the INCLE account, which provides  assistance to foreign countries and international organizations to develop  and implement policies and programs that maintain the rule of law and  strengthen institutional law enforcement and judicial capabilities, including  countering drug flows and combatting transnational crime. Generally,  INCLE funds are available for obligation for 2 fiscal years and must be  disbursed within 5 years of the end of the period of availability for new  obligations.", "Economic Support Fund (ESF): State and the U.S. Agency for  International Development (USAID) share responsibility for managing the  ESF account. For CBSI activities, it is primarily USAID who uses ESF funds  to assist foreign countries in meeting their political, economic, and security  needs.  Generally, ESF funds are available for obligation for 2 fiscal years  and must be disbursed within 5 years of the end of the period of availability  for new obligations.   Foreign Military Financing (FMF): State\u2019s Bureau of Political-Military  Affairs manages the FMF account, which provides grants and loans to  foreign governments and international organizations for the acquisition of  U.S. defense equipment, services, and training. The Department of Defense  is the main implementer of this funding. Previous acts appropriating funds  for FMF have generally provided that such funds are available for obligation  for 1 year, and deem such funds to be obligated upon apportionment.", "Nonproliferation, Anti-terrorism, Demining, and Related Programs  (NADR): State manages the NADR account, which funds contributions to  organizations supporting nonproliferation and provides assistance to foreign  countries for nonproliferation, antiterrorism, demining, export control  assistance, and other related activities. Generally, NADR funds are  available for obligation for 2 fiscal years and must be disbursed within 5  years of the end of the period of availability for new obligations.", "Development Assistance (DA): USAID manages the DA account, which  responds to long-term challenges to human and economic security by  funding activities in areas such as economic growth and education.  Generally, DA funds are available for obligation for 2 fiscal years and must  be disbursed within 5 years of the end of the period of availability for new  obligations.", "Since 2012, allocations have remained relatively constant each year,  ranging between $56.6 million and $63.5 million. Table 1 summarizes  the INCLE, ESF, NADR, and DA allocations and disbursements and the  FMF allocations and commitments by year of appropriation. Appendix II  includes a breakdown of allocated, obligated, and disbursed funds for  INCLE, ESF, NADR, and DA accounts; appendix III includes a breakdown  of FMF funding that State has allocated and committed to CBSI.", "Since fiscal year 2010, U.S. agencies have provided the most CBSI  funding to the Dominican Republic, Jamaica, and the countries covered  by the Eastern Caribbean embassy. These countries received  approximately 66 percent of total CBSI allocations from fiscal years 2010  through 2018. Approximately 13 percent of total CBSI allocations went to  the Bahamas, Guyana, Suriname, and Trinidad and Tobago, while 21  percent of total CBSI allocations went to regional activities. Table 2  provides a breakdown of allocated funds by country for CBSI activities."], "subsections": []}, {"section_title": "U.S. Government Agencies Support Various Security Activities throughout the Caribbean in Line with the Three CBSI Pillars", "paragraphs": ["State and USAID fund various security activities in partner countries.  State uses INCLE and FMF funds to conduct activities in support of CBSI  goals at all seven embassies, covering all 13 CBSI countries. State uses  several different implementing mechanisms\u2014including contracts,  cooperative agreements, and interagency agreements. According to INL  officials, INL has an average of 10-50 distinct ongoing activities within any  individual country program at any given time, ranging from multi-year,  multi-million dollar embedded advisory programs to one-time  procurements for equipment or individual trainings. USAID uses ESF  funds for activities in three missions\u2014the Dominican Republic, Eastern  and Southern Caribbean, and Jamaica. In general, USAID uses similar  implementing mechanisms, but typically has fewer projects that cover  multiple years.", "State primarily focuses on funding CBSI activities that fall within the pillar  of reducing illicit trafficking, and USAID concentrates on funding activities  within the pillar of promoting social justice. Both agencies fund activities in  the pillar of improving public safety and security.", "Reducing illicit trafficking. State uses INCLE and FMF funds, through  interagency agreements with DOD and other implementing partners, to  increase Caribbean countries\u2019 control over their territorial maritime  domain and reduce illicit trafficking, such as narcotics and firearms, as the  examples below illustrate.", "Eastern Caribbean. INL and PM have provided training and  equipment to the Regional Security System, a collective defense  organization of Eastern Caribbean countries whose responsibilities  include regional law enforcement training and narcotics interdiction.  For example, U.S. assistance funded the refurbishment of aircraft  operated by the Regional Security System to provide equipment for  intelligence, surveillance, and reconnaissance related to drug  interdiction.", "Jamaica. INL and PM have provided boats to the government of  Jamaica to increase the government\u2019s capacity to conduct  counternarcotic operations (see fig. 3).", "Throughout the Caribbean. INL supports activities providing training,  technical assistance, policy guidance, and basic equipment to  enhance the capacity of CBSI countries to combat illicit small arms  and ammunition trafficking through operational forensic ballistics.", "Throughout the Caribbean. State uses an interagency agreement to  support the Technical Assistance Field Team (TAFT) program. This  program, supported by both FMF and INCLE funds, aims to build  maritime capacity of partner countries throughout the Caribbean. The  team is composed of 15 Coast Guard and DOD engineers,  technicians, specialists, and logisticians, based at U.S. Southern  Command, who assist Caribbean maritime security forces with  maintenance and sustainment issues. The advisors have worked to  implement inventory management systems within CBSI countries and  conduct regular site visits to CBSI countries to assist in the  maintenance and logistics of maritime assets.", "Promoting social justice. USAID and its implementing partners\u2014 multilateral and nongovernmental organizations, for the most part\u2014use  ESF funds in an effort to increase economic opportunities for at-risk youth  and vulnerable populations, improve community and law enforcement  cooperation, improve the juvenile justice sector, and reduce corruption in  public and private sectors.", "Dominican Republic. USAID has provided assistance for community- based activities, such as the Community Justice Houses. These  centers are designed to provide services related to the justice sector,  such as public defense and mediation efforts for populations in areas  of high violence that have limited access to traditional justice  institutions.", "Dominican Republic and Barbados. USAID\u2019s implementing partners  work with at-risk youth to provide skills training and education for  those individuals in vulnerable populations.", "Jamaica. USAID\u2019s implementing partners work with youth in the  juvenile justice system to provide marketable technical skills, life skills,  and individualized psychosocial attention to assist in their  reintegration into society.", "Eastern and Southern Caribbean. USAID partners use a community- based approach to crime prevention to identify the underlying causes  of crime and violence by collecting standardized crime data across the  region.", "Increasing public safety and security. State uses INCLE to fund  activities to increase the rule of law and reduce transnational crime.  USAID uses ESF to support public safety and security activities by  funding training and support programs that aim to build institutional  capacity for police and judicial systems.", "Jamaica. INL works to enhance the government of Jamaica\u2019s capacity  to disrupt and deter money laundering operations and other financial  crimes by providing technical assistance, equipment and training for  combating money laundering and financial crime, and for the seizure  of criminally-acquired assets.", "Eastern Caribbean. INL uses training, technical assistance,  equipment purchases, and operational support to combat financial  crimes and increase asset forfeiture efforts.", "Dominican Republic. INL has provided funding for the government\u2019s  creation of a centralized emergency \u201c911\u201d response system to  increase citizen safety and security.", "Dominican Republic. Both INL and USAID provide assistance to the  Dominican National Police, and USAID\u2019s implementing partners work  with the judicial sector to improve the skills of prosecutors (see fig. 4).  INL provides assistance to the Dominican National Police through  funding training to increase police professionalization and supports  training on enforcing legislation for prosecutors and judges. USAID  funding works to support the reform and modernization of the  Dominican National Police by strengthening the management capacity  and accountability of the organization. USAID implementing partners  also work with prosecutors to strengthen the criminal justice system in  the Dominican Republic."], "subsections": []}]}, {"section_title": "State and USAID Undertake Some Planning and Reporting of CBSI Activities but the U.S. Government Cannot Assess Initiative-wide Progress", "paragraphs": ["The United States and Caribbean countries meet periodically to set  strategic goals and to designate high-level priorities for the subsequent  year, and U.S. agencies individually plan and report on CBSI activities on  a country-specific basis through a variety of reporting mechanisms (see  fig. 5). However, State has not created an initiative-wide mechanism for  planning and reporting on CBSI activities and the U.S. government  cannot assess initiative-wide progress."], "subsections": [{"section_title": "State and USAID Establish Strategic Goals and Priorities for CBSI with Partner Countries", "paragraphs": ["At the strategic and political level, U.S. government agencies and CBSI  partner countries engage on a periodic basis to set strategic goals and to  designate high-level priorities for the subsequent year. The process  involves various technical working groups meeting throughout the year,  culminating in the Caribbean-United States Security Cooperation  Dialogue meeting, attended by the Caribbean Community, the Dominican  Republic, the United States, and other interested Caribbean states and  international partners. At the 2017 meeting, participants set strategic  goals by reaffirming the initiative\u2019s three pillars of substantially reducing  illicit trafficking, advancing public safety and security, and promoting  social justice. Participants also produced a high-level plan of action that  aimed to strengthen commitment and accountability of the countries  involved and to ensure political support for implementation. Within each  goal, the plan identified high-level priorities such as counternarcotics,  anti-money laundering, border security, justice reform, and anti- corruption."], "subsections": []}, {"section_title": "State and USAID Generally Plan CBSI Activities on a Country- Specific Basis", "paragraphs": ["At the implementation level, State and USAID separately plan and report  their CBSI activities, generally on a country-specific basis. Within State,  INL develops multi-year country plans that are the basis for making  decisions on CBSI activities for each country, according to INL officials.  The plans describe objectives within a country for program areas such as  law enforcement professionalization, rule of law, and counternarcotics,  and include performance indicators related to those program areas. INL  developed a country plan for each of the seven embassies in CBSI from  fiscal years 2017 through 2021. In addition, a portion of INL\u2019s CBSI  funding is devoted to regional activities (i.e., activities that are  implemented in more than one CBSI country), and INL developed the  CBSI Regional Implementation Plan to describe the objectives and  performance indicators for regional activities. The CBSI activities that  are funded through FMF are planned and implemented by DOD in  coordination with PM.", "USAID uses its Country Development Cooperation Strategies (CDCS) as  the basis for planning CBSI activities in each country, according to USAID  officials. USAID developed a CDCS for each of the three missions that  have a USAID presence among the CBSI countries\u2014Eastern and  Southern Caribbean, the Dominican Republic, and Jamaica. The  strategies outline priorities for each mission and typically cover 5 years. In  each of the CDCS, USAID outlines three development objectives,  including one that is CBSI-related\u2014on crime prevention and reduction\u2014 and two that are not CBSI-related\u2014on climate change and health care.", "According to INL and USAID officials, coordination of CBSI activities  between the two agencies primarily occurs at the embassy level through  routine meetings. Officials at embassies in the CBSI countries also  compile bimonthly reporting cables that contain information on selected  CBSI activities. State\u2019s WHA, which plays a coordinating role for CBSI,  holds monthly coordination meetings for INL, PM, and USAID officials in  Washington, D.C. to discuss high-level issues and upcoming events  relevant to the initiative, as well as to prepare for meetings with  Caribbean partners, according to officials."], "subsections": []}, {"section_title": "The U.S. Government Cannot Assess CBSI Initiative-wide Progress Because It Does Not Have an Initiative-wide Planning and Reporting Mechanism", "paragraphs": ["While State and USAID set strategic goals and priorities with CBSI  partner countries and plan for and report on CBSI activities within each  agency or bureau, State has not established a CBSI-wide planning and  reporting mechanism that links agencies\u2019 activities to the three overall  CBSI goals. State and USAID typically use Integrated Country  Strategies (ICS) to strategically plan in a given country, and  Performance Plans and Reports (PPR) to assess progress made relative  to the foreign assistance priorities in a given country. Each of the U.S.  embassies that cover the CBSI countries has both an ICS and PPR.  However, the PPRs for the individual CBSI countries are for bi-lateral  funds, and the ICSs serve as a whole-of-U.S.-government strategy in a  country.", "According to State officials, since CBSI is a regional initiative, CBSI  activities are included in the scope of the relevant regional planning and  reporting documents. These regional documents include the WHA Joint  Regional Strategy and the WHA PPR. However, these documents  represent the entire Western Hemisphere and are not specific to CBSI  activities. The Joint Regional Strategy does not serve as a planning  mechanism for CBSI-wide activities and does not establish CBSI specific  targets or performance indicators. Moreover, while the PPR reports  outputs and outcomes, CBSI results are aggregated with other regionally  funded activities in the Western Hemisphere, such as the Central America  Regional Security Initiative. For example, while the PPR may report the  number of judicial personnel trained with U.S. government assistance,  that number may include officials in the Dominican Republic, Jamaica,  Honduras, or any other number of countries within the Western  Hemisphere. Therefore, the most recent WHA PPR does not serve as a  CBSI reporting mechanism as it is not possible to always know which  results are related to CBSI activities, and the CBSI-wide outputs and  outcomes can be indiscernible from other regional efforts.", "In 2012, State created the CBSI Results Framework, recognizing the  importance of tracking initiative-wide results. The Framework included the  three CBSI pillars\u2014reducing illicit trafficking, improving public safety and  security, and promoting social justice\u2014and specified intermediate results,  such as reducing drug demand in target areas, improving security at ports  of entry, and improving community and law enforcement cooperation.  Each of the intermediate results included performance indicators for  measuring and reporting CBSI results. According to WHA officials, WHA  had envisioned establishing baseline data, obtaining annual reporting  from each embassy, and reporting on a subset of the indicators.  However, neither State nor USAID currently use the framework to gauge  overall progress of CBSI. State officials that we interviewed were not  aware of the reason for discontinuing use of the framework and stated  that the decision to discontinue using it pre-dated their tenure. According  to State officials and our assessment of program documentation, State  does not currently use the framework in any official capacity. While  USAID officials stated that they continue to use the framework as internal  guidance on CBSI\u2019s direction, they stated that they do not use it to track  progress.", "The delivery of U.S. foreign assistance often involves multiple agencies or  a whole-of-government approach. We have previously identified key  elements for effectively aligning foreign assistance strategies in situations  where multiple agencies are working together to deliver foreign  assistance, such as CBSI. These elements include, among others, the  establishment of interagency coordination mechanisms, integration of  strategies with relevant higher- or lower-level strategies, and assessment  of progress toward strategic goals through the articulation of desired  results, activities to achieve the results, performance indicators, and  monitoring and evaluation plans and reports. We found that agencies that  establish strategies aligned with partner agencies\u2019 activities, processes,  and resources are better positioned to accomplish common goals,  objectives, and outcomes. For foreign assistance that involves multiple  agencies, strategies that consistently address agencies\u2019 roles and  responsibilities and interagency coordination mechanisms can help guide  implementation and reduce potential program fragmentation.", "The absence of a functioning CBSI-wide planning and reporting  mechanism leaves open the possibility that State\u2019s and USAID\u2019s existing  planning efforts may be inadequate in ensuring that activities are  effectively coordinated to reduce fragmentation or overlap. In 2016,  USAID contracted for an independent assessment of all of its CBSI  activities. Since USAID implements CBSI in conjunction with other U.S.  agencies, such as State, one of the objectives within the assessment was  to determine the degree to which USAID\u2019s activities were complementary  with those of other U.S. agencies and whether there were instances of  overlap. The assessment noted that coordination and information  exchange between the agencies about individual CBSI activities and their  components appeared to be relatively ad hoc and was primarily seen as  the mandate of staff in the field, though at that level, information sharing  and coordination had been widely variable. It noted that in general, the  level and type of communication between USAID and INL tended to be  influenced by personalities, and information was not shared  systematically. The assessment concluded that there was a potential for  overlap between USAID and INL and recommended that USAID and INL  take several actions to strengthen information sharing and coordinate and  align activities. This coordination is important since overlap or unintended  competition between INL\u2019s and USAID\u2019s CBSI activities has been  documented on at least one occasion. According to the fiscal year 2017  annual report submitted by an implementing partner for one of USAID\u2019s  activities in the Dominican Republic, the partner was directed to suspend  several of its activities related to training to strengthen standards for  criminal case preparation and training for police and prosecutors,  reportedly because State realigned the task to INL. The report cited poor  delineation of roles and relationships as an underlying cause.", "While State and USAID set strategic goals and plan and report on CBSI  activities in individual countries, the U.S. government does not have a  functioning initiative-wide planning and reporting mechanism that links  CBSI activities to overall goals or specifies a means for assessing  initiative-wide progress through articulation of desired results,  performance indicators, and a monitoring and evaluation plan. Without  such a mechanism that establishes consistent performance indicators  across agencies, countries, and activities and determines baselines and  targets, it is difficult to measure CBSI\u2019s activities across the initiative,  making it difficult to assess any progress made toward achieving CBSI\u2019s  overall goals. Consequently, the U.S. government has limited ability to  evaluate CBSI\u2019s successes and limitations and use such information to  better guide future decision-making."], "subsections": []}]}, {"section_title": "State and USAID Established Objectives and Performance Indicators and INL Is Taking Steps to Improve Weaknesses in Program Monitoring", "paragraphs": ["USAID and implementing partners have established objectives and  performance indicators for selected CBSI activities that we reviewed and  have been measuring and reporting on progress for those activities.  Within State, INL and implementing partners have established objectives  and performance indicators for all of the activities that we reviewed, and  INL and PM receive quarterly monitoring reports containing performance  information on the TAFT program. In response to identified weaknesses  in its program monitoring, INL is taking steps to improve program  monitoring for its Western Hemisphere programs, which include CBSI  activities."], "subsections": [{"section_title": "State and USAID Established Objectives and Performance Indicators for Selected CBSI Activities", "paragraphs": ["State and USAID policies related to program management\u2014found in the  FAM and ADS, respectively\u2014require the establishment of objectives and  performance indicators for program monitoring. We found that USAID  and its implementing partners established objectives and performance  indicators for all 10 of the CBSI activities in our sample and use these  indicators to measure activity progress. Table 3 includes examples of  the types of indicators established for USAID activities in our sample.", "In addition to establishing performance indicators, USAID and its  implementing partners are using these indicators to measure the progress  of CBSI activities. We found that implementing partners for nearly all of  the activities in our sample had submitted progress reports to USAID that  used the performance indicators to measure progress and identify  challenges in achieving the activities\u2019 goals.", "State and its implementing partners also established objectives and  performance indicators for all 15 of the CBSI activities that we reviewed.  See table 4 for examples of the types of indicators established for INL  activities in our sample."], "subsections": []}, {"section_title": "INL Cannot Ensure the Reliability of Its Program Monitoring Data but Is Taking Steps to Address Weaknesses in Western Hemisphere Program Monitoring", "paragraphs": ["INL cannot ensure the reliability of its CBSI program monitoring data but  is taking steps to improve its ability to consistently collect and store such  data for its activities in the Western Hemisphere, including CBSI activities.  We have previously reported that effective program monitoring of foreign  assistance requires quality data for performance reporting. Specifically,  leading practices for monitoring of foreign assistance activities include  development of objectives and relevant performance indicators,  procedures for assuring quality of data on performance indicators, and  submission of performance reports.", "According to INL officials, in the absence of a centrally available data  management system, program monitoring data is collected and  maintained at each embassy. As a result, compiling and providing  program monitoring data is time-consuming. For example, when we  requested a list of all completed and ongoing INL-funded CBSI activities  from fiscal years 2012 through 2017, INL responded that it would take  several months to compile that information.", "Further, INL officials told us that they cannot ensure the reliability of their  program monitoring data because of questions about the comparability of  data collected across embassies. During the course of our work, INL  officials at headquarters and overseas told us that program monitoring is  conducted differently in every embassy, and program monitoring data is  not defined or recorded in a standardized manner. These variations can  result in discrepancies in how program performance data is defined and  collected. For example, INL officials explained that in order to collect drug  seizure information that can be analyzed across countries, the data needs  to be collected in the same units of measurement and over the same time  period in each country, but currently, they are not. According to INL,  absent a standardized data collection process, it is difficult to track data  trends across programs.", "INL has expressed concerns about its program monitoring and an inability  to centrally collect reliable program monitoring data. In 2015, an  independent evaluation of INL\u2019s CBSI activities noted that lack of  monitoring information hinders INL\u2019s efforts to link assistance directly to  goals, objectives, and results laid out in the CBSI Results Framework. It  recommended that INL prioritize improving internal program monitoring  capacity. INL\u2019s Functional Bureau Strategy, released in 2018, states that  INL\u2019s program monitoring efforts are often constrained by the availability  of reliable data.", "In response to these concerns about program monitoring, the INL office  for Western Hemisphere Programs contracted with a private firm in 2017  to improve its program monitoring capabilities by creating new  performance indicators meant to standardize data collection across INL\u2019s  programs in the Western Hemisphere and better capture the impact of  INL\u2019s assistance. The contract also included the creation of a centralized  data management system for collecting and storing the program  monitoring data associated with the performance indicators.", "According to INL officials and progress reports submitted by the  contractor, some progress has been made. To date, the contractors have  been studying the availability of data, reviewing existing performance  indicators, and proposing new indicators. The contractors have been  considering options for designing and building the centralized data  management system. However, INL officials acknowledge that data  challenges remain, such as the issue of how to collect standardized data  from each of the embassies and how to build a functioning data  management system that is compatible with State requirements. As of  October 2018, according to INL officials, the characteristics of the  centralized data management system had not yet been determined, and  consequently, they are uncertain what capabilities the final data  management system will have. Therefore, it is unclear whether the  system will allow for the consistent collection and storage of reliable  program monitoring data for all CBSI activities and the ability to  distinguish these data from those of other Western Hemisphere activities.  In the absence of centrally-available, reliable data for CBSI activities, INL  may continue to struggle with effective program monitoring for these  activities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Caribbean region faces a variety of economic and security  challenges that jeopardize the region\u2019s economic growth and  development. Because of close societal ties and geographic proximity,  these challenges also threaten U.S. security. CBSI was created to  respond to these threats\u2014to provide mutually beneficial assistance that  would increase citizen security for residents of the Caribbean region and  bolster economic opportunities. However, while U.S. agencies have  allocated more than $560 million to CBSI since 2010, they cannot attest  to the initiative\u2019s success or failure. State\u2019s WHA, which plays the  coordinating role for CBSI, has not established an initiative-wide planning  and reporting mechanism that ensures CBSI activities are being  coordinated to maximize the impact of assistance and prevent overlap,  and that provides a means for assessing overall progress. Without such a  mechanism, the ability to demonstrate the efficacy of the initiative, and to  emphasize positive results that have been achieved, is limited.", "Although USAID and State have established objectives and performance  indicators for the CBSI activities we reviewed, State does not have a  process for centrally collecting and storing reliable program monitoring  data for the activities it funds through CBSI, particularly those managed  by INL. While INL is taking steps to address these challenges by  improving program monitoring across its activities in the western  hemisphere, without reliable performance data specific to CBSI, State  cannot report comprehensively or accurately on its CBSI activities or track  data trends across countries."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to State:  The Secretary of State should, in consultation with USAID and other  stakeholders as appropriate, create an initiative-wide planning and  reporting mechanism for CBSI that includes the ability to monitor,  evaluate, and report the results of their collaborative efforts  (Recommendation 1).", "The Secretary of State should ensure that INL\u2019s Office of Western  Hemisphere Programs develops and implements a data management  system for centrally collecting reliable program monitoring data for all INL- funded CBSI activities through its current program monitoring contract or  by some other means (Recommendation 2)."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State and USAID, DOD, the  Department of Justice, and the Department of Homeland Security for  review and comment. In its comments, reproduced in appendix IV, State  concurred with our two recommendations. State noted that it plans to  develop an updated Results Framework for CBSI that will provide the  basis for initiative-wide planning and reporting. State also noted that INL\u2019s  Office of Western Hemisphere Programs is working through its existing  monitoring and evaluation contract to improve centralized data collection  and is developing plans for an enhanced data management system that  will facilitate the collection and management of both strategic and  implementer-reported data. In addition, State reported that INL is  developing complementary bureau-wide monitoring and evaluation  guidance and procedures to ensure the consistency and reliability of  collected data across INL programs, which include CBSI activities. USAID  also provided written comments, which we have reproduced in appendix  V. State, USAID, DOD, and the Department of Homeland Security  provided technical comments, which we have incorporated as  appropriate. The Department of Justice reviewed the report but did not  provide comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Administrator of USAID, 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 staffs have any questions about this report, please contact  me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["We were asked to review security assistance to the Caribbean region  provided through the Caribbean Basin Security Initiative (CBSI). In this  report we (1) provide information on U.S. funding for CBSI activities, (2)  examine the extent to which the U.S. Department of State (State) and  U.S. Agency for International Development (USAID), in conjunction with  other agencies, have implemented a planning and reporting process for  CBSI, and (3) examine the extent to which State and USAID have  established objectives and performance indicators to measure the  progress of their CBSI activities.", "To provide information on U.S. funding for CBSI, we obtained State and  USAID data for fiscal years 2010 through 2018. We analyzed these data  to determine allocations, unobligated balances, unliquidated obligations,  and disbursements by fiscal year, funding account, and country. We  compared the data to those previously reported to identify  inconsistencies, and interviewed State and USAID officials. We  determined these data were sufficiently reliable for reporting allocations,  unobligated balances, unliquidated obligations, and disbursements by  fiscal year, funding account, and country. To obtain additional detail on  the types of assistance provided by the United States, we reviewed  activity documentation; interviewed State and USAID officials in  Washington, D.C. and traveled to Barbados, the Dominican Republic, and  Jamaica to meet with State, USAID, and implementing partner officials.  We also observed CBSI activities in these countries. We selected these  countries for fieldwork because they were among the countries receiving  the largest amount of CBSI funding and the embassies there included  CBSI program officials from State and USAID. The findings from these  countries are not generalizable to all CBSI countries.", "To determine the extent to which State and USAID have implemented a  planning and reporting mechanism for CBSI, we obtained relevant CBSI  planning and reporting documents, including State Bureau of International  Narcotics and Law Enforcement Affairs (INL) country and regional  implementation plans and documents related to the Caribbean-U.S.  Security Cooperation Dialogue; and strategy documents such as  Integrated Country Strategies, Country Development Cooperation Strategies, and Functional Bureau Strategies. We also assessed relevant  Performance Plans and Reports for Caribbean countries and the Western  Hemisphere and interviewed State officials to determine how information  on CBSI activities is aggregated and reported on a country level and  initiative-wide basis. In addition, we interviewed relevant State and USAID  officials in Washington, D.C. and in Barbados, the Dominican Republic,  and Jamaica, about their planning processes for CBSI activities. We  compared the planning and reporting procedures in place to the key  elements for effectively aligning foreign assistance strategies in situations  where multiple agencies work together to deliver foreign assistance.", "To determine the extent to which State and USAID have established  objectives and performance indicators to measure the progress of CBSI  activities, we selected three case study countries\u2014Barbados, the  Dominican Republic, and Jamaica. We selected these three countries  because they receive the greatest amount of CBSI funding and because  they have program officials from State and USAID in their embassies. We  requested lists of all ongoing and completed CBSI activities from State  and USAID for fiscal years 2012 through 2017 and used the lists to select  a non-generalizable sample of activities, 15 implemented by State and 10  by USAID. The activities were chosen to provide a range of  implementing partners, types of activity, and location. We requested State  and USAID documentation related to the activities in our sample,  including applications for funding, contracts, agreements, program  monitoring and progress reports, financial reports, and evaluations. We  reviewed the documentation to assess the performance management  practices in place for these activities, as well as country-level and  regional-level reporting related to the activities\u2014specifically focusing on  the use of program objectives and performance indicators, which are used to set and measure progress toward program goals. The objectives  and performance indicators in place for these activities do not represent  those in place for all CBSI activities, but offer illustrative examples. We  compared the performance management practices in place for the  sample activities to State and USAID policies. For the Technical  Assistance Field Team (TAFT) program implemented by the Department  of Defense (DOD) and the U.S. Coast Guard on behalf of State\u2019s Bureau  of Political-Military Affairs, we reviewed quarterly reports between fiscal  years 2014 and 2018 for performance management information. The  TAFT program is designed to provide technical assistance to enhance  operational readiness and maintenance of equipment used by CBSI  countries. The quarterly reports include articulation of objectives,  descriptive information on the support TAFT members provided during  each visit, assessments of host country capabilities, and details on where,  when, and how funds were expended. While this information is not  reported in the same manner as State\u2019s and USAID\u2019s performance data,  we determined it appropriate to treat the information provided in the TAFT  quarterly reports as comparable to the setting of objectives and  performance indicators as generally carried out by State and USAID. We  also interviewed State, USAID, DOD, the Department of Justice, the  Department of Homeland Security, and other implementing partner  officials in Washington, D.C.; Barbados; the Dominican Republic; and  Jamaica; and conducted site visits in these countries to determine the  types of performance indicators tracked and reported on for each activity.", "We conducted this performance audit from November 2017 to February  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."], "subsections": []}, {"section_title": "Appendix II: Funding Data Tables", "paragraphs": ["To demonstrate how funding for Caribbean Basin Security Initiative  (CBSI) activities have been allocated, obligated and disbursed, we are  providing a status of CBSI funds as of November 2018. Tables 5-9 below  show CBSI funding from the International Narcotics Control and Law  Enforcement (INCLE); Economic Support Fund (ESF); Nonproliferation,  Anti-terrorism, Demining, and Related Programs (NADR); and  Development Assistance (DA) accounts. These tables illustrate, by year  of appropriation, how U.S agencies have allocated, obligated, and  disbursed funds for activities in CBSI partner countries. Specifically, the  tables include unobligated balances\u2014that is, portions of allocated funds  that have not yet been obligated\u2014and unliquidated obligations (i.e.  obligated balances)\u2014that is, amounts already incurred for which payment  has not yet been made."], "subsections": []}, {"section_title": "Appendix III: Status of Caribbean Basin Security Initiative Foreign Military Financing Account Funds", "paragraphs": ["Table 10 below provides the status of Caribbean Basin Security Initiative  (CBSI) Foreign Military Financing (FMF) funds as of November 2018. The  presentation of FMF allocations and commitments in this table is different  from presentations on allocations, obligations, and disbursements of the  other CBSI accounts in tables 5-9 in appendix II because FMF funds are  budgeted and tracked in a different way.", "The Defense Security Cooperation Agency (DSCA) and the Defense  Financing and Accounting Service (DFAS) are responsible for the  financial systems that account for FMF funds as well as for tracking the  implementation and expenditure of those funds. According to DSCA  officials, FMF funds are obligated on apportionment. Further, DSCA\u2019s  system can track only uncommitted and committed amounts, not  unliquidated obligations or disbursements, of FMF funds. DFAS tracks  obligations and disbursements using the Defense Integrated Finance  System; however, there is no direct link between the DSCA and DFAS  systems and the DFAS system does not track funding for specific  initiatives, such as CBSI."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Thomas Costa (Assistant  Director), Jennifer Young, Martin Wilson, Peter Choi, Debbie Chung,  Benjamin Licht, Martin de Alteriis, Neil Doherty, and Mark Dowling made  key contributions to this report."], "subsections": []}]}], "fastfact": ["The U.S. government and Caribbean countries formally launched the Caribbean Basin Security Initiative in 2010 to try to reduce drug trafficking, increase public safety, and promote social justice in the region. U.S. agencies allocated more than $560 million from 2010 through 2018 for this collaborative effort with 13 nations.", "Is it working?", "The State Department doesn\u2019t know. We found that while U.S. agencies plan and report on their activities with specific countries, the State Department hasn\u2019t established a way to assess overall progress.", "We recommended that State improve its ability to monitor, evaluate, and report on the Initiative."]}
{"id": "GAO-19-225T", "url": "https://www.gao.gov/products/GAO-19-225T", "title": "Navy and Marine Corps: Rebuilding Ship, Submarine, and Aviation Readiness Will Require Time and Sustained Management Attention", "published_date": "2018-12-12T00:00:00", "released_date": "2018-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The 2018 National Defense Strategy emphasizes that restoring and retaining readiness is critical to success in the emerging security environment. The Navy and Marine Corps are working to rebuild the readiness of their forces while growing and modernizing their aging fleet of ships and aircraft. However, achieving readiness recovery goals will take years as both services continue to be challenged to rebuild readiness amid continued operational demands.", "This statement provides information on current and future readiness challenges facing (1) the Navy ship and submarine fleet and (2) Navy and Marine Corps aviation. GAO also discusses prior recommendations on Navy and Marine Corps readiness and progress to address them.", "This statement is based on previously published work since 2015 related to Navy and Marine Corps readiness challenges, including shipyard workforce and capital investment, ship crewing, weapon system sustainment, the fighter pilot workforce, and modernizing force structure. GAO conducted site visits to the Pacific fleet in November 2018 and analyzed updated data, as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Navy has taken steps to address training shortfalls in the surface fleet, but faces persistent maintenance and personnel challenges as it seeks to rebuild ship and submarine readiness. While the Navy has corrective actions underway, they will take years to implement. Following ship collisions in 2017, the Navy has taken steps to ensure its crews are trained to standards prior to deployment and made significant progress in those efforts. However, the Navy has struggled to complete ship maintenance\u2014with only 30 percent of maintenance completed on time since fiscal year 2012\u2014leading to thousands of days that ships were unavailable for training and operations (see figure). Additionally, manning shortfalls and experience gaps continue to contribute to high sailor workload and are likely to continue through at least fiscal year 2021. The Navy has developed a plan to improve shipyards and is re-examining its ship manning, among other actions; however, these positive steps have not yet fully addressed GAO's recommendations. Looking to the future, the Navy has indicated that it wants to grow its fleet to meet demands. However, the costs of such growth are not yet known and would likely require resourcing well above currently planned levels.", "Navy and Marine Corps aircraft availability has been limited due to numerous challenges (see figure). Specifically, the seven aircraft GAO reviewed have generally experienced decreasing availability since fiscal year 2011 and did not meet availability goals in fiscal years 2017 and 2018. The F-35\u2014the future of naval aviation\u2014also has not met availability goals due to part shortages and poor sustainment planning. In September 2018, the Department of Defense established aggressive targets for aircraft availability. While the Navy and Marine Corps are taking actions to improve aircraft availability, including addressing GAO's recommendations, aviation readiness will take many years to recover."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made a total of 45 recommendations in the prior work described in this statement. The Department of Defense concurred with most of them, and has many actions underway, but has not yet fully implemented any. Attention to these recommendations can assist the Navy and the Marine Corps as they seek to rebuild the readiness of their forces."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss issues related  to Navy and Marine Corps readiness.", "In June 2017, we issued a report highlighting five key mission challenges  facing the Department of Defense (DOD). In that report, we noted that  the United States faces an extremely challenging national security  environment at the same time it is grappling with addressing an  unsustainable fiscal situation in which DOD accounts for approximately  half of the federal government\u2019s discretionary spending. Within this  environment, DOD is working to both rebuild the readiness of its current  forces and modernize to meet future threats. Since we issued that report,  the department released a new National Defense Strategy in January  2018 that prioritizes the long-term challenges posed by highly capable  adversaries and emphasizes the need to rebuild readiness. Additionally,  Congress has passed appropriations to fund DOD\u2019s effort to restore  readiness.", "This statement provides information on current and future readiness  challenges facing the (1) Navy ship and submarine fleet and (2) Navy and  Marine Corps aviation. In appendix I, we also summarize our  recommendations related to Navy and Marine Corps readiness that we  have made in prior reports and we summarize any progress the Navy and  Marine Corps have made to implement those recommendations.", "This statement is based on prior reports we issued from 2015 through  2018 examining Navy and Marine Corps readiness challenges, shipyard  workforce and capital investment, ship crewing, weapon system  sustainment, the fighter pilot workforce, and force structure. To perform our prior work, we analyzed Navy and Marine Corps readiness,  maintenance, personnel, and training data, and interviewed cognizant  Navy and Marine Corps officials involved in operations. The reports cited  throughout this statement contain more details on the scope of the work  and the methodology used to carry it out. This statement also includes  updates to information as of November 2018, as appropriate, based on  Navy and Marine Corps documentation and discussions with senior Navy  leadership, the Fleet Forces Command, the Pacific Fleet, and other  officials. We also conducted 10 group discussions with officers and  enlisted personnel aboard a cruiser and a destroyer based in Yokosuka,  Japan in November 2018 to discuss crew workload, training, and ship  manning. We have also issued several classified reports since 2015  examining these issues and made recommendations to the Navy and the  Marine Corps; however, this statement does not include that work.", "We conducted the work on which this testimony is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["We testified before the Senate Committee on Armed Services in  September 2017 after four significant mishaps at sea resulted in the loss  of 17 sailors\u2019 lives and serious damage to Navy ships. We reported on  some of the Navy\u2019s challenges, including the degraded condition and  expired training certifications of ships homeported overseas, reductions to  ship crews that contributed to sailor overwork and safety risks, and an  inability to complete maintenance on time. Since that time, the Navy has  completed two internal reviews to address these and other challenges,  identifying 111 recommendations to improve surface fleet readiness. The  Navy formed an executive group to guide and closely track the  implementation of recommendations, and its reform efforts are ongoing.  As of November 2018, the Navy reported that it had implemented 78 (i.e., 70 percent) of these recommendations. Navy officials recognize that full  implementation will take significant time and management attention to  address the fundamental readiness challenges identified. In figure 1, we  show photographs of two of the four Navy ships involved in significant  mishaps that occurred in 2017. Both the USS Fitzgerald and the USS  John S. McCain were involved in collisions that resulted in sailor fatalities.", "DOD has reported that more than a decade of conflict, budget  uncertainty, and reductions in force structure have degraded its  readiness; in response, the department has made rebuilding readiness a  priority. The 2018 National Defense Strategy emphasizes that restoring  and retaining readiness across the entire spectrum of conflict is critical to  success in the emerging security environment. Nevertheless, DOD  reported that readiness of the total military force remains low and has  remained so since 2013. Our work has shown that the Navy has  experienced increasing maintenance challenges as a high pace of  operations has continued and maintenance has been deferred.  Maintenance and personnel challenges also hinder readiness recovery of  Navy aircraft. For the Marine Corps, our work has shown that ground  force readiness has improved and remained stable in recent years, but  acute readiness problems remain in aviation units.", "Over the past year, DOD has made department-wide progress in  developing a plan to rebuild the readiness of the military force, with the  military services providing regular input on the status of their readiness  recovery efforts. In August 2018, we reported that the Office of the  Secretary of Defense has developed a Readiness Recovery Framework  that the department is using to guide the services\u2019 efforts and plans to use  to regularly assess, validate, and monitor readiness recovery. The Office  of the Secretary of Defense and the services have recently revised  readiness goals and accompanying recovery strategies, metrics, and  milestones to align with the 2018 National Defense Strategy and Defense  Planning Guidance. We have ongoing work assessing DOD\u2019s progress in  achieveing its overall readiness goals.", "DOD\u2019s readiness rebuilding efforts are occurring in a challenging context  that requires the department to make difficult decisions regarding how  best to address continuing operational demands while preparing for future  challenges. Our work has shown that an important aspect of this, across  all of the services, is determining an appropriate balance between  maintaining and upgrading legacy weapon systems currently in  operational use and procuring new ones to overcome rapidly advancing  future threats."], "subsections": []}, {"section_title": "The Navy Fleet Faces Challenges in Rebuilding Readiness and the Costs Associated with Expanding the Fleet to Enhance Readiness in the Future Are Unknown", "paragraphs": ["Based on updated information we received in November 2018, the Navy  has taken steps to provide dedicated training time so its surface forces  may meet existing Navy training standards and their training is certified  when they deploy. However, the Navy continues to struggle with  rebuilding the readiness of the existing fleet due to enduring maintenance  and manning challenges. As the Navy seeks to expand its fleet by 25  percent, these challenges will likely be further exacerbated and the Navy  will likely face additional affordability challenges."], "subsections": [{"section_title": "Navy Has Taken Steps to Address Training Shortfalls in the Surface Fleet", "paragraphs": ["After the collisions in 2017, the Navy focused on training surface ship  crews to its existing standards. We testified in September 2017 that there  were no dedicated training periods built into the operational schedules of  the cruisers and destroyers based in Japan and 37 percent of training  certifications for these surface ship crews had lapsed as of June 2017.  Since that time, the Navy has worked to ensure surface ships are certified  before they are deployed. For example, the Navy has established controls  to limit waivers that allowed training lapses to worsen, now requiring  multiple high-level approvals for ships to operate uncertified. Based on  our analysis of updated data, the Navy has improved markedly in the  percentage of cruisers and destroyers with lapsed certifications in Japan,  from 41 percent of certifications expired in September 2017 to 9 percent  as of November 2018, with less than 3 percent of certifications expired on  ships in operational status.", "While the Navy has demonstrated its commitment to ensuring that crews  are certified prior to deploying, training for amphibious operations and  higher-level collective training may not be fully implemented for several  years. In September 2017, we reported that some Marine Corps units  were limited in their ability to complete training to conduct an amphibious  operation\u2014a military operation that is launched from the sea to introduce  a landing force ashore\u2014by several factors, including a decline in the  number of amphibious ships from 62 in 1990 to 32 as of November 2018,  access to range space, and a high pace of deployments, among others.  We recommended that the Navy and the Marine Corps develop an  approach to mitigate their amphibious operations training shortfalls as the  services await the arrival of additional amphibious ships into the fleet.  Marine Corps officials told us that the Marine Corps and the Navy are  working together to maximize amphibious training opportunities.  Additionally, the Navy has plans to phase in high-level collective training  into the operational schedules of its ships homeported in Japan over the  next several years. Previously, advanced and integrated training involving  multiple ships was conducted ad hoc if at all for ships homeported in  Japan. Such collective training is important because the 2018 National  Defense Strategy states that the department\u2019s principal priority is to  prepare for threats from strategic competitors due to the magnitude of the  threat they pose. However, in November 2018, officials from Fleet Forces  Command told us that fully implementing its training approach to prepare  for advanced adversaries would not be fully implemented across the fleet  for several years."], "subsections": []}, {"section_title": "The Fleet Faces Persistent Maintenance and Personnel Challenges as the Navy Seeks to Rebuild Readiness", "paragraphs": ["We have reported that the Navy faces persistent challenges in completing  maintenance on time and providing sufficient manning to its ships. Unless  these challenges are addressed, the Navy will be hampered in its ability  to rebuild readiness and prepare for the future."], "subsections": [{"section_title": "Maintenance Delays for Ships and Submarines Reduce Time for Training and Operations", "paragraphs": ["Our work has found that the Navy has been unable to complete ship and  submarine maintenance on time, resulting in continuing schedule delays  that reduce time for training and operations and create costly  inefficiencies in a resource constrained environment. The Navy\u2019s  readiness recovery is premised on the rigorous adherence to deployment,  training, and maintenance schedules. However, we reported in May 2016  on the difficulty that both the public and private shipyards were having in  completing maintenance on time. We reported that, from 2011 through  2014, about 28 percent of scheduled maintenance for surface combatants  was completed on time and 11 percent was completed on time for aircraft  carriers. We updated these data as of November 2018 to include  maintenance periods completed through the end of fiscal year 2018 and  found that the Navy continues to struggle to complete maintenance on  time. For fiscal years 2012-2018, our analysis for key portions of the Navy  fleet shows that 30 percent of Navy maintenance was completed on time,  leading to more than 27,000 days in which ships were delayed and  unavailable for training and operations as shown in figure 2 below.", "In addition to affecting training and operations, maintenance delays are  costly. In November 2018, we examined attack submarine maintenance  delays and reported that the Navy was incurring significant operating and  support costs to crew, maintain, and support attack submarines that are  delayed getting into and out of shipyard maintenance periods. We  estimated that over the past 10 years the Navy has spent $1.5 billion in  fiscal year 2018 constant dollars to support attack submarines that  provide no operational capability\u2014those sitting idle no longer certified to  conduct normal operations\u2014while waiting to enter the shipyards, and  those delayed in completing their maintenance at the shipyards (see  figure 3). We recommended that the Navy analyze how it allocates its  maintenance workload across public and private shipyards. DOD  concurred with our recommendation, stating that it has taken the first  steps to take a more holistic view of submarine maintenance  requirements and impacts across both the public and private shipyards. In  an update provided in November 2018, the Navy told us that they are  developing a contracting strategy to conduct two additional depot  maintenance periods at private shipyards in the future.", "Our prior work has shown that three primary factors at the naval  shipyards contribute to maintenance delays:", "Poor conditions and aging equipment limit the ability of the  shipyards to meet current and future demands. We reported in  September 2017 that facility and equipment limitations at the  shipyards contributed to maintenance delays for the aircraft carriers  and submarines, hindering the shipyards\u2019 ability to support the Navy.  Specifically, we found that the shipyards would be unable to support  an estimated one-third of maintenance periods planned over the next  23 years. We recommended that the Navy take steps to improve its  management of shipyard investments; the Navy concurred with this  recommendation and we are encouraged by its response. For  example, the Navy has developed a plan for the optimal placement of  facilities and major equipment at each public shipyard, which the Navy  estimates can ultimately increase its maintenance efficiency by  reducing personnel and materiel travel by an average of 65 percent.  This equates to recovering about 328,000 man days per year\u2014an  amount roughly equal to that of an aircraft carrier maintenance period.  However, the Navy\u2019s preliminary estimate \u2014that this effort will require  an estimated $21 billion and 20 years to address\u2014is well beyond  historical funding levels, and does not include some potentially  significant costs (e.g., for utilities, roads, or environmental  remediation).", "Shipyard workforce gaps and inexperience are limiting factors.", "The Navy has reported a variety of workforce challenges at the Navy\u2019s  four public shipyards such as hiring personnel in a timely manner and  providing personnel with the training necessary to gain proficiency in  critical skills. The Navy has noted that some occupations require  years of training before workers become proficient. According to Navy  officials, a large portion of its workforce is inexperienced. For  example, 45 percent of the Puget Sound and 30 percent of the  Portsmouth Naval Shipyards\u2019 skilled workforce have fewer than 5  years of experience. According to DOD officials, workforce shortages  and inexperience contribute to maintenance delays. For example, at  Pearl Harbor Naval Shipyard, two submarines were delayed  approximately 20 months, in part because of shortages in ship fitters  and welders, among other skilled personnel. Most of DOD\u2019s depots,  which include the naval shipyards, have taken actions to maintain  critical skills through retention incentives, bonuses, and awards. We  plan to issue a report examining DOD\u2019s depot skill gaps, including  those at the naval shipyards, later this month.", "Depot supply support may not be cost-effective. In June 2016, we  reported that the naval shipyards and other depots had not  implemented actions that would likely improve the cost-effectiveness  of their supply operations. Specifically, the Navy had not transferred  certain functions to the Defense Logistics Agency (DLA) at the  shipyards in the same manner as the Navy and Air Force did for their  aviation depots. The Navy and Air Force aviation depots that  transferred these functions to DLA had reaped a number of  efficiencies in their supply operations, including a 10-percent  reduction in backorders over a 5-year period. We recommended that  the Navy analyze whether such a transfer of functions is warranted at  the shipyards and the Navy concurred with the recommendation.  However, as of October 2018, the Navy had not conducted a  comprehensive analysis of transferring these functions and had  provided no plans to do so."], "subsections": []}, {"section_title": "Navy Processes for Determining Manning of Ships Do Not Account for All Ship Workload", "paragraphs": ["In May 2017, we reported that the Navy\u2019s process for determining  manpower requirements\u2014the number and skill mix of sailors needed on  the Navy\u2019s ships\u2014did not fully account for all ship workload. The Navy  was using outdated standards to calculate the size of ship crews that may  have been leading to overburdened crews working long hours. We  recommended steps to help ensure the Navy\u2019s manpower requirements  meet the needs of the existing and future surface fleet, and the Navy has  been studying ship workload and revising its guidance. As of November  2018, the Navy was continuing to analyze the manpower requirements of  its ship classes to better size and compose ship crews, and the Navy was  also working to improve shipboard manning. However, these efforts are  not yet complete and it is too early to assess their effectiveness. Until  manpower requirements are reassessed across the fleet, the Navy risks  that ship crews will continue to be undersized and sailors will be  overworked with potential negative effects on readiness and safety.", "Additionally, the Navy provided information in November 2018 that  showed that it is taking steps to ensure that ships have a minimum  percentage of crew assigned and with the appropriate skills. The Navy  has prioritized manning its surface ships homeported overseas. The Navy  established a minimum threshold of filling at least 95 percent of  authorized billets in its ship crews with sailors (referred to as fill), with a  minimum goal of 92 percent of those sailors having the right qualifications  for the billet (known as fit). According to Navy officials, the Navy is for the  most part meeting its fill goals Navy-wide, but has not consistently met its  fit goals. However, during group discussions in November 2018 with ship  crews and interviews with Navy officials in Japan, we learned that the  Navy\u2019s methods for tracking fit and fill do not account for sailor experience  and may be inaccurately capturing the actual presence of sailors onboard  and available for duty on its ships. Moreover, sailors consistently told us  that ship workload has not decreased, and it is still extremely challenging  to complete all required workload while getting enough sleep. Navy  officials told us that manning challenges will continue through at least  fiscal year 2021 as the Navy increases its end strength and trains its new  sailors to gain the proper mix of skills to operate and maintain the fleet."], "subsections": []}]}, {"section_title": "Navy Plans to Expand Its Fleet but Full Costs Are Unknown and Manning an Expanded Fleet Likely Will Be Challenging", "paragraphs": ["To meet continued operational demands, the Navy is planning for the  most significant fleet size increase in over 30 years. According to the  Navy\u2019s fiscal year 2019 shipbuilding plan, the Navy plans to build and  maintain a fleet of 355 battle force ships\u2014an increase of about 25  percent above the Navy\u2019s current force of 287 ships. To reach its goal,  the Navy plans to buy 301 ships through 2048 and extend the service life  of its 66 Arleigh Burke class destroyers and up to 7 attack submarines.  Together, the fiscal year 2019 shipbuilding plan and the service life  extensions would allow the Navy to reach a 355-ship fleet by the 2030s.", "Congressional Budget Office reporting and our past work have shown  that the Navy has consistently and significantly underestimated the cost  and timeframes for delivering new ships to the fleet. For example, the  Navy estimates that buying the new ships specified in the fiscal year 2019  plan would cost $631 billion over 30 years while the Congressional  Budget Office has estimated that those new ships would cost $801  billion\u2014a difference of 27 percent. We also reported in June 2018 that  acquisition outcomes for ship classes built during the last 10 years have  often not achieved cost, schedule, quality, or performance goals that were  established. Furthermore, we have reported that: all 8 of the lead ships delivered over the past decade that we  reviewed were provided to the fleet behind schedule, and more than  half of those ships were delayed by more than 2 years, and  six ships of different classes valued at $6.3 billion were delivered to  the Navy with varying degrees of incomplete work and quality  problems.", "As a result of past cost and schedule problems, our work has shown that  the Navy has a less-capable and smaller fleet today than it planned over  10 years ago. The Navy has also received $24 billion more in funding  than it originally planned in its 2007 long-range shipbuilding plan but has  50 fewer ships in its inventory today, as compared with the goals it first  established. Therefore, we have reported that as the Navy moves forward  in implementing its shipbuilding plan it will be paramount for the Navy to  learn from and apply lessons learned from the past.", "In addition to the cost of buying the ships and submarines to expand fleet  size, the Navy will likely face affordability challenges with regard to the  manning of an expanded fleet with the right number of sailors with the  right mix of skills. In May 2017, we reported that the personnel costs for  surface ship classes in fiscal years 2000-2015 were the largest share of  total operating and support costs and that careful planning will be needed  as new ships are brought into the fleet. We also reported that crew sizes  on recently inducted ship classes grew from original projections as the  Navy gained experience operating them. For example, the total crew size  of Littoral Combat Ships has grown from 75 in 2003 to 98 personnel in  2016, a 31-percent increase. Navy officials told us that they plan to better  articulate the personnel and resources needed for a larger fleet after fully  accounting for workload and right-sizing ship crews. The Navy\u2019s end  strength has since increased by over 11,000 personnel from fiscal year  2017 levels, which should help alleviate manning challenges as the fleet  grows. In November 2018, officials from Fleet Forces Command provided  us with projections of its manning shortfalls continuing through at least  fiscal year 2021 and steps it was planning to take to mitigate them."], "subsections": []}]}, {"section_title": "Navy and Marine Corps Aging Aircraft and F-35s Face Maintenance and Supply Challenges That Affect Readiness Rebuilding Now and in the Future", "paragraphs": ["Our work has shown that Navy and Marine Corps aircraft availability has  been limited by aging aircraft, delayed maintenance, and insufficient  supply support. Pilot and maintenance personnel shortfalls further limit  readiness recovery across legacy air platforms. The growing F-35  program, which is meant to replace many aging aircraft, has presented  additional operational and sustainment challenges, which will likely persist  into the future if not corrected. DOD, the Navy, and the Marine Corps  have emphasized mission capability of critical aviation platforms\u2014 including the Navy and Marine Corps F/A-18s and F-35s\u2014and are taking  steps to improve availability, but these efforts will take time to realize  results."], "subsections": [{"section_title": "Aircraft Availability Has Been Limited by Aging Fleets with Maintenance and Supply Challenges", "paragraphs": ["Navy and Marine Corps aircraft availability has been limited by challenges  associated with aging aircraft fleets, depot maintenance, and supply  support challenges that limit the services\u2019 ability to keep aviation units  ready. The Navy and Marine Corps spend billions of dollars each year  on sustainment, such as for spare parts and depot maintenance, to meet  aircraft availability goals. However, aircraft availability rates have  generally declined since fiscal year 2011. While specific aircraft  availability data are considered sensitive by the Navy and the Marine  Corps, and cannot be discussed in detail, we found in September 2018  that the Navy and the Marine Corps generally did not meet aircraft  availability goals in fiscal years 2011-2016 for the seven aircraft we  reviewed. In updating data in November 2018, we found that none of the  aircraft met aircraft availability goals for fiscal years 2017 and 2018.", "According to the Navy, the pace of operations has increased wear and  tear on its aircraft and decreased the time available for maintenance and  modernization\u2014a necessity for an aging fleet. For example, the average  age of a legacy F/A-18A-D Hornet is 26 years, of an AV-8B Harrier is 21  years, and of the C-2A Greyhound is 29 years. Both services expect  these aircraft will continue to be used for the foreseeable future and in  some cases into the 2030s.", "The Navy and the Marine Corps face delays in the arrival of the F-35 to  replace their legacy F/A-18A-D Hornets and AV-8B Harriers. To  compensate for the delay, the Navy and the Marine Corps are planning to  procure additional aircraft, such as the F/A-18E-F Super Hornet, and  extend the service life and upgrade the capabilities of their legacy aircraft.  However, these efforts and the sustainment of the Navy and Marine  Corps legacy aircraft fleet face key challenges as shown in figure 4.", "Specifically, our prior work has shown that the Navy and the Marine  Corps are confronted with two sets of challenges in sustaining their  aircraft:", "Depot maintenance complexities for aging aircraft and spare  parts availability. Depot maintenance on aging weapon systems,  including Navy and Marine Corps aircraft, becomes less predictable  as structural fatigue occurs and parts that were not expected to be  replaced begin to wear out. While the Navy and the Marine Corps  reported that sustainment funding accounts, such as those for depot  maintenance and spare parts, have been funded at increased levels  in fiscal years 2017 and 2018, efforts to improve spare parts  availability take time to produce results due to long lead times for  acquiring some items. In addition, Navy and Marine Corps aircraft  face challenges associated with diminishing manufacturing sources  and parts obsolescence. DOD has a program intended to manage  these risks, but we reported in September 2017 that its  implementation varied across DOD weapon system program offices.  We made recommendations to improve the program\u2019s management;  DOD concurred and has initiated improvement efforts.", "Maintenance personnel inexperience and retention. The Navy has  had difficulty attracting and retaining skilled maintainers, such as  sheet metal workers and machinists at its aviation depots (i.e., Fleet  Readiness Centers), which directly affects its ability to complete  planned maintenance. Some of the depots experienced challenges  attracting and retaining skilled personnel due to competition with  nearby contractors that are able to offer higher pay, according to Navy  depot officials. Similar to the shipyards, the aviation depots also lack  experienced personnel, affecting the efficiency and quality of  maintenance. For example, 41 percent of the skilled workers at Fleet  Readiness Center Southwest have 2 years or fewer of experience.  Workforce inexperience and attrition of skilled personnel were some  of the reasons cited for machining defects detected in the landing  gear for F/A-18, E-2, and C-2A aircraft by a recent Navy report. All  of the depots have undertaken retention efforts such as incentives,  bonuses, and awards to address these issues.", "Until the Navy and Marine Corps address maintenance and supply  challenges it will be difficult to meet Secretary of Defense-established  mission capability goals. Specifically, in September 2018, the Secretary of  Defense issued a memorandum emphasizing that a key component of  implementing the 2018 National Defense Strategy is ensuring critical  aviation platforms meet their mission capability targets by the end of fiscal  year 2019. The memorandum established a goal of achieving a minimum  of 80-percent mission capable rates for various aircraft, including for the  Navy\u2019s and Marine Corps\u2019 F/A-18 inventories, by the end of fiscal year  2019 while also reducing operating and maintenance costs. To  accomplish this, the Navy and the Marine Corps developed the Return to  Readiness strategy in November 2018 that includes a broad array of  actions to improve the availability of spare parts and evaluate the  application of best commercial practices to naval aviation sustainment,  among other actions. Office of the Secretary of Defense and Navy  program officials told us, and based on our prior work we agree, that this  goal will be challenging to achieve by the end of fiscal year 2019."], "subsections": []}, {"section_title": "Pilot Shortages Have Worsened in Recent Years and Are Projected to Remain through 2023", "paragraphs": ["We reported in April 2018 that fighter pilot shortages in the Navy and the  Marine Corps have been worsening in recent years and shortfalls are  projected to remain through at least fiscal year 2023. Our analysis of  Navy and Marine Corps data showed that the Navy\u2019s shortage of first  operational tour fighter pilots more than doubled from 12 percent in fiscal  year 2013 to 26 percent in fiscal year 2017. Similarly, the Marine Corps\u2019  overall shortage of fighter pilots quadrupled from 6 percent in fiscal year  2006 to 24 percent in fiscal year 2017.", "Also, as we reported in April 2018, service officials attributed the pilot  shortages to reduced training opportunities and increased attrition due to  career dissatisfaction, among other factors. Officials from both services  stated at the time that they have ensured that deploying squadrons have  been fully staffed with fighter pilots by using various approaches including  using senior pilots to staff junior positions and having pilots deploy more  frequently and for longer periods. However, we reported that squadron  leaders and fighter pilots said that these approaches had a negative  impact on the fighter pilot training and retention and ultimately may be  exacerbating the situation.", "Further compounding their pilot shortages, we also found that the  services have not recently reevaluated squadron requirements to reflect  an increased fighter pilot workload. As a result, the reported shortage  actually could be greater. The services were taking actions, including  increasing retention incentives for fighter pilots. To help determine the  magnitude of the shortages and help target strategies to better meet their  personnel needs, we recommended, and the Navy and Marine Corps  agreed, to reevaluate fighter pilot squadron requirements."], "subsections": []}, {"section_title": "New F-35 Aircraft Facing Sustainment and Operational Challenges", "paragraphs": ["Sustainment challenges are not just an issue for older aircraft, but  represent an enduring challenge for the F-35 Lightning II aircraft\u2014a key  component to the future of tactical aviation for the Navy and Marine  Corps. The Navy and Marine Corps are both flying F-35s now as the  program ramps up development, and they plan to procure nearly 700  aircraft over the coming decades. The sustainment costs of the F-35 fleet  are projected to exceed $1 trillion over its 60-year life cycle. In October  2017, we reported that:", "F-35B aircraft (including Marine Corps aircraft) were available (i.e.,  the aircraft were safe to fly, available for use, and able to perform at  least one tasked mission) about 52 percent of the time from March  2017 through June 2017, which fell short of the 65-percent goal  established by the Marine Corps for non-deployed units and", "F-35B aircraft (including Marine Corps aircraft) were fully mission  capable (i.e., the aircraft were capable of accomplishing all tasked  missions) about 15 percent of the time from March 2017 through June  2017, which fell short of the 60-percent goal established by the Marine  Corps for non-deployed units.", "We also reported on numerous sustainment challenges leading to less  than desirable outcomes for F-35 warfighter readiness. For example, F-35  aircraft were unable to fly 22 percent of the time because of parts  shortages from January 2017 through August 7, 2017. Additionally,  DOD\u2019s capabilities to repair F-35 parts at military depots were 6 years  behind schedule, which resulted in average part repair times that are  twice that of the program\u2019s objective.", "As DOD gains experience with the F-35, our work has shown that the  department has encountered additional challenges. In 2017, the Marine  Corps became the first military service to station F-35 aircraft overseas,  transferring aircraft to Iwakuni, Japan. While in the Pacific, DOD expects  to disperse its F-35s into smaller detachments to outmaneuver the enemy  and counter regional threats. However, in April 2018, we reported that this  approach posed logistics and supply challenges. In June 2018, we  reported that the F-35 program had not improved its reliability and  maintainability over the past year and continued to fall short on half of its  performance targets. Furthermore, we found that the program may not  meet its required targets before each variant of the F-35 is expected to  demonstrate maturity\u2014the point at which the aircraft has flown enough  hours to predictably determine reliability and maintainability over its  lifespan. This means that the Navy and the Marine Corps may have to  decide whether they are willing to accept less reliable and maintainable  aircraft than originally planned. Among other outcomes, this could result  in higher maintenance costs and lower aircraft availability than anticipated  which also could pose readiness challenges in the future. As we reported  in October 2017, the poor reliability of certain parts is already contributing  to shortages of F-35 spare parts.", "Challenges posed by the F-35 program are largely the result of  sustainment plans that do not fully include or consider key requirements.  Our work has shown that planning for sustainment and aligning its  funding are critical if DOD wants to meet its aircraft availability goals and  effectively deploy to support operations. To address the challenges  associated with F-35 sustainment and operational deployment, we  recommended that DOD revise its sustainment plans, align associated  funding, and mitigate the risks associated with key supply chain-related  challenges for deployed F-35s in the Pacific, among others. DOD  concurred with these recommendations and stated that it is taking steps  to address them. Furthermore, as previously discussed, the Secretary of  Defense has established an 80-percent mission capability goal for critical  aviation assets, including the F-35. Due to current low availability and  numerous sustainment issues, the F-35 fleet will be challenged in  meeting the goal.", "In sum, the Navy\u2019s and Marine Corps\u2019 significant readiness challenges  have developed over more than a decade of conflict, budget uncertainty,  and reductions in force structure. Both services have made encouraging  progress identifying the causes of their readiness decline and have begun  efforts to arrest and reverse it; however, our prior work shows that fully  addressing the persistent readiness challenges will require years of  sustained management attention. Our work cited today contains 25  specific recommendations to the Navy and the Marine Corps and an  additional 20 recommendations to various other DOD components to  assist these services in rebuilding the readiness of their forces and in  modernizing for the future. Attention to these recommendations can assist  the Navy and the Marine Corps as they seek to rebuild the readiness of  their forces.", "Chairmen Wicker and Sullivan, Ranking Members Hirono and Kaine, and  Members of the Subcommittees, this concludes my prepared statement. I  would be pleased to respond to any questions you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have questions about this testimony, please contact  John H. Pendleton, Director, Defense Capabilities and Management at  (202) 512-3489 or pendletonj@gao.gov.", "Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Suzanne Wren, Assistant  Director; Clarine Allen; Steven Banovac; John Bumgarner; Chris Cronin;  Benjamin Emmel; Cynthia Grant; Mae Jones; Amie Lesser; Tobin  McMurdie; Shahrzad Nikoo; Carol Petersen; Cody Raysinger; Michael  Silver; John E. \u201cJet\u201d Trubey; and Chris Watson."], "subsections": []}]}, {"section_title": "Appendix I: Implementation Status of Prior GAO Recommendations Related to Navy and Marine Corps Readiness", "paragraphs": ["Over the past 4 years, we have issued a number of reports related to  Navy and Marine Corps readiness and we used them to develop this  statement. Table 1 summarizes the recommendations in these reports.  The Department of Defense (DOD) concurred with most of the 45  recommendations and has many actions underway. However, DOD has  not fully implemented any of the recommendations to date. For each of  the reports, the specific recommendations and any progress made in  implementing them are summarized in tables 2 through 16."], "subsections": []}, {"section_title": "Related GAO Products", "paragraphs": ["Report numbers with a C or RC suffix are classified. Report numbers with  a SU suffix are sensitive but unclassified. Classified and sensitive but  unclassified reports are available to personnel with the proper clearances  and need to know, upon request.", "Navy Readiness: Actions Needed to Address Costly Maintenance Delays  Facing the Attack Submarine Fleet. GAO-19-229. Washington, D.C.:  November 19, 2018.", "Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare  for the Future. GAO-19-120T. Washington, D.C.: October 10, 2018.", "Weapon System Sustainment: Selected Air Force and Navy Aircraft  Generally Have Not Met Availability Goals, and DOD and Navy Guidance  Need to Be Clarified. GAO-18-678. Washington, D.C.: September 10,  2018.", "Weapon System Sustainment: Selected Air Force and Navy Aircraft  Generally Have Not Met Availability Goals, and DOD and Navy Guidance  Need Clarification. GAO-18-146SU. Washington, D.C.: April 25, 2018.", "Military Readiness: Update on DOD\u2019s Progress in Developing a  Readiness Rebuilding Plan. GAO-18-441RC. Washington, D.C.: August  10, 2018. (SECRET)", "Military Personnel: Collecting Additional Data Could Enhance Pilot  Retention Efforts. GAO-18-439. Washington, D.C.: June 21, 2018.", "F-35 Joint Strike Fighter: Development Is Nearly Complete, but  Deficiencies Found in Testing Need to Be Resolved. GAO-18-321.  Washington, D.C.: June 5, 2018.", "Warfighter Support: DOD Needs to Share F-35 Operational Lessons  Across the Military Services. GAO-18-464R. Washington, D.C.: April 25,  2018.", "Military Readiness: Clear Policy and Reliable Data Would Help DOD  Better Manage Service Members\u2019 Time Away from Home. GAO-18-253.  Washington, D.C.: April 25, 2018.", "Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce  Requirements. GAO-18-113. Washington, D.C.: April 11, 2018.", "Military Aircraft: F-35 Brings Increased Capabilities, but the Marine Corps  Needs to Assess Challenges Associated with Operating in the Pacific.  GAO-18-79C. Washington, D.C.: March 28, 2018. (SECRET)", "Navy and Marine Corps Training: Further Planning Needed for  Amphibious Operations Training. GAO-18-212T. Washington, DC.:  December 1, 2017.", "F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting  Readiness and Cost Transparency. GAO-18-75. Washington, D.C.:  October 26, 2017.", "Defense Supply Chain: DOD Needs Complete Information on Single  Sources of Supply to Proactively Manage the Risks. GAO-17-768.  Washington, D.C.: September 28, 2017.", "Navy and Marine Corps Training: Further Planning Needed for  Amphibious Operations Training. GAO-17-789. Washington, D.C.:  September 26, 2017.", "Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-809T.  Washington, D.C.: September 19, 2017.", "Naval Shipyards: Actions Needed to Improve Poor Conditions That Affect  Operation. GAO-17-548. Washington, D.C.: September 12, 2017.", "Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-798T.  Washington, D.C.: September 7, 2017.", "Navy Readiness: Actions Needed to Maintain Viable Surge Sealift and  Combat Logistics Fleets GAO-17-503. Washington, D.C.: August 22,  2017 (reissued on Oct 31, 2017).", "Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C.  Washington, D.C.: June 13, 2017. (SECRET)", "Navy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery  Process and Ship Quality. GAO-17-418. Washington, D.C.: July 13, 2017  Offshore Petroleum Discharge System: The Navy Has Not Mitigated Risk  Associated with System Limitations. GAO-17-531C. Washington, D.C.:  June 22, 2017. (SECRET)", "Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 7, 2016.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-534C. Washington, D.C.: June  30, 2016. (SECRET)", "Defense Inventory: Further Analysis and Enhanced Metrics Could  Improve Service Supply and Depot Operations. GAO-16-450.  Washington, D.C.: June 9, 2016.", "Navy and Marine Corps: Services Face Challenges to Rebuilding  Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016.  (SECRET//NOFORN)", "Military Readiness: Progress and Challenges in Implementing the Navy\u2019s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.", "F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its  Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016.", "Navy Force Structure: Sustainable Plan and Comprehensive Assessment  Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas  Homeports. GAO-15-329. Washington, D.C.: May 29, 2015.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["Since 2015, we have made 45 recommendations to help the Navy and Marine Corps ensure they have the personnel and equipment they need to be ready for their operations. We discussed the two services' readiness challenges in this testimony, including", "Personnel shortfalls and gaps in experience leading to high sailor workloads", "Maintenance delays that prevent ships and submarines from operating", "Unavailable aircraft in both the Navy and the Marine Corps", "While the services have taken initial steps to rebuild military readiness, fully addressing these challenges while balancing high demands will require years of sustained attention."]}
{"id": "GAO-18-356", "url": "https://www.gao.gov/products/GAO-18-356", "title": "VA Health Care: Improved Guidance and Oversight Needed for the Patient Advocacy Program", "published_date": "2018-04-12T00:00:00", "released_date": "2018-04-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VHA has designated patient advocates at each VAMC to receive and document feedback from veterans or their representatives, including requests for information, compliments, and complaints. In recent years, the importance of a strong patient advocacy program has taken on new significance given concerns with VHA's ability to provide veterans timely access to health care, among other issues.", "The Comprehensive Addiction and Recovery Act of 2016 included a provision for GAO to review VHA's patient advocacy program. This report examines the extent to which VHA has (1) provided guidance on the governance of the program; (2) provided guidance on staffing the program; (3) assessed the training needs of patient advocates and monitored training completion; and (4) monitored patient advocacy program data-entry practices and reviewed program data. GAO reviewed VHA and VAMC documents, including summaries of program data. GAO interviewed VHA officials about the program, as well as officials from a non-generalizable selection of eight VAMCs and five VISNs selected based on the volume of veteran complaints and other factors. GAO also compared VHA policies and practices to federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["The Veterans Health Administration (VHA) provided limited guidance to Department of Veterans Affairs (VA) medical centers (VAMC) on the governance of its patient advocacy program and its guidance, a program handbook, has been outdated since 2010. VAMCs are still expected to follow the outdated handbook, which does not provide needed details on governance, such as specifying the VAMC department to which patient advocates should report. Officials from most of the VAMCs that GAO reviewed noted that the VAMC department to which patient advocates report can have a direct effect on the ability of staff to resolve veterans' complaints. The lack of updated and complete guidance may impede the patient advocacy program from meeting its expectations, to receive and address complaints from veterans in a convenient and timely manner.", "VHA also has provided limited guidance to VAMCs on staffing the patient advocacy program. VHA's handbook states that every VAMC should have at least one patient advocate and appropriate support staff; however, it did not provide guidance on how to determine the number and type of staff needed. Officials at all but one of the eight VAMCs in GAO's review stated that their patient advocacy program staff had more work to do than they could accomplish. This limited guidance on staffing could impede VAMCs' efforts to ensure that they have the appropriate number and type of staff to address veterans' complaints in a timely manner.", "Further, VHA has recommended training for patient advocates, but it has not developed an approach to routinely assess their training needs or monitored training completion. VHA officials stated that they relied on VAMC and Veterans Integrated Service Network (VISN) staff to conduct these activities. However, GAO found that for the eight VAMCs in its review, the training needs of patient advocates were not routinely assessed, and training completion was not always monitored. Without conducting these activities, VHA increases its risk that staff may not be adequately trained to advocate on behalf of veterans.", "Finally, VHA has not monitored patient advocacy program data-entry practices or reviewed the data to assess program performance. VHA officials stated that they relied on VISN and VAMC officials to ensure that all complaints were consistently entered into VHA's Patient Advocate Tracking System (PATS). However, GAO identified inconsistencies in the extent to which VAMC officials did so. VHA's lack of monitoring may pose a risk that not all complaints are entered into this tracking system\u2014a goal of the program. Additionally, VHA officials stated they did not systemically review data in the system to assess program performance and identify potential system-wide improvements because VHA considered this the responsibility of VAMCs. As a result, VHA officials may miss opportunities to improve veterans' experiences.", "VHA is beginning to address many of these governance, staffing, training, and data issues, including directing a workgroup to provide recommendations by spring of 2018. However, because the recommendations will be advisory, and because program deadlines have slipped in the past, the nature and timing of the actions needed to resolve these issues remain unclear."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 6 recommendations to improve guidance for and oversight of the patient advocacy program, focusing on governance, staffing, training, and PATS data entry and assessment. VA concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Veterans Health Administration (VHA), within the Department of  Veterans Affairs (VA), operates one of the nation\u2019s largest health care  systems. VA has faced a growing demand by veterans for its health care  services due, in part, to (1) servicemembers returning from the United  States\u2019 military operations in Afghanistan and Iraq and (2) the growing  needs of an aging veteran population\u2014trends that are expected to  continue. The total number of veteran enrollees in VA\u2019s health care  system rose from 7.9 million to almost 9 million from fiscal year (FY) 2006  through FY 2016. As the number of veterans using VA health care  services increases, it is important to ensure that feedback about their care  is addressed in a convenient and timely manner. To that end, VHA has  designated patient advocates at each VA medical center (VAMC) to  receive and document feedback from veterans or their representatives,  including requests for information, compliments, and complaints.", "Although VHA\u2019s patient advocacy program has been in place since 1990,  it has taken on new significance in recent years given concerns about  veterans\u2019 ability to receive timely and quality care, among other issues.  Our work, along with that of the VA Office of Inspector General (OIG) and  others, has cited longstanding concerns about VA\u2019s oversight of its health  care system, including ambiguous policies and inconsistent processes.  These concerns contributed to the addition of veterans\u2019 health care to  GAO\u2019s High-Risk List in 2015, and its continued inclusion in the 2017  update. In 2017, the VA OIG raised concerns about the effectiveness of  VHA\u2019s patient advocacy program, including a lack of monitoring of  program data, such as feedback documented by advocates, to identify  trends across VAMCs.", "Until recently, VHA\u2019s patient advocacy program was overseen by the  Office of Patient Centered Care and Cultural Transformation  (OPCC&CT). However, the Comprehensive Addiction and Recovery Act  of 2016 (CARA), included a provision for VHA to establish an Office of  Patient Advocacy (OPA) by July 2017 to take on oversight responsibilities  for the program, such as ensuring that patient advocates at VAMCs  receive training.", "CARA also included a provision for us to review VHA\u2019s patient advocacy  program. This report examines the extent to which VHA has  1.  provided guidance to VAMCs on the governance of the program;  2.  provided guidance to VAMCs on staffing the program;  3.  assessed the training needs of patient advocates and monitored  4.  monitored patient advocacy program data-entry practices and  reviewed program data.", "For all four objectives, we interviewed officials involved in the patient  advocacy program from eight VAMCs and their five associated Veterans  Integrated Service Networks (VISN), regional networks of care. We  selected six of our eight VAMCs for variation in (1) the number of  complaints received and entered in VHA\u2019s Patient Advocate Tracking  System (PATS)\u2014an electronic system used to describe and track the  resolution of veterans\u2019 feedback across VAMCs\u2014in FY 2016, (2) facility  complexity level, (3) geographic location, and (4) the type of staff VAMCs  used to administer the program. We selected the remaining two VAMCs  based on one\u2019s involvement in piloting a new approach to recording  patient advocacy program data, and one\u2019s recent changes to the structure  of its program. We also ensured that at least three of the VAMCs we  selected received assessments from OPCC&CT on how they had  implemented the patient advocacy program to gain perspectives on the  office\u2019s involvement with VAMCs. See table 1 for a list of the eight  VAMCs we selected and their associated VISNs. Perspectives obtained  from the eight VAMCs and five VISNs in our review cannot be  generalized.", "We also interviewed VHA officials, including those who had overseen the  program when it was under OPCC&CT and who transitioned to OPA once  the office was established in 2017. In addition, we interviewed officials  from five veterans service organizations (VSO) to obtain their  perspectives on the patient advocacy program: American Legion,  Disabled American Veterans, Iraq and Afghanistan Veterans of America,  Veterans of Foreign Wars, and Vietnam Veterans of America.", "To examine the extent to which VHA has provided guidance to VAMCs on  the governance of the patient advocacy program, we reviewed VHA\u2019s  handbook for the program to determine, among other things, whether it  specified the VAMC department to which patient advocates should report  and whether it identifies responsibilities for VHA staff overseeing the  program. We also reviewed documentation of VHA\u2019s planned efforts  related to improving the governance of the program, such as a draft  directive for the program. We evaluated the information we reviewed in  VHA\u2019s handbook against federal internal control standards.", "To examine the extent to which VHA has provided guidance to VAMCs on  staffing the patient advocacy program, we reviewed VHA\u2019s handbook for  the program. Specifically, we reviewed the handbook to determine the  extent to which it provided guidance on how VAMCs should determine the  appropriate number and type of staff needed to administer the program.  We also reviewed documentation of VHA\u2019s planned efforts related to  staffing the program identified in a workgroup charter. We evaluated  VHA\u2019s efforts to provide guidance to VAMCs on staffing against key  principles for effective strategic workforce planning and federal internal  control standards.", "To examine the extent to which VHA has assessed the training needs of  patient advocates and monitored training completion, we reviewed  training materials VHA provided to VAMCs, such as a list of  recommended training for patient advocates. We also reviewed  documentation of VHA\u2019s planned efforts related to assessing the training  needs of patient advocates identified in a workgroup charter. We  evaluated the extent to which VHA has monitored training of patient  advocates against a guide for assessing strategic training and  development efforts and federal internal control standards.", "To examine the extent to which VHA has monitored data-entry practices  and reviewed data from the patient advocacy program, we reviewed  VHA\u2019s handbook for the program and summaries of data from PATS.  We also reviewed documentation of VHA\u2019s planned efforts related to  PATS data-entry practices and reviewing program data identified in a  workgroup charter. We evaluated the extent to which VHA has monitored  data-entry practices and reviewed PATS data against a guide for  assessing the reliability of computer-processed data and federal internal  control standards.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VHA\u2019s patient advocacy program is intended to provide veterans with a  means to provide feedback about health care services they receive at  VAMCs. VHA sets forth minimum expectations for VAMCs\u2019 administration  of the program, including that veterans must have easy access to a  patient advocate and must have their complaints addressed in a  convenient and timely manner."], "subsections": [{"section_title": "Administration of the Patient Advocacy Program", "paragraphs": ["The patient advocacy program is administered at the VAMC level. Each  of VA\u2019s 170 VAMCs is responsible for making at least one patient  advocate available to respond to veterans\u2019 feedback, and for ensuring  that feedback is recorded in PATS. VAMCs may designate other staff to  assist patient advocates in responding to feedback, such as lead patient  advocates and service-level advocates. Service-level advocates, such as  nurses or administrative staff, are designated at some VAMCs to respond  to veterans\u2019 feedback before involving a patient advocate. All VAMC staff  that have a designated role in the administration of the patient advocacy  program are referred to as patient advocacy program staff. In addition to  designating program staff, VAMCs may use a variety of methods to make  veterans aware of the patient advocacy program, such as displaying  signage on site and including information about the program on their  websites. (See app. I for more information on the methods selected  VAMCs used to make veterans aware of the program.)", "Patient advocacy program staff enter veterans\u2019 feedback in PATS using a  report of contact (ROC) and assign one or more issue codes that  generally describe the nature of the feedback, such as coordination of  care. (See app. II for additional information on entering veterans\u2019  feedback into PATS.) Each piece of feedback shared is categorized as  either a request for information, compliment, or complaint. VHA\u2019s  handbook for the program specifies certain goals for data collection and  resolution\u2014specifically, that all complaints should be entered in PATS to enable a comprehensive  understanding of veterans\u2019 issues and concerns to, in turn, identify  potential system-wide improvements; and  responses should occur no later than 7 days after the complaint is  made.", "With this guidance, patient advocacy program staff use a variety of  approaches for entering veterans\u2019 feedback in PATS and closing it in the  system once addressed. For example, when VAMCs have designated  service-level advocates, the process for entering and closing feedback in  PATS is generally different than the approach used by VAMCs that have  only patient advocates. (See fig. 1.)", "Patient advocacy program staff at each VAMC are assisted by a VISN- level coordinator who acts as a liaison between the VAMCs and VHA and  is responsible for ensuring consistency in PATS data collection within the  VISN. The VISN director is responsible for designating the coordinator  and ensuring that each VAMC within the VISN has at least one patient  advocate."], "subsections": []}, {"section_title": "Oversight of the Patient Advocacy Program", "paragraphs": ["The VHA office responsible for overseeing the patient advocacy program  changed as a result of CARA. From January 2011 to July 2017, the  program was overseen by OPCC&CT under VHA\u2019s Deputy Under  Secretary for Health for Operations & Management. CARA included a  provision for VHA to establish OPA to begin overseeing the program and  specified that this office would report directly to the Under Secretary for  Health, a higher-level office within VHA. Although OPCC&CT is no  longer responsible for overseeing the program, it is to continue to play an  advisory role to OPA during the initial phases of its work, according to  OPCC&CT officials.", "Many of OPA\u2019s oversight responsibilities are specified in CARA including  ensuring that patient advocates advocate on behalf of veterans, manage  PATS, and identify trends in the data to determine whether there are  opportunities for improving veterans\u2019 health care. Also, OPA\u2019s director is  required to ensure that patient advocates receive relevant, consistent  training across VAMCs. When establishing the office in July 2017, VHA  officials wrote a memo indicating that OPA\u2019s primary objectives were to  implement a standardized policy for the patient advocacy program and to  resolve any system-wide issues, such as concerns about care across  VAMCs identified through veterans\u2019 feedback. In addition, in August 2017,  OPA began soliciting feedback from VAMCs on various aspects of the  patient advocacy program to identify improvement priorities and best  practices. By September 2017, OPA had identified an acting program  director, established a workgroup (called the National Strategic  Workgroup) to develop recommendations related to program  administration, and finalized a charter that identifies workgroup  deliverables."], "subsections": []}]}, {"section_title": "VHA Has Provided Limited, Outdated Guidance to VAMCs on the Governance of the Patient Advocacy Program", "paragraphs": ["VHA has provided limited guidance to VAMCs on the governance of the  patient advocacy program. Specifically, VHA provided limited guidance on  how to meet the program\u2019s expectations that veterans have easy access  to a patient advocate who will hear their complaints and address them in  a timely manner. While VHA\u2019s handbook for the program provides general  information on the responsibilities of patient advocacy program staff, it  does not specify the VAMC department to which patient advocates should  report to help ensure VAMCs meet these expectations. According to VHA  officials, the lack of specific guidance was intentional and due in part to  VHA officials\u2019 view that leadership at each VAMC is in the best position to  understand the needs of veterans at their facilities, and therefore should  have flexibility to make decisions about governance in response to those  needs.", "In addition to providing limited guidance to VAMCs, VHA\u2019s patient  advocacy program handbook is out of date and does not incorporate  recent agency-wide changes, such as those made in response to VHA  Strategic Plan FY 2013 \u2013 2018 which identifies the goal of providing  proactive, patient-driven health care. The handbook for the program  was issued in 2005, expired in 2010, and as of January 2018, no updates  had been released. In the absence of an updated document, VAMCs are  still expected to follow the outdated handbook. However, the handbook  does not identify the responsibilities of the current VHA office responsible  for overseeing the program. Instead, it identifies the responsibilities of the  VHA office that oversaw the program before OPCC&CT began  overseeing the program in 2011.", "In recent years, OPCC&CT reviewed the implementation of the patient  advocacy program at some VAMCs and provided specific  recommendations on how to change program governance to better reflect  a more proactive patient advocacy program model. However, the  recommendations from these reviews were provided only to some VAMCs; guidance that could be applicable to all VAMCs was not added  to the handbook. OPCC&CT officials stated that they did not update the  handbook because they decided to instead spend time trying to  understand recent feedback they received from VAMC officials and  ensure that any updates would reflect system-wide shifts as a result of  VHA\u2019s strategic plan.", "OPCC&CT\u2019s limited and outdated guidance to VAMCs on the governance  of the patient advocacy program is inconsistent with federal internal  control standards for the control environment, which require agencies to  establish an organizational structure, assign responsibility, and delegate  authority to achieve agency objectives\u2014key aspects of governance. To  do so, an agency may develop an organizational structure that assigns  responsibilities to discrete units and defines reporting lines at all levels of  the organization. Without providing specific, timely guidance to VAMCs on  the governance of the patient advocacy program, the program is at risk of  not meeting its minimum expectations.", "In light of the limited and outdated guidance on the governance of the  program, patient advocacy program staff at most of our selected VAMCs  noted that the VAMC department to which patient advocates report can  have a direct effect on the ability of staff to resolve veterans\u2019 complaints.  For example, patient advocates at one VAMC said because of the  program\u2019s position within the organization, they did not have the authority  to ensure that VAMC officials external to the patient advocacy program,  such as physicians, quickly engaged in responding to veterans\u2019  complaints. In these cases, a patient advocate would contact the  physician to resolve a complaint, but may not have received a response  until the matter was brought to the attention of the physician\u2019s  supervisor\u2014a reporting line that is outside of the patient advocacy  program at this VAMC. Officials from several of our selected VAMCs and  VSOs noted that the position of the patient advocacy program within  VAMCs may not give patient advocates the authority to require VAMC  staff to respond to veterans\u2019 complaints. They added that conflict-of- interest concerns could arise when a veteran has a complaint about a  VAMC for which the patient advocate works. (See app. III for additional  information on the governance of the patient advocacy program at  selected VAMCs.)", "In VA\u2019s written comments on a draft of this report, which are reproduced  in Appendix IV, VA stated that it issued its new directive for the patient  advocacy program that had been in development as we were conducting  our review. While the updated directive specifies that a VAMC\u2019s lead  patient advocate should report to the facility director, it does not specify  the VAMC department to which other patient advocacy program staff,  including patient advocates who are not designated as lead patient  advocates and service-level advocates, should report. In addition, OPA\u2019s  National Strategic Workgroup recently submitted recommendations to  OPA on the governance of the patient advocacy program. OPA officials  stated that they plan to prioritize the recommendations and elicit feedback  from VISN directors on how to operationalize the recommendations.  However, it is unclear whether OPA will provide additional guidance  related to the governance of the program based on these  recommendations, such as guidance on the VAMC department to which  all types of patient advocacy program staff should report. Until actions to  address the weaknesses we found are completed, guidance on the  governance of the program will continue to be lacking."], "subsections": []}, {"section_title": "VHA Has Provided Limited Guidance to VAMCs on Staffing the Patient Advocacy Program", "paragraphs": ["VHA has provided limited guidance to VAMCs on the number and type of  patient advocacy program staff needed to ensure that complaints from  veterans are addressed in a convenient and timely manner. According to  VHA\u2019s existing handbook for the program, every VAMC should have at  least one patient advocate and appropriate administrative, technical, and  clerical support should be provided to allow for efficient performance of  the responsibilities of program staff. OPCC&CT did not provide guidance  on how VAMCs should determine the appropriate number of  administrative, technical, and clerical staff or type of patient advocacy  program staff, such as lead patient advocates and service-level  advocates. According to officials, this was because no assessment was  conducted to identify what staff resources would be needed to meet the  expectations of the program. In the absence of such an assessment,  OPCC&CT instead relied on each VAMC to determine what resources  would be needed based on the facility\u2019s size and services provided.  However, VHA\u2019s handbook for the program does not provide instruction  for VAMC or VISN officials on how to determine the number and type of  staff needed for the program. OPCC&CT officials added that budget  constraints can also affect a VAMC\u2019s ability to hire the appropriate staff  for the program. (See app. III for additional information on the number  and type of patient advocacy program staff at selected VAMCs.)", "Officials at all but one of the selected VAMCs stated that program staff at  their VAMCs had more work to do than they could handle. For example,  VAMC officials cited backlogs in work, such as calls from veterans not  being answered, messages not being responded to, voicemail boxes  being full, and not all veterans\u2019 feedback being entered into PATS.  Officials from one VAMC we spoke with in July 2017 stated that due to  workload demands and not enough patient advocacy program staff at  their VAMC, they had roughly 300 unanswered phone calls at that time  from veterans who want to provide feedback to a patient advocate.  Officials from several VSOs we spoke with stated that there is not enough  patient advocate staff, adding that veterans reported that their calls to  patient advocates were not answered, they were unable to reach an  advocate, or their calls were not responded to in a timely manner.", "The lack of staffing guidance is inconsistent with GAO\u2019s Key Principles for  Effective Strategic Workforce Planning, which states that workforce  planning is essential to addressing an organization\u2019s critical need to align  its human capital program with its current and emerging mission and  programmatic goals. Further, federal internal control standards require  agencies to design control activities to achieve objectives, a key aspect of  effectively staffing a program. Such control activities may include  effectively managing the agency\u2019s workforce, such as by continually  assessing the knowledge, skills, and abilities of the workforce to achieve  organizational goals.", "The lack of guidance on staffing may impede VAMCs\u2019 efforts to ensure  that they have the appropriate number and type of staff to administer the  patient advocacy program. The resulting misalignment of staff resources  could have negatively affected VAMCs\u2019 ability to achieve the program\u2019s  objectives, including addressing veterans\u2019 complaints in a timely manner.  For example, if there are not a sufficient number of patient advocates to  respond to veterans\u2019 phone calls in a timely manner, VAMCs may not be  able to ensure that patient advocates can respond to veterans\u2019 complaints  within 7 days, as called for by VHA\u2019s handbook for the program.", "According to VHA officials, OPA analyzed feedback from VAMCs on the  factors that should be considered in developing national guidelines for  staffing, such as facility size and complexity level, and directed its  National Strategic Workgroup to develop recommendations for  determining the extent to which VAMCs have utilized various patient  advocacy program staff, such as service-level advocates, by the spring of  2018. However, OPA expects that these efforts will result in  recommendations for consideration, and it is unclear what steps, if any,  will be taken based on the recommendations. Until actions to address the  weaknesses we found are completed, the lack of guidance for VAMCs on  determining the appropriate number and types of staff will put the patient  advocacy program at risk of being unable to address veterans\u2019 complaints  in a convenient and timely manner."], "subsections": []}, {"section_title": "VHA Has Recommended Training for Patient Advocates, but Has Not Developed an Approach to Routinely Assess Their Training Needs or Monitored Training Completion", "paragraphs": [], "subsections": [{"section_title": "VHA Has Developed a Recommended Training List for Patient Advocates, but Has Not Developed an Approach to Assess Their Training Needs on a Routine Basis", "paragraphs": ["VHA has recently developed a list of recommended training for patient  advocates. In the spring of 2017, OPCC&CT officials updated a  recommended training list for patient advocates developed before 2011  when OPCC&CT began overseeing the patient advocacy program. The  training list covers a wide variety of topics, including how to enter and  examine trends in PATS data, as well as key responsibilities of patient  advocates outlined in VHA\u2019s handbook for the program. OPCC&CT  officials stated that they would like to make the trainings required, but  have not pursued this because of the lengthy process within VHA to  designate required training for a specific group of staff. To update the list  in 2017, OPCC&CT convened a workgroup (which included several  patient advocates) to determine whether the old training list was  sufficient, and the workgroup shared its suggested updates with VISN- level coordinators for distribution to VAMCs in April 2017.", "We found that OPCC&CT has not developed an approach to routinely  assess the training needs of patient advocates. Rather, OPCC&CT  officials stated that they relied on VAMC and VISN staff to conduct these  assessments. However, VHA\u2019s handbook for the program does not  specify that VAMC or VISN officials are responsible for conducting routine  assessments of patient advocates\u2019 training needs. None of our selected  VAMCs routinely conducted assessments of the training needs of patient  advocates, such as assessing whether advocates were adequately  trained to carry out their responsibilities. Officials from two VAMCs said  they used ad hoc approaches to assess training needs. For example, one  patient advocate supervisor stated that training is offered on an \u201cas  needed\u201d basis in patient advocate meetings when a training need is  identified.", "The lack of an approach for routinely assessing the training needs of  patient advocates is inconsistent with federal standards for internal  control related to control activities. Under these standards relating to  human capital, management ensures that training is aimed at developing  and retaining employee knowledge, skills, and abilities to meet changing  organizational needs. Management should also continually assess the  knowledge, skills, and ability needs of a program so that the program is  able to obtain a workforce that has the required knowledge, skills, and  abilities to achieve organizational goals.", "Without an approach for routinely assessing the training needs of patient  advocates, VHA may not be able to clearly identify gaps in the knowledge  and skills of these staff over time, which, in turn, could put the program at  risk of not meeting its goals. For example, if there is a gap in  understanding among patient advocates that all complaints should be  entered into PATS, addressing veterans\u2019 complaints may be delayed, if  addressed at all, and opportunities to analyze complaint data for the  purpose of identifying system-wide improvements may be missed.", "According to VHA officials, OPA analyzed feedback from VAMCs on the  training needs of patient advocates, including how to correctly enter data  into PATS, and directed its National Strategic Workgroup to develop  recommendations for assessing the training needs of patient advocates  by the spring of 2018. OPA expects that these efforts will result in  recommendations for OPA to consider, but it is unclear what steps, if any,  will be taken based on the recommendations. Until actions to address the  weaknesses we found are completed, the lack of routine assessments of  training needs will continue to put the program at risk of staff not having  the requisite skills and knowledge to carry out their duties."], "subsections": []}, {"section_title": "VHA Has Not Monitored Training Completion for Patient Advocates", "paragraphs": ["VHA has not monitored the completion of training for patient advocates.  Specifically, OPCC&CT officials said that they did not monitor the extent  to which patient advocates completed the recommended training  distributed in April 2017. Instead, these officials relied on patient advocate  supervisors to monitor training completion. However, VHA\u2019s handbook for  the program does not specify that patient advocate supervisors are  responsible for monitoring the completion of training for patient  advocates.", "Half of patient advocate supervisors at our selected VAMCs did not track  the completion of patient advocacy training. Patient advocate supervisors  said that they are able to track the completion of general VA employee  training through VA\u2019s Talent Management System. However, most  training specific to patient advocacy were generally not included in this  system during the period of our review. Officials from our selected  VAMCs who did track patient advocacy training used various methods to  record completion, such as keeping attendance lists for the training  provided.", "Taking steps to monitor training completion would be consistent with  GAO\u2019s Guide for Assessing Strategic Training and Development Efforts in  the Federal Government which identifies components of the training and  development process, including having agencies collect and monitor data  corresponding to establishing training objectives. Monitoring training  completion would also be consistent with federal standards for internal  control related to control activities. Under these standards relating to  human capital, management ensures that training is aimed at developing  and retaining employee knowledge, skills, and abilities to meet changing  organizational needs. Management also continually assesses the  knowledge, skills, and ability needs of a program so that the program is  able to obtain a workforce that has the required knowledge, skills, and  abilities to achieve organizational goals\u2014key components for monitoring  training completion.", "If patient advocates are not properly trained in how to use PATS to  document and resolve complaints, tracking the status of complaints may  be more difficult, which could increase the likelihood that they are not  addressed in a timely manner, if at all. Further, CARA specifies that the  director of OPA should ensure that patient advocates receive training  specific to patient advocacy.", "According to VHA officials, OPA did not obtain information on whether  patient advocates completed recommended training and did not identify  an approach for monitoring training completion moving forward. Without  monitoring training completion, there is an increased risk that patient  advocates have not received the training they need to effectively fulfill  their responsibilities such as advocating on behalf of veterans and  consistently using PATS to document and resolve complaints."], "subsections": []}]}, {"section_title": "VHA Has Not Monitored Patient Advocacy Data-Entry Practices or Reviewed Patient Advocacy Data to Assess Program Performance and Identify System-Wide Improvements", "paragraphs": [], "subsections": [{"section_title": "VHA Has Not Monitored Whether Complaints Were Always Entered into PATS and Issue Codes Assigned Consistently", "paragraphs": ["VHA officials have not monitored PATS data-entry practices to ensure  complaints were always entered into PATS and issue codes were  assigned consistently to ROCs. OPCC&CT officials told us they did not  monitor the data-entry practices of patient advocacy program staff to  ensure that all complaints were entered into PATS, a key goal according  to VHA\u2019s handbook for the program. Rather, they relied on VISN and  VAMC officials to ensure that program staff entered all complaints into  PATS. Officials from two of the five VISNs we interviewed stated that they  did not perform any audits or checks of the data entered into PATS by  patient program staff at VAMCs.", "We also found inconsistencies in the extent to which VAMC officials  entered complaints into PATS, with complaints always entered into PATS  at one of our selected VAMCs, while at other VAMCs some complaints  were left unrecorded, according to officials. For example, at one VAMC,  officials stated that over a third of the complaints received were not  entered into PATS due to the competing workload demands of patient  advocates. Similarly, at another selected VAMC, almost a quarter of the  complaints received were not entered into PATS, according to patient  advocates there who explained that they primarily used a document  outside of PATS to record veterans\u2019 feedback.", "In addition, OPCC&CT officials told us they did not monitor whether  patient advocates used a consistent practice to assign issue codes to  veterans\u2019 feedback recorded into PATS. Using a consistent data-entry  practice is important to ensure that PATS data can be compared across  VAMCs to better enable an accurate and comprehensive understanding  of veterans\u2019 issues and concerns, a goal of the patient advocacy program.  OPCC&CT officials stated that they relied on VISN-level coordinators to  monitor coding practices because VHA\u2019s handbook for the program states  that these coordinators should develop VISN-wide consistent approaches  for entering complaints into PATS. VISN-level coordinators from two  selected VISNs stated that they created a standard practice for assigning  issue codes within a particular VISN; however, the coding practices  differed between VISNs, making national level analysis difficult.", "We also found inconsistencies in how VAMC officials coded specific  veterans\u2019 feedback. For example, patient advocates did not use  consistent practices to code issues related to the Veterans Choice  Program (Choice Program), one of the most common types of issues  patient advocates told us they hear about from veterans. Officials from  one of our selected VAMCs said they code feedback related to the  Choice Program under a specific \u201crequest for information\u201d issue code,  regardless of whether the feedback was a request for information,  compliment, or complaint. In contrast, officials at another VAMC stated  that they typically code feedback related to the Choice Program as a  complaint related to billing. (See app. II for additional information on data- entry practices at selected VAMCs.)", "OPCC&CT\u2019s lack of monitoring of PATS data-entry practices is  inconsistent with GAO\u2019s Assessing the Reliability of Computer-Processed  Data which identifies the importance of consistent data-entry practices to  ensure that data are reasonably complete and accurate. Further, federal  standards for internal control related to information and communications  require agencies to use quality information, such as relevant data from  reliable sources, to achieve the agency\u2019s objectives. Under internal  control standards for control activities, management also is to monitor  performance to achieve objectives. Without OPCC&CT monitoring data- entry practices, the patient advocacy program is at risk of not meeting its  goal that all complaints are entered into PATS and there is an increased  likelihood of VHA not having an accurate understanding of veterans\u2019  complaints across VAMCs.", "Moving forward, in fall 2017, OPA distributed meeting minutes to all VISN  and VAMC directors stating that all veterans\u2019 feedback should be  consistently recorded in PATS. OPA officials also updated some of the  issue codes in PATS in fall 2017 and added a code specifically for  community care issues, such as issues related to the Choice Program. In  addition, OPA officials stated that they plan to promote the consistent  assignment of issue codes to veterans\u2019 feedback through national  training, but have not specified when this training will occur or if OPA staff  will monitor patient advocates\u2019 consistent assignment of issue codes or of  data-entry practices generally. Until these actions are completed,  however, the gaps in monitoring of PATS data-entry practices that we  identified will continue to exist, putting the program at risk of incomplete  or unreliable data that may not allow an accurate understanding of  veterans\u2019 complaints, critical to making system-wide improvements."], "subsections": []}, {"section_title": "VHA Has Not Systematically Reviewed PATS Data to Assess Program Performance and Identify Potential System- Wide Improvements", "paragraphs": ["VHA officials have not systematically reviewed PATS data to assess  program performance and identify potential system-wide improvements,  goals of the patient advocacy program. Specifically, OPCC&CT officials  stated that they reviewed PATS data in response to inquiries, but did not  conduct systematic reviews of the data over time. For example, they did  not track VAMC performance on responding to complaints in a timely  manner or track the most common complaints across VAMCs to identify  potential opportunities for system-wide improvements.", "OPCC&CT officials stated that they did not conduct systematic reviews of  PATS data because VISN and VAMC officials were primarily responsible  for these analyses. However, according to VHA\u2019s handbook for the  patient advocacy program, VHA officials have a responsibility to examine  PATS data for trends across VAMCs and identify any areas for system- wide improvement. Officials stated that it was challenging to analyze  PATS information included in narrative text, such as descriptions of  veterans\u2019 feedback.", "Not reviewing PATS data is inconsistent with federal standards for  internal control for monitoring which require agencies to establish and  operate monitoring activities, such as assessing the quality of  performance over time, and evaluate the results. Further, not  conducting systematic assessments of PATS data made it difficult for  OPCC&CT to determine program performance, such as whether the  program was meeting its goal that all complaints are entered into PATS  and responded to within 7 days. Officials explained that VHA interprets  this goal to mean that complaints are closed in PATS within 7 days.  According to VA, between FY 2014 and FY 2017 there were more than  53,000 complaints per year open for greater than 7 days. If OPCC&CT  officials had conducted systematic reviews of PATS data, they may have  been able to identify that there were a significant number of complaints  open for longer than 7 days and consider what actions should be taken,  such as providing additional guidance to VAMCs on how to address  complaints in a timely manner.", "Furthermore, without systematically reviewing PATS data across VAMCs  to identify potential system-wide improvements, OPCC&CT officials may  have been unaware of important care issues across VAMCs. For  example, patient advocates from several of our selected VAMCs stated  that opioid prescription issues are among the most common complaints  they received from veterans. If OPCC&CT officials were to have  systematically reviewed PATS data across VAMCs to determine the  prevalence of these types of complaints, they could have identified the  need to address them on a national level and consider system-wide  policies or guidance in response.", "According to VHA officials, OPA is in the process of identifying the data it  needs to review on a routine basis, and directed its National Strategic  Workgroup to identify program data that could be reviewed to assess  program performance and identify potential system-wide improvements  by the spring of 2018. However, OPA expects that these efforts will result  in recommendations for OPA to consider, and it is unclear what steps, if  any, will be taken based on the recommendations. Until actions to  address the weaknesses we found are completed, the lack of a  systematic review of PATS data will persist, putting the program at  continued risk of missed opportunities for identifying and addressing  weaknesses across VAMCs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As one of the largest health care delivery systems in the nation, it is  critically important for VHA to ensure that each veteran who receives  health care services has easy access to an advocate who listens to that  veteran\u2019s feedback and responds in a timely manner. This is especially  important given concerns about veterans\u2019 ability to receive timely and  quality care. However, VHA\u2019s efforts to ensure that the patient advocacy  program is meeting its goals\u2014to identify potential system-wide  improvements and respond to complaints within 7 days\u2014have fallen  short. OPCC&CT did not provide sufficient oversight to the program in the  four key areas of governance, staffing, training, and data-entry practices,  which has left the program at risk for not meeting its goals.", "VHA\u2019s newly established OPA has initiated plans to improve the patient  advocacy program in these four areas; however, most of these plans  center around a workgroup that will make recommendations for OPA to  consider, and it is unclear what specific actions, if any, will be taken  based on these recommendations. Further, documentation for several of  OPA\u2019s planned efforts has not been finalized. Unless specific actions to  address the weaknesses we identified are completed expeditiously, the  program is at risk of not meeting its goals, including addressing veterans\u2019  complaints in a convenient and timely manner. Furthermore, without  addressing the weaknesses we identified, OPA misses opportunities to  review PATS data across VAMCs to identify potential system-wide issues  that, if addressed, could significantly improve the experience of veterans.  Such reviews are critical to ensuring that VHA is taking steps to both  meet its goal in its strategic plan to provide veterans with timely and  quality health care, and to address recent issues it has faced, such as  veterans\u2019 ability to access care in a timely manner."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to the VHA  Undersecretary for Health: provide updated guidance to VAMCs on the governance of the patient  advocacy program, including clear definitions of reporting lines.  (Recommendation 1) assess and provide guidance to VAMCs on appropriately staffing the  patient advocacy program, including guidance on how to determine  the appropriate number and type of staff. (Recommendation 2) develop an approach to routinely assess the training needs of patient  advocates. (Recommendation 3) monitor the completion of training for patient advocates.  (Recommendation 4) monitor PATS data-entry practices to ensure all complaints are  entered into PATS and that veterans\u2019 feedback is coded consistently.  (Recommendation 5)  systematically review PATS data to assess program performance and  identify potential system-wide improvements. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to VA for comment. In its written  comments, which are reproduced in Appendix IV, VA concurred with our  recommendations and noted that it recently issued the new directive for  patient advocacy that had been in development as we were conducting  our review. The directive supersedes the outdated handbook for the  patient advocacy program and describes certain aspects of program  governance, including certain reporting lines, roles, and responsibilities.  Accordingly, VA requested that we close our first recommendation related  to governance. We revised our report to reflect the issuance of the new  directive. However, we do not believe the directive fully implements our  recommendation. While the updated directive specifies that a VAMC\u2019s  lead patient advocate should report to the facility director, it does not  specify the VAMC department to which other patient advocacy program  staff, including patient advocates who are not designated as lead patient  advocates and service-level advocates, should report. Until VA specifies  the reporting lines for these other patient advocacy program staff, our  recommendation will remain open. In addition, VA stated in its written  comments that OPA has efforts underway related to staffing, training, and  PATS data entry and assessment and provided estimated completion  dates for these efforts. We will monitor VA\u2019s efforts to address our  recommendations. VA did not provide technical comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, the Under Secretary for  Health, and other interested parties. In addition, the report will be  available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at draperd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in Appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Awareness of the Patient Advocacy Program", "paragraphs": ["Our eight selected Department of Veterans Affairs (VA) medical centers  (VAMC) use a variety of methods to make veterans or their  representatives aware of the patient advocacy program, including  providing brochures on the program, displaying signage, and providing  program information on the VAMC\u2019s website. (See fig. 2 for examples of  patient advocacy program signage at some of the VAMCs we visited.)"], "subsections": []}, {"section_title": "Appendix II: Patient Advocate Tracking System (PATS) Data Entry and Management", "paragraphs": ["Patient advocacy program staff, such as patient advocates or service- level advocates who are designated to respond to veterans\u2019 feedback,  enter feedback from veterans or their representatives in the Veterans  Health Administration (VHA) Patient Advocate Tracking System (PATS)  by creating a report of contact (ROC). Each ROC includes basic  information regarding the individuals involved, a description of the  feedback provided by the veteran, and a description of the steps taken to  resolve the issue. Patient advocacy program staff assign one or more  issue codes that generally describe the nature of the feedback, such as  \u201ccoordination of care.\u201d (See figures 3 and 4.)", "In order to organize veterans\u2019 feedback, VHA categorizes feedback as  either requests for information, compliments, or complaints. Within each  of these categories VHA defines specific issue codes for program staff to  select from based on the description of the veteran\u2019s feedback. (See table  2.)", "The Comprehensive Addiction and Recovery Act of 2016 (CARA),  includes a provision for every VAMC to display the purpose of the  program, along with the contact information of a patient advocate at the  facility, in as many prominent locations as deemed appropriate to be seen  by the largest percentage of veterans. In September 2016, VHA Central  Office sent a memo to Veterans Integrated Service Network (VISN)  directors explaining this requirement and an Office of Patient Centered  Care and Cultural Transformation (OPCC&CT) official obtained  confirmation from all VHA facilities that this requirement was met in  October 2016. Nevertheless, officials from two veterans service  organizations (VSO) we interviewed stated they often encounter veterans  who are not aware of the patient advocacy program.", "According to VA, in fiscal year (FY) 2017, there were 268,114 veterans  associated with ROCs entered in PATS. VA also reported that, in the  same year, patient advocacy program staff entered 414,256 unique  reports of contact in PATS. According to VA, from the unique reports of  contact in PATS, program staff documented 473,564 issues, which  included (but were not limited to) 112,722 requests for information,  35,839 compliments, and 325,003 complaints. See table 3 for the top  five issues that patient advocacy program staff across VAMCs entered in  PATS for FY 2017. According to VA, in FY 2017, a total of 1,391 program  staff system-wide entered data in PATS. In the same year, according to  PATS, veterans, rather than family members or friends, most often  provided feedback to patient advocacy program staff.", "Our eight selected VAMCs varied in the number of patient level  advocates and service-level advocates who had access to PATS,  whether veterans\u2019 feedback was recorded outside of PATS, and which  issue code or codes were used to record feedback related to the  Veterans Choice Program. (See table 4.)", "Examples of methods that patient advocates and service-level advocates  used at selected VAMCs to record veterans\u2019 feedback outside of PATS  included call logs and tracking spreadsheets. VAMC officials indicated  that recording information outside of PATS helped them track their  responses to veterans\u2019 feedback. Some of the information recorded  outside of PATS was additional information that is not required to be  entered into PATS, such as requests for information."], "subsections": []}, {"section_title": "Appendix III: Approaches to the Governance and Staffing of the Patient Advocacy Program", "paragraphs": ["The eight Department of Veterans Affairs (VA) medical centers (VAMC)  selected for our review used a variety of approaches to govern the patient  advocacy program, resulting in differences in the number of positions for  patient advocates and service-level advocates and the title of the  positions. Service-level advocates, such as nurses or administrative staff,  are designated at some VAMCs to respond to veterans\u2019 feedback before  involving a patient advocate. (See table 5.)", "Patient advocates reported to a variety of departments among our  selected VAMCs. At two of the VAMCs, patient advocates reported to the  customer or consumer relations department, while at three, patient  advocates reported to the quality management department. In addition,  the placement of the department that patient advocates reported to within  the VAMC differed. For example, the patient advocate supervisor at one  of the selected VAMCs said that patient advocates reported to the  customer service manager, who did not report directly to the VAMC  director. At another VAMC, the patient advocate reported directly to the  VAMC director.", "In addition to the Veterans Health Administration (VHA) handbook for the  patient advocacy program, all eight of our selected VAMCs developed  their own policies for the administration of the program, and these policies  varied. For example, while almost all of the policies specified the  responsibilities with respect to the patient advocacy program of the  service chiefs\u2014officials who oversee the administration and operation of  service lines such as primary care, these responsibilities varied. For  example, two of the policies required service chiefs to incorporate  veterans\u2019 feedback into performance measures used for VAMC staff  external to the patient advocacy program, such as physicians, while the  other policies did not.", "We also found variation between our selected VAMCs with respect to  whether they had written descriptions of the service-level advocates\u2019  roles. Of the six VAMCs that designated service-level advocates, three  had written descriptions of their roles, while three did not. Further, among  the VAMCs that had a written description of the role of a service-level  advocate, the expectations for these advocates varied. For example, one  VAMC\u2019s written description specified that service-level advocates are  expected to enter veterans\u2019 feedback into PATS within 7 days of receiving  the feedback. The written descriptions at the other two VAMCs did not  specify this expectation."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Hern\u00e1n Bozzolo (Assistant  Director), Rebecca Rust Williamson (Analyst-in-Charge), Jennie F. Apter,  Q. Akbar Husain, and Emily Loriso made key contributions to this report.  Also contributing were Julie Flowers, Jacquelyn Hamilton, and Vikki  Porter."], "subsections": []}]}], "fastfact": ["The Veterans Health Administration has designated patient advocates at each VA medical center to receive and document feedback from veterans.", "Amid concerns about veterans\u2019 ability to receive timely and quality care, we reviewed the VHA patient advocacy program.", "We found that VHA is beginning to address governance, staffing, training, and other issues, including directing a workgroup to provide recommendations by spring of 2018. However, the recommendations are only for consideration and deadlines have slipped in the past.", "We recommended 6 actions to improve guidance for and oversight of the program."]}
{"id": "GAO-18-145", "url": "https://www.gao.gov/products/GAO-18-145", "title": "High-Containment Laboratories: Coordinated Actions Needed to Enhance the Select Agent Program's Oversight of Hazardous Pathogens", "published_date": "2017-10-19T00:00:00", "released_date": "2017-10-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Safety lapses continue to occur at some of the 276 laboratories in the United States that conduct research on select agents\u2014such as Ebola virus or anthrax bacteria\u2014that may cause serious or lethal infection in humans, animals, or plants, raising concerns about whether oversight is effective.", "GAO was asked to review the federal oversight approach for select agents and approaches from other countries or regulatory sectors. This report (1) evaluates the extent to which the Select Agent Program has elements of effective oversight and strategic planning documents to guide it, and (2) identifies approaches selected countries and regulatory sectors have used to promote effective oversight.", "GAO convened a meeting of experts with the help of the National Academy of Sciences to discuss oversight of select agents. GAO also reviewed relevant laws, regulations, and guidance, and interviewed officials from the Select Agent Program and laboratories it oversees. GAO also reviewed documents and interviewed officials from two countries and other U.S. sectors selected because they have alternate oversight approaches."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Select Agent Program (Select Agent Program)\u2014jointly managed by the Departments of Health and Human Services (HHS) and Agriculture (USDA)\u2014oversees laboratories' handling of certain hazardous pathogens known as select agents, but the program does not fully meet all key elements of effective oversight, as illustrated in the following examples:", "GAO's past work identified independence as a key element of effective oversight. However, the Select Agent Program is not structurally independent from all laboratories it oversees, and it has not assessed risks posed by its current structure or the effectiveness of mechanisms it has to reduce organizational conflicts of interest. Without conducting such assessments and taking actions as needed to address risks, the program may not effectively mitigate impairments to its independence.", "Another key element of effective oversight is the ability to perform reviews. Some experts and laboratory representatives raised concerns that the program's reviews may not target the highest-risk activities, in part because it has not formally assessed which activities pose the highest risk. Without assessing the risk of activities it oversees and targeting its resources appropriately, the program cannot ensure it is balancing its resources against their impact.", "Technical expertise is another key element GAO identified in past work. The Select Agent Program has taken steps to hire additional expert staff and improve training, but workforce and training gaps remain.", "Moreover, the program does not have joint strategic planning documents to guide its oversight. Although it began taking steps to develop a joint strategic plan during GAO's review, the program is not developing workforce plans as part of this effort. GAO's past work has found that strategic workforce planning is an essential tool to help agencies align their workforces with their missions and develop long-term strategies for acquiring, developing, and retaining staff. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program leverage resources to ensure all workforce and training needs are met.", "Selected countries and regulatory sectors GAO reviewed promote effective oversight using approaches that differ from the U.S. Select Agent Program's approaches:", "In Great Britain, oversight of laboratories that work with pathogens is under an independent government agency focused on health and safety.", "In both Great Britain and Canada, regulators focus their oversight on (1) biological safety, due to safety incidents which provided the impetus for laboratory oversight in these countries; and (2) regulation of all potentially hazardous pathogens and activities in laboratories."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 11 recommendations for the Select Agent Program, including to (1) assess risks from its current structure and the effectiveness of its mechanisms to reduce conflicts of interest and address risks as needed, (2) assess the risk of activities it oversees and target reviews to high-risk activities, and (3) develop a joint workforce plan. HHS and USDA agreed with GAO's recommendations.", "or John Neumann at (202) 512-3841 or neumannj@gao.gov ."]}], "report": [{"section_title": "Letter", "paragraphs": ["Safety lapses continue to occur at laboratories in the United States that  conduct research on hazardous pathogens\u2014such as the Ebola virus and  the bacteria that causes anthrax\u2014and toxins that may pose a serious  threat to humans, animals, or plants. These lapses raise concerns about  whether federal oversight of these laboratories is effective. For example,  in November 2016, the Department of Homeland Security discovered that  a private laboratory had inadvertently sent a toxic form of ricin (a  potentially lethal poison) to one of its training centers multiple times since  2011, potentially putting training participants at risk. In May 2015, the  Department of Defense (DOD) discovered that a DOD laboratory had  inadvertently shipped live anthrax bacteria to nearly 200 other  laboratories worldwide over the course of 12 years. And in July 2014, the  National Institutes of Health (NIH) discovered decades-old vials of  smallpox in a storage room of a Food and Drug Administration laboratory  on its campus.", "Laboratories that conduct research on pathogens fall into one of four  biological safety levels (BSL), with those at BSL-3 and -4 referred to as  high-containment laboratories for the purpose of this report. We\u2014along  with Congress and various federal committees\u2014have, for many years,  identified challenges and areas for improvement related to the safety,  security, and oversight of high-containment laboratories. In 2008 and  2009, for example, we found a proliferation of high-containment  laboratories across the United States, with the number of such  laboratories in the government, academic, and private sectors increasing  since 2001. We also found that, for the subset of these laboratories  subject to federal oversight, the oversight was duplicative, fragmented,  and dependent on self-policing. More recently, we found in 2016 that  stronger oversight mechanisms for federal high-containment laboratories  were needed at the individual federal department and component agency  levels. We have made numerous recommendations over the years,  including that a single entity be identified to determine the number of  high-containment laboratories needed to meet national goals, the  aggregate risks associated with the proliferation of laboratories, and the  type of oversight needed. Federal departments have made some  progress in implementing recommendations from our past reports,  including addressing issues we identified regarding duplicative oversight.", "Certain hazardous pathogens and toxins that may be used in high- containment laboratories are designated as select agents because they  have the potential to pose a severe threat to human, animal, or plant  health and safety, or to animal or plant products. Laboratories conduct  research on select agents for a variety of reasons, including to identify  their characteristics and develop vaccines and other measures to help  diagnose, prevent, or treat exposure to or infection with these agents.  Select agent research is subject to federal oversight and regulations, as  well as guided by the principles and practices of biological safety and  security. The Federal Select Agent Program (Select Agent Program) was  established to regulate the possession, use, and transfer of select agents  in response to security concerns following bioterrorism attacks in the  1990s and early 2000s. The Select Agent Program is jointly managed by  the Division of Select Agents and Toxins within the Department of Health  and Human Services (HHS) Centers for Disease Control and Prevention  (CDC) and the Agriculture Select Agent Services within the U.S.  Department of Agriculture (USDA) Animal and Plant Health Inspection  Service (APHIS). Together, these components within CDC and APHIS  regulate and oversee all high-containment laboratories in the United  States that register to work with select agents. Such laboratories are  required to follow both biological safety and security practices. According  to the Biosafety in Microbiological and Biomedical Laboratories manual,  biological safety practices are intended to reduce or eliminate exposure of  individuals and the environment to potentially hazardous pathogens and  biological security practices are intended to prevent the loss, theft,  release, or misuse of hazardous pathogens and related information by  limiting access to facilities and this information.", "Other countries also regulate and oversee hazardous pathogens handled  in high-containment laboratories and may take different approaches to  this oversight. Moreover, other high-risk sectors in the United States,  such as the nuclear industry, in some cases, take different approaches to  oversight. In our past work reviewing some of these sectors, we have  identified five key elements of effective oversight in areas where low- probability adverse events can have significant and far-reaching effects.  These elements are as follows:  Independence: The organization conducting oversight should be  structurally distinct and separate from the entities it oversees.", "Ability to perform reviews: The organization should have the access  and working knowledge necessary to review compliance with  requirements.", "Technical expertise: The organization should have sufficient staff  with the expertise to perform sound safety and security assessments.", "Transparency: The organization should provide access to key  information, as applicable, to those most affected by operations.", "Enforcement authority: The organization should have clear and  sufficient authority to require that entities achieve compliance with  requirements.", "In our past work, we have also found that requirements under the  Government Performance and Results Act of 1993 (GPRA), as  amended, for strategic planning at the agency level can serve as  leading practices at lower levels within federal agencies, such as for  individual programs. The act requires agencies to develop strategic  plans that include documents and planning tools such as mission  statements, strategic goals and objectives, and performance measures,  which, according to our past work, can help inform agency decision  making to address challenges.", "You asked us to review the effectiveness of the current approach to  overseeing select agents as well as approaches from other countries and  regulatory sectors. This report (1) examines the extent to which the Select  Agent Program has the elements of effective oversight and has strategic  planning documents to guide its oversight efforts, and (2) describes  approaches that selected countries and regulatory sectors have used to  promote effective oversight.", "To evaluate the extent to which the Select Agent Program has the  elements of effective oversight, we first identified five key elements of  effective oversight we have used in the past for assessing the  effectiveness of oversight in other areas where low probability adverse  events can have significant and far-reaching effects. We discussed these  elements with agency officials, experts, and representatives from  nongovernmental organizations to ensure their applicability to the  oversight of select agents (see app. I for a description of these elements  and our vetting process). We then reviewed relevant laws, select agent  regulations, and joint documents from the Select Agent Program, such as  program guidance, inspection checklists, memorandums of understanding  guiding the program, reports on the program, information on enforcement  actions, inspection data, and other documents to determine the extent to  which the program performed activities or met requirements in the key  elements. We took several steps to determine the reliability of the  inspection data, including interviewing agency officials and comparing a  subset of the data to information from other sources. We determined that  the inspection data were sufficiently reliable for the purpose of this report.", "We also reviewed documents from or related to the two components of  the program, CDC and APHIS, such as workforce planning documents,  agency policies, budget justifications, and internal program reviews. In  addition, we contacted the HHS Office of Inspector General (OIG) and  USDA Office of General Counsel to obtain their legal views on the  departments\u2019 authority to impose civil money penalties on federal  laboratories. We interviewed officials from CDC and APHIS\u2014including  senior agency leadership, senior Select Agent Program officials, and  inspectors\u2014to discuss the Select Agent Program\u2019s structure, inspections  and other oversight responsibilities, technical expertise, and other issues  related to the five elements of effective oversight. To gain additional  perspectives on the Select Agent Program, we interviewed officials from  DOD and the Department of Homeland Security as well as  representatives from a nongeneralizeable selection of 18 laboratories  registered with the Select Agent Program. We selected these laboratories  to represent a range of laboratories across various sectors (e.g.,  federal\u2014including CDC and APHIS\u2014academic, commercial, and state  and local government), biological safety levels, and CDC or APHIS  component registration. The views of these representatives are not  generalizable to all registered laboratories, but they provide illustrative  examples.", "To evaluate the extent to which the Select Agent Program has strategic  planning documents to guide its oversight efforts, we reviewed relevant  laws and our past work in this area. We also reviewed joint program  documents and documents from the two components of the program,  including mission statements, business plans, performance measures,  and other related documents. In our interviews with program officials, we  discussed the program\u2019s past and ongoing efforts related to strategic  planning.", "To obtain expert views on the effectiveness of the approaches the Select  Agent Program and other selected countries and regulatory sectors have  used to promote effective oversight, we worked with the National  Academy of Sciences to convene a meeting with 18 experts with  combined expertise in biological safety, biological security, microbiology,  nuclear safety, worker safety, airline safety, food safety, risk  management, organizational change management, and human factor  assessments. The experts were evaluated for any conflicts of interest,  such as any current or financial or other interest that might conflict with  the service of an individual because it (1) could impair objectivity and  (2) could create an unfair competitive advantage for any person or  organization. The 18 experts were determined to be free of conflicts of  interest, and the group as a whole was judged to have no inappropriate  biases. (See app. II for a list of the experts that participated and a  description of our expert selection methodology.) The 2-day meeting was  composed of six sessions covering a range of topics, such as  effectiveness of the Select Agent Program\u2019s oversight, lessons learned  from other oversight approaches, and considerations for the program  moving forward.", "We also reviewed relevant documentation and interviewed officials from  selected countries and sectors about their oversight approaches. To  select countries, we first identified developed countries with high- containment laboratory oversight models based on past reports and  recommendations from experts and nongovernmental organizations. We  then narrowed our list of countries to those with networks of high- containment laboratories comparable to that of the United States (i.e.,  with multiple BSL-3 and -4 laboratories across a range of sectors that  handle hazardous pathogens similar to select agents) and with key  differences in their oversight models compared with that of the United  States. Because of the resources needed to conduct site visits, we  selected two countries from that list to visit, the United Kingdom (UK) and  Canada. In addition, we interviewed officials from four additional  countries\u2014France, Germany, Switzerland, and the Netherlands\u2014to learn  about their oversight approaches. We conducted these interviews at a  meeting of the European subgroup of the International Expert Group on  Biosafety and Biosecurity Regulation in Switzerland. To learn more about  other regulatory sectors\u2019 oversight approaches, we reviewed documents  and interviewed officials from the Nuclear Regulatory Commission (NRC)  and Department of Labor\u2019s Occupational Safety and Health  Administration and collected information from the Department of  Transportation\u2019s Federal Aviation Administration.", "We compared information from federal documents about the Select Agent  Program\u2019s oversight and strategic planning efforts, interviews with  laboratory representatives and agency officials, and our expert meeting  against the five elements of effective oversight, federal internal control  standards, requirements from the Office of Management and Budget  (OMB), and our past work. We also reviewed the Select Agent Program\u2019s  responses and actions related to recent federal reviews of the program,  including CDC and APHIS internal reviews, reviews from the HHS and   USDA OIGs, and reports from other federal committees.", "We conducted this performance audit from July 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides information on select agent regulations and  program roles, responsibilities, and requirements; and the history of the  Select Agent Program."], "subsections": [{"section_title": "Select Agent Regulations and Program Roles, Responsibilities, and Requirements", "paragraphs": ["The Select Agent Program is fragmented because oversight responsibility  is, by law, split between CDC and APHIS. The two agencies have  delineated roles and responsibilities to regulate laboratories\u2014including  conducting inspections and other activities\u2014that possess, use, or transfer  biological select agents. CDC\u2019s Division of Select Agents and Toxins is  responsible for the oversight and regulation of select agents that could  pose a threat to public health and safety, such as the Ebola virus.  APHIS\u2019s Agriculture Select Agent Services is responsible for the oversight  and regulation of select agents that could pose a threat to animal or plant  health or animal or plant products, such as the virus that causes foot-and- mouth disease. Some select agents, such as Bacillus anthracis (the  bacterium that causes anthrax), are regulated by both agencies because  they pose a threat to both human and animal health; these agents are  known as overlap agents. As part of their oversight, CDC and APHIS  maintain a list of select agents that they are required to review and  republish at least every 2 years.", "Generally, laboratories (including those at federal agencies and private  institutions) and individuals who possess, use, or transfer these select  agents must register with CDC or APHIS and renew their registration  every 3 years. Most laboratories registered with the Select Agent  Program are registered with CDC (238 of 276). (See fig. 1 for information  about the laboratories registered with the program.) In fiscal year 2016,  CDC\u2019s budget to manage its component of the Select Agent Program was  about $21 million and APHIS\u2019s was about $5.5 million.", "Select agent regulations govern the possession, use, and transfer of  designated select agents. To apply for a certificate of registration, the  laboratory must submit an application package to either CDC or APHIS,  and laboratory personnel must submit to a security risk assessment  conducted by the Federal Bureau of Investigation (FBI). The Select  Agent Program conducts an on-site inspection before issuing a new  certificate of registration or renewing an existing registration; both are  valid for a maximum of 3 years. Once approved, a laboratory\u2019s  certification of registration may be amended to reflect changes in  circumstances, such as replacement of the responsible official or other  personnel changes, changes in ownership or control of the laboratory,  changes in the activities involving any select agents, or the addition or  removal of any select agents. As a condition of registration, the select  agent regulations require each laboratory to designate an individual to be  its responsible official, who is responsible for ensuring compliance with  the regulations. In addition, the regulations require laboratories to develop  various written plans, as well as provide training and maintain records of  training and other activities. For example, the regulations require that  laboratories registered with the program develop and implement a written  security plan sufficient to safeguard each select agent against  unauthorized access, theft, loss, or release; develop and implement a  written biological safety plan that is commensurate with the risk of the  select agent, given its intended use; provide training on biological safety  and security for individuals with access to select agents; and maintain  records on the activities covered by the select agent regulations."], "subsections": []}, {"section_title": "History of the Select Agent Program", "paragraphs": ["Several historical security incidents involving hazardous pathogens  resulted in a series of laws and other regulatory activity that served to  establish and amend the Select Agent Program. First, Congress passed  section 511 of the Antiterrorism and Effective Death Penalty Act of 1996  after an individual in the United States unlawfully obtained Yersinia pestis,  the bacterium that causes plague, by mail order. Section 511 directed the  Secretary of HHS to promulgate regulations identifying a list of biological  agents that have the potential to pose a severe threat to public health and  safety, providing procedures governing the transfer of those agents, and  establishing safeguards to prevent unauthorized access to those agents  for purposes of terrorism or other criminal activities. The HHS Secretary  delegated the authority to regulate select agents to CDC, thus  establishing the Select Agent Program in its initial form. In carrying out  this authority, CDC required laboratories transferring select agents to be  registered with the program.", "After the terrorist events of September 11, 2001, and the subsequent  anthrax attacks in October 2001, Congress passed the USA PATRIOT  Act of 2001 and the Public Health Security and Bioterrorism  Preparedness and Response Act of 2002. These acts significantly  expanded the Select Agent Program by restricting access to select  agents and increasing safeguards and security measures for select  agents. The 2002 act also expanded the program to include not only the  regulation of the transfer but also the use and possession of select  agents, and it granted comparable authority to USDA for select agents  that pose a threat to animal or plant health, or animal or plant products.  The Secretary of Agriculture delegated the authority to regulate select  agents that affect animal or plant health to APHIS. The act also required  HHS and USDA to coordinate on overlap agents and required the  Secretaries of both departments to establish, maintain, and biennially  review and republish the select agent list, making revisions as appropriate  to protect the public.", "On July 2, 2010, the President signed Executive Order 13546,  \u201cOptimizing the Security of Biological Select Agents and Toxins in the  United States.\u201d The executive order directed HHS and USDA, as a part of  their ongoing review, to tier the select agents on the list, consider  shortening the list, and establish physical security standards for select  agents with the highest risk of misuse; HHS and USDA did so in final  rules published October 5, 2012. About half of the laboratories  registered with the program as of December 2016 were registered to work  with tier 1 agents (142 of 276)."], "subsections": []}, {"section_title": "Select Agent Program Does Not Fully Meet Key Elements of Effective Oversight or Have Joint Strategic Planning Documents to Guide Its Efforts Select Agent Program Does Not Fully Meet Oversight Elements Related to Independence, Performing Reviews, Technical Expertise, Transparency, and Enforcement", "paragraphs": ["The Select Agent Program does not fully meet key elements of effective  oversight. In particular, the program has oversight shortcomings related to  each of the five key elements: independence, performing reviews,  technical expertise, transparency, and enforcement. In addition, the  program does not have joint strategic planning documents to guide its  oversight efforts, such as a joint strategic plan and workforce plan; it did,  however, begin taking steps to develop a joint strategic plan over the  course of our review.", "The Select Agent Program does not fully meet our key elements of  effective oversight. Specifically, the program is not independent from all  laboratories it oversees, and it has not formally assessed the potential  risks posed by its current organizational structure. In addition, the  program regularly performs reviews of laboratories\u2019 compliance with  regulatory and program requirements, but these reviews may not target  the activities that pose the highest risk to biological safety and security.  Moreover, even though the program has taken steps to hire additional  staff and enhance the technical expertise of its staff, workforce and  training gaps remain. The program has increased transparency since  2016, but the information it shares is limited and there is no consensus  about what additional information could be shared, given security  concerns. Lastly, the Select Agent Program has authority to enforce  compliance with program requirements, but is still working to address  past concerns about the need for greater consistency and clarity in  actions it takes in exercising this authority."], "subsections": [{"section_title": "Program Is Not Independent and Has Not Formally Assessed All Risks Posed by Its Current Structure", "paragraphs": ["Independence  The organization conducting oversight should  be structurally distinct and separate from the  entities it oversees.", "According to our key elements of effective oversight, to be independent,  the organization conducting oversight should be structurally distinct and  separate from the entities it oversees. The Select Agent Program is not  structurally distinct and separate from all of the laboratories it oversees  but has taken some steps to reduce conflicts of interest potentially posed  by its current structure within CDC and APHIS. The two components of  the Select Agent Program are located in CDC and APHIS, both of which  also have high-containment laboratories registered with the program.  Many experts at our meeting raised concerns that the Select Agent  Program cannot be entirely independent in its oversight of CDC and  APHIS laboratories because the Select Agent Program is composed of  divisions of those agencies. In particular, one expert stated that to be  independent, the agencies cannot regulate themselves, and others said  that the agencies\u2019 oversight of their own laboratories may present a  conflict of interest. However, laboratories owned by CDC and APHIS are  not generally located within the same agency divisions and thus are not in  the same chain of command as the Select Agent Program. The one  exception is an APHIS-owned complex of laboratories in the same  division as the APHIS component of the program, but that complex is  registered with CDC, which means that CDC leads its inspections and  oversight.", "Senior program officials, many laboratory representatives, and some  experts cited a number of benefits to the Select Agent Program\u2019s current  structure within CDC and APHIS, including the ability for inspectors to  have access to experts and other support from their respective divisions.  For example, program officials said that the Select Agent Program had  reached out to CDC scientists for assistance in developing guidance  documents for the program. In addition, inspectors sometimes obtain  technical assistance from experts in CDC and APHIS, such as in cases  where the inspectors are not familiar with certain techniques or equipment  being used in a registered laboratory. However, program officials also  said that they have tried to limit the extent that they rely on CDC and  APHIS scientists from outside the program, so as not to raise concerns  about conflicts of interest. Senior program officials from CDC and APHIS  also said that the Select Agent Program\u2019s current locations within the two  agencies allow for access to additional support as needed, including  additional funds and administrative services. Senior program officials from  CDC further stated that being located in an office focused on  preparedness and response is advantageous because the Select Agent  Program can quickly pivot into incident response mode, allowing for rapid  response and assessment of incidents that occur in registered  laboratories. They noted that this location proved advantageous during an  incident in 2015, for example, when the program responded to the  discovery that a DOD laboratory had inadvertently sent live Bacillus  anthracis, the bacterium that causes anthrax, to nearly 200 laboratories.", "The location of the program has also raised some concerns in the past,  which the Select Agent Program has taken some steps to address. In  response to past concerns about conflicts of interest and separation of  duties raised by HHS OIG, APHIS, and us, both CDC and APHIS made  structural changes to increase the Select Agent Program\u2019s independence  within their respective agencies. In particular, in 2003, in response to  concerns from HHS OIG and us, CDC moved its component of the Select  Agent Program into the agency\u2019s Office of Public Health Preparedness  and Response because that office did not have any laboratories  registered with the program. (See fig. 2 for HHS\u2019s organizational chart,  including a depiction of where CDC\u2019s Select Agent Program component  currently sits in relation to other agency divisions.) According to CDC  officials, the director of the CDC component of the Select Agent Program  has access to senior leadership at CDC as needed.", "Similarly, since 2013, APHIS has also made some organizational  changes, including realigning supervisory responsibilities for the program  and creating a direct line of communication from the director of the APHIS  component of the Select Agent Program to the APHIS administrator.  Previously, the program reported to a director whose division had a suite  of laboratories that the program inspects. Now it is managed through  APHIS\u2019s National Import Export Services, which has different senior-level  managers that report directly to the Office of the Administrator rather than  the managers who oversee registered laboratories. According to agency  officials, these changes increased the level of independence between the  Select Agent Program and APHIS-owned laboratories but did not fully  address the appearance of a lack of independence within APHIS, since  the agency\u2019s organizational chart still places the APHIS component of the  Select Agent Program under Veterinary Services. (See fig. 3 for USDA\u2019s  organizational chart, including a depiction of where APHIS\u2019s Select Agent  Program component currently sits in relation to other agency divisions).  The APHIS director of the Select Agent Program and the Associate  Administrator of APHIS meet regularly to discuss incidents involving  select agents, enforcement actions, and operation of the Select Agent  Program, among other issues, according to agency officials, but this  reporting structure is not documented. According to federal standards for  internal control, management should establish an organizational  structure, assign responsibility, and delegate authority to achieve the  entity\u2019s objectives and should develop and maintain documentation of its  internal control system. Until APHIS formally documents the reporting  structure for its component of the Select Agent Program from the APHIS  director of the program to the administrator of APHIS, it will continue to  appear to have conflicts of interest in its oversight of APHIS-owned  laboratories.", "In addition to these structural changes, the program has put mechanisms  in place to reduce organizational conflicts of interest, but the agencies do  not always follow a key mechanism. In particular, CDC and APHIS signed  a memorandum of understanding in 2012 that stated that APHIS would  provide the lead inspector for all inspections of registered laboratories  owned by CDC. However, in practice, CDC inspectors still participate in  inspection activities because of their expertise in human agents. In  March 2015, the memorandum was amended to state that CDC would  lead inspections of all USDA-owned laboratories.", "However, since the memorandum was amended, the APHIS component  of the Select Agent Program has led at least three inspections of USDA- owned or operated laboratories. In particular, APHIS led an inspection of  a laboratory owned by another USDA agency, the Agricultural Research  Service, in November 2015; one run by the Agricultural Research Service  and APHIS scientists in May 2015; and one owned by APHIS in  December 2015. APHIS officials we interviewed said that they had  overlooked this amendment to the memorandum of understanding and  the program does not have a process in place to help ensure the  memorandum is followed. According to federal standards for internal  control, management should design control activities to achieve  objectives and respond to risk. Such internal control activities help  ensure that management directives such as those outlined in the  memorandum of understanding are carried out, and should be effective  and efficient in accomplishing the program\u2019s control objectives. One  example of a control activity would be establishing a process to ensure  APHIS and CDC comply with the memorandum to help ensure APHIS  does not inspect its own laboratories. Without establishing control  activities to help ensure that each component of the program carries out  its inspection responsibilities as outlined in the program\u2019s memorandum  of understanding, the Select Agent Program cannot have reasonable  assurance that its key mechanism to reduce conflicts of interest is  implemented.", "Although the Select Agent Program has taken steps to help reduce  conflicts of interest, it has generally done so in response to concerns  raised by others. The program itself has not formally assessed all  potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks. For example, the program did not  identify all of the areas noted above that may present conflicts of interest  and has not considered whether there may be additional areas of  concern. An expert in our meeting identified benefits of an independent,  third-party review of the Select Agent Program. For example, we and  other audit organizations are subject to an external peer review at least  once every 3 years that includes a review of documentation related to  independence, among other issues. According to senior program  officials we interviewed, the program as a whole has not engaged in  comprehensive risk management activities but they would be willing to do  so in the future.", "OMB\u2019s Circular A-123 requires federal agencies to integrate risk  management activities into their program management to help ensure  they are effectively managing risks that could affect the achievement of  agency objectives. According to the circular, once initial risks are  identified, it is important for agencies to regularly re-examine risks to  identify new risks or changes to existing risks. In addition, federal internal  control standards state that management should identify, analyze, and  respond to risks related to achieving defined objectives. Without  (1) regularly assessing the potential risks posed by the program\u2019s current  structure and the effectiveness of its mechanisms to address them, such  as by commissioning external reviews, and (2) taking actions as  necessary to ensure any identified risks are addressed, the program may  not be aware of or effectively mitigate impairments to its independence  that could affect its ability to achieve its objectives."], "subsections": []}, {"section_title": "Reviews May Not Target the Highest-Risk Activities", "paragraphs": ["Ability to perform reviews  The organization should have the access and  working knowledge necessary to review  compliance with requirements.", "According to our key elements of effective oversight, the organization  conducting oversight should have the ability to perform reviews, including  access to facilities and working knowledge necessary to review  compliance with requirements. The Select Agent Program performs  several types of reviews to ensure compliance with regulatory and  program requirements, including registration inspections for laboratories  seeking certification to use select agents, renewal inspections for  laboratories seeking to renew their registration, and verification  inspections. (See fig. 4 for additional information on these inspections).  The program has the ability to access any registered laboratory for  inspection, including without prior notification. Inspections typically  include review of registration and other documents\u2014such as biological  safety and security plans and inventory and personnel training records\u2014 as well as physical inspections of laboratory workspace and interviews  with laboratory representatives, among other inspection activities. During  inspections, Select Agent Program inspectors go through checklists that  are based on the select agent regulations, the Biosafety in Microbiological  and Biomedical Laboratories manual, and guidelines from NIH. The  inspections cover a variety of topics\u2014such as facility design and  operation, incident response, security, training, records management, and  biological safety\u2014and may last anywhere from 1 day with 1 or 2  inspectors for simpler laboratories, to a couple of weeks with up to 10  inspectors for larger and more complex laboratories. Most laboratory  representatives we spoke with said that the inspectors generally had the  working knowledge necessary to review compliance and that the  inspections and resulting reports were in-depth and generally fair and  accurate.", "However, the program may not target the highest-risk activities in its  inspections, in part because it has not formally assessed which activities  pose the highest risk to biological safety and security. According to  Select Agent Program officials, the program\u2019s policy is to conduct at least  one verification inspection of all registered laboratories\u2014regardless of  their past history or performance\u2014between each 3-year renewal  inspection, and the program may consider additional inspections at  laboratories that pose a higher risk. Specifically, the program scores  laboratories\u2019 risk based on a number of factors, such as past inspection  findings. However, a 2017 HHS OIG report found that the CDC  component of the Select Agent Program had evaluated some, but not all,  variables that could inform the risk a laboratory poses to health and safety  and concluded that CDC may wish to enhance its risk assessment by  considering additional factors, such as whether a laboratory has  previously reported losses or releases of a select agent, to better inform a  laboratory\u2019s level of risk over time. In addition, some experts at our  meeting and laboratory representatives we interviewed raised concerns  that the program\u2019s inspections do not target resources to the highest-risk  activities. For example, some experts said that the program has  historically not put enough emphasis on verifying that certain laboratory  procedures are safe and effective, which some said may have contributed  to high-profile incidents in 2014 and 2015 in which select agents were  inadvertently released from high-containment laboratories. However,  according to the Select Agent Program, the program does not validate or  verify laboratory procedures as it is the responsibility of the laboratories  themselves to do so. Further, many experts at our meeting and laboratory  representatives we interviewed raised concerns about the amount of time  inspectors spend assessing compliance with inventory controls (e.g., by  counting and examining vials containing select agents) and reviewing  inventory records during the inspection process, which takes time away  from inspecting other aspects of biological safety and security. Experts at  our meeting said that these activities do little to reduce the risk of theft of  select agents because samples could be clandestinely removed from  vials and replicated without being detected by the inventory controls  currently in place. Finally, other laboratory representatives told us that  activities to assess compliance with certain program requirements did  little to reduce risk and were unnecessarily burdensome, such as time- consuming reviews of records so that nicknames such as \u201cRob\u201d match up  to registered names, such as \u201cRobert.\u201d These inspection activities are  generally intended to address biological security concerns, such as theft;  however, recent high-profile incidents at registered laboratories have  been related to biological safety rather than security, and no thefts have  been reported since 2003, when notification requirements were first  implemented, according to program officials and documents.", "Experts at our meeting generally agreed that the Select Agent Program  has historically put more focus on security than on biological safety in its  reviews, given that the program was established in response to terrorist  incidents. For example, some experts said that the program has not  focused enough on ensuring the health and safety of researchers and  reducing the potential for their exposure to select agents, which some  noted are more likely to occur than thefts due to security issues. Many  experts questioned if the focus on security continues to be appropriate, in  light of recent biological safety incidents. According to senior APHIS  officials we interviewed, the Select Agent Program has been mandated to  focus on security and if they move the program\u2019s focus too far from  security to biological safety, they may lose the goals established when the  program was formed. They also noted that, according to the select agent  regulations, laboratories are responsible for developing and implementing  a written biological safety plan, and therefore a balance should be  maintained between the laboratories\u2019 execution of these plans and the  level of oversight from the Select Agent Program. In addition, these  officials stated that, during inspections, it is much easier for inspectors to  ensure laboratories are meeting security requirements than carrying out  their biological safety plans. For example, inspectors can easily check to  make sure laboratories have required security barriers in place, such as  locks on doors, but it is harder to measure whether laboratories are  carrying out laboratory procedures safely. They also noted that the  program does not want to be prescriptive with respect to biological safety  so that laboratories can implement those biological safety practices that  are most appropriate for their facility.", "A 2015 internal review of the CDC component of the Select Agent  Program acknowledged uncertainties and gaps in understanding how  best to balance laboratories\u2019 ability to conduct critical research using  select agents with the program\u2019s need to ensure the safety and security of  the public and laboratory workers. The resulting report recommended  that the CDC and APHIS components of the program work together to  analyze inspection and investigation data to identify trends and  associations between inspection findings and risk and to improve the  inspection process. According to program officials we interviewed, the  Select Agent Program has not yet addressed the recommendation  because the program does not currently have adequate tools to do so.  They noted that the program is transitioning to a new database that will  enhance their ability to analyze program data to identify such trends and  associations and thereby guide improvements to the inspection process.  However, the program did not provide a plan for when or how the  program will carry out these analyses or use the information to improve  the inspection process. Federal internal control standards state that  management should identify, analyze, and respond to risks related to  achieving defined objectives. In addition, the Project Management  Institute\u2019s Standard for Program Management calls for program  scheduling planning as a leading practice to ensure organizational  activities are completed. Without developing and implementing a plan to  identify which laboratory activities carry the highest biological safety and  security risks and to respond to those risks by aligning inspections and  other oversight efforts to target those activities, the Select Agent Program  will not have assurance that it is effectively balancing the potential safety  and security gains from its oversight efforts against the use of program  resources and the effect on laboratories\u2019 research."], "subsections": []}, {"section_title": "Select Agent Program Has Taken Steps to Hire Additional Expert Staff and Improve Technical Expertise, but Gaps in Workforce and Training Remain", "paragraphs": ["According to our key elements of effective oversight, the organization  conducting oversight should have sufficient staff with the expertise to  perform sound safety and security assessments. CDC and APHIS have  hired additional staff for the program and improved training to enhance  expertise, but workforce and training gaps remain.", "Technical expertise  The organization should have sufficient staff  with the expertise to perform sound safety and  security assessments.", "The CDC and APHIS components of the Select Agent Program increased  the number of full-time federal inspectors in 2016 and 2017, but have  faced challenges in hiring and retaining sufficient staff with the requisite  expertise to perform the necessary work in a timely manner. According to  agency reports, agency officials, and laboratory representatives, Select  Agent Program inspectors are subject to a large workload with an  intensive travel schedule. Inspectors perform a variety of tasks, including  conducting on-site inspections of laboratories, developing written reports  of inspection results, processing requests for amendments to laboratory  registrations, and communicating program requirements to laboratory  representatives.", "According to agency reports and inspectors we spoke with, inspectors  often travel 30 percent to 50 percent or more of their time in performing  their duties. This intensive workload and travel schedule has led to  delays in both the issuing of inspection reports and processing of  registration amendments. According to a 2017 CDC report, the time to  process CDC\u2019s inspection reports in 2016 ranged from 4 to 224 business  days, with about 27 percent of reports exceeding the Select Agent  Program\u2019s 30-day target for issuance. Workload issues were cited as  one of the key reasons for delays. A 2016 APHIS internal report also  identified delays in issuing inspection reports. According to the 2016  report, the time to process APHIS\u2019s inspection reports in 2014 averaged  36 days, but some reports were issued more than 100 days from the date  the inspection concluded. Similarly, the processing time for amendments  to registrations, which the program has not routinely tracked in the past,  generally varies from a couple of weeks or months to approve simpler  amendments (such as personnel changes) to a year or more to approve  major changes to facilities (such as adding new laboratory space),  according to laboratory representatives. Delays in issuing inspection  reports or processing amendments may hamper the implementation of  corrective measures to address safety issues identified in inspections or  impede laboratories\u2019 research on select agents, according to agency  reports and laboratory representatives. For example, representatives from  one laboratory told us that they lost grant funding because it took over a  year for the Select Agent Program to review and approve an amendment  to its registration to allow the proposed research to be conducted.", "Workload issues have also created problems with retention, according to  agency documents and program officials we interviewed, and have  sometimes resulted in staff from the APHIS component of the Select  Agent Program being assigned responsibilities outside their areas of  expertise. For example, at the time of our review, an APHIS security  specialist was given the additional responsibility of conducting reviews not  related to his area of expertise, such as inspecting ventilation systems,  which are critical to ensuring select agents are not released into the  environment. According to the 2016 internal APHIS report, the APHIS  component of the program has historically struggled with resource  deficiencies and has had to implement strategies to fulfill its legal  mandates and meet basic goals and objectives within its limited  resources.", "Both the CDC and APHIS components of the Select Agent Program have  individually taken steps to identify and address gaps in their workforce but  have not coordinated these actions to manage fragmentation across the  program. CDC developed a formal workforce plan for its component of  the Select Agent Program in 2016, identified and secured the necessary  resources to implement the plan, and is working to fill needed positions.  As of August 2017, the CDC component of the program had 7 vacancies  out of its 51 total inspector positions. APHIS also identified additional  needed positions, through development of its 5-year business plan, and  has used money from an APHIS contingency fund to fill them. APHIS  hired additional inspectors in 2016 and 2017 and now has 11 inspector  positions, up from 7 in 2015. APHIS also added several other new  positions in the first half of 2017, including a scientific officer, a security  manager, and a program analyst, among others.", "However, according to program officials we interviewed, even with the  additional recently hired inspectors, the program may not have adequate  staff to handle surges in workload. For example, if there is a need to  respond to critical incidents similar to those that occurred at CDC and  DOD in 2014 and 2015, the program may find it challenging to respond  to those incidents in addition to meeting its annual inspection schedule.  Moreover, according to the 2016 APHIS internal review and CDC and  APHIS officials we interviewed, the complexity of laboratories that work  with select agents, the select agent regulations, and inspections have  continued to increase, which may continue to contribute to workload  issues in the future. Program officials we interviewed said they are  hopeful that the new database the program is implementing will allow the  program to gain efficiencies in amendment processing and other areas,  which may reduce workload issues in the future.", "Training to Improve or Maintain Expertise  Most laboratory representatives we interviewed said that, in their  experience, Select Agent Program inspectors generally had appropriate  expertise to perform reviews. According to agency documents, the vast  majority of the program\u2019s inspectors have advanced degrees, including  many inspectors from CDC with doctoral degrees in microbiology or  related fields and many inspectors from APHIS with doctoral degrees in  veterinary medicine. However, CDC and APHIS internal reviews from  2015 and 2016, respectively, as well as some laboratory  representatives we interviewed, identified some shortcomings and  inconsistencies in inspectors\u2019 expertise and approach related to their  regulatory responsibilities. In particular, the reports found that inspectors  had inconsistent knowledge about the select agent regulations,  variabilities in skill level, and divergent approaches to inspections, both  within and across the two components of the Select Agent Program. In  addition, several laboratory representatives said that some inspectors  imposed requirements on laboratories that the inspectors considered to  be best practices rather than requirements of the select agent regulations  or items on inspection checklists.", "Both CDC and APHIS officials in the program identified gaps in the  training available to maintain their expertise. CDC inspectors we  interviewed told us they need additional training opportunities to keep up  with scientific changes in the field, such as advances in laboratory  techniques and equipment. APHIS officials we interviewed also identified  areas where they need additional training, including in facilities and  engineering aspects of laboratories; decontamination; and new laboratory  techniques, technologies, and equipment. In addition, some APHIS  inspectors we interviewed said that they sometimes do not have the  necessary knowledge to effectively perform all aspects of inspections  and, in some cases, depend on inspectors from CDC to address gaps in  expertise. Relying on CDC inspectors when APHIS is inspecting CDC- owned laboratories raises conflict of interest concerns. Furthermore,  according to inspectors from both CDC and APHIS, they are rarely able to  attend external conferences or other external training because of their  intensive workload and travel schedules and because they must compete  for training funds with CDC or APHIS scientists who are not assigned to  the program. Priority is given to those scientists presenting information at  conferences, which Select Agent Program staff rarely do because their  inspection work is not the type of information shared at conferences,  according to program officials.", "In response to these concerns, both the CDC and APHIS components of  the Select Agent Program have individually taken steps to improve  training for program staff, including inspectors, but have not always  coordinated steps to manage fragmentation across the program. For  example, in 2016, APHIS increased training opportunities for two  inspectors to better enable them to inspect BSL-4 laboratories. In  addition, CDC developed a training strategy that identified various areas  in its training program that needed improvement, including the need to  provide funding support for existing training activities and enhanced  professional development opportunities.", "According to CDC\u2019s training strategy, the complexity of the inspector  position and evolving science on select agents demand ongoing training  and professional development opportunities for staff. Among other  recommendations, the strategy identified the need for three additional full- time-equivalent positions in the training area\u2014in addition to the one the  CDC component of the program currently has; as of August 2017, CDC  was in the process of hiring one additional training specialist. APHIS  has not developed a similar formal training strategy, but during the course  of our review, APHIS sought and received approval and funds to hire a  full-time training coordinator, which it was in the process of filling as of  July 2017. Because APHIS has not had a training coordinator dedicated  to the Select Agent Program in the past, the APHIS component of the  program has generally relied on CDC to address training needs, although  APHIS does provide its own training to its inspectors and has coordinated  with CDC to develop some training, according to APHIS officials. A senior  APHIS official noted that having its own training coordinator moving  forward will help ensure APHIS\u2019s training needs are met, as animal  inspection needs have not explicitly been addressed in the past when  CDC has taken the lead on training."], "subsections": []}, {"section_title": "Security Concerns Have Limited the Program\u2019s Transparency", "paragraphs": ["Transparency  The organization should provide access to key  information, as applicable, to those most  affected by operations.", "According to our key elements of effective oversight, the organization  conducting oversight should provide access to key information, as  applicable, to those most affected by operations. Past White House and  other reports, as well as experts at our meeting, also emphasized the  importance of transparency, including the sharing of information on  incidents and lessons learned, in the Select Agent Program. However,  the program limits the information it shares about registered laboratories  and violations of the select agent regulations, mainly because of security  concerns. For example, the program does not disclose to the public or  other laboratories the locations of laboratories registered with the  program, the agents that laboratories work with, or details on violations of  select agent regulations.", "The Select Agent Program has recently increased the transparency of  high-level laboratory and program information it shares with the public  and registered laboratories, partly in response to recent federal reports.  For example, in 2016, the Select Agent Program issued its first annual  public report on the program. The report provided a variety of  information, such as background information on the program, statistics  about registered laboratories, and aggregated information on the potential  losses and releases reported to the program. In 2015, the program  developed a mechanism for laboratories to request interpretation of the  select agent regulations from the program and has since published  several regulatory interpretations on its website. In addition, starting in summer 2016, the Select Agent Program worked with a nongovernmental  organization, the American Biological Safety Association International,  to develop an online forum for registered laboratories to share information  with one another, which laboratory representatives told us has been very  helpful. The Select Agent Program also held a workshop for responsible  officials from registered laboratories in December 2016 to disseminate  program information; the workshop also provided the opportunity for  attendees to interact. Many laboratory representatives told us that this  was very helpful, and some noted that they had not had an opportunity to  communicate and share lessons learned with responsible officials from  other registered laboratories in the past.", "Even so, some experts, agency officials, and laboratory representatives  we interviewed said there needs to be more transparency to the public  about select agent research and incidents in order to increase public trust  concerning the activities conducted at high-containment laboratories. For  example, several laboratory representatives noted that the media has  incorrectly described their laboratories as conducting \u201cbioterror\u201d research,  when the research they conduct is to mitigate the consequences of a  bioterrorist attack\u2014for example, by developing vaccines and other  measures to help diagnose, prevent, or treat exposure to or infection with  select agents. On the other hand, many laboratory representatives told us  that the program was already sharing an appropriate amount of  information with the public. According to officials from HHS and USDA,  this issue has been examined and discussed extensively within their  departments, partly in response to recent federal reports. CDC officials  pointed out that laboratories themselves could share additional  information about their select agent research and any incidents. For  example, the U.S. Army Medical Research Institute for Infectious  Diseases and the National Biodefense Analysis and Countermeasures  Center, both at Fort Detrick in Maryland, and the Galveston National  Laboratory in Galveston, Texas, voluntarily share information about their  select agent research and incidents with the public via their websites.", "In addition, many laboratory representatives we interviewed said the  program needs to be more transparent for registered laboratories. In  particular, some said that it would be helpful for the program to share  more information among laboratories about select agent research and  incidents to enhance the sharing of lessons learned to improve biological  safety and security. According to experts at our meeting, it is important for  information, such as lessons learned from incidents, to be shared among  laboratories so that they can learn from one another\u2019s experiences to  improve their own operations. Some laboratory representatives also  said that it would be helpful for the Select Agent Program to provide  additional guidance in certain areas, such as regarding the use and  storage of toxins. Federal internal control standards state that  management should internally and externally communicate the necessary  quality information to achieve the entity\u2019s objectives. However, there is  no consensus about what additional information should be shared with  laboratories. Without determining what additional information about  laboratories\u2019 use of select agents, incidents, and violations of the select  agent regulations is appropriate for the Select Agent Program to share  with registered laboratories, the program may be missing opportunities to  provide key information that ultimately could help improve biological  safety and security."], "subsections": []}, {"section_title": "Program Has Authority to Enforce Compliance with Requirements and Is Working to Address Concerns about Clarity and Consistency of Enforcement Actions", "paragraphs": ["According to our key elements of effective oversight, the organization  conducting oversight should have clear and sufficient authority to require  entities to achieve compliance with requirements. The Select Agent  Program has the authority to and takes a range of enforcement actions  for violations of the select agent regulations and is working to address  concerns about the clarity and consistency of enforcement actions. When  the Select Agent Program identifies a possible violation of the select  agent regulations, the program may take several types of compliance or  enforcement actions, as follows:", "Administrative actions: The Select Agent Program can propose a  corrective action plan; suspend or revoke a registered laboratory\u2019s  registration; or deny a laboratory\u2019s application to possess, use, or  transfer select agents.", "Referrals to HHS OIG or APHIS\u2019s Investigative and Enforcement  Services: The Select Agent Program may refer violations to HHS OIG  or APHIS\u2019s Investigative and Enforcement Services, both of which can  levy civil money penalties, issue a Notice of Violation letter, or close  the case.", "Referral to the FBI: The Select Agent Program can refer possible  violations involving criminal negligence, criminal intent, or suspicious  activity or person to the FBI for further investigation. Criminal  enforcement may include imprisonment for up to 5 years, a fine, or  both.", "The Select Agent Program has taken enforcement actions against  laboratories but did not always do so consistently or according to any  available criteria. The Select Agent Program has taken a range of  enforcement actions for violations of the select agent regulations\u2014 including suspending or revoking registrations or proposing corrective  action plans\u2014as well as referring violations to HHS OIG or APHIS\u2019s  Investigative and Enforcement Services for further investigation.", "Following investigation, HHS OIG and APHIS\u2019s Investigative and  Enforcement Services have taken other enforcement actions, including  levying civil money penalties and issuing Notice of Violation letters.  However, we previously found in 2016 that the Select Agent Program did  not consistently refer laboratories to investigative entities for violations of  the select agent regulations or enforce regulations related to incidents  involving incomplete inactivation, and we found that this appears to be  true beyond incidents involving incomplete inactivation as well. For  example, from 2003 through 2016, the program suspended or revoked 10  laboratories\u2019 registrations in response to violations of the select agent  regulations, only 1 of which was a federal laboratory, and neither HHS  OIG nor APHIS\u2019s Investigative and Enforcement Services have levied a  civil money penalty against a federal laboratory. Moreover, we  previously found that the program referred various laboratories to HHS  OIG for incidents involving incomplete inactivation but did not refer HHS  laboratories for two incidents in 2014. We recommended in 2016 that the  Select Agent Program develop and implement consistent criteria and  documentation requirements for referring laboratories to investigative  entities and enforcing regulations.", "The Select Agent Program is taking steps to address such past concerns  about the need for greater consistency and clarity in enforcement actions  and implement our recommendation. In particular, in September 2017,  the program finalized a document that provides guidance on when to refer  laboratories for violations and options for enforcement. This document  categorizes regulatory departures along a spectrum of severity with  associated enforcement options, so that inspectors and laboratories have  a clear understanding of what to expect during and as a result of  inspections, regardless of which Select Agent Program component  conducts them. In addition, the CDC component of the program worked  with HHS OIG to develop criteria to guide referrals to OIG, which CDC  finalized and implemented in June 2017. APHIS is not developing a  similar document at this time because APHIS officials believe the  guidance on when to refer laboratories for violations and options for  enforcement actions described above provides sufficient guidance on  referrals for the Select Agent Program. The program\u2019s development of  guidance with criteria is a positive step and the program continues to  develop associated documentation requirements for referring violations to  investigative entities and enforcing regulations, according to a senior  program official."], "subsections": []}]}, {"section_title": "Select Agent Program Does Not Have Joint Strategic Planning Documents to Guide Oversight", "paragraphs": ["As of August 2017, the Select Agent Program does not have joint  strategic planning documents to guide its shared oversight efforts across  CDC and APHIS. For example, the program does not have a joint  mission statement to collectively define what the program seeks to  accomplish through its oversight. It also does not yet have a strategic  plan, although it is taking steps to develop one. Agencies can use  strategic plans to set goals and identify performance measures for  gauging progress towards those goals. Strategic plans can also outline  how agencies plan to collaborate with each other to help achieve goals  and objectives, as well as describe the strategies and resources required  to achieve the goals and objectives.", "Mission statements for the two  components of the Federal Select Agent  Program  The Centers for Disease Control and  Prevention\u2019s (CDC) Division of Select Agents  and Toxins reduces the risks for thefts, losses,  and releases of biological agents by ensuring  regulated laboratories or importers are safe  and select agents are secure through its  monitoring of facilities and enforcement of  regulations.  The Animal and Plant Health Inspection  Service\u2019s (APHIS) Agriculture Select Agent  Services is a team of Agriculture Health  Professionals dedicated to providing superior  customer service to safeguard the health of  domestic animals, plants, and their products  from agricultural biological agents and toxins.", "Each component of the program has conducted some strategic  planning\u2014each has an individual mission statement, some strategic  planning documents, and performance measures\u2014but the components  differ in what they seek to achieve and how they measure the  effectiveness of their efforts. For example, according to CDC officials, in  the past, the CDC component has developed yearly strategic goals, such  as to improve regulatory oversight through inspections and the biological  safety and security of laboratories. In contrast, APHIS developed a 5-year  business plan for its component of the Select Agent Program in 2014,  which it updated in July 2017. In addition, it identified a number of annual  goals in 2015, 2016, and 2017, such as developing additional BSL-4  training and filling vacancies in existing and new positions. CDC\u2019s and  APHIS\u2019s performance measures also differ. For example, CDC has a  range of performance measures, such as tracking the number of  laboratory-acquired infections and the timeliness of inspection reports,  whereas APHIS\u2019s performance measures address the number of thefts,  losses, and releases involving select agents and the processing of  amendments.", "The Select Agent Program also does not have a joint workforce plan that  collectively identifies workforce and training needs to ensure the program  as a whole has the appropriate workforce with sufficient expertise to carry  out its responsibilities and that resources are being leveraged  appropriately across the two components of the program. According to  our past work, strategic workforce planning is an essential tool to help  agencies align their workforces with their current and emerging missions  and develop long-term strategies for acquiring, developing, and retaining  staff. Moreover, the Select Agent Program has not collectively  determined its training needs. The APHIS component of the program has  generally relied on CDC to help meet its ongoing training needs, as  noted, but we found through our review of CDC\u2019s training strategy that it  did not specifically address APHIS\u2019s training needs. According to program  officials, joint training provided in the past has not always explicitly  addressed animal inspection needs, as noted. Program officials noted  that the program has taken some steps to coordinate training, such as  holding joint inspector training and webinars.", "Senior program officials told us that, even without joint strategic planning  documents, the CDC and APHIS components of the Select Agent  Program manage fragmentation by collaborating on many aspects of the  program, such as through maintaining frequent communication at the  director level. They also said that the program had not developed a joint  mission statement or strategic planning tools in the past because they  prioritized other efforts in recent years, including responding to incidents  that occurred in 2014 and 2015, addressing recommendations from  recent reports, and developing a new database for the Select Agent  Program. In addition, each component of the program has generally  focused on its own agency\u2019s needs when conducting workforce planning.  One senior CDC official said that the Select Agent Program had always  been in \u201creactive mode\u201d and noted that the program could improve its  oversight if it took a more strategic view.", "During the course of our review, senior program officials told us that they  were taking steps to develop a joint strategic plan for the Select Agent  Program and, in August 2017, the program began soliciting bids from  contractors for the plan\u2019s development. The statement of work for the  contract states that the contractor shall develop guiding principles for the  Select Agent Program along with a mission statement, strategic goals and  objectives, and performance measures, among other requirements.  However, the statement of work for the contract does not have any  requirements related to development of a joint workforce plan. We have  found in the past that agencies\u2019 strategic workforce planning should be  clearly linked to the agency\u2019s mission and long-term goals developed  during the strategic planning process. Developing a joint workforce plan  that assesses workforce and training needs for the program as a whole  would help the program to better manage fragmentation by improving  how it leverages resources to ensure all workforce and training needs are  met; this assessment should be done in conjunction with the development  of the strategic plan. Leveraging of resources is especially important  given fiscal constraints and the uneven level of resources across the two  components of the program."], "subsections": []}]}, {"section_title": "Selected Countries and Regulatory Sectors Employ Other Approaches to Promote Effective Oversight", "paragraphs": ["Selected countries and regulatory sectors employ approaches to promote  effective oversight that, in some cases, differ from those of the Select  Agent Program. For example, other countries and sectors have regulatory  bodies that are structurally independent from the entities they oversee,  take a risk-based approach to performing reviews, rely on scientists and  other laboratory personnel to have requisite technical expertise on the  pathogens and activities in their laboratories, share incident information  on their public websites, and have prosecutorial authority when incidents  occur."], "subsections": [{"section_title": "Structural Independence of Oversight Bodies", "paragraphs": ["Some countries and sectors we reviewed have regulatory bodies that are  structurally independent from the entities they oversee. For example,  Great Britain\u2019s Health and Safety Executive, whose mission is to protect  worker and public health and safety and who oversees laboratories that  work with pathogens, is an independent central government agency,  according to officials. It has a chief executive accountable to the UK  government\u2019s Department of Work and Pensions and a public-private  board composed of representatives from a range of industries, including  trade unions. Officials noted that this structure, an independent agency  with direct access to a departmental head, allows the Health and Safety  Executive to have control over defining its own budget and staffing needs.  According to officials from the Health and Safety Executive and laboratory  representatives we interviewed, one strength of this approach is that it  avoids potential organizational conflicts of interest because none of the  laboratories that the Health and Safety Executive oversees are part of the  same agency.", "Great Britain\u2019s Health and Safety Executive  The Health and Safety Executive is an  independent regulator in Great Britain whose  mission is to prevent death, injury, and illness  in the workplace. It was originally established  following a government review of the health  and safety system in the country in 1974.  One division within the Health and Safety  Executive\u2014the Chemical, Explosives and  Microbiological Hazards Division\u2014regulates  sectors that have the potential for low- probability, high-consequence incidents,  including work in high-containment  laboratories. It began overseeing laboratories  following a smallpox outbreak in 1978.  Great Britain reviewed the regulations for  animal pathogens and rewrote them to make  them more aligned with the human pathogen  and genetically modified organism frameworks  after a 2007 safety incident in which a Great  Britain laboratory inadvertently released foot  and mouth disease into the environment. The  Health and Safety Executive is responsible for  safety oversight of pathogens that present a  risk to human health as well as animal  pathogens.  A separate entity, the National Counter  Terrorism Security Office, is responsible for  security oversight of a subset of pathogens  that pose biological security concerns, similar  to the United States\u2019 select agents. The Health  and Safety Executive and the National Counter  Terrorism Security Office work closely together  in providing oversight, according to officials.  As of July 2017, Great Britain had a total of  434 registered high-containment laboratories  across the government, academic, and private  sectors.", "Some other regulatory sectors in the United States are also structurally  independent from regulated facilities as a mechanism to ensure  independence. For example, prior to the creation of NRC in 1974, the  U.S. Atomic Energy Commission was responsible for both promotion and  oversight of the nuclear industry. The Energy Reorganization Act of 1974  established NRC as a separate, independent entity. According to a  relevant Senate committee report, this was a response to growing  criticism that there was a basic conflict between the U.S. Atomic Energy  Commission\u2019s regulation of the nuclear power industry and its  development and promotion of new technology for the industry.  Independence is one of NRC\u2019s \u201cPrinciples of Good Regulation\u201d that the  commission seeks to follow in carrying out its regulatory activities.  NRC\u2019s Office of Nuclear Reactor Regulation uses performance metrics  associated with these principles\u2014including measures of the objectivity  and independence of its inspectors\u2014to annually evaluate the  effectiveness of its Reactor Oversight Process in meeting its pre- established goals and intended outcomes. This office reports the results  of this analysis to NRC in an annual report on the self-assessment of the  Reactor Oversight Process."], "subsections": []}, {"section_title": "Risk-Based Approaches to Performing Reviews", "paragraphs": ["Other countries and sectors we reviewed have adopted risk-based  approaches to reviewing compliance with regulatory requirements. In  particular, regulators in some countries, including Great Britain and  Canada, apply a risk-based approach to target their reviews to  laboratories with a documented history of performance issues or those  conducting higher-risk activities. Great Britain\u2019s Health and Safety  Executive prioritizes which laboratories to inspect during the year by  assessing the level of risk a specific laboratory or program may have on  worker or public health and safety or the environment, according to  officials. This assessment takes into consideration factors such as which  pathogens pose a greater risk, how these pathogens are used in the  laboratory, and the potential consequences of an incident. For example,  officials noted that a laboratory complex that works with many pathogens  that may pose a significant risk to the country\u2014such as animal pathogens  that affect livestock and the food supply\u2014may be subject to more  oversight and additional inspections from regulators, based on the  associated risk assessment, than a diagnostic laboratory that may  destroy samples after testing.", "The Public Health Agency of Canada is  responsible for promoting and protecting the  health of Canadians through various public  health initiatives. It was established in 2004,  partly in response to an outbreak of severe  acute respiratory syndrome (SARS) in 2003,  when it became evident that Canada had no  legal requirements for domestic laboratories to  report information such as whether they were  working with SARS samples, and therefore  officials could not determine the potential  scope of the problem.   The agency sits under Canada\u2019s Minister of  Health and its Centre for Biosecurity is  responsible for administering and enforcing  Canada\u2019s Human Pathogens and Toxins Act to  oversee the safe and secure handling of  human pathogens and toxins. The act came  into full force in December 2015, following an  extensive consultation process with  stakeholders.   The Centre for Biosecurity has authority to  license and oversee laboratory activities  involving human pathogens and toxins, some  animal pathogens, and a subset of human  pathogens that have additional biological  security concerns.   Oversight responsibility for the other animal  pathogens rests with the Canadian Food  Inspection Agency.   As of June 2017, Canada had a total of 63  licensed high-containment laboratories across  the government, academic, and private  sectors.", "Similarly, officials from the Public Health Agency of Canada\u2019s Centre for  Biosecurity, whose mission is to protect the health and safety of the public  against the risks posed by human pathogens and toxins, stated that their  division for the oversight of laboratories that work with pathogens also  has a risk-based licensing and inspection scheme. Under this scheme,  the stringency of licensing and inspection requirements largely depends  on the pathogen\u2019s risk level. In addition, the Public Health Agency of  Canada places different requirements on activities carried out in  laboratories depending on their sector (e.g., public health or research)  because it determined that activities in certain sectors present a higher  risk than others, with the research sector having the highest associated  risks. As such, the Public Health Agency of Canada places additional  requirements on research scientists conducting certain activities with  pathogens than it does with respect to personnel conducting activities in  other types of laboratories. For example, the agency requires research  scientists to develop and submit documentation that demonstrates a  reasonable plan to manage risk and promote compliance with  requirements. Officials noted that this approach helps the agency to  understand where best to focus its efforts to achieve the desired risk  mitigation results. According to officials from both Great Britain and  Canada, this risk-based approach helps the oversight bodies in both  countries focus their limited resources on laboratories they have identified  as having the highest risks.", "In addition, Great Britain\u2019s Health and Safety Executive and the Public  Health Agency of Canada apply a risk-based approach in determining the  focus of their inspections. For example, according to agency officials in  Great Britain and Canada, because they have not found stringent  inventory requirements to be effective in reducing biological safety risks in  the laboratory, neither country places as much focus, time, or resources  on inventory management as the Select Agent Program does. For  example, neither country spends time during every inspection counting  and examining vials and comparing them to inventory logs, according to  officials. Instead, Great Britain\u2019s Health and Safety Executive\u2019s approach  is to sample laboratories\u2019 biological safety measures and assess whether  they have mechanisms in place to mitigate the consequences of incidents  should they occur. Similarly, in Canada, the Canadian Biosafety Standard  requires that laboratories working with pathogens in high-containment  have an inventory tracking system that is based on the risks internally  identified by the laboratory, in order to allow for timely identification of  missing vials if necessary.", "In addition to having less prescriptive inventory requirements than the  Select Agent Program, both Great Britain\u2019s Health and Safety Executive  and the Public Health Agency of Canada generally focus their  oversight on (1) biological safety, and (2) regulation of all potentially  hazardous pathogens in laboratories. In contrast, the Select Agent  Program originated from security-related concerns and regulates only  those pathogens identified on the U.S. select agent list and no other  pathogens, such as West Nile virus, that may be handled in high- containment but are not select agents. In both Great Britain and Canada,  specific biological safety incidents provided the impetus for establishing  oversight for laboratories that work with pathogens and, as a result, their  regulatory agencies generally focus on biological safety. Both Great  Britain and Canada have additional oversight requirements, such as  security clearances for personnel, for a limited number of pathogens for  which they have heightened security concerns, similar to the security  requirements for working with select agents in the U.S. For example, in  Great Britain, the Health and Safety Executive focuses on only biological  safety in its oversight of high-containment laboratories and works with the  National Counter Terrorism Security Office for oversight of pathogens  with biological security concerns. In addition, to ensure compliance with  biological safety regulations, officials we interviewed in Great Britain and  Canada told us it was beneficial for their programs to have oversight over  all hazardous pathogens that present biological safety risks to laboratory  workers and the public, regardless of their containment level and their  potential to pose biological security concerns. For example, the Public  Health Agency of Canada regulates any pathogens with characteristics  that require handling in laboratories equivalent to U.S. BSL-2, -3, or -4,  which currently covers thousands of pathogens, according to officials, as  opposed to the 66 agents on the U.S.\u2019s select agent list.", "NRC also considers risk in its oversight of nuclear reactors, fuel cycle  facilities, and radioactive materials. In particular, for facilities that work  with nuclear materials, NRC conducts inspections of a fraction of these  facilities each year because, according to officials, there is a lower risk  associated with nuclear materials than there is with nuclear power plants.  There are no resident inspectors at these facilities; instead, the frequency  of inspections for nuclear materials is based on the risk associated with,  among other things, the specific material and each facility\u2019s past  performance. Sites with past issues will receive more attention, while  sites with a history of good performance will generally be subject to the  minimum frequency of inspections applicable to that type of site. In  contrast, as part of its Reactor Oversight Process, NRC places at least  two resident inspectors at each of the country\u2019s commercial nuclear  power plants because they pose a higher risk. For nuclear power plants,  potential incidents can have high-consequences and far-reaching effects,  such as the effects of the 2011 nuclear accident at the Fukushima Daiichi  reactor in Japan. To ensure that each nuclear power plant is complying  with federal safety requirements, these inspectors oversee a variety of  activities on a daily basis, including by visiting control rooms, reviewing  logbooks, performing visual assessments, and observing tests and  repairs."], "subsections": []}, {"section_title": "Drawing on Technical Expertise of Advisory Panels and Laboratories", "paragraphs": ["Other countries have adopted various approaches to help ensure they  have access to individuals with the appropriate expertise to perform  sound safety and security assessments. According to officials in Great  Britain, regulators at the Health and Safety Executive have access to  external expert advisory committees to advise on issues related to new or  emerging pathogens, diseases, or other scientific issues that inspectors  may encounter during inspections or when developing policy. Health and  Safety Executive officials noted that they generally go to the committees  with questions of science and not regulation, as the inspectors are  expected to be experts in biological safety and Great Britain regulations.  Both France and Germany also have expert advisory committees that  regulators can consult on scientific and technical issues, according to  officials from these countries.", "Merging Oversight of Human and Animal  Pathogens in Great Britain and Canada  Great Britain merged the inspection and  oversight responsibilities for human and  animal pathogens into one oversight body, the  Health and Safety Executive, in 2008,  following the 2007 accidental release of foot  and mouth disease into the environment.  Oversight of animal pathogens was originally  under the United Kingdom\u2019s Department for  Environment, Food, and Rural Affairs  (DEFRA). When oversight of animal  pathogens was first transferred to the Health  and Safety Executive, DEFRA initially retained  the licensing of sites with animal pathogens. In  2015, DEFRA transferred all oversight  responsibilities, including licensing, to the  Health and Safety Executive, but retained  responsibilities for policy matters. According to  agency officials and laboratory representatives  in Great Britain, this change had a number of  benefits, including creating a single agency  contact for laboratories that work with  regulated pathogens, strengthening the  oversight of animal pathogens, and  improving  the logistics and ease of the system.   Similarly, in 2013, Canada transferred the  oversight responsibility for a subset of animal  pathogens from the Canadian Food Inspection  Agency (CFIA) to the Public Health Agency of  Canada to strengthen and harmonize its  biological safety oversight framework and  reduce the regulatory and administrative  burden on researchers and laboratory officials.  CFIA continues to issue permits for other  animal pathogens, such as emerging animal  diseases, which, according to officials, only  make up a small number of pathogens.", "Officials from the Public Health Agency of Canada noted that they  address the issue of technical expertise in part by placing substantial  responsibility on the scientists and other personnel in each laboratory to  understand and address the risks associated with their specific work,  such as the equipment and procedures used in that laboratory. Officials  from the Public Health Agency of Canada noted that personnel working in  licensed laboratories are the ones most at risk if a safety lapse or other  incident occurs, so the agency expects the responsible individuals at the  laboratories to reinforce the requirements and help ensure everyone  works safely and is in compliance with requirements. Under this  approach, the main responsibility is with the laboratory officials to  understand and manage the risks inherent in the work being performed at  their facility, while the role of the inspector is to verify that they have taken  appropriate steps to identify and address the risks.", "According to officials in the Netherlands, regulators place responsibility  for laboratory biological safety on biological safety officers at each of the  laboratories by accrediting them for the oversight of biological safety.  Regulators conduct the accreditation process, which includes a review of  personnel credentials, before individuals can be accredited. A 2-day  course on the laws\u2014such as details of biological safety requirements,  case studies, review of transportation rules, and incident examples\u2014is  offered to each new accredited biological safety officer. Biological safety  officers usually first seek accreditation for the equivalent of U.S. BSL-1 or  -2 laboratories and must request additional reviews to receive  accreditation for higher levels after acquiring the requisite knowledge and  applied laboratory experience for the levels for which they are requesting  accreditation. Officials from the Netherlands noted that it is important to  have biological safety officers in laboratories as these individuals are  versed in biological safety and can convey to researchers what they  should be doing to ensure safety, as the regulator cannot be on-site every  day."], "subsections": []}, {"section_title": "Transparency through Sharing Information on Agency Websites and Other Means", "paragraphs": ["Some countries and regulatory sectors have approaches that provide  transparency to entities and the public in a number of ways. For example,  in Great Britain, the Health and Safety Executive shares information on  licensing, enforcement actions, and prosecutions, among other  information, through its website and the public register. Health and Safety  Executive officials noted that the agency also issues information to  licensed laboratories when there are safety alerts, lessons learned, or key  decisions that it feels are pertinent to the regulated community. However,  officials limit the sharing of any information that is sensitive or has  security concerns, such as the names of individuals cleared to work with  pathogens, which poses additional security concerns. Regulators in the  Netherlands stated that they are also authorized to share a great deal of  information related to some regulated pathogens, such as laboratory risk  assessments, with the public and individuals who request the information.  Similarly, in Switzerland, the public can request some information about  laboratory licenses and the types of activities that occur at laboratories,  but regulators do not share information on laboratory exposures because,  according to a Swiss official, the public is not generally affected by them  so the officials do not feel a need to share such information.", "NRC shares safety-related information on nuclear facilities with the public,  including by posting the locations of nuclear facilities, inspection reports,  and policies on its website. According to NRC officials, NRC believes  transparency is important because, otherwise, secrecy can lead to  distrust and negatively affect NRC\u2019s relationship with industry and the  public. In addition, NRC has written policies available on its website that  detail what information it shares with registered facilities and the public,  as well as guidance for NRC staff on what they can and cannot share.", "NRC officials stated that NRC strives for a balance between openness  and security and that, because the nuclear sector\u2019s needs and the  public\u2019s concerns are constantly changing, it is important to reassess  policies as the necessity arises. For example, after the September 11,  2001, terrorist attacks, NRC decided to remove some information from  the public sphere in response to concerns that such information could be  misused and exploited for future terrorist attacks.", "The Federal Aviation Administration also shares information with the  public through its Aviation Safety Information Analysis and Sharing  System, which collects information from multiple databases, including  voluntarily reported near-miss data and accident information. This system  is intended to promote an open exchange of safety information to  continuously improve aviation safety, and it allows users to perform  integrated queries, search safety data, and review incident investigations  conducted by the National Transportation Safety Board. For example,  analysts from the Federal Aviation Administration analyzed data from the  Aviation Safety Information Analysis and Sharing System to determine  which weather-related factors posed the biggest threats to pilots and  aircraft. In addition, the Federal Aviation Administration provides public  access to a library of lessons learned from historically significant, policy- shaping accidents to share key knowledge across the industry to improve  aviation safety through the application of such lessons and to understand  how the current safety regime has been influenced by past accidents. For  example, the library discusses how two similar high-terrain crashes in the  1990s led to a requirement in 2000 to install a warning system in aircraft  to reduce the incidence of such terrain accidents."], "subsections": []}, {"section_title": "Mechanisms of Enforcement and Nonpunitive Reporting Systems", "paragraphs": ["Countries and regulatory sectors we reviewed employ a range of  mechanisms to take enforcement actions against entities or to encourage  incident reporting. For example, Great Britain, Canada, France, and  Switzerland all have the ability to pursue criminal prosecution in response  to serious violations of their laws or regulations governing high- containment laboratories, in addition to the ability to suspend work or shut  down laboratories. In Canada, penalties for the most serious violations  can include up to 10 years in prison. Officials from the Public Health  Agency of Canada and representatives from laboratories we spoke with  noted that laboratory personnel are still encouraged to report incidents in  laboratories, such as laboratory-acquired infections, regardless of the  potentially heavy penalties, because certain information that is voluntarily  provided during the course of an incident cannot then be used in any  subsequent criminal proceedings against that individual. In addition,  experts from our meeting noted that the nonpunitive nature of airline  reporting systems also encourages people to report incidents, which in  turn provides valuable information to regulators, pilots, airlines, and the  public that has been used to improve airline safety, as noted."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In their joint management of the Select Agent Program, CDC and APHIS  share a critical role in ensuring that important research on select agents  can be conducted in high-containment laboratories in a safe and secure  manner. This role is especially important given the significant risks that  pathogens handled in high-containment laboratories may pose to  laboratory workers and the public. The Select Agent Program has made a  number of improvements over the past few years, such as hiring  additional staff and sharing more information with the public and  registered laboratories. Nevertheless, the program does not fully meet all  key elements of effective oversight. For example, the program is not  independent in that it is not structurally distinct and separate from all of  the laboratories it oversees. Both CDC and APHIS have individually made  structural changes and put mechanisms in place to reduce conflicts of  interest, but the APHIS component of the program has not documented  the reporting process it developed to reduce conflicts of interest. Until  APHIS formally documents the reporting structure for its component of  the program from the APHIS director of the program to the administrator  of APHIS, it will continue to appear to have conflicts of interest in its  oversight of APHIS-owned laboratories. Moreover, APHIS has, on at least  three occasions, inspected its own or other USDA laboratories, which is  not in keeping with the memorandum of understanding it signed with the  CDC component of the program. Without establishing control activities to  help ensure that each component of the program carries out its inspection  responsibilities as outlined in the program\u2019s memorandum of  understanding, the Select Agent Program cannot have reasonable  assurance that its key mechanism to reduce conflicts of interest is  implemented.", "In addition, the program has not formally assessed all potential risks  posed by its current structure and the effectiveness of its mechanisms to  address those risks. For example, the program did not identify some  areas that may present conflicts of interest, such as APHIS carrying out  inspections of its own laboratories, and has not considered whether there  may be additional areas of concern. Without (1) regularly assessing the  potential risks posed by the program\u2019s current structure and the  effectiveness of its mechanisms to address them, such as by  commissioning external reviews, and (2) taking actions as necessary to  ensure any identified risks are addressed, the program may not be aware  of or effectively mitigate impairments to its independence that could affect  its ability to achieve its objectives.", "Further, regarding the ability to perform reviews, the program may not be  targeting the highest-risk laboratory activities in its inspections and other  oversight efforts. Without developing and implementing a plan to identify  which laboratory activities carry the highest biological safety and security  risks and to respond to those risks by aligning inspections and other  oversight efforts to target those activities, the program will not have  assurance that it is effectively balancing the potential safety and security  gains from its oversight efforts against the use of program resources and  the effect on laboratories\u2019 research. Moreover, the program is not fully  transparent because it shares only limited information about lessons  learned and other matters with registered laboratories, and there is no  consensus about what additional information should be shared. Without  determining what additional information about laboratories\u2019 use of select  agents, incidents, and violations of the select agent regulations is  appropriate for the Select Agent Program to share with registered  laboratories, the program may be missing opportunities to provide key  information that ultimately could help improve biological safety and  security. In addition, the program has not had clarity and consistency in  its enforcement actions and is taking steps to address our past  recommendation.", "Further, regarding technical expertise, the two components of the Select  Agent Program have individually hired additional staff for the program and  improved training to enhance expertise, but workforce and training gaps  remain. Although the program has begun to take steps towards  development of a joint strategic plan to collectively guide oversight efforts,  it does not have a joint workforce plan. Developing a joint workforce plan  that assesses workforce and training needs for the program as a whole  would help the program to better manage fragmentation by improving  how it leverages resources to ensure all workforce and training needs are  met; this assessment should be done in conjunction with the development  of the strategic plan. Leveraging of resources is especially important  given fiscal constraints and the uneven level of resources across the two  components of the program."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making 11 recommendations to the agencies that manage the  Select Agent Program, including 6 to APHIS and 5 to CDC:  To improve independence, the Administrator of APHIS should formally  document the reporting structure for the APHIS component of the Select  Agent Program from the APHIS director of the program to the  Administrator of APHIS. (Recommendation 1)", "To improve independence, the CDC director of the Select Agent Program  should work with APHIS to establish control activities to help ensure that  each component of the program carries out its inspection responsibilities  as outlined in the program\u2019s memorandum of understanding.  (Recommendation 2)", "To improve independence, the APHIS director of the Select Agent  Program should work with CDC to establish control activities to help  ensure that each component of the program carries out its inspection  responsibilities as outlined in the program\u2019s memorandum of  understanding. (Recommendation 3)", "To improve independence, the CDC director of the Select Agent Program  should regularly assess the potential risks posed by the program\u2019s  structure and the effectiveness of its mechanisms to address those risks,  such as by commissioning external reviews, and take actions as  necessary to ensure that any identified risks are addressed so that  impairments to independence do not affect its ability to achieve its  objectives. (Recommendation 4)", "To improve independence, the APHIS director of the Select Agent  Program should regularly assess the potential risks posed by the  program\u2019s structure and the effectiveness of its mechanisms to address  those risks, such as by commissioning external reviews, and take actions  as necessary to ensure any identified risks are addressed so that  impairments to independence do not affect its ability to achieve its  objectives. (Recommendation 5)", "To improve the ability to perform reviews, the CDC director of the Select  Agent Program should work with APHIS to develop and implement a plan  to identify which laboratory activities carry the highest biological safety  and security risks and to respond to those risks by aligning inspections  and other oversight efforts to target those activities. (Recommendation 6)", "To improve the ability to perform reviews, the APHIS director of the Select  Agent Program should work with CDC to develop and implement a plan to  identify which laboratory activities carry the highest biological safety and  security risks and to respond to those risks by aligning inspections and  other oversight efforts to target those activities. (Recommendation 7)", "To improve transparency, the CDC director of the Select Agent Program  should work with APHIS to determine what additional information about  laboratories\u2019 use of select agents, incidents, and violations of the select  agent regulations is appropriate for the program to share with registered  laboratories. (Recommendation 8)", "To improve transparency, the APHIS director of the Select Agent  Program should work with CDC to determine what additional information  about laboratories\u2019 use of select agents, incidents, and violations of the  select agent regulations is appropriate for the program to share with  registered laboratories. (Recommendation 9)", "To improve technical expertise and overcome fragmentation, the CDC  director of the Select Agent Program should work with APHIS to develop  a joint workforce plan that assesses workforce and training needs for the  program as a whole. This assessment should be done in conjunction with  the development of the strategic plan. (Recommendation 10)", "To improve technical expertise and overcome fragmentation, the APHIS  director of the Select Agent Program should work with CDC to develop a  joint workforce plan that assesses workforce and training needs for the  program as a whole. This assessment should be done in conjunction with  the development of the strategic plan. (Recommendation 11)"], "subsections": []}, {"section_title": "Agency Comments and Third-Party Views", "paragraphs": ["We provided a draft of this report for review and comment to DOD, HHS,  the Department of Homeland Security, NRC, the Department of  Transportation, and USDA. We also provided copies to officials from  Great Britain, Canada, and the Netherlands, as well as experts who  participated in our expert meeting at the National Academy of Sciences.", "HHS and USDA\u2014the agencies to whose components our  recommendations are directed\u2014both provided written comments  agreeing with all of our recommendations. These comments are reprinted  in appendixes III and IV, respectively. In their comments, HHS and USDA  provided additional information about steps they are taking, or planning to  take, to improve their oversight of select agents and to address our  recommendations. For example, HHS and USDA stated that the Select  Agent Program will explore options to improve independence, including  reexamining previous reviews and assessing the need for additional  reviews to ensure potential risks posed by the program\u2019s structure are  adequately assessed and addressed. In addition, to improve the ability to  perform reviews, HHS and USDA stated that the Select Agent Program is  transitioning to a new secure information system that will allow the  program to develop analytical tools and procedures to analyze risk- related data to improve the inspection process. Further, to enhance  transparency, HHS and USDA said the program is exploring ways to  disseminate information regarding common deficiencies identified during  inspections. Finally, to improve technical expertise and overcome  fragmentation, HHS and USDA said that the program has initiated  contract support for development of a joint strategic plan that will include  the assessment of workforce and training needs.", "HHS and USDA also provided technical comments, as did the  Department of Homeland Security; officials from Great Britain, Canada,  and the Netherlands; and a number of experts who participated in our  expert meeting at the National Academy of Sciences. We incorporated  these comments as appropriate. DOD, NRC, and the Department of  Transportation did not comment on this report.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Secretaries of Agriculture, Defense,  Health and Human Services, Homeland Security, and Transportation; the  Chairman of NRC; the Director of CDC; the Administrator of APHIS; and  other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Timothy M. Persons, Chief Scientist, at (202) 512-6412 or  personst@gao.gov or John Neumann, Director, Natural Resources and  Environment, at (202) 512-3841 or neumannj@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."], "subsections": []}]}, {"section_title": "Appendix I: Key Elements of Effective Oversight", "paragraphs": ["This appendix describes the steps we took to confirm the applicability of  five elements of effective oversight we have used in the past for our  evaluation of the Federal Select Agent Program (Select Agent Program).  We have used these key elements in the past for assessing the  effectiveness of oversight in other areas where low probability adverse  events can have significant and far-reaching effects. These elements are  as follows:  Independence: The organization conducting oversight should be  structurally distinct and separate from the entities it oversees.", "Ability to perform reviews: The organization should have the access  and working knowledge necessary to review compliance with  requirements.", "Technical expertise: The organization should have sufficient staff  with the expertise to perform sound safety and security assessments.", "Transparency: The organization should provide access to key  information, as applicable, to those most affected by operations.", "Enforcement authority: The organization should have clear and  sufficient authority to require that entities achieve compliance with  requirements.", "We took several steps to confirm the applicability of these elements for  our examination of the Select Agent Program. First, we discussed the  applicability of the criteria with senior officials from both components of  the Select Agent Program, within the Centers for Disease Control and  Prevention (CDC) and the Animal and Plant Health Inspection Service  (APHIS). Second, we discussed the elements with representatives from  the American Society of Microbiology and American Biological Safety  Association International, which were selected because of their focus on  microbiology and biological safety, respectively. Finally, we discussed  the elements with experts during our National Academy of Sciences  meeting (see app. II for information on this meeting). The officials,  representatives, and experts generally agreed that the five elements were  appropriate for our examination of the Select Agent Program. We  compared information from federal documents about the Select Agent  Program\u2019s oversight, interviews with laboratory representatives and  agency officials, and our expert meeting against the five elements of  effective oversight."], "subsections": []}, {"section_title": "Appendix II: List of Experts and Selection Methodology", "paragraphs": [], "subsections": [{"section_title": "\u2022 Bob Buchanan, Ph.D., Professor and Director of Center for Food Safety and", "paragraphs": ["Security Systems, University of Maryland", "Andrew Cottam, Ph.D., Head of the Microbiology and Biotechnology Unit, Health  and Safety Executive, United Kingdom  John Eakin, Principal Investigator, Air Data Research", "David Franz, DVM and Ph.D., Former Commander, United States Army Medical  Research Institute for Infectious Diseases", "Gigi Kwik Gronvall, Ph.D., Senior Associate, Johns Hopkins Center for Health", "Marianne Heisz, Ph.D., Director, Office of Biosafety Programs and Planning,  Public Health Agency of Canada", "Ruthanne Huising, Ph.D., Associate Professor, McGill University", "Gavin Huntley-Fenner, Ph.D., Principal Consultant, Huntley-Fenner Advisors  Joseph Kanabrocki, Ph.D. and NRCM(SM), Associate Vice-President for  Research Safety, Professor of Microbiology, University of Chicago", "Paul Keim, Ph.D., Regents Professor and Cowden Chair, Northern Arizona  James LeDuc, Ph.D., Director, Galveston National Laboratory, University of  Texas Medical Branch", "Carol Linden, Ph.D., Director, Office of Regulatory Science and Innovation, Food", "Allison MacFarlane, Ph.D., Professor and Director, Center for International  Science and Technology Policy, George Washington University", "Brian O\u2019Shea, Ph.D., Senior Biological Safety Officer, Battelle Memorial Institute", "Karlene Roberts, Ph.D., Professor Emeritus, Haas School of Business, University  Jonathan Rosen, Principal Industrial Hygiene Safety and Health Consultant, AJ  Rosen and Associates, LLC  The comments of these experts generally represented the views of the experts  themselves and not the agency, university, or company with which they are affiliated.", "The meeting with these experts was held at NAS in January 2017. To identify  experts to participate in the meeting, we worked iteratively with NAS staff to identify  and review biographical information and relevant qualifications of experts, as well as  factors such as representation from academia, industry, and federal government and  expertise in a range of areas. The Board on Life Sciences of NAS solicited  nominations for the expert panel from its extensive contacts in laboratory safety,  biological security, and other regulatory sectors, such as occupational safety and  health, airline safety, food safety, and chemical safety. These contacts included  current and former committee members, current and former members of the Board  on Life Sciences, and select members of NAS. NAS received responses from  approximately 45 nominees. From this initial list, NAS selected experts based on  their knowledge and expertise in the above-mentioned areas as well as their ability to  attend the meeting on the chosen dates and obtained our approval of its selections.  In order to facilitate discussion among participants, NAS did not include any federal  employees or contractors of the Select Agent Program. The final list of 18 experts  was then evaluated for any conflicts of interest. A conflict of interest was considered  to be any current or financial or other interest that might conflict with the service of an  individual because it (1) could impair objectivity and (2) could create an unfair  competitive advantage for any person or organization. The 18 experts were  determined to be free of conflicts of interest, and the group as a whole was judged to  have no inappropriate biases.", "We developed the session topics for the 2-day meeting based on our researchable  objectives and issues that we identified in our audit work, including our analysis of  agency documents and interviews with agency officials and representatives from  registered laboratories. The meeting was recorded and transcribed to ensure that we  accurately captured the experts\u2019 statements, and we reviewed and analyzed the  transcripts as a source of evidence. Although the expert meeting was not designed  to reach formal consensus on the issues, a number of themes emerged from the  group\u2019s discussion to which there was general agreement."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individuals named above, Mary Denigan-Macauley  (Assistant Director), Sushil Sharma (Assistant Director), Amy Bowser,  William Carrigg, Marcia Crosse, Caitlin Dardenne, Shana Deitch, Karen  Doran, Jack Melling, Cynthia Norris, Lesley Rinner, Sara Sullivan, Walter  Vance, and Elizabeth Wood made key contributions to this report."], "subsections": []}]}], "fastfact": ["Laboratories conduct research on hazardous pathogens\u2014such as Ebola virus or anthrax bacteria\u2014in more than 200 labs in the United States. Safety lapses continue to occur at some of these labs, raising concerns about whether oversight is effective.", "We looked at the Federal Select Agent Program, which is responsible for overseeing these labs, and found room for improvement. For example, the program allows some agencies to oversee their own labs, which could potentially lead to conflicts of interest. We recommended 11 actions to improve oversight."]}
{"id": "GAO-18-253", "url": "https://www.gao.gov/products/GAO-18-253", "title": "Military Readiness: Clear Policy and Reliable Data Would Help DOD Better Manage Service Members' Time Away from Home", "published_date": "2018-04-25T00:00:00", "released_date": "2018-04-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 1999, Congress required DOD to monitor the time that individual service members spend away from home and set a threshold to limit excessive time away. At the time, the threshold was no more than 220 days served away from home in a 365-day period. In the interest of national security, in 2001 DOD exercised a provision in the law and waived the requirement to limit time away for service members. Recently, DOD leaders have stated that the continued high pace of military operations have limited their ability to rebuild readiness.", "Senate Report 114-255 includes a provision for GAO to review the root causes of degraded readiness, including reviewing DOD's management of perstempo. This report assesses the extent to which DOD, the services, and SOCOM have (1) policies with specific and measurable thresholds on perstempo and (2) reliable data to monitor perstempo.", "GAO analyzed DOD, service, and SOCOM perstempo policies and analyzed DOD-wide perstempo data for fiscal years 2012-2016."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD), military service, and U.S. Special Operations Command (SOCOM) policies vary in identifying specific and measurable thresholds on the total time individual service members can be away from home, known as personnel tempo or \u201cperstempo.\u201d DOD's policy issued in 2013 states that service members should not be deployed for longer than they are at home. However, the policy does not set thresholds for perstempo, which includes time away from home for exercises and training in addition to deployment. Service members are sometimes away from home for long periods for training, exercises, or other activities. For example, Air Force officials told GAO that F-16 pilots participate in multiple exercises every year that require them to spend significant time away from home. The Navy and SOCOM set specific and measurable perstempo thresholds in policy in 2014 and 2016, respectively. However, the other services either are not enforcing or have not established specific and measurable perstempo thresholds in their policies. DOD has maintained the waiver of statutory perstempo thresholds since 2001, and officials have cited the effect of the high pace of operations and training on service members; however, DOD has not taken action to focus attention on the management of perstempo thresholds within the services and department-wide. Unless DOD ensures that perstempo thresholds are established and followed while statutory thresholds are waived, DOD will be unable to judge whether service members are spending too much total time away from home and, if so, whether this has resulted in any associated effects on military readiness.", "DOD does not have reliable data to monitor perstempo because the data are incomplete. Based on available DOD-wide data, GAO estimated that for fiscal year 2016 at least 51,000 service personnel spent more than 7 months away from home. However, that number is conservative because the analysis is limited by incomplete data. Specifically:", "DOD analysis shows that perstempo records are missing for at least 145,000 personnel who deployed in fiscal years 2014-2016.", "For fiscal years 2012-2016, 30 percent of DOD's perstempo records were missing information that identifies service members' occupations, 14 percent were missing information that identifies the purpose of the perstempo events, and 8 percent were missing information that identifies the category of perstempo events.", "The Navy identified about 13,000 personnel who spent more than 220 days away from home in fiscal year 2016 but were not accounted for in the DOD-wide data, and DOD officials could not explain why they were missing.", "Without taking steps to emphasize the collection of complete and reliable perstempo data, DOD will be limited in its ability to assess the amount of time service members are serving away from home for all perstempo events and in its ability to use that information to assist in gauging the stress on the force."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD (1) clarify its policy to include specific and measurable department-wide perstempo thresholds for use while statutory thresholds are waived or ensure service-level policies are established and followed, and (2) take steps to emphasize the collection of complete and reliable perstempo data. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For more than a decade, Congress and the military services have  reported low readiness levels, which they attribute partly to the pace of  military operations. In 1999, Congress addressed the pace of military  operations at that time by codifying thresholds for the amount of time  individual service members serve on duty away from their homes\u2014known  as \u201cpersonnel tempo\u201d or \u201cperstempo.\u201d The 1999 law required the  Secretary of each military department to provide extra pay for service  members who exceeded a certain threshold, required senior Department  of Defense (DOD) officials to provide approval for service members to  exceed these thresholds, and required the Secretary of each military  department to record the number of perstempo days for each service  member. However, in the aftermath of the September 2001 terrorist  attacks, the Deputy Secretary of Defense exercised a provision in the law  and issued a memorandum in October 2001 that waived the perstempo  thresholds and the requirement that senior DOD officials provide approval  when service members exceed the perstempo thresholds.", "While senior DOD leaders have kept the waiver in place, they have also  expressed concern that the high pace of military operations has had a  negative effect on readiness. For example, in June 2017, the Chairman of  the Joint Chiefs of Staff testified that since September 11, 2001, the U.S.  military has had an extraordinarily high pace of operations, which has had  a negative effect on readiness. In February 2017, the Vice Chief of Staff  of the Army testified in a congressional hearing that the pace of  operations has had a negative effect on the Army\u2019s readiness including  the readiness of Brigade Combat Teams and Combat Aviation Brigades.", "In November 2017, the Deputy Chief of Staff for Operations of the Air  Force testified that 26 years of operations had taken a toll on Air Force  personnel, which has affected the Air Force\u2019s readiness. In May 2017,  the Commander of the U.S. Special Operations Command (SOCOM)  testified that managing the pace of operations was essential to enabling  special forces to maintain their readiness. Finally, in September 2017, in  a testimony before the Senate Armed Services Committee about the  Navy ship collisions that occurred earlier that year, the Chief of Naval  Operations explained\u2014and later investigations by the Navy confirmed\u2014 that the pace of operations had contributed to deadly accidents in the  Pacific.", "Title 10 of the U.S. Code requires the Under Secretary of Defense for  Personnel and Readiness to monitor the tempo of the armed forces, and  DOD guidance requires the military services to track perstempo data.  Section 991 of title 10 distinguishes between unit operations and  individual service members\u2019 time away from home when discussing  tempo. \u201cPerstempo\u201d refers to the amount of time individual service  members serve on official duty at a location or under circumstances that  make it infeasible for them to spend off-duty time in the housing in which  they reside. \u201cOperational tempo\u201d refers to the rate at which military units  are involved in all military activities, including contingency operations,  exercises, and training deployments. While DOD has made considerable  efforts to manage operational tempo for units, managing the impact of  perstempo on individual service members has been a long-standing issue  for DOD. Our work has shown that the department has faced challenges  establishing perstempo-related policies; determining the time individual  service members should spend away from home; and managing  perstempo data, as discussed later in the report.", "Senate Report 114-255, accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2017, includes a provision for us to  address the root causes of degraded readiness, including reviewing the  way DOD has managed perstempo in mobilizing and deploying its  forces. This report assesses the extent to which DOD, the services, and  SOCOM have (1) policies in place with specific and measurable  thresholds on perstempo and (2) reliable data to monitor perstempo.", "For both objectives, we interviewed officials responsible for perstempo  policies and data in the Office of the Under Secretary of Defense for  Personnel and Readiness, the Office of Cost Assessment and Program  Evaluation, personnel and operations offices at the military services\u2019  headquarters, SOCOM, and the Defense Manpower Data Center. In  addition, we compared the evidence we collected with criteria in the  Standards for Internal Control in the Federal Government related to  setting specific and measurable objectives and using quality information  to determine whether objectives are being achieved.", "For objective one, we reviewed policies issued by the Office of the Under  Secretary of Defense for Personnel and Readiness, the military services,  and SOCOM to determine whether each had specific and measurable  objectives related to perstempo thresholds. We reviewed policies issued  by the Office of the Under Secretary of Defense for Personnel and  Readiness because it is responsible for monitoring the perstempo of the  armed forces. We reviewed policies issued by the services and SOCOM  because each of these organizations is responsible for tracking and  reporting the amount of time service members serve away from home.  We also analyzed statements that senior DOD leaders have made in  congressional hearings about the relationship between perstempo,  operational tempo, and readiness.", "For objective two, we assessed the reliability of perstempo data from the  Defense Manpower Data Center, which maintains a centralized database  of perstempo data. We obtained and analyzed perstempo data from the  Defense Manpower Data Center for active duty military personnel from  the four military services for fiscal years 2012 through 2016. We selected  this time period to maximize the amount of available data for us to  determine trends in rates of perstempo. To conduct reliability  assessments, we reviewed relevant documentation and interviewed  agency officials, including those who attempted but were not able to use  perstempo data in their analyses. We also analyzed the perstempo data  provided by the Defense Manpower and Data Center to identify the  number and percentage of records that were missing entries. Although  these analyses showed that the perstempo data were incomplete, we  found that they were sufficiently reliable for our purposes of providing a  conservative estimate of the minimum number of service members with  high rates of perstempo. Further, we analyzed perstempo data from the  Navy to determine whether the Navy\u2019s data corresponded with the  perstempo data maintained by the Defense Manpower and Data Center.  We found that the Navy\u2019s perstempo data were also incomplete but were  sufficiently reliable to provide a conservative estimate of the minimum  number of Navy personnel with high rates of perstempo. To mitigate the  limitations in both sets of perstempo data, we present perstempo  statistics rounded to the nearest thousands rather than the actual  statistics we calculated from the data.", "In addition, we analyzed the reliability of the Navy\u2019s perstempo waiver  data, and data from the Defense Manpower Data Center on the number  of service members who did not have a perstempo record but participated  in a perstempo event. To assess the Navy\u2019s perstempo waiver data, we  compared data collected by the Navy on the number of personnel who  obtained a waiver to exceed the Navy\u2019s perstempo threshold to data from  the Defense Manpower Data Center showing the number of Navy  personnel with high rates of perstempo to determine if the Navy waiver  data were complete. We found that these data were incomplete, but were  sufficiently reliable to provide a conservative estimate of the minimum  number of Navy personnel who had obtained a waiver to exceed the  Navy\u2019s perstempo threshold. To mitigate the limitations in the Navy\u2019s  perstempo waiver data, we present data rounded to the nearest  thousands rather than the actual data. Finally, we assessed the reliability  of data provided by the Defense Manpower Data Center that indicated the  number of individuals who deployed in fiscal years 2014-2016 and should  have had a perstempo record. To obtain these data, the Defense  Manpower Data Center compared data from DOD\u2019s Contingency  Tracking System with the perstempo database for fiscal years 2014  through 2016 to identify missing records. We assessed the reliability of  the relevant portions of the Contingency Tracking System and the  perstempo database needed to complete this analysis. We also reviewed  documentation of the analysis and interviewed the analysts who  performed the work. We concluded that the underlying data were  sufficiently reliable and the analysis was appropriate for reporting the  number of persons who participated in a perstempo event but did not  have a perstempo record for this time period.", "We used the perstempo data we obtained from the Defense Manpower  Data Center to calculate the time service members served away from  home in fiscal year 2016. We calculated data for fiscal year 2016 because  these were the most recent data available for a complete fiscal year at the  time we conducted our review. To calculate the time service members  served away from home, we included time they served on operational  deployments, exercises, unit or home station training, and mission  support temporary duty. We compared the time served away from home  against the deployment perstempo threshold of 220 days in a 365-day  period that is established in law, but has been waived by DOD since  2001.", "We conducted this performance audit from January 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Perstempo and Operational Tempo", "paragraphs": ["DOD uses two related but distinct terms to differentiate between  individual service members\u2019 time away from home versus unit  deployments:", "Perstempo: The amount of time individual service members serve on  official duty at a location or under circumstances that make it  infeasible for them to spend off-duty time in the housing in which they  reside including for deployment events, such as operations, exercises,  and unit training, and non-deployment events, such as individual  training and hospitalization.", "Operational tempo: The rate at which military units are involved in all  military activities, including contingency operations, exercises, and  training deployments.", "Operational deployments are one type of deployment event, but do not  account for all of the time individuals spend away from home. As a result,  individual perstempo is typically higher than operational tempo."], "subsections": []}, {"section_title": "Statutes and DOD Policy Regarding Perstempo", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2000 included a  provision that required the Under Secretary of Defense for Personnel and  Readiness to monitor the perstempo of the armed forces, and required  DOD to manage the number of days its service members are deployed.  Section 991 of title 10 defines \u201cperstempo\u201d as the amount of time  members of the armed forces are engaged in their official duties at a  location or under circumstances that make it infeasible for a member to  spend off-duty time in the housing in which the member resides. The law  establishes thresholds for deployment perstempo events\u2014220  deployment perstempo days in a 365-day period and 400 deployment  perstempo days in a 730-day period. The law also requires the  Secretary of Defense or a delegated official to approve when service  members exceed these thresholds, and requires DOD to establish a  system for tracking and recording the number of deployment perstempo  days for each member of the armed forces. Additionally, DOD obtained  the statutory authority to pay service members an allowance for lengthy  or numerous deployment perstempo events. Congress authorized DOD  to waive the deployment perstempo thresholds and recordkeeping  requirement, which in turn would prohibit the payment of high-deployment  allowances, if the department found that the waiver is necessary in the  interests of national security. See figure 1 for a timeline of these and  additional congressional and DOD actions related to perstempo.", "In the aftermath of the September 11th attacks, the Deputy Secretary of  Defense issued a memorandum that suspended the requirements to  manage deployment days for service members and the payment of high- deployment allowances. As a matter of DOD policy, the memorandum did  not suspend the recordkeeping requirement included in section 991 of  title 10. In May 2001, the Under Secretary of Defense for Personnel and  Readiness issued an instruction that described policy, responsibilities,  procedures, and information requirements for reporting of active duty  military personnel records, and this instruction included requirements for  perstempo reporting. In 2009, the Under Secretary of Defense for  Personnel and Readiness issued another instruction, DOD Instruction  1336.07, that was focused on the reporting of perstempo and the  instruction identifies responsibilities, procedures, and information- reporting requirements for perstempo. In particular, DOD Instruction  1336.07 states that the:", "Under Secretary of Defense for Personnel and Readiness is  responsible for providing overall policy guidance for DOD reporting of  all perstempo events;", "Director of the Defense Human Resources Activity, through the  Defense Manpower Data Center, is required to maintain a perstempo  events database;", "Secretaries of the military departments are responsible for  implementing these reporting requirements whenever service  members participate in or are associated with a perstempo event or  activity; and  services must record all perstempo events, including deployment  events such as operations, exercises, and unit training as well as non- deployment events such as individual training and hospitalization.", "In November 2013, the Under Secretary of Defense for Personnel and  Readiness issued a memorandum conveying that the amount of time that  a unit, detachment, or individual service member can be operationally  deployed should be equal to or less than the amount of time not  deployed. Operational deployments are one of the deployment  perstempo events. The memorandum also requires the military services  to register perstempo events. DOD\u2019s stated intent in the memorandum  was for commanders at every level to ensure that individual service  members, regardless of unit assignment, are not repeatedly exposed to  combat, do not experience disproportionate deployments, and do not  spend extended periods of time away from home unless required by  operational necessity."], "subsections": []}, {"section_title": "Prior Work on Perstempo and DOD Readiness", "paragraphs": ["We have reported on perstempo and readiness in multiple prior reports.  For example, in 1996 we reported on DOD\u2019s actions to mitigate the  impact of high perstempo, including efforts to create systems for  measuring perstempo. We reported that DOD had not issued  regulations for the long-term management of perstempo and had not  directed the services to have policies that limit perstempo. Further, we  reported that it was difficult for DOD to determine the amount of  perstempo time for military personnel for multiple reasons, including that  the services had different systems for tracking deployments. We  recommended that DOD (1) issue guidance on managing perstempo that  states whether each service should have a goal for the maximum  perstempo time for personnel and (2) issue regulations defining the  minimum perstempo data that each service must collect and maintain.  DOD concurred with these recommendations and, as we noted earlier,  the Under Secretary of Defense for Personnel and Readiness issued  DOD Instruction 1336.5 in 2001 that described policy, responsibilities,  procedures, and information requirements for perstempo reporting.  However, our recommendation has not been fully implemented because  DOD Instruction 1336.5 did not include guidance on managing perstempo  that states whether each service should have a goal for the maximum  perstempo time for personnel, as discussed later in the report.", "In 2007, we found that Army and Marine Corps perstempo data were  incomplete and inaccurate due to a lack of quality controls. We  recommended that the Office of the Under Secretary of Defense for  Personnel and Readiness provide guidance that directs the Army and  Marine Corps to develop quality control procedures for validating the  accuracy of the perstempo data. DOD concurred with our  recommendation and in 2009 issued DOD Instruction 1336.07; however,  our recommendation has not been fully implemented because the  instruction did not provide guidance that directs the Army and Marine  Corps to develop quality control procedures for validating the accuracy of  perstempo data, as discussed later in the report.", "Finally, our work has identified several challenges with readiness  rebuilding due in part to the high pace of operations that drives up  perstempo. In 2016, we reported that the global security environment will  likely continue to require significant reliance on U.S. military forces to  respond to a range of demands, and the military services have attributed  low readiness levels to increasingly long and frequent deployments,  reduced force structure, and continuing and emerging demands. We also reported that DOD implementation and oversight of department-wide  readiness rebuilding efforts did not fully include key elements of sound  planning. We recommended, among other things, that DOD and the  services establish comprehensive readiness goals and strategies for  implementing them, as well as associated metrics that can be used to  evaluate whether readiness recovery efforts are achieving intended  outcomes. DOD generally concurred with our recommendations and the  department has taken some steps to improve the readiness of the military  forces, but it has not yet taken steps to fully implement our  recommendations."], "subsections": []}]}, {"section_title": "DOD, Service, and SOCOM Policies Vary in Identifying Perstempo Thresholds for Service Members", "paragraphs": ["DOD, service, and SOCOM policies vary in identifying specific and  measurable thresholds on perstempo for individual service members.  DOD policy focuses on time away for deployment, which is a part of  perstempo but does not encompass the full range of activities that can  take service members away from home. Specifically, a 2013  memorandum from the Under Secretary of Defense for Personnel and  Readiness states that individual service members should not be deployed  longer than they are at their home station. However, the memorandum  describes perstempo only in general terms\u2014stating that individual service  members should not serve extended periods of time away from their  homestation unless required by operational necessity. An official in the  Office of the Under Secretary of Defense for Personnel and Readiness  acknowledged that the department has not defined DOD\u2019s perstempo  threshold\u2014to encompass non-deployment events\u2014in specific and  measurable terms and has not directed the services to establish such  perstempo thresholds.", "The Navy and SOCOM have established perstempo thresholds in their  policies and clarified which types of perstempo events apply to their  thresholds. While these policies vary slightly, both the Navy and SOCOM  describe in their policies the need to balance the pace of operations with  the quality of life of their service members. More specifically:", "Navy: In 2014, the Navy issued an instruction that includes a  perstempo threshold that identifies the number of days that individual  Navy service members may serve away from home. The Navy\u2019s  instruction established a threshold of 220 days in a 365-day period or  400 days in a 730-day period. The Navy\u2019s instruction also identified  that the threshold applies to all deployment perstempo events\u2014which  comprise operations, exercises, unit training, temporary duty, and  homestation training.", "Special Operations Command: In 2016, SOCOM issued a policy  memorandum that establishes a perstempo threshold that identifies  the number of days that individual SOCOM service members may  serve away from home. The policy memorandum established a  perstempo threshold of 480 days in a 730-day period. SOCOM\u2019s  policy memorandum also clarified that the threshold applies to both  deployment perstempo events (e.g., operational deployments and  exercises) and non-deployment perstempo events (e.g., serving as a  student or trainee at a school and performing administrative, guard, or  detail duties in garrison at the service member\u2019s permanent duty  station).", "In contrast, the Army, the Air Force, and the Marine Corps are either not  enforcing or have not established a specific and measurable perstempo  threshold in their policies. Officials from these services told us that they  focus on managing the impact of deployments consistent with the 2013  memorandum from the Under Secretary of Defense for Personnel and  Readiness, but noted that the memorandum does not set specific  perstempo limits. As a result, each service has taken a slightly different  approach:", "Army: In 2015, the Army issued a regulation that identified the  number of days that a service member may spend away from home;  however, Army officials told us it is not being enforced. The regulation  updated the Army\u2019s policy to include a perstempo threshold. The  regulation also defined the events that could be counted toward that  threshold and included a provision for the Army to manage its  personnel to that threshold. However, Army headquarters officials told  us that the Army is not enforcing this perstempo threshold and that  the Army only added these provisions to emphasize that collecting  perstempo data was a priority. According to the Army regulation, the  Secretary of the Army may suspend the applicability of this perstempo  program in the interest of national security, but Army headquarters  officials told us that the Secretary of the Army had not suspended the  perstempo program and the officials could not provide any official  action that suspended the requirement.", "Air Force: The Air Force does not have a specific and measurable  perstempo threshold in policy. An Air Force personnel instruction  states that the Air Force considers service members who spend more  than 120 days on temporary duty to have a high perstempo.  However, Air Force headquarters officials told us that this policy does  not establish a threshold for the amount of time that Air Force  personnel may serve away from their homestation and that the Air  Force does not require units to manage the assignments of their  personnel to ensure that they do not spend more than 120 days on  temporary duty. Air Force headquarters officials told us that they did  not think they needed to include thresholds for perstempo in Air Force  policies expressed in specific, measurable terms because the Air  Force relies on unit commanders to manage the perstempo of  individual service members and they believed that a perstempo  threshold would affect a small number of their service members.", "Marine Corps: The Marine Corps also does not have a specific and  measurable perstempo threshold in its policy, but its policy accounts  for perstempo time in determining individual service members\u2019  eligibility for overseas deployments, among other things. For  example, Marine Corps Order 1300.8 adjusts and delays the date that  service members are scheduled to deploy overseas by the amount of  perstempo time accrued for those service members. The Marine  Corps also issued an administrative message directing unit  commanders to manage the perstempo of individual service  members. However, neither of these policies establishes a specific  and measurable perstempo threshold. Marine Corps officials told us  that it has studied the effects of high rates of perstempo on retention  and told us that these studies have not provided the Marine Corps  evidence that perstempo drives retention.", "The approach taken by the Army, the Air Force, and the Marine Corps\u2014 to focus primarily on deployments\u2014reflects the focus placed on  deployments in DOD\u2019s policy but this approach omits perstempo events,  such as training and exercises. Such activities can take service members  away from home for long periods. For example, Air Force officials told us  that F-16 pilots spend considerable amounts of time participating in  multiple exercises every year that require them to spend significant time  away from their homestation. Similarly, a 2011 study conducted by CNA  found that perstempo was very high for service members in the III Marine  Expeditionary Force in Okinawa and Hawaii because of the number of  exercises in which those service members participated. In particular, the  study found that service members in the III Marine Expeditionary Force  participate in over 70 exercises and training events per year. Additionally,  relying on unit commanders to monitor the perstempo of service members  without providing specific and measurable guidance leaves it to the  interpretation of unit commanders to define excessive time away.", "Standards for Internal Control in the Federal Government state that  management should define objectives in specific and measurable terms  to enable it to identify risks to achieving those objectives. The standards  also state that specific terms are those that are fully and clearly set forth  so they can be easily understood, and measurable terms are those that  allow for the assessment of performance toward achieving objectives. As  we reported in 2007, shortly after the September 11, 2001, attacks, DOD  shifted its focus away from collecting and maintaining perstempo data  and began focusing on collecting and maintaining data to track  deployments related to major operations, which does not include the full  range of perstempo events. DOD continued this focus on managing  deployments versus perstempo in its issuance of the 2013 memorandum.", "Furthermore, even as it has continued to waive the statutory perstempo  thresholds and cited the effect of the high pace of operations and training  on service members, DOD has not taken action to focus attention on the  management of perstempo thresholds within the services and DOD. As a  result, the services have taken differing approaches, with the Army, the  Air Force, and the Marine Corps having no specific and measurable  thresholds. Through providing specific and measurable department-wide  perstempo thresholds in DOD guidance or directing the services and  SOCOM to establish and follow service-specific thresholds for its service  members, DOD will be better able to judge whether service members are  spending too much total time away from home and, if so, whether there  have been any associated effects on military readiness."], "subsections": []}, {"section_title": "DOD and the Services Do Not Have Reliable Data to Monitor Perstempo", "paragraphs": ["DOD does not have reliable perstempo data, which limits its ability to  effectively monitor perstempo across the department. In part due to the  incompleteness of the perstempo data, an official within the Office of the  Under Secretary of Defense for Personnel and Readiness told us that the  office cannot monitor perstempo even though section 136 of title 10  makes the office responsible for doing so. For example, a December  2017 Defense Manpower Data Center analysis indicated that perstempo  data are missing records for at least 145,000 individuals that deployed in  fiscal years 2014-2016. In addition, officials from the Office of Cost  Assessment and Program Evaluation told us that they attempted to  analyze the effects of high rates of perstempo on unit readiness in 2016  but that they were unable to draw conclusions from the analysis because,  among other things, the perstempo data were incomplete. Officials  explained that certain events were not captured in the perstempo data  consistently, such as Army rotations to a combined training center. Senior  service officials also told us that the analysis had limited usefulness due  to unreliable data.", "Although data are incomplete, our analysis of available data indicates that  tens of thousands of service personnel experienced high rates of  perstempo in fiscal year 2016. Because the perstempo policies vary  widely, we anchored our analysis to the 220 days in a 365-day period  identified in the currently waived statutory threshold. Using that  benchmark, we estimate that at least 51,000 service personnel spent  more than 7 months away from their homestation in fiscal year 2016 (see  table 1).", "Moreover, we believe these numbers may be far higher because our  analysis is limited by incomplete perstempo data as stated above.  Additionally, our estimate likely understates the number of  servicemembers as we excluded records from our analysis because they  were missing an end date in the data system for the perstempo event.", "Further, we found that the perstempo records we analyzed for fiscal years  2012 through 2016 were also missing other information, which limits the  utility of the data for users and decision makers. For example, we found  that 30 percent of perstempo records for fiscal years 2012 through 2016  were missing information that identifies the service member\u2019s occupation,  14 percent were missing information that identifies the purpose of the  perstempo event, and 8 percent were missing information that identifies  the category of perstempo event.", "Incomplete and unreliable data have presented management problems,  particularly for the Navy and SOCOM as they have sought to manage the  perstempo of their service members. For example, a Naval Personnel  Command official who oversees the Navy\u2019s perstempo program told us  that the 18,000 Navy personnel with more than 220 perstempo days in  fiscal year 2016\u2014that we estimated using Defense Manpower Data  Center data\u2014likely significantly understates the actual number of Navy  personnel with high rates of perstempo. The official stated that the Navy\u2019s  data showed that more than 31,000 Navy service members were away  from home more than 220 days in fiscal year 2016\u2014a difference of about  13,000 personnel. Officials from the Navy and Defense Manpower Data  Center were unable to explain the discrepancy. Moreover, Navy officials  told us that the Navy oversees perstempo by requiring subordinate  commands to obtain waivers when service members exceed 220 days in  a year. However, the Navy had waivers for about 6,000 personnel in  2016, or only about one-fifth of the personnel the Navy\u2019s own data  indicated were gone more than 220 days. To address this, the Navy  Personnel Command official told us that the Navy plans to establish an  automated system to verify that Navy service members who have  exceeded the Navy\u2019s 220-day perstempo threshold have a waiver.", "In addition, a SOCOM headquarters official told us that the command  does not have reliable perstempo data on its service members because  of limitations in the command\u2019s information technology system. As a  result, SOCOM does not currently have the ability to determine whether  its units are adhering to the SOCOM perstempo threshold. The official  told us that SOCOM is working to address the problem with this  information technology system.", "We previously reported on challenges DOD has had with collecting  reliable perstempo data in 1996 and 2007. While the department has  made some progress, the reliability of perstempo data has remained a  persistent challenge for the department. In 1996, we reported that DOD  could not measure the increase in time away from home because no  department-wide data system existed to track it. DOD generally agreed  with our findings and recommendations and indicated that it had taken,  and would continue to take, initiatives to manage perstempo. In 2007, we  reported that Army and Marine Corps perstempo data were inaccurate  and incomplete because of the lack of quality controls. We  recommended that the Under Secretary of Defense for Personnel and  Readiness provide guidance directing the Army and Marine Corps to  develop quality control procedures for validating the accuracy of the  perstempo data they collect and report to the Defense Manpower Data  Center. The department concurred with the recommendation and issued  an instruction in 2009 that required the services to report perstempo data  to the Defense Manpower Data Center. However, the Under Secretary  of Defense for Personnel and Readiness has not fully implemented our  recommendation because the instruction did not direct the Army and  Marine Corps to develop quality control procedures for validating the  accuracy of their perstempo data.", "The Standards for Internal Control in the Federal Government state that  management should use quality information to achieve its objectives and  that such information should be complete and accurate. The underlying  reason that perstempo data are not reliable is that DOD has not  emphasized the collection of complete and reliable perstempo data.  Specifically, an official from the Office of the Under Secretary of Defense  for Personnel and Readiness told us that the office last reviewed  perstempo data in 2012 and, at that time, determined that these data  were not fully reliable. The official also told us that to address this  challenge the office reiterated the requirement that the services must  collect perstempo data in its 2013 memorandum, but the memorandum  did not emphasize that the perstempo data collected should be complete  and reliable. Without taking steps to improve the quality of its perstempo  data, DOD will be limited in its ability to assess the amount of time service  members are serving away from home for all perstempo events and use  that information to assist them in monitoring and gauging the stress on  the force."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["In the years since 2001, senior DOD leaders have expressed concern  about the impact of a high pace of military operations and the high pace  has continued for portions of the force. DOD has taken steps to limit  operational deployments for individual service members, but has been  less focused on the impact of total time away from home on personnel,  commonly called perstempo. Total time away from home includes the  training and other activities that can take service members away from  home for long periods.", "DOD has two primary and long-standing challenges in managing  perstempo: setting clear policy and gathering reliable data. First, DOD  has not established a perstempo policy with specific and measurable  thresholds even as it has waived a statutory requirement that sets such  thresholds. In the absence of clear and specific guidance, the Navy and  SOCOM have set their own thresholds. By contrast, the Army set a  threshold but does not enforce it and the limits for Air Force and Marine  Corps service members are unclear. Unless DOD ensures that  perstempo thresholds are established and followed across the  department in specific and measurable terms, DOD will be unable to  judge when individual service members are spending too much time away  from home. Second, perstempo data are unreliable across the  department\u2014primarily because they are incomplete\u2014but high perstempo  is affecting tens of thousands of personnel. For example, available data  indicate that at least 51,000 active duty personnel spent more than 7  months per year away from home in fiscal year 2016, and the number  may be considerably higher. Incomplete perstempo data are a persistent  problem that continues to hamper efforts to oversee the impact of time on  duty away from home on individual service members. Until DOD and the  military services take steps to emphasize the collection of complete and  reliable perstempo data, DOD will be limited in its ability to oversee the  time its personnel are spending away from home or gauge the stress on  the force."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to DOD.", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Personnel and Readiness, in conjunction with the Secretaries  of the Army, the Navy, and the Air Force; the Commandant of the Marine  Corps; and the Commanding General of SOCOM, clarify its guidance on  perstempo thresholds as long as the statutory thresholds are waived by  either establishing specific and measurable department-wide perstempo  thresholds in DOD policy or ensuring that the Army, the Air Force, and the  Marine Corps establish and follow their own service-specific guidance on  thresholds. (Recommendation 1)", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Personnel and Readiness, in conjunction with the Secretaries  of the Army, the Navy, and the Air Force; the Commandant of the Marine  Corps; and the Commanding General of SOCOM, take steps to  emphasize the collection of complete and reliable perstempo data so that  DOD, the services, and SOCOM can monitor perstempo.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In  written comments, DOD concurred with our two recommendations. DOD  separately provided technical comments, which we incorporated as  appropriate. DOD\u2019s written comments are reprinted in their entirety in  appendix I.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Under Secretary of Defense  for Personnel and Readiness; the Secretaries of the Air Force, the Army,  and the Navy; the Commandant of the Marine Corps; and the  Commanding General of SOCOM. 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) 512-3489 or pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff members who made key  contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["John H. Pendleton, (202) 512-3489 or pendletonj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Patricia Lentini, Assistant  Director; Suellen Foth; Mae Jones; James P. Klein; Amie Lesser; Ricardo  Marquez; Shari Nikoo; Joshua Parr; and Michael Silver made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Affecting the Fleet. GAO-17-809T.  Washington D.C.: September 19, 2017.", "Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-798T.  Washington, D.C.: September 7, 2017.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 19, 2016.", "Special Operations Forces: Opportunities Exist to Improve Transparency  of Funding and Assess Potential to Lessen Some Deployments.  GAO-15-571. Washington, D.C.: July 16, 2015.", "Military Personnel: DOD Lacks Reliable Perstempo Data and Needs  Quality Controls to Improve Data Accuracy. GAO-07-780. Washington,  D.C.: July 17, 2007.", "Military Readiness: A Clear Policy Is Needed to Guide Management of  Frequently Deployed Units. NSIAD-96-105. Washington, D.C.: April 8,  1996."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-494", "url": "https://www.gao.gov/products/GAO-18-494", "title": "Committee on Foreign Investment in the United States: Action Needed to Address Evolving National Security Concerns Facing the Department of Defense", "published_date": "2018-07-10T00:00:00", "released_date": "2018-07-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Foreign acquisitions of U.S. companies can pose challenges for the U.S. government as it balances the economic benefits of foreign direct investment with the need to protect national security. CFIUS is an interagency group, led by Treasury, that reviews certain transactions\u2014foreign acquisitions or mergers of U.S. businesses\u2014to determine their effect on U.S. national security and whether the transaction may proceed.", "GAO was asked to review DOD's ability, as a member of CFIUS, to address defense issues. This report assesses factors, if any, that affect DOD's ability to identify and address national security concerns through the CFIUS process, among other objectives. GAO analyzed data on DOD co-led transactions from January 2012 through December 2017, the most recent data available. GAO also interviewed DOD and Treasury officials and reviewed documentation to identify DOD's CFIUS processes, resources, and responsibilities and selected a non-generalizable sample of nine DOD component reviewers, based on their participation in the CFIUS process."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) faces challenges identifying and addressing evolving national security concerns posed by some foreign investments in the United States.", "Resources: DOD's Office of Manufacturing and Industrial Base Policy represents the department and coordinates DOD's participation on the Committee on Foreign Investment in the United States (CFIUS). As a committee member, DOD co-leads CFIUS's review and investigation of transactions between foreign acquirers and U.S. businesses where it has expertise. DOD co-led 99 transactions in calendar year 2017, or 57 percent more transactions than it co-led in 2012, while the annual authorized positions increased from 12 to 17 during that same time period. DOD's workload has also been affected by the volume and complexity of the transactions it is responsible for co-leading, in addition to other CFIUS responsibilities, such as identifying transactions that foreign acquirers do not voluntarily file with CFIUS. DOD has taken some steps to address its resource limitations, but has not fully assessed the department-wide resources needed to address its growing workload.", "Emerging Technology and Proximity: DOD officials identified some investments that pose national security concerns from foreign acquirers gaining access to emerging technologies or being in close proximity to critical military locations, which, according to officials, cannot always be addressed through CFIUS because the investments would not result in foreign control of a U.S. business. DOD and Department of the Treasury (Treasury) officials said addressing these investments may require legislative action. DOD is taking steps to identify critical emerging technologies and military locations that should be protected from foreign investment. However, DOD has not fully assessed risks from these types of foreign investment or what additional authorities, if any, may be necessary for it to address them.", "Policy: DOD's CFIUS Instruction does not clearly identify some reviewer responsibilities or processes for identifying transactions that foreign acquirers do not voluntarily file with CFIUS. The policy is also outdated and inconsistent with current practices.", "DOD's CFIUS Instruction and federal internal control standards emphasize the importance of assessing organizational structures, policies, and procedures to respond to risks. Without assessing resources needed to address its CFIUS workload and risks from foreign investment in emerging technologies or in proximity to critical military locations, and ensuring its policies and processes clearly reflect the issues facing the department, DOD is at risk of being unable to respond to evolving national security concerns.", "This is a public version of a sensitive report that GAO issued in April 2018. Information that DOD and Treasury deemed sensitive has been omitted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making eight recommendations, including that DOD assess resources needed to address workload, assess risks from foreign investment in emerging technologies and in close proximity to critical military locations, and update its policies and processes to better reflect the evolving national security concerns facing the department. DOD and Treasury agreed with GAO's recommendations, and have identified some actions to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Foreign acquisitions of U.S. companies can pose challenges for the U.S.  government as it balances the economic benefits of foreign direct  investment in the United States against the potential that an acquisition  may harm national security. The Committee on Foreign Investment in the  United States (CFIUS) is responsible for reviewing covered  transactions\u2014mergers, acquisitions, or takeovers that could result in  foreign control of a U.S. business\u2014and for determining the effect of such  transactions on U.S. national security. Following its review of a covered  transaction, the committee may draft mitigation agreement measures to  address any threats to national security posed by the transaction. If  CFIUS concludes national security concerns cannot be mitigated, the  committee may elevate the transaction to the President to determine if the  transaction should be prohibited or suspended. The committee is chaired  by the Secretary of the Treasury and has eight other voting member  agencies, including the Department of Defense (DOD). CFIUS\u2019s  authority was last updated in 2007 with the passage of the Foreign  Investment and National Security Act of 2007, which currently guides the  CFIUS process. Among other changes, this legislation formalized  agency responsibilities and added additional factors agencies should  consider as part of their review. In 2017, bills were introduced in  Congress proposing revisions to CFIUS.", "The U. S. economy has historically been the world\u2019s largest recipient of  foreign direct investment, receiving $373.4 billion in 2016, according to  the Bureau of Economic Analysis. The Bureau also reported that from  2012 to 2016, Chinese foreign direct investment in the United States has  almost tripled from $3.6 billion to $10.3 billion. In response to these  recent trends in foreign investment, including increasing Chinese  investment in U.S. technology companies, members of Congress have  raised questions about the effectiveness of the CFIUS process in  protecting national security, particularly in protecting DOD\u2019s industrial  base and critical technologies from foreign control. In addition, the  National Defense Authorization Act for Fiscal Year 2018 required the  development of a plan and recommendations to improve the  effectiveness of the interagency vetting of foreign investments that could  potentially impair the national security of the United States. Ensuring the  effective protection of technologies critical to U.S. national security  interests has been on GAO\u2019s High-Risk List since 2007. Our body of work  in this area has identified progress in improving the effectiveness of the  programs designed to protect technologies critical to U.S. national  security interests, but government-wide challenges remain, including the  need to address weaknesses in individual programs and fully implement  export control reform. Further, in February 2018, we reported on CFIUS  workload and staffing as well as views on potential changes to CFIUS.", "You asked us to review DOD\u2019s ability, as a member of CFIUS, to address  defense issues. This report assesses factors, if any, that affect DOD\u2019s  ability to (1) identify and address national security concerns through the  CFIUS process, and (2) develop and monitor mitigation agreements  through the CFIUS process.", "This report is a public version of a sensitive report that we issued on April  5, 2018. DOD and the Department of the Treasury (Treasury) deemed  some of the information in our April report to be sensitive, which must be  protected from public disclosure. Therefore, this report omits sensitive  information related to (1) DOD\u2019s resources to perform certain CFIUS  functions, like monitoring mitigation agreements and identifying non- notified transactions; (2) the availability of location information as part of  notices that companies file with CFIUS; and (3) the resources and  communication required between DOD and the components to develop  and monitor mitigation agreements through the CFIUS process. Although  the information provided in this report is more limited, this report  addresses the same objectives and uses the same methodology as the  sensitive report.", "To assess what factors, if any, affect DOD\u2019s ability to identify and address  national security concerns through the CFIUS process, we reviewed  relevant documentation, including: CFIUS-related laws and regulations;  DOD policies and guidance; and DOD and CFIUS internal reports. While  there are other mechanisms that address national security concerns,  including export controls such as the International Traffic in Arms  Regulations and Export Administration Regulations, our review focused  on DOD\u2019s responsibilities, processes, and challenges addressing national  security concerns as a member of CFIUS. To assess DOD\u2019s efforts to  identify and address national security concerns it identified, we analyzed  data on transactions that DOD was responsible for co-leading from  January 1, 2012 through December 31, 2017, the most recent data  available. Based on information on the collection and management of  Department of the Treasury (Treasury) and DOD transaction data, our  review of related documentation, and interviews with relevant Treasury  and DOD officials, we determined that these data were sufficiently reliable  for our purposes. We also interviewed officials at Treasury, the Office of  Manufacturing and Industrial Base Policy (MIBP)\u2014the DOD office  responsible for coordinating the CFIUS process within the department\u2014 and selected DOD component reviewers to discuss DOD\u2019s CFIUS  workload and resources. In this report, we define resources as the  authorized positions, assigned personnel, and personnel performing  contract services related to CFIUS functions, and CFIUS-related costs.  We also discussed with these officials any limitations to addressing  certain national security concerns through the CFIUS process, and  guidance for conducting CFIUS reviews and identifying transactions not  voluntarily filed with the committee\u2014known as non-notified transactions.", "We selected a non-generalizable sample of nine DOD component  reviewers based primarily on their responsibilities for reviewing  transactions for key issues relevant to DOD, including concerns with  foreign investment in critical and emerging technologies and in proximity  to critical military locations. To obtain a range of views, we also solicited  MIBP\u2019s recommendations to identify components with varying levels of  participation and input into the CFIUS process. We obtained responses  from each component about similarities and differences in their CFIUS  processes and any challenges they face identifying and addressing  national security concerns. Findings based on information collected from  the nine components cannot be generalized to all components.", "To assess what factors, if any, affect DOD\u2019s ability to develop and monitor  mitigation agreements through the CFIUS process, we reviewed CFIUS- related laws and regulations and DOD policies and guidance to identify  DOD and its components\u2019 responsibilities and processes for developing  and monitoring compliance with mitigation agreements. To identify  actions DOD has taken to mitigate national security concerns, we  analyzed data from January 1, 2012 through December 31, 2017, the  most recent data available, to determine the number of mitigation  agreements DOD is responsible for, and actions DOD has taken to  monitor these agreements. Based on information on the collection and  management of Treasury and DOD CFIUS mitigation agreement data,  our review of related documentation, and interviews with relevant  Treasury and DOD officials, we determined that these data were  sufficiently reliable for our purposes. We interviewed officials at Treasury,  MIBP, and DOD components\u2014including those identified as part of our  non-generalizable sample\u2014to identify any challenges they face  developing and enforcing mitigation agreements. To provide illustrative  examples of the types of measures included in CFIUS mitigation  agreements, we reviewed all of the active mitigation agreements from one  component with responsibilities for monitoring mitigation agreements  involving proximity issues. These agreements are not generalizable to  other components. Appendix II provides more information about our  overall scope and methodology.", "The performance audit upon which this report is based was conducted  from January 2017 to April 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DOD and Treasury from April 2018 to July  2018 to prepare this unclassified version of the original sensitive report for  public release. This public version was also prepared in accordance with  these standards."], "subsections": [{"section_title": "Background", "paragraphs": ["CFIUS was established by executive order in 1975 to monitor the effect of  and to coordinate U.S. policy on foreign investment in the United States.  In 1988, Congress enacted the Exon-Florio amendment adding section  721 to the Defense Production Act of 1950, which authorized the  President to investigate the effect of certain foreign acquisitions of U.S.  companies on national security and to suspend or prohibit acquisitions  that might threaten to impair national security. The President delegated  this investigative authority to CFIUS. The Foreign Investment and  National Security Act of 2007 further amended the Defense Production  Act and formally established CFIUS in statute.", "CFIUS is responsible for reviewing and investigating covered transactions  to determine the effects of the transaction on national security. The  Foreign Investment and National Security Act of 2007 does not formally  define national security, but provides a number of factors for  consideration by CFIUS and the President in determining whether a  covered transaction poses a national security risk. These factors include  the potential national security effects on U.S. critical technologies and  whether the transaction could result in the control of a U.S. business by a  foreign government (for a full list of factors, see Appendix III). CFIUS may  also consider other factors in determining whether a transaction poses a  national security risk.", "Chaired by the Secretary of the Treasury, CFIUS includes voting  members from the Departments of Commerce, Defense, Energy, State,  Justice, and Homeland Security; the Office of the U.S. Trade  Representative; and the Office of Science and Technology Policy.  Treasury is responsible for a number of tasks. According to Treasury  officials, these tasks include coordinating operations of the committee,  facilitating information collection from parties involved in the transaction  (such as a foreign acquirer and U.S. business owner involved in an  acquisition), reviewing and sharing data on mergers and acquisitions with  member agencies, and managing CFIUS time frames. Treasury also  communicates with the parties on CFIUS\u2019s behalf. The committee  generally has three core functions:  review and investigate transactions that have been voluntarily  submitted\u2014or notified\u2014to the committee by the parties to the  transaction and take action as necessary to address potential national  security concerns; monitor and enforce compliance with mitigation agreements; and  identify transactions of concern that have not been voluntarily notified  to CFIUS for review, referred to in this report as non-notified  transactions.", "The Foreign Investment and National Security Act of 2007 does not  require that parties notify CFIUS of a transaction.", "In examining covered transactions, CFIUS members seek to identify and  address, as appropriate, any national security concerns that arise as a  result of the transaction. CFIUS reviews notices that have been  voluntarily submitted\u2014or notified\u2014to the committee by parties to  potentially covered transactions. Notices to CFIUS contain information  concerning the nature of the transaction and the parties involved, such as  the business activities performed by the U.S. business and any products  or services supplied to the U.S. government. After receiving a notice,  Treasury drafts an analysis to assess whether the transaction submitted  is a covered transaction, meaning whether the transaction could result in  foreign control of a U.S. business.", "With limited exceptions, a transaction receives safe harbor\u2014meaning the  transaction cannot be reviewed again\u2014when the CFIUS process is  completed and the committee has determined that the transaction may  proceed. CFIUS does not review every transaction or investment by  foreign entities. According to Treasury officials, there are certain  transactions by foreign entities that CFIUS does not have the authority to  review. These non-covered transactions and investments include the  establishment of a business, referred to as a greenfield investment, and  acquisitions of assets\u2014such as equipment, intellectual property, or real  property\u2014if such assets do not constitute a U.S. business.", "If CFIUS member agencies become aware of a transaction that might be  covered that has not been voluntarily notified to the committee and may  raise national security considerations, CFIUS may invite the parties to the  transaction to submit a notice. CFIUS may choose to unilaterally review  any transaction that could be covered. Treasury, DOD, and several  other member agencies have processes for identifying non-notified  transactions for CFIUS to potentially review."], "subsections": [{"section_title": "CFIUS Process", "paragraphs": ["The CFIUS process for examining transactions that have been notified to  the committee is comprised of up to four stages: national security review (30 days), national security investigation (45 days), and presidential action.", "In some cases, before a transaction is accepted and reviewed by CFIUS,  Treasury may conduct a pre-notice consultation with parties to a  transaction. This is not a required part of the process. For the purposes of  this review, we focus on three stages\u2014the national security review,  national security investigation, and presidential action.", "For each transaction accepted and reviewed by CFIUS, an agency or  agencies with relevant expertise are identified to act as a co-lead with  Treasury. Each agency in turn distributes the transaction to various  offices within its agency to provide an assessment of the transaction and  identify national security risks, which is then provided to CFIUS. For  example, the committee may reach consensus that no investigation is  required if it is determined that the covered transaction will not impair  national security or that the national security concerns are addressed  under existing authorities, such as export controls. If these conclusions  are reached, the national security review ends, and the transaction  proceeds. However, if, for example, an agency identifies an unresolved  national security risk, the agency may draft a risk-based analysis and  CFIUS may undertake a national security investigation. If during the  investigation the committee members reach consensus that a national  security risk exists, but the risks can be mitigated, mitigation agreement  measures are drafted to address those risks, and these measures are  negotiated with the other members of the committee and the parties to  the transaction.", "The CFIUS process may conclude after consensus is reached by all  agencies and the co-lead agencies certify to members of Congress that  there are no unresolved national security concerns, and the transaction  receives safe harbor. At the end of the national security investigation, if  the committee does not reach consensus that there are no unresolved  national security concerns or the committee concludes by consensus that  a foreign investment threatens to impair national security and the threat  cannot be mitigated, CFIUS elevates the transaction to the President. The  President may prohibit or suspend the transaction. At any point prior to  the conclusion of the process, parties may request to withdraw from the  CFIUS process. In some cases, the notice is resubmitted once the parties  believe that they have addressed the committee\u2019s concerns; in other  cases, the companies may choose to withdraw and abandon their  transaction. See figure 1 for an overview of the CFIUS process for  reviewing and investigating selected transactions."], "subsections": []}, {"section_title": "DOD CFIUS Process", "paragraphs": ["DOD Instruction 2000.25, Procedures for Reviewing and Monitoring  Transactions Filed with the Committee on Foreign Investment in the  United States (DOD\u2019s Instruction), provides policy and guidance on the  DOD CFIUS process and assigns responsibilities in that process. In  March 2011, DOD\u2019s CFIUS responsibilities were reassigned from the  Defense Technology Security Administration to the Office of the Under  Secretary of Defense for Acquisition, Technology, and Logistics (OUSD  (AT&L)). The transfer of responsibilities, effective in fiscal year 2012,  was intended to better align CFIUS\u2019s mission with the DOD office  responsible for industrial policy. Within OUSD (AT&L), MIBP serves as  the lead office for CFIUS, reviews transactions for DOD equities, and  distributes them to more than 30 organizations within DOD\u2014referred to in  this report as DOD components \u2014to determine whether the transaction  poses any national security concerns. These component reviewers  include organizations within the Office of the Secretary of Defense, as  well as the military departments, among others. For a full list of DOD  component reviewers, see appendix I.", "According to MIBP\u2019s processes, it is responsible for reviewing and  compiling comments and input from all DOD component reviewers during  the 30-day national security review. When national security concerns  with a transaction are identified, MIBP is to coordinate with affected DOD  component reviewers to clarify issues and arrive at consensus on the DOD position for the transaction. DOD is typically designated as a co- lead agency for transactions where it has identified equities\u2014such as  transactions involving companies that are DOD suppliers\u2014or other  potential national security concerns. If no national security concerns are  identified by DOD, MIBP will recommend that the transaction proceed.", "However, if national security concerns are identified by DOD and the  committee requires additional time to complete its review, DOD  recommends that the transaction proceed to a 45-day national security  investigation period. During this period, MIBP coordinates with DOD  component reviewers to draft and deliver a risk-based analysis to  Treasury within the statutory investigation time frame. The assessment  provides a description of the risk\u2014in terms of threat, vulnerability, and  consequence\u2014arising from the covered transaction. If the risks can be  addressed, DOD develops measures to be included in the mitigation  agreement that it is then responsible for monitoring and enforcing as a  signatory agency to the mitigation agreement.", "DOD guidance identifies three basic types of mitigation measures:  1.  Technical mitigation measures, which seek to address risks related  to vulnerabilities or critical assets with sensitive source codes, cutting- edge technologies, and communications infrastructure.  2.  Personnel mitigation measures, which seek to address risks arising  from foreign personnel having access to sensitive technology or other  critical assets.  3.  Management control mitigation measures, which seek to oversee  companies\u2019 ongoing implementation of mitigation agreements related  to technical or personnel mitigation measures.", "DOD, along with other lead agencies, carries out its monitoring  responsibilities on behalf of the committee and reports back to the  committee on the status of their responsibilities and company compliance  on at least a quarterly basis. DOD\u2019s Instruction requires the  identification of feasible measures to mitigate or eliminate the risks posed  by a transaction and emphasizes that adequate resources, in terms of  personnel and budget, should be provided to DOD and the components  for monitoring and ensuring compliance with mitigation agreements."], "subsections": []}, {"section_title": "Our Prior Work on CFIUS", "paragraphs": ["We have conducted prior work related to CFIUS issues, including whether  CFIUS has the resources to address its current workload and whether  CFIUS is able to address national security concerns related to the  proximity of certain real estate transactions to defense test and training  ranges.", "In February 2018, we reported on CFIUS workload and staffing as  well as stakeholder perspectives on potential changes to CFIUS. We  found that as the volume and complexity of CFIUS reviews have  increased in recent years, member agency officials have expressed  concerns that current CFIUS staffing levels may not be adequate to  complete core functions of the committee. We recommended that  Treasury should coordinate member agencies\u2019 efforts to better  understand the staffing levels needed to address the current and  projected CFIUS workload associated with core committee functions.  Treasury agreed with our recommendation.", "In December 2014, in reviewing DOD\u2019s assessment of foreign  encroachment risks on federally managed land, we found that DOD  did not have the information it needed to determine whether activities  by foreign entities near test and training ranges, such as performing  certain sensitive training techniques, could pose a threat to its  mission. We also reported that CFIUS is the only formal option in  regard to transactions involving foreign companies or entities that  accounts for national security concerns related to proximity to military  test and training ranges. We recommended that DOD develop and  implement guidance for conducting an assessment of risks to test and  training ranges from foreign encroachment. We also recommended  that DOD collaborate with other federal agencies managing land and  transactions adjacent to DOD\u2019s test and training ranges to obtain  additional information on transactions near these ranges. DOD agreed  with our recommendations and has begun collecting data to identify  locations the military services consider to be at risk from foreign  encroachment and collaborating with federal land management  agencies, as discussed later in the report."], "subsections": []}]}, {"section_title": "Resources and Evolving National Security Risks Pose Challenges for Identifying and Addressing DOD\u2019s Concerns through the CFIUS Process", "paragraphs": ["DOD has reviewed hundreds of transactions involving foreign acquirers  and U.S. businesses since 2012, but faces several challenges in  identifying and addressing national security concerns through the CFIUS  process. These challenges are: (1) resources not aligned with an  increasing workload; (2) some national security concerns not defined or  addressed in DOD\u2019s Instruction; (3) some investments that pose national  security concerns not always able to be addressed through the CFIUS  process; and (4) current component reviewer responsibilities and CFIUS  processes not reflected in DOD\u2019s Instruction."], "subsections": [{"section_title": "DOD Has Not Assessed Resources to Address a Substantially Increased CFIUS Workload", "paragraphs": ["DOD faces challenges addressing an increasing CFIUS workload with its  current resources. For example, we found that the number of DOD  personnel with CFIUS responsibilities has not kept pace with the growing  workload. The number of transactions CFIUS reviewed from 2012  through 2017 more than doubled, increasing from 114 transactions to 238  transactions. During that time, the number of transactions DOD was  responsible for co-leading increased by about 57 percent, to 99  transactions in calendar year 2017. From 2016 through 2017 alone,  these increases resulted in DOD reviewing almost 65 additional  transactions, and co-leading about 30 additional transactions, a  substantial increase in workload in one year. DOD also experienced an  increase in the cumulative number of mitigation agreements it was  responsible for monitoring, more than doubling from 39 in 2012 to 84 in  2017. Figure 2 provides additional information on DOD\u2019s workload and  authorized positions in MIBP\u2014the lead DOD office for CFIUS.", "Based on our review of data on transactions reviewed by CFIUS, DOD\u2019s  workload has also been affected by the volume and amount of time spent  on the transactions it has reviewed. We found almost half of DOD\u2019s co-led  transactions from 2015 through 2016\u201483 of 136 transactions, or 61  percent\u2014required 45-day national security investigations. According to  Treasury officials, the number of transactions requiring national security  investigations increases member agencies\u2019 workload because these  transactions are usually more complex and require additional resources  to review. Further, 9 DOD co-led transactions from 2015 through 2016  were withdrawn and resubmitted to CFIUS, and another 7 were  withdrawn and abandoned because of national security concerns or  because the committee was going to recommend that the transaction be  prohibited. MIBP officials told us that withdrawn and resubmitted or  withdrawn and abandoned transactions indicate the complexity of their  workload, because a significant number of hours are spent either  reviewing resubmitted transactions or justifying the committee\u2019s decision  to prohibit the transactions. Moreover, MIBP officials said that depending  on the scope and complexity of the national security concerns identified  within a transaction, they have had to redirect resources from other  functions to support their review responsibilities. As a result, the official  said there have been instances where MIBP has had to shift priorities and  delay performing other CFIUS tasks in order to assist with reviewing high  priority transactions.", "In addition to reviewing transactions, as a co-lead agency, DOD is also  responsible for negotiating any mitigation agreements or other conditions  necessary to protect national security, and monitoring compliance with  those agreements or conditions. However, according to DOD officials and  documents we reviewed, there are limited resources within MIBP and at  the DOD component level to do so. For example, MIBP officials said that  the volume and complexity of mitigation agreements have increased their  workload monitoring these agreements and strained their available  resources. Specific details on the effect of mitigation agreement workload  increases on MIBP\u2019s resources have been omitted because that  information is considered sensitive.", "In addition, MIBP officials stated that because mitigation agreements  typically do not expire, the number of agreements MIBP will be  responsible for monitoring will continue to increase in the future. For  example, based on our review of MIBP mitigation agreement information,  6 transactions with active mitigation agreements that MIBP is monitoring  have been in place for 10 years or more.", "We also found that MIBP has limited personnel available to identify  transactions not voluntarily filed with CFIUS\u2014non-notified transactions\u2014 that could pose national security concerns. In the absence of voluntary  reporting by the parties involved or independent discovery of the  transaction, it is possible that CFIUS may not review a non-notified  covered transaction that could pose a risk to national security. To address  this concern, MIBP officials began efforts to identify and research non- notified transactions in fiscal year 2016 and, at one point, had up to four  personnel involved in this effort. However, according to MIBP officials,  three of those personnel were reassigned to help conduct reviews of  notified transactions, leaving one person responsible for identifying and  researching non-notified transactions relevant to DOD. Specific details on  the effect of limited personnel on MIBP\u2019s ability to identify non-notified  transactions have been omitted because the information is considered  sensitive.", "To perform its CFIUS responsibilities, OUSD (AT&L) began receiving  some funding for CFIUS in fiscal year 2014\u2014on average about $2.4  million dollars a year. However, according to an MIBP official, the funding  MIBP receives for CFIUS is typically received after other priorities within  OUSD (AT&L) have been addressed. Further, OUSD (AT&L)\u2019s funding  does not include CFIUS responsibilities being performed by the other  DOD components, which according to MIBP officials do not typically have  their own resources for performing CFIUS responsibilities. Among the  components we spoke with, the amount of time and personnel dedicated  to CFIUS responsibilities varies greatly. According to these components,  the amount of time and personnel reviewing transactions ranged from one  person dedicating a few hours a month at one component, to a full-time  responsibility for six personnel at another component. However, most of  the components we spoke with said that CFIUS is a part-time  responsibility, and only four of the nine components we spoke with had  dedicated personnel to support CFIUS responsibilities. MIBP officials  confirmed that the components often have limited personnel and funding  to perform CFIUS responsibilities, which can affect the level of  involvement components have in reviewing transactions, monitoring  mitigation agreements, and researching the non-notified transactions.", "Recognizing the resource constraints posed by its increased workload,  MIBP has taken some steps to assess and adjust its CFIUS resources.  For example, MIBP received an increase in its authorized positions in  fiscal years 2016 and 2017. Specifically, authorized positions increased  from 12 to 17, and according to MIBP officials, 16 of the 17 positions were  filled as of October 2017. In January 2017, MIBP requested that  component reviewers estimate their CFIUS resource needs to address  increases in CFIUS workload. According to an MIBP official, this  information was used to support a fiscal year 2019 request for additional  funding and personnel to perform CFIUS responsibilities department- wide, and for funding to further develop information technology solutions  for managing DOD\u2019s CFIUS process. However, MIBP officials told us their  request was only partially funded by the department, and that MIBP would  have to determine how to distribute the funding received across the  various components to perform its CFIUS responsibilities.", "DOD\u2019s Instruction states that DOD components shall ensure that  adequate resources, in terms of personnel and budget, are available for  statutorily required mitigation agreement monitoring and compliance  activities. Moreover, federal internal control standards state an agency  should establish the organizational structure necessary to achieve its  objectives and periodically reevaluate this structure. In this case, this  includes the resources needed to accomplish CFIUS responsibilities,  such as monitoring mitigation agreements and identifying non-notified  transactions. However, according to an MIBP official, prior increases in  authorized positions were not added based on any formal review or  analysis of resource needs or capability gaps. While MIBP has taken  some steps to address its resource limitations, MIBP and some other  DOD component officials we spoke with who have CFIUS responsibilities  continue to face resource constraints to address their growing workload.  Even after receiving approval for some additional funding across DOD to  support CFIUS responsibilities, DOD\u2019s resource limitations could be  further exacerbated if the number of transactions continues to increase.  Without a formal analysis to assess and prioritize the resources  necessary for performing its current and future CFIUS responsibilities,  DOD will likely face challenges carrying out the duties and responsibilities  outlined in its CFIUS policy. In addition to keeping up with the workload  involved in reviewing notified transactions, the risks include not knowing  whether violations of mitigation agreements or non-notified transactions  are occurring that could pose risks to national security."], "subsections": []}, {"section_title": "National Security Concerns for Some Investments Are Not Well- Defined in DOD Policy", "paragraphs": ["DOD faces evolving national security concerns from foreign investments  in U.S. businesses developing emerging technologies and in proximity to  critical military locations, but there are inconsistencies in how DOD is  reviewing these investments. DOD\u2019s Instruction identifies factors to  assess relevant to DOD national security interests, such as whether a  firm produces critical technologies or unique defense capabilities, or  whether a company being acquired is part of DOD critical infrastructure  that is essential to project, support, or sustain military forces. However,  DOD\u2019s Instruction does not address the extent to which emerging  technologies and proximity to critical military locations are considered  under these factors, or whether and how components should review and  prioritize transactions for these concerns.", "Emerging Technology: Officials at several of the DOD components  we spoke with identified challenges addressing concerns related to  emerging technology, such as artificial intelligence and robotics,  through the CFIUS process and varied as to whether they elevate  concerns with transactions involving emerging technology. For  example, officials at four components said that it can be difficult to  explain the risks associated with foreign investment in U.S.  businesses developing emerging technologies, particularly if the  technology in question is not already being used in a defense program  or not being acquired through a traditional merger or acquisition.  Officials from another component noted that it can be difficult to  identify vulnerabilities and explain the need to protect early stage  technologies through the CFIUS process if the technology is not  advanced enough. DOD\u2019s Instruction defines critical technologies  based in part on those items that are already subject to export  controls, but does not specify the types of emerging technologies that  could be of concern for the department. Officials at several  components noted that it can be difficult for them to identify which  emerging technologies are going to be important to DOD to know  whether transactions should be mitigated or prohibited. DOD has  several lists identifying critical technologies or assets, but does not  have an agreed-upon list of emerging technologies that should be  protected from foreign investment, making it difficult for components  to know which emerging technologies are of concern to the  department.", "A recent DOD report noted that having an agreed-upon list of critical  technologies would provide clarity on which transactions reviewed by  CFIUS should be prohibited or suspended. According to MIBP  officials, they recently initiated a study to identify leading companies  and technology areas critical to the department now and in the future.  They intend for the study, planned to be completed in spring of 2018,  to identify critical and emerging technology sectors and companies  not currently included in the defense industrial base. According to  DOD officials knowledgeable of the study, MIBP plans to use the  results to work with the department\u2019s Office of Small Business and  others on ways to use internal DOD resources to protect emerging  technologies and intellectual property that are critical to DOD before  they are subject to foreign investment. However, officials did not state  how the study would help them address emerging technology through  CFIUS-related reviews or whether the results of the study would  inform changes to DOD\u2019s Instruction or otherwise be used to help  guide components on which emerging technologies are critical to the  department.", "Proximity: Each of the military departments varies in how it reviews  transactions for proximity to critical military locations. According to  DOD reports, transactions near certain military locations can present  encroachment issues or opportunities for persistent surveillance and  collection of sensitive information of training procedures or of the  integration of certain technological capabilities into major weapon  systems. When asked about how transactions are reviewed for  proximity concerns, MIBP officials said they defer to the military  departments to identify what constitutes a concern and do not limit  proximity to certain locations. Moreover, MIBP officials stated that  depending on the transaction, proximity concerns can arise regardless  of distance to a critical location, and that the circumstances  surrounding a transaction should be reviewed on a case-by-case  basis to account for those concerns.", "Proximity is not defined in the current DOD Instruction or listed as a  factor that the military departments should consider when reviewing  transactions. Officials from two of the military departments we spoke  with review every transaction on a case-by-case basis for proximity  concerns. According to documentation from the third department, it  limits its reviews to acquiring companies from certain countries and  only assesses those transactions for proximity concerns if the target  location is within a certain distance of designated critical locations or  assets. These different approaches for reviewing transactions have  resulted in inconsistencies among the military departments in the  types of proximity concerns they elevate to CFIUS. For example, in  one transaction, we found that officials from the third military  department recognized a concern near a training range used by all  three military departments. While the transaction was ultimately  withdrawn because CFIUS planned to recommend that the President  prohibit or suspend the transaction, the third department did not  identify a national security risk because it did not meet its criteria.  Officials from this military department stated that greater clarification  on the types of proximity concerns DOD wants to elevate through the  CFIUS process, as well as criteria that component reviewers should  use to identify risks, would be helpful.", "Our prior work has identified challenges DOD faces in identifying risks  to foreign encroachment near defense training ranges. In a December  2014 report, we recommended that DOD develop and implement  guidance for assessing risks to certain test and training ranges from  foreign encroachment based on mission criticalities and level of  threat. According to DOD officials, they recently conducted a data  call to the military departments to identify the locations that they  consider to be at risk from foreign encroachment. DOD plans to use  this information to develop guidance, not related to the CFIUS  process, to assess the risks that test and training ranges face from  foreign encroachment.", "Federal internal control standards state that agencies should clearly  define objectives and risk tolerances; identify, analyze, and respond to  risks, and communicate necessary information to achieve their  objectives. DOD is taking steps to identify and assess areas of concern  related to emerging technology and proximity, but these efforts are not  specific to the CFIUS process and have not yet been completed or  communicated to components through DOD\u2019s Instruction, or otherwise.  As a result, the components lack clear and consistent guidance on how to  review transactions for these specific types of national security concerns  facing the department. Without clarity on the types of transactions and  national security risks that should be addressed, for example by  incorporating the results of its efforts into DOD\u2019s Instruction, component  reviewers will likely continue to be inconsistent in reviewing transactions  and identifying and prioritizing national security concerns."], "subsections": []}, {"section_title": "DOD Has Identified Some Investments That Present National Security Concerns but Are Not Addressed through the CFIUS Process", "paragraphs": ["In addition to challenges identifying certain national security concerns  within DOD, CFIUS officials at Treasury and DOD indicated that national  security concerns for some foreign investments\u2014such as those related to  critical and emerging technologies and proximity to certain military  locations\u2014can arise that the committee does not have the authority to  review. For example, pursuant to CFIUS regulations, the purchase of  property that does not constitute a U.S. business by a foreign person or  the licensing of emerging intellectual property to a foreign person are not  covered transactions and therefore not addressed through the CFIUS  process. As shown in figure 3, while some foreign investments that may  result in national security concerns related to critical and emerging  technology and proximity are addressed through the CFIUS process,  others are not. According to DOD reports, CFIUS is one of the only tools  able to address foreign investment in the United States, but is limited in  its ability to address some investments in emerging technology and in  proximity to military locations. Without the ability to address national  security concerns arising from these investments, DOD is at risk of losing  access to technologies, assets, and locations critical to maintaining and  advancing U.S. technological superiority.", "A June 2017 DOD report found that although CFIUS is one of the only  tools available to address technology transfers as a result of foreign  investment, it is not effective at stopping technology transfer for  investments that are not addressed through the CFIUS process, like  certain joint ventures and other minority investments that do not result in  foreign control. However, according to DOD documents and officials,  these investments can result in technology transfers that threaten U.S.  national security. For example, according to the DOD report, Chinese  investors have been active in emerging technology sectors like artificial  intelligence, augmented and virtual reality, and robotics, and Chinese  investment in venture-backed start-ups is on the rise. The report also  found that China\u2019s continued foreign investment in critical emerging  technology companies may have consequences for DOD\u2019s ability to work  with these companies in the future and its ability to maintain U.S.  technological superiority.", "DOD officials cited concerns with their inability to address certain  investments through the CFIUS process that can result in technology  transfers or limit DOD access to emerging technologies. For example,  DOD officials from three components cited instances when companies  entered into joint ventures or other investment structures after  withdrawing their transaction from the CFIUS process. A DOD official at  one component cited a 2016 transaction where CFIUS planned to  recommend that the President prohibit the transaction to prevent the  transfer of a critical technology from a U.S. company to a foreign acquirer.  Following the companies\u2019 subsequent withdrawal from the CFIUS  process, they entered into a joint venture. While CFIUS is aware of the  joint venture and that it could result in the same transfer of technology  CFIUS attempted to prevent by proposing to prohibit the original  transaction, the committee has not yet determined whether it can be  addressed through the CFIUS process because CFIUS is only able to  review certain types of joint ventures. According to Treasury officials,  when these circumstances arise they are sometimes able to review the  joint venture, depending on the structure of the investment and whether it  meets the definition of a covered transaction pursuant to law and  associated regulations. Yet, even if this joint venture is ultimately  reviewed as a covered transaction, the technology that DOD and CFIUS  were originally concerned with may have already been transferred to the  foreign acquirer.", "DOD and Treasury officials also identified concerns with broader foreign  investment trends in critical and emerging technology that may not be  addressed through the CFIUS process. For example, according to MIBP  officials, they are concerned about foreign-owned enterprises exploiting critical technologies by structuring investments to avoid the CFIUS  process, and noted that multiple investment structures exist that can allow  foreign acquirers to gain access and influence over critical capabilities.  DOD and Treasury officials acknowledged the importance of critical and  emerging technologies and the consequences to DOD\u2019s technological  superiority if adversaries are able to use these technologies to advance  their own military capabilities. According to Treasury officials, determining  whether and how CFIUS should expand its scope to address these  concerns is one of the challenges they have encountered when they have  considered potential legislative changes to the CFIUS process. For  example, they said that if the scope of the law was expanded, it could  pose additional resource challenges, as CFIUS agencies would be  required to review an expanded number of potentially complex  transactions.", "According to federal internal control standards, agencies should identify,  analyze, and respond to significant changes that could affect their  operations. As noted earlier, DOD is in the process of identifying  emerging technologies that will be essential to the defense industrial  base, an important step towards informing future decision-making within  the department. However, according to MIBP officials, the study will  primarily be focused on identifying specific technology companies of  importance to the department. As noted earlier, the study is not specific to  CFIUS, and as a result plans for the study do not indicate that it will  identify and assess other limitations facing MIBP, like those encountered  addressing certain types of foreign investments that are not addressed  through the CFIUS process but that pose risks to DOD\u2019s technological  and military superiority. Given the importance of critical and emerging  technology to DOD, assessing any challenges DOD faces addressing  certain foreign investments in critical and emerging technologies through  the CFIUS process, and considering whether additional authority is  needed, would better position DOD to address any unresolved national  security concerns associated with these types of foreign investments.  Without such an assessment, DOD remains at risk of not having the  necessary tools and authorities to prevent the transfer of critical and  emerging technologies to foreign acquirers, which is important for  maintaining a viable defense industrial base and U.S. technological  superiority."], "subsections": [{"section_title": "Some Foreign Investments Not Addressed through CFIUS Process Pose Proximity Concerns near Critical Military Locations", "paragraphs": ["Some proximity concerns near critical military locations can be addressed  by CFIUS, but DOD also identified challenges addressing proximity  concerns with investments that are not able to be addressed through the  CFIUS process. For example, the establishment of businesses (which  may include land purchases) in the United States that do not include an  existing U.S. business\u2014referred to as greenfield investments\u2014are not  considered covered transactions, but can pose proximity concerns when  near certain military locations. Officials at MIBP and several other  components expressed concerns with their inability to address proximity  concerns arising from these investments, which can pose significant  national security risks and limit DOD\u2019s ability to perform necessary test  and training activities. We identified at least two greenfield investments  that have occurred since 2016 that have posed proximity concerns near  critical military locations, and were not able to be addressed through the  CFIUS process.", "One investment involving a purchase of land presented risks due to its  proximity to an Air Force base. According to DOD\u2019s Report to  Congress 2017 Sustainable Ranges, the investment involved a U.S.  company with substantial foreign financing, potentially subjecting  training range missions performed at the base to persistent monitoring  by a foreign government. According to officials, although the Air  Force identified concerns with the investment, because it did not  result in foreign control of a U.S. business, it was determined to not be  a covered transaction.", "Officials from another military department identified an investment that  was not voluntarily filed with CFIUS and posed proximity issues near  a training range. According to military department officials, the  investment involved the same foreign acquirer that had been a source  of concern in other voluntarily filed CFIUS transactions. The military  department elevated its concerns to CFIUS through the non-notified  process, but, according to officials, Treasury ultimately determined  that it was not a covered transaction because there was no foreign  control over a U.S. business. Moreover, because the investment was  already completed, the company had started construction that  threatened to encroach upon a training range that is one of only two in  the country available to perform certain types of training. Military  department officials said it was too soon to determine the effect that  this investment would have on their ability to perform training, but  emphasized the criticality of protecting unique testing and training  range spaces.", "Our prior work on defense training ranges also identified limitations DOD  faces in addressing proximity and encroachment concerns from foreign  investment. For example, we found in 2014 that officials from the Navy  and Air Force, in particular, had concerns about the number of  investment-related projects by foreign entities near their ranges (such as  leases for mining or oil or natural gas exploration), which could pose  potential security risks. However, we reported that DOD does not have  access to the information needed to determine whether foreign  investment activities near testing and training ranges pose a threat  because other civilian federal agencies, such as the Departments of  Interior and Transportation, that are responsible for approving these  transactions face legal, regulatory, or resource challenges that prevent  them from collecting information unrelated to their missions. We found  that, although DOD has had some success obtaining information on  foreign investment near test and training ranges, these efforts have been  based on informal coordination between military liaisons at certain bases  and local Department of Interior representatives. In addition to our  recommendation that DOD develop and implement guidance for  assessing risks to certain test and training ranges from foreign  encroachment, we recommended that DOD collaborate with these other  federal agencies to gather additional information needed for transactions  in proximity to DOD test and training ranges, and seek legislative relief if  needed. DOD concurred with our recommendations and has taken some  steps to address them. For example, as noted earlier, DOD is in the  process of developing guidance to assess risks to test and training  ranges based on its identification of locations it considers to be at risk  from foreign encroachment. According to DOD officials, they have also  drafted legislative proposals to address limitations to their ability to gather  information from the land management agencies on foreign investments  in proximity to critical military locations. According to DOD officials, these  proposals have not been submitted to Congress due to concerns raised  by the federal land management agencies, but DOD continues to explore  the possibility of legislative action to address these concerns.", "We also reported that DOD uses multiple methods, in coordination with  other federal agencies, to identify potential business activities near DOD  test and training ranges. But CFIUS is the only formal option in regard to  transactions involving foreign companies or entities that accounts for  national security concerns. A 2015 DOD report to Congress on security  risks related to foreign investment in the United States found that there  are no authorities in the current federal land management framework that  would require federal land management agencies to prevent a transaction  from occurring if DOD identified a national security concern. The report  further states that CFIUS and the Foreign Investment and National  Security Act of 2007 are the only federal authorities available to DOD to  assess national security risks posed by foreign investment in the vicinity  of critical military locations, like DOD training and test ranges, but that the  CFIUS process is not intended to address such national security risks.  While CFIUS is able to address proximity concerns that arise through  covered transactions, DOD has reported that it has limited ability to  identify, assess, and mitigate national security concerns for investments  that are not considered covered transactions through CFIUS, such as  greenfield investments. However, DOD\u2019s report does not identify, assess,  or make recommendations about what additional DOD authority, if any,  would be necessary to address these concerns, and as noted earlier,  DOD\u2019s efforts to develop and implement guidance based on its  identification of locations that they consider to be at risk from foreign  encroachment are still in progress.", "According to federal internal control standards, agencies should establish  policies and procedures to respond to risks; and identify, analyze, and  respond to significant changes that could affect their operations. DOD is  in the process of identifying locations it considers to be at risk from  foreign encroachment, which can eventually be used to inform its review  of foreign investments for proximity concerns, but DOD states that it is  currently unable to address concerns related to greenfield investments  through the CFIUS process because they are not considered covered  transactions. Moreover, DOD reported that CFIUS is not a DOD-led  process, and DOD is just one of nine member agencies. Members of Congress have recently proposed legislation that would expand the  definition of covered transactions to include foreign acquisitions or leases  of real estate in proximity to U.S. military locations, but the legislation is  pending. Taking additional steps to assess what authority, if any, is  needed to address foreign investment in proximity to certain critical  military locations and raising these concerns to Congress, as necessary,  would better position DOD to address its concerns. Until DOD completes  efforts to develop and implement guidance assessing risks to critical  locations that should be protected from foreign encroachment, and  assesses what authority, if any, is necessary to independently address  concerns with investments near these areas, it remains at risk of not  protecting these locations from the national security risks posed by  foreign adversaries."], "subsections": []}, {"section_title": "Detailed Location Information Not Included in Notices Submitted to CFIUS", "paragraphs": ["Detailed location information is not always included in notices submitted  to CFIUS, which can affect DOD\u2019s ability to review transactions for their  proximity to critical military locations. Some CFIUS transactions can  involve numerous properties or locations, and information on the  geographic coordinates of these locations is used by MIBP and the  components when determining if there could be national security  concerns with a transaction. Specific details on the use of geographic  coordinates to identify whether a transaction may pose proximity  concerns near critical military locations have been omitted because the  information is sensitive.", "According to Treasury officials, DOD often requests geographic  coordinates once a notice is submitted, and Treasury officials said they  have attempted to gather more detailed location information as part of  notices. However, officials at one military department said that while there  have been improvements in the availability of this information in notices,  there are still some companies that do not include the geographic  coordinate information. Treasury officials stated that CFIUS has the  authority to require this information from companies and has considered  revising its regulations to require this information. However, Treasury has  not yet done so. Federal internal control standards state that agencies  should establish policies and procedures to respond to risk and use  quality information to achieve its objectives. Requiring information on  geographic coordinates for all target locations in notices submitted to  CFIUS will improve DOD\u2019s ability to more efficiently identify and address  proximity concerns with covered transactions."], "subsections": []}]}, {"section_title": "DOD Has Not Updated Policy to Reflect Changes in Components\u2019 Review Responsibilities and Processes", "paragraphs": ["DOD\u2019s Instruction identifies CFIUS-related responsibilities and processes  for reviewing transactions, but that policy has not been updated to reflect  current component reviewer roles and responsibilities or processes for  addressing non-notified transactions that may pose national security  concerns for the department. The current DOD Instruction was issued in  2010\u2014prior to the transfer of CFIUS responsibilities from the Defense  Technology Security Administration to MIBP\u2014but has not been updated  to reflect the change. Moreover, the Instruction includes a list of the types  of information components should provide to request a non-notified  transaction be submitted to CFIUS for further action but has no guidance  or expectations for whether or how components should identify and  research them. In addition to DOD\u2019s Instruction, which is the guiding  policy for DOD\u2019s CFIUS procedures, in June 2016, MIBP developed an  internal process document describing its process for reviewing CFIUS  transactions; developing and monitoring mitigation agreements; and  identifying and reviewing non-notified transactions. While MIBP officials  said the process document is based on the DOD Instruction and is more  up-to-date, it is intended to be an internal reference document for MIBP  employees and contractors, and it has not been distributed more broadly  to the components involved in reviewing transactions for CFIUS.", "Moreover, the DOD Instruction does not reflect the department\u2019s  responsibilities for reviewing transactions. For example, MIBP\u2019s internal  process document identifies advisory and primary reviewers who are  responsible for providing inputs on transactions. However, based on our  review of the DOD Instruction, advisory and primary component  responsibilities are not differentiated, and several of the advisory  reviewers that are identified in MIBP\u2019s internal process document are not  listed as reviewers in the current Instruction. For example, according to  DOD documentation and officials, the Assistant Secretary of Defense for  Research and Engineering is an advisory reviewer for CFIUS cases and  coordinates input from several other reviewers\u2014including the Defense  MicroElectronics Activity and Defense Advanced Research Projects  Agency\u2014to determine if a transaction involves a critical technology.  However, the Assistant Secretary of Defense for Research and  Engineering\u2019s responsibilities for coordinating these inputs are not  identified in the current DOD Instruction, nor is this office listed as a  reviewer. Our review of DOD\u2019s Instruction, internal guidance, and other  documentation identified several other discrepancies between component  responsibilities identified in the Instruction and what is occurring in  practice. For example, the Under Secretary of Defense for Personnel and  Readiness, among other things, coordinates with OUSD (AT&L) and the  Director of Operational Test and Evaluation on the effects of  encroachment on DOD test and training areas. While MIBP officials  identified the Office of the Under Secretary of Defense for Personnel and  Readiness as a CFIUS reviewer, this office is not identified as a reviewer  in the DOD Instruction or internal MIBP process document.", "In addition to not having up-to-date information on reviewer roles and  responsibilities, the DOD Instruction does not include guidance on how  MIBP and the components should identify and research non-notified  transactions that may pose national security concerns. As discussed  above, because the CFIUS process is based on voluntary notices  submitted by parties to transactions, DOD and Treasury officials stated  that it is important to monitor foreign acquisitions of U.S. companies that  are not filed with CFIUS to determine if any may present national security  concerns. As shown in figure 4, there were approximately 1,680 mergers  and acquisitions involving foreign acquisitions of U.S. companies in  2016. While not all foreign acquisitions of U.S companies pose national  security concerns that would warrant them being reviewed by CFIUS,  DOD officials acknowledged challenges with their ability to identify and  research these transactions. Specific details on the challenges DOD  faces identifying non-notified transactions have been omitted because the  information is considered sensitive.", "In addition to challenges identifying non-notified transactions within MIBP,  DOD component reviewers\u2019 awareness of the non-notified transaction  process varied across the components that we spoke with, and  participation in this part of the process is ad hoc. For example, five of the  nine components in our sample said they do not have processes in place  to identify transactions that have not been voluntarily filed but present  risks to national security that could warrant CFIUS review. Officials from  four components we spoke with said they have identified non-notified  transactions. However, officials from most other DOD components told us  they either are not involved or occasionally review non-notified  transactions once MIBP identifies them, and they do not proactively  perform non-notified transaction research, in part due to resource  constraints.", "Officials from some components were also uncertain about whether they  should elevate some non-notified transactions of concern. For example,  DOD\u2019s Instruction does not explain when, pursuant to CFIUS regulations,  joint ventures are covered transactions. It also does not explain that, even  if a non-notified transaction has been completed\u2014meaning a foreign  acquirer has already finalized the purchase of a U.S. company\u2014CFIUS  can still recommend that the President suspend or prohibit the  transaction. Officials from two components said that they are aware of  completed joint ventures or other transactions that were of concern but  not voluntarily filed, and that they did not elevate them. According to  these officials, they assumed the joint ventures would not be covered or  that there was nothing CFIUS could do to address their concerns.", "In May 2017, the MIBP official responsible for non-notified transactions  began a DOD pilot working group for researching non-notified  transactions. According to the official, the working group is intended to  leverage component reviewer resources and involve them in performing  research on non-notified transactions identified by MIBP. However, as of  June 2017, participation in the group was limited to 5 of the more than 30  DOD component reviewers, and its processes for reviewing and  distributing transactions are still evolving. While this action represents a  positive step towards establishing and formalizing efforts to identify non- notified transactions, MIBP officials expressed concern that their ability to  identify transactions that may pose risks is not as developed as they  would like it to be. Specific details on MIBP\u2019s ability to identify  transactions that may pose risks have been omitted because the  information is considered sensitive.", "In contrast to DOD\u2019s limited non-notified guidance, the Department of  Homeland Security, another member agency of CFIUS, has guidance for  reviewing non-notified transactions in its Instruction for Department of  Homeland Security Participation in the Committee on Foreign Investment  in the United States. According to the Instruction, each week a digest of  non-notified transactions is to be sent to Department of Homeland  Security components for review, and selected components are required to  provide any concerns with the transaction within 7 days. The Department  of Homeland Security then determines whether to prepare a non-notified  request to forward the transaction on to CFIUS so that the committee can  determine whether the transaction merits further action.", "Federal internal control standards state that agencies should identify and  document agency responsibilities and processes in policy, and  periodically review and update policies based on changes. According to  MIBP officials, they have been revising DOD\u2019s Instruction for over 3  years, and recently began the formal department-wide review process.  MIBP officials said they had not released updated guidance to reflect  changes in responsibilities and processes sooner because of challenges  with employee attrition and leadership changes, which have resulted in  multiple rewrites. However, several components we spoke with  referenced the need for updated or standardized guidance to inform their  CFIUS review responsibilities and the development of their own  component-level guidance. It has been over 5 years since MIBP was  assigned responsibility for CFIUS, raising questions about the  prioritization of CFIUS within the department. Without clear and updated  guidance on reviewer responsibilities and established processes and  guidance on the identification and review of non-notified transactions,  DOD is at risk of inconsistencies in its review of transactions, and it may  be unable to address non-notified transactions that pose national security  concerns in a timely and efficient manner."], "subsections": []}]}, {"section_title": "DOD Faces Several Challenges Developing and Monitoring CFIUS Mitigation Agreements", "paragraphs": ["As noted above, mitigation agreements address any threats to national  security posed by a transaction. DOD is responsible for most of the  CFIUS mitigation agreements, but faces a variety of challenges when  taking action to mitigate national security concerns and ensure the  effectiveness of the agreements. These challenges relate to insufficient  personnel resources compared to MIBP\u2019s workload, and unclear  communication about the delineation of responsibilities between MIBP  and the DOD components. Moreover, DOD has not reported to Congress  on its responsibilities for monitoring and enforcing mitigation agreements."], "subsections": [{"section_title": "DOD Is Responsible for Most CFIUS Mitigation Agreements", "paragraphs": ["DOD is responsible for more mitigation agreements than other CFIUS  member agencies, monitoring 84 of the total of 141 mitigation agreements  for CFIUS, or about 60 percent as of the end of calendar year 2017.  DOD\u2019s responsibility for mitigation agreements more than doubled  between 2012 and 2017. Figure 5 shows how DOD\u2019s CFIUS mitigation  agreement-related responsibilities have increased since 2000.", "We reviewed Treasury data on transactions from January 2015 through  December 2016 to identify the types of national security concerns DOD  mitigated through the CFIUS process. We found that the 22 mitigation  agreements implemented by DOD during this period included acquisitions  of U.S. companies in the aerospace, energy, real estate, and information  technology industries, among others. Seventeen of these agreements  were implemented to address either supply assurance\u2014DOD\u2019s access to  certain products or services\u2014or proximity issues.", "Based on the Committee on Foreign Investment in the United States  Annual Report to Congress for Calendar Year 2015 and our review of  DOD documentation, the mitigation measures that have been negotiated  and adopted since 2015 may require the parties to the transaction to take  actions such as:", "Ensuring that only authorized persons have access to certain  technology and information;", "Appointing a U.S. government approved security officer;", "Providing annual reports and independent audits;", "Notifying security officers or relevant U.S. government parties in  advance of foreign national visits to the U.S. business for approval;", "Providing written notification when additional assets are purchased;", "Providing written notification and obtaining CFIUS approval of other  parties joining the joint venture; and", "Requiring supply assurance for products or services being provided to  the government.", "Based on our review of a non-generalizable sample of nine mitigation  agreements provided by one of the DOD component reviewers, mitigation  agreements typically have more than one measure. For example, there  were between 4 and 10 different measures in each agreement we  reviewed, and in one agreement, one measure required the submission of  more than 100 reports. While some of the mitigation measures require the  parties to the agreement to take action and report to DOD, MIBP also  monitors and enforces compliance with mitigation measures by  conducting on-site compliance reviews and investigations if violations are  discovered.", "If a company violates a mitigation agreement, CFIUS has the authority to  impose penalties, although, according to Treasury and DOD officials, the  committee has not taken action to enforce penalties for non-compliance  with a mitigation agreement. CFIUS regulations state that any person who  intentionally or through gross negligence violates a material provision of a  mitigation agreement may be liable for a civil penalty not to exceed  $250,000 per violation or the value of the transaction, whichever is  greater. DOD officials and the Deputy Assistant Secretary for  Investment Security at Treasury stated that the regulatory standard  regarding taking action against a company that has violated a mitigation  agreement is high. They noted it is difficult to prove that a company  violated a mitigation agreement intentionally or through gross negligence,  and that the national security effect may exist even if the cause of the  violation is ordinary negligence. In October 2017, MIBP officials  reported six instances since 2013 where companies were not in  compliance with their mitigation agreements, but stated that none of these  instances were the result of intentional or grossly negligent actions. They  told us that DOD has not recommended that CFIUS take action to impose  penalties in these cases. In general, according to Treasury and MIBP  officials, CFIUS member agencies work with companies to establish a  culture of compliance and correct violations of the mitigation agreements  as opposed to imposing fines or penalties."], "subsections": []}, {"section_title": "DOD Faces Challenges in Developing and Monitoring CFIUS Mitigation Agreements", "paragraphs": ["MIBP and the DOD components face a variety of challenges, to include  developing and monitoring mitigation agreements as a result of limited  personnel resources compared to an increasing workload; and  communicating about mitigation agreement responsibilities between DOD  and the components. Some of the specific details on personnel resource  challenges and communication between MIBP and the components have  been omitted because the information is sensitive.", "In addition to resource challenges within MIBP, resources for mitigation  agreement-related activities within the DOD components are also limited  and can vary. Officials from at least one component stated that they are  not involved in developing or monitoring mitigation agreements because  they do not have the resources to do so. Further, citing concerns with  DOD\u2019s ability to effectively oversee mitigation agreements, officials from  three DOD components stated that DOD should recommend prohibiting  transactions more often than imposing mitigation agreements. For  example, an official from one DOD component with CFIUS responsibilities  stated that it is not plausible that these agreements can be properly  executed because adversaries have the resources to conceal the fact that  they are not complying with the mitigation agreement. Officials from  another DOD component also expressed concerns with mitigation  agreement enforcement, and stated that they were likely to recommend  prohibiting transactions in the future instead of negotiating mitigation  agreements in transactions where a national security risk has been  identified.", "A June 2017 DOD report on technology transfer and emerging technology  found that given concerns about the cost and effectiveness of mitigation  agreements, if the mitigation agreements cannot be simple, CFIUS  should recommend that the President suspend or prohibit the transaction.  Similarly, officials at the Navy stated that mitigation measures are more  effective if they can be fully implemented before the transaction is closed,  as opposed to those that require ongoing monitoring. MIBP officials  stated that if resource shortfalls continue, they run the risk of having to  recommend that the President prohibit transactions because they are  unable to implement or monitor additional mitigation agreements.", "To bolster available DOD resources for monitoring mitigation agreements,  MIBP is in the process of expanding on a case-by-case basis its use of  third-party monitors\u2014private auditing and consulting firms approved by  DOD and CFIUS but paid for by the foreign acquirer. In these instances,  the acquirer is responsible for contracting with qualified third-party  independent monitors, which MIBP officials stated they believe could  result in cost savings to the government by reducing the resources it uses  to respond to routine notifications and requests for approval. MIBP  officials stated that this concept would allow MIBP to better extend control  over the range of agreements by focusing on monitoring the third-party  monitors. However, these officials also acknowledged that the use of  third-party monitors can present an inherent conflict of interest by having  foreign acquirers funding their own compliance and mitigation agreement  monitoring. It is too soon to assess the effect of the expansion of third- party monitoring on improving MIBP\u2019s ability to oversee compliance with  mitigation agreements.", "In addition, we found that MIBP has not clearly communicated  expectations and responsibilities for developing and monitoring mitigation  agreements to some DOD components. This has led to confusion about  what is expected of the components during this part of the process and  raised uncertainty within the components we met with about the  effectiveness of the mitigation agreements. For example, DOD\u2019s  Instruction requires components to identify, as applicable, mitigation  agreement measures as part of their risk-based analysis and participate  in monitoring the mitigation agreements in instances when they have  identified a risk. However, officials from several DOD components said  that they either do not include mitigation measures in their risk-based  analysis or have been asked not to by MIBP. According to Treasury  officials, the CFIUS process has been updated and the proposal of  mitigation measures can occur before or during the development of an  agency\u2019s risk-based analysis, but this information is not reflected in  DOD\u2019s Instruction, and DOD officials could not identify whether or how  this change in process had been communicated to the components.", "In addition, officials at one DOD component cited examples of unclear  communication regarding their responsibilities for mitigation agreement  documentation. For example, these officials told us they requested, but  did not receive, documentation from MIBP to ensure compliance with four  of the nine mitigation agreements it is responsible for monitoring.  According to documentation from this component, it had not received  approximately 110 of 133 documents and other reporting requirements  that were necessary to determine whether the company was in  compliance with the mitigation agreement. According to MIBP officials,  they had received the required documentation from the company but did  not share it with the component because they were not related to the  mitigation agreement measures that the component was responsible for  monitoring. As a result of this miscommunication, the component thought  that it was responsible for reviewing the missing documentation. MIBP  officials stated that they plan to expand and improve their capability to  provide DOD components access to the necessary documentation in the  future. Officials from MIBP and the component said MIBP currently  maintains a shared drive where it stores mitigation agreement  documentation, but not all components have access to this  documentation.", "Additionally, while DOD\u2019s Instruction states that DOD components that  propose mitigation measures should participate in overseeing those  measures, two of the nine components in our sample reported being  actively involved in ensuring compliance with mitigation agreements or  performing site visits. Two components have allocated several full-time  personnel to the task and another has guidance that directs its  involvement in CFIUS mitigation agreement monitoring. For example,  Navy officials said they have established an office to review transactions  that may pose proximity-related risks and monitor proximity-related  mitigation agreements, but they have not been given the authority by  MIBP to make a final determination regarding whether parties are in  compliance with the agreements or to participate in all discussions with  the parties. MIBP officials stated that they seek component input on all  mitigation agreements, but that MIBP has taken the lead in developing  and monitoring DOD mitigation agreements and ensuring compliance  because the DOD components have not historically had the resources to  dedicate to this responsibility.", "DOD\u2019s Instruction identifies oversight and communication mechanisms  that have not been implemented, but could assist the department in  addressing challenges monitoring and ensuring compliance with its  CFIUS mitigation agreements. For example, DOD\u2019s Instruction  establishes a CFIUS Monitoring Committee, made up of relevant DOD  component reviewers, to serve as the focal point for DOD monitoring.  Among other things, the CFIUS Monitoring Committee was intended to  meet quarterly. DOD\u2019s Instruction also calls for the development of a  DOD CFIUS Strategic Mitigation Plan to include things such as:  identification of strategic policy for mitigation and monitoring efforts,  taking into account resource management and filing trends;  identification of methods to substantiate and document company  compliance with mitigation agreements and maintain records of that  compliance; and annual analysis of past mitigation in order to determine if past  approaches to monitoring and mitigation can be improved.", "However, according to MIBP officials, the CFIUS Monitoring Committee  and the Strategic Mitigation Plan were not implemented because MIBP  did not have the resources to do so. MIBP officials also said they did not  see the establishment of the CFIUS Monitoring Committee with relevant  DOD components as necessary because MIBP has taken primary  responsibility for monitoring mitigation agreements. In addition to not  implementing these oversight and communication mechanisms, MIBP  has not updated DOD\u2019s Instruction to account for policies that are no  longer practiced, such as requiring proposed mitigation measures as part  of the risk-based analysis, or having components take responsibility for  monitoring the mitigation measures they recommend. According to  federal internal control standards, to achieve an entity\u2019s objectives,  management assigns responsibility and delegates authority to key roles  throughout the entity. In addition, management should internally  communicate the necessary quality information to achieve the entity\u2019s  objectives. Updated and improved guidance, including communication  about MIBP\u2019s management of mitigation agreements and component  involvement in developing and monitoring them, could help provide  additional oversight of DOD\u2019s mitigation agreements and address  resource challenges associated with an increasing workload."], "subsections": []}, {"section_title": "DOD Has Not Reported on Review of Mitigation Agreement Monitoring Responsibilities", "paragraphs": ["DOD has not reported its findings to Congress on a review regarding  monitoring and enforcing mitigation agreements. A 2013 House Report  asked the Secretary of Defense to review the role of the Deputy Assistant  Secretary of MIBP in monitoring CFIUS mitigation agreements in which  DOD was the lead or co-lead and determine if the Defense Security  Service is suited to perform these functions, and report the findings. The  House Armed Services Committee noted concerns over whether MIBP,  as a policy organization, has the resources and technical expertise to  provide reasonable oversight of implementation and compliance with  mitigation agreements. The House Report stated that DOD may benefit  from leveraging the capabilities of the Defense Security Service, which  already reviews every CFIUS filing on behalf of the National Industrial  Security Program, and monitors compliance with its own mitigation  agreements as part of that program.", "DOD was to report on the findings on the review in 2013, but, according  to MIBP officials, it has been delayed because disagreement exists within  DOD regarding where responsibility for monitoring mitigation agreements  should reside. Both MIBP and Defense Security Service officials we  spoke with said that their office is the best equipped to perform CFIUS  mitigation agreement responsibilities. As a result, formal coordination of  the department\u2019s response has not been completed. As of January 2018,  MIBP officials said that while they recognize the need to complete the  response, DOD has not committed to a specific time frame for the  response. Reporting the findings to the congressional defense  committees will facilitate the identification of current challenges related to  CFIUS mitigation agreement oversight, and could address questions  about the capabilities and responsibilities necessary to effectively monitor  and enforce CFIUS mitigation agreements."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Growing foreign direct investment in the United States provides important  economic benefits, but can also pose national security risks when that  investment comes from potential adversaries. Ensuring that DOD has the  resources, processes, and information necessary to perform its  responsibilities under CFIUS is essential at a time when the number and  complexity of transactions being reviewed by CFIUS has grown  significantly. According to officials, the types of investments that pose  risks have evolved, making questions about foreign control difficult to  determine and mitigate, including investments involving important  emerging technologies or real estate purchases in close proximity to  sensitive military locations.", "In light of these issues, assessing CFIUS resource requirements across  the department, completing efforts to identify and communicate critical  national security concerns, assessing whether DOD has the necessary  authority to address these concerns, and ensuring its policies and  practices reflect current DOD component reviewers and processes will be  essential to DOD\u2019s ability to address the evolving risks it faces from  foreign investment. For national security concerns that DOD determines it  does not have the authority to address, it may be necessary for DOD to  seek legislative action. Further, without updating DOD\u2019s CFIUS guidance  to reflect current requirements and reporting on reviews requested by a  committee of Congress on the department\u2019s responsibilities for monitoring  mitigation agreements, DOD will likely continue to face challenges  facilitating intra-departmental communication and questions about the  prioritization of CFIUS within DOD."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of eight recommendations: four to the Secretary of  Defense, three to the Deputy Assistant Secretary of Defense for MIBP,  and one to the Secretary of the Treasury. Specifically:  The Secretary of Defense should assess CFIUS resource requirements  within MIBP and DOD component reviewers in light of increasing  workload, and prioritize personnel and funding resources accordingly to  review, mitigate, and monitor transactions that are of concern to the  department. (Recommendation 1)", "The Secretary of Defense, in coordination with the Deputy Assistant  Secretary of Defense for MIBP and Office of the Under Secretary of  Defense, Personnel and Readiness, should incorporate the results of its  efforts to identify, assess, and prioritize national security concerns related  to foreign investment in emerging technologies and in proximity to certain  critical military locations, into DOD Instruction 2000.25 and communicate  the results to DOD component reviewers. (Recommendation 2)", "Following the completion of its emerging technology study, the Deputy  Assistant Secretary of Defense for MIBP should assess what additional  authorities may be necessary to address risks related to foreign  investment in critical and emerging technologies, and seek legislative  action to address risks posed by these investments as appropriate.  (Recommendation 3)", "Following the department\u2019s efforts to identify critical locations and develop  and implement guidance assessing risks to these locations from foreign  encroachment, the Secretary of Defense should assess what additional  authorities, if any, may be necessary to address national security risks  from foreign investments in proximity to these locations, and seek  legislative action as appropriate. (Recommendation 4)", "The Secretary of the Treasury should provide clarification to parties filing  a notice of a transaction with CFIUS that for filings involving multiple  locations, geographic coordinates are required to be part of the  notification. (Recommendation 5)", "The Deputy Assistant Secretary of Defense for MIBP should update DOD  Instruction 2000.25, to include additional guidance and clarification  regarding DOD component responsibilities during the CFIUS process and  DOD processes for identifying non-notified transactions.  (Recommendation 6)", "The Deputy Assistant Secretary of Defense for MIBP should update and  implement requirements identified in DOD Instruction 2000.25 regarding  management and oversight of mitigation agreements, such as taking into  account the resources needed to effectively monitor agreements,  improving communication methods between MIBP and the DOD  components, and clarifying component responsibilities in developing and  monitoring mitigation agreements. (Recommendation 7)", "The Secretary of Defense should submit the response to the House  Report reviewing the role of the Deputy Assistant Secretary of Defense  for MIBP in monitoring CFIUS mitigation agreements, and determining if  the Defense Security Service is suited to perform these functions.  (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DOD and Treasury provided written comments on a draft of the sensitive  report. These comments are reprinted in appendixes IV and V,  respectively. We also received technical comments from both agencies,  which we incorporated as appropriate. Both departments concurred with  our recommendations.", "In its written comments, DOD agreed to use a recent assessment of  CFIUS resource needs to inform its upcoming budget requests. We  acknowledge MIBP\u2019s recent efforts to identify and prioritize resource  needs in support of its CFIUS responsibilities. As DOD develops its  budget request, we encourage the department to consider increases in  DOD\u2019s CFIUS workload and the resources required to support essential  CFIUS functions, like monitoring mitigation agreements and identifying  non-notified transactions that may pose national security risks. DOD also  agreed to update its guidance related to CFIUS procedures and  responsibilities, and complete assessments about additional authorities  the department may need to address national security concerns related to  foreign investments in U.S. companies developing critical and emerging  technologies or in proximity to critical military locations. In its comments,  DOD stated it has identified over 40 critical military locations and expects  to develop guidance for assessing the risks posed by foreign investments  in proximity to these locations. DOD also agreed to complete its response  to the House Report reviewing MIBP\u2019s role in monitoring CFIUS mitigation  agreements. In its comments, DOD stated it is continuing to explore the  implementation of third-party monitors as an alternative solution for  monitoring CFIUS mitigation agreements.", "In its written comments, Treasury concurred with our recommendation to  provide clarification that parties filing a notice with CFIUS should include  geographic coordinates as part of their notice. Treasury has updated  information on its website to clarify that addresses and/or geographic  coordinates are required for a CFIUS filing to be considered complete.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Deputy Assistant Secretary of  Defense for MIBP, and the Secretary of the Treasury. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Department of Defense (DOD) Offices and Organizations with Committee on Foreign Investment in the Unites States (CFIUS) Review Responsibilities", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope and Methodology", "paragraphs": ["This report assesses factors, if any, that affect the Department of  Defense\u2019s (DOD) ability to (1) identify and address national security  concerns through the Committee on Foreign Investment in the United  States (CFIUS) process, and (2) develop and monitor mitigation  agreements through the CFIUS process.", "This report is a public version of a sensitive report that we issued on April  5, 2018. DOD and the Department of the Treasury (Treasury) deemed  some of the information in our April report to be sensitive, which must be  protected from public disclosure. Therefore, this report omits sensitive  information related to (1) DOD\u2019s resources to perform certain CFIUS  functions, like monitoring mitigation agreements and identifying non- notified transactions; (2) the availability of location information as part of  notices that companies file with CFIUS; and (3) the resources and  communication required between DOD and the components to develop  and monitor mitigation agreements through the CFIUS process. Although  the information provided in this report is more limited, this report  addresses the same objectives and uses the same methodology as the  sensitive report.", "To assess what factors, if any, affect DOD\u2019s ability to identify and address  national security concerns through the CFIUS process, we reviewed  relevant documentation, including: CFIUS-related laws and Department of  the Treasury (Treasury) regulations; DOD policies and guidance; and  DOD and CFIUS internal reports to identify DOD\u2019s responsibilities and  processes for identifying and addressing national security concerns  through the CFIUS process. While there are other authorities, including  export controls such as the International Traffic in Arms Regulations and  Export Administration Regulations, which in certain circumstances may  be used to address national security concerns that arise through foreign  investment, our review focused on the DOD\u2019s responsibilities addressing  national security concerns through the CFIUS process. To assess DOD\u2019s  efforts to identify and address national security concerns it identified, we  gathered and analyzed data on transactions that DOD was responsible  for co-leading from January 1, 2012, through December 31, 2017, the  most recent data available. To identify resources dedicated to supporting  CFIUS activities within the Office of Manufacturing and Industrial Base  Policy (MIBP)\u2014the DOD office responsible for coordinating the CFIUS  process on behalf of DOD\u2014we analyzed MIBP data from 2012 through  2017 on DOD personnel resources, and reviewed budget amounts from  2012 through 2016 for DOD CFIUS activities from DOD budget  documents. To identify the outcomes of transactions not voluntarily filed  with CFIUS\u2014known as non-notified transactions\u2014we gathered and  analyzed data on the number of non-notified transactions MIBP has  identified and researched since the beginning of fiscal year 2016, when  they started formally tracking that information. Based on information on  the collection and management of Treasury and DOD transaction data,  our review of related documentation, and interviews with relevant  Treasury and DOD officials, we determined that these data were  sufficiently reliable for the purposes of this report. To identify challenges  DOD faces addressing certain national security concerns, such as  protecting emerging and critical technology and foreign investments in  proximity to certain critical military locations, we reviewed a non- generalizable sample of CFIUS case file information for seven  transactions. We selected these transactions based on examples  identified by DOD components, and the types of national security  concerns, including those related to emerging technology and proximity,  that DOD officials identified throughout the review. We interviewed  officials at Treasury, MIBP, and selected DOD component reviewers to  discuss DOD\u2019s CFIUS workload and resources. In this report, we define  resources as the authorized positions, assigned personnel, personnel  performing contract services related to CFIUS functions, and CFIUS- related costs. We also discussed with these officials any limitations to  addressing certain national security concerns\u2014like protecting emerging  technology and foreign investment in proximity to critical military  locations\u2014through CFIUS, and guidance for the CFIUS process and  identifying non-notified transactions. Additional information on the DOD  components included in this review can be found below.", "To identify calendar year 2016 mergers and acquisitions involving U.S.  businesses, and the proportion of those mergers and acquisitions  involving foreign acquirers, we reviewed data available from the  Bloomberg Terminal, which is a commercial database containing data on  mergers and acquisitions. We gathered data on total 2016 mergers and  acquisitions involving U.S. companies that were announced, pending, or  completed. We also gathered data on 2016 mergers and acquisitions that  were announced, pending, or completed involving U.S. companies and  foreign acquirers to illustrate the number of potentially covered  transactions that may not be voluntarily notified to CFIUS. We assessed  the reliability of these data by reviewing relevant documentation and  ensuring the data gathered aligned with the search criteria identified. We  determined the data were sufficiently reliable for our purposes of  displaying total U.S. mergers and acquisitions and the proportion of those  transactions that involve foreign acquirers and thus could be potentially  covered transactions by CFIUS.", "To assess what factors, if any, affect DOD\u2019s ability to develop and monitor  mitigation agreements through the CFIUS process, we reviewed CFIUS- related laws and regulations and DOD policies and guidance to identify  DOD and its component reviewers\u2019 responsibilities and processes for  developing and monitoring compliance with mitigation agreements. We  also reviewed the Committee on Foreign Investment in the United States  Annual Report to Congress for Calendar Years 2014 and 2015. To  identify actions DOD has taken to mitigate national security concerns, we  analyzed data to identify the number of mitigation agreements DOD is  responsible for and actions DOD has taken to mitigate and monitor  transactions with national security concerns from January 1, 2012 through  December 31, 2017, the most recent data available. Based on information  on the collection and management of Treasury and DOD CFIUS  mitigation agreement data, our review of related documentation, and  interviews with relevant Treasury and DOD officials, we determined that  these data were sufficiently reliable for the purposes of this report. We  also reviewed executive summaries compiled by MIBP of the DOD-co-led  transactions with mitigation agreements, as well as selected CFIUS case  file documentation for seven transactions. We interviewed officials at  Treasury, MIBP, and DOD component reviewers to identify any  challenges they face developing and enforcing mitigation agreements. To  provide illustrative examples of the types of measures included in CFIUS  mitigation agreements, we reviewed all of the active mitigation  agreements from one component with responsibilities for monitoring  mitigation agreements involving proximity issues. These agreements are  not generalizable to other components.", "To gather a range of views on issues related to both objectives, we  selected a non-generalizable sample of nine DOD component reviewers  responsible for identifying, reviewing, and investigating transactions.  These components included officials from: the Departments of the Army,  Air Force, and Navy; the DOD Chief Information Officer, the Defense  Information Systems Agency; the Defense MicroElectronics Activity; the  Defense Advanced Research Projects Agency; the National Security  Agency; and the Office of Manufacturing and Industrial Base Policy,  Industrial Base Assessments.", "Our selection was based primarily on these components\u2019 responsibilities  for reviewing and investigating transactions for key issues DOD identified  as relevant to its review of transactions, including risks related to  emerging technology and proximity risks. We also solicited MIBP\u2019s  recommendations to identify components with varying levels of  participation and input into the CFIUS process. We interviewed all nine  components and in some cases also received written responses from  them to identify similarities and differences in their processes, any  challenges they face identifying and addressing national security  concerns through CFIUS, and their involvement and any challenges they  face developing or monitoring mitigation agreements. Findings based on  information collected from the nine components cannot be generalized to  all DOD components. In addition to the components included in our  sample, we also interviewed and received documentation from other DOD  organizations about the CFIUS process. These organizations included  officials from: the Defense Innovation Unit Experimental; the Defense  Security Service; the Defense Technology Security Administration; the  Assistant Secretary of Defense for Research and Engineering; and the  Office of the Under Secretary of Defense for Intelligence. We do not  include information gathered from these other components in statements  based on our non-generalizable sample.", "The performance audit upon which this report is based was conducted  from January 2017 to April 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DOD and Treasury from April 2018 to July  2018 to prepare this unclassified version of the original sensitive report for  public release. This public version was also prepared in accordance with  these standards."], "subsections": []}, {"section_title": "Appendix III: Factors the Committee on Foreign Investment in the United States Considers to Determine Whether Submitted Transactions Pose a National Security Risk", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact names above, W. William Russell (Assistant  Director), Katherine Trimble (Assistant Director), Meghan Perez (Analyst- in-Charge), and Heather B. Miller were principal contributors to this  report. In addition, the following people made contributions to this report:  Justin Fisher, Stephanie Gustafson, Kate Lenane, Alyssa Weir, and  Robin Wilson."], "subsections": []}]}], "fastfact": ["Foreign investment in U.S. companies can benefit the economy, but could pose risks to national security. The Committee on Foreign Investment in the United States (CFIUS) reviews certain foreign acquisitions and mergers and can mitigate risks or block transactions.", "DOD identified some investments as national security concerns because they may give foreign investors access to emerging technologies or be in proximity to critical military locations. However, the CFIUS process doesn't cover all the types of investments DOD identified.", "Our recommendations are to help DOD and CFIUS address these risks and other concerns."]}
{"id": "GAO-19-83", "url": "https://www.gao.gov/products/GAO-19-83", "title": "Orphan Drugs: FDA Could Improve Designation Review Consistency; Rare Disease Drug Development Challenges Continue", "published_date": "2018-11-30T00:00:00", "released_date": "2018-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The ODA provides incentives, including tax credits and exclusive marketing rights, for manufacturers to develop drugs to treat rare diseases, which are typically defined as affecting fewer than 200,000 people in the United States. Approximately 7,000 rare diseases affect an estimated 30 million people in the United States, and only 5 percent of rare diseases have FDA-approved treatments.", "GAO was asked to examine FDA's orphan drug processes. In this report, GAO examines, among other things, (1) the actions FDA has taken to address the growing demand for orphan designations; (2) the extent to which FDA has used consistent criteria and complete information in reviewing orphan designation applications; and (3) the steps FDA has taken to address rare disease drug development challenges. GAO analyzed FDA documents and data, as well as all designation review templates FDA completed as of March 2018 for applications received from October to December 2017. GAO interviewed agency officials, as well as stakeholders, including drug manufacturers, industry experts, and patient advocacy groups."]}, {"section_title": "What GAO Found", "paragraphs": ["The Food and Drug Administration's (FDA) Office of Orphan Products Development is responsible for reviewing drug manufacturer applications for orphan designation. Drugs granted this designation treat rare diseases and may receive various incentives under the Orphan Drug Act (ODA). As the number of orphan designation applications received and granted has grown, FDA outlined several process changes in its June 2017 modernization plan to improve designation review timeliness and consistency.", "In evaluating designation applications, FDA reviewers generally apply two consistent criteria\u2014(1) the size of the rare disease population, and (2) the scientific rationale that the drug may effectively treat the disease. To inform their evaluation, reviewers must record certain background information in a standard review template, such as the drug's U.S. marketing history. Officials told us this information provides important context, such as whether FDA has experience with a little known disease, critical to ensuring a complete designation application review. However, GAO's analysis of 148 designation review templates found that FDA does not consistently record or evaluate background information when making designation decisions. For example, 48 of 148 review templates GAO analyzed were missing information on the drug's U.S. marketing history. As such, FDA cannot be sure that reviewers are conducting complete evaluations that include all critical information needed for assessing its criteria.", "Stakeholders GAO interviewed and research GAO reviewed identified a number of rare disease drug development challenges, such as the difficulty in recruiting small populations for clinical trials, with differing opinions about the ODA incentives. For example, several stakeholders were critical of manufacturers obtaining multiple orphan designations\u2014and ODA incentives\u2014for the same drug when the drug may otherwise be profitable from treating multiple patient groups. However, many patient advocacy groups noted that granting ODA incentives in these circumstances is needed to encourage drug manufacturers to study the safety and efficacy of drugs in rare disease populations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FDA should ensure that all required information for reviews of orphan designation applications is consistently recorded and evaluated. The agency concurred with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the National Institutes of Health, there are approximately  7,000 rare diseases affecting an estimated 30 million people in the United  States. A rare disease or condition (hereafter, \u201cdisease\u201d) is typically  defined as affecting fewer than 200,000 people in the United States, and  these diseases are often serious or life-threatening. Currently, only about  5 percent of rare diseases have treatments approved by the Food and  Drug Administration (FDA).", "The Orphan Drug Act (ODA) was enacted in 1983 to provide drug  manufacturers with incentives for developing treatments for small patient  populations that were not expected to be profitable. The ODA, as  amended, provides incentives for drug manufacturers to develop drugs  and biologics (hereafter referred to collectively as \u201cdrugs\u201d) to treat rare  diseases. These incentives include tax credits and exclusive marketing  rights. In order to obtain the incentives, drug manufacturers must submit  an application to FDA for orphan designation\u2014a status given to a drug  that is intended to treat a rare disease. To receive orphan designation, a  drug manufacturer must provide evidence demonstrating that its drug  meets certain criteria specified in the ODA and FDA\u2019s implementing  regulations.", "Demand for orphan designations has grown substantially since the ODA\u2019s  enactment, with the number of designation applications nearly tripling  over the past decade. Separate from orphan designation, FDA also  determines which drugs may be marketed in the United States, based on  evidence of safety and effectiveness. The number of orphan drugs FDA  has approved for marketing has also increased over time, with 77  marketing approvals in 2017. According to FDA, the growth in orphan  designations and marketing approvals is expected to continue, partly due  to medical advances that make health care more personalized,  genetically targeted, and likely to address rare diseases. However, the  growth in orphan designations and marketing approvals has coincided  with questions about FDA\u2019s orphan drug program, including that drug  development challenges remain for the majority of rare diseases.", "Due to the importance of rare disease drug development, you requested  that we provide information on drugs receiving orphan designations and  marketing approvals, and examine certain aspects of FDA\u2019s orphan drug  processes. In this report, we examine  1.  actions FDA has taken to address the growing demand for orphan  2.  the extent to which FDA has used consistent criteria and complete  information to review applications for orphan designation, and the  characteristics of drugs seeking orphan designation;  3.  the orphan drugs FDA has approved for marketing; and  4.  the steps FDA has taken to address challenges in rare disease drug  development.", "To examine the actions FDA has taken to address the growing demand  for orphan designations, we reviewed agency plans for meeting this  demand and reports on timeliness metrics used to track designation  reviews. We also reviewed the agency\u2019s plans for staffing levels and  expertise devoted to reviewing orphan designation applications. In  addition, we reviewed its plan for additional programmatic actions to meet  designation demand and the mechanisms the agency has in place to  respond to orphan drug issues. To describe the rate of demand for  orphan designation over time, we obtained and analyzed FDA data over  the past 10 years from the agency\u2019s internal database on orphan  designation applications. Specifically, we determined the number of  designation applications received each year from January 1, 2008, to  December 31, 2017, and the rate of growth in applications and  designations granted during this time frame. We assessed the reliability of  data from FDA\u2019s internal database on orphan designation applications by  interviewing agency officials knowledgeable about the data, reviewing  related documentation, and performing electronic data testing for obvious  errors, and accuracy and completeness, where applicable. We  determined that the data were sufficiently reliable for the purposes of our  reporting objectives. We also interviewed FDA officials about how it  determines staffing levels given the growing demand for orphan  designation reviews. Finally, we interviewed two former Directors of  FDA\u2019s orphan drug program for their views on the level of resources  dedicated over time to FDA\u2019s orphan designation process.", "To examine the extent to which FDA has used consistent criteria and  complete information to evaluate applications for orphan designation, we  reviewed designation criteria detailed in the ODA, program regulations,  and agency guidance, as well as documentation of the agency\u2019s review  process. Specifically, we reviewed guidance for orphan designation  reviewers consisting of training and job aids, and a standard form used  for evaluating applications. We also assessed the extent to which  reviewers consistently documented and used all information required to  evaluate applications against orphan designation criteria. To do so, we  obtained and analyzed all 148 orphan designation review templates FDA  completed as of March 2018 for designation applications it received from  October to December 2017. We also assessed FDA\u2019s orphan  designation processes against federal internal control standards. Finally,  we interviewed FDA officials about the orphan designation process to  determine how effectively its criteria results in consistent orphan  designation determinations and how recent changes have affected their  processes. To describe the characteristics of drugs seeking orphan  designation, we analyzed rates of orphan designations granted and  denied from January 1, 2008, to December 31, 2017, from the agency\u2019s  internal database on orphan designation applications. We also analyzed  information from this database on the characteristics of those drugs  seeking orphan designation, such as population estimates and  therapeutic areas.", "To examine the orphan drugs FDA has approved for marketing, we  obtained and analyzed FDA data over a 10-year period. Specifically, we  identified all publicly listed orphan drugs with marketing approval dates  from January 1, 2008, to December 31, 2017. We then obtained and  analyzed data from FDA\u2019s internal databases on the characteristics of  these approved orphan drugs, including information on the time frames of  each drug\u2019s FDA review, the drug\u2019s therapeutic area, and whether it was  a new drug or a new use for a previously approved drug. We assessed  the reliability of data from FDA\u2019s internal databases on drug approvals by  interviewing agency officials knowledgeable about the data, reviewing  related documentation, and performing electronic data testing for obvious  errors, and accuracy and completeness, where applicable. We  determined that the data were sufficiently reliable for the purposes of our  reporting objectives.", "To describe the steps FDA has taken to address challenges in rare  disease drug development, we reviewed agency guidance on rare  disease drugs, such as staff training materials, and guidance on  developing rare disease drugs. For example, we reviewed guidance FDA  has issued in collaboration with patient advocacy groups on the  experiences of patients with certain rare diseases. We also reviewed FDA  studies on approved orphan drugs to identify rare disease drug  development challenges, and spoke to FDA officials about how they  address these challenges. To further assess rare disease drug  development challenges, we identified and reviewed relevant academic  research and other studies on FDA\u2019s approved orphan drugs and rare  disease drug challenges. We did not independently assess the  methodology or challenges identified in the academic research included  in our review. We also interviewed selected industry experts and  stakeholders to obtain multiple perspectives on the challenges with rare  disease drug development. Specifically, we selected three industry  experts with published work on FDA\u2019s orphan drug program, as well as  officials from the National Organization for Rare Disorders, six individual  patient advocacy groups with a rare disease focus, three pharmaceutical  industry associations, and four drug manufacturers with granted orphan  designations. We then categorized these challenges by thematic area.", "We conducted this performance audit from October 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Drug manufacturers seeking to develop and receive approval to market  an orphan drug go through two separate FDA processes. The drug  manufacturer may first apply for orphan designation, where FDA  determines if the drug is eligible and meets the criteria for designation.", "The manufacturer may then apply to FDA for approval to market the  orphan drug."], "subsections": [{"section_title": "Orphan Designation Eligibility and FDA\u2019s Process for Granting the Designation", "paragraphs": ["There are a variety of circumstances under which a manufacturer\u2019s drug  is eligible for orphan designation. A drug is eligible for orphan  designation when it is intended to treat a disease that affects fewer than  200,000 people in the United States. A drug is also eligible for orphan  designation when it is intended to treat a disease that affects 200,000 or  more people in the United States and there is no reasonable expectation  of recovering the cost of drug development and marketing from U.S.  sales. In addition, a drug that is intended to treat a specific population of  a non-rare disease (known as an orphan subset) is eligible for orphan  designation when a property of the drug (e.g., toxicity profile, mechanism  of action, or prior clinical experience) limits its use to this subset of the  population.", "FDA\u2019s Office of Orphan Products Development (OOPD) administers the  orphan drug program and evaluates orphan designation applications.  When a drug manufacturer submits a designation application, OOPD  receives and assigns it to a reviewer based on factors such as prior  experience related to a particular rare disease and workload across  OOPD reviewers. The drug manufacturer\u2019s application is required to  include such items as a description of the rare disease, documentation of  the number of people affected by the disease in the United States (the  population estimate), and a scientific rationale explaining why the drug  may effectively treat the disease. The manufacturer can submit an orphan  designation application at any point prior to submitting a marketing  application.", "When making an orphan designation decision, OOPD guidance requires  reviewers to evaluate the manufacturer\u2019s application and record  information about the drug and disease on a standard review template.  OOPD reviewers are also expected to independently verify certain  information included in the application. For example, OOPD reviewers  may review independent sources to verify the population estimate  provided by the manufacturer, including comparing the population  estimate against prior related orphan designations.", "Once the OOPD reviewer\u2019s decision is recorded on the standard review  template, it undergoes a secondary review that has typically been  completed by the Director of the Orphan Drug Designation Program.  This secondary review is intended to ensure the quality of the application  review and the consistency of the review across all related designation  applications. There are three possible outcomes from the designation  review: (1) the orphan designation is granted, (2) the application is  pending with the manufacturer due to OOPD finding it deficient, or (3) the  orphan designation is denied. OOPD sends the drug manufacturer a  decision letter detailing the outcome of its review. If the application is  pending or denied, the decision letter describes OOPD\u2019s concerns with  granting the orphan designation (e.g., insufficient evidence to support its  scientific rationale) and the manufacturer may address these concerns  either in an amendment to the original application (for pending status) or  as a new application (for denied status). (See fig. 1.)"], "subsections": []}, {"section_title": "FDA\u2019s Marketing Approval Process", "paragraphs": ["FDA\u2019s marketing approval process is the same for all drugs, regardless of  orphan status. (See fig. 2.) Once a manufacturer has assessed the safety  and efficacy of a new drug through preclinical testing and clinical trials, it  may apply to FDA for approval to market the drug in the United States. To  do so, a drug manufacturer submits its research in a new drug application  (NDA) or biologic license application (BLA) to FDA, which then reviews  and approves the drug for marketing if it is shown to be safe and effective  for its intended use. The two FDA centers responsible for reviewing  applications to market drugs in the United States are the Center for  Biologics Evaluation and Research (CBER) and the Center for Drug  Evaluation and Research (CDER).", "Upon completing its review of a marketing application, FDA will send an  action letter with its determination to the drug manufacturer. The time  elapsed from the date FDA receives the application to the date it issues  an action letter informing the drug manufacturer of the agency\u2019s decision  is defined as one review cycle. If FDA does not approve the marketing  application and the drug manufacturer resubmits the application, a new  review cycle begins.", "When FDA approves a drug manufacturer\u2019s marketing application, it  approves the drug to treat one or more specific uses, known as  indications. The approved indication is based on the clinical trial data  provided in the manufacturer\u2019s marketing application and is typically  narrower than the orphan designation, which is based on early drug  development data for the drug\u2019s intended use in the rare disease. For  example, one drug was granted orphan designation for the treatment of  cystic fibrosis (the rare disease), while the drug\u2019s marketing approval was  for the treatment of cystic fibrosis in patients 12 years and older who have  a certain genetic mutation (the indication). The orphan drug marketing  exclusivity incentive (a period of protection from competition) only applies  to the drug\u2019s approved indication. OOPD determines orphan drug  marketing exclusivity after receiving notification of the drug\u2019s marketing  approval from CBER and CDER.", "Because orphan drugs are often developed to treat patients with unmet  medical needs, they may be eligible for one or more of FDA\u2019s expedited  programs. FDA\u2019s four expedited programs\u2014accelerated approval,  breakthrough therapy designation, fast track designation, and priority  review\u2014are intended to facilitate and expedite the development and  review of new drugs to address unmet medical needs in the treatment of  a serious disease. Depending on the type of expedited program,  manufacturers of new drugs may receive a variety of benefits, such as  additional opportunities to meet with and obtain advice from FDA officials  during drug development or a shorter FDA review time goal for the  marketing application."], "subsections": []}]}, {"section_title": "FDA Implemented Its Modernization Plan to Address Growing Demand for Orphan Designations, and Has Recently Met Timeliness Goals", "paragraphs": ["In June 2017, FDA issued its Orphan Drug Modernization Plan and has  implemented a number of steps under the plan to address the demand for  orphan designations. According to OOPD data, the number of new  designation applications received grew from 185 in 2008 to 527 in 2017  (an increase of 185 percent), while the number of designations granted  also grew during the same period. (See fig. 3.) Prior to implementing the  modernization plan, OOPD had amassed a backlog of 138 applications  that were pending review for more than 120 days. The modernization plan  therefore established two goals: (1) eliminating the backlog of designation  applications within 90 days (by September 25, 2017), and (2) ensuring  that new designation applications are reviewed within 90 days of receipt.", "To accomplish its first goal, the modernization plan outlined seven actions  FDA planned to take to temporarily increase OOPD resources for  reviewing designation applications. For example, the agency established  an experienced team of senior OOPD reviewers to focus solely on the  backlog of designation applications. In addition, OOPD initially enlisted  temporary assistance from CBER and CDER reviewers who expressed  interest in helping clear the backlog. FDA officials told us OOPD also  subsequently received reviewer assistance from the Office of Medical  Products and Tobacco. OOPD trained these additional reviewers on the  orphan designation review process and criteria for granting orphan  status. As a result of these efforts, FDA cleared the application backlog by August 28, 2017, nearly a month ahead of its goal. (See table 1 for the  seven actions FDA took as part of its modernization plan to clear the  designation application backlog.)", "To accomplish FDA\u2019s second goal of reviewing new designation  applications within 90 days of receipt, the modernization plan outlined  eight steps the agency planned to take to improve the efficiency of its  application review process. For example, OOPD implemented a standard  review template in October 2017 that it had developed under the  modernization plan\u2019s first goal to address the backlog of applications. This  template outlines information that reviewers are supposed to record, as  applicable, from each application and evaluate when making a  designation decision\u2014namely, the (1) background information, (2) clinical  superiority analysis, (3) orphan subset analysis, (4) population estimate,  and (5) scientific rationale that the drug may effectively treat the  disease. (See app. I for more information about what is recorded in  OOPD\u2019s review template.) The review template also includes the  designation recommendation, as well as the secondary reviewer\u2019s  concurrence with the designation determination. FDA officials reported  that before implementing this review template, OOPD reviewers  documented less-structured narrative information about each application  on a prior form. In addition, OOPD introduced online training for  manufacturers on the information to include in a designation application  and the common issues OOPD has encountered when reviewing an  application. According to officials, this training is intended to enhance the  consistency and quality of designation applications, which may ultimately  reduce OOPD requests for additional information from manufacturers.  (See table 2 for the eight steps the agency took to improve the timeliness  of its designation application review process.)", "In July 2017, OOPD began using the new internal tracking report to  monitor adherence to its 90-day timeliness goal. As of March 2018, FDA  officials reported that OOPD management has received these tracking  reports on a daily basis, which identify the number of days that have  elapsed for each application pending review, among other things.  According to these tracking reports, OOPD has overall met its 90-day  timeliness goal for reviewing designation applications since mid- September 2017 and has completed most application reviews within 60  days of receipt. For example, as of July 20, 2018, OOPD had 35  applications pending review for 0 to 30 days; 31 applications pending  review for 31 to 60 days; 9 applications pending review for 61 to 90 days;  and no applications pending review for more than 90 days."], "subsections": []}, {"section_title": "FDA Uses Consistent Criteria to Grant Orphan Designation, but Reviews Do Not Include Complete Information", "paragraphs": [], "subsections": [{"section_title": "FDA Generally Applies Consistent Criteria in Reviewing Applications for Orphan Designation, but Did Not Ensure that All Required Information was Appropriately Recorded or Used", "paragraphs": ["OOPD applies two consistent criteria (i.e., two particular criteria that all  designation applications must meet) when determining whether to grant a  drug orphan status: (1) the disease that the drug is intended to treat  affects fewer than 200,000 people in the United States, and (2) there is  adequate scientific rationale that the drug may effectively treat the  disease. For circumstances involving orphan subsets of a non-rare  disease or clinical superiority, additional criteria are required for orphan  designation.", "According to OOPD data, of the 3,690 orphan designation applications  received from 2008 to 2017, OOPD determined that the majority of them  met these criteria and granted them orphan status. Specifically,  approximately 71 percent of applications were granted orphan  designation as of April 2018. The remaining designation applications were  placed in a pending status awaiting the manufacturer\u2019s response to  OOPD concerns (21 percent), denied orphan designation (5 percent), or  withdrawn (2 percent). (See table 3.)", "In addition, our analysis of 148 OOPD review templates completed for  new designation applications received from October to December 2017  provided further detail on OOPD\u2019s designation determinations since  implementing its Orphan Drug Modernization Plan. We found that for this  time period, 87 designation applications (59 percent) were granted  orphan status, 57 designation applications (39 percent) were placed in  pending status awaiting further information from the manufacturer, and 4  designation applications (3 percent) were denied orphan status. The  most common reason OOPD did not grant orphan designation was due to  concerns with the adequacy of the manufacturer\u2019s scientific rationale,  which occurred in 43 of the 61 pending or denied review templates.  OOPD reviewers noted various concerns with the scientific rationale  provided in these designation applications, including that the  manufacturer did not provide sufficient or adequate data to support their  scientific rationale, or that the manufacturer did not provide data from the  strongest available model for testing the drug.", "Of the five review template sections where reviewers are required to  record information, we found that OOPD does not ensure that all required  information is consistently recorded in the background information section  and evaluated when making designation decisions. OOPD instructs  reviewers to document background information, including elements of the  regulatory history of the drug (e.g., U.S. and foreign marketing history),  and previous orphan designations for both the drug and the disease.  Our analysis found that 102 of 148 OOPD review templates were missing  one or more elements of the regulatory history of a drug. (See table 4.) In  addition, we found that 19 of 148 review templates did not capture all  prior orphan designations for the drug and disease. In one case, the  OOPD reviewer did not record any prior orphan designation for the  disease in the review template and placed the designation application in  pending status due to concerns with the manufacturer\u2019s population  estimate. However, the disease that was the subject of the application  had 36 related orphan designations at the time of the review, 7 of which  had been granted in 2017.", "According to FDA officials, although the background information required  in the review template may not directly affect a designation decision, it  provides important context that is critical to ensuring a complete review of  a designation application. For example, FDA officials told us that in cases  where the designation application is for a disease with little published  information available, it may help to know the drug\u2019s U.S. marketing  history to identify whether CBER or CDER has experience with the  disease. Additionally, the prior orphan designation history can help the  OOPD reviewer identify previously accepted methodologies to estimate  the population for a disease.", "Despite requiring its reviewers to record background information for each  designation application, OOPD\u2019s guidance does not provide instructions  on how to use this information when evaluating the applications. Internal  control standards for the federal government specify that agencies should  record relevant, reliable, and timely information, and process that  information into quality data that enables staff to carry out their  responsibilities. Without instructions on how to use the background  information required in its review templates, OOPD reviewers may not  consistently use all of the information needed to conduct a complete  evaluation of a designation application.", "Additionally, OOPD instructs its reviewers to consider evidence found in  independent sources to verify the population estimate provided in a  designation application. However, in 23 of 148 OOPD review templates,  reviewers did not include the results of any such independent verification  in their evaluation of the manufacturer\u2019s population estimate. Internal  control standards state that agencies should conduct checks of their  recorded data to ensure its accuracy and completeness, but we found  that OOPD does not fully conduct such data checks. Without ensuring  that its reviewers conduct and record the results of independent  verification of population estimates, OOPD cannot be assured that quality  information is consistently informing its designation determinations.", "For the 148 templates we reviewed, we found that OOPD granted orphan  designation to 26 applications missing required information. Specifically,  we found that OOPD granted designation to 11 applications where the  reviewer did not record prior orphan designation history, to 13  applications where the reviewer did not document independent  verification of the manufacturer\u2019s population estimate, and to 2  applications where the reviewer did neither. In cases where the  background information was incomplete or there was no documentation  of independent verification of the manufacturer\u2019s population estimate,  there also was no evidence that the secondary reviewer verified the  completeness of these sections of the review templates."], "subsections": []}, {"section_title": "Most Orphan Designation Applications Had a Population Estimate of Fewer than 100,000 and Over Half of the Applications Target One of Four Therapeutic Areas", "paragraphs": ["Approximately 71 percent of orphan designation applications received by  FDA from 2008 to 2017 were for drugs intended to treat diseases  affecting 100,000 or fewer people. In addition, half of the applications  received during this time frame were for drugs intended to treat  populations of 50,000 or fewer people. (See fig. 4.) For applications that  OOPD granted orphan designation, the population estimates for the  diseases they were intended to treat ranged from 0 to 199,966 people.", "Of 3,491 orphan designation applications OOPD received from 2008 to  2017, over half were for the therapeutic areas of oncology (30 percent),  neurology (13 percent), hematology (7 percent), and gastroenterology  and liver (6 percent). Thirty-seven other therapeutic areas accounted for  the remaining 44 percent of applications, with each therapeutic area  accounting for 5 percent or fewer of designation applications received  during this time frame. Some of these other therapeutic areas included  pulmonary, immunology, cardiology, and dermatology. (See fig. 5.)", "Additionally, our analysis of 148 OOPD review templates from October to  December 2017 found that", "29 applications (20 percent) requested orphan status based on an  orphan subset claim, 7 of which were granted orphan designation;  and", "7 applications (5 percent) requested orphan status based on a clinical  superiority claim, 2 of which were granted orphan designation."], "subsections": []}]}, {"section_title": "FDA\u2019s Orphan Drug Marketing Approvals Increased from 2008 to 2017, Were Focused in Two Therapeutic Areas, and Typically Required about 9 Months for Agency Review", "paragraphs": ["FDA approved 351 orphan drugs for marketing from 2008 to 2017.  Orphan drug marketing approvals have increased over this period, from  17 in 2008 to 77 in 2017, and have accounted for an increasing  proportion of all FDA marketing approvals. Orphan drug marketing  approvals also vary by certain characteristics, but were typically in one of  two therapeutic areas and required about 9 months for FDA review,  among other commonalities.", "Therapeutic area. From 2008 to 2017, 53.3 percent of orphan drug  marketing approvals were in one of two therapeutic areas that were also  common for granted designations: oncology (42.5 percent) and  hematology (10.8 percent). There were 27 different therapeutic areas  overall, with 7 of those areas having 10 or more approved orphan drugs.  (See app. II for FDA\u2019s orphan drug marketing approvals from 2008 to  2017 by therapeutic area.)", "Number of indications. Of the 351 orphan drug marketing approvals  from 2008 to 2017, there were 252 unique drugs, because drugs can be  approved for more than one orphan indication. For example, the oncology  drug Velcade received FDA approval in 2008 as a first-line therapy for  multiple myeloma, and received approval for a second indication in 2014  for treatment of mantle cell lymphoma if the patient has not received at  least one prior therapy. (See app. II.) The majority of drugs had one  orphan indication (77.4 percent) or two orphan indications (15.9 percent).  However, several drugs (6.7 percent) were approved to treat three or  more orphan indications. Two oncology drugs had the most approved  orphan indications: Imbruvica (10 orphan indications) and Avastin (9  orphan indications).", "New drug or new indication for previously approved drug. The  majority (61.5 percent) of orphan drug marketing approvals from 2008 to  2017 have been for a new drug not previously approved for any use,  while the remainder (38.5 percent) have been for a new indication for a  drug previously approved to treat a rare or non-rare disease. (See fig.  6.) Of the new orphan drugs that received marketing approval, the  majority have been for novel uses\u2014new molecular entities or new  therapeutic biologics that are often innovative and serve previously unmet  medical needs, or otherwise significantly help to advance patient care and  public health.", "FDA review time. For orphan drug marketing approvals from 2008 to  2017, the median time from FDA receiving a marketing application to  approval was about 9 months, and ranged from 75 days to about 17  years. FDA averaged about 1.2 review cycles for these drugs, with the  number of cycles ranging from one to four reviews. Two neurology  drugs each had the largest number of reviews (four).", "Expedited programs. Approximately 71 percent of orphan drug  marketing approvals from 2008 to 2017 benefitted from at least one type  of FDA\u2019s four primary expedited programs (accelerated approval,  breakthrough therapy designation, fast track designation, or priority  review). Most orphan drug approvals in each year received priority  review, while less than half received accelerated approval, breakthrough  therapy designation, or fast track designation in the year the drug was  approved. (See fig. 7.) Very few (six) orphan drug approvals were  granted all four of these expedited programs in the year approved."], "subsections": []}, {"section_title": "FDA Issued Guidance and Offered Training to Address Ongoing Rare Disease Drug Development Challenges", "paragraphs": [], "subsections": [{"section_title": "FDA Developed Guidance and Training to Better Inform Its Reviewers and the Public about Rare Disease Drug Development Challenges", "paragraphs": ["To address rare disease drug development challenges, FDA has  established guidance for internal and public use, and offered training to its  reviewers. FDA\u2019s guidance and training on rare diseases includes topics  related to more general drug development issues, as well as the agency\u2019s  marketing approval process as it applies to orphan drugs.", "In general, FDA\u2019s review centers\u2014CBER and CDER\u2014are responsible for  establishing guidance on general rare disease drug development  issues. For example, FDA published draft guidance for industry in  August 2015 on common issues in rare disease drug development. The  guidance discusses important aspects of drug development, such as the  need for an adequate understanding of the natural history of the disease  and the drug\u2019s proposed mechanism of action, and the standard of  evidence to establish safety and effectiveness. CBER published  additional draft guidance in July 2018 on rare disease drug development  specific to gene therapy in order to help manufacturers consider issues  such as limited study population size, safety issues, and outcomes.", "FDA has also conducted studies to understand rare disease drug  development challenges. In March 2011, FDA issued a report to  Congress on the strengths and weaknesses of its regulatory process with  respect to rare and neglected tropical diseases. In that report, a group  of expert FDA officials found that its regulations allowed experienced  reviewers to use flexibility and scientific judgment in determining the  safety and efficacy of rare disease drugs. However, the group also noted  areas for improvement, such as the need to develop training for FDA  reviewers and to increase communication efforts with stakeholders,  including industry and advocacy organizations.", "One other key area the group identified was the need to analyze the  agency\u2019s orphan drug marketing approvals to further understand the  factors helping or hindering drug development. To do so, FDA analyzed a  subset of orphan drug approvals and published two studies:", "FDA\u2019s February 2012 publication on rare disease drug approvals  between 2006 and 2011 found that substantial proportions of  marketing approvals were for innovative drugs, and most clinical  studies were highly unique in terms of the study design, controls, and  outcome measures used. FDA concluded that developing defined  policy and consistency around such diverse drugs and unique clinical  studies would be difficult.", "FDA\u2019s May 2012 publication on marketing applications between 2006  and 2010 concluded that, due to the high approval rates for  applications targeting rare diseases in its study, increased efforts in  the agency\u2019s review process would be unlikely to substantially  increase the number of new rare disease drugs.", "FDA\u2019s patient engagement programs have also focused on rare disease  drug development. As of February 2016, the agency reported that nearly  half of patient-focused drug development meetings\u2014meetings to obtain  the patient perspective on specific diseases and their treatments\u2014have  been focused on rare diseases. In addition, four of six patient advocacy  groups we interviewed said that they used this type of meeting or another  structured meeting to provide FDA input on their rare disease. One  patient advocacy group told us that its meeting with FDA helped lead to  issued guidance on drug development for Duchenne muscular  dystrophy.", "As part of its efforts to better inform reviewers about the agency\u2019s  regulatory framework and drug development challenges with respect to  rare diseases, FDA has developed a training course and holds an annual  all-day meeting for reviewers. (See table 5.) In its rare disease training  course, FDA describes its authority to be flexible in reviewing marketing  applications for rare disease drugs. Multiple studies found that FDA has  regularly used this flexibility in approving rare disease therapies; for  example, by allowing marketing approval based on one adequate and  well-controlled study, rather than requiring two."], "subsections": []}, {"section_title": "Stakeholders and Research Identified Ongoing Rare Disease Drug Development Challenges, while Opinions on the Orphan Drug Act Incentives Varied", "paragraphs": ["Stakeholders we interviewed, including industry experts and patient  advocacy groups, and research we reviewed identified general rare  disease drug development challenges, as well as more specific concerns  pertaining to the ODA incentives and pricing. However, opinions of some  of the concerns attributed to the ODA incentives varied among  stakeholders.", "Barriers to rare disease drug development. The two barriers to rare  disease drug development most commonly cited among stakeholders we  interviewed were (1) the need for more basic scientific research (e.g.,  understanding patient experiences and progression of symptoms, known  as a disease\u2019s natural history), and (2) the difficulty in recruiting small  populations for clinical trials. One drug manufacturer explained that, when  a disease affects a small population, it is hard to identify and recruit  participants, because they may be geographically dispersed or have to  travel long distances to participate in the trial. Identifying these  participants and enrolling them into a clinical trial is therefore both labor-  and resource-intensive.", "A number of studies conducted by FDA and others identified similar  challenges, as well as other rare disease drug development issues. For  example, a 2010 study by the National Academies of Science,  Engineering, and Medicine noted that researchers still lack a basic  understanding of the mechanisms that underlie many rare diseases.  Another drug development challenge identified in the study is attracting  trained investigators to study rare diseases.", "To address some of these challenges, OOPD has a number of grant  programs focused on rare disease drug development, including one that  funds studies that track the natural history of a disease over time to  identify demographic, genetic, environmental, and other variables that  may lead to drug development. In addition, FDA\u2019s fiscal year 2019 budget  justification includes a request for funds to develop clinical trial networks  to create an understanding of the natural history and clinical outcomes of  rare diseases.", "Significance of ODA incentives in fostering drug development.  Although many stakeholders we spoke with categorized the ODA\u2019s  incentives as significant to rare disease drug development, two  stakeholder groups we spoke with\u2014industry experts and drug  manufacturers\u2014largely categorized the incentives as less important than  did other stakeholders. For example, two of four drug manufacturers we  interviewed told us that their company\u2019s drug development decisions are  based on the disease areas it wants to target and not due to ODA  incentives. In addition, several stakeholders noted non-ODA drivers of  orphan drug growth, including the ability to command high prices and  advances in scientific discovery for some rare diseases.", "Several studies also noted limitations of the ODA incentives, including the  structure of the orphan drug tax credit, the decreasing impact of the  marketing exclusivity incentive in protecting orphan drugs from  competition, and the ability of the incentives to target \u201ctruly\u201d rare  conditions that would not otherwise have obtained sufficient investment.  For example, the Congressional Research Service reported in December  2016 that the benefits of the orphan drug tax credit are limited to  companies with positive tax liabilities. As a result, the Congressional  Research Service concluded that the typical small startup company  investing in the development of an orphan drug may be unable to take  advantage of the tax credit during its first few years of operation when its  expenses exceed its revenue and cash flow may be a problem.", "Certain circumstances under which drug manufacturers may obtain  ODA incentives. Several stakeholders we spoke with were critical of how  drug manufacturers may obtain ODA incentives, such as for drugs that  were already approved to treat another disease or for multiple orphan  designations for the same drug. For example, one industry expert argued  that granting multiple orphan designations for the same drug subverts the  purpose of the ODA to support development of drugs that may not  otherwise be profitable, as a drug manufacturer can make a return on  investment from the drug from multiple patient groups rather than just  one. In contrast, many patient advocacy groups we spoke with noted that  drug manufacturers\u2019 ability to obtain ODA incentives under certain  circumstances, such as multiple orphan designations for the same drug,  are needed for further investment in drug development. In particular, they  noted that this provides an incentive for manufacturers to demonstrate  their drugs are safe and effective for individuals who have a rare disease  (particularly for FDA-approved drugs with an unapproved use\u2014known as  off-label use) and account for any differences within rare diseases.", "A number of studies raised similar concerns about these and other  issues, including off-label use of orphan drugs. Specifically, one study  noted that, due to increasing investment in precision medicine, manufacturers may develop drugs treating a particular genetic subset of a  non-rare disease. These subsets may qualify for ODA incentives, even  though they may not face the same development challenges as \u201ctrue\u201d  rare diseases. For example, three orphan drugs were approved as  treatments for a subset of non-small cell lung cancers that have a specific  gene mutation. According to the study, these drugs can also be used off- label for diseases other than the non-small cell lung cancer subset for  which they were originally approved.", "FDA has taken steps in recent years to address certain circumstances  under which drug manufacturers may obtain orphan designation. For  example, the agency recently issued guidance stating that it no longer  plans to grant orphan designation to pediatric subsets of non-rare  diseases. The agency attributed its decision, in part, to a loophole that  could result in a drug receiving an orphan designation for a pediatric  subset being exempt from requirements under the Pediatric Research  Equity Act to study drug safety and effectiveness in pediatric  subpopulations. FDA also held a workshop in May 2018 to seek input  on appropriate orphan designation for certain oncology treatments to stay  current with evolving knowledge.", "Orphan drug pricing. Stakeholders we interviewed and research we  identified also raised concerns about the high prices drug manufacturers  can charge for orphan drugs when receiving ODA incentives. Several  stakeholders we spoke with noted that it was difficult to discuss the ODA  without addressing concerns with how orphan drugs are priced. For  example, one patient advocacy group told us that it may be appropriate  for a drug to receive multiple orphan designations, but that the drug  manufacturer should revise the price of its drug to reflect the number of  orphan designations. Several studies have also pointed to high orphan  drug prices as a public health challenge in terms of access and  affordability, particularly when orphan drug development may be less  costly than non-orphan drugs due to smaller and fewer efficacy and  safety trials, shorter FDA review time, higher marketing approval success  rates, and lower marketing costs. One study found an inverse  relationship between the price of orphan drugs and their volume of use  (i.e., the more expensive the orphan drug, the fewer patients who use the  drug), and noted that over the past 20 years spending on medicine in the  U.S. market has shifted increasingly toward drugs that treat relatively few  people, such as those with rare diseases."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["With significant unmet need for most rare diseases, the ODA provides  manufacturers with a variety of incentives if they develop drugs that meet  orphan designation criteria. To ensure that drug manufacturers\u2019 claims in  their orphan designation applications are accurate, FDA must conduct  thorough and consistent evaluations. FDA took several steps beginning in  June 2017 to improve the consistency and efficiency of these evaluations,  including introducing a standard review template and guidance for  completing it. However, we found that FDA does not always ensure that  all information is consistently recorded in its review templates and  evaluated when making designation determinations, which are critical  steps needed to understand the full context of a drug\u2019s intended use in  the rare disease. FDA has a number of options it could take to ensure  that reviewers obtain all necessary information and use it to inform  orphan designation determinations. For example, we found that FDA\u2019s  guidance was not always clear in instructing reviewers how they should  use the information they record. Clarifying these requirements in  guidance could help reviewers make use of this information, including the  secondary reviewers who ensure the consistency and quality of  designation reviews. While FDA action to improve its designation reviews  will not address the broader rare disease drug development challenges  identified by stakeholders we interviewed and research we analyzed, it  could help FDA ensure the consistency of its review process, particularly  as demand for orphan designations continues to grow."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to FDA:  The Commissioner of FDA should ensure that information from orphan  drug designation applications is consistently recorded in OOPD review  templates and evaluated by OOPD reviewers when making an orphan  designation decision. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Health and Human  Services (HHS) for comment. In its written comments, reproduced in  appendix III, the agency concurred with our recommendation. HHS also  provided technical comments, which we incorporated as appropriate.", "In its response, HHS stated that it would consider our recommendation as  part of FDA\u2019s ongoing efforts to evaluate and revise the designation  review template, and to train reviewers. Regarding the background  information in the review template, HHS also noted that many drugs  requesting orphan designation do not have relevant regulatory history,  particularly adverse actions, as these drugs are early in drug  development at the time of requesting orphan designation. However, HHS  agreed with the importance of consistently documenting and utilizing  background information, and stated that FDA will continue to apply  consistent criteria to its review decisions.", "We are sending copies of this report to the Secretary of Health and  Human Services, appropriate congressional committees, and other  interested parties. The report is also available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  us at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs are on the last page of this  report. GAO staff who made major contributions to this report are listed in  appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Information Recorded in OOPD\u2019s Standard Designation Review Template", "paragraphs": ["In October 2017, the Food and Drug Administration\u2019s Office of Orphan  Products Development (OOPD) introduced a standard review template,  along with guidance for how to complete it, to aid its reviewers in  evaluating orphan designation applications. OOPD guidance instructs its  reviewers to record information about the drug and disease on the  standard review template, as well as the results of independent  verification done for certain information included in the application. The  template is then used with the designation application to determine  whether to grant orphan designation to a drug. (See table 6 for the  information recorded in OOPD review templates.)"], "subsections": []}, {"section_title": "Appendix II: Orphan Drug Marketing Approvals from 2008 to 2017", "paragraphs": ["The Food and Drug Administration (FDA) approved 351 orphan drugs for  marketing from 2008 to 2017 in 27 different therapeutic areas. Forty-two  percent (149) of orphan drug marketing approvals were in oncology, with  six other therapeutic areas having 10 or more approved orphan drugs.  (See table 7 for information on orphan drug marketing approvals from  2008 to 2017 by therapeutic area.) Additionally, the 351 orphan drug  marketing approvals were for 252 unique drugs, because drugs can be  approved for more than one orphan indication. The majority of drugs had  one orphan indication (77.4 percent) or two orphan indications (15.9  percent). However, several drugs (6.7 percent) were approved to treat  three or more orphan indications."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia Crosse (Director), Robert  Copeland (Assistant Director), E. Jane Whipple (Analyst-in-Charge), and  Brienne Tierney made key contributions to this report. Also contributing  were Kaitlin Farquharson, Alison Granger, Drew Long, and Vikki Porter."], "subsections": []}]}], "fastfact": ["How do you get drug manufacturers to make drugs that treat rare diseases\u2014when they may not sell enough to make a profit?", "The Food and Drug Administration designates some drugs as \"orphan drugs,\" which allows manufacturers to obtain incentives (like tax breaks) for developing drugs that treat rare diseases. But we found that FDA reviewers don\u2019t always include all the required information in their reviews to determine whether a drug is eligible for orphan designation.", "Especially as applications for orphan drug designations increase, we recommended improving how FDA reviews these applications."]}
{"id": "GAO-18-530", "url": "https://www.gao.gov/products/GAO-18-530", "title": "Defense Contracts: Improved Information Sharing Could Help DOD Determine Whether Items Are Commercial and Reasonably Priced", "published_date": "2018-07-31T00:00:00", "released_date": "2018-07-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD buys goods and services from the commercial market to take advantage of new innovations and save on acquisition costs. However, the department's process for determining whether an item can be purchased commercially\u2014and, at a fair and reasonable price\u2014can be long and challenging in certain situations.", "GAO was asked to review this process. This report identifies (1) factors that influenced DOD's commercial item and price reasonableness determinations, and (2) the extent to which DOD has taken steps to make information available to facilitate these determinations.", "To conduct this work, GAO examined federal regulations and guidance and selected case studies, which included a non-generalizable sample of 15 contracts awarded between fiscal years 2010 and 2018. GAO identified the case studies based on input from multiple sources that those contracts involved commercial item or price reasonableness determination challenges. GAO interviewed government and contractor officials responsible for those contracts."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has a process to determine if an item is available for purchase in the commercial marketplace at a reasonable price. Among selected case studies, GAO found four interrelated factors, each with its set of challenges that influenced how and whether DOD determines if an item is commercial and if its price is reasonable. These factors are:", "Availability of marketplace information : Market research is a key component that informs commercial item and price reasonableness determinations. However, GAO found that obtaining market-related information can be challenging because the products DOD requires may not be widely available in the commercial marketplace.", "Ability to obtain contractor data : When adequate market information is not available, DOD officials turn to the contractor for information to support the commercial item determination or data to make a price reasonableness determination. In the case studies GAO reviewed, most contractors provided relevant information, but not without delays and challenges. For example, while pricing data is key to DOD's ability to determine price reasonableness, several contracting officers reported that contractors were less willing to provide this data once an item was determined commercial.", "Extent of modifications to an item : When a commercial item must be modified to meet DOD's requirements, DOD officials may have to take additional steps, such as completing a comparative analysis of commercial items to the modified item. For example, in one case, a commercial navigation system had to be modified to withstand an explosion. To make the commercial item determination DOD officials had to make an on-site visit to the manufacturer to gain in-depth understanding of the services provided and to ensure they met DOD requirements.", "Reliability of prior commercial item determinations : Contracting officers may presume that an item is commercial if a DOD component had previously made that determination. However, GAO found that, in some cases, contracting officers reviewing a prior determination discovered that it was based on inaccurate information.", "DOD has taken steps to share more information across the department to inform these determinations, but efforts are in early stages of development or informal. No comprehensive information sharing strategy exists. In 2016, DOD established the Commercial Item Group within the Defense Contract Management Agency to provide recommendations on commercial item determinations. This group created a publicly available database to centralize commercial item information across DOD. However, this effort is incomplete. Also, according to DOD officials, they have not yet established who is responsible for the funding and upkeep of the information. Additionally, GAO case studies included instances where informal information sharing resulted in better outcomes, such as a lower price. Creating more opportunities to share information internally is crucial for DOD to facilitate a timely and efficient process in making these determinations and ensuring the best financial outcome for the government."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD develop a strategy for how information related to commerciality and price reasonableness determinations should be shared across the department, including making improvements to the existing database and determining responsibilities for its funding and upkeep. DOD agreed with GAO's recommendation and stated that actions will be taken starting in 2018 to address it."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) purchases commercial items to meet  many of its requirements in fulfilling its mission. In fiscal year 2017, the  department spent $53 billion on commercial item contracts plus an  unknown amount through subcontracts. Generally, items are considered  commercial if they\u2014or something similar\u2014already exist in the  marketplace or require few modifications to meet DOD\u2019s specific needs.  Purchasing commercial items enables DOD to take advantage of market  innovations, increase its supplier base, and reduce acquisition costs.  Contractors also prefer to sell products and services as commercial items  because there are fewer government-specific contractual requirements,  reduced costs and risks associated with government-unique  specifications, and fewer auditing requirements than for other types of  procurements.", "The process to purchase commercial items can be relatively  straightforward when the item or service procured is clearly commercial  and a robust market of competitors exists, such as when buying a  computer. However, some commercial item procurements can be more  involved, such as buying a computer that has a case ruggedized for use  in harsh conditions. This report focuses on these more complex  procurements, and the issues that arise with them. Contractors and DOD  have noted that in some cases, for instance when the item must be  modified for DOD\u2019s use and is not competitively procured, the acquisition  process has presented challenges. As we found in July 2017, companies  that have not traditionally done business with DOD view DOD\u2019s workforce  as inexperienced in making commercial item and price reasonableness  determinations and view this as a challenge to entering the DOD arena.  The DOD Office of Inspector General has reviewed the process of  determining a fair and reasonable price on selected sole-source  commercial spare parts contracts and found that on these contracts  contracting officers accepted the contractors\u2019 pricing without performing a  sufficient price analysis.", "You asked us to review DOD\u2019s process for acquiring commercial items. In  this report we (1) identify factors that influenced DOD\u2019s process for  making commercial item and price reasonableness determinations, and  (2) assess the extent to which DOD has taken steps to make information  available to help make these determinations.", "To identify factors that influenced DOD\u2019s process for acquiring  commercial items and to assess what DOD has done to make information  available, we examined the Federal Acquisition Regulation (FAR), the  Department of Defense Federal Acquisition Regulation Supplement  (DFARS), and associated DOD guidance. We also reviewed a  nongeneralizable sample of 15 contracts awarded between fiscal years  2010 and 2018, and interviewed government officials involved with these  contracts at the Air Force, Army, Navy, and the Defense Logistics Agency  (DLA) as well as contractors. These contracts represent both products  and services, and were selected because they had been previously  identified as contracts that involved difficulties in making commercial item  determinations by one or more of the following entities: the military  services, the Defense Contract Management Agency (DCMA),  contractors, or through previous GAO work. We selected these contracts  to gain insight into why these difficulties occurred. We interviewed officials  from the DCMA Commercial Item Group and reviewed the group\u2019s  publicly available database that centralizes commercial item information.", "Additionally, we discussed the management and funding of the database  with the Office of Defense Procurement and Acquisition Policy. See  appendix I for more details on our objectives, scope, and methodology.", "We conducted this performance audit from July 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Federal Acquisition Streamlining Act of 1994 established a  preference within the federal government to procure commercial items  rather than items developed exclusively for the government. Between  fiscal years 2013 and 2018, Congress passed additional legislation to  address various aspects of how DOD defines and purchases commercial  items, and how DOD makes commercial item and price reasonableness  determinations. For example, legislation passed in 2015 included a  provision stating DOD contracting officers may presume that previously  established commercial item determinations shall serve as determinations  for future procurements of an item. The law further stipulated that if a  prior determination is not used for an item previously determined to be  commercial, the contracting officer must request a review by the head of  the contracting activity to either confirm that it is still valid or issue a  revised determination.", "In January 2018, DOD revised its regulations and corresponding  procedures, guidance, and information related to the procurement of  commercial items to reflect recent legislative changes. The DFARS was  updated to provide guidance to contracting officers for making price  reasonableness determinations, promote consistency in making  commercial item determinations (including updating guidance regarding  the use of prior determinations), and expand opportunities for  nontraditional defense contractors to do business with DOD. The  department also updated its Guidebook for Acquiring Commercial Items,  which includes information on how to define, determine, and price  commercial items, to reflect the regulatory changes. Also in January  2018, a DOD advisory panel established to help streamline the defense  acquisition process released a report with recommendations to revise  definitions related to commercial buying and minimize government-unique  terms applicable to commercial buying."], "subsections": [{"section_title": "DOD Process for Making Determinations When Acquiring Commercial Items", "paragraphs": ["During the pre-award process for commercial procurement actions over  $1 million, two distinct determinations take place:  1.  a contracting officer must determine in writing whether a product or  service being procured is commercial, and  2.  the contracting officer must determine if the offered price is fair and  reasonable.", "According to the DOD Guidebook for Acquiring Commercial Items, the  government\u2019s ability to acquire affordable products and services  significantly improves when contracting officers have in-depth knowledge  of the market. The guidebook establishes that market research should be  an ongoing effort throughout the commercial item procurement process  to: (1) identify the industry and market for capabilities or technologies; (2)  identify prices at which the capabilities or technologies have been sold or  offered for sale; and, (3) continuously capture market information at  different points to ensure the best acquisition. When determining a fair  and reasonable price, market research should be conducted in order to  compare the proposed price to market pricing. Figure 1 illustrates the  process contracting officers generally follow to make commercial item and  price reasonableness determinations for more complex procurements.", "The contracting officer is ultimately responsible for making these  determinations, but, as appropriate, he or she may seek the assistance of  the Defense Contract Audit Agency (DCAA), military service  organizations such as the Navy Price Fighters or the Air Force Pricing  Center of Excellence, or the DCMA Commercial Item Group.", "The DCMA Commercial Item Group, which became operational in 2016,  provides recommendations on commercial item determinations within  DOD. It has created six Commercial Item Centers of Excellence, each of  which has its own area of market expertise, to assist contracting officers  in making timely and consistent commercial item determinations. These  centers are staffed with engineers and price/cost analysts who advise and  make recommendations on commerciality based on market analysis,  commercial item reviews and determinations, and commercial pricing  analysis. Additionally, the centers provide training and assistance to the  DOD acquisition community on various techniques and tools used to  evaluate commercial items and commercial item pricing.", "In order to make a commerciality determination, contracting officers may  need information specifying whether the items have been sold or offered  for sale to the general public. And, as noted above, the contracting officer  must determine that the government is getting a fair and reasonable  price. Some of this information may be acquired through market research;  however, as appropriate, the contracting officer may require or request  that the contractors submit information, such as price lists and sales  invoices, with their offers or during the evaluation. For more details on the  information and data required for commercial item and price  reasonableness determinations at different times in the procurement  process, see appendix II."], "subsections": []}]}, {"section_title": "Case Studies Identified Four Interrelated Factors That Influenced Commercial Item and Price Reasonableness Determinations, but Generally Did Not Delay Awards", "paragraphs": ["In the case studies we examined, we found four interrelated factors that  influenced how DOD determines if an item is commercial and whether the  price is fair and reasonable, and that each factor had its own set of  challenges:", "Availability of marketplace information", "Ability to obtain contractor data", "Extent of modifications to an item needed to satisfy DOD", "Reliability of prior commercial item determinations  Despite these challenges, contract award was not typically delayed. In  other cases where DOD was not able to obtain the information or data it  needed to make a determination, the department\u2019s options, such as not  awarding the contract or exploring other suppliers, were often not feasible  because DOD was working in a sole-source environment and not  procuring the item was not an option."], "subsections": [{"section_title": "Limited Market Information Can Complicate Contracting Officers\u2019 Commercial Item and Price Reasonableness Determinations", "paragraphs": ["When there is a healthy marketplace of items and services that the  government wants to buy, contracting officers can more readily support  their commerciality and price reasonableness determinations. However,  in our review, we identified cases in which limited market information  made such determinations more involved. For example, the Army was  working with a contractor to acquire repair and upgrade services for  navigation systems. The contractor said the services were commercial,  but when the contracting officer conducted market research to determine  the commerciality of the services, she found no similar services available  in the commercial market. According to a contracting official, the Army\u2019s  particular units had to be nuclear hardened to withstand an explosion and  needed some functional interfaces added, which made finding a similar  commercial service difficult. In the end, the DCMA\u2019s Commercial Item  Group officials completed an on-site review of the manufacturing process  to gain an in-depth understanding of the services provided. Using this  additional information, the contracting officer deemed the services  commercial.", "In contrast, for a previous report on commercial item acquisitions, we  reviewed selected Air Force contracts for information technology services  and video teleconferencing design and installation. Because these items  and services are available in the commercial marketplace, the availability  of information helped the contracting officers efficiently determine that the  items were commercial and that the prices were fair and reasonable."], "subsections": []}, {"section_title": "Obtaining Information from Contractors and Subcontractors Can Be Challenging", "paragraphs": ["Contracting officials from our case studies had difficulty obtaining  information from contractors after they could not find adequate  information in the marketplace. This difficulty occurred for a number of  reasons, including the contractor\u2019s own challenges in obtaining  information from their subcontractors. While several of the contracts we  reviewed showed that either the prime contractor or subcontractor  eventually provided sufficient information, obtaining this information was  not without difficulties. For example:  In a $1.7 billion Army sole-source contract for helicopter engines, the  prime contractor asserted that two small engine parts\u2014provided by a  subcontractor\u2014were commercial, but did not provide any documents  to support its assertion. After several requests for information on  commercial sales data, the prime contractor provided invoices for a  commercial engine that contained similar engine parts. The prime  contractor representative told us the reason it took so long to provide  the requested information was because the subcontractor would not  provide commercial sales data. As a result, the prime contractor  needed to research commercial engines that used similar parts in  order to support the commerciality assertion.", "In an $873 million Air Force sole-source contract for aircraft engines,  the contracting officer had difficulty obtaining commercial sales data  through market research for engine castings. The prime contractor did  not initially provide support for its assertion that the castings were  commercial, stating that it had difficulty obtaining supporting  information from its subcontractor. Air Force officials visited the  subcontractor\u2019s facility to determine that the item was a modified  version of a commercial item and was therefore commercial.", "In a $53 million Navy sole-source contract for KC-130J aircraft  propeller engineering and sustainment services, the contracting officer  told us she had difficulty determining if the proposed prices for these  commercial services were fair and reasonable because the contractor  provided invoices with the prices redacted. After several months of  back and forth, the contractor provided unredacted invoices for similar  services, which the contracting officer used to determine price  reasonableness. A contractor representative told us that the  contractor initially provided the redacted invoices in order to quickly  respond to the Navy\u2019s request for information, but that additional time  was needed to evaluate if releasing the unredacted price information  would violate a contractual agreement the contractor had with its  suppliers.", "In other cases, the contractor provided information or data that the  contracting officer considered insufficient to support a commercial item or  price reasonableness determination. For example:  In an F-15 aircraft production contract, Air Force contracting officials  had difficulty determining whether the prices of oil bypass valves were  fair and reasonable due to redactions in data the subcontractor  provided. The subcontractor\u2019s proposed price was four times more  than it had previously charged the government for the same item,  according to contracting officials. To support its prices, the  subcontractor provided a commercial price list and customer invoices  with redacted customer information, which the subcontractor  considered to be proprietary. According to contracting officials, the  redacted invoices did not provide enough detail to confirm whether  non-governmental end users were paying a price similar to the  proposed price in the Air Force contract. The subcontractor  subsequently provided a customer list associated with the redacted  invoices. Also, while the subcontractor showed that its proposed price  was lower than its commercial price list, contracting officers did not  consider subcontractor-provided support sufficient to explain why the  proposed price was higher than what the government had previously  paid. According to contracting officials, the prime contractor absorbed  the price difference between the subcontractor\u2019s proposed price and  what the Air Force paid for the valves.", "On a $2 million Army task order for navigation software upgrades on  Global Positioning System (GPS) units used in missiles, the DCMA  Commercial Item Group obtained redacted invoices and quotes from  a subcontractor to determine commerciality. But this information did  not provide enough detail to substantiate the commerciality  determination. A subcontractor representative told us that the  company provided redacted information to the government because  contractual agreements with its customers required them to not reveal  the customer name. After evaluating multiple factors, the DCMA  Commercial Item Group concluded that the GPS units did not match  the form, fit, or function of the commercial ones, and recommended  that this service and item were not commercial.", "Contractor representatives cited multiple reasons why they were unable  to provide data (see text box).", "Examples of Reasons Contractors Cited for Not Providing Data:", "One prime contractor told us that some subcontractors are  unwilling to provide information, such as unredacted invoices, to  them and therefore prime contractors cannot provide this  information to the government.", "Some subcontractors we interviewed explained that certain  information, such as customer names and prices paid in invoices,  is considered proprietary data.", "One subcontractor representative said that while the company  cannot provide unredacted invoices to a prime contractor, it is  willing to provide this information directly to the government, such  as the DCMA Commercial Item Group, which can verify the  content of the invoices at the contractors\u2019 facilities.", "Additionally, one contractor representative told us that when a previously  determined commercial item is later determined noncommercial, specific  cost or pricing data can be difficult to gather for companies that operate  primarily in the commercial market. This is because these companies  were not previously required to collect and provide this cost or pricing  data to the government. For example, the subcontractor that produces an  item for the Army told us that this item had been previously purchased by  the government on a commercial basis under an agreement that was later  canceled in 2014. When the government later determined this item was  noncommercial, the subcontractor had difficulty providing detailed cost  data for the government\u2019s units because they are procured on the same  manufacturing line as their commercial units. According to contractor  officials, the costs for subcomponents and labor hours for engineers that  work on these units are pooled together with cost for the commercial  business.", "A contracting officer\u2019s ability to obtain data is further affected once an  item has been deemed commercial. Several contracting officers told us  that once an item is determined commercial, contractors are less willing  to provide any pricing data. While certified cost and pricing data cannot  be required, the government can request uncertified data if needed to  make a price reasonableness determination. As previously noted, we  found cases in which contractor-provided information included redacted  invoices as evidence that an item was commercial. When the government  later requested uncertified cost and pricing data to determine price  reasonableness\u2014after exhausting government and public market  research resources\u2014the contractors were not willing or able to provide  the data. In most cases contractors eventually provided data after  multiple requests."], "subsections": []}, {"section_title": "Modified Items Require Additional Steps", "paragraphs": ["Our case studies showed that determining commerciality and price  reasonableness for items that are modified from the commercial variant  can be difficult, in part, because what can be deemed \u2018a minor  modification\u2019 is subject to interpretation. The commercial item definition  includes some types of commercial items that have minor modifications  not customarily available in the commercial marketplace, but that are  made to meet federal government requirements. For our case studies,  when prime contractors or subcontractors claimed a modified item was  commercial, contracting officers had to take extra steps to determine  whether the commerciality assertions appropriately met the commercial  item definition, such as completing a comparative analysis of commercial  items to the modified item. However, determinations in our case studies  were challenging to make because the items were generally acquired  through sole-source procurements and had no identified commercial  market. This made it more difficult for the contracting officer to make a  determination based on market research.", "In one of our case studies, there was a difference of opinion within  DOD as to whether a modified item was commercial. The prime  contractor for an Army sole-source contract procuring modified fuel  systems to meet military safety, crashworthiness, and ballistic  tolerance requirements for Blackhawk helicopters claimed that its  modified fuel system was a commercial item. However the contracting  officer found no commercial market existed for this item so the  contracting officer had to take additional steps. To make a  commerciality determination, the contracting officer sought assistance  from the DCMA Commercial Item Group, which recommended that  the fuel system was not commercial. The contracting officer submitted  a request to waive the requirement for certified cost or pricing data.  The DOD official reviewing the waiver request discovered that the fuel  system had previously been determined commercial for another  helicopter program and the Director of Defense Pricing concurred with  that commerciality determination."], "subsections": []}, {"section_title": "Contracting Officers Found Prior Commercial Item Determinations Not Always Accurate", "paragraphs": ["Some of our case studies exhibited challenges related to prior  commercial item determinations:", "The Navy contracted for a radio used in a variety of aircraft throughout  DOD. The contracting officer stated that the radio had been  considered commercial for 20 years. However, for the most recent  follow-on contract the contracting officer, who was new to the  program, reviewed the prior determination and found it to be in error.  In the prior determination the radio was compared to another radio  considered noncommercial. As part of his review for the new  determination, the contracting officer consulted with Air Force officials  because they procure the same radio for some of their aircraft  programs. The contracting officer ultimately determined that the radio  was, in fact, commercial by comparing it\u2014at the suggestion of the Air  Force\u2014to a different radio with similar features that is sold  commercially to the public. According to the contracting officer, the  Navy also benefited because the radio they had purchased for 20  years was also cheaper and more capable than the one that was sold  commercially, to which it was compared.", "For a $2.5 billion Air Force sole-source contract, the prime contractor  asserted that a cargo part, called a winch\u2014which had previously been  sold to the government as a commercial item\u2014was commercial.", "However the contracting officer reviewed the support for the prior  commercial item determination and found it was based on sales to a  holding company for a foreign government. Additional information  requested and received included catalog prices and the invoice to the  foreign holding company. The contracting officer determined this  support was not sufficient for determining commerciality because  sales to foreign governments were not considered commercial sales.  Additionally, market research did not yield any commercial sales or  evidence that the part was sold in the commercial marketplace. The  part was determined noncommercial.", "The National Defense Authorization Act for Fiscal Year 2016 states  contracting officers may presume a prior commercial item determination  made by a DOD component shall serve as a determination for  subsequent procurements of an item. In fact, if a previous determination  is not used, a contracting officer must request that the head of the  contracting activity review the prior determination and either confirm its  validity or issue a revised determination. Most contracting officers with  whom we spoke indicated that prior determinations should be reviewed to  determine if they were made under similar terms and conditions and  whether circumstances have changed since the determinations were  made. We found diverse opinions among contracting officers on whether  they would elevate concerns about a previous determination to the head  of the contracting activity. Some contracting officers said they would  elevate the determination if they had supporting data while others would  be hesitant under most circumstances due to the extensive process  involved."], "subsections": []}, {"section_title": "Challenges in Making Commercial Item and Price Reasonableness Determinations Did Not Typically Delay Contract Award", "paragraphs": ["Despite the different factors involved, for most of our case studies,  challenges in making the commercial item and price reasonableness  determinations did not ultimately affect the government\u2019s ability to award  the contract as planned. The time it took for the contractor to provide  information to the government and the government to make a  determination ranged from a few days to over a year. In most of our case  studies, contracting officials said that this time did not solely affect the  contract award because other factors, such as staff changes or awarding  multiple contracts at the same time, also delayed the process.", "However, in two of our 15 cases, contracting officers told us they were  delayed in awarding contracts when the contractor did not provide the  requested information in the anticipated timeframe. In one example, an  Army contracting official told us that a contract award was delayed when  a subcontractor did not provide information to the contractor to support its  commerciality assertion. The contracting officer noted that this delay also  placed the program at risk of a funding loss because the service  reallocated funding to another program that it viewed as less risky.", "Finally, contractors told us that they have taken steps to improve how  they assert the commerciality of their items. For example, several  contractors now use standardized forms to make commercial item  assertions and keep prior assertions in a centralized place. Several  contractor representatives we spoke with also told us that they have an  internal panel of experts review commercial item and price  reasonableness assertions to ensure consistency and that the assertions  meet federal regulations. The contractors\u2019 hope is that these forms and  processes will help reduce the back and forth in requesting information  among the government, prime contractor, and subcontractors. In addition,  some contractor representatives told us that they work with the DCMA  Commercial Item Group to better understand what information contracting  officers are requesting and to obtain assistance with subcontractors that  are unwilling to provide information to the prime contractor."], "subsections": []}, {"section_title": "When Information Needed to Make Commercial Item and Price Reasonableness Determinations Is Not Readily Available, Contracting Officers\u2019 Options Are Limited", "paragraphs": ["Some contracting officials told us that they have few options at their  disposal when they have difficulty obtaining information from the  contractor to make a commercial item or price reasonableness  determination in a sole-source environment. For example:", "For a $2 million Army task order for engineering services to upgrade  navigation software and several GPS units with these upgrades, the  contracting officer stated that procuring from an alternative source  was not an option because this GPS was unique to the program and  qualifying a different GPS would cost an estimated $50 million.", "In a nearly $2 million sole-source delivery order for Blackhawk  helicopter fuel tanks, the Army contracting official told us that the  program needed this fuel tank because the tank\u2019s configuration was  specific to the helicopter. As a result, the contracting official said they  could not walk away from the contractor. The contracting official  further noted that certifying an item from a second source would be  cost and time prohibitive for the government.", "Although in most of our sole-source case studies other options (e.g.,  contracting with a different vendor) were not viewed as being feasible, we  did have one case where DOD made the choice to not award a contract,  when the government and contractor could not agree on a reasonable  price. DLA wanted to negotiate a long-term contract for night vision  goggles, but after the contracting officer made repeated attempts to  obtain data from the contractor, they could not agree on a fair and  reasonable price. The prices were over 45 percent higher than prices that  DLA had previously paid for the same item. As a result, the acquisition  was canceled, and according to the contracting officer, the government  plans to buy quantities as needed through an existing vehicle.", "Another option is to elevate issues to DOD management, which can make  a determination on whether an item is commercial and is being offered at  a fair and reasonable price.", "One example from our case studies includes a $1.7 billion Army sole  source contract for helicopter engines. The contractor asserted  commerciality for the engines, which had historically been procured as  a noncommercial item. After extensive market research, the  contracting officer asked for information from the contractor to support  its commerciality assertion, but had difficulty obtaining it. According to  the contracting officer, the Army discussed the possibility of not  awarding this contract, but this was not considered feasible since the  engine is used in multiple aircraft. After months of back and forth  between the contracting officer and contractor, this commerciality  issue was elevated to the Director of Defense Pricing, who agreed  with the contracting officer\u2019s assessment that the engines were not  commercial and procured them on that basis."], "subsections": []}]}, {"section_title": "Both Formal and Informal Information Sharing Efforts Exist, but With No Comprehensive Strategy", "paragraphs": ["DOD has taken steps to share more information across the department to  inform commercial item and price reasonableness determinations, but  efforts to date are in early stages of development or happening informally  across the department. Despite these efforts, contracting officers still face  challenges in obtaining adequate information to make informed  commercial item and price reasonableness determinations, in part  because no comprehensive information sharing strategy exists to outline  responsibilities and funding of these efforts. DOD officials told us they  plan to explore other options for the sharing of commercial item  information, such as communities of practice, but have not made any  formal plans.", "One information sharing effort still in its early stages is the DCMA  Commercial Item Group\u2019s publicly available database, created in 2017 to  centralize commercial item information across DOD. The database,  however, has not been fully established as an effective tool. In its current  form it consists of a spreadsheet primarily listing items that contracting  officers have determined to be commercial. According to DCMA  Commercial Item Group officials, the database contains fewer items than  expected because not all DOD contracting officers have submitted their  commercial item determinations. The Office of Defense Procurement and  Acquisition Policy updated its Guidebook for Acquiring Commercial Items  in January 2018 to state that a commercial item determination is not  complete until the contracting officer submits it to the DCMA Commercial  Item Group along with a summary of pricing information. These  submissions are meant to improve consistency and efficiency in making  commercial item determinations. On February 22, 2018, the Air Force  Deputy Assistant Secretary for Contracting issued a memorandum that  reminded its contracting officers of this responsibility.", "We found that the database has limitations. For example, it includes only  a list of items evaluated and not the results of recommendations made on  commerciality by the DCMA Commercial Item Group. These  recommendations can be obtained by contacting the office directly.  DCMA officials stated results of their recommendations are specifically  not included in the public database because of concerns that a prime  contractor may prefer a subcontractor with a commercial item  determination over another without one.", "Most commercial item determinations included in the database go back  only to 2016, since this is when the DCMA Commercial Item Group began  collecting them. Additionally, DCMA Commercial Item Group officials said  they have no funding to support the database. Officials plan to meet with  DOD\u2019s Office of Defense Procurement and Acquisition Policy to discuss  funding and other potential systems to maintain the information as well as  provide DOD officials with direct access to copies of previous  determinations and related information. Defense Procurement and  Acquisition Policy and DCMA officials acknowledged that DOD has not  yet determined who is responsible for the funding and upkeep of this  information. Internal control standards promote assigning responsibility  and delegating authority to key roles to achieve an organization\u2019s  objectives. Without appropriate funding and clearly defined roles and  responsibilities for management and upkeep of the database, its  effectiveness as a tool to provide contracting officers with information to  help make commercial item determinations will continue to be limited.", "While the database serves as a means to formally share information to  help contracting officers make commercial item and price reasonableness  determinations, contracting officers in our case studies noted instances  where informal sharing of information between programs and services led  to improved outcomes, such as a lower price. For example,  In a $257 million sole source MQ-9 aircraft contract, the Air Force  contracting team questioned whether a modified commercial engine  being provided by a subcontractor was offered at a fair and  reasonable price. While the Air Force contracting team relied on  uncertified cost and pricing data provided by the subcontractor, a  contracting official told us that the team also relied on information  shared by Air Force officials in other programs that were procuring  similar commercial items at the same time. The contracting team  discovered that another contracting official obtained a lower price for a  similar commercial item, and as a result, used this information to  negotiate a lower price.", "In the procurement for radios used in a variety of aircraft, as  discussed earlier, Navy contracting officials used informal information  sharing to make a commercial item determination. The Navy obtained  information from the Air Force, which was procuring the same radio  and which had performed a review in January 2017 that it shared with  the Navy. The review noted that other similar commercial radios  existed and that a comparison of this radio to these other commercial  radios could help determine that the radio is commercial. Navy  contracting officials, using the Air Force\u2019s review as well as their own  technical analysis, determined the radios were a modified commercial  item.", "Despite the creation of the database and the informal information sharing  that occurs, contracting officers still face challenges in obtaining adequate  information to make informed commercial item and price reasonableness  determinations. Specifically, DOD lacks a strategy for improving the  sharing of commercial item and price reasonableness information across  the department, such as efforts like the DCMA Commercial Item Group\u2019s  database. Internal control standards promote effective sharing of  information to ensure managers have the information they need to make  informed decisions. In addition, internal control standards state that  management should communicate information internally and assign  responsibilities for key roles while also considering the cost necessary to  communicate the information. In an environment where information is  difficult to obtain from the contractor, as we have outlined in this report,  the ability for contracting officers to have easy access to all necessary  commerciality and pricing information within DOD is critical. If DOD does  not have such information easily available, contracting officers will  continue to struggle with obtaining all the information they need to make  informed and efficient commercial item and price reasonableness  determinations."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["When dealing with a limited marketplace and price data, determining  commerciality and price reasonableness can be challenging for DOD\u2019s  contracting staff. Ultimately, the effectiveness of determining  commerciality and fair and reasonable prices will depend on what  meaningful information the government successfully obtains to conduct its  analysis. Therefore, information sharing within the department is critical in  helping DOD\u2019s contracting officers determine commerciality and  reasonable prices on DOD\u2019s acquisitions. As our findings show, DOD has  made some efforts to facilitate the sharing of information, such as  establishing the DCMA Commercial Item Group. This group, in turn, set  up a database to increase the accessibility and utility of commercial and  pricing data. But the database is not yet robust enough to eliminate the  need for more sharing of information\u2014formal or informal\u2014across the  department. Enhancing information sharing efforts could address some of  the challenges we identified. Further, clearly defining the roles and  responsibilities for management of the database and identifying viable  funding sources to support the upkeep of the database will help ensure it  becomes a useful resource for contracting officials."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to DOD:  The Director of Defense Procurement and Acquisition Policy should work  with the Defense Contract Management Agency to develop a strategy for  sharing information related to commerciality and price reasonableness  determinations across DOD, including a plan to increase the information available in the Commercial Item alternative mechanisms to share information, either formal or informal;  and assignments of roles and responsibilities with regard to sharing  commercial item information, including how the database should be  funded, supported, and maintained."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix III, DOD concurred with our  recommendation, stating that it plans to issue a policy memo requiring all  commercial item determinations made after September 30, 2018 to be  included in the existing commercial item database. DOD further stated  that it will update its commercial item determination form to enhance  informal information sharing. In addition, DOD stated that the Director of  Defense Pricing within the Defense Procurement and Acquisition Policy  office and the Director of DCMA will enter into a memorandum of  agreement specifying roles and responsibilities in determining commercial  item policy and funding the commercial item database.", "DOD also provided technical comments, which were incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committee, the Secretary of Defense, and the Director of Defense  Procurement and Acquisition Policy. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or woodsw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to: (1) identify the factors that influenced the  Department of Defense\u2019s (DOD) commercial item and price  reasonableness determinations and (2) assess the extent to which DOD  has taken steps to make information available to help make these  determinations.", "To identify factors that influence the process and what DOD has done to  address them, we reviewed relevant sections of the Federal Acquisition  Regulation (FAR); Department of Defense Federal Acquisition Regulation  Supplement; DOD memorandums; policy, guidance, and instructions  related to the acquisition of commercial items, including the Guidebook  for Acquiring Commercial Items Part A: Commercial Item Determination  and Part B: Price Reasonableness Determination; and service-specific  guidance regarding commercial items.", "To assess challenges in making commercial item and price  reasonableness determinations, we identified a non-generalizable sample  of contracts which were reported by DOD officials and contractors as a  contract where it was difficult to make commercial item determinations,  price reasonableness determinations, or both, from a variety of sources.  Due to limitations of the Federal Procurement Data System-Next  Generation (FPDS-NG) we could not identify all DOD commercial item  acquisitions in the data system, specifically contracts that had been  coded as having used procedures other than FAR Part 12, Acquisition of  Commercial Items. Additionally, contracts which had issues in making  commercial item or price reasonableness determinations would not be  identifiable in FPDS-NG. Due to these limitations, we requested that three  DOD services \u2013 Air Force, Army, and Navy \u2013 and the Defense Logistics  Agency (DLA) each provide us with five contracts that had points of  contention with the commercial item determination or the price  reasonableness determination, either at the prime contract or subcontract  level. We also identified contracts by asking officials at the Defense  Contract Management Agency (DCMA) Commercial Item Group and the  Navy Price Fighters for contracts as well as identified contracts through  previous GAO work. Additionally, we asked contractors to identify  contracts they believed had issues in determining commerciality and/or  price reasonableness. One contractor identified two contracts, which we  reviewed, but did not find to have any issues concerning commerciality or  price reasonableness. From these requests we collected a non- generalizable sample of 56 contracts for commercial items.", "From the non-generalizable sample of 56 contracts, we selected 15  contracts awarded between 2010 and 2018 that met various criteria as  case studies. We selected 4 case studies from the Air Force, 4 from the  Army, 5 from the Navy, and 2 from DLA. The 15 case studies were  selected to represent: (1) multiple services; (2) a variety of issues with  commercial item or price reasonableness determinations, (3) reoccurring  prime contractors or subcontractors, and (4) a mix of product and  services acquired. We conducted an in-depth review of these contracts  and selected related orders to assess what challenges occurred when the  contracting officer was determining whether an item was commercial and  whether the price was fair and reasonable, and why these challenges  occurred.", "To assess challenges in making commercial item and price  reasonableness determinations, we reviewed the contract file  documentation for the 15 case studies, and interviewed contracting and  pricing officials. We reviewed documentation including commercial item  determinations, price negotiation memorandums, market research, and  DCMA Commercial Item Group and Defense Contract Audit Agency  reports. We also interviewed contracting officials and contractors to obtain  perspectives on how an item was determined to be commercial and then  subsequently, determined to be offered at a fair and reasonable price. We  interviewed contracting officers to obtain their views on the effect the new  Guidebook for Acquiring Commercial Items and recently passed  legislation would have on these challenges, and how they might affect  contracts in the future. We interviewed officials from the DCMA  Commercial Item Group to understand how they assist contracting  officers in making determinations, and about the publicly available  database that centralizes commercial item information. We also reviewed  this database to understand what types of information it contained.  Additionally, we discussed the management and funding of the database  with the Office of Defense Procurement and Acquisition Policy. We  interviewed contractors to discuss commercial item and price  reasonableness issues on the selected contracts, discuss general areas  of concern with regard to commercial item and price reasonableness  determinations, and identify other contentious contracts.", "We conducted this performance audit from July 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on audit objectives."], "subsections": []}, {"section_title": "Appendix II: DOD General Process for Making Commercial Item and Price Reasonableness Determinations", "paragraphs": ["Appendix II: DOD General Process for Making  Commercial Item and Price Reasonableness  Determinations applicable to most of the contracts in our case studies because all but one of the contracts were  awarded before the DFARS changes were implemented. Furthermore, where the Federal Acquisition  Regulation (FAR) and DFARS differed in terminology (e.g., the FAR noted a requirement for \u201cdata\u201d to  determine price reasonableness but the DFARS noted a requirement for \u201cinformation\u201d), the table and  report use the DFARS terminology."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tatiana Winger (Assistant  Director), Emily Bond, Jared Dmello, Lorraine Ettaro, Julie Hadley, Julia  Kennon, Timothy Moss, Miranda Riemer, Raffaele (Ralph) Roffo, and  Carmen Yeung made key contributions to this report."], "subsections": []}]}], "fastfact": ["DOD contracting officers buy products \"off the shelf\" to take advantage of innovations and save money. But at times they must navigate a complex process to determine if an item is available commercially and at a fair price.", "We found that:", "Required market information on specialized products may be hard to find", "Contractors may be slow to provide information", "Additional steps may be needed to determine if a commercial item needs modification before it is DOD-ready", "Earlier determinations on products may not be valid", "We recommended DOD develop a strategy for sharing information on determining commerciality and price reasonableness across DOD."]}
{"id": "GAO-19-159", "url": "https://www.gao.gov/products/GAO-19-159", "title": "Medicaid: CMS Action Needed to Ensure Compliance with Abortion Coverage Requirements", "published_date": "2019-01-04T00:00:00", "released_date": "2019-02-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["While federal law prohibits federal funding for abortions in most circumstances, state Medicaid programs are required to cover abortions in limited circumstances. CMS is responsible for monitoring state compliance with federal requirements. However, concerns have been raised about challenges women may face obtaining Medicaid coverage for abortions eligible for federal funding, as well as with abortion access more broadly.", "GAO was asked to review issues related to abortion access. This report examines (1) factors that may present challenges to women, including Medicaid beneficiaries, accessing abortions; and (2) federal and state information on the number of abortions eligible for federal Medicaid funding. GAO reviewed federal laws, regulations, and data sources; surveyed and received responses from Medicaid program officials in all 50 states and the District of Columbia; conducted a literature review; and interviewed CMS officials and eight abortion providers selected based on factors such as variation in Medicaid abortion coverage and geography."]}, {"section_title": "What GAO Found", "paragraphs": ["Women could face various challenges accessing abortions depending on where they live, and Medicaid beneficiaries may face additional challenges in some states. GAO identified seven key factors that could pose challenges to women accessing abortions, based on its interviews with providers and review of the literature: gestational limits, mandatory counseling, out-of-pocket costs, parental involvement requirements, provider availability, stigma and harassment, and waiting period requirements. The presence of these factors and their effect on abortion access\u2014such as delays in care or increased costs\u2014varied by state.", "GAO also found that state variation in Medicaid abortion coverage and payment requirements could further complicate access for program beneficiaries. State Medicaid programs are generally required to cover abortions and can seek federal funding for such coverage when the pregnancy is the result of an act of rape or incest, or the life of the pregnant woman would be endangered unless an abortion is performed. States may also cover abortions under other circumstances, but federal funds may not be used. In GAO's survey, one state reported not covering abortions in cases of rape or incest, and 14 states reported not covering the drug used in medical abortions, which they are generally required to cover if the abortion is otherwise eligible for federal funding. Officials from the Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees Medicaid, were unaware that these states were not covering the drug, and thus, have not taken any actions to address states' non-compliance.", "Federal information on the number of abortions eligible for federal Medicaid funding is incomplete, limiting CMS's ability to ensure proper payments and states' coverage of such abortions. For example, the form CMS-64, which states use to report Medicaid expenditures, does not collect information on the number of abortions paid for by managed care\u2014the delivery system serving most Medicaid beneficiaries. It also does not include this information from 8 states that GAO identified as incorrectly reporting abortion costs on the form. While also not complete, state information reported in GAO's survey was more comprehensive, and showed a wide range in the number of abortions eligible for federal funding covered across the 42 states that reported such information."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to CMS to ensure state compliance with federal requirements for Medicaid abortion coverage, including coverage of the drug used for medical abortions. The Department of Health and Human Services concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicaid, a joint federal-state health financing program, is one of the  nation\u2019s largest sources of coverage for medical and other health-related  services. In fiscal year 2017, Medicaid covered acute health care, long- term care, and other services for an estimated 74 million low income and  medically needy individuals. While federal law prohibits federal funding  for abortions in most circumstances, state Medicaid programs are  required to cover an abortion if the pregnancy is the result of rape or  incest, or the life of the pregnant woman would be endangered unless an  abortion is performed. In these circumstances, abortions are eligible for  federal funding. In addition, states can, at their own expense, choose to  cover this procedure beyond the circumstances outlined in federal law.", "The Centers for Medicare & Medicaid Services (CMS), the agency within  the Department of Health and Human Services (HHS) that oversees  Medicaid, has a critical role in monitoring states\u2019 compliance with federal  requirements, including ensuring that federal funding is provided only for  eligible abortions and that state Medicaid programs cover abortions  eligible for such funding. However, members of Congress and others  have raised concerns about women\u2019s access to abortions across states,  including for Medicaid beneficiaries in circumstances eligible for federal  funding. For example, concerns have been raised about the availability of  facilities providing abortions, which could affect women\u2019s access. A recent  study found that the number of abortion clinics varied greatly across the  country with the Northeast having nearly three times more clinics than the  Midwest based on regional population size. Another study found that the  number of abortion clinics has declined over time and that more than a  third of women across the country live in a county without an abortion  clinic.", "You asked us to examine issues related to women\u2019s access to abortions.  This report examines  1.  factors that may present challenges to women, including Medicaid  beneficiaries, accessing abortions; and  2.  federal and state information on the number of abortions eligible for  federal Medicaid funding.", "To examine factors that may present challenges to women, including  Medicaid beneficiaries, accessing abortions, we reviewed federal laws  and regulations, and surveyed Medicaid officials in all 50 states and the  District of Columbia (hereafter, states) regarding their scope of abortion  coverage, including coverage of medical abortions, and their  requirements for Medicaid payment for abortions eligible for federal  funding. All states responded to the survey. In addition, we interviewed  eight abortion providers about access challenges women may face.  These eight providers offered services in 21 states that represented more  than 40 percent of the total national Medicaid population, but varied in  terms of their Medicaid abortion coverage and geography. Our findings  from these interviews are not generalizable. We also conducted a  literature review to identify peer-reviewed studies that examined factors  that could present challenges to women accessing abortions. We  searched multiple reference databases for relevant studies published  between January 2007 and September 2017, and identified 637 studies  that were potentially relevant. To further refine our search, we reviewed  the abstract of each study to ensure the articles met certain criteria. For  the studies remaining, we examined their methodologies to determine  whether they were sufficiently reliable for the purposes of our reporting  objectives. As a result of these efforts, we identified 52 studies to include  in our review. For more details on the literature review and a list of  studies we reviewed, see appendix I. We also interviewed officials from  CMS and other relevant organizations representing a range of  perspectives on women\u2019s access to abortions.", "To examine federal information on the number of abortions eligible for  federal Medicaid funding, we reviewed available federal data sources,  such as the form CMS-64, which states use to report Medicaid  expenditures to CMS for the purpose of determining federal funding, and  interviewed CMS officials. To examine state information, we obtained  responses through our survey to questions regarding the number of  abortions eligible for federal funding that state Medicaid programs  covered and denied for fiscal years 2013 through 2017. We asked states  to report information by delivery system type and by the circumstance  eligible for federal funding (rape, incest, or life endangerment). We did not  independently verify state-reported information, but did follow up with  states to clarify inconsistencies or outliers we identified. On that basis,  we determined that the state-reported information was sufficiently reliable  for the purposes of our reporting objectives.", "We conducted this performance audit from May 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Abortion in the United States", "paragraphs": ["In 1973, the U.S. Supreme Court concluded in Roe v. Wade that a  woman has a fundamental right protected by the U.S. Constitution to  decide whether to terminate her pregnancy. However, the Court also  recognized that a state may have an interest sufficient to regulate  abortion after the first trimester of the pregnancy or proscribe abortion  after the fetus reaches viability, the point at which the fetus could live  outside the womb. Over time, states have adopted a range of abortion- related laws or policies, including the following examples.", "Gestational limits: Prohibiting abortions after a specified gestational  age.", "Insurance limitations: Limiting insurance coverage of abortions to  certain circumstances in either publicly or privately funded insurance  plans.", "Laws regulating abortion providers: Requiring abortion providers to  meet certain standards, such as standards that specify facility room  size or corridor widths.", "Mandatory counseling: Requiring specific information, including  information on fetal development or gestational age of the fetus, be  provided to a woman prior to an abortion.", "Parental involvement: Requiring the consent or notification of one or  both parents for minors seeking an abortion.", "Waiting periods: Requiring a certain amount of time to elapse  between informed consent\u2014which may include mandatory  counseling\u2014and having an abortion.", "Since Roe v. Wade was decided, many of these state laws have been  challenged, and the Court, in reviewing these laws, has considered  whether they impose an undue burden on a woman\u2019s right to choose an  abortion. Most recently, in 2016, the Court found that two Texas laws  regulating abortion providers offered few, if any, health benefits and  posed a substantial obstacle to women seeking abortions. Therefore,  the Court found that these two Texas laws constituted an undue burden  and were unconstitutional.", "The number of abortions performed in the United States has steadily  declined over the past 30 years, with the abortion rate reaching its lowest  point in 2014\u2014the most recent year data were available\u2014at 14.6  abortions per 1,000 women of reproductive age, according to a 2017  study. This study attributed this decline primarily to a decrease in the  number of unintended pregnancies and to a lesser extent, laws or policies  that may limit women\u2019s access to abortions.", "Abortions are typically performed in a clinic or other nonhospital setting  and involve one of two methods: medical abortion or surgical abortion.  Medical abortions involve using prescription drugs to terminate a  pregnancy. The prescription drug mifepristone, sold under the brand  name Mifeprex, in combination with the prescription drug misoprostol, is  the only Food and Drug Administration (FDA) approved medication for  medical abortions in the United States, and is approved for use through  10 weeks gestation. FDA has restricted the administration of Mifeprex to  patients in certain healthcare settings under the supervision of a certified  prescriber; thus, the drug cannot be sold in retail pharmacies. According  to Danco Laboratories, the manufacturer of Mifeprex, there is at least one  certified Mifeprex provider in every state. Surgical abortions, which can  involve different procedures depending on the stage of a women\u2019s  pregnancy, account for the majority of abortions in the United States.  However, according to a recent study, the incidence of medical abortions  increased 7 percent from 2011 to 2014, with medical abortions  accounting for 31 percent of all nonhospital abortions in 2014."], "subsections": []}, {"section_title": "Medicaid Coverage of Abortions", "paragraphs": ["Medicaid expenditures are financed by both the federal government and  the states. In order to receive federal funding for Medicaid expenditures,  states must adhere to a broad set of federal requirements and administer  their programs consistent with individual state plans approved by CMS.  However, Medicaid, by design, allows significant flexibility for states to  design and implement their programs. States have some discretion in,  among other things, setting Medicaid eligibility standards and provider  payment rates; determining the amount, scope, and duration of covered  benefits; and developing their own administrative structures. For example,  states must cover certain mandatory populations and services\u2014including  abortions in cases of rape, incest, or life endangerment\u2014but may impose  certain requirements on that coverage, such as requiring authorization  before a service is provided. States may also opt to cover other optional  populations and services, including abortions for which federal funding is  not available.", "States may also decide how Medicaid-covered services provided to  beneficiaries will be delivered. For example, states may pay health care  providers for each service they provide\u2014referred to as fee-for-service  (FFS)\u2014or contract with managed care organizations (MCO) to provide a  specific set of Medicaid-covered services to beneficiaries and pay them a  set amount per beneficiary, typically per month. While most states use  both delivery systems, the percentage of beneficiaries served through  comprehensive MCOs has grown in recent years, and represented nearly  70 percent of all Medicaid beneficiaries in 2016.", "Oversight of the Medicaid program is also shared by the federal  government and the states, and is aimed, in part, at ensuring that funds  are used appropriately and that beneficiaries have access to covered  services. With respect to abortion coverage, federal law and CMS  guidance outline specific requirements for federal funding to be available.  For example, states that claim federal funding for abortions in the case of  life endangerment must obtain a physician\u2019s certification that the abortion  is necessary for this purpose. While there is not a similar certification  requirement for federal funding of abortions in cases of rape or incest,  CMS guidance specifies that states may impose certain additional  requirements on providers and beneficiaries as a condition of Medicaid  payment for abortions eligible for federal funding, provided such  requirements are reasonable and do not deny or impede coverage for  such abortions.", "In the case of medical abortions, federal law does not specifically require  Medicaid coverage of the prescription drugs used to terminate a  pregnancy. However, state Medicaid programs that opt to cover  prescription drugs\u2014which is the case in all 51 states\u2014are generally  required to cover outpatient drugs of any manufacturer participating in the  Medicaid Drug Rebate Program. Danco Laboratories has a rebate  agreement for Mifeprex, and, as result, states should generally cover it for  abortions in the circumstances eligible for federal funding. In determining  states\u2019 compliance with this requirement, CMS guidance states that the  agency will consider several factors, including a state\u2019s authority to set  limitations on covered outpatient drugs under relevant state laws.", "To inform its oversight of Medicaid, CMS relies on state-reported data  that contain information on multiple aspects of the program. States  claiming federal funding for Medicaid services, including abortions, are  required to report quarterly expenditures to CMS on the form CMS-64.  CMS uses these data to pay states for the federal share of program  spending and the agency is responsible for ensuring that federal  payments are made appropriately. Additionally, states submit Medicaid  expenditure and utilization data that can be linked to individual  beneficiaries to CMS on a monthly basis through the agency\u2019s new  Transformed Medicaid Statistical Information System (T-MSIS)."], "subsections": []}]}, {"section_title": "Multiple Factors Could Present Challenges to a Woman\u2019s Access to Abortions Depending on Where She Lives", "paragraphs": ["Through provider interviews, we identified multiple factors that could  present challenges to women accessing abortions, but the extent to which  these factors were present in a state varied, as did their effect on access.  In addition, the studies we reviewed examined some of these factors  more than others, but often pointed to the challenges they could pose.  Medicaid beneficiaries may experience further challenges accessing  abortions in some states due to variation in Medicaid abortion coverage  and related payment requirements."], "subsections": [{"section_title": "Providers and Literature Pointed to Multiple Factors that Could Present Challenges to Women Accessing Abortions across States", "paragraphs": ["We identified seven key factors as potential challenges to women  accessing abortions based on our interviews with eight selected  providers: (1) gestational limits; (2) mandatory counseling; (3) out-of- pocket costs; (4) parental involvement; (5) provider availability; (6) stigma  and harassment; and (7) waiting periods. (See table 1.)", "The extent to which these factors are present in a state varies. For  example, one provider who did not identify stigma and harassment as a  factor affecting women in the state it operates in noted that women from  all over the country come to its clinics. The provider said this was  because women see its clinics as a safer place to obtain an abortion than  seeking care in their own state, where they would likely be stigmatized or  harassed. Additionally, providers in some states told us that they were  able to cover the entire cost of the abortion and pay for associated costs,  such as transportation, for women who could not afford to pay, while  providers in other states said that they could not cover the entire cost of  the abortion due to funding limitations. See figure 1 for an example of  differences in factors present in two states.", "In addition, a factor could be more challenging in one state versus  another, depending on the details of the factor and other factors present.  For example, one provider noted that the 24-hour waiting period in one  state it serves poses a minimal challenge, because women can complete  part of the process online and only make one visit to the abortion  provider. Conversely, a provider in another state said that the state\u2019s 72- hour waiting period requires two in-person visits and that the same doctor  be present at both, which can create delays in care and increase costs,  particularly if the woman needs to travel a long distance for her  appointments. Differences in access can also exist within a state. Most  notably, some selected providers pointed out that women in a state\u2019s rural  areas typically have more limited access to abortion providers than those  who live in the state\u2019s urban areas.", "The 52 studies we reviewed examined the key abortion access factors  identified through our interviews with selected providers, though some  factors were studied more than others. (See app. I.) Most of the  reviewed studies conducted statistical analyses to evaluate the effects of  a factor on abortion access and often identified access challenges. For  example, nearly two-thirds of the statistical studies for the three most  commonly studied factors\u2014out-of-pocket costs, parental involvement,  and provider availability\u2014found that the factor adversely affected a  measure of abortion access. (See table 2.)", "The other factors identified by providers\u2014gestational limits, stigma and  harassment, mandatory counseling, and waiting periods\u2014were less  frequently examined in the reviewed studies, and the findings from these  studies were more mixed. For example, gestational limits and stigma and  harassment were the least studied of all the factors with only three and  two studies, respectively, and the reviewed studies found both adverse  effects on access, as well as effects that were statistically insignificant.  While there were more studies on waiting periods, the results were  similarly mixed, with at least one study suggesting that the type of waiting  period could change the effect on access. This study found that while a  waiting period requiring two in-person visits could delay care, the effect of  waiting periods that required fewer in-person visits was not significant.  Finally, for mandatory counseling, the studies we reviewed rarely found  that the factor had a statistically significant effect on a measure of  abortion access (2 of 10 studies)."], "subsections": []}, {"section_title": "Variation in State Coverage and Payment Requirements Could Further Challenge Medicaid Beneficiaries\u2019 Access to Abortions", "paragraphs": ["In responding to our survey, 29 states reported limiting abortion coverage  for Medicaid beneficiaries to the three circumstances required under  federal law\u2014rape, incest, and life endangerment\u2014while 21 states  reported broader abortion coverage. The remaining state, South Dakota,  reported that it limits abortion coverage for Medicaid beneficiaries to  circumstances when the pregnancy endangers the life of the woman, and  does not cover abortions in cases of rape or incest. CMS confirmed that  South Dakota\u2019s Medicaid state plan does not include coverage of  abortions in cases of rape or incest, and shared a letter it sent to the state  in 1994 outlining that the state\u2019s coverage did not comply with federal law  and expressing CMS\u2019s intent to work with the state on possible solutions.  However, according to CMS officials, the agency has not taken any action  since that time to ensure South Dakota\u2019s compliance, and does not have  plans to do so. As a result, Medicaid beneficiaries in South Dakota do  not have Medicaid coverage for abortions in cases of rape or incest.", "States also varied in the extent to which their Medicaid programs covered  Mifeprex, the prescription drug most commonly used for medical  abortions. (See fig. 2.) As previously noted, state Medicaid programs that  opt to cover prescription drugs\u2014which is the case in all 51 states\u2014are  generally required to cover outpatient drugs of any manufacturer  participating in the Medicaid Drug Rebate Program, subject to a few  statutory exceptions. CMS officials told us that Mifeprex, which became  a covered outpatient drug in 2001, does not meet any of the exceptions  for categorical exclusion from coverage. However, 14 states reported  that they do not cover Mifeprex. Without such coverage, Medicaid  beneficiaries seeking abortions in these states would have to find another  way to pay for the drug or undergo a surgical abortion instead. CMS  officials were not aware that these states did not cover Mifeprex, and thus  the agency had not taken any action to address states\u2019 non-compliance.", "Beyond differences in the scope of their abortion coverage, states varied  in the types of requirements they imposed as a condition of Medicaid  payment for abortions eligible for federal funding, which could also affect  women\u2019s access to the procedure. Provider certification that the abortion  met the circumstances of rape, incest, or life endangerment was the most  common requirement reported by states. Other commonly reported  requirements included provider certification of counseling, beneficiary  certification of rape or incest, documentation of rape or incest, and prior  authorization by the state Medicaid agency. (See table 3.)", "The details of particular requirements also varied across states. For  example, among the 32 state Medicaid programs that claimed federal  funding for abortions, we reviewed available documents implementing the  federal requirement that physicians certify the abortion is necessary in the  case of life endangerment and found differences among the states. In  particular, some states\u2019 documents incorporated the statutory wording of  the life endangerment exception, others incorporated the wording of the  related federal regulation, and others used different wording.  Additionally, CMS officials told us that the agency does not require that  physicians fill out a specified form to meet the certification requirement,  and the 32 states varied in whether or not they had such a form. In  another example, of the 14 states that required documentation of cases of  rape or incest, some states specifically required a police report, and other  states allowed the beneficiary the option of either filing a police report or  filing a report with another public agency, such as a public health agency.", "Finally, states also varied in terms of the number of requirements they  imposed specific to Medicaid payment of abortions eligible for federal  funding. For example, some states had no requirements specifically for  these abortions, while one state had all five of the requirements most  commonly reported. In general, states that used state-only funds to  cover abortions in circumstances beyond those eligible for federal funding  had fewer requirements. (See fig. 3.)", "Our interviews with the eight selected providers suggest that the scope of  a state\u2019s Medicaid abortion coverage and related payment requirements  could affect abortion access. For example, six selected providers said  that they rarely submit abortion claims to state Medicaid programs that  limit abortion coverage to circumstances eligible for federal funding, in  part, because obtaining payment is challenging; involves multiple, often  unclear requirements; and frequently results in denied claims. One of  these providers noted that not obtaining Medicaid payment puts additional  pressure on already strained resources, affecting its ability to cover  abortions for women in general. Conversely, two providers operating in  states with broader Medicaid abortion coverage stated that they  frequently submit claims for abortions and receive payment.", "State-reported information on denied abortion claims suggests that the  difficulty the selected providers faced in obtaining Medicaid payment for  abortions eligible for federal funding in certain states could exist in other  states. Specifically, among the 15 states reporting information on  denials of payment for abortions in circumstances eligible for federal  funding, denial rates ranged from 4 percent to nearly 90 percent, with  about half of the 15 states reporting denial rates of 60 percent or more.  While we did not ask states to report on their reasons for denying  Medicaid payment for abortions, some states provided this information.  For example, one state said that its high denial rate is due to the initial  denial of all claims for abortions in cases of life endangerment that do not  have the recipient\u2019s address, as required by federal regulation. In  addition, 7 states reported having no payment denials, 4 of which did not  receive any claims for abortions eligible for federal funding over the 5- year period.", "Findings from the studies we reviewed also highlight the potential effect of  states\u2019 Medicaid coverage and payment requirements on a woman\u2019s  access to abortions. Eight studies that examined the effect of limiting  Medicaid abortion coverage to those eligible for federal funding found that  such coverage limits were associated with a reduction in the number of  women having abortions. For example, one of these studies analyzed  national data from 1985 to 2005 and found that limiting Medicaid  coverage to abortions eligible for federal funding reduced a state\u2019s  abortion rate by 8 to 9 percent. In addition, six studies that examined  providers\u2019 experiences obtaining Medicaid payment for abortions  corroborated many of the concerns raised by our selected providers. For  example, one study examining abortion provider experiences in six states  found that many providers choose not to bill Medicaid for abortions,  because obtaining payment for the procedure requires a significant time  commitment, and when states do pay, the amount is typically lower than  the cost of providing the abortion."], "subsections": []}]}, {"section_title": "Information on Abortions Eligible for Federal Medicaid Funding Is Incomplete, but Showed a Wide Range in the Number of Procedures Covered across States", "paragraphs": ["The usefulness of federal information\u2014namely CMS-64 data\u2014for  identifying the number of abortions eligible for federal Medicaid funding is  limited, which could hamper CMS\u2019s efforts to ensure proper payments  and states\u2019 coverage of abortions in cases of rape, incest, or life  endangerment. In particular, the CMS-64 does not include the following  information.", "Abortions states paid for through MCOs. The CMS-64 does not  include information on abortions eligible for federal funding provided  to Medicaid beneficiaries through MCOs, because states are not  required to identify expenditures for individual managed care services  on the form. In our survey, 23 states reported claiming federal  Medicaid funding for abortions from fiscal years 2013 through 2017  that were, at least in part, paid for through MCOs.", "Abortions in states reporting FFS abortions incorrectly. The  CMS-64 is also an incomplete information source, because of  inaccurate state reporting. CMS requires states to report FFS  abortions for which they claim federal funding on line 14 of the form.  However, in our survey, eight states reported that they include the  costs of such abortions on other lines of the CMS-64, such as on the  lines for outpatient hospital or physician services. According to  agency officials, CMS conducts quarterly reviews of the CMS-64 data  states report. CMS officials also said that reviewers are not required  to confirm whether states that report no abortions on line 14 have  accurately reported the information, which means that reviewers may  not identify states reporting abortions elsewhere. As a result,  information from the CMS-64 does not accurately reflect the number  of FFS abortions for all states that may be claiming federal Medicaid  funding.", "In addition, because state Medicaid programs use the CMS-64 to claim  federal funding for services provided, the form does not include  information from states that covered abortions for Medicaid beneficiaries  in circumstances of rape, incest, or life endangerment, but did not seek  federal funding for those costs. In our survey, 15 states\u2014accounting for  nearly half the Medicaid population nationwide\u2014reported that, from fiscal  years 2013 through 2017, they did not claim federal funding for abortions  covered by their programs.", "In comparison with the CMS-64 data, the information states reported  through our survey was more comprehensive. For example, 16 states  claiming federal Medicaid funding provided us information on the number  of abortions paid for through MCOs, information that was not captured on  the CMS-64 as individual services, but often represented a significant  portion of the abortions covered by these states. Similarly, the 8 states we  identified as incorrectly reporting their FFS abortions on the CMS-64  reported the number of such abortions to us, and these states accounted  for half of all FFS abortions for which states reported claiming federal  funding in our survey. As a result, the number of abortions for which  states claimed federal funding that was reported to us was substantially  higher than the number in CMS\u2019s annual reports to Congress on such  abortions, which are based on CMS-64 data. From fiscal year 2013 to  fiscal year 2016\u2014the latest year of data available from CMS\u2019s annual  reports\u2014our survey identified nearly 5,000 abortions for which states  claimed federal funding versus the approximately 550 identified in the  agency\u2019s reports.", "However, the information on abortions eligible for federal funding that  states reported to us was also incomplete.", "Nine states, accounting for about one-third of total Medicaid  enrollment, were unable to provide any information. These states  use only state funds to pay for abortions, and, for example, do not  require providers to report the circumstance for the abortion when  requesting Medicaid payment, including those eligible for federal  funding.", "Six states provided only FFS information, though they also reported  paying for abortions through MCOs. Because over 60 percent of  Medicaid beneficiaries in five of these states are enrolled in MCOs,  information was not available for a significant portion of their  beneficiaries.", "There were also other, smaller gaps in the states\u2019 information. For  example, six states were not able to provide information for at least 1 year  of the survey time frame, and one state was not able to provide  information on abortions in the case of life endangerment, which, based  on information provided by other states, typically accounts for the majority  of abortions eligible for federal Medicaid funding.", "While not always complete, 42 states reported information to us on  abortions eligible for federal Medicaid funding, which showed a wide  range in the number of procedures covered across states. Most of these  states (37 of 42) reported covering 15 or fewer abortions eligible for  federal funding per year, on average, from fiscal years 2013 through  2017, though this number may be understated in some states due to the  data limitations discussed above. However, during this same time  frame, 3 states (Iowa, South Dakota, and Wyoming) reported covering no  abortions eligible for federal funding, and 2 states (Nevada and  Pennsylvania) reported annually covering an average of more than 300  and 700 such abortions, respectively. (See app. II.)", "Additionally, when excluding Nevada and Pennsylvania, states reporting  information showed an aggregate decrease in the number of abortions  eligible for federal Medicaid funding they covered during the fiscal year  2013 through fiscal year 2017 time period (from 383 to 200). When data  from these two states were included, there was an aggregate increase  (from 876 to 1,544), as the number of abortions covered by Nevada and  Pennsylvania was much higher in later years.", "T-MSIS could be a potential future source of more complete information  on the number of abortions eligible for federal Medicaid funding.  However, in two reports issued in January 2017 and December 2017, we  examined T-MSIS implementation and identified issues with the  completeness and comparability of T-MSIS data across states, as well as  uncertainty with respect to how CMS will ensure the quality of the data or  use them for oversight purposes. Based on our findings, we  recommended that CMS expedite efforts to ensure the quality of T-MSIS  data and articulate its plan and associated time frame for using these  data for oversight. CMS agreed with these recommendations, but as of  October 2018, the agency had not fully implemented them, and we  continue to believe that these recommendations remain valid. Further,  due to ongoing concerns regarding the quality of T-MSIS data and the  small number of abortion services relative to other Medicaid services,  CMS officials said that the agency has focused its oversight efforts in  other areas."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["CMS has a central role in monitoring states\u2019 compliance with federal  requirements for coverage of abortions eligible for federal funding in the  Medicaid program. However, our work identified limitations in CMS\u2019s  oversight. In the case of South Dakota, CMS is aware that the state does  not cover abortions in cases of rape or incest, as required by federal law,  but has not taken any action in 25 years to ensure the state\u2019s compliance.  CMS was not aware of the14 states that reported not covering Mifeprex  despite the requirement to do so under federal law. Without such  coverage, Medicaid beneficiaries seeking abortions in these states would  have to find another way to pay for the drug or undergo a surgical  abortion. Finally, incomplete federal data on the number of abortions  eligible for federal Medicaid funding\u2014in part, due to inaccuracies that we  identified in the reporting of these expenditures by eight states\u2014limit the  agency\u2019s ability to ensure that states are covering such abortions and that  federal payments are made appropriately."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following three recommendations to the Administrator  of CMS.", "CMS should take action to ensure South Dakota\u2019s Medicaid state plan  provides coverage for abortions in cases of rape and in cases of  incest, in addition to life endangerment, to comply with federal law,  which currently requires such coverage. (Recommendation 1)", "CMS should determine the extent to which state Medicaid programs  are in compliance with federal requirements regarding coverage of  Mifeprex and take actions to ensure compliance, as appropriate.  (Recommendation 2)", "CMS should determine the extent to which state Medicaid programs  are accurately reporting fee-for-service abortions on line 14 of the  CMS-64 and take actions to ensure accuracy, as appropriate.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the Department of Health and  Human Services for comment. In its written comments, HHS concurred  with our recommendations and indicated a commitment to working with  states to address them. In doing so, HHS noted that while CMS  encourages states to design their Medicaid programs to meet the needs  of local beneficiaries, states must operate their programs consistent with  all applicable federal laws, including those referenced in our report. HHS  also provided technical comments, which we incorporated as appropriate.   HHS\u2019s comments are reprinted in appendix III.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of HHS, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs can be found on the last  page of this report. Major contributors to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Literature Review", "paragraphs": ["To identify studies examining factors that may present challenges to  women, including Medicaid beneficiaries, accessing abortions, we  conducted a literature review of recently published studies. Specifically,  we searched for relevant studies published from January 2007 through  September 2017. We searched various peer reviewed and industry  journals using databases, including ProQuest, CINAHL, Dialog, and  Scopus. Key terms included various combinations and iterations of  \u201cabortion,\u201d \u201caccess,\u201d \u201cchallenge,\u201d \u201climit,\u201d \u201crestrict,\u201d \u201cobtain,\u201d \u201cdeny,\u201d \u201cstate  regulation,\u201d \u201cstate law,\u201d \u201cstate rule,\u201d \u201cstate policy,\u201d \u201cMedicaid,\u201d \u201cparental  consent,\u201d \u201cparental notification,\u201d \u201ccounseling,\u201d \u201cwaiting period,\u201d  \u201cultrasound,\u201d \u201cambulatory surgical,\u201d \u201csurgical center,\u201d \u201cadmitting  privileges,\u201d \u201chospital distance,\u201d \u201chospital proximity,\u201d \u201chospital miles,\u201d \u201croom  size,\u201d \u201ccorridor,\u201d \u201cprocedure room,\u201d \u201ctransfer patient,\u201d \u201ctargeted regulation  of abortion providers,\u201d \u201cTRAP law,\u201d \u201cstigma,\u201d \u201cviolence,\u201d \u201cprotest,\u201d harass,\u201d  \u201cgestational limit,\u201d \u201cterm limit,\u201d \u201cout-of-pocket,\u201d \u201cexpense,\u201d \u201cprovider  availability,\u201d \u201cprovider shortage,\u201d and \u201cprovider participation.\u201d From our  search, we identified 637 studies.", "We systemically reviewed the abstracts of these studies to determine  which ones examined factors that may present challenges to women  accessing abortions. In doing so, we excluded studies where the research  (1) was not focused on the United States; (2) was not empirically  analytical, such as theoretical articles and opinion pieces; (3) did not  directly analyze the effect of a factor on a woman\u2019s ability to obtain an  abortion (i.e., analyzed the effect of a factor on mental health outcomes,  contraception use, or unintended birth); (4) did not focus on the civilian  population; (5) evaluated personal characteristics or issues that may  present challenges to obtaining abortions, such as income level or age;  and (6) analyzed a number of factors together so the individual effect of  any one factor could not be identified. For the studies remaining, we  examined their methodologies to determine whether they were sufficiently  reliable for the purposes of our reporting objectives. After taking these  steps, 52 studies remained.", "The 52 studies were then reviewed and coded by analysts to determine  the type of abortion access factor identified. We focused our analysis on  key factors identified through interviews with selected abortion providers:  (1) gestational limits; (2) mandatory counseling; (3) Medicaid challenges;  (4) out-of-pocket costs, (5) parental involvement, (6) provider availability,  including certain state laws regulating abortion providers; (7) stigma or  harassment; and (8) waiting periods. Table 4 identifies these 52 studies  and summarizes the factors they examined."], "subsections": []}, {"section_title": "Appendix II: State-Reported Information on the Number of Covered Abortions Eligible for Federal Medicaid Funding", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Susan Anthony (Assistant  Director), Rachel Svoboda, (Analyst-in-Charge), Marcia Crosse, Julianne  Flowers, Sandra George, Ashley Nurhussein, Sara Rizik, and Jennifer  Rudisill made key contributions to this report. Also contributing were  Sarah Gilliland, Kaitlin Farquharson, Drew Long, Vikki Porter, and Eric  Wedum."], "subsections": []}]}], "fastfact": ["To receive federal funding, state Medicaid programs are supposed to meet federal health care coverage requirements. These include coverage for abortion, but only in cases of rape, incest, or if the woman's life is endangered.", "We found state-reported practices that did not comply with federal requirements.", "1 state did not cover abortion in cases of rape or incest.", "14 states did not cover the drug used in non-surgical abortions, even when the abortion was eligible for federal funding.", "We made 3 recommendations to CMS, the Medicaid administrator, to ensure compliance with federal requirements for abortion coverage."]}
{"id": "GAO-18-69", "url": "https://www.gao.gov/products/GAO-18-69", "title": "Diversity in the Technology Sector: Federal Agencies Could Improve Oversight of Equal Employment Opportunity Requirements", "published_date": "2017-11-16T00:00:00", "released_date": "2017-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Technology companies are a major source of high-paying U.S. jobs, but some have questioned the sector's commitment to equal employment opportunity. EEOC provides federal oversight of nondiscrimination requirements by investigating charges of discrimination, and OFCCP enforces federal contractors' compliance with affirmative action requirements. GAO was asked to review workforce trends in the technology sector and federal oversight.", "This report examines (1) trends in the gender, racial, and ethnic composition of the technology sector workforce; and (2) EEOC and OFCCP oversight of technology companies' compliance with equal employment and affirmative action requirements. GAO analyzed workforce data from the American Community Survey for 2005-2015 and EEOC Employer Information Reports for 2007-2015, the latest data available during our analysis. GAO analyzed OFCCP data on compliance evaluations for fiscal years 2011-2016. GAO interviewed agency officials, researchers, and workforce, industry, and company representatives."]}, {"section_title": "What GAO Found", "paragraphs": ["The estimated percentage of minority technology workers increased from 2005 to 2015, but GAO found that no growth occurred for female and Black workers, whereas Asian and Hispanic workers made statistically significant increases (see figure). Further, female, Black, and Hispanic workers remain a smaller proportion of the technology workforce\u2014mathematics, computing, and engineering occupations\u2014compared to their representation in the general workforce. These groups have also been less represented among technology workers inside the technology sector than outside it. In contrast, Asian workers were more represented in these occupations than in the general workforce. Stakeholders and researchers GAO interviewed identified several factors that may have contributed to the lower representation of certain groups, such as fewer women and minorities graduating with technical degrees and company hiring and retention practices.", "Both the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) have taken steps to enforce equal employment and affirmative action requirements in the technology sector, but face limitations. While EEOC has identified barriers to recruitment and hiring in the technology sector as a strategic priority, when EEOC conducts investigations, it does not systematically record the type of industry, therefore limiting sector-related analyses to help focus its efforts. EEOC has plans to determine how to add missing industry codes but has not set a timeframe to do this. In addition, OFCCP's regulations may hinder its ability to enforce contractors' compliance because OFCCP directs contractors to set placement goals for all minorities as a group rather than for specific racial/ethnic groups. OFCCP also has not made changes to its establishment-based approach to selecting entities for review in decades, even though changes have occurred in how workplaces are structured. Without taking steps to address these issues, OFCCP may miss opportunities to hold contractors responsible for complying with affirmative action and nondiscrimination requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes 6 recommendations, including that EEOC develop a timeline to improve industry data collection and OFCCP take steps toward requiring more specific minority placement goals by contractors and assess key aspects of its selection approach. EEOC neither agreed nor disagreed with its recommendation, and OFCCP stated the need for regulatory change to alter placement goal requirements. GAO continues to believe actions are needed, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since the 1990s, the technology sector has become a major source of  employment in the United States, and the sector is projected to continue  to grow and produce high-paying jobs. As the technology sector has  grown, the nation\u2019s overall workforce has become more diverse and this  trend is expected to continue into the future. Recently, media reports,  technology workforce organizations, and policymakers have raised  questions about diversity in the technology sector workforce and the  extent to which companies are making changes to improve diversity and  prevent discrimination. Diversity has been a focus not only because of  concerns about equal access to these growing and high paying jobs, but  because studies have associated a diversity of perspectives with  enhanced innovation and other business advantages. Federal law  promotes equal employment opportunity by prohibiting companies from  discriminating in employment on the basis of race and gender, among  other things, and generally requires companies contracting with the  federal government to comply with affirmative action and other equal  employment opportunity provisions. The U.S. Equal Employment  Opportunity Commission (EEOC) and the U.S. Department of Labor\u2019s  Office of Federal Contract Compliance Programs (OFCCP) are the  primary federal agencies that enforce these requirements.", "You asked us to review gender, ethnic, and racial diversity trends in  technology companies and federal oversight of antidiscrimination laws in  this sector. This report examines (1) the demographic trends in the  representation of women and racial and ethnic groups in the technology  sector for the last 10 years, and (2) the efforts by EEOC and OFCCP to  oversee technology companies\u2019 and technology contractors\u2019 compliance  with equal employment opportunity and affirmative action requirements.", "There is no common definition of technology workers or which industries  comprise the technology sector. Therefore for this report, we defined  technology workers as people who work in occupations in the fields of  computing, engineering, and mathematics. We defined the technology  sector as a group of industries with the highest concentration of  technology workers, such as computer systems design and software  publishing, which is an approach similar to what other federal agencies  have used recently to analyze trends within this sector. To describe the  demographic trends within the technology workforce from 2005 through  2015, we analyzed workforce data from the American Community Survey  (ACS) administered by the U.S. Census Bureau and from the EEOC\u2019s  Employer Information Reports (EEO-1).", "For this report, we used ACS data to estimate populations in technology  occupations which we refer to as technology workers, or the technology  workforce. We compared the technology workforce to the general  workforce, which we defined as workers in all other occupations,  excluding workers in technology occupations, as a benchmark to  understand trends for the technology workforce in the context of overall  workforce trends. In addition, we conducted further analysis of ACS data  to compare technology workers within and outside the technology sector.  Using EEO-1 data, we also analyzed workforce trends among similar  occupations in the workforces of companies within and outside the  technology sector. Our analysis was not designed to determine the  presence or absence of discrimination.", "To understand diversity in academic preparation for technology  occupations, we reviewed 2014 degree completion data from the National  Center for Educational Statistics\u2019 Integrated Postsecondary Education  Data System (IPEDS) as tabulated by the National Science Foundation.  Using a variety of sources, such as academic research and interviews  with representatives from academia, we defined technology-related fields  as degree programs in computer science, engineering, and mathematics.  Through a review of documentation, electronic testing, and/or interviews  with agency officials knowledgeable about the data, we found these data  sufficiently reliable for our purposes.", "To review EEOC and OFCCP\u2019s oversight efforts related to technology  companies\u2019 and federal technology contractors\u2019 compliance with federal  equal employment opportunity and affirmative action requirements, we  reviewed relevant federal statutes, regulations, and agency policies and  conducted interviews with agency officials. We analyzed OFCCP data on  affirmative action compliance evaluations from fiscal year 2011 through  2016. We assessed the reliability of the data by reviewing agency  documentation and interviewing agency officials, and we determined that  the OFCCP data were sufficiently reliable for our purposes.", "Additionally, we interviewed academics and representatives from  workforce and industry organizations that either promote diversity or  advocate for the technology sector, as well as representatives of eight  information technology companies who work on diversity and inclusion  and compliance issues, to obtain information about challenges and  opportunities for diversity in the sector, and perspectives on federal  oversight of antidiscrimination laws. The views expressed by the  companies\u2019 representatives may not be representative of all technology  companies on these issues. See appendix I for more information on our  methodology.", "We conducted this performance audit from May 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Technology Sector", "paragraphs": ["The technology sector has major employment hubs across the country,  including the San Francisco Bay area, the greater New York City region,  and the Washington-Arlington-Alexandria region (see fig. 1). In addition,  technology workers are employed at companies outside the technology  sector, such as in the retail or financial services industries. For example,  a large retail company may require technology workers to create and  manage their online sales activities, but the company itself would be  considered part of the retail industry."], "subsections": []}, {"section_title": "Federal Requirements Related to Equal Employment Opportunity and Affirmative Action", "paragraphs": ["Private companies are generally prohibited by federal law from  discriminating in employment on the basis of race, color, religion, sex,  national origin, age, and disability status. Additionally, federal contractors  and subcontractors are generally required to take affirmative action to  ensure that all applicants and employees are treated without regard to  race, sex, color, religion, national origin, sexual orientation, and gender  identity, and to employ or advance in employment qualified individuals  with disabilities and qualified covered veterans. EEOC is responsible for  enforcement of federal antidiscrimination laws, and OFCCP enforces  affirmative action and nondiscrimination requirements for federal  contractors. EEOC and OFCCP have some shared activities and have  established a memorandum of understanding (MOU) to minimize any  duplication of effort. For example, under the MOU, individual complaints  filed with OFCCP alleging discrimination under Title VII are generally  referred to EEOC. In addition, on occasions when EEOC receives a  complaint not within its purview, such as cases that involve veteran  status, but over which it believes OFCCP has jurisdiction, it will refer the  complaint to OFCCP."], "subsections": [{"section_title": "U.S. Equal Employment Opportunity Commission", "paragraphs": ["The EEOC, created by Title VII of the Civil Rights Act of 1964, enforces  federal laws that prohibit employment discrimination on the basis of race,  sex, color, religion, national origin, age, and disability. As the nation\u2019s  primary enforcer of antidiscrimination laws, EEOC investigates charges of  employment discrimination from the public, litigates major cases, and  conducts outreach to prevent discrimination by educating employers and  workers. In fiscal year 2016, EEOC received about 91,500 charges,  secured more than $482 million for victims of discrimination, and filed 114  lawsuits.", "According to EEOC, many states, counties, cities, and towns have their  own laws prohibiting discrimination, usually similar to those EEOC  enforces, as well as agencies responsible for enforcing those laws, called  Fair Employment Practices Agencies. However, in some cases, these  agencies enforce laws that offer greater protection to workers. An  individual can file a charge with either the EEOC or with a Fair  Employment Practices Agency. When an individual initially files with a  Fair Employment Practices Agency that has a worksharing agreement  with the EEOC, and the allegation is covered by a law enforced by the  EEOC, the Fair Employment Practices Agency will dual file the charge  with EEOC (meaning EEOC will receive a copy of the charge), but will  usually retain the charge for processing. If the charge is initially filed with  EEOC and the charge is also covered by state or local law, EEOC dual  files the charge with the state or local Fair Employment Practices Agency  (meaning the Fair Employment Practices Agency will receive a copy of  the charge), but EEOC ordinarily retains the charge for processing.", "EEOC also pursues a limited number of cases each year designed to  combat systemic discrimination, defined by the agency as patterns or  practices where the alleged discrimination presented by a complainant  has a broad impact on an industry, profession, company, or geographic  location. EEOC can also initiate a systemic investigation under Title VII  with the approval of an EEOC commissioner, called a \u201ccommissioner  charge\u201d, provided the commissioner finds there is a reasonable basis for  the investigation. In addition, EEOC district directors can approve  systemic investigations, called \u201cdirected investigations\u201d which are initiated  by EEOC field office directors under the Age Discrimination in  Employment Act and the Equal Pay Act.", "Under Title VII, EEOC generally requires that large employers and non- exempt federal contractors file Employer Information Reports (EEO-1  reports) annually, which collect employees\u2019 demographic data by  business location on sex, race, and ethnic group for 10 occupational job  categories. According to EEOC documentation, EEO-1 data are used in  investigations of Title VII violations, litigation, research, comparative  analyses, class action suits, and affirmative action plans."], "subsections": []}, {"section_title": "Office of Federal Contract Compliance Programs", "paragraphs": ["The OFCCP is responsible for ensuring that the nearly 200,000 federal  contractor establishments comply with federal nondiscrimination and  affirmative action requirements. Under Executive Order 11246 and other  federal laws and regulations, covered federal contractors and  subcontractors are prohibited from discriminating in employment on the  basis of race, color, religion, sex, sexual orientation, gender identity, or  national origin and are required to take affirmative action to help ensure  that all applicants and employees are treated without regard to these  factors. In general, OFCCP\u2019s regulations require covered contractors to  comply with certain recordkeeping and reporting requirements, and  provide for enforcement procedures such as compliance evaluations and  complaint investigations to assist OFCCP in ensuring federal contractor  compliance with these regulations.", "Among other provisions, OFCCP\u2019s regulations generally require that  covered contractors prepare and maintain an affirmative action program  (AAP). Under OFCCP\u2019s regulations, an AAP is a management tool that  is designed to ensure equal employment opportunity, with an underlying  premise that the gender, racial, and ethnic makeup of a contractor\u2019s  workforce should be representative of the labor pools from which the  contractor recruits and selects. Companies must create an AAP for  each business establishment\u2014generally, a physical facility or unit that  produces the goods or services, such as a factory, office, or store for the  federal contractor. An AAP will also include any practical steps to  address underrepresentation of women and minorities, such as  expanding employment opportunities to underrepresented groups.  Covered contractors must also comply with certain recordkeeping  requirements, including records pertaining to hiring, promotion, lay off or  termination, rates of pay, and applications, among other records.", "OFCCP\u2019s enforcement program represents the majority of the agency\u2019s  activity and is carried out primarily by using compliance officers, who  evaluate contractors\u2019 compliance with various requirements, according to  agency officials. In addition to conducting compliance evaluations,  OFCCP also conducts investigations in response to complaints. In 2016,  we reported that according to OFCCP officials, responding to complaints  accounted for close to 16 percent of OFCCP\u2019s enforcement activities.  OFCCP selects contractor establishments for evaluations based on a  number of neutrally applied factors, such as employee count at the  establishment, contract value, or contract expiration date. We previously  found that OFCCP reviews, on average, 2 percent of federal contractor  establishments annually.", "As we previously reported, as part of its compliance evaluations, OFCCP  is to review the selected contractor\u2019s hiring, promotion, compensation,  termination, and other employment practices to determine whether  contractors are maintaining nondiscriminatory hiring and employment  practices. OFCCP conducts evaluations at the establishment level.  When a contractor establishment is selected for evaluation, OFCCP  sends the contractor a \u201cscheduling letter\u201d requesting the AAP and  supporting data, such as the percentage of women and minority staff at  the workplace by job group. Then, a compliance officer is to conduct a  desk audit, which is an off-site review of the submitted materials. If  necessary, the compliance officer may also conduct an on-site review or  further off-site analysis to make a final determination as to whether the  contractor is in compliance. In addition to looking at whether federal  contractors maintain nondiscriminatory hiring and employment practices,  which can result in finding discrimination violations, OFCCP also  frequently finds other types of violations, such as failure to keep  necessary records or conduct annual reviews of equal employment and  affirmative action efforts. These findings by the agency often require  administrative changes on the part of the contractor, such as improved  record-keeping. There are many different forms of remedies for  discrimination violations, including financial, employment, and  organizational change remedies. Although rare, under some  circumstances, OFCCP may bar a contractor from doing business with  the government."], "subsections": []}]}]}, {"section_title": "Technology Workforce Grew between 2005-2015, but Women and Some Minority Groups Continued to be Less Represented", "paragraphs": [], "subsections": [{"section_title": "Compared to General Workforce, the Technology Workforce Grew at a Higher Rate and Continued to be More Educated and Better Paid", "paragraphs": ["From 2005 to 2015, the estimated number of workers in the technology  workforce\u2014people who worked in mathematics, computing, or  engineering occupations\u2014increased at a higher rate (24 percent) than  the estimated number of workers in the general workforce (9 percent),  according to ACS data. In 2015, the technology workforce comprised an  estimated 7.5 million workers, an increase of slightly over 1.4 million  workers since 2005. (For a complete list of the occupations we include  as technology occupations, see appendix II).", "Most technology workers have a college degree and have a higher  median income than workers in the general workforce. Specifically, in  2015, an estimated 69 percent of technology workers held at least a  bachelor\u2019s degree, compared to 31 percent of workers in the general  workforce. In 2015, the estimated median income for technology  workers was $81,000 compared to $42,000 for the general workforce."], "subsections": []}, {"section_title": "Women and Certain Minority Groups Continued to be Less Represented in the Technology Workforce and Sector", "paragraphs": [], "subsections": [{"section_title": "Comparison of Technology Workforce to General Workforce, by Gender and Race", "paragraphs": ["From 2005 to 2015, the percentage of women in the technology  workforce remained flat and women remained a smaller proportion of the  technology workforce compared to their representation in the general  workforce. In 2015, women represented 22 percent (about 1.6 million  workers) of workers in technology occupations, compared to 48.7 percent  of workers in the general workforce (see fig. 2).", "Although the estimated percentage of minority technology workers as a  whole had grown since 2005, we found that this trend did not apply to  Black technology workers. Specifically, from 2005 through 2015, although  the number of Black workers increased as the technology workforce  grew, there was no statistically significant change in their representation  as a percentage of the entire technology workforce. In contrast, from  2005 to 2015, Hispanic and Asian technology workers had statistically  significant increases in their representation in the technology workforce.", "Even with the increase in their numbers in the technology workforce,  Black and Hispanic technology workers remained a smaller proportion of  these workers compared to their representation in the general workforce.  In contrast, Asian workers were an increasing share of the technology  workforce, where they remained more represented than they were in the  general workforce (see fig. 3).", "We found that when we examined gender representation for each  minority group, both Black and Hispanic men and women were less  represented in the technology workforce compared to their representation  in the general workforce. The same was true for White women, whereas  White men, Asian men, and Asian women were more represented in the  technology workforce compared to their representation in the general  workforce (see fig. 4).", "We defined the technology sector as those companies that have the  highest concentration of technology workers and are in such industries as  computer systems design and software publishing. Companies  categorized as outside the technology sector, for example, retail or  finance companies, may still employ some technology workers.  However, we found differences in median incomes for technology workers  within and outside the technology sector. In 2015, technology workers  employed in the technology sector earned an estimated median income  of $89,000 compared to median incomes of $78,000 for those working  outside the technology sector.", "We also compared the characteristics of technology workers within the  technology sector and outside the technology sector, and found male and  Asian technology workers were relatively more represented in the  technology sector than outside the technology sector. Similar to the lower  representation of female, Black, and Hispanic technology workers in  technology occupations, we found technology workers from these groups  were also more likely to work outside the technology sector than in the  technology sector. For example, according to our analysis of 2015 ACS  data, women represented an estimated 18 percent of all technology  workers employed in the technology sector, compared to 25 percent of all  technology workers employed outside the technology sector (see fig. 5).  White technology workers were also more represented outside the  technology sector than within the technology sector.", "Companies in the technology sector also employ non-technical workers  such as sales people, and the lower representation of women and certain  minorities in the technology sector was also present in such non-technical  job categories. According to our analysis of EEO-1 data, women were  less represented across the full range of management and non- management positions at companies within the technology sector,  including at leading technology companies, compared to their  representation in companies outside the technology sector. We  determined this by comparing specific occupations at companies both  within and outside the technology sectors using 2015 EEO-1 data. For  example, women held about 19 percent of senior-level management  positions at companies in the technology sector compared to nearly 31  percent of such positions at companies outside the technology sector in  2015. Women were also less represented in all of the remaining job  categories (mid-level managers, professionals, technicians, and all other  jobs) in the technology sector. (See fig. 6.)", "Comparing EEO-1 data at three points in time for 2007, 2011, and 2015,  we found women\u2019s representation in management positions as well as  among professionals and technicians at companies within the technology  sector remained at about the same level, and decreased for \u201call other  jobs\u201d (see table 1).", "Similar to women, Black and Hispanic workers were less represented  across multiple job categories in companies within the technology sector  compared to those outside the technology sector (see fig.7). For  example, 1.8 percent of senior level managers in the technology sector  were Black compared to 3.4 percent of senior level managers in all other  sectors. Appendix IV provides percentages for each minority group in  different job categories within and outside the technology sector. The  lower representation of Black workers in the technology sector relative to  their representation in other sectors was consistent across all job  categories (mid-level managers, professionals, technicians, and \u201call other  jobs\u201d). Hispanic workers were less represented in the technology sector  compared to outside the technology sector across all job categories  (senior and mid-level managers, professionals, technicians, and \u201call other  jobs\u201d). Compared to their representation across job categories within the  technology sector in general, Black and Hispanic workers had slightly  greater representation at the leading technology companies in senior  management and technician categories, and lower representation among  mid-level managers, professionals, and holders of \u201call other jobs.\u201d", "Asian workers comprised a greater proportion of managerial and  professional roles in the technology sector than in other sectors,  according to our analysis of 2015 EEO-1 data. Asian workers represented  11.0 percent of senior level managers in the technology sector compared  to 4.3 percent in industries outside the technology sector. This higher  representation of Asian workers in the technology sector was consistent  among mid-level managers, professionals and technicians. Asian workers  were more represented in the same categories at the leading technology  companies. However, a lower proportion of Asian workers held senior  management positions compared to their representation in professional  positions in both the technology sector and leading technology  companies. Further, the proportion of Asian workers in mid-level  management positions was also lower than their representation in  professional positions, from which mid-level managers might be selected,  in both the technology sector and leading technology companies. In  contrast, a higher proportion of White workers were in senior and mid- level management positions compared to their representation in  professional positions in both the technology sector and leading  technology companies.", "Comparing EEO-1 data at three points in time\u20142007, 2011, and 2015\u2014 we saw varied representation across job categories in the technology  sector by race/ethnicity. For example, Black workers decreased in their  representation in all job categories in the technology sector from 2007 to  2015. In contrast, Hispanic and Asian workers increased in their  representation in all job categories we examined from 2007 to 2015 (see  table 2)."], "subsections": []}]}, {"section_title": "Several Factors May Contribute to the Lower Representation of Women and Certain Minority Groups in the Technology Workforce", "paragraphs": ["Several factors may contribute to the lower representation of female,  Hispanic, and Black workers in the technology workforce and at  companies in the technology sector, based on research and interviews  with researchers and representatives from workforce and industry  organizations and technology companies. These include the lower  diversity of degree earners in technology-related fields, and company- based factors such as hiring practices and retention of women and  underrepresented minorities.", "The smaller proportion of women in the technology workforce may reflect  the number of women earning technology-related degrees. Slightly over  two-thirds of technology workers report having earned their bachelor\u2019s  degree in a computer, engineering, mathematics, or technology field.  However, according to our analysis of 2014 IPEDS data, the percentage  of technology-related bachelor\u2019s and master\u2019s degrees earned by women  is far less than for men, although women were comparable to men in their  receipt of science, technology, engineering, and math (STEM) degrees,  and surpassed men in obtaining degrees in all other fields. In 2014,  about 60,000 women were awarded technology-related bachelor\u2019s or  master\u2019s degrees (compared to about 50,000 in 2004) and about 190,000  men were awarded such degrees (compared to about 147,000 in 2004).  (See fig. 8.) An estimated 218,000 technology workers were added to the  technology workforce in 2015, according to our analysis of 2015  American Community Survey data from the U.S. Census Bureau. In  addition, technology degrees are also issued at the associate\u2019s level.", "Two researchers told us that women often have the academic preparation  to enter into technology-related degree programs, but they may choose  not to pursue such degrees because of instances of gender bias within  technology classes. Our prior work reported on studies that found women  leave STEM fields at a higher rate than their male peers, citing one study  that found women leave STEM academic positions at a higher rate than  men in part due to dissatisfaction with departmental culture, faculty  leadership, and research support. Further, a 2012 consulting firm report  found that businesses viewed as male-dominated tended to attract fewer  women at the entry level.", "In addition, according to our analysis of 2014 IPEDS data, three minority  racial or ethnic groups each constituted 10 percent or fewer of bachelor\u2019s  and master\u2019s degree earners in a technology-related field. Specifically,  among the 202,200 earners of degrees in a technology-related field in  2014, there were about 20,000 Hispanic recipients, 13,000 Black  recipients, and 18,000 recipients who were Multiracial or other race,  which includes American Indian or Alaska Native, Other or Unknown  Race, and Two or more Races, i.e. respondents who selected one or  more racial designations. Among all minority groups, Asian students,  including Pacific Islander, earned the highest proportion of technology- related degrees (about 24,000 individuals). (See fig. 9).", "One barrier to entry into technology degree paths for Black and Hispanic  students may be lower likelihood of access to preparatory academic  programs in secondary school. In 2016, we reported that the K-12 public  schools in the United States with students who are mostly Black or  Hispanic offered disproportionately fewer math and science classes for  their students. One researcher told us some colleges and universities,  to help these students be academically successful, provide additional  academic support such as tutoring to help bridge knowledge gaps. To  address the uneven access to preparatory math and science classes,  representatives from five technology companies told us they have started  to invest in exposing Black and Hispanic children to technology  occupations by, for example, developing online resources targeted to  them and their parents and creating partnerships with secondary schools  to improve their academic preparation in computer science.", "However, we have previously also reported that the number of students  graduating with STEM degrees may not be a good measure of the supply  of STEM workers because students often pursue careers in fields  different from the ones they studied. For example, a lower percentage of  women who obtained technology-related degrees became technology  workers compared to men who earned the same degrees, according to  our analysis of 2015 ACS data. Specifically, among women who earned  technology degrees, an estimated 33 percent worked as a technology  worker compared to 45 percent of men who earned technology degrees.", "Several representatives we interviewed from workforce and industry  organizations and technology companies told us that recruitment  practices may also have affected diversity in the technology workforce.  For example, representatives from three workforce and industry  organizations said technology companies tend to recruit from a select  number of universities and colleges, thereby limiting their pool of potential  applicants. To address this, representatives from several of the  technology companies we interviewed told us they had changed  recruitment practices and offered internships targeted to  underrepresented groups. For example, representatives of four  technology companies told us that their companies had expanded  recruitment to include more schools. Representatives from two  companies told us they offer programs such as summer and semester  internships for which the company actively recruits from Historically Black  Colleges and Universities and other specific schools to increase its pool  of diverse candidates.", "In addition, representatives from workforce organizations and technology  companies discussed concerns and strategies to address companies\u2019  hiring practices and internal cultures that may limit workforce diversity.", "For example, one of these representatives said that technology  companies often offer financial incentives to current employees to make  referrals for new hires, which can result in reliance on social networks.  These networks may be largely comprised of the same race and this  practice therefore makes it harder for potential candidates from  demographically different groups to have their resumes reviewed.  Another workforce organization representative reported that some hiring  managers filter out eligible candidates if their background and  qualifications are not the same as those of previously successful  employees. To address these concerns, representatives from one  technology company told us that they had moved away from depending  on referrals since this practice may result in leaders hiring people within  their own networks, which generally does not increase diversity of gender  or race/ethnicity. In addition, representatives from another company said  they plan to begin reviewing resumes with names removed to limit bias by  the reviewer. Further, representatives we interviewed from three  technology companies told us they offer training to employees to help  employees identify their own, unconscious biases.", "Other factors may affect retention of women and underrepresented  minorities. For example, a representative from a workforce organization  said that women leave technology occupations at a higher rate than men  because they feel as if they have not been given the same opportunities  for promotion and advancement within the company. A 2016 study that  examined women in engineering and science found that women\u2019s  concerns about pay and promotion are often an issue in male-dominated  fields regardless of the industry. Further, this study found that retention  difficulties become more severe as the share of men in the workforce  increased and that affected women\u2019s pay and promotion.", "Representatives from one company told us another challenge is the lack  of Black workers at the top levels, which might make it more difficult for  Black employees in particular to see a leadership path. Representatives  we interviewed from five technology companies told us they had  implemented efforts to increase retention and promotion rates among  minority and female workers, for example, by developing a diversity and  inclusion newsletter, employee resource groups with executive  sponsors, and internal training and classes for employees to improve  their readiness to be promoted.", "Representatives from five technology companies told us that commitment  of top leadership is an important factor that can help women and  underrepresented minorities in the technology sector. For example,  representatives from one company told us that top management support  for diversity efforts, such as setting hiring goals, can help move a  company in the direction of achieving representation goals and that  leadership is very important to this effort. Representatives from several  companies told us that there is often a business case for such changes:  These companies work in a diverse, global environment and strive to  make better products for diverse users. However, our prior work on  workforce diversity in the financial services sector found that some  diversity initiatives faced challenges gaining the \"buy-in\" of key  employees, such as the middle managers who are often responsible for  implementing such programs."], "subsections": []}]}, {"section_title": "EEOC and OFCCP Have Taken Steps to Oversee Equal Employment Opportunity and Affirmative Action Requirements, but Face Limitations", "paragraphs": [], "subsections": [{"section_title": "EEOC and OFCCP Have Taken Steps to Oversee Compliance in the Technology Sector", "paragraphs": ["According to EEOC officials, EEOC primarily oversees compliance with  equal employment opportunity requirements by investigating workers\u2019  individual charges of employment discrimination filed against companies.  EEOC has publicly acknowledged the low levels of diversity in the  technology sector. However, we were unable to identify a specific  number of charges received by EEOC against companies in industries  that are part of this sector because EEOC does not require investigators  to record the industry of the charged company. EEOC\u2019s database of  charges and enforcement actions\u2014the Integrated Mission System  (IMS)\u2014has a data field for the North American Industry Classification  System (NAICS) industry code, the standard used by federal statistical  agencies in classifying business establishments. However, we found that  it is completed for only about half the entries in the system. EEOC  officials in both the San Francisco and New York district offices told us  that, while they cannot readily identify individual charges against  technology companies, they believe they have received far fewer charges  against technology companies than they would have expected given the  public attention to the issue of diversity in the technology sector. In  terms of systemic cases, according to EEOC, as of June 2017, the  commission had 255 systemic cases pending since fiscal year 2011 involving technology companies (13 of these were initiated as  commissioner charges and 8 were directed investigations involving age  discrimination or pay parity issues). Officials from the New York region  reported that they had seen an increase in systemic cases against  technology companies in the past 3 years, largely involving practices of  information technology staffing firms.", "Several EEOC officials we interviewed noted that technology workers  may be initiating few complaints at the federal level due to factors such as  fear of retaliation from employers or the availability of other employment  or legal options. According to EEOC officials, fear of retaliation can affect  charges across sectors and, given the growth in the technology  workforce, an individual who feels discriminated against may simply leave  the company because there are many other opportunities for individuals  with technical skills. They also said that technology workers may  generally have greater wealth and can afford to hire private attorneys to  sue in state court rather than go through the EEOC. Moreover, they said  that some states, including California, have stronger employment  discrimination laws that allow for better remedies than federal laws, which  could lead employees to file charges at the state level rather than with the  EEOC.", "In addition, EEOC has acknowledged in a 2016 report that binding  arbitration policies, which require individuals to submit their claims to  private arbiters rather than courts, can also deter workers from bringing  discrimination claims to the agency, leaving significant violations in entire  segments of the workforce unreported. The report stated that an  increasing number of arbitration policies have added bans on class  actions that prevent individuals from joining together to challenge  practices in any forum. The report concluded that the use of arbitration  policies hinders EEOC\u2019s ability to detect and remedy potential systemic  violations. Researchers report that the use of such clauses has grown  and data on federal civil filings for civil rights employment cases reflect a  marked reduction in the number of such filings.", "Beyond pursuing charges, EEOC has taken some steps to address  diversity in the technology sector including research and outreach efforts.  In May 2016, citing the technology sector as a source for an increasing  number of U.S. jobs, EEOC released a report analyzing EEO-1 data on  diversity in the technology sector in tandem with a commission meeting  raising awareness on the topic. In addition, EEOC\u2019s fiscal year 2017- 2021 Strategic Enforcement Plan identified barriers to hiring and  recruiting in the technology sector as a strategic priority. EEOC has also  been involved in outreach efforts with the technology sector. For example,  the EEOC Pacific Region described more than 15 in-person or webinar  events since 2014 in collaboration with OFCCP and local organizations  focused on diversity in the technology sector. The topics of these events  included equity in pay and the activities of these two agencies in  enforcing nondiscrimination laws. Finally, in fall 2016, EEOC initiated an  internal working group to identify practices to help improve gender and  racial diversity in technology, but as of June 2017 had no progress to  report.", "OFCCP\u2019s regulations require covered federal contractors to take  proactive steps to ensure equal employment opportunity. OFCCP  annually conducts routine evaluations of selected federal contractors,  which includes those in the technology sector, for compliance with federal  nondiscrimination and affirmative action requirements. To the extent  that technology contractors are selected for evaluation through OFCCP\u2019s  normal selection process, these contractors are assessed for compliance  with nondiscrimination and affirmative action laws as are other selected  contractors. While evaluation of technology contractors occurs in the  course of OFCCP\u2019s routine activities, OFCCP does not currently use type  of industry as a selection factor, according to officials. We also found that  few (less than 1 percent) of OFCCP\u2019s 2,911 closed technology contractor  evaluations from fiscal years 2011 through 2016 resulted in discrimination  violations, though 13 percent resulted in other violations, such as record- keeping violations and failure to establish an affirmative action program  (AAP). An AAP is a key tool OFCCP requires contractors to complete to  ensure equal employment opportunity. The remaining 86 percent of  evaluations either found no violations or ended in administrative closure.  Technology contractor evaluations that had discrimination violations  resulted in back pay, salary adjustments, or other benefits totaling more  than $4.5 million for 15,316 individuals (averaging about $300 per award)  for fiscal years 2011 through 2016. The vast majority of discrimination  violations were on the basis of gender or race/ethnicity rather than  disability or veteran status. Corrective actions OFCCP identified for  federal technology contractors over this timeframe also included requiring  contractors to fill a total of 410 job vacancies as they arise with applicants  who had been denied employment on the basis of discrimination. In  addition, OFCCP recently filed three complaints against technology  companies.", "According to our analysis, OFCCP conducted evaluations on 36 of the 65  leading technology companies from fiscal year 2011 through fiscal year  2016. During this timeframe there were 272 reviews of establishments\u2014 physical business locations\u2014affiliated with these 36 companies. Based  on these evaluations, 15 of the 36 companies had administrative  violations, and 2 of the 36 also had discrimination violations. As a result of  the discrimination findings against these leading technology companies,  541 individuals received monetary benefits totaling $783,387 (an average  of $1,448 per award).", "In terms of other steps to conduct oversight of the technology sector,  OFCCP officials in the Pacific Region said they are hiring compliance  officers with legal training to be better able to address needs for reviews  in the technology sector, such as responding to lawyers representing  technology contractors. Officials in both the Pacific and Northeast regions  work closely with statisticians and labor economists on their cases, an  effort officials said has increased over the past few years. OFCCP has  also requested funding in its fiscal year 2018 congressional budget  justification to establish centers in San Francisco and New York that  would develop expertise to handle large, complex compliance evaluations  in specific industries, including information technology."], "subsections": []}, {"section_title": "EEOC Cannot Analyze Charge Data by Industry to Identify Priorities and OFCCP Faces Challenges to Oversight of Technology Companies", "paragraphs": ["We found that by not requiring an industry code in its investigations data,  EEOC cannot analyze charge data by industry to help identify  investigation and outreach priorities, in contradiction to EEOC strategic  planning documents and EEOC Inspector General reports, which have  emphasized the importance of doing so. By not requiring the use of the  NAICS code for each entry in IMS, EEOC is limited in its ability to use  these data for the purposes of identifying charges by industry sector and  conducting sector-related analyses. Officials were aware of substantial  gaps in coding of charges by industry and acknowledged limitations in the  commission\u2019s ability to analyze its investigations data by industry.  However, officials expressed concern that routinely creating more  complete records of the companies against which charges had been filed  would require investigators to divert attention from their efforts to  investigate charges. EEOC officials explained that the charging party  provides initial information on the respondent company and requiring  EEOC personnel to generate this information would slow down the  process. They said their priority is to investigate individual charges, not to  address larger trends or target specific industries. \u201cThe Strategic Enforcement Plan recommends using EEOC data to allow our  enforcement and outreach efforts to focus on areas of significant concern. This  might include tailoring outreach efforts for industries that experience greater  likelihood of certain charges or informing enforcement decisions based on  knowledge that certain industries have persistent problems, such as harassment.  The data maintained in IMS provide a rich resource of information that can be  used to explore the characteristics of industries that appear to have higher levels  of certain allegations than comparative industries.\u201d", "In addition, reports completed by the Urban Institute for the EEOC Office  of Inspector General in 2013 and 2015 similarly recommended analysis of  charge data, including by industry, to help identify priorities and measure  performance.", "While EEOC has plans to review a year of IMS data to clean it and  determine how best to add missing industry codes, among other  objectives, officials could not provide a specific timeframe for when this  review would begin and end. Standards for internal control in the federal  government state that management should use quality information to  achieve the agency\u2019s objectives and objectives should be defined in  specific terms so they are understood at all levels of the entity. This  involves clearly defining what is to be achieved, who is to achieve it, how  it will be achieved, and the time frames for achievement. Efforts to scrub  these data and identify missing codes could help EEOC determine how to  collect industry information on an ongoing basis for all entries. Doing so  would also help EEOC determine the level of NAICS code that would be  feasible and useful for investigators to identify and input into IMS.  Without analyzing its data on charges across industries, EEOC\u2019s ability to  proactively identify priorities for its outreach and enforcement resource  use is limited.", "We found that OFCCP also faces challenges that may hinder the  agency\u2019s oversight of technology companies. Specifically, OFCCP  reported facing delays in receiving information from federal contractors,  including technology companies, but has not yet evaluated whether its  own policies and practices also impede its efforts to hold federal  technology contractors responsible for the legal requirements to take  affirmative action and not discriminate against protected groups. In  addition, OFCCP regulations do not require federal contractors to  disaggregate data for the purpose of determining placement goals for  hiring, which may hinder contractors\u2019 efforts to implement effective  affirmative action programs.", "OFCCP has not analyzed delays in obtaining information from  contractors  OFCCP officials told us that they face delays in obtaining complete,  accurate, and timely documentation from federal contractors, including  technology companies, as part of the compliance review process. They  said this limited their access to critical information and hindered OFCCP\u2019s  ability to determine whether discrimination had occurred. Officials in the  Pacific Region reported that when issues are identified during OFCCP\u2019s  initial review that will require additional data, the data requests can be  extensive. Consequently, technology contractors are taking longer to  submit complete and accurate data that are needed to conduct analyses  of the contractor\u2019s workforce. In addition, officials in both the Pacific and  Northeast regions reported that companies may not provide raw data as  requested, or provide access to employees for OFCCP to interview,  which is part of the compliance review process. Using 2015 OFCCP  compliance evaluation data, we previously reported that close to 85  percent of contractor establishments across all sectors did not submit an  AAP within 30 days of being scheduled for an OFCCP compliance  evaluation, as required by OFCCP policy. Officials told us of the  potential need for a more flexible set of investigatory tools or sanctions,  such as subpoena power to speed up data-gathering or penalties for  delays in providing information, in order to obtain accurate and timely  information. In the case of incomplete data, OFCCP officials said one  option is to enter into an agreement with the contractor whereby the  contractor will gather the missing data, and OFCCP will monitor the  contractor\u2019s efforts and review detailed records at a later date. However,  they said that such an agreement could give the contractor an opportunity  to modify the data in the contractor\u2019s favor. Currently, OFCCP\u2019s primary  sanction is the threat of debarment, which makes a company ineligible to  receive future federal contracts.", "At the same time, OFCCP officials acknowledged there may additionally  be delays in their own review processes. In prior work, we\u2019ve reported  concerns by contractors and industry groups about lengthy and expansive  OFCCP evaluations. However, OFCCP has not analyzed its data on  closed evaluations to assess the cause of delays, which would help  determine whether changes should be made to its internal processes or if  stronger sanctions to obtain information from contractors are needed.  Internal control standards state that management should identify,  analyze, and respond to risks related to achieving its objectives. Further,  it states that management should design appropriate mechanisms to  enforce its directives to achieve those objectives and address related  risks. Without more information on the root cause of the delays, these  delays may continue, straining resources and inhibiting OFCCP\u2019s efforts  to identify potential discrimination. \u201cAn affirmative action program is a management tool designed to ensure equal  employment opportunity. A central premise underlying affirmative action is that,  absent discrimination, over time a contractor\u2019s workforce, generally, will reflect  the gender, racial and ethnic profile of the labor pools from which the contractor  recruits and selects. Affirmative action programs contain a diagnostic component  which includes a number of quantitative analyses designed to evaluate the  composition of the workforce of the contractor and compare it to the composition  of the relevant labor pools. Affirmative action programs also include action- oriented programs. If women and minorities are not being employed at a rate to  be expected given their availability in the relevant labor pool, the contractor\u2019s  affirmative action program includes specific practical steps designed to address  this underutilization.\u201d \u201cThe placement goal-setting process . . . contemplates that contractors will,  where required, establish a single goal for all minorities. In the event of a  substantial disparity in the utilization of a particular minority group or in the  utilization of women or women of a particular minority group, a contractor may be  required to establish separate goals for those groups.\u201d", "According to OFCCP officials, a contractor may be required to establish  separate goals for particular minority groups as part of a compliance  review. We found, however, that OFCCP\u2019s regulations do not require  federal contractors to disaggregate demographic data for the purpose of  establishing placement goals in their AAP. This may hinder their efforts to  implement effective AAPs, which are designed to assist the company in  achieving a workforce that reflects the gender, racial, and ethnic profile of  the labor pools from which the contractor recruits and selects. OFCCP  officials in headquarters and in the field said, based on their experience  evaluating companies\u2019 compliance, it was not common for companies to  have placement goals disaggregated by race and ethnicity in their AAPs.  A diversity and inclusion officer we interviewed from one large technology  contractor noted that the requirement in the AAP to identify the need for  placement goals for minorities as a whole does not address  underrepresentation in certain minority groups. According to the officer,  the company does not count Asian workers in setting the company\u2019s  diversity goals because Asians are well represented and the company  believes it should set a placement goal for groups for which the company  knows it needs to make progress. Citing comments received during  development of other regulations, OFCCP officials cautioned that an  analysis of utilization disaggregated by race/ethnicity may be more  challenging for smaller companies with fewer employees.", "Further, looking at trends in diversity for minorities as a whole may not  assist a company\u2019s affirmative action efforts to identify groups that need  particular outreach or support. Specifically, our analysis of workforce data  found differences in representation for Black and Hispanic workers in the  technology workforce compared to Asian workers. Under the current AAP  regulations, companies may opt not to detect and address  underrepresentation of particular minority groups since OFCCP does not  require placement goals disaggregated by race/ethnicity. While OFCCP  may be able to detect underrepresentation of particular minority groups  during its reviews, the office reviews only 2 percent of federal contractor  establishments each year. OFCCP officials said that they would need to  amend their regulations in order to require disaggregated race/ethnicity  information for placement goals on AAPs. The officials said  disaggregating race in placement goals could help an establishment  determine how to tailor outreach accordingly or better identify  impediments to its equal employment opportunity efforts. However, they  have not pursued this regulatory change because of competing priorities  on their regulatory agenda. OFCCP\u2019s mission includes holding federal  contractors responsible for the legal requirements to take affirmative  action and not discriminate against protected groups. However, not  requiring contractors to set placement goals for each minority group may  hinder OFCCP\u2019s ability to effectively achieve this mission.", "OFCCP has not reviewed key aspects of its current approach to  evaluations  OFCCP officials report the agency intends to incorporate additional  information on gender, racial, and ethnic disparities by industry into its  compliance evaluation selection process, but we found the methodology  to determine the disparities may have weaknesses. We have previously  reported on the challenges OFCCP faces with its enforcement efforts,  and identified additional areas that may limit OFCCP\u2019s enforcement of  federal contractors\u2019 equal employment and affirmative action efforts. For  example, our 2016 report found that OFCCP\u2019s weak compliance  evaluation selection process, reliance on voluntary compliance, and lack  of staff training create several challenges to its enforcement efforts. This  report found that because OFCCP was not able to identify which factors  are associated with risk of noncompliance, the agency does not have  reasonable assurance that it is focusing its efforts on those contractors at  greatest risk of not following nondiscrimination or affirmative action  requirements. OFCCP agreed with recommendations we made to  address these areas and detailed steps the agency would take. In  particular, to strengthen its compliance evaluation process to select  contractors at greatest risk of potential discrimination, the agency stated  that it planned to incorporate information on pay disparities and  employment disparities. OFCCP officials indicated this information  would be based on analysis of gender and race/ethnicity by industry using  ACS data and EEO-1 compensation data that was to be collected  beginning March 2018. However, in August 2017, the Office of  Management and Budget issued a memo suspending the pay-related  data collection aspects of the EEO-1 form. Despite this change, OFCCP  officials said they are exploring other options for focusing on  compensation disparities by industry, including through the use of ACS  data, administrative data, a previous study conducted by the Department  of Labor, as well as options proposed by contractors.", "We also found OFCCP\u2019s current methodology for identifying disparities by  industry with the ACS data may have some weaknesses that could affect  the accuracy of the outcomes. For example, its reliance on the broadest  industry level available may not sufficiently identify specific industries at  elevated risk. Further, the methodology includes future plans to conduct  the analysis for metropolitan areas. Given the importance of regional and  local labor markets for assessing affirmative action efforts, regional and  local analysis should also be completed before OFCCP incorporates this  analysis into its selection process. It is important that OFCCP use reliable  information in modifying its basic processes and setting priorities. For the  reasons cited earlier regarding the importance of using quality information  to make management decisions, it is important that OFCCP assess the  quality of the methods for its analysis of employment disparities among  industries. Without doing so, OFCCP may not accurately identify  industries at greatest risk of potential noncompliance with  nondiscrimination and affirmative action requirements so it can focus its  limited investigation resources most effectively.", "Further, according to OFCCP officials, although the agency has made  slight changes to various thresholds and factors for its selection process,  the agency has not made any significant changes to the selection process  for about 10 years, and has made no changes to its establishment-based  approach since OFCCP was founded in 1965. While OFCCP currently  grounds its review of a contractor in a particular physical establishment,  OFCCP officials acknowledged the changing nature of a company\u2019s work  can involve multiple locations and corresponding changes in the scope of  hiring and recruitment. Officials we interviewed from five of our eight  selected technology companies discussed their work spread across  locations, including the United States or overseas, and the related  challenges they face with OFCCP\u2019s establishment-based approach to  reviews. One company representative said the AAP is not useful because  site specific plans do not connect to business decisions. However,  OFCCP has not reviewed the implications for the effectiveness of its  mission of continuing with its establishment-based approach to  conducting compliance evaluations.", "In addition, OFCCP officials acknowledged their inability, in identifying  establishments for review, to consistently identify and include all  subcontractors to which OFCCP rules should apply. They said the agency  has not assessed the potential significance of any omissions of  subcontractors from the oversight process. Internal control standards  state that management should identify risks throughout the entity related  to achieving its defined objectives to form a basis for designing risk  responses, as well as the importance of periodically reviewing policies,  procedures and related control activities for continued relevance and  effectiveness in achieving the agency\u2019s objectives. OFCCP officials said  they have informally discussed how to adjust their work based on how  work is performed in today\u2019s economy\u2014with virtual sites, workplace  flexibilities, and nontraditional forms of employment. However, due to  competing priorities, they have not conducted a formal review of these  key aspects of its current approach to selecting entities for review. They  acknowledged such a review would be useful. Without assessing its  current approach to its establishment-based reviews and identification of  all relevant subcontractors, OFCCP does not have reasonable assurance  that its approach can identify discrimination occurring within the  companies it oversees and may be missing opportunities to identify more  effective practices or adjust its methods to external changes.", "While OFCCP has offered an option\u2014the Functional Affirmative Action  Program (FAAP)\u2014for companies to move away from establishment- based reviews and which may be more appropriate for some multi\u2013 establishment contractors, uptake has been low and the agency has not  conducted an evaluation of this program. Since 2002, OFCCP has  allowed companies to create FAAPs, with OFCCP approval, which are  based on a business function or unit that may exist at multiple  establishments. As of May 2017, 73 companies across all industries had  FAAPs in place. Further, some of the companies we interviewed were  unaware that the FAAP was an option or believed it was cumbersome to  establish given the complexity of their workforce. Asked why the FAAP  has not been more broadly adopted, OFCCP officials hypothesized it  could have to do with a requirement intended to ensure that companies  with FAAPs would be reviewed at least as often as others, but that may  result in these companies being reviewed more often than most.  Standards for internal control for government agencies state that  management should periodically review policies, procedures, and related  control activities for continued relevance and effectiveness in achieving  the entity\u2019s objectives. Reviewing and refining the FAAP program could  help OFCCP improve its ability to achieve its objectives and may provide  broader insight for OFCCP\u2019s overall enforcement approach."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Jobs in the high paying technology sector are projected to grow in coming  years. Female, Black, and Hispanic workers, however, comprised a  smaller proportion of technology workers compared to their  representation in the general workforce from 2005 through 2015, and  have also been less represented among technology workers inside the  technology sector than outside it. Both EEOC\u2019s and OFCCP\u2019s mission is  to combat discrimination and support equal employment opportunity for  U.S. workers; however, weaknesses in their processes impact the  effectiveness of their efforts. When conducting investigations, EEOC has  not been consistently capturing information on industry codes. This  impedes its ability to conduct industry sector analysis that could be used  to more effectively focus its limited enforcement resources and outreach  activities. Similarly, OFCCP faces delays in its compliance review process  but it has not analyzed its closed evaluations to understand the causes of  these delays and whether its processes need to be modified to reduce  them. In addition, as part of their affirmative action programs federal  contractors are only required to set placement goals for all minorities in  general. By not requiring contractors to disaggregate demographic data  for the purpose of establishing placement goals, OFCCP has limited  assurance that these contractors are setting goals that will address  potential underrepresentation in certain minority groups.", "Further, OFCCP plans to incorporate information on disparities by  industry into its process for selecting establishments for compliance  evaluations, but has not fully assessed its planned methods. Without such  assessment, OFCCP may use a process that does not effectively identify  the industries at greatest risk of potential noncompliance with  nondiscrimination and affirmative action requirements. In addition, key  aspects of OFCCP\u2019s approach to compliance reviews of contractors\u2019  affirmative action efforts have not changed in over 50 years, whereas the  structure and locations of these companies\u2019 work have changed. Finally,  although OFCCP has developed an alternative affirmative action program  for multi-establishment contractors, few contractors participate in this  program. Because OFCCP has not evaluated the program, it does not  have information to determine why there has not been greater uptake and  whether it provides a more effective alternative to an establishment-based  AAP."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of six recommendations, including one to EEOC  and five to OFCCP. Specifically:", "The Chair of the EEOC should develop a timeline to complete the  planned effort to clean IMS data for a one-year period and add  missing industry code data. (Recommendation 1)", "The Director of OFCCP should analyze internal process data from  closed evaluations to better understand the cause of delays that occur  during compliance evaluations and make changes accordingly.  (Recommendation 2)", "The Director of OFCCP should take steps toward requiring  contractors to disaggregate demographic data for the purpose of  setting placement goals in the AAP rather than setting a single goal  for all minorities, incorporating any appropriate accommodation for  company size. For example, OFCCP could provide guidance to  contractors to include more specific goals in their AAP or assess the  feasibility of amending their regulations to require them to do so.  (Recommendation 3)", "The Director of OFCCP should assess the quality of the methods  used by OFCCP to incorporate consideration of disparities by industry  into its process for selecting contractor establishments for compliance  evaluation. It should use the results of this assessment in finalizing its  procedures for identifying contractor establishments at greatest risk of  noncompliance. (Recommendation 4)", "The Director of OFCCP should evaluate the current approach used for  identifying entities for compliance review and determine whether  modifications are needed to reflect current workplace structures and  locations or to ensure that subcontractors are included.  (Recommendation 5)", "The Director of OFCCP should evaluate the Functional Affirmative  Action Program to assess its usefulness as an effective alternative to  an establishment-based program, and determine what improvements,  if any, could be made to better encourage contractor participation.  (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Labor (DOL),  Commerce, the Equal Employment Opportunity Commission (EEOC) and  the National Science Foundation (NSF).", "We received written comments from DOL that are reproduced in appendix  V. In addition, DOL, Commerce, EEOC, and NSF provided technical  comments which we incorporated into the report as appropriate.", "DOL agreed with 4 of the 5 recommendations we made to improve  oversight of federal contractors, and identified some steps it plans to take  to implement them. Specifically, the department agreed with our  recommendations to analyze internal process data to better understand  the cause of delays that occur during compliance evaluations, assess the  quality of methods used to incorporate consideration of disparities by  industry into the process to select contractors for review, and to evaluate  its current approach to identifying entities for review in light of changes in  workplace structures, as well as its Functional Affirmative Action  Program.", "DOL stated that it appreciated, but neither agreed nor disagreed, with our  recommendation to take steps toward requiring contractors to  disaggregate demographic data for the purpose of setting placement  goals in the AAP rather than setting a single goal for all minorities. The  department said this would require a regulatory change with little  immediate benefit as contractors are already required to collect  demographic data on each employee and applicant, and must conduct in- depth analyses of their total employment processes to identify where  impediments to equal opportunity exist. While we acknowledge these  data collection requirements for federal contractors, we remain concerned  that without requiring contractors to also establish placement goals to  address any underrepresentation for specific minority groups, contractors  may not develop objectives or targets to make affirmative action efforts  work. We maintain, therefore, that DOL should take steps toward  requiring contractors to develop placement goals disaggregated by  race/ethnicity.", "EEOC provided us a memo that it characterized as technical comments  on the draft report. In these comments, EEOC neither agreed nor  disagreed with our recommendation to develop a timeline to complete its  planned effort to clean IMS data for a one-year period, which would  include adding missing industry codes, but stated that it was taking some  actions to enhance these data. We continue to maintain a timeline should  be developed to complete this review, which is needed for the  commission to conduct industry sector analysis that could be used to  more effectively focus its limited resources and outreach activities. EEOC  also emphasized the importance of systemic investigations, noting that  while outreach may be somewhat useful in generating charges, individual  charges are unlikely to make a substantial impact on a systemic practice  affecting an entire employment sector. We maintain that the ability to  analyze IMS data by industry could help EEOC to focus its resource use,  including for systemic investigations. EEOC also noted staffing and  resource constraints as issues faced by the commission.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Labor, the Chair of the Equal  Employment Opportunity Commission, the Secretary of Commerce, and  the Director of the National Science Foundation. In addition, the report will  be available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff should have any questions about this report, please  contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our two objectives were to: (1) identify the demographic trends in the  technology workforce over the past 10 years, and (2) assess the efforts  by the U.S. Equal Employment Opportunity Commission (EEOC) and the  Department of Labor\u2019s Office of Federal Contract Compliance Programs  (OFCCP) to oversee technology companies and technology contractors\u2019  compliance with equal employment opportunity and affirmative action  requirements. This appendix provides details of the data sources used to  answer these questions, the analyses we conducted, and any limitations  we encountered."], "subsections": [{"section_title": "Definition of Technology Sector and Technology Occupations", "paragraphs": ["There is no commonly accepted definition of the technology sector or  technology-oriented occupations. To arrive at our definition for the  technology sector, we identified industries with the highest concentration  of technology-oriented occupations, a similar approach to what other  federal agencies have used recently to analyze trends within this sector.  To identify technology-oriented occupations, we reviewed relevant  research and interviewed researchers and other individuals  knowledgeable about the technology sector. Based on this research, we  defined technology-oriented occupations to include all computer,  engineering and mathematical occupations, including managers. We  selected our occupations using Bureau of Labor Statistics (BLS) Standard  Occupational Classification (SOC) System codes, and crosswalked those  occupations to the corresponding U.S. Census Bureau occupation codes  to conduct our analysis. (For a complete list of the occupations we  included as technology occupations, see appendix II).", "We defined the technology sector as a group of industries with the  highest concentration of technology workers. Using data from the  American Community Survey, an ongoing national survey conducted by  the U.S. Census Bureau that collects information from a sample of  households, we identified the 15 industries with the highest concentration  of technology workers. For this analysis, we used Census industry codes  since we used this dataset for many of our analyses. The concentration of  technology workers in these industries ranged from a high of 62.2 percent  in the computer systems design and related services industry to a low of  19.33 percent in the wired telecommunications carriers industry (see table  3). Companies in the technology sector also employ non-technical  workers, such as sales people.", "We cross-walked the industries we identified in the American Community  Survey with corresponding industry codes from the North American  Industry Classification System (NAICS), which is the standard used by  federal statistical agencies in classifying business establishments. The  other data sets used in this review use NAICS codes to identify industry.  The NAICS system has six levels of industry classification, with the  smallest level (2-digit code) providing the most general industry  classification, and the largest (6-digit) providing the most specific  classification. In total, we identified 55 6-digit NAICS industry codes that  comprise the technology sector using this method. (See appendix III for a  list of the 6-digit NAICS codes and industry names that correspond to the  Census industries we identified.)", "We compared our list of industries to those included in the 2016 reports  by EEOC and the BLS on the technology sector. While each report  includes a somewhat different set of industries depending on the authors\u2019  particular definition of technology occupations, most of the 15 industries  we selected overlap with industries selected in these other reviews.  Stemming from their particular focus, these reports included some  additional industries and/or occupations excluded from our analysis, such  as those in the life sciences. We also compared our findings on the  demographic trends in the technology workforce to 2016 EEOC and  Census Bureau reports that reviewed diversity in the technology sector.  Despite the definitional and methodological variations, the demographic  trends found in these other reports were generally comparable to our  findings."], "subsections": []}, {"section_title": "American Community Survey (ACS) Data", "paragraphs": ["To determine the demographic trends in the technology workforce over  the past decade, we analyzed quantitative data on technology workers  within and outside the technology sector from 2005 through 2015 from the  Census Bureau\u2019s Public Use Microdata Sample of the American  Community Survey (ACS) for the years 2005, 2007, 2009, 2011, 2013,  and 2015. ACS is an ongoing national survey that collects information  from a sample of households. We analyzed trend data for gender, race,  and ethnicity, and median salary by occupation and sector, and analyzed  point-in-time data on educational background by occupation.", "We analyzed the percentage of technology workers who earned  bachelor\u2019s degrees in computer, engineering, mathematics, and  technology fields. For median salary, we analyzed data for workers who  were employed full-time, which included those who, over the past 12  months, reported usually working 35 hours or more per week and 50  weeks or more per year, and those with wages greater than zero.", "To account for the sample representation and design used in the ACS,  we used the person weight present in the ACS data. We used the  successive difference replication method to estimate the standard errors  around any population estimate. For each comparison, we tested the  statistical significance of the difference for men and women and for  specific racial and ethnic groups at the p-value <0.05 level. In addition, we  tested the statistical significance of the change between 2005 and 2015  for each gender and racial/ethnic group.", "For race categories using ACS data in this report, we included only non- Hispanic members of White, Black, Asian, and Other categories. For the  Asian category, we included Asian American, Native Hawaiian or Other  Pacific Islander. The Hispanic category incorporated Hispanics of all  races. Our analysis included American Indian or Alaskan Native, and Two  or More Races, in the category reported as \u201cOther.\u201d", "We assessed the reliability of the ACS generally and of data elements  that were critical to our analyses and determined that they were  sufficiently reliable for our analyses. Specifically, we reviewed  documentation on the general design and methods of the ACS and on the  specific elements of the ACS data that were used in our analysis. We  interviewed Census Bureau officials knowledgeable about the ACS data  and completed our own electronic data testing to assess the accuracy  and completeness of the data used in our analyses."], "subsections": []}, {"section_title": "Employer Information Report (EEO-1) Data", "paragraphs": ["To determine workforce trends in companies within the technology sector  and at leading information technology companies, we analyzed data from  EEOC\u2019s Employer Information Reports (EEO-1) for the years 2007, 2011,  and 2015. We report EEO-1 data starting in 2007 because EEOC made  significant changes to its requirements related to the reporting of EEO-1  data over time. For example, beginning in 2007, EEOC changed its  requirements related to the reporting of data on managers and changed  its practices for collecting certain racial/ethnicity information. EEO-1  reports contain firm-level data that is annually submitted to EEOC,  generally by private-sector firms with at least 100 employees or federal  contractors with at least 50 employees that have a contract, subcontract  or purchase order amounting to $50,000 or more. Companies that fit the  above criteria submit separate EEO-1 reports for their headquarters as  well as each establishment facility. EEOC requires employers to use the  North American Industry Classification System (NAICS) to classify their  industry.", "To identify trends using EEO-1 data for workers, we analyzed data for  companies with the NAICS codes we initially identified as technology  industries. We selected the leading information technology companies  using Standard & Poor\u2019s (S&P) 500 Information Technology Index list,  which identifies the largest public information technology companies at a  given time. In October 2016, this list consisted of 67 companies in the  world that have stocks trading with the United States, and we analyzed  EEO-1 data from 65 of these companies. For both analyses, we  analyzed EEO-1 data from all job categories by gender, race and ethnicity, and industry sectors. For job categories, the EEO-1 form  collects data on 10 major job categories including 1) Executives, Senior  Level Officials and Managers; 2) First/Mid-Level Officials and Managers;  3) Professionals; 4) Technicians; 5) Sales Workers; 6) Administrative  Support Workers; 7) Craft Workers; 8) Operatives; 9) Laborers and  Helpers; and 10) Service Workers. In our analysis, \u201call other jobs\u201d  combines sales workers, administrative support workers, craft workers,  operatives, laborers and helpers, and service workers. We used the  race/ethnicity categories used by the EEOC as follows: White, Black or  African American, Asian (including Native Hawaiian or Other Pacific  Islander), Hispanic or Latino, and \u201cTwo or more Races\u201d (including  American Indian or Alaska Native).", "We assessed the reliability of the EEO-1 data and determined that  despite limitations, they were sufficiently reliable for our analyses. To  determine the reliability of the EEO-1 data that we received from EEOC,  we interviewed knowledgeable EEOC officials, reviewed relevant  documents provided by agency officials and obtained on its website, and  performed manual data testing for missing variables."], "subsections": []}, {"section_title": "Integrated Postsecondary Education Data System (IPEDS)", "paragraphs": ["For our analysis of technology degree earners, we used degree  completion data tabulated by the National Science Foundation from the  National Center for Education Statistics\u2019 Integrated Postsecondary  Education Data System (IPEDS) for the year 2014. Using a variety of  sources, such as academic research and interviews with representatives  from academia, we defined technology-related fields as degree programs  in computer science, engineering, and mathematics. We analyzed  IPEDS data by race and gender and who had obtained a bachelor\u2019s or  master\u2019s degree in technology-related fields. We determined that the  potential external candidates for technology positions generally had  obtained either a bachelor\u2019s or a master\u2019s degree in a technology-related field. We used the race/ethnicity categories used by IPEDS as follows:  White, Black, Asian (including Pacific Islander), Hispanic, and Multiracial  or other (which includes American Indian or Alaska Native, Other or  Unknown Race, and Two or more Races, i.e. respondents who selected  one or more racial designations). Race and ethnicity breakouts are for  U.S. citizens and permanent residents only, and thus do not include data  on temporary residents. The analysis by gender includes temporary  residents.", "To determine the reliability of IPEDs data, we reviewed relevant  documents obtained on the National Center for Education Statistics  website, such as annual methodology reports and the handbook of NCES  survey methods. We determined that data from IPEDs were sufficiently  reliable for our purposes."], "subsections": []}, {"section_title": "Analysis of EEOC and OFCCP Oversight", "paragraphs": ["To identify how EEOC and OFCCP have overseen technology  companies\u2019 compliance with federal equal opportunity and affirmative  action requirements, we reviewed relevant federal statutes and  regulations, EEOC and OFCCP policies, strategic planning documents,  and operational manuals. We interviewed EEOC and OFCCP officials in  headquarters, and in two regional locations selected based on the large  proportion of technology companies in those areas. At EEOC, we met  with officials from the San Francisco and New York district offices. At  OFCCP, we met with officials from the Pacific and Northeast regional  offices.", "To explore charges of discrimination filed with the EEOC against  technology companies, we planned to analyze data from the EEOC  Integrated Mission System (IMS), which contains records on EEOC  charges and enforcement activities. However, since industry code is not a  mandatory field for investigators to complete, roughly half the entries did  not have an industry code. Therefore, we could not reliably identify  technology companies that have faced charges or enforcement. We  attempted to match information we had developed on federal technology  contractors with charges filed in the IMS database. Depending on the  matching method we used, this yielded very different results and we  determined this was not a sufficiently reliable method. Further, any  matching method we used would have excluded technology companies  that did not hold a federal contract.", "To obtain information on evaluations of technology contractors completed  by OFCCP and complaints received against technology contractors, we  took a two-step approach. First, using the Federal Procurement Data  System\u2013Next Generation (FPDS-NG), we developed a list of company  establishments and their subsidiaries that received federal contract  obligations in fiscal years 2011-2015 under any of the 55 NAICS codes  we included above as technology industries. We selected only company  establishments that received 50 percent or more of their total federal  contract obligations under these NAICS codes. Each establishment was  counted only once regardless of how many federal contracts it received  during the time period. Using this method, we identified 43,448  establishments in our pool of \u201ctechnology contractors.\u201d To identify  subsidiaries, which are also subject to OFCCP requirements and  evaluations, we identified any other establishments that shared the global  vendor code with the contractors we identified, regardless of their NAICS  code. This yielded 2,116 additional contractors. Second, we matched the  names (removing suffixes) of the technology contractors and their  subsidiaries that we identified in FPDS-NG against OFCCP\u2019s data on  their evaluations of contractors to identify the evaluations of technology  contractors that OFCCP opened and completed from fiscal year 2011  through fiscal year 2016. We conducted a similar matching exercise to  identify the complaints OFCCP received against technology companies.  In addition, we identified which of the leading technology companies had  completed evaluations between fiscal year 2011 through 2016.", "We obtained information during interviews with researchers, and  representatives of workforce and industry organizations and associations.  In addition, we interviewed diversity and compliance representatives of eight of the leading information technology companies located in the San  Francisco Bay area which were also federal contractors to discuss their  efforts to increase diversity and to gain their perspectives on the federal  role in overseeing compliance with nondiscrimination laws. These  companies were:", "Cisco Systems, Inc.", "Facebook, Inc.", "Google Inc.", "Hewlett Packard Enterprise Company  Intuit Inc.", "Oracle America, Inc."], "subsections": []}]}, {"section_title": "Appendix II: Technology Occupations", "paragraphs": ["This is the list of technology occupations that we used in our analyses.  We selected our occupations using Bureau of Labor Statistics (BLS)  Standard Occupational Classification (SOC) System codes, and cross- walked those occupations to the corresponding U.S. Census Bureau  occupation codes."], "subsections": []}, {"section_title": "Appendix III: North American Industry Classification System (NAICS) Codes Identified as Technology-Related Industries", "paragraphs": ["This is the list of the 55 6-digit North American Industry Classification  System (NAICS) codes we identified as technology-related industries. To  develop this list, we identified the 15 industries with the highest  concentration of technology workers using U.S. Census Bureau industry  codes and then used the U.S. Census Bureau\u2019s 2012 Industry Code List  for Household Surveys to crosswalk the Census codes with NAICS  codes."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Betty Ward-Zukerman (Assistant  Director), Kate Blumenreich (Analyst-in-Charge), Sheranda Campbell,  Julianne Hartmann Cutts, Clarita Mrena, Moon Parks, Alexandra Rouse,  and John Yee made significant contributions to all phases of the work.  Also contributing to this report were Rachel Beers, James Bennett,  Hedieh Fusfield, Julia Kennon, Jean McSween, Jessica Orr, Dae Park,  James Rebbe, Almeta Spencer, and Alexandra Squitieri."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-17-785", "url": "https://www.gao.gov/products/GAO-17-785", "title": "Video Programming: FCC Should Conduct Additional Analysis to Evaluate Need for Set-Top Box Regulation", "published_date": "2017-09-29T00:00:00", "released_date": "2017-09-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Millions of households subscribe to cable, satellite, and telephone companies\u2014known as MVPDs\u2014for television, which is generally delivered via a set-top box attached to a television. Congress directed FCC to adopt regulations to assure a commercial market for devices to access MVPDs, and in February 2016, FCC proposed a rule intended to do so. Many industry stakeholders raised concerns about the proposal's potential effects, and FCC did not issue the proposed rule. This report examines: (1) the role of set-top boxes in accessing video programming content and (2) views of selected stakeholders and experts on the need for FCC regulation regarding set-top boxes and FCC's analysis of such need.", "GAO analyzed data from a media research group regarding the video market and interviewed 35 industry stakeholders including 12 MVPDs, 5 video content producers, 3 device manufacturers, 12 industry associations, and others; GAO selected stakeholders based on comments filed with FCC on its 2016 proposed rule. GAO also interviewed 11 industry analysts and experts selected based on industry coverage and publications."]}, {"section_title": "What GAO Found", "paragraphs": ["Set-top boxes play a significant but diminishing role in delivering video content in an evolving video market. Subscribers to multichannel video programming distributors (MVPD)\u2014companies that provide pay television services via subscriptions such as cable and satellite companies\u2014generally need a set-top box to access MVPD television services, and most subscribers lease a set-top box from their MVPD. However, consumers can now access video through a wide range of Internet-based services without a set-top box, using a variety of Internet-capable devices, such as tablets. Internet-based services include those providing on-demand video such as Netflix and some, such as Sling TV, providing live content similar to that from MVPDs. Some Internet-capable devices, such as Roku, allow people to watch Internet-based video on televisions. In recent years, subscriptions to MVPDs have fallen as more Internet-based services have become available. Partly in response to this competition, many MVPDs have begun offering content over the Internet to subscribers, accessible on many Internet-capable devices, including streaming devices that display it on televisions. While in most cases, MVPD subscribers still need a set-top box, a few MVPDs GAO interviewed now allow subscribers to access content they subscribe to solely over the Internet, without a set-top box.", "The Federal Communications Commission (FCC) has conducted limited analysis of the need for regulations to assure a commercial market for devices, such as set-top boxes, to access MVPD services. Most stakeholders and experts GAO interviewed said that further regulations for this purpose were not needed, given recent changes in the video content market. FCC is directed by law to set regulations to assure a commercial market for devices to access MVPD services. However, the law also specifies that any such regulations may no longer apply if FCC determines that the markets for both MVPD services and devices to access MVPDs are fully competitive. Moreover, while it does not extend to independent agencies, Office of Management and Budget guidance says agencies could use analyses to evaluate the need for proposed actions. However, FCC proposed a new rule in 2016 to promote a commercial set-top box market without undertaking a comprehensive analysis of the competitiveness of the market to support the proposed rule. FCC did not enact a final rule. Stakeholders had differing views on the potential effects of the proposed rule, but some raised concerns that the rule could have had negative effects on MVPDs and content providers. As described above, widespread changes in the video market in recent years have expanded consumers' choices for video services as well as devices to access those services. Nineteen of the 35 industry stakeholders GAO interviewed said rules are not needed at this time, while 8 said rules are still needed. (The rest gave uncertain answers or did not comment on this issue.) Without a comprehensive analysis, FCC lacks information on the extent of consumer choice and, furthermore, the extent to which increased options for video services affect the relative importance of consumer choice for devices to access MVPDs. Such an analysis could help FCC determine if additional regulations are needed and, as the market likely continues its rapid evolution, could serve as a benchmark in FCC's further consideration of whether market conditions have been met such that regulations may no longer apply."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FCC conduct a comprehensive analysis of how recent industry changes related to video services affect consumer choice for devices to access video services.", "FCC agreed with GAO's recommendation and provided technical comments that GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Television programming has long been an integral part of society and the  economy, delivering news, entertainment, advertisements, and more to  the vast majority of American households. Multichannel video  programming distributors (MVPD)\u2014which include cable, satellite, and  telephone companies\u2014enable consumers to subscribe to a large  package of video programming that includes local broadcast channels  (such as local NBC stations) as well as an array of cable channels (such  as ESPN and CNN). Over 75 percent of households subscribe to an  MVPD for video programming services. To do so, the household typically  needs a set-top box, which provides the video feed from the MVPD\u2019s  network to the television, while securing the content to ensure, for  example, that only channels included in the subscription can be  accessed. According to an analysis cited by the Federal  Communications Commission (FCC), in 2016 approximately 99 percent of  households that subscribed to MVPD service leased a set-top box,  spending an average of $231 per household.", "In the Communications Act of 1934, as amended by the  Telecommunications Act of 1996 (herein known as \u201cthe Act,\u201d) Congress  directed FCC to adopt regulations to assure the commercial availability of  devices\u2014such as set-top boxes\u2014that can access MVPD services. FCC  has made efforts to meet this directive, including by issuing a Notice of  Proposed Rulemaking in February 2016 that would have required MVPDs  to offer certain information to companies that are not affiliated with an  MVPD to allow those companies to design and build devices to access  video services from MVPDs, giving subscribers more alternatives to  leasing set-top boxes from their providers. However, in May 2017, the  new FCC Chairman said he did not believe that the proposed rulemaking  from the previous Commission furthered the goal of promoting a clear,  consumer-focused, fair, and competitive regulatory path for video  programming delivery, removed the proposed rule from circulation, and  said he does not intend to resurrect it. Since FCC proposed the rule, a  variety of stakeholders have disagreed on whether further regulation in  this area is needed. In addition, some have claimed that the proposed  rule would have negatively affected MVPDs and other industry  stakeholders.", "You asked us to review FCC\u2019s efforts to address the Act\u2019s requirements  to assure commercial availability of devices to access MVPD services.  This report examines: 1) the role of set-top boxes in accessing video  programming and 2) views of selected stakeholders and experts on the  need for FCC regulation regarding set-top boxes and how FCC has  analyzed such need.", "To review the role of set-top boxes in accessing video programming, we  contracted with Kagan, a unit of S&P Global Market Intelligence, a private  company, to obtain data and research on the video programming  industry. We obtained data on the video programming industry, including  data on subscriptions to MVPDs, online video distributors, and sales of  devices including set-top boxes and devices to access Internet-based  content, among other types of data. The timeframes for these data vary  based on the specific data points available. To determine the reliability of  these data we interviewed representatives of Kagan, reviewed  documentation on their data collection and analysis methodology, and  conducted a literature review to gauge how Kagan\u2019s analysis has been  used in the industry, as well as in previous GAO reports. We also  considered the fact that Kagan\u2019s data are often used and cited by FCC in  considering the reliability of the data. We did not assess all aspects of  Kagan\u2019s methodological techniques, such as its forecasting and  estimation procedures, due to the proprietary nature of this information.  We determined that these data were sufficiently reliable for reporting on  trends in the video programming industry in this report.", "To address both objectives, we reviewed the following: relevant federal  statutes and regulations including the Communications Act of 1934, as  amended by the Telecommunications Act of 1996, and FCC\u2019s regulations  issued in response to that statute; proposed rules, including FCC\u2019s  February 2016 proposed rule on set-top boxes; and relevant literature  identified through a literature search that discussed FCC\u2019s efforts to  respond to the Act. We also reviewed Office of Management and Budget  criteria for conducting regulatory analyses. In addition, we interviewed  officials with FCC and the United States Copyright Office\u2014part of the  Library of Congress\u2014and conducted semi-structured interviews with 35  stakeholders selected to include a range of industry stakeholders: nine larger MVPDs, including the five largest cable providers, as  measured by number of subscribers, two satellite providers, and two  telephone providers;  three smaller MVPDs, selected based on recommendations from an  industry association, WTA-Advocates for Rural Broadband;  three manufacturers of set-top boxes and other devices to access  video content;  three independent, minority, or diverse programmers and interest  groups;  two large video broadcast networks;  ten industry associations, including associations representing MVPDs,  technology companies, owners of copyright content, and others; and  two others representing different interests.", "In selecting the industry stakeholders beyond the MVPDs, we considered  comments filed with FCC on its 2016 proposed rule. Finally, we  conducted semi-structured interviews with 11 industry experts and  analysts. We selected these experts and analysts based on prior GAO  work that included interviews with industry experts and analysts, a review  of relevant publications and literature, a review of industry analysts who  cover relevant companies, and recommendations from industry experts  and analysts already interviewed. These interviews with industry  stakeholders and analysts and experts covered the market for video  programming, the role of set-top boxes and other devices to access video  content, FCC efforts to increase consumer choice in the market for  devices to access video content, and the need for FCC regulations  regarding set-top boxes. Following the interviews, we analyzed responses  across the interviews to identify and report on common themes. The  results of these interviews are not generalizable. For a complete list of  industry stakeholders and industry experts and analysts we interviewed,  please see appendix I.", "We conducted this performance audit from September 2016 to  September 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Set-top boxes provide a variety of functions, including enabling  consumers to access their video subscriptions. They also secure the  video provider\u2019s content to ensure that the subscriber can access only the  channels subscribed to, and prevent unauthorized use, such as recording  of content that subscribers do not have the right to record. Among other  features, set-top boxes may also allow subscribers to:  view a channel guide and search for programming and record content  for later viewing;  view linear programming\u2014meaning video programming that appears  on a given channel at a given time; and  view video on demand\u2014meaning video programming available for  consumers to access when they want to instead of at a specific time.", "Traditionally, video content flows from content producers to households  through various intermediaries (see fig. 1). Content producers negotiate  and agree to a variety of terms and conditions with the networks or local  television stations that carry the content, and those networks further  negotiate and agree to terms and conditions with the MVPDs that  distribute the content to subscribers. For example, a content producer  may agree that in addition to its program showing on the linear cable  channel at a specific time, its program is also available on demand, but  only for a specific period of time. Furthermore, networks may negotiate for  and agree to a range of terms with MVPDs regarding channel placement  and other items. Protections programmed into the set-top box help ensure  that such agreements are implemented.", "For over two decades, federal statutes and regulations have sought to  foster consumer choice for video services and devices to access such  services. The Cable Television Consumer Protection and Competition Act  of 1992, for example, requires FCC to report annually on the status of  competition in the video marketplace. Furthermore, Section 629 of the  Communications Act of 1934, as amended by the Telecommunications  Act of 1996 (\u201cthe Act,\u201d) directed FCC to assure the commercial availability  of devices that access MVPD service (which currently are typically set-top  boxes) by making them available from third parties unaffiliated with  MVPDs.", "In response to the Act, FCC adopted regulations in October 2003 that  allowed the direct connection of digital navigation devices (typically, set- top boxes) purchased from third parties to MVPD systems. To receive  and display MVPD content, these devices require a CableCARD, a card  provided by a subscriber\u2019s MVPD and installed in the third party set-top  box or other device, allowing a subscriber to view secure content they  subscribe to with their MVPD. As a result, such third party devices,  which remain available today, are known as CableCARD devices.", "Subsequent to the adoption of its CableCARD regulations, as noted  earlier, FCC issued a Notice of Proposed Rulemaking in February 2016  that was intended to provide consumers additional choice for set-top  boxes. In the proposed rule, FCC tentatively concluded that despite the  availability of CableCARD devices, the market for navigation devices  (such as set-top boxes) was not competitive, citing a previous analysis  that found that approximately 99 percent of MVPD subscribers continued  to lease a set-top box from their MVPD. Therefore, FCC stated in the  proposed rule that it should adopt new regulations. Moreover, FCC stated  that technological advances since the CableCARD regulations had been  adopted enabled new solutions that, with certain ground rules, would  make it easier to finally fulfill the purpose of the Act. One goal of the  proposed rule was to allow third party manufacturers to create new  devices and user interfaces\u2014the means through which users interact with  a set-top box such as the menus, remote control, and methods of  searching for programming\u2014to access MVPD services. For such devices  to work, the proposal required MVPDs to transmit to third party devices  video programming content and data about that programming, including  channel listings and schedules and data on what programming  subscribers are entitled to access. Such devices, as proposed, would not  rely on a CableCARD and would be compatible with any MVPD\u2019s  service. As such, as envisioned by FCC, the proposed rule would  enable a consumer to switch MVPDs without having to change the set-top  box.", "In September 2016, after receiving input from a wide range of  stakeholders, the former FCC Chairman issued a three page fact sheet  providing an overview of a proposed final rule that the Chairman  scheduled for Commission vote in September 2016. According to the  fact sheet, MVPDs would have been required to offer consumers a free  electronic application (commonly referred to as an \u201capp\u201d), which would be  controlled by the MVPD, that subscribers could download onto a variety  of Internet-capable devices such as tablets and smartphones to access  the programming they subscribe to. Under this scenario, control over the  user interface would have been maintained by the MVPD, not the third- party device manufacturer, as the original proposed rule envisioned.  However, the former Chairman ultimately deleted the proposed final rule  from the list of items scheduled for consideration at the September 2016  meeting, and action on the proposed rule is no longer pending for  consideration."], "subsections": []}, {"section_title": "Set-Top Boxes Play a Significant but Diminishing Role in Delivering Programming in an Evolving Video Market", "paragraphs": [], "subsections": [{"section_title": "The Internet Provides Opportunities for Viewing Video Programming without the Need For a Set-Top Box", "paragraphs": ["While over 75 percent of households still subscribe to MVPDs for video  services and rely on a set-top box leased from their provider to access  content, the Internet has created more opportunities for consumers to  access video programming services in ways that do not require a leased  set-top box. These providers vary regarding the types of video services  they offer:", "Content aggregators (e.g., Netflix and Amazon): These providers offer  video on-demand through a subscription. They aggregate content  from multiple sources and may provide their own content (e.g.,  Netflix\u2019s original series House of Cards) along with content from other  programmers. There are also niche aggregators such as Indie Flix  that provide specialized programming.", "Direct to Consumer (e.g., CBS All Access, HBONow, and Univision  Now): Some programmers and networks that distribute their content  through MVPDs are now separately providing live and on-demand  content directly to consumers through the Internet for a monthly  subscription. Consumers do not have to subscribe to an MVPD to  subscribe to such content. For example, HBO provides its content on  demand to its customers through the HBO Now app without requiring  a customer to subscribe through an MVPD.", "Virtual Service Providers (e.g. Sling TV, DIRECTV Now, and  PlayStation Vue): These providers use a model similar to the MVPD  model by providing live and on-demand programming from a variety of  networks over the Internet in generally smaller channel lineups. Such  services are targeted to households looking for a smaller channel line- up at a lower cost than from MVPDs.", "According to Kagan, subscriptions to content aggregators and direct to  consumer Internet-based services are expected to grow from 109 million  in 2016 to 137 million in 2020. Many new Internet video services have  launched since 2005, and there has been a particularly large growth since  2014. (See fig. 2.)", "Subscribers can access Internet-based video services using many  different Internet-connected devices and do not need a set-top box.  These devices include stand-alone devices such as video game consoles  (e.g., Xbox One), laptops, tablets, smart phones, and smart TVs\u2014which  include an integrated computer with an Internet browser, operating  system, and apps to stream Internet video subscriptions without a  separate device. Third party manufacturers have also developed  streaming media devices (e.g., Roku) designed to allow viewers to watch  Internet-provided content on their television set. Some of these devices,  such as tablets, allow consumers to view video programming content in or  out of the home with an Internet connection. Figure 3 below shows the  variety of devices, including set-top boxes, households can use to access  video programming.", "These new Internet-based providers offer greater choice in video  services, eliminating the need to lease a set-top box for households that  choose to subscribe to one or more of these providers in lieu of an MVPD  subscription. According to Kagan, the percentage of households  subscribing to MVPDs is down from a peak of approximately 91 percent  of households wired for service in 2009 to 79 percent in 2016, and Kagan  estimates that in 2016 there were 29 million households that either  cancelled their MVPD subscription or never had it. Additionally, Kagan  projects that there will be a continued decline in MVPD video  subscriptions by 2020, when 74 percent of households will subscribe to  MVPDs, in part due to competition from Internet video programming.  Eight of 11 industry experts and analysts we interviewed also stated that  they believed MVPDs\u2019 market share is falling due in part to Internet video.  Kagan reports based on results of an online survey it conducted of  households that never had an MVPD subscription that many in this group  are generally younger and have less income than other households, and  have in the past relied on over-the-air television because the cost of  MVPD service is too high. One industry expert told us that it is unclear  what will happen to these younger households\u2019 viewing habits as they  age. According to this expert, in the past these younger non-subscribers  would eventually subscribe to MVPDs as their income grew, but it is no  longer clear that this will happen due in part to Internet video options.", "While consumers are increasingly subscribing to Internet programming  that does not require a set-top box, the market for alternative devices to  access programming is also growing. According to Kagan, sales of these  alternative devices, such as streaming devices and smart TVs, have been  growing. (See fig.4.) For example, Kagan estimates that 70 percent of  television shipments in 2016 were smart TVs."], "subsections": []}, {"section_title": "MVPDs Generally Still Require a Set-Top Box but Have Offered Subscribers Additional Ways to Access Video in Response to the Changing Marketplace", "paragraphs": ["Many subscribers to MVPDs are still reliant on at least one set-top box,  usually leased from their provider, to access video programming. In the  wake of FCC\u2019s 2003 CableCARD regulations, third-party providers  developed CableCARD devices that consumers could purchase at retail  outlets and use to access their MVPD subscription with a CableCARD.  Such devices are still available currently. For example, one of the better- known of these options, the TiVo set-top box, was available on  Amazon.com as of July 2017. However, in spite of the commercial  availability of these devices, according to FCC in its 2016 proposed rule,  about 99 percent of subscribers to MVPDs lease at least one set-top box  from their MVPD. While all five of the large cable providers we  interviewed said that their customers have the option of using a third party  device, they all added that very few customers do so and the majority  lease their set-top box. All five of the large cable providers we  interviewed cited limited customer interest as key reason consumers did  not adopt third party CableCARD devices. Each also cited one or more of  the following reasons:  limited functionality, including limited ability to access on-demand  content when devices were first available; high up-front costs to purchase a third party device; and  the ease of leasing a set-top box from a provider, which will replace  the box if it breaks, compared to owning a third party device where if it  breaks the consumer may have to buy a new one.", "However, public interest organizations we interviewed stated they believe  that the low rate of adoption of CableCARD devices was due to limited  support from MVPDs. Specifically, representatives of one public interest  group we interviewed stated that MVPDs have not been advocates of  third party devices and have not devoted customer service toward this  effort, for example by providing their technicians with training. They also  stated that MVPDs have made it difficult for customers to use  CableCARD devices by, for example, requiring technicians to install the  CableCARD.  Representatives of one public interest group also stated  that because MVPDs charge their customers a monthly fee for using  CableCARD devices, as they do for a set-top box, customers have little  financial incentive to adopt these alternative devices. Another public  interest group stated that MVPDs do not make their subscribers aware of  their ability to purchase and use such devices.", "Although subscribers to MVPDs generally require a set-top box in most  cases to access content they subscribe to, many MVPDs are also offering  their video programming over the Internet and through alternative  devices. For example, according to Kagan, MVPDs have started to allow  consumers to access their subscription content via the Internet in and out  of the home, on multiple devices, and when they want, for example:", "Many cable networks allow subscribers to MVPDs that carry that  network to access live or on-demand content through an app or  website specific to that network. MVPDs do not develop or control  these apps and websites. Such service is often referred to as  \u201ctelevision everywhere.\u201d Kagan forecasts that views of Internet-based  television everywhere from MVPDs will increase from approximately  5.4 billion views in 2016 to 11 billion views in 2020. All nine of the  larger MVPDs we interviewed told us that their customers can access  some \u201ctelevision everywhere\u201d content online.", "Many MVPDs have also developed their own apps allowing their  subscribers to access a range of content. Eight of the nine larger  MVPDs told us they have developed apps for Internet-capable  devices such as smart phones and tablets that allow their subscribers  to access content in and out of the home. Such apps may allow for  viewing both live and on-demand content. For example, consumers  can use a Comcast application on their smart phone out of their home  to view content. In addition, some MVPDs have developed apps for  streaming devices such as Roku. In some, but not all, cases such  apps can be used as a replacement for a set-top box; however, only  three of the nine larger MVPDs we interviewed said that their  subscribers may be able to use apps and alternative devices to  access their subscriptions without the need for any set-top box. For  example, one MVPD told us that customers can use an app on a  Roku streaming device to access content without needing any set-top  boxes.", "These changes by MVPDs may be due to competition from new Internet- based services; 10 out of 11 industry experts and analysts we interviewed  told us that MVPDs are providing access to their programming through  alternative devices other than set-top boxes due to such competition.", "Despite growth in alternative devices and services, a Kagan report  indicated and MVPDs we interviewed told us that set-top boxes will still  play an important role in the near future for accessing video content from  MVPDs as the industry replaces many current set-top boxes with higher  end versions. For example, the set-top box for one MVPD we interviewed  now provides advanced functions such as voice control, universal  searching, and increased storage of programming. All nine larger MVPDs  we interviewed told us that they foresee the set-top box still playing a role  in their service in the near future, and only three said their customers may  be able to access their subscriptions solely on alternative devices without  the need for a set-top box. One MVPD told us that although it sees  video providers moving to apps on their own in the future, there will still  be an option for consumers to access content from their set-top box. This  MVPD has made upgrades to its set-top box to provide more features and  has incorporated Internet video applications such as Netflix directly into  its set-top box. Additionally, eight out of the 11 experts and industry  analysts we interviewed said that they expect the set-top box to continue  to be needed for traditional provider services for households in the future.  One expert stated that the set-top box is the most efficient way to access  and deliver programming, and that it remains the best solution for  consumers and an important component of video programming."], "subsections": []}, {"section_title": "Some Consumers May have Difficulty Taking Advantage of Internet Services That Do Not Require a Set-Top Box", "paragraphs": ["While the Internet has provided consumers with more choice for  accessing video programming without subscribing to an MVPD and using  an associated set-top box, consumers must have broadband access to be  able to use these alternative products. However, FCC, in a 2016  broadband progress report, estimated that 10 percent of the population  does not have adequate access to in-home fixed broadband Internet and  the lack of broadband access is particularly concentrated in rural and  tribal areas.", "Although subscriptions to broadband Internet service are rising as those  to MVPD video services are declining, most households are dependent  upon MVPDs to receive broadband Internet service. According to FCC,  97 percent of consumers are reliant on their MVPD for broadband  service, and according to Kagan the ten largest video providers account  for 91 percent of broadband subscriptions. However, as we recently  reported, continuing technological changes may provide new options for  obtaining access to broadband as, in the future, wireless Internet access  may be able to serve as a substitute to in-home broadband for some  consumers, and satellite-provided Internet service may also become an  option for consumers who don\u2019t have access to in-home wired  broadband. For example, Kagan expects wireless broadband to serve  as a growing substitute choice for consumers with the advancement of  higher speeds in the future."], "subsections": []}]}, {"section_title": "Experts and Stakeholders Suggest Additional FCC Efforts on Choice in Set-Top Boxes are Not Needed, but FCC has Conducted Limited Analysis of this Issue", "paragraphs": [], "subsections": [{"section_title": "Generally, Selected Stakeholders and Experts Did Not See Need for FCC Regulation to Increase Consumer Choice for Set- Top Boxes", "paragraphs": ["Most selected stakeholders and industry experts we spoke to did not see  a need for FCC to intervene in the set-top box market at this time, given  the changes taking place that provide consumers with more choices for  services and devices to access video programming. All 11 of the experts  and analysts we interviewed said that the industry is moving away from  set-top boxes on its own by providing content through other means and 9  of those 11 added that, as a result, there is no need for FCC regulatory  intervention. Furthermore, only 8 of the 35 total industry stakeholders we  interviewed stated that regulations are needed. These stakeholders  pointed to the development of apps and devices beyond set-top boxes  that consumers can use to access video content. For example, one of the  larger MVPDs said that competitive pressures have pushed the company  to offer consumers new ways and devices with which to access the  content they subscribe to.", "However, representatives of all three public interest organizations we  interviewed said that FCC regulations are still needed to promote  consumer choice for devices. Specifically, representatives of one public  interest organization we interviewed said that although the market has  evolved to provide more device choices for consumers, the fact that  almost all MVPD subscribers lease a set-top box shows that the intent of  the Act has not yet been met. They added that while MVPDs have been  increasing the development of apps for their subscribers to access  content, these apps so far do not have all the functionality of leased set- top boxes, meaning that the apps are not an adequate substitute. As  discussed earlier, despite the growth in apps, most larger MVPDs we  interviewed still require their subscribers to have at least one set-top box."], "subsections": []}, {"section_title": "Some Experts and Industry Stakeholders Raised Concerns about the Potential Effects of FCC\u2019s Recent Proposal to Expand Consumers\u2019 Choices for Devices", "paragraphs": ["Some industry stakeholders and experts and analysts we interviewed  thought that FCC\u2019s proposed rule could have had negative effects on  MVPDs as well as other industry participants, including content providers.  As discussed earlier, the proposed rule would have required MVPDs to  transmit information\u2014including video programming itself\u2014to third party  devices. According to representatives of one industry association we  interviewed, this could have meant that MVPDs, and the programmers  whose content they distribute, would lose control over content that they  had created or purchased the distribution rights to. Programmers  negotiate terms and conditions\u2014such as channel lineup and other  issues\u2014with MVPDs that distribute their content. Some stakeholders  expressed concern that under the proposed rule there would be no  guarantee that third party device and service companies would adhere to  all those terms and conditions under which that content was provided to  the MVPDs. Some MVPDs and programmers expressed concern that  some third-party device companies might modify the stream of  programming by, for example, changing channel placement or overlaying  advertising.", "Five of the 11 experts and analysts we interviewed thought that the  proposed rule could have led to copyright violations. Almost all larger  MVPDs, broadcast networks, and independent and diverse programmers  and interest groups we interviewed expressed concerns that should there  be copyright violations, content providers could also be negatively  affected. For example, one industry association said if a third party  device were to overlay advertising on a program, the value of advertising  availability that is usually sold by broadcast or cable networks or by cable  distributors would decrease since there might be competing advertising  displayed to viewers. This stakeholder added that any reduced ad  revenues would, in turn, reduce the ability to invest in content. Seven of  the 11 experts and analysts we interviewed reported that the proposed  rule could negatively affect content providers. Furthermore, some  stakeholders told us that they believed the possible negative effects of the  proposed rule could have especially affected independent and diverse  programmers such as Vme, a national Spanish language network.  According to one independent and diverse programmer we interviewed,  its business is dependent upon agreements with MVPDs that distribute its  programming. Those agreements include a range of terms including  advertising restrictions and channel placement. To the extent a third party  could modify the content\u2014such as by overlaying advertising\u2014that  programmer would have a harder time negotiating with MVPDs,  potentially reducing the compensation received from MVPDs for carrying  its channel, thus harming its business model. Furthermore, according to a  letter written by the Copyright Office, the proposed rule could have  interfered with the rights of copyright owners to license their works by  requiring MVPDs to provide content to third parties that would not  necessarily have a contractual relationship with the copyright owner.", "However, some other stakeholders we interviewed stated that they  believed there was little likelihood that the proposed rule would have led  to licensing terms not being followed and reported that the proposed rule  may have provided public benefits, specifically:", "Two public interest groups we interviewed said that because there  have not been violations with copyrights on CableCARD devices,  such violations would be unlikely on any new devices that would have  been created under the rule.", "Representatives with one industry association representing  technology companies said that the proposed rule could have  benefited independent and diverse programmers by increasing the  number of devices available to consumers to access content,  providing such programmers with increased opportunities for  consumers to find their content.", "Representatives with one public interest group said that consumers  would benefit from the proposed rule as new devices created in  response to the rule would increase access to programming on new  devices, thus increasing programming options overall.", "Representatives with a device manufacturer said that the proposal  could have provided consumers with new and innovative ways to  access video content."], "subsections": []}, {"section_title": "FCC Has Conducted Limited Analysis to Support Response to Statutory Requirement Regarding Consumer Choice for Set-Top Boxes", "paragraphs": ["In commenting on a draft of this report, FCC noted that the limited action of taking a not- yet-adopted proposal off circulation would not generally be an occasion for providing a  regulatory impact analysis since such an action would have no regulatory effect. limited interest in adopting such devices for a variety of reasons, such as  the ease of leasing a set-top box from a provider, which will replace the  box if it breaks, compared to owning a third party device where if it breaks  the consumer may have to buy a new one.", "The proposed rule also contained limited analysis of the potential effects  of this rule on consumers, MVPDs, or others. For example, while FCC  supported the proposed rule by stating that the average household pays  over $230 a year in set-top box lease fees, the proposal did not estimate  the extent to which any increased competition in the market for set-top  boxes might lead to cost savings for consumers. More broadly, FCC has  conducted some analysis of the evolving video market, which, as  discussed earlier, is providing consumers with more choices for both  video services as well as devices to access services. For example, FCC\u2019s  most recent congressionally mandated annual video competition report\u2014 published in January 2017\u2014includes discussion of the increasing  popularity of Internet-based video services and the competitive pressures  they have placed on MVPDs, among other things.", "While the Act requires FCC to set regulations to assure the commercial  availability of devices to access MVPD services, it also states that any  regulations implemented under the statute shall cease to apply if FCC  deems that: (1) the market for MVPDs is fully competitive, (2) the market  for devices used to access MVPD services is fully competitive, and (3) the  elimination of the regulations would promote competition and the public  interest. While, as discussed above, FCC has conducted some analyses  related to these issues, neither the proposed rule nor the recent video  competition report reflect a comprehensive analysis looking at how these  interrelated issues affect each other. In addition, May 2017 letters to  Congress from the new FCC Chairman stating his intention to not move  forward with this issue did not contain or cite any analysis supporting that  decision.33  Specifically, FCC\u2019s analyses do not consider the effect that increasing  consumer choice for video services has on the importance of consumer  choice for devices to access MVPD services. Increased consumer choice  for services may reduce the market power of MVPDs and may restrict  what they can do and what they can charge for set-top boxes\u2014as well as  potentially spurring innovation in how they offer access to their MVPD  services. While the 2017 video competition report touches on consumer  choice for both services and for devices, it does not discuss the extent to  which new choices for services have affected the importance of consumer  choice for devices. Furthermore, this analysis does not consider what  level of consumer choice for devices must exist for the market for devices  to be \u201cfully competitive.\u201d", "While FCC\u2019s former Chairman believed that new regulations were needed  to fulfill the requirements of the Act, the current Chairman believes that  the 2016 proposed rule did not further his goal of promoting a clear,  consumer-focused, fair, and competitive regulatory path for video  programming delivery. As stated earlier, the proposed rule contained  limited analysis. In addition, the new Chairman\u2019s letters to Congress noted  that he had removed his predecessor\u2019s proposal from circulation but were  silent as to whether the Commission would take any future action in this  proceeding. A future Commission may again determine that regulations  are needed or decide not to take any further action on this issue.", "In commenting on a draft of this report, FCC noted that the limited action of taking a not- yet-adopted proposal off circulation would not generally be an occasion for providing a  regulatory impact analysis since such an action would have no regulatory effect. access MVPDs. Such an analysis, conducted as part of FCC\u2019s existing  annual video competition reports\u2014which, as discussed, already include  relevant analyses\u2014could help FCC determine if additional regulations are  needed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The market for video services and devices to access video services has  evolved significantly in recent years so that consumers now have  considerably more choices for video services and devices to access such  services than when Congress passed the Telecommunications Act of  1996. Given the fast pace of change in the video market in recent years  and the likelihood that it will continue to evolve to offer consumers more  choices in how they access video content, it is important that FCC  analyze the implications of these changes for its responsibilities under the  Act to assure the commercial availability for devices that can access  MVPD programming.", "However, FCC has not conducted a comprehensive analysis to support  an informed decision as to whether further action is needed or not. FCC\u2019s  recently proposed rule and most recent annual video competition report  contain limited analysis of the extent to which Internet-based providers  affect consumer choice for video programming and what that change  means for the importance of consumer choice for devices in the context  of the Act. In contrast, a comprehensive analysis could inform FCC as to  whether the market conditions of competition for both video services and  devices have been reached under which, as stated in the Act, any  regulations implemented under the statute shall cease to apply. Should  such analysis show that those market conditions have not yet been  reached, a clear articulation by FCC of what elements have and have not  yet been met could help as a benchmark in FCC\u2019s further consideration of  this issue as the market likely continues to evolve. Without more  comprehensive analysis of the industry\u2019s evolution and its effects on  consumer choice for devices to access MVPD services, FCC could  potentially take regulatory action\u2014or choose not to take action\u2014in a way  that is not beneficial to consumers and does not meet the goals of the  Act."], "subsections": []}, {"section_title": "Recommendation", "paragraphs": ["To help ensure that any future decisions by FCC regarding its efforts  under the Act are based on comprehensive analysis, we recommend that  FCC, as part of its future annual video competition reports, analyze how  the ongoing evolution in the video programming market affects  competition in the related market for set-top boxes and devices, including  how this evolution affects the extent to which consumer choice for  devices to access MVPD content remains a relevant aspect of the  competitive environment. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FCC and the Library of Congress for  review and comment. FCC responded with a letter in which it agreed with  our recommendation. This letter is reprinted in appendix II. FCC also  provided technical comments that we incorporated as appropriate. The  Library of Congress reviewed our report and did not provide any  comments.", "We are sending copies of this report to interested Congressional  committees and the Chairman of the FCC. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff that made significant contributions  to this report are listed in Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Industry Stakeholders and Experts and Analysts Interviewed", "paragraphs": ["The following tables list the industry stakeholders and industry analysts  and experts GAO interviewed as part of this engagement."], "subsections": []}, {"section_title": "Appendix II: Comments from the Federal Communications Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Mark Goldstein, (202) 512-2834 or goldsteinm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Alwynne Wilbur (Assistant Director); Matt  Rosenberg (Analyst in Charge); Amy Abramowitz; West Coile; Leia  Dickerson; Sharon Dyer; Camilo Flores; Joshua Ormond; Nitin Rao; Amy  Rosewarne; and Elizabeth Wood made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-7", "url": "https://www.gao.gov/products/GAO-18-7", "title": "Combating Wildlife Trafficking: Agencies Are Taking Action to Reduce Demand but Could Improve Collaboration in Southeast Asia", "published_date": "2017-10-12T00:00:00", "released_date": "2017-10-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Wildlife trafficking\u2014illegal trade in wildlife\u2014is estimated to be worth $7 billion to $23 billion annually and, according to State, continues to push some protected and endangered animal species to the brink of extinction. In 2013, President Obama issued an executive order that established an interagency Task Force charged with developing a strategy to guide U.S. efforts to combat wildlife trafficking.", "GAO was asked to review U.S. agencies' CWT efforts. GAO's September 2016 report on wildlife trafficking focused on supply side activities ( GAO-16-717 ). This report focuses on demand side activities and examines, among other things, (1) what is known about the demand for illegal wildlife and wildlife products in the United States and in Asia and (2) actions agencies are taking to reduce demand for illegal wildlife products in the United States and in Asia. GAO reviewed information from U.S. agencies and international and nongovernmental organizations and interviewed U.S. officials in Washington, D.C., and Miami, Florida, and U.S. and foreign government officials in China, Thailand, and Vietnam."]}, {"section_title": "What GAO Found", "paragraphs": ["In the United States, China, and countries in Southeast Asia, there is diverse demand for illegally traded wildlife, according to data, reports, and various officials. The Department of the Interior's (Interior) U.S. Fish and Wildlife Service (FWS) has seized a variety of wildlife at U.S. ports, such as coral for aquariums, conch meat for food, seahorses for medicinal purposes, and crocodile skin for fashion items. In China and Southeast Asian countries, reports and officials have identified seizures and consumption of illegally traded wildlife products such as rhino horn, elephant ivory, pangolins (shown below), turtles, and sharks, among others, used for purposes such as food, decoration, pets, or traditional medicine.", "U.S. agencies are taking actions designed to reduce demand for illegal wildlife, including building law enforcement capacity and raising awareness, but disagreement on roles and responsibilities has hindered some combating wildlife trafficking (CWT) activities in Southeast Asia. FWS inspects shipments in the United States and facilitates law enforcement capacity building with partner nations overseas. The Department of State (State) conducts diplomatic efforts, some of which contributed to a joint announcement by China and the United States to implement restrictions on both countries' domestic ivory trade. The U.S. Agency for International Development (USAID) works with local organizations abroad to support programs intended to reduce wildlife demand, strengthen regional cooperation, and increase law enforcement capacity. Several other agencies also contribute expertise or resources to support various demand reduction activities. Certain practices can enhance and sustain collaborative efforts, such as establishing joint strategies, defining a common outcome, and agreeing on roles and responsibilities. GAO found that agencies applied the first two practices but could improve with regard to agreement on roles and responsibilities in Southeast Asia. For example, although the National Strategy for Combating Wildlife Trafficking Implementation Plan designates various Task Force agencies to lead or participate in achieving CWT strategic priorities, it does not define specific roles and responsibilities at the working level. Agencies have different views on roles and responsibilities in Southeast Asia. According to some officials, this disagreement resulted in inappropriate training activities and hindered U.S. cooperation with a host nation. More clearly defining roles and responsibilities would enhance agency collaboration."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Interior, State, and USAID work to clarify roles and responsibilities for staff collaborating on combating wildlife trafficking efforts in Southeast Asia. Agencies agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the Department of State (State), wildlife trafficking is a  multibillion-dollar transnational criminal activity that is both a conservation  issue and a security threat. Conservative estimates place it among the  top-ranked illicit types of trade. Wildlife trafficking undermines  conservation efforts, can fuel corruption, and destabilizes communities  that depend on wildlife for biodiversity and ecotourism revenues.  Poaching and the illegal trade in wildlife\u2014both of which are part of wildlife  trafficking\u2014continue to push some protected and endangered species to  the brink of extinction. Wildlife trafficking is fueled by unchecked demand  for exotic pets, culinary delicacies, and traditional medicines. The capture  and slaughter of animals is devastating wild populations of elephants,  rhinoceroses, tigers, pangolins, turtles, exotic birds, and many other  species.", "In 2013, President Obama issued an executive order that established an  interagency Presidential Task Force on Wildlife Trafficking (Task Force)  and charged it with developing a strategy to guide U.S. efforts to combat  wildlife trafficking. The Task Force is co-chaired by the Departments of the Interior (DOI), Justice (DOJ), and State, and the White House  released the Task Force\u2019s National Strategy for Combating Wildlife  Trafficking (the National Strategy) in February 2014. In February 2015,  the Task Force released the National Strategy for Combating Wildlife  Trafficking Implementation Plan (Implementation Plan), which identifies  specific objectives and steps supported by programs overseen by Task  Force agencies.", "You asked us to review U.S. efforts aimed at combating wildlife trafficking  (CWT). In September 2016, we issued a report focused on wildlife  trafficking in Africa and supply side CWT activities that addressed security  implications, agency actions, and effectiveness. We recommended that  agencies work with the Task Force to develop performance targets. The  agencies agreed and indicated in 2017 that they were working on  implementing the recommendation.", "This report focuses on demand reduction efforts and examines (1) what is  known about the demand for illegal wildlife and wildlife products in the  United States and in Asia; (2) actions agencies are taking to reduce  demand for illegal wildlife products in the United States and in Asia; and  (3) the extent to which the U.S. Fish and Wildlife Service (FWS) within  DOI, State, and the U.S. Agency for International Development (USAID)  are assessing the effectiveness of their CWT activities.", "We limited the scope of this review to the United States and Asia\u2014 identified as major markets for illegal wildlife demand\u2014to complement our  2016 report and to provide geographic diversity in our work. We selected  these geographic areas based on our review of reports on demand for  illegally traded wildlife and discussions with U.S. government agencies.", "To address our objectives, we analyzed agency documentation and met  with officials from DOI, DOJ, State, USAID, and the Department of  Commerce\u2019s National Oceanic and Atmospheric Administration (NOAA),  which have designated roles in the Implementation Plan to lead or  participate in efforts to reduce illegal wildlife demand; the Department of  Homeland Security (Homeland Security), which has a role in enforcement  and capacity-building efforts; and nongovernmental organizations (NGO)  that focus on combating wildlife trafficking. We conducted fieldwork in  Miami, Florida; China; Hong Kong; Thailand; and Vietnam. This sample is  not generalizable to all the countries or areas in which the United States  has CWT-related programs. While in each location in Asia, we  interviewed officials who played a role in CWT activities, which included  officials from DOI, State, USAID, and Homeland Security. We also  interviewed officials from host governments and representatives from  NGOs.", "To describe what is known about the demand for illegal wildlife and  wildlife products in the United States and Asia, we reviewed reports on  wildlife trafficking, surveys about purchasing behaviors for wildlife  products, and other information from U.S. agencies. We reviewed the  methodologies described in the reports and surveys and determined they  were sufficiently reasonable for the findings we report. However, it was  beyond the scope of this review to determine the reliability of the  underlying data. We also analyzed national seizure data from the FWS\u2019s  Law Enforcement Management Information System to report on wildlife  and wildlife products confiscated in the United States. To assess the  reliability of these data, we interviewed agency officials, reviewed  documentation about the data, and conducted basic logical tests. We  determined the data are sufficiently reliable for the purposes of reporting  seizures of wildlife and wildlife products. To gather perspectives on  demand for illegally traded wildlife during our field visits to China, Hong  Kong, Vietnam, and Thailand, we interviewed U.S. government and  foreign government officials; representatives from NGOs that are  implementing partners for U.S. agencies or have cooperated with U.S.  agencies on CWT activities; and one company for illustrative purposes.", "To examine actions agencies are taking to reduce demand for illegal  wildlife products in the United States and Asia, we interviewed relevant  officials and reviewed information, including agency and implementing  partner documentation of CWT-related projects, programs, and grants.  We also analyzed how agencies combating wildlife trafficking in  Southeast Asia are applying selected practices that can enhance and  sustain collaborative efforts. As we have previously reported, such  practices include establishing mutually reinforcing or joint strategies,  defining and articulating a common outcome, and agreeing on roles and  responsibilities. In addition, we conducted fieldwork at the Port of Miami, Florida, and interviewed U.S. government officials at this location to  obtain insights on U.S. government activities. We selected the Port of  Miami because it has been the site of large-scale CWT operations, and  agency officials identified Miami as a hub for wildlife trade and an  illustrative example of U.S. government CWT operations. We also  conducted fieldwork in Vietnam and China, where we visited animal  rescue centers and interviewed host government officials and NGO  representatives.", "To examine the extent to which FWS, State, and USAID are assessing  the effectiveness of their CWT activities, we reviewed program  documentation and spoke with agency officials. To assess agency  monitoring practices, we analyzed agency guidance and examined  selected programs as illustrative examples of how agencies applied their  own guidance. We included programs that had started, finished, or been  ongoing from the beginning of fiscal year 2015 to the end of fiscal year  2016 and programs that are or were solely dedicated to CWT. To assess  evaluation practices, we assessed a USAID midterm evaluation against  key elements of quality. Appendix I provides a detailed discussion of our  objectives, scope, and methodology.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The National Strategy for Combating Wildlife Trafficking and Reducing Demand", "paragraphs": ["The 2014 National Strategy defines wildlife trafficking as including all  aspects of the trade, from poaching and transit through consumer use.  The National Strategy outlines the guiding principles and strategic  priorities for U.S. efforts to stem illegal trade in wildlife, and one of the top  three priorities identified is to \u201cReduce Demand for Illegally Traded  Wildlife.\u201d Specifically, the National Strategy states that, as a strategic  priority, reducing demand for illegally traded wildlife calls for raising public  awareness of the harms done by wildlife trafficking through outreach in  the United States and public diplomacy abroad. The National Strategy  also states that the Task Force will seek to enlist individual consumers in  this fight through education and outreach to reduce demand for these  products and change consumption patterns that drive wildlife trafficking.", "While the Implementation Plan outlines a unique set of activities to reduce  demand, other activities under the plan\u2019s objectives may indirectly affect  demand. For example, one of the objectives under \u201cReduce Demand for  Illegally Traded Wildlife\u201d is to raise public awareness and recognition of  wildlife trafficking and its negative impacts and associated risks of  prosecution (emphasis added) as a means to change harmful  consumption patterns. Implementing robust legal frameworks and  effective enforcement increases the risk of prosecution, which may deter  not only wildlife traffickers but also consumers, who may risk legal  penalties. For the purposes of this report, we consider efforts to reduce  consumption of wildlife and law enforcement efforts to prevent illegal use  of wildlife as demand reduction-related activities.", "The Implementation Plan designates various U.S. agencies to lead or  participate in achieving the strategic priority of reducing demand for  illegally traded wildlife, which are outlined in table 1.", "In fiscal years 2014 through 2017, Congress directed that not less than  certain specified amounts, totaling $271 million over the 4 fiscal years, be  made available to combat wildlife trafficking (see fig. 1)."], "subsections": []}, {"section_title": "Global Efforts to Reduce Wildlife Trafficking", "paragraphs": ["Since September 2016, U.S. agencies and global stakeholders have  taken a range of actions to address CWT issues (see fig. 2). For example,  in October 2016, Congress passed the Eliminate, Neutralize, and Disrupt  (END) Wildlife Trafficking Act of 2016. Among other things, the act calls  for the Secretary of State, in consultation with the Secretaries of the  Interior and Commerce, to submit an annual report that lists each country  determined by the Secretary of State to be a focus country and a country  of concern. The act also directs the Task Force to submit an annual  strategic assessment of its work and provide a briefing to Congress.  Additionally, the 17th Meeting of the Conference of the Parties for the  Convention on International Trade in Endangered Species of Wild Fauna  and Flora (CITES) took place September 24, 2016, to October 5, 2016.  In December 2016, China announced that it would close its domestic  ivory market by the end of 2017, and in March 2017, China announced  closure of 67 ivory carving entities and retail outlets across the country."], "subsections": []}, {"section_title": "Estimates of the Illegal Wildlife Trade", "paragraphs": ["As reported by the United Nations, the International Criminal Police  Organization (INTERPOL), and other sources, wildlife trafficking networks  span the globe. Although sources have attempted to measure trade flows,  there is no precise estimate of illegally traded wildlife, and available  estimates are subject to uncertainty. In 2014, the United Nations  Environment Programme (UNEP) reported that various sources estimate  the global scale of illegal wildlife trade is between $7 billion and $23  billion annually. In 2016, UNEP and INTERPOL estimated that the scale  of wildlife crime may have increased, based on a rise in environmental  crime. They estimate that environmental crime increased by 26 percent  since 2014 and continues to increase by 5 to 7 percent annually. Illegal,  unreported, and unregulated (IUU) fishing often are not included in these  estimates since discussion of wildlife trafficking, as it relates to marine  species, focuses on those species protected under CITES and under  statutes such as the Endangered Species Act and the Marine Mammal  Protection Act, according to NOAA. While IUU fishing targets  commercially harvested marine species, as the Implementation Plan  outlines, the trafficking of fisheries products is a form of wildlife trafficking.  In 2016, UNEP and INTERPOL estimated that the global scale of IUU  fishing ranges from $11 billion to $24 billion annually."], "subsections": []}]}, {"section_title": "Demand for Illegal Wildlife and Wildlife Products Is Difficult to Measure, but Data and Reports Indicate Range of Species and Products Is Diverse", "paragraphs": ["The United States, China, and countries in Southeast Asia consume  many types of legal and illegal wildlife for diverse purposes. It is difficult  to measure demand for illegal wildlife and wildlife products due to the illicit  nature of the trade, but various data sources and reports provide  examples of the range of wildlife demand by illustrating types of wildlife  that are seized by governments and purchased by consumers."], "subsections": [{"section_title": "Illegal Wildlife Demand and Trade Are Diverse in the United States", "paragraphs": ["U.S. trade in wildlife and wildlife products includes a variety of wildlife  such as live reptiles, birds, mammals, and elephant ivory, according to  law enforcement information, reports, and government and NGO officials.  FWS and NOAA data on wildlife products seized at U.S. ports provide  examples of the diversity of illegally traded wildlife in the United States.  FWS and NOAA may seize wildlife products for a variety of reasons that include import, export, or sale of endangered or threatened species  protected under U.S. laws and regulations. For example, FWS may  seize a shipment due to invalid documentation needed to clear the  shipment. From 2007 to 2016, the top 10 wildlife shipments\u2014by species  or species group\u2014seized nationally by FWS were coral, crocodile, conch,  deer, python, sea turtle, mollusks, ginseng, clam, and seahorse. These  seized wildlife were in a variety of forms when confiscated, as shown in  table 2. For example, more than half of seized seahorse shipments were  dead whole animals, and a smaller percentage were medicinal parts or  products. During the past 10 years, more than one-third of the wildlife  shipments seized by FWS were confiscated while being imported from or  exported to Mexico (13.6 percent), China (13 percent), Canada (8.6  percent). Additional examples of wildlife seized by FWS are shown in  figure 3 and in appendix II.", "Seizure data from NOAA Fisheries\u2019 Office of Law Enforcement show that  it has also seized a variety of marine wildlife products. From 2007 to  2016, confiscated shipments have included whale teeth and meat, seal oil  pills, shark fins, and seal fur products like mittens and boots, according to  NOAA\u2019s seizure data. Seizure data from FWS and NOAA provide a  helpful illustration of wildlife that has been confiscated at U.S. ports but  may not be fully reflective of the illegal wildlife trade and consumption.", "Seizure data show the types of wildlife confiscated at ports of entry in a  country, but there are limits to what these data can tell us about the  demand for products like illegally traded wildlife. Various factors influence  the number of seizures at any given time or in any location such as the  level of illicit trade and the level and efficacy of enforcement efforts. For  example, as part of their enforcement, both NOAA and FWS conduct  inspections of shipments at U.S. ports. In some cases, they conduct  targeted inspections that may be based on information they have about a  particular species or market, which may influence detection and seizures  of illegal products. NOAA and FWS officials indicated that they can  increase their enforcement efforts by targeting investigations on specific  species or products. This additional effort may result in the seizure of  more shipments than would be made using routine inspection processes.", "In 2016, the NGO WildAid published a baseline survey conducted by  KRC Research to inform a public awareness campaign effort with FWS.  The survey reported that roughly 1 in 10 respondents in the United States  indicated that they had purchased or knew someone who had purchased  live animals such as iguanas, parrots, parakeets, or tortoises. A smaller  proportion of those that responded (roughly 1 in 20) reported that they  had purchased or knew someone who had purchased ivory. Reporting by  the International Fund for Animal Welfare in 2013 also identifies the  United States as a key end market for reptiles such as crocodiles,  pythons, and caimans and for wildlife products such as ivory.", "Based on reporting and discussions with U.S. government officials, there  may be varying reasons for the demand for wildlife and wildlife products.  Potential drivers of demand in the United States\u2014in particular demand for  illegal wildlife from Latin America\u2014 may include a desire for rare and  exotic plants and animals, according to reporting by Defenders of  Wildlife. FWS officials in Miami told us that some of the wildlife products  they confiscate\u2014such as products from cruise passengers\u2014 were  purchased by travelers who were unaware of the restrictions on the  wildlife product. FWS and U.S. Customs and Border Protection (CBP)  officials told us that consumers use wildlife for many different purposes,  including as pets, trophies, jewelry, food, religious items, and for  medicinal purposes. For example, FWS officials in Miami told us that  coral is often smuggled as part of the pet trade for use in aquariums. At  the Port of Miami, an FWS official told us that FWS has also seized  queen conch meat, which is exported from the Caribbean as a delicacy, according to FWS. During investigations, FWS has found wildlife  intended to be used as art or trophies. During the course of their  investigations, FWS officials in Miami have found a rhino bust being sold  for $80,000 and a giraffe bust being sold for $100,000. FWS has also  seized scarlet macaw feathers being used in jewelry, elephant ivory  carved as decorative pieces, and taxidermy big cats seized as hunting  trophies."], "subsections": []}, {"section_title": "Illegal Wildlife Demand and Trade Are Diverse in China and Countries in Southeast Asia", "paragraphs": ["Demand for illegally traded wildlife in China and countries in Southeast  Asia includes many wildlife species and end uses, according to reports  and government and NGO officials in the region. For example, iconic  wildlife such as elephants and rhinos are often cited in reports and by  officials in the field as examples of wildlife consumption in China and  Southeast Asia, but other wildlife, such as pangolins, bears, sharks, and  sea turtles are also named among the wildlife being consumed.", "China is a consumption country for illegal wildlife, while Hong Kong,  Thailand, and Vietnam are consumption and transit locations, according  to officials we spoke with from the U.S. government, foreign governments,  international organizations, and NGOs in these locations. Thailand often  serves as a transshipment point for illegal wildlife due to its land borders  with China, Laos, and Cambodia, according to government of Thailand  officials. Government officials in Vietnam stated a similar claim, explaining  that the country is often a transshipment point due to its land borders with  China and Laos. Table 3 displays examples of wildlife consumed and  trafficked in China, Hong Kong, Thailand, and Vietnam, according to U.S.  government, foreign government, and NGO officials in-location and at  DOI Headquarters.", "The International Fund for Animal Welfare has reported that China is the  world\u2019s largest consumer of illegal wildlife products due to its demand for  ivory, rhino horn, pangolin scales, bear bile, tiger bone, and shark fin  soup. According to analysis by the United Nations Office on Drugs and  Crime (UNODC) of seizure data from the World Wildlife Seizure  database, China was the destination for about 40 percent of the ivory  shipments that had reported destinations from 2006 to 2015.", "Reports also identify Thailand as a part of the illegal ivory trade.  INTERPOL\u2019s 2015 investigation, Operation Worthy II, resulted in seizures  of several tons of elephant ivory in Thailand and Singapore. TRAFFIC,  the wildlife trade monitoring network, visited retail outlets in Bangkok,  Thailand, during certain periods in 2013 and 2014 and, through covert  surveys of vendors, found bangles, rings, toothpicks, hairpins, chopsticks,  sculptures, and other products made of ivory for sale. TRAFFIC reports  that for seven consecutive months, from November 2013 to May 2014,  their surveys found more than 10,000 ivory items openly on display for  sale in Bangkok.", "An NGO official we spoke with in China told us that part of the NGO\u2019s  efforts includes targeting Chinese tourists traveling to Africa and  Southeast Asia to prevent purchasing of ivory as well as rhino horn.  UNODC has reported that more than two-thirds of rhino horns seized  from 2006 to 2015 were destined for China or Vietnam.", "Government officials in Hong Kong told us that they have also seized a  variety of wildlife products such as pangolin scales and turtles. Examples  of wildlife products seized by the government of Hong Kong are shown in  figure 4 and in appendix II. Hong Kong\u2019s government has also seized  elephant ivory, though as of March 2017, certain registered ivory can be  legally traded in Hong Kong under a license.", "The Organisation for Economic Co-operation and Development reports  that high economic growth may fuel consumer demand for status goods  such as art from elephant ivory and traditional medicine using rhino horn.  According to NGO officials we met with in Vietnam and China, consumers  purchase illegal wildlife products as a status symbol or to demonstrate  wealth. Wildlife is considered to be expensive and exotic in these  countries, and there is conspicuous consumption in some areas,  according to State officials in Vietnam and an FWS attach\u00e9. UNODC  reports that a survey of 18 restaurants\u2014 identified as high end by  UNODC\u2014 in Vietnam found that all of these restaurants sold pangolin  meat. UNEP and INTERPOL describe a similar phenomenon of a culture  of conspicuous consumption for wildlife products that indicate wealth.  These organizations report that buyers place higher value on illegal  wildlife products when they are considered rare and uncommon and thus  drive up prices for illegal wildlife. Higher prices and the perception of  luxury associated with products such as tiger pelts and shark fin soup  may attract consumers who want to display their wealth, according to  Global Financial Integrity.", "Another end use of illegally traded wildlife is in traditional medicine in  China and Vietnam, according to State and NGO officials in these  countries. They stated that there are beliefs that certain wildlife provide  health benefits; for example, pangolin scales are believed to help  lactating mothers produce milk. State and NGO officials noted that  traditional Chinese medicine has a long history of using various wildlife  products. For example, American ginseng root is often consumed as a  medicinal ingredient in China, according to FWS. While export of  American ginseng is permitted, there are restrictions based on factors  such as the age of the root. FWS has seized American ginseng root being  exported from the United States to China, and the Hong Kong  government has seized American ginseng being smuggled into Hong  Kong. For additional examples of how wildlife is consumed, see the side  bar for results from surveys conducted by USAID\u2019s Asia\u2019s Regional  Response to Endangered Species Trafficking (ARREST) program."], "subsections": []}]}, {"section_title": "Agencies Are Implementing Demand Reduction Efforts, but Opportunities Exist to Improve Collaboration in Southeast Asia FWS Raises Awareness and Enforces Laws in the United States and Builds Capacity Abroad", "paragraphs": [], "subsections": [{"section_title": "State Contributes to CWT- Related Diplomacy, Training, and Outreach", "paragraphs": ["State has led diplomacy efforts and implemented training and outreach  programs in Southeast Asia and China.", "Diplomacy: State\u2019s diplomatic CWT efforts have included  coordinating discussions between the U.S. and Chinese presidents in  2015 that, according to State, contributed to China and the United  States jointly committing to further restrict ivory exports and imports.  In June 2016, State and China\u2019s State Forestry Administration also  led the breakout session on wildlife trafficking during the eighth round  of the U.S.-China Strategic and Economic Dialogue in Beijing. In  December 2016, China announced that it would implement a  domestic ivory ban, and in March 2017, China announced the closure  of approximately one-third of the country\u2019s licensed ivory stores and  carvers.", "Training programs: State\u2019s INL works to build law enforcement  capacity abroad by supporting various trainings and workshops. For  example, in 2015, Thailand INL funded training in wildlife trafficking  and environmental crimes for 179 participants. In 2016, ILEA Bangkok  sponsored two FWS-led CWT training courses and one environmental  crimes course led by officials of the U.S. Environmental Protection  Agency. During our field visit to Bangkok, we observed an ILEA  course on combating wildlife trafficking for law enforcement officers,  which is shown in figure 7. Through the United Nations Office on  Drugs and Crime, INL funds Border Liaison Offices in Burma,  Cambodia, Laos, Thailand, and Vietnam, intended to enhance  interdiction and investigation capacity at land borders to prevent illicit  trafficking. At these offices, INL has supported training for officials on  wildlife trafficking detection and investigations.", "Outreach efforts: State has supported and implemented activities to  raise awareness about wildlife trafficking in Southeast Asia and China.", "For example, State collaborated with USAID and the government of  Vietnam to implement Operation Game Change, a 2015 awareness- raising effort designed to inform the Vietnamese public about wildlife  trafficking issues such as the trade in rhino horn. In 2016, for World  Wildlife Day, State\u2019s Acting Assistant Secretary of State for Oceans  and International Environmental and Scientific Affairs published an  opinion editorial for the South China Post in Hong Kong to raise  awareness about the illegal trade in elephant ivory."], "subsections": []}, {"section_title": "Four Major Initiatives Frame USAID CWT Efforts in Asia", "paragraphs": ["USAID conducts a range of CWT activities that are part of biodiversity,  conservation, or other initiatives, but it has four major initiatives explicitly  dedicated to CWT in Asia.", "Asia\u2019s Regional Response to Endangered Species Trafficking:  ARREST was a multiyear program completed in 2016. The program  was designed to curb wildlife trafficking by reducing consumer  demand, strengthening law enforcement capacity, and boosting  regional learning networks. As part of ARREST\u2019s demand reduction  objective, the program implemented various awareness-raising efforts  such as the iThink campaign, which developed and displayed public  service announcements in airports and subways in China, Thailand,  and Vietnam and on television stations in China and Vietnam.  Through the initiative dubbed \u201cWildlife Friendly Skies,\u201d the ARREST  program raised awareness among airline and airport staff in transport  hubs identified as hotspots for wildlife trafficking, which included  Bangkok, Thailand; Guangzhou, China; Hanoi, Vietnam; Nairobi,  Kenya; and Nanning, China. The ARREST program also held various  courses aimed at strengthening capacity across Asia. For example,  the program held 14 courses for 195 trainees who were from  Cambodia, Indonesia, Lao People\u2019s Democratic Republic, Thailand,  and Vietnam to train participants on completing wildlife crime  investigations.", "Saving Species: This USAID project began in 2016 and is a 5-year,  $9.9 million effort to combat wildlife trafficking in Vietnam. The project  specifically aims to reduce consumer demand for and consumption of  illegal wildlife and wildlife products, strengthen wildlife law  enforcement and prosecution, and improve and harmonize the legal  framework for prosecuting wildlife crimes in Vietnam. Some of the  project\u2019s planned activities for the first year include market surveys  focused on demand for wildlife such as elephant ivory, rhinos,  pangolins, and tigers. The project plans to use the survey results to  inform its awareness campaign messaging. The project also plans to  conduct capacity assessments of enforcement agencies in Vietnam to  inform development of targeted training curricula, modules, and  materials.", "Wildlife Asia: This USAID activity, in collaboration with the  Association of Southeast Asian Nations, aims to reduce the demand  for wildlife products and to improve regional action to end wildlife  crime in Southeast Asia and China. As of August 2016, USAID has  issued one contract, with an estimated value of $22.9 million, to  implement this activity.", "Protect Wildlife: This USAID project began in 2016 and is a 5-year,  $24.5 million effort to reduce threats to biodiversity in the Philippines  such as poaching and the illegal trade of wildlife and wildlife products  as well as to sustain healthy ecosystems. USAID is working with  public and private partners in the Philippines to strengthen  conservation policies and improve habitat management and on-site  and off-site enforcement systems.", "USAID also conducts biodiversity and conservation initiatives that have  CWT-related objectives but are not dedicated solely to CWT. For  example, USAID implemented the Ecosystems Improved for Sustainable  Fisheries project in the Philippines, designed to conserve marine  biodiversity, enhance ecosystem productivity, and improve law  enforcement at fisheries to combat illegal, unreported, and unregulated  fishing."], "subsections": []}, {"section_title": "Other Agencies Also Contribute to CWT", "paragraphs": ["DOJ, NOAA, and Homeland Security also support efforts to combat  wildlife trafficking in the United States and Asia. DOJ prosecutes criminals  and publicizes through press releases the results of criminal convictions  to encourage public awareness of this issue. DOJ also has participated in  capacity-building workshops in Burma, Laos, Thailand, and Vietnam and  CWT events such as the 2016 Hanoi Conference on Illegal Wildlife Trade  and the annual U.S.\u2013China Joint Liaison Group on law enforcement, in  which DOJ, State\u2019s INL, and other agencies participate in the Anti- smuggling Working Group. According to DOJ officials, DOJ also regularly  advocates the use of the United Nations Transnational Organized Crime  Convention as a legal basis for international cooperation to combat  wildlife trafficking.", "Domestically, NOAA inspects and seizes shipments at U.S. ports,  investigates cases of wildlife trafficking, and raises awareness about  wildlife crimes. NOAA has a liaison at Homeland Security\u2019s CTAC and,  according to NOAA officials, the CTAC has allowed NOAA to more  proactively target shipments and improve coordination with FWS and  CBP through daily interaction and more information sharing. As part of  their efforts to raise awareness about wildlife trafficking, NOAA also works  with DOJ, FWS, and State\u2019s Bureau of Public Affairs to publicly report  information on and raise awareness about law enforcement efforts such  as seizures. Internationally, NOAA provides technical assistance,  conducts capacity-building, and serves as a resource in international  policy discussions. For example, in collaboration with USAID, an analysis  unit from NOAA assisted the Philippines in developing an intelligence  assessment of illegal trade and trafficking in marine species. In November  2015, NOAA Office of Law Enforcement officers participated in the  Association of Southeast Asian Nations Trade and Environmental  Dialogue in Malaysia, providing presentations on illegal, unreported, and  unregulated (IUU) fishing and ways to combat the trade in IUU fish and  fish products.", "DHS\u2019s CBP supports and coordinates with FWS and NOAA to interdict  illegal wildlife shipments at U.S. ports. ICE HSI investigates wildlife crime  in the United States, and in Asia it supports foreign government CWT  efforts through capacity building and information sharing. For example, in  Vietnam, ICE HSI regularly shares information on wildlife seizures with  the host government to support investigations. In 2015, in Thailand, ICE  HSI conducted a 5-day workshop on advanced wildlife trafficking  investigations for officials across the government."], "subsections": []}, {"section_title": "Disagreement on Roles and Responsibilities Hindered Some CWT Activities in Southeast Asia", "paragraphs": ["Although agencies have worked together to combat wildlife trafficking,  disagreement on roles and responsibilities has hindered some CWT  activities in Southeast Asia, according to some officials. In prior work, we  defined collaboration broadly as any joint activity that is intended to  produce more public value than could be produced when the  organizations act alone. We also identified practices that can enhance  and sustain collaborative efforts, including establishing mutually reinforcing or joint strategies, defining and articulating a common outcome, and agreeing on roles and responsibilities.", "We found that agencies applied some collaboration mechanisms but also  have an opportunity to improve on agreeing on roles and responsibilities.  For example, the White House established a joint strategy, the National  Strategy for Combating Wildlife Trafficking, in 2014. The strategy lays out  guiding principles and strategic priorities for U.S. efforts to stem illegal  trade in wildlife. In Southeast Asia, the U.S. embassy in Malaysia\u2019s  Integrated Country Strategy articulates mission goals and objectives for a  coordinated effort among all U.S. agencies and includes prevention of  illegal wildlife trafficking as a key activity, according to officials. In  addition, U.S. missions in Bangladesh, Cambodia, India, Laos, Nepal,  Thailand, and Vietnam are developing CWT-specific country strategies,  according to officials.", "Agencies also defined and articulated a common outcome, outlined in the  National Strategy for Combating Wildlife Trafficking Implementation Plan  (Implementation Plan). The Implementation Plan states that success  relies on agencies working in concert to carry out the objectives, which  include strengthening enforcement, reducing demand for illegally traded  wildlife, and building international cooperation. Under three strategic  priorities, the Implementation Plan identifies 24 objectives and ways to  measure progress for each. In Southeast Asia, State and USAID officials  told us that they work toward those shared outcomes. In particular, they  stated that to achieve the shared outcome of reducing demand for wildlife  products, they cooperated on raising public awareness. For example,  State collaborated with USAID in Vietnam to implement Operation Game  Change, a 2015 awareness-raising effort designed to inform the  Vietnamese public about wildlife trafficking issues. In addition, to achieve  the common outcome of strengthening law enforcement capacity, USAID  is partnering with State, FWS, and DHS and other nongovernmental  actors to implement the Reducing Opportunities for Unlawful Transport of  Endangered Species program, which aims to increase enforcement  capacity at ports of entry in Vietnam and other countries.", "The Implementation Plan designates various U.S. agencies to lead or  participate in achieving CWT strategic priorities, so it provides high-level  direction on agency roles. However, the Implementation Plan does not  define specific roles and responsibilities at the working level for mission  staff implementing programs and activities. Officials at some missions  reported that agreement on roles, responsibilities, and priorities facilitated  collaboration on CWT activities in some instances. For example, an FWS  attach\u00e9 in the region told us that there has been effective collaboration  between FWS, State, and ICE HSI due to agreement on roles and a  shared understanding of key law enforcement terms and responsibilities.  In Thailand, FWS and ICE HSI officials told us that they share information  on cases, and FWS and State officials indicated that they have jointly  conducted a variety of capacity-building activities across the region. State  officials at ILEA in Bangkok attributed their successful regional  collaboration with FWS to a mutual understanding that CWT capacity  building is a responsibility that should be prioritized. State officials in  Cambodia indicated that their Embassy CWT Interagency Working Group  has been a forum for discussion among agencies in Cambodia to  collaborate on CWT roles and activities. The working group has a  designated lead agency and provides a forum to prevent or resolve  potential differences in points of view among the agencies.", "However, some officials also reported instances of disagreement on roles  and responsibilities that they said led to bad outcomes. For example, at  the mission in Bangkok, Thailand, which coordinates CWT activities  across the Southeast Asia region, agencies\u2019 disagreements on roles and  responsibilities have resulted in the delivery of inappropriate training  activities and interference with U.S. efforts to cooperate with a foreign  government, according to some officials. Specifically, FWS, State, and  ICE HSI have disagreed with USAID on the roles and responsibilities that  USAID implementing partners play with regard to law enforcement  activities. USAID officials stated that they entrust their implementing  partners to conduct law enforcement training and believe they sufficiently  involve their U.S. agency counterparts. However, FWS, State, and ICE  HSI officials believe that due to their law enforcement responsibilities  specifically related to strengthening host countries\u2019 antiwildlife trafficking  enforcement efforts, they should be consulted and involved to a greater  degree on activities directly related to such efforts.", "In Thailand, a USAID implementing partner\u2019s lack of collaboration with  U.S. law enforcement entities resulted in inappropriate training activities,  according to some officials. Officials from FWS, ICE HSI, and an NGO  told us that a CWT course conducted by a USAID implementing partner in  Thailand was inappropriate due to a focus on ambush and military tactics,  which are not suitable for the park rangers that received the training. In  addition, another training course conducted in Thailand was not tailored  for that country\u2019s landscape, according to a U.S. official, who explained  that the Thai officers receiving the training would be unable to apply its  lessons locally due to differences in terrain. FWS and ICE HSI officials  stated that they were not sufficiently consulted prior to the training and,  although they have provided feedback to USAID about these issues, they  expressed concern that USAID had not fully considered the feedback.  USAID officials indicated that training on ambush or military tactics would  not have been allowed, and they have no evidence it occurred. USAID  officials also stated that they were unaware of training that was not  properly tailored and that host countries generally praised training that  was provided by its implementing partner.", "FWS and State officials in Thailand also told us that agencies\u2019 and  implementing partners\u2019 efforts to share information on wildlife crime with  foreign governments have been fragmented due to disagreements about  roles. For example, USAID\u2019s implementing partners and FWS separately  approached foreign government entities to provide information or support  during a recent law enforcement seizure of wildlife products. According to  State and FWS officials in Thailand, while USAID\u2019s implementing partner  has a role in providing information that can support CWT activities, U.S.  agencies in-country are responsible for official engagement on law  enforcement matters and, therefore, should take the lead in  communicating with host governments, particularly in criminal  investigations.", "According to USAID officials, USAID and its implementing partners share  this responsibility and have a role to play. USAID officials told us that they  were aware of the difference in views and acknowledged that there may  have been instances in which an implementing partner overstepped.  USAID officials further explained that they have made an effort to address  this particular issue by changing its implementing partner as well as  changing their CWT program structure from a cooperative agreement to a  contract so that USAID has more oversight and control. The new  implementing partner also brought in a law enforcement expert to help  ensure that training and related activities will be appropriate, according to  USAID officials. In addition, the new USAID program specifies that  coordination with other agencies is required, and USAID conducted a  regional workshop in March 2017 to serve as a mechanism for  coordination.", "However, even after this conference, officials indicated that some  agencies still had not agreed on the appropriate balance for how  implementing partners should collaborate with U.S. law enforcement on  criminal investigations. According to State and FWS officials, differences  in agency views of their roles have hindered U.S. efforts to cooperate with  a foreign government and confuse foreign government officials who may  not realize that an implementing partner is not a U.S. government agency  and thus does not have the same authority. USAID officials indicated that  they were unaware of instances where its implementing partner interfered  with U.S. efforts to cooperate with a foreign government.", "Our work has shown that although collaborative mechanisms differ in  complexity and scope, they all benefit from certain key features, including  clarity of roles and responsibilities. For example, our work also notes that  agreement on roles and responsibilities helped agencies determine who  will lead a collaborative effort, clarify who will perform specific tasks,  organize joint and individual efforts, and facilitate decision making. In  addition, we have previously reported that key issues agencies should  consider whether participating agencies have clarified the roles and  responsibilities of participants in collaborative efforts and whether  participating agencies have agreed to a process for making and enforcing  decisions. Some U.S. missions in Southeast Asia are developing CWT- specific country strategies, which could provide a platform for the Task  Force to give additional guidance on roles and responsibilities of mission  staff engaged in CWT efforts in the region. Doing so would help clarify  which agency will do what and facilitate maximum use of resources."], "subsections": []}]}, {"section_title": "FWS, State, and USAID Have Taken Steps to Assess CWT Activities", "paragraphs": [], "subsections": [{"section_title": "FWS, State, and USAID Monitor CWT Activities", "paragraphs": ["FWS uses a range of measures to track the progress of its partners and  grantees. For example, FWS has established standard indicators for  CWT, which include the following:  the number of arrests of large-scale wildlife traffickers resulting from a  project\u2019s investigations, operations support, or both; and  the number of wildlife traffickers who have been arrested who are  successfully prosecuted.", "Specifically for public relations efforts, the guidance calls for applicants to  identify the desired behavior that the campaign is intended to encourage.  In addition, FWS required 2017 CWT project proposals to identify all  expected outputs or products of key project activities. This may include  management plans, brochures, posters, training manuals, number of  people trained, workshops held, hours of training provided, and  equipment purchased.", "One FWS-funded program designed to counter pangolin trafficking to  China by laying the foundations for reducing consumer demand provides  an illustrative example of how it applied FWS monitoring guidance.  Among other activities, the program proposed developing and piloting  strategies to change behavior, with the goal of eliminating the market for  illegally traded wildlife in key areas. The proposal identifies outputs, such  as reports on consumer demand, and states that key components of  developing a demand reduction strategy include identification of target  audiences and the specific behaviors that the campaign aims to change.  Quarterly reports as of April 2017 have described progress toward goals,  outlining methodological details on how motivation and potential barriers  for desired behavior will be measured. The program is scheduled to  conclude in September 2017.", "The FWS Office of Law Enforcement Strategic Plan 2016 \u2013 2020  identifies a set of CWT-related metrics for CWT, such as interdictions,  penalties, fines, and value of illegal activities. FWS reports this  information publicly. For example, Operation Crash, an ongoing  nationwide criminal investigation led by FWS that focuses on the illegal  trade in rhinoceros horn and elephant ivory, has resulted in 32 individuals  sentenced and approximately 34 years of total prison sentences, $2  million in fines, and $6 million in forfeitures as of February 2017.", "Regarding U.S.-based partnerships, FWS monitored the U.S. Illegal  Wildlife Demand Reduction Campaign by tracking the estimated number  of people who see the ads (reach) and the number of times content is  displayed (impressions). From launch through the middle of the second  quarter of fiscal year 2017, FWS reported the following:", "Billboards: Monthly, about 5 million travelers are estimated to pass by  the airport billboards at the international airports of Atlanta, Georgia;  Chicago, Illinois; Los Angeles, California; and Miami, Florida. To date,  an estimated total of about 45 million travelers have passed through  these airports and may have seen the messages.", "Social media: On September 7, 2016, FWS and its implementing  partner, WildAid, launched the campaign with joint press conferences  held at the Atlanta International Airport and at the Los Angeles  International Airport. This resulted in more than 1 million impressions  on Twitter, engagement of more than 236,000 friends on Facebook,  and 5,000 new followers on Instagram.", "In addition, at the beginning of the campaign, WildAid completed a public  survey to assess what percentage of the U.S. general public was aware  of wildlife trafficking. At the conclusion of the 3-year campaign, WildAid  intends to facilitate another public survey to evaluate the effectiveness of  the campaign, with results expected in late 2018."], "subsections": [{"section_title": "State", "paragraphs": ["INL\u2019s Guide to Developing a Performance Measurement Plan states that  program teams are to monitor project activities and results in order to  identify project successes and challenges, guide resource allocations,  and facilitate improved performance. According to a State official, INL  requires every CWT program implementer to provide quarterly progress  and financial reports and final programmatic and financial reports.  Quarterly reports must provide a quantitative and qualitative analysis of  work performed and include, among other things, results achieved,  challenges encountered, and action taken. At the end of a program, INL  extracts best practices and lessons learned for future planning, according  to a State official.", "We examined monitoring documentation related to three INL CWT  programs as illustrative examples, described below.", "From February to March 2016, State\u2019s ILEA in Thailand provided a  Wildlife Trafficking Investigators course designed to cover a range of  topics, including case management, corruption, and wildlife  identification. The report covering the first quarter of calendar year  2016 for this program describes progress made toward objectives and  identifies challenges and corrective action. For example, the report  states that students participated in crime scene processing,  surveillance, undercover operations, interviewing, raid planning, and  case presentation exercises \u2013 all reflective of a specific performance  measurement objective. The report also identifies challenges such as  securing role players for exercises and proposes using FWS  instructors and ILEA staff as a solution.", "State provided an approximately $2 million grant, running from  September 2015 to September 2017, to the Wildlife Conservation  Society (WCS) aimed at strengthening the capacity of government  and law enforcement officials on wildlife trafficking across key  countries in Latin America and Asia. The report covering the first  quarter of calendar year 2017 for this program describes progress and  activities related to objectives. For example, one activity is intended to  strengthen legislative frameworks to combat wildlife trafficking, and  the report states that in Vietnam, WCS has been providing inputs to  articles of the penal code relevant to wildlife protection.", "State provided approximately $400,000 to UNODC and the University  of Washington for a program running from September 2015 to  September 2017 to facilitate forensic DNA analysis of ivory seizures in  Africa and Asia. The most recent quarterly report for the program  provides information on results associated with objectives. For  example, one objective is to conduct DNA analysis on 175 African  elephant reference samples, and the report indicates that over 100  samples had been analyzed from countries in Africa.", "USAID\u2019s Evaluation Policy states that performance monitoring reveals  whether implementation is on track and that project managers will ensure  that implementing partners collect relevant monitoring data. To monitor  ARREST, USAID\u2019s implementing partner collected and self-reported data  on activities and progress against main goals. For example, the  implementing partner reported in 2016 that to strengthen law  enforcement, ARREST trained approximately 2,300 people. To reduce  consumption of endangered species, ARREST\u2019s iThink campaign at its  peak reached more than 40 million people per day, according to the  partner\u2019s report. In addition, a contractor analyzed ARREST\u2019s iThink  demand reduction campaign results. According to its report, 62 percent of  the audience in China had received the message after 6 months. In  Thailand, 63 percent of the audience had received the message, while in  Vietnam, 75 percent of the audience had received the message. The  report also provided suggestions for future work based on lessons  learned, such as segmenting the market, incorporating social norms, and  increasing the emphasis on social media.", "USAID designed monitoring elements into and developed plans for its  recently initiated programs in Southeast Asia. For example, USAID\u2019s  request for proposal (RFP) for Saving Species Vietnam, issued in  January 2016 prior to the contract award, identifies key results and  illustrative indicators for the main tasks. Specifically, the RFP suggests  metrics for reducing consumer demand, such as percentage of target  audience that receives the intended message and percentage change in  purchases of targeted illegal wildlife products. In addition, the RFP calls  for quarterly reports that must include, among other things, performance  indicator results against targets. USAID\u2019s RFP for Wildlife Asia also  designed monitoring into the program from the start by including similar  elements.", "In May 2017, USAID produced an Activity Monitoring, Evaluation and  Learning Plan for Saving Species (MEL Plan), which includes a Results  Framework that identifies the purpose of the program and details  associated tasks and key results. According to the MEL Plan, the Results  Framework was developed based on a range of inputs, including USAID\u2019s  Measuring Efforts to Combating Wildlife Crime \u2013 A Toolkit for Improving  Action and Accountability. The MEL Plan also provides a mix of output  and outcome performance indicators with baselines and targets, to be  used for communication and decision making. In addition, the MEL Plan  calls for Pause and Reflect Sessions, Annual Strategic Reviews, work  planning sessions, and other key learning events to reflect on progress  and use that knowledge to adapt accordingly. In May 2017, USAID also  produced a draft MEL Plan for Wildlife Asia, which provides performance  indicators with baselines and targets. In addition, the April 2017 draft MEL  Plan for the Philippines Protect Wildlife program contains similar  information and, according to USAID officials, the MEL Plan used the  action and accountability toolkit to inform the development of CWT  metrics."], "subsections": []}]}, {"section_title": "One Evaluation of CWT Activities Has Been Conducted by USAID", "paragraphs": ["One USAID CWT program in Asia conducted a midterm evaluation, but  State and FWS have not conducted any evaluations. State has not  conducted any evaluations of INL CWT activities because none meet  State\u2019s criteria for completing an evaluation, including funding and  duration thresholds, according to a State official. FWS has not conducted  any evaluations of its CWT activities in Asia but has established a new  CWT-focused branch, which is developing a strategic plan, a framework,  and indicators to measure progress and success for CWT efforts. In  March 2016, the Task Force released an annual progress report that  describes U.S. government accomplishments; however, according to an  official, the Task Force does not plan to issue a progress report in 2017  due to vacancies in leadership and because agencies are working on a  similar report planned for completion sometime in 2017, in response to  the Eliminate, Neutralize, and Disrupt Wildlife Trafficking Act of 2016.", "USAID\u2019s Evaluation Policy states that for each project, consideration will  be given during the design phase to the performance evaluation that will  be undertaken. The ARREST program conducted a midterm evaluation,  and we assessed it against key elements to determine the quality of the  evaluation. We have previously reported that addressing or requiring  certain elements provides the basis for a high-quality evaluation. For  this analysis, we considered a range of criteria, including the following:", "Evaluation questions align with program goals.", "Target population and sampling method are appropriate, given the  scope and nature of the evaluation questions.", "Data collection is appropriate for answering the evaluation questions.", "Data analysis is appropriate to answer the evaluation questions.", "We found that overall, the midterm evaluation was acceptable in quality,  although it fell short of fully addressing all the key elements. For example,  the evaluation generally met the first two elements above. However, the  evaluation only partially met the element for data collection and data  analysis. For example, the evaluation did not clearly specify how survey  recipients had been selected and did not provide precise details about  how qualitative data from in-person interviews had been analyzed. USAID  did not conduct a final evaluation of ARREST because, according to  officials, the timing of a late midterm evaluation was such that its findings  were used in the development of the new Wildlife Asia program, and it  would not have been cost-effective to conduct a final evaluation, among  other reasons.", "The draft Wildlife Asia MEL Plan identifies plans to prepare for a midterm  and final performance evaluation at the middle and end of the program  time line, and USAID officials confirmed that they intend to conduct  evaluations of the program. The Saving Species MEL Plan indicates that  program officials will work in collaboration with USAID to conduct a  midterm evaluation and that one objective will be to provide  recommendations in order to improve effectiveness and evaluate factors  that help or hinder the achievement of expected outcomes and objectives.  The MEL Plan also calls for a third-party firm, identified by USAID through  a competitive process, to conduct the evaluation in the third year of the  program. The draft Philippines Protect Wildlife MEL Plan indicates that  the program will conduct a midterm and final evaluation."], "subsections": []}, {"section_title": "FWS, State, and USAID Have Identified and Applied Some Lessons Learned", "paragraphs": ["FWS, State, and USAID guidance states that agencies should learn from  monitoring and evaluation efforts so they can identify what works, what  does not work, and why. For example, from monitoring the first year of  implementation, FWS learned from its domestic campaign that most  Americans consider themselves wildlife lovers, but most know little about  wildlife trafficking, indicating the need for outreach and education efforts.", "State officials told us that they took stock of regional CWT activities in  Asia to improve program planning. As a result, before launching the next  set of CWT courses, INL is conducting a needs assessment to clarify skill  gaps, impact potential, and alignment with other activities. In addition, INL  is examining approaches to strengthen sustainability such as adding  train-the-trainer courses.", "USAID and implementing partner officials told us that they learned  lessons during the implementation of ARREST and applied or plan to  apply them to new programs. For example, in response to ARREST\u2019s  midterm evaluation recommendation to focus demand reduction efforts  increasingly on behavior change communication, officials stated that they  adjusted the message of their campaign advertisements to target  behavior change and worked to recruit a range of key opinion leaders to  maximize reach and impact. USAID intends to carry this lesson over to its  new regional program, according to 2016 plans that call for the use of  behavior change communication methodologies, as opposed to one-off  public relations campaigns, in demand reduction activities. Officials told  us that in practice this means future campaigns will focus on specific  species, such as pangolins, and target Chinese and Vietnamese  consumers who believe pangolin scales can help with lactation. USAID\u2019s  implementing partner for Saving Species also identified possible ways to  improve the impact and sustainability of CWT training. For example,  instead of providing traditional, onetime classroom training, officials plan  to establish mentoring and on-the-job training programs in which officials  in similar roles teach one another. This facilitates learning and may help  identify CWT champions, enhancing sustainability and effectiveness,  according to program officials."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Wildlife trafficking, worth at least an estimated $7 billion annually,  continues to push some protected and endangered animal species to the  brink of extinction. Although agencies have worked together to combat  wildlife trafficking, as outlined in the National Strategy for Combating  Wildlife Trafficking Implementation Plan, disagreement on roles and  responsibilities has hindered some CWT activities in Southeast Asia. We  have previously reported that key issues agencies should consider  include whether participating agencies have clarified the roles and  responsibilities of participants in collaborative efforts and whether  participating agencies have agreed to a process for making and enforcing  decisions. Agencies have collaborated on a range of CWT activities,  including building law enforcement capacity, raising awareness, and  helping spur partner-nation action on CWT. While agencies have applied  some practices that can enhance and sustain collaborative efforts, such  as establishing joint strategies and defining a common outcome, some  officials in Southeast Asia reported a level of disagreement on roles and  responsibilities, resulting in the delivery of inappropriate training activities  and in the hindering of U.S. efforts to cooperate with a foreign  government. DOI, State, and USAID are members of the Presidential  Task Force on Wildlife Trafficking that is charged with coordinating  among agencies combating wildlife trafficking efforts. By ensuring that all  relevant member agencies have agreed on and clearly defined roles and  responsibilities, agencies will have more reasonable assurance that they  can effectively marshal the contributions of all agencies to take full  advantage of their expertise and resources in addressing CWT issues.  Taking steps to clarify specific roles and responsibilities, for example by  including them in a CWT country strategy or other document, could help  improve coordination, help ensure activities are mutually reinforcing,  reduce the risk of fragmented efforts, and maximize the impact of CWT  activities in Southeast Asia."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["GAO is making the following three recommendations:", "The Secretary of the Interior should work with the Task Force to clarify  roles and responsibilities of mission staff engaged in collaborative  efforts on combating wildlife trafficking in Southeast Asia.  (Recommendation 1)", "The Secretary of State should work with the Task Force to clarify roles  and responsibilities of mission staff engaged in collaborative efforts on  combating wildlife trafficking in Southeast Asia. (Recommendation 2)", "The Administrator of the U.S. Agency for International Development  should work with the Task Force to clarify roles and responsibilities of  mission staff engaged in collaborative efforts on combating wildlife  trafficking in Southeast Asia. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to the  Departments of Commerce, Homeland Security, the Interior, Justice,  State, and the Treasury, and USAID. The Departments of the Interior and  State and USAID agreed with our recommendations, and their comments  are reproduced in appendixes III, IV, and V, respectively. The  Departments of Commerce, the Interior, Justice, and State and USAID  provided us with technical comments, which we incorporated as  appropriate.", "In its comments, USAID indicated that it objects to the phrase \u201cbad  outcomes\u201d, the word \u201cinappropriate,\u201d and the description related to an  implementing partner that may have \u201coverstepped\u201d as used in our  discussion of agency collaboration. We attribute that language specifically  to certain agency officials, acknowledge differences in agency views, and  include perspectives from USAID officials for balance.", "In its comments, DOI notes that that the content in the report that most  directly substantiates the recommendations occasionally reads as  disagreements involving a few specific activities among a small number of  U. S. government personnel. Our findings focus on a limited set of people  and activities but reflect a clear opportunity to clarify roles and  responsibilities. Moreover, as we mention, the mission in Bangkok  coordinates CWT activities across the Southeast Asia region, so efforts to  improve collaboration potentially would have a broad effect and benefit.", "We are sending copies of this report to the appropriate congressional  committees and to the Secretaries of Commerce, Homeland Security, the  Interior, State, and the Treasury; the Attorney General of the United  States; the Administrator of USAID. In addition, the report is available at  no charge on the GAO Web site at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8612, or gianopoulosk@gao.gov. Contact points for our  Offices of Congressional Relations and of Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what is known about the demand for illegal  wildlife and wildlife products in the United States and in Asia, (2) actions  agencies are taking to reduce demand for illegal wildlife products in the  United States and Asia, and (3) the extent to which the U.S. Fish and  Wildlife Service (FWS) within the Department of the Interior (DOI), the  U.S. Department of State (State), and the U.S. Agency for International  Development (USAID) are assessing the effectiveness of their combating  wildlife trafficking (CWT) activities.", "We limited the scope of this review to the United States and Asia\u2014 identified as major markets for the illegal wildlife demand\u2014to complement  our 2016 report and to provide geographical diversity in our work. We  selected these geographic areas based on our review of reports on  demand for illegally traded wildlife and discussions with U.S. government  agencies.", "To address our objectives, we analyzed agency documentation and met  with officials from DOI, State, USAID, the Department of Justice, and the  Department of Commerce\u2019s National Oceanic and Atmospheric  Administration, which have designated roles in the National Strategy for  Combating Wildlife Trafficking Implementation Plan to lead or participate  in efforts to reduce illegal wildlife demand; the Department of Homeland  Security, which has a role in enforcement and capacity-building efforts;  and nongovernmental organizations (NGO) that focus on combating  wildlife trafficking. We conducted fieldwork in Miami, Florida; China; Hong  Kong; Thailand; and Vietnam. We selected these locations using a  combination of criteria: (1) Since fiscal year 2014, the location has  received at least $1 million in U.S. government funding for efforts related  to CWT; (2) CWT activities are under way in the location; and (3) the  location has the presence of at least two U.S. government agencies  conducting CWT work. This sample is not generalizable to all the  locations in which the United States has CWT-related programs.", "While in each location in Asia, we interviewed officials who played a role  in CWT activities, which included officials from State, USAID, and the  Departments of Homeland Security and the Interior. We also interviewed  officials from host governments responsible for the management of  natural resources and parks and representatives from NGOs, some of  which were involved in implementing U.S. government programs related  to awareness raising, law enforcement, and other CWT objectives.", "To describe what is known about the demand for illegal wildlife and  wildlife products in the United States and in Asia, we reviewed reports on  wildlife trafficking produced by United Nations organizations, the  Organisation for Economic Co-operation and Development, and NGOs  about the demand for these products in our locations of interest. We also  reviewed surveys conducted for programs partially or fully funded by U.S.  agencies that asked questions about purchasing behaviors for these  products in the United States, China, Vietnam, and Thailand. These  reports were either recommended to us by officials we interviewed or had  been identified during our prior work on the supply of wildlife products.  We reviewed the methodologies described in the reports and surveys and  determined they were sufficiently reasonable for providing examples of  wildlife and wildlife products traded and consumed and drivers for  consumption in China and countries in Southeast Asia. However, it was  beyond the scope of this review to determine the reliability of the  underlying data. Many of these reports depend heavily on seizure data,  which have limitations. The amount and location of seizures depend on  law enforcement efforts, efficacy of law enforcement efforts, presence of  illicit trade, and other factors, which are difficult to isolate.", "Additionally, we analyzed national seizure data from the FWS\u2019s Law  Enforcement Management Information System to report on wildlife  confiscated in the United States. To assess the reliability of these data,  we interviewed agency officials, reviewed documentation about the data,  and conducted basic logical tests. We reviewed the 42,100 seizure  records that FWS provided for logical consistency and removed a few  hundred records for which we found duplicative, unknown, or blank  values. Overall, we determined the data are sufficiently reliable for the  purposes of identifying wildlife products seized between fiscal years 2007  and 2016. Data on seizures may not be indicative of underlying trends in  trade and consumption, as they are dependent upon factors such as  enforcement and techniques used by those importing the goods. To  gather perspectives on demand for illegally traded wildlife in China and  Southeast Asia, during our field visits to China, Hong Kong, Thailand, and  Vietnam, we interviewed officials from DOI, State, USAID, the  Department of Homeland Security, and officials at foreign ministries,  NGOs that are implementing partners for U.S. agencies or have  cooperated with U.S. agencies on CWT activities, and one company. We  interviewed the company for illustrative purposes.", "To examine actions agencies are taking to reduce demand for illegal  wildlife products in the United States and Asia, we interviewed relevant  officials and reviewed information, including agency and implementing  partner documentation of CWT-related projects, programs, and grants.  We also analyzed how agencies combating wildlife trafficking in  Southeast Asia are applying selected practices that can enhance and  sustain collaborative efforts. As we have previously reported, such  practices include establishing mutually reinforcing or joint strategies,  defining and articulating a common outcome, and agreeing on roles and  responsibilities. In addition, we conducted fieldwork at the Port of Miami  and interviewed U.S. government officials at this location to obtain  insights on U.S. government activities. We selected the Port of Miami  because it has been the site of large-scale CWT operations, and agency  officials identified Miami as a hub for wildlife trade and an illustrative  example of U.S. government CWT operations. We also conducted  fieldwork in China and Vietnam, where we visited rescue centers and  interviewed host government officials and NGO representatives.", "To examine the extent to which FWS, State, and USAID are assessing  the effectiveness of their CWT activities, we selected programs to  analyze, spoke with agency officials, and reviewed documentation from  the programs selected. We included programs that had started, finished,  or been ongoing from the beginning of fiscal year 2015 to the end of fiscal  year 2016 and that are or were solely dedicated to CWT. Specifically for  State, programs must have been identified by its Bureau of International  Narcotics and Law Enforcement Affairs as a discrete activity that  contributed to CWT and must have been at least 3 months into  implementation. Specifically for USAID, programs must have (or have  had) funding greater than $1 million. To assess agency monitoring  practices, we analyzed agency guidance on monitoring and examined  selected programs as illustrative examples of how agencies applied their  own guidance. To assess evaluation practices, we assessed a USAID  midterm evaluation against key elements to determine quality. Two  social science analysts independently assessed this evaluation using the  same criteria, methods, and procedures that we developed for  GAO-17-316. The analysts met and reconciled any initial differences in  their assessments.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Photographs Related to Combating Wildlife Trafficking in the United States and Asia", "paragraphs": ["The following photographs (see fig. 8-26) were taken by GAO staff during  field visits to Miami, Florida; Beijing, China; Hong Kong; Bangkok,  Thailand; and Hanoi, Vietnam. GAO observed and photographed the  following:  shipment inspections conducted by U.S. Fish and Wildlife Service  inspectors at the Port of Miami; examples of wildlife that are traded in the United States; examples of wildlife and wildlife products that have been seized by the  U.S. Fish and Wildlife Service; examples of wildlife and wildlife products that have been seized in antiwildlife trafficking awareness campaigns at the Hartsfield\u2013Jackson  Atlanta International Airport; Beijing Capital International Airport; Hong  Kong International Airport; Suvarnabhumi Airport, Bangkok, Thailand;  Chatuchak Market in Bangkok, Thailand; and a highway in Hanoi,  Vietnam; wildlife at the Beijing Rescue and Rehabilitation Center; the  Endangered Primate Rescue Center, Cuc Phuong National Park,  Vietnam; and the Carnivore and Pangolin Rescue Center, Cuc  Phuong National Park, Vietnam; and  shops that sell ivory products in Hong Kong.", "To view these photographs online, please click on this hyperlink."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Kimberly M. Gianopoulos, (202) 512-8612, or gianopoulosk@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Judith Williams (Assistant  Director), Marc Castellano (Analyst-in-Charge), David Dayton, Martin De  Alteriis, Neil Doherty, Mark Dowling, Michael Hoffman, and Jasmine  Senior made key contributions to this report."], "subsections": []}]}], "fastfact": ["What do elephants, pangolins, and tigers have in common?", "The illegal wildlife trade\u2014estimated to be worth at least $7 billion annually\u2014is pushing these and other species to the brink of extinction. The United States and Asia are key sources of demand for a variety of wildlife.", "U.S. agencies are taking steps, such as raising awareness and training local authorities, to reduce demand and improve law enforcement, but disagreements over roles and responsibilities in Southeast Asia have hindered some efforts.", "We recommended that USAID and the Departments of State and Interior clarify roles and responsibilities of staff in the region."]}
{"id": "GAO-19-82", "url": "https://www.gao.gov/products/GAO-19-82", "title": "Coast Guard Shore Infrastructure: Applying Leading Practices Could Help Better Manage Project Backlogs of at Least $2.6 Billion", "published_date": "2019-02-21T00:00:00", "released_date": "2019-02-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Coast Guard, within the Department of Homeland Security (DHS), owns or leases more than 20,000 shore facilities, such as piers, docks, boat stations, air stations, and housing units, at more than 2,700 locations. In June 2017, the Coast Guard testified to Congress that it had a $1.6 billion recapitalization backlog for its shore infrastructure, which had a replacement value of about $20 billion.", "GAO was asked to review the Coast Guard's management of its shore infrastructure. This report examines: (1) what is known about the condition and costs of managing the Coast Guard's shore infrastructure, and (2) the extent to which the Coast Guard's process for managing its shore infrastructure meets leading practices.", "To answer these questions, GAO reviewed relevant laws and Coast Guard annual reports on its shore infrastructure, analyzed Coast Guard data, and interviewed Coast Guard officials. GAO also compared Coast Guard policies and procedures, and actions taken during fiscal years 2012 through 2018 to manage its shore infrastructure, against the leading practices that GAO previously identified for managing public sector maintenance backlogs."]}, {"section_title": "What GAO Found", "paragraphs": ["About 45 percent of the Coast Guard's shore infrastructure is beyond its service life, and its current backlogs of maintenance and recapitalization projects, as of 2018, will cost at least $2.6 billion to address, according to Coast Guard information. The deferred maintenance backlog included more than 5,600 projects, with an estimated cost of $900 million. The recapitalization and new construction backlog had 125 projects, with an estimated cost of at least $1.77 billion as of 2018 (see figure). GAO's analysis of Coast Guard data found that as of November 2018 there were hundreds of recapitalization projects without cost estimates\u2014the majority of recapitalization projects. Coast Guard officials told GAO that these projects are in the preliminary stages of development.", "The Coast Guard's process for managing its shore infrastructure did not fully meet 6 of 9 leading practices that GAO previously identified. Of the nine leading practices, the Coast Guard met three, partially met three, and did not meet three. For example, the Coast Guard generally has not employed models for predicting the outcome of maintenance investments and optimizing among competing investments, as called for in leading practices. In one instance, the Coast Guard used a model to optimize maintenance for its aviation pavement and, according to Coast Guard officials, found that it could save nearly $14 million by accelerating investment in this area (e.g., paving runways) sooner rather than deferring such maintenance. Coast Guard officials told us that such modeling could be applied within and across all of its shore infrastructure asset types, but the Coast Guard did not implement the results of this model and does not require their use. Without requiring the use of such models, the Coast Guard could be missing opportunities to achieve cost savings and better manage its maintenance backlogs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, which DHS agreed to implement, including that the Coast Guard align its management of its shore infrastructure backlogs with leading practices by requiring the use of models for predicting the outcome of, and optimizing among, competing investments for maintenance projects."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States Coast Guard, within the Department of Homeland  Security, is the principal federal agency charged with ensuring the  security and safety of the waters subject to U.S. jurisdiction and enforcing  laws which prevent death, injury, and property loss in the maritime  environment. To help carry out these and other missions, the Coast  Guard owns or leases more than 20,000 shore facilities, such as piers,  docks, boat stations, air facilities, and housing units at more than 2,700  locations. This infrastructure is often positioned along the nation\u2019s  coastlines where it can be vulnerable to damage from extreme weather.  All Coast Guard missions begin and end at a shore facility, and over 80  percent of Coast Guard personnel work onshore, according to the Coast  Guard. In June 2017, Coast Guard officials testified that the agency had  a $1.6 billion backlog of projects for recapitalization of its shore  infrastructure, as well as new construction. The replacement value of this  infrastructure was about $20 billion as of 2017. Being located along the  U.S. coastlines has resulted in some facilities requiring unexpected repair  and recapitalization, such as those impacted by superstorm Sandy, and  hurricanes Harvey, Irma, Maria, and Matthew. In July 2018, we reported  that the Coast Guard had not been able to address shore infrastructure  projects, primarily due to lack of funding, longstanding acquisition  management challenges, and that previous Coast Guard leadership  prioritized the acquisition of new operational assets to replace aging ships  and aircraft, over maintaining and repairing shore infrastructure.", "According to the National Research Council (NRC), public sector  buildings are assets acquired through the investment of tax dollars, and  underfunded maintenance can affect public health and safety, reduce  productivity, and cause long-term financial losses. In 2003, we added the  management of federal real property to our high-risk list of the  longstanding challenges the government faces. We have previously  reported on leading practices for managing public infrastructure  maintenance and repair backlogs, such as having clear maintenance and  repair investment objectives, conducting condition assessments as a  basis for establishing appropriate expenditure levels, aligning real  property portfolios with mission needs, disposing of unneeded assets,  and identifying the types of risks posed by the lack of timely investment.", "We have also reported that public assets require adequate maintenance,  repair, and recapitalization\u2014which can include replacing systems at the  end of their useful life\u2014to keep them in good condition.", "You asked us to review the condition of and costs associated with the  Coast Guard\u2019s management of its shore infrastructure. This report  examines (1) what is known about the condition and costs of managing  the Coast Guard\u2019s shore infrastructure, and (2) the extent to which the  Coast Guard\u2019s process for managing its shore infrastructure meets  leading practices for managing public maintenance backlogs.", "To identify what is known about the condition and costs of managing the  Coast Guard\u2019s shore infrastructure, we reviewed Coast Guard annual  reports on its shore infrastructure. We also reviewed Coast Guard  documentation and data on its shore infrastructure inventory to describe  the condition and costs of managing these assets. We examined the  Coast Guard\u2019s shore Acquisition, Construction, and Improvements (AC&I)  backlog of projects the Coast Guard has identified as necessary to fulfill  its missions (i.e., its Shore Facilities Requirements List) from fiscal years  2012 through 2018, as well as its depot-level maintenance backlog as of  March 2018. We also reviewed planning and budget documents such as  (a) the Coast Guard\u2019s annual Unfunded Priorities List, which identifies  projects the Coast Guard would undertake if funding were available, and  (b) its Congressional Budget Justifications, to examine how the Coast  Guards\u2019 reported Procurement, Construction, and Improvements (PC&I)  backlog has changed over time. We interviewed officials from Coast  Guard headquarters as well as personnel from all six Coast Guard Civil  Engineering Units (CEU) with responsibilities for categorizing the  condition of infrastructure, among other things, to obtain their field-level  perspectives on the condition of Coast Guard shore infrastructure.", "To evaluate the extent to which the Coast Guard\u2019s process for managing  its shore infrastructure met leading practices for managing public sector  maintenance backlogs, we analyzed Coast Guard plans, policies,  procedures, and related laws for managing, maintaining, and repairing  shore infrastructure. We identified and analyzed Coast Guard guidance  on its process for prioritizing projects for maintenance and repair of its  shore infrastructure, and we assessed Coast Guard practices against the  leading practices for managing maintenance backlogs that we identified in  our prior work. We also compared Coast Guard practices with the Office  of Management and Budget\u2019s (OMB) program evaluation and capital  programming guidance. We used the following scale to evaluate the  Coast Guard\u2019s management of its shore infrastructure deferred  maintenance and repair against the leading practices:", "Met\u2014The Coast Guard properly considered the leading practice and  demonstrated with documentary evidence that it had fully applied it.", "Partially Met\u2014The Coast Guard properly considered and  demonstrated with some documentary evidence that it had applied the  leading practice to some extent.", "Not Met\u2014The Coast Guard did not properly consider or apply the  leading practice and had no documentary evidence verifying that it  had applied it.", "We interviewed officials from Coast Guard Headquarters, the Shore  Infrastructure Logistics Center, the Coast Guard\u2019s two operational  commands (Atlantic Area Command and Pacific Area Command), and  the six CEUs to obtain their perspectives on the process for maintaining  and repairing shore infrastructure, and to assess the extent to which  Coast Guard actions align with leading practices for managing federal  agencies\u2019 deferred maintenance and repair backlogs. For both objectives,  we conducted data reliability assessments, including interviewing agency  officials and reviewing documentation, to ensure that the data used in our  analyses were sufficiently reliable for our purposes. While we identified  limitations with some of the data, as discussed later in our report, we  determined that the data are sufficiently reliable for the purposes of  reporting on the Coast Guard\u2019s overall portfolio of shore infrastructure  assets, and reporting on the minimum amount of money the Coast Guard  identified as needed to complete deferred repair and Procurement,  Construction and Improvements projects. See Appendix I for additional  details on our scope and methodology.", "We conducted this performance audit from November 2017 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Coast Guard\u2019s Organizational Approach to Managing Its Shore Infrastructure Portfolio", "paragraphs": ["Coast Guard shore infrastructure includes buildings and structures,  which it has organized into 13 asset types, known as asset lines. Table  1 provides information on Coast Guard asset lines, including examples of  assets, the number within each asset line in 2017, and the Coast Guard\u2019s  estimated replacement value of each asset line in 2017\u2014the most recent  value available at the time of our review.", "The Coast Guard\u2019s Office of Civil Engineering sets Coast Guard-wide civil  engineering policy, which includes facility planning, design, construction,  maintenance, and disposal. The Coast Guard\u2019s Shore Infrastructure  Logistics Center, established in 2009, is to manage and coordinate  infrastructure condition assessments via six regional Civil Engineering  Units (CEUs), along with other divisions and offices. The condition of  individual shore infrastructure assets is determined by CEU personnel  and civil engineers in the field. According to Coast Guard officials, every  Coast Guard facility, such as a base or boat station, is to be inspected by  a CEU representative every 3 years. The representative is to conduct a  facility condition assessment of all shore infrastructure assets\u2014buildings  and structures\u2014located at that facility. According to Coast Guard CEU  officials, the representative is to identify if any new maintenance-related  deficiencies exist at the facility and add them to the backlog of projects,  review the previous backlog, and verify that the Coast Guard\u2019s shore  facilities\u2019 inventory records are correct. This process is intended to help  define the current conditions of assets and identify maintenance needs.", "According to Coast Guard guidance, the Shore Infrastructure Logistics  Center also establishes project priorities for the acquisition, programmed  depot maintenance, major repair, and modification of Coast Guard shore  facilities, and implements shore infrastructure policies. Among other  things, the Shore Infrastructure Logistics Center is to (1) assure that all  Coast Guard facilities meet their operational and functional requirements,  (2) take corrective action before advanced deterioration requires major  repairs, (3) ensure preventative maintenance is performed on a routine  schedule, and (4) prevent over-maintenance and under-maintenance. In  addition, this guidance states that all Coast Guard property must have a  documented, standardized system of maintenance for facilities by  designated personnel familiar with, and properly trained on, the  maintenance system in place to support its shore infrastructure."], "subsections": []}, {"section_title": "Coast Guard\u2019s Civil Engineering Program Has a Requirements-Based Budget to Determine Funding Needs", "paragraphs": ["In 2016, the Coast Guard\u2019s civil engineering program began using  requirements-based budget planning to determine shore infrastructure  funding needs. According to the Coast Guard, a requirements-based  budget is an estimate of the cost to operate and sustain the Coast  Guard\u2019s shore infrastructure portfolio of assets over the lifecycle of the  asset, from initial construction or capital investment through divestiture or  demolition. Coast Guard budgeting for shore infrastructure distinguishes  between procurement and acquisitions and recurring and non-recurring  maintenance, among other things. Procurement and acquisitions  encompasses major projects to alter, acquire, or build new  infrastructure\u2014for example, modifying the bay doors on a boat garage so  that larger boats can be accommodated. In contrast, there are two types  of maintenance for shore infrastructure. Routine recurring maintenance,  known as Organizational-Level Maintenance (OLM), includes tasks such  as clearing moss and debris from a rooftop drain or applying caulk to seal  a building. Non-recurring maintenance, known as Depot-Level  Maintenance (DLM), consists of major maintenance tasks that are beyond  the capability of an individual unit, such as replacing exterior doors and  windows.", "The Coast Guard uses three accounts for its shore infrastructure.  Amounts in the Procurement, Construction and Improvements (PC&I)  account are used for the acquisition, procurement, construction,  rebuilding, and improvement of shore facilities and are directed to specific  projects. Amounts in the shore OLM account are used for routine  recurring maintenance, and amounts in the DLM account are used for  major maintenance and repair of Coast Guard real property. See Table  2 for additional information about these accounts."], "subsections": []}, {"section_title": "Coast Guard Utilizes Planning Boards to Prioritize Shore Infrastructure Projects", "paragraphs": ["The Coast Guard makes decisions regarding the allotment of resources  for shore infrastructure through PC&I, regional DLM, and central DLM  planning boards, which meet twice annually to prioritize Coast Guard  shore infrastructure needs on the basis of expected appropriations and  other factors, such as damage caused by natural disasters. These boards  are responsible for evaluating potential shore infrastructure projects that  have been identified by managers who are responsible for evaluating,  ranking, and recommending projects to the boards within their specified  product line. For example, aviation asset line managers are responsible  for aviation-related shore infrastructure projects, such as runways,  landing areas, and hangars. Table 3 provides specific information on  these planning board responsibilities and members.", "Figure 1 shows how the planning boards are to prioritize shore  infrastructure projects. Additional details about the planning boards\u2019  processes, including the extent to which they are documented and align  with leading practices, are described later in this report."], "subsections": []}, {"section_title": "Coast Guard Is Required to Report Unfunded Shore Infrastructure Priorities", "paragraphs": ["The Coast Guard is statutorily required to provide a list of each unfunded  priority, including unfunded shore infrastructure priorities, to certain  committees of Congress to support the President\u2019s budget, and its 5- year Capital Investment Plan (CIP). The term \u2018unfunded priority\u2019 means  a program or mission requirement that (1) has not been selected for  funding in the applicable proposed budget, (2) is necessary to fulfill a  requirement associated with an operational need, and (3) the  Commandant would have recommended for inclusion in the applicable  proposed budget had additional resources been available, or had the  requirement emerged before the budget was submitted."], "subsections": []}]}, {"section_title": "Almost Half of the Coast Guard\u2019s Shore Infrastructure is Beyond Its Service Life, and Project Backlogs Will Cost at Least $2.6 Billion to Address", "paragraphs": [], "subsections": [{"section_title": "Coast Guard Reported that 45 Percent of Its Shore Infrastructure Is Beyond Its Service Life", "paragraphs": ["As of 2017, the Coast Guard\u2019s annual report on shore infrastructure  stated that 45 percent of Coast Guard assets have exceeded their service  lives. The Coast Guard also reported that its overall shore inventory has  a 65-year service life. For example, the Coast Guard\u2019s 2017 shore  infrastructure report identified at least 65 percent of aviation pavements,  60 percent of aviation fuel facilities, and at least 53 percent of piers\u2014all of  which the Coast Guard has identified as mission-critical assets\u2014as being  past their service lives. Coast Guard officials told us that the agency had  changed their service life standard from 50 years to service lives linked to  each asset\u2019s assigned category code, based on Department of Defense  (DOD) standards, before they reported service life calculations in their  2017 annual report on shore infrastructure. As a result of this change,  some shore infrastructure that has been in service 50 to 65 years, which  would previously have been identified as past its service life, will be  characterized by the Coast Guard as within its service life\u2014a better  condition than the Coast Guard would have reported under its 50-year  standard.", "Additionally, in 2017, the Coast Guard rated its overall shore  infrastructure condition as a C- based on criteria it derived from  standards developed by the American Society of Civil Engineers. Some  asset lines, such as aviation, whose assets are generally mission-critical,  are rated lower. For example, the Coast Guard rated its industrial asset  line as a D, in part because 8 of the 9 assets which comprise the Coast  Guard Yard\u2014the only Coast Guard facility that can perform drydock  maintenance on large Coast Guard ships\u2014are more than 5 years beyond  their service life. Table 4 shows additional detail about Coast Guard  asset lines, including the rate at which the Coast Guard reported these  assets were functioning past their service life, and the condition grades  assigned by the Coast Guard for fiscal year 2017.", "According to Coast Guard officials, the demand placed on the Coast  Guard\u2019s shore infrastructure in recent years has increased because of the  new ships and aircraft the Coast Guard has acquired. For example, a  senior Coast Guard official told us that the agency has recently needed to  upgrade some of its hangars with liquid oxygen storage facilities in order  to support the Coast Guard\u2019s new HC-27A aircraft. Another official told  us that because the Coast Guard\u2019s National Security Cutters\u2014which the  Coast Guard began operating in 2010\u2014are 40 feet longer than the High  Endurance Cutters they are replacing, the Coast Guard has had to either  build new piers or lengthen existing ones."], "subsections": []}, {"section_title": "Coast Guard\u2019s Data Indicate that Project Backlogs of Shore Infrastructure Will Cost At Least $2.6 Billion to Address, as of 2018", "paragraphs": ["Coast Guard data show that it will cost at least $2.6 billion to address its  two project backlogs\u2014(1) recapitalization and new construction, and (2)  deferred maintenance. Given the level at which the Coast Guard has  been requesting such funding, it will take many years for the agency to  address the backlogs. For example, the Coast Guard estimated that  based on its fiscal year 2017 appropriation it would take 395 years to  address its current $1.77 billion PC&I recapitalization and new  construction backlog, assuming that funding would continue at this level.  This time frame estimate does not include the Coast Guard\u2019s deferred  DLM maintenance backlog, which the Coast Guard estimated to be nearly  $900 million in fiscal year 2018. Table 5 provides information on the  Coast Guard\u2019s two shore infrastructure backlogs as of August 2018.", "However, the number of projects in the Coast Guard\u2019s backlogs and the  associated cost for addressing them is incomplete. In July 2018, Coast  Guard officials told us that the majority of the projects on the PC&I  backlog do not yet have associated cost estimates, and thus have not  been factored into the backlog cost estimates they have previously  reported to Congress. In November 2018, the Coast Guard told us there  were 205 projects on the PC&I backlog without cost estimates. Officials  explained that they have not prepared cost estimates for these projects  because they are in the preliminary stage of development and cost  estimates would not be accurate. Figure 2 shows the number of projects  with cost estimates and the estimated value of its PC&I backlog for fiscal  years 2012 through 2018. See appendix II for additional details.", "In addition to the estimated $2.6 billion backlogs of PC&I recapitalization  and new construction and DLM deferred maintenance projects, the Coast  Guard carries out routine and recurring maintenance and repairs  (maintenance) through OLM funding. However, Coast Guard officials  stated that funding for maintenance projects cannot be disaggregated  from overall OLM funding. The Coast Guard\u2019s 2017 shore infrastructure  annual report states that industry studies establish that the most effective  maintenance organizations spend about 17 percent of their staff labor  effort on corrective maintenance (i.e., repairs) and 83 percent on  preventative maintenance (e.g., activities such as changing buildings  systems\u2019 filters and oil, resealing pavement surfaces, or repainting  buildings). However, Coast Guard\u2019s analysis of OLM records indicated  that 66 percent of their facilities\u2019 staff labor effort was used for corrective  maintenance. This imbalance indicates that fewer funds are available for  preventative maintenance than industry studies suggest, which could  increase costs and affect service lives if preventative maintenance cannot  be performed to the extent necessary. The annual report further stated  that the significant investment needed for corrective maintenance reflects  the state of the Coast Guard\u2019s aging infrastructure and the strain it places  on maintenance personnel. Moreover, Coast Guard officials testified to  Congress in June 2017 that aging infrastructure adversely affects  operational efficiency. Further, in July 2018 Congressional testimony by  the Coast Guard Deputy Commandant for Mission Support stated that the  agency needs to rebuild shore infrastructure readiness with sound  investments in operations and maintenance, but budget realities result in  deferred maintenance, fewer spare parts, and infrastructure reliability and  security concerns."], "subsections": []}]}, {"section_title": "The Coast Guard\u2019s Process for Managing Its Shore Infrastructure Does Not Fully Meet 6 of 9 Leading Practices, Resulting in Management Challenges", "paragraphs": ["The Coast Guard\u2019s process to manage its shore infrastructure  recapitalization and deferred maintenance backlogs does not fully meet 6  of 9 leading practices we have previously identified for managing public  sector maintenance backlogs. Specifically, of the nine leading practices,  the Coast Guard met three, partially met three, and did not meet three, as  shown in Table 6. We, as well as others, have identified that deferring  maintenance and repair backlogs can lead to higher costs in the long  term and pose risks to safety and agencies\u2019 missions."], "subsections": [{"section_title": "Coast Guard Met 3 of 9 Leading Practices for Managing Public Maintenance Backlogs", "paragraphs": ["The Coast Guard met 3 of 9 leading practices for managing public  maintenance backlogs by identifying the types of risks posed by not  making timely investments in its shore facilities; identifying the types of  assets, such as buildings, that are mission-critical; and by establishing  guidance that identifies the primary methods to be used for delivering  maintenance and repair activities, among other things. We have  previously found that these three practices are an important step toward  increased transparency and more effective management of maintenance  backlogs."], "subsections": [{"section_title": "Identify the Types of Risks Posed By Lack of Timely Investment", "paragraphs": ["According to leading practices, agencies should identify the types of risks  posed by not investing in deteriorating facilities, systems, and  components because this is important for providing more transparency in  the decision-making process, and for communicating with staff at all  organizational levels. The Coast Guard has a process to identify,  document and report risks in its annual shore infrastructure reports for  fiscal years 2015 through 2017. These reports identified the types of  risks the Coast Guard faces in not investing in its facilities, including  financial risk, capability risk, and operational readiness risk, but did not  specifically measure these risks. The Coast Guard met this leading  practice because the leading practice requires agencies to identify risk in  general terms\u2014for example, in terms of increased lifecycle costs, or risk  to operations. The leading practice does not require the agency to  quantify or measure this risk by, for example, calculating the probability  that a building or structure will fail and impair the Coast Guard\u2019s  operations."], "subsections": []}, {"section_title": "Identify Types of Facilities or Specific Buildings that Are Mission-Critical and Mission- Supportive", "paragraphs": ["Leading practices state that agencies should identify buildings as  mission-critical and mission-supportive to help establish where  maintenance and repair investments should be targeted, to ensure that  funds are being used effectively. Since at least 2012, the Coast Guard  has documented its process to classify all of its real property under a tier  system and established minimum investment targets by tier as part of its  central DLM planning boards. These tiers\u2014mission-critical versus  mission-supportive\u2014were incorporated into the guidance that Coast  Guard decision-makers are to follow in their deliberations about project  funding and to help them determine how to target funding more  effectively. For example, the Coast Guard\u2019s PC&I planning board  guidance for fiscal years 2019 through 2023 prioritized expenditures on  shore infrastructure-supporting front line operations such as piers or  runways over shore infrastructure providing indirect support to front line  operations such as administrative buildings."], "subsections": []}, {"section_title": "Identify the Primary Methods to Be Used for Delivering Maintenance and Repair Activities", "paragraphs": ["Identification of the primary methods of delivery for maintenance and  repair activities is intended to help agencies determine the level of  resources that should be allocated to each type of maintenance activity  and to repair projects, according to leading practices. The Coast Guard\u2019s  Civil Engineering Manual and other guidance documents detail how the  maintenance and repair program is structured and how budget accounts  are to be utilized. For example, the manual defined how projects should  be classified and funded\u2014e.g., DLM or OLM\u2014which has helped to  determine the Coast Guard units responsible for carrying out these  maintenance or repair activities."], "subsections": []}]}, {"section_title": "Coast Guard Partially Met 3 of 9 Leading Practices for Managing Maintenance Backlogs", "paragraphs": ["The Coast Guard partially met 3 of 9 leading practices for managing  public sector maintenance backlogs, including conducting condition  assessments, establishing performance goals and measures, and  aligning property portfolios with mission needs and disposing of  unnecessary assets."], "subsections": [{"section_title": "Conduct Condition Assessments as a Basis for Establishing Appropriate Levels of Funding Required to Reduce, If Not Eliminate, Any Deferred Maintenance and Repair Backlog", "paragraphs": ["Conducting periodic condition assessments are an effective approach for  facility management as identifying condition deficiencies can inform  budgeting decisions, according to leading practices. Under the Coast  Guard\u2019s process, facility condition assessments are to be used to  evaluate the condition of infrastructure and identify deficiencies. These  assessments are to lead to the creation of the maintenance and  recapitalization projects that then compose the Coast Guard\u2019s deferred  maintenance backlogs. However, the Coast Guard partially met this  leading practice because it has not issued specific guidance on how  these assessments are to be conducted, nor do the six CEUs follow a  standardized or consistent process for conducting their assessments,  according to Coast Guard field and headquarters officials. Further,  Coast Guard officials at 5 of the 6 CEUs told us that some or all of the  officials who conduct facility condition assessments serve on a rotational  basis. As a result, the level of familiarity inspectors have with the facilities  they inspect may vary, which could lead to differences in the  assessments they produce. Moreover, while inspectors at 3 of the 6  CEUs are to use checklists when conducting their inspections, all of these  checklists are different, and the other three CEUs do not currently use  checklists. We found that these differences have contributed to  inconsistencies in the information collected. For example, assessment  results we analyzed used different scales for prioritizing maintenance  projects, such as letter grades or red/amber/green scales. One  assessment we reviewed listed both DLM and OLM projects, and  provided the unit commander with detailed instructions accompanied by  pictures explaining how to address these issues, whereas other  assessments only identified DLM projects or \u201citems of concern.\u201d One  senior official acknowledged that the Coast Guard did not have  standardized assessments, and that developing them had not been the  highest priority among numerous guidance documents the Coast Guard is  trying to complete. Without standardized assessments, the Coast Guard\u2019s  ability to systematically compare projects for prioritization is limited, and  this could directly impact its ability to establish appropriate levels of  funding for addressing the backlog, as identified in this leading practice.", "Coast Guard officials told us they intend to issue guidance to standardize  facility condition assessments, but they could not provide a date for  completing the guidance that would be issued. Moreover, according to the  Coast Guard, it began to modernize its shore infrastructure civil  engineering management in 2006, and it has been working to develop its  current asset management model, including updating guidance, since  2013. By executing plans for a standardized facility condition assessment  process and developing a plan with milestones and timeframes for  standardizing the process, the Coast Guard will be better positioned with  more consistent data to prioritize and plan its shore infrastructure  projects."], "subsections": []}, {"section_title": "Establish Performance Goals, Baselines for Performance Outcomes, and Performance Measures", "paragraphs": ["According to leading practices, establishing performance goals, baselines  for performance outcomes, and performance measures allows agencies  to track the effectiveness of maintenance and repair investments, provide  feedback on progress, and indicate where investment objectives,  outcomes, or procedures require adjustment. According to Coast Guard  guidance, the Chief of the Office of Civil Engineering and the Shore  Infrastructure Logistics Center are to identify and promulgate  performance metrics annually. The Coast Guard partially met this leading  practice by documenting and tracking facility condition information using a  letter grade system and reporting this in its annual reports from 2015  through 2017. However, the Coast Guard has not set performance goals  for improving an asset\u2019s grade, or established baselines to indicate where  investments require adjustment, because it continues to revise the  formula it uses to calculate the letter grades. Consequently, the letter  grades from fiscal years 2015 through 2017 are not comparable year to  year to measure performance.", "Definitions of Performance Management  Common Terms  Performance goal - a target level of  performance expressed as a tangible,  measurable objective against which actual  achievement can be compared, including a  goal expressed as a quantitative standard,  value, or rate. A performance goal is  comprised of a measure, a time frame, and a  target.   Performance measure - a tabulation,  calculation, recording of activity or effort, or  assessment of results compared to intended  purpose, that can be expressed quantitatively  or in another way that indicates a level or  degree of performance.   Performance target - quantifiable or  otherwise measurable characteristic typically  expressed as a number that tells how well or  at what level an agency or one of its  components aspires to perform.   Baselines for Performance Outcomes- a  quantifiable point at which an effort began and  from which a change in outcomes can be  measured and documented.", "In 2017, the Coast Guard reported a new performance measure for its  maintenance efforts, called Average Condition Index, which reflects the  average condition of the assets weighted by their replacement value. The  Coast Guard set targets for this measure, but it did not establish what  actions it would take to meet these targets. Limitations with the Coast  Guard\u2019s performance measures for its shore infrastructure are not a new  issue, as they were also identified in 2015 by an external study  commissioned by the Coast Guard. Specifically, the study reported that  the Coast Guard\u2019s condition index, which was more than 15 years old at  the time, was not defensible because it lacked trend data and analysis  capabilities. This study recommended that the Coast Guard develop key  performance measures, among other things, for managing its shore  infrastructure.", "Coast Guard officials told us that it has collected data and drafted some  performance measures, but they have not yet implemented the  recommendations from the 2015 study or set a time frame for doing so  because they had not identified it as a priority. Establishing goals,  measures, and baselines would better position the Coast Guard to assess  their effectiveness and take appropriate actions to improve the condition  of its shore infrastructure."], "subsections": []}, {"section_title": "Align Real Property Portfolios with Mission Needs and Dispose of Unneeded Assets", "paragraphs": ["Leading practices state that agencies should efficiently employ available  resources, limit construction of new facilities, adapt existing buildings to  new uses, and transfer ownership of unneeded buildings to other public  or private organizations to align real property with mission needs. In  addition, facilities that are functionally obsolete, not needed to support an  agency\u2019s mission, not historically significant, or not suitable for transfer or  adaptive reuse should be demolished whenever it is cost effective to do  so, under this leading practice. We have previously reported that the eventual need to address deferred maintenance and repair could  significantly affect an agency\u2019s future budget resources. The Coast  Guard has made limited progress and partially met this leading practice  by disposing of some unneeded assets, but it has not consistently or  extensively aligned its property and mission needs. For example, in 2017,  the Coast Guard\u2019s Civil Engineering Units and facility engineers reviewed  all projects on its $1.77 billion PC&I project backlog and removed 132  projects from it because, according to officials, they were either no longer  valid as a result of mission changes, a non-PC&I alternative/solution was  found to be more beneficial, or the need was met through another  project. This validation effort was a positive step toward aligning  property and mission needs, but it raises questions about whether and to  what extent the PC&I backlog is routinely and consistently managed to  ensure that projects reflect mission needs.", "The Coast Guard made some progress aligning property and mission  needs through the sale of some assets. For example, in 2017, it sold 189  of its 2,961 housing assets through use of an initiative to divest itself of  some housing assets\u2014an effort which garnered $26.8 million in total  sales proceeds over the life of the program. However, the Coast  Guard\u2019s ability to dispose of unneeded assets has been limited in some  instances. For example, in 2013, the Coast Guard identified 18  multimission stations with duplicative coverage that could be permanently  closed, using a process based on criteria that reflected mission needs. In  October 2017, we reported that closing these stations could potentially  generate $290 million in cost savings over 20 years; however, as of  September 2018, the Coast Guard had taken no action to close these  stations or establish time frames for their closure, although Coast Guard  agreed with our recommendation that they do so. Moreover, our  analysis of Coast Guard planning documents found that 5 of the 18  multimission stations recommended for closure in 2013 have projects on  the Coast Guard\u2019s current PC&I backlog. For example, Station Shark  River, in New Jersey, was recommended for recapitalization in fiscal year  2017, despite Coast Guard recommendations to close the station in 1988,  1996, 2007, and 2013. Notably, the Coast Guard has made multiple  attempts in previous years to close stations that it deemed suitable for  closure but was unable to close them due to congressional intervention,  and subsequent legislation prohibiting closures. Given the Coast  Guard\u2019s competing acquisition, operational, and maintenance needs, and  PC&I backlog that will cost at least $1.77 billion to address, difficult trade- off decisions to align real property needs by disposing of unneeded  assets may help to mitigate some resource challenges."], "subsections": []}]}, {"section_title": "Coast Guard Did Not Meet 3 of 9 Leading Practices for Managing Shore Infrastructure Backlogs", "paragraphs": ["The Coast Guard did not meet 3 of 9 leading practices for managing  shore infrastructure backlogs, including establishing clear maintenance  and repair investment objectives, employing models for predicting the  outcomes of investments and analyzing trade-offs, and structuring  budgets and related information to address maintenance backlogs."], "subsections": [{"section_title": "Establish Clear Maintenance and Repair Investment Objectives and Set Priorities among Outcomes to Be Achieved", "paragraphs": ["Agencies with maintenance and repair responsibilities should determine  what outcomes are most important to achieve and set priorities among  them, according to leading practices. Coast Guard provided guidance for  central DLM planning boards, which calls for stakeholders to identify  which projects will be reviewed by the planning boards, for board  members to consider project trade-offs and to make recommendations on  which projects to fund, and for stakeholders to then review the results.  However, Coast Guard headquarters did not provide documented  guidance to the six CEUs responsible for administering regional DLM  planning boards\u2014a process intended to establish clear objectives or  priorities among outcomes to be achieved for approximately 70 percent of  the Coast Guard\u2019s DLM funds. Coast Guard headquarters officials told  us that they instead rely on each CEU to hold their respective regional  planning boards in accordance with locally established practices.  However, only 1 of the 6 CEUs has developed and implemented written  guidance for its DLM planning board process, and it is not clear how  these boards set objectives or priorities among outcomes to be  achieved.", "The Coast Guard provided some documentation detailing how regional  DLM planning board inputs and subsequent decisions were linked to  decision-making criteria for one regional DLM planning board meeting  hosted by one of its nine Districts. Table 7, among other things, shows  the limited extent of documentation to substantiate Coast Guard  decisions. However, the Coast Guard did not meet this leading practice  because it could not demonstrate, with documentation, how decisions  were linked to criteria for its PC&I planning board meetings, central DLM  planning board meetings, or any other regional DLM planning board  meeting. Without the full range of information on which planning board  decisions were made, neither we, nor the Coast Guard, could  substantiate the extent to which the Coast Guard followed its processes  or evaluate whether its processes for managing shore infrastructure  projects were sound.", "OMB guidance calls for agencies to use information to support decision- making, such as whether an asset is continuing to meet business needs  and contribute to goals, and whether there are smarter or more cost  effective ways to deliver the function. This guidance is comparable to  the leading practice discussed above, which calls for agencies to  establish clear maintenance and repair investment objectives and set  priorities among outcomes to be achieved. Additionally, according to  OMB, agencies are to have a plan for periodic, results-oriented  evaluations of program effectiveness, and agencies should discuss the  results of these evaluations when proposing reauthorizations.  Establishing guidance for planning boards to document project  prioritization decision-making, as well as the impact of trade-off decisions,  would allow agency decision makers, and Congress, to better understand  Coast Guard priorities and how shore infrastructure project priorities  might potentially affect other priorities. The Coast Guard was unable to  provide documentation showing how it prioritized projects for a number of  reasons, including that they didn\u2019t have written guidance, documentation  to verify the use of standardized meeting inputs such as presentations,  and meeting minutes. Furthermore, officials could not explain why certain  documentation was not maintained to demonstrate how the Coast Guard  had made and prioritized funding decisions. Such documentation may  allow the Coast Guard to show, for example, why repairing a station they  previously wanted to close is a higher priority than fixing a station they  appear to need to perform maintenance on certain assets (see fig. 3).", "To ensure that investment decisions are aligned with agency missions  and goals, agencies should employ models to predict the future condition  and performance of its facilities as a portfolio, according to leading  practices. Performance-prediction models predict the deterioration of  building components over time and are important because certain facility  components are particularly prone to deterioration or failure, thus  requiring more frequent maintenance or repairs. A 2015 review of the  Coast Guard\u2019s asset management framework identified the benefit of  analyzing tradeoffs between reactive and preventative maintenance and  described how preventative maintenance efforts could translate into cost  savings.", "Coast Guard officials provided one example of its efforts to model  outcomes, but it did not meet this leading practice because it has not  properly used the results of this model to optimize competing investments  for that asset line or any other asset line or provided documentary  evidence verifying that it properly applied it. In December 2017, a Coast  Guard Aviation Pavement Study employed a model that found that the  Coast Guard could more efficiently prioritize investment in aviation  pavement. It also identified strategies to achieve a long-term sustainable  pavement condition. A proposed fiscal year 2018 to 2020 Coast Guard  aviation pavement maintenance and recapitalization plan proposed using  the study results and recommended actions that it said could save the  Coast Guard $13.8 million by accelerating investment in aviation  pavement sooner rather than deferring such maintenance and  recapitalization. According to Coast Guard officials, the analytical  approach outlined in its 2017 study could be applied to all 13 of its shore  infrastructure asset lines. However, the Coast Guard has not properly  implemented a maintenance and recapitalization strategy based on the  results of its aviation pavement plan, nor has it applied the analytical  approach from this plan to other asset lines. Coast Guard officials told us  they have not fully acted on the aviation pavement plan nor developed  models for other asset lines. Specifically, a Coast Guard official described  actions the agency is taking as piecemeal; 1 of 5 PC&I projects identified  by their plan has been prioritized and funded. According to Coast Guard  officials, the other pavement projects continue to be a priority for the  asset line, but funding decisions have been deferred due to resource  constraints and other competing priorities. As a result of not properly  implementing its plan, it is unclear if the Coast Guard will achieve the cost  savings it projected. By not employing similar models across its asset  lines for predicting the outcome of investments, analyzing trade-offs, and  optimizing decisions among competing investments, the Coast Guard is  missing opportunities to potentially identify and achieve cost savings  across other asset lines."], "subsections": []}, {"section_title": "Structure Budgets to Identify Funding Allotted (1) for Routine Maintenance and Repair and (2) to Address Any Backlog of Deferred Maintenance and Repair Deficiencies Because Insufficient Levels of Such Funding Can Cause Agencies\u2019 Backlogs to Increase", "paragraphs": ["According to leading practices, agencies should structure maintenance  and repair budgets to differentiate between funding allotted for routine  maintenance and repairs, and funding allotted to addressing maintenance  and repair backlogs, to help ensure that underfunding does not affect the  health and safety or reduce the productivity of employees, among other  things. We found that Coast Guard budget requests did not provide  Congress with accurate information about its funding needs. Specifically,  we found that the Coast Guard did not meet this leading practice as its  budget requests (1) have not clearly identified funding allotted for routine  shore infrastructure maintenance needs, and (2) have not generally  addressed deferred maintenance and repair deficiencies, resulting in  increases to its backlogs. In addition, the Coast Guard has not included  information in its Unfunded Priorities Lists and other related reports that  clearly articulated trade-offs, or aligned with its requirements-based  budget targets for shore infrastructure. Coast Guard officials were not  able tell us why they have not requested maintenance and repair funding  to adequately address their shore infrastructure backlog of deferred  maintenance and repair deficiencies.", "First, we found that Coast Guard budget requests did not clearly identify  funding allotted for routine shore infrastructure maintenance needs to  address backlogs. Specifically, we found that budget requests related to  shore infrastructure for fiscal years 2012 through 2019 did not provide  Congress with required and complete information, as previously noted,  necessary to inform decision-makers of the risks posed by untimely  investments in maintenance and repair backlogs. While major  maintenance and repair funding can be tracked within the Coast Guard\u2019s  budget, funding for routine recurring maintenance for shore infrastructure  is embedded in a budget account that is used for both maintenance and  operational expenses. As a result, the Coast Guard could not  disaggregate expenditures from this account or determine how much  funding goes towards routine maintenance.", "Second, we found that Coast Guard budget requests did not generally  identify funding to address any backlogs of deferred maintenance or  recapitalization, except for one fiscal year\u20142012\u2014when the Coast Guard  requested $93 million to recapitalize deteriorated/obsolete facilities and  address the highest priority Shore Facilities Requirements List backlog  items. The 2012 budget request also noted that the health and  maintenance of its shore facilities are foundational for the safe and  effective execution of Coast Guard missions. However, the Coast Guard  reported on some challenges to completing maintenance projects. For  example, Coast Guard officials we interviewed stated that the annual  Congressional Budget cycle has contributed to infrastructure  management challenges because they are prohibited from signing  contracts for maintenance projects during continuing resolutions. For  example, since the fiscal year 2018 budget was not passed until March  2018, they had to rush during the summer, their busiest time of year, to  establish contracts and work orders to ensure projects were funded  before the end of the fiscal year on September 30th.", "Third, we found that the Coast Guard\u2019s annual Unfunded Priorities Lists  and other reports, including their 5-Year CIP, did not clearly describe  trade-offs. In July 2018, we reported that by continuing to manage its  operational asset acquisitions through its annual budget process and 5- year CIP, the Coast Guard creates constant churn as program baselines  must continually realign with budget realities, instead of budgets being  formulated to support program baselines. Coast Guard officials said that  prioritization and trade-off decisions are made as part of the annual  budget cycle, and that the shore infrastructure projects on its Unfunded  Priorities List reflect the highest priorities for the department within the  given top level funding. However, the annual Unfunded Priorities List  does not clearly articulate prioritization decisions, including information  about trade-offs among competing project alternatives, as well as the  impacts on missions conducted from shore facilities in disrepair that had  not been prioritized in previous years. According to Coast Guard officials,  and as we previously reported, such information is not included in the 5- Year CIP or Unfunded Priorities List because it is not statutorily  required. These information shortcomings are consistent with previous  findings and recommendations that the DHS Office of Inspector General  has made.", "Finally, we found that Coast Guard budget requests have not been  aligned with its requirements-based budget targets for shore  infrastructure. For example, we found that Coast Guard budget requests  have not identified appropriations sufficient to meet its DLM maintenance  and repair targets, which call for annual expenditures equal to two  percent of plant replacement value. According to the Coast Guard,  meeting its target for DLM would require allocating about $260 to $392  million annually for these repairs. Coast Guard officials told us that they have made difficult decisions to postpone necessary facility maintenance  and construction projects in order to address other competing priorities  related to mission execution, such as maintaining, operating, and  recapitalizing its aging surface and air fleets. Between fiscal years 2012  and 2017, the Coast Guard reported that it expended an average of $208  million per year on DLM, and officials stated that the Coast Guard never  met its target during this time period. Similarly, Coast Guard budget  requests have not been in alignment with its PC&I targets for  recapitalization. For example, Coast Guard recapitalization targets show  a far greater need for funding than the allotments from the appropriations  it requested between fiscal years 2012 and 2019. Specifically, Coast  Guard targets for recapitalization of shore assets indicate that $290 to  $392 million in PC&I funding is needed annually. However, the Coast  Guard budget requests for fiscal years 2012 through 2018 have ranged  between about $5 million and about $99 million annually, as shown in  Table 8.", "Notwithstanding the mismatch between Coast Guard budget requests  and its requirements-based budget targets, allotments for Coast Guard  shore PC&I from its appropriations in fiscal years 2016 through 2018  exceeded the Coast Guard\u2019s requests. For example, in fiscal year 2016,  the Coast Guard\u2019s allotment of $130 million was almost three times the  nearly $47 million requested. In 2018, the almost $45 million allotted was  more than four times the $10 million requested. Explanatory materials on  the annual appropriations act for fiscal year 2018 indicated that the  appropriated funding above requested amounts was to be used for  modernization and recapitalization of facilities, and facility improvements,  among other things. Without accurate and transparent information about  the Coast Guard\u2019s budgetary requirements, Congress will lack critical  information that could help to prioritize funding to address the Coast  Guard\u2019s shore infrastructure backlogs."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The Coast Guard\u2019s inventory of shore infrastructure assets is vast, aging,  and vulnerable to damage from extreme weather. Many of these assets  are also critical to the Coast Guard\u2019s operational mission performance.  The Coast Guard has taken some steps to manage this infrastructure by  implementing 3 of 9 leading practices for managing public sector  maintenance backlogs\u2014including identifying assets that are mission- critical, identifying risks posed by untimely investments, and identifying  the primary methods for delivering maintenance and repair activities.  However, significant work remains if the Coast Guard is going to make  headway on reducing its backlog of at least $2.6 billion. Fully  implementing the three leading practices that the Coast Guard now  partially meets could help ensure that it benefits from establishing  timeframes for and enhancing its guidance, establishing its performance  metrics, baselines, and targets, and shedding unneeded assets.  Additionally, fully implementing the leading practices that it does not  meet\u2014including implementing new approaches for documenting its  project prioritization decisions, developing models that could help identify  cost savings, and providing Congress with transparent and requirements- based budget requests that clearly identify alternatives and trade-offs\u2014 could help the Coast Guard more efficiently manage existing resources  and better position the Coast Guard and Congress to address the shore  infrastructure challenges."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are recommending the following six actions to the Coast Guard:", "The Commandant of the Coast Guard should direct the program  managers to develop a plan with milestones and time frames for  standardizing Coast Guard\u2019s facility condition assessments.  (Recommendation 1)", "The Commandant of the Coast Guard should direct program  managers to establish shore infrastructure performance goals,  measures, and baselines to track the effectiveness of maintenance  and repair investments and provide feedback on progress made.  (Recommendation 2)", "The Commandant of the Coast Guard should work with Congress to  develop and implement a process to routinely align Coast Guard\u2019s  shore infrastructure portfolio with mission needs, including by  disposing of all unneeded assets. (Recommendation 3)", "The Commandant of the Coast Guard should establish guidance for  planning boards to document inputs, deliberations, and project  prioritization decisions for infrastructure maintenance projects.  (Recommendation 4)", "The Commandant of the Coast Guard should employ models for its  asset lines for predicting the outcome of investments, analyzing trade- offs, and optimizing decisions among competing investments.  (Recommendation 5)", "The Commandant of the Coast Guard should include supporting  details about competing project alternatives and report trade-offs in  Congressional budget requests and related reports.  (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. In its  comments, reproduced in appendix III, DHS concurred with our  recommendations. DHS, through the Coast Guard, also provided  technical comments, which we incorporated as appropriate.", "DHS concurred with our first recommendation that the Commandant of  the Coast Guard direct program managers to develop a plan with  milestones and time frames for standardizing the Coast Guard\u2019s facility  condition assessments. DHS stated that the Coast Guard plans to  complete a standardized facility condition assessment by December  2019. However, to fully implement the recommendation, the Coast Guard  needs to ensure that it standardizes the process for conducting facility  assessments\u2014action that goes beyond completing a singular  standardized facility assessment.", "DHS concurred with our second recommendation that the Commandant  of the Coast Guard direct program managers to establish shore  infrastructure performance goals, measures, and baselines to track the  effectiveness of maintenance and repair investments and provide  feedback on progress made. DHS stated that the Coast Guard plans to  develop initial shore infrastructure measures with associated goals and  baselines during its annual strategic planning process and expects to  complete this process in March 2020.", "DHS concurred with our third recommendation that the Commandant of  the Coast Guard work with Congress to develop and implement a process  to routinely align the Coast Guard\u2019s shore infrastructure portfolio with  mission needs, including by disposing of all unneeded assets. DHS stated  that the Coast Guard plans to establish, by June 2020, a process to  assess current and projected operational and mission support needs to  identify and recommend disposal of unneeded land, buildings, and  structures. The Coast Guard reported that in the interim it will continue to  communicate with Congress about unneeded assets through its required  annual Conveyance of Coast Guard Real Property Report. The Coast  Guard reported that in the interim it will continue to communicate with  Congress about unneeded assets through its required annual  Conveyance of Coast Guard Real Property Report.", "DHS concurred with our fourth recommendation that the Commandant of  the Coast Guard establish guidance for planning boards to document  inputs, deliberations, and project prioritization decisions for infrastructure  maintenance projects. DHS stated that the Coast Guard plans to review  existing guidance and issue updates as necessary and that promulgation  of this guidance for its next planning boards will be completed by  December 2019. To fully implement this recommendation, the Coast  Guard needs to ensure that its guidance requires that inputs,  deliberations, and project prioritization decisions for these boards are all  fully documented.", "DHS concurred with our fifth recommendation that the Commandant of  the Coast Guard employ models for its asset lines for predicting the  outcome of investments, analyzing trade-offs, and optimizing decisions  among competing investments. DHS stated that the Coast Guard plans to  assess the use of modeling tools used by the Department of Defense as  well as other alternatives to enhance its real property asset management  capability. DHS stated that the Coast Guard expects to complete its initial  identification of alternatives in December 2019 and complete its  examination of alternatives in December 2020.", "DHS concurred with our sixth recommendation that the Commandant of  the Coast Guard include supporting details about competing project  alternatives and report trade-offs in Congressional budget requests and  related reports. DHS stated that the Coast Guard plans to submit future  budget proposals based on OMB guidance and will include additional  information in its Congressionally-mandated future Unfunded Priorities  Lists. To fully implement this recommendation, the Coast Guard needs to  ensure it includes supporting details about competing project alternatives  and report on trade-offs, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Homeland Security, and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or AndersonN@gao.gov. GAO staff who made key  contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report are to evaluate (1) what is known about the  condition and costs of managing the Coast Guard\u2019s shore infrastructure,  and (2) the extent to which the Coast Guard\u2019s process for managing its  shore infrastructure meets leading practices for managing public  maintenance backlogs.", "To identify what is known about the condition and costs of managing the  Coast Guard\u2019s shore infrastructure, we reviewed three Coast Guard  annual reports on shore infrastructure, issued for 2015 through 2017.  We also reviewed Coast Guard documentation and data on its shore  infrastructure inventory to describe the condition and costs of managing  these assets. To measure the size of the Coast Guard\u2019s total backlog, we  examined the Coast Guard\u2019s shore Acquisition, Construction, &  Improvements (AC&I)  backlog of projects the Coast Guard has  identified as necessary to fulfill its missions (i.e., its Shore Facilities  Requirements List) from fiscal years 2012 through 2018, as well as its  depot-level maintenance backlog as of March 2018. We also reviewed  planning and budget documents to determine how the backlog has  changed over time. To identify the appropriation targets the Coast Guard  identified as needed to address these backlogs, we reviewed guidance  and budget data for the three appropriations related to shore  infrastructure, reviewed planning and budget documents such as Coast  Guard\u2019s annual Unfunded Priorities List\u2014which are lists of projects the  Coast Guard would undertake if funding were available\u2014and the Coast  Guard\u2019s annual Congressional Budget Justifications for fiscal years 2012  through 2019, to demonstrate how the backlog has changed over time  relative to budgeted funds. We also interviewed Coast Guard officials at  headquarters and in the field to obtain their perspectives on the  appropriation targets and budget formulation process.", "To obtain additional information about the condition of the Coast Guard\u2019s  infrastructure in different parts of the country, we interviewed officials from  each of the Coast Guard\u2019s six geographically-organized Civil Engineering  Units (CEUs), which are responsible for implementing both District and  Headquarters directives. We also interviewed officials from the Coast  Guard\u2019s two geographically-defined Area Commands\u2014Pacific Area  (PACAREA) and Atlantic Area (LANTAREA), who vote on the  Procurement, Construction and Improvements (PC&I) and central DLM  planning boards. To review the Coast Guard\u2019s longer-term planning  process for its shore infrastructure, we reviewed the Coast Guard\u2019s 5-year  Capital Investment Plan and interviewed agency officials.", "To assess the reliability of the Coast Guard\u2019s data discussed in this  report, we interviewed knowledgeable agency officials, reviewed  documentation, and electronically tested the data for obvious errors and  anomalies. Specifically, we interviewed Coast Guard officials and  discussed the mechanisms they use to assess the quality of their data  and the extent to which Coast Guard employs quality control  mechanisms, such as automated edit checks. Additionally, in August  2018, the Coast Guard informed us that its data on its shore infrastructure  may not be complete if field inspectors did not identify problems at the  facilities they inspected. Coast Guard officials also told us in July 2018  that not all projects on the Coast Guard\u2019s PC&I backlog have cost  estimates. As a result, the amount of funding needed to address the  Coast Guard\u2019s backlog of shore infrastructure projects could be  understated because the Coast Guard has not identified all deficiencies  that exist at its facilities nor estimated the cost to fix all of the deficiencies  it knows about. Despite these limitations, we determined that the Coast  Guard\u2019s data are sufficiently reliable for the purposes of reporting on the  Coast Guard\u2019s overall portfolio of shore infrastructure assets and the  minimum amount of money the Coast Guard identified as needed to  complete deferred repair and PC&I projects.", "To identify leading practices for managing backlogs of deferred  maintenance projects, we reviewed our prior work and the literature on  deferred maintenance and repair as it pertains to federal real property  portfolios. In our prior work, we identified nine leading practices based on  studies conducted by the National Research Council (NRC) of the  National Academy of Sciences between 1998 and 2012. These  studies were (1) Stewardship of Federal Facilities: A Proactive Strategy  for Managing the Nation\u2019s Public Assets (1998); (2) Investments in  Federal Facilities: Asset Management Strategies for the 21st Century  (2004); (3) Predicting Outcomes from Investments in Maintenance and  Repair for Federal Facilities (2012). As we previously reported, the nine  leading practices we employed were the ones we identified as being the  most relevant and appropriate to federal agencies managing their  deferred maintenance and repair backlogs, however these practices do  not represent all actions that federal agencies can employ to improve  management of their real property to include their real property  maintenance and repair backlogs.", "To evaluate the extent to which the Coast Guard\u2019s process for managing  its shore infrastructure met leading practices for managing public  maintenance backlogs, we analyzed Coast Guard plans, policies,  procedures, and related laws for managing, maintaining and repairing  shore infrastructure. We identified and analyzed Coast Guard guidance  on its decision-making process for determining maintenance and repair  decisions, and assessed Coast Guard practices against our main criteria,  the leading practice discussed above. We also compared Coast Guard  practices with the Office of Management and Budget\u2019s (OMB) program  evaluation and capital programming guidance.", "We used the following scale to evaluate the Coast Guard\u2019s management  of its shore infrastructure deferred maintenance and repair:", "Met\u2014The Coast Guard properly considered the leading practice and  demonstrated with documentary evidence that it had fully applied it.", "Partially Met\u2014The Coast Guard properly considered and  demonstrated with some documentary evidence that it had applied the  leading practice to some extent.", "Not Met\u2014The Coast Guard did not properly consider or apply the  leading practice and had no documentary evidence verifying that it  had applied it.", "To further our understanding of the Coast Guard\u2019s process for prioritizing  PC&I and deferred maintenance projects and the extent to which Coast  Guard actions aligned with the aforementioned leading practices, we  interviewed knowledgeable Coast Guard officials with a role in making or  implementing decisions related to shore infrastructure to obtain their  perspectives. Specifically, we interviewed officials from Coast Guard units  to (1) obtain information about local conditions and maintenance  practices, and/or to (2) obtain information on the experiences these  officials had pertaining to the PC&I planning board, central DLM planning  board, and/or regional DLM planning board processes. We interviewed  officials from all six of the Coast Guard\u2019s regional Civil Engineering Units  (CEU) which are responsible for assessing the condition of Coast Guard\u2019s  shore infrastructure to obtain their perspectives on this topic and to  determine the extent to which data from one CEU is comparable to data  from another. We also interviewed officials from the Atlantic and Pacific  Areas in order to obtain a high-level regional perspective on  requirements, conditions, and planning efforts. To evaluate how Coast  Guard leadership assesses the condition of its infrastructure and makes  trade-offs between competing projects, we also interviewed officials from  Coast Guard headquarters units which oversee Coast Guard\u2019s shore  infrastructure. These interviews included officials from the Office of Civil  Engineering, the Shore Infrastructure Logistics Center, the Facilities  Operations & Support Division, and the Office of the Assistant  Commandant for Capability.", "To identify examples of (1) what is known about the condition and costs  of managing the Coast Guard\u2019s shore infrastructure, and (2) obtain  information about the Coast Guard\u2019s process for managing its shore  infrastructure, we conducted a site visit to Coast Guard Base Alameda in  Alameda, CA. The selection of Base Alameda for our site visit was based  on the concentration there of regional Coast Guard leadership and Coast  Guard facilities. Our findings from our Base Alameda site visit are not  generalizable to other Coast Guard facilities. Additionally, because the  Coast Guard personnel we interviewed were not necessarily performing  the same function or role, or even stationed in Alameda, for all years  covered by our review (2012-2018), our findings from these interviews are  not necessarily generalizable across time. Taken as a whole, however,  our site visit provided us with insights into the condition of the Coast  Guard\u2019s shore infrastructure and into the processes the Coast Guard  uses to maintain, repair, and replace these assets.", "We conducted this performance audit from November 2017 to February  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 that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Characteristics of Coast Guard\u2019s Shore Infrastructure Procurement, Construction, and Improvements Backlog", "paragraphs": ["This appendix provides summary statistics for the Coast Guard\u2019s  Procurement, Construction, and Improvements (PC&I) backlog as of  June, for 2012 through 2018. Table 9 provides details of individual shore  infrastructure projects on the PC&I backlog, table 10 provides details of  aids to navigation and projects that were grouped together by the Coast  Guard for planning purposes, and table 11 sums values in tables 9 and  10."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Nathan J. Anderson, (202) 512-3841 or andersonn@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact above, Dawn Hoff (Assistant Director), Andrew  Curry (Analyst-in-Charge), Michael Armes, John Bauckman, Chuck  Bausell, Rick Cederholm, Billy Commons, John Crawford, Michele Fejfar,  Peter Haderlein, Eric Hauswirth, Landis Lindsey, Michael Pinkham, Maria  Mercado, Jan Montgomery, Forrest Rule, Christine San, and Adam Vogt  made key contributions to this report."], "subsections": []}]}], "fastfact": ["There is a vast, aging Coast Guard infrastructure along the shore that includes piers, docks, and other facilities. The Coast Guard estimated that its backlog of construction and improvement projects would take $1.7 billion and 395 years to address. That doesn't include the Coast Guard's maintenance backlog, which would bring the total cost to at least $2.6 billion.", "While the Coast Guard has a culture of \u201cmaking do\u201d with the resources it has, these backlogs pose financial, safety, and mission performance risks.", "We made 6 recommendations to help the Coast Guard better manage its resources to address shore infrastructure challenges."]}
{"id": "GAO-18-605", "url": "https://www.gao.gov/products/GAO-18-605", "title": "Military Readiness: Air Force Plans to Replace Aging Personnel Recovery Helicopter Fleet", "published_date": "2018-08-16T00:00:00", "released_date": "2018-08-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since the 1980s, the Air Force has used its HH-60G Pave Hawk helicopters to conduct life-saving missions, including for personnel recovery and medical evacuations. The aging HH-60G inventory has shrunk over the years as a result of mishaps. As the inventory was declining, the Air Force began efforts to replace its fleet with the new Combat Rescue Helicopter.", "The National Defense Authorization Act for fiscal year 2018 includes a provision for GAO to review HH-60G replacement programs. This report examines: (1) the maintenance condition and service life of the Air Force's HH-60G Pave Hawk helicopters; (2) the Air Force's schedule for fielding the new Combat Rescue Helicopter in the active and reserve components; and (3) any training challenges the Air Force has identified related to this schedule.", "GAO analyzed flight hour and availability data and contracts and fielding schedule for new and refurbished personnel recovery helicopters for the Air Force. GAO also analyzed documentation, and interviewed officials from the Air Force Headquarters, the Air Force major commands, including the Air National Guard and Air Force Reserve, and training and test and evaluation units to discuss challenges the Air Force expects to face as it fields its new helicopters."]}, {"section_title": "What GAO Found", "paragraphs": ["The material condition of the Air Forces' aging HH-60G fleet has declined and maintenance challenges have increased, in part due to extensions beyond the designed service life of the helicopters. About 68 percent of the 96-helicopter fleet were mission-capable as of fiscal year 2017, below the Air Force desired mission-capable rate of 75 percent. The fleet is experiencing maintenance challenges. For example, the helicopters undergoing depot-level maintenance spent an average of 332 days undergoing such maintenance in fiscal year 2017 compared with 233 days in fiscal year 2007, more than a 40-percent increase. Air Force officials attribute these challenges to the helicopters exceeding their initially planned service life. Currently, available helicopters across the fleet average about 7,100 flight hours about 18 percent more than their initial expected service life of 6,000 hours.", "According to Air Force officials, the schedule for fielding the new Combat Rescue Helicopters generally prioritizes the replacement of helicopters with the highest number of flight hours; as a result, the active component is scheduled to begin receiving its new helicopters in fiscal year 2020, 6 years before the reserve component. In May 2018, the Air Force's active component HH-60Gs averaged about 2,000 more flight hours per helicopter than the reserve component. Under the fielding schedule, the Air National Guard squadrons are to receive new Combat Rescue Helicopters beginning in 2027, at the end of the fielding period. According to officials, in the meantime, to address aging helicopters in the Air National Guard, the Guard is scheduled to receive refurbished Army helicopters beginning in 2019. According to Air Force officials, these helicopters will have 3,000 or fewer flight hours and will be upgraded to the Air Force's HH-60G configuration. The Air Force officials explained that these helicopters are expected to increase reliability rates, reduce the need for unscheduled maintenance, and bridge the gap until the Air National Guard receives the new Combat Rescue Helicopters.", "Due to the Air Force fielding schedule for the Combat Rescue Helicopters, the Air Force may face a challenge in supporting formal training for reserve component squadrons in fiscal year 2025 through 2028. The training squadrons at Kirtland and Nellis Air Force Bases conduct all formal HH-60G training for both the active and reserve components. By 2025, these training squadrons are scheduled to be completely transitioned to the new Combat Rescue Helicopters. Given the fielding schedule, the training squadrons will not have any legacy HH-60Gs for formal training for the reserve component. However, some squadrons in the reserve component are scheduled to continue flying HH-60Gs until 2028 and will still need formal training. Air Force reserve component officials did not concur with the new Combat Rescue Helicopter fielding schedule. However, Air Force officials said that they plan to maintain their fielding schedule because changing it would require renegotiation of the contract, likely increase costs, and possibly delay delivery of the new helicopters. Air Force officials acknowledged this potential training issue and told GAO that the Air Force was considering options to address it; including retaining some legacy HH-60Gs at a training squadron to provide training during any gap period."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations in this report. GAO requested comments from the DOD, but none were provided."]}], "report": [{"section_title": "Letter", "paragraphs": ["When U.S. pilots are shot down or U.S. servicemembers are stranded  behind enemy lines, the Air Force\u2019s HH-60G Pave Hawk helicopter is a  combatant commander\u2019s platform of choice to rescue them. The unique  and advanced capabilities of this helicopter and its highly trained crews  make it the Department of Defense\u2019s (DOD) premier personnel recovery  helicopter. HH-60G units deploy frequently to support DOD personnel  recovery missions and other operations around the world, and in recent  years DOD has relied on these units to support medical evacuations in  Iraq and Afghanistan. Although the other military services fly similar  helicopters\u2014such as the Army\u2019s UH-60L\u2014the HH-60G\u2019s extensive  communication suite and ability to operate at high altitudes and conduct  in-flight refueling are some of the capabilities that make the HH-60G  uniquely suited for recovering personnel who may be isolated in enemy  territory. The HH-60G aircrew consists of two pilots and two special  mission aviators\u2014personnel trained to operate both as flight engineers  and as gunners for the HH-60G\u2019s two 50-caliber machine guns.", "First fielded in the 1980s, the HH-60G Pave Hawk helicopter is aging and  in need of replacement. The HH-60G was initially designed to have a  service life of approximately 6,000 flight hours, according to officials, and  the Air Force procured 112 helicopters. As the helicopters aged and the  inventory shrunk as a result of mishaps, the Air Force planned to procure  a replacement helicopter\u2014the Combat Search and Rescue Replacement  Vehicle. However, this replacement program was canceled in 2009. Since  then the inventory has continued to shrink and currently the Air Force has  96 HH-60G Pave Hawk helicopters, 16 fewer than required. The Air Force  is now planning to rebuild its inventory in two ways. First, the Air Force  procured 21 Army UH-60Ls, and those helicopters are being converted  into the HH-60G Pave Hawk configuration under the Air Force\u2019s  Operational Loss Replacement program. Second, the Air Force is  purchasing 112 new Combat Recovery Helicopters (HH-60Ws) to replace  its fleet of HH-60G Pave Hawk helicopters by 2029.", "The National Defense Authorization Act for Fiscal year 2018 included a  provision for us to review the Air Force\u2019s HH-60G replacement programs,  which it defined as including both the Operational Loss Replacement and  Combat Rescue Helicopter programs. The provision included direction to  review the fielding schedule for the new Combat Rescue Helicopter. This  report examines (1) the maintenance condition and the service life of the  Air Force\u2019s HH-60G Pave Hawk helicopters (2) the Air Force\u2019s schedule  for fielding the Combat Rescue Helicopter in the active and reserve  components, and (3) any training challenges the Air Force has identified  related to this schedule. Appendix I provides a brief summary of the  National Commission on the Structure of the Air Force\u2019s 2014 report to  the President and Congress, and the relationship of the Air Force\u2019s HH-60  replacement programs to that report.", "For objective one, we examined fiscal year 2013\u20132017 average \u201cmission  capable rates,\u201d which refer to the material condition of the aircraft  possessed by a squadron and their abilities to conduct their designed  missions. We compared the average squadron mission capable rates to  the Air Force desired mission capable rate. We also analyzed fiscal year  2013-2017 Air Force maintenance \u201ccode 3 breaks\u201d data, defined by the  Air Force as an aircraft that lands and is unable to complete at least one  of its primary missions. According to Air Force policy, this metric primarily  indicates aircraft system reliability. To determine which \u201ccode 3 breaks\u201d  were most common, we analyzed fiscal year 2013\u20132017 annual code 3  break reports across the HH-60G fleet. We also analyzed flight hour data  across the HH-60G fleet. Specifically, we analyzed flight-hour data by  component and major command and compared them with the initial  number of flight hours that Air Force officials stated the helicopters were  originally designed to fly.", "To assess the reliability of the fiscal year 2013\u20132017 mission capable  rates, maintenance \u201ccode 3 break\u201d data, and flight-hour data we  discussed with Air Force officials the processes used to collect the data  and the internal controls used to maintain the databases where the data  are maintained. We also conducted manual data testing on the flight-hour  data and did not find any missing data, outliers, or obvious errors. We  concluded that the data were sufficiently reliable for the purposes of  determining average mission capable rates, reported flight hours by  component, and the three most frequently-noted maintenance \u201ccode 3  breaks\u201d between 2013 and 2017. To corroborate our understanding of Air  Force efforts to rebuild the personnel recovery helicopter inventory and  maintenance, and mission capable rate data, we conducted interviews  with officials from Air Force Headquarters, the Air Combat Command, the  Air National Guard, the Air Force Reserve, the formal training squadrons  at Kirtland and Nellis Air Force Base, and the Test and Evaluation  squadron at Nellis Air Force Base.", "For objective two, we analyzed historical information from the Combat  Search and Rescue Replacement Vehicle helicopter program and from  the current Combat Rescue Helicopter fielding schedule. Specifically, we  analyzed the Combat Rescue Helicopter fielding schedule for fiscal years  2020 through 2029 to identify which helicopter squadrons would receive  the new Combat Rescue Helicopter and during which fiscal year.", "For objective three, we analyzed the Air Combat Command fielding  schedule for both Operational Loss Replacement helicopters and Combat  Rescue Helicopters and we spoke with the Air Combat Command, the Air  National Guard, the Air Force Reserve, and the Air Education and  Training Command officials to discuss the positive aspects of the Air  Combat Command\u2019s schedule, any concerns the officials had with the  schedule, and whether or not they had submitted any alternative  schedules. Based on some concerns that were raised by reserve  component officials, we reviewed and analyzed the Air Force training plan  for the Combat Rescue Helicopter and discussed it with Air Force training  officials. Specifically, we discussed expected differences between the  HH-60G and the Combat Rescue Helicopter training, and any potential  training gaps.", "We conducted this performance audit from September 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "HH-60G Pave Hawk Inventory", "paragraphs": ["According to Air Force officials, the Air Force has 82 HH-60G helicopters  designated to meet its personnel recovery mission requirements. The  remaining 14 HH-60Gs are designated for training and, development and  testing. Figure 1 shows the Air Force\u2019s inventory of HH-60G Pave Hawk  helicopters as of May 2018."], "subsections": []}, {"section_title": "Command Structure and Locations", "paragraphs": ["The Air Combat Command is the lead command for personnel recovery  helicopters and as such has responsibility for all requirements associated  with the helicopters, and for program funding. Formal training of  helicopter aircrews takes place at Kirtland and Nellis Air Force Bases.  The formal training unit at Kirtland Air Force Base is the only integrated  unit with both active and reserve component forces, but the unit\u2019s  helicopters are assigned to the active component. All other HH-60G Pave  Hawk units consist solely of active or solely of reserve component forces.  Figure 2 shows the locations and components of the HH-60G rescue  squadrons. It also shows the numbers of helicopters at each location."], "subsections": []}, {"section_title": "HH-60G Helicopter Pilot Training", "paragraphs": ["It takes several years to fully train a helicopter pilot. Pilots spend about a  year and half in their general introductory and specialized helicopter  training. For Air Force HH-60 pilots, this initial qualification training occurs  at Kirtland Air Force Base. Following that, the pilots continue their training  at their assigned operational squadrons. According to weapons school  officials, a few experienced HH-60 pilots are selected to attend the HH-60  weapons school at Nellis Air Force Base where the pilots assist in the  development of tactics, techniques, and procedures for the HH-60  community. Figure 3 shows a typical training timeline for HH-60G pilots."], "subsections": []}]}, {"section_title": "Air Force\u2019s HH-60G Helicopters Have Experienced Declines in Condition and Increases in Maintenance Challenges, Due in Part to Extensions beyond the HH-60G\u2019s Designed Service Life", "paragraphs": ["The material condition of the Air Force\u2019s HH-60G fleet has declined and  maintenance challenges have increased, in part due to extensions  beyond the initially designed service life of the helicopters. In November  2017, the Air Force\u2019s HH-60Gs were about 5 percent below their desired  \u201cmission capable\u201d rate of 75 percent, which refers to the material  condition of a squadron\u2019s possessed aircraft and their abilities to conduct  their designed missions. Mission capable rates have shown some year- to-year fluctuations, without any clear trends. However, for each of the  past 5 years, the helicopters\u2019 mission capable rates have been below the  Air Force\u2019s goal, and for fiscal year 2017, 68 percent of the 96 helicopter  fleet were mission capable.", "As the helicopters have aged, the amount of time spent conducting  maintenance on them has increased. For example, according to Air Force  officials, in fiscal year 2013 the fleet averaged about 21 maintenance  manhours for every HH-60G flight hour. However, by fiscal year 2017, the  maintenance time spent had increased to an average of more than 25  maintenance manhours for every flight hour. According to officials, the  increased time conducting maintenance is a result of an aging helicopter  that requires more intensive maintenance. Further, according to officials,  in 2007 the average amount of time required to conduct more extensive  depot-level maintenance was 233 days, but by fiscal year 2017 it was 332  days, more than a 40 percent increase. Air Force maintenance data for  fiscal years 2013-2017 show that airframes, turboshaft engines, and flight  controls (see fig. 4) were the HH-60G elements that failed most often.  According to Air Force officials, these structural and major component  failures can require time-consuming maintenance that negatively affects  availability and mission capable rates.", "According to Air Force flight-hour data, the average flight hours across  the HH-60G fleet have increased by nearly 20 percent from fiscal year  2013 through May 2018. Air Force officials stated that the HH-60G was  initially designed to have a service life of approximately 6,000 flight hours.  However, in May 2018, the fleet-wide average was approximately 7,100  flight hours, or about 18 percent more than their initial expected service  life. Table 1 shows that, as of May 2018, HH-60G training aircraft  averaged about 10,500 flight hours, while the primary mission and back  up aircraft averaged about 6,600 flight hours. The Air Force\u2019s two  developmental and testing aircraft had an average of 5,500 flight hours.  According to Air Force officials, this is because developmental and testing  aircraft are flown to test specific aircraft elements and not on regular  missions. As flight hours increase more maintenance is required and  maintenance challenges increase, according to Air Force officials."], "subsections": []}, {"section_title": "Air Force Fielding Schedule Delivers Combat Rescue Helicopters First to High Flight-Hour Squadrons", "paragraphs": ["According to Air Force officials, the Combat Rescue Helicopter fielding  schedule, which was included in the contract for the new helicopters, was  designed to ensure that helicopters with the highest flying hours are  generally replaced first. The officials told us that this is why the active  component units, which have higher flying-hour averages, would begin  receiving their new Combat Rescue Helicopters in fiscal year 2020.  Based on the current Combat Rescue Helicopter fielding schedule, the Air  Force Reserve is scheduled to receive its new helicopters beginning in  fiscal year 2026. The Air National Guard is scheduled to receive  refurbished Operational Loss Replacement helicopters in fiscal year 2019  and the new Combat Rescue Helicopters beginning in fiscal year 2027.  The last Combat Rescue Helicopters are scheduled to be fielded to all  three components in fiscal year 2029. Figure 5 shows the timeline for the  transition to the new Combat Rescue Helicopters.", "On average, the active component helicopters had about 2,000 more  flight hours per helicopter than the reserve component helicopters, in May  2018, as shown in figure 6. Specifically, the active component helicopters  had on average 7,700 flight-hours, while the reserve component  helicopters averaged 5,800 flight hours.", "The active component helicopters in figure 6 include the Kirtland training  helicopters, which averaged about 10,600 flight hours per helicopter.  According to Air Force officials, due in part to the high number of flight  hours per aircraft, Kirtland is one of the first squadrons scheduled to  receive the new Combat Rescue Helicopters. Specifically, Kirtland is  scheduled to begin receiving its new helicopters in fiscal year 2020.", "Among the reserve component, the Air National Guard helicopters have  an average of about 6,200 flight hours while the Air Force Reserve  helicopters have an average of about 5,500 flight-hours per aircraft.  However, the Combat Rescue Helicopter fielding schedule shows that the  Air National Guard squadrons are last to receive the new Combat Rescue  Helicopters. According to Air Force officials, to address the later fielding  of the new Combat Rescue Helicopters to the Air National Guard,  beginning in fiscal year 2019 the Air Force is replacing all of the Air  National Guard\u2019s helicopters with refurbished Army helicopters. These  helicopters will be upgraded to the Air Force\u2019s HH-60G configuration and  will each have 3,000 or fewer flight hours. These refurbished helicopters  are commonly referred to as the Operational Loss Replacement  helicopters. According to Air Force officials the Operational Loss  Replacement helicopters are expected to increase squadron helicopter  reliability and are expected to reduce unscheduled maintenance until the  Air National Guard squadrons receive their new Combat Rescue  Helicopters."], "subsections": []}, {"section_title": "The Air Force Has Identified Potential Training Challenges, but Would Likely Incur Costs If It Adjusted the Fielding Schedule for Its Combat Rescue Helicopters", "paragraphs": ["Due to the Air Force fielding schedule for the Combat Rescue  Helicopters, the Air Force may face a challenge in supporting formal  training for its reserve component squadrons during fiscal years 2025  through 2028. The rescue squadrons at Kirtland and Nellis Air Force  Bases conduct all formal HH-60G training, and by fiscal year 2025, are  scheduled to transition to providing formal training for the new Combat  Rescue Helicopters. Specifically, these formal training units are  scheduled to completely transition to the Combat Rescue Helicopter and  will have divested all of their legacy HH-60G aircraft, as shown in figure 7.  However, other squadrons will continue to fly the HH-60G aircraft after  fiscal year 2025. Specifically, seven rescue squadrons will fly the legacy  HH-60Gs in fiscal year 2025, and some will continue flying the HH-60Gs  until fiscal year 2028 and so will continue to need formal training to fly that  helicopter throughout that period.", "According to the Combat Rescue Helicopter fielding schedule shown in  figure 8, the reserve component squadrons will receive most of their  Combat Rescue Helicopters between fiscal years 2026 through 2028.  The Air National Guard squadrons will not receive their primary mission  Combat Rescue Helicopters until fiscal year 2028. This is 3 years after  the formal training units at Kirtland and Nellis will have stopped training  students on the legacy HH-60Gs.", "The Air Force Reserve and Air National Guard did not concur with the  Combat Rescue Helicopter fielding schedule. Reserve Component  officials said they did not concur, in part, because the Air Force did not  coordinate the fielding schedule prior to the contract\u2019s approval in 2014.  However, according to Headquarters Air Force officials, the Combat  Rescue Helicopter fielding schedule was coordinated with and approved  by all components prior to the 2014 contract being approved. Further, Air  Force officials stated they plan to maintain the fielding schedule because  changing it would require the renegotiation of the contract and would  likely result in increased costs and possibly a delay in delivery of the new  helicopters. The Combat Rescue Helicopter contract was developed as a  fixed-price contract. According to Air Force officials, as part of this fixed- price contract, specific terms such as base locations and order of delivery  were predetermined.", "According to Air Force officials, while the Combat Rescue Helicopter  contract does allow for some variation in the quantity of helicopters  procured each year, there is no location and order variation permitted  without the renegotiation of price. According to the Air Force, any  changes outside the included variation of the number of aircraft to be  purchased in a given year (i.e. change in the order or location of the  bases) would negate the firm-fixed prices in the year where the change  occurred, and in all the remaining years of the contract. Specifically, if  changes are made to the order or location of the bases, potential contract  line items that could increase include base level spares, readiness spares  packages, support equipment, interim supply support and field support  representatives for both aircraft and training systems. According to Air  Force officials, fielding schedule changes could also put at risk the ability  to provide timely funding for the military construction projects necessary  to house new simulators at the rescue squadrons\u2019 bases. These officials  stated that the current Combat Rescue Helicopter fixed-price contract is  ahead of schedule and within budget, as of June 2018. Air Force officials  said they expect to have new helicopters by March 2020, 3 months ahead  of schedule. They also said that if changes are made to the order of  deliveries under the contract, the contract would have to be renegotiated  which would, in turn, likely slow the delivery of the new helicopters and  increase contract costs.", "Air Force officials acknowledge that based on the current fielding  schedule there is a potential training gap that will occur in fiscal years  2025 through 2028 when the formal training units will no longer have any  HH-60Gs available to train the reserve component. As of June 2018, Air  Force officials told us that the Air Force was considering a number of  options to address future training issues, including the following:", "The Air Force would provide legacy HH-60G helicopters, for a limited  time, to the Air National Guard squadron at Kirtland Air Force Base.  This would allow the Air National Guard to continue providing initial  and requalification training on the legacy HH-60G helicopters for  several years after the active component portion of the formal training  unit at Kirtland Air Force Base has divested its legacy HH-60G  helicopters.", "The Air Force would require personnel that have completed training  on the Combat Rescue Helicopter at Kirtland Air Force Base to then  receive additional training for the legacy platform at their home  stations if their squadrons are still flying the HH-60Gs."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. DOD  told us that they had no comments on the draft report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense and the Secretary of the Air Force.  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) 512-3489 or at pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix II."], "subsections": []}]}, {"section_title": "Appendix I: The National Commission on the Structure of the Air Force Report and Recommendation Implementation", "paragraphs": ["Following disagreements over the Air Force\u2019s proposals to reduce aircraft  and Air National Guard end strength, the National Defense Authorization  Act for Fiscal Year 2013 established the National Commission on the  Structure of the Air Force. The act required the commission to conduct a  study to determine whether, and how, the Air Force structure should be  modified to best fulfill mission requirements in a manner consistent with  available resources. In January 2014, the commission issued its final  report, which included 42 recommendations. The Air Force agreed with  41 of the 42 commission\u2019s recommendations. The recommendations  varied in size, scope, and duration, and they focused on a range of topics  from personnel policies and systems to determining the appropriate  balance between the active and reserve component. However, as we  reported in 2016 many of the recommendations were interrelated and the  Air Force grouped the recommendations into various lines of effort and  assigned senior officials responsibility for tracking the implementation of  each line of effort. The \u201cTotal Force Continuum\u201d has half (21) of the  commission\u2019s 42 recommendations. Recommendation 11 is part of this  line of effort and it states:  As the Air Force acquires new equipment, force integration plans  should adhere to the principle of proportional and concurrent fielding  across the components. This means that, in advance of full  integration, new equipment will arrive at Air Reserve Component units  simultaneously with its arrival at Active Component units in the  proportional share of each component. As the Air Force Reserve and  Active Component become fully integrated, the Air Force should  ensure that the Air National Guard receives new technology  concurrent with the integrated units. The Air Force should no longer  recapitalize by cascading equipment from the Active Component to  the Reserve Components.", "In accordance with Section 1055 of the Carl Levin and Howard P. \u201cBuck\u201d  McKeon National Defense Authorization Act for Fiscal Year 2015, the Air Force provided the congressional defense committees with annual  responses to the commission\u2019s recommendations.", "In its initial response, the Air Force stated that it was embracing the  commission\u2019s intent and viewed the recommendations as a holistic  approach to improving the service. With regard to recommendation 11,  the Air Force stated that it agreed in principle with the recommendation  and would make every attempt to concurrently and proportionally equip all  components to be the most capable force within today\u2019s constrained  resources.", "In its 2017 response, the Air Force cited the Combat Rescue Helicopters  as one of the examples of how it is implementing recommendation 11.  Specifically, the Air Force reported that its future fielding of the CRH  shows the Air Force\u2019s commitment to concurrent and proportional fielding  of equipment amongst its components. Headquarters, Air Force officials  elaborated on this response in response to our request for clarification,  stating that the Air Force was replacing all its personnel recovery  helicopters\u2014for both its active and reserve component units\u2014under a  single contract and that it would not cascade any of its active component  helicopters to its reserve component units. As of August 2017, the Air  Force stated it had completed its review of recommendation 11 and it  updated its Air Force Policy Directive 10-3, Operational Utilization of the  Air Reserve Component Forces in November 2017, to better reflect the  intent of the recommendation."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michael Ferren, Assistant  Director; Vincent Buquicchio; Mae Jones; Leigh Ann Sheffield; Mike  Silver; and Nicole Volchko made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-289", "url": "https://www.gao.gov/products/GAO-18-289", "title": "DOD Financial Management: The Navy Needs to Improve Internal Control over Its Buildings", "published_date": "2018-05-10T00:00:00", "released_date": "2018-05-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This engagement was initiated in connection with the statutory requirement for GAO to audit the U.S. government's consolidated financial statements. The 2018 National Defense Authorization Act requires that the Secretary of Defense ensure that a full audit is performed on the financial statements of DOD for each fiscal year and that the results be submitted to Congress no later than March 31 of the following fiscal year. The Navy was the first military department to assert real property audit readiness related to DOD's Financial Improvement and Audit Readiness effort.", "For this report, GAO's objectives were to (1) determine the extent to which the Navy had internal control deficiencies, if any, that may impair its ability to assert that its buildings, as reported in its financial statements, exist and that the information about these buildings is complete and adequately supported by property records and (2) identify the challenges, if any, that Navy faces in valuing its buildings in accordance with federal accounting standards. GAO reviewed the Navy's policies and procedures for control activities over its buildings, performed data analyses, and tested a nongeneralizable sample of buildings. GAO also discussed with Navy officials the challenges in complying with federal accounting standards for valuing its buildings."]}, {"section_title": "What GAO Found", "paragraphs": ["Although the United States Navy (Navy) has taken actions to become audit ready for its real property, GAO identified internal control deficiencies that impaired the Navy's ability to assert that (1) buildings recorded in the internet Navy Facility Assets Data Store (iNFADS), the Navy's real property system, and reported as assets in its financial statements existed and (2) all of the Navy's buildings were recorded in iNFADS and correctly reported as assets in the Navy's financial statements. As shown in the figure below, the effects of these internal control deficiencies contributed to the Navy (1) continuing to maintain records in iNFADS for buildings that had been demolished, sometimes many years ago, and include these buildings as assets in its financial statements; (2) excluding some of the buildings it owns from being recorded in iNFADS and reported as assets in its financial statements; (3) erroneously reporting nonfunctional buildings as assets in its financial statements; and (4) excluding certain buildings from being reported as assets in its financial statements that met or exceeded the Department of Defense's (DOD) capitalization threshold.", "The Navy has various efforts under way to address challenges in valuing its buildings for financial reporting in accordance with federal accounting standards. Navy officials have acknowledged that significant delays can sometimes occur in the Navy being able to complete supporting documentation of the final costs to properly report buildings in its financial statements. Additionally, implementation of the Navy's new methodology to properly account for capital improvements will be critical for capturing accurate costs for buildings. Furthermore, the Navy has not consistently completed a physical inventory (asset evaluation) for each building every 5 years as required by DOD policy. These asset evaluations are an important control to help ensure that the information recorded for buildings in iNFADS is accurate. Finally, the Navy also faces a challenge in determining the placed in service dates for those buildings found through inventory procedures. The Navy's use of the date the building was found rather than the estimated date the building was placed in service can substantially affect the accuracy of the information in the Navy's systems and financial statements. Navy officials are aware of these challenges and have various efforts under way to address them. Effective implementation of these efforts is crucial to help address these challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to the Navy to improve internal controls for its buildings by implementing needed written procedures and control activities. The Navy concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense\u2019s (DOD) financial management has been on  our High-Risk List since 1995 because of, among other things, long- standing, uncorrected deficiencies with its financial management  systems, business processes, and material internal control and financial  reporting weaknesses. These deficiencies prevent DOD from having  auditable financial statements, which is one of the three major  impediments preventing us from expressing an opinion on the accrual- based consolidated financial statements of the U.S. government.", "The effects of DOD\u2019s financial management problems extend beyond  financial reporting and negatively affect DOD\u2019s ability to manage the  department and make sound decisions on mission and operations. For  example, we found that DOD cannot fully determine the number, size,  and costs of its leases for its leased facilities because the inventory  system that DOD uses to report on its leased assets contains some  inaccurate and incomplete data.", "DOD\u2019s reported property, plant, and equipment represent more than 70  percent of the U.S. government\u2019s reported property, plant, and  equipment. DOD manages a global real property portfolio that it reported  consists of approximately 562,000 facilities\u2014including barracks,  commissaries, data centers, office buildings, laboratories, and  maintenance depots\u2014located on about 4,800 sites worldwide and  covering more than 24.9 million acres. With a DOD-estimated  replacement value of about $880 billion, this infrastructure is critical to  maintaining military readiness, and the estimated cost to build and  maintain it represents a significant financial commitment. However, DOD  remains one of the few federal entities that cannot demonstrate its ability  to accurately account for and reliably report its costs or assets.", "DOD has undertaken several financial management improvement  initiatives over the years to address deficiencies in business systems,  processes, and controls through its Financial Improvement and Audit  Readiness (FIAR) Plan. In addition to the FIAR Plan, the 2010 National  Defense Authorization Act (NDAA) required, until December 2017, that  DOD provide semiannual reports to the congressional defense  committees on the status of the implementation of the FIAR Plan. The  2018 NDAA repealed the requirement for the FIAR Plan and semiannual  status reports and codified a requirement for DOD to submit a Financial  Improvement and Audit Remediation Plan to Congress by June 30, 2019,  and annually thereafter. DOD is further required to prepare a  consolidated corrective action plan management summary on the status  of key corrective action plans and to brief the congressional defense  committees semiannually on the status of the corrective action plans.", "The results of prior audits, including ours, have raised concerns about the  data reliability of certain key categories of the military services\u2019 general  property, plant, and equipment. In addition, the Department of the Navy\u2019s  (DON) inability to accurately account for real property assets, specifically  its buildings, continues to be a primary impediment to it receiving an  auditor\u2019s opinion on its financial statements. One of the previously  identified material weaknesses reported by the independent auditors for  fiscal year 2017 related to real property. Specifically, the independent  auditors reported that the DON had insufficient internal controls and  supporting documentation for real property and construction-in-progress.  The DON consists of two services\u2014the United States Navy (Navy) and  the United States Marine Corps. The DON was the first military  department to initially assert real property audit readiness for existence  and completeness. According to the Navy\u2019s accountable real property  system, the internet Navy Facility Assets Data Store (iNFADS), the Navy  owned 35,308 and 35,600 buildings as of September 30, 2017, and  September 30, 2016, respectively.", "This engagement was initiated in connection with the statutory  requirement for GAO to audit the U.S. government\u2019s consolidated  financial statements. Our objectives were to (1) determine the extent to  which the Navy had internal control deficiencies, if any, that may impair its  ability to assert that its buildings, as reported in its financial statements,  exist and that the information about the buildings is complete and  adequately supported by property records and (2) identify the challenges,  if any, that the Navy faces in valuing its buildings in accordance with  federal accounting standards.", "To address our objectives, we interviewed DOD and Navy officials and  reviewed regulations, instructions, policies, and procedures, including the  Naval Facilities Engineering Command\u2019s (NAVFAC) desk-top  procedures, to identify control activities over buildings. We reviewed the  results from prior testing conducted by a contractor that the Navy  engaged to help it achieve audit readiness for its real property. We also  performed data analyses of building data elements contained in iNFADS  as of September 30, 2016. To assess the reliability of data we used, we  reviewed relevant Navy documentation, interviewed knowledgeable  officials, reviewed policies and procedures regarding collecting and  maintaining the data, and performed data analyses to look for logical  inconsistencies. We concluded that the data elements we used from  iNFADS were sufficiently reliable for the purposes of selecting a  nongeneralizable sample of buildings to test during our site visits. We  selected the Norfolk and San Diego geographic areas for site visits  because of the numerous bases in each area and the proximity of the 5  installations to one another in both areas. Finally, we conducted site visits  in Norfolk and San Diego to understand the processes followed and  documents used to record real property transactions, test the buildings  selected in our nongeneralizable samples, and review the available  supporting documentation for the selected buildings.", "For the site visits, we selected a nongeneralizable sample of a total of 40  buildings from the iNFADS real property system, 20 from 5 Norfolk-area  installations and 20 from 5 San Diego-area Navy installations that we  visited, to test through observation whether these buildings existed (book- to-floor). We met with the real property accountable officers (RPAO) at  the 10 installations we visited. In addition to testing for existence, we  compared the descriptions of the buildings in iNFADS with the buildings  that we observed. For example, if the date the building was placed in  service was recent, we would observe whether it was a newer building.  We also selected a nongeneralizable sample of an additional 39 buildings  while at the installations to perform floor-to-book tests to test the  completeness of Navy\u2019s recorded buildings in iNFADS.", "To identify the challenges the Navy faces in valuing its buildings in  accordance with federal accounting standards, we reviewed federal  accounting standards and the Navy\u2019s documents for recording assets into  iNFADS and interviewed agency officials responsible for financial  reporting and real property management, including the RPAOs at the  installations we visited. While our audit objectives focused on certain control activities related to (1) the existence and completeness of the  Navy\u2019s buildings as reported in its financial statements and the  completeness and adequacy of supporting property records for those  buildings and (2) the valuation of the Navy\u2019s buildings in accordance with  federal accounting standards, we did not evaluate all control activities and  other components of internal control. If we had done so, additional  deficiencies may or may not have been identified that could affect the  control activities evaluated as part of this audit. See appendix I for  additional details on our audit scope and methodology.", "We conducted this performance audit from September 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Navy\u2019s Real Property Audit Assertions", "paragraphs": ["DOD has defined audit readiness as having the capabilities in place that  allow an auditor to plan and perform a full financial statement audit that  results in actionable feedback to DOD. In DOD\u2019s May 2016 FIAR Plan  Status Report, the DON initially asserted that it would be audit ready with  regard to real property (including construction-in-progress) for the  existence and completeness assertions by June 2016 and with regard to  the valuation assertion by March 2017. Subsequently, in DOD\u2019s  November 2016 FIAR Plan Status Report, the DON asserted that it would  be audit ready for the existence, completeness, and valuation assertions  by March 2017. In DOD\u2019s May 2017 FIAR Plan Status Report, the DON  reported that it had validated that the existence and completeness  assertions for real property. Ultimately, the DON reported in DOD\u2019s  November 2017 FIAR Plan Status Report that it had achieved audit  readiness for the existence and completeness assertions and was in the  process of determining audit readiness for the valuation assertion."], "subsections": []}, {"section_title": "Real Property Valuation Methods", "paragraphs": ["In August 2016, the Federal Accounting Standards Advisory Board issued  Statement of Federal Financial Accounting Standards (SFFAS) No. 50,  which allows reporting entities to apply alternative valuation methods in  establishing opening balances of general property, plant, and equipment  (G-PP&E). Such alternative valuation methods may be applied in  reporting periods beginning after September 30, 2016. SFFAS No. 50  permits each reporting entity to use alternative methods when presenting  financial statements, or one or more line items, (1) for the first time or   (2) after a period during which existing systems could not provide the  information necessary for producing financial statements in accordance  with generally accepted accounting principles (GAAP) without using  alternative methods. SFFAS No. 50 permits reporting entities to apply an  alternative method only once per line item after the period during which  the existing systems could not provide the information for producing  financial statements in accordance with GAAP. As of March 2018, the  Navy has not made an unreserved assertion attesting that its opening  balances of G-PP&E are reported in accordance with SFFAS No. 50.  After opening balances are established using an alternative valuation  method, federal accounting standards require historical cost to be used in  valuing G-PP&E acquired or constructed."], "subsections": []}, {"section_title": "Plant Replacement Value Being Used to Develop Opening Balances for the Navy\u2019s Buildings", "paragraphs": ["DOD already uses plant replacement value (PRV) for decision making  and management purposes and has reported that it will use PRV to  develop opening balances for the Navy\u2019s buildings. Navy is also currently  using PRV (an allowable alternative valuation method under SFFAS No.  50) for financial statement reporting of its buildings and plans to do so  until the DON makes an unreserved assertion that its financial statements  or its G-PP&E line item or reported assets classes are presented fairly in  accordance with GAAP. PRV represents an estimate of the replacement  cost in current year dollars to design and construct a facility to replace an  existing facility at the same location. As such, the replacement (or  construction) cost factor, generally applied to buildings as a dollar amount  multiplied by square footage, is also indexed to increase or decrease the  amount to account for other variations in costs for different geographic  areas or complexity of the facility. Once the calculation prescribed by the  formula has resulted in PRV, accumulated depreciation is computed  based on the placed in service date. Figure 1 shows an example of the  PRV formula being applied to an enlisted housing facility. The valuation  adjustment factors, as shown below, vary by location and use of the  building. Acquisitions and capital improvements made to existing  buildings during subsequent financial periods are to be recorded at the  actual cost of obtaining the asset or improvement and placing it into  service."], "subsections": []}, {"section_title": "Internal Control Activities", "paragraphs": ["Internal control activities, as defined in Standards for Internal Control in  the Federal Government, are the policies, procedures, and techniques  that enforce management\u2019s directives to achieve the entity\u2019s objectives  and address related risks. A deficiency in internal control exists when  the design, implementation, or operation of a control does not allow  management or personnel, in the normal course of performing their  assigned functions, to achieve control objectives and address related  risks."], "subsections": []}]}, {"section_title": "Internal Control Deficiencies Impaired the Navy\u2019s Ability to Properly Record and Report Certain of Its Buildings", "paragraphs": ["We identified internal control deficiencies that impaired the Navy\u2019s ability  to assert that as of September 30, 2016, (1) buildings recorded in  iNFADS and reported as assets in Navy\u2019s financial statements existed  and (2) all of the Navy\u2019s buildings were recorded in iNFADS and correctly  reported as assets in Navy\u2019s financial statements. As shown in figure 2,  the effects of these internal control deficiencies contributed to the Navy  (1) continuing to maintain records in iNFADS for buildings that had been  demolished, sometimes many years ago, and including these buildings as  assets in its financial statements; (2) excluding some of the buildings that  it owns from being recorded in iNFADS and reported as assets in its  financial statements; (3) erroneously reporting nonfunctional buildings as  assets in its financial statements; and (4) excluding certain buildings  from being reported as assets in its financial statements that met or  exceeded DOD\u2019s capitalization threshold."], "subsections": [{"section_title": "The Navy Did Not Have Properly Designed Procedures and Related Control Activities to Reasonably Assure Proper Accounting for Its Demolished Buildings", "paragraphs": ["While the Navy had written procedures for the multistep process for  disposal of real property by demolition, these procedures and related  control activities were not properly designed to reasonably assure that  demolished buildings were recorded as disposed and removed from the  accounting records. Specifically, the procedures and related control  activities did not reasonably assure that RPAOs were provided with a  signed demolition approval document and the related disposal form.  Without these documents, an RPAO may not be aware that a building has  been demolished and therefore may not take the appropriate actions to  record the asset as disposed in iNFADS so that the asset record is  subsequently removed from iNFADS at the end of the fiscal year and the  asset is thereby not included in Navy\u2019s financial statements.", "When a building is designated for disposal, multiple parties are involved  in the demolition process. This business process can involve the  installation\u2019s Public Works Department; the Regional Commander; the  Facilities Engineering Command realty specialist; the Commander, Navy  Installations Command; the demolition project manager; the demolition  contractor; and the General Services Administration. The multiple  functional offices involved in the disposal by demolition business process  and the lack of communication between the offices can result in buildings  being demolished without the RPAO\u2019s knowledge. The Navy\u2019s procedures  for the disposal of real property by demolition state that the RPAO is to  receive a signed demolition approval document from the installation\u2019s  Public Works Department. After the demolition has been completed, the  project manager is to work with the demolition contractor (if applicable),  the planner, and the RPAO to complete the disposal form. The RPAO,  within 10 days of the completion of the demolition, is to upload supporting  documentation about the disposed asset into iNFADS and create the  iNFADS disposal record. The Navy\u2019s procedures did not include a  control activity, such as a step to verify the RPAO\u2019s receipt of a signed  demolition approval document and disposal form, to reasonably assure  that the RPAOs are notified of all building demolitions. These notifications  are critical so that each RPAO can properly account for a building by  creating an iNFADS disposal record, which ultimately results in records  for demolished buildings being deleted from iNFADS and therefore not  included as assets in the financial statements.", "During our testing of a nongeneralizable sample of buildings in iNFADS,  we identified buildings that had been demolished prior to September 30,  2016, but were still recorded in iNFADS as of September 30, 2016, and  therefore were reported as assets in Navy\u2019s financial statements as of  September 30, 2016. According to SFFAS No. 6, Accounting for  Property, Plant, and Equipment, assets, including real property, shall be  removed from the asset accounts along with the associated accumulated  depreciation if the asset no longer provides service to the operations of the entity. The inclusion of demolished buildings in iNFADS results in  inaccurate Navy real property records and can lead to an overstatement  of reported balances for real property in Navy\u2019s financial statements. Of  the 40 buildings for which we performed book-to-floor tests for existence,  we found that 4 had been destroyed and no longer physically existed but  were still recorded in iNFADS and reported as assets in Navy\u2019s financial  statements. Because we used a nongeneralizable sample of buildings,  results from the sample cannot be used to make inferences about all of  the Navy\u2019s buildings. The four demolished buildings are described below.", "A six-car garage building had been demolished several years ago  according to the Navy, but its operational status was shown as active  in iNFADS as of September 30, 2016. Navy officials stated that while  the actual demolition date for this building is not known, based on the  demolition drawing for another building nearby, it appears to the Navy  that the garage was demolished prior to 2001.", "A marina shop building was demolished as of June 30, 2016, so that a  new building could be constructed at the same location. As of  September 30, 2016, the operational status of this marina shop was  shown as active in iNFADS. The disposal of the marina shop building  was not recorded in iNFADS until May 2017.", "A storage building was demolished in February 2016 but was still  recorded in iNFADS as of September 30, 2016. The RPAO was not  notified that the building had been demolished until April 2016. After  searching for the relevant paperwork, which could not be located, the  RPAO prepared the disposal form that was dated December 20,  2016.", "An aviation warehouse, which had previously been demolished, was  still recorded in iNFADS as of September 30, 2016. According to Navy  officials, the demolition package was initiated in 2013, but the  warehouse needed to remain in iNFADS until the site restoration work  was completed. Based on available information, the warehouse was  demolished around May 2014. The site restoration work was  completed in 2016, but the RPAO was never notified. According to  supporting documentation, a search for the relevant paperwork was  completed, after which the building was recorded in iNFADS as  disposed in March 2017.", "Consistent with our findings, the Navy Office of Financial Operations, in  preparing a white paper on real property accumulated depreciation, also  found that there were buildings recorded as existing in iNFADS that did  not exist. For this white paper, the Navy selected a generalizable  sample of 650 real property assets, including buildings, to test. Noted in  the white paper as of May 31, 2017, only 584 of the 650 sampled real  property assets were able to be tested. Specifically, 51 could not be  validated, and an additional 15 real property assets, or 2.5 percent of the  sample, were found to not exist, but were still recorded in iNFADS as  existing. Based on Navy\u2019s testing, we estimated that 2.5 percent of real  property in the Navy\u2019s iNFADS database as of May 2016 no longer  existed but had not been recorded in iNFADS as disposed."], "subsections": []}, {"section_title": "The Navy Lacks Procedures and Related Control Activities to Reasonably Assure Proper Accounting for Certain Buildings", "paragraphs": ["During some of our site visits, the RPAOs stated that some buildings  acquired or constructed with non-military construction funds (Non- MILCON) and that cost under $750,000 were not recorded in iNFADS.  A Navy official confirmed that there were issues with recording Non- MILCON construction costing $250,000 and above, but under $750,000,  for financial reporting purposes. Specifically, buildings or capital  improvements are sometimes built using other Non-MILCON funding, and  in some cases, an entity other than NAVFAC spends the funds. The  RPAOs therefore may not know of buildings constructed as Non-MILCON  projects if NAVFAC was not involved in the construction project. For  example, at one location, we observed a sentry house that had been  constructed for the Navy using Non-MILCON funding around 2006.  However, the sentry house was not recorded into iNFADS until 2014  when the building was identified as existing through the Navy\u2019s physical  inventory procedures.", "NAVFAC did not have final procedures and related control activities to  reasonably assure that buildings funded with Non-MILCON funding below  $750,000 were consistently recorded in iNFADS and, if the cost exceeded  the capitalization threshold, were reported as assets in the Navy\u2019s  financial statements. In 2015, the Navy began to develop both the  process and system changes required to track construction-in-progress  costs for the Navy\u2019s Non-MILCON projects with costs greater than  $750,000, so that the cost of the buildings associated with these projects  would be properly recorded in iNFADS. In March 2017, NAVFAC updated  its BMS process document with the steps for Non-MILCON buildings with  costs greater than $750,000 and adopted the new guidance in May 2017.", "According to NAVFAC officials, the Navy has already determined that an  equivalent detailed process is needed for Navy Non-MILCON buildings  costing less than $750,000 to reasonably assure that the RPAOs are  aware of these projects. The RPAOs are not involved in project  authorization or project funding and otherwise would be unaware of these  Non-MILCON projects. As a result, the RPAOs may not know of Non- MILCON buildings acquired or constructed with operations and  maintenance or other Non-MILCON funding under $750,000 and  accordingly do not have documentation to record the buildings\u2019  acquisitions in iNFADS. A BMS process document that addresses Non- MILCON projects costing under $750,000 is being developed. However,  according to a Navy official, a completion date has not been set for  finalizing this document. Until effective procedures are implemented,  Navy buildings constructed with Non-MILCON funding costing less than  $750,000 may not be timely recorded in iNFADS, which would cause  iNFADS to have incomplete information. If the buildings are not recorded  in iNFADS, the buildings will not be reported as assets in the financial  statements, as required, when the cost of the building meets or exceeds  the Navy\u2019s capitalization threshold of $250,000."], "subsections": []}, {"section_title": "The Navy Lacks Written Procedures and Related Control Activities to Reasonably Assure Proper Financial Reporting for Buildings Coded as Nonfunctional", "paragraphs": ["NAVFAC did not have written procedures requiring buildings coded as  nonfunctional in iNFADS to be excluded when accumulating data from  iNFADS for financial reporting purposes, nor did it have related control  activities to provide reasonable assurance that such buildings were  excluded. As a result, the Navy incorrectly included the amounts  associated with buildings coded as nonfunctional when accumulating  iNFADS information for financial reporting purposes. Specifically, based  on our aggregation of iNFADS data, the Navy erroneously reported 189  buildings coded as nonfunctional, amounting to $411 million in gross  value, $403 million in accumulated depreciation, and $8 million in net  book value, as assets in the financial statements as of September 30,  2016. For example, one building coded as nonfunctional that we  observed during our site visits was constructed in 1909, with a PRV of  over $5 million in iNFADS. The building has been vacant and unusable  since September 11, 2002, but was included as an asset in the financial  statements for fiscal year 2016.", "According to federal accounting standards, fully impaired assets, such as  nonfunctional buildings, should not be included in an entity\u2019s financial  statements and related notes. Specifically, SFFAS No. 6, Accounting for  Property, Plant, and Equipment, states that G-PP&E, which includes real  property, shall be removed from the accounts along with the associated  accumulated depreciation if the asset no longer provides service to the  operations of the entity. Moreover, SFFAS No. 44, Accounting for  Impairment of General Property, Plant, and Equipment Remaining in Use,  reiterates the requirement of SFFAS No. 6 by stating that fully impaired  assets should be removed from the G-PP&E accounts along with the  associated accumulated depreciation if, prior to disposal, the asset no  longer provides service in the operations of the entity.", "Navy officials confirmed that they do not have written procedures or  related control activities requiring buildings coded as nonfunctional in  iNFADS to be excluded when accumulating iNFADS data for financial  statement reporting purposes. As a result, for fiscal year 2016, the Navy  erroneously included buildings coded as nonfunctional as assets on its  financial statements. Navy officials agreed that nonfunctional buildings  meet the impairment definition of SFFAS No. 6 and No. 44, as these  buildings no longer provide service to Navy operations, and therefore  should be removed from the G-PP&E accounts. For fiscal year 2017,  Navy officials stated that nonfunctional buildings were reclassified from  the asset class that includes buildings to the \u201cOther\u201d asset class.  However, both asset classes were reported as G-PP&E on the balance  sheet, and as a result, the nonfunctional buildings were again reported as  assets in the G-PP&E line item in the Navy\u2019s financial statements."], "subsections": []}, {"section_title": "The Navy Lacks Written Procedures and Related Control Activities to Reasonably Assure Proper Financial Reporting for Buildings That Meet or Exceed DOD\u2019s Capitalization Threshold", "paragraphs": ["NAVFAC officials confirmed that they did not have written procedures and  related control activities to reasonably assure that buildings recorded in  iNFADS that met or exceeded DOD\u2019s established capitalization threshold  are properly included as assets in Navy\u2019s financial statements. For  financial reporting, the Navy\u2019s policy is to capitalize buildings based on  the established capitalization threshold in effect when each building was  placed in service.", "According to Navy officials, buildings placed in service from October 1,  2007, through September 30, 2013, should have been included as assets  in the financial statements if the buildings were valued at or above  $20,000, the capitalization threshold that was in place during that period.  However, for buildings placed in service during this period, the Navy  continued to use the previous capitalization threshold of $100,000 rather  than the $20,000 threshold. An Office of the Secretary of Defense  memorandum dated September 20, 2013, directed the services to  increase the capitalization threshold to $250,000 for assets acquired and  placed in service on or after October 1, 2013, and the Navy implemented  this change. Further, the Navy incorrectly reported in the notes to its fiscal  year 2016 and 2017 financial statements that the $20,000 capitalization  threshold was used for real property.", "Navy officials stated that when DOD\u2019s capitalization threshold was  changed to $20,000, the Navy did not adopt the reduced threshold  pending an evaluation of changes needed to iNFADS and the  development of procedures to implement the lower threshold. Because  the Navy did not adopt DOD\u2019s $20,000 capitalization threshold and  instead continued to use the $100,000 threshold, buildings placed in  service in fiscal years 2008 through 2013 with a value at or above  $20,000 but less than $100,000 were not reported as assets in the Navy\u2019s  financial statements as of September 30, 2016, and in prior years. Navy officials could not quantify the effect on its financial statements that  occurred based on the Navy\u2019s use of the $100,000 capitalization  threshold instead of the $20,000 threshold for fiscal years 2008 through  2013. Additionally, the Navy by not adopting DOD\u2019s $20,000 capitalization  threshold resulted in inconsistent reporting in DOD\u2019s consolidated  financial statements."], "subsections": []}]}, {"section_title": "Challenges the Navy Faces in Complying with Federal Accounting Standards for Valuing Its Buildings", "paragraphs": ["The Navy faces several challenges in valuing its buildings in accordance  with federal accounting standards, including (1) finalizing documentation  of actual cost information for buildings that are acquired and placed in  service after the Navy\u2019s opening balances have been established based  on alternative valuation methods permitted by SFFAS No. 50;   (2) capturing and recording costs of improvements that should be  reported; (3) consistently completing asset evaluations for each building  every 5 years as required by DOD Instruction 4165.14 to help ensure that  each building\u2019s information in iNFADS is correct; and (4) determining  placed in service dates for previously unrecorded buildings that are  subsequently discovered/identified through physical inventories/asset  evaluations. Navy officials are aware of these challenges and have  various efforts under way to address them. Effective implementation of  these efforts is crucial to help address these challenges."], "subsections": [{"section_title": "Finalizing the DD-1354 for Buildings Being Valued at Cost", "paragraphs": ["As we have previously reported, each completed military construction  project includes the DD-1354, Transfer and Acceptance of DOD Real  Property, to formally transfer ownership from the constructing entity to the  acquiring entity. The final version of the DD-1354 documents the final  total cost of the project in iNFADS, the source of real property information  for financial reporting. Navy officials acknowledge that significant delays  may occur in getting to the final version of the DD-1354, which occurs  after all costs are determined. If there are issues such as cost overruns or  contract disputes, the delays in completing the final version of the form  can be substantial. The Navy considers these substantial delays in  getting to the final version of the DD-1354 to be an obstacle to timely  documenting the final costs of buildings that are acquired and placed in  service after the Navy\u2019s opening balances have been established, based  on alternative valuation methods permitted by SFFAS No. 50. During our  site visits when we tested 79 buildings, we identified 13 buildings, either  constructed or with capital improvements made from 2012 through 2016,  for which a final DD-1354 had not yet been completed.", "According to several RPAOs we interviewed, getting to the final version of  the DD-1354 is a complicated process, requiring coordination among  multiple responsible parties and units, and determines all costs  associated with the construction. For example, a complex project that  involves the construction and demolition of multiple buildings makes the  allocation of the construction costs among the buildings of the project  considerably challenging."], "subsections": []}, {"section_title": "Recording Capital Improvements", "paragraphs": ["According to SFFAS No. 6, costs associated with capital improvements\u2014 those that extend the useful life of a building or improve its capacity\u2014are  to be recorded in the accountable real property system if the actual cost  exceeds the capitalization threshold. Navy officials reported that one  obstacle to capitalizing the costs of improvements is determining the  actual costs associated with the projects for capital improvements that are  made after the opening balances are established using alternative  valuation methods. The Navy has developed and is testing its  methodology to properly account for capital improvements to buildings.  This methodology uses an automated link from the Facilities Information  System (which has the construction-in-progress account) to iNFADS. The  success of this methodology will be critical for capturing capital  improvements for buildings.", "The inability to account for the total costs associated with capital  improvements to buildings after the opening balances have been  established using alternative valuation methods would result in the  undervaluing of the total actual cost and annual depreciation expense  associated with the buildings. Once PRV is used to establish the opening  balance for buildings, the Navy must accurately record capital  improvements in iNFADS in order to appropriately value the buildings and  record the correct depreciation expense."], "subsections": []}, {"section_title": "Performing Timely Asset Evaluations", "paragraphs": ["We observed that the Navy has taken steps to improve the quality of its  asset evaluations by completing and maintaining supporting  documentation. However, we found that the Navy has not consistently  completed asset evaluations for each building every 5 years as required  by DOD policy. An asset evaluation is a key Navy control to help ensure  that the information recorded in iNFADS is accurate. While the Navy  issued a revised BMS process document formalizing asset evaluations  procedures, these evaluations have not been performed every 5 years as  required. Specifically, in a June 30, 2017, Navy analysis, the Navy  determined that while an asset evaluation is required to be performed  every 5 years, the asset evaluations had not been done for more than 5  years for 17.4 percent of real property, including buildings. When asset  evaluations are not done every 5 years for each building, there is an  increased risk that information in iNFADS may not be accurate. In  addition, as a part of asset evaluations, Navy personnel verify key  information, including the square footage of buildings that is used for the  PRV calculation. The Navy has efforts under way to perform asset  evaluations for those buildings for which these evaluations had not been  completed in a 5-year period, including using contractors to help complete  the asset evaluations."], "subsections": []}, {"section_title": "Determining Placed in Service Dates for Buildings Found by Inventory", "paragraphs": ["As stated in DOD\u2019s Financial Management Regulation, real property  assets and capital improvements to these assets are to be capitalized as  of the date each asset was placed in service. Navy officials occasionally  identify existing buildings that have not been recorded in iNFADS and are  referred to as buildings found by inventory. These buildings are often  identified through NAVFAC\u2019s asset evaluations and periodic virtual  inventories. For these buildings, the placed in service dates may not be  known. While DOD and the Navy have subsequently developed  procedures for determining the placed in service dates for buildings found  by inventory, for some Navy buildings, the placed in service date  recorded in iNFADS was the date the building was found, rather than the  actual placed in service date.", "According to previous guidance, if a placed in service date could not be  identified through the due diligence process, then the building was  recorded as placed in service as of the date it was found. The Navy\u2019s  BMS process document for real property found by inventory, dated  October 25, 2016, stated each building found by inventory is to be  recorded with an estimated placed in service date determined using the  criteria provided in DOD\u2019s February 2015 guidance. We were told that  until December 2016, any building found by inventory was recorded with  a placed in service date of the day the building was found.", "The Navy\u2019s use of the date the building was found by inventory as the  placed in service date can substantially affect the information in iNFADS.  For example, one of the buildings in our nongeneralizable sample was an  old, abandoned maintenance shed. However, based on the iNFADS  property record, the building appeared to be a relatively new building  based on the recorded placed in service date of August 16, 2016, the  date it was found by inventory (see fig. 3). As a result, the building is  recorded in iNFADS on August 16, 2016, the placed in service date and  therefore the accumulated depreciation would be less than a building with  an older placed in service date. The complete, timely, and accurate  recording of the placed in service date information enables ensures  reliable and accurate reporting of real property information in DOD\u2019s  financial statements.", "Navy officials are aware of the challenges discussed above and have  various efforts under way to address them. Effective implementation of  these efforts is crucial to help address these challenges."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Navy\u2019s inability to accurately account for real property assets,  specifically its buildings, continues to be a material weakness reported by  independent auditors. Inadequate procedures and internal control  deficiencies prevent the Navy from accurately recording and reporting its  buildings and knowing how many buildings it actually owns. Some  buildings recorded in the Navy\u2019s accountable real property system,  iNFADS, do not exist. Similarly, the Navy does not have adequate  procedures and related controls to reasonably assure that all Non- MILCON buildings and capital improvements costing less than $750,000  are recorded in iNFADS. Additionally, the Navy erroneously reported  nonfunctional buildings as assets in its financial statements and excluded  certain buildings that met or exceeded DOD\u2019s capitalization threshold as  assets in its financial statements. As a result of these deficiencies, the  Navy does not have adequate information to support reliable reporting of  real property in its annual financial statements, and DOD, Congress, and  others do not have reliable, useful, and timely information for decision  making."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the Navy.", "The Commander of NAVFAC should develop and implement  procedures and related control activities for real property disposed of  by demolition to provide reasonable assurance that the RPAOs timely  receive a signed demolition approval document and disposal form, so  that demolished buildings are recorded as disposals in iNFADS and  removed at the end of the fiscal year. (Recommendation 1)", "The Commander of NAVFAC should finalize and implement written  procedures and related control activities to reasonably assure that all  buildings costing less than $750,000 and funded with Non-MILCON  funding are recorded in the Navy\u2019s iNFADS and therefore included as  assets in the financial statements if they meet or exceed the Navy\u2019s  capitalization threshold. (Recommendation 2)", "The Commander of NAVFAC should develop and implement written  procedures and related control activities to reasonably assure that  buildings coded as nonfunctional in iNFADS are excluded for financial  statement reporting purposes. (Recommendation 3)", "The Commander of NAVFAC should develop and implement written  procedures and related control activities related to DOD\u2019s  capitalization thresholds and outline the specific information to be  accumulated from iNFADS to reasonably assure that real property  assets are properly reported for financial statement reporting  purposes. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Navy for comment. In its  comments, reproduced in appendix II, the Navy concurred with our four  recommendations.", "We are sending copies of this report to the Secretary of Defense, the  Under Secretary of Defense (Comptroller)/Chief Financial Officer, the  Deputy Chief Financial Officer, the Office of the Assistant Secretary of  Defense (Energy, Installations, and Environment), the Assistant Secretary  of the Navy (Energy, Installations and Environment), the Assistant  Secretary of the Navy (Financial Management & Comptroller), the  Director of the Office of Management and Budget, and appropriate  congressional committees. In addition, the report is available at no charge  on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (404) 679-1873 or cordreyw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This engagement was initiated in connection with the statutory  requirement for GAO to audit the U.S. government\u2019s consolidated  financial statements. The focus of this engagement was the United  States Navy\u2019s (Navy) real property, specifically buildings, because the  Department of the Navy was the first military department to initially assert  real property audit readiness for existence and completeness. Our  objectives were to (1) determine the extent to which the Navy had internal  control deficiencies, if any, that may impair its ability to assert that its  buildings, as reported in its financial statements, exist and that the  information about the buildings is complete and adequately supported by  property records and (2) identify the challenges, if any, that the Navy  faces in valuing its buildings in accordance with federal accounting  standards.", "To address our first objective, we interviewed Department of Defense  (DOD) and Navy officials and reviewed relevant documentation, including  the Naval Facilities Engineering Command\u2019s (NAVFAC) Business  Management System (BMS) process documents, which are similar to  desktop procedures, to identify control activities over buildings. We  reviewed the results from prior real property audit readiness testing  conducted by a contractor that the Navy engaged to help it achieve audit  readiness for its real property. We performed data analyses of buildings  in the Navy\u2019s accountable real property system, the internet Navy Facility  Assets Data Store (iNFADS) as of September 30, 2016. To assess the  reliability of data we used, we reviewed relevant Navy documentation,  interviewed knowledgeable officials, reviewed policies and procedures  regarding collecting and maintaining the data, performed data analyses to  look for logical inconsistencies, and traced a nongeneralizable sample of  buildings to supporting documents. We concluded that the data elements  we used from iNFADS were sufficiently reliable for the purposes of  selecting a nongeneralizable sample of buildings to test.", "We selected the Norfolk and San Diego geographic areas for site visits  because of the numerous bases in each area and the proximity of 5  installations to one another in each of the areas. We analyzed data from  the iNFADS database as of September 30, 2016, to select buildings that  fit our selection criteria for our nongeneralizable sample of buildings for  book-to-floor testing from these two geographic areas. These selection  criteria included age of the buildings (both older and newer buildings);  square footage of the buildings, including small buildings (such as  sentry houses) and large buildings (such as training facilities and  barracks);  cost per square foot of the buildings, including lower cost (such as  warehouses) and higher cost (sentry houses with sophisticated  electronics); use of the buildings, to include a variety of uses (such as electrical  substations, training facilities, and offices); and operational status code of the buildings, including active and  nonfunctional.", "We conducted site visits in Norfolk and San Diego to interview real  property accountable officers (RPAO), observe buildings, and review the  available supporting documents for the sample buildings. We tested 40  buildings book to floor by visiting these buildings at 10 Navy installations  across two geographic areas. During our site visits, we also selected a  nongeneralizable sample of a total of 39 buildings on Navy installations to  be tested floor to book\u201419 from 5 Norfolk and 20 from 5 San Diego  areas. We met with the RPAOs at each of the10 installations and tested  by observation whether the 40 buildings selected for book-to-floor testing  existed. In addition to testing for existence, we compared the descriptions  of the buildings in iNFADS with the buildings that we observed. For  example, if the placed in service date in iNFADS was recent, we would  observe whether it was a newer building. We selected a nongeneralizable  sample of buildings for floor-to-book testing based on proximity to the  buildings we had selected for book-to-floor testing. For the 39 buildings  that we tested floor to book, we reviewed available supporting  documents.", "We also reviewed a Navy Office of Financial Operations white paper on  the risk and potential amount of material misstatement of accumulated  depreciation on the Navy\u2019s general fund consolidated balance sheet.  This white paper presented the results of a statistical sample for which 15  selected real property assets were excluded from testing because the  assets no longer existed. Two social science specialists with expertise in  research design and statistics reviewed the methodology and sampling  used in this study and found them to be sufficient for the purposes of  estimating the proportion of Navy real property assets reported as  existing in iNFADS that did not exist as of May 31, 2017. We used the  sampling information in the study to create a confidence interval around  the estimate of the proportion of buildings at the 95 percent confidence  level.", "To address our second objective, we reviewed federal accounting  standards, including Statement of Federal Financial Accounting Standard  (SFFAS) No. 50, and the Navy\u2019s documents for recording assets into  iNFADS. We also interviewed agency officials responsible for financial reporting and real property management, including the RPAOs at the  installations we visited, to identify the challenges the Navy faces in  recording buildings at actual cost once the opening balances have been  established according to SFFAS No. 50.", "While our audit objectives focused on certain control activities related to  (1) the existence and completeness of the Navy\u2019s buildings as reported in  its financial statements and the completeness and adequacy of  supporting property records for those buildings and (2) the valuation of  the Navy\u2019s buildings in accordance with federal accounting standards, we  did not evaluate all control activities and other components of internal  control. If we had done so, additional deficiencies may or may not have  been identified that could impair the effectiveness of the control activities  evaluated as part of this audit.", "We conducted this performance audit from September 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of the Navy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following individuals made  key contributions to this report: Paul Kinney (Assistant Director), Marcia  Carlsen, Dennis Clarke, Francine DelVecchio, Maxine Hattery, Jason  Kelly, Jared Minsk, Lisa Motley, Robert Sharpe, Sandra Silzer, and  Shana Wallace."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-202", "url": "https://www.gao.gov/products/GAO-19-202", "title": "Washington Metropolitan Area Transit Authority: Actions Needed to Strengthen Capital Planning and Track Preventive Maintenance Program", "published_date": "2019-01-31T00:00:00", "released_date": "2019-01-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Safety incidents in recent years on WMATA's rail system have raised questions about its processes for performing critical maintenance and replacing capital assets. WMATA initiated a new preventive maintenance program for its rail track in 2017, and is currently implementing a new capital planning process.", "GAO was asked to examine issues related to WMATA's capital funding and maintenance practices. This report examines: (1) how WMATA spent its capital funds from fiscal years 2011 through 2017, (2) how WMATA's new capital planning process addresses weaknesses it identified in the prior process, and (3) WMATA's progress toward its track preventive maintenance program's goals and how the program aligns with leading program management practices. GAO analyzed WMATA's financial and program information, interviewed officials of WMATA, the Federal Transit Administration, and five transit agencies selected for similarities to WMATA. GAO compared WMATA's capital planning process and track maintenance program with leading practices."]}, {"section_title": "What GAO Found", "paragraphs": ["From fiscal years 2011 through 2017, the Washington Metropolitan Area Transit Authority (WMATA) spent almost $6 billion on a variety of capital assets, with the largest share spent on improving its rail and bus fleet (see figure). Over this period, WMATA's capital spending was, on average, about $845 million annually.", "WMATA's new capital planning process could address some weaknesses it identified in the prior process. WMATA established a framework for quantitatively prioritizing capital needs (investments to a group of related assets) over a 10-year period. However, WMATA has not established documented policies and procedures for implementing the new process, such as those for selecting specific projects for funding in its annual capital budget. WMATA is currently using its new capital planning process to make fiscal year 2020 investment decisions. WMATA has proposed a fiscal year 2020 capital budget of $1.4 billion. Without documented policies and procedures for implementing the new planning process, WMATA's stakeholders do not have reasonable assurance that WMATA is following a sound process for making investment decisions.", "WMATA has made significant progress toward its track preventive maintenance program's goals, which are to reduce both track-defect and electrical-fire incidents by 50 percent in fiscal year 2019 compared with 2017. In fiscal year 2018, WMATA met its goal for reducing track defect incidents and reduced electrical fire incidents by 20 percent. However, in designing the program, WMATA did not fully assess risks. For example, WMATA did not quantitatively assess the impact of track defects or electrical fires on its ability to provide service, nor did it consider other risks such as non-electrical track fires, which represent about 30 percent of all fires on the system, or other factors, such as resources or track time. Without a comprehensive risk assessment, WMATA lacks reasonable assurance that the program is designed to address risks affecting the safety of the rail system or other risks that could hinder the new program's success."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that WMATA establish documented policies and procedures for the new capital planning process and conduct a comprehensive risk assessment for the track preventive maintenance program. WMATA described actions planned or underway to address GAO's recommendations. GAO believes the recommendations should be fully implemented, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Washington Metropolitan Area Transit Authority (WMATA) is one of  the largest transit operators in the nation, providing service for nearly 1- million rail and bus passenger trips each day, making it critical to the  National Capital Area\u2019s transportation infrastructure. In recent years  there have been questions about the safety of WMATA\u2019s rail transit  system and whether it has effective processes in place to replace assets  and perform critical maintenance. For example, the National  Transportation Safety Board (NTSB) found that WMATA had ineffective  inspection and maintenance practices that contributed to a January 2015  smoke incident near L\u2019Enfant Plaza station that resulted in one fatality  and 91 injuries. After investigations by the NTSB and the Federal Transit  Administration (FTA), among other actions, the FTA assumed direct  safety oversight of WMATA in October 2015. To address safety concerns  and recommendations from NTSB and FTA, WMATA conducted  SafeTrack, which was a large rehabilitation project that made emergency  repairs to WMATA\u2019s track infrastructure between June 2016 and June  2017. At the conclusion of SafeTrack, WMATA implemented its new  track preventive maintenance program designed to better ensure the  long-term reliability of its infrastructure and to prevent the need for  another SafeTrack.", "In addition to its efforts to improve safety, WMATA has also had a  growing maintenance backlog. In November 2016, WMATA reported that  it had about $17.4 billion in state-of-good-repair needs, up from the $7.6  billion it reported in February 2010. In 2018, the District of Columbia, the  state of Maryland, and the Commonwealth of Virginia each enacted  legislation that is expected to provide about $500 million combined  annually in additional funding to WMATA for capital purposes, a sum that  may help address this backlog. This funding is in addition to the $340  million contributed on average annually by state and local jurisdictions for  capital purposes from fiscal years 2011 through 2017, and almost $460  million received annually on average as grants from the federal  government for capital expenses over that period. WMATA is currently  developing a new capital planning process to improve its capital  investment decision-making and to address weaknesses WMATA  identified in its prior capital planning process.", "You asked that we review WMATA\u2019s capital funding and maintenance  practices. This report examines:  1.  How WMATA expended its capital funding from fiscal years 2011  2.  How WMATA\u2019s new capital planning process addresses weaknesses  it identified in the previous process, and  3.  WMATA\u2019s progress toward its track preventive maintenance program  goals and how the program aligns with leading program management  practices.", "To assess WMATA\u2019s capital spending from fiscal years 2011 through  2017, we reviewed WMATA\u2019s annual budgets, fourth-quarter and year- end financial reports, budget reconciliation reports, comprehensive  annual financial reports, FTA grant awards, and other documents  provided by WMATA and FTA. We selected fiscal year 2011 because it  was the first year in which WMATA received federal funding authorized by  the Passenger Rail Investment and Improvement Act of 2008 (PRIIA),  and we selected fiscal year 2017 because it was the most recent year  that capital expenditure data were available at the time of our review. We  also interviewed officials from WMATA and FTA to identify how WMATA  budgets and spends its capital funds. To identify categories of capital  spending, we collected information from WMATA\u2019s fourth-quarter reports  and year-end financial reports that were presented to WMATA\u2019s board of  directors and classified capital expenditures according to spending  categories included in WMATA\u2019s annual capital budgets and fourth- quarter financial reports. To identify annual capital funding received by  WMATA from fiscal years 2011 through 2017, we analyzed the  information provided by FTA on federal funding provided to WMATA and  reviewed financial reports from WMATA. We determined that these data  had some limitations but were sufficiently reliable for the purposes of our  review. An external audit report of WMATA financial information for fiscal  year 2016 noted a material weakness with WMATA\u2019s process for  accounting acquisition costs of capital assets. Specifically, there were  inconsistencies between WMATA\u2019s general ledger and sub-ledger, which  are used to record acquisition costs, depreciation, and other financial  information related to capital assets. As a result, additional steps were  required to reconcile the difference between the two sources and could  have resulted in a material error. However, after interviewing WMATA  officials about the weakness and assessing the available financial  information, we determined that the data we used were sufficiently  reliable for our purpose of showing general trends of capital  expenditures.", "To assess WMATA\u2019s new capital planning process, we reviewed WMATA  documentation, including its two most recent Capital Needs Inventory  reports prepared in 2010 and 2016. We also reviewed available WMATA  documentation on the new planning process, including guidance  documents on how WMATA intends to initiate capital projects, and  interviewed WMATA officials about capital planning and development of  the new capital planning process. Further, we compared WMATA\u2019s new  capital planning process to leading practices identified in GAO\u2019s  Executive Guide on capital decision-making, leading practices for  rehabilitating and replacing capital assets contained in the Transit  Cooperative Research Program Report 157, and project management  principles from the Project Management Institute, Inc. In addition, we  interviewed officials from five peer transit agencies that are similar to  WMATA to obtain information from them on how they conduct capital  planning. We selected these agencies based on a number of factors,  including those that were comparable to WMATA in terms of transit route  miles, system use, and capital spending. The transit agencies we  selected were: (1) Bay Area Rapid Transit; (2) Chicago Transit Authority;  (3) Massachusetts Bay Transportation Authority; (4) Metropolitan Atlanta  Rapid Transit Authority; and (5) Southeastern Pennsylvania  Transportation Authority. The results of these interviews are not  generalizable.", "To assess WMATA\u2019s track preventive maintenance program, we  reviewed WMATA documentation about the program, interviewed  WMATA officials, and analyzed track defect and wayside electrical fire  data provided by WMATA from fiscal years 2016 through 2018. We  interviewed WMATA officials about their procedures for collecting and  analyzing these data. To assess the accuracy of these data, we also  performed independent tests that included verifying WMATA\u2019s final tally of  track-defect and fire incidents and verifying there were no extended  periods of time in which data were missing. We determined the data were  sufficiently reliable for the purposes of our report. We also interviewed  officials from the American Public Transportation Association and the  American Railway Engineering and Maintenance-of-Way Association to  discuss best maintenance practices in the transit industry. We then  compared WMATA\u2019s track preventive maintenance program to leading  program management practices identified by the Project Management  Institute, Inc. and internal control standards related to risk assessment  published by the Committee of Sponsoring Organizations of the  Treadway Commission (COSO) and followed by WMATA. A more  detailed summary of our scope and methodology appears in appendix I.", "We conducted our work from November 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": ["WMATA was created in 1967 through an interstate compact\u2014matching  legislation passed by the District of Columbia, state of Maryland, and  Commonwealth of Virginia, and then ratified by Congress\u2014to plan,  develop, finance, and operate a regional transportation system in the  National Capital area. A board of eight voting directors and eight  alternate directors governs WMATA. The directors are appointed by the  District of Columbia, Virginia, Maryland, and the federal government, with  each appointing two voting and two alternate directors. WMATA  operates six rail lines\u2014the Red, Orange, Blue, Green, Yellow, and Silver  Lines\u2014connecting various locations within the District of Columbia,  Maryland, and Virginia. WMATA\u2019s rail system has 118 linear miles of  guideway: 51 miles of subway, 58 miles at ground level, and 9 miles on  aerial structures.", "WMATA\u2019s capital investments are funded through multiple sources.  These include a combination of grants it receives from the federal  government, along with matching funds and other contributions it receives  from the states and local jurisdictions in which it operates (see fig. 1).", "From fiscal years 2011 through 2017, WMATA received about $5.8 billion  in capital funding. Over half of this funding came from the federal  government ($3.2 billion), and state and local jurisdictions provided 41  percent ($2.4 billion). WMATA also took on about $230 million in long- term debt to finance its capital program during this time period. The  federal funding included grant awards, in addition to annual  appropriations authorized under PRIIA. In 2008, PRIIA authorized $1.5  billion to WMATA, available in increments over 10 years beginning in  fiscal year 2009, or until expended, for capital improvements and  preventive maintenance. PRIIA funding and certain federal grants  require state or local jurisdictions to provide matching funds. Additionally,  a large portion of funding from state and local jurisdictions is governed by  capital-funding agreements, which are periodically negotiated between  WMATA and the states and localities. From fiscal years 2011 through  2017, state and local jurisdictions contributed on average about $340  million annually to WMATA, generally for capital purposes. The annual  capital contributions from the jurisdictions are expected to more than  double as a result of the recent legislation enacted by the District of  Columbia, Maryland, and Virginia in 2018. In addition, WMATA officials  told us that it will have the ability to further leverage this dedicated funding  and issue debt to finance its capital projects.", "WMATA has several steps in its capital planning process. These include  developing the following:", "Capital Needs Inventory. WMATA periodically identifies its capital  investment needs in this inventory. WMATA issued a Capital Needs  Inventory in February 2010 and another in November 2016, each  covering a 10-year period. According to WMATA, Capital Needs  Inventories help inform the annual capital budget and capital  improvement program.", "Annual Capital Budget. Each year, WMATA prepares an annual  capital budget, which identifies projects WMATA plans to undertake in  the next fiscal year. WMATA\u2019s fiscal year 2019 annual capital budget  was approved by the board of directors at $1.3 billion.", "Six-Year Capital Improvement Program. Within WMATA\u2019s annual  capital budget, WMATA includes a Six-Year Capital Improvement  Program identifying capital projects WMATA plans to implement over  a 6-year period. WMATA\u2019s most recent Six-Year Capital Improvement  Program (covering the fiscal year 2019\u20142024 period) was approved  by the board of directors at $8.5 billion.", "According to WMATA officials, WMATA is currently implementing a new  capital planning process through which it will develop its fiscal year 2020  Capital Budget and fiscal year 2020-2025 Six-Year Capital Improvement  Program. WMATA adopts and implements the capital budget by June 30  for the new fiscal year, which begins on July 1. The fiscal year 2020  Capital Budget is scheduled to be adopted and implemented by June 30,  2019. Among other things, the goals and objectives of this new capital  planning process are to  construct an objective, data-driven, and risk-based approach to  estimate major rehabilitation and capital asset replacement needs; build a capital investment prioritization methodology aligned with  WMATA\u2019s strategic goals and grounded in asset inventory and  condition assessments; and develop a process that will support the construction and ongoing  stewardship of its Transit Asset Management Plan. The latter is  discussed in more detail below.", "WMATA has also recently undertaken efforts to address issues related to  the condition and maintenance of its track. After SafeTrack concluded in  June 2017, WMATA implemented what officials describe as its first track  preventive maintenance program designed to incorporate industry-wide  best practices related to track maintenance, in order to improve the rail  system\u2019s long-term safety and reliability. The new program commenced  in June 2017, and WMATA\u2019s board reduced late-night service to allow for  longer maintenance work hours.", "To make the best use of the extra maintenance hours, WMATA focused  its new program on six separate initiatives that together would address  what WMATA viewed as its two most pressing track maintenance  concerns\u2014electrical fires caused by cable and insulator defects along the  track wayside, and defects to the track itself, including unsecured rail  fasteners and worn track switches (see table 1). These initiatives are  planned to cover the entire transit system and will take various amounts  of time to complete.", "FTA also plays a role in WMATA activities by providing and directing the  use of federal funds, overseeing safety, and requiring transit asset  management. FTA provides grants that support capital investment in  public transportation, consistent with locally developed transportation  plans, and has provided such funding to WMATA as noted above.  Additionally, though states play a role in safety oversight of rail transit  systems through state safety oversight programs, FTA also has the  authority to conduct various safety oversight activities such as inspections  and investigations. Furthermore, FTA has the authority to assume  temporary, direct safety oversight of a rail transit system if it finds the  state safety oversight program is inadequate, among other things. After  FTA conducted a safety management inspection and issued a safety  directive with 91 required actions, it found WMATA\u2019s state safety- oversight program to be inadequate and assumed direct safety-oversight  of WMATA in October 2015. Finally, FTA is responsible for assisting  public transportation systems to achieve and maintain their infrastructure,  equipment, and vehicles in a state of good repair. Specifically, in July  2016, FTA issued regulations establishing a National Transit Asset  Management System. Applicable transit agencies were required to  have an initial transit asset management plan completed by October 1,  2018. For \u201ctier I providers,\u201d such as WMATA, this plan is to contain  nine elements, including an inventory of the number and type of capital  assets, and a condition assessment of those inventoried assets for which  a provider has direct capital responsibility. WMATA completed its  Transit Asset Management plan, dated October 1, 2018. This plan  outlines WMATA\u2019s policy, approach, and targeted actions to improve its  asset management practices over the next 4 years."], "subsections": []}, {"section_title": "WMATA Has Focused Recent Capital Expenditures on Its Vehicle Fleet and Expects Future Expenditures to Increase to Meet State-of-Good-Repair Needs", "paragraphs": [], "subsections": [{"section_title": "Since Fiscal Year 2011, WMATA Has Expended the Largest Share of Its Capital Funds on Replacing and Maintaining Its Rail and Bus Fleets", "paragraphs": ["WMATA expends its capital funds on a variety of capital assets as part of  its capital budget and Capital Improvement Program. From fiscal year  2011 through 2017, WMATA expended approximately $5.9 billion on  capital investments. Of this amount, WMATA expended the largest  portion on assets related to the replacement, rehabilitation, and  maintenance of its revenue vehicles (railcars, buses, and vans) and  lesser amounts on other categories of assets, as discussed below and  shown in figure 2.", "Rail and Bus Vehicle Fleet: WMATA expended approximately $2.16  billion (36 percent) of the total $5.9 billion on projects related to its rail  and bus fleet from fiscal years 2011 through 2017. The $2.16 billion  included approximately $1.1 billion (51 percent) on replacing,  expanding, and rehabilitating its rail fleet and approximately $956  million (44 percent) on its bus fleet. According to WMATA, it initiated  its railcar replacement program in 2005 to increase capacity and  reduce maintenance costs. In addition, a June 2009 Red Line collision  of two trains near Fort Totten resulted in nine deaths and led the  NTSB to recommend that WMATA retire and replace all 1000 series  railcars. From fiscal year 2011 through 2017, WMATA expended  almost $656 million on replacing these and other railcars and  expanding its overall fleet. This effort includes WMATA\u2019s planned  purchase of a total of 748 new 7000-series railcars (see fig. 3).  Approximately $530 million was expended on replacing vehicles from  fiscal years 2015 through 2017. For example, in fiscal year 2017  WMATA accepted delivery of about 50 percent (364 railcars) of its  planned purchase of 748, 7000-series railcars. WMATA expects to  complete its current railcar replacement program by fiscal year 2024,  with an estimated total program cost of about $1.7 billion.", "Fixed Rail Infrastructure: WMATA expended about $1.23 billion of the  total $5.9 billion (21 percent) to maintain its fixed-rail infrastructure. Of  this $1.23 billion, WMATA expended about $650 million (53 percent)  on rail infrastructure and rehabilitation projects and $573 million (47  percent) on improvements to its track and structures (e.g., bridges  and tunnels). According to WMATA, the rail infrastructure and  rehabilitation projects began in 2009 and were the first comprehensive  rehabilitation of WMATA\u2019s rail infrastructure in its history. Typical  projects included rehabilitating WMATA\u2019s water drainage pumps and  tunnel ventilation, fire, and communications systems, among other  things. WMATA work related to track and structures involved the  maintenance and rehabilitation of the steel rail that guides railcars, the  cross ties and fasteners that hold the rail in place, the third rail that  provides power to trains, and the bridges and tunnels the track runs  on or through. The share of WMATA\u2019s total capital expenditures going  to track and structures increased from about $80 million in fiscal year  2016 to $158 million in fiscal year 2017. This expenditure was  primarily to implement SafeTrack.", "Maintenance Facilities and Equipment: WMATA expended  approximately $1.1 billion of the total $5.9 billion (19 percent) on  assets related to maintenance facilities and equipment, which include  rail yards, bus garages, and equipment used to rehabilitate and  maintain WMATA\u2019s track and vehicle fleet. For example, from fiscal  years 2011 through 2017 WMATA expended approximately $75  million in constructing the Cinder Bed Road bus maintenance facility  in Lorton, Virginia.", "Passenger and Other Facilities: WMATA expended about $814 million  of the total $5.9 billion (14 percent) on passenger, business, and  security support facilities. Such facilities include rail and bus stations,  police facilities, and elevator and escalator rehabilitation.", "Business Systems and Project Management Support: WMATA also  expended about $628 million of the total $5.9 billion (11 percent) on  assets related to operations and business support software and  equipment."], "subsections": []}, {"section_title": "Prior to Fiscal Year 2017, WMATA Did Not Fully Expend Its Total Annual Capital Budget but Expects to Increase Expenditures to Address Repairs", "paragraphs": ["From fiscal years 2011 through 2017, WMATA frequently over-estimated  in its annual budgets the annual amount of capital investments it could  implement (see fig.4). Out of the approximately $7.5 billion that WMATA  budgeted for capital investments over this period, it expended  approximately $5.9 billion (80 percent). WMATA\u2019s ability to fully expend  its capital budget has varied from year to year. Specifically, WMATA  expended about 65 percent ($700 million) of its $1.1 billion capital budget  in fiscal year 2015, compared with 85 percent ($1.1 billion) of its $1.2  billion capital budget in fiscal year 2016. In fiscal year 2017, WMATA  expended nearly 100 percent of its $1.18 billion capital budget. WMATA  attributed the increased expenditures to intensified efforts to address  deferred maintenance, primarily through the SafeTrack initiative and an  increased delivery and acceptance rate for the new 7000-series railcars,  among other things. The total amount expended in fiscal year 2017 to  replace the older railcars with new vehicles totaled about $335 million.", "According to WMATA, there are a number of reasons why it has not fully  expended its capital budget in any given year:", "Contracting and Scheduling Issues: WMATA officials stated that there  were contract and scheduling delays in the implementation of planned  capital projects. For example, WMATA officials said contracts were  sometimes not executed during the fiscal year in which funds were  originally budgeted for the work, and in other instances contract work  was not carried out according to schedule and expenditures were  delayed.", "Changing Priorities: WMATA officials stated that in some instances,  the reevaluation and reprioritization of contracted projects affected  WMATA\u2019s ability to expend its capital budget. In such cases, new  capital needs were sometimes identified and prioritized over other  needs, which caused delays in work schedules and potential financial  claims by contractors due to delays. For example, WMATA stated that  in fiscal year 2011 the initiation of the Red Line rehabilitation program  was delayed as a result of the prioritization of the safety needs in  response to the 2009 Fort Totten accident.", "Federal Reimbursement Restrictions: WMATA officials cited FTA  restrictions on its reimbursement of federal funds between fiscal years  2014 and 2015 as a reason for its inability to expend budgeted capital  funds in those years. In a financial management oversight review  completed by FTA in 2014, FTA found material weaknesses and  significant deficiencies in WMATA\u2019s financial management controls,  policies, and procedures regarding its receipt of federal grant funds.  Based on these preliminary findings, FTA restricted WMATA\u2019s ability  to automatically access federal grant reimbursements until WMATA  undertook corrective actions. During these years, WMATA reported its  management slowed expenditures on targeted capital projects due to  concerns over reimbursement of grants. By October 2017, after  WMATA implemented an action plan to improve its financial controls,  FTA reinstated WMATA\u2019s ability to automatically receive all awarded  federal funds on a regular schedule.", "Unpredictable Funding: WMATA officials stated that unpredictable  funding affected the level of its capital expenditures from year to year.  Since WMATA had multi-year capital projects with multi-year  procurements, according to WMATA officials, uncertainty with regard  to how much capital funding would be received on an annual basis  affected the implementation of projects.", "Inadequate Capital Planning Process: WMATA attributed some of its  inability to expend budgeted capital funds to the absence of a uniform  and efficient capital planning process. According to WMATA, it lacked  formal procedures to initiate projects and newer projects often  experienced delays in implementation, which delayed expenditures on  these projects. Later in this report, we discuss WMATA\u2019s efforts to  develop a new capital planning process.", "Although WMATA expended more of its capital budget in fiscal year 2017  than it had in prior years, it estimated that capital spending will need to  increase even more to address state-of-good-repair needs. In 2016,  WMATA projected that its state-of-good-repair needs amounted to about  $17.4 billion from 2017 through 2026. This level is almost $10 billion more  than WMATA estimated for its state-of-good-repair needs from 2011  through 2020 in its February 2010 Capital Needs Inventory. WMATA  officials attributed the increase to a capital planning process insufficient to  identify capital needs and an increase in cost of needs that were  previously unmet. In addition, WMATA officials said the quality and  quantity of asset data had improved over time. To address its state-of- good-repair needs, in November 2016 WMATA estimated that it will need  to expend about $1.74 billion annually on capital expenditures from 2017  through 2026. This is more than twice the $845 million average annual  capital expenditures from fiscal year 2011 through fiscal year 2017."], "subsections": []}]}, {"section_title": "WMATA\u2019s New Capital Planning Process Could Address Some Previous Weaknesses WMATA Identified, but the Process Does Not Have Documented Policies and Procedures and Has Other Weaknesses", "paragraphs": ["WMATA\u2019s new capital planning process could address some of the  weaknesses it identified in the previous process, such as better  distinguishing capital needs (investments in groups of related assets)  from capital projects (investments in specific assets). However, WMATA  has not established documented policies and procedures to guide the developed performance measures to assess capital projects and the  capital planning process; and developed a plan to obtain complete information about the inventory  and condition of WMATA assets.", "These remaining weaknesses could hinder sound capital investment  decisions."], "subsections": [{"section_title": "WMATA\u2019s New Capital Planning Process Could Facilitate Better Identification of Capital Investment Needs", "paragraphs": ["WMATA\u2019s new capital planning process could facilitate better  identification of capital investment needs. Leading practices for capital  planning, among other things, call for an organization to conduct a  comprehensive assessment of its needs to meet its mission. WMATA  uses the Capital Needs Inventory to assess its capital needs over a 10- year period across its various assets and help identify specific projects to  include on subsequent capital improvement programs. In November  2016, WMATA issued its most recent Capital Needs Inventory, covering  calendar year 2017 through 2026, and reported there were weaknesses  and limitations in the process used to prepare the previous Capital Needs  Inventory, issued in 2010. Those weaknesses and the actions WMATA  has taken to address them include the following:", "Distinguishing capital needs from capital projects. WMATA reported in  2016 that the 2010 Capital Needs Inventory was primarily a list of  proposed projects and did not provide proper attention to evaluating  WMATA\u2019s overall asset needs and the readiness of projects for  programming in the capital improvement program. WMATA has taken  actions to potentially address this weakness. In April 2016, WMATA  issued a policy/instruction document that established policies and  procedures for preparing capital needs inventories. This document  defined the process for capital needs identification and established a  framework evaluating and prioritizing capital investment needs.  Among other things, this framework requires that WMATA  departments develop capital needs justification packages and that  these packages be reviewed by the Capital Program Advisory  Committee for completeness and accuracy before being forwarded for  further review. The guidance also requires that WMATA\u2019s strategic  objectives be considered when identifying and prioritizing capital  projects.", "Qualitative rather than quantitative prioritization of needs. In 2016,  WMATA reported that the prioritization of capital needs in the 2010  Capital Needs Inventory was primarily based on qualitative  assessments by management rather than being driven by quantitative  information and condition assessments. According to WMATA, the  2010 Capital Needs Inventory was largely based on the professional  judgment of staff in consideration of WMATA\u2019s strategic goals but was  not data-driven. WMATA has taken actions to address this weakness  by issuing a policy that requires WMATA\u2019s senior management  serving on the Capital Program Advisory Committee to use a more  quantitative-based capital prioritization formula in preparing the  Capital Needs Inventory. For example, the November 2016 Capital  Needs Inventory used a quantitative approach to rank and prioritize  capital needs. This approach included the use of four criteria\u2014asset  condition, safety and security, service delivery, and ridership impact\u2014 to numerically score capital needs and WMATA then used a risk- based weighting approach to combine these criteria into a single  overall prioritization score."], "subsections": []}, {"section_title": "WMATA Has Not Yet Established Documented Policies and Procedures, or Developed Performance Measures and Complete Asset Inventory Information", "paragraphs": ["While WMATA has addressed some weaknesses it identified in its prior  planning, it has not established documented policies and procedures to  guide the annual capital planning process, or developed measures to  assess capital project and program performance and a plan to obtain  complete information on its assets and their physical condition."], "subsections": [{"section_title": "Policies and Procedures to Guide the New Capital Planning Process", "paragraphs": ["Although WMATA established policies and procedures for prioritizing  capital needs\u2014that is, investments in groups of related assets\u2014for the  2016 Capital Needs Inventory, it has not established documented policies  and procedures for the new capital planning process, including how  WMATA will rank and select individual projects to address those needs  through its annual capital budgets and Six-Year Capital Improvement  Program. For example, through its Capital Needs Inventory WMATA  stated it needed to invest $17.4 billion over a 10-year period to address  its state-of-good-repair needs, including replacing vehicles, rehabilitating  stations, and investing in other types of assets. WMATA uses the annual  capital budget and Six-Year Capital Improvement Program to identify the  specific projects to be funded to meet the 10-year investment needs.  However, because WMATA has not established documented policies and  procedures for the new capital planning process, it has not yet identified  the specific methodologies to rank and select projects for funding on an  annual basis.", "According to WMATA officials, the legacy annual capital planning process  was based on implementing the list of projects that resulted from its 2010  Capital Needs Inventory and WMATA did not have a documented capital  planning process that it followed on an annual basis. WMATA officials told  us that the legacy capital planning process was \u201cad hoc\u201d in nature, in part  because WMATA was reacting to emergencies. For example, because  WMATA needed to address the NTSB recommendation to replace the  1000-series railcars and address FTA safety directives after the 2015  smoke incident at the L\u2019Enfant Plaza Station, it did not adhere to a formal  annual-planning process.", "The COSO internal control standards point out the importance of  organizations documenting their processes to facilitate retention and  sharing of organizational knowledge. Leading practices contained in the  Executive Guide also recommend that organizations have defined  processes for ranking and selecting projects for capital funding. In  addition, the Executive Guide noted that organizations find it beneficial to  rank projects because the number of requested projects often exceeds  available funding.", "Officials from all five of the peer transit agencies we spoke with told us  they had or planned to develop documented processes for making capital  investment decisions. For example, officials from four of the five peer  transit agencies we spoke with said they use a project scoring and  ranking system in their capital planning process, and officials from the fifth  agency told us it plans to develop such a system. Officials from one  agency provided us with its project evaluation and scoring system that  assigns scores using eight selection criteria that are tied to the agency\u2019s  strategic business plan and state priorities. The selection criteria include  such things as system preservation, safety, and cost-effectiveness.  Officials from another agency told us they use an analytical tool to score  projects and that every project (new or existing) gets re-scored annually.", "As a result of WMATA not having documented policies and procedures  for its capital planning process, it is unclear how important parts of the  process will work and the basis for WMATA\u2019s investment decisions.  WMATA has outlined some high-level policies for the capital planning  process and prepared limited guidance for certain parts of the process.  For example, WMATA officials told us that its recently issued Transit  Asset Management Plan contains asset management policies that  address the ranking and selecting of capital projects. Although the Transit  Asset Management Plan discusses the process for estimating and  prioritizing capital needs and, which are precursors of projects, the plan  does not specifically address how projects would be selected for annual  capital budgets and the capital improvement program. In addition,  WMATA developed limited guidance for staff to use in developing new  capital projects. Under this guidance, capital funds could be provided to  evaluate, plan, and develop projects. While this guidance may be useful  for developing projects, it does not establish the policies and procedures  WMATA will follow to decide which projects will be funded through the  annual capital budget and the capital improvement program.", "Further, the documentation prepared by WMATA to date does not  establish policies and procedures for the entire capital planning process  and how decisions will be made throughout the process. WMATA  reported in its fiscal year 2019 annual budget that it had created a capital  program manual that identifies the roles, responsibilities, processes, and  calendars of events to inform the fiscal year 2020 capital program.  WMATA officials told us that the previous Director of the Capital Planning  and Program Management Department had included this information in  the draft budget proposal when these documents were being developed.  However, WMATA officials told us that these documents were not  completed, and that the information was mistakenly not removed from the  budget before the previous director of the department left the agency.", "WMATA officials told us they plan to formalize policies, procedures, and  manuals for the fiscal year 2021\u20132026 capital-investment program cycle.  The current leadership of the Capital Planning and Program Management  Department told us that given the time-constraints facing WMATA in the  current fiscal year 2020 planning cycle, WMATA decided not to formally  document the new capital planning process until after WMATA has had a  chance to test it through the current planning cycle to see how it works.  According to the official, the department\u2019s leadership has instructed staff  to document steps taken in implementing the new process so that  WMATA will have the opportunity to learn from the new process and  make necessary changes before developing formal, written procedures  that will guide future planning cycles.", "Although delaying formal development of policies and procedures may  provide an opportunity to learn from the process while implementing it, it  does not provide the guidance necessary now as WMATA uses its new  capital planning process to develop the fiscal year 2020 capital program.  In particular, because WMATA has not established policies and  procedures for ranking and selecting projects, WMATA does not have a  framework or clear criteria for programming projects in the annual capital  budget for fiscal year 2020. WMATA has proposed a fiscal year 2020  capital budget of $1.4 billion. In addition, WMATA\u2019s plan to document  steps taken in implementing the new process as it is occurring does not  provide reasonable assurance that WMATA is making decisions using a  consistent process to direct investments toward WMATA\u2019s highest priority  needs. A consistent process is all the more important to ensure that  WMATA does not continue to use an ad-hoc process for capital  investment decisions, as it did in its legacy process. WMATA\u2019s annual  capital spending is anticipated to increase substantially over the fiscal  year 2020-2025 period, as WMATA expects to be programing the  additional $500 million annually for capital purposes committed by the  District of Columbia, Maryland, and Virginia. Without a documented  planning process that includes procedures for ranking and selecting  projects for funding in the fiscal year 2020 capital budget, WMATA\u2019s  stakeholders lack reasonable assurance that WMATA\u2019s capital  investment decisions will be made using a sound and transparent  process."], "subsections": []}, {"section_title": "Performance Measures to Assess Capital Projects and the Capital Planning Process", "paragraphs": ["WMATA has also not developed performance measures to assess capital  projects and the capital planning process. Leading practices from the  Executive Guide suggest that one way to determine if a capital  investment achieved the benefits that were intended when it was selected  is to evaluate its performance using measures that reflect a variety of  outcomes and perspectives. By looking at a mixture of measures, such as  financial improvement and customer satisfaction, managers can assess  performance based on a comprehensive view of the needs and objectives  of the organization. Leading organizations we studied in preparing the  Executive Guide, such as private sector companies, use financial and  non-financial criteria for success that are tied to organizational goals and  objectives. According to the Executive Guide, project-specific  performance measures are then used to develop unit performance  measures and goals, which are ultimately used to determine how well an  organization is meeting its goals and objectives.", "WMATA officials told us they have not developed performance measures  for assessing the performance of individual projects or the capital  planning process as a whole.  One WMATA official told us that WMATA  would like to evaluate results of the new capital planning process to  determine whether organizational goals have been met. The official  suggested that WMATA would work with a consultant to demonstrate a  linkage between capital planning goals and WMATA\u2019s organizational  goals. However, the official did not indicate when this step would occur or  provide additional information. Moreover, it is unclear whether the  official\u2019s intentions for this effort would result in measures for assessing  individual projects as well as the overall capital planning process. By  developing measures, WMATA will be better positioned to assess  whether specific capital investments met their intended outcomes or if the  capital planning process itself is helping WMATA achieve its strategic  goals and objectives and effectively using taxpayer funds."], "subsections": []}, {"section_title": "Information on Asset Inventories and Physical Condition Assessments", "paragraphs": ["WMATA also does not have a complete inventory or physical condition  assessments of its assets. Leading practices for good capital decision- making call for organizations to conduct a comprehensive assessment of  their needs and identify the organization\u2019s capabilities to meet these  needs. This process includes taking an inventory of assets and their  condition and assessing where there are gaps in meeting organizational  needs. The Transit Cooperative Research Program has also identified  asset inventory and condition assessments as the first step in determining  what asset rehabilitations and replacements are needed as transit  providers address their state-of-good-repair requirements. Asset  inventories and condition assessments provide critical information for  capital-investment decision making.", "WMATA has initiated various efforts to obtain better information about its  assets and their condition. These efforts have included:", "Transit Asset Inventory and Condition Assessment Project. In 2016,  WMATA began this project to provide a physical inventory of WMATA  assets and their condition, in part to comply with FTA\u2019s Transit Asset  Management regulations. According to WMATA, this project was to be  the cornerstone in ensuring a complete, consistent, accurate, and  centralized repository of relevant asset-related data. However,  WMATA officials said that the project primarily focused on obtaining  an inventory and condition assessment of WMATA facilities and  equipment. A February 2018 WMATA memo to senior management  stated that even when the project was completed, WMATA would still  lack a robust database of track, guideway, infrastructure (e.g., tunnels  and bridges), systems, and communication assets\u2014elements that the  November 2016 Capital Needs Inventory noted were the largest gaps  in the asset information used to support capital needs forecasting.  According to WMATA, this project produced inventory and condition  assessments for about 30 percent of WMATA\u2019s asset base. As of  October 2018, WMATA considered the project complete since it  provided information to help prepare WMATA\u2019s completed Transit  Asset Management Plan, dated October 1, 2018. WMATA officials  noted that they will continue to develop their asset inventories and  condition assessments through its new Enterprise Asset Management  Program, described below.", "Enterprise Asset Management Program. In December 2017, WMATA  began development of an Enterprise Asset Management Program.  According to WMATA, this program is an effort to institutionalize asset  management practices that are aligned with industry best practices to  provide, among other things, high quality asset data for informed  decision-making, including for capital planning. Expected program  tasks include updating asset records and improving and consolidating  asset inventories in WMATA\u2019s asset system of record (called  Maximo).", "WMATA\u2019s efforts to develop more complete asset inventory and condition  assessments are not complete. Among other things, WMATA  documentation on the Enterprise Asset Management Program cited  \u201cinattention, poor standardization, and organizational silos\u201d as factors that  have resulted in WMATA having multiple sets of asset records in various  states of accuracy and usefulness. The Enterprise Asset Management  Program, according to WMATA, is an effort to help address this situation  and improve asset data quality, including inventory and condition  assessments.", "Although WMATA is developing a new Enterprise Asset Management  Program, it has yet to develop a plan for obtaining a complete inventory  or physical condition assessments of its assets. The Project Management  Institute\u2019s Guide to the Project Management Body of Knowledge,  PMBOK\u00ae Guide describes the elements of good project management  and their importance in achieving organizational goals. Among these  elements are:", "Having a project charter that formally authorizes a project, that  commits resources to the activity, and that provides a direct link to  organizational strategic objectives;", "Preparing a project plan to define the basis of the project\u2019s work and  how the work will be performed; and", "Establishing a monitoring and control process to track, review, and  report overall progress in meeting the plan\u2019s objectives.", "WMATA has prepared draft documents that describe how it will  implement the Enterprise Asset Management Program and that contain  some elements of good project management. For example, in January  2018 WMATA circulated a proposed charter that once approved would  authorize the Enterprise Asset Management program, identify needed  resources, and link to WMATA\u2019s strategic goals. As of October 2018, this  proposed charter had not yet been finalized. Draft program documents  also indicate there would be a monitoring and control process that would  establish regular reporting to internal stakeholders to assess program  accomplishments and progress implementing the program.", "While WMATA has developed a proposed charter and a monitoring and  control process for its Enterprise Asset Management Program, it has not  established a plan for collecting asset inventory and condition  assessment information. The draft program charter includes general tasks  for updating asset records and improving and consolidating asset  inventory data in Maximo. However, a plan would provide more specific  details for how the work would be completed, such as the information to  be collected on different assets, how and when this information would be  consolidated into Maximo, milestones for completing the work, or how the  effort would be funded. Without a plan to obtain asset inventory and  condition assessment information WMATA will continue to lack critical  information needed for good capital planning and sound investment  decision-making."], "subsections": []}]}]}, {"section_title": "WMATA Reported Significant Progress toward Goals, but the Track Preventive Maintenance Program Does Not Fully Align with Leading Practices", "paragraphs": [], "subsections": [{"section_title": "WMATA Has Reduced Both Track Defect Incidents and Electrical Fires but Faces Challenges Implementing Its Track Preventive Maintenance Program", "paragraphs": ["WMATA has reported significant progress toward its goals of reducing  track defects and fire incidents, but still faces several challenges with  implementing its track preventive maintenance program. WMATA defines  an incident as any unplanned event that disrupts rail revenue service.  According to WMATA officials, within the track preventive maintenance  program WMATA seeks to reduce incidents specifically caused by  electrical wayside fires and track defects each by 50 percent from fiscal  year 2017 to fiscal year 2019. WMATA reported that in fiscal year 2018 it  had met its goal for track defect incidents but not for electrical wayside  fires. According to officials, track defect incidents\u2014which include  incidents caused by defective fasteners, switches, and \u201cballast\u201d\u2014were  reduced by 50 percent from a total of 778 in fiscal year 2017 to 387 in  fiscal year 2018. Electrical-wayside-fire incidents\u2014including incidents  caused by cable and insulator fires\u2014went down 20 percent from a total of  55 in fiscal year 2017 to 44 in fiscal year 2018 (see fig.5).", "Although WMATA has reduced both track defect incidents and electrical  fires, the track preventive maintenance program is not intended to  address the full range of all defects and track fires that may occur on the  system. WMATA officials told us that the track preventive maintenance  program specifically seeks to reduce electrical-wayside-fire incidents,  which are a specific sub-set of overall track fires, and does not include  non-electrical fires or smoke incidents, such as the ones caused by  railcars or debris. WMATA captures and publicly reports the non-electrical  fires as part of its quarterly Metro Performance Report, but according to  WMATA officials, these fires are not specifically addressed through the  track preventive maintenance program. While electrical fires decreased in  fiscal year 2018, non-electrical fires did not change, as WMATA reported  23 non-electrical fires for both fiscal years 2017 and 2018. Additionally  the track preventive maintenance program addresses a certain sub-set of  track defect incidents such as those caused by loose fasteners and  defective switches. According to WMATA, these track defect incidents  can be addressed through its track geometry, torqueing, and switch  maintenance initiatives. WMATA addresses other types of track defects,  such as rail breaks and third-rail defects, through its capital program.  However, according to WMATA, track defects attributable to the capital  program are still included as part of the overall goal to reduce all track  defect incidents by 50 percent by fiscal year 2019.", "WMATA established goals for completing each of the six track preventive  maintenance initiatives within a certain time period and reported that in  fiscal year 2018 it was on-track to meet or exceed those goals for four of  the initiatives. For example, in implementing its \u201ccable meggering\u201d  initiative, WMATA established a goal to inspect and replace electric  cables across its entire rail system within 4 years. According to WMATA,  it met its target for fiscal year 2018 by completing 25 percent of the entire  system in that year. In addition to cable meggering, WMATA also met its  annual targets for the switch maintenance, track bed cleaning, and stray  current-testing initiatives. As for the two initiatives behind schedule, the  torqueing initiative was 70 percent complete and the tamping initiative  stood at 90 percent for the 2018 target (see table 2). Officials told us they  have developed various ways to improve efficiency with these initiatives.  For instance, WMATA improved the productivity of its switch maintenance  initiative by separating the work to inspect the switches from the follow-up  repair work to grind and weld them. These activities had previously been  conducted by the same team.", "However, WMATA faces challenges in implementing the track preventive  maintenance program moving forward. WMATA officials described track  preventive maintenance as a necessary operation that must be  continuously performed and balanced in conjunction with regular train  operations that provide service to their customers. According to WMATA  officials, executing this new program requires regular refinements to  ensure it continues to progress toward its desired outcomes. Among the  implementation challenges identified by WMATA officials were the  following:", "Securing Sufficient Track Time. WMATA officials told us that getting  adequate time to perform track maintenance is difficult because it  requires reducing the number of hours in which WMATA provides  service to customers. Consequently, increased maintenance hours  can result in lost revenue. Officials from the peer transit agencies we  interviewed stated that the tension between conducting maintenance  and providing service is common in the transit industry. According to  WMATA officials, prior to SafeTrack, windows for performing track  maintenance were not sufficient to complete all necessary work,  partially because of this need to balance maintenance hours and  service hours. To address this issue, WMATA increased its weekly  overnight work hours from 33 hours to 39 hours during SafeTrack.  After SafeTrack was complete, WMATA extended weekly overnight  work hours again to a total of 41 hours. However, maintaining these  extended overnight work hours past fiscal year 2019 requires  approval from WMATA\u2019s board of directors. As a result, the long-term  viability of WMATA\u2019s track preventive maintenance program is  partially dependent on the board\u2019s decision to balance the competing  demands for service hours and maintenance time.", "Work Time Productivity. To maintain extended track-maintenance  hours into succeeding years, it will be important for WMATA to  demonstrate the new program\u2019s productivity. According to WMATA  officials, making the most productive use of the extended working  hours is a challenge, but it will be necessary to justify the extended  maintenance windows. WMATA officials told us that only a portion of  overnight work hours yields productive maintenance time. For  example, once a line ceases operations, it takes an additional hour for  all trains to reach their final destination, and another hour after that to  safely turn off all power running to the track and then establish a work  zone. Once maintenance work is completed, additional time must be  allotted for restoring power and allowing trains to move back into  position. Because of these requirements, a five-hour work window  may only yield two hours of productive work time (called \u201cwrench  time\u201d). For this reason, WMATA began tracking its wrench time at the  beginning of fiscal year 2018. As of June 2018, WMATA reported that  average wrench time had increased from about 2.0 hours per day in  July 2017 to 2.37 hours.", "Resource Constraints. According to WMATA officials, having sufficient  people with the necessary skills and experience to perform track  maintenance work is a significant challenge. For instance, expanded  maintenance windows have increased WMATA\u2019s workforce  requirements. As a result, WMATA has used contractors to assist with  its stray-current testing and track bed cleaning initiatives. In another  example, WMATA\u2019s torqueing initiative is particularly resource  intensive as the entire rail system contains 135 miles of \u201cdirect  fixation\u201d track, where the torqueing work is being done, and over  504,000 fasteners to check and tighten as necessary. According to  WMATA officials, bolts and fasteners are torqued during their initial  installment and then again 90 days afterward as part of the initial  capital expenditure. After that, any subsequent torqueing is executed  as part of the new track preventive maintenance program. WMATA  stated that the torqueing initiative seeks to torque all 135 miles of  direct fixation track annually. WMATA officials said the torqueing  initiative is a mix of contractor and in-house staff, with contractors  supplementing WMATA forces as needed."], "subsections": []}, {"section_title": "WMATA\u2019s Track Preventive Maintenance Program Does Not Fully Align with Leading Program Management Practices", "paragraphs": ["WMATA\u2019s track preventive maintenance program has followed certain  leading program management practices such as establishing key  performance metrics and monitoring progress toward them. Leading  practices recommend that organizations establish performance baselines  for their programs and communicate performance metrics to key  stakeholders. For instance, as previously noted, WMATA established a  measureable program goal to reduce track-defect and electrical-wayside- fire incidents by 50 percent within 2 years, and WMATA also established  time periods to complete its system-wide preventive maintenance  initiatives. In addition, WMATA\u2019s Rail Services Department\u2014which  manages the track preventive maintenance program\u2014among other  things, holds a monthly \u201cRailSTAT\u201d meeting in which the teams leading  the preventive maintenance initiatives report their progress toward these  goals to WMATA\u2019s management.", "However, WMATA\u2019s program does not fully align with other applicable  internal-control standards or leading program-management practices.  Specifically, COSO internal control standards and leading practices  identified by the Project Management Institute\u2019s The Standard for  Program Management stresses the importance of identifying and  assessing program risks and developing a program management plan.", "COSO recommends that organizations identify risks to the  achievement of its objectives and analyze risks as a basis for  determining how the risks should be managed. Furthermore, the risk  identification is to be comprehensive.", "The Standard for Program Management also recommends that when  identifying risks, the assessments be both qualitative and quantitative  in nature.", "Regarding program management plans:", "The Standard for Program Management recommends that  organizations develop program management plans that align with  organizational goals and objectives. This includes aligning the  program management plan with the organization\u2019s overall strategic  plan. Elements of the plan are to provide a roadmap that identifies  such things as milestones and decision points to guide program  activities.", "In developing the track preventive maintenance program, WMATA did not  fully identify or quantitatively assess risks associated with the program.  WMATA officials told us that in developing the track preventive  maintenance program they used their professional judgment to identify  track-defect and fire incidents as the most significant risks that they  needed to address through the program. However, WMATA\u2019s risk  identification was not comprehensive in nature, as it only considered two  technical aspects of track maintenance: electrical fires and track defects.  As previously mentioned, non-electrical fires\u2014which were not included in  the scope of the program or risk assessment\u2014did not change from fiscal  year 2017 through 2018 and represent approximately 30 percent of all  fires on the system over those years. Although WMATA officials told us in  designing the program they reviewed track-related incident data from  2016, they did not quantitatively analyze the impact of these incidents on  service or safety. In addition, WMATA did not consider broader strategic  risks to its program, such as the availability of a program\u2019s funding and stakeholders\u2019 support for the continuation of the program. Specifically,  while WMATA has identified several challenges with implementing the  program\u2014such as securing sufficient track time, demonstrating work time  productivity, and overcoming resource constraints\u2014none of these factors,  or potential mitigations, were documented in a risk assessment in  developing the program.", "WMATA has also not prepared a program management plan for the track  preventive maintenance program. Although WMATA has identified  program goals, officials told us that WMATA has not formally documented  the overall structure of the program or how it would be implemented.  Instead, the officials said the presentations they provide to WMATA\u2019s  board of directors, along with their ongoing staff and executive team  meetings, regarding the track preventive maintenance program cover the  relevant information needed for running the program. While providing  such information to the WMATA board of directors provides some  accountability for the program, these presentations do not represent a  formal program management plan that links with WMATA\u2019s strategic plan  or that identifies milestones and decision points necessary to guide the  program. As we previously reported, WMATA did not develop a project  management plan before starting its SafeTrack work, and due to this  omission and other issues, we found that WMATA lacked assurance that  the approach taken with SafeTrack was the most effective way to identify  and address safety issues. Furthermore, as this is the first time WMATA  has implemented a track preventive maintenance program, a program  management plan could help formally establish the program, provide  strategic guidance for this new program by providing accountability for  both internal and external stakeholders, and ensure that program goals  are met. A program management plan could also provide practical  benefits, such as helping ensure that WMATA\u2019s extended overnight work  hours are efficiently implemented and that sufficient resources are  devoted to the program.", "Without the strategic direction provided by a comprehensive risk  assessment and a formal program management plan, WMATA lacks a  documented vision for how the track preventive maintenance program  should be structured and implemented in order to meet the agency\u2019s  strategic goals and improve track safety. Specifically, without a risk  assessment that uses quantitative and qualitative data to assess risks\u2014 such as data for all fires on the system and qualitative risks such as  securing sufficient time for maintenance\u2014WMATA lacks assurance that  the program is comprehensively designed to address risks affecting the  safety of the rail system or other risks that could hinder the program\u2019s  success. Moreover, a program management plan that draws on  information from a comprehensive risk assessment would provide  WMATA officials with the assurance that they are prepared to respond to  current and future challenges that could threaten the long-term viability of  the program.", "Finally, although WMATA developed the track preventive maintenance  program to prevent the need for another emergency repair project like  SafeTrack, without a formal program management plan, the WMATA  employees charged with managing and implementing the program lack  an important document to guide their decision-making to meet that  objective and the agency\u2019s overall strategic objectives. Developing a  program management plan would outline the specific requirements to  successfully implement the program, including necessary track time,  expected productivity of program initiatives, and required resources.  Furthermore, it would provide WMATA\u2019s board of directors with  confidence that the program has a clear roadmap with milestones and  decision points as the board considers maintaining the extended  overnight work hours necessary to implement the program."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["WMATA\u2019s rail and bus systems provide nearly a million passenger trips  each day, and those passengers rely on WMATA for safe and reliable  public transportation in the nation\u2019s capital and the surrounding areas.  The federal, state, and local jurisdictions that fund WMATA expect  WMATA to wisely use taxpayer funds to ensure the system is safe and  reliable. WMATA can better meet these expectations by establishing  documented policies and procedures that outline how the new capital  planning process will work and the basis of investment decisions. In  addition, developing measures to assess the performance of individual  projects and the capital planning process would provide greater  assurance to WMATA\u2019s funding partners that its investment decisions  result in a measurable improvement in operating performance, reliability,  or other metrics. Furthermore, WMATA\u2019s recent efforts to establish an  Enterprise Asset Management Program, once finalized, could help  WMATA develop a more complete inventory of its assets and collect  critical information on their condition\u2014both of which are consistent with  sound capital planning. However, without a plan that provides specific  details for obtaining this information, WMATA will continue to lack the  critical asset information necessary to make lasting improvements in its  capital planning process and make sound capital-investment decisions.", "Similarly, track preventive maintenance plays a critical role as WMATA  works to reduce the track defects and fires that have endangered safety  and service reliability. WMATA could better demonstrate the direction of  the track preventive maintenance program and how it can improve track  safety by more comprehensively assessing the technical and broader  risks facing the program and by developing a formal plan that provides  greater assurance WMATA is prepared to address challenges that could  threaten the long-term viability of the program. Both actions would help  WMATA better focus the program on critical maintenance needs and  demonstrate its value to WMATA\u2019s board of directors and other  stakeholders as WMATA endeavors to provide safe, reliable, and quality  service to its riders."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to WMATA.", "The General Manager of WMATA should establish documented  policies and procedures for the new capital planning process. These  policies and procedures should include methodologies for ranking and  selecting capital projects for funding in WMATA\u2019s fiscal year 2020  capital budget and fiscal years 2020-2025 Capital Improvement  Program and for future planning cycles. (Recommendation 1)", "The General Manager of WMATA should develop performance  measures to be used for assessing capital investments and the capital  planning process to determine if the investments and planning  process have achieved their planned goals and objectives.  (Recommendation 2)", "The General Manager of WMATA should develop a plan for obtaining  complete information regarding WMATA\u2019s asset inventory and  physical condition assessments, including assets related to track and  structures. (Recommendation 3)", "The General Manager of WMATA should conduct a comprehensive  risk assessment of the track preventive maintenance program that  includes both a quantitative and qualitative assessment of relevant  program risks. In addition to considering technical program risks,  WMATA should also consider broader program risks, such as the  availability of funding for the program and stakeholders\u2019 support.  (Recommendation 4)", "The General Manager of WMATA should prepare a formal program  management plan for the track preventive maintenance program that  aligns with WMATA\u2019s strategic plan, addresses how the program is  linked to overall strategic goals and objectives, and includes program  milestones and decision points. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to WMATA and the Department of  Transportation for review and comment. WMATA provided written  comments, which are reprinted in appendix II, and technical comments,  which we incorporated as appropriate in the report. The Department of  Transportation provided technical comments, which we incorporated as  appropriate.", "WMATA concurred in part, or with the intent of four of the  recommendations, and disagreed with a fifth. Specifically, regarding the  first recommendation, which is  that WMATA establish documented policies and procedures for  the new capital planning process, and  that the policies and procedures include methodologies for  ranking and selecting capital projects for the fiscal year 2020  capital budget and fiscal year 2020\u20142025 capital-improvement  program.", "WMATA stated that it agreed with the recommendation, in part. WMATA  said it will continue its efforts to finalize and document policies and  procedures for the capital planning process for fiscal year 2021 and  beyond. WMATA noted that it already has in place numerous planning  tools, such as the 2016 Capital Needs Inventory assessment, which  helped inform the fiscal year 2020 capital planning process. According to  WMATA, it is currently reviewing policies, procedures, training materials,  and other documents for the fiscal year 2020 planning process, and those  documents will be updated and formalized through final documentation in  fiscal year 2021. WMATA noted that it anticipates that many of the  elements we recommend regarding the capital planning process will be  part of the process documented in fiscal year 2021. For example,  WMATA expects that additional automation, decision-making,  governance, and reporting capabilities, will be part of the process that will  be documented for fiscal year 2021. However, while WMATA has tools  available to inform the capital planning process, it has not prepared  documented policies and procedures for this process in fiscal year 2020.  As we reported, without documented policies and procedures, including  those for ranking and selecting projects for the fiscal year 2020 capital  budget, WMATA\u2019s stakeholders do not have reasonable assurance that  capital investment decisions are made using a sound and transparent  process. Taking action now to establish methodologies for ranking and  selecting projects for the fiscal year 2020 capital budget would provide  WMATA with an opportunity to improve upon those methodologies for the  fiscal year 2021 capital planning process to better ensure investments are  directed to WMATA\u2019s highest priority needs. As such, we continue to  believe this recommendation is valid and that WMATA should fully  implement it.", "Regarding the second recommendation that WMATA develop  performance measures for assessing capital investments and the capital  planning process, WMATA stated that it agreed with the intent of the  recommendation. WMATA also stated that it has developed such  measures through compliance with federal requirements, including the  FTA\u2019s performance-based planning requirements and the requirement  under MAP-21 that tier I transit providers, such as WMATA, establish  state-of-good-repair targets that are linked to the capital program.  WMATA noted these targets are set forth in its Transit Asset  Management Plan. Although WMATA\u2019s October 2018 Transit Asset  Management plan includes some broad performance measures and  targets for the state-of-good-repair for its various asset classes, as we  reported, WMATA has not developed performance measures to assess  individual capital projects or the capital planning process itself, as  suggested by leading practices in the Executive Guide. As discussed in  the report, such measures are important to determine if capital  investments have achieved their expected benefits and if they have  achieved organizational goals. Leading practices also indicate that by  using a mixture of measures managers can assess performance based  on a comprehensive view of the needs and objectives of an organization.  These needs and objectives can go beyond just the state-of-good-repair  to include such things as measures for assessing projects that would  improve service reliability, expand capacity, or achieve financial  objectives. We continue to believe that fully implementing this  recommendation would help ensure that capital investments meet their  intended outcomes and that the capital planning process helps WMATA  achieve its strategic goals and objectives.", "Regarding the third recommendation that WMATA develop a plan for  obtaining complete information about asset inventories and condition  assessments, WMATA stated that it agreed with the intent of the  recommendation and that its 2018 Transit Asset Management Plan  outlines plans for continuing its asset inventory update. WMATA also said  that it is working to ensure it has a complete asset inventory that  addresses legacy information and that includes accurate, up-to-date  condition assessments. As we reported, the Enterprise Asset  Management Program\u2014the program that WMATA told us it plans to use  to continue development of asset inventories and condition  assessments\u2014includes some elements of good project management, but  it also lacks an established plan for collecting asset inventory and  condition assessment information. Without a plan to obtain asset  inventory and condition assessment information WMATA will continue to  lack critical information needed for good capital planning and sound  investment decision-making. Thus, we continue to believe that this  recommendation is valid and that WMATA should fully implement it.", "Regarding the fourth recommendation that WMATA conduct a  comprehensive risk assessment of the track preventive maintenance  program that includes both quantitative and qualitative assessment of  relevant program risks, WMATA stated that it agreed with the intent of the  recommendation and is putting in place a new process that will address it.  Specifically, WMATA stated it is in the process of developing a new  Reliability Centered Maintenance process that will include a  comprehensive risk assessment of track infrastructure that includes  consideration of broader risks such as costs, funding, and track access.  According to WMATA, the new process is an engineering framework that  will define the maintenance regimen, including preventive maintenance,  and improve safety, reliability, and cost-effectiveness. During our review,  WMATA officials did not discuss the Reliability Centered Maintenance  process in detail or provide documentation that allowed us to evaluate  how this process might interface with the current track preventive  maintenance program. As a result, we were not able to evaluate how it  might address identification and assessment of risks associated with track  preventive maintenance. As we reported, going forward track preventive  maintenance will play a critical role as WMATA works to reduce track  defects and fires. We will review WMATA\u2019s actions to conduct a  comprehensive risk assessment as part of our routine recommendation  follow-up process.", "Regarding the fifth recommendation that WMATA prepare a formal  program management plan for the track preventive maintenance  program, WMATA stated that it disagreed with the recommendation.  WMATA noted that specific technical details of the track preventive  maintenance program are evolving as it better understands the most  effective maintenance regime through implementation of the Reliability  Centered Maintenance process. WMATA stated that it believes the  framework of Reliability Centered Maintenance is better suited to the  ongoing mission of physical asset management than traditional project  and program management tools. According to WMATA, the purpose of  Reliability Centered Maintenance is to ensure that all efforts are focused  on the safety, reliability, and cost-effectiveness of assets through their  lifecycle, which is more relevant and applicable to WMATA\u2019s strategic  plan than any individual preventive maintenance program. As stated  above, WMATA did not provide details about Reliability Centered  Maintenance during our review so we are not able to evaluate this  process in relation to the track preventive maintenance program. We will  review WMATA\u2019s actions related to implementation of the Reliability  Centered Maintenance process as part of our routine recommendation  follow-up process. We continue to believe this recommendation is valid  and that WMATA should fully implement it.", "We will send copies of this report to appropriate congressional  committees, the Secretary of Transportation, the Administrator of the  Federal Transit Administration, and the General Manager of WMATA. In  addition, we will make copies available to others upon request, and the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report examines: (1) How WMATA expended its capital funding from  fiscal years 2011 through 2017; (2) How WMATA\u2019s new capital planning  process addresses weaknesses it identified in the previous process; and  (3) WMATA\u2019s progress toward its track preventive maintenance goals and  how the program aligns with leading program management practices.", "For each of our objectives we reviewed pertinent federal statutes and  regulations as well as WMATA and FTA policies and documents. We also  selected a non-generalizable sample of five similar U.S. transit agencies  based on similarity to WMATA in transit route mileage, system use,  capital spending, system age, and rail fleet age. We also factored  geographical diversity into our selection process. We then interviewed the  officials from these selected transit agencies using a standard set of  questions to learn how they utilize their capital funds, conduct capital  planning, and oversee maintenance; and then we compared their  processes to WMATA. Transit route mileage, system use, capital  spending, and rail fleet age were measured using data from FTA\u2019s  National Transit Database. We measured system age according to data  available within the American Public Transportation Association\u2019s 2017  Public Transportation Fact Book, and geographical diversity was  determined through data available from the U.S. Census Bureau. The  transit agencies we selected were: (1) Bay Area Rapid Transit, Oakland,  California; (2) Chicago Transit Authority, Chicago, Illinois; (3)  Massachusetts Bay Transportation Authority, Boston, Massachusetts; (4)  Metropolitan Atlanta Rapid Transit Authority, Atlanta, Georgia; and (5)  Southeastern Pennsylvania Transportation Authority, Philadelphia,  Pennsylvania.", "To assess WMATA\u2019s capital spending from 2011 through 2017, we  interviewed knowledgeable officials from WMATA and FTA and also  reviewed WMATA annual budgets, fourth-quarter and year-end financial  reports, budget reconciliation reports, comprehensive annual financial  reports, and FTA grant awards. We selected fiscal year 2011 because it  was the first year in which WMATA received federal funding authorized by  the Passenger Rail Investment and Improvement Act of 2008 (PRIIA),  and we selected fiscal year 2017 because it was the most recent year  that capital expenditure data were available at the time of our review. By  analyzing this information we determined that the following sources  provided the most comprehensive and reliable available data on each of  the following topics for our report (see table 3):  We collected the aforementioned data, analyzed them to identify errors or  other anomalies, and interviewed officials to determine how the data are  compiled and checked for accuracy. We determined that these data had  some limitations, as an external audit report of WMATA financial  information for fiscal year 2016 noted a material weakness with WMATA\u2019s  process for accounting acquisition costs of capital assets. Specifically,  there were inconsistencies between WMATA\u2019s general ledger and sub- ledger, which are used to record acquisition costs, depreciation, and other  financial information related to capital assets. As a result, additional steps  were required to reconcile the differences between the two sources and  could have resulted in a material error. However, after interviewing  WMATA officials about the weakness and assessing the available  financial information, we determined that the data we used were  sufficiently reliable for our purpose of showing general trends of capital  expenditures.", "Our analysis sought to depict how WMATA allocates and expends funds  according to major asset categories within its capital-improvement plan.  However, these asset categories only remained consistent from 2011  through 2015, and were revised during 2016 and 2017. However, we  determined that each asset category consisted of Capital Improvement  Projects that were each assigned a number. These projects and their  corresponding numbers remained in existence from fiscal year 2011  through 2017, even though the asset categories were updated in fiscal  year 2016. Tracking by Capital Improvement Project number provided a  means to report consistently through that time period. Therefore, we used  the asset categories from fiscal years 2011 through 2015 as our base  reporting categories. These categories consisted of: (1) Vehicles/Vehicle  Parts, (2) Rail System Infrastructure Rehabilitation, (3) Maintenance  Facilities, (4) Systems and Technology, (5) Track and Structures, (6)  Passenger Facilities, (7) Maintenance Equipment, (8) Other Facilities,  and (9) Project Management and Support. We consolidated WMATA\u2019s  nine asset categories into five asset categories in order to represent  broader categories of investment: Rail and Bus Vehicle Fleet  (Vehicle/Vehicle Parts), Fixed Rail Infrastructure (Rail System  Infrastructure and Track and Structures), Maintenance Facilities and  Equipment (Maintenance Facilities and Maintenance Equipment),  Passenger and Other Facilities (Passenger Facilities and Other  Facilities), and Business Systems and Project Management Support  (Systems and Technology and Project Management and Support). We  then reviewed WMATA\u2019s fiscal year 2016 Fourth Quarter Report, fiscal  year 2017 Fourth Quarter Report, and fiscal year 2017 Budget  Reconciliation Report to match each project number from those two years  to their corresponding category from fiscal year 2011 through 2015.", "To assess WMATA\u2019s new capital planning process and how it addresses  weaknesses WMATA identified in the previous process, we interviewed  WMATA officials about their capital planning process and reviewed  WMATA documentation related to the capital planning process. This  included Capital Needs Inventories, WMATA\u2019s policy for preparation of  the 2010 and 2016 Capital Needs Inventories, annual capital budgets\u2014to include capital improvement programs, and guidance documents issued  by WMATA related to submitting projects for inclusion in the annual  capital budget. We also reviewed the fiscal year 2018 business plan for  WMATA\u2019s Capital Planning and Program Management Department. We  also interviewed officials from the Metropolitan Washington Council of  Governments, the American Public Transportation Association, and FTA  to discuss WMATA\u2019s capital planning and budgeting processes.  Furthermore, we compared WMATA\u2019s capital planning practices to  leading practices identified in GAO\u2019s Executive Guide. The Executive  Guide was used since it identifies leading practices for capital decision- making that are applicable to a wide variety of organizations, both public  and private. For example, the Executive Guide developed leading capital  planning practices by (1) identifying government and private sector  organizations recognized for outstanding capital decision-making  practices and (2) identifying and describing the leading capital decision- making practices implemented by these organizations. To identify leading  practices for capital planning, we also reviewed Transit Cooperative  Research Program Report 157. This report developed a framework for  transit agencies to use when prioritizing the rehabilitation and  replacement of capital assets and discusses leading practices in how to  do this. We also identified project management principles from the Project  Management Institute, Inc. Finally, we discussed capital planning with  the peer transit agencies and prepared a summary of various aspects of  capital planning in these agencies.", "To examine progress toward goals in WMATA\u2019s track preventive  maintenance program and how the program compares with leading  program management practices, we reviewed WMATA documentation  about the program, interviewed WMATA officials, and analyzed track- defect data and electrical-wayside-fire data provided by WMATA for fiscal  years 2016 through 2018\u2014which were the only years detailed track  defect and electrical fire incident data were available. In order to  determine whether the data provided were sufficiently reliable, we  checked the data for errors, conducted interviews with knowledgeable  officials to learn their procedures for collecting and analyzing the data,  and performed independent tests that included verifying WMATA\u2019s final  tally of track defect and fire incidents and verifying there were no  extended periods of time where data was missing. We also provided a set  of data reliability questions to determine whether procedures were  sufficient. After performing these steps we determined that the data were  sufficiently reliable for the purposes of our report.", "In our interviews with WMATA, officials also described what goals they  had created for the track preventive maintenance program, their progress  in meeting those goals, and provided documentation to demonstrate their  progress, which we reviewed. We also interviewed officials from the  American Public Transportation Association and the American Railway  Engineering and Maintenance-of-Way Association about best  maintenance practices in the transit industry. We then compared  WMATA\u2019s track preventive maintenance program to leading program  management practices identified by the Project Management Institute,  Inc.\u2019s The Standard for Program Management and internal control  standards published by the Committee of Sponsoring Organizations of  the Treadway Commission (COSO). The Project Management Institute\u2019s,  standards are utilized worldwide and provide guidance on how to manage  various aspects of projects, programs, and portfolios. In particular, The  Standard for Program Management provides guidance that is generally  recognized to support good program-management practices for most  programs, most of the time.", "We conducted our work from November 2017 to January 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Washington Metropolitan Area Transit Authority", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Matt Barranca (Assistant  Director), Richard Jorgenson (Analyst in Charge), Melissa Bodeau, Lacey  Coppage, Cory Gerlach, Erin Guinn-Villareal, Kirsten Lauber, Joshua  Ormond, and Patrick Tierney made significant contributions to this report."], "subsections": []}]}], "fastfact": ["To address safety problems in the Washington, D.C., Metro rail system, Metro started a preventive track maintenance program in June 2017. The program aims to reduce service disruptions caused by track defects or electrical fires\u2014which Metro says are the most significant safety risks.", "While Metro reports making progress, it can't be sure that the program is designed effectively. For example, the program doesn't address non-electrical fires, which comprise 30% of all track fires.", "We recommended a formal risk assessment, which would use data to assess safety and strategic risks to the program, such as ensuring adequate time for maintenance work."]}
{"id": "GAO-18-357T", "url": "https://www.gao.gov/products/GAO-18-357T", "title": "Inter-American Organizations: U.S. Share of Assessed Contributions and U.S. Agencies' Efforts to Monitor Assistance Agreements", "published_date": "2018-02-14T00:00:00", "released_date": "2018-02-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States belongs to several inter-American organizations, including the OAS, PAHO, IICA, and PAIGH, which promote democracy, security, health care, agricultural development, and scientific exchange in the Western Hemisphere. The United States helps finance these organizations' operating expenses through assessed contributions. The United States also provides voluntary contributions through the federal funding of assistance agreements to OAS, PAHO, and IICA.", "This testimony is based on GAO's June and December 2017 reports that, among other things, (1) determined the amounts and percentages of U.S. assessed contributions to the four organizations, (2) assessed the extent to which U.S. agencies included and documented key monitoring provisions as part of their assistance agreements, and (3) assessed the extent to which the organizations' strategic goals align with those of U.S. agencies.", "GAO analyzed documents and interviewed officials from State, HHS, USAID, USDA, and the four organizations. GAO analyzed the four organizations' audited financial reports and a nongeneralizable sample of 12 assistance agreements awarded by State, USAID, HHS, and USDA active in calendar years 2014 through 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["While the United States' assessed contributions constituted over 57 percent of total assessed contributions by member states to four inter-American organizations from 2014 to 2016, the U.S. share may be reduced in the near future (see table). In response to a statutory requirement, the U.S. Department of State (State) said it submitted to Congress a strategy that included working with the Organization of American States (OAS) member states toward ensuring that the OAS would not assess any single member state a contribution amounting to more than 50 percent of all OAS assessed contributions. At the OAS General Assembly in June 2017, OAS member states voted to draft a proposal to modify its system for determining member states' assessed contributions to potentially reduce the maximum assessed contribution to below 50 percent. The other three organizations use OAS's system for setting assessed contributions. Hence, any change in contributions at OAS should also be reflected at Pan American Health Organization (PAHO), Inter-American Institute for Cooperation on Agriculture (IICA), and the Pan-American Institute of Geography and History (PAIGH).", "State, the Department of Health and Human Services (HHS), the U.S. Agency for International Development (USAID), and the U.S. Department of Agriculture (USDA) provide voluntary contributions to OAS, PAHO, and IICA in the form of assistance agreements (e.g., grants and cooperative agreements). In December 2017, GAO reported that its review of 12 such agreements across the four agencies found that State and USDA did not include all key monitoring provisions in their agreements as called for by applicable guidance. State has since taken corrective action. GAO also found that all four U.S. agencies did not have full documentation of 18 of the 42 monitoring activities required by the 12 assistance agreements GAO reviewed. For example, USDA did not have full documentation, such as financial reports, of any of its 10 required monitoring activities, and USAID did not have full documentation of 2 of its 11 required activities. State and HHS said they initiated corrective action before our review. If an agency does not have full documentation of monitoring activities, it may lack information needed to make appropriate budgetary and programmatic decisions.", "GAO found that the strategic goals of the OAS, PAHO, IICA, and PAIGH are predominantly aligned with the strategic goals of State, USAID, HHS, and USDA. According to agency officials, the agencies employ mechanisms to ensure that assistance agreements with these organizations align with U.S. goals."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its December 2017 report, GAO recommended that (1) USDA ensure inclusion of all monitoring provisions as part of agreements and (2) USAID and USDA ensure full documentation of monitoring activities. USDA and USAID concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here to discuss our work regarding U.S. assistance to  inter-American organizations. The United States belongs to several inter- American organizations that, among other things, promote democracy,  security, health care, agricultural development, and scientific exchange in  the Western Hemisphere. These organizations include the Organization  of American States (OAS), the Pan American Health Organization  (PAHO), the Inter-American Institute for Cooperation on Agriculture  (IICA), and the Pan-American Institute of Geography and History  (PAIGH). The United States uses its membership in these organizations  to promote U.S. interests in the Western Hemisphere. According to the  Department of State (State), the OAS is the premier multilateral forum in  the Western Hemisphere for regional dispute resolution and promotion of  democratic governance. The United States also works with PAHO, IICA,  and PAIGH to provide technical support and guidance in areas including  public health, agriculture, and cartography.", "State provides the United States\u2019 assessed contributions to these four  organizations\u2019 regular budgets. State, the Department of Health and  Human Services (HHS), the U.S. Agency for International Development  (USAID), and the U.S. Department of Agriculture (USDA) also provide  project-specific voluntary contributions to the OAS, PAHO, and IICA  through assistance agreements, which include grants and cooperative  agreements. For calendar year 2016, the United States\u2019 assessed  contributions to these four organizations totaled over $130 million, and  voluntary contributions to the OAS, PAHO, and IICA totaled $32 million.  OAS, PAHO, IICA, and PAIGH have established mechanisms for  overseeing their use of these funds, such as external auditors and  internal audit boards as required by the standards of the Institute of  Internal Auditors. State and USDA have directly supported these  oversight mechanisms.", "My testimony today summarizes the findings from our June 2017 report  and our December 2017 report on U.S. assistance to inter-American  organizations. This testimony addresses, for calendar years 2014  through 2016, (1) the amounts and percentages of U.S. assessed  contributions to the four organizations, (2) the extent to which U.S.  agencies included and documented key monitoring provisions as part of  their assistance agreements, and (3) the extent to which the  organizations\u2019 strategic goals align with those of U.S. agencies.", "For our reports, we analyzed strategic planning and budget  documentation from the four organizations for calendar years 2014  through 2016. We also interviewed officials from the four organizations,  as well as officials from State, HHS, USAID, and USDA, which provide  contributions to these four organizations. To assess U.S. agencies\u2019  oversight of assistance agreements, we identified 60 active assistance  agreements that these agencies awarded to OAS, PAHO, and IICA  during calendar years 2014 through 2016 and selected a  nongeneralizable sample of 12 agreements, three each from HHS, State,  USAID, and USDA. We selected the three agreements from each agency  based on the lowest, median, and highest dollar value. We assessed  whether the agencies\u2019 agreements included key monitoring provisions  implementing applicable agency guidance. We identified key monitoring  provisions agencies are to include as part of their agreements as  provisions that ensure oversight of the use of funds by requiring  monitoring activities, such as financial and progress reports. We then  assessed the extent to which the agencies had documentation of the  required monitoring activities and examined the documentation of  monitoring activities that they provided. More detailed information on our  scope and methodology can be found in the two reports cited above.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["According to State, the OAS is the primary inter-American political forum  through which the United States engages with other countries in the  Western Hemisphere to promote democracy, human rights, security, and  development. While PAHO, IICA, and PAIGH are independent  organizations, the Charter of the Organization of American States directs  them to take into account the recommendations of the OAS General  Assembly and Councils. PAHO, a specialized international health  agency for the Americas, works with member countries throughout the  region to improve and protect people\u2019s health and serves as the Regional  Office for the Americas of the World Health Organization, the United  Nations agency on health. IICA, among other things, supports its member  states\u2019 efforts to achieve agricultural development and rural well-being  through consultation and the administration of agricultural projects  through agreements with the OAS and other entities. PAIGH specializes  in regional cartography, geography, history, and geophysics and has  facilitated the settlement of regional border disputes."], "subsections": [{"section_title": "U.S. Assessed Contributions to Inter- American Organizations and the Reform Act", "paragraphs": ["Member states collectively finance these organizations by providing  assessed contributions in accordance with the organizations\u2019 regulations.  The member states\u2019 assessed contributions are intended to finance the  organizations\u2019 regular budgets, which generally cover the organizations\u2019  day-to-day operating expenses, such as facilities and salaries. The  budgets are based on each organization\u2019s total approved quota  assessment and other projected income. Member states of each  organization meet to review and approve the organizations\u2019 budgets. The  exact dollar amount each member state is responsible for providing  corresponds to its assessed percentage of the total approved quota  assessment for any given year.", "In October 2013, the United States enacted the Organization of American  States Revitalization and Reform Act of 2013 (Reform Act). The Reform  Act directed the Secretary of State to, among other things, submit \u201ca  multiyear strategy that\u2026identifies a path toward the adoption of  necessary reforms that would lead to an assessed fee structure in which  no member state would pay more than 50 percent of the OAS\u2019s assessed  yearly fees.\u201d According to the Reform Act, it is the sense of Congress  that, among other things, it is in the interest of the United States, OAS  member states, and a modernized OAS that the OAS move toward an  assessed quota structure that (1) assures the financial sustainability of  the organization and (2) establishes, by October 2018, that no member  state pays more than 50 percent of the organization\u2019s assessed fees."], "subsections": []}]}, {"section_title": "The United States Contributed Over Half of Total Assessed Contributions to the Four Organizations, but OAS Member States Have Voted to Consider a Reduction of the U.S. Share", "paragraphs": ["In June 2017, we reported that the United States\u2019 assessed contributions  constituted over 57 percent of total assessed contributions by member  states to four inter-American organizations from 2014 through 2016 (see  table 1). During this time, the annual U.S. percentages (or quotas) of  these organizations\u2019 assessed contributions have remained about the  same. Therefore, the actual amounts assessed to the United States  generally remained the same.", "All four organizations apply a similar assessed quota structure that uses  the relative size of member states\u2019 economies, among other things, to  help determine each member state\u2019s assessed contributions. The OAS  determines the assessed quota for each member state based on the  United Nations\u2019 methodology, as adapted for the OAS, using criteria that  include gross national income, debt burden, and per capita income. The  other three organizations use OAS\u2019s system for determining member  states\u2019 quotas to calculate their member states\u2019 assessed contributions.  Thus, any change in the OAS\u2019s assessed quota structure should be  reflected at PAHO, IICA, and PAIGH, according to their respective  processes regarding the determination of assessed contributions.", "The U.S. share of assessed contributions may be reduced in the future.  The Reform Act required State to submit a strategy identifying, among  other things, a path toward the adoption of necessary reforms to the  OAS\u2019s assessed quota structure that would lead to a structure in which no  member state would pay more than 50 percent of OAS assessed  contributions. In response to that requirement, State told us that they  submitted to Congress a strategy that included working with OAS  member states toward ensuring that the OAS would not assess any  single member state a quota of more than 50 percent of all OAS  assessed contributions. State officials informed us that they worked with  other OAS member states, including Canada and Mexico, to explore  assessed quota reform options. For example, State officials consulted  with their counterparts from Mexico to review the OAS\u2019s assessed quota  structure and to consult on alternatives that would adjust all member  states\u2019 quotas so that no member state\u2019s quota exceeds 50 percent of the  OAS\u2019s assessed contributions. Subsequent to our June 2017 report, at  the OAS General Assembly in June 2017, OAS member states voted to  draft a proposal to modify the quota structure to potentially reduce the  maximum assessed quota to below 50 percent. According to State  officials, the modification to the quota structure, if approved, would be  gradual and would not be implemented until 2019."], "subsections": []}, {"section_title": "U.S. Agencies Provided Voluntary Contributions to OAS, PAHO, and IICA through Assistance Agreements but Could Enhance Their Monitoring of These Agreements", "paragraphs": ["State, HHS, USAID, and USDA fund activities at OAS, PAHO, and IICA in  the form of assistance agreements. In our December 2017 report, we  reviewed 12 such agreements across the four agencies and found that  State and USDA did not include all key monitoring provisions in their  agreements as called for by applicable guidance. State has taken  corrective action since the grants were awarded. We also found that all  four agencies did not have full documentation of 18 of the 42 monitoring  activities required by the 12 assistance agreements we reviewed. State  and HHS both initiated corrective action prior to our review of the grants."], "subsections": [{"section_title": "U.S. Agencies Provided Voluntary Contributions through Assistance Agreements to OAS, PAHO, and IICA", "paragraphs": ["The United States provided voluntary contributions to OAS, PAHO, and  IICA through project-specific assistance agreements, such as grants and  cooperative agreements. According to U.S. agency officials, the  organizations\u2019 regional knowledge and technical expertise make them  effective implementing partners for projects serving U.S. national interests  and priorities throughout the hemisphere. From calendar years 2014  through 2016, the United States provided voluntary contributions totaling  about $105 million to the OAS, PAHO, and IICA, as shown in table 2. In  2016, for example, the United States contributed $32 million, or  approximately 22 percent of the total of $143 million from all member  states. According to U.S. officials, levels of U.S. voluntary contributions  vary year-to-year due to factors that include the schedule of multiyear  agreement disbursements, sudden crises, and member states\u2019 priorities.  For example, in 2016, USAID approved an assistance agreement for $2  million to OAS to support international observation of government  elections in Haiti."], "subsections": []}, {"section_title": "U.S. Agencies Could Enhance Their Monitoring of Assistance Agreements", "paragraphs": ["In our review of 12 selected assistance agreements from State, HHS,  USAID, and USDA (out of a total of 60 active agreements during calendar  years 2014 through 2016), we found that none of the agencies had both  consistently included all the key monitoring provisions for their  agreements and fully documented the monitoring activities required by  those provisions. For example, USDA did not have full documentation,  such as financial reports, of any of its 10 required monitoring activities,  and USAID did not have full documentation of 2 of its 11 required  monitoring activities (financial and performance reports). U.S. agencies  could have greater assurance that the organizations are using these  funds as intended if they enhanced their monitoring of their assistance  agreements."], "subsections": [{"section_title": "Two of Four U.S. Agencies Did Not Include All Key Monitoring Provisions in the Agreements We Reviewed", "paragraphs": ["Each of the four agencies has established applicable guidance that calls  for agencies to conduct monitoring activities as part of their oversight of  their assistance agreements. The agencies implement their guidance by  including key provisions to carry out required monitoring activities as part  of their agreements. Federal standards for internal control call for  agencies to include in agreements all key provisions delineating the  parties\u2019 responsibilities. For the 12 agreements we reviewed, the number  of key monitoring provisions per agreement varied depending on when  the agency issued and updated its guidance relative to when the  agreements were approved.", "Federal standards for internal control call for agencies to document  internal controls, transactions, and significant events. Specifically,  internal control standards state that agency management should include  internal control activities (e.g., monitoring activities) in policies or  directives for transactions such as assistance agreements.", "For the 12 assistance agreements we reviewed, USDA and State did not  include provisions implementing 6 of the 55 total (11 percent) monitoring  activities required by applicable guidance (see table 3). For example,  State did not include two of the key monitoring provisions (a risk  assessment and a monitoring plan) in one of its agreements. State took  corrective action in 2015 by issuing a standard operating procedure.", "The agencies specify the requirements to fulfill the key monitoring  provisions in the individual assistance agreements, such as by requiring  financial reports on a quarterly basis or including specific information in  performance reports. Grants officers, if they deem it necessary or  appropriate, include additional monitoring provisions requiring activities  beyond those required by the applicable guidance, such as site visits.", "Federal standards for internal control call for agency management to  design monitoring activities, such as financial and performance reporting,  so that all transactions are completely and accurately recorded.  Recording these activities maintains their relevance and value to  management in controlling operations and making decisions. Without  access to complete monitoring documentation, the agencies risk  weakening the effectiveness of these controls.", "None of the four U.S. agencies had full documentation of all of the  monitoring activities required by their agreements we reviewed (see table  4). The agencies did not have full documentation of monitoring activities  for 9 of the 12 agreements we reviewed. For the 42 monitoring activities  identified across all of the individual agreements, the four agencies did  not have full documentation of 18 of the activities (43 percent). However,  State took corrective action in May 2017 to address its gaps in  documentation, and according to HHS officials, the Food and Drug  Administration addressed its gap in documentation by implementing its  agreement monitoring program in fiscal year 2018."], "subsections": []}]}]}, {"section_title": "The Strategic Goals of the Four Inter- American Organizations Are Predominantly Aligned with U.S. Agencies\u2019 Strategic Goals", "paragraphs": ["In our December 2017 report, we found that the strategic goals of the four  inter-American organizations are predominantly aligned with the high- level strategic goals for the Western Hemisphere documented by State,  USAID, HHS, and USDA, as shown in table 5. For example, four of the  five goals in State and USAID\u2019s Joint Strategy correspond with goals at  the OAS, IICA, and PAIGH. According to officials, the agencies all  consider U.S. strategic goals when deciding which projects to fund at  OAS, PAHO, and IICA. U.S. agencies, on an ongoing basis, evaluate  each inter-American organization to ensure U.S. and organization goals  are aligned. For example, according to USAID officials, USAID\u2019s  assistance project design and approval policies and procedures ensure  that all USAID-funded activities are linked to applicable U.S. and USAID  strategies.", "In conclusion, monitoring the implementation of U.S. assistance  agreements and fully documenting the results of such monitoring are key  management controls to help ensure that U.S. agreement recipients use  federal funds appropriately and effectively. The agencies risk weakening  the effectiveness of these controls by not including in their assistance  agreements all the key monitoring provisions called for by applicable  agency guidance. Further, if the agencies do not have full documentation  of the agreements\u2019 required monitoring activities, they may not be able to  effectively manage federally funded projects that support U.S. strategic  goals. In addition, agencies may not have all the information they need to  make budgetary and programmatic decisions.", "In our December 2017 report, we recommended that (1) USDA ensure  inclusion of all monitoring provisions as part of agreements and (2)  USAID and USDA ensure full documentation of monitoring activities. The  agencies concurred with these recommendations and indicated that they  will take actions to address them. For example, USAID said it would issue  an agency notice to remind all agreement officers to maintain complete  files for each agreement.", "Chairman Cook, Ranking Member Sires, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to answer any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Thomas Melito, Director, International Affairs and Trade at (202)  512-9601 or melitot@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  include Pierre Toureille (Assistant Director), Julia Jebo Grant (Analyst-in- Charge), Leslie Stubbs, Paul Sturm, Alana Miller, Shirley Min, Kira Self,  and Rhonda Horried. In addition, David Dayton, Martin de Alteriis, Neil  Doherty, Jeff Isaacs, and Alex Welsh provided technical assistance.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The U.S. belongs to several multilateral organizations of North and South American countries, the largest of which is the Organization of American States.", "In a report on which this testimony is based, we found that the U.S. paid over 57% of total assessed contributions for these organizations between 2014 and 2016. The State Department is working with OAS to reform its fee structure so that no country pays more than 50%.", "In another report, we examined how U.S. agencies monitor organizations' activities, for example to guard against misuse of funds. Our recommendations included that agencies fully document monitoring activities."]}
{"id": "GAO-18-212T", "url": "https://www.gao.gov/products/GAO-18-212T", "title": "Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training", "published_date": "2017-12-01T00:00:00", "released_date": "2017-12-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's September 2017 report, entitled Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training ( GAO-17-789 )."]}, {"section_title": "What GAO Found", "paragraphs": ["Navy and Marine Corps units that are deploying as part of an Amphibious Ready Group and Marine Expeditionary Unit (ARG-MEU) completed their required training for amphibious operations, but other Marine Corps units have been limited in their ability to conduct training for other amphibious operations\u2013related priorities. GAO found that several factors, to include the decline in the fleet of the Navy's amphibious ships from 62 in 1990 to 31 today limited the ability of Marine Corps units to conduct training for other priorities, such as recurring training for home-station units (see figure). As a result, training completion for amphibious operations was low for some but not all Marine Corps units from fiscal years 2014 through 2016. The services have taken steps to address amphibious training shortfalls, such as more comprehensively determining units that require training. However, these efforts are incomplete because the services do not have an approach to prioritize available training resources, evaluate training resource alternatives, and monitor progress towards achieving priorities. Thus, the services are not well positioned to mitigate any training shortfalls.", "The Navy and Marine Corps have taken some steps to improve coordination between the two services, but have not fully incorporated leading collaboration practices to improve integration of the two services\u2014naval integration\u2014for amphibious operations. For example, the Navy and Marine Corps have not defined and articulated common outcomes for naval integration that would help them align efforts to maximize training opportunities for amphibious operations.", "The Marine Corps has taken steps to better integrate virtual training devices into operational training, but gaps remain in its process to develop and use them. GAO found that for selected virtual training devices, the Marine Corps did not conduct front-end analysis that considered key factors, such as the specific training tasks that a device would accomplish; consider device usage data to support its investment decisions; or evaluate the effectiveness of existing virtual training devices because of weaknesses in the service's guidance. As a result, the Marine Corps risks investing in devices that are not cost-effective and whose value to operational training is undetermined."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss our recent  report on Navy and Marine Corps training for amphibious operations. As  you know, the Navy and the Marine Corps (collectively referred to as U.S.  naval forces) maintain forces that are capable of conducting an  amphibious operation\u2014a military operation that is launched from the sea  by an amphibious force, embarked in ships or craft, with the primary  purpose of introducing a landing force ashore to accomplish the assigned  mission. Training forces for amphibious operations requires extensive  coordination and integration between the Navy and Marine Corps. For  example, the services must schedule amphibious ships to be used for  training, develop operational concepts, and design and execute  exercises. This training also requires significant resources, including  access to Navy ships, and an adequate amount of range space to  realistically conduct live-fire training exercises. The Marine Corps, as well  as the other military services, has stated that the use of virtual training\u2014 including simulators or computer-generated simulations\u2014could help  overcome some of the difficulties associated with training in a live-only  environment.", "According to the Department of Defense (DOD), the future security  environment will require forces to train across the full range of military  operations\u2014including types of operations that have not been prioritized in  recent years, such as amphibious operations. However, over the last 15  years, continued operational deployments have required U.S. naval  forces to focus training for stability and counterinsurgency operations,  while limiting training in amphibious operations, among other areas. The  Navy has stated that the high demand for presence has put pressure on a  fleet that is stretched thin across the globe. Our recent testimony on Navy  readiness highlighted that the Navy has increased deployment lengths,  shortened training periods, and reduced or deferred maintenance to meet  high operational demands, which has resulted in declining ship conditions  and a worsening trend in overall readiness.", "In this context, my testimony today discusses the findings from our recent  September 2017 report on Navy and Marine Corps training for  amphibious operations. Accordingly, this testimony addresses (1) the  Navy and Marine Corps\u2019 ability to complete training for amphibious  operations priorities and factors limiting that training; (2) steps taken by  the Navy and Marine Corps to mitigate any training shortfalls, including  the Marine Corps\u2019 use of selected virtual training devices; and (3) efforts  to improve naval integration for amphibious operations. In addition, I will  highlight several key actions that we recommended in our report that the  Navy and Marine Corps could take to help mitigate training shortfalls and  improve the integration between these services for amphibious  operations.", "To conduct this work, we analyzed unit-level readiness data from fiscal  year 2014 through 2016 and deployment certification reports and  compared those data against the services\u2019 training requirements;  reviewed service training initiatives; interviewed a nongeneralizable  sample of officials from 23 Marine Corps units that were selected based  on their training plans; and selected a nongeneralizable sample of six  Marine Corps virtual training devices to review based on factors such as  target audience. Our September 2017 report includes a detailed  explanation of the methods used to conduct our work. We conducted the  work on which this testimony is based in accordance with generally  accepted government auditing standards.", "In summary, Navy and Marine Corps units completed training for certain  amphibious operations priorities but not others due to several factors. The  most prevalent factor we found that hampered training completion was a  lack of available amphibious ships on which to train. The Navy and  Marine Corps have taken some steps to identify and address amphibious  operations training shortfalls, but these efforts are incomplete.  Specifically, the services\u2019 current approach does not incorporate strategic  training and leading risk management practices. Further, the Marine  Corps has not fully integrated virtual training devices into operational  training. The Navy and Marine Corps have taken some steps to improve  coordination, but the services have not fully incorporated leading  collaboration practices that would help drive efforts to improve naval  integration. We made recommendations to address these issues and  DOD concurred with them."], "subsections": [{"section_title": "Background", "paragraphs": ["An amphibious force is comprised of an (1) amphibious task force and a  (2) landing force together with other forces that are trained, organized,  and equipped for amphibious operations. The amphibious task force is a  group of Navy amphibious ships, most frequently deployed as an  Amphibious Ready Group (ARG). The landing force is a Marine Air- Ground Task Force\u2014which includes certain elements, such as command,  aviation, ground, and logistics\u2014embarked aboard the Navy amphibious  ships. A Marine Expeditionary Unit (MEU) is the most-commonly  deployed Marine Air-Ground Task Force. Together, this amphibious force  is referred to as an ARG-MEU.", "An ARG consists of a minimum of three amphibious ships, typically an  amphibious assault ship, an amphibious transport dock ship, and an  amphibious dock landing ship. Navy ships train to a list of mission- essential tasks that are assigned based on the ship\u2019s required operational  capabilities and projected operational environments. Most surface  combatants, including cruisers, destroyers, and all amphibious ships,  have mission-essential tasks related to amphibious operations. Figure 1  shows the current number of amphibious ships by class and a description  of their capabilities.", "An MEU consists of around 2,000 Marines, their aircraft, their landing  craft, their combat equipment, and about 15 days\u2019 worth of supplies. The  MEU includes a standing command element; a ground element consisting  of a battalion landing team; an aviation element consisting of a composite  aviation squadron of multiple types of aircraft; and a logistics element  consisting of a combat logistics battalion. Marine Corps units also train to  accomplish a set of mission-essential tasks for the designed capabilities  of the unit. Many Marine Corps units within the command, aviation,  ground, and logistics elements have an amphibious-related mission- essential task. To be certified in the mission-essential task of amphibious  operations, Marine Corps units must train to a standard that may require  the use of amphibious ships.", "The Marine Corps\u2019 use of virtual training devices has increased over time,  and advances in technology have resulted in the acquisition of simulators  and simulations with additional capabilities designed to help individual  Marines and units acquire and refine skills through more concentrated  and repetitive training. For example, the Marine Corps utilizes a  constructive simulation that provides commanders with training for  amphibious operations, among other missions. The Marine Corps has  introduced other virtual training devices to prepare Marines for  operational conditions and for emerging threats, such as devices to  replicate a variety of vehicles for driver training and egress trainers,  among others. The Navy stated it does not utilize virtual training devices  that simulate amphibious operations, including ship-to-shore movement."], "subsections": []}, {"section_title": "Navy and Marine Corps Units Completed Training for Certain Amphibious Operations Priorities but Not Others Due to Several Factors", "paragraphs": ["In our September 2017 report, we found that Navy and Marine Corps  units deploying as part of ARG-MEUs completed required training for  amphibious operations, but the Marine Corps has been unable to  consistently accomplish training for other service amphibious operations  priorities. Specifically, based on our review of deployment certification  messages from 2014 through 2016, we found that each deploying Navy  ARG completed training for the amphibious operations mission in  accordance with training standards. Similarly, we found that each MEU  completed all of its mission-essential tasks that are required during the  predeployment training program. These mission-essential tasks cover  areas such as amphibious raid, amphibious assault, and noncombatant  evacuation operations, among other operations.", "However, we also reported that based on our review of unit-level  readiness data from fiscal year 2014 through 2016, Marine Corps units  were unable to fully accomplish training for other amphibious operations  priorities. These shortfalls include home-station unit training to support  contingency requirements, service-level exercises, and experimentation  and concept development for amphibious operations. For example,  Marine Corps officials cited shortfalls in their ability to conduct service- level exercises that train individuals and units on amphibious operations- related skills, as well as provide opportunities to conduct experimentation  and concept development for amphibious operations.", "In our September 2017 report, we identified several factors that created  shortfalls in training for amphibious operations priorities. Based on our  analysis of interviews with 23 Marine Corps units, we found that all 23 units cited the lack of available amphibious ships as the primary factor  limiting training for home-station units. The Navy\u2019s fleet of amphibious  ships has declined by half in the last 25 years, from 62 in 1990 to 31  today, with current shipbuilding plans calling for four additional  amphibious ships to be added by fiscal year 2024, increasing the total  number of amphibious ships to 35 (see fig. 2).", "Marine Corps officials from the 23 units we interviewed also cited other  factors that limit opportunities for amphibious operations training,  including the following:", "Access to range space. Seventeen of 23 Marine Corps units we  interviewed identified access to range space as a factor that can limit  their ability to conduct amphibious operations training. Unit officials  told us that priority for training resources, including range access, is  given to units that will be part of a MEU deployment, leaving little  range time available for other units.", "Maintenance delays, bad weather, and transit time. Ten of 23  Marine Corps units told us that changes to an amphibious ship\u2019s  schedule resulting from maintenance overruns or bad weather have  also reduced the time available for a ship to be used for training. The  transit time a ship needs to reach Marine Corps units has further  reduced the time available for training.", "High pace of deployments. Five of 23 Marine Corps units told us  that the high pace of deployments and need to prepare for upcoming  deployments limited their opportunity to conduct training for  amphibious operations."], "subsections": []}, {"section_title": "The Navy and Marine Corps Have Taken Some Steps to Identify and Address Amphibious Training Shortfalls, but These Efforts Are Incomplete", "paragraphs": [], "subsections": [{"section_title": "Services\u2019 Approach Does Not Incorporate Strategic Training and Leading Risk Management Practices", "paragraphs": ["In our September 2017 report, we identified some steps that the Navy  and Marine Corps have taken to mitigate the training shortfall for their  amphibious operations priorities, such as by better defining the amount of  amphibious operations capabilities and capacity needed to achieve the  services\u2019 wartime requirements. However, we found these efforts are  incomplete because the services\u2019 current approach for amphibious  operations training does not incorporate strategic training and leading  risk-management practices. Specifically, we found that:", "The Marine Corps does not prioritize all available training  resources. For Marine Corps units not scheduled for a MEU  deployment, officials described an ad hoc process to allocate any  remaining available amphibious ship training time among home- station units. Specifically, officials stated that the current process  identifies units that are available for training when an amphibious ship  becomes available rather than a process that aligns the next highest- priority units for training with available amphibious ships.", "The Navy and Marine Corps do not systematically evaluate a full  range of training resource alternatives to achieve amphibious  operations priorities. Given the limited availability of amphibious  ships for training, the Navy and Marine Corps have not systematically  incorporated selected training resource alternatives into home-station  training plans. During our review, we identified a number of  alternatives that could help mitigate the risk to the services\u2019  amphibious capability due to limited training opportunities. These  alternatives could include utilizing additional training opportunities  during an amphibious ship\u2019s basic phase of training; using alternative  platforms for training, such as Marine Prepositioning Force ships;  utilizing smaller Navy craft or pier-side ships to meet training  requirements; and leveraging developmental and operational test  events.", "The Navy and Marine Corps have not developed a process or set  of metrics to monitor progress toward achieving its amphibious  operations training priorities and mitigating existing shortfalls.  Current reporting systems do not allow officials to assess the services\u2019  progress in achieving amphibious operations priorities or to monitor  efforts to establish comprehensive amphibious operations training  programs. For example, we found that the Marine Corps does not  capture complete data on the full demand for training time with Navy  amphibious ships that could be used for such assessments.", "In our September 2017 report, we recommended that the Navy and  Marine Corps develop an approach to prioritize available training  resources, systematically evaluate among training resource alternatives  to achieve amphibious operations priorities, and monitor progress toward  achieving them. DOD concurred with our recommendation and stated that the Secretary of the Navy would develop an amphibious operations  training construct capitalizing on the application of primary and alternative  training resources."], "subsections": []}, {"section_title": "The Marine Corps Has Not Fully Integrated Virtual Training Devices into Operational Training", "paragraphs": ["While the Marine Corps has stated that the use of virtual training could  help mitigate some of the limitations of training in a live-only environment  and taken some steps to integrate these devices into operational training,  we identified gaps in its process to develop and use them. Specifically,  based on our review of a selection of 6 virtual training devices, we found  weaknesses in three key areas:", "Front-end planning. The Marine Corps\u2019 process for conducting front- end planning and analysis to support the acquisition of its virtual  training devices does not include consideration of critical factors for  integrating virtual training devices into operational training, such as  the specific training tasks the device is intended to address, how the  device would be used to meet proficiency goals, or available time for  units to train with the device. As a result, the Marine Corps does not  have a reasonable basis to ensure that it is acquiring the right number  and type of virtual training devices to meet its operational training  needs.", "Expected and actual usage data. The Marine Corps does not  consistently consider expected and actual usage data for virtual  training devices to support its investment decisions. In the absence of  these data, the Marine Corps risks sustained investment in virtual  training devices that do not meet operational training needs.", "Training effectiveness. The Marine Corps does not consistently  evaluate the effectiveness of its virtual training devices to accomplish  operational training. Without a well-defined process to consistently  evaluate the effectiveness of virtual training devices for training, the  Marine Corps risks investing in devices whose value to operational  training is undetermined.", "In our September 2017 report, we recommended that the Marine Corps  develop guidance for the development and use of virtual training devices  to address these gaps. DOD concurred with the recommendation and  stated it would work with the Commandant of the Marine Corps in its  development and implementation actions associated with the use of  virtual training devices."], "subsections": []}]}, {"section_title": "Incorporating Collaboration Practices would Further Naval Integration Efforts for Amphibious Operations", "paragraphs": ["The Navy and Marine Corps have taken some steps to improve  coordination between the two services, to include issuing strategic  documents that discuss the importance of improving naval integration and  establishing mechanisms to coordinate their amphibious operations  training capabilities. However, in our September 2017 report we found  that the services have not fully incorporated leading collaboration  practices that would help drive efforts to improve naval integration. Our  prior work on interagency collaboration has found that certain practices  can help enhance and sustain collaboration among federal agencies. I  would like to highlight a few practices that would especially benefit the  Navy and Marine Corps\u2019 efforts to improve integration for amphibious  operations.", "Common outcomes and joint strategy. The Navy and Marine Corps  have issued strategic documents that discuss the importance of  improving naval integration, but the services have not developed a  joint strategy that defines and articulates common outcomes to  achieve naval integration. This first critical step will enable them to  fully incorporate other leading collaboration practices aimed at  achieving a common purpose.", "Compatible policies, procedures, and systems. The Navy and  Marine Corps have not fully established compatible policies and  procedures, such as common training tasks and standards and  agreed-upon roles and responsibilities, to ensure their efforts to  achieve improved naval integration are consistent and sustained. We  also found that some of the Navy and Marine Corps\u2019 systems for  managing and conducting integrated training are incompatible,  leading to inefficiencies in the process to manage unit-level training  events.", "Leverage resources to maximize training opportunities. The  services are looking to better leverage available training resources for  amphibious operations. However, we identified examples of potential  training opportunities during surface warfare tactical training and  community relations events where enhancing the services\u2019  collaborative efforts could take greater advantage of available training  time for amphibious operations.", "Mechanisms to monitor results and reinforce accountability. The  Navy and Marine have not developed mechanisms to monitor,  evaluate, and report on results in improving naval integration and to  align efforts to maximize training opportunities. Service-level strategy  documents establish critical tasks to improve naval integration, but do  not constitute a process or mechanism to jointly reinforce  accountability for their naval integration efforts.", "In our September 2017 report, we recommended that the Navy and  Marine Corps clarify the organizations responsible and set time frames to  define and articulate common outcomes for naval integration, and use  those outcomes to develop a joint strategy, more fully establish  compatible policies, procedures, and systems, better leverage training  resources, and establish mechanisms to monitor results. DOD concurred  with the recommendation and stated it will develop mutual service naval  integration terminology, and training resource application and  organizational monitoring constructs to achieve common amphibious  operations training outcomes.", "Chairman Wilson, Ranking Member Bordallo, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact Cary Russell at   (202) 512-5431, or at russellc@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  are Matt Ullengren and Russell Bryan. Other staff who made contributions  to the report cited in this testimony are identified in the source product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-571T", "url": "https://www.gao.gov/products/GAO-18-571T", "title": "Government Efficiency and Effectiveness: Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits", "published_date": "2018-05-23T00:00:00", "released_date": "2018-05-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government faces a long- term, unsustainable fiscal path based on an imbalance between federal revenues and spending. While addressing this imbalance will require fiscal policy changes, in the near term opportunities exist in a number of areas to improve this situation, including where federal programs or activities are fragmented, overlapping, or duplicative.", "To call attention to these opportunities, Congress included a provision in statute for GAO to identify and report on federal programs, agencies, offices, and initiatives\u2014either within departments or government-wide\u2014that have duplicative goals or activities.", "GAO also identifies areas that are fragmented or overlapping and additional opportunities to achieve cost savings or enhance revenue collection. GAO's 2018 annual report is its eighth in this series ( GAO-18-371SP ).", "This statement discusses", "new areas identified in GAO's 2018 annual report;", "the progress made in addressing actions GAO identified in its 2011 to 2017 reports; and", "examples of open actions directed to Congress or executive branch agencies.", "To identify what actions exist to address these issues, GAO reviewed and updated prior work, including recommendations for executive action and matters for congressional consideration."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's 2018 annual report identifies 68 new actions that Congress or executive branch agencies can take to improve the efficiency and effectiveness of government in 23 new program areas. For example:", "The Department of Defense (DOD) could potentially save approximately", "$527 million over 5 years by minimizing unnecessary overlap and duplication in its U.S. distribution centers for troop support goods.", "The Department of Energy may be able to reduce certain risks and save tens of billions of dollars by adopting alternative approaches to treat a portion of its low-activity radioactive waste at its Hanford Site.", "The Department of Veterans Affairs could potentially save tens of millions of dollars when acquiring medical and surgical supplies by better adhering to supply chain practices of leading hospitals.", "The Coast Guard should close its boat stations that provide unnecessarily duplicative search and rescue coverage to improve operations and potentially save millions of dollars .", "Significant progress has been made in addressing many of the 724 actions that GAO identified from 2011 to 2017. As of March 2018, Congress and executive branch agencies have fully or partially addressed 551 (76 percent) of these actions. This has resulted in about $178 billion in financial benefits, of which $125 billion has been realized and at least an additional $53 billion is estimated to accrue. These estimates are based on a variety of sources that considered different time periods, assumptions, and methodologies. GAO estimates that tens of billions of additional dollars could be saved should Congress and executive branch agencies fully address the remaining 365 open actions, including the 68 new ones identified in 2018.", "Further steps are needed to fully address these remaining actions. For example:", "Congress and the Internal Revenue Service could realize hundreds of millions of dollars in savings and increased revenues by enhancing online services and improving efforts to prevent identity theft refund fraud.", "Medicare could save $1 to 2 billion annually if Congress equalized the rates paid for certain health care services, which often vary depending on where the service is performed.", "DOD could achieve billions of dollars in savings over the next several years by continuing to employ best management practices on its weapon systems acquisition programs.", "Congress could consider modifying how Medicare pays certain cancer hospitals to achieve almost $500 million annually in program savings.", "The Social Security Administration could help prevent the loss of billions of dollars by preventing overpayments to beneficiaries of the Disability Insurance program and improper waivers of beneficiaries' overpayment debt.", "Congress could consider modifying tobacco tax rates to eliminate significant tax differentials between similar products to address future revenue losses caused by manufacturers and consumers substituting tobacco products. Federal losses ranged from $2.6 to 3.7 billion between April 2009 and February 2014."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government faces an unsustainable long-term fiscal path  based on an imbalance between federal revenue and spending, primarily  driven by health care spending and net interest on the debt. Addressing  this imbalance will require long-term changes to both spending and  revenue and difficult fiscal policy decisions. In the near term, however,  opportunities exist to take action in a number of areas to better manage  fragmented, overlapping, or duplicative federal agencies or programs;  achieve cost savings; or enhance revenues.", "To call attention to these opportunities, Congress included a provision in  statute for us to identify and report to Congress on federal programs,  agencies, offices, and initiatives\u2014either within departments or  government-wide\u2014that have duplicative goals or activities. These  reports are issued annually to the House and Senate.", "In our first seven annual reports issued from 2011 to 2017, we presented  724 actions in 278 areas for Congress or executive branch agencies to  reduce, eliminate, or better manage fragmentation, overlap, or  duplication; achieve cost savings; or enhance revenue. To date,  Congress and executive branch agencies have partially or fully addressed  551 (76 percent) of the actions we identified from 2011 to 2017, resulting  in about $178 billion in financial benefits. We estimate that tens of billions  more dollars could be saved by fully implementing our open actions.", "Our 2018 report, which we released on April 26, 2018, presents 68 new  actions across 23 new program areas for Congress or executive branch  agencies to reduce, eliminate, or better manage fragmentation, overlap,  and duplication and achieve other financial benefits. My testimony today  describes (1) new issues identified in our 2018 annual report; (2) the  progress made in addressing actions identified in our past reports; and (3)  examples of open actions directed to Congress or executive branch  agencies.", "My comments are based upon our 2018 annual report, as well as our  update on the progress made in implementing actions that we have  suggested in our previous annual reports. These efforts are based on  work we previously conducted in accordance with generally accepted  government auditing standards. More details on our scope and  methodology can be found in the full report.", "Figure 1 outlines the definitions we use for fragmentation, overlap, and  duplication for this work.", "On April 26, 2018 we released the latest updates to our Action Tracker  (see sidebar). Our tracker includes a downloadable spreadsheet  (available in XLSX or CSV formats) that users can sort and filter based on  their specific needs or interests. For example, areas and actions can be  sorted by the year identified, mission area name, implementation status,  and implementing entities (Congress or specific agencies).", "GAO\u2019s Action Tracker, a publicly accessible  w ebsite, allows Congress, executive branch  agencies, and the public to track the  government\u2019s progress in addressing the  issues w e have identified. GAO updates the  Action Tracker twice a year, in the spring and  fall.  Click here to access GAO\u2019s online Action  Tracker and downloadable spreadsheet  (available in XLSX or CSV formats).", "Over 25 of the 68 new actions we identified in our annual report concern  fragmentation, overlap, or duplication in government missions and  functions (see table 1).", "In addition, our 2018 report presents over 30 new opportunities for  Congress or executive branch agencies to reduce the cost of government  operations or enhance revenue collections for the U.S. Treasury across  10 areas of government (see table 2).", "In addition to these new areas, we identified seven new actions that relate  to six existing areas presented in our 2011 to 2017 annual reports (see  table 3).", "Since our 2018 report was issued, we reported in April 2018 that four of  the Centers for Medicare & Medicaid Services\u2019 (CMS) Medicare prior  authorization programs potentially reduced spending by as much as $1.9  billion from September 2012 through March 2017. However, most of  these programs, which ensure that Medicare coverage and payment rules  have been met before the agency pays for selected items and services,  such as certain wheelchairs, are either paused or will end in 2018. CMS  does not have plans to extend these programs or expand the use of prior  authorization to additional items and services.", "We recommended that CMS should take steps, based on results from  evaluations, to continue prior authorization. The Department of Health  and Human Services (HHS) neither agreed nor disagreed with the  recommendation but said it would continue to evaluate prior authorization programs and take our findings and recommendations into consideration  in determining next steps. We believe continued use of prior authorization  for certain items and services\u2014determined by lessons learned from  existing prior authorization programs\u2014could significantly reduce  unnecessary Medicare spending."], "subsections": [{"section_title": "Congress and Executive Branch Agencies Continue to Address Actions That Span the Federal Government", "paragraphs": ["We monitor the progress that Congress and executive branch agencies  have made in addressing the issues we identified in each of our last  seven annual reports. As shown in table 4, Congress and executive  branch agencies have made consistent progress in addressing many of  the actions we identified from 2011 to 2017. As of March 2018, 376 (52  percent) of the actions we identified from 2011 to 2017 have been fully  addressed. See our online Action Tracker for the status of all actions."], "subsections": [{"section_title": "Billions in Financial Benefits Due to Actions Taken by Congress and Executive Branch Agencies", "paragraphs": ["The progress Congress and executive branch agencies have made in  addressing our open actions has resulted in $178 billion in financial  benefits, including roughly $125 billion in financial benefits from 2010  through 2017, with at least an additional $53 billion in estimated benefits  projected to accrue in 2018 or later. Table 5 highlights examples of  these results.", "These financial benefits continue to grow as we identify and document  additional agency actions that respond to our recommendations. For  example, in recent months CMS has formalized changes to its oversight  of spending allowed for large Medicaid demonstrations, which allow  states to test new ways to deliver or pay for care. These demonstrations,  by HHS policy, should not raise federal costs over what the program  would have cost without the demonstration\u2014that is, they should be  budget neutral. But our past work has shown that the spending HHS had  authorized for these demonstrations was much higher than what was  justified, as HHS had allowed states to use questionable methods when  proposing spending for their demonstrations.", "CMS\u2019s new policy partially responds to a longstanding recommendation  we have made to better ensure that valid methods are used to  demonstrate budget neutrality. We anticipate that CMS\u2019s recent actions  could potentially reduce the federal government\u2019s liability for Medicaid by  billions, or tens of billions, annually.", "While not all actions result in financial benefits to taxpayers, all of our  suggested actions, when implemented, can result in other benefits\u2014for  instance, they make government more efficient or eliminate, reduce, or  improve management of fragmented, overlapping, or duplicative  programs. For example, such benefits can be seen in the results of our  work on the government\u2019s acquisition of space programs. For over two  decades, we and others have reported on problems caused by  fragmented leadership and a lack of a single authority in oversight of  these multibillion dollar programs.", "In 2012, we made a recommendation aimed at strengthening leadership  and authority of space systems acquisitions. In response, in 2017 the  President revived the National Space Council to provide a coordinated  process for developing and monitoring the implementation of national  space policy and strategy. Separately, in the National Defense  Authorization Act for Fiscal Year 2018, Congress made changes to  certain DOD space leadership positions and required the department to  conduct a review and identify a recommended organizational and  management structure for its national security space components, and  submit related reports. The act also required DOD to contract with a  federally funded research and development center not closely affiliated  with the Air Force to develop a plan to establish a separate military  department responsible for DOD national security space activities.  These actions could reduce fragmentation and speed decision making in  the development of a substantial investment in space systems."], "subsections": []}]}, {"section_title": "Action on Remaining and New Areas Could Yield Significant Additional Benefits", "paragraphs": ["While Congress and executive branch agencies have made progress  toward addressing the 798 total actions we have identified since 2011,  further steps are needed to fully address the 365 actions that are partially  addressed or not addressed. We estimate that tens of billions of dollars  in additional financial benefits could be realized should Congress and  executive branch agencies fully address open actions. In addition to  producing financial benefits, these actions make government more  efficient; improve major government programs or agencies; reduce the  risk of mismanagement, fraud, waste, and abuse; and increase  assurance that programs comply with laws and funds are legally spent."], "subsections": [{"section_title": "Significant Open Actions Directed to Congress", "paragraphs": ["Congress has used our work to identify legislative solutions to achieve  cost savings, address emerging problems, and find efficiencies in federal  agencies and programs. Our work has contributed to a number of key  authorizations and appropriations. In addition, congressional oversight of  agencies\u2019 efforts has been critical in realizing the full benefits of our  suggested actions addressed to the executive branch, and it will continue  to be critical in the future.", "In our 2011 to 2018 annual reports, we directed 100 actions to Congress,  including the 3 new congressional actions we identified in 2018. Of the  100 actions, 58 remain open (11 of which were partially addressed and  47 were not addressed or new) as of March 2018. Table 6 highlights  areas with significant open actions directed to Congress. Appendix I has  a full list of all open congressional actions."], "subsections": []}, {"section_title": "Significant Open Actions Directed to Executive Branch Agencies", "paragraphs": ["In our 2011 to 2018 annual reports, we directed 698 actions to executive  branch agencies, including 65 new actions identified in 2018. Of the 698  actions, 307 remained open as of March 2018. Of these open actions,  164 were partially addressed and 143 were not addressed or new. While  these open actions span the government, a substantial number of them  are directed to seven agencies that made up 83 percent\u2014$3.7 trillion\u2014of  federal outlays in fiscal year 2017 and have the largest number of open  actions (see figures 2 and 3).", "As shown in figure 3, seven agencies have at least 25 open actions.", "The following sections highlight examples of open actions across those  seven major agencies."], "subsections": []}, {"section_title": "More Efficiently Targeting Defense Resources", "paragraphs": ["In our 2011 to 2018 reports, we directed 176 actions to DOD in areas that  center on DOD\u2019s effectiveness in providing the military forces needed to  deter war and to protect the security of the United States. As of March  2018, 74 of these 176 actions remained open. DOD represented about 14  percent of federal spending in fiscal year 2017, with outlays totaling about  $635.5 billion. Our work suggests that effectively implementing these  open actions, including those related to areas listed in table 7, could yield  substantial financial benefits and improve DOD\u2019s effectiveness."], "subsections": []}, {"section_title": "Improving the Efficiency of Health Care Programs", "paragraphs": ["In our 2011 to 2018 reports, we directed 111 actions to HHS in areas that  contribute to HHS\u2019s mission to enhance the health and well-being of  Americans. HHS provides health coverage for over 145 million Americans  through three principal programs\u2014Medicare, Medicaid, and the  Children\u2019s Health Insurance Program\u2014as well as the health-insurance  marketplaces. HHS also operates other public health-related agencies  such as the Food and Drug Administration, the Centers for Disease  Control and Prevention, and the National Institutes of Health.", "HHS represented about 27 percent of the fiscal year 2017 federal budget,  with outlays totaling about $1.2 trillion. As of March 2018, 56 of HHS\u2019s  111 actions remained open. Our work suggests that effectively  implementing these actions, including those related to areas listed in table  8, could reduce costs, provide services more efficiently, and yield  substantial financial benefits."], "subsections": []}, {"section_title": "Enhancing Federal Revenues", "paragraphs": ["In our 2011 to 2018 reports, we directed 91 actions to the Internal  Revenue Service (IRS) in areas that contribute to effectively and  efficiently providing high-quality service to taxpayers and enforcing the  law with integrity and fairness to all. As of March 2018, 38 of these 91  actions remained open. The funding of the federal government depends  largely upon IRS\u2019s ability to collect taxes legally owed. Our work suggests  that effective implementation of our open actions, including those related  to areas listed in table 9, could increase revenues through better  compliance or reduce costs."], "subsections": []}, {"section_title": "Improving the Efficiency and Effectiveness of Homeland Security Operations", "paragraphs": ["In our 2011 to 2018 reports, we directed 79 actions to the Department of  Homeland Security (DHS) in areas that contribute to the effective  implementation of its mission. In fiscal year 2017, DHS spent about $63.6  billion, about 1.4 percent of federal outlays. As of March 2018, 31 of the  79 actions to DHS remained open. Fully implementing these actions,  including those related to areas listed in table 10, could result in financial  benefits and substantial improvements in agency operations."], "subsections": []}, {"section_title": "Advancing the Implementation of Government-Wide Policies and Performance", "paragraphs": ["Many of the results the federal government seeks to achieve require the  coordinated effort of more than one federal agency, level of government,  or sector. OMB manages and coordinates many government-wide efforts.  In our 2011 to 2018 reports, we directed 66 actions to OMB in areas to  improve the efficiency and effectiveness of government-wide programs  and activities. As of March 2018, 30 of the 66 actions to OMB remained  open. Fully implementing these actions, including those related to areas  listed in table 11, could yield significant financial benefits and substantial  program improvements across government."], "subsections": []}, {"section_title": "More Efficiently Administering Services to Retirees and Citizens with Disabilities", "paragraphs": ["In our 2011 to 2018 reports, we directed 32 actions to the Social Security  Administration (SSA) in areas that contribute to SSA providing financial  assistance to eligible individuals through Social Security retirement and  disability benefits and Supplemental Security Income (SSI) payments. As  of March 2018, 27 of these 32 actions remained open.", "In fiscal year 2017, SSA spent about $1 trillion, roughly 22 percent of  federal outlays. While most of SSA\u2019s funding is used to pay Social  Security retirement, survivors, and disability benefits from the Old-Age  and Survivors Insurance Trust Fund and the Disability Insurance Trust  Fund, our work suggests that effective implementation of these actions,  including the examples listed in table 12, could result in significant  benefits."], "subsections": []}, {"section_title": "Improving Support and Services for Veterans", "paragraphs": ["In our 2011 to 2018 reports, we directed 54 actions to the Department of  Veterans Affairs (VA) in areas that contribute to VA effectively and  efficiently achieving its mission to promote the health, welfare, and dignity  of all veterans by ensuring that they receive medical care, benefits, and  social support. As of March 2018, 25 of these 54 actions remained open.  In fiscal year 2017, VA spent about $183.0 billion\u2014about 4 percent of  federal outlays\u2014for veterans\u2019 benefits and services. Our work suggests  that effective implementation of these actions, including those related to  areas listed in table 13, could yield cost savings and efficiencies that  would improve the delivery of services to the nation\u2019s veterans and their  families.", "We will continue to look for additional or emerging instances of  fragmentation, overlap, and duplication and opportunities for cost savings  or revenue enhancement. Likewise, we will continue to monitor  developments in the areas we have already identified. We stand ready to  assist this and other committees in further analyzing the issues we have  identified and evaluating potential solutions.", "Thank you, Chairman Enzi, Ranking Member Sanders, and Members of  the Committee; this concludes my prepared statement. I would be  pleased to answer questions."], "subsections": []}]}, {"section_title": "GAO Contacts", "paragraphs": ["For further information on this testimony or our April 26, 2018 report,  please contact J. Christopher Mihm, Managing  Director, Strategic Issues,  at (202) 512-6806 or mihmj@gao.gov, and Jessica Lucas-Judy, Director,  Strategic Issues, at (202) 512-9110 or lucasjudyj@gao.gov. Contact  points for the individual areas listed in our 2018 annual report can be  found at the end of each area in GAO-18-371SP. Contact points for our  Congressional Relations and Public Affairs offices may be found on the  last page of this statement."], "subsections": []}]}, {"section_title": "Appendix I: Open Congressional Actions, by Mission", "paragraphs": ["In our 2011 to 2018 annual reports, we directed 100 actions to Congress,  of which 58 remain open. Of the 58 open congressional actions, 11 are  partially addressed and 47 are not addressed or new, as of March 2018.  See table 14."], "subsections": []}], "fastfact": ["Every year, we identify and report on federal agencies, programs, and initiatives with fragmented, overlapping, or duplicative goals or activities; and ways to reduce costs or enhance revenue. The government saves money when it takes the actions we've proposed\u2014an estimated $178 billion so far by taking 52% of previously recommended actions.", "We testified on our 8th annual report, in which we identified 68 new actions that Congress and executive branch agencies could take to improve operations across government.", "Fully addressing these and remaining actions from our prior reports could lead to tens of billions of dollars of additional savings."]}
{"id": "GAO-18-473", "url": "https://www.gao.gov/products/GAO-18-473", "title": "San Francisco Bay Delta Watershed: Wide Range of Restoration Efforts Need Updated Federal Reporting and Coordination Roles", "published_date": "2018-08-16T00:00:00", "released_date": "2018-08-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The San Francisco Bay Delta watershed\u2014which drains a vast area of California from the Sierra Nevada Mountains to the Pacific Ocean\u2014supplies drinking water for 25 million people and provides irrigation for about half the nation's fruit and vegetable production. Decades of development and agriculture have led to large reductions in water quality and supply, natural flood protection, and habitats across the watershed's three major regions: the Bay, the Delta, and the upper watershed. Federal entities have been working with nonfederal entities for decades to protect and restore the watershed. GAO was asked to review restoration efforts in the watershed.", "This report examines, among other objectives, (1) the extent to which federal and nonfederal entities coordinate watershed restoration efforts and (2) information on the status of these efforts and related expenditures for fiscal years 2007 through 2016, the most recent data available. GAO reviewed laws; regional databases, plans, and reports; and budget documents. It also surveyed the 72 members of interagency groups (48 responded) and interviewed federal and nonfederal officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal entities, including the Department of the Interior, and nonfederal entities, such as California state agencies and nonprofits, carry out and coordinate a wide range of restoration efforts in the San Francisco Bay Delta watershed. These efforts have multiple benefits, such as improved water quality and habitat in restored marshland (see fig. below). The entities coordinate comprehensive efforts in the San Francisco Bay area (Bay) and Sacramento-San Joaquin Delta (Delta) through two groups. Federal efforts across the watershed are to be led and coordinated by Interior and the Council on Environmental Quality (CEQ) through a 2009 Interim Federal Action Plan, but not all federal entities are using the plan. Interior officials said the plan is no longer relevant because state and federal roles have changed. For example, they said a state-led committee acts as the coordinating body for federal entities; however, this committee focuses on one region of the watershed, while federal funding supports efforts in all three regions. By updating or revising the Interim Action Plan, Interior and CEQ could help clarify federal roles in supporting restoration efforts in the watershed.", "Information on the status of all restoration efforts across the watershed, including their accomplishments, is unknown because information is not being fully collected or reported. Also, related expenditures for fiscal years 2007 through 2016 are unknown, in part because federal reports do not include complete or reliable data for restoration efforts in the watershed. The 2004 CALFED Bay-Delta Authorization Act requires Interior and the Office of Management and Budget (OMB) to report annually to Congress on restoration accomplishments and federal and state expenditures in the watershed, respectively. Interior has not issued these reports since 2009, when the state agency from which Interior had obtained the state data was abolished. OMB has issued its reports with federal, but not state, data for the same reason. However, Interior and OMB have not reached out to other state entities for this information. Without obtaining and reporting available information, as required by law, Interior and OMB will not have reasonable assurance that they are providing Congress with the information needed to monitor federal and nonfederal restoration efforts and expenditures."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made seven recommendations, including that Interior and CEQ update or revise the Interim Federal Action Plan and that Interior and OMB coordinate with the state to meet the CALFED Act's reporting requirements. Interior partially concurred with the recommendations, and CEQ and OMB neither agreed nor disagreed with them. GAO maintains its recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The health of the San Francisco Bay Delta watershed\u2014which drains a  vast area of California from the Sierra Nevada Mountains to the Pacific  Ocean\u2014affects the well-being of millions of Americans. The watershed  consists of three major geographic areas: the San Francisco Bay and its  local watershed (Bay); the Sacramento-San Joaquin Delta (Delta); and  the expansive upper watershed, which includes California\u2019s Central Valley  and the western slope of the Sierra Nevada Mountains. Throughout the  entire watershed, reservoirs, canals, and other water supply infrastructure  convey fresh water to major agricultural areas and population centers in  the San Francisco Bay area and southern parts of California, including  water for important manufacturing, technology, and entertainment  sectors. According to the Environmental Protection Agency (EPA), the  watershed supplies at least some of the drinking water for about 25  million Californians and supports an important share of the U.S. economy  by providing irrigation for about half the nation\u2019s fruit and vegetable  production, natural flood protection for significant economic areas such as  Silicon Valley, and deep water ports for international trade, among other  things. Levees and other flood control infrastructure provide flood  protection for farms and communities across the Central Valley and in  other parts of the watershed.", "The watershed also provides habitat for hundreds of animal and plant  species, including several that are endangered or threatened. Significant  development and agriculture production over the past 150 years has  physically modified the watershed and strained many of its natural  resources. According to EPA, these changes have led to large reductions  in water quality and supply, challenges for flood protection, and declines  in species and their habitat. For example, most of the watershed\u2019s  historical wetlands, which perform key functions such as filtering  pollutants and absorbing storm surges, have been lost. Since 1972, EPA  has worked with the state of California to develop and enforce water  quality standards for the watershed, and since at least 1987, EPA and  other federal entities have worked through a variety of partnerships with  the state and other nonfederal entities, such as nongovernmental  organizations, to protect and restore the watershed\u2019s complex ecosystem.  Even with these activities, important parts of the watershed remain under  considerable stress, and potential solutions are complicated and  resource-intensive.", "According to EPA, dozens of federal and nonfederal entities, including  state government agencies, have responsibilities related to water quality  improvement and ecosystem restoration efforts in the San Francisco Bay  Delta watershed. Key federal entities include EPA, the National Oceanic  and Atmospheric Administration (NOAA), U.S. Army Corps of Engineers,  U.S. Department of Agriculture (USDA), Council on Environmental Quality  (CEQ), and several entities within the Department of the Interior,  including the Bureau of Reclamation, U.S. Fish and Wildlife Service, and  the U.S. Geological Survey. In addition, the Office of Management and  Budget (OMB) is required to submit a report to Congress, in coordination  with the Governor of California and certified by the Secretary of the  Interior, that contains financial information related to many of these  efforts. Key nonfederal entities include the Delta Stewardship Council, a  California state agency that oversees the state government\u2019s plan for  promoting a more reliable water supply and a healthy ecosystem, and a  variety of other organizations, such as state, local, and regional  government agencies and nonprofit science institutes. Different  combinations of federal and nonfederal entities work in each of the  watershed\u2019s three major geographic areas: the Bay, Delta, and upper  watershed. See appendix I for a list of selected federal and nonfederal  entities and some of their restoration-related roles in the watershed.", "You asked us to review restoration efforts in the San Francisco Bay Delta  watershed. This report examines (1) the extent to which federal and  nonfederal entities coordinate their San Francisco Bay Delta watershed  restoration efforts, (2) the extent to which federal and nonfederal entities  have developed measurable goals and approaches to assess progress  for San Francisco Bay Delta watershed restoration efforts, (3) information  on the status of San Francisco Bay Delta watershed restoration efforts  and related expenditures for fiscal years 2007 through 2016, and (4) key  factors that may limit San Francisco Bay Delta watershed restoration,  according to federal and nonfederal entities.", "To address all four objectives, we reviewed relevant federal and state  laws and documents and interviewed officials from 28 federal, state, and  other entities. To examine the extent to which federal and nonfederal  entities coordinate their San Francisco Bay Delta watershed restoration  efforts, we interviewed officials from federal, state, and other entities to  identify restoration activities and key regional plans and coordination  efforts, and we reviewed these activities, plans, and efforts. We compared  federal coordination efforts against a selection of our leading collaboration  practices to assess the extent to which they followed these practices.  Based on these interviews and reviews, we surveyed all federal, state,  and other entities participating in selected regional interagency groups to  identify coordination-related challenges, if any. We identified and sent  surveys to 72 entities, of which 48 responded to our questionnaire, a  response rate of 67 percent. To examine the extent to which federal and  nonfederal entities have developed measurable goals and approaches to  assess progress for San Francisco Bay Delta watershed restoration  efforts, we reviewed regional plans and related goals and progress  reports. We also interviewed officials from federal, state, and other  entities, including scientific groups, about efforts to develop measurable  goals and assess restoration progress.", "To examine information on the status of San Francisco Bay Delta  watershed restoration efforts and related expenditures for fiscal years  2007 through 2016, we obtained and analyzed available data from  regional and state databases on projects, expenditures, and cost  estimates for this period, which covers the time before and after the state  withdrew from a key federal-state partnership, and includes the last full  fiscal year for which the most recent data were available at the time of our  review. We assessed the reliability of these data by interviewing  knowledgeable officials and reviewing database documentation and  determined that they were not reliable for the purposes of identifying all  restoration projects across the entire watershed and for reporting related  expenditure data. We also reviewed federal and state reports on budget  requests and authority for that period and interviewed officials from  federal, state, and other entities about available sources of data on  projects, expenditures, and cost estimates. Specifically, we reviewed the  Bay Delta budget crosscuts, which include financial information for San  Francisco Bay Delta watershed restoration efforts reported by federal and  state agencies, for fiscal years 2007 through 2019. We assessed the  reliability of the data in the federal budget crosscut reports and tables by  interviewing federal agency officials about which data they provided for  the reports and tables and analyzing the data provided in the crosscut  reports. We determined that the data were reliable only for reporting  examples of the magnitude of funding for individual agencies. We  determined that these data were not reliable to aggregate funding levels  across programs and agencies or to compare funding levels of the  various agencies. We discuss these issues further in this report. We also  compared OMB\u2019s written guidance on submitting data for the crosscut  reports with federal standards for internal control to assess the extent to  which federal agencies followed the standard for design of control  activities. We conducted site visits to four restoration projects, selected  to provide illustrative examples of a variety of restoration activities in  different locations in the watershed.", "To determine key factors that may limit San Francisco Bay Delta  watershed restoration, according to federal and nonfederal entities, we  used our survey of federal, state, and other entities described above to  obtain views on factors that may limit restoration progress. We also  reviewed progress reports and studies exploring factors that may limit  restoration progress. Appendix II contains more detailed information on  the objectives, scope, and methodology of our review, and Appendix III  contains a copy of the survey questionnaire we used for this review.", "We conducted this performance audit from April 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides an overview of the (1) San Francisco Bay Delta  watershed, (2) multiple water demands in the watershed, (3) selected  laws and agreements related to restoration efforts in the watershed, and  (4) funding for restoration efforts in the watershed."], "subsections": [{"section_title": "San Francisco Bay Delta Watershed", "paragraphs": ["The San Francisco Bay Delta watershed is a single, complex ecosystem  covering more than 75,000 square miles, almost entirely in California. It  includes a diversity of fresh, brackish, and salt water ecosystems.  Figure 1 shows the watershed and its three major geographic areas and  their subregions.", "The watershed\u2019s three major geographic areas contain unique, yet  inherently interconnected environmental and cultural features and face  similar water quality and other threats:", "San Francisco Bay and its local watershed (Bay). The San  Francisco Bay is the large body of mostly salt water through which the  local watershed, as well as the entire Bay Delta watershed, drains into  the Pacific Ocean. According to U.S. Census data, more than 7  million people live in the nine-county Bay area containing the local  watershed\u2014an area with one of the nation\u2019s densest populations.  Large cities, such as San Jose, San Francisco, and Oakland; their  suburbs, including Silicon Valley; and numerous other cities occupy  much of the land surrounding the Bay. Since the California Gold Rush  in the mid-1800s, most of the Bay\u2019s historical wetlands have been  filled for development or converted to farmland or industrial salt  ponds, and the loss of these natural features has removed important  barriers for flood and erosion control. Because of its urban setting  and location at the downstream end of the watershed, the Bay\u2019s water  quality faces threats from numerous sources of pollution, including  sewage, trash, urban and industrial runoff (e.g., metals, solvents, and  inorganic chemicals), and runoff from agriculture and past mining  activities upstream (e.g., nutrients, pesticides, and metals).", "Sacramento-San Joaquin Delta (Delta). The Sacramento-San  Joaquin Delta comprises roughly 1,000 square miles where the fresh  waters of the Sacramento and San Joaquin Rivers converge south of  the city of Sacramento before flowing into the San Francisco Bay  through a network of more than 50 islands. It is a largely rural area  that is also home to more than 500,000 people living mostly on its  suburban periphery, and its communities and farmland are protected  from flooding by approximately 1,100 miles of levees. During the  California Gold Rush, settlers diked the Delta\u2019s channels and  waterways and began building levees to create dry land, resulting in  the loss of nearly all of the original wetlands in the area. As a result,  the Delta has been converted from an historic plain of seasonally  flooded brackish and freshwater wetlands to a mosaic of channelized  waterways surrounding its islands. According to reports, many of  these islands have subsequently subsided up to 25 feet below sea  level due largely to the use of groundwater and farming, which can  cause the islands\u2019 rich peat soil to oxidize and erode. The Delta is a  major outdoor recreation destination for activities such as fishing and  boating. Its key water quality threats include agricultural, urban, and  past mining runoff. In addition, the complex system of water supply  infrastructure projects built throughout the watershed diverts fresh  water from the Delta to other parts of the state, changing the saltwater  content of much of the area\u2019s wetlands and marshes.", "Upper watershed. The upper watershed is the vast area where the  watershed\u2019s rivers, streams, and tributaries originate at the crest of  the Sierra Nevada and other mountain ranges and then travel  hundreds of miles through California\u2019s Central Valley, the nation\u2019s  most productive agricultural area, according to USDA. The upper  watershed includes three subregions: the Sacramento River  watershed in northern California, through which water generally flows  south; the San Joaquin River watershed in central California, through  which water generally flows west and then north; and the Tulare Lake  Basin in southern California, through which water no longer drains  naturally. About 5 million people live throughout the area in a mix of  rural and urban communities, including large inland cities, such as  Fresno and Sacramento. In the upper watershed, the Sierra Nevada  snowpack serves as temporary storage for roughly one-third to one- half of California\u2019s water, depending on the year. Most of the major  rivers hold reservoirs to capture and store the snowmelt for longer- term use. As a result of mining, agriculture, and water infrastructure  development, the area\u2019s historic water flows have been highly  modified, the Central Valley\u2019s historic grasslands and flood plains  have been converted to managed wetlands and are often threatened  by land subsidence, and runoff from agriculture and past mining  activities are dominant threats to water quality in low-lying areas. In  the mountains and foothills, forest fires can threaten water quality,  mostly by causing erosion that increases sediment in streams.", "The Bay and Delta together form the San Francisco Bay/Sacramento-San  Joaquin Delta Estuary, often referred to as the Bay Delta, one of the  largest estuaries in North America. The Bay Delta is the ecosystem  created by the mixing of salt water from the Pacific Ocean and fresh  water from the Sacramento and San Joaquin Rivers and their tributaries.  It provides habitat for about 750 species of plants and animals, including  more than 130 species of fish. It also contains more than 700,000 acres  of farmland, and millions of users access it each year for recreational  activities, such as hunting, boating, and fishing. In contrast to the  managed wetlands of the upper watershed, the Bay Delta wetlands are  tidal areas\u2014brackish wetland influenced by the push and pull of ocean  tides. Even with the tidal influence, the saltwater content of the Bay Delta  is also heavily influenced by the amount of fresh water available, much of  which is diverted by water supply infrastructure projects and can vary due  to multiple water demands."], "subsections": []}, {"section_title": "Multiple Water Demands in the Watershed", "paragraphs": ["Because of the watershed\u2019s economic, environmental, and cultural  importance, it has been the subject of political and legal battles over  multiple water demands for decades. Beginning in the 1930s, federal and  then state water projects\u2014two complex networks of dams, pumps,  reservoirs, canals, and other facilities\u2014have diverted water from the  Sacramento and San Joaquin Rivers to agricultural, industrial, and urban  consumers in the Bay area and southern parts of California. The federal  Central Valley Project primarily diverts water for agricultural use, and the  California State Water Project, which was developed in the 1960s,  primarily diverts water for drinking and industrial use. Hundreds of water  contractors, such as the Westlands Water District and the Metropolitan  Water District of Southern California, purchase water from these projects,  which can divert about 20 to 70 percent of the natural water flowing into  the Bay Delta, depending on legal limits and seasonal levels of  precipitation.", "Other water demands include habitat needs for threatened and  endangered species such as the Delta smelt (a fish) and various salmon  species. In particular, federal agencies have developed instream flow  requirements for these species of fish that require water to be released  from dams upstream to help maintain adequate water quality and  temperature for the fish. As a result, most of the water in the watershed is  managed by federal, state, and local water projects for use by private and  investor-owned water agencies and districts and their customers, as well  as for fish and habitat purposes. Any proposed changes to this  complicated water allocation system\u2014which accounts for California\u2019s  largest supply of fresh water\u2014often raise concerns among water users  about losing water, receiving reduced priority for water supplies, or  obtaining water of poor quality. For example, according to one study, the  state of California has allocated more water rights than what could be  available naturally. Other concerns involve the system\u2019s infrastructure\u2014 the system depends largely on a complex network of aging levees, many  of which were first built in the mid-1800s\u2014and the possible effects on  water supply and quality. Specifically, earthquakes, floods, subsidence, or  sea level rise could cause these levees to fail and put the state\u2019s fresh  water supply at risk from saltwater contamination. As a result of these and  other concerns, many stakeholders in the watershed have been, and  continue to be, involved in legal actions over multiple water demands."], "subsections": []}, {"section_title": "Selected Laws and Agreements Related to Restoration Efforts in the Watershed", "paragraphs": ["Construction and operation of the Central Valley Project and the State  Water Project has fundamentally altered the physical environment of the  Bay, Delta, and parts of the upper watershed, where nearly every  tributary has been dammed to create reservoirs to supply these water  projects. By the late 1980s, species decline and water quality problems  became so critical in the Bay Delta that stakeholders raised concerns that  the continued operation of these projects might be conflicting with federal  and state water quality and endangered species laws (discussed  below).", "In 1992, the Central Valley Project Improvement Act amended the Central  Valley Project authorizations, which previously focused primarily on  certain uses such as irrigation and power generation. The act specifies,  among other things, a number of actions for the purposes of protecting,  restoring, and enhancing fish, wildlife, and associated habitats in the  Central Valley and Trinity River basins in California. The act\u2019s stated  purposes include, among other things, to achieve a reasonable balance  among competing demands for use of Central Valley Project water,  including the requirements of fish and wildlife, agriculture, municipal and  industrial and power contractors. Under the act, Reclamation implements  several programs, including those to restore habitat on Central Valley  rivers and streams, improve diversion facilities to protect certain juvenile  fish, and deliver water supplies for critical wetland habitat supporting  resident and migratory waterfowl and threatened and endangered  species.", "To address the increasingly complex issues surrounding the Bay Delta,  the federal and California state governments reached an agreement to  create the CALFED Bay-Delta Program (CALFED) in 1995 to restore  ecological health, improve water quality, fortify water management  infrastructure, and increase water supply reliability. From 1995 through  2009, about 20 federal and state agencies collaborated through this  program, issuing a record of decision in 2000 outlining CALFED goals  and programs and implementing federal and state legislation enacted in  the early 2000s. Under the National Environmental Policy Act of 1969,  agencies issue a record of decision at the end of the environmental  impact statement process, which they are required to conduct for major  federal actions that have a significant effect on the environment.", "The 2000 record of decision established a program with 12 components,  including water quality and ecosystem restoration, to be managed by  state and federal agencies. According to the record of decision,  CALFED\u2019s water quality goal was to provide good water quality for the  millions of Californians who rely on the Delta for all or a part of their  drinking water. CALFED\u2019s goal for ecosystem restoration under the  record of decision was to improve aquatic and terrestrial habitats and  natural processes to support stable, self-sustaining populations of diverse  and valuable plant and animal species through an adaptive management  process. This process includes reevaluating or updating goals, activities,  or performance measures based on the results of ongoing monitoring and  progress assessments. Under the record of decision, the water quality  and ecosystem restoration programs include activities throughout the  Bay, Delta, and upper watershed.", "In 2002, California enacted the California Bay-Delta Act, which  established the California Bay-Delta Authority to oversee CALFED. In  2004, the Calfed Bay-Delta Authorization Act (CALFED Act), a federal  law, implemented the record of decision, directed federal agencies to  coordinate CALFED activities with California state agencies, and authorized federal agencies to participate in the California Bay-Delta  Authority as nonvoting members for the full duration of the period it  continued to be authorized by state law. CALFED received federal  appropriations to develop and implement ecosystem protection and  restoration projects. Section 105 of the act requires Interior to report  annually on the accomplishments of various program components,  including those related to additional water storage and ecosystem  restoration. Section 106 of the act requires OMB, in coordination with the  governor of California, to report annually on all expenditures since 1998  to achieve the program\u2019s objectives.", "However, in 2009, California repealed the California Bay-Delta Act and  abolished the California Bay-Delta Authority, replacing it with the Delta  Reform Act and the Delta Stewardship Council. The 2009 law focused  state efforts more specifically on the Delta, in part by tasking the council  with developing an enforceable Delta Plan for promoting a healthy Delta  ecosystem and a more reliable water supply. According to a report by  the California Legislative Analyst\u2019s Office, the CALFED federal-state  partnership ended due to several challenges, including uncertain  financing, weak governance, and a lack of accountability. Although  California state law was amended in 2009, the federal CALFED Act has  not been significantly amended since its enactment in 2004.", "As we reported in June 2015, although the CALFED record of decision  remains in effect, the state\u2019s future direction for Bay Delta activities are  likely to be coordinated through the Delta Plan. The Delta Plan was,  under certain conditions, to incorporate a 50-year conservation plan  initiated by the state, in cooperation with Reclamation, in 2006. The 50- year plan proposed restoring approximately 150,000 acres of wetlands,  grasslands, and other areas in and around the Delta over 50 years and  addressing water supply reliability concerns by building two large tunnels  to transport fresh water under the Delta. In 2015, facing uncertainties in  obtaining permits to implement the plan, the state replaced the 50-year  plan with two separate initiatives managed by the California Natural  Resources Agency: (1) California EcoRestore, which aims to begin  restoring at least 30,000 Delta acres over 5 years, and (2) California  WaterFix, which includes building the two tunnels from the 50-year plan.  The ecosystem chapter of the Delta Plan is being amended, and the  amended chapter is anticipated to be complete by early 2019, according  to Delta Stewardship Council officials. While it does not directly  incorporate EcoRestore, the Delta Plan ecosystem amendment currently  under development acknowledges that EcoRestore\u2019s successful  implementation is needed to achieve the restoration objectives in the  Delta Reform Act, according to Delta Stewardship Council officials.", "In addition to the CALFED Act and the Central Valley Project  Improvement Act, other federal laws, including water quality and  endangered species laws, are relevant to restoration efforts in the  watershed. Some relevant laws include the following:", "The Clean Water Act. The objective of this act is to restore and  maintain the chemical, physical, and biological integrity of the nation\u2019s  waters. A 1987 amendment to the act created the National Estuary  Program to promote comprehensive planning for, and conservation  and management of, estuaries of national significance. The National  Estuary Program calls for the development of comprehensive  conservation and management plans (CCMP) for these designated  estuaries, including the Bay Delta estuary, which was designated  under the program in 1987. Under the act, EPA also works with  California to regulate water quality. In addition, section 404 of the  Clean Water Act generally prohibits the discharge of dredged or fill  material into waters of the United States without a permit from the  Corps. The Corps administers the permitting responsibilities of the  section 404 program while EPA develops, in conjunction with the  Corps, the substantive environmental criteria that permit applicants  must meet.", "The Endangered Species Act. This act was enacted to, among other  things, provide a means to conserve the ecosystem upon which  endangered species and threatened species depend and to provide a  program for the conservation of such endangered species and  threatened species. Under the act, species may be listed as  endangered or threatened. Several species in the watershed are  listed as threatened or endangered, including the Delta smelt,  steelhead trout, spring- and winter-run Chinook salmon, Ridgway\u2019s rail  (a bird), salt marsh harvest mouse, red-legged frog, and California  tiger salamander. NOAA\u2019s National Marine Fisheries Service and the  U.S. Fish and Wildlife Service, depending on the species, implement  the act, including by issuing biological opinions regarding the potential  effects of proposed federal actions on endangered and threatened  species.", "The San Joaquin River Restoration Settlement Act. In conjunction  with the settlement this act implements, it outlines, among other  things, measures to achieve the goals of restoration of the San  Joaquin River and the successful reintroduction of California Central  Valley spring-run Chinook salmon. Under the act, Reclamation is to  coordinate several actions, including the expansion of a segment of  the San Joaquin River to provide habitat for juvenile salmon."], "subsections": []}, {"section_title": "Funding for Restoration Efforts in the Watershed", "paragraphs": ["Across the watershed, funding for restoration efforts typically comes from  a variety of federal, state, local, nongovernmental, and private entities.  According to Interior officials, federal funding includes approximately $37  million per year for CALFED overall and additional funding for  implementation of the Central Valley Project Improvement Act, available  for certain projects in the Delta and upper watershed. Also, according to  Interior officials, the U.S. Geological Survey funds research and  monitoring to support water quality management, water operations, and  restoration. Additional federal sources of funding include grant programs  from EPA, NOAA, and the U.S. Fish and Wildlife Service and projects  funded through Reclamation, in addition to funding for water projects that  can include a restoration component. For example, Reclamation has  provided about $37 million annually since fiscal year 2015 for the San  Joaquin River Restoration Program. A number of other federal entities,  including USDA\u2019s Natural Resources Conservation Service, also fund  restoration projects in the watershed. For example, USDA\u2019s Natural  Resources Conservation Service has programs, such as the  Environmental Quality Incentives Program and the Agricultural  Conservation Easement Program, to support farm conservation efforts  throughout the Central Valley.", "Funding from state sources primarily comes from state water and  conservation agencies and is funded through statewide bonds and the  state\u2019s general fund. For example, in 2014, California voters authorized  $7.5 billion in bonds to fund ecosystems and watershed protection and  restoration; water supply infrastructure projects, including surface and  groundwater storage; and drinking water protection across the state,  including the San Francisco Bay Delta watershed. In addition to the bond  funding, in 2016, voters from nine Bay area counties authorized an  annual $12 parcel tax that is expected to raise approximately $500 million  over 20 years for Bay wetlands restoration, as well as other multi-benefit  projects.", "In the Delta, in addition to federal and state funding for restoration efforts,  according to state officials, funding often comes from water contractors  that pay for major restoration efforts through their obligations under the  State Water Project to address biological opinions issued by federal  regulatory agencies for endangered or threatened species. For  example, water contractors are responsible for funding restoration efforts  under the state\u2019s California EcoRestore initiative, including at least $205  million to restore 8,000 acres of fish habitat and $171 million for 17,000  acres of floodplain improvements. EcoRestore began in 2015, and total  costs for projects are expected to reach at least $300 million in the  initiative\u2019s first 4 years, according to the California Natural Resources  Agency.", "According to officials from several federal and nonfederal entities,  including EPA and the San Francisco Estuary Partnership, no official  estimates exist for the expected total future costs to restore the entire  watershed, though some estimates have been developed for limited types  of activities. For example, regarding cost estimates, the San Francisco  Estuary Partnership typically refers to Save the Bay\u2019s 2007 Greening the  Bay report, which estimates that it will cost almost $1.5 billion over 50  years to restore the 36,176 acres of Bay shoreline already set aside for  restoration. Overall, according to related reports, investments on the  order of tens of billions of dollars would likely be necessary to restore the  entire watershed."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Entities Coordinate Comprehensive Restoration Efforts in Specific Geographic Areas, but Federal Entities Do Not Coordinate Across the Watershed", "paragraphs": ["Federal and nonfederal entities, including state agencies and  nongovernmental organizations, carry out and coordinate a wide range of  restoration efforts in the watershed. These entities coordinate  comprehensive restoration efforts in the Bay and Delta primarily through  two coordinating bodies\u2014the San Francisco Estuary Partnership and the  Delta Plan Interagency Implementation Committee, respectively. In the  upper watershed, federal and nonfederal entities do not have a  coordinating body for comprehensive restoration efforts, but they do  coordinate restoration efforts through plans specific to entities, projects,  or restoration topics. In 2009, federal entities first developed an Interim  Federal Action Plan for coordinating federal restoration efforts across the  entire watershed, but not all of the entities are using the plan."], "subsections": [{"section_title": "Federal and Nonfederal Entities Carry Out A Wide Range of Restoration Efforts in the Watershed", "paragraphs": ["Federal and nonfederal entities carry out a wide range of restoration  efforts\u2014i.e., water quality improvement and ecosystem restoration\u2014that  can involve multiple entities, vary in geographic scope, span multiple  years, and are intended to achieve multiple benefits. According to our  review of reports and interviews with officials from federal and nonfederal  entities, water quality improvement efforts include projects intended to  improve the physical, chemical, or biological characteristics of water, and  ecosystem restoration efforts include projects to restore degraded  habitats. According to these interviews, restoration efforts can target a  range of priorities, including conservation, resiliency, mitigation,  monitoring, and enhancement. In addition, these efforts can directly or  indirectly support water quality improvement and ecosystem restoration  goals and objectives, and they can encompass a variety of activities, such  as planning, project selection, project implementation, permitting, funding,  technical assistance, and assessment. Figure 2 shows the locations and  different habitat types for a number of the completed and ongoing  restoration projects implemented by federal and nonfederal entities\u2014 partly under the CCMP, California EcoRestore, and other efforts\u2014in the  Bay Delta Estuary.", "Restoration efforts in the watershed can involve multiple levels of  government, as well as nongovernmental organizations. For example, the  South Bay Salt Pond Restoration Project near San Jose, California\u2014the  largest tidal wetland restoration project on the west coast of the United  States, according to the project\u2019s website\u2014is a joint effort among the U.S.  Fish and Wildlife Service, California Department of Fish and Wildlife, and  the California State Coastal Conservancy, along with local governments,  donors, consultants, and other participants. Similarly, the Hamilton  Wetland Restoration Project near Novato, California, which involves the  restoration of tidal and seasonal wetlands, is a joint effort among the  Corps, California State Coastal Conservancy\u2014the nonfederal sponsor  and landowner\u2014and other federal and nonfederal entities.", "Restoration efforts in the watershed also vary in geographic scope and  can span jurisdictions. The South Bay Salt Pond Restoration Project  includes federal and state land and, according to the project\u2019s website, is  expected to restore more than 15,000 acres of industrial salt ponds to  tidal marsh and other wetland habitats in three counties located along the  shores of the southern part of San Francisco Bay. (See fig. 3.)", "The Hamilton Wetland Restoration Project comprises state-owned land  and, according to the California State Coastal Conservancy, has the  purpose to restore approximately 2,600 acres to tidal wetland on a former  army airfield and adjacent properties along the San Francisco Bay in an  area 25 miles north of San Francisco. (See fig. 4.)", "In contrast, other efforts include project areas on farms. For example,  under its Environmental Quality Incentives Program, USDA\u2019s Natural  Resources Conservation Service has focused on providing conservation  planning, among other services, for farm operators and nonindustrial  forestland owners, including tribes. Officials from several federal and  nonfederal entities, including EPA, the San Francisco Estuary  Partnership, the Central Valley Joint Venture, and the California State  Coastal Conservancy, stated that the primary focus of restoration efforts  varied from one geographic area to another. For example, according to  some of these officials, efforts to restore tidal wetlands are prevalent in  the Bay, and efforts to address land subsidence are prevalent in the  Delta. (See fig. 5.)", "Restoration efforts in the watershed can span multiple years. For  example, the South Bay Salt Pond Restoration Project is an ongoing,  multi-phase, 50-year effort that began with the acquisition of former  industrial salt ponds in 2003. Likewise, the Hamilton Wetland Restoration  Project is an ongoing, multi-phase effort that began in 1999. In the upper  watershed, planning began in 2012 for California EcoRestore\u2019s ongoing  Yolo Bypass Salmonid Habitat Restoration and Fish Passage Project,  which aims to increase floodplain habitat for endangered and threatened  fish species in the Sacramento River watershed.", "Restoration efforts in the watershed can also have multiple primary  benefits. For example, the Hamilton Wetland Restoration Project was  designed to reverse years of land subsidence, restore wetlands,  reestablish historic habitat for wildlife and endangered species, and  beneficially reuse dredged sediment. Multiple benefits could also accrue  over time. For instance, according to the California State Coastal  Conservancy, while the Hamilton Wetland Restoration Project currently  provides habitat for migratory water birds and fish, it is expected to  become thickly vegetated with a complex network of tidal channels that  provide habitat for several threatened and endangered species.  Restoration efforts can also provide multiple secondary benefits. For  example, restoring wetlands may provide resilience against sea level rise,  habitat for wildlife, and an area for recreation."], "subsections": []}, {"section_title": "Federal and Nonfederal Entities Coordinate Comprehensive Restoration Efforts in the Bay and Delta through Coordinating Bodies and Specific Restoration Efforts in the Upper Watershed", "paragraphs": ["Federal and nonfederal entities coordinate comprehensive restoration  efforts in the Bay and Delta through the San Francisco Estuary  Partnership and the Delta Plan Interagency Implementation Committee,  respectively. In the upper watershed, federal and nonfederal entities  coordinate specific restoration efforts through plans specific to entities,  projects, or restoration topics. Specifically:", "Bay. In the Bay, federal and nonfederal entities coordinate  comprehensive restoration efforts through the San Francisco Estuary  Partnership. The partnership was established in 1987 and receives  funding from EPA\u2019s National Estuary Program to implement the  CCMP for the San Francisco Estuary (i.e., the Bay Delta). The  partnership\u2019s members include federal, state, and local government  entities; nongovernmental organizations, such as conservation  groups; and a utility commission. The partnership\u2019s members  provided input on developing and revising the CCMP and have  integrated goals into the CCMP from their own topic- or entity-specific  strategic plans. Partnership members also coordinate restoration  efforts guided by the CCMP. For example, the U.S. Fish and Wildlife  Service, U.S. Geological Survey, the California State Coastal  Conservancy, and the California Department of Fish and Wildlife work  to coordinate on managed wetlands and ponds\u2014one of the  restoration efforts outlined in the CCMP. Furthermore, partnership  members may carry out various activities for restoration projects in the  Bay, such as project planning, regulating and permitting (e.g., for  dredging and extracting sediment), on-the-ground project  implementation, and scientific monitoring. Partnership members meet  quarterly and participate in a conference every 2 years to provide  updates on the status of projects, share scientific research, and  present monitoring results.", "Delta. In the Delta, federal and nonfederal entities coordinate  comprehensive restoration efforts through the Delta Plan Interagency  Implementation Committee. This committee was created in 2013 by  the Delta Stewardship Council, the state agency responsible for  overseeing the Delta Plan\u2014the state\u2019s plan for promoting a more  reliable water supply and a healthy ecosystem. The committee is  made up of representatives from 7 federal and 11 state entities and  helps implement the Delta Plan. Members of the committee may  also carry out various activities for restoration projects in the Delta,  such as scientific monitoring, on-the-ground project implementation,  project planning, and regulating and permitting (e.g., for placing  materials such as concrete structures or rocks into the water to  support levees). The committee meets twice a year and participates in  conferences to gather scientific consensus or to share recent  research. Some committee members are also members of the San  Francisco Estuary Partnership and coordinate separately through  initiatives that may have predated the committee and that are specific  to entities, projects, or restoration topics.", "Upper watershed. In the upper watershed, while federal and  nonfederal entities do not have a coordinating body for  comprehensive restoration efforts, they coordinate restoration efforts  through plans specific to entities, projects, or restoration topics. For  example, 20 federal, state, and nongovernmental entities coordinate  through the Central Valley Joint Venture\u2014a partnership with the  mission to conserve migratory bird habitat\u2014and its implementation  plan. Likewise, dozens of federal, state, and local government entities  coordinate to implement the Central Valley Flood Protection Plan, a  plan adopted by California\u2019s Central Valley Flood Protection Board for  managing flood risk. In addition, NOAA, the U.S. Fish and Wildlife  Service, and the California Department of Fish and Wildlife coordinate  on implementing a conservation strategy in parts of the Central  Valley."], "subsections": []}, {"section_title": "Federal Entities Developed a Plan for Coordinating Federal Restoration Efforts across the Watershed, but Not All of the Entities Are Using the Plan", "paragraphs": ["A federal memorandum of understanding and an Interim Federal Action  Plan outline how federal entities are to coordinate the federal  government\u2019s restoration activities and support state efforts across the  entire watershed. The California Bay-Delta Memorandum of  Understanding among Federal Agencies, signed in September 2009,  established a Federal Bay-Delta Leadership Committee to coordinate  federal efforts related to restoration and water management across the  entire watershed while the state structure was transitioning from the  California Bay-Delta Authority to the Delta Stewardship Council, and the  state therefore was no longer participating in the originally structured  CALFED federal-state partnership. According to the memorandum, this  federal committee was to be led by Interior and CEQ and to meet  regularly. The signatories of the memorandum also agreed to develop a  federal work plan to outline near-term federal actions and begin to identify  and prioritize key longer-term federal actions for restoration efforts and  water management across the watershed. The entities issued an Interim  Federal Action Plan in December 2009.", "The Interim Federal Action Plan organizes federal actions into four  priorities, including working with state and local authorities on joint project  planning to ensure healthy Bay Delta ecosystems and to improve water  quality. Specifically, the federal entities agreed to build projects to  improve water supply, including through conservation efforts in municipal  areas and on agricultural lands; to fund habitat restoration projects for  threatened and endangered fish across the watershed; and to assess the  effects of pollutants such as mercury and pesticides on water quality.  According to the Interim Federal Action Plan, these priorities cut across  different federal entities\u2019 missions and activities in the watershed. Further,  the Interim Federal Action Plan includes actions aimed at ensuring the  effective and efficient use of federal resources, such as by leveraging  nonfederal resources.", "In late 2010, the agencies that signed the memorandum provided a status  update on the Interim Federal Action Plan that confirmed the federal  government\u2019s support of state efforts in the watershed. The status  update directs the federal government to review the components of any  proposed restoration plan and understand the costs and benefits such a  plan would have on federal water resources and taxpayers. The  President\u2019s fiscal year 2019 budget, which sets the administration\u2019s top- level priorities and was released in February 2018, reaffirmed the federal  government\u2019s commitment to the Interim Federal Action Plan and stated  that the plan is under the leadership of CEQ, Interior, and the Delta  Stewardship Council. OMB staff stated the Interim Federal Action Plan  provides overall guidance to federal agencies and clarifies that the  agencies should focus their various actions in the watershed on the plan\u2019s  four priorities, including while working with nonfederal entities through  collaborative bodies.", "Nonetheless, not all federal entities are using the Interim Federal Action  Plan. Officials from the USDA Natural Resources Conservation Service  told us they use the plan to determine conservation funding levels and  priorities in the watershed. However, a former official who was  responsible for CEQ\u2019s Bay Delta portfolio said that although the plan still  matches the needs of the watershed, agencies had stopped following it in  the past several years because the plan had become less of a priority for  the administration. In addition, EPA and NOAA officials stated they were  not aware of agencies following the plan in the past several years.  According to the plan, its most important aspect is the federal  government\u2019s reaffirmation of its partnership with state and local entities  and its commitment to coordinate actions with them. Yet, of the 31  nonfederal entities responding to our survey questionnaire, 11 indicated  that they were not at all familiar with the Interim Federal Action Plan, and  another 9 indicated that they were slightly familiar with it.", "Further, according to Interior officials, although restoration efforts  described in the Interim Federal Action Plan have largely remained the  same and its functions and activities are still relevant, the plan is  outdated. In particular, according to these officials, the Interim Federal  Action Plan refers to the state\u2019s 50-year conservation plan, which  California is no longer pursuing. Moreover, according to Interior and EPA  officials, the Federal Bay-Delta Leadership Committee\u2014the coordinating  body for the Interim Federal Action Plan\u2014has not convened since the  Delta Plan was developed in May 2013, even though the memorandum  called for the committee to meet on a regular basis. Instead, according  to Interior officials, the state-led Delta Plan Interagency Implementation  Committee has replaced the federal leadership committee as the  coordinating body for federal efforts in the watershed.", "Interior and EPA officials we interviewed said the federal role outlined in  the Interim Federal Action Plan is no longer relevant because of recent  leadership and strategic changes in the watershed resulting from the  state\u2019s withdrawal from the originally structured CALFED program and  increased focus on the Delta through the Delta Stewardship Council.  According to OMB staff and Interior and Delta Stewardship Council  officials, the Delta Plan Interagency Implementation Committee is the  current approach for coordinating among and between federal and state  entities, and according to Interior officials, federal participation in the  committee is key. The committee, however, focuses specifically on the  Delta, and the Delta Plan generally does not include restoration efforts in  the Bay and the upper watershed. Restoration requires a robust  watershed-wide approach, according to the Interim Federal Action Plan,  because the Bay, Delta, and upper watershed systems are  interconnected. Specifically, according to one respondent to our survey,  actions in the upper watershed affect water quality improvement and  ecosystem restoration success in the Delta and ultimately the Bay. For  example, according to California state officials, carefully timed water  releases from dams in the upper watershed are the only way to control  saltwater content in the Delta, which is critical for agriculture and urban  water supply. Further, a National Research Council report states that  Delta planning cannot be successful if it is not integrated into statewide  planning because the Delta is fed by large upstream watersheds and  water from the Delta is used outside the region, such as in the Bay. In  addition, federal funding supports efforts throughout the watershed.", "While the Interim Federal Action Plan is consistent with several of our  leading practices for collaboration, it is not being used by all federal  agencies. As we reported in 2012, key considerations for implementing  interagency collaborative mechanisms include whether participating  agencies have clarified roles and responsibilities, developed ways to  continually update and monitor written agreements on how agencies  coordinate, and identified how leadership will be sustained over the long  term. We have found that agencies that articulate their agreements in  formal documents, such as plans, can strengthen their commitment to  working collaboratively and that transitions and inconsistent leadership  can weaken coordination. A written document can incorporate  agreements reached among participants in any or all of the following  areas: leadership, accountability, roles and responsibilities, and  resources. Although the Interim Federal Action Plan reflects several of  these practices, it is not being used to lead overall federal efforts and has  not been updated to reflect current roles and responsibilities in the  watershed, in particular the transition of coordination from the plan\u2019s  federal leadership committee to the Delta Plan Interagency  Implementation Committee and the state\u2019s increased focus on the Delta.  Further, the Delta Plan Interagency Implementation Committee is not an  interagency coordination mechanism for the federal and state agencies to  communicate complete information for the entire watershed.", "Updating, including revising or refocusing, the Interim Federal Action Plan  could help federal entities more fully coordinate with and support  nonfederal restoration efforts across the watershed. EPA and Interior  officials stated that coordination among the regions is challenging  because agency missions and activities can be siloed. Officials from the  Delta Stewardship Council told us that without coordinating with federal  entities, they found it difficult to plan resources and work with federal  entities. In addition, 31 of the 48 federal and nonfederal entities that  responded to our survey questionnaire indicated that coordination of  goals for the entire watershed was a very great or great challenge.  Moreover, according to our analysis of questionnaire responses, 29 of 48  federal and nonfederal entities indicated that coordination among partners  at different levels of government was a very great or great challenge. For  example, in narrative responses to our survey questionnaire, one  respondent stated that restoration projects can be delayed because many  federal and nonfederal entities focus narrowly on their own missions  without considering those of other stakeholders. By updating or revising  the plan to outline and reflect entities\u2019 roles and responsibilities in light of  the changes in the state\u2019s role and other relevant developments since  2009, and notifying all participating entities to ensure they are aware of  the plan and their role in it, Interior and CEQ could help clarify the federal  government\u2019s role in supporting restoration efforts in the watershed and  help ensure the effective use of federal resources in these efforts."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Entities Have Developed Measurable Goals and Approaches to Assess Progress for Restoration Efforts in the Watershed", "paragraphs": ["Federal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Bay and Delta and for specific  restoration efforts in the upper watershed. Federal and nonfederal entities  have also developed approaches to assess progress for restoration  efforts in the Bay and Delta and for some goals in the upper watershed. In  the Bay and Delta, the San Francisco Estuary Partnership uses indicators  to rate the goals as good, fair, or poor, and in 2015, the partnership rated  the overall state of the Delta as in fair to poor condition and the Bay as  healthier."], "subsections": [{"section_title": "Federal and Nonfederal Entities Have Developed Measurable Goals for Comprehensive Restoration Efforts in the Bay and Delta and for Specific Efforts in the Upper Watershed", "paragraphs": ["Federal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Bay and Delta through the  coordinating bodies for these areas and have developed measurable  goals for specific restoration efforts in the upper watershed. The  coordinating bodies have documented the goals in plans, which often  contain action items aimed at achieving those goals. In addition, all three  of the regions share some similar goals, such as ecosystem restoration,  climate resilience, and water quality."], "subsections": [{"section_title": "Measurable Goals for the Bay", "paragraphs": ["Federal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Bay through the San Francisco  Estuary Partnership. The partnership documented these goals in the  CCMP, which provides a 35-year vision for restoring the estuary. The  most recent CCMP, updated in 2016, contains four long-term goals  related to broad restoration efforts: ecosystem restoration, climate  resilience, water quality and quantity, and governance. Each goal  contains three objectives, which detail desired outcomes that make  progress toward achieving goals. To achieve the goals and objectives,  the plan also identifies 32 actions\u2014each of which can be associated with  multiple goals and objectives\u2014that lay out 112 priority tasks for the next 5  years. Figure 6 shows an example of a priority task and how it relates to  the actions, objectives, and goals. The 2016 CCMP also includes  measurements to track progress for all actions and links the plan\u2019s goals,  objectives, and actions to 33 environmental indicators established by the  partnership.", "Federal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Delta through the Delta  Stewardship Council and documented them in the Delta Plan, first  published in 2013. The Delta Plan contains six goals and establishes  funding principles to support implementation of the Delta Plan as a  whole. Four of the goals\u2014protecting, restoring, and enhancing the Delta  ecosystem; reducing climate-related risks; improving water quality; and  governance\u2014are similar to those of the CCMP. To accomplish all six  goals and meet the funding principles, the Delta Plan sets forth 87  provisions for various entities, such as local, state, and federal agencies.  Fourteen of these provisions are legally enforceable regulatory policies.  The Delta Plan also has 159 performance measures associated with  these goals and provisions. For example, under improving water quality,  the Delta Plan includes a provision related to priority habitat restoration  areas. (See fig. 7.)", "Federal and nonfederal entities developed measurable goals for specific  efforts in the upper watershed and documented these goals in plans  specific to entities, projects, or restoration topics. These plans include  goals similar to those outlined in the CCMP or the Delta Plan\u2014such as  ecosystem restoration, climate resilience, and improved water quality\u2014 and some of the goals have associated performance measures. For  example, several federal and nonfederal entities documented in the  Central Valley Joint Venture Implementation Plan the acreage they would  like to enhance annually for conserving migratory bird habitat\u2014a specific  ecosystem restoration effort. Another group, California\u2019s Central Valley  Flood Protection Board, documented in the state\u2019s Central Valley Flood  Protection Plan that it would like to increase infrastructure performance in  populous areas to result in a more resilient flood management system\u2014 an example of a specific resiliency goal. This goal contains tracking  metrics, including measuring the miles of levees repaired or improved. In  addition, Interior produces metrics and reports for activities under the  Central Valley Project Improvement Act."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Entities Have Developed Approaches to Assess and Report Progress toward Some Measurable Goals in the Bay, Delta, and Upper Watershed", "paragraphs": ["Federal and nonfederal entities have developed indicators to assess and  report progress toward some of the measurable goals in the Bay, and  have applied these in the Delta as well. In the Bay, the San Francisco  Bay Regional Water Quality Control Board has implemented regional  monitoring pilot studies since 1989, and in 1992 it established a regional  monitoring program led by a nonprofit science center. In 1991, in addition  to water quality, the science center began reporting on the monitoring and  assessment of ecosystem restoration and resilience in the estuary, such  as changes over time in pollution, dredging, and numbers of endangered  and threatened fish and wildlife. The San Francisco Estuary Partnership  then used the science center\u2019s restoration and resilience assessments to  create the 1993 CCMP goals. At the same time, partly in response to a  recommendation from the CCMP, the science center became the San  Francisco Estuary Institute, a nonprofit scientific organization that  performs monitoring to inform watershed management. The San  Francisco Estuary Partnership began reporting on water quality progress  in 2011. The first of these reports, titled the State of San Francisco Bay,  focused on the Bay.", "In the Delta, the Delta Stewardship Council in 2013 began working to  coordinate scientific monitoring efforts based on the goals outlined in the  Delta Plan. Scientific monitoring efforts in the Delta include a regional  water quality monitoring program, begun by the Central Valley Regional  Water Quality Control Board in 2015. The monitoring efforts also include  the Interagency Ecological Program, a consortium of state and federal  agencies that have collaborated to monitor and research ecological  conditions in the Delta since the 1970s, including by contributing to the  CALFED science program. Based on the results of these separate  monitoring efforts, the Delta Stewardship Council has a process in place  to periodically update the Delta Plan\u2019s performance measures and goals.", "In 2015, the San Francisco Estuary Partnership updated its assessment  and report to include both the Bay and the Delta and renamed it State of  the Estuary. The partnership plans to update these reports  approximately every 5 years and include both the Bay and the Delta.  For the 2015 report, more than 100 scientists from entities such as the  San Francisco Estuary Institute, the U.S. Geological Survey, and the  Delta Stewardship Council collaborated to monitor and assess estuary  health against environmental indicators established by the partnership.  The report includes 17 indicators specifically for the Bay, 8 indicators  specifically for the Delta, and 4 estuary-wide indicators (see table 1). The  report rates the status of the indicators\u2014such as the safety of water for  swimming, the safety of fish to eat, and the level of harbor seal  populations\u2014as good, fair, or poor. For example, the State of the  Estuary report assessed the regional extent of tidal marsh in the Bay as  \u201cfair\u201d and \u201cimproving\u201d and the Yolo Floodplain Flows in the Delta as  \u201cpoor;\u201d however, the report did not detail the partnership\u2019s methodology  for delineating between \u201cfair\u201d and \u201cpoor\u201d assessments. On the basis of  its assessment, the partnership rated the Delta and Suisun Bay  ecosystems as being in fair to poor condition and the Bay as healthier.", "In the upper watershed, progress assessment is tied to entity- and topic- specific plans and is not summarized by any one group or in one report.  For example, California\u2019s Central Valley Flood Protection Board assigns  agencies to keep track of data toward tracking metrics for the goals of the  Central Valley Flood Protection Plan. In another example, the state\u2019s  California EcoRestore initiative provides progress reports on restoration  projects to mitigate damage caused by water conveyance programs."], "subsections": []}]}, {"section_title": "The Status of All Restoration Efforts across the Watershed and Total Expenditures Is Unknown", "paragraphs": ["Information on the status of all restoration efforts across the watershed,  including their accomplishments, is unknown because, while the  information is being developed, complete and current information is not  being fully collected or reported. Total expenditures for fiscal years 2007  through 2016 are unknown, in part because federal reports do not include  complete or reliable data for federal and state expenditures in the  watershed."], "subsections": [{"section_title": "Information on the Status of All Restoration Efforts across the Watershed Is Being Developed but Is Not Complete and Current", "paragraphs": ["Information on the status of all restoration efforts across the watershed,  including their accomplishments, is unknown because complete and  current information is not being fully collected or reported. At the state  level, the San Francisco Estuary Institute and the Delta Stewardship  Council each maintains a database with information about federal and  nonfederal restoration efforts, including those implemented during fiscal  years 2007 through 2016, but neither database contains data on all  restoration efforts in the watershed. Specifically:", "EcoAltas. The San Francisco Estuary Institute, in cooperation with  the San Francisco Bay Joint Venture, maintains the EcoAtlas  database, which is the more comprehensive of the two databases.  EcoAtlas integrates stream and wetland maps, restoration  information, and monitoring results with land use, transportation, and  other information important to the state\u2019s wetlands. According to  institute officials, the database was originally designed to focus on the  Bay and includes information on nearly every restoration effort in the  Bay. According to these officials, the institute is working to update  EcoAtlas and gather information on all efforts across the watershed.  Officials from several federal and nonfederal entities\u2014including  NOAA, the institute, the San Francisco Bay Joint Venture, and the  Central Valley Joint Venture\u2014told us that the completeness of  EcoAtlas\u2019s data on restoration efforts in the Delta is catching up to  that for the Bay, but a lot of work remains to gather more complete  data in the upper watershed, such as by gathering more complete  project information from entities conducting restoration work there.", "DeltaView. The Delta Stewardship Council\u2019s DeltaView database  collects state and federal data on efforts directly related to  implementing the state\u2019s Delta Plan goals. As a result, DeltaView  does not include information for all restoration efforts in the Delta  since, for example, local government agencies and other nonfederal  entities may also conduct restoration efforts in the Delta. According  to its website, DeltaView is designed to track and report on Delta Plan  progress and help the Delta Plan Interagency Implementation  Committee make more informed decisions about implementing the  Delta Plan. According to council officials, because it is designed to  focus on the Delta, DeltaView does not include efforts in the Bay or  upper watershed unless they directly affect the Delta. Further, while  officials who manage EcoAtlas and DeltaView take steps to check the  completeness of the data, such as using regional administrators to  oversee project completeness for EcoAltas or following up with  agency officials annually for DeltaView, they stated it is difficult to  confirm their completeness because they largely rely on self-reporting  by different federal and nonfederal entities. Council officials stated  that while the information in EcoAtlas is generally more  comprehensive, DeltaView\u2019s information on restoration efforts in the  Delta is more complete than EcoAtlas\u2019s information about the Delta,  and they are working with the institute on ways to merge the two  databases to make more complete information available in a single  database.", "On the federal level, section 105 of the CALFED Act requires Interior, in  cooperation with the Governor of California, to submit a report annually to  Congress that, among other things, describes the status of  implementation of all CALFED components, such as water quality and  ecosystem restoration across the watershed. Under the act, the report is  to include the progress made in meeting certain goals as well as  accomplishments in achieving certain CALFED objectives during the past  fiscal year. However, according to Interior officials, the department issued  the most recent of these reports in February 2009. Interior officials stated  that the California Bay-Delta Authority used to collect information on all the projects in the watershed and prepare and submit these reports.  However, since the California Bay-Delta Authority was abolished and  replaced by the Delta Stewardship Council, Interior does not obtain this  information from any state entity, although Interior is still required to  submit the report annually to Congress.", "Because Interior has not issued a report since 2009, when the California  Bay-Delta Authority was abolished, and because other sources of  information on restoration efforts such as EcoAtlas are not yet fully  developed, no complete or current information on the progress of  restoration efforts is available. According to Interior officials, the  requirement to report is outdated and the department does not have  information to report because it stopped obtaining data from the California  Bay-Delta Authority after it was abolished. However, Interior and other  federal agencies continue to work with state agencies on the state\u2019s  current Delta Plan, which replaced the state\u2019s CALFED plans. Also,  according to Interior officials, the department has not reached out to the  state to identify new sources of information, given the change in state  plans or agency structure.", "Section 105 of the CALFED Act requires Interior, in consultation with  California\u2019s governor, to report annually on \u201cthe status of implementation  of all components of the Calfed Bay-Delta Program.\u201d The law goes on to  identify the specific objectives on which Interior is to report, which  include activities that Interior and other federal agencies are currently  carrying out, such as research and wetland restoration. According to  respondents to our survey questionnaire, having such information could  help stakeholders make more informed decisions about these efforts.  Specifically, according to our analysis of responses, 32 of 48 federal and  nonfederal entities indicated that it would be very or extremely important  to have reports on progress of federal and nonfederal entities in  implementing restoration activities. In addition, according to our analysis  of responses, 27 of 48 federal and nonfederal entities indicated that it  would be very or extremely important to have reports on  accomplishments of federal and nonfederal entities in achieving the  objectives of restoration activities. Without attempting to obtain and  report state information as required under section 105 of the CALFED  Act, Interior will not have reasonable assurance that it is providing  Congress, or others, with the information needed to monitor federal and  nonfederal restoration activities."], "subsections": []}, {"section_title": "Total Expenditures for All Restoration Efforts in the Watershed Are Unknown in Part Because Federal Reporting is Incomplete", "paragraphs": ["Total expenditures for all restoration efforts in the watershed for fiscal  years 2007 through 2016 are unknown in part because federal reports do  not include complete or reliable expenditure data, and other tracking  mechanisms are still developing this information. San Francisco Estuary  Institute officials stated that EcoAtlas recently began to include  expenditure data for the on-the-ground costs of implementing restoration  projects, but overall expenditure data on these projects are still  incomplete. In addition, as discussed earlier, EcoAtlas is still in the  process of gathering complete information for efforts in the Delta and  upper watershed. DeltaView includes federal and state expenditure data  for efforts in the Delta; however, according to Delta Stewardship Council  officials, it does not include data for all restoration efforts in the Delta,  such as those funded by nongovernmental organizations. The institute\u2019s  plans to expand EcoAtlas to include expenditures and data on efforts  across the watershed, including by working with the council to merge the  two databases, indicates that entities are taking steps to gather more  complete information. As they continue to do so, more information will be  available to report on expenditures for restoration efforts in the  watershed.", "One source of information on federal and state expenditures across the  watershed is OMB\u2019s interagency budget crosscut reports for CALFED  activities; however, these reports do not contain complete or accurate  expenditure data. Section 106 of the CALFED Act requires OMB to  submit a financial report annually to Congress, in coordination with the  Governor of California and certified by the Secretary of the Interior, that  includes, among other things, an interagency budget crosscut report.  The report is to display each participating federal agency\u2019s proposed  budget for the upcoming fiscal year to carry out CALFED activities and  identify all expenditures since 1998 by the federal and state governments  to achieve the objectives of CALFED, which, as noted previously, include  water quality and ecosystem restoration components. The report is also  to contain a detailed accounting of all funds received and obligated by all  federal and state agencies responsible for implementing CALFED  activities during the past fiscal year.", "According to OMB staff, since California abolished the California Bay- Delta Authority in 2009, the state no longer submits state data for the  crosscut report, so the agency only includes data reported by federal  agencies in the crosscut reports and tables. OMB staff said this is  because the state no longer has an agency organized around reporting  this information. The Delta Stewardship Council has responsibility for the  former state agency\u2019s activities, but given its narrower focus on the Delta,  it is unclear whether the council could submit data to OMB for the entire  watershed. According to OMB staff, OMB has not asked the Delta  Stewardship Council or any other state entities to submit the data they do  have to OMB; however, a council official told us the council would like an  opportunity to work on the crosscut report.", "Survey responses indicate that the state crosscut data could be helpful to  federal and nonfederal entities. We asked survey respondents to indicate  how important, if at all, they thought reports on all federal or state  expenditures and funding committed to be spent (i.e., obligations) on  restoration activities would be when they carry out activities related to  these responsibilities in the San Francisco Bay Delta watershed.  According to our analysis of survey responses, 24 of 48 federal and  nonfederal entities indicated that it would be very or extremely important  to have reports on both federal and state expenditures. Also, according  to our analysis of survey responses, 27 of 48 federal and nonfederal  entities indicated that it would be very or extremely important to have  reports on federal obligations, and 24 of the 48 entities indicated that it  would be very or extremely important to have reports on state  obligations. Without attempting to obtain and report state information  as required under section 106 of the CALFED Act, OMB will not have  reasonable assurance that it is providing Congress with the information it  needs to monitor federal and nonfederal restoration expenditures.", "In addition, while there was written guidance for submitting crosscut data  for fiscal years 1998 through 2011, OMB has not updated its written  guidance on reporting data for the CALFED Act since the guidance  expired in 2011 to reflect who should report what data. Instead, according  to OMB staff, it has generally provided oral instruction to agencies on  what data to submit. As a result, we found that federal agencies reported  different types of data for OMB to include in the budget crosscut and that  the budget crosscut was therefore not reliable for the purposes of  reviewing total expenditures. Some federal agencies, including EPA and  the U.S. Geological Survey, note in their crosscut submissions that the  data provided are funding levels or allocations, rather than expenditures.  In addition, Interior reported that it submits obligations, which are also  different than expenditures. As a result, the crosscut reports and tables  may include a mix of federal budget authority, obligations, and  expenditures, depending on the type of data the agencies choose to  submit.", "According to OMB staff, while OMB reports federal budget authority data  for the most recent fiscal year in the crosscut report, OMB relies on  agencies to submit data on prior year expenditures for inclusion in the  crosscut. However, the crosscut report itself labels the data reported as  \u201cenacted\u201d dollars\u2014or budget authority\u2014but does not mention  expenditures. Some federal officials said that clearer guidance would be  helpful. For example, USDA officials stated that it would be helpful for  OMB to clarify whether to submit estimated funding allocations or actual  obligations and to provide more specific information about the types of  restoration projects to include because the data USDA currently submits  provide a narrow scope for the agency\u2019s restoration-related work in the  watershed.", "The lack of updated guidance is inconsistent with federal standards for  internal control, which call for an agency to design control activities to  achieve objectives and manage risks. Such control activities include  clearly documenting internal controls, and the documentation may appear  in management directives, administrative policies, or operating manuals.  Because OMB has not updated its written guidance on reporting data  since the guidance expired in 2011 to clearly communicate what data  agencies should report, its mechanism for tracking data\u2014the crosscut  reports and tables\u2014does not include complete or reliable expenditure  data. As a result, congressional and other federal and nonfederal decision  makers may not have the information they need to determine that  resources are being used efficiently or effectively. For example, in a  September 2017 report, Interior\u2019s Office of Inspector General found that  Reclamation obtained $50 million over 7 years for CALFED-related  purposes using a process that it did not disclose to Congress through  available mechanisms, including OMB\u2019s crosscut reports. According to  the Inspector General\u2019s report, these crosscuts assist the President in  considering the necessary and appropriate level of funding for each of the  agencies in carrying out its responsibilities under CALFED. By directing  its staff to update its written guidance for federal and state agencies on  submitting data for its budget crosscut reports, OMB will have more  reasonable assurance that it is helping those agencies provide current,  complete, and accurate data to help congressional and other decision  makers achieve restoration objectives."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Entities Identified Several Factors, such as Competing Interests, Coordination, and Climate Change, As Key Factors that May Limit Restoration", "paragraphs": ["Several factors may limit restoration progress or pose risks to the long- term overall success of such efforts in the San Francisco Bay Delta  watershed, according to our analysis of questionnaire responses from 48  federal and nonfederal entities. These factors reflect characteristics of  watersheds in other parts of the country that we have previously  discussed, including funding constraints and the effects of climate change  (see fig. 8).", "Federal and nonfederal entities also identified up to three factors that  pose the greatest risks to the long-term overall success of water quality  improvement and ecosystem restoration efforts in the San Francisco Bay  Delta watershed. Specifically, based on our analysis of the survey  results, we found that federal and nonfederal entities consistently  identified the following risks:", "Competing interests of water users, including residential,  commercial, agricultural, and environmental. According to our  analysis of survey responses, this particular risk varies by geographic  area in the watershed. For example, 20 of 25 entities that indicated  they conduct restoration work in the Sacramento River Watershed\u2014 part of the upper watershed region\u2014identified this factor as a greatest  risk. By comparison, 19 of 34 entities that indicated they conduct  restoration work in the Bay identified this factor as a greatest risk. In  its survey responses, one nonfederal entity indicated that the  distribution of water and other natural resources among competing  interests is not clearly defined or not distributed in a method that  satisfies all parties. Therefore, according to this entity, stakeholders  who are not satisfied with natural resources distribution may be  hesitant to invest time and money in conservation practices that  benefit water quality. In another survey response, a federal entity  described competing interests as one of the biggest roadblocks in  planning and implementing water quality improvement and ecosystem  restoration in the Bay Delta region. This entity explained that there is  an extremely limited freshwater supply in the region and interests that  compete for it have resulted in several lawsuits and delays for  restoration projects.", "Obtaining sufficient federal funding for water quality  improvement and ecosystem restoration activities. Of the 48  survey respondents, 24 indicated that this factor is one of the greatest  risks to long-term overall success of water quality improvement and  ecosystem restoration efforts. According to one nonfederal entity\u2019s  survey response, funding for ecosystem restoration in the Bay area  traditionally has come from a mix of federal and state sources. For  example, the entity said a local source that will provide nearly $500  million over 20 years recently was established but needs to be  leveraged by significant state and federal dollars to meet the  estimated $1.5 billion needed for restoration in the Bay area. In its  response to our survey, one federal entity stated that federal funding  is extremely limited for restoration activities that are not part of  mitigation efforts. The federal entity also stated that federal funding for  long-term monitoring of restoration success and water quality  improvement is difficult to sustain because these efforts are not eye- catching and do not provide quick results. A nonfederal entity stated  that many state entities rely on federal grants to perform activities that  result in improved water quality and ecosystem restoration.", "Planning for the effects of climate change. In their survey  responses, 24 of 48 entities indicated that this factor is one of the  greatest risks to long-term overall success of water quality  improvement and ecosystem restoration efforts. One nonfederal entity  said expected reductions in the Sierra Nevada snow pack\u2014the  largest source of water supply for the watershed\u2014will result in  increased demand on limited local water sources. Other respondents  noted a need to consider addressing the effects of climate change at  a high level. For instance, one nonfederal entity said successfully  planning for climate change includes planning and coordinating at the  watershed level, not at the project or jurisdictional level. Another  nonfederal entity said the potential impact of sea level rise is great  and ecosystem restoration solutions will require much more regional  planning and agreement than more traditional engineering solutions.  However, entities also acknowledged the challenges associated with  planning for the effects of climate change with incomplete information.  For example, in its response to our questionnaire, one entity stated it  is difficult to understand the impact on water quality resulting from  conservation practices on working lands, at both the private  landowner level and the watershed level, if the projects have not  incorporated climate change impacts such as flooding and sediment  erosion.", "The factors identified by federal and nonfederal entities that may limit or  pose a risk to restoration efforts are generally consistent with our prior  work on large-scale ecosystem restoration efforts in other parts of the  country (see Related GAO Products at the end of this report). For  example, we previously reported that similar factors, such as funding  constraints and the effects of climate change, may limit restoration efforts  in the Great Lakes and Chesapeake Bay. Survey responses also  indicate that some of these risks can be interrelated. For example, one  federal entity said that while certain shoreline restoration and levee  stabilization projects could ameliorate the effects of climate change,  finding adequate funding to plan for and implement such projects is  extremely difficult. According to this entity, all the competing interests and  limited freshwater supply in the watershed further exacerbates these  difficulties.", "In response to our questionnaire, federal and nonfederal entities identified  what they consider to be the most important action that could be taken at  a federal level to help improve restoration efforts in the watershed. For  example, seven entities mentioned actions related to streamlining or  coordinating federal permitting processes. Half of the entities that  responded to our questionnaire also indicated a need for actions related  to federal funding, and four entities indicated a need to use the best  available science to direct restoration efforts."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The complex nature of the restoration efforts in the San Francisco Bay  Delta watershed demands a high level of coordination across a large  number of entities and competing interests. The results of federal and  nonfederal entities working together can be seen in parts of the  watershed, such as the Bay, where this work has resulted in the  development of comprehensive regional strategies, sources of funding for  some restoration projects, an expanding regional database, and an  inventory of potential projects.", "In other parts of the watershed, particularly the Delta, coordination has  wavered. The CALFED Act was enacted in 2004 to implement, at the  federal level, a federal-state partnership for restoring the San Francisco  Bay Delta watershed. When the state of California withdrew from the  originally structured CALFED federal-state partnership in 2009, the effort  to coordinate across the entire watershed transitioned and the focus of  coordination became the Delta Plan, a state-led effort. Key federal  entities, including Interior and CEQ, continue to have interests across the  watershed, such as coordinating or conducting programs and projects  and expending resources. To that end, in 2009 they developed a unifying  vision for the federal government through the Interim Federal Action Plan.  However, as the state continues to change its focus within the watershed,  the Interim Federal Action Plan has become outdated, and not all relevant  federal entities are using it. By updating or revising the plan to outline and  reflect entities\u2019 roles and responsibilities in light of the changes in the  state\u2019s role and other relevant developments since 2009, and by notifying  all participating entities to ensure they are aware of the plan and their role  in it, Interior and CEQ could help clarify the federal government\u2019s role in  supporting restoration efforts in the watershed and help ensure the  effective use of federal resources in these efforts.", "In addition, since California stopped participating in the originally  structured CALFED partnership, information on projects and expenditures  for restoration and other activities in the watershed have not been  completely reported, or reported at all. Although California abolished the  California Bay-Delta Authority, the requirements for Interior to report on  the status of implementation of all CALFED components, including water  quality and ecosystem restoration efforts, and for OMB to submit a  financial report, including an interagency budget crosscut report, still  exist, and information about related restoration efforts and expenditures  remains unknown. By coordinating with the appropriate state entities to  obtain and report the information available to meet the CALFED Act\u2019s  requirements, Interior and OMB would have more reasonable assurance  that they are providing the information congressional and other decision  makers need to monitor the restoration efforts and associated  expenditures. Further, by directing staff to update OMB\u2019s written guidance  for federal and state agencies on submitting data for its budget crosscut  reports, OMB would have more reasonable assurance that it is helping  those agencies provide current, complete, and accurate data to help  decision makers achieve restoration objectives."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making seven recommendations\u2014two each to Interior and CEQ  to address issues with the Interim Federal Action Plan; one each to  Interior and OMB to obtain and report information; and one to OMB to  update its budget crosscut guidance. Specifically:  The Secretary of the Interior should work with the Chair of CEQ to update  or revise the Interim Federal Action Plan for the California Bay-Delta to  outline and reflect entity roles and responsibilities in light of changes in  the state of California\u2019s role and other relevant developments since 2009.  (Recommendation 1)", "The Secretary of the Interior should notify all participating entities to  ensure they are aware of the Interim Federal Action Plan and their role in  it. (Recommendation 2)", "The Chair of CEQ should work with the Secretary of the Interior to update  or revise the Interim Federal Action Plan for the California Bay-Delta to  outline and reflect entity roles and responsibilities in light of changes in  the state of California\u2019s role and other relevant developments since 2009.  (Recommendation 3)", "The Chair of CEQ should notify all participating entities to ensure they are  aware of the Interim Federal Action Plan and their role in it.  (Recommendation 4)", "The Secretary of the Interior should coordinate with appropriate state  entities to obtain and report the information available to meet the  requirements under section 105 of the CALFED Act. (Recommendation 5)", "The Director of OMB should coordinate with appropriate state entities to  obtain and report the information available to meet the requirements  under section 106 of the CALFED Act. (Recommendation 6)", "The Director of OMB should direct staff to update OMB\u2019s written guidance  for federal and state agencies on submitting data for the budget crosscut  reports OMB is required to submit under section 106 of the CALFED Act.  (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments, Third-Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to CEQ, EPA,  OMB, and the Departments of Agriculture, Commerce, Defense, and the  Interior. We also provided the California Delta Stewardship Council a draft  of this report for review and comment. Interior provided written comments  and stated that it partially concurred with our three recommendations to  the department; Interior also provided technical comments, which we  incorporated into the report as appropriate. In an email from CEQ\u2019s  Deputy General Counsel, CEQ provided technical comments, which we  incorporated into the report as appropriate, but the agency neither agreed  nor disagreed with our recommendations to it. In oral comments provided  on August 8, 2018, OMB neither agreed nor disagreed with our two  recommendations to the agency, but OMB staff suggested some  additional language to the recommendations. In addition, USDA and  Commerce provided technical comments, which we incorporated into the  report as appropriate. Defense and EPA informed us that they had no  comments on the draft report. The California Delta Stewardship Council  provided written comments stating that its staff generally agreed with the  \u201csum\u201d of the recommendations in the report. The council also provided  technical comments, which we incorporated into the report as  appropriate.", "In its written comments, reproduced in appendix IV, Interior stated that  the department appreciated our review of the coordination of watershed  restoration efforts among federal and nonfederal entities and that it  partially concurred with our three recommendations to the department.  Specifically, regarding our first two recommendations to update or revise  the Interim Federal Action Plan and notify all participating entities of their  role in the plan, Interior stated that the department believes revisiting the  Interim Federal Action Plan is not the most efficient course of action  because the state-led Delta Plan Interagency Implementation Committee  now serves as the coordination group. Interior stated that it will continue  to actively participate in the committee, which includes participation and  leadership from federal agencies at the regional and Washington office  levels. However, as we discuss in the report, the committee focuses on  only one region of the watershed (the Delta), and federal agencies fund  and carry out restoration efforts across all three regions of the watershed.  Further, as we discuss in the report, the President\u2019s fiscal year 2019  budget states that federal activities are coordinated through the Interim  Federal Action Plan rather than the state-led committee. Also, Interior\u2019s  letter states that its bureaus are concurrently engaged with the state of  California in multiple activities in the Bay Delta that span their respective  mission areas. This provides further support for the plan to be updated or  revised to include these types of activities. Thus, we continue to believe  that Interior should update or revise the plan to better reflect changes in  the state\u2019s role and other relevant developments since 2009.", "Regarding our third recommendation to Interior that it coordinate with the  state to meet reporting requirements, Interior stated that the California  Delta Stewardship Council compiles and reports on funding information  and progress for federal and state agencies and that Interior could  coordinate with the state on information not reported by the council. As  we discuss in the report, the council\u2019s reporting efforts focus on only the  Delta, although federal funding and efforts span the entire watershed;  therefore, the council\u2019s reporting efforts cannot fully address Interior\u2019s  reporting requirements. In addition, Interior has not reached out to state  entities for this information since 2009, when the state agency from which  Interior had previously obtained state data was abolished. Thus, we  continue to believe that Interior should coordinate with the appropriate  state entities to obtain and report the information available to meet the  CALFED Act\u2019s reporting requirements. We note that Interior said it would  actively participate in the Delta Plan Interagency Implementation  Committee and could seek to coordinate with the state on information not  reported by the Delta Stewardship Council, and we are encouraged that  the department recognizes the need to take these actions.", "In oral comments regarding our first recommendation to OMB that it  coordinate with the state to meet reporting requirements, OMB staff said it  is unclear whether the Director of OMB has the authority to require or  compel the state or its agencies to provide data to OMB on restoration  and other projects they are carrying out. The staff suggested that we  revise the recommendation to state that the Director of OMB should  \u201cconsider whether there are additional opportunities to\u201d coordinate with  appropriate state entities to obtain and report the available information.  Our recommendation is for OMB to coordinate with appropriate state  entities, not to require or compel them to do so. In addition, as stated in  its written comments (reproduced in appendix V), the California Delta  Stewardship Council\u2014the state agency responsible for the activities of  the abolished California Bay-Delta Authority\u2014would welcome the  opportunity to coordinate with OMB and contribute to the budget crosscut  reports. Furthermore, Section 106 of the CALFED Act requires OMB to  submit a financial report annually to Congress, in coordination with the  Governor of California, that includes an interagency budget crosscut  report. Thus, we believe that the recommendation is worded appropriately  and captures the actions that OMB should take to coordinate with the  appropriate state entities to obtain and report the information available to  meet the CALFED Act's reporting requirements.", "In oral comments regarding our second recommendation to OMB that it  update its written guidance for federal and state agencies on submitting  data for the budget crosscut reports, OMB staff said that the agency does  not have the expertise to validate or verify the quality of the information  agencies submit and is not confident that the data collected will be  reliable. The staff said that other entities with day-to-day experience with  the programs and data and with the relevant statutory authority may be in  a better position to obtain, report, and verify the quality of restoration  data. The staff suggested that we revise the recommendation to state that  the Director of OMB should \u201cassess whether to\u201d update OMB\u2019s written  guidance for federal and state agencies on submitting data for the budget  crosscut reports. However, OMB\u2019s current approach is resulting in the  reporting of unreliable data. As reported above, OMB has generally  provided oral instruction to agencies since its written guidance expired in  2011; as a result, the crosscut reports and tables may include a mix of  federal budget authority, obligations, and expenditures. Further, Section  106 of the CALFED Act requires, among other things, that OMB identify  all expenditures since 1998 by the federal and state governments to  achieve CALFED objectives. Therefore, we continue to believe that OMB  should update its written guidance to clarify the type of data that agencies  should submit in order to ensure it is reporting the data required by the  CALFED Act. We note that our recommendation does not direct OMB  staff to validate or verify the quality of the information; instead, it states  that OMB should clarify in guidance what data agencies should provide.  In addition, if OMB determines it is appropriate, updated written guidance  could advise agencies to validate and verify the data before submitting it  to OMB.", "In its written comments, reproduced in appendix V, the California Delta  Stewardship Council made four comments on the themes outlined in the  recommendations of our report and two specific comments on the report\u2019s  description of the Delta. Commenting on the themes outlined in the  recommendations, the council stated that:", "No entity in California has the sole responsibility or authority for  managing water supply and the Delta ecosystem; instead, authority,  expertise, and resources are spread out among a cadre of federal,  state, and local agencies. The council further said that its Delta Plan  Interagency Implementation Committee plays a vital coordination role  for the 17 state and federal agencies operating in the Delta, that  federal participation is critical to the committee\u2019s success, and that it  encourages federal agencies to continue to attend and actively  participate in the committee.", "There is a history of coordination in the Bay Delta systems, as  evidenced by events such as the State of the Estuary Conference and  the Bay Delta Science Conference, as well as the CCMP. Given that  the upper watershed currently lacks a collaborative structure such as  the implementation committee, the council said that further exploration  should be done as to how this gap could be filled.", "The council is not currently in contact with CEQ and OMB and would  welcome the opportunity to coordinate with them should a revised  Interim Federal Action Plan be pursued. The council also stated that,  to the extent possible, such a revised plan should consider and build  on existing planning frameworks such as the Delta Plan and the  CCMP.", "As stated in the report, the council welcomes the opportunity to  contribute to the CALFED budget crosscut reports.", "In addition, the council made two specific comments on the report\u2019s  description of the Delta. First, it stated that our report is thorough in  discussing many aspects of the watershed, but it somewhat neglects the  importance of levees, particularly in the Delta. While we provide an  overview of levees in the background section, a more detailed discussion  of these and other water infrastructure facilities is beyond the scope of  this review, which is to examine restoration efforts in the watershed and  does not include detailed examination of issues related to water supply.  Second, the council stated that the report should mention and consider  characteristics associated with the Delta as an evolving place, which  refers to the council\u2019s efforts to consider the interaction between  environmental and social factors\u2014such as cultural values and socio- economic issues\u2014into decision making for the Delta. We believe our  discussion of federal and nonfederal coordination roles within and across  the watershed\u2019s three major regions, including the Delta, appropriately  considers the interaction between environmental and social factors, within  the scope of this review.", "We are sending copies of this report to the appropriate congressional  committees, the Chair of CEQ; the Secretaries of Agriculture, Commerce,  Defense, and the Interior; the Administrator of EPA; the Director of OMB;  the Executive Officer of the California Delta Stewardship Council; and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Selected Federal and Nonfederal Entities with Restoration-Related Roles in the San Francisco Bay Delta Watershed", "paragraphs": ["Many federal and nonfederal entities, including state and local  government agencies and nongovernmental organizations, have roles  related to water quality improvement and ecosystem restoration efforts in  the San Francisco Bay Delta watershed. Different combinations of federal  and nonfederal entities work throughout the watershed and its three major  geographic areas, which are the San Francisco Bay and its local  watershed (Bay), the Sacramento-San Joaquin Delta (Delta), and the  upper watershed, which includes California\u2019s Central Valley and the  western slope of the Sierra Nevada Mountains. See below for a list of  federal and nonfederal entities and a brief description of some of their  restoration-related roles in the watershed. We selected these entities  based on our review of documents provided by, and interviews with,  federal and nonfederal entities."], "subsections": [{"section_title": "Selected Federal Entities with Restoration-Related Roles in the Watershed", "paragraphs": ["Several federal entities have roles related to water quality improvement  and ecosystem restoration efforts in the watershed. All federal agencies  listed are signatories to the 2009 memorandum of understanding, unless  otherwise noted. Federal agencies and some of their restoration-related  roles include the following:", "Executive Office of the President.", "Council on Environmental Quality (CEQ). Under the 2009  memorandum of understanding, CEQ is to work with the Secretary  of the Interior in coordinating the development and implementation  of federal policy and initiatives in Bay-Delta matters and is the co- chair of the Federal Bay-Delta Leadership Committee.", "Office of Management and Budget (OMB). OMB is not a signatory  to the 2009 memorandum of understanding, but under the Calfed  Bay-Delta Authorization Act (CALFED Act), OMB is required to  annually submit a financial report to Congress, in coordination with  the Governor of California and certified by the Secretary of the  Interior, that includes, among other things, an interagency budget  crosscut report that identifies all expenditures since 1998 by the  federal and state governments to achieve the objectives of the  Calfed Bay-Delta Program (CALFED). CALFED program  components include, among other things, water quality and  ecosystem restoration.", "U.S. Army Corps of Engineers. According to Corps officials, the  Corps plans and implements projects, including ecosystem restoration  projects; participates in regional planning, while using its own return- on-investment analysis for prioritizing projects; and helps the state  water agencies maintain levees. The Corps also issues permits for the  discharge of dredged or fill material under section 404 of the Clean  Water Act.", "U.S. Department of Agriculture (USDA).", "Natural Resources Conservation Service (NRCS). Through  general conservation programs and also its targeted Bay Delta  Initiative, NRCS and its local partners aim to address the critical  water quantity, water quality, and habitat restoration needs of the  Bay Delta region by implementing voluntary conservation  practices on private lands. NRCS provides agricultural producers  technical and financial assistance in the Bay Delta region to  implement conservation practices and establish conservation  easements that improve water quality and quantity and restore  and protect wetland, riparian, and wet meadow habitat.", "U.S. Forest Service. The Pacific Southwest Region of the U.S.", "Forest Service manages 20 million acres of National Forest land  in California. National forests supply 50 percent of the water in  California and form the watershed of most major aqueducts and  more than 2,400 reservoirs throughout the state. According to  U.S. Forest Service officials, the agency\u2019s management actions on  National Forest land in California are focused on ecological  restoration, with the goal of retaining and restoring the ecological  resilience, including water quality, of terrestrial and aquatic  ecosystems. According to these officials, this work is often  accomplished using an \u201call lands\u201d approach to restoration, by  coordinating and collaborating across forests and wildlands  regardless of ownership. Ecological restoration management  actions that contribute to water quality include meadow, river, and  riparian restoration to improve watershed function, as well as fuels  reduction activities, such as forest thinning and prescribed fire.  According to these officials, many forest lands have dense fuels  and are highly susceptible to severe wildfire, which causes  increased erosion rates and sedimentation and negatively affects  water quality and delivery.", "U.S. Department of Commerce.", "National Oceanic and Atmospheric Administration (NOAA). NOAA  implements the Endangered Species Act for certain species.  Under section 7 of the act, federal agencies must ensure that any  action they authorize, fund, or carry out is not likely to jeopardize  the continued existence of any endangered or threatened species  or result in the destruction or adverse modification of its critical  habitat. To fulfill this responsibility, federal agencies must consult  with NOAA\u2019s National Marine Fisheries Service, depending on the  affected species, to assess the potential effects of proposed  actions. Formal consultations between federal agencies and the  National Marine Fisheries Service or U.S. Fish and Wildlife  Service are required where a proposed action could have an  adverse effect on listed species or designated critical habitat;  these consultations conclude with issuance of biological opinions  by the National Marine Fisheries Service or U.S. Fish and Wildlife  Service. NOAA also obtains, manages, and expends funding to  conduct habitat restoration. According to NOAA officials, NOAA\u2019s  Restoration Center has directed federal funds toward restoration  projects in the Bay Delta. In addition, funds from natural resource  damage assessments have been used for habitat restoration in  San Francisco Bay, according to NOAA officials.", "U.S. Department of the Interior. Under the 2009 memorandum of  understanding, Interior is to serve as the lead for developing and  coordinating federal policy and initiatives in Bay-Delta matters and is  the co-chair of the Federal Bay-Delta Leadership Committee. Under  the CALFED Act, Interior is required to annually submit a report to  Congress, in cooperation with the Governor of California, that, among  other things, describes the status of implementation of all CALFED  components, which include water quality and ecosystem restoration  components.", "Bureau of Reclamation. Reclamation administers the Central  Valley Project, which has long-term contracts to supply water to  more than 250 contractors in 29 of California\u2019s 58 counties, and  implements a number of actions under the Central Valley Project  Improvement Act. The act was enacted for several purposes,  including to protect, restore, and enhance fish, wildlife, and  associated habitats. Reclamation also implements other actions,  such as those under the San Joaquin River Restoration  Settlement Act.", "U.S. Fish and Wildlife Service. The U.S. Fish and Wildlife Service  implements the Endangered Species Act for certain species.  According to agency officials, the U.S. Fish and Wildlife Service is  also a major landowner, with several National Wildlife Refuges  throughout the watershed where restoration efforts are  implemented. Additionally, according to agency officials, the U.S.  Fish and Wildlife Service provides funding through grant  programs, such as the North American Wetlands Conservation,  National Coastal Wetlands Conservation, and Wildlife and  Sportfish Restoration programs, and provides technical assistance  through efforts, such as the Partner for Fish and Wildlife, Coastal,  and Tribal Wildlife programs.", "U.S. Geological Survey. According to U.S. Geological Survey  officials, the agency\u2019s role in the watershed includes conducting  physical, chemical, and biological monitoring and scientific  investigations to support water and water quality management,  fish and wildlife management, and infrastructure management and  protection. According to officials, the agency also provides policy- neutral technical support to Interior and other federal, state, and  local entities.", "U.S. Environmental Protection Agency (EPA). EPA implements the  Clean Water Act, including management of the National Estuary  Program. According to agency officials, EPA also provides  authorization, financial support, and oversight of the California State  Water Resources Control Board, the partner state agency charged  with implementing Clean Water Act programs in California, and  provides direct funding, technical assistance, and oversight of  programs and projects achieving Clean Water Act goals in the state."], "subsections": []}, {"section_title": "Selected State Government Entities with Restoration-Related Roles in the Watershed", "paragraphs": ["Several state government entities in California have roles related to water  quality improvement and ecosystem restoration efforts in the watershed.  A list of selected state agencies and information from the agencies  summarizing their restoration-related roles follows:", "California Delta Stewardship Council. The Delta Stewardship  Council is a planning and science agency, with some regulatory  authority. The council develops and reviews the Delta Plan, the  implementation of which is to further the restoration of the Delta  ecosystem and a reliable water supply. The council also funds  research, synthesizes and communicates scientific information to  decision makers, and coordinates with Delta agencies to promote  science-based adaptive management. In addition, the council  establishes and oversees the Delta Plan Interagency Implementation  Committee, a joint state-federal committee that implements the Delta  Plan.", "California Natural Resources Agency. The Natural Resources  Agency is a resource management agency, with some regulatory  authority.", "Central Valley Flood Protection Board. The Central Valley Flood  Protection Board establishes and enforces standards for the  maintenance and operation of the flood control system; develops  and implements the state\u2019s flood protection plan for the Central  Valley; and coordinates activities among the Corps and local flood  control agencies.", "Department of Fish and Wildlife. The Department of Fish and  Wildlife plans, collaborates on, enforces, and funds species  management, habitat conservation, and wetlands restoration.  According to agency officials, the department also is a major  owner of land where restoration efforts take place, such as the  Napa-Sonoma Marsh Wildlife Area and Eden Landing Ecological  Reserve, and houses the California Wildlife Conservation Board,  which provides funding for restoration projects.", "Department of Water Resources. The Department of Water  Resources administers the California State Water Project,  including sales to water contractors. The department also  implements and funds\u2014through the State Water Project\u2014two fish  habitat restoration projects in response to NOAA and U.S. Fish  and Wildlife Service biological opinions. In addition, the  department develops the California Water Plan, the state\u2019s overall  water resources plan.", "Sacramento-San Joaquin Delta Conservancy. The Sacramento- San Joaquin Delta Conservancy plans, collaborates on (with local  communities), implements, and funds projects in the Delta and  Suisun Marsh to protect, improve, and restore habitats and  ecosystems, improve water quality, and support water-related  agricultural sustainability, among other things.", "San Francisco Bay Conservation and Development Commission.", "The San Francisco Bay Conservation and Development  Commission plans, collaborates on, and regulates the San  Francisco Bay, Bay shoreline, and Suisun Marsh; it also permits  projects that fill or extract materials from the Bay.", "Sierra Nevada Conservancy. The Sierra Nevada Conservancy  plans, collaborates on, implements, and funds projects in parts of  the upper watershed to protect, improve, and restore habitats and  ecosystems, improve water quality, and prepare for climate  change, among other things.", "State Coastal Conservancy. The State Coastal Conservancy  plans, collaborates on, implements, and funds\u2014partly through  voter-approved bonds\u2014projects around the Bay to protect and  improve natural lands, improve water quality and wildlife habitats,  and prepare for climate change, among other things.", "California Environmental Protection Agency. The California  Environmental Protection Agency is a regulatory agency.", "State Water Resources Control Board. The State Water  Resources Control Board allocates water rights, adjudicates water  rights disputes, develops statewide protection plans, establishes  water quality standards, and guides the nine regional water quality  control boards.", "San Francisco Bay Regional Water Quality Control Board. One of  nine regional water quality control boards in California, the San  Francisco Bay Regional Water Quality Control Board exercises  rulemaking and regulatory activities for the Bay.", "Central Valley Regional Water Quality Control Board. One of nine  regional water quality control boards in California, the Central  Valley Regional Water Quality Control Board exercises rulemaking  and regulatory activities for the Central Valley (including the Delta)  of the upper watershed."], "subsections": []}, {"section_title": "Other Selected Nonfederal Entities with Restoration- Related Roles in the Watershed", "paragraphs": ["Other nonfederal entities\u2014including local and regional government  agencies, nongovernmental organizations, private businesses, and  private landowners\u2014have roles related to water quality improvement and  ecosystem restoration efforts in the watershed. Other nonfederal entities  and some of their restoration-related roles include the following:", "Central Valley Joint Venture. The Central Valley Joint Venture is a  cooperative, regional partnership\u2014partially supported through the  U.S. Fish and Wildlife Service and established under the North  American Waterfowl Management Plan\u2014that plans and coordinates  migratory bird and other habitat restoration and conservation in the  Central Valley.", "San Francisco Estuary Institute. The San Francisco Estuary  Institute is a nonprofit science center that provides data and other  technical tools for assessing the health of the waters, wetlands,  wildlife, and landscapes of the Bay and Delta; manages the EcoAtlas  database of restoration projects; and works closely with the California  State Water Resources Control Board and the San Francisco Estuary  Partnership.", "San Francisco Estuary Partnership. The San Francisco Estuary  Partnership is a cooperative, regional partnership that develops and  manages the comprehensive conservation and management plan for  the San Francisco Estuary (i.e., the Bay Delta) under EPA\u2019s National  Estuary Program, including coordinating projects and leveraging  funds. The partnership is staffed by the nine-county Association of  Bay Area Governments and housed by the San Francisco Bay  Regional Water Quality Control Board.", "San Francisco Bay Joint Venture. The San Francisco Bay Joint  Venture is a cooperative, regional partnership\u2014organized through the  U.S. Fish and Wildlife Service and established under the North  American Waterfowl Management Plan\u2014that plans and coordinates  migratory bird and other habitat restoration and conservation in the  Bay.", "Other regional government agencies. Other regional government  agencies have a variety of restoration-related roles, depending on the  entity. In addition to the San Francisco Estuary Partnership, examples  of regional government agencies with restoration roles in the  watershed include the Bay Area Clean Water Agencies, Bay Area  Flood Protection Agencies Association, and California Association of  Resource Conservation Districts.", "Nongovernmental organizations. Other nongovernmental  organizations have restoration-related roles in the watershed,  including the Audubon Society, Bay Planning Coalition, Ducks  Unlimited, Nature Conservancy, and Save the Bay.", "Local governments. Local governments have a variety of  restoration-related roles, depending on the entity. For example,  according to U.S. Fish and Wildlife officials, Marin and San Mateo  Counties are recognized leaders in planning for climate resiliency in  wetland restoration. Also, Alameda County uses sediment excavated  from flood control district channels to build or create wetlands to  provide vital wildlife habitat. In addition, water treatment facilities work  with the California State Water Resources Control Board to help fund  the San Francisco Estuary Institute\u2019s water quality monitoring  program.", "Dredging businesses. Dredging businesses work with the California  State Water Resources Control Board to help fund the San Francisco  Estuary Institute\u2019s water quality monitoring program.", "Water contractors. Through obligations under the Central Valley  Project and State Water Project, water contractors help fund certain  restoration projects required under biological opinions by various  regulatory agencies, including NOAA, the U.S. Fish and Wildlife  Service, and the California Department of Fish and Wildlife, according  to state officials.", "Private landowners. Some private landowners collaborate on or sell  land for various restoration and conservation projects. Private  landowners include businesses (e.g., technology companies and an  industrial salt pond owner) and farmers in the Bay and farmers and  ranchers throughout the Delta and upper watershed."], "subsections": []}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we examine (1) the extent to which federal and nonfederal  entities coordinate their San Francisco Bay Delta watershed restoration  efforts, (2) the extent to which federal and nonfederal entities have  developed measurable goals and approaches to assess progress for San  Francisco Bay Delta watershed restoration efforts, (3) information on the  status of San Francisco Bay Delta watershed restoration efforts and  related expenditures for fiscal years 2007 through 2016, and (4) key  factors that may limit San Francisco Bay Delta watershed restoration,  according to federal and nonfederal entities.", "To address all four objectives, we reviewed relevant federal and state  laws and documents. We also interviewed officials from more than 28  federal, state, and other entities we identified through our review of laws  and documents, snowball sampling, and their participation in regional  interagency groups conducting restoration work in the San Francisco Bay  Delta watershed. During these interviews, we asked about, among other  things, restoration plans that coordinate multiple aspects of water quality  improvement and ecosystem restoration efforts on a regional level in the  San Francisco Bay Delta watershed. Officials and representatives we  interviewed identified the Comprehensive Conservation and Management  Plan (CCMP) and the Delta Plan as the overarching regional strategies  for the Bay and Delta, respectively. We considered these strategies  \u201ccomprehensive regional plans\u201d and reviewed them to address our  objectives.", "To address our objectives, we obtained information from a questionnaire  we sent to all 61 federal, state, and other entities that serve on the boards  or implementation committees of regional interagency groups conducting  restoration work in our geographic scope. These groups were the San  Francisco Bay Joint Venture, San Francisco Estuary Partnership, Delta  Plan Interagency Implementation Committee, and Central Valley Joint  Venture. The survey group includes many of the entities listed above in  appendix I. We also sent this questionnaire to federal agencies that are  signatories of the CALFED record of decision and 4 other relevant  organizations identified through snowball sampling. We initially identified  and distributed our questionnaire to 78 entities. We sent a single  questionnaire to each nonfederal entity (e.g., state agency,  nongovernmental organization, local government agency, etc.) and sent  more than one questionnaire, as appropriate, to federal agencies that  have offices or officials working in different parts of the watershed. We  determined which federal level to survey based on a review of agency  organizational charts and inquiries with agency officials. We considered  each office or federal designee to be a separate federal entity due to the  distinct nature of their work based on geographic region. To ensure we  got survey responses that reflect the opinions of an entity, we included  instructions for survey points of contact to collaborate with colleagues, as  needed, and indicated that we only wanted one survey response from  each entity. After we began our survey effort, we identified 6 entities as  out of scope for a variety of reasons, such as being a subgroup of another  entity we surveyed. Our final population of surveyed entities was 72, of  which 48 responded to our questionnaire, a response rate of 67 percent.", "In our questionnaire, we collected information on water quality  improvement and ecosystem restoration efforts in the San Francisco Bay  Delta watershed, including, among other things, (1) challenges that may  limit restoration progress; (2) risks to the long-term overall success of  water quality improvement and ecosystem restoration efforts; and (3)  types of reports that entities could consider important when carrying out  responsibilities related to water quality improvement and ecosystem  restoration. To ensure that our survey questions were appropriate and  that respondents could answer them in a reliable and meaningful way, we  conducted survey pre-tests with 5 entities from the study population, had  the questionnaire reviewed by an independent reviewer within GAO, and  revised the questionnaire as appropriate based on the results of these  efforts. The survey questionnaire used for this review is in appendix III.  Our survey field period ran from December 4, 2017, through January 29,  2018. We distributed the questionnaire electronically through email. After  the requested return date passed, we emailed or telephoned respondents  who had not returned the questionnaire and asked them to respond.", "By January 29, 2018, we received 48 questionnaires. In order to minimize  potential nonresponse bias, we reviewed the key characteristics of  respondents to ensure we received completed questionnaires from each  of our population subgroups. Because this was not a sample  questionnaire, it has no sampling errors. However, the practical difficulties  of conducting any survey may introduce nonsampling errors, such as  difficulties in interpreting a particular question or sources of information  available to respondents, which can introduce unwanted variability into  the survey results. We took steps in developing the questionnaire,  collecting the data, and analyzing them to minimize such nonsampling  error. Survey questionnaires may also be subject to error in entering and  analyzing data. We implemented quality control procedures on our data  entry by verifying the accuracy of the process. We noted any missing,  irregular, or incorrect responses by the respondent and resolved these  responses, as needed, through email correspondence with the relevant  entities.", "To examine the extent to which federal and nonfederal entities coordinate  their San Francisco Bay Delta watershed restoration efforts, we  interviewed officials from federal, state, and other entities to identify key  regional plans and coordination efforts. We reviewed these plans and  efforts and compared federal coordination efforts against a selection of  our leading practices for collaboration to assess the extent to which  federal entities followed these practices. The selected leading practices  for collaboration include whether participating agencies have clarified  roles and responsibilities, developed ways to continually update and  monitor written agreements on how agencies coordinate, and identified  how leadership will be sustained over the long-term. Our questionnaire  discussed above also surveyed entities to identify coordination-related  challenges, if any.", "To understand what restoration projects were being carried out, we  obtained information from the San Francisco Estuary Institute\u2019s EcoAtlas  database and the Delta Stewardship Council\u2019s DeltaView database on  restoration projects. We also conducted site visits to a nonprobability  sample of four projects selected to provide illustrative examples of a  variety of restoration activities in different locations in the watershed. We  identified these sites by asking knowledgeable stakeholders about  restoration projects in each region of the watershed that involved a variety  of partners, including federal agencies, that were at various stages of  completion. We then arranged visits that would allow us to observe  projects in each region that illustrated a range of these selection criteria.  We also conducted site visits to water project facilities, including a  reservoir, dam, and pumping station. In addition, we attended the State of  the San Francisco Estuary Conference in Oakland, California, on October  10 and 11, 2017, and observed many presentations and panel  discussions on topics ranging from Delta restoration planning to  pesticides in the estuary, by a wide range of officials from federal and  nonfederal entities conducting restoration efforts across the watershed.", "To examine the extent to which federal and nonfederal entities have  developed measurable goals and approaches to assess progress for San  Francisco Bay Delta watershed restoration efforts, we reviewed  comprehensive regional plans and related goals and progress reports,  including the technical appendix for the State of the Estuary report. To  do so, we looked for factors such as goals with quantifiable metrics and  targets, as well as indicators used to assess and report progress. We also  interviewed officials from federal, state, and other entities, including  scientific groups, about efforts to develop measurable goals and assess  restoration progress.", "To examine information on the status of San Francisco Bay Delta  watershed restoration efforts and related expenditures for fiscal years  2007 through 2016, we obtained and analyzed available data\u2014collected  from the EcoAtlas and DeltaView databases\u2014that included information  about projects, expenditures, and cost estimates for this period. This  period covers the time before and after the state withdrew from the  CALFED federal-state partnership, as originally structured, and includes  the last full fiscal year for which the most recent data were available at the  time of our review. We assessed the reliability of these data by  interviewing knowledgeable officials and reviewing database  documentation and determined that they were not reliable for purposes of  identifying all restoration projects across the entire watershed and for  reporting related expenditure data. We also reviewed federal and state  reports on budget requests and authority for that period and interviewed  officials from federal, state, and other entities about available sources of  data on projects, expenditures, and cost estimates.", "We also obtained and reviewed OMB\u2019s Bay Delta budget crosscuts,  which include financial information for San Francisco Bay Delta  watershed restoration efforts reported by federal and state agencies, for  fiscal years 2007 through 2019. We assessed the reliability of the data in  the federal budget crosscut reports and tables by interviewing federal  agency officials about what data they provided for the reports and tables  and analyzing the data provided in the crosscut reports. We determined  that the data were reliable only to report examples of the magnitude of  funding for individual agencies. We determined that these data were not  reliable to aggregate funding levels across programs and agencies or to  compare funding levels of the various agencies, as we discuss in this  report. We then compared OMB\u2019s written guidance on submitting data for  the crosscut reports with federal standards for internal control to assess  the extent to which federal agencies followed the standard for design of  control activities.", "To determine key factors that may limit San Francisco Bay Delta  watershed restoration, according to federal and nonfederal entities, we  sent the survey questionnaire described above to federal, state, and other  entities to obtain views on (1) challenges that may limit restoration  progress and (2) risks to the long-term overall success of water quality  improvement and ecosystem restoration efforts. We also interviewed  officials from federal, state, and other entities about factors that may limit  restoration progress, as well as reviewed progress reports and studies  exploring these factors.", "We conducted this performance audit from April 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Summary Results of GAO Survey Questionnaire of Federal and Nonfederal Entities", "paragraphs": [], "subsections": [{"section_title": "We distributed this survey questionnaire to 72 federal and nonfederal entities that work in the San Francisco Bay Delta watershed. In this survey, we collected information on water quality improvement and ecosystem restoration efforts in the San Francisco Bay Delta watershed, including, among other things, (1) challenges that may limit restoration progress; (2) risks to the long-term overall success of water quality improvement and ecosystem restoration efforts; and (3) types of reports that entities could consider important when carrying out responsibilities related to water quality improvement and ecosystem restoration. The following copy of this survey questionnaire includes summary information for the responses provided by federal and nonfederal entities. It does not include information for narrative responses.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix V: Comments from the California Delta Stewardship Council", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Janet Frisch (Assistant  Director), Susan Iott (Assistant Director), Chad M. Gorman (Analyst-in- Charge), Chuck Bausell, Stephen Betsock, Mark Braza, Marissa Dondoe,  Ellen Fried, Carol Henn, Karen Howard, Richard Johnson, Gwen Kirby,  Ben Licht, John Mingus, Tricia Moye, Rebecca Parkhurst, Sara Sullivan,  Sarah Veale, Michelle R. Wong, Elizabeth Wood, and Edith Yuh made  key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Great Lakes Restoration Initiative: Improved Data Collection and  Reporting Would Enhance Oversight. GAO-15-526. Washington, DC: July  21, 2015.", "Bureau of Reclamation: Financial Information for Three California Water  Programs. GAO-15-468R. Washington, DC: June 4, 2015.", "Great Lakes Restoration Initiative: Further Actions Would Result in More  Useful Assessments and Help Address Factors That Limit Progress.  GAO-13-797. Washington, DC: September 27, 2013.", "Chesapeake Bay: Restoration Effort Needs Common Federal and State  Goals and Assessment Approach. GAO-11-802. Washington, DC:  September 15, 2011.", "Recent Actions by the Chesapeake Bay Program Are Positive Steps  Toward More Effectively Guiding the Restoration Effort, but Additional  Steps Are Needed. GAO-08-1131R. Washington, DC: August 28, 2008.", "Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could  Help Guide Future Restoration and Protection. GAO-08-130. Washington,  DC: December 14, 2007.", "South Florida Ecosystem: Restoration Is Moving Forward but Is Facing  Significant Delays, Implementation Challenges, and Rising Costs.  GAO-07-520. Washington, DC: May 31, 2007.", "Chesapeake Bay Program: Improved Strategies Are Needed to Better  Assess, Report, and Manage Restoration Progress. GAO-06-96.  Washington, DC: October 28, 2005.", "Great Lakes: Organizational Leadership and Restoration Goals Need to  Be Better Defined for Monitoring Restoration Progress. GAO-04-1024.  Washington, DC: September 28, 2004.", "Watershed Management: Better Coordination of Data Collection Efforts  Needed to Support Key Decisions. GAO-04-382. Washington, DC: June  7, 2004.", "Great Lakes: An Overall Strategy and Indicators for Measuring Progress  Are Needed to Better Achieve Restoration Goals. GAO-03-515.  Washington, DC: April 30, 2003."], "subsections": []}], "fastfact": ["The San Francisco Bay Delta watershed supplies drinking water to 25 million people and irrigation for about half the nation's fruit and vegetable production. Federal and nonfederal entities carry out activities to protect and restore the watershed, which has seen declines in water quality, flood protection, and habitat.", "We found federal agencies are not all using their plan to coordinate restoration efforts. Also, Congress required annual reports on these efforts, but reporting ceased after a key state agency was abolished in 2009.", "We made 7 recommendations aimed at improving coordination and gathering the required information for Congress."]}
{"id": "GAO-17-796T", "url": "https://www.gao.gov/products/GAO-17-796T", "title": "International Mail Security: CBP and USPS Should Assess Costs and Benefits of Using Electronic Advance Data", "published_date": "2017-09-07T00:00:00", "released_date": "2017-09-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes information contained in GAO's August 2017 report, entitled International Mail Security: Costs and Benefits of Using Electronic Data to Screen Mail Need to Be Assessed ( GAO-17-606 )."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. Customs and Border Protection (CBP) is the primary federal agency tasked with targeting and inspecting inbound international items and seizing illegal goods, including illegal or inadmissible drugs and merchandise. As mail and express cargo arrive in the United States, both the U.S. Postal Service (USPS) and express consignment operators (such as FedEx and DHL) provide items to CBP for inspection. However, unlike express consignment operators, USPS is not currently required to provide CBP with electronic advance data (EAD), such as the shipper's and recipient's name and address, for inbound international mail and does not have control over mail prior to its arrival in the United States. Thus, USPS relies on foreign postal operators to collect and provide EAD voluntarily or by mutual agreement.", "In 2014 and 2015, USPS and CBP initiated two pilot programs at the New York International Service Center (ISC) to target certain mail for inspection using some of the EAD obtained under data-sharing agreements with foreign postal operators. Under the pilots, CBP uses EAD to target a small number of pieces of mail each day. According to USPS officials, when USPS employees scan either individual targeted pieces or larger sacks containing this targeted mail, they are alerted that CBP has targeted the item and set the item or sack aside for inspection. According to USPS and CBP, USPS has been unable to provide some targeted mail for inspection because locating targeted mail once it arrives at an ISC has been a challenge. Since the pilots began, USPS has provided CBP with about 82 percent of targeted mail for one pilot, and about 58 percent of targeted mail for the other. However, while USPS and CBP have collected some performance information for these pilots (including the percentage of targeted mail provided for inspection), this information is not linked to a specific performance target agreed upon by USPS and CBP--such as a specific percentage of targeted mail provided to CBP for inspection. Further, the agencies have not conducted an analysis to determine if the pilot programs are achieving desired outcomes. Because CBP and USPS lack clear performance goals for these pilots, they risk spending additional time and resources expanding them prior to fully assessing the pilots' success or failure.", "In our report we found that the costs and benefits of using EAD to target mail for inspection are unclear. For example, according to USPS and CBP officials, increasing the use of EAD to target mail for inspection may have benefits, such as reducing time and resources needed for the screening process--potentially decreasing costs--and may increase the security of inbound mail. However, the costs of collecting and implementing the use of EAD are not yet known, and neither USPS nor CPB currently collect the data necessary to know whether using EAD might increase the security of inbound mail or decrease the time and costs associated with screening. For example, CBP has collected data on the percentage of inspections resulting in a seizure for mail inspected as a result of targeting in the pilot programs at the New York ISC. However, CBP does not collect comparable data for seizures resulting from inspections conducted based on current methods of choosing mail for inspection. In light of the challenges that collecting and using these data present, it is important that CBP and USPS carefully consider actions to enhance inbound international mail security to avoid wasting time and money on potentially ineffective and costly endeavors."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In our report, we recommended that CBP, in coordination with USPS: (1) establish measureable performance goals to assess pilot programs and (2) evaluate the costs and benefits of using EAD to target mail for inspection compared with other targeting methods. CBP and USPS agreed with these recommendations and CBP plans to implement them by February 28, 2018."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our August 2017 report on  international mail security, which we are publicly releasing today. The  expanding international use of e-commerce and the ease and expediency  of cross-border transactions have resulted in a much higher volume of  global trade, as consumers may be importing goods when they make  purchases over the Internet. This expansion could increase the potential  for threats to national security, in addition to public health and safety,  because international mail and express cargo can be used to send illegal  or otherwise prohibited items to the United States. For example, there has  been a recent increase in deaths in the United States related to the  synthetic opioid fentanyl, a controlled substance, which could arrive in the  United States in international mail or express cargo.", "The U.S. Postal Service (USPS) and express consignment operators\u2014 such as FedEx, DHL, and the United Parcel Service (UPS) \u2014play key  roles handling inbound international items. U.S. Customs and Border  Protection (CBP), within the Department of Homeland Security, also has  a critical role as the primary federal agency tasked with targeting and  inspecting suspicious inbound international items and seizing illegal  goods entering the country. Some members of Congress and others have  called for additional security efforts related to inbound international mail,  such as increasing the collection of electronic advance data (EAD) that  may provide CBP with information to better focus its targeting and  inspection efforts. These data include the sender\u2019s name and address,  recipient\u2019s name and address, contents\u2019 description, number of pieces,  and total weight.", "My remarks today are based on our report, which addressed (1) types of  items CBP has seized from mail and express cargo sent to the United  States; (2) how inbound international items are inspected as they arrive in  the United States; and (3) options to collect EAD for mail and the costs  and benefits of using these data to target mail for inspection. For the  purposes of this statement, I will focus primarily on our findings related to  USPS\u2019s and CBP\u2019s efforts to obtain and use EAD to target mail for  inspection. Specific details that are related to the screening process and  foreign postal operators and that CBP and USPS considered sensitive  are not included in our report or this statement.", "For our report, we reviewed and analyzed data on seizures of mail and  express cargo items as documented in CBP\u2019s Seized Asset and Case  Tracking System (SEACATS). We reviewed applicable laws and  regulations; USPS and CBP guidance; USPS Office of Inspector  General\u2019s reports; international mail agreements, including requirements  set by the Universal Postal Union (UPU) and agreements for EAD with  foreign postal operators; and proposed federal legislation. We interviewed  officials from USPS, the Department of State, CBP, and the  Transportation Security Administration (TSA) and representatives from  the three largest express consignment operators (based on CBP cargo  volume data for fiscal year 2015): UPS, FedEx, and DHL.", "We reviewed available information related to pilot programs conducted by  USPS and CBP using EAD to target mail for inspection for the period  from July 2014 through January 2017 (the time period for which data  were available). We compared available documentation on the goals and  performance of the pilots to federal internal control standards related to  defining program goals. We did not assess the effectiveness of CBP\u2019s  screening efforts for inbound international express cargo or mail because  that was outside the scope of our review. To assess USPS\u2019s and CBP\u2019s  efforts to collect and implement EAD, we compared these efforts to GAO guidance on program evaluation. Further details on our scope and  methodology are included in our report. The work on which this statement  is based was conducted in accordance with generally accepted  government auditing standards.", "In summary, we found that CBP seizes a variety of inbound items,  including drugs and merchandise, through inspections of express cargo  and mail as it arrives in the United States. However, CBP and USPS have  not established measureable goals for pilot programs to use EAD for  targeting mail for inspection, nor have they identified the potential costs  and benefits of using EAD. Given the challenges associated with  collecting and using EAD, CBP should, in coordination with USPS,  establish measureable goals for pilot programs and evaluate the costs  and benefits of using EAD to target mail for inspection compared with  other targeting methods. CBP and USPS agreed with these  recommendations and CBP plans to implement them by February 28,  2018."], "subsections": [{"section_title": "CBP Seizes a Variety of Inbound Items That May Pose Threats to U.S. Safety and Security", "paragraphs": ["In our report, we found that, according to data from CBP\u2019s Seized Asset  and Case Tracking System (SEACATS), during fiscal years 2012 through  2016 CBP conducted about 308,000 seizures of inbound international  items that may pose a threat to U.S. security, health and safety, business,  and ecology. Of those, CBP seized about 70 percent from mail and 30  percent from express cargo. Seized items are categorized in SEACATS  as either drugs or merchandise. Among the approximately 308,000  seizures, illegal or inadmissible drugs accounted for about 47 percent of  total seizures and merchandise accounted for about 53 percent.", "According to testimony by a U.S. Immigration and Customs Enforcement  official, a recent increase in deaths related to the synthetic opioid fentanyl  has resulted in an increased focus on identifying methods by which  traffickers bring fentanyl into the United States. In fiscal years 2012  through 2015, CBP\u2019s seizure data reflect zero seizures of fentanyl, but  according to CBP, fentanyl seizures would have been captured under  other categories in SEACATS. According to CBP, a specific category  code for fentanyl was added to SEACATS in fiscal year 2016. SEACATS  reflects 53 seizures of fentanyl in fiscal year 2016 via both mail and  express cargo."], "subsections": []}, {"section_title": "USPS\u2019s and CBP\u2019s Pilot Programs Lack Performance Targets", "paragraphs": ["As mail and express cargo arrive in the United States, both USPS and  express consignment operators provide items to CBP for inspection.  Express consignment operators accept items for delivery to the United  States at points of sale in foreign countries and provide EAD to CBP prior  to the items\u2019 scheduled arrival in the United States. CBP then analyzes  the EAD and provides lists of targeted items to express consignment  operators. However, unlike express consignment operators, USPS is not  currently required to provide CBP with EAD for inbound international mail  and does not have control over mail prior to its arrival in the United  States. Thus, USPS relies on foreign postal operators to collect and  provide EAD voluntarily or by mutual agreement. According to USPS  data, USPS received EAD for about one third of all inbound international  mail (excluding letters, flats, and military/diplomatic mail) for the period  from April 2016 through March 2017. For the month of March 2017 (the  most recent data available at the time of our review), USPS data indicate  that EAD was available for roughly half of all inbound international mail  (excluding letters, flats, and military/diplomatic mail).", "In 2014 and 2015, USPS and CBP initiated two pilot programs at the New  York International Service Center (ISC) to target certain mail for  inspection using some of the EAD obtained under data-sharing  agreements with foreign postal operators. At the time of our review, CBP  did not use EAD to target mail for inspection outside of these pilots.  According to USPS documents, the goal of these pilots is to test the  effectiveness of placing holds on mail that has been targeted by CBP  based on EAD. Under the pilots, CBP uses EAD to target a small number  of pieces of mail each day. According to USPS officials, when USPS  employees scan either individual targeted pieces or larger sacks  containing this targeted mail, they are alerted that CBP has targeted the  item and set the item or sack aside for inspection. Since the pilots began,  USPS has made efforts to locate and provide CBP with the targeted mail  and CBP has collected performance data on the percentage of targeted  mail USPS has provided for inspection: about 82 percent for one pilot,  and about 58 percent for the other.", "In our report we note that, according to USPS and CBP, USPS has been  unable to provide some targeted mail for inspection because locating  targeted mail once it arrives at an ISC has been a challenge. Specifically,  USPS ISCs may receive thousands of large sacks of mail per day that are  scanned as they are accepted. Each sack may contain hundreds of  pieces of mail that are not individually scanned upon arrival. As a result,  locating a targeted item requires manually sorting through the entire sack,  and USPS employees may overlook the item while sorting through the  larger sack to locate targeted mail. According to USPS officials, at the  time of our review they were testing an automated method to identify  targeted mail within these larger sacks.", "Standards for internal control in the federal government state that defining  program goals in specific and measurable terms allows for the  assessment of performance toward achieving objectives. However,  while USPS and CBP have collected some performance information for  these pilots (including the percentage of targeted mail provided for  inspection), this information is not linked to a specific performance target  agreed upon by USPS and CBP\u2014such as a specific percentage of  targeted mail provided to CBP for inspection. Further, the agencies have  not conducted an analysis to determine if the pilot programs are achieving  desired outcomes.", "In our report, we concluded that, because CBP and USPS lack clear  performance goals for these pilots, they risk spending additional time and  resources expanding them prior to fully assessing the pilots\u2019 success or  failure. As such, we recommended that CBP, in conjunction with USPS,  (1) establish measureable performance goals for pilot programs and (2)  assess the performance of the pilots in achieving these goals. The  Department of Homeland Security concurred with this recommendation  and plans to implement it by February 28, 2018."], "subsections": []}, {"section_title": "USPS and CBP Have Not Evaluated Relative Costs and Benefits of Increased Use of Electronic Advance Data", "paragraphs": ["In our report we found that the costs and benefits of using EAD to target  mail for inspection are unclear. For example, according to USPS and  CBP officials, increasing the use of EAD to target mail for inspection may  have benefits, such as reducing the volume of inspected mail and  increasing the percentage of inspections that result in identification of a  threatening or illegal item. This potential outcome could decrease time  and resources needed for the screening process\u2014potentially decreasing  costs\u2014and may increase the security of inbound mail. However, the  costs of collecting and implementing the use of EAD are not yet known,  and neither USPS nor CPB currently collect the data necessary to know  whether using EAD might increase the security of inbound mail or  decrease the time and costs associated with screening.", "Specifically, regarding the costs of collecting EAD, USPS has not  calculated the current costs of collecting EAD from countries with which it  has data-sharing agreements, but officials stated that USPS does not  incur significant additional costs for each new designated postal operator  or type of mail for which it begins collecting EAD. While some of the  costs of obtaining EAD may be borne by designated postal operators in  other countries, rather than directly by USPS, costs to USPS to use EAD  to target mail for inspection may include: equipment and personnel required to identify targeted mail (such as  equipment required to sort through hundreds of pieces of mail to  identify a single piece of mail), and  software upgrades required to exchange data with foreign postal  operators and with CBP.", "In our report we found that an analysis of the costs associated with  planned efforts is particularly critical given USPS\u2019s financial challenges.", "As we recently found, USPS reported a net loss of $5.6 billion in fiscal  year 2016\u2014its 10th consecutive year of net losses. In light of this  situation, any expenditure of financial resources to make any additional  infrastructure and information technology upgrades necessary to  implement the use of EAD for targeting merit careful consideration.", "Beyond costs, in our report we also determined that USPS and CBP have  not performed an analysis of the benefits of using EAD to target mail for  inspection, including the effectiveness of targeted inspection based on  EAD relative to other methods of selecting mail for inspection. Thus, the  extent to which targeting based on EAD might result in an increased  ability to identify threats or other benefits over current methods is  unknown. For example, CBP has collected data on the percentage of  inspections resulting in a seizure for mail inspected as a result of  targeting in the pilot programs at the New York ISC. However, CBP does  not collect comparable data for seizures resulting from inspections  conducted based on current methods of choosing mail for inspection.", "Moreover, USPS and CBP experience challenges related to inspecting  mail that may limit their ability to effectively use EAD to target mail for  screening and, thus, to experience EAD\u2019s possible benefits. For example,  USPS depends on foreign postal operators to make EAD available.  According to USPS and State Department officials, however, those  operators may not share the same security priorities as USPS and CBP  and may not make EAD available. If the amount of available EAD remains  limited for inbound mail, this may reduce the effectiveness of CBP\u2019s  targeting efforts or could constrain CBP\u2019s ability to reduce the volume of  mail it inspects.", "Our prior work has found that in designing preventive measures\u2014such as  the screening of inbound mail to identify potential threats\u2014it is helpful to  conduct a thorough assessment of vulnerabilities as well as cost-benefit  analyses of alternative strategies. In the absence of information on the  relative costs of various methods of selecting mail for inspection as well  as their effectiveness at identifying potential threats in inbound mail,  USPS and CBP are unable to fully understand whether obtaining  additional EAD for targeting purposes will provide security or resource  benefits.", "In our report, we therefore concluded that, particularly in light of the  challenges that collecting and using these data present, it is important  that CBP and USPS carefully consider actions to enhance inbound  international mail security to avoid wasting time and money on potentially  ineffective and costly endeavors. As such, we recommended that CBP, in  conjunction with USPS, evaluate the relative costs and benefits of  collecting EAD for targeting mail for inspection in comparison to other  methods. The Department of Homeland Security concurred with this  recommendation and plans to implement it by February 28, 2018.", "In conclusion, existing pilots could be used as an opportunity for CBP and  USPS to: (1) articulate performance goals for the pilots, (2) collect data  and assess the pilots on their success in enabling USPS to provide  targeted mail to CBP for inspection, and (3) assess the costs and benefits  of various methods of choosing mail for inspection. We are encouraged  that USPS and the Department of Homeland Security agreed with our  findings and recommendations. Effective implementation of our  recommendations should help CBP and USPS ensure that efforts to  collect and use EAD to target mail for inspection achieve the desired  security and resource benefits.", "Chairman Meadows, Ranking Member Connolly, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgements", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Lori Rectanus, Director, Physical Infrastructure Issues at (202)  512-2834 or rectanusl@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Derrick Collins and Katie Hamer. Other staff who made contributions  to the report cited in this testimony are identified in the source product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-46", "url": "https://www.gao.gov/products/GAO-19-46", "title": "Global Development Lab: USAID Leverages External Contributions but Needs to Ensure Timely Data and Transparent Reporting", "published_date": "2018-11-07T00:00:00", "released_date": "2018-11-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Lab was created as a USAID bureau in April 2014. The Lab was intended to institutionalize and improve USAID's ability to harness and leverage science, technology, innovation, and partnerships in addressing development issues and goals worldwide. The Lab supports projects and activities and announces, issues, and manages awards\u2014or funding opportunities\u2014for innovators to propose new ideas, approaches, and technologies. The Lab also incorporates external (i.e., non-USAID) contributions into its programming.", "Senate Report 114-290 included a provision for GAO to review the Lab. GAO's report examines, among other things, (1) the Lab's programs, funding, and staffing resources and (2) the extent to which the Lab has documented its oversight of awards with non-USAID contributions and clearly reported these contributions. GAO reviewed and analyzed agency documents and interviewed agency officials in Washington, D.C., and from six missions. GAO also analyzed selected Lab documentation for fiscal years 2014 through 2017."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Agency for International Development's (USAID) Global Development Lab (the Lab) has programs and activities for each of its five strategic objectives: science, technology, innovation, and partnerships (STIP) and agency integration of STIP. The Lab comprises five centers and two support offices (see figure). The centers house more than 25 Lab programs focused on issues such as development research, digital development, innovation ventures, and private sector engagement. The Lab's funding for its programs has generally been decreasing, as have its staffing numbers, since fiscal year 2015. USAID allocations of program funds to the Lab decreased from $170.7 million in fiscal year 2015 to $77 million in fiscal year 2017.", "Although the Lab has documented its oversight of awards that include non-USAID contributions, some data it collects for these contributions are outdated and its public reporting of such data lacks transparency.", "For awards GAO reviewed, the Lab consistently documented its compliance with key award oversight requirements. However, its Internal Guide to Accounting for Leverage (internal guide) does not include instructions for ensuring the data for these contributions are current. As a result, GAO found the Lab's management information system contained outdated data for non-USAID contributions in 10 of 24 awards GAO reviewed.", "The Lab publicly reports a broader range of non-USAID contributions than the types described in USAID policy. However, the Lab's internal guide does not require the Lab to disclose the types of contributions represented in its public reporting. As a result, the Lab's public reporting of such contributions lacks transparency.", "USAID policy and standards for internal control in the federal government require the use and communication of timely and reliable information. Revising the Lab's internal guide to include instructions for updating data on non-USAID contributions and requiring the Lab's public reporting to disclose the types of contributions represented would help the Lab ensure accuracy and transparency in the information it reports to Congress and the public."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that USAID ensure that the Lab revises its Internal Guide to Accounting for Leverage to (1) include instructions for updating data on non-USAID contributions for awards and (2) require its public reporting of non-USAID contributions to disclose the types of contributions represented.", "USAID concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2010, the U.S. Agency for International Development (USAID) and the  Department of State initiated efforts to enhance the use of science and  technology to meet development challenges in the 21st century. These  efforts were driven by, among other things, technological breakthroughs  and improvements in connectivity that provided USAID with opportunities  to change the global development landscape. According to USAID, it  established the Office of Innovation and Development Alliances and the  Office of Science and Technology in 2010 to open up solutions to  development issues, foster scientific inquiry, and embrace an  environment of entrepreneurship and ingenuity. In 2014, these efforts led  to the creation of the Global Development Lab (the Lab) as a USAID  bureau. According to USAID officials, since its inception, the Lab has  sought innovative solutions to development challenges and used public\u2013 private partnerships to further its mission and invest in strategies to  address development problems ranging from hunger to disease to  literacy.", "Senate Report 114-290 included a provision for GAO to assess the  structure, activities, and results of the Lab, among other things. In this  report, we examine (1) the Lab\u2019s programs, funding, and staffing  resources; (2) the extent to which the Lab has documented its oversight  of awards with non-USAID contributions and clearly reported these  contributions; and (3) the tools that the Lab uses to assess its  performance as well as results that such assessments have shown.", "To examine the Lab\u2019s programs, funding, and staffing resources, we  reviewed and analyzed Lab documents and data covering fiscal years  2014 through 2017. We also interviewed Lab officials representing every  center and office regarding the Lab\u2019s organizational structure, programs,  and services.", "To examine the extent to which the Lab has documented its oversight of  awards with non-USAID contributions, we reviewed and analyzed Lab  data on awards with committed non-USAID contributions in fiscal years  2014 through 2017. To assess the reliability of these data, we reviewed  documentation and interviewed USAID officials to identify and rectify any  missing or erroneous data. We determined that the data and information  were sufficiently reliable for comparison with award documentation. We  reviewed and analyzed award documentation from 24 Lab-managed  awards that included non-USAID contributions. These awards  represented all such awards issued during or after fiscal year 2014 and  ending during or before fiscal year 2017. We also reviewed USAID  guidance related to the oversight of non-USAID funding contributions  contained in the agency\u2019s Automated Directives System (ADS) as well as  Lab-issued guidance related to the oversight of such funds. Additionally,  we met with Lab officials responsible for managing these awards and with  Lab officials responsible for creating and implementing Lab guidance.", "To report on the tools the Lab uses to assess its performance, we  reviewed and analyzed Lab performance and program documents, such  as the Lab\u2019s strategic plan and evaluations. We also reviewed results of  the Lab\u2019s performance indicators and portfolio reviews covering fiscal  years 2016 through 2017. In addition, we interviewed officials from five  USAID bureaus in Washington, D.C., and from six USAID missions  overseas to obtain information on their interactions with the Lab. See  appendix I for more information about our objectives, scope, and  methodology.", "We conducted this performance audit from July 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Establishment, Mission, and Objectives of the Lab", "paragraphs": ["In 2014, USAID established the Lab as a USAID bureau by merging and  restructuring two offices\u2014the Office of Science and Technology and the  Office of Innovation and Development Alliances. According to USAID  officials, the agency moved a number of the two offices\u2019 core programs  and activities, along with staffing functions, to the Lab. In a January 2014  notification, USAID informed Congress of its intent to establish the Lab  and noted initial staffing levels, funding, and short-term plans. The Lab is  generally subject to guidance pertaining to operating units and bureaus,  including policies and procedures set out in USAID\u2019s ADS. It also  publishes and contributes to various performance and financial reporting  of information, such as USAID\u2019s Annual Performance Plan and Report,  which are provided to Congress and available to the public, according to  Lab officials.", "The Lab was created to work collaboratively within USAID and with other  government and nongovernment partners to produce development  innovations, among other things. According to Lab officials, the Lab seeks  to improve USAID\u2019s ability to harness the power of science, technology,  innovation, and partnerships (STIP) with private and public sectors by  funding and scaling breakthroughs that would accelerate the completion  of foreign policy and development goals.", "The Lab has a two-part mission:  1.  Produce development breakthroughs and innovations by funding,  testing, and scaling proven solutions that will affect millions of people.  2.  Accelerate the transformation of development enterprise (i.e., to build  capacity of the public and private sectors to work in the development  arena) by opening it to people everywhere with good ideas, promoting  new and deepening existing partnerships, applying data and  evidence, and harnessing scientific and technological advances.", "The Lab\u2019s mission, objectives, and goals are laid out in its strategic plan,  which has evolved since the Lab\u2019s creation. In fiscal years 2014 and  2015, the Lab operated under an initial strategy that focused on  examining the delivery capabilities and constraints of current and ongoing  Lab programs; prioritizing investments of time and resources; and  confirming new activities and programs. The strategy for fiscal years 2016  through 2020 presents a results framework that includes the Lab\u2019s two- part mission statement as well as five objective statements and  corresponding intermediate result statements explaining how the Lab  intends to achieve its goals (see fig. 1)."], "subsections": []}, {"section_title": "Structure of the Lab", "paragraphs": ["The Lab, which is headed by an Executive Director, includes five  centers\u2014the Center for Development Research, the Center for Digital  Development, the Center for Development Innovation, the Center for  Transformational Partnerships, and the Center for Agency Integration\u2014 each focused on one of the Lab\u2019s five strategic objectives. The Lab also  includes two offices, the Office of Engagement and Communication and  the Office of Evaluation and Impact Assessment, which provide support  services. Figure 2 shows the Lab\u2019s organizational structure.", "Table 1 describes each of the Lab\u2019s centers and offices.", "In April 2018, the USAID Administrator announced agency reorganization  plans that will affect the Lab. USAID leadership plans to create a new  Bureau for Development, Democracy, and Innovation and a Bureau for  Policy, Resources, and Performance. According to USAID, the new  bureaus will combine existing operating units that provide technical and  program design support and expertise into a \u201cone-stop shop\u201d of  consultancies that USAID missions can utilize. The new bureaus will  absorb the Lab, along with other units, and track its contributions using  new metrics that measure customer service to determine whether  missions and bureaus have access to the right expertise at the right time,  according to the USAID Administrator. As of October 2018, USAID had  not indicated time frames for implementing the reorganization plans."], "subsections": []}, {"section_title": "Funding Mechanisms for Lab Activities", "paragraphs": ["To achieve its objectives and goals, the Lab funds and manages awards  (which result in activities) that cover STIP programming as well as the  Lab\u2019s operations. The Lab uses a number of different mechanisms\u2014for  example, broad agency announcement procedures, annual program  statements, and requests for applications\u2014when making awards, which  include grants, cooperative agreements, and contracts.", "Global Development Alliance  A Global Development Alliance (GDA) is a  partnership involving the U.S. Agency for  International Development (USAID) and the  private sector. GDA partners work together to  develop and implement activities that leverage  and apply assets and expertise to advance  core business interests, achieve USAID\u2019s  development objectives, and increase the  sustainable impact of USAID\u2019s development  investments. Generally, according to USAID,  the value of private sector expertise,  capabilities, and resources contributed to an  alliance must equal and, in general, should  significantly exceed the value of resources  provided by USAID.", "The Lab also holds competitions focused on new ideas, approaches, and  technologies to address development problems, and awards prizes to  individuals or groups that meet the competition\u2019s requirements. Some  awards include funding from USAID as well as cash or in-kind  contributions from non-USAID sources in the private or public sector.  The Lab refers to the use of all non-USAID contributions as leverage and  reports leverage as a programmatic performance indicator. According to  USAID documents, the agency seeks to build partnerships that leverage  the assets, skills, and resources of the public, private, and nonprofit  sectors to deliver sustainable development impact. Examples of such  leverage contributions include donated cash, services, or supplies from  implementing partners or third parties to specific awards managed by the  Lab. Third parties contributing to Lab managed programs have included  foreign governments, international organizations, businesses and  corporations, philanthropic foundations, non-governmental organizations,  and higher education institutions, among others. One method USAID has  approached this goal is through Global Development Alliances (see  sidebar)."], "subsections": []}]}, {"section_title": "The Lab Aligns Programs to Support Its Five Strategic Objectives; Funding and Staffing Have Decreased since Fiscal Year 2015", "paragraphs": [], "subsections": [{"section_title": "The Lab Aligns Programs with Its Strategic Objectives", "paragraphs": ["Staff in the Lab\u2019s five centers, offices, and Lab-Wide Priorities manage  more than 25 programs and portfolios, which encompass projects and  activities under a specific issue, aligned with the Lab\u2019s five strategic  objectives. The programs focus on development research (science  objective), digital development (technology objective), innovation ventures  (innovation objective), and private-sector engagement (partnerships  objective). Table 2 shows examples of programs and portfolios aligned  with each strategic objective.", "Examples of the Lab\u2019s programs and activities include the following (see  app. II for more information about these and other Lab programs):", "Staff in the Lab\u2019s Center for Development Innovation manage the  Grand Challenges for Development initiative, intended to foster  innovations to address key global health and development problems.  Since 2011, USAID and its partners have launched 10 Grand  Challenges that are implemented by USAID bureaus, including the  Lab. The Lab is responsible for managing the Securing Water for  Food Grand Challenge and also the Scaling Off-Grid Energy Grand  Challenge. Other USAID bureaus implement the other eight Grand  Challenges (see app. III for a description of the Grand Challenges).", "Staff in the Lab\u2019s Center for Development Research manage the  Higher Education Solutions Network. The program is a partnership  with seven universities that also work with partners in academia, the  private sector, civil society, and governments worldwide. The  universities established eight development labs that focus on efforts to  solve a range of development problems.", "The Lab\u2019s two offices support various aspects of the centers\u2019  programs and portfolios, such as internally promoting center programs  throughout USAID and conducting monitoring and evaluation  activities.", "Types of STIP Services Provided by the  Global Development Lab  Digital development: Technologies and  data-driven approaches to extend the reach of  development programs   Catalyzing innovation: Integration of design  methodologies, development innovations, and  programming solutions to solve development  challenges differently.   Partnerships/private sector engagement:  Relationships between USAID and one or  many organizations, including private sector  entities, in an effort to create development  impact.  Scientific research and capacity building:  Application of science and research to solve  development problems.", "In addition to managing programs, the centers provide a variety of STIP- focused services and support, including assistance with programming, to  USAID field missions and headquarters bureaus as part of the Lab\u2019s  mission to accelerate development impact. According to Lab  documentation, the Lab can provide services related to country and  regional strategic planning; project design and implementation; activity  design and implementation; and monitoring and evaluation. The Lab\u2019s  STIP services fall into several categories\u2014digital development, catalyzing  innovation, partnerships and private sector engagement, and scientific  research and capacity building, according to Lab documents (see  sidebar).", "The centers, led by the Center for Agency Integration, deliver internal  STIP services and mechanisms through toolkits, training, advisory  services, and assessment and analysis of STIP activities or programming,  according to Lab documentation. For example, at the request of missions  or bureaus, the Digital Finance team in the Center for Digital  Development can, among other things, review and provide technical input  on awards related to digital finance. In addition, the Lab has provided  advisory services to USAID operating units regarding innovative design or  methods, such as co-creation, which can be used throughout the program  cycle including in procurement (i.e., the broad agency announcement,  annual program statements, etc.). According to Lab officials, some  services are funded by the Lab at no cost to USAID operating units, while  other services must be funded by the USAID operating units through  funding mechanisms such as \u201cbuy-ins\u201d or cooperative agreements.", "Lab data for fiscal years 2014 through 2017 show that the Lab provided  services or support frequently in digital development activities, such as  geospatial support to USAID field operations, and partnership services.  For example, the Lab has provided technical services to missions around  the world related to the GeoCenter (housed in the Center for Digital  Development), which supports the application of advanced data and  geographic analysis to international development challenges to improve  the strategic planning, design, monitoring, and evaluation of USAID\u2019s  programs. In addition, the Lab provided partnership services related to  private-sector engagement, including technical assistance and  consultative services to USAID missions for more efficiently engaging,  building, and maintaining relationships with the private sector at local or  regional levels.", "Officials we interviewed at USAID missions and headquarters bureaus  described services or tools they had received from the Lab, such as  technical advice and training related to establishing private-sector  partnerships and leveraging funding. For example, some USAID  headquarters officials told us they had taken Lab-led private-sector  engagement training that addressed developing collaborations with  external stakeholders, establishing risk-sharing agreements, and  engaging investors and other financial sector actors. In addition, some  mission officials stated that they were involved in Lab-supported  programs such as the Partnerships for Enhanced Engagement in  Research and the Partnering to Accelerate Entrepreneurship Initiative  and had received Lab support related to geographic information system  mapping. One mission had a Lab-funded embedded advisor who  provided technical assistance to a country\u2019s Ministry of Health. According  to Lab officials, demand for the Lab\u2019s services and support exceeds the  Lab\u2019s capacity and its resources."], "subsections": []}, {"section_title": "Program Funding for the Lab Has Decreased since Fiscal Year 2015", "paragraphs": ["Allocations of program funds from USAID to the Lab have decreased over  the past few fiscal years, from $170.7 million in fiscal year 2015 to $77  million in fiscal year 2017. Similarly, the Lab\u2019s obligations of program  funds have also decreased since fiscal year 2015, according to Lab  data. Obligations reached around $170 million in fiscal year 2015, the  Lab\u2019s first full year of operations. By fiscal year 2016, the Lab\u2019s  obligations had decreased to about $109 million\u2014a reduction of over 35  percent. Although the Lab is still obligating fiscal year 2017 funding, its  obligations would not exceed $77 million if it obligated the full amount of  program funding provided to the Lab. As table 3 shows, from fiscal year  2014 through fiscal year 2017, the Lab obligated over $435 million of its  program funds for its centers and support services (see app. IV for an  overview of funding from various appropriations accounts in fiscal years  2014-2017). According to Lab officials, the program funds cover Lab- managed programs and programming (including funding for awards  comprised of many activities) and the centers\u2019 services, STIP activities,  and staffing (including contractors), among other things (see app. V for a  discussion of Lab-managed activities and corresponding obligations for  fiscal years 2014-2017).", "As table 3 shows, in fiscal years 2014 through 2017, the Lab\u2019s Center for  Development Innovation obligated the most funds overall. The center  houses the Development Innovation Ventures, a portfolio of innovations  with the goal of reducing global poverty. Borrowing from the private  sector\u2019s venture capital model, the portfolio seeks to identify and test  innovative development solutions based on three principles: rigorous  evidence, cost-effectiveness, and potential to scale up.", "Lab officials indicated that the Lab has reassessed and realigned  programming priorities because of decreased funding. For example, the  Lab temporarily suspended new applications for awards through the  Development Innovation Ventures program from the end of July 2017 due  to budget uncertainties in fiscal year 2018. However, Lab officials  indicated that the Lab has recently secured funding for new applications  for the program. Funding decreases have also caused the Lab to scale  back or put some programs on hold, according to Lab officials. For  example, the Lab scaled back its Partnering to Accelerate  Entrepreneurship Initiative; its Lab-Wide Priorities; and its Monitoring,  Evaluation, Research, and Learning Innovation programs. The Lab also  put its partnerships with NextGen missions on hold indefinitely, according  to Lab officials. In addition, the Lab reported that it has been able to  provide only minimal support for multi-stakeholder partnerships, such as  the Digital Impact Alliance and the Global Innovation Fund."], "subsections": []}, {"section_title": "Lab Staffing Has Decreased since Fiscal Year 2015", "paragraphs": ["The number of staff in the Lab has decreased since fiscal year 2015, the  first year for which staffing numbers are available. Lab staff include both  direct-hire staff, comprising civil service and foreign-service employees,  and contractors with specialized skills who supplement the efforts of  direct-hire staff. Contractors have made up at least 35 percent or more of  staff each fiscal year since 2015. The total number of staff, including  direct-hire staff and contractors, decreased by over 30 percent from fiscal  years 2015 through 2018, dropping from 224 in fiscal year 2015 to 155 in  fiscal year 2018 (see table 4).", "Lab information shows that the staff primarily comprise senior technical  and professional experts and that about 80 percent of staff are on time- limited appointments, which can last 1 to 5 years, according to Lab  officials. Further, according to Lab officials, due to the ever-changing  nature of work in the Lab, staff may work on multiple projects and  activities across several teams or may be assigned to work with one team  or on a single project until it is completed. For example, Lab officials  stated that when Lab-Wide Priorities are established, staff members are  brought in to contribute to these efforts while also working on activities in  the centers they support.", "In addition to declining staff numbers overall, since fiscal year 2015, the  number of direct-hire staff employed by the Lab has decreased.  According to Lab officials, because of the technical focus of its  programming, the Lab has not been able to staff all authorized positions  with direct-hire employees who have the necessary expertise. Instead,  the Lab has filled some of these positions with contractors or science  fellows. The Lab also uses a variety of other hiring mechanisms, such as  the Participating Agency Service Agreement with the Department of  Agriculture and the American Association for Advancement of Science  fellows, to allow for flexibility and obtain the needed expertise to  implement STIP and technical services throughout USAID. By fiscal year  2017, the Center for Digital Development had 40 staff members\u2014the  highest overall number, including the highest number of contractor staff  members\u2014among all the Lab\u2019s centers. This center\u2019s contractor staff  primarily consisted of technical specialists assisting the GeoCenter (see  app. VI for numbers of direct hires and contractors at each center in fiscal  years 2015-2018).", "Lab officials stated that the decline in staff numbers\u2014primarily direct-hire  staff\u2014over the years was due to a number of factors, including a  government-wide hiring freeze, budget constraints, and a high attrition  rate among the Lab\u2019s staff beginning in 2017. According to several Lab  officials, the high attrition rate was due to uncertainty about the USAID  reorganization and its impact on the Lab, since a large percentage of the  Lab\u2019s staff is employed on a term-limited basis."], "subsections": []}]}, {"section_title": "The Lab Documented Its Oversight of Awards with Non- USAID Contributions, but Some Data Are Outdated and Public Reporting Lacks Transparency", "paragraphs": [], "subsections": [{"section_title": "The Lab\u2019s Documented Oversight of Awards with Non-USAID Contributions Followed USAID and Lab Guidance", "paragraphs": ["Our review of Lab documents showed that, for all 24 Lab-managed  awards we reviewed, the Lab consistently documented certain oversight  requirements for non-USAID contributions (i.e., committed, rather than  actual, contributions from the private sector, the public sector, and other  U.S. government agencies). We reviewed 24 Lab-managed awards that  included non-USAID contributions to determine whether the Lab  documented its compliance with key award oversight requirements we  identified in USAID and Lab guidance.", "For all 24 awards, the Lab documented its compliance with the following  key requirements:  report funding amounts committed from non-USAID sources;  conduct valuations of in-kind contributions, as applicable; document partners met cost-share or matching funds, if required; maintain copies of the award agreement and any modifications.", "Additionally, for awards receiving in-kind contributions, the Lab  maintained documentation in award files demonstrating that officials  reviewed the valuation of in-kind services and supplies. Further, in the 10  awards we reviewed containing cost-share requirements, the Lab  maintained documentation to show partners\u2019 progress in meeting those  requirements."], "subsections": []}, {"section_title": "The Lab\u2019s Data for Some Non-USAID Contributions Are Outdated", "paragraphs": ["We found that the Lab\u2019s management information system contained  outdated data on non-USAID contributions, which the Lab reports as  leverage. According to ADS 596, information should be communicated  to relevant personnel at all levels within an organization and the  information should be relevant, reliable, and timely. Further, Standards  for Internal Control in the Federal Government states that management  should use quality information to achieve the entity\u2019s objectives, including  obtaining relevant data from reliable internal sources in a timely manner.  Further, the Lab\u2019s \u201cInternal Guide to Accounting for Leverage\u201d (internal  guide) states that data on non-USAID contributions will be collected from  Lab teams semi-annually.", "Our analysis of data in the Lab\u2019s management information system found  that one of two tables used to develop a number of internal and external  reports contained outdated data for 10 of the 24 awards we reviewed and,  in some cases, had not been updated for more than 2 years. Although  this table showed a total of about $24.5 million in non-USAID  contributions for these 10 awards, award documentation provided by the  Lab showed the updated amount of non-USAID contributions to be about  $12.1 million. For example, for an award aimed at providing hydro- powered irrigation pumps in Nepal, the table showed committed non- USAID contributions of about $262,000, while our review of award  documentation found that the updated amount was about $410,000. For  another award aimed at providing drip irrigation systems for small-plot  farmers in India, the table showed partners had committed $362,000 in  non-USAID contributions. However, in reviewing award documentation,  we found that partners had ultimately committed about $61,600 to this  award.", "The Lab\u2019s internal guide does not provide instructions for ensuring that  the non-USAID contributions data in USAID\u2019s management information  system are timely. According to Lab officials, the outdated data we  identified resulted from staff\u2019s failure to manually enter updated data in  both of the two tables used for external reporting. Lab officials stated that  leverage data are entered manually because the Lab\u2019s management  information system does not have the capacity to automatically update  the tables. However, we found that the Lab\u2019s internal guide does not  describe the Lab\u2019s current process for entering leverage data in the  system or include instructions for ensuring that these data are regularly  updated. Instead, the internal guide refers to a data collection practice  that predates the Lab\u2019s management information system and that,  according to Lab officials, is no longer in use.", "To the extent that the Lab used outdated data when generating external  reports and budget exercises, it risks reporting incorrect information about  non-USAID contributions to Lab awards. According to Lab officials, the  table with outdated data on non-USAID contributions that we identified in  the Lab\u2019s management information system is one of the data sources that  the Lab uses for reports to the USAID Administrator\u2019s Leadership Council  and the Department of State and in USAID\u2019s Annual Performance Plan  and Report. According to Lab documentation, the Lab also uses these  data to develop a number of annual budget formulation and justification  exercises, including congressional communications. Providing  instructions for updating all non-USAID contributions data in its  management information system could help the Lab strengthen the  timeliness and reliability of these data and of the external reports that  include them."], "subsections": []}, {"section_title": "The Lab\u2019s Internal Guide Does Not Require Its Public Reporting of Leverage Data to Disclose Types of Non-USAID Contributions Represented", "paragraphs": ["The Lab\u2019s internal guide does not require its public reporting of data on  non-USAID contributions, or leverage, to disclose the types of  contributions represented. According to ADS 596, information should be  communicated to relevant personnel at all levels within an organization  and the information should be relevant, reliable, and timely. In addition,  according to Standards for Internal Control in the Federal Government,  management should externally communicate complete and accurate  information to achieve an entity\u2019s objectives.", "The Lab defines leverage more broadly than the Agency\u2019s definition found  in USAID\u2019s ADS 303. Specifically, these definitions differ in two ways.  First, the Lab definition includes cost-share contributions, which the ADS  definition excludes. Second, the ADS definition limits leverage to public-private partnership awards, while the Lab\u2019s definition does not contain a  similar limitation.", "Because the Lab\u2019s definition of leverage differs from the definition in ADS,  the Lab uses two separate indicators to track non-USAID contributions,  according to Lab officials. For the leverage data it collects for USAID  reporting on public-private partnerships, the Lab adheres to the ADS  definition, accounting as leverage all non-USAID resources, excluding  cost sharing, that are expected to be applied to a program in USAID  public-private partnership awards. For the leverage data it collects for its  internal performance management and external reports, the Lab accounts  in its leverage calculations all cost-share contributions (from both private  and public-sector partners); all other contributions (from the private  sector, the public sector, and other U.S. government agencies); and gifts  (from bilateral donors).", "According to Lab officials, the Lab\u2019s definition of leverage differs from the  ADS definition because the Lab partners with both the private and public  sectors in its contracts and awards, and the Lab\u2019s more expansive  definition allows it to fully account for all non-USAID contributions.  However, despite the difference in the Lab\u2019s and USAID\u2019s definitions, the  Lab\u2019s internal guide does not require that its public reporting of leverage  data identify the types of non-USAID contributions represented in the  data. As a result, the Lab\u2019s public reporting\u2014for example, on its  webpage\u2014provides the total amount leveraged but does not specify the  types of contributions committed by non-USAID partners.", "Given the difference between the Lab\u2019s definition used in its public  reporting and the ADS definition of leverage, USAID lacks assurance that  it is reporting transparent data on leveraged non-USAID contributions.  Moreover, because the Lab\u2019s internal guide does not require the Lab\u2019s  public reporting of leverage to disclose the types of contributions,  Congress and the public lack access to complete information about the  extent and nature of the Lab\u2019s partnerships. By specifying the types of  non-USAID contributions included in its data on leveraging, the Lab could  increase the transparency of its public reporting for this key metric."], "subsections": []}]}, {"section_title": "The Lab Uses Various Tools to Assess Its Performance; Assessments Have Identified Both Positive Results and Some Weaknesses", "paragraphs": ["The Lab uses various tools, such as its results framework, portfolio  reviews, strategic learning reviews, and evaluations, established by  USAID policy or Lab-specific practices to assess its performance.  Because the Lab has existed only since 2014 and has had a strategy only  since 2016, it has been able to collect a limited amount of data with which  to assess its performance to show any trends in achieving results.  However, the performance assessment tools that the Lab uses have  identified both positive results and some weaknesses or challenges."], "subsections": [{"section_title": "Results Framework Tool and Identified Results", "paragraphs": ["The Lab\u2019s strategy for fiscal years 2016 through 2020 includes a results  framework comprising the Lab\u2019s five strategic objectives, as shown  previously in figure 1. For each strategic objective, the framework  presents a corresponding development objective\u2014that is, the most  ambitious result that a Lab center aims to achieve through its projects and  activities\u2014as well as targets the Lab is focused on achieving by 2020.  Progress toward the targets is tracked with annual and, in some cases,  semi-annual performance indicators, according to Lab officials (see app.  VIII for a list and descriptions of the Lab\u2019s indicators). According to Lab  officials, the Lab considers the results framework a living document and  adjusts indicators and targets as necessary based on changing  circumstances. The Lab\u2019s indicator data indicate that, overall, the Lab met  or exceeded its targets slightly more often than it did not meet them (see  table 5).", "As table 5 indicates, the Lab met or exceeded its targets for 20 of its 39  indicators in fiscal years 2016 and 2017. For example, for one indicator\u2014 total number of program or policy changes made by public sector, private  sector, or other development actors that are influenced by Lab-funded  research results or related scientific activities\u2014the Lab reported that it  exceeded its target for both fiscal years. The Lab\u2019s targets for this  indicator for fiscal years 2016 and 2017 were set at 42 and 48,  respectively, with reported results of 83 and 84. For another indicator\u2014 total dollar value of private and public capital catalyzed for early-stage  entrepreneurs as a result of USAID support\u2014the Lab reported it had  exceeded its fiscal year 2017 target of $575 million, with an actual result  of around $686 million. In addition, the Lab improved its performance for  seven indicators, according to its data. For instance, for agency  integration indicators\u2014such as the number of operating units that have  integrated STIP at the strategic, programmatic, and organizational  levels\u2014the Lab went from not meeting its targets in fiscal year 2016 to  exceeding its targets in fiscal year 2017.", "The Lab\u2019s indicator data also show some areas in which the Lab has  faced challenges or has not met its targets. As table 5 shows, the Lab did  not meet its targets for 19 of the 39 indicators in fiscal years 2016 and  2017. For example, for one indicator\u2014number of operating units that  have integrated STIP at the strategic, programmatic, and organizational  levels\u2014the Lab did not meet its targets of 15 and 20, respectively, for  fiscal years 2016 and 2017, with reported results of 12 and 19. For  another indicator\u2014number of smart innovation methods adopted by  USAID operating units\u2014the Lab set a target of eight but reported an  actual result of six. Moreover, from fiscal year 2016 to fiscal year 2017,  the Lab\u2019s performance declined for seven indicators. For instance, for  innovation indicators\u2014number of system actors engaged in innovation  methods and number of smart innovation methods adopted by agency  operating units\u2014the Lab went from exceeding its targets in fiscal year  2016 to not meeting them in fiscal year 2017. Lab officials stated that the  Lab\u2019s performance goals were meant to be ambitious and that the Lab  would adjust goals on the basis of resource and budget constraints."], "subsections": []}, {"section_title": "Portfolio Review Tool and Identified Results", "paragraphs": ["The Lab has implemented biannual portfolio reviews of projects and  activities. According to Lab officials, the portfolio reviews assess  progress toward strategic objectives, provide Lab staff an opportunity to  share lessons learned, and foster collaboration across the centers. In  fiscal years 2016 and 2017, the Lab conducted four portfolio reviews\u2014 two at midyear and two at the end of both years. Each portfolio review  discussed the performance of each center, examined how well the center  was meeting the targets for its performance indicators, and addressed  topics such as key achievements and challenges and priority evaluation  and research questions for the upcoming fiscal year. Lab officials stated  that portfolio reviews have helped the Lab become more rigorous and  better understand the reasons for implementing the various projects and  activities.", "The Lab\u2019s portfolio reviews for fiscal years 2016 and 2017 highlight,  among other things, lessons learned and achievements made for  particular projects and toward the Lab\u2019s overall strategic objectives and  targets. The reviews also note challenges faced Lab-wide as well as  planned adjustments to address these challenges. Examples of the  portfolio reviews\u2019 findings, by strategic objective, include the following for  each of the five Lab centers:", "Science. The review noted that lessons learned by the Center for  Development Research included emphasis on managing relationships  and the need to communicate with missions about the ways in which  research can help them contribute to their objectives. The review also  noted that the center\u2019s challenges included striking the right balance  between different elements of the science objective in the Lab  strategy and developing mission-focused tools for integrating  research.", "Technology. The review noted that the Center for Digital  Development achieved largely positive ratings for digital development  training and for a substantial amount of technical assistance,  trainings, and knowledge products. The review also noted that the  center had faced some challenges, such as staffing constraints that  limited staff\u2019s ability to prioritize both internal and external  engagements.", "Innovation. The review noted that the Center for Development  Innovation had several achievements, including positive feedback  from innovators who received technical assistance from the center as  well as agency partners who received program design services. The  challenges noted included the center\u2019s need for more engagement  with key missions and for finding balance between advisory services  and direct project implementation.", "Partnerships. The review noted that the Center for Transformational  Partnerships had identified lessons learned in areas such as the  center\u2019s ability to support missions by helping them to identify  opportunities and determine when and where partnership makes  sense. One challenge that the review identified was the possibility that  the center\u2019s limited resources might inhibit technical assistance to  missions and bureaus. Planned adjustments included prioritizing  advisory and liaison support to the regions that have lower capacity  for private sector engagement.", "Agency integration. The review noted that the Center for Agency  Integration achieved several successes, including introducing the Lab  and STIP to over 30 Foreign Service nationals (i.e., local, non-U.S.  citizens employed by USAID), several of whom continued to  champion STIP at their missions. The review also noted challenges,  such as staffing and capacity gaps, that hampered training efforts as  well as USAID staff being overwhelmed by the amount of information  flowing from the Lab."], "subsections": []}, {"section_title": "Strategic Learning Review Tool and Identified Results", "paragraphs": ["In October 2017, the Lab implemented an evaluation, research, and  learning plan that includes practices recommended for bureaus.  According to Lab officials, the Lab\u2019s plan is intended to help build  evidence within and across the centers and ensure that resources are  prioritized to support evaluation and research. As part of this plan, the  Lab identified five key questions for all of the centers that evaluations,  research, and learning efforts should attempt to help answer. According  to Lab officials, the Lab began holding strategic learning reviews,  beginning in spring 2018, to help it address theories of change\u2014that is,  descriptions of how and why a result is expected to be achieved through  a particular project or activity. The Lab developed the reviews to  complement its portfolio reviews, according to Lab officials.", "The Lab, led by the Office of Evaluation and Impact Assessment,  completed its first cross-Lab strategic learning reviews in the spring of  2018, according to Lab officials. The reviews focused on three of five key  questions in the Lab\u2019s evaluation, research, and learning plan: addressing  adaptive management; supporting innovators, entrepreneurs, and  researchers; and sustaining results. According to the Lab, the 2-hour  sessions, in which Lab officials and other selected agency subject-matter  experts participated, resulted in discussions about issues that the  participants considered most important for the Lab to address or improve  in the future. For example, participants identified actions that could be  currently achieved, such as designating time for \u201cpause and reflect\u201d exercises, particularly for  reducing USAID\u2019s administrative burden for first-time Lab partners  that lack the capacity to manage USAID requirements; and  focusing on larger market-enabling environments rather than on a  single value chain.", "According to Lab documents, the Lab plans to use data from the reviews  to develop recommendations that will be reflected in an action memo and  to track any actions the Lab takes to implement the recommendations.  Lab officials stated that the Lab plans to hold three additional 2-hour  strategic learning reviews in fall 2018."], "subsections": []}, {"section_title": "Evaluation Tool and Identified Results", "paragraphs": ["Evaluation  Evaluation is the systematic collection and  analysis of information about the  characteristics and outcomes of programs and  projects that provides a basis for judgments to  improve effectiveness and/or inform decisions  about current and future programming.", "The Lab assesses its performance through evaluations (see sidebar).  According to Lab officials, the Lab has conducted both external  evaluations and internal evaluations, and the majority of its performance  evaluations are external. As of October 2018, the Lab had primarily  completed performance evaluations, although Lab officials reported that  the Lab was also conducting three impact evaluations and one  developmental evaluation. In addition to conducting evaluations, the Lab  conducts assessments\u2014management tools used to gather information  about context or operating environment or to review an activity or  project.", "As of October 2018, the Lab reported that it had completed 7 external  performance evaluations of its programs or projects and had an additional  12 ongoing evaluations, both internal and external. The Lab\u2019s completed  performance evaluations cover a variety of programs, activities, and  USAID services, such as the Securing Water for Food Grand Challenge  project and the Lab\u2019s technical assistance services. We reviewed the  seven completed external performance evaluations and found that they  identified a range of program strengths as well as challenges or  weaknesses. For example:", "Mid-Term Review of Securing Water for Food: A Grand Challenge  for Development. The evaluation identified program strengths,  such as a diversity of innovations in the portfolio. The evaluation also  found that the program had potential weaknesses, including a lack of  focus on innovations for locations with greater water scarcity.", "Mid-Term Evaluation of the Partnerships for Enhanced  Engagement in Research Program. The evaluation found, among  other things, that partnerships between scientists in developing  countries and in the United States have been of value for scientific  output and strengthening professional relationships. In addition, the  evaluation identified potential weaknesses in the program, including  the need to facilitate broader dissemination of research findings by  convening program grantees, the private sector, government officials,  and civil society partners to network and share findings as well as  policy and program challenges.", "Mid-Term Evaluation of the Higher Education Solutions  Network. The evaluation found, among other things, that  development labs housed in seven higher education institutions have  begun providing data to inform USAID operating units\u2019 decision  making, collaborating to develop and test new technologies and  innovative approaches, and engaging in knowledge sharing and  learning. Additional findings included the need for Higher Education  Solutions Network labs to streamline activities, adjust resource  allocations, and increase synergies based on the insights gained  through the first 5 years.", "Global Broadband and Innovations Alliance Performance  Evaluation. The evaluation found, among other things, successful  outcomes of specific projects focused on sustainably increasing  broadband internet connectivity in the developing world. The  evaluation also found that USAID had been challenged by changing  leadership in the agency, which resulted in shifting priorities. In  addition, the evaluation found that limited marketing of the mechanism  to missions and other bureaus and offices resulted in lower-than- expected initial buy-in from the missions.", "STIP Integration Performance Evaluation: West Africa Regional  and Uganda. The evaluation found, among other things, that  mission staff want to build their capacity to use STIP but would prefer  more demand-driven services from the Lab, rather than services that  do not align with mission strategies.", "In addition to completing formal evaluations, the Lab has completed over  15 assessments of its activities or projects since 2014 and also is  conducting a number of ongoing assessments. The completed  assessments reflect work in all five centers and cover areas such as  digital finance services, co-creation, and STIP integration."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since its establishment as a USAID bureau more than 4 years ago, the  Lab has supported the agency\u2019s efforts to address science, technology,  innovation, and partnerships. Further, the Lab has funded and managed  opportunities for innovators to propose new ideas, approaches, and  technologies that tie into USAID\u2019s overall development goals and  programming. The Lab\u2019s centers have pursued global partnerships with a  wide range of non-USAID public and private sector stakeholders in an  effort to augment their programming and further their efforts.", "However, because non-USAID contributions data that the Lab collects are  not always current, some of the leverage data the Lab reports internally  and externally to help demonstrate its accomplishments risks being  outdated. Moreover, because the Lab\u2019s Internal Guide to Accounting for  Leverage does not require its public reporting of leverage data to identify  the types of contributions represented, the Lab\u2019s public reporting lacks  transparency. Ensuring that the Lab\u2019s internal data on non-USAID  contributions are updated and that its publicly reported information about  leveraged resources from the public and private sector is transparent will  enable the Lab and USAID to better demonstrate to Congress and  American taxpayers that the agency is maximizing its use of development  resources to pursue new and innovative approaches to development  challenges."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to USAID:", "The USAID Administrator should ensure that the Executive Director of  the Lab assures that the Lab\u2019s Internal Guide to Accounting for  Leverage includes instructions to update all non-USAID contributions  data in the Lab\u2019s management information system at least annually.  (Recommendation 1)", "The USAID Administrator should ensure that the Executive Director of  the Lab assures that the Lab\u2019s Internal Guide to Accounting for  Leverage requires that the Lab\u2019s public reporting of leverage data  discloses the types of non-USAID contributions represented.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to USAID for review and comment.  USAID provided written comments that are reprinted in appendix IX. In its  letter, USAID concurred with, and indicated that it is already addressing,  both recommendations. In addition, USAID provided technical comments  on the draft, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the USAID Administrator, 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) 512-3149 or gootnickd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we examine (1) the Global Development Lab\u2019s (the Lab)  programs, funding, and staffing resources, (2) the extent to which the Lab  has documented its oversight of awards with non-U.S. Agency for  International Development (USAID) contributions and clearly reported  these contributions, and (3) the tools that the Lab uses to assess its  performance as well as results that such assessments have shown."], "subsections": [{"section_title": "Programs, Funding, and Staffing", "paragraphs": ["To examine the Lab\u2019s programs, funding, and staffing resources, we  reviewed and analyzed Lab program, funding, and staffing documents  and data covering fiscal years 2014 to 2017. We reviewed the  congressional notification in which USAID advised Congress of its intent  to establish the Lab, program description documents, as well as the Lab\u2019s  current strategy document which contains the Lab\u2019s results framework  and strategic objectives covering science, technology, innovation,  partnerships (STIP), and agency integration. In addition, we reviewed  documents that provided information on services and tools the Lab  provides to operating units within USAID. We reviewed and analyzed  Lab funding data, by appropriations accounts, which included allocations  and obligations for Lab programs by centers and offices covering fiscal  years 2014 to 2017. The Lab did not yet have fiscal year 2018 funding  information available. In addition, we reviewed and analyzed obligation  data on Lab-managed activities for fiscal years 2014 to 2017. To report  on staffing, we reviewed and analyzed Lab staffing data for fiscal years  2015 to 2018 which included data on the number of direct hire staff and  contractors, hiring mechanisms used to bring staff on board, as well  information on the centers and offices the staff worked in. To assess the  reliability of the staffing data for fiscal years 2015 to 2018 and the funding  data for fiscal years 2014 to 2017, we compared and corroborated  information provided by the Lab with staffing and funding information in the Congressional Budget Justifications for the fiscal years. On the basis  of the checks we performed, we determined these data to be sufficiently  reliable for the purposes of this report.", "We interviewed Lab officials representing every center\u2014Center for  Development Research, Center for Digital Development, Center for  Development Innovation, Center for Transformational Partnerships, and  Center for Agency Integration; each support office\u2014Office of  Engagement and Communication, and Office of Evaluation and Impact  Assessment; and all Lab-Wide Priorities\u2014Ebola, Digital Development for  Feed the Future, and Beyond the Grid\u2014to understand the Lab\u2019s  organizational structure, roles and responsibilities, programs, and  services, among other things. We also spoke with officials in the  Administrative Management Services and Program and Strategic  Planning offices, which cover the Lab\u2019s financial and human resources,  as well as strategic planning and reporting. To obtain insight into the  Lab\u2019s interaction and STIP integration within USAID, we also interviewed  agency officials from five USAID bureaus in Washington, D.C.\u2014 Democracy, Conflict, and Humanitarian Assistance; Economic Growth,  Education, and Environment; Food Security; Global Health; and Policy,  Planning, and Learning; and from six USAID missions overseas\u2014 Albania, Cambodia, Guinea, Haiti, Uganda, and the Regional  Development Mission for Asia.", "To determine the number of activities the Lab managed from fiscal years  2014 through 2017, and the amount it had obligated for these activities in  this timeframe, we reviewed and analyzed data from USAID\u2019s financial  management system\u2014Phoenix. Additionally, we met with Lab officials  responsible for managing and reviewing the data in this system. To  ensure that we accounted for only programmatic activities in our  timeframe, we removed activities, in consultation with Lab Officials, from  the dataset that pertained to institutional support contracts and  fellowships. We also met with officials from each of the Lab\u2019s centers to  discuss the activities that they manage. We determined that the data  were sufficiently reliable to account for Lab managed activities."], "subsections": []}, {"section_title": "Oversight, Documentation, and Reporting of Non- USAID Contributions", "paragraphs": ["To address oversight and documentation of awards with non-USAID  contributions, we reviewed Lab and USAID policies and guidance for  oversight of non-USAID contributions as of fiscal year 2017, including Lab  guidance, and relevant chapters of USAID\u2019s Automated Directives  System (ADS), which contain the agency\u2019s policy. We analyzed Lab- managed awards with committed funding from non-USAID partners from  fiscal years 2014 through 2017 (a total of 154) from the Lab\u2019s information  management system DevResults, which we determined was sufficient to  allow us to select a sample of these awards for further review. Our  sample included 24 awards, which represented all Lab-managed awards  containing non-USAID contributions issued on or after fiscal year 2014,  and ending in or before fiscal year 2017. We selected these timeframes to  ensure that the awards we reviewed did not predate the creation of the  Lab (fiscal year 2014) and to ensure that activities and all award  documentation on activities had been completed.", "To assess the reliability of these committed funding data, we reviewed  documentation and interviewed USAID officials to identify and rectify any  missing or erroneous data. Since we selected only awards in our given  timeframe, the results cannot be generalized to all Lab managed awards  receiving non-USAID committed contributions. We determined that the  data and information were sufficiently reliable to compare against award  documentation. The awards we reviewed covered four of the Lab\u2019s five  objectives: science (1 award), technology (3 awards), innovation (19  awards), and partnerships (1 award). To determine the extent to which  the Lab had documented certain oversight requirements for these  awards, we reviewed award documentation contained in the 24 award  files against key oversight requirements and best practices established by  USAID and the Lab. These oversight requirements include:  report committed funding amounts received from non-USAID sources;  conduct valuations of in-kind contributions, as applicable; document partners met cost-share or matching funds, if required; and maintain copies of the award agreement and any modifications.", "To determine the extent to which the Lab\u2019s information management  system contained current data on non-USAID contributions, we reviewed  committed funding data for the 24 selected awards in this system against  documentation in the award files. We also reviewed the Lab\u2019s guidance  on accounting for non-USAID contributions in addition to meeting with  Lab officials responsible for data input and oversight of such  contributions. However, we did not independently assess the accuracy of  the committed contributions against actual contribution amounts because  the Lab does not collect data on actual contributions received in all of its  awards.", "To determine the extent to which the Lab\u2019s guidance on accounting for  non-USAID contributions differs from USAID agency guidance, we  compared guidance documents provided by the Lab with agency  guidance from USAID\u2019s ADS 303. Among other guidance documents, we  reviewed the Lab\u2019s Global Development Lab Internal Guide to Accounting  for Leverage, and the Lab\u2019s \u201cIndicator Reference Sheet.\u201d We also  interviewed Lab officials responsible for implementing the Lab\u2019s guidance  for accounting for non-USAID contributions, as well as officials from  USAID\u2019s office of Policy, Planning, and Learning who are responsible for  developing and updating ADS guidance on non-USAID contributions. We  also reviewed the Lab\u2019s public reporting of non-USAID contributions on  USAID\u2019s website."], "subsections": []}, {"section_title": "Performance Assessment and Results", "paragraphs": ["To report on the tools that the Lab uses to assess its performance, we  reviewed and analyzed numerous Lab program and performance  documents. These included the Lab\u2019s strategic plan that covers fiscal  years 2016 to 2020 and the Lab\u2019s results framework that outlines the  strategic objectives; Performance Management Plan; evaluation,  research, and learning plan; Lab portfolio reviews; and Lab strategic  learning reviews.", "To learn about the Lab\u2019s performance management, program evaluation,  and assessment process, we interviewed Lab officials from the Office of  Evaluation and Impact Assessment and the Program and Strategic  Planning office. We reviewed sections of USAID\u2019s ADS 201 that pertain to  strategic planning and implementation; project design and  implementation; activity design and implementation; and monitoring,  evaluation, and learning. We also spoke with officials in the Bureau for  Policy, Planning, and Learning regarding the performance management  requirements for bureaus outlined in ADS 201.", "To report on the results of the Lab\u2019s performance indicators, we reviewed  indicator data from the Lab for fiscal years 2014 to 2017. Since the Lab\u2019s  strategy was created in 2016, we focused our analysis on indicator data  for fiscal years 2016 and 2017 that represent the Lab\u2019s objectives as laid  out in the Lab\u2019s Results Framework. The Lab provided this information  from DevResults, to include targets and measurements for each indicator  by fiscal year. The data that we received from the Lab contained over 250  total indicators, which included those at the objective level, intermediate  level, and sub-intermediate results level. We identified and analyzed 39  indicators representing the objective and intermediate results levels (for  the science, technology, innovation, partnerships, and agency integration  objectives) and looked at the targets and actuals for these for fiscal years  2016 and 2017. We compared each target value with the actual value to  determine whether the Lab met, exceeded, or did not meet its targets for  each indicator. If the target and the actual were the same value, we  designated this as \u201cmeets.\u201d If the target value was less than the actual  value, we designated this as \u201cexceeds.\u201d Finally, if the target value was  more than the actual value, we designated this as \u201cdoes not meet.\u201d We  also identified indicators (both at the objective and intermediate results  levels) where the Lab improved its performance from fiscal year 2016 to  fiscal year 2017 as well as indicators where the Lab had declined in its  performance from fiscal year 2016 to fiscal year 2017. To assess the  reliability of the Lab\u2019s performance data base, we interviewed Lab officials  and reviewed documentation, and we determined that the data was  sufficiently reliable for the purposes of comparing the Lab\u2019s targets to  reported results. However, it was beyond the scope of this engagement to  assess the reliability of each of the 39 indicators.", "To report the results of the Lab\u2019s seven external evaluations, we reviewed  the completed external evaluations that were conducted in 2016 and  2017. As applicable, we looked at the purpose of those evaluations,  findings, lessons learned, and any challenges to the program or project  that the evaluation covered. We did not assess whether the Lab met its  evaluation requirements under ADS 201, as this issue was outside of the  scope of our review. We did not independently assess the methodology  that was used in the evaluations.", "To report the results of the Lab\u2019s portfolio reviews, we reviewed four  portfolio reviews\u2014two at midyear and two at the end of the year\u2014that the  Lab conducted in fiscal years 2016 and 2017. The portfolio reviews  included sections on the Lab\u2019s five objectives. As the portfolio reviews  used different approaches to collect information, we analyzed them and  identified headings in the documents that pointed towards results,  including findings, challenges, achievements, and lessons learned and  summarized this information. To report on the results of the strategic  learning reviews, we reviewed the three strategic learning reviews\u2014each  a 2-page document\u2014that the Lab had conducted in spring of 2018. We  summarized each review and reported on each of the reviews\u2019 questions  and one of the \u201cnow what\u201d actions from each review to provide an  illustrative example.", "We conducted this performance audit from July 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Description of Key Global Development Lab Programs and Portfolios by Each Center", "paragraphs": ["The Global Development Lab\u2019s (the Lab) five centers, its offices, and Lab- Wide Priorities manage more than 20 key programs and portfolios. The  following are descriptions of key programs or portfolios implemented or  managed by the Lab\u2019s five centers\u2014Development Research, Digital  Development, Development Innovation, Transformational Partnerships,  and Agency Integration."], "subsections": [{"section_title": "Center for Development Research", "paragraphs": ["Higher Education Solutions Network (HESN): According to Lab  documentation, HESN is a partnership with seven universities working  with partners worldwide. Leveraging nearly equal investments from each  higher education institution, the universities established eight  development labs that collaborate with a network of 685 partner  institutions in academia, the private sector, civil society, and government  across 69 countries. HESN\u2019s development labs work with the U.S.  Agency for International Development (USAID) to address problems  faced by developing countries.", "Partnership for Enhanced Engagement in Research (PEER): According to  Lab documentation, PEER supports competitively awarded grants for  collaborative research projects led by developing country scientists and  engineers who partner with American researchers. PEER-funded  scientists conduct applied research that can inform public policy or new  practices in development with a goal of creating and leading new  innovations or generating evidence for how to scale innovations. PEER  also builds research capacity by providing funds, tools, technical  assistance, and research opportunities for local scientists and students.  The program is implemented in partnership with the U.S. National  Academy of Sciences.", "Science and Research Fellowship Programs: According to Lab  documentation, the Lab supports three fellowship programs that are  characterized by a commitment to the use of science, technology,  innovation, and partnerships. The American Association for the  Advancement of Science (AAAS) Science and Technology Policy  Fellowship and the Jefferson Science Fellowship both bring scientists and  technical experts to serve 1- to 2-year fellowships at the U.S. Agency for  International Development, contributing their knowledge and analytical  skills to development policy, research, and programming. Further, the  Research and Innovation (RI) Fellowship program connects U.S.  graduate student researchers research, or technical expertise, to address  pressing development challenges.", "Research Policy Support: According to Lab documentation, the Lab  provides advice to the agency on implementing the USAID Scientific  Research Policy. This may include areas like peer review and open  access to research products including data and USAID staff publications."], "subsections": []}, {"section_title": "Center for Digital Development", "paragraphs": ["Digital Inclusion: According to Lab documentation, the Lab helps improve  connectivity by expanding access to the internet in countries where  USAID works to help ensure that the most marginalized citizens have the  skills and resources to be active participants in the digital economy. The  team supports missions to integrate internet solutions into existing  programs to ensure health clinics, schools, and other critical facilities are  connected and offer access to modern internet services.", "Development Informatics (portfolio): According to Lab documentation, the  Lab seeks to make development more adaptive, efficient, and responsive  to citizens and decision makers by helping transform the use of data and  technology throughout development. The Lab supports mission  investments in technology platforms that can collect and analyze data  more efficiently to improve strategic planning and program  implementation. The Lab also leads the public advocacy campaign for the  Principles for Digital Development, a set of agency best practices for  applying digital technology and data in development.", "GeoCenter: According to Lab documentation, the Lab applies geographic  and other data analysis to improve the strategic planning, design,  implementation, monitoring, and evaluation of USAID\u2019s programs. The  GeoCenter works directly with USAID bureaus and missions to integrate  geographic analysis, futures analysis (including scenario planning), and  data analytics to inform development decisions. The team also leads a  geospatial community of 50 geographic information systems specialists in  field-based missions and in Washington, D.C.", "Digital Finance (portfolio): According to Lab documentation, the Lab\u2019s  Digital Financial Services team is working with USAID missions and  bureaus through multi-stakeholder alliances and direct technical  assistance to help the world\u2019s financially excluded and underserved  populations obtain access to and use financial services that meet their  needs. The Digital Finance team has worked with over 30 missions and  agency operating units to improve operational and programmatic  efficiency as a means to accelerating development objectives within  USAID projects and programs."], "subsections": []}, {"section_title": "Center for Development Innovation", "paragraphs": ["Development Innovation Ventures (DIV): According to Lab  documentation, DIV is the agency\u2019s venture capital-inspired, tiered,  evidence-based funding model that invests comparatively small amounts  in relatively unproven concepts, and continues to support only those that  prove to work. It applies three core criteria to its application review  process\u2014evidence of impact, cost-effectiveness, and potential to scale.  DIV accepts applications at three different funding stages from Proof of  Concept ($25,000-150,000); Testing ($150,000\u2013$1.5 million); and  Transitioning to Scale ($1.5 million\u2013$15 million).", "Grand Challenges for Development: According to Lab documentation,  grand challenges call on the global community to discover, test, and  accelerate innovative solutions around specific global challenges. The  Lab is also leading efforts to apply innovation methods such as funding  for challenges and prizes to accelerate innovation or incentivize action  toward specific outcomes, such as the development of more efficient,  lower-cost refrigeration solutions in the recently launched Off-Grid  Refrigeration Competition.", "The Global Innovation Exchange: According to Lab documentation, this  effort is an online platform to convene and connect innovators, funders,  and experts working on development innovations around the world. The  exchange is co-funded by USAID, the Australian Department of Foreign  Affairs and Trade, the Korea International Cooperation Agency, and the  Bill and Melinda Gates Foundation.", "Innovative Design (portfolio): According to Lab documentation, innovative  design tools and approaches can help make a process more open and  collaborative, incorporate human-centered design, or find a more  innovative approach to solving a development problem. The Lab works to  reframe development challenges, reach new audiences, and spur new  ways of solving problems. It seeks to equip USAID teams with skills to  design innovative programs using tools like design thinking and co- creation. It also builds diverse networks around critical systems  challenges and facilitates a dialogue on the practice of innovation and  design across USAID and the industry."], "subsections": []}, {"section_title": "Center for Transformational Partnerships", "paragraphs": ["Global Development Alliances (GDAs): According to Lab documentation,  GDAs are partnerships between USAID and the private sector that use  market-based solutions to advance broader development objectives.  These partnerships combine the assets and experiences of the private  sector to leverage capital, investments, creativity, and access to markets  to work to solve the complex problems facing governments, businesses,  and communities. GDAs leverage market-based solutions to advance  broader development objectives. GDAs are co-designed, co-funded, and  co-managed by all partners involved so that the risks, responsibilities, and  rewards of partnership are shared.", "Partnering to Accelerate Entrepreneurship (PACE): According to Lab  documentation, the Lab\u2019s PACE initiative catalyzes private-sector  investment into early-stage enterprises and helps entrepreneurs grow  their businesses.", "Diaspora Engagement (portfolio): According to Lab documentation, the  diaspora engagement is a core focus area for the Lab, which works with  non-traditional partners in diaspora communities and organizations in  under-addressed technical areas to test and incubate innovative  partnership models."], "subsections": []}, {"section_title": "Center for Agency Integration", "paragraphs": ["Science, Technology, Innovation, and Partnerships (STIP) Agency  Integration (portfolio): According to Lab documentation, the Lab supports  the application of STIP across the agency by providing technical  assistance, training, and catalytic investments in mission-driven STIP  programs. In fiscal year 2016, the Lab worked closely with eight missions  to integrate STIP tools and approaches to accelerate their development  objectives. For example, the Lab is supporting ongoing efforts with the  Uganda mission and a range of local partners, including the government  of Uganda, to promote and source local, sustainable off-grid power  solutions to impact a majority of underserved citizens.", "Digital Development for Feed the Future: According to Lab  documentation, the Lab is collaborating with USAID\u2019s Bureau for Food  Security on integrating digital technologies into Feed the Future activities  to accelerate reductions in global hunger, malnutrition, and poverty. An  example includes facilitating greater precision agriculture through richer  data collection, analysis, and packaging.", "Operational Innovation: According to Lab documentation, the Operations  Innovations Team collaborates with partners to test and demonstrate  viable disruptions which improve efficiency and effectiveness of Agency\u2019s  internal business processes, practices, and procedures."], "subsections": []}]}, {"section_title": "Appendix III: Description of 10 Grand Challenges for Development", "paragraphs": ["Since 2011, the U.S. Agency for International Development (USAID) and  its partners have launched 10 Grand Challenges for Development. Grand  Challenges for Development mobilize governments, companies, and  foundations around important issues. According to USAID, through these  programs, USAID and public and private partners bring in new voices to  solve development problems through sourcing new solutions, testing new  ideas, and scaling (expanding) what works. Table 6 includes a description  of each of the Grand Challenges, identifies the founding partners, and  lists the primary bureau within USAID responsible for the programs.  According to Global Development Lab (the Lab) officials, the Lab  manages Securing Water for Food and Scaling Off-Grid Energy Grand  Challenges."], "subsections": []}, {"section_title": "Appendix IV: Global Development Lab Program Fund Allocation and Obligation Totals by Account, Fiscal Years 2014-2017", "paragraphs": ["The Global Development Lab\u2019s (the Lab) funding comes from different  appropriations accounts. While the majority of the funding for fiscal years  2014 to 2017 is from the Development Assistance account, the Lab has  also received lesser amounts of funding from four other accounts (see  table 7)."], "subsections": []}, {"section_title": "Appendix V: Global Development Lab Managed Activities in Fiscal Years 2014 through 2017", "paragraphs": ["In fiscal years 2014 through 2017, the Global Development Lab (the Lab)  managed a total of 339 activities addressing science, technology,  innovation, and partnerships implemented by partners and obligated  about $371 million for these awards. As figure 3 shows, the number of  activities the Lab managed increased each year during this period, from  149 in fiscal year 2014 to 226 in fiscal year 2017. Obligated funding for all  activities also increased annually until fiscal year 2017, when it declined  by 27 percent.", "The Global Development Lab obligated funds to other activities it  managed during this period that are not reflected in the data presented.  These include obligations for institutional support contracts and staff  fellowships.", "In fiscal years 2014 through 2017, four of the Lab\u2019s centers managed a  variety of activities addressing the Lab\u2019s science, technology, innovation,  and partnerships objectives.", "The Center for Development Research managed 28 activities  addressing the Lab\u2019s science objective. Obligations for these activities  totaled about $120.4 million. The majority of this funding went to two  programs, the Higher Education Solutions Network (about $81.2  million) and the Partnership for Enhanced Engagement in Research  (about $27.7 million).", "The Center for Digital Development managed 17 activities addressing  the Lab\u2019s technology objective, ranging from providing geospatial  satellite imagery to increasing the use of mobile money and e- payments in developing countries. Obligations for these activities  totaled $64.5 million, with the majority of this funding going to Digital  Finance activities.", "The Center for Development Innovation managed 205 activities  addressing the Lab\u2019s innovation objective. Obligations for these  activities totaled about $115.4 million. This funding went to three  programs: the Development Innovation Ventures program (about $57  million), the Innovation Acceleration program (about $19.3 million) and  the Innovation Design program (about $39.2). The Lab\u2019s Innovation  Acceleration and Design program houses the Securing Water for  Food Grand Challenge.", "The Center for Transformational Partnerships managed 37 activities  addressing the Lab\u2019s partnerships objective. Obligations for these  activities totaled $39.8 million. For example, the Lab obligated about  $13.9 million for the Partnering to Accelerate Entrepreneurship  program, which aims to bring private-sector investment into  businesses at early stages of development, among other things.", "In addition, other U.S. Agency for International Development (USAID)  missions and bureaus have provided funding to Lab-managed projects  through buy-ins. From fiscal years 2014 to 2017, USAID missions and  bureaus provided funding to 55 Lab-managed projects, totaling $53  million. According to Lab officials, missions and bureaus can buy into  projects in the development stage and can also buy into existing projects.  For example, according to officials at USAID\u2019s mission in Haiti, the Lab  developed and funded a Higher Education Solutions Network project in  Haiti, which provided the Haitian Ministry of Planning with capacity- building training to improve the collection of development and funding  data for all donors in the country. Because the USAID mission saw the  value of this project, it bought into the project, using its own funding, to  allow the project to continue for an additional 2 years."], "subsections": []}, {"section_title": "Appendix VI: Global Development Lab Centers\u2019 Direct Hires and Contractors, Fiscal Years 2015-2018", "paragraphs": ["The Global Development Lab (the Lab) has numerous contractors who  provide technical expertise in the centers and fill gaps when direct-hire  staff are not available, according to Lab officials. In fiscal years 2016 to  2018, the Center for Digital Development had the most contractors of all  the centers (see table 8). The contractors in this center are technical  specialists mainly in the Lab\u2019s GeoCenter, which uses geographic  information systems to collect data to help aid development decisions in  countries around the world. In fiscal year 2018, there were more  contractors than direct-hire staff in the Center for Digital Development."], "subsections": []}, {"section_title": "Appendix VII: U.S. Agency for International Development Missions\u2019 and Bureaus\u2019 Views on the Global Development Lab", "paragraphs": ["Officials in the five U.S. Agency for International Development (USAID)  bureaus and six missions we spoke with provided positive feedback on  their interactions with the Global Development Lab (the Lab) but also  identified some challenges. USAID officials identified numerous positive  aspects or benefits of working with the Lab, such as the following:", "Lab staff brings diverse expertise and outside perspectives to the  agency and provides technical assistance to projects that would not  have been implemented otherwise. For example, some USAID  officials mentioned that the Lab staff has insight into innovative  approaches\u2014whether procurement-related or project design and  monitoring\u2014and that the Lab has the ability to bring in contractors  with specific technical expertise that the traditional development arena  lacks.", "Lab staff is responsive and often willing to help with technical issues.", "Some USAID staff mentioned that Lab staff provide expertise and  answer questions on an informal basis, sometimes covering areas  where they are not the assigned point of contact with a particular  bureau or mission.", "The Lab coordinates cross-cutting projects across the agency, such  as the Grand Challenges for Development. Some bureau officials  stated that Lab officials have been able to share their perspectives at  training and other activities which has allowed them to be aware of  what others across USAID are doing relevant to activities related to  science, technology, innovation, and partnerships (STIP).", "The Lab funds projects and activities that missions and USAID  headquarters operating units cannot afford. Some USAID officials  mentioned that the Lab has sent staff out to provide STIP training,  with the Lab covering the costs. However, some officials also  mentioned that they have seen that recent budget cuts have had an  impact on the Lab\u2019s funding for more recent activities.", "The Lab holds trainings on topics such as procurement processes and  private sector engagement that have helped missions and bureaus  adopt new approaches to work and development partnerships.", "USAID officials also noted problematic aspects or challenges in working  with the Lab, such as:", "Some Lab services can be cost prohibitive. For example, some  mission officials mentioned that Lab resources are centralized in  headquarters and therefore the cost to missions might be high and not  affordable.", "Staff turnover at the Lab is frequent, making it difficult for bureau or  mission officials to maintain relationships with the Lab. For example,  some officials stated there has not been consistent contact with the  Lab due to Lab staff frequently moving around or leaving. This has  included changes in contacts for agreement officer representatives  responsible for awards impacting the mission.", "The centers\u2019 services and the ways in which bureaus or missions  could work most effectively with the Labs are not always clear. For  example, some mission and bureau officials mentioned that Lab staff  does not always understand a country\u2019s context when suggesting or  deploying potential programs or activities related to STIP. This  includes working to integrate STIP activities or innovations into the  Country Development Cooperation Strategy when these might not be  feasible for a country context or responsive to the needs of the  mission.", "USAID officials noted that when they have provided feedback to the Lab,  the Lab has generally been responsive. In addition, bureau officials  mentioned that the Lab\u2019s communications have improved."], "subsections": []}, {"section_title": "Appendix VIII: List and Description of Global Development Lab\u2019s Performance Indicators, Fiscal Years 2016-2017", "paragraphs": ["The Global Development Lab (the Lab) established its performance  indicators when it created its strategy in fiscal year 2016 to cover fiscal  years 2016-2020. The Lab\u2019s results framework, which is reflected in the  strategy, includes the Lab\u2019s objective statements and intermediate results  statement from which the Lab\u2019s performance indicators flow. See table 9  for a description of indicators for the Lab\u2019s five strategic objectives for  fiscal years 2016 to 2017."], "subsections": []}, {"section_title": "Appendix IX: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Leslie Holen (Assistant Director),  Andrea Riba Miller (Analyst in Charge), Nick Jepson, and Kelly Friedman  made key contributions to this report. Also contributing were Martin De  Alteriis, Jeff Isaacs, Chris Keblitis, Reid Lowe, Aldo Salerno, and Nicole  Willems."], "subsections": []}]}], "fastfact": ["Since USAID\u2019s Global Development Lab started in 2014, it has sought innovative solutions to international development problems such as hunger and illiteracy. The Lab has a goal of supporting some efforts with outside contributions from private and public partners.", "We examined how the Lab uses and reports its funding. We found:", "The Lab\u2019s funds from USAID dropped from $170.7 million in 2015 to $77 million in 2017.", "Some of the Lab\u2019s public reporting on outside contributions was outdated or incomplete.", "To improve transparency, we recommended the Lab revise internal guidance to ensure up-to-date and complete reporting on outside contributions."]}
{"id": "GAO-18-635", "url": "https://www.gao.gov/products/GAO-18-635", "title": "2020 Census: Census Bureau Improved the Quality of Its Cost Estimation but Additional Steps Are Needed to Ensure Reliability", "published_date": "2018-08-17T00:00:00", "released_date": "2018-09-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In October 2017, the Department of Commerce (Commerce) announced that the projected life-cycle cost of the 2020 Census had climbed to $15.6 billion, a more than $3 billion (27 percent) increase over its 2015 estimate. A high-quality, reliable cost estimate is a key tool for budgeting, planning, and managing the 2020 Census. Without this capability, the Bureau is at risk of experiencing program cost overruns, missed deadlines, and performance shortfalls.", "GAO was asked to evaluate the reliability of the Bureau's life-cycle cost estimate. This report evaluates the reliability of the Bureau's revised life-cycle cost estimate for the 2020 Census and the extent to which the Bureau is using it as a management tool, and compares the 2015 and 2017 cost estimates to describe key drivers of cost growth. GAO reviewed documentary and testimonial evidence from Bureau officials responsible for developing the 2020 Census cost estimate and used its cost assessment guide ( GAO-09-3SP ) as criteria."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2015, the Census Bureau (Bureau) has made significant progress in improving its ability to develop a reliable cost estimate. While improvements have been made, the Bureau's October 2017 cost estimate for the 2020 Census does not fully reflect all the characteristics of a reliable estimate. (See figure.) Specifically, for the characteristic of being well-documented, GAO found that some of the source data either did not support the information described in the cost estimate or was not in the files provided for two of its largest field operations. In GAO's assessment of the 2015 version of the 2020 Census cost estimate, GAO recommended that the Bureau take steps to ensure that each of the characteristics of a reliable cost estimate is met. The Bureau agreed and has taken steps, but has not fully implemented this recommendation.", "A reliable cost estimate serves as a tool for program development and oversight, helping management make informed decisions. During this review, GAO found the Bureau used the cost estimate to inform decision making.", "Factors that contributed to cost fluctuations between the 2015 and 2017 cost estimates include:", "Changes in assumptions. Among other changes, a decrease in the assumed rate for self-response from 63.5 percent in 2015 to 60.5 percent in 2017 increased the cost of collecting responses from nonresponding housing units.", "Improved ability to anticipate and quantify risk. In general, contingency allocations designed to address the effects of potential risks increased overall from $1.3 billion in 2015 to $2.6 billion in 2017.", "An overall increase in information technology (IT) costs. IT cost increases, totaling $1.59 billion, represented almost 50 percent of the total cost increase from 2015 to 2017."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any new recommendations but maintains its earlier recommendation\u2014that the Secretary of Commerce direct the Bureau to take specific steps to ensure its cost estimate meets the characteristics of a high-quality estimate. In its response to this report, Commerce generally agreed with the findings related to cost estimation improvements, but disagreed that the cost estimate was not reliable. However, until GAO's recommendation is fully implemented the cost estimate cannot be considered reliable."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Census Bureau (Bureau) estimates that the 2020 Census will be  the most expensive census in our nation\u2019s history, at an estimated cost of  $15.6 billion after adjusting for inflation. The Bureau faces the challenge  of cost effectively counting a population that is growing steadily larger,  more diverse, and increasingly difficult to enumerate with a reengineered  design that relies in part on automation to locate housing units and count  the nation\u2019s population. In an environment of constrained resources,  containing costs is imperative for the 2020 Census.", "In February 2017, we designated the 2020 Census as a high-risk area, in  part because of uncertainty over costs and long-standing weaknesses in  the Bureau\u2019s management of information technology intended to  automate the census. At the time the 2020 Census was designated high  risk, the life-cycle cost for the 2020 Census was $12.5 billion, a figure  since revised downward to $12.3 billion. However, in October 2017, the  Department of Commerce (Commerce) announced that it had updated its  October 2015 life-cycle cost estimate and now projects the life-cycle cost  of the 2020 Census will be $15.6 billion, a more than $3 billion (27  percent) increase over its earlier estimate. The higher estimated life-cycle  cost is due, in part, to the Bureau\u2019s earlier failure to meet best practices  for a quality cost estimate, a concern we had reported in June 2016.", "Reliable cost estimates that appropriately account for risks facing an  agency can help an agency manage large complex activities like the 2020  Census and can also help Congress provide oversight and make funding  decisions. Having a realistic estimate of projected costs makes for  effective resource allocation, and it increases the probability of a  program\u2019s success.", "You requested that we evaluate the reliability of the life-cycle cost  estimate the Bureau submitted to Congress in October 2017. This report  (1) evaluates the reliability of the Bureau\u2019s revised life-cycle cost estimate  for the 2020 Census, and the extent to which the Bureau is using it as a  management tool; and (2) compares the 2015 and 2017 life-cycle cost  estimates to describe key drivers of cost growth.", "For both objectives, we reviewed documentation related to the cost  estimate and interviewed Bureau officials responsible for developing the  2020 Census life-cycle cost estimate. For the first question, we  interviewed Bureau officials and evaluated whether the Bureau\u2019s cost  estimate was generated according to best practices of our Cost  Estimating and Assessment Guide. We also assessed the extent to  which the Bureau is using the cost estimate as a management tool. For  the second question, we compared cost information included in the 2015  and 2017 cost estimates. We relied on our cost assessment guide as  criteria. More information on our scope and methodology can be found in  appendix I.", "We conducted this performance audit from December 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["A high-quality, reliable cost estimate is a key tool for budgeting, planning,  and managing the 2020 Census. According to OMB, programs must  maintain current and well-documented estimates of program costs, and  these estimates must encompass the full life-cycle of the program.  Among other things, OMB states that generating reliable program cost  estimates is a critical function necessary to support OMB\u2019s capital  programming process. Without this capability, agencies are at risk of  experiencing program cost overruns, missed deadlines, and performance  shortfalls.", "A reliable cost estimate is critical to the success of any federal  government program. With the information from reliable estimates,  managers can: make informed investment decisions, allocate program resources, measure program progress, proactively correct course when warranted, and ensure overall accountability for results.", "To be considered reliable, a cost estimate must meet the criteria for each  of the four characteristics outlined in our Cost Estimating and Assessment  Guide. According to our analysis, a cost estimate is considered reliable if  the overall assessment ratings for each of the four characteristics are  substantially or fully met. If any of the characteristics are not met,  minimally met, or partially met, then the cost estimate does not fully  reflect the characteristics of a high-quality estimate and cannot be  considered reliable. Those characteristics are:", "Well-documented: An estimate is thoroughly documented, including  source data and significance, clearly detailed calculations and results,  and explanations of why particular methods and references were  chosen. Data can be traced to their source documents.", "Accurate: An estimate is unbiased, the work is not overly  conservative or overly optimistic, and is based on an assessment of  most likely costs. Few, if any, mathematical mistakes are present.", "Credible: Any limitations of the analysis because of uncertainty or  bias surrounding data or assumptions are discussed. Major  assumptions are varied, and other outcomes are recomputed, to  determine how sensitive they are to changes in the assumptions. Risk  and uncertainty analysis is performed to determine the level of risk  associated with the estimate. The estimate\u2019s results are cross- checked, and an independent cost estimate (ICE) is conducted to see  whether other estimation methods produce similar results.", "Comprehensive: An estimate has enough detail to ensure that cost  elements are neither omitted nor double counted. All cost-influencing  ground rules and assumptions are detailed in the estimate\u2019s  documentation."], "subsections": [{"section_title": "Past GAO Work on Census Cost Estimation", "paragraphs": ["Meeting best practices outlined in our Cost Estimating and Assessment  Guide for a reliable cost estimate has been a long-standing challenge for  the Bureau. In 2008 we reported that the 2010 Census cost estimate was  not reliable because it lacked documentation and was not  comprehensive, accurate, or credible. For example, in our 2008 report on  the Bureau\u2019s cost estimation process, Bureau officials were unable to  provide documentation that supported the assumptions for the initial 2001  life-cycle cost estimate as well as the updates. Consequently, we  recommended that the Bureau establish guidance, policies, and  procedures for estimating costs that would meet best practices criteria.  The Bureau agreed with the recommendation and said at the time that it  already had efforts underway to improve its future cost estimation  methods and systems. Moreover, weaknesses in the life-cycle cost  estimate were one reason we designated the 2010 Census a GAO High- Risk Area in 2008.", "In 2012 we reported that, while the Bureau was taking steps to strengthen  its life-cycle cost estimates, it had not yet established guidance for  developing cost estimates. We recommended that the Bureau finalize its  guidance, policies, and procedures for cost estimation in accordance with  best practices. The Bureau agreed with the overall theme of the report  but did not comment on the recommendation. During this review we found  that the Bureau took steps to address this recommendation, which is  discussed later in this report. Such guidance can help to institutionalize  best practices and ensure consistent processes and operations for  producing reliable estimates.", "In a 2016 report we found that the October 2015 version of the Bureau\u2019s  life-cycle cost estimate for the 2020 Census was not reliable. Overall,  we reported that the 2020 Census life-cycle cost estimate partially met  two of the characteristics of a reliable cost estimate (comprehensive and  accurate) and minimally met the other two (well-documented and  credible). We recommended that the Bureau take specific steps to ensure  its cost estimate meets the characteristics of a high-quality estimate. The  Bureau agreed with this recommendation, and took steps to improve the  reliability of its cost estimate, which we focus on later in this report.  Consequently, an unreliable life-cycle cost estimate is one of the reasons  we designated the 2020 Census a GAO High-Risk Area in 2017."], "subsections": []}, {"section_title": "Development of the 2020 Cost Estimate", "paragraphs": ["In October 2015, the Bureau estimated the cost of the 2020 Census to be  $12.3 billion. According to the Bureau, the October 2015 version was the  Bureau\u2019s first attempt to model the life-cycle cost of its planned 2020  Census, in contrast to its earlier 2011 estimate, which the Bureau said  was intended to produce an approximation of potential savings and to  begin developing the methodology for producing decennial life-cycle cost  estimates covering all phases of the decennial life cycle. To help control  costs while maintaining accuracy, the Bureau introduced significant  change to how it conducts the decennial census in 2020. Its planned  innovations include reengineering how it builds its address list, improving  self-response by encouraging the use of the Internet and telephone, using  administrative records to reduce field work, and reengineering field  operations using technology to reduce manual effort and improve  productivity. In contrast to the estimated $12.3 billion in 2015, the 2020  Census would cost $17.8 billion in constant 2020 dollars if the Bureau  repeated the 2010 Census design and methods, according to the  Bureau\u2019s estimates.", "In October 2017, Commerce announced that it had updated the October  2015 life-cycle cost estimate, projecting the life-cycle cost of the 2020  Census to be $15.6 billion, an increase of over $3 billion (27 percent) over  its 2015 estimate. (See figure 1.) In developing the 2017 version of the  cost estimate, Bureau cost estimators identified cost inputs, their ranges  for possible outcomes, and overall cost estimating relationships (i.e.,  logical or mathematical formulas, or both). To identify cost inputs and the  ranges of potential outcomes, the Bureau worked with subject matter  experts and used historical data to support assumptions and generate  inputs. The Bureau\u2019s cost estimation team used a software tool to  generate the cost estimate.", "Because cost estimates predict future program costs, uncertainty is  always associated with them. For example, data from the past (such as  fuel prices) may not always be relevant in the future. Risk and uncertainty  refer to the fact that because a cost estimate is a forecast, there is always  a chance that the actual cost will differ from the estimate. One way to  determine whether a program is realistically budgeted is to perform an  uncertainty analysis, so that the probability associated with achieving its  point estimate can be determined, usually relying on simulations such as  those of Monte Carlo methods. This can be particularly useful in  portraying the uncertainty implications of various cost estimates.", "Consistent with cost estimation practices outlined in our Cost Estimating  and Assessment Guide, the estimate was compared with two  independent cost estimates (ICE), developed by Commerce\u2019s Office of  Acquisition Management (OAM) and the Bureau\u2019s Office of Cost  Estimation, Analysis, and Assessment. The offices producing the ICEs  and the cost estimate team worked together to examine the process each  used, an effort known as the reconciliation process. Through this  reconciliation, the Bureau identified areas where discrepancies existed  and elements that could require additional review and possible  improvement.", "According to Bureau documentation the estimate will be updated as the  program meets milestones and to reflect changes in technical or program  assumptions. Figure 2 details the Bureau\u2019s cost estimation process. OAM  was involved extensively in the development of the 2017 estimate, an  increased involvement compared to 2015, according to Bureau officials.  OAM participated in regular review meetings throughout the development  of the estimate and also developed an independent cost estimate, as  shown in the figure below.", "End-to-end system testing activities for the 2020 Census are currently  underway in Providence, Rhode Island. According to the Bureau,  information collected from the test, such as overall response rates and  the use of administrative records to inform census records, will inform  future versions of the life-cycle cost estimate. Some updates from the test  will be incorporated into the next cost estimate, which will be available in  the first quarter of the coming fiscal year."], "subsections": []}]}, {"section_title": "Census Bureau Has Made Progress but Has Not Taken All the Steps Needed to Ensure the Reliability of 2020 Cost Estimate", "paragraphs": ["Since our June 2016 report, in which we reviewed the Bureau\u2019s 2015  version of the cost estimate, the Bureau has made significant progress.  For example, the Bureau has put into place a work breakdown structure  (WBS) that defines the work, products, activities, and resources  necessary to accomplish the 2020 Census and is standardized for use in  budget planning, operational planning, and cost estimation. However, the  Bureau\u2019s October 2017 cost estimate for the 2020 Census does not fully  reflect characteristics of a high-quality estimate as described in our Cost  Estimating and Assessment Guide and cannot be considered reliable.", "Our Cost Estimating and Assessment Guide describes best practices for  developing reliable cost estimates. For our reporting needs, we collapsed  these best practices into four characteristics for sound cost estimating\u2014 comprehensive, well-documented, accurate, and credible\u2014and identified  specific best practices for each characteristic. To be considered reliable,  an organization must meet or substantially meet each characteristic. Our  review found the Bureau met or substantially met three out of the four  characteristics of a reliable cost estimate, while it partially met one  characteristic: well-documented. When compared to the October 2015  estimate, the 2017 estimate shows considerable improvement. (See  figure 3 below.)"], "subsections": [{"section_title": "Well-Documented", "paragraphs": ["Cost estimates are considered valid if they are well-documented to the  point they can be easily repeated or updated and can be traced to original  sources through auditing, according to best practices. The Bureau only  partially met the criteria for well-documented, as set forth in our Cost  Estimating and Assessment Guide. A cost estimate that does not fully  meet the criteria for well-documented cannot be used by management to  make informed and effective implementation decisions.", "The well-documented characteristic comprises five best practices. The  Bureau substantially met two out of five best practices (as shown in figure  4). First, the estimate describes in sufficient detail the calculations  performed and the estimating methodology used to derive each element\u2019s  cost, and the cost estimate had been reviewed by management. Since  cost estimates can inform key decisions and budget requests, it is vital  that management review and understand how the estimate was  developed, including risks associated with the underlying data and  methods.", "The cost estimate only partially met three best practices for the  characteristic of being well-documented. In general, some documentation  was missing, inconsistent, or difficult to understand. First, we found that  source data did not always support the information described in the basis  of estimate document or could not be found in the files provided for two of  the Bureau\u2019s largest field operations: Address Canvassing and Non- Response Follow-Up (NRFU). For example, the cost estimate  documentation referred to actual data from the 2010 Census and  information obtained from experts as sources for address canvassing  rework rates. However, the folder source documents provided as  support for the basis of estimate did not include this information. Next, in  several cases, we could not replicate calculations, such as for mileage  costs, using the description provided. Lastly, we found that some of the  cost elements did not trace clearly to supporting spreadsheets and  assumption documents.", "Failure to document an estimate in enough detail makes it more difficult to  replicate calculations, or to detect possible errors in the estimate; reduces  transparency of the estimation process; and can undermine the ability to  use the information to improve future cost estimates or even to reconcile  the estimate with another independent cost estimate. The Bureau told us  it would continue to make improvements to ensure the estimate is well- documented. For the estimate to be considered well-documented, the  Bureau will need to address these issues."], "subsections": []}, {"section_title": "Accurate", "paragraphs": ["An accurate cost estimate supports measurement of program progress by  providing unbiased and correct data, which can help management ensure  accountability for scheduled results. We found the Bureau\u2019s cost estimate  substantially met the criteria for accuracy. As shown in figure 5, and in  line with best practices outlined in our Cost Estimating and Assessment  Guide, the estimate was not overly optimistic; appeared to be free of  errors; was based on historical data or input from subject matter experts;  and, according to Bureau officials, is updated regularly as information  becomes available.", "The Bureau can enhance the accuracy of their estimate by increasing the  level of detail included in the documentation, such as detail on specific  inflation indices used, and by monitoring actual costs against estimates.  We identified areas for improvement, which, according to Bureau officials,  will be addressed as part of its ongoing efforts. For example, while the  basis of estimate document describes different inflation indexes, it was  not clear exactly which indexes were applied to the various cost elements  in the estimate. Also, evidence of how variances between estimated costs  and actual expenses would be tracked over time was not available at the  time of our analysis. Tools to track variance enable management to  measure progress against planned outcomes. Bureau officials stated that  they already have systems in place that can be adapted for tracking  estimated and actual costs."], "subsections": []}, {"section_title": "Credible", "paragraphs": ["All estimates include a certain amount of informed judgment about the  future. Assumptions made at the start of a program can turn out to be  inaccurate. Credible cost estimates identify limitations due to uncertainty  or bias surrounding data or assumptions, and control for these  uncertainties by identifying and quantifying cost elements that represent  the most risk. We found that the Bureau\u2019s cost estimate substantially met  the criteria for credible, as shown in figure 6 below.", "The Bureau\u2019s cost estimate clearly identifies risks and uncertainties, and  describes approaches taken to mitigate them. In line with best practices  outlined in our Cost Estimating and Assessment Guide, the Bureau did  the following:", "Sensitivity analysis. The Bureau conducted sensitivity analysis to  identify possible changes to estimated costs for the 2020 Census  based on varying major assumptions, parameters, and data inputs.  For example, the Bureau calculated the likely cost implications for a  range of possible response rates to identify a range of projected costs  and to calculate appropriate reserves for risk. Bureau officials stated  that they also identified the estimate input parameters that contributed  the most to estimate uncertainty.", "Risk and uncertainty analysis. A cost estimate is a forecast, and as  such, there is always a chance that the actual cost will differ from the  estimate. Uncertainty is the indefiniteness about the outcome of a  situation. Uncertainty is assessed in cost estimate models to estimate  the risk (or probability) that a specific funding level will be exceeded.  We found the Bureau performed an uncertainty analysis on a portion  of the estimate to determine whether estimated costs were realistic  and to establish the probability of achieving projections outlined in the  estimate. The Bureau used a combination of modeling based on  Monte Carlo analysis and allocations of funding for risks. The Monte  Carlo simulation was performed on a portion of the estimate to  account for uncertainty around various operational parameters for  which a range of outcomes was possible, including Internet response  rates and the extent to which data collection issues might be resolved  using administrative records. To account for the inherent uncertainty  of assumptions included within the life-cycle cost estimate, the Bureau  added funding to the cost estimate totaling approximately $292 million  to account for risks based on the results of the Monte Carlo analysis.", "For other risks, such as acquisition lead time and the possibility of  delays in information technology (IT) development, contingency  funding was added to the estimate to reflect the potential cost of  resolving these issues, through use of a backup system or an  alternative approach. These are described as \u201cspecial risks\u201d in the  Bureau\u2019s basis of estimate, and total approximately $171 million.", "Based on additional sensitivity analysis, the Bureau added  approximately $965 million to the cost estimate to reflect discrete risks  outlined in the risk register as well as those associated with (1)  variability in self-response rates, (2) the effect of fluctuations in the  size and wage rate of the temporary workforce on the cost of field  operations, and (3) the potential need to reduce the enumerator-to- manager staffing ratio in case expected efficiencies in field operations  are not realized.", "In addition to these provisions, the Secretary of Commerce added a  contingency amount of about $1.2 billion to account for what the  Bureau refers to as unknown-unknowns. Bureau documentation  states that conducting a decennial census is an extremely complex,  high-risk operation. In order to mitigate some of the risk, contingency  funding must be available to initiate ad hoc activities necessary to  overcome unforeseen issues. According to Bureau documentation  these include such risks as natural disasters or cyber-attacks. The  Bureau provides a description of how the general risk contingency is  calculated. However, this description does not clearly link calculated  amounts to the risks themselves.", "In our June 2016 report we reported the Bureau had not properly  accounted for risk and recommended the Bureau, in part; improve  control over how risk and uncertainty are accounted for. We continue  to believe the prior recommendation from our June 2016 report  remains valid and should be addressed: that the Bureau properly  account for risk in the 2020 Census cost estimate, among other  things. As such, risks need to be linked to the $1.2 billion general risk  contingency fund.", "Independent cost estimate. According to best practices outlined in  our Cost Estimating and Assessment Guide, an independent cost  estimate should be performed to determine whether alternate  estimate approaches produce similar results. The Bureau compared  their estimate with two independent cost estimates, developed by  Commerce\u2019s Office of Acquisition Management and the Bureau\u2019s  Office of Cost Estimation and Assessment. As part of their process for  finalizing the cost estimate, Bureau officials reconciled differences  between the estimates in discussions with the two offices, resulting in  more conservative assumptions by the Bureau around risk and  uncertainty in both cases.", "In addition to implementing our recommendation to properly account  for risk, going forward, while the Bureau substantially met the  credibility characteristic it will be important for them to also integrate  regular cross-checks of methodology into their cost estimation  process. In our analysis we observed that no specific cross-checks  of cost methodology were performed. According to the Bureau, cross- checks were not performed because the Bureau considered the  independent cost estimates as overall cross-checks on the reliability  of their methodology and did not conduct additional cross-checks. The  main purpose of cross-checking is to determine whether alternative  methods for specific cost elements within the cost estimate could  produce similar results. An independent cost estimate, though  important for the credibility of an estimate, does not fulfill the same  function as a targeted cross-check of individual elements."], "subsections": []}, {"section_title": "Comprehensive", "paragraphs": ["Comprehensive estimates have enough detail to ensure that cost  elements are neither omitted nor double-counted, all cost-influencing  assumptions are detailed in the estimate\u2019s documentation, and a work  breakdown structure is defined. Our analysis of the 2017 cost estimate  demonstrates improvement over the 2015 cost estimate when the  Bureau\u2019s cost estimate only partially met the criteria for comprehensive.", "We found the Bureau met or substantially met all four best practices for  the comprehensive characteristic, as shown in figure 7. For example, all  life-cycle costs are included in the estimate along with a complete  description of the 2020 Census program and current schedule. We also  found that the Bureau substantially met criteria for documenting cost  influencing ground rules and assumptions.", "A standardized WBS (as detailed in table 1) with supporting dictionary  outlines the major work of the program and describes the activities and  deliverables at the project level where costs are tracked. In 2016, the  Bureau\u2019s WBS did not contain sufficient detail and we found significant  differences in the presentation of the work between sources. In 2017,  based on our review of Bureau documentation and interviews with Bureau  officials, we found that the WBS is standardized and cost elements are  presented in detail. The WBS is a necessary program management tool  because it provides a basic framework for a variety of related tasks like  estimating costs, developing schedules, identifying resources,  determining where risks may occur, and providing the means for  measuring program status.", "Although the Bureau\u2019s updated life-cycle cost estimate reflects three of  the four characteristics of a reliable cost estimate, we are not making any  new recommendations to the Bureau in this report. We continue to  believe the prior recommendation, made in 2016, remains relevant: that  the Secretary of Commerce ensure that the Bureau finalizes the steps  needed to fully meet the characteristics of a high-quality estimate, most  notably in the well-documented area. The Bureau told us it has used our  best practices for cost estimation to develop their cost estimate, and will  focus on those best practices that require attention moving forward.  Without a reliable cost estimate, the Bureau is limited in its ability to make  informed decisions about program resources and to effectively measure  progress against operational objectives."], "subsections": []}, {"section_title": "Life-Cycle Cost Estimate Is Used by Management to Inform Decisions", "paragraphs": ["OMB, in its guidance for preparing and executing agency budgets, cites  that credible cost estimates are vital for sound management decision  making and for any program or capital project to succeed. A well- developed cost estimate serves as a tool for program development and  oversight, supporting management to make informed decisions.", "According to the Bureau, the 2020 Census cost estimate is used as a  management tool to guide decision making. Bureau officials stated the  cost estimate is used to examine the cost impact of program changes.  For example, the cost estimate served as the basis for the fiscal year  2019 funding request developed by the Bureau. The Bureau also said it  used the 2020 Census life-cycle cost estimate to establish cost controls  during budget formulation activities and to monitor spending levels for  fiscal year 2019 activities. According to the Bureau, as detailed  operational and implementation plans are defined, the 2020 Census life- cycle cost estimate has been and will continue to be used to support  ongoing \u201cwhat-if\u201d analyses in determining the cost impacts of design  decisions. Specifically, using the cost estimate to model the impact of  changes on overall cost, the Bureau adjusted the scope of the Census  Enterprise Data Collection and Processing (CEDCaP) operation."], "subsections": []}, {"section_title": "Census Bureau Guidance to Develop Cost Estimates Meets Best Practices", "paragraphs": ["The processes for developing and updating estimates are designed to  inform management about program progress and the use of program  resources, supporting cost-driven planning efforts and well-informed  decision making. Our work has identified a number of best practices for  use in developing guidance related to cost estimation and analysis that  are the basis of effective program cost estimating and should result in  reliable and valid cost estimates that management can use for making  informed decisions.", "In 2012 we reported that the Bureau had not yet established guidance for  developing cost estimates. We recommended that the Bureau establish  guidance, policies, and procedures for developing cost estimates that  would meet best practice criteria. The Bureau agreed with the theme of  the report but did not specifically agree with the recommendation.  Moreover, in June 2016, we also reported that the cost estimation team  did not record how and why it changed assumptions that were provided to  it and did not document the sources of all data it used. The  documentation of these changes to assumptions did not happen because  the Bureau lacked written guidance and procedures for the cost  estimation team to follow. During this review we found the Bureau has  since established reliable guidance, processes, and policies for  developing cost estimates and managing the cost estimation process.  The following documents, shown in table 2, establish roles and  responsibilities for oversight and approval of cost estimation processes,  provide a detailed description of the steps taken to produce a high-quality  cost estimate, and clarify the process for updating the cost estimate and  associated documents over the life of a project.", "The Decennial Census Program\u2019s Cost Estimate and Analysis Process,  which provides a detailed description of the steps taken to produce a  high-quality estimate, is reliable as it met the criteria for 8 steps and  substantially met the criteria for 4 steps of the 12 best steps outlined in  our Cost Estimating and Assessment Guide, as shown below in figure 8.  To avoid cost overruns and to support high performance, it will be  important for the Bureau to abide by their newly developed policies and  guidance and continue to use the life-cycle cost estimate as a  management tool."], "subsections": []}]}, {"section_title": "Increased Costs Are Driven by an Assumed Decrease in Self-Response Rates and Increases in Contingency Funds and IT Cost Categories", "paragraphs": ["The 2017 life-cycle cost estimate includes significantly higher costs than  those included in the 2015 estimate. In 2015, the Bureau estimated that  they could conduct the operation at a cost of $12.3 billion in constant  2020 dollars. The Bureau\u2019s latest cost estimate, announced in October  2017, reflects the same design, but at an expected cost of $15.6 billion.  Figure 9 below shows the change in cost by WBS category for 2015 and  2017. The largest increases occurred in the Response, Managerial  Contingency, and Census/Survey Engineering categories. Increased  costs of $1.3 billion in the response category (costs related to collecting,  maintaining, and processing survey response data) were in part due to  reduced assumptions for self-response rates, leading to increases in the  amount of data collected in the field, which is more costly to the Bureau.  Contingency allocations increased overall from $1.35 billion in 2015 to  $2.6 billion in 2017, as the Bureau gained a greater understanding of  risks facing the 2020 Census. Increases of $838 million in the  Census/Survey Engineering category were due mainly to the cost of an IT  contract for integrating decennial survey systems that was not included in  the 2015 cost estimate. Bureau officials attribute a decrease of $551  million in estimated costs for Program Management to changes in the  categorization of costs associated with risks: In the 2017 version of the  estimate, estimated costs related to program risks were allocated to their  corresponding WBS element.", "More generally, factors that contributed to cost fluctuations between the  2015 and 2017 cost estimates include:  changes in assumptions for census operations,  improved ability to anticipate and quantify risk, an overall increase in IT costs, and more defined contract requirements."], "subsections": [{"section_title": "Changes in Assumptions", "paragraphs": ["Several assumptions for the implementation of the 2020 Census have  changed since the 2015 cost estimate. Some assumptions contributing to  cost changes, mainly in the Response (related to collecting and  processing response data) and Frame (the mapping and collecting  addresses to frame enumeration activities) categories, include the  following:", "Self-response rates. Changes in assumptions for expected self- response rates contributed to increases in the response category, as  the assumed rate decreased from 63.5 percent in 2015 to 60.5  percent in 2017, thereby increasing the anticipated percentage and  associated cost of nonresponse follow-up. When the Bureau does  not receive responses by mail, phone, or Internet, census  enumerators visit each nonresponding household to obtain data.  Thus, reduced self-response rates lead to increases in the amount of  data collected in the field, which is more costly to the Bureau. Bureau  officials attributed this decrease to a forecasted reduction in Internet  response due to added authentication steps at log in and the  elimination of the function allowing users to save their responses and  return later to complete the survey.", "Productivity rates. The productivity of enumerators collecting data  for NRFU is another variable in the cost estimate that was updated,  contributing to cost increases in the response category. Expected  productivity rates for NRFU decreased from the 2015 estimate of 4  attempts per hour to 2.9. According to Bureau documentation, this  more conservative estimate is based on historical data, rather than  research and test data.", "In-office address canvassing rates. The Bureau will not go door-to- door to conduct in-field address canvassing across the country to  update address and map information for every housing unit, as it has  in prior decennial censuses. Rather, some areas would only need a  review of their address and map information using computer imagery  and third-party data sources\u2014what the Bureau calls \u201cin-office\u201d  address canvassing procedures. However, in March 2017, citing  budget uncertainty the Bureau decided to discontinue one of the  phases of in-office review address canvassing for the 2020 Census.  The cancellation of that phase of in-office review is expected to  increase the number of housing units canvassed in-field by 5 percent  (from 25 to 30 percent of all canvassed housing units). In-field  canvassing is more labor intensive compared to in office procedures.  The 2017 version of the cost estimate reflects this increase in  workload for in-field address canvassing, though overall changes in  estimated costs for the Frame category, of which Address Canvassing  is a part, were minimal.", "Staffing. Updated analysis resulted in changes to several staffing  assumptions, which resulted in decreases across WBS categories.  Changes included reduced pay rates for field data collection staff  based on current labor market conditions and reductions in the length  of staff engagement."], "subsections": []}, {"section_title": "Anticipation of Risk", "paragraphs": ["In general, contingency allocations increased overall from $1.35 billion in  2015 to $2.6 billion in 2017. This increase in contingency can be  attributed, in part, to the Bureau gaining a clearer understanding of risk  and uncertainty in the 2020 Census as it approaches. The Bureau  developed some of its contingency based on proven risk management  techniques, including Monte Carlo analysis and allocated funding for  known risk scenarios. The 2017 estimate includes close to $1.4 billion in  estimated costs for these risks, almost three times the amount included in  the 2015 estimate. The basis of estimate contains detail on the various  risks and the process for calculating the associated contingency. The  2017 version also includes a contingency amount of $1.2 billion for  general risks, or unknown-unknowns, such as natural disasters and  cyber-attacks.", "Contingency amounts were reallocated within the WBS to more closely  reflect the nature of the risk: Bureau officials attribute a decrease from the  2015 estimate of $551 million in estimated costs for program  management to changes in the categorization of costs associated with  risks. Officials stated that, in 2015, discrete program risks were previously  consolidated as program management costs. In 2017, these discrete  costs were reallocated to associate risks with the appropriate WBS  element. For example, contingency amounts related to the likelihood of  achieving a certain response rate previously included in the program  management work breakdown category are now a part of the \u201cresponse\u201d  work breakdown category."], "subsections": []}, {"section_title": "Increased IT Costs", "paragraphs": ["Increases in IT costs, totaling $1.59 billion, represented almost 50 percent  of the total cost increase from 2015 to 2017. The total share of IT costs as  a percentage of total census costs increased from 28 percent in 2015 to  32 percent in 2017, or from $3.41 billion to approximately $5 billion.  Increases in IT costs are spread across seven cost categories. Figure 10  shows the IT and non-IT cost by WBS for the 2017 cost estimate. IT costs  in infrastructure, response data, and census/survey WBSs account for the  majority of the approximately $5 billion.", "The Bureau\u2019s October 2015 cost estimate included IT costs for, among  other things, system engineering, test and evaluation, and infrastructure,  as well as for a portion of the Census Enterprise Data Collection and  Processing (CEDCaP) program. The 2017 estimated IT cost increases  were due, in large part, to the Bureau (1) updating the cost estimate for  CEDCaP; (2) including an estimate for technical integration services that  contributed to increases in the Census and Survey Engineering category;  and (3) updating costs related to other major contracts (such as mobile  device as a service, field IT services, and payroll systems)."], "subsections": []}, {"section_title": "Contract Requirements", "paragraphs": ["Bureau documents described an overall improvement in the Bureau\u2019s  ability to define and specify contract requirements. This resulted in  updated estimates for several contracts, including for the Census  Questionnaire Assistance (CQA) contract. Assumptions regarding call  volume to the CQA were increased by 5 percent to account for expected  response by phone after the elimination of the option to save Internet  responses and return to complete the form later. The Bureau also cited  updated cost data and the results of reconciliation with independent cost  estimates as factors contributing to the increased costs of other major  contracts, including for the procurement of data collection devices."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["The Secretary of Commerce provided comments on a draft of this report  on August 2, 2018. The comments are reprinted in appendix II.  The  Department of Commerce generally agreed with our findings regarding  the improvements the Census Bureau has made in its cost estimates.  However, Commerce did not agree with our assessment that the  Bureau\u2019s 2017 lifecycle cost estimate is \u201cnot reliable.\u201d  Commerce noted  that it had conducted two independent cost analyses and was satisfied  that the cost estimate was reliable.  The Bureau also provided technical  comments that we incorporated, as appropriate.", "We maintain that, to be considered reliable, a cost estimate must meet or  substantially meet the criteria for each of the four characteristics outlined  in our Cost Estimating and Assessment Guide.  These characteristics are  derived from measures consistently applied by cost estimating  organizations throughout the federal government and industry and are  considered best practices for the development of reliable cost estimates.   Without a reliable cost estimate, the Bureau is limited in its ability to make  informed decisions about program resources and to effectively measure  progress against operational objectives. Thus, while the Bureau has  made considerable progress in all four of the characteristics, it has only  partially met the criteria for the characteristic of being well-documented.   Until the Bureau meets or substantially meets the criteria for this  characteristic, the cost estimate cannot be considered reliable.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.  At that time, we will send copies of the report to the  appropriate congressional committees, the Secretary of Commerce, the  Under Secretary of Economic Affairs, the Acting Director of the U.S.  Census Bureau, and other interested parties. In addition, this report is  available at no charge on the GAO website at http://gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The purpose of our review was to evaluate the reliability of the Census  Bureau\u2019s (Bureau) life-cycle cost estimate using our Cost Estimating and  Assessment Guide. We reviewed (1) the extent to which the Bureau\u2019s  life-cycle cost estimate and associated guidance met our best practices  for cost estimation using documentation and information obtained in  discussions with the Bureau related to the 2020 life-cycle cost estimate  and (2) compared the 2015 and 2017 life-cycle cost estimates to describe  key drivers of cost growth. For both objectives we reviewed  documentation from the Bureau on the 2020 life-cycle cost estimate and  interviewed Bureau and Department of Commerce officials.", "For the first objective, we relied on our Cost Estimating and Assessment  Guide as criteria. Our cost specialists assessed measures consistently  applied by cost-estimating organizations throughout the federal  government and industry and considered best-practices for developing  reliable cost estimates. We analyzed the cost estimating practices used  by the Bureau against these best practices and evaluated them in four  categories: comprehensive, well-documented, accurate, and credible.", "Comprehensive. The cost estimate should include both government  and contractor costs of the program over its full life-cycle, from  inception of the program through design, development, deployment,  and operation and maintenance to retirement of the program. It should  also completely define the program, reflect the current schedule, and  be technically reasonable. Comprehensive cost estimates should be  structured in sufficient detail to ensure that cost elements are neither  omitted nor double counted. Specifically, the cost estimate should be  based on a product-oriented work breakdown structure (WBS) that  allows a program to track cost and schedule by defined deliverables,  such as hardware or software components. Finally, where information  is limited and judgments are made, the cost estimate should  document all cost-influencing assumptions.", "Well-documented. A good cost estimate\u2014while taking the form of a  single number\u2014is supported by detailed documentation that  describes how it was derived and how the expected funding will be  spent in order to achieve a given objective. Therefore, the  documentation should capture in writing such things as the source  data used, the calculations performed and their results, and the  estimating methodology used to derive each WBS element\u2019s cost.", "Moreover, this information should be captured in such a way that the  data used to derive the estimate can be traced back to, and verified  against, their sources so that the estimate can be easily replicated  and updated. The documentation should also discuss the technical  baseline description and how the data were normalized. Finally, the  documentation should include evidence that the cost estimate was  reviewed and accepted by management.", "Accurate. The cost estimate should provide for results that are  unbiased, and it should not be overly conservative or optimistic. An  estimate is accurate when it is based on an assessment of most likely  costs; adjusted properly for inflation; and contains few, if any, minor  mistakes. In addition, a cost estimate should be updated regularly to  reflect significant changes in the program\u2014such as when schedules  or other assumptions change\u2014and actual costs, so that it is always  reflecting current status. During the update process, variances  between planned and actual costs should be documented, explained,  and reviewed. Among other things, the estimate should be grounded  in a historical record of cost estimating and actual experiences on  other comparable programs.", "Credible. The cost estimate should discuss any limitations of the  analysis because of uncertainty or biases surrounding data or  assumptions. Major assumptions should be varied, and other  outcomes recomputed to determine how sensitive they are to changes  in the assumptions. Risk and uncertainty analysis should be  performed to determine the level of risk associated with the estimate.  Further, the estimate\u2019s cost drivers should be cross-checked, and an  independent cost estimate conducted by a group outside the acquiring  organization should be developed to determine whether other  estimating methods produce similar results.", "If any of the characteristics are not met, minimally met, or partially met,  then the cost estimate does not fully reflect the characteristics of a high- quality estimate and cannot be considered reliable.", "We also analyzed the Bureau\u2019s cost estimation and analysis guidance  and evaluated them against a 12-step process outlined in our Cost  Estimation and Assessment Guide. A high-quality cost estimating process  integrates the following:  1.  Define estimate\u2019s purpose.  2.  Develop estimating plan.  3.  Define program characteristics.  4.  Determine estimating structure.  5.  Identify ground rules and assumptions.  6.  Obtain data.  7.  Develop point estimate and compare it to an independent cost  estimate.  8.  Conduct sensitivity analysis.  9.  Conduct risk and uncertainty analysis.  10. Document the estimate.  11. Present estimate to management for approval.  12. Update the estimate to reflect actual costs and changes.", "These 12 steps, when followed correctly, should result in reliable and  valid cost estimates that management can use for making informed  decisions. If any of the steps in the Bureau\u2019s process do not meet,  minimally meet, or partially meet the 12 steps, then the cost estimate  guidance does not fully reflect best practices for developing a high-quality  estimate and cannot be considered reliable.", "Lastly, to describe key drivers of cost growth, we compared cost  information included in the 2015 and 2017 cost estimates. We analyzed  both summary and detailed cost information to assess key changes in  totals overall, by WBS category, and by information technology (IT) vs.  Non-IT costs. We used this analysis in conjunction with information  received from the Bureau during interviews and through document  transfers to describe overall changes in the cost estimate from 2015 to  2017.", "We conducted this performance audit from December 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Lisa Pearson (Assistant Director),  Karen Cassidy (Analyst in Charge), Brian Bothwell, Jackie Chapin, Ann  Czapiewski, Jason Lee, Ty Mitchell, Kayla Robinson, and Tim Wexler  made significant contributions to this report."], "subsections": []}]}], "fastfact": ["In October 2017, the Census Bureau announced that the projected life-cycle cost of the 2020 Census had climbed to $15.6 billion, a 27-percent increase from its 2015 estimate.", "A reliable cost estimate is essential to budgeting, planning, and managing the Census. We found that, while the Census Bureau has improved its cost-estimation process, the 2017 cost estimation still doesn\u2019t meet all the necessary criteria of a reliable cost estimate. For example, the Bureau needs to improve documentation to support the cost estimate. We maintain our previous recommendation that the Census Bureau ensure that its cost estimate for the Census is reliable."]}
{"id": "GAO-19-73", "url": "https://www.gao.gov/products/GAO-19-73", "title": "Defense Real Property: DOD Needs to Take Additional Actions to Improve Management of Its Inventory Data", "published_date": "2018-11-13T00:00:00", "released_date": "2018-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD manages a portfolio of real property assets that as of fiscal year 2016 reportedly included about 568,000 facilities with a combined plant replacement value of about $1 trillion and 27.2 million acres of land. DOD requires the military services and Washington Headquarters Services to collect and maintain information about each of the assets in their inventories to assist the department with management decision making.", "In May 2017, the House Armed Services Committee, Subcommittee on Readiness, asked GAO to review DOD's management and use of its real property data. This report evaluates (1) how accurately and completely RPAD reflects DOD's real property assets, (2) DOD's processes to ensure accuracy and completeness in recording and reporting real property data, and (3) DOD's actions to ensure it has addressed risks that may affect the use of real property information for managing its assets. GAO analyzed the RPAD and military services' data for fiscal years 2014-2016; reviewed documentation; conducted site visits; and interviewed DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the Department of Defense's (DOD) Real Property Assets Database (RPAD) contained inaccurate data and lacked completeness, although certain data that GAO reviewed had improved their accuracy since fiscal year 2014. RPAD is a department-wide database of real property data annually compiled by the Office of the Secretary of Defense from the inventories of the military services and DOD's Washington Headquarters Services, which manages real property in the National Capital region. DOD uses RPAD to report on DOD's real property to Congress and other federal agencies, such as the Office of Management and Budget and the General Services Administration to assist in managing federal real property.", "DOD has weaknesses in its processes for recording and reporting real property data that have led to inaccurate and incomplete information. GAO and others found military services have not consistently recorded real property transactions (i.e., acquisition of, change to, and disposal of a real property asset) and physical inventories of assets. GAO also found that the military services have not corrected identified discrepancies in their data systems, such as missing entries for utilization and facility condition and overdue asset reviews. GAO reviewed records of 120 facilities with identified discrepancies in fiscal year 2015 RPAD data and compared them to the records in the respective data system in 2017 and found that 61 discrepancies remained. The military services had corrected the data in the remaining 59 reviewed facilities in their data systems. DOD's efforts to prepare for an upcoming financial audit have helped identify issues and improve accuracy of some data. However, if DOD does not require the military services to fully monitor recording processes and implement corrective actions to resolve data discrepancies, the department will continue to have incomplete and inaccurate real property data and unreliable RPAD information.", "DOD has not addressed three risks that can adversely affect its ability to use its information to manage its real property. Specifically, DOD (1) has unfilled real property positions limiting its capacity to manage its data, (2) lacks a department-wide approach to improving its data quality, and (3) has not identified how it will complete implementation of an effort to improve access to data. These risks exist, in part, because DOD has not developed a strategy that identifies and addresses risks with accompanying time frames and performance metrics. If DOD does not develop a strategy that identifies and addresses risks to data quality and information accessibility, DOD may miss the opportunity to reasonably ensure that the information needed for effective decision making by DOD, Congress, and other federal agencies is available to meet real property accountability and reporting objectives."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations to improve DOD's real property data, including fully monitoring recording processes; developing and implementing corrective actions for identified data discrepancies; and developing a strategy to address risks associated with data quality and information accessibility. DOD concurred or partially concurred with all draft recommendations. In response, GAO agreed to combine two recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) manages a portfolio of real property  assets that reportedly included about 568,000 facilities with a combined  plant replacement value of about $1 trillion and nearly 27.2 million acres  of land in fiscal year 2016. In January 2018, the Under Secretary of  Defense (Comptroller) testified that reform efforts within DOD, such as  those occurring in real property management, were dependent upon  accurate data and that not having accurate data complicates those  efforts. Each of the military services and DOD\u2019s Washington  Headquarters Services (WHS) maintains its own data systems that  include information about each of the real property assets. The information collected and maintained in these systems includes whether  an asset is owned or leased, its size, and for certain types, the asset\u2019s  value, percentage of space utilized, and condition, among other  characteristics.", "DOD annually compiles this information into a consolidated database,  called the Real Property Assets Database (RPAD), which represents the  data at the end of the fiscal year. DOD uses RPAD to report to the  General Services Administration\u2019s Federal Real Property Profile  Management System, which is a database of real property under the  custody and control of executive branch agencies. The military services  and WHS are to collect and maintain information on each of their real  property assets to report in annual financial statements. Furthermore, the  military services and WHS must manage their portfolios of real property  assets in part to identify their needs for sustainment, restoration, and  modernization of their facilities.", "For more than 20 years, we have identified opportunities for DOD to  improve the quality of the information that it collects on its real property to  better inform decision making about these assets. For example, in 1997,  we added DOD\u2019s defense support infrastructure to our list of high-risk  areas in the federal government\u2014due in part to long standing challenges  it faces in managing its infrastructure\u2014to include the need to improve the  quality of its information in its inventory data systems. In our most recent  High Risk Update in February 2017, we reported that DOD had shown  some improvement in the accuracy and completeness of real property  data, but needed to fully implement its planned actions to help the  department assess its goals and efforts, among other things. Further, we  identified the collection of reliable real property data to support decision  making as a long-standing challenge that federal agencies, including  DOD, continue to face.", "Further, our prior work on DOD\u2019s real property information on RPAD  reported accuracy and completeness issues with the data compiled from  the military services\u2019 data systems. DOD has begun to implement actions  in response to our recommendations but has not fully completed the  corrective actions. For example, in June 2016 we reported that the  military services had not yet fully implemented a department-wide  process to standardize facility condition assessments and rates. The  Navy and the Air Force have since adopted a standardized process, and  Army installation management officials stated they sought funding  through 2021 to implement the standardized process at all Army  installations. In addition, in September 2011, we reported that DOD\u2019s  RPAD for fiscal year 2010 reported data on the percentage of space  utilized for fewer than half of DOD\u2019s total inventory of facilities, and that  much of the data were outdated and did not reflect the true usage of the  structures. Since then, DOD provided guidance for measuring,  maintaining, and reporting utilization consistently throughout DOD, as we  recommended. As the guidance is implemented, DOD will fully address  our recommendation and officials expect improvement in the accuracy  and completeness of utilization data.", "In May 2017, the House Armed Services Committee, Subcommittee on  Readiness, requested that we evaluate the progress that the Office of the  Secretary of Defense (OSD) and the military services have made toward  maintaining complete and accurate inventories of their real property  assets and toward using real property inventory data to make sound  decisions regarding defense support infrastructure management. For this  report, we evaluated the extent to which (1) RPAD accurately and  completely reflects DOD\u2019s real property assets; (2) DOD has processes to  help ensure the accuracy and completeness in recording and reporting  real property data; and (3) DOD has addressed the risks that may affect  use of real property information for managing its assets.", "For all objectives, we reviewed DOD\u2019s policies, procedures, and other  documents related to real property management and accountability. We  also conducted site visits to 12 installations (3 from each military  service). We selected the non-generalizable sample of installations  based on criteria that considered (1) four U.S. geographic regions, (2)  geographic distance between each installation, and (3) variation in the  range of tests of the fiscal year 2015 RPAD data in a number of data  elements for entries that did not comply with DOD\u2019s requirements for  inventory information. In this report, we use discrepancies to refer to data  entries that do not comply with DOD\u2019s requirements for inventory  information as well as entries in two or more data sets that should match  but do not. During these visits, we interviewed real property officials at  each location and obtained documentary and testimonial evidence related  to differences in existing and inventoried real property and processes to  ensure accuracy and completeness in real property data. We also  observed and collected data on specific facilities to compare to  information recorded in the data system of the military services and  RPAD. We selected a non-generalizable sample of 120 facilities (10 at  each site) for current record review in the military services\u2019 data systems.  The selections were based on variation of discrepancies among five data  elements within RPAD and variation in facility type (building, structure,  and linear structure). We also observed some of these facilities to  compare to the information that was recorded in the data systems. These data only represent the facilities selected and are not representative of all  facilities at all installations. We also interviewed officials from the Office of  the Assistant Secretary of Defense for Energy, Installations, and  Environment, Washington Headquarters Services, the Air Force, the  Army, the Navy, and the Marine Corps.", "For objective one, we obtained end-of-year data sets of real property  information from three sources: (1) OSD\u2019s compiled RPAD, (2)  submissions to OSD from the military services and WHS, and (3) military  services\u2019 inventories, which we refer to as the three types of data sets.  We obtained the most recently available full year data for 3 years\u2014fiscal  years 2014 through 2016. We used RPAD data to conduct tests related  to accuracy among five data elements for facilities for fiscal years 2014  through 2016 to identify the extent to which entries comply with DOD\u2019s  inventory requirements, such as entries that were missing, out of range,  or overdue, and compared each year\u2019s results to identify changes in the  magnitude of those discrepancies. We selected these five data  elements because they are among the most frequently used by decision  makers. These tests of compliance with the inventory requirements  identify a number of discrepancies that may exist in the five data  elements. Because our tests were limited to five data elements, our  results are not generalizable. Additional testing would be necessary to  determine the full extent that discrepancies and other inaccuracies exist  in all of the data elements.", "Next, we assessed documentary evidence and obtained testimonial  statements about completeness issues with RPAD and we compared the  number of facilities and their reported total plant replacement value in  each of the three data sets for fiscal years 2014 through 2016 to describe  any differences between the data sets that should have been identical.", "We assessed the reliability of the data from the three types of data sets  through interviews, review of related documentation, and data testing,  and found those data sufficiently reliable to describe issues related to the  accuracy and completeness of the RPAD.", "For objective two, we reviewed relevant DOD documents and conducted  interviews with officials at OSD, WHS, and the military services to obtain  information and identify any challenges that DOD had identified with the  processes. We also obtained documentary evidence related to inventory  testing, data monitoring through testing, and reporting of real property  since fiscal year 2014. We compared this testimonial and documentary  evidence to DOD and military services\u2019 policies and procedures and  federal internal control standards.", "For our third objective, we evaluated actions taken by DOD to enhance  how it uses real property data since fiscal year 2014 and to identify any  risks that may affect how DOD can use this information. We reviewed  documentation including OSD and military service actions to improve data  quality, workforce plans for real property, and data requests from various  users across the department. This included reviewing documents related  to OSD\u2019s planned expansion of a business information platform to include  required real property inventory information. Additionally, we conducted  interviews with officials from OSD to determine what actions they have  taken to enhance how they use department-wide information on real  property and risks to the department\u2019s ability to use real property data.  We interviewed military service officials at installation management  offices and real property offices during our site visits at 12 installations to  identify specific actions they have taken to help ensure they can use real  property information and any risks related to using that information. We  assessed the information collected in documentation and interviews  against guidance on risk management from DOD and the Office of  Management and Budget.", "We conducted this performance audit from May 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Roles and Responsibilities for DOD Real Property", "paragraphs": ["The Under Secretary of Defense for Acquisition and Sustainment has  overall responsibility and oversight for DOD\u2019s real property and provides  overarching guidance and procedures for real property management.  The Assistant Secretary of Defense for Energy, Installations, and  Environment, assists with developing policy and guidance for real  property inventory and serves as the focal point for all matters related to  the inventory of real property assets. The military services and WHS are  responsible for implementing policies, programs, and procedures in  accordance with OSD\u2019s guidance to maintain an accurate and complete  real property inventory. They are also responsible for ensuring that real  property requirements are being met when other DOD components, such  as defense agencies and DOD field activities, utilize real property under  their jurisdiction. The defense agencies and DOD field activities are  responsible for confirming that all real property assets that they occupy,  operate, or maintain are contained within the real property inventory and  for reconciling any real property data, when needed, with their supporting  military service or WHS."], "subsections": []}, {"section_title": "Real Property Inventory Data", "paragraphs": ["Real property inventory data are used at the installation, military service,  and OSD levels for the recording, planning, managing, and reporting of  DOD real property assets, as shown in figure 1.", "Installation level. Real property officials are to record transactions to  document new acquisitions, changes to existing facilities, and disposals  and to collect information\u2014including physical characteristics, space  usage, and facility condition\u2014on the real property at each installation.  Officials are to enter this information into corresponding military service or  WHS real property data systems. Installation officials stated they use  real property information for a variety of purposes such as prioritizing  facilities for sustainment and restoration projects, preparing installation  master plans, and conducting fire and safety planning.", "Service level. Military service headquarters and WHS use inventory  information to oversee and manage their real property needs across their  installations. For example, according to officials, these data inform how  they use property to support their missions and to budget for required  sustainment, restoration, or construction of real property. In addition, this  information is used to account for real property asset holdings that are  included in financial statements prepared to meet federal financial  reporting requirements.", "OSD level. OSD requires that the military services and WHS submit their  real property inventories to be compiled into a department-wide data  set\u2014RPAD. The OSD focal point is responsible for providing  information from the RPAD to assist various OSD offices with  responsibilities for budget and mission planning. For example, the  information is used in budgeting for sustainment of facilities. Additionally,  OSD offices use the information in mission planning for certain DOD  components\u2014defense agencies, DOD field activities, and U.S. Special  Operations Command\u2014and for certain types of facilities, including  sustainable buildings, historic property, and ranges. Moreover, OSD uses  this information to meet reporting requirements outside of DOD. These  include reports to Congress on the utilization of DOD\u2019s facilities. All  executive branch federal agencies are required to annually submit real  property data to the General Services Administration to compile into the  Federal Real Property Profile. DOD also reports information to the Office  of Management and Budget on disposals and square footage of certain  types of purposes to meet report requirements for the National Strategy  for the Efficient Use of Real Property.", "OSD provides annual guidance that gives specific requirements for  content and format for the military services\u2019 RPAD submissions, including  data elements and any associated business rules. For fiscal year 2016,  OSD required 216 data elements to be maintained in RPAD and provided  a data dictionary, called the Real Property Information Model, which  defines these elements. OSD also has a process to verify and validate  the data the military services and WHS submitted annually to the RPAD  that includes OSD using a verification and validation tool to determine  whether each data element has an entry that is in the correct format and  complies with established business rules. When data anomalies are  discovered with the data, OSD provides the data back to the submitting  organization for review and correction as necessary. The military services  and WHS certify annually that the real property information submitted to  OSD accurately reflects each of their inventories.", "Some key real property data elements are significant for planning and  reporting on real property assets:", "Operational status. A code used to identify the current operational  status of the real property asset, such as whether the site location of  the asset is active, the existence of the asset, and the usage of the  asset.", "Asset review. A date used to document any type of review of an  asset. DOD requires that each facility be physically inventoried on a  cycle\u2014every 5 years for non-historic facilities and every 3 years for  historic facilities.", "Plant replacement value. A calculation of the cost to replace the  current physical plant (facilities and supporting infrastructure) using  today\u2019s construction costs (labor and materials) and standards  (methodologies and codes).", "Utilization rate. A percentage (on a scale 0 to 150) used to represent  the extent to which a real property asset is used by the primary user  for the current program based on its design purpose. DOD has not  established cutoff points to determine unutilized, underutilized, and  utilized real property. However, according to OSD officials, DOD  considers a utilization rate of 101 to 150 as over utilized, meaning an  asset\u2019s available space is not sufficient to meet the primary user\u2019s  space requirement.", "Facility condition. A measure of a facility\u2019s physical condition that is  expressed as a percentage (on a scale of 0 to 100). Factors used to  calculate the facility condition include the facility\u2019s estimated deferred  maintenance and repair costs and the facility\u2019s plant replacement  value. DOD guidance states a condition of 0 to 59 is failing; 60 to 79 is  poor; 80 to 89 is fair; and 90 to 100 is good.", "Figure 2 displays these real property data elements."], "subsections": []}, {"section_title": "Real Property and Financial Management", "paragraphs": ["DOD has undertaken several financial management improvement  initiatives over the years to address deficiencies in business systems,  processes, and controls through its Financial Improvement and Audit  Readiness (FIAR) Plan. The FIAR Plan guidance includes 40 of the  data elements required to be reported to OSD and maintained in RPAD  within the scope of the effort. As part of the department\u2019s FIAR effort,  each of the military services developed individual plans to prepare their  management processes, such as their accountability systems and  procedures for real property, which would be tested during financial audit.  The military services\u2019 real property efforts to prepare for financial audit  have included developing manuals, monitoring activities such as testing  of the implementation of real property procedures, and implementation of  corrective actions to address identified deficiencies in the processes and  procedures."], "subsections": []}]}, {"section_title": "DOD\u2019s Real Property Asset Database Contained Inaccurate Data and Lacked Completeness, Although Certain Data We Reviewed Improved", "paragraphs": ["DOD\u2019s RPAD has data quality issues specific to accuracy of certain data  elements and completeness of the dataset, although certain data we  reviewed improved since fiscal year 2014. Accuracy of data elements and  completeness of RPAD are important to OSD, other federal agencies,  and Congress because they use this information to determine facility  sustainment funding and to understand DOD\u2019s utilization of its real  property as a means to identify potential excess property for disposal,  among other things."], "subsections": [{"section_title": "Accuracy of Certain Data in RPAD Improved but Other Data Did Not Comply with Information Requirements", "paragraphs": ["We found that accuracy of certain data in the selected set of key data  elements we reviewed improved while other data contained discrepancies  that resulted in inaccuracies in RPAD for fiscal years 2014 through 2016.  For some data we reviewed, the magnitude of such discrepancies  decreased while others increased from fiscal year 2014 to fiscal year  2016. Specifically, we found:", "Operational status. For operational status codes that are not an  active status, such as an asset that was determined to be excess or  surplus, or disposed, OSD\u2019s business rules require a corresponding  date that documents when the status was determined or when a  disposal was completed. If the corresponding date is not provided,  then the operational status cannot be verified as correct. Our analysis  of operational status from fiscal year 2014 through fiscal year 2016  found improvements in data on surplus and disposed facilities. The  percentage of surplus and disposed facilities without a valid date  improved from 37.5 percent to 0 percent and 3.3 percent to 0.3  percent, respectively. However, the percentage of excess facilities  without a valid date increased from 22.7 percent to 47.9 percent.", "Asset review date. All facilities are required to have a date that  documents a physical inventory; these reviews are to be conducted at  least every 5 years, unless a historic asset. The percentage of  facilities with a review date older than 5 years improved from 34.1  percent in fiscal year 2014 to 22.1 percent in fiscal year 2016. RPAD  in fiscal year 2016 indicated that 143,420 facilities had a physical  inventory date that was older than 5 years, which suggests that the  information for these facilities may not be accurate because the  information has not been updated within the required time frame.  According to real property installation officials, overdue dates can  occur because the physical inventory was either not conducted or the  information from the physical inventory was not entered into the  military services\u2019 data systems. The percentage of facilities with a  missing review date increased from 3.4 percent in fiscal year 2014 to  7.2 percent in fiscal year 2016.", "Plant replacement value. All facilities are required to have a plant  replacement value not less than zero, meaning it cannot be a negative  number. For all 3 fiscal years, none of the facilities had a negative  plant replacement value and missing entries were an insignificant  number. The business rules allow for values of zero though these  entries may potentially create problems for other data elements that  use plant replacement value as part of their calculation. For example,  plant replacement value is a denominator in the formula used to  calculate facility condition index. If a plant replacement value is zero,  the facility condition index cannot be determined. The percentage of  facilities with a plant replacement value of zero declined from 3.4  percent in fiscal year 2014 to 2.3 percent in fiscal year 2016.", "Utilization rate. All facilities are required to have a utilization rate  from 0 to 150. The percentage of facilities missing a utilization rate  improved from 23.3 percent in fiscal year 2014 to 2.4 percent in fiscal  year 2015 before increasing to 14.4 percent in fiscal year 2016. As  such, in fiscal year 2016, about 93,600 facilities did not have an  indication of the utilization and this information was not available to  users of RPAD.", "Facility condition index. All facilities are required to have a facility  condition from 0 to 100. The percentage of facilities that had missing  facility condition entries increased from 0.5 percent in fiscal year 2014  to 5.6 percent in fiscal year 2016.", "Figure 3 displays our analysis of discrepancies between the information  requirements and data entries in RPAD."], "subsections": []}, {"section_title": "RPAD Was Incomplete as It Did Not Include All of DOD\u2019s Existing Real Property Assets", "paragraphs": ["RPAD did not include all of DOD\u2019s existing real property assets in fiscal  years 2014 through 2016, resulting in an incomplete data set.  Specifically, we found (1) the military services have not recorded all  assets that existed and reflected previously disposed facilities that no  longer existed as active in their respective data systems, (2) the military  services did not report all assets in the RPAD submission to OSD that  were recorded in each military service\u2019s data system, and (3) OSD did not  include all assets reported by the military services in RPAD, as shown in  figure 4.", "We and others found instances of facilities that existed that the military  services did not record in their data systems and of disposed facilities that  no longer existed but were still reflected as active in RPAD. During our 12  site visits, officials at two installations stated that there were real property  assets on their installations that were not recorded in their real property  data system at the time of our visit. For example, real property officials at  an Army installation identified over 2,000 existing assets\u2014primarily linear  structures\u2014that were not in the inventory. Real property officials at a  Marine Corps installation acknowledged that they were aware of assets  that were not recorded in the data system but did not know the quantity of  these. The officials stated they were in the process of reconciling the real  property inventory with the assets in existence on the installation. In May  2018, Marine Corps Headquarters officials stated they plan to send real  property officials to this location from other installations to assist with  entering identified assets into the inventory. With the additional support,  the officials expect the reconciliation to be completed in fiscal year 2019,  3 years earlier than initially planned.", "Moreover, in our review of 120 facilities during site visits, we found that 6  of the facilities had been disposed of but were recorded as active in the  fiscal year 2015 RPAD data of the Air Force and Army. For example, all  four of the Army\u2019s disposals occurred previous to fiscal year 2015 but  were not entered into the data system until fiscal year 2016. The changes  were made and reflected in the inventory submission for fiscal year 2016.  Also, one of the Air Force\u2019s assets, fencing, had been disposed of years  ago with the housing project that it enclosed, but was not included in the  original disposal documentation. The real property installation officials  had identified this omission when reviewing the list of assets that we  selected for our review and began documenting the disposal prior to our  site visit.", "DOD reported in its 2017 Agency Financial Report that material  weaknesses in its internal controls over real property resulted in, among  other things, that the department could not substantiate that all existing  assets were recorded in the military services data systems. Similar to  our site visit results, the Navy Office of Financial Operations also reported  in June 2017 that 15 of 650 real property assets tested from a non- generalizable sample were reported to have been disposed of, but were  not recorded as disposed of or removed from the Navy\u2019s data system.", "Additionally, we found RPAD did not include some facilities that were in  the military services\u2019 data systems. The number and total plant  replacement value across these three data sets should be identical, but  were not in each of the 3 years that we reviewed. This means information  on the excluded real property was not available to users of RPAD or to  the Federal Real Property Profile. Specifically,", "The military services did not report all facilities in their data  systems to OSD for inclusion into RPAD. Our analysis found the  Army, Navy, and Marine Corps did not report to OSD between  approximately 40,900 facilities (6.1 percent) and 103,600 facilities  (15.9 percent) of the facilities included in their data systems in fiscal  years 2014 through 2016. If all of these facilities still existed during  those years, these unreported facilities had a total plant replacement  value that ranged from $12.8 billion to $56.5 billion during the 3 fiscal  years. We could not include the Air Force in this analysis because it  was not able to provide its end-of-year real property inventory for  fiscal years 2014 through 2016. Air Force officials stated that their  contractor did not archive copies of the end-of-year real property  inventory for these years but would begin to do so for fiscal year 2017.", "OSD did not include all facilities reported by the military services  and WHS in RPAD. Additionally, our analysis showed that the  number of facilities OSD did not include in RPAD ranged from about  3,300 facilities (0.5 percent) to 19,400 facilities (2.6 percent) of the  facilities reported by the military services and WHS in fiscal years  2014 through 2016. If all of these facilities still existed during those  years, the total plant replacement value of the unreported facilities  ranged from $3.4 billion to $21.6 billion.", "OSD and military service officials agreed that accuracy and completeness  issues with real property have been a long standing issue, but stated  recent audit efforts associated with FIAR should result in some  improvements of the data. For example, military service installations  officials stated that they are working to reconcile differences between  existing real property and information in their data systems to include  adding existing assets that are not in the data system and correcting  information on disposed assets. Moreover, military service officials stated  that they have emphasized conducting timely physical inventories and  require installations to report on the currency of their physical inventories.  According to officials, when reporting real property to OSD and when  OSD consolidates this information into RPAD, assets with significant  errors in their records are excluded to improve the accuracy of the  information in the data set. The officials explained as the accuracy of the  data improves through physical inventories, fewer assets will be excluded  in the reporting process, which will improve completeness of RPAD.", "However, as we describe further in this report, the audit efforts will not  correct all identified accuracy and completeness issues."], "subsections": []}]}, {"section_title": "Deficiencies Exist in DOD\u2019s Processes for Recording and Reporting Real Property Data", "paragraphs": ["DOD\u2019s processes for recording and reporting real property data have  deficiencies that contribute to inaccuracies and incompleteness in the  RPAD data. Specifically, we identified inconsistencies in the military  services\u2019 recording of real property transactions and physical inventories  of assets. In addition, we found the military services have not corrected  identified discrepancies in their real property data reported to OSD in the  annual RPAD submissions."], "subsections": [{"section_title": "DOD Has Processes for Recording and Reporting Real Property Data", "paragraphs": ["According to a DOD instruction, OSD must establish, issue, and maintain  data requirements for DOD\u2019s real property inventory. As such, DOD  requires that the military services maintain an accurate and complete  record of their real property, regardless of the organization using or  funding the real property. The real property accountable officers at each  installation must implement processes to ensure that all real property  transactions are auditable and that information recorded, including  physical inspections, is accurate, complete and retained in accordance  with applicable laws and regulations. OSD also requires that the military  services report their real property data for RPAD following OSD  requirements and that they utilize OSD\u2019s verification and validation tool to  identify discrepancies between data entries and DOD\u2019s real property  information requirements.", "OSD and the military services have developed some procedures to  implement these policies. For example, OSD established an annual  reporting process, to include defining the specific content and format for  the submission of information. Moreover, the military services have  developed written procedures that clarify how specific transactions should  be conducted. For example, the Marine Corps has developed detailed  guidance on control processes for appropriately documenting disposed  assets. The Navy has developed procedures for conducting physical  inventories. The Army has defined roles and responsibilities for  accounting for real property, including changes to facility function (i.e.,  category code). Lastly, the Air Force has developed overall policies and  procedures for accounting for real property that defines the roles and  responsibilities of accountable officials."], "subsections": []}, {"section_title": "Military Services Did Not Consistently Record Real Property Data", "paragraphs": ["The processes for recording real property information include  documenting and entering into the data system when transactions\u2014 acquisition of, change to, and disposal of a real property asset\u2014or  physical inventories occur. To document a transaction or physical  inventory, real property installation officials are expected to complete the  required supporting records. According to Standards for Internal Control  in the Federal Government, appropriately designed control activities could  include requiring documentation should be completed within a reasonable  time frame after the event occurs. Then, the officials are to promptly  enter the updated information into the real property data system.", "DOD also requires a review of each real property asset record, including  a physical inventory of each real property asset every 5 years for non- historic assets or every 3 years for historic assets. Physical inventories  help ensure current and accurate information on assets are reflected in  the military services\u2019 data systems. Furthermore, the Standards for  Internal Control in the Federal Government require agencies to design  control activities to achieve objectives, to monitor activities, and to  remediate identified deficiencies on a timely basis. Such activities could  include appropriately documenting and accurately and timely recording  transactions, and implementing procedures to help ensure that processes  are monitored and evaluated for deficiencies on an ongoing basis,  corrective actions are determined for any identified deficiencies, and these actions are completed and documented to correct deficiencies on a  timely basis."], "subsections": [{"section_title": "Real Property Transactions", "paragraphs": ["We and the military services identified that transactions were not being  consistently documented with required supporting records or entered into  the military services\u2019 data systems within reasonable time frames.  Specifically, during our site visits to 12 military services\u2019 installations,  officials at 5 installations stated that they were experiencing delays with  documenting and entering into the data system some transactions.  According to the officials, this occurred due to challenges with obtaining  required information from contractors, heavy workloads, and staff  shortages.", "Moreover, the military services found through testing in 2017 that they did  not consistently document transactions with required supporting records  or enter real property transactions into the data system. The military  services conducted these tests as part of their preparation for financial  statement audits to identify deficiencies in the recording of real property  transactions. The military services were then to develop corrective  action plans and remedy any identified deficiencies prior to the  department\u2019s audit of the fiscal year 2018 financial statements.  Specifically,", "The Air Force conducted tests in March 2017 and reported that of 271  assets tested, 171 did not have appropriate supporting records. The  Air Force also reported in a separate test of 27 assets that 17 of these  were not timely or accurately recorded.", "The Army conducted tests in October 2017 and reported that more  than half of the assets selected did not pass its testing for one or more  of the 9 key data elements associated with plant replacement value.  Lack of adequate supporting records was the most common reason  for test failure.", "The Navy conducted tests in October 2017 and identified  documentation issues or key elements that were not timely or  accurately entered into its data system for 11 out of 58 assets  tested.", "The Marine Corps conducted tests in July 2017 and identified  documentation issues or key elements that were not timely or  accurately entered into its data system for 20 of 55 assets tested."], "subsections": []}, {"section_title": "Physical Inventories", "paragraphs": ["We and the military services have identified that real property installation  officials do not consistently document or enter physical inventory  information into the military services\u2019 data systems.", "We found during our site visits to 12 military service installations that for  21 facilities out of 106 facilities tested, real property installation officials  had not entered physical inventory information in the military services\u2019  data system within the last 5 years. The 21 facilities we reviewed  included 16 from the Air Force (with 2 reflected as being last inventoried  in January 1934 or October 1992), 4 from the Army, and 1 from the  Marine Corps (which showed as being been last inventoried in November  2003).", "The military services also identified similar inconsistencies with recording  physical inventories in testing of their real property assets as part of their  preparation for financial statement audits:", "The Air Force conducted tests in March 2017 and reported that  installation officials, for 89 out of 281 assets tested, did not have  complete supporting records or did not timely provide the most recent  physical inventory checklist that reconciled with the Air Force\u2019s data  system.", "The Army conducted tests in September 2016 and reported 1 of the 5  installations tested did not have adequate supporting records for asset  changes identified in physical inventories.", "The Navy conducted tests in June 2017, and reported 5,918 of the  34,104 assets tested had not had a physical inventory for more than 5  years. Furthermore, in October 2017, the Navy reported that 9 of 41  assets it tested did not have supporting records that the inventory was  performed per DOD requirements for timeliness.", "The Marine Corps had an external auditor conduct tests in September  2017 and reported that installation officials could not support the last  physical inventory performed for 83 of 998 assets tested.", "The military services did not fully monitor recording processes on an  ongoing basis, including evaluating whether or the extent to which  activities are being carried out and remediating any identified  deficiencies. We found that this occurred in part due to the military  services not being required to conduct ongoing monitoring of the  processes used for recording real property transactions and physical  inventories. According to military service officials, they conduct monitoring  of recording and have begun developing corrective action plans as part of  the recent audit readiness effort that are based on the Financial  Improvement and Audit Readiness Guidance. However, this guidance  aimed principally at improving financial reporting addresses 40 of the 216  data elements required to be maintained in RPAD. DOD has not  determined to what extent the remaining data elements are a priority for  other management purposes beyond financial reporting. Accordingly, the  remaining 176 data elements, or approximately 80 percent, are not  required to be monitored. For example, the recording of RPAD-required  data elements for dates that support an operational status of excess,  surplus, and disposed or document when a facility was built are not  included in current monitoring efforts. The monitoring of the recording of  only about 20 percent of the required data elements in RPAD results in  inaccurate and incomplete data not being systemically evaluated and  corrective actions not being taken to resolve the issues. Unless the  military services are required to monitor on an ongoing basis the  processes used for recording all required real property information, DOD  will continue to have data quality issues related to accuracy and  completeness in the military services\u2019 data systems that will be reflected  in RPAD."], "subsections": []}]}, {"section_title": "Military Services Have Not Corrected Identified Discrepancies Reported in Their RPAD Submissions", "paragraphs": ["The military services have not corrected identified discrepancies in their  real property data reported to OSD in the annual RPAD submissions.  OSD provided the military services with a verification and validation tool  to identify data that does not comply with information requirements.  Specifically, from fiscal years 2014 through 2016, the military services  used OSD\u2019s verification and validation tool to identify discrepancies and  submitted reports summarizing the results to OSD, but have not corrected  all discrepancies identified by the tool. According to real property  installation officials, they have not been directed by headquarters to  correct discrepancies in their data systems that were identified in their  annual RPAD submission. Our review of 120 assets during the 12  installation site visits confirmed that 61 assets with discrepancies in five  key data elements tested in the fiscal year 2015 RPAD data set continued  to have these discrepancies in 2017.", "Based on our analysis, the military services have not corrected identified  discrepancies in part because OSD\u2019s guidance for annual RPAD  reporting does not define which data elements were most significant to  the department\u2019s decision making and should be a priority for correction.  Furthermore, we found that the guidance does not require the military  services to develop and implement corrective action plans to remediate  discrepancies in significant data elements in their data systems that are  identified by OSD\u2019s verification and validation tool. According to OSD and  military service officials, identifying significant data elements could assist  with streamlining and prioritization of efforts to improve data quality. In  addition, OSD officials agreed that requiring the services to develop and  implement corrective action plans would benefit data quality, but stated  there are challenges with the verification and validation tool that would  need to be addressed to leverage its full potential. By OSD not defining  significant data elements and coordinating corrective action plans to  remediate discrepancies, the military services may continue to submit  information with discrepancies from year to year in some data elements  and will miss an opportunity to improve the accuracy of inventory data."], "subsections": []}]}, {"section_title": "DOD Has Not Addressed Risks to Its Ability to Use Information to Manage Its Real Property", "paragraphs": ["DOD has not addressed three risks\u2014unfilled real property positions to  manage its data, lack of a department-wide approach to improving data  quality, and a limited plan for the implementation of its expanded data  platform\u2014that diminish its ability to use real property information to  manage its real property."], "subsections": [{"section_title": "Unfilled Real Property Positions", "paragraphs": ["We found that DOD has not addressed how it will overcome unfilled real  property positions throughout the department, which poses a risk to data  quality. For example, real property installation officials at 10 of 12  installations we visited told us that they had unfilled real property  positions, including real property accountable officers, engineers, realty  specialists, planners, and space management analysts. Real property  installation officials told us that their unfilled real property positions  contributed to workload backlogs and prevented them from sufficiently  maintaining their real property data. The Army, Marine Corps, and Navy  completed various workforce plans that found they did not have a  sufficiently sized workforce to adequately maintain their real property  data:", "Army: In March 2015, the Army completed a workforce analysis that  found current authorized manning documents are short 223 real  property positions of the total 495 positions required to perform these  functions, which include real property accountable officers and realty  specialists.", "Marine Corps: In August 2016, the Marine Corps identified that it had  an immediate need for 20 real property accountable officer positions  to effectively maintain its real property data. According to Marine  Corps officials, they have since filled 19 of the 20 positions.", "Navy: For its fiscal year 2018 planning, the Navy identified a need for  63 real property positions\u2014ranging from real property accountable  officers to geospatial specialists\u2014to meet real property requirements.", "The Air Force has not identified the workforce it needs to maintain quality  data on its real property, but Air Force officials told us in May 2018, that  they are beginning efforts to better understand their workforce needs.", "OSD and military service officials stated that they continually face  challenges due to unfilled real property positions. However, they do not  expect to fill all of their authorized positions because senior leadership  has prioritized staffing at other offices and military service officials stated  that they face challenges in finding qualified applicants for open positions.  Despite the recognized needs, DOD has not outlined how it plans to  overcome challenges related to its unfilled real property positions.  According to an OSD official, OSD cannot direct the military services to fill  their real property positions; however, OSD has not coordinated with the  military services to identify opportunities to overcome unfilled positions.  Potential opportunities may include using available staff more efficiently  or evaluating opportunities to better address how they will manage  unfilled positions."], "subsections": []}, {"section_title": "Lack of a Department-wide Approach to Improving Data Quality", "paragraphs": ["Absent a department-wide approach to improving data at various levels  within DOD, military service headquarters have individually initiated  actions to improve data quality for certain data elements. These efforts  are largely uncoordinated and result in inconsistent approaches to  address similar data quality risks and may contribute to inefficient use of  resources and accuracy issues in the real property data. For example,  military service headquarters officials told us they have taken action to  improve data quality when they do not receive specific guidance from  OSD, including communicating priorities to installations and developing  contracts to improve select data elements. We found instances where the  military services took different actions to improve their information on  utilization rates prior to OSD issuing a memorandum to have a  standardized approach to determine this information. For example, the  Army developed a database to record space authorization information for  each asset. The Marine Corps used a contract to obtain space utilization  information at certain installations. Moreover, a Marine Corps  headquarters official stated in some cases that after Marine Corps  headquarters implemented its own policy and provided guidance to the  installations to fill a gap that OSD issued guidance with a different  approach. The official stated that the Marine Corps had spent financial  resources on a contract to improve a data element that they later had to  categorize in a different way due to OSD guidance. Also, real property  installation officials at a Marine Corps installation stated that their  headquarters had made large-scale changes to the records of their  housing assets due to a new approach to determine specific data  elements for those assets, which resulted in inaccuracies. Officials noted  that headquarters later retracted that approach and restored the records.", "In addition, we observed in our review of real property records during the  site visits that real property installation officials did not apply the same  criteria for determining an asset\u2019s operational status for the codes of  disposed, closed, and nonfunctional that resulted in inaccuracies. Navy  regional command officials provided written guidance and a decision  support tool for determining appropriate codes for operational status to  help improve accuracy within this data element. However, according to  real property installation officials, the Air Force and Army did not have  similar guidance. OSD and military service officials agreed that better  coordination among OSD and the military services would assist their  effort to improve data quality."], "subsections": []}, {"section_title": "Limited Plan for Implementation of OSD\u2019s Expanded Data Platform", "paragraphs": ["OSD has not fully identified how it will complete implementation of a new  module for real property within its expanded data platform, known as the  Data Analytics and Integration Support platform, and DOD faces a risk to  information accessibility as it may not fully realize the anticipated benefits  of the effort. OSD currently uses the platform for generating unique  identification numbers for its real property assets and as a dashboard for  tools related to military construction planning. However, OSD has neither  outlined how it will accomplish its stated objectives and goals for  expansion of this platform as OSD\u2019s new data system for real property, nor has it set time frames for the expansion. In September 2017, OSD  modified its contract for updating the Data Analytics and Integration  Support platform, but that contract does not specify when full  implementation of the expansion to include a new module for real  property will occur.", "OSD is planning to expand the use of the Data Analytics and Integration  Support platform to make it a near real-time, department-wide information  source of required real property information accessible to a greater  number of users who manage real property. If implemented, this  expanded platform would replace DOD\u2019s annual data call to the military  services for end-of-year real property information to compile into the  RPAD. Further, the expanded platform would interface daily with the  military service data systems. This would provide near real-time  information to users for the department-wide management of DOD\u2019s real  property. According to OSD officials, users could also access real  property information themselves and run their own data analyses when  OSD expands this platform to replace the annual data call to the military  services. Figure 5 displays a comparison of RPAD to the proposed  expansion of the Data Analytics and Integration Support platform.", "OSD officials told us that the military services will need to ensure their  data systems can fully interface with the Data Analytics and  Implementation Support platform for full integration to occur. Specifically,  the officials stated that the Army\u2019s data system can fully interface with  OSD\u2019s expanded platform, but the Navy wants to test how its data system  would interface with the platform before it can fully connect. In addition,  officials noted that the Air Force\u2019s current data system is the least  compatible with OSD\u2019s expanded data platform because it is currently  working to design and implement a new data system for real property.  OSD and Air Force, Marine Corps, and Navy officials noted that they are  aware the military service data systems are not fully integrated with  OSD\u2019s expanded data platform.", "Guidance from DOD and the Office of Management and Budget note that  risk management is integral to effective program management. The  Standards for Internal Control in the Federal Government states  management should define objectives clearly such as through specific  and measurable terms that allow for the assessment of performance  toward achieving those objectives and that management should identify,  analyze, and respond to risks related to achieving defined objectives.  The office of the Assistant Secretary of Defense for Energy, Installations,  and Environment is responsible for providing the guidance and  procedures for implementing real property management policy, including  ensuring the information is available to determine if an asset is used  effectively. One way an organization can manage risk is by developing a  risk management strategy that identifies risks to program objectives, and  includes time frames and performance metrics for addressing those risks.", "DOD has taken some actions that when fully implemented should result in  some improvements to select data elements and the potential to enhance  information accessibility. However, in part, DOD\u2019s weaknesses with  quality information on real property and accessibility to this information  continue to exist because DOD has not developed a strategy that  identifies and addresses risks, such as those previously described, and  includes time frames and performance metrics. OSD and military service  officials agreed that a strategy for addressing risks would help the  department to further its effort to improve the quality and accessibility of  the information. Developing and implementing such a strategy would allow the department to take key steps toward improving its information  for managing its real property. Without a strategy for improving the quality  of the data and information used to manage its real property, DOD,  Congress, the Office of Management and Budget, and the General  Services Administration will not have information needed for effective  decision making and do not have reasonable assurance that risks to data  quality and information accessibility are being managed appropriately.  Specifically, information would be limited in decision making related to  improving space management at installations, to adequately sustaining  DOD\u2019s real property assets, and to accurately generating financial  statements."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD\u2019s efforts to reform its real property management is complicated by  not having quality data on its large inventory of assets\u2014over 568,000  facilities with an estimated combined plant replacement value of about $1  trillion. An accurate and complete inventory of its assets is essential for  DOD to make informed management decisions about its real property.  The department has taken action to improve data quality of some data  elements through financial improvement and audit readiness efforts.  However, deficiencies in the processes for recording and reporting real  property data continue to lead to inaccurate and incomplete information.  The military services do not require monitoring of the recording of all  required real property information, to include evaluating on an ongoing  basis whether or to what extent these activities are carried out and  remediating any identified deficiencies. In addition, OSD has not defined  which data elements were significant to the department\u2019s decision making  and which should be a priority for correction. Also, the military services do  not have plans to correct the discrepancies in significant data elements in  their data systems that are identified by OSD\u2019s verification and validation  tool. Without taking actions to address these deficiencies, DOD will  continue to have inaccurate and incomplete real property data and  unreliable information in RPAD.", "DOD also has not developed a strategy that establishes time frames and  performance metrics to address risks to data quality and information  accessibility. Specifically, DOD faces risks related to unfilled real property  positions, a lack of a department-wide approach to improving data, and a  limited plan for implementation of OSD\u2019s expanded data platform. Without  a strategy to address these risks, DOD is missing an opportunity to  ensure that the information needed for effective decision making, such as  budget decisions and oversight by Congress, is available to meet real  property accountability and reporting objectives and to avoid inefficient  and potentially costly workarounds, such as additional data calls to  installations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 6 recommendations to the Department of  Defense:  The Secretary of the Army should require monitoring of its processes  used for recording all required real property information\u2014to include  evaluating on an ongoing basis whether or to what extent these activities  are being carried out\u2014and remediating any identified deficiencies.  (Recommendation 1)", "The Secretary of the Navy should require monitoring of Navy and Marine  Corps processes used for recording all required real property  information\u2014to include evaluating on an ongoing basis whether or to  what extent these activities are being carried out\u2014and remediating any  identified deficiencies. (Recommendation 2)", "The Secretary of the Air Force should require monitoring of its processes  used for recording all required real property information\u2014to include  evaluating on an ongoing basis whether or to what extent these activities  are being carried out\u2014and remediating any identified deficiencies.  (Recommendation 3)", "The Secretary of Defense should ensure that the Undersecretary of  Defense for Acquisition and Sustainment, in collaboration with the military  services, defines and documents which data elements within the RPAD  submissions are most significant for decision-making. (Recommendation  4)", "The Secretary of Defense should ensure that the Undersecretary of  Defense for Acquisition and Sustainment, in collaboration with the military  services, coordinates on corrective action plans to remediate  discrepancies in significant data elements in its real property data system  that are identified by OSD\u2019s verification and validation tool.  (Recommendation 5)", "The Secretary of Defense should ensure that the Undersecretary of  Defense for Acquisition and Sustainment, in collaboration with the military  services, develops a strategy that identifies and addresses risks to data  quality and information accessibility. At a minimum, this strategy should  establish time frames and performance metrics for addressing risks  related to (1) unfilled real property positions, (2) a lack of a department- wide approach to improving its data, and (3) implementation of OSD\u2019s  expanded data platform. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for comment. In written  comments, DOD concurred with four recommendations and partially  concurred with three recommendations. DOD\u2019s comments are  summarized below. DOD also provided technical comments, which we  incorporated as appropriate.", "In written comments, DOD stated that Recommendations 2 and 3 should  be combined to more appropriately align with authority and responsibility  of the U.S. Navy and U.S. Marine Corps as a single Military Department  and DOD concurred with the combination of the two recommendations.  Based on these comments, we combined the draft recommendations for  separate actions by the Secretary of the Navy and the Commandant of  the Marine Corps into one recommendation. In our final report, the action  is addressed to the Secretary of the Navy in Recommendation 2 and our  total number of recommendations is decreased to six.", "DOD partially concurred with our recommendation that the  Undersecretary of Defense for Acquisition and Sustainment collaborate  with the military services to develop a strategy that identifies and  addresses risks to data quality and information accessibility  (Recommendation 6). We recommended that the strategy, at a minimum,  include timeframes and performance metrics for addressing risks and  include other specific information. However, DOD stated that it plans to  collaborate with the military services on separate service strategies that  reflect each military service\u2019s operating environment. We continue to  believe that DOD would benefit from one department-wide strategy to  improve data quality and information accessibility. For example, we found  that the military services\u2019 efforts to improve data quality have been largely  uncoordinated and had led to inconsistent approaches, which may have  contributed to data inaccuracies. Further, we found that OSD has not fully  identified how it will complete implementation of a data platform  expansion to include real property information and may not realize the  anticipated benefits of the effort. The platform is an effort managed by  OSD and would benefit from a single DOD strategy addressing key points  noted in our recommendation. Accordingly, we believe our  recommendation remains warranted.", "DOD\u2019s comments are reprinted in their entirety in appendix II.", "We are sending copies of this report to the appropriate congressional  committees and to the Secretary of Defense; the Under Secretary of  Defense for Acquisition and Sustainment; the Under Secretary of Defense  (Comptroller); and Secretaries of the Departments of Air Force, Army,  and Navy, the Commandant of the Marine Corps, and the Director of  Washington Headquarters Services. 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  Brian J. Lepore at (202) 512-4523 or leporeb@gao.gov or William J.  Cordrey at (404) 679-1873 or cordreyw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are listed on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Physical Inventory", "paragraphs": ["For the military services and Washington Headquarters Services\u2019 real  property inventories, DOD requires that the data elements shown below  in table 1 be validated through a physical inventory of each real property  asset. Physical inventories are to be performed every 5 years or every 3  years for historic assets."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Gina Hoffman (Assistant  Director), Paul Kinney (Assistant Director), Susan Langley (Analyst-in- Charge), Scott Bruckner, Vincent Buquicchio, Josh Edelman, Chad  Hinsch, Brad Johnson, Amie Lesser, Carol Petersen, Sam Portnow,  Richard Powelson, Michael Silver, and John Yee made key contributions  to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["DOD Financial Management: The Navy Needs to Improve Internal  Control Over Its Buildings, GAO-18-289. Washington, D.C.: May 10,  2018.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others, GAO-17-317. Washington, D.C.: February 15,  2017.", "Defense Facility Condition: Revised Guidance Needed to Improve  Oversight of Assessments and Ratings, GAO-16-662. Washington, D.C.:  June 23, 2016.", "DOD Financial Management: Greater Visibility Needed to Better Assess  Audit Readiness for Property, Plant, and Equipment, GAO-16-383.  Washington, D.C.: May 26, 2016.", "Defense Infrastructure: More Accurate Data Would Allow DOD to Improve  the Tracking, Management, and Security of Its Leased Facilities,   GAO-16-101. Washington, D.C.: March 15, 2016.", "Underutilized Facilities: DOD and GSA Information Sharing May Enhance  Opportunities to Use Space at Military Installations, GAO-15-346.  Washington, D.C.: June 18, 2015.", "Defense Infrastructure: DOD Needs to Improve Its Efforts to Identify  Unutilized and Underutilized Facilities, GAO-14-538. Washington, D.C.:  September 8, 2014.", "Defense Infrastructure: Army Brigade Combat Team Inactivations  Informed by Analyses, but Actions Needed to Improve Stationing  Process, GAO-14-76. Washington, D.C.: December 11, 2013.", "Federal Real Property: Greater Transparency and Strategic Focus  Needed for High-Value GSA Leases, GAO-13-744. Washington, D.C.:  September 19, 2013.", "Military Bases: Opportunities Exist to Improve Future Base Realignment  and Closure Rounds, GAO-13-149. Washington, D.C.: March 7, 2013.", "Military Base Realignments and Closures: Updated Costs and Savings  Estimates from BRAC 2005, GAO-12-709R. Washington, D.C.: June 29,  2012.", "Excess Facilities: DOD Needs More Complete Information and a Strategy  to Guide Its Future Disposal Efforts, GAO-11-814. Washington, D.C.:  September 19, 2011.", "Defense Infrastructure: The Enhanced Use Lease Program Requires  Management Attention, GAO-11-574. Washington, D.C.: June 30, 2011.", "Federal Real Property: Progress Made on Planning and Data, but  Unneeded Owned and Leased Facilities Remain, GAO-11-520T.  Washington, D.C.: April 6, 2011.", "Military Base Realignment and Closures: DOD Is Taking Steps to Mitigate  Challenges but Is Not Fully Reporting Some Additional Costs,   GAO-10-725R. Washington, D.C.: July 21, 2010.", "Defense Infrastructure: Continued Management Attention Is Needed to  Support Installation Facilities and Operations, GAO-08-502. Washington,  D.C.: April 24, 2008.", "Federal Real Property: Progress Made Toward Addressing Problems, but  Underlying Obstacles Continue to Hamper Reform, GAO-07-349.  Washington, D.C.: April 13, 2007.", "Defense Infrastructure: Issues Need to Be Addressed in Managing and  Funding Base Operations and Facilities Support, GAO-05-556.  Washington, D.C.: June 15, 2005.", "Defense Infrastructure: Changes in Funding Priorities and Strategic  Planning Needed to Improve the Condition of Military Facilities,  GAO-03-274. Washington, D.C.: February 19, 2003.", "Defense Infrastructure: Military Services Lack Reliable Data on Historic  Properties, GAO-01-437. Washington, D.C.: April 6, 2001.", "Military Infrastructure: Real Property Management Needs Improvement,  GAO/NSIAD-99-100. Washington, D.C.: September 7, 1999."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-420", "url": "https://www.gao.gov/products/GAO-18-420", "title": "Federal Buildings: More Consideration of Operations and Maintenance Costs Could Better Inform the Design Excellence Program", "published_date": "2018-05-22T00:00:00", "released_date": "2018-05-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 1994, GSA has spent more than $8 billion to construct 78 new federal buildings through its Design Excellence program. Some design choices can affect a building's O&M costs and functionality.", "GAO was asked to review GSA's ability to manage O&M costs under the Design Excellence program. This report assesses the extent to which: (1) GSA's design choices affect O&M costs; (2) GSA considers O&M costs and functionality when planning and designing buildings; and (3) GSA systematically collects and shares information on O&M costs.", "GAO conducted a web-based survey of building managers for the 78 Design Excellence buildings. GAO also visited 10 Design Excellence buildings in three GSA regions selected based on several factors, including geographic and agency diversity. GAO reviewed GSA documents, and interviewed GSA officials and building tenants. Information obtained through site visits and interviews is not generalizable."]}, {"section_title": "What GAO Found", "paragraphs": ["The goals of the General Services Administration's (GSA) Design Excellence Program are to creatively design federal buildings that meet federal agencies' functional needs and become public landmarks. Some design choices for Design Excellence buildings have decreased ongoing operations and maintenance (O&M) costs, but others have increased those costs. GSA's building managers and tenants told GAO that design choices that have reduced O&M costs include the use of durable materials and low maintenance landscaping. Other design choices have increased O&M costs. For example, according to GAO's survey of 78 building managers of Design Excellence buildings, multistory atriums often led to additional O&M costs, including the need to erect expensive scaffolding for maintenance.", "While GSA aims to create Design Excellence buildings that are cost-effective and functional, it makes design choices without fully considering their effect on O&M costs and functionality. For example, GSA officials do not estimate the majority of O&M costs, such as the building maintenance associated with their design choices until the design is almost finalized. This outcome is partly because GSA procedures do not direct GSA officials to develop such estimates during the design and planning of Design Excellence buildings and because building and regional managers responsible for addressing the O&M consequences are also not involved in the design and planning process. As a result, important cost information that could help building project teams make the most cost-effective design choices is not available to help them. In addition, while building managers GAO surveyed reported that GSA's design choices generally support a building's functionality, they also reported that some design choices increased O&M costs without improving functionality. For example, they identified design choices related to material color and lighting that increased O&M costs but did not enhance the functionality of the building for the tenants.", "Although GSA has developed some information on how design choices can affect O&M costs, it does not consistently collect and share such information. For example, GSA has evaluated the performance of only six Design Excellence buildings, and does not systematically collect information on how design choices have affected O&M costs in all existing buildings. Without a process to collect and share such information, future buildings may not benefit from these lessons, and problematic choices may be repeated."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to update existing GSA procedures for planning and designing new buildings to: (1) estimate full O&M costs; (2) obtain information from personnel responsible for addressing the O&M consequences of design decisions; (3) further consider how design choices may affect building functionality; and (4) systematically collect and share lessons from existing buildings. GSA agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 1994, the General Services Administration (GSA) has spent more  than $8 billion to construct 78 new federal courthouses and office  buildings through the Design Excellence Program. Under this program,  GSA works with private-sector architects, interior designers, engineers,  and construction firms to plan buildings that meet the needs of  government agencies while also meeting certain design principles, such  as visually representing the dignity of the federal government and  avoiding uniformity. Beyond construction costs, some design choices,  such as multistory atriums, can also affect how much the government  spends for ongoing operations and maintenance (O&M) costs for the  buildings. Design choices also can affect functionality of the building for  government workers and the public. Understanding how GSA considers  the tradeoffs between aesthetics, costs, and functionality is important as  the agency embarks on construction projects, including current plans to  spend billions of dollars more to construct courthouses and other federal  buildings.", "You asked us to evaluate GSA\u2019s ability to manage O&M costs for federal  buildings constructed under the Design Excellence Program. This report  assesses the extent to which:", "GSA made design choices that affect O&M costs;", "GSA considers O&M costs and functionality when planning and", "GSA systematically collects and shares information on O&M costs  related to design choices in existing buildings.", "Our review focused on the 78 federal buildings and courthouses that GSA  has constructed under the Design Excellence Program\u2014referred to as  \u201cDesign Excellence buildings\u201d\u2014since the program started in 1994. To  address our objectives, we administered a web-based survey to the GSA  building managers of these 78 Design Excellence buildings and achieved  a response rate of 100 percent. The survey asked for information on the  extent to which certain design choices affect O&M costs and building  functionality. We also visited 10 Design Excellence buildings in three GSA  regions to view design choices and O&M activities. We interviewed tenant  agencies located in these buildings, GSA building managers responsible  for managing these buildings, and officials from GSA regional offices with  oversight responsibilities for these buildings. To ensure geographic and  agency diversity, we selected our site-visit locations based on several  factors, including location and the tenant agency. Although not  generalizable to all Design Excellence buildings, information gathered  from our site visits shows how O&M costs were considered in specific  buildings and the effects of design choices.", "To address our objectives, we also examined relevant GSA documents  pertaining to all buildings included in our review, including those detailing  investment needs for maintenance and repairs and evaluations  commissioned by GSA on, for example, how well these buildings comply  with building standards and their overall performance. We also reviewed  applicable federal regulations and guidance, including GSA procedures,  policies and standards for designing, constructing, and operating federal  facilities; our prior work; and reports by other federal agencies and related  industry associations on topics including the standard costs of operating and maintaining office buildings. We collected information on the extent to  which Design Excellence buildings are visible and accessible to the public  and analyzed GSA data on project construction and O&M costs from  2000 to 2016. We assessed the reliability of these data through  electronic testing and a review of documentation on the data and  determined that the data were reliable for the purpose of illustrating the  extent to which O&M costs make up total building costs.", "In addition, we interviewed GSA officials located in the Washington, D.C.,  headquarters office and in four of GSA\u2019s 11 regional offices. We selected  regional offices based on the location of our site visits and included one  additional regional office based on its having the highest total O&M- operating costs of the remaining eight regional offices. With GSA officials,  we discussed several topics including how O&M costs were considered  during planning and design and how information on design choices\u2019 O&M  costs are shared. We compared GSA\u2019s efforts to consider O&M costs and  functionality when planning and designing these buildings and their  process for collecting and sharing O&M information across these  buildings to the federal standards for internal control related to using  complete and relevant information when making decisions and designing  control activities and internal communications. We also compared GSA\u2019s  efforts to consider O&M costs in the planning and design of these  buildings to guidance from GSA and the Office of Management and  Budget. Further details on our scope and methodology can be found in  appendix I.", "We conducted this performance audit from May 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government is the largest real property owner in the United  States with a vast inventory costing billions of dollars annually to operate  and maintain. Federally owned buildings include courthouses, offices,  warehouses, schools, hospitals, housing, data centers, and laboratories,  among other things. GSA acts as the federal government\u2019s landlord, and  is responsible for designing, constructing, and managing federal buildings  for other federal agencies and the judiciary to occupy. There are  currently approximately 1,600 federally owned buildings under GSA\u2019s  custody and control.", "According to the Office of Management and Budget (OMB), agencies,  including GSA, should have accurate information on acquisition and  \u201clifecycle\u201d costs of current and proposed assets, including costs for  designing and constructing the building, O&M, and disposal. For  example, when planning and designing new federal buildings, GSA must  analyze building energy and water systems (e.g., for air conditioning and  heating) to identify those with the lowest acquisition and operating costs.  In addition, once the building is constructed, GSA building managers and  O&M contractors are responsible for maintaining the building, which  includes tasks related to recurring maintenance and repair (e.g., on  heating and cooling systems), maintaining the property\u2019s roads and  grounds, cleaning and janitorial services, and paying for utilities.", "In 1994, GSA instituted the Design Excellence Program, a process for  designing, constructing, renovating, altering, and repairing federal  courthouses and office buildings. This program was developed in  response to criticisms that federal buildings lacked architectural  distinction. It stresses creativity in the design of buildings with the intent of  constructing spaces that meet the tenant\u2019s functional needs while also  becoming public landmarks. More specifically, the program aims to meet  several guidelines\u2014called the Guiding Principles for Federal  Architecture\u2014 including designing spaces that:  reflect the dignity, enterprise, vigor, and stability of the U.S.  government; avoid uniformity; and are built in locations in which federal buildings can be incorporated  into the existing public streets and landscape.", "According to GSA officials, the Design Excellence Program also  streamlines how GSA selects and manages the private-sector architects  and engineering firms it hires for new projects. The process consists of  four primary stages: planning for the prospective tenant\u2019s needs and general project details  (e.g., request for proposal announcement);  selecting and working with an architectural and engineering firm to  design the building;  selecting a contractor to construct the building; and occupancy by the tenants.", "The process is overseen by a GSA project team, consisting of a project  manager, contracting officer, officials from GSA\u2019s Office of the Chief  Architect, and additional subject matter experts, who work with the federal  tenant that plans to occupy the space.", "A large number of the federal courthouses and office buildings  constructed and controlled by GSA in the last 20 years have been  completed under the Design Excellence Program. Under the program,  GSA has constructed 78 facilities including 62 courthouses and 16 federal  office buildings, including a data center and laboratories. These  buildings account for more than 36-million square feet of space, are  located in 33 states and the District of Columbia, and many have won  architecture and design awards. Figure 1 shows examples of federal  courthouses and office buildings constructed under the Design  Excellence Program."], "subsections": []}, {"section_title": "GSA Made Design Choices That Decreased and Increased O&M Costs", "paragraphs": [], "subsections": [{"section_title": "Some GSA Design Choices Have Decreased O&M Costs", "paragraphs": ["According to interviews with GSA officials and building tenants, GSA has  made choices in some Design Excellence buildings intended to reduce  long-term O&M costs. For example:  Increased natural light. All 10 of the Design Excellence buildings we  visited were designed to include interior natural light, which some  building managers reported reduced energy costs. According to GSA  officials, natural light is not only aesthetically pleasing; it also  improves lighting quality for building tenants and reduces lighting  costs. For example, the First Street Federal Courthouse (Los Angeles,  California) has a light well as part of its atrium and a serrated glass  fa\u00e7ade that maximizes natural light. Building officials said that 22 of  the 24 courtrooms in the building receive natural light from multiple  sources, reducing energy usage and requiring less frequent  replacement of lighting. In addition, building officials at the Albert  Armendariz, Sr., U.S. Courthouse (El Paso, Texas) reported extensive  natural light from a three story window wall and the front atrium; both  features provide ample light for building tenants. (See fig. 2).", "Durable and easily maintained materials and finishes. In most of the  10 Design Excellence buildings we visited, GSA officials and building  tenants reported selecting materials and finishes that (1) are highly  durable and easy and inexpensive to clean; (2) are expected to last a  long time; and (3) required little maintenance. For example, the lobby  walls and floors of the Ronald Reagan Federal Building and  Courthouse (Santa Ana, California) are made out of travertine, a very  durable stone, which has lasted more than 15 years without the need  for repairs or replacement. In addition, officials at a few buildings  noted that the decision to install carpet tiles in lieu of large patches of  carpet has made it very easy and relatively inexpensive to maintain  and repair office spaces and courtrooms.", "Low-maintenance landscaping. Several of the 10 Design Excellence  buildings we visited incorporated native flora into the landscape  design, which can reduce energy and water costs. For example,  officials planted native, drought resistant plants around the First Street  Federal Courthouse (Los Angeles, California). Building officials at the  Las Cruces U.S. Courthouse (Las Cruces, New Mexico), which is  located in a desert environment, also reported most of the native  landscape around the courthouse does not require watering."], "subsections": []}, {"section_title": "Some GSA Design Choices Have Increased O&M Costs", "paragraphs": ["According to our survey respondents\u2014building managers at all 78 Design  Excellence buildings included in our review\u2014certain GSA design choices,  such as multistory atriums and custom windows, have resulted in  increased O&M costs compared to an average GSA building without  those features. Almost all Design Excellence building managers (76 out  of 78) reported that certain design choices resulted in increased O&M  costs that would not have occurred had that design choice not been  selected. For example, 67 out of 78 building managers for Design  Excellence buildings stated that the effect of including multistory open  spaces, like atriums, increased O&M costs due to the challenges  associated with heating and cooling, making needed repairs, and  cleaning these spaces. (See table 1). Building managers and tenants we  spoke with confirmed our survey results, and provided examples of  design choices that resulted in unexpected O&M cost increases. For  example, officials noted increased O&M costs associated with separate  structures and multistory atriums that were difficult to access for cleaning  and repairs.", "Separate Structures. Managers from only 21 of 78 Design Excellence  buildings reported having an attached, but separate structure (e.g.,  pavilions, rotundas, restaurants, and other additional spaces connected to  the building), but managers at 19 of those buildings stated that the effect  of such design features increased O&M costs. For example, one federal  building we visited had a rotunda with a domed roof that, according to  building managers, has multiple gutter leaks that are not currently  accessible due to the design of the space. As a result, maintenance staff  continuously patch the ceiling without addressing the cause of the leaks  (see fig. 3).", "Atriums and Lobbies. Managers from 67 of 78 Design Excellence  buildings reported their buildings\u2019 multistory atriums and lobbies  increased O&M costs. Several GSA managers we interviewed identified  additional costs to maintain a multistory atrium or lobby, including costs  for renting expensive scaffolding or mechanical lifts. For example, one  Design Excellence building we visited has water leaks in the lobby ceiling,  which can only be reached by extensive and expensive scaffolding (see  fig. 4).", "Large, Custom Windows. Managers from 65 of 78 Design Excellence  buildings reported that the effect of design choices related to their  buildings\u2019 windows increased O&M costs. In addition, several Design  Excellence buildings we visited had custom or uniquely shaped windows,  which occasionally increased the costs to replace, repair, or maintain  them. For example, GSA officials at one courthouse reported repairing  one two-story, custom-made window pane, which cost $80,000 to  fabricate and $50,000 to install. The courthouse had eight of these  windows, and a GSA official stated that the windows are an attractive  feature of the building that introduced natural light, but a different window  choice would have been cheaper to maintain (see fig. 5).", "Mission Spaces. Managers from 48 Design Excellence buildings reported  that the effect of design choices related to mission spaces (i.e., spaces in  which federal employees conduct work) increased O&M costs.  Specifically, managers from 32 buildings stated that design choices made  in mission spaces increased repair costs, and managers from 30  buildings reported increased cleaning costs. GSA officials at several  buildings we visited discussed challenges accessing and maintaining  mechanical systems incorporated into tenant mission spaces. For  example, one Design Excellence building includes a heating, ventilation,  and air-conditioning (HVAC) system that is hidden under a raised floor  within mission spaces. Because building managers cannot easily access  the system, there are maintenance delays and challenges identifying and  making necessary repairs, which ultimately result in higher O&M costs.  Building officials reported they considered replacing the HVAC system,  but doing so would cost approximately $55 million. (See fig. 6).", "Other Design Choices. According to Design Excellence building  managers that responded to our survey and at locations we visited, the  effect of several other design choices including energy efficient elements  (e.g., solar panels and green roofs), courtyards, floors, and circulation  (e.g., hallways, stairways, and elevators) increased O&M costs. For  example, according to these officials, (1) the design of green roofs led to  water leaks; (2) the design of courtyards led to problems maintaining  unique landscaping; (3) flooring choices, specifically selected materials,  led to premature scuffing and cracking; and (4) the design of hallways  and stairways made them difficult to maintain."], "subsections": []}]}, {"section_title": "GSA Does Not Fully Consider O&M and Functionality Effects When Making Design Choices", "paragraphs": ["With the Design Excellence Program, GSA aims to create buildings that  are cost-effective and function well for tenants. However, GSA makes  design choices for Design Excellence buildings during the planning and  design stages of new projects without fully considering the effect of these  choices on O&M costs and functionality."], "subsections": [{"section_title": "GSA Does Not Fully Consider How Design Choices Affect O&M Costs", "paragraphs": ["GSA does not estimate most O&M costs during planning and design.  Specifically, according to GSA officials we interviewed and planning  documents we reviewed, when planning and designing new buildings,  officials estimate the costs of major energy systems, such as boilers and  chillers. However, based on our review of GSA and industry data, these  systems only account for about one-third of O&M costs in Design  Excellence buildings. GSA officials stated that they do not estimate the  remaining two-thirds of O&M costs\u2014which include maintenance,  cleaning, and landscaping\u2014until late in the building\u2019s construction.  However, GSA officials also said that it would be costly to make  significant design changes at that point in the process. In addition, the  O&M estimates for maintenance, cleaning, and landscaping are for the  purpose of selecting a contractor to provide these services, not as a  means for addressing or reducing future O&M costs, according to  officials.", "GSA building and regional managers who are responsible for addressing  the O&M consequences of design choices told us that they were not  always integrated or asked to participate in planning and designing new  Design Excellence buildings. Specifically, GSA building and regional  managers at several of the buildings we visited stated that they were  never, or seldom, consulted on O&M costs and issues during the design  process, nor did they have an opportunity to review design documents. A  few GSA building managers we spoke with stated that on rare occasions  when they were consulted their input was rarely incorporated, or was  requested too late in the construction stage to allow for necessary  changes. According to these officials, if given the chance, they could have  highlighted issues with certain design choices that would significantly  increase O&M costs and could have offered potential solutions to reduce  those costs. Officials responsible for overseeing the Design Excellence  Program told us that other officials with an understanding of issues  surrounding O&M are involved in the process for designing new buildings  through, for example, subject matter reviews of the design concepts.  Officials agreed, however, that more could be done to formally involve the  perspective of facilities staff, such as building managers, who are  responsible for the day-to-day management of O&M.", "We found that GSA\u2019s lack of consideration of how design choices may  affect the O&M costs of Design Excellence buildings could be attributed  to existing procedures that do not emphasize the need to consider such  costs during the planning and design stage. Specifically, GSA\u2019s  procedures for planning, designing, and constructing new Design  Excellence buildings focus on design creativity, construction challenges,  budget, and schedule and do not direct GSA to estimate O&M costs  during planning and design. While these procedures promote several  factors to consider in a building\u2019s design\u2014including aesthetics,  functionality, and constructability\u2014and generally require firms to submit  documentation on budget and schedule, they do not call for information  on expected O&M costs. In addition, these procedures do not include  seeking input on design decisions from facilities personnel who will have  responsibility for the ongoing O&M once the building is occupied.", "Federal standards for internal control state that federal agencies should  use complete and relevant information when making decisions and  design control activities, including procedures, to achieve objectives.  These federal standards also state that federal agencies should ensure  the communication of information internally, for example through  procedures that allow management to receive quality information from  personnel, to help achieve the entity\u2019s objectives. In addition, guidance  from GSA and the Office of Management and Budget directs officials to  consider and strive for the lowest possible costs, including O&M costs,  when designing buildings.", "Information on how specific design choices could affect ongoing O&M  costs would allow GSA to better understand the impact of those choices.  Such information is critical as O&M accounts for a significant proportion of  resources dedicated to federal buildings over the long-term. According to  GSA and industry associations, O&M costs are significantly higher over  time than all other costs, including for construction, and typically account  for between 60 and 80 percent of building lifecycle costs. To illustrate  this point, we analyzed GSA construction and O&M data for Design  Excellence buildings. As figure 7 shows, we estimate that over an  average building\u2019s age (60 years) the total construction and O&M costs  for GSA\u2019s 78 existing Design Excellence buildings could be about $18  billion\u2014$8.1 billion for construction (45 percent) and $9.9 billion for O&M  (55 percent). Because GSA\u2019s procedures do not direct officials to  estimate about two-thirds of O&M costs or fully integrate officials with an  understanding of the O&M consequences of design decisions, officials  may not have been aware of how design choices would affect  approximately $6.6 billion (two-thirds of $9.9 billion) in O&M costs. In  addition, without procedures that clearly emphasize the need to more fully  consider O&M costs in Design Excellence buildings during the planning  and design stage, GSA and other stakeholders may not have a complete  picture of all relevant information necessary to make informed decisions  on how to best design future federal buildings.", "GSA realizes that the focus of Design Excellence projects has been on  design and construction, not O&M costs, and, in September 2017,  initiated a process, called \u201cOperational Excellence\u201d, to more fully consider  O&M costs. This process includes considering ways to more fully  consider O&M costs during planning and design, including developing a  cost tool that would estimate future O&M costs. In addition, GSA is  considering ways to update existing procedures for designing and  constructing new buildings to include a more comprehensive evaluation of  potential O&M costs, for example, by more fully integrating  knowledgeable personnel at key stages. However, according to GSA  officials, they are still in the early stages of determining what needs to be  done in part due to a small staff, which includes one full-time employee  and one part-time employee. As of March 2018, GSA has not established  a schedule for updating its procedures to require considering O&M during  design."], "subsections": []}, {"section_title": "Design Excellence Buildings Generally Function Well, but Some Costly Design Choices Did Not Improve Functionality", "paragraphs": ["Most design choices made for Design Excellence buildings, including the  shape and size of courtrooms and the lighting in hallways, have had a  positive effect on overall building functionality (i.e., helped the tenant  agency achieve its mission), according to officials we surveyed and  interviewed. For example, GSA building managers we surveyed reported  the functionality of at least one design choice in most buildings (72 of 78  buildings) as good or very good. Specifically, they reported that in most  buildings, the overall functionality of design choices was good in many of  the areas we asked them about. In addition, building managers reported  that the functionality of the following design choices was also good or  very good:  selected material color (53 buildings) and lighting (58 buildings);  shape and size of the space (61 buildings); pedestrian circulation (61 buildings); and  temperature control in the areas critical for a building\u2019s operation,  such as courtrooms or office space (46 buildings).", "GSA and tenant agency officials whom we interviewed were also positive  about how the design choices affected the functionality of their buildings,  especially the use of windows and atriums to allow natural light. Tenants  also reported they enjoyed other features of the new buildings, including  commissioned artwork and the design of the interior and exterior.  Tenants\u2019 satisfaction with the function of Design Excellence buildings  may, in part, reflect the condition of their previous office space. For  example, one tenant noted that moving from temporary trailers into a  state-of-the-art courthouse was a substantial functional improvement.", "However, we found that increased spending on certain design choices did  not always provide improved functionality for the building tenant. For  example, GSA building managers reported that in many buildings (67 of  78) atriums and lobbies (i.e., vertical penetrations) have increased O&M  costs due to higher repair, cleaning, and energy costs. At the same time,  building managers reported that in 51 of those 67 buildings, choices  made in the design of multistory atriums and lobbies, e.g., material color  and lighting, did not have a positive effect on building functionality (see  table 2). Similarly, the decision to install solar panels and green roofs  (e.g., energy efficient elements), increased O&M costs in several areas,  particularly repair costs, but in over half of the buildings with these  features, building managers did not report an improvement in  functionality. For example, in two courthouses we visited solar panels  installed with the intention of saving on energy costs are not supplying as  much power as expected and, therefore, have not yet provided the  expected energy benefits.", "Tenants we interviewed also noted that in some cases, design choices  have not functioned well and are costly to maintain and operate.  According to a tenant at one Design Excellence office building, while the  decision to construct a multistory atrium has added aesthetic value for  federal employees, it has also resulted in challenges balancing air  pressure between the atrium and the adjacent office spaces. These  differences in air pressure have resulted in uncomfortable working  conditions, such as fluctuating temperatures, which have hampered  productivity. Another tenant told us about design choices such as long  hallways and elevators that do not stop at all floors, making it difficult for  tenant employees to move efficiently through the building. Some of these  design choices, such as elevators with mechanical systems at the bottom  of the elevator shaft, have proven costly to maintain as they age more  quickly. Other tenants noted that the selection of heating and cooling  systems, which automatically adjust building temperatures based on time  of day, for example, have not functioned as planned, resulting in variable  temperatures and employee discomfort.", "In addition, GSA has sometimes made design choices in buildings that do  not apply to one of the primary functional goals of the Design Excellence  Program\u2014to serve as a landmark that positively represents the federal  government to the public. Specifically, GSA does not consider that some  buildings, due to their purpose or location, are unlikely to function as  landmarks because they have limited interaction with or limited visibility  by the public. In this regard, we found that most Design Excellence  buildings (66 of 78) are visible and accessible to the general public, i.e.,  \u201cpublic-facing\u201d. Many of these buildings have succeeded in becoming  public landmarks and several have won awards for their design.  Specifically,", "62 serve as courthouses, which are visible from public streets and  people may enter to observe judicial proceedings or conduct personal  business. See figure 8 for an example of a Design Excellence  courthouse with publicly visible exteriors and interiors.", "Four serve as office buildings for various federal agencies that are  publicly accessible.", "In contrast, we found that 12 Design Excellence office buildings restrict  the public from accessing interior spaces. Specifically,", "Seven can be seen from public sidewalks or roads, even though the  building is not open to the public, such as the U.S. Secret Service  Headquarters and FBI field office buildings. As a result, these  buildings\u2019 exteriors could be public landmarks that represent the  federal government, but the interior design features are not publicly  accessible. For example, the Ronald H. Brown U.S. Mission to the  United Nations Building in New York City has an impressive and  publicly visible exterior fa\u00e7ade but restricts public access to a multi- story rotunda and art space (see fig. 9).", "Five have obstructed views from public roads and sidewalks in  addition to restricting public access to the interior. Neither the  exterior nor interior design choices, which can be expensive to  operate and maintain, in these buildings can be seen or appreciated  by the public. For example, according to the tenant agency and GSA  officials, the visually impressive interior atrium and courtyard at the  Ariel Rios Federal Building have proven logistically challenging and  expensive to maintain and are not accessible to the public. In addition, the fa\u00e7ade of the National Oceanic and Atmospheric Administration  Satellite Operations Facility, which, according to GSA officials, is  expensive to maintain and repair, is not accessible by the public. (See  fig. 10).", "According to GSA officials, when they carry out their planning and design  for Design Excellence buildings, they do not differentiate between  buildings that will be public-facing and those that will not. This approach  may be in part due to the fact that GSA\u2019s procedures for planning and  designing new Design Excellence buildings do not call for consideration  of how design choices may have different functional benefits, including  whether the interior and exterior of planned buildings would be accessible  to the public. Federal standards for internal control state that federal  agencies should use complete and relevant information when making  decisions and designing control activities, including procedures to achieve  objectives. By taking a \u201cone size fits all\u201d approach and not considering  the functionality of design choices, such as how a building\u2019s location and  intended use will affect the public\u2019s ability to see the exterior and interior,  GSA may be selecting design choices that increase O&M costs without  improving functionality."], "subsections": []}]}, {"section_title": "GSA Does Not Systematically Collect and Share Information on Common O&M Cost Experiences That Could Affect Design Choices", "paragraphs": ["According to GSA officials, GSA currently does not systematically collect  and share information on how design choices made for previous Design  Excellence projects have affected O&M costs with the project teams\u2014 consisting of a project manager, contracting officer, and other GSA  officials\u2014that are responsible for overseeing the planning and design of  new buildings. GSA has evaluated what is and is not working effectively  in some existing Design Excellence buildings and has on occasion shared  these evaluations with project teams. For example, GSA has evaluated  the performance of 6 out of 78 Design Excellence buildings. These  evaluations included identifying design decisions that led to higher O&M  costs and, on one occasion, developed a formal presentation to share  these lessons with the team working on a new Design Excellence project.", "According to officials, GSA requires agency personnel with subject matter  expertise to review building design concepts provided by private-sector  architects and engineers. GSA also fosters information sharing through  procedures that encourage project teams to exchange ideas, lessons  learned, and concerns. However, these processes either (1) are not done  in a consistent or systematic way, or (2) require information sharing  among a small group of officials, i.e., a project team, which might not  have visibility over the extensive design choices made in all existing  buildings. While all of these information-sharing initiatives offer benefits,  GSA\u2019s procedures do not include a systematic collection and sharing of  information with the project teams responsible for managing new Design  Excellence projects on how design choices affected O&M costs in  existing Design Excellence buildings. According to GSA officials, they are  considering formalizing this sort of information collection and sharing as  part of the Operational Excellence process, but as previously noted, GSA  is in the early stages of setting up this initiative and has not established a  schedule for completing its actions or updating its procedures.", "As discussed, some design choices in existing Design Excellence  buildings have decreased or increased O&M costs. Since GSA does not  systematically share how these types of design choices affected O&M  costs with teams responsible for planning and designing new buildings,  similar issues could occur in future buildings. For example, we previously  mentioned that building managers indicated that using durable materials,  low maintenance landscaping, and energy-efficient lighting can reduce  long-term O&M costs.", "Building managers also reported common issues caused by design  choices that led to increased costs including:  Inefficiently located mechanical systems. Building managers reported  the location of mechanical systems in Design Excellence buildings  often led to increased cost. Specifically, building managers reported  the location of these systems increased repair costs (41 out of 77  buildings) and energy costs (32 out of 77 buildings). In the Design  Excellence buildings we visited, building managers and tenants  reported issues with the location of mechanical systems (4 buildings).  For example, officials indicated that air-conditioning systems were  placed in inefficient locations that required more energy usage  because water had to be pumped unnecessarily far distances (see fig.  11).", "Difficult-to-access lights. Building managers reported that design  choices for the location of interior lights increased maintenance costs  in the majority of Design Excellence buildings (55). In particular,  managers reported that the location of lights in atriums and lobbies  (38 buildings) and courtrooms and other mission spaces (33  buildings) increased costs. In addition, GSA officials at locations we  visited said that lights above tall staircases, ceiling lights in atriums  and auditoriums, and lights directly above permanent structures led to  additional costs, including the need to use scaffolding or rent large  equipment to maintain these lights. (See fig. 12). One way that a  majority of GSA building managers (61) we surveyed are attempting  to mitigate high maintenance cost for lighting issues is to install  energy efficient equipment, such as light-emitting diode (LED) lights.", "Difficult-to-maintain materials and finishes. In 68 Design Excellence  buildings, building managers reported that materials or finishes were  chosen that are easily worn. Similarly, in buildings we visited (4  buildings), GSA officials reported that decisions on the materials used  or configuration of exterior surfaces (e.g., the roof or fa\u00e7ade) of a  Design Excellence building led to repair and maintenance problems,  particularly water leaks. (See fig. 13).", "Hard to clean surfaces. Cleaning surfaces, especially in atriums, can  be a challenge for maintaining Design Excellence buildings. For  example, building managers we surveyed reported that the decision to  install certain types of window treatments increased cleaning costs  (49 buildings). In three buildings we visited, building managers and  tenants also said Design Excellence buildings required special  equipment or scaffolding to clean windows or surfaces, which led to  increased cleaning costs. (See fig. 14).", "According to federal standards for internal control, agencies should use  and communicate complete and relevant information when designing  control activities, including procedures to achieve objectives. Without a  formalized process for systematically collecting and sharing how design  choices affected O&M costs in existing buildings, designs for future  Design Excellence buildings may not benefit from the successful  strategies used by others to reduce O&M costs or may continue to repeat  problematic choices that may result in increased O&M costs."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Through the Design Excellence Program, GSA has achieved excellence  in architecture and the design of federal buildings. Buildings constructed  under the Design Excellence Program have created unique and  aesthetically pleasing workspaces, have met the functional needs of  tenant agencies, and have become public landmarks. However, because  GSA does not have program procedures that call for consideration of how  certain design features may affect O&M, it may not be fully aware of the  costs of including these features in its building design and plans.  Specifically, GSA does not estimate or gather all perspectives from  building and regional managers on the full O&M costs of design choices,  or consider the extent to which they will improve the functionality of the  building for tenants and the public. For example, GSA\u2019s one-size fits all  approach in designing these buildings does not consider whether non- public buildings need the same costly architectural elements as buildings  intended to serve as public landmarks. Further, GSA is missing  opportunities to improve future building designs by not systematically  gathering and sharing information on the common design choices that  had both positive and negative effects on O&M costs. Without a clear  picture of the ongoing costs of these choices, GSA and other  stakeholders are missing critical information to better inform the design  and construction of new buildings. While GSA has just begun an  Operational Excellence initiative to help identify future O&M costs, it is not  clear what actions GSA will take to improve consideration of O&M costs  during planning and design or when it will take those actions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to GSA:", "The Administrator of the General Services Administration should  update existing procedures to require GSA officials to estimate the full  operations and maintenance costs of design choices in the planning  and design process for new Design Excellence buildings.  (Recommendation 1)", "The Administrator of the General Services Administration should  update existing procedures to require GSA officials to obtain  information from personnel responsible for addressing the operations  and maintenance consequences of design choices at key decision  points during the planning and design of new Design Excellence  buildings. (Recommendation 2)", "The Administrator of the General Services Administration should  update existing procedures to require GSA officials to further consider  and document, during the planning and design of new Design  Excellence buildings, how design choices may affect building  functionality, such as whether a building is publicly visible and  accessible. (Recommendation 3)", "The Administrator of the General Services Administration should  update existing procedures to require GSA officials to systematically  collect and share information with project teams responsible for  overseeing the planning and design of new buildings on the positive  and negative effects of common design choices on operations and  maintenance costs in existing Design Excellence buildings.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to GSA, the U.S. Administrative Office  of Courts, the Department of Homeland Security, the Department of  Justice, and the Department of Commerce for comment. In written  comments, reproduced in appendix IV, GSA stated that it agreed with our  recommendations and provided several technical comments. GSA  clarified its policies for selecting and analyzing the lifecycle costs of  building systems. In addition, GSA stated that table 2 in our report did not  capture the full functional benefits and reasons for making certain design  choices. As we noted in the report, this table does not preclude that a  specific design choice may be functional or have functional benefits. We  also included several of the examples GSA highlighted in their comments,  such as the functional need for a separate structure, which may serve key  security functions. GSA also stated that our conclusions did not indicate  that most Design Excellence buildings functioned well. We added  language to the conclusions to clarify this point.", "The U.S. Administrative Office of Courts, the Department of Homeland  Security, the Department of Justice, and the Department of Commerce  did not provide comments.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of the General Services Administration,  Director of the Administrative Office of U.S. Courts, Attorney General, and  the Secretaries of Homeland Security and Commerce. 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) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report assesses the extent to which: (1) the General Services  Administration (GSA) made design choices that affect operations and  maintenance (O&M) costs; (2) GSA considers O&M costs and  functionality when planning and designing buildings; and (3) GSA  systematically collects and shares information on O&M costs related to  design choices in existing buildings.", "To address all of our objectives, we reviewed applicable federal  regulations; GSA procedures, policies, and standards for designing,  constructing, and operating federal facilities, including specific policies  and procedures for Design Excellence buildings; our prior work; and  reports by other federal agencies and related professional organizations  on topics, including the standard costs of operating and maintaining office  buildings. Our review examined 78 federal buildings and courthouses that  GSA constructed under the Design Excellence Program\u2014referred to as  \u201cDesign Excellence buildings\u201d\u2014since the program started in 1994. At our  request, GSA provided a list of all buildings under the agency\u2019s custody  and control that were constructed under the Design Excellence Program.  Based on input from GSA officials indicating that large campuses were  unlikely to have reliable O&M data, we excluded nine buildings that are  part of the White Oak Campus in Silver Spring, Maryland. We reviewed  relevant GSA documents pertaining to the remaining 78 Design  Excellence buildings, including the most recent Asset Business Plans  detailing investment needs for maintenance and repairs, strategies for  efficient operations, building use, and tenant satisfaction. We analyzed  GSA-provided historical data on construction and O&M costs from 2000  to 2016 for the buildings in our review and projected O&M future costs. To  calculate our projection, we made several assumptions, including (1) that  annual O&M costs would increase at the same level as 2016 O&M costs  ($174 million), and (2) that Design Excellence buildings will reach the  average age of all current GSA buildings (60 years). We assessed the  reliability of these data through electronic testing and reviewing documentation on the data. We determined that the data provided were  sufficiently reliable for the purpose of illustrating the extent to which O&M  costs make up total building costs.", "We also conducted a web-based survey of GSA building managers  responsible for overseeing O&M for the 78 Design Excellence buildings  included in our review. The survey addressed the extent to which certain  design choices affect O&M costs and building functionality. We developed  the survey based on our objectives, prior GAO work, and site visits to 10  Design Excellence buildings. We pretested the survey with GSA officials  at three Design Excellence buildings, which were selected based on  building age, location, total square feet, fiscal year 2016 O&M costs, and  the building\u2019s primary use (e.g., office or courthouse). As part of our  pretesting, we asked GSA building managers to explain their  understanding of survey questions and made edits based on their  comments. We conducted the survey from November 2017 to March  2018 and our response rate was 100 percent (78 out of 78). See  appendix III for a copy of the survey and summarized responses.", "We visited 10 Design Excellence buildings in three GSA regions to view  design choices and O&M activities. As part of these site visits, we  conducted interviews that included tenant agencies located in these  buildings, GSA building managers responsible for managing these  buildings and officials from GSA regional offices with oversight  responsibilities for these buildings. To select our site visit locations and  ensure geographic and agency diversity, we considered several factors  including building operating costs, size, location, and the tenant agency.  Based on these criteria we selected the buildings listed in table 3. The  interviews and tours we conducted during our site visits do not allow us to  generalize the findings to all Design Excellence buildings. Information  gathered from our site visits did allow us to show how O&M costs were  considered in specific Design Excellence buildings and the effects of  design choices.", "We also interviewed GSA officials located in GSA Headquarters within  the Office of Design and Construction, including the Chief Architect, and  the Office of Facilities Management. We also interviewed GSA regional  officials within the Office of Facilities Management in four of GSA\u2019s 11  regional offices: Greater Southwest Region, National Capital Region,  Pacific Rim Region, and Southeast Sunbelt Region. We selected regional  offices based on the location of our site visits and included one additional  regional office based on it having the highest total O&M operating costs of  the eight remaining regional offices. We discussed several topics with  GSA officials, including how O&M costs were considered during planning  and design and how information on the O&M costs of design choices are  shared.", "To determine the extent to which GSA considers O&M costs and  functionality when planning and designing buildings, we analyzed Federal  Real Property Profile (FRPP) data. Our analysis of U.S. government- owned office buildings that are less than 40 years old, occupied, and  needed for a tenant\u2019s mission, identified five potentially relevant variables  to explain variation in the O&M costs: building type (i.e., whether a  building was constructed under the Design Excellence Program), size,  age, and condition of the building, as well as the median hourly wage of  O&M services in the building\u2019s location. After controlling for these  variables, we found that size and median hourly wage but not building  type had a statistically significant relationship to O&M costs. We  assessed the reliability of these data through electronic testing as well as  a review of documentation for each federal data source. We determined  that the data provided were sufficiently reliable for the purpose of  describing our attempts to identify factors that influence O&M costs in  federal buildings. We also requested and received additional information  from the building managers of Design Excellence federal office buildings.  Specifically we asked for information on the extent to which these federal  office buildings are public-facing, have restrictions on public entry and are  visible from public sidewalks or roads, and what the daily volume of public  visitors was.", "We compared GSA\u2019s efforts to consider O&M costs in the planning and  design of Design Excellence buildings to pertinent Standards for Internal  Control in the Federal Government on using complete and relevant  information when making decisions and design control activities, including  procedures, to achieve objectives, as well as on communicating  information internally. In addition, we compared GSA\u2019s efforts to consider  these costs in the planning and design of Design Excellence buildings to  guidance from GSA and the Office of Management and Budget that  directs agency officials to consider and strive for the lowest possible  costs, including O&M costs, when designing buildings. We also  compared GSA\u2019s efforts to consider functionality when planning and  designing these buildings to pertinent Standards for Internal Control in the  Federal Government on using complete and relevant information when  making decisions and design control activities, including procedures, to  achieve objectives.", "To assess the extent to which GSA systematically collects and shares  information on O&M costs related to design choices in existing Design  Excellence buildings, we reviewed Post Occupancy Evaluations  commissioned by GSA on six Design Excellence buildings. These  evaluations contain information, such as how GSA buildings are  performing and the extent to which they comply with GSA\u2019s federal  standards for public buildings. These evaluations can include reviews of  operations and maintenance documentation, interviews and surveys with  building occupants, and interviews with relevant GSA staff, architectural  and engineering design team staff, and an on-site evaluation. We also compared GSA\u2019s process for collecting and sharing how design choices  affected O&M costs in existing buildings to pertinent Standards for  Internal Control in the Federal Government on using and communicating  complete and relevant information when designing control activities,  including procedures, to achieve objectives.", "We conducted this performance audit from May 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Buildings Constructed under the General Services Administration\u2019s (GSA) Design Excellence Program", "paragraphs": ["GSA created the Design Excellence Program in 1994. Under this  program, GSA has constructed 78 buildings in 33 states and the District  of Columbia, buildings that range in size from about 35,000- to over 3- million gross square feet (see table 4)."], "subsections": []}, {"section_title": "Appendix III: Survey of General Services Administration (GSA) Building Managers and Summarized Results", "paragraphs": [], "subsections": [{"section_title": "This appendix provides a copy of the survey completed by managers for all 78 buildings constructed under GSA\u2019s Design Excellence Program included in our review. The appendix also includes the responses received for each of the close- ended questions (1a, 1b, 1c, 1e, 2a, 3a, and 4a); it does not include information on open-ended responses (1d, 1f, 2b, 3b, 3c, 4b, and 5). The purpose of this survey was to gather responses on how design choices affected operation and maintenance (O&M) costs and building function. See appendix I for additional information on our survey methodology.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Keith Cunningham (Assistant  Director); Matthew Cook (Analyst in Charge); Eli Albagli; Sarah Arnett;  Colin Ashwood; Melissa Bodeau; Lacey Coppage; Caitlin Cusati;  Terrence Lam; Joshua Ormond; Dae Park; Minette Richardson; Kelly  Rubin; Ardith Spence; and Dave Wise made key contributions to this  report."], "subsections": []}]}], "fastfact": ["Since 1994, the General Services Administration has spent more than $8 billion to build 78 buildings under its Design Excellence program. Agency officials told us that some design choices\u2014such as use of durable materials\u2014decreased operations and maintenance costs. But others\u2014such as multistory atriums\u2014 increased them. We found that the agency", "makes design choices without fully considering effects on operations and maintenance costs", "does not consistently collect and share information on how design choices affected these costs in existing buildings", "We made 4 recommendations, including that the agency update procedures to address these issues."]}
{"id": "GAO-18-456", "url": "https://www.gao.gov/products/GAO-18-456", "title": "B61-12 Nuclear Bomb: Cost Estimate for Life Extension Incorporated Best Practices, and Steps Being Taken to Manage Remaining Program Risks", "published_date": "2018-05-31T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Weapons in the U.S. nuclear stockpile are aging. To refurbish or replace nuclear weapons' aging components, NNSA and DOD undertake LEPs. The B61-12 LEP is the most complex and expensive LEP to date. In October 2016, NNSA formalized a program cost estimate of about $7.6 billion, which is lower than an independent cost estimate of about $10 billion.", "Senate Report 113-44 included a provision for GAO to periodically assess the status of the B61-12 LEP. This report assesses (1) the extent to which NNSA followed best practices for cost estimation in producing the program cost estimate for the B61-12 LEP; (2) the reasons for differences between the program cost estimate and the independent cost estimate and how the differences were reconciled; and (3) the extent to which NNSA and DOD have identified and managed program risks. GAO assessed the program cost estimate against best practices, reviewed NNSA and DOD documents, conducted site visits to four NNSA and Air Force sites responsible for design, production, and management activities, and interviewed NNSA and DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Nuclear Security Administration (NNSA) incorporated most cost estimating best practices to develop the program cost estimate for the B61-12 Life Extension Program (LEP), which seeks to consolidate four versions of a nuclear weapon\u2014the B61 bomb\u2014into a bomb called the B61-12. As shown in the figure below, the program substantially met best practices for ensuring the estimate was comprehensive, well-documented, accurate, and credible.", "The B61-12 LEP's program cost estimate differs from an estimate prepared by another NNSA office independent of the program primarily because the program used different methods and assumptions than the independent office. The program developed its estimate by compiling cost and schedule estimates for activities at each of the NNSA contractor sites participating in the LEP. In contrast, the independent office evaluated program activities completed to date and applied a historical model to estimate costs and durations for remaining activities. NNSA management met with officials from both offices to reconcile the estimates but did not document the rationale for adopting the program estimate unchanged. GAO recommended in a January 2018 report that NNSA document and justify such decisions, in part because GAO's prior work has shown that independent cost estimates historically are higher than programs' cost estimates because the team conducting the independent estimate is more objective and less prone to accept optimistic assumptions. In response to the January 2018 report, NNSA agreed to establish a protocol to document management decisions on significant variances between program and independent cost estimates, but it has not yet provided evidence that it has done so.", "NNSA and the Department of Defense (DOD) have identified and are managing risks that could complicate efforts to meet the LEP's fiscal year 2025 completion date. Risks within the program's areas of responsibility include an aggressive flight test schedule for bomb delivery aircraft. The program is managing these and other risks with a formal risk management process. The program has also taken steps to address risks outside its direct control, such as risks related to the readiness and certification of the weapon's F-35 delivery aircraft, by providing information to the responsible DOD organizations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making no new recommendations but discusses a prior recommendation that NNSA document and justify decisions regarding independent cost estimates. NNSA provided technical comments, which GAO incorporated as appropriate. DOD did not have any comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) has underscored the significant  contribution of B61 nuclear bombs\u2014the oldest nuclear weapons in the  United States\u2019 active stockpile\u2014to assuring U.S. allies in the North  Atlantic Treaty Organization (NATO) and elsewhere of the U.S.  commitment to global security and nuclear nonproliferation. Critical  components of these bombs are approaching the end of their operational  lives. To maintain the safety, security, and effectiveness of B61 bombs,  the Department of Energy\u2019s National Nuclear Security Administration  (NNSA) and DOD are undertaking a life extension program (LEP) that will  result in a bomb known as the B61-12. The B61-12 LEP\u2014one of four  ongoing LEPs\u2014is the most complex and expensive LEP undertaken  since the Department of Energy began stockpile life extension activities in  January 1996.", "Our past reports on the B61-12 LEP present a mixed record of  improvements and continuing challenges in program management. Most  recently, in February 2016, we reported positive steps, including that the  program had become the first LEP to develop and use an earned value  management system to monitor cost and schedule performance and that  it had developed a database to help monitor and manage program risks,  such as risks related to component design and procurement of parts.  Moreover, we found that the B61-12 LEP is the first NNSA defense  program to issue a cost estimate that integrates all participating NNSA  sites\u2019 costs into a single program cost estimate. In past LEPs, according  to an NNSA official, NNSA had not integrated its individual  site  contractors\u2019 cost estimates, which contributed to program costs being  underestimated. These improvements notwithstanding, we also reported  in February 2016 that the estimated cost and schedule of the B61-12 LEP  had changed significantly since the LEP\u2019s inception. Specifically, we  found that the cost estimate for the program had increased from an initial  rough estimate of about $4 billion at the time of our May 2011 report on  the LEP to about $8.9 billion at the time of our February 2016 report; the  latter estimate included about $7.3 billion for NNSA\u2019s portion of the work  and $1.6 billion for DOD\u2019s portion, which is separately funded. In October  2016, NNSA formalized its cost estimate in a classified baseline cost  report for the LEP at a higher figure of about $7.6 billion. The baseline  cost report also established an estimated program completion date of  fiscal year 2025. Concurrently with the development of the baseline cost  report, NNSA\u2019s Office of Cost Estimating and Program Evaluation  completed an independent cost estimate for the program. The  independent cost estimate projected a higher cost of about $10 billion and  a later completion date of fiscal year 2027 for NNSA\u2019s work on the B61-12  LEP.", "Senate Report 113-44, accompanying S. 1197, a bill for the National  Defense Authorization Act for Fiscal Year 2014, included a provision for  us to examine key elements of the B61-12 LEP and periodically review  the program as it passes through the phases of the process under which  NNSA and DOD jointly manage LEPs. This report examines (1) the extent  to which NNSA followed best practices for cost estimation in producing  the program cost estimate for the B61-12 LEP; (2) the reasons for the  differences between the program cost estimate for the LEP and the  independent cost estimate and how the differences were reconciled, if at  all; and (3) the extent to which NNSA and DOD have identified and  managed risks to the program.", "To examine the extent to which NNSA followed best practices for cost  estimation in producing the program cost estimate for the B61-12 LEP,  we reviewed documentation and data on the program cost estimate and  interviewed program officials responsible for producing the cost estimate  to understand the methods, assumptions, information, and data NNSA  used to produce the estimate. Specifically, we reviewed NNSA\u2019s October  2016 baseline cost report, which is the report through which NNSA  formally established its cost estimate for the B61-12 LEP. We also  reviewed documentation that NNSA site contractors participating in the  LEP provided to the B61-12 program office to assist it in compiling the  baseline cost report. This documentation included documents that  established the bases and assumptions for site contractors\u2019 contributions  to the cost estimate, documents that established the contractors\u2019 work  breakdown structures, and presentations on contractors\u2019 cost estimating  models. In addition, we visited and interviewed federal officials and  contractors at the Pantex Plant in Amarillo, Texas; the Kansas City  National Security Campus in Kansas City, Missouri; and the B61-12  program office in Albuquerque,  New Mexico, where we also interviewed  contractors from Sandia and Los Alamos National Laboratories. We  selected these sites because they are responsible for a range of design  and production activities being undertaken in the program. During these  site visits, we interviewed officials and contractors to discuss their cost  estimating methods, and we viewed classified and unclassified systems  and documents used in compiling the baseline cost report. GAO cost  estimation specialists then assessed this information against the best  practices for cost estimating found in GAO\u2019s cost estimating guide, which  GAO developed to establish a consistent methodology that can be used  across the federal government to develop, manage, and evaluate capital  program cost estimates. We describe these best practices in further  detail in the body of this report.", "To examine the reasons for the differences between the B61-12 program  cost estimate for the LEP and the independent cost estimate and how the  differences were reconciled, if at all, we reviewed information on the  program cost estimate, as discussed above. We also reviewed  information on the independent cost estimate and interviewed officials  from NNSA\u2019s Office of Cost Estimating and Program Evaluation who were  responsible for producing the independent cost estimate, to understand  the methods and assumptions they used. In addition, we interviewed  officials from both the program office for the B61-12 LEP and the Office of  Cost Estimating and Program Evaluation to discuss how NNSA evaluated  and used information from the independent cost estimate and any steps  they took to reconcile the two estimates.", "To examine the extent to which NNSA and DOD have identified and  managed risks to the program, we reviewed documents that establish  procedures these agencies use to manage program risks, including  NNSA\u2019s Risk and Opportunity Management Plan. During the interviews  and site visits described above, we discussed with officials program risks  and the steps NNSA and DOD are taking to manage them, viewed  information in the program\u2019s classified Active Risk Manager database, and viewed weapon components and facilities to better understand the  items and functions described in the documentation under review. In  addition, we visited the Air Force Nuclear Weapons Center in  Albuquerque to discuss program risks and risk management steps and to  discuss and view information in the Active Risk Manager database. We  also interviewed officials from DOD\u2019s Office of Nuclear Matters and the  NNSA Program Execution Officer for LEPs about their views on the  management of the LEP and any risks involved with the program.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes (1) the purpose of LEPs and the process that  NNSA and DOD use to manage them, known as the phase 6.X process;  (2) the management of the ongoing LEP for the W76 warhead\u2014an  important historical reference for the B61-12 LEP\u2014and the status of the  two other ongoing LEPs; (3) future nuclear modernization plans and our  past conclusions and recommendations on the affordability of these  plans; and (4) the objectives of the B61-12 LEP and the roles and  responsibilities of NNSA and the Air Force in conducting the program."], "subsections": [{"section_title": "LEPs\u2019 Purpose and the Phase 6.X Process for Managing Them", "paragraphs": ["NNSA and DOD undertake LEPs to refurbish or replace nuclear weapons\u2019  components to extend their lives, enhance their safety and security  characteristics, and consolidate the stockpile into fewer weapon types to  minimize maintenance and testing costs while preserving needed military  capabilities.", "NNSA and DOD jointly manage LEPs under a multi-step process known  as the phase 6.X process. The B61-12 LEP is currently in phase 6.4  (production engineering) of this process. Figure 1 illustrates the phase  6.X process.", "The phase 6.X process and the roles and functions of DOD, DOE, and  NNSA in nuclear weapon refurbishment activities are described in a  guidance document known as the Procedural Guideline for the Phase 6.X  Process. The document also calls for NNSA to formally update its  program cost estimate and reissue it as the baseline cost report prior to  entering phase 6.4. In January 2017, NNSA issued a supplemental  directive that also directs the Office of Cost Estimating and Program  Evaluation to prepare an independent cost estimate for each nuclear  weapon system undergoing life extension before an LEP enters phase  6.4.", "The Procedural Guideline for the Phase 6.X Process also describes the  roles and functions of two joint bodies that provide oversight and approval  functions to LEPs and other nuclear weapons-related activities: the  Nuclear Weapons Council and its Standing and Safety Committee. The  Nuclear Weapons Council is the joint DOD and DOE activity that serves  as the focal point for interagency activities to maintain the nuclear  weapons stockpile. Its membership includes the Under Secretary of  Defense for Acquisition, Technology and Logistics (generally the Chair);  the Under Secretary of Defense for Policy; the Vice Chairman of the Joint  Chiefs of Staff; the Commander of U.S. Strategic Command; and the  Department of Energy\u2019s Under Secretary for Nuclear Security, who also  serves as the Administrator of the National Nuclear Security  Administration. In addition, the Nuclear Weapons Council charters a  Project Officers Group for each weapon system to provide a technical  forum for weapon development and management activities. Each Project  Officers Group is led by a project officer from either the Navy or Air Force,  the two military services that maintain and operate nuclear weapons."], "subsections": []}, {"section_title": "Management of the W76-1 LEP and Other Ongoing LEPs", "paragraphs": ["According to B61-12 program officials, the W76-1 LEP\u2014which NNSA  expects to complete in fiscal year 2019\u2014has served as an important  historical reference as NNSA prepared its plans and cost estimates for  the B61-12 LEP. In August 2017, NNSA issued a study documenting  lessons learned from difficulties it encountered in managing the W76-1  LEP. According to the study, prior to the W76-1 LEP, NNSA had not  undertaken full-scale weapon system design activities since the 1982  design of the W88 warhead. Among other findings, the lessons learned  study stressed the importance of using modern tools to validate and  manage an LEP\u2019s system and technical requirements to maintain cost,  schedule, and performance during all phases of the program. This finding  is consistent with our March 2009 findings that NNSA and DOD  established an unrealistic schedule for the W76-1 LEP, did not establish a  consistent cost baseline, and did not effectively manage technical risks in  the program. These problems resulted in delays, additional  expenditures, and difficulties tracking the cost of the program. Notably,  the program had to delay first production of the W76-1 from September  2007 to September 2008 when it encountered problems with the final test  batch of a key material, known as Fogbank. We recommended that  NNSA develop realistic schedules for the W76-1 and future LEPs that  build in additional time for unexpected technical challenges that may  delay the programs. NNSA agreed with our recommendation and has  taken steps toward improvement in this area, which we continue to  monitor.", "In addition to the B61-12 and W76-1 LEPs, NNSA and DOD are  managing two other LEPs: the W88 Alteration 370 program and the W80- 4 LEP. Table 1 provides basic information on all four ongoing LEPs."], "subsections": []}, {"section_title": "Future Nuclear Modernization Plans and Their Affordability", "paragraphs": ["In addition to the four ongoing LEPs, NNSA and DOD have outlined plans  for several future nuclear weapon modernization programs:", "Under NNSA\u2019s current program of record, which does not yet reflect  new requirements that will be generated based on the 2018 Nuclear  Posture Review, NNSA has plans for life extension efforts to transition  the nuclear stockpile to three interoperable ballistic missile warheads  and two air-delivered weapons. NNSA has described this plan as  the 3+2 strategy. To undertake this strategy, NNSA has proposed  initiating a series of interoperable warhead programs between about  2020 and 2060. NNSA\u2019s plans for the first ballistic missile warhead in  the 3+2 strategy\u2014the Interoperable Warhead 1\u2014indicate that, if  authorized by Congress, the warhead would cost an estimated $12.4  billion from 2020 to 2041. As we reported in August 2015, NNSA  paused the Interoperable Warhead 1 program in fiscal year 2014 to  provide more time to study the concept of interoperability  and to  reduce uncertainty about the agency\u2019s ability to achieve necessary  plutonium and uranium capabilities to support the LEP. Under its  current program of record, NNSA plans to resume the Interoperable  Warhead 1 program in fiscal year 2019.", "Under its current program of record, NNSA has also begun  preliminary planning for Interoperable Warhead 2, Interoperable  Warhead 3, and B61-12 follow-on programs that, if authorized, would  start in the 2020s and 2030s.", "In the 2018 Nuclear Posture Review, DOD stated a near-term  intention to modify a small number of existing submarine-launched  ballistic missile warheads to provide a low-yield option, and a long- term intention to pursue a modern nuclear-armed sea-launched cruise  missile. The NNSA Administrator stated in March 2018 that NNSA  would continue to work with DOD to determine the resources, time,  and funding required to address these and other policies specified in  the Nuclear Posture Review.", "As we concluded in an April 2017 report, these plans come during a  particularly challenging decade for NNSA\u2019s nuclear modernization efforts,  as the agency plans to simultaneously execute at least four LEPs along  with major construction projects, such as efforts to modernize NNSA\u2019s  uranium and plutonium capabilities. We further concluded that NNSA\u2019s modernization budget estimates for fiscal years 2022 through 2026 may  exceed the funding levels programmed for modernization in future  budgets, raising affordability concerns. Moreover, we concluded that  NNSA had not addressed a projected \u201cbow wave\u201d of future funding  needs\u2014that is, an impending and significant increase in requirements for  additional funds\u2014or the mismatch between potential funding needs and  potential funding available. We recommended that NNSA include an  assessment of the affordability of NNSA\u2019s portfolio of modernization  programs in future versions of the Stockpile Stewardship and  Management Plan\u2014for example, by presenting options NNSA could  consider to bring its estimates of modernization funding needs into  alignment with potential future budgets. NNSA did not explicitly agree or  disagree with our recommendation, but we will continue to monitor any  actions NNSA takes in response to the recommendation."], "subsections": []}, {"section_title": "Objectives of the B61-12 LEP and the Roles and Responsibilities of NNSA and the Air Force", "paragraphs": ["The B61-12 LEP has several objectives: consolidating the nuclear bomb  stockpile, improving the accuracy of the resulting weapon through a new  guidance assembly, and addressing other age-related issues.", "Consolidating the stockpile. Under the B61-12 LEP, NNSA and the  Air Force plan to consolidate and replace four of the five variants of  the B61 that were in the active stockpile at the time the B61 LEP  began.", "Improving accuracy. The B61-12 is to be equipped with a new tail kit  guidance assembly that enables it to be delivered with greater  accuracy than the B61 bombs it replaces, which are equipped with  parachutes. More specifically, according to Air Force officials and  documents, the assembly will provide the B61-12 with a guided  freefall capability while retaining a ballistic (unguided) delivery  capability. The greater accuracy of the B61-12 is to enable the B61-12  to meet all the military requirements for which past versions of the  B61 were designed.", "Addressing other age-related issues. The B61-12 LEP is to extend  the service life of the B61 by at least 20 years, make field  maintenance of the weapon easier for Air Force technicians, and  provide modern security features.", "NNSA manages its B61-12 LEP activities through a federal program  office on Kirtland Air Force Base in Albuquerque, New Mexico, under the  direction of the federal program manager. It manages the work of six  government-owned, contractor-operated NNSA laboratories and sites that  serve as design and production agencies for the LEP. Sandia National  Laboratories, also located on Kirtland Air Force Base, serves as the  systems-level integrator for the overall weapon design. Figure 2 shows  the six sites participating in the B61-12 LEP and their respective roles.", "The Air Force\u2019s responsibilities, in addition to managing the acquisition of  the tail kit guidance assembly, include integrating the B61-12 with its  delivery aircraft and the operational flight program software of these  aircraft. The Air Force Nuclear Weapons Center, also at Kirtland Air Force  Base and under the direction of the Air Force lead project officer,  manages technical integration and other LEP-related tasks required to  qualify, certify, and field the weapon.", "The delivery aircraft that carry the B61-12 are being designed to deliver  the weapon in two different modes with two different systems, the second  of which provides the enhanced capabilities offered by the new tail kit  guidance assembly. System 1 aircraft will have an analog interface with  the B61-12 that is designed to deliver the weapon in a ballistic mode, with  the tail kit in a fixed position. System 2 aircraft will have a digital interface  with the B61-12, enabling the guided delivery capability afforded by the  tail kit assembly. Figure 3 illustrates the delivery aircraft for the B61-12."], "subsections": []}]}, {"section_title": "NNSA Substantially Incorporated Best Practices in Developing the B61- 12 Program Cost Estimate", "paragraphs": ["NNSA substantially incorporated most of the cost estimating best  practices identified by our past work when it developed the $7.6 billion  program cost estimate for the B61-12 LEP. Our cost estimating guide  identifies best practices for developing a high-quality, reliable cost  estimate and identifies four characteristics of such an estimate: it is  comprehensive, well-documented, accurate, and credible. These four  characteristics and some of the best practices that underlie them are  illustrated in figure 4.", "We assessed the B61-12 program cost estimate by comparing it with the  best practices identified in our cost estimating guide and found that it  substantially met the criteria for all four characteristics of a high-quality,  reliable cost estimate (see fig. 5).", "A summary of our assessment is presented below, including reasons that  the program cost estimate substantially met the criteria under each of the  four characteristics as well as some examples of the best practices that  the cost estimate could have more fully incorporated. Appendix  I provides  additional information on our assessment.", "Comprehensive: Substantially Met. The program established a  consistent and clearly defined work breakdown structure\u2014a  hierarchical structure that subdivides the work necessary to  accomplish the program\u2019s objectives into smaller elements\u2014to ensure  that costs were not double-counted or omitted. The clearly defined  work breakdown structure also helped the B61-12 program office  manage the process of integrating each site contractor\u2019s estimate for  the cost of its activities into the overall program estimate. To more  fully incorporate the criteria for a comprehensive cost estimate, the  program would have had to take additional steps, such as including  the full life-cycle costs associated with the B61-12 weapon in the  estimate. Specifically, the estimate would have had to include costs  such as program costs incurred prior to phase 6.3, the cost of NNSA  federal program office personnel, components that are being shared  by different nuclear weapon programs (such as the weapon\u2019s radar),  and costs associated with maintenance of the B61-12 after the LEP  ends and the weapon enters the stockpile. In addition, the estimate  would have had to include an assessment of how the program would  be affected if key assumptions, such as the timing of the delivery of  the tail kit guidance assembly, did not hold true. Nevertheless, the  program incorporated practices that substantially met the criteria for a  comprehensive cost estimate, which we believe contributed to the  program\u2019s estimate being reliable.", "Well-documented: Substantially met. In our visits to NNSA sites  and our associated review of site contractors\u2019 documents, we found  that site contractors provided detailed documentation of their  contributions to the cost estimate to the B61-12 program office. At all  of the sites we visited, experienced cost estimating teams captured  specific information on the data and data sources used to inform their  estimates. To more fully incorporate the criteria for a well-documented  cost estimate, the documentation that the site contractors provided to  the NNSA program office would have had to capture the reliability of  the underlying data and discuss how the data were normalized.  Nevertheless, the program incorporated practices that substantially  met the criteria for a well-documented cost estimate, which we believe  contributed to the program\u2019s estimate being reliable.", "Accurate: Substantially met. Technical personnel at both the NNSA  sites and the Albuquerque  federal program office discussed program  risks to ensure that the program estimate represented a most likely,  unbiased cost. Furthermore, all of the site-level cost estimates we  examined\u2014which the federal program office integrates into the overall  program cost estimate\u2014drew on historical data from primary sources,  including internal financial systems from either past B61 costs or  previous LEPs. Use of such sources is consistent with the best  practice of grounding the estimates in a historical record of cost  estimating and actual experiences on other comparable programs. In  addition, the federal program office routinely reviews contract  performance reports from each of the B61-12 sites to track variances  between estimated and actual costs on a monthly basis. To more fully  incorporate the criteria for an accurate cost estimate, the program  would have had to use site estimates that were calculated in base- year dollars and then uniformly adjusted for inflation at the program  level, and clearly defined the method it used to determine inflation  indexes. Instead, all of the site contractors developed their cost  estimates in then-year dollars and applied varied inflation indexes.  Nevertheless, the program incorporated practices that substantially  met the criteria for an accurate cost estimate, which we believe  contributed to the program\u2019s estimate being reliable.", "Credible: Substantially met. The B61-12 LEP became the first LEP  to undergo a statutorily required independent cost estimate,  conducted by the Office of Cost Estimating and Program Evaluation.  Additionally,  a different NNSA office developed a third cost estimate  for the program to aid in the preparation of NNSA\u2019s budget materials.  Each of these three estimates used a different methodology. NNSA  used this third estimate to cross-check overall program costs.  Moreover, to assess risk and uncertainty in the program, most of the  site estimates we reviewed included a detailed, quantifiable risk  assessment for their portion of the overall program estimate. To more  fully incorporate the criteria for a credible cost estimate, the program\u2019s  sensitivity analysis would have had to more fully examine and  document cost impacts for the overall estimate and the individual site  estimates. Instead, according to NNSA officials, it focused primarily  on schedule and critical path analysis. Moreover, to more fully  incorporate the criteria for a credible cost estimate, the program would  have had to address risk correlation and the calculation of confidence  levels differently. In the program\u2019s analysis of risks and uncertainties  in the program, we found the program inconsistently examined  correlation among program risks. Specifically, according to NNSA  officials, to arrive at the 70 percent confidence level for the overall  program cost estimate, the program office added site-level cost  estimates together at the 50 percent and 70 percent confidence  levels. As noted in our cost guide, adding risk results for the  underlying estimates in this way results in an incorrect confidence  level for the overall estimate. Nevertheless, the program  incorporated practices that substantially met the criteria for a credible  cost estimate, which we believe contributed to the program\u2019s estimate  being reliable.", "We consider a cost estimate to be reliable if the overall assessment  ratings for each of the four characteristics are substantially or fully met\u2014as was the case with the B61-12 program cost estimate, which  substantially met these criteria. For that reason, we are not making  recommendations related to the program\u2019s use of cost estimating best  practices. However, by fully incorporating all of the best practices for the  four characteristics, NNSA can better ensure that its future cost estimates  are of high quality and reliable."], "subsections": []}, {"section_title": "Varying Methods and Assumptions about Future Program Performance Led to Differences between the Estimates, but NNSA Did Not Document the Rationale for Adopting the Program\u2019s Estimate Unchanged", "paragraphs": ["The $7.6 billion program cost estimate for the B61-12 LEP differs from the  $10 billion independent cost estimate primarily because the program  office used different methods and assumptions than the Office of Cost  Estimating and Program Evaluation, which prepared the independent cost  estimate. The B61-12 program developed its estimate by compiling site- specific cost and schedule estimates for activities at each of the NNSA  sites participating in the LEP; in contrast, the independent cost estimate  projected a cost and completion date by evaluating program activities  completed to date and applying a historical model to estimate costs and  durations for remaining activities. As noted in our cost guide, both of  these methods are commonly applied. To reconcile the differences  between the two estimates, high-ranking NNSA officials met with officials  from the B61-12 program office and the Office of Cost Estimating and  Program Evaluation to discuss the estimates in 2016. However, NNSA  did not document the rationale for its decision to use the program office\u2019s  lower estimate unchanged or a plan for how it would take the independent  cost estimate into consideration. We previously recommended that NNSA  should establish a requirement for its management to document and  justify key decisions based on a reconciliation of LEP cost estimates with  the Office of Cost Estimating and Program Evaluation\u2019s independent cost  estimates. NNSA agreed with this recommendation."], "subsections": [{"section_title": "The B61-12 Program Office and the Office That Developed the Independent Cost Estimate Used Different Estimating Methods and Assumptions", "paragraphs": ["Cost estimating best practices specify that programs should develop a  point estimate\u2014the best guess at the program\u2019s cost estimate, given the  underlying data\u2014by collecting, analyzing, and validating program data  and then using one of several commonly used methods for estimating the  program\u2019s cost. Once a program has developed a point estimate, the  program should compare it to an independent cost estimate, which gives  an objective measure of whether the program\u2019s point estimate is  reasonable. In January 2017, NNSA issued two directives implementing  statutory requirements for the Office of Cost Estimating and Program  Evaluation to develop independent cost estimates for NNSA programs,  including LEPs.", "The differences between the respective cost estimating methods, both of  which are valid, used by the B61-12 program office and the Office of Cost  Estimating and Program Evaluation are the primary reason for the  differences between the program estimate and the independent cost  estimate. According to B61-12 program officials, the program generally  developed its point estimate by using a \u201cbottom-up\u201d method formally  known as the \u201cengineering build-up\u201d cost estimating method. In using this  method, a program subdivides the work necessary to accomplish its  objectives into a work breakdown structure. The program then develops  estimates of costs at the lowest level of the work breakdown structure,  one piece at a time, and uses the sum of the pieces to form the overall  estimate. To develop its cost estimate, the B61-12 program office  required all participating NNSA site contractors to prepare and submit  their own cost estimates for the work to be performed on the LEP and  provided instructions on what data to provide to the program office. For  example, these instructions specified that all sites must apply a bottom-up  estimating approach that includes detailed quantities and integrated  resource-loaded schedules for all work breakdown structure elements  under their management. The program office then compiled the site- provided information in a database to arrive at a total program cost. The  program office also aggregated schedule information from the sites,  which maintain detailed resource-loaded integrated site schedules, to  develop an NNSA Integrated Master Schedule. As we previously noted,  the program office estimated in October 2016, based on this process, that  NNSA\u2019s portion of work on the B61-12 LEP would cost $7.6 billion and  that the LEP would be completed in fiscal year 2025, with a first  production unit date of March 2020.", "In contrast, to develop the independent cost estimate, the Office of Cost  Estimating and Program Evaluation used an estimating method that  employed data on the B61-12 LEP\u2019s actual performance, coupled with  historical information from the W76-1 LEP for stages of the phase 6.X  process that the B61-12 LEP had not yet reached. Specifically, the office  gathered data on 1,600 activities in the NNSA Integrated Master  Schedule for the LEP. The office tracked these 1,600 activities from  August 2014 through March 2016 by evaluating data from successive  versions of the NNSA Integrated  Master Schedule, which the B61-12  program office updates monthly based on actual program performance to  date. In a memo summarizing the office\u2019s independent cost estimate, the  office stated that the program\u2019s task completion rate lagged the baseline plan. The office concluded that the LEP\u2019s first production unit date would  occur 2 years after the March 2020 target date unless the program took  measures to reduce the LEP\u2019s scope by removing tasks, delaying  activities until after the first production unit date, or relaxing requirements  to accommodate less mature components than originally planned. The  office also concluded, based on the program\u2019s spending rate of  approximately $45 million per month, that pre-first production unit costs  would increase by about $1 billion over the program\u2019s estimate. To  estimate the cost and schedule of the program after the first production  unit date, the office used both B61-12 LEP actuals and historical  information from the W76-1 LEP, comparing W76-1 funding levels to B61- 12 spending levels. On the basis of its analysis, the office concluded that  full-scale production of the B61-12 would cost approximately $1 billion  more than the program office estimated. All told, the independent cost  estimate projected that the B61-12 LEP would cost approximately $10.0  billion and take about 2 years longer\u2014with a projected completion date in  fiscal year 2027\u2014barring changes to the program\u2019s scope.", "The B61-12 program office and the Office of Cost Estimating and  Program Evaluation also have differences of opinion regarding the  continued validity of the August 2014 schedule performance data and its  relevance to the independent cost estimate. According to B61-12 program  officials, the information in the NNSA Integrated Master Schedule  improved and changed after the Office of Cost Estimating and Program  Evaluation gathered initial schedule performance data in August 2014  and used this information as a starting point to evaluate the program\u2019s  performance. These issues include the following:", "The officials described the data available to the Office of Cost  Estimating and Program Evaluation in August 2014 as tentative,  saying that the program can now use the NNSA Integrated Master  Schedule to track performance at a more detailed level.", "According to B61-12 program officials, the program made important  decisions that affected components on the program schedule\u2019s critical  path at the time the August 2014 schedule performance data were  gathered. Subsequent to establishing the baseline, for example, the  program office restructured the path to first production unit for high- explosives components, correcting errors that had been captured in  the August 2014 data and changing to a more streamlined approach  to qualify high-explosives components from legacy material. This  decision affected the program\u2019s critical path to first production unit,  moving the completion date earlier.", "The program undertook schedule recovery efforts that eased  schedule constraints affecting other program elements that were on  the critical path at the time of the August 2014 data.", "As a result of these factors, B61-12 program officials said that the entire  baseline schedule that the Office of Cost Estimating and Program  Evaluation analyzed appeared more problematic than the updated  schedule and that the entirety of the independent cost estimate was  thrown off by the obsolete August 2014 data.", "Officials from the Office of Cost Estimating and Program Evaluation told  us they disagree with the B61-12 program office\u2019s assessment of the  independent cost estimate schedule analysis. These officials said that  they understand that the schedule baseline is continuously changing but  that the independent cost estimate schedule analysis is not dependent on  a particular baseline. Rather, they said that the analysis is based on  actual schedule performance for the 1,600 activities that represent the  scope required to achieve the design maturity and that the program office  specified in August 2014 as needed to reach the first production unit  (phase 6.5) milestone.", "Officials from the Office of Cost Estimating and Program Evaluation said  that although they will not formally assess the B61-12 LEP\u2019s schedule  again until the end of phase 6.4 of the program, their informal analysis of  NNSA Integrated Master Schedule data as of February 2017 still showed  the same rate of activity completion that underpinned the office\u2019s  independent cost estimate. At some point, according to these officials, the  program will have to double or even triple its rate of activity completion to  finish the LEP on schedule, which will increase cost. In contrast, B61-12  program officials stated that, given the improved quality of the program\u2019s  integrated master schedule data, they expect that the independent cost  estimate that the Office of Cost Estimating and Program Evaluation  prepares at the end of phase 6.4 of the LEP will be closer to the  program\u2019s estimate than to the October 2016 independent cost estimate.", "Program officials also said that the program\u2019s performance to date  supports their position that the program cost estimate is accurate.", "The positions of the two offices also differ regarding the B61-12  program\u2019s ability to accelerate work in the production stages of the LEP to  ensure that the LEP meets its completion date. B61-12 program officials  stated that they have options other than to complete tasks sequentially  and at a steady rate, so they do not expect the \u201cstraight-line\u201d level of  productivity assumed in the independent cost estimate analysis to occur.  For example, some parts do not have to be built in a particular sequence.  Instead, program officials said, the production agencies can build different  lots of components when they are ready, so technologies that are ready  earlier than others can be moved to production in the war reserve lot  while other components remain in earlier stages. They also said that the  program would not maintain an even spending rate of $45 million per  month, as suggested in the independent cost estimate. Rather, they  noted, the program\u2019s spending rate is currently $55 million a month, and  the program plans for it to rise to $65 million per month as the current  production engineering phase of the LEP draws to a close and the  production agencies accelerate their activities. These factors  notwithstanding, one Office of Cost Estimating and Program Evaluation  official observed that activities in the later stages of an LEP remain  complex and carry risks. The official cited the history of the challenges  that led to the delay of first production of the W76-1, cited earlier in this  report, and said that the B61-12 program faces the added challenges of  having to integrate with several delivery aircraft and of having more  electronic components than the W76-1. As noted in our cost estimating guide, studies have shown limited opportunity for getting a delayed  program back on track after it is more than 15 percent to 20 percent  complete."], "subsections": []}, {"section_title": "NNSA Officials Met to Reconcile the Program\u2019s Cost Estimate and the Independent Cost Estimate but Did Not Document the Rationale for Adopting the Program\u2019s Estimate Unchanged", "paragraphs": ["Cost estimating best practices specify that a program cost estimate and  an independent cost estimate should be reconciled and that differences  between them should be examined and discussed to achieve  understanding of overall program risk. Officials from NNSA, including  from the Office of Cost Estimating and Program Evaluation and the B61- 12 program office, told us that they held several discussions in 2016  regarding the differences between the program estimate and the  independent cost estimate. These included a meeting with the second- highest ranking official in NNSA\u2014the principal deputy administrator\u2014 during which the respective offices presented their estimates and  explained the methods used to produce them. After these meetings, the  principal deputy administrator and the NNSA Administrator agreed to  approve the program estimate unchanged.", "According to B61-12 program officials, the program adapted some of its  practices as a result of their interactions with the Office of Cost Estimating  and Program Evaluation. For example, officials said that they changed  the program\u2019s procedure for baseline changes to ensure consistency  across the participating sites. The program also began to conduct  baseline execution index analyses, as the Office of Cost Estimating and  Program Evaluation recommended. Baseline execution index analyses  track a program\u2019s execution of tasks to date by monitoring the percentage  of activities that a program has completed early or on time and that have  a baseline for completion within the month the analysis is conducted.  According to program officials, similar to a schedule performance index in  an earned value management system, the baseline execution index gives  an alternate cumulative measure that gives a program an opportunity to  improve as it proceeds.", "However, B61-12 program officials said that they did not document the  rationale for adopting the program cost estimate without making changes  informed by the independent cost estimate. They told us that any attempt  to combine the results of the two estimates would have been difficult,  considering the significant differences between the program\u2019s cost  estimating model and the Office of Cost Estimating and Program  Evaluation\u2019s model. We recommended in a January 2018 report that  NNSA should establish a requirement for its management to document  and justify key decisions based on a reconciliation of LEP cost estimates  with the Office of Cost Estimating and Program Evaluation\u2019s independent  cost estimates. We concluded in the report that without a requirement  for its management to document and justify key decisions based on a  reconciliation of program cost estimates with the Office of Cost Estimating  and Program Evaluation\u2019s independent cost estimates, NNSA may not  have assurance that the independent cost estimates are being  appropriately incorporated into the LEP decision-making process,  potentially decreasing the reliability  of program cost estimates. Our prior  work has shown that, in general, because the independent cost estimate  team is outside the acquisition chain, is not associated with the program,  and has nothing at stake with regard to program outcome or funding  decisions, its estimate is usually considered more accurate than the  program\u2019s internal estimate. In addition, our prior work has shown that  independent cost estimates are historically higher than program office  cost estimates because the team conducting the independent cost  estimate is more objective and less prone to accept optimistic  assumptions. However, we have also found that because independent  cost estimates are typically higher than program office cost estimates, in  some cases management may choose to ignore them because the  estimates are too high. NNSA agreed with our January 2018  recommendation, stating that by March 2018, it would establish a protocol  to document management decisions regarding significant variances  between LEP cost estimates and the independent cost estimates  produced by the Office of Cost Estimating and Program Evaluation.  However, NNSA has not provided evidence that it has done so. We  continue to believe that documenting key decisions regarding cost  estimates is particularly important in the context of LEPs, where decisions  could increase a program\u2019s costs by billions of dollars."], "subsections": []}]}, {"section_title": "NNSA and DOD Have Identified Risks and Are Taking Steps to Manage Them", "paragraphs": ["NNSA and DOD have identified and are managing various risks that  could complicate efforts to meet the fiscal year 2025 completion date for  the B61-12 LEP. Some of these risks that the agencies are managing are  within the program\u2019s areas of responsibility, such as an aggressive flight  test schedule, and additional risks could be identified within these areas.  To manage risks, the program uses a formal risk management process  and has taken steps such as consolidating flight tests and holding more  regular meetings between NNSA\u2019s design and production agencies. The  program also faces risks that program officials told us lie outside the  program\u2019s direct control\u2014such as risks related to the F-35 delivery  aircraft, nuclear certification, and NATO coordination issues\u2014and officials  said they have provided information to the responsible DOD organizations  to help address these risks."], "subsections": [{"section_title": "NNSA and DOD Have Taken Steps to Identify and Help Manage Risks within the Program\u2019s Responsibility, and They May Identify Additional Risks", "paragraphs": ["NNSA and DOD have taken steps to identify and help manage risks  within the B61-12 LEP\u2019s responsibility, and program officials said that  they may identify additional risks as the program progresses. More  specifically, the program has a formal risk management process through  which it has identified risks and could identify additional risks as the  program proceeds, according to agency officials. Risks already identified  and being managed include risks related to the program\u2019s aggressive  schedule of flight tests and to finalizing design and coordinating  procurement and delivery of components."], "subsections": [{"section_title": "Risk Identification Process", "paragraphs": ["The B61-12 LEP has a formal risk management process that has  identified joint NNSA and Air Force risks within the program\u2019s areas of  responsibility that could significantly impact the overall program\u2019s  schedule, its cost, or the technical performance of the weapon. According  to program officials and the Program Joint Risk Management Plan, this  process calls for each program element in NNSA or the Air Force to be  responsible for identifying and managing risks at the lowest level  possible. After the program element reviews and documents a risk, it then  reviews the risk to determine its applicability to be considered a joint  risk\u2014that is, a risk that has the potential to affect any of the top-level  program milestones or the program\u2019s ability to successfully meet system  performance requirements. Program officials told us that the Air Force  lead project officer decides whether to accept the risk into the joint risk  list. Senior management oversees those risks through a formal  management plan.", "The process includes continual reviews to identify new risks that may  emerge. The Joint Risk Review Board meets as new potential risks are  identified to review their likelihood and consequence. Officials from both  the Office of Cost Estimating and Program Evaluation and DOD\u2019s Office  of Nuclear Matters told us that during phase 6.4 and thereafter, the  program may still discover new risks\u2014\u201dunknown unknowns\u201d\u2014during  technical tests to qualify components and the development of production  processes.", "The process also has steps to manage risks and remove them from the  joint high-risk list, if the Joint Risk Management Board judges them to  have been resolved to closure or a low-risk status, according to program  officials. NNSA and DOD program officials said that the program\u2019s risk  management process has resulted in the resolution of about three- quarters of the identified high risks on the joint risk list. They also  observed that the program\u2019s Selected Acquisition Reports, through which  NNSA and the Air Force report to the congressional defense committees  on the program\u2019s cost and schedule, have been unchanged since 2013  regarding major program milestones. Program officials said that to  provide a 90-day schedule buffer and add flexibility to the program\u2019s  schedule in the event of unexpected difficulties, the program has planned  to reach phase 6.5 in December 2019, ahead of the phase 6.5 date of  March 2020 that is reported in the Selected Acquisition Reports.  However, other officials told us that it is too soon to say whether the  program can manage the identified risks, or other unidentified risks, to  prevent delays in a program that has relatively little schedule margin.  Problems can emerge even during the first production stage of an LEP,  as happened in the W76-1 LEP due to the Fogbank production  challenges we discuss earlier in this report and in our March 2009 review  of W76 and B61 modernization efforts."], "subsections": []}, {"section_title": "Managing Risks Related to the Program\u2019s Aggressive Schedule of Flight Tests", "paragraphs": ["DOD and NNSA officials we interviewed generally agreed that the  program faces risks in completing an aggressive flight testing schedule to  support the first production unit deadline. According to the officials, the  B61-12 program needs to complete more than 60 flight tests over a 3- year period to meet this deadline. Completing the tests entails actively  coordinating with the Air Force organizations that manage the various  aircraft that will carry the B61-12 weapon: the B-2 bomber and the F-15,  F-16, F-35, and PA-200 fighters. According to B61-12 program officials,  aircraft may not be available when needed for the planned flight testing.  This risk is of particular concern for B-2 bombers, they said, because only  one B-2 test unit is available and it is in heavy demand for other Air Force  purposes. Program officials characterized the flight test schedule as  aggressive and ambitious, but feasible, and told us the program has  managed the risks caused by the tight testing timeframes by coordinating  with the responsible organizations and consolidating tests to minimize the  amount of time required on each type of aircraft. Further, when aircraft  are not available as planned, program officials said they can revise the  sequence of tests. For instance, they accommodated the unavailability  of  a B-2 test asset on a planned test date by moving up a test date on the F- 16. This schedule adjustment avoided a ripple effect of delays on the  overall testing schedule, according to Air Force officials. The video in  figure 6 shows an F-16 dropping an inert B61-12 bomb during a flight test  on March 14, 2017.", "NNSA and DOD have identified and taken steps to manage risks related  to finalizing the weapon\u2019s design and coordinating the procurement and  delivery of components. These risks include:", "Technical risks associated with the design and production of  various components. Officials told us some components of the  bomb and tail kit assembly are on the program\u2019s list of joint risks.  They said that their use of the joint risk management process calls  management attention to potentially  serious risks and helps the  program to manage these risks as early and as continually as  possible. For example, NNSA officials said that when technical risks  arose in designing one classified component on the program\u2019s critical  path\u2014potentially affecting the design schedule\u2014they augmented the  design team with additional scientists in an effort to ensure that the  component would be completed in time to support the production  schedule. Similarly, to manage design risks related to the exacting  specifications for certain components, Kansas City National Security  Campus is working to develop sufficiently precise gages to measure  the required specifications during production.", "Late design changes from design agencies provided to the  production agencies. NNSA\u2019s Fiscal Year 2018 Stockpile  Stewardship and Management Plan identified late changes to  component design as a risk facing the B61-12 program and other  LEPs. Contractor officials we interviewed from the Kansas City  National Security Campus and the Pantex Plant said that late  changes to weapon design requirements from the Sandia and Los  Alamos design agencies could create schedule problems for  establishing production processes at the production sites. Kansas City  National Security Campus officials expressed concerns that some  component requirements continue to change\u2014some arising from  testing results\u2014which creates a tension between improving the  design and stabilizing production requirements and processes. Pantex  officials also told us about a potentially significant production delay if  late design changes require Pantex to get new production tools or  testers. Late design changes could occur as scientists at the design  agencies analyze test results. Flight tests, for example, produce a  volume of information. Officials at the federal program office in  Albuquerque said that 4 test flights on the B-2, conducted in July  2017, produced 4 to 6 hours\u2019 worth of data per flight. Officials at both  the Pantex and Kansas City sites said they have developed  management strategies to provide some flexibility in their production  schedules, such as speeding production by having staff work longer  shifts. Moreover,  because of lessons learned from prior LEPs, officials  at both sites told us that coordination between production sites and  design agencies has significantly improved over past practices\u2014 specifically, by having ongoing engagement that started earlier in the  weapon development process. For instance, Pantex officials told us  that they hold monthly meetings with design agencies to discuss  design changes. A Pantex official told us that, as a result of  addressing production concerns early, design requirements  developed at the design agencies are less likely to result in  unanticipated production problems.", "Vendor risks associated with procuring various bomb  components. According to NNSA officials we interviewed, some  bomb components are procured through single commercial vendors,  in small lots, or are unusual. Kansas City National Security Campus  officials told us that they had to replace one vendor that could no  longer provide a certain material and that they generally risk losing  potential or existing vendors because vendors prefer contracts for  larger volumes of components than NNSA needs for the B61-12  bomb. In addition, unique materials for the bomb include certain  components with specific compositions of rubber and plastics.  Officials at the Kansas City National Security Campus said that they  have encountered difficulties with getting rubber and plastic  components from vendors that consistently meet composition  specifications or with sustaining vendors\u2019 interest in producing small  batches of precision-manufactured components. In one such instance,  they said they improved incentives and communication with a vendor  to avoid losing a source for a key component. The officials said they  also contract with smaller vendors when larger vendors may not be  interested in the size of the contract NNSA offers.", "Delays in delivery of components from other production sites to  Pantex for full bomb assembly. NNSA and Pantex officials told us  that Pantex, which will assemble the full B61-12 bomb, depends on  the other production sites delivering the components in a timely  manner. NNSA production sites are scheduled to provide components  to Pantex 120 days before the first production unit date. Pantex and  NNSA officials have identified some schedule flexibility  for assembling  the first production unit at Pantex, depending on which components  have delayed deliveries. Specifically, if the delayed components are  those needed later in the assembly process, such as the bomb\u2019s nose  assembly, Pantex could stay on schedule by assembling other  delivered components until the delayed components are needed.  Delivery of other components, such as detonators, is more time- sensitive, and it is essential that these be delivered on time for  assembly to proceed as planned, according to Pantex officials."], "subsections": []}]}, {"section_title": "NNSA and DOD Have Taken Steps to Identify and Help Manage Risks outside the Program\u2019s Direct Control", "paragraphs": ["According to program officials, certain risks that may have a bearing on  the B61-12 LEP or that may affect the fielding of the weapon lie in areas  outside the program\u2019s direct control. Nevertheless, program managers  have taken steps to coordinate with other responsible parties to help  address these risks. For example, two of the three delivery aircraft  designated as system 2 aircraft\u2014the F-35 and the B-2\u2014have not yet  completed development and procurement of operational flight program  software that will enable the aircraft to deliver the B61-12 with the  enhanced accuracy offered by the tail kit assembly, a key feature of the  LEP. B61-12 program officials told us that the program offices  responsible for each of these aircraft must manage the development and  procurement of the operational flight program software. To help inform the  software development process, the B61-12 program provided the F-35  and B-2 program offices with information about the weapon\u2019s interface  with the airplane, including information from flight tests performed on an  earlier version of the F-35, according to program officials. NNSA and  DOD officials characterized B-2 development related to the B61-12 as  significantly more advanced than F-35 development. Specifically, Air  Force officials said that a developmental version of the B-2 operational  flight program software was fielded and certified in 2017 and would  undergo final weapon system demonstration flight tests in October 2019  and nuclear design certification in June 2020. By contrast, they said that  the F-35 software will not be ready for nuclear design certification until  January 2023, after the B61-12 program\u2019s first production unit date. The  F-35 program office will be responsible for funding tests and aircraft- weapon integration activities, according to the Air Force officials. Because  of the need to defer some flight tests until the software for the B-2 and F- 35 aircraft is ready, only one of the three system 2 delivery aircraft has  undergone testing of the B61-12 bomb\u2019s capabilities in its system 2  setting: the F-15E, on which NNSA and DOD conducted the first system 2  tests of the B61-12 in August 2017.", "Other risks outside the program\u2019s direct control concern nuclear  certification and the NATO mission. Nuclear certification\u2014ensuring that  people and objects that come into contact with the weapon will not  adversely affect its performance characteristics\u2014is a prerequisite to  fielding the B61-12 and other nuclear weapons, but it is the responsibility  of the Air Force organizations that manage the delivery aircraft. In a  classified report issued in January 2018, we discuss risks related to  nuclear certification of dual capable aircraft, which are able to deliver  conventional munitions or nuclear bombs. B61-12 program officials told  us that they are working to address these risks by providing information  on the weapon to all of the organizations that manage the delivery  aircraft. Similarly, in another classified report issued in February 2018, we  discuss a risk related to the NATO mission that may affect the B61-12  LEP; program officials told us that they are working to address this risk,  as well. We made recommendations in the two classified reports related  to these risks; the responsible agencies agreed with our  recommendations and stated their intention to take action in response to  them."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to NNSA and DOD for comment.  NNSA provided technical comments, which we incorporated as  appropriate. DOD indicated that it did not have any comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense and Energy, the Administrator of  NNSA, and other interested parties. In addition, this report is available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made significant  contributions to the report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Results of GAO\u2019s Assessment of the B61-12 Life Extension Program Cost Estimate Compared with Best Practices", "paragraphs": [], "subsections": [{"section_title": "Characteristic Comprehensive", "paragraphs": ["Best practice  The cost estimate includes all life cycle costs.  The cost estimate completely defines the program,  reflects the current schedule, and is technically  reasonable.  The cost estimate work breakdown structure\u2014a  hierarchical structure that subdivides the work necessary  to accomplish the program\u2019s objectives into smaller  elements\u2014is product-oriented, traceable to the  statement of work/objective, and at an appropriate level  of detail to ensure that cost elements are neither omitted  nor double-counted.  The estimate documents all cost-influencing ground rules  and assumptions.   The documentation should capture the source data used,  the reliability of the data, and how the data were  normalized.  The documentation describes in sufficient detail the  calculations performed and the estimating methodology  used to derive each element\u2019s cost.  The documentation describes step by step how the  estimate was developed so that a cost analyst unfamiliar  with the program could understand what was done and  replicate it.  The documentation discusses the technical baseline  description, and the data in the baseline is consistent  with the estimate.  The documentation provides evidence that the cost  estimate was reviewed and accepted by management.  The cost estimate results are unbiased, not overly  conservative or optimistic, and based on an assessment  of most likely costs.  The estimate has been adjusted properly for inflation.", "The estimate contains few, if any,  minor mistakes.  The cost estimate is regularly updated to reflect  significant changes in the program so that it always  reflects current status.  Variances between planned and actual costs are  documented, explained, and reviewed.   The estimate is based on a historical record of cost  estimating and actual experiences from other  comparable programs."], "subsections": []}, {"section_title": "Characteristic Credible", "paragraphs": ["Best practice  The cost estimate includes a sensitivity analysis that  identifies a range of possible costs based on varying  major assumptions, parameters, and data inputs.  A risk and uncertainty analysis was conducted that  quantified the imperfectly understood risks and identified  the effects of changing key cost driver assumptions and  factors.  Major cost elements were cross checked to see whether  results were similar.  An independent cost estimate was conducted by a group  outside the acquiring organization to determine whether  other estimating methods produce similar results."], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Jonathan Gill (Assistant Director),  Rob Grace (Analyst in Charge), Terry Hanford (Senior Analyst), and  Jennifer Leotta (Senior Operations Research Analyst) made key  contributions to this report. Also contributing to this report were Antoinette  C. Capaccio, Scott Fletcher, Penney Harwell Caramia, Cynthia Norris, Karen Richey, and Sara Sullivan."], "subsections": []}]}], "fastfact": ["The National Nuclear Security Administration undertakes life extension programs to refurbish/replace aging components of nuclear weapons. NNSA recently estimated that the program for the B61-12 nuclear bomb would cost about $7.6 billion\u2014but an independent estimate put the cost at $10 billion.", "We found that NNSA incorporated best practices for cost estimates for the program, but also found room for improvement\u2014such as documenting management decisions on the differences between these two cost estimates."]}
{"id": "GAO-18-99", "url": "https://www.gao.gov/products/GAO-18-99", "title": "Nuclear Weapons: NNSA Needs to Determine Critical Skills and Competencies for Its Strategic Materials Programs", "published_date": "2017-11-14T00:00:00", "released_date": "2017-11-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NNSA is responsible for ensuring a sustainable supply of strategic materials critical to the nation's nuclear security missions, as well as the capability to process these materials. NNSA estimates that strategic materials management activities will cost about $7.7 billion over the next 5 years.", "The House Report accompanying H.R. 4909, a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to review NNSA's management of its strategic materials programs. This report examines (1) the extent to which NNSA has, for these programs, defined requirements, including program manager roles and responsibilities, and (2) the progress of NNSA's implementation of those program requirements.", "GAO reviewed NNSA program management policies and documents related to its strategic materials program manager positions and interviewed NNSA officials and program managers."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) manages strategic materials programs for uranium, plutonium, tritium, and lithium\u2014materials that are critical to national security. NNSA has set program requirements that each of the programs must follow and has established the roles and responsibilities of the program managers. NNSA has defined these requirements in two documents:", "Program Execution Instruction (2016). Outlines requirements for program management documents, such as a program plan, cost and schedule estimates, and an integrated master schedule that includes the entire scope of work for successful execution.", "Program Management Policy (2017). Outlines the program managers' authority and requirements for managing the strategic materials programs, such as managing risk, and requires each program to develop documents, such as a mission strategy and technology development plan.", "NNSA officials reported that the agency is making progress implementing the requirements outlined for each of the strategic materials programs, although some of the programs are farther along than others. For example:", "The uranium and domestic uranium enrichment programs established in 2014 are the furthest along and have developed the documents needed to meet strategic program requirements.", "The plutonium program has met some of the requirements, such as developing a program plan, work breakdown structure, and decision analysis, but does not yet have an integrated master schedule.", "The tritium program met the requirements during the course of GAO's review.", "The lithium program, which is the newest, has made the least amount of progress and to date has developed only a mission strategy, a mission requirements matrix, and a technology development plan.", "According to NNSA officials, shortage of staff assigned to the strategic materials programs has been the primary reason hampering progress in implementing the program requirements. For example, a lithium program manager has not yet been assigned, and all the other programs have identified the need for additional staff beyond the one or two staff currently assigned to each. According to officials, competing agency priorities and perceived staffing limits are the primary impediments to assigning more staff to these programs. However, GAO also found that NNSA has not determined the critical skills and competencies needed for these programs. GAO's prior work has identified certain activities or practices that can help an agency strategically manage its human capital. These activities include determining the critical skills and competencies that will be needed to achieve the program's mission and developing strategies to address gaps in the number, deployment, and alignment of staff needed. By determining the critical skills and competencies needed for the strategic materials programs and using this determination to develop strategies to address any gaps in the number, deployment, and alignment of program staff, NNSA may have the information it needs to better justify increased staffing levels for the programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that NNSA determine the critical skills and competencies that will be needed for the strategic materials programs and use this determination to develop strategies for addressing any gaps related to the number, deployment, and alignment of program staff. NNSA agreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Certain materials\u2014such as uranium, plutonium, tritium, and lithium\u2014are  critical to the nuclear security missions of the Department of Energy  (DOE). These missions include ensuring a safe, secure, and reliable  nuclear deterrent; achieving designated reductions in the nuclear  weapons stockpile; and supporting the nation\u2019s nuclear nonproliferation  efforts. Managing these missions is the responsibility of the National  Nuclear Security Administration (NNSA), a separately organized agency  within DOE. To carry out this responsibility, NNSA must ensure a  sustainable supply of these materials, which NNSA calls strategic  materials. For example, NNSA is seeking to establish a new capability to  enrich uranium\u2014a capability that it lost with the 2013 closure of the aging  Gaseous Diffusion Plant in Paducah, Kentucky\u2014to sustain the production  of tritium.", "NNSA has established programs for ensuring the supply of each of these  four strategic materials, as well as a separate strategic materials program  specifically to develop the new domestic uranium enrichment capability.  NNSA\u2019s Office of Defense Programs, responsible for implementing  NNSA\u2019s stockpile mission, in 2014 and 2015 named federal program  managers to oversee the uranium, domestic uranium enrichment,  plutonium, and tritium programs and has designated a lead point of  contact for the lithium program. As we reported in November 2016,  program managers play key roles in the federal government, including  overseeing contracts to help agencies get what they need at the right time  and at a reasonable price.", "The strategic materials program managers and lithium lead point of  contact are responsible for complex programs that may take decades and  cost billions of dollars to execute and that often include the design and  construction of major projects (i.e., those with an estimated cost of $750  million or greater). Such projects include the Uranium Processing Facility  (UPF), which is under construction in Tennessee to replace and  modernize a portion of NNSA\u2019s enriched uranium capabilities, and a  variety of activities to replace the capabilities of the Chemistry and  Metallurgy Research Facility\u2014built in the 1950s\u2014in New Mexico for  conducting plutonium analysis. NNSA estimated that it would cost about  $1.4 billion in fiscal year 2018 to carry out its annual activities associated  with its strategic materials programs.", "The House Armed Services Committee report accompanying H.R. 4909,  a bill for the National Defense Authorization Act for Fiscal Year 2017,  included a provision for us to review NNSA\u2019s management of its strategic  materials programs. This report examines (1) the extent to which NNSA  has, for its strategic materials programs, defined program requirements,  including program manager roles and responsibilities; and (2) the  progress of NNSA\u2019s implementation of those program requirements.", "To examine the extent to which NNSA has defined program requirements  for its strategic materials programs, we reviewed NNSA directives on  program management, including its 2016 Program Execution Instruction.  To review NNSA\u2019s definition of strategic materials program manager roles  and responsibilities, we reviewed the NNSA memorandums that created  and described strategic materials program manager positions, where  applicable, as well as NNSA\u2019s 2017 Program Management Policy for  Weapons and Strategic Materials Programs. To examine NNSA\u2019s  progress toward implementing program requirements for its strategic  materials programs, we obtained and reviewed all of the documents that  NNSA programs had completed as of June 2017 in response to  requirements contained in NNSA\u2019s 2017 Program Management Policy for  Weapons and Strategic Materials Programs. In addition, we obtained and  reviewed documents for a nonprobability sample of 22 of the 65 total  requirements that strategic materials programs must implement based on  NNSA\u2019s 2016 Program Execution Instruction. This sample included key  documents such as program plans and the work breakdown structures for  all of the strategic materials programs. The results of our review of this  sample of requirements are not generalizable but represent illustrative  examples of NNSA\u2019s progress. NNSA also identified a number of  documents that were still being developed in response to both sets of  requirements. We interviewed all four of NNSA\u2019s appointed strategic  materials managers and the lithium lead point of contact, as well as other  NNSA officials to better understand the steps NNSA had taken as of  September 2017 to implement these requirements. We also reviewed  NNSA\u2019s budget requests for fiscal years 2016, 2017, and 2018 and other  relevant agency documents, such as strategies and implementation plans  for the strategic materials programs.", "We conducted this performance audit from June 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["NNSA\u2019s strategic materials programs include a broad range of activities.  The programs often include (1) building unique new facilities, (2)  modifying and repairing existing facilities and equipment, and (3)  developing and deploying new technologies for processing and producing  strategic nuclear materials. The programs may involve multiple NNSA  and DOE sites and multiple facilities at a given site. For example, since  the days of the Manhattan Project, a large portion of the nation\u2019s uranium  mission has been executed at the Y-12 National Security Complex in Oak  Ridge, Tennessee, with uranium production and associated operations  housed in several nuclear facilities within the complex. These facilities are  in some cases more than 60 years old. NNSA\u2019s uranium program is  coordinating efforts to build the UPF, invest in the infrastructure of  existing facilities to extend their lives, and develop and deploy several  new technologies that are expected to increase the efficiency and  effectiveness of uranium processing. Collectively, these uranium program  activities may take more than 2 decades to implement and cost several  billion dollars.", "NNSA\u2019s 2017 future-years nuclear security program estimate projected  that NNSA would need about $1.4 billion in fiscal year 2018 to carry out  its annual activities associated with the management of these strategic  materials programs (see table 1). NNSA documents indicate that the  agency expects to spend about $7.7 billion over the next 5 years on  activities related to managing its strategic materials. This spending, which  would represent about 12 percent of the approximately $63 billion NNSA  expects to spend on all weapons activities over this same time period,  includes: $4.8 billion for costs related to construction of facilities and other  capital equipment purchases that will be used to support the strategic  materials mission; and $2.9 billion for program costs related to general activities such as  reducing risk and ensuring sufficient supply, as well as the  consolidation, disposition, tracking, and accounting of nuclear  materials.", "Program managers are an important part of the federal government\u2019s  workforce. They interact with the managers of individual projects to  provide support and guidance on those projects but also must take a  broad view of the overall objectives of programs and an agency\u2019s  organizational culture. According to leading practices outlined by the  Project Management Institute, organizations develop program plans,  capture and understand stakeholder needs, and establish processes for  maintaining program management oversight, among other activities.  Recognizing the importance of improving program management, in  December 2016 the President signed the \u2018\u2018Program Management  Improvement Accountability Act\u201d that required the Office of Management  and Budget to, among other things, adopt and oversee implementation of  government-wide standards, policies, and guidelines for program and  project management for executive agencies and assess the quality and  effectiveness of program management for these agencies. We have  previously reported on DOE\u2019s and NNSA\u2019s program management  challenges.", "In March 2009, we found that NNSA and the Department of Defense  (DOD) established unrealistic schedules, did not establish consistent  cost baselines, and did not effectively manage technical risks in some  of their nuclear weapon life extension programs. These problems  resulted in delays, additional expenditures, difficulties tracking the  cost of the programs, and difficulties in meeting all of NNSA\u2019s and  DOD\u2019s technical objectives. We recommended that NNSA develop  and use consistent budget assumptions and criteria for the baseline to  track costs over time, among other actions. NNSA agreed with our  recommendations and made changes to its cost estimating  procedures.", "In November 2014, we found that the lack of requirements for  programs meant that DOE could not ensure that it was developing  fully credible cost estimates for programs. We recommended that  DOE revise its program management directives to require that  programs develop life-cycle cost estimates in accordance with our 12  cost-estimating best practice steps. DOE agreed with our  recommendation but has not yet incorporated the best practice steps  into its program management directives.", "In February 2016, we found that the B61-12 life extension program,  the most complex such program NNSA has undertaken to date, faces  ongoing management challenges in some areas, including staff  shortfalls and an earned value management system that has yet to be  tested. We did not make any recommendations but reiterated  previous recommendations such as those already mentioned.", "In November 2016, we found that DOE and NNSA had not  established organization-wide policies or practices addressing leading  practices related to program management, and we recommended that  DOE do so. DOE did not agree or disagree with this  recommendation. NNSA, however, in late 2016 instituted a training  program for program management.", "NNSA\u2019s stockpile stewardship program has established strategic  materials as one of the major elements to sustain the nation\u2019s nuclear  weapons stockpile. According to NNSA budget documents, the strategic  materials programs help ensure the sustainment of nuclear material  processing capabilities and fund the stabilization, consolidation,  disposition, tracking, and accounting of nuclear materials. Strategic  materials are generally not available, or are available only in limited  quantities, from commercial suppliers because of their specific properties  and use in nuclear weapons or for other national security purposes.  NNSA named strategic material program managers in 2014 and 2015 to  integrate, oversee, plan, and execute material strategies for uranium  (including domestic uranium enrichment), plutonium, and tritium.", "In addition to the general program management challenges highlighted  above, we have also reported previously on challenges facing NNSA\u2019s  strategic materials programs:  In July 2015, we found that NNSA had identified various challenges in  its lithium production strategy that may impact its ability to meet  demand for lithium in the future. These challenges included  insufficient supply of lithium material and constraints facing NNSA\u2019s  efforts to replace the aging lithium production facility. We  recommended that NNSA objectively consider all alternatives, without  preference for a particular solution, as it proceeds with its analysis of  alternatives process. NNSA neither agreed nor disagreed with our  recommendation but did undertake a formal analysis of alternatives in  2017, according to NNSA officials.", "In August 2016, we found that NNSA had not documented important  requirements for its plutonium program at Los Alamos National  Laboratory in New Mexico. We recommended that, among other  things, NNSA should update its program requirements. NNSA outlined  actions taken and planned to address this recommendation."], "subsections": []}, {"section_title": "NNSA Has Defined Strategic Materials Program Requirements, Including Roles and Responsibilities for Program Managers", "paragraphs": ["NNSA\u2019s Office of Defense Programs has set program requirements for  the strategic materials programs and has established the roles and  responsibilities of the programs\u2019 managers. NNSA defined these program  requirements in two documents issued in 2016 and 2017. Collectively  these documents set documentation requirements as well as established  the roles and responsibilities of the strategic materials program  managers. According to NNSA officials, these requirements apply to each  of the programs, including the lithium program. These requirements are  outlined below.", "Program Execution Instruction (2016) \u2013 In January 2016, NNSA  approved a Program Execution Instruction that defines requirements  for carrying out NNSA defense programs, such as the strategic  materials programs. This instruction outlines a series of  requirements that vary based on the categorization\u2014and therefore  the rigor\u2014of management applied to a program. Of the four  categories outlined in the instruction\u2014Standard Management,  Enhanced Management A, Enhanced Management B, and Capital  Acquisition Management\u2014NNSA has generally designated the  strategic materials programs as \u201cEnhanced Management B,\u201d the most  rigorous designation applicable to this type of program, according to  NNSA officials. The \u201cEnhanced Management B\u201d programs are  required to have the following elements documented: a program plan,  a work breakdown structure that details the work elements necessary  to organize the total work scope with cost estimates, a decision  analysis, an integrated master schedule that includes the entire scope  of work required for the program\u2019s successful execution, a  performance management approach, and a lessons learned/best  practices review. According to the instruction, if the scope, cost, and  schedule of a program are more complex, moving to a more rigorous  program management category is often required. According to the  instruction, when enhanced complexity and risk are associated with a  program, among other things, \u201cEnhanced Management B\u201d is the  appropriate designation. The instruction also allows for programs to  \u201ctailor,\u201d or modify, the application of certain requirements depending  on risk and other factors.", "Program Management Policy for Weapons and Strategic  Materials Programs (2017) \u2013 NNSA issued a program management  policy in January 2017 that defines general roles and responsibilities  for all four strategic materials program managers. This policy  broadly outlines the managers\u2019 authority and responsibilities for  managing the strategic materials; these responsibilities include  developing program documentation and managing risk. According to  NNSA officials we interviewed, the policy is based on NNSA\u2019s  experience in implementing the uranium program in 2014. The policy  requires each of the strategic materials programs to develop a  number of guidance documents, including a mission strategy, mission  requirements, and a technology development plan. For each program,  the policy also requires the formation of a strategic materials mission  working group that is comprised of the key stakeholders involved in  the program."], "subsections": []}, {"section_title": "NNSA Officials Reported Progress in Meeting Strategic Materials Program Requirements but Challenges from Staffing Shortages", "paragraphs": ["NNSA officials told us that they are making progress in implementing the  program requirements outlined for each of the strategic materials  programs, although some are further along than others. However, these  officials said that relatively few staff had been assigned to these  programs, which has challenged implementation efforts."], "subsections": [{"section_title": "Progress Reported in Implementing Program Requirements", "paragraphs": ["For its two strategic materials programs established in 2014\u2014uranium  and domestic uranium enrichment\u2014NNSA officials told us that they are  generally meeting the strategic materials program management  requirements outlined in the Program Execution Instruction and the  Program Management Policy for Weapons and Strategic Materials.  NNSA officials identified documents for each program, including mission  strategy, mission requirements, program plan, and work breakdown  structure. For the other programs, according to agency officials, NNSA is  still working to meet these requirements, though the tritium program met  all requirements during the course of this review. More specifically,  according to agency officials:", "The plutonium sustainment program has met some of the Program  Execution Instruction requirements to date, including having in place a  program plan, work breakdown structure, and decision analysis, but  not an integrated master schedule (although one is being developed,  according to agency officials). The plutonium program also has a  mission strategy in place, as called for by the Program Management  Policy for Weapons and Strategic Materials, but has not yet met the  other strategic materials program management requirements.  According to agency officials, those requirements are being  developed.", "The tritium sustainment program has recently met the Program  Execution Instruction requirements as well, including having a  program plan, work breakdown structure, integrated master schedule,  and performance management approach in place. Additionally, the  program recently updated documentation to meet the Program  Management Policy requirements including revising its Strategic  Material Mission Working Group in 2017, according to agency  officials.", "The lithium program is early in its development, and no program  manager has been appointed yet, pending senior NNSA leadership  decisions. NNSA has a lithium mission strategy, a mission  requirements matrix, and a technology development plan in place, as  required by the Program Management Policy for Weapons and  Strategic Materials, but the rest of the strategic materials program  management requirements are still in the process of being developed,  according to agency officials. NNSA officials said that even though the  lithium program is not subject to the same requirements, they intend  for it to meet all of the same requirements as the other strategic  materials programs."], "subsections": []}, {"section_title": "Staffing Challenges Reported", "paragraphs": ["Officials from the Office of Defense Programs, including the strategic  materials program managers themselves, said that a shortage of staff has  presented a challenge in terms of implementing the requirements of the  strategic materials programs and meeting their missions. According to  NNSA officials, all of the strategic materials programs have been  assigned relatively few federal staff to implement the programs. The  officials also said that while they plan to have all five strategic materials  programs fully meet the requirements and operate as cohesive programs,  the lack of staff has hampered their efforts to do so. For example, the  plutonium manager said more staff were needed to successfully  implement the program, and the lithium lead point of contact said that at  least two full-time staff members would be required to accomplish the  work needed to make the lithium program meet program requirements.  Specifically, according to agency officials as of October 2017, in addition  to contractor support:  the uranium program had the program manager and two federal  staff assigned;  the domestic uranium enrichment program had the program  manager and one federal staff assigned;  the plutonium program had the program manager and one federal  staff member;  the tritium program had the program manager and no dedicated  staff, relying instead on staff in other programs such as a federal  program manager from a different program who acts as staff for this  program; and  the lithium program had the lead point of contact and no dedicated  staff, although a contracted senior technical advisor provides some  support.", "NNSA officials cited competing agency priorities and current perceived  staffing limits as the primary impediments to assigning more staff to these  programs. First, according to agency officials, the relative newness of the  strategic materials programs and competing agency priorities to  modernize the nuclear weapons infrastructure and modernize and extend  the lives of current nuclear weapons have meant that federal staff are in  high demand across the agency. This concern is consistent with issues  we have identified in our past work as well. For example, in April 2017,  we noted NNSA\u2019s ambitious, costly, decades-long effort to modernize the  nation\u2019s nuclear security enterprise. In addition to ongoing and planned  infrastructure modernization, some of which is associated with the  strategic materials programs, this modernization includes four ongoing  expensive weapons refurbishments and efforts to improve the agency\u2019s  research, development, testing, and evaluation capabilities by, for  example, continuing efforts in advanced modeling, simulation, and  computing. Similarly, we found in September 2016 that the competing  agency priorities for infrastructure modernization and weapons  refurbishments had negatively affected another NNSA program: the  Enhanced Surveillance Program.", "Second, NNSA officials said that they have limited flexibility when it  comes to increasing federal staff levels. Specifically, in each year that the  total number of federal employees at NNSA exceeds 1,690, the  Administrator is required by law to submit to the congressional defense  committees a report justifying such excess. In the NNSA Administrator\u2019s  testimony before the Senate Appropriations Subcommittee on Energy and  Water Development in June 2017, he stated that since 2010, NNSA\u2019s  program funding had increased 28 percent, while its federal staffing levels  had decreased by 17 percent. He said that initial results from a yet-to-be- completed study by the Office of Personnel Management in support of the  Reform of Government Initiative indicate the need for a 20 percent  increase in federal staff at NNSA.", "We have also previously reported that staffing shortages have affected  NNSA\u2019s efforts to improve management capability. For example, we  reported in October 2014 that NNSA determined that inadequate levels of  federal staff had contributed to management problems with the UPF  project. As a result, NNSA increased staffing levels for the UPF project  office from 9 full-time equivalents in 2012 to more than 50 as of January  2014. According to NNSA officials, the additional staff enabled NNSA to  conduct more robust oversight of the contractor\u2019s design efforts than was  previously possible. Similarly, in 2016, we found that the B61-12 life  extension program, the most costly and complex such program  undertaken to date, successfully requested that NNSA enlarge its  program office staff from 3 to 8 full-time equivalent staff to provide more  management capability. However, we found that even with this increase  in federal staff, some NNSA and DOD officials said that they believe that  NNSA needs two to three times more personnel in the federal program  manager\u2019s office to ensure sufficient federal management and oversight.", "One area that we noted in this review is that with regard to the strategic  materials programs, NNSA has not conducted a workforce needs  assessment. Strategic materials program officials acknowledged that they  had neither specifically assessed the number or skills of staff needed to  manage the strategic materials programs, nor did they have current plans  to do such an assessment. Our prior work on strategic human capital  management has identified certain activities or practices that can help an  agency strategically manage its human capital. These activities include  determining the critical skills and competencies that will be needed to  achieve the programs\u2019 missions and developing strategies to address  gaps in the number, deployment, and alignment of staff needed. NNSA  officials said that individual offices have attempted over time to assess  resource and skill needs but that these efforts have been hampered by,  among other things, a lack of staff. By determining the critical skills and  competencies needed to achieve each strategic material program\u2019s  mission and using this determination to develop strategies to address any  gaps in the number, deployment, and alignment of staff needed, NNSA  may find it has better information to justify increased staffing levels for its  strategic materials programs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since 2014, NNSA has taken steps to establish programs to maintain and  modernize the nation\u2019s nuclear weapons stockpile, including appointing  federal program managers for four of the five strategic materials  programs, as well as steps to establish and organize the programs  according to internal program management requirements. This is a  significant step given the importance, cost, and complexity of these  strategic materials programs. However, NNSA has made varying  progress implementing these strategic materials programs, in part  because these programs may not have been allotted staff and  management capacity commensurate with their cost and scope of work.", "Although strategic materials program officials acknowledged staffing  limitations, they have not determined the critical skills and competencies  that will be needed to meet program requirements and, ultimately,  achieve the programs\u2019 missions. By determining the critical skills and  competencies needed to achieve each strategic materials programs\u2019  missions and using that determination to develop strategies to address  any gaps in the number, deployment, and alignment of staff needed,  NNSA may find it has more information to justify increased staffing levels  for its strategic materials programs."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The NNSA Administrator should determine the critical skills and  competencies that will be needed for the strategic materials programs  and use this determination to develop strategies for addressing  challenges, if any, related to the number, deployment, and alignment of  program staff (Recommendation 1)."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOE and NNSA for their review and  comment. NNSA provided written comments, which are reproduced in full  in appendix II, as well as technical comments, which we incorporated in  our report as appropriate. In its comments, NNSA agreed with our  recommendation and stated that the recommendation is consistent with  the programs\u2019 current evolution. NNSA further stated that it recognizes  the need to define the range of skills and competencies necessary to  execute the programs' critical missions and that it plans to identify the  complete set of core competencies needed for these programs by  December 31, 2018.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Administrator of the National  Nuclear Security Administration, and other interested parties. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Strategic Nuclear Materials Managed by the National Nuclear Security Administration (NNSA)", "paragraphs": ["Appendix I: Strategic Nuclear Materials  Managed by the National Nuclear Security  Administration (NNSA)", "NNSA has established programs for ensuring the supply of each of the  following strategic materials as well as the capability to process them:", "Uranium \u2013 National security needs for uranium are met using a large  existing inventory of previously enriched uranium. Although NNSA  has estimated that stocks are sufficient for projected needs, existing  uranium needs to be purified, machined, and recovered from existing  operations. The Y-12 National Security Complex in Oak Ridge,  Tennessee, is the NNSA site for conducting enriched uranium  activities, producing uranium-related components for nuclear  warheads and bombs, and processing feedstock for nuclear fuel for  the U.S. Navy. In 2004, NNSA decided to construct a new Uranium  Processing Facility (UPF) that consolidated the functions of four  separate uranium facilities into a single building. In 2014, NNSA, on  the advice of a peer review team, decided to pursue a uranium  program that includes a smaller UPF and, among other program  elements, modifications to existing uranium buildings and capabilities  to include several new uranium processing technologies. Construction  on the UPF continues at the Y-12 site, and NNSA continues to  request funds for that project. Fiscal year 2018 funds are to be used  for construction of some related subprojects. According to NNSA  officials, the UPF is expected to be complete by 2025 and cost no  more than $6.5 billion. NNSA estimates that additional investments  needed to upgrade existing uranium facilities will cost about $20  million per year for the next 20 years.", "Domestic Uranium Enrichment \u2013 To produce tritium, the Tennessee  Valley Authority (TVA) must use unobligated uranium in certain  nuclear reactors, under an interagency agreement between  Department of Energy (DOE) and TVA. The United States has not  had a sustained uranium enrichment capability since the 2013 closure  of the Paducah Gaseous Diffusion Plant, which was originally  constructed in 1952. In 2014, NNSA created the domestic uranium  enrichment program manager position with responsibility to sustain  the agency\u2019s supply of low-enriched uranium for tritium production.", "We currently have ongoing work reviewing the program\u2019s plan to  ensure supply through 2060. NNSA estimated that over the next 5  years alone, these activities will likely cost more than $400 million.", "Plutonium \u2013 A set of aging facilities at Los Alamos National  Laboratory provides the backbone of NNSA\u2019s plutonium work, such as  certifying the safety of existing nuclear weapons\u2019 plutonium pits and  producing new pits to extend the life of nuclear weapons in the  stockpile. NNSA conducts plutonium analysis in the Chemistry and  Metallurgy Research facility, which was built in the 1950s, but NNSA  plans to cease programmatic operations in this facility by 2019  because of its aging infrastructure and because it sits on a seismic  fault line. NNSA produces pits and conducts pit surveillance in the 38- year-old high-hazard, high-security Plutonium Facility 4 at Los  Alamos. Other important plutonium activities, such as NNSA\u2019s  plutonium disposition efforts and the processing of plutonium used to  provide heat sources for space missions, are not included in the  plutonium manager\u2019s portfolio because other program offices are  responsible for these activities, according to NNSA officials. Officials  said that these program offices coordinate capability and facility needs  with the plutonium program manager.", "In August 2014, DOE cancelled plans to construct the nuclear facility  that was part of the overall Chemistry and Metallurgy Research  Replacement (CMRR), which was approved in 2005 to replace the  aging Chemistry and Metallurgy Research facility. In its place, DOE  approved the implementation of the first part of NNSA\u2019s new  plutonium strategy: the revised CMRR project, which includes a  subproject to remove contaminated equipment no longer in use in  Plutonium Facility 4, install new plutonium analysis equipment, and  modify an existing building to handle higher quantities of plutonium.  NNSA estimated that the CMRR project would cost from $2.4 billion to  $2.9 billion and be completed by 2024. In addition, in November 2015,  DOE approved the mission need for the implementation of the second  part of the strategy: building modular nuclear facilities to add high- hazard, high-security laboratory space at Los Alamos (the Plutonium  Modular Approach) to meet plutonium pit production requirements.  NNSA estimated that the Plutonium Modular Approach could cost  from $1.3 billion to $3.0 billion and be completed by the end of 2027.", "Tritium \u2013 NNSA has relied on tritium produced many years ago;  recycling and recovery of existing tritium is currently the source of  most of the tritium in the stockpile, according to NNSA officials.  However, tritium decays relatively rapidly, and in 2015 NNSA  identified a need to produce additional tritium. To produce tritium,  lithium target rods\u2014called tritium-producing burnable absorber rods\u2014 are irradiated in TVA\u2019s reactors. The irradiated rods are transported to  DOE\u2019s Tritium Extraction Facility at the Savannah River Site in South  Carolina, where they are processed in a specialized facility to extract  and then prepare the tritium for nuclear warheads. NNSA requested  $9.8 million in design funds in fiscal year 2018 for construction of a  new tritium production capability. In its fiscal year 2018 budget  request, NNSA estimated that this facility would cost about $425  million and be approved for operations in 2027.", "Lithium \u2013 Lithium is a key component of nuclear weapons and is  essential for their refurbishment. NNSA has a sufficient supply of  enriched lithium-6 (the isotope used in refurbishments and for tritium  production), but that lithium is stored in another form and must  undergo complex processing before it can be used for these  purposes. NNSA halted certain aspects of its lithium processing  operation\u2014conducted at its Y-12 site in Oak Ridge, Tennessee\u2014in  May 2013 due to the condition of the site\u2019s 72-year-old lithium  production facility. Currently, NNSA is relying on a less complex but  also less efficient process that results in a loss of approximately 50  percent of material. In 2013, NNSA developed a lithium production  strategy that proposed a new lithium production facility, which the  agency estimated would cost more than $500 million. NNSA plans to  request $30.4 million in fiscal year 2019 for construction of this facility.  This strategy includes sustaining current infrastructure and deploying  new technologies to sustain lithium production."], "subsections": []}, {"section_title": "Appendix II: Comments from the National Nuclear Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Jonathan Gill (Assistant Director), Alisa  Beyninson, Antoinette Capaccio, Jeff Larson, Cynthia Norris, and Kiki  Theodoropoulos made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Modernizing the Nuclear Security Enterprise: A Complete Scope of Work  Is Needed to Develop Timely Cost and Schedule Information for the  Uranium Program. GAO-17-577. Washington, D.C.: September 8, 2017.", "Program Management: DOE Needs to Develop a Comprehensive Policy  and Training Program. GAO-17-51. Washington, D.C.: November 21,  2016.", "DOE Project Management: NNSA Needs to Clarify Requirements for Its  Plutonium Analysis Project at Los Alamos. GAO-16-585. Washington,  D.C.: August 9, 2016.", "Modernizing the Nuclear Security Enterprise: NNSA\u2019s Budget Estimates  Increased but May Not Align with All Anticipated Costs. GAO-16-290.  Washington, D.C.: March 4, 2016.", "Modernizing the Nuclear Security Enterprise: NNSA Increased Its Budget  Estimates, but Estimates for Key Stockpile and Infrastructure Programs  Need Improvement. GAO-15-499. Washington, D.C.: August 6, 2015.", "DOE Project Management: NNSA Should Ensure Equal Consideration of  Alternatives for Lithium Production. GAO-15-525. Washington, D.C.: July  13, 2015.", "DOE and NNSA Project Management: Analysis of Alternatives Could Be  Improved by Incorporating Best Practices. GAO-15-37. Washington, D.C.:  December 11, 2014.", "Project and Program Management: DOE Needs to Revise Requirements  and Guidance for Cost Estimating and Related Reviews. GAO-15-29.  Washington, D.C.: November 25, 2014.", "Nuclear Weapons: Some Actions Have Been Taken to Address  Challenges with the Uranium Processing Facility Design. GAO-15-126.  Washington, D.C.: October 10, 2014.", "Nuclear Weapons: Technology Development Efforts for the Uranium  Processing Facility. GAO-14-295. Washington, D.C.: April 18, 2014.", "Plutonium Disposition Program: DOE Needs to Analyze the Root Causes  of Cost Increases and Develop Better Cost Estimates. GAO-14-231.  Washington, D.C.: February 13, 2014.", "Nuclear Weapons: Information on Safety Concerns with the Uranium  Processing Facility. GAO-14-79R. Washington, D.C.: October 25, 2013.", "Nuclear Weapons: Factors Leading to Cost Increases with the Uranium  Processing Facility. GAO-13-686R. Washington, D.C.: July 12, 2013.", "Nuclear Weapons: National Nuclear Security Administration\u2019s Plans for Its  Uranium Processing Facility Should Better Reflect Funding Estimates and  Technology Readiness. GAO-11-103. Washington, D.C.: November 19,  2010."], "subsections": []}], "fastfact": ["The National Nuclear Security Administration manages programs related to securing and processing uranium, plutonium, tritium, and lithium\u2014materials critical to national security. NNSA will spend an estimated $7.7 billion to manage these programs over the next 5 years.", "NNSA has set program requirements (such as developing cost and schedule estimates) for these programs but hasn't fully met them, due primarily to staff shortages. We recommended that NNSA determine the critical staff skills it will need for these programs, and use that information to address staffing shortages."]}
{"id": "GAO-19-54", "url": "https://www.gao.gov/products/GAO-19-54", "title": "Defense Contracting: DOD Should Clarify Criteria for Using Lowest Price Technically Acceptable Process", "published_date": "2018-11-13T00:00:00", "released_date": "2018-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["When awarding a contract competitively, DOD may use the LPTA process, under which the lowest price is the determining factor when selecting an offer. Section 813, as amended, contained a provision for GAO to submit four annual reports on DOD's use of the LPTA process for contracts exceeding $5 million as well as how contracting officials considered eight specific criteria. GAO issued its first report in response to this provision in November 2017.", "This second report, among other things, assesses the extent to which (1) DOD used the LPTA process in fiscal year 2017 and (2) contracting officials considered Section 813 criteria when using the LPTA process.", "GAO selected a generalizable sample of 172 DOD contracts and orders valued at $5 million and above that were competitively awarded in fiscal year 2017. GAO verified that 46 of these contracts and orders used the LPTA process by reviewing solicitations. GAO selected 14 contracts and orders from the 46 based on the most frequently purchased products and services, reviewed documents, and interviewed officials to determine if the Section 813 criteria were considered."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO estimates that about 26 percent of the Department of Defense's (DOD) contracts and orders valued $5 million and above in fiscal year 2017 were competitively awarded using the lowest price technically acceptable (LPTA) process. DOD used the LPTA process to buy such things as equipment, fuel, information technology services and construction services.", "Section 813 of the National Defense Authorization Act for Fiscal Year 2017, as amended, mandated that DOD revise its regulations to require that eight criteria be considered when using the LPTA process. As of September 2018, DOD had not yet done so. Accordingly, a DOD acquisition policy official stated that contracting officers are not yet required to consider these criteria. Nevertheless, GAO found that contracting officials generally considered five of the eight criteria for the 14 contracts and orders GAO reviewed (see table).", "Source: GAO analysis of Section 813, DOD source selection guidance, contract file documents and interviews with contracting officials. | GAO-19-54", "A DOD official stated that the updated regulations will reflect these eight criteria, including that justifications be documented. However, the official could not comment on whether the revisions will clarify how DOD contracting officials should implement the two other criteria that were generally not considered. Some contracting officials GAO interviewed were confused about how to apply these two criteria. Four of the 14 contracting officials stated that they did not understand how to apply the criterion regarding whether purchased goods are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Additionally, 8 of the 14 contracting officials stated the criterion regarding an assessment of life-cycle costs was not applicable to their acquisitions. Absent clarification on how to consider these two criteria, DOD increases the risk that its contracting officials will not consistently implement the requirements in Section 813, as amended."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD address, as regulations are updated, how contracting officials should apply two Section 813 criteria that were generally not considered. DOD concurred with the recommendations and plans to revise its regulations and issue additional guidance by the end of fiscal year 2019."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) obligated about $320 billion through  contracts for goods and services in fiscal year 2017. When awarding a  contract competitively, DOD has a number of source selection processes  it can use to evaluate firms\u2019 proposals. One process DOD can use is a  best value, lowest price technically acceptable (LPTA) process. In the  LPTA process, DOD awards the contract to the firm presenting the lowest  priced proposal that is technically acceptable, and no tradeoffs are  permitted. Alternatively, DOD can use a best value tradeoff process, in  which it can vary the relative importance of cost or price to other factors  such as a firm\u2019s technical capability or past performance. In these cases,  DOD may award a contract to a firm offering other than the lowest-priced  proposal if it determines that a higher-priced proposal provides a  worthwhile benefit to the department.", "Section 813 of the National Defense Authorization Act for Fiscal Year  2017, as amended, required DOD to revise the Defense Federal  Acquisition Regulation Supplement (DFARS) to allow the use of the LPTA  process only when eight criteria are met. For example, one criterion is  that contracting officials must determine that no, or little, value would be  gained from a proposal exceeding the solicitation\u2019s minimum technical  requirements. The specific criteria are discussed in the background  section of this report.", "Section 813 also included a provision that we report no later than  December 1, 2017, and annually thereafter for 3 years on the number of  instances where DOD used the LPTA process for contracts exceeding $5  million, as well as an explanation of how contracting officials considered  the criteria identified in Section 813. In November 2017, we issued our  first report as required by Section 813. This second report (1) determines  the extent to which DOD used the LPTA process in competitively  awarded contracts and orders valued at $5 million and above in fiscal  year 2017; (2) identifies the reasons why contracting officials used the  LPTA process for selected contracts and orders; and (3) for those same  selected contracts and orders, assesses the extent to which contracting  officials considered the eight criteria listed in Section 813.", "DOD does not maintain centralized data on which source selection  procedure is used to award contracts and orders. Consequently, to  determine the extent to which DOD used the LPTA process in  competitively awarded contracts and orders valued at $5 million and  above in fiscal year 2017, we used data from the Federal Procurement  Data System-Next Generation (FPDS-NG) to identify the population of  DOD contracts that were reported as competitively awarded contracts  and valued at $5 million and above in fiscal year 2017. This resulted in  the identification of approximately 3,000 contracts. We focused our review  on the Army, Navy, Air Force, and Defense Logistics Agency (DLA)  because they accounted for 96 percent\u2014or almost 2,900\u2014of the DOD  contracts competitively awarded during this time. In addition to contracts,  we used data from FPDS-NG to identify a population of approximately  1,800 DOD task and delivery orders with an estimated value of $5 million  and above that were reported in FPDS-NG as competed under multiple  award, indefinite delivery indefinitely quantity (IDIQ) contracts during this  time. We again focused our analysis on the Army, Navy, Air Force and  DLA which accounted for 81 percent\u2014or about 1,400\u2014of these orders.", "Using these data, we randomly selected a generalizable sample of 94  contracts and 91 orders from the respective populations of contracts and  orders above. For each contract and order in our sample, we requested  that DOD identify the source selection method used. We independently  verified DOD\u2019s responses by reviewing solicitations. We removed five  contracts and eight orders from our sample. Of the five contracts, we  removed three contracts from our sample because they were incorrectly  classified in FPDS-NG as having been competed when they were not;  one contract because it was terminated after award due to a bid protest;  and one contract because it was classified. Similarly, of the eight orders,  we removed seven from our sample because they were incorrectly  classified in FPDS-NG as being competitively awarded when they were  not and one because it was incorrectly identified as having a value over  $5 million. After removing these contracts and orders, our generalizable  sample consisted of 89 contracts and 83 orders. By tracing relevant  FPDS-NG data to the contracts and orders we reviewed, we determined  these data were sufficiently reliable for us to project the number of  contracts and orders valued over $5 million that the Army, Navy, Air  Force, and DLA competitively awarded in fiscal year 2017 using the LPTA  process.", "To identify the reasons why contracting officials chose to use the LPTA  process and to assess whether those officials considered the eight criteria  in Section 813, we selected from our sample six contracts and eight  orders that used the LPTA process. We selected these 14 contracts and  orders to include a mix of the most frequently purchased products and  services. Of these 14 contracts and orders, four orders were for services  for which Section 813 directs DOD to avoid using the LPTA source  selection process, to the maximum extent practicable. For all of these  selected contracts and orders, we obtained and analyzed relevant  contract file documents including the acquisition plan, solicitation, and  source selection decision document, and we interviewed contracting  officials. Findings from our review of these 14 contracts and orders  cannot be generalized to all contracts and orders that used the LPTA  process. We also reviewed applicable sections of the Federal Acquisition  Regulation (FAR), the DFARS, and DOD\u2019s March 2016 Source Selection  Procedures to identify existing criteria regarding the appropriate use of  the LPTA process.", "We conducted this performance audit from January 2018 through  November 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["FAR Part 15 describes the use of several competitive source selection  processes to meet agency needs, which include the LPTA process and  tradeoff process on a best value continuum (see fig. 1).", "The FAR states that when using the LPTA process, tradeoffs are not  permitted. DOD may elect to use the LPTA process where the  requirement is clearly defined and the risk of unsuccessful contract  performance is minimal. In such cases, DOD can determine that cost or  price should play a dominant role in the source selection. When using the  LPTA process, DOD specifies its minimum requirements in the  solicitation. Firms submit their proposals and DOD determines which of  the proposals meet those requirements. No tradeoffs between cost or  price and non-cost factors (for example, technical capabilities or past  performance) are permitted. Non-cost factors are rated on an acceptable  or unacceptable basis. The award is made based on the lowest priced,  technically acceptable proposal submitted to the government. With either  the LPTA or the tradeoff process, contracting officials may establish a  competitive range and conduct discussions with offerors before selecting  an offer for award.", "By contrast, DOD may elect to use the tradeoff process in acquisitions  where the requirement is less definitive, more development work is  required, or the acquisition has a greater performance risk. In these  instances, non-cost factors may play a dominant role in the source  selection process. Tradeoffs between price and non-cost factors allow  DOD to accept other than the lowest priced proposal. The FAR requires  DOD to state in the solicitation whether all evaluation factors other than  cost or price, when combined, are significantly more important than,  approximately equal to, or significantly less important than cost or price.", "Contracting officials have broad discretion in the selection of the  evaluation criteria that will be used in an acquisition. A written acquisition  plan generally should include a description of the acquisition\u2019s source  selection process and the relationship of the evaluation factors to the  acquisition objectives, but the FAR does not explicitly require contracting  officials to document the reasons why the specific source selection  procedures or evaluation factors were chosen.", "DOD\u2019s March 2016 Source Selection Procedures offer additional  guidance regarding the use of the LPTA source selection process. The  procedures are mandatory for acquisitions conducted as part of a major  system acquisition program and all competitively negotiated FAR part 15  acquisitions with an estimated value over $10 million. The March 2016  guide states that the LPTA source selection process may be used in  situations where there would not be any value on a product or service  exceeding the required technical or performance requirements. The guide  also states that such situations may include acquisitions  for well-defined, commercial, or non-complex products or services; where risk of unsuccessful contract performance is minimal; and where DOD has determined there would be no need or value to pay  more for higher performance.", "Section 813, as amended, requires that DOD revise the DFARS to  require that the LPTA process only be used in situations when the  following eight criteria are met.  1.  DOD can clearly describe the minimum requirements in terms of  performance objectives, measures, and standards that will be used to  determine acceptability of offers.  2.  DOD would realize no, or little, value from a proposal exceeding the  solicitation\u2019s minimum technical requirements.  3.  The proposed technical approaches can be evaluated with little or no  subjectivity as to the desirability of one versus the other.  4.  There is a high degree of certainty that a review of technical proposals  other than that of the lowest-price offeror would not identity factors  that could provide other benefits to the government.  5.  The contracting officer has included a justification for the use of the  LPTA process in the contract file.  6.  The lowest price reflects full life-cycle costs, including for operations  and support.  7.  DOD would realize little or no additional innovation or future  technological advantage by using a different methodology.  8.  For the acquisition of goods, the goods being purchased are  predominantly expendable in nature, nontechnical, or have a short life  expectancy or shelf life.", "Section 813 required DOD to revise the DFARS within 120 days of  enactment of the National Defense Authorization Act for Fiscal Year  2017. The NDAA was enacted December 23, 2016, but, as of November  2018, the DFARS had not been revised. A Defense Pricing and  Contracting (DPC) official stated the revisions are in process but were  delayed due to a number of reasons, including the need for the revisions  to reflect  two additional criteria that were added to Section 813 (shown as  criteria (7) and (8) in the list above) through subsequent provisions in  Section 822 of the National Defense Authorization Act for Fiscal Year  2018, and  compliance with Executive Order 13771, which calls for the reduction  and control of regulatory costs.", "The DPC official stated that until the DFARS is updated, DOD contracting  officials are not required to consider the Section 813 criteria."], "subsections": [{"section_title": "Use of the LPTA Process for Task and Delivery Orders", "paragraphs": ["The FAR describes a wide selection of contract types that may be used in  acquisitions. One of those types is an IDIQ contract, which provides for  an indefinite quantity, within stated limits, of supplies or services during a  fixed period of time. The FAR implements a statutory preference for  multiple-award IDIQ contracts, which are awarded to two or more  contractors under a single solicitation. These contracts allow agencies to  establish a group of prequalified contractors to compete for future orders  under streamlined ordering process once agencies determine their  specific needs. These contracts can be awarded using a source selection  process that is on the best value continuum, such as LPTA or tradeoff.", "When a concrete need arises, a contracting officer will issue a task order  for services or delivery order for products. DOD frequently issues orders  under IDIQ contracts to address its needs. DOD obligated approximately  $133 billion\u201440 percent of its total fiscal year 2017 contract obligations\u2014 through such orders. With certain exceptions, the FAR requires that when  a contracting officer places an order under a multiple-award IDIQ  contract, the contracting officer must provide all of the IDIQ contract  holders a \u201cfair opportunity\u201d to be considered for the order. Generally, a  contracting officer placing an order exceeding the simplified acquisition  threshold must provide a \u201cfair notice\u201d that includes the basis upon which  the selection will be made to all contractors offering the required products  or services under the multiple-award contract.", "We have previously found that DOD has awarded IDIQ contracts using  the tradeoff process but then issued orders off of those IDIQ contracts  using either the LPTA process or a tradeoff process. In other words,  DOD employs both the LPTA and tradeoff processes for competitive  orders issued against the same IDIQ contract, depending upon the  requirement."], "subsections": []}, {"section_title": "Past GAO Reports on DOD Source Selection Process", "paragraphs": ["Since 2010, we have issued three reports on DOD\u2019s use of source  selection processes. In October 2010, we found that, for 60 of the 88  contracts we reviewed, DOD used a tradeoff process and weighted non- cost factors as more important than price. In these cases, DOD was  willing to pay more when a firm demonstrated it understood complex  technical issues more thoroughly, could provide a needed product or  service to meet deadlines, or had a proven track record in successfully  delivering products or services of a similar nature. In addition, we  determined that when making tradeoff decisions, DOD selected a lower  priced proposal nearly as often as it selected a higher technically rated,  but more costly, proposal. In so doing, DOD chose not to pay more than  $800 million in proposed costs by selecting a lower priced offer over a  higher technically rated offer in 18 of the contracts we reviewed. The  majority of solicitations where non-cost factors were equal to or less  important than cost were for less complex requirements. We also found  that DOD faced several challenges when using the best value tradeoff  process, including difficulties in developing meaningful evaluation factors,  the additional time investment needed to conduct best value tradeoff  procurements, and a greater level of business judgment required of acquisition staff when  compared to other acquisition approaches.", "To help DOD effectively employ the best value tradeoff process, we  recommended that DOD develop training elements such as case studies  that focus on reaching tradeoff decisions. DOD concurred and  implemented the recommendation in August 2012.", "In 2014, we found that DOD had increased its use of the LPTA process  for new contracts with obligations over $25 million, using the LPTA source  selection process to award an estimated 36 percent of new fiscal year  2013 contracts compared to 26 percent in fiscal year 2009. We found that  contracting officials\u2019 decisions on which source selection process would  be used was generally rooted in knowledge about the requirements and  contractors. For contracts with obligations over $25 million, DOD used  the LPTA source selection process primarily to acquire commercial  products such as fuel, and we identified relatively few uses of the LPTA  process to acquire higher dollar services. For contracts with obligations  over $1 million and under $25 million, DOD used the LPTA process an  estimated 45 percent of the time for a mix of products and services,  including fuel, aircraft parts, computer equipment, construction-related  services, engineering support services, and ship maintenance and  repairs. We did not make recommendations to DOD in this report.", "In 2017, we reviewed contracts that DOD awarded using the LPTA  process for service categories for which Section 813 established the  LPTA process is to be avoided to the maximum extent practicable, such  as those for information technology, knowledge based services,  cybersecurity, and other professional support services. We found that  the Army, Navy, and Air Force rarely used the LPTA source selection  process for information technology and selected support services  contracts valued at $10 million or more that were awarded in the first half  of fiscal year 2017. Our analysis found that the three military departments  awarded 781 new contracts valued at $10 million or more during this time  frame. Of these 781 contracts, 133 contracts were awarded for  information technology and support services. However, only 9 of the 133  contracts used the LPTA source selection process. In addition, we found  that contracting officials\u2019 reasons for using the LPTA process were  generally consistent with the criteria listed in Section 813. We did not  make recommendations to DOD in this report."], "subsections": []}]}, {"section_title": "About One-Quarter of Fiscal Year 2017 DOD Contracts and Orders Valued $5 Million and Above Used the LPTA Process", "paragraphs": ["Based upon the results of our generalizable sample, we estimate that  about 26 percent of contracts and orders competitively awarded by the  Army, Navy, Air Force, and DLA valued at $5 million and above in fiscal  year 2017 used the LPTA process. Table 1 shows the number and  percentage of contracts and orders in our sample that we estimate to  have used the LPTA process.", "We reviewed the 46 contracts and orders for which the Army, Navy, Air  Force and DLA used the LPTA process and found that 20 were for  products and 26 for services. Within this sample, the Army, Navy, Air  Force, and DLA bought a variety of products and services (see figure 2)."], "subsections": []}, {"section_title": "Contracting Officials Used the LPTA Process for Reasons Consistent with Current Requirements", "paragraphs": ["Contracting officials associated with the 14 contracts and orders we  selected used the LPTA process, in part, because they determined there  was no tradeoff available or determined that DOD would not derive any  benefit from paying a premium for offers that exceeded the minimum  capabilities. As previously mentioned, DOD\u2019s March 2016 Source  Selection Procedures currently states that the LPTA process may be  used when there would not be additional value to a product or service  exceeding the required technical or performance requirements.  Therefore, these determinations are consistent with the DOD\u2019s current  guidance. The following examples illustrate contracting officials\u2019 rationale  for using the LPTA process.", "A DLA contracting official awarded a contract for natural gas with a  ceiling value of approximately $14.8 million over a 2-year ordering  period. The contracting official stated that no tradeoffs were available  because the requirement was specifically for natural gas that would  be used in government owned facilities across multiple states and an  alternative fuel source was not required. Therefore, offerors were  evaluated, from a technical acceptability perspective, on whether they  were able to deliver the amount of natural gas required by the  specified time frames.", "Similarly, the Marine Corps purchased over 15,400 general-purpose  laptops with an estimated value of approximately $14.1 million. To  meet a DOD initiative of upgrading general use laptops to Windows  10, Marine Corps officials determined that a commercially available  laptop would meet their requirements. Marine Corps contracting  officials stated that through their market research they noted there  were laptops with additional capabilities available; however, they  determined it was not beneficial to pay for higher capabilities.", "Overall, for the 14 contracts and orders we reviewed, contracting officials  identified several reasons for using the LPTA process (see table 2). In  many cases, contracting officials cited more than one reason.", "The following examples illustrate reasons contracting officials identified  for the use of the LPTA process.", "The Air Force awarded a foreign military sales IDIQ contract, with a  maximum ordering value of $65 million, to provide planned  maintenance and supply support services for F-16 aircraft owned by  Taiwan. The contract had a one-month mobilization period, a 5-year  base ordering period, and two 1-year option ordering periods.  According to Air Force officials, the contract\u2019s requirements were well- defined because the standard tasks and processes, such as engine  maintenance, corrosion prevention, and aircraft washing, are strictly  defined by an Air Force instruction. Contracting officials determined  there was a low risk of contractor failure because (1) the pool of  qualified firms interested in performing this type of contract is limited,  and (2) the incumbent workforce had to be offered the chance to  continue working under any new contract, regardless of the  management company that won the award.", "The Navy issued an order under a multiple-award IDIQ contract, with  a value of $6.1 million, to renovate office space in two buildings at a  naval air station. The Navy determined that the risk of contractor  failure on this order was low because the contractor was pre-qualified  as part of the initial contract award. Additionally, contracting officials  stated the requirement was well-defined, as the contractor was  required to renovate the space according to the plans provided by the  Navy.", "The Navy awarded a multiple award IDIQ contract with an estimated  maximum value of $502.6 million, over a one-year base period and  four 1-year options, for repair and maintenance of non-nuclear surface  ships harbored in San Diego. Navy officials considered the  requirements non-complex due to the nature of the work to be  performed. In this case, the tasks included welding, marine pipefitting,  sheet metal forming, and electrical/electronic repairs, among others,  which were to adhere to established standards that would be specified  in the orders. The contracting officials stated that for more complex  repairs they would use a different contract.", "DLA awarded a contract with an estimated value of $5.7 million, over  a 2-year ordering period, for a commercial jet fuel system icing  inhibitor to be delivered to Middle Eastern destinations, such as Qatar.  Given that the additive was a commercial product, DLA determined  that awarding the contract to the offeror that could deliver the required  quantity within specific time frames at the lowest price was in the  government\u2019s best interests.", "Of the 14 contracts and orders we reviewed, 4 orders were for services  that Section 813 identified as those that DOD should, to the maximum  extent practicable, avoid using the LPTA process. These four orders were  for cybersecurity services, information technology services, and  knowledge-based professional services. DOD contracting officials\u2019  rationale for using the LPTA process for these four orders were also  consistent with guidance in DOD\u2019s March 2016 Source Selection  Procedures, as illustrated below:", "The Air Force issued an order with an estimated value of $11.6  million, with a 1-year base period and four 1-year options, for  healthcare information technology system support services at several  European military installations. These services included help desk  support and network administration services, such as maintenance,  administration, and troubleshooting services for the local computer  servers. Air Force contracting officials stated the requirements were  well-defined, as the services have been provided by a contractor for a  long time and were well understood. Further, the officials stated they  confirmed that the requiring office was not willing to pay for additional  services beyond the minimum requirements. Contracting officials also  determined there was a low risk of contractor failure because they  were placing an order under a multiple-award IDIQ contract and all  contract holders were pre-qualified to perform the work.", "The Air Force issued an order with a reported value of $21.6 million,  with a 1-year base period and four 1-year options, for information  technology services, which included cybersecurity services, network  management administration, requirements analysis, and  communications planning at a European military installation. Air Force  contracting officials stated the requirements for this contract were  well-understood, as the Air Force had been contracting for these  services for more than 15 years. Further, contracting officials stated  the contractor was required to use an existing government software  program to identify any information technology threats. Finally,  contracting officials determined there was a low risk of contractor  failure because they were issuing an order under a multiple-award  IDIQ contract for which all contract holders were pre-qualified to  perform the work.", "The Army issued an order with an estimated value of $10.7 million,  with a 1-year base period and two 1-year options, for professional  support services at the United States Army Sergeants Major Academy  at Biggs Army Airfield, El Paso, Texas. Under this order, the  contractor was to provide instructors to teach a pre-existing curriculum  to Sergeants Major and Master Sergeants in strategic operations,  preparing them to take positions throughout the DOD. The order  provided that the instructors should be former Army sergeants and  hold a Master\u2019s degree, with a preference for a Master\u2019s degree in  adult education. In addition, the instructors had to have or had to  obtain specific Army contractor instruction certifications. Therefore,  the contracting official stated there was no benefit in having  instructors that exceeded these recommended qualifications.", "The Navy issued an order with a value of approximately $10 million  and a period of performance of approximately four years and five  months for installation of furniture/equipment onboard the USS  George Washington aircraft carrier. Tasks included removing  furniture, installing new, furniture in the same place, and painting,  among others, to maintain ship habitability. Contracting officials  determined there was no value in performing a tradeoff because the  tasks were for routine work and all of the IDIQ contract holders  previously were found to have the technical capability to perform the  work."], "subsections": []}, {"section_title": "DOD Contracting Officials Considered Most of the Section 813 Criteria before Using the LPTA Process, but Were Confused by Some Aspects", "paragraphs": ["Contracting officials stated that they generally considered five of the eight  criteria in Section 813 when awarding the 14 contracts and orders we  reviewed. This was done, in part, because according to contracting  officials, those criteria are inherently considered by contracting officials  when determining which source selection process should be used.  Further, based on our analysis, these five criteria are generally reflected  in DOD\u2019s March 2016 Source Selection Procedures. Table 3 illustrates  whether contracting officials considered the Section 813 criteria when  they decided to use the LPTA process for the 14 contracts and orders we  reviewed. As previously discussed, DOD has not yet updated regulations  to put the Section 813 criteria into effect. A DPC official stated that until  DOD regulations are updated, DOD contracting officials are not required  to consider the Section 813 criteria.", "Most of the contract files we reviewed did not include a written justification  for the use of the LPTA process. A DPC official stated when the DFARS  is updated to implement Section 813, DOD intends to include a  requirement for contracting officials to prepare a written justification for  the use of the LPTA process.", "Some contracting officials were uncertain how to address the other two  criteria that were generally not considered. For example, 4 of the 14  contracts and orders that we reviewed were for products. As stated  above, one of the Section 813 criteria will require contracting officers who  are purchasing goods to determine that the goods are predominantly  expendable in nature, nontechnical, or have a short life expectancy or  shelf life. Two of the four contracting officials for the products we  reviewed stated they made this determination for these purchases.  However, the other two stated that they would not have known how to  consider this criterion for their procurements. Specifically, a Marine Corps  contracting official who purchased general use computers stated it was  unclear if a computer that will be replaced every 5 years would be  considered to have a short shelf life. Additionally, an Air Force contracting  official who purchased Blackberry licenses stated that it was unclear if  this criterion would apply to such licenses, and if it did, whether a 1-year  license would be considered a short-shelf life. As a result, this contracting  official stated he would not know how to consider this criterion in similar  acquisitions.", "Additionally, 12 of the 14 contracting officials we interviewed raised a  number of questions about how to consider full life-cycle costs, including  operations and support, which is another criterion under Section 813. In  this regard,", "Eight contracting officials did not think life-cycle costs applied to their  acquisitions and therefore they did not understand what costs they  would have considered. For example, an Army contracting official who  purchased construction quality assurance and oversight services  stated the concept of life-cycle costs generally applies to products, not  services. Similarly, a DLA official who contracted for a de-icing agent  stated that this particular product does not have life-cycle costs  associated with it.", "Three contracting officials raised questions regarding who would be in  the best position to determine life-cycle costs. For instance, an Air  Force contracting official stated life-cycle costs are determined by the  requiring office, not by the contracting office, so it was not clear what  role the contracting office would have in evaluating life-cycle costs.", "One contracting official who awarded an IDIQ contract stated this  criterion would not apply to such an award because specific  requirements would be determined when issuing orders under the  IDIQ contract. Therefore, the contracting officer believed that any life- cycle costs should be considered when issuing subsequent orders.", "In the two remaining cases, one contracting official stated he was not  confused by this criterion, but did not consider life-cycle costs when  awarding the contract to provide instructors at the Army Sergeants Major  Academy. In another case, the contracting official stated life-cycle costs  for a $14.8 million contract for natural gas had been considered, but the  official determined there were no life-cycle costs associated with the use  of natural gas in this instance.", "As previously discussed, DOD has not yet revised the DFARS to include  the criteria specified in Section 813, nor has DOD\u2019s March 2016 source  selection procedures been updated to address consideration of the new  criteria. A DPC official stated that the DFARS is in the process of being  updated and will reflect Section 813. For example, the official stated that  the updated regulation will require written justifications for using the LPTA  process. This official, however, could not comment on whether the  revisions will provide clarification, beyond what was written in Section  813, on how to apply the two criteria that DOD contracting officials  generally found confusing. Without further clarification, such confusion is  likely to continue. As a result, contracting officials will be at risk of not  consistently applying the criteria in Section 813.", "Our work also found differing opinions on whether the criteria in Section  813 would apply to the issuance of competitive orders under multiple- award IDIQ contracts. Our prior work has found that such orders  represent a significant portion of DOD\u2019s annual contract obligations. For  example, 7 of the 14 contracting officials generally stated the criteria in  Section 813 could apply at the order level depending on the nature of the  requirement. They stated that requirements are determined when issuing  orders and, as a result, it is possible that methods including the LPTA  process or a tradeoff process could be used when issuing orders.  Conversely, the remaining 7 contracting officials stated the criteria should  not apply to the issuance of orders, in part, because these criteria would  generally have been considered at the time the IDIQ contract was  awarded. Military department policy officials we interviewed generally  believed that the criteria in Section 813 should not be applicable to  orders. When we raised this issue, a DPC official stated that DOD plans  to address whether the Section 813 criteria are applicable to orders when  DOD revises the DFARS."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["As DOD prepares to revise the DFARS to implement the eight criteria in  Section 813, as amended, it has an opportunity to address the issues we  identified. DOD stated its intent to require a written justification for using  LPTA and to address whether the Section 813 criteria are applicable to  the issuance of task and delivery orders. It is equally important that, in  revising the regulation, DOD also clarify how contracting officers are to  determine if a good is expendable in nature, nontechnical or have a short  life expectancy or shelf life, and how they are to consider if the lowest  price reflects full life-cycle costs, including for operations and support for  services as well as products. Absent additional direction, contracting  officials across DOD may not understand how to consistently apply these  criteria when using the LPTA process."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  The Secretary of Defense should ensure that the Director, Defense  Pricing and Contracting , addresses how contracting officials using the  LPTA process should apply the Section 813 criterion regarding  procurement for goods that are predominantly expendable in nature,  nontechnical, or have a short life expectancy or shelf life as revisions to  the DFARS are considered. (Recommendation 1)", "The Secretary of Defense should ensure that the Director, Defense  Pricing and Contracting addresses how contracting officials using the  LPTA process should apply the Section 813 criterion regarding full life- cycle costs, including for operations and support as revisions to the  DFARS are considered. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in Appendix I, DOD concurred with both of  our recommendations. DOD stated that, in addition to its ongoing efforts  to update its regulations, a new DFARS Procedures, Guidance and  Information case was opened on October 25, 2018 to provide contracting  officers with supplemental internal guidance on applying the new criteria  for using LPTA. DOD anticipates that the revised regulations and the  internal guidance will be published in the fourth quarter of fiscal year  2019.", "DOD also provided technical comments, which were incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Director, Defense Pricing  and Contracting. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Justin Jaynes (Assistant  Director), Victoria Klepacz (Analyst in Charge), Jennifer Baker, Matthew  Crosby, Lorraine Ettaro, Stephanie Gustafson, Julia Kennon, Roxanna  Sun, Jay Still, Alyssa Weir, and Khristi Wilkins made key contributions to  this report."], "subsections": []}]}], "fastfact": ["One way to award a competitive federal contract is to choose based on cost, when the cheapest option will suffice. But how does DOD decide when that's the case?", "While there are some general criteria for using this process, DOD's regulations don't provide specific criteria for making determinations. That will change when DOD updates its regulations as directed by a 2016 law.", "We found that some contracting officers were confused about how to apply 2 of the 8 criteria in the law, including how to assess the full cost to DOD over the life of the good or service being bought.", "We recommended providing more guidance on the criteria."]}
{"id": "GAO-18-101", "url": "https://www.gao.gov/products/GAO-18-101", "title": "Defense Infrastructure: Action Needed to Increase the Reliability of Construction Cost Estimates", "published_date": "2018-03-27T00:00:00", "released_date": "2018-03-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Between fiscal years 2005 and 2016, Congress annually appropriated between $2.5 to $9.6 billion in MILCON funding for the active component of the U.S. military to use for projects worldwide. Reliable project construction cost estimates are of great importance, since those estimates drive these appropriations.", "House Report 114-537 accompanying a proposed bill authorizing national defense activities for fiscal year 2017 included a provision for GAO to report on DOD's MILCON cost estimating. This report examines the extent to which (1) the active component obligated and expended the MILCON appropriations received during fiscal years 2005-2016, (2) the active component reprogrammed MILCON appropriations during fiscal years 2010 through 2016, and (3) DOD's MILCON cost estimates are reliable for selected projects and DOD's guidance for developing estimates fully incorporates the steps needed for developing reliable estimates. GAO analyzed the active components' MILCON execution data and reviewed DOD's guidance for cost estimating and compared it with the best practices identified in GAO's Cost Estimating and Assessment Guide ."]}, {"section_title": "What GAO Found", "paragraphs": ["During fiscal years 2005 through 2016, Congress appropriated about $66 billion in military construction funds (MILCON) to the active duty Army, Navy, and Air Force (referred to as the active component) for projects. As of September 30, 2016, the active component had obligated all but about $5.1 billion and expended all but about $11 billion of those funds. Of the $5.1 billion remaining unobligated, about $4.6 billion was still available to be obligated because MILCON appropriations are generally available for new obligations for 5 years. According to Department of Defense (DOD) officials, available but unobligated amounts no longer needed may be either taken back by Congress or reprogrammed to other MILCON projects that the active component identifies as needing additional funding.", "During fiscal years 2010 through 2016, the active component reprogrammed about $1.6 billion in MILCON appropriations to fund emergency projects, projects that were authorized but did not receive specific appropriations, and projects needing additional funding. Of this amount, the Army reprogrammed about $789 million; the Navy, about $535 million; and the Air Force, about $295 million.", "DOD's guidance does not fully incorporate the steps needed for developing reliable estimates and the estimates for three projects that GAO reviewed were not reliable. Specifically, two of the three high-value projects GAO examined experienced a more than 30-percent increase from the initial cost estimates submitted to Congress. GAO determined that DOD cost estimators did not follow all the best practices associated with the four characteristics\u2014comprehensive, well-documented, accurate, and credible\u2014of a reliable estimate for these projects. GAO's Cost Estimating and Assessment Guide identifies 12 steps that, if used, are more likely to result in reliable and valid cost estimates. However, as shown below, DOD's construction guidance\u2014the Unified Facilities Criteria\u2014does not include all of these steps. Until DOD incorporates these steps, DOD and congressional decision-makers may not have reliable estimates to inform their decisions regarding appropriations and the oversight of projects."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD ensure that its cost estimating guidance fully incorporate the steps needed for developing reliable cost estimates. DOD partially concurred with GAO's recommendation and stated that it will issue revised cost guidance in fiscal year 2019 that more fully incorporates those steps that would benefit the military construction program."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2016, Congress appropriated $3.9 billion in military  construction (MILCON) funding for the active component of the U.S.  armed forces to use for projects in the United States and overseas. The  Department of Defense (DOD) receives a MILCON appropriation annually  and uses it for the planning, design, and construction of facilities  worldwide. To use these appropriations for specific projects, DOD  submits proposals and cost estimates for approval by stakeholders  including Congress and the Secretary of Defense. DOD guidance states  that DOD must prepare the cost estimates as accurately as possible to  reflect the budgetary cost of providing facilities. However, DOD regularly  experiences differences between initial cost estimates and final costs  which, in some instances, necessitate changes to project schedules and  budgets or requests for additional funding from Congress in order to  award construction contracts and complete projects. Some differences  between initial estimates and final costs for MILCON projects can be  attributed to factors outside of DOD\u2019s control, such as unforeseen  environmental and site conditions. However, some projects have raised  congressional concerns regarding the quality of DOD\u2019s MILCON cost  estimating practices.", "Obtaining approval and funding for MILCON projects requires DOD to  annually submit requirements and justifications in support of its funding  requests to Congress. After congressional decision-makers approve  projects and appropriate MILCON amounts, DOD may award contracts  and obligate and disburse funds for projects. DOD designates  construction agents for the military departments and defense agencies  with the primary responsibility for developing and refining these proposals  and cost estimates and for managing the design and construction of  projects. If amounts designated for a specific construction project are  unobligated and remain available at the project\u2019s completion, the amounts  are considered savings and may be reprogrammed. Reprogrammed  amounts may be used to fund other projects where there are shortfalls,  projects authorized by Congress but not specifically funded through the  appropriations process, and emergency projects, such as facilities  destroyed by fires.", "House Report 114-537 accompanying a proposed bill authorizing national  defense activities for fiscal year 2017 included a provision for us to review  and report on DOD\u2019s MILCON cost estimating and project management  processes. We examined the extent to which (1) the active component  obligated and expended the MILCON appropriations received during  fiscal years 2005-2016, (2) the active component reprogrammed MILCON  appropriations during fiscal years 2010 through 2016, and (3) DOD\u2019s  MILCON cost estimates for select projects are reliable and DOD\u2019s  guidance for developing estimates fully incorporates the steps needed for  developing reliable estimates.", "For our first objective, we reviewed MILCON appropriations and  congressional designated amounts for projects included in appropriation  acts and accompanying explanatory statements, committee reports, and  conference reports accompanying the appropriations acts for fiscal year  2005 through fiscal year 2016 because these data were available  electronically. Further, we analyzed the obligation and disbursement data  of the active component\u2019s MILCON accounts using appropriation status  by fiscal year program and subaccount reports, bid savings reports, and  annual reports from the U.S. Department of the Treasury. We also  collected and compared project data from each of the military  departments on projects that had been initiated and completed during  fiscal year 2010 through fiscal year 2016, including the initial project  estimate submitted on Form 1391 (i.e., the form DOD uses to submit  project-level requirements and justifications in support of its MILCON  funding requests to Congress) and the contract award amount and  analyzed any differences between the two.", "For our second objective, we reviewed DOD\u2019s requests to Congress for  prior approval to move MILCON funds from one project to another within  a MILCON appropriation account, known as \u201creprogramming.\u201d We  calculated the total number of times such requests were made and for  what dollar amounts for fiscal year 2010 through fiscal year 2016.  Furthermore, we selected one project from each military department from  this same time frame and reviewed the accompanying Form 1391 and the  reprogramming requests associated with the projects to illustrate how  savings from one MILCON project may provide funds for another project.  For both our first and second objectives, we assessed the reliability of the  data by interviewing knowledgeable officials about the data and the steps  that they had taken to verify the data\u2019s accuracy. We determined that the  data were sufficiently reliable for our objectives.", "For the third objective, we compared the process for developing the cost  estimate for three selected projects with the characteristics and best  practices for developing a reliable cost estimate as identified in our Cost  Estimating and Assessment Guide: Best Practices for Developing and  Managing Capital Program Costs (the Cost Guide). This guide is a  compilation of cost estimating best practices drawn from across industry  and federal government. We selected our projects from the universe of  projects that we reasonably expected could have begun execution (i.e.,  projects initiated during fiscal years 2012-2014); projects that were  underway, but not substantially completed (i.e., between 10- and 75- percent complete); and projects that constituted a significant financial  investment (i.e., projects with appropriations of $75 million or greater).  Ultimately, of the 690 total projects we identified DOD-wide, 13 met these  criteria. From the 13 projects, we judgmentally selected 3: (1) the  construction of a replacement elementary school at Marine Corps Camp  Foster, Japan; (2) the construction of a Strategic Command operations  building at Offutt Air Force Base, Nebraska; and (3) the construction of a  Marine Corps command headquarters and cyberspace operations  building in Fort Meade, Maryland. These projects are not intended to  constitute a projectable sample, but rather are intended to provide in- depth information about how cost estimates are developed, compared  with best practices, across the active component.", "In conducting the assessments for these three projects, we examined the  processes used to develop both the Form 1391 estimate and the  independent government estimate (i.e., the estimate used to award the  contract) to determine whether the project cost estimates reflected the  characteristics of a high-quality and reliable cost estimate, as defined in  the Cost Guide. We also reviewed DOD\u2019s Unified Facilities Criteria and  the military departments\u2019 respective guidance related to MILCON cost  estimating and compared them with the steps needed for developing  reliable cost estimates identified in Cost Guide. We interviewed officials  and military project cost estimators at headquarters and at the Air Force\u2019s  Engineering Division, and we also interviewed DOD\u2019s construction agents  to discuss DOD\u2019s cost-estimating requirements and the guidance they  follow in preparing, documenting, and reviewing project cost estimates.  We provide further details on our scope and methodology in appendix I.", "We conducted this performance audit from January 2016 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "MILCON Appropriation and Obligation Process", "paragraphs": ["DOD\u2019s MILCON appropriations are used to fund the acquisition,  construction, installation, and equipping of temporary or permanent public  works, military installations, facilities, and real property needed to support  U.S. military forces in the United States and overseas. As with other DOD  activities, no funds may be appropriated in any fiscal year or obligated or  expended for MILCON activities unless such funds have been specifically  authorized by law. Each year, the National Defense Authorization Act  authorizes amounts to be appropriated in each of the 18 programmatic  MILCON appropriations accounts. Individual or conference committee  reports accompanying each fiscal year\u2019s National Defense Authorization  Act provide specific congressional direction on authorized funding levels  designated for specific construction projects supported by the various  MILCON accounts. Similarly, conference committee reports or  explanatory statements accompanying each fiscal year\u2019s appropriations  acts establish appropriated funding levels for MILCON projects.", "The process through which the active component requests funding for  construction projects is supported by DOD\u2019s Form 1391 Military  Construction Project Data (Form 1391). The Form 1391 is to be used to  support each project proposed for inclusion in the MILCON appropriations  request submitted concurrently with all other DOD appropriations  requests annually. The forms are to be used for both new projects as well  as urgent unforeseen projects. The Form 1391 describes the scope, total  project costs, and estimates of specific project elements. Costs  associated with other project elements such as contingency and  supervision, inspection, and design are also to be captured and included  in the total requested amount. Finally, the Form 1391 is to include a  description of the proposed construction and a requirements statement  indicating what requirement the project provides. Project budget  estimates are initially developed at the installation level and are provided  to the next responsible level for review, validation, refinement,  prioritization, and approval. Administrative support is to be provided when  requested across the departments, but ultimately the installation is the  originator and the primary responsible entity in developing the completed  Form 1391.", "MILCON appropriations are generally available for obligation for 5 fiscal  years, at which time the appropriation expires. For 5 years after they  expire, appropriations are available for limited purposes, such as  liquidating obligations made during the period of availability or adjusting  contract costs. After these 5 years, any remaining unexpended amounts,  whether obligated or unobligated, are canceled and returned to the U.S.  Treasury. Once funds are returned to the U.S. Treasury, they are no  longer available for any purposes.", "DOD obligates its appropriations throughout the period in which the  appropriation is available. An \u201cunobligated balance\u201d is the difference  between the total appropriation amount and total obligations made  against the appropriated amounts. An \u201cunexpended balance\u201d is the total  of obligated but unliquidated and unobligated amounts. According to  DOD officials, available but unobligated amounts no longer needed may  be either rescinded by Congress or reprogrammed to other MILCON  projects that the active component identifies as needing additional  funding. Reprogrammed amounts may be used to fund other projects  where there are shortfalls; for projects authorized by Congress but not  specifically funded through the appropriations process; for emergency  projects, such as for facilities destroyed by fires. DOD\u2019s flexibility to  reprogram without congressional approval is limited by the amount to be  reprogrammed to a particular project. DOD\u2019s Financial Management  Regulation requires prior congressional approval for a reprogramming  that would result in an increase exceeding 25 percent of a project\u2019s  authorized base amount or $2 million, whichever is less. Prior approval  is not required when established costs or project-related thresholds are  not reached. According to DOD officials, reprogrammings requiring  congressional approval are called \u201cabove-threshold reprogrammings\u201d and  those that do not are called \u201cbelow-threshold reprogrammings.\u201d"], "subsections": []}, {"section_title": "DOD Construction Agents", "paragraphs": ["DOD designates construction agents for the military departments and  defense agencies with primary responsibility for developing and refining  MILCON proposals and cost estimates, and to manage the design and  construction of projects. Typically, the Army Corps of Engineers is the  construction agent for Army MILCON-funded projects and the Naval  Facilities Engineering Command is the construction agent for Navy and  Marine Corps MILCON-funded projects. Either of those DOD entities can  be the construction agent for the defense agencies and activities, such as  for the Missile Defense Agency or Defense Education Activity, with the  approval of the military department having jurisdiction of the real property  facility. However, both the Army and the Navy may use each other\u2019s  construction agent if it is in the interest of efficiency and cost- effectiveness or when otherwise considered appropriate. The Air Force  may use either the Army Corps of Engineers or Naval Facilities  Engineering Command for its projects. Additionally, the Air Force Civil  Engineer Center, although not a designated construction agent, reviews  and approves requirements for Air Force MILCON cost estimates, and in  some cases may design and construct Air Force projects where both the  Air Force and the commander of the assigned construction agent agree  that it is the most efficient, expeditious, and cost-effective means to  complete the project."], "subsections": []}, {"section_title": "DOD Guidance for MILCON", "paragraphs": ["Within DOD there are two levels of military construction guidance: the  Unified Facilities Criteria and component-level guidance. The Unified  Facilities Criteria are overarching, DOD-wide technical manuals and  standards used for planning, design, construction, restoration, and  maintenance of DOD facility projects. The Unified Facilities Criteria was  designed to standardize and streamline the process for developing,  maintaining, and disseminating criteria in support of MILCON. The Unified  Facilities Criteria contains guidance describing methods, procedures, and  formats for the preparation of construction cost estimates and  construction contract modification estimates, among other types of  guidance. The Unified Facilities Criteria is to be used to the greatest  extent possible by all the DOD regardless of funding source. In addition to  the Unified Facilities Criteria, the military departments and agencies have  also developed their own internal guidance on MILCON, providing further  direction on conducting activities such as cost analysis and determining  facility requirements."], "subsections": []}, {"section_title": "Our Cost Assessment Model", "paragraphs": ["We developed the GAO Cost Estimating and Assessment Guide: Best  Practices for Developing and Managing Capital Program Costs (Cost  Guide) to assist federal agencies in developing reliable cost estimates  and also as a tool for evaluating existing cost estimating procedures.   To develop the Cost Guide, our cost experts assessed measures applied  by cost estimating organizations throughout the federal government and  industry and considered best practices for the development of reliable  cost estimates. While the Cost Guide has a focus on developing cost  estimates in the context of government acquisition programs, it outlines  best practices that are generally applicable to cost estimation in a variety  of circumstances. These best practices can be used to assess (1) the  specific project cost estimates an agency develops to determine whether  they meet the four characteristics\u2014comprehensive, well-documented,  accurate, and credible\u2014for being reliable and (2) an agency\u2019s cost  estimating guidance and procedures to see how well they incorporate all  the steps needed for producing a high-quality cost estimate. Figure 1  shows the four characteristics and associated best practices for each that  define a reliable cost estimate and table 1 shows the 12 steps identified in  the Cost Guide that, if followed correctly, should result in high-quality cost  estimates that management can use for making informed decisions."], "subsections": []}]}, {"section_title": "The Active Component Obligated and Expended Most of Its Military Construction Appropriations Received during Fiscal Years 2005 through 2016", "paragraphs": ["During fiscal years 2005 through 2016, Congress appropriated about $66  billion in MILCON funds to the active component and, as of September  30, 2016, the active component had obligated all but about $5.1 billion  and expended all but about $11 billion of those funds. Of the $5.1 billion  that remains unobligated, about $4.6 billion was unexpired and available  for new obligations (i.e., from fiscal year 2013 through 2016  appropriations). Table 2 shows the active component\u2019s combined  MILCON appropriations, obligations, and unexpended funds from fiscal  year 2005 through fiscal year 2016.", "In general, during the early first few years of a MILCON appropriation  available for 5 years, it is often likely that most of the funds will remain  unobligated. For example, as shown in table 2 above, of the nearly $3.9  billion appropriated for military construction for the active component from  the fiscal year 2016-2020 appropriation, only about $1.1 billion had been  obligated as of September 30, 2016. This is not surprising given the time  that it takes to award, obligate and disburse funds for projects. Ultimately,  though, as an appropriation nears its expiration date, all or nearly all of  the amounts have generally been obligated. In fact, as shown in table 2,  for each MILCON appropriation received by the active component prior to  fiscal year 2013 (fiscal years 2005 through 2012), less than 2 percent of  each year\u2019s appropriation was unexpended as of September 30, 2016. In  appendix II, we provide additional analysis of the active component\u2019s  unexpended and unobligated balances, by appropriation year and by  military department.", "Although ultimately, the active component obligates and expends most of  its MILCON appropriations, the active component can experience a wide  range of differences between initial cost estimates and final costs during  the execution of individual MILCON projects, resulting in savings or  shortfalls depending on the project. For example, we found that from  fiscal year 2010 through fiscal year 2016, the active component achieved  about $4.2 billion in MILCON project savings as a result, for example, of  canceled projects, projects with lower than expected contractor bids, or  the use of less expensive building materials. In appendix III, we provide  additional analysis of the active component\u2019s estimated initial costs and  the contract award amounts that were funded by MILCON appropriations  for fiscal year 2010 through fiscal year 2016."], "subsections": []}, {"section_title": "The Active Component Reprogrammed Hundreds of Millions of Dollars in Military Construction Appropriations in Fiscal Years 2010- 2016", "paragraphs": ["The active component reprogrammed about $1.6 billion in MILCON  appropriations to fund shortfalls caused by emergency projects, projects  that were authorized but did not receive specific appropriations, and  projects needing additional funding in fiscal years 2010 through 2016. Of  this amount, the Army reprogrammed about $789 million of about $14  billion in appropriated MILCON funds; the Navy, about $535 million of  about $14 billion in appropriated MILCON funds; and the Air Force, about  $295 million of about $7 billion in appropriated MILCON funds. Table 3  shows the number and amounts of above-threshold reprogrammings by  the active component for fiscal years 2010 through 2016.", "As seen in table 3, for any given year there are typically hundreds of  millions of dollars reprogrammed. There are generally multiple active or  canceled projects that result in cost savings, which may be used to fund  authorized but not specifically funded projects. Below are three examples  where the active component funded MILCON projects with amounts  reprogrammed from other projects:", "Repair Shop at Andersen Air Force Base, Guam: This is an Air  Force project to construct a pacific air resiliency low  observable/corrosion control/composite repair shop in Guam. It is an  authorized project that did not receive specific funding during the  appropriation process but was fully funded by reprogrammed cost  savings from active construction projects. Congress authorized $34.4  million for the repair shop in fiscal year 2015; however, no funds were  specifically appropriated for the project. According to Air Force  officials, since this was their top unfunded military construction  priority, they used $34.4 million in savings achieved from other  projects to construct the repair shop. Table 4 lists the three projects  whose MILCON funds were reprogrammed for the repair shop at  Andersen Air Force Base in Guam.", "Training Facility at the Naval Air Station at Mayport, Florida: This  is a Navy project to construct a littoral combat ship training facility in  Florida. It is a specifically funded project requiring additional funds  that received reprogrammed amounts from a canceled project. In  fiscal year 2014, the initial cost as listed on the Form 1391 was  estimated to be $20.5 million, but project costs increased by 41  percent to an estimated $28.9 million, according to a fiscal year 2016  reprogramming request to Congress. As detailed in the  reprogramming request, the Navy attributed the increased cost to  underestimated mission simulator and communication line  requirements. To fund the increased costs, the Navy used $8.3 million  in savings from a canceled project to complete the facility. Table 5  lists the canceled project that resulted in funds being reprogrammed  for the training facility at Mayport.", "Barracks at Presidio of Monterey, California: This is an Army  project to construct a trainee barracks in California. It is a specifically  funded project in need of additional funds that received  reprogrammed amounts from active and canceled construction  projects. In fiscal year 2011, the initial cost for the project as listed on  the Form 1391 was estimated to be $63 million, but project costs  increased by 51 percent to $95 million, according to a fiscal year 2015  reprogramming request to Congress. As detailed in the  reprogramming request, the Army attributed the increased costs to a  3-year delay in construction and the need to move the project to a  small, steep-terrain site. The reprogramming request further noted  that the delay in construction was due to the discovery at the  proposed construction site of a seismic fault and a plant that is an  endangered species. To fund the increased costs, the Army sought to  reprogram funds from the savings achieved from the active and  canceled projects. Table 6 lists the projects that generated the  reprogrammed funds used for the barracks at Presidio."], "subsections": []}, {"section_title": "DOD\u2019s Cost Estimates for Selected Construction Projects Were Not Reliable and DOD\u2019s Guidance Does Not Fully Incorporate the Steps Needed for Developing Reliable Estimates", "paragraphs": ["Our analyses of the cost estimates for three selected projects shows that  the cost estimates were not reliable, and DOD\u2019s cost estimating guidance  does not fully incorporate all the steps needed for producing reliable  estimates. We examined the cost estimates of three high-value military  construction projects and noted that the initial cost estimates increased  for all three projects, with cost estimates for two of the projects increasing  by over 30 percent and the other, by about 7 percent. Specifically:", "Strategic Command Operations Building, Offutt Air Force Base,  Nebraska. The project to construct a nuclear, space, and network  command and control operations building for the command at Offutt  Air Force Base, Nebraska, increased from an initial cost estimate in  fiscal year 2012 of $564 million to $601 million in fiscal year 2014 (or  a 7-percent increase). According to a fiscal year 2014 reprogramming  request to Congress, the Air Force attributed the increased cost to the  fact that the project team did not appreciate the full scope, complexity,  and risk of such an information technology- intensive project. These  cost issues are similar to challenges we have reported on for other  information technology-intensive MILCON projects. The Air Force is  the project owner and the Army Corps of Engineers is the construction  agent for this project.", "Command Headquarters and Cyberspace Operations Building,  Fort Meade, Maryland. The project to construct a command  headquarters and cyberspace operations building with sensitive  compartmented information facility in Fort Meade, Maryland,  increased from an initial cost estimate in fiscal year 2013 of $84  million to $110 million in fiscal year 2015 (or a 31-percent increase).  As detailed in the fiscal year 2015 reprogramming request, the Navy  attributed the increased cost to higher than expected construction  costs due to increased demand on the labor workforce in the  Washington, D.C./Baltimore area and underestimated electrical power  requirements. The Navy is the project owner and the Army Corps of  Engineers is the construction agent for this project.", "Elementary School Camp Foster, Japan. The project to replace an  elementary school at Camp Foster, Japan increased from an initial  cost estimate in fiscal year 2012 of $79 million to $107 million in fiscal  year 2014 (or a 35-percent increase). As detailed on the fiscal year  2014 reprogramming request, the Department of Defense Education  Activity attributed the increased cost to the volatile construction  climate in Japan caused by natural disasters; Japanese government  policies, economic stimulus, and reform; and the planned  developments for the 2020 Tokyo Olympic Games. Although this  project is not owned by any of the military departments, it is being  managed by the Army Corps of Engineers in its role as a DOD  construction agent through which it plays an important role in the  development of the construction cost estimate. The Department of  Defense Education Activity is the project owner and the Army Corps  of Engineers is the construction agent.", "To determine the reliability of the cost estimates for these three selected  projects, we assessed the cost estimates against the best practices for  developing a reliable estimate in our Cost Guide. As previously  discussed, the Cost Guide defines the four characteristics\u2014 comprehensive, well documented, accurate, and credible\u2014of a reliable  cost estimate and the associated best practices related to each  characteristic. In conducting these assessments, we examined both the  Form 1391 estimate (i.e., the estimate used to develop the budget) and  the independent government estimate i.e., (the estimate used to award  the contract) for each project. Our analysis of the cost estimates for the  three selected projects shows that the cost estimators did not follow all  the best practices listed for each of the four characteristics. As a result,  none of the characteristics were fully or substantially met. To be reliable,  a cost estimate must substantially or fully meet each of the four  characteristics. As the Cost Guide states, if any of the characteristics are  not met, minimally met, or partially met, then the cost estimate does not  fully reflect the characteristics of a high-quality estimate and cannot be  considered reliable. Table 7 provides the results of our assessment of the  cost estimates for each of the three selected projects.", "The Cost Guide also identifies 12 steps that, when incorporated into an  agency\u2019s cost estimating procedures and guidance, are more likely to  result in reliable and valid cost estimates. However, our analysis of DOD\u2019s  department-wide cost estimating guidance\u2014the Unified Facilities  Criteria\u2014found that the criteria did not include all of these 12 steps. The  Unified Facilities Criteria incorporates some of the 12 steps to some  degree, but not others, and as a result DOD is at a greater risk of  developing estimates that are not reliable. Table 8 provides our  assessment of the extent to which DOD\u2019s Unified Facilities Criteria  incorporates the 12 steps needed to develop a high-quality, reliable cost  estimate.", "Each of the military departments is required to follow the Unified Facilities  Criteria to the greatest extent possible when designing and constructing  facilities. However, as shown by the table above, there are shortcomings  in these criteria when compared with our Cost Guide. Despite these  shortcomings, the military departments have gone beyond the Unified  Facilities Criteria and developed their own guidance that more closely  aligns with our Cost Guide. For example, for both the \u201cdetermining the  estimating structure\u201d and \u201cobtain the data\u201d steps, we found that all three  military departments had developed their own guidance that more closely  aligned with the 12 steps than the Unified Criteria did. In addition, some  military departments are also making improvements to their cost  estimating processes, but these improvements have not been fully  implemented yet. For example, the Air Force Civil Engineer Center is  implementing a cost estimate improvement plan to include the training of  nearly 700 airmen and has conducted a study that directly ties the 12  steps in the Cost Guide to the associated tasks to be completed by the  Air Force cost estimator to meet each individual step. However, the  actions contained in the cost improvement plan have not been fully  implemented and still remain in the concept phase. Similarly, although the  Army Corps of Engineers is investigating expanding the use the of cost  and schedule risk analysis\u2014which could align with the best practices in  the Cost Guide\u2014that the Army currently conducts for selected civil work  construction projects to its high-cost military construction projects, the  Army has not formally required the use of these tools. In appendix IV, we  describe the guidance the military departments have developed beyond  the Unified Facilities Criteria.", "The Cost Guide is designed to establish a consistent methodology that is  based on best practices and that can be used across the federal  government for developing, managing, and evaluating capital program  cost estimates. Air Force and Army Corps of Engineers officials noted  that there may be instances in which following all the 12 steps of the Cost  Guide for every MILCON project would not be appropriate to the risk level  of the project. For example, it may not be realistic or to the military  departments\u2019 benefit for the military departments to conduct a sensitivity  and uncertainty analysis or develop an independent cost estimate for all  the construction projects they initiate every year, especially for low-cost  projects. We agree that it may not be suitable to fully apply all 12 of the  cost estimating steps in the Cost Guide to all MILCON projects. However,  incorporating the 12 steps into the Unified Facilities Criteria would  establish consistency across DOD in the cost estimating process by  ensuring that, for each MILCON project, each step in the Cost Guide  would at least be considered. Furthermore, DOD could choose to  establish thresholds\u2014based on, for example, the dollar values of the  projects\u2014to guide the services in implementing the 12 steps for the most  valuable projects. Skipping or not considering any step of the 12-step cost  estimating process, especially for high-value projects such as those in our  case studies, increases the risk that cost estimates may use improper  assumptions, lack appropriate definition, or be otherwise unreliable.  Without improving the Unified Facilities Criteria with respect to cost  estimating processes, DOD and the services will not be positioned well to  provide reliable cost estimates to DOD and congressional decision- makers."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Each year DOD receives billions of dollars in MILCON appropriations to  use for projects in the United States and overseas. The quality of project  cost estimates are of great importance since those estimates are the  basis for DOD\u2019s requests for appropriations. While DOD\u2019s policy is that  MILCON cost estimates be prepared as accurately as possible in order to  reflect the full cost of constructing DOD facilities, DOD\u2019s Unified Facilities  Criteria\u2014the department\u2019s primary construction criteria for developing  cost estimates\u2014does not fully incorporate all of the steps needed for  producing reliable cost estimates. Until DOD incorporates the 12 steps of  high-quality, reliable cost estimating into this department-wide  construction criteria, DOD and congressional decision-makers may not  have reliable estimates to inform their decisions regarding appropriations  and the oversight of projects."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making one recommendation to DOD:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Energy, Installations, and the Environment work with DOD\u2019s  construction agents, military departments, and other offices to improve  DOD\u2019s MILCON cost estimating guidance (i.e., DOD\u2019s Unified Facilities  Criteria) by fully incorporating all the steps needed for developing high- quality reliable cost estimates. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD. In written comments, which are  reprinted in their entirety in appendix VI, DOD partially concurred with our  recommendation.  DOD also provided technical comments that have  been incorporated into the report as appropriate.", "DOD partially concurred with our recommendation to improve its cost  estimating guidance by fully incorporating all 12 steps needed for  developing high-quality, reliable estimates. DOD stated that it did not  believe that it is suitable to fully apply all 12 steps to any construction  project due to characteristics of the military construction program that  DOD believes differ from those of major system or weapon acquisition  programs. However, DOD also stated that it concurred with the intent and  general applicability of the twelve steps to military construction and that  DOD cost estimating guidance lacks specificity in several of these areas.   DOD acknowledged that expanding its cost guidance to more fully  incorporate these steps would benefit the military construction program,  and that it is planning to address this by revising its cost guidance during  Fiscal Year 2019.", "In our report, we recognize that it may not be appropriate to fully apply all  12 steps to each construction project. For example, it may not be realistic  or to the military departments\u2019 benefit to conduct a sensitivity and  uncertainty analysis or develop an independent cost estimate for all the  construction projects they initiate every year, especially for low-cost  projects. Accordingly, we did not recommend that DOD fully apply all 12  steps to each construction project, but rather that it fully incorporate the  12 steps into the Unified Facilities Criteria so that, at least, each step is  considered for each project. DOD could then choose to establish  thresholds\u2014based on, for example, the dollar values of the projects\u2014to  determine for which the 12 steps should be fully applied or other  circumstances in which some steps might not be applicable.  We believe  DOD\u2019s planned revisions will meet the general intent of our  recommendation.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense, the Secretaries of the Army, Navy,  and Air Force. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff has any questions about this report, please contact me  at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To examine the active component\u2019s military construction (MILCON)  obligations and expended balances, we reviewed MILCON appropriations  found in appropriations acts, including accompanying explanatory  statements and conference committee reports from fiscal year 2005  through 2016. Further, we analyzed the obligation and disbursement data  of the active component\u2018s MILCON accounts, appropriation status  reports, bid savings reports, as well as annual reports from the U.S.  Department of the Treasury. We also collected and compared project  data from each of the active component on projects that had been  initiated and completed during fiscal year 2010 through fiscal year 2016.  Specifically, we compared the initial estimate as shown on the Form  1391\u2014the form DOD uses to submit requirements and justifications in  support of its funding requests to Congress\u2014with the contract award  amount and analyzed any differences between the two.", "To examine the amount of MILCON reprogramming during fiscal years  2010 and 2016 by the active component, we reviewed DOD\u2019s requests to  Congress to reprogram MILCON funds from one project to another. We  calculated the total number of times such requests were made and the  dollar amounts for fiscal year 2010 through fiscal year 2016. We selected  this time frame because the reprogramming requests were readily  available from DOD. In addition, we judgmentally selected three projects  from this same time frame and reviewed accompanying Forms 1391 and  the reprogramming requests associated with the projects to illustrate  instances in which savings from one MILCON project funded another  project. We collected and analyzed data for fiscal years 2005 through  2016 on the active component MILCON appropriations, obligations, and  disbursements and we collected reprogramming data for fiscal years  2010 through 2016. We assessed the reliability of the data by interviewing  knowledgeable officials about the data and the steps that they had taken  to verify the data\u2019s accuracy. We determined that the data were  sufficiently reliable for our objectives.", "To determine the extent to which DOD\u2019s MILCON cost estimates are  reliable and DOD\u2019s guidance for producing estimates fully incorporates all  of the steps needed for developing reliable estimates, we compared the  process for developing three selected projects with the characteristics  and best practices for developing a reliable estimate identified in GAO\u2019s  Cost Estimating and Assessment Guide: Best Practices for Developing  and Managing Capital Program Costs (the Cost Guide). This guide is a  compilation of cost estimating best practices drawn from across industry  and federal government. We selected our projects from the universe of  projects that we reasonably expected could have begun execution (i.e.,  projects initiated during fiscal years 2012-2014); projects that were  underway, but not substantially completed (i.e., between 10- and 75- percent complete); and projects that constituted a significant financial  investment (i.e., projects with appropriations of $75 million or greater).  Ultimately, of 690 total projects we identified DOD-wide, 13 met these  criteria and, from this sample, we selected the 3 projects included in this  report: (1) the construction of a replacement elementary school at Camp  Foster, Japan; (2) the construction of a Strategic Command operations  building at Offutt Air Force Base, Nebraska; and (3) the construction of a  Marine Corps command headquarters and cyberspace operations  building in Fort Meade, Maryland.", "In conducting the assessments for these three selected projects, we  examined the processes used to develop both the Form 1391 estimate  (i.e the form DOD uses to submit project-level requirements and  justifications in support of its MILCON funding requests to Congress ) and  the independent government estimate (i.e., the estimate used to award  the contract)  to determine whether the project cost estimates had the  characteristics of a high-quality and reliable cost estimate, as defined in  the Cost Guide. These projects are not intended to be a projectable  sample, but to illustrate how cost estimates are assessed against best  practices. Although the Camp Foster project is not owned by any of the  active component, the construction and planning of the project is being  led by the Army Corps of Engineers in its capacity as a DOD construction  agent and, as such, we decided to include it in our review. Additionally,  we reviewed DOD\u2019s Unified Facilities Criteria and the active component\u2019s  respective guidance related to MILCON cost estimating and compared  them with the steps needed for developing reliable estimates identified in  the Cost Guide. We also interviewed military project cost estimators and  active component construction agents to discuss the requirements and  guidance they follow in preparing, documenting, and reviewing project  cost estimates. Table 9 details the documents we reviewed for our cost  estimating assessments.", "We conducted this performance audit from January 2016 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Active Component\u2019s Unobligated, Unexpended Balances, and Execution of Military Construction Appropriations, Fiscal Years 2005 through 2016", "paragraphs": ["In this appendix we provide the supporting details on the active  component\u2019s unobligated and unexpended balances of military  construction (MILCON) appropriations for fiscal years 2005 through  2016. We include details on unobligated and unexpended balances by  appropriation year and include individual tables for each military  department of the active component. Overall, the active component had  high obligation and expenditure rates associated with MILCON  appropriations that have expired or been canceled. The Army, the Air  Force, and the Navy consistently expended over 90 percent of amounts  appropriated in fiscal years 2005 through 2011.", "This appendix also provides supporting details on the active component\u2019s  execution of MILCON appropriations for fiscal years 2010 through 2016.  Using Department of Defense (DOD) data, we identified two groups of  MILCON projects: congressionally directed and other. \u201cCongressionally  directed\u201d projects are those MILCON projects specifically identified in an  appropriation act, explanatory statement, and/or committee reports  accompanying the appropriation act for a specific fiscal year. \u201cOther\u201d  projects refer to congressionally directed MILCON projects identified in an  appropriation act, explanatory statement, and/or conference committee  reports in a previous fiscal year. Overall, the active component obligated  about 89 percent of its fiscal years 2010 through 2012 appropriations for  congressionally directed projects whose appropriations expired on  September 30, 2017."], "subsections": [{"section_title": "Unobligated and Unexpended Balances", "paragraphs": ["Tables 10 through 12 present detailed information on unexpended and  unobligated balances for each military department of the active  component\u2019s MILCON appropriation for fiscal years 2005 through 2016,  as reported by DOD as of September 30, 2016."], "subsections": [{"section_title": "Army", "paragraphs": ["Table 10 shows that for fiscal years 2005 through 2012, the Army  expended almost all of its MILCON appropriations. Specifically, with the  exception of fiscal year 2012, the Army expended at least 90 percent of  its appropriations received each fiscal year for 2005 through 2011.  Unexpended rates for amounts appropriated for fiscal years 2014 through  2016 vary and unobligated amounts for these years remain available for  new obligations.", "Table 11 shows that, for fiscal years 2005 through 2013, the Air Force  expended almost all of its MILCON appropriations. Specifically, the Air  Force expended at least 95 percent of its appropriations received each  year for fiscal years 2005 through 2011 and also in fiscal year 2013.  Unexpended rates for amounts appropriated for fiscal years 2014 through  2016 vary and unobligated amounts for these years remain available for  new obligations.", "Table 12 shows that for fiscal years 2005 through 2012, the Navy  expended almost all of its MILCON appropriations. Specifically, the Navy  expended at least 90 percent of its appropriations received each fiscal  year for 2005 through 2011. Unexpended rates for amounts appropriated  for fiscal years 2014 through 2016 vary and unobligated amounts for  these years remain available for new obligations."], "subsections": []}]}, {"section_title": "Execution of Military Construction Appropriations", "paragraphs": ["Tables 13 through 15 provide detailed information on budget execution  for each active duty military department\u2019s MILCON appropriation for  \u201ccongressionally directed\u201d and \u201cother\u201d MILCON projects for fiscal years  2010 through 2016, as reported by DOD as of September 30, 2016."], "subsections": [{"section_title": "Army", "paragraphs": ["Table13 shows the obligations made by the Army for MILCON  appropriations for fiscal years 2010 through 2016. We analyzed the  obligations made during these appropriations\u2019 period of availability for  congressionally directed and other MILCON projects. For fiscal year  2010, using data in the table, we found that about 97.2 percent of  obligations were for congressionally directed projects and 2.8 percent  were for other projects, as discussed above. In fiscal year 2011, about 94  percent of obligations were for congressionally directed projects and 4.2  percent were for other projects; and in fiscal year 2012, about 86.5  percent of obligations were for congressionally directed projects and 7.2  percent were for other projects.", "Table 14 shows the obligations made by the Air Force for MILCON  appropriations for fiscal years 2010 through 2016. We analyzed the  obligations made during these appropriations\u2019 period of availability for  congressionally directed and other MILCON projects. For fiscal year  2010, using the data listed in the table, we found that 90.5 percent of  obligations were for congressionally directed projects and 7.3 percent  were for other projects, as discussed above. In fiscal year 2011, about  84.3 percent of obligations were for congressionally directed projects and  12.9 percent were for other projects; and in fiscal year 2012, about 87.5  percent of obligations were for congressionally directed projects and 9.0  percent were for other projects.", "Table 15 shows the obligations made by the Navy for MILCON  appropriations for fiscal years 2010 through 2016. We analyzed the  obligations made during these appropriations\u2019 period of availability for  congressionally directed and other MILCON projects. For fiscal year  2010, using data in the table, we found that 84.7 percent of obligations  were for congressionally directed projects and 15.0 percent were for other  projects, as discussed above. In fiscal year 2011, about 87.7 percent of  obligations were for congressionally directed projects and 11.8 percent  were for other projects; and in fiscal year 2012, about 85.5 percent of  obligations were for congressionally directed projects and 13.4 percent for  other projects."], "subsections": []}]}]}, {"section_title": "Appendix III: Comparison of Completed Military Construction Projects\u2019 Initial Cost Estimates with Contract Award Amounts, Fiscal Years 2010 through 2016", "paragraphs": ["This appendix provides information on our analysis of DOD\u2019s estimated  initial costs and contract award amounts of projects that had been  initiated and completed during fiscal year 2010 through fiscal year 2016  by the active component. An official from the Office of the Assistant  Secretary of Defense for Energy, Installations, and Environment told us  that, to determine whether initial cost estimates were over- or  underestimated, a comparison between initial Form 1391 estimates and  contract award amounts would be a valid approach since contract award  amounts are, in general, estimates of the same requirements identified on  a Form 1391. The official also noted that supervision, inspection,  overhead, and contingency costs included on a Form 1391 are not  included in contract award amounts, which could create differences  between the Form 1391 cost estimates and contract award  prices. Because of this, we excluded the supervision, inspection,  overhead, and contingency costs from the Form 1391 estimates in the  table below to eliminate those differences. Form 1391 cost estimates may  also vary from contract award amounts for reasons such as changes in  project size or scope, changes in project characteristics, unexpectedly  high or low contractor bids, or differences in expected building material  costs, among other things. A negative percent change from the Form  1391 estimate to the contract award amount indicates the estimated  project cost was overestimated and a positive percent change indicates  the project was underestimated. We did not determine the precise  reasons for any differences between estimated costs and contract award  amounts. Table 16 lists information on 414 completed projects funded  with military construction (MILCON) appropriations during fiscal year 2010  through fiscal year 2016 sorted by largest percentage overestimated to  largest percentage underestimated."], "subsections": []}, {"section_title": "Appendix IV: Military Department Guidance for Developing Military Construction Cost Estimates", "paragraphs": ["The military departments of the active component have gone beyond the  Unified Facilities Criteria and developed their own guidance for military  construction (MILCON) that more closely aligns with the 12 steps needed  for developing high-quality, reliable estimates. Table 17 describes the  guidance developed by the military departments to align with those steps."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Maria Storts, Assistant Director;  Bonita Anderson; Shawn Arbogast; Ronald Bergman; Brian Bothwell;  Robert Brown; Farrah Graham; Mae Jones; Jennifer Leotta; Amie Lesser;  Felicia Lopez; Carol Petersen; Vikki Porter; Steve Pruitt; and Karen  Richey made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-67", "url": "https://www.gao.gov/products/GAO-19-67", "title": "Medicare Laboratory Tests: Implementation of New Rates May Lead to Billions in Excess Payments", "published_date": "2018-11-30T00:00:00", "released_date": "2018-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Medicare paid $7.1 billion for 433 million laboratory tests in 2017. These tests help health care providers prevent, diagnose, and treat diseases.", "PAMA included a provision for GAO to review CMS's implementation of new payment rates for these tests. This report addresses, among other objectives, (1) how CMS developed the new payment rates; (2) challenges CMS faced in setting accurate payment rates and what factors may have mitigated these challenges; and (3) the potential effect of the new payment rates on Medicare expenditures. GAO analyzed 2016 Medicare claims data (the most recent data available when GAO started its work and the year on which new payment rates were based) and private-payer data CMS collected. GAO also interviewed CMS and industry officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) revised the Clinical Laboratory Fee Schedule (CLFS) for 2018, establishing new Medicare payment rates for laboratory services. Prior to 2018, these rates were based on historical laboratory fees and were typically higher than the rates paid by private payers. The Protecting Access to Medicare Act of 2014 (PAMA) required CMS to develop a national fee schedule for laboratory tests based on private-payer data. To revise the rates, CMS collected data on private-payer rates from approximately 2,000 laboratories and calculated median payment rates, weighted by volume. GAO found that the median private-payer rates were lower than Medicare's maximum payment rates in 2017 for 88 percent of tests. CMS is gradually phasing in reductions to Medicare payment rates, limited annually at 10 percent over a 3-year period (2018 through 2020), as outlined in PAMA.", "CMS relied on laboratories to determine whether they met data reporting requirements, but agency officials told GAO that CMS did not receive data from all laboratories required to report. CMS did not estimate the amount of data it should have received from laboratories that were required to report but did not. CMS took steps to exclude inaccurate private-payer data and estimated how collecting certain types and amounts of additional private-payer data could affect Medicare expenditures. However, it is not known whether CMS's estimates reflect the actual risk of incomplete data resulting in inaccurate Medicare payment rates. GAO found that PAMA's phased in reductions to new Medicare payment rates likely mitigated this risk of inaccurate Medicare payment rates from 2018 through 2020. However, GAO found that collecting incomplete data could have a larger effect on the accuracy of Medicare payment rates in future years when PAMA allows for greater payment-rate reductions.", "CMS's implementation of the new payment rates could lead Medicare to pay billions of dollars more than is necessary and result in CLFS expenditures increasing from what Medicare paid prior to 2018 for two reasons. First, CMS used the maximum Medicare payment rates in 2017 as a baseline to start the phase in of payment-rate reductions instead of using actual Medicare payment rates. This resulted in excess payments for some laboratory tests and, in some cases, higher payment rates than those Medicare previously paid, on average. GAO estimated that Medicare expenditures from 2018 through 2020 may be $733 million more than if CMS had phased in payment-rate reductions based on the average payment rates in 2016. Second, CMS stopped paying a bundled payment rate for certain panel tests (groups of laboratory tests generally performed together), as was its practice prior to 2018, because CMS had not yet clarified its authority to do so under PAMA, according to officials. CMS is currently reviewing whether it has the authority to bundle payment rates for panel tests to reflect the efficiency of conducting a group of tests. GAO estimated that if the payment rate for each panel test were unbundled, Medicare expenditures could increase by as much as $10.3 billion from 2018 through 2020 compared to estimated Medicare expenditures using lower bundled payment rates for panel tests."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Administrator of CMS (1) collect complete private-payer data from all laboratories required to report or address the estimated effects of incomplete data, (2) phase in payment-rate reductions that start from the actual payment rates rather than the maximum payment rates Medicare paid prior to 2018, and (3) use bundled rates for panel tests. HHS concurred with GAO's first recommendation, neither agreed nor disagreed with the other two, and has since issued guidance to help address the third. GAO believes CMS should fully address these recommendations to prevent Medicare from paying more than is necessary."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicare is the single largest purchaser of laboratory tests in the United  States. In 2017, Medicare paid $7.1 billion for 433 million laboratory tests  that gave health care providers information they used in preventing,  diagnosing, and treating disease. Medicare\u2014a federal health insurance  program administered by the Centers for Medicare & Medicaid Services  (CMS), an agency within the Department of Health and Human Services  (HHS)\u2014pays for laboratory tests under Medicare Part B using payment  rates established under the Clinical Laboratory Fee Schedule (CLFS).", "On January 1, 2018, Medicare began paying for laboratory tests using  rates established with a new payment rate-setting methodology (the 2018  CLFS), as required by the Protecting Access to Medicare Act of 2014  (PAMA). The 2018 CLFS reflects the first major change in payment  methodology for laboratory tests in three decades. Prior to 2018, the  CLFS was based on historical laboratory charges from the mid-1980s,  adjusted annually for inflation and other factors, and had remained  relatively unchanged.", "PAMA directed CMS to develop new rates for the CLFS based on rates  paid by certain private payers, creating a single, national fee schedule for  laboratory tests. PAMA also called for a phase-in of the new payment  rates by limiting any reductions to 10 percent per year for each of the first  3 years of implementation. PAMA continues phasing in the reductions in  the second 3-year cycle after implementation, limiting any reductions to  15 percent per year. In 2015, CMS estimated that the changes in  payment rates resulting from PAMA would reduce Medicare expenditures  by $360 million in the first year.", "PAMA included a provision for GAO to review CMS\u2019s implementation of  the new payment rates for laboratory services in the revised CLFS. This  report examines:  1.  what is known about the payment rates laboratories receive from  2.  how CMS developed the 2018 CLFS payment rates;  3.  the challenges CMS faced in setting accurate Medicare payment rates  based on complete and accurate private-payer data, and what factors  may have mitigated these challenges; and  4.  the potential effect of CMS\u2019s implementation of new payment rates on  Medicare expenditures.", "To describe what is known about the payment rates laboratories received  from private payers, we reviewed market reports from industry analysts  and laboratory representatives that analyzed private-payer rates for  laboratory tests. We identified these market reports by searching a  database of industry analyses from 2014 through 2018. We also  identified reports cited by laboratory industry representatives and  reviewed information submitted to CMS by industry stakeholders during  rate-setting processes. We did not independently verify the data in these  reports. We also interviewed officials from three organizations  representing the laboratory industry and laboratory companies that we  identified. We selected these organizations because they represented a  large and diverse group of laboratories and different perspectives in their  support for the new payment rates initially proposed by CMS. We relied  on market reports and interviews with industry officials because we were  unable to identify a reliable and comprehensive source on private-payer  rates for laboratory tests.", "To describe how CMS developed the 2018 CLFS payment rates, we  reviewed documents from CMS, such as guidance to industry and  Medicare contractors, and the agency\u2019s proposed and final rulemaking  that describes the process CMS established to collect data on private- payer rates that laboratories received. We also reviewed documentation  CMS published about its preliminary and final calculations of the 2018  CLFS. In addition, we compared the median private-payer rates  (weighted by volume) that CMS calculated to Medicare\u2019s 2017 national  limitation amounts for laboratory tests (the maximum that CMS would pay  for a laboratory test). We used this comparison to determine the  percentage difference between the median payment rates and the 2017  national limitation amounts. We also interviewed CMS officials and  representatives from the laboratory industry and laboratory companies.", "To determine the challenges CMS faced in setting accurate Medicare  rates based on complete private-payer data, and what factors may have  mitigated these challenges, we conducted two types of analyses. First,  we determined the share of Medicare payments in 2016 that reporting  laboratories received to compare against the share that CMS estimated  laboratories meeting reporting requirements would receive. We identified  laboratories reporting data to CMS using the national provider identifier  (NPI) they reported. We used the Medicare claims data to determine  these laboratories\u2019 share of Medicare payments in 2016. We assessed  the reliability of the claims data by testing for missing data and obvious  outliers. On this basis, we determined that these data were sufficiently  reliable for the purposes of our report.", "For our second analysis related to collecting complete data, we estimated  the potential effects that collecting data from additional laboratories could  have had on Medicare payment rates and expenditures from 2018  through 2020. For this analysis we used the private-payer data that  CMS collected to estimate what Medicare expenditures could be if CMS  had received additional data. Specifically, we used the private-payer data  CMS collected to identify median private-payer rates and payment rates  at other percentiles. We then estimated the amounts of additional private- payer data as well as the payment rates in these additional data that  would be needed to shift median private-payer rates to these other  percentiles. To estimate the amount that additional data could shift  median private-payer rates, we assumed that all of the payment rates in  additional data could shift these medians in the same direction, either up  or down. For example, we estimated that collecting 20 percent more data  with payment rates above the 60th percentile of payment rates in the data  already collected could shift median rates to the 60th percentile,  approximately. Conversely, we estimated that collecting 20 percent more  data with payment rates below the 40th percentile of payment rates in the  data already collected could shift median rates to the 40th percentile,  approximately. We then estimated Medicare payment rates and  expenditures using payment rates at these percentiles as median private- payer rates. See appendix II for our calculations at the different  percentiles.", "To determine the challenges CMS faced in setting accurate Medicare  rates based on accurate private-payer data, we analyzed the effects on  Medicare expenditures of including and excluding data that CMS  identified as potentially inaccurate in calculating the payment rates,  assuming that the same number of laboratory tests performed in 2016  was also performed in each year from 2018 through 2020. We also  interviewed CMS officials about how they addressed the effect of  inaccurate private-payer data on Medicare payment rates and their  estimates of the potential effect of inaccurate data on Medicare  expenditures, as well as the effect of incomplete private-payer data. We  compared CMS\u2019s activities to relevant federal standards for internal  control related to identifying, analyzing, and responding to risk.", "To examine the potential effect of CMS\u2019s implementation of new payment  rates on Medicare expenditures, we estimated Medicare expenditures  from 2018 through 2020, using CLFS rates CMS published and  conducted two analyses related to panel tests, which are groups of tests  performed together. The first analysis examined the effect of using 2017  national limitation amounts to phase in reductions to payment rates for  panel tests, which Medicare commonly paid at lower rates. We estimated  changes in Medicare expenditures if CMS had limited annual reductions  to payment rates for panel tests based on the average amounts Medicare  had allowed for payment in 2016 instead of on the national limitation  amounts from 2017.", "For our second analysis of the potential effect of CMS\u2019s implementation of  new payment rates on Medicare expenditures, we examined the effect of  paying for panel tests as a group using bundled payments or separately  as individual component tests using multiple, unbundled payments. We  estimated potential changes in Medicare expenditures due to paying  separately for each component test that makes up a panel test, in  comparison with paying a bundled rate. For panel tests without billing  codes, we used Medicare bundled payment rates from 2016 to compare  with CMS\u2019s calculated payment rates for component tests from 2018  through 2020 because bundled payment rates are not available for these  years.", "We took additional steps to support or extend our analyses. We reviewed  analyses conducted by CMS and reviewed information from a  subcommittee to the Medicare Advisory Panel on Clinical Diagnostic  Laboratory Tests regarding payment for panel tests. We interviewed CMS  about its legal authority to use bundled payment rates and its actions to  avoid paying more than necessary for laboratory tests. We compared  CMS\u2019s actions to the relevant standards for internal control in the federal  government related to using quality information and to designing and  implementing control activities to respond to risks.", "We conducted this performance audit from July 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Medicare Payment for Individual and Panel Tests before PAMA\u2019s Implementation in 2018", "paragraphs": ["Medicare pays for laboratory tests that are performed individually or in a  group. For individual tests, laboratories submit claims to Medicare for  each test they perform that is on the CLFS; tests are identified using a  billing code. Prior to the implementation of PAMA in 2018, the payment  rates on the CLFS were based on rates charged for laboratory tests in  1984 through 1985 adjusted for inflation. Additionally, 57 geographic  jurisdictions had their own fee schedules for laboratory tests. CMS used  the 57 separate fee schedules to calculate a national limitation amount,  which served as the maximum payment for individual laboratory tests.  Thus, the payment rate for an individual test was the lesser of the amount  claimed by the laboratory, the local fee for a geographic area, or the  national limitation amount for a particular test.", "Medicare pays bundled payment rates for certain laboratory tests that are  performed as a group, called panel tests. Panel tests can be divided into  two categories\u2014those without billing codes and those with billing codes.  Panel tests without billing codes are composed of at least 2 of 23 distinct  component tests. Additionally, there are 7 specific combinations of these  23 component tests that are commonly used and have their own billing  code. Prior to 2018, Medicare paid for both types of panel tests (those  without or with a billing code) using a bundled rate based on the number  of tests performed, with modest payment increases for each additional  test conducted. For example, in 2017, Medicare paid $7.15 for panel  tests with two component tests and $9.12 for panel tests with 3  component tests, with a maximum bundled payment rate of $16.64 for all  23 component tests. Prior to 2018, the Medicare Administrative  Contractors would count the number of tests performed before  determining the appropriate bundled payment rate. For those panel  tests with a billing code, the payment rate was the same if laboratories  used the associated billing code for the panel test or listed each of the  component tests separately."], "subsections": []}, {"section_title": "Medicare Payment for Individual and Panel Tests after PAMA\u2019s Implementation in 2018", "paragraphs": ["After PAMA\u2019s implementation in 2018, the 57 separate fee schedules for  individual laboratory tests were replaced with a single national fee  schedule. The payment rates for this single national fee schedule were  based on private-payer rates for laboratory tests paid from January 1,  2016 through June 30, 2016. Specifically, the payment rate for an  individual test was generally based on the median private-payer rates for  a given test, weighted by test volume.", "Payment for panel tests also changed in 2018. For panel tests without  billing codes, Medicare Administrative Contractors no longer counted the  number of component tests performed to determine the bundled payment  rate; instead, Medicare paid the separate rate for each component test in  the panel. For panel tests with a billing code, the payment rate depended  on how the laboratory submitted the claim. If a laboratory used the billing  code associated with the panel test, Medicare paid the bundled payment  rate for that billing code. If a laboratory submitted a claim for the panel  test, but listed each of the component tests separately instead of using  the panel test\u2019s billing code, Medicare paid the individual payment rate for  each component test. Table 1 below summarizes the changes to payment  rates before and after 2018."], "subsections": []}, {"section_title": "Types of Clinical Laboratories", "paragraphs": ["Multiple types of laboratories receive payment under Medicare. The three  laboratory types that received the most revenue from the CLFS in 2016  were independent laboratories, hospital-outreach laboratories, and  physician-office laboratories. (See table 2.)", "Estimates of the size of the total U.S. laboratory market vary. For  example, the Healthcare Fraud Prevention Partnership estimated that the  laboratory industry received $87 billion in revenue in 2017, while another  market report estimated the laboratory industry received $75 billion in  revenue in 2016. Similar to Medicare, the three laboratory types that  generally receive the most revenue overall are independent laboratories,  hospital-outreach laboratories, and physician-office laboratories, when  laboratory tests performed in hospital inpatient and outpatient settings  were excluded.", "Estimates of revenue received by these laboratories also vary. For  example, in recent years, estimates of the share of laboratory industry  revenue generated by independent laboratories ranged from 37 percent  to 54 percent. Additionally, estimates of revenue generated by hospital- outreach laboratories recently ranged from 21 to 35 percent, and  physician-office laboratories ranged from 4 to 11 percent of total  laboratory industry revenue."], "subsections": []}]}, {"section_title": "Private-Payer Rates for Laboratory Tests Generally Vary by Laboratory Type and Other Characteristics", "paragraphs": ["Private-payer rates for laboratory tests conducted by the three largest  laboratory types generally vary by type and other characteristics,  according to market reports and the laboratory industry officials we  interviewed.", "Independent laboratories. These laboratories generally receive  lower private-payer rates than other types of laboratories,  according to industry officials we interviewed. Market reports we  reviewed noted that about half of the independent laboratory  market is dominated by two national laboratories and that these  national laboratories provide more competitive pricing by  performing a large volume of tests at one time. Medicare  accounted for a smaller proportion of the revenue earned by these  two national laboratories (12 percent), compared to other  laboratories, according to another market report we reviewed. In  contrast, a different market report noted that smaller, independent  laboratories tend to earn more of their revenue from Medicare (34  percent).", "Hospital-outreach laboratories. These hospital-affiliated  laboratories typically receive relatively higher private-payer rates,  according to industry officials we interviewed. Although hospital- outreach laboratories perform tests similar to other laboratories,  they can obtain above-average payment rates by leveraging the  market power of their affiliated hospital when negotiating rates  with private payers, according to industry officials and market  reports. Hospital-outreach laboratories generally receive about  25 to 30 percent of their revenue from the Medicare CLFS.", "Physician-office laboratories. Physician-office laboratories  typically receive higher private-payer rates than independent  laboratories, according to a recent analysis by a laboratory  industry association. This industry association also noted that  the cost structure to operate in a setting such as a physician-office  laboratory is different than in large independent laboratories, as  the physician-office laboratory is unable to conduct a large  number of tests at one time. Officials from another industry  association we interviewed said that payment rates for these  laboratories are generally dependent on the size of the physician  practice group. These same officials told us that larger physician  groups (e.g., 10 or more physicians) typically negotiate higher  rates from private payers than smaller physician groups. Most  physician-office laboratories received less than $25,000 in  revenue per year from Medicare, according to CMS.", "Additionally, in 2013, the Department of Health and Human Services  Office of Inspector General found that Medicare\u2019s payment rates on the  CLFS were higher than rates paid by some private health insurance  plans. Specifically, it found that Medicare rates for laboratory tests were  18 percent to 30 percent higher than rates paid by certain insurers under  health benefits plans for federal employees."], "subsections": []}, {"section_title": "CMS Analyzed Private-Payer Data to Develop New Payment Rates", "paragraphs": ["Definition of Applicable Laboratories  Required to Report Private-Payer Data to  CMS  CMS defined applicable laboratories as those  meeting four criteria: (1) they met the  definition of laboratory under regulations  implementing the Clinical Laboratory  Improvement Amendments of 1988; (2) they  billed Medicare Part B under their own  Medicare billing number, also called the  national provider identifier; (3) more than 50  percent of their total Medicare revenues  came from the Clinical Laboratory Fee  Schedule (CLFS) and/or the Physician Fee  Schedule; and (4) they received at least  $12,500 in Medicare revenue from the CLFS  from January 1, 2016, through June 30, 2016.", "CMS analyzed private-payer data it collected from about 2,000  laboratories to develop new payment rates for individual laboratory tests  on the CLFS. PAMA defined laboratories required to report private-payer  data, called applicable laboratories, as laboratories that meet certain  criteria. (See sidebar.) Applicable laboratories with their own specific  billing number, the NPI, submitted these data to CMS. If one  organization operated multiple applicable laboratories, each with its own   NPI, then the organization could report data to CMS for multiple  applicable laboratories. CMS collected data from applicable laboratories  on payments they received from private payers during the first half of  2016. Specifically, CMS collected data on (1) the unique billing code  associated with a laboratory test; (2) the private-payer rate for each  laboratory test for which final payment was made during the data  collection period (January 1, 2016, through June 30, 2016); and (3) the  volume of tests performed for each unique billing code at that private- payer rate. For the data CMS collected between January 1, 2017, and  May 30, 2017, CMS relied on the entities reporting to CMS to attest to the  completeness and accuracy of the data they submitted.", "CMS relied on each laboratory to identify whether or not it was an  applicable laboratory and took steps to assist laboratories in meeting  reporting requirements. According to CMS officials, they relied on  laboratories to self-identify as applicable laboratories because they were  unable to accurately identify the number of laboratories required to  report. To assist laboratories, CMS issued multiple guidance documents  to the industry outlining the criteria for being an applicable laboratory and  describing the type of data CMS intended to collect. CMS also  conducted educational calls when the proposed and final rules were  issued and prior to the data collection period. CMS officials told us they  conducted additional outreach activities, including holding conference  calls with national laboratory associations and attending professional  conferences. Officials said they used these outreach activities in addition  to the guidance issued to inform laboratories of the reporting  requirements for applicable laboratories, for example.", "In addition, CMS established a revenue threshold of $12,500 in an effort  to reduce the reporting burden for entities that receive a relatively small  amount of revenues under the CLFS. In its final rule, CMS noted that it  expected that many of the laboratories that would be below this revenue  threshold and, thus exempt from reporting data to CMS, would be  physician-office laboratories. CMS also chose to use the NPI in its  definition of applicable laboratory in the final rule to allow hospital- outreach laboratories that use their own NPI to submit data to the  agency. In its proposed rule, CMS suggested using an alternative  identification number to the NPI. However, according to the final rule,  CMS chose to use the NPI in its definition of applicable laboratory to allow  those hospital-outreach laboratories billing using their own NPI to submit  private-payer data to the agency.", "According to CMS, at the end of the 5-month submission period, the  agency had received data from approximately 2,000 applicable  laboratories, representing a volume of almost 248 million laboratory tests;  these data accounted for about $31 billion in revenue from private payers.  CMS reported that the data it collected included private-payer rates for 96  percent of the 1,347 eligible billing codes on the CLFS. CMS used these  data to calculate a median, private-payer rate, weighted by volume and  phased in this change by limiting payment-rate reductions to 10 percent  per year. Beginning in 2018, these new payment rates served as the  single, national payment rate for individual laboratory tests. These  payment rates were also used for the individual, component tests that  make up panel tests and were used when laboratories billed Medicare for  panel tests by listing the component tests separately.", "In general, the median payments rates, weighted for volume, that CMS  calculated were lower than Medicare\u2019s previous payment rates for most  laboratory tests. According to our analysis, these median payment rates  were lower than the corresponding 2017 CLFS national limitation  amounts (the maximum that CMS would pay for laboratory tests) for  approximately 88 percent of tests. Figure 1 below describes the  percentage difference between these median payment rates and  Medicare\u2019s 2017 national limitation amounts for laboratory tests.", "The final payment rates that CMS calculated, which included the 10- percent, phased in, payment-rate reductions, will remain in effect until  December 31, 2020; PAMA requires CMS to calculate new payment rates  for the CLFS every 3 years. Reporting entities will next be required to  submit data on private-payer rates to CMS in early 2020, for final  payments made from January 1, 2019 through June 30, 2019. PAMA  capped any reductions for the second 3-year cycle after implementation  to a maximum of 15 percent per year."], "subsections": []}, {"section_title": "PAMA\u2019s Provisions and CMS\u2019s Actions May Have Mitigated Some Challenges Related to Incomplete and Inaccurate Private-Payer Data, but Future Challenges Remain Incomplete Data Likely Had a Limited Effect from 2018 through 2020 but Could Affect Future Rates", "paragraphs": ["CMS did not collect private-payer data from all laboratories required to  report this information and did not estimate how much data was not  reported by these laboratories, according to agency officials. CMS relied  on laboratories to determine whether they met data reporting  requirements and submit data accordingly. CMS emphasized the  importance of receiving data from all laboratories required to report by  stating that it is critical that CMS collect complete data on private-payer  rates in order to set accurate Medicare rates. However, agency officials  told us that CMS did not receive data from all laboratories required to  report. They also told us that CMS did not have the information available  to estimate how much data was missing because not all laboratories  reported or the extent to which the data collected were representative of  all of the data that laboratories were required to report.", "Prior to collecting private-payer data, CMS estimated that laboratories  subject to reporting requirements would receive more than 90 percent of  CLFS expenditures to physician-office laboratories and independent  laboratories. Specifically, based on its analysis of 2013 Medicare  expenditures, CMS estimated that reporting requirements would apply to  the laboratories that received 92 percent of CLFS payments to physician- office laboratories and 99 percent of CLFS payments to independent  laboratories.", "After laboratories reported private-payer data, we analyzed the share of  CLFS expenditures received by the laboratories that reported. Our  analysis found that CMS collected data from laboratories that received  the majority of CLFS payments to physician-office, independent, and  other non-hospital laboratories in 2016. However, the laboratories that  reported private-payer data received less than 70 percent of CLFS  expenditures to physician-office, independent, and other non-hospital  laboratories. Specifically, using Medicare claims data, we calculated that  CMS collected data from laboratories that received 68 percent of 2016  CLFS payments to physician-office, independent, and other non-hospital  laboratories.", "Although it did not collect complete data, CMS concluded that it collected  sufficient private-payer data to set Medicare payment rates and that  collecting more data from additional laboratories that were required to  report would not significantly affect Medicare expenditures. This  conclusion was based, in part, on a sensitivity analyses that CMS  conducted of the effects that collecting certain types and amounts of  additional data would have on weighted median private-payer rates and  the effects those rates could have on Medicare payment rates and, thus,  expenditures. Results from these analyses showed that Medicare  expenditures based on the CLFS would have changed by 2 percent or  less after collecting more data from the various types of laboratories. For  example, CMS estimated that doubling the amount of private-payer data  from physician-office laboratories would increase expenditures by 2 percent and collecting ten times as much data from hospital outreach  laboratories would increase expenditures by 1 percent. (See fig. 2.)", "PAMA\u2019s 10-percent limit on annual payment-rate reductions likely  reduced the effect that incomplete private-payer data could have on the  CLFS because this limit applied to most Medicare payment rates for  laboratory tests. As demonstrated in figure 1, while 59 percent of tests  had median private-payer rates that were at least 30 percent less than  their respective 2017 national limitation amounts, CMS published  Medicare rates for these tests for 2018 through 2020 that were reduced  by only 10 percent per year as a result of this limit. For example, a  hypothetical laboratory test with a 2017 CLFS national limitation amount  of $10.00 and a median private-payer rate of $7.00 would result in CLFS  rates of $9.00 in 2018, $8.10 in 2019, and $7.29 in 2020. Changes to  median private-payer rates due to collecting more complete data or  eliminating inaccurate data would have no effect on Medicare payment  rates from 2018 through 2020 for this hypothetical test if they resulted in  new median rates of $7.29 or less.", "Our analysis of the potential effects that collecting data from additional  laboratories could have had on Medicare payment rates and expenditures  found that the effect of CMS not collecting complete data would likely  have been greater absent PAMA\u2019s limits on annual reductions to  Medicare payment rates. As a result, CMS may face challenges setting  accurate Medicare rates if it does not collect complete data from all  laboratories required to report in the future when PAMA allows for greater  annual payment-rate reductions. To conduct this analysis, we used the  private-payer data CMS collected to analyze the range of effects that  collecting additional data could have on Medicare expenditures, assuming  2016 utilization rates remain constant. The extent of these effects  depends on the amount of additional data CMS would need to collect to  obtain complete data and whether the payment rates in these additional  data would have been greater or less than the medians of the rates  reported. For example, we estimated that if CMS needed to collect 20  percent more data for its collection to be complete, doing so could  increase Medicare CLFS expenditures from 2018 through 2020 by as  much as 3 percent or reduce them by as much as 3 percent depending  on the payment rates in these additional data. However, if annual limits to  Medicare payment-rate reductions were not applied, collecting these  additional data could increase CLFS expenditures by as much as 9  percent or reduce them by as much as 9 percent. (See fig. 3 and app. II  for additional information about these estimates.)", "As demonstrated in figure 2, CMS did analyze how collecting certain  types and amounts of data from additional laboratories would affect  Medicare expenditures. However, without valid estimates of how much  more data these additional laboratories were required to report and how  much these data would change median payment rates, it remains  unknown whether CMS\u2019s analyses estimate the actual risk of setting  Medicare payment rates that do not reflect private-payer rates from all  applicable laboratories, as mandated by PAMA. CMS could have  compared the data it collected with independent information on the  payment rates laboratories were required to report, for example. The  independent information could be estimated by auditing a random sample  of laboratories or could be estimated using data from third-party vendors,  if these vendors could supply relevant and reliable information."], "subsections": [{"section_title": "CMS Mitigated Challenges of Setting Accurate Medicare Payment Rates by Identifying and Excluding Inaccurate Private-Payer Data that Could Have Led to Paying More than Necessary", "paragraphs": ["We found that CMS mitigated challenges to setting accurate Medicare  payment rates by identifying, analyzing, and responding to potentially  inaccurate private-payer data. CMS addressed potentially inaccurate  private-payer data and other data that CMS determined did not meet  reporting requirements.", "CMS removed or replaced data from four reporting entities that  appeared to have or confirmed having reported revenue\u2014which is  the payment rate multiplied by the volume of tests paid at that  rate\u2014instead of payment rates. We estimated that if CMS had  included these data that CLFS expenditures from 2018 through  2020 would have increased by 7 percent.", "CMS removed data it determined were reported in error including  duplicate submissions and submissions with payment rates of  $0.00. We estimated that removing these data will change CLFS  expenditures from 2018 through 2020 by less than one percent.", "CMS identified four other types of potentially inaccurate data that it  determined would not significantly impact Medicare payment rates or  expenditures and did not exclude them from calculations of median  private-payer rates. CMS considered the following potentially inaccurate  data to have met its reporting requirements:  1.  data from 57 entities that reported particularly high rates in at least 60  percent of their data,  2.  data from 12 entities that reported particularly low rates in at least 50  percent of their data,  3.  data with payment rates that were 10 times greater than the 2017  national limitation amounts or 10 times less than these amounts, and  4.  data from laboratories that may not have met the $12,500 low- expenditure threshold or that reported data from a hospital NPI  instead of a laboratory NPI.", "We found that each of these four types of potentially inaccurate data  would have changed estimated Medicare CLFS expenditures from 2018  through 2020 by 1 percent or less if CMS had instead excluded the data.  To conduct this analysis, we recalculated Medicare rates after excluding  each type of data and estimated Medicare expenditures assuming 2016  rates of utilization."], "subsections": []}]}, {"section_title": "CMS\u2019s Implementation of New Payment Rates Could Lead to Medicare Paying Billions More than Necessary for Some Tests", "paragraphs": [], "subsections": [{"section_title": "CMS\u2019s Approach to Phase In Reductions to Payment Rates Temporarily Increased Some Rates and Contributed to Estimated Increases in Medicare Expenditures for Certain Laboratory Tests", "paragraphs": ["Although weighted median private-payer rates were lower than  Medicare\u2019s 2017 national limitation amounts for 88 percent of tests, we  estimated the total Medicare expenditures based on the 2018 CLFS  would likely increase by 3 percent ($225 million overall) compared to  2016 expenditures, assuming test utilization remained at 2016 levels.  This increase in estimated expenditures is due, in part, to CMS\u2019s use of  above-average payment rates as a baseline to calculate payment rates  for those laboratory tests affected by PAMA\u2019s annual payment-rate  reduction limit of 10 percent. (See fig. 4.)", "When applying the 10-percent payment-rate reduction limit, CMS used as  its starting point the 2017 national limitation amounts in order to set a  single, national payment rate for each laboratory test. Thus, the Medicare  payment rate for a test in 2018 could not be less than 90 percent of the  test\u2019s 2017 national limitation amount. However, prior to 2018, some  payment rates were commonly lower than the national limitation amounts  because they were based on the lesser of (1) the amount billed on claims,  (2) the local fee for a geographic area, or (3) a national limitation amount,  and because panel tests had different bundled payment rates. As a result,  by reducing payment rates from national limitation amounts, CMS did not  always reduce rates from what Medicare actually paid.", "Panel tests, in particular, frequently received bundled payment rates that  differed substantially from national limitation amounts associated with  their billing codes prior to 2018. We compared national limitation  amounts, which represent maximum Medicare payment rates for tests,  with the average amounts Medicare allowed for payment in 2016, which  reflect actual Medicare payment rates. For example, figure 5 below  shows that the 2017 national limitation amount for comprehensive  metabolic panel tests ($14.49) was substantially higher than both the  average amount Medicare allowed for payment in 2016 ($11.45) and the  median payment rate laboratories reported receiving from private payers  ($9.08). As a result, using the 2017 national limitation amount as a basis  for payment reductions caused Medicare\u2019s payment rate to increase from  an average allowed amount of $11.45 in 2016, to a payment rate of  $13.04 in 2018, instead of decreasing towards a lower median private- payer rate of $9.08. By increasing average payment rates rather than  phasing in reductions to rates, CMS\u2019s implementation may lead to paying  more than necessary for some tests.", "Federal standards for internal control for information and communications  require agency management to use quality information to achieve its  objectives. Basing reductions on national limitation amounts rather than more relevant information on how much Medicare actually paid\u2014such as  the average allowable amounts in 2016, for example\u2014could result in  Medicare paying more than necessary by $733 million from 2018 through  2020, according to our estimates."], "subsections": []}, {"section_title": "CMS\u2019s Changes to Payment Rates for Panel Tests Could Lead Medicare to Pay Billions of Dollars More than Is Necessary", "paragraphs": ["In implementing PAMA, CMS eliminated bundled rates for panel tests that  lack billing codes and started paying separately for each component test  instead. CMS also implemented the 2018 CLFS in a manner that could  lead to unbundling payment rates for panel tests with billing codes. If  payment rates for all panel tests were unbundled, we estimated that  Medicare expenditures could increase by $218 million for panel tests that  lack billing codes and by as much as $10.1 billion for panel tests with  billing codes from 2018 through 2020. CMS also estimated that there  could be significant risks of paying more than necessary associated with  unbundling and has taken initial steps to monitor these risks and explore  possible responses, but had not yet responded to these risks as of July  2018.", "CMS Unbundled Payment Rates for Panel Tests without Billing  Codes  Beginning in 2018, CMS no longer uses bundled payment rates for panel  tests without billing codes and instead pays laboratories individual  payments for each component test that comprises these panel tests.  However, CMS staff and members of its advisory panel discussed  concerns with this approach. At an advisory panel meeting in 2016, CMS  staff relayed concerns from stakeholders that CMS would not be able to  collect valid data on private-payer rates for these panel tests. According  to agency staff, stakeholders had informed CMS that private payers  commonly use bundled payment rates for these panel tests, but  laboratories would only be able to report unbundled payment rates for  individual component tests.", "We estimated that unbundling these payment rates would increase  Medicare expenditures from 2018 through 2020 by $218 million in  comparison to the estimated Medicare expenditures over the same time  period based on Medicare\u2019s 2016 utilization and allowable amounts. For  example, under the 2016 CLFS, Medicare paid approximately 435,000  claims for panel tests that included the laboratory tests assay of  creatinine (HCPCS code 82565) and assay of urea nitrogen (HCPCS  code 84520) at an average bundled payment rate of $6.82. In contrast,  under the 2018 CLFS, these two component tests are reimbursed  individually at $6.33 and $4.88, respectively, or $11.21 combined\u2014a 63  percent increase.", "Despite concerns about the validity of available private-payer data on  component tests for panel tests without billing codes, CMS used these  data to set payment rates for component tests. CMS officials told us that  they stopped using bundled payment rates for these panel tests because  it is not clear that CMS has the authority to combine the individual  component tests into groups for bundled payment as it did before 2018  due to PAMA\u2019s reference to payments for each test. However, in July  2018, CMS officials told us the agency was reviewing its authority  regarding this issue. CMS officials told us they are exploring alternative  approaches that could limit increases to Medicare expenditures but had  not yet determined what additional legal authority would be needed, if  any, and did not know when CMS would make this determination. Agency  officials told us that CMS has taken initial steps to monitor unbundling and  explore possible responses, including the following:", "Monitoring unbundling: CMS has begun monitoring changes in  panel test utilization, payment rates, and expenditures associated  with its implementation of PAMA, according to officials. For  example, CMS officials told us that preliminary data indicated that  Medicare payments for individual component tests of panel tests  has increased substantially in 2018, but, as of July 2018, it was  too early to draw conclusions from these data because  laboratories have up to one year to submit claims for tests.", "Collecting input on alternatives: In 2016, a subcommittee of an  advisory panel that CMS established reviewed Medicare\u2019s use of  bundled payment rates for panel tests and published different  approaches for CMS to consider implementing in combination with  other changes to implement PAMA.", "CMS\u2019s Implementation of PAMA May Have Allowed Unbundling of  Payment Rates for Panel Tests with Billing Codes  Beginning in 2018, laboratories that submit claims for any of the seven  panel tests with billing codes by using the billing codes for the individual  component tests now receive the payment rate for each component test,  rather than the bundled rate. Prior to 2018, laboratories could submit  claims for these panel tests either by using the specific codes for panel  tests or by billing separately for each of the component tests, and,  regardless of how laboratories submitted claims, Medicare Administrative  Contractors would pay bundled payment rates based on how many of the  23 component tests were conducted. However, CMS instructed Medicare  Administrative Contractors to stop bundling payment rates for tests that  are billed individually on claims rather than billed on claims using codes  for panel tests, beginning in 2018. CMS did so because it was not clear  that CMS had the authority to combine the individual component tests into  groups for bundled payment as it did before 2018 due to PAMA\u2019s  reference to payments for individual tests, according to agency officials.  This change could potentially have a large effect on Medicare spending.  For example, if a laboratory submitted a claim individually for the 14  component tests that comprise a comprehensive metabolic panel it would  receive a payment of $81.91, a 528 percent increase from the 2018  Medicare bundled payment rate of $13.04 for this panel test. (See fig. 6.)", "Improving how reductions to payment rates for panel tests are phased in  could mitigate, but not completely counteract, the effect of unbundling  these payment rates. For example, for the comprehensive metabolic  panel test described in figure 6, basing maximum reductions on 2016  average allowable amounts would result in a 2018 Medicare bundled  payment rate of $10.31 instead of $13.04 and individual payment rates for  the 14 component tests that total $56.06\u2014a 32 percent decrease from  $81.91 that Medicare would otherwise pay.", "If the payment rate for each panel test with a billing code were unbundled,  we estimated that Medicare expenditures for these tests from 2018  through 2020 could reach $13.5 billion, a $10.1 billion increase from the  $3.3 billion we estimated Medicare would spend using the bundled  payment rates in the CLFS. Similarly, prior to implementing PAMA, CMS  estimated that Medicare expenditures to physician-office, independent,  and other non-hospital laboratories could potentially increase as much as  $2.5 billion in 2018, alone if it paid for the same number of panel tests  with billing codes as it did in 2016 but paid for each component test  individually. These estimates represent an upper limit on the increased  expenditures that could occur if every laboratory stopped using panel test  billing codes and instead used the billing codes for individual component  tests. We do not know the extent to which laboratories will stop filing  claims using panel test billing codes.", "CMS officials also told us that they were aware of the risks associated  with paying for the individual component tests instead of the bundled  payment rate for a panel test with a billing code. However, CMS  guidance, which was effective in 2018, continued to allow laboratories to  use the billing codes for individual component tests rather than the billing  code for the panel. CMS officials explained that this was due to PAMA\u2019s  reference to payments for individual tests, similar to CMS\u2019s decision to  stop paying bundled rates for panel tests without billing codes. At the time  we did our work, CMS had not implemented a response to these risks but  had taken some initial steps to monitor unbundling and consider  alternative approaches to Medicare payment rates for these tests. HHS  provided additional information on planned activities to address these  risks in its written comments on a draft of this report. (See app. III.)"], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["CMS collected data on private-payer rates from laboratories that were  required to report these data, but not all laboratories complied with the  reporting requirement, and the extent of noncompliance remains unclear.  PAMA\u2019s provision directing CMS to phase in payment-rate reductions to  Medicare payment rates likely moderates the potential adverse effects of  incomplete private-payer data. However, in the future, failing to collect  complete data could substantially affect Medicare payment rates because  private-payer rates alone will determine Medicare payment rates. In  addition, we estimated that Medicare expenditures on laboratory tests will  be $733 million higher from 2018 through 2020, because CMS started  phasing in payment-rate reductions from national limitation amounts  instead of more relevant data on actual payment rates, such as average  allowable amounts. Finally, changes to payment rates, billing practices,  and testing practices could increase Medicare expenditures by as much  as $10.3 billion from 2018 through 2020, if CMS does not address the  risks associated with unbundling payment rates for panel tests. Agency  officials indicated that it was unclear if PAMA limited CMS\u2019s ability to  combine individual component tests into groups for bundled payment,  and, as of July 2018, CMS was reviewing this matter but did not know  when it would make a determination."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to CMS:", "The Administrator of CMS should take steps to collect all of the  data from all laboratories that are required to report. If only partial  data can be collected, CMS should estimate how incomplete data  would affect Medicare payment rates and address any significant  challenges to setting accurate Medicare rates. (Recommendation  1)", "The Administrator of CMS should phase in payment-rate  reductions that start from the actual payment rates Medicare paid  prior to 2018 rather than the national limitation amounts. CMS  should revise these rates as soon as practicable to prevent paying  more than necessary. (Recommendation 2)", "The Administrator of CMS should use bundled rates for panel  tests, consistent with its practice prior to 2018, rather than paying  for them individually; if necessary, the Administrator of CMS  should seek legislative authority to do so. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHs  provided written comments, which are reproduced in appendix III. HHS  also provided technical comments, which we incorporated as appropriate.", "HHS concurred with our first recommendation to take steps to  collect all data from laboratories required to report and  commented that it is evaluating ways to increase reporting. In  particular, in a November 2018 final rule, HHS changed the  definition of an applicable laboratory, which it expects will increase  the number of laboratories required to report data on private-payer  rates to the agency.", "HHS neither agreed nor disagreed with our second  recommendation to phase in payment-rate reductions that start  from the actual payment rates Medicare paid prior to 2018. HHS  noted that any changes to the phasing in of payment-rate  reductions would need to be implemented through rulemaking. We  estimated that by using the national limitation amounts as a  starting point for these reductions, Medicare expenditures would  increase by $733 million from 2018 through 2020. For this reason,  we continue to believe CMS should revise these rates as soon as  practicable and through whatever mechanism CMS determines  appropriate.", "HHS neither agreed nor disagreed with our third recommendation  to use bundled rates for panel tests. However, HHS commented  that it is taking steps to address this issue. More specifically, for  panel tests with billing codes, HHS is working to implement an  automated process to identify claims for panel tests that should  receive bundled payments, similar to the process used to bundle  payment rates for these panel tests prior to PAMA\u2019s  implementation and anticipates implementing this change by the  summer of 2019. In addition, HHS posted guidance on November  14, 2018, stating that the panel tests with billing codes,  laboratories should submit claims using the corresponding code  rather than the codes for the separate component tests beginning  in 2019. To reduce the potential of paying more than necessary,  we believe it is important that CMS implement its proposed  automated process to allow for these payments as soon as  possible.", "In contrast, for panel tests without billing codes, HHS commented  that it is continuing to review its authority and considering other  approaches to payment for these panel tests, such as adding  codes to the CLFS. We estimate that unbundling the payment for  these panel tests could increase Medicare expenditures by $218  million from 2018 through 2020 compared to expenditures based  on Medicare\u2019s 2016 utilization, and the actual amount could be  higher if utilization increases. For this reason, we believe CMS  should implement bundled payment rates for these panel tests to  avoid excess payments.", "We are sending copies of this report to the appropriate congressional  committees and the Administrator of CMS. 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) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Table of Key Dates Related to Developing the New Payment Rates for the 2018 Clinical Laboratory Fee Schedule", "paragraphs": ["Appendix I: Table of Key Dates Related to  Developing the New Payment Rates for the  2018 Clinical Laboratory Fee Schedule Event  Centers for Medicare and Medicaid Services (CMS) issued the CLFS proposed rule.", "CMS issued responses to frequently asked questions regarding the CLFS proposed rule.", "CMS issued the CLFS final rule.", "CMS issued responses to frequently asked questions regarding the CLFS final rule.", "CMS held the joint Annual Laboratory Public Meeting and Medicare Advisory Panel on  Clinical Diagnostic Laboratory Tests meeting.", "CMS issued laboratory billing codes subject to data collection and reporting.", "CMS issued guidance to laboratories for collecting and reporting data.", "CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting.", "CMS issued the CLFS data reporting template.", "CMS collected data on (1) the billing code associated with a laboratory test; (2) the  private-payer rate for each laboratory test for which final payment was made during the  data collection period (i.e., January 1, 2016, through June 30, 2016); and (3) the volume  of tests performed for each billing code at that private-payer rate.", "CMS issued additional guidance for laboratories as the data collection period began.", "CMS issued the CLFS fee-for-service data collection user\u2019s manual.", "CMS issued revised guidance to laboratories for collecting and reporting data.", "CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting.", "CMS released the proposed CLFS rates.", "CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting.", "Deadline for stakeholders to submit comments on the proposed CLFS rates to CMS.", "CMS issued the final CLFS rates.", "New CLFS rates became effective."], "subsections": []}, {"section_title": "Appendix II: Estimated Effects on Medicare Expenditures from Collecting Additional Data", "paragraphs": ["Table 4 below demonstrates the challenges the Centers for Medicare &  Medicaid Services (CMS) faces in setting accurate Medicare payment  rates to the extent it does not collect complete data from laboratories on  private-payer rates. Specifically, the table shows the potential effect that  collecting additional data for each laboratory test could have on Medicare  expenditures and how this effect could vary depending on (1) the amount  of additional data collected, (2) payment rates in the additional data, and  (3) limits to annual reductions in Medicare payment rates. These limits  are in place from 2018 through 2023 to phase in changes to payment  rates."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Martin T. Gahart, Assistant  Director; Gay Hee Lee, Analyst-in-Charge; Kaitlin Farquharson, Sandra  George, Dan Lee, Elizabeth T. Morrison, Laurie Pachter, Vikki Porter, and  Russell Voth made key contributions to this report."], "subsections": []}]}], "fastfact": ["Medicare paid $7.1 billion for 433 million lab tests in 2017, and typically paid higher rates than private insurers. Medicare is required to use a new methodology to establish payment rates in 2018, which tries to address this issue.", "However, we found that this new methodology could cause Medicare to pay billions more than is necessary for several reasons. For example, it uses maximum payment rates for lab services\u2014the most Medicare will pay for\u2014rather than actual payment rates in 2017 as a baseline to reduce rates. We recommended that Medicare address this issue."]}
{"id": "GAO-18-418", "url": "https://www.gao.gov/products/GAO-18-418", "title": "Identity Theft: IRS Needs to Strengthen Taxpayer Authentication Efforts", "published_date": "2018-06-22T00:00:00", "released_date": "2018-07-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Strong preventive controls can help IRS defend itself against identity theft refund fraud. These controls include taxpayer authentication\u2014the process by which IRS verifies identities before allowing people access to a resource; sensitive data; or, in some cases, a tax refund. The risk of fraud has increased as more personally identifiable information has become available as a result of, for example, large-scale cyberattacks on various entities. IRS's ability to continuously monitor and improve taxpayer authentication is a critical step in protecting billions of dollars from fraudsters.", "GAO was asked to examine IRS's efforts to authenticate taxpayers. This report (1) describes the taxpayer interactions that require authentication and IRS's methods; (2) assesses what IRS is doing to monitor and improve taxpayer authentication; and (3) determines what else, if anything, IRS can do to strengthen taxpayer authentication in the future.", "To meet these objectives, GAO reviewed IRS documents and data, evaluated IRS processes against relevant federal internal control standards and guidance, and interviewed IRS officials and state and industry representatives."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) has identified over 100 interactions requiring taxpayer authentication based on potential risks to IRS and individuals. IRS authenticates millions of taxpayers each year via telephone, online, in person, and correspondence to ensure that it is interacting with legitimate taxpayers. IRS's estimated costs to authenticate taxpayers vary by channel.", "IRS has made progress on monitoring and improving authentication, including developing an authentication strategy with high-level strategic efforts. However, it has not prioritized the initiatives supporting its strategy nor identified the resources required to complete them, consistent with program management leading practices. Doing so would help IRS clarify relationships between its authentication efforts and articulate resource needs relative to expected benefits. Further, while IRS regularly assesses risks to and monitors its online authentication applications, it has not established equally rigorous internal controls for its telephone, in-person, and correspondence channels, including mechanisms to collect reliable, useful data to monitor authentication outcomes. As a result, IRS may not identify current or emerging threats to the tax system.", "IRS can further strengthen authentication to stay ahead of fraudsters. While IRS has taken preliminary steps to implement National Institute of Standards and Technology's (NIST) new guidance for secure digital authentication, it does not have clear plans and timelines to fully implement it by June 2018, as required by the Office of Management and Budget. As a result, IRS may not be positioned to address its most vulnerable authentication areas in a timely manner. Further, IRS lacks a comprehensive process to evaluate potential new authentication technologies. Industry representatives, financial institutions, and government officials told GAO that the best authentication approach relies on multiple strategies and sources of information, while giving taxpayers options for actively protecting their identity. Evaluating alternatives for taxpayer authentication will help IRS avoid missing opportunities for improving authentication."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 11 recommendations to IRS to estimate resources for and prioritize its authentication initiatives, address internal control issues to better monitor authentication, develop a plan to fully implement new NIST guidance, and develop a process to evaluate potential authentication technologies. IRS agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Our prior work has found that strong preventive controls can help the  Internal Revenue Service (IRS) defend itself against tax fraud. These  controls include taxpayer authentication\u2014in general, the process by  which IRS verifies people\u2019s identities before allowing them access to  sensitive data (such as tax return information from a prior year) or, in the  case of a suspicious tax return, a refund. IRS also uses authentication to  verify a person\u2019s identity before allowing access to a resource, such as an  information technology (IT) system.", "The risk of fraud has increased as more personally identifiable  information (PII) has become readily available as a result of, for example,  large-scale cyberattacks on entities including IRS, the Office of Personnel  Management (OPM), and, recently, Equifax. In May 2015, IRS  temporarily suspended its Get Transcript service after fraudsters used  personal information obtained from sources outside IRS to pose as  legitimate taxpayers and access tax return information from up to 724,000  accounts. In June and July 2015, OPM announced two data breaches  affecting approximately 22.1 million current or former federal employees  and contractors and their family members. Among the data stolen were  Social Security numbers (SSN) and financial and personal health  information. In September 2017, Equifax announced that criminals had exploited a vulnerability in its systems and obtained PII on 145.5 million  individuals including names, SSNs, birth dates, addresses, and in some  cases, driver\u2019s license information. In March 2018, Equifax announced,  after further investigation, that criminals stole partial driver\u2019s license  information for an additional 2.4 million individuals. The proliferation of  stolen PII poses a threat to the tax system by making it difficult for IRS to  distinguish legitimate taxpayers from fraudsters. This threat is particularly  acute during the filing season when IRS and taxpayers interact the most.", "IRS estimates that at least $12.2 billion in identity theft (IDT) tax refund  fraud was attempted in calendar year 2016, and that it prevented the theft  of at least $10.5 billion of that amount. However, IRS reports that at least  $1.6 billion was paid out to fraudsters. IRS\u2019s ability to continuously  monitor and improve its approach to taxpayer authentication is a critical  step in defending the agency against evolving cyber threats and fraud  schemes and in protecting billions of taxpayer dollars. To further address  IDT refund fraud, IRS held a Security Summit in March 2015 with state  tax administrators and industry partners, including tax preparation and  software firms and financial institutions. This ongoing effort is intended to  improve information sharing and collaboratively address critical issues,  including authentication and fraud detection.", "Within this context, you asked us to examine IRS\u2019s efforts to authenticate  taxpayers. This report (1) describes the taxpayer interactions that require  authentication, including the general rationale behind the requirements,  and IRS\u2019s authentication methods; (2) assesses what IRS is doing to  monitor and improve its authentication methods, both internally and  collaboratively through the Security Summit, to secure taxpayer  information and reduce IDT refund fraud; and (3) determines what else, if  anything, IRS can do to strengthen its authentication methods while  improving services to taxpayers in the future.", "To describe the interactions that require taxpayer authentication and  IRS\u2019s authentication methods, we reviewed IRS documents, policies and  procedures, and IRS-reported information related to taxpayer  authentication volume and costs per transaction for fiscal years 2016 and  2017. We determined that the data were sufficiently reliable for our  purposes. We also interviewed IRS officials knowledgeable about the  agency\u2019s authentication programs and services offered to taxpayers  through various channels. For this report, we focused on the following  four IRS programs and services because they require taxpayer  authentication, verify a significant number of taxpayer identities each  year, and illustrate IRS\u2019s different approaches to authentication:  the Taxpayer Protection Program (TPP),  Identity Protection Personal Identification Number (IP PIN), and  IRS\u2019s online services.", "To assess IRS\u2019s efforts to monitor and improve authentication internally  and through the Security Summit, we reviewed IRS policies, procedures,  authentication risk assessments, and information on authentication  performance. To better understand IRS\u2019s efforts to authenticate taxpayers  via telephone and in-person and how customer service representatives  (CSR) record data for authentication, we selected a random,  generalizable sample of records from IRS\u2019s Account Management  Services (AMS) to create estimates about IRS\u2019s authentication outcome  data for TPP. We determined that these data were sufficiently reliable for  the purpose of our review based on discussions with knowledgeable IRS  officials and by checking key data elements for out-of-range or logically  inaccurate data. (See appendix I for more information.) We also  compared IRS\u2019s efforts to applicable activities in the IRS Identity  Assurance Strategy and Roadmap (Roadmap), IRS\u2019s Strategic Plan  Fiscal Years 2014-2017 (Strategic Plan), Standards for Internal Control in  the Federal Government, GAO\u2019s Framework for Managing Fraud Risks in  Federal Programs, and relevant National Institute of Standards and  Technology (NIST) guidance.", "We interviewed IRS officials in Return Integrity and Compliance Services  (RICS), Identity Assurance Office (IAO), and IT knowledgeable about the  agency\u2019s taxpayer authentication programs. We also interviewed IRS,  state, and industry co-leads from two Security Summit workgroups to  understand IRS\u2019s collaborative efforts to improve taxpayer authentication.", "To evaluate what else, if anything, IRS can do to strengthen its  authentication methods while improving services to taxpayers, we  interviewed IRS officials knowledgeable about the agency\u2019s plans for  taxpayer authentication. We also met with officials from the General  Services Administration (GSA) who are developing a government-wide  authentication platform; officials from the Office of Management and  Budget (OMB) who were involved in developing IRS\u2019s Secure Access  platform; and officials from the Department of Veterans Affairs (VA) who  are working with a third-party identity proofing service to authenticate  veterans applying for benefits online. Further, we met with knowledgeable  officials from the National Institute of Standards and Technology (NIST) to  discuss its guidelines for online identity-proofing and authentication.  Based on referrals from NIST and Security Summit workgroup co-leads  and our prior work in this area, we also interviewed a nongeneralizable  selection of representatives from state revenue offices, industry, and  financial institutions. In total, we met with representatives from five state  departments of revenue and one association representing state tax  officials, three financial institution organizations, one financial service  industry association, three identity-proofing/authentication organizations,  and four tax industry organizations. We compared IRS\u2019s authentication  programs and plans for future improvements to its Strategic Plan and  Roadmap, federal internal controls, guidance from NIST and OMB,  principles for project planning, our prior work on the Government  Performance and Results Act, our Information Technology Investment  Management framework, and our Cost Estimating and Assessment  Guide: Best Practices for Developing and Managing Capital Program  Costs. For a more detailed description of our objectives, scope, and  methodology, see appendix I.", "We conducted this performance audit from January 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Authentication Provides IRS Reasonable Assurance That It Is Interacting with Legitimate Taxpayers", "paragraphs": ["IRS authenticates taxpayers to provide the agency with reasonable  assurance that it is interacting with the legitimate taxpayer. IRS verifies  that it is interacting with the legitimate taxpayer through identity proofing  and authentication. Identity proofing is the process of first establishing  that people are actually who they claim to be. Authentication is the  process of verifying that returning users are who they say they are by  requiring the use of one or more authenticators\u2014such as a password, a  cryptographic key, or a fingerprint\u2014before allowing them access to  sensitive data or a resource. In this report, we refer to both steps  collectively as \u201cauthentication.\u201d", "For high-risk interactions, such as access to prior year tax information,  authentication can help IRS avoid improperly disclosing PII or issuing a  fraudulent refund. Authentication is particularly important for combatting  IDT refund fraud, which occurs when a fraudster obtains an individual\u2019s  SSN, date of birth, or other PII and uses it to file a fraudulent tax return  seeking a refund. IDT refund fraud can also affect businesses.  Specifically, fraudsters can use business information to file a fraudulent  corporate return requesting a refund. According to IRS officials, fraudsters  can file false employer Form W-2, Wage and Tax Statements (W-2) to  support fraudulent individual returns seeking refunds. We have previously  reported that when IRS suspects that a tax return is fraudulent, it will stop  the return from further processing, and attempt to notify and authenticate  the taxpayer before issuing the refund.", "Authentication can be accomplished using different methods depending  on the risk of the interaction.", "Single-factor authentication: Useful when someone wants to  access a low-risk system or service, this method may require only a  user name and password.", "Multi-factor authentication: For high-risk interactions such as  access to systems that include PII or financial information, this  method requires at least two of the following: \u201csomething you know\u201d  (e.g., a user name and password); \u201csomething you have\u201d (e.g., a  mobile phone or cryptographic key); or \u201csomething you are\u201d (e.g., a  fingerprint or other biometric data).", "Designing authentication programs involves a balancing act\u2014IRS needs  to prevent fraudsters from passing authentication using stolen taxpayer  information, but it must balance that against the burden on legitimate  taxpayers who must also authenticate. If IRS makes the authentication  process too stringent, legitimate taxpayers may not be able to  successfully authenticate to, for example, access their prior year tax  information or have IRS release a frozen refund. Conversely, if the  process is too easy, fraudsters will likely be able to authenticate as easily  as legitimate taxpayers.", "Industry representatives told us that identity proofing and authentication  are becoming more difficult with the wide availability of PII. Further,  according to NIST, it is challenging for organizations to authenticate users  remotely via a web application because the processes and technologies  to establish and use digital identities offer multiple opportunities for  impersonation or other attacks. These interactions may become even  more difficult and risky for organizations like IRS, who may interact with a  taxpayer only once a year.", "As shown by the data breaches discussed at the beginning of this report,  fraudsters are persistent in their efforts to exploit weaknesses in online  systems and, in the context of IRS, access sensitive taxpayer information.  For example, IRS reported that, between January and March 2017,  fraudsters were able to use PII to access information from 100,000  taxpayer accounts through IRS\u2019s Data Retrieval Tool. According to the  Treasury Inspector General for Tax Administration, identity thieves may  have used PII obtained outside the tax system to start the Free Application for Federal Student Aid (FAFSA) application process and  access tax information through the Data Retrieval Tool. Further, we have  previously reported that fraudsters can use PII obtained in a data breach  to more easily create fraudulent returns that resemble authentic tax  returns, making it more difficult for IRS to detect potential fraud.", "Even as IRS has adapted its IDT defenses, fraudsters have developed  more complex and sophisticated methods to bypass those defenses and  commit fraud undetected. IDT refund fraud affects IRS, state revenue  offices, tax preparers, tax software companies, and financial institutions.  According to industry representatives, as these entities improve security  in one area prone to fraud, fraudsters\u2019 methods evolve to target a weaker  area. For example, in March 2016, IRS alerted payroll and human  resource professionals of a phishing e-mail scheme in which fraudsters  posed as company executives and requested personal information on  employees via e-mail, including W-2s. With this information, fraudsters  can imitate the legitimate taxpayer and file fraudulent tax returns seeking  refunds. In January 2018, IRS reported that the agency received about  100 reports of W-2 phishing schemes in 2016 and about 900 reports in  2017. IRS also reported that more than 200 employers, affecting  hundreds of thousands of employees, were victimized by W-2 phishing  schemes in 2017."], "subsections": []}, {"section_title": "IRS Has Broad Efforts Underway to Address IDT and Authentication Challenges", "paragraphs": ["IRS is working to address these challenges, in part, by collaborating with  industry\u2014including tax software companies, the tax preparer community,  and financial institutions\u2014as well as state partners. In March 2015, the  former IRS Commissioner convened a Security Summit with industry and  states to improve information sharing and fraud detection and to address  common challenges. The Summit led to the creation of seven workgroups  to combat IDT refund fraud across multiple platforms. Each workgroup is  led by three co-leads\u2014one each from IRS, state departments of revenue  or state associations, and industry partners. These workgroups  collaborate on initiatives to improve IDT refund fraud prevention and  detection, including authentication.", "In 2015, IRS also established the Identity Assurance Office (IAO) to  increase insight into authentication and fraud detection needs agency- wide, including authentication services delivered via four channels:  telephone, online, in-person, and correspondence (i.e., postal mail\u2014 hereafter referred to as mail\u2014or fax). Among other responsibilities, IAO  works with stakeholders across IRS to review the agency\u2019s various  authentication programs, including assessing risks of current and planned  authentication efforts across the four channels and identifying ways to  mitigate these risks. In December 2016, IAO released its IRS Identity  Assurance Strategy and Roadmap (Roadmap) for developing a modern  and secure authentication environment for all taxpayers, regardless of  how they interact with IRS."], "subsections": []}, {"section_title": "NIST Established New Requirements for Digital Authentication", "paragraphs": ["Among other things, the National Institute of Standards and Technology  (NIST) develops and maintains standards, guidelines, recommendations,  and research on the security and privacy of information and information  systems. In June 2017, NIST released guidance on digital authentication  to help agencies improve the security of their identity-proofing and  authentication programs. In its new guidance, NIST breaks down the  digital identity environment into three separate components of assurance:  1.  Identity proofing: establishing that the person is actually who they  2.  Authentication: establishing that the person attempting to access a  service is in control of one or more valid authenticators associated  with that person\u2019s identity; and  3.  Federation: the concept that one set of user credentials can be used  to access multiple systems.", "The guidance directs agencies to assess the risk for each component of  identity assurance, rather than conducting a single risk assessment for  the entire process. According to NIST officials, this new approach  provides flexibility in choosing identity proofing and authentication  solutions; aligns with existing, standards-based market offerings; is  modular and cost-effective; and enhances individual privacy.", "In addition to NIST\u2019s new requirements for authentication, recent  technology advances and private-sector innovation are providing new  options for identity proofing and authenticating users, including in cases  where, for example, IRS interacts with taxpayers once a year. Some  examples of these technologies include physical biometrics, such as  facial recognition, as well as behavioral biometrics, such as voice  patterns, computer keystroke or mouse use patterns, swipe patterns, and  gait analysis."], "subsections": []}]}, {"section_title": "IRS Incorporates Risk and Other Factors to Guide Authentication Decisions for Taxpayer Interactions", "paragraphs": [], "subsections": [{"section_title": "IRS Identifies Interactions that Require Authentication and Estimates Risk to Determine Authentication Approach", "paragraphs": ["According to IRS documents and discussions with officials, the agency  considers risks to both the taxpayer and IRS when making decisions  about how to approach authentication, which is consistent with federal  guidelines. In making these decisions, IRS considers how individuals  would be affected by the unauthorized release of sensitive information.  IRS also considers the impact on the agency, including the potential for  financial loss or harm to IRS programs or services, and loss of public  trust.", "In 2016, IRS identified over 100 interactions between the agency and  taxpayers that require authentication. The interactions range in risk level  and IRS categorized them based on the potential for incorrect payment of  refunds, disclosure of taxpayer information, and critical impacts on IRS  operations. High-risk interactions include when an individual taxpayer  establishes an online account with IRS, which provides access to prior  year tax information and other PII, or when a taxpayer is asked to confirm  his identify before IRS processes what the agency considers to be a  potentially fraudulent tax return. Lower-risk interactions include paying a  tax bill online. According to IRS, as the risk level of taxpayer interactions  increases\u2014for example, interactions that involve sensitive financial  information\u2014the authentication process becomes more rigorous. This  enhanced security helps reduce the possibility that a fraudster can  successfully authenticate. Further, if tax professionals want to conduct  business with IRS online, such as when working on behalf of a client to  file a return or request a prior year\u2019s tax transcript, they must establish an  account and authenticate their identity."], "subsections": []}, {"section_title": "IRS Can Authenticate Taxpayers through One or More Channels", "paragraphs": ["According to IRS, the agency determines the means by which a taxpayer  or tax professional can authenticate his or her identity and what data are  required during the authentication process to appropriately minimize risk  to the agency. IRS officials told us that the agency works to balance  potential risks against its resources and mission to provide all taxpayers  access to IRS services and support. IRS performs authentication through  the following channels.", "Telephone. Taxpayers can authenticate via telephone with a customer  service representative (CSR) for selected higher-risk interactions with  IRS, such as in cases of suspected IDT refund fraud. Telephone  authentication can require taxpayers to respond to knowledge-based  questions that a fraudster would not likely know. For example, for high- risk interactions, taxpayers must answer additional tax return-related  questions. Taxpayers who fail to respond correctly to these questions are  then required to authenticate in person at a Taxpayer Assistance Center.  For certain lower-risk interactions, taxpayers can authenticate through an  automated telephone system.", "In-person. For some interactions with IRS, taxpayers can authenticate  their identity directly with an IRS employee at 1 of IRS\u2019s approximately  400 Taxpayer Assistance Centers located throughout the country.  Taxpayers may need to present one or more government-issued forms of  identification and other documents, such as a utility statement, depending  on the level of authentication required for the specific interaction.", "Online. IRS authenticates taxpayers online for both high-risk and lower- risk interactions. For high-risk interactions such as requesting a tax  transcript or looking up an Identity Protection Personal Identification  Number (IP PIN), taxpayers must pass a multi-factor authentication  process using IRS\u2019s Secure Access platform. IRS launched Secure  Access in June 2016 following the Get Transcript data breach and, as of  April 2018, was using it for 11 applications including authentication for  Get Transcript, IP PIN, and the online account. Officials told us they plan  to implement Secure Access for other IRS applications in 2018.  Taxpayers authenticating through Secure Access establish an account by  providing IRS with a valid e-mail address, basic personal information, and  personal financial information. Taxpayers then provide IRS a mobile  phone number and IRS sends the phone an activation code that the  taxpayer enters online. This step validates that the taxpayer possesses  the mobile phone. IRS authenticates returning users via a security code.  For lower-risk interactions, taxpayers may authenticate online by  answering several knowledge-based questions, such as questions about  their current return to learn the status of their refund.", "Correspondence. In some cases, taxpayers can submit documents or  request tax information via correspondence, which are then reviewed by  IRS and authenticated by matching against information in IRS\u2019s systems.  This method can require that IRS send the requested documents (such  as a tax transcript) only to the taxpayer\u2019s address of record, or require the  taxpayer to include a photocopy of identification. For example, in some  instances, taxpayers who cannot authenticate via telephone and cannot  travel to a Taxpayer Assistance Center in person may be able to  authenticate by mail.", "Each authentication channel requires different IRS resources. These  resources include IRS staff and overhead; contracts with vendors that  provide identity verification services; and costs inherent to the specific  channel, such as mailing costs. Figure 1 summarizes IRS\u2019s authentication  channels and illustrates a number of the interactions that taxpayers or tax  professionals can accomplish through one, or several, channels. It also  illustrates the differences in costs per transaction. According to IRS data,  in-person authentication at a Taxpayer Assistance Center is the most  expensive way to authenticate taxpayers (about $89 per interaction),  followed by telephone (about $54 per interaction). Online authentication  costs the least, at less than $1 per interaction. According to the National  Taxpayer Advocate, while requiring the appropriate level of authentication  is necessary to protect IRS against fraudsters, the agency also needs to  offer taxpayers a range of options for interacting with IRS."], "subsections": []}, {"section_title": "IRS\u2019s Authentication Programs and Services Are Designed to Reduce Fraud", "paragraphs": ["In this report, we focus on four key IRS programs and services that  require authentication:", "Taxpayer Protection Program (TPP). Through TPP, IRS reviews tax  returns that are flagged by IRS\u2019s IDT filters as potentially fraudulent,  such as when a return includes characteristics of known fraud  schemes. IRS sends a letter notifying taxpayers that they must  authenticate their identity before IRS will process the return or issue a  refund. According to IRS, in fiscal year 2017, more than 1.9 million  taxpayers received such a notification, and IRS authenticated about  1.17 million of them. These taxpayers could verify their identity via  telephone, in-person, and correspondence. In August 2016, IRS  suspended its TPP online authentication service because of potential  system security weaknesses. In mid-March 2018, IRS relaunched the  first phase of a more secure TPP online authentication service, which  is discussed later in this report.", "Get Transcript. This service allows individual taxpayers to request  and receive a copy of their prior years\u2019 tax information. The transcript  contains information from the taxpayer\u2019s tax filing history, such as  information from Form 1040, U.S. Individual Income Tax Return, that  can be used, for example, when applying for a mortgage or student  loan, or to electronically file (e-file) an upcoming tax return. Taxpayers  can request the transcript online or in-person (to be delivered online  or via mail); over the telephone (to be delivered via correspondence);  or by correspondence (to be delivered via mail). Taxpayers must  provide authentication information before IRS will process their  request. According to IRS, in fiscal year 2017, IRS delivered about  26.4 million transcripts, with about 59 percent of transcripts delivered  online.", "IP PIN. IRS assigns each victim of IDT a single-use identification  number to be used to file a future electronic or paper tax return. IRS  also offers taxpayers in Florida, Georgia, and the District of Columbia  the option to request an IP PIN to help prevent IDT in these high tax- related IDT locations. IRS automatically rejects e-filed returns if they  do not include the IP PIN and will delay paper returns for extra  examination when taxpayers file without the IP PIN. According to IRS,  the agency mailed 3.5 million IP PINs to be used during the 2017 filing  season.", "IRS\u2019s Online Services. IRS has developed a number of online  services that require taxpayers and tax professionals to authenticate  before accessing information online. For example, taxpayers who  have established a verified online account can set up an online  payment plan. Taxpayers can also check the status of their refund, as  well as update their address of record. Taxpayers can also use IRS\u2019s  mobile application for some of these actions, such as checking the  status of a refund or making a payment to IRS. Similarly, through  IRS\u2019s e-Services, tax professionals who have been vetted and  approved by IRS can manage their e-file accounts, file tax returns on  behalf of clients, and view their clients\u2019 tax return information.", "As noted in figure 2, the volume of taxpayers authenticated for each IRS  program or service varies by channel. Further, although TPP costs IRS  more than Get Transcript and affects far fewer taxpayers, IRS reported  that TPP helped prevent $5.3 billion in lost tax revenue in calendar year  2016."], "subsections": []}]}, {"section_title": "IRS Has Made Progress on Its Authentication Efforts, but Has Not Prioritized Authentication Improvements and Is Not Sufficiently Assessing and Monitoring Risks for All Channels", "paragraphs": [], "subsections": [{"section_title": "IRS Has Begun to Implement Its Authentication Strategy, but Has Not Articulated Priorities and Resource Needs", "paragraphs": ["IRS has identified high-level strategic campaigns, or efforts to enhance  identity assurance, in its Identity Assurance Strategy and Roadmap  (Roadmap) and has established a business process to support these  efforts. However, IRS has not articulated relative priorities for the  foundational initiatives supporting its strategic efforts or the resources it  will require to complete them. As discussed earlier, IRS\u2019s 2016 Roadmap  is the agency\u2019s plan for developing a modern and secure authentication  environment for all taxpayers regardless of how they interact with IRS.  The Roadmap outlines six core authentication objectives, followed by 10  high-level strategic efforts, and 14 foundational initiatives to help IRS  address its authentication challenges and identify opportunities for future  investment. (See appendix II.) Further, IRS has identified about 90  activities to support its foundational initiatives and the responsible  organizations and general duration to complete them. These initiatives  include, for example,  implementing a risk assessment framework that can be applied  across all authentication channels and services; developing a framework of identity proofing and authentication  requirements for third parties accessing and using IRS data and  services; and  improving taxpayer assurance by sending automated electronic alerts  to taxpayers, such as when they file a return.", "To support implementation of these initiatives, IRS established a 12- member executive governance board. Board members are senior  executives from business units across IRS, including the Identity  Assurance Office (IAO), IT Applications Development, IT Cyber Security,  and Wage and Investment. The board helps to monitor progress, risks,  and challenges associated with implementing its Roadmap, and has  generally met monthly since January 2017.", "Our prior work on government performance has identified several leading  practices for planning at the program or initiative level. Among other  things, these practices call for strategic plans to contain the goals and  objectives of a program and the human, financial, and information  resources required to complete them. Leading practices also call for  agencies to develop estimates of benefits and costs to help prioritize new  investments. Following these practices can help agencies establish  priorities in a complex environment.", "IRS has made progress on some of the strategic efforts identified in its  Roadmap. For example, consistent with its core objectives, IRS has taken  steps to enhance fraud detection by improving telephone authentication  procedures and expanding its online authentication services. In October  2016, IRS implemented a new process for high-risk telephone  authentication, which includes generating questions for the taxpayer  using data from internal IRS systems instead of from third-party data or  credit reporting agencies. In addition, in March 2018, IRS launched the  first phase of its improved online authentication service for TPP, called ID  Verify. According to IRS officials, the first phase of the service will be  available to taxpayers who did not file the return in question and appear  to be victims of IDT refund fraud. The second phase, which IRS plans to  implement later in 2018, will expand the service to all taxpayers selected  for TPP.", "While IRS\u2019s Roadmap demonstrates the breadth of the agency\u2019s strategic  vision and core objectives, it does not articulate the resources IRS needs  to implement any of its 14 foundational initiatives and their supporting  activities. For example, one of IRS\u2019s foundational initiatives is to send  event-driven notifications to taxpayers, such as when they file a return or  request a tax transcript. Such notifications could help IRS detect  potentially fraudulent activity at the earliest stage and improve  authentication of tax returns. The Roadmap identifies seven supporting  activities for this foundational initiative. One is to provide taxpayers with  greater control over their online accounts. Another supporting activity is to  determine methods for sending notifications to taxpayers about activity on  their account. However, IRS has not identified the resources required to  complete these activities, and the Roadmap notes that six of the seven  activities will take between 6 months to 3 years to complete. In December  2017, IRS officials stated that they had developed business requirements  for the foundational initiative to give taxpayers greater control over their  online accounts. However, IRS has not identified funding for the  initiative\u2019s other supporting activities\u2014such as developing requirements  to send push notifications to taxpayers\u2014and implementing them will  depend on the availability of future resources.", "Further, while IRS has developed a business process that would help the  agency prioritize initiatives, the process has not been fully implemented.  In 2015, we recommended that IRS estimate and document the costs,  benefits, and risks of possible options for taxpayer authentication, in  accordance with OMB and NIST guidance. Consistent with our  recommendation and its Roadmap, IRS developed a process to assess  the costs, benefits, and risks of current and potential authentication tools.  In May 2017, IRS implemented its business decision model to analyze  and improve its online taxpayer authentication services and provided us  with results from an analysis for implementing a text-to-voice functionality  for IRS\u2019s Secure Access online authentication platform. This function  would allow taxpayers the option of receiving an automated voice code  for authentication on a verified landline (instead of a text message on a  mobile phone). As a result of this analysis, IRS approved the proposal to  implement this tool. However, in December 2017, IRS officials stated that  the text-to-voice tool is not moving forward because of other competing IT  improvements and funding constraints. Further, IAO has not yet applied  the business decision model to other potential authentication initiatives,  such as those identified in its Roadmap.", "In December 2017, IRS officials stated that each of the strategic efforts  and foundational initiatives identified in the Roadmap are a high priority,  and they are working to address them concurrently while balancing the  availability of resources against the greatest threats to the tax  environment. We recognize that a strategy is necessarily high-level and  that IRS must remain flexible and use necessary resources to respond to  unexpected threats. At the same time, clearly identifying resources and  prioritizing its initiatives and activities will help clarify the relationships  between IRS\u2019s authentication efforts and resource needs relative to  expected benefits. Further, such efforts may also help IRS establish  clearer timelines and better respond to unexpected events."], "subsections": []}, {"section_title": "IRS Has Not Established a Policy to Assess Risks for Telephone, In-Person, and Correspondence Authentication", "paragraphs": ["While IRS has generally performed regular risk assessments on its online  authentication applications, it does not perform comparable assessments  to identify, assess, and mitigate risks for its telephone, in-person, and  correspondence authentication channels. Federal guidance directs  agencies to regularly assess and address the risks of government IT  systems. Specifically, OMB requires agencies to conduct annual risk  assessments on IT systems performing remote authentication. The  assessments should also be conducted when the agency plans to modify  its business processes or technology. This includes reviewing new and  existing electronic transactions to ensure that authentication processes  provide the appropriate level of assurance outlined in NIST guidance.  While federal guidelines broadly require agencies to identify and manage  risks and establish specific requirements for programs using online  authentication, no corresponding federal guidelines exist for telephone,  in-person, and correspondence authentication, although we have  previously reported that federal guidance and standards are applicable to  IRS\u2019s phone authentication.", "Similarly, our Framework for Managing Fraud Risks in Federal Programs  directs agencies to conduct fraud risk assessments at regular intervals  and when there are changes to the program operating environment, as  assessing fraud risks is an iterative process. Previously, such risk assessments have helped IRS identify security weaknesses and, in some  cases, have led the agency to take an authentication service offline. For  example, in response to a recommendation we made in May 2016, IRS  performed an updated risk assessment on TPP\u2019s online authentication  service, a key defense against IDT refund fraud. Based on the results of  this assessment, IRS disabled its online authentication service until it  could appropriately address the security weaknesses that it identified.", "Consistent with federal guidance, IRS has identified and analyzed risks  associated with services and programs requiring online authentication,  including TPP, Get Transcript, and IP PIN, among others. Further, IRS  has made recent progress in updating risk assessments and improving  security for its online authentication applications. Specifically, between  June 2017 and April 2018, IRS reassessed authentication risk levels for  some online applications, mitigated risks by moving additional  applications behind its Secure Access authentication platform, and  identified other compensating controls to appropriately protect its  systems. In December 2017, IRS officials stated that they were working  to bring remaining authentication applications in line with their most  recent risk assessment. They expected to complete this work by the last  quarter of fiscal year 2018.", "IRS has efforts underway to identify risks for telephone, in-person, and  correspondence authentication, but has made limited progress  implementing its process for assessing risks for all taxpayer  authentication channels. As previously discussed, in 2016, IRS identified  over 100 interactions that require taxpayer authentication and categorized  these into three high-level risk outcomes. According to IRS\u2019s risk  assessment process, the next step is for IRS business units to assess the  effects of incorrect authentication for each interaction or program, identify  gaps in existing processes, and develop options to address the gaps. IRS  officials stated that this process involves conducting scenario-based  workshops with subject matter experts.", "However, as of March 2018, this process has only been applied to TPP  and one other IRS business practice. In early 2017, IRS conducted a 2- day, internal, scenario-based workshop to assess risks and impacts and  to identify gaps for TPP authentication. Workshop participants identified  45 short-, medium-, and long-term potential enhancements to TPP\u2019s  authentication processes. However, IRS had not performed similar risk  impact assessments for other programs that rely on telephone, in-person,  and correspondence authentication\u2014including Get Transcript and IP  PIN\u2014and officials do not have a plan or timeline for conducting these  assessments. Further, IRS has not developed a plan with time frames to  address the deficiencies it identified for TPP. In December 2017, IRS  officials stated they are reviewing the 45 TPP enhancements identified by  workshop participants, but have no clear plans to implement them  because of resource constraints.", "IRS has made limited overall progress on this front because it does not  have a policy that requires regular assessments and timely mitigation of  identified issues for telephone, in-person, and correspondence  authentication, as is required for online authentication programs and  services. IRS also does not have guidelines for mitigating authentication  risks to these channels in a timely manner. In late November 2017, the  Director of IAO stated that IAO alone does not have the authority to  create and implement a policy that compels other IRS business units to  use its risk assessment process or mitigate issues in a timely manner.  Officials from other IRS business units stated that they continually assess  risks to telephone, in-person and correspondence authentication, even  without a policy to do so. However, IRS could not provide evidence of  such prior risk assessments or risk mitigation plans. IRS\u2019s Roadmap  states that it will implement a secure authentication platform for taxpayers  regardless of how they interact with IRS\u2014online, via telephone, in- person, or correspondence\u2014to help ensure that information is secure and  that the agency is interacting with a legitimate taxpayer. Without a policy  for conducting risk assessments for these channels and addressing  deficiencies in a timely manner, IRS may underestimate known risks and  overlook emerging threats to the tax environment. As a result, these  channels may be more vulnerable to fraudulent activity, including  unauthorized attempts to access taxpayer information."], "subsections": []}, {"section_title": "IRS Lacks Internal Controls to Effectively Monitor Telephone, In- Person, and Correspondence Authentication", "paragraphs": ["IRS has established internal controls including procedures and  mechanisms to monitor performance of online authentication, but does  not have similar controls in place to monitor the performance of  telephone, in-person, and correspondence authentication. Federal  standards for internal control call for agencies to design their information  systems in a way that meets operational needs and allows the agency to  respond to risks. Further, agencies are to collect and use quality  information to make informed decisions. Quality information is  appropriate, current, complete, accurate, accessible, and provided on a  timely basis. Further, to have an effective internal control system,  agencies should also establish procedures to monitor and evaluate the  performance of programs and systems as part of the normal course of  operations. To this end, monitoring should be performed on an ongoing  basis, and any deficiencies the agency has identified should be  addressed in a timely manner. Monitoring activities are even more critical  in an environment where the risk of fraud is high because such efforts  allow an agency to quickly respond to emerging risks to minimize the  impact of fraud. Further, IRS\u2019s Strategic Plan calls for its organizations  to use analytics and research to improve program effectiveness and  foster a timely, data-driven decision-making environment.", "According to IRS documentation and discussions with officials, the  Secure Access online authentication platform allows IRS to conduct near  real-time monitoring of taxpayer authentication outcomes. Specifically,  for each online service using Secure Access, IRS is able to monitor on a  daily basis how many taxpayers registered for an account; rates of  successful and unsuccessful identity proofing and verification; and  suspicious user patterns, such as multiple login attempts. IRS is also able to monitor system error codes for specific steps in the authentication  process, such as when the secure messaging process fails. IRS officials  stated that this enhanced performance monitoring of online authentication  began in June 2016, and it is helping IRS determine where in the  authentication process taxpayers may be having difficulties and potential  causes of the problem.", "However, IRS does not have comparable procedures and mechanisms to  monitor authentication outcomes for telephone, in-person, and  correspondence authentication, particularly for TPP, one of IRS\u2019s key  defenses against IDT refund fraud. Further, since August 2016,  taxpayers have been able to authenticate using only these channels. IRS  currently uses its Account Management Services (AMS) to capture  telephone and in-person authentication outcomes for TPP; however, as  discussed below, this is not an effective mechanism for monitoring  authentication outcomes.", "AMS is IRS\u2019s primary application for recording, storing, and retrieving  information on all types of taxpayer interactions over time. IRS\u2019s customer  service representatives (CSR) use AMS to, among other things, record  information related to taxpayer authentication performed over the phone  or in person for TPP. According to IRS documentation, AMS includes a  field where the CSR is to enter the authentication outcome and also an  area where the CSR enters notes on the details of the taxpayer  interaction. In the context of TPP, IRS officials stated that CSRs use the  notes field to record, for example, the reason why the taxpayer failed the  authentication process, and other information important for other CSRs to  know. IRS also relies on another application to review the status of TPP  cases, such as if a case is open or closed.", "To better understand how CSRs are implementing procedures to capture  TPP authentication outcomes in AMS, we analyzed data in AMS from  January through October 2017. The result of our analysis and related  discussions with IRS officials indicate three primary internal controls  issues. First, IRS does not have a reliable, direct mechanism to collect  data on the number of taxpayers who pass and fail telephone, in-person,  and correspondence authentication. Second, data quality issues make it  difficult for IRS to understand why taxpayers may be failing these  authentication processes. Third, the IRS organizations responsible for  monitoring these channels do not have access to complete AMS data,  making it difficult for IRS to identify potential authentication issues and  develop solutions to address them.", "No mechanism to collect reliable, direct data on authentication  passes and failures. As previously discussed, when a taxpayer calls IRS  or visits a Taxpayer Assistance Center in regard to a TPP letter, the CSR  is to enter the result of the authentication (i.e., pass or fail) into AMS with  one of nine codes that accurately reflects the authentication outcome.  However, AMS does not have a separate, discrete field where the CSR is  to enter this information. The field available to capture authentication  information is shared with 68 other issue codes, increasing the likelihood  that the CSR may select a more generic issue, such as \u201cidentity theft\u201d  instead of one of the nine codes designated for TPP. Further, one of the  TPP outcome codes, called \u201cother issue,\u201d may be too broad for useful  analysis. Of the data we reviewed, we found that about one-third of TPP  authentication cases were categorized as \u201cother issue,\u201d which provides  no information on the authentication outcome. According to IRS\u2019s  procedures, this category is to be used in various scenarios, including  when IRS does not have enough information to generate questions for  authenticating the taxpayer, and in other cases when a taxpayer fails  telephone authentication and must go to a Taxpayer Assistance Center.  However, by combining all of these issues into one broad category, IRS  has limited insight into the size of each particular problem and may be  underestimating the number of taxpayers who fail TPP authentication.  Further, IRS does not directly capture the results of correspondence- based authentication in AMS and is therefore unable to monitor pass and  failure rates for this channel.", "Issues with data quality. We selected a generalizable random sample of  AMS cases identified as TPP authentication failures for January through  October 2017 and identified several data quality issues based on our  analysis. First, we found that an estimated 19 percent of cases were  categorized as an authentication failure, but the content of the CSR notes  indicated otherwise. Further, we could not determine a clear match  between the TPP authentication outcome and the CSR notes in an  additional estimated 18 percent of cases. For example, in these  instances, the CSRs\u2019 notes provided no information on why the taxpayer  failed authentication, or the notes were clearly unrelated to TPP.", "Second, we found that CSRs do not consistently enter useful information  in the notes explaining why a taxpayer failed authentication, which could  provide IRS management with valuable feedback on characteristics of  potential fraud or problem areas for legitimate taxpayers. Specifically, our  analysis showed that in an estimated 63 percent of cases, CSRs\u2019 notes  contained information that was useful or somewhat useful for helping IRS  understand why a taxpayer failed authentication. In the estimated 37  percent of cases where we determined that the notes were not useful,  CSRs generally documented the outcome (i.e., authentication failure) but  not the details on why the taxpayer failed. We recognize that a portion of  the TPP authentication failures may represent fraudsters trying to  authenticate as a legitimate taxpayer. However, given that IRS\u2019s fraud  detection systems have a history of high false positive rates, these  failures may also represent legitimate taxpayers who may be having  trouble authenticating.", "Further, while the CSR notes could provide IRS potentially valuable  information on why taxpayers may be failing authentication, further data  analysis may prove difficult. This is because this information is captured  in a free-text notes field, rather than in a drop-down list or other  standardized way to record data that can then be analyzed. Further,  during our analysis of AMS data, we found variation in the way CSRs  enter notes, particularly in their use of abbreviations and shorthand on  why a taxpayer failed authentication. Such variation makes systematic  data analysis difficult.", "According to IRS officials and documents we reviewed, there may be  several causes for the data quality issues. For example, as noted earlier,  CSRs may not be selecting the correct TPP authentication outcome code  because there are too many options and procedures may be unclear. IRS  officials also noted that when a taxpayer contacts IRS about TPP  authentication, they may want to discuss multiple issues. In these cases,  the CSR may choose to record information on another issue instead of  the authentication outcome.", "Complete AMS data sets are not readily available for analysis. In  addition to the issues described above, the organizations responsible for  monitoring TPP telephone and in-person authentication data do not have  access to complete AMS data for TPP. IRS officials responsible for  managing TPP told us that they do not have direct access to AMS data  reports because they are not the system\u2019s business owner. Instead, they  receive a weekly extract of AMS data from IRS\u2019s IT department. However,  officials stated that this weekly data extract is limited to approximately the  first 5,000 records for each issue area or outcome code, including the  codes for TPP. IRS IT officials stated that they limited the file size of the  AMS weekly report because it became too large to share internally via e- mail. IT officials stated that the free-text notes entries in AMS were the  main cause for large file sizes. However, this procedure of emailing an extract of the data, rather than providing direct access to AMS, makes it  difficult for IRS to perform comprehensive analyses and ongoing  monitoring for TPP using AMS.", "To put this into further context, IRS officials reported that in fiscal year  2017, they authenticated about 1.13 million taxpayers for TPP via  telephone and at Taxpayer Assistance Centers. However, we found  only about 471,600 records with a TPP outcome code in the AMS data  IRS provided to us. This represents only about 42 percent of the records  we were expecting to see in AMS. IRS officials stated that the  discrepancy was likely due to the AMS record limit described above. Yet,  in the course of our analysis, we found that only a small number of  outcome codes over 42 weeks appeared to be affected by this record  limit. (See appendix I for details.) IRS officials could not confirm additional  explanations for the discrepancy in the number of records.", "IRS\u2019s Office of Research, Applied Analytics, and Statistics (RAAS)  performs research and quantitative analysis on TPP and has studied  authentication performance. For example, in April 2017, RAAS reported  results of a newly implemented TPP authentication procedure and found  that while the new procedures helped to reduce call times, CSRs were  not following the procedures correctly in an estimated 44 percent of the  calls. According to IRS officials, RAAS\u2019s research efforts provide IRS  management with insight into TPP performance and officials have  identified areas where TPP can be improved. However, officials face  similar data limitations we described above. Further, officials from IRS\u2019s  RAAS division stated that they must submit a formal data request with IT  in order to receive additional data beyond what is included in the AMS  weekly extract. While valuable, these research efforts are not a substitute  for ongoing monitoring using complete, reliable data, which would allow  IRS to identify and address potential problems in a more timely manner.", "IRS officials acknowledged that AMS has limitations and stated that they  are in the process of planning a new capability in another system to  analyze how taxpayers perform on specific questions during the high-risk  authentication process. However, this capability will not address the  issues in AMS we described above. Further, as of late November 2017,  officials were uncertain when this capability would be implemented  because of IT funding constraints. Without effective internal control  procedures and mechanisms for collecting authentication outcome data,  ensuring data quality, and using these data to perform comprehensive  analyses and ongoing monitoring of TPP, IRS will continue to have limited  insight into its taxpayer authentication operations. As a result, IRS may be  challenged in identifying current and emerging threats to the tax system."], "subsections": []}, {"section_title": "IRS Is Working with Security Summit Partners to Improve Taxpayer Authentication", "paragraphs": ["Through the Security Summit, IRS is working with states, software  companies, and financial industry partners to identify how best to address  IDT and refund fraud. In February 2018, IRS announced that its key  indicators for IDT dropped for the second year in a row and the number of  taxpayers who reported they were victims of IDT in 2017 fell by about 40  percent, in part because of the Security Summit\u2019s ongoing efforts to stop  suspected fraudulent returns from entering tax processing systems. IRS  has also included key efforts led by the Security Summit in its Roadmap.", "The Security Summit\u2019s authentication workgroup leads several initiatives  aimed at verifying the authenticity of the taxpayer and the tax return at the  time of filing. One initiative involves analyzing data elements that are  collected during the tax return preparation and filing process. In filing  season 2017, the authentication workgroup collected data on 62  elements, 37 of which were new for that year. These elements included,  for example, trusted customer requirements and other characteristics of  the return. In addition, in 2016 the authentication workgroup worked with  software providers to improve authentication procedures to protect  taxpayers against their accounts being taken over by criminals. According  to IRS officials, these improvements were some of the most visible to  taxpayers because they included new password standards to access tax  software and required the use of security questions.", "Authentication workgroup leaders also described their efforts to  collaborate with industry to address authentication challenges. For  example, in 2017, IRS, payroll service providers, and tax software  providers expanded the Form W-2, Wage and Tax Statements (W-2)  verification code pilot program. The goal of this program is to verify W-2  data submitted by taxpayers on e-filed individual tax returns, using a  unique 16-character verification code printed on the form. According to  IRS, verification codes appeared on more than 60 million W-2s issued for  tax year 2017, compared with about 27.5 million W-2s issued for tax year  2016.", "Overall, co-leads from each of the sectors expressed positive views about  the level of commitment and cooperation guiding the Security Summit  authentication efforts. Officials with whom we spoke stated that they are  dedicated to continuing to address authentication issues collaboratively  because they all have an interest in improving authentication to reduce  tax refund fraud."], "subsections": []}]}, {"section_title": "IRS Has Improved Its Authentication Methods, but Additional Actions Could Help Enhance Security", "paragraphs": [], "subsections": [{"section_title": "IRS Has Taken Preliminary Steps to Adopt NIST\u2019s New Guidance, but Does Not Have a Timeline or Detailed Plans for Full Implementation", "paragraphs": ["As described above, in June 2017, NIST released guidance related to  online authentication that agencies will need to implement to ensure they  are authenticating users in a secure manner. NIST\u2019s guidance is  designed to (1) describe the risk management process for selecting  appropriate digital identity services and (2) help agencies implement  authentication programs that provide reasonable risk-based assurances  that a returning user is the same user that previously accessed the  service. Adherence to the NIST guidance will help IRS provide  reasonable risk-based assurance that the person accessing IRS services  is who they claim to be. Further, OMB guidance states that federal legacy  systems have 12 months to comply with a new NIST publication, while  systems under development or undergoing a major transformation need  to use the current revision when deployed.", "IRS officials told us they have met with NIST officials and plan to update  IRS systems and applications to comply with the new security guidelines.  IRS officials also noted that the agency has taken preliminary steps to  implement the new guidelines. For example, in December 2017, IRS  implemented a more secure authentication option through its mobile app,  IRS2Go. After taxpayers link their online account with the mobile app,  they can use the app to generate a security code to log into their online  account. This option is in line with NIST\u2019s new guidance and provides  taxpayers with an alternative to receiving the security code via a text  message. IRS has also taken other preliminary steps to implement the  new NIST guidance, including  forming a task force to guide the implementation of NIST guidance, working with the Security Summit to develop an authentication  framework that incorporates the new guidance for state and industry  partners,  starting an analysis to identify gaps between IRS\u2019s current  authentication procedures and the new NIST guidance, and updating authentication procedures.", "However, IRS has not yet established detailed plans, including timelines,  milestone dates, and resource needs, for fully implementing the new  guidance. IRS officials cited several reasons for the delay. They said the  agency will have to balance maintaining current authentication programs  with developing IT infrastructure to support technologies that are  compliant with the new guidance. In addition, officials stated that they will  need to take a slower, incremental approach to updating authentication  programs because of resource constraints. In March 2018, IRS officials  provided us a draft, high-level analysis of IRS systems relative to the new  NIST guidance, including some action items to address potential gaps.", "This preliminary analysis is a first step to help IRS identify gaps between  IRS\u2019s current authentication methods and the new NIST guidance.  However, it does not include steps needed to implement the high-level  action items, a timeline with milestones, or the resources needed to  implement improvements to bring IRS into compliance with the new NIST  guidance. IT officials stated that IRS intends to develop its  implementation roadmap through 2018 and begin implementing technical  solutions in 2019. However, those officials did not identify the technical  solutions nor did they have a prioritization plan or documentation of a  timeline to fully implement the new NIST guidance.", "Implementing the new NIST guidance and updating authentication  programs to be protected by the appropriate level of assurance is  consistent with federal standards for internal control and IRS\u2019s Roadmap.  Standards for Internal Control notes that agencies should identify,  analyze, and respond to risks, as well as assess whether risk response  actions sufficiently reduce risk to an acceptable level. Further, one of  IRS\u2019s initiatives in its Roadmap is to strengthen e-authentication and  ensure it is in compliance with federal regulations, which includes  guidance from NIST.", "Developing a plan that includes timelines with specific milestones and  resource needs to implement the new NIST guidance is consistent with  leading practices for effective planning and management. Specifically, in  our prior work on the Government Performance and Results Act, we  found that developing and using specific milestones and timelines to  guide and gauge progress toward achieving an agency\u2019s desired result is  a leading practice for effective strategic planning and management.  Further, our body of work on IRS has noted that developing project plans  with measurable goals, schedules, and resources can help the agency  more effectively plan new projects and initiatives.", "According to IRS officials, IRS must balance the needs of its existing  authentication efforts against potential new investments. IRS\u2019s gap  analysis on current authentication procedures relative to the NIST  guidance may help IRS prioritize which improvements are most critical.  However, without clear plans, timelines, and milestones for performing  this work, IRS may not be positioned to address the most vulnerable  areas in a timely manner. IRS\u2019s timely implementation of NIST\u2019s new  guidance is critical, as it can help the agency mitigate potential security  weaknesses in its existing online authentication programs."], "subsections": []}, {"section_title": "IRS Does Not Have a Comprehensive Process to Evaluate Technologies That Could Help It Improve Authentication", "paragraphs": ["While IRS has made some progress in improving its authentication  programs, the agency lacks a comprehensive, repeatable process to  identify and evaluate potential new authentication technologies and  approaches. IRS\u2019s planning documents have noted a commitment to  identify and leverage authentication best practices from outside  organizations to protect taxpayer data and support IRS business needs.  Specifically, IRS\u2019s Roadmap states that the agency will leverage leading  technology and implementation practices from the private and public  sectors through a repeatable environmental scan process and, when  appropriate, collaborate with partners to address its authentication needs.  Similarly, IRS\u2019s Strategic Plan notes that the agency will invest in  innovative, secure technology needed to protect taxpayer data and  support the business needs of the agency and its partners.", "IRS officials told us the agency continuously researches new identity  assurance processes and technologies and has talked with other  agencies, industry groups, and vendors to better understand how  particular technology solutions could apply to IRS\u2019s environment. Further,  according to officials, IRS plans to work with an outside organization to  analyze third-party identity proofing and authentication services; however,  IRS is in the initial phases of this effort. IRS also recently established the  Commissioner\u2019s Identity Assurance Executive Steering Committee to help  oversee IRS\u2019s authentication efforts agency-wide. This committee is  intended to serve as an advisory body, creating a forum for agency-wide  collaboration, as well as providing guidance and direction for identity  assurance implementation. IRS provided us documentation that it  reviewed some available authentication technologies and their pros and  cons in February 2016, and told us that this research helped them  develop their Roadmap. However, IRS officials could not provide  documentation on more recent evaluations of the broader authentication  environment, or evidence of a repeatable, comprehensive process to  identify and evaluate available authentication technologies and services.", "IRS officials stated that one way the agency evaluates potential  technologies is through limited pilots or \u201cinnovation studies.\u201d For example,  from October 2017 to January 2018, IRS conducted a limited pilot to  explore the feasibility of having a third-party identity assurance service  provider authenticate taxpayers on behalf of IRS. Officials stated that  this pilot was possible because it required little upfront investment by IRS.  Specifically, IRS received a grant from NIST to implement it, and officials  stated that it required minimal integration with IRS\u2019s IT infrastructure. In  January 2018, IRS officials stated they were reviewing the results of the  pilot, but had not decided on any next steps. Further, IRS officials stated  that the agency is considering other pilots, including one to assist with  IRS\u2019s telephone authentication and one to enhance security checks  during the Individual Taxpayer Identification Number application  process. However, while IRS has completed preliminary planning for  these pilots, it has not established priorities or timelines because each  pilot requires IT support, for example, to ensure the application can be  integrated with IRS\u2019s infrastructure and to make any technical changes.  Further, in December 2017, IRS officials stated that all innovation studies  were on hold until resources become available.", "IRS may benefit from considering new ways of approaching its  authentication efforts, as other public and private entities face similar  challenges of authenticating users. Our discussions with representatives  from industry and financial institutions and with government officials  indicate that there is no single, ideal taxpayer authentication solution that  will solve IRS\u2019s challenges related to IDT refund fraud. Further,  representatives from industry and financial institutions and government  officials with whom we spoke advocated a layered approach to  authentication that relies on multiple strategies and sources of  information, while giving taxpayers options for further protecting their  information. Based on our discussions with representatives from industry and state departments of revenue and government officials, some options  IRS could consider include the following:", "Expanding existing IRS services to further protect taxpayers. As  discussed earlier, IRS\u2019s online account offers taxpayers several  services, including the ability to set up a payment plan and make  payments to IRS and view their tax history. In fiscal year 2017, about  808,000 taxpayers created online accounts, and IRS expects this  number to grow. IRS\u2019s Roadmap has identified enhancing taxpayer  assurance by expanding authentication, such as generating and  sending event-driven notifications to taxpayers to help IRS  authenticate returns, which could help IRS quickly validate legitimate  returns.", "With this option, IRS may be able to further protect taxpayers from  IDT refund fraud. For example, IRS could develop additional  functionality for the online account that allows the taxpayer to  designate a bank account or a preference for a paper check for  receiving a tax refund. If a fraudster filed a return with different  information, the return would automatically be rejected. In February  2018, IRS officials stated that their strategic vision includes  empowering taxpayers to manage their online account; however,  when these services offer the ability to change personal or financial  information, there is greater potential for fraudsters to exploit them.", "Federated model. A federated authentication approach allows an  organization to rely on trusted authentication credentials from another  entity to log into its systems, potentially without needing to save  information from the trusted source. (See figure 3.) One example of  a federated authentication model is when people use their Google or  Facebook credentials to log into a different website or mobile  application. IRS could use a trusted authentication credential from the  private or public sector, or another federal agency. The General  Services Administration (GSA) has developed a single sign-on  authentication platform for federal agencies called Login.gov. In  March 2018, GSA officials told us that the Office of Personnel  Management and Customers and Border Patrol were using Login.gov  and that several other agencies plan to use the authentication  platform. According to IRS officials, IRS and Department of the  Treasury officials have met with GSA to discuss whether Login.gov  could meet IRS\u2019s authentication needs. In December 2017, IRS IT  officials said they are tracking Login.gov\u2019s progress and capabilities  and want to ensure that GSA officials understand IRS\u2019s requirements.  IRS officials said that the agency is interested in being able to  federate with different organizations, but does not want to limit  federating to one entity, since different taxpayers will want to use  different credentials. IRS officials also noted that the agency will need  to implement additional IT infrastructure to support a federated model  for authentication.", "Possession-based authentication. This type of authentication offers  users a convenient, added layer of security when used as a second  factor for accessing websites or systems that would otherwise rely on  a username and password for single-factor authentication. As  shown in figure 4, Universal Authentication Framework (UAF)  solutions use biometrics, such as an embedded fingerprint, facial  recognition, or voice recognition sensor on a computer or smart  phone, eliminating the need for a password. Similarly, authentication  with a Universal Second Factor (U2F) uses a trusted device or  \u201csecurity key\u201d for authentication in addition to a username and  password. According to a representative from the Fast Identity Online  (FIDO) Alliance, UAF standards and U2F devices comply with NIST\u2019s  new guidance for digital authentication. While IRS is not likely to  provide the devices to taxpayers, it could enable its systems to accept  these types of standards-based authentication technology for  taxpayers who elect to use UAF or U2F devices. For example,  taxpayers could use a UAF or U2F device when logging into their IRS  online account for additional protection.", "States\u2019 strategies for authentication. When we met with  representatives from five states to discuss how they authenticate  taxpayers, representatives from three states volunteered that they use  driver\u2019s license information to help authenticate taxpayers and tax  returns. One state we met with compares driver\u2019s license information  to other state agency data to help authenticate returns. IRS could  investigate making driver\u2019s license information, or other government  identification, a requirement when filing a federal return, and work with  states and other outside organizations to assist with authentication.  This information could be a key factor in verifying that the legitimate  taxpayer is filing the return. While some industry representatives told  us driver\u2019s license information is a good credential for identity- proofing, this information can be compromised. For example,  fraudsters can use stolen PII to obtain fraudulent driver\u2019s licenses.", "Contracting with outside organizations. Several private-sector  organizations offer identity proofing and authentication services. We  spoke with officials from the Department of Veterans Affairs (VA) and  representatives from the State of Alabama\u2019s Department of Revenue,  both of which are currently using such services. VA is using a third-  party service to identity proof and authenticate veterans accessing  services through www.vets.gov. For the 2018 filing season, Alabama  has contracted with a third-party organization to offer taxpayers a  service that sends them an alert when a return is filed using their  name, and authenticates the return as legitimate using a selfie. This  photo is then digitally compared to their driver\u2019s license photo. IRS  could evaluate these services to see if any meet their needs.", "Working with trusted partners. IRS could partner with organizations  it trusts that are accessible to taxpayers and enable the partners to  identity-proof and authenticate taxpayers. Trusted partners could  include tax preparers, financial institutions, or other federal agencies.  In November 2017, IRS officials told us that they had been discussing  an in-person identity proofing study with the Social Security  Administration (SSA), where SSA would identity proof taxpayers and  transmit the authentication data to IRS. However, in June 2018, IRS  officials stated that discussions with SSA are ongoing, and they have  not made a decision about next steps because SSA is concerned  about resources. IRS is also exploring working with the U.S. Postal  Service on an information-sharing initiative that could help IRS identify  potential IDT.", "Throughout the course of our work, IRS officials stated that improving the  security of IRS\u2019s online authentication applications is a high priority and  further noted that IRS must ensure that the highest-risk authentication  improvements are completed first. In January 2018, IRS officials stated  that the agency\u2019s priority is implementing tax reform, which will use IRS\u2019s  limited IT resources. Further, officials noted that priorities, including  resources required to develop project estimates, are determined by IRS\u2019s  appropriate executive steering committees.", "Developing a repeatable, comprehensive process to identify and evaluate  different alternatives for taxpayer authentication, such as the ones  described above, is consistent with leading practices and can help IRS  ensure that it has a sound rationale for its investment decisions. It can  also help ensure that IRS has the resources it needs to make  authentication improvements in a timely manner. For example, these  evaluations may involve developing and documenting a business case for  selected initiatives in IRS\u2019s Roadmap. Such a process could compare  options for in-house authentication solutions with solutions available in  the private sector based on estimates of cost, schedule, and benefits, as  applicable. By identifying options and performing such an evaluation, IRS  may find, for example, that an authentication technology available in the  private sector already complies with the new NIST guidelines, offers IRS  additional fraud detection capabilities, or is less expensive than  developing a similar capability in-house. On the other hand, the process  may show that minor improvements to a technology IRS is already using  can provide the most secure option in relatively short time, given  appropriate resources. This information could be communicated to IRS\u2019s  executive steering committees, as well as to Congress, to help IRS  identify resource needs and ensure it is pursuing the most efficient and  effective authentication improvements to protect IRS and taxpayers  against evolving threats.", "IRS\u2019s authentication environment is one component of a broad, complex  IT infrastructure, and the agency faces many challenges as it modernizes  its tax systems. However, given the availability of PII and the prevalence  of cyberattacks, developing a repeatable, comprehensive process to  identify and evaluate alternative options for taxpayer authentication and  implementing improvements can help IRS ensure it is authenticating  taxpayers in the most secure manner. IRS documentation acknowledges  that a hybrid authentication approach using in-house solutions, third-party  services, and working with trusted partners is the best approach to  implementing the new NIST guidance and expanding IRS\u2019s authentication  coverage. However, without a process to comprehensively identify and  evaluate available or emerging authentication technologies and models,  IRS may be missing an opportunity to implement the most secure, robust  technologies to authenticate and protect taxpayers. Further, including  these authentication options and prioritizing them with other initiatives  included in IRS\u2019s Roadmap would help IRS ensure it is working on the  highest priority authentication improvements first. It also provides a way  for IRS to communicate its strategy and plan for authentication to IRS  management and external stakeholders."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Each year, IRS authenticates millions of taxpayers via telephone, online,  in-person, or correspondence to verify potentially fraudulent tax returns,  provide taxpayers access to a tax transcript, or issue a replacement IP PIN. IRS\u2019s cost to authenticate taxpayers varies widely, with in-person  authentication at a Taxpayer Assistance Center costing about $89 per  interaction and online authentication costing less than $1 per interaction.  The challenge for IRS is to provide taxpayers with options to interact with  the agency, while providing IRS with reasonable assurance that it is  authenticating the legitimate taxpayer.", "In its Roadmap, IRS has identified high-level strategic efforts and  numerous foundational initiatives to address its most pressing  authentication challenges. IRS has made progress in several areas  identified in its Roadmap. However, identifying the resources the agency  will need to complete its foundational initiatives and further prioritizing  them would help IRS better understand the relationship between its  competing priorities and limited IT resources. Further, while IRS has  made progress in identifying risks and establishing internal control  activities to monitor online taxpayer authentication, it has not established  equally rigorous controls for telephone, in-person, and correspondence  authentication. First, IRS does not have a policy for identifying, assessing,  and mitigating risks for these authentication channels. Second, IRS does  not have effective internal controls for collecting reliable, useful data on  telephone, in-person, and correspondence authentication outcomes for  TPP and for using these data to monitor authentication operations.  Without effective controls for collecting these data and using it for  monitoring, IRS may not be positioned to identify potential vulnerabilities  in its operations and the necessary improvements.", "Given the widespread availability of PII that fraudsters can use to  perpetrate tax fraud, it is essential for IRS to strengthen taxpayer  authentication to stay ahead of fraudsters\u2019 schemes. Completing an  analysis of IRS\u2019s current authentication procedures relative to new NIST  guidance may help IRS identify and prioritize which improvements are  most critical. Developing a timeline with milestones and resource needs  to implement NIST\u2019s new guidance can help guide IRS\u2019s implementation  and help officials gauge progress and ensure the most critical  improvements are made in a timely manner. Further, implementing  NIST\u2019s new guidance can help IRS ensure its online authentication  applications are appropriately protecting IRS information. While improving  IRS\u2019s current authentication programs would help IRS further protect  taxpayer information and identify and prevent fraud, IRS may not need to  conduct all of its taxpayer authentication activities in-house nor build IRS- specific authentication solutions: there are many additional tools and  partners IRS could consider. Further, developing a repeatable,  comprehensive process to identify and evaluate potential authentication  technologies and services will help IRS avoid missing opportunities for  improving authentication. Further, including and prioritizing these  authentication technologies and services in IRS\u2019s Roadmap could provide  useful information to decision makers given IRS\u2019s concerns over  competing IT priorities and limited resources."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 11 recommendations to IRS:  The Commissioner of Internal Revenue should direct the Identity  Assurance Office, in collaboration with other IRS business partners, to  estimate the resources (i.e., financial and human) required for the  foundational initiatives and supporting activities identified in its Identity  Assurance Strategy and Roadmap. (Recommendation 1)", "Based on the estimates developed in Recommendation 1, the  Commissioner of Internal Revenue should direct the Identity Assurance  Office to prioritize foundational initiatives in its Identity Assurance  Strategy and Roadmap. (Recommendation 2)", "The Commissioner of Internal Revenue should establish a policy for  conducting risk assessments for telephone, in-person, and  correspondence channels for authentication. This policy should include,  for example, the frequency of assessments to be performed and  timeframes for addressing deficiencies. (Recommendation 3)", "Consistent with the policy developed in Recommendation 3, the  Commissioner of Internal Revenue should direct the Identity Assurance  Office and IRS business owners to develop a plan for performing risk  assessments for telephone, in-person, and correspondence channels for  authentication. (Recommendation 4)", "The Commissioner of Internal Revenue should establish a mechanism to  collect data on outcomes for telephone, in-person, and correspondence  authentication, consistent with federal standards for internal control.  (Recommendation 5)", "The Commissioner of Internal Revenue should revise or establish, as  appropriate, procedures to ensure data quality in the Account  Management Services (AMS) consistent with federal standards for  internal control. (Recommendation 6)", "The Commissioner of Internal Revenue should ensure that IRS business  units have access to complete AMS data to monitor authentication  performance and identify potential issues. (Recommendation 7)", "The Commissioner of Internal Revenue should direct the Identity  Assurance Office and other appropriate business partners to develop a  plan\u2014including a timeline, milestone dates, and resources needed\u2014for  implementing changes to its online authentication programs consistent  with new NIST guidance. (Recommendation 8)", "In accordance with the plan developed in Recommendation 8, the  Commissioner of Internal Revenue should implement improvements to  IRS\u2019s systems to fully implement NIST\u2019s new guidance.  (Recommendation 9)", "The Commissioner of Internal Revenue should develop a repeatable,  comprehensive process to identify and evaluate alternative options for  improving taxpayer authentication, including technologies in use by  industry, states, or other trusted partners. (Recommendation 10)", "Based on the approach developed in Recommendation 10, the  Commissioner of Internal Revenue should include and prioritize these  options, as appropriate, in IRS\u2019s Identity Assurance Strategy and  Roadmap. (Recommendation 11)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Commissioner of Internal  Revenue for review and comment. In its written comments, which are  summarized below and reproduced in appendix III, IRS agreed with our  11 recommendations and stated that it is taking action to address them.", "IRS agreed with our recommendations to identify resources and prioritize  the foundational authentication initiatives identified in its Roadmap. IRS  noted that the Roadmap is a concept document outlining potential  strategic initiatives and IRS has not finalized its approach. IRS stated that  once it finalizes its authentication approach, it will estimate the resources  required for each initiative and prioritize them, consistent with our  recommendation. As stated earlier, we recognize that a strategy is a high- level plan and may need to change based on agency needs.  Nevertheless, IRS\u2019s timely attention to identifying resources and  prioritizing its approved authentication initiatives will better position the  agency to respond to known and unknown threats to the tax system.", "Further, IRS agreed with our recommendations to develop a plan for fully  implementing NIST\u2019s new authentication guidance and make the  necessary improvements to its systems. In its written comments, IRS  noted that its ability to complete these efforts will depend on the  availability of resources. As noted throughout our report, we recognize the  challenge of balancing competing IT priorities and limited resources, but  given the importance of implementing authentication improvements  consistent with NIST\u2019s guidance, we continue to believe it should be a  high priority. Additional actions, including addressing our  recommendations, will help IRS further mitigate potential security  weaknesses in its existing online authentication programs and help  prevent potentially hundreds of millions of dollars in fraudulent refunds  from being issued.", "IRS also agreed with our other seven recommendations, but did not  provide additional details on how it plans to address them.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Chairmen and  Ranking Members of other Senate and House committees and  subcommittees that have appropriation, authorization, and oversight  responsibilities for IRS. We will also send copies of the report to the  Commissioner of Internal Revenue and other interested parties. In  addition, this report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff has any questions about this report, please contact me  at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of  Congressional Relations and Public Affairs are on the last page of this  report. GAO staff members who made major contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) describe the taxpayer interactions that require  authentication, including the general rationale behind the requirements,  and the Internal Revenue Service\u2019s (IRS) authentication methods; (2)  assess what IRS is doing to monitor and improve its authentication  methods, both internally and collaboratively through the Security Summit,  to secure taxpayer information and reduce identity theft refund fraud; and  (3) evaluate what else, if anything, IRS can do to strengthen its  authentication methods while improving services to taxpayers.", "To describe the interactions that require taxpayer authentication and  IRS\u2019s methods to do so, we reviewed IRS documents, policies and  procedures, IRS data and information on the number of taxpayers  authenticated by channel, and interviewed knowledgeable IRS officials.  IRS documents and policies we reviewed included IRS\u2019s Authentication  Strategy: Current State Touchpoints, IRS\u2019s Identity Assurance Strategy  and Roadmap (Roadmap), and Internal Revenue Manuals related to  taxpayer authentication. For this report, we focused on the following four  IRS programs and services because they require taxpayer authentication,  verify a significant number of taxpayer identities each year, and illustrate  IRS\u2019s different approaches to authentication: the Taxpayer Protection  Program (TPP), Get Transcript, Identity Protection Personal Identification  Number (IP PIN), and IRS\u2019s online services. We reviewed IRS-reported  data and information on taxpayer authentication volumes and per  transaction costs for these programs for fiscal years 2016 and 2017. To  assess the reliability of this data, we examined it for errors and talked with  knowledgeable IRS officials. We determined that the data were  sufficiently reliable for our purposes. We also interviewed knowledgeable  IRS officials on the agency\u2019s authentication programs and services to  understand different authentication options offered to taxpayers through  various channels: in-person, online, telephone, and correspondence.", "To assess IRS\u2019s efforts to monitor and improve authentication internally  and through the Security Summit, we reviewed IRS policies, procedures,  authentication risk assessments, and data from IRS systems on  authentication performance. We compared IRS\u2019s efforts to applicable  activities in the Roadmap, IRS\u2019s Strategic Plan Fiscal Years 2014-2017  (Strategic Plan), Standards for Internal Control in the Federal  Government, GAO\u2019s Framework for Managing Fraud Risks in Federal  Programs, and relevant National Institute of Standards and Technology  (NIST) guidance. We interviewed IRS officials in IRS\u2019s Return Integrity  and Compliance Services (RICS), Identity Assurance Office (IAO), and  Information Technology (IT) knowledgeable about the agency\u2019s taxpayer  authentication programs. For additional context and informational  purposes, we visited IRS\u2019s Andover, Massachusetts call center to  observe IRS customer service representatives (CSR) authenticating  taxpayers for TPP. We also interviewed IRS, state, and industry co-leads  from the Security Summit\u2019s Authentication workgroup and Strategic  Threat Assessment and Response workgroup to understand IRS\u2019s  collaborative efforts to improve taxpayer authentication.", "To better understand IRS\u2019s efforts to authenticate taxpayers via telephone  and in person, and how CSRs record data for TPP authentication, we  obtained data from IRS\u2019s Accounts Management System (AMS) for the  weeks January 1, 2017, through October 23, 2017. This was the most  recent and complete set of data at the time of our review. We reviewed  AMS records coded with any of the nine TPP authentication outcome  codes for tax years 2015, 2016, or with \u201c0.\u201d We assessed the reliability of  the data by: (1) performing electronic testing of key data elements,  including checks for missing, out-of-range, or logically inaccurate data; (2)  reviewing documents for information about the data and IRS\u2019s systems;  and (3) interviewing officials knowledgeable about the data to discuss any  limitations. During these discussions, IRS officials stated that the AMS  data we received may not include all available records in AMS. This is  because the IRS office that creates the weekly AMS data report includes  only the first 5,000 records for each outcome code. To assess whether  this was an issue for our data set, we reviewed record counts for each of  the nine TPP outcome codes for the 42 weeks of data IRS provided us.  We found 12 out of these 378 instances (3 percent) where the data  appeared to be affected by the 5,000 record cutoff. Each of these  instances occurred in the \u201cTPP- Other \u2013 Sent to TAC\u201d issue code for  which we planned no further analysis. Specifically, we did not include this  issue code in the generalizable random probability sample described  below. As a result, we determined that the data were sufficiently reliable  for the purposes of our report.", "To assess the quality and usefulness of the data CSRs enter into AMS for  TPP, we selected a random, generalizable sample of records CSRs  coded as a TPP authentication failure. We stratified the population into  two groups: (1) high-risk authentication failures, and (2) all other  authentication failures. From each population, we drew a random sample  of 96 records independently, reflecting the population size of each  stratum and to be able to detect a 10 percent difference in absolute value  between the sample estimate and true population number with a 95  percent confidence level; that is, a 1 out of 20 chance of failure. Because  we followed a probability procedure based on random selections, our  sample is only one of a large number of samples that we might have  drawn. Each sample record was subsequently weighted in the analysis to  account statistically for all the cases in the population, including those  which were not selected.", "Two analysts independently reviewed each sample record to determine  (1) whether the TPP authentication outcome code generally aligned with  the CSR\u2019s notes and (2) the extent to which the CSR notes were useful in  understanding why a taxpayer failed authentication. First, the analysts  categorized each record in the sample as \u201caligned\u201d (authentication  outcome code and content of CSR notes are clearly aligned); \u201cnot  aligned\u201d (authentication outcome code and content of CSR notes are  clearly not aligned); or \u201ccannot determine\u201d (if the content of the CSR  notes was unclear and the analyst could not confidently determine that  the record was aligned or not aligned). Next, for each record in the  sample, the analysts categorized the content of the notes as one of the  following:", "Useful: CSR notes provided a clear explanation of why the taxpayer  failed authentication (e.g., question failed; taxpayer did not have  proper identification; or taxpayer did not have copy of tax return during  the call/visit).", "Somewhat Useful: CSR notes provided some information on where  in the process or why a taxpayer failed, but no clear explanation of the  specific reason (e.g., taxpayer passed disclosure, but could not  answer high risk questions).", "Not Useful: CSR notes were blank, or provided no useful information  on where in the process or why a taxpayer failed authentication.", "Cannot Determine: This was selected when the content of the CSR  notes was unclear and the analyst could not determine if information  was useful.", "After the independent review, the analysts discussed their results and  resolved any disagreements. Based on these results, we determined how  many records in the sample were \u201caligned,\u201d \u201cnot aligned,\u201d or \u201cunable to  determine.\u201d Further, we analyzed records categorized as \u201caligned\u201d to  determine how many included CSR notes that were useful, somewhat  useful, or not useful.", "To evaluate what else, if anything, IRS can do to strengthen its  authentication methods while improving services to taxpayers, we  interviewed knowledgeable officials from IRS and reviewed  documentation to understand IRS\u2019s current authentication methods,  future plans for authentication, and challenges IRS faces in taxpayer  authentication. We also interviewed knowledgeable officials at the  General Services Administration/18F to understand their work on a  government-wide authentication platform, Login.gov, and how IRS may  be able to use this technology in the future. We also interviewed  Department of Veterans Affairs officials to understand how they  authenticate veterans applying for benefits at www.vets.gov. Further, we  met with knowledgeable officials from NIST on their guidelines for online  identity-proofing and authentication, which were released in June 2017.  To understand current and emerging authentication strategies and  technologies, we interviewed representatives from state departments of  revenue and from industry. We also interviewed knowledgeable officials  from the Office of Management and Budget\u2019s (OMB) U.S. Digital Service  to understand their work with IRS in 2016 in launching IRS\u2019s Secure  Access online authentication platform and to understand any emerging  technologies and standards for authentication. We interviewed a  nongeneralizable selection of knowledgeable state and industry  representatives based on referrals from NIST officials, and other  government and industry representatives knowledgeable on tax issues,  including co-chairs from the Security Summit\u2019s Authentication workgroup.", "In total we met with representatives from five state departments of  revenue, one association representing state tax officials, three financial  institution organizations, one financial service industry association, three  identity-proofing/authentication organizations, and four tax industry  organizations. Finally, we compared IRS\u2019s authentication programs and  plans for future improvements to its Roadmap, Standards for Internal  Control, GAO\u2019s Information Technology Investment Management  framework, principles for project planning, GAO\u2019s prior work on the  Government Performance and Results Act, GAO\u2019s Cost Estimating and  Assessment Guide: Best Practices for Developing and Managing Capital  Program Costs, and NIST and OMB guidance to determine ways IRS  could strengthen its authentication methods, while improving taxpayer  service.", "We conducted this performance audit from January 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Overview of IRS\u2019s Identity Assurance Strategy and Roadmap", "paragraphs": ["Prioritize technology and processes for e- Authentication to enhance identification,  verification, and authorization capabilities as  taxpayers continue to shift toward electronically  filing.", "Establish a central authentication policy across  the enterprise (i.e., channels and functions)"], "subsections": []}, {"section_title": "Appendix III: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Neil Pinney (Assistant Director),  Dawn Bidne, Matthew Bond, Mark Canter, Jehan Chase, Heather A.  Collins (Analyst-in-Charge), Michele Fejfar, Robert Gebhart, Steven Flint,  Dae Park, and Robert Robinson made significant contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Tax Fraud and Noncompliance: IRS Can Strengthen Pre-refund  Verification and Explore More Uses. GAO-18-224. Washington, D.C.:  January 30, 2018.", "Identity Theft: Improved Collaboration Could Increase Success of IRS  Initiatives to Prevent Refund Fraud. GAO-18-20. Washington, D.C.:  November 28, 2017.", "Financial Audit: IRS\u2019s Fiscal Years 2017 and 2016 Financial Statements.  GAO-18-165. Washington, D.C.: November 9, 2017.", "Information Technology: Management Attention Is Needed to  Successfully Modernize Tax Processing Systems. GAO-18-153T.  Washington, D.C., October 4, 2017.  2017 Annual Report: Additional Opportunities to Reduce Fragmentation,  Overlap, and Duplication and Achieve Other Financial Benefits.  GAO-17-491SP. Washington, D.C.: April 26, 2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.  2016 Filing Season: IRS Improved Telephone Service but Needs to  Better Assist Identity Theft Victims and Prevent Release of Fraudulent  Refunds. GAO-17-186. Washington, D.C.: January 31, 2017.", "Information Technology: Federal Agencies Need to Address Aging  Legacy Systems. GAO-16-468. Washington, D.C.: May 25, 2016.", "Identity Theft and Tax Fraud: IRS Needs to Update Its Risk Assessment  for the Taxpayer Protection Program. GAO-16-508. Washington, D.C.:  May 24, 2016.", "Information Security: IRS Needs to Further Improve Controls over  Taxpayer Data and Continue to Combat Identity Theft Refund Fraud.  GAO-16-589T. Washington, D.C.: April 12, 2016.", "Information Security: IRS Needs to Further Improve Controls over  Financial and Taxpayer Data. GAO-16-398. Washington, D.C.: March 28,  2016.", "Information Security: IRS Needs to Continue Improving Controls over  Financial and Taxpayer Data. GAO-15-337. Washington, D.C.: March 19,  2015.", "Identity Theft and Tax Fraud: Enhanced Authentication Could Combat  Refund Fraud, but IRS Lacks an Estimate of Costs, Benefits and Risks.  GAO-15-119. Washington, D.C.: January 20, 2015.", "Identity Theft: Additional Actions Could Help IRS Combat the Large,  Evolving Threat of Refund Fraud. GAO-14-633. Washington, D.C.:  August 20, 2014.", "Internal Revenue Service: 2013 Tax Filing Season Performance to Date  and Budget Data. GAO-13-541R. Washington, D.C.: April 15, 2013."], "subsections": []}], "fastfact": ["IRS estimates that in 2016 criminals used false identities to try to claim billions in tax refunds. IRS kept $10.5 billion out of their hands, but criminals got at least $1.6 billion. To help address this high risk issue, IRS works to verify the identities of millions of taxpayers each year.", "We reviewed IRS\u2019s taxpayer authentication efforts and made 11 recommendations to help IRS stay ahead of fraudsters, including:", "prioritizing its authentication initiatives,", "estimating the funding and other resources it will need to implement these initiatives, and", "developing a process to evaluate potential authentication technologies."]}
{"id": "GAO-18-141T", "url": "https://www.gao.gov/products/GAO-18-141T", "title": "2020 Census: Continued Management Attention Needed to Oversee Innovations, Develop and Secure IT Systems, and Improve Cost Estimation", "published_date": "2017-10-12T00:00:00", "released_date": "2017-10-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["One of the Bureau's most important functions is to conduct a complete and accurate decennial census of the U.S. population, which is mandated by the Constitution and provides vital data for the nation. A complete count of the nation's population is an enormous undertaking as the Bureau seeks to control the cost of the census, implement operational innovations, and use new and modified IT systems. In recent years, GAO has identified challenges that raise serious concerns about the Bureau's ability to conduct a cost-effective count. For these reasons, GAO added the 2020 Census to its high-risk list in February 2017.", "In light of these challenges, GAO was asked to testify about the Bureau's progress in preparing for the 2020 Census. To do so, GAO summarized its prior work regarding the Bureau's planning efforts for the 2020 Census. GAO also included observations from its ongoing work on the 2018 End-to-End Test. This information is related to, among other things, recent decisions on preparations for the 2020 Census; progress on key systems to be used for the 2018 End-to-End Test, including the status of IT security assessments; execution of the test at three test sites; and efforts to update the life-cycle cost estimate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Census Bureau (Bureau) is planning several innovations for the 2020 Decennial Census, including re-engineering field operations, using administrative records to supplement census data, verifying addresses in-office using on-screen imagery, and allowing the public to respond using the Internet. These innovations show promise for controlling costs, but they also introduce new risks, in part because they include new procedures and technologies that have not been used extensively in earlier decennial censuses, if at all. GAO's prior work has emphasized the importance of the Bureau conducting a robust testing program to demonstrate that the systems and operations perform as intended under census-like conditions prior to the 2020 Census. However, because of budget uncertainties the Bureau canceled its 2017 field test and then scaled back its 2018 End-to End Test, placing these innovation areas more at risk.", "The Bureau continues to face challenges in managing and overseeing the information technology (IT) programs, systems, and contracts supporting the 2020 Census. For example, GAO's ongoing work indicates that the system development schedule leading up to the 2018 End-to-End test has experienced several delays. Further, the Bureau has not yet addressed several security risks and challenges to secure its systems and data, including making certain that security assessments are completed in a timely manner and that risks are at an acceptable level. Given that certain operations for the 2018 End-to-End Test began in August 2017, it is important that the Bureau quickly address these challenges. GAO plans to monitor the Bureau's progress as part of its ongoing work.", "In addition, the Bureau's cost estimate is not reliable and is out-of-date. Specifically, in June 2016, GAO reported that the cost estimate for the 2020 Census did not fully reflect characteristics of a high-quality estimate and could not be considered reliable. Moreover, since the Bureau did not follow cost estimation best practices, its annual budget requests based on the cost estimate may not be fully informed. Additionally, the Bureau has not yet updated its October 2015 cost estimate, but GAO expects that the cost of the current census design (around $12.5 billion in 2020 constant dollars) will increase due to, for example, expected increases in 2020 program IT costs (see figure). GAO made several recommendations to address these concerns, and the Bureau plans to address these recommendations in an updated cost estimate to be released later this fall."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Over the past 4 years, we have made 33 recommendations specific to the 2020 Census to address the issues raised in this testimony and others. As of October 2017, the Bureau had fully implemented 10 of the recommendations, and was at varying stages of implementing the remaining recommendations.", "or Robert Goldenkoff at (202) 512-2757 or goldenkoffr@gao.gov ."]}], "report": [{"section_title": "Letter", "paragraphs": ["We are pleased to be here today to discuss the U.S. Census Bureau\u2019s  (Bureau) progress in preparing for the 2020 Decennial Census. As you  know, one of the most important functions of the Bureau is conducting the  decennial census of the U.S. population, which is mandated by the  Constitution and provides vital data for the nation. The information that  the census collects is used to apportion the seats of the House of  Representatives; redraw congressional districts; allocate billions of dollars  each year in federal financial assistance; and provide a social,  demographic, and economic profile of the nation\u2019s people to guide policy  decisions at each level of government. Further, businesses use census  data to market new services and products and to tailor existing ones to  demographic changes.", "For 2020, a complete count of the nation\u2019s population is an enormous  undertaking as the Bureau seeks to control the cost of the census while it  implements several innovations and manages the processes of acquiring  and developing new and modified information technology (IT) systems. In  recent years, we have identified challenges that raise serious concerns  about the Bureau\u2019s ability to conduct a cost-effective count of the nation,  including issues with the agency\u2019s research, testing, planning, scheduling,  cost estimation, systems development, and IT security practices. Over the  past 4 years, we have made 33 recommendations specific to the 2020  Census to help address these issues and others; however, only 10 of  them had been fully implemented as of October 2017. We also added the  2020 Decennial Census to the High-Risk List in February 2017.", "The Bureau\u2019s preparations for 2020 have been further complicated by late  changes to the 2018 End-to-End Test (a \u201cdress rehearsal\u201d of the actual  enumeration) and by current vacancies in the positions of Bureau director  and deputy director. These vacancies are due to the previous director\u2019s  retirement on June 30, 2017, and the previous deputy director\u2019s  appointment to be the Chief Statistician of the United States within the  Office of Management and Budget in January 2017. Although interim  leadership has since been named, in our prior work we have noted how  turnover in the Bureau\u2019s top position makes it difficult to ensure  accountability and continuity, as well as to develop and sustain efforts  that foster change, produce results, mitigate risks, and control costs over  the long term. With the operations for the End-to-End Test beginning in  August 2017, and as preparations for 2020 ramp-up, addressing the  risks jeopardizing the 2020 Census by implementing our  recommendations is more critical than ever.", "Our testimony today focuses on the Bureau\u2019s progress in three areas: (1)  implementing innovations aimed at controlling costs and enhancing  accuracy, (2) implementing and securing critical IT systems, and (3)  ensuring the reliability of the Bureau\u2019s cost estimate for the 2020 Census.", "The information in this statement is based primarily on prior work  regarding the Bureau\u2019s planning efforts for 2020. For that prior body of  work, we reviewed, among other things, relevant Bureau documentation,  including the 2020 Census Operational Plan, recent decisions on  preparations for the 2020 Census, and outcomes of key IT milestone  reviews. We also interviewed Bureau staff. Other details on the scope  and methodology for our prior work are provided in each published report  on which this testimony is based.", "In addition, we included information in this statement from our ongoing  work on the 2018 End-to-End Test examining the address canvassing  operation and the readiness of IT systems. For our ongoing work on the  2018 address canvassing operation, we reviewed plans for and execution  of the address canvassing portion of the 2018 End-to-End Test at each of  the three test sites\u2014in Pierce County, Washington; Providence County,  Rhode Island; and Bluefield-Beckley-Oak Hill, West Virginia. Across the  three test sites, we observed 18 census workers conduct address  canvassing operations and interviewed local office staff at each location.  These observations are not generalizable.", "For our ongoing work on the readiness of the Bureau\u2019s IT systems, we  collected and reviewed documentation on the status and plans for system  development, testing, and security assessments for the 2018 End-to-End  Test, including the Bureau\u2019s integration and implementation plan, solution  architecture, and memorandums documenting outcomes of security  assessments. We also interviewed agency officials.", "We provided a copy of the new information we are reporting in this  testimony to the Bureau for comment on September 18, 2017. The  Bureau provided technical comments, which we addressed as  appropriate.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The cost of the census has been escalating over the last several  decennials. The 2010 decennial was the costliest U.S. Census in history  at about $12.3 billion, and was about 31 percent more costly than the  $9.4 billion 2000 Census (in 2020 dollars). The average cost for counting  a housing unit increased from about $16 in 1970 to around $92 in 2010  (in 2020 dollars). According to the Bureau, the total cost of the 2020  Census is estimated to be approximately $12.5 billion dollars (in 2020  dollars). As discussed later in this statement, however, the cost of the  2020 Census will likely be higher than this current estimate.", "Meanwhile, the return of census questionnaires by mail (the primary  mode of data collection) declined over this period from 78 percent in 1970  to 63 percent in 2010 (see figure 1). Declining mail response rates\u2014a key  indicator in determining the cost-effectiveness of the census\u2014are  significant and lead to higher costs. This is because the Bureau sends  temporary workers to each non-responding household to obtain census  data. As a result, non-response follow-up is the Bureau\u2019s largest and  most costly field operation. In many ways, the Bureau has had to invest  substantially more resources each decade to match the results of prior  enumerations.", "Further, achieving a complete and accurate census is becoming an  increasingly daunting task, in part, because the nation\u2019s population is  growing larger, more diverse, and more reluctant to participate. When the  census misses a person who should have been included, it results in an  undercount; conversely, an overcount occurs when an individual is  counted more than once. Such errors are particularly problematic  because of their impact on various subgroups. Minorities, renters, and  children, for example, are more likely to be undercounted by the census.", "The Bureau faces an additional challenge of locating unconventional and  hidden housing units, such as converted basements and attics. For  example, as shown in figure 2, what appears to be a small, single-family  house could contain an apartment, as suggested by its two doorbells. If  an address is not in the Bureau\u2019s address file, its residents are less likely  to be included in the census."], "subsections": [{"section_title": "The Bureau Has Redesigned the 2020 Census to Help Control Costs", "paragraphs": ["The basic design of the enumeration\u2014mail out and mail back of the  census questionnaire with in-person follow-up for non-respondents\u2014has  been in use since 1970. However, a key lesson learned from the 2010  Census and earlier enumerations, is that this \u201ctraditional\u201d design is no  longer capable of cost-effectively counting the population.", "In response to its own assessments, our recommendations, and studies  by other organizations, the Bureau has fundamentally re-examined its  approach for conducting the 2020 Census. Specifically, its plan for 2020  includes four broad innovation areas (re-engineering field operations,  using administrative records, verifying addresses in-office, and  developing an Internet self-response option).", "The Bureau has estimated that these innovations could result in savings  of over $5 billion (in 2020 dollars) when compared to its estimates of the  cost for conducting the census with traditional methods. However, in June  2016, we reported that the Bureau\u2019s life-cycle cost estimate of $12.5  billion, developed in October 2015, was not reliable and did not  adequately account for risk, as discussed later in this statement.", "Bureau Plans to Use IT to Drive Innovation  To help drive these innovations, the Bureau plans to rely on both new and  legacy IT systems and infrastructure. For example, the Bureau is  developing or modifying 11 IT systems as part of an enterprise-wide  initiative called Census Enterprise Data Collection and Processing  (CEDCaP), which is managed within the Bureau\u2019s IT Directorate. This  initiative is a large and complex modernization program intended to  deliver a system-of-systems to support all of the Bureau\u2019s survey data  collection and processing functions, rather than continuing to rely on  unique, survey-specific systems with redundant capabilities. In addition,  according to Bureau officials, the 2020 Census Directorate or other  Bureau divisions are developing or modifying 32 other IT systems.", "To help inform, validate, and refine the operational design of the 2020  Census, and to test several of the IT systems, the Bureau has held a  series of operational tests since 2012. Among these, in March 2017, the  Bureau conducted a nationwide test (referred to as the 2017 Census  Test) of households responding to census questions using paper, the  Internet, or the phone. This test evaluated key new IT components, such  as the Internet self-response system and the use of a cloud-based  infrastructure.", "The Bureau is currently conducting the 2018 End-to-End Test, which  began in August 2017 and runs through April 2019. It is the Bureau\u2019s final  opportunity to test all key systems and operations to ensure readiness for  the 2020 Census. The Bureau\u2019s plans for this test include, among other  things, address canvassing, self-response (via paper, Internet, and  phone), and nonresponse follow-up.", "To support its 2018 End-to-End Test, the Bureau plans to deploy and use  43 systems incrementally to support nine operations from December  2016 through the end of the test in April 2019. These nine operations are:  (1) in-office address canvassing, (2) recruiting staff for address  canvassing, (3) training for address canvassing, (4) in-field address  canvassing, (5) recruiting staff for field enumeration, (6) training for field  enumeration, (7) self-response (i.e., Internet, phone, or paper), (8) field  enumeration, and (9) tabulation and dissemination. Appendix I includes  additional details about the 43 systems, the operation or operations they  support, and key deployment dates."], "subsections": []}]}, {"section_title": "The Bureau Needs to Manage Risks of Implementing Innovations", "paragraphs": [], "subsections": [{"section_title": "The Bureau Plans Four Innovation Areas for 2020, but Has Scaled Back Key Census Tests", "paragraphs": ["The four innovation areas the Bureau plans for 2020 show promise for a  more cost-effective head count (see table 1). However, the innovations  also introduce new risks, in part, because they include new procedures  and technology that have not been used extensively in earlier decennials,  if at all. Our prior work has shown the importance of the Bureau  conducting a robust testing program, including the 2018 End-to-End  Test. However, because of funding uncertainty the Bureau canceled the  field components of the 2017 Census Test including non-response follow- up, a key census operation.", "In November 2016, we reported that the cancelation of the 2017 field  tests was a lost opportunity to test, refine, and integrate operations and  systems, and that it put more pressure on the 2018 End-to-End Test to  demonstrate that enumeration activities will function under census-like  conditions as needed for 2020. In May 2017, the Bureau scaled back  the operational scope of the 2018 End-to-End and, of the three planned  test sites, only the Rhode Island site would fully implement the 2018 End- to-End Test. The Washington and West Virginia state test sites would test  address canvassing. In addition, due to budgetary concerns, the Bureau  decided to remove three coverage measurement operations (and the  technology that supports them) from the scope of the test. Without  sufficient testing, operational problems can go undiscovered and the  opportunity to improve operations will be lost, in part because the 2018  End-to-End Test is the last opportunity to demonstrate census technology  and procedures across a range of geographic locations, housing types,  and demographic groups."], "subsections": []}, {"section_title": "New Uses of Administrative Records Are Promising, but Introduce Challenges", "paragraphs": ["Administrative records\u2014information already provided to the government  as it administers other programs, such as mail collection by the U.S.  Postal Service\u2014have been discussed and used for the decennial census  since the 1970s, and for 2020 the Bureau plans a more significant role for  them. In July 2017, we reported that the Bureau had taken steps to  ensure that its use of administrative records would lower the cost and  improve the accuracy of the 2020 Census.", "For example, the Bureau set a rule that it would only use administrative  records to count a household when a minimum amount of information  was present within data sources. According to the Bureau, this would help  ensure that administrative records are used only in circumstances where  research has shown them to be most accurate. Additionally, before using  any administrative records to support census operations, the Bureau  determined it will subject each source to a quality assurance process that  includes, among other things, basic checks for data integrity as well as  assessments by subject matter experts of the information\u2019s fitness for  various uses by the Bureau. (See figure 3.)", "According to the Bureau, it links administrative records data sources to  complement each other, improving their reliability and completeness. The  Bureau also creates an anonymous personal identifier for each individual  in the data to reduce the risk of disclosure once the data are linked across  sources.", "In July 2017, we reported that the Bureau had already tested the uses of  administrative records that hold the most potential for reducing census  costs, such as counting people who did not respond to census mailings.  The Bureau planned to test additional applications of administrative  records for the first time during the 2018 End-to-End Test. For example,  the Bureau planned to use administrative records to support quality  control during its non-response field enumeration. The Bureau planned to  compare response data collected by enumerators to administrative  records and flag significant differences based on predefined rules. The  differences might be in the total count of persons in a household or in  specific combinations of personal characteristics, such as age or race.  According to the Bureau, flagging such differences could be used to help  identify which enumeration cases to reinterview as part of the quality  control operation.", "However, we reported in October 2015 that the Bureau faced other  challenges with using administrative records for the 2020 Census. For  example, although the Bureau has no control over the accuracy of data  provided to it by other agencies, it is responsible for ensuring that data it  uses for the 2020 Census are of sufficient quality for their planned uses.  Another challenge we identified in 2015 is the extent to which the public  will accept government agencies sharing personal data for the purposes  of the census. The Bureau has recognized these challenges within its risk  registers."], "subsections": []}, {"section_title": "The Bureau Has Fundamentally Re- Engineered Address Canvassing for 2020", "paragraphs": ["In-Office Address Canvassing. The Bureau has re-engineered its  approach to building its master address list for 2020. Specifically, by  relying on multiple sources of imagery and administrative data, the  Bureau anticipates constructing its address list with far less door-to-door  field canvassing compared to previous censuses.", "One major change the Bureau has made consists of using in-office  address canvassing\u2014a two-phase process that was to systematically  review small geographic areas nationwide, known as census blocks, to  identify those that will not need to be canvassed in the field, as shown in  figure 4.", "The Bureau estimated that the two phases of in-office canvassing would  have resulted in roughly 25 percent of housing units requiring in-field  canvassing, instead of canvassing nearly all housing units in the field as  done in prior decennials. With in-office address canvassing census  workers compare current aerial imagery for a given block with imagery for  that block dating to the time of the last decennial census in 2010. During  this first phase, called Interactive Review, specially trained census  workers identify whether a block appears to have experienced change in  the number of housing units, flagging each block either as stable\u2014free of  population growth, decline, or uncertainty in what is happening in the  imagery over time\u2014or \u201cactive,\u201d in which case it moves to the next phase.  Addresses in stable blocks are not marked for in-field canvassing.", "For blocks where change is detected or suspected, the Bureau was to  use a second phase of in-office canvassing, known as Active Block  Resolution, to attempt to resolve the status of each address and housing  unit in question within that block. During this phase, census workers use  aerial imagery, street imagery, and data from the U.S. Postal Service, as  well as from state, local, and tribal partners when reviewing blocks. If a  block can be fully resolved during this phase of in-office canvassing, the  changes are recorded in the Bureau\u2019s master address file. If a block  cannot be fully resolved during the second phase of in-office canvassing,  then the entire block, or some portion of the block, is flagged for inclusion  in the in-field canvassing operation. A first pass of the entire country for  in-office address canvassing began in September 2015 and was  completed in June 2017. In-field canvassing for the 2020 Census is  scheduled to begin in August 2019.", "However, in July 2017 we reported that the Bureau altered its design for  re-engineered address canvassing because of budget uncertainty by  suspending the second phase of in-office address canvassing. Without  the second phase of in-office address canvassing, blocks that are not  resolved by phase one will have a greater chance of requiring in-field  canvassing. Bureau officials told us at that time that they anticipated  that canceling the second phase of in-office address canvassing  altogether would increase their estimated in-field canvassing workload by  5 percentage points, from 25 percent to 30 percent of housing units\u2014 increasing costs.", "The Bureau did not develop cost and quality information on address  canvassing projects, and detailed information on cost tradeoffs was not  available when we requested it. The information the Bureau had did not  break out the estimated cost of the different phases of in-office address  canvassing through 2020. However, the total estimated cost for both  phases one and two was approximately $22 million. Thus, this  suspension might save a portion of the $22 million, but it will potentially increase the cost of the address canvassing operation downstream. Our  July 2017 report recommended, and the Bureau agreed, that the Bureau  should use its evaluations before 2020 to determine the implications of in- office address canvassing on the cost and quality of address canvassing,  and use this information to justify decisions related to its re-engineered  address canvassing approach.", "In-Field Address Canvassing for the 2018 End-to-End Test. On  August 28, 2017, temporary census employees known as address listers  began implementing the in-field component of address canvassing for the  2018 End-to-End Test. Listers walked the streets of designated census  blocks at all three test sites to verify addresses and geographic locations.  The operation ended on September 27, 2017. As part of our ongoing  work, we visited all three test sites and observed 18 listers conduct  address canvassing. Generally, we found that listers were able to conduct  address canvassing as planned. However, we also noted several  challenges. We shared the following preliminary observations from our  site visits with the Bureau:  Internet connectivity was problematic at the West Virginia test site.  We spoke to four census field supervisors that described certain  areas as dead spots where Internet and cell phone service were not  available. We also were told by those same supervisors that only  certain cell service providers worked in certain areas. In order to  access the Internet or cell service in those areas, census workers  sometimes needed to drive several miles.", "The allocation of lister assignments was not always optimal. Listers  were supposed to be provided assignments close to where they live in  order to optimize their local knowledge and to limit the numbers of  miles being driven by listers to and from their assignment area.  Bureau officials told us this was a challenge at all three test sites.  Moreover, at one site the area census manager told us that some  listers were being assigned work in another county even though  blocks were still unassigned closer to where they resided. Relying on  local knowledge and limiting the number of miles can increase both  the efficiency and effectiveness of address canvassing.", "The assignment of some of the large blocks early in the operations  was not occurring as planned. At all three 2018 End-to-End Test sites  Bureau managers had to manually assign some large blocks (some  blocks had hundreds of housing units). It is important to assign large  blocks early on because leaving the large blocks to be canvassed  until the end of the operation could jeopardize the timely completion of  address canvassing.", "The global positioning system-derived location for the lister was not  always corresponding to the location on the map. A Bureau official  confirmed that at all three test sites, the location icon jumped around  or was on the wrong street. According to a Bureau official, listers were  told to override the global positioning system-derived location when  confirming the geographic location of the residence.", "We have discussed these challenges with Bureau officials who stated that  overall they are satisfied with the implementation of address canvassing  but also agreed that resolving challenges discovered during address  canvassing, some of which can affect the operation\u2019s efficiency and  effectiveness, will be important before the 2020 Census. We will continue  to monitor address canvassing operation and plan to issue a report in the  winter of 2018."], "subsections": []}]}, {"section_title": "The Bureau Continues to Face Challenges in Implementing and Securing Key IT Systems", "paragraphs": [], "subsections": [{"section_title": "The Bureau Continues to Face Challenges Implementing and Managing IT Systems", "paragraphs": ["We have previously reported that the Bureau faced challenges in  managing and overseeing IT programs, systems, and contractors  supporting the 2020 Census. Specifically, it has been challenged in  managing schedules, costs, contracts, and governance and internal  coordination for its IT systems. As a result of these challenges, the  Bureau is at risk of being unable to fully implement key IT systems  necessary to support the 2020 Census. We have previously  recommended that the Bureau take action to improve its implementation  and management of IT in areas such as governance and internal  coordination. We also have ongoing work reviewing each of these  areas.", "Our ongoing work has indicated that the Bureau faces significant  challenges in managing the schedule for developing and testing systems  for the 2018 End-to-End Test that began in August 2017. In this regard,  the Bureau still has significant development and testing work that remains  to be completed. As of August 2017, of the 43 systems in the test, the  Bureau reported that 4 systems had completed development and  integration testing, while the remaining 39 systems had not completed  these activities.", "Of these 39 systems, the Bureau reported that it had deployed a portion  of the functionality for 21 systems to support address canvassing for the  2018 End-to-End Test; however, it had not yet deployed any functionality  for the remaining 18 systems for the test. Figure 5 summarizes the  development and testing status for the 43 systems planned for the 2018  End-to-End Test, and appendix I includes additional information on the  status of development and testing for these systems.", "Moreover, due to challenges experienced during systems development,  the Bureau has delayed key IT milestone dates (e.g., dates to begin  integration testing) by several months for the systems supporting six of  the nine operations in the 2018 End-to-End Test. Figure 6 depicts the  delays to the deployment dates for the operations in the 2018 End-to-End  Test, as of August 2017.", "However, our ongoing work also indicates that the Bureau is at risk of not  meeting the updated milestone dates. For example, in June 2017 the  Bureau reported that at least two of the systems expected to be used in  the self-response operation (the Internet self-response system and the  call center system) are at risk of not meeting the delayed milestone dates.  In addition, in September 2017 the Bureau reported that at least two of  the systems expected to be used in the field enumeration operation (the  enumeration system and the operational control system) are at risk of not  meeting their delayed dates.", "Combined, these delays reduce the time available to conduct the security  reviews and approvals for the systems being used in the 2018 End-to- End Test. We previously testified in May 2017 that the Bureau faced  similar challenges leading up to the 2017 Census Test, including  experiencing delays in system development that led to compressed time  frames for security reviews and approvals.  Specifically, we noted that  the Bureau did not have time to thoroughly assess the low-impact  components of one system and complete penetration testing for another  system prior to the test, but accepted the security risks and uncertainty  due to compressed time frames. We concluded that, for the 2018 End-to- End Test, it will be important that these security assessments are  completed in a timely manner and that risks are at an acceptable level  before the systems are deployed.", "The Bureau noted that, if it continues to be behind schedule, field  operations for the 2018 End-to-End Test will not be performed as  planned. Bureau officials are evaluating options to decrease the impact of  these delays on integration testing and security review activities by, for  example, utilizing additional staff. We have ongoing work reviewing the  Bureau\u2019s development and testing delays and the impacts of these delays  on systems readiness for the 2018 End-to-End Test.", "The Bureau faces challenges in reporting and controlling IT cost growth.  In April 2017, the Bureau briefed us on its efforts to estimate the costs for  the 2020 Census, during which it presented IT costs of about $2.4 billion  from fiscal years 2018 through 2021. Based on this information and other  corroborating IT contract information provided by the Bureau, we testified  in May 2017 that the Bureau had identified at least $2 billion in IT costs.", "However, in June 2017, Bureau officials in the 2020 Census Directorate  told us that the data they provided in April 2017 did not reflect all IT costs  for the 2020 program. The officials provided us with an analysis of the  Bureau\u2019s October 2015 cost estimate that identified $3.4 billion in total IT  costs from fiscal years 2012 through 2023. These costs included, among  other things, those associated with system engineering, test and  evaluation, and infrastructure, as well as a portion of the costs for the  CEDCaP program.", "Yet, our ongoing work determined that the Bureau\u2019s $3.4 billion cost  estimate does not reflect its current plans for acquiring IT to be used  during the 2020 Census and that the related costs are likely to increase:  In August 2016, the Bureau awarded a technical integration contract  for about $886 million, a cost that was not reflected in the $3.4 billion  expected IT costs. More recently, in May 2017, we testified that the  scope of work for this contract had increased since the contract was  awarded; thus, the corresponding contract costs were likely to rise  above $886 million, as well.", "In March 2017, the Bureau reported that the contract associated with  the call center and IT system to support the collection of census data  over the phone was projected to overrun its initial estimated cost by at  least $40 million.", "In May 2017, the Bureau reported that the CEDCaP program\u2019s cost  estimate was increasing by about $400 million\u2014from its original  estimate of $548 million in 2013 to a revised estimate of $965 million  in May 2017.", "In June 2017, the Bureau awarded a contract for mobile devices and  associated services for about $283 million, an amount that is about  $137 million higher than the cost for these devices and services  identified in its October 2015 estimate.", "As a result of these factors, the Bureau\u2019s $3.4 billion estimate of IT costs  is likely to be at least $1.4 billion higher, thus increasing the total costs to  at least $4.8 billion. Figure 7 identifies the Bureau estimate of total IT  costs associated with the 2020 program as of October 2015, as well as  anticipated cost increases as of August 2017.", "IT cost information that is accurately reported and clearly communicated  is necessary so that Congress and the public have confidence that  taxpayer funds are being spent in an appropriate manner. However,  changes in the Bureau\u2019s reporting of these total costs, combined with cost  growth since the October 2015 estimate, raise questions as to whether  the Bureau has a complete understanding of the IT costs associated with  the 2020 program. In this regard, we have previously reported on issues  with the Bureau\u2019s cost estimating practices (which are discussed in more  detail later in this statement). To address these issues, in October 2017,  officials stated that the Bureau is developing a new cost estimate for the  entire 2020 Census program, which they expect to release by the end of  this fall.", "Our ongoing work also determined that the Bureau faces challenges in  managing its significant contractor support. The Bureau is relying on  contractor support in many key areas of the 2020 Census. For example, it  is relying on contractors to develop a number of key systems and  components of the IT infrastructure. These activities include (1)  developing the IT platform that is to be used to collect data from a  majority of respondents\u2014those using the Internet, telephone, and non- response follow-up activities; (2) procuring the mobile devices and cellular  service to be used for non-response follow-up; and (3) developing the  infrastructure in the field offices. According to Bureau officials, contractors  are also providing support in areas such as fraud detection, cloud  computing services, and disaster recovery.", "In addition to the development of key technology, the Bureau is relying on  contractor support for integrating all of the key systems and infrastructure.  The Bureau awarded a contract to integrate the 2020 Census systems  and infrastructure in August 2016. The contractor\u2019s work was to include  evaluating the systems and infrastructure and acquiring the infrastructure  (e.g., cloud or data center) to meet the Bureau\u2019s scalability and  performance needs. It was also to include integrating all of the systems,  supporting technical testing activities, and developing plans for ensuring  the continuity of operations. Since the contract was awarded, the Bureau  has modified the scope to also include assisting with operational testing  activities, conducting performance testing for two Internet self-response  systems, and technical support for the implementation of the paper data  capture system.", "However, our ongoing work has indicated that the Bureau is facing  staffing challenges that could impact its ability to manage and oversee the  technical integration contractor. Specifically, the Bureau is managing the  integration contractor through a government program management office,  but this office is still filling vacancies. As of October 2017, the Bureau  reported that 35 of the office\u2019s 58 federal employee positions were  vacant. As a result, this program management office may not be able to  provide adequate oversight of contractor cost, schedule, and  performance.", "The delays during the 2017 Test and preparations for the 2018 End-to- End Test raises concerns regarding the Bureau\u2019s ability to effectively  perform contractor management. As we reported in November 2016, a  greater reliance on contractors for these key components of the 2020  Census requires the Bureau to focus on sound management and  oversight of the key contracts, projects, and systems. As part of our  ongoing work, we plan to monitor the Bureau\u2019s progress in managing its  contractor support.", "Effective IT governance can drive change, provide oversight, and ensure  accountability for results. Further, effective IT governance was envisioned  in the provisions referred to as the Federal Information Technology  Acquisition Reform Act (FITARA), which strengthened and reinforced  the role of the departmental CIO.", "To ensure executive-level oversight of the key systems and technology,  the Bureau\u2019s CIO (or a representative) is a member of the governance  boards that oversee all of the operations and technology for the 2020  Census. However, in August 2016 we reported on challenges the Bureau  has had with IT governance and internal coordination, including  weaknesses in its ability to monitor and control IT project costs,  schedules, and performance. We made eight recommendations to the  Department of Commerce to direct the Bureau to, among other things,  better ensure that risks are adequately identified and schedules are  aligned. The department agreed with our recommendations. However, as  of October 2017, the Bureau had only fully implemented one  recommendation and had taken initial steps toward implementing others.", "Further, given the schedule delays and cost increases previously  mentioned, and the vast amount of development, testing, and security  assessments left to be completed, we remain concerned about executive- level oversight of systems and security. Moving forward, it will be  important that the CIO and other agency executives continue to use a  collaborative governance approach to effectively manage risks and  ensure that the IT solutions meet the needs of the agency within cost and  schedule. As part of our ongoing work, we plan to monitor the steps the  Bureau is taking to effectively oversee and manage the development and  acquisition of its IT systems."], "subsections": []}, {"section_title": "The Bureau Has Significant Information Security Steps to Complete for the 2018 End-to-End Test", "paragraphs": ["In November 2016, we described the significant challenges that the  Bureau faced in securing systems and data for the 2020 Census, and we  noted that tight time frames could exacerbate these challenges. Two  such challenges were (1) ensuring that individuals gain only limited and  appropriate access to the 2020 Census data, including personally  identifiable information (PII) (e.g., name, address, and date of birth), and  (2) making certain that security assessments were completed in a timely  manner and that risks were at an acceptable level. Protecting PII, for  example, is especially important because a majority of the 43 systems to  be used in the 2018 End-to-End Test contain PII, as reflected in figure 8.", "To address these and other challenges, federal law and guidance specify  requirements for protecting federal information and information systems,  such as those to be used in the 2020 Census. Specifically, the Federal  Information Security Management Act of 2002 and the Federal  Information Security Modernization Act of 2014 (FISMA) require executive  branch agencies to develop, document, and implement an agency-wide  program to provide security for the information and information systems  that support operations and assets of the agency.", "Accordingly, the National Institute of Standards and Technology (NIST)  developed risk management framework guidance for agencies to follow in  developing information security programs. Additionally, the Office of  Management and Budget\u2019s (OMB) revised Circular A-130 on managing  federal information resources required agencies to implement the NIST  risk management framework to integrate information security and risk  management activities into the system development life cycle.", "In accordance with FISMA, NIST guidance, and OMB guidance, the  Office of the CIO established a risk management framework. This  framework requires that system developers ensure that each of the  systems undergoes a full security assessment, and that system  developers remediate critical deficiencies. In addition, according to the  Bureau\u2019s framework, system developers must ensure that each  component of a system has its own system security plan, which  documents how the Bureau plans to implement security controls. As a  result, system developers for a single system might develop multiple  system security plans (in some cases as many as 34 plans), which all  have to be approved as part of the system\u2019s complete security  documentation. We have ongoing work that is reviewing the extent to  which the Bureau\u2019s framework meets the specific requirements of the  NIST guidance.", "According to the Bureau\u2019s framework, each of the 43 systems in the 2018  End-to-End Test will need to have complete security documentation (such  as system security plans) and an approved authorization to operate  prior to their use in the 2018 End-to-End Test. However, our ongoing  work indicates that, while the Bureau is completing these steps for the 43  systems to be used in the 2018 End-to-End Test, significant work  remains. Specifically:", "None of the 43 systems are fully authorized to operate through the  completion of the 2018 End-to-End Test. Bureau officials from the  CIO\u2019s Office of Information Security stated that these systems will  need to be reauthorized because, among other things, they have  additional development work planned that may require the systems to  be reauthorized; are being moved to a different infrastructure  environment (e.g., from a data center to a cloud-based environment);  or have a current authorization that expires before the completion of  the 2018 End-to-End Test. The amount of work remaining is  concerning because the test has already begun and the delays  experienced in system development and testing mentioned earlier  reduce the time available for performing the security assessments  needed to fully authorize these systems before the completion of the  2018 End-to-End test.", "Thirty-seven systems have a current authorization to operate, but the  Bureau will need to reauthorize these systems before the completion  of the 2018 End-to-End Test. This is due to the reasons mentioned  previously, such as additional development work planned and  changes to the infrastructure environments.", "Two systems have not yet obtained an authorization to operate.", "For the remaining four systems, the Bureau has not yet provided us  with documentation about the current authorization status.", "Figure 9 depicts the authorization to operate status for the systems being  used in the 2018 End-to-End Test, as reported by the Bureau.", "Because many of the systems that will be a part of the 2018 End-to-End  Test are not yet fully developed, the Bureau has not finalized all of the  security controls to be implemented; assessed those controls; developed  plans to remediate control weaknesses; and determined whether there is  time to fully remediate any deficiencies before the systems are needed for  the test. In addition, as discussed earlier, the Bureau is facing system  development challenges that are delaying the completion of milestones  and compressing the time available for security testing activities.", "As we previously reported, while the large-scale technological changes  (such as Internet self-response) increase the likelihood of efficiency and  effectiveness gains, they also introduce many information security  challenges. The 2018 End-to-End Test also involves collecting PII on  hundreds of thousands of households across the country, which further  increases the need to properly secure these systems. Thus, it will be  important that the Bureau provides adequate time to perform these  security assessments, completes them in a timely manner, and ensures  that risks are at an acceptable level before the systems are deployed. We  plan to continue monitoring the Bureau\u2019s progress in securing its IT  systems and data as part of our ongoing work."], "subsections": []}]}, {"section_title": "The Bureau Needs to Improve the Reliability of Its 2020 Cost Estimate", "paragraphs": [], "subsections": [{"section_title": "2020 Census Cost Estimate Does Not Reflect Best Practices", "paragraphs": ["In June 2016, we reported that the Bureau\u2019s October 2015 update of its  life-cycle cost estimate for the 2020 Census did not conform to the four  characteristics that constitute best practices, and, as a result, the  estimate was unreliable. Cost estimates that appropriately account for  risks facing an agency can help an agency manage large, complex  activities like the 2020 Census, as well as help Congress make funding  decisions and provide oversight. Cost estimates are also necessary to  inform decisions to fund one program over another, to develop annual  budget requests, to determine what resources are needed, and to  develop baselines for measuring performance.", "In June 2016, we reported that, although the Bureau had taken steps to  improve its capacity to carry out an effective cost estimate, such as  establishing an independent cost estimation office, its October 2015  version of the estimate for the 2020 Census only partially met the  characteristics of two best practices (comprehensive and accurate) and  minimally met the other two (well-documented and credible). All four  characteristics need to be substantially met in order for an estimate to be  deemed high-quality:", "Comprehensive. To be comprehensive an estimate should have  enough detail to ensure that cost elements are neither omitted nor  double-counted, and all cost-influencing assumptions are detailed in  the estimate\u2019s documentation, among other things, according to best  practices. In June 2016, we reported that, while Bureau officials were  able to provide us with several documents that included projections  and assumptions that were used in the cost estimate, we found the  estimate to be partially comprehensive because it was unclear if all  life-cycle costs were included in the estimate or if the cost estimate  completely defined the program.", "Accurate. Accurate estimates are unbiased and contain few  mathematical mistakes. We reported in June 2016 that the estimate  partially met best practices for this characteristic, in part because we  could not independently verify the calculations the Bureau used within  its cost model, which the Bureau did not have documented or  explained outside its cost model.", "Well-documented. Cost estimates are considered valid if they are  well-documented to the point they can be easily repeated or updated  and can be traced to original sources through auditing, according to  best practices. In June 2016, we reported that, while the Bureau  provided some documentation of supporting data, it did not describe  how the source data were incorporated.", "Credible. Credible cost estimates must clearly identify limitations due  to uncertainty or bias surrounding the data or assumptions, according  to best practices. In June 2016, we reported that the estimate  minimally met best practices for this characteristic in part because the  Bureau carried out its risk and uncertainty analysis only for about $4.6  billion (37 percent) of the $12.5 billion total estimated life-cycle cost,  excluding, for example, consideration of uncertainty over what the  decennial census\u2019s estimated part will be of the total cost of CEDCaP.", "In June 2016, we recommended that the Bureau take action to ensure its  2020 Census cost estimate meets all four characteristic of a reliable cost  estimate. The Bureau agreed with our recommendation. We also reported  in June 2016 that risks were not properly accounted for in the cost  estimate and recommended that the Bureau properly account for risk to  ensure there are appropriate levels for budgeted contingencies, and  those recommendations have not yet been implemented.", "In October 2017, Bureau officials told us they were making progress  towards implementing our recommendations and would provide us with  that documentation when the cost estimate and supporting  documentation are finalized. Moreover, Bureau officials also told us that  an updated cost estimate would be available by the end of this fall.  However, until the Bureau updates its estimate and we have the  opportunity to review its reliability, questions will surround the quality of  the 2020 Census cost estimate and the basis for any 2020 Census  annual budgetary figures."], "subsections": []}, {"section_title": "The Cost of the 2020 Census Will Likely Be Higher Than Originally Planned", "paragraphs": ["While the Bureau has not updated its October 2015 cost estimate, several  events since then indicate that the cost of the current design will be  higher. For example:", "As previously mentioned, in August 2016 an $886 million IT  integration contract was awarded. According to Bureau officials, there  was no reference to this contract in the documentation for the planned  contract costs supporting the October 2015 life-cycle cost estimate.", "In March 2017, the Bureau suspended part of how it is verifying  address in-office procedures using on-screen imagery\u2014one of its four  key design innovations intended to control the cost of the 2020  Census. According to Bureau officials, the suspension of the one part  of in-office canvassing will increase the workload of the more  expensive in-field (door-to-door address identification) by at least five  percentage points, from 25 percent to 30 percent of housing units\u2014 increasing the cost over what had been assumed as part of the earlier  cost estimate. Based on cost assumptions underlying its October  2015 life-cycle cost estimate, we found, as part of our prior work, that  the potential addition of five percentage points to the field workload  alone could reduce the Bureau\u2019s cost savings by $26.6 million.", "As earlier discussed, in May 2017, Bureau officials reported that the  cost of the CEDCaP program has now increased by over $400 million,  from about $548 million to $965 million."], "subsections": []}, {"section_title": "2020 Census Cost Estimate May Not Fully Inform Annual Budget Requests", "paragraphs": ["Cost estimates are also used by the Bureau as a tool to inform the annual  budget process. However, since the Bureau did not fully follow best  practices for developing and maintaining the life-cycle cost estimate, as  previously described, annual budget requests based on that cost estimate  may not be fully informed.", "A high-quality cost estimate is the foundation of a good budget. A major  purpose of a cost estimate is to support the budget process by providing  an estimate of the funding required to efficiently execute a program.  Because most programs do not remain static but evolve over time,  developing a cost estimate should not be a onetime event but rather a  recurrent process. Effective program and cost control requires ongoing  revisions to the cost estimate and budget.", "Using a reliable life-cycle cost estimate to formulate the budget could help  the Bureau ensure that all costs are fully accounted for so that resources  are adequate to support the program. Credible cost estimates could also  help the Bureau effectively defend budgets to the Department of  Commerce, OMB, and Congress. Concerns about the soundness of the  life cycle cost estimate and the quality of annual budgets related to the  2020 Census are particularly important because the bulk of funds will be  obligated in fiscal years 2019 through 2020. In our June 2016 report on  the Bureau\u2019s life-cycle cost estimate we made several recommendations  with which the Bureau agreed. We will continue to monitor the Bureau\u2019s  efforts to address these recommendations.", "In conclusion, the Bureau has made progress in revamping its approach  to the census and testing the new design. However, it faces considerable  challenges and uncertainties in (1) implementing the cost-saving  innovations; (2) managing the development and security of key IT  systems; and (3) developing a quality cost estimate for the 2020 Census.  For these reasons, the 2020 Census is a GAO high risk area.", "Continued management attention is vital for ensuring risks are managed,  the Bureau\u2019s preparations stay on-track, and the Bureau is held  accountable for implementing the enumeration as planned. We will  continue to assess the Bureau\u2019s efforts to conduct a cost-effective  enumeration and look forward to keeping Congress informed of the  Bureau\u2019s progress.", "Chairman Gowdy, Ranking Member Cummings, and Members of the  Committee, this completes our prepared statement. We would be pleased  to respond to any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you have any questions about this statement, please contact David A.  Powner at (202) 512-9286 or by e-mail at pownerd@gao.gov or Robert  Goldenkoff at (202) 512-2757 or by e-mail at goldenkoffr@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other key  contributors to this testimony include Lisa Pearson (Assistant Director);  Jon Ticehurst (Assistant Director); Kate Sharkey (Analyst in Charge);  Mark Abraham, Dewi Djunaidy; Hoyt Lacy; Andrea Starosciak; Umesh  Thakkar; Timothy Wexler; and Katherine Wulff. Staff who made key  contributions to the reports cited in this statement are identified in the  source products."], "subsections": []}]}, {"section_title": "Appendix I: Status as of August 2017 of Development and Integration Testing for Systems in the 2018 End-to-End Test", "paragraphs": ["As part of its 2018 End-to-End Test, the Census Bureau (Bureau) plans to  deploy 43 systems incrementally to support nine operations from  December 2016 through the end of the test in April 2019. The nine  operations are: (1) in-office address canvassing, (2) recruiting for address  canvassing, (3) training for address canvassing, (4) in-field address  canvassing operation, (5) recruiting for field enumeration, (6) training for  field enumeration, (7) self-response (i.e., Internet, phone, or paper)  operation, (8) field enumeration operation, and (9) tabulation and  dissemination. According to the Bureau, a single system may be  deployed multiple times throughout the test (with additional or new  functionality) if that system is needed for more than one of these  operations.", "Table 1 describes the status as of August 2017 of development and  integration testing for each system in the 2018 End-to-End Test.  Specifically, as of August 2017, the Bureau had completed both  development work and integration testing for 4 systems, and was in the  process of completing development and testing for 39 systems."], "subsections": []}], "fastfact": ["The U.S. Census Bureau is planning several innovations for the 2020 Census, such as allowing Internet responses and using technology to verify addresses. In this testimony, we noted that the Bureau has scaled back testing for the systems and operations supporting these innovations.", "We also discussed securing critical IT systems. The Bureau has significant IT security steps to complete for the end-to-end test that began in August 2017.", "In addition, we looked at the October 2015 cost estimate for the 2020 Census\u2014which can't be considered reliable. Although no updates have been publicly released, recent events suggest higher costs."]}
{"id": "GAO-18-302", "url": "https://www.gao.gov/products/GAO-18-302", "title": "CMS Innovation Center: Model Implementation and Center Performance", "published_date": "2018-03-26T00:00:00", "released_date": "2018-04-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Patient Protection and Affordable Care Act created the Innovation Center within CMS to test new approaches to health care delivery and payment\u2014known as models\u2014for use in Medicare, Medicaid, or CHIP. The Innovation Center became operational in November 2010. In 2012, GAO reported on the early implementation of the Innovation Center. GAO found that, during the first 16 months of operations, the Innovation Center focused on implementing 17 new models and developed preliminary plans for evaluating the effects of each model and for assessing the center's overall performance.", "GAO was asked to update its previous work. In this report, GAO: (1) describes the status of payment and delivery models implemented and the resources used; (2) describes the center's use of model evaluations; and (3) examines the center's assessment of its own performance. GAO reviewed available documentation, such as model fact sheets and frequently asked questions, and evaluation reports for models that have been implemented. GAO reviewed obligation data and performance information for the time period for which complete data or information were available. GAO also interviewed officials from the Innovation Center and CMS's Office of the Actuary.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["As of March 1, 2018, the Center for Medicare and Medicaid Innovation (Innovation Center) had implemented 37 models that test new approaches for delivering and paying for health care with the goal of reducing spending and improving quality of care. These models varied based on several characteristics, including the program covered\u2014Medicare, Medicaid, the Children's Health Insurance Program (CHIP), or some combination of the three\u2014and the nature of provider participation\u2014voluntary or mandatory. Going forward, the Innovation Center indicated that the center plans to continue focusing on the use of voluntary participation models and to develop models in new areas, including prescription drugs, Medicare Advantage, mental and behavioral health, and program integrity. Through fiscal year 2016, the Innovation Center obligated $5.6 billion of its $10 billion appropriation for fiscal years 2011 through 2019.", "The Innovation Center has used evaluations of models (1) to inform the development of additional models, (2) to make changes to models as they are implemented, and (3) to recommend models for expansion. For example, Innovation Center officials noted that, for some instances where evaluations have shown reduced spending with maintained or improved quality of care, the center has developed new models that build upon the approaches of earlier models, but with adjustments intended to address reported limitations. In addition, the Innovation Center used evaluations to recommend two models to the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary for certification for expansion. According to CMS officials, a model evaluation and a certification for expansion differ in that a model evaluation assesses the impact of a delivery and payment approach for model participants only, while a certification for expansion assesses the future impact on program spending more broadly across all beneficiaries, payers, and providers who would be affected by the expanded model. As a result, the Office of the Actuary used the results of the evaluation and other information, such as Medicare claims data and published studies, to certify the expansion of both models.", "To assess the center's overall performance, the Innovation Center established performance goals and related measures and reported meeting its targets for some goals in 2015, the latest year for which data were available (see table below).", "Innovation Center officials told GAO that the center also recently developed a methodology to estimate a forecasted return on investment for its model portfolio. The center is in the early stages of refining the methodology and applying it broadly across its models."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal spending on health care in the United States\u2014driven primarily by  Medicare and Medicaid expenditures\u2014is expected to reach over $1  trillion in 2018 and to continue increasing and exerting pressure on the  federal budget. At the same time, studies have found that higher levels  of spending do not reliably lead to enhanced quality of care. The Centers  for Medicare & Medicaid Services (CMS), within the Department of Health  and Human Services (HHS), has sought to both reduce spending and  improve quality of care for beneficiaries enrolled in Medicare, Medicaid,  and the Children\u2019s Health Insurance Program (CHIP) by testing new ways  for delivering and paying for health care services. To further such testing,  the Patient Protection and Affordable Care Act (PPACA) established the  Center for Medicare and Medicaid Innovation (Innovation Center) within  CMS under section 1115A of the Social Security Act.", "In establishing the Innovation Center, the law provided CMS with  additional authority when testing new health care delivery and payment  approaches, known as models. For example, CMS may expand the  duration and scope of models tested by the Innovation Center through  rulemaking instead of needing the enactment of legislation, which was  required to expand the demonstrations that CMS frequently conducted in  the past. In addition, the law provided a dedicated appropriation for  testing models\u2014$10 billion for the Innovation Center\u2019s activities for the  period of fiscal years 2011 through 2019 and $10 billion per decade  beginning in fiscal year 2020.", "In November 2012, we reported on the early activities of the Innovation  Center. We found that, during the first 16 months of operations, the  Innovation Center focused on implementing 17 new models while  assuming responsibility for 20 demonstrations that CMS began before the  start of the center. We also reported that the Innovation Center developed  preliminary plans for evaluating the effects of each model on spending  and quality of care and assessing the center\u2019s overall performance.", "At the time of our 2012 report, however, it was too early to consider  certain questions raised by members of Congress about Innovation Center operations, including the use of its dedicated funding, the impact  of the models tested, and the center\u2019s overall performance. Given the  amount of time that has passed\u2014the Innovation Center has been in  operation for over 7 years\u2014you asked us to update our previous work to  provide information on the activities of the center and to report on any  results of the testing. This report examines  1.  the status of the Innovation Center\u2019s testing of models and the  resources used for such activities;  2.  the use of model evaluations; and  3.  the Innovation Center\u2019s assessment of its performance.", "To determine the status of model testing and the resources used by the  Innovation Center for such activities, we reviewed Innovation Center  documentation, including information on models the center was  implementing or had announced, as well as web pages, model fact  sheets, and frequently asked questions. We obtained and analyzed  Innovation Center data on the amounts of the Innovation Center\u2019s  appropriations obligated. We also interviewed and obtained written  responses from Innovation Center officials. Our work focused on models  tested and funded through appropriations under section 1115A of the  Social Security Act, as enacted by PPACA, which established the center  and provided its dedicated appropriations. In general, our work covered  the period during which the Innovation Center first became operational  (fiscal year 2011) through the most recent time period for which complete  information was available. For the status of model testing, we considered  information through March 1, 2018. For the resources used, we analyzed  data on the amounts of the Innovation Center\u2019s appropriations obligated  through fiscal year 2016. We assessed the reliability of the obligation data  by comparing it to publicly reported amounts and discussing the data with  center officials. We determined these data were sufficiently reliable for the  purposes of our objectives.", "To determine how the Innovation Center used evaluations of models, we  interviewed officials from the center, CMS\u2019s Office of the Actuary,  evaluation contractors, and subject matter experts to discuss the use of  evaluations, in general, as well as for five selected models specifically.  We selected models based on a nonprobability sample that included both  Medicare and Medicaid models; ongoing and completed models; models  that fell under the responsibility of different Innovation Center staffing  groups; and one model evaluated for expansion. Because we used a  nonprobability sample, our results are not generalizable beyond the  models we reviewed; however, they provide insight into how CMS uses  the evaluations of its models. We also analyzed publicly available  evaluation reports and other model documentation publicly available from  the Innovation Center and the Office of the Actuary.", "To describe the Innovation Center\u2019s assessment of its performance, we  reviewed information reported on the center\u2019s targeted and actual  performance available in CMS\u2019s Congressional Budget Justifications for  fiscal years 2012 through 2018. Information on the center\u2019s targets was  available for performance years 2014 through 2018. Complete  information on the center\u2019s actual performance was available for 2015.  Partial information was available for 2014 and 2016, and no information  was available for 2017 and 2018. We also interviewed Innovation Center  officials regarding the assessment of performance.", "We conducted this performance audit from February 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Requirements for Innovation Center Models Implemented under Section 1115A", "paragraphs": ["Section 1115A establishes certain requirements for the Innovation Center  that relate to the selection of models, use of resources, and evaluation of  models. These requirements include:  consulting with representatives of relevant federal agencies, as well  as clinical and analytical experts in medicine or health care  management, when carrying out its duties as described in the law; ensuring models address deficits in care that have led to poor clinical  outcomes or potentially avoidable spending; making no less than $25 million of the Innovation Center\u2019s dedicated  funding available for model design, implementation, and evaluation  each fiscal year starting in 2011; evaluating each model to analyze its effects on spending and quality  of care, and making these evaluations public; and modifying or terminating a model any time after testing and evaluation  has begun unless it determines that the model either improves quality  of care without increasing spending levels, reduces spending without  reducing quality, or both.", "Under section 1115A, certain requirements applicable to previous CMS  demonstrations are inapplicable to models tested under the Innovation  Center. For example, while prior demonstrations generally required  congressional approval in order to be expanded, section 1115A allows  CMS to expand Innovation Center models\u2014including on a nationwide  basis\u2014through the rulemaking process if the following conditions are met:  (1) the agency determines that the expansion is expected to reduce  spending without reducing the quality of care, or improve quality without  increasing spending; (2) CMS\u2019s Office of the Actuary certifies that the  expansion will reduce or not increase net program spending; and (3) the  agency determines that the expansion would not deny or limit coverage or  benefits for beneficiaries. In addition, certain requirements previously  cited by the Medicare Payment Advisory Commission as administrative  barriers to the timely completion of demonstrations are inapplicable.  Specifically, section 1115A provides the following:", "HHS cannot require that an Innovation Center model initially be  budget neutral\u2014that is, designed so that estimated federal  expenditures under the model are expected to be no more than they  would have been without the model\u2014prior to approving a model for  testing.", "Certain CMS actions in testing and expanding Innovation Center  models cannot be subject to administrative or judicial review.", "The Paperwork Reduction Act\u2014which generally requires agencies to  submit all proposed information collection efforts to the Office of  Management and Budget (OMB) for approval and provide a 60-day  period for public comment when they want to collect data on 10 or  more individuals\u2014does not apply to Innovation Center models."], "subsections": []}, {"section_title": "Innovation Center Staffing and Organization", "paragraphs": ["The Innovation Center uses a combination of staff and contractors to test  models. Since the center became operational in November 2010, the  number of staff increased steadily through the end of fiscal year 2016.  (See fig. 1.) As of September 30, 2017, there were 617 staff\u2014a slight  decrease in the number of staff from the end of the prior fiscal year.  Officials indicated that, in the future, changes in the model portfolio may  require additional staff to manage and support model development and  implementation. However, officials do not anticipate needing to increase  staffing levels at the same pace as they did between fiscal years 2011  and 2016. Additionally, the Innovation Center uses third-party contactors  to perform functions related to the implementation of models and to  perform evaluations of the changes in the quality of care furnished and  program spending under a model.", "The Innovation Center has organized its 617 staff members primarily into  eight groups and the Office of the Director. Four of the eight groups are  responsible for coordinating the development and implementation of  models. Staff in these four groups primarily lead efforts in developing  model designs and obtaining approval for their models from CMS and  HHS. Once a model is approved, staff coordinate the remaining  implementation steps, including soliciting and selecting participants and  overseeing the model during the testing and evaluation period. The other  four groups perform key functions that support model development and  implementation, such as reviewing ideas submitted for consideration as  possible models, overseeing the evaluations of models, providing  feedback to model participants about their performance, disseminating  lessons learned across models, and monitoring budget resources. The  Office of the Director, in general, has oversight responsibilities for the  models led by these groups. Table 1 provides information on the staffing  groups within the Innovation Center."], "subsections": []}, {"section_title": "Innovation Center Process for Model Development and Implementation", "paragraphs": ["The Innovation Center has developed internal agency guidance that  outlines a general process used by the four model groups for developing  and implementing models. (See fig. 2.) Appendix I provides additional  information about the general process for implementing models."], "subsections": []}, {"section_title": "Innovation Center Categories for Models", "paragraphs": ["The Innovation Center has organized its models into seven categories  based on delivery and payment approaches tested and program  beneficiaries covered. The seven categories are as follows:", "Accountable Care. This category includes models built around  accountable care organizations (ACOs)\u2014groups of coordinated  health care providers who are held responsible for the care of a group  of patients. The models are designed to encourage ACOs to invest in  infrastructure and care processes for improving coordination,  efficiency, and quality of care for Medicare beneficiaries.", "Episode-based payment initiatives. This category includes models  in which providers are held accountable for the Medicare spending  and quality of care received by beneficiaries during an \u201cepisode of  care,\u201d which begins with a health care event (e.g., hospitalization) and  continues for a limited time after.", "Initiatives Focused on Medicare-Medicaid Beneficiaries. This  category includes models focused on better serving individuals  eligible for both Medicaid and Medicare in a cost-effective manner.", "Initiatives Focused on Medicaid and CHIP Populations. This  category includes models administered by participating states to lower  spending and improve quality of care for Medicaid and CHIP  beneficiaries.", "Initiatives to Accelerate the Development and Testing of New  Payment and Service Delivery Models. This category includes  models where the Innovation Center works with participants to test  state-based and locally developed models, covering Medicare  beneficiaries, Medicaid beneficiaries, or both.", "Initiatives to Speed the Adoption of Best Practices. This category  includes models in which the Innovation Center collaborates with  health care providers, federal agencies, and other stakeholders to test  ways of disseminating evidence-based best practices that improve  Medicare spending and quality of care for beneficiaries.", "Primary Care Transformation. This category includes models that  use advanced primary care practices\u2014also called \u201cmedical homes\u201d\u2014 to emphasize prevention, health information technology, care  coordination, and shared decision-making among patients and their  providers.", "For certain categories, the Innovation Center assigns primary  responsibility for developing and implementing models to a single model  group; for some other categories, the responsibility is shared across  different groups. For example, the center assigned responsibility for  models in the ACO and the Primary Care Transformation categories to  the Seamless Care Model Group, whereas the responsibility for models in  the Initiatives to Accelerate the Development and Testing of New  Payment and Service Delivery Models categories were assigned across  all four model groups. Appendix II provides a summary of the number of  models organized under each category and a description of each model."], "subsections": []}]}, {"section_title": "The Innovation Center Implemented 37 Models That Test Varying Delivery and Payment Approaches, and Obligated over $5.6 Billion", "paragraphs": [], "subsections": [{"section_title": "The Innovation Center Implemented 37 Models and Announced an Additional 2; Models Varied by Delivery and Payment Approaches Tested, Beneficiaries Covered, and Other Characteristics", "paragraphs": ["As of March 1, 2018, the Innovation Center had implemented 37 models  under section 1115A of the Social Security Act. (See fig. 3.) Of those 37  models, the testing period has concluded for 10 of them. In addition, the  Innovation Center has announced two models to begin testing in 2018.", "Innovation Center models varied based on several characteristics,  including delivery and payment approaches tested and program(s)  covered. Delivery and payment approaches varied across all  implemented and announced models\u2014even models organized by the  Innovation Center under the same model category. For example, the six  models that tested an episode-based payment approach varied in terms  of how episodes were defined, including the clinical and surgical episodes  to which models applied. In addition, some models included multiple  approaches for achieving changes in health care delivery or payment.  Models also differed in terms of the programs covered, with 22 models  covering Medicare only, 9 models covering Medicare and Medicaid, one  model covering Medicaid and CHIP, and 7 models covering all three  programs. Other characteristics by which models varied include the  nature of model participation for providers (voluntary or mandatory) and  the source of innovation (i.e., federal, state, or local initiatives). See table  2 for a breakdown of models across selected characteristics. Appendix II  provides a full description of all models implemented and announced by  the Innovation Center.", "In September 2017, the Innovation Center provided some insight into its  future plans when it issued an informal \u201crequest for information\u201d that  identified guiding principles under which models will be designed going  forward, described focus areas for new models, and requested feedback  from stakeholders. One of the guiding principles focused on voluntary  models\u2014a principle consistent with a final rule published in December  2017 canceling four mandatory participation models in development and  making participation in a fifth mandatory model voluntary for some  geographic areas. Other guiding principles included promoting  competition based on quality, outcomes, and costs; empowering  beneficiaries, their families, and caregivers to take ownership of their  health; and using data-driven insights to ensure cost-effective care that  also leads to improvements in beneficiary outcomes. In addition, the  Innovation Center indicated the following focus areas for new model  development: additional advanced alternative payment models;  consumer-directed care and market-based innovation models; physician  specialty models; prescription drug models; Medicare Advantage  innovation models; state-based and local innovation, including Medicaid- focused models; mental and behavioral health models; and program  integrity."], "subsections": []}, {"section_title": "The Innovation Center Obligated over 55 Percent of Its Initial Multiyear Appropriation through Fiscal Year 2016", "paragraphs": ["According to Innovation Center documentation, through September 30,  2016, the center obligated over $5.6 billion of the $10 billion appropriated  for fiscal years 2011 through 2019 under section 1115A of the Social  Security Act. The obligated amounts for individual models during this  period ranged from $8.4 million to over $967 million, and varied based on  model scope and design. For example, a model where the Innovation  Center used its waiver authority to provide additional flexibility to  participants (rather than additional funding) required only $8.4 million in  obligations for the evaluation of the model and implementation activities.  In contrast, a model where the Innovation Center awarded funding to a broad set of partners, including providers, local government, and public- private partnerships, to test their own care delivery and payment models  required more than $870 million in obligations for payments to awardees  and used over $95 million for contractor evaluations and other activities  that supported model development and implementation.", "Innovation Center spending falls into three categories: model programs,  innovation support, and administration.", "Model programs include obligations that directly support individual  models and delivery system reform initiatives.", "Innovation support includes center-wide operational expenses that are  not directly attributable to a single model.", "Administration includes permanent federal full-time equivalent payroll  expenses, administrative contracts, administrative interagency  agreements, and general administrative expenses.", "As the Innovation Center implemented additional models each year, total  annual obligations increased steadily from approximately $95 million in  fiscal year 2011 to more than $1.3 billion in fiscal year 2015, but  decreased slightly in fiscal year 2016. (See fig. 4) Most of these total  obligations were for model programs, which followed a similar pattern,  increasing from $51 million in 2011 to about $1.1 billion in fiscal year  2015, with a slight decrease in fiscal year 2016. According to officials, the  2016 decrease in obligations for model programs was due in part to some  of the earlier, expensive models ending and to newer models being less  costly than the older models. Officials noted, for example, that a number  of newer models incorporated basic program infrastructure used in  previously implemented models, which allowed for reduced model costs.  Officials also indicated that the decrease in obligations may be due to  newer models using payment approaches that are funded by the  Medicare Trust Fund, rather than funded by the Innovation Center\u2019s  dedicated appropriation. The center\u2019s obligations for both innovation  support and administration increased from around $20 million for each  category in fiscal year 2011 to about $163 million for innovation support  and $119 million for administration in fiscal year 2016. Officials told us  that as obligations for model programs grew, so did obligations for  innovation support and administration, which includes indirect costs and  contractor assistance."], "subsections": []}]}, {"section_title": "Evaluations Inform the Development of Models and Decisions to Certify Certain Models for Expansion", "paragraphs": [], "subsections": [{"section_title": "The Innovation Center Has Used the Results from Evaluations to Inform the Development of Additional Models and to Make Changes to Implemented Models", "paragraphs": ["The Innovation Center has used the results from model evaluations to  generate ideas for new models. For some of the early implemented  models, evaluation results showed reduced spending and maintained or  improved quality of care, but also identified model design limitations that  could affect those results. According to officials, in some of these  instances, the Innovation Center has developed new models that build  upon the approaches of earlier models, but include adjustments intended  to address identified limitations (see text box).", "Evaluations of Implemented Models  The evaluation of each model is performed by  a third-party contractor, who generally  determines the effect of a model on quality of  care and program spending by comparing  data for model participants to those of a  comparison group of providers and  beneficiaries with characteristics similar to  model participants. For purposes of the  evaluation, the Innovation Center has the  authority to require the collection and  submission of necessary data by model  participants. Accordingly, the third-party  contractor collects both quantitative and  qualitative data. The quantitative data are  used to assess program spending and quality  of care and the qualitative data are used to  provide the context needed to understand the  quantitative results.", "Example of A Model That Tests the Same General Delivery and Payment Approach  of a Previously Implemented Model While Addressing Limitations  Bundled Payment for Care Improvement (BPCI) Model 2 tested an episode-based  delivery and payment approach in which the Innovation Center set a benchmark, or  target, price for all Medicare services a beneficiary might receive during a clinical  episode\u2014defined by BPCI Model 2 as the initial hospital stay and all services received up  to 90 days after discharge. If the total spending for Medicare services during an episode  was lower than the target price, participating hospitals would receive payments in  addition to the normal fee-for-service payments. If the total spending for Medicare  services during an episode was higher than the target price, participating hospitals would  have to reimburse Medicare. Participants could select up to 48 different clinical episodes  under the model.   The evaluation of BPCI Model 2 found that orthopedic surgery episodes\u2014of which  approximately 90 percent were hip and knee joint replacement surgeries\u2014may have  resulted in reduced program spending and improved quality of care. However, the  evaluation also identified limitations affecting those results. For example, the target prices  for hip and knee replacement surgeries did not account for potential differences in  Medicare spending between elective surgeries and surgeries required after a fracture. As  a result of this limitation, hospitals could attempt to control spending by limiting the  number of episodes associated with higher cost beneficiaries (i.e., those requiring  surgery due to a fracture).  In part to address the design issue identified under BPCI Model 2, Innovation Center  officials told us they developed the Comprehensive Care for Joint Replacement (CJR)  model. Implemented in April 2016, the CJR model tests the same general delivery and  payment approach used in BPCI Model 2, but focuses specifically on hip and knee joint  replacement surgical episodes and adjusts the target price to account for the higher  spending related to hip and knee joint replacement surgeries following a fracture. As of  March 1, 2018, no evaluations of the CJR model have been publicly released.", "The Innovation Center has also used the results from evaluations as one  way to improve the operational and participant support for new models.  According to officials, evaluations have helped them identify lessons  learned regarding support systems, such as which types of systems work  well with which types of models, and then the center incorporated those  lessons when designing the systems for new models. For example,  officials noted that the experience with the learning system from the  Bundled Payments for Care Improvement (BPCI) models informed the  learning system for the Comprehensive Care for Joint Replacement  (CJR) model. The lessons learned helped the Innovation Center better  identify where participants would need additional support and the learning  activities\u2014such as webinars and implementation guides\u2014to provide the  needed support during the early stages of model implementation.  Innovation Center officials told us that these lessons from evaluations  helped ensure that each successive model built upon the collective  experience of models implemented by the center.", "The Innovation Center also has used evaluation results to make periodic  changes to models during the testing period. According to officials, these  changes include adjustments to the delivery and payment approaches  tested, such as refining the target population, broadening the geographic  focus, and refinements of spending calculations. Innovation Center  officials noted that, in general, such changes were limited to minimize  their effects on the evaluation of program spending and quality of care.  Officials also identified changes to operational and participant support  systems, which have included changes to the timing of participant data  reporting, revisions to how data are collected from participants, and  changes to the way learning materials are delivered to participants.  According to officials, these types of changes are generally intended to  help improve the experience of participants.", "According to Innovation Center officials, evaluation results may also be  used in making a decision to terminate a model prior to the end of its  planned testing period. However, officials stated that the Innovation  Center has not terminated any models prior to the conclusion of their  testing periods, either based on the results of an evaluation or for other  reasons."], "subsections": []}, {"section_title": "Evaluations Informed Innovation Center Decisions to Recommend Two Models be Certified for Expansion", "paragraphs": ["The Innovation Center used evaluation results in recommending two  models be certified for expansion. According to Innovation Center  officials, the evaluation of each model adequately demonstrated that the  delivery and payment approach tested reduced Medicare spending while  maintaining or improving quality of care. Based on these results, the  Innovation Center formally requested that CMS\u2019s Office of the Actuary  analyze the financial impact of a potential expansion of each model. The  two models were:", "Pioneer ACO. Pioneer ACO tested an ACO delivery and payment  approach that gave providers an opportunity to be paid a relatively  greater share of savings generated, compared to participants in other  ACO models, in exchange for accepting financial responsibility for any  losses. In year 3 of the model, ACOs that met certain levels of savings  in the first two years could elect to receive a portion of their Medicare  fee-for-service payments in the form of predetermined, per beneficiary  per month payments.", "YMCA of the USA Diabetes Prevention Program (Diabetes  Prevention Program). The Diabetes Prevention Program applied a  lifestyle change program recognized by the Centers for Disease  Control and Prevention to reduce to the risk of Type 2 diabetes for at- risk Medicare beneficiaries. The Diabetes Prevention Program was a  part of the Health Care Innovation Awards Round One model.", "When assessing the Pioneer ACO and Diabetes Prevention Program  models for expansion, the officials from the Office of the Actuary  considered the model evaluation results that were available and  information from other sources. For example, the assessment of  Pioneer ACO used historical shared savings calculations and beneficiary  attribution data from ACOs in the Medicare Shared Saving Program and  Pioneer ACO; Medicare claims and enrollment data; and published  studies. According to CMS officials, a model evaluation and a certification  for expansion differ in that a model evaluation assesses the historical  impact of a delivery and payment approach for model participants only,  while a certification for expansion assesses the future impact on program  spending across all beneficiaries, payers, and providers who would be  affected by the expanded model.", "Based on its assessments, the Office of the Actuary certified both models  for expansion and steps have been taken to expand them. In certifying  Pioneer ACO, the Office of the Actuary concluded that because ACOs, in  general, have been shown to produce savings relative to Medicare fee- for-service, an expansion of Pioneer ACO would generate further savings  to the Medicare program. According to officials, CMS expanded Pioneer  ACO by incorporating elements of the model\u2014through rulemaking\u2014as  one of the options that providers may choose under the Medicare Shared  Savings Program. For the Diabetes Prevention Program, the Office of  the Actuary concluded that certain changes considered as part of the  expansion would, in the near term, improve upon the original savings  achieved as part of the Health Care Innovation Awards as well as savings  achieved in similar diabetes prevention programs. The Innovation Center  has expanded\u2014through rulemaking\u2014the Diabetes Prevention Program  under a new, nationwide model to be implemented in April 2018.", "In addition, officials from the Innovation Center and the Office of the  Actuary discussed potentially assessing whether Partnership for Patients  should be certified for expansion. Partnership for Patients is a model that  leveraged federal, state, local, and private programs to spread proven  practices for reducing preventable hospital-acquired conditions and  readmissions across acute care hospitals. According to officials, the  Innovation Center shared the results for Partnership for Patients\u2014which  showed improved quality of care in the form of reduced preventable  hospital-acquired conditions and readmissions\u2014with the officials from the  Office of the Actuary. After discussing these issues, Innovation Center  officials decided not to request a formal analysis for certification of  expansion."], "subsections": []}]}, {"section_title": "The Innovation Center Established Performance Goals and Related Performance Measures and Reported Meeting Its Targets for Some Goals", "paragraphs": ["To assess is own performance, the Innovation Center established three  center-wide performance goals and related measures.", "Goal 1: Reduce the growth of healthcare costs while promoting  better health and health care quality through delivery system reform.  This goal has three performance measures that focus on ACOs. As  shown in table 3, the Innovation Center has reported mixed results in  achieving the targets set. According to agency reported data, the  Innovation Center met the targets for 2 of its 3 Goal 1 performance  measures for 2015. For the remaining measure\u2014the percentage of ACOs  that shared in savings\u2014the center did not meet its target during either of  the two years for which data were available. According to officials, when  results fall short of targets, they examine the causes and make  appropriate adjustments to the program. Officials stated that the missed  target was driven by the high growth in the number of ACOs that were  new\u2014and therefore would not yet be expected to achieve a level of  savings in which they could share\u2014and not by ACO performance deficits.  As a result, officials decided that no adjustments were required to the  Medicare Shared Savings Program or other ACO Models to help improve  performance. However, as shown in table 3, the Innovation Center set a  target for 2016 that was lower than the 2015 target. For 2017, the  Innovation Center lowered the expectation for growth compared to  previous years, setting a target that was 1 percent higher than the 2016  target. Moving forward, CMS believes that as more ACOs gain  experience, more will share in savings. Additionally, the agency expects  that with additional performance years, the targets for the measure will  become more refined.", "Goal 2: Identify, test, and improve payment and service delivery  models. This goal has one performance measure, which identifies the  number of models that currently indicate (1) cost savings while  maintaining or improving quality or (2) improving quality while maintaining  or reducing cost. As of September 30, 2016, the Innovation Center  reported that four section 1115A model tests have met these criteria (see  table 4).", "Goal 3: Accelerate the spread of successful practices and models.  For this goal, the first performance measure focuses on the number of  states developing and implementing a health system transformation and  payment reform plan. The second measure focuses on increasing the  percentage of active model participants who are involved in Innovation  Center or related learning activities. As shown in table 5, the Innovation  Center reported meeting its target for the first measure for both fiscal  years 2015 and 2016, but not meeting its target for the second measure.  For the second measure, the Innovation Center noted in its report to  Congress that although the results for fiscal year 2016 showed a slight  decrease in overall participation in Innovation Center or related learning  activities, the majority of models performed higher than their individual  targets. Several models underperformed, however, bringing down the  overall percentage rate.", "In addition to the Goal 3 performance measures, the Innovation Center  identifies two related contextual indicators\u2014which according to officials  are measures that provide supporting information to help understand  trends or other information related to the goal. The first contextual  indicator provides a snapshot of Medicare beneficiary participation at a  given point in time for all models operational for more than 6 months. In  fiscal year 2016, CMS reported that over 3.6 million Medicare fee-for- service beneficiaries participated in models, representing approximately 9  percent of Medicare fee-for-service beneficiaries. The second contextual  indicator provides information to help understand the level of interest and  participation among providers in the Innovation Center\u2019s model portfolio.  In fiscal year 2016, the Center estimates that 103,291 providers  participated in Innovation Center payment and service delivery models.", "In addition to the three goals established by the Innovation Center, CMS  has established an agency-wide goal related to the center\u2019s performance.  In 2015, CMS announced goals to help drive Medicare, and the health  care system at large, toward rewarding the quality of care instead of the  quantity of care provided to beneficiaries. One of these goals was to shift  Medicare health care payments from volume to value using alternative  payment models established under the Innovation Center. This agency- wide goal has one performance measure, which is to increase the  percentage of Medicare fee-for-service payments tied to alternative  payment models, such as ACOs or bundled payment arrangements. As  shown in table 6, CMS reported meeting its target for 2015 and 2016.", "Looking forward, officials told us that the Innovation Center has  developed a methodology to estimate a forecasted return on investment  for the model portfolio, and is in the early stages of refining the  methodology and applying it broadly across the portfolio in 2018. As part  of the development efforts, the Innovation Center expects to utilize  standard investment measures used in the public and private sectors."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for comment. The Department  provided technical comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services. In addition, the report will be available at no charge  on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Center for Medicare and Medicaid Innovation\u2019s General Process for Implementing Models", "paragraphs": ["Appendix I: Center for Medicare and Medicaid  Innovation\u2019s General Process for Implementing  Models An agency may issue a request for information for planning purposes."], "subsections": []}, {"section_title": "Appendix II: Models Implemented or Announced by the Center for Medicare and Medicaid Innovation under Section 1115A", "paragraphs": ["As of March 1, 2018, the Center for Medicare and Medicaid Innovation  (Innovation Center) organized its models into seven categories based on  delivery and payment approaches tested and program beneficiaries  covered. Table 8 provides the number of models implemented and  announced, organized under each category.", "The Innovation Center organized seven of its models under the  Accountable Care category. (See table 9.)", "The Innovation Center organized seven of its models under the Episode- Based Payment Initiatives category. (See table 10.)", "The Innovation Center organized three of its models under the Initiatives  Focused on Medicare-Medicaid Enrollees category. (See table 11.)", "The Innovation Center organized one of its models under the category,  Initiatives Focused on the Medicaid and Children\u2019s Health Insurance  Program Population. (See table 12.)", "The Innovation Center organized 14 of its models under the category,  Initiatives to Accelerate the Development and Testing of New Payment  and Service Delivery Models. (See table 13.)", "The Innovation Center organized three of its models under the category,  Initiatives to Speed the Adoption of Best Practices. (See table 14.)", "The Innovation Center organized four of its models under the category,  Primary Care Transformation. (See table 15.)"], "subsections": []}, {"section_title": "Appendix III: Models Required by Different Provisions of the Patient Protection and Affordable Care Act", "paragraphs": ["In addition to models required by section 1115A of the Social Security  Act, as added by the section 3021 of Patient Protection and Affordable  Care Act, the Center for Medicare and Medicaid Innovation implemented  six models under different provisions of the Patient Protection and  Affordable Care Act. (See table 16.)"], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Greg Giusto (Assistant Director),  Aaron Holling (Analyst-in-Charge), Ashley Dixon, and Rachel Rhodes  made key contributions to this report. Also contributing to the report were  Sam Amrhein, Muriel Brown, and Emily Wilson."], "subsections": []}]}], "fastfact": ["Federal spending on health care\u2014driven primarily by Medicare and Medicaid\u2014is expected to top $1 trillion in 2018.", "The Affordable Care Act created the CMS Innovation Center to test new approaches to health care delivery, known as models, that could curb spending while providing better care. We reviewed the center's efforts.", "Since 2010, the center has tested or is in the process of testing 37 models. In evaluating these models, the Innovation Center has recommended the expansion of 2 Medicare models that reduced costs and maintained or improved care quality. Evaluations have also helped the center improve new model design and operation."]}
{"id": "GAO-18-51", "url": "https://www.gao.gov/products/GAO-18-51", "title": "Information Technology: OMB Needs to Report On and Improve Its Oversight of the Highest Priority Programs", "published_date": "2017-11-21T00:00:00", "released_date": "2017-11-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government plans to spend almost $96 billion on IT investments in fiscal year 2018; however, as GAO has previously found, too often these investments have cost overruns and schedule delays. To enhance oversight of IT programs, for 2015, Congress directed OMB to identify the 10 highest priority IT programs that are under development across federal agencies and report on their status each quarter. Further, for 2016, Congress directed USDS to provide a quarterly report of current USDS projects, including the top 10 high priority programs.", "GAO was asked to review OMB's oversight of high priority programs. This review evaluated (1) OMB's process for identifying, overseeing, and reporting on the high priority IT investment programs and (2) USDS's process for identifying and prioritizing its projects, including its consideration of the high priority programs, and its reporting on the projects. GAO analyzed OMB memorandums and reports to Congress and interviewed OMB staff, including from USDS. In addition, GAO compared USDS's processes with IT management best practices."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Management and Budget's (OMB) Office of E-Government and Information Technology (E-Gov) reported that it undertook a structured approach to identify the top 10 high priority IT programs in reports to Congress in June 2015 and June 2016. Specifically, OMB staff stated that they chose the top 10 programs from a longer list of agency programs requiring additional oversight (referred to as high impact programs). E-Gov staff reported that the high priority programs were already receiving greater oversight than what was provided to the other major programs due to their high impact designation. This additional oversight included frequent meetings with agency Chief Information Officer (CIO) leadership and quarterly meetings with OMB staff. However, the Federal CIO was not directly involved in this oversight. According to E-Gov staff, the Federal CIO does not typically get involved in individual programs due to the large number of programs. However, past experience has shown that Federal CIO involvement has had a significant impact. For example, Federal CIO-led reviews of troubled projects, known as TechStat reviews, resulted in $3 billion in savings in 2010. Until OMB ensures that the Federal CIO is more directly involved in the oversight of these high priority programs, it may be missing a key opportunity to improve accountability and achieve positive results.", "OMB's 2015 and 2016 reports to Congress on the top 10 high priority programs identified the status of the programs and major milestones. However, the reports were not issued on a quarterly basis, as directed. E-Gov staff stated that they were unable to do so because of other competing reporting requirements and the limited resources available to draft and fully review the report on a quarterly basis. In addition, OMB stopped issuing the reports on the top 10 high priority IT programs after June 2016. OMB stated that Congress' 2016 direction to the U.S. Digital Service (USDS)\u2014an OMB component\u2014to provide a quarterly report that described the status of USDS teams and projects, including the top 10 high priority programs, meant that OMB should only report on USDS projects considered to be high priority. However, continued identification and reporting on the top 10 high priority programs, and not just USDS projects, would further enhance congressional oversight by providing congressional stakeholders information that is not readily available on those programs in the greatest need of attention.", "USDS issued reports to Congress on the status of its key projects in December 2016 and July 2017; however, the reports did not address the top 10 high priority programs as directed by Congress, according to OMB staff, because of OMB's interpretation of Congress's direction. In addition, the reports were not issued quarterly, as directed. USDS staff attributed this to the time and effort needed to review and prepare the report. However, continuing to identify and report on the top 10 high priority programs while also reporting on USDS's projects would help to enhance congressional oversight and current administration IT governance entities' efforts by providing stakeholders with information that is not readily available."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to OMB for enhancing the oversight of high priority programs and continuing to report on both these programs and USDS projects. OMB neither agreed nor disagreed with the recommendations but disagreed with several of GAO's conclusions, which GAO continues to believe are valid as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government plans to spend almost $96 billion on information  technology (IT) in fiscal year 2018. However, we have previously found  that the effective and efficient acquisition of IT investments has been a  longstanding challenge in the federal government and that IT  expenditures have often resulted in significant cost overruns, schedule  delays, and questionable mission-related achievements. Due to these  and other issues, in February 2015, we added improving the  management of IT acquisitions and operations to our list of high-risk  areas of concern for federal government agencies.", "In addition, to achieve increased oversight of federal IT programs, in  December 2014, Congress stated in its explanatory statement  accompanying the Consolidated and Further Continuing Appropriations  Act, 2015, that the Office of Management and Budget (OMB) is to identify  the 10 highest priority IT investment programs (hereafter referred to as  the top 10 high priority programs) that are under development across  federal agencies and report on their status each quarter. Further, in an  explanatory statement accompanying the Consolidated Appropriations  Act, 2016, Congress stated that the U.S. Digital Service (USDS), a  component of OMB, is to provide a quarterly status report on current  USDS projects, including the top 10 high priority programs.", "You asked us to review OMB\u2019s efforts to provide oversight of the top 10  high priority IT programs. Our specific objectives were to evaluate (1)  OMB\u2019s process for identifying, overseeing, and reporting on the high  priority IT investment programs and (2) USDS\u2019s process for identifying  and prioritizing its projects, including its consideration of the high priority  programs, and its reporting on the projects.", "To address the first objective, we obtained and reviewed reports that  OMB sent to Congress in June 2015 and June 2016 on the high priority IT  programs to discern any information about the process that was used for  identifying and overseeing these programs. In the absence of  documented procedures specific to the high priority programs, we also  reviewed OMB memorandums addressing the identification and oversight  of high impact programs, which are programs that OMB has determined  merit additional support and oversight by OMB and/or agency leadership  due to factors such as their size and cost. According to OMB staff, these  high impact programs are a broader set of programs from which OMB  selects the top 10 high priority programs.", "Further, we reviewed an OMB work plan charting the process that OMB\u2019s  Office of E-Government and Information Technology (E-Gov) used to  identify and oversee high impact programs. We also reviewed  screenshots of a tool that OMB uses to analyze agency IT investment  data as a part of their process to identify and oversee high impact  programs. The tool draws information from IT portfolio summaries that  agencies submit to OMB as part of the budget process. In addition, we  interviewed relevant E-Gov office staff responsible for preparing the top  10 high priority reports, including the Unit Chief for the Agency Oversight  and Implementation team, regarding the processes they used for  identifying the programs and the oversight they provide to such  programs.", "We corroborated what we learned from OMB about its oversight of high  priority and high impact programs by obtaining information from eight  agencies identified as having one of the top 10 high priority IT programs  in the June 2016 report to Congress. We asked relevant officials within  these agencies, among other things, how the oversight that OMB  provided to their high priority IT programs had differed from that provided  to other major investments. In addition, we asked the officials whether this  oversight included the programs being discussed with OMB during  quarterly portfolio review meetings known as PortfolioStat. Finally, we  analyzed OMB\u2019s June 2015 and June 2016 reports to Congress  identifying the top 10 high priority IT, which were issued in response to  Congress\u2019s explanatory statement for fiscal year 2015.", "To address the second objective, we reviewed USDS\u2019s documentation,  including its January 2017 master project list, and interviewed staff,  including the former Deputy Administrator. In addition, we discussed with  USDS staff the findings from a previous GAO engagement that assessed  the organization\u2019s project selection process to determine any changes  to their process since August 2016. Upon determining that the process  had not changed, we relied on the prior engagement\u2019s evaluation of the  process to determine if it addressed the best practice identified in GAO\u2019s  Information Technology Investment Management Framework. This  framework calls for organizations to use their defined selection process,  including predefined selection criteria, to select their projects. We also  analyzed OMB\u2019s December 2016 and July 2017 reports to Congress  that were issued in response to the explanatory statement for fiscal year  2016, which stated that OMB was to report on the status of USDS\u2019s  projects, including the top 10 high priority IT programs.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government plans to invest about $96 billion in fiscal year  2018 for IT that is critical to the health, economy, and security of the  nation. However, prior IT expenditures have often resulted in significant  cost overruns, schedule delays, and questionable mission-related  achievements. For example,", "The Department of Health and Human Services\u2019 website,  Healthcare.gov, and its supporting systems, which were to facilitate  the establishment of a federal health insurance marketplace by  January 2014, encountered significant cost increases, schedule slips,  and delayed functionality. In a series of reports, we identified  numerous planning, oversight, security, and system development  challenges faced by this program.", "For almost two decades, the Department of Veterans Affairs (VA) has  undertaken numerous initiatives with the Department of Defense  (DOD) that were intended to advance the ability of the two  departments to share electronic health records. In our report of the  departments\u2019 efforts in 2015, we reported that the departments had  not identified outcome-oriented goals and metrics to clearly define  what they aimed to achieve from their interoperability efforts, resulting  in numerous failures. During most of the last 20 years, VA has also  been planning to modernize its system separately from DOD.  Recently, the Secretary of VA announced that the department plans to  use the same electronic health record system that DOD is in the  process of acquiring. However, the significant challenges that have  confronted VA in its efforts contributed to our designation of VA health  care as a high risk area.", "The Department of Homeland Security\u2019s U.S. Citizenship and  Immigration Services\u2019 Transformation Program, which was initiated to  address processing inefficiencies and transform the agency\u2019s current  paper-based system into an electronic account-based system, has  faced continual management and development challenges, limiting its  progress and ability to achieve its goals of enhanced national security  and system integrity, better customer service, and operational  efficiency. The U.S. Citizenship and Immigration Services estimates  that the program\u2019s cost increased by approximately $1 billion and its  schedule was delayed by over 4 years from its initial approved  baseline.", "The Office of Personnel Management\u2019s Retirement Systems  Modernization program, which was intended to improve the efficiency  and effectiveness of its retirement claims processing, was canceled in  February 2011 after the agency had spent approximately $231 million  on a third attempt to automate the processing of federal employee  retirement claims.", "As previously stated, due to the challenges associated with acquiring IT  across the federal government, in 2015, we added improving the  management of IT acquisitions and operations to our list of high-risk  areas. We recently issued an update to our high-risk report and  determined that, while progress has been made in addressing the high- risk area of IT acquisitions and operations, significant work remains to be  completed. For example, as of May 2017, OMB and federal agencies  had implemented 380 (or about 47 percent) of the 803 recommendations  that we had made from fiscal years 2010 through 2015 related to IT  acquisitions and operations."], "subsections": [{"section_title": "OMB\u2019s Mission and Oversight of Federal IT Programs", "paragraphs": ["By law, OMB is to oversee federal agencies\u2019 management of information  and information technology. Within OMB, primary responsibility for  oversight of federal IT has been given to the Administrator of the Office of  Electronic Government and Information Technology, who is also called  the Federal Chief Information Officer (Federal CIO). According to OMB,  this oversight responsibility covers about 800 major and nearly 5,700  non-major IT investments across the federal government. As a part of  the oversight, the E-Gov office develops policy and reviews federal  agencies\u2019 IT strategic plans. In addition, OMB establishes processes to  analyze, track, and evaluate the risks and results of IT investments made  by executive agencies, and issues guidance on processes for selecting  and overseeing agency privacy and security protections for information  and information systems.", "OMB has also implemented a series of initiatives to improve the oversight  of underperforming investments and more effectively manage IT. These  initiatives include the following:", "Federal IT Dashboard. In June 2009, to further improve the  transparency into and oversight of federal agencies\u2019 IT investments,  OMB deployed the Federal IT Dashboard, a public website with  information on the performance of these investments. OMB provided  guidance to the agencies on the information they should maintain and  update on the dashboard. Currently, the dashboard displays  information on the cost, schedule, and performance of close to 800  major IT investments at 26 federal agencies. In addition, agencies are  to submit ratings from their CIOs to the dashboard, which, according  to OMB\u2019s instructions, should reflect the level of risk facing an  investment relative to that investment\u2019s ability to accomplish its goals.  The public display of these data is intended to allow OMB, other  oversight bodies, and the general public to hold agencies accountable  for mission-related outcomes. Over the past 7 years, we have issued  a series of reports that have noted both significant steps OMB has  taken to enhance the oversight, transparency, and accountability of  federal IT investments by creating the dashboard, as well as issues  with the accuracy and reliability of the data it contains.", "TechStat reviews. In January 2010, the Federal CIO began leading  TechStat reviews\u2014face-to-face meetings to discuss whether to  terminate or turn around IT investments that are in danger of failing or  are not producing results. These meetings involved OMB and agency  leadership and were intended to increase accountability and improve  performance. OMB reported that federal agencies achieved over $3  billion in cost savings or avoidances as a result of these reviews in  2010. Subsequently, it empowered agency CIOs to begin holding  their own TechStat reviews by June 2012. OMB\u2019s 2015 guidance  specified that the TechStat reviews were to be held with agency  leadership, not led by OMB as in the past, and that agencies were  only required to notify OMB of the meetings\u2019 occurrence and report  the results.", "In November 2015, we testified that OMB had conducted only one  TechStat review between March 2013 and October 2015, and had not  listed any related savings in its quarterly reporting to Congress since  June 2012. In April 2017, OMB reported that it had not led a  TechStat review since 2015. A report issued by the Federal CIO  Council in January 2017, entitled The State of Federal Information  Technology, noted that shifting TechStat reviews from OMB to  agencies had diminished the executive scrutiny and impact of the  initiative.", "PortfolioStat sessions. To better manage existing IT systems, in  2012, OMB launched the PortfolioStat initiative, which required  agencies to conduct an annual, agency-wide portfolio review to,  among other things, reduce commodity IT spending and demonstrate  how their investments aligned with the agency\u2019s mission and business  functions. These reviews were to be held between the Federal CIO  and agency leadership. In 2014 and 2015, OMB\u2019s PortfolioStat  guidance also called for it and agencies to identify high impact IT  programs that merited additional support and oversight by OMB  and/or agency leadership, and for these programs to be discussed  during a PortfolioStat session. The 2015 guidance also changed the  frequency of the PortfolioStat sessions from annually to quarterly, and  the level of participation to no longer require attendance by the  Federal CIO or the agency\u2019s Deputy Secretary.", "The Federal Information Technology Acquisition Reform provisions  (commonly referred to as FITARA) enacted as a part of the Carl Levin  and Howard P. \u2018Buck\u2019 McKeon National Defense Authorization Act for  Fiscal Year 2015 aimed to improve federal IT acquisition and operations  and recognized the importance of these OMB initiatives by incorporating  certain requirements into the law. For example, among other things, the  act requires OMB to publicly display investment performance information  and review federal agencies\u2019 IT investment portfolios.", "Further, as previously mentioned, the December 2014 explanatory  statement for the Consolidated Appropriations Act, 2015, stated that OMB  was to identify the top 10 high priority IT programs under development in  the federal government and report on their status quarterly. Additionally,  in December 2015, in the explanatory statement for the Consolidated  Appropriations Act, 2016, Congress stated that USDS, an OMB  component, was to provide a quarterly status report on its current  projects, including the top 10 high priority programs."], "subsections": []}, {"section_title": "USDS\u2019s Mission and Organization", "paragraphs": ["The current mission of USDS is to deliver better government services to  the American people through technology and design. USDS is focused  on, among other things, improving the nation\u2019s most important digital  services used by the public, and modernizing procurement processes and  practices for the digital era. To execute its mission, USDS recruits  private sector experts, such as IT engineers and designers and leading  civil servants, and deploys small teams to federal agencies. It selects  which projects it will apply resources to and generally initiates the effort  with the federal agency that owns the IT projects. In August 2016, we  reported that USDS had developed procedures and criteria for selecting  and prioritizing projects to work on."], "subsections": []}, {"section_title": "Current Administration\u2019s Efforts to Improve Federal IT", "paragraphs": ["The current administration has initiated additional efforts aimed at  improving federal IT, including digital services. Specifically, in March  2017, the administration established the Office of American Innovation,  which has a mission to, among other things, make recommendations to  the President on policies and plans aimed at improving federal  government operations and services and modernizing federal IT. In doing  so, the office is to consult with both OMB and the Office of Science and  Technology Policy. Further, in May 2017, the administration established  the American Technology Council, which has a goal of helping to  transform and modernize federal agency IT and how the federal  government uses and delivers digital services. The Federal CIO and the  USDS Administrator are members of this council."], "subsections": []}]}, {"section_title": "OMB Identified High Priority IT Programs, but Did Not Ensure Federal CIO Oversight or Continued and Timely Reporting", "paragraphs": ["OMB reported that it undertook a structured approach to identifying the  top 10 high priority IT programs it reported to Congress in June 2015 and  June 2016. Specifically, staff in the E-Gov office, including the Unit Chief  for the Agency Oversight and Implementation team, stated that they  chose the top 10 programs from a list of high impact programs that OMB  separately maintains. They added that their approach was not guided by  any documented procedures or scoring techniques to distinguish the  programs.", "Analysts in the E-Gov office told us that, to identify the high impact  programs from which the top 10 high priority programs were selected,  they used program information from IT portfolio summaries, monthly IT  dashboard updates, and quarterly integrated data collection submissions  that OMB receives from agencies. They also considered several  additional factors, such as risk exposure, public impact, public use,  criticality to agency mission, size, and cost. In addition, they considered  input from USDS leadership and OMB budget examiners, as well as our  reports, inspectors general reports, and CIO risk ratings.", "Further, the analysts stated that OMB sought input from officials of the 24  Chief Financial Officers Act agencies to gain a better understanding of  the importance of each program. In the end, based on all of the  information considered, E-Gov staff made a judgment call regarding  which of the agencies\u2019 programs to identify as being high impact.  According to these staff, on average, two high impact programs are  identified for each of the 24 agencies, with at least one program being  identified for each agency, and as many as four programs being identified  for some larger agencies. Further, according to the staff, the Federal CIO  approved the process for selecting the high impact programs.", "In addition, in determining the top 10 high priority programs, the E-Gov  staff stated that they identified on the high impact list those programs that  they believed were representative of the most important IT programs  across federal agencies. They also considered other factors, such as  whether a program had generated legislative interest or had performance  issues. They added that the Federal CIO then approved the list of top 10  programs that they had selected.", "OMB subsequently issued two reports to Congress\u2014in June 2015 and  June 2016\u2014that identified the top 10 high priority programs. Along with  the status of each program, the reports identified the IT investments that  were a part of each program as well as total IT spending, average CIO  risk rating, major milestones, and the level of involvement USDS has with  the program. Table 1 lists the programs that OMB identified in the two  reports.", "As shown in the table, OMB made two changes to the top 10 list in 2016.  Specifically, it replaced the Social Security Administration\u2019s Service  Modernization program with the agency\u2019s Disability Case Processing  System due to a change in focus within the agency. In addition, it  replaced VA\u2019s Medical Appointment Scheduling System with VA\u2019s  Medical 21st Century Development Core program, which is a larger effort  that encompasses the scheduling system."], "subsections": [{"section_title": "OMB Oversight Efforts Did Not Ensure Federal CIO Involvement", "paragraphs": ["E-Gov staff reported that the high priority programs were already  receiving greater oversight than what was provided to the other major  programs due to their high impact designation. Specifically, the staff  stated that OMB provides additional oversight to high impact IT programs  by regularly communicating about them through quarterly, monthly,  weekly, or daily meetings with agency CIOs and program staff, depending  on the risk and profile of the program. In contrast, communication is much  less frequent for other major IT systems. The staff added they also  discuss high impact programs with agencies during quarterly PortfolioStat  meetings. Further, they stated that they can request that agencies  perform a TechStat review, if needed, for a troubled high impact program.", "Most agencies that owned the high priority programs identified in the June  2016 report confirmed that OMB had already provided increased  oversight for the high priority programs when they were originally  designated as high impact programs. Specifically, officials from six of the  eight agencies stated that the programs were discussed during quarterly  PortfolioStat sessions, and officials from five agencies stated that OMB  had provided action items for them to address with regard to their  programs. Further, officials from six agencies stated that OMB\u2019s  oversight included periodic meetings (e.g., daily, weekly, or bi-weekly). Its  oversight also included participation in a TechStat review of a high impact  program performed by the Social Security Administration.", "Nevertheless, while additional OMB oversight of the high impact  programs (and, accordingly, the identified high priority programs) is a  positive step, the Federal CIO was not directly involved in this oversight.  According to the E-Gov staff, the Federal CIO does not typically get  involved with overseeing individual IT programs due to the large number  of programs. However, the results of past CIO-led TechStat reviews  suggest that the Federal CIO\u2019s involvement in overseeing such programs  does have significantly positive results. Specifically, as previously  mentioned, CIO-led TechStat reviews of IT investments performed in  2010 resulted in $3 billion in savings and cost avoidance.", "Further, during a September 2016 Comptroller General forum to explore  challenges and opportunities for improving federal IT acquisitions and  operations, current and former CIOs and other participants pointed to the  importance of OMB\u2019s oversight and guidance, and specifically, to the role  of the Federal CIO in helping to ensure effective IT governance. The  participants cited specific OMB initiatives undertaken by the Federal CIO,  including the TechStat reviews that had resulted in greater accountability  and positive results. Thus, without the involvement of the Federal CIO  more directly and regularly in the oversight of high impact and high  priority programs, including leading TechStat reviews for the programs,  OMB is likely to miss significant opportunities to improve accountability for  and achieve positive results from the federal government\u2019s IT  investments."], "subsections": []}, {"section_title": "OMB Has Stopped Reporting on High Priority IT Programs", "paragraphs": ["OMB issued two reports on the high priority programs\u2014one in 2015 and  another in 2016. While these reports provided the requested information  they were not issued quarterly. According to the E-Gov staff, OMB was  not able to report quarterly on the programs because of other competing  reporting requirements, limited resources available to draft the report, and  the amount of time it takes to get its reports fully reviewed.", "Moreover, the staff stated that they stopped issuing the high priority  reports in 2016 because they believe the explanatory statement to the  Consolidated Appropriations Act, 2016, no longer directed them to  continue reporting on the programs. Specifically, the explanatory  statement directed USDS to provide a quarterly report to the Committees  on Appropriations of the House and Senate describing the status of  current USDS teams and projects, including the top 10 high priority  programs, a list of USDS accomplishments, and agency project  proposals. Both E-Gov staff and USDS staff said they determined this to  mean that OMB should report on the USDS projects considered to be  high priority given USDS\u2019s responsibilities. In addition, USDS staff stated  that they did not receive any feedback from congressional stakeholders  indicating otherwise.", "However, continued identification and reporting on the top ten high priority  programs, and not just USDS projects, would further enhance  congressional oversight by providing congressional stakeholders with  information on high priority programs that is not readily available. Such  information could also be useful for current administration IT governance  entities such as the Office of American Innovation and the American  Technology Council, to assist them with prioritizing their efforts to  modernize federal agency IT."], "subsections": []}]}, {"section_title": "USDS Has a Defined Project Selection Process, but its Reporting Did Not Address High Priority Programs As Requested and Was Not Timely", "paragraphs": ["USDS has developed a process for identifying and prioritizing the IT  projects to which it provides support. Moreover, as we have previously  reported, its project selection process is consistent with best practices,  which state that organizations should establish and implement  procedures for prioritizing projects that include identifying selection  criteria to help consistently select projects based on their contributions to  the strategic goals of the organization.", "In explaining the process used to identify projects, USDS staff stated that  they obtained input from various sources, including the Federal IT  Dashboard, leadership of the relevant federal agency, E-Gov analysts,  and GAO reports. In addition, the staff said they considered the high  impact programs identified by the E-Gov office; they also coordinated with  E-Gov analysts through monthly meetings to incorporate issues of  significance to E-Gov into their selection process.", "To further facilitate the selection process, the USDS staff established  three questions as criteria for prioritizing agencies\u2019 IT projects, in the  following order of importance: (1) What will do the greatest good for the  greatest number of people in the greatest need? (2) How effective and  cost efficient will the USDS investment be? (3) What potential exists to  scale or reuse a technological solution across the government? The staff  said they used the criteria to create a list of all potential projects, including  their descriptions and information on resource needs; they updated the  list when they identified additional projects that met the criteria. This list  was subsequently used by USDS leadership to make decisions about  which projects to pursue. According to the staff, an important  consideration when selecting a project was whether there was executive  sponsorship from the agency. They added that executive sponsorship  ensures that USDS has the help it needs to make changes to the  projects, and it affects the efficiency and cost-effectiveness of USDS\u2019s  investment. Projects that were not selected went into a backlog that is to  be used to select a project when a team becomes available to work on a  new engagement.", "USDS has issued two reports to Congress on the status of its projects\u2014 one in December 2016 and the other in July 2017. The report issued in  December 2016 summarized the status of 11 projects that USDS is  engaged in at federal agencies, and 3 broader initiatives that are intended  to improve the performance and cost-effectiveness of government digital  services. According to USDS staff, the 11 projects had broad impact and  had made the most significant progress. For example, these included the  VA\u2019s Vets.gov project, which is intended to assist the department in  developing a new digital application for healthcare, and DOD\u2019s Defense  Travel System, a system that facilitates travel for all DOD employees.  Further, USDS reported on the status of their efforts for these three  initiatives: modernizing procurement processes, development of federal  shared services, and hiring top technical talent.", "The July 2017 report included summaries for 10 projects, including 5 new  projects. Specifically, the new projects were the General Service  Administration\u2019s Login.gov project, the Small Business Administration\u2019s  effort to modernize small business certification for government  contractors, DOD\u2019s Advisor Network system, DOD\u2019s Defense Personal  Property System, and transforming federal IT procurement through digital  acquisition training. In addition, 6 projects that were discussed in the  December 2016 report were not included in the July 2017 report.", "Table 2 provides a complete list of the projects identified in the two  reports.", "Our analysis determined that four of the projects identified in USDS\u2019s  reports were among the high priority programs that OMB\u2019s E-Gov office  had identified in its June 2015 and June 2016 reports to Congress. These  projects were Healthcare.Gov, Disability Claim Processing, modernizing  the immigration system at the Department of Homeland Security, and  improving the Visa program at the Department of State. However,  USDS\u2019s report does not specify this or provide an update on the status of  the other high priority programs. USDS staff stated that they did not  address all of the top 10 high priority programs because, as stated earlier  in this report, they interpreted Congress\u2019s 2016 request as being focused  on USDS\u2019s priority projects and not on the programs previously identified  by E-Gov. As mentioned earlier, however, continuing to identify and  report on the top 10 high priority IT programs while also reporting on  USDS\u2019s projects would further enhance congressional oversight and  current administration IT governance entities\u2019 efforts by providing  stakeholders with information on high priority programs and USDS  projects that is not readily available.", "Further, although USDS was directed to report quarterly, it did not do so.  Instead, it issued a report in December 2016, nearly a year after  Congress\u2019s direction, and in July 2017, nearly 7 months after its first  report. In discussing this matter, USDS staff said they were not able to  report quarterly due to the time and effort needed to prepare and review a  report. As a result, USDS\u2019s reporting did not provide congressional  stakeholders with the timely information needed to support their oversight  responsibilities."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["While OMB\u2019s 2015 and 2016 reports to Congress on the top 10 high  priority programs included the status of the programs, their total IT  spending, and other information to assist Congress in monitoring the  progress of critical programs, OMB did not issue the reports quarterly as  directed in the explanatory statement. In addition, OMB does not plan on  continuing to issue the top 10 high priority reports because it believes  that, in 2016, Congress directed the agency to instead focus on providing  a status of USDS\u2019s most important projects. Further, OMB\u2019s December  2016 and July 2017 reports on USDS\u2019s projects did not address the top  10 high priority programs across the government. However, continued  reporting on the top 10 high priority programs would further enhance  congressional oversight by providing congressional stakeholders with  information that is not readily available on those programs in the greatest  need of attention. Reporting on the top 10 high priority programs could  also be useful for IT governance entities such as the Office of American  Innovation and the American Technology Council, to assist them with  prioritizing their efforts to modernize federal agency IT.", "Moreover, OMB did not issue the high priority programs and USDS  reports on a quarterly basis as requested. Without OMB\u2019s quarterly  reporting on the progress of both the top 10 high priority programs and  the status of the USDS projects, congressional stakeholders and others  may lack the timely information they need to support their oversight and  other responsibilities.", "Finally, while additional OMB oversight of the high impact programs (and,  accordingly, the identified high priority programs) is a positive step, the  Federal CIO was not directly involved in the oversight of these programs.  Based on the positive impact of direct Federal CIO involvement in leading  investment reviews in the past, such involvement could significantly  improve program outcomes."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to OMB:", "The Director of OMB should continue to identify and report to  Congress on the status of the top 10 high priority IT programs and the  extent to which USDS is involved in the programs, as was done in  June 2015 and June 2016. In doing so, the Director should ensure  that these reports are issued quarterly. (Recommendation 1)", "The Director of OMB should ensure that the Federal CIO is directly  involved in the oversight of high priority programs. (Recommendation  2)", "The Director of OMB should continue to report on the status of USDS  projects. In doing so, the Director should ensure that the reports are  issued quarterly. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We received comments on our draft report via e-mail from the OMB  liaison to GAO. In the comments, OMB did not specifically state whether it  agreed or disagreed with our recommendations. Rather, OMB stated that  it has concerns with GAO\u2019s alternative interpretations of law and that  GAO\u2019s findings and conclusions are rooted in an incorrect legal  interpretation of OMB\u2019s annual appropriation. Specifically, it stated that  GAO considers reporting requirements specific to an annual appropriation  to apply for all future annual appropriations.", "However, OMB\u2019s characterization is incorrect, as we did not assert this  legal conclusion. As stated in our report, in the explanatory statement  accompanying the Consolidated and Further Continuing Appropriations  Act, 2015, Congress directed OMB to identify the 10 highest priority IT  investment programs (referred to in our report as the top 10 high priority  programs) that are under development across federal agencies and  report on their status each quarter. Subsequently, the explanatory  statement accompanying the Consolidated Appropriations Act, 2016,  directed USDS to provide a quarterly status report on, among other  things, current USDS projects, including the top 10 high priority programs.  Our report does not conclude that the language of either explanatory  statement establishes a legally binding requirement, whether applicable  only to the subject fiscal year or beyond.", "GAO\u2019s conclusions are based on the view that continued identification  and reporting on the top 10 high priority programs, and not just USDS  projects, would help to enhance congressional oversight. Identifying and  reporting on the top 10 high priority programs is important because such  information is not readily available. We have revised relevant statements  in the report to clarify our message in this regard. Further, while GAO did  not assert a legal conclusion, we have, nonetheless, removed all  references to our \u201cinterpretation\u201d of the explanatory statement so as to  avoid the inference that we are making legal conclusions.", "OMB also said our conclusion that it has stopped reporting altogether is  incorrect. However, our report does not state that OMB has stopped  reporting altogether. Rather, our report states that OMB stopped issuing  reports on the top 10 high priority IT programs due to its interpretation of  the 2016 explanatory statement and, instead, switched to reporting on the  status of USDS\u2019s projects.", "In addition, OMB stated that, while it agreed that the reports have not  been submitted on a quarterly basis, it provided Congress with the  requested information for the four quarters of the relevant fiscal years. In  addition, OMB stated that USDS is currently discussing with  congressional stakeholders whether providing quarterly briefings, instead  of reports, would address the quarterly reporting requirement. As noted in  our report, timely (i.e., quarterly) information would enhance  congressional and other stakeholders\u2019 oversight responsibilities.  Therefore, we maintain that our recommendation for reporting quarterly is  appropriate.", "Finally, OMB stated that it disagreed with our conclusion that the lack of  personal Federal CIO involvement in high priority IT programs had  resulted in inadequate oversight. While we state that the Federal CIO was  not directly involved in overseeing the high priority programs, we did not  conclude that this resulted in inadequate oversight. Rather, we stated that  the results of past CIO-led TechStat reviews suggest that more direct and  regular involvement of the Federal CIO would improve accountability and  achieve positive results for the federal government\u2019s investments. Thus,  we continue to believe that our recommendation to ensure that the  Federal CIO is directly involved in overseeing high priority programs is  appropriate.", "OMB also provided technical comments, which we have incorporated into  the report as appropriate.", "We are sending copies of this report to interested congressional  committees, the Director of the Office of Management and Budget, and  other interested parties. In addition, the report will be available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9286 or pownerd@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 I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sabine Paul (Assistant Director),  Scott Borre (Analyst in Charge), Nancy Glover, Lori Martinez, Bradley  Roach, and Marshall Williams, Jr. made key contributions to the report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-619", "url": "https://www.gao.gov/products/GAO-18-619", "title": "Advanced Fossil Energy: Information on DOE-Provided Funding for Research and Development Projects Started from Fiscal Years 2010 through 2017", "published_date": "2018-09-21T00:00:00", "released_date": "2018-10-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["One aspect of DOE's mission is to secure U.S. leadership in energy technologies. To that end, DOE funds R&D for energy projects, including for advanced fossil energy (innovative technologies for coal, natural gas, and oil). DOE provides funding for R&D projects, including large projects designed to demonstrate the commercial viability of technologies. Also, DOE is authorized to make loan guarantees to support certain energy projects through its Loan Guarantee Program, which is administered by its Loan Programs Office.", "GAO was asked to review DOE's funding for advanced fossil energy projects. This report describes DOE's funding for advanced fossil energy R&D projects started from fiscal years 2010 through 2017 and the types of projects and recipients that received funding, among other objectives. For purposes of this report, GAO used the term funding to mean obligations.", "GAO analyzed relevant laws, regulations, and guidance; DOE data on R&D funding for fiscal years 2010 through 2017; and DOE documents. GAO also interviewed DOE officials in the Office of Fossil Energy, the National Energy Technology Laboratory, and the Loan Programs Office."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy (DOE) provided $2.66 billion in funding, or obligations, for 794 research and development (R&D) projects started from fiscal years 2010 through 2017 to develop advanced fossil energy technologies. Such technologies include processes for converting coal into synthesis gas composed primarily of carbon monoxide and hydrogen, and recovering methane from gas hydrates. Of the $2.66 billion, DOE provided $1.12 billion in funding for 9 later-stage, large demonstration projects, which were to assess the readiness for commercial viability of carbon capture and storage (CCS) technologies. CCS involves capturing man-made carbon dioxide at its source and storing it permanently underground. DOE provided the remaining $1.54 billion in funding for 785 other projects in amounts that were relatively small\u2014over half were for less than $1 million.", "Six demonstration projects researched CCS technologies using coal, while three used other fuels. The nine demonstration projects received funding ranging from $13 million to $284 million. As shown in the figure, three projects implementing CCS technologies were active as of the end of fiscal year 2017. Also, DOE withdrew its support for four projects, and two projects were withdrawn by the recipients\u2014all before completion. These projects did not reach completion due to several factors, such as a lack of technical progress, or changes in the relative prices of coal and natural gas that made the projects economically unviable.", "Of the 785 other projects, about 89 percent involved R&D of coal technologies, such as coal gasification\u2014the conversion of carbon-containing material into synthesis gas. The other 11 percent of the 785 projects involved R&D of oil and gas technologies, such as the development of technologies to find, characterize, and recover methane from gas hydrates."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For more than 100 years, three fossil fuel sources\u2014coal, oil, and natural  gas\u2014have made up at least 80 percent of total U.S. energy consumption,  according to the Department of Energy\u2019s (DOE) Energy Information  Administration. Furthermore, in 2017, about 63 percent of U.S. electricity  generation was from fossil fuels\u2014including coal, oil, and natural gas\u2014 and fossil fuels made up about 95 percent of transportation fuels in the  United States. While fossil fuels are associated with some negative  environmental impacts\u2014such as carbon dioxide (CO at its source and storing it underground, converting carbon- containing material (i.e., coal) into synthesis gas composed primarily of  carbon monoxide and hydrogen, and recovering methane from gas  hydrates. Within DOE, the Office of Fossil Energy (FE) carries out  federal R&D programs on advanced fossil energy technologies, among  other things. FE\u2019s primary mission is to ensure reliable fossil energy  resources for clean, secure, and affordable energy while enhancing  environmental protection. In addition, the National Energy Technology  Laboratory (NETL)\u2014overseen by FE\u2014implements a broad spectrum of  energy and environmental R&D programs; has expertise in coal, oil, and  natural gas; and performs contract and project management, among  other things. In addition, the laboratory coordinates and oversees R&D  projects for FE.", "In addition to its R&D programs, DOE administers the Title XVII Loan  Guarantee Program (LGP) for innovative energy technologies through its  Loan Programs Office. One of the goals of the LGP is to encourage  commercial use in the United States of new or significantly improved  energy-related technologies. Title XVII of the Energy Policy Act of 2005  (EPAct), as amended, authorizes DOE to provide loan guarantees for  certain energy projects in several categories, including advanced fossil  energy technology. Under the LGP, to encourage such innovative energy  projects, the federal government agrees to reimburse lenders for the  guaranteed amount of loans if the borrowers default. If borrowers default  on the loans, the federal government can be exposed to substantial  financial risks.", "You asked us to review DOE\u2019s funding for advanced fossil energy  projects. This report describes 1) DOE\u2019s funding for advanced fossil  energy R&D projects that started from fiscal years 2010 through 2017 and  the types of projects and recipients that received funding, and 2) DOE\u2019s  loan guarantees, if any, for advanced fossil energy projects from fiscal  year 2006 through August 2018. For the purposes of this report, we use  the term funding to mean obligations.", "To address the first objective, we reviewed relevant laws, regulations, and  DOE guidance. We analyzed DOE advanced fossil energy R&D project  data for fiscal years 2010 through 2017. We focused our review on 794  advanced fossil energy R&D projects that received funding through NETL  because the 794 projects represent all of the advanced fossil energy R&D  projects in our scope started from fiscal years 2010 through 2017. We  used fiscal year 2010 as the start date because DOE officials told us that  DOE\u2019s current data management system came into use for the R&D  projects that started in fiscal year 2010. We used fiscal year 2017 as the  end date because that was the most recent complete year for which data  were available. DOE provided us with a spreadsheet that included key  project information\u2014such as the name of the recipient of the R&D funding  and the project start date\u2014as well as obligations data for each project  started during the period of our review by summing the obligations for the  project from each year. We reported on DOE\u2019s funding for these R&D  projects; DOE generally provided financial assistance for these projects  through grants or cooperative agreements. Because advanced fossil  energy R&D financial assistance for the Small Business Innovation  Research and Small Business Technology Transfer programs, as well as  for the DOE national laboratories, are not obligated through NETL, we  excluded these projects from our scope. To assess the reliability of the  funding data, as well as the specific project information for the 794 R&D  projects, we interviewed data specialists at DOE Headquarters, FE, and  NETL and reviewed DOE internal guidance for the maintenance of  agency data. We found the data to be sufficiently reliable for our  purposes. We also reviewed DOE websites and documentation, including  fact sheets, and interviewed officials from FE and NETL. To characterize the recipients of advanced fossil energy R&D funding, we coded each  recipient into one of three categories: university, industry or other. We  developed definitions for making the coding determination for each  recipient; more information on this process, including the full definitions, is  in appendix I.", "To describe the status of DOE\u2019s advanced fossil energy loan guarantees,  we reviewed relevant laws, regulations, and guidance, as well as past  GAO reports describing DOE\u2019s administration of the loan program. We  analyzed information that DOE provided on applications for loan  guarantees for advanced fossil energy projects under the LGP and other  related information for fiscal year 2006 through August 2018. We used  fiscal year 2006 as the start date because it was the first year that DOE  issued an advanced fossil energy project solicitation\u2014an announcement  of opportunities for loan guarantees for advanced fossil energy projects\u2014 and we used August 2018 as the end date in order to provide the most  up-to-date information possible. We also reviewed the advanced fossil  energy project solicitations issued by DOE during this timeframe. To  assess the reliability of the summary information, we interviewed LGP  staff who maintain the information for advanced fossil energy  applications, and reviewed DOE documentation. We found the data to be  sufficiently reliable for our purposes. In addition, we interviewed officials  from the Loan Programs Office who work on the LGP. For further details  on our scope and methodology, see appendix I.", "We conducted this performance audit from March 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides an overview of 1) DOE\u2019s administration of its  advanced fossil energy R&D program, and 2) DOE\u2019s Loan Guarantee  Program (LGP)."], "subsections": [{"section_title": "DOE\u2019s Administration of Its Advanced Fossil Energy R&D Projects", "paragraphs": ["Within DOE, FE carries out DOE\u2019s program for fossil energy R&D, which  includes federal research, development, and demonstration efforts on  advanced power generation; power plant efficiency; water management;  and carbon capture and storage (CCS) technologies. CCS is a process  that involves capturing man-made CO at its source and storing it  permanently underground. The program for fossil energy R&D also  includes the development of technological solutions for the development  of U.S. unconventional oil and gas domestic resources, such as from  shale formations. FE also oversees the operations, infrastructure, and  R&D at NETL, among other things. NETL officials told us that NETL has  dual roles: it serves as project manager for advanced fossil energy R&D  projects that receive federal assistance, and, as a DOE national  laboratory, it also conducts applied research. FE and NETL collaborate  on the selection and administration of the awards for advanced fossil  energy R&D projects, according to DOE officials.", "DOE\u2019s efforts to administer its program for advanced fossil energy R&D  take place across a spectrum of activities, including providing financial  assistance for large demonstration projects. In the 1980s and early  1990s, DOE\u2019s fossil energy R&D program primarily focused on reducing  emissions of harmful pollutants from coal-fired power plants, particularly  sulfur dioxide and nitrogen oxide. For example, DOE began its large  demonstration projects of advanced coal technologies in the mid-1980s;  this work focused on R&D to mitigate acid rain and to reduce the  pollutants released from coal combustion. More recently, DOE has  provided funding for advanced fossil energy R&D to reduce COemissions by developing beneficial uses for COfrom coal-fired power  plants, and to improve methods for CCS, among other things. As we have  previously reported, CCS is a key technology that shows potential for  reducing CO Specifically, CCS  technologies separate and capture CO from other gases produced when  combusting or gasifying coal, compress it, then transport it to  underground geologic formations such as saline aquifers\u2014porous rock  filled with brine\u2014or oil and natural gas reservoirs, where the captured  CO in large quantities: the Boundary Dam plant in  Canada and the Petra Nova plant in Texas. Both plants retrofitted CCS  technology to existing plants. A third fossil-fueled, electricity-generating  operation, the Kemper County Energy Facility in Mississippi, was  scheduled to begin CCS operations in 2016, but cost overruns and delays  in construction and operations led to the suspension of the plant\u2019s CCS  component in June 2017. Each of these power plants using CCS systems  may be described as a first-of-its-kind venture, using technologies  developed at a pilot scale ramped up to commercial scale. It is not  unusual for projects in the demonstration phase of the R&D process to  experience higher-than-anticipated costs, delays, and other challenges,  according to a 2017 Congressional Research Service report.", "DOE generally uses announcements of opportunities for federal financial  assistance to competitively solicit potential applicants of advanced fossil  energy R&D projects. According to DOE officials, the department sets  priorities for its advanced fossil energy R&D funding each year based in  part on the amount appropriated for FE R&D and on FE\u2019s R&D plans, as  well as any direction that Congress may have specified for certain types  of technology R&D. DOE\u2019s advanced fossil energy R&D projects typically  lasted for multiple years.", "DOE sets milestones for technical progress for each year of a project to  ensure that funding recipients accomplish a specific R&D objective or set  of objectives, according to DOE officials. The recipient may submit some form of report on its progress on the R&D as well as accomplishments to  DOE for review and approval to continue. DOE officials told us they  review the progress of the recipient at each phase and the project  continuation is subject to the recipient\u2019s technical progress, the recipient\u2019s  compliance with all of the other terms\u2014including any financial terms\u2014of  the agreement, and the availability of DOE\u2019s funds, based on  congressional appropriations."], "subsections": []}, {"section_title": "DOE\u2019s Loan Guarantee Program", "paragraphs": ["The LGP was originally designed to address a fundamental impediment  to innovative and advanced energy projects: securing enough affordable  financing to survive the period between developing innovative  technologies and commercializing them. As we have previously reported,  these projects have risks, such as technology risk\u2014the risk that the new  technology will not perform as expected\u2014and execution risk\u2014the risk  that the borrower or project will not perform as expected. Because the  risks that commercial lenders must assume to support new technologies  can put the cost of private financing out of reach, companies may not be  able to commercialize innovative technologies without the federal  government\u2019s financial support.", "Federal loan guarantee programs such as the LGP can help companies  obtain financing because the federal government agrees to reimburse the  lender for the guaranteed amount if a borrower defaults. Section 1703 of  EPAct authorizes DOE to provide loan guarantees for projects that avoid,  reduce, or sequester air pollutants or man-made emissions of  greenhouse gases and employ new or significantly improved technologies  as compared to commercial technologies in service in the United States  at the time the guarantee is issued. EPAct describes several categories  of projects that are eligible for guarantees under the program, including,  among others, renewable energy systems, efficient end-use energy  technologies, advanced nuclear facilities, advanced fossil energy  technology, and CCS technologies. DOE\u2019s Loan Programs Office, which  administers the LGP, had issued three loan guarantees under Section  1703 supporting nuclear technologies as of August 2018, but none  supporting advanced fossil energy or any other technologies."], "subsections": []}]}, {"section_title": "DOE Provided $2.66 Billion in Funding for 794 Advanced Fossil Energy R&D Projects Started from Fiscal Years 2010 through 2017 DOE Provided $1.12 Billion in Funding for Nine Large Demonstration Projects Started from Fiscal Years 2010 through 2017", "paragraphs": ["DOE provided $2.66 billion in funding for 794 advanced fossil energy  R&D projects started from fiscal years 2010 through 2017. These 794  projects included 9 later-stage large demonstration projects and 785 other  advanced fossil energy R&D projects. DOE provided $1.12 billion in  funding to nine large projects aimed at demonstrating the commercial  viability of CCS technologies. DOE provided $1.54 billion in funding to  785 other R&D projects for both coal and oil and gas technologies, mostly  to universities and industry, located in 46 states and the District of  Columbia.", "For nine large demonstration projects started from fiscal years 2010  through 2017, DOE provided $1.12 billion in funding. These projects  received that funding from appropriations from the American Recovery  and Reinvestment Act of 2009 (Recovery Act) and supported efforts to  reduce the financial and technical risks of commercial CCS, according to  a 2017 report by the Congressional Research Service. Six  demonstration projects researched CCS technologies using coal, while  three used other fuels, namely methane, ethanol, and petcoke.  Recipients were generally required to provide a certain percentage of the  cost of each R&D project, called cost share. Specifically, to receive  funding, recipients of funding for the nine large demonstration projects  agreed to pay at least $610 million in cost share for the demonstration  projects. Three of those demonstration projects remained active at the  end of fiscal year 2017. Four projects had their support withdrawn by  DOE, and two were withdrawn by the recipient. These projects ended due  to several factors such as a lack of technical progress, the closure of the  Recovery Act appropriations account on September 30, 2015, and  changing economic conditions\u2014such as decreased natural gas prices  which resulted in changes in the relative prices of coal and natural gas.", "The nine large demonstration projects represented over 40 percent of the  $2.66 billion in advanced fossil energy R&D funding for the 794 projects  (see fig. 1).", "Of the $1.12 billion in funding for the advanced fossil energy  demonstration projects, DOE provided $616 million in funding for three  large demonstration projects that started in fiscal year 2010 and that  remained active as of the end of fiscal year 2017.", "Petra Nova Parish Holdings of Texas has a demonstration project  underway that has retrofitted an existing coal-fired power plant in  Texas with post-combustion carbon capture technology, according  to DOE documentation. The objective of this project is to  demonstrate the ability to capture 90 percent of the CO According to DOE documentation, DOE\u2019s  involvement with the project is scheduled to conclude in  December 2019. The Petra Nova project captured and stored its  first 1 million metric tons of CO in November 2017, according to  DOE officials.", "Archer Daniel Midlands of Illinois had a demonstration project  underway to capture CO per year  using dehydration and compression processes and sequester it in  the Mt. Simon Sandstone formation (a saline reservoir) in Illinois.  DOE provided $141 million in funding for the project from fiscal  years 2010 through 2017. DOE\u2019s involvement with the project is  scheduled to conclude in September 2019, according to DOE  documentation. During calendar year 2017, the project captured  and stored over 500,000 metric tons of CO  emitted from two large steam-methane reformers, which produce  hydrogen from methane, for its demonstration project in Texas.  The captured gas is compressed and sent via pipeline to oil fields  in eastern Texas to be used for enhanced oil recovery and thereby  sequestered, according to DOE documentation. DOE provided  $284 million in funding for the project from fiscal years 2010  through 2017. DOE\u2019s involvement under this demonstration  project\u2019s award concluded the last day of fiscal year 2017."], "subsections": [{"section_title": "DOE Provided $1.54 Billion in Funding for 785 Other R&D Projects Started from Fiscal Years 2010 through 2017 to Support Advanced Fossil Energy", "paragraphs": ["DOE provided $1.54 billion in funding for 785 other advanced fossil  energy R&D projects started from fiscal year 2010 through 2017. For  these 785 R&D projects, DOE provided: on average, $2.0 million per project; a median of $0.8 million per project;  less than $5 million to 91.8 percent (721) of the 785 projects; and  less than $1 million to 58.1 percent (456) of the projects.", "For projects started from fiscal years 2010 through 2017, total funding for  projects by fiscal year started ranged from less than $100 million to more  than $300 million (see fig. 2).", "As noted earlier, recipients of DOE\u2019s R&D funding were generally  required to provide cost share to support the cost of each R&D project.  For 661 of the 785 projects, the initially agreed-upon dollar amount to be  covered by recipients was $617 million in cost-share. Recipients did not  provide a cost-share for the remaining 124 of the 785 projects, which  were predominantly grants without cost share requirements, according to  DOE officials.", "According to DOE data, DOE provided the largest amount of funding for  projects started in 2010 because DOE received a supplemental  appropriation for fossil energy R&D through the Recovery Act. DOE  provided funding for 72 of the coal technologies research projects\u2014 totaling $237 million\u2014using appropriations from the Recovery Act,  according to DOE data.", "Of the 785 R&D projects for which DOE provided funding, most advanced  fossil energy projects researched coal technologies rather than oil and  gas, and recipients of the funding were generally universities and industry  groups that were distributed across the country."], "subsections": [{"section_title": "Most of DOE\u2019s 785 Advanced Fossil Energy Projects Researched Coal Technologies", "paragraphs": ["Of the 785 projects, 698 (about 89 percent) involved coal technologies,  receiving $1.40 billion (about 91 percent) of the $1.54 billion in funding  DOE provided for the projects. The remaining projects and funding  supported R&D for oil and gas technologies, according to DOE\u2019s  categorization of the projects by fuel type (see table 1).", "Within each fuel type, projects researched various technology types, such  as R&D on coal gasification systems and the mitigation of methane  emissions from natural gas infrastructure. The funding for the 785 R&D  projects ranged from $5,000 for a research conference (oil and gas) to  $125 million for a research facility focused on next-generation CCS  technologies (coal). so that it does not  change phases, but rather undergoes drastic density changes over small ranges of  temperature and pressure. Such cycles have shown the potential for increased heat-to- electricity conversion efficiencies, high power density, and simplicity of operation  compared to existing steam-based power cycles. $5,000 for a research conference to $29 million for the University of  Texas at Austin\u2019s active project on the deep-water characterization and  scientific assessment of gas hydrates. Specifically, DOE identified the  following four categories as oil and gas-related research areas:", "Gas Hydrates: The development of technologies to find,  characterize, and recover methane from gas hydrates through  field testing, numerical simulation, and laboratory experimentation,  among other things. For example, DOE provided the University of  California-San Diego $350,000 in funding for a 3-year active  project to characterize the baselines and changes in gas hydrate  systems.", "Natural Gas Infrastructure: The monitoring of the U.S. natural  gas pipeline network, which includes more than 300,000 miles of  interstate and intrastate transmission pipelines. For example, DOE  provided the University of Pittsburgh $1.2 million in funding for a  3-year active project on multi-functional fiber sensors for pipeline  monitoring and methane detections.", "Onshore Unconventional Resources: The production of  hydrocarbons\u2015primarily natural gas\u2015from shale formations. For  example, DOE provided the Ground Water Protection Council, of  Oklahoma, $13 million for an 8-year project for data management  and regulatory approaches related to hydraulic fracturing and  geologic sequestration of CO The R&D projects in this area included research on geologic  uncertainty prediction of oil and gas, and improvement of subsea systems  reliability through automation and advanced technology."], "subsections": []}, {"section_title": "Recipients Were Generally Universities and Industry Groups That Were Distributed Across the Country", "paragraphs": ["The recipients of the funding for the 785 advanced fossil energy R&D  projects were mostly universities and industry groups that were located in  47 states and the District of Columbia. Of these recipients, approximately  51 percent were universities; 43 percent were industry groups; and 5  percent were other entities, including other federal agencies, such as the  U.S. Geological Survey (see table 2).", "While university recipients received funding for a majority of projects,  industry recipients received a majority of the funding (see table 3).", "Recipients were located in 47 states and the District of Columbia. The  three states with the highest number of projects with recipients located in  their states were Texas (100), California (61), and Ohio (53). The three  states where recipients received the most funding were Texas (about  $169 million), Alabama (about $161 million), and California (about $152  million) (see fig. 3)."], "subsections": []}]}]}, {"section_title": "DOE Made No Loan Guarantees for Advanced Fossil Energy from Fiscal Year 2006 through August 2018", "paragraphs": ["Although DOE issued three solicitations for applications for advanced  fossil energy loan guarantees\u2014most recently in fiscal year 2014, for up to  $8 billion in loan guarantees\u2014DOE had not guaranteed any loans for  advanced fossil energy as of August 2018. Specifically, the 2006 and  2008 advanced fossil energy solicitations were for projects that involved  coal-based power generation and that would incorporate CCS, coal  gasification, or other beneficial uses of carbon, among other things.  However, neither solicitation resulted in any loan guarantees, in part  because during this timeframe of the late 2000s, natural gas prices fell,  causing a shift in the market, which led to such coal-related projects no  longer being economically competitive, according to DOE officials.  According to the fiscal year 2014 solicitation, applicants could use any  fossil fuel\u2014including coal, oil, or natural gas\u2014that would reduce, avoid,  or sequester greenhouse gases.", "In response to the 2014 advanced fossil energy solicitation, DOE officials  told us that DOE had received 19 applications total. According to DOE  officials:", "Five fossil energy applicants were actively moving through the  process of review as of August 2018. For example, in January  2018, one applicant issued a press release stating that it was  pursuing a $1.9 billion loan guarantee to support the development  of infrastructure for a proposed underground storage facility for  natural gas liquids and intermediates.", "Nine fossil energy applicants had been idle or not following up  with the Loan Programs Office.", "Three applicants did not meet certain eligibility requirements.", "Two companies withdrew their applications\u2014one in 2014, and one  in 2018.", "Of the five advanced fossil energy applicants actively in the process of  DOE review, DOE offered a conditional commitment to guarantee up to  $2 billion in loans to one applicant\u2014Lake Charles Methanol\u2014in  December 2016. As we have previously reported, a conditional  commitment is one where DOE commits to issue a loan guarantee if the  applicant satisfies specific requirements. According to information on  the DOE website, the Lake Charles Methanol plant in Louisiana would  produce methanol from the gasification of petcoke, and capture and  transport the CO to Texas for enhanced oil recovery. According to DOE  documentation, the Lake Charles project planned to leverage the work  and experience gained from the earlier DOE demonstration project by  Leucadia Energy."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOE for review and comment. DOE  provided technical comments, which we incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Energy, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we describe 1) the Department of Energy\u2019s (DOE) funding  of advanced fossil energy research and development (R&D) projects  started from fiscal years 2010 through 2017 and the types of projects and  recipients that received funding, and 2) DOE\u2019s loan guarantees, if any, for  advanced fossil energy projects from fiscal year 2006 through August  2018. You asked us to review DOE\u2019s funding for advanced fossil energy  projects.", "To address the first objective, we reviewed relevant laws, regulations, and  DOE guidance. We analyzed DOE advanced fossil energy R&D project  data for fiscal years 2010 through 2017. We focused our review on  advanced fossil energy R&D projects that received funding through the  Office of Fossil Energy\u2019s (FE) National Energy Technology Laboratory  (NETL) because the 794 projects represent all of the advanced fossil  energy R&D projects in our scope started from fiscal years 2010 through  2017. We used fiscal year 2010 as the start date because DOE officials  told us that DOE\u2019s current data management system came into use for  the R&D projects that started in fiscal year 2010. We used fiscal year  2017 as the end date because that was the most recent complete year for  which data were available. DOE provided us with a spreadsheet that  included key project information\u2014such as the name of the recipient of the  R&D funding and the project start date\u2014as well as obligations data for  each project started for the period of our review (fiscal years 2010  through 2017), by the fiscal year during which the project was started, by  summing the obligations for the project from each year. We reported on  DOE\u2019s funding for these R&D projects; DOE generally provided financial  assistance for these projects through grants or cooperative agreements. In addition,  NETL\u2019s in-house R&D work was outside of the scope of our review. To  assess the reliability of the funding data, as well as the specific project  information for the 794 R&D projects, we interviewed data specialists at  DOE Headquarters, FE, and NETL and reviewed DOE internal guidance  for the maintenance of agency data. We found the data to be sufficiently  reliable for our purposes. We also reviewed DOE websites and  documentation, including fact sheets, and interviewed officials from FE  and NETL.", "To characterize the kinds of groups that received advanced fossil energy  R&D funding, we developed the following definitions for coding each  recipient:", "University: any institution of higher education, such as a public or  non-profit private college, junior college, or university.", "Federal financial assistance means assistance that non-federal entities receive or  administer in the form of grants, property, cooperative agreements, food commodities,  direct appropriations, or other assistance, and can also include loans, loan guarantees,  interest subsidies, and insurance, depending on the context, but does not include amounts  received as reimbursement for services rendered to individuals in accordance with OMB- issued guidance. 2 C.F.R. \u00a7 200.40. See also 31 U.S.C. \u00a7 7501(5). A grant agreement is  generally defined as a legal instrument of financial assistance between a federal awarding  agency and a non-federal entity that is used to enter into a relationship the principal  purpose of which is to transfer anything of value from the federal awarding agency to the  non-federal entity to carry out a public purpose authorized by law, and not to acquire  property or services for the federal awarding agency\u2019s direct benefit or use. 2 C.F.R. \u00a7  200.51. A cooperative agreement is distinguished from a grant in that it provides for  substantial involvement between the federal awarding agency and the non-federal entity in  carrying out the activity contemplated by the federal award. 2 C.F.R. \u00a7 200.24. For  purposes of our report, we use the term awards to refer to both grants and cooperative  agreements. organized primarily for profit. Industry includes some organizations  that were founded as non-profit corporations but call themselves  \u201ccompanies\u201d and/or describe \u201cserving clients.\u201d", "Other: any entity not associated with a university or industry.", "Other includes groups such as other federal government  agencies, as well as non-profit corporations and other entities  which we could not identify conclusively as either industry or  universities.", "We used these three categories, and their definitions, to guide us in the  coding process. After developing these definitions, three analysts  independently coded each recipient as a university, industry, or other. Our  method was to examine the identifying information on each recipient\u2019s  website and decide which category best described the entity. We also  had an independent analyst check the coding category that we had  assigned to each recipient and verify that we had made a reasonable  coding decision.", "To describe the status of DOE\u2019s advanced fossil energy loan guarantees,  we reviewed relevant laws, regulations, and guidance, as well as past  GAO reports describing DOE\u2019s administration of the loan program. We  also reviewed summary information that DOE provided on applications for  loan guarantees for advanced fossil energy projects. We analyzed  information that DOE provided on applications for loan guarantees for  advanced fossil energy projects under the Loan Guarantee Program  (LGP) and other related information for fiscal year 2006 through August  2018. We used fiscal year 2006 as the start date because it was the first  year that DOE issued an advanced fossil energy project solicitation\u2014an  announcement of opportunities for loan guarantees for advanced fossil  energy projects\u2014and we used August 2018 as the end date in order to  provide the most up-to-date information as possible. We also reviewed  the advanced fossil energy project solicitations DOE issued during this  timeframe. To assess the reliability of the summary information, we  interviewed LGP staff who maintain the information for the advanced  fossil energy applications, and reviewed DOE documentation. We found  the data to be sufficiently reliable for our purposes. In addition, we  interviewed officials from the Loan Programs Office who work on the  LGP.", "We conducted this performance audit from March 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Karla Springer (Assistant  Director), Rebecca Makar (Analyst-in-Charge), TC Corless, Cindy Gilbert,  Carol Henn, Kirk Menard, Patricia Moye, Sheryl Stein, and Sara Sullivan  made key contributions to this report. Also contributing to this report were  Carolyn Blocker, Marcia Carlsen, Nirmal Chaudhary, Jaci Evans, Ryan  Gottschall, Keesha Luebke, and John Yee."], "subsections": []}]}], "fastfact": ["Fossil fuels\u2014coal, oil, and natural gas\u2014will likely continue to be the major source of U.S. energy. The Department of Energy funds research and development (R&D) for innovative fossil fuel technologies.", "In the period we reviewed, the department provided $2.66 billion for 794 such projects. Among other things, we found:", "42% of the funding ($1.12 billion) went to 9 later-stage demonstration projects on carbon capture and storage technologies, which could reduce greenhouse gas emissions. Of the 9 projects, 6 used coal and 3 used other fuels.", "Most of the rest of the funding ($1.40 billion) went to 698 other coal R&D projects."]}
{"id": "GAO-18-262", "url": "https://www.gao.gov/products/GAO-18-262", "title": "NASA Contractor Whistleblowers: Steps Taken to Implement Program but Improvements to Timeliness and Guidance Needed", "published_date": "2018-03-08T00:00:00", "released_date": "2018-04-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NASA obligated over $18 billion in contracts and more than $1 billion in grants in fiscal year 2016, and it relies on a significant number of contractor and grantee employees to accomplish its work. These employees are legally protected from reprisal\u2014such as demotion or firing\u2014for whistleblowing.", "GAO was asked to review NASA's whistleblower reprisal protections for contractor and grantee employees. This report addresses, among other things, the extent to which (1) NASA's Inspector General investigated contractor and grantee whistleblower reprisal complaints; (2) NASA's Administrator reviewed reprisal complaints in a timely manner; and (3) NASA communicated the applicable whistleblower reprisal protections to contractors. GAO reviewed NASA and its Inspector General's policies and guidance; reviewed a generalizable sample of 100 contracts from all NASA centers with contracts in fiscal year 2016; and interviewed relevant officials and contractors, grantees, and advocacy groups."]}, {"section_title": "What GAO Found", "paragraphs": ["From 2008 through June 2017, National Aeronautics and Space Administration (NASA) contractor and grantee employees submitted 48 reprisal complaints such as alleged firing or demotion for reporting fraud, waste, or abuse within the government. NASA's Inspector General addressed all 48 complaints, completed investigations for 6 of those complaints, and forwarded investigation reports to the NASA Administrator, who is responsible for making a final determination of whether reprisal occurred. The Administrator determined that none of the complaints qualified for protection under the law.", "Further, in 5 of the 6 cases forwarded by the OIG, the Administrator was required by statute to make a final determination of reprisal within 30 days. GAO found that the Administrator did not meet this required time frame for all 5 cases and had no documented response for one of them (see figure for all 5 cases). According to officials from NASA's Office of General Counsel, each case must be handled on a case by case basis to ensure due process and 30 days is insufficient time to issue an order of final determination of reprisal. However, in order to ensure that whistleblower reprisal complaints are handled within required timeframes, NASA would have to monitor and evaluate its processes for making final determinations of reprisal, but it has not yet taken this step. Consequently, NASA does not know what changes may be needed to ensure that it is meeting the statutory 30-day requirement.", "NASA communicates whistleblower protections to contractors through inclusion of a required contract clause. For example, GAO found that almost all\u201498 percent\u2014of contracts would be expected to include a whistleblower clause as required by statute. However, certain elements of NASA whistleblower protection guidance have contributed to a different understanding of reprisal protections among officials at headquarters, a NASA center, and the Inspector General. For example, a July 2014 procurement notice and contract clause language resulted in different interpretations about when the protections apply. Federal internal control standards require that an entity should communicate necessary quality information internally to meet the objectives of its mission. Without additional clarity in its guidance on when the protections apply, NASA centers and procurement officials will be at risk of inconsistent implementation of the law."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to NASA, including evaluating the process for reviewing reprisal complaints to ensure it is meeting the required timeframe and clarifying guidance on when protections apply to contractor employees. NASA agreed with the recommendations and plans to develop a documented process to ensure it reviews reprisal complaints in a timely manner and clarify guidance as appropriate, among other things."]}], "report": [{"section_title": "Letter", "paragraphs": ["When contractor and grantee employees report fraud, waste, abuse, and  mismanagement, agencies should ensure they are prepared to fully  investigate reprisal complaints\u2014such as demotion or firing\u2014for  whistleblowing. Agencies also need to make a formal determination on  whether reprisal occurred. Employees of contractors and grantees  conduct a significant amount of work for the National Aeronautics and  Space Administration (NASA). Given the sometimes enormous safety  risks involved in space exploration, having an established process in  place to investigate reprisal claims helps ensure NASA is able to act  quickly whenever a whistleblower reports experiencing reprisal. In fiscal  year 2016, NASA obligated over $18 billion in contracts to support  acquisitions such as satellites and the construction of a solar plant; and  more than $1 billion in grants for things such as science, technology,  engineering, and math education initiatives and a student stipend for  space-related research.", "Although some protections for contractor employee whistleblowers have  existed for years, section 2409 of Title 10, U.S. code (the statute), was  amended in 2008, 2013, and 2014 to give contractor and grantee  employee whistleblowers at NASA enhanced protection from reprisal. The  statute establishes that an employee of a contractor, subcontractor,  grantee, subgrantee, or personal services contractor may not be subject  to reprisal for disclosing certain whistleblower complaints to certain  authorities.", "You asked us to evaluate NASA\u2019s implementation of whistleblower  reprisal protections. This report addresses the extent to which (1) NASA\u2019s  Inspector General has investigated contractor and grantee whistleblower  reprisal complaints, including meeting statutory timeliness requirements,  and developed guidance for the investigations; (2) NASA\u2019s Administrator  meets statutory timeliness requirements to review reprisal complaints; (3)  NASA communicated externally and internally about the applicable  contractor whistleblower reprisal protections; and (4) NASA  communicated with grantees the applicable whistleblower reprisal  protections.", "To assess the extent to which NASA\u2019s Office of Inspector General (OIG)  investigated reprisal complaints and developed guidance for the  investigations, and the NASA Administrator met timeliness requirements,  we obtained NASA guidance and relevant documentation. We conducted  interviews with agency officials, including officials from the OIG and the  Office of General Counsel on behalf of the Administrator about their  processes and practices to conduct duties outlined in the statute. We  reviewed data provided by the NASA OIG on the total number of  whistleblower allegations of fraud, waste, abuse, misconduct, or  mismanagement and reprisal complaints; the number of contractor and  grantee employee whistleblower allegations and reprisal complaints; and  the outcomes or decisions reached by the OIG of a reprisal complaint  from fiscal years 2008, the year the enhanced protections were put in  place, through 2017. We assessed the reliability of these data by asking  the NASA OIG to describe the source(s) of information used and steps  taken to identify the numbers provided, and limitations and caveats that  would affect our use of these data\u2014such as the data being self-reported  by the OIG and Administrator. Based on these steps, we determined the  data to be sufficient for our purposes of determining the extent to which  the complaints were addressed.", "To assess the extent to which NASA communicates whistleblower  protections externally, to contractors and grantees, we identified new  fiscal year 2016 contract awards over $300,000 as reported in the  Federal Procurement Data System-Next Generation (FPDS-NG). We  selected contracts that were not only over the simplified acquisition  threshold (generally $150,000), but were over $300,000 to account for  possible exceptions and to ensure that we were sampling contracts that  would be required to include a whistleblower reprisal clause. To  determine whether the required NASA Federal Acquisition Regulation  (FAR) Supplement clause 1852.203-71 (NFS clause) or other potentially  applicable clauses were included in NASA contracts, we selected for  review a generalizable random sample of 100 contracts from a total of  270 contracts. The sample is projectable to NASA fiscal year 2016  contracts; however, making a legal determination of compliance would  require a case by case review, which we did not do for contracts not in  our sample. The 100 contracts consist of a random selection of 10  contracts from each NASA center that awarded new contracts in fiscal  year 2016; for those centers that did not have 10 contracts, we selected  all contracts. The remaining contracts were pulled from NASA Shared  Services Center (NSSC), because that center does the most contracting.  We estimated the percent of NASA contracts expected to include  whistleblower clause(s) as the weighted average of results from the 10  contracting centers. Additionally, we selected a non-generalizable random  sample of 10 grants awarded by NASA in fiscal year 2016 for review to  determine whether NASA grants included a mechanism notifying grantee  employees of their whistleblower rights and reprisal protections. For both  the sample of contracts and grants, we conducted data reliability checks  by comparing the data to the documentation and concluded the data were  sufficiently reliable for our purposes to determine if relevant whistleblower  reprisal protections information was communicated externally.", "To assess internal communication about whistleblower protections, we  reviewed relevant documentation, including guidance, and conducted  interviews with procurement officials, NASA Headquarters, NASA\u2019s Office  of General Counsel, and Chief Counsels at Johnson Space Center (JSC),  NSSC, and Marshall Space Flight Center. We also conducted interviews  with contractors, grantees, and whistleblower advocacy groups. For  additional information on our scope and methodology, see appendix I.", "We conducted this performance audit from March 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["and individuals made by an employee who  believes he or she has witnessed certain  wrongdoing, such as gross mismanagement  Reprisal Complaint: Following a disclosure,  a complaint that an employee has  experienced reprisal as a result of the  disclosure, such as demotion or discharge.", "For contractor and grantee employees at NASA, whistleblower  protections have changed over time. For example, by statute, in 2007,  NASA contractor employees were protected against reprisal if they  disclosed information relating to a substantial violation of law related to a  contract. However, in 2008, amendments to the whistleblower statute  provided protections only to those contractor employees at NASA who  reported \u201ca substantial and specific danger to public health or safety.\u201d In  2013, the statute was amended again to include disclosures of gross  mismanagement of a NASA contract or grant, a gross waste of  Administration funds, and abuse of authority relating to a NASA contract  or grant, or a violation of law, rule, or regulation related to a NASA  contract or grant. In 2014, the statute was further amended with the only  significant change to protect grantee and subgrantee employees. See  table 1 for detailed description of the 2008, 2013, and 2014 amendments  of the statute."], "subsections": [{"section_title": "Requirements under the Current Statute", "paragraphs": ["Under the current statute, the NASA Office of Inspector General and  Administrator have different responsibilities. Since the 2014 amendments,  contractor, subcontractor, grantee, and subgrantee employees are  protected from reprisal if they disclose to certain persons or bodies  information they reasonably believe is evidence of gross mismanagement  of a federal contract or grant, a gross waste of federal funds, an abuse of  authority relating to a federal contract or grant, a substantial and specific  danger to public health or safety, or a violation of law, rule, or regulation  related to a federal contract or grant. Additionally, contractor employees  may make whistleblower disclosures to several entities, including a  management official at the contractor. Figure 1 depicts the disclosure  process and the complaint process.", "NASA OIG Role: Upon receiving a reprisal complaint, the OIG must  evaluate whether a reprisal complaint is covered under the statute. In  addition to the steps described in figure 1 for investigating complaints,  there are instances when the OIG does not investigate. The OIG might  not investigate for a variety of reasons, such as in cases where the  complaint is already under investigation by another authority such as  another OIG, or otherwise does not allege a violation of the law, such as if  whistleblower disclosure does not constitute gross fraud, waste, abuse or  mismanagement. If the OIG determines the case is not covered under the  statute, it may then notify the complainant that no further action will be  taken on the reprisal complaint.", "Administrator Role: Upon receipt of the NASA OIG investigation report,  the NASA Administrator (the head of agency) has 30 days to determine  whether the contractor made a prohibited reprisal and issue an order  denying or granting relief. According to NASA officials, during the 30-day  period after the agency head receives the OIG report, the agency practice  has been to ask the OIG for any additional investigative work and also  afford the complainant and the contractor an opportunity to submit a  written response to the OIG report. Any person adversely affected or  aggrieved by the administrator\u2019s order may, within 60 days of issuance,  obtain a limited review by the U.S. circuit court of appeals.", "Agency Procurement Official Role: Under the NFS regulations, NASA  contracting officers are also responsible for inserting an NFS  whistleblower clause into applicable contracts that requires contractors  communicate to their employees their rights under the statute. The NFS  whistleblower clause lays out the responsibility of contractors to  communicate to their employees their rights under the statute, in writing  and in their predominant native language. All contracts over the simplified  acquisition threshold awarded on or after July 29, 2014, require a  whistleblower clause. The statute also requires NASA to make best  efforts to include a clause providing for the applicability of the 2013  amendments in contracts awarded before July 1, 2013\u2014the effective date  of the 2013 amendments\u2014that have undergone major contract  modifications. The terms \u201cbest efforts\u201d and \u201cmajor modifications\u201d are not  defined in the statute. Unlike provisions affecting contractors, the statute  does not require NASA to ensure that grantees or subgrantees notify  employees in writing of their rights under the statute."], "subsections": []}]}, {"section_title": "NASA OIG Investigated Reprisal Complaints within Required Time Frames and Recently Updated Incomplete Guidance", "paragraphs": ["From 2008 to June 2017, NASA OIG addressed whistleblower reprisal  complaints within required time frames, according to OIG officials. At the  time we initiated this review, the OIG\u2019s guidance for handling reprisal  complaints had been updated to reflect most statutory changes; however,  it did not include guidance regarding subgrantees. During the course of  our review, the OIG updated the investigation guidance in October 2017  to include subgrantee employees."], "subsections": [{"section_title": "NASA OIG Handled Reprisal Complaint Investigations within Required Time Frames", "paragraphs": ["NASA OIG completed 6 reprisal investigations within required time  frames. The OIG received 277 whistleblower disclosures leading to 48  reprisal complaints from 2008 through June 2017, and handled those  complaints within required time frames, according OIG officials. For the 6  of those reprisal complaints that were investigated, the OIG used  extensions. OIG officials said that extensions may be necessary for a  number of reasons, including that the complaint may be highly technical  in nature, requiring the OIG to find subject matter expertise to better  understand the nature of the whistleblower complaint and whether it  constitutes gross fraud, waste, abuse, or mismanagement.", "When the OIG receives a reprisal complaint, complainants are asked to  fill out a whistleblower complaint form and an investigation is initiated.  See figure 2 below for the process by which the OIG conducts its  investigations.", "In addition, there were 5 complaints currently under investigation and 37  complaints during this time frame that the NASA OIG did not investigate  because the OIG deemed them to be frivolous, determined they were not  covered under the statute, or the complaint was handled in another  forum, such as the court system or by another OIG. Complaints were  deemed frivolous for several reasons, including if the complainant did not  want to disclose his or her identity and proceed with the claim, or the  whistleblower disclosure happened after the reprisal. OIG officials told us  that when cases are disposed of without an investigation, the OIG notifies  the complainant of the decision in writing. Figure 3 shows the disposition  of the 48 reprisal complaints received from 2008 through June 2017."], "subsections": []}, {"section_title": "The OIG Updated Investigation Guidance", "paragraphs": ["The OIG has developed guidance for conducting investigations, which  includes a chapter on contractor and grantee whistleblower reprisal  complaints. Although most changes to the statute (such as to whom  reprisal may be reported) had been incorporated into the investigation  guidance, the initial guidance provided to us by the OIG did not include a  2014 statutory requirement to extend protections to subgrantees. During  the course of our review, in October 2017, the OIG updated its guidance  for investigating reprisal complaints to include subgrantee employees.  Because subgrantees are now protected by statute, including them in the  investigation policy will help ensure they are consistently extended  protections through OIG investigations.", "In addition to its guidance, OIG officials said they have developed training  specific to whistleblower investigations for new investigators, conducted  internal training for investigators, and external training for contractor  employees. Additionally, the OIG Investigators\u2019 Central Field Office  conducts periodic training for investigators that includes any updates to  whistleblower protections. With regard to external training, the OIG  officials said that investigators at some of the NASA centers\u2014with the  largest contract activity\u2014have conducted on-site training for some  contractors. This training is conducted as part of general fraud awareness  training."], "subsections": []}]}, {"section_title": "NASA Administrator Did Not Meet the Required Time Frames for Reprisal Complaint Review", "paragraphs": ["The Administrator failed to meet the required review time frame and issue  an order of final determination of reprisal for 5 completed investigations  received from the OIG from 2008 through June 2017. In all 5 cases, the  Administrator took longer than the 30 days to issue an order. In one of  those 5 complaints, an official from the Office of General Counsel was  unable to provide us with the issued order and said he did not believe one  was completed, and could not provide an explanation as to why an order  was not completed. For the 5 reprisal complaints, figure 4 shows the  number of days from when the Administrator received an OIG report of  findings to the time when an order of final determination was  documented.", "In addition to the 5 complaints mentioned above, there was another OIG  investigation of a reprisal complaint that did not require response from the  administrator within 30 days, but was finalized within our review time  frame, for a total of 6 completed OIG investigations of reprisal complaints.  For 3 of the 6 complaints, the OIG found that reprisal had occurred and  reported those findings to the administrator for final determination of  reprisal. The Administrator determined that none of these 3 complaints  qualified for protection under the law. For 2 of these complaints, the  Administrator found that they did not qualify for protections because they  fell under the 2008 version of the statute and failed to allege a violation  specific to public health and safety. In 2017, a court affirmed the  Administrator\u2019s position. For the third complaint, the Administrator  determined reprisal could not be substantiated due to the complainant not  meeting the standards of evidence under the statute.", "Further, we found that NASA does not have a standard process in place  for the Administrator to review cases that qualify for protections under the  statute and issue an order of final determination. According to an official  from the Office of General Counsel, the agency has no standard process  to ensure the contractors are afforded due process, among other things.  The official from Office of General Counsel said the Administrator may  need to conduct an additional investigation in some cases. He said that  each case is different and would have to be handled on a case by case  basis. In addition, the official said the Administrator may need to conduct  hearings, independent of the OIG. Moreover, the official from Office of  General Counsel highlighted concern that the Administrator\u2019s office does  not have the resources to conduct additional investigative work, which he  said is a key contributor for the office\u2019s inability to meet the 30-day  timeline to issue an order of final determination. Despite acknowledging  these challenges, the Administrator does not have a formal process or  criteria to monitor and evaluate the way the office handles issuing an  order of final determination of reprisal to ensure that it meets the statutory  time requirements.", "Because the Administrator took longer than 30 days to respond to all  reprisal complaints, including one where the Office of General Counsel  failed to provide evidence that the Administrator responded at all, there  may be the unintended consequence of disincentivizing future  whistleblowers from making disclosures who fear their complaint will not  be handled timely. Internal controls require that management should  establish and operate monitoring activities to monitor the internal control system, evaluate the results, and take appropriate action to address  issues on a timely basis. Without monitoring, evaluating, and taking  appropriate corrective action based on the way the Administrator or his or  her designee makes a final determination of reprisal, there is no  assurance that whistleblower reprisal complaints will be handled within  required time frames in the future."], "subsections": []}, {"section_title": "NASA Almost Always Communicates Whistleblower Protections to Contractors, but Internal Guidance Is Unclear", "paragraphs": ["In almost all of the contracts we reviewed, NASA had met its obligation to  ensure its contractors are communicating whistleblower protections to  their employees through a whistleblower contract clause. We also found  that NASA has put in place guidance to its contracting workforce on the  protections, and guidance on when to include the whistleblower clause in  contracts. However, we found that some NASA officials have interpreted  this guidance differently. Further, NASA\u2019s guidance does not reflect an  agency-wide policy on when to include the whistleblower clause when  modifying a contract."], "subsections": [{"section_title": "Whistleblower Clause Included in Almost All Contracts, but a Few Were Missing the Required Clause", "paragraphs": ["In most cases, NASA included a clause regarding whistleblower reprisal  protections in applicable contracts to ensure contractors communicate  rights to its employees. But we found that the clause was not included in  all relevant contracts in our review. Based on our review of a  generalizable sample of contracts, we estimate that 98 percent of  contracts would be expected to include a whistleblower clause at the time  new contracts were awarded in applicable contracts in 2016, and 2  percent would not. Within our sample, 4 contracts did not have a  whistleblower reprisal clause. After we shared our contract file review  findings with NASA officials, they modified 3 of the 4 contracts to include  the missing required whistleblower clause. For the remaining contract, the  contractor performance was complete, the contract had been closed, and  no further action will be taken.", "According to NASA procurement officials, human error, combined with its  former contract writing system, could explain why the contracts in our  sample did not have the required clause. They explained that the former  contracting writing system relied on templates and did not automatically  include the NFS clause into all contracts. Under this system, contracting  officers used templates that included a list of all potential or applicable  NFS and FAR clauses, which are incorporated through a manual process.  Officials said that if a clause were included in the templates, it is unlikely  that it would be removed because doing so would require supervisory  approval.", "NASA procurement officials told us that the agency launched a new  contract writing system in June 2017. They said that under the new  contract writing system, contracting officers use a logic system that  prepopulates each contract with required clauses. They said that the new  automated system will likely lead to fewer human errors because inserting  the clause will not be a manual process. Because the new system is still  being implemented, we were unable to evaluate whether the risk of  human error has been reduced or eliminated to ensure applicable  contract awards have the clause.", "Under the previous and current systems, NASA contracts are to undergo  various levels of review prior to award\u2014including attorney review\u2014at the  centers or headquarters based on risk level and dollar thresholds. For  example, contracts awarded by JSC valued at over $50 million are to be  reviewed by headquarters. NASA procurement officials stated that they  conduct procurement management reviews, and centers conduct annual  self-assessments; however, at one center, officials pointed out that these  reviews have not previously included whether a whistleblower clause is  included in new contracts or major modifications. They said this is  because reviews typically focus on known issues or program risk, and  inclusion of the whistleblower clause has not been previously identified as  an issue or risk. Contractors we spoke with were generally aware of their  responsibilities to communicate reprisal protections to their employees  because their contracts with NASA included the required NFS  whistleblower clause. In response to our review, NASA procurement  officials said they plan to include a review of the inclusion of NFS  whistleblower clause in future compliance reviews as an area of  emphasis and will instruct centers to include whether the clause is  included in applicable contracts as part of the centers\u2019 self-assessment  process."], "subsections": []}, {"section_title": "NASA\u2019s Guidance Contributes to Different Understanding of Reprisal Protections", "paragraphs": ["Three elements of NASA\u2019s whistleblower reprisal protection guidance\u2014its  procurement notice, NFS clause, and definition of major modification\u2014 contribute to potential confusion or inconsistent application of  whistleblower reprisal protections.", "First, in July 2014, NASA notified its contracting officials of the changes to  the NFS required by the 2013 amendments to section 2409 Title 10 of the  U.S. code through a procurement notice 04-80, but this notice has been  interpreted differently by officials in NASA Headquarters, a NASA center,  and the OIG. Procurement notices are drafted by NASA Headquarters,  reviewed and approved by NASA general counsel and NASA\u2019s Office of  Procurement. The NASA centers, acting through their procurement  offices and, as needed their legal counsel, review and implement the  notices.", "After the procurement notice was issued, some NASA officials interpreted  it differently. For example, in one instance, a NASA center Chief  Counsel\u2019s office attorney advised a center procurement official that  reprisal protections found in the 2013 amendments extend to contractors\u2019  employees working on contracts awarded before the effective date of the  amendments. This is true, he said, regardless of whether the contract  contains any clause explicitly making the 2013 amendments applicable.  However, both the OIG and the Administrator\u2019s counsel have expressed a  different understanding of the statute conveyed in the notice, stating that  a clause making the 2013 amendments applicable must be in a contract  in order for the complainant to be protected under the statute. Later, the  attorney from the center Chief Counsel\u2019s office revised his understanding  of the statute and concluded the procurement notice was not accurate as  written.", "Second, NASA personnel have different understandings about whether  the NFS clause is sufficient for contractor employees to be covered by the  statute. The NFS clause instructs contractors to inform their employees in  writing of contractor whistleblower employee rights; but, unlike the FAR  clause that is used to implement similar legislation for other agencies, the  NFS clause does not state that employees working on the contract are  subject to the whistleblower rights and remedies. The attorney from a  NASA center said that the NFS clause is enough to ensure contractor  employees are given rights under the statute. However, OIG officials have  said that without including that element of the clause, employees working  under NASA contracts awarded prior to the effective date of the 2013  amendments may not be covered by those amendments. See table 2 for  description of the clauses and their differences.", "Third, the lack of agency-wide guidance for when to include the clause in  major modifications leads to different implementation of the requirement.  The 2013 amendments require that NASA makes best efforts to include a  whistleblower clause in contracts undergoing a major modification.  NASA\u2019s July 2014 procurement notice also encourages contracting  officers to include the NFS whistleblower clause when issuing major  modifications to contracts awarded before July 29, 2014. However, it  does not specify what a major modification is under this statute, and the  statute itself does not define \u201cmajor.\u201d According to NASA procurement  officials at headquarters and at two NASA centers, it is at the discretion of  the NASA Centers\u2019 offices of procurement and contracting officers to  decide if a clause is inserted into modifications, and whether they are  considered major. Procurement officials and the contracting officers we  spoke with told us that there is no definition of major modifications in the  law, regulation, or NASA Headquarters or Center policies or guidance.  NASA procurement officials said this is because it could be different for  each contract and the contracting officer makes the determination based  upon the facts related to the situation. Nevertheless, without  communicating the factors to consider when determining whether a  modification is major and whether that contract should or should not  include the clause, NASA and the Centers\u2019 procurement officials are at  risk of potential inconsistent incorporation of the clause among applicable  contracts.", "One attorney in NASA\u2019s General Counsel\u2019s Office said there may be  costs associated with asking a contractor to insert new clauses\u2014such as  the whistleblower clause\u2014into an existing contract during a major  modification because it would require a bilateral negotiation between the  contractor and the agency. However, one contractor we spoke with said  that there would be no cost to adding the clause and that doing so would  not be an issue because the whistleblower clause is consistent with the  internal whistleblower policies and practices of the institution. Further, he  said that the institution he represents would be hesitant to argue against  inclusion of the NFS clause in its contracts with NASA.", "Internal control standards require that an entity should internally  communicate necessary quality information in order to meet requirements  of the mission. These 3 areas of potential confusion related to NASA\u2019s  current guidance could result in different application of the law, unless  they are clarified."], "subsections": []}]}, {"section_title": "NASA Has Not Established a Mechanism to Communicate Whistleblower Protections to Grantees", "paragraphs": ["Although whistleblower protections are now extended to grantee  employees by statute, NASA does not have a mechanism in place to  communicate the protections to grantees or subgrantee employees.  Unlike the requirement for NASA to ensure contractors communicate  whistleblower reprisal rights to their employees in writing and in the  employees\u2019 predominant language, the statute does not prescribe a  similar requirement for NASA to ensure that grantees communicate  whistleblower reprisal rights to their employees. During the grant  application process, NASA requires grantees to attest that they will not  require grantee employees to sign confidentiality agreements that would  prohibit them from reporting fraud, waste, and abuse.", "NASA officials said that grant awards do not include a mechanism, such  as a term or condition, to encourage NASA grantees to notify their  employees of their whistleblower reprisal protections. In the 10 NASA  grants from fiscal year 2016 that we reviewed, there was no requirement  included for grantees to communicate these protections to employees.  However, we found that all 10 grants included a statement that each  award was subject to all applicable laws and regulations of the United  States in effect on the date of award, including the Uniform Guidance. For  federal grants in general, the Uniform Guidance provides a government- wide framework for grants management. Within this guidance, there is a  reference to the whistleblower protections in the statute; however, it does  not explicitly describe the statute\u2019s requirements.", "The grant advocacy group and representatives of three NASA grantees  we spoke with were aware that some protections exist and noted that  many grantees have their own whistleblower policies, but were not aware  of the specific protections provided by the statute, which indicates that  opportunities exist for improving communications between NASA and its  grantees about these protections. Further, representatives of the grant  advocacy group noted that the whistleblower protections for grantee  employees were not specifically mentioned at recent annual meetings  where grantees and federal officials discuss issues that affect grantees.  Internal controls require that management externally communicate the  necessary quality information to achieve the entity\u2019s objectives. Without  additional communication about the protections provided by the statute,  grantees may not fully understand or appreciate the significance of the  rights afforded to their employees, and grantee employees may not be  aware of their whistleblower reprisal protections, which could hinder their  willingness to report instances of fraud, waste, and abuse."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Because contractor and grantee employee whistleblowers risk reprisal  after disclosing potential fraud, waste, abuse and mismanagement,  ensuring they are protected from retaliation or adverse consequences is  critical. Without monitoring and evaluating the timeliness of reviewing and  responding to reprisal complaints, the Administrator may not be prepared  to determine reprisal on future cases within the statutorily required 30  days.", "Additionally, although NASA has developed guidance related to  contractor protections, this guidance has led to inconsistent interpretation  of the law and could potentially lead to inconsistent application of how  contractor protections for employees are conveyed. More clear guidance  would help contracting officers determine when to incorporate the NFS  clause into major modifications to ensure consistency throughout the  agency.", "Finally, because unlike contracts, there is no similar clause for grants,  NASA is in the position to help ensure grantees know their employees\u2019  rights against reprisal if they observe and disclose fraud, waste, abuse or  mismanagement. However, NASA has not effectively communicated to  grantees information about these provisions and as a result grantees and  their employees may not be fully aware of these protections.  Consequently, if they witness fraud, waste, abuse or mismanagement,  they may not be willing to disclose those for fear of reprisal."], "subsections": []}, {"section_title": "Recommendations for Executive Action:", "paragraphs": ["We are making three recommendations to NASA:  The Administrator should monitor, evaluate, and make appropriate  corrective actions, such as a documented process, to ensure it reviews  reprisal complaints in a timely manner. (Recommendation 1)", "The Administrator should review NASA\u2019s guidance or develop other  guidance, including defining major modification, to clarify when  whistleblower protections are conveyed. (Recommendation 2)", "The Administrator should communicate whistleblower protections to  grantees and subgrantees and their employees. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments And Our Evaluation", "paragraphs": ["We provided a draft of this product to NASA for review and comment.  NASA provided written comments on a draft of this report. In its written  comments, reprinted in appendix II, NASA concurred with all three  recommendations. In its response to our recommendations NASA agreed  to develop and document a process to ensure it reviews reprisal  complaints in a timely manner to ensure all parties\u2019 due process rights are  protected, review existing procurement policy and clarify guidance as  appropriate, and update NASA grant guidance to communicate  whistleblower protections to grantees, sub-grantees and their employees.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and members. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or oakleys@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["To assess the extent to which National Aeronautics and Space  Administration\u2019s (NASA) Office of Inspector General (OIG) has  investigated contractor and grantee whistleblower reprisal complaints and  developed guidance for the investigations, we reviewed data provided by  the NASA OIG on the total number of whistleblower allegations of fraud,  waste, abuse, misconduct, or mismanagement and reprisal claims. We  also reviewed the number of contractor and grantee employee  whistleblower allegations and reprisal complaints provided by the OIG  and the outcomes or decisions reached by the OIG of a reprisal complaint  from fiscal years 2008 through 2017. We assessed the reliability of these  data by asking the NASA OIG to describe the source(s) of information  used and steps taken to identify the numbers provided, and limitations  and caveats that would affect GAO\u2019s use of the data\u2014such as the data  being self-reported by the OIG and Office of General Counsel. Based on  these steps, we determined the data to be sufficient for our purposes of  determining how the complaints were addressed. Additionally, we  reviewed relevant documentation to assess the extent to which the NASA  OIG was conducting investigations and communicating findings to the  NASA Administrator within required time frames. To determine the extent  NASA OIG developed guidance, we interviewed or obtained written  answers from OIG officials about their processes and practices for  investigating whistleblower reprisal complaints. We reviewed the  guidance and training and other materials that NASA OIG uses to  implement whistleblower protection investigations. We also visited  Johnson Space Center (JSC)\u2014selected because it had the highest  number of reprisal cases from 2008 through 2017\u2014to discuss policies  and procedures specific to that center with OIG investigators and the OIG  program manager for whistleblower protections. Because they are also a  part of the Investigators\u2019 Central Field Office, we also spoke with  investigators at Marshall Space Flight Center and Kennedy Space  Center.", "To assess the extent to which NASA\u2019s Administrator meets the statutory  timeliness requirements to review reprisal complaints, we reviewed the  timeliness of the Administrator\u2019s final determination to ensure that NASA  was meeting statutory requirements. Specifically, we reviewed relevant  documentation to assess the extent to which the Administrator was  making final determination of reprisal in 30 days\u2014the required review  period specified by statute. We reviewed the Administrator\u2019s  documentation on the final disposition of reprisal investigations and  compared the date of the Administrator\u2019s final decision to the date of  receipt of the reprisal investigations from the NASA OIG. We also  conducted interviews with the Office of General Counsel, who spoke on  behalf of the Administrator.", "To assess the extent to which NASA communicated the applicable  whistleblower reprisal protections externally with contractors, we reviewed  a generalizable sample of NASA contracts to determine the extent a  required whistleblower clause was included. We used the Federal  Procurement Data System-Next Generation (FPDS-NG) to generate a  sample of contract actions over $300,000 that were awarded by NASA in  fiscal year 2016. We selected contracts that were not only over the  simplified acquisition threshold (generally $150,000), but were over  $300,000 to account for possible exceptions and to ensure that we were  sampling contracts that would be required to include a whistleblower  reprisal clause. From the 270 contracts identified, for purposes of  examining the inclusion of NASA Federal Acquisition Regulation  Supplement (NFS) clause 1852.203-71 (or other potentially applicable  clauses) in NASA contracts, a legal requirement, we selected a  generalizable random sample of 100 contracts. The sample is projectable  to NASA fiscal year 2016 contracts; however, we did not make a case by  case legal determination for contracts not in our sample. We randomly  selected 10 contracts from each center that awarded new contracts in  2016, and for those centers that did not have 10 contracts, we selected all  contracts. The remaining contracts were then pulled from the NASA  Shared Services Center (NSSC) because that center does a majority of  NASA\u2019s contracting. We asked for contracts awarded in fiscal year 2016  to ensure we were sampling contracts that are required to have the  clause and would be reasonably accessible by NASA. We excluded  interagency contracts and task or delivery orders awarded using blanket  purchase agreements to ensure we sampled base contracts awarded by  NASA, not other agencies.", "We estimated the percentage of NASA contracts expected to include  whistleblower clause(s) as the weighted average of results from the 10  contracting centers. Because we followed a probability procedure based  on random selections, our sample is only one of a large number of  samples that could have been drawn. Because each sample could have  provided different estimates, we express the uncertainty associated with  any particular estimate as a 95 percent confidence interval. This is the  interval that, with repeated sampling, would be expected to contain the  actual population value for 95 percent of the samples we could have  drawn. As a result, we are 95 percent confident that this confidence  interval contains the true percentage of contracts expected to include  whistleblower clause(s); however, to assess legal compliance we would  have to make a case by case determination, which we did not do. We  conducted data reliability checks on the FPDS-NG dataset by comparing  it to contract documentation obtained from contract files and determined it  was sufficiently reliable for our purposes. Additionally, we conducted  interviews with NASA procurement officials and contracting officers at  multiple locations including NASA Headquarters, NSSC and JSC to  discuss any additional measures NASA takes to communicate  whistleblower protections to its contractors and their contractor  employees. To further assess internal communication, we reviewed  relevant documentation, including guidance, and conducted interviews  with procurement officials, NASA\u2019s Office of General Counsel, and Chief  Counsels at JSC, NSSC, and Marshall Space Flight Center.", "To assess the extent to which NASA communicated the applicable  whistleblower reprisal protections with grantees, we reviewed a non- generalizable sample of grants awarded by NASA in fiscal year 2016 to  determine whether NASA grants included a mechanism notifying  grantees of their employees\u2019 whistleblower rights and reprisal protections.  We used FPDS-NG to identify a non-generalizable random sample of 10  grants awarded by NASA in fiscal year 2016 for review to determine  whether any of the selected grants included a mechanism to  communicate whistleblower reprisal protections to grantee employees.  We conducted data reliability checks on the FPDS-NG data by comparing  it to grant documentation obtained from grant awards and determined it  was sufficiently reliable for our purposes. Additionally, we conducted  interviews with NASA grant making officials to discuss any additional  measures NASA takes to communicate whistleblower reprisal protections  to its grantees and their grantee employees.", "Finally, in order to learn about contractor and grantee experiences during  NASA\u2019s implementation of enhanced whistleblower protections, we  conducted interviews with or received written answers to questions from a  selected group of NASA contractors and grantees. Using FPDS-NG data,  we selected institutions with the highest and lowest contracts (including  small business contracts) and grants by obligations in 2016. Using these  selection criteria, we selected three contractors and three grantees to  meet with based on the amount of funds obligated in 2016. We ultimately  interviewed or obtained written answers from all selected contractors and  grantees. Additionally, we spoke with two advocacy groups, one about  grants and one about contracts.", "We conducted this performance audit from March 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Penny Berrier (Assistant  Director), Mary Diop, Lorraine Ettaro, Alexandra Gebhard, Kurt Gurka,  Stephanie Gustafson, Julia Kennon, Jordan Kudrna, Kate Lenane,  Roxanna Sun, and Khristi Wilkins made key contributions to this report."], "subsections": []}]}], "fastfact": ["NASA relies on contractor employees to fulfill its mission\u2014and these employees are legally protected from reprisal, such as demotion or firing, for whistleblowing. But is the agency fulfilling its duty to investigate reprisal complaints from these employees in a timely manner?", "Since 2008, NASA has not made a final determination of whether or not a reprisal occurred in the required 30-day time frame, nor has the agency evaluated its process for reviewing those complaints in a timely manner. We recommended that NASA take steps to ensure that it meets its 30-day time frame."]}
{"id": "GAO-18-87", "url": "https://www.gao.gov/products/GAO-18-87", "title": "Overseas Allowances: State Spends Almost $480 Million Annually to Compensate Employees for Costs and Hardships of Foreign Assignments", "published_date": "2017-11-02T00:00:00", "released_date": "2017-11-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["State spends millions of dollars annually on allowances to compensate its employees for costs and hardships related to foreign assignments. Many of these assignments are critical to U.S. foreign policy objectives. In accordance with U.S. law, State employees working abroad may be reimbursed for costs related to working overseas, including the cost of living in expensive locations, dependent education costs, and the costs of maintaining family members away from post. They also may be eligible for such allowances in locations where they encounter harsh or dangerous living conditions. These allowances cover over 13,000 employees across more than 275 posts.", "GAO was asked to review State's administration of allowances for its employees. GAO's September 2017 report focused on State hardship and danger pay allowances ( GAO-17-715 ), while this report (1) describes all of the allowances that State offers its employees serving overseas and (2) examines the amount State spent annually on these allowances in fiscal years 2011 through 2016. GAO analyzed State data and documents and communicated with State officials in Washington, D.C., and Charleston, South Carolina, the location of State's Bureau of the Comptroller and Global Financial Services."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of State (State) offers 14 different allowances to compensate State employees serving at overseas posts for costs and hardships related to foreign assignments across four categories.", "Cost-of-living allowances consist of six types of allowances that reimburse employees for certain costs incurred from employment overseas, such as the cost for dependent education that would normally be free in the United States.", "Recruitment and retention incentive allowances consist of three types of allowances that compensate employees for service at posts where conditions may be difficult or dangerous. For example, hardship pay compensates employees for service where conditions differ substantially from those in the United States.", "Quarters allowances consist of three types of allowances that reimburse employees for substantially all housing costs at posts where government housing is not provided. For example, the temporary quarters subsistence allowance pays for temporary housing when government-provided housing is not available.", "Other allowances consist of two types of allowances that reimburse employees, such as ambassadors, who must maintain an official residence in-country or employees who incur expenses representing the U.S. government in an official capacity to a foreign government.", "State spent almost $480 million per year on its 14 allowances for employees serving overseas, totaling almost $2.9 billion in fiscal years 2011 through 2016. Most of this amount went toward cost-of-living and recruitment and retention allowances. During this period, the three largest individual allowances accounted for about 70 percent of the total spending on all allowances. These were the education allowance, about $853.0 million; hardship pay, about $732.3 million; and post allowance, used to offset the higher cost of living at certain posts, about $417.3 million."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of State (State) provides a range of allowances to  compensate its employees for costs and hardships related to  assignments at overseas posts, many of which are critical to advancing  U.S. foreign policy objectives. State employees working abroad may be  eligible for such allowances in locations where they encounter harsh or  dangerous living conditions. They also may be reimbursed for costs  related to working overseas, including the cost of living in locations more  expensive than Washington, D.C., dependent education costs, and the  costs of relocating to a new post or maintaining family members away  from employees\u2019 assigned posts.", "As part of a broader request, you asked us to review State\u2019s  administration of allowances for its employees. This report (1) describes  the allowances State offers its employees serving overseas and (2)  examines the amount State spent annually on these allowances from  fiscal years 2011 through 2016.", "To describe the different allowances that State offers to its employees  serving overseas, we reviewed the Foreign Affairs Manual (FAM), the  Foreign Affairs Handbooks, the Department of State Standardized  Regulations, and State documents. To examine State\u2019s spending at  overseas posts on these allowances from fiscal years 2011 through 2016,  we analyzed payroll and financial management data from State\u2019s Bureau  of the Comptroller and Global Financial Services (CGFS) after  determining the data sufficiently reliable for the purposes of our reporting  objectives. We also interviewed CGFS and State\u2019s Office of Allowances  officials. See appendix I for additional information about our objectives,  scope, and methodology.", "We conducted this performance audit from May 2017 through November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["State is the lead agency responsible for implementing American foreign  policy and representing the United States abroad. It operates over 275  embassies, consulates, and other posts worldwide, staffed by over  13,000 Foreign Service officers. State has the authority to grant  allowances to employees serving overseas to offset the cost of living and  working overseas as well as to recruit and retain employees who serve in  difficult and dangerous locations.", "Two key offices within State are involved in administering and processing  allowances for overseas employees.", "State\u2019s Office of Allowances in the Bureau of Administration develops  and coordinates policies, regulations, standards, and procedures to  administer allowances under the Department of State Standardized  Regulations. The office compiles statistics on overseas living costs  and conditions and computes the established allowances to  compensate U.S. government civilian employees for costs and  hardships related to assignments abroad.", "State\u2019s Bureau of the Comptroller and Global Financial Services  (CGFS) processes allowances for State employees through the  Consolidated American Payroll Processing System, State\u2019s payroll  system, and captures information on payments for all allowances  through the Global Financial Management System, State\u2019s accounting  system. State uses the Consolidated American Payroll Processing  System to process American employees\u2019 pay, including allowances  paid directly to employees. This system generally captures  information on the location where an employee is assigned. According  to State officials, the Global Financial Management System captures  information on all State payments, including those paid through  vouchers, such as for rent paid directly to the landlord."], "subsections": []}, {"section_title": "State Offers 14 Allowances to Compensate Its Employees for Costs and Hardships Related to Foreign Assignments", "paragraphs": ["State provides 14 allowances to employees serving overseas to  compensate them for the costs and hardships related to foreign  assignments across four broad categories\u2014cost-of-living, recruitment and  retention incentives, quarters, and other allowances. Table 1 includes a  brief summary of these allowances."], "subsections": [{"section_title": "Cost-of-Living Allowances", "paragraphs": ["Cost-of-living allowances reimburse employees for certain excess costs,  exclusive of any quarters costs, incurred from employment overseas.  The following six allowances fall into this category:", "The post allowance is granted to employees officially stationed at  posts or foreign areas where the cost of living, exclusive of the cost of  quarters, is substantially higher than in Washington, D.C. It is  designed to permit employees to spend the same portion of their  salaries for standard living expenses as they would if they were living  in Washington, D.C. The Office of Allowances updates the post  allowance at least every other year based, in part, on a survey filled  out by posts. As part of this process, posts must collect and compile  prices for a sample basket of goods from stores that U.S. government  employees serving at that post frequent (see fig. 1). For example, as  of September 3, 2017, Embassy Port-au-Prince had a post allowance  rate of 20 percent and was expected to submit its next required  survey in June 2018.", "The foreign transfer allowance defrays an employee\u2019s extraordinary,  necessary, and reasonable costs when he transfers to a post in a  foreign area. This allowance includes four expense types\u2014 predeparture subsistence, wardrobe, lease penalty, and  miscellaneous.", "The predeparture subsistence expense portion assists employees  with the cost of temporary lodging, meals, laundry, and dry  cleaning for up to 10 days when they vacate their permanent  residence in the United States before traveling to their overseas  post. This allowance may be granted before the employees\u2019 final  departure from the United States, beginning not more than 30  days after they vacate their residence. The reimbursement rate is  based on the per diem rate of their U.S. post.", "Employees are eligible for the wardrobe expense portion when  they transfer across two climate zones for a new foreign  assignment. For example, if an employee were to transfer from  Saint Petersburg, Russia (zone 1), to Doha, Qatar (zone 3), then  the employee would receive a wardrobe allowance. This  allowance is a flat rate of $600 for individuals, $1,000 for  employee and one family member, or $1,300 for employees and  multiple family members.", "The lease penalty expense portion offsets a residential lease  penalty unavoidably incurred by employees when they transfer.", "The miscellaneous expense portion covers employees\u2019 expenses  incurred from moving, such as pet transportation, vehicle  registration, and driver\u2019s license fees. These expenses are capped  at the lesser of either 1 week\u2019s salary or $650 for an individual, or  2 weeks\u2019 salary or $1,300 for a family.", "The home service transfer allowance defrays an employee\u2019s  extraordinary, necessary, and reasonable costs when she transfers  from an overseas post to a post in the United States. To qualify for  this allowance, the employee must agree to work for the U.S.  government for at least 12 months after her transfer. Similar to the  foreign transfer allowance, the home service transfer allowance  includes four expense types\u2014subsistence, wardrobe, lease penalty,  and miscellaneous.", "The subsistence expense portion covers the same types of  expenses as the predeparture subsistence expense portion.  However, employees are also eligible to receive reimbursements  upon return to the United States based on the per diem rate for  the first 30 days and then a prorated rate thereafter.", "The wardrobe, lease penalty, and miscellaneous expense types  are the same for the home service transfer as for the foreign  service transfer.", "The separate maintenance allowance (SMA) defrays the additional  expense of maintaining family members at another location (1)  because of dangerous, notably unhealthful, or excessively adverse  living conditions at the overseas post of assignment, (2) for the  convenience of the U.S. government, or (3) because of special needs  or hardships involving the employee or a family member. There are  three types\u2014involuntary, voluntary, and transitional.", "Involuntary SMA is provided when State determines that there is  an adverse, dangerous, or notably unhealthful condition that  should exclude family members from accompanying employees at  a post. The annual rate is based on family size ranging from  $6,800 for one child only to $23,000 for an adult and four or more  family members.", "Voluntary SMA can be authorized based on an employee\u2019s  request for special needs or hardship at posts for reasons  including, but not limited to, career, health, educational, or family  considerations. The annual rate is based on family size, ranging  from $5,300 for one child only to $18,000 for an adult and four or  more family members.", "Transitional SMA is granted for a limited time after a post\u2019s  evacuation status changes or in connection with the beginning or  end of an unaccompanied posting. It is paid at a daily rate based  on the number of eligible family members, the standard  continental U.S. per diem rate, and the amount of time the  employee receives the allowance.", "The education allowance defrays extraordinary and necessary costs,  not otherwise compensated for, to obtain adequate elementary and  secondary education for dependent children at overseas posts that  would normally be free of charge in the United States. State\u2019s Office  of Overseas Schools determines the adequacy of schools at posts.  State determines the approved rate based on allowable education  expenses for (1) a school at the post, (2) a school away from the  post, (3) home schooling / private instruction, or (4) special-needs  education. For example, employees assigned to New Delhi can send  their school-aged children to the American Embassy School, which  State has determined is the least-expensive adequate school at post  (see fig. 2). Tuition for this school costs State between about $18,000  and $30,000 per child per year, depending on the child\u2019s grade level.", "The educational travel allowance annually covers the travel expenses  of one round trip for each dependent between a school attended and  the overseas post of assignment. This benefit is primarily intended to  reunite a full-time, postsecondary student attending college (including  the postbaccalaureate level), or technical or vocational school with the  employee / parent serving the U.S. government in the foreign area.  Educational travel cannot be paid at the same time as the education  allowance."], "subsections": []}, {"section_title": "Recruitment and Retention Incentive Allowances", "paragraphs": ["Recruitment and retention incentive allowances compensate employees  for service at posts where conditions may be difficult or dangerous.  State uses the following three allowances to recruit and retain staff at  posts:", "Hardship pay compensates employees for service in foreign areas  where conditions of environment differ substantially from conditions of  environment in the continental United States in that the living  conditions are extraordinarily difficult, involve excessive physical  hardship, or are notably unhealthy. Employees assigned to  designated posts can earn hardship pay at rates ranging from 5 to 35  percent above basic compensation in 5 percent increments, based on  the severity of the hardship as determined by State.", "Danger pay compensates employees for service in foreign areas  where conditions of civil insurrection, civil war, terrorism, or wartime  conditions threaten physical harm or imminent danger to the health or  well-being of the employee. Employees in designated danger pay  locations are granted between 15 and 35 percent above basic  compensation, in 10 percent increments, based on whether family  members are allowed at overseas posts.", "The difficult-to-staff incentive differential is paid to employees  assigned to a 15 percent or higher hardship pay post after State has  determined that especially adverse conditions of environment warrant  additional pay as an incentive to fill the employee\u2019s position at that  post. State must establish a history of difficulty in filling positions at a  post prior to posts being eligible for this incentive. For example,  employees posted in Lagos, Nigeria, were eligible for this allowance  following the 2016 bidding cycle. Employees filling these positions  can earn 15 percent above their basic compensation. However, the  difficult-to-staff incentive and danger pay allowance combined cannot  exceed 35 percent of basic pay. Employees must agree to a 3-year  assignment to receive the difficult-to-staff incentive."], "subsections": []}, {"section_title": "Quarters Allowances", "paragraphs": ["Quarters allowances reimburse employees for substantially all costs for  either temporary or residence quarters at posts where government  housing is not provided. According to State officials, while most overseas  posts provide government-leased or owned housing for employees and  their families at no cost to the employee, employees can receive the  following three allowances to assist with housing costs:", "The living quarters allowance defrays the annual cost of suitable,  adequate living quarters for the employee and his or her family at an  overseas post where government-leased or government-owned  housing is not provided. Rates vary by post and are designed to  substantially cover the average employee\u2019s costs for rent, utilities,  required taxes levied by the local government, and other allowable  expenses. According to State officials, while most posts provide  government housing, employees assigned to posts in Canada and  Bern, Switzerland, for example, primarily rely on the rental market.", "The temporary quarters subsistence allowance assists with the  reasonable cost of temporary lodging, meals, and laundry in a foreign  area when an employee first arrives at a new post and permanent  quarters are not yet available, or when an employee is getting ready  to depart the overseas post permanently and must vacate residential  quarters. The rate is based on the per diem at post, the size of an  employee\u2019s family, and the amount of time the employee receives the  allowance. Employees cannot receive this allowance while receiving  the post allowance.", "The extraordinary quarters allowance is typically granted for up to 90  days to employees and eligible family members at an overseas post  when they are required to partially or completely vacate their  permanent quarters because of renovations, repairs, or unhealthy or  dangerous conditions in their permanent quarters. The rate is based  on the per diem at post, post allowance, and family size. In contrast to  the temporary quarters subsistence allowance, employees can  continue to receive the post allowance when they receive the  extraordinary quarters allowance."], "subsections": []}, {"section_title": "Other Allowances", "paragraphs": ["State offers two additional allowances designed to reimburse employees  who must maintain an official residence or employees who incur  expenses representing the U.S. government in an official capacity to a  foreign government.", "The official residence expense reimburses a principal representative,  such as an ambassador, at an overseas post for expenses related to  operating and maintaining a suitable official residence in-country  when those expenses exceed the usual expenses incurred if he were  serving at the post in any other official capacity. The allowance is  intended to offset the cost of representing the United States abroad  when a principal representative extends official hospitality to foreign  dignitaries and important visitors and by hosting appropriate  ceremonies (for an example, see fig. 3). Generally, principal  representatives are expected to direct at least 3.5 percent of their  salary toward maintaining their residences, and State may reimburse  expenses above that.", "The representation allowance reimburses employees, including  foreign national employees, and adult family members acting with or  on behalf of employees, for expenses incurred in establishing and  maintaining relationships of value to the United States in foreign  countries. Reimbursement may include costs for entertainment and  customary gifts or gratuities; for entertainment expenses, it must be  clearly demonstrated that the purpose is to directly promote U.S.  foreign policy interests, that the expenditure is not for personal  recreation, and that it is not otherwise prohibited by regulation."], "subsections": []}]}, {"section_title": "State Spent Almost $480 Million Annually on Allowances for Its Employees Serving Overseas, Totaling Almost $2.9 Billion in Fiscal Years 2011\u2013 2016", "paragraphs": [], "subsections": [{"section_title": "State Spent about 70 Percent of Its Total Spending on Allowances from Fiscal Years 2011 through 2016 on the Education Allowance, Hardship Pay, and Post Allowance", "paragraphs": ["State spent $2.9 billion on 14 allowances from fiscal years 2011 through  2016, 70 percent of which went to the three most expensive allowances\u2014 the education allowance, hardship pay, and post allowance. The  education allowance accounted for 30 percent of the total ($853.0  million), hardship pay accounted for 25 percent ($732.3 million), and the  post allowance accounted for 15 percent ($417.3 million). The other 11  allowances accounted for the remaining 30 percent of the total ($870.0  million) in fiscal years 2011 through 2016 (see fig. 4). Each of these 11  allowances accounted for less than 10 percent of total spending, ranging  from danger pay ($266.5 million) to the educational travel allowance  ($11.4 million). For additional information on State spending across all 14  allowances by fiscal year, see appendix II."], "subsections": []}, {"section_title": "State Spent Almost $480 Million Annually in Fiscal Years 2011\u20132016, with Individual Allowances Varying", "paragraphs": ["State spent almost $480 million annually on the 14 allowances from fiscal  years 2011 through 2016, with varying amounts for individual allowances.  The lowest annual spending on such allowances during this period was  $462.3 million in fiscal year 2011 and the highest was $496.1 million, in  fiscal year 2014 (see fig. 5).", "Trends in spending for individual allowances varied from fiscal years 2011  through 2016, with the largest variation in spending from the cost-of-living  allowances. The largest increase in absolute spending across all  allowances during this period, as well as the largest single allowance  expenditure, was for the education allowance ($39.7 million). While the  overall spending for dependent education increased each year, State  officials noted that the spending on this allowance varied by post and year  based on the number of dependent children of overseas employees and  increasing education costs at some posts. The largest decrease in  absolute spending across all allowances during this period was for the  post allowance ($21.1 million). According to State officials, this variation  was caused, at least in part, by fluctuation in the strength of the dollar  against major global currencies. The other cost-of-living allowances\u2014 SMA, home service transfer, foreign transfer, and educational travel\u2014had  relatively smaller fluctuations in dollar spending across fiscal years. For  example, State explained that the region\u2019s increased volatility from the  \u201cArab Spring\u201d may have contributed to the change in SMA spending from  fiscal years 2011 to 2012 (see fig. 6). According to State officials, this  unrest likely caused more volatile security situations at many State posts,  resulting in fewer family members of overseas employees living at the  assigned post of their parent or spouse, and, therefore, an increase in  SMA support.", "Recruitment and retention incentive allowances had the largest net  decrease in allowance spending from fiscal years 2011 through 2016,  about $10.6 million. Hardship pay increased by $5.3 million, with its  largest single year change between fiscal years 2015 and 2016 following  State\u2019s 2015 revisions to its process for determining hardship pay rates.  In conjunction with an increase in hardship pay, danger pay decreased by  $15.6 million during this period. The difficult-to-staff incentive differential  remained relatively constant, decreasing by about $264,000 (see fig. 7).", "State\u2019s spending on quarters allowances decreased from fiscal years  2011 through 2016 by almost $1 million. According to State officials, over  this period State shifted employees from the living quarters allowance into  U.S. government owned and leased facilities. They explained that, as of  August 22, 2017, a limited number of posts in Canada and Switzerland  relied primarily on the living quarters allowance, as opposed to U.S.  government-provided housing. For the extraordinary quarters  allowance, State officials explained that short-term, unexpected facilities  issues that render a house uninhabitable\u2014such as water damage, mold  remediation, or fire\u2014cause variations in spending. These costs can vary  significantly by year and by post. Spending on the temporary quarters  subsistence allowance increased by $1.6 million from fiscal years 2011  through 2016 (see fig. 8).", "The other allowances category consists of the official residence expense  and representation allowances. The official residence expense spending  at posts decreased by $2.6 million from fiscal years 2011 through 2016.  The representation allowance increased by $6.6 million during the same  period (see fig. 9)."], "subsections": []}, {"section_title": "State\u2019s Spending on the Post Allowance, Separate Maintenance Allowance, Hardship Pay, and Danger Pay Varied Substantially by Country in Fiscal Years 2011\u20132016", "paragraphs": ["State\u2019s spending on the post allowance, SMA, hardship pay, and danger  pay varies substantially by country because these expenditures are  determined by factors specific to each post and allowance. For the post  allowance, spending by country reflects allowance rates, the number of  State employees, and the size of State employees\u2019 families at each of the  country\u2019s posts. Spending for SMA, by country, depends upon the  number of State employees maintaining their families away from post.  Spending for hardship pay and danger pay, by country, reflects the  allowance rate and number of State employees permanently assigned to  posts in each country. For example, in fiscal year 2016 State spent about  the same amount on hardship pay in Dhaka, Bangladesh (a post eligible  for 35 percent hardship pay), as it did in Bangkok, Thailand (a post  eligible for 10 percent hardship pay) because State had more than twice  as many personnel assigned to Thailand as to Bangladesh.", "Figure 10 shows a map of State\u2019s post allowance spending by country for  fiscal years 2011 through 2016. State provided this allowance in about  170 countries worldwide in that period.", "Figure 11 shows State\u2019s spending on SMA. Employees received an SMA  across about 170 countries from fiscal year 2011 through 2016.", "Figure 12 shows State\u2019s spending on hardship pay. About 140 countries  had posts eligible for hardship pay from fiscal years 2011 through 2016.", "As illustrated in figure 13, countries with danger pay spending in fiscal  years 2011 through 2016 are largely concentrated in the Middle East and  Africa. Employees from posts in about 30 countries received danger pay  from fiscal years 2011 through 2016. Several countries with danger pay  spending during this period\u2014including Mexico, Colombia, and Saudi  Arabia\u2014were no longer eligible for danger pay as of February 5, 2017."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to State for comment. State provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of State. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-8980 or courtsm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to (1) describe the allowances the  Department of State (State) offers its employees serving overseas and (2)  examine the amount State spent annually on these allowances from fiscal  years 2011 through 2016.", "To describe the different allowances offered by State to employees  serving overseas, we reviewed the Foreign Affairs Manual (FAM), Foreign  Affairs Handbooks, the Department of State Standardized Regulations,  and other State information. We selected 14 allowances to include in our  scope based on 3 FAM Exhibit 3210. From this list we excluded the  advance-of-pay allowance because it is not an additional outlay from  State\u2019s budget.", "To examine State\u2019s spending at overseas posts for these allowances, we  analyzed data in fiscal years 2011 through 2016 from State\u2019s  Consolidated American Payroll Processing System and State\u2019s Global  Financial Management System, which are administered by State\u2019s  Bureau of the Comptroller and Global Financial Services (CGFS). We  used the Global Financial Management System, State\u2019s accounting  system, to analyze the foreign transfer, home service transfer, education  allowance, educational travel, difficult-to-staff incentive, living quarters,  temporary quarters subsistence, extraordinary living quarters, official  residence expense, and representation allowances. We used the  Consolidated American Payroll Processing System, State\u2019s payroll  system, to analyze post allowance, separate maintenance allowance  (SMA), hardship pay, and danger pay expenditures, including information  on the outlays by country. Because CGFS processes these four  allowances through payroll, it provided us with spending data for the 26  pay periods that best approximated each fiscal year from 2011 through  2016, and we used these data to summarize spending by fiscal year.", "All spending in this report is presented in nominal dollars. We also used  the gross domestic product price index to analyze trends in hardship and  danger pay, expressed in terms of constant (inflation-adjusted) dollars. To  assess the reliability of the data that State provided, we performed testing  to identify missing data, outliers, and errors; and interviewed Office of  Allowances officials in Washington, D.C., and CGFS officials in  Charleston, South Carolina. We determined that the data we used were  sufficiently reliable for the purposes of summarizing spending by country  for the post allowance, SMA, hardship pay, and danger pay and by fiscal  years 2011\u20132016 for all allowances. We also communicated with State  officials from the Office of Allowances, CGFS, and the Bureau of  Overseas Building Operations about changes in allowance expenditures  over time.", "We conducted this performance audit from May 2017 through November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our  description and analysis based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Department of State Spending for Allowances for Employees Serving at Overseas Posts, Fiscal Years 2011\u20132016", "paragraphs": ["Appendix II: Department of State Spending for  Allowances for Employees Serving at  Overseas Posts, Fiscal Years 2011\u20132016 417,283  37,900  46,441  55,019  852,972  11,367  (21,055)  (347)"], "subsections": [{"section_title": "Education travel Recruiting and retention incentive allowances Hardship differential", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Hynek Kalkus (Assistant  Director), Alana Miller (Analyst-in-Charge), Ashley Alley, Timothy Carr,  Debbie Chung, Gita Devaney, Neil Doherty, Jill Lacey, Drew Lindsey, and  Eli Stiefel made key contributions to this report."], "subsections": []}]}], "fastfact": ["The State Department has 14 allowances that compensate employees for living overseas. For example, a post allowance helps offset the cost of living in areas more expensive than Washington, D.C., an education allowance covers the cost of sending children to school overseas, and a hardship allowance pays employees up to 35% more to serve in difficult places.", "In an earlier report, we focused on hardship and danger pay. In this report, we looked at what State spent on all of its allowances, which amounted to about $2.9 billion from 2011 to 2016. The education allowance, hardship pay, and post allowance accounted for about 70 percent of the total."]}
{"id": "GAO-18-320", "url": "https://www.gao.gov/products/GAO-18-320", "title": "U.S. Patent and Trademark Office: Assessment of the Covered Business Method Patent Review Program", "published_date": "2018-03-12T00:00:00", "released_date": "2018-03-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Patents can promote innovation by giving inventors exclusive rights to their inventions, and patent owners can bring infringement lawsuits against anyone who uses, makes, sells, offers to sell, or imports a patented invention without authorization. As GAO previously reported, such lawsuits can take years and cost several million dollars. USPTO's CBM program provides a trial proceeding to challenge a patent's validity at USPTO's board for, according to stakeholders, a fraction of the time and money that would be spent in the federal courts. The CBM program began in September 2012 and is slated to sunset in September 2020.", "GAO was asked to examine the CBM program. This report (1) describes the extent to which the program has been used to challenge patents, and the results of those challenges; (2) examines the extent to which USPTO ensures timeliness of trial decisions, reviews decisions for consistency, and engages with stakeholders to improve proceedings for the program; and (3) discusses stakeholder views on the effects of the program and whether it should be extended past its sunset date. GAO analyzed CBM trial data from September 2012 through September 2017, reviewed USPTO documents, and interviewed 38 stakeholders, such as legal and academic commentators, selected for their knowledge of or direct involvement in such trials."]}, {"section_title": "What GAO Found", "paragraphs": ["From September 2012 through September 2017, entities facing patent infringement lawsuits filed 524 petitions challenging the validity of 359 patents under the U.S. Patent and Trademark Office's (USPTO) covered business method (CBM) program, resulting in decisions against about one-third of these patents. The CBM program provides entities facing infringement lawsuits an opportunity to challenge the validity of a business method patent by demonstrating that it did not meet requirements for patentability. Business method patents focus on ways of doing business in areas such as banking or e-commerce. The rate of filing petitions over this period has fluctuated but has generally declined since 2015, and none were filed in August or September 2017.", "USPTO has taken several steps to ensure the timeliness of trial decisions, review past decisions, and engage with stakeholders to improve proceedings under the program:", "Timeliness: USPTO regularly informs relevant parties about paperwork requirements and due dates throughout trials. According to program data, as of September 2017, all 181 completed trials were completed within statutorily required time frames.", "Decision review: USPTO has taken several steps to review its decisions and has monitored the rate at which the Court of Appeals for the Federal Circuit affirms or reverses them. However, USPTO does not have guidance, such as documented procedures, for reviewing trial decisions, or the processes leading to decisions, for consistency. Without guidance, such as documented procedures, USPTO cannot fully ensure that it is meeting its objective of ensuring consistency of decisions.", "Stakeholder engagement: USPTO judges have engaged with stakeholders by participating in public roundtables and webinars, and attending judicial conferences, among other things.", "Stakeholders GAO interviewed generally agreed that the CBM program has reduced lawsuits involving business method patents in the federal courts. While many stakeholders favored maintaining aspects of the program, there was not strong consensus among stakeholders for how future trials should be designed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that USPTO develop guidance, such as documented procedures, for reviewing trial decisions for consistency. USPTO agreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["To promote the progress of science and useful arts, the Constitution  grants Congress the power to provide inventors with exclusive rights to  their inventions\u2014in the form of patents\u2014for a limited time. Congress has  done so by enacting statutes governing the issuance of patents, which  generally allow patent owners to exclude others from making, using,  selling, or importing the patented invention for up to 20 years from the  date on which the application for the patent was filed at the U.S. Patent  and Trademark Office (USPTO). By restricting competition, patents allow  their owners to earn greater profits on inventions than if the inventions  could be freely imitated. USPTO receives hundreds of thousands of  applications each year from inventors seeking patents. By law, before  granting a patent, USPTO must determine whether a patent application  meets patentability requirements for subject matter; novelty; non- obviousness; and clarity and specificity.", "Business methods\u2014which are ways of doing business in areas such as  e-commerce, insurance, banking, or stock trading\u2014were generally  thought to be unpatentable until a 1998 court ruling (State Street Bank).  USPTO officials told us they saw a swift increase in the number of  applications for business method patents after that ruling. In part because  USPTO examiners were less trained in business methods, examiners  issued some patents for business methods that did not meet the clarity  and specificity requirements because they were insufficiently detailed to  enable someone to make and use the inventions. Examiners also issued  some patents for technologies that were well known to people in the field,  rather than for novel inventions. For example, the technologies for  imaging, storage, and transmittal of financial data were in widespread use  before two patents for these technologies were issued in June 1999 and  February 2000 following the State Street Bank ruling. The owner of these  two patents, DataTreasury, sued some of the nation\u2019s largest banks for  patent infringement. Many banks settled the lawsuits for undisclosed  amounts and paid licensing fees to keep using these technologies rather  than engage in what might have been a costly court battle. In one case, a  federal judge ordered a bank to pay DataTreasury more than $53 million  for willful infringement. In April 2015, one of the DataTreasury patents  was ultimately ruled unpatentable by USPTO; the second was ruled  unpatentable in September of that year. Those invalidity rulings were  affirmed by the U.S. Court of Appeals for the Federal Circuit in October  2016.", "In the late 2000s, legal commentators, technology companies, and others  began raising questions about whether the patent system was working  well to promote innovation. In particular, questions were raised about an  increase in the number of low-quality patents\u2014those that should not have  been granted because they do not meet the patentability requirements.  Questions were also raised about the increase in patent infringement  litigation, especially in the software and technology sectors. A common  theme of such questions was whether this type of patent litigation was  driven by patent owners asserting low-quality software and business  method patents solely to force costly monetary settlements, which could  pull resources away from research and development and other activities  more closely aligned with innovation. In June 2016, we reported that the  majority of defendants in patent infringement lawsuits between 2009 and  2015 were accused of infringing software and business method patents.  That report recommended USPTO take a number of steps aimed at  improving patent quality, especially relative to software and business  method patents. USPTO agreed with our recommendations and is  working to address them.", "In 2011, Congress passed the Leahy-Smith America Invents Act (AIA),  which authorized three administrative proceedings for challenging an  issued patent\u2019s validity, including the Transitional Program for Covered  Business Method Patents (CBM program). A \u201ccovered\u201d business  method patent is a patent that claims a method or corresponding  apparatus for performing data processing or other operations used in the  practice, administration, or management of a financial product or service.  All three of the new administrative proceedings took effect in September  2012, allowing entities facing patent infringement lawsuits an opportunity  to demonstrate that the patents should not have been granted because  they did not meet the requirements for patentability. The proceedings are  held before administrative patent judges at USPTO\u2019s Patent Trial and  Appeal Board and, as reported by the House of Representatives  Committee on the Judiciary, were intended to provide a more efficient and  less costly alternative to district court for deciding patent validity. The  CBM program is slated to sunset in September 2020.", "You asked us to examine the CBM program. This report (1) describes the  extent to which the CBM program has been used to challenge patents,  and the results of those challenges; (2) examines the extent to which  USPTO ensures timeliness of trial decisions, reviews decisions for  consistency, and engages with stakeholders to improve its administrative  proceedings for the program; and (3) discusses stakeholder views on the  effects of the CBM program and whether it should be extended past its  scheduled September 2020 sunset date.", "To describe the extent to which the CBM program has been used to  challenge patents, and the results of those challenges, we obtained data  on board proceedings from RPX Corporation and Unified Patents. These  data included information on all proceedings from September 2012  through September 2017. We tested the quality of the data, interviewed  relevant officials, and reviewed relevant documentation for the data. We  found the data to be sufficiently reliable to describe board petitions and  their outcomes. To provide context for our findings, we compared the data  for the CBM program with data for inter partes review, another type of  administrative proceeding for challenging patent validity.", "To examine the extent to which USPTO ensures timeliness of trial  decisions, reviews decisions for consistency, and engages with  stakeholders to improve its administrative proceedings for the program,  we reviewed the AIA and USPTO documents and interviewed USPTO  officials and stakeholders. We assessed USPTO\u2019s efforts to review  decisions for consistency against federal standards for internal control  and USPTO\u2019s current strategic plan.", "To obtain stakeholder views on the effects of the CBM program and  whether it should be extended, we conducted semistructured interviews  with 38 stakeholders knowledgeable about the CBM program. To identify  these stakeholders, we first identified the following sets of stakeholder  groups: board petitioners and patent owners, attorneys in board  proceedings, technology trade groups, public interest groups, legal and  academic commentators, and venture capitalists. We then selected  knowledgeable stakeholders based on a set of criteria we developed for  each group. For example, we selected petitioners who challenged  multiple patent owners using the CBM program, petitioners who had used  other review programs heard by the board, and petitioners from a range  of industries such as banks, other financial institutions, and technology  companies. We selected patent owners who had experience defending  more than one patent using the CBM program or who had defended a  patent in more than one challenge, and patent owners of different types:  individual inventors, operating companies, and non-practicing entities.  The selected stakeholders did not form a random, statistically  representative sample of all relevant stakeholders, so we cannot  generalize the results of the interviews to the relevant total population, but  the stakeholders did provide a broad spectrum of opinions on the CBM  program. We identified key themes and sub-themes from the stakeholder  interviews by using qualitative analysis software to group the responses.  We then analyzed and categorized the themes to draw inferences about  the CBM program by examining the amount and nature of agreement and  disagreement between stakeholder responses and by assessing the  strength of the arguments supporting each response. We also considered  the way in which stakeholders\u2019 interests could influence their responses.  In addition, we analyzed data from RPX Corporation on patent  infringement lawsuits filed in all 94 federal district courts from January  2007 through June 2017. To assess the reliability of these data, we  electronically and manually tested these data for reasonableness and  interviewed knowledgeable officials, and we found these data to be  sufficiently reliable to allow us to identify trends in patent litigation over a  period from 5 years before the Patent Trial and Appeal Board  proceedings began to 5 years after their implementation. Appendix I  provides more detail on our scope and methodology.", "We conducted this performance audit from November 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient and 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."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides an overview of patenting in the United States,  patent infringement litigation, and administrative proceedings for patent  validity challenges. It also includes a brief history of court decisions that  clarified eligibility requirements for the Patent Trial and Appeal Board\u2019s  CBM program. See \u201cRelated GAO Products\u201d at the end of this report for a  list of our prior work related to patents and intellectual property."], "subsections": [{"section_title": "Patenting in the United States", "paragraphs": ["In the United States, patents may be granted by USPTO for any new and  useful process or machine, or any new and useful improvement on an  existing process or machine, but there are some exceptions. Laws of  nature, physical phenomena, and abstract ideas are not patentable.  The U.S. Supreme Court and the U.S. Court of Appeals for the Federal  Circuit have refined the boundaries of these exceptions over time,  allowing some subject matter that was previously not patentable to  become so. For example, U.S. Supreme Court decisions in the 1970s  found mathematical formulas used by computers (i.e., software) were like  laws of nature and therefore not patentable subject matter. However, a  1981 Supreme Court decision overturned USPTO\u2019s denial of a patent  application for a mathematical formula and a programmed digital  computer because, as a process, the claimed invention was patentable  subject matter. Similarly, business methods were widely considered  unpatentable subject matter until 1998, when the U.S. Court of Appeals  for the Federal Circuit ruled in the State Street Bank decision that they  were patentable. In 2014, however, the Supreme Court effectively  limited the patentability of some business methods by ruling in Alice Corp.", "Pty. Ltd. v. CLS Bank Int\u2019l that using a generic computer to implement an  abstract idea is not patentable.", "Traditionally, economic theory has held that intellectual property rights,  such as those conferred by patents, can help encourage innovation and  stimulate economic growth. Exclusive rights provided by patents, for  example, can help patent owners recoup investments in technology and  earn greater profits than if their patented technologies could be freely  imitated. Moreover, to the extent that intellectual property rights  encourage specialization, innovators may be more productive than they  would be in the absence of patent laws. Because of complex trade-offs,  however, some economists hold a more nuanced view of the potential for  patents to promote innovation and increase productivity. By increasing  the cost of using technologies, for example, patents may discourage not  only diffusion of these technologies but also cumulative innovation that  uses such technologies to develop new technologies. In addition,  attempts to quantify the effect of patents on economic growth often fail to  account for the creation of useful knowledge outside the patent system.  Furthermore, to the extent that innovation occurs in the absence of patent  laws, the need for patents can vary across industries or over time. Some  researchers have suggested that some patents are currently limiting  innovation, especially in areas such as software and computer  technologies that overlap with business methods.", "USPTO receives hundreds of thousands of applications each year from  inventors seeking patents to protect their work. According to USPTO  data, applications for patents have increased in recent years, and the  share of patents granted for business methods has significantly increased  over the past 2 decades (see fig. 1). In calendar year 2014, patents  related to business methods accounted for more than 28 percent of all  issued patents.", "A patent\u2019s claims define the legal boundaries of the invention, often in  complex technical language. A patent application can be written to define  an invention broadly or narrowly. Patent applicants often prefer broader  claims because their competitors are less able to avoid infringement by  making only small changes to their patented invention, as we reported in  June 2016.", "Before issuing a patent, USPTO patent examiners determine whether  claimed inventions in the application meet requirements for patentable  subject matter, novelty, non-obviousness, and clarity\u2014the four  patentability grounds that are established by statute. Patent examiners  assess whether the claimed invention consists of patentable subject  matter and also ensure that the claims are described clearly enough to  enable a person skilled in the art to make the claimed invention. In  addition, examiners determine whether a patent application\u2019s claimed  invention is novel and non-obvious by comparing the application\u2019s content  to \u201cprior art\u201d\u2014 existing patents and patent applications both in the United  States and abroad, as well as non-patent literature such as scientific  articles.", "In February 2015, USPTO launched an Enhanced Patent Quality  Initiative, which included several proposals designed to improve the  quality of patent examination and issued patents. However, we found in  June 2016 that USPTO faced challenges in issuing patents in accordance  with standards. For example, we found that a majority of examiners (67  percent) said they have somewhat or much less time than needed to  complete an examination, given a typical workload, and many examiners  felt a time pressure that reduced their ability to conduct thorough  searches. Examiners also said that it was difficult to issue patents that  met the statutory requirements because of the limited availability of and  access to non-patent prior art such as offers for sale and public use.  Examiners said another limitation is their being responsible for  examinations in subject areas in which they do not have adequate  technical knowledge. We made seven recommendations to USPTO  aimed at improving patent quality, clarity, and prior art search. USPTO  agreed with the recommendations and is working to address them."], "subsections": []}, {"section_title": "Patent Infringement Litigation", "paragraphs": ["Patent owners can bring infringement lawsuits against anyone who uses,  makes, sells, offers to sell, or imports the patented invention without  authorization. Only a small percentage of patents in force are ever  litigated, but some scholars believe that low-quality patents can make  such litigation not only more complex and expensive but also more  frequent. During an infringement case, the accused infringer may seek to  have the lawsuit dismissed by showing the patent is invalid. When the  courts rule on validity, they generally invalidate almost half of the patents,  according to academic research.", "Exactly what a patent covers and whether another product infringes the  patent\u2019s claims are rarely easy questions to resolve in litigation, and  defending a patent infringement lawsuit in district court can take years  and cost millions of dollars, not including damages if infringement is  found. Whatever the outcome, costly litigation can leave defendants  with fewer resources for innovation. Consequently, patent infringement  defendants often find it in their best interest to settle lawsuits quickly, as  we reported in August 2013."], "subsections": []}, {"section_title": "Administrative Proceedings for Challenging Patent Validity before the Patent Trial and Appeal Board", "paragraphs": ["The AIA in 2011 created the Patent Trial and Appeal Board and stated  any references in federal law to USPTO\u2019s then-existing Board of Patent  Appeals and Interferences be deemed to refer to the new board. By  statute, the Patent Trial and Appeal Board consists of the USPTO  Director, Deputy Director, Commissioner for Patents, Commissioner for  Trademarks, and administrative patent judges. In practice, to issue  decisions in the matters that come before it, the board involves more than  300 people serving in many positions, according to the board. The board  is led by the Chief Judge and Deputy Chief Judge, who, along with other  members of senior management, meet regularly to discuss operational  and procedural matters of importance to the board\u2019s overall mission,  according to the board.", "The AIA created three new administrative proceedings for the board to  administer, each with different statutory rules (see table 1). Two  proceedings were made permanent:", "Post-grant review provides a 9-month opportunity following the  issuance of a patent during which a third party can file a petition to  challenge a patent\u2019s validity on any of the four statutory grounds:  subject matter eligibility, novelty, non-obviousness, and clarity.", "Inter partes review is available to third parties for the life of the patent,  but on a limited set of grounds (non-novelty or obviousness), and on a  limited set of acceptable prior art (previously issued patents and  printed publications).", "The third proceeding\u2014the CBM program\u2014was included in the act as a  temporary proceeding that can be used to challenge a patent at any point  in its life, as allowable under the inter partes review program. However,  under the CBM program, only a party (e.g., a company or an individual)  that is sued or charged in an infringement suit can petition. Such  petitioners can challenge a patent\u2019s validity on any of the four statutory  grounds without the limits on prior art in inter partes review. Additionally,  rules about which arguments parties are officially barred from being  raised again in later legal actions (called estoppel provisions) are less  restrictive under the CBM program than for the other two board  proceedings. However, the body of patents that qualify for review under  the CBM program is limited to those that claim a non-technological  method involved in the practice, administration, or management of a  financial service or product. A patent is \u201ctechnological\u201d if it claims a  technological feature that solves a technical problem using a technical  solution. Many software and business method patents issued in the  wake of State Street Bank describe implementing an abstract idea on a  generic computer. Since the Supreme Court\u2019s 2014 decision in Alice,  which closely aligns with the CBM program\u2019s \u201cnon-technological\u201d  designation, these types of ideas are no longer thought to be patentable.", "Inter partes review is the most-used of the proceedings created by the  AIA and the one stakeholders we interviewed were most familiar with  when they discussed the Patent Trial and Appeal Board. The other  proceedings have been used less frequently, likely because of the short  window for filing a challenge, in the case of post-grant review, and  because of additional restrictions on what patents may be challenged, in  the case of CBM.", "Under statute and regulation, the full review process at the Patent Trial  and Appeal Board for any of the three proceedings generally takes up to  18 months and comprises two phases: (1) the petition phase, which lasts  up to 6 months, and (2) the trial phase, which generally lasts up to 12  months. During the petition phase, the petitioner\u2014typically a party  accused of patent infringement, in the CBM program\u2014 files a petition  challenging the validity of one or more of the patent\u2019s claims and pays  fees for each challenged claim. In some cases, a petitioner will file more  than one petition challenging a patent. This might occur when a petitioner  is constrained by the maximum number of pages allowed in a petition.  Multiple petitions can also be filed against a single patent if the patent  owner has sued more than one party for infringement, and each files a  separate petition challenging the patent\u2019s validity. Petitioners might also  file a petition under more than one proceeding, either concurrently or  sequentially.", "When a petition is received and the fees paid, administrative personnel of  the board, under direction of the Chief Judge, assign three technically  trained administrative patent judges to the case. According to agency  documents, these three-judge panels are put together taking into account  many factors, including technical experience, experience at the board,  potential conflicts of interest, and availability. The patent owner may then,  within 3 months of the petition date, file a preliminary response to the  petitioner\u2019s arguments. Within 3 months of submission of any preliminary  response, or the last date on which such response may be filed, the panel  of judges determines whether to allow the petition to move to the trial  phase for review. This determination is called the \u201cinstitution decision.\u201d  According to statute and regulations, in the case of the CBM program and  post-grant review, a panel of judges may not institute a review unless the  information presented in the petition, if not rebutted, would demonstrate  that it is \u201cmore likely than not\u201d that at least one of the claims challenged in  the petition is unpatentable, or in the case of inter partes review, if the  petitioner has a \u201creasonable likelihood\u201d of prevailing.", "The first step in the trial phase is discovery (a step that exists in all federal  civil litigation), during which the parties produce documents or testimony  relevant to the challenged claims. Each party has 3 months to file  discovery documents for the panel of judges\u2019 review. If a petitioner and  patent owner do not settle a case or it does not otherwise terminate, the  case will proceed to the oral hearing. The hearing is an opportunity for the  parties to make their strongest arguments and to answer judges\u2019  questions, according to a board official, and after the hearing, the panel of  judges will deliberate over the course of a few weeks or months and then  issue its final written decision. The final written decision must be issued  within 1 year of the institution decision, with limited exceptions. The  patent owner may, for example, cancel one or more claims in the patent  in an attempt to avoid institution of the trial.", "Figure 2, shows the progression of a case from the petitioner\u2019s filing  to the panel of judges issuing a final written decision.", "Under its Standard Operating Procedures, every Patent Trial and Appeal  Board decision is, by default, a routine opinion until it is designated as  \u201crepresentative,\u201d \u201cinformative,\u201d or \u201cprecedential.\u201d", "Representative decisions typically provide a representative sample of outcomes on a particular matter; they are not binding authority.", "Informative decisions provide norms on recurring issues, guidance on issues of first impression, and guidance on the board\u2019s rules and practices; they are not binding authority.", "Precedential decisions are binding authority and emphasize decisions that resolve conflicts or address novel questions.", "Nominations for these designations can be made by a Patent Trial and  Appeal Board judge, the Chief Judge, the Director of USPTO, the Deputy  Director of USPTO, the Commissioner for Patents, or the Commissioner  for Trademarks. Also, a member of the public may nominate a decision  for a precedential designation within 60 days of its issuance. The Chief  Judge can designate a nominated decision as representative or  informative, but under Standard Operating Procedures, a precedential  designation requires a majority agreement among all voting members of  the board, including administrative patent judges and statutory members,  as well as concurrence by the Director of the USPTO."], "subsections": []}, {"section_title": "Court Decisions on Eligibility for Review under the CBM Program", "paragraphs": ["Petitioners and patent owners may appeal the final written decisions of  the Patent Trial and Appeal Board to the U.S. Court of Appeals for the  Federal Circuit, just as unsatisfied plaintiffs or defendants may appeal a  federal district court decision, and decisions may ultimately be appealed  to the U.S. Supreme Court. The following decisions have significantly  influenced the eligibility rules for CBM review, for different reasons:  In Cuozzo Speed Technologies, LLC v. Lee (June 2016), the U.S. Supreme Court affirmed the board\u2019s use of the \u201cbroadest reasonable construction\u201d standard\u2014meaning the ordinary meaning that someone skilled in the art would reach\u2014to define the language of the claims during post-grant review as a reasonable exercise of the board\u2019s rulemaking authority. Defining claim language using the broadest reasonable interpretation meant that the number of business method patents that could be determined as financial in nature is larger than it would otherwise be, so more patents are potentially eligible for review under the CBM program.", "In Unwired Planet, LLC v. Google Inc. (November 2016), the U.S. Court of Appeals for the Federal Circuit ruled that the USPTO\u2019s policy of assessing whether a claim\u2019s activities were \u201cincidental\u201d or \u201ccomplementary\u201d to a financial activity was too broad a standard to apply when determining whether a patent claim was eligible for a CBM review. The court stated that, to be CBM-eligible, a patent must claim a method used in the practice, administration, or management of a financial product or service. Applying this narrower standard effectively reduced the number of patents accepted for review under the CBM program.", "In Secure Axcess, LLC v. PNC Bank Nat\u2019l Assoc. (February 2017), the U.S. Court of Appeals for the Federal Circuit clarified that a CBM patent must specifically have a claim that contains an element of financial activity in order for a patent to qualify for review under the CBM program. Like the Unwired Planet decision, the narrower standard expressed by the court has led to fewer patents being  eligible for review under the CBM program."], "subsections": []}]}, {"section_title": "More Than 350 Patents Have Been Challenged under the CBM Program, and About One-Third of These Patents Were Ruled Unpatentable", "paragraphs": ["From September 2012 through September 2017, parties accused of  patent infringement filed 524 petitions challenging the validity of 359  distinct patents under the CBM program, resulting in rulings against about  one-third of these patents. The average monthly number of CBM petitions  fluctuated during this period, but use of the program has declined since  about 2015. Some stakeholders have expressed concern about multiple  petitions being filed against the same patent, but our analysis of petition  data showed that the vast majority of patents challenged under the CBM  program were challenged once or twice. Overall, through September  2017, the Patent Trial and Appeal Board completed reviews of 329 of the  359 patents challenged under the program, and the board ruled at least  some challenged patent claims unpatentable in about one-third of these  patents."], "subsections": [{"section_title": "Petitioners Have Challenged the Validity of 359 Patents under the CBM Program, but Use of the Program Has Declined Overall", "paragraphs": ["Parties accused of patent infringement filed 524 petitions for patent  review under the CBM program from September 2012 through September  2017, with the number of petitions per month fluctuating but tapering off  over time (see fig. 3). During this 5-year period, an average of more than  9 petitions per month were filed under the CBM program, but this average  rate has declined since 2015 to fewer than 5 per month in the last fiscal  year, with no petitions filed in August or September 2017. As a point of  comparison, the number of petitions for inter partes review has generally  increased over the 5-year period.", "Stakeholders we interviewed suggested several possible reasons for the  decline in CBM petitions. Specifically, some stakeholders told us that  recent Federal Circuit and Supreme Court decisions that have changed  what is patentable subject matter and the eligibility criteria for CBM review  may have reduced the set of business method patents eligible for CBM  review. Some stakeholders also suggested CBM petitioners  successfully targeted the lowest-quality business method patents in the  early years of the program, and now that those patents have been  challenged, there are fewer patents that do not meet patentability  requirements. Another possibility, according to stakeholders, is that  owners of business method patents are wary of asserting their intellectual  property and risking its invalidation, especially in light of the Alice  decision, which effectively limited the patentability of some business  methods. As a result, according to these stakeholders, fewer such  patents end up in litigation and subsequently before the Patent Trial and  Appeal Board. Some stakeholders also told us the CBM program has  reduced patent infringement lawsuits, including some filed by non- practicing entities. In addition, a few stakeholders told us some patent  owners may be waiting until after the CBM program sunsets to assert  their patents."], "subsections": []}, {"section_title": "Patents Are Infrequently Challenged More Than Once or Twice", "paragraphs": ["Some stakeholders we interviewed were concerned about multiple  petitions being filed against the same patents; however, our analysis  showed that the vast majority of the 359 distinct patents challenged under  the CBM program were challenged only once or twice under that  program. Stakeholders have suggested that petitioners are, in some  cases, using the CBM program and the inter partes review program as  tools to increase costs borne by patent owners, and in the case of the  CBM program, as a tool to delay district court proceedings. Some  stakeholders have stated that the use of the AIA trials in this manner  amounts to harassment, and at least one stakeholder has written letters  to USPTO requesting the Director to intervene.", "However, our analysis of petition data showed that among the 359  patents challenged under the CBM program, 73.3 percent were  challenged once and 18.4 percent were challenged twice during the 5- year period we reviewed. Another thirty patents, or 8.4 percent, were  challenged more than twice under the CBM program during this period  (see fig. 4). Of these 30 patents, in many cases multiple parties  challenged a single patent; in others, a single petitioner or set of  petitioners challenged a patent multiple times.", "In addition, of the 359 patents challenged under the CBM program during  the 5-year period we reviewed, 92 were also challenged at least once in  inter partes review. In some instances, petitioners filed concurrent  petitions for CBM and inter partes review if, for example, they were  unsure if the claims were eligible for a CBM review. In other instances,  petitioners first sought CBM review and, when that was unsuccessful,  filed an inter partes review. In these cases, petitioners may initially be  seeking CBM review because of the additional grounds available for  challenging the patents, and then turning to the inter partes review  program if the CBM challenge proves unsuccessful. In other instances,  petitioners first had success under the inter partes review program and  then filed another petition under the CBM or inter partes review programs,  according to our analysis of petition data.", "When including patent challenges under both the CBM and inter partes  review programs, 52.1 percent of the 359 patents challenged under the  CBM program were challenged once and 29.3 percent were challenged  twice (see fig. 4). More than half of the patents challenged under both  programs (50 of 92 patents) did not have any challenged patent claims  instituted for trial under the CBM program, meaning that those patents, in  many cases, did not meet the CBM program\u2019s eligibility requirements and  may have been more appropriately challenged with an inter partes  review.", "There are several other reasons why petitioners may file more than one  petition against a single patent, according to stakeholders we interviewed.  First, the board limits the number of pages that a petitioner may use to  submit prior art and arguments for invalidity. Some petitioners might file  more than one petition so they have room to present all of their art and  arguments at once. Data we analyzed on CBM petitions show that many  follow-on petitions are filed on or near the same day as the first petition,  supporting this argument. Second, in some cases the patent owner may  not identify all the asserted patent claims in the district court right away or  may change the set of asserted claims later in the proceedings,  necessitating an additional CBM or inter partes review petition to cover  the new claims. Third, in order to get the expensive district court  proceedings stayed\u2014that is, halted pending the board\u2019s decision on the  patent\u2019s validity\u2014a petitioner may file a CBM petition on patentability or  clarity grounds soon after the district court trial commences, because  these arguments require limited time to formulate. Later, once the  petitioner takes the time to investigate the prior art, the petitioner might  file a second petition challenging the patent for non-novelty or  obviousness. In our analysis of petition data, we found some examples  that were consistent with this approach. Fourth, if a patent owner charges  multiple entities with patent infringement, each of the alleged infringers  has an individual right to file a petition challenging the patent\u2019s validity.  The defendants in the infringement suits who become petitioners at the  board may collaborate with one another and join their cases, but they  may also choose to file petitions individually. In our analysis of petition  data, we found examples of both. Petitioners might choose to join their  cases in order to share the cost of counsel, while others may choose not  to join their cases, perhaps because they use substantially different art  and arguments in their petitions.", "Our analysis of the petition data found some examples of multiple  petitions against a single patent that may raise questions about the  legitimacy of the follow-on petitions. In some instances, a second, follow- on petition challenging the patent\u2019s validity on the same statutory grounds  as it did in the first petition was filed by the same petitioner after the first  petition was denied institution. This type of multiple petitioning may occur  when, for instance, a procedural termination resulted from a technical  error in the first petition. Board officials said it may also occur because a  petitioner is using the first denial of institution to alter the arguments and  guide the second petition, a strategy that the board has labeled \u201croad- mapping.\u201d In other instances, a single petitioner filed a second, follow-on  petition challenging the patent on different statutory grounds after the first  petition was denied institution. These follow-on petitions may be  legitimate attempts to correct simple errors in the first petitions, or they  may reflect practices that might raise questions about whether the  program is being used as intended.", "Patent Trial and Appeal Board officials are aware of concerns over  multiple petitions and recently concluded a study about the prevalence of  such practices in relation to all three types of proceedings created by the  AIA. The board found that almost two-thirds (63.4 percent) of follow-on  petitions were filed on or near the same day as the first petition. Nearly  three in four (72.4 percent) follow-on petitions were filed before the  institution decision on the first petition. These findings suggest that most  petitioners are not waiting to use the board\u2019s decision of non-institution as  a guide for developing a second petition. Moreover, the board officials we  interviewed told us they are empowered to deny a petition if they  determine the petition presents the same or substantially the same prior  art or arguments previously presented in another petition. Board officials  told us they had denied several recent petitions on this basis. In addition,  in a recent precedential opinion, the board clarified the characteristics it  looks for to determine whether it should deny an inter partes review when  a petitioner submits a follow-on petition. These characteristics include  whether the petitioner previously filed a petition against the same patent  claims; whether the petitioner provides adequate explanation for the time  elapsed between filing two or more petitions against the same patent  claims; and whether the petitioner knew, or should have known, about the  prior art presented in the second petition at the time of the first petition."], "subsections": []}, {"section_title": "Claims Have Been Ruled Unpatentable in More Than One-Third of Patents Challenged under the CBM Program", "paragraphs": ["The Patent Trial and Appeal Board has ruled unpatentable some or all of  the patent claims instituted for trial in about one-third of challenged  patents and about one-third of petitions under the CBM program. Data on  petition outcomes, however, are open to different interpretations  depending on how they are presented. For example, board judges ruled  some or all of the patent claims considered at trial unpatentable in 96.7  percent of petitions (175 of 181) under the CBM program for which they  issued a final written decision from September 2012 through September  2017. On the basis of this statistic, the board could seem to invalidate  the majority of the patents it reviews, as noted by some stakeholders.  However, this outcome is predictable given the criteria for institution of a  CBM trial\u2014a judge panel will institute a petition to the trial phase if it is  \u201cmore likely than not\u201d that at least one of the claims challenged in a  petition is unpatentable\u2014which tips outcomes for instituted petitions  toward rulings of unpatentability. In addition, board judges did not issue  final written decisions for all petitions that enter the trial phase because  the parties often reach a settlement before the final written decision.  When taking into account all of the CBM petitions that had an outcome as  of Sept 30, 2017, board judges ruled some or all of the claims considered  at trial unpatentable in 35.6 percent of the cases (175 of 492).", "The results are similar when considered by patent rather than by petition.  Specifically, for patents challenged between September 2012 and  September 2017 and for which a final written decision was issued in at  least one petition, 95.2 percent of patents (120 of 126) had some or all  the patent claims that were instituted for trial ruled unpatentable.  However, because not all challenged patent claims are instituted for trial  and because final written decisions are not issued for all petitions that  enter the trial phase, it is also accurate to say the board judges ruled  some or all of the patent claims unpatentable for 36.5 percent of  challenged patents (120 of the 329) that had an outcome as of  September 30, 2017 (see fig. 5).", "Changes in petition outcomes over time also challenge the idea that the  board invalidates most patents it reviews. In particular, the percentage of  CBM petitions instituted for trial has decreased over time (see fig. 6). In  2012, about 80.0 percent of CBM petitions had some or all challenged  claims instituted. In comparison, in 2016 about 53.5 percent of CBM  petitions had some or all claims instituted. Preliminary data for 2017  suggests that this trend might continue: through September 2017, about  38.5 percent of CBM petitions had some or all claims instituted. Similar to  the decline in number of petitions filed, this trend might have a few  explanations, according to stakeholders. Specifically, board panels might  be less likely to institute a petition for trial based on conclusions of the  U.S. Court of Appeals for the Federal Circuit in Unwired Planet and  Secure Axcess. Another possibility is that the patents in earlier cases  represented the easiest targets for validity challenges, and thus the more  recent challenges are based on shakier legal grounds and less likely to  meet the CBM program\u2019s institution threshold.", "In addition to declining institution rates, there has been an increase in the  percentage of CBM petitions that settle before reaching an outcome.  Specifically, the percentage of cases where the parties settled their  dispute either before or after the institution decision increased from about  6.7 percent in 2012 to about 28.9 percent in 2016. When a case before  the board is settled, it generally concludes any concurrent district court  infringement case. The patent owner\u2019s intellectual property remains in  place, and the patent owner is free to assert the patent against other  alleged infringers later."], "subsections": []}]}, {"section_title": "The Board Met Timeliness Requirements and Has Taken Steps to Analyze Decisions and Improve Proceedings but Does Not Have Guidance to Ensure Decision Consistency", "paragraphs": ["The Patent Trial and Appeal Board has completed all trials under AIA- authorized proceedings within statutorily directed time frames, according  to board data, and the board has taken steps to review issues that could  affect the consistency of its trial proceedings and decisions and to engage  with stakeholders to improve its proceedings. To ensure timeliness of trial  proceedings, the board provided a checklist of information and time  frames to petitioners and patent owners, among other things. According  to board documents and interviews with officials, the board has also taken  steps to review and assess its trial proceedings and decisions, but it does  not have guidance for reviewing trial decisions, or the processes that lead  to the decisions, for consistency. The board has also taken several steps  to engage with stakeholders regarding various aspects of trial  proceedings."], "subsections": [{"section_title": "Patent Trial and Appeal Board Data Indicate Trials Have Been Completed within Statutorily Directed Time Frames", "paragraphs": ["According to data on Patent Trial and Appeal Board proceedings, as of  September 31, 2017, all trials under AIA-authorized proceedings,  including the CBM program, have been completed within statutorily  directed time frames. The board maintains a database of trial proceedings  that includes the date of each petition, decision to institute a trial, and final  written decision. Board officials we interviewed told us the timeliness of  decisions to institute a trial and of final written decisions has not been a  concern in the 5 years that it has operated. According to board officials,  as of November 2017, two AIA trials\u2014one under the inter partes review  program and one under the CBM program\u2014have been extended for good  cause past the typical 1-year time limit between the institution decision  and the final written decision, as allowed by statute.", "Board officials told us they have taken several steps to ensure that trials  are completed within required time frames. According to board  documentation, between 2012 and 2017, for example, the board hired  more than 150 additional administrative patent judges, in part to preside  over AIA trials. In addition, the board has taken several proactive  administrative steps to help ensure that stakeholders are aware of  requirements for information filing and dates. For example, when a  petition is filed, the board\u2019s administrative staff creates a checklist of  information required and due dates, and communicates these dates and  requirements to petitioners and patent owners throughout the trial.", "Some stakeholders have expressed concern that AIA trial time frames are  too short and deprive patent owners and petitioners of due process rights.  One patent attorney that we spoke with, for example, noted that the short  time frames limit discovery. As directed by the AIA, a final determination  for a review generally must be issued not later than 1 year after the date a  review has been instituted, and the director may extend that period by up  to 6 months for good cause. Board officials we interviewed stated that  they do not believe parties are having trouble completing discovery  activities in the time allotted in view of the limited discovery allowed at the  board. Board officials further stated that they have not found compelling  reasons to extend trial proceedings on the basis of the need for additional  discovery. As reflected in USPTO\u2019s strategic plan, timeliness of the  board\u2019s trial process is a key program goal, and board officials said trials  would be extended only in unusual circumstances. In addition, board  officials stated that the board adheres to the 12-month timeline for final  written decisions because this timeline gives the district courts a definitive  and predictable endpoint for the trials."], "subsections": []}, {"section_title": "The Board Has Taken Several Steps to Review Issues That Affect Trial Proceedings, but It Does Not Have Guidance to Ensure the Consistency of Its Decisions", "paragraphs": ["The Patent Trial and Appeal Board has decision review processes that  help ensure trial decisions are revisited as appropriate, but the board  cannot ensure the consistency of these decisions because it does not  have guidance for reviewing them or the processes that lead to them. For  trials still in progress, board officials told us that there are several ways  that management gets involved in reviews. According to officials, a review  of an ongoing trial is triggered if and when a paneled judge raises any  issue deserving of management attention. Such issues are brought to the  attention of the Chief Judge or other members of the board\u2019s  management team and are acted upon at their discretion. According to  board officials, the usual response is a management meeting with the  three-judge panel, with the goal of ensuring the judges are aware of any  precedent or ongoing trials dealing with similar issues. The officials said  these review meetings are also meant to ensure that board management  is aware of any decisions that may be relevant to the stakeholder  community or the public. According to board officials, issues that may  prompt action include those that are not routine in nature, that involve  novel questions of law, or that may result in decisions that could  contradict previous board decisions. Board officials called these review  meetings the first step for keeping track of key issues. Board officials told  us these reviews raise a fair number of issues, but the process relies on  self-reporting by the judges, and board officials told us the effectiveness  of these reviews is not measured.", "Board officials also told us that a separate internal review process has  evolved over time, whereby a small group of board judges, in consultation  with board management, seeks to ensure decision quality and  consistency by reading a large number of draft AIA trial decisions and  giving feedback or suggestions to authoring judges prior to issuance. The  board is currently drafting a formal charter that will outline the group\u2019s  function, reviewer selection, and membership term. According to board  officials, these reviews are meant to help ensure consistency with  applicable board rules, other board decisions, and Federal Circuit and  Supreme Court case law. In addition, such reviews may result in coaching  and training to increase an individual judge\u2019s quality of performance.", "Regarding completed trials, board officials told us they review any board  AIA trial decisions that are appealed to the U.S. Court of Appeals for the  Federal Circuit and that the appeals court reverses or remands.  Specifically, the board monitors Federal Circuit decisions and board  management then reviews any reversals or remands for opportunities to  improve processes and stay abreast of emerging issues. According to  board officials, for any reversal or remand, board management and  members of the three-judge panel that decided the case meet to discuss  what steps could have been taken to avoid the Federal Circuit reversal or  remand, and what else can be learned from the Federal Circuit decision.  In some instances, according to officials, the board will host a session  where all board judges are invited to review and discuss the trial court  decision and the decision of the Federal Circuit. In addition, board officials  told us they track data on Federal Circuit affirmances, remands, and  reversals. The board has recently updated its Standard Operating  Procedure to provide guidance on how it handles cases remanded by the  Federal Circuit. This procedure creates internal norms to promote  timeliness and consistency of the board\u2019s response to remands. The  procedure includes a goal for the board to issue decisions on remands  within 6 months of receipt and calls on the Chief Judge and the Deputy  Chief Judge to discuss each remanded case with the presiding three- judge panel before the panel expends substantial effort on the case. The  Chief Judge may also elect to expand the panel assigned to the  remanded case, when deemed prudent.", "Furthermore, officials told us that all board decisions\u2014including final  written decisions, decisions to institute a trial, and any substantive  orders\u2014are reviewed by board judges on the date of issuance.  Specifically, a rotating group of judges, on a voluntary basis, reads and  analyzes each day\u2019s decisions and, according to board officials, sends a  summary list of the number of decisions made that day along with a brief  decision summary for any cases where key issues of interest were raised.  Board officials said that most decisions are straightforward and generally  not summarized in detail. For decisions highlighted in the summary  report, according to officials, a lead judge, in most cases, will then review  the decision more closely. Example summary lists provided to us by the  board show brief summaries of a trial involving interpretations of prior art  admissibility and a trial dealing with an interpretation of a challenge based  on clarity.", "Finally, board officials told us that the board has begun to increase the  number of trial decisions considered for precedential and informative  designations as part of its efforts to ensure the consistency of trial  decisions. Board officials also told us that increasing the number of these  designations had not been a priority while the AIA trial procedures and  processes were being operationalized and as the board was hiring more  than 150 administrative patent judges over the past 5 years. However,  officials said that they are now taking steps to simplify the vetting and  voting process, and the board expects more precedential and informative  designations going forward.", "Taken together, the board\u2019s review processes help ensure that board trial  decisions are reviewed in some manner. However, because the board  does not have documented procedures for how to review decisions for  consistency, the board cannot fully ensure the consistency of the  decisions or the processes that lead to them. USPTO\u2019s 2014-2018  strategic plan includes the goal to \u201coptimize patent quality and timeliness,\u201d  which includes an objective to \u201cmaintain  ability to provide  high-quality decisions.\u201d As part of this objective, the plan states that it is  \u201ccritical for the  to ensure consistency in its decisions through  review of decisions in  proceedings.\u201d", "Under federal standards for internal control, management should design  control activities to achieve objectives and respond to risks. Such control  activities include clearly documenting internal control in a manner that  allows the documentation to be readily available for examination. The  documentation may appear in management directives, administrative  policies, or operating manuals. However, the board has not yet clearly  documented how judges are to review trial decisions, or the processes  that lead to the decisions, to ensure consistency. Without developing  guidance, such as documented procedures, outlining the steps USPTO  will take to review the Patent Trial and Appeal Board decisions and the  processes that lead to decisions, USPTO cannot ensure that it is fully  meeting the objective of ensuring consistency of its decisions."], "subsections": []}, {"section_title": "The Patent Trial and Appeal Board Has Taken Several Steps to Engage Stakeholders and Address Stakeholder Concerns", "paragraphs": ["The Patent Trial and Appeal Board has taken several steps to engage  stakeholders regarding trial proceedings and decisions and address  related concerns. USPTO\u2019s strategic plan states that the board should  expand outreach to stakeholders by providing opportunities for interaction  and updates on board operations and other important issues. The board  has done so through several types of public outreach efforts, including  participating in roundtables, webinars, and judicial conferences, among  other activities. The board has made several changes to policies and  procedures based on stakeholder feedback gathered through these  mechanisms.", "For example, after the Patent Trial and Appeal Board had been  operational for about 18 months, it conducted a series of eight  roundtables in April and May of 2014 at locations around the country to  publicly share information concerning trial proceedings, to obtain public  feedback on these proceedings, and to launch the process of revisiting its  trial rules and trial practice guide. At these roundtables, the board  provided the public with statistics summarizing the administrative trial  proceedings, as well as lessons learned for filing effective petitions,  engaging in successful discovery and amendment practice, and  effectively presenting a case at oral hearing, among other things. The  board also asked for and received feedback from the public on the AIA  administrative trial proceeding rules and trial practice guide, as well as on  experiences in general with the AIA administrative trial proceedings.  Subsequent to the 2014 roundtables, the USPTO sought public input on  all aspects of AIA trial proceedings through a June 27, 2014 Federal  Register notice, which included 17 specific questions regarding certain  trial rules, such as claim construction, the claim amendment process, and  good cause trial extensions. USPTO took a two-step approach in  responding to the 37 comments received in response to this Federal  Register notice. First, USPTO implemented several immediate changes  to board proceedings, including changes to page limits for some  documents. According to the annual report of USPTO\u2019s Patent Public  Advisory Committee, these changes were favorably received by the  stakeholder community. Second, in April 2016, the board implemented  more substantive changes, including allowing testimonial evidence to be  submitted with a patent owner\u2019s preliminary response to a petition and  changing from a page limit to a word count for major briefings, among  other things.", "In addition to roundtables, the board has engaged with stakeholders  through several other mechanisms, including webinars and judicial  conferences. For example, in February 2015, the board announced its  inaugural \u201cBoardside Chat\u201d lunchtime webinar series, which has been  held bi-monthly ever since. These webinars are designed to update the  public on current board activities and statistics, and to allow a means for  the board to regularly receive public feedback about AIA trial proceedings  and any issues of concern. Topics discussed at these events include key  trial decisions, proposed changes to trial rules, and best practices for prior  art presentations in AIA trials, among other things. Since 2015, the board  has hosted an annual judicial conference, where the board engages with  stakeholders and educates them about AIA trial proceedings, answers  questions, and receives feedback. Board judges present trial statistics,  information about the internal functioning of the board, practice tips, and  engage in discussions on topics of current interest to stakeholders.  Topics have included motions to amend and the prevalence of multiple  petitions. More recently, the board has conducted other outreach  sessions, including: an August 2017 roundtable meeting with stakeholders from the  American Intellectual Property Law Association to address a broad  range of topics affecting practitioners before the board, including how  patent claims are interpreted, claim amendments, and conditions  under which multiple petitions from a single petitioner would be  denied; a webinar on August 31, 2017, addressing common evidentiary issues  that occur during AIA trial proceedings; and a webinar on September 12, 2017, with the Chief Judge to  commemorate the 5th anniversary of the board, where discussion  topics included the origins and mission of the board, recent board  developments, and operational procedures.", "According to USPTO\u2019s Patent Public Advisory Committee, this type of  outreach provides a valuable two-way conduit for constructive flow of  information to and from the board. In addition to these various outreach  efforts, stakeholders are encouraged to provide feedback to the board, on  any topic related to trial proceedings, by e-mail or telephone.", "Board officials we interviewed told us that they review information  obtained from stakeholders during roundtable meetings and other  outreach events and implement changes to policies and procedures  where applicable. The officials told us that stakeholder feedback has  been used to inform updates to the board\u2019s trial rules guidance, to modify  rules of practice, and in updating Standard Operating Procedures. In  addition, board officials told us that in response to stakeholder concerns,  they conducted two extensive studies covering motions to amend and the  filing of multiple petitions against a single patent. Furthermore, board  officials told us that they have held training sessions for judges regarding  specific areas of interest to stakeholders. Lastly, board officials also told  us that the board\u2019s website, including the frequently-asked-questions  pages, is updated with information relevant to stakeholders, including  stakeholder concerns. For example, written stakeholder comments  submitted in response to a proposed rulemaking are posted on the  USPTO website for public viewing."], "subsections": []}]}, {"section_title": "Stakeholders Agree the CBM Program Has Reduced Litigation, and Many See Value in Maintaining Aspects of the Program", "paragraphs": ["Stakeholders we interviewed generally agreed that the CBM program has  reduced litigation, and many said there is value in maintaining some  aspects of the program. Stakeholders generally agreed that the CBM  program has contributed to a decrease in litigation involving business  methods patents and that the program has had positive effects on  innovation and investment. Most stakeholders also said there is value in  maintaining, among other things, the ability to challenge patents on all  four statutory grounds before the Patent Trial and Appeal Board."], "subsections": [{"section_title": "Stakeholders Generally Agreed the CBM Program Has Contributed to a Decrease in Litigation Involving Business Method Patents", "paragraphs": ["Stakeholders we interviewed generally agreed the CBM program has  reduced litigation involving business method patents because the CBM  program allows these patents to be more easily challenged than in district  courts. Stakeholders told us that fewer business method patent lawsuits  are filed and that existing lawsuits are often dropped after patents have  been through the CBM program. However, stakeholders also noted that  the Supreme Court\u2019s 2014 decision in Alice may have also reduced the  number of business method patent lawsuits. Patents that would be found  invalid under Alice are often very similar to the patents that are eligible for  challenge under the CBM program, and in some cases, according to  stakeholders, it is cheaper and more efficient to challenge a patent\u2019s  validity in district court using Alice than it is to use the CBM program.", "Stakeholders described the following additional effects of the CBM  program:", "Business method patent assertion is riskier. The CBM program  makes it riskier to assert business method patents because,  compared with district court, the program offers a cheaper and more  efficient way for alleged infringers to challenge a patent\u2019s validity.  District court litigation can take several years and cost several million  dollars, while CBM trials are limited to 18 months and generally cost  much less. In addition, technically trained board judges have greater  expertise in patent law than an average district court judge and jury,  and are often better able to understand complex patentability issues.  Because of this, some alleged infringers are more willing to present  complex arguments\u2014such as questions about whether the patent  meets standards for clarity\u2014to the board than to a jury. As a result,  the CBM program has deterred owners of financial business method  patents from asserting their patents for fear those patents will be ruled  unpatentable. According to stakeholders, the existence of CBM  challenges has put downward pressure on settlement amounts.  Patent owners may want to avoid the risk of their patent being  invalidated and will demand lower settlement amounts to avoid the  risk of CBM and district court proceedings. Petitioners, too, told us  they use this knowledge to negotiate lower settlement fees. In  addition, because challenges under the CBM program may suspend  the parallel district court proceedings, it is more difficult for patent  owners to expect quick settlements from alleged infringers looking to  avoid the rapidly increasing court costs associated with lengthy trials.  The parties can still reach settlements after the alleged infringer files a  challenge under the CBM program, but the patent owners have less  leverage in negotiations. On the other hand, for patent owners willing  to go through a CBM challenge, their patents will emerge stronger  having survived the additional review according to stakeholders we  interviewed.", "Business method patent owners have adjusted assertion  strategies to avoid the CBM program. Patent owners are focused  on asserting business method patents that are higher quality and less  vulnerable to challenge under the CBM program or based on the  Supreme Court\u2019s decision in Alice; in other words, those patents that  describe a technological invention that is not abstract and  implemented on a generic computer. In addition, a few stakeholders  told us that they have abandoned some claims in certain patents to  avoid the possibility of their patents being challenged under the CBM  program. Stakeholders also told us that patent owners seem to be  asserting more patents, and more claims, than before the CBM  program was implemented, as a strategy either to ratchet up defense  costs for accused infringers and secure a settlement or to at least  have success with some of the infringement charges. In addition,  some stakeholders said that because the board charges fees for each  petition challenging a patent, asserting more patents is a strategy to  increase expected costs of defending against infringement and, thus,  to increase the likelihood of a settlement. However, our analysis of  RPX litigation data from 2007 to 2017 did not support these  assertions. Patent litigation data did not show an increase in the  monthly average number of patents asserted per case among cases  involving one or more business method patents.", "The CBM program has decreased the value of business method  patents. The CBM program has decreased the value of business  method patents generally, even beyond those focused on financial  services. Several stakeholders told us that the board\u2019s broad initial  interpretation of the CBM program\u2019s eligibility requirements  contributed to an increased risk to a wider swath of business method  and software patents than was intended by Congress. Stakeholders  told us that any patent tangentially related to financial business  methods has been devalued because it could potentially be  challenged under the CBM program. In addition, stakeholders said  they believed that the threat of such challenges has decreased the  value of all business method patents, including those that might  ultimately survive a CBM challenge. Some stakeholders pointed to a  decrease in licensing of business method patents and others  suggested that patents have lost value on the secondary patent  market. Available data that we reviewed, though limited, support the  claims that patent values on the secondary market have fallen. A few  stakeholders, however, told us that to the extent these patents have  lost value, the devaluation is related to problems with patent quality."], "subsections": []}, {"section_title": "Stakeholders Generally Agreed the CBM Program Has Had Positive Effects on Innovation and Investment", "paragraphs": ["Stakeholders generally agreed the effects of the CBM program on  innovation and investment have been minimal or mostly positive. More  specifically, stakeholders told us that the CBM program is good for overall  innovation and investment in financial technologies in that the program  eliminates overly broad (non-specific), low-quality patents. Stakeholders  told us they believe the existence and assertion of overly broad patents is  bad for innovation, in part because defending against alleged  infringement is expensive and time-consuming, even under the CBM  program. Assertion of overly broad, unclear, or otherwise low-quality  patents acts much like a tax on investment, according to stakeholders.  Stakeholders also told us that removing such patents from the  marketplace promotes innovation because it prevents these patents from  blocking new innovation. According to stakeholders, innovation is  represented by the quality of the patents issued rather than the quantity.  A large number of patents in a technology space, according to  stakeholders, can make it difficult to innovate within that crowded space.", "A few stakeholders had differing views, stating that the CBM program has  affected some companies\u2019 ability to protect a business model with a  business method patent, although one stakeholder acknowledged that the  Supreme Court\u2019s decision in Alice has also had an effect. These types of  comments were generally from stakeholders with company-specific  interests, including individual patent owners and companies that have had  patents invalidated under the CBM program. Other stakeholders,  however, including those in the financial services industry, told us that  innovation in their field is robust. For example, these companies are  developing mobile-payment and blockchain technologies, and the  companies have not seen any negative effects from the CBM program on their ability to innovate, patent, and invest in these financial services  technologies.", "Stakeholders generally agreed that the CBM program and the other post- grant programs have had a positive effect on patent quality, as patent  applicants are more and more aware of what it takes to ensure a patent  will survive a post-grant challenge. Several stakeholders highlighted extra  steps they have taken before and during the patent application and  examination stages to ensure their patents will stand up to any eventual  challenges. For example, one patent owner told us how his company  proactively worked to get its patent examined by a foreign patent office, in  an effort to understand any quality issues with the patent, before  submitting a patent application to USPTO. Another stakeholder told us  about an extended back-and-forth with the USPTO examiner. This  stakeholder told us that the additional effort taken during the examination  process resulted in a patent that is much clearer and that will be more  likely to stand up to additional scrutiny."], "subsections": []}, {"section_title": "Most Stakeholders Said There Is Value in Maintaining Aspects of the CBM Program", "paragraphs": ["Most stakeholders told us there was value in maintaining aspects of the  CBM program, including the ability to challenge patents on all four  statutory grounds at the Patent Trial and Appeal Board, and many told us  that it would be useful to expand this capability to a broader set of patents  beyond business methods. However, there was no strong consensus  among stakeholders for how the AIA trials should be designed in the  future.", "Stakeholders generally agreed that the ability to challenge a patent\u2019s  validity on subject matter eligibility grounds remains important, although  there was not broad agreement among stakeholders regarding how far  that ability should extend beyond business method patents.", "Stakeholders we interviewed pointed to inconsistencies in how federal  courts interpret subject matter eligibility requirements and said that  challenges on subject matter eligibility grounds should remain an option  at the Patent Trial and Appeal Board because of the board\u2019s expertise  over the courts. Some stakeholders said subject matter eligibility  challenges were important for a wider scope of patents than just business  methods because concerns about subject matter eligibility that apply to  business method patents extend to software-related patents in general. In  addition, a few stakeholders suggested that subject matter eligibility  challenges should be available for patents in all areas of technology. The  continued prevalence of challenges in district courts based on the  Supreme Court\u2019s decision in Alice, for business method patents and for a  wider array of patents, highlights the importance of retaining the ability to  challenge patent validity at the board on subject matter eligibility  grounds.", "Similarly, stakeholders told us that patent clarity problems exist beyond  business method patents. Stakeholders said that the federal courts and  jurors do not necessarily have the expertise to interpret patent clarity  requirements and that the technically trained Patent Trial and Appeal  Board judges were better suited to make patentability determinations,  including on clarity grounds. One stakeholder, for example, told us that  petitioners can delve much deeper into the invalidity argument on patent  clarity grounds at a CBM trials than they can as defendants in district  court, mostly because the board judges have the requisite technical  expertise. In addition, many stakeholders told us that challenging patents  on clarity grounds was also important for a much broader array of patents  than business method patents, and some suggested that these  challenges should remain an option for all patents challenged at the  board. In June 2016, we reported that more than 40 percent of patent  examiners experience pressure to avoid rejecting a patent application  because of problems with clarity and we recommended additional steps  USPTO could take to improve patent clarity. This suggests there are a  potentially large number of patents, beyond and including business  method patents, that could benefit from a second look by the board on  these grounds, and inter partes review does not allow patents to be  challenged on clarity grounds.", "Stakeholders discussed several other topics related to the future of the  CBM program:", "Post-grant review is not an effective substitute for the CBM program for challenging patents on subject matter eligibility and patent clarity grounds. Stakeholders told us that the 9-month window, after a patent is issued, to file challenges using post-grant review is too short to make it an effective substitute for the CBM program. Post-grant review was established as a permanent mechanism at the board for challenging all patents on all statutory grounds. However, only 78 petitions have been filed for post-grant review through September 30, 2017. According to stakeholders, few companies have the resources to continuously monitor patent issuance in real time. In addition, even if companies do discover patents that are relevant to their business, companies, in general, are not willing or able to spend resources challenging patents that may never be used as the basis for an infringement lawsuit. As a result, the public essentially does not have the ability to challenge most patents on subject matter eligibility and clarity grounds, according to stakeholders.", "CBM challenges should not be limited to a specific technology.", "Although the CBM program was designed to address a problem caused by a narrow set of patents, some stakeholders told us they are troubled by CBM\u2019s focus on patents for financial services and products. Stakeholders said that singling out such services and products is unfair and that the need to determine eligibility for review  created uncertainty for patent owners. In addition, some stakeholders  told us that the singling out of a particular subset of patents may raise  questions about compliance with an international treaty.", "Concerns remain about business method and software-related  patents. Some stakeholders told us the patents that the CBM  program was designed to address have largely been addressed by  improved examination at USPTO, reducing the need for the program.  In addition, some stakeholders told us that the CBM program, which  was designed to be temporary, had largely succeeded in addressing  the problems with business method patents. However, other  stakeholders told us that patents of questionable validity, including  business method and software patents, continue to be issued by the  patent office. Given these continuing concerns over software-related  patents, several stakeholders suggested that one viable option for the  future of the CBM program is to expand its eligibility beyond financial  services patents to cover all software-related patents. In addition, in  contrast to the inter partes review program, the CBM program allows  any form of prior art to be used to challenge a patent on novelty or  obviousness grounds. This broader allowance for prior art is important  because many software and business method patents were preceded  by prior art not found in existing patents or printed publications."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In 2016, we reported on a number of patent quality challenges at USPTO  and made several recommendations to help improve the quality and  clarity of issued patents. In that report, we estimated that almost 70  percent of patent examiners did not have enough time to complete a  thorough examination of patent applications given a typical examiner\u2019s  workload. Given these time constraints and other patent quality  challenges, the Patent Trial and Appeal Board has provided a means to  challenge low-quality patents after they have been issued. Stakeholders  generally agreed that the CBM program has reduced lawsuits in the  federal courts involving business method patents, and many stakeholders  were in favor of maintaining aspects of the program.", "The board has a track record of issuing timely decisions that have largely  been upheld by the U.S. Court of Appeals for the Federal Circuit.  However, the board does not have guidance, such as documented  procedures, for reviewing trial decisions and the processes that led to the  decisions. Without developing guidance, such as documented  procedures, that outlines the steps USPTO will take to review the Patent  Trial and Appeal Board\u2019s decisions and the processes that lead to  decisions, USPTO cannot fully ensure that it is meeting the objective of  ensuring consistency of its decisions."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to USPTO:", "The Director of USPTO should develop guidance, such as  documented procedures, for judges reviewing the Patent Trial and  Appeal Board\u2019s decisions and the processes that lead to the  decisions. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Commerce for  review and comment. In its comments, reproduced in appendix II, the  department agreed with the recommendation and stated that it has begun  taking steps to address it, including drafting a formal, written charter that  documents procedures for reviewing board decisions. The department  further stated that it intends to address the recommendation within one  year. In addition, it provided technical comments, which we incorporated  as appropriate.", "As agreed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution until 8 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Commerce, and  other interested parties. In addition, this report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) describe the extent to which the Patent Trial  and Appeal Board\u2019s Transitional Program For Covered Business Method  Patents (CBM program) has been used to challenge patents, and the  results of those challenges; (2) examine the extent to which USPTO  ensures timeliness of trial decisions, reviews decisions for consistency,  and engages with stakeholders to improve its administrative proceedings  for the program; and (3) discuss stakeholder views on the effects of the  CBM program and whether it should be extended past its scheduled  September 2020 sunset date.", "To describe the extent to which the CBM program has been used to  challenge patents, and the results of those challenges, we obtained data  on board proceedings from two companies\u2014RPX Corporation and  Unified Patents\u2014that included information on all of the board\u2019s  proceedings from September 2012 through September 2017. RPX and  Unified Patents collect, compile, and analyze data from the U.S. Patent  and Trademark Office\u2019s publicly available data system. Both companies  manually review these data to verify variables and to manually code  additional information from other publicly available board documents. We  conducted data quality testing, interviewed relevant officials, and  reviewed relevant documentation for the data. We found these data to be  sufficiently reliable for the purposes of our reporting objectives.", "For petitions filed at the board, data from RPX and Unified Patents  include information on the patent in dispute, including its U.S. patent  number, petition-filing dates, and trial institution and final written decision  dates. RPX data include the patent claims challenged and the statutory  grounds on which they were challenged. In addition, RPX data includes  which patent claims were instituted for trial on which statutory grounds,  and which patent claims were ruled unpatentable on which statutory  grounds. RPX and Unified Patents provided the names of the petitioners  and patent owners, as well as whether the patent owner is an operating  company or one of several classifications of non-practicing entities. RPX  also provided the names of the parties\u2019 attorneys. We categorized which  program each petition was filed under (CBM, inter partes review, or post- grant review) to enable comparisons across programs.", "We used the data from Unified Patents on Patent Trial and Appeal Board  proceedings to supplement the RPX data for outcomes of each petition.  Specifically, we compared the Unified Patents\u2019 outcome variable\u2014which  describes the final outcome of the proceeding\u2014and the RPX outcome  variable to create a new variable that reflects the full available information  about each petition\u2019s outcome. There were some\u2014fewer than 3 percent  of cases\u2014where the two variable values were inconsistent with one  another. In these cases, we reviewed trial documentation to determine  the correct value for the outcome variable. The Unified Patents outcome  variable sometimes had more information than the RPX variable. For  example, cases that were terminated because of settlement were  identified as settlements in the Unified Patents data, but not in the RPX  data. We retained the additional detail for our analysis.", "To determine trial outcomes at the patent level, we analyzed the petition  in which the patent proceeded the furthest in the CBM process. For  example, if a patent was challenged under the CBM program multiple  times\u2014for example, three times\u2014and two petitions were not instituted to  the trial phase and one was instituted and then settled before the board  judges issued a final written decision, we used the petition that proceeded  the furthest for our patent-level analysis of outcomes. In this way, we  were able to report what happened to patents under the CBM program,  while not double-counting those patents that were challenged more than  once.", "To examine the extent to which USPTO ensures trial timeliness, reviews  past decisions for consistency, and engages with stakeholders to improve  its administrative proceedings for the program, we reviewed the America  Invents Act (AIA); USPTO\u2019s strategic plan; the Patent Trial and Appeal  Board\u2019s policy and guidance documents, including the Trial Practice  Guide; and we interviewed board officials on several occasions. We  compared USPTO\u2019s efforts to review decisions for consistency against  USPTO\u2019s current strategic plan as well as Standards for Internal Control  in the Federal Government (commonly referred to as the \u201cGreen Book\u201d).  In addition, we reviewed publicly available information documenting the  steps the board takes to engage with stakeholders, including  documentation of webinars, judicial conferences, and roundtable  discussions.", "To obtain stakeholder views on the effects of the CBM program and  whether it should be extended, we conducted semi-structured interviews  with 38 stakeholders knowledgeable about the CBM program. To identify  these stakeholders, we first identified the following sets of stakeholder  groups: petitioners and patent owners who have been involved with CBM  trials; attorneys who have represented clients with board proceedings;  industry trade groups; academic and legal commentators; public interest  groups; and venture capitalists. We identified petitioners, patent owners,  and attorneys who had been involved in board proceedings using data  from RPX Corporation and Unified Patents. We ranked petitioners, patent  owners, and attorneys based on how many CBM cases they had been  involved with, and how many inter partes review cases they had been  involved with in front of the board. We then requested, via email,  interviews with several stakeholders from each stakeholder group, and  began our semi-structured interviews as stakeholders accepted our  invitation. During our initial set of semi-structured interviews, we identified  additional stakeholders through an iterative process known as a \u201csnowball  selection method,\u201d whereby during each interview we solicited names of  additional stakeholders it would be useful to interview. As we obtained  the names of additional stakeholders, we requested additional interviews,  conducted interviews, and solicited additional stakeholders, until we (a)  had interviewed four or more stakeholders from each identified  stakeholder group and (b) found that stakeholder responses were, in  general, commonly describing the same broad themes and relevant  points that previous stakeholders had described about the topics we were  discussing. In total, the stakeholders we recruited and interviewed did not  form a random, statistically representative sample of all relevant  stakeholders. As such, we cannot generalize the results of the interviews.  However, these stakeholder groups and the stakeholders we interviewed  provide a broad spectrum of informed opinions on the CBM program.", "Of the 38 stakeholders interviewed, 14 had previously petitioned CBM  against more than one patent owner, and many of those had also  petitioned an inter partes review. In addition, we interviewed 6 patent  owners that had been involved in multiple CBM trials. We also  interviewed attorneys from 5 law firms that have represented multiple  petitioners and patents owners in CBM cases. In addition, we interviewed  officials from 4 trade groups, 4 venture capital firms, and 5 academics  and legal commentators, all of whom had interest and expertise in the  CBM program.", "During our semi-structured interviews, we asked stakeholders the  following three broad questions:", "How much and in what way has the existence of the CBM program  affected patent assertion strategies since 2012?", "How much has the CBM program influenced investment decisions  and innovation for technologies related to financial-services business  methods?", "Should the CBM program be allowed to expire in September 2020 or  should it be renewed?", "For each question, we used a consistent set of follow-up prompts to  ensure that we fully covered all aspects of each topic with the  stakeholders, that we received complete answers, and that we were able  to accurately record the responses. While we asked every stakeholder  each of the three questions, we did so keeping in mind the particular  background and experience of each stakeholder because experience and  expertise differed across our wide range of stakeholders. As such, during  each interview, we focused on the topics where the stakeholder had the  most experience, expertise, or knowledge.", "To systematically analyze the information we collected during our semi- structured interviews, we used qualitative analysis software to group the  responses into categories and themes. All information was individually  coded by two analysts. We classified individual responses according to  these broad themes, which generally corresponded to our main  questions:", "The effect of the CBM program on patent assertion and litigation.", "The effect of the CBM program on innovation and investment in  business methods.", "The future of the CBM program.", "Within each broad theme, we labeled and organized sub-themes. We  established the sub-themes by identifying natural clusters of stakeholder  responses.", "We analyzed the categorized themes and sub-themes to draw inferences  about the effectiveness of the CBM program by taking the following steps:  We first examined the amount and nature of agreement and  disagreement between responses within each theme and sub-theme. We  then assessed the strength of the arguments supporting each categorized  response, and considered factors including the number of stakeholders  who discussed a topic, including the strength of the rationale for each  viewpoint and other supporting evidence provided. We also considered  the way in which stakeholders\u2019 interests could influence their  perspectives.", "In this report, we present the themes with the strongest and most  consistent support based on rationale including the prevalence of each  argument, the presence of credible evidence in support of statements,  and the amount of consistency and corroboration of themes across  stakeholders. Because stakeholders do not make up a defined population  that we could sample from, and because the stakeholders we interviewed  had a wide range of experience and expertise, we did not tally up similar  responses and do not present stakeholder responses based solely on  how many stakeholders agreed or disagreed with a given statement.", "We conducted this performance audit from November 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient and 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following individuals made  contributions to this report: Rob Marek (Assistant Director), Kevin Bray,  Mark Braza, Richard Burkard, Stephanie Gaines, Michael Krafve, Cynthia  Norris, Ardith Spence, Sara Sullivan, and Sarah Williamson."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Intellectual Property: Patent Office Should Define Quality, Reassess  Incentives, and Improve Clarity. GAO-16-490. Washington, D.C.: June  30, 2016.", "Intellectual Property: Patent Office Should Strengthen Search Capabilities  and Better Monitor Examiners\u2019 Work. GAO-16-479. Washington, D.C.:  June 30, 2016.", "Intellectual Property: Assessing Factors That Affect Patent Infringement  Litigation Could Help Improve Patent Quality. GAO-13-465. Washington,  D.C.: August 22, 2013.", "U.S. Patent and Trademark Office: Performance Management Processes.  GAO-10-946R. Washington, D.C.: September 24, 2010.", "Intellectual Property: Enhanced Planning by U.S. Personnel Overseas  Could Strengthen Efforts. GAO-09-863. Washington, D.C.: September 30,  2009.", "Check 21 Act: Most Consumers Have Accepted and Banks Are  Progressing Toward Full Adoption of Check Truncation. GAO-09-8.  Washington, D.C.: October 28, 2008.", "U.S. Patent and Trademark Office: Hiring Efforts Are Not Sufficient to  Reduce the Patent Application Backlog. GAO-08-527T. Washington,  D.C.: February 27, 2008.", "U.S. Patent And Trademark Office: Hiring Efforts Are Not Sufficient to  Reduce the Patent Application Backlog. GAO-07-1102. Washington,  D.C.: September 4, 2007.", "Intellectual Property: Improvements Needed to Better Manage Patent  Office Automation and Address Workforce Challenges. GAO-05-1008T.  Washington, D.C.: September 8, 2005.", "Intellectual Property: Key Processes for Managing Patent Automation  Strategy Need Strengthening. GAO-05-336. Washington, D.C.: June 17,  2005.", "Intellectual Property: USPTO Has Made Progress in Hiring Examiners,  but Challenges to Retention Remain. GAO-05-720. Washington, D.C.:  June 17, 2005."], "subsections": []}], "fastfact": ["Entities facing lawsuits for infringing a certain type of patent (e.g., for online shopping) can challenge the validity of that patent through a U.S. Patent and Trademark Office program for a fraction of the time and money that would be spent in federal courts.", "Under the program, the Patent Trial and Appeal Board decides whether these patents are valid. We recommended that the Patent Office develop guidance for reviewing these decisions to ensure consistency.", "The program is set to expire in September 2020\u2014but stakeholders say that it has reduced lawsuits, and that aspects of the program should be included in other Patent Office programs."]}
{"id": "GAO-18-697T", "url": "https://www.gao.gov/products/GAO-18-697T", "title": "Native American Youth: Information on Involvement in Justice Systems and Grant Programs to Help Address Juvenile Delinquency", "published_date": "2018-09-26T00:00:00", "released_date": "2018-09-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's September 2018 report, entitled Native American Youth: Involvement in Justice Systems and Information on Grants to Help Address Juvenile Delinquency ( GAO-18-591 )."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's analysis of available data found that the number of American Indian and Alaska Native (Native American) youth in federal and state and local justice systems declined across all phases of the justice process\u2014arrest, adjudication, and confinement\u2014from 2010 through 2016. During this period, state and local arrests of Native American youth declined by almost 40 percent from 18,295 in 2010 to 11,002 in 2016. The vast majority of Native American youth came into contact with state and local justice systems rather than the federal system.", "However, more Native American youth were involved in the federal system than their percentage in the nationwide population (1.6 percent). For example, of all youth arrested by federal entities during the period, 18 percent were Native American. According to Department of Justice (DOJ) officials, this is due to federal jurisdiction over certain crimes involving Native Americans. Comprehensive data on Native American youth involvement in tribal justice systems were not available for analysis. GAO's analysis showed several differences between Native American and non-Native American youth in the federal justice system. For example, the majority of Native American youths' involvement was for offenses against a person, such as assault and sex offenses. In contrast, the majority of non-Native American youths' involvement was for public order offenses (e.g., immigration violations) or drug or alcohol offenses. On the other hand, in state and local justice systems, the involvement of Native American and non-Native American youth showed many similarities, such as similar offenses for each group.", "DOJ and the Department of Health and Human Services (HHS) offered at least 122 discretionary grants and cooperative agreements (grant programs) from fiscal years 2015 through 2017 that could be used to address juvenile delinquency among Native American youth. DOJ and HHS made approximately $1.2 billion in first-year awards to grantees during the period, of which the agencies awarded approximately $207.7 million to tribal governments or Native American organizations. Officials from the agencies, tribal governments, and Native American organizations identified factors they believe affect success in applying for grant programs. For example, some tribal governments and Native American organizations found being able to call or meet with federal officials during the application process helpful but found that short application deadlines are a challenge."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recently completed report on  American Indian and Alaska Native (Native American) youth involvement  in federal, state and local, and tribal justice systems, and federal grant  programs available to help address issues of delinquency among Native  American youth.", "In particular, I will highlight our findings pertaining to (1) what available  data show on the number and characteristics of Native American youth in  federal, state and local, and tribal justice systems; and (2) selected  federal discretionary grants and cooperative agreements (grant  programs) that could help prevent or address delinquency among Native  American youth, and tribal governments and Native American  organizations\u2019 access to them.", "According to recent reports and agency research, several risk factors  make some Native American youth susceptible to becoming involved with  justice systems at the federal, state and local, and tribal levels.  These risk factors include exposure to violence; substance abuse; poverty;  limited job market skills; and tribal communities\u2019 limited funding for mental  health, education, housing, and other services.", "Native American youth who commit offenses can enter one or more  justice systems at the federal, state and local, and tribal levels. Although  these justice systems have unique characteristics, youth generally  proceed through certain phases, including arrest, prosecution and  adjudication, and in some instances, placement and confinement in a  detention facility.", "When a Native American youth enters the federal criminal justice system,  the Department of Justice (DOJ) and Department of the Interior (DOI),  among others, have responsibility for investigating and prosecuting his or  her act of delinquency or crime. Additionally, federal agencies including  DOJ and the Department of Health and Human Services (HHS) provide  funding through grant programs that grantees could use to help prevent  or address juvenile delinquency.", "Outside Indian country, a state generally has jurisdiction to proceed  against a youth who has committed a crime or act of juvenile  delinquency. Federal law limits federal jurisdiction over youth if a state  has jurisdiction over the youth and has a system of programs and  services adequate for their needs. State and local justice systems have  specific courts\u2014often at the county or city level\u2014with jurisdiction over  youth alleged to have committed an act of juvenile delinquency or a crime. Inside Indian country, youth (and adults) may fall under federal,  state, or tribal jurisdiction depending on several factors. These factors  include the nature of the crime, the status of the alleged offender and  victim\u2014that is, whether they are Indian or not\u2014and whether jurisdiction  has been conferred on a particular entity by statute. The Major Crimes  Act, for example, grants the federal government criminal jurisdiction over  Indians in Indian country charged with serious, felony-level offenses  enumerated in the statute, such as murder, manslaughter, kidnapping,  burglary, and robbery. State jurisdiction in Indian country is generally  limited to two instances: when both the alleged offender and victim are  non-Indian, or when a federal statute confers, or authorizes, a state to  assume criminal jurisdiction over Indians in Indian country. Otherwise,  only the federal and tribal governments have jurisdiction in Indian country.", "For our September 2018 report, we analyzed federal, state and local, and  tribal arrest, adjudication, and confinement data from 2010 through 2016 (the most recent available) from DOJ and DOI. We also analyzed DOJ  and HHS grant program award documentation from fiscal years 2015  through 2017, and application information for a sample of the grant  programs chosen based on the amount of funding awarded and other  factors. Additionally, we also interviewed officials from DOJ, HHS, and 10  tribal governments or Native American organizations chosen to include  successful and unsuccessful applicants to the grant programs, among  other things. Additional information on our scope and methodology can  be found in our September 5, 2018 report. For specific information about  the different databases from which we gathered our data, see appendix I.  Our work was performed in accordance with generally accepted  government auditing standards."], "subsections": [{"section_title": "Available Data Indicate Native American Youth Involvement in Justice Systems Declined from 2010 through 2016 and Differed in Some Ways from That of Non-Native American Youth", "paragraphs": ["In our September 2018 report, we found that from 2010 through 2016 the  number of Native American youth in federal and state and local justice  systems declined across all phases of the justice process\u2014arrest,  adjudication, and confinement\u2014according to our analysis of available  data. At the federal level, arrests by federal agencies dropped from 60  Native American youth in 2010 to 20 in 2016, and at the state and local  level, arrests of Native American youth declined by almost 40 percent  from 18,295 arrested in 2010 to 11,002 in 2016.", "Our analysis also found that the vast majority of these Native American  youth came into contact with state and local justice systems, not the  federal system. For example, from 2010 through 2016, there were  105,487 total arrests of Native American youth reported by state and local  law enforcement agencies (LEAs). In contrast, there were 246 Native  American youth held in federal custody by the U.S. Marshals Service due  to arrest by federal LEAs during the same period.", "We also found a number of similarities between Native American and  non-Native American youth in state and local justice systems. For  example, the offenses that Native American youth and non-Native  American youth were arrested, adjudicated, and confined for were  generally similar. In contrast, our analysis also showed a number of  differences between Native American and non-Native American youth in  the federal justice system. For example, our analysis showed variation in  the types of offenses committed by each group. From fiscal years 2010  through 2016, the majority of Native American youth in the federal justice  system were arrested, adjudicated, or confined for offenses against a  person, with the top two specific offenses being assault and sex  offenses. In contrast, the majority of involvement of non-Native  American youth in the federal system during the same period was due to  public order or drug and alcohol offenses at all three stages, with the top  two specific offenses being drug and immigration related. Our  September 2018 report contains additional information on the differences  between Native American and non-Native American youth involved with  the federal justice system.", "Further, we found that the percent of Native American youth involved in  most state and local systems was generally similar to their representation  in the youth populations in those states. For example, our analysis found  that the majority (about 75 percent) of Native American youth arrested by  state and local LEAs from calendar years 2010 through 2016 were  located in 10 states: Alaska, Arizona, Minnesota, Montana, New Mexico,  North Dakota, Oklahoma, South Dakota, Washington, and Wisconsin.  These 10 states had among the highest percent of Native Americans in  their states\u2019 overall youth populations, according to 2016 U.S. Census  estimates we reviewed. In 2016, the largest number of arrests by state  and local LEAs occurred in Arizona and South Dakota.", "In contrast, we found that representation of Native American youth  arrested, referred for adjudication, and confined at the federal level during  the period reviewed was greater (13 to 19 percent) than their  representation in the nationwide youth population (1.6 percent).", "DOJ officials told us that the population of Native Americans in the federal  justice system has historically been higher than their share in the  nationwide population, and they attributed this and other differences  shown by our analysis to federal government jurisdiction over certain  crimes in Indian country, as well as the absence of general federal  government jurisdiction over non-Native American youth. According to  DOJ officials, this jurisdiction requires the federal government to  prosecute offenses that would commonly be prosecuted by states if  committed outside of Indian country. According to DOJ officials, a small  handful of federal criminal statutes apply to all juveniles, such as  immigration and drug statutes, but the federal government has been  granted greater jurisdiction over Native American youth than non-Native  American youth by federal laws that apply to crimes committed in Indian  Country, such as the Major Crimes Act. For example, one DOJ official  noted that the Major Crimes Act gives the federal government exclusive  jurisdiction over crimes such as burglary and sex offenses committed in  Indian country. This differs from the treatment of non-Native American  youth, who are not prosecuted in the federal system for the same types of  offenses, because the federal government does not have jurisdiction over  those youth for such offenses. Non-Native American youth are instead  subject to the general juvenile delinquency jurisdiction of state and local  courts.", "Additionally, DOJ officials stated that tribal justice systems are often  underfunded and do not have the capacity to handle Native American  youths\u2019 cases. Therefore, they stated that when both federal and tribal justice systems have jurisdiction, the federal system might be the only  system in which the youth\u2019s case may be adjudicated. For these reasons,  the percentage of Native American youth offenders in the federal justice  system is higher than non-Native American juveniles in accordance with  population size, according to DOJ officials.", "Representatives from four of the five Native American organizations we  interviewed, whose mission and scope of work focus on Native American  juvenile justice issues and that have a national or geographically specific  perspective, noted that federal jurisdiction is a key contributor to the  higher percentage of Native American youth involved at the federal justice  level. Additionally, representatives from all five organizations noted,  similarly to DOJ officials, that federal jurisdiction over crimes in Indian  country is typically for more serious offenses (specifically under the Major  Crimes Act), such as offenses against a person.", "Comprehensive data from tribal justice systems on the involvement of  Native American youth were not available. However, we identified and  reviewed a few data sources that provided insights about the arrest,  adjudication, and confinement of Native American youth by tribal justice  systems. See appendix II for a summary of our analysis of data from  these sources."], "subsections": []}, {"section_title": "DOJ and HHS Offered at Least 122 Grant Programs; Tribal Governments or Native American Organizations Were Eligible for Almost All but in a Sample of Applications We Reviewed, Applied Primarily for Programs Specifying Native Americans", "paragraphs": ["In our September 2018 report, we identified 122 discretionary grants and  cooperative agreements (grant programs) offered by DOJ and HHS from  fiscal years 2015 through 2017 that could help prevent or address  delinquency among Native American youth. DOJ and HHS made  approximately $1.2 billion in first-year awards through the 122 programs  over the period, of which the agencies awarded about $207.7 million to  tribal governments or Native American organizations. A list of the 122  programs, which focus on a range of issues such as violence or trauma,  justice system reform, alcohol and substance abuse, and reentry and  recidivism, can be found in our September 2018 report.", "The 122 DOJ and HHS grant programs we identified included 27  programs that specified tribes or Native Americans as a primary  beneficiary and 95 programs that did not specify these populations but  could include them as beneficiaries. For example, the Department of  Justice\u2019s Office of Juvenile Justice and Delinquency Prevention offered  the Defending Childhood American Indian/Alaska Native Policy Initiative:  Supporting Trauma-Informed Juvenile Justice Systems for Tribes  program for funding in fiscal year 2016. The goal of this program\u2014 increasing the capacity of federally recognized tribes\u2019 juvenile justice and  related systems to improve the life outcomes of youth who are at risk or  who are involved in the justice system and to reduce youth exposure to  violence\u2014explicitly focused on tribal communities. On the other hand, the  Sober Truth on Preventing Underage Drinking Act grant program, which  HHS\u2019s Substance Abuse and Mental Health Services Administration  offered for funding in fiscal year 2016 to prevent and reduce alcohol use  among youth and young adults, is an example of a program that did not  specify tribes or Native Americans as a primary beneficiary but could  include them as beneficiaries.", "We found that tribal governments and Native American organizations  were eligible for almost all of the grant programs we identified.  Specifically, they were eligible to apply for 70 of 73 DOJ programs and 48  of 49 HHS programs. However, although tribal governments and Native  American organizations were eligible to apply for almost all of the  programs, we found in a non-generalizable sample of applications we  reviewed that they applied primarily for the programs that specified tribes  or Native Americans as a primary beneficiary. For example, we reviewed  applications for 18 DOJ grant programs and found that tribal governments  and Native American organizations accounted for over 99 percent of the  applications for the 5 grant programs within the sample that specified  tribes or Native Americans as a primary beneficiary. However, tribal  governments and Native American organizations accounted for about 1  percent of the applications for the 13 programs in the sample that did not  specify tribes or Native Americans as a primary beneficiary.", "We interviewed officials from DOJ\u2019s Office of Justice Programs (OJP) and  seven HHS operating divisions to obtain their perspectives on why tribal  governments and Native American organizations might not apply for grant  programs that do not specify them as a primary beneficiary. They  identified various reasons, including that tribal governments and Native  American organizations might not be aware that they are eligible to apply  for certain grant programs; might believe that their applications to grant  programs that do not specify tribes or Native Americans as a primary  beneficiary will not be competitive with other applications; or might prefer  to apply for those grant programs that specify tribes or Native Americans  as a primary beneficiary.", "We also interviewed representatives from 10 tribal governments and  Native American organizations, who provided perspectives on whether or  not a grant program\u2019s focus on tribes or Native Americans as a primary  beneficiary affected their decision to apply for the program. Officials  from 6 of 10 tribal governments and Native American organizations  indicated that they would consider any grant program that met the needs  of their communities, while the remaining 4 indicated that a grant  program\u2019s focus or lack thereof on tribes or Native Americans could affect  their ability to apply for it.", "Officials from the 10 tribal governments and Native American  organizations also identified various federal practices they found helpful  or challenging when applying for grant programs related to preventing or  addressing delinquency among Native American youth. When asked  what federal practices, if any, were particularly helpful when applying to  receive federal funding, they most frequently responded that they found it  particularly helpful to be able to call or meet with federal officials if they  had questions about or needed help on their applications. Regarding the  biggest challenges, they cited short application deadlines, difficulties  collecting data for grant program applications, and a scarcity of grant  writers and other personnel needed to complete a quality application.", "In addition, DOJ OJP and HHS officials provided perspectives on why  some tribal governments and Native American organizations might be  more successful in applying for federal funding than others. The officials  stated, among other things, that larger and better-resourced tribal  governments and Native American organizations were more successful at  applying for federal funding and that previously successful grant program  applicants were more likely to be successful again.", "More detailed information on the perspectives from tribal governments,  Native American organizations, and agency officials regarding the factors  they believe affect the ability of tribal governments and Native American  organizations to apply successfully for federal grant programs can be  found in our September 2018 report.", "Chairman Hoeven, Vice Chairman Udall, and Members of the Committee,  this completes my prepared statement. I would be pleased to respond to  any questions you may have at this time."], "subsections": []}]}, {"section_title": "Appendix I: Data Sources for Federal, State and Local, and Tribal Justice Systems by Phase of the Justice Process", "paragraphs": ["For our September 2018 report, we obtained and analyzed record-level  and summary data from federal, state and local, and tribal justice systems  from 2010 through 2016. Figure 1 illustrates the data sources we  included in our report for each phase of the justice process (arrest,  adjudication, and confinement) in each justice system (federal, state and  local, and tribal). Generally, state and local entities include those  managed by states, counties, or municipalities."], "subsections": []}, {"section_title": "Appendix II: GAO Findings Regarding American Indian and Alaska Native Youth Involvement with Tribal Justice Systems", "paragraphs": ["Comprehensive data from tribal justice systems on the involvement of  American Indian and Alaska Native (Native American) youth were not  available. However, in our September 2018 report, we identified and  reviewed a few data sources that can provide certain insights about the  arrest, adjudication, and confinement of Native American youth by tribal  justice systems. The following is a summary of our analysis of data from  these sources.", "Arrests. Although comprehensive data on the number of tribal law  enforcement agency (LEA) arrests were not available, we obtained and  reviewed admission records from three juvenile detention centers in  Indian country managed by the Department of the Interior\u2019s Bureau of  Indian Affairs (BIA). Based on those records, at least 388 Native  American tribal youth were admitted to these three facilities in 2016, as  shown in table 1. In the Northern Cheyenne facility, for which we obtained  records for 5 years, the number of youth admitted increased yearly  between 2012 and 2016, from 14 to 204.", "According to BIA officials, this growth in the number of youth admitted to  the Northern Cheyenne facility likely reflects an increase in admissions of  Native American youth from surrounding tribes. Specifically, because the  Northern Cheyenne facility is centrally located, the officials said that the  facility admits youth from other tribes, which have grown accustomed to  sending their youth to the facility. BIA officials also noted that the  Northern Cheyenne facility services an area where there is a high rate of  delinquency among youth, and because the facility works well with Native  American youth struggling with delinquency issues, many tribes elect to  send their delinquent youth to the facility. Further, since 2012, the  Northern Cheyenne facility increased its bed space and staff, thus  increasing its capacity to admit more youth, according to BIA officials.", "Even though comprehensive tribal arrest data were not available, we  reported in September 2018 that the Department of Justice\u2019s (DOJ)  Bureau of Justice Statistics (BJS) was undertaking an effort to increase  collection of arrest data from tribal LEAs. Specifically, this data collection  activity is the Census of Tribal Law Enforcement Agencies. This  collection activity, which BJS plans to conduct in 2019, is to capture  information including tribal LEA workloads and arrests, tribal LEA access  to and participation in regional and national justice database systems,  and tribal LEA reporting of crime data into FBI databases.", "Adjudication. Comprehensive data were not available to describe the  extent to which tribal courts processed Native American youth or found  them guilty. However, BJS concluded a tribal court data collection effort\u2014 the National Survey of Tribal Court Systems\u2014in 2015. Through this  survey, BJS gathered information from more than 300 tribal courts and  other tribal judicial entities on their criminal, civil, domestic violence, and  youth caseloads, and pretrial and probation programs, among other  things. DOJ officials told us that BJS has analyzed the data, and plans to  release results in the future.", "Confinement. According to data published by BJS, the number of youth  in Indian country jails declined from 190 in 2014 to 170 in 2016 (about an  11 percent decrease)."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Gretta L. Goodwin, Director, Homeland Security and Justice at  (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Tonnye\u2019 Conner-White, Assistant Director; Steven Rocker, Analyst-in- Charge; Haley Dunn; Angelina Torres; Taylor Matheson; Anne Akin; Paul  Hobart; Jamarla Edwards; Claire Peachey; Eric Hauswirth; Heidi Neilson;  Amanda Miller; and Elizabeth Dretsch. Key contributors to the previous  work on which this testimony is based are listed in our September 2018  report.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Federal reports on Native American youth found challenges\u2014such as poverty and exposure to violence\u2014that can make them susceptible to being arrested, charged, or sentenced in the justice system.", "This testimony includes a discussion of our findings:", "Overall Native American juvenile delinquency rates declined 2010-2016.", "While most Native American youth in the system were at the state or local level, their share of the population in the federal system was higher than their share of the nationwide youth population\u2014likely due to federal jurisdiction on tribal lands.", "We also found 122 federal grant programs to address underlying challenges."]}
{"id": "GAO-19-21", "url": "https://www.gao.gov/products/GAO-19-21", "title": "VA Medical Centers: VA Should Establish Goals and Measures to Enable Improved Oversight of Facilities' Conditions", "published_date": "2018-11-13T00:00:00", "released_date": "2018-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VHA oversees one of the largest health care systems, serving approximately 9-million veterans at numerous health care facilities, including 170 medical centers. To ensure a safe environment for veterans and employees, VHA must keep its facilities clean and well maintained.", "GAO was asked to examine (1) how VHA medical centers identify maintenance and repair needs and challenges they face in addressing those needs, and (2) to what extent VHA provides oversight to ensure medical centers are providing a safe, clean, and functional environment.", "GAO reviewed VHA's procedures and standards related to facility operations and maintenance functions at medical centers and interviewed VHA's administrative office officials regarding oversight of these functions. GAO also interviewed VHA officials from three regional offices and six medical centers selected based on factors such as geographic location and veteran population served, and conducted site visits at four of these medical centers."]}, {"section_title": "What GAO Found", "paragraphs": ["Veterans Health Administration's (VHA) medical centers conduct regular inspections of the settings in which patients receive health care services, called the \u201cenvironment of care\u201d, to identify maintenance and repair needs. These inspections also help ensure compliance with accreditation standards requiring, among other things, that utility systems operate properly and that areas are clean and in good repair. The main three steps in the process associated with these inspections are shown below. In addition to the environment of care inspections, VHA conducts other periodic assessments of facilities' major systems, such as plumbing and air conditioning.", "VHA inspections routinely identify deficiencies reflective of an aging infrastructure\u2014VHA's buildings are on average 55 years old. This situation in turn is leading to workload and staffing challenges in addressing maintenance and repair needs. For example, according to VHA's 2017 data, medical centers reported conducting approximately 11,000 total inspections for the year that resulted in about 128,000 identified deficiencies. Most of these deficiencies were closed within 14 business days, as required by VHA. However, nearly 30,000 of them were not closed or had been addressed through a plan for future work. Medical center officials added that correcting deficiencies may only be a temporary solution for issues related to aging structures that need extensive repairs and renovations. In addition, VA headquarters and field officials said that staff vacancies are common and can affect the efficiency and speed of maintenance and repairs.", "VHA provides guidance and selected oversight to ensure medical centers implement the process for environment of care inspections. However, VHA lacks performance goals, objectives, and measures that would enable it to provide effective oversight, address challenges, and assess how well it is achieving a clean, safe, and functional environment. As part of ensuring compliance with the inspection process, VHA measures whether medical centers meet certain requirements, such as having appropriate staff present for inspections. VHA does not, however, have measures that enable it to assess how well medical centers are achieving desired outcomes. Although it has stated its intent to develop such measures, VHA has not yet committed to a time frame for doing so."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VHA set a timeline for defining goals, objectives, and outcome-oriented performance measures that can address challenges and help achieve a clean and safe care environment. VA concurred with the recommendation and provided general and technical comments, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Department of Veterans Affairs (VA) administers one of the  largest health care systems, serving approximately 9 million enrolled  veterans annually at health care facilities across the country, including  170 VA medical centers, through the Veterans Health Administration  (VHA). To ensure a safe environment for veterans and employees, VHA  is responsible for keeping these facilities safe, clean, and well maintained.", "VHA obligated more than $6.5 billion for the operations and maintenance  of its medical facilities for fiscal year 2018. This amount pays for day-to- day functions, such as operating heating and cooling systems, laundering  textiles, maintaining hospital grounds, and making needed repairs. Efforts  related to maintaining the \u201cenvironment of care\u201d\u2014the setting in which  patients receive health care services\u2014are also a part of day-to-day  operation and maintenance activities. Repairs can range from small,  recurring maintenance projects such as repainting walls and repairing  water leaks in pipes and roofs to larger non-recurring projects such as  upgrading water treatment plants and modernizing boiler systems.", "You asked us to review issues related to VHA medical centers\u2019 facility  operations and maintenance functions. In this report, we examine: (1)  how VHA medical centers identify maintenance and repair needs and  challenges the centers face in addressing those needs, and (2) to what  extent VHA provides oversight to ensure medical centers are providing a  safe, clean, and functional environment.", "To determine how VHA identifies maintenance and repair needs at  medical centers and challenges they face in addressing those needs, we  reviewed VHA procedures, policies, and standards related to operations  and maintenance functions at medical centers and published reports from  VA, GAO, and relevant stakeholder groups. We also reviewed VHA\u2019s  environment of care inspections data for fiscal years 2016\u20132017 as  reported by medical centers related to their compliance with facility  maintenance standards. We focused this review on environment of care  inspections because these inspections are identified in VHA guidance as  critical to all aspects of patient care in a medical facility. As such,  environment of care standards are important considerations for VHA\u2019s  engineering staff when planning and executing maintenance and  operations functions. We assessed the reliability of environment of care  inspections data by reviewing documentation and interviewing  knowledgeable agency officials to identify steps VA takes to ensure the  quality and accuracy of the data, such as training inspectors on entering  inspections data. Through these steps, we determined that the data were  sufficiently reliable for the purposes of this reporting objective.", "Further, we selected three Veterans Integrated Service Networks (VISN)  and six medical centers\u2014two medical centers within each VISN\u2014for  review and site visits.  We chose the three VISNs to include a range in  terms of geographic location and veteran demographics and ones with  higher numbers of identified deficiencies and percentages of deficiencies  not addressed within 14 days in fiscal year 2017. We chose the six  medical centers based on these factors as well as on their proximity to  the selected VISN\u2019s location, and to include both urban and rural centers.  We conducted in-person site visits at four of the six selected medical  centers and interviewed officials responsible for overseeing, planning,  and budgeting for facility maintenance and operations. We observed the  environment of care inspections process at two of the medical centers  during our site visits. The results of the information obtained at VISNs and  medical centers are not generalizable to the entire population of VISNs  and medical centers. Table 1 shows the VISNs and medical centers  selected for our review.", "To determine how VHA provides oversight to ensure medical centers are  providing a safe, clean, and functional environment, we reviewed VHA  policy and guidance on the environment of care inspections process. We  interviewed officials from the VHA administrative office that oversees  compliance in the environment of care at medical centers and the  selected VISNs and medical centers about:  challenges that may affect VHA\u2019s ability to maintain or operate  medical centers;", "VHA oversight; and  the implementation of environment of care policies.", "We compared the information from these documents and interviews to  best practices for results-oriented management as identified in previous  GAO work.", "We conducted this performance audit from June 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VHA policy requires that all medical facilities provide a safe, clean,  functional environment for patients, visitors, and employees. The Joint  Commission,  an organization that accredits medical centers and other  hospitals throughout the country, has developed standards that require  medical centers to undertake several actions that relate to engineering,  environmental management, and safety including: maintaining the patient environment by ensuring that a suitable  temperature is maintained, that areas are clean and appropriately  lighted, and furnishings and equipment are in good repair; managing utility systems to ensure operational reliability; and minimizing fire hazards and providing a safety system in case of fire.", "To help ensure medical centers maintain these standards, VHA requires  medical centers to conduct regular environment of care inspections of the  facility. According to VHA officials, because of the large size of many  medical centers, most conduct environment of care inspections in a  different part of their facility every week throughout the year. In 2016, a  VHA directive formally established VHA\u2019s Comprehensive Environment of  Care Program (Environment of Care Program) and outlined management  and oversight responsibilities for the program. Environment of care  inspections are a main component of the program.", "In addition to the environment of care inspections, VHA uses other  inspections to help execute and oversee facility operations and  maintenance functions. For example, every 3 years, VA contracts for  Facility Condition Assessments, where contractors evaluate all buildings  and major systems at a medical facility (e.g., structural, mechanical, plumbing, and others) and identifies needed repairs and replacements.  This inspection gives a graded score from A to F for VHA facilities, with  \u201cC minus\u201d as the average facility score received for overall infrastructure  conditions at VHA facilities as of 2015. This inspection focuses on major  systems, while environment of care inspections focus on day-to-day  facility conditions, including that of patient-care areas. Furthermore,  preventative maintenance inspections are usually conducted on systems,  such as boilers or heating, ventilation, and air-conditioning (HVAC)  systems, and would vary in frequency based on the manufacturer  requirements. Medical center staff also noted that facility operations and  maintenance issues may be identified by staff in the course of their day- to-day duties and reported to engineering for repair.", "VHA medical centers employ staff trained in plumbing, carpentry, grounds  maintenance, and other trades needed to maintain facilities, as well as  housekeeping staff. These employees are responsible for carrying out the  work necessary to ensure medical centers comply with safety standards,  and VHA policies and inspection requirements.", "The majority of funding for medical centers, including funding for  operations and maintenance, is determined on the basis of past years\u2019  allocations, veteran populations served, and the types of services  provided. The budget for VA medical facilities has increased by  approximately 30 percent over the last 5 fiscal years."], "subsections": []}, {"section_title": "Medical Centers Rely on Environment of Care Inspections to Identify Deficiencies but May Encounter Challenges in Completing Needed Repairs", "paragraphs": [], "subsections": [{"section_title": "Environment of Care Inspections", "paragraphs": ["The medical center director or a designee, such as the medical center\u2019s  Environment of Care Coordinator, has the overall responsibility for  managing and leading weekly environment of care inspections at a  medical center. Each medical center should have an environment of care  committee, and the medical center director or a designee should facilitate  committee meetings to discuss the environment of care processes,  findings, trends, and any other related issues. Inspections are conducted  by an environment of care inspection team, which is made up of  representatives from various facility departments, including, among  others:", "Environmental Management Service\u2014which is responsible for  ensuring a state of physical and biological cleanliness, including  proper handling of waste materials\u2014and", "Engineering Service, which is responsible for utilities that allow the  physical plant to function, including basic systems such as heating  and electrical, among others.", "According to VHA guidance, the team is to conduct its inspections using a  VHA checklist as a guide to determine if there are any deficiencies. For  example, the checklist includes questions such as:", "Are there loose floor tiles/carpet?", "Are ceiling tiles stained or other signs of leaks?", "Are there any electrical hazards present?", "Team members record information on deficiencies that they identify into  an Environment of Care inspections database, which is used to document  and track the status of deficiencies.", "During interviews with medical center staff at all six of the medical centers  included in our review, officials told us they follow the environment of care  inspections process that VHA guidance outlines. At two of the medical  centers we visited, we accompanied inspections team on environment of  care inspections and observed staff following this process. The inspection  teams walked through the areas designated for inspection, for example  examining conditions of floors, ceilings and fire safety systems. Also, as  we discuss later in the report, VHA officials also monitor aspects of the  inspections process, such as who attends the inspection. VHA officials  told us they also collect data on performance measures related to  utilization of the environment of care checklists and environment of care  inspections process but no longer track these measures because medical  centers achieved 100 percent utilization of these measures in 2015.  Figure 1 below details the process used to identify and address  deficiencies, as outlined in VHA guidance.", "As previously mentioned, VHA guidance considers these inspections to  be critical to all aspects of patient care in a medical facility, and officials at  all six medical centers confirmed that they rely on these inspections to  identify needed repairs. For example, officials in one medical center noted  that the frequency and thoroughness of these inspections has helped  them determine day-to-day wear and tear issues and informed their  planning processes. Medical center staff noted that condition deficiencies  identified through this process are often minor but are nonetheless  important to maintenance of a clean and safe patient environment. For  example, a damaged or stained ceiling tile identified during an inspection  could be a potential safety hazard to patients or indicate an issue with  leaking pipes. The replacement of the tile itself is a minor repair, but that  repair could be an indication of an important maintenance issue at the  medical center. As table 2 below shows, the deficiencies commonly  identified through the inspections process include items that need to be  cleaned or dusted or walls that need minor repairs.", "Medical center staff we interviewed said, in general, the most common  environment of care deficiencies can be addressed by medical center  staff, but medical centers told us they sometimes use contractors if  warranted. In most cases, a deficiency can be addressed with simple  repairs such as patching and repainting walls, replacing stained and  damaged tiles, or by cleaning. On our site visits, we saw examples of the  types of issues that medical center staff address during environment of  care inspections. In one case, we were shown a recurring deficiency at  the medical center caused by moving hospital beds. Moving beds in and  out of rooms was damaging the plaster corners of a wall near the door.  We were also shown the solution, which was a metal corner guard the  medical center had installed in some rooms, and the center was working  to install corner guards in other locations as funds became available.  Figure 2 below shows examples of deficiencies we observed during  environment of care inspections at medical centers.", "Other types of condition deficiencies that are not directly in the  environment of care, such as a broken boiler, typically would not be  identified during environment of care inspections, but rather medical  center staff said they are identified during scheduled preventive  maintenance activities, or during other facility inspections. Regardless of  how they are identified, more serious repairs often require a different  funding and approval process than day-to-day maintenance. For  example, if significant damage occurred to a medical center\u2019s roof and the  cost of repairs is greater than $25,000, it would most likely be deemed a  non-recurring maintenance project and would require approval from either  the VISN or VA\u2019s central office."], "subsections": []}, {"section_title": "Challenges in Addressing Identified Deficiencies", "paragraphs": ["The buildings that VHA manages are, on average, 55 years old, and  many have substantial capital repair and improvement needs. A VA- commissioned report noted that there were significant barriers that facility  management staff faced in maintaining facilities to a high quality.  According to the report, while some of these barriers involved immediate  resource constraints such as budgets for staffing and conducting  maintenance and janitorial tasks, the root cause of many of these issues  is the general age and underlying condition of VHA facilities."], "subsections": [{"section_title": "Workload", "paragraphs": ["Engineering officials at medical centers told us that the amount of work  associated with conducting weekly inspections and addressing  environment of care deficiencies is substantial. For example, according to  VHA\u2019s data for fiscal year 2017, medical centers reported conducting  about 11,000 weekly inspections, during which more than 128,000  deficiencies were identified. Most deficiencies were closed within 14  business days, as required by VHA policy, but nearly 30,000 deficiencies  across all medical centers had not been addressed within 14 days or had  been addressed through a plan for future work.", "One significant factor contributing to the number of deficiencies and the  associated workload is the advanced age of many medical centers. A  VHA commissioned study found that the general age and underlying  condition of medical centers, including VHA buildings\u2019 being older than 50  years on average and lack of capital investment to address infrastructure  concerns, are the root causes of many barriers that facility management  staff faced in achieving their objectives of maintaining high quality  facilities, and exacerbate the workload issues at these medical centers.  This observation was echoed by medical center officials in our review. For  example at one medical center officials told us that in some cases,  correcting deficiencies found on an environment of care inspection is a  temporary solution for issues related to aging structures that need  extensive repairs and renovations. For example, a roof that needs to be  repaired due to leaks and other structural issues may result in an  increase in the number of interior ceiling tiles with water stains.  Maintenance staff must then continue to identify and replace stained  ceiling tiles, until the root cause, which is subject to a different funding  and approval process, is addressed.", "Also, medical center staff we interviewed said the administrative  requirements associated with the environment of care program  contributed to workload challenges. Medical center staff are responsible  for entering deficiency data into the Environment of Care inspections  database, which is used to document and track results from the  environment of care inspections. The same staff can also be responsible  for reconciling the environment of care inspections database with other  systems, like the medical center\u2019s work order system and other  inspections databases. Medical center staff said that each deficiency  can result in as many as four or more separate data entry actions in the  Environment of Care inspections database and in a separate system  used to track work orders. As an example of the administrative workload  related to the inspection process, the Long Beach medical center in California, whose main building was built in 1967, reported the most  deficiencies in its VISN. According to VHA data, this medical center  reported more than 3,500 environment of care deficiencies related to  facility condition in fiscal year 2017, and medical center officials said this  resulted in as many as 12,000 or more separate data-entry actions.", "Additionally, VHA\u2019s aging information technology systems exacerbate the  administrative workload. VA medical center officials told us that VHA\u2019s  work order system lacks interoperability with the Environment of Care  inspections database, resulting in the need to manually record information  on deficiencies in both systems. Officials we spoke with at VA medical  centers told us that this process can substantially add to post-inspection  workload and to the administrative burden associated with tracking and  closing out deficiencies. Medical center staff also noted that it can often  be the same staff member performing environment of care inspections,  conducting the work to correct deficiencies, and performing administrative  tasks.", "Limitations in VA\u2019s information technology systems, among other things,  led GAO to designate VA health care as a high-risk area. Information  technology limitations we previously identified at VA include the outdated,  inefficient nature of certain systems and a lack of system  interoperability."], "subsections": []}, {"section_title": "Staffing", "paragraphs": ["Staffing shortages have also been recognized by VA\u2019s Central Office staff  as an issue that needs to be addressed across VA facilities. For example,  officials said that in addition to the engineering staff\u2019s shortages  discussed below, there is also a known shortage at many medical centers  of qualified cleaning and janitorial staff, a shortage that can affect the  ability for medical centers to quickly address some of the environment of  care deficiencies. Additionally, we have previously reported that VA is  collaborating with the Office of Personnel Management to address  challenges with recruiting and retaining engineering positions.", "Officials at medical centers included in our review discussed the difficulty  of recruiting and retaining employees to perform maintenance work, such  as painters, electricians, and other relevant maintenance trades. All six of  the medical centers reported vacancies during the last year in  engineering department positions that are needed to complete  maintenance and repairs, such as electricians and painters. The extent to  which these medical centers experienced vacancies, however, varied  widely. The lowest number of reported vacancies by a medical center was  two and the highest number of reported vacancies was 49. Factors cited  by medical center officials on why they had difficulty hiring and retaining  staff encompassed a range of issues, including loss of long-time staff due  to retirement, and a lack of qualified applicants for vacant positions. For  example, medical centers located in and around Los Angeles, California,  reported that their location\u2014in a high cost of living area with a competitive  private-sector jobs market\u2014affected their ability to recruit and retain  these employees. Conversely, medical centers located farther from urban  areas reported difficulty finding and retaining staff due to their relatively  rural locations and smaller overall population.", "Officials from all six medical centers said that while they endeavor to  address all environment of care deficiencies in accordance with the  inspection requirements, these vacancies affected their ability to perform  maintenance and repair functions. For example, officials from one  medical center reported that four out of seven electrician positions at their  medical center were vacant. The officials said in addition to their rural  location, their need for engineering staff knowledgeable in a range of  electrical systems made recruitment difficult. Their facility has buildings  that are over 50 years old, as well as newer buildings, with significantly  different electrical systems. The officials noted that while all electrical  work was eventually completed, the lack of staff slowed or deferred  repairs, or required contract labor. Another medical center noted that a  shortage of relevant engineering staff meant that work orders and  preventative maintenance functions were backlogged and that they had to  utilize overtime to accomplish required functions. When faced with  changing workload demands and staffing shortages, medical centers can,  and do, utilize contractors."], "subsections": []}]}]}, {"section_title": "VHA Takes Steps to Help Medical Centers Comply with Inspection Requirements but Does Not Have Goals or Measures to Determine Program Effectiveness", "paragraphs": ["While VHA provides guidance and oversight to ensure medical centers  implement the environment of care inspection process, it lacks  performance goals, objectives, and measures that would enable it to  assess how well it is achieving its policy of a clean, safe, and functional  environment. We have previously found that results-oriented  organizations set performance goals to define desired program outcomes  and develop performance measures that are clearly linked to these  performance goals and outcomes. Program goals communicate what  results the agency seeks, and performance measures show the progress  the agency is making toward achieving program goals. Performance  measurement also gives managers crucial information to identify gaps in  program performance and plan any needed improvements. Without such  goals and measures in place, VHA is limited in its ability to effectively  manage the Environment of Care Program, including making effective  use of program data and addressing obstacles to improving program  performance."], "subsections": [{"section_title": "VHA\u2019s Oversight of the Environment of Care Program Focuses on Compliance with Inspections Requirements", "paragraphs": ["VHA\u2019s oversight of the Environment of Care Program focuses on ensuring  that medical centers are conducting the inspections according to VHA  requirements. To help medical centers achieve compliance with the  inspection requirements, VHA does the following: develops guidance for medical center and VISN staff on their roles  and responsibilities in conducting inspections and compliance  monitoring, and on how to use the Environment of Care inspections  database software; oversees the deployment and maintenance of the Environment of  Care inspections database software, which medical centers use to  track deficiencies and staff attendance at inspections, among other  things; and provides summary reports from inspections data on deficiencies,  closure status, and staff attendance rate at inspections to officials at  the medical center and VISN-level for program management purposes  To monitor a medical center\u2019s compliance with environment of care  requirements, VHA tracks three measures, which, according to VHA  officials, were established to ensure that medical centers were meeting  requirements related to the inspections process, such as having relevant  staff present for the inspections. Table 3 below shows the three measures  VHA currently uses along with the related performance targets.", "We have previously reported that performance measures should focus on  outcomes to help agencies manage programs to achieve desired  results. VHA\u2019s current measures do not indicate whether desired  outcomes are being achieved or how effective inspections are but rather  whether staff are following policies related to inspections. As a result,  these measures provide program managers with little information on the  actual quality of the environment of care, such as the level of cleanliness  and safety provided. For example:", "One performance measure is based on the requirement that medical  centers address deficiencies within 14 days, either by fixing the  problem or by preparing an action plan describing how the problem  will be fixed. However, because this requirement can be met with an  action plan, it is not a useful measure for understanding the  deficiencies that have not yet been remediated.", "Similarly, the two performance measures on staff attendance at  inspections do not directly relate to the condition of the facility but  reflect the level of compliance with inspection requirements. We  spoke with officials at one medical center who said vacancies within  their information security office prevented them from meeting the  inspection team attendance measure. However, officials said the staff  absence did not affect the inspection team\u2019s ability to perform an  inspection and determine facility deficiencies, given that relevant  engineering staff was present.", "Furthermore, we have previously reported that VHA needs to strengthen  aspects of the environment of care inspection process to ensure more  complete and accurate data on medical center compliance with  environment of care standards, and provide better oversight of the  system."], "subsections": []}, {"section_title": "VHA Has Not Established Outcome-Oriented Performance Goals, Objectives, and Related Measures", "paragraphs": ["VHA has not defined program goals and objectives and related  performance measures, and is therefore limited in its ability to determine  how well program activities, including the environment of care inspection  process, are supporting the agency\u2019s broader policy of providing a clean,  safe, and functional environment. VHA\u2019s current performance measures  are not tied to specific performance goals for the Environment of Care  Program, as such goals have not yet been created. Nor do these  performance measures provide useful information on the actual condition  of facilities or desired outcomes. As a result, these metrics provide VHA  with limited information on how to better manage the program to ensure  clean, safe, and functional medical facilities that, at a minimum, meet the  Joint Commission standards. Without clearly defined and outcome- oriented goals, it will be challenging for VHA to determine what type of  evaluative information it will need to monitor the progress of the  Environment of Care Program, identify how system-wide challenges such  as staffing shortages are affecting outcomes, and improve medical center  conditions.", "VHA has stated it intends to create goals and objectives for the  Environment of Care Program, along with performance measures to  assess whether the goals and objectives are being achieved, but it has  not yet done so. The VHA directive from 2016 that created the  Environment of Care Program directed program officials to establish a  steering committee, whose responsibilities would include, among other  things, developing goals, objectives, and related performance measures  for the program. According to a VHA official, VHA formed this committee  in January 2018, following delays caused by leadership vacancies and  competing demands within the agency. In June 2018, the committee  finalized its charter, which states that the scope of the committee\u2019s  activities is to include defining goals, objectives, performance metrics,  and targets for the Environment of Care Program. VHA officials do not  have a timeline in place for when they expect to complete the steps they  defined in the charter."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["To provide quality care for the nation\u2019s veterans, medical centers must be  clean, safe, and functional. This standard can be a challenge given the  substantial capital repair and improvement needs in many of these  facilities. The Environment of Care Program is an important part of VHA\u2019s  efforts to ensure medical centers are maintained in accordance with  accreditation requirements. However, absent clear goals, objectives, and  performance measures, and a timeline for developing them, VHA will  continue to be limited in its ability to assess how effective the program is  at ensuring a safe, clean, and functional environment. Setting outcome- oriented program goals and objectives provides structure to then  reevaluate existing performance measures or set new ones, all of which  would improve oversight, help VHA determine the effectiveness of the  program, and target areas in need of improvement."], "subsections": []}, {"section_title": "Recommendation for Agency Action", "paragraphs": ["We are making the following recommendation to VHA:  The Undersecretary for Health should set a timeline for defining goals,  objectives, and outcome-oriented performance measures for the  Environment of Care Program. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to VA for comment. In its written  comments, reproduced in appendix I, VA stated it concurred with our  recommendation. VA also provided technical comments, which we  incorporated as appropriate.", "Additionally, VA provided general comments on our report. In those  general comments, VA questioned how we characterized the  Environment of Care Program in the context of Facility Condition  Assessments, the age of its buildings, and software interoperability, and  stated that responsibility for a successful Environment of Care Program  lies at the medical center. We agree it is important to have a strong  Environment of Care Program that is facilitated by leadership at the  medical center and VISN-levels. However, even with strong leadership  and a robust Environment of Care Program, underlying facility condition  issues\u2014impacted by the age of the facility\u2014can affect the kind of  deficiencies found during inspections. These challenges impacted  elements of the Environment of Care Program at all of the medical  centers in our review.", "VA also stated that the report did not adequately reflect the significance of  the environment of care committees at each medical center, and that  performance measures at the national level are measures of compliance,  not a measure of success. We have made relevant revisions in the report  to reflect the role these committees play as a part of the inspections  process. We also agree with VA that the metrics established nationally  are not a measure of success for the various medical centers\u2019  Environment of Care Programs. While the primary responsibility for the  Environment of Care Program and its inspections is at the medical center  and VISN-level, it is still important for VA to have national level  performance measures. Without them, gauging national level  performance and analyzing trends across medical centers is difficult. In  concurring with our recommendation, VA has positioned itself to create  and implement measures to support medical centers and the  Environment of Care Program.", "VA also made comments related to the non-recurring maintenance  approval and funding process, and highlighted a pilot to test a tool to  replace its current facility condition assessment. We have made revisions  to footnotes and relevant report sections as appropriate to address the  changes noted by VA to the non-recurring maintenance approval and  funding process, and added a footnote acknowledging the pilot.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, the Undersecretary of  Veterans Affairs for Health, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Key contributors to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Inspections Related to the Condition of Veterans Health Administration\u2019s (VHA) Facilities", "paragraphs": ["Appendix II: Inspections Related to the  Condition of Veterans Health Administration\u2019s  (VHA) Facilities Purpose  The Facility Condition Assessment   evaluates all buildings and major   systems at a medical facility and   identifies needed repairs and   replacements. This inspection   gives a graded score from A to F   for VHA facilities.", "Frequency  Facility Condition Assessments are   done on a rotating basis, with each  Veterans Integrated Service Network  (VISN) being evaluated every 3 years.  The information gathered during each  Facility Condition Assessment is put   into a Facility Condition Assessment  database for each facility identified by  building, system, and condition. Each  system has an associated cost for  identified repairs and replacements.  These data allow for planning and  expenditure of resources within the  VISNs. This information enables the  VISN to plan, manage, and direct   capital resources against identified   needs in a consistently managed  approach across the VA system.", "Green Environmental Management System  ensures VHA compliance with relevant  federal, state and local environmental   statutes and regulations; increases the  efficiency of energy, water and other   resource usage; helps reduce regulated   air emissions; utilizes pollution prevention  principles; incorporates environmentally  preferable practices for the design,  construction and operation of buildings;   and ensures that VHA facilities are good  neighbors in the local communities.", "Green Environmental Management  System inspections are done   annually.", "The primary purpose and intent of the   Annual Workplace Evaluation is to ensure  occupational safety and health evaluations   of all worksites are completed and comply   with Occupational Safety and Health  Administration and agency requirements.   The objective is to evaluate Occupational  Safety and Health Administration   compliance, current building conditions,   work practices, and Occupational Safety   and Health Administration program  implementation throughout the facility and   at offsite campuses such as rented office  buildings, clinics, labs, etc.", "Annual Workplace Evaluations are  required to be performed at least   once every fiscal year. The Annual  Workplace Evaluation must be   scheduled at least once during a 12- month period +/- 3 months from the   start date of the previous Annual  Workplace Evaluation."], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Heather J. Halliwell (Assistant  Director), Betsey Ward-Jenks (Analyst-in-Charge), Dwayne Curry, and  Colleen A. Taylor made key contributions to this report. Also contributing  were Kelly Rubin, Michelle Weathers, and Crystal Wesco."], "subsections": []}]}], "fastfact": ["The Veterans Health Administration oversees one of the nation's largest healthcare systems, serving about 9 million veterans at numerous facilities, including 170 medical centers.", "To ensure a safe environment for veterans and employees, VHA must keep its facilities clean and well maintained. This can be a challenge given their substantial capital repair and improvement needs.", "VHA's Environment of Care Program is an important part of its efforts to ensure its facilities are regularly inspected and meet standards. We recommended VHA develop ways to better measure the program's effectiveness and target areas in need of improvement."]}
{"id": "GAO-18-148", "url": "https://www.gao.gov/products/GAO-18-148", "title": "Information Technology Reform: Agencies Need to Improve Certification of Incremental Development", "published_date": "2017-11-07T00:00:00", "released_date": "2017-11-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Investments in federal IT too often result in failed projects that incur cost overruns and schedule slippages. Recognizing the severity of issues related to government-wide IT management, Congress enacted federal IT acquisition reform legislation in December 2014. Among other things, the law states that OMB require in its annual IT capital planning guidance that CIOs certify that IT investments are adequately implementing incremental development.", "GAO was asked to review agencies' use of incremental development. This report addresses the number of investments certified by agency CIOs as implementing adequate incremental development and any reported challenges, and whether agencies' CIO certification policies and processes were in accordance with FITARA. GAO analyzed data for major IT investments in development, as reported by 24 agencies, and identified their reported challenges and use of certification information. GAO also reviewed the 24 agencies' policies and processes for the CIO certification of incremental development and interviewed OMB staff."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies reported that 62 percent of major information technology (IT) software development investments were certified by the agency Chief Information Officer (CIO) for implementing adequate incremental development in fiscal year 2017, as required by the Federal IT Acquisition Reform Act (FITARA) as of August 2016. However, a number of responses for the remaining investments were incorrectly reported due to agency error. Officials from 21 of the 24 agencies in GAO's review reported that challenges hindered their ability to implement incremental development, which included: (1) inefficient governance processes; (2) procurement delays; and (3) organizational changes associated with transitioning from a traditional software methodology that takes years to deliver a product, to incremental development, which delivers products in shorter time frames. Nevertheless, agencies reported that the certification process was beneficial because they used the information from the process to assist with identifying investments that could more effectively use an incremental approach, and using lessons learned to improve the agencies' incremental processes.", "As of August 2017, only 4 of the 24 agencies had clearly defined CIO incremental development certification policies and processes that contained: descriptions of the role of the CIO in the process; how the CIO's certification will be documented; and included definitions of incremental development and time frames for delivering functionality consistent with Office of Management and Budget (OMB) guidance (see figure).", "In addition, OMB's fiscal year 2018 capital planning guidance did not establish how agency CIOs are to make explicit statements to demonstrate compliance with FITARA's incremental provisions, while the 2017 guidance did. However, OMB's fiscal year 2019 guidance provides clear direction on reporting incremental certification and is a positive step in addressing this issue."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 19 recommendations to 17 agencies, including 3 to improve reporting accuracy and 16 to update or establish certification policies. Eleven agencies agreed with GAO's recommendations, 1 partially agreed, and 5 did not state whether they agreed or disagreed. OMB disagreed with several of GAO's conclusions, which GAO continues to believe are valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies rely on information technology (IT) systems to provide  essential services affecting the health, economy, and defense of the  nation. In fiscal year 2017, agencies were budgeted to spend more than  $89 billion on IT, including more than $43 billion on 752 major  investments. With many of these investments in a development phase, it  is important to ensure that agencies are making the most efficient use of  their financial resources through effective management practices.  However, as we have previously testified, IT projects often fail\u2014that is,  even after exceeding their budgets by millions of dollars and delaying the  schedules by years\u2014the results do not meet requirements.", "Recognizing the severity of challenges related to the government-wide  management of IT, in December 2014, Federal Information Technology  Acquisition Reform Act provisions (commonly referred to as FITARA)  were enacted as a part of the Carl Levin and Howard P. \u2018Buck\u2019 McKeon  National Defense Authorization Act for Fiscal Year 2015. The law states  that the Office of Management and Budget (OMB) require in its annual IT  capital planning guidance that each covered agency\u2019s chief information  officer (CIO) certify that IT investments are adequately implementing  incremental development, as defined in capital planning guidance issued  by OMB.", "Further, in February 2015, we added improving the management of IT  acquisitions and operations to our high-risk list\u2014a list of agencies and  program areas that have a higher potential for fraud, waste, abuse, and  mismanagement, or are in need of transformation. In introducing this risk  area, we specifically noted that agencies had used incremental  development less than 50 percent of the time for a selection of  investments that we reviewed and called on agencies to improve their  delivery of functionality to ensure that a minimum of 80 percent of the  government\u2019s acquisitions deliver functionality every 12 months. We  recently issued an update to our high-risk report in February 2017 and  noted that, while progress has been made in addressing the IT  acquisitions and operations high-risk area, significant work remains to be  completed, including the need for demonstrated progress by agencies in  delivering functionality every 12 months on major acquisitions.", "You asked us to review agencies\u2019 use of incremental development in  managing major IT investments. Our objectives were to determine: (1) the  number of investments certified by agencies as implementing adequate  incremental development and any reported challenges that impact the  agencies\u2019 incremental delivery of functionality, and (2) whether agencies  are establishing policies and processes for CIO certification of  incremental development in accordance with FITARA.", "To address the first objective, we analyzed fiscal year 2017 data for the  major investments reported on the IT Dashboard as of August 31, 2016,  by the 24 agencies required to provide this information under FITARA.  These agencies are the Department of Commerce (Commerce),  Department of Defense (Defense), Department of Education (Education),  Department of Energy (Energy), Department of Health and Human  Services (HHS), Department of Homeland Security (DHS), Department of  Housing and Urban Development (HUD), Department of the Interior  (Interior), Department of Justice (Justice), Department of Labor (Labor),  Department of State (State), Department of Transportation  (Transportation), Department of the Treasury (Treasury), Department of  Veterans Affairs (VA), U.S. Department of Agriculture (USDA),  Environmental Protection Agency (EPA), General Services Administration  (GSA), National Aeronautics and Space Administration (NASA), National  Science Foundation (NSF), Office of Personnel Management (OPM),  Small Business Administration (SBA), Social Security Administration  (SSA), U.S. Agency for International Development (USAID), and U.S.  Nuclear Regulatory Commission (NRC).", "Among the reported investments, we identified 166 investments  undertaking software development activities in which at least 50 percent  or more of funding was allocated to development, modernization, and  enhancement activities. For each of these investments, we assessed  the status of reported certifications by the CIOs of the respective  agencies. We presented the results of our data analysis to officials from  each agency\u2019s Office of the CIO and incorporated any changes to the  data as appropriate. We determined that the data were sufficiently reliable  for the purpose of this report.", "We also presented a list of challenges identified during our past work on  incremental development to officials in the Office of the CIO at each of the  24 agencies involved with investment management and software  development activities. We then asked the officials to identify from the  list their top three challenges to delivering incremental functionality;  explain the actions they took to addresses the challenges; and describe  the outcomes. In addition, we also asked agency officials to identify any  challenges that were not included in the list, but which were among their  top three challenges. Lastly, we also asked the agencies in our review to  identify how the CIO utilized the information obtained during the process  of certifying investments\u2019 adequate incremental development to make  decisions regarding the agency\u2019s major IT investments.", "For the second objective, we analyzed the 24 agencies\u2019 CIO certification  policies and processes to determine whether they were consistent with  the provision in FITARA and OMB guidance. In addition, we  interviewed staff from OMB\u2019s Office of E-Government and Information  Technology regarding OMB\u2019s guidance related to incremental  development and FITARA. A full description of our objectives, scope, and  methodology can be found in appendix I.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Investments in federal IT have the potential to make agencies more  efficient in fulfilling their missions. However, as we have previously  reported, these investments too often result in failed projects that incur  cost overruns and schedule slippages, while contributing little to mission- related outcomes. For example:", "The Farm Service Agency\u2019s Modernize and Innovate the Delivery of  Agricultural Systems program, which was to replace aging hardware  and software applications that process benefits to farmers, was halted  in July 2014 after investing about 10 years and at least $423 million,  while only delivering about 20 percent of the functionality that was  originally planned.", "Defense\u2019s Expeditionary Combat Support System was canceled in  December 2012, after spending more than a billion dollars and failing  to deploy within 5 years of initially obligating funds.", "VA\u2019s Financial and Logistics Integrated Technology Enterprise  program was intended to be delivered by 2014 at a total estimated  cost of $609 million, but was terminated in October 2011 due to  challenges in managing the program.", "OPM\u2019s Retirement Systems Modernization program was canceled in  February 2011, after spending approximately $231 million on the  agency\u2019s third attempt to automate the processing of federal  employee retirement claims.", "DHS\u2019s Secure Border Initiative Network program was ended in  January 2011, after the department obligated more than $1 billion to  the program, because the program did not meet cost-effectiveness  and viability standards.", "The tri-agency (Defense, NASA, and the National Oceanic and  Atmospheric Administration) National Polar-orbiting Operational  Environmental Satellite System was a weather satellite program that  was disbanded by the White House Office of Science and Technology  Policy in February 2010 after the program spent 16 years and almost  $5 billion.", "The VA Scheduling Replacement Project was terminated in  September 2009 after spending an estimated $127 million over 9  years.", "One approach to reducing software development risks is to divide  investments into smaller parts, or increments. While a traditional waterfall  software development effort usually is broadly scoped, multiyear, and  produces a product at the end of a sequence of phases, an incremental  development approach delivers software products in smaller modules  with shorter time frames. This development technique has been  recognized in prior law since 1996 and in OMB guidance since 2000.", "By following an incremental development approach, agencies have the  potential to: deliver capabilities to their users more rapidly, giving them more  flexibility to respond to changing agency priorities;  increase the likelihood that each project will achieve its cost,  schedule, and performance goals; obtain additional feedback from users, increasing the probability that  each successive increment and project will meet user needs; more easily incorporate emerging technologies; and  terminate a poorly performing investment, with fewer sunk costs.", "Since 2000, OMB Circular A-130 has directed agencies to incorporate an  incremental development approach into their policies and ensure that  investments implement them. Further, since 2012, OMB has required  that functionality be delivered at least every 6 months.", "In addition, FITARA states that OMB is to require in its annual IT capital  planning guidance that covered agency CIOs certify that IT investments  are adequately implementing incremental development, as defined in  capital planning guidance issued by OMB. Accordingly, in June 2015,  OMB released two related sets of guidance on the implementation of  FITARA that included instructions pertaining to CIO certification of  adequate incremental development. In particular, agencies were to,  among other things:", "Develop policies and processes which ensure CIO certification.", "OMB required agencies to define IT policies and processes which  ensure that the CIO certifies that IT resources are adequately  implementing incremental development. In the guidance, OMB  defined adequate incremental development as the planned and actual  delivery of new or modified technical functionality to users that occurs  at least every 6 months for development of software or services.", "Report the status of CIO certification. OMB\u2019s guidance required  agency CIOs to certify in each major IT investment\u2019s business case  whether the investment\u2019s plan for the current year adequately  implements incremental development.", "OMB uses the major IT business cases to monitor major investments  once they are funded. Performance information on each major  investment, including the status of incremental delivery, is made publicly  available on the web-based IT Dashboard. In using the IT Dashboard,  OMB intends to provide transparency and oversight into these agencies\u2019  investments. This public display of data is also intended to allow  Congress and government oversight bodies, as well as the general  public, to hold agencies accountable for the results and progress of the  investments.", "Further, OMB issued its fiscal year 2018 and fiscal year 2019 capital  planning guidance in June 2016 and August 2017, respectively, which  required agency CIOs to provide the certifications needed to demonstrate  compliance with FITARA."], "subsections": [{"section_title": "GAO Has Reported on Efforts to Improve IT Acquisitions Using Incremental Development", "paragraphs": ["During the past several years, we have reported on a variety of  challenges related to improving federal IT acquisitions through the use of  incremental development. In 2011, we identified seven successful  investment acquisitions and nine common factors critical to their  success. Specifically, we reported that department officials had  identified seven successful investments that best achieved their  respective cost, schedule, scope, and performance goals. Notably, all of  these were smaller increments, phases, or releases of larger projects. For  example, the Defense investment in our sample was the seventh  increment of an ongoing investment; Energy\u2019s system was the first of two  phases; the DHS investment was rolled out to two locations prior to  deployment to 37 additional locations; and Transportation\u2019s investment  had been part of a prototype deployed to four airports.", "Common factors critical to the success of three or more of the seven  investments were:  1.  Program officials were actively engaged with stakeholders.  2.  Program staff had the necessary knowledge and skills.  3.  Senior department and agency executives supported the programs.  4.  End users and stakeholders were involved in the development of  requirements.  5.  End users participated in testing system functionality prior to formal  end-user acceptance testing.  6.  Government and contractor staff were stable and consistent.  7.  Program staff prioritized requirements.  8.  Program officials maintained regular communication with the prime  contractor.  9.  Programs received sufficient funding.", "These critical factors help support OMB\u2019s objective of improving the  management of large-scale IT acquisitions across the federal  government.", "In May 2014, we reported on the status of incremental development at  five agencies (Defense, DHS, HHS, Transportation, and VA). We noted  that these agencies planned to deliver functionality for fewer than half of  the investments in 12-month cycles and that only about one-fourth of  these investments would deliver in 6-month increments, as required by  OMB. Additionally, OMB staff reported to us that they did not expect that  many investments would meet the 6-month requirement. Therefore, we  questioned whether a 6-month delivery requirement was an appropriate  government-wide goal and whether OMB should instead consider a 12- month time frame, as called for in its IT Reform Plan. Accordingly, we  recommended that OMB require projects to deliver functionality at least  every 12 months. OMB disagreed with our recommendation, asserting  that changing the requirement from 6 to 12 months would reduce the  emphasis on incremental development that it had been advocating and  that 6 months was an appropriate goal. However, we noted in our report,  agencies\u2019 plans to deliver functionality every 6 months was low and it  would not always be practical for certain types of investments to deliver  functionality every 6 months. We therefore continue to believe our  recommendation is appropriate.", "We also recommended that OMB develop and issue clearer guidance on  incremental development to ensure that it has the necessary information  to oversee the extent to which projects and investments are implementing  its guidance. OMB took action to address this recommendation and  issued capital planning guidance in fiscal year 2016 that requires  agencies to report on whether each of their projects has delivered a  production release every 6 months and to provide a rationale if  functionality is not being delivered. In addition, we recommended that the  five selected agencies\u2014Defense, DHS, HHS, Transportation, and VA\u2014 update and implement their associated policies. Most agencies agreed  with our recommendation or had no comment. As of September 2017,  Defense, DHS, Transportation, and VA have addressed our  recommendation.", "In February 2015, we added improving the management of IT acquisitions  and operations to our high-risk list, citing a lack of disciplined and  effective management and inconsistent application of best practices to  the successful acquisition of IT projects throughout the federal  government. In particular, we noted the critical importance of  implementing incremental development in order to reduce investment risk  and called on federal agencies to ensure that a minimum of 80 percent of  the government\u2019s major acquisitions deliver functionality at least every 12  months.", "In August 2016, we reported on the status of incremental development  and noted that, for fiscal year 2016, 22 agencies had reported on the IT  Dashboard that 64 percent of their software development projects would  deliver useable functionality every 6 months, as required by OMB.  However, shortcomings in OMB\u2019s guidance\u2014the lack of clarity regarding  the types of projects where incremental development would not apply,  and how the status of these nonsoftware projects should be reported\u2014 affected the accuracy of the data on the IT Dashboard. We therefore  recommended in August 2016 that OMB clarify its existing guidance  regarding what IT investments were and were not subject to requirements  on the use of incremental development and how CIOs should report the  status of projects that were not subject to these requirements. OMB did  not specifically agree or disagree with our recommendation, but stated  that it generally agreed with our report. In April 2017, OMB staff reported  that the agency had taken action and included language to address our  recommendation in its fiscal year 2018 guidance; however, an analysis of  that guidance showed that it still lacked direction on how CIOs are to  report the status of nonsoftware projects.", "In addition, for our August 2016 report, we reviewed seven departments\u2019  guidance and found that only three departments (Commerce, DHS, and  Transportation) had policies and processes to ensure that the CIO would  certify that IT investments were adequately implementing incremental  development in accordance with FITARA. We therefore made  recommendations to the remaining four departments (Defense,  Education, HHS, and Treasury) to establish a policy and process for the  certification of major IT investments\u2019 adequate use of incremental  development, in accordance with OMB\u2019s guidance on the implementation  of FITARA. Two departments concurred with our recommendation, one  department disagreed, and one department did not comment. As of  August 2017, none of the four departments had taken action to address  the recommendation; as discussed later in the report.", "We issued an update to our high-risk report in February 2017 and noted  that, while progress has been made in addressing this high-risk area,  significant work remains to be completed. For example, as of December  2016, OMB and agencies had implemented 366 (or about 46 percent) of  the 803 open recommendations that we had made from fiscal years 2010  through 2015 related to IT acquisitions and operations. We also noted  that agencies needed to make demonstrated progress in delivering  functionality every 12 months on major acquisitions.", "Further, in April 2017, we reported on the results of a forum, convened by  the Comptroller General on September 14, 2016, to explore challenges  and opportunities for CIOs to improve federal IT acquisitions and  operations\u2014with the goal of better informing policymakers and  government leadership. Thirteen current and former federal agency  CIOs, members of Congress, and private sector IT executives noted the  importance of federal agencies\u2019 IT procurement offices and processes  evolving to align with new technologies, as agencies are not always set  up to take advantage of acquisitions using Agile development  processes."], "subsections": []}]}, {"section_title": "Agencies Reported That Most of Their Major Software Development Investments Were Certified as Having Adequate Incremental Development, but Continue to Face Challenges and Identify Benefits", "paragraphs": ["Agencies reported to OMB through the IT Dashboard that more than half  of their major software development investments were certified by the  CIO as implementing adequate incremental development as of August  2016. For the remaining investments, the agencies offered various  interpretations regarding what investments needed to be certified. For  example, officials of several agencies reported that they were not utilizing  incremental development for certain investments. In other instances,  agencies did not provide a response to OMB regarding the question in the  major IT business case about certification, or responded that they did not  consider certification to be applicable for their investments. However,  based on OMB\u2019s guidance, a number of these \u201cnot applicable\u201d responses  were incorrectly reported, as these agencies had investments that  included software development and were, therefore, required to report on  the certification of adequate incremental development.", "In addition, officials from a majority of the agencies reported that multiple  challenges had impacted their ability to implement adequate incremental  development. These challenges related to inefficient governance  processes; procurement delays; the lack of stable, prioritized  requirements; and organizational and cultural changes associated with  the transition from a traditional software methodology to an incremental  methodology. Nevertheless, officials from 21 agencies reported that the  certification process was beneficial because they used the information  obtained during the process to assist with management oversight of major  IT investments, including identifying investments that could be using a  more effective incremental approach and using lessons learned to  improve the agency\u2019s incremental processes."], "subsections": [{"section_title": "CIOs Certified 62 Percent of Major IT Investments as Having Adequate Incremental Development", "paragraphs": ["FITARA states that, in its annual IT capital planning guidance, OMB is to  require CIOs to certify that IT investments are adequately implementing  incremental development. In 2015, OMB defined adequate incremental  development as the planned and actual delivery of new or modified  technical functionality to users that occurs at least every 6 months for  development of software or services. Further, OMB\u2019s IT capital planning  guidance for fiscal year 2017 required CIOs to certify whether their  agencies\u2019 major IT investments had adequately implemented incremental  development for the current year. Specifically, agencies were to  respond to a question in the major IT business case regarding whether  the CIO certified adequate incremental development for each investment  with a response of either yes, no, or not applicable. Agencies\u2019 responses  to this question are publicly reported by OMB on the IT Dashboard.", "As of August 31, 2016, 21 of the 24 agencies in our review had reported  on the IT Dashboard a total of 166 major software development  investments that were planned to be primarily in development for fiscal  year 2017. Of these 166 investments, the agencies reported that 62  percent (103 investments) were certified by the CIO as using adequate  incremental development for fiscal year 2017, as shown in table 1 in  alphabetical order by department and agency. (For additional details on  the certification status of the 166 investments, see appendix II.)", "For the remaining 63 investments, 8 agencies either reported in the major  IT business case that the investment was not certified as adequately  implementing incremental development or that certification was not  applicable. Three other agencies did not provide a response to the  question regarding certification in the major IT business case submitted to  OMB. Figure 1 shows the breakdown of responses by agency regarding  investments that were not certified as implementing adequate incremental  development, as reported on the IT Dashboard.", "Officials in the Office of the CIO at each of the 3 agencies provided a  variety of reasons for why the 11 investments were not certified as  implementing adequate incremental development. For example, HHS  officials noted that certain investments are required to meet complex  statutory requirements and, thus, a 6-month release schedule is not  always appropriate for them. Interior officials stated that their investment  had just been categorized as a major investment and, at the time of the  submission of certification status, a baseline had not been approved. The  officials stated, however, that the baseline has since been approved and  the investment is expected to deliver functionality every 6 months.  Further, SSA officials reported that 3 investments were not software  development initiatives even though 2 of these investments had been  inaccurately reported as such on the IT Dashboard.", "Regarding the 33 investments for which the 3 agencies did not provide a  response in the major IT business case for the investment, officials from  each agency\u2019s Office of the CIO attributed the lack of a response to either  data entry errors or the agency not being required to publicly report this  information for the investments. In particular, USDA and Treasury officials  reported that the lack of certification data on the IT Dashboard was the  result of a data entry error. Treasury officials also stated that the agency\u2019s  missing responses were due to a lack of administrative oversight in  reviewing the data for accuracy and consistency. The officials noted that  the Treasury CIO had certified all of the agency\u2019s investments but some  investments failed to select the proper response in the business case.", "Defense officials reported that 16 investments were categorized as  national security systems and, therefore, were exempt from public  reporting on the IT Dashboard (though not exempt from acquisition  policies regarding the use of incremental development). The officials  said that they did not provide a response on the remaining 7 investments  because 1 investment was not a software development effort and the  other 6 investments were designated as major automated information  systems and, therefore, the agency did not have to submit business  cases to OMB with this information.", "Lastly, officials from the Office of the CIO at 7 agencies reported a variety  of reasons for why they had provided a response of \u201cnot applicable\u201d for 19  investments. For example, Interior officials stated that, at the time of the  certification submission, the investment did not have any approved  development projects and, therefore, the agency had indicated not  applicable in its response for the one investment. However, the officials  stated that the investment\u2019s projects have since been approved and the  CIO has reviewed the investment and certified adequate incremental  development.", "For the remaining 18 investments at the other 6 agencies (Commerce,  DHS, Education, Energy, HHS, and Transportation), officials from each  agency\u2019s Office of the CIO reported that the majority of the projects  associated with their investments were not primarily related to software  development, or that they were using either a non-incremental  development methodology or a mixed non-incremental/incremental  development methodology. As a result, the officials believed the  certification of adequate incremental development was not applicable,  even though at least one project within each of the investments involved  software development.", "However, based on OMB\u2019s guidance, these \u201cnot applicable\u201d responses for  the 18 investments were incorrectly reported and the agencies should  have provided either a \u201cyes\u201d or \u201cno\u201d response to the certification question  because the investment included software development. Specifically,  OMB\u2019s fiscal year 2017 capital planning guidance states that certification  of incremental development applies to any investment that is developing  software or services, as noted in its definition of adequate incremental  development. In addition, staff in OMB\u2019s Office of E-Government and  Information Technology stated that a \u201cnot applicable\u201d response to the  question was only acceptable in cases where software development was  not occurring, such as an investment related to infrastructure or  technology refreshment of equipment.", "Staff in the Office of E-Government and Information Technology  acknowledged the need for more meaningful oversight of agencies\u2019 use of  incremental development and stated that, beginning in fiscal year 2018,  OMB will no longer require agencies to report CIO certification information  in their investments\u2019 major IT business cases or on the IT Dashboard.  Rather, OMB staff stated that agencies would be required to separately  provide the certifications needed to demonstrate compliance with  FITARA. OMB\u2019s revised approach and agencies\u2019 implementation of  OMB\u2019s guidance are further discussed later in this report.", "Regardless of the reporting requirements in place, it remains critical that  federal agencies report accurate incremental development information to  OMB because of OMB\u2019s plans to use this information for investment  management and oversight. However, our September 2016 work has  highlighted the poor quality of data related to incremental development at  the project level, including whether a project is delivering a release every  6 months. Specifically, we reviewed seven agencies\u2019 major IT software  projects and found inconsistencies that affected the accuracy of the  reported rates of delivery for all agencies\u2014and at least a 10 percentage  point difference in the reported rate on the IT Dashboard for five of these  agencies. We therefore made recommendations to the seven agencies to  improve their reporting of incremental development data on the IT  Dashboard.", "Having accurate data on agency investments\u2019 use of incremental  development is critical for providing oversight and management of these  investments and to ensure that OMB and lawmakers can hold CIOs  accountable for the investments\u2019 performance. We have previously made  recommendations to Commerce, Defense, DHS, Education, HHS,  Transportation, and Treasury to improve the accuracy of reporting on the  IT Dashboard and continue to believe these recommendations are  appropriate. In addition, until Energy, SSA, and USDA improve their  reporting of incremental development data on the IT Dashboard, their  efforts to improve the use of incremental development may not be  successful. As a result, the agencies increase the risk that the potential  impact of utilizing incremental development to more quickly deliver useful  functionality to users and improve the likelihood that these multimillion  dollar projects will meet their stated goals, may not be realized."], "subsections": []}, {"section_title": "Multiple Challenges Were Commonly Identified by Agencies as Impacting the Delivery of Incremental Functionality", "paragraphs": ["The majority of the 24 agencies in our review reported that multiple  challenges had impacted their ability to adequately implement  incremental development for their major IT software development  investments. In particular, when presented with a list of challenges  identified by our past work on incremental development, 21 of the  agencies selected seven common challenges to developing investments  incrementally. Each of these seven challenges was selected by 5 or more  agencies. For example:", "14 agencies identified problems with program staff over-utilization and  the lack of skills and experience as their top challenge;", "6 agencies reported that development work was slowed by inefficient  governance and oversight processes;", "5 agencies reported that development schedules were impeded by  procurement delays; and", "5 agencies identified the lack of stable, prioritized requirements as a  challenge.", "In addition, 3 agencies identified a new challenge which had not been  described in our prior work. Specifically, they reported that organizational  and cultural changes associated with the transition from a traditional  waterfall software methodology to an incremental methodology required  more time and resources to implement than anticipated. Table 2  summarizes the common challenges identified by agencies and the  number of agencies that reported each challenge, ranked by number of  agencies reporting the challenge. Examples of the challenges\u2014and  actions taken to overcome them\u2014are discussed following the table.", "Project staff were over-utilized or lacked the necessary skills and  experience. Officials from the Office of the CIO at 14 agencies (DHS,  Education, EPA, GSA, Justice, NASA, NRC, OPM, SBA, SSA, State,  Treasury, USAID, and VA) reported challenges in implementing  incremental development practices associated with project staff, such as  a lack of staff with the necessary skills and experience in utilizing  incremental approaches, inadequate training on these approaches,  overutilization of business or subject matter experts, and the lack of  engagement between product owners and subject matter experts. To  address these challenges, agency officials reported implementing new  approaches, such as training programs focused on incremental  development, coaching strategies to assist project managers in managing  acquisitions, and hiring practices. For example, among these agencies:", "DHS officials reported that project staffs\u2019 lack of necessary skills and  experience in understanding the requirements for managing major IT  acquisitions is an ongoing issue, not only related to incremental  development, but also to IT program and project management. The  officials stated that they had developed an acquisition coaching and  assistance strategy that was intended to establish an experienced  team of acquisition coaches who were up-to-date on the latest  acquisition, contracting, and development techniques to assist project  managers in managing the acquisitions. The officials stated that they  hoped to present lessons learned and recommendations on this  strategy to the agency\u2019s Agile working group in summer 2017.", "Treasury officials reported a significant need for specialized  engineers, architects, and developers with skills in older programming  languages to maintain its many legacy systems. For example, officials  noted that the agency is modernizing its core taxpayer account  processing applications, which utilized antiquated programming  languages, to more modernized platforms. Treasury officials noted  that they have been shifting staff to meet immediate needs;  augmenting teams with contractors, where possible; and hiring new  staff to fill critical open positions. Nevertheless, the officials said they  have had to slow work on four key projects and delay the launch of  other projects. In addition, the officials stated that they are relying on  contractors more to meet the agency\u2019s staffing needs.", "EPA officials noted that, as the agency transitions from using waterfall  software development approaches to Agile-based approaches, it  needs more skilled staff with experience in Agile development. These  officials stated that the agency\u2019s CIO had taken several actions to  address this challenge, including creating an Office of Digital Services  and Technical Architecture to promote Agile and user-centered  design, establishing a fellowship program to bring outside Agile  experts into the project teams, and creating a blanket purchase  agreement to allow agency project teams to purchase Agile  programming and consulting services.", "According to NRC officials, one of the greatest incremental delivery  challenges has been the difficulty of engaging sufficient business area  product owners and subject matter experts. For example, the officials  explained that, despite product owners\u2019 enthusiasm for increased  engagement with developers, the demands of the agency\u2019s core  mission work presents challenges for these owners in being available  for meetings related to Agile development activities. NRC officials  informed us that the agency had addressed the challenge by working  to establish a predictable, recurring schedule for product owner and  subject matter expert engagement on development projects, where  expectations are communicated to management about time  commitments.", "Further, agency officials from a number of the 14 agencies that  experienced this challenge reported varying approaches to implementing  new incremental development training. For example, Treasury officials  stated that the agency has developed in-house training for existing  developers to meet the needs of its modernized programs. Education  officials noted that the agency identified a select team of IT professionals  within the agency to receive formal training in incremental development  practices. Further, VA officials told us that its Enterprise Program  Management Office is focused on training IT personnel on incremental  development principles. Finally, SSA officials reported that the agency  had launched a training program that had sent hundreds of developers  through a 6-week boot camp program, which included courses in  incremental development and modern coding languages.", "Programs did not receive sufficient funding or received funding later  than needed. Officials from the Office of the CIO at nine agencies (GSA,  NASA, OPM, SSA, State, Treasury, USAID, USDA, and VA) reported  challenges associated with programs not receiving sufficient funding or  not receiving funding until late in the fiscal year. These challenges were a  result of changing funding priorities, budget cuts, and continuing  resolutions, which disrupted delivery schedules and required agencies to  delay, reprioritize, or discontinue the rollout of particular investments or  modernization activities. Agencies reported adopting various approaches  to overcome the challenges in this area, such as delaying project  schedules, developing alternate plans for delivering functionality, and  using flexible contracting strategies. For example:", "USDA officials reported that funding for a number of projects was not  available until late in the fiscal year, which impacted project  schedules. The officials stated that one component agency addressed  the funding delay by adjusting schedule start dates for projects  relative to the current fiscal year, which helped to improve schedule  projections.", "OPM officials told us that they had faced challenges in performing  work on incremental projects due to a lack of available resources  caused by delays in receiving funding. The officials stated that they  addressed this challenge by developing alternate plans to delivering  incremental functionality with a different scope or focus for the  system.", "VA officials reported that they faced challenges with funding IT efforts  that span multiple years. The officials noted that administrative  priorities often change over time, impacting the level of funding  approved in subsequent years to undertake incremental development  projects. To address this, officials noted that they used flexible  contracting strategies\u2014such as options that allow the government to  continue the contract only when funding is assured, adjusting a  contract\u2019s time frames to match a delay, adjusting schedules,  designing contracts so that a vendor is paid based on completion of  measured functionality, and using the change request process to  contribute funding to other projects.", "Treasury officials stated that the lack of a dedicated funding  commitment had led to difficulties in longer-term strategic planning for  IT improvements. The officials stated that resources assigned to  certain IT projects had to be leveraged for legislatively mandated  investments, causing project delays and pauses for these projects. As  a result, the officials reported that the agency had been reviewing  core initiatives and infrastructure programs, such as infrastructure,  hardware, and software refresh and process improvements, to  determine if they can scale back scope or lengthen schedules. The  officials said that at least one program has been formally paused.", "Projects experienced management and organizational challenges  that introduced delays. Officials from the Office of the CIO at seven  agencies (Commerce, Interior, NASA, NRC, NSF, SBA, and  Transportation) reported that management and organizational challenges  had introduced delays in delivering functionality to users. These  challenges included delays in testing and meeting delivery schedules due  to dependencies on other systems or projects and a lack of approved  software or appropriate equipment. Agency officials reported  implementing various approaches to overcome these challenges, such as  addressing external dependencies, tailoring development processes, and  providing waivers for the acquisition of software and hardware. For  example:", "Commerce officials reported that they faced organizational challenges  in meeting scheduled delivery time frames due to delays with another  project that was not ready for testing. In particular, the officials  reported that one of their systems was ready for testing but  experienced delays because the system had an interface with another  system that was not ready for testing. The officials said that the delay  in Commerce\u2019s ability to test its system resulted in missed delivery  milestones. In order to continue development, the project team  separately tested its system without including the interface  functionality.", "NRC officials reported that they had experienced delays in meeting  their incremental projects\u2019 delivery schedules due to dependencies on  multiple complex projects. These officials told us that the agency  addressed these delays by improving existing processes and  implementing a change control board and an enterprise test  development environment.", "SBA officials reported that delays were introduced when the agency  did not have necessary software and hardware available for  development activities. Officials noted that these challenges were a  result of the agency not maintaining an updated inventory of approved  software and developers not having access to laptops needed for  development activities. SBA officials stated that the agency addressed  the lack of approved software and equipment needed for incremental  development by processing a waiver to use software tools and  procuring laptops for the developers.", "Incremental development work was slowed by inefficient  governance and oversight processes. Officials from the Office of the  CIO at six agencies (DHS, HUD, NRC, State, USAID, and USDA)  reported that they had experienced challenges in developing projects  incrementally because they were required to follow agency processes  that were lengthy, inefficient, or not easily adaptable to a more rapid  incremental delivery release schedule. Agency officials also noted that a  lack of understanding among project staff regarding the benefits of  incremental development was a challenge. The officials reported  implementing new guidance and management processes to overcome  these challenges. For example:", "DHS officials reported that inefficient governance and oversight  processes had caused delays in obtaining necessary approvals for  moving projects forward. Specifically, these officials reported that the  agency\u2019s acquisition lifecycle framework did not allow for tailoring any  of its processes to accommodate Agile development. The officials  noted that these challenges were addressed with the publication of  updated lifecycle documents that incorporated incremental  development guidance into the agency\u2019s policies and procedures.", "HUD officials reported that the agency\u2019s internal approval process for  the Privacy Act System of Record Notice did not accommodate  incremental releases. Specifically, the agency\u2019s incremental  development process called for the release of functionality every 60  days, but the agency\u2019s Privacy Office required 90 to 180 days to  complete its approval process. HUD officials reported that the Office  of the CIO is collaborating with the Privacy Office to expedite the  existing approval process, and have proposed that a single system of  record notice be prepared for each incremental development project,  rather than one for each release.", "USAID officials reported that the time needed for defining and  incorporating changes in response to IT security and privacy  standards, processes, and artifacts provided before the system is  granted an Authority to Operate is a challenge. These officials  stated that the Office of the CIO has acquired additional  knowledgeable staff to support projects in the incorporation and  execution of security and privacy requirements.", "State officials reported that applying incremental development  principles to projects has been a challenge because agency  personnel have lacked a clear understanding of the benefits of  incremental development and how to apply incremental concepts to  unique project types. These officials reported that the agency was  updating its guidance and processes to place greater emphasis on the  importance of incremental development, and that the agency had  established a review process to ensure projects plan for implementing  incremental development.", "Project characteristics made rapid delivery of functionality  infeasible or impracticable. Officials from the Office of the CIO at six  agencies (Interior, Justice, Labor, SSA, Transportation, and Treasury)  reported that they believed rapid delivery of functionality was infeasible or  impracticable for projects that addressed human health and safety  concerns, had legislative mandates that established immovable delivery  time frames, were primarily for infrastructure deployment, were updates to  existing systems to address legal or other regulatory changes, or were  updates to legacy systems that utilize old programming languages.  However, none of the agencies identified solutions for these challenges  that enabled them to deliver functionality in the 6-month time frames  required by OMB. For example:", "Transportation officials noted that Federal Aviation Administration  projects, like those for its Next Generation Air Transportation  System, are unique and complex due to safety concerns that impact  the national airspace. As a result, these investments require years of  design, development, and testing, which officials believe precludes  using incremental approaches that must deliver usable functionality  every 6 months.", "Labor officials reported that certain projects, which are initiated in  response to an executive order or other external mandate, come with  required delivery time frames. This results in relatively short  development schedules that do not lend themselves to using an  incremental approach.", "Justice officials reported that several of the agency\u2019s investments  primarily dealt with the deployment of secure telecommunications,  data centers, and other network infrastructure, making it difficult to  translate that delivery into meaningful increments. Justice officials  stated that they did not deploy incremental development because the  projects were infrastructure projects.", "Treasury officials reported that the development and maintenance of  some major investments, such as the agency\u2019s legacy tax systems,  are not conducive to a 6-month delivery schedule due to the number  of modifications that must be made based on changes to the tax laws,  legislative mandates, and other system updates. Treasury officials  stated that the agency has established a mature governance process  for rolling out changes to these tax systems so there is only one  annual update to the systems.", "SSA officials stated that using an incremental software development  approach to modernize the agency\u2019s legacy applications was  challenging because the code for these applications was  unstructured, overly complex, heavily interdependent, and utilized old  programming languages. The officials stated that, in order to  modernize these legacy applications, the project teams had to break  programming changes into useful segments, streamline imbedded  business process requirements, and rewrite the code using modern  programming languages. As a result, the officials stated that these  activities could not, at least initially, deliver functionality in smaller  increments.", "Incremental development schedules were impeded by procurement  delays. Officials from the Office of the CIO at five agencies (Education,  HUD, Interior, OPM, and USDA) reported that they had experienced  challenges with meeting incremental development schedules due to  delays in getting contracts awarded or getting contract modifications  approved. To overcome this challenge, agency officials reported that they  negotiated with vendors and worked with the offices of procurement  within their agencies to reduce delays and ensure all paperwork was  completed in the time frames required. For example:", "Education officials reported that the agency uses contractors to  perform most of its software development work. These officials stated  that modifying existing contracts to require the use of incremental  development approaches had caused delays in getting vendors to  deliver functionality in 6-month increments. Education officials  reported that they had negotiated with vendors to restructure delivery  schedules in order to meet incremental delivery time frames.", "HUD officials reported that they had faced challenges in meeting  project schedules due to delays in getting paperwork approved by the  agency\u2019s procurement office, which was busy with end-of-year  activities. To address this, HUD officials stated that they collaborated  with the Office of the Chief Procurement Officer to ensure the project  teams submitted the required documentation for approval in advance  of the procurement office\u2019s end-of-year activities.", "OPM officials noted that they had faced challenges with adapting their  procurement process to use incremental approaches. The officials  stated that they worked with their Office of Procurement to incorporate  incremental development procurement methodologies in order to  reduce the time from contract initiation to award, as well as to reduce  the amount of contract documentation and its complexity.", "Programs did not have stable, prioritized requirements. Officials from  the Office of the CIO at five agencies (DHS, Justice, NSF, Transportation,  and VA) reported that maintaining stable requirements, including defining  a set of initial requirements, handling ongoing changes, and managing  stakeholder expectations regarding the scope of, and number of changes  to requirements, were challenges. To overcome these challenges,  agencies reported strengthening standards, implementing training and  coaching, and exercising better requirements and business practices. For  example:", "DHS officials stated that managing stakeholder expectations related  to requirements was challenging because product owners and  business users expected project requirements not to change once  they were developed, while development teams had planned for  requirements to change and be reprioritized over the course of the  project since the team was using an incremental approach. These  officials reported that they issued new guidance and offered  assistance and coaching for programs and projects to better identify  and document needs and requirements, while encouraging business  users to plan for and prioritize the backlog of items to be deployed  incrementally.", "Justice officials reported that it was a challenge to finalize the scope  of work for various projects because disparate stakeholders had  competing priorities which led to constant changes in the  requirements. The officials noted that, for one of the agency\u2019s  projects, the project team is currently establishing a process to obtain  consensus on stakeholder priorities in advance. For other projects,  Justice teams have sought or received training from experienced,  certified Agile experts in developing customer requirements.", "NSF officials reported that, when first establishing its incremental  development program, the agency had experienced challenges in  defining a stable set of priority requirements for the initial increments.  The officials told us that, to address this challenge, they elevated  customers to fill the leadership roles of the working groups that  provided the requirements to ensure the requirements of each  increment were well defined and clearly prioritized.", "VA officials reported that, while the agency has transitioned to Agile  development methods over the past several months, it still works  through challenges in developing detailed user stories with its  business partners, and reported many instances when a project was  undertaken without knowing the full scope of requirements. VA  officials reported that they took several actions to help address this  challenge, including introducing a new development methodology to  promote incremental development principles, and establishing an  account management office that works with business partners to  ensure detailed business cases are prepared prior to approval. They  also integrated more rapid prototyping into the planning stages as a  way to gather requirements and test assumptions early and cheaply.", "Organizational changes associated with the transition from a  traditional software methodology to an incremental development  methodology require time and resources. Officials from the Office of  the CIO at three agencies (EPA, GSA, and Labor) independently reported  challenges related to organizational changes, such as staff adapting to  the culture shift from being business customers to taking on a more active  role as product owners and project managers in the software  development process. For example:", "EPA officials stated that the agency had experienced challenges as  staff transitioned from using waterfall development practices to Agile  practices because there had been skepticism within the agency on  whether an Agile approach could meet the requirements for agency  systems. The officials stated that the CIO had established an office to  provide support to project teams that needed assistance in adopting  Agile approaches, created a community of practice group, and  developed guides and other maturity models to provide guidance on  the adoption of Agile methodologies.", "GSA officials explained that implementing incremental delivery has  required a culture shift for the agency\u2019s business customers who were  accustomed to having a different set of roles and responsibilities in  the traditional software development process than what is used in the  incremental development process. The officials stated that they have  worked to train their customers to better capture the vision of what  needs to be built and to be more active product owners and managers  in communicating with the development team. As a result, the officials  in the GSA Office of the CIO stated that they are enabling the  business customers to serve as better product owners. The officials  further stated that, by implementing this change, project staffs have  (1) defined and prioritized clearer requirements; (2) selected the  proper technical tools to support business needs; (3) worked with the  contracting office to develop better-defined contracting documents  and make contract awards; (4) identified dependencies associated  with development efforts; and (5) provided transparency on what work  has been completed, what work is planned, and the challenges  associated with the investments.", "Additionally, three agencies (Defense, Energy, and HHS) reported no  challenges with implementing incremental development. However,  officials from all three agencies discussed issues surrounding the use of  incremental development, both as part of this review and as part of our  prior work. In particular, Energy officials had told us that they had  projects that failed to adequately employ incremental development  practices, which required follow-up with program managers to identify  corrective actions. Also, both Defense and HHS officials have reported  facing management and organizational challenges, such as  dependencies on integrating changes with other systems, which impacted  the delivery of functionality every 6 months. Defense officials noted that  many of the agency\u2019s investments were complex and could not adhere to  a 6-month delivery schedule.", "Federal investments may continue to encounter increased cost and  schedule risks if agencies cannot adequately implement incremental  development approaches. The discussion of challenges identified in this  report\u2014and the range of actions taken by the agencies to address  them\u2014 is a valuable resource that could have the potential to help  agencies that face similar concerns."], "subsections": []}, {"section_title": "Agencies Reported Using Information from the Incremental Certification Process to Improve Investment Management Oversight", "paragraphs": ["Although a number of agencies identified challenges in utilizing  incremental development, officials in the Office of the CIO at 21 of the 24  agencies also reported that the CIO certification process was beneficial  to their agencies because it had assisted them in overseeing the  management of agency investments. For example, officials from 13  agencies reported that they used the information derived from the  certification process to identify challenged development projects that  could be using a more effective incremental development approach and  officials from 2 agencies stated that the information helped them  determine whether an investment should undergo a TechStat review.  Table 3 lists the four benefits reported by federal agencies in utilizing the  CIO certification process and the number of agencies that reported each  activity, ranked by number of agencies reporting the challenge. Examples  of the benefits agency officials identified from these investment  management oversight activities are discussed following the table.", "More effective use of incremental development approaches. Officials  from the Office of the CIO at 13 agencies (Defense, DHS, Education,  Energy, EPA, GSA, Interior, NASA, NRC, SBA, SSA, Transportation, and  USDA) stated that they review the information about the investment\u2019s use  of incremental development to identify projects that could be  implementing a more effective incremental development approach. For  example, Energy, GSA, and SBA officials stated that they review projects  not using adequate incremental development in order to identify  necessary corrective actions, such as: (1) breaking out projects into  shorter duration activities; (2) implementing the use of investment  reviews, whereby funds are released incrementally upon completion of  clear success criteria; (3) developing major IT investment business cases  that outline project plans for incremental development; and (4) monitoring  new and existing investments to ensure delivery of capabilities within  schedule and cost thresholds.", "In addition, DHS, NASA, NRC, and SSA officials reported that the CIO  uses the information to make corrections to projects that are not  adequately implementing incremental development through such actions  as the CIO\u2019s office: (1) working with project team officials to convert  project activities to an incremental approach; (2) requiring any deviations  from approved releases of software development products to be  approved by the CIO; (3) requiring projects that deviate from the use of  adequate incremental development principles to be approved by the CIO;  and (4) determining which investments must use incremental  development, and requiring the projects to do so.", "Provide oversight of IT investments. Officials from the Office of the  CIO at seven agencies (Commerce, Interior, Labor, OPM, NSF, State,  and VA) stated that they use the information to provide oversight of IT  investments. In particular, Interior and NSF officials reported that their  CIOs use the information obtained during the performance measurement  baseline approval process to make decisions regarding the agency\u2019s  major IT investments. For Interior, officials stated that the types of  decisions the CIO may make include, but are not limited to, accelerating  delivery, reducing scope, or halting or terminating an IT project. For NSF,  officials stated that the decisions could result in changes to program  objectives or scope of individual projects under the program, redirection  of resources, changes to planned levels of expenditure, or  recommendations for corrective actions based on the evaluation.", "In addition, Commerce officials stated that investment data are reviewed  by the CIO on a monthly basis and, based on the status, can undergo  further scrutiny at a review board meeting or other CIO review process.  Labor officials noted that its capital planning team updates the CIO\u2019s  rating and explanation for each major IT investment in the agency\u2019s  capital planning and investment control system, and submits the rating  information to the IT Dashboard each month.", "Improve incremental development processes. Officials from the Office  of the CIO at five agencies (DHS, EPA, HUD, Justice, and USDA) stated  that they leveraged the information to improve their incremental  development processes. For instance, USDA officials reported that they  leveraged the results of the certification process to build an incremental  development community of practice. DHS officials stated that they  developed coaching and other assistance to help convert projects to an  incremental process. Lastly, Justice officials stated that they utilized the  results of the certification process to: (1) develop best practices and  lessons learned on using incremental development, (2) establish  additional training, and (3) establish mentoring programs or other  familiarization with incremental techniques to support business  improvement.", "Determine if a TechStat is warranted. Officials from the Office of the  CIO at two agencies (Labor and SBA) stated that they use the results of  the certification process to determine whether an investment should  undergo a TechStat review. In particular, Labor officials stated that if an  investment is rated as high risk for 3 consecutive months during the  review process, then a TechStat is initiated. In addition, SBA officials  noted that, as part of their certification process, the Office of the CIO  portfolio management team meets with the CIO to determine if any IT  investments should have a Techstat review.", "Given the significant size of the federal government\u2019s annual investment  in IT and the often disappointing results from IT development efforts,  finding innovative ways to improve the quality and timeliness of agencies\u2019  IT investments may help improve these development efforts. The  discussion of benefits identified with using the certification process\u2014and  the range of management oversight activities taken by the agencies\u2014 may have the potential to help agencies improve their management and  oversight of IT acquisitions."], "subsections": []}]}, {"section_title": "Most Agencies Lack Detailed CIO Certification Policies and OMB Has Improved Related Reporting Guidance", "paragraphs": ["Of the 24 agencies in our review, only 4 had clearly defined processes  and policies to ensure that the CIO will certify that major IT investments  are adequately implementing incremental development. The remaining 20  agencies either did not include details such as the role of the CIO in the  certification process or how certification would be documented, or had not  yet finalized a policy.", "OMB\u2019s fiscal year 2018 guidance was not clear regarding what actions  agencies should take to demonstrate compliance with FITARA\u2019s  certification requirement. However, OMB issued its new fiscal year 2019  guidance in August 2017, which addressed the weaknesses we identified."], "subsections": [{"section_title": "Only 4 of 24 Agencies Have Clearly Defined a Policy for CIO Certification of Incremental Development", "paragraphs": ["A provision in FITARA, enacted in December 2014, states that, in its  annual IT capital planning guidance, OMB is to require agency CIOs to  certify that IT investments are adequately implementing incremental  development. Subsequent OMB guidance on the law\u2019s implementation,  issued in June 2015, directed agency CIOs to define processes and  policies for their agencies which ensure that they certify that IT resources  are adequately implementing incremental development. As part of the  guidance, OMB defined adequate incremental development as the  development of software or services, with planned or actual delivery of  new or modified technical functionality to users that occurs at least every  6 months.", "OMB\u2019s guidance allows agencies the flexibility to define the processes  that CIOs use for ensuring the certification of adequate incremental  development. For example, CIOs can rely on internal governance  processes, such as investment and capital planning processes, to  evaluate agency investments for adequate use of incremental  development. In addition, agency CIOs are to use OMB\u2019s definition of  adequate incremental development when developing their certification  processes and determining whether to certify that their investments met  these criteria. While OMB\u2019s guidance is not specific on what elements should be included in these certification policies and processes, GAO\u2019s  Information Technology Investment Management framework notes that  policies and procedures should be clearly defined, including the role of  appropriate stakeholders, and have appropriate artifacts to document  decisions made.", "Although OMB\u2019s requirement has been in place since June 2015, only 4  of the 24 agencies we reviewed (Commerce, DHS, Energy, and  Transportation) have clearly defined processes and policies intended to  ensure that their CIOs certify that major IT investments are adequately  implementing incremental development. Specifically, all 4 agencies\u2019  policies contained all the elements that we evaluated in the agency  guidance: descriptions of the role of the CIO in the process; how the  CIO\u2019s certification will be documented; and definitions of incremental  development and time frames for delivering functionality consistent with  OMB guidance.", "However, the remaining 20 agencies did not have clearly defined  processes and policies in place because their documentation either did  not describe the CIOs\u2019 role in the certification process or how certification  would be documented, define incremental development and provide  delivery time frames consistent with OMB guidance; or the policy had not  yet been finalized. The results of our analysis of agencies\u2019 policies is  shown in figure 2, while additional details regarding the status of the 24  agencies\u2019 incremental policies are provided in appendix III.", "The four agencies that had clearly defined policies for certification took a  variety of approaches to defining how the CIOs would conduct the review  and certification of major IT investments, determining how certification  would be documented, and ensuring OMB\u2019s guidance regarding the  definition of adequate incremental development and delivery time frames  was followed. Specifically:", "Commerce\u2019s capital planning guidance requires bureau CIOs or other  accountable officials to review project documentation regarding  project deliverables and issue an e-mail or other time-stamped  document that certifies the adequate implementation of incremental  development. In addition, Commerce guidance adheres to OMB\u2019s  guidance requiring delivery time frames every 6 months or less and  sets forth a definition of adequate incremental development that is  consistent with OMB guidance.", "DHS\u2019s technical investment review guidance states that the CIO is to  conduct a review of each investment using an investment review  checklist that includes information provided by project managers as to  whether the investments have used incremental development  adequately. The CIO is to certify whether the project is implementing  incremental delivery at least every 6 months and document this  certification in the checklist. DHS guidance also includes a definition  of adequate incremental development and time frames for delivering  functionality that are consistent with OMB guidance.", "Energy\u2019s capital planning guidance states that the CIO is to review  and certify each investment\u2019s adequate use of incremental  development as part of monthly investment review board meetings  and during the monthly review of the IT Dashboard data. The status of  this certification is documented in the agency\u2019s monthly investment  summary spreadsheet. In addition, Energy\u2019s guidance adheres to  OMB\u2019s definition of adequate incremental development and its  associated delivery time frames for its incremental development  activities.", "Transportation\u2019s investment management guidance states that the  CIO is to conduct a review of the investment as part of the investment  review board process; this board is co-chaired by the agency CIO.  The CIO is to certify adequate incremental development in the signed  investment decision review document. In addition, Transportation\u2019s  guidance adheres to OMB\u2019s definition of adequate incremental  development and delivery time frames.", "However, the remaining 20 agencies did not have clearly defined policies  and processes in place to ensure CIOs are certifying each major IT  investment\u2019s adequate incremental development. In particular, while  officials from the Office of the CIO at 11 agencies asserted that they had  a policy for CIO certification, these policies lacked details, such as a  description of the role of the CIO in the process, a description of how  certification would be documented, and definitions of incremental  development and delivery time frames consistent with OMB guidance.  Table 4 details our evaluation of the certification policies provided to us by  the 11 agencies.", "Agency officials in the Office of the CIO at each of the 11 agencies  provided a variety of reasons for why their policies lacked details  regarding the role of the CIO in the process and how certification was  documented, or did not include definitions for incremental development  and delivery time frames. For example, State officials reported that  updating their policies to comply with FITARA was not seen as a priority  until Congress conducted its own evaluation of incremental development  in May 2016. They stated that their new policy is currently in the process  of being finalized but no time frames for finalization were provided.  However, we could not determine whether the guidance is expected to  address the issues we identified because State provided us excerpts of  its new draft policy and the new proposed guidance that did not include  any details in the areas we identified.", "In addition, GSA officials stated that they had used existing governance  bodies and processes to determine whether the investment would be  certified. The officials stated that they did not see a reason to create a  separate policy for CIO certification, since the agency always looks at  using incremental development for new projects and the agency certifies  the investment in the major IT business case.", "Further, OPM officials stated that their agency had been on a path to  address the FITARA requirements, but progress was slowed due to the  lack of a budget for fiscal year 2017. The officials stated that they intend  to update the agency\u2019s policies, but had no firm plans for doing so  pending the availability of budgetary resources.", "Lastly, NSF officials stated that they have not seen the need to have a  policy on CIO certification for a number of reasons. NSF reported that it is  a small agency with few large IT investments, and many of those are  legacy systems in operations and maintenance, rather than development.  Therefore, according to the officials, the agency has not had many  occasions for the CIO to need to certify adequate incremental  development for major IT investments. Second, the officials stated that  the NSF CIO is actively involved in the investment review process and did  not feel a policy was needed to describe these activities. Third, NSF  officials stated that it is their belief that policies are generally only required  to correct something which is not working. Lastly, NSF officials stated that  the agency\u2019s definition of an Agile sprint was its definition of incremental  development. However, sprints are not released directly to users, and  therefore, the definition is not consistent with OMB guidance. However,  the officials said they might reconsider developing a policy, but did not  provide a time frame for doing so.", "Finally, 9 agencies had not yet finalized a CIO certification policy. Office  of the CIO officials in each of these agencies reported that they had relied  on existing IT governance processes and budget mechanisms, or created  new targeted IT reviews to determine the CIO certification for fiscal year  2017 that was reported on the IT Dashboard. For example, HHS officials  reported that the agency used existing project and investment milestone  reviews as part of its enterprise performance lifecycle to determine  whether the investment would be certified as having adequate  incremental development.", "SBA officials told us that the agency\u2019s portfolio management team met  with investment managers during the monthly update process for the IT  Dashboard, while USAID officials noted that the agency\u2019s CIO reviews the  incremental development status of all major investment software  development projects on a monthly basis. Further, Justice officials  reported that the IT Investment Oversight Manager\u2019s staff reviewed the  major business cases and requested justification for software  development investments that were not: (1) using an iterative or Agile  methodology, (2) expected to have a production release containing  usable functionality every 6 months, or (3) showing an actual or planned  date for deployment production within a 6-month time frame.", "In addition, while six of these agencies reported plans to finalize a policy  for CIO certification by December 2017, one agency reported its policy  would be finalized in 2018, and two agencies did not provide a time frame  for finalizing a policy. Figure 3 below shows the agencies\u2019 reported time  frames for finalizing a policy on CIO certification of incremental  development.", "Officials from each agency\u2019s Office of the CIO provided a variety of  reasons for why they had not yet developed or finalized policies for CIO  certification of adequate incremental development. For example, EPA  officials stated that the agency has been focusing on standing up the  programs and structures needed to support incremental development  and, thus, had not prioritized developing a policy. In addition, EPA  officials stated that they had not developed a definition of functionality or  time frames, but that their guidance points to industry standards.", "SBA officials stated that, since the majority of the agency\u2019s investments  were in operations and maintenance, they did not see the need to have  policies or procedures for incremental development. In addition, HUD,  NASA, and USAID officials reported that their agencies were in the  process of finalizing policies, but had experienced delays due to the  number of stakeholder comments or limited staff resources.", "Lastly, Defense officials stated that they had included information in their  fiscal year 2018 budget submission guidance for component CIOs to  certify adequate incremental development and were working to  incorporate this process into their Financial Management Regulations,  which were to be finalized in the first quarter of fiscal year 2018. However,  the officials stated that the agency\u2019s process is driven by its efforts to  comply with whatever process OMB requires in the annual capital  planning guidance and, thus, they would not have a separate certification  policy from the budget guidance.", "Additionally, Defense officials reported that, for their agency\u2019s  investments, delivery every 12 to 18 months was more appropriate than  the 6 months that OMB requires. Nevertheless, while Defense officials  may believe that 12 to 18 month delivery cycles may be more appropriate  for their work, OMB\u2019s guidance requires agencies to deliver functionality  at least every 6 months and does not allow for exceptions. We previously  recommended that Defense establish a policy on the CIO certification of  incremental development. Until this guidance is finalized, Defense may  not be able to ensure incremental development practices are adequately  implemented at the agency. We therefore continue to believe the  recommendation is appropriate.", "Annual CIO certification of incremental development is critical to ensuring  that agency CIOs exercise the proper authority and oversight over their  agencies\u2019 major IT investments. Having appropriate authority and  oversight helps to create IT systems that add value and are aligned with  agencies\u2019 missions, while reducing the risks associated with low-value  and wasteful investments. In the absence of clearly defined policies,  agencies continue to run the risk of failing to deliver major investments in  a cost-effective and efficient manner.", "We have previously made recommendations to Defense, Education,  HHS, and Treasury to establish CIO certification policies, but as noted in  this report, these agencies still have not yet finalized their guidance to  clearly detail their agencies\u2019 processes for certification. Therefore, we  continue to believe these recommendations are appropriate.", "Agencies that lacked finalized policies may not be able to meet their  reported time frames for finalizing their certification policies, since agency  officials have noted that their approval processes are quite lengthy, and in  some cases, the proposed dates for completion have changed several  times. In addition, several policies were still being developed. Therefore,  we cannot be assured that these documents will fully address the areas  we noted. Until the 20 agencies update or finalize processes and policies  for CIO certification, including defining the role of the CIO in the process,  describing how certification will be documented, and including definitions  of incremental development and delivery time frames consistent with  OMB guidance, they will not be able to fully ensure adequate  implementation of, or benefit from, incremental development practices. As  a result, the agencies increase the risk that federal government resources  will not be used in the most effective and efficient manner."], "subsections": []}, {"section_title": "OMB Has Improved Its IT Capital Planning Guidance to Ensure CIO Certification Reporting Clearly Specifies Agency Responsibilities", "paragraphs": ["FITARA states that OMB is to require in an agency\u2019s annual IT capital  planning guidance that each covered agency CIO certify that IT  investments are adequately implementing incremental development, as  defined in capital planning guidance issued by OMB. However, since  the law was enacted in December 2014, OMB has taken three different  approaches to address this reporting requirement. Of the approaches,  one did not clearly and consistently provide agencies with the direction  needed to effectively implement this important provision and report the  status of certification.", "As previously noted, OMB\u2019s fiscal year 2017 IT capital planning  guidance (issued in June 2015) required each major IT investment to  respond to a question in the associated major IT business case regarding  whether the CIO certified the adequate implementation of incremental  development with either a yes, no, or not applicable. This reporting  approach required that agency CIOs provide an explicit statement  regarding the certification of adequate implementation of incremental  development for each major IT investment. Further, this approach allowed  for the status of CIO certification of each investment to be publicly  reported on the IT Dashboard via the investment\u2019s major IT business  case.", "However, OMB\u2019s capital planning guidance for fiscal year 2018 (issued  in June 2016) lacked clarity regarding how agencies were to address the  requirement certifying adequate incremental development. While the  2018 guidance states that agency CIOs are to provide the certifications  needed to demonstrate compliance with FITARA, there is no specific  reference to the provision requiring CIO certification of adequate  incremental development. As a result of this change, OMB placed the  burden on agencies to know and understand how to demonstrate  compliance with FITARA\u2019s incremental development provision. Further,  because of the lack of clarity in the guidance as to what agencies were to  provide, OMB could not demonstrate how the fiscal year 2018 guidance  ensured that agencies provided the certifications specifically called for in  the law.", "OMB staff explained that the changes to the fiscal year 2018 capital  planning guidance were made with the intent to rely on agencies\u2019 reported  responses on the IT Dashboard regarding the use of incremental  development by an investment\u2019s projects, rather than relying on an  agency\u2019s response to the yes, no, or not applicable question about the  status of an investment\u2019s certification of incremental development.", "Providing a clear and consistent approach for agencies to follow in  reporting the status of certification is critical to ensure that agencies are  able to comply with this key FITARA provision and to ensure that CIOs  are held accountable for the performance of their major IT investments.  OMB staff from the Office of E-Government and Information Technology  stated that the fiscal year 2019 guidance would be responsive to the  issues we raised.", "Accordingly, in August 2017, OMB issued its fiscal year 2019 guidance,  which addressed the weaknesses we identified in the previous fiscal  year\u2019s guidance. Specifically, the revised guidance requires agency CIOs  to make an explicit statement regarding the extent to which the CIO is  able to certify the use of incremental development, and to include a copy  of that statement in the agency\u2019s public congressional budget justification  materials. As part of the statement, an agency CIO must also identify  which specific bureaus or offices are using incremental development on  all of their investments.", "Agency CIO certification of the use of adequate incremental development  for major IT investments is critical to ensuring that agencies are making  the best effort possible to create IT systems that add value while reducing  the risks associated with low-value and wasteful investments. These  changes to OMB\u2019s fiscal year 2019 guidance provide a key improvement  for ensuring that agency CIOs have a consistent approach to follow in  providing the certifications specifically called for in the law."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["One of the aims of FITARA was to encourage the use of incremental  development throughout the federal government and, as of August 2016,  more than half of the 24 agencies\u2019 IT investments had been certified as  adequately implementing incremental development, as required by  FITARA and defined in OMB guidance. However, a number of responses  for agency investments were incorrectly reported and it will be critical that  agencies continue to improve the accuracy of investment data reported  on the IT Dashboard. While we have previously made recommendations  to numerous agencies to improve the accuracy of reporting on the IT  Dashboard, issues with reporting remain, reinforcing the need for  agencies to ensure that accurate data are made available for the  oversight and management of their investments.", "In addition, while OMB issued guidance in June 2015, requiring agency  CIOs to define policies and processes for CIO certification, as of August  2017, only 4 of 24 agencies had established policies that clearly define  these processes. At this point, over 2 years since the law\u2019s enactment, it  is critical that agencies take action to put in place appropriate incremental  certification polices to ensure CIOs exercise the proper authority and  oversight over major IT investments, as required by law. Otherwise,  agencies run the risk of not realizing the benefits of incremental  development, as well as not implementing FITARA\u2019s requirement for  incremental development. While we previously made recommendations to  Defense, Education, HHS, and Treasury to establish CIO certification  policies, these agencies have still not yet finalized their guidance, and  therefore, we continue to believe these recommendations are  appropriate.", "Further, OMB has taken three different approaches to addressing  FITARA\u2019s reporting requirement for CIO certification and one did not  clearly and consistently provide agencies with the direction needed to  effectively implement this important provision and report the status of  certification. OMB\u2019s fiscal year 2017 capital planning guidance was  helpful to agencies, in that it clearly directed agencies on how to publicly  report their certifications. This also helped Congress in its oversight of  agencies\u2019 FITARA compliance. In contrast, OMB\u2019s fiscal year 2018 capital  planning guidance was a step backward, and OMB could not demonstrate  how the guidance ensured that agencies provided the certifications  specifically called for in the law. Going forward, the changes in guidance  that OMB has implemented for fiscal year 2019 recognize the importance  of providing clear direction to CIOs and how critical it is for agencies to  create IT systems that add value while reducing the risks associated with  low-value and wasteful investments."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 19 recommendations to 17 departments and  agencies in our review. Specifically:  The Secretary of Energy should ensure that the CIO of Energy reports  major IT investment information related to incremental development  accurately in accordance with OMB guidance. (Recommendation 1)", "The Secretary of Agriculture should ensure that the CIO of USDA reports  major IT investment information related to incremental development  accurately in accordance with OMB guidance. (Recommendation 2)", "The Commissioner of the Social Security Administration should ensure  that the CIO of SSA reports major IT investment information related to  incremental development accurately in accordance with OMB guidance.  (Recommendation 3)", "The Secretary of Housing and Urban Development should ensure that the  CIO of HUD establishes an agency-wide policy and process for the CIO\u2019s  certification of major IT investments\u2019 adequate use of incremental  development, in accordance with OMB\u2019s guidance on the implementation  of FITARA, and confirm that it includes: a description of the CIO\u2019s role in  the certification process; a description of how CIO certification will be  documented; and a definition of incremental development and time  frames for delivering functionality, consistent with OMB guidance.  (Recommendation 4)", "The Secretary of the Interior should ensure that the CIO of Interior  updates the agency\u2019s policy and process for the CIO\u2019s certification of  major IT investments\u2019 adequate use of incremental development, in  accordance with OMB\u2019s guidance on the implementation of FITARA, and  confirm that it includes: a description of the CIO\u2019s role in the certification  process; a description of how CIO certification will be documented; and a  definition of incremental development, consistent with OMB guidance.  (Recommendation 5)", "The Attorney General of the United States should ensure that the CIO of  Justice establishes an agency-wide policy and process for the CIO\u2019s  certification of major IT investments\u2019 adequate use of incremental  development, in accordance with OMB\u2019s guidance on the implementation  of FITARA, and confirm that it includes: a description of the CIO\u2019s role in  the certification process; a description of how CIO certification will be  documented; and a definition of incremental development and time  frames for delivering functionality, consistent with OMB guidance.  (Recommendation 6)", "The Secretary of Labor should ensure that the CIO of Labor updates the  agency\u2019s policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes a description of the CIO\u2019s role in the certification process and a  description of how CIO certification will be documented.  (Recommendation 7)", "The Secretary of State should ensure that the CIO of State updates the  agency\u2019s policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes: a description of the CIO\u2019s role in the certification process; a  description of how CIO certification will be documented; and a definition  of incremental development and time frames for delivering functionality,  consistent with OMB guidance. (Recommendation 8)", "The Secretary of Agriculture should ensure that the CIO of USDA  establishes an agency-wide policy and process for the CIO\u2019s certification  of major IT investments\u2019 adequate use of incremental development, in  accordance with OMB\u2019s guidance on the implementation of FITARA, and  confirm that it includes: a description of the CIO\u2019s role in the certification  process; a description of how CIO certification will be documented; and a  definition of incremental development and time frames for delivering  functionality, consistent with OMB guidance. (Recommendation 9)", "The Secretary of Veterans Affairs should ensure that the CIO of VA  updates the agency\u2019s policy and process for the CIO\u2019s certification of  major IT investments\u2019 adequate use of incremental development, in  accordance with OMB\u2019s guidance on the implementation of FITARA, and  confirm that it includes a description of the CIO\u2019s role in the certification  process and a description of how CIO certification will be documented.  (Recommendation 10)", "The Administrator of EPA should ensure that the CIO of EPA establishes  an agency-wide policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes: a description of the CIO\u2019s role in the certification process; a  description of how CIO certification will be documented; and a definition  of incremental development and time frames for delivering functionality,  consistent with OMB guidance. (Recommendation 11)", "The Administrator of GSA should ensure that the CIO of GSA updates the  agency\u2019s policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes a description of the CIO\u2019s role in the certification process and a  description of how CIO certification will be documented.  (Recommendation 12)", "The Administrator of NASA should ensure that the CIO of NASA  establishes an agency-wide policy and process for the CIO\u2019s certification  of major IT investments\u2019 adequate use of incremental development, in  accordance with OMB\u2019s guidance on the implementation of FITARA, and  confirm that it includes: a description of the CIO\u2019s role in the certification  process; a description of how CIO certification will be documented; and a  definition of incremental development and time frames for delivering  functionality, consistent with OMB guidance. (Recommendation 13)", "The Director of the NSF should ensure that the CIO of NSF updates the  agency\u2019s policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes: a description of the CIO\u2019s role in the certification process; a  description of how CIO certification will be documented; and a definition  of incremental development and time frames for delivering functionality,  consistent with OMB guidance. (Recommendation 14)", "The Chairman of NRC should ensure that the CIO of NRC establishes an  agency-wide policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes a description of the CIO\u2019s role in the certification process and a  description of how CIO certification will be documented.  (Recommendation 15)", "The Director of OPM should ensure that the CIO of OPM updates the  agency\u2019s policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes a description of the CIO\u2019s role in the certification process and a  description of how CIO certification will be documented.  (Recommendation 16)", "The Administrator of SBA should ensure that the CIO of SBA establishes  an agency-wide policy and process for the CIO\u2019s certification of major IT  investments\u2019 adequate use of incremental development, in accordance  with OMB\u2019s guidance on the implementation of FITARA, and confirm that  it includes: a description of the CIO\u2019s role in the certification process; a  description of how CIO certification will be documented; and a definition  of incremental development and time frames for delivering functionality,  consistent with OMB guidance. (Recommendation 17)", "The Commissioner of the Social Security Administration should ensure  that the CIO of SSA updates the agency\u2019s policy and process for the  CIO\u2019s certification of major IT investments\u2019 adequate use of incremental  development, in accordance with OMB\u2019s guidance on the implementation  of FITARA, and confirm that it includes a description of the CIO\u2019s role in  the certification process and a description of how CIO certification will be  documented. (Recommendation 18)", "The Administrator of USAID should ensure that the CIO of USAID  establishes an agency-wide policy and process for the CIO\u2019s certification  of major IT investments\u2019 adequate use of incremental development, in  accordance with OMB\u2019s guidance on the implementation of FITARA, and  confirm that it includes: a description of the CIO\u2019s role in the certification  process; a description of how CIO certification will be documented; and a  definition of incremental development and time frames for delivering  functionality, consistent with OMB guidance. (Recommendation 19)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We received comments on a draft of this report from OMB and the 24  agencies that we reviewed. Of the 17 agencies to which we made  recommendations, 11 agencies agreed with our recommendations, 1  agency partially agreed, and 5 agencies did not state whether they  agreed or disagreed with the recommendations.", "In addition, of the 7 agencies and OMB to which we did not make  recommendations, 2 agencies agreed with the report and 5 agencies  stated that they had no comments on the report. OMB did not agree with  certain findings in the report. In addition, OMB and multiple agencies  provided technical comments on the report, which we incorporated as  appropriate.", "The following discusses the comments received from each agency to  which we made a recommendation.", "In written comments, Energy concurred with our recommendation to  ensure that the CIO reports major IT investment information related to  incremental development accurately in accordance with OMB  guidance, and described actions it has taken to address the  recommendation. Specifically, the agency stated that its Office of the  CIO reviews the accuracy of Energy\u2019s major IT investment project  reporting related to incremental development as part of monthly IT  Dashboard and Investment Review Board meetings. By taking these  actions, the agency considered the recommendation closed.", "As noted earlier in our report, we identified issues with the accuracy of  Energy\u2019s reported data related to the certification of incremental  development. If Energy consistently and effectively implements its  reviews of IT Dashboard data, as described, these actions should  help to improve the accuracy of reported incremental development  data on the IT Dashboard. We plan to continue to monitor the  agency\u2019s reporting of its incremental data on the IT Dashboard and  accordingly, consider our recommendation to currently remain open.  Energy\u2019s comments are reprinted in appendix IV.", "In written comments, HUD concurred with our recommendation to  establish an agency-wide policy and process for CIO certification of  adequate incremental development and stated that it would provide  more definitive information and timelines on how it plans to address  the recommendation once our final report is issued. HUD\u2019s comments  are reprinted in appendix V.", "In written comments, Interior stated that the agency concurred with  our recommendation to update the agency\u2019s policy and process for  CIO certification of adequate incremental development and described  planned actions to implement it. Specifically, the agency reported that  it is committed to updating its existing policy to include a description of  the CIO\u2019s role in the incremental development certification process, a  description of how the CIO\u2019s certification is documented, and a  definition of incremental development, consistent with OMB\u2019s  guidance. Interior\u2019s comments are reprinted in appendix VI.", "In an e-mail received on September 15, 2017, an audit liaison  specialist in Justice\u2019s Audit Liaison Group in the Internal Review and  Evaluation Office stated that the agency agreed with our  recommendation to establish an agency-wide policy and process for  CIO certification of adequate incremental development and described  planned actions to implement it. Specifically, the official stated that  Justice will amend existing policy and processes to implement this  recommendation. In addition, the official stated that Justice is fully  supportive of incremental development and has drafted  documentation, including guidance on an incremental system  development life cycle.", "In an e-mail received on September 5, 2017, an administrative officer  in Labor\u2019s Office of the Assistant Secretary for Administration and  Management stated that the agency had no comments on the report.", "In written comments, State did not say whether the agency agreed or  disagreed with our recommendation to update the agency\u2019s policy and  process for CIO certification of adequate incremental development,  but described ongoing actions to implement it. Specifically, the agency  reported that it has developed an incremental development policy that  addresses the recommendation we noted in our report. The agency  added that the policy is currently in the process of being approved.  State\u2019s comments are reprinted in appendix VII.", "In an e-mail received on September 1, 2017, a senior advisor in the  USDA Office of the CIO\u2019s Enterprise Management office stated that  the agency concurred with our findings and recommendations to  report major IT investment incremental development information  accurately and to establish an agency-wide policy and process for  CIO certification of adequate incremental development, and had no  further comments.", "In written comments, VA partially concurred with our recommendation  to update the agency\u2019s policy and process for CIO certification of  adequate incremental development, stating that, while the agency  does not currently have a policy in place outlining the CIO certification  process, the agency CIO does direct that all investments utilize Agile  and incremental delivery. The agency stated that it would take action  to address our recommendation by drafting a policy that outlines the  CIO\u2019s role in the certification process and describes how certification  will be documented. The agency added that the policy is targeted for  completion by November 2017.", "If implemented as planned, these actions should address the intent of  our recommendation. VA\u2019s comments are reprinted in appendix VIII.", "In written comments, EPA stated that the agency generally agreed  with our recommendation to establish an agency-wide policy and  process for CIO certification of adequate incremental development,  and presentation of facts in the report. The agency also noted that the  policy developed in response to our recommendation is to address  FITARA issues above and beyond the certification of incremental  development.", "In addition, the agency noted a technical correction to a sentence in  our report related to EPA\u2019s use of information from certification. We  have incorporated changes to the draft, as appropriate, to address  this comment. EPA\u2019s comments are reprinted in appendix IX.", "In written comments, GSA agreed with our recommendation to update  the agency\u2019s policy and process for CIO certification of adequate  incremental development and reported that it would develop and  implement a plan to fully address it. GSA\u2019s comments are reprinted in  appendix X.", "In written comments, NASA concurred with the recommendation to  establish an agency-wide policy and process for CIO certification of  adequate incremental development and described ongoing actions to  implement it. Specifically, the agency stated that it is currently  updating its policies to address the incremental development  requirement. In this regard, NASA Policy Directive 2800.1 is to include  a responsibility for the Office of the CIO to certify that IT resources are  adequately implementing incremental development. In addition, NASA  Policy Directive 7120.7 is being updated to include a definition of  incremental development and processes for ensuing that the CIO  certifies incremental development. According to the agency, these  policies are estimated to be completed by March 2018. NASA\u2019s  comments are reprinted in XI.", "In an e-mail received on September 14, 2017, a senior advisor in  NSF\u2019s Office of the Director/Office of Integrative Activities stated that  the agency had no comments on our report.", "In written comments, NRC stated that it was in general agreement  with the findings in our report. The agency did not state whether it  agreed or disagreed with our recommendation to establish an agency- wide policy and process for CIO certification of adequate incremental  development, but described the planned action to implement the  recommendation. Specifically, the agency reported that it plans to  establish agency-wide, formalized processes and procedures for the  CIO to approve the incremental development of major IT investments  by December 31, 2017. NRC\u2019s comments are reprinted in appendix  XII.", "In written comments, OPM concurred with the recommendation to  update the agency\u2019s policy and process for CIO certification of  adequate incremental development and described planned actions to  implement it. Specifically, the agency reported that it intends to update  its policies and processes to include a description of the CIO\u2019s role in  the certification process and a description of how certification will be  documented. OPM\u2019s comments are reprinted in appendix XIII.", "In an e-mail received on September 11, 2017, a program manager in  SBA\u2019s Office of Congressional and Legislative Affairs stated that the  agency concurred with our recommendation to establish an agency- wide policy and process for CIO certification of adequate incremental  development, and had no further comments.", "In written comments, SSA agreed with our two recommendations to  report major IT investment incremental development information  accurately and establish an agency-wide policy and process for CIO  certification of adequate incremental development, and described  planned actions being taken or planned to implement them.  Specifically, the agency reported that it had implemented two new  processes to support incremental development certification. According  to the agency, each IT investment program manager is to answer a  series of questions about the investment\u2019s status and also certify  whether their investment adequately implements incremental  development. This information is to be used in the CIO\u2019s ongoing  investment evaluation process for reporting investment information on  the IT Dashboard. SSA reported that these new processes are to be  defined in an upcoming revision to the agency\u2019s Capital Planning and  Investment Control Guide. SSA\u2019s comments are reprinted in appendix  XIV.", "In written comments, USAID did not state whether it agreed or  disagreed with our recommendation to establish an agency-wide  policy and process for CIO certification of adequate incremental  development, but described ongoing actions to implement the  recommendation. Specifically, the agency reported that it is in the  process of establishing an agency-wide policy and process for the  CIO\u2019s certification of adequate incremental development. It estimates  that this policy will be implemented by August 31, 2018. USAID\u2019s  comments are reprinted in appendix XV.", "In addition to the aforementioned comments, the seven agencies and  OMB to which we did not make recommendations provided the following  responses.", "In written comments, Commerce stated that the agency concurred  with the report as written. Commerce\u2019s comments are reprinted in  appendix XVI.", "In an e-mail received on September 7, 2017, a GAO Affairs staff  member in Defense\u2019s Executive Services Directorate stated that the  agency had no formal comments on the report.", "In an e-mail received on September 8, 2017, a staff member in  Education\u2019s Office of the Secretary/Executive Secretariat stated that  the agency had no comments on the report.", "In an e-mail received on September 11, 2017, an audit liaison in  HHS\u2019s Office of the Assistant Secretary for Legislation stated that the  agency had no comments on the report.", "In an e-mail received on September 11, 2017, a program analyst in  DHS\u2019s GAO-Office of Inspector General\u2019s Liaison Office stated that  the agency would not be sending a management response letter.", "In an e-mail received on September 8, 2017, the Director of Audit  Relations and Program Improvement in Transportation\u2019s Office of the  Secretary stated that the agency would not be providing a written  management response.", "In an e-mail received on September 15, 2017, a supervisory IT  specialist/GAO-Office of Inspector General liaison in Treasury\u2019s Office  of the CIO stated that the agency generally agreed with the report.  The agency also provided comments related to various challenges  discussed in the report. Specifically, the official described Treasury\u2019s  efforts to address challenges noted in the report related to project staff  lacking the necessary skills for implementing incremental  development practices and programs not receiving sufficient funding.  In this regard, the official stated that the agency continues to develop  knowledge, skills, and abilities for project managers and IT specialists  and continues to provide specialized programming training to its IT  staff in order to move to more modern programming languages and IT  tools as part of system modernization efforts. In addition, the official  stated that, to address challenges related to programs receiving  sufficient funding, Treasury continues to adjust planned and ongoing  projects to align with the availability of funds and external mandates.", "In an e-mail received on September 19, 2017, an OMB Assistant  General Counsel stated that the agency generally disagreed with the  tone, tenor, and conclusions of law reflected in aspects of our report.  Among the concerns was that we had asserted that OMB\u2019s prior  year\u2019s guidance to agencies on CIO certification of incremental  development was not in compliance with OMB\u2019s statutory obligations  under FITARA.", "As our report states, FITARA mandates OMB to include in its annual  IT capital planning guidance, a requirement that CIOs certify that  investments are adequately implementing incremental development  as defined in the guidance. We reported that OMB had issued  guidance for fiscal years 2017, 2018, and 2019. However, we noted  that the fiscal year 2018 guidance differed from the guidance issued in  the other two fiscal years in that it did not clearly establish how  agency CIOs were to demonstrate compliance with FITARA\u2019s  certification of adequate incremental development provision. Instead,  the fiscal year 2018 guidance placed the burden on agencies to know  and understand how to implement the FITARA requirement.", "Thus, while we concluded that OMB\u2019s fiscal year 2018 guidance was  not clear on how agencies were to certify adequate incremental  development, we did not assert that this guidance failed to comply  with FITARA. Accordingly, we did not make a conclusion of law  regarding OMB\u2019s guidance, as the e-mail stated. We continue to  believe that our assessment of the fiscal year 2018 guidance is  correct.", "OMB also stated that it disagreed with our conclusion that OMB could  not demonstrate compliance with FITARA.", "However, our report did not make the conclusion that is stated in  OMB\u2019s response. As noted above, our report pointed out that OMB\u2019s  fiscal year 2018 guidance lacked clarity in terms of specifically stating  what information agencies were to provide OMB in order to be  compliant with FITARA\u2019s requirement that agency CIOs certify  incremental development. Therefore, we concluded that OMB could  not demonstrate how the fiscal year 2018 guidance ensured that  agencies provided the certifications specifically called for in the law.  As such, we continue to believe that our conclusion is appropriate.", "Further, OMB stated that our conclusion was predicated on OMB\u2019s  reluctance to share agency pre-decisional budget information.", "It is up to OMB to demonstrate that its fiscal year 2018 guidance  ensured agency compliance with FITARA. Though OMB asserted that  our conclusion was based on OMB\u2019s reluctance to share agency pre- decisional budget information, our conclusion was instead based on  the fact that OMB provided no documentary evidence to establish how  agencies complied with the FITARA certification requirement for fiscal  year 2018. Consequently, we believe our assessment that OMB could  not demonstrate how the fiscal year 2018 guidance ensured that  agencies provided the certifications specifically called for in the law is  accurate.", "In a subsequent e-mail to us on October 4, 2017, the OMB Assistant  General Counsel provided additional comments related to the  disagreements described above. Specifically, OMB stated that our  report\u2019s \u201cfocus on the use of the term \u2018certification\u2019 was confusing in  that  appears to reference the term \u2018certify\u2019 [found in the  FITARA provision on the adequate use of incremental development],  and also seems to be a reference to the requirement that CIOs  \u2018approve\u2019 and define development processes.\u201d", "In our report, we discuss FITARA\u2019s requirement that OMB annually  issue capital planning guidance requiring agency CIOs to certify that  IT investments are adequately implementing incremental  development. We analyzed the guidance that OMB has issued to  meet this requirement over the past 3 years, and we evaluated  agencies\u2019 progress in implementing that guidance. In doing so, we  noted that OMB had also issued supplementary FITARA  implementation guidance in June 2015 that required agencies to  define policies and processes to ensure that the CIO certifies that IT  resources are adequately implementing incremental development.  Throughout our discussion, we clearly delineate between the  incremental development certification provided to OMB by an  agency\u2019s CIO and the agency\u2019s policies and processes that support  and inform that certification. As such, we believe we have used the  term \u201ccertification\u201d appropriately and consistently throughout our  report.", "We are sending copies of this report to interested congressional  committees, the Director of the Office of Management and Budget, the  Secretaries and agency heads of the departments and agencies in this  report, and other interested parties. This report will also be available at no  charge on our website at http://www.gao.gov.", "If you or your staffs have any questions on matters discussed in this  report, please contact me at (202) 512-9286 or pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix XVII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives for this engagement were to determine (1) the number of  investments certified by agencies as implementing adequate incremental  development and any reported challenges that impact the agencies\u2019  incremental delivery of functionality; and (2) whether agencies are  establishing policies and processes for chief information officer (CIO)  certification of incremental development in accordance with the Federal  Information Technology Acquisition Reform Act provisions (commonly  referred to as FITARA) enacted as a part of the Carl Levin and Howard P.  \u2018Buck\u2019 McKeon National Defense Authorization Act for Fiscal Year 2015.", "For our first objective, we obtained and analyzed major information  technology (IT) investment data reported by agencies on the IT  Dashboard as of August 31, 2016, for fiscal year 2017, which was the first  year that the Office of Management and Budget (OMB) required the 24  covered agencies to report the status of CIO certification of incremental  development for each investment. We chose this date because it was the  final day updated fiscal year 2017 data from the agencies would be  publicly available until the release of the President\u2019s fiscal year 2018  budget submission.", "Initially, we analyzed the fiscal year 2017 data of major IT software  development investments that were planning to allocate at least 50  percent of their funding to development, modernization, and  enhancement activities. We then reviewed agency responses to the  question regarding CIO certification of adequate incremental development and eliminated any investment where the agency\u2019s rationale for choosing  \u201cnot applicable\u201d was due to the investment not undertaking software  development activities. In doing so, we identified a total of 166  investments from 21 agencies. Three agencies (National Aeronautics and  Space Administration, National Science Foundation, and U.S. Nuclear  Regulatory Commission) out of the 24 in our review did not have any  investments that met these criteria for fiscal year 2017. For the 21  agencies with major IT investments to review, we then determined the  total number of investments that agencies reported were certified by the  CIO for adequate incremental development. We also reviewed and  summarized agency responses reported on the IT Dashboard for  investments that did not have CIO certification.", "To help determine the reliability of the reported agency CIO certification  data on the IT Dashboard, we presented the results of our analysis of CIO  certification responses to officials from each agency\u2019s Office of the CIO  that were involved in investment management and software development  activities and solicited their input and explanations for the results. Two  agencies each provided an update on one of their investments, which we  have incorporated as appropriate. We determined that the data were  sufficiently reliable for the purpose of this report.", "In order to identify the challenges impacting the agencies\u2019 incremental  delivery of functionality, we developed a list of common challenges based  on our prior work, in which eight agencies reported that the following eight  challenges inhibited their delivery of functionality:  1.  project staff were over-utilized or lacked the necessary skills and  2.  programs did not receive sufficient funding or received funding later  3.  projects experienced management and organizational challenges that  introduced delays;  4.  development work was slowed by inefficient governance and  5.  project characteristics made rapid delivery of functionality infeasible or  6.  development schedules were impeded by procurement delays;  7.  programs did not have stable, prioritized requirements; and  8.  incremental development was impeded by select technologies.", "We sent the list of challenges to each of the 24 agencies and asked  officials from the Office of the CIO at each agency involved with  investment management and software development activities to identify  their top three challenges from this list that impacted their ability to deliver  incremental functionality for major IT investments. We also asked agency  officials to identify any challenges that were not included in the list, but  which were also among their top three challenges. Finally, we asked  agencies to explain what actions were taken to address the reported  challenges and describe the extent to which the challenges were  overcome.", "Because of the open-ended nature of the agencies\u2019 responses to our  questions, we conducted a content analysis of the information we  received in order to identify common challenges that impact agencies\u2019  ability to deliver incremental functionality. In doing so, team members  individually reviewed the challenges reported by agencies and assigned  them to various categories. Team members then compared  categorization schemes, discussed the differences, and reached  agreement on the final list of challenges by totaling the number of times  each challenge was mentioned. For those challenges that were prompted  by the list we provided to agencies, we reported challenges that were  identified by five or more agencies. Three agencies also identified a new  challenge that was not on our list, which we reported due to the number  of agencies reporting it as a challenge. Three of the 24 agencies in our  review (Departments of Defense, Energy, and Health and Human  Services) reported that they had no challenges with implementing  incremental development.", "We also asked the agencies in our review how the CIO utilized the  information obtained during the process of certifying investments\u2019  adequate incremental development to make decisions regarding the  agency\u2019s major IT investments. Because of the wide variety of responses  we received from agencies, we conducted a content analysis of the  information in order to identify ways the CIOs used the information. In  doing so, team members individually reviewed agencies\u2019 responses and  assigned them to various categories. Team members then compared  their categorization schemes, discussed the differences, and reached  agreement on the final characterization of ways in which agencies  benefited from the certification process.", "For our second objective, we analyzed the 24 agencies\u2019 policies and  processes governing the CIO certification of adequate incremental  development to determine whether those policies and processes were  consistent with FITARA. The provision states that OMB is to require in its  annual IT capital planning guidance that agency CIOs covered by the law  certify that IT investments are adequately implementing incremental  development. To assess this, we reviewed guidance issued by OMB on  the implementation of FITARA, and assessed agencies\u2019 documentation  of incremental development certification policies and processes against  GAO\u2019s IT investment management framework. This framework states  that an organization\u2019s policies and procedures should be clearly defined,  in that they provide details regarding the role of appropriate stakeholders  and the artifacts to document decisions made.", "Because of the wide variety of responses and documents we received  from agencies related to their incremental development certification  processes, we conducted a content analysis of the information in order to  determine compliance with OMB\u2019s guidance. In doing so, team members  individually reviewed agencies\u2019 responses and documents and assigned  them to various categories and sub-categories. Team members then  compared their categorization schemes, discussed the differences, and  reached agreement on the final characterization of compliance with OMB  guidance. In cases where agencies provided multiple policies or  documents, we followed up to clarify which portions were considered by  the agency to support the CIO certification requirement.", "In analyzing whether the agencies\u2019 policies on CIO certification met  FITARA, OMB, and GAO criteria, we assessed whether the policies  clearly defined the role of the CIO in the certification of adequate  incremental development, and described how CIO certification was  documented. We also reviewed agencies\u2019 incremental development  policies and processes to identify the agencies\u2019 definitions of incremental  development and time frames for delivering functionality to determine  whether they were consistent with OMB guidance. Agencies found to not  have a policy where the CIO process was clearly defined were evaluated  as such for one of two reasons: either the agency\u2019s formal policy did not  completely address our assessment criteria or the agency\u2019s policy had  not yet been finalized. For agencies that told us they had not yet finalized  a policy for certification, we asked them to explain the process, if any,  used by the agency to certify major IT investments for fiscal year 2017. In  addition, we interviewed staff from OMB\u2019s Office of E-Government and  Information Technology regarding its guidance to agencies related to  FITARA\u2019s incremental development certification provision.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Federal Agency Major IT Investments\u2019 Reported Chief Information Officer Certification of Incremental Development on the IT Dashboard for Fiscal Year 2017", "paragraphs": ["Table 5 lists the 166 major information technology (IT) software  development investments primarily in development, as reported on the IT  Dashboard as of August 31, 2016, and the agency\u2019s reported response to  the question in the major IT business case regarding whether the  agency\u2019s Chief Information Officer certified the adequate use of  incremental development for the investment for fiscal year 2017. All 166  investments reported in the major IT business case that the investment  included software development."], "subsections": []}, {"section_title": "Appendix III: Analysis of Federal Agency Chief Information Officer Incremental Development Certification Policies", "paragraphs": [], "subsections": [{"section_title": "Table 6 shows our analysis regarding whether the agency had policies and processes that clearly defined the Chief Information Officer (CIO) certification process for the adequate use of incremental development, including: (1) describing the CIO\u2019s role in the certification process; (2) describing how CIO certification is to be documented; (3) having a definition of incremental development in the policy consistent with Office of Management and Budget (OMB) guidance; and (4) having time frames for delivering functionality in the policy consistent OMB guidance.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix V: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the General Services Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": [{"section_title": "The report number GAO-17-556 has been changed to GAO-18-148.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix XII: Comments from the U.S. Nuclear Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIV: Comments from the Social Security Administration", "paragraphs": [], "subsections": [{"section_title": "The report number GAO-17-556 has been changed to GAO-18-148.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix XV: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": [{"section_title": "The report number GAO-17-556 has been changed to GAO-18-148.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix XVI: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, the following staff made key  contributions to this report: Dave Hinchman (Assistant Director), Chris  Businsky, Rebecca Eyler, Justin Fisher, Valerie Hopkins (Analyst in  Charge), Sandra Kerr, James MacAulay, Jamelyn Payan, Priscilla Smith,  and Andrew Stavisky."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-298", "url": "https://www.gao.gov/products/GAO-18-298", "title": "Information Technology: IRS Needs to Take Additional Actions to Address Significant Risks to Tax Processing", "published_date": "2018-06-28T00:00:00", "released_date": "2018-06-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IRS relies extensively on IT investments to annually collect more than $3 trillion in taxes, distribute more than $400 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. For fiscal years 2016 and 2017, the agency reported spending approximately $2.7 billion and $2.6 billion, respectively, for IT investments.", "GAO was asked to review IRS's IT operations. GAO's specific objectives were to (1) evaluate the performance of selected IRS IT investments, (2) summarize any risks associated with selected legacy systems and evaluate the steps the agency has taken to manage such risks, and (3) determine the extent to which IRS has implemented key IT workforce planning practices.", "GAO analyzed planned versus actual performance information for nine selected investments for fiscal year 2016 and the first 2 quarters of fiscal year 2017\u2014four in development and five in the operations and maintenance phase; identified risks facing three legacy investments and analyzed IRS's efforts to manage these risks against key practices; and analyzed IRS's IT workforce planning efforts against best practices."]}, {"section_title": "What GAO Found", "paragraphs": ["The performance of the Internal Revenue Service's (IRS) selected information technology (IT) investments that GAO reviewed varied. Specifically, the four selected investments in the development phase that GAO reviewed spent less than planned, but most were behind schedule and delivered less scope than planned (see table below). In addition, the five selected investments in the operations and maintenance phase that GAO reviewed had performed internal qualitative assessments of performance as required by the Office of Management and Budget (OMB); however, none of the analyses addressed all key factors specified in OMB guidance.", "Three investments GAO reviewed in the operations and maintenance phase that are legacy investments\u2014Individual Master File (IMF), Integrated Data Retrieval System (IDRS), and Mainframes and Servers Services and Support (MSSS)\u2014 are facing significant risks due to their reliance on legacy programming languages, outdated hardware, and a shortage of human resources with critical skills. For example, IRS reported that it used assembly language code and Common Business Oriented Language (both developed in the 1950s) for IMF and IDRS, which exposes these investments to a rise in procurement and operating costs, and a decrease in staff available with the proper skill sets. Further, MSSS relies on a significant amount of outdated hardware exposing the investment to rising warranty and maintenance fees, as well as equipment failures. Despite these risks, the agency has not fully implemented key risk management practices and may be challenged in mitigating risks effectively so that they do not impact the agency's ability to carry out its mission.", "IRS has not yet fully implemented any of the key IT workforce planning practices GAO has previously identified. Specifically, the agency has developed a tool to automate the IT workforce planning process, but the tool is in the initial stages of implementation. IRS officials attributed the limited progress in implementing IT workforce planning practices to resource constraints and competing priorities. Nevertheless, until the agency fully implements these practices, it will continue to face challenges in assessing and addressing the gaps in knowledge and skills that are critical to the success of its key IT investments."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that IRS perform operational analyses consistent with guidance, implement key risk management practices, and fully implement key IT workforce planning practices. IRS did not agree or disagree with the recommendations, but said it would provide a plan for addressing each recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Internal Revenue Service (IRS) relies extensively on information  technology (IT) investments to annually collect more than $3 trillion in  taxes, distribute more than $400 billion in refunds, and carry out its  mission of providing service to America\u2019s taxpayers in meeting their tax  obligations. For fiscal years 2016 and 2017, the agency reported  spending approximately $2.7 billion and $2.6 billion, respectively, for  these investments.", "Given the size and significance of IRS\u2019s investments and the challenges  inherent in successfully delivering them, you asked us to review the  performance of key IT investments and the agency\u2019s associated risk  management efforts. Specifically, our objectives were to (1) evaluate the  performance of selected IRS IT investments, (2) summarize any risks  associated with selected IRS legacy systems and evaluate the steps the  agency has taken to manage them, and (3) determine the extent to which  IRS has implemented key IT workforce planning practices.", "To address the first objective, we initially identified a non-generalizable  sample of the agency\u2019s investments based on several factors, including  (1) mission criticality; (2) funding for fiscal year 2016, as reported on the  Federal IT Dashboard; and (3) investment risk, as determined by IRS.  This resulted in the selection of nine investments for our review.", "Four of the selected investments were primarily in development during  fiscal year 2016 and five investments were primarily in the operations and  maintenance phase during the same time frame. For the four  investments in development, we reviewed documentation, including  quarterly reports showing planned versus actual cost, schedule, and  scope of work delivered for fiscal year 2016 and the first 2 quarters of  fiscal year 2017. We also interviewed relevant officials.", "For the five investments in the operations and maintenance phase, we  obtained operational performance metrics for fiscal year 2016 and the first  2 quarters of fiscal year 2017, as well as the planned versus actual  results against these metrics. We also compared IRS\u2019s efforts to assess  the operational performance of these investments with key factors  identified in the Office of Management and Budget\u2019s (OMB) capital  programming guidance. These factors included, for example, (1)  analyzing how well the investment contributes to achieving the  organizations strategic goals; and (2) determining the extent to which the  investment supports customer processes as designed, and how well the  investment is delivering the goods or services it was designed to deliver.", "For the second objective, we chose three investments from our initial  selection of nine\u2014Individual Master File (IMF), Integrated Data Retrieval  System (IDRS), and Mainframes and Servers Services and Support  (MSSS)\u2014because they were originally placed into operation in the late  1960s and early 1970s and, thus, are considered legacy systems. To  summarize the risks associated with these systems, we reviewed risk  logs, risk detail reports, and reports identifying the number of staff  supporting the systems. In addition, we reviewed agency documentation  identifying the legacy programming languages used and the age of the  supporting hardware.", "To evaluate the steps IRS has taken to manage the risks, we analyzed  documentation, including risk management plans; risk logs; risk detail  reports; and meeting minutes from IRS\u2019s Applications Development Risk  Review Board. In addition, we evaluated the agency\u2019s risk management  efforts by comparing the aforementioned documentation to key practices  identified in the Software Engineering Institute\u2019s Capability Maturity  Model\u00ae Integration for Development and OMB guidance. We also  interviewed IRS officials involved in the risk management process.", "To address the third objective, we obtained documentation describing a  tool that IRS is planning to implement agency-wide to address IT  workforce planning. Further, we viewed a demonstration of the  functionality provided by this tool, and interviewed officials in IRS\u2019s human  capital office, as well as investment staff, to determine the extent to which  the tool has been implemented across the agency.", "We also obtained and reviewed information relative to the agency\u2019s cross- functional acquisition training, efforts intended to strengthen IT program  management, and results of IT skills assessments. We compared IRS\u2019s  current and planned IT workforce planning efforts to key practices for IT  workforce planning derived from sources such as the Clinger-Cohen Act  of 1996; Office of Personnel Management workforce planning guidance;  and OMB Circular A-130; and as identified in our report on IT workforce  planning efforts.", "In addition, we interviewed staff responsible for managing four  investments to identify the extent to which IT workforce planning best  practices were being implemented. We selected the four investments  from our initial selection of nine investments according to one or more of  the following factors: (1) mission critical designation by IRS, (2) exposure  to human capital risk, or (3) status as a key development effort at IRS.  Additional details regarding our objectives, scope, and methodology can  be found in appendix I.", "We conducted this performance audit from November 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The mission of the IRS, an agency within the Department of the Treasury  (Treasury), is to provide America\u2019s taxpayers with top quality service by  helping them understand and meet their tax responsibilities; and to  enforce the tax law with integrity and fairness to all. In carrying out its  mission, IRS annually collects over $3 trillion in taxes from millions of  individual taxpayers and numerous other types of taxpayers. It also  manages the distribution of over $400 billion in refunds. To guide its  future direction, the agency has six strategic goals: (1) empower and  enable all taxpayers to meet their tax obligations; (2) protect the integrity  of the tax system by encouraging compliance through administering and  enforcing the tax code; (3) collaborate with external partners proactively  to improve tax administration; (4) cultivate a well-equipped, diverse,  flexible and engaged workforce; (5) advance data access, usability and  analytics to inform decision making and improve operational outcomes;  and (6) drive increased agility, efficiency, effectiveness and security in  IRS operations.", "The mission of IRS\u2019s Information Technology organization is to deliver IT  services and solutions that drive effective tax administration to ensure  public confidence. It is led by the Chief Information Officer (CIO), who  oversees several subordinate offices. Figure 1 shows the structure of  IRS\u2019s Information Technology organization."], "subsections": [{"section_title": "IRS Relies on Major IT Investments for Tax Processing", "paragraphs": ["For fiscal year 2016, IRS\u2019s IT portfolio contained 137 investments, of  which 23 were classified as major. According to the agency, it spent  approximately $2.7 billion on its IT investments during fiscal year 2016. Of  the $2.7 billion, approximately $1.9 billion (70 percent) was spent for  operations and maintenance activities, and approximately $800 million  (30 percent) was spent for development, modernization, and  enhancement.", "Among the agency\u2019s investments that we selected for our review, the  following four were primarily in development during fiscal year 2016:", "The Affordable Care Act (ACA) Administration investment  encompasses the planning, development, and implementation of IT  systems needed to support IRS\u2019s tax administration responsibilities  associated with the Patient Protection and Affordable Care Act. The  agency reported spending $253 million on this investment in fiscal  year 2016.", "Customer Account Data Engine 2 (CADE 2) is to, among other things,  provide daily processing of taxpayer accounts, address a financial  material weakness, and maintain a clean audit opinion. It is expected  to replace the nearly 50 year old IMF system that IRS is using to  process individual taxpayer accounts. A key project supporting CADE  2 is the Individual Tax Processing Engine project, which, according to  the agency, is a complex effort to, among other things, convert  approximately 200,000 lines of IMF\u2019s legacy assembly language code  to Java.", "According to IRS, the agency has completed an initial phase of  converting the assembly language code for core IMF components to  Java; however, significant work remains to complete the conversion.  Specifically, in October 2017, IRS\u2019s CIO stated that the agency could  deliver a system to replace the core IMF components in 5 years if the  agency was provided with 50 to 60 employees and the associated  funding, direct hire authority to hire employees with the right skills,  and approximately $85 million each year. The agency reported  spending $182.6 million on CADE 2 in fiscal year 2016.", "The Return Review Program (RRP) is IRS\u2019s primary system for fraud  detection. As such, it supports the agency\u2019s capabilities to detect,  resolve, and prevent criminal and civil tax noncompliance. According  to IRS, as of May 2017, the system had helped protect over $4.5  billion in revenue. The agency reported spending $100.2 million on  this investment in fiscal year 2016.", "Enterprise Case Management (ECM) is to provide an enterprise  solution for performing case management across IRS\u2019s business  units. According to the agency, its current systems provide limited  visibility into case management practices between programs, process  redundancies, and multiple handoffs that can lead to, among other  things, increased risks; and ECM is expected to address these  limitations. The agency reported spending $38.1 million on the  investment in fiscal year 2016.", "Five other investments that we selected for our review were in the  operations and maintenance phase during fiscal year 2016:", "MSSS represents approximately 73 percent of IRS\u2019s IT infrastructure.", "Specifically, this investment encompasses the design, development,  and deployment of servers, middleware and large systems, and  enterprise storage infrastructures, including systems software  products, databases, and operating systems. The MSSS investment  began in 1970. The agency reported spending $499.4 million on this  investment in fiscal year 2016.", "Telecommunications Systems and Support (TSS) provides the voice  and data network infrastructure services, video services, and  engineering throughout IRS. The TSS investment began in 2001. The  agency reported spending $336.4 million on this investment in fiscal  year 2016.", "End User Systems and Services (EUSS) provides desktops, laptops,  mobile devices, software, incident management services, and asset  management services to end users in IRS. The EUSS investment  began in 2002. The agency reported spending $238.0 million on this  investment in fiscal year 2016.", "IDRS is used by IRS employees to review tax information, issue  notices to taxpayers, and update taxpayer records. The IDRS  investment began in 1973. The agency reported spending $15.8  million on this investment in fiscal year 2016.", "IMF is IRS\u2019s system for processing individual taxpayer account data.  Using this system, accounts are updated, taxes are assessed, and  refunds are generated as required during each tax filing period.  Virtually all IRS information system applications and processes  depend on output, directly or indirectly, from this data source. As  previously noted, the agency uses assembly language code to  program this system, which began in the late 1960s. The agency  intends to decommission IMF once CADE 2 is fully implemented;  however, as we recently reported, the agency has not provided a  target date for decommissioning IMF. The agency reported  spending $14.3 million on this investment in fiscal year 2016."], "subsections": []}, {"section_title": "GAO Has Made Recommendations to Improve IRS\u2019s Major IT Investments, Government- Wide Legacy Systems, and IT Workforce Planning", "paragraphs": ["For several years, we have reported on the performance of IRS\u2019s IT  investments and identified opportunities for improving the management of  these investments.", "In February 2015, we reported that the agency had provided  summary-level Chief Technology Officer risk assessment ratings for  the majority of IT investments in quarterly reporting to Congress.  However, the agency did not provide such ratings for selected  investments for which Congress required detailed reporting, including  CADE 2 and RRP, which are the subject of this review. We noted  that summary-level risk assessment ratings would improve the  visibility into risks faced by the investments and provide Congress  with the information to more easily determine the investments  requiring greater attention. Consequently, we recommended that IRS  provide summary-level risk assessment ratings for all major  investments in its quarterly reporting to Congress.", "In response to our recommendation, IRS began providing summary- level risk information for all major investments in its fiscal year 2015  second quarter report to Congress. In its report for the fourth quarter  of fiscal year 2016, the agency reported that selected aging systems  were facing increased risks. In this regard, the agency CIO provided a  risk assessment rating for major IT investments, which incorporated  risks associated with people, infrastructure, deferred scope, and  delivery of agreed-upon scope.", "IRS reported that two investments had risk ratings that went from yellow  to red. Specifically, IMF received a red risk rating for the people factor  and CADE 2 received a red risk rating for the delivery of agreed upon  scope factor.", "In a report in June 2016, we noted, among other things, that CADE 2  and ACA did not report information on planned versus actual delivery  of functionality in accordance with best practices. In addition, ACA  did not report timely information on planned versus actual costs.  Accordingly, we recommended that IRS report, at least quarterly,  scope and cost performance for CADE 2 and ACA, consistent with  best practices.", "In response to our recommendation, the agency began reporting on  planned versus actual delivery of functionality for CADE 2 starting in  fiscal year 2016. However, the agency has not reported on planned  versus actual functionality for ACA. In March 2017, officials  responsible for managing the investment told us that the agency had  not implemented the recommendation because it did not see the  benefit in doing so given that the remaining development work was  minimal. IRS subsequently completed the development work for ACA  in September 2017, at which point the investment transitioned to  operations and maintenance. Given the status of the investment, we  agree that the recommendation is no longer applicable.", "In addition, our prior work has emphasized the importance of IRS more  effectively managing its legacy systems.", "As part of a government-wide review in November 2013, we reported  on the extent to which 10 agencies\u2019 large investments had undergone  operational analyses\u2014a key performance evaluation and oversight  mechanism required by OMB to ensure investments in the operations  and maintenance phase continue to meet agency needs. We noted  that MSSS had not had an operational analysis for fiscal year 2012.  As a result, we recommended that Treasury perform an operational  analysis for the investment. The department did not comment on our  recommendation but subsequently performed an operational analysis  for the MSSS investment.", "In May 2016, we reported on legacy IT systems across the federal  government, noting that these systems were becoming increasingly  obsolete and that many of them used outdated software languages  and hardware parts that were unsupported by the vendor. As part of  that work, we highlighted Treasury\u2019s use of assembly language code  and Common Business Oriented Language (COBOL)\u2014a  programming language developed in the late 1950s and early  1960s\u2014to program its legacy systems.", "We noted the need for agencies to move to more modern,  maintainable languages, as appropriate and feasible. Further, we  noted that a leading IT research and advisory company had reported  that organizations using COBOL should consider replacing the  language, and that there should be a shift in focus to using more  modern languages for new products. We also pointed out that the use  of COBOL presents challenges for agencies given that procurement  and operating costs associated with this language will steadily rise,  and because fewer people with the proper skill sets are available to  support the language.", "Further, we reported that IMF was over 50 years old and, although  IRS was working to modernize it, the agency did not have a time  frame for completing the modernization or replacement. In addition,  we noted that IRS did have not have specific activities or timelines for  updating MSSS and EUSS. Thus, we recommended that Treasury  direct the CIO to identify and plan to modernize or replace IRS\u2019s  legacy systems. The department had no comments on our  recommendation.", "We have also previously reported on agencies\u2019 IT workforce planning  efforts. Specifically, in November 2016 we identified eight key IT  workforce planning activities based on relevant laws and guidance and  noted that the five federal departments in our review, including Treasury,  had mixed progress in addressing the activities. We made one  recommendation to Treasury and the department agreed with our  recommendation."], "subsections": []}]}, {"section_title": "Performance of Selected IRS IT Investments Varied", "paragraphs": ["The performance of selected IRS IT investments has varied. In this  regard, we found that the four selected investments in development had  spent less than planned, and that most were behind schedule and had  delivered less scope than planned. In addition most of these investments  had significant variances, meaning that actual cost, schedule, or scope  varied from plans by more than 10 percent. For the five selected  investments in the operations and maintenance phase, we found that  most had met all of their operational performance targets and all  performed operational analyses required by OMB. However, none of the  analyses addressed all key factors specified in OMB\u2019s guidance."], "subsections": [{"section_title": "The Selected Investments in Development Spent Less than Planned, but Most Were Behind Schedule and Had Delivered Less Scope than Planned", "paragraphs": ["Best practices highlight the importance of monitoring the performance of  projects in development by comparing actual cost, schedule, and scope  to plans in order to allow appropriate corrective actions if actual  performance deviates significantly from planned performance.", "With regard to the four selected investments in development that we  reviewed, IRS reported cost, schedule, and scope performance  information for ECM, CADE 2, and RRP, but the agency reported only  cost and schedule information for ACA. Table 1 provides details reported  by the agency on the performance of these IT investments.", "Regarding ECM, the agency reported that it spent $1.5 million less than  budgeted, had an approximately 9 percent schedule overrun for the three  projects it worked on during the time frame of our review, and delivered  about 90 percent of planned scope. However, after 18 months of working  with a contractor, the agency paused all development activities for the  investment because the product that was being delivered did not meet the  agency\u2019s needs.", "Specifically, according to agency officials, including the CIO, the  contractor\u2019s solution was not sufficiently automated to be scalable across  the agency. Thus, IRS subsequently established a new effort to acquire a  product that would be aligned with its business needs. The officials stated  that the strategy for acquiring the new product includes collaboration with  other agencies on experiences in implementing enterprise case  management systems and requesting information on potential solutions  from commercial vendors.", "Regarding CADE 2, IRS reported that it spent $4 million less than it  budgeted, had a 54 percent schedule overrun for the 15 projects it  worked on during the time frame of our review, and delivered 46 percent  of the planned scope. Officials responsible for managing CADE 2 stated  that the cost, schedule, and scope variances from planned performance  were due to human resource and funding shortages.", "Specifically, the agency reported that it does not have an adequate  number of staff with expertise in assembly language code and tax  processing to perform development work on both its core tax processing  system (IMF) and its tax processing system modernization effort (CADE  2), or enough Java programmers to develop and maintain new code. As a  result, the agency paused 7 of the 15 projects. (IRS\u2019s efforts to address  its human resources constraints are discussed later in this report.)", "For RRP, the agency reported that it spent $29.5 million less than  budgeted, had a 19 percent schedule overrun for the 4 projects it worked  on during the time frame of our review, and delivered about 80 percent of  planned scope. According to the agency, these variances were due to,  among other things, overestimation of planned costs, deferral of planned  scope to a future release, and additional time needed to address a  development defect.", "For ACA, the agency reported that it spent $41.6 million less than  planned and was on time for the four projects it worked on. According to  the agency, the cost variance was due to, among other things, an initial  overestimation of the costs to complete planned work. IRS did not track  scope delivery for ACA and, as a result, we could not determine the  scope performance for the investment.", "As previously mentioned, in June 2016, we recommended that IRS report  on actual scope information for ACA at least quarterly. In its March 2017  response to the recommendation, the agency stated that it did not see the  benefits of implementing the recommendation for the investment given  the minimal development work remaining. IRS has since completed this  development work and transitioned ACA to the operations and  maintenance phase. We agree that the recommendation is no longer  applicable given the status of the investment."], "subsections": []}, {"section_title": "The Majority of Selected Investments in the Operations and Maintenance Phase Met Performance Targets", "paragraphs": ["According to OMB\u2019s fiscal year 2016 capital planning guidance, ongoing  performance of operational investments should be monitored to ensure  the investments are meeting the needs of the agency, are delivering  expected value, and/or are consistent with the agency\u2019s enterprise  architecture. To achieve these goals, agencies are required to establish  and publically report on five operational metrics for major IT investments,  as well as planned and actual performance against these metrics.  According to OMB, these metrics seek to answer more subjective  questions about areas such as customer satisfaction and financial  performance.", "IRS reported operational performance metrics, as required, for the five  selected investments we reviewed that were in the operations and  maintenance phase. Further, three of these investments\u2014IMF, MSSS,  and TSS\u2014met all of their operational performance targets, and the  remaining two investments\u2014IDRS and EUSS\u2014met four of five  operational performance targets during the time frame that we reviewed.  Table 2 lists the operational performance metrics for each of the five  investments, the metrics\u2019 areas of focus, as well as the extent to which  IRS met planned performance targets.", "With regard to the investments that did not meet their performance  targets:  IDRS did not meet its target for IRS employees\u2019 usage of the  investment for 9 out of the 18 months we reviewed. Officials  responsible for managing IDRS stated that this was likely due to a  reduction in the number of staff at the agency who access taxpayer  accounts and to a lag experienced early in the months before notices  are sent out for the filing year.", "EUSS did not meet its target for the average amount of time IRS  employees wait to receive telephone support for 6 out of the 18  months we reviewed. According to officials responsible for managing  EUSS, this target was missed due to the attrition of telephone support  staff and the agency\u2019s inability to hire additional support staff."], "subsections": []}, {"section_title": "Operational Analyses for Selected Investments in the Operations and Maintenance Phase Addressed Most, but Not All Key Factors", "paragraphs": ["OMB\u2019s fiscal year 2016 capital programming guidance highlights the  importance of operational analyses in examining the ongoing  performance of operational investments. The guidance further notes that  such analyses should be conducted at least annually and should address,  among other things, the following:  the extent to which the investment supports customer processes as  designed, and how well the investment is delivering the goods or  services it was designed to deliver; how well the investment contributes to achieving the organizations a comparison of current performance with a pre-established cost alternative methods of achieving the same mission needs and greater utilization of technology or consolidation of investments to  better meet organizational goals.", "The five selected investments that we reviewed in the operations and  maintenance phase performed operational analyses that addressed most,  but not all of these key factors identified in OMB guidance. Specifically,  four of the investments addressed five of the six factors, and one  investment addressed four of the factors. Table 3 provides our  assessment of the investments\u2019 operational analyses.", "With regard to the investments that did not address all key factors  identified in OMB\u2019s guidance:", "The IMF operational analysis did not address the factor associated  with greater utilization of technology or consolidation of investments to  better meet organizational goals. Specifically, the analysis stated that  the agency is researching the validity of converting legacy assembly  language code to a modern programming language. However, the  analysis did not more broadly address greater utilization of technology  or consolidation to better meet organizational goals, consistent with  the key factor in OMB\u2019s guidance. In addition, the analysis did not  reflect IRS\u2019s progress to date in modernizing IMF and the associated  challenges. This omission is concerning given the risk exposure from  the agency\u2019s continued use of the legacy assembly language code.  (Such risk is further discussed later in this report.)", "With respect to IDRS, while the investment is intended to, among  other things, provide for systemic review of tax information, issue  notices to taxpayers, and update taxpayer records, IRS\u2019s performance  metrics generally focused on system availability and usage and did  not address the extent to which the intended functionality was being  provided. Agency officials agreed that IDRS\u2019s metrics could be  improved to address the extent to which intended functionality is being  provided.", "For TSS, while the investment provides, among other things, video  conferencing and enterprise voice and fax services, the operational  analysis did not address how well these service offerings were being  delivered. IRS officials stated that they had instead evaluated these  service offerings in a post-implementation review, which is a one-time  effort conducted after an investment has completed development.  However, by not addressing the factor in the operational analysis,  which is an annual exercise, IRS risks not being continually informed  of the extent to which the investment is meeting the needs of the  agency. In addition, the operational analysis for the TSS investment  did not appropriately include a comparison of current performance  with a pre-established cost baseline. Specifically, while the analysis  included planned and actual cost figures for fiscal year 2016, the  planned cost figure was not complete as it did not account for  reimbursable costs and user fees.", "Regarding MSSS, the operational analysis did not address alternative  methods of achieving the same mission needs and strategic goals.  Senior officials in IRS\u2019s Information Technology organization stated  that the agency had performed analyses of alternative methods for  achieving mission needs and strategic goals, but these analyses were  not included in the operational analysis for the investment.", "The operational analysis for EUSS did not appropriately include a  comparison of current performance with a pre-established cost  baseline. Specifically, while the analysis included planned and actual  cost figures for fiscal year 2016, the planned cost figure was not  complete as it did not include multi-year funding and user fees.", "A Branch Chief for the IDRS investment stated that IRS has used the  same operational performance metrics for the investment for 10 to 15  years, and the agency has not revisited them to justify their validity over  time or to modify them. The Branch Chief further noted that the  operational performance metrics are usage-based and do not provide a  qualitative measure of how well the investment is delivering intended  services. IRS officials did not identify the causes for the deficiencies we  noted with the other selected investments\u2019 operational analyses.", "Until IRS addresses the shortcomings noted for the selected operational  investments, the agency risks not having critical information needed to  determine whether the investments fully meet intended objectives and  whether there are alternative ways to efficiently meet the agency\u2019s  mission."], "subsections": []}]}, {"section_title": "Selected Legacy Investments Face Significant Risks and IRS Has Not Implemented Steps Needed to Effectively Manage These Risks", "paragraphs": ["Three selected investments we reviewed\u2014IMF, IDRS, and MSSS\u2014are  facing significant risks due to their reliance on legacy programming  languages, outdated hardware, and a shortage of human resources with  critical skills. However, IRS has not implemented steps needed to  effectively manage these risks\u2014and thus, the agency\u2019s ability to carry out  its tax processing and modernization efforts may be impacted.", "Two of the three selected investments\u2014IMF and IDRS\u2014rely on legacy  programming languages, resulting in increased risk to continuing  operation of these investments. Specifically, IRS reported that IMF is  written in assembly language code and COBOL, and IDRS is written in  COBOL. As we previously reported, reliance on assembly language code  and COBOL has risks, such as a rise in procurement and operating costs,  and a decrease in the availability of individuals with the proper skill sets.", "In addition, one investment in our review\u2014MSSS\u2014relies on a significant  amount of outdated hardware. Specifically, at the start of fiscal year 2017,  the agency reported an inventory of approximately $684.2 million in  hardware associated with this investment. Of this amount, approximately  $430.3 million, or 63 percent, was for outdated hardware, with about 21  percent of that amount directly supporting tax processing. The $430.3  million is broken down as follows: $112.6 million in communications equipment, which includes devices  such as network switches and telephone systems; $171.5 million in systems supporting IRS employees, which includes  desktop and laptop computers, scanners, and printers; $88.9 million in equipment directly supporting tax processing, which  includes servers and UNISYS mainframes; and $57.3 million in storage equipment, which includes automated tape  libraries and disk arrays.", "Figure 2 illustrates the categories of hardware associated with MSSS,  including outdated hardware.", "IRS officials stated that the outdated hardware associated with MSSS is  expensive to maintain because it is often past the warranty. Specifically,  after a warranty for hardware ends, the maintenance fees for this  hardware commonly increase by approximately 25 percent per year. In  addition, the officials stated that, relying on this hardware has the  potential to expose IRS to equipment failures that could preclude its  systems from supporting the annual tax filing season and expanding the  systems and tools for enforcement approaches, among other things.", "The three selected investments\u2014IMF, MSSS, and IDRS\u2014are also facing  risks due to the attrition of key personnel. For example, IMF program  officials noted that developers are responsible for maintaining taxpayer  accounts and applying business rules associated with the tax process for  a given situation or tax year, and thus require skills beyond creating or  updating lines of code. However, according to an internal staffing report  for IMF for 2011 to 2017, the agency experienced attrition of developers  skilled in legacy programming languages and tax processing, exposing  the investment to increased risks of not being able to successfully  process tax information. For example:", "According to the report, from 2011 to 2017, 24 developers responsible  for performing work on the IMF investment retired or were transferred  to other positions. In addition, as a result of this attrition, 32  developers were available to perform IMF system updates for the  2017 tax filing season, which was about 4 developers (5,840 work  hours) less than needed to perform the work. Further, as of July 2017,  IMF projected a shortage of 3 developers (4,042 work hours) needed  for the 2018 tax filing season.", "In an internal document identifying options to address the loss of  knowledge caused by the attrition of staff for IMF, IRS reported that it has  taken various actions as a result of the ongoing attrition of developers.  Among others, these actions include: (1) cancelation of planned system  enhancements; (2) training and transfer of developers from other projects  to perform work on IMF; and (3) reduction in the amount of development  work being completed for CADE 2 to address a financial material  weakness.", "According to IMF risk logs, the investment also reported potential impacts  on tax processing as a result of the attrition. These impacts include (1)  the agency\u2019s delay in implementing modifications to IMF for the filing  season to reflect changes in the tax law, (2) tax processing delays due to  the lack of adequate institutional knowledge to resolve complex issues,  and (3) a lack of necessary data from IMF, which the agency uses as  input for other tax processing systems.", "Further, according to the agency\u2019s CIO, it takes 4 to 5 years to train  developers performing work on the IMF investment. The agency,  however, is facing challenges with such training and development. For  example, IMF program staff stated that the agency has historically  recruited and trained future developers from within the agency, where  staff had an understanding of IRS business processes and concepts.  However, according to the program staff, budgetary reductions limiting  travel, moving costs, or stipends, have prevented the agency from  continuing such efforts.", "According to our analysis of an IRS report showing staffing allocations  for MSSS, as of April 2017, IRS reported that there were 12 COBOL  developers supporting the MSSS investment. Agency officials noted  impacts as a result of attrition among its developers, such as the loss  of historical knowledge and expertise required to ensure proper  maintenance of systems and prevent disruptions during the tax filing  season.", "With regard to IDRS, IRS officials reported the attrition of 30  developers from January 2012 through January 2017. In addition,  these officials noted that, as of March 2017, the attrition had resulted  in a shortage of 20 developers required to complete work on the  investment. In addition, the agency identified 10 \u201csingle points of  failure\u201d for this investment, meaning that only one staff is available to  support a function. Further, the officials noted that attrition of staff may  result in (1) a delay in updating systems to reflect tax law changes  and (2) IRS\u2019s inability to complete critical IDRS project activities on  time."], "subsections": [{"section_title": "The Three Selected Legacy Investments Did Not Fully Implement Key Practices for Managing Risks", "paragraphs": ["We established an evaluation framework based on leading practices from  The Software Engineering Institute and OMB guidance. The framework  consists of 6 practices and 22 associated activities for managing IT  investment risks. Table 4 identifies these practices and activities.", "IRS has not fully implemented all of the key practices for managing risks  for any of the three selected legacy investments that we reviewed.  Specifically, based on our analysis, the agency fully implemented one key  practice and partially implemented the remaining five for IMF; fully  implemented two key practices, partially implemented two, and did not  implement the remaining two for IDRS; fully implemented one key  practice, partially implemented three, and did not implement the  remaining two for MSSS. Table 5 provides our assessment of the extent  to which IRS implemented key risk management practices for the  selected three legacy investments.", "IRS fully implemented one key risk management practice for IMF.  Specifically, IRS officials responsible for managing IMF risks stated that  the agency continuously identified risks through, among other things,  monthly meetings. Further, these risks were documented using the Item  Tracking Reporting and Control tool, IRS\u2019s risk and issue repository.", "In addition, we determined that IRS partially implemented the remaining  five key risk management practices for IMF. Specifically, the agency  prepared for risk management by using IRS\u2019s Application Development  organization risk management strategy along with the Item Tracking  Reporting and Control tool, which describe how projects are to identify,  analyze, prioritize, mitigate, and monitor risks and issues. However, the  risk management strategy did not address risk constraints or risk  assumptions. In addition, IRS\u2019s risk analysis for IMF included criteria for  evaluating and quantifying risk likelihood and severity, but it did not  address residual risk, which is the exposure remaining after action has  been taken to manage a risk. Further, the agency\u2019s prioritization of risks  for IMF included consideration of risk criticality, but did not include the  creation of a risk profile, which documents the highest priority risks.", "With respect to risk mitigation, IRS developed a Stabilization Plan in  December 2016 for IMF, and used the Item Tracking Reporting and  Control tool. The Stabilization Plan and tool addressed risk mitigation  plans, which included specific actions to be taken, as well as an  assignment of responsibility and commitment of resources. Further, the  agency documented the rationale for accepted IMF risks and established  a schedule or period of performance for risk handling activities. However,  IRS did not meet the activities for developing alternative courses of action  for all critical risks, and establishing threshold values for acceptability of  risks, or threshold values for each risk category.", "Finally, regarding monitoring, IRS reviewed risks at least annually, but did  not implement a strategy to escalate and monitor unresolved risks, even  though the Application Development risk management strategy outlined a  process for doing so. Further, the agency did not compare risks status to  acceptability thresholds to determine the need for implementing a risk  mitigation plan. Officials responsible for overseeing risk management  activities for the investment also did not review its risk management  process at least annually to ensure that the process remains appropriate  and effective.", "IRS fully implemented two of the key risk management practices for  IDRS. Specifically, the agency continuously identified IDRS risks via bi- weekly meetings and documented risks using the Item Tracking  Reporting and Control tool. In addition, the agency prioritized risks based  on a documented risk inventory and risk profile.", "In addition, IRS partially implemented two key practices. Specifically,  similar to IMF, the agency prepared the IDRS investment for risk  management by using IRS\u2019s Application Development organization risk  management strategy; however, it did not address risk constraints or risk  assumptions. Further, the agency partially analyzed IDRS risks by  including criteria for evaluating and quantifying risk likelihood and  severity; however, it did not include residual risks and, thus, may not be  aware of additional risk mitigation actions that are needed.", "Further, IRS did not implement the remaining two practices. With respect  to risk mitigation, as of March 2017, the agency did not include risk  mitigation plans, as required, for 15 of the 20 risks identified for IDRS.  Further, the agency did not maintain dates for risk handling activities for  the investment, as the majority of completion dates and projected impact  dates for identified risks had passed and these dates were not updated.  The agency also did not meet any of the key activities for monitoring  identified risks for the investment. For example, it did not compare risk  status to acceptability thresholds to determine the need for implementing  a risk mitigation plan. Further, the agency did not provide evidence that  executive leadership is monitoring all top risks for IDRS. For example,  while IRS officials closed 19 of 20 identified risks noting that these risks  were tracked by the Applications Development Risk Review Board, the  meeting minutes that we received from this board did not show that the  risks were being monitored. Lastly, IRS did not review the IDRS risk  management process at least annually.", "IRS fully addressed one key risk management practice for MSSS.  Specifically, the agency prioritized risks in the MSSS risk log by assigning  \u201cred,\u201d \u201cyellow,\u201d and \u201cgreen\u201d indicators to identified risks. Further, IRS  identified the most significant risks for the MSSS investment in a weekly  status report which is intended to address the agency\u2019s readiness to  support the tax filing season.", "IRS partially implemented three practices for MSSS. The agency  continuously identified the investment\u2019s risks via several processes. For  example, the agency uses its Sustaining Infrastructure Program to  address infrastructure components in need of replacement. According to  IRS officials and documentation on the Sustaining Infrastructure Program,  the program includes (1) an identification of aging infrastructure  components; and (2) risk scoring and ranking of the components based  on age, the extent to which the asset is associated with critical IRS  processes, and the asset\u2019s impact on operations. IRS officials stated that  this process results in a prioritized list of assets that are candidates for  replacement. In addition, the agency documents MSSS risks via a risk  log; however, the risk log does not include all risks for the investment. For  example, while officials responsible for managing the MSSS investment  told us about human resource risks, these risks were not included in the  risk log.", "The agency also partially mitigated the investment\u2019s risks by developing  risk mitigation plans and specific actions for the items identified in its risk  log; however, the actions did not include a schedule or period of  performance. IRS also did not establish threshold values for MSSS risk  categories, or alternative courses of action for critical risks.", "The agency partially monitored MSSS risks by reviewing risks regularly,  providing executive monitoring of top risks, and implementing a strategy  to escalate unresolved risks. However, the agency did not compare risk  status to acceptability thresholds to determine the need for implementing  a risk mitigation plan. In addition, an IRS official responsible for managing  risk and issue data for the MSSS investment stated that IRS did not  review the risk management process for MSSS annually. Instead, the  officials only updated the date and version number on the document that  captures this process.", "In addition, IRS did not implement two key practices. First, the agency did  not prepare the MSSS investment for risk management. Specifically,  while the agency provided the risk management plan intended to  document how it prepares the investment for risk management, we  found\u2014and IRS\u2019s Director for Demand Management and Project  Governance, and approver of this plan confirmed\u2014that the plan did not  describe the risk management activities that the agency was carrying out  for the investment. In addition, the agency did not meet key activities for  analyzing MSSS risks. For example, the agency used criteria for  evaluating and quantifying risk likelihood but it did not document criteria to  analyze the severity of all of its risks or consider inherent and residual  risks.", "IRS cited various reasons for the inconsistent implementation of risk  management key practices for the three selected investments. For  example, IDRS officials responsible for risk management stated that their  current guidance did not clearly address some of the key practices.  Further, MSSS officials responsible for risk management stated that the  majority of the risk management activities for the investment are not  documented. In addition, MSSS officials stated that selected risks were  not documented due to their perception that a reduced budget and hiring  freeze would not allow the agency to mitigate the risks. However,  documenting these risks would ensure that IRS appropriately forms a  baseline for initiating risk management activities.", "Until IRS fully implements all of the key practices for managing risks, it  will be challenged to successfully identify and mitigate risks before they  adversely impact the agency\u2019s ability to carry out its mission."], "subsections": []}]}, {"section_title": "IRS Has Not Implemented Key IT Workforce Planning Practices", "paragraphs": ["As we have previously reported, implementing effective IT workforce  planning practices can better position agencies to address human capital  risks. Accordingly, our prior work has highlighted four key IT workforce  planning practices and supporting activities identified in various laws  enacted and guidance issued over the past 20 years that call for agencies  to perform workforce planning activities. These key practices are (1)  setting the strategic direction for workforce planning, (2) analyzing the  workforce to identify skill gaps, (3) developing strategies to address skill  gaps, and (4) monitoring and reporting on progress in addressing skill  gaps. The key IT workforce planning practices and supporting activities  are identified below.", "While IRS has initiated IT workforce planning efforts, the agency has not  yet implemented any of the four IT workforce planning practices.  Specifically, we found that the Human Capital Office and IT organization  have collaboratively developed a tool to automate the IT workforce  planning process but the tool is in the initial stages of implementation and  IRS has not yet performed any of the activities associated with setting the  strategic direction for workforce planning. In addition, the agency has  developed an inventory of its current IT workforce but it has not yet  developed the competency and staffing requirements nor conducted any  of the activities associated with analyzing the workforce to identify skill  gaps, developing strategies to address skill gaps, or monitoring and  reporting on progress in addressing skill gaps for the agency.", "While IRS has not implemented key practices for IT workforce planning at  the agency level, staff for IMF and CADE 2\u2014two of the four investments  selected for our review\u2014provided evidence of efforts they had taken to  address their workforce needs. For example,", "For IMF, in 2016, IRS established a process for continuously  matching the current workforce capacity, in terms of skills and staffing,  with a projected level of work. In addition, IMF staff identified  competencies and staffing requirements for the investment, and  assessed the gaps in competencies and staffing by assessing net  available staff hours with needed staff hours for particular skill types.  Lastly, IMF staff developed strategies and implemented activities in an  effort to address IT skill gaps by creating a Stabilization Plan, which  includes short and long-term activities for training and realignment of  resources.", "For CADE 2, IRS conducted an assessment in 2015 to identify  government and contractor resource needs and utilization. IRS also  identified skill gaps and developed strategies and implemented  activities such as knowledge transfer sessions to begin addressing  these skill gaps. The CADE 2 program manager stated that the  program is waiting for additional guidance and direction from the  human capital office, as the work in this area was a rudimentary one- time effort.", "Staff for the remaining two investments we reviewed\u2014IDRS and RRP\u2014 stated that they were awaiting further implementation of the agency-wide  workforce planning tool to address their IT workforce planning needs.", "IRS officials attributed the limited progress in implementing IT workforce  planning practices to resource constraints and competing priorities.", "Nevertheless, until the agency implements these practices, it will continue  to face challenges in assessing and addressing the gaps in knowledge  and skills that are critical to the success of its key investments, some of  which we identified earlier in the report."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["IRS has performed operational analyses to examine the ongoing  performance of some IT investments, but it has not fully addressed key  factors specified in OMB guidance. Until IRS fully addresses all key  factors for performing operational analyses, the agency risks not having  the information it needs to determine whether the investments fully meet  intended objectives, or if there are alternative or more efficient ways to do  so.", "In addition, IRS faces significant risks that could impact key tax  processing investments. Specifically, IMF, IDRS, and MSSS are reliant on  legacy programming languages and outdated hardware, and the agency  is experiencing shortages of staff with the skills to support these  investments. However, the agency has not implemented key risk  management practices, placing the tax processing and modernization  efforts at risk. By fully implementing key risk management practices, IRS  will have better assurance that it is proactively addressing risks before  they can impact the agency\u2019s ability to carry out its mission. Further,  although human capital risks have in part led to significant cost, schedule,  and scope variances for CADE 2, a key modernization system, IRS has  not implemented key IT workforce planning practices. Specifically, while  the agency has initiated efforts to address workforce planning agency- wide, which it plans to continue, the efforts have not yet been  implemented for all of the agency\u2019s IT investments. Until IRS implements  effective key workforce planning practices, it will not be best positioned to  address the human capital risks it faces and ensure the timely and  effective delivery of its investments."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 21 recommendations to IRS:  The Commissioner of the IRS should ensure the operational analysis for  IMF fully addresses greater utilization of technology or consolidation of  investments to better meet organizational goals.  (Recommendation 1)", "The Commissioner of the IRS should ensure the operational analysis for  IDRS addresses the extent to which the investments support customer  processes as designed, and how well the investments are delivering the  goods or services they were designed to deliver.  (Recommendation 2)", "The Commissioner of the IRS should ensure the operational analysis for  TSS addresses the extent to which the investments support customer  processes as designed, and how well the investments are delivering the  goods or services they were designed to deliver.  (Recommendation 3)", "The Commissioner of the IRS should ensure the operational analysis for  TSS includes a comparison of current performance with a pre-established  cost baseline.  (Recommendation 4)", "The Commissioner of the IRS should ensure the operational analysis for  EUSS includes a comparison of current performance with a pre- established cost baseline.  (Recommendation 5)", "The Commissioner of the IRS should ensure the operational analysis for  MSSS addresses alternative methods of achieving the same mission  needs and strategic goals.  (Recommendation 6)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with preparing for risk management  for the IMF investment.  (Recommendation 7)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with analyzing risk for the IMF  investment.  (Recommendation 8)", "The Commissioner of the IRS should fully implement the risk  management key practice for prioritizing risk for the IMF investment.  (Recommendation 9)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with mitigating risk for the IMF  investment.  (Recommendation 10)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with monitoring, reporting, and  controlling risk for the IMF investment.  (Recommendation 11)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with preparing for risk management  for the IDRS investment.  (Recommendation 12)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with analyzing risk for the IDRS  investment.  (Recommendation 13)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with mitigating risk for the IDRS  investment.  (Recommendation 14)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with monitoring, reporting, and  controlling risk for the IDRS investment.  (Recommendation 15)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with preparing for risk management  for the MSSS investment.  (Recommendation 16)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with identifying risk for the MSSS  investment.  (Recommendation 17)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with analyzing risk for the MSSS  investment.  (Recommendation 18)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with mitigating risk for the MSSS  investment.  (Recommendation 19)", "The Commissioner of the IRS should fully implement the risk  management key practice associated with monitoring, reporting, and  controlling risk for the MSSS investment.  (Recommendation 20)", "The Commissioner of the IRS should fully implement IT workforce  planning practices, including the following actions (1) setting the strategic  direction for workforce planning; (2) analyzing the workforce to identify  skill gaps; (3) developing strategies and implementing activities to  address skill gaps; and (4) monitoring and reporting on progress in  addressing skill gaps.  (Recommendation 21)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We received written comments on a draft of this report from IRS. In its  comments, which are reproduced in appendix II, IRS did not state  whether it agreed or disagreed with our recommendations. However, the  agency acknowledged the importance of strengthening its risk  management process by implementing the key leading practices we  identified, and described actions underway which confirm the significance  of the risks described in our report. The agency also reported actions it  has taken since the end of our review to address the IT workforce  planning recommendation and stated that it would provide a detailed  corrective action plan addressing each of our recommendations. Further,  IRS provided technical comments, which we incorporated, as appropriate.", "We are sending copies of this report to interested congressional  committees, the Commissioner of IRS, and other interested parties. This  report will also be available at no charge on our website at  http://www.gao.gov.", "If you or your staffs have any questions on matters discussed in this  report, please contact me at (202) 512-9286 or pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) evaluate the performance of selected Internal  Revenue Service (IRS) information technology (IT) investments, (2)  summarize any risks associated with selected legacy systems and  evaluate the steps IRS has taken to manage them, and (3) determine the  extent to which IRS has implemented key IT workforce planning  practices.", "To select investments for our review, we first considered investments  identified by IRS as essential to tax processing. We then considered the  following factors: (1) investments impacting the greatest number of IRS  business areas and associated services based on our review of IRS\u2019s  2016 Technology Roadmap; (2) investments with the highest levels of  funding for fiscal year 2016, as reported on the Federal IT Dashboard; (3)  investments that IRS\u2019s Chief Information Officer rated as having  significant risk with respect to human capital or infrastructure; and (4)  investments with planned future system migration efforts as outlined in  IRS\u2019s Enterprise Transition Plan.", "In addition, we considered a mix of investments in development and  operations and maintenance. We selected the following nine investments  (presented in order of those considered mission critical, followed by those  most prominently meeting the above selection factors): (1) Individual  Master File (IMF), (2) Integrated Data Retrieval System (IDRS), (3)  Telecommunications Systems and Support (TSS), (4) Mainframes and  Servers Services and Support (MSSS), (5) End User Systems and  Services (EUSS), (6) Enterprise Case Management (ECM), (7) Customer  Account Data Engine 2 (CADE 2), (8) Return Review Program (RRP),  and (9) Affordable Care Act Administration (ACA).", "To address our first objective, we analyzed IRS\u2019s reporting on the  performance of the nine investments in our selection. The investments  included four that were primarily in development\u2014CADE 2, RRP, ECM,  and ACA\u2014and five that were primarily in the operations and maintenance  phase\u2014IMF, IDRS, TSS, MSSS, and EUSS. For the three investments  which were using IRS\u2019s Investment Performance Tool\u2014CADE 2, RRP, and ECM\u2014we compiled and analyzed quarterly reports showing planned  versus actual cost, schedule, and scope for work IRS was performing on  these investments during fiscal year 2016 through the first 2 quarters of  2017. For the fourth investment\u2014ACA\u2014we compared reported planned  and actual costs, as well as planned and actual completion dates for  development activities for fiscal year 2016 and the first 2 quarters of  2017. IRS did not report information on ACA\u2019s performance in meeting  scope goals.", "In addition, for the five operational investments, we compiled and  analyzed operational performance information reported for the selected  investments for fiscal year 2016 and the first 2 quarters of 2017; this  information included, where reported, the performance target and actual  results for each metric. Further, we determined the extent to which an  operational analysis was performed for each of the investments in  accordance with best practices. To do so, we obtained operational  analyses for fiscal year 2016 and analyzed the analyses against relevant  practices outlined in the Office of Management and Budget\u2019s (OMB) fiscal  year 2016 capital programming guidance.", "To assess the reliability of the data for the investments in development  used for this objective, we interviewed officials responsible for overseeing  the use of the Investment Performance Tool to confirm the completeness  of the data generated from the tool, as well as our understanding of what  these data represent. We also followed up with these officials to discuss  detected anomalies we found in the performance data. In addition, we  relied on data reliability assessments we previously completed on IRS\u2019s  financial management system because it is a source of the actual cost  data found in the Investment Performance Tool.", "Finally, we followed up on IRS\u2019s actions to address recommendations we  previously made to improve the reliability of the cost, schedule, and scope  performance data. While we found additional actions are needed to  address our recommendations, we determined the investments\u2019 data are  sufficiently reliable for our purposes. With respect to the reported  operational performance data, we reviewed documentation describing the performance metrics and interviewed IRS officials regarding the process  for reporting such metrics. We determined these data were sufficiently  reliable for purposes of reporting on operational performance.", "For our second objective, we selected three investments from our initial  selection of nine\u2014IMF, IDRS, and MSSS\u2014because they were placed  into operation in the late 1960s and early 1970s, and are therefore  considered legacy investments. To summarize the risks associated with  these investments, we reviewed, among other things, risk logs captured  in IRS\u2019s Item Tracking Reporting and Control tool and risk detail reports.  In addition, we obtained resource assessment documentation, where  available, and documentation from IRS identifying staff availability and the  legacy programming languages supporting these investments. We also  identified aged hardware components supporting the selected  investments by obtaining reports from the Knowledge, Incident/Problem,  Service Asset Management system. This system is used for tracking and  managing IRS assets, to include recording and tracking asset  acquisitions, transfers, and disposals. We supplemented our review of  documentation with interviews of IRS officials responsible for software  and infrastructure maintenance.", "To evaluate the steps IRS has taken to mitigate risks, we analyzed  documentation such as risk management plans; risk logs captured in  IRS\u2019s Item Tracking Reporting and Control tool and through other means;  risk detail reports that included the probability, impact, and overall status  for identified risks; risk mitigation plans; and meeting minutes from IRS\u2019s  Applications Development Risk Review Board. We also interviewed IRS  officials involved in the risk management process, including software  developers responsible for maintaining aging programming languages,  system administrators, and risk coordinators. We selected officials based  on (1) the median number of years the officials had worked to support the  investment; (2) their position as an investment Branch Chief or Section  Chief in order to fairly represent the management\u2019s perspective on  matters discussed; (3) consideration of employees who serve in more  than one role in the risk management process in order to obtain diverse  perspectives on the process; and (4) their fair representation of all  programming language types and infrastructure supporting the  investments. We evaluated IRS\u2019s risk management efforts by comparing  information obtained to key practices from the Software Engineering  Institute\u2019s Capability Maturity Model\u00ae Integration for Development, as well  as OMB guidance.", "To assess the reliability of the data used for our second objective, we  interviewed officials responsible for overseeing the use of IRS\u2019s Item  Tracking Reporting and Control tool and users of this tool to determine if  the tool was being consistently implemented. In addition, as part of our  interviews with software developers responsible for maintaining aging  programming languages, we determined the extent to which risks shared  by these officials were consistent with formally documented risks. Lastly,  we corroborated IRS\u2019s identification of legacy programming languages,  and infrastructure components with our staff possessing expert  knowledge of IRS\u2019s IT environment. We determined these data were  sufficiently reliable for purposes of describing risks faced by selected  investments, as well as for evaluating IRS\u2019s risk management efforts.", "For our third objective, we obtained documentation describing a tool that  IRS is planning to implement agency-wide to address IT workforce  planning. Further, we obtained a demonstration of the functionality  provided by this tool, and interviewed officials in IRS\u2019s human capital  office, as well as investment staff, to determine the extent to which this  tool has been implemented across the agency. We also obtained and  reviewed information relative to cross-functional acquisition training,  efforts intended to strengthen IT program management, and results of IT  skills assessments. We compared IRS\u2019s efforts to key practices for IT  workforce planning derived from sources, including the Clinger-Cohen Act  of 1996, Office of Personnel Management workforce planning guidance,  and OMB Circular A-130, and identified in our report on IT workforce  planning efforts.", "In addition, we selected four investments from our initial selection of  nine\u2014IMF, IDRS, CADE 2, and RRP\u2014to identify efforts they had taken to  address their workforce needs. We selected the four investments based  on one or more of the following factors: (1) mission critical designation by  IRS, (2) exposure to human capital risk, or (3) status as a key  development effort at IRS.", "Officials responsible for managing two of the investments\u2014IMF and  CADE 2\u2014provided information on their efforts. For IMF, we reviewed  workforce capacity planning documentation as well as short and long- term workforce plans to assess IMF implementation of workforce planning  efforts such as skills gap analysis, development of strategies and  implementation of activities to address IT skills gaps, and monitoring and  reporting progress in addressing IT skills gaps. For CADE 2, we reviewed  documentation from its resource assessment conducted in 2015, which  included information relative to resource needs and skills gaps. In  addition, we reviewed documentation of efforts to address skills gaps,  including training and knowledge transfer programs.", "We conducted this performance audit from November 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, the following staff made key  contributions to this report: Sabine Paul (Assistant Director), Bradley  Roach (Analyst in Charge), Andrew Banister, Mark Canter, Vern  Cumarasegaran, Rebecca Eyler, Paul Middleton, and Martin Skorczynski."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-506T", "url": "https://www.gao.gov/products/GAO-18-506T", "title": "Unaccompanied Children: DHS and HHS Have Taken Steps to Improve Transfers and Monitoring of Care, but Actions Still Needed", "published_date": "2018-04-26T00:00:00", "released_date": "2018-04-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["ORR is responsible for coordinating and implementing the care and placement of unaccompanied children\u2014that is, children who enter the United States with no lawful immigration status. The number of these children taken into custody by DHS and placed in ORR's care rose from about 6,600 in fiscal year 2011 to nearly 57,500 in fiscal year 2014, many coming from Central America. Though declining somewhat, the number has remained well above historical levels. In fiscal year 2017, DHS referred 40,810 such children to ORR.", "This testimony discusses efforts by DHS and HHS to improve the placement and care of unaccompanied children in four key areas: (1) the process by which unaccompanied children are transferred from DHS to ORR custody; (2) how ORR monitors the care of unaccompanied children in its custody; (3) how ORR identifies and screens sponsors before children are transferred to their care; and (4) what is known about services these children receive after they leave ORR custody.", "This testimony is based primarily on the findings from two prior GAO reports: a 2015 report on actions needed to ensure unaccompanied children receive required care in DHS custody; and a 2016 report on further actions HHS could take to monitor their care. This testimony also includes updated information on the progress agencies have made in implementing GAO's recommendations, and more recent statistics from publicly available sources."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) and Department of Health and Human Services (HHS) have agreed to establish a joint collaborative process for the referral and placement of unaccompanied children, but the process has not yet been implemented. In 2015, GAO reported that the interagency process for referring unaccompanied children from DHS to HHS's Office of Refugee Resettlement (ORR) shelters was inefficient and vulnerable to error, and that each agency's role and responsibilities were unclear. GAO recommended that DHS and HHS jointly develop and implement an interagency process with clearly defined roles and responsibilities, as well as procedures to disseminate placement decisions, for all agencies involved. In February 2018, HHS officials told GAO that the agency was reviewing a draft of the DHS-HHS joint concept of operations.", "ORR has reported taking steps to improve monitoring of grantees that provided services to unaccompanied children. In 2016, GAO reported that ORR relied on grantees to document and annually report on the care they provide for unaccompanied children, such as housing and educational, medical, and therapeutic services, but documents were often missing and ORR was not able to complete all of its planned visits. GAO recommended that ORR review its monitoring program to ensure that onsite visits are conducted in a timely manner, that case files are systematically reviewed, and that grantees properly document the services they provide. Since 2016, ORR has reported that its grantee monitoring has improved, with more timely completion of on-site monitoring of all its grantees.", "ORR relies on grantees to identify and screen sponsors before placing children with them. In 2016, GAO reported that most unaccompanied children from certain Central American countries were released to a parent or other relative, in accordance with ORR policy (see figure).", "Sponsors' Relationship to Unaccompanied Children from El Salvador, Guatemala, and Honduras (Released from Custody from January 7, 2014, through April 17, 2015)", "In 2016, GAO reported that limited information was available on the services provided to children after they leave ORR care, and recommended that HHS develop processes to ensure its post-release activities provide reliable and useful summary data. Subsequent data from ORR indicate that the percentage of children receiving these services has increased, from about 10 percent in fiscal year 2014, to about 32 percent in fiscal year 2017. Also, in August 2017, ORR officials said that new case reporting requirements had been added to ORR's policy guide; however, further steps are needed to ensure the systematic collection of these data to provide useful information on post-release services across agencies, as GAO recommended."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss efforts by the Department of  Homeland Security (DHS) and the Department of Health and Human  Services (HHS) to improve the process of placing and providing care for  unaccompanied children\u2014that is, children who enter the United States  with no lawful immigration status. The number of unaccompanied  children apprehended by DHS officials and subsequently placed in the  care of HHS\u2019s Office of Refugee Resettlement (ORR) increased from  nearly 6,600 in fiscal year 2011 to nearly 57,500 in fiscal year 2014. In  particular, the number of unaccompanied children from three countries\u2014 El Salvador, Guatemala, and Honduras\u2014increased dramatically over this  time. While the number of children DHS placed in ORR\u2019s care declined  through much of fiscal year 2015, it subsequently began increasing again  and has remained well above historical levels. More recent data from the  U.S. Border Patrol suggest that DHS apprehended nearly 60,000  unaccompanied children at the southwest border in fiscal year 2016 and  more than 41,000 in fiscal year 2017. Also, according to ORR data, DHS  referred 40,810 unaccompanied children to ORR in fiscal year 2017, and  in the first 6 months of fiscal year 2018, DHS apprehended nearly 22,000  unaccompanied children.", "My statement today will focus on efforts made by DHS and HHS to  improve the placement and care of unaccompanied children in four key  areas: (1) the process by which unaccompanied children are transferred  from DHS to ORR custody; (2) how ORR monitors the care of  unaccompanied children in its custody; (3) how ORR identifies and  screens sponsors before children are transferred to their care; and (4)  what is known about services and the status of removal proceedings for  children after they leave ORR custody. My statement is based primarily  on the findings from two prior GAO reports: a 2015 report on actions  needed to ensure unaccompanied children receive required care in DHS  custody; and a 2016 report on further actions HHS could take to monitor  their care. For detailed descriptions of the methodologies used, see our  prior reports. Additionally, we obtained and analyzed information and  documentation on actions DHS and HHS have taken to address our  recommendations in these prior two reports. The work upon which this  statement is based was conducted 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 provided a reasonable  basis for our findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Under the Homeland Security Act of 2002, responsibility for the  apprehension, temporary detention, transfer, and repatriation of  unaccompanied children is delegated to DHS; and responsibility for  coordinating and implementing the care and placement of  unaccompanied children is delegated HHS\u2019s Office of Refugee  Resettlement (ORR). U.S. Customs and Border Protection\u2019s U.S. Border  Patrol and Office of Field Operations (OFO), as well as U.S. Immigration  and Customs Enforcement (ICE), apprehend, process, temporarily detain,  and care for unaccompanied children who enter the United States with no  lawful immigration status. ICE\u2019s Office of Enforcement and Removal  Operations is generally responsible for transferring unaccompanied  children, as appropriate, to ORR, or repatriating them to their countries of  nationality or last habitual residence. Under the William Wilberforce  Trafficking Victims Protection Reauthorization Act of 2008 (Trafficking  Victims Protection Reauthorization Act), unaccompanied children in the  custody of any federal department or agency, including DHS, must be  transferred to ORR within 72 hours after determining that they are  unaccompanied children, except in exceptional circumstances.", "ORR has cooperative agreements with residential care providers to  house and care for unaccompanied children while they are in ORR  custody. The aim is to provide housing and care in the least restrictive  environment commensurate with the children\u2019s safety and emotional and  physical needs. In addition, these residential care providers, referred to  here as grantees, are also responsible for identifying and assessing the  suitability of potential sponsors\u2014generally a parent or other relative in the  country\u2014who can care for the child after they leave ORR custody. To  do this, grantees collect information from potential sponsors and run  various background checks. In cases in which there are questions about  the ability of the sponsor to meet the child\u2019s needs and provide a safe  environment, and for children included in specified categories under the  Trafficking Victims Protection Reauthorization Act, a home study is also  conducted. In certain circumstances ORR may also arrange for post- release services for the child.", "Release to a sponsor does not grant unaccompanied children legal  immigration status. Children are scheduled for removal proceedings in  immigration courts to determine whether they will be ordered removed  from the United States or granted immigration relief. There are several  types of immigration relief that may be available to these children, for  example, asylum or Special Immigrant Juvenile status."], "subsections": []}, {"section_title": "A Joint Collaborative Process for the Referral and Placement of Unaccompanied Children Has Not Yet Been Implemented", "paragraphs": ["In response to a recommendation in our 2015 report, DHS and HHS have  agreed to establish a joint collaborative process for the referral and  transfer of unaccompanied children from DHS to ORR shelters, but the  process has not yet been implemented. It will be important to ensure that,  once implemented, this process has clearly defined roles and  responsibilities for each agency, as we recommended.", "In 2015, we reported that the interagency process to refer  unaccompanied children from DHS to ORR shelters was inefficient and  vulnerable to error. For example, as of April 2015, DHS and ORR relied  on e-mail communication and manual data entry to coordinate the  transfer of unaccompanied children to shelters because each agency  used its own data system and these systems did not automatically  communicate information with one another. These modes of  communication made the referral and placement process vulnerable to  error and possible delay in the transfer of these children from DHS to  ORR. Each DHS component also submitted shelter requests to ORR in a  different way. We reported that the roles and responsibilities of DHS  components were not consistent during the referral and placement  process, and DHS points of contact for ORR varied across Border Patrol  sectors and ICE and OFO areas of operation. Further, we noted that the  inefficiencies in the placement process for unaccompanied children had  been a long-standing challenge for DHS and ORR. Therefore, we  recommended that DHS and HHS jointly develop and implement a  documented interagency process with clearly defined roles and  responsibilities, as well as procedures to disseminate placement  decisions, for all agencies involved in referring and placing  unaccompanied children in ORR shelters.", "The agencies agreed with this recommendation and in response, DHS  and HHS finalized a memorandum of agreement (MOA) in February  2016. The MOA provides a framework for coordinating each agency\u2019s  responsibilities and establishing procedures, shared goals, and  interagency cooperation with respect to unaccompanied children. The  MOA states that DHS and HHS agree to establish a joint concept of  operations. According to the MOA, this joint concept is to include, among  other things, standard protocols for consistent interagency cooperation on  the care, processing, and transport of these children during both steady  state operations, as well as in the event the number of unaccompanied  children exceeds standard capabilities and existing resources. In  February 2018, HHS officials told us that the agency is reviewing a draft  of the DHS-HHS joint concept of operations. To fully address our  recommendation, DHS and HHS will need to ensure that this joint  concept, once finalized and implemented, includes a documented  interagency process with clearly defined roles and responsibilities, as well  as procedures to disseminate placement decisions, as we recommended."], "subsections": []}, {"section_title": "ORR Reports Taking Steps to Improve Monitoring of Grantees\u2019 Provision of Services", "paragraphs": ["In response to a recommendation in our 2016 report, ORR reported  taking steps to improve monitoring of its grantees, including reviewing its  monitoring protocols and ensuring all grantees were monitored over a 2- year period. These steps should increase the timeliness, completeness,  and consistency of ORR\u2019s monitoring; however, ORR needs to ensure  that its updated processes and protocols are fully implemented and in  use.", "In 2016, we reported that ORR relies on grantees to provide care for  unaccompanied children, such as housing and educational, medical, and  therapeutic services, and to document in children\u2019s case files the services  they provide. Grantees are required to provide these services and to  document that they did so. However, in our 2016 report, we found that  documents\u2014such as legal presentation acknowledgment forms, records  of group counseling sessions, or clinical progress notes\u2014were often  missing from the 27 randomly selected case files we reviewed. In  addition, we identified several cases in which forms that were present in  the files were not signed or dated. We found that although ORR used its  web-based data system to track some information about the services  children received, and grantees reported on the services they provided in  their annual reports, the documents contained in case files were the  primary source of information about the services provided to individual  children. We concluded that without including all of the documents in case  files, it was difficult for ORR to verify that required services were actually  provided in accordance with ORR policy and cooperative agreements.", "In our 2016 report, we noted that ORR\u2019s most comprehensive monitoring  of grantees occurred during on-site visits, but that onsite visits to facilities  were inconsistent. Prior to fiscal year 2014, project officers were  supposed to conduct on-site monitoring of facilities at least once a year.  However, we found in our review of agency data that many facilities had  not received a monitoring visit for several years. For example, ORR had  not visited 15 facilities for as many as 7 years. In 2014, ORR revised its  on-site monitoring program to ensure better coverage of grantees and  implemented a biennial on-site monitoring schedule. Nevertheless, ORR  did not meet its goal to visit all of its facilities by the end of fiscal year  2015, citing lack of resources. In our 2016 report, we concluded that  without consistently monitoring its grantees, ORR cannot know whether  they were complying with their agreements and that children were  receiving needed services. We recommended that the Secretary of HHS  direct ORR to review its monitoring program to ensure that onsite visits  are conducted in a timely manner, case files are systematically reviewed  as part of or separate from onsite visits, and that grantees properly  document the services they provide to children. HHS concurred with this  recommendation and stated that it had created a new monitoring initiative  workgroup to examine opportunities for further improvement.", "Since our 2016 report, ORR has reported achieving more timely and  complete monitoring. In May 2017, ORR issued a summary of its fiscal  year 2016 monitoring showing that monitoring of all of its 88 grantees was  completed over the 2-year period of fiscal years 2015 and 2016. As a  result of this monitoring, the agency reported issuing 786 corrective  actions, almost all of which were closed within 90 days. The most  common corrective actions were related to incomplete case file  documentation and inconsistent implementation of some of ORR policies  and procedures, according to ORR. Subsequently, for the 2-year period  of fiscal years 2017 and 2018, ORR reported that as of April 2018, it had  completed monitoring of 65 grantees and planned to complete monitoring  of all of its remaining 39 grantees by the end of the fiscal year.", "In addition, ORR has reported that it is taking steps to ensure its  monitoring processes and protocols are more systematic and uniform.  During 2016, ORR announced a new Monitoring Initiative with the goal of  establishing a comprehensive system of monitoring for all ORR-funded  programs; HHS reported that it had conducted three trainings for ORR  Project Officers and was in the process of adding two to three additional  Project Officer positions to the unaccompanied children program. In April  2018, HHS reported that ORR was in the process of reviewing and  revising its monitoring tools, and planned to have final versions of these  tools completed by the end of fiscal year 2018. Once ORR completes its  review of its monitoring tools and fully implements its revised protocols,  these steps, along with its more timely monitoring, should help ensure an  improved monitoring program."], "subsections": []}, {"section_title": "ORR Relies on Grantees to Identify and Screen Sponsors for Unaccompanied Children", "paragraphs": ["In 2016, we reported that ORR grantees that provide day-to-day care of  unaccompanied children are responsible for identifying and screening  sponsors prior to releasing children to them. During children\u2019s initial intake  process, case managers ask them about potential sponsors with whom  they hope to reunite. Within 24 hours of identifying potential sponsors,  case managers are required to send them a Family Reunification  Application to complete. The application includes questions about the  sponsor and other people living in the sponsor\u2019s home, including whether  anyone in the household has a contagious disease or criminal history.  Additionally, the application asks for information about who will care for  the child if the sponsor is required to leave the United States or becomes  unable to provide care.", "Grantees also ask potential sponsors to provide documents to establish  their identity and relationship to the child, and they conduct background  checks. The types of background checks conducted depend on the  sponsor\u2019s relationship to the child (see table 1). In certain circumstances  prescribed by the Trafficking Victims Protection Reauthorization Act or  ORR policy, a home study must also be conducted before the child is  released to the sponsor. Additionally, other household members are  also subjected to background checks in certain situations, such as when  a documented risk to the safety of the unaccompanied child is identified,  the child is especially vulnerable, and/or the case is being referred for a  mandatory home study.", "In our 2016 report, we found that between January 7, 2014, and April 17,  2015, nearly 52,000 children from El Salvador, Guatemala, or Honduras  were released to sponsors by ORR. Of these children, nearly 60 percent  were released to a parent. Fewer than 9 percent of these children were  released to a non-familial sponsor, such as a family friend, and less than  1 percent of these children were released to a sponsor with whom their  family had no previous connection (see table 2). Historically, most of  these unaccompanied children have been adolescents 14 to 17 years of  age, but about a quarter of the children from these three countries in 2014  and early 2015 were younger."], "subsections": []}, {"section_title": "ORR Reports Creating New Data Collection Guidance on Post-Release Services", "paragraphs": ["In response to a recommendation in our 2016 report, ORR reported  taking various steps to collect additional information on the services  provided to unaccompanied children after they are released from ORR  custody. We welcome this progress, but continue to believe that further  steps are needed to fully address our recommendation.", "In 2016, we reported that limited information was available about post- release services provided to children and their sponsors. Post-release  services include such things as guidance to the sponsor to ensure the  safest environment possible for the child; assistance accessing legal,  medical, mental health, and educational services for the child; and  information on initiating steps to establish guardianship, if necessary. The  Trafficking Victims Protection Reauthorization Act requires ORR to  provide post-release services to children if a home study was conducted,  and authorizes ORR to provide these services to some additional  children.", "Our 2016 report noted that ORR was in a position to compile the data it  collects on post-release services, and to share the data internally and  externally with other federal and state agencies to help them better  understand the circumstances these children face when they are released  to their sponsors. ORR was already collecting some information from its  post-release grantees on services provided to children after they left ORR  custody, and its newly instituted well-being calls and National Call Center  would allow it to collect additional information about these children.  However, at the time, ORR did not have processes in place to ensure that  all of these data were reliable, systematically collected, and compiled in  summary form to provide useful information about this population for its  use and for other government agencies, such as state child welfare  services. As a result, in our 2016 report, we recommended that the  Secretary of HHS direct ORR to develop a process to ensure all  information collected through its existing post-release efforts are reliable  and systematically collected, so that the information could be compiled in  summary form to provide useful information to other entities internally and  externally. HHS concurred and stated that ORR would implement an  approved data collection process that would provide more systematic and  standardized information on post-release services and that it would make  this information available to other entities internally and externally.", "At the time of our 2016 study, a relatively small percentage of  unaccompanied children who had left ORR custody were receiving post- release services. Officials said ORR\u2019s responsibility typically ended after it  transferred custody of children to their sponsors. We found that slightly  less than 10 percent of unaccompanied children received post-release  services in fiscal year 2014, including those for whom a home study was  conducted. However, the percentage of unaccompanied youth receiving  post-release services has increased in recent years. According to publicly  available ORR data, approximately 31 percent of unaccompanied youth  received such services in fiscal year 2015, 20 percent in fiscal year 2016,  and 32 percent in fiscal year 2017.", "In addition, during 2015, ORR had taken steps to expand eligibility criteria  for post-release services. According to ORR officials, these changes  included making all children released to a non-relative or distant relative  eligible for such services. ORR also began operating a National Call  Center help-line in May 2015. Children who contacted ORR\u2019s National  Call Center within 180 days of release and who reported experiencing (or  being at risk of experiencing) a placement disruption, also became  eligible for post-release services, according to ORR officials. Additionally,  our 2016 report noted that in August 2015, ORR had instituted a new  policy requiring grantee facility staff to place follow-up calls, referred to as  Safety and Well Being follow-up calls, to all children and their sponsors  30 days after the children are placed to determine whether they were still  living with their sponsors, enrolled in or attending school, and aware of  upcoming removal proceedings, and to ensure that they were safe.  ORR\u2019s policy required grantees to attempt to contact the sponsor and  child at least three times.", "In August 2017, ORR told us that the agency had created new guidance  on case reporting, records management, retention, and information- sharing requirements for post-release service provider, and that it had  collected data on Safety and Well Being follow-up calls that had been  made to children and their sponsors. For example, ORR told us that  during the first quarter of fiscal year 2016, its grantees reached 87  percent of unaccompanied children and 90 percent of sponsors by phone  within 30 to 37 days after the child\u2019s release from ORR care. In the  second quarter of fiscal year 2016, these figures were 80 percent and 88  percent, respectively. ORR also said that the agency had developed a  plan for collecting and analyzing National Call Center data. However, as  of April 2018, ORR officials noted that case management functionality  had not yet been built into ORR\u2019s web-based portal. Further, ORR  officials told us that the agency planned to create uniform data collection  reporting forms for grantees providing post-release services, but as of  April 2018, it had not developed these forms. ORR\u2019s steps represent  progress towards systematically collecting information that can be used  internally and shared, as appropriate, with external agencies; however, to  ensure our recommendation is fully addressed, ORR will need to  complete its data collection and reporting efforts.", "With respect to unaccompanied children\u2019s immigration proceedings, we  reported in 2016 that several different outcomes are possible, and that  the outcomes for many children had not yet been determined. An  unaccompanied child who is in removal proceedings can apply for various  types of lawful immigration status with DHS\u2019s U.S. Citizenship and  Immigration Services (USCIS), including asylum and Special Immigration  Juvenile status. Alternatively, an unaccompanied child who has not  sought, or has not been granted, certain immigration benefits within the  jurisdiction of USCIS, may still have various forms of relief available to  him or her during immigration proceedings. For example, an immigration  judge may order the child removed from the United States, close the case  administratively, terminate the case, allow the child to voluntary depart  the United States, or grant the child relief or protection from removal.   Moreover, a judge\u2019s initial decision does not necessarily indicate the end  of the removal proceedings. For example, cases that are administratively  closed can be reopened, new charges may be filed in cases that are  terminated, and children may appeal a removal order. In addition, in  cases involving a child who receives a removal order in absentia, and a  motion to reopen the child\u2019s case has been properly filed, the child is  granted a stay of removal pending a decision on the motion by the  immigration judge. In our 2016 report, we found that according to ICE  data on final removal orders from fiscal year 2010 through August 15,  2015, ICE removed 10,766 unaccompanied children, and about 63  percent of these children (6,751) were from El Salvador, Guatemala, or  Honduras.", "Chairman Portman, Ranking Member Carper, and Members of the  Subcommittee, this concludes my prepared remarks. I would be happy to  answer any questions that you may have."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For further information regarding this testimony, please contact Kathryn  A. Larin at (202) 512-7215 or larink@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement.", "Individuals who made key contributions to this testimony include Margie  K. Shields (Assistant Director), David Barish (Analyst-in-Charge), James  Bennett, Kathryn Bernet, Ramona Burton, Rebecca Gambler, Theresa  Lo, Jean McSween, James Rebbe, Almeta Spencer, Kate van Gelder,  and James Whitcomb.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-410", "url": "https://www.gao.gov/products/GAO-18-410", "title": "Long Island Sound Restoration: Improved Reporting and Cost Estimates Could Help Guide Future Efforts", "published_date": "2018-07-12T00:00:00", "released_date": "2018-07-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Long Island Sound, an estuary bordered by Connecticut and New York, provides numerous economic and recreational benefits. However, development and pollution have resulted in environmental impacts, such as the degradation of water quality. EPA partnered with both states to create the Study to restore and protect the Sound. The Study developed a comprehensive conservation and management plan in 1994 and updated the plan in 2015.", "GAO was asked to examine federal efforts to restore the Sound. This report examines, among other objectives, (1) what is known about the progress made toward achieving the 1994 plan, (2) how Study members plan to measure and report on progress toward achieving the 2015 plan, and (3) estimated costs of the restoration. GAO reviewed Study plans, reports, and data. GAO also interviewed 12 Study members\u2014including federal and state agency officials\u2014and representatives of 5 Study work groups about restoration efforts and progress made."]}, {"section_title": "What GAO Found", "paragraphs": ["The Long Island Sound Study (the Study) is a federal-state partnership formed in 1985 to restore Long Island Sound. The Environmental Protection Agency (EPA) and officials from Connecticut and New York provide oversight for the Study, which includes federal and state agencies, nonprofit organizations, and other groups. GAO found the following:", "Progress toward 1994 Plan. The Study established an initial plan for the Sound in 1994 and has collected data on certain indicators of the Sound's health and published progress reports on its website. However, the Study has not comprehensively assessed progress against the 1994 plan. In the absence of such an assessment, GAO interviewed Study members who generally agreed that moderate progress has been made in achieving goals for five of the six problem areas in the 1994 plan. Without a comprehensive assessment, it is not possible to determine the extent these views reflect actual progress.", "Reporting Progress for the 2015 Plan. The Study's 2015 management plan identifies 20 long-term targets and associated numerical indicators that will be used to measure future progress. The Study has also updated the format for pages on its website to provide more consistent progress reports for these targets. However, the reports do not yet fully incorporate leading practices for performance reporting that GAO has previously identified. For example, they do not include evaluations of goals that are not met for 15 targets. By ensuring that leading practices are fully incorporated into the Study's performance reporting efforts, EPA can help the Study better assess and report on future progress.", "Estimating Costs of Restoration. The Study has estimated that the future costs of restoration will be at least $18.9 billion through 2035. However, the current estimates are understated because they do not include the costs of all activities that will be needed to accomplish the 2015 plan, and they do not reflect the uncertainty associated with some of the costs. By capturing the full costs and uncertainties in cost estimates, the Study can provide decision makers critical information needed to allocate resources effectively."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that EPA work with the Study to ensure that it fully incorporates leading practices into its performance reporting efforts and that its cost estimates include the full range of activities as well as those for which there is uncertainty. EPA agreed with GAO's recommendations and highlighted steps the agency will take to meet the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For centuries, Long Island Sound (the Sound)\u2014an estuary bordered by  Connecticut and New York and surrounded by one of the most densely  populated areas of the United States\u2014has provided numerous public  benefits including fishing, recreation, and a transportation route to the  Atlantic Ocean. Development, deforestation, and industrialization across  the region have resulted in degradation of water quality from pollution,  such as chemicals, sediment, and sewage. Moreover, the degradation of  water quality has resulted in declining fish populations. In 1985,  congressional committees directed the Environmental Protection Agency  (EPA) to work with the states to research, monitor, and assess estuaries  including Long Island Sound. Further, in 1987, the National Estuary  Program was established under amendments to the Clean Water Act to,  among other things, identify nationally significant estuaries threatened by  pollution, development, or overuse, and promote comprehensive  management of those estuaries. EPA has designated 28 estuaries of  national significance, including Long Island Sound.", "In 1985, EPA partnered with Connecticut and New York to form the Long  Island Sound Study (the Study) to restore and protect the Sound.  Dedicated to restoring and protecting the Sound, the Study is a  partnership consisting of federal and state agencies, nonprofit and public  organizations, and individuals. The director of the Study is an EPA  official, and the Study is overseen by EPA and senior officials from the  Connecticut Department of Energy and Environmental Protection and the  New York State Department of Environmental Conservation. Study  members include other federal and state agencies and an interstate  group. The Study also has a Citizens Advisory Committee and a Science  and Technical Advisory Committee, and representatives of those  committees provide advice for implementing restoration activities or  science and technical issues.", "Since it was established in 1985, the Study has developed two  comprehensive conservation and management plans for the Sound that  include recommended actions to restore and maintain the Sound\u2019s  chemical, physical, and biological integrity, including its water quality. The  Study issued the first Long Island Sound Comprehensive Conservation  and Management Plan in 1994 (1994 plan). In the 1994 plan, it identified  six priority problems and goals for each problem: (1) low dissolved  oxygen, or hypoxia, (2) toxic substances, (3) pathogen contamination, (4)  floatable debris, (5) management and conservation of living resources  and their habitats, and (6) land use and development. The Study issued  a revised plan in 2015 (2015 plan), which is organized around four  themes, each with its own goal: (1) clean water and healthy watersheds,  (2) thriving habitats and wildlife, (3) sustainable and resilient communities,  and (4) sound science and inclusive management.", "You asked us to review federal efforts to restore the Sound. This report  examines (1) what is known about the progress made toward achieving  the 1994 plan; (2) the goals of the 2015 plan and factors, if any, that may  hinder progress according to Study members; (3) how Study members  plan to measure and report on progress toward achieving the 2015 plan;  and (4) what Study members expended on restoration activities in fiscal  years 2012 through 2016 and cost estimates for future activities.", "To examine what is known about the progress made toward achieving the  1994 plan, we analyzed the plan to gain a better understanding of it and  to identify any goals associated with the six priority problems. We also  reviewed data from the Study\u2019s website in November 2017, the Study\u2019s  most recent progress reports, and the book Long Island Sound:  Prospects for the Urban Sea, a summary of available science and  environmental data for the Sound published in 2014. We reviewed data  that were on the Study\u2019s website in November 2017 because the time  frame coincided with the time frames for our review. These reports, data,  and book included examples of progress but did not assess performance  toward the goals associated with the priority problems in the 1994 plan.  Therefore, we asked Study members for their responses on progress and  the data that supported their responses. To do so, we interviewed  representatives of the 12 Study members who agreed to participate and 5  Study work groups to learn the extent to which they believe progress has  been made toward the goals and to obtain key data that they cited as  evidence for their responses. For some priority problems, Study  members said that they were unable to provide a response about  progress toward the associated goals because they did not have  sufficient knowledge or data, and as a result, the number of respondents  for each problem varied. To examine the goals of the 2015 plan and  factors that may hinder progress according to Study members, we  analyzed the 2015 plan and interviewed Study members to identify the  factors they believe may hinder progress toward achieving the goals of  the 2015 plan.", "To examine how Study members plan to measure and report on progress  toward achieving the 2015 plan, we analyzed sections of the plan that  contained goals associated with the four themes and relevant web pages  that the Study issued in March 2018 and analyzed them again in June  2018, and interviewed Study members to learn how they planned to  report on progress. We also interviewed a nonprobability sample of 19  individuals with expertise on Long Island Sound to obtain their views on  these sections of the plan. The 19 experts we interviewed included  primarily members of academia. We identified these experts through  recommendations from Study members and by reviewing the list of  authors in the book Long Island Sound: Prospects for the Urban Sea. We  did not interview experts who represented a Study member or were  involved with the development of the 2015 plan. We asked the experts to  identify which topics of the plan they could discuss based on their  particular expertise. Because we used a nonprobability sample, the  information obtained from these interviews is not generalizable to other  individuals with Long Island Sound-related expertise but provides  illustrative information.", "To examine what Study members expended on restoration activities in  fiscal years 2012 through 2016 and cost estimates for future activities, we  obtained and analyzed expenditure data from Study members and  analyzed cost estimate information in the 2015 plan. Of the 12 Study  members described above, 7 provided at least some expenditure data to  us, 4 said that they do not fund restoration activities, and 1 did not reply to  our request for expenditure data. We were unable to compare  expenditure data across Study members because they did not track  expenditures in the same way. To assess the reliability of the expenditure  data, we interviewed officials to explain how the data were collected and  obtained information about the completeness and accuracy of the data  and found the expenditure data to be sufficiently reliable for reporting on  expenditures of restoration activities for the period. We also consulted the  Office of Management and Budget\u2019s general guidance for estimating  costs, and analyzed EPA\u2019s funding guidance for comprehensive  conservation and management plans. Further, we attended two Study  meetings (on April 12, 2017, by telephone, and May 11, 2017, in person)  to obtain information about how Study members make expenditure  decisions. Appendix I contains a more detailed description of our  objectives, scope, and methodology.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Long Island Sound is an estuary, a body of water where fresh water from  rivers draining from the land mixes with salt water from the ocean, in this  case the Atlantic Ocean. The Sound is 113 miles long and 21 miles  across at its widest point, with an average depth of 63 feet and a deepest  point of 320 feet. The Sound\u2019s coastline is 583 miles and includes more  than 60 bays, with beaches and harbors where people interact most  frequently with the Sound. As shown in figure 1, the Sound is bordered by  Connecticut to the north and New York to the south and west, and its  watershed includes parts of Massachusetts, New Hampshire, Rhode Island, and Vermont. Nearly all of Connecticut\u2019s waters drain into the  Sound, as do waters from the northern portion of Long Island and the  New York City metropolitan area. New York City is the most populous city  in the United States.", "In 1985, congressional committees directed EPA to work with states to  research, monitor, and assess estuaries including the Sound. Around the  same time, Connecticut, New York, and EPA raised concerns about  pollution in the Sound due to the presence of a large population living  near it, as well as 44 wastewater treatment plants and other industries  that discharged into the Sound. In addition, they also raised concerns  about pollution coming from sources that were not easily identified, such  as runoff from land surrounding the Sound.", "To restore the health of the Sound, EPA partnered with the two states in  1985 to form the Long Island Sound Study, a partnership consisting of  federal and state agencies, nonprofit and public organizations, and  individuals dedicated to restoring and protecting the Sound. The Study  has several committees and work groups that help to develop and  implement the comprehensive conservation and management plan for the  Sound. These groups include the Science and Technical Advisory  Committee and the Citizens Advisory Committee, as well as the Water  Quality Monitoring Work Group and the Habitat Restoration and  Stewardship Work Group, which are responsible for facilitating improved  collection, coordination, management, and interpretation of water quality,  and promoting restoration of the Sound through an improved  understanding of current threats.", "In 1987, the National Estuary Program was established under  amendments to the Clean Water Act; the act further required EPA to give  priority consideration to Long Island Sound, among others. According to  EPA, the National Estuary Program is a community-based program  designed to restore and maintain the ecological integrity of estuaries of  national significance. One year after the program was established, EPA  designated the Sound as such an estuary. Under the program, each  estuary of national significance has a management conference that is  required to develop a comprehensive conservation and management plan  to restore and maintain the chemical, physical, and biological integrity of  the estuary, including water quality, among other things.", "In 1990, the Long Island Sound Improvement Act required EPA to  establish the Office of the Management Conference of the Long Island  Sound Study, to be directed by an EPA official and to assist the Long  Island Sound Study in carrying out its goals. The act required the Long  Island Sound Study Office, as directed by EPA, to provide administrative  and technical support to the management conference, or the Study. The  act also required the Long Island Sound Study Office to report biennially  on progress made in implementing the comprehensive conservation and  management plan starting no more than 2 years after issuing the final  plan. The Study, assisted by the Office, developed two reports\u2014the  Protection and Progress report and Sound Health report\u2014to show  progress toward the 1994 plan and issued the reports about every 2  years from 2001 through 2013. According to the Study, the purpose of  the Protection and Progress report was to highlight regional efforts to  restore and protect Long Island Sound, and the purpose of the Sound  Health report was to provide a snapshot of the environmental health of  Long Island Sound. In addition, the Study collects, tracks, and publishes  information about environmental indicators on its website periodically, and  has produced reports that summarized work done to carry out the 1994  plan.", "In its 1994 plan, the Study identified six priority problems and created  associated goals (see table 1).", "In the 1994 plan, the Study identified hypoxia as the major water quality  problem in the Sound, defining hypoxia as dissolved oxygen  concentrations of less than 3 milligrams of oxygen per liter of water and  noting that levels less than that are inadequate to support healthy  populations of estuarine organisms. The Study noted that hypoxia caused  significant, adverse ecological effects in the bottom water habitats of the  Sound, such as reducing the abundance and diversity of adult fish and  possibly reducing other species\u2019 resistance to disease.", "According to the National Oceanic and Atmospheric Administration, the  most common cause of hypoxia is nutrient pollution, specifically  discharges of nitrogen and phosphorus. As shown in figure 2, sources of  nutrient pollution include wastewater discharged from wastewater  treatment plant pipes and runoff from agricultural fields, stormwater, and  groundwater.  Excess nutrients can cause algae\u2014which occur naturally  in oceans, lakes, rivers, and other water bodies\u2014to rapidly multiply,  resulting in algal blooms that can discolor the water or accumulate as  thick scums and mats. When the algae die they sink and decompose, and  this decomposition consumes oxygen that is dissolved in water and used  by fish and shellfish to live. Reduced oxygen levels, in turn, can lead to  increased mortality for fish, shellfish, and other aquatic populations, or  can drive some species to relocate to more oxygenated waters. Water in  estuaries is naturally stratified, with less dense fresh warmer water  generally staying on top, and denser salty cool water on the bottom.", "In 2000, Connecticut and New York developed a total maximum daily  load (TMDL) to achieve water quality standards for dissolved oxygen in  Long Island Sound. In the TMDL, the states described efforts to manage  hypoxia and identified nitrogen as the key contributor to hypoxia and  identified the sources and amounts of nitrogen contributed to the Sound.  These include wastewater treatment plants in Connecticut and New York;  combined sewer overflows (CSO); nonpoint source pollution, or runoff  from sources such as residences and farms that includes stormwater and  groundwater; and atmospheric deposition. The TMDL set a 15-year  nitrogen reduction goal for Connecticut and New York, from both point  and nonpoint sources of nitrogen, to be achieved by August 2014. The  TMDL also calls for implementing management actions for nitrogen  entering the Sound from other states where feasible. In the TMDL,  Connecticut and New York identified the need for an adaptive  management approach because it would require nitrogen reduction  beyond the limits of technology current at the time. The states also  agreed to reassess the nitrogen reduction goals and revise the TMDL as  necessary."], "subsections": [{"section_title": "Although a Comprehensive Assessment of Progress Has Not Been Conducted, Study Members Believe Moderate Progress Has Been Made Since 1994 The Study Collected a Wide Range of Data and Issued Progress Reports, but Did Not Conduct a Comprehensive Assessment of Progress Toward Achieving the 1994 Plan", "paragraphs": ["Although the Study has collected a wide range of data to measure the  health of Long Island Sound and has issued periodic progress reports  since 2001, these progress reports have not contained a comprehensive  assessment of progress toward the goals of the 1994 plan. In the  absence of a comprehensive assessment of progress, Study members  we interviewed said that they believe that moderate progress has been  made toward goals associated with five of the six priority problems  identified in the 1994 plan.", "The Study has collected a wide range of data used to measure the health  of Long Island Sound. According to a Study member, the Study began  identifying and collecting these data in 1998 with the purpose of  evaluating progress toward achieving the goals of the 1994 plan. The  data were gathered by federal and state agencies and universities, and  were provided to the Study, which published the data on its website. As of  November 2017, the data on the website were organized into groups of  environmental indicators including water quality, marine and coastal  animals, land use and population, and habitats. We found that many of  the indicators and their data could be linked to goals associated with the  six priority problems in the 1994 plan. Examples of these indicators and  the related data and associated goals are shown in table 2.", "As required by the Long Island Sound Improvement Act, since 2001, the  Study has issued periodic progress reports\u2014five Protection and Progress  reports and six Sound Health reports, available on the Study\u2019s website\u2014 that have focused on specific examples of the restoration effort. The most  recent of these reports were organized into sections that can be linked to  the priority problems identified in the 1994 plan. For example, the most  recent Protection and Progress report, issued in 2013, included sections  on water quality and habitat restoration efforts that can be linked to the  priority problems \u201chypoxia\u201d and \u201cmanagement and conservation of living  resources and their habitats.\u201d", "The most recent progress reports also included examples of progress  using indicator data that we could link to some of the goals and priority  problems in the 1994 plan, such as the following:", "Both reports included examples of progress that could be linked with  the priority problem \u201chypoxia.\u201d The Protection and Progress report  identified pounds of nitrogen discharged into the Sound from 2001  through 2012 and provided data showing reduced nitrogen discharges  over time, which the Study stated it expected to result in decreased  hypoxic areas and increased dissolved oxygen. The Sound Health  report identified both the area, in square miles, and duration, in days,  of hypoxia in the Sound from 1987 through 2012.", "The Protection and Progress report included examples of progress  that could be linked to the goal to increase the abundance and  distribution of harvestable species, which is associated with the  priority problem \u201cmanagement and conservation of living resources  and their habitats.\u201d For example, the Protection and Progress report  included examples of progress in the number of river miles restored  from 1998 through 2012 as well as the number of fish returning to the  rivers.", "The Sound Health report included examples of progress that could be  linked to both goals associated with the priority problem \u201cpathogen  contamination.\u201d These goals were to (1) increase the amount of area  certified or approved for shellfish harvesting while adequately  protecting the public health and (2) eliminate public bathing beach  closures while adequately protecting the public health. The Sound  Health report identified the number of beach closure and advisory  days from 1993 through 2011 and the number of acres approved for  shellfish harvesting from 2005 through 2011.", "However, the Study\u2019s progress reports did not contain a comprehensive  assessment of the progress toward the goals of the 1994 plan.  Specifically, the progress reports included examples of progress using  indicator data and they did not include a comparison of that progress  against a specific amount to be achieved\u2014a numerical goal. For  example, the Protection and Progress report included an example of  progress on pathogen contamination, but the report did not include a  comparison of the data on acres of shellfish harvesting areas against a  numerical goal for the amount of acres of shellfish approved for  harvesting. In addition, the Sound Health report included examples of  progress on toxic substances, but the report did not include a comparison  of the reduction of toxics discharged into the Sound against a numerical  goal for the reduction of toxic inputs. As we have previously reported,  having a numerical goal permits expected performance to be compared  with actual results. Part of the challenge for the Study to conduct such  an assessment arises from the fact that only one of the goals in the 1994  plan had numerical goals against which the Study could compare  progress. According to a Study member, because the rest of the goals  were not numerical goals, a comprehensive assessment of progress  toward achieving the 1994 plan was not conducted.", "Although such an assessment was not conducted, the Study has made  available a comprehensive assessment of available science and data  about the environmental dynamics of the Sound in the 2014 publication  Long Island Sound: Prospects for the Urban Sea. The book\u2014written by  scientists from federal and state agencies and universities\u2014includes  sections on the geology and chemistry of the Sound; development  patterns in the area surrounding the Sound; metals, contaminants, and  nutrients discharged to the Sound; and management options for the  Sound. Prospects for the Urban Sea identified science gaps and research  needs and made several recommendations, including better  characterizing the relationship between smaller bays and inlets and the  Sound, integrating climate change across programs, prioritizing  management of existing pollution sources and impairments, and  improving data management and interpretation. According to Study  members, the book served as a reference for scientists conducting  research in Long Island Sound and as the basis for the 2015 plan."], "subsections": []}, {"section_title": "Study Members Believe Moderate Progress Has Been Made Toward Goals Associated with Five Priority Problems, but Not Toward the Goal Associated with Hypoxia", "paragraphs": ["In the absence of a comprehensive assessment of progress, we asked  study members for their views regarding progress made since 1994.  Nearly all of the Study members we interviewed who provided a response  about progress made toward the goals of the 1994 plan agreed that the  restoration effort has made moderate progress, and they cited various  data to support their views. Specifically, Study members believed that  moderate progress has been made toward achieving goals for five of the  six priority problems: (1) toxic substances, (2) pathogen contamination,  (3) floatable debris, (4) management and conservation of living resources  and their habitats, and (5) land use and development. However, Study  members agreed that they have not made similar progress toward the  goal associated with the priority problem hypoxia because they had not  observed the reductions in hypoxia that they expected; representatives  from the New York State Department of Environmental Conservation said  that the defined hypoxia goals have been met.", "Table 3 shows the number of Study members we interviewed who said  moderate progress has been made toward goals associated with five of  the priority problems in the 1994 plan and the number of Study members  who provided views about progress. Although the Study members we  interviewed cited various data to support their views, without a  comprehensive assessment of that data it is not possible to definitively  determine to what extent their assessment of progress reflects actual  progress made.", "The following summarizes Study members\u2019 views about all six of the  priority problems and data they cited."], "subsections": [{"section_title": "Toxic Substances", "paragraphs": ["The goal in the 1994 plan associated with the priority problem \u201ctoxic  substances\u201d was to protect and restore the Sound from the adverse  effects of toxic substance contamination by reducing toxic inputs,  cleaning up contaminated sites, and effectively managing risk to human  users. Toxic substances include metals, such as mercury and lead, and  chlorinated hydrocarbons, such as the pesticide  dichlorodiphenyltrichloroethane, commonly known as DDT. These  substances were released from industrial and wastewater treatment  plants into the air and into rivers and streams that flow to the Sound. The  Study reported in a 2012 progress report that bans of toxic substances,  stricter regulation of industrial facilities, and a decline in manufacturing  contributed to the reduction of toxic substances.", "All nine Study members who provided a response about progress toward  this goal said that moderate progress has been made. As evidence that  moderate progress has been made, Study members cited data from  EPA\u2019s Toxics Release Inventory. For example, two Study members said  that the EPA data showed that toxic releases into the Long Island Sound  watershed have been reduced.", "In addition, two Study members identified concerns about new toxic  substances identified in the Sound. Specifically, they said that monitoring  and research is needed to understand how toxic substances found in  pharmaceutical and personal products may affect the Sound. One  program that monitors toxic substances in the Sound is the Mussel Watch  program, run by the National Oceanic and Atmospheric Administration\u2019s  National Centers for Coastal Ocean Science. The program examines  tissues of shellfish, such as oysters, to measure toxic substances that  were previously unknown or unidentified that may negatively affect the  Sound or human health. The research includes monitoring of substances  found in everyday products including pharmaceuticals, personal care  products, furniture, and plastics."], "subsections": []}, {"section_title": "Pathogen Contamination", "paragraphs": ["The two goals in the 1994 plan associated with the priority problem  \u201cpathogen contamination\u201d were (1) to increase the amount of area  certified or approved for shellfish harvesting while adequately protecting  the public health and (2) to eliminate public bathing beach closures while  adequately protecting the public health. Pathogens include bacteria or  viruses from animal waste or inadequately treated sewage discharge that  can accumulate in shellfish. Human consumption of contaminated  shellfish can lead to illness and disease. Nine of the 10 Study members  who provided a response about progress toward these goals said that  moderate progress has been made. As evidence that moderate progress  has been made, some Study members cited data on the number of acres  approved for shellfish harvesting and on the number of beach closures  and advisory days. For example, according to one Study member, since  2010 there has been an increase in the number of acres certified for  shellfishing in New York\u2019s portion of Long Island Sound.", "Seven of the nine Study members who said that moderate progress has  been made toward this priority problem also said that improvements in  wastewater treatment plants and regulation of sewage discharge from  boats have reduced the amount of pathogens in the Sound, such as by  reducing the amount of waste discharged into the Sound. Several of the  Study members said that these improvements have included  municipalities investing in wastewater treatment plant upgrades to  address combined sewer overflow (CSO) pollution. For example, New  York City officials said that the city spent $2.5 billion on infrastructure  projects, such as improvements in wastewater treatment plants and CSO  retention tanks. As a result, the officials said that New York City\u2019s  wastewater treatment plants can manage more stormwater, leading to  fewer CSOs and reduced pathogen discharges overall."], "subsections": []}, {"section_title": "Floatable Debris", "paragraphs": ["The two goals in the 1994 plan associated with the priority problem  floatable debris were (1) to reduce the flow of litter from its major sources  and (2) to collect and pick it up once it is in the Sound. Floatable debris in  the Sound mostly consists of plastic bags, plastic bottles, and food  wrappers. This debris is washed into the Sound through stormwater and  CSOs. In the 1994 plan, the Study proposed actions to reduce the flow of  floatable debris into the Sound in two ways, engaging volunteers in  cleanup efforts and collecting it from combined sewers before it enters the  Sound. Nine of the 10 Study members who provided a response about  progress toward these goals said that moderate progress has been  made. Three Study members said that recycling or public outreach  programs may have contributed to progress made in part by increasing  public awareness of the problem. As evidence that moderate progress  has been made, Study members cited data from coastal cleanups and  from New York City\u2019s boom and skim program. For example, one Study  member said that beach cleanup data show a reduction in debris  collected from beach cleanups and another Study member stated that  New York City has installed screens at some CSO outflows to capture  debris in runoff released to the waters of Long Island Sound."], "subsections": []}, {"section_title": "Management and Conservation of Living Resources and Their Habitats", "paragraphs": ["The three goals in the 1994 plan associated with the priority problem  \u201cmanagement and conservation of living resources and their habitats\u201d  were to (1) assure a healthy ecosystem with balanced and diverse  populations of indigenous plants and animals, (2) increase the abundance  and distribution of harvestable species, and (3) assure that edible species  are suitable for unrestricted human consumption. In the 1994 plan, the  Study reported that it would focus on managing water quality, habitats,  and species to address these goals. In particular, the Study reported in  the 1994 plan that the destruction of coastal habitats has had a major  impact on the diversity and abundance of plants and animals in and along  the Sound.", "Eleven of the 12 Study members who provided a response about  progress toward these goals said that moderate progress has been  made. As evidence that moderate progress has been made, Study  members cited data on several indicators, including acres of coast habitat  and acres of eelgrass restored, marine mammal sightings, and the  number of nesting pairs of coastal birds. For example, one Study member  cited an increase in the abundance of eelgrass beds as support for  moderate progress toward that type of habitat. Two other Study members  cited increased sightings of dolphins and whales in the Sound as an  indicator of improved habitat."], "subsections": []}, {"section_title": "Land Use and Development", "paragraphs": ["The five goals in the 1994 plan associated with the priority problem \u201cland  use and development\u201d were to: (1) reduce the impacts from existing  development to improve water quality, (2) minimize the impacts from new  development to prevent further degradation of water quality, (3) expand  information, training, and education for land use decisions to effectively  incorporate water quality and habitat protection, (4) conserve natural resources and open space, and (5) improve public access so that the  public can use and enjoy Long Island Sound. According to EPA,  impervious cover\u2014land cover that does not allow water to infiltrate into  the ground\u2014increases the amount of stormwater that runs off into  streams, rivers, and other water bodies. Stormwater runoff can carry  pollutants such as pathogens, toxic substances, and nutrients to storm  drains, rivers, and streams that flow into the Sound. According to the  1994 plan, one way to reduce impervious cover and control stormwater  runoff is through the use of green infrastructure. Green infrastructure  includes practices and structures to manage stormwater that use or mimic  natural processes to slow stormwater runoff, filter pollutants from the  runoff, and facilitate stormwater storage for future use or to replenish  groundwater. An example of a green infrastructure project implemented  around the Sound is a bioswale, a vegetated area adjacent to a road,  designed to collect and filter stormwater, cleaning the water and  improving water quality by allowing it to seep into the soil. Figure 3 shows  a bioswale developed for use in New Haven, Connecticut, as part of a  Long Island Sound restoration project.", "Eleven of the 12 Study members who provided a response about  progress toward these goals said that moderate progress has been  made. As evidence, Study members cited data on changes in impervious  cover. Study members also cited data on open space acquisitions as  showing progress toward the goals related to this problem. According to  Study members, one way that the Study protected open space was by  identifying locations around the Sound that should be acquired and  protected from development. Specifically, in 2006, the Study designated  33 locations, called Stewardship Areas, to protect habitat and wildlife from  encroaching development. Stewardship Areas are locations within the  Long Island Sound region that have significant ecological, educational,  open space, public access, or recreational value and are protected from  development. Figure 4 shows the locations of the 33 Stewardship Areas  in the Long Island Sound region.", "The goal in the 1994 plan associated with the priority problem \u201chypoxia\u201d  was to increase dissolved oxygen levels in the Sound to eliminate  adverse impacts of hypoxia resulting from human activities. All 11 of the  Study members who provided a response about progress toward this goal  agreed that nitrogen has been reduced in the Sound since the 1994 plan,  while 4 said that they have not observed the expected reduction in  hypoxia. According to the 1994 plan, Study members based their  expectation on a water quality model they used at the time. As evidence  for nitrogen reduction in the Sound, Study members said that both  Connecticut and New York met their 15-year TMDL wasteload allocation  target to reduce nitrogen discharged into the Sound by 58.5 percent. To  achieve their nitrogen targets, the Study reported that the states  upgraded wastewater treatment plants. For example, communities in both states upgraded their plants with biological nutrient removal, a  process in which bacteria break down and remove the reactive nitrogen  found in human waste. According to EPA officials, recovery from hypoxia  in coastal waters will not be rapid or predictable and evidence shows that  dissolved oxygen levels in the Sound are recovering because of nitrogen  reductions.", "According to Study members, hypoxia is a complex phenomenon affected  by a number of factors that help to explain characteristics of hypoxia in  the Sound. For example, three Study members said that an increase in  water temperature can exacerbate hypoxia; warmer water holds less  oxygen than cold water. As a result, in summer months the combination  of temperature and salinity contributes to the isolation of the bottom layer  of water from the usually well-oxygenated surface layer. Two Study  members said that another factor that affects hypoxia is precipitation. For  example, heavy rainfall could increase the amount of stormwater runoff  that carries nutrients, such as nitrogen, into the Sound, which could lead  to an increase in algal blooms and hypoxia. According to the 2012 Sound  Health report, in 2012, Hurricane Sandy\u2019s storm surge overwhelmed  many wastewater treatment plants, and stormwater runoff entered the  Sound. In addition, four Study members said that there may be a lag  between a reduction in nitrogen and a reduction in levels of hypoxia.", "Several Study members said that the water quality model they used in  1994 to predict the relationship between hypoxia and nitrogen may have  incorrectly predicted the effect of reducing nitrogen on hypoxia or could  be improved to better show the relationship between the two. Beginning  in 2005, the Study conducted an evaluation of its water quality model that  identified fundamental weaknesses with how the model captured the  dynamics of hypoxia and mixing of water layers in the Sound.  Subsequently, the Study has funded the development of a new model  that it expects will more accurately reflect the relationship of the various  sources of nitrogen and hypoxia. A Study member said that it was not  possible to predict when the new model would be ready because of the  nature of the work. However, the Study member added that it may be 10  to 20 years before the data show if and how nitrogen reduction efforts  based on the new model reduce hypoxia."], "subsections": []}]}]}, {"section_title": "The 2015 Plan Has Four Goals to Improve Water Quality and Ecosystem Functions, but Study Members Identified Various Factors that May Hinder Progress The 2015 Plan Has Four Goals and Associated Themes to Improve Water Quality and Other Ecosystem Functions", "paragraphs": ["The 2015 plan has four goals to improve water quality and restore and  protect ecosystem functions, among others. Each goal is associated with  one of four broad themes: clean water and healthy watersheds, thriving  habitats and wildlife, sustainable and resilient communities, and sound  science and inclusive management. To achieve the goals, the Study  developed specific outcomes, objectives, strategies, and action plans but  stated that factors such as insufficient funding and climate change may  hinder restoration efforts. In addition, most Study members stated that  even if the goals of the 2015 plan are met, new and emerging challenges  will require restoration efforts to continue, at a minimum, to monitor the  Sound.", "The 2015 plan has four goals, associated with four themes to improve  water quality and other ecosystem functions in the Sound while creating  sustainable communities and using sound science as a basis for  restoration. According to the 2015 plan, the goals and associated themes  were developed by building upon the progress already made toward the  1994 plan and years of research and monitoring of the Sound. As  previously mentioned, Study members said that the book they published  with many scientists helped to develop the 2015 plan. The book Long  Island Sound: Prospects for the Urban Sea, synthesized the advances in  science made over the past decades in understanding the Sound. Study  members also said that an update of the plan was needed to incorporate  an improved understanding of the Sound and to address new issues that  might affect restoration of the Sound. The four goals and their associated  themes are as follows.", "Clean water and healthy watersheds. The goal associated with this  theme addresses improving water quality through reducing  contaminant and nutrient loads from the land and waters impacting  the Sound. According to the 2015 plan, the condition of the Sound  depends on the quality of the water draining from the land around it  and, although progress has been made, the issues affecting water  quality in the 1994 plan remain. These issues include hypoxia,  pathogens, and development.", "Eelgrass   Eelgrass (Zostera marina) is a rooted  underwater plant with ribbon-like strands that  form beds and meadows in estuaries. These  beds are a haven for crabs, scallops,  numerous species of fish, and other wildlife  because the beds provide for them a habitat,  protection from predators, nursery grounds,  food, and oxygen. Additionally, eelgrass  improves water clarity by filtering pollutants  from runoff and by absorbing nutrients such  as nitrogen and phosphorus. It also protects  shorelines from erosion by absorbing wave  energy. Eelgrass health can be negatively  affected by excessive nutrients, limited  sunlight exposure, and high water  temperatures. For these reasons, the Long  Island Sound Study uses eelgrass growth as  an indicator for good water quality.", "Thriving habitats and abundant wildlife. The goal associated with  this theme addresses restoring and protecting the Sound\u2019s ecological  balance, including fish and shellfish populations and ecologically  significant shorelines and habitats along the Sound, to benefit both  people and the environment. According to the 2015 plan, the 1994  plan identified habitats and living resources to manage and protect  and the Study identified 12 types of coastal habitats for restoration,  including beaches and dunes, cliffs and bluffs, estuarine embayments,  coastal and island forests, freshwater wetlands, coastal grasslands,  intertidal flats, rocky intertidal zones, riverine migratory corridors,  submerged aquatic vegetation such as eelgrass, shellfish reefs, and  tidal wetlands. While progress has been made through acquiring  thousands of acres of land, according to the 2015 plan, habitat  connectivity and riverine migratory corridor reconnection can be  improved.", "Sustainable and resilient communities. The goal associated with  this theme addresses supporting communities to use, appreciate, and  help protect the Sound. According to the 2015 plan, local government  leadership, private sector engagement, community organizations, and  individual stewardship will be needed to restore the Sound. The  theme focuses efforts on communities, which was not a focus of the  1994 plan.", "Sound science and inclusive management. The goal associated  with this theme seeks to ensure the Study is using sound science and  cross-jurisdictional governance that is inclusive, adaptive, innovative,  and accountable throughout its restoration efforts in the Sound.  According to the 2015 plan, the Sound and its watershed covers more  than 16,000 square miles in six states and includes hundreds of local  watersheds. Management of the Sound involves collaboration and  governance among numerous partners and stakeholders who need  thorough understanding of the issues. According to the plan, such  understanding comes from research, monitoring, assessment,  mapping, and modeling programs.", "To achieve the goals associated with the plan\u2019s four themes, the Study  also developed outcomes, objectives, strategies, and implementation  actions and published these in the 2015 plan and supplemental  documents. The 2015 plan defines outcomes as \u201cbroad results needed to  achieve the goals.\u201d For example, as shown in table 4, an outcome  associated with the \u201cclean water and healthy watersheds\u201d theme is \u201cto  improve research, monitoring, and modeling for water quality.\u201d Each  outcome has multiple associated objectives, which are the  accomplishments needed to achieve each outcome, and each objective  has multiple strategies. To carry out each strategy, the Study has  developed 139 implementation actions, which are specific actions such as  estimating future phosphorus loads or promoting eelgrass management.  The Study also developed four supplemental documents, one for each  theme, that describe the 139 implementation actions and steps to be  taken in 2015 through 2019 and the expected outcomes."], "subsections": [{"section_title": "Study Members Cited Numerous Factors, Including Insufficient Funding, Climate Change, and Development and Growth That May Hinder Progress", "paragraphs": ["Study members we interviewed said numerous factors may hinder Long  Island Sound restoration progress, including insufficient funding, climate  change, insufficient scientific understanding or data-related issues,  development and population growth, and insufficient public appreciation  of the Sound. (See app. II for a list of all the factors Study members  identified that may hinder progress.)", "Of the 17 Study members we interviewed about factors that may hinder  progress, 14 said that insufficient funding can, for example, hinder their  ability to manage restoration efforts, mitigate the effects of development  and population growth, implement new projects, or effectively conduct  existing projects. One Study member said that development and  population growth can be overcome with mitigation activities, but that  these require funding. Another Study member said that insufficient  funding leads to vacant staff positions and that the Study member\u2019s  organization is strained with small staff numbers. This limits the Study\u2019s  ability to coordinate among the many agencies and programs working on  restoration. Another Study member identified the effects of insufficient  funding on a restoration project. Specifically, a town received a Study  grant for a green infrastructure project near the Sound, but the town  modified the project because the grant was smaller than what the project  needed. The project plan included constructing the building with  permeable parking surfaces and green features, such as rain gardens, to  help improve water quality. According to a town official, the town wanted  to do more green features but because it received a smaller grant, the  number of permeable surfaces and green features the town could build  were limited.", "Nine of the 17 Study members we interviewed said that climate change  can hinder restoration progress. Study members discussed different types  of effects that may be possible, such as affecting water temperature,  weather, and sea level. For example, two Study members said that  warmer waters caused by climate change could increase the Sound\u2019s  susceptibility to hypoxia by increasing the risk of potential harmful algal  blooms and the length of time low-dissolved oxygen remained at hypoxic  levels. Another Study member stated that warmer waters can cause  outbreaks of the naturally occurring bacterium Vibrio parahaemolyticus,  which accumulates in shellfish and affects the shellfishing industry. In  addition, two Study members said that changes in weather caused by  climate change could cause an increase in stormwater and therefore the  amount of pathogens washed into the Sound; another Study member said  that increased storm activity could destroy marshes. According to the  Study, salt marsh vegetation in tidal wetlands helps protect against  erosion and typically manages to accumulate enough sediment and  organic matter to keep up with naturally-occurring, gradual sea level rise.  However, the Study reported that tidal wetlands in the Sound may not be  able to keep up with the rise in sea level projected to result from climate  change. One Study member said that marshes are already being  affected by increased coastal flooding that may be caused by sea level  rise.", "As we reported in November 2013, changes in the climate\u2014including  warmer temperatures, changes in precipitation patterns, rising sea levels,  and more frequent and intense storms\u2014affect water resources in a  number of ways, such as erosion and inundation in coastal areas. In  particular, we reported that a 2011 federal agency review of the potential  impacts of climate change on water resources identified four interrelated  areas of concern for water resource managers. One of the four is  protecting coastal and ocean resources as rising sea levels and changes  in storm frequency, intensity, and duration impact coastal infrastructure.  Also, in September 2014, we reported that ocean acidification\u2014the  increased absorption of carbon dioxide emitted by humans into the  oceans\u2014is resulting in chemical changes in the oceans that may pose  risks for some marine species and ecosystems, as well as for the human  communities that rely upon them for food and commerce.", "Tidal wetlands and salt marshes   Wetlands are areas that are inundated or  saturated by surface or groundwater and that  have a prevalence of vegetation adapted for  life in saturated soil conditions. Tidal wetlands  are specifically linked to estuaries\u2014locations  where sea water mixes with fresh water to  form an environment of varying salinity. Tidal  wetlands are among the most productive  ecosystems in the world, providing food,  shelter, and breeding or nursery grounds for  many species of wildlife. Salt marshes are a  type of tidal wetlands that have been flooded  and drained by salt water brought in by the  tides. Salt marshes help protect the land from  flooding and erosion in stormy weather, and  filter pollutants contained in storm water  runoff. Tidal wetlands are threatened by  changes in the climate causing sea levels to  rise more rapidly, which can cause tidal  wetlands to convert to open water.", "In addition, one expert we interviewed said that gains in restoring  marshes and wetlands already made by the Study may be lost due to  rising sea levels. To address this problem, another expert we interviewed  said that techniques such as spraying material dredged from the Sound,  such as sand and silt, across these areas for the purpose of raising  wetlands or marshes are being tested to keep up with sea level rise. One  expert also said that increased water temperatures around the Sound  may make the water uninhabitable for shellfish. EPA officials said that  while increased water temperatures will affect the relative abundance and  distribution of shellfish in the Sound, it cannot be concluded that the  Sound will become uninhabitable for shellfish because of increased water  temperatures. In addition, as we reported in October 2016, unusually high  water temperatures may enhance the growth of harmful algal blooms that  produce toxins causing neurological and other damage in fish  populations. Warming waters will also increase the Sound\u2019s  susceptibility to hypoxia because the solubility of oxygen decreases as  water temperature increases.", "Five of the 17 Study members we interviewed said that insufficient  scientific understanding and data related issues would hinder progress  toward restoration of the Sound. For example, one Study member  highlighted the need to better understand the relationship between  nutrients and hypoxia. That Study member also said that incomplete data  on nutrients, particularly from nonpoint sources, may hinder progress.  Another Study member said that obtaining data is difficult, in particular for  areas such as embayments and tributaries that are still affected with  nonpoint source pollution.", "Three of the 17 study members we interviewed said that development  and population growth will also hinder the progress of restoration. In  addition, 7 of the 17 Study members said that the Sound cannot be  restored to past conditions, and a key reason why is that development  and increased human population have led to changes in the Sound that  hinder full restoration. For example, one Study member said that  increased population and development can negatively affect water quality  because it resulted in a greater amount of impervious cover such as  highways and roads, which in turn increases the nutrient and sediment  pollution in runoff.", "Microbeads   Microbeads are pieces of manufactured  polyethylene plastic 5 millimeters or less in  size that are added as exfoliants to health  and beauty products, such as some  cleansers and toothpastes. These tiny  particles may pass through some water  filtration systems and end up in the oceans  and the Great Lakes, posing a potential threat  to aquatic life. For example, microbeads can  look like food to fish and other marine  organisms. Once ingested, microbeads can  obstruct an animal\u2019s digestive system. In  addition, microbeads can absorb  contaminants that can be hazardous to  animals that eat the microbeads, and, in turn,  can harm the animals and people that  consume them.", "Three of the 17 Study members we interviewed said that insufficient  public appreciation of the Sound would hinder progress toward  restoration. In this context, two Study members highlighted that much of  the land along the Sound is privately owned, which makes it difficult for  some to travel to the Sound or to appreciate it.", "Nearly all of the Study members who we interviewed said that even if the  goals associated with the four themes of the 2015 plan are achieved,  restoration efforts will need to continue into the future because the Sound  will continue to face new challenges and threats and that the Study will  need to continue monitoring the Sound to understand them. For example,  microbeads are an emerging issue that was not addressed in the 2015  plan. In 2015, after the Study issued the 2015 plan, a Southern  Connecticut State University research team reported that it had found  microbeads in New Haven Harbor, Connecticut. Microbeads are small  pieces of plastic found in common household products that can make  their way into waterbodies and threaten aquatic life. In December 2015,  the federal government enacted the Microbead-Free Water Act of 2015,  which banned the manufacturing, distribution, and offer for sale into  interstate commerce of rinse-off cosmetics that contain intentionally- added plastic microbeads. In addition, in June 2015, Connecticut had  enacted legislation that phased in bans on the manufacturing, import,  sale, or offer for sale of personal care products and over-the-counter  drugs that contain microbeads in that state. New York had proposed  legislation to address the issue of microbeads in early 2015 but did not  enact it."], "subsections": []}]}, {"section_title": "Study Members Have Identified Long-Term Targets and Indicators to Measure Progress, but Have Not Yet Fully Incorporated Leading Practices for Performance Reporting", "paragraphs": ["Study members said that they plan to use 20 long-term targets with  associated indicators to measure progress toward the goals associated  with the four themes of the 2015 plan. While 18 of the long-term targets  currently have numerical goals, they do not yet have associated  intermediate targets that can be used to monitor progress; but EPA  officials said that the Study is working to establish them. In March 2018,  the Study issued web pages for each of the 20 targets to report on such  progress, but, as of June 2018, these pages do not yet fully incorporate  leading practices of performance reporting."], "subsections": [{"section_title": "Twenty Long-Term Targets and Associated Indicators Will Be Used to Measure Progress and Intermediate Targets Are Being Developed", "paragraphs": ["Study members said that they have identified and plan to use 20 long- term targets with associated indicators to measure progress toward the  goals of the 2015 plan (see app. III for a complete list of the 20 long-term  targets and their associated indicators). The 20 targets are grouped by  the four themes in the 2015 plan. All of the targets include indicators that  describe how the targets will be achieved, and all but two of those  indicators currently have numerical goals, with a value to be achieved by  2035. For example, the indicator for the target \u201capproved shellfish areas\u201d  in the \u201cclean waters and healthy watersheds\u201d theme has a numerical goal  to upgrade the percentage of shellfish acreage restricted or closed for  shellfishing in 2014 in Connecticut and New York by 5 percent by 2035.  According to the 2015 plan, to achieve a 5 percent increase, the states  would need to upgrade 17,400 of the 349,000 acres of closed or  conditionally closed shellfish areas.", "Of the 20 targets in the 2015 plan, the 2 that do not yet have indicators  with numerical goals are \u201chabitat connectivity\u201d and \u201cpublic engagement  and knowledge.\u201d Two of the Study members responsible for updating the  indicators said that the Study is developing numerical goals for each  target. According to these Study members, the main reason that these  targets do not yet have numerical goals is that presently there are  insufficient data that can be analyzed and interpreted to establish them.  Study members are in the process of collecting data that will be used to  finalize a numerical goal. These Study members said that it may take a  year or more to collect the necessary data.", "Generally, the 19 experts we interviewed agreed that the indicators used  by the Study were valid, accurate, and reliable ways to measure progress  for the 20 long-term targets, but some experts also suggested  improvements. For 12 of the 20 indicators, all of the experts we  interviewed agreed that they were valid, accurate, and reliable. For  example, one expert pointed out that the indicator for the riparian buffer  extent target is the only practical way to measure progress. Another  expert said that the indicator for the coastal habitat extent target is a good  choice because it can show progress that the public can easily  understand. A few experts suggested improvements to make some of  the indicators more useful for measuring progress. For example, one  expert said that the indicator for the target \u201cextent of hypoxia\u201d would be  better if the focus were on the Western Sound, where hypoxia is a greater  problem. The expert also questioned why the Study is concerned with  hypoxia across the entire Sound when some areas are only slightly  hypoxic and not big enough to have a great impact on the overall level of  hypoxia in the Sound. EPA officials responded that the target \u201cextent of  hypoxia\u201d is focused on the Western Sound. They added that it must be  noted that target applies everywhere in the Study because changes in  water quality could occur anywhere in the Sound.", "For the other eight indicators, not all experts we interviewed agreed on  these indicators. For example, for the tidal wetlands indicator\u2014the  acreage of tidal wetlands restored to help restore tidal flow\u2014eight of nine  experts we interviewed said that the indicator was valid, accurate, and  reliable, but one expert said that it was too simplistic. This expert said that  a better indicator would focus on the amount and health of marsh grasses  that are planted to restore the tidal wetlands. This is because marsh  grass health is affected by nitrogen levels and sea level rise, which also  impact tidal wetlands. For the approved shellfish area indicator\u2014the  acreage of approved shellfishing areas\u2014six of eight experts we  interviewed said that the indicator was valid, accurate, and reliable, but  two experts disagreed. One of these experts said that the target is part of  the theme to improve water quality and that shellfishing areas can be  approved for administrative reasons that are not related to water quality  improvement. The other expert added that certain shellfish areas in New  York are closed because budget constraints limit the number of reviews  that can be conducted to reopen shellfishing areas.", "The use of numerical goals to monitor progress toward the 20 long-term  targets is consistent with leading practices for performance management  that we have identified in our previous work. We have found that a key  attribute of successful performance measures is that they have  quantifiable numerical goals or other measurable values that permit  expected performance to be compared with actual results. Additionally,  we have reported that intermediate goals and measures can be used to  show progress or contribution to intended results.", "During the course of our work, we shared with Study members our  concern that only 2 of the 20 long-term targets have intermediate  targets. In response, in web pages for the 20 targets available in June  2018, the Study had established intermediate targets for an additional 10  of the 18 long-term targets that did not have intermediate targets. For  these 10 targets, the Study identified how much progress would need to  be made each year to achieve each target\u2019s numerical goal by 2035.  For example, for the approved shellfish areas target, the intermediate  target is \u201cto approve more than 850 acres of currently closed shellfish  areas per year to reach the goal of approving 17,400 acres by 2035.\u201d For  the remaining 13 targets without intermediate targets, EPA officials said  that the Study is working to establish intermediate targets using the  indicator data collected by federal and state agencies. By incorporating  intermediate targets into its web pages to report on progress, the Study  can better ensure its members, the public, and Congress have important  information on whether the Study is making progress toward achieving its  long-term targets or whether additional actions need to be taken."], "subsections": []}, {"section_title": "Progress Reports Do Not Yet Fully Incorporate Leading Practices", "paragraphs": ["As previously mentioned, the Long Island Sound Improvement Act of  1990 required the Study to report every 2 years on progress made in  implementing the comprehensive conservation and management plan.  The Study reported through 2013, using the Protection and Progress and  Sound Health reports but did not report again until it issued web pages for  the 20 long-term targets in March 2018. According to an EPA official, the  Study did not report on the evaluation of progress during that 5-year  period because EPA was working with Study members to adapt the  Study\u2019s reports to the 2015 plan indicators and to update the format of its  web pages to report on progress. An EPA official said that the Study  plans to use the web pages the agency issued in March 2018 to report  progress on each of the 20 long-term targets.", "Our previous work on performance management states that reporting on  performance should involve leading practices such as (1) evaluating  performance compared to a plan, (2) reviewing performance for a  preceding period of time (for example, 5 years), and (3) evaluating  actions for unmet goals. We have found the following benefits of these  leading practices:", "Evaluating performance compared to a plan allows agencies to  describe the performance indicators established in the plan and the  performance achieved to meet them. In addition, evaluating  performance could help agencies understand the relationship  between their activities and the results they hope to achieve.", "Reviewing performance for a preceding period of time, including  baseline and trend data, can help agencies ensure that individuals  using the report review the information in context and identify whether  performance targets are realistic given the past performance. In  addition, the data can assist individuals who use the report to draw  more informed conclusions than they would by comparing only a  single year\u2019s performance against a target.", "Evaluating actions for unmet goals explains why the goal was not  met, provides plans and schedules to achieve the goal, and, if the  goal is impractical, why it is impractical. Explaining the reasons for  any unmet goals allows agencies to recommend actions that can be  taken to achieve the goals, or needed changes to the goals.", "In our review of the Study\u2019s web pages in June 2018, we found that the  Study has not yet fully incorporated the three leading practices for  reporting on performance. The Study used the three practices to varying  extents, as described below.", "Evaluating performance compared to the 2015 plan for 19  targets. We believe that the Study fully incorporated this practice by  creating a status bar on the web pages for 19 of the 20 ecosystem  targets to indicate if progress toward a target\u2019s numerical goal was  behind schedule, on track, ahead of schedule, or if the numerical goal  was met. For example, the Study reported that progress for the  target \u201capproved shellfish areas\u201d was behind schedule.", "Reviewing performance for a preceding period of time for 11  targets. We believe that the Study partially incorporated this practice  by reporting progress data for 5 or more preceding years for 11  targets but not the remaining 9. For example, on the web page for  the tidal wetlands extent target, the Study reported progress data for  each year from 1998 to 2017.", "Evaluating actions for unmet goals for four targets. We believe  that the Study partially incorporated this practice by explaining why  the goal was not met for 4 targets but did not explain why the goal  was not met for 15 targets. For example, for the target \u201cpublic  access to beaches and waterways,\u201d the Study reported that  increasing the number of public access points may be difficult  because there are many privately owned properties along the Long  Island Sound coast. However, the Study provided plans and  schedules to achieve unmet goals for only two targets. For example,  the Study reported that to achieve the numerical goal for protected  open space, an average of 200 acres of Connecticut land and 150 of  New York land needs to be protected each year.", "An EPA official said that the web pages may undergo further  modifications and that the Study plans to update information about the  targets annually or according to how frequently the underlying data are  collected. By working with the Study as it finalizes its reporting format to  incorporate the leading practices of performance reporting, EPA could  help ensure that the Study provides the public and Congress with the  information they need to determine whether the Study is making progress  toward achieving the long-term targets associated with the goals of the  2015 plan, or whether the Study should take additional action to meet the  targets."], "subsections": []}]}, {"section_title": "Study Members Expended at Least $466 Million on Restoration Activities, but the Study\u2019s Estimate of At Least $18.9 Billion for Future Restoration Is Not Comprehensive", "paragraphs": ["Seven Study members who provided expenditure data to us expended at  least $466 million on restoration activities in the Sound from fiscal years  2012 through 2016, although the total expenditures by all Study members  over this period are unknown. In the 2015 plan, the Study estimated that  future activities will cost at least $18.9 billion over 20 years, but these  estimates may not reflect all future restoration costs because they  address only some of the plan\u2019s long-term targets."], "subsections": [{"section_title": "Four Study Members Expended At Least $466 Million to Restore Long Island Sound, and Three Others Funded Activities that Contributed to Restoration", "paragraphs": ["Of the seven Study members who provided expenditure data to us, four  Study members said that they provide funding for restoration activities  specifically for the Sound. Officials from EPA, the states of Connecticut  and New York, and the U.S. Fish and Wildlife Service said that they  expended at least $466 million on activities to restore Long Island Sound  from fiscal years 2012 through 2016. Table 5 shows their reported  expenditures on restoration activities in Long Island Sound from fiscal  years 2012 through 2016.", "The states of Connecticut and New York expended the majority of the  $466 million to restore Long Island Sound from fiscal years 2012 through  2016. According to a Connecticut Department of Energy and  Environmental Protection official, Connecticut expended about $106  million on restoration activities from fiscal years 2012 through 2016.  These activities included more than $10 million for habitat restoration,  more than $14 million for land acquisition, and more than $81 million for  nitrogen reduction. According to the official, Connecticut expended more  than $21 million in fiscal year 2012 to upgrade equipment at three  wastewater treatment plants to reduce nitrogen discharged from the  plants into the Sound. New York State Department of Environmental  Conservation officials said that the agency could not provide us with the  total amount the agency expended on Sound restoration activities in fiscal  years 2012 through 2016 because the agency does not track  expenditures specific to Long Island Sound restoration. However, they  provided examples of activities for which they expended about $337  million. The three activities for which officials provided examples of  expenditures were to upgrade wastewater treatment plants.", "From fiscal years 2012 through 2016, EPA reported expending about $22  million to operate the Long Island Sound Study, including about $19  million from the agency\u2019s Long Island Sound program and about $3  million from the National Estuary Program. On average, EPA reported  expending about $4.5 million per year on Study operations, such as  public outreach and education, monitoring, modeling, research, and  activities to achieve the 1994 and 2015 plans. Of the $4.5 million per  year, the Study provided an average of $1.3 million per year to the Long  Island Sound Futures Fund. The Long Island Sound Futures Fund is a  grant program that, according to the Study, funds activities in local  communities that aim to protect and restore the Sound. For example,  the Long Island Sound Futures Fund awarded $150,000 to the New York  City Department of Parks and Recreation in 2016 to construct a living  shoreline in Douglaston, New York. The purpose of this project was to  stop the continued loss of urban salt marsh by reestablishing up to one  acre of salt marsh and enhancing nearby forest, upland, and coastal  grassland habitat.", "A U.S. Fish and Wildlife Service official said that the agency expended  about $1 million in 39 activities from fiscal years 2012 through 2016.  According to Long Island Sound Futures Fund documents, funds provided  to the Long Island Sound Futures Fund are used to pay for restoration  projects. For example, the U.S. Fish and Wildlife Service provided  $55,392 in fiscal year 2016 to a project to restore a 12-acre coastal forest  in the Village of Mamaroneck, New York. The focus of the project is to  reverse forest fragmentation and degradation by removing non-native  plants and planting native trees, shrubs, and herbs.", "In addition to the funds expended by the four Study members above,  officials from three other Study members\u2014the Natural Resources  Conservation Service, the U.S. Geological Survey, and the U.S. Army  Corps of Engineers\u2014also said that they expended funds for restoration  activities in the region around the Sound but do not isolate expenditures  made specifically for the Sound. For example, officials from these Study  members said that the agencies expended funds for activities in the  region that contributed to restoration but were not intended solely to  restore the Sound. They each provided examples of restoration  expenditures or costs for fiscal years 2012 through 2016: the National  Resource Conservation Service expended $54 million through programs  such as the Environmental Quality Incentives Program; the U.S.  Geological Survey expended about $3.8 million on data monitoring and  other activities; and the U.S. Army Corps of Engineers expended $27  million for 13 projects."], "subsections": []}, {"section_title": "The 2015 Plan Estimated that Future Activities May Cost At Least $18.9 Billion, but the Estimates Address Only Some of the Plan\u2019s Long-Term Targets", "paragraphs": ["Study members estimated in the 2015 plan that future restoration  activities would cost at least $18.9 billion over 20 years. Nearly all the  amount was for activities addressing the goal to achieve clean waters and  healthy watersheds. As shown in table 6, Study members estimated that  activities under that goal could cost at least $18.1 billion from 2015  through 2035. The cost estimate included $5.5 billion specifically for work  on wastewater treatment plants in New York, Connecticut, and the upper  watershed states, which may include upgrading the plants with available  technologies for nutrient removal. Study members also estimated that  activities to reduce nitrogen by addressing CSOs and urban stormwater in  Connecticut may cost at least $4.4 billion and $700 million. Finally, the  cost estimate included $12.4 billion to complete ongoing work in New  York and Connecticut to reduce overflows from combined sewer systems  as well as sewer systems that are not combined with stormwater  systems.", "The remainder of the $18.9 billion was for activities related to goals to  achieve thriving habitats and other restoration themes. As shown in table  7, Study members estimated that these other activities could cost $778  million from 2015 through 2035. According to the 2015 plan, activities to  address the goals to achieve thriving habitats and abundant wildlife, such  as by protecting open space, may cost $650 million\u2014$500 million in New  York and $150 million in Connecticut. These activities could include  acquiring properties that the Study has identified as high priority for  conservation to minimize coastal development in the future. Study  members also estimated in the 2015 plan that Connecticut and New York  would spend about $4 million each on education activities. These  activities could include volunteer and outreach efforts for the general  public at the 33 Long Island Sound Stewardship Areas, such as how  human disturbance can affect wildlife.", "Economic guidance generally states that investment decisions should be  informed by a consideration of both benefits and costs of relevant  alternatives. For example, the Office of Management and Budget (OMB)  has issued guidance on estimating costs and benefits to help federal  agencies efficiently allocate resources through well-informed decision  making about activities. This guidance includes OMB Circular A-94,  which we have previously identified as providing leading practices for  economic analysis. OMB Circular A-94 directs agencies to follow certain  economic guidelines for estimating costs and conducting cost- effectiveness analyses of federal programs or policies to promote efficient  resource allocation through well-informed decision making in certain  circumstances. The guidance applies to federal agencies and programs,  but we have previously found that it provides leading practices for  economic analysis of investment decisions. Under OMB Circular A-94, a  cost estimate is to include a comprehensive assessment of the costs.", "By developing its $18.9 billion estimate, the Long Island Sound Study has  taken steps to assess the potential costs of future restoration activities.  However, the 2015 plan includes 20-year cost estimates for activities  related to 10 of the 20 long-term targets that the Study plans to achieve.  These cost estimates focus primarily on activities to achieve clean waters  and healthy watersheds and thriving habitats and abundant wildlife.  These include restoration activities that address wastewater treatment  plants to help achieve the long-term target nitrogen loading, and  restoration activities to conserve open space to achieve the long-term  target protected open spaces. However, the total does not include the  cost of activities to achieve other long-term targets such as river miles  restored for fish passage, tidal wetlands extent, marine debris, and public  access to beaches and waterways.", "A Study member said that the Study completed 20-year estimates for  proposed restoration activities where feasible and included them in the  2015 plan. The Study member also said that EPA worked with Study  members to develop cost estimates using costs for past restoration  activities. However, the Study member said that the exact course of  action, and therefore costs, for many of the long-term targets were not  defined and were still uncertain. For example, the Study only recently  invested funds to evaluate nitrogen reduction targets to attain water  quality standards, which can be used to determine the scope of work  needed and costs to inform a cost estimate associated with achieving the  nitrogen loading target. OMB Circular A-94 recognizes that estimates of  costs are typically uncertain because of imprecision in underlying data  and assumptions and states that this uncertainty can and should be part  of the analysis and estimate. According to the circular, because such  uncertainty is basic to many analyses, its effects should be analyzed and  reported. One way to handle such uncertainty in a cost estimate is to  perform a sensitivity analysis, which will result in a range of possible cost  estimates. By working with Study members to develop cost estimates that  include analyses of uncertainties for each of the targets in the plan, EPA  and the Study could better estimate the comprehensive costs for Long  Island Sound restoration and could better allocate resources and make  decisions about their financial investments in the Sound.", "In addition to the 20-year cost estimates, the 2015 plan contained four  supplemental documents that described the 139 implementation actions  for carrying out the strategies for the plan\u2019s four themes in greater detail  as well as estimated costs for carrying out those implementation actions  for fiscal years 2015 through 2019. EPA\u2019s funding guidance for  comprehensive conservation and management plans states that agencies  should estimate the range of potential costs of all actions to implement  the plan. For the four 5-year supplemental documents that it developed,  EPA worked with the Study to create four cost ranges: (1) $0 to $25,000;  (2) $25,000 to $150,000; (3) $150,000 to $1 million; and (4) greater than  $1 million. The Study then assigned these ranges to the implementation  actions in the four 5-year implementation plans for each theme. However,  the Study only assigned 75 percent of the 139 implementation actions in  the 2015 plan to these four ranges. Instead of a cost range, the Study  identified the funding needs for more than a third of the remaining 25  percent of the actions as staff time or not applicable. A Study member  said that the Study did not assign a range of costs for staff time and  identified some action costs as not applicable because, for example, the  work required would be intermittent or the associated costs were  accounted for in other implementation actions. According to Circular A-94,  uncertainty, such as staff time, should be included in a cost estimate. In  addition, implementation actions for which costs are accounted for  elsewhere could be assigned to the Study\u2019s first cost range, $0 to  $25,000. According to the Study member, estimates of potential cost  ranges for the implementation actions could be included in future  supplements to the 2015 plan. By working with the Study to estimate the  range of potential costs for all the implementation actions and including  the estimates in future supplements to the 2015 plan, EPA would have  better   assurance that Study members have complete information to  guide resource allocation decisions about activities to achieve the goals  of the 2015 plan."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["By identifying six priority problems and associated goals in the 1994 plan  and taking actions to achieve these goals, the Study, with EPA as  director, has provided a long-standing focus on improving the water  quality and other ecosystem functions in the Sound and its surrounding  watershed. In its updated 2015 plan, the Study identifies further actions to  be taken and has identified numerical goals for almost all of the 20 long- term targets in the 2015 plan, which unlike the 1994 plan, will enable the  Study to do a comprehensive assessment of progress toward the  numerical goals of the 2015 plan. As of June 2018, the Study has not yet  fully incorporated leading practices for performance reporting, such as  evaluating actions for unmet goals, in the web pages the Study plans to  use to report progress for the 20 long-term targets. By working with the  Study as it finalizes its reporting format, EPA can ensure that the leading  practices of performance reporting are fully incorporated, which in turn will  help ensure that the Study is providing information to the public and  Congress about its restoration progress.", "In addition, the 2015 plan includes 20-year cost estimates for some, but  not all the activities related to the 20 long-term targets that the Study  plans to achieve. By working with Study members to develop cost  estimates that include analyses of uncertainties for each of the targets in  the plan, EPA and the Study could better estimate the comprehensive  costs for Long Island Sound restoration and ensure better resource  allocation decisions for the Sound. In addition, the Study has not  estimated the range of potential costs of all 139 implementation actions in  the 2015 plan. By working with the Study to estimate the range of  potential costs for all the implementation actions and including the  estimates in future supplements to the 2015 plan, EPA would have  reasonable assurance that Study members have considered complete  cost information when making resource allocation decisions about  activities to achieve the goals of the 2015 plan."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the  Environmental Protection Agency in its capacity as the Director of the  Long Island Sound Study, in coordination with Study members:", "The Director, working with the Study, should ensure that as the Study  finalizes its reporting format, it fully incorporates leading practices of  performance reporting. (Recommendation 1)", "The Director, working with the Study, should develop cost estimates  that include analyses of uncertainties for each of the targets in the  2015 plan. (Recommendation 2)", "The Director, working with the Study, should estimate the range of  potential costs for all implementation actions and include the  estimates in future supplements to the 2015 plan. (Recommendation  3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to EPA and the departments of  Agriculture, Commerce, Defense, and the Interior for their review and  comment. We also provided a draft of the report to the Connecticut  Department of Energy and Environmental Protection and the New York  State Department of Environmental Conservation for their review and  comment. EPA provided written comments, which are reproduced in  appendix V, and stated that it agreed with the conclusions and  recommendations in our report. EPA also provided technical comments,  which we incorporated as appropriate. The departments of Agriculture,  Defense, and the Interior, and the Connecticut Department of Energy and  Environmental Protection responded by email that they did not have  comments on the draft report. The Department of Commerce and the  New York State Department of Environmental Conservation provided  technical comments, which we incorporated as appropriate.", "In a letter signed by the Regional Administrators of EPA Region 1 and  Region 2, EPA stated that the report is timely because the Study is  working to transition from the 1994 plan to evaluating and reporting on the  2015 plan and highlighted steps the agency will take to meet our  recommendations. EPA stated that working with the Study the agency:  plans to further evaluate, develop, and apply leading practices of  performance reporting as it finalizes its reporting format, estimating  enhancements to the reporting format will be available on the Study\u2019s  website by the end of 2019; will evaluate the range of costs needed to  attain each of the targets and include cost estimates with uncertainty  bounds in future updates of the plan, expecting the enhanced cost  information will be available on the Study\u2019s website by the end of 2019;  and will ensure that the planned update to implementation actions  includes a range of costs for all implementation actions, estimating  actions will be completed in 2020.", "In its written comments, EPA suggested two specific revisions to our  report. First, EPA stated that the Study has established more intermediate  goals than we included in our report. In our report, we said that as of  March 2018, the Study had established intermediate targets for 7 of the  20 long-term ecosystem targets. According to EPA\u2019s comments, applying  the methodology that we used in the report to the 20 ecosystem targets  results in 11 targets having intermediate goals. EPA also stated that the  agency will work with the Study to better communicate these existing  intermediate goals on the web pages reporting ecosystem progress. In  response to this information, we analyzed the Study\u2019s web pages that  were available in June 2018 and agreed that five additional ecosystem  targets had intermediate goals as of that date. We revised the report to  include this information.", "Second, EPA stated that the report\u2019s statement that the 2015 plan  estimates that future implementation activities may cost nearly $21.9  billion is a misleading interpretation of the 2015 plan\u2019s implementation  costs because the plan does not present that figure. EPA stated that table  6 in our report appeared to double count Connecticut\u2019s combined sewer  overflow costs in the 2015 plan by including both the $4.4 billion taken  from text and $3 billion taken from a table in the plan. Although we  presented these data to EPA during our review, the error was not caught  until the draft report was reviewed. EPA stated that the 2015 plan is  admittedly unclear in attributing costs to specific categories and that the  agency will work with the Study to clarify the estimated implementation  costs in future updates. In response to EPA\u2019s comments, we reviewed the  2015 plan and removed the $3 billion cost estimate for Connecticut\u2019s  combined sewer overflow from table 6 and revised the total cost estimate  for future restoration activities to $18.9 billion.", "We are sending copies of this report to the appropriate congressional  committees, Administrator of EPA, Secretary of Agriculture, Secretary of  Commerce, Secretary of Defense, Secretary of the Interior, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made significant contributions  to this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This appendix provides information on the scope of work and the  methodology used to examine (1) what is known about the progress  made toward achieving the 1994 Long Island Sound Comprehensive  Conservation and Management Plan (1994 plan); (2) the goals of the  2015 Long Island Sound Comprehensive Conservation and Management  Plan (2015 plan) and factors that may hinder progress according to Long  Island Sound Study (the Study) members; (3) how Study members plan  to measure and report on progress toward the goals of the 2015 plan; and  (4) what Study members expended on restoration activities in fiscal years  2012 through 2016 and cost estimates for future activities.", "To examine what is known about the progress toward achieving the 1994  plan, we analyzed the plan to gain a better understanding of it and identify  any goals associated with the six priority problems. We also analyzed  data from the Study\u2019s website in November 2017, the Study\u2019s most recent  progress reports, and the book Long Island Sound: Prospects for the  Urban Sea\u2014a summary of available science and environmental data for  the Long Island Sound (the Sound). We analyzed the Study\u2019s most  recent progress reports\u2014Protection and Progress and Sound Health.  We analyzed data that were on the Study\u2019s website in November 2017  because the time frame coincided with the time frames of our review.  These data, reports, and the book included examples of progress but did  not assess performance toward the goals associated with the priority  problems in the 1994 plan. Therefore, we asked Study members for their  responses on progress and the data that supported their responses. To  do so, we interviewed Study members to obtain their views about  progress toward the 1994 plan.", "For our interviews with Study members, we contacted all 16 members of  the Study and representatives of the 5 Study work groups that were  active at the time of this review. Of the 16 Study members, 14 agreed to  participate in this review: (1) Department of Agriculture\u2019s Natural  Resources Conservation Service; (2) Department of Commerce\u2019s  National Marine Fisheries Service; (3) Department of Defense\u2019s U.S.  Army Corps of Engineers; the Department of the Interior\u2019s (4) U.S. Fish  and Wildlife Service and (5) U.S. Geological Survey; (6) Environmental  Protection Agency (EPA); (7) Connecticut Sea Grant; (8) Connecticut  Department of Energy and Environmental Protection; (9) New York State  Department of Environmental Conservation; (10) New York Department  of State; (11) New York City Department of Environmental Protection;  (12) the New England Interstate Water Pollution Control Commission;  (13) the Study\u2019s Citizens Advisory Committee; and (14) the Study\u2019s  Science and Technical Advisory Committee.", "The 5 Study work groups are (1) Climate Change and Sentinel Monitoring  Work Group, (2) Habitat Restoration and Stewardship Work Group, (3)", "Public Involvement and Education Work Group, (4) Water Quality  Monitoring Work Group, and (5) Watersheds and Embayment Work  Group. Representatives from all 5 work group agreed to participate in this  review.", "We asked the following question for each priority problem: \u201cSince 1994,  how much progress has been made addressing the priority problem in  Long Island Sound: no progress, little progress, moderate progress, or  goal has been met?\u201d For purposes of reporting responses to this  question, we refer to Study members and work group representatives  collectively as Study members. The New York State Departments of  Environmental Conservation and State provided their responses together,  and therefore we counted the two agencies as one Study member. The  New England Interstate Water Pollution Control Commission did not  provide a response to this question. As a result, 17 Study members  provided responses to this question.", "As part of the interviews, we also asked Study members, \u201cWhat evidence  are you basing your response on?\u201d We did not independently assess the  reliability of the data they cited for the purpose of evaluating if the data  showed progress toward addressing the priority problems. Instead, we  noted the limitations the Study associated with the data to better interpret  Study members\u2019 views. For some priority problems, Study members said  that they were unable to provide a response because they did not have  sufficient knowledge or data about progress toward the associated goals.  As a result, the total number of Study members who answered these  questions varied by priority problem and, for each priority problem, we  identified the total who provided a response. In addition, we visited two  Long Island Sound restoration projects to observe restoration activities  and learn how these activities may contribute to progress toward the  goals of the 1994 plan.", "To examine the goals of the 2015 plan and factors that may hinder  progress according to Study members, we analyzed the 2015 plan to  obtain information about the goals to achieve four themes in the plan. In  the interviews with the 17 Study members described above, we asked  them \u201cWhat factors, if any, may hinder achievement of the 2015 plan\u2019s  goals.\u201d More than one Study member representative was present in many  of the interviews and each representative in the interviews could identify  as many factors as they thought necessary. As a result, the number of  times a factor was identified\u201454\u2014was greater than number of Study  members. We narrowed the number of responses to 11 categories by  grouping together factors that were the same or were similar. In those  cases that more than one representative of the same Study member  identified the same factor, we counted that factor only once for that Study  member in order to generate the statements we used in the report. See  appendix II for a complete list of all the factors that were identified, the  number of Study members who identified each factor, and how we  grouped those factors into the 11 categories.", "To examine how Study members plan to measure and report on progress  toward achieving the 2015 plan, we analyzed sections of the plan that  contained goals associated with four themes and relevant web pages that  the Study issued in March 2018 and then analyzed them again in June  2018. We also conducted interviews with subject matter experts to obtain  their views on the sections of the 2015 plan that contained the themes  and goals, and with Study members to learn how they planned to report  on progress toward the 2015 plan. As a result of our analysis of the 2015  plan and interviews with Study members, we identified the 20 long-term  targets and associated indicators that Study members plan to use to  measure progress toward the 2015 plan, and determined that the Study  plans to report on progress using the web pages.", "For our interviews with subject matter experts, we identified individuals  with expertise on the 20-long term targets and their associated indicators.  We identified 73 experts by asking Study members to recommend  experts and identifying the contributors to Long Island Sound: Prospects  for the Urban Sea. We removed from this list those individuals whom we  had already interviewed, those who represented a Study member, those  who were involved with the development of the 2015 plan, and those  whose contact information we were unable to obtain from the Study  member or an Internet search. We invited by email the remaining 47  experts to participate in interviews to obtain their views about the 20 long- term targets and their associated indicators. We also provided the experts  with a list of the 20 targets and indicators and asked them to review the  targets and to \u201cselect those that you would be comfortable speaking  about based on your knowledge and expertise.\u201d Of the 34 experts who  responded, we interviewed 19 about the targets they had expertise in and  could discuss. The remaining 15 experts chose not to participate or said  that they were ineligible because they were either involved with the  development of the 2015 plan or affiliated with a Study member.", "We then interviewed the 19 experts about each of the targets and  associated indicators that they said they had identified. The experts we  interviewed included members of academia, as well as one state official  and one county official. Not all of the 19 experts were able to address  each of 20 targets and associated indicators. As a result, the total number  of expert responses varied for each target and associated indicator and  we identified the total number of experts who responded to questions  about each target and associated indicator. Because we used a  nonprobability sample, the information obtained from these interviews is  not generalizable to other individuals with expertise on the 20 long-term  targets and their associated indicators but provides illustrative  information.", "For our analysis of the web pages the Study published in March 2018, we  used GAO\u2019s prior work on performance management reporting, which  identified leading practices that have the potential for enhancing the  general usefulness of performance reports as vehicles for providing  decision makers and the public with information to assess progress. We  then analyzed the web pages to determine the extent to which they  incorporated these leading practices.", "To examine what Study members expended on restoration activities in  fiscal years 2012 through 2016 and cost estimates for future activities, we  took the following steps: we analyzed EPA\u2019s Justification of Appropriation  Estimates for Committee on Appropriations for fiscal years 2014 through  2018 to obtain the relevant EPA expenditure data; we obtained and  analyzed expenditure data from other Study members; and we analyzed  the cost estimate information in the 2015 plan. We chose this time period  because it was the most recent period for which expenditure data were  available during the time frames for our review. Of the 12 Study members  described above, 7 provided at least some expenditure data, 4 said that  they do not fund restoration activities, and 1 did not reply to our request  for expenditure data. We were unable to compare expenditure data  across Study members because three Study members said that they  spend funds for restoration activities in the region around Long Island  Sound but do not isolate expenditures made specifically for it. We  assessed the reliability of these data through interviews with Study  members who were familiar with these data. We found these data to be  sufficiently reliable for the purpose of this reporting objective with the  limitation that they represent the minimum amount of Study member  expenditures on restoration activities in fiscal years 2012 through 2016.  Further, we attended two Study meetings (on April 12, 2017, by phone,  and May 11, 2017, in person) to obtain information about how Study  members make expenditure decisions for restoration activities.", "For our analysis of cost estimate information in the 2015 plan, we  consulted the Office of Management and Budget Circular A-94, which  provides general guidance for estimating costs, and analyzed EPA\u2019s  funding guidance for comprehensive conservation and management  plans. We then analyzed the cost estimates in the 2015 plan to  determine the extent to which they followed the Office of Management  and Budget and EPA guidance. In our interviews with Study members  and subject matter experts described above, we determined that Study  members had not developed other cost estimates for restoring Long  Island Sound, and experts were unaware of other such estimates. We  also interviewed relevant officials from EPA, the Connecticut Department  of Energy and Environmental Protection, and the New York State  Department of Environmental Conservation to obtain information about  how the cost estimates in the 2015 plan were created.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Factors Identified by Members of the Long Island Sound Study", "paragraphs": ["In our review of the Long Island Sound restoration efforts, we asked Long  Island Sound Study (the Study) members to identify factors that may  hinder Long Island Sound restoration progress. Specifically, we asked the  following question to all 17 Study members we interviewed: \u201cWhat factors,  if any, may hinder achievement of the goals of the 2015 Long Island  Sound Comprehensive and Conservation Management Plan.\u201d More than  one Study member representative was present in many of the interviews  and each representative could identify one or more factors. As a result,  the number of factors identified\u201454\u2014was greater than number of Study  members who identified the factor. Table 8 shows the 11 categories of  factors, the number of times factors in those categories were identified,  and the number of Study members who identified each factor.", "We narrowed the number of responses to 11 factor categories by  grouping together factors that were the same or were similar. Table 9  shows each factor category, each of the original factors that Study  members identified, and the number of times the factor was identified by  Study members."], "subsections": []}, {"section_title": "Appendix III: The 20 Long-Term Targets and Associated Indicators", "paragraphs": ["The 2015 Long Island Sound Comprehensive Conservation and  Management Plan has four broad themes\u2014clean water and healthy  watersheds, thriving habitats and abundant wildlife, sustainable and  resilient communities, and sound science and inclusive management\u2014 and associated goals. It also has 20 long-term targets with associated  indicators (see table 10)."], "subsections": []}, {"section_title": "Appendix IV: Expert Responses on Whether Indicators Are Accurate, Valid, and Reliable", "paragraphs": ["We interviewed a nonprobability sample of 19 individuals with expertise  on Long Island Sound to obtain their views on the 20 long-term targets  and their associated indicators that the Long Island Sound Study said  they plan to use to measure progress toward the goals of the 2015 Long  Island Sound Comprehensive Conservation and Management Plan. We  asked each expert to review the targets and associated indicators and to  \u201cselect those that you would be comfortable speaking about based on  your knowledge and expertise.\u201d We then conducted interviews with each  expert, and asked \u201cis the indicator a valid, accurate, and reliable way to  measure progress to achieve the target?\u201d Table 11 shows the expert\u2019s  responses for each target."], "subsections": []}, {"section_title": "Appendix V: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Susan Iott (Assistant Director),  Michelle K. Treistman (Analyst-in-Charge), Chuck Bausell, Mark Braza,  Ellen Fried, Benjamin T. Licht, James I. McCully, Katya E. Rodriguez, and  Sara Sullivan made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Great Lakes Restoration Initiative: Improved Data Collection and  Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.:  July 21, 2015.", "Great Lakes Restoration Initiative: Further Actions Would Result in More  Useful Assessments and Help Address Factors That Limit Progress.  GAO-13-797. Washington, D.C.: September 27, 2013.", "Chesapeake Bay: Restoration Effort Needs Common Federal and State  Goals and Assessment Approach. GAO-11-802. Washington, D.C.:  September 15, 2011.", "Recent Actions by the Chesapeake Bay Program Are Positive Steps  Toward More Effectively Guiding the Restoration Effort, but Additional  Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008.", "Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could  Help Guide Future Restoration and Protection. GAO-08-130. Washington,  D.C.: December 14, 2007.", "South Florida Ecosystem: Restoration Is Moving Forward but Is Facing  Significant Delays, Implementation Challenges, and Rising  Costs.GAO-07-520. Washington, D.C.: May 31, 2007.", "Chesapeake Bay Program: Improved Strategies Are Needed to Better  Assess, Report, and Manage Restoration Progress. GAO-06-96.  Washington, D.C.: October 28, 2005.", "Great Lakes: Organizational Leadership and Restoration Goals Need to  Be Better Defined for Monitoring Restoration Progress. GAO-04-1024.  Washington, D.C.: September 28, 2004.", "Great Lakes: An Overall Strategy and Indicators for Measuring Progress  Are Needed to Better Achieve Restoration Goals. GAO-03-515.  Washington, D.C.: April 30, 2003."], "subsections": []}], "fastfact": ["Long Island Sound, an estuary in one of the nation's most densely populated areas, provides many economic and recreational benefits. However, development and pollution have degraded water quality and led to hypoxia, low levels of dissolved oxygen that increase mortality of fish and other species.", "A federal-state partnership funded restoration projects and created a plan and cost estimates to restore the Sound. However, current reports and estimates do not provide complete information about how progress will be measured or what restoration will cost.", "We recommended steps to improve the partnership's progress reports and cost estimates."]}
{"id": "GAO-18-599", "url": "https://www.gao.gov/products/GAO-18-599", "title": "2020 Census: Actions Needed to Address Challenges to Enumerating Hard-to-Count Groups", "published_date": "2018-07-26T00:00:00", "released_date": "2018-08-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["A goal for the 2020 Census is to count everyone once, only once, and in the right place. Achieving a complete and accurate census is becoming an increasingly complex task, in part because the nation's population is growing larger, more diverse, and more reluctant to participate. When the census misses a person who should have been included, it results in an undercount. Historically, certain sociodemographic groups have been undercounted in the census, which is particularly problematic given the many uses of census data.", "GAO was asked to review the Bureau's plans for enumerating hard-to-count groups in the 2020 Census. This report examines (1) the Bureau's plans for improving the enumeration of the hard-to-count in 2020, and how that compares with 2010; and (2) the challenges the Bureau faces in improving the enumeration of the hard-to-count in 2020. GAO reviewed Bureau planning, budget, operational, and evaluation documents as well as documents of the hard-to-count related working groups of the Bureau's National Advisory Committee; and interviewed Bureau officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Census Bureau's (Bureau) plans for enumerating groups considered hard-to-count, such as minorities, renters, and young children, in the 2020 Census includes the use of both traditional and enhanced initiatives. For example, the Bureau plans to continue using certain outreach efforts used in 2010, such as a communications campaign with paid advertising, partnerships with local organizations, and targeted outreach to immigrant and faith-based organizations. The Bureau also plans enhancements to its outreach efforts compared to 2010. For example, to help address the undercount of young children, the Bureau revised the census questionnaire and instructions to enumerators to more explicitly include grandchildren in counts. Other planned changes include:", "Expanded languages: The Bureau plans to offer more non-English language response options and instructional materials than for 2010.", "More partnership specialists: The Bureau plans to hire nearly twice as many partnership specialists as it had planned for the 2010 Census to recruit partner organizations in local communities.", "Earlier partnership hiring : The Bureau started hiring a small number of partnership staff in October 2015\u20142 years earlier than it did for 2010.", "While efforts have been made, enumerating hard-to-count persons in 2020 will not be easy. Aside from the inherent difficulties of counting such individuals, the Bureau faces certain management challenges related to its hard-to-count efforts.", "First, the Bureau's hard-to-count efforts are distributed across over one third of its 35 operations supporting the 2020 Census. And while decentralized operations can provide flexibility, to enhance visibility over these hard-to-count efforts, the Bureau recently developed a draft operational document. However, the Bureau will continue to face challenges in ensuring its hard-to-count efforts integrate with each other. For example, some of the detailed plans for 10 of the hard-to-count efforts were released in 2016 and are awaiting updates, while 4 plans have yet to be released. With less than 2 years until Census Day (April 1, 2020), there is little room for delay. Therefore, to ensure that emerging plans related to the hard-to-count efforts integrate with existing plans, Bureau management will need to continue its focus on control of the changes in hard-to-count efforts moving forward.", "Second, the Bureau faces a challenge of a tighter labor market than existed prior to 2010 that could potentially create shortfalls or delays in its hiring of partnership staff who are needed to reach small and hard-to-count communities. In early hiring for 2020, Bureau officials reported smaller than expected applicant pools, declined offers, and turnover. Although it has plans to identify critical skills for 2020 and for tailored recruiting, collecting data on its hiring efforts will also be important. Currently, the Bureau lacks data from its 2010 Census that could have helped inform its partnership-staff hiring efforts for 2020."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Bureau take steps to ensure that forthcoming changes and decisions on its hard-to-count related efforts are integrated with other operational efforts and that it collects data on its 2020 partnership hiring efforts.", "The Department of Commerce agreed with GAO's recommendations, and the Bureau provided technical comments that were incorporated, as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["A goal of the 2020 Census is to count everyone once, only once, and in  the right place. However, achieving a complete and accurate census is  becoming an increasingly complex task. This is in part because the  nation\u2019s population is growing larger; more diverse in culture, living  arrangements, and in the number of languages spoken; and more  reluctant to participate. The U.S. Census Bureau\u2019s (Bureau) efforts during  the early part of the decade were largely focused on preparing and testing  innovations largely designed to save money. The former Bureau director  previously testified that part of these savings could go toward improving  the enumeration of the \u201chard-to-count\u201d groups historically missed in the  census, such as racial and ethnic minorities, renters, and young children.  However, the Bureau\u2019s cost estimates have risen over the decade,  eliminating much of those initial projected savings, and the Bureau has  requested increased funding over multiple years while it develops its  plans for enumerating these groups.", "You asked us to review the Bureau\u2019s plans for enumerating the hard-to- count groups in the 2020 Census. This report examines (1) the Bureau\u2019s  plans for improving the enumeration of the hard-to-count in 2020, and  how that compares with its effort for 2010; and (2) the challenges, if any,  the Bureau faces in improving the enumeration of the hard-to-count in  2020.", "We generally limited our scope to the six Bureau operations with a goal or  objective related to improving the enumeration of the hard-to-count  groups. These operations are: Integrated Partnership and  Communications, Language Services, Non-ID Processing, Group  Quarters/Service-Based Enumeration, Enumeration at Transitory  Locations, and Coverage Improvement.", "To address both of these objectives, we reviewed Bureau planning,  budget, operational, and evaluation documents related to the Bureau\u2019s  efforts to enumerate hard-to-count groups in the 2020 Census and prior  decennials. We also interviewed Bureau officials responsible for planning  and executing the 2020 Census and with experience in prior decennials  about planned changes from the 2010 Census and related challenges.", "To address the first objective, we also analyzed the Bureau\u2019s most  recently available planned hiring and life cycle cost estimates for these  activities and compared those to the Bureau reported level of planned  hiring and actual spending for the 2010 Census. To assess the reliability  of these Bureau reported data, we compared the historical information the  Bureau provided us for the 2010 Census with information found in the  Bureau\u2019s 2010 Census evaluations, and interviewed knowledgeable  Bureau officials. We determined that the data were sufficiently reliable to  describe the Bureau\u2019s planned hiring and cost estimates for the 2020  Census compared to similar activities for the 2010 Census, except where  noted.", "To address the second objective, we also reviewed related Bureau  evaluations and recommendations from the 2010 Census and 2020  Census research and testing activities, and from the Bureau\u2019s National  Advisory Committee and hard-to-count related working groups to identify  challenges the Bureau may face in improving the enumeration of the hard  to count. We supplemented our review of Bureau documentation by  conducting a search of the literature for academic and other publications  related to including hard-to-count groups in surveys.", "We conducted this performance audit from November 2017 to July 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Hard-to-Count Groups", "paragraphs": ["Although the Bureau goes to great lengths to conduct an accurate count  of the nation\u2019s population, some degree of inaccuracy is inevitable. When  the census misses a person who should have been included, it results in  an undercount. An overcount occurs when an individual is counted more  than once or in the wrong place. These errors are problematic because  certain groups such as minorities, young children, and renters are more  likely to be missed in the census, while other groups such as those who  may own a second, seasonal home are more likely to be counted more  than once. As census data are used to apportion seats in Congress,  redraw congressional districts, and allocate billions of dollars in federal  assistance each year, improving coverage and reducing undercounts are  important.", "As an example, the Bureau reported that the 2010 Census did not have a  significant net undercount or overcount nationally. However, as shown in  figure 1, errors in census coverage were unevenly distributed through the  population. For example, the Bureau estimated that it missed nearly 5  percent of American Indians living on reservations\u2014the  sociodemographic group with the highest percent net undercount in  2010\u2014whereas the Bureau estimated it overcounted almost 1 percent of  non-Hispanic whites.", "In addition to those groups with characteristics the Bureau can  measure\u2014based on their responses to certain questions asked on the  census questionnaire\u2014there are many other hard-to-count groups, some  of which cut across sociodemographic groups, as shown in table 1. For  example, lesbian, gay, bisexual, transgender, or queer/questioning  persons or persons who distrust government can cut across all  sociodemographic groups.", "There are complex reasons why certain groups are considered hard-to- count. According to Bureau officials, for example, one way to think about  the hard-to-count problem is to consider what groups are hard to locate,  contact, persuade, and interview for the census (see figure 2).", "Hard-to-locate. Some groups are hard-to-locate because where they live  is unknown, or they move frequently. For example, the Bureau faces  difficulty counting persons experiencing homelessness. Adding to this  difficulty are reported increases in the prevalence and complexity of  outdoor encampments across the country. Inhabitants design many of  these encampments to remain hidden; some people may remain in an  encampment for years while other people may move frequently.", "Hard-to-persuade. Other groups are hard-to-persuade to participate in  the census. For example, while the Bureau had identified those who  distrust government as a hard-to-count group based on research prior to  the 2010 Census, in November 2017, the Bureau reported to its National  Advisory Committee an increase in unprompted confidentiality concerns  raised by individuals in focus groups and pretests for the 2020 Census  and other surveys.", "Multiple factors. Some groups are hard to count for multiple complex  reasons. For example, a Bureau taskforce found that households with  young children up to 4 years old may be missed altogether due to  frequent moves between rental units (hard-to-contact). Moreover, some  households studied\u2014such as complex households with multiple  generations\u2014also appeared to be confused about whether or not to  include their young children when completing the questionnaire or when  being interviewed by census enumerators. The Bureau also found that  language barriers sometimes resulted in households leaving young  children off their census or other survey questionnaire (hard-to- interview)."], "subsections": []}, {"section_title": "Congress Has Prioritized Funding for Decennial Partnership and Communications Efforts in Both the 2010 Census and the 2020 Census", "paragraphs": ["An appropriation in the American Recovery and Reinvestment Act of  2009 (Recovery Act) allowed the Bureau to increase the funding of the  Bureau\u2019s 2010 Census partnership and communications efforts. The  Bureau has partnered with governments, businesses, and local  community organizations to help promote the census. The Bureau has  also relied on a communications campaign including paid advertisements  in national and targeted markets to help build awareness of the census.  After adjusting for inflation, the Bureau spent about $123 million to  expand its advertising and about $125 million to expand its partnership  efforts (in 2017 dollars), primarily by hiring additional partnership-related  staff beyond original plans.", "Partnership staff hired to support the 2010 Census were responsible for  mobilizing local support for the census by working with local organizations  to promote participation. Partnership staff for the 2010 Census included a  mix of partnership specialists\u2014responsible for building relationships with  and obtaining commitments from governments, local businesses, and  other organizations to help promote the census\u2014managers, graphic  designers, and clerical support positions. After receiving Recovery Act  funding, the Bureau created a new partnership assistant position. After  the partnership specialists had established agreements with local  organizations, these partnership assistants were responsible for  supporting the implementation of promotion efforts, such as by staffing  fairs and other events. Bureau officials told us that they believed that  creating a new partnership assistant position would help promote census  awareness.", "The Consolidated Appropriations Act, 2018 directed the Bureau to  conduct its fiscal year 2018 partnership and communications efforts in  preparation for the 2020 Census at a level and staffing no less than the  Bureau conducted during fiscal year 2008 in preparation for the 2010  Census. The act appropriated more than $2.5 billion for the Periodic  Censuses and Programs account, which according to Bureau officials  includes over $1 billion from the Bureau\u2019s fiscal year 2019 budget request  intended to smooth transition of funding between fiscal years, such as in  the event of a continuing resolution."], "subsections": []}]}, {"section_title": "The Bureau Plans to Enhance Outreach to and the Enumeration of Hard-to-Count Groups in 2020, but Estimated Spending Is Similar to 2010", "paragraphs": [], "subsections": [{"section_title": "The Bureau Plans Enhancements to Key 2020 Census Operations to Address Complexity Enumerating Hard-to- Count Groups", "paragraphs": ["The Bureau will continue to rely on its Integrated Partnership and  Communications operation\u2014designed to communicate the importance of  census participation and motivate self-response\u2014as a key component of  its efforts to improve enumeration of hard-to-count persons in the 2020  Census. Evaluations conducted by the Bureau found that its partnership  and communications efforts had positive effects on increasing awareness  and participation among the hard-to-count in prior censuses. Because of  the positive effects, the Bureau has begun outreach to the more than  257,000 tribal, state, and local governments as well as other businesses  and organizations it partnered with in 2010. For example, the Bureau  plans to continue using \u201ctrusted voices\u201d\u2014individuals or groups with  relevance, importance, and relatability to a given population, such as local  leaders and gatekeepers within isolated communities\u2014to promote the  census. As part of this effort, the Bureau plans to continue outreach  initiatives to specific constituencies, such as to faith-based communities,  and, through its Foreign Born/Immigrant initiative, to outreach and  communicate with recent immigrants, undocumented residents, refugees,  and migrant and seasonal farm workers.", "In addition, the Bureau still plans to advertise in national and targeted  markets. For example, to support its 2020 outreach efforts, including to  hard-to-count groups, the Bureau awarded a communications contract in  August 2016 to Young and Rubicam, an advertising firm. As has been  done in prior censuses, this contractor has enlisted 14 partners and  subcontractors to help it reach specific sociodemographic groups, such  as American Indian and Alaska Native populations and Hispanic  communities.", "Given the increasingly complex task of counting those historically missed  in the census, the Bureau has taken steps or plans to enhance some  aspects of the initiatives under its Integrated Partnership and  Communications operation and to other key operations compared to the  2010 Census, as shown in table 2. For example, the Bureau overhauled  a metric it has used to help manage and target field work for its  partnerships to areas with hard-to-count populations, basing it now on  predictions of each household\u2019s likelihood to self-respond to the census.  Using this new low response score metric, the Bureau created a publicly  available online mapping tool for its partnership staff and other users to  better understand the sociodemographic make-up of their assigned areas  and to plan their outreach efforts accordingly. Moreover, as we  previously recommended in 2010, the Bureau also plans to develop  predictive models to help allocate its advertising using: (1) these  predictive response data, (2) results describing the complexity of difficult  enumeration from its recent \u201cbehaviors, attitudes, and motivators survey\u201d  study and focus groups, and (3) other third-party data.", "The Bureau is still evaluating certain initiatives before deciding whether or  not to include them in its 2020 plans. For example, as part of the 2018  End-to-End Test currently underway in Providence, Rhode Island, the  Bureau is piloting the use of Internet kiosks in selected post offices to  help allow persons to self-respond to the census. Bureau officials said  they will decide whether to move forward with the use of kiosks in post  offices in 2020 after evaluating the pilot and the test.", "In addition, according to the Bureau\u2019s current planning documents, the  Bureau has plans to change other key operations to help improve the  enumeration of certain hard-to-count groups. For example, to help  address the complex undercount of young children, the Bureau revised  the census questionnaire and instructions to enumerators to more  explicitly mention the inclusion of grandchildren and any non-relatives in  household population counts. In addition, the Bureau\u2019s planning  documents describe plans to offer administrators at certain group  quarters locations, such as college dormitories, the option to electronically  transfer their rosters to the Bureau. Bureau officials said that this  planned change will help reduce the need for enumerators to visit those  locations, and that such an efficiency gain will allow them to devote  resources on the ground to other harder to enumerate group quarters.", "Recognizing the importance of reaching an increasingly linguistically  diverse population, the Bureau has also made significant changes to its  Language Services operation for 2020, including increasing the number  of non-English languages formally supported by the Bureau. Table 3  below summarizes changes in the number of languages the Bureau plans  to support. According to the Bureau, this larger choice of languages  should increase the percentage of limited-English-speaking households  directly supported by that operation from 78 percent in 2010 to 87 percent  in 2020.", "The Bureau is still assessing the level of non-English support it will  directly provide through advertising, partnership, and promotional  materials. Bureau officials stated that they will decide the number of \u2014 and which\u2014non-English languages to support after it has completed  research on how best to segment advertising markets in fall 2018. Until  then, it has committed to at least 12 non-English languages\u2014which is  less than half of the 27 non-English languages similarly supported in the  2010 Census. Bureau officials said that one action they will take to  mitigate any effects if the Bureau decides on a fewer number of  languages for 2020 is to provide language-independent media  templates\u2014including scripts to videos ready for non-English voiceovers\u2014 to any partner groups that may need them.", "The Bureau has also formalized its language translation capabilities for  the non-English languages it chooses to support based on 2010 Census  evaluations that found, among other things, that the Bureau\u2019s lack of  sufficient oversight of its translation process hampered consistency of its  translation of promotion and outreach materials. For the 2020 Census,  Bureau officials said they intend to rely on in-house translation experts  adhering to translation industry standards. Bureau officials stated that the Bureau will not attempt to oversee the translations that partners may  make into less commonly spoken languages using the Bureau\u2019s  language-neutral materials when trying to reach more isolated language  areas, though officials stated that its partners, including contractors for  advertising, will rely on Bureau-developed language glossaries for census  terminology when translating into other languages."], "subsections": []}, {"section_title": "The Bureau Plans Total Spending for Its 2020 Census Outreach Efforts Similar to that for 2010 Census, and to Hire More Partnership Specialists Instead of Assistants", "paragraphs": ["The Bureau estimates total spending for its 2020 partnership and  communications outreach efforts to be similar to what it reported  spending on those efforts for the 2010 Census after adjusting for inflation.  Specifically, according to documents supporting the Bureau\u2019s most recent  life cycle cost estimate for the 2020 Census, the Bureau may spend about  $850 million in its outreach to promote the 2020 Census, compared to  nearly $830 million in total spending in comparable categories for the  2010 Census. (See table 4.)", "Partnership staff. According to the Bureau\u2019s current planning  documents, it will hire nearly twice as many partnership specialists\u2014 responsible for building relationships and obtaining commitments from  organizations\u2014to support the 2020 Census than it hired to support the  2010 Census. Despite this planned increase in partnership specialists,  the Bureau\u2019s total estimated spending on partnership staff\u2014$248  million\u2014is less than the $334 million the Bureau reported spending in the  same cost category for 2010 after adjusting for inflation. This change is  in part because the Bureau does not plan to hire any partnership  assistants to support the 2020 Census.", "According to Bureau planning data from the 2010 Census, the Bureau  planned to hire over 1,700 partnership assistants\u2014those that assisted  specialists for the 2010 Census\u2014with Recovery Act funding. As noted  previously, Bureau officials said that the additional funding it received  from the Recovery Act in 2009 (about $125 million in 2017 dollars) largely  funded the hiring of these partnership assistants. The effect of the  Recovery Act funding on partnership hiring is shown in figure 3 below.  According to Bureau officials, without the Recovery Act funding and its  direction for the Bureau to increase hiring in order to stimulate the  economy, the Bureau would not have hired the large number of  partnership assistants that it did.", "According to Bureau officials, this shift in hiring toward more partnership  specialists will enable a greater focus on creating more partnerships and  require greater reliance on partner organizations to help with staffing for  outreach and promotion events in local communities that partnership  assistants were used for in the 2010 Census. While the ability of future  partners to help with these events remains to be seen, Bureau officials  involved in early outreach with partners stated that they believe this  planned approach shows early promise based on the over 1,500 partners  they have engaged for the 2020 Census so far.", "Headquarters support. The $111 million amount the Bureau plans to  spend in headquarters support for outreach efforts is similar to the $106  million it spent in the 2010 Census after adjusting for inflation. According  to Bureau documents, this support will be used for advertising, media,  and partnership efforts.", "Communications campaign. The Bureau plans to spend more in its  communications campaign category in the 2020 Census than what it  reported spending in this area during the 2010 Census\u2014$492 million  compared to $388 million after adjusting for inflation, according to the  Bureau\u2019s cost estimation documents. The campaign will include paid  advertising and the development of promotional materials. According to  Bureau officials, they will initiate much of this spending in May 2019. This  larger figure includes about $152 million for additional contracted services  still being planned, but provisionally allocated for various advertising  support efforts with the balance for various partnership materials not  included in other contracts.", "The Bureau does not plan to repeat its \u201c2010 Census Road Tour\u201d  involving a large mobile display and over a dozen cargo vans that were  driven to promotional events around the country at a cost of about $16.6  million after adjusting for inflation. While the Bureau did not conduct a  formal evaluation of the initiative\u2019s effectiveness at encouraging response  during the 2010 Census, Bureau officials told us that they do not believe it  was as effective a use of resources compared to the other options they  are planning for 2020."], "subsections": []}, {"section_title": "The Bureau Started Partnership Hiring Earlier for the 2020 Census Than for 2010", "paragraphs": ["An evaluation conducted by the Bureau of its 2010 partnership efforts  recommended that, for the 2020 Census, the Bureau hire at least a core  group of partnership staff 3 years prior to census day instead of the 2  years prior as was done for the 2010 Census. Consistent with that  recommendation, according to Bureau officials, the Bureau hired five  partnership specialists for the 2020 Census in October 2015\u2014more than  2 years earlier in the decennial cycle than its first hiring of partnership  specialists in January 2008 for the 2010 Census, as shown in figure 4.  Bureau officials told us that this hiring helped the Bureau complete tribal  consultations earlier than it had for the 2010 Census. Moreover, the  Bureau continued its early hiring with 39 more partnership specialists in  fiscal year 2017. Bureau officials said that, with the additional year of  preparation, these staff initiated outreach to the highest level of  government in each of the 50 states, the District of Columbia, and Puerto  Rico, resulting in, as of April 2018, partnership staff having obtained  commitments or statements of interest from all but two state governments  to form State Complete Count Commissions/Committees. These  Commissions/Committees are intended to help form partnerships at the  highest levels of government within each state and leverage each state\u2019s  vested interest in a timely and complete count of its population.", "Bureau officials said they also recently further accelerated the Bureau\u2019s  planned time frames for hiring partnership specialists. These officials said  that with the funds made available in the Fiscal Year 2018 Consolidated  Appropriations Omnibus, the Bureau began posting job announcements  for about 70 partnership specialists in April 2018 and hopes to begin  hiring in July 2018\u20143 months earlier than October 2018, as had  otherwise been planned.", "In addition, with 2018 funds, Bureau officials said they are working to  identify elements of the communications campaign to begin earlier than  the planned start date of October 1, 2018. The Bureau and the lead  communications contractor identified possible efforts to start months  earlier. According to Bureau officials, they are finalizing how to accelerate  these efforts, including the Statistics in Schools initiative, media planning,  and hosting a creative development workshop with the communications  contractors."], "subsections": []}]}, {"section_title": "The Bureau Faces Internal Management and External Workforce Challenges in Improving the Enumeration of Hard- to-Count Groups in 2020", "paragraphs": [], "subsections": [{"section_title": "The Bureau Faces an Internal Management Challenge Integrating Its Many Hard-to-Count Efforts", "paragraphs": ["According to the Bureau and as shown in figure 5, over one-third of its 35  operations (14 of 35) are designed, at least in part, to help improve the  enumeration of hard-to-count groups. These efforts range from the  earliest field data collection operations\u2014such as address canvassing  when the Bureau aims to identify all possible addresses where people  live, including hidden housing units such as basement apartments or  attics\u2014to some of its later field operations, such as nonresponse follow- up when census enumerators visit each household that did not self- respond.", "Each of the 35 operations is implemented by a separate team that  manages and controls its activities and, according to Bureau governance  documents, is also responsible for reviewing and managing its risks,  schedule, and scope, as well as developing needed capability  requirements. Team leads are responsible for ensuring integration with  other operation teams, and escalating risks to management, as well as  ensuring communication upward to the various governance bodies  overseeing the decentralized structure. Operational decisions within the  scope of plans that have been approved by the governance bodies are  made at the team level, while ultimate responsibility rests with respective  associate directors for the decennial, field, communications, and other  directorates, whose staff largely comprise the teams, and the Director of  the Census Bureau itself. The Bureau exercises change control over the  scope, schedule, and documentation of its baseline program design, with  a change control board comprising process and program managers with  responsibility over the operational teams. Approved changes are formally  communicated via e-mail to stakeholders in the change control process.", "Managing decentralized operations in such a way can be effective and  provide an agency flexibility in responding to changing conditions on the  ground, such as when adapting census methods in response to natural  disasters as the Bureau had to do during the 2010 Census for areas  affected by Hurricane Katrina. However, such decentralization also  presents a challenge to management as it tries to ensure the integration  of its efforts to improve enumeration of the hard-to-count groups.", "To help address the challenge of managing so many hard-to-count efforts  that cut across the decentralized operations, during our review, the  Bureau developed a draft operational design document. This document  describes the major operations and initiatives that contribute to, at least in  part, its goal to improve the enumeration of hard-to-count groups in the  2020 Census. This is the Bureau\u2019s first comprehensive look at the hard- to-count goal for the 2020 Census. Bureau officials said that they  developed the document because they realized that looking across the  Bureau\u2019s operations and how they relate to difficulties enumerating hard- to-count groups would provide them a useful perspective that could help  identify any gaps or interdependencies in their various hard-to-count  efforts. Bureau officials said they plan to refine and include this document  as a chapter in the fall 2018 update of their broader 2020 Census  Operational Plan. Although this is a good first step to elevate the visibility  of the hard-to-count goal, we identified a number of other areas where  additional steps or management focus may be needed in order to help  ensure integration of certain hard-to-count related efforts, including the  following:", "During exchanges of information between the Bureau and its National  Advisory Committee in 2017 and 2018, the Bureau proposed using  additional focus groups with certain population groups, census  interviewers, and trusted community messengers. These focus groups  are intended to identify root causes and ways to overcome the  confidentiality concerns increasingly being raised by respondents in  the Bureau\u2019s earlier testing by helping to inform messaging and  outreach plans as well as staff support documents and training  materials. However, as of May 1, 2018, the Bureau reported that it  had yet to identity the resources needed to conduct the additional  focus groups it had proposed. If the Bureau is going to take this step,  it would need to complete its analysis from these proposed focus  groups with interviewers and others before starting to develop its 2020  messaging, currently scheduled to begin in October 2018. Any delays  in scheduling these activities could have an effect on activities  intended to help improve enumeration of the hard-to-count in other  related operations.", "The detailed operational plans for 10 of the Bureau\u2019s 14 hard-to- count-related operations have been documented and released  publicly. However, we found that several of the detailed plans already  released\u2014while self-described as being updated over time to reflect  changes in strategies based on ongoing planning, research, and  testing\u2014are nearly two years old and may not reflect more recent  decisions made. Attention by Bureau management to the details of  these operational plans as they are updated will be critical to ensure  that their interdependencies with other efforts are accounted for.", "Similarly, as of May 2018, little detail is available about what  interdependencies the other 4 hard-to-count related efforts will have  on the overall 2020 Census Operational Plan and on the Bureau\u2019s  efforts to improve the enumeration of the hard-to-count in particular.  For example, the Bureau\u2019s operation to enumerate persons at  transitory locations\u2014key to counting mobile persons, including those  living at motels or with traveling carnivals\u2014is one of the 4 efforts  without a detailed operational plan yet. Because the Bureau is not  scheduled to test the integration of this enumeration with other  systems before the 2020 Census, it remains to be seen how its  forthcoming design may interact with other related operations and  systems. While Bureau officials stated that procedures likely to be  used for this operation are well established from prior censuses, they  also stated that there may be significant changes from the past in the  process the Bureau uses to determine where to count persons in this  operation and may rely on changes in the non-ID processing  operation\u2014helping enumerate persons not having a pre-assigned  census identification number. With less than 2 years to go until  Census Day (April 1, 2020), there is little room for delay in considering  how forthcoming details on hard-to-count efforts yet to be finalized\u2014 or changed based on ongoing testing or other decisions\u2014may have  consequences on other related efforts.", "According to the Project Management Institute\u2019s A Guide to the Project  Management Body of Knowledge, integrated change control can help  address overall risk to related efforts, which often arises from changes  made without consideration of the overall goals or plans. A significant  amount of hard-to-count-related planning for the 2020 Census is currently  underway, and in the less than 2 years remaining before Census Day, it  will be important for Bureau management to maintain a focus that helps  ensure that hard-to-count-related decisions yet to be made as well as any  changes to those already made are integrated with other related efforts.  Focused attention on these efforts will also help ensure that any  interdependencies, synergies, or gaps are identified and included in the  change-control processes the Bureau already has in place."], "subsections": []}, {"section_title": "Hiring Partnership Staff with Critical Skills in a Tight Labor Market Creates a Workforce Challenge for the Bureau and It Lacks Data from 2010 to Guide Its Efforts", "paragraphs": ["As noted previously, a key component of the 2010 Census was the hiring  of partnership staff to help build relationships with and obtain  commitments from local organizations to help encourage census  participation, particularly among hard-to-count groups. For the 2020  Census, in addition to the core relationship-building skills, Bureau officials  said they are working to identify specialized skills needed to operate  partnership initiatives in a 2020 environment, such as advanced  knowledge of digital media. However, the Bureau faces a significant  challenge in hiring these kinds of staff because it is operating in a much  tighter labor market than it did prior to the 2010 Census. As a result, it  may not be able to hire the partnership staff with the skills it now needs as  easily as it had in the past.", "According to Bureau of Labor Statistics data, the unemployment rate in  January 2008, when the Bureau first hired partnership staff for the 2010  Census, was 5 percent. That number increased to more than 7 percent by  December 2008, and then ranged from more than 7.5 percent to 10  percent in 2009 and through Census Day in April 2010. During this time,  the Bureau hired nearly 3,000 partnership staff, many of which the  Bureau hired in a few short months after receiving additional funding from  the Recovery Act. The unemployment rate is substantially lower now as  we approach the comparable part of the decade for the 2020 Census.  Specifically, the rate has ranged from 4.9 percent in October 2016, when  the Bureau starting hiring for an early round of about 40 partnership staff,  to less than 4 percent in May 2018.", "Bureau officials reported experiencing challenges during these early  hiring efforts for partnership staff, although they were ultimately able to fill  the nearly 40 positions the Bureau sought to fill across its six census  regions. Bureau officials in the regional field offices reported observing  smaller applicant pools, declined job offers, and early turnover due to a  lower pay rate the Bureau offered compared to the local economy.  Moreover, these officials reported seeing fewer applicants through local  job markets, which had been successful recruiting mechanisms in the  prior census. According to the Bureau\u2019s planning documents, the Bureau  plans to ramp up its hiring of partnership specialists between July 2018  and 2019. If the unemployment rate generally holds steady at around the  4 percent of May 2018, the Bureau will likely face challenges recruiting  and retaining partnership staff with the critical skills needed.", "Bureau officials said that they will develop customized recruiting  strategies to fill specific needs as they identify and refine the mix of  partnership skills needed to support their 2020 efforts. For example,  Bureau officials acknowledged the need to more effectively use USAJobs,  the federal recruiting website, and targeted job announcements. They  also identified the possibility of hiring additional partnership staff for short- term assignments closer to census day to help meet specific needs, such  as assisting with non-English language enumeration and connecting with  faith-based or immigrant communities in areas with low participation.  Following through on its plans to identify an optimal mix of skill-sets and  tailored recruiting strategies, in accordance with leading practices, will be  important for the Bureau as it operates in a tight labor market because  delays or shortfalls in hiring partnership staff could put the Bureau\u2019s plans  for building support for the census at risk.", "As the Bureau has decided to rely more heavily on partnership specialists  as part of its outreach and promotion strategy to reach hard-to-count  groups and still faces decisions about where to staff them, it has done so  without the benefit of data on its actual hiring of partnership staff from the  2010 Census. During our review, the Bureau was unable to readily  provide us with data on the actual number or timing of partnership  specialists and assistants hired to support the 2010 Census, and instead,  we had to use detailed Bureau planning documents for our analysis.  Bureau officials reported that their records in 2010 did not clearly link the  positions and grades recorded in the payroll system for individual staff  who were hired to support a different operation to the roles they  subsequently played in carrying out the partnership efforts.", "Standards for Internal Control in the Federal Government state that  management should use quality information to achieve the entity\u2019s  objectives. Bureau officials recognize the importance of having such  data readily available both for evaluating implemented efforts and for  future planning, and said they will take steps to better record these types  of data for the 2020 Census. Doing so will better position the Bureau to  evaluate the effectiveness of its hiring strategy and tradeoffs in alternative  approaches, to learn lessons from the 2020 implementation, and to  optimize related staffing strategies in the future."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Much of the Bureau\u2019s planning efforts to help address the longstanding  challenge of enumerating hard-to-count groups in the 2020 Census are  underway. Importantly, the various operations and initiatives related to the  hard-to-count are either in the planning or early implementation stages.  While the Bureau has taken some steps to better understand the scope of  these efforts, going forward, it will be important for the Bureau to ensure  that management maintains a focus on forthcoming changes and  decisions on hard-to-count related efforts to ensure they are integrated  with other hard-to-count related efforts across the Bureau\u2019s decentralized operations. Doing so will help the Bureau identify possible synergies,  interdependencies, or gaps specific to how they might affect the Bureau\u2019s  ability to improve the census and help address overall risk to related  efforts.", "In addition, information about related efforts in prior censuses can help  inform management and its ongoing planning. However, the Bureau\u2019s  lack of complete and reliable data on hiring partnership staff for the 2010  Census\u2014such as numbers, dates, and positions filled\u2014affects its ability  to fully consider tradeoffs it is making among types of staff it plans to hire  for the 2020 Census. As the Bureau continues to ramp up its hiring of  partnership specialists and other staff to support enumeration of the hard- to-count, improved recording of hiring numbers, dates, and positions  filled\u2014particularly for staff supporting multiple operations\u2014can help  position the Bureau to evaluate the effectiveness of its hiring strategy and  support efforts to optimize any related hiring in future censuses."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Department of  Commerce and the Census Bureau:", "The Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau takes steps to ensure that forthcoming changes and  decisions on hard-to-count related efforts are integrated with other  hard-to-count related efforts across the Bureau\u2019s decentralized  operations. (Recommendation 1)", "The Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau takes steps to ensure for the purposes of evaluation  and future planning that information is recorded and available on  partnership hiring numbers, dates, positions filled, and in support of  what part of the 2020 Census. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Commerce. In its  written comments, reproduced in appendix I the Department of  Commerce agreed with our findings and recommendations and said it  would develop an action plan to address them. The Census Bureau also  provided technical comments that we incorporated, as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Commerce, the Undersecretary of Economic Affairs, the  Acting Director of the U.S. Census Bureau, and the appropriate  congressional committees. In addition, the report will be available at no  charge on the GAO website at https://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. The GAO staff that made major contributions  to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Ty Mitchell, Assistant Director;  Chris Falcone, Analyst-in-Charge; Mark Abraham, Ann Czapiewski, Kayla  Robinson, Cynthia Saunders, and Stewart Small made key contributions  to this report."], "subsections": []}]}], "fastfact": ["For the 2020 Census, the Census Bureau is planning to increase its efforts to include hard-to-count groups, such as minorities, renters, and young children. It is adding more language choices for its materials, hiring more people for outreach in local communities, and hiring earlier.", "Still, the Bureau faces challenges such as integrating its outreach and promotion activities across its many different operations, and a tighter labor market that could make hiring people with key skills more difficult.", "We recommended the Bureau take steps to ensure changes in its efforts are incorporated across its operations, and collect detailed hiring data."]}
{"id": "GAO-18-564", "url": "https://www.gao.gov/products/GAO-18-564", "title": "Medicaid: CMS Needs to Better Target Risks to Improve Oversight of Expenditures", "published_date": "2018-08-06T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Medicaid has grown by over 50 percent over the last decade, with about $370 billion in federal spending in fiscal year 2017. CMS is responsible for assuring that expenditures\u2014reported quarterly by states\u2014are consistent with Medicaid requirements and matched with the correct amount of federal funds. CMS's review of reported expenditures has become increasingly complex due to variation in states' Medicaid programs and an increasing number of different matching rates.", "GAO was asked to examine CMS's oversight of state-reported Medicaid expenditures. In this report, GAO examined how CMS assures that (1) expenditures are supported and consistent with requirements; and (2) the correct federal matching rates were applied to expenditures subject to a higher match. GAO also examined the financial impact of resolved errors. GAO reviewed documentation for the most recently completed quarterly reviews by 3 of CMS's 10 regional offices for six states that varied by Medicaid program expenditures and design. GAO also reviewed policies, procedures, and data on resolved errors; and interviewed CMS and state officials. GAO assessed CMS's oversight processes against federal standards for internal control."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, has various review processes in place to assure that expenditures reported by states are supported and consistent with Medicaid requirements. The agency also has processes to review that the correct federal matching rates were applied to expenditures receiving a higher than standard federal matching rate, which can include certain types of services and populations. These processes collectively have had a considerable federal financial benefit, with CMS resolving errors that reduced federal spending by over $5.1 billion in fiscal years 2014 through 2017.", "However, GAO identified weaknesses in how CMS targets its resources to address risks when reviewing whether expenditures are supported and consistent with requirements.", "CMS devotes similar levels of staff resources to review expenditures despite differing levels of risk across states. For example, the number of staff reviewing California's expenditures\u2014which represent 15 percent of federal Medicaid spending\u2014is similar to the number reviewing Arkansas' expenditures, which represents 1 percent of federal Medicaid spending.", "CMS cancelled in-depth financial management reviews in 17 out of 51 instances over the last 5 years. These reviews target expenditures considered by CMS to be at risk of not meeting program requirements.", "CMS told GAO that resource constraints contributed to both weaknesses. However, the agency has not completed a comprehensive assessment of risk to (1) determine whether oversight resources are adequate and (2) focus on the most significant areas of risk. Absent such an assessment, CMS is missing an opportunity to identify errors in reported expenditures that could result in substantial savings to the Medicaid program.", "GAO also found limitations in CMS's processes for reviewing expenditures that receive a higher federal matching rate.", "Internal guidance for examining variances in these expenditures was unclear, and not all reviewers in the three CMS regional offices GAO reviewed were investigating significant variances in quarter-to-quarter expenditures.", "Review procedures for expenditures for individuals newly eligible for Medicaid under the Patient Protection and Affordable Care Act were not tailored to different risk levels among states. For example, in its reviews of a sample of claims for this population, CMS reviewed claims for the same number of enrollees\u201430\u2014in California as for Arkansas, even though California had 10 times the number of newly eligible enrollees as Arkansas.", "Without clear internal guidance and better targeting of risks in its review procedures for expenditures receiving higher matching rates, CMS may overpay states."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that CMS improve its risk-based targeting of oversight efforts and resources, and clarify related internal guidance. The Department of Health and Human Services concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Over the last decade, Medicaid\u2014a joint, federal-state program that  finances health care coverage for low-income and medically needy  populations\u2014has increased by over 50 percent, both in terms of  enrollment and cost. In fiscal year 2017, Medicaid covered an estimated  73.5 million individuals at an estimated cost of $596 billion, including  about $369 billion in federal spending. Federal projections indicate that  those costs will continue to grow.", "The Centers for Medicare & Medicaid Services (CMS), the agency within  the Department of Health and Human Services (HHS) that oversees  Medicaid, is responsible for providing federal funds on the basis of state  estimates of expenditures. CMS subsequently reconciles states\u2019 actual  expenditures against those estimates. Thus, a key part of CMS\u2019s  oversight responsibility is to review state-reported expenditures to assure  that they are supported and consistent with Medicaid requirements. Each  quarter, states report their expenditures to CMS through its CMS-64 form.  CMS regional offices are responsible for reviewing these reported  expenditures and working with states to resolve any questionable  expenditures. If CMS identifies errors\u2014which can include (1) errors in the  amounts reported or (2) reported expenditures that are not allowable\u2014the  agency can require states to reduce reported expenditures or return  federal funds. Because Medicaid requirements include higher than  standard federal matching rates for certain types of services and for  certain populations of enrollees, part of CMS\u2019s review process is to  assure that expenditures are being matched at the correct rate. For  example, states receive higher matching rates for services provided in  Indian Health Service (IHS) facilities and for family planning services.  They also receive higher matching rates for individuals newly eligible  under the Patient Protection and Affordable Care Act (PPACA), referred  to in this report as Medicaid expansion enrollees.", "While there is a common reporting form, state expenditure reporting  varies depending upon the populations and services states cover and  how they deliver and finance care. These variations reflect the diversity of  the design of states\u2019 Medicaid programs; however, the task of reviewing  reported expenditures has grown increasingly complex due to this  variation, and is further complicated by the growing number of different  federal matching rates for expenditures. When reporting errors or  inappropriate expenditures go undetected, it can result in overpayment by  the federal government.", "Given the significance of federal Medicaid expenditures and past  concerns about the challenges CMS has faced in ensuring that  expenditures are being matched at the correct rate, you asked us to  examine CMS oversight of state-reported expenditures. This report  examines the following:  1.  CMS\u2019s policies and procedures for assuring that state-reported  Medicaid expenditures are supported and consistent with Medicaid  requirements.  2.  How CMS assures that correct federal matching rates are applied to  expenditures subject to a higher than standard matching rate.  3.  The financial impact of CMS\u2019s efforts to resolve errors in reported  expenditures.", "To examine CMS\u2019s policies and procedures for assuring that state- reported Medicaid expenditures are supported and consistent with  Medicaid requirements, we reviewed CMS\u2019s internal guidance to regional  offices on conducting quarterly reviews of reported expenditures. We also  reviewed CMS\u2019s guidance to states on reporting expenditures, including  the reporting forms. To examine how CMS\u2019s regional offices implemented  this guidance, we selected 3 of 10 regional offices to achieve geographic  variation. We selected regional offices 3, 6, and 9, which cover states in  the East, South, and West of the United States. Within our three regional  offices, we selected six states to review CMS\u2019s oversight: Arkansas,  California, Maryland, Nevada, Pennsylvania, and Texas. We selected  these states to achieve variation in program expenditures, enrollment,  and program features, including whether they expanded Medicaid  eligibility under PPACA. Together these six states account for  approximately 30 percent of total federal Medicaid expenditures in fiscal  year 2015. We visited our selected regional offices to conduct a  walkthrough of their review of expenditures for our selected states for the  most recently completed quarter at the time we planned our site visits,  generally the first quarter of fiscal year 2017.", "We obtained and examined copies of reviewers\u2019 documentation of the  steps taken to complete their quarterly reviews in the six selected states,  including the completed review guides, summary memos, and  correspondence with state officials. We also reviewed CMS\u2019s internal  guidance for conducting financial management reviews, and obtained and  examined documentation of reviews conducted from 2014 through 2017  (the first 4 years of expansion under PPACA), and resources assigned to  review functions. In reviewing documentation of the quarterly reviews and  the financial management reviews, we determined whether current  procedures were resulting in reviewers identifying errors, but did not  assess the magnitude of the errors identified. We interviewed officials  from CMS\u2019s central office and our three selected regional offices about  their review policies, processes, and resources. We also interviewed  Medicaid officials from our six selected states about their experiences  submitting data and undergoing CMS\u2019s review processes. In evaluating  this information, we compared policies and procedures against the  Standards for Internal Control in the Federal Government.", "To examine how CMS assures that correct matching rates are applied to  expenditures, we reviewed CMS policies and procedures for reviewing  expenditures subject to a higher than standard federal matching rate,  including the quarterly review guide. In addition, we examined the extent  to which these were consistently applied by reviewing the quarterly review  documentation for our three selected regional offices. Specifically, we  examined how they reviewed expenditure reporting for four types of  expenditures for which states receive a higher federal matching rate: IHS,  services for certain women with breast or cervical cancer, family planning,  and Medicaid expansion. We selected these four expenditure types  because they cover a variety of services and populations, and under  CMS\u2019s quarterly review guidance, they are subject to specific review  procedures. We also tested CMS\u2019s reviews by completing our own  reviews of reported expenditures in the six states. Specifically, we  calculated the variance in expenditures from the quarter under review to  the previous quarter, which is in line with CMS\u2019s review guidance. We  also interviewed CMS officials, including officials in our selected regional  offices about their review process. In evaluating the measures CMS has  taken to assure that correct matching rates are applied to different  expenditures, we compared policies and procedures against the  Standards for Internal Control in the Federal Government.", "To examine the financial impact of errors resolved by CMS, we reviewed  data on errors resolved in fiscal years 2014 through 2017, the four most  recent years of available data. Specifically, we reviewed data on the  magnitude of errors resolved through states reducing reported  expenditures and on errors resolved by CMS issuing a disallowance,  which requires a state to return federal funds. We also reviewed data on  deferrals of federal funds (i.e., CMS defers payment until issues are  resolved) as of the end of fiscal year 2017. We asked CMS officials  responsible for overseeing data on errors to describe the reliability of the  data, including any limitations. For the data on disallowances, deferrals,  and errors resolved by states reducing reported expenditures, we  reviewed relevant documentation; examined the data for obvious errors,  such as missing values; and compared the results to other supporting  documentation to ensure accuracy, when possible. We determined that  all data were sufficiently reliable for the purposes of our reporting  objectives. We also reviewed the documentation from the three selected  regional offices\u2019 quarterly expenditure reviews for examples of errors  resolved in our six selected states. Using the data on disallowances, and  documentation from the quarterly expenditure reviews, we analyzed the  range in types of errors and the range in the financial impact of errors  resolved by CMS. We also interviewed CMS officials from the regional  offices and CMS\u2019s central office about the errors resolved and their  procedures for issuing deferrals and disallowances.", "We conducted this performance audit from April 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "State Expenditure Reporting", "paragraphs": ["In order to receive federal matching funds, states report expenditures  quarterly to CMS on the CMS-64. States are required to report their  expenditures to CMS within 30 days of the end of each quarter, but may  adjust their past reporting for up to 2 years after the expenditure was  made, referred to as the 2-year filing limit. Adjustments can reflect  resolved disputes or reclassifications of expenditures. Expenditures  reported after the 2-year filing limit are generally not eligible for a federal  match, with certain exceptions.", "The CMS-64 is a series of forms that capture expenditure data for  different aspects of states\u2019 Medicaid programs, such as different types of  services, populations, and different federal matching rates. (See table 1  for examples of the expenditure types captured by the CMS-64.) States  report their expenditures quarterly on the CMS-64 at an aggregate level\u2014 such as a state\u2019s total expenditures for such categories of services as  inpatient hospital services\u2014and these reported expenditures are not  linked to individual enrollees or services. States\u2019 reporting may vary  depending on the features of their Medicaid program. Some examples of  this variation include the following:", "States that expanded eligibility under PPACA would need to report  expenditures not only by the type of services (e.g., inpatient hospital  services), but also by populations receiving different federal matching  rates, such as expansion enrollees.", "States with waivers\u2014that is, where the state received approval from  HHS to waive certain Medicaid requirements in order to test and  evaluate new approaches for delivering and financing care under a  demonstration\u2014would need to report those expenditures associated  with these waivers on additional forms."], "subsections": []}, {"section_title": "CMS Oversight of State Expenditure Reporting", "paragraphs": ["CMS is responsible for assuring that expenditures reported by states are  supported and allowable, meaning that the state actually made and  recorded the expenditure and that the expenditure is consistent with  Medicaid requirements. CMS regional offices perform the ongoing  oversight, with enhanced oversight procedures in the 20 states with the  highest federal Medicaid expenditures. (See fig.1)", "CMS is required to review the expenditures reported by states each  quarter. (See fig. 2.) Regional office reviewers have 50 days to review the  expenditures and compute the federal share of states\u2019 Medicaid  expenditures.", "As part of the quarterly review, regional office reviewers also check that  expenditures receive the correct matching rate. In general, the amount of  federal funds that states receive for Medicaid services is determined  annually by a statutory formula\u2014the Federal Medical Assistance  Percentage (FMAP), which results in a specific federal matching rate for  each state. However, there are a number of exceptions where higher  federal matching rates can apply for certain types of beneficiaries,  services, or administrative costs. See table 2 for examples of higher  matching rates that apply for expenditures for certain types of enrollees,  services, or administrative costs.", "When CMS identifies questionable expenditures or errors through its  reviews, there are several ways that they can be resolved, as  summarized below.", "Deferral of federal funds. CMS can defer federal matching funds if,  during the quarterly review, the regional office reviewer needs  additional information to determine whether a particular expenditure is  allowable. The reviewer may recommend that CMS defer the  expenditure until the state provides additional support or corrects the  reporting.", "State reducing reported expenditures. If the state agrees that the  questionable expenditure is an error, the state can submit an adjusted  report during the quarterly review or make an adjustment in a  subsequent quarter. These adjustments prevent federal payments  for those expenditures.", "Disallowance of expenditure. If CMS determines an expenditure is  not allowable, CMS can issue a disallowance, and the state returns  federal funds through reductions in future federal allocations. States  may appeal disallowances."], "subsections": []}]}, {"section_title": "CMS Has Processes in Place to Assure that State-Reported Medicaid Expenditures Are Supported and Allowable, but Weaknesses Limit Its Ability to Effectively Target Risk", "paragraphs": ["CMS uses a variety of processes to assure that state-reported  expenditures are supported during quarterly reviews and performs  focused financial management reviews on expenditures considered at  risk of not complying with Medicaid requirements. Although we found that  CMS was identifying errors and compliance issues using both review  methods, we also found weaknesses in how CMS targets its oversight  resources to address risks."], "subsections": [{"section_title": "CMS Uses Quarterly Reviews, Supplemented with More Focused Reviews, to Assure that Reported Expenditures Are Supported and Allowable and Has Detected Errors in the Process", "paragraphs": ["CMS uses quarterly reviews to assess whether expenditures are  supported by the state\u2019s accounting systems; are in accordance with  CMS approved methodologies, plans, and spending caps; and whether  there are significant unexplained variances\u2014changes in expenditures\u2014 from one quarter to the next (referred to as a variance analysis). CMS  review procedures include validation measures that check to ensure that  expenditures were reported within the 2-year limit, which is a check done  on all types of expenditures. Another validation measure compares  expenditures to various approval documents. For example, when a state  has a waiver in place, expenditures are reviewed against waiver  agreements that authorize payment for specified services or populations.  Other examples include comparing supplemental payment expenditures  to caps set for those expenditures. (See table 3.)", "Our examination of the quarterly reviews indicated that the reviews  involved significant coordination with other CMS staff and the state. In  addition to reviewing state documentation, officials from two regional  offices told us that they consult other regional office staff who oversee the  approval of new expenditures to ensure that expenditures reflect  approved program features. For example, officials in region 9 told us that  in reviewing managed care expenditures, they consult with their  colleagues who review the state\u2019s payment methodologies for capitated  payments. In reviewing information technology development  expenditures\u2014which are subject to a higher federal matching rate\u2014 reviewers for all six selected states examined advanced planning  documents, which requires coordination with staff who approve those  documents to ensure that the state was receiving the correct matching  rates and staying within the approved amounts. With regard to  coordination with states, we found that regional reviewers for all six  reviews contacted states to follow-up on issues identified during the  review. Officials also described being in regular contact with states to stay  abreast of program, system, and staffing changes to inform their reviews.  For example, according to regional officials, Arkansas experienced some  significant and unexpected staffing challenges in 2016 that resulted in  delays in the state reporting expenditures and returning federal  overpayments, and the reviewer worked closely with state staff to track  the state\u2019s progress.", "We found evidence that reviewers identified errors during their quarterly  reviews. In the six quarterly reviews we examined, regional offices  identified errors in three of the six states. For example, region 3  reviewers found errors in Maryland\u2019s expenditure reporting\u2014including  claims for the wrong matching rate for two enrollees who were not eligible  for PPACA\u2019s Medicaid expansion and reporting provider incentive  payments on the wrong line\u2014and worked with the state to correct those  errors. Additionally, region 9 reviewers found errors in California\u2019s  reporting of expenditures. For example, they found that the state reported  waiver expenditures for the incorrect time period, which has implications  for CMS\u2019s ability to monitor and enforce spending limits for the waiver.  Reviewers worked with the state to correct those errors.", "To supplement the quarterly reviews, CMS generally directs regional  offices to conduct a focused financial management review (FMR) each  year on an area of high risk within the region, typically within one state.  According to regional officials, CMS uses these reviews to investigate  expenditures in greater depth and detail than is reasonable within the  timeframes of a quarterly review. For example, reviewers can examine  individual claims for services from providers or the methodologies  developed for certain payment types. Regional reviewers also use these  reviews to investigate errors that could not have been detected by the  quarterly review. For example, regional office 6 officials told us that they  uncovered inappropriate financing arrangements when they used an FMR  to examine how Texas financed the state share of its supplemental  payments to hospitals in one of its counties. To do so, the regional office  reviewed payments from the state to the provider, project plans, and  interviewed providers\u2014steps that are not part of the quarterly review  process. Rather, in the quarterly review, the reviewer only checks that  state-reported payments are supported by state accounting records and  are within applicable caps; thus, inappropriate financing of the state share  would not have been detected through the quarterly review.", "In fiscal years 2014 through 2017, CMS used FMRs to review various  expenditures considered to be at risk for not complying with Medicaid  requirements. Specifically, as outlined in annual work plans, regional  offices planned to conduct 31 FMRs and estimated that the total amount  of federal funds at risk in expenditure areas covered by their planned  reviews was $12 billion. (See app. I.) Planned FMRs targeted a wide  range of topics, with the reviews most frequently targeting expenditures  for the Medicaid expansion population. (See table 4.)", "We found that CMS frequently identified compliance issues through  FMRs. As of March 2018, CMS reported that reviewers had identified  compliance issues with financial impact in 11 of the 31 planned FMRs,  though most of those findings were still under review. More findings from  the planned FMRs are likely as some of the reviews were still ongoing.  We reviewed the draft results for 5 FMRs. Among these, CMS found  that four states were reporting expenditures that were not allowable. For  example, as noted earlier, a 2014 FMR on supplemental payments in  Texas revealed inappropriate funding arrangements, and CMS issued a  disallowance for approximately $27 million. In some cases, FMRs did not  have apparent financial findings, but identified significant internal control  weaknesses in the state and recommended specific corrective actions\u2014 such as better aligning eligibility and expenditures systems to better  detect and correct irregularities\u2014that would provide greater assurances  that federal funds are appropriately spent.", "Both the quarterly reviews and the FMRs occur in conjunction with other  ongoing CMS financial oversight activities. For example in addition to  reviewing expenditures, regional office reviewers assess how states  estimate their costs, set payment rates for managed care and home and  community based services, and allocate costs among different Medicaid  administrative activities under their cost allocation plans. CMS officials  told us that issues relating to state compliance with Medicaid  requirements for expenditures could be identified during these other  oversight activities and could inform follow-up during the quarterly reviews  or be the subject of a FMR. Officials also told us that since FMRs were  instituted, the agency has built in more front-end procedures for  preventing problems with the accuracy and allowability of reported  expenditures. As examples, they cited their work on managed care rate  reviews, among other things."], "subsections": []}, {"section_title": "Weaknesses Limit CMS\u2019s Ability to Effectively Target Risk in Its Oversight of Expenditures", "paragraphs": ["We identified two weaknesses in how CMS is allocating resources for  overseeing state-reported expenditures that limited the agency\u2019s ability to  target risk in its efforts to assure that these expenditures are supported  and consistent with Medicaid requirements. First, we found that CMS has  allocated similar staff resources to states with differing levels of risk. For  example, the staff resources dedicated to reviewing California\u2019s  expenditures\u2014ranking first nationally in expenditures and constituting 15  percent of all federal Medicaid expenditures\u2014are comparable to  significantly smaller states in other regions, despite California\u2019s history of  reporting challenges and its inability to provide electronic records, which  requires on-site review. (See fig. 3.) CMS has allocated 2.2 staff to  review California\u2019s expenditures in contrast to one person to review  Arkansas\u2019 expenditures, which constitute 1 percent of federal Medicaid  expenditures, and Arkansas does not have a similar history of complex  reporting challenges. We also found that California\u2019s reviewers have set a  higher threshold for investigating variances in reported expenditures than  in the five other selected states. Specifically, reviewers investigated  variances in California of plus or minus 10 percent if the variances  represented more than 2 percent of medical expenditures, or $450 million  in the quarter we reviewed. The state experienced an approximately 24  percent increase in its prescription drug expenditures\u2014roughly $200  million\u2014during that quarter, but the variance was deemed not  significant. In contrast, for two of our five other selected states, we  found that reviewers generally investigated variances of plus or minus 10  percent regardless of the dollar amount of the variance and in the  remaining three states they had significantly lower dollar thresholds than  used for California.", "Second, CMS reported cancelling the FMR requirement for regional  offices in 17 out of 51 instances in the last 5 years when faced with  resource constraints. In some cases, CMS excused individual regional  offices from conducting planned FMRs due to staff shortage as the  agency did for regions 3 and 7 in 2014; region 8 in 2016; and regions 3,  7, 8, and 9 in 2018. In 2015, according to CMS officials, all 10 regions  were excused from conducting an FMR, because the regional offices  needed their staff to focus on implementing new procedures for validating  expenditures for the Medicaid expansion population. In addition to  cancelling FMRs, CMS was delayed in finalizing FMRs. Among the eight  FMRs that were conducted in fiscal year 2014,  three have been issued as final reports,", "CMS decided no report was needed on a fourth, and  the four remaining FMRs from 2014 were still under review as of  March 2018, delaying important feedback to states on their  vulnerabilities.", "According to CMS officials, resource constraints have contributed to both  of these weaknesses. Our analysis of staffing data indicated that, from  fiscal years 2014 to 2018, the number of full time equivalent staff  dedicated to financial oversight activities declined by approximately 19  percent across all 10 regions. These staff are responsible not only for  completing the quarterly reviews and FMRs, but also other financial  oversight activities, including resolving audit findings and other on-going  oversight activities noted previously. During this period, federal  Medicaid expenditures are estimated to have increased by approximately  31 percent, and the reporting of expenditures has grown more complex.  In addition to the decline in dedicated staff, officials told us they faced  challenges in filling vacancies either because of hiring restrictions or  challenges in recruiting qualified candidates. Officials described  instances where regional offices shared resources with other offices to  address critical gaps in resources. For example region 9 was able to  obtain part-time assistance from a region 6 reviewer to help review  California\u2019s expenditures. However, CMS officials told us that they had  not permanently reallocated resources between regional offices, because  all regional offices are under-resourced given their various oversight  responsibilities as of May 2018. With regard to cancelling FMRs, CMS  officials noted that other oversight responsibilities, including the quarterly  reviews, are required under statute or regulation and thus have a higher  priority than FMRs.", "Compounding its resource allocation challenges, CMS has not conducted  a comprehensive, national assessment of risk to determine whether  resources for financial oversight activities are (1) adequate and (2)  allocated\u2014both across regional offices and oversight tools\u2014to focus on  the greatest areas of risk. Agency officials told us that they have not  conducted a formal risk assessment, because they are assessing risk on  an on-going basis, allocating resources within each region accordingly  and sharing resources across regions to the extent possible. However,  this approach does not make clear whether the level of resources  dedicated to financial oversight nationally is adequate given the risk.", "Federal internal control standards for risk assessment require agencies to  identify and analyze risks related to achieving the defined objectives (i.e.,  assuring that state-reported expenditures are in accordance with  Medicaid rules), and respond to risks based on the significance of the  risk. Without completing a comprehensive, national assessment of risk  and determining whether staff resources dedicated to financial oversight  are adequate and allocated commensurate with risk, CMS is missing an  opportunity to improve its ability to identify errors in reported expenditures  that could result in hundreds of millions of dollars in potential savings to  the Medicaid program."], "subsections": []}]}, {"section_title": "Vulnerabilities Exist in CMS\u2019s Review of Expenditures for Which States Receive Higher Federal Matching Rates", "paragraphs": ["CMS reviewers in the selected regional offices we reviewed did not  consistently perform variance analyses\u2014which compare changes in  expenditures from the quarter under review to the previous quarter\u2014of  higher matched expenditures during quarterly reviews. Further, the  sampling procedures used to examine Medicaid expansion expenditures  did not account for varying risks across states."], "subsections": [{"section_title": "CMS Did Not Consistently Conduct Variance Analyses When Reviewing Certain Types of Expenditures that Receive Higher Federal Matching Rates", "paragraphs": ["CMS has multiple procedures in place to review expenditures that receive  a higher federal matching rate. As with other expenditures, reviewers are  required to complete a variance analysis, comparing reported  expenditures in the quarter under review to those reported in the prior  quarter and investigating variances above a certain threshold. However,  we found that our three selected regional offices were not consistently  conducting these analyses across several different types of expenditures  with higher matching rates.", "While CMS\u2019s internal guidance required that regional offices conduct  variance analyses on expenditures with higher matching rates, we found  that for the quarter we investigated (generally the 1st quarter of fiscal year  2017), our selected regional offices did not consistently do so for three  types of expenditures that we reviewed: IHS, family planning, and certain  women with breast or cervical cancer. Two of the three regional offices  (regions 3 and 9) did not conduct or did not document these required  variance analyses, and the remaining regional office (region 6) conducted  the analyses but deviated from standard procedures outlined in CMS  guidance, as summarized below.", "CMS region 3. Reviewers did not conduct variance analyses for either  Maryland or Pennsylvania. Regional office staff with whom we spoke  said that as part of the quarterly review they conduct the standard  variance analysis on category of service lines of the CMS-64.  Expenditures for IHS, family planning and services for certain women  with breast or cervical cancer are not separately identified at that  level. Although CMS reviewers said they thought the standard  analysis was sufficient, net changes within a broad service category  may obscure major changes within these higher matched  expenditures. For example, examining changes in total inpatient  hospital expenditures would not necessarily reveal a significant  variance limited to inpatient expenditures in IHS facilities that receive  a higher federal match.", "CMS region 9. Reviewers told us that they examined higher matched  expenditures for California; however, no variance analyses of IHS,  family planning, or breast or cervical cancer services were included in  the work papers provided to us. In addition, they told us that they do  not conduct a variance analysis on IHS, family planning, and services  for certain women with breast or cervical cancer for Nevada, noting  that expenditures in these areas tend to be quite small.", "CMS region 6. Reviewers conducted a variance analysis of these  higher matched expenditures for Arkansas and Texas and provided  us documentation; however, the documentation showed some  deviation from the required steps specified in CMS\u2019s guidance. For  example, for Texas, spending on two of the three categories was  beyond the threshold for significance, but the reviewer did not  document any follow-up with the state.", "Although expenditures for IHS, family planning, and certain women with  breast or cervical cancer constituted a small share of total federal  spending on Medicaid services\u2014roughly 1 percent\u2014combined spending  on these categories was approximately $1 billion in the first quarter of  fiscal year 2017. Our analysis indicated that variances in spending for  these three services ranged widely across our six states, and in four of  the states, some of their expenditures were above the thresholds for  significance. (See fig. 4.) For example, in regional office 3, Maryland  experienced a significant variance in its family planning expenditures\u2014an  increase of approximately $8 million dollars or 7,700 percent from the  previous quarter\u2014but there was no indication in the documentation  provided that the regional office identified or investigated that variance.", "Similar to the variance analyses for other higher matched expenditure  types, we found that the selected regional offices did not consistently  conduct variance analyses on expenditures reported for the Medicaid  expansion population. First, although five of our six states opted to  expand Medicaid under PPACA, two of the five states (Maryland and  Pennsylvania) were not subjected to a variance analysis for their  expansion populations, a segment that accounted for nearly $7 billion in  Medicaid expenditures in fiscal year 2016. Among the remaining three  states, CMS regional office staff conducted a variance analysis, but in two  of them, the reviewers did not document whether they investigated  significant variances, leaving it unclear whether this required step was  taken. Specifically, for two of the three remaining states\u2014Arkansas and  Nevada\u2014reviewers did not document which variances were deemed  significant or that any such variances were discussed with state officials.", "The guidance specified in CMS\u2019s quarterly review guide is not always  clear or consistent. For example:", "For IHS, family planning, and certain women with breast or cervical  cancer, the guidance is explicit that the analysis is required, but the  automated variance report used by reviewers for the step does not  include these expenditures.", "For Medicaid expansion expenditures, the review guide is not explicit  about whether a variance analysis is required, but CMS has an  automated variance report available for these expenditures, which  suggests that such an analysis was expected.", "The guidance suggests that a variance analysis should be conducted  for expansion enrollees; however, it does not specify whether the  analysis should be conducted in conjunction with\u2014or take the place  of\u2014more in-depth examinations.", "According to federal internal controls standards for information and  communication, agencies should communicate the information necessary  for staff to achieve the agency\u2019s objectives. CMS\u2019s guidance on  conducting variance analyses for types of expenditures with higher  federal matching rates has not been sufficiently clear to assure that such  analyses are being consistently conducted. By not consistently  conducting such checks, errors may be going undetected and CMS may  be providing federal funds at a higher matching rate than is allowable."], "subsections": []}, {"section_title": "The Sampling Procedures Used to Examine Medicaid Expansion Expenditures Did Not Account for Varying Risks across States", "paragraphs": ["CMS has additional procedures in place to review service expenditures  reported for the Medicaid expansion population, a category of  expenditures that received a 95 percent federal match in 2017.  Specifically, in addition to a variance analysis, CMS guidance specifies  that each regional office reviewer is to review claims for a sample. The  guide directs the reviewer to obtain a full list of all expansion enrollees  from the state and to select 30 to 40 for further review. Next, the reviewer  is to obtain supporting documentation from the state listing the eligibility  factors for the sampled enrollees, such as age, pregnancy status,  Medicare enrollment, and income. The reviewer is to select a single claim  for each enrollee and verify that the corresponding expenditures were  reported under the correct federal matching rate category\u2014i.e., that the  sample claim for each individual was accounted for in the relevant section  of the CMS-64. The review guide specifies that the sample review be  conducted each quarter unless the state has had four consecutive  quarters with three or fewer errors, in which case, the sampling must be  performed only annually.", "We found that regional offices were identifying errors in their sampling  reviews. For example, region 3 reviewers found that Pennsylvania had  incorrectly categorized an individual in the sample as a Medicaid  expansion enrollee, with the selected expenditures initially reported as  eligible for the higher matching rate. According to CMS central office  officials, the sampling methodology has helped identify systemic issues  with state expenditure systems in some states and resulted in corrections,  adjustments, and in one case, a disallowance. Under current procedures,  among our five selected states that expanded Medicaid under PPACA, all  five were determined to have had four consecutive clean quarters  according to agency officials; that is, the state had three or fewer errors in  each quarter. Nationally, all but one of the 33 states that have  implemented Medicaid expansion under PPACA had four consecutive  clean quarters as of March 2018, according to CMS officials.", "We found, however, that CMS\u2019s procedures for sampling reviews had a  key weakness in that they did not account for varying risks across states,  as illustrated in the following examples.", "We found that sample size does not account for significant differences  in program size. For example, both California and Arkansas have  expanded Medicaid under PPACA, and regional office staff told us  they reviewed claims for 30 expansion enrollees in each of the two  states, despite the fact that California has over 10 times as many  expansion enrollees as Arkansas. Region 9 officials told us that for  California they had initially sampled 100 enrollees during the first  quarter they were required to conduct this analysis, but the review  was time consuming given staff resources, and they were advised by  CMS\u2019s central office to limit their sample to 30 individuals. CMS  officials told us that the sampling procedures are resource intensive  and that the sample size they decided upon was what they thought  they had the resources to complete.", "Additionally, the sample size does not account for previously identified  risks in a state\u2019s program. Specifically, as we noted in a 2015 report,  CMS\u2019s sampling review of expansion expenditures was not linked to  or informed by reviews of eligibility determinations conducted by CMS,  some of which identified high levels of eligibility determination  errors. According to CMS officials, the expenditure review is  primarily intended to ensure that states are correctly assigning  expenditures for the expanded eligibility groups as initially determined,  not whether the eligibility determination is correct.", "Federal standards for internal control related to risk assessment require  that agencies identify, analyze, and respond to risks. However, because  CMS\u2019s sampling methodology does not account for risk factors like  program size and high levels of eligibility determination errors, the  agency\u2019s review of expansion population expenditures may be missing  opportunities to detect systemic issues with improperly matched  expenditures.", "Quarterly variance analyses and sampling of Medicaid expansion  enrollees can be supplemented by financial management reviews. For  fiscal year 2016, CMS recommended regional offices conduct FMRs on  expenditure claims for expansion enrollees. As of March 2018, however,  regional offices had completed an FMR on Medicaid expansion  expenditures in only one state, with no findings, and were in the process  of completing FMRs for five other states. According to CMS officials, no  additional reviews in this area were planned for fiscal year 2018."], "subsections": []}]}, {"section_title": "CMS Resolved over $5.1 Billion in Expenditure Errors in Fiscal Years 2014 through 2017", "paragraphs": ["Financial Impact of Expenditure Reviews  Compared with Program Integrity  Recoveries   The impact of CMS\u2019s expenditure review  activities is greater than the impact from other  program integrity efforts. For example, in  fiscal year 2015, CMS resolved errors through  expenditure reviews that saved over $1.4  billion in federal funds. In the same year,  CMS reported that efforts by states and the  federal government to identify improper  payments to providers\u2014for example, services  that were billed by a provider but were not  received by a beneficiary\u2014resulted in  recoveries that totaled $852.9 million, in both  state and federal funds.", "In fiscal years 2014 through 2017, CMS\u2019s regional offices resolved  expenditure errors that reduced federal spending by over $5.1 billion, with  at least $1 billion in errors resolved in each of three of those four years.  Errors were resolved through states agreeing to reduce their reported  expenditures, which prevented federal payments to the state for those  expenditures; and through CMS issuing disallowances, under which  states are required to return federal funds. Although CMS resolved over  $1 billion in expenditure errors in each year of fiscal years 2014 through  2016, CMS resolved less than $600 million in fiscal year 2017. CMS  officials explained that this change likely reflects delays in clearance of  disallowances due to the transition between presidential administrations.  (See fig. 3.) In addition to these resolved errors, as of the end of 2017,  CMS had $4.47 billion in outstanding deferrals of federal funds, where  CMS was delaying federal funds until additional information was provided.  Expenditures flagged for deferrals may or may not represent errors.", "All 10 CMS regional offices resolved errors from fiscal years 2014 through  2017, though the magnitude varied across regions. (See table 5.) Among  the 10 regional offices, 9 reported that they had resolved errors through  states agreeing to reduce reported expenditures. Additionally, 9 regional  offices issued a total of 49 disallowances across 16 states, with the  majority of the disallowances occurring in regional offices 2 and 3. Finally,  all 10 regional offices had taken deferrals for questionable expenditures,  with 22 states having outstanding \u201cactive\u201d deferrals that had not been  resolved as of the fourth quarter of fiscal year 2017, which ranged in  amount from $178 to $444 million. CMS officials told us that the range of  resolved errors and deferred funds across regional offices may reflect  differences in the proportion of high-expenditure states. For example,  regional office 4 oversees four states ranking in the top 20 in terms of  Medicaid expenditures, while regional office 8 does not oversee any top- 20 states. The variation may also reflect large actions taken in specific  states. For example, the majority of the disallowed funds in regional office  2 from fiscal years 2014 to 2017 were due to a single disallowance of  $1.26 billion in one state.", "The financial significance of individual errors resolved by CMS\u2019s regional  offices varied significantly. We found that regional offices resolved errors  that ranged from reporting errors that had no federal financial impact\u2014 such as expenditures that were allowable, but were reported on the  incorrect line\u2014to hundreds of millions of dollars in expenditures that were  found to be unallowable under Medicaid requirements. Over the fiscal  years we reviewed, more than half of the disallowances CMS issued were  less than $15 million; however, in four states CMS issued disallowances  of over $100 million, including a disallowance of over $1 billion in New  York. (See fig. 5.)", "In some cases, actions taken by CMS to resolve errors were the  culmination of years of work. For example, over several years the  California Medicaid program reported a large volume of expenditures for  which it did not yet have sufficient supporting documentation. The  regional office officials told us that the state reported these expenditures  in order to comply with the 2-year filing limit, and had reported these as  \u201cplaceholder claims,\u201d with the intention of providing additional support at a  later time. Over the course of at least 6 years, CMS deferred hundreds of  millions of dollars in federal funds related to these placeholder claims. Of  the active deferrals as of the end of fiscal year 2017, most of the total  amount of deferred funds was taken for expenditures in California, which  represented $3.4 billion of the $4.5 billion in total active deferrals.  According to CMS officials, in 2015, CMS prohibited California from  reporting additional placeholder claims. Region 9 officials told us that they  continue to work with the state to clear the deferrals related to this issue.  They were able to resolve 9 related deferrals in fiscal year 2017;  however, another over 60 deferrals were still unresolved."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The growth of federal Medicaid expenditures, estimated at about $370  billion in fiscal year 2017, makes it critically important to assure  expenditures are consistent with Medicaid requirements. CMS has a  variety of processes in place to review state-reported expenditures, and  those reviews have resulted in CMS resolving errors that have saved the  federal government a considerable amount of money; over $5 billion in  the last 4 years. However, the increasing complexity of expenditure  reporting is occurring as resources to review these expenditures are  decreasing, hindering CMS\u2019s ability to target risk and potentially allowing  for hundreds of millions of federal dollars in errors to go undetected. In  the absence of a comprehensive risk assessment, which CMS has not  conducted, CMS may be missing opportunities to better target resources  to higher risk expenditures and increase the savings from these oversight  activities.", "The variety of different matching rates has contributed to the increased  complexity of CMS\u2019s expenditure reviews. Although CMS has review  procedures in place to assure that the correct matching rate is applied for  services and populations receiving a higher federal matching rate, unclear  guidance has contributed to inconsistency in the extent to which these  reviews are conducted. In addition, we found weaknesses in the sampling  methodology CMS requires its regional offices to use to help ensure that  expenditures for Medicaid expansion enrollees\u2014expenditures that  receive a higher matching rate and that represented almost 20 percent of  total federal Medicaid spending in 2016\u2014are consistent with Medicaid  requirements. In particular, the methodology does not account for risk  factors like program size or vulnerabilities in state eligibility-determination  processes and systems. As a result of the inconsistency in reviews and a  sampling methodology that does not consider program risk, errors may be  going undetected, resulting in CMS providing federal funds at higher  federal matching rates than is allowable. In addition, CMS could be  missing opportunities to identify any systemic issues that may contribute  to such errors."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following three recommendations to CMS:  1.  The Administrator of CMS should complete a comprehensive, national  risk assessment and take steps, as needed, to assure that resources  to oversee expenditures reported by states are adequate and  allocated based on areas of highest risk. (Recommendation 1)  2.  The Administrator of CMS should clarify in internal guidance when a  variance analysis on expenditures with higher match rates is required.  (Recommendation 2)  3.  The Administrator of CMS should revise the sampling methodology for  reviewing expenditures for the Medicaid expansion population to  better target reviews to areas of high risk. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHS  concurred with all three recommendations, noting that it takes seriously  its responsibilities to protect taxpayer funds by conducting thorough  oversight of states\u2019 claims for federal Medicaid expenditures. Regarding  our first recommendation\u2014that CMS complete a comprehensive, national  risk assessment and take steps to assure that resources are adequate  and allocated based on risk\u2014HHS noted that CMS will complete such an  assessment, and, based on this review, will determine the appropriate  allocation of resources based on expenditures, program risk, and  historical financial issues. CMS will also identify opportunities to increase  resources. Regarding our second recommendation\u2014clarifying internal  guidance on when a variance analysis on higher matched expenditures is  required\u2014HHS noted that CMS will issue such internal guidance.  Regarding our third recommendation\u2014that CMS revise the sampling  methodology for reviewing expenditures for the Medicaid expansion  population to better target reviews to areas of high risk\u2014HHS noted CMS  is considering ways to revise its methodology.", "HHS\u2019s comments are reproduced in appendix II.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services, appropriate congressional  committees, and other interested parties. The correspondence is also  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: CMS Financial Management Review (FMR) Topics and Estimated Amounts at Risk, Fiscal Years 2014 through 2017", "paragraphs": [], "subsections": [{"section_title": "Regional office 1", "paragraphs": ["Public psychiatric residential treatment facilities   Medicare Part B premium buy-ins  Outpatient hospital reimbursement for mental health services  Review of comprehensive psychiatric emergency program rates  Provider taxes implemented to avoid program reductions  Health homes data and expenditures reporting  Provider incentive payments for health information technology   1115 demonstration provider incentive payments  Public psychiatric residential treatment facilities  Managed care organizations\u2019 provider payments  Provider incentive payments for health information technology   Federally qualified health center reimbursement payments  Eligibility and enrollment maintenance and operations  Managed care organizations\u2019 reporting of drug rebates   3   CMS cancelled these 2014 FMRs due to a staffing shortage.  Region 8 was excused from the requirement to conduct an FMR in 2016 due to staffing constraints."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Susan Barnidge (Assistant  Director), Jasleen Modi (Analyst-in-Charge), Caroline Hale, Perry  Parsons, and Sierra Gaffney made key contributions to this report. Also  contributing were Giselle Hicks, Drew Long, and Jennifer Whitworth."], "subsections": []}]}], "fastfact": ["The Centers for Medicare & Medicaid Services (CMS) review state spending reports to verify that states appropriately spent their federal Medicaid funds.", "CMS reviewers have saved over $5 billion in the past 4 years by identifying errors in state spending reports\u2014finding expenditures that lacked supporting data or were not allowed under Medicaid rules.", "Could they be finding more? CMS may be missing chances to save because of how it targets its reviews. For example, CMS has 1 staff member reviewing Arkansas reports and only 2.2 staff reviewing California, which spends 15 times as much. Our recommendations address this and other issues we found."]}
{"id": "GAO-18-27", "url": "https://www.gao.gov/products/GAO-18-27", "title": "DOD Financial Management: Additional Actions Needed to Complete the Army's Analyses of Unsupported Accounting Entries for Its General Fund", "published_date": "2017-10-20T00:00:00", "released_date": "2017-10-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of Defense (DOD) remains on GAO's High-Risk List in part because of its long-standing financial management deficiencies, which have prevented it from having auditable financial statements. One of the contributing factors is the billions of dollars of unsupported JVs within DOD's accounting systems, with the largest portion attributable to the Army's general fund. Because the National Defense Authorization Act for Fiscal Year 2014 required that DOD submit audit results to Congress for fiscal year 2018, a Working Group was established to address the Army's unsupported JVs, including analyzing root causes and developing corrective action plans.", "This report examines to what extent the Working Group, as of March 2017, has performed analyses and developed corrective action plans to address identified root causes. GAO reviewed and analyzed relevant documentation and interviewed agency officials and members of the Working Group."]}, {"section_title": "What GAO Found", "paragraphs": ["Since February 2015, the Journal Voucher Working Group (Working Group), which is comprised of Department of the Army (Army) and Defense Finance and Accounting Service personnel, has been actively working toward implementing new processes to address inadequate support for journal vouchers (JV) in the Army's general fund. JVs are accounting entries manually entered or system generated to record corrections or adjustments in an accounting system. From October 2016 to March 2017, the Working Group identified more than 121,000 unsupported JVs totaling $455 billion in one of its reporting systems, Defense Departmental Reporting System-Budgetary (DDRS-B).", "In the May 2017 Financial Improvement and Audit Readiness Plan Status Report, the Army stated that it had completed its root cause analyses for all JVs. However, GAO found that the Working Group had conducted the analyses on only a small percentage of the total number of unsupported JVs that existed as of March 2017. Specifically, as of March 2017, the Working Group had been focusing on manual JVs processed in DDRS-B, which only represent 10 percent of the dollar value and 3 percent in the total number of unsupported JVs in that system alone. Therefore, the analyses cannot be considered complete because the Working Group had not yet analyzed the remainder of the population, including those in other systems. Members of the Working Group indicated that in March 2017, the Working Group began including system-generated JVs in its analyses, which made up 90 percent in dollar value and 97 percent in total number of unsupported JVs processed in DDRS-B as of March 2017, but had not yet begun identifying any root causes. Members of the Working Group stated that these efforts will be an ongoing, iterative process because of anticipated new challenges that continually arise from new business processes or programs.", "As of March 2017, the Working Group reported that it had developed 38 corrective action plans to address all of the identified root causes of unsupported manual JVs in DDRS-B for the Army's general fund. According to members of the Working Group, 18 of the 38 have been implemented. However, the Working Group is unable to determine how many more corrective action plans will need to be developed to resolve the unsupported JV issue until the root cause analyses are complete. Further, GAO found that the Working Group's monitoring of corrective action plan implementation does not include a method that sufficiently identifies the progress toward fully addressing the issue of unsupported JVs or to what extent each implemented corrective action plan has reduced unsupported JVs. Members of the Working Group stated that the Working Group uses monthly JV metrics reports to monitor its implemented corrective actions, but the reports are not designed to provide the level of detail necessary to sufficiently monitor whether root causes identified are resolved through corrective action plans. Therefore, the metrics cannot demonstrate to what extent the Working Group has reduced unsupported JVs and how much more effort is required to fully address the issue and help ensure that the Army's financial statements are auditable for fiscal year 2018."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Army (1) ensure that the entire population of unsupported JVs is identified and analyzed and (2) develop metrics that sufficiently monitor the extent to which the Working Group has identified root causes and determine the extent to which unsupported JVs are being reduced based on the implemented corrective actions. The Army concurred with GAO's recommendations and provided information on actions it has taken or plans to take to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) has been on GAO\u2019s High-Risk List  since 1995 in part because of long-standing, uncorrected deficiencies  with its financial management systems, business processes, financial  manager qualifications, and material internal control and financial  reporting weaknesses. These deficiencies prevent DOD from having  auditable financial statements, which is one of the three major  impediments preventing us from expressing an opinion on the  consolidated financial statements of the U.S. government. According to  DOD, one of the contributing factors to its inability to produce auditable  financial statements is the billions of dollars of unsupported journal  vouchers (JV) within its accounting systems, with the largest portion  attributed to the Department of the Army\u2019s (Army) general fund. JVs are  accounting entries to record corrections or adjustments to a business  transaction in an accounting system. While the use of JVs is a common  accounting practice, they should be fully supported with detailed  information to appropriately justify the accounting entries. Without such  support, management and auditors are unable to assess the validity of  the accounting entries, and to the extent that the unsupported JVs are  material to the financial statements, the auditors would be unable to  complete their audit. When financial statements are not prepared with  supported accounting entries, there is a risk that DOD and Army management cannot rely on the Army\u2019s accounting system data when  making management and resource decisions.", "The National Defense Authorization Act (NDAA) for Fiscal Year 2014  required that the Secretary of Defense ensure that a full audit is  performed on DOD\u2019s fiscal year 2018 financial statements and that the  results be submitted to Congress no later than March 31, 2019.  Therefore, with oversight from the Office of the Assistant Secretary of the  Army for Financial Management and Comptroller (ASA(FM&C)),  personnel from the Army and the Defense Finance and Accounting  Service (DFAS), the Army\u2019s service provider, formed a Journal Voucher  Working Group (Working Group) in February 2015 to address the  inadequate support of JVs affecting the Army\u2019s financial statements. The  Working Group has been tasked to actively work toward reducing the  number of unsupported JVs for the Army\u2019s general fund. Specifically,  one of the main focuses of the Working Group is to determine the root  causes of unsupported JVs and to develop corrective action plans for the  identified root causes. The Working Group conducts biweekly meetings  to discuss current initiatives, any outstanding issues, and progress toward  its goals. Additionally, ad hoc meetings are scheduled as needed.", "This audit was initiated as part of the mandate that requires GAO to audit  the U.S. government\u2019s consolidated financial statements, which cover all  accounts and associated activities of the executive branch agencies,  including DOD, because of the significance of the military services\u2019  financial statements to the audit of the consolidated financial statements  of the U.S. government. Our objectives were to report the extent to which  the Working Group, as of March 2017, (1) performed analyses to  determine the root causes of unsupported JVs for the Army\u2019s general  fund and (2) developed and monitored the implementation of corrective  action plans to address identified root causes of unsupported JVs.", "To address our first objective, we reviewed various Army, DFAS, and  DOD financial reporting guidance; performed walk-throughs of the JV  process; and interviewed agency officials to gain an understanding of the  processes for recording JVs and analyzing causes of unsupported JVs.  We also reviewed documentation provided and interviewed the Working  Group members to determine the extent to which root cause analyses  have been performed and completed as of March 2017 and whether the  population of accounting entries used for analyses included all  unsupported JVs. To address our second objective, we obtained  documentation of and inquired about the development and monitoring of  the implementation of the Working Group\u2019s corrective action plans to  address the root causes identified as of March 2017. We also obtained  and analyzed monthly JV metrics reports (metrics) produced by DFAS.  Members of the Working Group use the metrics as their primary source  for monitoring progress. We inquired about any limitations or challenges  that prevented the Working Group from fully implementing any developed  corrective action plans. Further details on our scope and methodology are  provided in appendix I.", "We conducted this performance audit from December 2015 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provided a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government began preparing and we began auditing the  consolidated financial statements of the U.S. government in fiscal year  1997. However, we have been unable to render an opinion on them in  part because of serious financial management problems at DOD that  have prevented its financial statements from being auditable. Pursuant to  the NDAA for Fiscal Year 2010, DOD developed and has updated a  Financial Improvement and Audit Readiness (FIAR) Plan. The FIAR Plan  includes the specific actions to be taken and costs associated with   (1) correcting the financial management deficiencies that impair DOD\u2019s  ability to prepare complete, reliable, and timely financial management  information and (2) ensuring that DOD\u2019s financial statements are  validated as ready for audit by September 30, 2017. Further, the NDAA  for Fiscal Year 2014 mandated that the Secretary of Defense ensure that  an audit is performed on DOD\u2019s fiscal year 2018 financial statements and  that the results are submitted to Congress no later than March 31, 2019.", "DOD has undertaken several financial management improvement  initiatives over the years to address deficiencies in business systems,  processes, and controls through its FIAR Plan and financial management  reform methodology contained in its FIAR Guidance. In its April 2016  FIAR Guidance, DOD identified seven critical capabilities that are  necessary to achieve auditability. One of the seven critical capabilities  identified is the ability to support or eliminate certain material JVs and  other adjustments made to financial transactions, trial balances, and  financial statements. As of September 2015, DOD determined that the  largest portion attributable to the billions of dollars of unsupported JVs  relates to the Army\u2019s general fund. In 2015, DOD created the Working  Group, made up of both Army and DFAS personnel, to develop solutions  to reduce the number of required JVs and reduce or eliminate the number  of unsupported JVs that affect the Army\u2019s general fund.", "In July 2016, DOD\u2019s Office of the Inspector General (OIG) released a  report indicating that about 90 percent of the dollar value and number of  the Army general fund JVs the OIG tested, which were defined by the  Army as \u201csupported,\u201d were in fact unsupported because the JVs either   (1) forced account balances to agree with other data sources without  reconciling the differences or determining which data sources were  correct, (2) corrected errors or reclassified amounts to other accounts  without adequately documenting why the JVs were needed, or   (3) changed ending balances of accounts without adequate  documentation to support the JVs.", "DOD acknowledged in its November 2016 FIAR Plan Status Report that it  still faces a significant challenge in reducing the number and amount of  unsupported JVs. The November 2016 FIAR Plan Status Report also  set a December 2016 completion date for the Army to (1) perform JV root  cause analyses for all financial statements for all JVs and (2) implement  corrective action plans and verify successful implementation of DFAS\u2019s  corrective actions."], "subsections": [{"section_title": "Army\u2019s Financial Systems", "paragraphs": ["As shown in figure 1, the Army uses multiple systems to document,  record, and report activities at the transaction level, which are then  consolidated and uploaded into DOD\u2019s reporting system known as the  Defense Departmental Reporting System (DDRS). JVs can be used to  record accounting entries and make any necessary corrections or  adjustments within any of these systems at the transaction level or  consolidated level. JVs can also be manually entered or system  generated in the accounting systems. Manual JVs are those prepared by  DFAS personnel to adjust errors identified during financial statement  compilation, to record necessary accounting entries caused by system  limitations or timing differences, and to prepare required month- and year- end closing accounting entries. System-generated JVs are those  automatically generated based on system change requests and without  manual involvement by DFAS personnel.", "The General Fund Enterprise Business System (GFEBS) is the Army\u2019s  primary accounting system used to record the majority of the Army\u2019s  activities, including budget execution, procurement, civilian pay,  collections, and disbursements. The Army also has a separate accounting  system for supply-related transactions called the Global Combat Support  System (GCSS). Accounting entries for transactions recorded in GCSS  are sent to GFEBS to consolidate all of the Army\u2019s transaction data into a  single accounting system. Then, at month\u2019s end, all the information in  GFEBS is uploaded into the budgetary module of DDRS known as the  Defense Departmental Reporting System-Budgetary (DDRS-B).", "The Army also has several legacy systems that continue to process  transactions but were not designed to interface with GFEBS as the  accounting formats are not compatible. Therefore, at each month\u2019s end,  the balances for the legacy systems are configured into a format that can  be read by DDRS-B and crosswalks to the accounts within the DDRS-B  accounting system before they are sent to DDRS-B. Once the balances  have been uploaded, DDRS-B performs edit checks to identify any errors  that may exist. DFAS personnel then pull the data into the Electronic  Error Correction and Transaction Analysis (ELECTRA) application to  review any errors identified during the edit checks and use ELECTRA to  create a JV to be uploaded into DDRS-B that makes necessary  corrections or adjustments.", "After the Army has consolidated all information into DDRS-B from both  GFEBS and legacy systems each month, DFAS personnel will review the  information to determine whether any additional JVs are necessary to  correct errors identified during the reconciliation process or to record any  JVs that could not be processed prior to the upload into DDRS-B.", "On a quarterly basis after all necessary corrections are made, all  information in DDRS-B is consolidated and uploaded into a second  module within DDRS known as the Defense Departmental Reporting  System-Audited Financial Statements (DDRS-AFS), which is used to  prepare the financial statements. At this level, additional JVs can be  made if DFAS personnel determine that further corrections are necessary  or if information is received subsequent to the upload from DDRS-B."], "subsections": []}]}, {"section_title": "The Working Group Has Identified Some Root Causes but Has Not Started Analyses of the Majority of Unsupported Journal Vouchers", "paragraphs": ["The Working Group has been actively working toward implementing new  processes to support JVs and eliminate unsupported JVs in the Army\u2019s  general fund. From October 2016 to March 2017, the Working Group,  based on DFAS-produced metrics, reported that it had identified more  than 121,000 unsupported JVs totaling $455 billion.", "The Working Group prioritized its identifying of root causes of  unsupported JVs based upon factors such as potential correction  complexity, materiality, and volume. In the May 2017 FIAR Plan Status  Report, DOD stated that the Army had completed its root cause analyses  for all JVs. However, we found that the analyses have been performed on  only a small percentage of the total number of unsupported JVs that  existed as of March 2017 and cannot be considered completed for all  unsupported JVs. In addition, members of the Working Group confirmed  as of June 2017 that the Working Group has not yet performed all  analyses necessary and stated that the Working Group\u2019s efforts will be an  ongoing, iterative process because of anticipated new challenges that  continually arise from new business processes or programs.", "A critical capability to achieve auditability, described in the April 2016  FIAR Guidance, is that all material JVs be supported and the population  of accounting entries reconcile with each financial statement line item as  well as the originating system of the accounting entry. As highlighted in  figure 2, the Working Group focused its efforts on manual JVs processed  at the consolidated level within DDRS-B as these JVs were consistent  with its prioritization method in conducting the analyses and getting the  financial statements audit ready.", "In December 2015, DFAS began requiring a form to be attached to all  manual DDRS-B JVs that serves as a checklist of all documents  necessary to be included for a JV to be considered supported. However,  as indicated on the metrics provided through March 2017, manual  unsupported JVs were still being recorded in DDRS-B. Further, as of  March 2017, the Working Group had not included in its root cause  analyses (1) any unsupported JVs at the transaction level, such as within  GFEBS, which are mostly attributed to year-end closing accounting  entries; (2) any unsupported JVs within DDRS-AFS, which are used to  prepare the financial statements; or (3) system-generated JVs. As a  result, a significant number of JVs still require analyses.", "Our review of the population of unsupported JVs from October 2016 to  March 2017 found that system-generated JVs made up 90 percent in  dollar value and 97 percent in number of total unsupported JVs. In July  2016, the DOD OIG similarly found that the Working Group had not been  analyzing its system-generated JVs and recommended that the Working  Group periodically review system-generated JVs to understand the  reasons for the JVs and to verify the support for the JVs. Acting on the  DOD OIG\u2019s recommendation, members of the Working Group indicated  that in March 2017, the Working Group began including system- generated JVs in its population of JVs to analyze but had not yet begun  its analyses or identified any root causes. In addition, members of the  Working Group stated that in February 2017, the Working Group began  planning a new initiative called the Business Mission Area Champions  (BMAC) Initiative. This initiative is to expand the Working Group\u2019s  analyses of root causes for JVs beyond those recorded at the  consolidated level within DDRS-B and begin analyzing transaction-level  JVs recorded in its systems that feed into DDRS-B before consolidation,  such as GFEBS. However, as of May 2017, no details have been  developed, such as planned actions or timelines. Therefore, because of  the recent inclusion of the large population of system-generated JVs in  the total population and because the BMAC Initiative is not yet under way,  a significant amount of analyses remains to fully identify root causes and  ultimately correct the Army\u2019s overall unsupported JV issue. Figure 3  summarizes the progress of the Working Group\u2019s root cause analyses of  unsupported JVs as of March 2017.", "According to OMB Circular A-123, agencies should perform a root  cause analysis of the deficiencies to ensure that subsequent strategies  and plans address the root cause of the problem and not just the  symptoms. Identifying and developing an understanding of the root cause  is management\u2019s responsibility. In addition, Standards for Internal Control  in the Federal Government states that management should complete and  document corrective actions to remediate control deficiencies on a timely  basis. Because it has not yet performed root cause analyses on the  majority of unsupported JVs, the Working Group has not been able to  identify appropriate corrective actions to eliminate such unsupported JVs  and ultimately help produce auditable financial statements for the Army\u2019s  general fund."], "subsections": []}, {"section_title": "The Working Group Has Developed Corrective Action Plans for All Identified Root Causes but Is Not Sufficiently Monitoring Implementation", "paragraphs": ["As of March 2017, members of the Working Group reported that the  Working Group had developed 38 corrective action plans to address all of  the identified root causes of unsupported manual JVs at the consolidated  level in DDRS-B for the Army\u2019s general fund. According to these  members, of the 38 corrective action plans developed, 18 have been  implemented. In addition, because the root cause analyses have been  limited, the Working Group has not yet been able to determine how many  more corrective action plans will need to be developed to resolve the  unsupported JV issue.", "Further, we found that the Working Group\u2019s monitoring of corrective  action plan implementation does not include a method that sufficiently  identifies the progress that has been made toward fully addressing the  issue of unsupported JVs or to what extent each implemented corrective  action plan has reduced unsupported JVs. The April 2016 FIAR Guidance  provides specific tasks for DOD reporting entities, including the Army, to  complete so that DOD can achieve its audit readiness objective. One of  these tasks specific to JVs is to describe plans for implementing  corrective actions to address the root causes of unsupported JVs. In  addition, the Implementation Guide for OMB Circular A-123 recommends  that management identify measurable indicators to better assess  progress and more rapidly make course corrections to ensure timely and  effective resolution of identified issues. In order to monitor whether a  corrective action plan was implemented effectively, members of the  Working Group stated that the Working Group uses metrics to monitor  implementation of corrective actions for unsupported manual JVs at the  consolidated level in DDRS-B. DFAS creates monthly metrics reports of  DDRS-B accounting entries that include all unsupported and supported  JVs for the month.", "The JVs used to create these metrics are the same JVs that the Working  Group uses to conduct its JV root cause analyses. However, the metrics  organize the JVs into broad categories that do not provide enough details  to link to the categories that the Working Group uses. For example, the  metrics use broad categories, such as data calls or correcting entries to  classify the JVs, whereas the root cause analyses are conducted at a  more detailed level, such as for a specific transaction. The Working  Group was unable to demonstrate to us which metric category was  affected by the corrective action plan implemented for each root cause  identified. In addition, the Working Group\u2019s reported progress was based  on an increase in the percentage of supported JVs in relation to the total  population of JVs from October 2016 to March 2017 as reported in the  metrics. However, during this period, the metrics also show an increase in  the actual number and dollar amount of manual unsupported JVs.  Specifically, based on the Working Group\u2019s reporting method, the  percentage of unsupported manual JVs decreased in relation to the total  population of manual JVs from October 2016 to March 2017 by 8 percent  in the number of JVs and 14 percent in the dollar value of JVs. However,  the actual number and dollar value of the unsupported manual JVs  reported on the October 2016 and March 2017 metrics increased from  329 to 462 and from a total of $3.3 billion and $7.0 billion, respectively.  Because the metrics used to monitor corrective action plans do not clearly  indicate which JVs are affected by a specific root cause identified,  resolved JVs cannot be tied to an implemented corrective action plan.  Therefore, the Working Group is unable to demonstrate to what extent it  has moved closer to eliminating and reducing unsupported JVs and to  what extent the Army\u2019s financial statements are becoming auditable for  fiscal year 2018.", "In addition, according to members of the Working Group as of March  2017, 16 of the 20 remaining corrective action plans developed are  pending implementation because they require system changes, which  need to be negotiated with the contractor selected to make the system  changes. Therefore, the Working Group has developed temporary  mitigating procedures to support those JVs required to be recorded until  system changes are implemented. For example, one of the root causes  that the Working Group identified was a JV recorded in DDRS-B related  to the accounting entry to record a customer refund from a prior year  purchase. When DFAS personnel record an accounting entry for a  customer refund from a prior year purchase into GFEBS, the system  erroneously records the transaction as a current year refund, through the  reimbursements and other income earned\u2014collected account, rather than  as a current year obligation and outlay as required by OMB Circular A-11,  Preparation, Submission, and Execution of the Budget. Until this system  change is made to GFEBS so that it can differentiate between the return  of a prior year purchase or a current year purchase, DFAS has to reverse  each entry and record the current year obligation and outlay with an additional JV into DDRS-B to correct the error made and include with the  JV an explanation of the situation as well as detail level transactions to  support the JV. DFAS considers this type of support to be a temporary  solution; however, until system changes are made, the Working Group  will be unable to implement the corrective action plans developed and  resolve the root causes identified or determine whether the corrective  action plan developed for this issue will be effective."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Since 2015, the Working Group has been analyzing manual unsupported  JVs in DDRS-B to determine their root causes and to concentrate its  efforts on getting the Army\u2019s financial statements audit ready. As of March  2017, the Working Group had not analyzed system-generated JVs that  constitute 90 percent of the total dollar value or 97 percent of the total  number of unsupported JVs because of the volume and potential  correction complexity of these JVs. Also, the Working Group had not  analyzed unsupported JVs at the transaction level or in DDRS-AFS.  Although we recognize that these efforts will be an ongoing, iterative  process, until the Working Group has identified and completed its  analyses of root causes for all unsupported JVs, the Army will not be able  to correct the overall unsupported JV issue.", "As of March 2017, the Working Group had developed 38 corrective action  plans and verified successful implementation of 18 corrective action plans  to address the issue of unsupported JVs in the Army\u2019s general fund.  However, because the Working Group\u2019s root cause analyses were limited  to a small percentage of the total unsupported JVs, the development of  corrective action plans was likewise limited. In addition, the metrics used  to analyze JVs and monitor implemented corrective actions are not  designed to provide the level of detail necessary to sufficiently monitor  whether root causes identified are resolved through corrective action  plans. As a result, the Army cannot determine to what extent it has  reduced unsupported JVs in its general fund and how much more effort is  required to fully address the issue and help ensure that the Army\u2019s  financial statements will be auditable for fiscal year 2018."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Army:  The Assistant Secretary of the Army for Financial Management and  Comptroller should ensure that the Working Group identifies and  analyzes the full population of manual unsupported JVs at the transaction  level and in DDRS-AFS and determines the root causes for these JVs.  (Recommendation 1)", "The Assistant Secretary of the Army for Financial Management and  Comptroller should work with DFAS to enhance the monthly JV metrics  report or develop another method to sufficiently monitor the extent to  which the Working Group has identified the root causes of unsupported  JVs and to determine the extent to which unsupported JVs are being  reduced based on the implemented corrective actions. (Recommendation  2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Army for review and comment. In  its written comments, reprinted in appendix II, the Army concurred with  our recommendations and provided information on actions it has taken or  plans to take to address them.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  (Comptroller) and Chief Financial Officer, the Deputy Chief Financial  Officer, the Director of Financial Improvement and Audit Readiness, the  Secretary of the Army, and the Director of the Defense Finance and  Accounting Service. 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) 512-9869 or khana@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to report on the extent to which the Journal Voucher  Working Group (Working Group) had, as of March 2017, (1) performed  analyses to determine the root causes of unsupported journal vouchers  (JV) for the Department of the Army\u2019s (Army) general fund and   (2) developed and monitored the implementation of corrective action  plans to address identified root causes of unsupported JVs.", "To address our first objective, we reviewed our prior relevant reports and  reports by the Department of Defense (DOD) and DOD\u2019s Office of  Inspector General to gain an understanding of the nature of the issues  identified related to the Army\u2019s unsupported JVs for its general fund and  how they affect DOD\u2019s audit readiness as described in the Financial  Improvement and Audit Readiness (FIAR) Guidance. We also reviewed  various Army, Defense Finance and Accounting Service, and DOD  financial reporting guidance; performed walk-throughs of the JV process;  and interviewed agency officials to gain an understanding of the  processes for recording JVs and analyzing causes of unsupported JVs,  including (1) the various types of JVs recorded and reasons why the JVs  are unsupported, (2) parties responsible for preparing and approving JVs,  and (3) requirements for determining and documenting the root causes of  unsupported JVs and monitoring such efforts.", "Further, we obtained the Working Group\u2019s root cause analyses performed  and completed as of March 2017. We analyzed the documentation  provided and interviewed agency officials to determine the extent to which  (1) root cause analyses have been performed for all unsupported JVs of  the Army\u2019s general fund and (2) root causes had been identified to  address the issue of unsupported JVs. We also reviewed documentation  provided to determine whether the Working Group was including all  unsupported JVs in the population used for analyses.", "To address our second objective, we obtained the Working Group\u2019s  documentation of corrective action plans developed and implemented as  of March 2017 to address the root causes identified by the Working  Group. We inquired about the development and the status and  implementation of each corrective action plan. We also inquired about the  steps the Working Group has taken to validate and monitor the  effectiveness of corrective action plans that have been implemented to  address root causes identified. We also inquired about how the Working  Group measures its progress using the monthly JV metrics reports, which  the Working Group identified as its primary source for monitoring  progress, and analyzed the JV metrics reports from October 2016 to  March 2017. Further, we inquired of the reasons why corrective action  plans had not been fully implemented.", "We also interviewed members of the Working Group to confirm our  understanding of any limitations or challenges identified during the root  cause analyses. We obtained their views on these or other concerns and  reviewed relevant documentation supporting their evaluation of the root  causes, efforts to address the root causes, and the potential impact on  the Army\u2019s financial management and future auditability.", "We interviewed Army officials about efforts to monitor the effectiveness of  the Working Group\u2019s corrective action plans to determine what actions, if  any, the Army has taken to monitor the corrective action plans regarding  deficiencies related to unsupported JVs. We considered whether the  Working Group\u2019s efforts for developing and monitoring the implementation  of corrective action plans addressing identified deficiencies followed the  relevant criteria contained in internal control standards; Office of  Management and Budget Circular A-123, Management\u2019s Responsibility  for Enterprise Risk Management and Internal Control; and DOD FIAR  Guidance.", "We conducted this performance audit from December 2015 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of the Army", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following individuals made  key contributions to this report: Lynda Downing (Assistant Director),  Francine DelVecchio, Natasha Guerra, Cole Haase, Jason Kelly, and  David Scouten."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-422", "url": "https://www.gao.gov/products/GAO-18-422", "title": "Biological Select Agents and Toxins: Actions Needed to Improve Management of DOD's Biosafety and Biosecurity Program", "published_date": "2018-09-20T00:00:00", "released_date": "2018-09-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In May 2015, DOD discovered that one of its laboratories (formerly called the Life Sciences Division) at Dugway Proving Ground, Utah, had inadvertently made 575 shipments of live Bacillus anthracis \u2014the bacterium that causes anthrax\u2014to 194 laboratories and contractors worldwide from 2004 through 2015. A December 2015 investigation by the Army determined that there was insufficient evidence to establish a single point of failure and made recommendations for improving safety and security at DOD laboratories that handle BSAT.", "The NDAA for Fiscal Year 2017 included a provision for GAO to review DOD's actions to address the Army's recommendations. GAO assessed the extent to which (1) DOD has implemented recommendations from the Army's 2015 investigation report, (2) the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, (3) the Army's biological T&E mission is independent from its biological R&D mission, and (4) DOD has carried out a required study and evaluation. GAO reviewed DOD documents and key actions in response to the Army's recommendations and conducted site visits to DOD's BSAT laboratories."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has made progress by taking a number of actions to address the 35 recommendations from the Army's 2015 investigation report on the inadvertent shipments of live Bacillus anthracis (anthrax). However, DOD has not yet developed an approach to measure the effectiveness of these actions. As of March 2018, DOD reports 18 recommendations as having been implemented and 17 as having actions under way to implement them. These actions are part of a broader effort to improve biosafety, biosecurity, and overall program management. For example, in March 2016, DOD established the Biological Select Agents and Toxins (BSAT) Biorisk Program Office to assist in overseeing the BSAT Biosafety and Biosecurity Program and implementation of the recommendations. Measuring the effectiveness of each implemented recommendation would help better determine if the actions taken are working, if there are unintended consequences, or if further action is necessary.", "The Secretary of the Army, as DOD's Executive Agent, has implemented a BSAT Biosafety and Biosecurity Program to improve management, coordination, safety, and quality assurance for the DOD BSAT enterprise. However, DOD has not developed a strategy and implementation plan for managing the program. Without a strategy and implementation plan, Dugway Proving Ground, Utah, and DOD's laboratory facilities that currently produce and handle BSAT may be unclear about DOD's strategy to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD's BSAT enterprise.", "The Army has not fully institutionalized measures to ensure that its biological test and evaluation (T&E) mission remains independent from its biological research and development (R&D) mission so that its T&E procedures are objective and reliable. In April 2016, the Army directed the transfer of the operational T&E mission from West Desert Test Center-Life Sciences Division at Dugway Proving Ground, Utah, to Edgewood Chemical Biological Center, Maryland. The Army issued a memorandum of agreement between the two entities to lay out roles and responsibilities for test processes and procedures. However, the memorandum does not distinguish T&E from R&D mission requirements, and does not contain guidelines to mitigate risks associated with potential conflicts of interest between the R&D and T&E missions. Without these measures, there is a potential risk to the independence of the T&E mission.", "The National Defense Authorization Act (NDAA) for Fiscal Year 2017 required DOD to report by February 1, 2017, on the feasibility of consolidating BSAT facilities within a unified command, partnering with industry for the production of BSAT in lieu of maintaining such capabilities within the Army, and whether such operations should be transferred to another government or commercial laboratory. DOD has not completed this required study and evaluation of its BSAT infrastructure which, when complete, will affect the future infrastructure of the BSAT Biosafety and Biosecurity Program. Further, DOD officials have no estimated time frames for when DOD will complete the study and evaluation. Without time frames for completing the study and evaluation, DOD is unable to provide decision makers with key information on its infrastructure requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD develop an approach to assess the effectiveness of the recommendations, a strategy and implementation plan for its BSAT Biosafety and Biosecurity Program, measures to ensure independence, and time frames to complete a study. DOD concurred with all four of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Safety lapses involving hazardous pathogens have occurred at some of  the 276 government, private, and academic laboratories in the United  States that conduct research on biological select agents and toxins  (BSAT). Such agents may cause serious or lethal infection in humans,  animals, or plants. BSAT materials, such as the Ebola virus and Bacillus  anthracis\u2014the bacterium that causes anthrax\u2014have been determined to  have the potential to pose a severe threat to public health and safety.  Laboratories conduct research on BSAT for a variety of reasons,  including identifying their characteristics and developing vaccines and  other measures to help diagnose, prevent, or treat exposure to or  infection by these agents. Safety lapses involving hazardous pathogens  have occurred in the past at some of the Department of Defense (DOD)  laboratories that handle BSAT to conduct research on medical and  physical countermeasures to protect the warfighter from biological  threats. Such incidents raise concerns about whether oversight of  biosafety and biosecurity in these laboratories is effective.", "In May 2015, DOD discovered that one of its laboratories\u2014formerly called  the Life Sciences Division\u2014at Dugway Proving Ground, Utah, had  inadvertently shipped incompletely inactivated (i.e., live) Bacillus  anthracis to 194 laboratories and contractors worldwide over the course  of 12 years. In response to this discovery, the Deputy Secretary of  Defense ordered an immediate 30-day review in May 2015 that resulted  in a moratorium on the production, handling, testing, and shipment of  inactivated Bacillus anthracis. The Deputy Secretary of Defense  subsequently directed a more detailed review by the Army. In December  2015, the Army issued an investigation report on its findings which,  among other things, determined that although the inadvertent shipment of  incompletely inactivated Bacillus anthracis was a serious breach of  regulations and raised biosecurity concerns, it did not pose a public  health risk. The investigation also determined that there was insufficient  evidence to establish a single failure as the cause for the inadvertent  shipments of incompletely inactivated Bacillus anthracis. However, the  report cited scientific and institutional issues and said that senior  management at Dugway Proving Ground had contributed to \u201ca culture of  complacency, resulting in laboratory personnel not always following rules,  regulations, and procedures.\u201d The Army\u2019s 2015 investigation report  resulted in recommendations to the Army to improve scientific knowledge  gaps on irradiation and viability testing processes, address institutional  concerns to reduce the risk of future mishaps involving biological material,  and address individual accountability for the failures that contributed to  the inadvertent shipment of incompletely inactivated Bacillus anthracis.", "DOD\u2019s Chemical and Biological Defense Program (CBDP) leads the  department\u2019s efforts to protect military personnel, particularly the  warfighter, against a wide range of threats, including biological threats.  The CBDP Enterprise is comprised of 26 DOD organizations that  determine warfighter requirements, provide science and technology  expertise, conduct research and development and test and evaluation on  capabilities needed to protect the warfighter, and provide oversight. In  fiscal year 2017, according to DOD officials, CBDP received about   $1.2 billion to support research, development, testing, and evaluation,  and procurement efforts. For fiscal year 2018, CBDP received nearly   $1.4 billion. The Army supports CBDP, and the Secretary of the Army is  the Executive Agent for the BSAT Biosafety and Biosecurity Program.", "Since 2007, we have testified and reported on issues associated with  high-containment laboratories that handle BSAT and have recommended  improvements for federal oversight and enhancements to biosafety and  biosecurity. Our most recent testimonies and reports have addressed the  effectiveness of the current federal approach to overseeing select agents  and issues related to the inactivation of pathogens in high-containment  laboratories. For example, in our July 2015 testimony before the House  Energy and Commerce Subcommittee on Oversight and Investigations,  we noted that DOD had begun to track biosafety and biosecurity incidents  at the senior department level, which it had not done prior to the May  2015 incident at Dugway Proving Ground in which incompletely  inactivated Bacillus anthracis was inadvertently shipped to other  laboratories and contractors worldwide.", "In March 2016, we issued a report that made recommendations to various  federal departments and agencies with responsibility for managing BSAT  in high-containment laboratories. Some of these recommendations were  addressed to DOD. The department concurred with the recommendations on improving oversight mechanisms of high- containment laboratories. In implementing those recommendations, DOD  reported in 2016 that it was taking actions, such as revising existing  department policies for managing hazardous biological agents in high- containment laboratories; analyzing inspection trends and incident reports  to identify recurring issues in safety, security, or administration; requiring  routine reporting results from laboratories that are not registered to  handle select agents and laboratory incidents; and developing  implementation time frames for the recommendations from a July 2015  DOD review of the incident at Dugway Proving Ground.", "Section 218 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 included a provision for us to review DOD\u2019s actions to address  findings and recommendations of the Army\u2019s December 2015  investigation report regarding the inadvertent shipment of incompletely  inactivated Bacillus anthracis from Dugway Proving Ground, Utah. It also  included a provision for us to review DOD\u2019s efforts to implement quality  control and assurance measures for the department\u2019s BSAT Biosafety  and Biosecurity Program, among other things. This report discusses the  extent to which (1) DOD has implemented the recommendations from the  Army\u2019s 2015 investigation report and has developed an approach to  measure the effectiveness of actions taken to address the  recommendations, (2) the Army has implemented the BSAT Biosafety  and Biosecurity Program and developed a strategy and implementation  plan, (3) the Army has developed measures to ensure that its biological  test and evaluation mission remains independent from its biological  research and development mission, and (4) DOD has carried out a study  and evaluation in compliance with the requirements of section 218,  subsection (d), of the NDAA for Fiscal Year 2017.", "For objective one, we reviewed key policy, guidance, and other  documents, including the recommendations from the Army\u2019s 2015  investigation report, and assessed the actions that DOD took from May  2015 through May 2018 to address those recommendations. In addition,  we reviewed the Standards for Internal Control in the Federal  Government and DOD Instruction 5010.40, Managers\u2019 Internal Control  Program Procedures, to identify criteria for communicating quality  information and performing monitoring and reporting activities.", "For objective two, we obtained and reviewed documentation from DOD  officials on current policies, procedures, and directives identifying  oversight and governance authorities involved in supporting DOD\u2019s BSAT  Biosafety and Biosecurity Program. We compared the actions of the Army  to leading practices for strategic planning and the recommendations from  the Army\u2019s 2015 investigation report. We interviewed DOD officials from  the military services to identify their strategies and efforts in supporting  DOD\u2019s plans to effectively manage DOD\u2019s BSAT Biosafety and  Biosecurity Program. We also interviewed cognizant officials to identify  any biosafety and biosecurity improvements that have been made to  DOD laboratories that possess, use, or transfer biological select agents  and toxins made since the 2015 incident at Dugway Proving Ground. In  addition, we conducted site visits to all six DOD BSAT laboratories, five of  which currently are responsible for handling BSAT. We also conducted  voluntary facilitated group discussions with small, self-selected groups of  laboratory staff at each of these facilities to obtain their views on the  effect of the incident at Dugway Proving Ground on covered facilities and  on DOD\u2019s subsequent corrective actions.", "For objective three, we reviewed and compared an Army regulation on  test and evaluation to an Army general order that directed the  reassignment of the West Desert Test Center \u2013 Life Sciences Division at  Dugway Proving Ground, Utah, to the U.S. Army Materiel Command  Research, Development and Engineering Command \u2013 U.S. Army  Edgewood Chemical Biological Center at Aberdeen Proving Ground,  Maryland. We also compared that Army regulation to an Army directive  that provided guidelines for the transfer of the Life Sciences Division (now  known as the BioTesting Division) from Army Test and Evaluation  Command to Army Research, Development and Engineering Command\u2019s  Edgewood Chemical Biological Center. We conducted interviews with  senior staff at the BioTesting Division, the West Desert Test Center, and  Edgewood Chemical Biological Center to determine what procedures are  in place to ensure that the BioTesting Division\u2019s test and evaluation  activities are not being influenced by Edgewood Chemical Biological  Center\u2019s research and development efforts.", "For objective four, we compared the relevant requirements from the  NDAA for Fiscal Year 2017 contained in section 218, subsection (d), with  DOD\u2019s April 2017 report to the congressional defense committees, to  determine whether the report included all of the required elements.  Specifically, DOD is required to evaluate (1) the feasibility of consolidating  covered facilities within a unified command to minimize risk,   (2) opportunities to partner with industry on the production of BSAT and  related services in lieu of maintaining such capabilities within the Army,  and (3) whether BSAT operations should be transferred to another  laboratory that may be better suited to execute production for non-DOD  customers. We also reviewed our prior reports that evaluated federal  oversight of high-containment laboratories and DOD\u2019s management of  infrastructure within the CBDP Enterprise, and we toured all six DOD  BSAT laboratory facilities to observe the current physical space\u2014both  operational and under construction\u2014for handling and testing BSAT. More  detailed information on our scope and methodology can be found in  appendix I of this report.", "We conducted this performance audit from May 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Biodefense Roles and Responsibilities", "paragraphs": ["Multiple federal departments and agencies\u2014including DOD\u2014have  responsibilities as part of their missions to assess the threat of biological  agents and carry out key biodefense roles as delineated in Homeland  Security Presidential Directive 10, Biodefense for the 21st Century, and  the National Strategy for Countering Biological Threats. Since the 2001  anthrax incident, in which powdered Bacillus anthracis spores were  deliberately put into letters that were mailed through the U.S. postal  system that resulted in five deaths, the federal government has  experienced growth and proliferation of research programs to protect  public health and agriculture in the event of a natural emergency, man- made biological incident, or act of biological terrorism. DOD laboratories  that handle and research deadly pathogens are important components of  the U.S. biodefense infrastructure that supports such biological research  programs."], "subsections": []}, {"section_title": "The Federal Select Agent Program", "paragraphs": ["Select agent research is subject to federal oversight and regulations and  is guided by the principles and practices of biosafety and biosecurity. The  Federal Select Agent Program was established to regulate the  possession, use, and transfer of BSAT, in response to security concerns  following bioterrorism attacks in the 1990s and early 2000s. The Federal  Select Agent Program is jointly managed by the Centers for Disease  Control and Prevention (CDC), Division of Select Agents and Toxins,  within the Department of Health and Human Services (HHS), and the  Animal and Plant Health Inspection Service (APHIS), Agriculture Select  Agent Services, within the Department of Agriculture (USDA). These  two agencies jointly regulate and oversee laboratories in the United  States that are registered to work with BSAT. The Federal Select Agent  Program also conducts inspections of registered entities for compliance  with the select agent regulations."], "subsections": []}, {"section_title": "DOD\u2019s Designated Infrastructure Manager for CBDP, Including BSAT", "paragraphs": ["CBDP was established to develop defense capabilities to protect the  warfighter from current and emerging chemical and biological threats.  The CBDP Enterprise\u2019s mission is to enable the warfighter to deter,  prevent, protect against, mitigate, respond to, and recover from chemical,  biological, radiological, and nuclear threats and effects as part of a  layered, integrated defense. The CBDP Enterprise conducts research and  develops defenses against chemical threats\u2014such as cyanide and  mustard gases\u2014and biological threats\u2014such as anthrax and Ebola\u2014and  tests and evaluates capabilities and products to protect military forces  from them. We reported in June 2015 on the need for DOD to designate  an entity to identify, align, and manage its chemical and biological  defense infrastructure, which includes its BSAT-related infrastructure.  We found that CBDP had not fully identified the infrastructure capabilities  required to address threats, had not planned to identify potential  duplication without considering information from existing federal studies,  and had not updated its guidance and planning process to include  specific responsibilities and time frames for risk assessments. As a result,  we recommended, among other things, that DOD  identify and designate an entity within the CBDP Enterprise with  the responsibility and authority to lead the effort to ensure  achievement of infrastructure goals, and establish time lines and milestones for achieving the goals it has  identified for chemical and biological infrastructure, including the  Program Analysis and Integration Office\u2019s 2008 recommendation  that the CBDP Enterprise identify its required infrastructure  capabilities.", "DOD concurred with all of our recommendations. In response to our  recommendations, DOD, among other things, designated an  infrastructure manager for CBDP and is implementing a three-phase  process to identify and define the roles and responsibilities of the position  by the end of 2018.", "As part of its BSAT infrastructure, DOD currently has five covered  facilities that contain various laboratories across the military services that  possess and handle BSAT. Each of these facilities currently is registered  with the Federal Select Agent Program to possess BSAT in the United  States. A sixth DOD facility, the BioTesting Division at Dugway Proving  Ground, Utah, is working to regain its certification as a covered facility  (see fig. 1).", "DOD officials said that other DOD facilities, in addition to these six, are  registered with the Federal Select Agent Program to handle BSAT in an  emergency outbreak situation. However, according to DOD officials, they  do not currently possess BSAT. CBDP officials stated that DOD used to  have more facilities that possessed and handled BSAT, but as a result of  prior base realignment and closure activities, the department has  consolidated its BSAT laboratory capabilities within the six facilities  highlighted in figure 1, based on the unique capabilities and missions  performed by each facility to support the warfighter. One of these unique  capabilities, for example, is the Whole System Live Agent Test Chamber  located at the BioTesting Division at Dugway Proving Ground, Utah, a  one-of-a-kind chamber designed and constructed primarily for biological  agent aerosol testing. For more information on the unique capabilities  DOD has identified for each of the DOD laboratories that handle BSAT,  scroll over figure 1 to see an interactive display of information on each  facility or see appendix II for static images of this information."], "subsections": []}, {"section_title": "BSAT Policies and Guidance", "paragraphs": ["DOD and the military services have issued a number of policies and  guidance aimed at ensuring safety and security for BSAT materials and  establishing standards for the handling of BSAT within DOD facilities. In  particular, DOD issued Instruction 5210.88, Security Standards for  Safeguarding Biological Select Agents and Toxins (BSAT), which  established security standards for safeguarding BSAT materials and  identified roles and responsibilities for BSAT biosecurity. These include  oversight responsibilities for the BSAT security program, which is led by  the Assistant Secretary of Defense for Nuclear, Chemical, and Biological  Defense Programs. Oversight responsibilities include establishing  security standards for safeguarding BSAT, coordinating with the Federal  Select Agent Program, and establishing and maintaining a database of all  BSAT at DOD covered facilities.", "In response to DOD Instruction 5210.88, each of the military services has  received waivers or issued separate policies for securing BSAT materials.  The Army has been granted a waiver to its existing policies that are  inconsistent with DOD Instruction 5210.88 and, according to Army  officials, is in the process of updating its policies to align with the DOD  instruction. According to Navy officials, the Navy has been granted  waivers while it is updating existing policies that do not currently align with  DOD Instruction 5210.88. The Air Force has issued policies directing  alignment with the DOD instruction. Further, a national strategy and a  number of executive orders and presidential directives have been issued  addressing a range of concerns, such as biological defense and safety  and security for handling BSAT. For example, in 2010 the President  issued an executive order directing federal agencies to harmonize their  policies and guidance on BSAT to align them with the select agent  regulations in order to mitigate any conflicting direction and promote  research and innovation."], "subsections": []}, {"section_title": "The Army\u2019s Investigation into the May 2015 Dugway Incident", "paragraphs": ["In May 2015, DOD discovered that the Life Sciences Division\u2014currently  known as the BioTesting Division\u2014at Dugway Proving Ground, Utah, had  inadvertently made 575 shipments from 2004 through 2015 of  incompletely inactivated Bacillus anthracis\u2014the bacterium that causes  anthrax\u2014to 194 laboratories and contractors worldwide (see fig. 2 for  locations).", "Laboratory officials at Dugway Proving Ground believed that the samples  of Bacillus anthracis (see sidebar) they were shipping had been  inactivated\u2014that the hazardous effects of the pathogen had been  destroyed, while the pathogen retained characteristics of interest for  research purposes. DOD was inactivating samples to support research on  the detection, identification, and characterization of biological threats (see  fig. 3).", "Anthrax is a serious infectious disease  caused by the pathogen known as Bacillus  anthracis. This pathogen occurs naturally in  soil and commonly affects domestic and wild  animals around the world. It can survive in  the environment for decades. Contact with  Bacillus anthracis can cause severe illness in  both humans and animals. The bacteria can  multiply, spread out in the body, produce  toxins (poisons), and cause severe illness.  Humans can be infected by breathing in  spores, eating food or drinking water that is  contaminated with spores, or getting spores  in a cut or scrape in the skin. It is very  uncommon for people in the United States to  become sick with anthrax.   Because Bacillus anthracis is both infectious  and exceptionally resilient, it is ideally suited  for potential adversaries\u2019 biological weapons  programs. Therefore, Department of Defense  (DOD) biodefense officials believe that it is  critical for the department to have a strong  countermeasures program to protect the  warfighter against this dangerous pathogen.", "As of March 2018, DOD reported having implemented 18 of   35 recommendations in the Army\u2019s 2015 investigation report. DOD  reported that it has actions under way to implement the remaining   17 recommendations. The Secretary of the Army, as Executive Agent for  DOD\u2019s BSAT Biosafety and Biosecurity Program, is responsible for  implementing the recommendations from the 2015 investigation report.  Since 2015, the Army has taken multiple types of actions\u2014including operational, administrative, and personnel actions\u2014to implement the  recommendations from the report.", "We asked DOD to characterize the relative priority of the  recommendations and describe those actions that have been taken or are  under way. DOD reported that", "12 recommendations were considered \u201chigh\u201d priority, 7 of these  being assessed as implemented and 5 as in progress,", "18 recommendations were considered \u201cmoderate\u201d priority, 10 of  these being assessed as implemented and 8 as in progress, and", "5 recommendations were considered \u201clow\u201d priority, 1 being  assessed as implemented and 4 as in progress.", "Appendix III shows the implementation status of the 35 recommendations  from the Army\u2019s 2015 investigation report that we reviewed.", "Rather than focus exclusively on the recommendations from the Army\u2019s  2015 investigation report, the BSAT Biorisk Program Office (BBPO)  incorporated actions to implement the 2015 recommendations into  broader Army efforts to improve biosafety, biosecurity, and overall  program management. Appendix IV describes BBPO\u2019s roles and  responsibilities. For example, Army Directive 2016-24, Department of  Defense Biological Select Agent and Toxins Biosafety Program,  incorporates some of the recommendations from the Army\u2019s 2015  investigation report, such as establishing a mentorship program for  laboratory staff and others who work with BSAT, as well as directing  studies into the science of inactivation of Bacillus anthracis. In addition,  the Army has developed implementation guidance to carry out Army  Directive 2016-24, which provides clarification on the directive and on the  reporting requirements to the BBPO and Executive Agent Responsible  Official (hereafter referred to as the EARO) in support of the NDAA for  Fiscal Year 2017.", "BBPO officials told us that recommendations from the Army\u2019s 2015  investigation report that are not incorporated in the directive have been or  are being addressed through a combination of establishing working  groups and, at one time, through a General Officers Steering Committee.  This committee monitored implementation through updates to the EARO  and the Director of the Army Staff. For example, BBPO officials told us  that, from 2016 to 2017, quarterly meetings between the General Officers  Steering Committee and the Director of the Army Staff were used to  discuss the status of requirements in Army Directive 2016-24. These  quarterly meetings also provided status updates on target completion  dates for the Army\u2019s 2015 investigation report recommendations that  were incorporated in the directive. We found that the quarterly information  briefs included information on the status and time frames for  implementing recommendations that were incorporated into the Army  directive."], "subsections": []}, {"section_title": "BBPO Has Not Yet Developed an Approach to Measure the Effectiveness of Actions Taken to Address Recommendations", "paragraphs": ["In carrying out broader biosafety efforts and implementing  recommendations from the Army\u2019s 2015 investigation report as well as  recommendations from other entities, BBPO has established processes  to track the status of actions that it has taken and monitor time lines for  completion by responsible DOD organizations. This helps BBPO  understand what actions have been taken and where they fit into a larger  plan to improve biosafety at specific facilities and organizations and  across the DOD BSAT enterprise.", "According to Standards for Internal Control in the Federal Government,  an internal control provides reasonable assurance that the objectives of  an entity will be achieved, including the use of ongoing monitoring,  evaluations, or a combination of the two to obtain reasonable assurance  of the operating effectiveness of the entity\u2019s internal controls over the  assigned process. It also states that managers should identify, analyze,  and respond to risks. Such evaluations and risk assessments are  necessary to help officials understand whether the actions they have  taken\u2014or will take\u2014address the situations that prompted the original  recommendations.", "We found that BBPO\u2019s approach to planning for and executing actions to  implement the 2015 Army recommendations and other recommendations  fulfills the monitoring element of the internal control standards. BBPO has  not, however, systematically carried out the evaluation element. Based on  our review of DOD documentation, such as the quarterly information  briefs on status of recommendations, and on subsequent interviews with  BBPO officials, we found that BBPO has not developed an approach to  assess the effectiveness of each implemented recommendation in  achieving its intended purpose. According to DOD officials, BBPO has  been focused on implementing not only the recommendations from the  2015 Army investigation report but also its broader efforts for the DOD  BSAT Biosafety and Biosecurity Program and has not yet formalized an  approach to evaluating the effectiveness of actions taken to address the  recommendations from the 2015 Army investigation report.", "There are many ways to assess effectiveness that could assist BBPO in  improving its implementation processes. One approach we found related  to DOD\u2019s implementation of recommendations for the defense nuclear  enterprise provides an example that may be useful. In 2017, we reported  on DOD\u2019s process to monitor progress and identify risks while  implementing recommendations within the defense nuclear enterprise\u2014a  community that, like chemical and biological defense, operates in a low- probability, high-risk environment. In that report, we noted that DOD\u2019s  Office of Cost Assessment and Program Evaluation had developed a  tracking tool that applied a systematic approach for stating the underlying  problem, identifying and overseeing offices of responsibility,  implementation actions, milestones, and metrics to measure the  effectiveness of the actions taken toward implementing each of the  recommendations to support the defense nuclear enterprise. We also  found that identifying risks can help an agency to track and measure the  completion of tasks over time. This example incorporates both the  monitoring and evaluation elements of internal control that we discussed  earlier. Measuring the effectiveness of each implemented  recommendation would help bolster BBPO\u2019s existing efforts. It would also  help BBPO to better determine whether the actions taken are working,  whether there are unintended consequences, or if further action is  necessary."], "subsections": []}]}, {"section_title": "The Army Has Implemented a BSAT Biosafety and Biosecurity Program but Does Not Have a Completed Strategy and Implementation Plan", "paragraphs": [], "subsections": [{"section_title": "The BSAT Biosafety and Biosecurity Program Is a Broad Effort to Improve Management, Coordination, Safety, and Quality Assurance", "paragraphs": ["In response to the 2015 incident at Dugway Proving Ground and various  subsequent DOD and external reviews of management, operational,  coordination, safety, and quality assurance incidents between 2004 and  2015, DOD has initiated a broad range of efforts to address these types  of incidents and to improve DOD\u2019s BSAT enterprise. The designation of  the Army as the DOD Executive Agent for the DOD Biosafety and  Biosecurity Program is one example of DOD\u2019s efforts to improve  management. Prior to 2015, there was no centralized oversight authority  for DOD\u2019s BSAT enterprise. The Secretary of the Army\u2019s designation as  the Executive Agent and subsequent delegation of this authority to The  Army Surgeon General has, according to BBPO and laboratory officials,  resulted in improved coordination and communication across DOD and  with the Federal Select Agent Program. According to these same officials,  BBPO also has contributed to improved communication between DOD  laboratories by establishing working groups and is developing a process  for approving standard operating procedures for working with BSAT  across the CBDP Enterprise.", "DOD has made key safety improvements by taking a number of actions to  address the incident at Dugway Proving Ground and the  recommendations from the Army\u2019s 2015 investigation report. These key  safety improvements include (1) establishing a DOD Executive Agent and  a support office to provide oversight, (2) implementing improved quality  control and assurance standards at its covered facilities, (3) developing a  new quality management system, (4) conducting additional scientific  studies on BSAT inactivation, and (5) taking multiple actions to address  requirements associated with Army Directive 2016-24 and the Army\u2019s  2015 investigation report. Appendix V provides detailed information on  the key safety improvements DOD has completed in response to the  incident at Dugway Proving Ground and the recommendations from the  Army\u2019s investigation report.", "According to BBPO officials, in addition to implementing improved quality  control and assurance standards at covered facilities, they also have  established a quality control and assurance working group to address and  track implementation of the recommendations in accordance with the  Army\u2019s Implementation Guidance for Army Directive 2016-24 and to  implement the quality control and assurance measures from section 218  of the NDAA for Fiscal Year 2017. Further, the EARO has established a  BSAT Biorisk and Scientific Review Panel to review and assess biosafety  and biosecurity concerns associated with new and existing procedures  conducted at DOD BSAT laboratories and to provide recommendations to  the EARO on their acceptability for use to enhance biosafety and  biosecurity across the DOD BSAT programs.", "To provide additional insights into DOD\u2019s actions to make safety  improvements and to better understand the effects of those actions on  laboratory staff and operations following the 2015 incident at Dugway  Proving Ground, we conducted facilitated discussions with a non- generalizable sample of supervisory and non-supervisory staff at the six  DOD laboratories that handled BSAT. We used these facilitated  discussions to obtain the views of those laboratory staff who have and will  be implementing key biosafety and biosecurity actions from multiple  sources. Appendix VI presents selected comments, organized by key  themes, from laboratory staff at DOD facilities that handle BSAT in  response to actions taken by DOD following the 2015 incident at Dugway  Proving Ground. We heard a broad range of views on the effects of the  Dugway incidents as well as the effects of subsequent actions to improve  the BSAT Biosafety and Biosecurity Program. For example, some  individuals were concerned about the effect of administrative  requirements on the efficiency of their work, while others believed that the  organizational changes made by the Army have improved communication  and coordination. We did not validate any of the views expressed to us,  but they may be of value to BBPO and officials throughout the BSAT  enterprise in considering both how their program efforts are perceived  and how best to carry them out."], "subsections": []}, {"section_title": "BBPO Has Not Completed a Strategy and Implementation Plan to Assist the Program in the Long Term", "paragraphs": ["BBPO has begun to develop a draft concept plan to establish roles and  responsibilities for the BSAT Biosafety and Biosecurity Program.  However, we found that BBPO has not developed a strategy or  implementation plan for the long term. BBPO\u2019s draft concept plan  identified manpower and funding requirements for the BSAT Biorisk  Program Office but did not go further in laying out a strategy and  implementation plan. According to BBPO officials, BBPO currently is  relying on DOD Instruction 5210.88 as overarching guidance for  managing BSAT biosecurity operations and bringing DOD into  compliance with Executive Order 13546, Optimizing the Security of  Biological Select Agents and Toxins in the United States, and select  agent regulations. BBPO also relies on DOD Manual 6055.18-M for  managing DOD BSAT biosafety operations. In addition, DOD is in the  process of drafting an overarching directive for the combined DOD BSAT  Biosafety and Biosecurity Program that will be based on DOD Instruction  5210.88 and DOD Manual 6055.18-M. According to BBPO officials,  BBPO plans to develop a multi-service policy to consolidate biosafety and  biosecurity initiatives for combined biorisk management and replace Army  Directive 2016-24 once the Army has fully implemented its directive.  While efforts to develop the draft concept plan and overarching guidance  are important, BBPO has not identified long-term goals, objectives,  external factors that can affect goals, use of metrics to gauge progress,  an evaluation plan for monitoring goals and objectives, and an overall  time frame for completion of a strategy and implementation plan.", "According to Office of Management and Budget Circular (OMB) A-11, in  addition to fulfilling the requirements of the GPRA Modernization Act of  2010, strategic planning serves a number of important management  functions related to achieving an agency\u2019s mission. For example,  strategic planning is a valuable tool for communicating a vision for the  future and should include goals and objectives that align with resources  and guide decision making to accomplish priorities and improve  outcomes. An overall strategy would also help to prioritize funding;  accomplish priorities to improve outcomes; and coordinate biosafety and  biosecurity protocols, practices, and procedures to achieve harmonization  across the military services and the DOD BSAT enterprise. To  accomplish these things, a strategy and implementation plan can include  such things as long-term goals, objectives, external factors that can affect  goals, use of metrics to gauge progress, and a time frame for completion.", "BBPO officials acknowledged that they need a strategy and  implementation plan for the BSAT Biosafety and Biosecurity Program.  They said that once they complete the concept plan, they will develop a  strategy that will include specific goals and tasks to support programmatic  efforts. They explained that they have not been able to develop a strategy  and implementation plan because BBPO still is organizing the office and  carrying out its other responsibilities while working toward obtaining  stakeholder support for the program.", "As DOD completes a concept plan for the program and turns its attention  to a strategy and implementation plan for the program over the long term,  BBPO has an opportunity to incorporate the following key elements  typically found in such strategies and implementation plans and specified  in OMB guidance: long-term goals, objectives, external factors that can  affect goals, use of metrics to gauge progress, evaluation of the plan to  monitor goals and objectives, and an overall time frame for completion of  the strategy and implementation plan. Without a strategy and  implementation plan, Dugway Proving Ground and DOD\u2019s currently  covered facilities may not be able to determine how to inform DOD\u2019s long- term planning efforts. In addition, components of the DOD BSAT  enterprise may remain unclear about the department\u2019s strategy to  harmonize BSAT operations to ensure safety, security, and  standardization of procedures throughout DOD\u2019s BSAT enterprise. A  strategy and implementation plan could also help ensure unity of  command among the military services to employ department-wide  policies and procedures for managing the biosafety and biosecurity of  BSAT. They also could help DOD to identify the capabilities necessary to  support laboratory improvements, mitigate biological mishaps similar to  the 2015 incident at Dugway Proving Ground, and allocate resources that  support the BSAT enterprise."], "subsections": []}]}, {"section_title": "The Army Has Not Fully Institutionalized Measures to Ensure the Independence of Edgewood Chemical Biological Center\u2019s Test and Evaluation Mission", "paragraphs": ["The Army has not fully institutionalized measures to ensure that its  biological test and evaluation mission remains independent from its  biological research and development mission at Edgewood Chemical  Biological Center. This is important for preventing undue influence of test  and evaluation procedures on research and development procedures,  and vice versa. In April 2016, the Army issued General Order 2016-04 in  response to a recommendation from the Army\u2019s Biosafety Task Force,  which directed the transfer of the West Desert Test Center \u2013 Life  Sciences Division at Dugway Proving Ground, Utah, and its reassignment  to the U.S. Army Materiel Command-Research, Development and  Engineering Command \u2013 U.S. Army Edgewood Chemical Biological  Center at Aberdeen Proving Ground, Maryland. This transfer took place  in July 2016, and the former Life Sciences Division was subsequently  renamed the BioTesting Division. Edgewood Chemical Biological Center\u2019s  traditional mission primarily is focused on research and development,  while the West Desert Test Center\u2019s traditional mission is focused on test  and evaluation.", "DOD subsequently reported to the congressional defense committees on  April 10, 2017, that it had realigned the BioTesting Division in order to  place it under staff with more experience in handling BSAT. According  to the CBDP\u2019s 2017 Annual Report to Congress, the realignment of the  BioTesting Division will enable tracking, reporting, and meeting of audit  requirements within an approved framework for managing governance,  risks, and compliance. Figure 4 illustrates the transfer of command and  control of the BioTesting Division.", "Officials at Edgewood Chemical Biological Center identified a number of  steps they have taken and plan to take to address concerns related to  potential conflict of interest, including the following:  In June 2016, the Army Test and Evaluation Command and Army  Research, Development and Engineering Command signed a  memorandum of agreement addressing reassignment of the  BioTesting Division that lays out roles and responsibilities for test  processes and procedures between the two entities. The  memorandum also notes that the Research, Development and  Engineering Command will develop a mitigation strategy for  conflicts of interest when Edgewood Chemical Biological Center is  the developer and the BioTesting Division is the tester.", "In November 2017, Edgewood Chemical Biological Center  elevated the BioTesting Division from a branch to a division to  raise its visibility and alleviate concerns about independence  between the test and evaluation functions and the research and  development functions of Edgewood Chemical Biological Center.", "However, as of March 2018, the Army has not institutionalized measures,  such as policies, standard operating procedures, protocols, and roles and  responsibilities to ensure independence between the biological research  and development mission and the test and evaluation mission.  Specifically, the Army has not provided any measures beyond the  memorandum of agreement that acknowledged the potential for conflict of  interest, such as the conditions under which one or more officials\u2014even  without intent\u2014exercises undue influence of test and evaluation mission  procedures on research and development procedures. The Army also  recognizes the need for a mitigation strategy\u2014to ensure independence  between the biological research and development function and the test  and evaluation function that takes the transfer of command and control  into account. The memorandum of agreement does not contain, for  example, criteria that distinguish the mission requirements for operational  test and evaluation for the BioTesting Division from the mission  requirements for research and development, and risk management  guidelines to mitigate risks associated with potential conflicts of interest  between the Edgewood Chemical Biological Center research and development mission and the BioTesting Division\u2019s test and evaluation  mission.", "Army officials explained that a mitigation strategy has not been  developed\u2014and that there is no time frame for developing such a  strategy\u2014because there is no testing of BSAT materials under way at the  BioTesting Division, since its BSAT registration has been withdrawn.  According to Army officials, this condition could last for at least 1 to   2 years. While a mitigation strategy to prevent potential conflict of interest  is envisioned by the memorandum of agreement, Edgewood Chemical  Biological Center officials currently are focused on re-registering the  BioTesting Division with the Federal Select Agent Program and bringing it  back up to full operational capability. A senior official at Edgewood  Chemical Biological Center acknowledged that the risk to independence  between Edgewood Chemical Biological Center and the BioTesting  Division is an issue that remains unresolved and there are currently no  measures in place to prevent potential conflict of interest.", "According to Army Regulation 73-1, Test and Evaluation: Test and  Evaluation Policy, independence is important to ensure that the decision  maker is provided with, for example, unbiased, objective advice about the  status of the development of a system. In addition, as we have reported,  independence between research and development functions and test and  evaluation functions is key to the effectiveness of operational test and  evaluation. We have reported long-standing conflicts between the  research and development mission and the test and evaluation mission  when there is a lack of independence, including (1) how many and what  types of tests to conduct; (2) when testing should occur; (3) what data to  collect, how to collect it, and how best to analyze it; and (4) what  conclusions are supportable given the analysis and the limitations of the  test program.", "One example where the Army considered a potential conflict of interest  was between the Army Test and Evaluation Command\u2019s chemical test  and evaluation mission and Edgewood Chemical Biological Center\u2019s  chemical research and development mission. Specifically, Army Directive 2016-24 directed the Army Test and Evaluation Command to conduct a  separate evaluation to determine whether to transfer the \u201cremaining  elements,\u201d that is, the chemical mission, from West Desert Test Center to  Edgewood Chemical Biological Center. Officials from the Army Test and  Evaluation Command stated that after developing alternative courses of  action, they decided\u2014in contrast to their decision on the biological  mission\u2014to keep the chemical mission under the Army Test and  Evaluation Command rather than transferring it to the Edgewood  Chemical Biological Center. According to officials at the Army Test and  Evaluation Command, the transfer of operational command and control of  their chemical mission could create an independence issue by placing the  chemical test and evaluation function within the same command as the  research and development function. The chemical mission represents a  major operational command and control element of the Army Test and  Evaluation Command.", "Without measures in place to preserve independence\u2014such as criteria  that establish mission requirements for operational test and evaluation for  the BioTesting Division or risk management guidelines\u2014there is a  potential risk to the independence of the testing and evaluation mission  conducted by the BioTesting Division. For example, the BioTesting  Division might be compelled to prioritize the testing of Edgewood  Chemical Biological Center products over those of other DOD and non- DOD customers. Officials in the Army Test and Evaluation Command  stated that the transfer of the biological test and evaluation mission may  increase the complexity of the evaluation mission by requiring additional  coordination. Furthermore, the BioTesting Division\u2019s procedures on  particular efforts could be influenced, resulting in test and evaluation that  may not be objective or reliable. Without developing measures to prevent  conflicts of interest, the Army will not have reasonable assurance of the  independence of the BioTesting Division\u2019s test and evaluation mission."], "subsections": []}, {"section_title": "DOD Has Not Completed the Study and Evaluation Required by the NDAA for Fiscal Year 2017 to Determine Specific Infrastructure Needs for the BSAT Program", "paragraphs": ["DOD has not completed its BSAT infrastructure study to determine its  infrastructure needs, as required by the NDAA for Fiscal Year 2017. DOD  was to report to the congressional defense committees by February 1,  2017, among other things, on the results of its study to evaluate (1) the  feasibility of consolidating covered facilities within a unified command to  minimize risk, (2) opportunities to partner with industry for the production  of BSAT and related services in lieu of maintaining such capabilities  within the Army, and (3) whether operations under the BSAT production  program should be transferred to another government or commercial  laboratory that might be better suited to produce BSAT for non-DOD  customers. Moreover, Standards for Internal Control in the Federal  Government provides specific guidance to federal agencies on how to  communicate clearly defined objectives that are to be achieved\u2014 including time frames for completing those objectives\u2014and to inform  decision makers in a timely manner.", "DOD provided a report to the congressional defense committees on April  10, 2017, stating that the department is still identifying its BSAT  infrastructure requirements. However, as of March 2018, CBDP officials  acknowledged that these study efforts are still ongoing and that there are  no estimated time frames for completing any of them. DOD officials stated  that they are focusing on identifying enterprise-wide infrastructure for  CBDP, of which BSAT infrastructure is just one part. Officials explained  that they have prioritized their efforts to first address the  recommendations from our 2015 report, which included calling for DOD to  designate an entity to take responsibility for CBDP Enterprise  infrastructure. CBDP officials stated that when they established the  infrastructure manager position, they decided to study CBDP Enterprise  infrastructure from a \u201cclean slate\u201d and leverage lessons learned from  previous studies. According to DOD officials, this information will be used  to identify any capability gaps, right-size the CBDP Enterprise  infrastructure, and support DOD\u2019s final report to Congress regarding  BSAT infrastructure.", "Regarding DOD\u2019s first required task\u2014to study the feasibility of  consolidating covered facilities within a unified command to minimize  risk\u2014DOD officials stated that study efforts are ongoing and highlighted  initial consolidation actions the department has taken. Specifically, DOD  officials stated that (1) DOD had established the Secretary of the Army as  Executive Agent to further consolidate command oversight of DOD\u2019s  BSAT Biosafety and Biosecurity Program and (2) the Army had  transferred the command and control of the BioTesting Division from the  Army Test and Evaluation Command to Edgewood Chemical Biological  Center, as previously discussed.", "Regarding DOD\u2019s second required task, DOD officials stated that the  Army and DOD have not yet begun any specific studies on opportunities  to partner with industry to produce BSAT and related services as an  alternative to maintaining these capabilities within the Army. CBDP  officials stated that they continually look for opportunities to partner with  industry on production. CBDP officials told us that they plan to determine  if there are opportunities to partner with industry after the CBDP  Enterprise-wide study effort is completed. In the meantime, officials  highlighted that the Army\u2019s Defense Biological Product Assurance Office  within the Joint Program Executive Office for Chemical and Biological  Defense\u2014formerly known as the Critical Reagents Program\u2014has taken  action to study its office\u2019s BSAT-related commercial product line, which  has resulted in the office divesting itself of inactivated BSAT materials.", "Regarding the third required task, the NDAA for Fiscal Year 2017  required DOD to study whether BSAT production operations should be  transferred to another government or commercial laboratory that might be  better suited to produce BSAT for non-DOD customers. DOD reported  that it has taken steps to support a future decision on this issue and,  according to DOD officials, once it has completed the CBDP Enterprise- wide study of infrastructure capabilities and capacity, it will determine  whether the BSAT community needs to transfer any part of its production  to another entity. With regard to the production of BSAT for non-DOD  customers, Army officials stated that when the BioTesting Division at  Dugway Proving Ground becomes fully operational and re-registers with  the Federal Select Agent Program in fiscal year 2019, it will no longer be  producing and shipping BSAT to non-DOD customers. The Army took  steps to address the issue prior to the NDAA for Fiscal Year 2017.  Specifically, in August 2015, the Army established a Biosafety Task Force  working group that examined, among other things, DOD\u2019s covered  facilities and options for locations for producing BSAT. Subsequently, in  February 2016, the Army recommended that additional analysis be  conducted before any decision is made to change the current BSAT  laboratory infrastructure. Appendix VII shows what DOD has reported and  completed in response to the requirements in the NDAA for Fiscal Year  2017.", "The NDAA for Fiscal Year 2017 is not the first time that DOD has been  directed to review its BSAT infrastructure. Biosafety, biosecurity, and  biodefense issues have been long-standing concerns for the nation. We  found that the federal government\u2014including DOD\u2014has spent over a  decade studying biosafety and biosecurity issues, including BSAT  infrastructure. DOD has contributed to and is continuing to support a  number of federal efforts regarding size, safety, security, and oversight of  high-containment laboratories across the United States, including the  efforts of the Federal Experts Security Advisory Panel and Fast Track  Action Committee to examine the size and scope of laboratories working  with BSAT across the United States. Appendix VIII describes and  provides a summary of selected federal panels, task forces, and working  groups that have examined biosafety, biosecurity and biodefense issues  since 2004. (Our prior reports related to these matters are included in  Related GAO Products at the end of this report.)", "According to CBDP officials, once CBDP gathers information on the  capacity and needs of its enterprise-wide infrastructure and determines  where there are capability gaps, it anticipates providing a report to the  congressional defense committees. These officials said that the report will  provide information on whether DOD should consolidate or transfer  infrastructure and opportunities to partner with industry on BSAT. The  EARO has periodically met with congressional authorizers, according to  BBPO officials, to provide programmatic updates on the DOD BSAT  Biosafety and Biosecurity Program. However, CBDP officials stated that  they have not provided an update to the congressional defense  committees on the results of the study efforts since they issued their  preliminary report on April 10, 2017. In addition, CBDP officials told us  that they do not have an estimated time frame for when they will be able  to provide the final report on the results of the study of BSAT  infrastructure. DOD has reported that its mandated study efforts on  BSAT-related infrastructure still are ongoing because DOD is focused first  on identifying CBDP Enterprise-wide infrastructure and has no estimated  time frames for completing the mandated study. Unless DOD establishes  time frames for finalizing its study, decision makers will not have  reasonable assurance that DOD is taking the necessary steps in a timely  manner to provide the required BSAT infrastructure CBDP needs to  support the warfighter."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The inadvertent shipments of incompletely inactivated Bacillus anthracis  from Dugway Proving Ground, according to the Army\u2019s 2015 investigation  report, constituted serious breaches of regulations and raised biosafety  and biosecurity concerns. Since then, DOD has taken steps to improve  biosafety and biosecurity and made significant progress in addressing the  recommendations from the Army\u2019s investigation report. The department  currently has an opportunity to take several additional management  actions that, if implemented fully, will help it capitalize on the progress  that it has made. Addressing the gap in assessing how effectively the  recommendations and actions taken address the original condition and  contributing factors they were intended to resolve would bolster the  Army\u2019s long-term efforts. The Army could incorporate such an approach  into its existing processes to monitor the implementation of  recommendations from the Army\u2019s 2015 investigation report.", "The Army clearly has a concept in mind for the BSAT Biosafety and  Biosecurity Program. However, that concept does not constitute a  strategy and implementation plan that identifies specific long-term goals,  objectives, external factors that can affect goals, and tasks to support  programmatic efforts through the use of metrics to gauge progress;  milestones; an evaluation of the plan; and an overall time frame for  completion. Without a strategy and implementation plan, the Army may  not be able to harmonize BSAT operations to ensure safety, security, and  standardization of procedures throughout DOD\u2019s BSAT enterprise.", "The Army recognizes that the transfer of operational command and  control of the BioTesting Division from West Desert Test Center at  Dugway Proving Ground, Utah, to Edgewood Chemical Biological Center  at Aberdeen Proving Ground, Maryland, could result in unintended  consequences, such as a potential risk to the independence of the testing  and evaluation mission. However, although Army officials said they intend  to develop a strategy to mitigate this risk, there is no time frame for doing  so, because there is no testing under way at the BioTesting Division and  there will be none for at least 1 to 2 years. This hiatus in testing should  not preclude Army efforts to develop a mitigation strategy. Without  measures in place to prevent or mitigate a risk to independence, the  transfer of operational command and control could ultimately compromise  the quality of future technologies used by the warfighter.", "Finally, DOD is focusing on identifying the enterprise-wide infrastructure  necessary for CBDP. However, it has not yet determined time frames for  completion of the study required by the NDAA for Fiscal Year 2017  related to consolidation of command, transfer of BSAT production  responsibilities, and opportunities to partner with industry for the  production of BSAT. Without time frames for reporting on the final results  of this study, DOD is unable to provide decision makers with key  information needed to determine infrastructure requirements for the BSAT  program and contribute to federal-level efforts to determine the  appropriate number of high-containment laboratories in the United States."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the Department of  Defense:  The Secretary of the Army should ensure that The Surgeon General of  the Army, as the EARO for DOD\u2019s BSAT Biosafety and Biosecurity  Program, incorporates into existing processes an approach for assessing  how effectively the recommendations from the Army\u2019s 2015 investigation  report address the original condition and contributing factors that they  were intended to resolve. (Recommendation 1)", "The Secretary of the Army should ensure that The Surgeon General of  the Army, as the EARO for DOD\u2019s BSAT Biosafety and Biosecurity  Program, develops a strategy and implementation plan for the DOD  BSAT Biosafety and Biosecurity Program that includes long-term goals,  objectives, external factors that can affect goals, use of metrics to gauge  progress, an evaluation plan for monitoring goals and objectives, and a  time frame for completion. (Recommendation 2)", "The Secretary of the Army should ensure that the Commander of Army  Materiel Command establishes measures to prevent the potential risk to  independence posed by transferring operational command and control of  the BioTesting Division from West Desert Test Center to the Edgewood  Chemical Biological Center. Such measures could include, for example,  criteria that establish mission requirements for operational test and  evaluation for the BioTesting Division, in accordance with DOD and Army  regulations, and risk management guidelines to mitigate risks associated  with potential conflicts of interest between the Edgewood Chemical  Biological Center research and development mission and the BioTesting  Division\u2019s test and evaluation mission. (Recommendation 3)", "The Secretary of Defense should ensure that the Deputy Assistant  Secretary of Defense for Chemical and Biological Defense establishes  time frames to complete the study and its evaluations required by the  NDAA for Fiscal Year 2017, Section 218(d), regarding the feasibility of  consolidating covered facilities within a unified command, opportunities to  partner with other industry for the production of BSAT, and transfer of  BSAT production responsibilities. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["In written comments on a draft of this report, DOD concurred with all four  of our recommendations, discussed actions it is taking and plans to take  to implement them, and provided target dates for completing  implementation of these actions. The full text of DOD\u2019s written comments  are reprinted in appendix IX. DOD also provided us with several technical  comments, which we incorporated in the report, as appropriate. We  believe these actions, if fully implemented, will address our  recommendations.", "USDA and HHS did not provide formal agency comments on a draft of  this report, but provided us with a technical comment, which we  incorporated in the report, as appropriate.", "We are sending copies of this report to the congressional defense  committees as well as other appropriate congressional committees; the  Secretaries of Defense, Agriculture, and Health and Human Services; the  Assistant Secretary of Defense for Nuclear, Chemical, and Biological  Defense Programs; the Deputy Assistant Secretary of Defense for  Chemical and Biological Defense; the Department of Defense Inspector  General; the Secretaries of the Army, the Air Force, and the Navy and the  Commandant of the Marine Corps; the Directors, Centers for Disease  Control and Prevention and Animal and Plant Health Inspection Service;  and other cognizant officials, as appropriate. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact Joseph Kirschbaum at (202) 512-9971 or KirschbaumJ@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The National Defense Authorization Act (NDAA) for Fiscal Year 2017  included a provision for us to report on the Department of Defense\u2019s  (DOD) actions to address findings and recommendations of the Army\u2019s  December 2015 investigation report (hereafter, the Army\u2019s 2015  investigation report) regarding the inadvertent shipment of incompletely  inactivated Bacillus anthracis from Dugway Proving Ground, Utah. It also  included a provision for us to report on DOD\u2019s efforts to implement quality  control and assurance measures for the department\u2019s Biological Select  Agents and Toxins (BSAT) Biosafety and Biosecurity Program, among  other things. This report discusses the extent to which (1) DOD has  implemented the recommendations from the Army\u2019s 2015 investigation  report and has developed an approach to measure the effectiveness of  actions taken to address the recommendations, (2) the Army has  implemented the BSAT Biosafety and Biosecurity Program and  developed a strategy and implementation plan, (3) the Army has  developed measures to ensure that its biological test and evaluation  mission remains independent under its biological research and  development mission, and (4) DOD has carried out a study and  evaluation in compliance with the requirements contained in section 218,  subsection (d), of the NDAA for Fiscal Year 2017.", "To determine how DOD has implemented the recommendations from the  Army\u2019s 2015 investigation report and has developed an approach to  measure the effectiveness of actions taken to address the  recommendations, we reviewed the Army\u2019s 2015 investigation report  recommendations and assessed the subsequent actions that DOD had  taken to address those recommendations. To determine whether specific  recommendations have been addressed, we analyzed guidance that  DOD and the Army issued to instruct department and military service  activities on roles and responsibilities and implementation efforts to  support DOD\u2019s BSAT Biosafety and Biosecurity Program, such as DOD  Instruction 5210.88, Security Standards for Safeguarding Biological  Select Agents and Toxins (BSAT); Army Directive 2016-24, Department  of Defense Biological Select Agent and Toxins Biosafety Program; and  Implementation Guidance for Army Directive 2016-24. We also analyzed  supporting documentation from DOD officials to demonstrate how those  specific recommendations were addressed.", "As of March 2018, DOD had designated a priority level and had updated  the completion status of its implementation for each of the 35 of   39 recommendations from the Army\u2019s 2015 investigation report that we  reviewed. This update and priority level designation was conducted at our  request. We also asked that DOD provide us with milestones and risk  assessments associated with the implementation of the recommendations  from the Army\u2019s investigation report. However, DOD was unable to  provide this information. (We did not review the 4 recommendations in the  investigation report that pertain to individual accountability.) We  interviewed cognizant DOD and military service officials to obtain their  perspectives on efforts to address the recommendations in response to  the 2015 incident at Dugway Proving Ground. In addition, we reviewed  Standards for Internal Control in the Federal Government and DOD  Instruction 5010.40, Managers\u2019 Internal Control Program Procedures to  identify criteria for communicating quality information and performing  monitoring and reporting activities.", "To determine the extent to which the Army has implemented the BSAT  Biosafety and Biosecurity Program and developed a strategy and  implementation plan, we obtained documentation from DOD officials on  current policies, procedures, and directives identifying oversight and  governance authorities involved in supporting DOD\u2019s BSAT Biosafety and  Biosecurity Program. Also, we obtained examples of working groups  responsible for developing quality control and assurance guidance and  standard operating procedures for working with BSAT in DOD  laboratories and across the Chemical and Biological Defense Program  (CBPD) Enterprise. In addition, we compared the actions of the BSAT  Biorisk Program Office (BBPO), such as developing the draft Department  of Defense Biological Select Agents and Toxins Biorisk Program Office  Concept Plan, to leading practices for sound management identified in  the GPRA Modernization Act of 2010, and the Army\u2019s 2015 investigation  report recommendations. Further, we interviewed DOD officials from the  military services to determine their strategies and efforts in supporting  DOD\u2019s plans to effectively manage DOD\u2019s BSAT Biosafety and  Biosecurity Program. We also interviewed cognizant officials to determine  any biosafety and biosecurity improvements made since the 2015  incident at Dugway Proving Ground.", "We toured all six DOD BSAT laboratory facilities, five of which currently  are responsible for handling BSAT, to observe the current physical  space\u2014both operational and under construction\u2014for handling and testing  BSAT. These site visits were conducted at the (1) BioTesting Division,  Dugway Proving Ground, Utah; (2) Edgewood Chemical Biological  Center, Aberdeen Proving Ground, Maryland; (3) U.S. Army Medical  Research Institute of Infectious Diseases, Fort Detrick, Maryland;   (4) Naval Medical Research Center, Fort Detrick, Maryland; (5) Chemical,  Biological, and Radiological Defense Division, Naval Surface Warfare  Center \u2013 Dahlgren Division, Dahlgren, Virginia; and (6) 711th Human  Performance Wing, Wright \u2013 Patterson Air Force Base, Ohio.", "We also conducted facilitated discussions between September 2017 and  November 2017 with groups of laboratory non-supervisory staff at each of  the six DOD BSAT laboratories\u2014five of which currently are responsible  for handling BSAT\u2014to obtain their views of the effects of the 2015  discovery at Dugway Proving Ground and the subsequent investigation  and management actions to respond to identified problems. Generally,  discussion groups are designed to obtain in-depth testimonial information  about participants\u2019 views, opinions, and/or experiences on specific issues,  which cannot be easily obtained from single interviews. In preparation for  each discussion group, we asked the leadership at each of the six DOD  laboratories to distribute our e-mail inviting all laboratory staff to  participate in an on-site discussion group. These small groups consisted  of self-selected volunteers, and were not random samples of research staff at each of these laboratories. The number of non-supervisory  laboratory staff participants in each group ranged from 3 to 17 and totaled  44 participants.", "A GAO team member facilitated each discussion group, using a  structured discussion guide with open-ended questions. The team did not  record the discussions. Instead, multiple GAO team members took notes  of the discussion, without ascribing comments to specific individuals.", "We later summarized the information collected for each discussion group  and identified recurring themes. We did not design these discussion  groups to provide results that were generalizable to the whole research  staff at each laboratory. Laboratory staff who did not participate in these  discussion groups may have different opinions and observations from  those who participated in our discussion groups. Moreover, while we  designed our discussion method to encourage participants to offer  whatever comments they wished, we cannot assume that participants  mentioned all of the effects that may have influenced their laboratory  activities since 2015.", "We also reviewed our prior work on the management of hazardous  biological agents in high-containment laboratories at federal departments  and agencies, including DOD. A list of related GAO products on high- containment laboratories is included in the Related GAO Products pages  at the end of this report.", "To examine the extent to which DOD has developed measures to ensure  that the BioTesting Division\u2019s test and evaluation mission remains  independent from the research and development mission that resides at  Edgewood Chemical Biological Center, we reviewed and compared Army  Regulation 73-1 on testing and evaluation to Army General Order   2016-04, which first directed the transfer of the Life Sciences Division\u2014 later renamed the BioTesting Division\u2014from the Army Test and  Evaluation Command to Edgewood Chemical Biological Center. We also  compared AR 73-1 to Army Directive 2016-24, Department of Defense  Biological Select Agent and Toxins Biosafety Program, which provided  additional guidelines for this transfer. We also reviewed the  memorandum of agreement between the Army Test and Evaluation  Command and the Army Research, Development and Engineering  Command to assess plans, roles, and responsibilities for transfer and  reassignment of the BioTesting Division from the West Desert Test  Center to the Edgewood Chemical Biological Center. We also conducted  interviews with senior staff at the BioTesting Division, the West Desert  Test Center, and the Edgewood Chemical Biological Center to determine  what procedures are in place to ensure that the BioTesting Division\u2019s test  and evaluation activities are not being influenced by the Edgewood  Chemical Biological Center\u2019s research and development efforts.", "To examine the extent to which DOD has carried out a study and  evaluation in compliance with the requirements contained in section 218,  subsection (d), of the NDAA for Fiscal Year 2017, we compared the  relevant requirements from the NDAA for Fiscal Year 2017 with DOD\u2019s  April 10, 2017, report to the congressional defense committees to  determine whether the report included all of the required elements  concerning consolidation, transfer, and opportunities to partner with  industry on the production of BSAT. We also obtained\u2014through  interviews with agency and written responses\u2014the status of DOD\u2019s  efforts to address NDAA for Fiscal Year 2017 concerning infrastructure  requirements for the BSAT program and enterprise-wide infrastructure for  CBDP. We reviewed the Standards for Internal Control in the Federal  Government to identify criteria providing guidance to federal agencies to  communicate clearly defined objectives that are to be achieved, including  time frames for completing those objectives and informing decision  makers.", "Information used in our analysis primarily covers the period from May  2015 through July 2018 and the information is the most recent available.  We included budget information from fiscal year 2016 to fiscal year 2018.  To conduct our work, we obtained documentation and interviewed  cognizant officials from DOD organizations, offices, and military  commands responsible for funding, managing, and overseeing the  production, handling, testing, and shipment of BSAT; the Departments of  Health and Human Services (HHS) and Agriculture (USDA) agencies that  manage the Federal Select Agent Program, which jointly regulate and  oversee covered entities in the United States that are registered to  possess, use, and transfer BSAT; and all six DOD BSAT laboratories, five  of which currently are responsible for handling BSAT. See below for a  complete list of organizations and agencies."], "subsections": [{"section_title": "Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Department of Health and Human Services", "paragraphs": ["Centers for Disease Control and Prevention, Atlanta, Georgia We conducted this performance audit from May 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Static Images and Information for Map of Department of Defense Biological Select Agents and Toxins Laboratories", "paragraphs": ["ECBC fosters research, development, testing, and application of technologies  for protecting warfighters, first responders, and the nation from chemical and  biological warfare agents. ECBC currently is developing better ways to  remotely detect these chemical and biological materials and technologies to  counter everything from homemade explosives to biological aerosols to  traditional and non-traditional chemical hazards.", "USAMRIID\u2019s mission is to provide leading edge medical capabilities to deter  and defend against current and emerging biological threat agents. USAMRIID  has the largest BSAT program within DOD and is committed to protecting U.S.  Armed Forces from biological threats worldwide by conducting a range of  efforts in the research and development of medical countermeasures and  other technologies to prevent or mitigate the health effects of biological agents  and emerging diseases.", "ECBC BioTesting Division, Dugway Proving Ground\u2019s primary mission is to  support the Chemical Biological Defense Program through test and evaluation  of biological systems, methodologies, and any associated need that requires  biological capabilities. ECBC Dugway possesses the Whole System Live  Agent Test Chamber, a high capacity, one-of-a-kind biological agent aerosol  containment chamber designed and constructed primarily for biological  warfare agent aerosol-detection system testing.", "The Chemical, Biological, Radiological Defense Division at NSWCDD  provides full-spectrum life cycle support for chemical, biological, and  radiological detection, protection, decontamination, and modeling and  simulation systems. This mission includes shipboard, fixed-site, and  expeditionary chemical, biological, and radiological defense applications.  NSWCDD maintains the only Navy Biological Safety Level-3 laboratory  devoted to non-medical chemical, biological, and radiological defense  applications, and is a leader in chemical and biological decontamination  research, centering on the decontamination of Bacillus anthracis.", "The Biological Defense Research Directorate at the Naval Medical Research  Center serves as a national resource providing testing and analysis for the  presence of potential biological hazards. The researchers are considered  leaders in the field of detection, including hand-held assays, molecular  diagnostics, and confirmatory analysis.", "The 711th Human Performance Wing conducts research on technologies for  the rapid detection of chemical, biological, and radiological events; hyperbaric  medical research; and light, durable intensive care capabilities for aeromedical  evacuation. It also has the nation\u2019s only Radiological Assessment Teams  available for 24/7 deployment."], "subsections": []}, {"section_title": "Appendix III: Actions Taken to Implement Recommendations from the Army\u2019s 2015 Investigation Report as of March 2018", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2017 contained a  provision for us to review the actions taken by the Department of Defense  (DOD) to address the findings and recommendations of the Army\u2019s 2015  investigation report regarding the incident at Dugway Proving Ground,  including any actions taken to address the culture of complacency in the  biological select agents and toxins (BSAT) program that was identified in  the report.", "As of March 2018, DOD had designated a priority level and had updated  the completion status of its implementation for each of the 35 of   39 recommendations from the Army\u2019s 2015 investigation report that we  reviewed. This update and priority level designation was conducted at  GAO\u2019s request. We also asked that DOD provide us with milestones and  risk assessments associated with the implementation of the  recommendations from the Army\u2019s investigation report. However, DOD  was unable to provide this information. We did not review the   4 recommendations in the investigation report that pertain to individual  accountability. Of the 35 recommendations, DOD officials identified 12 as  high priority, 18 as moderate priority, and 5 as low priority. DOD officials  also provided us with an update of the completion status for  implementation of each of the recommendations. Of those   35 recommendations, DOD officials indicated that 18 had been completed  and 17 were in progress. (We did not independently assess whether each  recommendation and DOD\u2019s subsequent actions addressed the problems  identified in the Army\u2019s report.) Table 2 lists the 35 recommendations  (tasks) by category, the priority assigned to each recommendation by  DOD, the reported actions DOD has taken to address them, and the  completion status DOD has reported for each as of March 2018."], "subsections": []}, {"section_title": "Appendix IV: Delegation of Authority for the Biological Select Agents and Toxins Biosafety and Biosecurity Program", "paragraphs": ["The Deputy Secretary of Defense designated the Secretary of the Army  on July 23, 2015, as the Executive Agent for the Department of Defense\u2019s  (DOD) Biological Select Agents and Toxins (BSAT) Biosafety Program.  According to DOD Instruction 5210.88, the Secretary of the Army is  responsible for performing technical reviews and conducting inspections,  and harmonizing protocols and procedures across DOD laboratories that  handle BSAT.", "DOD used a sequential delegation of authority to establish leadership  roles and responsibilities initially for the DOD BSAT Biosafety Program  and subsequently for the DOD BSAT Biosecurity Program. First, on  October 26, 2015, the Secretary of the Army designated The Surgeon  General of the Army as the Executive Agent Responsible Official (EARO)  for the DOD BSAT Biosafety Program to consolidate oversight of BSAT  biosafety operations across the department. Second, on December 9,  2016, The Surgeon General of the Army further delegated EARO  authority to the Commanding General, U.S. Army Medical Research and  Materiel Command, for the DOD BSAT Biosafety Program. Third, on  January 3, 2017, the Deputy Secretary of Defense designated the  Secretary of the Army as the DOD Executive Agent for the BSAT  Biosecurity Program. Fourth, on March 31, 2017, the Secretary of the  Army further designated The Surgeon General of the Army as the EARO  for the DOD BSAT Biosecurity Program. Finally, on May 30, 2017, The  Surgeon General of the Army delegated EARO responsibility for the DOD  BSAT Biosecurity Program to the Commanding General, U.S. Army  Medical Research and Materiel Command.", "Army Directive 2016-24, Department of Defense Biological Select Agent  and Toxins Biosafety Program, directs The Surgeon General of the Army  to coordinate with the Office of the Deputy Assistant Secretary of Defense  for Chemical and Biological Defense for requirements and resources\u2014 including force structure, manpower, and infrastructure\u2014and to prioritize  resources for research requirements to advance the field of BSAT  biosafety. Figure 10 shows the alignment and organization of offices  within DOD and the military services that are responsible for carrying out  and supporting the Chemical and Biological Defense Program Enterprise.", "According to BSAT Biorisk Program Office (BBPO) officials, BBPO was  established in March 2016 to support the EARO in its oversight of DOD\u2019s  BSAT Biosafety and Biosecurity Program and implementation of tasks  and recommendations in Army Directive 2016-24. BBPO manages a  scientific review panel, inspection of DOD laboratories, harmonization of  DOD\u2019s BSAT-related regulations and procedures, and coordination of  interaction and information with the Federal Select Agent Program. BBPO  also is responsible for establishing a system to track and manage BSAT  and BSAT-related products across DOD, providing oversight for  laboratory biosafety, and advancing BSAT-related scientific research to  address knowledge gaps. According to DOD officials, in fiscal year 2016,  BBPO received approximately $805,000 for operation costs; in fiscal year  2017, BBPO received approximately $2 million. In addition, in fiscal year  2018, BBPO received approximately $2 million.", "As part of BBPO\u2019s oversight responsibilities, it acts as a single point of  contact for coordinating with the Federal Select Agent Program. In June  2017, the EARO and the directors of the Centers for Disease Control and  Prevention, Division of Select Agents and Toxins, and the Animal and  Plant Health Inspection Service (APHIS), Agriculture Select Agent  Services, on behalf of the Federal Select Agent Program, executed a  memorandum of understanding that articulates agency responsibilities.  This memorandum includes (1) oversight coordination, (2) Centers for  Disease Control and Prevention and APHIS notifying DOD BSAT  Biosafety and Biosecurity Programs of any referrals of a DOD-registered  entity to the Department of Health and Human Services Office of  Inspector General that may involve compliance violations with select  agent regulations, and (3) facilitating coordinated inspections. For  example, according to BBPO officials, BBPO receives every inspection  report and reviews it for DOD-wide implications.", "The Army has established a joint service inspection program that is led by  the Department of the Army Inspector General. That office, according to  BBPO officials, has worked closely with the Federal Select Agent  Program in coordination with BBPO to enhance the effectiveness of joint  inspections and unannounced or short-notice inspections. According to  an Army official, the Department of the Army Inspector General  coordinates with the other military services\u2019 Inspectors General, who  identify subject matter experts with operational experience to serve on  every joint service inspection team.", "In addition, BBPO officials told us that, as part of its oversight and  coordination responsibilities, the office established the BSAT Biorisk and  Scientific Review Panel, which was formally chartered in August 2017.  This panel is charged with convening at least twice a year to review and  assess biosafety, biosecurity, and technical concerns associated with  currently established and new procedures conducted at DOD BSAT  laboratories. The panel will review and assess scientific evidence that  supports the mitigation of biosafety risks and provide recommendations to  the EARO on approval of new or existing laboratory procedures. It also  serves in an advisory capacity to the EARO on any matters that pertain to  biosafety and biosecurity associated with BSAT-related research."], "subsections": []}, {"section_title": "Appendix V: The Department of Defense Has Made Key Safety Improvements by Implementing Recommendations", "paragraphs": ["The Department of Defense (DOD) has made key safety improvements  by taking a number of actions to address the incident at Dugway Proving  Ground and the recommendations from the Army\u2019s 2015 investigation  report. Key safety improvements include (1) establishing a DOD  Executive Agent and a support office to provide oversight,   (2) implementing improved quality control and assurance standards at its  covered facilities, (3) developing a new quality management system,   (4) conducting additional scientific studies on biological select agents and  toxin (BSAT) inactivation, and (5) taking multiple actions to address Army  Directive 2016-24 and the Army\u2019s 2015 investigation report. These safety  improvements are discussed below in more detail."], "subsections": [{"section_title": "DOD Has Established an Executive Agent for DOD\u2019s BSAT Biosafety and Biosecurity Program", "paragraphs": ["One of the key safety improvements DOD took in response to the incident  at Dugway Proving Ground was to establish an Executive Agent for the  BSAT Biosafety and Biosecurity Program (see appendix IV). Specifically,  at the direction of the Deputy Secretary of Defense, the Secretary of the  Army was designated in July 2015 as the Executive Agent for DOD\u2019s  BSAT Biosafety Program, and subsequently in January 2017 as the  Executive Agent for the DOD BSAT Biosecurity Program. In October  2015, the Secretary of the Army further designated The Surgeon General  of the Army as the Executive Agent Responsible Official for the DOD  BSAT Biosafety Program to consolidate oversight of BSAT biosafety  operations across the department. The Secretary of the Army, as outlined  in DOD Instruction 5210.88, is responsible for performing technical  reviews, conducting inspections, and harmonizing protocols and  procedures across DOD laboratories that handle BSAT."], "subsections": []}, {"section_title": "DOD Has Improved Quality Control and Assurance at Dugway Proving Ground and Currently Covered Facilities", "paragraphs": ["Another key safety improvement DOD took in response to the incident at  Dugway Proving Ground was to improve quality control and assurance at  Dugway and other DOD facilities that currently handle BSAT. The Army\u2019s  2015 investigation report made several recommendations to the Army to  enhance and improve quality control and assurance at Dugway Proving  Ground. These included (1) establishing a quality control and assurance  manager, (2) carrying out an environmental sampling and inspection  program, and (3) developing and enhancing the video surveillance  program. BSAT Biorisk Program Office (BBPO) officials explained that the  DOD BSAT laboratories had some quality control and assurance  measures in place prior to the National Defense Authorization Act (NDAA)  for Fiscal Year 2017.", "The quality control and assurance recommendations from the Army\u2019s  2015 investigation report, which initially applied only to Dugway Proving  Ground, were subsequently enacted in section 218 of the NDAA for Fiscal  Year 2017 to apply to all DOD covered facilities. These requirements  include:  1.  designation of an external manager to oversee quality assurance and  2.  environmental sampling and inspections;  3.  production procedures that prohibit operations where live BSAT are  used in the same laboratory where viability testing is conducted;  4.  production procedures that prohibit work on multiple organisms or  multiple strains of one organism within the same biosafety cabinet;  5.  a video surveillance program that uses video monitoring as a tool to  improve laboratory practices in accordance with regulatory  requirements;  6.  formal, recurring data reviews of production in an effort to identify  trends and nonconformance issues before such issues affect end  products;  7.  validated protocols for production processes to ensure that process  deviations are adequately vetted prior to implementation; and  8.  maintenance and calibration procedures and schedules for all tools,  equipment, and irradiators.", "BBPO officials told us that, in response to the requirements in the NDAA  for Fiscal Year 2017, they are developing a department-wide quality  control and assurance program for the BSAT community. BBPO also  developed several policies that address the measures mandated by the  NDAA for Fiscal Year 2017. These policies address setting minimum  requirements for (1) monitoring environmental quality, (2) performing  maintenance on laboratory equipment, and (3) controlling laboratory  cross-contamination between organisms or strains within the same  biological safety cabinet and between live and inactivated BSAT.", "DOD officials said that some NDAA for Fiscal Year 2017 requirements do  not necessarily apply to every laboratory. According to DOD officials,  some of these requirements are no longer relevant as a result of certain  events, such as the inadvertent shipment of incompletely inactivated  anthrax from the BioTesting Division at Dugway Proving Ground that  currently is not handling BSAT. Furthermore, some of the requirements  need further clarification. For example, the NDAA for Fiscal Year 2017  required DOD covered facilities to implement quality control and quality  assurance measures, including a video surveillance program that uses  video monitoring, in accordance with regulatory requirements. (In  providing technical comments on a draft of this report, both the  Department of Health and Human Services\u2019 Centers for Disease Control  and Prevention and Department of Agriculture\u2019s Animal and Plant Health  Inspection Service\u2014which jointly manage the Federal Select Agent  Program\u2014said that select agent regulations do not require development  and utilization of a video surveillance program.)", "The Army\u2019s 2015 investigation report also recommended the  development and utilization of a video surveillance program in  accordance with Federal Select Agent Program regulatory requirements.  DOD officials stated that there is no such requirement in federal select  agent regulations and, therefore, to implement a video surveillance  program would result in laboratories having an unfunded requirement for  maintenance costs. According to a BBPO official, DOD officials reached  out to congressional staff to obtain clarification on implementing this  requirement and, according to these officials, were advised to \u201cinterpret  the requirement as appropriate.\u201d DOD officials stated that because the  federal select agent regulations do not require video surveillance, DOD is  not obligated to implement a video surveillance program in accordance  with the provision in the NDAA for Fiscal Year 2017. Army Regulation  190-17 for the BSAT security program, however, already includes a  requirement that all Army Biosafety Level-3 and 4 laboratories have  operational closed-circuit television cameras installed and positioned so  that all areas of the research room can be viewed. In response to the  NDAA for Fiscal Year 2017 and its requirement to implement a video  surveillance program, BBPO officials stated that recommendations for the  use of video surveillance are being established by the Quality Assurance  Working Group that supports BBPO for all laboratories in each of the  military services that handle BSAT."], "subsections": []}, {"section_title": "DOD is Developing a New Quality Management System", "paragraphs": ["Example of a Potential Quality Control and  Assurance Procedure at the Department of  Defense (DOD)  DOD\u2019s future quality management system will  include critical control points for helping to  prevent personnel from making mistakes while  conducting scientific procedures. For example,  a certain procedure for extracting genetic  information from pathogens that also  inactivates pathogens uses a chemical  mixture called TRIzol. The quality  management system will include a critical  control point for this procedure in the form of  achieving a ratio of pathogen sample to the  amount of TRIzol. In this new system, the  scientist or laboratory technician may be  required to enter the amount into the new  system to show that the ratio is correct to  inactivate the pathogen.", "DOD officials report that, to enhance quality control and assurance at  Dugway Proving Ground and across DOD\u2019s currently covered facilities,  the Joint Program Executive Office for Chemical and Biological Defense,  on behalf of BBPO, is in the process of developing a new quality   management system known as the Joint Interagency Biorisk System. The  system would centralize information on DOD\u2019s BSAT Biosafety and  Biosecurity Program, such as operational and governance  documentation. For example, the system would gather applicable quality  assurance-related information from Dugway Proving Ground and DOD\u2019s  currently covered facilities to provide BBPO with the ability to track  inventory and shipment of BSAT materials and ensure that approvals and  waivers for exceptions to laboratory protocols are made at the appropriate  level, among other things. DOD currently is identifying the critical control  points that would be built into the Joint Interagency Biosafety System to  ensure quality throughout the BSAT handling, production, storage,  containment, shipment, destruction, and inactivation processes.  According to officials from BBPO, DOD\u2019s future quality management  system will include critical control points to help personnel prevent  mistakes while conducting scientific procedures (see sidebar for  additional information)."], "subsections": []}, {"section_title": "DOD Has Conducted Studies on Inactivating Pathogens and Is Continuing Its Research", "paragraphs": ["In response to the results of DOD\u2019s July 2015 30-day review, the Deputy  Secretary of Defense directed the Under Secretary of Defense for  Acquisition, Technology and Logistics to develop a plan for research  related to the development of standardized irradiation and viability testing  protocols. The Army\u2019s subsequent 2015 investigation report also  identified specific actions the Secretary of the Army should consider  taking, including directing additional research to address existing gaps in  scientific knowledge regarding the inactivation of BSAT.", "Chemical and Biological Defense Program officials said that they are  developing a validated method for inactivating Bacillus anthracis spores  using irradiation to improve safety. DOD reported completion of the first  phase of the study for developing a validated method with scientists from  three DOD laboratories, using a weakened strain of Bacillus anthracis.  The second phase of the Bacillus anthracis inactivation study was  completed in October 2017, according to Army officials, using a  potentially lethal strain of Bacillus anthracis. In April 2018, DOD officials  stated that as a result of the first two phases of this study, they have  received approval from peer reviewers to publish their study results,  which will recommend these results as a validated inactivation method.  The next step will be to analyze the data from these studies to determine  whether additional studies are needed to answer further questions about  factors that may affect testing for the presence of live pathogens."], "subsections": []}, {"section_title": "The Army Has Taken Multiple Types of Actions at Dugway Proving Ground to Implement Recommendations from the Army\u2019s 2015 Investigation Report", "paragraphs": ["Since 2015, the Army also has taken multiple types of actions specifically  at Dugway Proving Ground\u2014including operational, administrative, and  personnel actions\u2014to implement the recommendations from the Army\u2019s  2015 investigation report. The report made several recommendations for  improvements at the BioTesting Division at Dugway Proving Ground. The  Army\u2019s subsequent Directive 2016-24 assigned responsibility for  implementing some of these recommendations and called for additional  actions, including reassigning command and control of the division to the  Army\u2019s Edgewood Chemical Biological Center at Aberdeen Proving  Ground, Maryland. According to DOD officials, as part of this action, a  new management team was established at the BioTesting Division that  includes new managers responsible for quality control and assurance. In  addition to hiring personnel, the BioTesting Division established training  programs for all laboratory staff, including training sessions on biological  safety, for which participants received certification after completing  coursework.", "In response to the 2015 incident at Dugway Proving Ground, the Centers  for Disease Control and Prevention suspended Dugway Proving Ground\u2019s  BioTesting Division\u2019s certificate of registration in accordance with federal  select agent regulations in August 2015. In May 2017, DOD\u2019s request  for withdrawal of the laboratory\u2019s registration was approved and  remaining BSAT in its possession was either transferred or destroyed.  DOD officials explained that the withdrawal of the BioTesting Division\u2019s  registration has allowed the division time to implement recommendations,  modernize and make repairs to laboratories, and retrain personnel  without the added burden of continuous inspections. Officials from the  BioTesting Division stated that they are in the process of re-registering  with the Federal Select Agent Program and are taking a phased approach  in anticipation of reaching full operational status in fiscal year 2019.  Figure 11 is a timeline of selected actions DOD has taken.", "Because BBPO is focused on broader issues and not just the Army\u2019s  2015 investigation report recommendations, BBPO officials have also  compiled and consolidated recommendations and actions from multiple  reports, including the Army\u2019s 2015 investigation report, the DOD Review  Committee Report, a DOD Inspector General report, and the NDAA for  Fiscal Year 2017. BBPO officials explained that they developed tasks to  operationalize the recommendations and acknowledged that BBPO and  the now-terminated General Officers Steering Committee had not yet  developed a standardized definition for recommendations deemed  complete. BBPO officials told us they consider all of these  recommendations to be part of their broader DOD biosafety efforts."], "subsections": []}]}, {"section_title": "Appendix VI: Key Themes and Selected Comments from Staff at Department of Defense BSAT Facilities", "paragraphs": ["As part of our review, we conducted facilitated discussions between  September 2017 and November 2017 using a self-selected sample of  supervisory and non-supervisory staff at six Department of Defense  (DOD) laboratories, five of which currently handle biological select agents  and toxins (BSAT). The purpose of the discussions was to better  understand the effects of DOD actions on laboratory staff and operations  following the 2015 discovery that staff at Dugway Proving Ground had  incompletely inactivated Bacillus anthracis and subsequently shipped live  anthrax to multiple locations. The intent was to obtain the views of those  laboratory staff who have and will be implementing recommendations  from multiple reports. Using a protocol we developed, one of our analysts  facilitated each discussion group by asking a similar set of questions  about effects of the DOD response to the 2015 incident at Dugway  Proving Ground. Our analysts documented laboratory staffs\u2019 comments  as closely as possible to the original language used by participants.  During subsequent reviews and sorting (coding) of the participants  comments, we found that four key themes emerged. Within each of the  four themes, our analysts also identified related sub-themes.", "For the purposes of selecting individual comments as shown in table 3  below, our analysts considered several factors including clarity and  relevance to our study\u2019s objectives. Our self-selected convenience  sample of laboratory staff provided comments describing the various  effects of the 2015 anthrax incident on laboratory staff and operations.  We did not verify the factual basis of the laboratory staff comments.  Moreover, the comments that we have identified cannot be generalized to  all DOD laboratory staff at the six facilities we visited. Table 3 lists the key  theme, sub-theme, and selected comments made by laboratory staff  during our facilitated discussion groups at each of the six DOD covered  laboratories, five of which currently handle BSAT."], "subsections": []}, {"section_title": "Appendix VII: Department of Defense Reported Responses to Tasks Required by the NDAA for Fiscal Year 2017", "paragraphs": ["The Department of Defense (DOD) issued a report to the defense  congressional committees on April 10, 2017, in response to section 218  of the National Defense Authorization Act (NDAA) for Fiscal Year 2017.  As of March 2018, DOD officials stated that the tasks required by the  NDAA for Fiscal Year 2017 to study the consolidation of commands,  opportunities to partner with industry for the production of biological select  agents and toxins (BSAT), and the transfer of BSAT production  responsibilities are still ongoing. Table 4 shows the status of DOD\u2019s  efforts to respond to the tasks required by the NDAA for Fiscal Year 2017."], "subsections": []}, {"section_title": "Appendix VIII: Summary of Selected Federal Panels, Task Forces, and Working Groups Examining Biodefense-Related Issues", "paragraphs": ["Biosafety, biosecurity, and biodefense issues have been a long-standing  concern for the nation. The federal government has been examining  biosafety, biosecurity, and biodefense issues for over a decade through  many voluntary and federally mandated commissions, task forces, and  federal panels and working groups. These issues have been reviewed  from a variety of perspectives\u2014scientific, regulatory, academic, health,  national defense, and homeland security. Table 5 provides a summary of  some key recommendations and observations to address biosafety,  biosecurity, and biodefense issues and related topics. The Department of  Defense (DOD) participated in many of these efforts, some of which are  ongoing, including the National Science Advisory Board for Biosecurity  and the Federal Experts Security Advisory Panel. Observations represent  comments made by individual participants and do not represent  organizational recommendations."], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contact and GAO Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, GAO staff who made key  contributions on this report include Mark A. Pross (Assistant Director);  Latrealle Lee (Analyst-in-Charge); Amy Bowser; Patricia Farrell Donahue,  Ph.D.; Alexandra Gonzalez; Ashley Grant, Ph.D.; Matthew Jacobs;  Joanne Landesman; Amie Lesser; Amber Lopez Roberts; Timothy M.  Persons, Ph.D.; Bethann Ritter Snyder, and Lillian Yob."], "subsections": []}]}, {"section_title": "Glossary", "paragraphs": ["assay: A quantitative or qualitative procedure for detecting the presence,  estimating the concentration, and/or determining the biological activity of  a macromolecule (e.g., an antibody or antigen, molecule, ion, cell,  pathogen, etc.). Assays are based on measurable parameters that allow  differentiation between sample and control.  biodefense: Prevention, protection against, and mitigations for biological  threats that could have catastrophic consequences to the nation.  biological agent: Microorganism (or derived toxin) that causes disease  in humans, animals, or plants.  biological weapon: A harmful biological agent used as a weapon to  cause death or disease usually on a large scale.  biorisk management: The effective management of risks posed by  working with infectious agents and toxins in laboratories; it includes a  range of practices and procedures to ensure the biosecurity, biosafety,  and biocontainment of those infectious agents and toxins.  biosafety: The combination of practices, procedures, and equipment that  protect laboratory workers, the public, and the environment from the  infectious agents and toxins used in the laboratory.  biosecurity: The measures taken to protect infectious agents and toxins  from loss, theft, or misuse.  biotechnology: The manipulation of living organisms or their  components to produce useful usually commercial products.  biological select agents and toxins certified personnel: Personnel  certified and cleared to work with biological select agents and toxins.  covered facility: Any facility of the Department of Defense that produces  biological select agents and toxins.  decontamination: The removal or count reduction of contaminating  pathogens present on an object.", "Federal Select Agent Program: A regulatory program established to  regulate the possession, use, and transfer of biological select agents and  toxins.  high-containment laboratory: Biosafety level (BSL)-3 or 4 facilities in  which studies are conducted on a variety of dangerous pathogens and  toxins.  inactivation: A procedure to render pathogens as non-toxic while  retaining characteristics of interest for future use.  irradiation: A process by which radiation (e.g., ultraviolet light, gamma  rays, and X-rays) is used.  nonviable: A pathogen that is no longer capable of growing, replicating,  infecting, or causing disease.  protocol: A detailed plan for a scientific procedure.  select agent: A biological agent or toxin that (1) potentially poses a  severe threat to public health and safety, animal or plant health, or animal  or plant products and (2) is regulated by select agent rules for  possession, use, and transfer (7 C.F.R. Part 331 (2018), 9 C.F.R. Part  121 (2018), and 42 C.F.R. Part 73 (2018)).  toxin: The toxic material or product of plants, animals, microorganisms  (including, but not limited to, bacteria, viruses, fungi, or protozoa), or  infectious substances, or a recombinant or synthesized molecule,  whatever their origin and method of production, and includes (1) any  poisonous substance or biological product that may be engineered as a  result of biotechnology produced by a living organism or (2) any  poisonous isomer or biological product, homolog, or derivative of such a  substance.  ultracentrifuge: A high-speed centrifuge able to separate colloidal and  other small particles and used especially in determining the sizes of such  particles or the molecular weights of large molecules.  validation: For the purpose of inactivation methods, the method must be  scientifically sound and produce consistent results each time it is used  such that the expected result can be ensured. Methods of validation may  include (1) use of the exact conditions of a commonly accepted method  that has been validated, (2) a published method with adherence to the  exact published conditions, or (3) for in-house methods, validation testing  should include the specific conditions used and appropriate controls (from  the Federal Select Agent Program).  validated inactivation procedure: A procedure to render a select agent  non-viable but which allows the select agent to retain characteristics of  interest for future use; or to render any nucleic acids that can produce  infectious forms of any select agent virus non-infectious for future use.  The efficacy of the procedure is confirmed by demonstrating the material  is free of all viable select agents."], "subsections": []}, {"section_title": "Related GAO Products", "paragraphs": ["DOD Personnel: Further Actions Needed to Strengthen Oversight and  Coordination of Defense Laboratories\u2019 Hiring Efforts. GAO-18-417.  Washington, D.C.: May 30, 2018.", "High-Containment Laboratories: Coordinated Efforts Needed to Further  Strengthen Oversight of Select Agents. GAO-18-197T. Washington, D.C.:  November 2, 2017.", "High-Containment Laboratories: Coordinated Actions Needed to Enhance  the Select Agent Program\u2019s Oversight of Hazardous Pathogens.  GAO-18-145. Washington, D.C.: October 19, 2017.", "Biodefense: Federal Efforts to Develop Biological Threat Awareness.  GAO-18-155. Washington, D.C.: October 11, 2017.", "Public Health Information Technology: HHS Has Made Little Progress  toward Implementing Enhanced Situational Awareness Network  Capabilities. GAO-17-377. Washington, D.C.: September 6, 2017.", "High-Containment Laboratories: Actions Needed to Mitigate Risk of  Potential Exposure and Release of Dangerous Pathogens.  GAO-16-871T. Washington, D.C.: September 23, 2016.", "High-Containment Laboratories: Improved Oversight of Dangerous  Pathogens Needed to Mitigate Risk. GAO-16-642. Washington, D.C.:  August 30, 2016.", "High-Containment Laboratories: Comprehensive and Up-to-Date Policies  and Stronger Oversight Mechanisms Needed to Improve Safety.  GAO-16-305. Washington, D.C.: March 21, 2016.", "High-Containment Laboratories: Preliminary Observations on Federal  Efforts to Address Weaknesses Exposed by Recent Safety Lapses.  GAO-15-792T. Washington, D.C.: July 28, 2015.", "Chemical and Biological Defense: Designated Entity Needed to Identify,  Align, and Manage DOD\u2019s Infrastructure. GAO-15-257. Washington, D.C.:  June 25, 2015.", "Standards for Internal Control in the Federal Government. GAO-14-704G.  Washington, D.C.: September 2014.", "High-Containment Laboratories: Recent Incidents of Biosafety Lapses.  GAO-14-785T. Washington, D.C.: July 16, 2014.", "High-Containment Laboratories: Assessment of the Nation\u2019s Need Is  Missing. GAO-13-466R. Washington, D.C: February 25, 2013.", "Homeland Security: Agriculture Inspection Program Has Made Some  Improvements, but Management Challenges Persist. GAO-12-885.  Washington, D.C.: September 27, 2012.", "Environmental Justice: EPA Needs to Take Additional Actions to Help  Ensure Effective Implementation. GAO-12-77. Washington, D.C.: October  6, 2011.", "High-Containment Biosafety Laboratories: Preliminary Observations on  the Oversight of the Proliferation of BSL-3 and BSL-4 Laboratories in the  United States. GAO-08-108T. Washington, D.C.: October 4, 2007.", "Test and Evaluation: Impact of DOD\u2019s Office of the Director of  Operational Test and Evaluation. GAO/NSIAD-98-22. Washington, D.C.:  October 24, 1997."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-666", "url": "https://www.gao.gov/products/GAO-18-666", "title": "Small Business Contracting: Small Business Administration Could Further Strengthen HUBZone Eligibility Reviews in Puerto Rico and Programwide", "published_date": "2018-09-24T00:00:00", "released_date": "2018-09-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The HUBZone program is intended to stimulate economic development in economically distressed areas. Certified HUBZone firms are eligible for federal contracting benefits, including limited competition awards such as set-aside contracts, and are required to be recertified every 3 years. The Puerto Rico Oversight, Management, and Economic Stability Act of 2016 required SBA to develop criteria and guidance for a risk-based approach to verify firm eligibility for the program and included a provision for GAO to review SBA's development and implementation of the required criteria and guidance. This report examines, among other objectives, (1) SBA's development of criteria and guidance on using a risk-based approach for certifying and recertifying HUBZone firms, and (2) SBA's implementation of the revised policies and procedures for firms located in Puerto Rico.", "GAO analyzed SBA documents and reviewed files of a non-generalizable sample of 12 firms located in Puerto Rico that received certification between March 2017 and March 2018. GAO also interviewed SBA officials, representatives from HUBZone-certified firms in Puerto Rico, and local economic development agencies in Puerto Rico."]}, {"section_title": "What GAO Found", "paragraphs": ["The Small Business Administration (SBA) adopted criteria and guidance for a risk-based approach to certifying and recertifying firms for the Historically Underutilized Business Zone (HUBZone) program in March 2017, but the extent to which it conducted a risk assessment to inform its approach is unclear. In 2009, in response to GAO's prior recommendations to address weaknesses in the HUBZone certification process, SBA increased documentation requirements for certification, but not recertification (which every 3 years determines continued program eligibility).", "In March 2017, SBA changed its recertification criteria and guidance to require firms with $1 million or more in HUBZone contract awards to provide documentation to support continuing eligibility.", "SBA officials stated they completed a risk assessment of the HUBZone recertification process, but as of July 2018, had not provided GAO with documentation on when they performed the risk assessment, which risks were identified and considered, or what analysis established the $1 million threshold.", "GAO previously found SBA lacked key controls for its recertification process and recommended in 2015 that SBA assess the process.", "GAO continues to believe that an assessment of the recertification process would help inform a risk-based approach to reviewing and verifying information from firms that appear to pose the most risk to the program.", "Based on GAO's review of case files for a non-generalizable sample of 12 firms in Puerto Rico that received HUBZone certification in March 2017\u2013March 2018, SBA did not consistently document or follow its policies and procedures for certification reviews.", "SBA did not have complete documentation in 9 of 12 cases. SBA officials described alternative procedures they used to determine firms' eligibility, but SBA has not updated its internal policy manuals to reflect these procedures and analysts did not document use of such procedures in the files GAO reviewed.", "In 4 of 12 cases, SBA did not follow its policy to conduct three levels of review (by an analyst, a senior analyst, and the program director or deputy) when determining to approve or deny a firm.", "It is not known to what extent SBA reviewed staff compliance with certification and recertification review procedures. SBA provided an assurance letter stating it evaluated the Office of HUBZone's internal controls and concluded the controls were effective, but the letter did not specify what steps SBA took for the evaluation.", "Standards for internal control state management should document its control policies and conduct periodic reviews to ensure controls are effective. Because SBA has not updated its internal policy manuals or conducted a documented review of staff compliance with its quality review procedures, it lacks reasonable assurance that firms are eligible or its review process is effective. In turn, this increases the risk of ineligible firms participating in the HUBZone program and receiving contracting preferences to which they are not entitled."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that SBA (1) update internal policy manuals to reflect current policies and procedures, and (2) review and document staff compliance with procedures for certification and recertification reviews of firms. SBA generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The purpose of the Historically Underutilized Business Zone (HUBZone)  program is to provide federal contracting preferences to qualified small  businesses located in economically distressed communities (referred to  as HUBZones) that employ residents of the areas. The contracting  preferences that a certified HUBZone firm (one that meets requirements  to participate in the program) can receive include sole-source and set- aside contracts, and the application of a price evaluation preference on  awards under full and open competition.", "We and the Office of Inspector General (OIG) at the Small Business  Administration (SBA) reported over the past 12 years on the need for  SBA\u2014which administers the HUBZone program\u2014to strengthen its  internal controls and fraud prevention to help ensure that only eligible  firms participate in the program. Fraud risks include risks that firms would misrepresent their program eligibility and potentially receive  contract awards for which they do not qualify. We identified internal  control-related deficiencies in the HUBZone program. For example, in  February 2015 we identified problems with the mechanisms that SBA  used to certify and monitor firms and that SBA was not following its policy  of recertifying firms every 3 years (a certified firm can participate in the  program as long as it remains eligible and is recertified). In March 2017,  we reported that oversight improved but some weaknesses remained.", "The Puerto Rico Oversight, Management, and Economic Stability Act  (PROMESA) of 2016 mandated that by March 27, 2017, SBA develop  and implement criteria and guidance on using a risk-based approach for  requesting and verifying information from entities applying to be certified  or recertified as a qualified HUBZone small business firm. PROMESA  also granted an exemption to a requirement for HUBZone designation  that allowed more HUBZones to be established in Puerto Rico.", "PROMESA included a provision that we assess SBA\u2019s development and  implementation of the required criteria and guidance for HUBZone  certification and recertification. This report (1) examines SBA\u2019s  development of criteria and guidance on using a risk-based approach for  certifying and recertifying HUBZone firms, (2) examines SBA\u2019s  implementation of the revised policies and procedures for certifying and  recertifying firms located in Puerto Rico, and (3) describes any economic  impacts of HUBZone expansion and recent trends in federal small  business contracting in Puerto Rico.", "To examine SBA\u2019s development of criteria and guidance for HUBZone  certification and recertification, we reviewed prior GAO and SBA OIG  reports, applicable statutes and regulations, and SBA documents,  including criteria and guidance for certifying and recertifying firms. We  compared the process SBA followed to federal internal control standards  and GAO\u2019s framework for managing fraud risk. To examine SBA\u2019s  implementation of the criteria and guidance in Puerto Rico, we used  SBA\u2019s Dynamic Small Business Search database to identify HUBZone  firms located in Puerto Rico that received HUBZone certification after  March 27, 2017. We randomly selected a non-generalizable sample of 12  firms from the total of 47 firms that met those criteria and reviewed case  files for the 12 firms\u2019 certification applications. We also reviewed the files  for two HUBZone firms in Puerto Rico that were subject to recertification  during that time. To describe any economic impacts of the expansion of  the HUBZone program in Puerto Rico and recent federal contracting  trends, we used the Dynamic Small Business Search database and  federal procurement data from the Federal Procurement Data System- Next Generation to analyze the number of firms in different HUBZones in  Puerto Rico and the dollar amount of federal contract obligations awarded  to the firms from fiscal years 2006 through 2018 (June)\u2014that is, from the  starting point for the analysis used in our 2017 report to the most recent  available data at the time of our current review. We assessed the  reliability of the SBA small business database and federal procurement  database by reviewing relevant related documentation and determined  that they were sufficiently reliable for analyzing trends and for describing  economic conditions in HUBZone areas. For all of the objectives, we  interviewed SBA officials in Washington, D.C., and Puerto Rico and  representatives from the Puerto Rico Chamber of Commerce and the  Federal Contracting Center. In addition, we conducted a site visit to San  Juan, Puerto Rico, in May 2018 and conducted two discussion groups  and one interview with representatives from nine HUBZone firms located  there. The views of these representatives are not generalizable to all  HUBZone firms. Appendix I describes our scope and methodology in  greater detail.", "We conducted this performance audit from February 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The HUBZone Act of 1997 (which established the HUBZone program)  identified HUBZones as (1) qualified census tracts, which are determined  generally by area poverty rate or household income; (2) qualified  nonmetropolitan counties, which are determined generally by area  unemployment rate or median household income; and (3) lands meeting  certain criteria within the boundaries of an Indian reservation. Congress  subsequently expanded the criteria for HUBZones to add former military  bases, counties in difficult development areas outside the continental  United States, and certain areas affected by disasters. According to SBA  officials, 5,306 firms were HUBZone certified as of July 1, 2018. As of that  date, there were 20,154 HUBZone qualified census tracts, 834 HUBZone  qualified non-metropolitan counties, 125 HUBZone base realignment and  closure areas, 593 HUBZone Native American lands (Indian lands), and  95 HUBZone qualified disaster areas (87 qualified disaster census tracts  and 8 qualified disaster non-metropolitan counties).", "The HUBZone program provides certified small businesses located in  designated areas with contracting opportunities in the form of set-asides,  sole-source awards, and price-evaluation preferences. A set-aside  restricts competition for a federal contract to specified contractors. For  example, competition may be restricted to SBA-certified HUBZone  businesses if there is a reasonable expectation of at least two SBA- certified HUBZone bidders and a fair market price. A sole-source award is  a federal contract awarded, or proposed for award, without competition.  Also, in any full and open competition for a federal contract, the HUBZone  price evaluation preference allows the price that a HUBZone firm offers to  be deemed lower than the price of another offeror (if the HUBZone firm\u2019s  offer is not more than 10 percent higher than the other offer and the other  offeror is not a small business concern)."], "subsections": [{"section_title": "HUBZone Certification and Recertification Processes and Related GAO Recommendations", "paragraphs": ["To be certified to participate in the HUBZone program, a firm must meet  the following criteria: when combined with its affiliates, be small by SBA size be at least 51 percent owned and controlled by U.S. citizens, or  owned by an Indian Tribal Government, Alaska Native  Corporation, Community Development Corporation, or small  agricultural cooperative; have its principal office\u2014the location where the greatest number  of employees perform their work\u2014in a HUBZone; and have at least 35 percent of its employees reside in a HUBZone.", "In a 2008 report, we found that SBA had relied on information that firms  entered into an online application system called the HUBZone Certification Tracking System to indicate they met the size, ownership,  location, and employee residence standards. At the time, SBA  performed limited verification of the self-reported information. Although  agency staff could request additional supporting documentation, SBA did  not have specific guidance or criteria for such requests. Thus, we  recommended that SBA develop and implement guidance to more  routinely and consistently obtain supporting documentation from applicant  firms. SBA agreed with the recommendation and changed its certification  procedures.", "Since fiscal year 2009, SBA has required all firms applying for HUBZone  certification to provide supporting documentation about their size,  ownership, location, and employees\u2019 residence, which the agency then is  to review to verify the firm\u2019s eligibility for the program. According to SBA  officials, the current initial certification process has two components: (1)  submission and review of an online application, which is processed by  SBA through the HUBZone Certification Tracking System; and (2)  submission of corroborative documentation, which SBA processes  through a document review. The tracking system contains information on  firms that apply to the HUBZone program, as well as on certified firms  that apply for recertification. Firms wishing to remain in the program must  recertify their continued eligibility to SBA every 3 years. The tracking  system automatically identifies firms that are due for recertification and  sends notifications to those firms.", "In 2015, we reported that SBA implemented controls for certification, but  generally did not require firms seeking recertification to submit any  information to verify continued eligibility. Instead, the agency relied on  firms\u2019 attestations of continued eligibility. According to SBA officials at  the time, they did not believe they needed to request supporting  documentation from recertifying firms because all firms in the program  had undergone a full document review. We noted that SBA could apply a  risk-based approach to its recertification process to review and verify information from firms that appeared to pose the most risk to the program.  We concluded that recertification essentially remained a self-certification  process. We recommended that SBA reassess its recertification process  and add additional controls, such as developing criteria and guidance on  using a risk-based approach to requesting and verifying firm information.  SBA agreed with our recommendation and noted it would assess the  process. In March 2017, we reported that SBA planned to address our  recommendation using a technology solution."], "subsections": []}, {"section_title": "GAO\u2019s Fraud Risk Framework and Related Legislation", "paragraphs": ["According to federal internal control standards and GAO\u2019s fraud risk  framework, managers in executive branch agencies are responsible for  managing fraud risks and implementing practices for combating those  risks. When fraud risks can be identified and mitigated, fraud may be  less likely to occur. Federal internal control standards call for agency  management officials to assess the internal and external risks their  entities face as they seek to achieve their objectives. The standards state  that management should consider the potential for fraud when identifying,  analyzing, and responding to risks. Risk management is a formal and  disciplined practice for addressing risk and reducing it to an acceptable  level.", "In July 2015, we issued the fraud risk framework, which provides a  comprehensive set of key components and leading practices that serve  as a guide for agency managers to use when developing efforts to  combat fraud in a strategic, risk-based way. The Fraud Reduction and  Data Analytics Act of 2015 required the Office of Management and  Budget to establish guidelines for federal agencies to create controls to  identify and assess fraud risks and design and implement antifraud  control activities. In July 2016, the Office of Management and Budget  issued guidelines that, among other things, affirm managers should  adhere to the leading practices identified in GAO\u2019s fraud risk framework."], "subsections": []}, {"section_title": "National Defense Authorization Act for Fiscal Year 2018", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2018 includes a  number of provisions relating to the HUBZone program. For example,  the act requires SBA (by January 1, 2020) to verify the accuracy of  documentation provided by a HUBZone firm seeking recertification to  determine whether the firm remains qualified for HUBZone certification.  The act also requires SBA to begin conducting examinations of qualified  HUBZone firms by January 1, 2020, using a risk-based analysis to select  firms to be examined. According to the act, these risk-based  examinations are intended to ensure that each firm examined meets the  program requirements for certification. The act also specifies that any  small business that SBA determines to have misrepresented its status as  a qualified HUBZone firm be subject to liability for fraud."], "subsections": []}, {"section_title": "HUBZone Expansion in Puerto Rico", "paragraphs": ["On June 16, 2016, SBA announced it had revised the definition of  qualified census tracts eligible to be designated as HUBZones to provide  more opportunities for firms in Puerto Rico. Previously, in addition to  poverty rate and income, SBA applied a statutory population cap that  limited the number of eligible census tracts. According to the  announcement, SBA had determined that the 20 percent population cap  was not in keeping with the spirit and intent of the HUBZone program. On  June 30, 2016, PROMESA authorized an exemption to the 20 percent  cap for HUBZone designations in Puerto Rico for a limited time (10 years  or until the date on which the Financial Oversight and Management Board  for Puerto Rico ceased to exist, whichever came first). It also required  SBA to promulgate regulations to implement the exemption. SBA promulgated the regulations, which became effective December 22,  2017.", "By lifting the population cap in June 2016, SBA increased the number of  eligible census tracts in Puerto Rico by 516 (from 260 to 776). As a result,  nearly all of Puerto Rico now qualifies as a HUBZone (see fig.1)."], "subsections": []}, {"section_title": "2017 Hurricanes", "paragraphs": ["In 2017, two major hurricanes (Irma and Maria) hit Puerto Rico. Hurricane  Irma skirted Puerto Rico and left more than 1 million people without  power. Hurricane Maria, a Category 4 hurricane, made landfall and  caused catastrophic damage. For instance, Hurricane Maria wiped out  the power grid, resulting in outages across Puerto Rico that continued for  months after the storm. The majority of the island had its power restored  by April 4, 2018, according to the Department of Energy. However, the  power grid remains fragile. For example, Puerto Rico experienced an  island-wide outage on April 18, 2018."], "subsections": []}]}, {"section_title": "SBA Adopted Criteria and Guidance for a Risk-Based Approach to HUBZone Certification and Recertification but the Extent to Which It Conducted a Risk Assessment of the Recertification Process Is Unclear SBA Adopted New Documentation Requirements for Recertifying Certain HUBZone Firms", "paragraphs": ["In response to the PROMESA provision to implement a risk-based  approach to HUBZone certification and recertification, SBA adopted  certification and recertification criteria and guidance on March 27, 2017,  for requesting and verifying information. Since 2009 and in response to  a prior GAO recommendation, SBA has required and reviewed  documentation from all small businesses seeking initial certification to  show compliance with HUBZone eligibility requirements. The criteria  and guidance adopted by SBA in March 2017 did not change the  HUBZone certification process. SBA\u2019s internal guidance directs staff to  review and confirm the accuracy of all documentation provided by the  firms applying for HUBZone certification.", "However, the 2017 guidance and criteria introduced some documentation  requirements to the recertification process. (Before March 2017, firms  seeking HUBZone recertification were not required to submit  documentation to demonstrate continued compliance with eligibility  requirements.) Currently, any certified firm seeking recertification that  received $1 million or more in HUBZone contract dollars since its last  certification or recertification has to demonstrate compliance with the 35  percent HUBZone employee residency and principal office requirements. More specifically, under the March 2017 guidance and  criteria, certified HUBZone small business concerns that have received  $1 million or more in HUBZone contract dollars since their initial  certification or most recent recertification must submit (1) a list of all  current employees, identifying the name of the employees, their  addresses, the number of hours they worked per month, and the location  at which they performed their work; and (2) payroll documentation.  HUBZone firms seeking recertification that have not received $1 million in  HUBZone contract dollars are not required to submit documentation  supporting continual eligibility for the program."], "subsections": [{"section_title": "Extent to Which SBA Conducted a Risk Assessment of the Recertification Process Is Unclear", "paragraphs": ["SBA officials stated that they had completed a risk assessment of their  HUBZone recertification process to develop the March 2017 guidance  and criteria. In our 2015 report, we found SBA did not require firms to  submit supporting documentation as part of the recertification process\u2014in  effect, firms self-certified. We recommended that SBA conduct an  assessment of the recertification process and implement additional  controls, such as developing criteria and guidance on using a risk-based  approach to requesting and verifying firm information.", "However, as of July 31, 2018, SBA had not provided documentation of  when the risk assessment was performed or of what risks were identified  and considered in developing the criteria and guidance. SBA officials  stated that out of necessity, given their current information system and  staffing resources, they chose the $1 million threshold as the only  criterion for their risk-based approach.", "As of July 31, 2018, SBA also had not provided documentation of what  analysis was performed to establish the $1 million threshold. According to  SBA officials, the threshold was determined based on the belief that,  when a firm received contract awards over $1 million, it increased  opportunity for the firm to fall out of compliance with HUBZone  requirements.", "SBA officials noted that they plan to review the current threshold at the  end of fiscal year 2018 and that the threshold amount will likely decrease  because a relatively small number of firms have exceeded the $1 million  threshold. Based on our analysis of Federal Procurement Data System- Next Generation data, we estimated that from fiscal year 2015 through  fiscal year 2017 about 9 percent of HUBZone firms nationally exceeded  the $1 million threshold. SBA officials also noted that the agency has  been developing a new information system to replace the current  certification tracking system. According to SBA officials, the new system  will help simplify the application process and allow firms to submit  additional documentation more easily. SBA officials said the 2017 criteria  and guidance will be built into the parameters of the new information  system, which will allow SBA to expand the review of documentation  submitted by firms seeking recertification. Officials have stated that  subject to funding and resources, the HUBZone Certification Tracking  System is scheduled to be decommissioned in fiscal year 2019.", "In the past, SBA has implemented a number of actions to better ensure  that only eligible firms participate in the HUBZone program and to  address internal control weaknesses that we have identified in previous  GAO reports. However, in 2015, we found that SBA lacked key controls  for its recertification process. Specifically, SBA did not require firms to  submit supporting documentation as part of the recertification process\u2014in  effect, firms self-certified. We reported that by not routinely requiring and  reviewing key supporting documentation from recertification applicants,  SBA was missing an additional opportunity to reduce the risk that  ineligible firms obtain HUBZone contracts. We recommended that SBA  conduct an assessment of the recertification process and implement  additional controls, such as developing criteria and guidance on using a  risk-based approach to requesting and verifying firm information.", "Standards for Internal Control in the Federal Government state that  management should identify, analyze, and respond to risks related to  achieving the defined objectives of the program. Additionally, the  standards state that management should use a risk assessment to  identify and analyze risks related to achieving the defined objectives to  form a basis for designing risk responses. Once identified, management  can analyze the identified risks to estimate their significance and design  responses to the analyzed risks. Similarly, according to GAO\u2019s fraud risk  framework, leading practices for managing fraud risk include identifying  inherent fraud risks affecting the program, assessing the likelihood and  impact of inherent fraud risks, and examining the suitability of existing  fraud controls. The Fraud Reduction and Data Analytics Act of 2015  states that agencies shall conduct an evaluation of fraud risks using a  risk-based approach, and then design and implement financial and  administrative control activities to mitigate identified fraud risks.  Additionally, as discussed above, the National Defense Authorization Act  for Fiscal Year 2018 requires that SBA perform examinations of  HUBZone firms using a risk-based selection process.", "As we reported in 2015, the characteristics of firms and the status of  HUBZone areas\u2014the bases for program eligibility\u2014can often change,  and need to be monitored. We continue to believe that conducting a risk  assessment of the recertification process would help inform a risk-based  approach to reviewing and verifying information from firms that appear to  pose the most risk to the program. For example, a risk assessment could  help inform SBA\u2019s planned review of the current threshold for requesting  and verifying information from firms seeking HUBZone recertification."], "subsections": []}, {"section_title": "SBA Did Not Consistently Document or Follow Its Policies and Procedures for Certification Reviews for Firms in Puerto Rico That We Reviewed SBA Had Complete Documentation for Office Location but Not Employee Residency for Firms in Puerto Rico We Reviewed and Had Not Updated Its Policies", "paragraphs": ["Our review of 12 case files for Puerto Rican firms that recently received  HUBZone certification found incomplete documentation for certification  reviews (and by extension, recertification reviews) and undocumented  procedures. SBA also did not consistently follow its procedures to  complete three distinct levels of review when approving the 12 firms for  certification. Representatives of firms in Puerto Rico with whom we spoke  said certification was generally straightforward, but identified some  challenges, including with providing documentation.", "We found that all 12 cases we reviewed in a non-generalizable sample of  Puerto Rican firms that had received HUBZone certification between  March 2017 and March 2018 had complete documentation to  demonstrate that the primary office was located in a HUBZone. However,  we also found that documents were missing, illegible, or did not  corroborate the information claimed regarding employees\u2019 residency for 9  of 12 firms that we reviewed. We focused on the document review  process for the principal office location and the employee residency  requirements because, according to SBA\u2019s March 2017 guidance for the  certification and recertification processes, firms must corroborate their  compliance with these requirements at both certification and  recertification. In addition, SBA officials told us that the document review  process is essentially the same for firms seeking certification as it is for  firms seeing recertification. We also reviewed the files of two HUBZone  firms in Puerto Rico that were subject to recertification between March  2017 and March 2018, but neither met the threshold to trigger a  document review under the updated criteria and guidance.", "SBA\u2019s guidance for the certification process requires firms to submit  documentation so that SBA can verify that a firm meets the employee residency and principal location requirements. The documentation must  show that each individual is an employee of the firm (payroll documentation), each individual asserted to be a HUBZone resident lives at the  address they claim (proof of address, such as a driver\u2019s license),  and  the address is in a HUBZone (copy of a HUBZone map indicating  the employee and his or her address), and  the firm\u2019s primary office is located in a HUBZone (such as a copy  of a lease or rental agreement and list of employees who work  there).", "Additionally, SBA\u2019s internal policy manuals describe procedures that  analysts are to follow in reviewing and verifying these documents,  including the types of documents that firms may submit to demonstrate  eligibility, and scenarios in which analysts should request additional  information or clarification from the firm (for example, if a driver\u2019s license  is expired).", "For 9 of 12 cases we reviewed, SBA lacked complete documentation to  verify that every employee asserted to be a HUBZone resident lived in a  HUBZone. That is, although SBA analysts contacted firms during the  certification process to obtain additional documentation, and firms  responded to the requests, SBA analysts still had incomplete information  for 9 of the 12 cases at the time they approved the firms.", "In 5 of these 9 cases, the firm would not be eligible for HUBZone  certification if the SBA analyst had not counted employees for which  documentation was missing or did not corroborate the information  claimed regarding an employee\u2019s address. Specifically,  in 3 cases, the address on the employee\u2019s identification for at  least one employee did not match the address at which the firm  claimed the employee lived.  in 3 cases, the identification for at least one employee was  expired.  in 1 case, the copies of the HUBZone maps did not indicate to  which employees they referred.  in 1 case, payroll documentation demonstrating that individuals  were employees of the firm was missing.  in the other 4 cases, the firm still would be eligible for HUBZone  certification (would meet the 35 percent residency requirement)  even if the analyst had not counted the employee for which  documentation was missing or illegible (1 case) or for which  identification did not match the claimed residency address (4  cases).", "We also identified an inconsistency when reviewing the case files for the  only Puerto Rican HUBZone firm recertified between June 2017 and May  2018. Specifically, the firm reported on its application that it had zero  employees, but also claimed 19 of its employees lived in a HUBZone. The  firm did not provide any supporting documentation because it did not  meet the threshold in the new recertification criteria to require a document  review. SBA officials said this likely resulted from a display error in the  online system. SBA officials said that they did not contact the recertifying  firm because the firm was not required to submit corroborating  documentation. However, without confirmation of the correct total number  of employees, SBA analysts would not be able to determine the firm\u2019s  compliance with the employee residency requirement (35 percent living in  a HUBZone) and therefore would not be able to determine the firm\u2019s  eligibility to continue HUBZone participation.", "SBA officials explained how they handled incomplete information  provided by firms by describing other procedures that analysts followed in  these cases. For example, if any employee\u2019s address did not match  across the firm\u2019s employee list, the employee\u2019s identification, or the  HUBZone map, the analyst reviewing the firm\u2019s application would request  clarification and enter the address from the identification into the current  HUBZone map. Or if the address could not be plotted, the analyst would  presume the employee lived in a HUBZone if the broader geographic  area on their identification (such as zip code) was clearly in a HUBZone.", "SBA officials said this approach is useful for applications from firms in  Puerto Rico, because of difficulties with mapping addresses in the  territory. SBA officials also said that if a firm did not provide  documentation for an employee or SBA could not verify it, but the firm  clearly met the 35 percent resident requirement, the analyst would not  follow up with additional documentation requests and not count that  employee as a HUBZone resident.", "However, these procedures are not documented in SBA\u2019s internal written  policies for certifying HUBZone firms and analysts did not document their  use of these procedures in the case files we reviewed. Specifically, the  policy manuals do not include certain procedures SBA officials explained  to us they used for the document review process, such as assumptions of  eligibility for addresses located in a broader geographic area that is  clearly a HUBZone. SBA has not updated its three internal policy manuals  since 2014, 2010 and 2007, respectively.", "According to SBA officials, analysts rely on oral direction from the  HUBZone program director or deputy to review and process HUBZone  certifications and recertifications to supplement outdated policy  documents. Internal control standards state that management should  document in policies the internal control responsibilities of the  organization.", "Because SBA has not updated its internal policy manuals, analysts who  review applications for HUBZone certification and recertification may not  be consistently following applicable internal policies and procedures. As a  result, management does not have reasonable assurance that analysts  are following procedures correctly to obtain and review all of the required  documents from firms. Without such review, SBA may not have  reasonable assurance that firms meet the eligibility criteria for HUBZone  participation\u2014which increases the risk of ineligible firms participating in  the program. Because SBA officials told us that firms seeking  recertification that meet the threshold for additional document review  undergo essentially the same reviews as firms seeking certification, the gaps in certification cases that we observed suggest that gaps are  possible in recertification as well."], "subsections": []}, {"section_title": "SBA Did Not Consistently Follow Its Quality Review Procedures When Certifying Firms In Puerto Rico That We Reviewed", "paragraphs": ["SBA did not consistently follow its quality review procedures to complete  three distinct levels of review when approving the 12 Puerto Rican firms  in our non-generalizable sample for certification. In 4 of 12 cases, one  person reviewed the application for two levels of review; in the other 8  cases, three different analysts reviewed the application. We found that  SBA notified all 12 firms of their approval in writing, in accordance with its  policy.", "SBA\u2019s internal policy states that the certification process has three levels  of review: (1) an analyst reviews the application documents and makes a  recommendation to approve or deny the firm, (2) a senior analyst reviews  the application and the first analyst\u2019s recommendation, and (3) the  program director or deputy finalizes the approval or denial and notifies the  firm of the decision. The three levels of review are intended to provide  quality assurance. For example, the second analyst reviews the case file  and the first analyst\u2019s recommendation for completeness, accuracy, and  consistency with eligibility criteria.", "SBA officials told us that, in some cases, one individual\u2019s review may  count as two of the three levels of reviews in order to make the most  efficient use of available analyst capacity. SBA officials said the deputy  director reviewed several applications from Puerto Rican firms, including  the four cases we identified, as part of work to develop an application  screening tool and to engage the Puerto Rico district office when  processing applications from firms in Puerto Rico. These reviews were  counted as two of the three levels of review. Officials said that in these  cases, the program director completes the final review and should  annotate the case file notes about the quality assurance actions that were  taken. In three of the four cases, the program director noted that she  completed the final review and approval but not what quality assurance  actions were taken; the deputy director completed both the second and  final review in the other case. SBA officials described the third-level  review (final approval or denial) as a high-level review to ensure no  questions or unresolved matters are outstanding in order to approve or  deny the application. Therefore, it is not likely that the program director  would be reviewing supporting documents to identify any problems that  could be identified if an additional analyst conducted a second-level,  quality assurance review.", "Internal control standards state that management should design control  activities at various levels with a segregation of duties, and periodically  review its procedures and associated internal control activities for  effectiveness. Management should also monitor its internal control  system through ongoing monitoring to assess the quality and  effectiveness of the internal control system\u2019s performance over time.", "SBA provided an assurance letter prepared in response to the Federal  Managers Financial Integrity Act that stated the agency evaluated the  Office of HUBZone\u2019s internal controls and concluded the controls were  effective. However, it is not known to what extent SBA reviewed staff\u2019s  compliance with certification and recertification quality review procedures  as part of this assessment, because the letter does not describe what  steps SBA took to conduct the evaluation.", "Without reviewing staff compliance with certification and recertification  procedures, SBA lacks reasonable assurance that analysts follow such  procedures and that internal controls function effectively. This increases  the risk that ineligible firms could receive HUBZone certification and thus  contracting preferences to which they are not entitled."], "subsections": []}, {"section_title": "Representatives of Firms in Puerto Rico We Interviewed Said Certification Process Generally Was Straightforward, but Documentation Requests Presented Some Challenges", "paragraphs": ["Representatives of nine HUBZone firms we interviewed in Puerto Rico  were not aware of changes made to the recertification process, but said  that the certification process they followed was straightforward and  generally easy. However, they reported some challenges, including with  documentation.", "Representatives of most of the firms said that the most difficult part of the  certification process was documenting the address for their primary office  location and employees\u2019 residences to show they are located in a  HUBZone. They said this is time-consuming and tedious, especially for  firms with many employees. Although they felt that SBA\u2019s HUBZone  mapping software had improved, they said the formatting of addresses in  Puerto Rico creates a challenge, consistent with what we reported in  2017. One representative described having to pinpoint locations manually in Google Maps to obtain geographic coordinates, and then  enter the coordinates into SBA\u2019s HUBZone map instead of street  addresses. Other representatives noted that some of their employees  have informal living arrangements and cannot easily provide proof of  address.", "Some representatives said that they struggled with the specific time  frames that payroll documentation must cover. SBA requires firms to  submit payroll documentation for the pay period that includes the date of  their application and a sufficient number of preceding payrolls to cover a  4-week period, but firms said it was difficult to submit payroll reports at  exactly the right time to meet this requirement.", "According to representatives from HUBZone firms and two economic  development organizations we interviewed, some challenges with  certification may be unique to firms in Puerto Rico, including the address  format issue described above. Representatives from one firm and the  economic development organizations said that some firms in Puerto Rico  may face language barriers if Spanish is their primary language, or if they  lack formal documentation required for certification, such as not having  computerized records. The 2017 hurricanes also created several  challenges for firms. For example, some firms did not have electricity and  closed for several months. Firms that closed while trying to obtain  HUBZone certification could not respond to follow-up requests from SBA  immediately or provide documentation of their business operations for the  time period in which they were affected.", "Representatives from firms we interviewed said they had little contact with  SBA other than in relation to compliance. Although some have attended  SBA events, representatives said they generally worked with SBA partner  organizations, such as the Federal Contracting Center and Small  Business and Technology Development Center to obtain assistance with  gaining HUBZone certification and applying for federal contracts.  Representatives from three firms we interviewed said that officials from  SBA visited their offices to provide technical assistance support.", "According to SBA officials in Washington, D.C., they have improved their  communications with firms and increased outreach for the HUBZone  program in recent years. For example, the HUBZone tracking system  automatically generates emails to firms, such as reminders that they are  due for recertification, which according to SBA officials, has eliminated  the backlog of recertifications on which we reported in February 2017.  Representatives from the Puerto Rico District Office also said they  increased promotion of the HUBZone program in recent years through  monthly events and seminars on all SBA programs across Puerto Rico,  including a seminar on obtaining HUBZone certification. Representatives  from the district office said they are not involved with the certification and  recertification processes, but provide support by conducting from three to  six site visits to HUBZone firms annually in Puerto Rico and the U.S.  Virgin Islands."], "subsections": []}]}, {"section_title": "HUBZone Set-Aside Contracting Was Minimal in Comparison to Other Small Business Contracting in Puerto Rico; However, Assessment of HUBZone Expansion Impacts Might Be Premature", "paragraphs": ["An increase in HUBZone set-aside contracts could theoretically help  deliver economic impact to Puerto Rico, but it is likely too soon to assess  larger-scale economic benefits resulting from HUBZone program  expansion in Puerto Rico as of June 2018. From fiscal years 2006  through June 2018, the share of HUBZone set-aside contracts as a  percentage of small business contracts in Puerto Rico has remained low  despite sharp increases in the number of HUBZone firms and overall  federal contracting in Puerto Rico. Over this period, small businesses in  Puerto Rico have been winning a large and increasing percentage of total  federal contracting obligations in Puerto Rico. Firms, economic  development organizations, and SBA representatives said any impacts of  HUBZone expansion in Puerto Rico may not yet be observable due to  hurricane-related setbacks. They also identified longer-standing  challenges that Puerto Rican firms have faced in obtaining HUBZone set- aside contracts consistent with those we identified in 2017. In 2018,  SBA established a procurement center representative (PCR) in Puerto  Rico, which the agency expects will help address some of those  challenges."], "subsections": [{"section_title": "Economic Impacts of HUBZone Expansion in Puerto Rico Not Yet Apparent", "paragraphs": ["Based on our analysis as of June 30, 2018, it appears that larger-scale  economic benefits from HUBZone expansion have not been realized (it  may be too early to assess the impact of program expansion). While  HUBZone certification alone likely would not have a direct economic  impact (such as on job creation) in Puerto Rico, the expansion of  HUBZones in Puerto Rico, which now cover nearly the entire island, gives  opportunities to more firms to qualify for and pursue preferential  contracting opportunities. The number of HUBZone firms has risen since  the expansion\u2014from 20 in September 2016 to 101 as of June 30, 2018.", "The program could help deliver economic impacts if HUBZone firms  received contract awards as a result of contract preferences such as set- aside or sole-source contracts. For instance, employees hired to fulfill  HUBZone set-aside contracts could represent jobs created in Puerto Rico  (if those contracts otherwise would have been awarded to a firm outside  Puerto Rico). However, if the contract otherwise would have been  awarded to another Puerto Rican firm, the new jobs would represent an  economic transfer, not jobs created.", "Our analysis of HUBZone set-aside contracts in Puerto Rico indicated  that a few, newly certified HUBZone firms received set-aside contracts,  which can be a source of job creation.", "Six of the nine firms that received HUBZone set-aside contracts in  fiscal years 2017 and 2018 (through June 2018), totaling $5.1  million, were certified after the 2016 program expansion.", "One newly certified HUBZone firm that we interviewed said that  program expansion resulted in the firm becoming HUBZone- eligible. The firm\u2019s representative said that it obtained a 5-year  HUBZone set-aside contract for $700,000, which resulted in the  firm hiring six employees to fulfill the contract.", "But HUBZone set-aside contract obligations have remained largely  unchanged in recent years, and firms face both temporary and longer- standing challenges in accessing and winning contract awards, as we  discuss later in this section. For a description of contracting trends in  Puerto Rico, see appendix II."], "subsections": []}, {"section_title": "Federal Contracting to Small Businesses in Puerto Rico More Than Doubled Over the Past 3 Years", "paragraphs": ["Based on our analysis, federal contracts to businesses in Puerto Rico  increased from $355 million in fiscal year 2015 to $841 million in fiscal  year 2018 (through June 2018). Similarly, federal contracts to small  businesses in Puerto Rico increased from $244 million to $688 million in  the same period (see fig. 2).", "Although HUBZone set-aside contract obligations have remained largely  unchanged in recent years, small businesses in Puerto Rico also have  been winning a large and increasing percentage of total federal  contracting obligations in Puerto Rico. Specifically, federal contract  obligations to small businesses located in Puerto Rico as a percentage of  total federal contract obligations in Puerto Rico increased from 69 percent  in fiscal year 2015 to 82 percent in fiscal year 2018 (through June 2018).  A significant portion of the increase in overall contracting and small  business contracting to Puerto Rican firms in fiscal year 2018 (through  June 2018) was related to hurricane relief. Specifically, we calculated that  55 percent of total federal contracting obligations in Puerto Rico and 64  percent of obligations awarded to Puerto Rican small businesses in fiscal  2018 were associated with hurricane relief."], "subsections": []}, {"section_title": "HUBZone Set-Aside Contracts as a Share of Federal and Small Business Contracts in Puerto Rico Remained Relatively Low in Recent Years", "paragraphs": ["While the obligations for federal contracting to small businesses in Puerto  Rico sharply increased in recent years, as did the number of HUBZone  firms, the share of HUBZone set-asides as a percentage of small  business contracts in Puerto Rico remained low and relatively unchanged  (see fig. 3). HUBZone set-aside contract obligations increased from  negative $20,881 in fiscal year 2016 to $3.8 million in fiscal year 2017 (1  percent of the total value of small business contracts in Puerto Rico). The  set-aside obligations dropped to $1.7 million through June 2018 (0.2  percent of the total value of small business contracts in Puerto Rico).", "Representatives of two economic development organizations that we  interviewed stated that continued low use of HUBZone set-aside  contracts by contracting agencies could subsequently decrease firms\u2019  willingness to participate in the HUBZone program in Puerto Rico.  Representatives of firms and two economic development organizations  noted that the process of monitoring, identifying, and applying for  HUBZone set-aside contracts is time consuming and without the  availability of set-aside contracts program participation may not be  worthwhile for firms in Puerto Rico."], "subsections": []}, {"section_title": "Temporary Challenges May Hinder Use of HUBZone Set-Aside Contracts in Puerto Rico in the Short Term", "paragraphs": ["Representatives of firms and two economic development organizations  and SBA officials in Washington D.C. and the Puerto Rico District Office  told us that use of HUBZone set-aside contracts and any resulting  economic impacts of HUBZone expansion in Puerto Rico may not yet be  observable because of temporary challenges, such as advance contracts  and outmigration due to the 2017 hurricanes."], "subsections": [{"section_title": "Advance Contracts", "paragraphs": ["One temporary challenge they cited was the use of advance contracts by  agencies in response to the 2017 hurricanes. In advance contracts, an  agency establishes contracts before a disaster for goods and services  typically needed during a disaster response.", "Such contracts may prevent contracting officers from establishing a  HUBZone set-aside on contracts awarded for disaster response and  recovery. For example, a representative from one firm we interviewed  said that in the wake of the 2017 hurricanes it had ample supplies of a  vaccine in high demand on the island. The firm\u2019s representative thought  that contracting officers previously established an advance contract with a  company in the continental United States to supply the vaccine.  Therefore, contracting officers were unable to contract the Puerto Rican  HUBZone firm to supply the vaccine to the island. However, SBA officials  in the Puerto Rico District Office told us that once advance contracts are  completed, the contracting agency can replace the contract with another  contract to perform those services, which could be a HUBZone set-aside  contract."], "subsections": []}, {"section_title": "Outmigration from 2017 Hurricanes", "paragraphs": ["Representatives of firms and one economic development organization  and SBA officials in the Puerto Rico District Office told us that  outmigration from Puerto Rico after the 2017 hurricanes reduced the  amount of talent and workers available to fulfill contracts. Representatives  of one firm said that contracting officers may be concerned that the  defection of talent from Puerto Rico could limit firms\u2019 abilities to complete  contracts, limiting the contracting officers\u2019 willingness to set aside  contracts.", "However, representatives of firms and one economic development  organization said that contracts can be fulfilled by multiple Puerto Rican  firms if necessary. Also, representatives of firms and one economic  development organization said that people who left the island have  started returning and replenishing the workforce."], "subsections": []}]}, {"section_title": "Longer-Standing Challenges Also May Hinder Use of HUBZone Set-Aside Contracts", "paragraphs": ["Representatives of firms and two economic development organizations  and SBA officials in Washington D.C. and the Puerto Rico District Office  also identified longer-standing challenges to increased use of HUBZone  set-aside contracts in Puerto Rico, including difficulty meeting  procurement requirements, limited knowledge of the federal contracting  process, lack of access to contracting officers, and award of contracts to  firms outside Puerto Rico. These concerns are similar to those we  recognized in our 2017 report on SBA contracting program in Puerto  Rico."], "subsections": [{"section_title": "Difficulty Meeting Procurement Requirements", "paragraphs": ["Representatives of some firms we interviewed stated that procurement  requirements for federal contracts (such as performance history for  construction contracts) posed challenges for small businesses in Puerto  Rico. Representatives of some firms said that as an island, Puerto Rico  faces specific challenges in meeting procurement requirements. For  example, one firm\u2019s representative said that the construction of a school  required a business to demonstrate experience in developing several  schools in the past. According to this representative, opportunities to  construct schools are limited in Puerto Rico and many Puerto Rican firms  would be capable of fulfilling these contracts, but relevant experience  constructing similar buildings is not considered as meeting this  requirement.", "In 2017, we reported that the experience of construction businesses in  Puerto Rico does not match procurement requirements, which are often  standardized to mainland building standards and do not consider unique  conditions in Puerto Rico. As a result, firms and associations that we  interviewed in 2017 said that agencies\u2019 contracting officers may not  consider the experience of Puerto Rican businesses as qualifying.  Representatives from four associations that we interviewed in 2017 stated  that construction businesses in Puerto Rico demonstrate in their  construction plans greater understanding of building requirements in  Puerto Rico, such as accounting for tropical climate or the risk of seismic  activity, but these factors were not incorporated into federal procurement  requirements."], "subsections": []}, {"section_title": "Limited Knowledge of the Federal Contracting Process", "paragraphs": ["Representatives of firms and two economic development organizations  and SBA officials in the Puerto Rico District Office said that limited  knowledge of the federal contracting process can be a challenge for  HUBZone firms in Puerto Rico. One firm\u2019s representative explained that  responding to agencies\u2019 requests for information was important because  to create a HUBZone set-aside contract a federal agency must  demonstrate that at least two firms could compete for the contract.  Another firm\u2019s representative said that because it was unaware of the  importance of responding to the requests for information, it had not  responded to requests for information for any contract opportunities.  Firms\u2019 representatives also noted that the process of responding to  requests for information and requests for proposals is time consuming  and often infeasible because they lack the financial and personnel  resources of larger businesses.", "Firms can obtain information about federal and small business contracting  from several sources. Firms\u2019 representatives we interviewed said that  they generally seek assistance from SBA partner organizations, such as  the Federal Contracting Center and Small Business and Technology  Development Center, to gain a better understanding of the contracting  process. Officials from SBA\u2019s Puerto Rico District Office said that they  hold regular training on contracting programs and how to navigate the  contracting process. The District Office also holds one-on-one  appointments with businesses to help them navigate the federal  contracting process and has offered training on proposal writing."], "subsections": []}, {"section_title": "Lack of Access to Contracting Officers", "paragraphs": ["Representatives of firms we interviewed said that obtaining HUBZone set- aside contracts was difficult for small businesses in Puerto Rico partially  because of a lack of access to contracting officers. Most firms\u2019  representatives we interviewed said that, similar to obtaining assistance  in navigating the contracting process, they seek assistance from SBA  partner organizations, such as the Federal Contracting Center and Small  Business and Technology Development Center, to identify HUBZone  contract opportunities and connect with contracting officers.", "Firms\u2019 representatives also said that they attend conferences and  matchmaking events at which they meet contracting officers; however,  they said that this approach has not yet helped them to obtain increased  HUBZone set-aside contracts in Puerto Rico. One firm\u2019s representative  said that the advice at networking events is that firms should approach  contracting officers, but small businesses do not have the contacts to  approach contracting officers. Representatives of some firms said that  SBA should act as an advocate or facilitator to provide connections  between small businesses and contracting officers. Some of the firms\u2019  representatives noted that in the absence of HUBZone set-aside  contracts, they tend to pursue subcontracts with companies that have  prime federal contracts."], "subsections": []}, {"section_title": "Award of Contracts to Firms Outside of Puerto Rico", "paragraphs": ["Representatives of two economic development organizations we  interviewed said that most HUBZone set-aside contracts and most of the  hurricane relief-related contracts performed in Puerto Rico were awarded  to firms outside Puerto Rico. In 2017, we similarly reported that  representatives from four associations stated that challenges such as lack  of access to contracting officers and difficulty meeting procurement  requirements led to concerns about contracts being awarded to  businesses located outside of Puerto Rico for work to be performed in  Puerto Rico.", "Representatives of firms and one economic development organization  also pointed out that for some industries, work does not need to be  physically performed at the contract location; therefore, Puerto Rican  HUBZone firms could be competitive for contracts located in other states.  According to firms and one economic development organization, this is  especially true in the technology industry, which is well represented in  Puerto Rico with multiple HUBZone firms. However, representatives of  the Puerto Rican technology firms we contacted noted that they have  experienced great difficulty obtaining HUBZone contracts. One firm\u2019s  representative suggested that this challenge might be partially due to  Puerto Rican firms having less experience than firms outside of Puerto  Rico in competing for HUBZone set-aside contracts. To compete for  contracts, one firm said that its chief executive officer permanently moved  to Washington, D.C., and another firm said its staff travels to Washington,  D.C., once a month."], "subsections": []}]}, {"section_title": "Procurement Center Representative Based in Puerto Rico May Help Address Some Challenges Faced by HUBZone Firms in Puerto Rico", "paragraphs": ["In 2018, SBA established a PCR in Puerto Rico and SBA officials said the  agency expects that the PCR will help address some of the challenges  discussed previously. SBA PCRs work with federal agencies and small  businesses to identify contracting opportunities for small businesses.  The Puerto Rico PCR said that she plans to hold events for HUBZone  firms to help them better understand and navigate the federal contracting  process. For example, she plans to hold a Federal Acquisition Regulation  \u201cboot camp,\u201d a 40-hour training to educate firms on the federal contracting  process. She also stated that through regular interaction with other PCRs  and with contracting officers, she can identify and discuss opportunities  for HUBZone set-aside contracts for Puerto Rican small businesses. One  economic development organization we interviewed said that it is too  early to see an effect of the new Puerto Rico PCR, but that they have met  with her and have been encouraged by her efforts to date.", "In 2017, we reported that several stakeholders identified the lack of an  SBA PCR in Puerto Rico as a disadvantage for small businesses in  Puerto Rico seeking contracts with the federal government. According  to a representative from the Federal Contracting Center that we  interviewed in 2017, having a PCR in Puerto Rico is important because  the PCR can advocate for small businesses there. For example, the PCR  can work with contracting officers to determine small business set-asides,  make adjustments to procurement requirements, and make agency  contracting officers more aware of businesses in Puerto Rico. According  to one economic development organization\u2019s representative, the PCR  could assist local businesses and promote businesses located in Puerto  Rico to federal agencies."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Our review of a sample of 12 case files for Puerto Rican firms certified  between March 2017 and March 2018 found that SBA lacked complete  documentation for one of two requirements we reviewed and did not  consistently follow its own procedures for quality control reviews when  approving firms. This suggests potential gaps in internal controls for both  the certification and recertification processes, as SBA reviews firms\u2019  compliance with program requirements at both certification and  recertification. Although SBA policy includes documentation reviews and  a quality control process, its internal policy manuals do not reflect all  document review procedures, and analysts did not always follow  procedures for quality control reviews. SBA has not updated its policy  manuals and, it is not known to what extent it has reviewed staff  compliance with the quality review procedures. Although SBA provided an  assurance letter stating its internal controls are effective, the letter did not  describe steps taken in the evaluation. Documenting all procedures would  help ensure that analysts consistently follow policy when certifying and  recertifying firms. Documented reviews of staff compliance also could  serve to identify and remediate any noncompliance with certification and  recertification processes. Both actions would serve to strengthen the  verification function in the HUBZone program, which is necessary to help  ensure that only eligible firms participate in the program."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to SBA. Specifically:  The Administrator of SBA should update the agency\u2019s internal policy  manuals for certification and recertification reviews to reflect existing  policies and procedures not currently in written guidance.  (Recommendation 1)", "The Administrator of SBA should conduct and document reviews of staff  compliance with procedures associated with HUBZone certification and  recertification. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to SBA. In  response, SBA provided written comments, which are reproduced in  appendix III. SBA also provided technical comments, which we  incorporated as appropriate. SBA generally agreed with both of our  recommendations. However, SBA disagreed with three of our findings in  the draft report.", "In the draft report, we stated that SBA\u2019s guidance for the certification  process requires firms to submit documentation so that SBA can verify  that a firm meets the employee residency requirement, including  documentation showing that each employee\u2019s address is located in a  HUBZone, for employees claimed to be HUBZone residents. We noted  that documents were missing, illegible, or did not corroborate the  information claimed regarding at least one employee\u2019s residency for 9 of  12 certifying firms that we reviewed. We also stated that in 5 of these 9  cases, the firm would not be eligible for HUBZone certification if the SBA  analyst had not counted such employees. In its comments, SBA stated  that it is only required to verify that no fewer than 35 percent of a  HUBZone firm\u2019s employees reside in a HUBZone. SBA asserted that it  had sufficient documentation to conclude that at least 35 percent of each  firm\u2019s employees resided in a HUBZone for each of the 12 firms we  reviewed. While SBA analysts may have addressed insufficient  documentation by following additional procedures, which are described in  the report, we found that these procedures were not documented in  SBA\u2019s internal written policies for certifying HUBZone firms and analysts  did not document their use of these procedures in the case files we  reviewed. Therefore, we were not able to verify that SBA took such steps  to verify the employees\u2019 addresses.", "In the draft report, we identified an inconsistency when reviewing the case  files for the only Puerto Rican HUBZone firm recertified between June  2017 and May 2018. Specifically, the firm reported on its application that  it had zero employees, but also claimed 19 of its employees lived in a  HUBZone. In its comments, SBA stated that these numbers came from a  program examination system that is no longer used by the agency and  therefore would not have been administratively correct to use in the 2017  recertification process. However, the file we received from SBA\u2019s  HUBZone Certification Tracking System asks for such information and  had a response date noted as December 26, 2017. We recognize and  noted that the firm was not required to submit corroborating  documentation to verify employee information, because it was under the  $1 million threshold. However, SBA policy states that recertifying firms  must represent that the circumstances relative to their eligibility at the  time of certification have not materially changed. In this instance, SBA  recertified the firm when basic information obtained for the firm appeared  to be erroneous and did not indicate that the firm was in compliance with  the employee residency requirement.", "In the draft report, we stated that SBA did not consistently follow its  quality review procedures to complete three distinct levels of review when  approving the 12 Puerto Rican firms in our non-generalizable sample for  certification. In its comments, SBA stated that while its legacy system, the  HUBZone Certification Tracking System, requires three levels of review,  its internal policies do not require that each level of review be performed  by different staff. However, SBA internal policies that we reviewed state  that the three levels of review should be conducted by different people,  specifically an analyst, a senior analyst, and the program director.  Furthermore, internal control standards state that management should  design control activities at various levels with a segregation of duties, and  periodically review its procedures and associated internal control activities  for effectiveness.", "We are sending copies of this report to congressional committees, the  Small Business Administration, and other interested parties. In addition,  this report will be available at no charge on GAO\u2019s website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives in this report were to (1) examine the Small Business  Administration\u2019s (SBA) development of criteria and guidance on using a  risk-based approach for certifying and recertifying Historically  Underutilized Business Zone (HUBZone) firms, (2) examine SBA\u2019s  implementation of the revised policies and procedures for firms located in  Puerto Rico, and (3) describe any economic impacts of HUBZone  expansion and recent trends in federal small business contracting in  Puerto Rico.", "To examine SBA\u2019s development of its criteria and guidance for HUBZone  certification and recertification, we reviewed SBA\u2019s policies and  procedures for certifying and monitoring HUBZone firms. To learn about  SBA\u2019s risk-based approach, we interviewed officials at the headquarters  level responsible for certifying and recertifying HUBZone firms. We  reviewed prior GAO and SBA Office of Inspector General reports,  applicable statutes and regulations, and SBA documents. We also  compared the development of SBA\u2019s certification and recertification  processes with federal internal control standards and relevant federal  guidance and statutes for managing fraud risk.", "To examine SBA\u2019s implementation of the revised recertification processes  in Puerto Rico, we used SBA\u2019s Dynamic Small Business Search database  to identify HUBZone firms located in Puerto Rico that received HUBZone  certification after March 27, 2017. We examined SBA\u2019s document review  process for Puerto Rican firms that received HUBZone certification or  were due for recertification between March 2017 and March 2018. We  reviewed the case files for a non-generalizable sample of 12 firms that  received initial certification and two firms that were due for recertification  during this time period. We reviewed documents submitted by firms to  SBA as part of the initial certification process. But we were unable to  examine the document review component of recertification directly.  According to SBA officials, only two firms in Puerto Rico recertified  between March 27, 2017, and May 30, 2018, when we received the  applicant case files from SBA, and neither met the threshold of $1 million  in contract awards to trigger a full document review.", "From SBA\u2019s small business database, we identified 443 firms in Puerto  Rico that had had HUBZone certification at any point as of March 12,  2018, and removed 350 firms that exited the program in order to review  only currently certified firms (leaving 93 certified firms). From this  universe, we identified 47 HUBZone-certified firms located in Puerto Rico  with a certification date later than March 27, 2017, after removing  duplicates. We chose a judgmental sample of 12 firms that we randomly  selected from the total of 47 firms using a random number generator. We  checked the city and industry of each of the 12 firms to confirm the firms  provided some geographical and industry variation. Results from this  sample are not generalizable to all HUBZone-certified firms.", "We examined the contents of the case files for each of the 12 firms, which  included the application the firm submitted through SBA\u2019s HUBZone  Certification Tracking System and supporting documents that firms  submitted to corroborate their eligibility, including proof of office location,  payroll documentation, HUBZone maps, and employees\u2019 identification  such as driver\u2019s licenses. We compared the case file contents to SBA\u2019s  guidance on which documents firms must submit and internal guidance  for analysts reviewing applications.", "To determine which documents to review, we compared SBA\u2019s list  of required documents for certification to those required at  recertification and identified which are similar. We reviewed SBA  analysts\u2019 notes, which are recorded in the HUBZone tracking  system to verify that they reviewed the documents to determine  the firms\u2019 eligibility. We also reviewed any emails exchanged  between SBA and the applicant to identify cases in which SBA  requested follow-up from the firm.", "We reviewed the name of the SBA analyst who completed each  level of review, as indicated in the tracking system file, to  determine whether SBA followed its policy of completing three  levels of review. We also reviewed the tracking system files to  verify the final approval and whether SBA sent the certification  notice to the firm. We compared these files to SBA\u2019s internal  policy manuals.", "To describe any economic impacts of the expansion of the HUBZone  program in Puerto Rico, and to describe recent federal contracting trends,  we used SBA\u2019s small business database and federal procurement data  from the Federal Procurement Data System-Next Generation. We  analyzed the number of firms in designated HUBZones in Puerto Rico  and the amount of federal contract obligations awarded to the firms from  fiscal year 2006 through June of fiscal year 2018\u2014that is, from the  starting point for the analysis we used in our 2017 report to the most  recent available data at the time of our current review. We assessed the  reliability of the two databases by reviewing database guides and prior  GAO work, and determined them to be reliable for the purposes of that  analysis.", "For all of the objectives, we also interviewed SBA officials in Washington,  D.C., and Puerto Rico and representatives from the Puerto Rico Chamber  of Commerce and the Federal Contracting Center. In addition, we  conducted a site visit to San Juan, Puerto Rico, in May 2018. There, we  conducted two discussion groups and one interview with representatives  from nine HUBZone firms located in Puerto Rico to obtain their  perspectives on the HUBZone certification process, federal contracting  opportunities, economic impacts of HUBZone expansion in Puerto Rico,  and economic impacts of the 2017 hurricanes. We invited every Puerto  Rican HUBZone firm to participate in the discussion groups and met with  the nine firms that responded to our email. The views of representatives  from these firms are not generalizable.", "We conducted this performance audit from February 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Federal Contracting Trends and Use of Socioeconomic Set-Asides in Puerto Rico, Fiscal Years 2006\u20132018", "paragraphs": ["This appendix provides information, based on our analysis of federal  procurement data, on small business contracting in Puerto Rico, including  the use of socioeconomic set-aside contracts and contracting by sector  and agency."], "subsections": [{"section_title": "Small Business Contracting in Puerto Rico", "paragraphs": ["Annual federal contract obligations to small businesses in Puerto Rico  more than doubled from fiscal year 2015 through June 2018. Small  businesses in Puerto Rico also won a larger percentage of total federal  contracting obligations in Puerto Rico."], "subsections": []}, {"section_title": "Use of Socioeconomic Set-Asides in Puerto Rico", "paragraphs": ["Although federal contract obligations to small businesses in Puerto Rico  sharply increased in recent years, obligations through set-aside contracts  for the Historically Underutilized Business Zone (HUBZone), 8(a)  Business Development, Women-Owned Small Business, and Service- Disabled Veteran-Owned Small Business programs remained relatively  unchanged (see fig. 4). The increases in federal contract obligations to  small businesses in fiscal years 2017 and 2018 came mostly through free  and open competition and awards reserved for small businesses that  excluding those for the 8(a), HUBZone, Women-Owned Small Business,  and Service-Disabled Veteran-Owned Small Business programs.", "HUBZone set-aside contract obligations increased from negative $20,881  in fiscal year 2016 to $3.8 million in fiscal year 2017 (1 percent of the total  value of small business contracts in Puerto Rico), but dropped to $1.7  million through June 2018 (0.2 percent of the total value of small business  contracts in Puerto Rico). Furthermore, 17.3 percent of the $21.9 million  in contract obligations awarded to Puerto Rican HUBZone firms in fiscal  year 2017 were through HUBZone set-aside contracts, and 3.3 percent of  the $50.5 million awarded in fiscal year 2018 (see fig. 5). Other  socioeconomic set-asides accounted for the highest share of obligations  awarded (76.6 percent in 2017 and 80.1 percent in 2018) and free and  open competition accounted for the rest (6.1 percent in 2017 and 16.6  percent in 2018).", "The fiscal year 2017 increase in federal contracting obligations in Puerto  Rico were not substantially tied to hurricane relief since Hurricane Irma  and Hurricane Maria hit Puerto Rico in September, the last month of the  fiscal year. One percent of total federal contracting obligations in Puerto  Rico and 1 percent of obligations awarded to Puerto Rican small  businesses were associated with hurricane relief (see table 1). However,  a significant portion of the increase in overall contracting and small  business contracting to Puerto Rican firms in fiscal year 2018 (through  June 2018) was related to hurricane relief. Specifically, 55.3 percent of  total federal contracting obligations in Puerto Rico and 64.3 percent of  obligation awarded to Puerto Rican small businesses were associated  with hurricane relief. Furthermore, 16.1 percent of HUBZone set-aside  contract obligations awarded to Puerto Rican firms were hurricane-related  through June 2018."], "subsections": []}, {"section_title": "Contracting in Puerto Rico by Sector", "paragraphs": ["In fiscal years 2017 and 2018, overall federal prime contracting  obligations in Puerto Rico and those awarded to small businesses in  Puerto Rico were concentrated in the construction sector (about 25  percent in 2018), the manufacturing sector (about 20 percent in 2018),  and the administrative and support and waste management sector (about  36 percent in 2018). For contracts awarded using HUBZone set-asides  in Puerto Rico, the construction sector (about 52 percent in 2018), the  information sector (about 11 percent in 2018), and the health care sector  (about 37 percent in 2018) were most represented (see table 2)."], "subsections": []}, {"section_title": "Contracting in Puerto Rico by Agency", "paragraphs": ["Among federal agencies, the Department of Defense has awarded the  greatest percentage of overall federal prime contracting obligations,  obligations to small businesses, and HUBZone set-aside contract  obligations to firms located in Puerto Rico. Specifically, in fiscal year  2018, Department of Defense contract obligations represented 58 percent  of total obligations, 64 percent of obligations to small businesses, and 84  percent of HUBZone set-aside obligations to Puerto Rican firms (see  table 3). Although, Department of Homeland Security contract obligations  in Puerto Rico typically have represented less than 3 percent of total  obligations and less than 5 percent of obligations to small businesses in  Puerto Rico, those percentages increased to 21 percent and 23 percent,  respectively, in fiscal year 2018 due to hurricane-related contracts  awarded to Puerto Rican firms."], "subsections": []}]}, {"section_title": "Appendix III: Comments from SBA", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["William B. Shear, (202) 512-8678 or shearw@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Harry Medina (Assistant  Director), Chris Ross (Analyst in Charge), Tarik Carter, Lilia Chaidez,  Pamela Davidson, Erika Huber, Julia Kennon, John McGrail, John  Mingus, Barbara Roesmann, and Jena Sinkfield made key contributions  to this report."], "subsections": []}]}], "fastfact": ["For the Spanish translation of the one-page English Highlights for this document, see GAO-19-203.", "The Historically Underutilized Business Zone program is intended to increase employment and development in distressed areas. Businesses operating in these areas may qualify for federal contracting benefits such as limited competition for contracts.", "A 2017 law", "required the Small Business Administration to do more to address fraud risk when vetting firms seeking to participate or remain in the program", "allowed more HUBZones in Puerto Rico.", "We reviewed 12 newly certified firms in Puerto Rico, and found SBA did not consistently follow its risk management policies. We recommended SBA boost staff compliance with its policies and take other actions."]}
{"id": "GAO-18-366", "url": "https://www.gao.gov/products/GAO-18-366", "title": "Federal Disaster Assistance: Individual Assistance Requests Often Granted but FEMA Could Better Document Factors Considered", "published_date": "2018-05-31T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FEMA's IA program provides help to individuals to meet their immediate needs after a disaster, such as shelter and medical expenses. When a state, U.S. territory, or tribe requests IA assistance through a federal disaster declaration, FEMA evaluates the request against regulatory factors, such as concentration of damages, and provides a recommendation to the President, who makes a final declaration decision.", "GAO was asked to review FEMA's IA declaration process. This report examines (1) the number of IA declaration requests received, declared, and denied, and IA actual obligations from calendar years 2008 through 2016, (2) the extent to which FEMA accounts for the regulatory factors when evaluating IA requests, and (3) any challenges FEMA regions and select states reported on the declaration process and factors and any FEMA actions to revise them. GAO reviewed FEMA's policies, IA declaration requests and obligation data, and FEMA's RVARs from July 2012 through December 2016, the most recent years for which data were available. GAO also reviewed proposed rulemaking comments and interviewed FEMA officials from all 10 regions and 11 state emergency management offices selected based on declaration requests and other factors."]}, {"section_title": "What GAO Found", "paragraphs": ["From calendar years 2008 through 2016, the Department of Homeland Security's (DHS) Federal Emergency and Management Agency (FEMA) received 294 Individual Assistance (IA) declaration requests from states, U.S. territories, and tribes to help individuals meet their immediate needs after a disaster. Of these, the President declared 168 and denied 126 requests. Across the various types of IA declaration requests, severe storms (190) were the most common disaster type and drought (1) was among the least common. FEMA obligated about $8.6 billion in IA for disaster declarations during this period.", "GAO found that FEMA regions did not consistently obtain and document information on all elements of established IA regulatory factors when making IA recommendations to headquarters. Following a declaration request, a FEMA region is to prepare a Regional Administrator's Validation and Recommendation (RVAR)\u2014a document designed to include data on each of the six IA regulatory factors for each declaration request as well as the regional administrator's recommendation. GAO reviewed all 81 RVARs from July 2012\u2014the date FEMA began using the new RVAR template\u2014through December 2016. GAO found that regions did not consistently obtain and document information for the elements required under the six regulatory factors (see table). For example, only 44 of the 81 RVARs documented all elements under the concentration of damage factor. By evaluating why regions are not completing all elements of each current IA regulatory factor, FEMA could identify whether any corrective steps are needed.", "Officials from the 10 FEMA regions and 11 states GAO interviewed, reported positive relationships with each other, but also cited various challenges with the IA declaration process and regulatory factors. For example, these officials told GAO that there are no established minimum thresholds for IA, making final determinations more subjective and the rationale behind denials unclear. However, as required by the Sandy Recovery Improvement Act of 2013, FEMA has taken steps to revise the IA factors by issuing a notice of proposed rulemaking. According to FEMA, the proposed rule aims to provide more objective criteria, clarify the threshold for eligibility, and speed up the IA declaration process. As of April 2018, the proposed rule was still under consideration. According to FEMA officials, they plan to finalize the rule in late 2018; therefore, it is too early to know the extent to which it will address these challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FEMA evaluate why regions are not completing the RVARs for each element of the current IA regulatory factors and take corrective steps, if necessary. DHS concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Natural disasters in 2017, such as the California wild fires and the Atlantic  hurricane season, affected approximately 25.8 million people in the  United States\u2014nearly 8 percent of the U.S. population. As a result of  these disasters, 4.7 million individuals applied for assistance in 2017 from  the Federal Emergency Management Agency (FEMA) through its  Individual Assistance (IA) program, which provides help to individuals and  families to meet their immediate needs, shelter, and medical needs in the  wake of a disaster. FEMA provided more than $2 billion in IA funds in  response to these disasters. FEMA is a component of the Department of  Homeland Security (DHS) that leads the federal effort to prepare, respond  to, and help recover from disasters, both natural and man-made.  Following a major disaster declaration by the President, FEMA may  provide three principal forms of assistance. These include IA; Public  Assistance, which addresses repairs to communities\u2019 and states\u2019  infrastructure; and Hazard Mitigation Assistance, which provides funding  for projects a state submits to reduce the threat of future damage.", "To obtain federal disaster assistance, a state or tribe must request a  disaster declaration through FEMA (IA declaration), and then FEMA  determines whether to make a recommendation to the President to  declare a major disaster. In reviewing the state or tribe\u2019s IA disaster  declaration request, FEMA is to consider six primary factors, established  in regulation in 1999, to determine the severity, magnitude, and impact of  a disaster event. These IA regulatory factors include: (1) concentration of  damages (e.g., homes destroyed); (2) trauma (e.g., injuries and death);  (3) special populations (e.g., elderly and disabled); (4) voluntary agency  assistance; (5) insurance coverage; and (6) average amount of individual  assistance by state. After Hurricane Sandy, Congress passed the Sandy  Recovery Improvement Act of 2013 to improve certain aspects of disaster  assistance, and the act directed FEMA to review, update, and revise the  IA factors in order to provide more objective criteria, clarify the threshold  for eligibility, and speed the IA declaration process.", "You asked us to review the IA declaration process and regulatory factors  along with FEMA\u2019s proposed changes to the factors. This report  examines (1) the number of IA declaration requests received, declared,  and denied, including the types of disasters and related obligations for IA  major disaster declarations from calendar years 2008 through 2016; (2)  the extent to which FEMA accounts for the six IA factors when evaluating  state and tribal IA declaration requests; and (3) what challenges, if any,  FEMA regions and selected states report regarding the factors used in  the IA declaration process, and what actions, if any, FEMA has taken to  revise these factors.", "To answer our first objective, we reviewed FEMA policies and  procedures, regulations, and internal documents related to the IA disaster  declaration process such as FEMA\u2019s guidance on the process, manual on  damage assessment, and fact sheets on IA programs. We obtained and  analyzed data from FEMA\u2019s systems for disaster declaration requests  made by states and tribal entities; and IA actual obligations for  declarations made from calendar years 2008 through 2016, the most  recent data available at the beginning of our review. To assess the  reliability of these data, we reviewed the data and discussed data quality  control procedures with FEMA officials. We determined that the data we  used from these systems were sufficiently reliable for the purposes of this  report.", "To answer our second objective, we reviewed relevant laws, FEMA  policies and procedures, regulations, guides, memoranda, internal  documents, and other documents related to the IA disaster declarations  process, including the current IA factors established in regulation. We  reviewed and analyzed the completeness of all 81 FEMA nonemergency  and nonexpedited Regional Administrator\u2019s Validation and  Recommendations (RVAR) prepared from July 2012 through December  2016, the most recent years for which data were available at the time of  our review. We excluded emergency and expedited disaster declaration  requests because such requests are not required to include all the  information related to the regulatory factors. We did not include RVARs  prepared prior to July 2012, after FEMA updated its RVAR guidance and  training and began recommending the use of a new RVAR template in  order to help ensure consistency across regions. We also obtained a  copy of the RVAR template, which we determined contained 28 elements,  most of which pertain to the six IA factors identified in the regulation. We  used these elements to analyze the 81 RVARs to determine if information  on the IA regulatory factors were obtained and documented. We  interviewed officials from FEMA headquarters and all 10 FEMA regions  on their consideration of the IA regulatory factors and development of the  RVARs. We also compared the 81 RVARs to Standards for Internal  Control in the Federal Government. To assess the reliability of the  RVARs, we reviewed and analyzed the RVARs that FEMA officials  provided and discussed quality control procedures with them. We  determined that the information we used from the RVARs was sufficiently  reliable for the purposes of this report.", "To answer our third objective, we reviewed relevant laws and FEMA  policies and procedures, notices, regulations, and guidance related to the  IA disaster declaration process and FEMA\u2019s proposed rulemaking, which  proposes revisions to the current six IA regulatory factors. We interviewed  officials from all 10 FEMA regions, FEMA headquarters officials, and  state-level emergency management officials in 11 states to discuss their  perspectives on the IA declaration process and current regulatory factors,  any associated challenges, and their perspectives on the proposed  changes to the current IA regulatory factors. We selected the 11 states  based on those that have undergone multiple IA requests from calendar  years 2008 through 2016 and those that have experienced various types  of disasters in different regions of the country. We selected California,  Illinois, Indiana, Kentucky, Mississippi, Missouri, New York, Ohio,  Oklahoma, South Dakota, and Virginia. We made three site visits to  obtain more detailed information on the IA declaration processes. We  visited FEMA regions IX and V, and spoke with regional FEMA officials,  as well as with emergency management officials for the states of  California and Illinois. We also visited region IV and we spoke with FEMA  officials for that region. We chose these locations to obtain examples and  experiences across a wide variety of disaster types and regions. The  information gathered during these site visits is not generalizable to other  states or regions, but the details provide insights regarding FEMA\u2019s and  states\u2019 management of these processes. We also reviewed and  summarized the 14 public comments states submitted on FEMA\u2019s  proposed rulemaking that proposes changes to the current IA regulatory  factors.", "We conducted this performance audit from January 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  finding 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The Robert T. Stafford Disaster Relief and Emergency Assistance Act  (Stafford Act), as amended, establishes the process for states or tribal  entities to request a presidential disaster declaration. The act also  generally defines the federal government\u2019s role during the response and  recovery after a disaster and establishes the programs and process  through which the federal government provides disaster assistance to  state, local governments, tribal entities and individuals. In addition to its  central role in recommending to the President whether to declare a  disaster, FEMA has primary responsibility for coordinating the federal  response when a disaster is declared as well as recovery, which typically  consists of providing grants to assist state and tribal entities to alleviate  the damage resulting from such disasters. Once a disaster is declared,  FEMA provides assistance through the IA, Public Assistance, and Hazard  Mitigation Assistance programs. For instance, some declarations may  provide grants only for IA and others only for Public Assistance. Hazard  Mitigation Assistance grants, on the other hand, are available for all  declarations if the affected area has a FEMA-approved Hazard Mitigation  plan. The process for requesting assistance is the same for the three  types of assistance."], "subsections": [{"section_title": "Disaster Declaration Process", "paragraphs": ["Under the Stafford Act, states\u2019 governors or tribal chief executives may  request federal assistance, if state and tribal resources are overwhelmed  after a disaster. As part of the request to the President, a governor or  tribal chief executive must affirm that the state or tribe has implemented  an emergency plan and that the situation is of such severity and  magnitude that effective response is beyond the capabilities of the state  or tribal entity, among other things. After a state or tribe submits a request  for disaster declaration through FEMA\u2019s regional office, the regional office  is to evaluate the request and make a regional recommendation through  the RVAR, which is submitted to FEMA headquarters for further review.  The FEMA administrator then is to review the state\u2019s or tribe\u2019s request  and the RVAR, and recommend to the President whether a disaster  declaration is warranted. Figure 1 shows the process for a disaster  declaration from the time a disaster occurs until the President approves or  denies a declaration request."], "subsections": []}, {"section_title": "Five Programs Available under Individual Assistance", "paragraphs": ["The IA program provides financial and direct assistance to disaster  victims for expenses and needs that cannot be met through other means,  such as insurance. The IA comprises five different programs as shown  below. When states or tribal entities request disaster declarations, they  may request assistance under any or all of the five programs. Likewise,  when the President makes a disaster declaration, the declaration may  authorize IA which may also include any or all of the five IA programs.  1.  Individuals and Households Program provides assistance to  eligible disaster survivors with necessary expenses and serious needs  which they are unable to meet through other means, such as  insurance. According to FEMA headquarter officials, direct  assistance is provided to individuals to meet housing needs.  2.  Crisis Counseling Program assists individuals and communities by  providing community-based outreach and psycho-educational  services.  3.  Disaster Legal Services provides assistance through an agreement  with the Young Lawyers Division of the American Bar Association for  free legal help to survivors who are unable to secure legal services  adequate to meet their disaster-related needs.  4.  Disaster Case Management Program involves a partnership  between a FEMA disaster case manager and a survivor to develop  and carry out a Disaster Recovery Plan.  5.  Disaster Unemployment Assistance provides unemployment  benefits and reemployment services to individuals who have become  unemployed as a result of a major disaster and who are not eligible  for regular state unemployment insurance."], "subsections": []}, {"section_title": "The Six IA Regulatory Factors Used to Assess IA Declaration Requests", "paragraphs": ["In accordance with its responsibilities under the Stafford Act, FEMA  issued a regulation in 1999 that outlines the six factors regional and  headquarters officials are to consider when assessing requests for a  disaster declaration and when developing a recommendation to the President for a federal disaster declaration. The regulation states that  FEMA considers the six factors not only to evaluate the need for IA but  also to measure the severity, magnitude, and impact of the disaster. The  state or tribe provides information on these factors when submitting its  disaster declaration request. The six factors for IA include the following:  1.  Concentration of Damages\u2014characterizes the density of the  damage in individual communities. The regulation states that highly  concentrated damages \u201cgenerally indicate a greater need for federal  assistance than widespread and scattered damages throughout a  state.\u201d For example, concentration of damage data includes the  numbers of homes destroyed, homes with major or minor damages,  and homes affected.  2.  Trauma\u2014the regulation provides conditions that might cause trauma  including large numbers of injuries and deaths, large-scale disruption  of normal community functions, and emergency needs such as  extended loss of power or water.  3.  Special Populations\u2014FEMA considers the impact of the disaster on  special populations, such as low-income populations, the elderly, or  the unemployed.  4.  Voluntary Agency Assistance\u2014involves the availability and  capabilities of voluntary, faith, and community-based organizations,  and state and local programs to help meet both the emergency and  recovery needs of individuals affected by disasters.  5.  Insurance Coverage\u2014addresses the level of insurance coverage  among those affected by disasters. Because disaster assistance  cannot duplicate insurance coverage, as recognized in the regulation,  if a disaster occurred where almost all of the damaged dwellings were  fully insured for the damage that was sustained, FEMA could  conclude that a disaster declaration by the President was not  necessary in accordance with this factor.  6.  Average Amount of Individual Assistance by State\u2014according to  the regulation, there is no set threshold for recommending IA.  However, it states that the averages, depicted in table 1, may prove  useful to states and voluntary agencies as they develop plans and  programs to meet the needs of disaster victims. The inference is that  these averages generally indicate the amount of damages that could  be expected for a state based on its size (small, medium, and large).  The averages contained within the regulation and depicted in table 1  are based on disasters that occurred between July of 1994 and July of  1999."], "subsections": []}]}, {"section_title": "The President Declared 57 Percent of All IA Requests from 2008 through 2016, with Total Obligations of Approximately $8.6 Billion", "paragraphs": [], "subsections": [{"section_title": "The Number of IA Declarations Varied by Region and Severe Storms Were the Most Frequent Disaster Type", "paragraphs": ["The President declared 57 percent of all IA declaration requests from  calendars years 2008 through 2016, with total IA obligations of  approximately $8.6 billion. FEMA received 294 IA declaration requests  from calendar years 2008 through 2016. Of these, the President declared  168 requests (57 percent), and 51 percent of these declarations were  from Regions IV and VI, as shown in table 2.", "Additionally, of the 126 IA declaration requests denied by the President,  Regions X and IX had the highest percentage of denials, at 71 percent  (10 out of 14) and 67 percent (12 out of 18), respectively, and Region I  had the lowest percentage of denials at 13 percent (2 out of 15), as  shown in table 3. See appendix I for the number of IA declarations  requested, declared, and denied by states and tribes from each FEMA  region for disaster declarations requested from calendar years 2008  through 2016.", "According to a FEMA headquarters official, when a disaster declaration is  denied, FEMA sends a denial letter to states or tribes based on the  review of all the information available. The letter generally states that the  damage was not of such severity and magnitude as to be beyond the  capabilities of the state, affected local governments, and voluntary  agencies, and accordingly the supplemental federal assistance is not  necessary. Of the emergency management officials we interviewed in 11  states, officials in five states reported that FEMA provided a rationale  behind the denial, while officials in three states reported that no rationale  was provided.", "Among the various types of disasters for which IA declaration requests  were received, severe storms, flooding, and tornados accounted for the  highest number of IA requests, with drought, fishery closure, and  contaminated water being the least common, as shown in table 4."], "subsections": []}, {"section_title": "FEMA IA Obligations Varied by Region and State", "paragraphs": ["FEMA obligated a total of approximately $8.6 billion in IA for disaster  declarations made from calendar years 2008 through 2016. These actual  obligations were provided to 46 states and they ranged from less than $1  million to more than $1 billion as shown in figure 2. See appendix II for  FEMA\u2019s IA actual obligations by state and type of disasters for disaster  declarations made from calendars years 2008 through 2016.", "Additionally, actual obligations for IA declarations made from calendar  years 2008 through 2016 varied greatly by FEMA region, as also shown  in figure 3. For example, FEMA Region VI had the highest obligations at  around $3.3 billion. Region X had the lowest obligations at $24.8 million.  As shown in table 5, the amount of obligations for disasters declarations  also varied greatly by state. For example, Louisiana had the highest  obligations at approximately $2 billion, followed by New York and Texas  at about $1.3 billion and $1.1 billion, respectively. The state with the  lowest obligations was the U.S. Virgin Islands at about $2,100."], "subsections": []}]}, {"section_title": "FEMA Regions Varied in How They Considered IA Regulatory Factors and Did Not Consistently Obtain and Document Information on All Elements of These Factors", "paragraphs": [], "subsections": [{"section_title": "FEMA Regions Varied in Their Consideration of the IA Regulatory Factors Based on Disaster Circumstances", "paragraphs": ["Six of FEMA\u2019s 10 regional offices reported using all six regulatory factors  when evaluating states\u2019 or tribes\u2019 IA declaration requests. Officials from  the other 4 regions reported using five of the six factors, with the  exception being the average amount of individual assistance by state  factor. These officials noted that they do not use this factor because  FEMA considers the factor to be outdated or they consider all of the  factors holistically.", "Officials from FEMA\u2019s regional offices also generally reported that the  extent to which they consider the six IA regulatory factors equally in all  cases varies, depending on the circumstances of the related disaster.  Specifically, officials from 7 of the 10 regions stated that they use the  regulatory factors on a case-by-case basis as certain factors are more  relevant than others based on the disaster. For example, if a tornado hits  a rural community and completely destroys all properties within the  community with no death or injury, then the regulatory factor for trauma  may not be as applicable, while the concentration of damages regulatory  factor would have greater relevance. On the other hand, if a tornado hits  the center of a town resulting in damages with death and injuries, then the  trauma regulatory factor would become more important to consider.", "Additionally, officials in 3 of the 10 regions reported that in addition to the  six regulatory factors, they also take into account institutional knowledge  and staff experience when evaluating the regulatory factors. For example,  officials in one region stated that their staff have more than 10 years of IA  declaration experience, and as such, they are familiar with the extent of  the information needed and collect the information accordingly."], "subsections": []}, {"section_title": "FEMA Regions Did Not Consistently Obtain and Document Information on All Elements of the IA Regulatory Factors in RVARs", "paragraphs": ["Based on our analysis of RVARs from July 2012 through December 2016  used to recommend approving or denying IA requests, FEMA regional  offices did not consistently obtain and document information on all  elements of the IA regulatory factors. As described earlier, FEMA regions  are to use the RVAR to document information on the IA factors and to  recommend to the FEMA administrator whether a disaster should be  declared.", "According to FEMA headquarters officials, FEMA developed the RVAR  template in June 2012 to help ensure consistency across regions when  making recommendations to headquarters on IA declaration requests.  Officials stated that prior to the template, information on the six factors  was mainly provided in narrative format. The new template listed the  various elements found within each of the six regulatory factors, guiding  the regional offices to provide information based on those elements. For  example, instead of providing a general narrative on the trauma factor,  the new template listed the elements to be provided under trauma, such  as the number of injuries and deaths, as well as information on power  outages and disruption of other community functions and services. Also,  instead of summarizing the concentration of damages factor, the template  allowed regional offices to categorize the damage concentration as low,  medium, high, or extreme. Furthermore, the template also provided a  uniform format to present quantitative information such as the number of  homes destroyed; whether home damages are major or minor; the  number of homes affected; and level of home ownership. See appendix III  for a sample RVAR template.", "We analyzed 81 RVARs developed by the 10 FEMA regions from July  2012 through December 2016 and found that regions did not consistently  obtain and document information on all elements related to each of the  six regulatory factors in their RVARs. As shown in table 6, all 81 RVARs  had at least some elements documented but not all for each of the IA  regulatory factors. For example, for the IA concentration of damages  regulatory factor, the six elements to be addressed include the number of  homes destroyed, damaged or affected, damage concentration, and  damage to critical facilities. While 44 of the 81 RVARs documented all of  the six elements, 37 documented some but not all of the elements.  Similarly, for the trauma regulatory factor, the four elements to be  addressed include injuries, death, power outages, and disruption of  community functions. While 30 of the 81 RVARs documented all of the  four elements, 51 documented some but not all of the elements. For the  insurance coverage factor, while five RVARs documented all of the  elements, 73 RVARs documented some but not all of the elements.  Elements under this factor include home ownership, insurance, and flood  insurance, when applicable. None of the six regulatory factors were fully  documented across all RVARs. See appendix IV for detailed information  on the extent to which all of the elements of the six regulatory factors  were documented in the RVARs from July 2012 through December 2016.", "FEMA headquarters officials acknowledged that information related to all  the elements for each of the IA regulatory factors were missing from the  RVARs. They stated that they had not collected all information on all  factors because one factor may have more weight than another based on  the specific incident that has occurred. However, they also indicated that  they do not fully know and have not evaluated all of the reasons why a  region may have omitted information on an element of a factor. FEMA  headquarters officials agreed that having complete information on all  elements of the regulatory factors in the RVARs would assist in their  recommendation process.", "Standards for Internal Control in the Federal Government suggest that  agencies should establish and operate monitoring activities to ensure that  internal controls\u2014such as the documentation of all of the elements of the  IA regulatory factors FEMA regions considered\u2014are effective, and to take  corrective actions as appropriate. Because it is unclear why regions are  not completely documenting all elements related to the current six  regulatory factors, such an evaluation could help FEMA identify whether  any corrective steps are needed. Doing so could help FEMA ensure it is  achieving its stated goals in providing consistency in the evaluation  process and in the types of factors it considers."], "subsections": []}]}, {"section_title": "FEMA and States Reported Challenges in the IA Declaration Process, and FEMA Is Revising the Regulatory Factors Used to Assess Declaration Requests", "paragraphs": [], "subsections": [{"section_title": "FEMA and State Officials Reported Both Positive Relationships and Some Challenges in the IA Declaration Process", "paragraphs": ["Officials we interviewed in 9 of the 10 FEMA regions and state  emergency management offices in all 11 states reported the positive  relationship they maintain with each other as a strength in the IA  declaration process. For example, both FEMA regional officials and  state emergency management officials stated that they have a good  working relationship and are in regular communication via telephone or  in-person meetings with each other. Also, state emergency management  officials we spoke to stated that whenever they are in need of assistance,  they know they can reach out to FEMA regional officials for assistance.  However, FEMA regional and state emergency management officials we  spoke to also reported various challenges with the process. These  include the subjective nature of the IA regulatory factors given the lack of  eligibility thresholds, the lack of transparency in the decision-making  process, and difficulty gathering information on IA regulatory factors.", "Subjective nature of the IA factors and lack of eligibility thresholds.  Officials from 9 of 10 FEMA regions stated the subjective nature of the IA  program is a challenge; and officials in 6 of the 10 regions also said they  found the lack of eligibility thresholds a challenge. An official in one region  stated that unlike FEMA\u2019s Public Assistance program, which has  minimum thresholds for eligibility, it is unclear when states should apply  for IA funds. Under the Public Assistance program, for example, for states  or tribes to qualify for assistance, they must demonstrate that they have  sustained a minimum of $1 million in damages and the impact of  damages must amount to $1.00 per capita in the state. An official in  another region explained that although the subjectivity of the IA factors  provides flexibility in determining the type of IA program needed, having  some quantifiable criteria could help officials explain to states why their  requests were denied or approved.", "Similarly, officials we interviewed in 7 of the 11 states said they found the  subjective nature of the factors with no threshold to be a challenge. A  state emergency management official in one state said this subjectivity  makes it difficult to determine whether or not the state should make an IA  request. A state emergency management official in another state reported  that the subjectivity can cause the IA declaration process to be  inconsistent, and it is not always clear how or why certain declarations  were approved and others were not. Further, a state emergency  management official in an additional state also pointed to the subjective  nature of the factors with no threshold as a reason for not being able to  provide a more detailed rationale behind a declaration denial.", "To illustrate this, table 7 shows how four states requested IA declarations  related to the same tornado in 2012 and varied in what they reported  across the six IA factors, such as the levels of damages incurred, special  populations among their residents, and insurance coverage. Two of these  four states\u2014Kentucky and Indiana\u2014received IA declarations and the  other two\u2014Ohio and Illinois\u2014were denied.", "Lack of transparency. Another challenge reported by FEMA regional  and state emergency management officials was the lack of transparency  in how FEMA evaluates and provides a recommendation to the President  on whether a declaration is warranted. For example, officials we  interviewed in 4 of 10 regions indicated the lack of transparency as a  challenge. A FEMA official in one region stated that the region would like  more transparency regarding what FEMA headquarters recommends to  the President and whether the President\u2019s decision aligns with FEMA\u2019s  recommendation. State emergency management officials we interviewed  in 10 of 11 states also reported that lack of transparency with the IA  process is a challenge. For example, an emergency management official  in one state said it is not clear how or if FEMA considers all of the factors.  Also, an emergency management official in another state reported that it  was unclear to him why his state\u2019s declaration request was denied while  the requests of other states with similar incidents were declared.", "Difficulty gathering information on IA regulatory factors. Officials in 4  of 10 FEMA regions reported difficulty gathering information, such as  income or insurance coverage, as a challenge. An official in one region  stated that it is difficult to obtain information related to IA factors from  states. For example, the official said that calculating the concentration of  damages is difficult absent technical guidance from FEMA headquarters,  as the current guidance only accounts for the number of structure  damage but not the impact of damage. Further, officials in two FEMA  regions stated that states lack a dedicated IA official, making it difficult for  state officials, who play multiple roles, to provide the necessary  information related to the IA factors in their IA declaration request.  Additionally, a state emergency management official in one state also  reported that lack of staff resources in her state makes it difficult to verify  all the local damage assessments prior to making a declaration request."], "subsections": []}, {"section_title": "FEMA Is Taking Steps to Revise the IA Regulatory Factors", "paragraphs": ["Pursuant to the Sandy Recovery Improvement Act of 2013, in November  2015, FEMA issued a Notice of Proposed Rulemaking to revise the six  current IA regulatory factors to the following proposed factors:  state fiscal capacity and resource availability; uninsured home and personal property losses; disaster-impacted population profile;  impact to community infrastructure;  casualties; and disaster-related unemployment.", "According to FEMA headquarters officials, the revisions aim to provide  more objective criteria, clarify the threshold for eligibility, and speed the  declaration. The officials said the proposed rule also seeks to provide  additional clarity and guidance for all the established factors. Table 8  shows FEMA\u2019s description of current and proposed IA factors.", "FEMA received public comments from 14 states in the Federal Register  during the comment period for the proposed rule and proposed  guidance. The 14 states expressed concern about the proposed factor  for state fiscal capacity and resource availability, including the reliability  and relevance of data sources such as total taxable resources. These  states expressed concern that the data collection necessary to meet the  new requirements would fall upon them, adding to the cost burden of  completing an IA disaster declaration request. They also explained that  the use of total taxable resources and other similar data is not an effective  way to assess a state\u2019s current ability to provide resources following a  disaster. Also, these states indicated that the data points such as total  taxable resources and per capita personal income that would be used to  evaluate state fiscal capacity are outdated and inaccurate and would be  an inefficient way to evaluate a state\u2019s true fiscal capacity to respond to a  disaster.", "Regarding the other five proposed factors, several states in their  comments raised questions about ambiguities in interpreting the factors  or the feasibility and cost of gathering related data. For example, in  regards to the factor on disaster impacted population, five states  expressed concern that the data required for the disaster-impacted  population factor would be a cost burden to the state or that the data  would be inappropriate for evaluation. Additionally, two states said  unemployment related to a disaster incident for the disaster-related  unemployment factor would be hard to quantify in the first 30 days  following a disaster. They stated that this was especially an issue given  that states work to submit an IA disaster declaration request as soon as  possible following a disaster.", "According to the Office of Management and Budget\u2019s Office of  Information and Regulatory Affairs website, the projected date for  finalization of the proposed rule is September 2018; however, as of April  2018, FEMA officials stated that they were not certain whether that  timeframe would be met. Until the proposed rule is finalized, we will not  know the extent to which the various challenges FEMA regions and state  officials raised in our interviews and in comments on the proposed rule  will be addressed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FEMA has obligated over $8.6 billion nationwide in IA from calendar  years 2008 through 2016, highlighting the importance of FEMA\u2019s  evaluation of states\u2019 and tribes\u2019 IA declaration requests. FEMA\u2019s regional  offices evaluate the request and make a regional recommendation  through the Regional Administrator\u2019s Validation and Recommendation,  which documents information on all relevant IA regulatory factors. FEMA  has developed the Regional Administrator\u2019s Validation and  Recommendation to ensure regions consistently obtain and document the  information needed by FEMA to make a disaster declaration  recommendation to the President based on the IA regulatory factors.  However, FEMA\u2019s regional offices do not consistently obtain and  document information on all elements of the current IA regulatory factors.  Because it is unclear why regions are not always documenting all of the  elements related to these factors, evaluating the reasons why could help  FEMA identify if any corrective steps are needed. Doing so could also  help FEMA ensure it is meeting its stated goals in providing consistency  in the evaluation process and in the types of factors it considers."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Administrator of FEMA evaluate why regions are  not completing the Regional Administrator\u2019s Validation and  Recommendations for each element of the current IA regulatory factors  and take corrective steps, if necessary."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for its review and comment.  DHS provided written comments, which are summarized below and  reproduced in full in appendix V. DHS concurred with the  recommendation and described planned actions to address it. In addition,  DHS provided written technical comments, which we incorporated into the  report as appropriate.", "DHS concurred with our recommendation that FEMA evaluate why  regions are not completing the Regional Administrator\u2019s Validation and  Recommendations for each element of the IA regulatory factors and take  corrective steps, if necessary. DHS stated that a FEMA working group  consisting of headquarters stakeholders will draft survey questions for  FEMA region officials to identify the common reasons why an element of  an IA regulatory factor may not be addressed within a RVAR. According  to DHS, the working group will also analyze, assess, and present the  findings of the survey responses to FEMA senior leadership, and if  needed, FEMA will develop and send a memorandum to the regions with  additional guidance regarding the appropriate preparation of RVARs.  DHS stated that the estimated completion date is in the fall of 2018.  These actions, if implemented effectively, should address the intent of our  recommendation.", "We will send copies of this report to the Secretary of Homeland Security,  the FEMA Administrator, and the appropriate congressional committees.", "If you or your staff have any questions about this report, 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. Key contributors to this report are listed in appendix  VI."], "subsections": []}]}, {"section_title": "Appendix I: Individual Assistance Declarations Requested, Declared, and Denied, Calendar Years 2008-2016", "paragraphs": ["Table 9 provides the total number of Individual Assistance declaration  requests made, declared, and denied, by region, state, and tribe for  disaster declarations requested from calendar years 2008 through 2016."], "subsections": []}, {"section_title": "Appendix II: Individual Assistance Actual Obligations for Declarations Made, Calendars Years 2008-2016", "paragraphs": ["Table 10 provides Federal Emergency Management Agency\u2019s (FEMA)  Individual Assistance (IA) actual obligations for declarations made from  calendar years 2008 through 2016 by state and type of disaster."], "subsections": []}, {"section_title": "Appendix III: Regional Administrator\u2019s Validation and Recommendation Template", "paragraphs": ["As part of the Federal Emergency Management Agency\u2019s (FEMA)  declaration process, FEMA\u2019s regional offices are to evaluate states\u2019 or  tribes\u2019 declaration requests, including the IA declaration request, and  make a recommendation called the Regional Administrator\u2019s Validation  and Recommendation (RVAR) and submit the RVAR to FEMA  headquarters. In June 2012, FEMA headquarters issued a template for  FEMA regional offices to use in developing the RVAR as identified in  figure 3."], "subsections": []}, {"section_title": "Appendix IV: Information on the Elements of the Six Individual Assistance Regulatory Factors", "paragraphs": ["Tables 11 through 16 provide information on each element of the 6  Individual Assistance (IA) regulatory factors documented in the Regional  Administrator\u2019s Validation and Recommendation (RVAR) from July 2012  through December 2016 by the Federal Emergency Management Agency  region."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Aditi Archer (Assistant Director),  Su Jin Yon (Analyst-In-Charge), Hiwotte Amare, Eric Hauswirth, Susan  Hsu, Jun S. (Joyce) Kang, Christopher Keisling, Heidi Nielson, Hadley  Nobles, Anne Rhodes-Kline, and Jerome (Jerry) Sandau made significant  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-653", "url": "https://www.gao.gov/products/GAO-18-653", "title": "Embassy Construction: Pace Is Slower Than Projected, and State Could Make Program Improvements", "published_date": "2018-09-25T00:00:00", "released_date": "2018-10-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 1998, terrorists bombed two U.S. embassies in East Africa, killing over 220 people and injuring more than 4,000 others. In 1999, State launched the CSCP with the primary goal of providing secure, safe, and functional workplaces, and OBO adopted a streamlined, standard design for all new embassies. In 2011, OBO shifted to the Excellence approach for new embassies, where greater use of custom designs is intended to improve embassies' functionality, quality, operating costs, and appearance.", "GAO was asked to review the performance of the CSCP. This report examines (1) the pace of the CSCP in constructing new embassies, (2) the cost and schedule performance of OBO's recent embassy construction projects, and (3) key factors that have affected State's ability to deliver construction projects efficiently. GAO analyzed information from State planning, funding, and reporting documents and interviewed State and contractor officials. As part of an assessment of nine construction case-study projects, selected for cost or schedule increases, GAO conducted four site visits to embassies under construction."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of State's (State) Bureau of Overseas Buildings Operations (OBO) has constructed new embassies at a slower pace than forecast due in part to unexpected building requirements and inflation. In 1999 State identified a need to replace 180 embassies. In 2005, with about 30 projects underway, State planned to replace the other 150 embassies by 2018. Since 1999, OBO has built 77 embassies under its Capital Security Construction Program (CSCP), at a total cost of about $24 billion as of fiscal year 2017. CSCP's pace has been affected by unexpected additional building requirements, such as office annexes and Marine quarters. Also, CSCP received only one program funding adjustment for inflation since 1999, and State does not intend to seek annual adjustments. Currently, OBO does not provide information on inflationary effects on CSCP or an estimated total capital investment or feasible time frames for the nearly 50 embassies identified for replacement beyond 2022. Lack of such information may affect stakeholders' ability to make informed budget decisions.", "While cost growth occurred on a majority of completed embassy projects and durations averaged about 36 months, these were generally within budgeting and planning allowances. GAO could not assess performance of Excellence projects because none had been completed as of the end of fiscal year 2017.", "Staffing workload and contractor collaboration have affected OBO's project delivery. Without an OBO-wide workforce analysis, it is unclear whether OBO's staffing is commensurate with its workload needs. OBO maintains that its office overseeing project design reviews is understaffed, adversely affecting some of its critical functions. Contractors also expressed concerns about the quality of design reviews, which may be affected by a staffing shortage and the use of temporary contractors. Also, OBO and contractor officials acknowledged weaknesses in collaboration, particularly with regard to contractors less experienced with embassy construction. Of the five contractors GAO spoke with, three said they are unlikely to pursue future projects because of issues working with OBO. Formal construction partnering\u2014an industry best practice\u2014between OBO and its contractors could help avoid adversarial relationships that inhibit swift resolution of issues. OBO's two long-standing contractors that have completed most of the CSCP embassy projects participated in early projects OBO identified as having used formal partnering."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State (1) provide information on the estimated effects of inflation on planned projects, (2) provide an analysis of estimated total costs and time frames to complete the CSCP, (3) conduct an OBO-wide workforce analysis, and (4) pilot formal construction partnering. State concurred with our recommendations and also conveyed it is now pursuing other initiatives beyond Excellence."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Department of State (State) operates more than 275 embassies,  consulates, and other diplomatic missions worldwide. More than 86,000  U.S. government employees are housed in these facilities. On August 7,  1998, terrorists bombed the U.S. embassies in Nairobi, Kenya, and Dar  es Salaam, Tanzania, killing over 220 people and injuring more than  4,000 others. Following those attacks, the Secure Embassy Construction  and Counterterrorism Act of 1999 required State to develop and report a  list of diplomatic facilities scheduled for replacement, prioritized on the  basis of their vulnerability to terrorist attack. At that time, State  determined that embassies at more than 180 posts needed to be  replaced to meet security standards and initiated the Capital Security  Construction Program (CSCP) to construct new secure, safe, and  functional embassies, administered by State\u2019s Bureau of Overseas  Buildings Operations (OBO). To expedite construction, OBO standardized  embassies\u2019 designs and streamlined their construction through a design- build project delivery method, which combined design and construction  under a single contract. In 2006, we reported that OBO\u2019s Standard  Embassy Design (SED) and design-build approach had made significant  progress in expediting construction and helped to cut the average  completion time of projects to about 3 years\u2014nearly half the time of  embassies built during the prior construction era following the 1983 Beirut  embassy bombing.", "In 2011, in response to criticisms that some SED embassies had a  \u201cfortress-like\u201d appearance and were not as adaptable to local conditions,  OBO replaced the SED with a new Excellence in Diplomatic Facilities  initiative (Excellence). In contrast to SED, Excellence makes use of  customized designs for each embassy, which OBO maintains will improve  embassies\u2019 functionality, quality, and operating costs, as well as their  appearance in representing the United States. However, stakeholders  have expressed concern that the Excellence approach may add to the cost to construct embassies and slow the rate of moving personnel into  more secure facilities. In a 2017 report, we examined the implementation  and evaluation of Excellence within OBO headquarters.", "You asked us to review the performance of the CSCP. This report  examines (1) the pace of the program in constructing new embassies, (2)  the cost and schedule performance of State\u2019s recent embassy  construction projects, and (3) factors that have affected State\u2019s ability to  deliver construction projects efficiently.", "To conduct this review, we obtained information from agency planning,  funding, and reporting documents and interviewed State officials within  OBO; the Bureau of Diplomatic Security (Diplomatic Security); and the  Office of Acquisitions Management. We also examined cost data drawn  from the Federal Procurement Data System as well as OBO-provided  data on contract costs and schedules, which we found to be sufficiently  reliable for our purposes. In addition, we also interviewed officials from  construction contractors that have built embassies for State. Further, we  selected nine construction projects as case studies from among projects  awarded in fiscal year 2008 through fiscal year 2015 and funded through  CSCP. Selection criteria included projects whose construction time  exceeded or was estimated to exceed 36 months (as informed by GAO\u2019s  2006 assessment that early CSCP embassies were built in about 36  months and OBO\u2019s projection that Excellence embassies will generally  not take any longer to build), or projects with actual or estimated  construction contract cost increases of more than 5 percent over initial  contract price at award (OBO\u2019s typical cost contingency at contract  award), or projects meeting both conditions. We sought to include as  many different CSCP contractors in our case studies as possible from the  pool of eight contractors constructing embassies from fiscal year 2008  through fiscal year 2017. We also reviewed the design contracts for two  projects that had just begun construction. For each of our case studies,  OBO compiled relevant information into project narratives. In general, we  attribute information from these narratives to OBO.", "In September 2017, we traveled to Jeddah, Saudi Arabia; Jakarta,  Indonesia; The Hague, Netherlands; and Pristina, Kosovo to observe  construction progress and meet with U.S. embassy officials responsible  for construction, facilities maintenance, post management, and security.  In addition we interviewed contractor officials in these locations and in the  United States. We also reviewed the results of a 2016 survey of OBO  staff. Specifically, we have included narrative responses from that survey  commenting on issues we encountered during our audit work for this  report. Views expressed in the survey may not be representative of all  OBO staff views on given topics. For more information on our OBO staff  survey, its results, and methodology, see GAO-17-296. See appendix I  for more information on our scope and methodology for this report.", "We conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Following terrorist attacks against the U.S. embassy in Beirut, Lebanon,  in 1983, State began an embassy construction program\u2014known as the  Inman program\u2014to protect U.S. personnel. However, as we\u2019ve previously  reported, State completed only 24 of the 57 planned construction  projects, in part due to poor planning, systemic weaknesses in program  management, difficulties acquiring sites, schedule delays, cost increases,  and subsequent funding limitations. Following the demise of the Inman  program in the early 1990s, State initiated very few new embassy projects  until after the two 1998 embassy bombings in Kenya and Tanzania.  Following the bombings in Africa, the Secure Embassy Construction and  Counterterrorism Act of 1999 required State to develop and report a list of  diplomatic facilities scheduled for replacement based on their vulnerability  to terrorist attack. One of the congressional findings in the Secure  Embassy Construction and Counterterrorism Act of 1999 was that unless  embassy vulnerabilities are addressed in a sustained and financially  realistic manner, the lives and safety of U.S. employees in diplomatic  facilities will continue to be at risk from further terrorist attacks. State  subsequently initiated the CSCP to construct new embassies. The CSCP  is administered by OBO, which in April 2018 had about 1,135 direct-hire  civil service personnel, U.S. Foreign Service officers, and personal  services contractors stationed in Washington, D.C., and overseas.", "The Secure Embassy Construction and Counterterrorism Act of 1999  calls for new diplomatic facilities to be sufficiently sized to ensure that all  U.S. government personnel at a post are located on a single secure site  and that those facilities are set back not less than 100 feet from the site\u2019s  perimeter boundary. Before constructing a new embassy, State must  certify to Congress that, among other things, the facility\u2019s design  incorporates adequate measures for protecting classified information and  activities as well as personnel working in the facilities. OBO contracts  with architectural and engineering firms (design firms) to develop bridging  or full designs meeting security and other project requirements. These  design firms submit their designs for reviews by OBO and Diplomatic  Security to ensure conformance with building code and security  standards, respectively. Diplomatic Security, in consultation with the  Office of the Director of National Intelligence, must certify that the design  meets security standards prior to the start of construction. While this  certification occurs during the design phase of a project, Diplomatic  Security also has other roles in the process, such as participating in site  selection, ensuring OBO contractors have necessary security clearances,  and ensuring facilities are securely constructed.", "After passage of the Secure Embassy Construction and Counterterrorism  Act of 1999, State determined that embassies at 180 posts\u2014out of 260  posts at the time\u2014needed to be replaced to meet security standards.  State adjusted this milestone\u2014to building 150 embassies by 2018\u2014in  2005, when it worked with the Office of Management and Budget (OMB)  to establish the Capital Security Cost-Sharing Program (cost-sharing),  with a primary goal of accelerating the replacement of embassies.  Under cost-sharing, nearly 30 U.S. agencies with a presence in U.S.  embassies were to provide a total of $17.5 billion for constructing the  150 new embassies by 2018\u201412 years sooner than had been projected  without cost sharing. In justifying its cost-sharing approach, State  emphasized that, among other things, requiring agencies to pay for  overseas staff would make them more likely to closely assess the need  for each overseas position, thereby rightsizing overseas staffing levels."], "subsections": [{"section_title": "Standard Embassy Design (SED)", "paragraphs": ["OBO sought to expedite construction and control CSCP costs through  adoption of the SED and streamlined construction through a design-build  delivery method. The SED was a set of documents providing  prototypical plans for a medium-sized embassy including specifications  and design criteria, and explaining how to adapt those to a particular site  and project. The SED was not a complete design but rather a  standardized template for the structural, spatial, and security  requirements of a new embassy compound to guide a contractor\u2019s final  design. Compound elements described by the SED generally included the  main office building; U.S. Marine security guards\u2019 living quarters; a  warehouse; a utility building; compound access control buildings and  perimeter walls; and parking facilities. The SED also allowed for the  standardization of building components such as security windows and  doors. Figure 1 shows the prototypical facilities defined by the SED.", "OBO combined the SED with the design-build delivery method, which  integrates completion of the design as well as all construction  responsibilities into a single contract. Under this model, the design-build  contractor is responsible for both design and construction and thus  generally bears the risks, such as added cost, for any design problems  because the contractor hires the design firm to bring the design to  completion. Under the SED approach, OBO hired its own design firms  beforehand to conduct project development activities such as planning  surveys, site studies, and other analyses needed to inform the project\u2019s  design. OBO would utilize these design firms to develop a scope of work  and provide the design-build contractor a concept or schematic design  showing how OBO expected the office chancery and supporting embassy  facilities to be arranged on the site using the SED prototypical design to  include standard site and building plans, technical specifications, design  criteria, and instructions for its adaptation for a particular project and  contract requirements. The contractor\u2019s design firm would then use the  SED documentation to develop a 100-percent completed design adapted  for a site at a particular post. Figure 2 provides an overview of the  embassy construction process under OBO\u2019s implementation of design- build utilizing the SED."], "subsections": []}, {"section_title": "Transition to Excellence", "paragraphs": ["In 2006, we reported that the SED approach and design-build delivery  method had enabled OBO to make significant progress in completing new  embassies and had helped to reduce the average time to complete  projects to about 3 years (36.7 months). This was nearly 3 years faster  than embassies built during the Inman era. However, while the SED approach enabled OBO to accelerate the construction of new embassies,  some stakeholders raised concerns about the aesthetics, quality, location,  and functionality of those facilities. Criticisms included that the SED  embassies had a \u201cfortress-like\u201d appearance that detracted from their  symbolic value in presenting American ideals of openness and  innovation; that the emphasis on speed and cost control resulted in  poorer-quality buildings and removal of functional elements such as  warehouses; that the 10-acre lot specified by the SED required siting  embassies too far from urban centers where foreign government offices  are located; and that the standardized aspects of its design were difficult  to adapt to unique site conditions and post needs.", "To address some of these criticisms, OBO began to use design-build with  bridging (bridging) as a delivery method in 2008 with the first construction  project awarded in 2009. Generally under this method, OBO first  contracts with a design firm (the bridging architect) to develop a project- specific, partial design package (bridging design) that conveys State\u2019s  design vision and a higher level of detail for key design requirements.  Such details that State might convey in a bridging design could include  the selection of specific building systems (e.g., the types of structural  foundation systems to be used for each building on the site) or post- specific security features (e.g., location, types, and heights of security  walls and bollards to be used around and within the site). Unlike the SED,  each bridging design is project-specific, customized, and separately  executed by an outside design firm contracted by OBO. The extent of  each bridging design varies by project but generally approximates an  overall 35- to 50-percent completed design, according to OBO officials.  OBO\u2019s procedure is to then separately contract with a construction  contractor (and its own design firm) to complete the design and build the  project. Figure 3 provides an overview of the embassy construction  process under bridging.", "Although customized, OBO\u2019s bridging designs continued to use the SED  as a starting point for several years after OBO adopted bridging in 2008.  However, criticisms aimed at the underlying SED elements continued, for  instance, that the standardized design sometimes hindered adaptation of  designs in response to different climates, countries, or unique post  functions. In 2011, OBO initiated the Excellence approach, which placed  greater emphasis on custom designs for each project. OBO subsequently  phased out the SED as the basis for embassy designs, and according to  OBO officials, SED specifications, standards and guidance were  incorporated into OBO\u2019s Design Standards and Design Guide.  According to OBO officials, by 2014, design firms hired by OBO to  develop bridging designs no longer used the SED as a starting point. In  addition, OBO shifted to greater use of the design-bid-build delivery  method alongside bridging. Generally under design-bid-build, OBO first  solicits and contracts with a design firm to develop a 100-percent design.  Under this method, OBO then uses the completed design to solicit bids  from prospective construction contractors. According to OBO  documentation, OBO selects a project\u2019s delivery method, either bridging  or design-bid-build, based on an evaluation of a project\u2019s local context,  complexity, construction factors, and urgency. Figure 4 provides an  overview of the embassy construction process under design-bid-build.", "Under both bridging and design-bid-build, OBO generally bears greater  risk than it did under strict design-build in the SED approach. That is  because if design errors impact construction, the contractor may seek  additional costs and schedule relief from OBO for needed corrections and  changes it attributes to problems with the design provided by the  government. Additionally some stakeholders have expressed concern  that the added design-work inherent to the Excellence approach may add  to the cost to construct embassies and slow the rate of moving personnel  into more secure facilities. However, OBO has maintained that greater  design control under Excellence will improve embassies\u2019 functionality,  quality, operating costs, and their overall public impact in representing the  United States."], "subsections": []}]}, {"section_title": "State\u2019s Project Delivery Pace Has Been Slower Than Projected, as Unforeseen Building Requirements and Inflation Have Affected Progress", "paragraphs": ["Although State has built 77 new embassies since 1999 and at the end of  fiscal year 2017 had another 21 under construction, the CSCP\u2019s project  delivery pace has fallen short of State\u2019s 2005 target of constructing 150  new embassies by 2018. This is due, in part, to unexpected building  requirements and the effects of inflation. In 2012, recognizing the  erosion of purchasing power as a result of inflation, the Benghazi  Accountability Review Board (ARB) recommended State work with  Congress to increase the CSCP\u2019s annual funding level from $1.4 billion to  approximately $2.2 billion in fiscal year 2015 and for up to 10 years  thereafter. OBO plans to begin construction of 25 embassies in fiscal  years 2018\u20132022 and nearly 50 more beyond fiscal year 2022, but it is  unclear whether OBO can maintain its average pace of 5 new embassy  contract awards per year\u2014particularly as State has not defined the  overall capital cost and potential timeframes needed to achieve this goal,  nor does it currently expect to seek year-to-year adjustments for inflation."], "subsections": [{"section_title": "State Will Not Meet Its Original Project Delivery Goals", "paragraphs": ["Although State has made progress in constructing more secure  embassies, State\u2019s CSCP will not achieve the target of constructing 150  new embassies by 2018, a milestone that the 2005 cost-sharing was  intended to facilitate. From fiscal year 1999 through 2017, State  completed 77 new embassies and had 21 under construction. In fiscal  year 2017, State also forecast a potential need for 72 additional  embassies beyond those completed or under construction. Of those 72,  State planned to begin construction on 25 new embassies in fiscal years  2018 through 2022, at an estimated pace of 5 new starts per year. The  remaining 47 locations were identified by State as candidates for new  embassy compounds beyond 2022. Figure 5 shows the status of CSCP  embassy projects as of the end of fiscal year 2017.", "Total CSCP funding from 1999 through 2017 reached approximately  $24.2 billion (in nominal dollars). Figure 6 shows the cumulative progress  in completing the 77 embassies along with year-to-year cumulative  funding from fiscal year 1999 through fiscal year 2017.", "State\u2019s CSCP will not achieve the 2005 target of constructing 150 new  embassies by 2018. To achieve this target, State would have had to  complete an average of about 10 embassies per year. Instead, on  average, State has completed 5 new embassy compounds each year  since cost-sharing was authorized in 2005. If State\u2019s project delivery pace  remains unchanged, it would take more than 15 years to complete the 72  new embassies identified in State\u2019s CSCP planning schedule at the end  of fiscal year 2017."], "subsections": []}, {"section_title": "The CSCP Has Had to Cover Unforeseen Additional Building Requirements and Has Received One Inflation Adjustment", "paragraphs": ["The pace of CSCP has been affected by unexpected building  requirements and inflation. Beyond the 77 completed embassies and the  21 under construction, the $24 billion for CSCP since 1999 has also  funded additional building requirements that State had not originally  envisioned. According to State, these unforeseen requirements  included:  1.  On-compound staff housing at some posts, such as Beirut;  2.  New or reopened posts, such as Kabul,  3.  Marine security guard quarters on some new and existing  compounds, such as Monterrey, in response to a recommendation in  the 2012 Benghazi ARB report and as State revised its policy  governing the presence of U.S. Marines at some posts.  4.  New security requirements at high threat posts\u2014such as taller  perimeter walls, guard towers, and unique security support spaces.  5.  Office annexes; for example OBO is now building new annexes in  Kampala, Uganda and Nairobi, Kenya, posts where new embassies  were completed in 2001 and 2006 respectively. From 1999 through  2017 State completed 28 annex office buildings under the CSCP\u2014 such as for U.S. Agency for International Development\u2014or acquired  buildings and upgraded them for use as an embassy.", "Figure 7 shows completed annex projects along with embassy  completions. OBO officials told us that unforeseen requirements continue  to affect the CSCP.", "Over time, CSCP funding has also been subject to the effects of inflation.  The 1999 ARB following the bombings of U.S. embassies in Tanzania  and Kenya recommended that embassy construction and other security  improvements be funded at $1.4 billion per year over 10 years. With the  introduction of cost-sharing in 2005, State set an annual CSCP funding  goal of $1.4 billion, as the 1999 ARB had recommended, as well as the  goal of completing 150 new embassies by 2018 for a projected funding  total of $17.5 billion. However, State officials indicated that when the  program was established, no provision was made for potential inflation  over the life of the program. Therefore, while CSCP funding generally  increased from 2005 through 2010, OBO officials stated that CSCP  funding gradually purchased less than anticipated due to the lack of an  inflation adjustment. This absence of inflation as a built-in factor in  program planning is in contrast to OBO\u2019s cost estimates for individual new  embassy projects. Those project-level cost projections account for  inflation and recognize that the projects will typically take at least 3 years  to build. If annual CSCP program-level funding is held constant as  individual project costs generally increase over time, fewer projects can  be funded in later years of the program resulting in a slower pace of  project delivery.", "In 2012, recognizing the erosion of purchasing power as a result of  inflation, the Benghazi ARB recommended that State work with Congress  to restore the CSCP capacity to its earlier level by increasing its annual  funding level to approximately $2.2 billion starting in fiscal year 2015 and  for up to 10 years thereafter. Based on State data, that recommended  funding level was not met in 2015, but was generally met in fiscal years  2016 and 2017 due to the provision of additional Overseas Contingency  Operations funding. In general, according to OBO, such funding is used  to support State requirements in high-threat locations, which, according to  OBO, are subject to the highest rates of project cost change. State  generally considers this funding to be non-enduring and supplemental to  funding through State\u2019s regular budgets. Figure 8 shows State funding  data representing the total annual CSCP funding from fiscal year 1999  through 2017\u2014including cost-sharing, supplemental, and Overseas  Contingency Operations funding\u2014compared with State\u2019s 2005 CSCP  funding goal ($1.4 billion annually) and the 2012 Benghazi ARB annual  funding recommendation ($2.2 billion annually), proposed for  implementation in fiscal year 2015."], "subsections": []}, {"section_title": "State Has Not Estimated Total CSCP Cost and Time Frame and Has Not Planned for Future Inflation", "paragraphs": ["Lack of Reliable Data on the Number of  Staff Moved into New Embassies  The number of U.S. government staff moved  into more secure facilities has been a  reported performance measure for the Capital  Security Construction Program (CSCP) since  the time of the Standard Embassy Design  approach. For example, the U.S. Department  of State (State) reported moving over 30,000  people (out of more than 86,000) into more  secure facilities from 2000 through 2014.      We attempted to assess CSCP performance  on this measure on a project-by-project basis  but found it unreliable for the purpose of  establishing how many staff have been  moved into newly constructed facilities.  State\u2019s Bureau of Overseas Buildings  Operations (OBO) officials explained that the  \u201cnumber of staff moved\u201d metric was based on  the projected desk and non-desk positions  within each embassy construction contract.  However, OBO never established a policy or  procedure on how these data should be  collected, managed, or validated. The data  for this metric were informally tracked within  OBO\u2019s Office of Construction Management.    As a result, information for this performance  measure is inconsistent, precluding a  progress assessment of the CSCP using this  metric. For example, totals for some years  included data for major renovation projects of  existing buildings while other years\u2019 data may  have included acquired buildings purchased  by State (and built by others).   In 2017, we found State\u2019s one strategic  CSCP-related performance indicator\u2014the  relocation of staff into more secure and  functional facilities\u2014provides no performance  assessment on the extent to which  Excellence facilities are any more functional,  sustainable, or effective in supporting U.S.  diplomacy. We recommended State  determine whether this measure is still  appropriate or needs to be revised. According  to OBO officials, this metric is being revisited  as part of a broader evaluation of OBO\u2019s  performance measures. See GAO-17-296.", "Although the CSCP schedule for fiscal year 2017 identifies nearly 75  embassies still requiring replacement, the overall capital cost and likely  time frame expected to achieve the program\u2019s goal are unknown, as OBO  has not made such estimates. According to OBO officials, State is not  focused on replacing a set number of embassies within an estimated total  capital investment cost (e.g., 150 embassies for $17.5 billion, as planned   in 2005) or by a given end-date (e.g., 150 embassies by 2018, as planned  in 2005). Rather, OBO\u2019s approach is to request $2.2 billion annually in  accordance with the Benghazi ARB\u2019s recommendation. According to  these officials, this approach allows agencies that contribute to cost- sharing to consistently plan for a predictable funding level, and OBO will  work to complete as many projects as soon as possible within this annual  funding level. Further, they noted that State does not intend to seek  annual inflation adjustments for the CSCP.", "In general, according to OBO policy, the CSCP is guided by Diplomatic  Security\u2019s annual Security Environment Threat List of security rankings  for posts, from which OBO develops a \u201cTop 80\u201d list of the 80 most at-risk  posts needing a new embassy. OBO uses the Top 80 list to develop  and adjust the CSCP schedule, which presents planned embassy awards  for the current fiscal year and for each of the next 5 fiscal years. For  example, the November 2016 CSCP schedule (current at the end of fiscal  year 2017) listed the 5 posts slated for awards in fiscal year 2017. In  addition, it listed the 25 posts slated for awards in fiscal years 2018  through 2022, grouped by the specific fiscal year when OBO anticipated  being able to award the relevant construction contracts. The nearly 50  embassies planned for beyond fiscal year 2022 were broadly categorized  in an \u201cout-year\u201d category in the November 2016 CSCP schedule.", "According to leading practices in capital decision-making we have  previously identified, agencies\u2019 long-term capital plans should provide  insight into likely funding and other resources and time frames needed to  achieve organizational mission goals. We also noted in our guide to  leading practices that, while out-year cost estimates are preliminary, they  help provide decision makers with an overall sense of funding needs and  that such long-range planning assists in developing both current and  future budgets.", "OBO\u2019s fiscal year 2017 CSCP schedule does not identify estimated costs,  either at the project or aggregate level. According to OBO officials,  scope, cost, and size estimates are communicated on a project-specific  basis to stakeholders through briefings and each fiscal year\u2019s  congressional notifications listing projects to be implemented in the  coming years. According to these officials, the CSCP schedule is  intended to be a flexible way to communicate a snapshot of OBO\u2019s  prioritization of posts to receive embassy awards over the next 5 fiscal  years, emphasizing that the exact list can change. For example, a new  embassy project might be advanced sooner than originally planned due to  a change in State\u2019s security or policy priorities. Conversely, a project may  be moved out to a later fiscal year due to challenges that OBO believes  may be posed by the host government or other challenges identified  during or after site acquisition. Although the CSCP does track the  projected timing of some specific projects, State lacks a strategic planning  document that estimates longer term CSCP resource needs. For  example, the CSCP schedule contains no estimated 5-year program cost  for the next 25 embassies OBO plans to build, nor does it provide  stakeholders an estimate or cost range for the total capital investment  and feasible time frames needed to address the 47 embassies that OBO  has identified for replacement beyond the next 5 years.", "Additionally, guidance from OMB indicates that when developing budget  estimates agencies should consider the effect that economic or other  changes can have on program levels beyond the budget year. OMB  guidance further states that agencies should be prepared to discuss the  impact that program levels and changes in methods of program delivery  will have on program operations and administration. OMB guidance  states that for discretionary programs, agencies may include an  allowance for the full rate of anticipated inflation, less than the full rate, or  no allowance for inflation. The guidance recognizes that agencies must  make trade-offs between budget increases for inflation versus other  increases for programmatic purposes.", "Given that it contains no cost information, the CSCP schedule is not  meant to be a tool to forecast and convey to stakeholders the long-term  effects of inflation on program capacity. Therefore, considering the 72  embassies yet to be replaced, past inflationary effects, and the CSCP\u2019s  pace thus far, it is unclear what pace OBO will be able to maintain without  some level of inflation adjustment to its funding goal of $2.2 billion per  year. Without information on the projected pace of construction and  estimated effects of inflation, stakeholders\u2019 may lack complete information  to make fully-informed budget decisions."], "subsections": []}]}, {"section_title": "Completed Embassy Projects Have Generally Stayed within Budgeting and Planning Allowances", "paragraphs": ["While cost growth occurred on a majority of completed embassy projects  and durations averaged about 36 months, these were generally within  budgeting and planning allowances. We could not assess cost and  schedule performance of projects begun under the Excellence approach  because none had been completed by 2017. OBO maintains that the  greater upfront investment in more customized designs under this  approach will yield long-term benefits in embassies\u2019 functionality, quality,  and operating costs, as well as in their appearance in representing the  United States. While an assessment of those potential benefits cannot be  made at this time, we did find examples of Excellence and Excellence-like  projects illustrating how innovative designs can increase upfront project  costs."], "subsections": [{"section_title": "Contract Costs for Most Completed Projects Have Increased but Generally Stayed within Contingency Allowances", "paragraphs": ["While construction contract costs increased after award for most of the 22  completed projects we reviewed, the increases were generally less than  contingency allowances, and most projects were completed within their  contingency budgets. State reserves a contingency amount in its project  budget\u2014ranging from 5 to 10 percent of the contract value at award\u2014to  cover unforeseen project changes and cost increases. OBO\u2019s overall  project budgets also include funding for other nonconstruction costs and  contracts, such as planning, design, and on-site project management and  security.", "For the 22 completed embassy construction projects we reviewed, 16  (almost 75 percent) were finished within 10 percent or less of the original  contract value at award, and 3 of these 16 projects finished under the  original contract value at award. Six of the projects (over 25 percent)  exceeded the original contract value at award by over 10 percent.", "For the 6 projects whose final costs were more than 10 percent over the  original contract value at award, some of the cost increases were due to  events unrelated to original design or construction issues. For example, in  Khartoum, Sudan, OBO project documentation indicates that the contract  increase was due, in part, to host government restrictions on the  importation of needed construction materials and having to restart the  project. In other instances, as discussed earlier, additional building  requirements increased project costs. For example, OBO officials noted  that a U.S. Agency for International Development office annex was added  to the embassy project in Kyiv, Ukraine, and Marine security guard  quarters were added to the projects in Monterrey, Mexico; Mbabane,  Swaziland; and Vientiane, Laos.", "Table 1 shows the original construction contract value at award and the  final or current contract value for the 22 completed projects as of the end  of fiscal year 2017. Of these 22 projects, 16 were SEDs; four were  \u201cExcellence-like,\u201d meaning they were transition projects awarded after  OBO\u2019s 2011 decision to institute Excellence but before OBO finished  implementing Excellence in 2014; and 2 were not based on the SED  template but predated the Excellence initiative. Contract value for some  completed projects may change, in part due to outstanding requests for  costs from the contractor or legal claims. Our cost assessment of the 22  completed projects included no Excellence projects, as none had been  completed as of the end of fiscal year 2017.", "For the 21 ongoing construction projects that we reviewed, 14 (including 7  Excellence projects and 4 Excellence-like projects) had experienced  some cost growth beyond the original contract value at award as of the  end of fiscal year 2017. Because these were ongoing projects and 6 of  the 21 had been awarded in fiscal year 2017 and therefore had not  substantially progressed, we could not determine whether they would  finish within their budget contingency, nor could we compare cost  increases of Excellence projects\u2014none of which had been completed\u2014 with cost increases of SED projects. See appendix II for the cost status of  these ongoing projects as of the end of fiscal year 2017."], "subsections": []}, {"section_title": "Innovative Designs Can Increase Project Costs", "paragraphs": ["OBO maintains that its greater upfront investment in unique designs  under Excellence will yield long-term benefits in embassies\u2019 functionality,  quality, and operating costs, as well as their appearance in representing  the United States. Critics of the Excellence program assert that aspects of  unique designs, such as buildings\u2019 shapes and layouts, construction  materials, or the architectural products used, are often expensive to  design, build, and maintain. For example, some Excellence or  Excellence-like designs specify stylized, custom-built architectural  facades that are to be installed on the buildings\u2019 exteriors. These can  include cantilevered roofs; customized windows; architectural screens;  glass curtain-wall systems; or very specific stone, brick, or concrete  work. Some critics have also raised concerns about some aspects of  buildings\u2019 interior architectural features. For example a project official  reported to us that State could have saved nearly $950,000 had it utilized  an aluminum handrail\u2014rather than a bronze handrail\u2014for one embassy\u2019s  main staircase. The bridging design called for all metal site furnishings  and railings to be a bronze tone in color. The bridging designer  specifically indicated the use of bronze color throughout the design was  intended to relate to the local metal craft of the region. An OBO official we  spoke with indicated that while he understood there might be some  savings for changing the handrail to aluminum, he felt the designer\u2019s  intent in specifying the use of a bronze handrail was clear and was  approved by OBO during the design review process, and thus he did not  feel it would be appropriate to make a change. Figure 9 depicts the more  custom and stylized Excellence exterior designs alongside more  standardized SED projects.", "In reviewing our case study projects, we found instances of custom  exteriors that had led to greater construction costs. For example, OBO  project documentation shows the use of a customized glass exterior wall  designed for the Jakarta, Indonesia, embassy significantly impacted cost  and schedule after contract award, adding at least $18 million to the cost  and 180 days to the schedule. According to project documentation as well  as OBO and contractor officials, OBO\u2019s decision to employ a unique glass  curtain-wall system for that project and subsequent questions raised by  Diplomatic Security about the design, led OBO to modify the contract to  add (1) $2.2 million and 180 added days to explore alternative designs  and conduct redesign work in order to obtain Diplomatic Security  certification; (2) $13.3 million, which OBO told us was for a dedicated  facility to be established in the United States to securely fabricate the  glass curtain wall before secure shipment to the site; and (3) $3 million to  have cleared American workers install portions of the wall. OBO had not  previously employed such a system in a completed embassy project and  could not provide us with documentation analyzing the risks of such a  feature to cost and schedule\u2014which might have included potential delays  to get Diplomatic Security\u2019s approval of the design\u2014compared with  conventional concrete construction. Figure 10 shows this glass curtain  wall under construction.", "Additionally, on the Hyderabad, India, project, OBO project  documentation shows the initial design of the unique exterior screen  concerned OBO management, leading to more design development by  the contract architect, further review by OBO\u2019s design staff, and added  cost. Senior management expressed concerns about the appearance of  the screen, mainly that the screen was too traditional compared with the  spirit of the design of the building and the rest of the campus and that the  pattern of the screen needed more variation for daylight and views. To  respond to this concern, OBO issued two contract modifications to OBO\u2019s  architect for additional design work for the exterior screen. OBO told us  that subsequent design development for three alternatives for the screen  contributed an additional design cost of about $750,000, raising the final  bridging design cost to approximately $10.5 million. That figure excludes  roughly $816,000 for support services during construction, of which OBO  reports a minor portion was attributable to ensuring that the construction  contractor achieved the design intent for the exterior screen. Figure 11  shows schematic design renderings of the approved screen design.", "In our 2016 survey of OBO staff, several staff indicated that unique  Excellence project designs can impact costs. Table 2 provides  examples of such comments."], "subsections": []}, {"section_title": "Construction of Completed Projects Averaged Around 36 Months", "paragraphs": ["For the 22 completed embassies we reviewed, the average time to  completion was just over 36 months, though with some distinctive  outliers. To assess schedule, we compared embassy construction  durations with a benchmark of 36 months. We used that planning  allowance because, in the past, OBO has maintained that a SED would  generally take no more than 36 months to construct and that construction  durations would not be any different under Excellence. For the 22  completed construction projects, 14 (about 64 percent) were completed in  36 months or less, including one Excellence-like project. The remaining 8  projects (36 percent) were completed in over 36 months, including 4 SED  projects and 3 Excellence-like projects.", "Construction durations can be affected by factors not controlled by the  U.S. government, such as host government relations, adverse security  conditions, or border/port closures. For example, one schedule outlier  was due to a work stoppage and restart in Khartoum, Sudan, where the  short schedule does not capture the construction activities performed  under an earlier 2005 contract. Other events extending construction  duration included, as referenced earlier, the addition of U.S. Marine  security guard quarters to the projects in Monterrey, Mexico and  Mbabane, Swaziland, as well as delays related to host government  permitting issues in Bishkek,  Kyrgyzstan, according to State project  documentation. Figure 12 summarizes schedule performance on the  basis of construction duration for these 22 completed embassy  construction projects. Our schedule assessment of 22 completed projects  included no Excellence projects, as none had been completed as of the  end of fiscal year 2017.", "We did not assess the final schedule performance of the 21 construction  projects ongoing at the end of fiscal year 2017 because there were at  different stages of construction. As a result, it is too early to draw  conclusions regarding schedule performance of individual Excellence  projects compared with SED projects. See appendix II for the schedule  status of these projects as of the end of fiscal year 2017."], "subsections": []}]}, {"section_title": "Staffing Workload and Contractor Collaboration Challenges Impede Efficiency of Project Delivery", "paragraphs": ["After shifting to the use of more customized designs under Excellence, it  is unclear if OBO\u2019s staffing levels, particularly in its Office of Design and  Engineering (Design and Engineering), are sufficient to execute its full  workload. Staffing workload challenges were cited by program  stakeholders across the organization, but no strategic workforce analysis  exists to fully assess OBO\u2019s human capital capacity against the full range  of its real property responsibilities, including the CSCP. With regard to  project implementation, formal partnering between OBO and its  construction contractors could help avoid adversarial relationships that  inhibit swift resolution of issues."], "subsections": [{"section_title": "It Is Unclear If OBO\u2019s Staffing Is Commensurate with Its Workload under the Excellence Approach OBO Faces Staffing Workload Challenges in Design and Other Offices", "paragraphs": ["According to OBO officials, OBO\u2019s workload and responsibilities exceed  its available staff. In April 2018, OBO officials told us the bureau\u2019s  authorized federal staffing level\u2014including both domestic and overseas  positions\u2014is 1,415 positions. However, according to OBO officials  roughly 280 (about 20 percent) were vacant due to both attrition and  State\u2019s recent hiring freeze. OBO federal staff at that time consisted of  approximately 1,135 people, including direct-hire civil service and Foreign  Service staff, as well as personal services contractors (PSC) whom  OBO defines as individuals who have direct employment contracts with  State. In addition, OBO is supported by nearly 300 individuals who are employed by companies that provide those individuals to OBO as  supplemental staff. Those 300 individuals are referred to by State as  third-party contractors because their employment contracts are not with  State but rather with their respective companies.", "Design and Engineering is one of the key offices supporting Excellence.  According to OBO budget planning documents and the Managing Director  of the directorate that includes Design and Engineering, this office has  faced workload and staffing challenges for several years. Some OBO  officials told us that the office\u2019s need for more staff has been ongoing  since 2014, which roughly corresponds with OBO\u2019s full implementation of  Excellence. In 2015, the staff within Design and Engineering conducted  a workload and workforce review in preparation for the office\u2019s annual,  internal budget planning process. Based on that review, the Director of  Design and Engineering briefed OBO\u2019s Director and Deputy Director that  some critical functions were not being performed or had been diminished,  including quality design reviews (insufficient depth of review); advanced  planning (master planning, feasibility studies); project analysis (scenario  planning, life cycle analysis); and guidance to design firms (limited  interactions).", "In the 2015 briefing, the Director of Design and Engineering proposed two  courses of action to OBO\u2019s Director and Deputy Director: (1) workload  prioritization or (2) workforce increase. The first approach sought to  identify critical workload responsibilities\u2014such as new embassy  construction\u2014that the existing staff should prioritize over other  responsibilities that may need to be addressed with additional staffing or  outsourced to private industry. The second approach, increasing the  workforce, proposed that OBO hire more Design and Engineering staff to  support all the office\u2019s responsibilities. According to a senior OBO official,  OBO\u2019s Deputy Director at the time determined the best course of action  was to implement a workforce increase, and in 2016 he instructed Design  and Engineering\u2019s Director to plan to increase the office\u2019s authorized staff  from approximately 150 to 250 people over several years. However,  OBO officials told us this decision was a goal at that time and did not  reflect any formal staffing authorization by OBO or State; for that reason,  it was not reflected in any OBO human capital staffing assessment or  plan. In the interim, until Design and Engineering could get authority and  funding for more federal direct-hire or PSC positions, OBO planned to  make increased use of third-party contractors. Since 2015, direct-hire  authorized staffing levels for this office generally have not increased.", "In April 2018, OBO officials indicated that Design and Engineering  needed about 300 staff to meet the office\u2019s workload responsibilities.  Design and Engineering\u2019s internal 2018 budget planning documents show  that since fiscal year 2015, the office has had 154 authorized civil service  and PSC positions. However, in April 2018 OBO reported to us that  Design and Engineering had filled only 108 of the 154 authorized  positions, amounting to a vacancy rate of roughly 30 percent. OBO also  reported that Design and Engineering was using 31 temporary third-party  contractors, for a total combined on-board federal and contractor staffing  level of 139 positons. Design and Engineering\u2019s internal fiscal year 2018  budget planning documents show that the office proposed to increase its  authorized staff level from 154 positions to 304 positions by 2020,  effectively increasing by 50 positions each fiscal year.", "According to senior OBO officials, requests for increased federal staffing  for Design and Engineering and other OBO offices have generally not  been approved since at least fiscal year 2015, in part, because of general budgeting and fiscal constraints. OBO officials indicated the denials of  staffing requests were generally executive-level decisions made at  different stages during the budget planning process within OBO, State,  and OMB. In general, OBO officials characterized those decisions as  common when agencies are under pressure to control program costs.", "Design and Engineering Announcements  The following are examples of third-party  contractor job announcements for positons  intended to support the Office of Design and  Engineering in the Bureau of Overseas  Buildings Operations (OBO):", "Senior Architect \u2013 fills OBO \u201cfluctuating  skill needs and gaps\u201d in architecture  design, project planning, building code  analysis, and construction design  reviews; reviews plans, specification and  technical reports; mentors more junior  architects.", "As previously noted, Design and Engineering is utilizing private-sector  companies to hire temporary third-party contractors in order to execute its  workload and, in part, until OBO can receive authority to hire additional  direct-hire staff. According to OBO officials, OBO in the past has primarily  used third-party contractors to meet needs that were genuinely of a  temporary nature, such as to conduct planning surveys and staff  overseas projects during construction. More recently, however, OBO has  begun to rely more on third-party contractors to provide key professional  capabilities, as evidenced by some recent contractor hiring  announcements for positons intended to support Design and Engineering  (see sidebar). senior expert on interior design and  space planning; reviews construction  submittals; advises on contract bids,  change orders, schedule extensions, cost  increases; coordinates on planned  embassy spaces with Diplomatic  Security, the intelligence community, and  OBO\u2019s construction contractors.", "We previously reported that new embassies are state-of-art facilities that  have unique security features and whose designs must be certified by  State as meeting security standards prior to the start of construction.  Design reviews to assess proposed project designs in accordance with  State standards and building codes are a key responsibility of Design and  Engineering. Such reviews are important to the success of a construction  project because insufficient design reviews by agency staff can lead to  design errors and omissions that can affect project cost and schedule.", "Federal Facilities Council Study on Design  Oversight  The Federal Facilities Council report indicated  that to provide effective design oversight an  agency\u2019s interest is best served if the in-house  staff can fulfill the functions of a \u201csmart buyer,\u201d  whereby the agency retains in-house staff that  understands the agency\u2019s mission, its  requirements, and customer needs. The  council noted that if the agency does not have  the staff capacity to operate as a smart buyer,  an agency risks project schedule and cost  overruns, as well as facilities that do not meet  performance objectives.   The Federal Facilities Council also reported  that uncontrollable circumstances have  resulted in nearly all agencies\u2019 engineering  functions being contracted to outside  consultants at one time or another. As long as  sufficient skills are retained in-house to meet  the smart buyer approach, according to the  council report, there does not appear to be  any greater risk from contracting out a  broader range of design review functions  including construction document reviews and  code compliance. However, complex projects  that include unique and specialized features  of high mission relevance, such as high- security facilities, were an exception cited by  the council. When federal agencies are  building such unique facilities, the council  advised that they retain key expertise in- house as core competencies, with design  review a primary in-house responsibility. quality, and performance. The council also concluded that effective  design review processes result in more comprehensive and accurate  design and construction documents that, in turn, lower project costs. (See  sidebar for additional information on the council\u2019s report.)", "Construction contractors we spoke with expressed concerns about the  quality of OBO\u2019s design reviews and capabilities to manage the amount of  questions from construction contractors about OBO\u2019s Excellence designs.  Two contractors believe OBO is using more third-party contractors to  perform design reviews than it did previously and that some may lack  specialized knowledge of embassy standards and security measures. The  two contractors said that this may lead to lack of design consistency and  continuity across projects. One construction contractor also indicated  OBO takes more time to resolve design issues because it typically will  consult with OBO\u2019s contracted Excellence design firm before answering a  construction contractor\u2019s design-related question or approving a design  change that may arise during construction. In our 2016 survey, several  OBO staff raised concerns regarding OBO\u2019s capability to perform design  oversight with existing staff. Table 3 lists some of those selected staff  comments.", "OBO senior management stated that similar staffing challenges  compared with workload also exist in OBO\u2019s Construction, Facility, and  Security Management directorate. According to OBO documentation the  Office of Construction Management is authorized 111 direct hire Foreign  Service Construction Engineers worldwide but as of March 2018, it had  86, amounting to about a 20 percent vacancy rate. Those direct-hire  Foreign Service engineers typically serve overseas as Project Directors  (PD) for an embassy construction project.", "Other Third-Party Contractor Job  Announcements  We found examples of third-party contractor  job announcements intended to support the  Bureau of Overseas Buildings Operations  Office of Construction, Facility, and Security  Management directorate:", "Construction Management Program  Analyst \u2013 reports on projects\u2019 problem  areas for resolution; monitors projects\u2019  financial progress; prepares change  requests and contract modifications;  documents scope, cost, or schedule  changes; provides guidance and training  to lower level analysts; ensures internal  controls and data integrity.", "According to the Office of Construction Management\u2019s 2018 internal  budget planning documents, the office sought to covert 50 third-party  contractors deployed overseas to direct-hire PSCs. Those positions\u2014 typically civil, electrical, or mechanical engineers\u2014serve as on-site  technical staff under the PD, to oversee construction activities and  respond to construction contractors\u2019 questions or proposed changes.", "Facility Manager \u2013 serves on an interim  basis at posts lacking a facility manager;  deals with unusual or emergency facility- related conditions that may impact  embassy operations; oversees the day- to-day safe operation and maintenance of  embassy facilities; manages post\u2019s  building maintenance staff; performs  design reviews.", "Similarly, OBO\u2019s Office of Facility Management reported to us that, for  fiscal year 2018, it expected that it may be unable to fill 33 (about 15  percent) of its 224 authorized Foreign Service Facility Manager positions,  at both newer and existing legacy embassies. Those positons serve as  the single U.S. facilities officer overseeing primarily locally hired embassy  staff that operate and maintain embassy building systems. As of March  2018, OBO reported it was trying to cover these positions through  temporary staff assignments for 2 to 3 months. As with Design and  Engineering, we found examples of positions within Construction,  Facilities, and Security Management\u2014including Facility Managers\u2014 where OBO was relying on third-party contractors to provide key  professional capabilities (see sidebar).", "Physical Security Specialist \u2013 reviews  design plans, especially for sensitive  embassy spaces; oversees transit  security plans for sensitive project  materials; determines on-site construction  security staffing needs; serves on  interagency security committees;  prepares responses to State\u2019s Inspector  General, GAO, and Congressional  inquiries.", "Despite OBO-wide workload and staffing challenges, OBO cannot  precisely quantify these challenges or their effects because it lacks a  strategic workforce assessment of OBO-wide staffing levels and workload  capacity needed to support the CSCP under Excellence. According to  OBO, Excellence is a holistic effort to improve every aspect of OBO\u2019s  operations, including real estate acquisition, security methods and  technologies, cost management, construction management, and facilities  management. OBO\u2019s \u201cGuiding Principles for Excellence in Diplomatic  Facilities\u201d conveyed that delivering Excellence would be a comprehensive  process that seeks to utilize the best methods, technologies, and staff  abilities and that each of\ufb01ce, person, and action in OBO contributes to the  realization of this goal. However, OBO\u2019s 2011 decision memo approving  the shift to Excellence did not identify possible effects to OBO-wide  workload, staff levels, and personnel costs, including likely costs to hire  either more federal staff or third-party contractors. In addition, the  decision memo did not address whether the new design-centric program  might affect the staffing needs to manage other OBO responsibilities,  such as renovations and security upgrades to existing embassies.", "As we have previously reported, the use of bridging and design-bid-build  under Excellence entails a time and cost investment in design on the  project\u2019s front-end. When two contracts are utilized by OBO\u2014one for  design and one for construction\u2014additional administrative and  programmatic effort is needed to develop, award, and manage multiple  contracts. Diplomatic Security officials also reported to us that reviewing  customized Excellence designs increased their workload.", "In 1999, OPM published a five-step model that suggests agencies should  define their strategic direction, assess their current and future workforces,  and develop and implement action plans for closing identified gaps in  future workforce needs. Further, according to GAO human capital best  practices, strategic workforce planning addresses two critical needs: (1)  aligning an organization\u2019s human capital program with its current and  emerging mission and programmatic goals and (2) developing long-term  strategies for acquiring, developing, and retaining staff to achieve  programmatic goals. Without an OBO-wide analysis of workload  capacity and existing staffing, State senior managers and key program  stakeholders will lack essential information to make decisions about  workload priorities, staffing resources, and budget needs pertaining to  CSCP and OBO\u2019s Excellence approach."], "subsections": []}, {"section_title": "Formal Partnering during Construction Could Help Avoid Collaboration Challenges That Affect Efficiency of Project Delivery", "paragraphs": ["Working collaboratively as a team to efficiently deliver new embassies  has been a challenge for OBO and some of its construction contractors.  OBO officials said some construction contractors selected to build new  embassies have struggled to deliver projects, in part because they had  less experience in terms of the number of embassies they had built, or  were new to the embassy program. Construction contractors have to  learn a great deal of information very quickly\u2014to include State security  standards, design specifications, and operating procedures\u2014and many  do not succeed, according to these OBO officials. Of the six contractors  involved with our nine project case studies, four of the five that we spoke  with relayed concerns about poor working relationships with some OBO  on-site Project Directors (PD) and that OBO was a difficult business  partner, similar to concerns raised about OBO that we have previously  reported. Formal construction partnering (partnering) is a recognized  construction industry best practice to foster improved collaboration and  problem solving and continues to be utilized by major federal construction  agencies."], "subsections": [{"section_title": "On-Site OBO-Contractor Relationship Is Important to Project Collaboration", "paragraphs": ["Contractor and OBO officials stressed the importance of the on-site  relationship between the OBO PD and the contractor in successfully  completing projects. According to State policy, OBO\u2019s PDs are the  Contracting Officer\u2019s Representative at the site and have primary  responsibility for overseeing the contractor. The PD serves as State\u2019s  principal technical contact for the construction contractor and reviews all  change proposals. Per OBO guidance, the PD (under advisement with  Design and Engineering) renders interpretations of the contract plans and  specifications and acts as arbiter of any technical disputes with the  contractor. In cases where the recommended proposal amount exceeds  the PD\u2019s dollar-value authority for changes, the PD makes a  recommendation for action to State\u2019s Contracting Officer in Washington,  D.C.", "OBO and contractor officials indicated that OBO\u2019s PDs are critical to the  success of embassy projects and noted that while some PDs make an  active effort to collaborate with contractors, other PDs do not. Our  interviews with OBO and contractor officials reflected that PDs who do not  collaborate well can have a challenging relationship with the contractor  that makes it difficult to reach timely solutions to project and contract  issues. In addition, contractor officials stated that strained relationships  with some PDs may be further exacerbated because OBO headquarters  often takes too long to make decisions\u2014in support of their PDs in the  field\u2014on proposed changes and additional work that State is considering  or that contractors propose as being needed. Three of the five  contractors we spoke with cited such concerns about PDs and OBO  headquarters as a long-standing or systemic issue. Officials from one  contractor indicated that when PD-contractor disagreements arise and  combine with delays by OBO headquarters, an issue that could be  resolved at a lower cost or schedule impact can become a critical  problem leading to greater cost and schedule impacts for the government,  the contractor, or both.", "Senior OBO officials acknowledged differing styles and capabilities  among OBO\u2019s PDs, as well as the need to improve response times in  OBO headquarters. With regard to PDs, senior OBO officials stated that  some PDs\u2019 working styles are more proactive in cooperatively seeking to  resolve issues face-to-face and through meetings with the contractor\u2019s  on-site team; conversely, other PDs\u2019 styles are more geared to  corresponding with the contractor\u2019s team through written communication  and contractual correspondence. One of these officials stated that he did  not believe the latter style was as effective, but that it is sometimes  needed when contract issues cannot be solved by the two sides.", "Another OBO official stated that OBO needs to look beyond individuals\u2019  technical engineering or architectural skills and experience and examine  their \u201csoft skills\u201d\u2014such as communication abilities, problem-solving skills,  and how they work with others\u2014to better assess who might excel when  OBO assigns staff to projects. According to OBO officials, it can be very  challenging to determine whether and to what degree a PD is reasonably  enforcing the contract and doing their best to collaborate with the  contractor to resolve project issues that arise."], "subsections": []}, {"section_title": "OBO Headquarters-Contractor Response Times Are Also a Collaboration Issue", "paragraphs": ["Regarding response times, senior OBO officials stated that OBO is  working to improve turnaround on proposed changes during construction.  However, they emphasized the necessity of PDs frequently having to go  back to OBO headquarters to ensure an on-site change proposal is in  accordance with OBO\u2019s contracted designer\u2019s intent as well as State\u2019s  design and security standards. In addition, they stated that lack of timely  responses can sometimes be the fault of the contractor, particularly if the  contractor is less experienced with embassy construction or new to the  program and unfamiliar with OBO\u2019s process requirements.", "OBO now allows for more time to resolve contractor requests for  equitable adjustment that involve increases to contract cost or schedule  than it had in the past. In 2008, OBO guidance called for State to  acknowledge in writing contractors\u2019 requests for equitable adjustments\u2014 due to cost or schedule changes\u2014within 3 days and to seek to evaluate  the merits of such requests and make final decisions within 55 days. In  2016, State changed its guidance to allow 15 days to acknowledge  contractors\u2019 requests for equitable adjustments and 90 days for State to  make a final decision. OBO documentation indicates that the process  can take even longer than 90 days if State determines that the contractor  has not provided enough information for State to assess the merits of the  request for additional time or cost. Two of the contractors we spoke with  stated that excessive delays in responding to a request for an equitable  adjustment can increase the likelihood of contractor-initiated litigation.  With regard to changes initiated by State, contractors were also frustrated  when OBO issues a request for proposal to a contractor\u2014to provide a  price and schedule for the prospective change\u2014and then OBO does not  make a timely decision as to whether it wants to implement the change.", "OBO officials said they are trying to shorten the time it takes them to  make decisions concerning contractors\u2019 requests for information,  proposals for equitable adjustments to contract price or schedule, and  OBO proposals to undertake additional work. In April 2018, OBO officials  noted that they recently expanded the scope included in OBO\u2019s generic  statement of work for \u201cconstruction phase services\u201d that it requests from  contracted design firms. The responsibilities added to the statement of  work are an effort to utilize and leverage the design firms to provide more  support to OBO\u2019s PDs in the field, enabling the PDs to respond to OBO  contractors more quickly."], "subsections": []}, {"section_title": "Case Studies Contained Examples of Both Adversarial and Cooperative Relationships", "paragraphs": ["Three of our nine case-study projects (involving six contractors) had  adversarial relationships between OBO and three of its contractors. In our  discussions with both OBO and contractor officials, as well as a review of  OBO and contractor documentation, we found that those relationships  were characterized by poor on-site collaboration and claims of delays in  acting on proposed changes that affected project efficiency. In all three  cases, both parties took the position that it was the performance of the  other party when dealing with challenges and changes that most  impacted the project\u2019s progress. The federal contractor performance  evaluations for these projects also reflected the strained relationships  between OBO and the contractors. Two of these situations involved  contractors less experienced with the CSCP. In five of our nine case  studies, OBO PDs and the contractor generally had cooperative  relationships that responded effectively to project issues and resolved  conflicts successfully. Four of these five projects involved the CSCP\u2019s  two long-standing contractors. The third contractor, who reported a  positive contractual relationship with OBO on one of our project case  studies, indicated it had very poor relationship with OBO on its only other  CSCP project. Information on four of our case studies\u2014two that had  more adversarial relationships between State and the contractors and two  that exhibited more cooperative relationships\u2014is included in the text box,  and appendix III contains more information on these projects and our  other five construction case studies.", "Example Case-Study Relationships between Overseas Buildings Operations  (OBO) and Its Contractors Bishkek, Kyrgyzstan: A poor working relationship between OBO and the contractor  inhibited resolution of a variety of disagreements. These disagreements included  responsibility for obtaining zoning approvals and building permits with the host  government, and whether the contractor could remove a satellite dish in the  construction zone. Issues regarding timeliness of decision-making by OBO  headquarters and quality of contractor submissions were also raised on this project.", "Jeddah, Saudi Arabia: This project was challenged by errors and omissions in the  design provided to the contractor, according to OBO and contractor officials. Both OBO  and the contractor acknowledged that a difficult working relationship slowed efforts to  deal with such challenges. Disagreement also arose regarding timely response to  proposed changes; the contractor maintained that OBO headquarters was delaying  work due to slow decision-making, while OBO maintained that the contractor failed to  mitigate schedule delays for which the contractor was responsible.", "The Hague, Netherlands: Both OBO and the contractor said they had a good working  relationship and indicated that OBO\u2019s Project Director and his on-site project architect  enabled OBO to more collaboratively and effectively react to technical inquiries from the  contractor. Both OBO and the contractor noted that the two sides worked cooperatively  to resolve environmental issues and permitting issues raised by the local government.", "Kyiv, Ukraine: Both OBO and the contractor observed that each side worked very  cooperatively on-site and at the headquarters level to swiftly accommodate and mitigate  the cost and schedule impact resulting from the addition of an office annex for the U.S.  Agency for International Development."], "subsections": []}, {"section_title": "Partnering Is a Recommended Practice Intended to Foster More Effective Project Collaboration", "paragraphs": ["According to the Federal Facilities Council, facility acquisition traditionally  has been an adversarial environment between facility owners and  construction contractors. The council also indicated conflicting interests  between the parties can result in poor communication, poor problem  solving, and poor results. Further, the council has reported that when  multiple organizations make a commitment to work cooperatively toward  a common objective utilizing teambuilding techniques on building  projects, the practice is called \u201cpartnering.\u201d", "OBO does not utilize formal partnering, though State\u2019s supplement to the  Federal Acquisition Regulations System acknowledges that partnering  may be used in the context of alternative dispute resolution. According  to the State supplement, this partnering involves an agreement in  principle to share the risks involved in completing a project, and to  establish and promote a partnership environment. It notes that partnering  itself is not a contractual agreement and it does not create any legally  enforceable rights. Instead, partnering seeks to create a new cooperative  attitude in completing government contracts. The three basic steps in  partnering identified by State\u2019s supplement are as follows:  1.  Establish the new relationship through personal contact among the  principals for the government and the contractor before the work  begins.  2.  Prepare a joint statement of goals establishing common objectives in  specific detail for reaching the goals.  3.  Identify specific dispute prevention processes designed to head off  problems, evaluate performance, and promote cooperation.", "Both the General Services Administration (GSA) and the U.S. Army  Corps of Engineers call for partnering as a preferred management  process on all major projects as a cooperative approach with their  contractors to resolve problems and reduce conflicts, litigation, and  claims.", "For example, GSA recommends formal partnering for all construction  projects developed by its Public Building Services in excess of $10  million in estimated construction costs. One GSA executive official we  spoke with cited partnering as a best practice that can mitigate cost  growth and schedule delays by providing a more collaborative  process to reach fair and equitable decisions faster to the benefit of  both the government and the contractors.", "The Corps of Engineers has recommended formal and professionally  facilitated partnering as an integral element on designated \u201cmega  projects,\u201d which generally are those costing in excess of $200 million,  have schedules that exceed 2 years, or have national or international  significance, among other considerations. The Corps of Engineers  reports that partnering is an organized process that can remove  organizational impediments to communication and is consistent with  the government\u2019s implicit duty to act in a fair and reasonable  manner."], "subsections": []}, {"section_title": "Long-Standing CSCP Contractors May Be Better Able to Informally Partner with OBO Than Less Experienced Contractors", "paragraphs": ["As of the end of fiscal year 2017, there were five construction contractors  building new embassies under the CSCP. For the 21 ongoing new  embassy construction projects, 18 (approximately 85 percent) were under  contract with 2 construction contractors who have historically received the  majority (60 percent) of OBO construction contract awards since 1999.  The 3 other projects were each being built by one of the contractors less  experienced with embassy construction. Two of our case studies\u2014 Jeddah and Jakarta\u2014included work begun by two earlier contractors that  had been terminated by State, according to OBO officials. Further, the  two long-standing OBO construction contractors were awarded 9 of the  10 new embassy construction projects in fiscal years 2016 and 2017. In  our discussions with OBO officials, they recognized that they have had  persistent challenges in bringing new contractors into the CSCP but retain  an interest in expanding OBO\u2019s contractor pool.", "Left unaddressed, some contractors\u2019 frustrations with OBO projects may  be a factor in shrinking State\u2019s contractor pool. Three of the five  contractors we spoke with (all less experienced with embassy  construction) indicated they will not be pursuing future embassy projects  because they believe State has not acted as a fair partner in overseeing  its embassy construction projects. Examples of negative perceptions some of the contractors cited from their perspective included that State  had not been fair in working with the contractors to resolve challenges  such as design-related issues, security-related issues, government- directed changes, or unique issues posed by the countries in which the  projects were located. Contractors said that such issues affected their  and State\u2019s costs and schedules.", "OBO officials acknowledged that OBO\u2019s relationships with some  contractors have posed challenges and saw both parties as bearing some  responsibility. They also acknowledged that two long-standing OBO  contractors continue to build most new embassies, and they expressed  an interest in expanding OBO\u2019s contractor pool. We reported similar  collaboration concerns raised by OBO contractors in 2009 when we  examined contractor participation in the embassy construction program  and the decline in the number of contractors participating in the  program. In 2009, 10 of 17 construction contractors rated State as a  poor or fair business partner. Of the 17 construction contractors surveyed  in 2009, 3 had received about 62 percent of OBO\u2019s construction contract  awards from 2001 through 2007. In general, many contractors at that time  told us they were not making as much profit as anticipated and most  contractors also expressed concerns about State\u2019s management of the  program and State\u2019s on-site PDs.", "Executive officers from one of OBO\u2019s two long-standing contractors  stated that due to the firm\u2019s experience with CSCP, it is able to carry out  informal partnering with OBO to better address project challenges. This  firm knows OBO\u2019s requirements and processes, as well as who within  OBO headquarters to call to discuss specific issues, if the firm believes  that such issues are not being addressed in a timely manner by the PD or  contracting officer. For example, this long-standing contractor said it was  generally able to overcome a variety of project issues and disagreements  in Pristina, Kosovo, through the firm\u2019s knowledge of, and informal  partnering relationship with, OBO headquarters. The OBO PD and  contractor\u2019s on-site project manager could not reach resolution on the  cost or schedule impacts of a variety of issues including (1) the extent to  which State\u2019s approving the contractor\u2019s local-hired construction workers  was delayed, (2) the timing and responsibility for bringing permanent  power to the site, and (3) the extent to which there were differing site  conditions requiring the contractor to excavate unsuitable soils and  existing foundations.", "In January 2018\u2014after our September 2017 site visit to Pristina\u2014this  contractor\u2019s headquarters office was able to resolve some issues with  OBO and State\u2019s Office of Acquisitions that otherwise had not been  resolved by their on-site project manager and OBO\u2019s PD. The firm\u2019s  executive officers stated that contractors with personnel less experienced  with the CSCP\u2014including with OBO and Diplomatic Security  requirements and procedures\u2014do not have this in-depth knowledge and  may experience greater challenges on their first few CSCP projects as a  result. They suggested that OBO should utilize more formal partnering to  bring new contractors into the program. They also cited the need to have  both formal and informal processes for elevating and resolving issues in  order to provide accountability at all levels and ensure that issues are  addressed in a timely manner. The contractor believes that formal  partnering could lessen the learning curve for new firms, reduce the  conflicts between OBO PDs and the contractors\u2019 project managers on- site, and keep more firms in the program.", "Formal partnering, particularly with firms that have less experience with  embassy construction, could help avoid adversarial working relationships  between OBO and contractors that inhibit swift resolution of, or even  exacerbate, challenges experienced on already-complex projects. Where  more cooperative project relationships\u2014informal partnering\u2014occurred on  our case-study projects, either on-site between OBO\u2019s PD and the  contractor or between OBO headquarters and the contractor, we found  that this dynamic helped to more easily resolve challenges and facilitate  project efficiency. In discussing the possible use of partnering on OBO  projects, one senior OBO official reported that while OBO utilized formal  partnering to a limited extent on some the CSCP\u2019s early projects\u2014 Nairobi, Kenya; Tunis, Tunisia; and Conakry, Guinea\u2014he commented  that he did not think it was very valuable. In his view, it seemed like the  contractors at that time were using the partnering agreement to claim that  OBO was not partnering properly. However, other OBO officials stated  that they understood the practice of partnering by some federal agencies  has evolved since that time. OBO officials agreed that although OBO had  not considered formal partnering recently, it could potentially be useful, particularly if tried on smaller projects with new contractors or those less  experienced with embassy construction. They added that such piloting  would have to be done judiciously to determine how it might best work.  We note that two of those three early projects OBO identified as having  used formal partnering included the current two long-standing contractors  that have completed most of the CSCP embassy projects."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["In passing the Secure Embassy Construction and Counterterrorism Act of  1999, one of the congressional findings was that, unless embassy  vulnerabilities are addressed in a sustained and financially realistic  manner, the lives and safety of U.S. employees in diplomatic facilities will  continue to be at risk from further terrorist attacks. State\u2019s CSCP made  steady progress through fiscal year 2017, completing 77 new embassies  and starting construction on 21 more at a cost of just over $24 billion.  However, State will not achieve its 2005 forecast for building 150  embassies by 2018 because progress has been hampered, in part, by  unforeseen building requirements and inflation that were not originally  factored into CSCP funding levels. These issues will affect State\u2019s  progress as it continues to replace embassies that do not meet security  standards. Because State does not currently intend to seek annual  inflationary adjustments for CSCP, although individual projects do  address inflation to some extent, the CSCP\u2019s pace of embassy production  is likely to be reduced over time. As State continues to work with the  Congress to chart the future course, priorities, and funding levels for the  program, regular information on the effects of cost inflation would be  helpful as stakeholders reassess the CSCP program\u2019s funding level from  year to year.", "Moreover, State plans to begin the construction of 25 new embassies  within the next 5 years and has identified the need to replace nearly 50  additional embassies in later years. While the CSCP schedule identifies  future embassy replacements, it does not address the projected cost and  time needed to achieve the CSCP\u2019s ultimate critical goal of replacing  embassies that do not meet State\u2019s security standards. Recognizing that  precise estimates cannot be easily made for later years, even a notional  long-term estimate of the CSCP\u2019s overall capital funding investment and  time frames, along with an assessment of risk factors such as inflation,  would strengthen State\u2019s ability to support and sustain its funding needs,  encourage dialogue with congressional committees, and promote  consensus by decision makers in the executive and legislative branches  on funding levels and expectations for program progress.", "Additionally, State\u2019s shift to the Excellence approach was predicated on  the idea that customized designs would produce embassy compounds  that are more innovative, functional, and sustainable than those built  using the SED approach, and would also be at least as secure and more  cost efficient to operate. It is too early to tell whether this greater upfront  investment in design will yield cost and schedule benefits during  construction of Excellence embassies or over their life cycle. While past  embassies have generally been completed within expected cost and  schedule allowances, given the number of embassies yet to be built to  meet urgent security needs amid a constrained resource environment, it  remains incumbent upon State to realistically assess its ability under  Excellence to deliver embassies as efficiently as possible. By  comprehensively evaluating its human capital needs against CSCP  priorities and other workload demands, OBO can provide program  stakeholders\u2014including State, OMB, and Congress\u2014the ability to make  fully informed choices as to the capacity of OBO\u2019s design and  construction organization to support embassy production of these  embassies in the near and longer term.", "Furthermore, formal partnering could provide OBO with a tool to enhance  collaboration both on-site and between contractors and OBO  headquarters. This could mitigate the unforeseen issues that arise on all  of these challenging overseas projects, but which may be more  complicated to resolve for Excellence projects because each one is  unique. Piloting a partnering program, particularly with newer or less  experienced construction firms could also provide one option to facilitate  State\u2019s long-standing goal of expanding its contractor base."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to State:  The Secretary of State should determine the estimated effects of cost  inflation on planned CSCP embassy construction capacity and time  frames and update this information for stakeholders on a regular basis,  such as through the annual budgeting process. (Recommendation 1)", "The Secretary of State should provide an analysis for stakeholders  identifying those embassies that still need to be replaced to meet State\u2019s  security standards and estimating total CSCP costs and projected time  frames needed to complete those projects. (Recommendation 2)", "The Secretary of State should ensure that the Director of OBO conducts  an OBO-wide workforce analysis to assess staffing levels and workload  capacity needed to carry out the full range of OBO\u2019s mission goals, to  include the CSCP. Such an assessment could provide a basis for broader  stakeholder discussion of OBO\u2019s human capital needs and potential  prioritization of activities. (Recommendation 3)", "The Secretary of State should ensure that the Director of OBO pilots  formal construction partnering for the CSCP, particularly with construction  firms that are new or less experienced with the program.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State for comment. State provided  written comments that are reprinted in appendix IV. In its letter, State  concurred with our four recommendations and described actions planned  to address each of them. In addition, State made several observations,  including that it has moved beyond Excellence to pursue several new  initiatives that aim to lower project and long-term operations and  maintenance costs. We acknowledge the continued evolution of State\u2019s  CSCP. However, our recommendations transcend the pros and cons of  any particular delivery method and will be helpful to State, and  stakeholders, as it works to improve the design and construction of new  embassies. State also provided technical comments on the draft, which  we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of State. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  either Brian M. Mazanec at (202) 512-5130 or at mazanecb@gao.gov or  Lori Rectanus at (202) 512-2834 or at rectanusl@gao.gov. Contact points  for our Office of Congressional Relations and Office of Public Affairs can  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the pace of the Department of State\u2019s (State)  Capital Security Construction Program (CSCP) in constructing new  embassies, (2) the cost and schedule performance of State\u2019s recent  embassy construction projects, and (3) factors that have affected State\u2019s  ability to deliver construction projects efficiently.", "To conduct this review, we obtained information from agency planning,  funding, and reporting documents and interviewed State officials within  the Bureau of Overseas Buildings Operations (OBO); the Bureau of  Diplomatic Security (Diplomatic Security); and the Office of Acquisitions  Management. Within OBO, we spoke with officials from offices  responsible for site acquisition, planning, project development, design  and engineering, cost management, construction management, facility  management, policy and program analysis, and financial management.  We also interviewed officials from construction contractors that have  constructed embassies for State.", "To examine the pace of the CSCP, we reviewed OBO project completion  data for projects awarded from fiscal year 1999 (after the two embassy  bombings in Africa) through the end of fiscal year 2017. We then  compared these data against the goals of the program as reported in  State documentation, such as past budget justifications and long-term  planning reports. We also compared completion data against CSCP  funding levels since fiscal year 1999, and further compared those funding  levels with recommendations in the Accountability Review Board reports  from 1999 and 2012 (following terrorist attacks against U.S. facilities). We  also examined OBO\u2019s CSCP schedule outlining embassies planned to  begin construction through fiscal year 2022 and other embassies  identified beyond that time frame. We further consulted GAO\u2019s guide to  leading practices in capital decision-making as well as budget guidance  from the Office of Management and Budget (OMB). We also attempted  to assess CSCP performance in moving U.S. government staff into  secure facilities but found State\u2019s data unreliable for this purpose.", "To examine the cost and schedule performance of State\u2019s recent  embassy construction projects, we selected projects awarded from fiscal year 2008 through 2017. We chose fiscal year 2008 because that year  OBO modified its Standard Embassy Design (SED) delivery program to  allow for more bridging design to better tailor the SEDs to specific sites.  This time frame would also capture Excellence-like projects awarded  between the introduction of Excellence in 2011 and the full  implementation of Excellence in 2014, as well as pure Excellence projects  awarded in 2014 and later. Of the embassy construction projects awarded  since fiscal year 2008, we identified 22 completed projects and another  21 underway.", "To assess the cost performance of these projects, we used cost data  drawn from the Federal Procurement Data System and back-checked  against OBO-provided contract data, which we found to be sufficiently  reliable for our purposes. We then compared any increases in cost from  the contract value at award to OBO\u2019s general cost contingency for  unforeseen changes on embassy construction projects, which ranges  from 5 to 10 percent. To assess schedule performance, we compared  construction durations from contract documentation with a benchmark of  36 months. We used that benchmark because, in the past, OBO has  maintained that a SED would generally take no more than 36 months to  construct and that construction durations would not be any different under  Excellence. This benchmark was further informed by past GAO  reporting. We did not assess the cost or schedule performance of the 21  projects still ongoing at the end of fiscal year 2017. Because these were  ongoing projects at different stages of construction, we could not  determine whether they would finish within their budget contingency, nor  could we assess their final schedule performance. Furthermore, because  no pure Excellence projects had been completed by the end of fiscal year  2017, we could not compare cost increases or schedule performance of  Excellence projects with SED projects.", "To examine factors that have affected State\u2019s ability to deliver  construction projects efficiently, we selected nine construction case  studies out of our universe of projects awarded in fiscal year 2008  through fiscal year 2015, and funded through CSCP. Criteria for  selection included projects with construction contract cost increases,  actual or estimated, of more than 5 percent over the life of the contract  projects, as well as projects whose construction duration exceeded, or  was estimated to exceed, 36 months. We also sought to include as many  different contractors, delivery types (e.g., design-bid-build), and  construction approaches (e.g., Excellence) as possible. Our final nine  construction case studies included projects in Kyiv, Ukraine; Monterrey,  Mexico; Santo Domingo, Dominican Republic; Bishkek, Kyrgyzstan;  Jakarta, Indonesia; Jeddah, Saudi Arabia; The Hague, Netherlands;  Pristina, Kosovo; and Port Moresby, Papua New Guinea. Because many  of OBO\u2019s pure Excellence projects were more recently awarded, we also  reviewed the design contracts for Hyderabad, India, and Beirut, Lebanon.", "For each case study, we examined Federal Procurement Data System  data, OBO project data and documentation, as well as official contract  documentation\u2014including modifications that involved changes in cost or  schedule. Additionally, for each of our case studies, OBO compiled  information from its Office of Project Development and Coordination,  Office of Construction Management, Office Cost Management, and Office  of Financial Management into project narratives. Each narrative was then  cleared by project managers, project directors, office directors, and  managing directors of the affected directorates. In general, we attribute  information from these narratives to OBO. We also interviewed relevant  OBO and contractor officials involved with the projects, including on-site  personnel from both completed and ongoing projects. In September 2017,  we conducted fieldwork in Jeddah, Jakarta, The Hague, and Pristina to  observe and discuss construction progress with on-site U.S. embassy  and contractor officials. U.S. embassy officials we spoke with included  those responsible for construction, facilities maintenance, post  management, and security.", "To further explore issues arising from our case studies we obtained  information from OBO planning, funding, and staffing documents and also  interviewed State and contractor officials in Washington. We also  reviewed the results of our 2016 survey of OBO staff. Specifically, we  have included narrative responses from that survey commenting on  issues we encountered during our audit work for this report. In some  cases we edited responses for clarity or grammar. Views expressed in the  survey may not be representative of all OBO staff views on given topics.", "We conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Cost and Schedule Status of Ongoing Embassy Construction Projects as of the End of Fiscal Year 2017", "paragraphs": ["This appendix contains contract values and schedule information for 21  embassy construction projects that were ongoing as of the end of fiscal  year 2017. Table 4 shows contract values for these projects, while figure  13 illustrates schedule information."], "subsections": []}, {"section_title": "Appendix III: Embassy Construction and Design Case-Study Projects", "paragraphs": ["This appendix contains information on selected U.S. Department of State  (State) Bureau of Overseas Buildings Operations (OBO) case-study  projects included in our review. Nine studies focus on the construction  phase of the projects, and two are design case studies. For each case  study, we examined Federal Procurement Data System data, OBO  project data and documentation, as well as official contract  documentation\u2014including modifications that involved changes in cost or  schedule. We also interviewed relevant OBO and contractor officials  involved with the projects, including on-site personnel from both  completed and ongoing projects. For details on our selection of the  projects and our case-study methodology, see appendix I.", "For the nine construction case studies, we include timelines showing  dates for notices to proceed, the original estimated completion dates, and  either (a) the actual substantial completion dates (for projects completed  as of end of September 2017) or (b) the scheduled completion date (for  ongoing projects as of the end of September 2017). The start and end  points by which State measures the schedule performance of a project  are, respectively, the date when State issues a notice to proceed and the  date when it issues a notice of substantial completion. During the course  of a project, State may grant schedule extensions for reasons such as (1)  changes (i.e., change orders); (2) government-caused delays (e.g.,  delays in issuing a notice to proceed to the contractor); (3) differing site  conditions than represented in the contract; or (4) excusable delays (e.g.,  for circumstances that could not reasonably be foreseen or avoided).", "Similarly, while the value of construction contracts increased for all of the  construction case-study projects we reviewed, State typically reserves a  contingency amount in its project budgets\u2014ranging from 5 to 10 percent  of the contract value at award\u2014to cover unforeseen project changes and  cost increases. OBO\u2019s overall project budgets also include funding for  other nonconstruction costs and contracts, such as planning, design, and  on-site project management and security. We are not reporting overall  project budgets. As of August 2018, the only ongoing case studies that  State reported to us for which they notified Congress of the need to  reprogram funding to cover additional costs were Jakarta and Jeddah.", "For each of the following case studies, OBO compiled information from its  Office of Project Development and Coordination, Office of Construction  Management, Office of Cost Management, and Office of Financial  Management into project narratives. Each narrative was then cleared by  project managers, project directors, office directors, and managing  directors of the affected directorates. In our case studies, we generally  attribute information from these narratives to OBO. For contract value at  award and contract value as of the end of fiscal year 2017 we relied upon  data from the Federal Procurement Data System. We used OBO  narratives and project data and documentation as the basis for our  description of the contract delivery type, the date of award, dates of  issuance for notice to proceed and substantial completion, and original  estimated completion date. The discussion in the following case studies  of notable contract actions, such as modifications, requests for equitable  adjustment, and terminations is based upon OBO project narratives and  contract documentation, as well as statements by government and  contractor officials. In some but not all cases, we had relevant contract  documentation available to compare against OBO project data and  documentation or what OBO officials told us.", "Table 5 lists the case-study projects described in this appendix, ordered  by the fiscal years in which the construction or design contracts were  awarded."], "subsections": [{"section_title": "Construction Case Study: U.S. Embassy in Kyiv, Ukraine Project Overview", "paragraphs": ["State established the U.S. Embassy in Kyiv in 1991 upon the dissolution  of the Soviet Union. According to OBO, State originally redeveloped and  rehabilitated an existing leased facility, built in 1950, to serve as the  chancery office building, while post consular services, public diplomacy  and the Marine security guard quarters were in leased facilities off-site.  OBO reported that while security improvements were made at these  locations over the years, none of these buildings fully satisfied the Secure  Embassy Construction and Counterterrorism Act of 1999 security  standards, such as the 100-foot setback from the street. In September  2008, State purchased a 10-acre site to build a new embassy compound.", "A $209.9 million design-build contract for the new embassy was awarded  in September 2008. The project was based on the Standard Embassy  Design (SED). As of September 2017, the contract value was $238.6  million, an increase of $28.7 million or 13.7 percent. According to OBO,  State issued a notice to proceed in March 2009, and the original  estimated completion date was November 2011. Substantial completion  was in September 2011, 2 months early.", "Figure 14 shows two views of the new embassy and the timeline for the  original schedule compared with the final schedule."], "subsections": [{"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["According to OBO, the most significant change to the contract was the  addition of an annex for the U.S. Agency for International Development  (USAID), at a cost of $28 million. OBO reports that State granted the  contractor a 12-month extension for adding the annex; however, the  project was completed 2 months ahead of the original estimated contract  completion date. Both State and contractor officials observed that each  side worked very cooperatively to mitigate cost and schedule effects of  adding the USAID office annex. The other major cost driver was a $4.6  million contract modification to address utility issues. One State official  reported that site utility and below grade infrastructure requirements were  challenging given the cold climate."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Consulate in Monterrey, Mexico", "paragraphs": [], "subsections": [{"section_title": "Project Overview", "paragraphs": ["According to OBO, State had occupied the former U.S. consulate in  Monterrey since 1969, and further, the facility did not meet security  standards set by the Secure Embassy Construction and Counterterrorism  Act of 1999. State documented shortcomings with the building\u2019s air  conditioning and electrical systems. OBO documentation indicated the  former site also lacked the space to accommodate staff growth in U.S.  agencies\u2019 offices and the consulate\u2019s functions. OBO reported that  consular demand for services had increased significantly\u2014from 12 to 65  consular windows\u2014and the consulate overall had added desks for 60  U.S. staff and 132 locally engaged staff.", "In September 2009, State awarded a $101.9 million design-build contract  for the new consulate based on a bridging design. The bridging design  was based on the standard embassy design. As of September 2017, the  contract value was about $125 million, an increase of $23.1 million or  about 23 percent. According to OBO, State issued the notice to proceed  for the project in April 2010 and the original estimated completion date  was January 2013. Substantial completion occurred in May 2014, 16  months after the original estimated completion date.", "Figure 15 shows two views of the new consulate and the timeline for the  original schedule compared with the final schedule."], "subsections": []}, {"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["According to State, the scope of work in the original contract for the  compound included a consulate office building, vehicle maintenance  building, access control facilities, recreational facility, parking structure,  mail screening facility, site perimeter barrier, and associated security  features as well as off-site roadway construction and improvements. OBO  documentation shows the primary cost and schedule increase on the  project was due to the addition of Marine security guard quarters; that  contract modification increased the value of the contract by $16.3 million  and also extended the length of the contract by 337 days. OBO reported  that another contract modification\u2014adding a photovoltaic power system  to the project\u2014increased the contract value by $2.3 million."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Embassy in Santo Domingo, Dominican Republic", "paragraphs": [], "subsections": [{"section_title": "Project Overview", "paragraphs": ["According to State, it built the former U.S. embassy in 1950 to  accommodate 75 staff. Prior to the construction of the new embassy, the  U.S. mission comprised 17 U.S. government agencies employing  hundreds of people working in eight office buildings throughout the city.  OBO reported that most of those buildings did not meet security setback  standards that Congress established in 1999 or fire and life safety codes.", "According to OBO, in September 2010, State awarded a $148.8 million  design-build contract for the new embassy based on a bridging design.  The project was based on the SED. As of September 2017, the contract  value was about $150.4 million, an increase of about 1 percent.  According to OBO, State issued the notice to proceed for the project in  January 2011 and the original estimated completion date was October  2013. Substantial completion occurred in May 2014, 7 months after the  original estimated completion date. Figure 16 shows an architectural  rendering and photograph of the new embassy office building, along with  the timeline for the original schedule compared with the final schedule."], "subsections": []}, {"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["Five contract modifications totaling about $1.6 million accounted for most  of the cost increase. The largest modification totaled over $600,000,  which OBO told us resulted from a need to increase switchgear capacity.  According to OBO, in the several years since substantial completion, the  contract has not been closed, and unexpended funds remain. As a result,  the final contract value may change. OBO reported that the contractor  had submitted one outstanding request for equitable adjustment for about $450,000. Further, on its side, the U.S. government is withholding around  $7 million for liquidated damages, punch list deficiencies, and warranty  items."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Embassy in Bishkek, Kyrgyzstan", "paragraphs": [], "subsections": [{"section_title": "Project Overview", "paragraphs": ["According to OBO, State established the U.S. embassy in Bishkek in  1991 after the dissolution of the Soviet Union. Specifically, a pre- engineered factory-manufactured building was shipped to Bishkek and  assembled on an 11-acre, U.S. government-owned site in 1996. OBO  reported that by 2008, the U.S. diplomatic mission had outgrown the 1996  facility, and in 2009 it became clear that, in addition to new facilities,  significant security upgrades were needed to meet current security  standards.", "The new embassy project was to include a chancery (office annex), utility  building, Marine security guard quarters, compound access control  facilities, support buildings (warehouse and shops), and surface parking.  A $116.8 million design-build with bridging contract for the new embassy  was awarded in April 2011. The project was based on the SED. As of  September 2017, the contract value was about $123.3 million, an  increase of $6.5 million, or about 5.6 percent. According to OBO, State  issued the notice to proceed for the project in July 2012, and the original  estimated completion date was December 2014. Substantial completion  occurred in March 2017, 27 months after the original estimated  completion date.", "Figure 17 shows the 1996 chancery office building, the new chancery  office building, and the timeline for the original schedule compared with  the final schedule."], "subsections": []}, {"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["A number of factors contributed to increases in contract cost and  schedule for this project. For example, according to OBO, off-site  electrical power upgrades required a $2 million contract modification for  switchgear installation and building a redundant power line to a substation  3 kilometers away from the new embassy compound. OBO also  reported that one contract modification extended the schedule by 37 days  and added $3.4 million to the contract because State temporarily halted  the contractor\u2019s work in some areas of the building due to Bureau of  Diplomatic Security (Diplomatic Security) requirements. According to  State and contractor officials, challenges to the project included (1) a six- phase construction plan to accommodate building on an operational  compound; (2) frequent staff changes (including four on-site OBO project  directors, two OBO construction executives at headquarters, and many  contractor staff changes) and poor relations between OBO and the  contractor; and (3) disagreement regarding OBO and contractor roles and  responsibilities (including, for example, responsibility for obtaining zoning  permits)."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Embassy in Jakarta, Indonesia Project Overview", "paragraphs": ["According to OBO, the U.S. government-owned chancery in the  Indonesian government center in Jakarta was built in the 1950s, and its  mechanical, electrical, and plumbing systems are outdated, inefficient,  and expensive to operate. State decided to build a new, secure embassy  on the current embassy site. When completed, the embassy compound  will include a chancery, Marine security guard quarters, support facilities,  preserved historic structures, community facilities, and parking.", "A $302 million design-build with bridging contract for the new embassy  was awarded in September 2012. The project was guided by State\u2019s  Excellence in Diplomatic Facilities principles but was awarded before  OBO fully implemented Excellence in 2014. As of September 2017, the  contract value was $339 million, an increase of $37 million, or 12 percent.  According to OBO, State issued a notice to proceed for the project in  December 2012, and the original estimated completion date was  December 2017. OBO reported to us that by September 2017 the  scheduled completion date had been extended to February 2019, 14  months after the original estimated completion date.", "Figure 18 shows a model of the embassy compound, the new chancery  office building under construction and the timeline for the original  schedule compared with the schedule as of the end of September 2017."], "subsections": [{"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["Before the current construction contract for the new embassy on the  existing embassy compound, State separately contracted for the  construction of temporary office buildings to relocate staff during  construction. According to OBO, the work on the temporary office  buildings fell behind the contracted schedule and would not be completed  before the new embassy contractor\u2019s arrival on-site. Consequently, State  terminated the first contract for temporary buildings and awarded the  remaining work to the current contractor.", "OBO encountered significant challenges due to its decision to employ a  glass curtain-wall system for the new embassy\u2019s chancery office  building. OBO project documentation shows the use of the customized  glass exterior wall designed for the embassy significantly impacted cost  and schedule after contract award, adding at least $18 million to the cost  and 180 days to the schedule. OBO\u2019s decision to employ a unique glass  curtain-wall system for this project and subsequent questions raised by  Diplomatic Security about the design led OBO to modify the contract to  add (1) $2.2 million and 180 days to explore alternative designs and  conduct redesign work in order to obtain Diplomatic Security approval, (2)  $13.3 million so that a dedicated facility could be established in the United  States to securely fabricate the glass curtain wall before secure shipment  to the site, and (3) $3 million to have cleared American workers install  portions of the glass curtain wall. OBO had not previously employed  such a system in a completed embassy project and could not provide us  with documentation analyzing the risks of such a feature to cost and  schedule\u2014which might have included potential delays to get Diplomatic  Security\u2019s approval of the design\u2014compared with conventional concrete  construction.", "As of the end of September 2017, OBO reported that State and the  contractor had agreed to extend substantial completion to February 2019  after settling the contractor\u2019s request for equitable adjustment, which had  claimed that five events delayed construction: (1) the late turnover of  unimpeded access to the early site work; (2) the redesign of compound  access facilities; (3) the redesign of portions of controlled areas of the  building; (4) additional time for the certification of security requirements,  specifically related to the curtain-wall system; and (5) design changes to  the curtain-wall system itself.", "Post officials also expressed concerns that this new embassy compound  was originally planned to accommodate only the U.S. embassy to  Indonesia. Subsequently, State opened a permanent mission to the  Association of Southeast Asian Nations in Jakarta to be collocated within  the new embassy. Because of this and other staff growth, U.S. embassy  officials told us that the new embassy will have little to no room for future  growth."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Consulate in Jeddah, Saudi Arabia", "paragraphs": [], "subsections": [{"section_title": "Project Overview", "paragraphs": ["According to OBO, the current consulate built in 1952 served as the  chancery before the U.S. embassy moved to Riyadh in 1984. In 2004 an  attack on the consulate resulted in the deaths of five employees and  wounded many more. The new Jeddah compound will include a  consulate office building, staff housing, ambassador\u2019s residence, consul  general\u2019s residence, Marine security guard quarters, and various  supporting facilities.", "OBO reported that construction of the new consulate started under a  design-build contract awarded in 2007, but the construction contractor  was terminated-for-default in 2012, leaving State with a partially built  project. In September 2012 State awarded a $100.5 million construction  contract for the new compound to a second contractor. The project was  based on the SED. As of September 2017, that second contract value  was $131.3 million, an increase of $30.8 million, or 30.6 percent.  According to OBO, State provided notice to proceed in October 2013 and  the estimated completion date was October 2015. According to State  documentation, this completion date was subsequently extended to  February 2017. State and contractor officials told us that, at the end of  September 2017, a modification was pending that would further extend  the schedule to January 2018, 27 months after the original estimated  completion date.", "Figure 19 shows the existing consulate, the new consulate office building  under construction, and the timeline for the original schedule compared  with the schedule as of the end of September 2017."], "subsections": []}, {"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["According to OBO, State hired a design firm\u2014previously a subcontractor  of the first construction contractor\u2014to finish the design so that contract  bids could be solicited from new contractors to complete the project. In  doing so, State effectively changed the project delivery method from  design-build to design-bid-build, whereby it directly contracted the design  firm to finish the construction documents and then contracted a  construction firm to build the project.", "Both State and contractor officials reported to us that this project was  consistently challenged by design errors and omissions. According to  OBO, approximately $14 million of the nearly $31 million cost increase\u2014 and 131 calendar days\u2014were due to issues with this project\u2019s design.", "According to State and contractor officials, the project was generally  completed in March of 2017, which both sides termed \u201cvirtually  substantially complete.\u201d However, they stated that significant issues with  the consulate building\u2019s cooling and fire suppression systems effectively  prevented OBO from contractually accepting the project as complete and  allowing consulate staff to move in. As of September 2017, State and the  contractor could not provide a firm date for when they expected consulate  staff to be able to occupy the new compound.", "Both OBO and contractor officials acknowledged that a difficult working  relationship slowed efforts to deal with project challenges. For example,  they stated the project had at least four different OBO project directors.  One OBO official characterized the collaboration on the project by State,  the contractor, and State\u2019s designer as \u201chaving a lot of conflicts\u201d and said  that as problems with the project arose during construction, all parties  \u201cdug their heels in.\u201d In September 2017, one official indicated the then  temporary Project Director had improved the working relationship with  post and the contractor and was doing his best to work through the  current issues and delay. Disagreement also arose regarding timely  response to proposed changes; the contractor maintained that OBO  headquarters was delaying work due to slow decision-making, while OBO  maintained that the contractor\u2019s proposals did not meet requirements.", "The functionality of the completed compound may also be affected by  several issues. According to post officials, after the February 2015  closure of the U.S. Embassy in Yemen, State relocated some of those  staff to Jeddah, requiring the conversion of five newly built apartments  into office space. Post officials also reported that the original plan for the  staff apartments was predicated on the post remaining an  unaccompanied duty assignment whereby U.S. staff may not bring family  members. Those officials expressed concern that space would become  limited because family members are now allowed to accompany Foreign  Service Officers to Jeddah. An additional concern was that the consulate  was originally intended to provide consular services only for U.S. citizens  but was now authorized to issue nonimmigrant visas for Saudis seeking  to travel to the United States, which post officials predicted would  increase consular traffic flow beyond the new building\u2019s intended volume."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Embassy in The Hague, Netherlands", "paragraphs": [], "subsections": [{"section_title": "Project Overview", "paragraphs": ["According to OBO, the previous U.S. embassy in The Hague was located  on a downtown square opposite the Netherlands Parliament. Completed  in 1959, the chancery sat directly adjacent to a major road and sidewalks  and did not meet State security standards set by the Secure Embassy  Construction and Counterterrorism Act of 1999.", "The new embassy compound is located within the municipality of  Wassenaar, adjacent to The Hague. The compound includes a chancery  office building, Marine security guard quarters, support buildings, and  parking. According to OBO, the design phase included a lengthy site  planning, landscape design, and architectural design period due to local  ordinances and stringent permitting requirements. OBO reported that  this design contract was awarded in November 2012, and the design was  completed in July 2013. The project delivery method was design-bid- build.", "A $125 million construction contract for the new embassy was awarded in  September 2013. As of September 2017, that contract value was $131.7  million, an increase of about $6.7 million, or approximately 5 percent.  According to OBO, State issued a notice to proceed for the project in  June 2014, and the estimated completion date was June 2017. In  September 2017, OBO reported that it and the contractor had extended  the contract completion date to July 2017. In addition, as of September  2017, OBO and the contractor were negotiating over further cost and  schedule changes.", "Figure 20 shows a historical photo of the 1959 embassy, the new  embassy under construction, and a timeline showing the original schedule  compared with the schedule as of the end of September 2017."], "subsections": []}, {"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["According to OBO, the official permit for construction was received in  August 2013, with an effective date of September 2013. However, the  permit was issued with a number of conditions that OBO reported took  approximately 9 months for State to resolve and resulted in a delay of full  notice to proceed until June 2014. Both OBO and the contractor said  that the two sides worked cooperatively to resolve permitting issues  raised by the local government. Based on OBO reporting, these issues  contributed, in part, to over $1 million in cost modifications on the  contract. Further, technical omissions that were not discovered during  design review resulted in changes to sprinklers, fire alarms, security  window treatments, and classified data interconnections. According to  OBO, these late changes resulted in further requests for time extensions  from the contractor.", "In addition, according to OBO, State did not plan for the colocation of one  tenant agency onto the compound (8 people) and a second tenant  agency increased its staffing by approximately 40 percent (19 people).  Because of those staffing changes, post officials reported that there is no  additional space for future growth in the new compound."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Embassy in Pristina, Kosovo Project Overview", "paragraphs": ["According to OBO, State established this post in 1999 as a U.S. liaison  office during the military intervention in Kosovo by North Atlantic Treaty  Organization forces. When the U.S. government opened the post, OBO  reported that it assembled a number of contiguous residential properties  under short-term leases and closed the adjacent streets. State  designated the post as an embassy in 2008. Figure 21 shows some of the  existing houses that State converted for use as the embassy.", "In September 2014, State awarded a $158.4 million design-build contract  for the new embassy under a bridging design. The new embassy is one  of the first projects fully designed and constructed under the Excellence  approach. As of September 2017, that contract value was $159.6 million,  an increase of less than 1 percent. According to OBO, State issued a  notice to proceed for the project in December 2014, and the original  estimated completion date was October 2017. As of September 2017,  completion was scheduled for January 2018, 3 months after the original  estimated completion date).", "Figure 22 shows an architectural rendering of the new embassy, a photo  of it under construction, and a timeline for the original schedule compared  with the schedule as of the end of September 2017."], "subsections": [{"section_title": "Contributors to Contract Cost or Schedule Changes", "paragraphs": ["According to OBO, the largest change in cost resulted from State adding  additional security cameras to improve monitoring of the compound and  its facilities. In a separate change, OBO also granted the contractor a  schedule extension of 98 days to account for changes in security  requirements at project startup and funds to include adjustments made by  State to the locations of the recreation facility, pool, and other items  relative to the perimeter security wall.", "As of September 2017 in our interviews with them, the OBO Project  Director and contractor\u2019s on-site Project Manager could not reach  resolution on the cost or schedule impacts of a variety of issues. These  included (1) the delay in State\u2019s approving the contractor\u2019s locally hired  construction workers, (2) the timing of and responsibility for bringing  permanent power to the site, and (3) site condition issues related to  unsuitable soils and existing foundations."], "subsections": []}]}, {"section_title": "Construction Case Study: U.S. Embassy in Port Moresby, Papua New Guinea", "paragraphs": [], "subsections": [{"section_title": "Project Overview", "paragraphs": ["According to OBO, the current U.S. embassy is housed in a building  constructed in 1970 in Port Moresby\u2019s business district. The lease will  expire in September 2020. Furthermore, the facility is overcrowded,  functionally deficient, and does not meet the latest security standards.", "Also according to OBO, in 2009 the U.S. government acquired a 7.26- acre site for a new embassy compound through a long-term lease from  the government of Papua New Guinea. State planned for the new  embassy to be a standard secure mini-compound and awarded a  construction contract in late 2011 with an estimated completion date in  mid-2014. However, according to a State official, because the embassy  requirements changed, State decided to terminate the contract for the  convenience of the government.", "The project delivery method is design-bid-build. A $95 million  construction contract for the new embassy was awarded in September  2015. As of September 2017, that contract value was $102.5 million, an  increase of $7.5 million, or about 8 percent. According to OBO, State  issued the notice to proceed for the project in March 2017, after a delay of  about a year due to another prospective contractor disputing the contract  award. As of September 2017, the estimated completion date remained  unchanged at September 2019.", "Figure 23 shows an architectural rendering of the new embassy, an aerial  view of the embassy under construction, and the timeline for the schedule  as of the end of September 2017."], "subsections": []}, {"section_title": "Contributors to Contract Cost and Schedule Changes", "paragraphs": ["According to OBO, in 2013, after the initial contractor had completed  approximately 40 percent of the project, State changed the project scope:  (1) Staffing was increased from 47 desks to 77 desks, which could not be  accommodated in the standard secure mini-compound; (2) classified  information processing was added as a new requirement; and (3) a  Marine security guard detachment was assigned to post, requiring the  addition of a residence for them. Due to these new requirements,  according to a State official, State decided to terminate the contract for  the convenience of the government.", "According to OBO, the embassy compound was redesigned under a  design contract to accommodate the new project scope. The redesign  contract lasted 14 months, from April 2014 to June 2015. OBO reported  that when the first contractor stopped work on the standard secure mini- compound, the concrete structures for all buildings on the compound had  been completed. The new design, finished in June 2015, added a four- story office tower next to the existing chancery structure, with additional  general work areas, and new controlled access areas. The redesigned  site also added a nine-bed Marine security guard quarters, enlarged the  building for the warehouse and shops, and added upgraded community  facilities. According to OBO, further cost increases could accrue because  of damage to government-provided equipment left by the first contractor,  which may need to be re-purchased."], "subsections": []}]}, {"section_title": "Design Case Study: U.S. Embassy in Beirut, Lebanon Project Overview", "paragraphs": ["According to OBO, the embassy currently operates out of a nearly 18- acre compound in East Beirut consisting of a mixture of office and  residential facilities that are both government-owned and leased.  According to State, this site is severely cramped and does not meet  current security standards.", "The new embassy site consists of just over 44 acres situated on a steep  hilltop area near the existing U.S. embassy. State typically seeks to build  new embassy compounds on 10 acres of land. OBO noted to us the new  compound will include a chancery office building, staff residences,  support buildings such as a warehouse and recreation facility, and Marine  security guard quarters. Figure 24 shows architectural renderings of the  new embassy."], "subsections": [{"section_title": "Background on the Design", "paragraphs": ["The design contract for this design-bid-build project was awarded in  September 2014 for $39.6 million. Project documentation indicates the  design process included the development of three initial concepts, which  were reviewed by OBO\u2019s Industry Advisory Group and OBO senior  management. OBO reported a single design concept was selected in  January 2015 for further development. The design firm then developed a  schematic design (less than 35 percent design) that OBO indicated was  approved by the OBO Director in March 2015.", "The design proceeded through design development (35 percent) and  construction document development (60 percent and 90 percent); OBO  reported to us the final construction documents were completed in April  2016. Following completion of the 100 percent design and subsequent  contract solicitation activities, in December 2016 State awarded a $613.3  million construction contract to build the new embassy. As of September  2017, a notice to proceed for construction had just been issued."], "subsections": []}, {"section_title": "Contributors to Design Contract Cost Changes", "paragraphs": ["OBO reported that the 100 percent design was completed in April 2016  (19 months after contract award). OBO reports that final design cost by  itself was $45.3 million, amounting to a $5.7 million, or about 14.5  percent, increase over the original design contract value. OBO  documentation shows the increase in the cost for the project\u2019s design  was, in part, attributed to added design for temporary construction  support facilities\u2014to include both temporary office space and 40 secure  housing units\u2014that would be needed on-site by State\u2019s project  management team during the construction. However, the total contract  cost as of the end of fiscal year 2017 was $58 million, about 46.5 percent  more than the original contract value. This larger value includes  approximately $13 million primarily for \u201cTitle II, construction phase  services.\u201d Through these services, the design firm provides technical  support to OBO during construction to answer the construction  contractor\u2019s questions about the design and generally to support OBO\u2019s  review of the construction contractor\u2019s material samples, drawings,  building systems and product data, test and inspection reports, and any  design changes or substitutions.", "State\u2019s estimated construction costs increased during the project\u2019s design  from approximately $500 million to over $660 million due to what OBO  reports were challenging site conditions that required the extensive use of  retaining walls and engineered foundation systems. Additional perimeter  security in the form of guard towers was also added. OBO indicated these  scope changes required additional design and increased the construction  cost estimate."], "subsections": []}]}, {"section_title": "Design Case Study: U.S. Consulate, in Hyderabad, India Project Overview", "paragraphs": ["Established in 2009, the U.S. consulate general in Hyderabad is the first  new U.S. diplomatic post to open in India since India\u2019s independence in  1947. According to OBO, in 2007 the U.S. government leased the current  4-acre consulate property\u2014that was once used as a palace\u2014for use as  an interim consulate location. OBO indicated the new consulate will be  built on a 12.3-acre site located in Hyderabad\u2019s financial and high-tech  districts. Further, the new compound will include a consulate office  building, three compound access facilities, a support annex to include a  warehouse, a recreation facility, and Marine security guard quarters.  Figure 25 shows the existing interim consulate and an architectural  rendering of the new consulate."], "subsections": [{"section_title": "Background on the Design", "paragraphs": ["State issued a task order for the design of the project in September 2014  with the intent that the project would be a design-bid-build project and that  the design firm OBO tasked would prepare a 100 percent design. OBO  indicted the construction contract for the project was planned to be  awarded in fiscal year 2017. However, after beginning initial design,  OBO determined that changing the delivery method from design-bid-build  to design-build with bridging would allow for an earlier construction  contract award in fiscal year 2016.", "With this change in the project delivery method, the design task order was  modified such that OBO\u2019s design firm would provide bridging  documents\u2014roughly a 35 percent design\u2014rather than a 100 percent  design. The bridging documents would then be used by the design-build  construction contractor to complete the design and construct the project.  The design firm that had been tasked by OBO to prepare the bridging  documents would also (1) review and process design submittals from the  design-build contractor, (2) answer any request for information about the  bridging design intent, and (3) ensure the design intent represented by  the bridging design was maintained throughout design development by  the design-build contractor."], "subsections": []}, {"section_title": "Contributors to Design Contract Cost or Schedule Changes", "paragraphs": ["According to OBO, the bridging design was completed in April 2016 (19  months after the initial contract task order). As noted earlier in this  report, OBO project documentation shows the initial design of the  building\u2019s unique exterior screen concerned OBO management, leading  to more design development by the contract architect, further review by  OBO\u2019s design staff, and added cost. OBO senior management expressed  concerns about the look of the screen, mainly that the screen was too  traditional compared with the spirit of the design of the building and the  rest of the campus and that the pattern of the screen needed more  variation for daylight and views.", "To respond to these concerns, OBO issued two contract modifications to  OBO\u2019s architect for additional design work for the exterior screen.  According to OBO, subsequent design development for three alternatives  for the screen contributed an additional design cost of about $750,000,  raising the final bridging design cost to approximately $10.5 million. That  amount does not include the roughly $816,000 for the design firm to  provide additional support services during construction, of which OBO  reports a minor portion is attributable to ensuring the construction  contractor achieved the design intent for the exterior screen. According to  OBO data, the design-build contract to complete the design and build the  project was awarded in September 2016 at a value of $203 million. OBO  also reported the design-build contractor received full notice to proceed  with construction in March 2017. As of the end of September 2017, the  project was still under construction."], "subsections": []}]}]}, {"section_title": "Appendix IV: Comments from the U.S. Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": ["Brian M. Mazanec, (202) 512-5130 or mazanecb@gao.gov.  Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Leslie Holen (Assistant  Director), Michael Armes (Assistant Director), David Hancock, John  Bauckman, and Eugene Beye, made key contributions to this report.  David Dayton, Justin Fisher, Alex Welsh, and Neil Doherty provided  technical assistance."], "subsections": []}]}], "fastfact": ["Responding to two 1998 terrorist bombings of U.S. embassies, the State Department embarked on a program to construct more secure embassies. While it had completed 77 as of September 2017, State won't reach its goal of 180 new embassies by 2018.", "Unexpected requirements\u2014such as adding office annexes\u2014and not accounting for inflation have contributed to slowing project delivery. With over 20 embassies under construction and 72 planned, State faces staffing shortages and strained contractor relationships.", "We made recommendations to State to plan for inflation, analyze funding and workforce needs, and seek improved contractor relationships."]}
{"id": "GAO-18-234T", "url": "https://www.gao.gov/products/GAO-18-234T", "title": "Information Technology: Further Implementation of FITARA Related Recommendations Is Needed to Better Manage Acquisitions and Operations", "published_date": "2017-11-15T00:00:00", "released_date": "2017-11-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government plans to invest almost $96 billion on IT in fiscal year 2018. Historically, these investments have too often failed, incurred cost overruns and schedule slippages, or contributed little to mission-related outcomes. Accordingly, in December 2014, Congress enacted FITARA, aimed at improving agencies' acquisitions of IT. Further, in February 2015, GAO added improving the management of IT acquisitions and operations to its high-risk list.", "This statement summarizes agencies' progress in improving the management of IT acquisitions and operations. It is based on GAO's prior and recently published reports on (1) data center consolidation, (2) risk levels of major investments as reported on OMB's IT Dashboard, (3) implementation of incremental development practices, and (4) management of software licenses."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Management and Budget (OMB) and federal agencies have taken steps to improve the management of information technology (IT) acquisitions and operations through a series of initiatives, and as of November 2017, had fully implemented about 56 percent of the approximately 800 related GAO recommendations made between fiscal years 2010 through 2015. However, important additional actions are needed.", "Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers, which was reinforced by the Federal Information Technology Acquisition Reform Act (FITARA) in 2014. However, in a series of reports that GAO issued over the past 6 years, it noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies' data center consolidation plans, data center optimization, and OMB's tracking and reporting on related cost savings. These reports contained a matter for Congressional consideration, and a total of 160 recommendations to OMB and 24 agencies, to improve the execution and oversight of the initiative. Most agencies and OMB agreed with the recommendations or had no comments. As of November 2017, 84 of the recommendations remained open.", "Enhancing transparency . OMB's IT Dashboard provides information on major investments at federal agencies, including ratings from Chief Information Officers that should reflect the level of risk facing an investment. Over the past 6 years, GAO has issued a series of reports about the Dashboard that noted both significant steps OMB has taken to enhance the oversight, transparency, and accountability of federal IT investments by creating its Dashboard, as well as concerns about the accuracy and reliability of the data. In total, GAO has made 47 recommendations to OMB and federal agencies to help improve the accuracy and reliability of the information on the Dashboard and to increase its availability. Most agencies agreed with the recommendations or had no comments. As of November 2017, 25 of these recommendations remained open.", "Implementing incremental development . OMB has emphasized the need for agencies to deliver investments in smaller parts, or increments, in order to reduce risk and deliver capabilities more quickly. Since 2012, OMB has required investments to deliver functionality every 6 months. Further, GAO has issued reports highlighting additional actions needed by OMB and agencies to improve their implementation of incremental development. In these reports, GAO made 42 recommendations. Most agencies agreed or did not comment on the recommendations. As of November 2017, 34 of the recommendations remained open.", "Managing software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that better management of licenses was needed to achieve savings, and made 136 recommendations to improve such management. Most agencies generally agreed with the recommendations or had no comments. As of November 2017, 112 of the recommendations remained open."]}, {"section_title": "What GAO Recommends", "paragraphs": ["From fiscal years 2010 through 2015, GAO made about 800 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations, and included recommendations to improve the oversight and execution of the data center consolidation initiative, the accuracy and reliability of the Dashboard, incremental development policies, and software license management. Most agencies agreed with GAO's recommendations and had taken some actions or had no comments. In addition, from fiscal year 2016 to present, GAO has made more than 200 new recommendations in this area. GAO will continue to monitor agencies' implementation of these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to provide an update on federal agencies\u2019  efforts to improve the acquisition of information technology (IT). As I have  previously testified, the effective and efficient acquisition of IT has been a  long-standing challenge in the federal government. In particular, the  federal government has spent billions of dollars on failed and poorly  performing IT investments, which often suffered from ineffective  management. Recognizing the importance of government-wide  acquisition of IT, in December 2014, Congress enacted federal IT  acquisition reform legislation (commonly referred to as the Federal  Information Technology Acquisition Reform Act, or FITARA).", "In addition, in February 2015, we added improving the management of IT  acquisitions and operations to our list of high-risk areas for the federal  government. We recently issued an update to our high-risk report and  noted that, while progress has been made in addressing the high-risk  area of IT acquisitions and operations, significant work remains to be  completed.", "My statement today provides an update on agencies\u2019 progress in  improving the management of IT acquisitions and operations. The  statement is based on our prior and recently published reports that  discuss federal agencies\u2019 (1) data center consolidation efforts, (2) risk  levels of major investments as reported on OMB\u2019s IT Dashboard, (3)  implementation of incremental development practices, and (4)  management of software licenses. A more detailed discussion of the  objectives, scope, and methodology for this work is included in each of  the reports that are cited throughout this statement.", "We conducted the work upon which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["According to the President\u2019s budget, the federal government plans to  invest more than $96 billion for IT in fiscal year 2018\u2014the largest amount  ever. However, as we have previously reported, investments in federal IT  too often result in failed projects that incur cost overruns and schedule  slippages, while contributing little to the desired mission-related  outcomes. For example:", "The Department of Veterans Affairs\u2019 Scheduling Replacement Project  was terminated in September 2009 after spending an estimated $127  million over 9 years.", "The tri-agency National Polar-orbiting Operational Environmental  Satellite System was halted in February 2010 by the White House\u2019s  Office of Science and Technology Policy after the program spent 16  years and almost $5 billion.", "The Department of Homeland Security\u2019s Secure Border Initiative  Network program was ended in January 2011, after the department  obligated more than $1 billion for the program.", "The Office of Personnel Management\u2019s Retirement Systems  Modernization program was canceled in February 2011, after the  agency had spent approximately $231 million on its third attempt to  automate the processing of federal employee retirement claims.", "The Department of Veterans Affairs\u2019 Financial and Logistics  Integrated Technology Enterprise program was intended to be  delivered by 2014 at a total estimated cost of $609 million, but was  terminated in October 2011.", "The Department of Defense\u2019s Expeditionary Combat Support System  was canceled in December 2012 after spending more than a billion  dollars and failing to deploy within 5 years of initially obligating  funds.", "Our past work found that these and other failed IT projects often suffered  from a lack of disciplined and effective management, such as project  planning, requirements definition, and program oversight and  governance. In many instances, agencies had not consistently applied  best practices that are critical to successfully acquiring IT.", "Such projects have also failed due to a lack of oversight and governance.  Executive-level governance and oversight across the government has  often been ineffective, specifically from chief information officers (CIO).  For example, we have reported that some CIOs\u2019 roles were limited  because they did not have the authority to review and approve the entire  agency IT portfolio."], "subsections": [{"section_title": "Implementing FITARA Can Improve Agencies\u2019 Management of IT", "paragraphs": ["FITARA was intended to improve agencies\u2019 acquisitions of IT and enable  Congress to monitor agencies\u2019 progress and hold them accountable for  reducing duplication and achieving cost savings. The law includes  specific requirements related to seven areas.", "Federal data center consolidation initiative (FDCCI). Agencies are  required to provide OMB with a data center inventory, a strategy for  consolidating and optimizing their data centers (to include planned  cost savings), and quarterly updates on progress made. The law also  requires OMB to develop a goal for how much is to be saved through  this initiative, and provide annual reports on cost savings achieved.", "Enhanced transparency and improved risk management. OMB  and covered agencies are to make detailed information on federal IT  investments publicly available, and agency CIOs are to categorize  their investments by level of risk. Additionally, in the case of major IT  investments rated as high risk for 4 consecutive quarters, the law  requires that the agency CIO and the investment\u2019s program manager  conduct a review aimed at identifying and addressing the causes of  the risk.", "Agency CIO authority enhancements. CIOs at covered agencies  are required to (1) approve the IT budget requests of their respective  agencies, (2) certify that OMB\u2019s incremental development guidance is  being adequately implemented for IT investments, (3) review and  approve contracts for IT, and (4) approve the appointment of other  agency employees with the title of CIO.", "Portfolio review. Agencies are to annually review IT investment  portfolios in order to, among other things, increase efficiency and  effectiveness and identify potential waste and duplication. In  establishing the process associated with such portfolio reviews, the  law requires OMB to develop standardized performance metrics, to  include cost savings, and to submit quarterly reports to Congress on  cost savings.", "Expansion of training and use of IT acquisition cadres. Agencies  are to update their acquisition human capital plans to address  supporting the timely and effective acquisition of IT. In doing so, the  law calls for agencies to consider, among other things, establishing IT  acquisition cadres or developing agreements with other agencies that  have such cadres.", "Government-wide software purchasing program. The General  Services Administration is to develop a strategic sourcing initiative to  enhance government-wide acquisition and management of software.  In doing so, the law requires that, to the maximum extent practicable,  the General Services Administration should allow for the purchase of  a software license agreement that is available for use by all executive  branch agencies as a single user.", "Maximizing the benefit of the Federal Strategic Sourcing  Initiative. Federal agencies are required to compare their  purchases of services and supplies to what is offered under the  Federal Strategic Sourcing Initiative. OMB is also required to issue  regulations related to the initiative.", "In June 2015, OMB released guidance describing how agencies are to  implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls that will meet the  law\u2019s requirements, while providing agencies with flexibility to adapt to  unique agency processes and requirements;  clarify the CIO\u2019s role and strengthen the relationship between agency  CIOs and bureau CIOs; and  strengthen CIO accountability for IT costs, schedules, performance,  and security.", "The guidance identified several actions that agencies were to take to  establish a basic set of roles and responsibilities (referred to as the  common baseline) for CIOs and other senior agency officials, which were  needed to implement the authorities described in the law. For example,  agencies were required to conduct a self-assessment and submit a plan  describing the changes they intended to make to ensure that common  baseline responsibilities were implemented. Agencies were to submit their  plans to OMB\u2019s Office of E-Government and Information Technology by  August 15, 2015, and make portions of the plans publicly available on  agency websites no later than 30 days after OMB approval. As of  November 2016, all agencies had made their plans publicly available.", "In addition, in August 2016, OMB released guidance intended to, among  other things, define a framework for achieving the data center  consolidation and optimization requirements of FITARA. The guidance  includes requirements for agencies to: maintain complete inventories of all data center facilities owned,  operated, or maintained by or on behalf of the agency; develop cost savings targets for fiscal years 2016 through 2018 and  report any actual realized cost savings; and measure progress toward meeting optimization metrics on a quarterly  basis.", "The guidance also directs agencies to develop a data center  consolidation and optimization strategic plan that defines the agency\u2019s  data center strategy for fiscal years 2016, 2017, and 2018. This strategy  is to include, among other things, a statement from the agency CIO  indicating whether the agency has complied with all data center reporting  requirements in FITARA. Further, the guidance indicates that OMB is to  maintain a public dashboard that will display consolidation-related costs  savings and optimization performance information for the agencies."], "subsections": []}, {"section_title": "IT Acquisitions and Operations Identified by GAO as a High-Risk Area", "paragraphs": ["In February 2015, we introduced a new government-wide high-risk area,  Improving the Management of IT Acquisitions and Operations. This area  highlighted several critical IT initiatives in need of additional congressional  oversight, including (1) reviews of troubled projects; (2) efforts to increase  the use of incremental development; (3) efforts to provide transparency  relative to the cost, schedule, and risk levels for major IT investments; (4)  reviews of agencies\u2019 operational investments; (5) data center  consolidation; and (6) efforts to streamline agencies\u2019 portfolios of IT  investments. We noted that implementation of these initiatives was  inconsistent and more work remained to demonstrate progress in  achieving IT acquisition and operation outcomes.", "Further, our February 2015 high-risk report stated that, beyond  implementing FITARA, OMB and agencies needed to continue to  implement our prior recommendations in order to improve their ability to  effectively and efficiently invest in IT. Specifically, from fiscal years 2010  through 2015, we made 803 recommendations to OMB and federal  agencies to address shortcomings in IT acquisitions and operations.  These recommendations included many to improve the implementation of  the aforementioned six critical IT initiatives and other government-wide,  cross-cutting efforts. We stressed that OMB and agencies should  demonstrate government-wide progress in the management of IT  investments by, among other things, implementing at least 80 percent of  our recommendations related to managing IT acquisitions and operations  within 4 years.", "In February 2017, we issued an update to our high-risk series and  reported that, while progress had been made in improving the  management of IT acquisitions and operations, significant work still  remained to be completed. For example, as of November 2017, OMB  and agencies had fully implemented 452 (or about 56 percent) of the 803  recommendations. This was an increase of about 284 recommendations  compared to the number of recommendations we reported as being fully  implemented in 2015. Figure 1 summarizes the progress that OMB and  agencies have made in addressing our recommendations as compared to  the 80 percent target, as of November 2017.", "In addition, in fiscal year 2016, we made 202 new recommendations, thus  further reinforcing the need for OMB and agencies to address the  shortcomings in IT acquisitions and operations. Also, beyond addressing  our prior recommendations, our 2017 high-risk update noted the  importance of OMB and federal agencies continuing to expeditiously  implement the requirements of FITARA.  To further explore the challenges and opportunities to improve federal IT  acquisitions and operations, we convened a forum on September 14,  2016, to explore challenges and opportunities for CIOs to improve federal  IT acquisitions and operations\u2014with the goal of better informing  policymakers and government leadership. Forum participants, which  included 13 current and former federal agency CIOs, members of  Congress, and private sector IT executives, identified key actions related  to seven topics: (1) strengthening FITARA, (2) improving CIO authorities,  (3) budget formulation, (4) governance, (5) workforce, (6) operations, and  (7) transition planning. A summary of the key actions, by topic area,  identified during the forum is provided in figure 2.", "In addition, in January 2017, the Federal CIO Council concluded that  differing levels of authority over IT-related investments and spending  have led to inconsistencies in how IT is executed from agency to agency.  According to the Council, for those agencies where the CIO has broad  authority to manage all IT investments, great progress has been made to  streamline and modernize the federal agency\u2019s footprint. For the others,  where agency CIOs are only able to control pieces of the total IT footprint,  it has been harder to achieve improvements."], "subsections": []}, {"section_title": "Current Administration Has Undertaken Efforts to Improve Federal IT", "paragraphs": ["The current administration has initiated additional efforts aimed at  improving federal IT, including digital services. Specifically, in March  2017, the administration established the Office of American Innovation,  which has a mission to, among other things, make recommendations to  the President on policies and plans aimed at improving federal  government operations and services and on modernizing federal IT. In  doing so, the office is to consult with both OMB and the Office of Science  and Technology Policy on policies and plans intended to improve  government operations and services, improve the quality of life for  Americans, and spur job creation.", "In May 2017, the administration also established the American  Technology Council, which has a goal of helping to transform and  modernize federal agency IT and how the federal government uses and  delivers digital services. The President is the chairman of this council, and  the Federal CIO and the United States Digital Service administrator are  members."], "subsections": []}, {"section_title": "Congress Has Taken Action to Continue Selected FITARA Provisions and Modernize Federal IT", "paragraphs": ["Congress has recognized the importance of agencies\u2019 continued  implementation of FITARA provisions, and has taken legislative action to  extend selected provisions beyond their original dates of expiration. For  example, Congress has passed legislation to:  remove the expiration date for enhanced transparency and improved  risk management provisions, which were set to expire in 2019;  remove the expiration date for portfolio review, which was set to  expire in 2019; and extend the expiration date for FDCCI from 2018 to 2020.", "In addition, Congress is considering legislation to ensure the availability of  funding to help further agencies\u2019 efforts to modernize IT. Specifically,  recently proposed legislation calls for agencies to establish working  capital funds for use in transitioning from legacy systems, as well as for  addressing evolving threats to information security. The legislation also  proposes the creation of a technology modernization fund within the  Department of the Treasury, from which agencies could borrow money to  retire and replace legacy systems as well as acquire or develop systems."], "subsections": []}]}, {"section_title": "Agencies Have Taken Steps to Implement FITARA, but Additional Actions are Needed to Address Related Recommendations", "paragraphs": ["Agencies have taken steps to improve the management of IT acquisitions  and operations by implementing key FITARA initiatives. However,  agencies would be better positioned to fully implement the law and, thus,  realize billions in cost savings and additional management improvements,  if they addressed the numerous recommendations we have made aimed  at improving data center consolidation, increasing transparency via  OMB\u2019s IT Dashboard, implementing incremental development, and  managing software licenses."], "subsections": [{"section_title": "Agencies Have Made Progress in Consolidating Data Centers, but Need to Take Action to Achieve Planned Cost Savings", "paragraphs": ["One of the key initiatives to implement FITARA is data center  consolidation. OMB established FDCCI in February 2010 to improve the  efficiency, performance, and environmental footprint of federal data  center activities, and the enactment of FITARA reinforced the initiative.  However, in a series of reports that we issued from July 2011 through  August 2017, we noted that, while data center consolidation could  potentially save the federal government billions of dollars, weaknesses  existed in several areas, including agencies\u2019 data center consolidation  plans, data center optimization, and OMB\u2019s tracking and reporting on  related cost savings. In these reports, we made a matter for  Congressional consideration, and a total of 160 recommendations to  OMB and 24 agencies to improve the execution and oversight of the  initiative. Most agencies and OMB agreed with our recommendations or  had no comments. As of November 2017, 84 of these recommendations  remained open.", "For example, in May 2017, we reported that the 24 agencies  participating in FDCCI collectively had made progress on their data center  closure efforts. Specifically, as of August 2016, these agencies had  identified a total of 9,995 data centers, of which they reported having  closed 4,388, and having plans to close a total of 5,597 data centers  through fiscal year 2019. Notably, the Departments of Agriculture,  Defense, the Interior, and the Treasury accounted for 84 percent of the  completed closures.", "In addition, that report noted that 18 of the 24 agencies had reported  achieving about $2.3 billion collectively in cost savings and avoidances  from their data center consolidation and optimization efforts from fiscal  year 2012 through August 2016. The Departments of Commerce,  Defense, Homeland Security, and the Treasury accounted for  approximately $2.0 billion (or 87 percent) of the total.", "Further, 23 agencies reported about $656 million collectively in planned  savings for fiscal years 2016 through 2018. This is about $3.3 billion less  than the estimated $4.0 billion in planned savings for fiscal years 2016  through 2018 that agencies reported to us in November 2015. Figure 3  presents a comparison of the amounts of cost savings and avoidances  reported by agencies to OMB and the amounts the agencies reported to  us.", "As mentioned previously, FITARA required agencies to submit multi-year  strategies to achieve the consolidation and optimization of their data  centers no later than the end of fiscal year 2016. Among other things, this  strategy was to include such information as data center consolidation and  optimization metrics, and year-by-year calculations of investments and  cost savings through October 1, 2018.", "Further, OMB\u2019s August 2016 guidance on data center optimization  contained additional information for how agencies are to implement the  strategic plan requirements of FITARA, and stated that agencies were  required to publicly post their strategic plans to their agency-owned digital  strategy websites by September 30, 2016.", "As of April 2017, only 7 of the 23 agencies that submitted their strategic  plans\u2014the Departments of Agriculture, Education, Homeland Security,  and Housing and Urban Development; the General Services  Administration; the National Science Foundation; and the Office of  Personnel Management\u2014had addressed all five elements required by the  OMB memorandum implementing FITARA. The remaining 16 agencies  either partially met or did not meet the requirements. For example, most  agencies partially met or did not meet the requirements to provide  information related to data center closures and cost savings metrics. The  Department of Defense did not submit a plan and was rated as not  meeting any of the requirements.", "To better ensure that federal data center consolidation and optimization  efforts improve governmental efficiency and achieve cost savings, in our  May 2017 report, we recommended that 11 of the 24 agencies take action  to ensure that the amounts of achieved data center cost savings and  avoidances are consistent across all reporting mechanisms. We also  recommended that 17 of the 24 agencies each take action to complete  missing elements in their strategic plans and submit their plans to OMB in  order to optimize their data centers and achieve cost savings. Twelve  agencies agreed with our recommendations, 2 did not agree, and 10  agencies and OMB did not state whether they agreed or disagreed.", "More recently, in August 2017, we reported that agencies needed to  address challenges in optimizing their data centers in order to achieve  cost savings. Specifically, we noted that, according to the 24 agencies\u2019  data center consolidation initiative strategic plans as of April 2017, most  agencies were not planning to meet OMB\u2019s optimization targets by the  end of fiscal year 2018. Further, of the 24 agencies, 5\u2014the Department of  Commerce and the Environmental Protection Agency, National Science  Foundation, Small Business Administration, and U.S. Agency for  International Development\u2014reported plans to fully meet their applicable  targets by the end of fiscal year 2018; 13 reported plans to meet some,  but not all, of the targets; 4 reported that they did not plan to meet any  targets; and 2 did not have a basis to report planned optimization  milestones because they do not report having any agency-owned data  centers. Figure 4 summarizes agencies\u2019 progress in meeting OMB\u2019s  optimization targets as of February 2017, and planned progress to be  achieved by September 2017 and September 2018, as of April 2017.  Figure 4: Agency-Reported Plans to Meet or Exceed the Office of  Management and Budget\u2019s (OMB) Data Center Optimization Targets  FITARA required OMB to establish a data center optimization metric  specific to measuring server efficiency, and required agencies to report  on progress in meeting this metric. To effectively measure progress  against this metric, OMB directed agencies to replace the manual  collection and reporting of systems, software, and hardware inventory  housed within agency-owned data centers with automated monitoring  tools and to complete this effort no later than the end of fiscal year 2018.  Agencies were required to report progress in implementing automated  monitoring tools and server utilization averages at each data center as  part of their quarterly data center inventory reporting to OMB.", "As of February 2017, 4 of the 22 agencies reporting agency-owned data  centers in their inventory\u2014 the National Aeronautics and Space  Administration, National Science Foundation, Social Security  Administration, and U.S. Agency for International Development\u2014reported  that they had implemented automated monitoring tools at all of their data  centers. Further, 10 reported that they had implemented automated  monitoring tools at between 1 and 57 percent of their centers, and 8 had  not yet begun to report the implementation of these tools. In total, the 22  agencies reported that automated tools were implemented at 123 (or  about 3 percent) of the 4,528 total agency-owned data centers, while the  remaining 4,405 (or about 97 percent) of these data centers were not  reported as having these tools implemented. Figure 5 summarizes the  number of agency-reported data centers with automated monitoring tools  implemented, including the number of tiered and non-tiered centers.", "To address challenges in optimizing federal data centers, in our August  2017 report, we made recommendations to 18 agencies and OMB. Ten  agencies agreed with our recommendations, three agencies partially  agreed, and six (including OMB) did not state whether they agreed or  disagreed."], "subsections": []}, {"section_title": "Risks Need to Be Fully Considered When Agencies Rate Their Major Investments on OMB\u2019s IT Dashboard", "paragraphs": ["To facilitate transparency across the government in acquiring and  managing IT investments, OMB established a public website\u2014the IT  Dashboard\u2014to provide detailed information on major investments at 26  agencies, including ratings of their performance against cost and  schedule targets. Among other things, agencies are to submit ratings  from their CIOs, which, according to OMB\u2019s instructions, should reflect the  level of risk facing an investment relative to that investment\u2019s ability to  accomplish its goals. In this regard, FITARA includes a requirement for  CIOs to categorize their major IT investment risks in accordance with  OMB guidance.", "Over the past 6 years, we have issued a series of reports about the  Dashboard that noted both significant steps OMB has taken to enhance  the oversight, transparency, and accountability of federal IT investments  by creating its Dashboard, as well as concerns about the accuracy and  reliability of the data. In total, we have made 47 recommendations to  OMB and federal agencies to help improve the accuracy and reliability of  the information on the Dashboard and to increase its availability. Most  agencies agreed with our recommendations or had no comments. As of  November 2017, 25 recommendations remained open.", "In June 2016, we determined that 13 of the 15 agencies selected for in- depth review had not fully considered risks when rating their major  investments on the Dashboard. Specifically, our assessments of risk for  95 investments at the 15 selected agencies matched the CIO ratings  posted on the Dashboard 22 times, showed more risk 60 times, and  showed less risk 13 times. Figure 6 summarizes how our assessments  compared to the selected investments\u2019 CIO ratings.", "Aside from the inherently judgmental nature of risk ratings, we identified  three factors which contributed to differences between our assessments  and the CIO ratings:", "Forty of the 95 CIO ratings were not updated during April 2015 (the  month we conducted our review), which led to differences between  our assessments and the CIOs\u2019 ratings. This underscores the  importance of frequent rating updates, which help to ensure that the  information on the Dashboard is timely and accurately reflects recent  changes to investment status.", "Three agencies\u2019 rating processes spanned longer than 1 month.", "Longer processes mean that CIO ratings are based on older data, and  may not reflect the current level of investment risk.", "Seven agencies\u2019 rating processes did not focus on active risks.", "According to OMB\u2019s guidance, CIO ratings should reflect the CIO\u2019s  assessment of the risk and the investment\u2019s ability to accomplish its  goals. CIO ratings that do no incorporate active risks increase the  chance that ratings overstate the likelihood of investment success.", "As a result, we concluded that the associated risk rating processes used  by the 15 agencies were generally understating the level of an  investment\u2019s risk, raising the likelihood that critical federal investments in  IT are not receiving the appropriate levels of oversight.", "To better ensure that the Dashboard ratings more accurately reflect risk,  we made 25 recommendations to 15 agencies to improve the quality and  frequency of their CIO ratings. Twelve agencies generally agreed with or  did not comment on the recommendations and three agencies disagreed,  stating that their CIO ratings were adequate. However, we noted that  weaknesses in these three agencies\u2019 processes still existed and that we  continued to believe our recommendations were appropriate."], "subsections": []}, {"section_title": "Agencies Need to Increase Their Use of Incremental Development Practices", "paragraphs": ["OMB has emphasized the need to deliver investments in smaller parts, or  increments, in order to reduce risk, deliver capabilities more quickly, and  facilitate the adoption of emerging technologies. In 2010, it called for  agencies\u2019 major investments to deliver functionality every 12 months and,  since 2012, every 6 months. Subsequently, FITARA codified a  requirement that agency CIOs certify that IT investments are adequately  implementing incremental development, as defined in the capital planning  guidance issued by OMB. Further, subsequent OMB guidance on the  law\u2019s implementation, issued in June 2015, directed agency CIOs to  define processes and policies for their agencies which ensure that they  certify that IT resources are adequately implementing incremental  development.", "However, in May 2014, we reported that 66 of 89 selected investments  at five major agencies did not plan to deliver capabilities in 6-month  cycles, and less than half of these investments planned to deliver  functionality in 12-month cycles. We also reported that only one of the five  agencies had complete incremental development policies. Accordingly,  we recommended that OMB clarify its guidance on incremental  development and that the selected agencies update their associated  policies to comply with OMB\u2019s revised guidance (once made available),  and consider the factors identified in our report when doing so.", "Four of the six agencies agreed with our recommendations or had no  comments, one agency partially agreed, and the remaining agency  disagreed with the recommendations. The agency that disagreed did not  believe that its recommendations should be dependent upon OMB taking  action to update guidance. In response, we noted that only one of the  recommendations to that agency depended upon OMB action, and we  maintained that the action was warranted and could be implemented.", "Subsequently, in August 2016, we reported that agencies had not fully  implemented incremental development practices for their software  development projects. Specifically, we noted that, as of August 31, 2015,  22 federal agencies had reported on the Dashboard that 300 of 469  active software development projects (approximately 64 percent) were  planning to deliver usable functionality every 6 months for fiscal year  2016, as required by OMB guidance. The remaining 169 projects (or 36  percent) that were reported as not planning to deliver functionality every 6  months, agencies provided a variety of explanations for not achieving that  goal. These included project complexity, the lack of an established project  release schedule, or that the project was not a software development  project.", "Further, in conducting an in-depth review of seven selected agencies\u2019  software development projects, we determined that 45 percent of the  projects delivered functionality every 6 months for fiscal year 2015 and 55  percent planned to do so in fiscal year 2016. However, significant  differences existed between the delivery rates that the agencies reported  to us and what they reported on the Dashboard. For example, for four  agencies (the Departments of Commerce, Education, Health and Human  Services, and Treasury), the percentage of delivery reported to us was at  least 10 percentage points lower than what was reported on the  Dashboard. These differences were due to (1) our identification of fewer  software development projects than agencies reported on the Dashboard  and (2) the fact that information reported to us was generally more current  than the information reported on the Dashboard.", "We concluded that, by not having up-to-date information on the  Dashboard about whether the project is a software development project  and about the extent to which projects are delivering functionality, these  seven agencies were at risk that OMB and key stakeholders may make  decisions regarding the agencies\u2019 investments without the most current  and accurate information. As such, we recommended that the seven  selected agencies review major IT investment project data reported on  the Dashboard and update the information as appropriate, ensuring that  these data are consistent across all reporting channels.", "Finally, while OMB has issued guidance requiring agency CIOs to certify  that each major IT investment\u2019s plan for the current year adequately  implements incremental development, only three agencies (the  Departments of Commerce, Homeland Security, and Transportation) had  defined processes and policies intended to ensure that the CIOs certify  that major IT investments are adequately implementing incremental  development. Accordingly, we recommended that the remaining four  agencies\u2014the Departments of Defense, Education, Health and Human  Services, and the Treasury\u2014establish policies and processes for  certifying that major IT investments adequately use incremental  development.", "The Departments of Education and Health and Human Services agreed  with our recommendation, while the Department of Defense disagreed  and stated that its existing policies address the use of incremental  development. However, we noted that the department\u2019s policies did not  comply with OMB\u2019s guidance and that we continued to believe our  recommendation was appropriate. The Department of the Treasury did  not comment on its recommendation.", "More recently, in November 2017, we reported that agencies needed to  improve their certification of incremental development. Specifically,  agencies reported that 62 percent of major IT software development  investments were certified by the agency CIO for implementing adequate  incremental development in fiscal year 2017, as required by FITARA as of  August 2016. Table 1 identifies the number of federal agency major IT  software development investments certified for adequate incremental  development, as reported on the IT Dashboard for fiscal year 2017.", "Officials from 21 of the 24 agencies in our review reported that challenges  hindered their ability to implement incremental development, which  included: (1) inefficient governance processes; (2) procurement delays;  and (3) organizational changes associated with transitioning from a  traditional software methodology that takes years to deliver a product, to  incremental development, which delivers products in shorter time frames.  Nevertheless, 21 agencies reported that the certification process was  beneficial because they used the information from the process to assist  with identifying investments that could more effectively use an  incremental approach, and used lessons learned to improve the agencies\u2019  incremental processes.", "In addition, as of August 2017, only 4 of the 24 agencies had clearly  defined CIO incremental development certification policies and processes  that contained descriptions of the role of the CIO in the process and how  the CIO\u2019s certification will be documented; and included definitions of  incremental development and time frames for delivering functionality  consistent with OMB guidance. Figure 7 summarizes our analysis of  agencies\u2019 policies for CIO certification of the adequate use of incremental  development in IT investments.", "Lastly, we reported that OMB\u2019s capital planning guidance for fiscal year  2018 (issued in June 2016) lacked clarity regarding how agencies were  to address the requirement for certifying adequate incremental  development. While the 2018 guidance stated that agency CIOs are to  provide the certifications needed to demonstrate compliance with  FITARA, the guidance did not include a specific reference to the provision  requiring CIO certification of adequate incremental development. We  noted that, as a result of this change, OMB placed the burden on  agencies to know and understand how to demonstrate compliance with  FITARA\u2019s incremental development provision. Further, because of the  lack of clarity in the guidance as to what agencies were to provide, OMB  could not demonstrate how the fiscal year 2018 guidance ensured that  agencies provided the certifications specifically called for in the law.", "Accordingly, in August 2017, OMB issued its fiscal year 2019 guidance,  which addressed the weaknesses we identified in the previous fiscal  year\u2019s guidance. Specifically, the revised guidance requires agency CIOs  to make an explicit statement regarding the extent to which the CIO is  able to certify the use of incremental development, and to include a copy  of that statement in the agency\u2019s public congressional budget justification  materials. As part of the statement, an agency CIO must also identify  which specific bureaus or offices are using incremental development on  all of their investments.", "In our November 2017 report, we made 19 recommendations to 17  agencies to improve reporting and certification of incremental  development. Eleven agencies agreed with our recommendations, 1  partially agreed, and 5 did not state whether they agreed or disagreed.  OMB disagreed with several of our conclusions, which we continued to  believe were valid.", "In total, from May 2014 through November 2017, we have made 42  recommendations to OMB and agencies to improve their implementation  of incremental development. As of November 2017, 34 of our  recommendations remained open."], "subsections": []}, {"section_title": "Agencies Need to Better Manage Software Licenses to Achieve Savings", "paragraphs": ["Federal agencies engage in thousands of software licensing agreements  annually. The objective of software license management is to manage,  control, and protect an organization\u2019s software assets. Effective  management of these licenses can help avoid purchasing too many  licenses, which can result in unused software, as well as too few licenses,  which can result in noncompliance with license terms and cause the  imposition of additional fees.", "As part of its PortfolioStat initiative, OMB has developed policy that  addresses software licenses. This policy requires agencies to conduct an  annual, agency-wide IT portfolio review to, among other things, reduce  commodity IT spending. Such areas of spending could include software  licenses.", "In May 2014, we reported on federal agencies\u2019 management of software  licenses and determined that better management was needed to achieve  significant savings government-wide. In particular, 22 of the 24 major  agencies did not have comprehensive license policies and only 2 had  comprehensive license inventories. In addition, we identified five leading  software license management practices, and the agencies\u2019  implementation of these practices varied.", "As a result of agencies\u2019 mixed management of software licensing,  agencies\u2019 oversight of software license spending was limited or lacking,  thus potentially leading to missed savings. However, the potential savings  could be significant considering that, in fiscal year 2012, 1 major federal  agency reported saving approximately $181 million by consolidating its  enterprise license agreements, even when its oversight process was ad  hoc. Accordingly, we recommended that OMB issue needed guidance to  agencies; we also made 135 recommendations to the 24 agencies to  improve their policies and practices for managing licenses. Among other  things, we recommended that the agencies regularly track and maintain a  comprehensive inventory of software licenses and analyze the inventory  to identify opportunities to reduce costs and better inform investment  decision making.", "Most agencies generally agreed with the recommendations or had no  comments. As of November 2017, 112 of the recommendations had not  been implemented. Table 2 reflects the extent to which agencies  implemented recommendations in these areas.", "In conclusion, with the enactment of FITARA, the federal government has  an opportunity to save billions of dollars; improve the transparency and  management of IT acquisitions and operations; and to strengthen the  authority of CIOs to provide needed direction and oversight. The forum  we held also recommended that CIOs be given more authority, and noted  the important role played by the Federal CIO.", "Most agencies have taken steps to improve the management of IT  acquisitions and operations by implementing key FITARA initiatives,  including data center consolidation, efforts to increase transparency via  OMB\u2019s IT Dashboard, incremental development, and management of  software licenses; and they have continued to address recommendations  we have made over the past several years. However, additional  improvements are needed, and further efforts by OMB and federal  agencies to implement our previous recommendations would better  position them to fully implement FITARA.", "To help ensure that these efforts succeed, OMB\u2019s and agencies\u2019  continued implementation of FITARA is essential. In addition, we will  continue to monitor agencies\u2019 implementation of our previous  recommendations.", "Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly,  and Members of the Subcommittees, this completes my prepared  statement. I would be pleased to respond to any questions that you may  have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Dave Powner, Director, Information Technology at (202) 512- 9286 or pownerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Kevin Walsh (Assistant Director), Chris Businsky, Rebecca Eyler,  Meredith Raymond, and Bradley Roach (Analyst in Charge).", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-9", "url": "https://www.gao.gov/products/GAO-19-9", "title": "Illegal Marijuana: Opportunities Exist to Improve Oversight of State and Local Eradication Efforts", "published_date": "2018-11-14T00:00:00", "released_date": "2018-11-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Marijuana is generally illegal under federal law. Nonetheless, an increasing number of states have legalized medical or recreational marijuana under state law. However, in these states, some marijuana-related activity may still be illegal under state law. Since 1981, DEA's DCE/SP has provided financial support to participating state and local agencies for their efforts to eradicate illegal marijuana.", "GAO was asked to review DEA's DCE/SP. This report examines (1) DCE/SP funding and expenditures in recent years, (2) how DEA ensures that participating agencies expend funds in accordance with program requirements, and (3) how DEA uses performance assessment to help manage DCE/SP. GAO analyzed DCE/SP guidance, and expenditure and performance information from 2015 through fiscal year 2017, and evaluated DEA's oversight and performance management efforts against internal control standards. GAO also interviewed officials from DEA, the U.S. Forest Service, and participating agencies in six states, which GAO selected to include varying levels of DCE/SP funding and numbers of marijuana grow sites eradicated in recent years."]}, {"section_title": "What GAO Found", "paragraphs": ["The Drug Enforcement Administration (DEA) obligated over $17 million annually on average from 2015 through 2018 to its Domestic Cannabis Eradication/ Suppression Program (DCE/SP)\u2014which supports participating state and local law enforcement agencies' efforts to eradicate illegal marijuana. DEA obligated funds to participating agencies in states with and without marijuana legalization laws. Participating agencies expended the majority of funds on aviation support and overtime (see fig. below). Officials told GAO they expended funds to help eradicate marijuana that was not in compliance with state and local marijuana laws. For example, officials in California\u2014a state with medical and recreational marijuana legalization laws\u2014said that all of their eradication occurs on public lands such as national forests, or private land that had been trespassed upon. In total, agencies have eradicated several million plants annually in recent years.", "Participating Agencies' Top Domestic Cannabis Eradication/Suppression Program (DCE/SP) Expenditures in Recent Years", "DEA oversees participating agencies' compliance with program expenditure requirements in various ways, but does not consistently collect supporting documentation for expenditure reports. DEA field officials collect varying levels of documentation, and headquarters officials were not aware of these varying practices. DEA officials said they are now working to address this issue, but they have not developed a plan with specific actions and time frames for completion. By developing and implementing such a plan, DEA could have greater assurance that funds are being expended appropriately.", "DEA collects information on program activities to help manage DCE/SP, such as number of plants eradicated. However, participating agencies GAO spoke with have practices for reporting some program activities that differ from DEA's guidance due to varying interpretations of the guidance. As a result this information is neither fully accurate nor reliable for assessing program performance. Also, DEA has not clearly documented all of its program goals or developed performance measures to assess progress toward those goals. Improving the reliability of the information it collects, clearly documenting all program goals, and developing performance measures could provide DEA with the information it needs to manage the program more effectively."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that DEA develop a plan to ensure the collection of consistent documentation of expenditures, clarify its guidance for reporting program activities, document all of its program goals, and develop performance measures. DEA concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Marijuana is the most widely available and commonly used illegal drug in  the United States, and the only major illegal drug grown domestically,  according to the Drug Enforcement Administration (DEA). Within the  Department of Justice (DOJ), DEA is the primary federal law enforcement  agency responsible for investigating and enforcing potential violations of  the Controlled Substances Act of 1970, as amended. Under the Act  generally, it is a federal crime for any person to knowingly or intentionally  manufacture, distribute, dispense, or possess marijuana. As part of its  marijuana enforcement efforts, DEA began providing financial assistance  to state and local law enforcement agencies to support their efforts to  eradicate and suppress illegal, domestically-grown marijuana in 1979.  DEA formally established this assistance through its Domestic Cannabis  Eradication/Suppression Program (DCE/SP) in 1981. In fiscal year 2018,  DEA obligated $14 million to state and local law enforcement agencies  through DCE/SP to support eradication and suppression of illegal  marijuana.", "Despite the federal government\u2019s long-standing prohibition on marijuana,  an increasing number of states have legalized medical or recreational  marijuana under state law over the past two decades. In 2015, we  reported on DOJ\u2019s efforts to monitor the effects of state marijuana legalization relative to DOJ marijuana enforcement policy, including  August 2013 guidance which provided additional clarification of DOJ\u2019s  priorities and certain circumstances that may warrant DOJ to challenge a  state\u2019s implementation of its marijuana legalization program. The August  2013 guidance instructed DOJ\u2019s prosecutorial and law enforcement  components to focus marijuana enforcement efforts on priorities that were  particularly important to the federal government, leaving all other  enforcement of state law pertaining to marijuana-related activity to state  and local law enforcement agencies and regulatory bodies. We  recommended that DOJ document a plan specifying its monitoring  process, and share the plan with DOJ components. DOJ concurred with  the recommendations. In January 2018, the Attorney General rescinded  DOJ\u2019s marijuana enforcement policy, including the August 2013  guidance. Subsequently, we closed this recommendation as not  implemented.", "Given trends in marijuana legalization under state law, questions have  been raised about the necessity and effectiveness of DEA\u2019s DCE/SP. You  asked us to review DEA\u2019s DCE/SP. This report addresses the following  questions:  1.  How much funding has DEA obligated to DCE/SP in recent years, and  how have participating agencies expended program funds?  2.  How does DEA ensure that participating agencies expend DCE/SP  funds in accordance with program requirements?  3.  How does DEA use performance assessment to help manage  DCE/SP?", "To address all three questions, we analyzed relevant DEA  documentation, and interviewed DEA officials in headquarters. We also  conducted semi-structured interviews with officials from DEA, the U.S.", "Forest Service, and participating agencies in the following six states:  California, Georgia, Kentucky, Michigan, Nevada, and Texas. We  selected these states to include varying levels of DCE/SP funding and  numbers of marijuana grow sites eradicated from 2014 through fiscal year  2016\u2014the most recent year for which DEA data were available at the  time of our state selection. The six states in our sample collectively  received approximately 52 percent of total DCE/SP funding obligated to  states from 2014 through fiscal year 2016. When selecting states, we also  considered whether a state had experienced a significant level of  marijuana eradication on national forests in recent years, as well as the  status of medical or recreational marijuana legalization under state law.  For each of our selected states, we interviewed DEA field officials  responsible for implementing DCE/SP in the state; Forest Service law  enforcement officials responsible for overseeing and conducting  marijuana eradication efforts on national forests in the state; and  participating agencies\u2019 points-of-contact for DCE/SP. We conducted our  interviews in person in California, Georgia, and Texas. The information  we obtained from these interviews cannot be generalized to all states that  received DCE/SP funding, but provides a range of perspectives and  experiences regarding DCE/SP from federal, state, and local law  enforcement officials.", "To address our first question, we also reviewed DEA documentation  related to DCE/SP funding, including DEA\u2019s funding requests for DCE/SP  from DOJ\u2019s Assets Forfeiture Fund for fiscal years 2015 through 2018.  We reviewed documents describing how participating agencies use  program funds, including the DCE/SP Coordinator Handbook and  Program Guide (DCE/SP Handbook), participating agencies\u2019 annual  strategic plans for using DCE/SP funds to conduct eradication and  suppression activities, and letters of agreement between participating  agencies and DEA. Also, we analyzed DEA data on (1) DCE/SP funding  obligated to participating agencies, and to DEA for program support from  2015 through fiscal year 2018 and (2) DCE/SP funding expended by  participating agencies in each state from 2015 through fiscal year 2017,  organized by categories of expenses, such as overtime and equipment.", "To assess the reliability of DEA\u2019s funding data, we reviewed the data for  any missing elements, outliers, and obvious errors, and interviewed  agency officials knowledgeable about the data. We determined that  DEA\u2019s funding data for DCE/SP were sufficiently reliable for the purpose  of reporting obligations at the program and state levels, as well as  participating agencies\u2019 aggregate expenditures by category. Furthermore,  we interviewed DEA and Forest Service headquarters and field officials,  and officials from participating agencies in each of our selected states to  obtain perspectives on how participating agencies expended DCE/SP  funds. We also viewed items that participating agencies purchased using  DCE/SP funds in California, Georgia, and Texas, and observed a  marijuana grow site on federal land that participating agencies eradicated  in California and Georgia as part of our in-person visits.", "To address our second question, we also reviewed DEA\u2019s guidance for  expending DCE/SP funds, including the DCE/SP Handbook and letters of  agreement between DEA and participating agencies. We reviewed  documentation related to DEA\u2019s processes for overseeing participating  agencies\u2019 expenditure of program funds, including purchase request  forms, quarterly expenditure reports, and reports describing the results of  DEA site visits to participating agencies\u2019 facilities and operations during  fiscal year 2017\u2014the first year for which these reports were available.  Furthermore, we interviewed DEA headquarters officials responsible for  the overall management and oversight of DCE/SP, and DEA field officials  responsible for providing guidance to participating agencies on expending  program funds, and for collecting and reviewing participating agencies\u2019  information on program expenditures. We also interviewed officials from  participating agencies in each of our selected states, and reviewed  supporting documentation for DCE/SP expenditures to better understand  the amount and types of information participating agencies submit to  DEA. We evaluated DEA\u2019s efforts to oversee participating agencies\u2019  expenditure of DCE/SP funds, such as its practices for collecting and  reviewing receipts and supporting documentation for program  expenditures, against agency requirements for participating agencies to  submit information on program expenditures to DEA. We also compared  these efforts against standards for project management.", "To address our third question, we also reviewed DEA documentation  related to performance management, including the DCE/SP Handbook  and congressional budget justifications for fiscal years 2012 through  2018. We analyzed DEA\u2019s data on the marijuana eradication and  suppression activities conducted as part of DCE/SP, such as the number  of marijuana plants eradicated, pounds of processed marijuana seized,  and arrests made, for 2015 and fiscal years 2016 through 2017\u2014the  most recent year for which these data were available. To assess the  reliability of DEA\u2019s data on marijuana eradication and suppression  activities, we reviewed the data for any missing elements, outliers, and  obvious errors, and reviewed documentation about the data. We also  interviewed officials from DEA and participating agencies about the  reliability of the data. Specifically, we interviewed DEA field officials  responsible for providing guidance to participating agencies on reporting  data to DEA, and for reviewing the data that participating agencies report.  Furthermore, we interviewed officials from participating agencies in each  state about how they collect and report data to DEA on their agency\u2019s  marijuana eradication and suppression activities. We determined that the  data were not fully reliable for the purpose of assessing program  performance. As a result, we do not include these data in this report. In  addition, we interviewed DEA headquarters officials to determine how  DEA uses the data it collects to help manage the program, including the  extent to which DEA uses the data to measure progress toward goals and  performance measures for DCE/SP. We evaluated DEA\u2019s practices for  collecting and using program data to assess performance and manage  the program, which we derived from our review of agency documentation  and interviews with DEA officials, against the Government Performance  and Results Act of 1993 (GPRA), as amended by the GPRA  Modernization Act of 2010 (GPRAMA); federal internal control  standards related to defining and measuring progress on agency  objectives and using and communicating quality information; and our  prior work describing important attributes of successful performance  measures.", "We conducted this performance audit from September 2017 through  November 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal and State Marijuana Laws", "paragraphs": ["Marijuana refers to the dried leaves, flowers, stems, and seeds from the  cannabis plant, which contains the psychoactive or mind-altering  chemical delta-9-tetrahydrocannabinol (THC), as well as other related  compounds. Marijuana is a controlled substance under federal law and is  classified as a Schedule I drug\u2014the most restrictive of categories of  controlled substances by the federal government. The Controlled  Substances Act of 1970, as amended, does not allow Schedule I drugs,  including marijuana, to be dispensed with a prescription, and provides  federal sanctions for the possession, manufacture, distribution,  dispensing, or use of such drugs.", "However, as of July 2018, 32 states and the District of Columbia had  passed voter initiatives or legislation legalizing marijuana for medical  purposes under state or territorial law. Of these, nine states and the  District of Columbia had also passed voter initiatives or legislation  legalizing marijuana for recreational purposes under state or territorial  law. In addition, another 15 states have laws only pertaining to the use of  products containing cannabidiol, also known as CBD, one of the non- psychoactive ingredients in marijuana plants. Nonetheless, federal  penalties remain, and some marijuana-related activity may also be illegal  under state law, including in states that have legalized marijuana for  medical or recreational purposes. Figure 1 shows a map of marijuana  legalization under state or territorial law, as of July 2018."], "subsections": []}, {"section_title": "Illegal Marijuana Cultivation and Eradication", "paragraphs": ["Marijuana is the only major illegal drug grown domestically, according to  DEA. Individuals and larger organized groups, such as drug trafficking  organizations, establish outdoor and indoor grow sites to cultivate  marijuana. Outdoor grow sites can be located on privately-owned land,  such as residential yards, farms, and timber lands, and publicly-owned  land, such as national forests, as shown in Figure 2. Indoor grow sites  can be located in residential houses and larger warehouses.", "Previously, we, along with the U.S. Department of Agriculture\u2019s (USDA)  Office of Inspector General (OIG) have reported on the environmental  effects of illegal marijuana cultivation on federal lands. For example, in  2010, we reported that illegal marijuana cultivation on federal lands can  involve, among other things, the application of pesticides, herbicides,  fertilizers, and other chemicals, including chemicals that may be banned  in the United States; removal of natural vegetation; diversion of water  from streams; and deposits of large amounts of trash and human waste.  In 2018, USDA\u2019s OIG reported that trash and chemicals such as  pesticides and fertilizers may remain at eradicated marijuana grow sites  on national forest lands for multiple years, partly due to the cost of  cleanup, which can reach as high as $100,000. Figure 3 shows  examples of environmental effects of illegal marijuana cultivation on  federal lands in California and Georgia.", "Marijuana eradication operations can encompass the following activities:  seizure and destruction of marijuana plants, seizure and destruction of  processed marijuana\u2014which is smokeable marijuana in the drying  process, loose, or packaged; confiscation of weapons and assets; and  apprehension of individuals at the grow site. Additionally, operations may  include the removal of trash and infrastructure, such as propane tanks  and irrigation tubing, from outdoor grow sites during or after eradication  operations to reduce the likelihood that growers will return."], "subsections": []}, {"section_title": "DEA\u2019s Domestic Cannabis Eradication/Suppression Program", "paragraphs": ["DEA established DCE/SP in 1981 to support participating state and local  law enforcement agencies in their efforts to eradicate and suppress  illegal, domestically-grown marijuana. Over the past three decades,  DEA has provided support for marijuana eradication and suppression  efforts through DCE/SP in all 50 states, Puerto Rico, Guam, and the U.S.  Virgin Islands. In fiscal year 2018, DEA obligated DCE/SP funding to  125 participating agencies in 37 states.", "DEA\u2019s Office of Operations Management, Investigative Support Section is  responsible for the overall management and oversight of DCE/SP.  Personnel from DEA\u2019s field divisions and contractors are responsible for  implementing DCE/SP in the field. Specifically, DEA field divisions assign  a special agent to serve as DCE/SP coordinator for each state in its area  of responsibility. DCE/SP coordinators are responsible for reviewing  participating agencies\u2019 annual strategic plans for DCE/SP, and approving  certain purchase requests, among other things. DEA also contracts for  analytical and administrative support for the program. The contract  provides DEA with six personnel, referred to as regional contractors,  whose primary duties include providing guidance to participating agencies  on allowable program expenditures, and reviewing the information  participating agencies report to DEA on their program expenditures and  eradication and suppression activities.", "DEA\u2019s implementation of DCE/SP is a multi-step process with activities  performed by DEA and participating agencies during each step, as shown  in Figure 4. Each year, DEA requests and receives funding for DCE/SP  from DOJ\u2019s Assets Forfeiture Fund. To participate in DCE/SP, a state or  local law enforcement agency must apply and enter into a reimbursable  funding agreement with DEA. Specifically, a participating agency must  submit an annual strategic plan describing, among other things, how it  intends to use DCE/SP funding to address the illegal domestic marijuana  threat in its area of responsibility, and coordinate with other federal  agencies, such as the Forest Service. DEA and the participating agency  then sign a letter of agreement, whereby the participating agency agrees  to eradicate and suppress illegal marijuana as part of DCE/SP, and DEA  agrees to provide a specified amount of funding to the participating  agency to defray the costs of those activities. This agreement also  outlines program restrictions and requirements for participating agencies,  which include only using DCE/SP funds to reimburse expenses that DEA  has deemed allowable; obtaining approval from DEA prior to expending  DCE/SP funds on certain items; submitting an expenditure report to DEA  each quarter; and collecting and reporting to DEA information on its  marijuana eradication and suppression activities."], "subsections": []}]}, {"section_title": "DEA Obligated Over $17 Million Annually on Average to DCE/SP in Recent Years; Participating Agencies Expended Most Funds on Aviation Support and Overtime", "paragraphs": [], "subsections": [{"section_title": "DEA Obligated Between $12.4 Million and $22 Million Annually to DCE/SP from 2015 Through Fiscal Year 2018; Five States Were Obligated About Half of the Funds Each Year", "paragraphs": ["DEA obligated about $17.7 million annually on average to DCE/SP from  2015 through fiscal year 2018. As shown in Figure 5, the total amount of  funding DEA obligated to DCE/SP decreased from $22 million in 2015 to  $12.4 million in fiscal year 2017, and increased to $18 million in fiscal  year 2018.", "During each year of the 4-year time frame we reviewed, DEA obligated  most of the DCE/SP funds to support the marijuana eradication efforts of  the participating agencies\u2014for example, $14 million of the $18 million in  fiscal year 2018 went to 125 participating agencies in 37 states, or  approximately $378,000 on average per state. DEA obligated the  remaining funds\u2014for example, $4 million in fiscal year 2018\u2014to pay for  program support. This support includes payments for the following items:", "The DEA Aviation Division, which provided reconnaissance,  surveillance, undercover operations, and marijuana eradication  support to selected participating agencies, according to DEA  documentation. The Aviation Division prioritized its support to  participating agencies based upon their past eradication operations,  the availability of aviation support provided by other participating  agencies, and DCE/SP coordinators\u2019 request for support.", "Equipment, travel, and training for DEA headquarters and field  divisions to support eradication activities.", "Six regional contractors that provided administrative support to the  program.", "Figure 5 also shows that in each year from 2015 through fiscal year 2018,  about half of total DCE/SP funds went to participating agencies in five  states. For example, in fiscal year 2018 DEA obligated 48 percent of  these funds to participating agencies in California, Kentucky, Georgia,  Texas, and Tennessee. Moreover, by magnitude, California, Kentucky,  Georgia, and Tennessee were among the top five states in each of the 4  years we examined.", "DEA headquarters officials reported that they obligate funding to  participating agencies based on various factors, including the agencies\u2019  past performance, their level of matching investment in the program, and  the approximate amount of illegal growing in an area. DEA headquarters  officials noted that some marijuana grows may still be illegal under state  and local law\u2014even in those states that have legalized or regulated  marijuana in some form under state or local law. As such, DEA has  obligated funds to participating agencies in states with and without some  form of marijuana legalization under state law."], "subsections": []}, {"section_title": "Participating Agencies Expended Most Funds on Aviation Support and Overtime in Recent Years", "paragraphs": ["Participating state and local agencies have expended DCE/SP funds on a  range of items, as described below. However, we calculated that two  items\u2014 aviation support and overtime \u2014accounted for a large majority of  their expenditures in each of the 3 years we reviewed from 2015 through  fiscal year 2017. For example, participating agencies expended 46  percent on overtime and 38 percent on aviation support in fiscal year  2017, as shown in Figure 6.", "Aviation Support. Participating agencies expended 43 percent ($17.0  million) of their DCE/SP funds to rent aircraft or purchase fuel for aviation  support from 2015 through fiscal year 2017, according to DEA data. For  example, officials from a participating state agency in California reported  expending DCE/SP funds to contract for the use of helicopters for at least  90 days per year, which they use to support marijuana eradication efforts  across the state. Officials from participating local agencies in California  reported that aircraft support is critical to their marijuana eradication  efforts because it allows them to conduct aerial surveillance to detect  possible marijuana grow sites, transport personnel in and out of grow  sites in remote areas, and remove large quantities of marijuana plants  from grow sites, as shown in Figure 7.", "Overtime. Participating agencies expended 40 percent ($16.0 million) of  their DCE/SP funds to pay employee overtime from 2015 through fiscal  year 2017, according to DEA data. Officials from a participating agency  in Nevada told us that marijuana eradication is labor-intensive\u2014in some  cases involving long hikes and camping in the mountains\u2014which can  result in overtime costs. In addition, officials from a participating agency in  Michigan told us that they expend DCE/SP funds to reimburse members  of state task force teams for overtime costs incurred during their  participation in marijuana eradication operations, which generally involves  1- to 3-hour extensions of their regular shifts.", "Travel and per diem. Participating agencies expended 6 percent ($2.3  million) of their DCE/SP funds to pay travel and per diem costs from 2015  through fiscal year 2017, according to DEA data. For example, officials  from a participating agency in Nevada reported that traveling to marijuana  grow sites in remote areas may take up to 6 hours, which requires them  to incur travel and per diem costs for overnight stays. In addition, DEA  headquarters officials reported that officials from participating agencies  who attend the DCE/SP national strategic meeting are permitted to  expend DCE/SP funds to pay for travel and per diem expenses.  According to DEA headquarters officials, federal, state, and local officials  from across the country attend the strategic meeting to discuss trends  and issues related to illegal marijuana cultivation, and DCE/SP\u2019s priorities  and goals.", "Supplies, clothing, and protective gear. Participating agencies  expended 3 percent ($1.1 million) of their DCE/SP funds to purchase  supplies, and another 2 percent ($0.8 million) to purchase clothing and  protective gear from 2015 through fiscal year 2017, according to DEA  data. For example, officials from a participating agency in Texas  reported expending DCE/SP funds to purchase machetes for cutting  marijuana plants; cameras for taking pictures or filming at eradication  sites; backpacks and hydration bladders; Global Positioning System  devices for navigation; first aid kits; gloves to protect personnel from  pesticides, fertilizers, and other hazardous chemicals; and heavy-duty  pants and shirts, as shown in Figure 7.", "Equipment. Participating agencies expended 3 percent ($1.0 million) of  their DCE/SP funds to purchase equipment from 2015 through fiscal year  2017, according to DEA data. For example, officials from participating  agencies in Georgia, Kentucky, and Texas told us that they have  expended DCE/SP funds to purchase all-terrain vehicles, which they use  to help access marijuana grow sites more quickly than on foot, and help  them to navigate difficult terrain, including mountainous areas. Figure 7  includes a photo of an all-terrain vehicle purchased with DCE/SP funds.", "All other expenditures. Participating agencies expended 2 percent ($0.6  million) of their DCE/SP funds on training, and another 1 percent ($0.4  million) on miscellaneous commercial contracts from 2015 through fiscal  year 2017. Participating agencies also expended less than 1 percent of  their DCE/SP funds on both container and space rental ($0.2 million) and  vehicle rental ($0.1 million) from 2015 through fiscal year 2017.", "Factors that affect how participating agencies expended funds.  Officials from participating agencies we spoke with in six selected  states\u2014California, Georgia, Kentucky, Michigan, Nevada, and Texas\u2014as  well as DEA and Forest Service, provided perspectives on factors that  affected how participating agencies expended DCE/SP funds to support  their marijuana eradication efforts.", "State marijuana legalization. Officials we spoke with said that  they expended DCE/SP funds to help eradicate marijuana grow  sites not in compliance with their state and local laws. For  example, in Georgia\u2014where medical or recreational marijuana  has not been legalized under state law\u2014state officials reported  that they strive to eradicate all marijuana grow sites. By  comparison, state and local officials in California\u2014where medical  and recreational use of marijuana is legal under state law\u2014said  that all of the grow sites they eradicate are in violation of state and  local laws. These grow sites include those on public lands such as  national forests, and private land that had been trespassed  upon.", "Marijuana eradication on national forests. DEA requires  participating agencies to coordinate with Forest Service when  conducting DCE/SP-funded eradication efforts on national forests.", "Officials from Forest Service and participating agencies we spoke  with reported that they coordinate with one another when planning  and conducting marijuana eradication on national forests\u2014and  that some of these efforts are funded by DCE/SP. For example,  Forest Service officials in Kentucky reported that they participate  in planning meetings with the state\u2019s marijuana eradication task  force. During the eradication season, Forest Service conducts  aerial surveillance in helicopters funded by the state police using  DCE/SP funds, and assists with eradication operations when  available. As another example, officials in Georgia reported  expending DCE/SP funds to conduct aerial surveillance to detect  possible marijuana grow sites on national forests.", "Officials from some participating agencies we spoke with reported  that they were able to expend DCE/SP funds to assist Forest  Service with the removal of infrastructure such as sleeping bags  and irrigation tubes at marijuana grow sites on national forests.  For example, officials from a participating state agency in  California reported that they assist with the removal of basic  infrastructure and chemicals when feasible. However, Forest  Service is responsible for the removal of infrastructure and  subsequent environmental reclamation on national forests."], "subsections": []}]}, {"section_title": "DEA Oversees Participating Agencies\u2019 Expenditure of DCE/SP Funds in Various Ways, but Does Not Consistently Collect the Supporting Documentation", "paragraphs": [], "subsections": [{"section_title": "DEA Provides Guidance, Pre-approves Purchases, Conducts On-Site Observations, and Reviews Information on Participating Agencies\u2019 Expenditures to Help Ensure Compliance with Program Requirements", "paragraphs": ["DEA oversees participating agencies\u2019 expenditure of DCE/SP funds in  various ways to help ensure compliance with program requirements,  including the following:  Provides guidance. DEA provides participating agencies a copy of its  DCE/SP Handbook which describes, among other things, information on  allowable and non-allowable uses of DCE/SP funds. For example, the  Handbook explains that participating agencies may expend DCE/SP  funds to pay overtime costs of officers participating in eradication  activities if the officers otherwise would be unable to participate, but may  not expend DCE/SP funds to pay for employee benefits. In addition,  participating agencies may expend DCE/SP funds on equipment, such as  all-terrain vehicles and Global Positioning System devices, but not  purchase body armor, firearms, or tasers. See Table 1 for additional  information on allowable uses of DCE/SP funds.", "Pre-approves certain purchases. DEA pre-approves certain equipment  purchases, and requires additional review procedures to pre-approve  higher-cost items. According to DEA guidance and headquarters officials,  participating agencies are required to submit a purchase request form to  DEA for the purchase of all durable supplies, materials, and equipment.  A participating agency must also attach supporting documentation along  with the request form\u2014including price quotes, a description of the items,  and intended use. Purchases up to $2,500 are approved by the DCE/SP  coordinator, while purchases greater than $2,500, or 10 percent or more  of an agency\u2019s obligated funds, also require approval from the DEA  Special Agent in Charge in the applicable DEA field division, who then  passes the request along to DEA headquarters officials for final approval.", "Conducts on-site observations. DEA headquarters officials told us that,  as part of their oversight for fiscal year 2017, they conducted on-site  observations of participating agencies in seven states at training events,  eradication operations, and participating agencies\u2019 facilities. DEA  headquarters officials said that they selected the site visit locations based  on participating agencies\u2019 funding levels and input from DEA field officials,  among other factors. According to these officials, site visits allowed DEA  to observe participating agencies\u2019 equipment and compare it with  documentation on pre-approved equipment purchases and reported  expenditures.", "DEA was unable to provide information about the location or results of  site visits prior to fiscal year 2017 due to both a lack of documentation  and recent personnel turnover. However, DEA began documenting the  location and results of site visits for fiscal year 2017. According to  officials, the site visits did not reveal instances of misuse of funds in fiscal  year 2017. Officials noted that documenting site visits is an important  practice that will help inform the program\u2019s plans for future site visits, and  could help DEA identify best practices for marijuana enforcement to share  with participating agencies.", "In addition, some DCE/SP coordinators we spoke with said that on-site  observations help them to oversee participating agencies\u2019 expenditure of  program funds in the field. For example, one DCE/SP coordinator said  that he has daily on-site contact with participating agencies, and that  although he had not observed any misuse of funds, his on-site presence  would allow him to detect misuse if it were to occur.", "Reviews information on program expenditures. DEA\u2019s DCE/SP  Handbook requires participating agencies to submit cumulative quarterly  expenditure reports specifying how much the agency expended in each of  the allowable expense categories, such as overtime, aviation support,  and equipment. DEA regional contractors are required to review  quarterly expenditure reports, and sign and submit the reports to  headquarters for further review. Headquarters officials told us that they  may ask participating agencies to clarify reported expenditures, and DEA  may withhold funding if necessary until any issues are resolved. DEA also  requires participating agencies to provide supporting documentation, such  as receipts, for certain expenses claimed in the end-of-year quarterly  expenditure reports."], "subsections": []}, {"section_title": "DEA Does Not Consistently Collect Supporting Documentation for Participating Agencies\u2019 Reported Expenditures", "paragraphs": ["Notwithstanding these efforts to oversee participating agencies\u2019  expenditure of DCE/SP funds, DEA does not consistently collect  supporting documentation from participating agencies regarding their  reported DCE/SP expenditures. As noted above, participating agencies  are required to submit a copy of a receipt or other supporting  documentation for certain expense claimed in the end-of-year quarterly  expenditure reports, and regional contractors are responsible for  collecting this information. However, the DEA regional contractors we  spoke with had differing understandings of DEA\u2019s requirement regarding  the collection of information on DCE/SP expenditures, and indicated to us  that they are collecting varying levels of supporting documentation. For  example,", "One regional contractor told us that DEA does not specify the  completeness of supporting documentation that regional contractors  are required to collect. Nonetheless, he still collects supporting  documentation for all expenses, which in some cases may consist of  200 pages for a single quarterly expenditure report.", "Another regional contractor told us that he is required to collect  quarterly expenditure reports, and participating agencies are required  to maintain supporting documentation internally. He stated that the  completeness of supporting documentation he collects varies by  participating agency within his region. For example, one participating  state agency in his region submits supporting documentation to DEA  for pre-approved equipment purchases only, but maintains supporting  documentation for other expenditures internally as required. In  contrast, he explained, other participating agencies in his region  provide supporting documentation for all expenditures, including  aviation support and overtime.", "A third regional contractor said the only clear requirement DEA has  regarding the collection of information on program expenditures is that  regional contractors must collect supporting documentation for large  equipment expenditures. However, he still collects supporting  documentation for all expenditures, including overtime.", "A fourth regional contractor told us that he is only required to collect  supporting documentation for equipment, material, supply, and  clothing expenditures. Accordingly, he collects supporting  documentation for these expenditures from all participating agencies  in his region. Some participating agencies in his region provide  supporting documentation for all their expenditures, including aviation  support and overtime.", "Officials in headquarters told us that although they were not fully aware of  these varying practices for collecting supporting documentation, they had  confidence that participating agencies were maintaining documentation  internally as required. Moreover, DEA headquarters officials told us that  they expect regional contractors to collect supporting documentation for  aviation support and overtime expenses when participating agencies  submit their end-of-year quarterly expenditure report. However, it is our  assessment that this expectation differs from DEA\u2019s written requirement  because the requirement does not include supporting documentation for  overtime expenses.", "Based on the results of our audit work, DEA headquarters officials said  that they had taken initial steps to address this issue. In particular,  officials said that they plan to convene a working group to discuss a  potential update to DEA\u2019s requirements for the collection of supporting  documentation after the eradication season in 2018. In addition, officials  said they had met with regional contractors to discuss potential solutions  to address this issue. However, DEA headquarters officials could not  provide us with a plan for this effort. Standards for project management  call for developing a plan with specific actions and time frames. By  developing and implementing such a plan to ensure that regional  contractors are implementing DEA\u2019s requirement for collecting supporting  documentation in the intended manner, DEA could have greater  assurance that program funds are being expended appropriately."], "subsections": []}]}, {"section_title": "DEA Collects and Uses Information on Program Activities to Help Manage DCE/SP, but Should Strengthen Data Reliability, Clearly Document Goals, and Establish Measures", "paragraphs": [], "subsections": [{"section_title": "DEA Collects and Uses Information on Number of Plants Eradicated and Other Program Activities to Help Manage DCE/SP", "paragraphs": ["DEA collects information from participating agencies and DEA field  officials on their marijuana eradication and suppression activities to help  manage DCE/SP, such as the number of marijuana plants eradicated,  pounds of processed marijuana seized, and number of arrests made. For  example, according to DEA\u2019s DCE/SP statistical reports, over 4 million  illegal domestic marijuana plants, on average, were eradicated annually  from 2015 through fiscal year 2017. Participating agencies are required  to report information on their marijuana eradication and suppression  activities to DEA. DEA also collects information on marijuana eradication  and suppression activities its officials conduct in the field. For example,  DEA field officials may unilaterally conduct eradication and suppression  activities or provide support to other law enforcement agencies that do  not receive program funding (nonparticipating agencies) on marijuana  enforcement efforts, and report information on these activities.", "According to DEA documents and headquarters officials, DEA uses this  information to help manage the program in a variety of ways. Specifically,  DEA uses the information to develop and maintain a national assessment  of illegal domestic marijuana cultivation; inform the scope and nature of  program activities for future years; support the program\u2019s funding request  and determine funding levels for participating agencies; and assess  performance on an agency-wide objective related to dismantling drug  trafficking organizations. DEA also reports this information on DCE/SP\u2019s  public website."], "subsections": []}, {"section_title": "Participating Agencies\u2019 Practices for Reporting Some of Their Marijuana Eradication and Suppression Activities Differ from DEA Guidance", "paragraphs": ["We found that participating agencies have practices for reporting  information on some of their marijuana eradication and suppression  activities that differ from DEA\u2019s written guidance. Moreover, we found that  stakeholders at all levels\u2014participating agencies as well as DEA field and  headquarters officials\u2014had varying understandings of what participating  agencies are required to report to DEA for DCE/SP. As a result, the  information DEA collects is not fully reliable for the purpose of assessing  program performance.", "According to DEA guidance, participating agencies are required to report  information\u2014such as the number of marijuana plants eradicated\u2014only  from eradication and suppression activities funded by DCE/SP. However,  among the six states we contacted, officials from participating agencies in  four states and a DCE/SP coordinator from a fifth state told us that they  also include information on activities from nonparticipating agencies in the  information reported to DEA. As a result of this broadening of  information being reported, DEA does not have a fully accurate  representation of the activities being performed by agencies receiving  DCE/SP funding. Officials from these five states told us that they  included this information to provide DEA with a more comprehensive  assessment of the illegal domestic marijuana cultivation issue in their  area. DEA headquarters officials were not aware of this reporting  practice. Moreover, officials said that participating agencies should only  report information resulting from their DCE/SP-funded operations, which  may include results from support they provide to nonparticipating  agencies. For example, if a participating agency provides support to a  nonparticipating agency in the form of aircraft surveillance to help identify  illegal grow sites, or additional officers to assist with an eradication  operation, the participating agency should report the results from those  activities to DEA. However, these expectations are not defined in DEA  guidance.", "DEA guidance also states that participating agencies should make every  effort to not report eradication and suppression information resulting from  interdiction activities, which are not considered DCE/SP-funded  operations. For example, marijuana seized by a participating agency  during a routine traffic stop\u2014a type of interdiction activity\u2014should not be  reported. However, we found that participating agencies had varying  understandings of whether or not to report this information to DEA. As a  result, information DEA collects from these officials is not consistent.  Specifically, we identified three different practices that participating  agencies followed to report eradication and suppression information  resulting from routine traffic stops:  report marijuana seized during routine traffic stops only if the  marijuana can be linked back to a domestic source;  report all marijuana seized during routine traffic stops irrespective of  source; and do not report any marijuana seized during routine traffic stops.", "Further, we found that DEA field officials responsible for providing  guidance to participating agencies had varying understandings of whether  participating agencies should report information on marijuana seized  during routine traffic stops to DEA. For example, two DCE/SP  coordinators told us that information resulting from routine traffic stops  should not be reported because DCE/SP is focused on the eradication of  illegal marijuana grow sites. However, 3 of the 4 DEA regional contractors  we spoke with said that participating agencies should report information  resulting from routine traffic stops only if the marijuana seized can be  tracked to a domestic source.", "DEA headquarters officials were not aware of these differing reporting  practices and varying understandings. Headquarters officials told us that  they expect participating agencies to report information on marijuana  seized during routine traffic stops only if the marijuana can be linked to a  domestic source. However, our assessment is that this expectation is not  consistent with DEA\u2019s written guidance. Officials explained that  interdiction activities, such as routine traffic stops, are relevant to  marijuana suppression, especially in light of recent changes in illegal  marijuana cultivation and trafficking trends. For example, according to  DEA officials, Kansas\u2014a state without marijuana legalization\u2014has  recently experienced a decrease in the number of illegal outdoor  marijuana grow sites in conjunction with an increase in the amount of  illegal domestic marijuana being trafficked into the state from Colorado\u2014 a state with recreational and medical marijuana legalization.", "Standards for Internal Control in the Federal Government state that  management should use quality information\u2014including accurate and  consistent information\u2014to achieve the entity\u2019s objectives. Federal  standards for internal control also state that management should  communicate the necessary quality information internally and externally  to achieve the entity\u2019s objectives. Based on the results of our audit work,  DEA headquarters officials said that they had taken initial steps and have  additional plans to update DEA\u2019s written guidance. For example, officials  told us that they plan to convene a working group to help address this  issue after the eradication season in 2018. This working group will,  according to officials, elicit input from DEA headquarters, regional  contractors and DCE/SP coordinators in the field, as well as participating  agencies. However, DEA headquarters officials could not provide us with  any details or documentation of its initial steps and additional plans to  address this issue. Clarifying the guidance and communicating it to  participating agencies and DEA field officials\u2014for example, by sharing  the updated guidance with them, discussing reporting practices during its  national strategic meeting, or including the guidance in DEA information  systems\u2014would help ensure the consistent application of the guidance,  and as a result, improve the reliability of the information DEA collects.  The improved information could help DEA assess program performance  and manage the program more effectively."], "subsections": []}, {"section_title": "DEA Has Not Clearly Documented All of Its Program Goals, and Does Not Have Measures to Assess Performance", "paragraphs": ["Although DEA collects and uses information on DCE/SP activities to help  manage the program, it has not clearly documented all of its program  goals and has not developed performance measures to assess whether  the agency is making progress towards achieving its goals.", "We did not find explicitly-labeled program goals in the DCE/SP  Handbook, DEA budget justification documents, and DEA\u2019s webpage  which we reviewed. However, we found the following four statements  which appeared to reflect program goals:  1.  halt the spread of marijuana cultivation in the United States;  2.  eradicate marijuana that is illegally cultivated by a person or drug  trafficking organization;  3.  disrupt and dismantle drug trafficking organizations and deprive these  organizations of significant revenue streams; and  4.  deter the illegal cultivation of marijuana through arrest, prosecution,  incarceration of cultivators and seizure of drug-derived assets, and by  making cultivation untenable due to increased law enforcement  activities.", "DEA headquarters officials confirmed to us that the statements above  reflected the goals of the program. However, they also described the  following additional goals that are not explicitly defined in agency or  program documentation: maximize the number of law enforcement agencies that participate in  improve safety during operations through increased access to training  and eradication schools; and  share information on illegal marijuana cultivation among law  enforcement agencies.", "Headquarters officials explained that because they are still relatively new  to the program\u2014having arrived in 2016\u2014they had not yet documented  these goals. Officials said they plan to document the program goals in the  future, but did not provide specific time frames for doing so. Standards for  Internal Control in the Federal Government state that management  should define objectives clearly to enable identification of risks and define  risk tolerances. Moreover, objectives are to be specific and measurable  so they can be understood at all levels of the entity and that performance  towards achieving those objectives can be assessed.", "Further, DEA has not developed performance measures with baselines,  measurable targets, and linkage to program goals\u2014several important  attributes we have previously identified that performance measures  should include if they are to be effective in monitoring progress and  determining how well programs are achieving their goals. Baselines  enable decision makers to assess the program\u2019s performance over time.  Identifying and reporting deviations from the baseline as a program  proceeds provides valuable oversight by identifying areas of program risk  and their causes to decision makers. Measurable targets help decision  makers conduct assessments of whether program goals were achieved.  Lastly, linkages between an organization\u2019s goals and performance  measures create a line of sight so that everyone understands how  program activities contribute to the organization\u2019s goals.", "DEA headquarters officials agreed that developing baselines to monitor  trends in program performance over time would be useful for program  management. However, officials said that setting measurable targets  would be challenging because of factors outside of DEA\u2019s control that  may affect eradication efforts, including extreme weather events and  changes in illegal marijuana cultivation and trafficking trends. However,  DEA currently has performance measures with measurable targets for  some of its drug enforcement-related programs and activities. For  example, DEA has a performance measure with a measurable target for  its agency-wide objective related to dismantling drug trafficking  organizations\u2014maximizing the monetary value of currency, property, and  drugs seized. This performance measure reflects the outcomes of  multiple activities across DEA, including DCE/SP. Further, while we agree  that developing drug enforcement-related performance measures with  measurable targets may be difficult, targets can help DEA evaluate past  performance and make informed decisions about future operations,  including allocating resources or developing strategies for the purpose of  maintaining or improving performance.", "GPRAMA directs agencies to develop and document goals, as well as  performance measures to assess progress towards their goals. While  those requirements are applicable to the department or agency level  (e.g., DOJ), we have previously reported that they can serve as leading  practices at other organizational levels, including the program, project, or  activity level. Agencies can use performance measurement to make  various types of management decisions to improve programs and results,  such as developing strategies and allocating resources, including  identifying problems and taking corrective action when appropriate.  Clearly documenting all program goals and developing performance  measures with baselines, measurable targets, and linkage to program  goals could provide DEA with the information it needs to assess progress  and make informed decisions about current and future operations."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Despite states\u2019 legalization of marijuana for medical or recreational  purposes, illegal marijuana cultivation continues to occur. As the nation\u2019s  primary federal law enforcement agency for investigating and enforcing  potential violations of controlled substance laws and regulations, DEA  aims to halt the spread of illegal domestic marijuana cultivation. To  accomplish this goal, DEA has provided financial assistance through  DCE/SP to support participating state and local law enforcement  agencies\u2019 efforts to curb illegal domestic marijuana cultivation for almost  four decades. These participating agencies have collectively eradicated  several million illegal domestic marijuana plants annually in recent years.", "Nonetheless, DEA management can take further actions to improve its  oversight of various aspects of the program. Specifically, by developing  and implementing a plan with specific actions and time frames to ensure  that DEA field staff are consistently implementing the agency\u2019s  requirements for collecting information on program expenditures, DEA will  be better positioned to ensure that program funds are being expended  appropriately. Additionally, by clarifying its guidance on the eradication  and suppression activities participating agencies are required to report\u2014 and communicating the guidance to participating agencies and relevant  DEA officials\u2014DEA will have more reliable information to assess program  performance and manage the program effectively. Finally, by clearly  documenting program goals for DCE/SP and developing related  performance measures with baselines, measurable targets, and linkage  to those goals, DEA will be better able to assess the program\u2019s  performance over time and, if necessary, redirect resources to effective  eradication and suppression efforts. Moving in this direction could help  program investments achieve even greater results."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DEA:", "The DEA Administrator should develop and implement a plan with  specific actions and time frames to ensure that regional contractors  are implementing DEA\u2019s requirement for collecting documentation  supporting participating agencies\u2019 DCE/SP program expenditures in  the intended manner. (Recommendation 1)", "The DEA Administrator should clarify DCE/SP guidance on the  eradication and suppression activities that participating agencies are  required to report, and communicate it to participating agencies and  DEA officials responsible for implementing DCE/SP.  (Recommendation 2)", "The DEA Administrator should clearly document all DCE/SP program  goals. (Recommendation 3)", "The DEA Administrator should develop DCE/SP performance  measures with baselines, targets, and linkage to program goals.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOJ, including DEA, and USDA for  review and comment. In its comments, reproduced in appendix II, DEA  concurred with our recommendations and described planned actions to  address them. DEA also provided technical comments, which we  incorporated as appropriate. USDA told us that they had no comments on  the draft report.", "In response to our first recommendation that DEA develop and implement  a plan with specific actions and time frames to ensure that regional  contractors are implementing DEA's requirement for collecting  documentation supporting participating agencies' DCE/SP program  expenditures in the intended manner, DEA concurred and stated that it  will take measures to ensure that contract personnel are documenting  and reporting expenditures in accordance with policy. Furthermore, DEA  reported plans to update its DCE/SP Handbook by the end of the second  quarter of fiscal year 2019 to provide uniform policy guidance on this  matter. These actions, if implemented as described, should address the  intent of our recommendation.", "DEA also concurred with our second recommendation that DEA clarify  DCE/SP guidance on the eradication and suppression activities that  participating agencies are required to report, and communicate it to  participating agencies and DEA officials responsible for implementing  DCE/SP. In its response, DEA reported plans to update the DCE/SP  Handbook by the end of the second quarter of fiscal year 2019 so that the  handbook clearly articulates the requirements and methods for reporting  eradication and suppression data. Furthermore, DEA reported plans to  conduct site visits and conference calls in the third and fourth quarters of  fiscal year 2019 to communicate the requirements. These actions, if  implemented as described, should address the intent of our  recommendation.", "DEA concurred with our third recommendation that DEA clearly document  all DCE/SP program goals. In its response, DEA reported plans to amend  and document program goals for fiscal year 2019 and ensure that they  are explicitly included in the DCE/SP Handbook and budget submissions.  These actions, if implemented as described, should address the intent of  our recommendation.", "DEA concurred with our fourth recommendation that DEA develop  DCE/SP performance measures with baselines, targets, and linkage to  program goals. In its response, DEA stated that it had identified  performance measures for DCE/SP and convened an ongoing working  group of subject matter experts to select a subset of these performance  measures in order to better inform DCE/SP processes and management  decision-making. These actions, if implemented as described, should  address the intent of our recommendation.", "We are sending copies of this report to the appropriate congressional  committees, the Attorney General, the DEA Administrator and the  Secretary of Agriculture, 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) 512-8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Domestic Cannabis Eradication/Suppression Program Funds Obligated to and Expended by Participating Agencies, 2015 through Fiscal Year 2018", "paragraphs": ["From 2015 through fiscal year 2018, the Drug Enforcement  Administration (DEA) obligated about $56 million through its Domestic  Cannabis Eradication/Suppression Program (DCE/SP) to state and local  law enforcement agencies (participating agencies) in 43 states and the  U.S. Virgin Islands to support their marijuana eradication and suppression  activities. See table 2.", "In the table below, we also provide the status of marijuana legalization  under state or territorial law, as of July 2018. Specifically, these  categories include: recreational and medical legalization (R&M); medical  legalization only (M); cannabidiol product access laws only (CBD); and no  legalization (No)."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Justice", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Brett Fallavollita (Assistant  Director), David Bieler (Analyst-in-Charge), Matthew T. Lowney, Billy  Commons, Pamela Davidson, Steve Gaty, Eric Hauswirth, Benjamin  Licht, Kimberly McGatlin, and Adam Vogt made key contributions to this  report."], "subsections": []}]}], "fastfact": ["The Drug Enforcement Administration has recently obligated, on average, over $17 million a year to help state and local agencies eradicate millions of illegal marijuana plants. Agencies in states where marijuana is legal also received funds because illegal growing can occur on national forests or trespassed farm lands.", "Much of these funds were used for helicopter support and overtime, reflecting long days in remote areas.", "We found that agencies inconsistently reported data to DEA, making it difficult for DEA to reliably assess program performance.", "We recommended that DEA improve its oversight of program performance and spending."]}
{"id": "GAO-18-701T", "url": "https://www.gao.gov/products/GAO-18-701T", "title": "Immigration: Progress and Challenges in the Management of Immigration Courts and Alternatives to Detention Program", "published_date": "2018-09-18T00:00:00", "released_date": "2018-09-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of Justice's EOIR is responsible for conducting immigration court proceedings, appellate reviews, and administrative hearings to fairly, expeditiously, and uniformly administer and interpret U.S. immigration laws. The Department of Homeland Security's ICE manages the U.S. immigration detention system, which houses foreign nationals, including families, whose immigration cases are pending or who have been ordered removed from the country. ICE implemented the ATD program in 2004 to be a cost-effective alternative to detention that uses case management and electronic monitoring.", "This statement addresses (1) EOIR's caseload, including the backlog, and how EOIR manages immigration court operations, including hiring, workforce planning, and technology use; and (2) participation in and the cost of the ATD program and the extent to which ICE has measured the performance of the ATD program. This statement is based on two reports and a testimony GAO issued from November 2014 through April 2018, as well as actions agencies have taken, as of September 2018, to address resulting recommendations. For the previous reports and testimony, GAO analyzed EOIR and ICE data, reviewed documentation, and interviewed officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In June 2017, GAO reported that the Executive Office for Immigration Review's (EOIR) immigration court case backlog\u2014cases pending from previous years still open at the start of a new fiscal year\u2014more than doubled from fiscal years 2006 through 2015 (see figure), primarily due to declining cases completed per year.", "GAO also reported in June 2017 that EOIR could take several actions to address management challenges related to hiring, workforce planning, and technology utilization, among other things. For example, EOIR did not have efficient practices for hiring immigration judges. EOIR data showed that on average from February 2014 through August 2016, EOIR took more than 21 months to hire a judge. GAO also found that EOIR was not aware of the factors most affecting the length of its hiring process. GAO recommended that EOIR assess its hiring process to identify efficiency opportunities. As of January 2018, EOIR had made progress in increasing its number of judges but remained below its fiscal year 2017 authorized level. To better ensure that it accurately and completely identifies opportunities for efficiency, EOIR needs to assess its hiring process.", "In November 2014, GAO reported that the number of aliens who participated in U.S. Immigration and Customs Enforcement's (ICE) Alternatives to Detention (ATD) program increased from 32,065 in fiscal year 2011 to 40,864 in fiscal year 2013. GAO also found that the average daily cost of the program\u2014$10.55\u2014was significantly less than the average daily cost of detention\u2014$158\u2014in fiscal year 2013. Additionally, ICE established two performance measures to assess the ATD program's effectiveness, but limitations in data collection hindered ICE's ability to assess program performance. GAO recommended that ICE collect and report on additional court appearance data to improve ATD program performance assessment, and ICE implemented the recommendation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO previously made recommendations to EOIR to improve its hiring process, among other things, and to ICE to improve ATD performance assessment. EOIR and ICE generally agreed and implemented or reported actions planned to address the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our work on the immigration  court system and the Alternatives to Detention (ATD) program. Each  year, the Department of Homeland Security (DHS) initiates hundreds of  thousands of cases with the U.S. immigration court system to decide  whether respondents\u2014foreign nationals charged on statutory grounds of  inadmissibility or deportability\u2014are removable as charged; and, if so,  should be ordered removed from the United States or granted any  requested relief or protection from removal and permitted to lawfully  remain in the country. Within DHS, U.S. Immigration and Customs  Enforcement (ICE) operated on a budget of nearly $3 billion in fiscal year  2017 to manage the U.S. immigration detention system, which houses  foreign nationals, including families, whose immigration cases are  pending or who have been ordered removed from the country.", "With regards to the immigration court system, the Department of Justice\u2019s  (DOJ) Executive Office for Immigration Review (EOIR) is responsible for  conducting immigration court proceedings, appellate reviews, and  administrative hearings to fairly, expeditiously, and uniformly administer  and interpret U.S. immigration laws and regulations. Within EOIR,  immigration judges at 58 immigration courts located nationwide preside  over removal proceedings for respondents detained by ICE or released  pending the outcome of their proceedings, to determine their removability  and eligibility for any relief being sought. In addition to removal  proceedings, immigration judges also conduct certain other types of  hearings, such as to review negative credible fear determinations and ICE  custody and bond decisions, as well as make decisions on motions, such  as motions to reopen cases or reconsider prior decisions. Members of  EOIR\u2019s Board of Immigration Appeals hear and issue decisions regarding  appeals of immigration judges\u2019 decisions and certain DHS decisions.", "With regards to the ATD program, ICE is responsible for the oversight of  foreign nationals who, if not detained in a detention facility, were released  into the community. In November 2014, we reported that ICE uses one or  more release options when it determines that a foreign national is not to  be detained in ICE\u2019s custody\u2014including bond, order of recognizance,  order of supervision, parole, or on condition of participation in the ATD  program. ICE implemented the ATD program in 2004 to be a cost- effective alternative to detention that uses case management and  electronic monitoring to ensure adult foreign nationals released into the  community comply with their release conditions\u2014including requirements  to appear at immigration court hearings\u2014and comply with final orders of  removal from the United States.", "The ATD program seeks to provide an enhanced monitoring option for  those foreign nationals for whom ICE, or an immigration judge, has  determined that detention is neither mandated nor appropriate, yet may  need a higher level of supervision than that provided by the less  restrictive release conditions, such as being released on bond. Foreign  nationals enrolled in the ATD program may be subject to various types of  supervision, including office visits, unscheduled home visits, and  electronic monitoring\u2014Global Positioning System (GPS) equipment or a  telephonic reporting system. ICE generally makes all decisions about the  appropriate level of supervision and type of technology with which a  foreign national should be monitored. However, a private contractor  carries out the case management for foreign nationals enrolled in one of  the two components of the ATD program that were available at the time of  our November 2014 report.", "My statement today addresses: (1) EOIR\u2019s caseload, including the  backlog, and how EOIR manages immigration court operations, including  workforce planning, hiring, and technology utilization; and (2) participation  in and the cost of the ATD program and the extent to which ICE has  measured the performance of the ATD program. This statement is based  on two reports and one testimony that we issued between November  2014 and April 2018, as well as actions agencies have taken, as of  September 2018, to address our recommendations from the reports. To  perform the work for our previous reports and testimony on the  immigration courts, we analyzed data on immigration case receipts and  completions from EOIR\u2019s case management system for fiscal years 2006  through 2015; examined documentation, such as contracts for workforce  planning services; and interviewed EOIR and DHS officials from  headquarters and six immigration courts. To perform the work for our  previous report on ATD, we reviewed agency documents, analyzed ATD  program data from fiscal years 2011 through 2013, and interviewed ICE  officials responsible for the ATD program. More detailed information  about our scope and methodology can be found in our reports and  testimony. To determine actions the agencies have taken to address  recommendations we made in these reports as of September 2018, we  collected documentation and testimony from ICE and EOIR officials.", "The work upon which this testimony is based was conducted 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."], "subsections": [{"section_title": "The Immigration Court Backlog Grew and EOIR Has Faced Long-Standing Management Challenges", "paragraphs": [], "subsections": [{"section_title": "The Immigration Courts\u2019 Caseload and Case Backlog Grew As Immigration Courts Completed Fewer Cases", "paragraphs": ["We reported in June 2017 that our analysis of EOIR\u2019s annual immigration  court system caseload\u2014the number of open cases before the court  during a single fiscal year\u2014showed that it grew 44 percent from fiscal  years 2006 through 2015 due to an increase in the case backlog, while  case receipts remained steady and the immigration courts completed  fewer cases. For the purpose of our analysis, the immigration courts\u2019  annual caseload was comprised of three parts: (1) the number of new  cases filed by DHS; (2) the number of other case receipts resulting from  remands from the Board of Immigration Appeals and motions to reopen  cases, reconsider prior decisions, or recalendar proceedings; and (3) the  case backlog\u2014the number of cases pending from previous years that  remain open at the start of a new fiscal year. During this 10-year period,  the immigration courts\u2019 overall annual caseload grew from approximately  517,000 cases in fiscal year 2006 to about 747,000 cases in fiscal year  2015, as shown in figure 1.", "We further reported in June 2017 that, according to our analysis, total  case receipts remained about the same in fiscal years 2006 and 2015 but  fluctuated over the 10-year period, with new case receipts generally  decreasing and other case receipts generally increasing. Over the same  period, EOIR\u2019s case backlog more than doubled. Specifically, immigration  courts had a backlog of about 212,000 cases pending at the start of fiscal  year 2006 and the median pending time for those cases was 198 days.  By the beginning of fiscal year 2009, the case backlog declined slightly to  208,000 cases. From fiscal years 2010 through 2015, the case backlog  grew an average of 38,000 cases per year. At the start of fiscal year  2015, immigration courts had a backlog of about 437,000 cases pending  and the median pending time for those cases was 404 days.", "The increase in the immigration court case backlog occurred as  immigration courts completed fewer cases annually. In particular, the  number of immigration court cases completed annually declined by 31  percent from fiscal year 2006 to fiscal year 2015\u2014from about 287,000  cases completed in fiscal year 2006 to about 199,000 completed in 2015.  According to our analysis, while the number of cases completed annually  declined, the number of immigration judges increased between fiscal year  2006 and fiscal year 2015. This resulted in a lower number of case  completions per immigration judge at the end of the 10-year period.", "Additionally, we reported in June 2017 that initial immigration court case  completion time increased more than fivefold between fiscal year 2006  and fiscal year 2015. Overall, the median initial completion time for  cases increased from 43 days in fiscal year 2006 to 286 days in fiscal  year 2015. However, case completion times varied by case type and  detention status. For example, the median number of days to complete a  removal case, which comprised 97 percent of EOIR\u2019s caseload for this  time period, increased by 700 percent from 42 days in fiscal year 2006 to  336 days in fiscal year 2015. However, the median length of time it took  to complete a credible fear case, which comprised less than 1 percent of  EOIR\u2019s caseload during this period, took 5 days to complete in fiscal year  2006 as well as in fiscal year 2015. Initial case completion times for both  detained and non-detained respondents more than quadrupled from fiscal  year 2006 through fiscal year 2015. The median case completion time  for non-detained cases, which comprised 79 percent of EOIR\u2019s caseload  from fiscal year 2006 to fiscal year 2015, grew more than fivefold from 96  days to 535 days during this period. Similarly, the median number of days  to complete a detained case, which judges are to prioritize on their  dockets, quadrupled over the 10-year period, increasing from 7 days in  fiscal year 2006 to 28 days in fiscal year 2015.", "EOIR officials, immigration court staff, DHS attorneys, and other experts  and stakeholders we interviewed provided various potential reasons why  the case backlog may have increased and case completion times slowed  in recent years. These reasons included: a lack of court personnel, such as immigration judges, legal clerks,  and other support staff;  insufficient funding to appropriately staff the immigration courts; a surge in new unaccompanied children cases, beginning in 2014,  which may take longer to adjudicate than other types of cases;   frequent use of continuances\u2014temporary case adjournments until  a different day or time\u2014by immigration judges; and   issues with the availability and quality of foreign language  translation."], "subsections": []}, {"section_title": "EOIR Has Initiated Actions to Improve Its Management of the Immigration Courts, but Has Faced Long-Standing Challenges", "paragraphs": ["We also reported in June 2017 that EOIR has faced long-standing  management and operational challenges. In particular, we identified  challenges related to EOIR\u2019s workforce planning, hiring, and technology  utilization, among other things. We recommended actions to improve  EOIR\u2019s management in these areas. EOIR generally concurred and has  initiated actions to address our recommendations. However, EOIR needs  to take additional steps to fully implement our recommendations to help  strengthen the agency\u2019s management and reduce the case backlog.", "Workforce planning. In June 2017, we reported that EOIR estimated  staffing needs using an informal approach that did not account for long- term staffing needs, reflect EOIR\u2019s performance goals, or account for  differences in the complexity of court cases. For example, in developing  its staffing estimate, EOIR did not calculate staffing needs beyond the  next fiscal year or take into account resources needed to achieve the  agency\u2019s case completion goals, which establish target time frames in  which immigration judges are to complete a specific percentage of certain  types of cases. Furthermore, we found that, according to EOIR data,  approximately 39 percent of all immigration judges were eligible to retire  as of June 2017, but EOIR had not systematically accounted for these  impending retirements in its staffing estimate.", "At the time of our review, EOIR had begun to take steps to account for  long-term staffing needs, such as by initiating a workforce planning report  and a study on the time it takes court staff to complete key activities.  However, we found that these efforts did not align with key principles of  strategic workforce planning that would help EOIR better address current  and future staffing needs. EOIR officials also stated that the agency had  begun to develop a strategic plan for fiscal years 2018 through 2023 that  could address its human capital needs. We recommended that EOIR  develop and implement a strategic workforce plan that addresses key  principles of strategic workforce planning.", "EOIR agreed with our recommendation. In February 2018, EOIR officials  told us that they had established a committee and working group to  examine the agency\u2019s workforce needs and would include workforce  planning as a key component in EOIR\u2019s forthcoming strategic plan.  Specifically, EOIR officials stated that the agency had established the  Immigration Court Staffing Committee in April 2017 to examine how to  best leverage its existing judicial and court staff workload model to  address its short- and long-term staffing needs, assess the critical skills  and competencies needed to achieve future programmatic results, and  develop strategies to address human capital gaps, among other things. In  February 2018, EOIR officials stated that the agency replaced this  committee, which had completed its work, with a smaller working group of  human resource employees charged with addressing the agency\u2019s  strategic workforce planning. These are positive steps, but to fully  address our recommendation, EOIR needs to continue to develop, and  then implement a strategic workforce plan that: (1) addresses the  agency\u2019s short- and long-term staffing needs; (2) identifies the critical  skills and competencies needed to achieve future programmatic results;  and (3) includes strategies to address human capital gaps. Once this  strategic workforce plan is completed, EOIR needs to monitor and  evaluate the agency\u2019s progress toward its human capital goals.", "Hiring. Additionally, in our June 2017 report, we found that EOIR did not  have efficient practices for hiring new immigration judges, which has  contributed to immigration judges being staffed below authorized levels  and to staffing shortfalls. For example, in fiscal year 2016, EOIR received  an appropriation supporting 374 immigration judge positions but had 289  judges on board at the end of the fiscal year. EOIR officials attributed  these gaps to delays in the hiring process. Our analysis of EOIR hiring  data supported their conclusion. Specifically, we found that from February  2014 through August 2016, EOIR took an average of 647 days to hire an  immigration judge\u2014more than 21 months. As a result, we recommended  that EOIR (1) assess the immigration judge hiring process to identify  opportunities for efficiency; (2) use the assessment results to develop a  hiring strategy that targets short- and long-term human capital needs; and  (3) implement any corrective actions related to the hiring process  resulting from this assessment.", "In response to our report, EOIR stated that it concurred with our  recommendation and was implementing a new hiring plan as announced  by the Attorney General in April 2017 intended to streamline hiring.  Among other things, EOIR stated that the new hiring plan sets clear  deadlines for assessing applicants moving through different stages of the  process and for making decisions on advancing applicants to the next  stage, and allows for temporary appointments for selected judges  pending full background investigations. In February 2018, EOIR indicated  to us that it had begun to use the process outlined in its hiring plan to fill  judge vacancies. The Attorney General also announced in April 2017 that  the agency would commit to hire an additional 50 judges in 2018 and 75  additional judges in 2019. In January 2018, EOIR officials told us that the  agency had a total of 330 immigration judges, an increase of 41 judges  since September 2016. However, EOIR remained below its fiscal year  2017 authorized level of 384 immigration judges based on funding  provided in fiscal years 2016 and 2017. Additionally, the Consolidated  Appropriations Act, 2018 provided funding for EOIR to hire at least 100  additional immigration judge teams, including judges and supporting staff,  with a goal of fielding 484 immigration judge teams nationwide by 2019.", "In September 2018, EOIR reported it had a total of 351 immigration  judges and was continuing to hire additional judges.", "Hiring additional judges is a positive step; however, EOIR has not  assessed its hiring process to identify opportunities for efficiency, and we  found in our June 2017 report that EOIR was not aware of the factors  most affecting its hiring process. For example, we reported that EOIR  officials attributed the length of the hiring process to delays in the Federal  Bureau of Investigation background check process, which is largely  outside of EOIR\u2019s control. However, our analysis found that while  background checks accounted for an average of 41 days from fiscal year  2015 through August 2016, other processes within EOIR\u2019s control  accounted for a greater share of the total hiring time. For example, for the  same period our analysis found that an average of 135 days elapsed  between the date EOIR posted a vacancy announcement and the date  EOIR officials began working to fill the vacancy. By assessing its hiring  process, EOIR could better ensure that it is accurately and completely  identifying opportunities for efficiency. To fully address our  recommendation, EOIR will need to continue to improve its hiring process  by (1) assessing the prior hiring process to identify opportunities for  efficiency; (2) developing a hiring strategy targeting short- and long-term  human capital needs; and (3) implementing corrective actions in response  to the results of its assessment of the hiring process.", "Technology utilization. In June 2017 we also reported on EOIR\u2019s  technology utilization, including the agency\u2019s oversight of the ongoing  development of a comprehensive electronic-filing (e-filing) capability\u2014a  means of transmitting documents and other information to immigration  courts through an electronic medium, rather than on paper. EOIR  identified the implementation of an e-filing system as a goal in 2001, but  had not, as of September 2018, fully implemented this system. In 2001,  EOIR issued an executive staff briefing for an e-filing system that stated  that only through a fully electronic case management and filing system  would the agency be able to accomplish its goals. This briefing also cited  several benefits of an e-filing system, including, among other things,  reducing the data entry, filing, and other administrative tasks associated  with processing paper case files; and providing the ability to file court  documents from private home and office computers.", "As we reported in June 2017, EOIR initiated a comprehensive e-filing  effort in 2016\u2014the EOIR Court and Appeals System (ECAS)\u2014for which  EOIR had documented policies and procedures governing how its primary  ECAS oversight body\u2014the ECAS Executive Committee\u2014would oversee  ECAS through the development of a proposed ECAS solution. However,  we found that EOIR had not yet designated an entity to oversee ECAS  after selection of a proposed solution during critical stages of its  development and implementation. We recommended that in order to help  ensure EOIR meets its cost and schedule expectations for ECAS, the  agency identify and establish the appropriate entity to oversee ECAS  through full implementation. EOIR concurred and stated that it had  selected and convened the EOIR Investment Review Board to serve as  the ECAS oversight body with the EOIR Office of Information Technology  directly responsible for the management of the ECAS program.", "EOIR officials told us in February 2018 that the board convened in  October 2017 and January 2018 to discuss, among other things, the  ECAS program. However, as we reported in June 2017, EOIR officials  previously told us that the EOIR Investment Review Board was never  intended to oversee ECAS implementation due to the detailed nature of  this system\u2019s implementation. As of September 2018, EOIR has not  demonstrated its selection of, or how the EOIR Investment Review Board  is to serve as the oversight body for ECAS. Additionally, we  recommended in June 2017 EOIR develop and implement a plan that is  consistent with best practices for overseeing ECAS to better position the  agency to identify and address any risks and implement ECAS in  accordance with its cost, schedule, and operational expectations. As of  September 2018, EOIR has not indicated that it has developed such a  plan."], "subsections": []}, {"section_title": "ATD Participation Increased and Costs Less than Detention; ICE Established Program Performance Measures Participation in the ATD Program Increased and Average Daily Cost of the Program Was Lower than the Average Daily Cost of Detention", "paragraphs": ["In November 2014 we reported that the number of foreign nationals who  participated in the ATD program increased from 32,065 in fiscal year  2011 to 40,864 in fiscal year 2013 in part because of increases in either  enrollments or the average length of time foreign nationals spent in one of  the program\u2019s components. For example, during this time period, the  number of foreign nationals enrolled in the component of the program that  was run by a contractor who maintained in-person contact with the foreign  national and monitored the foreign national with either GPS equipment or  a telephonic reporting system, increased by 60 percent. In addition, the  average length of time foreign nationals spent in the other component of  the program, which offered a lower level of supervision at a lower contract  cost but still involved ICE monitoring of foreign nationals using either  telephonic reporting or GPS equipment provided by a contractor,  increased by 80 percent\u2014from about 10 months to about 18 months. ICE  officials stated that how long a foreign national is in the ATD program  before receiving a final decision on his or her immigration proceedings  depends on how quickly EOIR can process immigration cases.", "We also found in our November 2014 report that the average daily cost of  the ATD program was $10.55 in fiscal year 2013, while the average daily  cost of detention was $158. While our analyses showed that the  average daily cost of the ATD program was significantly less than the  average daily cost of detention, the length of immigration proceedings  affected the cost-effectiveness of the ATD program to varying extents  under different scenarios. As previously discussed, immigration judges  are to prioritize detained cases, and our June 2017 report found that  EOIR data showed that median case completion times for non-detained  cases were greater than for detained cases. Accordingly, the length of  immigration proceedings for foreign nationals in detention may be shorter  than those in the ATD program.", "Specifically, in our November 2014 report, we conducted two analyses to  estimate when the cost of keeping foreign nationals in the ATD program  would have surpassed the cost of detaining a foreign national in a facility.  Under our first analysis, we considered the average costs of ATD and  detention and the average length of time foreign nationals in detention  spent awaiting an immigration judge\u2019s final decision. We found that the  ATD program would have surpassed the cost of detention after a foreign  national was in the program for 1,229 days in fiscal year 2013\u2014 significantly longer than the average length of time foreign nationals spent  in the ATD program in that year (383 days). In our second analysis, we  considered the average costs of ATD and detention and the average  length of time foreign nationals spent in detention\u2014regardless of whether  they had received a final decision from an immigration judge\u2014since some  foreign nationals may not be in immigration proceedings or may not have  reached their final hearing before ICE released them from detention.  ICE reported that the average length of time that a foreign national was in  detention in fiscal year 2013 was 29 days. Using this average, we  calculated the average length of time foreign nationals could have stayed  in the ATD program before they surpassed the cost of detention would  have been 435 days in fiscal year 2013."], "subsections": []}, {"section_title": "ICE Established ATD Performance Measures, and Took Actions to Ensure the Measures Monitored All Foreign Nationals Enrolled in the Program", "paragraphs": ["We found in our November 2014 report that ICE established two program  performance measures to assess the ATD program\u2019s effectiveness in (1)  ensuring foreign national compliance with court appearance requirements  and (2) ensuring removals from the United States, but limitations in data  collection hindered ICE\u2019s ability to assess overall program performance.", "Compliance with court appearances. For the component of the ATD  program managed by the contractor, data collected by the ATD contractor  from fiscal years 2011 through 2013 showed that over 99 percent of  foreign nationals with a scheduled court hearing appeared at their  scheduled court hearings while participating in the ATD program. The  court appearance rate dropped slightly to over 95 percent of foreign  nationals with a scheduled final hearing appearing at their hearing.  However, we reported that ICE did not collect similar court compliance  data for foreign nationals in the component of the ATD program that ICE  was responsible for managing\u2014which accounted for 39 percent of the  overall ATD program in fiscal year 2013. As a result, we recommended  that ICE collect and report data on foreign national compliance with court  appearance requirements for participants in this component of the ATD  program.", "As of June 2017, ICE reported that the ATD contractor was collecting  data on foreign nationals\u2019 court appearance compliance for foreign  nationals in both components of the ATD program, and at that time, was  collecting data for approximately 88 percent of foreign nationals that were  awaiting a hearing. ICE officials stated that they did not expect that 100  percent of foreign nationals in the ATD program would be tracked for  court appearance compliance by the contractor because there may be  instances where ICE has chosen to monitor a foreign national directly,  rather than have the contractor track a foreign national\u2019s compliance with  court appearance requirements. Officials stated that ICE officers may  decide to monitor a foreign national directly because they determined that  it is in the government\u2019s best interest, or it was fiscally responsible when a  foreign national\u2019s court date was far in the future and court tracking  conducted by the contractor would be costly. In July 2017, ICE reported  that they assessed whether ICE officers that directly monitor foreign  nationals in the ATD program had reliable data to determine court  appearance compliance and found no practical or appropriate way to  obtain such data without devoting a significant amount of ICE\u2019s limited  resources. Although ICE is not collecting court appearance compliance  data for all foreign nationals in both components of the ATD program, as  of July 2017, it has met the intent of our recommendation by collecting  and reporting on all available data on the majority of foreign nationals in  both components of the ATD program.", "Removals from the United States. For this program performance  measure, a removal is attributed to the ATD program if the foreign  national (1) was enrolled in ATD for at least 1 day, and (2) was removed  or had departed voluntarily from the United States in the same fiscal year,  regardless of whether the foreign national was enrolled in ATD at the time  the foreign national left the country. The ATD program met its goal for  removals in fiscal years 2012 and 2013. For example, in fiscal year  2013, ICE reported 2,901 removals of foreign nationals in the ATD  program\u2014surpassing its goal of 2,899 removals.", "ATD program performance measures provide limited information about  the foreign nationals who are terminated from the ATD program prior to  receiving the final disposition of their immigration proceedings, or who  were removed or voluntarily departed from the country. Specifically, ICE  counts a foreign national who was terminated from the program and was  subsequently removed from the United States toward the ATD removal  performance measure as long as the foreign national was in the program  during the same fiscal year he or she was removed from the country.  However, foreign nationals who were terminated from the program do not  count toward court appearance rates if they subsequently do not appear  for court. ICE officials reported that it would be challenging to determine a  foreign national\u2019s compliance with the terms of his or her release after  termination from the ATD program given insufficient resources and the  size of the nondetained foreign national population. In accordance with  ICE guidance, staff resources are instead directed toward apprehending  and removing foreign nationals from the United States who are  considered enforcement and removal priorities.", "Chairman Johnson, Ranking Member McCaskill, and Members of the  Committee, this completes my prepared statement. I would be happy to  respond to any questions you or the members of the committee may  have."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Taylor Matheson (Assistant  Director), Tracey Cross, Ashley Davis, Paul Hobart, Sasan J. \u201cJon\u201d Najmi,  and Michele Fejfar. Key contributors for the previous work on which this  testimony is based are listed in each product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["This testimony addresses our earlier work on 2 immigration topics:", "The U.S. immigration court system, which considers hundreds of thousands of removal cases a year. The case backlog doubled from 2006 through 2015, even as new cases declined. We recommended improving the system's management, including its hiring process.", "The Alternatives to Detention program, in which people with pending cases are released and may be monitored electronically. Immigration and Customs Enforcement reported high levels of program compliance from 2011 through 2013 but did not collect data on the entire program. We recommended improving program performance measures."]}
{"id": "GAO-18-484T", "url": "https://www.gao.gov/products/GAO-18-484T", "title": "Federal Real Property: DHS and GSA Have Not Implemented Recommendations to Strengthen the Management of DHS Headquarters Consolidation", "published_date": "2018-04-12T00:00:00", "released_date": "2018-04-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DHS and GSA have been managing efforts to consolidate DHS executive leadership, operational management, and other personnel at one secure headquarters location rather than at multiple locations throughout the Washington, D.C., metropolitan area. The consolidation is to include the development of multi-billion dollar headquarters facilities at the St. Elizabeths campus in Washington, D.C.", "In September 2014, GAO issued a report entitled: Federal Real Property: DHS and GSA Need to Strengthen the Management of DHS Headquarters Consolidation (GAO-14-648). This statement summarizes the key findings and recommendations from this report, and provides a status update as of April 2018 on DHS and GSA implementation of GAO's recommendations.", "To complete the September 2014 report, GAO compared DHS and GSA capital planning efforts against applicable leading practices, interviewed officials, and reviewed cost and schedule estimates for the St. Elizabeths project. To assess subsequent DHS and GSA actions to implement GAO's September 2014 recommendations, GAO conducted periodic follow-up with agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In its September 2014 report, GAO found that Department of Homeland Security (DHS) and General Services Administration (GSA) planning for the DHS headquarters consolidation at the St. Elizabeths campus in Washington, D.C. did not fully conform with leading capital decision-making practices intended to help agencies effectively plan and procure assets. Specifically, GAO found that DHS and GSA had not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives that would help officials adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. GAO recommended that DHS and GSA conduct various assessments and analyses and use the results to inform updated DHS headquarters consolidation plans. The agencies concurred with this recommendation.", "In its September 2014 report, GAO also found that DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths did not conform or, only minimally or partially conformed, with leading estimating practices, and were therefore unreliable. Thus, GAO recommended that DHS and GSA develop revised cost and schedule estimates for the remaining portions of the consolidation project in accordance with leading practices, and the agencies concurred with this recommendation.", "The DHS Headquarters Consolidation Accountability Act of 2015, enacted in April 2016 would, according to the accompanying Senate committee report, ensure that DHS and GSA fully address the recommendations from GAO's September 2014 report and provide Congress the information needed to make sound decisions regarding the project. Among other things, the Act required DHS, in coordination with GSA, to submit information to Congress, including various assessments and updated cost and schedule estimates related to the DHS headquarters consolidation. As of April 2018, however, DHS and GSA had not submitted the information to Congress that would either meet the requirements of the Act or address GAO's recommendations. DHS and GSA officials cited funding instability as one challenge to updating consolidation plans and cost and schedule estimates."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Among other things, GAO recommended in its September 2014 report that DHS and GSA develop revised DHS headquarters plans that reflect leading practices for capital decision making and also reliable cost and schedule estimates. DHS and GSA concurred with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the Department of Homeland  Security (DHS) headquarters consolidation project at St. Elizabeths  campus in Washington, D.C., including a status update on the  recommendations that we made in a 2014 report on this issue. The  multi-billion dollar construction project, managed by DHS and the General  Services Administration (GSA), is the centerpiece of DHS\u2019s larger effort  to manage and consolidate its workforce of over 20,000 in the National  Capital Region. As conceived in 2006, the federally owned St. Elizabeths  site was designed to consolidate DHS\u2019s executive leadership, operational  management, and other personnel at one secure location rather than at  multiple locations throughout the Washington, D.C., metropolitan area.  The St. Elizabeths project is intended to allow for more efficient DHS  operations and provide long-term cost savings by reducing reliance on  leased space. From fiscal year 2006 through fiscal year 2014, the St.  Elizabeths consolidation project had received approximately $495 million  through DHS appropriations and approximately $1.1 billion through GSA  appropriations, for a total of over $1.5 billion. However, since  construction began in fiscal year 2009, the project has generally received  less funding than requested, which DHS and GSA officials have stated  has led to cost escalations and schedule delays. The President\u2019s fiscal  year 2019 budget requests a total of about $400 million for continued  consolidation and new development funds for the project.", "In September 2014, we made three recommendations to improve the  management of DHS headquarters consolidation, and DHS and GSA  concurred with the recommendations.", "In 2014, we recommended that:  1.  DHS and GSA conduct the following assessments and use the results  to inform updated DHS headquarters consolidation plans: a comprehensive needs assessment and gap analysis of current  and needed capabilities that take into consideration changing  conditions; and an alternatives analysis that identifies the costs and benefits of  leasing and construction alternatives for the remainder of the  project and prioritizes options to account for funding instability.  2.  DHS and GSA develop revised cost and schedule estimates for the  remaining portions of the consolidation project that conform to GSA  guidance and leading practices for cost and schedule estimation,  including an independent evaluation of the estimates.  3.  DHS designate the headquarters consolidation program a major  acquisition, consistent with DHS acquisition policy, and apply DHS  acquisition policy requirements.", "In our September 2014 report, we further stated that Congress should  consider making future funding for the St. Elizabeths project contingent  upon DHS and GSA developing a revised headquarters consolidation  plan that conforms with leading practices and that (1) recognizes changes  in workplace standards, (2) identifies which components are to be  colocated at St. Elizabeths and in leased and owned space throughout  the National Capital Region, and (3) develops and provides reliable cost  and schedule estimates.", "Subsequently, in 2015, we designated our three recommendations to  DHS and GSA as \u201cPriority Recommendations\u201d due in part to the important  fiscal and operational implications of DHS headquarters consolidation. In  addition, we have designated the broader areas of Managing Federal  Real Property and Strengthening DHS Management Functions as High  Risk areas due to mismanagement vulnerabilities or a need for  transformation.", "The Department of Homeland Security (DHS) Headquarters  Consolidation Accountability Act of 2015, enacted in April 2016 would,  according to the accompanying Senate committee report, ensure that  DHS and GSA fully address the recommendations from our September  2014 report and provide Congress the additional information needed to  make sound decisions regarding the headquarters consolidation project.  Among other things, the Act requires DHS, in coordination with GSA, to  submit information to Congress about DHS headquarters consolidation  efforts not later than 120 days after enactment (enacted April 29, 2016).  Required information includes a comprehensive assessment of the  difference between the current real property and facilities needed by DHS  in the National Capital Region, an analysis that identifies the costs and  benefits of leasing and construction alternatives for the remainder of the  consolidation project, and updated cost and schedule estimates.  Furthermore, under the Act, the Comptroller General is to report on its  review and evaluation of the quality and reliability of the cost and  schedule estimates not later than 90 days after their submittal to  Congress. As of April 2018, DHS and GSA had not submitted the  required headquarters consolidation information to Congress or  implemented our related recommendations.", "Although DHS and GSA have yet to provide the information to Congress,  construction is proceeding at the St. Elizabeths campus. Figures 1 and 2  show progress made to the Center Building from September 2016 to  March 2018. This structure will house the Secretary of Homeland Security  and other key leadership.", "My testimony summarizes the key findings of our September 2014 report  on DHS and GSA efforts to manage the DHS headquarters consolidation  project, and provides a status update on DHS and GSA implementation of  our recommendations. To complete our September 2014 report, we  compared DHS and GSA capital planning efforts against applicable  leading practices in capital decision making and interviewed DHS and  GSA officials responsible for the planning and management of the DHS  headquarters consolidation. We also compared DHS and GSA  documents on the estimated cost and schedule for the St. Elizabeths  project with cost- and schedule-estimating leading practices we have  identified in our prior work, and relevant GSA guidance. To assess  subsequent DHS and GSA actions to implement our September 2014  recommendations, we conducted periodic follow-up with DHS and GSA  officials and obtained relevant documentation. The work upon which this  statement is based was conducted 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."], "subsections": [{"section_title": "Consolidation Plans Did Not Fully Conform with Leading Capital Decision- Making Practices and GAO Recommendation Has Not Been Implemented", "paragraphs": ["In our September 2014 report, we found that DHS and GSA planning for  the DHS headquarters consolidation did not fully conform with leading  capital decision-making practices intended to help agencies effectively  plan and procure assets. Specifically, we found that DHS and GSA had  not conducted a comprehensive assessment of current needs, identified  capability gaps, or evaluated and prioritized alternatives that would help  officials adapt consolidation plans to changing conditions and address  funding issues as reflected in leading practices. At that time, DHS and  GSA officials reported that they had taken some initial actions that may  facilitate consolidation planning in a manner consistent with leading  practices. For example, DHS had an overall goal of reducing the square  footage allotted per employee across the department in accordance with  workplace standards, such as standards for telework and hoteling. As  we reported in 2014, DHS and GSA officials acknowledged that new  workplace standards could create a number of new development options  to consider, as the new standards would allow for more staff to occupy  the space at St. Elizabeths than previously anticipated. DHS and GSA  officials also reported at that time that analyzing different leasing options  could affect consolidation efforts. However, we found that the  consolidation plans, which were finalized between 2006 and 2009, had  not been updated to reflect these actions.", "In addition, we found in September 2014 that funding for the St.  Elizabeths project had not aligned with what DHS and GSA initially  planned. We reported that according to DHS and GSA officials, the  funding gap between what DHS and GSA requested and what was  received from fiscal years 2009 through 2014, was over $1.6 billion.  According to these officials, this gap created cost escalations of over $1  billion and schedule delays of over 10 years relative to original estimates.  We found in 2014 that these delays posed challenges for DHS in terms of  its leasing portfolio. Specifically, DHS\u2019s long-term leasing portfolio was  developed based on the original expected completion date for St.  Elizabeths development in 2016. In 2014, DHS and GSA reported that  they had begun to work together to consider changes to the DHS  headquarters consolidation plans, but they had not announced when new  plans would be issued. Furthermore, because final documentation of  agency deliberations or analyses had not yet been developed, it was  unclear if any new plans would be informed by an updated  comprehensive needs assessment and capability gap analysis as called  for by leading capital decision-making practices. Therefore, in our  September 2014 report we recommended that DHS and GSA conduct  various assessments and analyses and use the results to inform updated  DHS headquarters consolidation plans. DHS and GSA concurred with this  recommendation and stated that their forthcoming draft St. Elizabeths  Enhanced Consolidation Plan would contain these analyses.", "As of April 2018, however, the agencies had not submitted updated plan  information to Congress that would either meet the requirements of the  DHS Headquarters Consolidation Accountability Act or address our  recommendation. According to DHS officials, the agencies prepared a  comprehensive response to the Act, including updated analyses, but the  information is no longer current and now needs to be revised and  revalidated before it is submitted to Congress. Officials told us that the  updated consolidation plans and analyses assumed that the project would  receive more funding in fiscal years 2017 and 2018 than was  appropriated. Further, officials told us that the current Administration is  expected to provide input on the planned DHS component occupancies at  the St. Elizabeths campus. We continue to believe that DHS and GSA  attention to following leading capital decision-making practices\u2014including  having a consolidation plan that justifies future actions\u2014is critical given  the project\u2019s multi-billion dollar cost and impact on departmental  operations."], "subsections": []}, {"section_title": "Cost and Schedule Estimates for the St. Elizabeths Project Did Not Reflect Leading Practices and GAO Recommendation Has Not Been Implemented", "paragraphs": ["In our September 2014 report, we found that DHS and GSA cost and  schedule estimates for the headquarters consolidation project at St.  Elizabeths did not conform or only minimally or partially conformed with  leading estimating practices, and were therefore unreliable.  Furthermore, we found that in some areas, the cost and schedule  estimates did not fully conform with GSA guidance relevant to developing  estimates.", "In 2014, we found that DHS and GSA cost estimates for the headquarters  consolidation project at St. Elizabeths did not reflect leading practices,  which rendered the estimates unreliable. For example, we found that the  2013 cost estimate\u2014the most recent available at the time of our 2014  report\u2014did not include (1) a life-cycle cost analysis of the project,  including the cost of repair, operations, and maintenance; (2) was not  regularly updated to reflect significant changes to the program including  actual costs; and (3) did not include an independent estimate to  determine whether other estimating methods produce similar results. In  addition, a sensitivity and a risk and uncertainty analysis had not been  performed to assess the reasonableness of the cost estimate. We have  previously reported that a reliable cost estimate is critical to the success  of any program. Specifically, we have found that such an estimate  provides the basis for informed investment decision making, realistic  budget formulation and program resourcing, meaningful progress  measurement, proactive course correction when warranted, and  accountability for results. Accordingly, in 2014, we concluded that DHS  and GSA would benefit from maintaining current and well-documented  estimates of project costs at St. Elizabeths\u2014even if project funding is not  fully secured.", "In 2014, we also found that the 2008 and 2013 schedule estimates (the  estimates available at the time of our review) did not include all activities  for both the government and its contractors necessary to accomplish the  project\u2019s objectives and did not include schedule baseline documents to  help measure performance as reflected in leading practices and GSA  guidance. For the 2008 schedule estimate, we found that resources (such  as labor, materials, and equipment) were not accounted for and a risk  assessment had not been conducted to predict a level of confidence in  the project\u2019s completion date. In addition, we found the 2013 schedule  estimate was unreliable because, among other things, it was incomplete  in that it did not provide details needed to understand the sequence of  events, including work to be performed in fiscal years 2014 and 2015.", "In 2014, we concluded that developing cost and schedule estimates  consistent with leading practices could promote greater transparency and  provide decision makers needed information about the St. Elizabeths  project and the larger DHS headquarters consolidation effort. However, in  commenting on our analysis of St. Elizabeths cost and schedule  estimates, DHS and GSA officials said that it would be difficult or  impossible to create reliable estimates that encompass the scope of the  entire St. Elizabeths project. In response to our findings, officials said that  given the complex, multiphase nature of the overall development effort,  specific estimates are created for smaller individual projects, but not for  the campus project as a whole. Therefore, in their view, leading  estimating practices and GSA guidance cannot reasonably be applied to  the high-level projections developed for the total cost and completion date  of the entire St. Elizabeths project. GSA stated that the higher-level,  milestone schedule currently being used to manage the program was  more flexible than the detailed schedule we proposed, and had proven  effective even with the highly variable funding provided for the project.", "However, our September 2014 review found this high-level schedule was  not sufficiently defined to effectively manage the program. For example,  our review showed that the schedule did not contain detailed schedule  activities that included all government, contractor, and applicable  subcontractor efforts. In our 2014 report, we recognized the challenges of  developing reliable cost and schedule estimates for a large-scale,  multiphase project like St. Elizabeths, particularly given its unstable  funding history and agreed that incorporating cost- and schedule- estimating leading practices could involve additional costs. However, we  also concluded that unless DHS and GSA invest in these practices,  Congress risked making funding decisions and DHS and GSA  management risked making resource allocation decisions without the  benefit that a robust analysis of levels of risk, uncertainty, and confidence  provides. Therefore, in our September 2014 report we recommended that  DHS and GSA develop revised cost and schedule estimates for the  remaining portions of the consolidation project in accordance with leading  practices. DHS and GSA concurred with the recommendation.", "As of April 2018, however, the agencies had not submitted revised cost  and schedule information to Congress that would either meet the  requirements of the DHS Headquarters Consolidation Accountability Act  or address our recommendation. GSA is leading efforts to revise the  project\u2019s cost and schedule estimates, and according to GSA officials, the  revised figures will take into account leading cost- and schedule-  estimation practices, including a risk assessment. We continue to believe  that creating up-to-date, reliable cost and schedule estimates for DHS  headquarters consolidation should be an integral part of DHS and GSA  efforts to reassess the project. Without this information, it will be more  difficult for agency officials and Members of Congress to make informed  decisions regarding resource allocations and compare competing funding  priorities."], "subsections": []}, {"section_title": "DHS Did Not Consistently Apply Its Acquisitions Guidance When Overseeing the St. Elizabeths Project, but Has Taken Steps to Implement GAO\u2019s Recommendation", "paragraphs": ["In our September 2014 report, we also found that DHS had not  consistently applied its major acquisition guidance for reviewing and  approving the headquarters consolidation project. Specifically, we found  that DHS had guidelines in place to provide senior management the  opportunity to review and approve its major projects, but DHS had not  consistently applied these guidelines to its efforts to work with GSA to  plan and implement headquarters consolidation. Part of the inconsistency  was the result of DHS designating the headquarters consolidation project  as a major acquisition in some years but not in others. For example, we  found that in 2010 and 2011, DHS identified the headquarters  consolidation project as a major acquisition and included the project on  DHS\u2019s Major Acquisitions Oversight List. Thus, the project was subject  to the oversight and management policies and procedures established in  DHS major acquisition guidance; however, the project did not comply with  major acquisition requirements as outlined by DHS guidelines. For  example, we found that the project had not produced any of the required  key acquisition documents requiring department-level approval, such as  life-cycle cost estimates and an acquisition program baseline, among  others.", "As we reported in 2014, in 2012, the project as a whole was dropped from  the list. Subsequently, in 2013 and 2014, DHS included the information  technology (IT) acquisition portion of the project on the list, but not the  entire project. DHS officials explained that they considered the St.  Elizabeths project to be more of a GSA acquisition rather than a DHS  acquisition because GSA owns the site and the majority of the building  construction is funded through GSA appropriations. In our 2014 report,  we recognized that GSA had responsibility for managing contracts  associated with the headquarters consolidation project. However, we also  noted that a variety of factors, including the overall cost, scope, and  visibility of the project, as well as the overall importance of the project in  the context of DHS\u2019s mission, made the consolidation project a viable  candidate for consideration as a major DHS acquisition. By not  consistently applying this review process to headquarters consolidation,  we concluded that DHS management risked losing insight into the progress of the St. Elizabeths project, as well as how the project fits in  with its overall acquisitions portfolio. Thus, in our September 2014 report  we recommended that the Secretary of Homeland Security designate the  headquarters consolidation program a major acquisition and apply DHS  acquisition policy requirements. DHS concurred with the  recommendation.", "As of April 2018, DHS has made some progress implementing this  recommendation. For example, on September 16, 2014, DHS issued an  Acquisition Decision Memorandum designating the DHS-funded portions  of the headquarters consolidation program as a Major Acquisition  Program to be overseen by the departmental Acquisition Review Board  (ARB). DHS also made progress implementing this recommendation by  conducting and documenting an ARB of the program in November 2016.  The ARB process provided DHS greater oversight of headquarters  consolidation, and provided a forum for officials to consider a wide range  of issues affecting consolidation efforts, such as funding and project  scope. In addition, in January 2018, DHS officials reported that they were  working to align headquarters consolidation program documentation to  meet the spirit of DHS acquisition policy guidance. We will reassess the  status of this recommendation after the consolidation plan and cost and  schedule estimates are updated and submitted to Congress per the DHS  Headquarters Consolidation Accountability Act. At that time, we believe  there will be more certainty about the future direction of the project  overall, and DHS\u2019s funded portion in particular, and we will be better able  to assess the level of DHS acquisitions oversight for the project.", "Chairman Perry, Ranking Member Correa, and Members of the  Subcommittee, this concludes my prepared statement. I look forward to  responding to any questions that you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions about this testimony,  please contact Chris Currie, Director, Homeland Security and Justice  Issues, 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 statement. GAO staff who made key contributions to  this statement are John Mortin (Assistant Director), Karen Richey  (Assistant Director), Juan\u00e1 Collymore, Jennifer Leotta, Thomas Lombardi,  David Lutter, and Erin O\u2019Brien.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The Department of Homeland Security is planning to consolidate operations and thousands of its workers at the St. Elizabeths campus in Washington, D.C. Construction began at the site in 2009.", "Over $2 billion has been appropriated for the project since fiscal year 2006, which was less than requested. DHS and General Services Administration officials told us this led to cost increases and delays.", "Since our 2014 report, Congress has required DHS, in coordination with GSA, to give them cost, schedule, and other information consistent with our report\u2019s recommendations. For this testimony, we found that the information has not yet been provided."]}
{"id": "GAO-18-431T", "url": "https://www.gao.gov/products/GAO-18-431T", "title": "Personnel Security Clearances: Additional Actions Needed to Implement Key Reforms and Improve Timely Processing of Investigations", "published_date": "2018-03-07T00:00:00", "released_date": "2018-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The government-wide personnel security clearance process was designated as a high-risk area in January 2018 because it represents one of the highest management risks in government.", "This testimony focuses on, among other things, the extent to which executive branch agencies (1) made progress reforming the security clearance process, and (2) are meeting timeliness objectives and reducing NBIB's investigative backlog.", "GAO's statement is based on information from public versions of its reports issued in November 2017 on continuous evaluation of clearance holders and in December 2017 on clearance reform efforts. Information that ODNI and OPM deemed sensitive was omitted. For those reports, GAO reviewed Executive Orders and PAC strategic documents; obtained data from the Office of the Director of National Intelligence (ODNI) on the timeliness of initial clearances and periodic reinvestigations; and interviewed officials from ODNI, NBIB, and other agencies."]}, {"section_title": "What GAO Found", "paragraphs": ["Executive branch agencies have made progress reforming the security clearance process, but long-standing key initiatives remain incomplete. Progress includes the issuance of federal adjudicative guidelines and updated strategic documents to help sustain the reform effort. However, agencies still face challenges in implementing aspects of the 2012 Federal Investigative Standards\u2014criteria for conducting background investigations\u2014and in implementing a continuous evaluation program. In addition, while agencies have taken steps to establish government-wide performance measures for the quality of investigations, neither the Director of National Intelligence (DNI) nor the interagency Security, Suitability, and Credentialing Performance Accountability Council (PAC) have set a milestone for completing their establishment.", "GAO's analysis of timeliness data for specific executive branch agencies showed that the number of agencies meeting investigation and adjudication timeliness objectives for initial secret and top secret security clearances and periodic reinvestigations decreased from fiscal years 2012 through 2016. For example, while 73 percent of agencies did not meet timeliness objectives for initial clearances for three of four quarters in fiscal year 2012, 98 percent of agencies did not meet these objectives in fiscal year 2016. The DNI has not developed a government-wide plan, including goals and milestones, to help agencies improve timeliness. Agencies' challenges in meeting timeliness objectives have contributed to a significant backlog of background investigations at the agency that is responsible for conducting the majority of investigations, the National Background Investigations Bureau (NBIB). NBIB documentation shows that the backlog of pending investigations increased from about 190,000 in August 2014 to more than 710,000 as of February 2018, as shown below. NBIB leadership has not developed a plan to reduce the backlog to a manageable level."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In November 2017 and December 2017, GAO made 12 recommendations to the DNI and the Director of NBIB, including setting a milestone for establishing measures for investigation quality, developing a plan to meet background investigation timeliness objectives, and developing a plan for reducing the backlog. NBIB concurred with the recommendations. The DNI concurred with some, but not all, of GAO's recommendations. GAO continues to believe they are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss personnel  security clearance reforms. The government-wide personnel security  clearance process was designated as a high-risk area in January 2018  because it represents one of the highest management risks in  government. A high-quality personnel security process is necessary to  minimize the risks of unauthorized disclosures of classified information  and to help ensure that information about individuals with criminal  histories or other questionable behavior is identified and assessed. In  2014, emphasis on security clearance reform was renewed following  high-profile events such as the September 2013 shooting at the  Washington Navy Yard by an individual who had both access to the  facility and a security clearance. In November and December 2017, we  reported, among other things, that the executive branch faces challenges  completing key reform efforts, processing security clearances, and  reducing a significant backlog in background investigations.", "In January 2018, in light of the serious challenges facing the interagency  Security, Suitability, and Credentialing Performance Accountability  Council (PAC), the entity responsible for driving the implementation of  and overseeing the reform efforts, we placed the government-wide  personnel security clearance process on GAO\u2019s High-Risk List. We made  this designation out-of-cycle because it was important to call attention to  these challenges now. My testimony today focuses on three of the key  challenges that led to the high-risk designation, including: (1) the extent to  which executive branch agencies made progress reforming the security  clearance process; (2) the extent to which executive branch agencies are  meeting timeliness objectives and reducing the National Background  Investigations Bureau\u2019s (NBIB) investigative backlog; and (3) the potential  effects of continuous evaluation\u2014a process to review the background of  clearance holders and individuals in sensitive positions at any time during  the eligibility period\u2014on executive branch agencies.", "My testimony is primarily based on our November and December reports  on these topics. For those reports, we reviewed relevant statutes,  Executive Orders, and PAC strategic documents; obtained data from the  Office of the Director of National Intelligence (ODNI) on the timeliness of  initial personnel security clearances and periodic reinvestigations for  fiscal years 2012 through 2016 for specific executive branch agencies;  and interviewed PAC, Office of Personnel Management (OPM), NBIB,  ODNI, and Department of Defense (DOD) officials. Our November and  December 2017 reports include a detailed explanation of our scope and  methodology. In these reports, we made 12 recommendations to the  Director of National Intelligence and the Director of NBIB, some of which I  will discuss today. NBIB concurred with the recommendations. The  Director of National Intelligence concurred with some, but not all, of our  recommendations. We continue to believe these recommendations are  valid. Information that ODNI and OPM deemed sensitive was omitted. We  conducted the work on which this statement is based in accordance with  generally accepted government auditing standards."], "subsections": [{"section_title": "Executive Branch Agencies Have Made Progress Reforming the Security Clearance Process, but Long-Standing Key Initiatives Remain Incomplete", "paragraphs": [], "subsections": [{"section_title": "The PAC Has Made Progress Reforming the Personnel Security Clearance Process", "paragraphs": ["The PAC has made progress in reforming the personnel security  clearance process and implementing various security clearance reform  initiatives. For example, the PAC has taken action on 73 percent of the  recommendations of a February 2014 review conducted in the wake of  the Washington Navy Yard shooting. Actions in response to these  recommendations included ODNI and OPM jointly issuing Quality  Assessment Standards in January 2015, which establish federal  guidelines for assessing the quality of investigations. Additionally, ODNI  developed the Quality Assessment Reporting Tool, through which  agencies will report on the completeness of investigations.", "Similarly, the PAC reported quarterly on the status and progress of key  initiatives, as part of the Insider Threat and Security Clearance Reform  cross-agency priority goal. This reporting included the milestone due  date and status for each initiative. According to PAC Program  Management Office officials, although the data are no longer publicly  reported, they have continued to track the status of these milestones  internally, and identified almost half of the initiatives\u201416 of 33\u2014as  complete as of the third quarter of fiscal year 2017.", "Additionally, the PAC has issued three documents that serve as its  updated strategic framework for the next 5 years. In July 2016, it issued  its Strategic Intent for Fiscal Years 2017 through 2021, which identifies  the overall vision, goals, and 5-year business direction to achieve an  entrusted workforce. In October 2016, it issued an updated PAC  Enterprise IT Strategy, which provides the technical direction to provide  mission-capable and secure security, suitability, and credentialing IT  systems. According to PAC program management officials, the third  document\u2014PAC Strategic Intent and Enterprise IT Strategy  Implementation Plan\u2014was distributed to executive branch agencies in  February 2017. Further, we reported in December 2017 that PAC  members noted additional progress in reforming the personnel security  clearance process, such as the development of Security Executive Agent  Directives, the identification of executive branch\u2014wide IT shared service  capabilities, and the standardization of adjudicative criteria."], "subsections": []}, {"section_title": "Long-Standing Key Reform Initiatives Remain Incomplete", "paragraphs": ["Although the PAC has reformed many parts of the personnel security  clearance process, the implementation of certain key initiatives, including  the full implementation of the 2012 Federal Investigative Standards and  the development of government-wide performance measures for the  quality of investigations, remain incomplete. The Federal Investigative  Standards outline criteria for conducting background investigations to  determine eligibility for a security clearance, and are intended to ensure  cost-effective, timely, and efficient protection of national interests and to  facilitate reciprocal recognition of the resulting investigations.", "However, the standards also changed the frequency of periodic  reinvestigations for certain clearance holders and include continuous  evaluation as a new requirement for certain clearance holders.", "Continuous evaluation is a key executive branch initiative to more  frequently identify and assess security-relevant information, such as  criminal activity, between periodic reinvestigations. Continuous evaluation  is a process to review the background of an individual who has been  determined to be eligible for access to classified information or to hold a  sensitive position at any time during the period of eligibility. Continuous  evaluation involves automated record checks conducted on a more  frequent basis, whereas periodic reinvestigations are conducted less  frequently and may include, among other things, subject and reference  interviews. The types of records checked as part of continuous evaluation  are the same as those checked for other personnel security purposes.  Security-relevant information discovered in the course of continuous  evaluation is to be investigated and adjudicated under the existing  standards.", "Efforts to implement an executive branch continuous evaluation program  go back to at least 2008, with a milestone for full implementation by the  fourth quarter of fiscal year 2010. In November 2017, we reported that  while ODNI has taken an initial step to implement continuous evaluation  in a phased approach across the executive branch, it had not determined  when the future phases of implementation will occur. We recommended,  among other things, that the Director of National Intelligence develop an  implementation plan. ODNI generally concurred with that  recommendation.", "Regarding government-wide measures for the quality of background  investigations, as noted earlier, ODNI and OPM issued the Quality  Assessment Standards and ODNI issued the Quality Assessment  Reporting Tool. The Quality Assessment Standards established federal  guidelines for assessing the quality of investigations. The Quality  Assessment Reporting Tool is a tool through which agencies will report  on the completeness of investigations. However, measures for quality  have not been developed, and it is unclear when this key effort will be  completed. The original milestone for completing government-wide  measures was fiscal year 2010, and no new milestone has been  established. In our December 2017 report, we recommended that the  Director of National Intelligence, in his capacity as the Security Executive  Agent, and in coordination with the other PAC Principals, establish a  milestone for the completion of government-wide performance measures  for the quality of investigations. ODNI disagreed with the  recommendation, stating that it is premature to establish such a milestone  and that it will do so once the Quality Assessment Reporting Tool metrics  have been fully analyzed. We continue to believe that setting a milestone,  which takes into consideration the amount of time needed to analyze  Quality Assessment Reporting Tool data, will help to ensure that the  analysis of the data is completed, initial performance measures are  developed, and agencies have a greater understanding of what they are  being measured against."], "subsections": []}]}, {"section_title": "Agencies Meeting Timeliness Objectives for Clearances Decreased, and a Government-Wide Approach Has Not Been Developed to Improve Timeliness or Address the Backlog", "paragraphs": ["Our analysis of government-wide and agency-specific data shows a  decline in the number of executive branch agencies meeting the  timeliness objectives for processing clearances. While ODNI has taken  steps to address timeliness challenges, it has not developed a  government-wide approach to help agencies improve the timeliness of  initial personnel security clearances. Additionally, the backlog of  background investigations conducted by NBIB\u2014the primary entity  responsible for conducting background investigations\u2014has steadily  increased since 2014 and as of February 2018 exceeds 710,000 cases.  NBIB personnel are attempting to decrease the backlog by making the  background investigation process more effective and efficient and  increasing investigator capacity. However, NBIB faces challenges in  developing a plan to reduce the size of the investigation backlog to a  manageable level."], "subsections": [{"section_title": "Agencies Meeting Timeliness Objectives Decreased", "paragraphs": ["Our analysis showed that the percentage of executive branch agencies  meeting timeliness objectives for investigations and adjudications  decreased from fiscal years 2012 through 2016. The Intelligence Reform  and Terrorism Prevention Act of 2004 (IRTPA) established an objective  for each authorized adjudicative agency to make a determination on at  least 90 percent of all applications for a personnel security clearance  within an average of 60 days after the date of receipt of the completed  application by an authorized investigative agency. The objective includes  no longer than 40 days to complete the investigative phase and 20 days  to complete the adjudicative phase. In assessing timeliness under these  objectives, executive branch agencies exclude the slowest 10 percent  and report on the average of the remaining 90 percent (referred to as the  fastest 90 percent).", "As part of the Insider Threat and Security Clearance Reform cross- agency priority goal, the PAC reported quarterly on the average number  of days to initiate, investigate, adjudicate, and complete the end-to-end  process for initial secret and initial top secret cases and periodic  reinvestigations for the executive branch as a whole from fiscal year 2014  through 2016. For fiscal year 2016, the PAC reported that the  government-wide average for executive branch agencies did not meet the 40-day investigation objective for the fastest 90  percent of initial secret clearances for any quarter; the averages  ranged from 92 days to 135 days; did not meet ODNI\u2019s revised investigation objective for the fastest 90  percent of initial top secret clearances for any quarter; the averages  ranged from 168 days to 208 days; did not meet the goal of conducting the investigative portion of  periodic reinvestigations within 150 days for the fastest 90 percent of  cases for any quarter; the averages ranged from 175 days to 192  days; and did not meet the goal of completing periodic reinvestigations\u2014the  end-to-end goal\u2014within 195 days for any quarter of fiscal year 2016;  the averages ranged from 209 days to 227 days.", "Our analysis of timeliness data for specific executive branch agencies  showed that the percentage of agencies meeting established  investigation and adjudication timeliness objectives for initial secret and  top secret personnel security clearances and periodic reinvestigations  decreased from fiscal year 2012 through 2016. We found that agencies  with delegated authority to conduct their own investigations and those  that use NBIB as their investigative provider experienced challenges in  meeting established investigative timeliness objectives. Specifically, in  fiscal year 2012, we found that", "73 percent of the agencies, for which we obtained data, did not meet  investigation and adjudication objectives for at least three of four  quarters for initial secret clearances,", "41 percent did not meet those objectives for initial top secret", "16 percent did not meet the investigative goal for at least three of four  quarters for the fastest 90 percent of periodic reinvestigations.", "By fiscal year 2016, the percentage of agencies that did not meet these  same objectives had increased to 98 percent, 90 percent, and 82 percent,  respectively.", "Furthermore, ODNI requests individual corrective action plans from  agencies not meeting security clearance timeliness objectives. However,  the executive branch has not developed a government-wide plan, with  goals and interim milestones, to meet established timeliness objectives  for initial security clearances that takes into consideration increased  investigative requirements and other stated challenges. In our December  2017 report, we recommended that the Director of National Intelligence,  as Security Executive Agent, develop a government-wide plan, including  goals and interim milestones, to meet timeliness objectives for initial  personnel security clearance investigations and adjudications. Although  the DNI did not specifically comment on this recommendation, we  continue to believe a government-wide plan would better position ODNI to  identify and address any systemic government-wide issues.", "We also recommended that the Director of National Intelligence conduct  an evidence-based review of the investigation and adjudication timeliness  objectives and take action to adjust the objectives if appropriate. He did  not agree with this recommendation and stated that it is premature to  revise the existing timeliness goals until NBIB\u2019s backlog is resolved. We  continue to believe that our recommendation to conduct an evidence- based review, using relevant data, is valid. As we noted in our report,  even agencies with delegated authority to conduct their own  investigations are experiencing challenges meeting established timeliness  objectives. We also noted that ODNI has not comprehensively revisited  the investigation or adjudication timeliness objectives for initial security  stemming from the implementation of the 2012 Federal Investigative  Standards."], "subsections": []}, {"section_title": "Backlog of Background Investigations Has Steadily Increased since 2014", "paragraphs": ["The executive branch\u2019s challenges in meeting investigation timeliness  objectives for initial personnel security clearances and periodic  reinvestigations have contributed to a significant backlog of background  investigations at the primary entity responsible for conducting background  investigations, NBIB. NBIB personnel are attempting to decrease the  backlog by making the background investigation process more effective  and efficient. To do so, NBIB conducted a business process  reengineering effort that was intended to identify challenges in the  process and their root causes. Specifically, NBIB officials cited efforts that  have been implemented to reduce the number of personnel hours  necessary to complete an investigation, such as centralizing interviews  and using video-teleconferencing for overseas investigations (to decrease  travel time), automated record checks, and focused writing (to make  reports more succinct and less time-consuming to prepare). However,  NBIB has not identified how the implementation of the business process  reengineering effort will affect the backlog or the need for additional  investigators in the future. In December 2017, we recommended that the  Director of NBIB develop a plan, including goals and milestones, that  includes a determination of the effect of the business process  reengineering efforts on reducing the backlog to a \u201chealthy\u201d inventory of  work, representing approximately 6 weeks of work. NBIB concurred with  this recommendation.", "NBIB documentation shows that the backlog of pending investigations  increased from about 190,000 in August 2014 to more than 710,000 as of  February 2018, as shown in figure 1. NBIB\u2019s Key Performance Indicators  report states that a \u201chealthy\u201d inventory of work is around 180,000 pending  investigations, representing approximately 6 weeks of work, and would  allow NBIB to meet timeliness objectives.", "ODNI officials stated that several significant events contributed to agency  challenges in meeting timeliness objectives over the past 5 fiscal years,  including a government shutdown, the 2015 OPM data breach, a loss of  OPM contractor support, and OPM\u2019s review of the security of its IT  systems, which resulted in the temporary suspension of the web-based  platform used to complete and submit background investigation forms. In  addition, executive branch agencies noted the increased investigative  requirements stemming from the 2012 Federal Investigative Standards as  a further challenge to meeting established timeliness objectives in the  future.", "While NBIB has taken steps to increase its capacity to conduct  background investigations by increasing its own investigator staff as well  as awarding new contracts, in our December 2017 report we noted that  NBIB officials have assessed four scenarios, from the status quo\u2014 assuming no additional contractor or federal investigator hires\u2014to an  aggressive contractor staffing plan beyond January 2018. The two  scenarios that NBIB identified as most feasible would not result in a  \u201chealthy\u201d inventory level until fiscal year 2022 at the earliest. In our  December 2017 report, we recommended that the Director of NBIB  establish goals for increasing total investigator capacity\u2014federal  employees and contractor personnel\u2014in accordance with the plan for  reducing the backlog of investigations, as noted above. NBIB concurred  with this recommendation."], "subsections": []}]}, {"section_title": "The Potential Effects of Continuous Evaluation on Executive Branch Agencies Are Unknown", "paragraphs": ["We reported in November 2017 that the potential effects of continuous  evaluation on executive branch agencies are unknown because future  phases of the program and the effect on agency resources have not yet  been determined. ODNI has not yet determined key aspects of its  continuous evaluation program, which has limited the ability of executive  branch agencies to plan for implementation in accordance with ODNI\u2019s  phased approach. For example, while ODNI has initiated the first phase  of continuous evaluation in coordination with implementing executive  branch agencies, it has not yet determined what the future phases of  implementation will entail, or when they will occur. As we reported in  November 2017, the uncertainty regarding the requirements and time  frames for the future phases of the program has affected the ability of  executive branch agencies to plan to implement continuous evaluation  and estimate the associated costs.", "Although executive branch agencies have identified increased resources  as a risk associated with implementing continuous evaluation, and ODNI  has acknowledged that risk, ODNI, in coordination with the PAC, has not  assessed the potential effects of continuous evaluation on an agency\u2019s  resources. Further, ODNI has not developed a plan, in consultation with  implementing agencies, to address such effects, including modifying the  scope or frequency of periodic reinvestigations or replacing periodic  reinvestigations for certain clearance holders.", "Moreover, the potential effect of continuous evaluation on periodic  reinvestigations is unknown. Executive branch agencies have expressed  varying views about potential changes to the periodic reinvestigation  model:", "DOD officials stated that with workload and funding issues, they see  no alternative but to replace periodic reinvestigations for certain  clearance holders with continuous evaluation, as the record checks  conducted are the same for both processes.", "State Department officials expressed concerns that relevant  information, such as state and local law-enforcement records that are  not yet automated, would be missed if it did not conduct periodic  reinvestigations.", "State Department officials, along with officials from the Departments  of Justice and Homeland Security, stated it may be possible to  change the frequency or scope of periodic reinvestigations at some  point in the future.", "The Security Executive Agent Directive for continuous evaluation,  issued since our report, clarified that continuous evaluation is  intended to supplement but not replace periodic reinvestigations.", "In our November 2017 report, ODNI officials stated that ODNI is not  opposed to further improving the security clearance process, and that  once continuous evaluation is operational, it plans to determine the  efficiencies and mitigation of risks associated with the approach.  Specifically, these officials stated that once continuous evaluation is  further implemented and ODNI has gathered sufficient data\u2014which they  estimated would take about a year from May 2017\u2014they can perform  analysis and research to determine whether any changes are needed to  the periodic reinvestigation model.", "We recommended that the Director of National Intelligence assess the  potential effects of continuous evaluation on agency resources and  develop a plan, in consultation with implementing agencies, to address  those effects, such as modifying the scope of periodic reinvestigations,  changing the frequency of periodic reinvestigations, or replacing periodic  reinvestigations for certain clearance holders. ODNI generally concurred  with this recommendation.", "Finally, the National Defense Authorization Act for Fiscal Year 2018,  enacted in December 2017, will have a significant impact on the  personnel security clearance process. Among other things, the act  authorized DOD to conduct its own background investigations and  requires DOD to begin carrying out a related implementation plan by  October 1, 2020. It also requires the Secretary of Defense, in  consultation with the Director of OPM, to provide for a phased transition.  These changes could potentially affect timeliness, the backlog, and other  reform initiatives but the effect is unknown at this time. DOD\u2019s  investigations represent the majority of the background investigations  conducted by NBIB.", "Chairman Burr, Vice Chairman Warner and Members of the committee,  this concludes my prepared testimony. I look forward to answering any  questions."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgements", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Brenda S. Farrell at (202) 512-3604 or at farrellb@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this testimony. GAO staff who  made key contributions to this testimony are Kimberly Seay (Assistant  Director), James Krustapentus, Michael Shaughnessy, and John Van  Schaik.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-94", "url": "https://www.gao.gov/products/GAO-18-94", "title": "Private School Choice: Federal Actions Needed to Ensure Parents Are Notified About Changes in Rights for Students with Disabilities", "published_date": "2017-11-16T00:00:00", "released_date": "2017-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Growth of voucher and ESA programs has drawn attention to the ways states ensure accountability and transparency to the public and prospective parents. With over half of voucher and ESA programs specifically designed for students with disabilities, there is interest in the information parents receive about special education services and rights when enrolling in a choice program. GAO was asked to examine these topics in more depth.", "This report examines (1) academic, administrative, and financial accountability mechanisms in private choice programs; (2) information available to the public and families on private choice programs and participating schools; and (3) how parents of students with disabilities are informed about changes in rights when enrolling in private choice programs. GAO analyzed information from all voucher and ESA programs operating in January 2017 and interviewed officials from Education, national groups, and six of the largest private choice programs. GAO reviewed websites of a nationally representative sample of private voucher schools, and worked with private choice groups and national organizations to contact families that recently interacted with a choice program. GAO interviewed all 17 families that responded."]}, {"section_title": "What GAO Found", "paragraphs": ["States include different academic, administrative, and financial accountability mechanisms in their voucher and education savings account (ESA) programs\u2014programs that use public funds for private school educational expenses (see figure). Of the 27 programs operating in January 2017, most had academic and administrative accountability mechanisms for participating schools, such as academic testing requirements (18 of 27) or health and safety requirements (25 of 27). In addition, 15 of 27 programs required schools to demonstrate financial soundness and 8 of 27 programs required annual financial audits.", "Almost all of the 27 private school choice program websites provide a directory of participating schools and some provide guidance on selecting schools. However, GAO estimates that no more than half of all schools participating in any type of voucher program mention students with disabilities anywhere on their websites, according to GAO's review of a nationally generalizable sample of websites of private schools in voucher programs. Further, GAO estimates that no more than 53 percent of private schools in voucher programs designed for students with disabilities provide disability-related information on their websites.", "GAO found private school choice programs inconsistently provide information on changes in rights and protections under the Individuals with Disabilities Education Act (IDEA) when parents move a child with a disability from public to private school. In 2001, the U.S. Department of Education (Education) strongly encouraged states and school districts to notify parents of these changes, but according to Education, IDEA does not provide it with statutory authority to require this notification. According to GAO's review of information provided by private school choice programs, and as confirmed by program officials, in school year 2016-17, 83 percent of students enrolled in a program designed specifically for students with disabilities were in a program that provided either no information about changes in IDEA rights or provided information that Education confirmed contained inaccuracies about these changes. Officials from national stakeholder groups, private choice programs, and Education told GAO that some parents do not understand that certain key IDEA rights and protections\u2014such as discipline procedures and least restrictive environment requirements\u2014change when parents move their child from public to private school. Ensuring that quality information is communicated consistently and accurately to parents can help address potential misunderstanding about changes in federal special education rights."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider requiring states to notify parents/guardians about changes in federal special education rights when a parent moves a child from public to private school. In addition, GAO recommends Education review and correct inaccurate IDEA-related information provided by states. Education generally agreed with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["In the past decade, the number of private school voucher and education  savings account (ESA) programs\u2014collectively referred to as private  school choice programs\u2014has more than quadrupled from six programs in  2006 to 27 in 2016. Private school choice programs use public funds to  pay elementary and secondary students\u2019 educational expenses in private  schools and other non-public settings. In school year 2016-17, there were  23 voucher and four ESA programs operating in 14 states and  Washington, D.C. Except for the federally funded District of Columbia  Opportunity Scholarship Program, all of these private school choice  programs are administered and funded by states. This growth has drawn  attention to the role of academic, administrative, and financial  accountability mechanisms in these programs. Further, as more than half  of these programs are specifically for students with disabilities, there is  interest in the information families receive about special education and  disability-related supports when enrolling in a choice program. The U.S.  Department of Education (Education) administers the Individuals with  Disabilities Education Act (IDEA) and provides states, school districts,  parents, and the public with information about the rights of students with  disabilities under IDEA. You asked us to examine accountability and  transparency in private school choice programs, including the information  provided to families of students with disabilities.", "This report examines (1) the academic, administrative, and financial  accountability mechanisms in private school choice programs; (2) the  information available to the public and prospective parents on private  school choice programs and participating private schools; and (3) how  parents of students with disabilities are informed about any changes in  their rights under federal law when enrolling in private school choice  programs, including how the U.S. Department of Education provides  information about these rights.", "To obtain information for all three objectives, we reviewed relevant federal  laws, regulations, and guidance, including IDEA and related guidance and  information from Education.", "To determine key program characteristics, including which accountability  mechanisms these programs had in place and the type of information  they provided publicly, we reviewed publically available documents from  all 23 voucher programs and all four ESA programs operating in the  United States as of January 2017.  Further, we reviewed documents and  conducted interviews with program officials in six private school choice  programs in five states (Arizona, Florida, Indiana, Ohio, and Wisconsin).  These voucher and ESA programs are among the largest, and collectively  served more than two-thirds of all voucher and ESA students in school  year 2016-17. Selecting these programs also enabled us to examine  programs with varying requirements and accountability mechanisms.", "To describe information that participating private schools make available  to the public and prospective families, we reviewed a nationally  representative, stratified random sample of 344 websites of private  schools participating in a voucher program.  In addition, we interviewed  officials from Education, as well as from national stakeholder groups and  private school choice researchers, which we selected to obtain a range of  perspectives on private school choice initiatives. To provide examples of  how individual schools and programs make information available to the  public and families, we also visited and interviewed officials at two private  school choice programs, three private schools, and one school district in  Florida.  Finally, we held three discussion groups and conducted  interviews with a total of 17 families who chose to speak to us about their  recent experiences with private school choice programs. We worked with  private school choice organizations and national stakeholder groups to  contact families who had recently interacted with private school choice  programs. We interviewed all of the families who responded to our  interview request, individually or in a group, and these families had at  least one child with a disability. These interviews and discussions are  intended to provide illustrative examples of the sources, types, and  usefulness of information parents may rely on as they make school  choice decisions for their children. For more information about our scope  and methodology, see appendix I.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["States operate and administer several types of private school choice  programs. This report focuses exclusively on vouchers and ESAs.", "Vouchers: These programs generally provide interested parents with  funds for tuition at a participating private school. The first voucher  program began in 1990.", "ESAs: These programs are typically designed to fund a broader set of  educational expenses, such as online learning programs, private  tutoring, or education therapies. The first ESA program began in  2011.", "The size of voucher and ESA programs varies widely (see fig. 1 and  appendix II for more details). In school year 2016-17, student participation  in individual programs ranged from fewer than 10 to more than 34,000, for  a total of 181,624 students across all programs."], "subsections": [{"section_title": "Design of Private School Choice Programs", "paragraphs": ["States establish the eligibility criteria for students to participate in choice  programs as well as any accountability requirements for participating  private schools. As noted in our prior work, these requirements can vary  considerably across states.", "Eligibility criteria: Almost all private school choice programs use a  student\u2019s disability status or family income as eligibility criteria (see  table 1).", "Accountability mechanisms: For purposes of this report, we define  accountability mechanisms as requirements that private school choice  programs place on private schools as a condition for participation.  These mechanisms act as minimum participation requirements for  private schools (see fig. 2). See appendix II for more details on  accountability mechanisms by program."], "subsections": []}, {"section_title": "Individuals with Disabilities Education Act", "paragraphs": ["IDEA Part B requires each state to ensure that a free appropriate public  education (FAPE) is made available to all eligible children with  disabilities. An eligible child with a disability in a public school setting, or  placed in a private school by a public agency as a means of providing  special education and related services, is entitled to FAPE. FAPE  means special education and related services that (1) have been  provided at public expense, under public supervision, and without charge;  (2) meet the standards of the state educational agency, including the  requirements of IDEA; (3) include an appropriate preschool, elementary  school, or secondary school education in the state involved; and (4) are  provided in conformity with an individualized education program (IEP).", "When a parent of a child with a disability chooses to enroll their child in a  private elementary or secondary school, whether or not through a private  school choice program, that child is considered a \u201cparentally placed\u201d  private school child under IDEA. A school district\u2019s obligations to  parentally placed private school children with disabilities are not as  extensive as those for children enrolled in public schools or for children  with disabilities placed in a private school by a public agency, according  to Education documents. Under IDEA, a child with a disability who is  parentally placed in a private school does not have a right to FAPE, or an  individual right to receive some or all of the special education and related  services that the child would be entitled to receive if enrolled in a public  school. However, parentally placed children must be included in the  population whose needs are considered for services under IDEA\u2019s  \u201cequitable services\u201d provisions. See table 2 for a summary of key  differences in rights under IDEA for children with disabilities in public  school and private school."], "subsections": []}, {"section_title": "The Role of the U.S. Department of Education", "paragraphs": ["Education has two offices that can address questions and provide  information related to parentally placed private school children with  disabilities, including those in private school choice programs.", "Education\u2019s Office of Special Education and Rehabilitative Services  (OSERS) administers IDEA in all of its aspects. It also supports  programs that help educate children and youth with disabilities,  including developing and distributing evidence-based products,  publications, and resources to help states, local school district  personnel, and families improve results for children with disabilities.", "Education\u2019s Office of Non-Public Education (ONPE) fosters maximum  participation of nonpublic school students and teachers in federal  education programs and initiatives. ONPE\u2019s activities include  providing parents with information regarding education options for  their children, and providing technical assistance, workshops, and  publications to states, school districts, private schools, and other  education stakeholders."], "subsections": []}]}, {"section_title": "State Private School Choice Programs Emphasize Different Accountability Mechanisms and Approaches to Monitoring", "paragraphs": [], "subsections": [{"section_title": "Most Programs Have Academic and Administrative Accountability Mechanisms; Fewer Have Financial Accountability Mechanisms", "paragraphs": [], "subsections": [{"section_title": "Academic Accountability Mechanisms", "paragraphs": ["Most private school choice programs have academic accountability  mechanisms, which can include requirements for participating private  schools to administer tests, report testing results, obtain accreditation,  and teach core subjects, according to our analysis of information from  program documents and officials. (See fig. 3.)", "We found that testing is the most common academic accountability  mechanism in private choice programs, and that programs design this  requirement in different ways. Academic testing and reporting  requirements can help the public compare the academic achievement of  private school choice students with students in public schools. Two-thirds  of private choice programs (18 of 27)\u2014which represented 78 percent of  all students participating in voucher and ESA programs in school year  2016-17\u2014require private schools to test voucher or ESA students. Of  the 18 programs that require testing, nine programs require participating  schools to administer their state\u2019s standardized test and six require  schools to administer some type of norm-referenced test. See appendix  II for more information on testing requirements by program.", "Private schools appeared to have mixed experiences implementing the  testing requirements in private school choice programs. For example,  officials from four of the six programs we examined in depth noted that  most private schools in their programs did not experience challenges  administering the testing requirements, and said that many private  schools had testing practices in place before joining the programs.  However, officials in two programs also said that some private schools  were unfamiliar with or unequipped to administer standardized tests.  Officials from several state and national private school choice  organizations also told us that smaller private schools sometimes lack the  staff and budgets to administer standardized tests.", "One-third (9 of 27) of programs require that schools publicly report test  results, including three of the four largest voucher programs\u2014Wisconsin\u2019s  Milwaukee Parental Choice Program, Indiana\u2019s Choice Scholarship  Program, and Ohio\u2019s EdChoice Scholarship Program\u2014which publicly  report test results via online systems. However, in our interviews,  officials from two voucher programs noted some private schools  experienced challenges administering standardized tests or providing the  program offices with data. For example, according to officials in one  program, most private schools did not have systems for administering the  state\u2019s standardized tests electronically. Officials in another program also  noted that protecting student privacy in small private schools can be  challenging.", "Few of the 15 choice programs that are designed specifically for students  with disabilities have accountability mechanisms related to special  education and related services. For example, Arkansas\u2019s Succeed  Scholarship Program requires schools to meet accreditation requirements  for providing services to severely disabled individuals. Mississippi\u2019s  Dyslexia Therapy Scholarship for Students with Dyslexia Program  requires schools to provide a specific learning environment for dyslexia  therapy; and Louisiana\u2019s School Choice Program for Certain Students  with Exceptionalities requires schools to provide special education  services for at least 2 years prior to joining the program."], "subsections": []}, {"section_title": "Administrative Accountability Mechanisms", "paragraphs": ["Most private school choice programs have some administrative  accountability mechanisms, and these varied across programs, according  to our analysis of information from program documents and officials.  Administrative accountability mechanisms include requirements that  participating private schools employ teachers, paraprofessionals, and/or  specialists who have minimum qualifications, conduct background checks  on employees, comply with state and local health and safety standards,  and comply with site visits by program officials. (See fig. 4.)", "Most programs (25 of 27) require participating private schools to comply  with state and local health and safety standards. Eight of the 25 programs  rely on other state agencies to oversee the safety of school facilities  rather than impose separate health and safety requirements on  participating schools. In addition, about half of all voucher and ESA  programs (17 of 27)\u2014including three of the largest programs, which  represented 73 percent of all students participating in voucher and ESA  programs in school year 2016-17\u2014require participating private schools to  conduct background checks on all employees, or all employees with  direct and unsupervised contact with children.", "About two-thirds (19 of 27) of programs require participating private  schools to employ teachers and other staff with specific qualifications or  credentials. For example, 13 programs require teachers to have a degree  and/or state teaching license. Other programs, such as Florida\u2019s John M.  McKay Scholarships for Students with Disabilities Program, require  private schools to employ teachers with either a bachelor\u2019s degree, three  years of experience, or specific credentials or special skills, knowledge, or  expertise to provide instruction in certain subjects. Similarly, about half  (14 of 27) of programs require schools to hire paraprofessionals and/or  specialists with specific qualifications or credentials.", "More than half (15 of 27) of programs require site visits to participating  private schools, and program officials we interviewed described various  ways of implementing this requirement. For example, officials in three  programs told us they conduct site visits to verify information submitted by  participating private schools. Officials in one program noted that site visits  are routine for entities that receive state funds; officials coordinate with  the school beforehand, meet with the principal and staff, and perform spot  checks on student files. Some program officials told us they also monitor  participating schools using risk-based school reviews, requesting  graduation rates, or by requiring schools to meet an attendance rate  benchmark."], "subsections": []}, {"section_title": "Financial Accountability Mechanisms", "paragraphs": ["Although financial accountability mechanisms are the least common  mechanisms used by private choice programs, more than half of  programs had at least one such requirement. (See fig. 5.)", "Just over half (15 of 27) of programs require private schools to provide  proof of fiscal soundness in order to participate. Most of these programs  give private schools two options: schools must either submit proof they  have been in operation for a specified length of time (ranging from 1 to 5  years) or provide a surety bond to the state to insure against any losses.  For example, in Florida\u2019s John M. McKay Scholarships for Students with  Disabilities Program, schools must have been operating for at least 3  years or provide the Florida Department of Education with a surety bond  or letter of credit equal to the amount of voucher funds the private school  receives quarterly.", "Less than a third (8 of 27) of programs\u2014which represented fewer than a  quarter of all students participating in voucher and ESA programs in  school year 2016-17\u2014require participating schools to provide annual  audits. Officials in two programs we examined in depth described  concerns about the limited financial accountability provisions in their  programs\u2019 statutes. In one program with no financial accountability  mechanisms, program officials said they would prefer to have the  authority to remove private schools with financial issues from the  program. Similarly, officials in the other program stated that they had  some concerns about the financial stability of some of their participating  schools but do not have authority to deny participation in the program  based on financial criteria.", "In addition, all ESA programs, which generally provide funds directly to  eligible individuals, have financial accountability mechanisms for parents.  For example, Florida\u2019s Gardiner Scholarship Program is administered by  two organizations that review parents\u2019 expenditures for compliance with  program requirements and reimburse parents accordingly. Certain  categories of purchases are pre-approved, but generally approvals are  made on a case-by-case basis. In contrast, Arizona\u2019s ESA program  provides parents with a debit card for educational purchases. Parents are  expected to use the debit card appropriately and retroactively submit  itemized expense reports to the program each quarter. If program staff  reviewing expenditures find any that do not meet statutory requirements,  families are directed to reimburse the program."], "subsections": []}]}, {"section_title": "Private Choice Programs Described Various Approaches to Monitoring Participating Schools", "paragraphs": ["The six private choice programs we examined in depth took various  approaches to monitoring participating schools\u2019 compliance with their  programs\u2019 academic, administrative, and financial accountability  requirements. Officials from several of these programs also described  coordinating with accrediting agencies, other state departments, and  independent auditors to help monitor private schools and ensure quality  and safety. For example, officials in one program told us they received a  number of complaints about a lack of adult supervision at a participating  private school and asked local Child Protective Services to intervene.  Program officials in two states said they use their state\u2019s private school  accreditation process to help enforce program accountability  requirements because private schools must be accredited to participate.", "Programs often require participating schools to attest to meeting  accountability requirements, although some program officials said they  have limited resources to independently verify this information. For  example, program officials in one state said they have limited resources  to independently verify the information submitted by schools in their  annual applications because processing voucher payments takes priority.", "Program officials in another state said financial constraints prevented  them from visiting all of the schools that were flagged for not complying  with program requirements last year.", "Finally, some program officials we spoke to told us that their states  provide programs with limited authority to intervene with participating  private schools when there are concerns. For example, officials in one  program described being concerned that a particular school\u2019s buildings  were unsafe. However, they said that the choice program\u2019s statute does  not contain requirements related to the safety of participating schools,  and the city must issue a safety notice before program staff could remove  the school from the program."], "subsections": []}]}, {"section_title": "Private School Choice Programs and Participating Schools Provide a Range of Information to the Public and Prospective Families", "paragraphs": [], "subsections": [{"section_title": "Most Private School Choice Programs Provide Directories of Participating Schools, Which Include Varying Information", "paragraphs": ["Almost all private school choice programs provide a directory of  participating private schools for the public and prospective families,  although the information included\u2014and the way it is provided\u2014varies.  For example, 21 of 27 programs provide contact information, and 20  programs provide information on grades served. Far fewer programs  provide information on school accreditation status (6 programs), student  race and ethnicity data (5 programs), and graduation rates (4 programs).  (See fig. 6.)", "Parents we interviewed had mixed responses about the information  provided by private school choice programs and reported using other  sources of information as well. Some parents mentioned using private  choice program websites as key sources of information to identify and  narrow their school choice options, while other parents said they wished  that the programs would provide more information to help them consider  potential schools. Parents also reported consulting family, friends, and  other trusted community members or advisers and conducting internet  searches when making school decisions.", "Along with directories, some private school choice programs provide  additional guidance for parents on their websites. Just over one-third (10  of 27) of private school choice programs\u2014serving 65 percent of students  in choice programs\u2014provide guidance to parents on how to choose a  school. For example, the Ohio Department of Education Scholarship  program office and Indiana Department of Education provide a checklist  of questions parents might ask potential schools. These suggested  questions include admission requirements, tuition and other costs, and  discipline policies.", "We also found that one state\u2014Florida\u2014provides a link on its website to a  federally-created decision tool on choosing schools. This tool,  developed by Education, is designed to help families navigate the  process of choosing a school, and includes questions that parents may  want to ask as well as a discussion of school choice options. However,  the document was last updated in 2007 and does not reference the  Elementary and Secondary Education Act of 1965, as amended by the  Every Student Succeeds Act. It also has few questions tailored to  parents of students with disabilities or about special education/disability  services and accommodations in educational settings. During the course  of our review, Education officials said they were in the process of  reviewing and determining whether to update existing guidance, including  this document. As part of this review, Education officials said they plan to  issue an updated version of the document in 2018 and may consider  including additional questions for parents of students with disabilities.", "We found that only 3 of the 15 programs designed for students with  disabilities provide guidance on their websites on making informed school  choice decisions that is specifically tailored to these families. For  example, Georgia\u2019s guidance recommends families ask how a school will  accommodate their child\u2019s needs and Tennessee\u2019s guidance advises  parents to consider whether the school provides inclusive educational  settings."], "subsections": []}, {"section_title": "Private Schools Participating in Voucher Programs Provide Varying Information on Their Websites; Most Websites Do Not Have Information Related to Special Education Services", "paragraphs": ["Much like the private school choice programs in which they participate,  private schools vary in the information they provide to the public and  prospective families on their websites. In our review of a nationally  representative sample of 344 websites of private schools participating in  the 23 voucher programs operating as of January 2017, we found notable  differences in the type and amount of information on the sites (see fig.  7). For example, we estimate that 85 percent of participating private  schools describe their curriculum or teaching philosophy on their  websites; 68 percent indicate how long the school has been in operation;  27 percent provide information on the number of students attending the  school; and 13 percent provide information on student performance on  standardized tests. (See fig. 7.) schools in voucher programs for students with disabilities mention  students with disabilities or special education services anywhere on their  websites. In addition, we estimate that no more than 21 percent of  private schools participating in a voucher program specifically designed  for students with disabilities provide certain types of special  education/disability-related information on their websites that might be of  interest to prospective families choosing a school for their student with a  disability. (See fig. 8.) of disabilities schools served as well as the disability-related services  schools offer. Parents described attempts to enroll their student with  disabilities in multiple schools before finding one that would admit their  child or that was the right fit for their child\u2019s needs. Several parents  described the process of finding the right school for their children as trial  and error.", "Lack of information can result in parents discovering key information  about a school only after enrolling their child. For example, a family who  has a student currently enrolled in a private school choice program told us  they wished they had known that they would be charged for some of the  special education services the private school was providing to their child.  One family told us they were surprised to learn that teachers providing  special education services to their child were not trained to provide those  services, and another parent described changing schools because they  learned aspects of their child\u2019s disability could not be accommodated only  after enrolling their child in a school."], "subsections": []}]}, {"section_title": "Private Choice Programs Do Not Provide Consistent Information about Changes in IDEA Rights When a Parent Moves a Child from Public to Private School, and IDEA Does Not Require That Parents Be Notified", "paragraphs": [], "subsections": [{"section_title": "Parents of Students with Disabilities May Not Be Consistently or Correctly Notified about IDEA Rights upon Enrolling in Choice Programs", "paragraphs": ["When a parent moves a child with a disability from public school to a  private school, the child\u2019s rights under IDEA change. Specifically, when a  child with a disability is enrolled in a private school by his or her parents  or guardians (i.e., a parentally placed private school student), regardless  of participation in a private school choice program, the child is no longer  entitled to FAPE and other key rights and protections under IDEA.  There is no requirement under IDEA or in Education\u2019s regulations that  parents be told about this change in rights to services when enrolling their  children in private schools.", "Private school choice programs are not consistently providing information  on changes in rights under IDEA when a child with a disability moves  from public to private school, and some programs are providing incorrect  information. Specifically, in our review of information provided by all 27  private school choice programs in operation as of January 2017, we  found that 9 of the 27 programs did not provide any information about  these changes in rights. Moreover, among the 15 programs specifically  for students with disabilities, we found that 4 programs provided no  information about changes in rights under IDEA when a child with a  disability moves from public to private school. As shown in figure 9, these  4 programs enrolled the majority of students participating in disability  choice programs in school year 2016-17 (73 percent). Another 5 of these  programs\u2014which enrolled 10 percent of students participating in disability  choice programs in school year 2016-17\u2014provided information that  included inaccurate statements about rights under IDEA, as confirmed by  Education officials. Some of these inaccuracies were related to IDEA\u2019s  \u201cequitable services\u201d provisions, under which parentally placed private  school students with disabilities may be eligible to receive federally  funded equitable services.", "Education officials reiterated that IDEA does not require states to provide  notification about changes in disability rights when a parent moves a child  from a public school to a private school. However, federal internal control  standards state that agencies should provide quality information to  external stakeholders. In addition, Education officials stated that, in the  past, when the agency has been aware of cases where states are  providing inconsistent or inaccurate information, the agency has worked  with states to correct the information in order to avoid further  dissemination of inaccurate information."], "subsections": []}, {"section_title": "Education Recommends but Does Not Require That Parents Be Notified of Changes in Rights", "paragraphs": ["Education does not require states or districts to notify parents of key  changes in disability rights when a parent moves their child from public  to private school, but the agency has recommended that states and  districts notify parents of these changes. Specifically, in 2001, Education  issued a document\u2014which Education refers to as a policy letter\u2014stating  that \u201cin order to avoid parental misunderstanding, the Department  strongly recommends that the state and local educational agency notify  parents who choose private school placement under [a private school  choice program] that the students may retain certain rights under Section  504 and Title II of the ADA, although the student will not be entitled to a  free appropriate public education under IDEA, while enrolled in the private  school.\u201d", "In addition, while Education has issued guidance documents explaining  the obligations of states and school districts under IDEA to ensure the  equitable participation of parentally placed private school children with  disabilities, Education has not developed guidance or other documents  that could serve as specific notification to parents of changes in IDEA  rights when a parent moves a child with a disability from public to private  school. When we asked Education officials about this issue, they  reiterated that IDEA does not require such notification, and referred us to  two publications by ONPE and OSERS regarding the equitable  participation requirements in IDEA that apply to parentally placed private  school children. The first is a 2011 ONPE document, titled The Individuals  with Disabilities Education Act: Provisions Related to Children with  Disabilities Enrolled by Their Parents in Private Schools. The second is  a 2011 OSERS document, titled Questions and Answers on Serving  Children with Disabilities Placed by Their Parents in Private Schools  (revised April 2011). While these documents explain how children\u2019s  rights under IDEA are affected when parents place their child in a private  school, they do not specifically address key IDEA rights and protections\u2014 such as discipline procedures and the least restrictive environment  requirements\u2014that do not apply when a student with a disability is moved  from a public school to a private school by their parent. Further, these  documents do not include the agency\u2019s prior recommendation on parental  notification, or provide sample language that stakeholders could use to  notify parents of these changes in rights. Education also noted that under  IDEA and its regulations, a notice of IDEA procedural safeguards must be  provided to parents at least once a year and at other specified times, but  also is not required to notify parents that if a child is parentally placed in a  private school, the child is not entitled to FAPE and that these key rights  and protections no longer apply.", "A wide variety of stakeholders, including officials from national school  choice and disability organizations, private school choice programs, and  Education told us that parents in private choice programs do not always  understand that they will not have all of the same IDEA rights and  protections when moving their children from public to private school. For  example, some stakeholders said that confusion arises because parents  are under the impression that since school choice programs are operated  and funded by the state, and are often designed for students with  disabilities, their children will have similar protections to those ensured to  public school children under IDEA. Other stakeholders told us that  because private schools sometimes request a copy of a student\u2019s IEP,  parents can mistakenly assume that the private school will provide the  services and accommodations outlined in the document.", "Among the 17 families we interviewed, their views ranged from not being  concerned about possible changes in rights\u2014because they felt their  students were not being served well in public schools\u2014to echoing the  stakeholder concerns described above. These 17 families also had  differing understandings of the change in disability rights when enrolling  their students in private school choice programs. For example, some  families we interviewed said they were not aware that some of the  disability services and therapies provided at private schools came at  additional costs, because these services at public schools were provided  free of charge. Parents of children with physical disabilities said they were  surprised that some private schools, including schools for students with  disabilities, were not accessible for children with physical disabilities.", "Education officials told us that IDEA does not provide it with statutory  authority to require states and school districts to give parents notice that  IDEA rights and protections\u2014such as discipline procedures and least  restrictive environment requirements\u2014do not apply when a student with a  disability is moved from public to private school by a parent. Absent a  requirement that states notify parents about changes in key federal  special education rights when a child is moved from public to private  school by their parents, states may inconsistently provide information,  contributing to confusion about the change in key federal disability rights  and protections."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In the past decade, school choice options, including private school choice  programs, have expanded across the country, providing more education  alternatives for students and families, and this trend is expected to  continue. School choice places more responsibility and decision making  in the hands of parents, increasing the importance of high quality  information to help parents make informed decisions. As more than half of  the current private school choice programs are designed specifically for  students with disabilities, it is critical that parents have access to quality  information about changes in special education rights when they are  considering moving their child from public to private school. Although  Education has strongly recommended that states and districts notify  parents that IDEA rights change when they move their parentally placed  child from public to private school, in 2016-17, more than 80 percent of  students in private choice programs designed for students with disabilities  were enrolled in a program that either provided no information about  changes in IDEA rights or provided some inaccurate information about  these changes. Absent a requirement in IDEA that states notify parents of  such changes, states are unlikely to begin providing parents with  consistent and accurate information about changes that affect some of  our nation\u2019s most vulnerable children."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider requiring that states notify parents/guardians of  changes in students\u2019 federal special education rights when a student with  a disability is moved from public to private school by their parent."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Assistant Secretary for Special Education and Rehabilitative Services  should review information provided by states related to changes in federal  special education rights when a parent places a student with a disability in  a private school and work with states to correct inaccurate information."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education for review and comment.  Education\u2019s comments are reproduced in appendix III. Education also  provided technical comments, which we incorporated as appropriate.", "Education generally agreed with our recommendation to correct  inaccurate information provided by states related to changes in federal  special education rights when a parent places a student with a disability in  a private school. During the course of our review, Education confirmed  that five private school choice programs provided information that  included inaccurate statements about rights under IDEA. However,  Education stated that the department believes it is necessary to review  the full documents containing information provided by states, so that it  can determine the context in which the information was presented. We  will coordinate with Education as appropriate to facilitate such a review.  Reviewing and evaluating the information provided by states are  important first steps. However, we continue to believe that it is critical that  Education take the next step to work with states to correct any inaccurate  information about the rights of students with disabilities under IDEA being  provided by private school choice programs.", "Our draft report also included a recommendation for Education to require  states to notify parents/guardians of changes in students\u2019 federal special  education rights, including that key IDEA rights and protections do not  apply when a student with a disability is moved from public to private  school by their parent. In response, Education stated that IDEA does not  include statutory authority to require such notice, and suggested that the  department instead encourage states to notify parents. However, as  noted in our draft report, Education already strongly encourages states  and school districts to provide such notice.  Despite these efforts, we  found that in 2016-17, more than 80 percent of students nationwide who  are enrolled in private choice programs designed for students with  disabilities were enrolled in a program that either provided no information  about changes in IDEA rights, or provided some inaccurate information  about these changes. We therefore continue to believe that states should  be required, not merely encouraged, to notify parents/guardians about  key changes in federal special education rights when a parent moves a  child with a disability from public to private school. To this end, we have  converted our recommendation into a Matter for Congressional  Consideration to require such notice.", "In its comments, Education stated that the draft report title could be  improved. Because, in the final report, we issued the Matter for  Congressional Consideration discussed above, we have revised the title  to reflect that federal actions are needed to ensure parents are notified  about key changes in rights for students with disabilities.", "Education also inaccurately asserted that statements in the draft report  about the availability of information for parents are based on limited  reviews and small samples. As stated in the draft report, our findings  about the information for parents are derived from two sources: private  school choice programs and private schools participating in these  programs. Our findings about information provided by private school  choice programs are based on a comprehensive review of all 27 voucher  and educational savings account programs operating in the United States  during the 2016-17 school year. In addition, as noted in the draft report,  we verified these findings with officials from each of these programs.  Our  findings about information participating private schools make available  are based on a nationally representative, generalizable sample of  websites from 344 private schools participating in voucher programs  during the 2016-17school year. Finally, contrary to Education\u2019s  assessment that we based findings on a small sample of 17 families, as  stated in the draft report, our discussion groups and interviews with these  families provided illustrative examples of the types of information families  used when making private school choice decisions. These illustrative  examples were not the basis of any findings. We have clarified the  language in the final report as appropriate.", "Further, Education commented that the draft report did not address  factors that often lead parents to enroll their children in private schools in  state choice programs. These factors were not addressed because they  are beyond the scope of our objectives for this report. Finally, Education  noted that parents may believe that educational benefits or services  provided by private schools to their children with disabilities outweigh any  rights conferred by IDEA or services provided by public schools. This is  an important point, and this perspective was included in the draft  Education reviewed. For example, in the draft Education reviewed, we  stated that some families with whom we spoke were not concerned about  any changes in rights because they felt their students were not being well  served in public schools.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to interested congressional  committees and to the Department of Education. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the academic, administrative, and financial  accountability mechanisms in private school choice programs; (2) the  information available to the public and prospective families on private  school choice programs and participating private schools; and (3) how  families of students with disabilities are informed about any changes in  their rights under federal law when enrolling in private school choice  programs, and how the U.S. Department of Education provides  information to families about these rights."], "subsections": [{"section_title": "Overall Methodology", "paragraphs": ["To obtain information for all three objectives, we reviewed relevant federal  laws, regulations, and guidance. To determine key program  characteristics, including accountability mechanisms these programs had  in place and the type of information they provided publicly, we reviewed  publically available documents from all 23 voucher programs and four  education savings account (ESA) programs, referred to in this report as  private school choice programs, operating in the United States as of  January 2017 to obtain information about program design and  requirements. We confirmed this information with each program. In  addition, we reviewed documents and conducted interviews with program  officials in six private school choice programs in five states (Arizona,  Florida, Indiana, Ohio, and Wisconsin). We also interviewed officials from  the U.S. Department of Education (Education) as well as national  stakeholder groups and private school choice researchers, which we  selected to obtain a range of perspectives on private school choice  initiatives. To describe information that participating private schools make  available to the public, we conducted a review of a nationally  representative stratified random sample of 344 private schools  participating in one of the voucher programs to identify information  provided on school websites to parents and the public. To obtain  information on how parents are informed about changes in their child\u2019s  rights under federal law, we reviewed Education guidance and policy  documents on the Individuals with Disabilities Education Act (IDEA) and  parentally placed private school students. To provide examples of how  individual schools and programs make information available to the public  and families, we also visited and interviewed officials at two private school  choice programs, three private schools, and one school district in  Florida.  Additionally, we spoke with 17 families who had recently  interacted with private school choice programs.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Analysis of Private School Choice Programs\u2019 Accountability Mechanisms", "paragraphs": ["We defined \u201caccountability mechanisms\u201d as requirements that private  school choice programs place on participating private schools. These  requirements are intended to set minimum standards that private schools  must meet to participate in the choice program. We compiled our list of  mechanisms based on research conducted by national school choice  organizations and other organizations, interviews with private school  choice researchers, and our previous audit work. The list includes  mechanisms likely to be used by multiple programs and is not meant to  be exhaustive. We confirmed the appropriateness of our list of selected  mechanisms during subsequent interviews with private school choice  researchers and national stakeholder groups who confirmed that the  mechanisms were common elements in program statutes, and/or  standard mechanisms for establishing accountability in education. To  identify the presence of each of the mechanisms in a choice program, we  reviewed publicly available documents on the program\u2019s website. We also  reviewed documents linked to the program\u2019s website. To confirm our  assessment of each school choice program, we sent our analysis to the  program\u2019s administrators for verification. All programs responded and any  changes are reflected in the report. We did not independently verify these  requirements in state laws or regulations."], "subsections": []}, {"section_title": "Interviews in Selected Private School Choice Programs", "paragraphs": ["To obtain a richer understanding of accountability and transparency  decisions, and challenges facing private school choice programs, we  selected a non-generalizable sample of six private school choice  programs in five states (Arizona, Florida, Indiana, Ohio, and Wisconsin)  for a more in-depth review. These selected programs collectively served  the majority of voucher and ESA students in school year 2016-17. In total,  these programs represented about two-thirds of all participating students.  For the selected programs, we reviewed program documents, and  conducted interviews with programs officials and school choice  organizations.", "In addition, we conducted a site visit to Florida in March 2017.  Florida  has the second largest school voucher program (the John M. McKay  Scholarships for Students with Disabilities Program), and the largest ESA  program (the Gardiner Scholarship Program). Collectively the two  programs served approximately one-fifth (22 percent) of voucher and  ESA students nationwide in school year 2016-17. To gather information  on all three objectives, we interviewed officials from program  administration offices for both programs. To obtain schools\u2019 perspective  on all three objectives, we interviewed officials at three private schools  that participate in both school choice programs, and officials at a public  school district. To obtain information on how families of students with  disabilities are informed about any changes in their rights under federal  law when enrolling in private school choice programs and families\u2019  understanding of these changes, we conducted a series of interviews with  families of students with disabilities."], "subsections": []}, {"section_title": "Private Schools\u2019 Websites Review", "paragraphs": ["To determine the extent to which participating private schools provided  information to prospective families and the public, we reviewed websites  from a nationally representative sample of 344 private schools eligible to  participate in one of the 23 voucher programs in operation as of January  2017. We limited our review to voucher school programs because we  were unable to determine the universe of schools participating in all of the  four ESA programs operating at the time of our review.", "Our sampling frame consisted of all schools eligible for participation in a  private school choice voucher program. To create the frame, we  downloaded the most currently available list of eligible schools as of April  3, 2017, from each program\u2019s website. We identified 4,011 schools  eligible to participate in at least one of the private school choice voucher  programs covered by this review. Ohio\u2019s Jon Peterson Special Needs  Scholarship Program and Autism Scholarship Program allow multiple  types of providers to receive voucher funds. As such, the lists for these  programs included public schools, private companies, individual  specialists, chartered private schools, and unchartered private schools. A  chartered private school is a private school that has been approved by  Ohio\u2019s State Board of Education, according to program officials. As  program officials told us, chartering is Ohio\u2019s version of state  accreditation. Because chartered schools were the only readily  identifiable type of provider included in the downloaded lists from the  program\u2019s website, we decided to limit our list to chartered private schools  and drop other providers from our schools list.", "Because web addresses were not always included in programs\u2019 lists of  schools, we used information provided in the lists to conduct internet  searches to locate school websites. This enabled us to produce an  estimate on the number of participating schools without a website. In  order to review comparable information across the sampled schools\u2019  websites, we developed a standardized web-based data collection  instrument which we used to examine each website for academic,  administrative, and financial information and information related to  students with disabilities. We used a combination of information from our  audit work on identifying accountability mechanisms, Education guidance  on choosing a school, and our interviews to develop the questions  included in the data collection instrument. We reviewed all websites from  April 19 through 27, 2017. An analyst recorded information in the data  collection instrument. The information was then checked for  completeness by another analyst. We then analyzed the information  across schools.", "We stratified the population using two design variables\u2014one for whether  or not the school participated in programs with eligibility limited to  students with disabilities, and one for whether or not the school  participated in one of the largest four voucher programs. This resulted in  four sampling strata. The resulting sample of 344 schools allowed us to  make national estimates about the availability of school information by  program type. Because we followed a probability procedure based on  random selections, our sample is only one of a large number of samples  that we might have drawn. Since each sample could have provided  different estimates, we express our confidence in the precision of our  particular sample\u2019s results as a 95 percent confidence interval (e.g., plus  or minus 6 percentage points). This is the interval that would contain the  actual population value for 95 percent of the samples we could have  drawn. Confidence intervals are provided along with each sample  estimate in the report. All website review results presented in the body of  this report are generalizable to the estimated population except where  otherwise noted."], "subsections": []}, {"section_title": "Parent Interviews and Questionnaires", "paragraphs": ["To obtain information from parents on both our second and third  objectives, we conducted interviews with 17 families who had recent  experiences with private school choice programs. We also created a short  questionnaire that included questions on the type of information families  want and use when making private school choice decisions for their  children. The questionnaire also included questions on how families of  students with disabilities are informed about any changes in their rights  under federal law when enrolling in private school choice programs and  their understanding of those changes. We worked with private school  choice organizations and national stakeholder groups that directly  communicate with parents to contact parents on our behalf to answer the  questionnaire and be interviewed. The questionnaire was given to each  parent we interviewed or who participated in each of the discussion  groups conducted during our Florida site visit. Parents completing the  questionnaire had at least one child with a disability and either  participated or considered participating in a private school choice program  designed for students with disabilities."], "subsections": []}]}, {"section_title": "Appendix II: Key Information about Private School Choice Programs, School Year 2016- 17", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the U.S. Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nagla\u2019a El-Hodiri (Assistant  Director), Alison Grantham (Analyst-in-Charge), Kelsey Burdick, Cheryl  Jones, and Alex Squitieri made key contributions to this report. Also  contributing to this report were Susan Aschoff, Carl Barden, James  Bennett, Deborah Bland, Sarah Cornetto, Lawrence Malenich, Shelia  McCoy, Tom Moscovitch, Kelly Rubin, Andrew Stavisky and Barbara  Steel-Lowney."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-123", "url": "https://www.gao.gov/products/GAO-18-123", "title": "Rental Assistance Demonstration: HUD Needs to Take Action to Improve Metrics and Ongoing Oversight", "published_date": "2018-02-20T00:00:00", "released_date": "2018-03-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HUD administers the Public Housing program, which provides federally assisted rental units to low-income households through PHAs. In 2010, HUD estimated its aging public housing stock had $25.6 billion in unmet capital needs. To help address these needs, the RAD program was authorized in fiscal year 2012. RAD allows PHAs to move (convert) properties in the public housing program to Section 8 rental assistance programs, and retain property ownership or transfer it to other entities. The conversion enables PHAs to access additional funding, including investor equity, generally not available for public housing properties.", "GAO was asked to review public housing conversions under RAD and any impact on residents. This report addresses, among other objectives, HUD's (1) assessment of conversion outcomes; (2) oversight of resident safeguards; and (3) provisions to help preserve the long-term affordability of units. GAO analyzed data on RAD conversions through fiscal year 2017; reviewed a sample of randomly selected, nongeneralizable RAD property files; and interviewed HUD officials, PHAs, developers, academics, and affected residents."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Housing and Urban Development (HUD) put procedures in place to evaluate and monitor the impact of conversion of public housing properties under the Rental Assistance Demonstration (RAD) program. RAD's authorizing legislation requires HUD to assess and publish findings about the amount of private-sector leveraging. HUD uses a variety of metrics to measure conversion outcomes. But, the metric HUD uses to measure private-sector leveraging\u2014the share of private versus public funding for construction or rehabilitation of assisted housing\u2014has limitations. For example, HUD's leveraging ratio counts some public resources as leveraged private-sector investment and does not use final (post-completion) data. As a result, HUD's ability to accurately assess private-sector leveraging is limited.", "HUD does not systematically use its data systems to track effects of RAD conversions on resident households (such as changes in rent and income, or relocation) or monitor use of all resident safeguards. Rather, since 2016, HUD has required public housing agencies (PHA) or other post-conversion owners to maintain resident logs and collect such information. But the resident logs do not contain historical program information. HUD has not developed a process for systematically reviewing information from its data systems and resident logs on an ongoing basis. HUD has been developing procedures to monitor compliance with some resident safeguards\u2014such as the right to return to a converted property\u2014and begun a limited review of compliance with these safeguards. However, HUD has not yet developed a process for monitoring other safeguards\u2014such as access to other housing voucher options. Federal internal control standards require agencies to use quality information to achieve objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring. Without a comprehensive review of household information and procedures for fully monitoring all resident safeguards, HUD cannot fully assess the effects of RAD on residents.", "RAD authorizing legislation and the program's use agreements (contracts with property owners) contain provisions intended to help ensure the long-term availability of affordable units, but the provisions have not been tested in situations such as foreclosure. For example, use agreements between HUD and property owners specify affordability and use restrictions that according to the contract would survive a default or foreclosure. HUD officials stated that HUD intends to develop procedures to identify and respond to risks to long-term affordability, including default or foreclosure in RAD properties. However, HUD has not yet done so. According to federal internal control standards, agencies should identify, analyze, and respond to risks related to achieving goals and objectives. Procedures that address oversight of affordability requirements would better position HUD to help ensure RAD conversions comply with program requirements, detect potential foreclosure and other risks, and take corrective actions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes five recommendations to HUD intended to improve leveraging metrics, monitoring of the use and enforcement of resident safeguards, and compliance with RAD requirements. HUD agreed with our recommendations to improve metrics and build on existing oversight."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2011, the Department of Housing and Urban Development (HUD)  reported that its public housing stock had approximately $25.6 billion in  backlogged capital needs, with an average repair need of about $23,365  per unit, and according to HUD these figures have increased since then.  HUD\u2019s Rental Assistance Demonstration (RAD) program was created, in  part, to address these capital needs. Under the traditional public housing  program, public housing agencies (PHA) generally cannot use private  funding sources to address the capital needs of their properties.  Furthermore, HUD estimates 10,000 units of public housing are  demolished or disposed of each year due to disrepair. RAD allows PHAs  to access other programs that create incentives for private investments,  such as the Low-Income Housing Tax Credit (LIHTC) program or insured  loans available through the Federal Housing Administration (FHA), or  conventional loans to address capital needs. In RAD, properties move  (convert) from the public housing program into Section 8 rental assistance  programs. RAD also permits PHAs to transfer ownership of the public  housing property as long as ownership or control of the Section 8  assisted units is by a public or nonprofit entity, although PHAs may elect  to retain ownership. If approved by HUD, the PHA can transfer the public  housing property to a for-profit entity to facilitate private investment  through tax credits provided that the PHA preserves its interest in the  property.", "You asked us to examine the public housing component of the RAD  program to determine if it is achieving the goals it was enacted to  accomplish, including the long-term preservation of affordable units and  protection of residents. This report examines (1) HUD\u2019s assessment of  the physical and financial outcomes of RAD conversions to date; (2) how  RAD conversions affected residents and what safeguards were in place  to protect them, including while temporarily relocated; (3) what  challenges, if any, PHAs faced in implementing RAD; and (4) the extent  to which RAD provisions are designed to help preserve the long-term  affordability of units.", "To examine physical and financial outcomes in properties, we obtained  and analyzed RAD data on conversions as of September 30, 2017. We  assessed the reliability of the data by verifying that data fields\u2014such as  the total number of units converted, dates for conversions, and financial  information\u2014were reasonable and consistent with our data request, and  by reviewing internal HUD procedures and data dictionaries, and  determined that the data were sufficiently reliable for the purposes of  describing rehabilitation and new construction in RAD projects and  evaluating RAD leveraging metrics. In addition, we obtained HUD  documentation to review the methodology used to calculate RAD  leverage metrics. We also reviewed RAD documentation and selected  conversion files. We randomly selected a nongeneralizable sample of  files for converted properties (31 files closed as of July 19, 2017) that  planned to incur construction costs (undergo rehabilitation or new construction). We reviewed published RAD evaluations and metrics. We  interviewed PHAs at each of eight locations we visited and developers at  five of those locations (some PHAs acted as the developer). We selected  site visit locations to include a range of PHA sizes from small to large,  and PHAs that proposed a range of construction costs for RAD  conversion (from no construction costs to $594 million in construction  costs). Using a nonprobability sample based on PHA size, RAD subsidy  type, planned rehabilitation and resident relocation, number and size of  RAD transactions, transaction closing dates, construction costs, and  location we selected and spoke with an additional 10 PHAs by telephone  about HUD postclosing monitoring. We also reviewed HUD\u2019s postclosing  procedures and interviewed HUD officials about their processes.", "To determine how RAD affected residents in converted units, we  analyzed HUD public housing and Section 8 household data before and  after conversion including demographic characteristics of residents and  changes in rent, income, and household location. We determined that  some statistics were sufficiently reliable for the purpose of describing  some characteristics of RAD households, while others were not. We  discuss our assessment of household data reliability later in this report.  Further, for additional information on our data reliability assessment and  determination see appendix I. To describe safeguards for residents, we  reviewed legal requirements in HUD notices and HUD documentation on  RAD monitoring and compliance procedures. We also reviewed selected  conversion files to help determine how HUD implemented safeguards and  interviewed HUD about its implementation of resident safeguards. Finally,  we held focus groups with residents during our site visits to better  understand any effects on their living conditions.", "To determine challenges PHAs faced in implementing RAD, we reviewed  HUD guidance and related documents for PHAs in the program. We also  interviewed 8 PHAs during our site visits and spoke with another 10 PHAs  by telephone about the benefits and challenges of participating in the  RAD program.", "To examine provisions designed to help preserve long-term affordability  of units, we reviewed the RAD authorizing statute and amendments and  HUD notices. For a nongeneralizable sample of 31 randomly selected  properties, we examined templates for contractual agreements for RAD  closings and analyzed closing contracts to determine if agreements  matched program requirements. We interviewed HUD staff and staff of 18  PHAs (8 site visit PHAs and 10 by teleconference) to obtain their views  on the potential strengths or weaknesses of preservation provisions in the  case of default or foreclosure.", "We conducted this performance audit from February 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The RAD program was authorized by Congress and signed into law by  the President in November 2011 under the Consolidated and Further  Continuing Appropriations Act, 2012 with amendments in 2014, 2015,  2016, and 2017. The RAD program consists of two components. The  first component of the RAD program\u2014and the focus of our review\u2014 provides PHAs the opportunity to convert units subsidized under HUD\u2019s  public housing program and owned by the PHAs to properties with long- term (typically, 15\u201320 years) project-based voucher (PBV) or project- based rental assistance (PBRA) contracts. These are two forms of  Section 8 rental assistance that tie the assistance to the unit to provide  subsidized housing to low-income residents. In a RAD conversion, PHA- owned public housing properties can be owned by the PHA, transferred to  new public or nonprofit owners, or transferred to private, for-profit owners  when necessary to access LIHTC financing, if the PHA preserves its  interest in the property in a HUD-approved manner. The second  component of RAD converts privately owned properties with expiring  subsidies under old rental assistance programs to PBV or PBRA in order  to preserve affordability and encourage property rehabilitation.", "The goals of the RAD program include preserving the affordability of  federally assisted rental properties and improving their physical and  financial condition. Specifically, postconversion owners (PHAs, nonprofits,  or for-profit entities) can leverage the subsidy payments under the newly  converted contracts to raise capital through private debt and equity  investments, or conventional private debt, to make improvements. The  RAD program provides added flexibility for PHAs to access private and  public funding sources to supplement public housing funding. These  financing sources may include debt financing through public or private  lenders; mortgage financing insured by FHA; PHA operating reserves;  replacement housing factor funds; seller or take-back financing; deferred  developer fees; equity investment generated by the availability of 4  percent and 9 percent LIHTC; or other private or philanthropic sources.", "PHAs also may pursue various options for their conversions, which often  depend on property needs and available financing, including property  rehabilitation or new construction. Additionally, PHAs may undertake  conversion involving no property rehabilitation or new construction to  meet certain financial goals or for future rehabilitation or new  construction, as long as the PHA can demonstrate to HUD that the  property does not need immediate rehabilitation and can be physically  and financially maintained for the term of the Section 8 Housing  Assistance Payment contract (HAP contract).", "The RAD authorizing legislation and RAD Notice also specify  requirements for ownership and control of converted properties. That is,  converted properties must have public or nonprofit ownership or control,  with limited exceptions. The RAD authorizing legislation, RAD Notice,  HAP contracts, and RAD Use Agreement also establish procedures to  help ensure that public housing remains a public asset should challenges  arise, such as default, bankruptcy, or foreclosure.", "Oversight of RAD conversion and properties is primarily divided among  three HUD offices. The Office of Recapitalization is responsible for  administering the conversion process but generally does not oversee  converted properties. Before conversion, the Office of Public and Indian  Housing oversees the properties. After conversion, oversight remains with  Public and Indian Housing for properties that convert to PBV contracts  and transfers to the Office of Multifamily Housing Programs for PBRA.", "The RAD program has been implemented and expanded in phases.  Since its authorization, the RAD unit cap gradually increased from 60,000  units in 2011 to 225,000 units in May 2017. The RAD program is currently  fully subscribed with all 225,000 units allocated. As of September 30,  2017, 689 conversions were closed that involved a total of 74,709 units  (see fig. 1 for a breakdown by fiscal year). Additionally, 706 conversions  involving 79,078 units were in the process of structuring conversion plans.  The remaining conversions under the cap were allocated to specific  properties and in the process of having commitments issued or reserved  under multi-phase or portfolio awards, according to HUD officials.", "RAD conversions begin with the submission of an application by PHAs  after which they are notified of selection. The PHA is then required to  submit a financing plan within 180 days or a later deadline based on the  nature of the financing proposed.", "A RAD conversion is considered closed when the HAP contract is signed  and financial documents are executed. The properties are considered  converted to Section 8 assisted housing on the effective date of the HAP,  which is generally the first day of the following month. Once the RAD  conversion is closed, the PHA or ownership entity can move forward with  its submitted proposals or RAD-related rehabilitation or new construction  and is responsible for complying with RAD requirements and associated  contracts. In some cases, rehabilitation can take place in advance of  conversion closing if public housing funds are being used."], "subsections": []}, {"section_title": "Most RAD Conversions Involved Construction and Tax Credits, but HUD\u2019s Leveraging and Construction Metrics Are Limited", "paragraphs": [], "subsections": [{"section_title": "Most RAD Conversions Involved Property Rehabilitation or New Construction, and Financing Often Included Tax Credits", "paragraphs": [], "subsections": [{"section_title": "Most Conversions Involved Construction and Many Used Tax Credits", "paragraphs": ["Most RAD conversions involved some type of construction. Our analysis  of HUD data showed that as of September 30, 2017", "417 of 689 closed conversions (61 percent) involved planned  rehabilitation to the property, 86 (12 percent) new construction, and  186 (27 percent) no construction; and", "361 of 706 active RAD conversions (51 percent) involved planned  rehabilitation, 89 (13 percent) new construction, and 256 (36 percent)  no construction.", "HUD officials stated that they approve conversions that involve no  immediate planned rehabilitation or new construction as long as the  property has no immediate needs to be addressed. Such conversions  allow PHAs to better position themselves to access additional capital to  address future rehabilitation or construction plans.", "Our review of 31 conversion files also showed that the scope of proposed  physical changes varied among RAD conversions. For properties that  included scope of work narratives, physical changes included renovations  to mitigate hazardous materials, aesthetic renovations, code and  accessibility compliance, and construction of new buildings, among other  changes.", "Financing for RAD conversions involved multiple public and private  sources, but many conversions used LIHTC. Our analysis of HUD data  showed that as of September 30, 2017, 173 of 689 closed RAD  conversions (25 percent) utilized 4 percent LIHTC, 99 (14 percent)  utilized 9-percent LIHTC, and 416 (60 percent) did not use LIHTC. By  dollar amount, major financing sources were 4 percent LIHTC at $2.4  billion; new first mortgages at $1.8 billion; and 9 percent LIHTC at $1.1  billion.", "Construction costs constituted the highest-dollar use of financing for RAD  conversions, but not all conversions incurred construction costs, as  discussed earlier. On average, construction costs per closed conversion  were $6.4 million (ranging from no construction costs to $236 million) and  nearly $60,000 per-unit converted to RAD. Construction costs  represented the highest-dollar use of financing for closed RAD  conversions at $4.4 billion followed by building and land acquisition costs,  and developer fees. For more information on financing sources and uses,  see appendix II."], "subsections": []}, {"section_title": "Stakeholders Cited Various Factors Influencing Financing for RAD Conversions", "paragraphs": ["PHA officials and developers we interviewed cited various factors that  influence financing sources needed for RAD conversions. For example,  property needs assessments help establish the level of rehabilitation or  new construction that would address the capital needs of the property. In  turn, needs assessments can derive from physical assessment results  and incorporate federal, state, or local compliance requirements. For  instance, rehabilitation or construction would need to address the  accessibility requirements of the Americans with Disabilities Act and local  building codes, among other requirements.", "PHA officials and developers we interviewed also said they had to  consider competition or access to financing for RAD conversions. For  example, PHAs noted that tax credit applications and other financing had  to be competitive. Some PHAs we interviewed also noted that while the 9  percent LIHTC provides more equity to finance low-income units  (finances 70 percent of the costs of the units), there is more competition  for the 9 percent LIHTC, while the 4 percent LIHTC can be automatically  awarded for certain deals involving tax exempt bonds and federally  subsidized projects. Thus, while some PHAs and developers might prefer  to obtain 9 percent LIHTC, they often apply for 4 percent LIHTC to  increase the chances of obtaining some tax credit equity. For example,  one particular PHA that had used both 4 percent and 9 percent LIHTCs  noted that in one transaction it had to compete against 74 applicants for  25 available awards of 9 percent credits."], "subsections": []}]}, {"section_title": "HUD\u2019s Metric for Financial Outcomes\u2014the RAD Leverage Ratio\u2014May Not Be Accurately Calculated, Partly because Final (Postcompletion) Financial Information Is Not Used", "paragraphs": [], "subsections": [{"section_title": "The RAD Leverage Ratio Does Not Reflect the Amount of Private-Sector Leveraging", "paragraphs": ["The RAD authorizing statute requires HUD to assess and publish findings  regarding the amount of private capital leveraged as a result RAD  conversions. A leverage ratio relates the dollars other sources provide to  the dollars a program provides to an institution or a project. HUD uses  various quantitative, qualitative, and processing and efficiency metrics to  measure conversion outcomes. To meet the RAD statutory requirement,  HUD published an overall RAD leverage ratio that has fluctuated between  19:1 and 9:1 since 2014. HUD\u2019s most recent leverage ratio in fiscal year  2017 was 19:1, nearly double what the agency reported the prior year.  We asked HUD officials why the leverage ratio nearly doubled between  2016 and 2017 and received conflicting information during the course of  our audit.", "Initially, officials noted that the ratio was intended to replicate the  methodology used by PD&R in its September 2016 report.", "Subsequently, the officials clarified that they did not follow PD&R\u2019s  methodology for categorizing financial source data. Specifically,  officials did not review or make manual adjustments to the financial  data PHAs entered in open source fields to ensure sources actually  represented public, private, or other funding categories when  calculating the leverage ratio.", "Finally, they noted that they disagreed with the methodology used in  the PD&R September 2016 report and stated that there are various  ways to calculate leverage. For the purposes of announcing the most  recent leverage ratio in 2017, HUD officials decided that a leverage  ratio comparing federally appropriated public housing resources would  reflect the amount of financing leveraged had RAD not existed.", "We found, and officials from HUD acknowledged, three limitations to the  RAD leverage calculation. First, HUD generally had data on funding  sources and amounts a RAD conversion proposed to use (at the time of  its application to HUD and at the time of closing of construction financing)  rather than data after construction is completed on funding sources and  amounts. HUD officials stated that they were reviewing final closing  packages to confirm that the data reflect the latest reported information  on sources and uses of funds for each conversion at closing. However,  sources and uses of funds and amounts at the time the RAD conversion  is closed may differ from amounts upon completion of construction. In  October 2017, HUD implemented procedures to verify completion of  planned construction activities and costs, which we discuss later in this  report.", "Second, HUD\u2019s leverage ratio, published in 2017, did not manually adjust  funding source data to accurately account for all sources in calculating  the leverage ratio for RAD. Specifically, HUD did not isolate funding  sources that were federally appropriated, contributed by the PHA, or  contributed by state or local municipalities to calculate leverage. For  example, among approximately $2 billion from other financial sources,  HUD included Moving to Work (MTW) funding (which may include public  housing capital funds, public housing operating funds, and voucher funds)  and tax credit equity as leveraged sources. However, these are not  necessarily private sources, which we explain later in this report. As a  result, HUD\u2019s current calculation does not reflect the amount of private- sector leveraging. HUD calculated and published a RAD leverage ratio in  May of 2017 using the following formula:  Total leverage ratio = (total dollars from all sources \u2013 public housing dollars)", "To calculate the RAD leverage ratio, HUD uses some but not all financial  source data it collects (see app. II for a list of data fields collected by  HUD). For example, HUD mistakenly excluded data that capture private  funds, reducing the amount of total sources in the numerator. HUD  calculates \u201cpublic housing dollars\u201d by adding data that capture  replacement factor funds, public housing operating reserve funds, and  prior-year public housing capital funds. HUD considers tax credit equity,  new first mortgages, and \u201cother funding\u201d data to be non-public housing  dollars (see app. II for a list of fields in HUD\u2019s calculation). PHAs enter a  description and amount for other funding sources in \u201cother funding\u201d data  fields (see app. II). For example, a PHA may enter a federal financial  source in one of the open-entry \u201cother funding\u201d data fields, requiring a  manual adjustment to properly account for the financial source.   According to HUD, additional fields were included in mid-2016 to better  differentiate certain sources such as from the HOME Investment  Partnerships Program (HOME) and seller take-back financing. Prior to  this point, these financial sources were placed into \u201cother\u201d fields, and the  standard resource desk report had not been updated until mid-2017 to  include all of these fields.", "Third, HUD does not categorize and report its leveraging by private and  public sources. According to HUD officials, informative leverage  methodologies could calculate the ratio based on the leveraging of public  housing program funds, the leveraging of all federally appropriated funds,  or the leveraging of PHA funds (i.e., sources in the transaction that have  come from the PHA itself even if not federally appropriated through the  public housing program), among other methodologies. The RAD  authorizing statute requires HUD to assess and publish findings on the  amount of private-sector leveraging. In addition, Standards for Internal  Control in the Federal Government require agencies to communicate  quality information with external parties, such as other government  entities, to make informed decisions and evaluate the entity\u2019s  performance in achieving key objectives.", "HUD also does not use final (postcompletion) funding data in another  metric of RAD leveraging. Specifically, in June 2017 HUD publicly  reported that RAD \u201chas leveraged more than $4 billion in capital  investment in order to make critical repairs and improvements.\u201d HUD  calculates this figure by summing the construction costs\u2014a  subcomponent of total costs\u2014with data from the time a conversion closes  and not upon completion of construction. HUD officials we spoke with  clarified that this metric solely reports construction investments and does  not reflect any conclusion regarding private leverage of public funds. But,  HUD publically characterized this measure in different ways, including as  the amount of \u201cpublic-private investment in distressed public housing,\u201d the  amount of \u201cconstruction achieved under RAD,\u201d and the amount of \u201cnew  private and public funds leveraged by RAD.\u201d", "HUD\u2019s 2016 interim report calculated and published multiple leverage  ratios, but chose to highlight a RAD leverage ratio that is consistent with  ratios used for other HUD programs. However, the ratio does not  specifically follow the prescribed ratio language in the authorizing statute  because the report states that the ratio represents the amount of private  and public external sources invested for every dollar invested by PHAs  but the statutory language only discusses private-sector leveraging.  Officials further noted that the statute does not require a particular  methodology and HUD relies on PD&R\u2014and its independent contractor\u2014 to determine the appropriate methodology for purposes of compliance  with the statute. Lastly, the statute does not preclude the use of other  leverage metrics for other purposes, such as using the ratio to measure  the amount of nonpublic housing funds leveraged in RAD transactions  that would not be available to the property absent RAD. As a result,  HUD\u2019s leverage metrics announced in May 2017 do not accurately reflect  the amount of private-sector leveraging achieved through RAD, do  include public funding as private sources, and inconsistently measured  sources that were federally appropriated or contributed by PHAs,  potentially under- or over-reporting the program\u2019s performance.  Additionally, in October 2017, HUD began implementing procedures to  collect data after construction is completed and is not yet able to calculate  a leverage metric using final (postcompletion) financial sources rather  than the financial sources collected at closing. The lack of a consistent  metric for private leveraging could also lead to inconsistent reporting of  the leverage ratio, as has occurred in prior years."], "subsections": []}, {"section_title": "Recalculations, Including of Funding Sources, Can Increase Accuracy of the RAD Leverage Ratio", "paragraphs": ["We recalculated RAD leverage ratios in a number of different ways,  including to correct errors we identified during our review. For example,  HUD\u2019s 2016 interim report noted that data on closed transactions do not  provide detailed description of \u201cother sources,\u201d requiring a crosswalk  between applications and closed transactions to develop estimates for the  allocation of \u201cother sources\u201d across financial source categories.  Abbreviated descriptions are provided in the form of notes that are not  always clear and consistent; therefore public housing sources may  include federally appropriated sources, as well state, city, or county  sources. Through our estimates, we found that the overall leverage ratio  could range from 7.44:1 for a ratio recalculating HUD\u2019s leverage ratio to  1.23:1 for a ratio estimating private-sector leveraging.", "Recalculation with HUD methodology and financial source  recategorization. As discussed previously, HUD\u2019s methodology does  not account for all financial data collected by HUD and includes  \u201cother\u201d funding sources erroneously considered as leveraged funds.  Thus, we manually adjusted RAD funding source data and found that  nearly $1.2 billion were erroneously considered leveraged funds  because they are not private funds. For example, HUD included MTW  funds; public housing operating reserves; public housing capital funds;  replacement housing factor funds; other federal funds; other state,  local, or county funds; and take-back financing funds as leveraged  financial sources. For more information, see appendix II.", "We obtained documentation from HUD to replicate their methodology and  recategorized financial sources that corrected errors in the data, and  found that the RAD leverage ratio was less than half of HUD\u2019s most  recently publicly reported leverage ratio (19:1), approximately 7.44:1 (see  app. II).", "Recalculation to exclude LIHTC and other federal sources. We  previously reported that LIHTCs are considered a federal source  because tax credit equity represents foregone federal tax revenue  and, therefore, are a direct cost to the government. Accordingly, we  recalculated the RAD leverage ratio by excluding all federal funding  sources and obtained a ratio of approximately 1.43:1 (see app. II).", "Recalculation of private-sector leveraging. Lastly, the RAD  authorizing statute requires HUD to assess and publish findings on  the amount of private-sector leveraging, but HUD\u2019s current calculation  does not present the amount of private-sector leveraging and does  not include all available data (for example, the \u201cOther Private\u201d funds  collected by HUD). We estimated the amount of private-sector  leveraging by grouping public housing sources, other public sources,  and private sources, resulting in a leverage ratio of approximately  1.23:1 (see app. II)."], "subsections": []}]}, {"section_title": "HUD Implemented Procedures to Verify Completion of Planned Construction Activities and Costs in October 2017, but Does Not Collect Final Comprehensive Financial Data", "paragraphs": ["In October 2017, HUD implemented procedures to certify completion after  developers finish RAD-approved rehabilitation or construction. Previously,  HUD had a limited ability to monitor and evaluate final (postcompletion)  physical and financial changes in RAD projects with existing data.  According to HUD officials, HUD did not implement completion  certification procedures before October 2017 because it had been  addressing what it considered to be the highest risks first (such as  clarifying requirements for RAD participants, resident safeguards, and  other procedural and administrative requirements).", "HUD\u2019s October 2017 completion certification procedures include  instructions for owners to report final construction costs and  documentation on completion of repairs or construction within 45 days of  the completion date recorded in the RAD Conversion Commitment. More  specifically, HUD requires owners to list a final construction cost  amount\u2014a subcomponent of total costs\u2014in the RAD resource desk,  describe variances from the approved construction cost amount in a  comment box, and describe how increases in costs were addressed.  Additionally, a third-party must certify that the repairs in the scope of work  were completed by providing an attestation to HUD.", "However, HUD\u2019s procedures do not require documentation from the  owners to support the final total cost figures, which include not only  construction costs but also building and land acquisition costs, and  developer fees, among others as noted earlier in this report. These  procedures also do not require a certification from owners on all financing  sources and costs recorded in the RAD Conversion Commitment.", "Standards for Internal Control in the Federal Government require that  management implement control activities through documented policies  and procedures to provide reasonable assurance that the objectives of  the agency will be achieved, and also communicate quality information  with external parties to make informed decisions and evaluate the entity\u2019s  performance in achieving key objectives.", "While HUD now has certification completion procedures in place, this  process provides the agency limited financial information from owners. As  a result, HUD is unable to report metrics that reflect final (postcompletion)  RAD financial outcomes after construction is completed. Furthermore,  HUD is limited in its ability to effectively oversee conversion budget and  cost variances, and expenditures that require HUD approval. Lastly, the  RAD authorizing statute requires that the Secretary of HUD demonstrate  the feasibility of the RAD conversion model to recapitalize and operate  public housing properties under various situations and by leveraging other  sources of funding to recapitalize properties. Without metrics that reflect  the final (postcompletion) financial outcomes of RAD after construction is  completed, HUD and congressional decisionmakers are unable to make  informed decisions concerning the RAD program."], "subsections": []}]}, {"section_title": "HUD Has Not Systematically Analyzed Household- Level Data on Residents in RAD Conversions or Monitored Implementation of Some Resident Safeguards", "paragraphs": ["HUD has not systematically tracked or analyzed household data on  residents in RAD-converted units that are available from its public  housing or Section 8 databases or from PHAs or other postconversion  owners\u2014the main sources of resident data for the RAD program. In  addition, HUD has not yet developed monitoring procedures for all the  resident safeguards in the RAD program. Finally, residents told us of  some concerns about information they received on RAD conversions,  communications opportunities, and the relocation process."], "subsections": [{"section_title": "HUD Has Not Systematically Analyzed Household-Level Data on the Effects of RAD Conversion on Residents", "paragraphs": ["HUD officials told us that the agency does not systematically track or  analyze household-level data on residents in RAD-converted units across  existing program databases (HUD maintains household data for the  public housing and Section 8 rental assistance programs in two  databases). In particular, HUD does not track changes in household  characteristics before and after conversion, such as changes in rent, as  well as relocations or displacement of individual households.", "However, according to HUD officials, their databases are not designed to  track the impact of RAD conversion on residents and they are unable to  electronically link household information submitted before RAD  conversion to information submitted after conversion. Once a property is  converted, the property and corresponding household information are  removed from the public housing database. Owners of converted  properties are to use software to manually enter household information  into the databases for the Section 8 program when submitting tenant  certifications and information for assistance payments. This procedure  is the standard for administration of all project-based Section 8 properties.  HUD officials stated that they have explored the possibility of transferring  household data from one system to another at the time of a property\u2019s  conversion.", "While HUD has not systematically analyzed household information from  its public housing and Section 8 databases, we were able to perform a  limited analysis. We requested and received data from HUD on the  households affected by RAD. Using the data provided that were current  as of June 2017, we were able to identify about 26,000 households that  lived in units that were converted to a PBV subsidy, but we were unable  to identify the total number of households converted to a PBRA subsidy.  Based on our analysis of 26,000 PBV households, we found about 2,700 (about 11 percent of) households were headed by an about 6,800 (about 26 percent of) households were headed by an  individual with a disability; about 2,700 households (about 10 percent of) households were  headed by an elderly person who also had a disability; over half (about 14,000 or 54 percent) of the households were headed  by an individual identified as black; close to 11,000 households (about  41 percent) were identified as white; and about 1,000 households  (about 4 percent) were identified as Asian. Close to 3,100 households  (about 12 percent) were headed by an individual identified as  Hispanic; about half (about 49 percent) of the PBV households were single- person households;  the median annual income of PBV households both before and after  RAD conversion was about $10,000; and about 5,300 (about 20 percent) of households were paying a flat rent  rather than income-based rent before RAD conversion.", "However, the data on PBV households were not comprehensive. For  example, while about 10,000 residents (about 57 percent) experienced a  rent increase following RAD conversion under PBV, we could not  determine if the rent increase was the result of an increase in resident  income. We also could not determine changes in location among the PBV  households following RAD conversion.", "Rather than relying on the public housing and Section 8 databases for  tracking household information during conversion, HUD officials indicated  that the agency will rely on locally maintained resident logs, which contain  household information collected by property owners, as the starting point  when HUD determines a compliance review is warranted. The logs will be  the primary way the agency collects household information for  compliance reviews under the RAD program, according to HUD officials.  In November 2016, HUD issued a notice, which requires the PHA or other  postconversion owner to maintain a log about every household at a  converting project, including information on race and ethnicity, household  size, and disability. The notice also requires owners to track residence  status throughout the relocation process, including whether the resident  has returned, moved elsewhere, was permanently relocated or evicted;  relocation dates; and details on any temporary housing and moving  assistance provided. Owners are required to make the information  available to HUD upon request for audits and other purposes. According  to HUD officials, the agency expects the information in the resident logs  to be more robust than what they would collect through the public housing  and Section 8 databases, which do not track residents while they are  relocated.", "HUD officials stated that the agency plans to review selected resident  logs as part of an ongoing limited compliance review of about 90 RAD  conversion projects. HUD officials told us they are developing procedures  for performing compliance reviews\u2014such as developing a mechanism to  review a sample of logs on a periodic basis\u2014but they have not yet done  so because they have been focusing on developing procedures for  activities that present a high risk to the program as described in the  following section. HUD has not established a time frame for developing  these procedures. However, HUD officials indicated that they plan to  select resident logs for review based on risk of noncompliance and do not  plan to analyze program-wide information currently collected in the public  housing and Section 8 databases for program monitoring. HUD officials  also noted that that PD&R is planning to track a sample of residents  through its evaluation of the program, which we previously mentioned.", "While HUD has decided to rely on resident logs because of the difficulty  of tracking household information across its program databases, using  resident logs to assess the effects of the RAD program on residents has  limitations. While the resident logs would contain detailed household  information, they were not required prior to November 2016 and may not  contain information on households converted before that date (RAD  conversions started in 2013). HUD\u2019s public housing and Section 8  databases contain information on such households. Second, as  previously mentioned, HUD plans to review resident logs only when there  is a risk of noncompliance, but they collect household information in their  databases on a rolling basis. Standards for Internal Control in the Federal  Government require agencies to use quality information to achieve their  objectives, and obtain and evaluate relevant and reliable data in a timely  manner for use in effective monitoring.", "Without a comprehensive review of household information\u2014one based  on information in HUD data systems as well as resident logs\u2014HUD  cannot reasonably assess the effects of ongoing and completed RAD  conversions on residents and compliance with resident safeguards, as  discussed in the next section."], "subsections": []}, {"section_title": "HUD Has Been Developing Procedures to Monitor Some RAD Resident Safeguards", "paragraphs": ["HUD has not yet developed monitoring procedures for certain resident  safeguards under the RAD program. RAD requirements include those  intended to ensure that residents whose units are converted through RAD are informed about the conversion process;  can continue to live in a converted property following RAD conversion; are afforded certain protections carried over from the public housing are afforded a phase-in of any rent increases under Section 8  program requirements.", "Currently, based on HUD notice requirements, PHAs must document  compliance with three safeguards (PHA plan amendments, resident  notification, and procedural rights) in their RAD application and other  conversion paperwork. For example, PHAs must submit comprehensive  written responses to resident comments received in connection with the  required resident meetings with their RAD application. For one safeguard,  PHAs are not required to report to HUD but must retain documentation of  compliance to be made available to HUD as part of the monitoring for the  program. For others, the HUD notice does not specify reporting and  monitoring requirements.", "Based on our review of files for selected conversions, which we  previously discussed, we found PHAs generally submitted documentation  of their efforts to inform residents about RAD conversion, such as  providing evidence to HUD of meetings with residents and written  responses to resident questions as required. However, the specific  documents for these requirements were not available from HUD in all  cases. HUD\u2019s review of amendments to PHA plans was documented in all  but one of the conversions we reviewed. Documentation requirements for  resident relocations have changed since RAD was introduced, which  made the documentation more difficult to assess.", "HUD developed and started implementing procedures in October 2017  that require owners to certify and provide data supporting compliance with  the resident right-to-return requirements. For example, owners must  certify the number of residents who exercised their right to return to a  converted property compared with the number of residents who did not  return. HUD is also developing standard operating procedures to review  each conversion for compliance with RAD relocation provisions.  Specifically, the procedures would describe the review steps required at  different stages of the conversion process, a process for identifying risks,  and how to address instances of noncompliance with RAD requirements.  Additionally, HUD noted that they have 2 compliance reviews under way  including 1 involving a set of HUD requirements that affect relocations of  more than 1 year and the limited compliance review of 90 projects that we  previously described.", "HUD officials noted that they are developing additional guidance in other  areas. First, HUD officials indicated that as part of an overall update of  RAD standard operating procedures, they are developing additional  protocols on resident notification and how residents\u2019 comments are  addressed through conversion planning. Second, the agency had not  been consistently collecting required documentation on \u201chouse rules,\u201d  which describe the conditions and procedures for evicting residents and  terminating assistance at RAD PBRA properties, so it has developed and  implemented additional legal review procedures as part of the  implementation of RAD resident eviction and grievance procedural rights  requirements. According to HUD officials, they have been focusing  primarily on right-to-return and relocation requirements because they  represent areas of highest risk.", "HUD has not developed separate monitoring procedures for other  resident safeguards\u2014the phase-in of tenant rent increases, resident  representation through tenant organizations, and choice mobility  requirements. However, HUD officials told us that they plan to assess  how administrative data can be used to monitor choice mobility as part of  the planning for a separate PD&R evaluation of this safeguard. HUD  officials also indicated that there are procedures for residents to report  complaints to HUD if resident representation and organization  requirements are not met. Standards for Internal Control in the Federal  Government require agencies to implement control activities through  documented policies and procedures to provide reasonable assurance  that agency objectives will be achieved. These standards also require  agencies to design procedures to achieve goals and objectives, and  identify, analyze, and respond to risks related to achieving the defined  objectives. Table 1 includes a description and information on  implementation of resident safeguards that most directly affect residents\u2019  experience with the conversion process and ability to live at the property  following conversion. Appendix III describes these and other RAD  resident safeguards.", "HUD officials indicated that the safeguards for the phase-in of tenant rent  increases, resident representation, procedural rights, and choice mobility  presented a lower risk than the right-to-return requirements, so they were  a lower priority, and in some cases were addressed through general  monitoring of the Section 8 program. For choice mobility options, HUD  indicated that its data systems are not designed to track whether  residents are able to exercise these options, such as tracking whether  residents left a property to exercise choice mobility or for other reasons.", "All but two of the resident safeguards do not take effect until after a  property has been converted and is part of the Section 8 program. For  example, residents are only eligible to use vouchers through choice  mobility after they have lived in the converted property for 1 or 2 years  depending on the assistance contract involved (PBV or PBRA). Moreover,  certain RAD safeguards are not typically available for Section 8 residents.  For example, RAD establishes resident representation provisions and  procedural rights that are more in line with public housing rather than  Section 8 requirements. While HUD has indicated that the Section 8  program has experience administering different types of assistance  contracts, RAD nonetheless creates separate requirements for certain  provisions from the public housing and Section 8 programs.", "As previously mentioned, RAD conversions have been completed at an  increasing pace in the last 5 years. However, because HUD has not yet  developed separate monitoring procedures for certain requirements\u2014the  phase-in of tenant rent increases, resident representation through tenant  organizations, and choice mobility requirements, many of which take  effect after a conversion\u2014and without using all available household data,  the agency will not be able to reasonably ensure that these safeguards  were implemented."], "subsections": []}, {"section_title": "Residents Described Mixed Experiences during the RAD Conversion Process", "paragraphs": ["Residents who participated in our focus groups expressed some  concerns about information they received on RAD conversions,  communications opportunities, and the relocation process. Residents  indicated that they were notified about RAD conversion in a variety of  ways. Residents in 5 of 14 focus groups found the information presented  to them on RAD to be helpful. Residents in 7 of 14 focus groups indicated  that the information they received was not helpful. Across these focus  groups, a range of concerns was expressed, including that the  information provided was not always clear or reflective of the final  changes resulting from RAD conversion, and that the PHA and  management were not always forthcoming with information about the  RAD changes.", "Residents in some focus groups also indicated that they were not  involved in the RAD conversion. Residents in 5 of 14 groups indicated  that they were not given the opportunity to provide input into the RAD  changes, while residents in 6 of 14 groups indicated that their concerns  were not addressed and their suggestions were not incorporated.", "Residents also described problems with relocations. Some of the  concerns expressed by resident focus groups on relocation related to the  location of the temporary units (3 of 14 focus groups), the timing of  relocation or amount of notice given (7 of 14 focus groups), and moving  issues (such as items damaged during moves).", "Residents were asked to describe ways in which RAD conversion  improved or harmed their living conditions. Residents in several focus  groups indicated that RAD improved their living conditions, including both  the condition (7 of 14 focus groups) and appearance of their units or the  property in which they lived (6 of 14 focus groups). Some of the changes  residents liked included the installation of new appliances, mold and pest  removal, and safety and energy efficiency improvements. However,  residents in several of the focus groups identified problems with their  living conditions following RAD conversion. The problems residents  identified included security concerns (10 of 14 focus groups); renovations  that were of poor quality (6 of 14 focus groups); and other problems with  the units (10 of 14 focus groups), such as pest problems; decreased  amenities (8 of 14 focus groups), such as the removal of common areas  or in-unit washing machines; and issues with property management (11 of  14 focus groups). For example, in several instances, residents stated that  new managers or owners in place following RAD conversion were not  responsive to their needs or concerns.", "During our site visits, residents described other experiences with RAD  conversion. Residents in all of the groups identified being notified about  RAD. Residents in 9 of 14 focus groups indicated that their rent was the  same following RAD conversion. Residents in a few focus groups  indicated that their rent had increased because of changes in their  income or conversion from a flat rent. However, residents in a few focus  groups experienced challenges in how their income was certified for the  purpose of calculating rents, such as problems with requests for  information (2 of 14 focus groups) and other issues with the process (4 of  14 focus groups). For example, residents reported having to provide the  same paperwork multiple times. No instances in which residents were  permanently involuntarily displaced were reported. One resident  organization expressed concerns about fewer eviction protections and  resident representation after RAD conversion."], "subsections": []}]}, {"section_title": "PHAs Identified Benefits and Challenges of RAD Participation", "paragraphs": ["We spoke with 18 PHAs, some of which cited benefits as well as several  challenges of RAD participation and some noted HUD responsiveness to  their circumstances and concerns. According to many of the PHAs we  spoke with, benefits of participating in the RAD program included  reducing administrative requirements in Section 8 programs and opening  avenues for additional sources of funding. In particular, many of the PHAs  noted that RAD allowed them to access tax credit equity and other  funding to complete the bulk of their repairs and renovations at once.  Over half of the PHAs we spoke with also found HUD to be flexible and  responsive to individual PHA circumstances. The majority of PHAs we  spoke with indicated that remaining in the public housing program was  not tenable because funding for the public housing program was not  enough to meet their long-term capital needs.", "PHAs we contacted also noted several challenges of participating in RAD:  financing constraints, timing challenges, and evolving requirements.", "Financing constraints. Some PHAs noted that program rent  requirements can limit PHA participation in RAD. Each year, HUD  calculates a contract rent\u2014the total rent for a unit, including operating  subsidy and resident contribution. PHAs must use the contract rent to  calculate Section 8 subsidies for properties converting under RAD.  According to HUD and several PHAs, contract rents for RAD-converted  Section 8 units are lower than rents in traditional Section 8 assisted units,  and are almost always lower than market-rate rents. Several PHAs and  HUD officials have described the difficulty of converting units from the  public housing program with this rent limitation. For example, when the  cost of needed rehabilitation or construction is high, low allowable  contract rents might not be sufficient to access appropriate capital for the  conversion.", "In certain localities, PHAs have found solutions to augment rents and  have used RAD flexibilities to allow them to convert and plan for operating  expenses. For example, the PHA in Tacoma, Washington, used the  Moving to Work program flexibilities to increase contract rents and  housing officials in San Francisco used an allowable procedure to transfer  RAD assistance from converted buildings to properties throughout its  portfolio (each is a blend of traditional project-based vouchers with higher  contract rents and RAD assistance). In Montgomery County, Maryland,  the PHA similarly included RAD assistance in some mixed-finance  properties that contain other high-rent subsidies and market-rate rents.", "Timing challenges. Some PHAs said they faced major challenges in  coordinating RAD timelines with HUD, lenders, or other parties or with the  requirements of the LIHTC process. HUD officials acknowledged that  PHAs with more complex transactions, including those involved in the  LIHTC process, struggle to implement their conversion plans within RAD  time frames. HUD officials noted that because there is a statutory cap on  the number of units that can be converted under RAD, they have  established time frames to stay under the cap and ensure that PHAs that  are planning to convert are ready to participate in the program.", "Additionally, according to HUD, it has made technical assistance  available to all PHAs that receive a Commitment to enter into a Housing  Assistance Payment contract during the RAD process to help ensure their  readiness for RAD closing and to meet remaining conversion deadlines.", "On the other hand, some PHAs expressed concern to us about delays in  the conversion process that put them at risk for missing state LIHTC  deadlines. HUD officials described putting conversions on a fast-track on  a case-by-case basis to meet LIHTC deadlines. For example, in one case  a PHA relocated residents before closing and without HUD approval.  HUD required the PHA to fund an escrow account until it was able to  determine any payments that might need to be made to residents and any  other necessary corrective action. This was done so that HUD could look  into the issue while mitigating additional harm to the residents and  continuing to move the PHA toward closing and aligned with tax credit  application deadlines.", "The timing of conversion can also create gaps in the payment of Section  8 funds to PHAs. Section 8 funding should begin in January of the year  following conversion. PHAs rely on annual public housing subsidies for  the conversion year\u2014public housing program funds are paid to PHAs  annually and are not recaptured by HUD following RAD conversion.  However, according to some PHAs we interviewed, Section 8 funding did  not begin on time. For example, in Baltimore, Maryland, subsidy flow after  conversion had not begun as of June of the following year. HUD officials  told us inadequate guidance from HUD and confusion from PHAs  regarding the necessary steps to request payment in a timely manner  have been the major cause of the problems. HUD has tried to remedy  delays and updated its notice to provide clearer guidance on the timing of  subsidy flow around the time of conversion to Section 8. Moreover, HUD  officials indicated that there has been confusion among PHAs on how to  request funds, so HUD is currently revising and updating the guidance on  steps PHAs must take to request payment under the PBRA program.  HUD officials also indicated that it has begun monitoring whether new  participants are taking the steps needed well before their first request for  funding.", "Some PHAs we contacted also mentioned difficulty in coordinating with  HUD on fulfilling internal RAD requirements and reviews. According to  some, the different offices involved in RAD conversions within HUD were  not well aligned and had different interpretations of the rules. For  example, some RAD conversions require a civil rights review by HUD\u2019s  Office of Fair Housing and Equal Opportunity Office, including those  transactions that require new construction or resident relocations. Some  PHAs indicated that such reviews occurred too late in the conversion  process even after other HUD offices had approved the conversion. HUD  officials acknowledge that different HUD offices have different objectives  in the RAD process. HUD officials indicated that the agency is trying to  coordinate more effectively among these offices and streamline the  conversion process as much as possible.", "Evolving requirements. While the majority of PHAs with which we spoke  said that HUD provided clear, sufficient, and timely information, some  PHAs noted that it also was challenging to adapt to evolving  requirements.", "Some PHAs noted that as HUD identified problems in the early years of  the program, it would change the guidance in response. For example,  HUD officials explained that it had clarified fair housing review  requirements in response to PHA concerns that the fair housing review  occurred too late in the process and could affect successful conversion of  projects. The most recent RAD notice (effective January 2017) is the third  version since 2013 and revisions have involved substantial changes.  For example, this notice provided PHAs with greater flexibilities on the  funding sources they can use to raise initial contract rents and the ways  they can demonstrate ownership and control of a converted property. In  addition, HUD introduced a notice in November 2016 to strengthen  resident protections.", "Some PHAs told us they found the pace or timing of the evolving  requirements difficult to manage and also noted confusion about  conversion instructions and guidance due to changing requirements. For  example, one PHA indicated that the agency had problems reporting  information into a new RAD data field in HUD\u2019s Voucher Management  System because there was no guidance at the time on how to complete  this field. However, HUD has since included additional instructions in the  user\u2019s manual that became effective in April 2017."], "subsections": []}, {"section_title": "Strength of Protections Intended to Preserve Affordability Is Unknown and HUD Does Not Have Procedures to Address Preservation Risks", "paragraphs": [], "subsections": [{"section_title": "RAD Provisions and Use Agreements Have Not Been Tested", "paragraphs": ["The Committee has included language to establish procedures that will ensure  that public housing remains a public asset in the that  event that the project  experiences problems, such as default or foreclosure.", "In each RAD conversion, HUD and the property owner execute a use  agreement, which specifies affordability and use restrictions for the  property. The use agreement generally exists concurrently with the HAP  contract, which is executed to govern the provision of either the PBRA or  PBV subsidy for the unit. The use agreement must be recorded in a  superior position to new or existing financing or other encumbrances on  the converted property. Under a Section 8 HAP contract, residents pay  30 percent of adjusted household income. In the absence of the HAP  contract, the use agreement is set up to control the amount paid:  If the HAP contract is removed due to breach, noncompliance, or  insufficiency of appropriations, under the use agreement new  households in all units previously covered under the HAP contract  must have incomes at or below 80 percent of the area median income  for households of the size occupying an appropriately sized unit for  their family size at the time of admission, and rents may not exceed  30 percent of 80 percent of area median income for the remainder of  the term of the use agreement.", "For new residents at or below 80 percent of the area median income,  under the use agreement the resident rent contribution without a HAP  contract generally would be higher than that paid under a HAP  contract, which is based on household income instead of the  universally determined area median income.", "Although the use agreement maintains some level of affordability, the  owner receives no subsidy under PBRA or PBV without a HAP contract  and resident rent contribution is not tied to individual household income  but rather based on a universal area income calculation (see fig. 3).", "According to HUD officials, other program requirements support the goal  of long-term preservation:", "HAP contracts are executed for 20 years for PBRA or 15\u201320 years for  PBV properties and compliance with all affordability requirements in  the HAP and statute and regulation governing the PBRA and PBV  programs must be maintained while the contract is in force.", "According to the authorizing statute, PHAs (for PBV contracts) and  HUD (for PBRA contracts) shall offer and project owners shall accept  a renewal contract at the expiration of the initial HAP contract and at  each subsequent renewal. Each renewal contract will be subject to a  RAD use agreement, governing the use of the property consistent  with HUD requirements.", "According to the RAD notice, the project owner also is to establish  and maintain a replacement reserve to aid in funding extraordinary  maintenance and repair and replacement of capital items. The reserve  account must be built up to and maintained at a level determined by  HUD to be sufficient to meet projected requirements. According to  HUD officials, during the conversion, HUD staff review each capital  needs assessment to try to determine whether a property\u2019s capital  needs can be addressed over the forthcoming 20-year period.", "We reviewed 31 completed conversion files, the set of documentation  required by HUD to enable a PHA to convert units from public housing to  a Section 8 subsidy, and associated RAD contracts. In each file, key  contractual protections appeared consistent with program requirements.  Specifically, in all cases executed use agreements (which included  requirements to limit residency eligibility to households making less than  80 percent of area median income) were included and not altered from  the HUD template. In most files we reviewed, we found foreclosure riders  were included and that they stated that use agreements would survive  foreclosure, meaning that any new owners would take ownership subject  to the agreements. Executed HAP contracts, requiring that residents\u2019  contributions be set at 30 percent of adjusted household income, also  were present in all files we reviewed.", "According to HUD officials, PHAs, and two housing groups we spoke  with, provisions in the RAD use agreement to keep units affordable  appear to be strong, with use and affordability protections designed to  survive foreclosure, but the strength of provisions cannot yet be fully  determined because the provisions have not yet been tested in  foreclosure proceedings or in courts. According to HUD officials, as of  October 2017 no RAD properties had entered foreclosure.", "The RAD authorizing statute requires that ownership be transferred to a  capable public entity or, if not one, a capable entity as determined by  HUD, or if necessary to fulfill LIHTC requirements for the property, to a  HUD-approved for-profit entity (provided the PHA retained sufficient  interest in the property). HUD also subjects any subsequent transfer of  the property to HUD review and requires the successor ownership to  meet these same requirements. As stated in the use agreement, a lien  holder must give HUD notice prior to declaring a default and provide HUD  concurrent notice with any written filing of foreclosure (providing that the  foreclosure sale must not be sooner than 60 days after the notice), but  the use agreement does not prohibit a lien holder from foreclosing on the  lien or accepting a deed in lieu of foreclosure. The RAD use agreement,  which is recorded superior to other liens and places use and affordability  restrictions on the property, survives foreclosure. With or without a HAP  contract in place, the lender or new owner must maintain the units for low- income households according to the terms of the use agreement.  Therefore, according to HUD officials, the lender or new owner has an  incentive to identify an appropriate owner and secure HUD approval to  avoid a default under the HAP contract, which provides a Section 8  subsidy to the owner. That is, if no HAP contract were in place, the owner  would collect only the tenant rent contribution (30 percent of 80 percent of  area median income), rather than the tenant rent contribution plus the  subsidy.", "HUD has discretion to enforce or waive certain use and affordability  protections.", "According to the authorizing statute, in the case of foreclosure,  bankruptcy, or termination and transfer of assistance for material  violation or substantial default, the priority for ownership or control  must be provided to a capable public entity, or, if no such entity can  be found, to a capable entity as determined by the Secretary of HUD.", "Additionally, the statute allows the transfer of property to for-profit  entities to facilitate the use of LIHTC financing, with requirements to  maintain the PHA\u2019s interest, which was discussed above. As of  September 30, 2017, about 40 percent of RAD conversions involved  LIHTC financing.", "According to the RAD notice, in the event of a default of a property\u2019s  use agreement or HAP contract, HUD may terminate the HAP  contract and transfer assistance to another location to retain  affordable units. HUD will determine the appropriate location and  owner entity for the transferred assistance consistent with statutory  goals and requirements for RAD.", "The RAD use agreement will remain in effect even in the case of  abatement or termination of the HAP contract for the term the contract  would have run, unless HUD agreed differently in writing. In this case,  the RAD notice limits HUD discretion to terminate the use agreement  to only cases involving a transfer of assistance to another property."], "subsections": []}, {"section_title": "HUD Does Not Have Procedures in Place to Identify and Respond to Preservation Risks", "paragraphs": ["HUD has not yet developed procedures to monitor RAD projects for risks  to long-term affordability of units, including default or foreclosure. HUD  officials described an ongoing effort to develop oversight procedures it  would need to reasonably ensure compliance with RAD agreements and  avoid risks to long-term affordability once conversions closed and units  moved to Section 8 but, as previously discussed, the agency has not yet  completed this effort or fully implemented a monitoring system.", "HUD officials told us they also planned to develop protocols to more  closely monitor properties at risk of foreclosure, including developing  indicators, procedures, roles, and responsibilities within HUD, but they  have not finalized the design of procedures or fully implemented them. To  develop protocols, HUD created an asset management working group in  September 2016. The officials also stressed that no one can take  possession of or foreclose on a property without HUD involvement and  approval. For example, HUD officials said they expect few foreclosures  among RAD-converted properties because lenders tend to communicate  with the agency early so that it can become involved to prevent  foreclosure. HUD officials pointed to a robust structure to oversee  program properties in the PBRA program, but stated PBV property  oversight continues to be developed by the Office of Public and Indian  Housing.", "According to Standards for Internal Control in the Federal Government,  agencies should design procedures to achieve goals and objectives, such  as the preservation of unit affordability, and respond to risks, in this case  the risk of default or foreclosure or noncompliance with program  requirements. Additionally, management should identify, analyze, and  respond to risks related to achieving its goals and objectives. According  to HUD officials, the agency had not yet fully developed and implemented  oversight procedures for postconversion monitoring because since 2012,  the agency has focused on RAD start-up and review and oversight  procedures for the conversion process. HUD officials also said that many  projects would receive ongoing monitoring from other parties, which also  could serve as a safeguard for unit affordability and help ensure the  appropriate financial and physical condition of the property after RAD  conversion. For example, just under half of all RAD properties use LIHTC  financing as part of financing packages, which can also include local and  state bonds. According to HUD officials, oversight by tax credit allocating  agencies, investors, and lenders, while not alone sufficient, helps secure  affordable units in a property for the long-term. However, tax credit  allocating agencies, investors, and lenders are not signatories to the HAP  contract or use agreement and have no formal role in reasonably  ensuring that properties meet requirements exclusive to RAD.", "Although other entities may exercise some oversight of properties, by not  developing and implementing procedures for ongoing oversight, HUD in  its role as program administrator will not be able to reasonably ensure  that properties adhere to requirements or meet basic program goals.  Furthermore, without such monitoring HUD would be limited in its ability  to identify and assist with properties at risk of foreclosure."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["RAD was created to demonstrate the feasibility of converting public  housing units to other rental assistance programs to help preserve  affordable rental units and address the significant backlog of capital  needs in the public housing program. However, demonstrating the  feasibility of RAD conversion is contingent on collecting and assessing  quality information about the conversion projects. HUD has an opportunity  to improve the demonstration\u2019s metrics. For instance, implementing  robust postclosing oversight and collecting information on financial  outcomes upon completion of construction would not only improve HUD\u2019s  oversight capabilities but also allow it to report quality information.  Moreover, limitations in HUD\u2019s methodology for calculating leverage  ratios for RAD may obscure the effect of funding sources used to help  fund RAD conversions, potentially under- or over-reporting the program\u2019s  capital leveraging. By collecting comprehensive information on final  (postcompletion) financing sources and costs and developing quality  metrics, HUD would be better positioned to more accurately report the  results of the demonstration program.", "Additionally, a focus on the conversion process itself (and less on its  results), and limitations in HUD\u2019s data have contributed to limited  monitoring by HUD in other areas. Specifically, by not developing and  implementing monitoring procedures to assess the effect of RAD on  residents HUD cannot ensure compliance with resident safeguards.  Further, HUD collects and maintains household data for the public  housing and Section 8 programs, yet it does not systematically use this  information to ensure that resident safeguards are in place. Finally, HUD  could benefit from additional procedures to assess RAD properties for  risks to long-term preservation to be able to respond to property default or  foreclosure."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to HUD:  HUD\u2019s Assistant Secretary for Housing should include provisions in its  postclosing monitoring procedures to collect comprehensive high quality  data on financial outcomes upon completion of construction, which could  include requiring third-party certification of and collecting supporting  documentation for all financing sources and costs. (Recommendation 1)", "HUD\u2019s Assistant Secretary for Housing should improve the accuracy of  RAD leverage metrics\u2014such as better selecting inputs to the leverage  ratio calculation and clearly identifying what the leverage ratio  measures\u2014and calculate a private-sector leverage ratio.  (Recommendation 2)", "HUD\u2019s Assistant Secretary for Housing should prioritize the development  and implementation of monitoring procedures to ensure that resident  safeguards are implemented. (Recommendation 3)", "HUD\u2019s Assistant Secretary for Housing should determine how it can use  available program-wide data from public housing and Section 8  databases, in addition to resident logs, for analysis of the use and  enforcement of RAD resident protections. (Recommendation 4)", "HUD\u2019s Assistant Secretary for Housing should prioritize the development  and implementation of procedures to assess risks to the preservation of  unit affordability. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HUD for comment. HUD provided  written comments on the draft report, which are summarized below and  reproduced in appendix IV. HUD also provided technical comments,  which we incorporated as appropriate.", "In its comment letter, HUD stated that it agreed with our findings that  HUD can improve metrics used to assess program impact and build on  existing oversight structures. HUD described actions it intends to take to  implement our recommendations to the extent possible and consistent  with resource limitations.", "More specifically, HUD agreed with our first recommendation to ensure it  collects comprehensive quality data on financial outcomes in its  postclosing monitoring procedures (which could include supporting  documentation for all financing sources and costs). HUD agreed it should  routinely collect an updated list of funding sources and uses and related  documentation when projects had cost overruns or other significant  changes. HUD intends to review and revise, as appropriate, required  postcompletion certifications. HUD added that in most cases, funding  sources and uses do not materially change between closing and  construction completion. HUD stated that securing the postclosing  information in such cases might be of minimal benefit relative to the  additional reporting burden. However, it is not clear how HUD would  determine if projects had significant changes in costs or uses because  HUD lacks postcompletion information that would show the magnitude of  changes. In relation to reporting burden, HUD already has implemented  procedures to collect limited financial information following the completion  of construction in October 2017. We believe any additional reporting  would not be disproportionate to the benefits of improving HUD's  oversight capabilities through project completion and enhancing its  reporting to more accurately reflect the results of the demonstration  program.", "For our second recommendation to improve the accuracy of RAD  leverage metrics and calculate a private-sector leverage ratio, HUD  agreed that RAD leverage metrics can be improved. HUD will ensure that  the private-sector leverage ratio required by statute is clearly identified  and included in its RAD evaluation. HUD also intends to identify a small  number of relevant leverage ratios with distinct methodologies and will  routinely publish these ratios with clear identification and explanations. In  relation to our finding of misidentified funding sources, HUD plans to re- examine its chart of accounts and review prior transaction records to  address errors and properly classify transaction sources.", "In response to our third recommendation to prioritize the development  and implementation of monitoring procedures for resident safeguards,  HUD agreed that it is important to better document and expedite  development and implementation of monitoring procedures. HUD also  agreed that additional monitoring was needed to ensure the right of  residents to request and move with a tenant-based voucher after a period  of residency (choice-mobility). HUD noted that its Office of Policy  Development and Research is seeking funding for additional research on  RAD with a focus on the use and effect of choice-mobility options, which  would inform HUD's monitoring efforts. Finally, while HUD said that we  did not find the safeguards to be weak or inadequate, we did not perform  an audit designed to assess the safeguards and therefore cannot opine  on their adequacy. On the basis of our findings, we found that HUD\u2019s  implementation of these safeguards could be strengthened.", "Regarding our fourth recommendation that HUD determine how it can use  available program-wide data and resident logs for analysis of RAD  resident protections, HUD agreed to examine how it could use its existing  data systems to further enhance its monitoring efforts. HUD added that  the systems have limitations, so that the agency also uses other  mechanisms to track and monitor implementation of resident protections.", "For our fifth recommendation to prioritize the development and  implementation of procedures to assess risks to the preservation of unit  affordability, HUD agreed that it is important to assess and mitigate risks  to unit affordability. HUD stated that it employs robust underwriting  standards prior to permitting conversion, and relies on existing  procedures to conduct ongoing oversight of Project-Based Rental  Assistance (PBRA) properties, which we discussed in the draft. However,  as we noted, HUD has not yet developed procedures to more closely  monitor RAD properties at risk of foreclosure, though it plans to establish  indicators of foreclosure risk and oversight roles and responsibilities  within HUD. HUD said that since the summer of 2017, it has been  evaluating what additional oversight procedures might be needed for RAD  Project-Based Voucher properties. HUD also described plans to augment  its existing oversight procedures to preserve affordable units in the event  of foreclosure by developing protocols in the following areas: transfer of  property ownership to a capable entity, transfer of the rental assistance to  another site, and protection of residents in the event a Housing  Assistance Payment contract was terminated.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Housing  and Urban Development and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are listed on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines aspects of the Department of Housing and Urban  Development\u2019s (HUD) Rental Assistance Demonstration (RAD) program.  More specifically, this report addresses (1) HUD\u2019s assessment of the  physical and financial outcomes of RAD conversion to date; (2) how RAD  conversions affected residents and what safeguards were in place to  protect them, including while temporarily relocated and during conversion;  (3) what challenges, if any, public housing agencies (PHA) faced in  implementing RAD; and (4) the extent to which RAD provisions are  designed to help preserve the long-term affordability of units.", "To address all four objectives, we analyzed agency documentation and  interviewed officials from HUD. The documentation we reviewed included  policies and procedures for RAD; manuals describing HUD data systems;  draft policies and procedures for implementing postclosing oversight; and  reports on RAD performance. We interviewed HUD headquarters officials  from the Office of Recapitalization within the Office of Housing, which  oversees the administration of RAD, and the Office of Policy  Development and Research (PD&R). We also interviewed PHA officials  and developers involved in RAD transactions, as well as selected experts  and other stakeholders to obtain their perspectives on RAD. Additionally,  we conducted a literature search to identify publications related to RAD.", "We visited a nonprobability sample of eight PHAs in Maricopa County,  Arizona; Alameda County, California; Montgomery County, Maryland; and  in the cities of San Francisco, California; Baltimore, Maryland; New Bern,  North Carolina; El Paso, Texas; and Tacoma, Washington, to observe  housing units before, during, or after renovation when possible as well as  common areas that had planned or undergone renovation. We selected  sites to include varying PHA sizes, RAD subsidy types, planned  rehabilitation and resident relocation, numbers and sizes of RAD  transactions, closing dates, constructions costs, and geographic locations  across the United States. At each site, we conducted semistructured  interviews with PHA officials and, when available, developers (5 sites).", "We also conducted one or two focus-group interviews with groups of 6\u2013 15 residents who lived at the converted properties to obtain their  perspectives and experiences. In each location, we asked the PHAs to  invite residents to participate in the focus groups based on their  availability. We also met with the Resident Advisory Board in each  location that had one. For 7 of 8 site visits, we selected two RAD  properties to conduct resident focus groups (in Alameda County,  California we held one focus group). We conducted a content analysis  based on resident focus group interviews to describe resident  experiences and the RAD program\u2019s effects on residents. Utilizing the  selection criteria noted above, we conducted semistructured telephonic  interviews with an additional nonprobability sample of 10 PHAs in Fresno,  California; Fort Collins, Colorado; Dekalb County, Georgia; Chicago,  Illinois; Ypsilanti, Michigan; Cuyahoga County, Ohio; Philadelphia;  Pennsylvania; Spartanburg, South Carolina; McKinney, Texas; and  Yakima, Washington. Because we selected a non-probability sample of  PHAs to visit and interview, the information we obtained cannot be  generalized more broadly to all PHAs. However, it provides context on  RAD particularly on implementation challenges and perspectives on  physical and financial impacts, long-term affordability, and resident  protections.", "We also selected the following 11 individuals and organizations as  experts and stakeholders:  1.  Council of Large Public Housing Authorities  2.  National Association of Housing and Redevelopment Officials  3.  Center on Budget and Policy Priorities  4.  Public Housing Authorities Directors Association  5.  National Housing Law Project  6.  Community Legal Services of Philadelphia  7.  Maryland Legal Aid  8.  Disability Rights Maryland  9.  Jaime Alison Lee, Associate Professor of Law and Director,  Community Development Clinic, University of Baltimore School of Law  10. Yumiko Aratani, Assistant Professor, Columbia University Mailman  11. University of California, Berkeley, Terner Center for Housing  We interviewed experts and stakeholders on resident impacts and  implementation challenges associated with RAD. The entities may not  represent all views on these topics, but their views provide insights on  RAD. To select these individuals and groups, we met with three major  PHA associations and two resident advocacy groups, and asked for  referrals for organizations or individuals with expertise in RAD.", "We also selected a nonprobability, random sample of 31 RAD conversion  files to review. Utilizing HUD RAD Resource Desk data, we randomly  selected 31 RAD files for properties that had closed conversion as of  June 30, 2017 and that planned to incur construction costs. We used the  files to help us determine physical changes to RAD conversions and the  impacts of RAD on residents through, for example, relocation. We  excluded RAD conversions with no construction costs from the random  sample because they would not have physical changes and no resident  relocation would occur before or during our review.", "To address our first objective on the physical and financial outcomes of  RAD conversion to date and how HUD measured these outcomes, we  first obtained and analyzed HUD data on RAD conversions since RAD\u2019s  authorization (from fiscal years 2013 through 2017). We assessed the  reliability of these data by reviewing system documentation, interviewing  knowledgeable officials about system controls, and conducting electronic  testing. We determined that the data were sufficiently reliable for the  purposes of describing rehabilitation and new construction in RAD  projects and evaluating RAD leveraging metrics. We included in our  analysis all RAD conversions that were active or closed. We used these  data to determine the number of closed RAD conversions, associated  financial sources and uses, subsidy types, and type of construction  (rehabilitation, new construction, and no rehabilitation or new  construction). In addition, during our interviews with PHAs and  developers, we obtained their perspectives on potential contributing  factors to financial decisions and type of construction pursued through  RAD conversion. As noted earlier, we also reviewed 31 randomly  selected files of converted properties with construction costs to describe  property physical changes in RAD conversions.", "Furthermore, we reviewed HUD documents, such as HUD and PD&R  evaluations, publications, and policies and procedures to gain additional  context for how HUD measures RAD outcomes. We also interviewed  HUD officials, including PD&R and Office of Recapitalization officials, on  RAD data and metrics, as well as other performance monitoring activities.  We further analyzed data from the HUD RAD Resource Desk to  determine how these data support HUD\u2019s metrics and performance  monitoring activities. As previously mentioned, we determined that these  HUD data were sufficiently reliable for the purposes of this report.  Specifically, we assessed and calculated RAD leverage ratio and  construction activity. We assessed HUD\u2019s performance monitoring  activities and reporting against the RAD authorizing statute, Standards for  Internal Control in the Federal Government.", "To recalculate estimates of the RAD leverage metric, we obtained  documentation from the Office of Recapitalization to review the  methodology used to calculate their most recent leverage ratio. We  aligned the methodology they provided with RAD Resource Desk  Transaction Log data that was downloaded on August 7, 2017. We  replicated HUD\u2019s methodology and matched the data utilized with the  descriptors from the Transaction Log. To isolate financial sources and  manually adjust the \u201cother source\u201d data, we compiled matched  descriptors and funding amounts and categorized each observation  based on the funding source description, as a federal source,  state/county/city source, or PHA source, among others. For additional  information and results, see appendix II.", "To determine how RAD affected residents in converted units, we  analyzed HUD public housing and Section 8 household data before and  after conversion (demographic characteristics of residents and changes in  rent, income, and location). Specifically, we examined data from 2013\u2014 when the first transactions closed\u2014through June 30, 2017. HUD  compiled and provided custom extracts of data on households in RAD- converted properties from the Inventory Management System/Public and  Indian Housing Information Center (IMS/PIC) (public housing and Section  8 PBV) and Tenant Rental Assistance Certification System (Section 8  PBRA). We assessed the reliability of the data extracts provided by HUD  by (1) performing electronic testing of required data elements, (2)  reviewing existing information about the data and the system that  produced them, and (3) interviewing agency officials knowledgeable  about the data. We determined the data on PBV households were  sufficiently reliable for the purposes of our reporting objectives, but that  the data on PBRA households was not sufficiently reliable for purposes of  describing some characteristics of RAD households. For example, in  trying to determine participation in the RAD program by year, we received  several thousand PBRA entries that preceded the establishment of the  RAD program. Moreover, as we previously mentioned, the  postconversion household data for PBRA conversions is in a separate  data system, so some variables, such as those related to race, ethnicity,  rent, and income, differ from the other household data for that program.  Because of these limitations, the data for PBRA households were not  reliable for purposes of comparing RAD household characteristics before  and after conversion as we had intended. To describe safeguards for  residents and help ascertain how HUD implemented protections, we  reviewed legal protections and requirements in HUD notices, reviewed  selected conversion files, and interviewed HUD officials about monitoring  and compliance processes. Finally, as previously described, we held  focus groups with residents to better understand any effects on their living  conditions and quality of life.", "To determine challenges PHAs faced in implementing RAD, we reviewed  HUD guidance and related documents for PHAs in the program. We also  interviewed eight PHAs during our site visits and spoke with another 10  PHAs by telephone about the benefits and challenges of participating in  the RAD program.", "To examine provisions designed to help preserve long-term affordability  of units, we reviewed the RAD authorizing statute and amendments and  HUD notices and interviewed HUD staff to verify our understanding of  agency affordability protections. For a sample of 31 randomly selected  properties, we examined templates for contractual agreements for RAD  closings and analyzed closing documents and contracts to determine if  agreements matched program requirements. We interviewed HUD staff  and staff of 18 PHAs to obtain viewpoints on the potential strengths or  weaknesses of preservation in the case of default or foreclosure.", "We conducted this performance audit from February 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: HUD\u2019s Reported Leverage Ratios and Our Recalculation Estimates", "paragraphs": ["The Department of Housing and Urban Development\u2019s (HUD) Office of  Recapitalization collects financial sources and use data from Rental  Assistance Demonstration (RAD) participants. Table 2 lists the financial  source fields collected by HUD.", "Table 3 lists the financial cost fields collected by HUD.", "Table 4 provides additional financial source detail pertaining to HUD\u2019s  leverage ratio calculation.", "Table 5 and Table 6 show the total financial source amounts collected by  HUD. Specifically, Table 5 shows total financial source amounts prior to  recategorization, while Table 6 shows total financial source amounts after  manual adjustments. Manual adjustments included isolating funding  source observations in \u201cother funding\u201d fields 1-6 and incorporating them  into existing fields, as appropriate.", "Table 7 replicates HUD\u2019s methodology for calculating the RAD leverage  metrics after manual adjustments in HUD data. See Table 4, above, to  compare changes in each category.", "Table 8 recalculates the leverage ratio by deducting federal sources as  leveraged sources.", "Table 9 recalculates the leverage ratio by deducting public sources as  leveraged sources (compare to Table 8 above)."], "subsections": []}, {"section_title": "Appendix III: RAD Resident Safeguard and Monitoring Requirements", "paragraphs": ["The Rental Assistance Demonstration (RAD) program has numerous  requirements intended to ensure residents whose units are converted  through RAD receive certain protections. The following is a description of  these safeguards and their reporting and monitoring requirements."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": [{"section_title": "GAO\u2019s Mission", "paragraphs": ["The Government Accountability Office, the audit, evaluation, and investigative  arm of Congress, exists to support Congress in meeting its constitutional  responsibilities and to help improve the performance and accountability of the  federal government for the American people. GAO examines the use of public  funds; evaluates federal programs and policies; and provides analyses,  recommendations, and other assistance to help Congress make informed  oversight, policy, and funding decisions. GAO\u2019s commitment to good government  is reflected in its core values of accountability, integrity, and reliability."], "subsections": []}, {"section_title": "Obtaining Copies of GAO Reports and Testimony", "paragraphs": ["The fastest and easiest way to obtain copies of GAO documents at no cost is  through GAO\u2019s website (https://www.gao.gov). Each weekday afternoon, GAO  posts on its website newly released reports, testimony, and correspondence. To  have GAO e-mail you a list of newly posted products, go to https://www.gao.gov  and select \u201cE-mail Updates.\u201d"], "subsections": [{"section_title": "Order by Phone", "paragraphs": ["The price of each GAO publication reflects GAO\u2019s actual cost of production and  distribution and depends on the number of pages in the publication and whether  the publication is printed in color or black and white. Pricing and ordering  information is posted on GAO\u2019s website, https://www.gao.gov/ordering.htm.", "Place orders by calling (202) 512-6000, toll free (866) 801-7077, or   TDD (202) 512-2537.", "Orders may be paid for using American Express, Discover Card, MasterCard,  Visa, check, or money order. Call for additional information."], "subsections": []}]}, {"section_title": "Connect with GAO", "paragraphs": ["Connect with GAO on Facebook, Flickr, Twitter, and YouTube.  Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.  Visit GAO on the web at https://www.gao.gov."], "subsections": []}, {"section_title": "To Report Fraud, Waste, and Abuse in Federal Programs", "paragraphs": [], "subsections": []}, {"section_title": "Congressional Relations", "paragraphs": [], "subsections": []}, {"section_title": "Public Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Strategic Planning and External Liaison", "paragraphs": ["James-Christian Blockwood, Managing Director, spel@gao.gov, (202) 512-4707  U.S. Government Accountability Office, 441 G Street NW, Room 7814,  Washington, DC 20548  Please Print on Recycled Paper."], "subsections": []}]}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Paul Schmidt (Assistant  Director), Julie Trinder-Clements (Analyst in Charge), Meghana Acharya,  Enyinnaya David Aja, Alyssia Borsella, Juan J. Garcia, Ron La Due Lake,  Amanda Miller, Marc Molino, Barbara Roesmann, Jessica Sandler,  MaryLynn Sergent, Rachel Stoiko, and William Woods made major  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-462", "url": "https://www.gao.gov/products/GAO-18-462", "title": "Capital Investment Grants Program: FTA Should Address Several Statutory Provisions", "published_date": "2018-05-31T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FTA's Capital Investment Grants program is the primary source of federal financial assistance to support transit projects that are locally planned, implemented, and operated. FTA evaluates and rates projects seeking funding through this program according to statutory criteria and recommends to Congress which projects to fund. The funding that project sponsors receive is subject to congressional appropriation.", "MAP-21 includes a provision for GAO to biennially review FTA's implementation of the Capital Investment Grants program. This report discusses: (1) FTA's progress in addressing statutory provisions contained in MAP-21 and the FAST Act and (2) how the evaluation and rating process FTA has established for Core Capacity Improvement projects enables FTA to verify that statutory requirements are met before recommending such projects for funding. GAO reviewed the relevant laws and FTA's guidance. GAO also interviewed FTA officials and six project sponsors, representing seven of the eight Core Capacity Improvement projects in the Capital Investment Grants program at the time of GAO's review."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Transit Administration (FTA) has not addressed three statutory provisions concerning the Capital Investment Grants program contained in the Moving Ahead for Progress in the 21st Century Act (MAP-21) and the Fixing America's Surface Transportation Act (FAST Act). Specifically, FTA has not:", "issued regulations regarding the evaluation and rating process for Core Capacity Improvement projects, which are a category of eligible projects within the program;", "established a program of interrelated projects designed to allow for the simultaneous development of more than one transit project within the Capital Investment Grants program; or", "implemented a pilot program designed to create a fast-track approval process for transit projects that meet specific statutory criteria.", "Throughout this review, FTA officials told GAO they do not have immediate plans to address these three statutory provisions. Officials cited a proposal by the President to phase out the Capital Investment Grants program as one of the factors influencing this decision. However, in March the Consolidated Appropriations Act, 2018, provided the program with more than $2.6 billion and required FTA to continue to administer the program in accordance with the procedural and substantive requirements specified in statute. Subsequently, FTA officials told GAO that they are reviewing the Act and determining next steps. However FTA officials did not indicate that they intend to address these provisions. If FTA does not implement the outstanding provisions, FTA and project sponsors\u2014that is, local transit agencies\u2014may be missing opportunities to deliver transit projects more efficiently.", "Based on a review of FTA's policy guidance, on FTA's instructions for applying to the Capital Investment Grants program, and on other documentation supporting the two Core Capacity Improvement projects that FTA has recommended for funding as of June 2017, GAO found that FTA has established a process to verify that proposed Core Capacity Improvement projects meet statutory requirements before recommending projects for funding. Core Capacity Improvement projects are capital investments designed to increase the capacity of an existing transit system and must meet specific statutory requirements to be eligible for funding through the program. GAO found that prior to recommending a project for funding FTA works with project sponsors to verify that their proposed project includes elements that will increase transit system capacity versus maintaining the current system, that the required amount of local funding is committed to the project, and that sponsors have the technical and financial capacity to complete the project they are proposing, among other statutory requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FTA should initiate a rulemaking regarding the evaluation and rating process for Core Capacity Improvement projects and take steps to address two other statutory provisions. FTA agreed with the recommendations but disagreed with certain findings on which they are based. GAO believes these findings are valid, as discussed in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since the 1970s, the Federal Transit Administration\u2019s (FTA) Capital  Investment Grants program has been the primary source of federal  financial assistance to new \u201cfixed-guideway\u201d projects or extensions to  existing fixed-guideway systems across the United States. Projects that  compete for funding through this program are planned and implemented  locally, and include capital investments in heavy and light rail, commuter  rail, streetcars, and ferries as well as bus rapid transit. FTA evaluates and  rates projects seeking funding through this program based on statutory  criteria, recommends to Congress which projects to fund, and awards  funding to projects. Program funding is provided through the annual  appropriations process, and over the last 10 fiscal years FTA has  awarded over $19 billion to cities, states, and other localities across the  country.", "In March 2017, the President\u2019s fiscal year 2018 budget proposed phasing  out the program, stating that future investments in new transit projects  should be funded by the localities that use and benefit from those  projects, and the administration reiterated that intent as part of its fiscal year 2019 budget proposal in February 2018. Consequently, FTA  recommended that Congress limit future funding for the Capital  Investment Grants program. However, in March 2018 the Consolidated  Appropriations Act, 2018, provided the program with more than $2.6  billion, and required FTA to continue to administer the Capital Investment  Grants program in accordance with the program\u2019s procedural and  substantive requirements.", "The Moving Ahead for Progress in the 21st Century Act (MAP-21),  enacted in 2012, included a provision for us to biennially review FTA\u2019s  processes and procedures for evaluating and rating projects seeking  funding through the Capital Investment Grants program. In April 2016,  we issued our most recent report in response to the provision, focusing  on FTA\u2019s efforts in implementing changes that MAP-21 made to the  program\u2019s processes, changes that were aimed at expediting project  delivery. We reported that FTA was taking steps to implement MAP-21,  such as by implementing a provision directing FTA to issue policy  guidance outlining the review and evaluation process for new fixed- guideway projects and Core Capacity Improvement projects (hereafter  Core Capacity projects), and reported that FTA intended to take action to  address other provisions over the next few years. However, we also  reported that the Fixing America\u2019s Surface Transportation Act (FAST  Act), enacted in 2015, contained new provisions for FTA to address.", "FTA\u2019s progress in addressing outstanding statutory provisions as  amended by MAP-21 and the FAST Act, and how FTA\u2019s evaluation and rating process enables it to verify that  statutory requirements are met before recommending a Core Capacity  project for funding.", "In conducting this review, we focused on reviewing FTA\u2019s progress  addressing statutory provisions that were outstanding at the time of our  previous biennial review as well as the evaluation and rating requirements  specified in statute for Core Capacity projects. To address our objectives,  we reviewed the relevant provisions of MAP-21 and the FAST Act. We  also reviewed FTA\u2019s policy guidance; other pertinent agency  documents, such as FTA\u2019s instructions for applying to the program, its  templates for evaluating and rating projects in the program, and its annual  reports to Congress with funding recommendations; and prior GAO  reports. We also reviewed documentation, such as FTA\u2019s assessments,  supporting the two grant agreements it had awarded for Core Capacity  projects at the time we initiated this review. For both objectives, we  compared the requirements specified in statute with FTA\u2019s  implementation of those requirements. In addition, we interviewed FTA  officials, representatives of the American Public Transportation  Association, and representatives of six project sponsors in the Capital  Investment Grants program. The six project sponsors we interviewed  represented seven of the eight Core Capacity projects in the program at  the time we initiated this review. We also visited the sites of those seven  projects, which are located in California, Illinois, Indiana, New Jersey, and  Texas. During our visits we obtained information about the transportation  challenges that these projects are attempting to address and the  sponsors\u2019 perspectives on FTA\u2019s processes and procedures for  evaluating and rating Core Capacity projects. For a description of the  Core Capacity projects in the program at the time we initiated this review,  see appendix I.", "We conducted this performance audit from June 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The primary source of federal funding for new fixed-guideway projects or  extensions to existing fixed-guideway systems is FTA\u2019s Capital  Investment Grants program, which is a discretionary and competitive  grant program funded through annual appropriations. The program is  governed by statutory provisions, and funding is provided in the form of  a construction grant agreement, which is subject to congressional  appropriations.", "Projects that compete for funding through the Capital Investment Grants  program are designed and implemented by project sponsors, which are  usually local transit agencies. Prior to 2012, project sponsors typically  applied for funding as either a New Starts or Small Starts project. New  Starts projects are capital investments whose sponsors request $100  million or more in Capital Investment Grants funding or have an  anticipated capital cost of $300 million or more. Small Starts projects are  capital investments whose sponsors request less than $100 million in  Capital Investment Grants funding and have an anticipated capital cost of  less than $300 million.", "In 2012, Congress created a third category of eligible projects called Core  Capacity projects. Unlike New Starts and Small Starts, for which the  amount of funding project sponsors request and the anticipated capital  cost of a project are key factors, Core Capacity projects are not defined  by cost. Instead, Core Capacity projects are \u201ccorridor-based capital  investments\u201d in existing fixed-guideway systems that increase the  capacity of a corridor by not less than 10 percent, in a corridor that is at or  above capacity or is expected to be within 5 years. Examples of Core  Capacity projects include capital investments to expand a transit system\u2019s  platforms and acquire real property, rights of way, or rail cars associated  with corridor improvements increasing capacity.", "To enter the Capital Investment Grants program, project sponsors submit  an application to FTA with information on the proposed project, such as a  description of the transportation problem the project seeks to address,  among other requirements. If accepted into the program, project sponsors  must then follow a multi-step, multi-year development process outlined in  statute during which FTA determines if the project is eligible for funding  through the Capital Investment Grants program. The development  process that project sponsors must follow varies depending on whether  the project is a New Starts or Core Capacity project, or a Small Starts  project. For example, New Starts and Core Capacity projects are required  to complete a two-phase development process. During the first phase,  called Project Development, project sponsors must complete an  environmental review process outlined in the National Environmental  Policy Act of 1969 and address other statutory requirements. Project sponsors must also provide FTA with sufficient information for FTA to  evaluate and rate the project, among other FTA requirements. To  complete the second phase, called Engineering, project sponsors must,  among other requirements, develop a firm and reliable cost, scope, and  schedule for their project and obtain all non-Capital Investment Grants  program funding commitments. Small Starts projects complete a  development process that is similar but consists of only one phase, called  Project Development.", "During the development process, FTA is required to evaluate and rate  projects using a number of statutory criteria designed to assess the merit  of a project (i.e., project justification). For example, for Core Capacity  projects, FTA is required to evaluate and rate a project against six criteria:  (1) mobility improvements, (2) environmental benefits, (3) cost- effectiveness, (4) the congestion relief associated with the project, (5) the  economic development effects associated with the project, and (6) the  existing capacity needs of the corridor. FTA is also required to evaluate  and rate the local financial commitment to a project, including evidence of  stable and dependable financing sources, as well as the project sponsor\u2019s  ability to operate the project and continue to operate any related transit  system. FTA\u2019s ratings are \u201cpoint-in-time\u201d evaluations\u2014meaning that  they can change\u2014as a project progresses through the development  process.", "To receive funding, project sponsors must complete the development  process outlined in statute and meet all statutory eligibility requirements.  Projects must also address all FTA requirements, and FTA must  recommend the project for funding to Congress. FTA\u2019s recommendations  are based on its evaluation and rating of the project using the criteria  specified in statute, the availability of Capital Investment Grants program  funds, and the readiness of the project, such as whether the project\u2019s  cost, scope, and schedule are advanced enough to be considered  reliable. As mentioned earlier, the funding that projects receive is subject  to congressional appropriations.", "As we previously reported, both MAP-21 and the FAST Act made  numerous changes to the Capital Investment Grants program. For  example, in addition to establishing Core Capacity projects as a new  category of eligible projects, MAP-21 reduced the number of phases in  the development process that projects in the Capital Investment Grants  program must follow to be eligible for and receive funding. According to  FTA officials, changes the FAST Act made to the program include raising  the dollar threshold for eligibility for New Starts and Small Starts projects  and increasing the number of projects that are eligible for funding by  allowing joint public transportation and intercity-passenger-rail service to  compete for funding."], "subsections": []}, {"section_title": "FTA Has Not Addressed Three Out of Four Outstanding Statutory Provisions", "paragraphs": ["FTA has not addressed three of four outstanding statutory provisions  concerning the Capital Investment Grants program. As shown in table 1,  three of these provisions stem from MAP-21, which was enacted in 2012,  and the fourth stems from the FAST Act, enacted in 2015.", "When we initiated our review, FTA officials told us FTA did not have  immediate plans to address the outstanding statutory provisions due to  the administration\u2019s stated intent to phase out the Capital Investment  Grants program. As mentioned earlier, in 2017 the President\u2019s Fiscal  Year 2018 budget first proposed phasing out the program, stating that  future investments in new transit projects should be funded by the  localities that use and benefit from those projects. Since then, FTA\u2019s  annual reports to Congress, which contain funding recommendations for  the program, have reflected this direction. For example, FTA\u2019s Fiscal Year  2018 report recommended that Congress only fund those projects that  had already received a grant agreement through the program, and FTA\u2019s  Fiscal Year 2019 report stated that FTA neither requests nor  recommends any funding for projects in the Capital Investment Grants  program beyond those that have already received a grant agreement.  However, as also mentioned earlier, in March 2018 the Consolidated  Appropriations Act, 2018, provided the program with more than $2.6  billion, and also directed FTA to continue to administer the Capital  Investment Grants program in accordance with the program\u2019s procedural  and substantive requirements. Following the enactment of the  Consolidated Appropriations Act, 2018, FTA officials told us that they are  reviewing the law and determining next steps. However, they did not  indicate that they have any immediate plans to address those provisions.  Moving forward, if FTA does not take steps to address the outstanding  provisions, FTA runs the risk of violating federal law.", "During our review, FTA officials told us that other factors have also  influenced FTA\u2019s decisions. For example, FTA officials noted that since  our last report, issuing regulations regarding the evaluation and rating  process for Core Capacity projects was not identified as one of the  Department\u2019s regulatory priorities and, currently, FTA has no plans to  issue such regulations. However, issuing regulations to address this  provision is important. FTA\u2019s policy guidance notes that aspects of the  development process, such as the steps to get into and through the  development process, were not subject to public outreach and are open  to be discussed in future updates to the Major Capital Projects rule.  While FTA officials emphasized that the agency\u2019s policy guidance is  intended to serve as a guide for running the program until such time that  FTA initiates further rulemaking, FTA\u2019s policy guidance also notes that  further rulemaking is needed to fully implement the changes MAP-21 and  the FAST Act made to the Capital Investment Grants program. Until FTA  initiates this rulemaking, it is unclear when if at all, FTA might address  most of these outstanding provisions.", "With respect to addressing the program of interrelated projects  provisions, FTA officials reiterated their concerns, as we noted in our last  report, that establishing an evaluation and rating process for a program of  interrelated projects is difficult. As an example, FTA officials noted that as  part of the New Starts, Small Starts, and Core Capacity evaluation  process, FTA takes into account factors such as a corridor\u2019s current  ridership estimates and future ridership projections. According to FTA  officials, evaluating and rating projects that encompass multiple corridors  is challenging because it requires that FTA establish new measures and  breakpoints\u2014that is, thresholds for FTA\u2019s ratings. Both FTA officials and  the American Public Transportation Association representatives we spoke  with told us that FTA has sought input from the transit industry in the past  to help address these concerns. However, FTA officials also told us that  addressing their concerns requires additional research and public  outreach on FTA\u2019s part and that undertaking that work has not been a  priority of the Department of Transportation. Representatives from two of  the sponsors we spoke with, as well as representatives of the American  Public Transportation Association, told us that the transit industry is  interested in seeing FTA implement the program of interrelated projects  provisions and that doing so could help transit agencies deliver projects  more efficiently. For example, according to one sponsor, implementing  those provisions could help this sponsor purchase materials in bulk and  reduce costs. Until FTA takes steps to address this provision, the federal  government or project sponsors may be missing opportunities to deliver  transit projects more efficiently.", "In the case of the FAST Act\u2019s provision establishing a pilot program\u2014 called the \u201cExpedited Project Delivery for Capital Investment Grants Pilot  Program,\u201d designed to create a fast-track approval process for projects  that meet specific statutory criteria, such as having a maximum federal  share of 25 percent\u2014FTA published a notice in the Federal Register in  2016 stating that it would publish guidance describing the process project  sponsors should follow to apply for consideration as a pilot project.  However, at the time of our review, FTA had not provided sponsors with  information that describes the process they should follow to apply for  consideration as a pilot project. FTA officials told us that project sponsors  have generally not expressed interest in participating in the program  under the FAST Act, and most of the project sponsors that we spoke  with agreed. Specifically, four of the six Core Capacity project sponsors  told us that some FAST Act requirements, such as a requirement that  projects in the program be supported in part by a public-private  partnership, made participating in the program less attractive. According  to two of the sponsors, private investors do not have an incentive to  invest in public transit projects unless they can profit from their  investment, but the FAST Act limits that opportunity by requiring that  projects participating in the pilot program be operated and maintained by  employees of an existing public transportation provider. Nonetheless, in  February 2018, the President\u2019s infrastructure plan recommended  restructuring this program, with changes, to better achieve the goals of  expediting project delivery. Among the changes recommended are  allowing the pilot program to be available to all projects and not just on a  pilot basis, and increasing the federal share from 25 to 50 percent. Taking  steps to describe the steps project sponsors should follow to apply for  consideration as a pilot project under this program could help FTA better  understand whether further changes are needed.", "The statutory provision FTA has addressed relates to a MAP-21 provision  directing FTA to use an expedited technical-capacity review process for  certain experienced project sponsors. At the time of our 2016 report,  FTA was in the process of finalizing the development of a tool to address  this provision, and since then, FTA has implemented that tool.  Specifically, the tool helps FTA staff determine the level of review  required of project sponsors based on a number of risk factors, such as  the complexity of a proposed project and the sponsor\u2019s experience level.  According to FTA, this tool helps FTA staff develop project-specific  oversight plans that specify the resources FTA should devote when  overseeing a particular project. Projects that FTA determines are at lower  risk have fewer oversight resources allocated to them, and FTA officials  told us that they have been using this tool on all projects in the program  since mid-2017."], "subsections": []}, {"section_title": "FTA Has a Process to Verify That Requirements Are Met before Recommending a Core Capacity Project for Funding", "paragraphs": ["Based on our review of FTA\u2019s policy guidance, instructions for applying to  the Capital Investment Grants program, and interviews with FTA  officials and six Core Capacity project sponsors, we found that FTA has  established a process to verify that proposed Core Capacity projects  meet statutory requirements before recommending projects for funding.  In addition, based on our review of documentation supporting FTA\u2019s  funding recommendations for the two Core Capacity projects with grant  agreements as of June 2017, as well as interviews with FTA officials and  both project sponsors, we found that FTA took steps to verify that the  statutory requirements were met before recommending those two projects  for full funding grant agreements. Representatives of the other four  sponsors we spoke with also confirmed that FTA is taking steps to verify  that their projects meet the statutory requirements. Such requirements  include specific project eligibility and other requirements that projects  must meet during the Project Development and Engineering phases of  the development process.", "Project Eligibility: Under statute, Core Capacity projects must meet  specific eligibility requirements. For example, along the lines previously  noted, statutory provisions require that a Core Capacity project be a  substantial corridor-based capital investment located in a corridor that is  at or over capacity, or projected to be at or over capacity within the next 5  years. These projects must also increase the corridor\u2019s capacity in the  peak hour and direction of travel by not less than 10 percent. To verify  that projects meet these requirements, project sponsors and FTA officials  told us that FTA staff assisted project sponsors in refining their project\u2019s corridor (see fig. 1), and reviewed information provided by the sponsors  on such things as the corridor\u2019s current ridership estimates; the type,  configuration, and capacity of light- and heavy-rail cars; and the number  of seats on commuter rail cars. FTA\u2019s policy guidance outlines the criteria  that FTA uses, criteria that FTA developed after consulting industry  standards and reaching out to the transit industry. FTA officials  emphasized that they apply these criteria consistently across projects  when evaluating whether a project\u2019s corridor is at capacity.", "As another example, under statute, Capital Investment Grant funding for  Core Capacity projects may not be applied to \u201cstate of good repair\u201d  improvements to the transit system. \u201cState of good repair\u201d  improvements include, among other things, the replacement or  rehabilitation of existing rail cars, tracks, or communications equipment  due to normal wear and tear or preventive maintenance. Core Capacity  projects are likely to be intertwined with state of good repair  improvements, however, and FTA staff work with project sponsors to  identify which project costs within the project corridor are eligible to  receive Core Capacity funding and which are related to maintaining a  state of good repair.", "Project Development Phase: As with the project eligibility requirements  discussed above, statutory provisions identify specific requirements that  must be met during the Project Development phase, and we found that  FTA has a process to verify that those requirements are met. For  example, under statute, Core Capacity projects have 2 years after the day  on which they enter into Project Development to complete the activities  required to obtain a project rating by FTA. Completion of the Project  Development phase is marked by the completion of the environmental  review process required under the National Environmental Policy Act of  1969 and FTA\u2019s assignment of a project rating. FTA\u2019s policy guidance  encourages project sponsors to perform whatever work they feel is  necessary prior to requesting entry into Project Development to enable  them to complete this phase within 2 years. According to both FTA  officials and representatives from each of the six Core Capacity project  sponsors, FTA staff work closely with project sponsors to assist them with  preparations to enter Project Development, review their documentation,  and complete this phase on time. Further, each of the six Core Capacity  project sponsors we spoke with told us that FTA follows up with sponsors  to ensure that all statutory and FTA requirements for the Project  Development phase are met. For example, the project sponsors reported  that FTA officials hold a variety of periodic (e.g., weekly, monthly,  quarterly) meetings with project sponsors during which they discuss  various aspects of the sponsor\u2019s progress toward meeting the statutory  requirements.", "Under statute, to assign a project rating, FTA must evaluate and rate  Core Capacity projects against specific project justification criteria and  local financial commitment criteria, as well as ensure that the project has satisfied the project eligibility and other statutory requirements, such as  having been selected as the locally preferred alternative and adopted into  the appropriate regional transportation plans. To obtain the information  needed to make these evaluations, FTA provides project sponsors with  reporting instructions and templates on its website specifying its  documentation requirements. These instructions and templates allow for  the standardized review of the project eligibility requirements previously  discussed, as well as aspects of the project justification and local financial  commitment criteria. Representatives of two of the six Core Capacity  project sponsors described these instructions and templates as helpful,  and said the templates enable them to gauge what their project\u2019s potential  rating might be. Representatives of four sponsors also reported that when  completing the templates they are in frequent contact with FTA officials to  help ensure they are appropriately providing all required information. FTA  officials inform sponsors that the agency reviews completed templates  along with other information to assign project ratings.", "Pursuant to statute, once FTA determines that a Core Capacity project  meets the specified project eligibility requirements, assigns the project a  rating, and determines that the environmental review process has been  completed, among other requirements, the project is ready to enter the  Engineering phase. Before advancing the project to Engineering, FTA  requires project sponsors to provide proof that at least 30 percent of the  non-Capital Investment Grants funding necessary to complete the project  is committed, as well as a variety of other documentation, such as a 20- year financial plan; a detailed cost estimate; a detailed project  management plan and project schedule; a preliminary safety hazard,  threat, and vulnerability analysis; and a draft \u201cbefore and after\u201d study  plan. Once a project sponsor indicates it is ready to advance its project to the Engineering phase, FTA assigns oversight contractors, who take a  prominent role in overseeing the day-to-day management of the project in  order to provide FTA with ongoing reports of the project sponsor\u2019s  financial and technical progress.", "Engineering Phase: Based on our review of documentation for the two  Core Capacity projects that have received a grant agreement, we found  that FTA also has a process to verify that the requirements specified in  statute applicable to the Engineering phase are met before  recommending a Core Capacity project for funding. Pursuant to statute,  during the Engineering phase the project sponsor must continue to show  the financial capability to complete the project and maintain and operate  the future transit system with stable and dependable funding sources.  FTA requires that project sponsors show increasing financial capacity  during the first 3 years in this phase by providing proof of commitments  for at least 50 percent of all non-Capital Investment Grants funding.  Pursuant to statute, project sponsors must also continue to show the  technical capability to complete the project. FTA requires that project  sponsors show increasing technical capacity during this phase by making  sufficient progress advancing the level of project design.", "According to representatives from the two Core Capacity projects that  have received a grant agreement, FTA\u2019s oversight contractors interact  with project sponsors frequently throughout the Engineering phase, and  are responsible for assisting FTA in determining whether sponsors have  the technical and financial capacity to complete their projects. Both FTA  officials and the two project sponsors reported that these oversight  contractors review project documentation throughout the Engineering  phase to verify that the sponsor meets FTA requirements to execute a  grant agreement, and are otherwise acceptable for advancing a project.  In reviewing documentation for the two Core Capacity projects that have  received a grant agreement, we found these oversight contractors  provided FTA with their comprehensive assessments of the project  sponsor\u2019s technical and financial capacity. FTA officials said they use  these assessments when evaluating whether a project should be  recommended for a grant agreement."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["For years, the Capital Investment Grants program has served as the  primary source of federal financial assistance to new transit projects  across the United States. During this review, however, the future of that  program has been unclear, given the administration\u2019s stated intent to  phase out the program and FTA\u2019s actions, which have reflected that  direction. The Consolidated Appropriations Act, 2018, provided FTA with  both the funding to continue awarding grants through the program and the  direction to administer the program in accordance with the requirements  specified in law. FTA stated that it is reviewing the law and determining  next steps but did not indicate that it has specific plans or timeframes for  addressing the three outstanding provisions discussed in this report. By  not addressing those provisions, FTA runs the risk of failing to implement  provisions of federal law, and the federal government or project sponsors  may be missing opportunities to deliver transit projects more efficiently."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the Department  of Transportation:", "The FTA Administrator should initiate a rulemaking regarding the  evaluation and rating process for Core Capacity Improvement  projects, consistent with statutory provisions. (Recommendation 1)", "The FTA Administrator should take steps, such as undertaking  additional research or public outreach, to enable FTA to evaluate and  rate projects in a program of interrelated projects, in a manner  consistent with statutory provisions. (Recommendation 2)", "The FTA Administrator should take steps to describe the process  project sponsors should follow to apply for consideration as a pilot  project under the Expedited Project Delivery for Capital Investment  Grants Pilot Program. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Transportation for  review and comment. In its comments, which are reproduced in appendix  II, the Department concurred with our recommendations. However, the  Department also stated in its letter that our report did not adequately  describe the steps FTA has completed to implement the statutory  provisions discussed in this report. Further, the Department stated that  FTA has demonstrated its intent to address the outstanding provisions.", "We agree with the Department that FTA has taken numerous actions  toward addressing various statutory provisions of the Capital Investment  Grants program, provisions contained in either MAP-21 or the FAST Act.  As noted above in this report, we discussed many of those actions in our  April 2016 review of the Capital Investment Grants program. At that time,  we reported that FTA was making progress implementing MAP-21 and  that FTA intended to take action over the next 2 years toward addressing  the remaining provisions of MAP-21 and the new requirements of the  FAST Act. However, as of this report, FTA has still not addressed all the  provisions, and as the Department stated in its letter, FTA cannot specify  when action will be taken to address the outstanding provisions.  Accordingly, we believe that our assessment is an accurate reflection of  FTA\u2019s progress in addressing the outstanding statutory provisions of the  Capital Investment Grants program as amended by MAP-21 and the  FAST Act.", "We are sending copies of this report to interested congressional  committees and the Secretary of the Department of Transportation. In  addition, this report will be available at no charge on GAO\u2019s website at  http://www.gao.gov.", "If you or your staff have any questions or would like to discuss this work,  please contact me at (202) 512-2834 or GoldsteinM@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Core Capacity Improvement Projects", "paragraphs": ["Appendix I: Core Capacity Improvement  Projects Project description  The Metropolitan Transportation Authority proposes to implement capacity  improvements to the Canarsie L Line, which operates between South Brooklyn  and Manhattan. Improvements include three new power substations and other  upgrades necessary to increase capacity on the line. The Metropolitan  Transportation Authority estimates that when the project is complete, capacity in  the corridor will be increased 10 percent.", "The Dallas Area Rapid Transit is proposing to extend and modify platforms along  two existing light rail lines to accommodate longer trains. The Dallas Area Rapid  Transit estimates that when the project is complete, capacity in the corridor will be  increased 12 percent.", "The Dallas Area Rapid Transit is proposing to implement a second light-rail  alignment through the central business district of Dallas to supplement the  existing alignment. The Dallas Area Rapid Transit estimates that when the project  is complete, capacity in the corridor will be increased 100 percent.", "The Northern Indiana Commuter Transportation District is proposing to construct  a second track and make additional improvements along a 26.6-mile segment of  its South Shore commuter rail line between Gary and Michigan City.", "The Joint Powers Board (also known as Caltrain) is implementing capacity  improvements that include upgrading and electrifying a 51-mile commuter rail line  extending from San Francisco to San Jose. Caltrain estimates that when the  project is complete, capacity in the corridor will be increased 11 percent.", "The New Jersey Transit Corporation, in cooperation with the Port Authority of New  York and New Jersey, the Gateway Program Development Corporation, and  Amtrak are proposing to replace an over 100-year-old drawbridge across the  Hackensack River in Hudson County, New Jersey, with a new, two-track bridge,  among other capacity improvements. The sponsors estimate that when the project  is complete, capacity in the corridor will be increased 10 percent.", "The Chicago Transit Authority is implementing capacity improvements along a  5.6-mile corridor on the north side of Chicago. Improvements include the  reconstruction of four stations, the installation of a new higher-capacity signal  system, and the procurement of 32 new railcars. The Chicago Transit Authority  estimates that when the project is complete, capacity in the corridor will be  increased 15 percent.", "The Bay Area Rapid Transit District is proposing to implement capacity  improvements between Oakland and Daly City in South San Francisco.  Improvements include implementing communication-based train control  equipment, the procurement of 252 rail cars, additional power substations, and  the expansion of a maintenance facility. The Bay Area Rapid Transit District  estimates that when the project is complete, capacity in the corridor will be  increased 37 percent."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Brandon Haller (Assistant Director);  Melissa Bodeau; Kelsey Burdick; Geoffrey Hamilton; Wesley A. Johnson;  Elke Kolodinski; Malika Rice; and Elizabeth Wood made key contributions  to this report."], "subsections": []}]}], "fastfact": ["The Federal Transit Administration's Capital Investment Grants program is the main source of federal funds for local transit projects such as light rail and street cars. FTA decides which projects to recommend to Congress for funding based on criteria set by Congress, such as the level of economic benefit and congestion relief.", "We found that the agency had not addressed three congressional requirements for the grants program, in part because the program was slated to be cut. However, funding was restored. We recommended that FTA start developing the regulations and meet the requirements."]}
{"id": "GAO-19-134T", "url": "https://www.gao.gov/products/GAO-19-134T", "title": "Tribal Broadband: FCC's Data Overstate Access, and Tribes Face Barriers Accessing Funding", "published_date": "2018-10-03T00:00:00", "released_date": "2018-10-03T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in two GAO reports: Broadband Internet: FCC\u2019s Data Overstate Access on Tribal Lands , ( GAO-18-630 ) and Tribal Broadband: Few Partnerships Exist and the Rural Utilities Service Needs to Identify and Address Any Funding Barriers Tribes Face ( GAO-18-682 ). Specifically, it addresses (1) the extent to which FCC\u2019s approach to collecting broadband availability data accurately captures broadband access on tribal lands, (2) the extent to which FCC obtains tribal input on the data, (3) partnerships tribes have formed with entities to deploy broadband infrastructure on tribal lands, and (4) barriers tribes face in obtaining federal funding. For these reports, GAO analyzed FCC and RUS data, and interviewed agency officials as well as a non-generalizable sample of stakeholders representing tribes and broadband providers."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Communications Commission\u2019s (FCC) approach to collecting data on broadband availability causes it to overstate broadband access\u2014the ability to obtain service\u2014on tribal lands. In FCC\u2019s approach, broadband is considered to be \u201cavailable\u201d for an entire census block if the provider could serve at least one location in the census block. FCC, tribal stakeholders, and providers have noted that this approach leads to overstatements of broadband availability. Because FCC uses these data to measure broadband access, it also overstates broadband access on tribal lands. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be better able to target federal broadband funding to tribal areas that need it the most.", "FCC does not have a formal process to obtain tribal input on the accuracy of provider-submitted broadband data. Most of the tribal stakeholders GAO interviewed stated FCC should work more directly with tribes to improve the accuracy of FCC\u2019s data. Establishing a formal process to obtain input from tribal governments could help improve the accuracy of FCC\u2019s broadband data for tribal lands.", "Tribes have formed partnerships with different types of entities to deploy broadband infrastructure on tribal lands, but such partnerships are not widespread. The partnerships GAO identified included private providers, a community access network provider, an electric cooperative, a regional consortium, and tribally owned broadband providers.", "GAO reviewed four federal programs to deploy broadband services and found that from 2010 to 2017, less than 1 percent of funding has gone directly to tribes or tribally owned providers. The tribal entities GAO contacted cited barriers to obtaining funds from the Rural Utilities Service (RUS) grant funding, such as preparing network design, demonstrating financial sustainability of the broadband project within 5 years, and obtaining matching funds required to apply for federal grants. However, according to RUS officials, RUS has not taken steps to identify or address the barriers tribes face when applying for RUS grant funding due to limited resources and multiple competing priorities for those resources. By identifying and addressing regulatory barriers that may impede tribal entities\u2019 access to RUS funding, RUS could help tribes obtain funding to expand broadband deployment on tribal lands."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In GAO-18-630 , GAO made three recommendations to FCC, two of which related to improving its collection of broadband data. In GAO-18-682 , GAO made one recommendation to RUS to address regulatory barriers. FCC agreed and RUS neither agreed nor disagreed and both agencies described actions planned to address the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our September 2018 reports on  the Federal Communications Commission\u2019s (FCC) data regarding  broadband access on tribal lands and barriers tribes face in obtaining  federal funding for broadband deployment. Broadband infrastructure is  critical for economic development, educational and job opportunities, and  public health and safety. However, residents of tribal lands continue to  have lower levels of broadband access than other Americans.", "Policy-makers have noted the need for accurate information in order to  target funding to areas lacking broadband access, and FCC has identified  the need to work with tribes to ensure such information is accurate for  tribal lands. Currently, the primary source of information regarding where  broadband is and is not available is the FCC, which collects this  information from broadband providers. FCC collects this data by requiring  that fixed and mobile broadband providers report on their broadband  deployment by filing a form twice a year (Form 477). FCC uses data from  this form to determine which areas qualify for broadband funding.", "One barrier to increasing access to broadband on tribal lands is the cost  to providers of deploying infrastructure to tribal lands located in rugged,  sparsely populated areas. In an attempt to address this and other issues,  the federal government administers a number of programs to subsidize  broadband deployment in areas in which the return on investment has not  attracted private investment. For example, FCC administers the Connect  America Fund\u2014a Universal Service Fund program\u2014which provides  subsidies to fixed and mobile providers of telecommunications and  broadband services in rural, insular, and other remote areas where the  cost of providing service is high. To be eligible to receive subsidies under  the Connect America Fund, a provider must be designated an eligible  telecommunications carrier. In addition, the Rural Utilities Service (RUS)  has a current program and had a prior program and the National  Telecommunications and Information Administration (NTIA) had a prior  program that provided funding to improve broadband service in unserved  or underserved areas. The RUS and NTIA prior programs were  authorized by the American Recovery and Reinvestment Act of 2009  (Recovery Act) to expand high-speed Internet service in unserved areas,  and there is no current funding for these programs.", "My statement today discusses: (1) the extent to which FCC\u2019s approach to  collecting broadband availability data accurately captures the ability of  Americans living on tribal lands to access broadband Internet services;  (2) the extent to which FCC obtains tribal input on the data; (3) examples  of partnership arrangements that tribal entities have used to increase  broadband deployment on tribal lands; and (4) barriers that tribal entities  face in obtaining federal funding for broadband deployment. This  statement is based on two reports that we issued in September 2018. To  perform the work for our report on FCC\u2019s broadband data, we analyzed  FCC\u2019s broadband availability data for tribal lands as well as FCC\u2019s  processes for collecting and using those data. We interviewed FCC  officials as well as a non-generalizable sample of tribal and industry  stakeholders and reviewed relevant FCC rulemaking proceedings. To  perform the work for our report on tribal partnerships and barriers to  federal funding, we reviewed program documentation from FCC, RUS,  and NTIA. We also interviewed FCC, RUS, and NTIA officials and a non- generalizable sample of representatives from tribal governments, tribally  owned broadband providers, and tribal associations. More detailed  information about our scope and methodology can be found in our  reports.", "The work upon which this testimony is based was conducted in  accordance with generally accepted government auditing standards."], "subsections": [{"section_title": "FCC\u2019s Data Overstate Broadband Access on Tribal Lands", "paragraphs": ["In our September 2018 report on broadband access on tribal lands, we  found that FCC collects broadband availability data from broadband  providers, but its method for collecting the data does not accurately or  completely capture broadband access\u2014the ability to obtain service\u2014on  tribal lands. Specifically, FCC directs fixed broadband providers to  submit a list of census blocks where service is available on their Form  477 filings. In the Form 477 instructions, FCC defines \u201cavailable\u201d as  whether the provider does\u2014or could, within a typical service interval or  without an extraordinary commitment of resources\u2014provide service to at  least one end-user premises in a census block. Thus, in its annual  reports and maps of fixed broadband service, FCC considers an entire  block to be served if a provider reports that it does, or could offer, service  to at least one household in the census block. As shown in figure 1,  FCC\u2019s definition of availability leads to overstatements of fixed broadband  availability on tribal lands by: (1) counting an entire census block as  served if only one location has broadband, and (2) allowing providers to  report availability in blocks where they do not have any infrastructure  connecting homes to their networks if the providers determine they could  offer service to at least one household. FCC has noted that  overstatements of availability can be particularly problematic in rural  areas, where census blocks cover larger areas.", "According to FCC officials, FCC requires providers to report fixed  broadband availability where they could provide service to: (1) ensure that  it captures instances in which a provider has a network nearby but has  not installed the last connection to the homes, and (2) identify where  service is connected to homes, but homes have not subscribed. FCC  officials also told us that FCC measures availability at the census block  level because sub-census block data may be costly to collect. However,  FCC acknowledged that by requiring a provider to report where it could  provide service, it is not possible to tell whether the provider would be  unable or unwilling to take on additional subscribers in a census block it  lists as served. In addition, when reporting on broadband access in  tribal lands, FCC uses the broadband availability data described above,  and does not collect information on factors that FCC and tribal  stakeholders have stated can affect broadband access. These factors  include affordability, service quality, and service denials.", "By developing and implementing methods for collecting and reporting  accurate and complete data on broadband access specific to tribal lands,  FCC would be better able to target federal broadband funding to tribal  areas that need it the most. We recommended FCC develop and  implement methods for collecting and reporting accurate and complete  data on broadband access specific to tribal lands. FCC agreed with this  recommendation and stated that it is exploring methods to collect more  granular broadband deployment data."], "subsections": []}, {"section_title": "FCC Does Not Have a Formal Process to Obtain Tribal Input on its Broadband Data", "paragraphs": ["As we reported in September 2018, FCC does not have a formal process  to obtain input from tribes on the accuracy of the data and tribal  stakeholders can face difficulties obtaining information from providers.  FCC\u2019s 2010 National Broadband Plan noted the need for the federal  government to improve the quality of data regarding broadband on tribal  lands and recommended that FCC work with tribes to ensure that any  information collected is accurate and useful. Although the Plan also  noted that tribal representatives should have the opportunity to review  mapping data and offer supplemental data or corrections, FCC lacks a  formal process to obtain tribal input on its broadband data. FCC officials  told us that they address questions and concerns regarding providers\u2019  coverage claims submitted to FCC\u2019s Office of Native Affairs and Policy.  However, about half of the tribal representatives we spoke to stated that  they were not aware of the Form 477 data or corresponding maps, or  raised concerns about a lack of outreach from FCC to inform tribes about  the data. Most of the tribal stakeholders we interviewed told us that FCC  should work more directly with tribes to obtain information from them to  improve the accuracy of FCC\u2019s broadband deployment data for tribal  lands. These stakeholders identified several ways in which FCC could  work with tribes on this issue, including onsite visits, increased outreach  and technical training, and opportunities for tribes to collect their own data  or submit feedback regarding the accuracy of FCC\u2019s data.", "FCC\u2019s National Broadband Plan also noted the importance of supporting  tribal efforts to build technical expertise with respect to broadband issues.  A few of the stakeholders we interviewed noted that tribes have faced  difficulties when they attempt to challenge FCC\u2019s broadband availability  data. For example, in 2013, all of the tribal entities that challenged FCC\u2019s  data on mobile service availability were unsuccessful in increasing the  number of eligible areas. A few tribal stakeholders provided varying  reasons for this, one of which was the need for more technical expertise  to help the tribes meet FCC\u2019s requirements regarding the information  needed to support a challenge. Because FCC lacks a formal process to  obtain tribal input on its broadband data, FCC is missing an important  source of information regarding areas in which the data may overstate  broadband service on tribal lands.", "By establishing a process to obtain input from tribal governments on the  accuracy of provider-submitted broadband data as recommended in the  National Broadband Plan, FCC could help tribes develop and share  locally-specific information on broadband access and improve FCC\u2019s data  for tribal lands. However, the success of such an effort may rely on the  tribes\u2019 knowledge of, and technical ability to participate in, the process.  Thus, we recommended FCC develop a formal process to obtain tribal  input on the accuracy of provider-submitted broadband data that includes  outreach and technical assistance to help tribes participate in the  process. FCC agreed with this recommendation and stated that it will  work with stakeholders to explore options for implementing such a  process.", "Finally, some tribes face challenges accessing data from providers. In  2011, FCC required that providers receiving funds to serve tribal lands  meaningfully engage with the tribes and discuss broadband deployment  planning. In 2012, FCC issued guidance on meeting this requirement  and stated that the guidance would evolve over time based on the  feedback of both tribal governments and broadband providers.  However, FCC has taken limited steps to obtain such feedback and has  not updated the guidance. About half of the tribal stakeholders we  interviewed raised concerns about difficulties accessing information from  providers regarding broadband deployment on their tribe\u2019s lands (which  providers may consider proprietary), and some providers told us that they  attempt to engage with tribes, but the level of responsiveness they  receive from tribes varies. Thus, we recommended, and FCC agreed, that  FCC obtain feedback from tribal stakeholders and providers to determine  whether it needs to clarify its tribal engagement guidance."], "subsections": []}, {"section_title": "Few Tribal Broadband Partnerships Exist", "paragraphs": ["In our September 2018 report on tribal partnerships, we found that  partnership arrangements between tribes and other entities to increase  broadband deployment on tribal lands are not widespread. Because of  the greater costs associated with deploying broadband on unserved tribal  lands that are generally rural, with possibly rugged terrain, there may be  little to no private sector incentive to deploy broadband or enter into a  partnership arrangement to do so. The partnership examples we  identified were ones that obtained federal funding under past programs  funded by the Recovery Act. Among these examples, tribes partnered  with several different types of entities, including private providers, a  community access network provider, an electric cooperative, a regional  consortium, and tribally owned providers."], "subsections": []}, {"section_title": "Tribes Face Barriers to Obtain Federal Funding for Broadband Deployment", "paragraphs": ["We also reported in September 2018 that FCC and RUS are the primary  sources of federal funding to deploy broadband infrastructure in rural and  remote areas where the cost of providing service is high, including tribal  lands. Based on our review of the funding provided by four federal  programs targeted to increase deployment in unserved areas, very little  has gone directly to tribes or to tribally owned broadband providers.  Specifically, we found that from 2010 to 2017, less than 1 percent of FCC  funding and about 14 percent of RUS funding went directly to tribes and  tribally owned providers. Combined, FCC and RUS funding totaled $34.6  billion during that time period and tribes and tribally owned providers  received $235 million, or about 0.7 percent.", "FCC\u2019s 2010 National Broadband Plan stated that tribes needed  substantially greater financial support than was available to them at the  time and that accelerating tribal broadband deployment would require  increased funding. Furthermore, the National Congress of American  Indians expressed concerns that the needs for federally funded  broadband projects are greater on tribal lands but tribes do not receive  the appropriate share of federal funding aimed at increasing broadband  deployment. Several of the tribes we visited told us they were trying to  deploy broadband infrastructure or offer service because the private  providers were not building out on their lands.", "Through our analysis, we found that from 2010 to 2017, 14 tribal entities  received federal funding from FCC and RUS to increase broadband  deployment (see fig. 2).", "The tribal officials, tribal associations, and tribally owned broadband  providers we interviewed cited several barriers that tribes may face when  seeking federal funding for broadband deployment. The two primary  barriers these interviewees cited were (1) the statutory requirement for  the eligible telecommunications carrier (ETC) designation and (2) grant  application requirements. Regarding the statutory requirement for ETC  designation, FCC officials told us there were 11 tribes that have providers  designated as ETCs and therefore would be eligible to receive support  from FCC\u2019s Connect America Fund (CAF)\u2014the largest source of federal  funding for broadband deployment in unserved and underserved areas.  Although FCC adopted rules in 2011 to create CAF and modernize the  program so that it could support broadband capable networks, FCC  officials told us that most ETCs are the telephone companies that were in  existence when the Telecommunications Act of 1996 was enacted into  law. According to FCC officials, FCC has explored whether it has  authority to allow non-ETC providers to receive CAF support payments  but determined that the statute is clear that only ETCs can receive  program support. Between 2012 and 2017, FCC officials said FCC  received nine ETC applications, four of which were from tribally owned  providers. Of those four, only one tribally owned provider was designated  as an ETC.", "According to representatives from a tribal association we contacted, FCC  has provided ETCs with billions of dollars to deploy service to unserved  areas, but FCC\u2019s efforts have not always been successful in the hardest  to reach areas, particularly tribal lands. The representatives stated that  FCC\u2019s competitive market approach does not work where competition  cannot be supported and that there needs to be a different approach.  Similarly, tribal officials from Idaho told us that although the provider in  their area has received millions of dollars in CAF subsidies, it has not  deployed broadband on the tribal lands. Other tribal officials from Idaho  told us that although private providers received CAF subsidies to deploy  broadband service to their reservation, the private providers told the tribe  it would be years before they offer service on tribal lands.", "Additionally, the tribal officials, tribal associations, and tribally owned  broadband providers we interviewed said tribes may face barriers  completing federal grant applications to obtain funding for broadband  deployment. For example, they said tribes face regulatory barriers in  applying for RUS\u2019s grant funding, including preparing existing and  proposed network design, demonstrating financial sustainability of the  broadband project within 5 years, and obtaining matching funds.", "The National Broadband Plan recommended that federal agencies  facilitate tribal access to broadband funding opportunities. Furthermore,  recognizing the need to reduce barriers to expand broadband  deployment, the Broadband Opportunity Council, established in March  2015, issued a memorandum stating that federal agencies should use all  available and appropriate authorities to identify and address regulatory  barriers that may unduly impede either broadband deployment or the  infrastructure to augment broadband deployment. However, according  to RUS officials, RUS has not taken steps to identify or address the  barriers tribes face when applying for RUS grant funding due to limited  resources and multiple competing priorities for those resources. We  recommended that RUS identify any regulatory barriers that may unduly  impede efforts by tribes to obtain RUS grant funds for broadband  deployment on tribal lands and implement any steps necessary to  address the identified barriers. By doing so, RUS could help tribes obtain  funding to expand broadband deployment on tribal lands. RUS neither  agreed nor disagreed with this recommendation.", "Chairman Hoeven, Vice Chairman Udall, and Members of the Committee,  this completes my prepared statement. I would be pleased to respond to  any questions that you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Mark Goldstein, Director, Physical Infrastructure Issues at (202)  512-2834 or GoldsteinM@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Rose Almoguera, Katherine Blair, Keith Cunningham, Crystal  Huggins, Sally Moino, and Tina Paek. Other staff who made contributions  to the reports cited in this testimony are identified in the source product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Broadband provides high-speed Internet service, which can improve communications and drive economic growth. However, tribal lands have lower levels of broadband access than the rest of the nation. Congress has prioritized identifying unserved areas and targeting funds to increase broadband deployment, including on tribal lands.", "In this testimony, we found:", "this digital divide on tribal lands may be larger than estimated because FCC data overstate availability on tribal lands", "tribes face barriers to obtaining funds to improve access. Less than 1 percent of broadband funding from programs we reviewed went directly to tribes from 2010 to 2017."]}
{"id": "GAO-19-196", "url": "https://www.gao.gov/products/GAO-19-196", "title": "Consumer Data Protection: Actions Needed to Strengthen Oversight of Consumer Reporting Agencies", "published_date": "2019-02-21T00:00:00", "released_date": "2019-03-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CRAs collect, maintain, and sell to third parties large amounts of sensitive data about consumers, including Social Security numbers and credit card numbers. Businesses and other entities commonly use these data to determine eligibility for credit, employment, and insurance. In 2017, Equifax, one of the largest CRAs, experienced a breach that compromised the records of at least 145.5 million consumers.", "GAO was asked to examine issues related to federal oversight of CRAs. Among other things, this report discusses (1) measures FTC has taken to enforce CRA compliance with requirements to protect consumer information, (2) measures CFPB has taken to ensure CRA protection of consumer information, and (3) actions consumers can take after a breach. GAO reviewed relevant laws, documentation related to CRA examinations, and policies and practices of selected CRAs; and interviewed representatives of regulatory agencies, CRAs, consumer and industry groups, and Attorneys General from four states with consumer reporting requirements."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2008, the Federal Trade Commission (FTC) has settled 34 enforcement actions against various entities related to consumer reporting violations of the Fair Credit Reporting Act (FCRA), including 17 actions against consumer reporting agencies (CRA). Some of these settlements included civil penalties\u2014fines for wrongdoing that do not require proof of harm\u2014for FCRA violations or violations of consent orders. However, FTC does not have civil penalty authority for violations of requirements under the Gramm-Leach-Bliley Act (GLBA), which, unlike FCRA, includes a provision directing federal regulators and FTC to establish standards for financial institutions to protect against any anticipated threats or hazards to the security of customer records. To obtain monetary redress for these violations, FTC must identify affected consumers and any monetary harm they may have experienced. However, harm resulting from privacy and security violations can be difficult to measure and can occur years in the future, making it difficult to trace a particular harm to a specific breach. As a result, FTC lacks a practical enforcement tool for imposing civil money penalties that could help to deter companies, including CRAs, from violating data security provisions of GLBA and its implementing regulations.", "Since 2015, the Consumer Financial Protection Bureau (CFPB) has had five public settlements with CRAs. Four of these settlements included alleged violations of FCRA; and three included alleged violations of unfair, deceptive, or abusive practices provisions. CFPB is also responsible for supervising larger CRAs (those with more than $7 million in annual receipts from consumer reporting) but lacks the data needed to ensure identification of all CRAs that meet this threshold. Identifying additional sources of information on these CRAs, such as by requiring them to register with the agency through a rulemaking or leveraging state registration information, could help CFPB ensure that it can comprehensively carry out its supervisory responsibilities. According to CFPB staff, the bureau does not have authority to examine for or enforce the GLBA\u2019s safeguards provisions. After the Equifax breach, however, CFPB used its existing supervisory authority to examine the data security of certain CRAs. CFPB\u2019s process for prioritizing which CRAs to examine does not routinely include an assessment of companies\u2019 data security risks, but doing so could help CFPB better detect such risks and prevent the further exposure or compromise of consumer information.", "If a CRA experiences a data breach, affected consumers can take actions to mitigate the risk of identity theft\u2014such as implementing a fraud alert or credit freeze\u2014and can file a complaint with FTC or CFPB. However, consumers are limited in the direct actions they can take against the CRA. Consumers generally cannot exercise choice in the consumer reporting market\u2014such as by choosing which CRAs maintain their information\u2014if they are dissatisfied with a CRA\u2019s privacy or security practices. In addition, according to CFPB, consumers cannot remove themselves from the consumer reporting market entirely because they do not have a legal right to delete their records with CRAs. This limited control by consumers, coupled with the large amount and sensitive nature of the information CRAs possess, underscores the importance of appropriate federal oversight of CRAs\u2019 data security."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Congress consider giving FTC civil penalty authority to enforce GLBA\u2019s safeguarding provisions. GAO also recommends that CFPB (1) identify additional sources of information on larger CRAs, and (2) reassess its prioritization of examinations to address CRA data security. CFPB neither agreed nor disagreed with GAO\u2019s recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2017, the consumer reporting agency (CRA) Equifax, Inc., disclosed  that it had experienced a data breach and that unknown individuals had  extracted from its databases sensitive consumer information\u2014such as  names, addresses, birth dates, and credit card, driver\u2019s license, and  Social Security numbers\u2014of at least 145.5 million consumers in the U.S.  Such unauthorized access to personally identifiable information could  lead to identity theft, raising concerns among policymakers about how  CRAs in general are collecting, using, and protecting sensitive consumer  information. We have addressed issues related to data breaches and  identity theft in our prior work, including our recent analysis of the Equifax  data breach.", "According to the Consumer Financial Protection Bureau (CFPB), the  consumer reporting market comprises more than 400 companies, and the  Consumer Data Industry Association reports that these companies issue  three billion reports and make more than 36 billion updates to consumer  files each year. These companies collect vast amounts of sensitive  consumer information, package it into consumer reports, and sell the  reports to third parties. Banks, employers, and others use these reports  to make credit, employment, insurance, and other decisions. According to  a 2018 Department of the Treasury report, the three nationwide CRAs\u2014 Equifax, Experian, and TransUnion\u2014maintain credit files on nearly 210  million Americans.", "You asked us to examine issues related to the causes of the Equifax  breach, Equifax\u2019s response to the breach, federal oversight of CRAs, and  the role of CRAs in federal agencies\u2019 implementation of government  programs. This report, one in a series of our reports that addresses  these issues, examines the oversight of CRAs, specifically (1) the federal  laws and regulations governing CRAs\u2019 collection, use, and protection of  consumer information; (2) measures the Federal Trade Commission  (FTC) has taken to enforce CRA compliance with requirements to protect  consumer information; (3) measures CFPB has taken to ensure that  CRAs protect consumer information; and (4) FTC\u2019s and CFPB\u2019s roles in  assisting consumers following a data breach and actions consumers can  take following a data breach of a CRA.", "To examine the laws governing CRAs, we identified relevant laws and  reviewed them for their application to CRAs. We interviewed and  reviewed documentation from the three nationwide CRAs and interviewed  three additional CRAs that produce or compile consumer reporting  information. We selected these CRAs because they are not sector- specific and hold information on a broad segment of the population. We  conducted a site visit to Equifax\u2019s Alpharetta, Georgia data center to learn  more about steps the company takes to comply with relevant consumer  protection laws. In addition, we interviewed staff from CFPB and FTC,  and the Office of the Attorney General of four states with existing or  proposed information protection laws or regulations that vary from federal  requirements (California, Illinois, Massachusetts, and New York). We also  interviewed associations representing companies that furnish consumer  information to and use consumer reports from CRAs\u2014the American  Bankers Association, the Property Casualty Insurance Association of  America, and the National Retail Federation\u2014about their roles in the  collection, use, and protection of consumer data, and steps they take to  comply with relevant laws.", "To assess FTC and CFPB measures to enforce information protection  provisions and to ensure CRAs\u2019 proper collection, use, and protection of  consumer information, we reviewed documents from FTC and CFPB. We  reviewed the types of enforcement actions available to FTC and CFPB for  violations of relevant laws, as well as specific enforcement actions these  agencies have brought against CRAs. We also reviewed documentation  on the scope of CFPB examinations of larger market participant CRAs  since 2015, as well as findings from recent CRA examinations. In  addition, we reviewed CFPB examination guidance for supervising these  CRAs, including CFPB\u2019s internal guidelines for conducting data security  examinations. We also reviewed documents related to CFPB\u2019s process  for prioritizing which institutions and which product lines should receive  supervisory examination, and we interviewed CFPB staff about this  process. We interviewed officials from FTC and CFPB on their oversight  activities, and we interviewed representatives of industry, consumer, and  privacy groups on their views about supervision and oversight of CRAs.", "To assess FTC\u2019s and CFPB\u2019s roles in assisting consumers, as well as  actions consumers can take following a data breach of a CRA, we  reviewed the two agencies\u2019 websites and other publicly available  consumer educational materials. We also interviewed staff from these  agencies about their roles in assisting consumers following a breach. To  identify actions consumers can take following a data breach, we reviewed  our prior related reports and spoke with the industry and consumer  representatives noted above. See app. I for a more detailed discussion  of our scope and methodology for this report.", "We conducted this performance audit from November 2017 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Consumer Reporting Process", "paragraphs": ["Information on consumers is exchanged through a consumer reporting  process that includes consumers, CRAs, furnishers, and users of that  information (see fig.1).", "Consumers are individuals whose information is collected and shared  to make eligibility decisions, such as for credit, insurance, or  employment.", "CRAs are companies that assemble or evaluate consumer  information for the purpose of furnishing consumer reports to third  parties who use the reports to determine consumer eligibility for  employment, or products and services such as credit and insurance.", "Furnishers are entities such as banks or credit card companies that  provide CRAs with consumer information, such as account openings,  bill payments, or delinquency information. CRAs use this information,  along with other information, including from public records such as  bankruptcies, to compile consumer reports.", "Users are banks, credit card companies, employers, or other entities  that use consumer reports to make eligibility decisions for individual  consumers. Users vary in the specific information they request from  CRAs and how they interpret the data. Some institutions, such as  banks, may act as both furnishers and users.", "During the consumer reporting process, a consumer would not  necessarily interact with the CRA; however, if the consumer discovered  inaccurate information on their credit report as a result of, for example,  being denied credit, the consumer could file a dispute with the CRA or the  furnisher. Consumers may also request copies of their consumer reports  from CRAs directly, and CRAs may provide consumers with disclosures  about how their information is being shared."], "subsections": []}, {"section_title": "Oversight Agencies", "paragraphs": ["FTC and, most recently, CFPB, are the federal agencies primarily  responsible for overseeing CRAs. FTC has authority to investigate most  organizations that maintain consumer data and to bring enforcement  actions for violations of statutes and regulations that concern the security  of data and consumer information. CFPB, created in 2010 by the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank  Act), has enforcement authority over all CRAs for violations of certain  consumer financial protection laws. In general, it also has the authority  to issue regulations and guidance for those laws. CFPB has supervisory  authority over larger market participants in the consumer reporting  market. In 2012, CFPB defined larger market participant CRAs as those  with more than $7 million in annual receipts from consumer reporting.  CFPB\u2019s supervision of these companies includes monitoring, inspecting,  and examining them for compliance with the requirements of certain  federal consumer financial laws and regulations. As discussed below,  these laws include most provisions of the Fair Credit Reporting Act  (FCRA); several provisions of the Gramm-Leach-Bliley Act (GLBA); and  provisions of the Dodd-Frank Act concerning unfair, deceptive, or abusive  acts or practices."], "subsections": []}, {"section_title": "Data Breaches and the Equifax Breach", "paragraphs": ["Although there is no commonly agreed-upon definition of \u201cdata breach,\u201d  the term generally refers to an unauthorized or unintentional exposure,  disclosure, or loss of sensitive information. This information can include  personally identifiable information such as Social Security numbers, or  financial information such as credit card numbers. A data breach can be  inadvertent, such as from the loss of an electronic device; or deliberate,  such as from the theft of a device. A breach can also occur as a result of  a cyber-based attack by individuals or groups, including organizations\u2019  own employees, foreign nationals, or terrorists. Data breaches have  occurred at all types of organizations, including private, nonprofit, and  federal and state entities.", "In the Equifax data breach, Equifax system administrators discovered on  July 29, 2017, that intruders had gained unauthorized access via the  Internet to a server housing the company\u2019s online dispute portal. The  breach compromised the personally identifiable information of at least  145.5 million individuals, and included names, addresses, and birth dates;  and credit card, driver\u2019s license, and Social Security numbers. Equifax\u2019s  investigation of the breach identified factors that led to the breach:  software vulnerabilities, failure to detect malicious traffic, failure to isolate  databases from each other, and inadequately limiting access to sensitive  information such as usernames and passwords. Equifax\u2019s public filings  after the breach noted that the company took steps to improve security  and notify individuals about the breach. Our August 2018 report provides  more information on the breach and Equifax\u2019s response.", "While data breaches do not always result in measurable harm, intruders  may retain or resell stolen information to commit identity theft, which can  include existing-account fraud and new-account fraud. In existing-account  fraud, identity thieves use financial account identifiers, such as credit card  or debit card numbers, to take over an individual\u2019s existing accounts to  make unauthorized charges or withdraw money. In new-account fraud,  identity thieves use an individual\u2019s identifying data, such as Social  Security and driver\u2019s license numbers, to open new financial accounts  and incur charges and obtain credit in an individual\u2019s name without that  person\u2019s knowledge. In addition, identity thieves may commit synthetic  identity fraud, where they combine real and/or fictitious information to  create identities with which they may defraud financial institutions,  government agencies, or individuals."], "subsections": []}]}, {"section_title": "Several Federal Laws Govern the Collection, Use, and Protection of Consumer Information", "paragraphs": [], "subsections": [{"section_title": "FCRA Governs the Accuracy, Use, and Sharing of Consumer Information, and CRAs Reported Taking Actions to Comply", "paragraphs": ["FCRA, enacted in 1970, is one of the primary federal laws governing the  personal information that CRAs hold. It governs the accuracy of this  information and gives consumers rights to view, correct, or opt out of the  sharing or use of certain aspects of their personal information among  affiliates. FCRA also applies to how CRAs can use and share the  information.", "Accuracy of collected information. FCRA requires that when  preparing a consumer report, CRAs follow reasonable procedures to  assure \u201cmaximum possible accuracy\u201d of the information concerning  the individual about whom the report relates. Companies that furnish  information to CRAs also must take steps regarding the accuracy of  information they report, as required by FCRA and its implementing  regulation, Regulation V. A 2012 CFPB report cited steps that  nationwide CRAs take to help ensure that information they collect  from furnishers is legitimate and accurate. The report notes that  initial screening of furnishers generally includes an inspection of the  companies\u2019 physical headquarters, phone numbers, websites,  business licenses, and company records such as annual reports. In  addition, these CRAs may hire third-party investigation services to  screen for illegal or unethical business practices. They may also  conduct additional inspections in response to consumer complaints,  variations in data reporting, or changes in a furnisher\u2019s ownership. To  conduct quality checks on data submitted by furnishers, CFPB  reported that the nationwide CRAs check for blank fields or logical  inconsistencies. Representatives of CRAs we spoke with provided  examples of the quality assurance steps they take. For example, one  representative told us that they look for violations of logical patterns,  such as a loan going from 30 days past due to 90 days past due over  the course of one month. CFPB reported that when inaccuracies are  identified, the CRAs can reject the information. These steps may  improve the quality of the information received from furnishers, but  they cannot ensure the accuracy of such data.", "Use and sharing of information. FCRA permits CRAs to provide  users with consumer reports only if the user has a \u201cpermissible  purpose,\u201d such as to process a credit application, screen a job  applicant, or underwrite an insurance policy, subject to limitations  where the credit or insurance transaction is not initiated by the  consumer. FCRA also prohibits the use of a consumer report for any  purpose other than that specified to the CRA when the user obtained  the report. It also requires that CRAs take steps to validate the  legitimacy of users and their requests for consumer report information  and apply FCRA requirements to the sharing of information within  their companies.", "Validating the legitimacy of users and their requests for  consumer report information. Representatives of CRAs told us  they take several steps to validate the legitimacy of users and their  requests, including verifying credit transactions, periodically  evaluating user agreements, and validating users\u2019 identities. For  example, representatives of one CRA said they sometimes conduct  on-site visits to verify the existence of an entity and the business it  conducts. In addition, they said they randomly select 6,000 to 8,000  consumer files each year and ask users associated with those files to  show proof that the consumers engaged in the credit transactions  contained in those files. However, several CRAs told us that these  steps cannot guarantee that the users and requests are valid. For  example, representatives of one CRA noted that once a user has the  information, a CRA would find it difficult to prevent that user from  retaining and reusing it for purposes other than the original  permissible purpose.", "Applying FCRA requirements to sharing information internally.  As amended by the Fair and Accurate Credit Transactions Act of  2003, FCRA limits the ability of affiliated companies to market  products or services to consumers using shared consumer data.  Affiliates may use consumer report information for product or service  marketing only if they clearly and conspicuously disclose to the  consumer that the information may be shared for such solicitations,  the consumer is provided a simple method to opt out of such  solicitations, and the consumer does not opt out. Representatives of  CRAs told us that they apply the same FCRA protections when they  share consumer reporting data among their departments or  subsidiaries, which may use the data for other purposes. For  example, one nationwide CRA said that one of its internal groups  seeks to ensure that the company implements appropriate legal  protections when it shares data for other uses within the company.", "Staff from state Attorneys General offices we spoke with told us that their  states also have laws pertaining to consumer reporting, which have  similar requirements to those in FCRA. In addition, they noted that while  there is no federal data breach notification law, all 50 states have laws  requiring companies to notify consumers in the event of a data breach.  According to the National Conference of State Legislatures, those laws  have varying requirements, such as the timing or method of notification,  and who must be notified."], "subsections": []}, {"section_title": "GLBA and Other Laws Govern the Protection of Consumer Information", "paragraphs": ["Congress enacted GLBA in part to protect the privacy and security of  nonpublic personal information that individuals provide to financial  institutions. According to FTC staff, CRAs may be considered financial  institutions under GLBA if they collect, maintain, and report on consumer  information. As with FCRA, GLBA restricts financial institutions from  sharing consumers\u2019 private information, but GLBA restricts sharing with  nonaffiliated third parties specifically, and those parties face similar  restrictions in how they may further share or use the information.", "In addition, unlike FCRA, GLBA includes a provision directing FTC and  certain federal regulators (not including CFPB) to establish standards  specifically with respect to protection against any anticipated threats or  hazards to the security of customer records. Specifically, under GLBA,  these federal regulators are directed to establish appropriate standards  for financial institutions under their jurisdiction to ensure the security and  confidentiality of customer records and information; protect against any  anticipated threats or hazards to the security or integrity of such records;  and protect against unauthorized access to or use of such records or  information that could result in substantial harm or inconvenience to any  customer. To implement these standards for CRAs, and other entities  that fall under its jurisdiction, FTC adopted its Safeguards Rule, which  requires, among other things, that financial institutions have a written  information security program, assess the risks to customer information,  and evaluate and adjust the information security program in light of  foreseeable risks. FTC staff told us that because GLBA applies to  information about a consumer with a customer relationship with a  financial institution, the Safeguards Rule may not apply in all cases where  a CRA holds personal information on individuals. For example, they said  that GLBA would more clearly apply if the consumer had purchased credit  monitoring or other products or services directly from the CRA, or if the  CRA obtained customer information from another financial institution,  such as a bank. Representatives of the three nationwide CRAs told us  that for purposes of protecting information, they do not distinguish  between consumers with whom they have a direct customer relationship  and those with whom they do not.", "CRAs we spoke with provided examples of how they protect consumer  information and meet GLBA requirements to maintain administrative,  technical, and physical safeguards. For example, with respect to  administrative safeguards, representatives of one CRA said they enforce  contractual requirements for data access and data security.  Representatives of another CRA said that the technical safeguards they  use include firewalls, anti-virus software, and malware protection.  Examples of physical safeguards from another CRA included monitoring  data centers by video and restricting access to secure data rooms. To  address data protection more generally, representatives of CRAs we  spoke with told us they routinely conduct internal audits of their data  security systems, and that the financial institutions they work with  frequently conduct audits of their risk management practices, including  CRAs\u2019 data security controls.", "Provisions related to unfair or deceptive acts or practices also may apply  to CRAs\u2019 protection of consumer data. Specifically, under FTC\u2019s authority,  section 5 of the Federal Trade Commission Act (FTC Act) prohibits \u201cunfair  or deceptive acts or practices\u201d in or affecting commerce. In the context  of privacy and security, these provisions require companies to truthfully  represent practices to consumers. For example, FTC has found  companies that alleged that they were following certain security  protections, but did not in fact have such security features, to have  engaged in unfair or deceptive practices. Similarly, the Dodd-Frank Act  prohibits providers of consumer financial products or services from  engaging in \u201cunfair, deceptive, or abusive acts or practices,\u201d and CFPB  has authority to enforce and supervise for compliance with this  provision. CFPB has alleged that claims to consumers that transactions  are safe and secure while simultaneously lacking basic security practices  can constitute unfair, deceptive, or abusive acts or practices. FTC and  CFPB officials said that in the case of data breaches, they would examine  each case individually to determine whether the institution violated these  provisions in connection with the breach.", "Some states also have laws that protect consumer information, including  laws that generally govern data security. For example, staff from the  Massachusetts Attorney General\u2019s office told us that their state has a data  security law similar to FTC\u2019s Safeguards Rule but with more specific  requirements, including those for malware detection and firewalls.  According to the National Consumer Law Center, all 50 states have  consumer protection laws that prohibit unfair or deceptive practices. Staff  from state Attorneys General offices told us that they can prosecute  entities for potential violations of these provisions, including data  breaches. They told us that following the Equifax breach, several states\u2019  Attorneys General launched a joint investigation into whether Equifax  violated state laws, including prohibitions of unfair or deceptive practices.  According to staff from one state Attorney General office, as of February  2019, this investigation was ongoing. In addition, Equifax reported that  individual states have also filed legal action or have ongoing  investigations. For example, Massachusetts and West Virginia have filed  civil enforcement actions against Equifax that seek various remedies,  including civil penalties."], "subsections": []}]}, {"section_title": "FTC Has Taken Enforcement Measures against CRAs but Lacks Civil Penalty Authority for GLBA Data Protection Provisions", "paragraphs": [], "subsections": [{"section_title": "FTC Enforces CRA Compliance with Consumer Protection Laws", "paragraphs": ["FTC enforces compliance with consumer protection laws under  authorities provided in FCRA, GLBA, and the FTC Act. FCRA authorizes  FTC to enforce compliance for nearly all companies not supervised by  either a federal banking regulator or certain other federal agencies.  GLBA authorizes FTC to issue certain rules and enforce compliance for  all nonbank financial institutions and other entities not under the  jurisdiction of a federal banking regulator, the National Credit Union  Administration, Securities and Exchange Commission, or state insurance  regulators. The FTC Act authorizes FTC to investigate and take  administrative and civil enforcement actions against companies under its  jurisdiction that engage in unfair or deceptive acts or practices in or  affecting commerce. According to FTC, in the last 10 years, it has  brought 34 enforcement actions for FCRA violations, including 17 against  CRAs. In addition, FTC said that it had taken a total of 66 actions against  companies (not just in the last 10 years), including CRAs, that allegedly  engaged in unfair or deceptive practices relating to data protection.", "If FTC has reason to believe that a company has violated laws under its  jurisdiction, it may initiate an investigation to determine whether to take  enforcement action. FTC staff said that in determining whether to take on  a case related to privacy and data security matters, they consider factors  such as the company\u2019s size and the sensitivity of the data in the  company\u2019s network. For example, FTC may choose not to investigate a  data breach of a small company that affects few people; however, it may  investigate a potential data security violation of a large company, even  without evidence of a breach. Under its statutory authority, FTC can ask  or compel companies to produce documents, testimony, and other  materials to assist in its investigations. In June 2018, FTC notified  Equifax that it was considering legal action against the company as a  result of its 2017 data breach, including seeking civil penalties.", "If FTC finds that a company violated consumer law, the agency may take  several different actions depending on its legal authority and what it  considers to be the most appropriate response. For example, FTC may,  in administrative proceedings, issue cease-and-desist orders for unfair or  deceptive acts or practices. Further, FTC generally may seek a range of  remedies from the U.S. district courts, including injunctions, damages to  compensate consumers for their actual losses, and disgorgement of ill- gotten funds. In limited circumstances, FTC also may seek civil money  penalties, which are monetary fines imposed for a violation of a statute or  regulation.", "Examples of FTC enforcement actions related to consumer reporting  include:  In May 2016, FTC settled with a furnisher that allegedly violated  FCRA requirements to have adequate policies and procedures for  reporting accurate credit information to CRAs. FTC alleged that a  debt collector acting as a furnisher did not have a written policy  regarding the accuracy and integrity of information it furnished, and in  numerous instances failed to inform consumers about these  outcomes.", "In 2011, FTC brought enforcement actions against three CRAs that  merge, and then sell, information from the three nationwide CRAs.  FTC alleged that these companies did not meet GLBA standards and  violated unfair or deceptive practices prohibitions by not providing  reasonable and appropriate security for consumers\u2019 personal  information. These violations included not developing and  disseminating information security policies, and not addressing risks  by, for example, evaluating the security of end users\u2019 computer  networks.", "In 2006, FTC settled with ChoicePoint\u2014a CRA\u2014and imposed a $10  million civil penalty for violations of FCRA stemming from a 2005 data  breach. In 2009, FTC obtained an additional $275,000 in equitable  monetary relief due to ChoicePoint\u2019s violation of the order after an  additional data breach occurred in 2008."], "subsections": []}, {"section_title": "FTC\u2019s Lack of Civil Penalty Authority for GLBA May Hinder Its Effectiveness in Enforcing Data Security Provisions", "paragraphs": ["As previously discussed, in some circumstances, FTC enforcement  authority can include civil money penalties. This includes cases of  knowing violations of FCRA. For example, in a 2014 settlement, FTC  levied $525,000 in civil penalties against a CRA after alleging that the  company did not comply with FCRA provisions to ensure the accurate  and permissible use of its reports. FTC does not have civil penalty  authority for initial violations of the FTC Act but may obtain civil penalties  from companies for violations of FTC Act orders.", "FTC\u2019s civil penalty authority does not extend to initial violations of GLBA\u2019s  privacy and safeguarding provisions, which require administrative,  physical, and technical safeguards with an emphasis on protection  against anticipated threats and unauthorized access to customer records.  For violations of GLBA provisions, which are enforced pursuant to FTC  Act authority, FTC may seek an injunction to stop a company from  violating these provisions and may seek redress (damages to  compensate consumers for losses) or disgorgement. However,  determining the appropriate amount of consumer compensation requires  FTC to identify the consumers affected and the amount of monetary harm  they suffered. In cases involving security or privacy violations resulting  from data breaches, assessing monetary harm can be difficult.  Consumers may not be aware that their identities have been stolen as a  result of a breach and or identity theft, and related harm may occur years  in the future. In addition, it can be difficult to trace instances of identity  theft to specific data breaches. According to FTC staff, these factors can  make it difficult for the agency to identify which individuals were victimized  as a result of a particular breach and to what extent they were harmed  and then obtain related redress or disgorgement. Having civil penalty  authority for GLBA provisions would allow FTC to fine a company for a  violation such as a data breach without needing to prove the monetary  harm to individual consumers.", "FTC staff told us and testified before Congress that civil penalties are  often the most appropriate remedy for a data breach, and that such  penalties serve as an effective deterrent in cases involving weak data  privacy and security policies and practices. FTC staff noted that in the  case of a data breach, each consumer record exposed could constitute a  violation; as a result, a data breach that involved a large number of  consumer records could result in substantial fines. Unlike FTC, other  regulators have civil penalty authority to punish entities that violate  provisions of GLBA. For example, the Office of the Comptroller of the  Currency has said that it can enforce GLBA privacy and safeguard  provisions with civil money penalties against any insured depository  institution or institution-affiliated party subject to its supervision.", "In our 2009 report on modernizing the financial regulatory framework, we  stated that financial regulators should have the authority to carry out and  enforce their statutory missions. In the case of FTC, this includes having  the tools necessary to meet its mission of protecting consumers from  harm, including the harm caused by misuse of personal information, by  having the range of authorities to punish entities for violations of the  statutes and regulations the agency enforces.", "In 2006, we suggested that Congress consider providing FTC with civil  penalty authority for its enforcement of GLBA\u2019s privacy and safeguarding  provisions. We noted that providing this authority would give FTC a  practical enforcement tool to more effectively enforce provisions related to  security of data and consumer information. Following the 2008 financial  crisis, Congress introduced several bills related to data protection and  identity theft, which included giving FTC civil penalty authority for its  enforcement of GLBA. However, in the final adoption of these laws,  Congress did not provide FTC with this authority. Since that time, data  breaches at Equifax and other large organizations have highlighted the  need to better protect sensitive personal information. Accordingly, we  continue to believe FTC and consumers would benefit if FTC had such  authority."], "subsections": []}]}, {"section_title": "CFPB Enforces and Examines CRAs for Compliance with Consumer Protection Laws but Does Not Fully Consider Data Security in Prioritizing Examinations", "paragraphs": [], "subsections": [{"section_title": "CFPB Enforces and Examines CRA Compliance with Consumer Protection Laws", "paragraphs": ["CFPB enforces compliance with most provisions of FCRA; several  provisions of GLBA; and the prohibition of unfair, deceptive, or abusive  acts or practices under the Dodd-Frank Act. According to CFPB staff,  CFPB cannot enforce data security standards under these statutory  provisions or the FTC\u2019s implementing rules because CFPB does not have  authority to supervise for or enforce compliance with the GLBA\u2019s  safeguards provision or FCRA\u2019s red flags or records disposal  provisions.", "Since 2015, CFPB has had five public settlements with CRAs. Four of  these settlements included alleged violations of FCRA and three included  alleged violations of unfair, deceptive, or abusive practices provisions. For  example, in March 2017, CFPB settled with Experian for $3 million in civil  penalties for an alleged violation of FCRA and alleged deceptive acts or  practices. Experian marketed to consumers an \u201ceducational credit  score\u201d that the company claimed lenders used to make credit decisions.  CFPB alleged that lenders did not use these \u201ceducational credit scores\u201d  for this purpose, and that Experian violated FCRA\u2019s implementing  regulation by requiring consumers to view Experian advertisements  before obtaining a free credit report. In December 2015, CFPB levied a  fine of $8 million against another CRA\u2014Clarity Services, Inc.\u2014for  obtaining consumer reports without a permissible purpose in violation of  FCRA and failing to investigate consumer disputes. CFPB is also  continuing its investigation of Equifax\u2019s data breach.", "CFPB supervises the larger market participant CRAs (those with more  than $7 million in annual receipts from consumer reporting, as defined by  CFPB) and has the authority to examine these CRAs for compliance with  federal consumer financial protection laws. From 2015 through 2017,  CFPB examined several CRAs. Some of these examinations resulted in  findings of deficiencies related to data accuracy and dispute processes,  and follow-up examinations were conducted as necessary. As part of its  supervisory role, CFPB also periodically monitors the nationwide CRAs  by requesting information on their activities and identifying any changes in  risk to consumers and the market. CFPB uses this information to learn of  changes to a CRA\u2019s compliance, personnel, issues raised by the CRA\u2019s  internal audits, or other developments that might affect CFPB\u2019s strategy  for supervising the CRA."], "subsections": []}, {"section_title": "CFPB May Not Be Identifying All CRAs under Its Supervisory Authority", "paragraphs": ["CFPB has examined several larger market participant CRAs, but may not  be identifying all CRAs that meet the $7 million threshold. CFPB staff told  us that as of October 2018, they were tracking between 10 and 15 CRAs  that might qualify as larger market participants (as defined by CFPB).  CFPB staff told us that they believe the CRA market is highly  concentrated and there were not likely to be many larger market  participants beyond the 10 to 15 they are tracking. However, CFPB staff  said that the 10 to 15 CRAs may not comprise the entirety of larger  market participants because whether CRAs meet the threshold may vary  from year to year and CFPB has limited data to determine whether CRAs  meet the threshold. Specifically, CFPB staff said that identifying additional  larger market participant CRAs can be challenging. For example, the  Securities and Exchange Commission does not require nonpublicly  traded CRAs to file financial and other information that CFPB could  otherwise use to identify these CRAs, which are generally not widely  known to the public. In addition, CFPB staff said they do not ask CRAs to  provide their annual receipts, with the exception of the specific CRAs  being considered for examination in a given year, because CFPB staff  said calculating these receipts could create an additional cost to the  companies.", "Our January 2009 report on reforming the U.S. financial regulatory  structure noted that regulators should be able to identify institutions and  products that pose risks to the financial system, and monitor similar  institutions consistently. One method for identifying institutions for  oversight, particularly where data are limited, is to require companies to  register with the relevant regulator. For example, among other  requirements, insured depository institutions must obtain a charter to  operate, and money services businesses generally must register with the  Financial Crimes Enforcement Network. Similarly, CFPB could identify  CRAs that meet the larger market participant threshold by requiring such  businesses to register with them, subject to a rulemaking process and  cost-benefit analysis of the burden it could impose on the industry.   Another method CFPB could use to identify CRAs and inform its oversight  activities would be to leverage information collected by states.  Stakeholders we spoke with cited New York and Maine as examples  where CRAs are required to register with the state. Implementing  strategies such as registration or leveraging existing information could be  a cost-effective way for CFPB to identify all CRAs under its authority.  Identifying additional sources of information on the population of larger  market participant CRAs\u2014including those that are lesser-known, possibly  unknown to CFPB, and possibly in possession of large amounts of  sensitive consumer information\u2014could help ensure that CFPB has more  comprehensive information for carrying out its supervisory  responsibilities."], "subsections": []}, {"section_title": "CFPB\u2019s Prioritization of CRA Examinations Does Not Specifically Account for Data Security Risk", "paragraphs": ["To determine which product lines, institutions, and compliance issues to  examine, CFPB determines the institutions (for example, banks, credit  unions, non-bank mortgage servicers, and CRAs) and the consumer  product lines that pose the greatest risk to consumers, and prioritizes  these for examinations annually (see fig.2). CFPB segments the  consumer product market into institution product lines, or specific  institutions\u2019 offerings of consumer product lines. CFPB then assesses  each institution product line\u2019s risk to consumers at the market level and  institutional level. To assess risk at the market level, CFPB considers  market size and other factors that contribute to market risk. Market size  includes a consideration of a product\u2019s market size relative to other  consumer finance product markets. Other market risk factors include the  potential risk to consumers from new or existing products offered in the  market as well as emerging risks and trends in consumer financial  products. For example, CFPB noted that a market may be considered  higher risk if consumers cannot choose the provider of a financial product  or service in that market, or if the transactions occur between two  businesses rather than between a business and consumers. Because  they do not face the same risk of losing customers as companies in other  markets, companies in higher-risk markets may not have the same  financial incentives to protect the interests of consumers.", "To assess risk at the institution level, CFPB considers an institution\u2019s  market share within a product line, as well as field and market  intelligence. An institution\u2019s market share correlates with the number of  consumers who could be affected by that institution\u2019s practices; therefore,  CFPB generally places a higher priority on larger providers of products.  Field and market intelligence includes quantitative and qualitative  information on an institution\u2019s operations for a given product line,  including the strength of its compliance management systems, the  number of regulatory actions directed at the institution, findings from prior  CFPB examinations, information obtained from CFPB\u2019s quarterly  monitoring of institutions, public reports, and the number and severity of  consumer complaints CFPB has received about the institution. Field and  market intelligence can also include information about an institution\u2019s fair  lending practices and its ability to provide fair, equitable, and  nondiscriminatory access to credit.", "Taking market and institutional considerations together, CFPB places  institution product lines into tiers based on its determination of their  relative risk to consumers. These risk tiers range from 1 to 5, with 1 being  the lowest risk and 5 being the highest risk. Risk tiers then feed into  CFPB\u2019s development of its supervision strategy, which includes other  information, including information from subject matter experts and recent  legal and policy decisions that could affect examinations, and  consultations with internal stakeholders. CFPB uses both the risk tiers  and information from its supervision strategy to identify potential  institutions for examination. Following this process, CFPB has regularly  determined CRAs\u2019 consumer reporting to be a high priority for  examination since it began supervising them in 2012.", "After identifying institution product lines to examine, CFPB determines  specific areas of compliance to assess. These determinations are made  by considering sources such as consumer complaints, public filings and  reports, and past examination findings related to the same or similar  products or institutions. Most recently, CFPB examinations of CRA\u2019s  consumer reporting have focused on issues such as data accuracy,  dispute processes, compliance management, and permissible purposes.", "Although CFPB\u2019s examination prioritization incorporates several important  factors and sources, the process does not routinely include assessments  of data security risk, such as how institutions detect and respond to cyber  threats. According to CFPB staff, the agency\u2019s process for determining  risk tiers incorporates the risk factors specifically cited in the Dodd-Frank  Act, including those related to the size of a product market. The Act also  states that CFPB should consider other factors it determines to be  relevant; as such, CFPB staff noted that certain elements of data  protection have been included in the scope of some of its past CRA  examinations. For example, CFPB staff said that in assessing compliance  with FCRA\u2019s permissible purposes provision, the examination scope  would include ensuring that data are not improperly shared. CFPB staff  noted that the bureau cannot examine for compliance with or enforce the  data security standards in provisions of GLBA and FCRA or FTC\u2019s  implementing rules, even at larger participant CRAs. After the Equifax  breach, however, CFPB used its existing supervisory authority to develop  internal guidelines for examining data security, and conduct some CRA  data security examinations. CFPB staff said that they do not routinely  consider data security risks during their examination prioritization process  and have not reassessed the process to determine how to incorporate  such risks going forward.", "The Dodd-Frank Act requires CFPB, when implementing its risk-based  supervision program, to consider risks posed to consumers in the relevant  product and geographic markets. In addition, federal internal control  standards state that agencies should identify, analyze, and respond to  risks related to achieving defined objectives. This can entail considering  all significant internal and external factors to identify risks and their  significance, including magnitude of impact, likelihood of occurrence,  nature of the risk, and appropriate response. In light of the Equifax  breach, as well as CFPB\u2019s acknowledgment of the CRA market as a  higher-risk market for consumers, it is important for CFPB to routinely  consider factors that could inform the extent of CRA data security risk  such as the number of consumers that could be affected by a data  security incident and the nature of potential harm resulting from the loss  or exposure of information.", "CFPB\u2019s reliance primarily on consumer complaints, information from  public filings, and information and findings from past examination for  prioritizing examinations may not fully detect data security risks that  CRAs pose. Data accuracy and dispute resolution feature prominently in  consumer complaints, according to CFPB staff, because consumers  mostly interact with CRAs in these contexts. But consumers likely did not  know, for example, about Equifax\u2019s data security challenges prior to its  breach, so that vulnerability was not a focus of complaints. While the  three nationwide CRAs acknowledged the risk of data breaches in recent  public filings, other larger participant CRAs may not be publicly traded  and therefore may not have public filings. Further, if CFPB\u2019s past  examinations have not addressed data security, the agency cannot use  those past examination findings to target current risks.", "The Equifax breach demonstrated the vulnerability that CRAs may face  with regard to data security. We have noted that advancements in  technology, combined with the increasing sophistication of hackers and  others with malicious intent, have increased the risk of sensitive personal  information being exposed and compromised. We have also reported  that rapid developments in new technologies will continue to pose new  threats to security, privacy, and safety. In recent years, insured  depository institutions\u2014which, like CRAs, maintain large amounts of  sensitive consumer data\u2014have been subject to regular information  technology examinations, which, according to one regulator, may include  a cybersecurity component. Banking regulators have noted that  unauthorized access to the information and systems that support these  institutions can affect operations, pose risk to consumers through  exposure of private information, and undermine consumer confidence.", "The risks may be similar for CRAs\u2014companies that by definition also  maintain extensive amounts of sensitive consumer information. By  including routine consideration of data security risks into its process for  prioritizing CRA examinations, CFPB can better ensure that its  supervision of CRAs proactively detects such risks and helps prevent the  further exposure or compromise of consumer information."], "subsections": []}]}, {"section_title": "Regulators Inform Consumers about Protections Available and Consumers Can Take Some Actions after a CRA Data Breach FTC and CFPB Provide Consumers with Information on How to Address Identity Theft Risk", "paragraphs": ["FTC and CFPB provide educational information for consumers on ways to  mitigate the risk of identity theft. For example, FTC has a dedicated  website (IdentityTheft.gov) that allows consumers to report suspected  identity theft to FTC and develop and implement a recovery plan. In  addition, FTC offers businesses guidance on steps to take in the event of  a data breach, including notification of relevant parties and a model  notification letter. CFPB\u2019s website offers consumers tips on how to protect  their information and spot identity theft. CFPB also publishes a  consumer guide that lists CRAs and their websites, and ways to obtain  free credit reports.", "After a breach, FTC and CFPB publish information specific to that breach.  For example, shortly after Equifax\u2019s announcement of the breach, FTC  published information on when the breach occurred, the types of data  compromised, and links to additional information on Equifax\u2019s website.  Similarly, CFPB released three blog posts and several social media posts  shortly after Equifax\u2019s public announcement of the breach. These  included information on ways that consumers could protect themselves in  the wake of the breach and special protections and actions for service  members."], "subsections": [{"section_title": "Consumers Have Options to Mitigate Identity Theft Risk and Respond to Breaches", "paragraphs": ["At any time, consumers can take actions to help mitigate identity theft  risk. For example, consumers can implement a credit freeze free of  charge, which can help prevent new-account fraud by restricting potential  creditors from accessing the consumer\u2019s credit report. Similarly,  implementing a free fraud alert with a credit bureau can help prevent  fraud because it requires a business to verify a consumer\u2019s identity before  issuing credit. Consumers also can monitor their credit report for  suspicious activity, either through self-review or by using a free or paid  credit monitoring service. FTC and others recommend that consumers  regularly review their credit card and bank statements to detect fraudulent  charges.", "Consumers whose data have been compromised in any data breach can  file a complaint with FTC or CFPB. FTC has an online \u201ccomplaint  assistant,\u201d and FTC staff told us they use consumer complaints to help  inform their investigatory and enforcement activity. CFPB staff told us that  they use consumer complaints to help prioritize examinations and inform  enforcement activity. In the 6 months following Equifax\u2019s announcement  of its data breach, CFPB received more than 20,000 consumer  complaints about the impact of the breach or Equifax\u2019s response.", "However, consumers are limited in the direct actions they can take  against a CRA in the event of a data breach, for two primary reasons.  First, consumers generally cannot trace the source of the data used to  commit identity theft to a particular breached entity. As a result, it can be  difficult to link a breach by a CRA (or any other entity) to the harm a  consumer suffers from a particular incidence of identity theft, which may  make it challenging to prevail in a legal action. Second, unlike with many  other products and services, consumers generally cannot exercise choice  if they are dissatisfied with a CRA\u2019s privacy or security practices.  Specifically, consumers cannot choose which CRAs maintain information  about them. In addition, consumers do not have a legal right to delete  their records with CRAs, according to CFPB staff, and therefore cannot  choose to remove themselves entirely from the CRA market.", "FTC and CFPB have noted that the level of consumer protection required  can depend on the consumer\u2019s ability to exercise choice in a marketplace.  For example, when determining whether a practice constitutes an unfair  practice, FTC considers whether the practice is one that consumers could  choose to avoid. Similarly, according to CFPB staff, the consumer  reporting market may pose higher risk to consumers because consumers  cannot choose whether or which CRAs possess and sell their information."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The 2017 data breach of Equifax highlighted the data security risks  associated with CRAs. While companies in many industries have  experienced data breaches, CRAs may present heightened risks because  of the scope of sensitive information they possess and because  consumers have very limited control over what information CRAs hold  and how they protect it. These challenges underscore the importance of  appropriate federal oversight of CRAs\u2019 data security.", "While FTC has taken significant enforcement actions against CRAs that  have violated federal privacy or data security laws, it is important that the  agency have all of the appropriate enforcement options to fulfill its  mission of protecting consumers. However, GLBA, one of the key laws  governing the security of consumer information, does not provide FTC  with civil penalty authority. The remedies that FTC does have available  under GLBA\u2014such as disgorgement and consumer redress\u2014may be  less practical enforcement tools for violations involving breaches of mass  consumer data. Accordingly, providing FTC with civil penalty authority can  enable it to more effectively or efficiently enforce GLBA\u2019s privacy and  safeguarding provisions.", "Although CFPB is responsible for overseeing larger market participant  CRAs, it lacks the data to identify with certainty all the CRAs under its  supervision, in part because the sources it is using, such as public filings,  are not comprehensive. Using additional methods to obtain information,  such as requiring larger market participant CRAs to register with the  agency or leveraging state registration information, would help CFPB  ensure it is tracking all CRAs under its supervision and is providing  appropriate oversight.", "CFPB considers a number of market and institutional factors in prioritizing  which CRAs to examine, but data security has not routinely been among  these factors. Given the nature and amount of consumer information  CRAs hold, as well as increasing threats from hackers and others with  malicious intent, vulnerabilities in these companies\u2019 data security can  pose significant risk to a vast number of consumers. By ensuring that its  process for determining the scope of CRA examinations routinely  includes factors that would detect data security risks, CFPB can better  ensure the effectiveness of its supervision and help prevent further  exposure or compromise of consumer information."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider providing the Federal Trade Commission with  civil penalty authority for the privacy and safeguarding provisions of the  Gramm-Leach-Bliley Act to help ensure that the agency has the tools it  needs to most effectively act against data privacy and security violations.  (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to CFPB:  The Director of CFPB should identify additional sources of information,  such as through registering CRAs or leveraging state information, that  would help ensure the agency is tracking all CRAs that meet the larger  participant threshold. (Recommendation 1)", "The Director of CFPB should assess whether its process for prioritizing  CRA examinations sufficiently incorporates the data security risks CRAs  pose to consumers, and take any needed steps identified by the  assessment to more sufficiently incorporate these risks.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to CFPB, the Board of Governors of the  Federal Reserve System, the Federal Deposit Insurance Corporation,  FTC, and the Office of the Comptroller of the Currency. All of the  agencies provided technical edits, which we incorporated as appropriate.  In addition, we received written comments from CFPB, which are  reprinted in appendix II.", "CFPB neither agreed nor disagreed with our recommendations.  Regarding our recommendation that it identify additional sources of  information that would help ensure that it is tracking all CRAs that meet  the larger market participant threshold, CFPB noted that it cannot require  CRAs to register with the bureau without first undertaking a rulemaking.  While we acknowledge the challenges of tracking larger participant CRAs,  we maintain that CFPB should be able to identify and monitor them  consistently. In its letter, CFPB stated that this may be feasible. The  agency noted that, short of rulemaking, there may be cost-effective ways  to better ensure that it is appropriately tracking larger participant CRAs  and added that they intend to track these CRAs by exploring ways to  leverage state registration information. These actions, if fully  implemented, would meet the intent of our recommendation.", "With respect to the recommendation that CFPB assess whether its  process for prioritizing CRA examinations sufficiently incorporates data  security risks, CFPB said it will continue to evaluate risks to consumers,  including data security risks, as part of its prioritization process. CFPB  also said it will assess whether that process should incorporate data  security risks CRAs pose to consumers. However, CFPB expressed  concern with the scope of its statutory authority, such as its lack of  authority to supervise for compliance with GLBA safeguard provisions.", "CFPB noted that we did not adequately consider or discuss its limited  statutory authority in the area of data security. Specifically, CFPB stated  that it does not have authority to supervise for, enforce compliance with,  or write regulations implementing GLBA\u2019s safeguards provisions or  FCRA\u2019s records disposal provision. In response, we added language in  the report to clarify CFPB\u2019s lack of certain authorities over these data  security provisions. Nonetheless, as we discuss in the report, CFPB has  conducted data security examinations of some CRAs under its existing  authority, including its authority to assess compliance with the  requirements of federal consumer financial law. We continue to believe  that effective supervision of CRAs and the protection of consumer  information require that CFPB consider data security risks in its  prioritization of CRA examinations.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, CFPB, the Board of Governors of the Federal  Reserve System, the Federal Deposit Insurance Corporation, FTC, and  the Office of the Comptroller of the Currency. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Michael Clements at (202) 512-8678 or clementsm@gao.gov, or Nick  Marinos at (202) 512-9342 or marinosn@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) the federal laws and regulations  governing consumer reporting agencies\u2019 (CRA) collection, use, and  protection of consumer information; (2) measures the Federal Trade  Commission (FTC) has taken to enforce CRA compliance with  requirements to protect consumer information; (3) measures the  Consumer Financial Protection Bureau(CFPB) has taken to ensure that  CRAs protect consumer information; and (4) FTC\u2019s and CFPB\u2019s roles in  assisting consumers following a data breach and actions consumers can  take following a data breach of a CRA.", "To examine the laws governing CRAs, we identified the relevant laws,  including the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, and  statutes related to unfair or deceptive acts or practices. We reviewed  these laws for their application to CRAs and their collection, use, and  protection of consumer information. We interviewed representatives of  relevant federal agencies, including CFPB and FTC, about these laws  and regulations and how they apply to CRAs. We also reviewed  documents from and interviewed federal banking regulators on their role  in overseeing financial institutions\u2019 management of third-party risk,  including those of CRAs. We selected four states with existing or  proposed information protection laws or regulations that vary from federal  requirements (California, Illinois, Massachusetts, and New York);  reviewed related documentation; and interviewed Attorneys General from  these states about their enforcement of state laws. In addition, we  interviewed and reviewed documentation from the three nationwide CRAs  and interviewed three other CRAs that produce or compile consumer  reporting information. We selected these CRAs because they are not  sector-specific and hold information on a broad segment of the  population. We conducted a site visit to Equifax\u2019s Alpharetta, Georgia  data center to learn more about steps the company takes to comply with  relevant consumer protection laws. We also interviewed representatives  of furnishers and users of CRA consumer information\u2014the American  Bankers Association, the Property Casualty Insurance Association of  America, and the National Retail Federation\u2014about their roles in the  collection, use, and protection of consumer data, and steps their  members take to comply with relevant laws.", "To assess FTC\u2019s and CFPB\u2019s measures to enforce information protection  provisions and to ensure CRAs\u2019 proper collection, use, and protection of  consumer information, we reviewed agency documentation and  interviewed agency officials on their oversight activities. We reviewed the  types of enforcement actions available to FTC and CFPB for violations of  laws related to consumer reporting, as well as specific enforcement  actions these agencies have brought against CRAs, data furnishers, and  users of consumer reports. We also interviewed agency staff about FTC  enforcement actions against CRAs and how it determines when to pursue  such actions. We reviewed CFPB documentation on the scope of its  supervisory examinations of larger market participant CRAs since 2015,  as well as findings from recent CRA examinations. In addition, we  reviewed CFPB examination guidance for supervising these CRAs,  including CFPB\u2019s internal guidelines for conducting data security  examinations. We also reviewed documents related to CFPB\u2019s process  for prioritizing which institutions and which product lines (specific product  offerings) should receive supervisory examination, and we interviewed  CFPB staff about this process. Finally, we interviewed representatives of  industry, consumer, and privacy groups for their views on the supervision  of CRAs. These included the three nationwide CRAs, three other CRAs,  the Consumer Data Industry Association, National Consumer Law Center,  Consumer Federation of America, Consumers Union, World Privacy  Forum, ID Theft Resource Center, and Consumer Action.", "To assess FTC and CFPB roles in assisting consumers, and actions  consumers can take following a data breach of a CRA, we reviewed the  two agencies\u2019 efforts to inform and educate consumers following  breaches. Specifically, we reviewed consumer education materials on  FTC\u2019s and CFPB\u2019s websites related to data breaches and identify theft in  general, as well as specific information posted after the Equifax data  breach. We also interviewed staff from these agencies about their roles in  assisting consumers following a breach. To identify actions consumers  can take following a data breach, we reviewed our prior related reports  and spoke with representatives of the industry and consumer  representatives noted above.", "We conducted this performance audit from November 2017 to February  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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Bureau of Consumer Financial Protection", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "GAO Staff Acknowledgments:", "paragraphs": ["In addition to the individuals named above, John de Ferrari and John  Forrester (Assistant Directors); Winnie Tsen (Analyst-in-Charge), Bethany  Benitez, Kavita Daitnarayan, Farrah Graham, Andrea Harvey, Thomas  Johnson, Tovah Rom, Rachel Siegel, Jena Sinkfield, and Tina Torabi  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Consumer reporting agencies are companies that collect, maintain, and sell vast amounts of sensitive data. In 2017, a breach at Equifax, one of the largest of these companies, compromised at least 145.5 million consumers' data.", "Consumers have little control over what information these companies have, so federal oversight is important\u2014and it could be improved. For example, the Consumer Financial Protection Bureau doesn't routinely consider data security risk when prioritizing its examinations of these companies.", "We recommended improving federal enforcement of data safeguards and oversight of these companies' security practices."]}
{"id": "GAO-18-277T", "url": "https://www.gao.gov/products/GAO-18-277T", "title": "NASA: Preliminary Observations on the Management of Space Telescopes", "published_date": "2017-12-06T00:00:00", "released_date": "2017-12-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Acquisition management has been a long-standing challenge at NASA, although GAO has reported on improvements the agency has made in recent years. Three space telescope projects are the key enablers for NASA to achieve its astrophysics' science goals, which include seeking to understand the universe. In its fiscal year 2018 budget request, NASA asked for about $697 million for these three projects, which represents over 50 percent of NASA's budget for its astrophysics' major projects. In total, these projects represent an expected investment of at least $12.4 billion.", "This statement reflects preliminary observations on (1) the current status and cost of NASA's major telescope projects and (2) lessons learned that can be applied to NASA's management of its telescope projects. This statement is based on ongoing work on JWST and ongoing work on the status of NASA's major projects. Both reports are planned to be published in Spring 2018. This statement is also based on past GAO reports on JWST and NASA's acquisitions of major projects, and NASA input."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Aeronautics and Space Administration's (NASA) current portfolio of major space telescopes includes three projects that vary in cost, complexity, and phase of the acquisition life cycle.", "GAO's ongoing work indicates that these projects are each making progress in line with their phase of the acquisition cycle but also face some challenges. For example, the current launch date for the James Webb Space Telescope (JWST) project reflects a 57-60-month delay from the project's original schedule. GAO's preliminary observations indicate this project still has significant integration and testing to complete, with very little schedule reserve remaining to account for delays. Therefore, additional delays beyond the delay of up to 8 months recently announced are likely, and funding available under the $8 billion Congressional cost cap for formulation and development may be inadequate.", "There are a number of lessons learned from its acquisitions that NASA could consider to increase the likelihood of successful outcomes for its telescope projects, as well as for its larger portfolio of projects, such as its human spaceflight projects. For example, twice in the history of the JWST program, independent reviews found that the program was not holding adequate cost and schedule reserves. GAO has found that NASA has not applied this lesson learned to all of its large projects, and similar outcomes to JWST have started to emerge. For example, NASA did not incorporate this lesson with its human spaceflight programs. In July 2016 and April 2017, GAO found that these programs were holding inadequate levels of cost and schedule reserves to cover unexpected cost increases or delays. In April 2017, GAO recommended that NASA reassess the date of the programs' first test flight. NASA concurred and, in November 2017, announced a launch delay of up to 19 months."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations in this statement, but has made recommendations in prior reports to strengthen NASA's acquisition management of its major projects. NASA has generally agreed with GAO's recommendations and taken steps to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the National Aeronautics and  Space Administration\u2019s (NASA) management of its astrophysics\u2019 space  telescope projects. These telescopes are the key enablers for the agency  to achieve its astrophysics\u2019 science goals, which include seeking to  understand the universe and our place in it. These major space telescope  projects\u2014projects with a life cycle cost greater than $250 million\u2014 include:  the James Webb Space Telescope (JWST), which is designed to help  understand the origin and destiny of the universe, the creation and  evolution of the first stars and galaxies, and the formation of stars and  planetary systems;  the Transiting Exoplanet Survey Satellite (TESS), whose mission goal  is to discover exoplanets\u2014or planets in other solar systems\u2014during  transit, the time when the planet\u2019s orbit carries it in front of its star as  viewed from Earth; and  the Wide-Field Infrared Survey Telescope (WFIRST), which is  designed to perform wide-field imaging and survey of the near- infrared sky to answer questions about the structure and evolution of  the universe and expand our knowledge of planets beyond our solar  system.", "In its fiscal year 2018 budget request, NASA asked for about $697 million  for these three projects, which represents over 50 percent of NASA\u2019s  budget for its astrophysics\u2019 projects. In total, these projects represent an  expected investment of at least $12.4 billion. As such, while it is important  for NASA to continually stretch technological boundaries to further  scientific research, it is also important to manage these projects  prudently, with clear accountability and oversight for taxpayer dollars.", "For over two decades, acquisition management has been a long-standing  challenge at NASA, although we have reported on improvements the  agency has made in recent years. We first designated NASA\u2019s acquisition management as a high-risk area in 1990 in view of NASA\u2019s  history of persistent cost growth and schedule slippage in the majority of  its major systems. Our work has identified a number of causal factors  related to these issues, including poor cost estimating and  underestimation of risks associated with the development of its major  systems. We have also identified a set of best practices that can help  agencies manage development risks. NASA leadership has made  concerted efforts to address these causal factors. In our February 2017  High Risk Update, however, we found that more needs to be done with  respect to anticipating and mitigating risks\u2014especially with regard to  large programs, estimating and forecasting costs for its largest projects,  and implementing management tools.", "My statement today provides our preliminary observations on (1) the  current status and cost of NASA\u2019s major telescope projects and (2)  lessons learned that can be applied to NASA\u2019s management of its  telescope projects. This statement is based on our ongoing work for this  committee and others on the JWST project and our annual review of the  status of all of NASA\u2019s major projects, as well as our February 2017 High-  Risk Update and other past reports. To assess the cost and schedule  performance of these projects, we collected information on these areas  from projects using a data collection instrument, analyzed projects\u2019  monthly status reports, interviewed NASA project and headquarters  officials, and reviewed project documentation. For JWST and TESS,  which are in the implementation phase, we compared current cost and  schedule estimates to their original cost and schedule baselines. To  identify lessons learned that can be applied to NASA\u2019s management of its  telescope projects, we examined NASA\u2019s efforts to address issues  identified in our prior JWST work, such as the quality of the cost and  schedule risk analyses, and our February 2017 High-Risk Update.", "We are conducting the work on which this statement is based in  accordance with generally accepted government auditing standards. We  plan to issue a final report on our annual review of the JWST program, as  well as our annual assessment of NASA\u2019s major projects, in Spring 2018.  NASA provided us technical comments on information that is included in  this statement on the telescope projects, which we incorporated as  appropriate."], "subsections": [{"section_title": "Background", "paragraphs": ["NASA\u2019s mission is to drive advances in science, technology, aeronautics,  and space exploration, and contribute to education, innovation, our  country\u2019s economic vitality, and the stewardship of the Earth. To  accomplish this mission, NASA establishes programs and projects that  rely on complex instruments and spacecraft. NASA\u2019s portfolio of major  projects ranges from space satellites equipped with advanced sensors to  study the Earth to a telescope intended to explore the universe to  spacecraft to transport humans and cargo to and beyond low-Earth orbit.  Some of NASA\u2019s projects are expected to incorporate new and  sophisticated technologies that must operate in harsh, distant  environments.", "The life cycle for NASA space flight projects consists of two phases\u2014 formulation, which takes a project from concept to preliminary design, and  implementation, which includes building, launching, and operating the  system, among other activities. NASA further divides formulation and  implementation into phase A through phase F. Major projects must get  approval from senior NASA officials at key decision points before they  can enter each new phase. Figure 1 depicts NASA\u2019s life cycle for space  flight projects.", "Formulation culminates in a review at key decision point C, known as  project confirmation, where cost and schedule baselines are established  and documented in a decision memorandum. To inform those baselines,  each project with a life-cycle cost estimated to be greater than $250  million must also develop a joint cost and schedule confidence level  (JCL). The JCL initiative, adopted in January 2009, is a point-in-time  estimate that, among other things, includes all cost and schedule  elements, incorporates and quantifies known risks, assesses the impacts  of cost and schedule to date, and addresses available annual resources.  NASA policy requires that projects be baselined and budgeted at the 70  percent confidence level.", "The agency baseline commitment established at key decision point C  includes cost and schedule reserves held at the project\u2014those within the  project manager\u2019s control\u2014and NASA headquarters level. Cost reserves are for costs that are expected to be incurred\u2014for instance, to address  project risks\u2014but are not yet allocated to a specific part of the project.  Schedule reserves are extra time in project schedules that can be  allocated to specific activities, elements, and major subsystems to  mitigate delays or address unforeseen risks."], "subsections": []}, {"section_title": "Status of NASA\u2019s Major Telescope Projects", "paragraphs": ["NASA\u2019s current portfolio of major space telescopes includes three  projects\u2014WFIRST, TESS, and JWST\u2014that vary in cost, complexity, and  phase of the acquisition life cycle. WFIRST, a project that entered the  concept and technology development phase and established preliminary  cost and schedule estimates in February 2016, is in the earliest stages of  the acquisition life cycle. With preliminary cost estimates ranging from  $3.2 billion to $3.8 billion, this project is an observatory designed to  perform wide-field imaging and survey of the sky at near-infrared  wavelengths to answer questions about the structure and evolution of the  universe and to expand our knowledge of planets beyond our solar  system. The current design includes a 2.4 meter telescope that was built  and qualified for another federal agency over 10 years ago; the project is  evaluating which components to reuse and which to modify, refurbish, or  build new. TESS\u2014a smaller project whose latest cost estimate is  approximately $337 million\u2014is targeted to launch in March 2018 and will  be used to conduct the first extensive survey of the sky from space for  transiting exoplanets.", "And finally, JWST, with a life-cycle cost estimate of $8.835 billion, is one  of NASA\u2019s most complex projects and top priorities. The telescope is  designed to help understand the origin and destiny of the universe, the  creation and evolution of the first stars and galaxies, and the formation of  stars and planetary systems. With a 6.5-meter primary mirror, JWST is  expected to operate at about 100 times the sensitivity of the Hubble  Space Telescope. JWST\u2019s science instruments are to detect very faint  infrared sources and, as such, are required to operate at extremely cold  temperatures. To help keep these instruments cold, a multi-layered  tennis-court-sized sunshield is being developed to protect the mirrors and  instruments from the sun\u2019s heat.", "We have reported for several years on the JWST project, which has  experienced significant cost increases and schedule delays. Prior to  being approved for development, cost estimates for JWST ranged from  $1 billion to $3.5 billion, with expected launch dates ranging from 2007 to  2011. Before 2011, early technical and management challenges,  contractor performance issues, low levels of cost reserves, and poorly  phased funding levels caused JWST to delay work after confirmation,  which contributed to significant cost and schedule overruns, including  launch delays. The Chair of the Senate Subcommittee on Commerce,  Justice, Science, and Related Agencies requested from NASA an  independent review of JWST in June 2010. In response, NASA  commissioned the Independent Comprehensive Review Panel, which  issued its report in October 2010. The panel concluded that JWST was  executing well from a technical standpoint, but that the baseline cost  estimate did not reflect the most probable cost with adequate reserves in  each year of project execution, resulting in an unexecutable project.", "Following this review, Congress in November 2011 placed an $8 billion  cap on the formulation and development costs for the project and NASA  rebaselined JWST with a life-cycle cost estimate of $8.835 billion that  included additional money for operations and a planned launch in October  2018. The new baseline represented a 78 percent increase to the  project\u2019s life-cycle cost from the original baseline and a launch date in  October 2018, a delay of 52 months. The revised life-cycle cost estimate  included a total of 13 months of funded schedule reserve.", "Our ongoing work indicates that these three projects are each making  progress in line with their phase of the acquisition cycle, but also face  challenges in execution. Some of these challenges are unique to the  projects themselves and some are common among the projects in  NASA\u2019s portfolio. For example, when projects enter the integration and  test phase, unforeseen challenges can arise and affect the cost and  schedule for the project. Table 1 provides more details about the current  acquisition phase, cost, and schedule status of NASA\u2019s major space  telescope projects based on our ongoing work.", "WFIRST. NASA\u2019s preliminary cost and schedule estimates for the  WFIRST project are currently under review as the project responds to  findings in the WFIRST Independent External  Technical/Management/Cost Review. This independent review was  conducted to ensure the mission\u2019s scope and required resources are well  understood and executable. NASA initiated this review in April 2017 to  address the National Academies\u2019 concerns that WFIRST cost growth  could endanger the balance of NASA\u2019s astrophysics program and  negatively affect other scientific priorities. The review found that the  mission scope is understood, but not aligned with the resources provided  and concluded that the mission is not executable without adjustments  and/or additional resources. For example, the study team found that  NASA\u2019s current forecasted funding profile for the WFIRST project would  require the project to slow down activities starting in fiscal year 2020,  which would result in an increase in development cost and schedule.  NASA agreed with the study team\u2019s results and directed the project to  reduce the cost and complexity of the design in order to maintain costs  within the $3.2 billion cost target.", "The project is currently identifying potential ways to reduce the scope of  planned activities (called \u201cdescopes\u201d), assessing the science impact of  those descopes, and then developing recommendations for the  Astrophysics Division leadership. An example of a descope that may be  considered is the requirement for WFIRST to be \u201cstar-shade ready,\u201d  which means the design must be compatible with a star-shade device that  is positioned between it and the star being observed to block out starlight  while allowing the light emitted by the planet through.", "TESS. The TESS project is currently holding cost and schedule reserves  consistent with NASA center requirements, but there are no longer  headquarters-held cost reserves to cover a delay if the project cannot  launch as planned in March 2018. According to a project official, the  project is holding 16 days of schedule reserve to its target March 2018  launch readiness date, which includes 6 days for the completion of  integration and test, and 10 days for launch operations. The project  previously used schedule reserves to accommodate the delayed delivery  of its Ka-band transmitter, which is essential for TESS as it transmits the  mission data back to Earth, due to continued performance and  manufacturing issues. The two main risks to the March 2018 launch date  are if: 1) SpaceX requires additional time past December 2017 for  NASA\u2019s Launch Services Program to certify that TESS can fly on its  upgraded launch vehicle\u2014certification is necessary because it will be the  first time that NASA will use this version of the vehicle\u2014and 2) any issues  are identified during the remainder of environmental testing.", "The project is also conducting additional testing on its spare camera at  temperatures seen in space to better understand expected camera  performance on orbit. TESS will use four identical, wide field-of-view  cameras to conduct the first extensive survey of the sky from space for  transiting exoplanets. However, during thermal testing, the project found  that the substance attaching the lenses to the camera barrel places  pressure on the lenses and causes the cameras to be slightly out of  focus. In June 2017, NASA directed the project to proceed with  integrating the cameras\u2014as they are expected to meet TESS\u2019s top level  science requirements even with the anomaly. At its most recent key  decision review in August 2017, NASA reallocated $15 million of TESS\u2019s  headquarters-held reserves to the WFIRST project. While this had the  effect of decreasing life cycle costs for TESS, it also increased risk as the  project no longer has any additional headquarters-held cost reserves to  cover a launch delay past March 2018.", "JWST. The JWST project continues to make progress towards launch,  but the program is encountering technical challenges that require both  time and money to fix and may lead to additional delays, beyond a delay  recently announced. While the project has made much progress on  hardware integration and testing over the past several months, it also  used all of its remaining schedule reserves to address various technical  issues, particularly on the spacecraft element. In September 2017, the  JWST project requested from the European Space Agency\u2014who will  contribute the Ariane V launch vehicle\u2014a launch window from March to  June 2019, or 5 to 8 months later than the planned October 2018 launch  readiness date, established in 2011. The project based this request on  the results of a schedule risk assessment that incorporated inputs from  the contractor on expected durations of ongoing spacecraft element  integration work and other challenges that were expected to increase  schedule.", "With the later launch window to June 2019, the project expected to have  up to 4 months of new schedule reserves. However, shortly after  requesting the revised launch window, the project learned from its  contractor that up to another 3 months of schedule reserve use is likely,  due to lessons learned from conducting deployment exercises of the  sunshield, such as reach and access limitations on the flight hardware. As  a result, and pending further examination of the schedule, the project now  has approximately one month of schedule reserve to complete  environmental testing of the spacecraft element and the final integration  phase. The final integration phase is where the instruments and telescope  will be integrated with the spacecraft and sunshield to form the completed  observatory. As I previously noted, our work has shown the integration  and test is the riskiest phase of development, where problems are most  likely to be found and schedules slip. Given the risks associated with the  integration and test work ahead, coupled with a level of schedule  reserves that is currently well below the level stated in the procedural  requirements issued by the NASA center responsible for managing  JWST, additional delays to the project\u2019s revised launch readiness date of  June 2019 are likely. As a result, the funding available under the  Congressional cost cap of $8 billion may be inadequate as the contractor  will need to continue to retain higher workforce levels for longer than  expected to prepare the mission for a delayed launch."], "subsections": []}, {"section_title": "Lessons Learned from NASA Acquisitions", "paragraphs": ["As Congress, NASA, and the science community consider future  telescope efforts, it will be exceedingly important to shape and manage  new programs in a manner that minimizes cost overruns and schedule  delays. This is particularly important for the largest programs as even  small cost increases can have reverberating effects. NASA\u2019s telescope  and other science projects will always have inherent technical, design,  and integration risks because they are complex, specialized, and often  push the state of the art in space technology. But too often, our reports  find that management and oversight problems\u2014which can include poor  planning, optimistic cost estimating, funding gaps, lax oversight, and poor  contractor performance, among other issues\u2014are the real drivers behind  cost and schedule growth.", "To its credit, NASA has taken significant steps, partly in response to our  past recommendations, to reduce acquisition risk from both a technical  and management standpoint, including actions to enhance cost and  schedule estimating, provide adequate levels of reserves to projects,  establish better processes and metrics to monitor projects, and expand  the use of earned value management to better monitor contractor  performance. For example, in November 2012, we found that NASA  employee skill sets available to analyze and implement earned value  management vary widely from center to center, and we recommended  that NASA conduct an earned value management skills gap analysis to  identify areas requiring augmented capability across the agency, and,  based on the results of the assessment, develop a workforce training plan  to address any deficiencies. NASA concurred with this recommendation  and developed an earned value management training plan in 2014 based  on the results of an earned value management skills gap analysis that  was conducted in 2013. Moreover, in recent years, we have found that  many of the projects within the agency\u2019s major project portfolio have  improved their cost and schedule performance. Nevertheless, the extent  to which NASA has adopted some of the following lessons learned within  its portfolio of major projects is mixed, and NASA has an opportunity to  strengthen its program management of major acquisitions, including its  space telescopes, by doing so.", "Manage Cost and Schedule Performance for Large Projects to Limit  Implications for Entire Portfolio. In 2013, following JWST\u2019s cost  increases and schedule growth, we found that though cost and schedule  growth can occur on any project, increases associated with NASA\u2019s most  costly and complex missions can have cascading effects on the rest of  the portfolio. For example, we found that the JWST cost growth would  have reverberating effects on the portfolio for years to come and required  the agency to identify $1.4 billion in additional resources over fiscal years  2012 through 2017, according to Science Mission Directorate officials.  NASA identified approximately half of this required funding from the four  science divisions within the Science Mission Directorate account. The  majority of the cuts were related to future high priority missions, missions  in the operations and sustainment phase, and research and analysis.", "In essence, NASA had to mortgage future high priority missions and  research to address JWST\u2019s additional resource needs. Similarly, the  National Academy of Sciences has concluded in the past that it is  important for NASA to have a clearly articulated and consistently applied  method for prioritizing why and how its scarce fiscal resources are  apportioned with respect to the science program in general and on a  more granular level among component scientific disciplines. The  academy noted that failure to do so could result in a loss of capacity,  capability, and human resources in a number of scientific disciplines and  technological areas that may take a generation or more to reconstitute  once eliminated. NASA\u2019s establishment of the WFIRST Independent  External Technical/Management/Cost Review that I previously discussed  is a step in the right direction to help ensure the Astrophysics Division  incorporates this lesson learned.", "Establish Adequate Cost and Schedule Reserves to Address Risks.  Twice in the history of the JWST program, independent reviewers found  that the program\u2019s planned cost reserves were inadequate. First, in April  2006, an Independent Review Team confirmed that the project\u2019s technical  content was complete and sound, but expressed concern over the  project\u2019s reserve funding, reporting that it was too low and phased in too  late in the development lifecycle. The review team reported that for a  project as complex as JWST, 25 to 30 percent total reserve funding was  appropriate. The team cautioned that low reserve funding compromised  the project\u2019s ability to resolve issues, address risk areas, and  accommodate unknown problems. As I previously mentioned, following  additional cost increases and schedule threats, NASA commissioned the  Independent Comprehensive Review Panel. In 2010, the panel again  concluded JWST was executing well from a technical standpoint, but that  the baseline cost estimate did not reflect the most probable cost with  adequate reserves in each year of project execution, resulting in an  unexecutable project.", "NASA heeded these lessons when it established a new baseline for  JWST in 2011. For example, the revised schedule included more  reserves than required by the procedural requirements issued by the  NASA center responsible for managing JWST. We have found, however,  that NASA has not applied this lesson learned to all of its large projects\u2014 most notably with its human spaceflight projects, including the Space  Launch System, Orion Crew Capsule, and associated ground systems\u2014 and similar outcomes to the JWST project have started to emerge with  these projects. We previously reported that all three of these programs  were operating with limited cost reserves, which limited each program\u2019s  ability to address risks and unforeseen technical challenges.", "For example, we found in July 2016 that the Orion program planned to  maintain very low levels of annual cost reserves until 2018. The lack of  available cost reserves in the near term led to the program deferring work  to address technical issues to stay within budget, and put the program\u2019s  future cost reserves at risk of being overwhelmed by deferred work. In  April 2017, we also found that all three programs faced development challenges in completing work, and each had little to no schedule reserve  remaining to the launch date\u2014meaning they would have to complete all  remaining work with minimal delay during the most challenging stage of  development. We found that it was unlikely that the programs would  achieve the planned launch readiness date and recommended that NASA  reassess the date. NASA agreed with this recommendation and stated  that it would establish a new launch readiness date. In November 2017,  NASA announced that a review of the possible manufacturing and  production schedule risks indicated a launch date of June 2020\u2014a delay  of 19 months\u2014but the agency will manage to a December 2019 launch  date because, according to NASA, they have put in mitigation strategies  for those risks. We will follow-up on those mitigation strategies as part of  future work on the human space exploration programs.", "Regularly and Consistently Update Project JCLs to Provide Realistic  Estimates to Decision Makers. In 2009, NASA began requiring that  programs and projects with estimated life-cycle costs greater than $250  million develop a JCL prior to project confirmation. This was a positive  step for NASA to help ensure that cost and schedule estimates are  realistic and projects are thoroughly planning for anticipated risks. This is  because a JCL assigns a confidence level, or likelihood, of a project  meeting its cost and schedule estimates. Our cost estimating best  practices recommend that cost estimates should be updated to reflect  changes to a program or be kept current as a program moves through  milestones. As new risks emerge on a project, an updated cost and  schedule risk analysis can provide realistic estimates to decision-makers,  including the Congress. This is especially true for NASA\u2019s largest projects  as updated estimates may require the Congress to consider a variety of  actions.", "However, there is no requirement for NASA projects to update their JCLs,  and our prior work has found that projects\u2014including JWST\u2014do not  regularly update cost risk analyses to take into account newly emerged  risks. Our ongoing work indicates that of the 16 major projects currently in NASA\u2019s portfolio that have developed JCL estimates, only 2 have  reported updating their JCLs (other than required due to a rebaseline).  For example, the Interior Exploration using Seismic Investigations,  Geodesy, and Heat Transport Project (InSight), a Mars lander, updated  its JCL after the project missed its committed launch date. As a result, the  project was able to provide additional information to decision makers  about the probability that it will meet its revised cost and schedule  estimates. As a project reaches the later stages of development,  especially integration and testing, the types of risks the project will face  may change. An updated project JCL would provide both project and  agency management with data on relevant risks that can guide the project  decisions. For example, in December 2012, we recommended the JWST  project update its JCL. NASA concurred with this recommendation;  however, we recently closed the recommendation because NASA had not  taken steps to implement it and the amount of time remaining before  launch would not have allowed the benefit of implementing the  recommendation to be realized. An updated JCL may have portended the  current schedule delays, which could have been proactively addressed by  the project.", "Enhance Oversight of Contractors to Improve Project Outcomes. In  December 2012, we found that the JWST project had taken steps to  enhance communications with and oversight of its contractors.  According to project officials, the increased communication allowed them  to better identify and manage project risks by having more visibility into  contractors\u2019 activities. The project reported that a great deal of  communication existed across the project prior to the Independent  Comprehensive Review Panel; however, additional improvements were  made. For example, the project increased its presence at contractor  facilities as necessary to provide assistance; this included assigning two  engineers on a recurring basis at a Lockheed Martin facility to assist in  solving problems with an instrument. The JWST project also assumed full  responsibility for the mission system engineering functions from Northrop  Grumman in March 2011. NASA and Northrop Grumman officials both  said that NASA is better suited to perform these tasks.", "We continue to see instances in our ongoing work that highlight the  importance of implementing this lesson learned from JWST. For example, we found in 2017 that the Space Network Ground Segment Sustainment  project\u2014a project that plans to develop and deliver a new ground system  for one Space Network site that provides essential communications  tracking services to NASA and non-NASA missions\u2014exceeded its  original cost baseline by at least $401.7 million and been delayed by 27  months. The project has attributed some of the cost overruns and  schedule delays to the contractor\u2019s incomplete understanding of its  requirements, which led to poor contractor plans and late design  changes. The project also took steps to assign a new NASA project  manager, increase physical presence at the contractor facility, and have  more staff focused on validation and verification activities.", "In summary, NASA continues to make progress developing its space  telescopes to help understand the universe and our place in it. But much  like other major projects that NASA is developing, there continues to be  an opportunity for NASA to learn from JWST and other projects that have  suffered from cost overruns and schedule delays. Key project  management tools and prior GAO recommendations that I have  highlighted here today, could help to better position these large, complex,  and technically challenging efforts for a successful outcome. We look  forward to continuing to work with NASA and this subcommittee in  addressing these issues.", "Chairman Babin, Ranking Member Bera, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Cristina T. Chaplain, Director, Acquisition and Sourcing  Management at (202) 512-4841 or chaplainc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this statement include Molly Traci, Assistant Director; Richard  Cederholm, Assistant Director; Carrie Rogers; Lisa Fisher; Laura  Greifner; Erin Kennedy; and Jose Ramos.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["In this testimony, we note that NASA's 3 major telescope projects are all making progress in development, but also face some challenges.", "For example, the James Webb Space Telescope has made progress in developing and testing its hardware and instruments, and addressing technical problems. However, the project has already been delayed by up to 60 months. Additional delays are likely given the risks associated with final integration of the telescope and the spacecraft\u2014the next phase of the project."]}
{"id": "GAO-18-309", "url": "https://www.gao.gov/products/GAO-18-309", "title": "Drinking Water and Wastewater Infrastructure: Opportunities Exist to Enhance Federal Agency Needs Assessment and Coordination on Tribal Projects", "published_date": "2018-05-15T00:00:00", "released_date": "2018-06-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Tens of thousands of American Indians and Alaska Natives do not have safe drinking water or wastewater disposal in their home\u2014referred to as needs arising from a sanitation deficiency\u2014at a higher percentage than the general population, according to IHS. Among other things, IHS assesses homes, either individually or by reviewing public water systems, to determine any deficiencies. Seven agencies, including IHS, EPA, and USDA, have programs that provide drinking water and wastewater infrastructure assistance to Indian tribes.", "GAO was asked to review federal efforts to provide water infrastructure assistance to Indian tribes. This report examines, among other objectives, the extent to which selected federal agencies (1) identified tribes' drinking water and wastewater infrastructure needs and (2) funded tribal water infrastructure projects, including tribes' most severe sanitation deficiencies. GAO reviewed agency data on tribal needs, analyzed agency funding data for tribal water infrastructure projects, reviewed agency policy documents, and interviewed agency officials and officials from 22 tribes representing different geographic locations."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal agencies have identified several billion dollars in existing and future tribal drinking water and wastewater infrastructure needs. Specifically, the Indian Health Service (IHS) worked with tribes to identify, in fiscal year 2016, an estimated $3.2 billion in water infrastructure projects to address existing sanitation deficiencies in Indian homes, and the Environmental Protection Agency (EPA) identified an additional $2.4 billion in future tribal drinking water infrastructure needs over the next 20 years. However, IHS could enhance the accuracy of its information about the water infrastructure needs of some Indian homes. In February 2018, the database that IHS uses to track Indian homes' sanitation deficiencies showed that about one-third of the homes (138,700) had no deficiency. However, because the database does not provide IHS with a way to record if a home's deficiency has been assessed, IHS could not determine whether these homes had no deficiency or if they had not yet been assessed to identify a deficiency. IHS officials stated that improving the database's accuracy would be beneficial. By implementing a way to indicate in its database whether these homes' deficiencies have been assessed, IHS could also more efficiently address any deficiencies in these homes.", "Federal agencies provided about $370 million for tribal drinking water and wastewater infrastructure projects in fiscal year 2016, including some projects to address what the agencies identified as the most severe sanitation deficiencies (i.e., communities that lack safe drinking water or wastewater disposal). IHS and U.S. Department of Agriculture (USDA) policies direct the agencies to fund tribal projects that address these deficiencies. However, agency scoring processes may not always prioritize the projects that address them:", "IHS assigns points to projects using eight scoring factors, including sanitation deficiency and cost. Based on GAO's review of IHS documents and interviews with agency officials, IHS's process for selecting projects can discourage funding some projects that address the most severe sanitation deficiencies, especially those with a relatively high cost per home. As a result, some projects to serve homes without water infrastructure can remain unfunded for many years. IHS officials said the scoring factors balance a number of interests, and the agency is looking to improve the extent to which it funds projects that address these deficiencies.", "USDA uses a different set of scoring factors to assign points when evaluating project applications for its tribal water program, including rural population and income levels. However, USDA does not have a scoring factor to assign points to a project based on whether it will serve homes that lack safe drinking water or wastewater disposal, as it does with another program with similar goals. Instead, USDA officials said they use discretionary points to score projects on this basis, but these points may not be awarded at all. As a result, USDA may not have reasonable assurance that it consistently evaluates project applications in a way that aligns with agency policy to fund projects that address the most severe sanitation deficiencies.", "By IHS reviewing and USDA updating their scoring processes, the agencies could have more assurance that the projects they fund address the most severe sanitation deficiencies in Indian communities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 16 recommendations, including that (1) IHS develop a way to indicate in its database if homes' deficiencies have been assessed and (2) IHS and USDA review and update project scoring processes. IHS agreed with these recommendations, and USDA proposed an approach for addressing the recommendation on scoring, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Tens of thousands of American Indians and Alaska Natives do not have  safe, potable water available in their homes for drinking, cooking, and  cleaning, or adequate facilities to safely dispose of wastewater, according  to the Department of Health and Human Services\u2019 Indian Health Service  (IHS). The agency has stated that, nationwide, members of Indian tribes  are more likely to live in homes without safe drinking water and  wastewater facilities than non-Indians in part due to the remoteness of  many Indian reservations. Moreover, IHS has reported that inadequate  access to safe drinking water and wastewater disposal can lead to many  health problems, including increased hospitalizations for pneumonia,  influenza, and other illnesses.", "The federal government\u2019s role in funding construction and repair of  drinking water and wastewater systems in Indian country differs from its  role in funding such systems in the rest of the country. According to IHS  estimates, the federal government provides a significant share of the  financial assistance to construct and repair drinking water and wastewater  infrastructure in Indian country. In contrast, in non-tribal communities,  utilities typically sell municipal bonds and raise revenues to pay for  construction of drinking water and wastewater infrastructure by charging  customers. These communities and utilities can receive funding and  planning assistance from their respective states and the federal  government to repair, replace, and upgrade their drinking water and  wastewater infrastructure. In Indian country, tribes, tribally owned utilities,  or separate entities are generally responsible for operating and  maintaining drinking water and wastewater infrastructure. However,  according to a national intertribal organization, tribes typically do not  have access to the same array of financing options as state or local  governments, and do not necessarily charge their customers for services.", "Seven federal agencies administer programs that provide drinking water  and wastewater infrastructure assistance to Indian tribes. IHS, the  Environmental Protection Agency (EPA), and the U.S. Department of  Agriculture (USDA) have drinking water and wastewater infrastructure  programs that are specifically targeted to provide financial assistance for  planning and construction to address Indian tribes\u2019 needs. According to  IHS documentation, such needs arise from a sanitation deficiency in  existing drinking water or wastewater infrastructure (or lack thereof) that  can negatively affect public health. In addition, the Department of Housing  and Urban Development (HUD), the Department of the Interior\u2019s Bureau  of Reclamation, the U.S. Army Corps of Engineers, and the Department  of Commerce\u2019s Economic Development Administration (EDA) administer  programs that may provide financial assistance to tribes for drinking water  and wastewater infrastructure. The types of assistance these agencies  provide vary by program, and each program has its own eligibility  requirements and authorities.", "You asked us to review federal efforts to provide drinking water and  wastewater assistance to Indian tribes, including interagency  collaboration efforts. This report examines the extent to which the seven  federal agencies, as applicable, (1) identified Indian tribes\u2019 drinking water  and wastewater infrastructure needs; (2) funded tribal drinking water and  wastewater infrastructure projects, including projects to address the most  severe sanitation deficiencies; and (3) collaborated to meet Indian tribes\u2019  drinking water and wastewater infrastructure needs.", "To determine the extent to which these federal agencies identified Indian  tribes\u2019 drinking water and wastewater infrastructure needs, we identified  requirements for IHS and EPA to collect and report information on needs,  but we did not identify such requirements for the other agencies. We  reviewed IHS\u2019s and EPA\u2019s most recent reports describing tribal drinking  water and wastewater infrastructure needs and reviewed the supporting  data in IHS\u2019s Sanitation Deficiency System (SDS) on proposed tribal  drinking water and wastewater infrastructure projects from fiscal year  2016, the most recent year of data available at the time of our review.  To assess the reliability of SDS project data and EPA needs information,  we discussed the data and any of its limitations with agency officials and  determined that the data were sufficiently reliable to provide descriptive  information about tribes\u2019 drinking water and wastewater infrastructure  project needs. We also assessed the reliability of specific information in  IHS\u2019s Home Inventory Tracking System (HITS), including the sanitation  deficiencies associated with homes, by reviewing documentation and  interviewing IHS officials. As we discuss later in this report, we indicate  when we found certain limitations with that information. We did not assess  the reliability of other information in HITS that was not relevant to our  review. We interviewed IHS and EPA officials involved with identifying  tribal water needs from all 12 IHS areas and the 9 EPA regions that  administer tribal drinking water and wastewater infrastructure programs.  We also interviewed officials from the other five agencies regarding any  efforts to collect information on tribal drinking water and wastewater  infrastructure needs.", "To determine the extent to which the agencies funded tribal drinking  water and wastewater infrastructure projects, we analyzed obligations  data from the seven agencies that administer programs that provide  drinking water and wastewater infrastructure assistance to Indian tribes\u2014 IHS, EPA, USDA, HUD, Reclamation, Corps, and EDA\u2014from fiscal years  2012 through 2016. To assess the reliability of the data obtained from  these agencies, we discussed the funding data, each agency\u2019s data  system, and any limitations with agency officials and determined that the data were sufficiently reliable for the purposes of our reporting objective.  To determine the extent to which agency funding addressed the most  severe sanitation deficiencies, we identified programs that have  documented goals in regulation and policy to fund projects that address  these needs. For these programs, we compared the number of funded  projects that addressed the most severe deficiencies with the number of  funded projects that met other needs for fiscal year 2016. During the  course of reviewing these regulations and agencies\u2019 obligations data, we  identified issues with how USDA awarded grants under one of its tribal  programs\u2014the Rural Alaska Village Grant program. We then obtained  and reviewed documentation of these grant awards and interviewed  officials who manage the program and officials from the agency\u2019s Office  of the General Counsel.", "To determine the extent to which the federal agencies collaborated to  meet tribal water needs, we reviewed documentation of national-level  interagency collaboration, including memorandums of understanding.  We compared the agencies\u2019 actions to the key features of interagency  collaboration that we have previously identified. We reviewed agencies\u2019  collaboration at the regional level by surveying the seven agencies about  their joint actions on activities related to tribal drinking water and  wastewater in six states\u2014Alaska, Arizona, California, New York,  Oklahoma, and South Dakota\u2014and by conducting a network analysis  using the survey responses. We selected regional offices that operate in  individual states as the unit of analysis because the federal agencies  organize their field structures differently, with some using region, area,  and state offices to work with tribes\u2014we refer to all of these office types  as regional offices. We selected this nonprobability sample of six states to  include a large percentage of the number of federally recognized tribes, to  obtain a range in the total federal obligations to tribes and the identified  needs of tribes, and for geographic diversity. The sample of states is not  generalizable, and the results of our work do not apply to all states where  Indian tribes are located. However, they provide illustrative examples of  interagency collaboration within the six selected states, which include  about 70 percent of the 573 federally recognized tribes.", "We sent collaboration surveys to the regional offices of each of the seven  federal agencies in the six states. We also sent a survey to the State of  Alaska because the state provides a 25 percent match for two federal  water infrastructure programs, but we did not include other state agencies  in our survey because they do not provide a similar match. The survey  asked each agency regional office in each state about the mechanisms  that it used to collaborate with each of the other regional offices within the  same state for the 3-year period prior to our survey, the factors that  affected their collaboration, and any additional mechanisms that would be  beneficial to use in the future. We disseminated a total of 46 surveys and  obtained and analyzed 46 responses. We conducted site visits to three of  the six states, selected based on their geographic diversity and the range  of identified water infrastructure needs. We also interviewed federal  agency officials and officials with the State of Alaska about their  collaboration in the six states. We interviewed officials from 22 Indian  tribes and representatives from 8 intertribal organizations to obtain their  perspectives on obtaining drinking water and wastewater infrastructure  assistance from the seven agencies in the six selected states. We  selected these tribes to obtain a range in their geographic locations and  the amount of drinking water and wastewater infrastructure assistance  they have received. Our findings are not generalizable to all tribes but  provide illustrative examples. Appendix I contains a detailed description  of our scope and methodology, and appendix II contains additional  information about our survey and network analysis, including questions  and summary responses.", "We conducted this performance audit from August 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides information on water infrastructure in Indian  country, federal programs that provide drinking water and wastewater  infrastructure assistance to Indian tribes, and our prior work on  interagency collaboration."], "subsections": [{"section_title": "Water Infrastructure in Indian Country", "paragraphs": ["The 573 federally recognized Indian tribes in the United States vary  greatly in terms of their culture, language, population size, land base,  location, and economic status. Many are located in remote and often  environmentally challenging areas. According to the U.S. Census  Bureau\u2019s American Community Survey, in 2016, about 26 percent of  American Indians and Alaska Natives were living below the poverty line,  compared with 14 percent for the nation as a whole.", "According to EPA databases, tribes operate about 950 public drinking  water systems and about 340 public wastewater systems. Drinking  water systems often include groundwater wells, water treatment plants,  and pipelines to deliver water to homes. A regulated, centralized  wastewater system may include sewer lines, tanks, and wastewater  treatment plants or lagoons, but small, rural communities are more likely  to have decentralized wastewater systems, such as individual septic  systems. Once centralized water or wastewater systems are constructed  in Indian country, ownership is typically transferred to the tribe. A tribally  owned utility, tribal government, or a separate entity operates and  maintains the system on behalf of the tribe. Some tribal utilities charge  user fees to help offset operations and maintenance costs, but other tribal  utilities do not charge these fees because of users\u2019 low income levels or  for cultural reasons, according to IHS and tribal officials.", "According to EPA, thousands of Indian homes are not currently served by  a regulated, centralized drinking water or wastewater system, due in part  to the logistical and other challenges associated with Indian water  systems that must serve widely dispersed populations in remote  locations. Instead, as we reported in September 2017, homes that are  not served by water systems may have private wells and septic  systems, or they may be entirely unserved. According to EPA and IHS  documents, some tribal members may haul drinking water from a  regulated drinking water source. However, containers used to haul and  store the water can introduce bacteria and other contaminants. Also,  because the regulated water source in some communities may be many  miles away, residents may haul drinking water from nearby unregulated  water sources, such as streams or livestock wells. For homes without  access to a wastewater disposal system, residents may use a privy, use  honeybuckets, or discharge waste directly to the ground.", "According to researchers with the Centers for Disease Control and  Prevention, restricted access to clean water for hand washing and  hygiene, along with manually disposing of waste, exposes people\u2014 especially infants and the elderly\u2014to higher rates of illness and  hospitalization. We reported in January 2017 that such health concerns  underscore the importance of quality health care\u2014including preventative care, such as providing safe sanitation facilities\u2014for American Indian and  Alaska Native people. Further, according to IHS, American Indian and  Alaska Native families living in homes with satisfactory environmental  conditions, which include safe water and sewer systems, require  appreciably fewer medical services and place fewer demands on primary  health care delivery systems."], "subsections": []}, {"section_title": "Federal Drinking Water and Wastewater Infrastructure Programs to Assist Indian Tribes", "paragraphs": ["Seven federal agencies administer a number of programs that provide  assistance to tribes for drinking water and wastewater infrastructure  projects. Each agency has its own programs and processes for providing  this assistance, with some similarities. Tribes can apply to one or more  federal programs for financial assistance. In some cases, federal  agencies coordinate to jointly fund the same project if the project is too  large for one agency to fund. In other cases, agencies may work together  by separately funding different parts of a large project or different phases  of a multi-year project. Of these agencies, IHS, EPA, and USDA  administer drinking water and wastewater infrastructure programs that are  specific to Indian tribes.", "IHS\u2019s mission is to raise the physical, mental, social, and spiritual health  of American Indians and Alaska Natives to the highest level. To fulfill this  mission, IHS provides primary health care and disease prevention  services. IHS\u2019s Office of Environmental Health and Engineering\u2019s  Sanitation Facilities Construction program, established in 1959,  contributes to IHS\u2019s disease prevention efforts. This program provides  technical and financial assistance to Indian tribes for the cooperative  development and construction of drinking water and wastewater systems  and support facilities. According to the Indian Health Care Amendments  of 1988, it is the policy of the United States that all Indian communities  and Indian homes, new and existing, be provided with safe and adequate  water supply systems and sanitary wastewater disposal systems as soon  as possible. IHS\u2019s 12 regional offices, called Areas, are responsible for  working with tribes when administering the Sanitation Facilities  Construction program.", "The Indian Health Care Amendments of 1988 require that IHS report  annually to Congress on the sanitation deficiency levels for Indian tribes  and communities, including, among other things, the amount of funds  necessary to raise all Indian tribes and communities to zero sanitation  deficiency. The act identifies five deficiency levels, and IHS uses a  deficiency level of 0 to represent the absence of a deficiency in its data  systems (see table 1).", "To develop its annual report to Congress and identify sanitation  deficiencies in Indian communities and homes, IHS maintains two data  systems: (1) the Sanitation Deficiency System (SDS), which contains  proposed drinking water and wastewater infrastructure projects to  address identified sanitation deficiencies; and (2) the Home Inventory  Tracking System (HITS), which contains home-specific information that  complements the SDS\u2019s project-specific information. According to IHS  program documentation, the project descriptions in the SDS are to  include information about the sanitation deficiency level that each project  will address, the project\u2019s estimated cost, and the number of Indian  homes that the project will serve. According to IHS documents, HITS is  to include information about each Indian home that may have a sanitation  deficiency that is eligible to receive Sanitation Facilities Construction  program assistance, including the home\u2019s geographic location and  deficiency level. Eligible homes can be located on or off reservations, but  according to IHS officials, the agency typically does not collect information about Indian homes located in large urban areas. According  to IHS program documentation, IHS uses information in HITS to track the  status of and plan for the provision of sanitation facilities for Indian  homes.", "To address tribes\u2019 identified sanitation facility needs, IHS is authorized to  construct essential sanitation facilities, including domestic and community  water supplies and facilities, as well as wastewater disposal facilities for  Indian homes, communities, and lands. Under the Sanitation Facilities  Construction program, IHS administers two primary drinking water and  wastewater infrastructure activities: one to address sanitation deficiencies  in existing homes and communities based on needs identified in the SDS,  and one to provide water infrastructure for newly constructed or recently  renovated Indian homes\u2014these needs are not included in the SDS.  According to IHS policy, the agency selects projects to fund that address  deficiencies in existing homes based on ranked project lists contained in  the SDS, by area.", "According to IHS policy, the agency can manage sanitation projects on  behalf of a tribe (direct service), or a tribe or tribal entity can elect to  manage projects. According to this policy, to implement a project under  direct service, a tribe formally requests IHS assistance, and IHS  engineers typically develop projects to include in the SDS. When IHS  selects the project to fund, the tribe decides whether it will complete the  project design and manage the construction contract or have IHS  engineers do so.", "EPA provides annual grants to states to help finance drinking water and  wastewater infrastructure through its Drinking Water and Clean Water  State Revolving Fund programs, respectively. EPA sets aside a certain  percentage of the appropriations it receives for these programs to make  grants directly to Indian tribes for drinking water and wastewater  infrastructure. Nine EPA regions administer the Drinking Water  Infrastructure Grants Tribal Set-Aside and the Clean Water Indian Set- Aside programs, while states administer the State Revolving Funds.  Under the drinking water set-aside program, EPA funds projects for  community water systems that serve tribal populations, as well as for non- profit, non-community water systems owned by a tribal government that  serve a tribal population. Under the clean water set-aside program, EPA  provides funding for the planning, design, and construction of wastewater  treatment plant facilities that serve federally recognized Indian tribes,  Alaska Native villages, and certain tribes in Oklahoma. According to EPA  officials, tribes are among those eligible to receive loans from the states\u2019  State Revolving Fund programs. In addition, EPA administers the  separate Alaska Native Villages and Rural Community Water Grant  program that awards grants to the State of Alaska to, among other things,  improve sanitation in rural and Alaska Native villages.", "USDA\u2019s Rural Utilities Service allocates a portion of its appropriation for  rural water and wastewater disposal programs to make drinking water  and wastewater infrastructure grants to Indian tribes; this is referred to as  the Native American program. USDA administers the Native American  program at the national level and works with tribes at the state office and  local level to conduct outreach and assist with the application process,  among other things. The Native American program provides grants for  water and wastewater facilities and services to rural and low-income tribal  communities \u201cwhose residents face significant health risks \u2026 due to the  fact that a significant proportion of the community\u2019s residents do not have  access to, or are not served by, adequate affordable water supply  systems or waste disposal facilities.\u201d In addition, USDA administers the  Rural Alaska Village Grant program, which provides grants to the State of  Alaska for development and construction of water and wastewater  systems that address dire sanitation conditions in rural or Alaska Native  villages with 10,000 or fewer people. Tribes are also eligible to receive  loans and grants for infrastructure investments from the agency\u2019s Water  and Waste Disposal Program, which is administered by USDA\u2019s state  offices. Tribes that are located close to the U.S.-Mexico border and that  meet the definition of a colonia are eligible for assistance from USDA\u2019s  Colonias program, a water infrastructure grant program to serve state- designated, low-income, unincorporated areas along the border. Finally,  USDA administers a grant program to provide technical assistance and  training, and the agency makes pre-planning grants available to tribes,  organizations that serve tribes, and other recipients through multiple  programs to assist with the development of application components, such  as preliminary engineering or environmental reports."], "subsections": [{"section_title": "Additional Agencies", "paragraphs": ["Four additional agencies may provide drinking water or wastewater  assistance to Indian tribes through other programs not specific to drinking  water or wastewater or as authorized by statute:", "HUD. HUD administers the Indian Community Development Block  Grant program, a set-aside from the agency\u2019s Community  Development Block Grant program that is specific to Indian tribes.  Indian Community Development Block grants can be used for  construction of public facilities, provision of public services, housing,  and certain economic development projects, among other things.  HUD also awards Indian Housing Block Grants to tribes for affordable  housing activities, which may include the development and  rehabilitation of utilities, necessary infrastructure, and utility  services.", "Reclamation. As authorized by statute, Reclamation provides  assistance for drinking water infrastructure in the 17 western states,  including rural water supply projects for tribes. Some of the statutes  that direct Reclamation to construct rural water supply projects for  tribes are enacted Indian water rights settlements. In addition, until  September 2016, Reclamation\u2019s rural water supply program was  authorized to conduct appraisal investigations and feasibility studies  for proposed rural water supply projects, including those that serve  Indian tribes, but the program was not authorized to construct rural  water supply projects.", "Corps. As authorized by statute, the Corps may provide designated  communities, counties, and states with design and construction  assistance for drinking water and wastewater infrastructure. For  example, Congress has authorized and made appropriations for  the Corps to provide assistance to Indian tribes for water-related  environmental infrastructure projects\u2014including wastewater treatment  facilities and water supply, storage, treatment, and distribution  facilities\u2014through the Corps\u2019 Section 219 Environmental  Infrastructure Program.", "EDA. EDA\u2019s Public Works Program provides grants to economically  distressed areas to, among other things, help rehabilitate, expand,  and improve their public works facilities, including drinking water and  wastewater facilities. The Economic Adjustment Assistance  Program provides grants for, among other things, development of  public facilities, including drinking water and wastewater facilities.  EDA\u2019s Planning Program provides grants to various entities, including  tribes, to pay the costs of economic development planning, which can  include planning for water infrastructure."], "subsections": []}]}, {"section_title": "Prior GAO Work on Interagency Collaboration", "paragraphs": ["As part of our body of work on interagency collaboration, our September  2012 report discussed a variety of mechanisms to implement interagency  collaborative efforts and identified key features that all efforts benefit  from. Mechanisms to implement interagency collaborative efforts  include establishing interagency task forces or signing memorandums of  understanding. Key features, many of which are related to practices to  enhance and sustain collaboration identified in our previous work, fall into  the following categories: outcomes and accountability, bridging  organizational cultures, leadership, clarity of roles and responsibilities,  participants, resources, and written guidance and agreements."], "subsections": []}]}, {"section_title": "Federal Agencies Estimated About $3 Billion in Existing Tribal Drinking Water and Wastewater Infrastructure Needs in Fiscal Year 2016, but the Needs Are Underestimated", "paragraphs": ["IHS and EPA estimated costs for tribal water infrastructure needs, with  IHS identifying at least $3.2 billion in estimated costs for infrastructure  projects to address existing drinking water and wastewater infrastructure  needs for fiscal year 2016 and EPA estimating the costs of future tribal  drinking water infrastructure needs at an additional $2.4 billion over the  following 20 years. However, IHS\u2019s estimate of existing needs is likely too  low because IHS has not identified all eligible Indian homes that may  have existing sanitation deficiencies\u2014drinking water or wastewater  infrastructure needs\u2014and some data in the system that IHS uses to track  home-specific infrastructure needs are not accurate."], "subsections": [{"section_title": "IHS and EPA Have Estimated Several Billion Dollars in Existing and Future Tribal Water Infrastructure Needs", "paragraphs": ["In fiscal year 2016, IHS identified about $3.2 billion in estimated costs for  projects to address existing tribal drinking water and wastewater  infrastructure needs. This estimate represented more than 2,000 projects  in the SDS to address 373 tribes\u2019 existing drinking water and wastewater  infrastructure needs. To develop these projects, IHS policy directs area  staff to invite all federally recognized tribes to identify existing drinking  water and wastewater infrastructure needs each year. IHS staff then  work with interested tribes to develop projects, including cost estimates,  to include in the SDS. In fiscal year 2016, projects to address deficiency  levels 4 and 5\u2014homes or communities that lack a safe drinking water  supply or wastewater disposal system, or both\u2014accounted for  $1.6 billion, or about half, of the total estimated costs of tribal  infrastructure needs in the SDS. More than 80 percent of the deficiency  level 4 and 5 project costs were located in the IHS Alaska and Navajo  areas. In addition, in fiscal year 2016, IHS determined that more than  60 percent of the total existing drinking water and wastewater  infrastructure needs in the SDS were infeasible, mostly due to the  significant costs associated with infeasible deficiency level 5 projects.", "EPA collects and reports data on the drinking water infrastructure needs  of the nation\u2019s public water systems, including the future needs of tribally  owned or operated drinking water systems. Specifically, EPA is required  to assess capital improvement needs of all eligible public water systems  every 4 years, and EPA has conducted its Drinking Water Infrastructure  Needs Survey and Assessment to obtain this information every 4 years  from 1995 through 2015. EPA last reported in 2013 on the estimated  costs of capital improvement projects needed to repair, replace, and  upgrade existing tribal and other public drinking water systems over the  following 20 years. In its 2013 report, EPA estimated the costs of future  tribal drinking water needs of public systems at approximately  $2.4 billion. EPA does not, and is not required to collect information  about future tribal wastewater infrastructure needs.", "Other agencies that provide tribes with assistance for drinking water or  wastewater infrastructure projects do not\u2014and are not required to\u2014 systematically identify tribal drinking water or wastewater infrastructure  needs. For example, USDA officials explained that tribes identify needs  through the applications they submit to the agency\u2019s programs. These  officials stated that they also identify tribal needs through outreach to  tribes and coordination with other agencies, such as IHS. In addition,  HUD officials said that they do not collect information specifically about  tribal water infrastructure needs because they rely on the tribes to  propose or identify projects to meet any needs based on the tribes\u2019  priorities."], "subsections": []}, {"section_title": "IHS Underestimates Existing Tribal Water Infrastructure Needs Because IHS Has Not Identified All Eligible Homes with Infrastructure Needs and Relevant Data Are Not Accurate", "paragraphs": ["IHS area staff work with tribes each year to (1) identify Indian homes  eligible for and in need of IHS drinking water or wastewater infrastructure  assistance to include in IHS\u2019s home-specific tracking system, HITS; and  (2) develop projects aimed at correcting any identified sanitation  deficiencies in these homes to include in the SDS. Through this process,  IHS has entered information about hundreds of thousands of eligible  Indian homes in HITS and developed thousands of projects in the SDS.  According to agency documents, HITS is to include information about  each Indian home that is eligible to be served by the Sanitation Facilities  Construction program and that may have an existing sanitation  deficiency. However, based on our review of IHS documentation and  interviews with IHS officials, HITS does not contain all eligible Indian  homes that may have existing sanitation deficiencies, and some data in  the system are not accurate."], "subsections": [{"section_title": "HITS Does Not Contain All Eligible Indian Homes That May Have Existing Water Infrastructure Needs", "paragraphs": ["According to IHS officials, as of February 2018, HITS contained  information for about 406,000 Indian homes. However, according to IHS  area officials, the system does not contain information about all Indian  homes eligible to be served by the Sanitation Facilities Construction  program. For example, Oklahoma City Area officials we interviewed  estimated that, based on Census data and their professional experience,  more than 100,000 Indian homes in their area may be eligible for IHS  program assistance but are not included in the system, and an unknown  number of those homes likely have existing drinking water and  wastewater infrastructure needs. These officials, as well as tribal  officials administering the Sanitation Facilities Construction program for  their tribes in Oklahoma, said that the system does not contain all eligible  Indian homes, in part because it is difficult to identify where tribal  members are living since most of the communities in the state are a  mixture of tribal and non-tribal residents and are not located on  reservations. In addition, Portland Area officials stated that they believe  the system is missing an unknown number of eligible Indian homes in  their area because it is challenging to identify eligible homes that are in  scattered locations away from tribal community facilities. In contrast,  Navajo Area officials said they believe the system is more than  95 percent complete for their area, in part because the area aligns with  the Navajo Nation\u2019s lands.", "IHS headquarters officials stated that they do not expect HITS to capture  all eligible Indian homes, in large part because some tribes have chosen  to not provide such information to IHS for cultural or other reasons. These  officials said they are focused on working collaboratively with tribes to  identify homes that have existing deficiencies rather than all homes  eligible for services but added that IHS areas are expected to identify  such homes during the normal course of their work. IHS area officials and  tribal officials we interviewed stated that identifying eligible Indian homes  not located on reservations is resource intensive, and they do not have  sufficient resources to locate these homes. IHS Oklahoma City Area  officials said it would be helpful to find efficient ways to identify additional  eligible homes that may have sanitation deficiencies. For example, these  officials said they have started using EPA data to target communities with  water systems that do not meet EPA\u2019s water quality standards and  identify eligible homes within those communities, but they have made  limited progress with their existing resources.", "Standards for Internal Control in the Federal Government calls for  management to use quality information to achieve the entity\u2019s objectives;  such information is appropriate, current, complete, accurate, accessible,  and provided on a timely basis. We recognize that it would be resource  intensive for IHS to locate every eligible Indian home to include in HITS,  but because the system may not contain roughly 20 percent of eligible  Indian homes, opportunities exist for IHS to identify in a targeted, efficient  way additional homes with existing deficiencies to include in HITS. By  implementing a targeted, resource-efficient method to identify additional  eligible Indian homes that may have existing sanitation deficiencies to  include in HITS, IHS could have better assurance that it has more  complete information to help improve its estimate of the number of eligible  Indian homes that may need sanitation facilities assistance."], "subsections": []}, {"section_title": "Deficiency Levels Are Not Accurate For Every Home in HITS", "paragraphs": ["Deficiency levels for thousands of homes may not be accurately captured  in HITS. IHS headquarters officials stated that, as of February 2018, of  the roughly 406,000 total tribal homes in HITS, about 229,400 homes had  a deficiency level of 0. Therefore, the remaining approximately  176,600 tribal homes had deficiency levels 1 through 5. HITS  automatically assigns a deficiency level 0 to each home when IHS enters  it into the system, and homes remain at a deficiency level 0 until IHS  develops projects in the SDS to serve those homes. HITS does not  provide IHS with the option of recording a home\u2019s deficiency level as  unassessed, so a deficiency level 0 could indicate that there is no  deficiency or that the home has not yet been assessed to determine a  deficiency.", "IHS area officials we interviewed stated that they were aware of homes  with sanitation deficiencies that were not accurately reflected in HITS. For  example, Phoenix Area staff said they knew of homes with a deficiency  level 4 or 5 that had a deficiency level 0 in HITS because these homes  were not yet included within the scope of an SDS project. Also,  California Area officials estimated that they had not assessed deficiency  levels for about 20,000 eligible homes in their area, and Oklahoma City  Area officials said they had not assessed more than 100,000 homes in  their area\u2014these homes\u2019 deficiency levels all appeared as deficiency  level 0 in HITS, but their actual deficiencies were unknown.", "According to IHS officials, there are multiple ways to assess homes\u2019  deficiency levels. For homes that are not connected to a public water  system, such as homes with private wells, IHS staff may need to visit  homes to identify any existing deficiencies, with permission of the tribe.  For homes connected to a public water system, staff can assign the  homes the deficiency level associated with the water system but may  need to visit the community to assess the system\u2019s overall deficiency  level. IHS officials from the California and Oklahoma City areas said they  did not have the staff resources to begin the process of identifying  whether the deficiency level 0 homes in their areas had deficiencies and  developing projects for the SDS to serve them.", "IHS headquarters officials stated that they have identified homes that the  Sanitation Facilities Construction program has served since implementing  HITS in 2015. For example, IHS officials stated that of the about  229,400 homes with a deficiency level 0 in HITS, they had determined  that about 90,700 correctly show that deficiency level because they have  been included in a project in the SDS since 2015. IHS had not included  the remaining approximately 138,700 homes with a deficiency level 0 in  a project in the SDS. Therefore, using HITS, IHS could not determine if  these homes had (1) no deficiency, (2) a deficiency that IHS addressed  prior to 2015, or (3) an unknown deficiency because the homes had not  been assessed.", "IHS officials stated that in the future they will be able to use HITS to better  track the agency\u2019s service and project history at the individual home level.  However, IHS officials did not explain what steps they would take to  identify deficiencies for the approximately 138,700 homes in HITS that  had not been included in an SDS project. Standards for Internal Control in  the Federal Government calls for management to use quality information  to achieve the entity\u2019s objectives; such information is appropriate, current,  complete, accurate, accessible, and provided on a timely basis. IHS  officials said that improving the system\u2019s accuracy would be beneficial. By  implementing a mechanism to indicate in HITS whether each home with a  deficiency level of 0 has been assessed, IHS could also have more  efficient ways to take steps to address the deficiencies of the homes  contained in HITS."], "subsections": []}]}]}, {"section_title": "Federal Agencies Provided Funding for Tribal Water Infrastructure Projects, but Processes May Not Prioritize Projects That Address the Most Severe Deficiencies", "paragraphs": ["In fiscal year 2016, federal agencies obligated approximately $370 million  for tribal drinking water or wastewater infrastructure projects. The  agencies with tribal-specific programs for drinking water and wastewater  infrastructure\u2014IHS, EPA, and USDA\u2014funded some projects to address  what they identified as the most severe sanitation deficiencies\u2014 communities and homes that do not have safe drinking water or  wastewater disposal facilities. However, the agencies\u2019 processes may not  always prioritize projects that address the most severe sanitation  deficiencies. In addition, during the course of our review, we identified  issues with how USDA awarded grants under its Rural Alaska Village  Grant program."], "subsections": [{"section_title": "Federal Agencies Provided About $370 Million in 2016 for Tribal Water Infrastructure Projects", "paragraphs": ["In fiscal year 2016, federal agencies provided about $370 million to  develop, construct, or repair tribal drinking water and wastewater  infrastructure projects to address tribes\u2019 needs. This amount represents  about 11 percent of the more than $3 billion in total existing tribal drinking  water and wastewater infrastructure needs that IHS identified in 2016.  Appendix III contains additional detail about agency obligations for tribal  drinking water and wastewater infrastructure projects for fiscal years 2012  through 2016.", "Federal agency obligations were used to address a variety of tribal  drinking water and wastewater infrastructure needs. For example,  IHS, EPA, USDA, and the State of Alaska provided approximately  $15.9 million for multiple, phased projects to bring first-time, in-home  piped drinking water and wastewater service to approximately 90 homes  in the Native Village of Eek in Alaska (see fig. 1). The residents of Eek  obtain their drinking water by hauling water from the village washeteria,  a building that contains toilets, washing machines, and a spigot for  purchasing water for use in the home. Most homes in the community do  not have piped water or sewer service to kitchens or bathrooms, and  residents use washbasins for handwashing and food preparation and  honeybuckets for wastewater disposal. As of April 2017, construction was  ongoing, and officials estimated that the entire community of about  300 people would be served by the fall of 2018. See appendix IV for other  examples of tribal drinking water and wastewater infrastructure projects  that we visited.", "In addition to providing financial assistance for projects to design or  construct water infrastructure, federal programs provided grants for  technical assistance and training for tribal utilities and staff. For example,  in fiscal year 2016, USDA awarded a $130,000 grant from its Technical  Assistance and Training program to one organization that works with  tribes. USDA also awarded a contract to the National Rural Water  Association for it to employ a network of technical consultants who can  provide on-site technical assistance to eligible systems, including tribally  operated systems experiencing day-to-day operational issues, among  other challenges.", "Federal programs mostly did not provide financial assistance for routine  operations and maintenance of installed community or individual  infrastructure. Tribal officials we interviewed, however, said that paying  for operations and maintenance is often the tribe\u2019s biggest challenge once  a system is constructed or upgraded. For example, officials from one tribe  said that the tribe did not have sufficient resources to operate and  maintain a newly constructed water treatment system. Tribal officials we  interviewed stated that their members are often unable to afford the utility  fees needed to support the water system. For private systems, officials  from two tribes said some of their members have trouble maintaining new  drinking water filtration and septic systems because, for example, the  systems are technically complex and costly to maintain. Officials from  another tribe said homeowners who have difficulty operating and  maintaining a system may return to using an unsafe drinking water source  they previously used, for example. According to IHS officials, the agency  has been collaborating with EPA, USDA, and tribes to improve collection  of information about the cause of some systems\u2019 premature failure and to  analyze best practices for operations and maintenance of tribal water  systems."], "subsections": []}, {"section_title": "Agencies Funded Some Projects to Address the Most Severe Sanitation Deficiencies", "paragraphs": ["Agencies with tribal-specific programs for water infrastructure\u2014IHS, EPA,  and USDA\u2014selected and funded projects that address the most severe  sanitation deficiencies. Three of these agencies\u2019 programs\u2014IHS\u2019s  Sanitation Facilities Construction, EPA\u2019s clean water set-aside, and  USDA\u2019s Native American program\u2014documented in regulation or policy  their goal of funding projects to address these needs. Specifically,  according to IHS\u2019s Sanitation Facilities Construction program policy, the  program\u2019s goal includes providing funding first and in greater degree to  homes and communities with the greatest needs, that is, those that lack  safe drinking water or wastewater disposal, or both. EPA\u2019s clean water  set-aside program policy states the program\u2019s goal is to protect public  health in Indian country by addressing the lack of access to sanitation  facilities (i.e., deficiency levels 4 and 5 for IHS and EPA). Finally, under  the applicable requirements and policy, USDA\u2019s Native American  program\u2019s objective is to provide water and waste disposal facilities and  services to low-income rural communities whose residents face significant  health risks. The program\u2019s goal includes funding the neediest projects,  giving priority to areas that lack running water, flushing toilets, and  modern sewage disposal systems.", "According to agency policy, IHS\u2019s Sanitation Facilities Construction  program and EPA\u2019s clean water set-aside program prioritize and select  projects to fund according to the projects\u2019 rankings in each IHS area\u2019s  SDS list. To create the ranked lists, IHS staff assign scores to each  project based on a set of eight scoring factors, each with a different  number of points that may be assigned to a project (see table 2).", "USDA prioritizes and selects projects to fund from its Native American  program using a different process than IHS and EPA. USDA\u2019s process  involves tribes, working with USDA state offices, submitting project grant  applications to the headquarters office. USDA state offices score project  applications before submitting them to the headquarters office. USDA  policy directs the program to make funds available according to priority,  and the agency accepts and evaluates applications and awards grants  throughout the year. USDA officials said the program maintains a wait list  for eligible applications received after all available funds have been  obligated each year. According to USDA\u2019s scoring sheet for the Native  American program, the agency evaluates project applications based on a  set of five scoring factors, each with a different number of points to award.  These scoring factor categories include population, income, joint  financing, and discretionary points that can be awarded at state offices  and headquarters (see table 3). USDA officials said that they also take  SDS deficiency levels into account when reviewing project applications,  but that the statute authorizing the Native American program does not  specifically reference IHS\u2019s deficiency level definitions.", "Using their respective processes to prioritize and select projects for  funding, IHS\u2019s Sanitation Facilities Construction program, EPA\u2019s clean  water set-aside program, and USDA\u2019s Native American program  obligated a total of nearly $110 million in fiscal year 2016 for projects to  meet a mixture of needs. For example, for approximately 190 projects  from the SDS that IHS, EPA, and others funded in fiscal year 2016, about  40 percent were projects to address deficiency levels 2 and 3, and about  60 percent were projects to address deficiency levels 4 and 5. Further,  in fiscal year 2016, USDA reported that its Native American program  funded four projects that provided new drinking water and wastewater  service to some tribal communities and funded nine projects that  replaced, renovated, or expanded existing infrastructure. Based on our  review of IHS and USDA documents, deficiency level 2 and 3 projects as  well as replacement and renovation projects can address important water  quality and other problems, but they generally do not address the most  severe deficiencies or the most significant health risks.", "Based on our review of IHS and EPA documents and interviews with  these agencies\u2019 officials, we found that their process for prioritizing and  selecting projects to fund from the SDS can discourage funding some  deficiency level 4 and 5 projects, especially those with a relatively high  cost per home. According to some IHS area officials we interviewed,  applying IHS\u2019s scoring factors and the points associated with each factor  means that deficiency level 3 projects may score higher than\u2014and  therefore receive funding before\u2014deficiency level 4 or 5 projects. For  example, a project\u2019s cost per home is a significant contributor to its score  because IHS assigns as low as minus 20 points for projects that have a  relatively high cost to implement per home. IHS officials said that,  typically, deficiency level 3 projects replace existing community  infrastructure and serve more homes, which makes those projects\u2019  relative cost per home lower than deficiency level 4 and 5 projects. IHS  headquarters officials explained that they developed the SDS scoring  system in consultation with tribes so the system could balance the need  to fund deficiency level 4 and 5 projects with the need to fund projects  with lower deficiencies that address health needs and serve a larger  number of homes. However, because deficiency level 4 and 5 projects  may rank lower than some projects that address less severe deficiencies  and rank too low to be funded in a given year, hundreds of feasible  projects to address the most severe sanitation deficiencies have  remained on SDS lists for 5 years or more, based on our review of these  lists. As of the end of fiscal year 2016, many of these projects had not  been selected for funding from IHS or EPA.", "IHS headquarters officials said that the agency is working to improve the  extent to which it funds feasible projects to address the highest sanitation  deficiencies. For example, these officials said that they are updating the  2003 Sanitation Facilities Construction program guidelines to incorporate subsequently issued guidance, and this update should also more directly  align the guidelines with the program\u2019s original focus\u2014to prioritize service  to Indian homes and communities that lack access to piped water and  sewer systems. However, a senior IHS official said that changing the  SDS scoring factors is not part of this effort because the current scoring  factors balance a number of interests in addition to projects\u2019 deficiency  levels. The official said that higher deficiency level projects ranking lower  than other projects on the SDS list in a given year does not mean that  public health needs are going unaddressed. Yet, our analysis shows that  projects to address the highest deficiency levels have remained in the  SDS for many years. We recognize that IHS faces trade-offs when  selecting tribal infrastructure projects to fund. By reassessing the point  distribution across the SDS scoring factors as part of IHS\u2019s program  guidelines update, in light of trade-offs between funding projects that  address the most severe sanitation deficiencies and projects that meet  other needs, IHS may have better assurance that its projects address the  most severe sanitation deficiencies in Indian communities.", "Regarding USDA\u2019s Native American program, based on our review of  agency documents and interviews with USDA officials, we found that the  agency\u2019s process for prioritizing and selecting projects may not provide  USDA with reasonable assurance that it is selecting projects to fund that  address the most severe sanitation deficiencies. Specifically, USDA\u2019s  scoring factors for its Native American program do not include a scoring  factor category to evaluate the extent to which projects will address health  risks that stem from tribes\u2019 lack of drinking water and wastewater  infrastructure. In contrast, USDA prioritizes projects to fund under its  Colonias grant program using an additional scoring factor that awards  points based on the extent to which a proposed project will address  health risks stemming from lack of safe drinking water and wastewater  disposal in a colonia. For example, USDA awards 50 points for projects  in colonias where a lack of access to safe drinking water and wastewater  disposal results in a significant health risk. We recommended in  December 2009 that USDA take steps to better target its limited funds  for the Colonias program, and USDA responded in part by creating the  additional scoring factor for colonias to ensure that the neediest colonias  receive funding.", "To prioritize Native American program applications that address  significant health risks, USDA officials said they use discretionary points.  However, according to program policy, USDA state office and  headquarters officials may award discretionary points to meet other  purposes that are not related to addressing health risks, such as  encouraging projects with green infrastructure or promoting geographic  diversity among grantees, or they may not award these points at all. As a  result, USDA may not have reasonable assurance that it is consistently  evaluating or funding project applications in a way that aligns with the  Native American program\u2019s goal. USDA policy states that both the Native  American and Colonias programs are to prioritize areas that lack running  water, flushing toilets, and modern sewage disposal systems. By  implementing a scoring factor similar to the one in the Colonias  program\u2014that is, one that awards points for proposed projects that  address health risks from a lack of access to safe drinking water and  wastewater disposal\u2014for the Native American program, USDA would  have more assurance that it is evaluating project applications consistently  and funding projects to address the most severe sanitation deficiencies in  Indian communities, consistent with the program\u2019s goal."], "subsections": []}, {"section_title": "USDA Did Not Always Award Rural Alaska Village Grants to Authorized Recipients, and the Program\u2019s Regulations Are Inconsistent with Its Authority", "paragraphs": ["During the course of reviewing funding for tribal drinking water and  wastewater infrastructure projects, we encountered several issues with  one of USDA\u2019s tribal drinking water and wastewater infrastructure  programs, the Rural Alaska Village Grant program. Specifically, section  306D of the Consolidated Farm and Rural Development Act authorizes  USDA to make grants to the State of Alaska for the benefit of rural or  Native villages to provide for the development and construction of  drinking water and wastewater systems. According to USDA reports,  these grants are used for projects that have provided, for example, rural  Alaska Native residents with access to safe drinking water and flush  toilets in their homes. From the program\u2019s beginning in fiscal year 1997  through fiscal year 2016, USDA awarded 455 grants totaling more than  $444 million to provide safe drinking water and wastewater disposal to  thousands of Alaska Natives in remote communities.", "We found that from fiscal year 1997 through fiscal year 2016, USDA  awarded 159 Rural Alaska Village grants totaling about $157 million to  recipients not authorized by section 306D. These recipients were Alaska  Native villages, municipalities, and the Alaska Native Tribal Health  Consortium, which is the tribal organization that administers IHS\u2019s  Sanitation Facilities Construction program in Alaska. USDA\u2019s  appropriations acts for fiscal years 2012 through 2017, however,  authorized USDA to provide Rural Alaska Village grants to the  Consortium. Of the 159 grants, USDA awarded 127 grants (about  $121 million) to municipalities and Alaska Native villages from 1997  through 2016, and it awarded 32 grants (about $36 million) to the  Consortium in 2011 before first receiving authority to do so in fiscal year  2012. Based on our review of a list of USDA grant agreements, selected  agreements, and according to agency officials, in 2011, USDA signed  32 such agreements with the Consortium and the communities on whose  behalf the Consortium administered the grants. USDA officials stated that  the agency made seven total obligations to the Consortium in 2011 for  these grants.", "USDA officials stated that they did not agree that the agency had  awarded Rural Alaska Village grants to ineligible entities because the  program\u2019s authorizing statute gives the State of Alaska control over the  use of the grants, and the state concurred with USDA making some  grants directly to other parties. For example, the USDA officials stated  that a 2011 memorandum of agreement between USDA, the State of  Alaska, IHS, and the Consortium was a vehicle for the state to direct a  portion of the Rural Alaska Village grants to other parties. These officials  stated that since the statute does not prevent the state from redirecting  portions of the grant to other parties, it is not improper for USDA to enter  into an agreement with the state to award the grants directly to other  parties so that the state does not have to redirect them. In commenting on  a draft of this report, USDA noted that the agency has awarded two  grants to municipalities since signing the 2011 agreement.", "In addition, USDA officials said that they entered into the memorandum  of agreement and began awarding grants to the Consortium in 2011 to  address problems with the program\u2019s administration, which resulted in  projects that were delayed or halted. For example, USDA stated in a 2010  report that the State of Alaska had not adequately documented project  costs and that USDA staff were concerned that the state had not applied  the obligations it received from USDA to the intended communities.  According to USDA officials, they have seen a significant improvement in  the state\u2019s grant administration and more timely delivery of projects since  the 2011 agreement. In addition, the Rural Alaska Village Grant program  manager said the agency awards grants directly to Native villages that  have the capacity to administer them. In commenting on a draft of this  report, USDA stated that the agency has made all grants to the  Consortium pursuant to the 2011 memorandum of agreement.", "The State of Alaska can choose to make subgrants once it receives the  Rural Alaska Village grant, but section 306D of the Consolidated Farm  and Rural Development Act only authorizes USDA to award grants to the  State of Alaska. Moreover, the 2011 memorandum of agreement cannot  authorize USDA to award grants to recipients that are not authorized by  statute. By ensuring that all Rural Alaska Village grants are awarded only  to recipients identified as eligible in section 306D or USDA appropriations  acts, USDA will have assurance that it is complying with the law. If USDA  wants to award Rural Alaska Village grants to municipalities and Alaska  Native villages, it should seek authority to do so, as it did to award such  grants to the Consortium.", "In addition, the regulations governing the Rural Alaska Village Grant  program identify rural or native villages in Alaska as eligible grant  recipients. USDA officials explained that the agency amended the Rural  Alaska Village Grant program regulations in 2015 to codify the 2011  memorandum of agreement. However, this regulation identifying rural  and Alaska Native villages as eligible grant recipients expands USDA\u2019s  authority to award grants beyond the existing statutory authorities, which  do not list rural or Alaska Native villages as eligible recipients. Until  USDA amends the Rural Alaska Village Grant program regulations to  be consistent with USDA\u2019s authority, the agency\u2019s regulations will  continue to recognize recipients not authorized by statute."], "subsections": []}]}, {"section_title": "The Extent to Which Federal Agencies Collaborated to Meet Tribes\u2019 Water Infrastructure Needs Varied at the National Level and in Six Selected States", "paragraphs": ["Most of the seven federal agencies that administer programs to provide  drinking water and wastewater infrastructure assistance to Indian tribes  have taken actions to collaborate at the national level, and the agencies  have identified additional opportunities to collaborate. At the regional  level, seven federal agencies we surveyed reported collaborating on a  range of activities within six selected states\u2014with some agencies  frequently working together and others rarely collaborating\u2014and the  agencies identified opportunities to increase collaboration at the regional  level to better serve tribes."], "subsections": [{"section_title": "Most Reviewed Agencies Have Taken Actions to Collaborate at the National Level on Tribal Water Infrastructure and Have Identified Additional Opportunities to Increase Collaboration", "paragraphs": ["Most of the seven federal agencies we reviewed have taken actions to  collaborate at the national level and identified additional opportunities to  collaborate that they have not yet taken. In our previous work, we found  that achieving important national outcomes\u2014such as providing access to  safe drinking water and wastewater disposal\u2014often requires coordinated  and collaborative efforts of a number of programs spread across the  federal government. For example, IHS, EPA, USDA, HUD, and  Reclamation have formed a national tribal infrastructure task force to  facilitate the agencies\u2019 collaborative efforts when providing services,  support, and technical assistance to tribes.", "The tribal infrastructure task force\u2019s efforts reflect some of the key  features that we have found all collaborative mechanisms benefit from in  our previous work:", "Written guidance and agreements. We have previously reported  that agencies that articulate their agreements in documents can  strengthen their commitment to working collaboratively. The  members of the tribal infrastructure task force first documented their  agreement in a memorandum of understanding in 2007, the year the  task force was created. The agencies updated the memorandum most  recently in 2013, and they use the document to formally agree on the  group\u2019s common goal and purposes and to clarify and define roles  and responsibilities. Having participating agencies document their  agreements on how they will be collaborating, and continually  updating and monitoring these agreements, are practices that are  consistent with our prior work.", "Outcomes and accountability. In our previous work, we have  reported on the importance of groups having clear goals. In its 2013  memorandum of understanding, the tribal infrastructure task force  identified a common goal of improving access to safe drinking water  and basic sanitation for American Indians and Alaska Natives. In the  memorandum, the member agencies also agreed on the task force\u2019s  stated purposes, one of which is to enhance the efficient leveraging of  funds.", "Leadership. We have found that identifying one agency as the leader  of a collaborative group is often beneficial because it centralizes  accountability and can speed decision making. EPA has served as  the federal focal point for the task force; this has included hosting the  task force\u2019s website that serves as a common source for documents  the group has produced. According to an official involved with the task  force, EPA\u2019s role has provided continuity in leadership.", "The task force\u2019s efforts have yielded some specific results. For example,  in 2013, tribal infrastructure task force members agreed to adopt a  uniform preliminary engineering report template, a key supporting  document that multiple agencies require in their project application and  evaluation processes. Task force members created this template in part  in response to our October 2012 recommendation that EPA and USDA  develop such a document. According to agency officials we interviewed,  the report template has been helpful for tribes since they no longer have  to produce different versions of the same document when submitting  multiple applications to different agencies. USDA officials said they have  since worked with other agencies to develop an online version of the  preliminary engineering report that is accessible to task force members  and others to further improve collaboration.", "However, according to agency officials involved with the task force, there  may be additional opportunities to improve the efficiency of their  collaboration at the national level. For example, in 2011, a workgroup of  the task force identified a series of 10 options to increase the efficiency of  collaboration by streamlining their application processes. As of  November 2017, according to agency officials, the task force had not  acted on most of the options. One such option was for agencies to better  align their different funding and application cycles where possible.  Several tribal officials and representatives from a tribal organization we  interviewed cited challenges with complying with the agencies\u2019 different  application requirements. For example, they said that doing so can be  resource intensive and can make it difficult to obtain funds for one project.  Other tribal officials we interviewed also identified ways that agencies could improve their collaboration that would benefit tribal applicants and  that the task force did not identify in its 2011 report. For example, various  tribal officials suggested that agencies standardize federal program  application processes and coordinate their outreach to tribes to discuss  agency programs and their requirements.", "According to an agency official involved with the task force, when the  group considered which options from the 2011 report to implement,  member agencies focused their efforts on implementing those that were  most achievable given the agencies\u2019 limited resources. Other officials  also said that it would be worthwhile to reconsider some of the options  identified in the report. As stated in the task force\u2019s 2013 memorandum of  understanding, one of its purposes is to enhance the member agencies\u2019  efficient leveraging of funds. By reviewing the 2011 task force report and  identifying and implementing additional actions to help increase their  collaboration, the task force member agencies could improve their ability  to leverage limited program funds."], "subsections": []}, {"section_title": "Federal Agencies\u2019 Regional Offices Collaborated to Varying Extents within Six Selected States and Reported That Additional Collaboration Would Be Beneficial", "paragraphs": ["The regional offices of the seven federal agencies we surveyed  collaborated with each other to varying extents in the six selected states  (Alaska, Arizona, California, New York, Oklahoma, and South Dakota).  In the 2013 memorandum of understanding, the tribal infrastructure task  force member agencies\u2014IHS, EPA, USDA, HUD, and Reclamation\u2014 agreed that they are expected to collaborate at the regional level to  achieve a common goal of providing safe drinking water and basic  sanitation for tribes. However, based on our review of agency survey  responses, these agencies did not always collaborate in each of the six  states. We measured agency collaboration in terms of the number of  instances in which one agency regional office reported using a  collaborative mechanism with another agency. These collaborative  mechanisms include state- or project-level working groups,  memorandums of understanding, and shared databases, among others.  In responses to our survey, we found that the number of instances of  agency regional offices reporting that they used one or more collaborative  mechanism with other agencies varied across the six states. For  example, the agencies\u2019 regional offices collaborated the most in Alaska  and the least in New York and Oklahoma. Figure 2 shows the  percentage of instances where an agency reported using a collaborative  mechanism with another agency when jointly working on tribal drinking  water and wastewater activities in the six states, out of the total possible  instances. Appendix II contains additional details about our survey and  agency responses.", "In responses to our survey, certain agencies\u2019 regional offices reported  collaborating with each other in some states but not in other states. For example, EPA and USDA regional offices both reported working together  in Alaska, Arizona, and California, but not in New York, Oklahoma, or  South Dakota. IHS and HUD reported collaborating with each other in  three states but not in the other states. Not all agencies work with tribes in  every state. For example, Reclamation does not operate in Alaska or New  York, so we did not survey the agency in those states. The Corps\u2019  regional offices responded that they are not authorized to work on  drinking water or wastewater infrastructure with tribes in two of the six  states. In contrast, IHS and EPA regional offices reported collaborating  with each other in all six states, the most of any agency pair.", "In their responses to our survey and in interviews, the seven federal  agencies\u2019 regional offices most frequently identified three key factors that  limited how much they collaborated in the six states. Specifically:  Incompatibility of agency policies and missions. Agencies\u2019  regional offices reported that having incompatible policies or agency  missions was a factor that had hindered their collaboration with other  agencies. For example, IHS and HUD regional offices in four states  reported that a restriction on IHS\u2019s ability to serve new homes  constructed with grants from HUD\u2019s housing programs limited their  collaboration. Several agencies\u2019 regional offices reported that  having compatible policies helped their collaboration. For example,  IHS and USDA regional offices in Alaska responded that multiple  agencies\u2019 use of IHS\u2019s SDS list as a common source for identifying  potential projects to fund has helped collaboration. We previously  found that adopting compatible policies and procedures is one way for  agencies to establish means of operating across agency  boundaries.", "Insufficient resources. An additional factor that hindered agencies\u2019  collaboration was insufficient staff and financial resources. For  example, HUD and IHS regional officials we interviewed in Arizona  said that a state-level tribal infrastructure working group they were  involved in became inactive in 2016, after the lead agency determined  it was unable to continue dedicating staff resources to that role and  none of the other agencies picked up the lead. In contrast, several  IHS and EPA regional offices reported that the existence of standard  interagency agreements that facilitate transferring EPA funds to IHS  helped them collaborate and leverage funding for projects that each  agency would not have funded on its own. Identifying and leveraging  the resources needed to initiate or sustain a collaborative effort is a  key consideration for implementing the interagency collaborative  mechanisms we previously identified.", "Absence of personal relationships. Agencies\u2019 regional offices also  reported that the absence of relationships with staff from other  agencies hindered their collaboration. In contrast, agencies\u2019 regional  offices reported that having good working relationships with staff from  other agencies helped their collaboration. For example, USDA\u2019s  regional office and the State of Alaska reported that their strong  relationships with each other and other agencies in Alaska helped  their collaboration, and that these relationships were enhanced by  agency staff\u2019s frequent communication through regular meetings. We  previously found that having positive working relationships can bridge  organizational cultures and build trust.", "In their responses to the survey and in interviews, several agencies\u2019  regional offices identified examples of inefficiencies that have occurred  when they did not collaborate, including inefficient use of their limited  resources. For example, officials from one EPA region we interviewed  said that there have been years when EPA staff spent time developing a  project only to learn that USDA had already funded the same project. The  officials stated that this inefficiency could have been avoided if they had  been communicating with their USDA counterparts about the projects that  each agency was considering to fund. Also, in two states, EPA\u2019s regional  office reported that EPA and USDA may be missing opportunities to  leverage funding for individual projects by not sharing information about  projects.", "In all six states, nearly all of the federal agency regional offices  responded that it would be beneficial to increase their collaboration.  Specifically, more than 90 percent of the federal agency respondents  identified at least one collaborative mechanism that would be beneficial  for them to begin using with another agency. The specific mechanisms  that the agencies identified appeared to relate to the amount of  collaboration in which they had already engaged. For example, agency  regional offices that reported not having collaborated with another agency  most frequently said that it would be beneficial to begin having informal  communications with their counterparts in other agencies and to start  sharing project-specific documents such as preliminary engineering  reports. Alternatively, agency regional offices that reported having  collaborated with another agency most frequently responded that it would  be beneficial to begin using a memorandum of understanding as an  additional mechanism for collaborating where they had not already done  so. In the tribal infrastructure task force\u2019s 2013 memorandum of  understanding, the member agencies\u2014IHS, EPA, USDA, HUD, and  Reclamation\u2014agreed that they are expected to collaborate at the  regional level to provide safe drinking water and basic sanitation for tribes  and to more efficiently leverage program funds. By directing their regional  offices to identify and pursue additional mechanisms to increase their  collaboration, the task force member agencies would have better  assurance that their regional offices are efficiently leveraging limited  program funds and following through on the commitment to collaborate."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Identifying and addressing drinking water and wastewater infrastructure  needs in Indian country is a difficult undertaking. IHS dedicates a  significant effort each year to working with tribes to identify their existing  drinking water and wastewater infrastructure needs. However, one of  IHS\u2019s systems\u2014HITS\u2014may be missing tens of thousands of eligible  Indian homes, an unknown number of which may have existing sanitation  deficiencies. Additionally, some homes\u2019 deficiency levels in HITS are  inaccurate. By implementing a targeted, resource-efficient method to  identify additional eligible Indian homes that may have existing sanitation  deficiencies to include in HITS, IHS could have better assurance that it  has more complete information to help improve its estimate of the number  of eligible Indian homes that may need sanitation facilities assistance.  Also, IHS officials said that improving the system\u2019s accuracy would be  beneficial. By implementing a mechanism to indicate in HITS whether  each home with a deficiency level of 0 has been assessed, IHS could  also have more efficient ways to take steps to address the deficiencies  of the homes contained in HITS.", "IHS and USDA funded some projects to address the most severe  sanitation deficiencies, but residents of many Indian homes remain  without safe drinking water or wastewater disposal as the agencies also  prioritized and funded projects that addressed other needs. We recognize  that IHS faces trade-offs when selecting tribal infrastructure projects to  fund. By reassessing the point distribution across the SDS scoring factors  as part of IHS\u2019s program guidelines update, in light of trade-offs between  funding projects that address the most severe sanitation deficiencies and  projects that meet other needs, IHS may have better assurance that its  projects address the most severe sanitation deficiencies in Indian  communities. Also, by USDA implementing a scoring factor similar to the  one in its Colonias program\u2014that is, one that awards points for proposed  projects that address health risks from a lack of access to safe drinking  water and wastewater disposal\u2014for the Native American program, USDA  would have more assurance that it is evaluating project applications  consistently and funding projects to address the most severe sanitation  deficiencies in Indian communities, consistent with the program\u2019s goal.", "USDA has provided thousands of Alaska Natives with safe drinking water  and wastewater infrastructure through its Rural Alaska Village Grant  program. However, USDA awarded some grants to recipients not  authorized by statute. By ensuring that all Rural Alaska Village grants are  awarded only to recipients authorized by statute, USDA will have  assurance that it is complying with the law. If USDA wants to award Rural  Alaska Village grants to municipalities and Alaska Native villages, it  should seek authority to do so as it did to award these grants to the  Alaska Native Tribal Health Consortium. Also, until USDA amends the  Rural Alaska Village Grant program regulations to be consistent with  USDA\u2019s authority, the agency\u2019s regulations will continue to recognize  recipients not authorized by statute.", "The five agencies that participate in the national tribal infrastructure task  force have committed to working together at the national and regional  levels to increase tribes\u2019 access to safe drinking water and basic  sanitation. In our previous work, we have found that achieving important  national outcomes, such as providing access to safe drinking water and  wastewater disposal, often requires collaborative efforts by a number of  programs across the federal government. At the national level, the task  force has not acted on most of the options it previously identified to  improve member agencies\u2019 collaboration. By reviewing the 2011 task  force report and identifying and implementing additional actions to help  increase their collaboration, the task force member agencies could  improve their ability to leverage limited program funds. At the regional  level, we found that the task force member agencies had not fulfilled their  commitment to collaborate in all of the six states we reviewed. Responses  to our survey also indicated that there is unrealized potential for the task  force member agencies\u2019 regional offices to increase the extent of their  collaboration. By directing their regional offices to identify and pursue  additional mechanisms to increase their collaboration, the task force  member agencies would have better assurance that their regional offices  are leveraging limited program funds and following through on their  commitment to collaborate."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making 16 recommendations\u2014two to IHS to improve information  in HITS; one each to IHS and USDA to review their project selection  processes; two to USDA to address issues with its Rural Alaska Village  Grant program; and two each to IHS, USDA, EPA, HUD, and  Reclamation to increase collaboration at the national and regional levels.", "The Director of IHS should implement a targeted, resource-efficient  method to identify additional eligible Indian homes that may have  existing deficiencies to include in HITS. (Recommendation 1)", "The Director of IHS should implement a mechanism to indicate in  HITS whether each home with a deficiency level of 0 has been  assessed. (Recommendation 2)", "The Director of IHS should reassess the point distribution across the  SDS scoring factors as part of its program guidelines update, in light  of trade-offs between funding projects that address the most severe  sanitation deficiencies and projects that meet other needs.  (Recommendation 3)", "The Assistant to the Secretary of Agriculture for Rural Development  should implement a scoring factor that awards points for proposed  Native American program grant projects that address health risks from  a lack of access to safe drinking water and wastewater disposal, as it  does with the Colonias grant program. (Recommendation 4)", "The Assistant to the Secretary of Agriculture for Rural Development  should ensure that all Rural Alaska Village grants are awarded only  to recipients authorized by law or seek authority to award grants to  municipalities and Alaska Native villages. (Recommendation 5)", "The Assistant to the Secretary of Agriculture for Rural Development  should amend the Rural Alaska Village Grant program regulations so  that they are consistent with USDA\u2019s authority. (Recommendation 6)", "The Director of IHS, in cooperation with other members of the tribal  infrastructure task force, should review the 2011 task force report and  identify and implement additional actions to help increase the task  force\u2019s collaboration at the national level. (Recommendation 7)", "The Administrator of EPA, in cooperation with other members of the  tribal infrastructure task force, should review the 2011 task force  report and identify and implement additional actions to help increase  the task force\u2019s collaboration at the national level.  (Recommendation 8)", "The Assistant to the Secretary of Agriculture for Rural Development,  in cooperation with other members of the tribal infrastructure task  force, should review the 2011 task force report and identify and  implement additional actions to help increase the task force\u2019s  collaboration at the national level. (Recommendation 9)", "The Deputy Assistant Secretary of the Department of Housing and  Urban Development\u2019s Office of Native American Programs, in  cooperation with other members of the tribal infrastructure task force,  should review the 2011 task force report and identify and implement  additional actions to help increase the task force\u2019s collaboration at the  national level. (Recommendation 10)", "The Commissioner of Reclamation, in cooperation with other  members of the tribal infrastructure task force, should review the 2011  task force report and identify and implement additional actions to help  increase the task force\u2019s collaboration at the national level.  (Recommendation 11)", "The Director of IHS, in cooperation with other members of the tribal  infrastructure task force, should direct IHS area offices to identify and  pursue additional mechanisms to increase their collaboration.  (Recommendation 12)", "The Assistant to the Secretary of Agriculture for Rural Development,  in cooperation with other members of the tribal infrastructure task  force, should direct USDA state offices to identify and pursue  additional mechanisms to increase their collaboration.  (Recommendation 13)", "The Administrator of EPA, in cooperation with other members of the  tribal infrastructure task force, should direct EPA regional offices to  identify and pursue additional mechanisms to increase their  collaboration. (Recommendation 14)", "The Deputy Assistant Secretary of the Department of Housing and  Urban Development\u2019s Office of Native American Programs, in  cooperation with other members of the tribal infrastructure task force,  should direct HUD regional offices to identify and pursue additional  mechanisms to increase their collaboration. (Recommendation 15)", "The Commissioner of Reclamation, in cooperation with other  members of the tribal infrastructure task force, should direct  Reclamation regional offices to identify and pursue additional  mechanisms to increase their collaboration. (Recommendation 16)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to the  Department of Health and Human Services (for IHS), HUD, the  Department of the Interior (for Reclamation), EPA, USDA, the Department  of Defense (for the Corps), and the Department of Commerce (for EDA).  Of the five agencies to which we directed recommendations, three\u2014 Health and Human Services, HUD, and Interior\u2014agreed with the  recommendations directed to them. The fourth agency, EPA, agreed with  one of the recommendations and agreed with the intent of the second  recommendation but proposed revised language, as discussed below.  The Acting Director of Grants Evaluation for HUD\u2019s Office of Native  American Programs provided comments by e-mail, and Health and  Human Services, Interior, and EPA provided written comments that are  reproduced in appendixes V, VI, and VII, respectively. The fifth agency to  which we directed recommendations, USDA, disagreed with the two  recommendations regarding the Rural Alaska Village Grant program and  neither agreed nor disagreed with the other three recommendations  directed to it, although the agency proposed alternative language for two  of these recommendations in its written comments, reproduced in  appendix VIII. Of the two agencies to which we did not direct  recommendations, Defense provided a letter, reproduced in appendix IX,  in which it indicated the agency had no comments on the report, and  Commerce\u2019s Audit Liaison stated in an e-mail that Commerce would not  send a formal comment letter. In addition, Health and Human Services,  USDA, and EDA (for Commerce) provided technical comments, which we  incorporated in the report as appropriate.", "In its written comments, EPA requested that we revise the language of  the recommendation that the members of the tribal infrastructure task  force direct their regional, state, or area offices to identify and pursue  additional mechanisms to increase their collaboration. EPA stated that it  agreed with the intent of the recommendation but that it was concerned  that, as worded, the recommendation may not achieve the intended goal.  Instead, EPA stated that it can accomplish increased regional  collaboration through multiple avenues and as such, provided revised  language that would remove reference to its regional offices taking the  recommended action. We encourage EPA to take advantage of  increasing regional collaboration through all avenues it sees fit. However,  because EPA\u2019s regional offices are the entities that collaborate with other  agencies in the various regions, we continue to believe it is important for  these offices to participate in identifying and implementing the means for  increasing collaboration in their respective regions. As a result, we did not  modify the recommendation language in response to EPA\u2019s comment.", "In its written comments, USDA stated it disagreed with our statements  concerning the Rural Alaska Village Grant program and asked that we  remove the two corresponding recommendations from our report.  Specifically, USDA stated that our recommendations are unnecessary  because the agency is operating within its authorities. USDA stated that it  believes providing grants directly to parties other than the state\u2014 including Alaska Native villages and municipalities\u2014under the 2011  memorandum of agreement is consistent with the purpose of section  306D of the Consolidated Farm and Rural Development Act and  appropriations made for the program. As we state in the report, we agree  that the State of Alaska can choose to make subgrants once it receives  the Rural Alaska Village grant. We also state in the report that we did not  see any evidence of grants being used for other than their intended  purposes during the course of our review. However, the language of  section 306D only authorizes USDA to award grants to the State of  Alaska and not directly to other entities. Therefore, we believe that our  recommendations are necessary. If USDA wants to make Rural Alaska  Village grants to municipalities and Alaska Native villages, it should seek  authority to do so as it did to award such grants to the Alaska Native  Tribal Health Consortium.", "Regarding our fourth recommendation that USDA implement a scoring  factor that awards points for proposed Native American program projects  that address health risks, USDA stated that it would like clarification as to  what form of scoring factor would be acceptable to address this  recommendation. USDA stated that it would prefer to use its discretionary  points under the program\u2019s existing regulations to award additional points  to give a higher priority to projects that address a lack of access to safe  drinking water and wastewater disposal, and that the agency could  implement this change at the start of fiscal year 2019 or sooner. In  contrast, USDA stated that changing the program\u2019s regulations to  implement the scoring factor could take 18 months or longer. USDA also  stated that this approach would only have a programmatic effect in fiscal  years when demand for Native American program grant funds exceeds  the available funding. Our intent for the recommendation as written is to  provide USDA with the flexibility to best determine how to implement it. If  USDA has determined that using its discretionary points under the  program\u2019s existing regulations gives greater priority to addressing health  risks faced by Native American communities, and that such an approach  is consistent with applicable law, such an approach could meet the intent  of our recommendation.", "USDA also requested in its written comments that we modify the  language of the ninth recommendation aimed at increasing collaboration  at the national level by removing reference to increasing national  collaboration and that we modify the thirteenth recommendation aimed at  increasing regional collaboration by removing reference to the agency\u2019s  state offices and regional level collaboration. USDA did not provide a  clear rationale for its requested change for either recommendation. We  continue to believe that implementing these recommendations, as  worded, would help improve collaboration at the national and regional  levels. Therefore, we did not modify the language in response to USDA\u2019s  comments.", "In several places in its written comments, USDA stated that our draft  either omitted information or contained inaccurate information and  requested that we make modifications. Specifically, USDA stated that we  omitted statutory language for the Native American program in a few  places in the report. In response, we added additional language from and  about the Native American program\u2019s authorizing statute in several  places. USDA also stated the report is missing information about the  scope of some of its programs, including its Technical Assistance and  Training program. In response, we added more information about this  program, including obligations made to non-profit organizations that work  on behalf of tribes. Further, USDA stated that we did not accurately  characterize certain activities that USDA conducts under some of its  programs, including identifying tribal needs and conducting operations  and maintenance. In response, we modified language to reflect additional  information about how USDA identifies tribal needs and to indicate that  the Native American program is not authorized to fund operations and  maintenance. Regarding the Rural Alaska Village Grant program, USDA  stated that we did not accurately represent information shared by a USDA  official and information about the number of grants made to the  Consortium. We revised language attributed to the official and clarified  information about the number of grants awarded based on additional  information that USDA provided by e-mail after submitting its written  comments.", "In other cases where USDA requested revisions to the draft in its written  comments, we did not make suggested changes because they did not  align with the scope of our review. Specifically, in addition to its Technical  Assistance and Training program, USDA asked that we add information  about tribal obligations under its Solid Waste Management program.  Since federal agency efforts to fund solid waste management projects are  outside the scope of this review, we did not make this revision. In  addition, USDA requested that we limit our discussion of Rural Alaska  Village Grant awards to fiscal year 2011 and forward. We did not make  this change because USDA\u2019s grants to municipalities and Native villages  prior to 2011 are directly relevant to our findings and are within the scope  of this review. Finally, USDA asked that we edit our description of the  findings of a 2010 report to Congress by citing a different report instead.  We did not make this change because the original report contained  relevant information for our findings.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Agriculture, the Secretary of  Commerce, the Secretary of Defense, the Secretary of Health and  Human Services, the Secretary of Housing and Urban Development, the  Secretary of the Interior, the Administrator of the Environmental  Protection Agency, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Anne-Marie Fennell at (202) 512-3841 or fennella@gao.gov or J. Alfredo  G\u00f3mez at (202) 512-3841 or gomezj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to examine the extent to which the  seven federal agencies, as applicable, (1) identified Indian tribes\u2019 drinking  water and wastewater infrastructure needs; (2) funded tribal drinking  water and wastewater infrastructure projects, including projects to  address the most severe sanitation deficiencies; and (3) collaborated to  meet Indian tribes\u2019 drinking water and wastewater infrastructure needs.", "To address these objectives, we reviewed our previous reports, other  agency reports, and agency obligations to identify the federal agencies  that provide financial or other assistance to Indian tribes for drinking water  and wastewater infrastructure. We identified seven agencies, as shown in  table 4. We identified the Indian Health Service (IHS), Environmental  Protection Agency (EPA), and U.S. Department of Agriculture (USDA) as  federal agencies that have drinking water and wastewater infrastructure  programs specifically targeted to provide financial assistance for planning  and construction to address Indian tribes\u2019 needs. According to IHS  documentation, such needs arise from a sanitation deficiency in existing  drinking water or wastewater infrastructure (or lack thereof) that can  negatively affect public health. In addition, the Department of Housing  and Urban Development (HUD), the Department of the Interior\u2019s Bureau  of Reclamation, the Department of Commerce\u2019s Economic Development  Administration (EDA), and the U.S. Army Corps of Engineers administer  programs that may assist tribes with drinking water and wastewater  infrastructure planning and construction. The types of assistance these  agencies provide vary by program, and each program has its own  eligibility requirements and authorities.", "To determine the extent to which these federal agencies identified Indian  tribes\u2019 drinking water and wastewater infrastructure needs, we identified  requirements for IHS and EPA to collect and report information on needs,  but we did not identify such requirements for the other agencies. We  reviewed IHS\u2019s project-level tribal drinking water and wastewater  infrastructure needs data from the Sanitation Deficiency System (SDS) for  fiscal year 2016, the most recent year of data available at the time of our  review. The SDS contains information about proposed drinking water and  wastewater infrastructure projects, including each project\u2019s estimated  cost. IHS policy directs area staff to invite all federally recognized tribes to  identify potential projects each year. Area staff then work with interested  tribes to develop projects and enter project information into standard  fields in the SDS. As of the end of fiscal year 2016, the SDS included  more than 2,000 projects for 373 tribes. We also reviewed IHS\u2019s most  recent reports describing tribal drinking water and wastewater needs.  In addition, we reviewed information about tribal public drinking water  systems reported in EPA\u2019s 2013 Drinking Water Infrastructure Needs  Survey and Assessment report. EPA assesses and reports on the  nation\u2019s public water systems\u2019 capital improvement needs every 4 years,  including needs of tribally owned or operated drinking water systems. For  its 2013 report, EPA assessed tribal water system needs by administering  a survey to a statistical sample of 306 tribal water systems out of  956 identified tribal public drinking water systems.", "We assessed the reliability of SDS project-level needs data and  information from EPA\u2019s 2013 Drinking Water Infrastructure Needs Survey  and Assessment report by reviewing our previous related work regarding  the use of these data and documentation from IHS and EPA. We also  interviewed IHS and EPA officials involved with identifying tribal water  needs from headquarters and all 12 IHS areas and 9 EPA regions that  administered the drinking water and clean water set-aside programs,  discussing the data and any of its limitations. We tested the data for  accuracy and completeness by identifying any duplicate, missing, or  invalid records and cross-referencing with relevant datasets. We  determined that IHS\u2019s SDS project-level needs data and information  from EPA\u2019s 2013 report were sufficiently reliable to provide descriptive  information on tribes\u2019 needs for drinking water and wastewater  infrastructure projects for this report.", "Further, we reviewed documentation on the Home Inventory Tracking  System (HITS)\u2014IHS\u2019s database containing home-specific information  that the agency also uses in administering the Sanitation Facilities  Construction program. The information in HITS includes each home\u2019s  geographic location and individual sanitation deficiency, and IHS officials  said in February 2018 that the system contained a total of 405,986  homes. We also interviewed IHS headquarters and area officials about  this system\u2019s contents, uses, and limitations, and we compared this  information to the agency\u2019s implementation plan and other documentation  for HITS. We identified issues with the information contained in the  system related to its completeness (whether it contains the correct  number of homes in light of its purpose) and related to the accuracy of  homes identified as having no deficiency, as we discuss in the report.  These issues were sufficient for us to determine that the number of  homes in the system was incomplete and that deficiency level information  was not accurate for all homes in the system. As a result, we did not  assess the reliability of other information in HITS that was not relevant to  our review. We also interviewed officials from the other five agencies  regarding any efforts to collect information on tribal drinking water and  wastewater infrastructure needs.", "To determine the extent to which the agencies funded tribal drinking  water and wastewater infrastructure projects, we analyzed data from the  seven agencies administering programs that provide assistance to tribes  for drinking water and wastewater infrastructure\u2014IHS, EPA, USDA, HUD,  Reclamation, EDA, and Corps. Specifically, we obtained and analyzed  obligations data for drinking water and wastewater projects under  programs that are specifically for or available to tribes. Generally, we  reviewed each agency\u2019s obligations data for fiscal years 2012 through  2016, the most recent 5 years of data available at the time of our review.  Corps provided us with information on obligations for projects that  involved tribal drinking water or wastewater infrastructure, but none of  these obligations were in fiscal years 2012 through 2016. We assessed  the reliability of the other agencies\u2019 data by reviewing our previous related  work regarding the use of these data and any available documentation  from each agency; interviewing knowledgeable agency officials involved  with collecting or analyzing these data; and testing data for accuracy and  completeness by identifying any duplicate, missing, or invalid records. We  present more details about each agency\u2019s data, any limitations, and how  we addressed those limitations below. On the basis of these efforts, we  determined that the data obtained from these agencies were sufficiently  reliable for our descriptive purposes unless otherwise noted below.", "IHS. IHS provided us with project-level obligations data from fiscal  years 2012 through 2016 for tribal drinking water and wastewater  infrastructure projects from its Project Data System. In reviewing  these data, we found data reliability issues that posed challenges to  accurately reporting IHS\u2019s project obligations separate from other  agencies\u2019 contributions to projects, which IHS also tracks in the  system. We determined that the project-level obligations data from the  Project Data System were not sufficiently reliable for the purposes of  this objective. However, we determined that using IHS\u2019s information  on allocations to areas for the same time frame would introduce fewer  limitations to our reporting. IHS provided us with information from  fiscal years 2012 through 2016 on allocations to each of its 12 areas  by Sanitation Facilities Program activity (i.e., sanitation deficiencies,  new housing, and emergency and special projects). IHS officials  stated that the IHS Director of the Division of Sanitation Facilities  Construction determines the area allocations amounts annually, and  that IHS obligated all of its area allocations each fiscal year. IHS did  not separate the area allocations information by drinking water,  wastewater, or solid waste projects; therefore, we report total  obligations with solid waste projects included.", "EPA. EPA provided us with project-level obligations data from fiscal  years 2012 through 2016 from each of its three tribal-specific  programs listed in table 4. EPA uses its Tribal Direct Implementation  Nexus system to track project obligations for the Clean Water Indian  Set-Aside and Drinking Water Infrastructure Grants Tribal Set-Aside  programs, but the agency relies on the State of Alaska to provide  similar project-level information for its Alaska Native Villages and  Rural Community Water Grant program. In reviewing EPA\u2019s data,  we found several duplicate project records. We confirmed the issue  with EPA officials and deleted those duplicate records to accurately  aggregate EPA\u2019s obligations by fiscal year for our report.", "USDA. USDA provided us with grant and loan obligations data from  fiscal years 2012 through 2016 for all of its programs specifically for  or available to tribes from its Community Program Application  Processing system. First, we removed solid waste and landfill projects  that were indicated as such in the project name. To determine the  project obligations for programs specifically for tribes, we included all  obligations from USDA\u2019s Native American and Rural Alaska Village  Grant programs. USDA also awarded grants and loans to tribes or  non-profit organizations working on behalf of tribes from non-tribal  specific programs such as from its Water and Waste Disposal  program as well as the Section 306C Colonias, Emergency  Community Water Assistance Grant, Predevelopment Planning  Grants, Special Evaluation Assistance for Rural Communities and  Households, and Technical Assistance and Training programs. To  determine the project obligations for those programs, we included  projects that had an applicant or customer type as a tribe or tribal  entity (e.g., an organization working on behalf of a tribe or tribes such  as tribal health consortia or tribal utility authorities) and projects that  served a population of at least 50 percent tribal users. For these  awards, we included the full amount of the award regardless of the  percent of tribal users served.", "HUD. HUD provided us with project-level obligations data from fiscal  years 2012 through 2016 for its Indian Community Development Block  Grant program from its Performance Tracking Database. We worked  with HUD officials to identify projects that included drinking water and  wastewater infrastructure and to identify the amount of the obligations  used for those purposes to determine HUD\u2019s overall fiscal year project  obligations for tribal water infrastructure.", "Reclamation. Reclamation provided us with project-level obligations  data from fiscal years 2012 through 2016 for the tribal portions of  authorized water system projects, including projects authorized by  enacted Indian water rights settlements. For the Indian water rights  settlement project obligations, Reclamation provided both mandatory  and discretionary amounts. We included both rural water system  projects and Indian water rights settlements projects in reporting  Reclamation\u2019s overall fiscal year obligations.", "EDA. EDA provided us with project-level obligations data from fiscal  years 2012 through 2016 for tribal projects funded by its Public  Works, Economic Adjustment Assistance, and Planning programs  from its Operations Planning and Control System. To determine  whether the EDA projects included drinking water or wastewater  infrastructure, we reviewed each project\u2019s description or scope of  work for mention of a drinking water or wastewater infrastructure  component. If we determined that the project included water  infrastructure, we included the entire project\u2019s obligation amount for  each fiscal year we report.", "In addition, to determine the extent to which agencies\u2019 funding addressed  the most severe sanitation deficiencies, we identified programs that have  documented goals in regulation and policy to fund projects that meet  these needs, which the programs identify as the absence of safe drinking  water or wastewater disposal facilities. These selected programs included  IHS\u2019s Sanitation Facilities Construction program, EPA\u2019s clean water set- aside program, and USDA\u2019s Native American program. For these  programs, we compared the number of funded projects to address the  most severe sanitation deficiencies with the number of funded projects  that met other needs for fiscal year 2016. Specifically, for IHS and EPA,  we calculated the percentage of projects for each deficiency level that the  agencies and other entities selected to fund from the fiscal year 2016  SDS list. For USDA, we reviewed the list of Native American program  project obligations in fiscal year 2016 and determined the number of  projects where USDA reported the purpose as new, replacement,  renovation, or expansion. We also reviewed documentation of the  agencies\u2019 project identification and selection methods to determine  whether these methods aligned with stated goals. We interviewed IHS  and EPA officials from headquarters and all area and regional offices that  administer these programs, and USDA officials from headquarters and six  state-level offices (see below for state selection information), regarding  their administration of these programs. Additionally, we analyzed IHS\u2019s  data from the SDS from fiscal years 2005 through 2016 to identify  projects that remained unfunded and that were in the SDS for more than  5 years. We did not review the extent to which EPA\u2019s drinking water set- aside program addressed the most severe sanitation deficiencies  because EPA regions implement the program using a variety of different  processes.", "During the course of evaluating the extent to which federal agencies have  provided funding for tribal drinking water and wastewater infrastructure  projects, we identified issues with USDA\u2019s Rural Alaska Village Grant  program. We reviewed obligations data in light of the program\u2019s  authorizing statute, implementing regulations, and relevant provisions in  USDA appropriations acts. USDA provided us with the Rural Alaska  Village Grant program\u2019s award amounts for fiscal years 1997 through  2016, and we determined whether the grant recipients were eligible or  ineligible at the time of the award. We interviewed agency officials who  manage the program and from USDA\u2019s Office of the General Counsel.", "To determine the extent to which the federal agencies collaborated to  meet tribal water needs, we reviewed documentation of national-level  collaboration, including federal program and interagency documents,  such as national-level memorandums of understanding and interagency  agreements. We interviewed headquarters officials from the seven  agencies about their interagency collaboration. We compared the  agencies\u2019 actions to the key features of interagency collaboration that we  have previously identified. We reviewed agencies\u2019 collaboration at the  regional level by surveying the seven agencies about their joint actions on  activities related to tribal drinking water and wastewater in six states\u2014 Alaska, Arizona, California, New York, Oklahoma, and South Dakota\u2014 and by conducting a network analysis using the survey responses. We  selected agency regional offices within these six states as the unit of  analysis because the federal agencies organize their field structures  differently, with some using region, district, area, or state offices to work  with tribes\u2014we refer to all of these office types as regional offices. We  selected the nonprobability sample of six states to include a large  percentage of the number of federally recognized tribes, to obtain a range  in the total federal obligations to tribes and identified needs of tribes in the  SDS, and for geographic diversity. The sample of states is not  generalizable, and the results of our work do not apply to all states where  Indian tribes are located. However, reviewing federal agency  collaboration in these states provides illustrative examples of interagency  collaboration within the six selected states, which include about  70 percent of the 573 federally recognized tribes. We compared the  agencies\u2019 reported collaboration with a national-level memorandum of  understanding that contained commitments for collaborating at the  regional level. For a detailed description of our survey methodology  and the analysis of our results, see appendix II.", "We also interviewed federal agency and State of Alaska officials to  discuss the extent to which their drinking water and wastewater  assistance programs collaborate with other agencies to meet tribal  needs in the six selected states. We interviewed, either in person or by  telephone, officials from the eight IHS areas, five EPA regions, and six  USDA state offices that work with tribes and other agencies in the six  states. We conducted site visits from February through April 2017 to three  of the six states\u2014Alaska, Arizona, and Oklahoma. During these visits,  we met with tribal officials and staff and federal agency officials, and we  visited tribal water infrastructure project sites. We selected these states  for site visits based on geographic diversity and to obtain a range in the  amount of tribal water infrastructure needs identified in the SDS. We  met with or interviewed by telephone officials from 22 Indian tribes and  representatives from 8 intertribal organizations that represent and work  with tribes on water infrastructure issues to obtain their views about the  water and wastewater infrastructure assistance that they receive from  federal agencies. We judgmentally selected these tribes and  organizations to obtain a range in their geographic locations and the  amount and variety of federal drinking water and wastewater  infrastructure assistance they have received. Our findings are not  generalizable to all tribes but provide illustrative examples of input  provided by tribal officials.", "We conducted this performance audit from August 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Survey of Federal Agency Collaboration on Tribal Water Infrastructure Projects in Six Selected States", "paragraphs": ["This appendix describes how we selected the sample and administered  the survey, designed the survey questionnaire, and conducted the  network analysis for our survey on interagency collaboration regarding  tribal drinking water and wastewater infrastructure projects."], "subsections": [{"section_title": "Sample Selection and Survey Administration", "paragraphs": ["To determine the extent to which the selected federal agencies have  collaborated to meet tribal water needs, we surveyed officials at seven  federal agencies: Indian Health Service (IHS), Environmental Protection  Agency (EPA), U.S. Department of Agriculture (USDA), Department of  Housing and Urban Development (HUD), Economic Development  Administration (EDA), Bureau of Reclamation, and the U.S. Army Corps  of Engineers. Specifically, we surveyed agency officials in six states:  Alaska, Arizona, California, New York, Oklahoma, and South Dakota.  Appendix I describes how we selected these agencies and states. The  results of this survey are not generalizable beyond these agencies in  these states.", "We reviewed maps of each agency\u2019s regional or state offices and  identified and confirmed the offices that work with tribes and other  agencies in the six selected states. If one state included multiple regions  from the same agency, we administered the survey to officials in all  relevant regional offices. In addition, if one agency\u2019s region covered more  than one of the selected states, we administered a survey to the agency\u2019s  regional office for each state. The federal agencies and regional offices  we included in our survey were:", "Corps divisions: Great Lakes & Ohio River, Northwestern, Pacific  Ocean, South Pacific, Southwestern;", "EDA regions: Austin, Denver, Philadelphia, Seattle;", "EPA regions: 2, 6, 8, 9, 10 (Alaska Operations Office);", "HUD regions: Alaska, Eastern Woodlands, Northern Plains, Southern  IHS areas: Alaska, California, Great Plains, Nashville, Navajo,  Oklahoma City, Phoenix, Tucson;", "Reclamation regions: Great Plains, Lower Colorado, Mid-Pacific; and", "USDA state offices: Alaska, Arizona, California, New York, Oklahoma,  South Dakota.", "In Alaska, we also included the Alaska Department of Environmental  Conservation as a respondent because the state provides a 25 percent  match for two federal water infrastructure programs. We did not include  other state agencies because they do not provide a similar match. We  also included the Alaska Native Tribal Health Consortium because it  administers IHS\u2019s Sanitation Facilities Construction program in Alaska.", "The practical difficulties of conducting any survey may introduce errors,  commonly referred to as non-sampling errors. For example, respondents  may have difficulty interpreting a question, they may have limited  information to respond to a question, or officials from different agencies  may have different recollections regarding the extent of collaboration on  a particular project. We sought to minimize the impact of non-sampling  error by conducting six pretests of the draft questionnaire with agency  officials; five pretests were conducted by telephone and one pretest was  conducted in person. We selected officials to cover a range of agencies  and locations. During these pretests, we sought to determine whether  (1) the questions were clear and unambiguous, (2) terminology was used  correctly, (3) the questionnaire did not place an undue burden on agency  officials, (4) the information could feasibly be obtained, and (5) the survey  was comprehensive and unbiased. We modified the questionnaire in  response to these pretests. To further minimize the impact of non- sampling error, we conducted a sensitivity analysis.", "We customized the questionnaire for each agency regional office so that  we asked each office to respond about its collaboration only with the  other agencies located in its state. We e-mailed these questionnaires to  46 respondents from May 15 through May 17, 2017, and conducted  follow-up as necessary. We received a 100 percent response rate."], "subsections": []}, {"section_title": "Survey Questionnaire Design", "paragraphs": ["In the survey, we asked each agency regional office whether it had jointly  conducted activities related to tribal drinking water or wastewater projects  during the past 3 years with each of the other agencies\u2019 regional offices  within the same state. If an agency regional office responded \u201cyes,\u201d we  then provided a list of tribal drinking water and wastewater activities and  asked the agency regional office if it had jointly conducted any of the  listed activities related to tribal drinking water and wastewater  infrastructure projects in collaboration with the other agency. The  activities included: identifying infrastructure needs, communicating  information to tribes about programs that fund projects, planning and  designing proposed projects, evaluating proposed projects according to  eligibility and scoring criteria, selecting projects to fund, constructing  projects, providing technical assistance for operating and maintaining  water infrastructure, and negotiating or implementing Indian water rights  settlements. We developed the list of activities based on our initial  interviews and pretests with agency officials.", "We next provided a list of collaborative mechanisms. For each of these  collaborative mechanisms, we asked the agency regional office if it had  used the mechanism when jointly conducting activities in collaboration  with the other agency related to tribal drinking water and wastewater  infrastructure projects within the same state during the past 3 years. The  mechanisms included: state-, regional-, or project-level memorandum of  understanding or agreement; interagency agreement to transfer funding;  working group, task force, or committee; consulting on project selection;  sharing project documents; geographic co-location; shared database or  other data sharing; conferences or forums; informal or ad hoc  communication; and personnel detailing or sharing. If the agency regional  office responded that it had not used one of the listed mechanisms, we  asked if it would be beneficial to use that mechanism to collaborate in the  future. We identified the list of mechanisms based on our prior work on  interagency collaboration and pretests with agency officials. We also  asked the agency regional office what factors, if any, helped it to  collaborate with the other agency on tribal drinking water and wastewater  infrastructure projects in the state and what factors, if any, hindered it  from collaborating with the other agency. For both questions, we asked  the agency regional office to consider agency policies and procedures,  available resources, leadership, personalities, presence of written  agreements, and accountability measures.", "If an agency regional office responded \u201cno\u201d to the initial question of  whether it had jointly conducted activities related to tribal drinking water  or wastewater projects during the past 3 years with another agency\u2019s  regional office, we asked a shorter set of follow-up questions. We  provided the list of collaborative mechanisms and asked if it would be  beneficial for the agency regional office to use any of the listed  mechanisms to collaborate with the other agency on activities related to  tribal drinking water and wastewater infrastructure projects in the future  in the state. We also asked the agency regional office to describe the  factors, if any, that hindered its collaboration with the other agency."], "subsections": []}, {"section_title": "Network Analysis", "paragraphs": ["To quantify the extent of interagency collaboration during the past 3 years  and the potential for future collaboration among the federal agencies we  surveyed, we conducted a Network Analysis\u2014a method of analyzing the  patterns of interaction among multiple entities. Specifically, we  aggregated the survey responses to our questions about drinking water  and wastewater activities and collaborative mechanisms for each pair  of agencies in all six states. We configured these aggregated data into  networks representing the pattern of collaboration among the agencies.  We then analyzed these networks to determine how extensively the  agencies have collaborated and the extent to which additional future  collaboration could be beneficial for them. We also analyzed these  networks to assess how the pattern of collaboration varied by state. We  describe the steps of our analysis and agency survey responses below."], "subsections": [{"section_title": "Quantifying Collaboration between Pairs of Federal Agencies", "paragraphs": ["To quantify the extent of collaboration among the federal agencies across  the six states during the past 3 years, we aggregated the responses to  our survey by agency pair. The seven federal agencies form 21 possible  agency pairs. For each agency pair, we combined the first agency\u2019s  responses regarding its collaboration with the second agency and the  second agency\u2019s responses regarding its collaboration with the first  agency. We aggregated the agency pair responses in this way for each  of the three measures of collaboration for all six states, specifically:", "Drinking water and wastewater activities. We calculated the total  number of instances in which each agency in a pair reported having  worked on an activity with the other agency in that pair during the past  3 years (see column 2 in table 5). We examined this measure to  identify the pairs of agencies that collaborated most and least  extensively. For example, IHS and EPA reported the highest number  of instances of jointly conducting tribal drinking water and wastewater  activities across the six states. In contrast, EDA and IHS reported no  such instances of collaboration.", "Use of collaborative mechanisms. We calculated the total number  of instances in which each agency in a pair reported having used a  mechanism to collaborate with the other agency in that pair during the  past 3 years (see column 3 in table 5). We examined this measure to  identify the pairs of agencies that collaborated most and least  extensively. The pattern of collaboration based on this measure is  similar to the pattern based on drinking water and wastewater  activities. For example, IHS and EPA also reported the highest  number of instances of using specific collaborative mechanisms  across the six states.", "Potential future collaboration. We calculated the total number of  instances in which each agency in a pair reported that it would be  beneficial to use a mechanism to collaborate with the other agency  in that pair in the future (see column 4 in table 5). We compared this  measure to the number of mechanisms the agency pairs reported  having used during the past 3 years. Each of the agency pairs  reported that it would be beneficial to use additional collaborative  mechanisms in the future, including those pairs that had reported not  collaborating. For example, the agency pairs of EDA-IHS and EDA- Reclamation both reported no instances of using a mechanism to  collaborate with each other and both reported multiple instances in  which use of a collaborative mechanism would be beneficial in the  future."], "subsections": []}, {"section_title": "Quantifying the Potential for Increased Collaboration", "paragraphs": ["To quantify the potential to increase collaboration among the federal  agencies, we configured the agency pair data into two networks. The first  network represented recent collaboration among the agencies\u2014the  instances in which agencies reported having used a mechanism to  collaborate during the past 3 years (based on column 3 in table 5).  The second network represented potential future collaboration among the  agencies (based on the sum of columns 3 and 4 in table 5). As such, it  captures the instances in which agencies reported having used a  mechanism to collaborate during the past 3 years plus the instances in  which they reported it would be beneficial to use an additional mechanism  in the future.", "Figure 3 shows a graphical illustration of these two networks. In this  figure, the circles represent agencies and the lines represent  collaboration between the agencies. Specifically, the darkness of the lines  indicates the number of mechanisms used by the corresponding pair of  agencies. The left side of figure 3 illustrates reported use of collaborative  mechanisms during the past 3 years, and the right side of figure 3  illustrates potential future collaboration. The figure shows that overall  collaboration would increase if the agencies began using the additional  mechanisms that they reported would be beneficial.", "We quantified the difference between these networks in two ways. First,  we calculated the increase in overall collaboration that would occur if  agencies began using the additional mechanisms that they reported  would be beneficial. Based on this calculation, the number of instances of  agencies using collaborative mechanisms would approximately triple.  Specifically, agencies reported 403 instances of having used a specific  mechanism to collaborate with another agency\u2014this number would  increase to 1,249 if agencies began using all of the identified mechanisms  that they reported would be beneficial. This difference is shown in figure  3, in which the right side of the figure (potential future collaboration) has  a greater number of darker lines connecting the agencies compared with  the left side of the figure (recent collaboration).", "Second, we measured how the relative amount of collaboration for each  agency would change if the agencies began using additional mechanisms  they reported would be beneficial. To do this, we aggregated the agency  pair data for each of the agencies. For the network of recent  collaboration, for example, we added (1) the number of instances that  each agency reported using a collaborative mechanism with any of the  other agencies and (2) the number of instances that any of the other  agencies reported using a collaborative mechanism with the first agency.  We performed a similar calculation using the agency pair data for the  network of potential future collaboration. The analysis shows that the use  of collaborative mechanisms during the past 3 years was primarily  centered on three agencies (IHS, EPA, and USDA). If all of the agencies  began using the additional mechanisms that they reported would be  beneficial, however, collaboration would be distributed more evenly  across the entire network of agencies. This difference is also shown in  figure 3, in which agencies such as HUD, Reclamation, and Corps are  connected to other agencies with dashed lines on the left side of the  figure (representing less extensive recent collaboration), but with thick  lines on the right side of the figure (representing more extensive potential  future collaboration)."], "subsections": []}, {"section_title": "Quantifying the Variation in Collaboration by State", "paragraphs": ["To quantify the extent of variation in collaboration by state, we  disaggregated the agency pair data reported in table 5 by each of the  states for the three measures of collaboration we asked about in our  survey. In particular, tables 6, 7, and 8 show the number of instances in  which an agency reported collaborating on drinking water and wastewater  infrastructure activities with another agency during the past 3 years  (table 6), using collaborative mechanisms with another agency during  the past 3 years (table 7), and collaborative mechanisms that would be  beneficial to use with another agency in the future (table 8). The totals in  the bottom rows of these tables show the extent of collaboration based on  these measures by state. Specifically, tables 6 and 7 show that agencies  worked together on activities and used collaborative mechanisms most  extensively in Alaska and least extensively in New York and Oklahoma.  Table 8 shows that agencies in New York and Oklahoma reported the  greatest potential for using additional collaborative mechanisms. The  totals in the far right columns of these tables show the extent of reported  collaboration by activity (table 6), collaborative mechanism (table 7), and  the extent of potential future collaboration by collaborative mechanism  (table 8)."], "subsections": []}]}]}, {"section_title": "Appendix III: Federal Agency Obligations for Tribal Drinking Water and Wastewater Infrastructure Projects, Fiscal Years 2012 through 2016", "paragraphs": ["Appendix III: Federal Agency Obligations for  Tribal Drinking Water and Wastewater  Infrastructure Projects, Fiscal Years 2012  through 2016 According to Environmental Protection Agency officials, obligations listed may not match annual  appropriations because the agency may have de-obligated and re-obligated any unexpended  obligations to other projects.  We determined that the U.S. Department of Agriculture awarded a grant or loan from its non-tribal  specific programs for a tribal drinking water or wastewater infrastructure project if the recipient was a  tribe or tribal entity (for example, an organization working on behalf of a tribe or tribes such as tribal  health consortia or tribal utility authorities) and if the project was to serve a population of at least 50  percent American Indian or Alaska Native.   The Economic Development Administration obligated approximately $34,000 for one project in fiscal  year 2012, which is not reflected in the table due to rounding. We determined that the Economic  Development Administration awarded a grant for a tribal drinking water or wastewater infrastructure  project if the project\u2019s description or scope of work mentioned a drinking water or wastewater  infrastructure component. Obligations are combined from three programs: Public Works, Economic  Adjustment Assistance, and Planning."], "subsections": []}, {"section_title": "Appendix IV: Examples of Tribal Water Infrastructure Projects We Visited", "paragraphs": ["This appendix contains summaries and photographs of selected tribal  drinking water and wastewater infrastructure projects we visited from  February through April 2017 in Alaska, Arizona, and Oklahoma."], "subsections": [{"section_title": "Portable Alternative Sanitation System Pilot Project, Native Village of Kivalina, Alaska", "paragraphs": ["The Native Village of Kivalina, located on a barrier island above the Arctic  Circle, is one of approximately 30 communities in Alaska where residents  do not have access to safe drinking water and wastewater disposal  facilities in their homes. Kivalina, a community of 469 residents, has a  community washeteria with washing machines, dryers, and drinking water  available for purchase. Like many Alaska Native villages, the harsh winter  climate, limited revenue, and isolation create challenges for installing and  operating water infrastructure. Erosion due to diminishing sea ice and  other factors threaten Kivalina, and the community is considering  relocation. As such, infrastructure improvements are limited to small  projects consisting of moveable, low-water use infrastructure to provide  interim sanitation improvements. In 2015, the Alaska Native Tribal Health  Consortium installed a pilot sanitation system in nine homes. This system  is called the Portable Alternative Sanitation System and consists of a  bathroom sink, rainwater catchment, in-home water treatment, and a  separating toilet, where liquid waste is collected separate from solid  waste. According to a Consortium report, the system is a low-cost  alternative to traditional piped infrastructure. The total cost was $633,000  to design, install, and monitor the system, with the Indian Health Service  (IHS) and the Consortium contributing to the project. The Consortium  recommended expanding the pilot system to the rest of Kivalina, and a  Consortium official said it is working with IHS to test the system in several  homes in three other unserved communities in Alaska."], "subsections": []}, {"section_title": "Village of Shungopavi Sewer Line Q & Dump Stations Construction Project, Hopi Tribe, Arizona", "paragraphs": ["As of 2015, more than 30 percent of the nearly 80 homes in the Hopi  Village of Shungopavi did not have adequate wastewater disposal. The  Sewer Line Q and Dump Stations construction project included installing  a sewer main to connect nine homes to sewer service. Previously, some  of these homes had discharged wastewater directly onto the ground, and  one had a septic system. The project also involved installing three  honeybucket dump stations in the village and connecting them to the  existing sewer system so that an additional 19 homes could dispose of  raw sewage in an environmentally safe manner. According to IHS  officials, solid rock a few feet beneath the surface made it challenging and  expensive to lay the sewer pipes. The total estimated cost was $666,000,  with the Environmental Protection Agency (EPA), the Village of  Shungopavi, and IHS contributing to the project. According to IHS  officials, the project is expected to be fully constructed in 2018."], "subsections": []}, {"section_title": "Oaks Wastewater Lagoons Construction Project, Cherokee Nation, Oklahoma", "paragraphs": ["The Cherokee Nation\u2019s Oaks Wastewater Lagoons project serves an  estimated 85 Indian-owned homes in the community of Oaks, Oklahoma.  The project consisted of constructing three wastewater lagoons and a  spray irrigation field. According to a tribal official, because the previous  lagoons leaked into the adjacent creek, local residents who used the  creek for swimming, fishing, and other traditional purposes were at high  risk of coming in contact with lagoon leakage. The total cost of the project  was an estimated $1.22 million, and the U.S. Department of Agriculture,  EPA, IHS, the Department of Housing and Urban Development, and the  Oklahoma Water Resources Board made contributions to the project. The  Cherokee Nation completed the project in 2012 under the provisions of its  self-governance compact with IHS."], "subsections": []}, {"section_title": "Drinking Water Pump Station Replacement Project, Sasakwa Rural Water District, Seminole Nation of Oklahoma", "paragraphs": ["The Sasakwa Rural Water District is owned and operated by the  Seminole Nation of Oklahoma and serves 61 households\u2014about  60 percent of which are Indian homes, according to tribal officials. The  Drinking Water Pump Station Replacement project involved drilling new  wells and constructing a new pump station and treatment system. IHS  constructed the original Sasakwa water treatment plant in 1972.  According to an IHS project summary, the problems with the prior system  included (1) recurring leaks in the water transmission line and distribution  system and (2) deterioration of the pump and treatment building and  equipment due to weather, vandalism, and poor water quality. The project  cost approximately $700,000, with EPA funding the project. According to  tribal officials, the replacement water treatment plant became operational  in 2014."], "subsections": []}]}, {"section_title": "Appendix V: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Jeffery D. Malcolm (Assistant  Director, in memoriam), Leslie Kaas Pollock (Analyst in Charge), Carolyn  S. Blocker, Mark Braza, John Delicath, David Dornisch, Cynthia Grant,  Susan Iott, Serena Lo, Elizabeth Luke, Micah McMillan, Jon Melhus,  Jeanette Soares, Sara Sullivan, Kiki Theodoropoulos, and Sarah Veale  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Tens of thousands of American Indians and Alaska Natives do not have safe drinking water or wastewater disposal in their homes, which may negatively affect their health.", "We found that the Indian Health Service (and other federal agencies that fund tribal water projects) spent about $370 million on these projects in 2016. However, they didn't always prioritize projects in areas that lacked safe drinking water or wastewater disposal.", "We recommended that IHS and the Department of Agriculture update their processes to prioritize tribal water infrastructure projects in communities that currently lack safe drinking water and wastewater disposal."]}
{"id": "GAO-19-120T", "url": "https://www.gao.gov/products/GAO-19-120T", "title": "Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare for the Future", "published_date": "2018-10-10T00:00:00", "released_date": "2018-10-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The 2018 National Defense Strategy emphasizes that restoring and retaining readiness across the entire spectrum of conflict is critical to success in the emerging security environment. Air Force readiness has steadily declined primarily due to the persistent demand on a fleet that has aged and decreased in size since the 1990s. The Air Force is working to both rebuild the readiness of its forces and modernize its aging fleet to meet future threats. However, according to the Air Force, its readiness goals will take years to achieve as it continues to be challenged to rebuild readiness amid continued operational demands.", "This statement provides information on Air Force (1) readiness and management challenges including personnel, equipment, training, and organization and utilization, and (2) plans to grow and modernize its force in the context of readiness recovery across DOD. Also, GAO summarizes recommendations to address these challenges and actions taken by the Air Force.", "This statement is based on previously published work since 2016 related to Air Force readiness challenges, fighter pilot workforce requirements, weapon sustainment, aviation training, and force structure."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's prior work has highlighted that the Air Force faces management and readiness challenges in four interrelated areas:", "Personnel: The Air Force has reported that pilot and aircraft maintainer shortfalls are a key challenge to rebuilding readiness. GAO found in April 2018 that the Air Force had fewer fighter pilots than authorizations for 11 of 12 years, from fiscal years 2006 through 2017. Even as unmanned aerial systems had become more prevalent and fighter pilot workloads had increased, the Air Force had not reevaluated fighter squadron requirements. GAO recommended that the Air Force reevaluate fighter pilot squadron requirements to ensure it has the pilots necessary for all missions.", "Equipment: Air Force aircraft availability has been limited by challenges associated with aging aircraft, maintenance, and supply support. GAO reported in September 2018 that, from fiscal year 2011 through 2016, the Air Force generally did not meet availability goals for key aircraft. Further, in October 2017 GAO found F-35 availability was below service expectations and sustainment plans did not include key requirements. GAO recommended that DOD revise F-35 sustainment plans to include requirements and decision points needed to implement the F-35 sustainment strategy.", "Training: The Air Force has identified the need to ensure its forces can successfully achieve missions to address a broad range of current and emerging threats. However, GAO reported in September 2016 that Air Force combat fighter squadrons did not complete annual training requirements due to aircraft availability and training range limitations, and had used the same underlying assumptions for its annual training requirements from 2012 to 2016. GAO recommended that the Air Force reassess its annual training requirements to ensure its forces can accomplish a full range of missions.", "Organization and Utilization: Air Force management of its force structure can also exacerbate readiness challenges. GAO found in July 2018 that the Air Force's organization of its small F-22 fleet had not maximized aircraft availability, and that its utilization of F-22s reduced opportunities for pilots to train for missions in high-threat environments. GAO found that unless the Air Force assesses the organization and use of its F-22s, F-22 units are likely to continue to experience aircraft availability and pilot training rates that are below what they could be. GAO recommended that the Air Force reassess its F-22 organizational structure to reduce risk to future operations.", "Looking to the future, the Air Force will have to balance the rebuilding of its existing force with its desire to grow and modernize. To meet current and future demands, the Air Force has stated that it needs to have more squadrons. However, the costs of such growth are as yet unknown, and will have to compete with other military services looking to increase their force structure and recapitalize their forces. Even with growth, the Air Force would be dependent on the force of today for decades to come and will need to stay focused on rebuilding the readiness of existing forces. Addressing GAO's recommendations are necessary steps to meet current and future needs and can assist the Air Force moving forward."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made 14 recommendations in prior unclassified work described in this statement. DOD generally concurred with most of them and has implemented 1. Continued attention to these recommendations can assist and guide the Air Force moving forward as it seeks to rebuild the readiness of its forces."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss issues related  to Air Force readiness.", "In June 2017, we issued a report highlighting five key mission challenges  facing the Department of Defense (DOD). In that report, we noted that  the United States faces an extremely challenging national security  environment at the same time it is grappling with addressing an  unsustainable fiscal situation in which DOD accounts for approximately  half of the federal government\u2019s discretionary spending. Within this  environment, DOD is working to both rebuild the readiness of its current  forces and modernize to meet future threats. Since we issued that report,  the Department released a new National Defense Strategy in January  2018 that prioritizes the long-term challenges posed by highly capable  adversaries and emphasizes the need to rebuild readiness. Additionally,  Congress has passed appropriations to fund DOD\u2019s effort to restore  military readiness.", "This statement provides information on Air Force (1) readiness and  management challenges in four interrelated areas of personnel,  equipment, training, and organization and utilization, and (2) plans to  grow and modernize its force in the context of rebuilding readiness across  DOD. We also summarize our recommendations to address these Air  Force challenges and their actions taken.", "This statement is based on our body of work issued from 2016 to 2018  examining Air Force readiness challenges, fighter pilot workforce  requirements, weapon system sustainment, aviation training, and force  structure. To perform our prior work, we analyzed Air Force readiness,  personnel, maintenance, and training data, and interviewed cognizant Air  Force officials involved in operations. The reports cited throughout this  statement contain more details on the scope of the work and the  methodology used to carry it out. We have also issued several classified  reports since 2016 examining these issues and made recommendations  to the Air Force; however this statement does not include that work.", "We conducted the work on which this testimony is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD has reported that more than a decade of conflict, budget  uncertainty, and reductions in force structure have degraded military  readiness; in response, the department has made rebuilding the  readiness of the military forces a priority. The 2018 National Defense  Strategy emphasizes that restoring and retaining readiness across the  entire spectrum of conflict is critical to success in the emerging security  environment. Nevertheless, DOD reported readiness of the total military  force remains low and has remained so since 2013. Our work has shown  that Air Force readiness, in particular, has steadily declined due to a  persistent demand for forces, a decline in equipment availability and  experienced maintenance personnel, the effect of high deployment rates  on units\u2019 ability to conduct needed training, and a smaller inventory of  aircraft. DOD has made department-wide progress in developing a plan  to rebuild readiness of the military force. In August 2018, we reported  that the Office of the Secretary of Defense has developed a Readiness  Recovery Framework that the Department is using to guide the military  services\u2019 efforts and plans to regularly assess, validate, and monitor  readiness recovery. According to officials, the Office of the Secretary of  Defense and the military services are currently revising readiness goals  and accompanying recovery strategies, metrics, and milestones to align  with the 2018 National Defense Strategy and Defense Planning  Guidance. However, additional work remains to ensure that the actions  DOD is taking will ultimately achieve overall readiness goals.", "DOD\u2019s readiness rebuilding efforts are occurring in a challenging context  that requires the department to make difficult decisions regarding how  best to address continuing operational demands while preparing for future  challenges. An important aspect of this, across all of the military services,  is determining an appropriate balance between maintaining and  upgrading legacy weapon system platforms currently in operational use  and procuring platforms able to overcome rapidly advancing future  threats. Air Force leaders have stated that striking such a balance is  exceptionally difficult. While each of the military services, including the Air  Force, must grapple with these choices, senior leaders have called for  immediate readiness rebuilding with particular focus on aviation. In a  memorandum on September 17, 2018, the Secretary of Defense noted  that DOD faces shortfalls in aviation squadrons across the force with the  aviation inventory and supporting infrastructure suffering from systemic  underperformance and unrealized capacity. In order to focus on meeting  DOD\u2019s most critical priorities first, the Secretary of Defense emphasized  the need to rebuild readiness. As such, the Secretary directed the Air  Force to achieve a minimum of 80 percent mission capable rates for fiscal  year 2019 for the F-35, F-22, and F-16, while simultaneously reducing  these platforms\u2019 operating and maintenance costs every year starting in  fiscal year 2019."], "subsections": []}, {"section_title": "Air Force Faces Several Interrelated Management and Readiness Challenges", "paragraphs": ["Our prior work has identified management and readiness challenges in  four interrelated areas\u2014personnel, equipment, training, and organization  and utilization, and we have made recommendations to help the Air Force  address rebuilding the readiness of its existing fleet."], "subsections": [{"section_title": "Personnel: Pilot and Aircraft Maintainer Shortfalls Have Impeded Readiness Recovery", "paragraphs": ["The Air Force has reported that manpower shortfalls, particularly among  skilled pilots and maintainers, are a primary challenge to rebuilding  readiness. As we have previously reported, developing fighter pilots  requires a significant investment of time and funding. According to Air  Force officials, a fighter pilot requires approximately 5 years of training to  be qualified to lead flights, at a cost of between about $3 million to $11  million depending on the specific type of aircraft. In April 2018, we  reported that according to Air Force pilot staffing level and authorizations  data for fiscal years 2006 through 2017, the Air Force had fewer fighter  pilots than authorizations for 11 of those 12 years (see fig. 1). This gap  grew from 192 fighter pilots (5 percent of authorizations) in fiscal year  2006, to 1,005 (27 percent) in fiscal year 2017. According to briefing  documents prepared by the Air Force, this gap was concentrated among  fighter pilots with fewer than 8 years of experience. The Air Force  forecasted that the fighter pilot gap will persist over time, even as the Air  Force takes steps to train more fighter pilots and improve retention.", "Air Force officials identified multiple factors that led to low numbers of  fighter pilots. For example, the military services trained fewer fighter pilots  than targeted over the last decade. In fiscal years 2007 through 2016, the  Air Force trained 12 percent fewer new fighter pilots than the targeted  amount. In our April 2018 report, we found that the military services had  not reevaluated squadron requirements to reflect increased fighter pilot  workload and the emergence of unmanned aerial systems. Fighter pilots  and squadron leaders from each of the military services we interviewed at  the time consistently told us that the fighter pilot occupation has  significantly changed in recent years due to changes in fighter aircraft  tactics and technology, additional training requirements, and the removal  of administrative support positions from squadrons. Without updating  squadron requirements to reflect this growing administrative burden on  fighter pilots, the currently identified differences between fighter pilot  numbers and authorizations may be understated. By contrast, without  updating future fighter pilot requirements to take into account changing  roles and missions\u2014in particular the increasing role of unmanned aerial  systems in combat operations\u2014forecasted fighter pilot gaps may be  overstated. In short, we concluded that reevaluating fighter pilot  requirements is a key first step to help the military services, including the  Air Force, clearly determine the magnitude of the gaps and target  strategies to meet their personnel needs. In our April 2018 report, we  recommended that the Air Force reevaluate fighter pilot squadron  requirements to ensure it has the pilots necessary for all missions. DOD  concurred with this recommendation.", "The Air Force is also trying to manage a shortage of aircraft maintainer  personnel\u2014both uniformed personnel and depot civilians. In September  2018, we found that the Air Force reported losing experienced  maintainers, either to retirement or to other programs such as the F-35  Lightning II (F-35). For example, we reported that the Air Force\u2019s C-17,  which is a long-range, heavy logistics transport aircraft, requires depot  modifications to keep it viable, but there was a shortage of depot  maintainer personnel due to attrition, inability to retain skilled workers,  and hiring freezes. The Air Force has several initiatives underway,  including hiring additional maintainer personnel and temporarily  transitioning active-duty maintenance units from some legacy aircraft. As  of August 2018, the Air Force had requested an increased end strength of  8,000 personnel to fill critical personnel needs in maintenance and pilots.  Officials stated that progress was being made in increasing end strength  and hiring additional personnel, which should address these challenges.  However, according to Air Force officials, it may take several years before  newly hired maintainer personnel will have the training and experience  they need to improve aircraft availability rates. We have work underway to  examine the Air Force\u2019s management of its aircraft maintainer workforce  and DOD depot skill gaps and plan to report on these issues over the  next 6 months."], "subsections": []}, {"section_title": "Equipment: Aircraft Availability Has Been Limited by Aging Aircraft, Costly Maintenance, and Diminished Supply Support", "paragraphs": ["Air Force aircraft availability has been limited by challenges associated  with aging aircraft, maintenance, and supply support. According to the Air  Force, the average age of the fleet is 28 years. The average ages of the  B-52 strategic bomber and the KC-135 tanker each exceed 50 years, and  the Air Force expects to continue to use these aircraft for decades. The  Air Force spends billions of dollars each year to sustain its fixed-wing  aircraft fleet\u2014comprised of both legacy and new aircraft\u2014which needs  expensive logistics support, including maintenance and repair, to meet its  availability goals. We reported in September 2018 that from fiscal year  2011 through 2016, the Air Force generally did not meet aircraft  availability goals while it continued to accrue increased maintenance  costs. Figure 2 summarizes the sustainment challenges we reported  that face selected Air Force aircraft.", "Sustainment challenges are not just an issue for older aircraft, but  represent an enduring challenge for the Air Force. The F-35\u2014which is  intended to replace a variety of legacy fighter aircraft in the Air Force and  more broadly represents the future of tactical aviation for DOD\u2014has  projected sustainment costs of over $1 trillion over a 60-year life cycle.  In October 2017, we reported that DOD\u2019s projected operating and support  costs estimate for the F-35 rose by 24 percent from fiscal year 2012 to  fiscal year 2016 and are not fully transparent to the military services.", "In October 2017, we also reported that the F-35 fleet faced sustainment  challenges that pose risks to its ability to meet current and future  warfighter readiness requirements. The Air Force planned to procure  more than 1,700 F-35 aircraft and, as the largest participant in the F-35  program, its readiness could be disproportionately affected by the  sustainment challenges facing this program. In particular, DOD\u2019s  capabilities to repair F-35 parts at military depots were 6 years behind  schedule, which resulted in average part repair times of 172 days\u2014twice  that of the program\u2019s objective. These repair backlogs have contributed to  significant F-35 spare parts shortages\u2014from January to August 7, 2017,  F-35 aircraft were unable to fly 22 percent of the time because of parts  shortages. As a result, the Air Force had generally not met its aircraft  availability goals for its fielded F-35 aircraft (See fig. 3 for Air Force  personnel performing maintenance on the F-35).", "Our work has shown that these challenges are largely the result of  sustainment plans that do not fully include key requirements or timely and  sufficient funding. In our October 2017 report, we recommended, among  other things, that DOD revise sustainment plans to ensure that they  include the key requirements and decision points needed to fully  implement the F-35 sustainment strategy and align funding plans to meet  those requirements. DOD concurred with this recommendation and DOD  officials report that they are focusing actions and resources toward  achieving key production, development and sustainment objectives by  2025. In addition, the conference report accompanying a bill for fiscal  year 2019 defense appropriations directed a higher appropriation amount  for the Air Force\u2019s aircraft procurement than DOD requested in its  budget. This appropriation may create more demand on the already  strained sustainment enterprise for which DOD has not always provided  timely funding (for example, funding for spare parts)."], "subsections": []}, {"section_title": "Training: Units Are Challenged To Achieve Full Spectrum Readiness", "paragraphs": ["The Air Force has identified the need to ensure a full-spectrum capable  force that can successfully perform missions addressing a broad range of  current and emerging threats; however, the Air Force has had difficulty  training for full spectrum readiness. For more than a decade, the Air  Force focused its training on supporting operations in the Middle East,  including Iraq and Afghanistan. Commanders established training  requirements that they deemed necessary to prepare aircrews to conduct  missions in these locations\u2014such as close air support-to-ground forces\u2014 limiting training for other missions. In September 2016, based on our  analysis of data on the completion of annual training, we found that  combat fighter squadrons were generally able to complete mission  training requirements for ongoing contingency operations, but were  unable to meet annual training requirements across the full range of  missions. Wing and squadron commanders we interviewed at the time  cited several common limitations related to the challenges discussed in  this testimony that affected the ability of their squadrons to complete  training across the full range of missions including the maintenance unit\u2019s  ability to provide adequate numbers of aircraft for training, adversary air  tasking, and manpower shortfalls in the squadrons.", "We also reported in September 2016 that F-22 and F-35 squadrons faced  training range limitations. F-22 squadron commanders told us that the  airspace available limits their ability to train for their more complex  missions, including offensive counter air and defensive counter air  missions. Additionally, the commanders we interviewed at the time for  squadrons flying F-22 and F-35 aircraft told us that limits in training range  capabilities, such as threat replicators and targets, affected the training  completed at smaller regional training ranges, as well as at larger training  ranges such as the Utah Test and Training Range and the Nevada Test  and Training Range. According to these officials, the training ranges  lacked many of the more advanced threat replication systems that can  challenge F-35 and F-22 capabilities and provide effective training across  their full range of missions.", "The 2018 National Defense Strategy cites, as the department\u2019s principal  priority, the need to prepare for threats from advanced adversaries due to  the magnitude of the threat they pose. Further, the Air Force reports that  it will confront an increasingly complex security environment in the  coming years that will demand a wider range of skill sets and different  capabilities than are currently being employed. For example, aircrews  may be called upon to conduct missions that require freedom of  maneuver in highly-contested air spaces. However, in our September  2016 report, we found that the Air Force has used the same underlying  assumptions to establish its annual training requirements from 2012  through 2016, which may not reflect current and emerging training needs.  Specifically, the total annual live-fly training sorties by aircraft, the criteria  for designating aircrews as experienced or inexperienced, and the mix  between live and simulator training remained the same from 2012 through  2016. We concluded that without fully reassessing the assumptions  underlying its training requirements, the Air Force could not be certain  that its annual training plans are aligned with its stated goals to ensure a  full-spectrum capable force that can successfully achieve missions across  a broad range of current and emerging threats. We recommended that  the Air Force reassess its annual training requirements and make any  appropriate adjustments to its future training plans to ensure that its  forces can accomplish a full range of missions. The Air Force has a  number of efforts under way to study or address some of the factors that  limit the ability of fighter squadrons to meet annual training requirements."], "subsections": []}, {"section_title": "Organization and Utilization: Air Force Management of Its Forces Can Diminish Existing Capability", "paragraphs": ["The Air Force\u2019s management of its limited force structure can also  exacerbate some of the problems discussed above, as we found for the  F-22 fleet. The F-22, widely regarded as the best air superiority fighter  aircraft in the world, is an integral part of the U.S. military\u2019s ability to  defeat high-end adversaries (See fig. 4 for an image of the F-22).", "To meet its assigned air superiority responsibility, the Air Force is to  provide the combatant commanders with both mission capable aircraft  and pilots who are trained to fly those aircraft in the expected threat  environments. However, in July 2018, we found that Air Force  organization and utilization of its small fleet of F-22s has reduced its  ability to provide these two elements, thereby further limiting this  important capability.", "Specifically, we found that the Air Force\u2019s organization of its small F-22  fleet has not maximized the availability of these 186 aircraft. Availability  was constrained by maintenance challenges and unit organization. For  example, maintaining the stealth coating on the outside of the F-22  aircraft was time consuming and significantly reduced the aircraft\u2019s  availability for missions. Maintenance availability challenges were  exacerbated by the Air Force\u2019s decision to organize the F-22 fleet into  small units of 18 or 21 aircraft per squadron and one or two squadrons  per wing. Traditional fighter wings have three squadrons per wing, with 24  aircraft in each squadron, which creates maintenance efficiencies  because people, equipment, and parts can be shared, according to Air  Force officials. Further, the Air Force organized F-22 squadrons to  operate from a single location. However, it generally deployed only a part  of a squadron, and the remaining part struggled to keep aircraft available  for missions at home. Larger, traditional Air Force squadrons and  deployable units provide a better balance of equipment and personnel,  according to service officials. The Air Force had not reassessed the  structure of its F-22 fleet since 2010 and may be foregoing opportunities  to improve the availability of its small yet critical F-22 fleet, and better  support combatant commander air superiority needs in high threat  environments.", "Further, we found that the Air Force\u2019s utilization of its F-22 fleet limited  pilot opportunities to train for air superiority missions in high threat  environments. To complete the annual training requirements for air  superiority missions, F-22 pilots must train almost the entire year.  However, F-22 pilots were not meeting their minimum yearly training  requirements for air superiority missions, according to Air Force training  reports and service officials. Moreover, using F-22s for exercises and  operational missions that do not require the F-22\u2019s unique capabilities  interrupted pilot training and led to reduced proficiency. For example, F- 22 units were often directed to participate in partnership building  exercises. However, during these exercises, F-22 pilots may be restricted  from flying the F-22 the way they would fly it in combat\u2014due to security  concerns about exposing the F-22\u2019s unique capabilities. These  restrictions not only limited the value of the exercises, but also could  result in pilots developing bad habits, according to Air Force officials. The  Air Force also uses F-22s to support alert missions\u2014that is, a mission  that requires certain bases to have jets ready at all times to respond to  threats from civil or military aviation. The alert mission does not require  the advanced capabilities of the F-22, but we reported that because there  are no other operational Air Force fighter squadrons based at the F-22  locations in Alaska and Hawaii, the alert mission fell on the F-22 units.  Pilots and aircraft assigned to the alert mission could not be used for any  other purposes, limiting opportunities for pilots to enhance air superiority  skills. Unless the Air Force takes steps to assess and make necessary  adjustments to the current organization and use of its F-22s, F-22 units  are likely to continue to experience aircraft availability and pilot training  rates that are below what they could be. As a result, the Air Force may  incur increased risks in future operations in high threat areas. In July  2018, we recommended that the Air Force reassess its F-22  organizational structure and identify ways to increase F-22 pilot training  opportunities for high-end missions to reduce risk to future operations.  DOD concurred with both recommendations."], "subsections": []}]}, {"section_title": "Air Force Will Need to Balance Near-term Readiness Recovery with Plans to Grow and Modernize the Force", "paragraphs": ["In September 2018, the Secretary of the Air Force described the need to  grow the number of Air Force squadrons from 312 to 386\u2014a 24 percent  increase\u2014between fiscal years 2025 and 2030 in order to meet persistent  operational demands and address the challenges identified in the  National Defense Strategy. However, the details and costs of such  growth are as yet unknown and will have to compete with other military  services looking to increase their force structure and major defense  capabilities that require recapitalization. For example, over the next three  decades, the Navy plans to grow its fleet by nearly 25 percent\u2014at an  estimated cost of about $800 billion\u2014and modernizing and maintaining  the nation\u2019s nuclear arsenal could cost $1.2 trillion over the same  timeframe. All of these investments would need to be made amid a  deteriorating national fiscal picture.", "Even if it grows, the Air Force will be dependent on the force of today for  decades to come and will need to stay focused on rebuilding its  readiness. Many of the Air Force\u2019s fourth generation fighters will be part  of the force structure for the next decade or more, and the Air Force plans  to retain the F-22 aircraft until 2060. In addition, the Air Force proposed  divesting the A-10 to make budgetary room for more modern aircraft.  However, as we reported in August 2016, the Air Force did not fully  examine the implications of this course of action and could not  demonstrate how it would meet the multiple missions being performed by  the aging A-10. Therefore, focusing on rebuilding the existing force will  be crucial to positioning the Air Force for the future. While these  challenges are particularly acute in the Air Force, the Air Force is not  alone among the military services. Given persistently low readiness levels  across the military, we have called for a comprehensive readiness  rebuilding plan for the entire Department of Defense to guide rebuilding  efforts, including setting clear goals and identifying resources required to  meet those goals for all services, including the Air Force.", "In sum, as it plans for the future, the Air Force will need to balance the  rebuilding of its existing force with its desire to grow and modernize. We  have made a number of recommendations\u2014with which the Air Force  have generally concurred with but most have not yet been implemented\u2014 that provide a partial roadmap to address important readiness challenges.  Implementing our recommendations to reevaluate fighter pilot squadron  requirements, revise F-35 sustainment plans, reassess annual training  requirements, and examine how the Air Force organizes and utilizes its F- 22 organizational structure are necessary steps to meet current and  future needs and can assist the Air Force moving forward. In addition,  sustained management attention and continued congressional oversight  will be needed to ensure that the Air Force demonstrates progress in  addressing its personnel, equipment, training, and organization and  utilization challenges.", "Chairman Sullivan, Ranking Member Kaine, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have questions about this testimony, please contact  John Pendleton, Director, Defense Capabilities and Management at (202)  512-3489 or pendletonj@gao.gov.", "Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Chris Watson, Assistant  Director; Nick Cornelisse, Amie Lesser, Shari Nikoo, Michael Silver,  Nicole Volchko, and Lillian Yob."], "subsections": []}]}, {"section_title": "Appendix I: Implementation Status of Key Prior GAO Recommendations Related to Air Force Readiness", "paragraphs": ["Over the past three years, we issued several reports related to Air Force  readiness that are cited in this statement. Table 1 summarizes the status  of our key recommendations related to Air Force readiness since 2016; a  total of 14 recommendations. The Department of Defense (DOD) has  implemented 1 of these recommendations. For each of the reports, the  specific recommendations and their implementation status are  summarized in tables 2 through 7."], "subsections": []}, {"section_title": "Related GAO Products", "paragraphs": ["Report numbers with a C or RC suffix are classified. Report numbers with  a SU suffix are sensitive but unclassified. Classified and sensitive but  unclassified reports are available to personnel with the proper clearances  and need to know, upon request.", "Weapon System Sustainment: Selected Air Force and Navy Aircraft  Generally Have Not Met Availability Goals, and DOD and Navy Guidance  Need to Be Clarified. GAO-18-678. Washington, D.C.: September 10,  2018.", "Military Readiness: Air Force Plans to Replace Aging Personnel  Recovery Helicopter Fleet. GAO-18-605. Washington, D.C.: August 16,  2018.", "Military Aviation Mishaps: DOD Needs to Improve Its Approach for  Collecting and Analyzing Data to Manage Risks. GAO-18-586R.  Washington, D.C.: August 15, 2018.", "Military Readiness: Update on DOD\u2019s Progress in Developing a  Readiness Rebuilding Plan. GAO-18-441RC. Washington, D.C.: August  10, 2018. (SECRET)", "Force Structure: F-22 Organization and Utilization Changes Could  Improve Aircraft Availability and Pilot Training. GAO-18-190. Washington,  D.C.: July 19, 2018.", "Military Personnel: Collecting Additional Data Could Enhance Pilot  Retention Efforts. GAO-18-439. Washington, D.C.: June 21, 2018.", "Air Force Readiness: Changes to Readiness Reports Could Help  Stakeholders Take More Informed Actions. GAO-18-65C. Washington,  D.C.: June 18, 2018. (SECRET)", "Force Structure: Changes to F-22 Organization and Utilization Could  Improve Aircraft Availability and Pilot Training. GAO-18-120C.  Washington, D.C.: April 27, 2018. (SECRET//NOFORN)", "Military Readiness: Clear Policy and Reliable Data Would Help DOD  Better Manage Service Members\u2019 Time Away from Home. GAO-18-253.  Washington, D.C.: April 25, 2018.", "Warfighter Support: DOD Needs to Share F-35 Operational Lessons  Across the Military Services. GAO-18-464R. Washington, D.C.: April 25,  2018.", "Weapon System Sustainment: Selected Air Force and Navy Aircraft  Generally Have Not Met Availability Goals, and DOD and Navy Guidance  Need Clarification. GAO-18-146SU. Washington, D.C.: April 25, 2018.", "Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce  Requirements. GAO-18-113. Washington, D.C.: April 11, 2018.", "Military Aircraft: F-35 Brings Increased Capabilities, but the Marine Corps  Needs to Assess Challenges Associated with Operating in the Pacific.  GAO-18-79C. Washington, D.C.: March 28, 2018. (SECRET)", "F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting  Readiness and Cost Transparency. GAO-18-75. Washington, D.C.:  October 26, 2017.", "Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "Air Force Training: Further Analysis and Planning Needed to Improve  Effectiveness. GAO-16-864. Washington, D.C.: September 19, 2016.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 7, 2016.", "Force Structure: Better Information Needed to Support Air Force A-10  and Other Future Divestment Decisions. GAO-16-816. Washington, D.C.:  August 24, 2016.", "Air Force Training: Further Analysis and Planning Needed to Improve  Effectiveness. GAO-16-635SU. Washington, D.C.: August 16, 2016.", "Force Structure: Better Information Needed to Support Air Force A-10  and Other Future Divestment Decisions. GAO-16-525C. Washington,  D.C.: July 12, 2016. (SECRET//NOFORN)", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-534C. Washington, D.C.: June  30, 2016. (SECRET)", "Air Force: Service Faces Challenges to Rebuilding Readiness.  GAO-16-482RC. Washington, D.C.: May 25, 2016. (SECRET)", "Force Structure: Performance Measures Needed to Better Implement the  Recommendations of the National Commission on the Structure of the Air  Force. GAO-16-405. Washington, D.C.: May 6, 2016.", "F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its  Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016.", "F-35 Sustainment: Need for Affordable Strategy, Greater Attention to  Risks, and Improved Cost Estimates. GAO-14-778. Washington, D.C.:  September 23, 2014.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["To be ready to carry out its operations, the Air Force needs to have well-maintained equipment and trained personnel. However, Air Force readiness has declined steadily since the 1990s.", "Today, the Air Force is working to rebuild readiness and modernize its fleet to meet future threats. This testimony discusses challenges in these 4 areas:", "Addressing shortfalls of skilled pilots and maintenance professionals", "Ensuring aircraft can be used for missions", "Training for current and future threats", "Managing and using the small F-22 fleet"]}
{"id": "GAO-19-112", "url": "https://www.gao.gov/products/GAO-19-112", "title": "Improper Payments: Selected Agencies Need Improvements in Their Assessments to Better Determine and Document Risk Susceptibility", "published_date": "2019-01-10T00:00:00", "released_date": "2019-01-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Improper payments are a long-standing problem in the federal government, estimated at almost $141 billion for fiscal year 2017. Agencies are required to perform risk assessments to identify programs that may be susceptible to significant improper payments.", "GAO was asked to review federal agencies' improper payment risk assessments. This report examines the extent to which certain agencies' improper payment risk assessments for selected programs provided a reasonable basis for determining their susceptibility to significant improper payments. GAO analyzed the most recent risk assessments, from 2015 through 2017, for the following five programs: USDA's Agriculture Risk Coverage and Price Loss Coverage programs; HHS's Head Start; DOJ's Law Enforcement; and Treasury's Interest on the Public Debt and Home Affordable Modification Program. GAO selected these programs, focusing on programs that recently underwent a risk assessment and size of programs' gross outlays\u2014which totaled about $330 billion in fiscal year 2017 for the five programs GAO selected."]}, {"section_title": "What GAO Found", "paragraphs": ["The Improper Payments Information Act of 2002, as amended (IPIA), defines \u201csignificant\u201d improper payments as improper payments in the preceding fiscal year that may have exceeded either (1) 1.5 percent of program outlays and $10 million or (2) $100 million (regardless of the improper payment rate). GAO found that the Departments of Health and Human Services (HHS), the Treasury (Treasury), Justice (DOJ), and Agriculture (USDA) assessed the five programs GAO selected for review as at low risk for susceptibility to significant improper payments; however, HHS, Treasury, and DOJ lacked sufficient documentation to assess the extent to which their risk assessments provided a reasonable basis for their risk determinations. On the other hand, USDA's quantitative risk assessment of its program's susceptibility to significant improper payments provided a reasonable basis for its low-risk determination.", "Although HHS, Treasury, and DOJ considered, among other factors, the nine risk factors from IPIA and Office of Management and Budget guidance, they did not document or effectively demonstrate how these factors affected their programs' susceptibility to significant improper payments. These programs' risk assessments did not contain sufficient documentation to determine how the agencies arrived at their risk determinations for each risk factor, or how the total scores for all risk factors led to low-risk determinations. For example, HHS determined that its Head Start program was at high risk for several risk factors\u2014including complexity per transaction and volume of payments\u2014but did not document how these high-risk ratings informed its overall determination that Head Start was not susceptible to significant improper payments.", "Further, the agencies did not have documentation to demonstrate how they determined the weighting of each risk factor or the risk level ranges from the risk assessment templates as they relate to the programs' susceptibility to significant improper payments. For example, based on GAO's analysis of Treasury's risk assessment template, the agency could identify areas of risk related to each of the nine risk factors. But because of the assigned weights given to each risk factor, Treasury's final risk calculation would still not determine the program to be at high risk of susceptibility to significant improper payments. Without documenting the basis for the assigned weights, Treasury cannot demonstrate, and GAO cannot determine, that its process for determining its programs' susceptibility to significant improper payments was reasonable. Until HHS, Treasury, and DOJ revise their risk assessment processes to help ensure that they result in reliable assessments, they cannot be certain whether their programs are susceptible to significant improper payments and therefore whether they are required to estimate the amount of improper payments.", "GAO also found that HHS did not assess many of its programs and activities at least once during the 3-year period from fiscal years 2015 through 2017, as required by IPIA. Based on the analysis of HHS information, GAO identified at least 140 programs or activities that were not assessed during the 3-year period. When not all eligible programs are reviewed as required, there is an increased risk that the agency may not identify all risk-susceptible programs and activities, resulting in incomplete improper payment estimates."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Treasury, DOJ, and HHS revise their improper payment risk assessment processes, and that HHS revise its procedures to help ensure that all programs are assessed at least once every 3 years. In their responses, Treasury and HHS agreed with the recommendations, and DOJ disagreed with GAO's recommendation. GAO continues to believe that the recommendation is valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Improper payments\u2014payments that should not have been made or were  made in incorrect amounts under statutory, contractual, administrative, or  other legally applicable requirements\u2014are a long-standing, significant  problem in the federal government. For fiscal year 2017, estimated  federal improper payments totaled about $141 billion. Although agencies  report improper payment estimates annually, in our report on the Fiscal  Years 2017 and 2016 Consolidated Financial Statements of the U.S.  Government, we continued to report that the federal government is  unable to determine the full extent to which improper payments occur and  reasonably assure that actions are taken to reduce them. In addition, we  have previously noted that some inspectors general (IG) have reported  issues related to agencies\u2019 improper payment estimates, including  processes that may not produce reliable estimates.", "The Improper Payments Information Act of 2002, as amended (IPIA),  requires, among other things, that at least once every 3 years, each  federal agency review all of its programs and activities to identify those  that may be susceptible to significant improper payments\u2014a process  commonly referred to as an improper payment risk assessment. Under  IPIA, improper payments are considered \u201csignificant\u201d if in the preceding  fiscal year they may have exceeded either (1) 1.5 percent of program  outlays and $10 million or (2) $100 million (regardless of the improper  payment rate). Properly executed improper payment risk assessments  are the cornerstone of a government-wide effort to identify and reduce  improper payments. Agencies are required to develop improper payment  estimates and corrective action plans for any programs that agencies,  OMB, or statute identifies as susceptible to significant improper  payments.", "You requested that we review federal agencies\u2019 improper payment risk  assessments. This report examines the extent to which certain federal  agencies\u2019 improper payment risk assessments for selected programs  provided a reasonable basis for determining their susceptibility to  significant improper payments.", "To address our objective, we selected a nongeneralizable sample of 4  agencies and five programs for review. We considered improper payment  information for the 24 agencies subject to the Chief Financial Officers Act  of 1990. In considering which agencies to review, we selected a mix of  agencies that did and did not report improper payment estimates for fiscal  year 2017, and included at least one agency that administered eligibility- based programs. The 4 agencies that we selected for our review were the  Departments of Agriculture (USDA), Health and Human Services (HHS),  Justice (DOJ), and the Treasury (Treasury). We then selected five  programs across these agencies to review, focusing on programs that  underwent a risk assessment during fiscal years 2015 through 2017 and  the size of programs\u2019 gross outlays for fiscal year 2017. The five  programs that we selected for review were USDA\u2019s Commodity Credit  Corporation Agriculture Risk Coverage and Price Loss Coverage  programs; HHS\u2019s Head Start program; DOJ\u2019s Law Enforcement program;  and Treasury\u2019s Interest on the Public Debt and Home Affordable  Modification Program. Fiscal year 2017 outlays for these programs  totaled approximately $330 billion.", "We reviewed improper payment risk assessment requirements in IPIA  and the related guidance in Office of Management and Budget (OMB)  Circular A-123, Appendix C, Requirements for Effective Estimation and  Remediation of Improper Payments (OMB M-15-02). We also reviewed  relevant internal control standards to determine the activities needed to  help ensure that agencies conduct effective improper payment risk  assessments\u2014assessments that provide a reasonable basis for  determining the susceptibility to significant improper payments. We  obtained the most recent improper payment risk assessment that USDA,  HHS, DOJ, and the Treasury conducted on the selected programs during  the 3-year period covered by our review (fiscal years 2015 through 2017).  We then analyzed those risk assessments against relevant IPIA  requirements, OMB guidance, and internal control standards to determine  whether the agencies had evaluated the appropriate risk factors for  improper payments, appropriately considered those factors in their risk  assessments, and provided a reasonable basis for their risk  determinations. Additionally, we interviewed officials at the selected  agencies on their processes for conducting improper payment risk  assessments and reviewed documented policies and procedures. For  agencies that lacked supporting documentation or did not provide a  reasonable basis for their risk determinations, we interviewed appropriate  agency officials to determine the reasons they did not. Appendix I  provides further details on our scope and methodology.", "We conducted this performance audit from December 2017 to January  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Improper Payment Requirements", "paragraphs": ["IPIA defines an improper payment as any payment that should not have  been made or that was made in an incorrect amount (including  overpayments and underpayments) under statutory, contractual,  administrative, or other legally applicable requirements. It includes  duplicate payments, any payment made to an ineligible recipient, any  payment for an ineligible good or service, any payment for a good or  service not received (except for such payments where authorized by law),  and any payment that does not account for credit for applicable discounts.  OMB M-15-02 also provides that when an agency\u2019s review is unable to  determine whether a payment was proper as a result of insufficient or lack  of documentation, this payment must also be considered an improper  payment.", "IPIA also defines the scope of payments subject to improper payment  requirements. Specifically, a payment is any transfer or commitment for  future transfer of federal funds\u2014such as cash, securities, loans, loan  guarantees, and insurance subsidies\u2014to any nonfederal person or entity  that is made by a federal agency, a federal contractor, a federal grantee,  or a governmental or other organization administering a federal program  or activity.", "Executive branch agencies are required to take various steps regarding  improper payments under IPIA and as directed by OMB M-15-02. The  steps include the following:  1.  reviewing all programs and activities and identifying those that may be  susceptible to significant improper payments (commonly referred to as  a risk assessment),  2.  developing improper payment estimates for those programs and  activities that agency risk assessments, OMB, or statute identifies as  being susceptible to significant improper payments,  3.  analyzing the root causes of improper payments and developing  corrective actions to reduce them, and  4.  reporting on the results of addressing the foregoing requirements.", "Figure 1 illustrates these steps, as well as the major components of  conducting an improper payment risk assessment.", "IPIA requires that agencies conduct improper payment risk assessments  for all federal programs and activities at least once every 3 years and  identify any program or activity that may be susceptible to significant  improper payments. OMB guidance provides that programs that have  been determined to be susceptible to significant improper payments and  that are already reporting an estimate\u2014or in the process of establishing  an estimate\u2014do not have to conduct additional improper payment risk  assessments. IPIA defines \u201csignificant\u201d improper payments as improper  payments in the preceding fiscal year that may have exceeded either   (1) 1.5 percent of program outlays and $10 million or (2) $100 million  (regardless of the improper payment rate). OMB M-15-02 provides  guidance for implementing the IPIA requirements and covers agencies\u2019  responsibilities for improper payment risk assessments, estimation, and  reporting.", "OMB M-15-02 also lists steps that agencies should take when conducting  improper payment risk assessments. Agencies must institute a systematic  method of reviewing all programs and activities to identify those that may  be susceptible to significant improper payments, as defined by IPIA.  According to OMB M-15-02, this systematic method could be a  quantitative evaluation based on a statistical sample or a qualitative  method (e.g., a risk-assessment questionnaire). Prior to fiscal year 2018,  at a minimum, agencies were required to take into account nine risk  factors\u2014seven specified in IPIA and two in OMB guidance\u2014that are  likely to contribute to improper payments, regardless of which method  was used by the agency (see table 1).", "In June 2018, OMB revised its guidance for improper payments in OMB  Circular A-123, Appendix C, Requirements for Payment Integrity  Improvement (OMB M-18-20). In the revised guidance, OMB no longer  directs agencies to consider the two additional risk factors that were  included in OMB M-15-02 in their risk assessments. Rather, OMB directs  agencies to take into account those risk factors that are likely to  contribute to a susceptibility of significant improper payments. The  revised guidance also states that beginning in fiscal year 2020, agencies  should use quantitative evaluations for programs or activities with outlays  exceeding $5 billion. As specified in OMB M-18-20, the end goal of the  systematic method of reviewing all programs, whether qualitative or  quantitative, is to determine whether a program is susceptible to  significant improper payments. Accordingly, OMB M-18-20 states that if a  qualitative method is used, it must be designed to accurately determine  whether the program is susceptible to significant improper payments."], "subsections": []}, {"section_title": "Characteristics of Programs Reviewed", "paragraphs": ["When conducting improper payment risk assessments, each federal  agency, unless otherwise specified by OMB Circular A-11, after  consultation with OMB, is generally authorized to determine the grouping  of programs that most clearly identifies and reports improper payments  for the agency. The five programs we reviewed serve a variety of  purposes and are administered by various agencies across the federal  government."], "subsections": [{"section_title": "Head Start", "paragraphs": ["HHS\u2019s Head Start program was established in 1965 to deliver  comprehensive educational, social, health, nutritional, and psychological  services to low-income families and their children. These services include  preschool education, family support, health screenings, and dental care.  Head Start was originally aimed at 3- to 5-year-olds. The Head Start  program makes grants directly to approximately 1,600 local organizations,  including community action agencies, school systems, tribal governments  and associations, and for-profit and nonprofit organizations.", "The Head Start program has several primary eligibility criteria to enroll in  the program\u2014including that the child\u2019s family earns income below the  federal poverty level; the child\u2019s family is eligible for or, in the absence of  child care, would potentially be eligible for public assistance; the child is in  foster care; or the child is homeless. Head Start services are to be  provided free of charge to eligible families.", "Prior to fiscal year 2013, HHS reported improper payment estimates for  the Head Start program. However, as of fiscal year 2013, HHS, in  consultation with its Office of Inspector General (OIG) and with approval  from OMB, no longer reports annual improper payment estimates related  to the program. According to HHS, Head Start\u2019s fiscal year 2017 outlays  were approximately $9.4 billion."], "subsections": []}, {"section_title": "Interest on the Public Debt", "paragraphs": ["Public debt is defined as Treasury-issued securities, primarily consisting  of marketable Treasury securities (i.e., bills, notes, and bonds), and a  smaller amount of nonmarketable securities, such as savings bonds and  special securities issued to state and local governments. A portion is debt  held by the public and a portion is debt held by federal government  accounts.", "Debt held by the public represents federal debt held by investors outside  of the federal government, including individuals, corporations, state or  local governments, the Federal Reserve, and foreign governments. Types  of securities held by the public include Treasury bills, notes, and bonds  and State and Local Government Series securities. Debt held by the  public primarily represents the amount the U.S. government has  borrowed from the public to finance cumulative cash deficits. As of  September 30, 2017, total debt held by the public was $14.7 trillion.", "Debt held by federal government accounts (intragovernmental holdings)  represents balances of federal government accounts of certain federal  agencies that are either authorized or required to invest excess receipts  in Treasury securities. As of September 30, 2017, total debt held by  federal government accounts was $5.6 trillion.", "Interest calculations on the public debt differ depending on the types of  securities, their associated terms, and average interest rates. According  to Treasury, total interest paid on public debt for fiscal year 2017 was  approximately $294.8 billion."], "subsections": []}, {"section_title": "Home Affordable Modification Program", "paragraphs": ["In February 2009, as part of a broader plan to stabilize the housing  market and economy, Treasury established the Making Home Affordable  Program to help struggling families avoid possible foreclosure. As part of  this plan, Treasury announced a national modification program for first- lien mortgages, the Home Affordable Modification Program (HAMP). The  program offered eligible homeowners who are at risk of foreclosure  reduced monthly mortgage payments that are more affordable and  sustainable over the long term. Homeowners who chose to participate in  the program had to show (1) documented financial hardship and (2) an  ability to make their monthly mortgage payments after a modification.", "HAMP works by encouraging participating mortgage servicers to modify  mortgages so struggling homeowners can have lower monthly payments  and avoid foreclosure. It has specific eligibility requirements for  homeowners and includes strict guidelines for servicers.", "In December 2016, entrance into the Making Home Affordable program  expired. However, payments for previously approved participants in  HAMP will continue until approximately September 2023. According to  Treasury, HAMP\u2019s fiscal year 2017 outlays were approximately   $4.1 billion."], "subsections": []}, {"section_title": "Law Enforcement", "paragraphs": ["For improper payment risk assessment purposes, DOJ has five mission- aligned program groups. The Law Enforcement group is the largest in  terms of annual outlays and consists of the following five components:  1.  the Bureau of Alcohol, Tobacco, Firearms, and Explosives;  2.  the Drug Enforcement Administration;  3.  the Federal Bureau of Investigation;  4.  Offices, Boards, and Divisions; and  5.  the United States Marshals Service.", "According to DOJ, Law Enforcement\u2019s fiscal year 2017 outlays were  approximately $11.8 billion."], "subsections": []}, {"section_title": "Agriculture Risk Coverage and Price Loss Coverage", "paragraphs": ["The Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC)  programs were authorized by the 2014 Farm Bill to provide farmers with  protection against adverse changes in market conditions. Although ARC  and PLC are considered two separate programs, they are grouped as one  program for the purposes of conducting improper payment risk  assessments. The programs are managed by the Commodity Credit  Corporation, whose activities are primarily administered by USDA\u2019s Farm  Service Agency.", "Within the ARC program, farmers have the choice of an individual-based  option, known as ARC-Individual, or a county-based option, known as  ARC-County. Both options provide revenue loss coverage to farmers  when the legislative guarantee for a crop exceeds the actual year  revenue.", "PLC program payments are issued to farmers when a crop\u2019s \u201creference  price,\u201d as specified in the 2014 Farm Bill, is in excess of an average price,  which is determined at the national level each year for the covered  commodities.", "ARC/PLC statutes and regulations establish a series of eligibility criteria  that farmers must meet in order to enroll in the programs. Among other  things, to be eligible farmers must produce a certain quantity of at least 1  of the 21 covered commodities, actively engage in the farming process,  meet income eligibility limits, and meet certain land conservation  requirements. According to USDA, ARC/PLC\u2019s fiscal year 2017 outlays  were approximately $9.6 billion."], "subsections": []}]}]}, {"section_title": "Four of the Five Risk Assessments Lacked Documentation to Support Their Risk Determinations, and Many of HHS\u2019s Programs Were Not Assessed", "paragraphs": [], "subsections": [{"section_title": "HHS\u2019s Improper Payment Risk Assessment for Head Start Lacked Documentation to Support Its Low Risk Determination, and Many Other Programs Were Not Assessed HHS\u2019s Improper Payment Risk Assessment for Head Start Lacked Documentation to Support Its Low Risk Determination", "paragraphs": ["In its fiscal year 2016 qualitative risk assessment, HHS assessed its  Head Start program as at low risk of susceptibility to significant improper  payments. However, HHS did not have sufficient documentation on how  it developed its risk assessments, so we could not determine if the risk  assessment process was designed to provide a reasonable basis for  making risk determinations.", "Although HHS did take into account the nine risk factors, among other  factors, HHS did not document or effectively demonstrate how each  specific risk factor affected Head Start\u2019s susceptibility to significant  improper payments. HHS\u2019s improper payment risk assessment template  included the nine risk factors, among other factors, and described how  the divisions should consider each risk factor. However, HHS did not  document how the descriptors or individual risk factors relate to the  program\u2019s susceptibility to significant improper payments. Further,  although HHS used a risk assessment template to assess each of the risk  factors, which included space for the divisions to provide additional  information regarding the risk determinations, the division responsible for  the Head Start program did not always provide sufficient documentation  or support for us to determine how it arrived at its risk determinations for  each risk factor. For example, see the following:", "Eligibility determination: HHS considered the eligibility of initial  Head Start payments that HHS made to the initial grantees\u2014local  organizations\u2014as low risk. However, HHS did not consider the Head  Start eligibility decisions that these organizations made at the  subrecipient level\u2014calling into question the reliability of HHS\u2019s risk  assessment. In the Head Start program, local organizations, not HHS,  make the eligibility determinations for individuals to be enrolled in the  program. In addition, local organizations, not HHS, are responsible for  maintaining the documentation to substantiate the eligibility of  enrollees. HHS did not consider the impact of these determinations in  its improper payment risk assessment. Our analysis of improper  payment estimates from paymentaccuracy.gov for fiscal years 2016  and 2017 indicates that the inability to authenticate eligibility is one of  the largest root causes of improper payments.", "Audit findings: HHS assigned a low-risk rating for findings from  oversight agencies. However, in the risk assessment, it identified nine  audit reports that the OIG issued pertaining to Head Start agencies  with findings on unallowable costs, enrollment, and misuse of grant  funds. According to agency officials, these OIG reports contained  findings related to costs and misuse of grant funds that are specific to  particular grantees and may not be indicative of widespread  programmatic issues. However, HHS did not document the rationale  for this assessment.", "Program management report: HHS assigned a low-risk rating for  findings related to program management reports. According to HHS\u2019s  Report to Congress on Head Start Monitoring for Fiscal Year 2015,  \u201callowable and allocable costs\u201d was the most commonly cited  noncompliance issue in its fiscal reviews of grantees. Specifically,  8.8 percent of grantees included in a fiscal review were found to be  noncompliant with regard to allowable and allocable costs. However,  HHS did not document whether it considered the impact of  noncompliance by grantees in its Head Start risk assessment.", "According to HHS officials, divisions were required to maintain supporting  documentation for their risk assessments, although submission of the  related documents along with the risk assessment was not mandatory.", "HHS officials stated that this policy was orally communicated to the  divisions; however, it was not formally documented. Lack of a written  policy for the divisions to maintain such information may have contributed  to HHS\u2019s inability to provide sufficient supporting documentation for its  low risk determinations.", "HHS\u2019s qualitative risk assessment for Head Start also did not document  or effectively demonstrate how the total score for all risk factors led to a  determination that the program was not susceptible to significant  improper payments. Our analysis of HHS\u2019s risk assessment showed that  for several of its risk factors, HHS did not score those factors as low risk.  For example, HHS assigned a high-risk rating for three of the nine risk  factors: (1) permanency of the program, (2) volume of payments made  through the program, and (3) complexity per transaction. HHS\u2019s risk  assessment did not document or support how it determined Head Start to  overall be at low risk for susceptibility to significant improper payments  given the high-risk ratings for certain risk factors. Without supporting  documentation, HHS cannot demonstrate, and we cannot determine, if  HHS\u2019s low risk determination for Head Start was reasonable.", "Additionally, based on HHS\u2019s risk assessment scoring template, a  program could be considered \u201chigh risk\u201d for all nine risk factors, but  because of the assigned weight given to each of the nine risk factors,  HHS\u2019s final risk calculation would still not determine the program to be at  high risk of susceptibility to significant improper payments. According to  HHS officials, the agency has procedures to review the improper payment  risk assessments that the individual divisions perform; however, these  review procedures are not formally documented. HHS officials stated that  while no risk assessment has identified all nine risk factors as high risk, if  all nine risk factors were identified as high risk by a division, the agency  would require supporting documentation from the division for review and  could overrule the outcome calculated based on the risk assessment  scoring template if necessary. Without documented procedures for this  review process, HHS lacks assurance that this process, if applicable,  would consistently take place.", "According to HHS, the fiscal year 2016 improper payment qualitative risk  assessment template used for Head Start was designed to calculate an  overall risk rating of low, medium, or high based on program management  responses to each individual risk factor. However, HHS did not have  documentation to demonstrate how it determined the weighting of the risk  factors or how the numerical risk level ranges from the risk assessment  template related to a program\u2019s susceptibility to significant improper  payments. Additionally, HHS did not have documentation demonstrating  the basis for its determination that specific risk factors do or do not lead to  susceptibility to significant improper payments. HHS officials stated that  OMB does not have specific guidance on establishing weights for each  risk factor or assigning numerical risk level ranges to determine overall  susceptibility to significant improper payments. HHS officials also stated  that HHS developed its own numerical risk level ranges based on  experience and data from previous risk assessments. When asked for  documentation to support its weighting of the various risk factors, HHS  officials stated that they did not document this analysis. Without  documenting the basis for the assigned weights, HHS cannot  demonstrate, and we cannot determine, that its process for determining  Head Start\u2019s susceptibility to significant improper payments was  reasonable.", "Federal internal control standards state that management should develop  control activities to achieve objectives and respond to risks and  implement control activities through policies. As part of these standards,  management should clearly document internal controls and other  significant events in a manner that allows the documentation to be readily  available for examination. Additionally, management should periodically  review policies, procedures, and related control activities for continued  relevance and effectiveness. Further, federal internal control standards  state that management should use quality information to achieve the  entity\u2019s objectives. As such, to reasonably determine if a program is  susceptible to significant improper payments, agencies\u2019 risk assessments  would have a logical connection with, or bearing upon, the statutory  definition of significant improper payments. Until HHS revises its risk  assessment process to help ensure that it results in a reliable  assessment, it will be uncertain whether Head Start may be susceptible to  significant improper payments and therefore require an estimate of its  improper payments."], "subsections": [{"section_title": "HHS Did Not Conduct Risk Assessments for Many of Its Programs and Activities", "paragraphs": ["During our agency and program selection process, we found that HHS did  not assess many of its programs and activities at least once during the 3- year period from fiscal years 2015 through 2017, as required by IPIA.  Although HHS conducted improper payment risk assessments for a total  of 71 programs and activities during the 3-year period, based on our  analysis of HHS-provided outlay data, HHS did not conduct the required  risk assessment for at least 140 programs. For example, HHS did not  assess its Block Grants for Prevention and Treatment of Substance  Abuse program that had outlays of approximately $1.8 billion in fiscal year  2016. According to HHS officials, HHS has limited resources, so it took a  risk-based approach when selecting programs to include in its improper  payment risk assessment process. Further, HHS officials stated that HHS  was transitioning in fiscal year 2015 to a new risk assessment process.  As such, HHS\u2019s procedures directed its divisions to select one program  per division for fiscal year 2015 and two programs per division for fiscal  years 2016 and 2017.", "Federal internal control standards state that management should design  control activities to achieve objectives and respond to risks and  implement control activities through policies. Without properly designed  control activities to help ensure that all programs and activities are  assessed for susceptibility to significant improper payments at least once  every 3 years, as required by IPIA, there is an increased risk that HHS  may not identify all risk-susceptible programs and activities, resulting in  incomplete improper payment estimates."], "subsections": []}]}, {"section_title": "Treasury\u2019s Improper Payment Risk Assessments for Interest on the Public Debt and HAMP Lacked Documentation to Support Its Low Risk Determinations", "paragraphs": ["In its fiscal year 2017 qualitative risk assessments, based on fiscal year  2016 outlay data, Treasury assessed its Interest on the Public Debt and  HAMP as at low risk of susceptibility to significant improper payments.  However, Treasury did not have sufficient documentation for how it  developed its risk assessments, so we could not determine if the risk  assessment process was designed to provide a reasonable basis for  making risk determinations.", "Although Treasury did take into account the nine risk factors, among  other factors, it did not document or effectively demonstrate how each  specific risk factor affected the programs\u2019 susceptibility to significant  improper payments. Treasury\u2019s risk assessment templates for these  programs had 62 questions which required \u201cYes,\u201d \u201cNo,\u201d or \u201cNot  applicable\u201d responses. Treasury did not document how each of the 62  questions related to each program\u2019s susceptibility to significant improper  payments. Further, the template did not require the bureaus responsible  for the Interest on the Public Debt and HAMP risk assessments to provide  documentation or support other than a check mark in response to these  questions. Without descriptions of how to answer the questions or  documentation to support the responses, we could not verify the  reasonableness of the Interest on the Public Debt or HAMP improper  payment risk assessments.", "For example, the Interest on the Public Debt program\u2019s risk assessment  questionnaire was completed for 11 different payment types under the  program. For the TreasuryDirect payment type, Treasury answered \u201cNo\u201d  to the question, \u201cAre there risks due to a high volume of payments for  TreasuryDirect?\u201d Treasury did not provide documentation or other support  for how the agency determined that there was no risk for this question.  Further, since the template lacked descriptors, it is unclear if responses  related to the number of transactions or the dollar amount of transactions.  In fiscal year 2016, TreasuryDirect payments totaled almost $300 billion,  representing about 7.8 percent of all the federal government outlays. In  contrast, Treasury answered \u201cYes\u201d to this same question for the HAMP  program, for which payments were about 1 percent (about $4 billion) of  the total payments made by TreasuryDirect.", "Similarly, in the HAMP risk assessment questionnaire, Treasury  answered \u201cNo\u201d to the question, \u201cAre payment or payment eligibility  decisions made outside the agency?\u201d However, under HAMP, financial  institutions, not Treasury, determine whether borrowers are eligible for  loan modification through the program. Treasury did not document why a  \u201cNo\u201d response was appropriate.", "Treasury\u2019s risk assessments for Interest on the Public Debt and HAMP  also did not document or effectively demonstrate how the total scores for  all risk factors led to the determinations that the programs were not  susceptible to significant improper payments. For example, in its risk  assessment, Treasury\u2019s responses indicated several improper payment  risks for Interest on the Public Debt, including (1) complexity of  administering the payment type, (2) unmitigated risks relying on  contractors to perform critical agency operations, and (3) payments being  made to incorrect payees or ineligible recipients.", "Further, based on total payments for the Interest on the Public Debt,  Treasury would have to be over 99.97 percent accurate in its payments in  order for the activity to not reach the $100 million threshold for significant  improper payments. Treasury\u2019s risk assessment did not document or  support how it determined Interest on the Public Debt to be at low risk for  susceptibility to significant improper payments considering these risks for  improper payments.", "Similarly, Treasury\u2019s responses in its risk assessment questionnaire  indicated several improper payment risks for HAMP, including (1) an  emphasis on expediting payments, (2) risks resulting from recent changes  in agency operations and personnel, (3) complicated criteria for manually  computing payments, and (4) a high volume of payments. Treasury\u2019s risk  assessment did not document or support how it determined HAMP to be  at overall low risk for significant improper payments considering these  risks for improper payments. Without supporting documentation, Treasury  cannot demonstrate, and we cannot determine, if Treasury\u2019s low risk  determinations for Interest on the Public Debt and HAMP were  reasonable.", "Additionally, based on our analysis of Treasury\u2019s risk assessment  template, a bureau could identify areas of risk related to each of the nine  risk factors for a program, but because of the assigned weights given to  each of the nine risk factors, Treasury\u2019s final risk calculation would still not  determine the program to be at high risk of susceptibility to significant  improper payments.", "According to Treasury officials, Treasury provides general instructions on  how to complete the risk assessment templates, but the bureaus are  responsible for assessing the risks. In addition, according to Treasury, the  fiscal year 2017 improper payment risk assessment template used for  Interest on the Public Debt and HAMP was designed to calculate an  overall risk rating of low, medium, or high based on bureau responses to  each individual question. However, Treasury did not have documentation  to demonstrate how it determined the weighting of the risk factors or the  numerical risk level ranges from the template related to the programs\u2019  susceptibility to significant improper payments. Additionally, Treasury did  not have documentation demonstrating the basis for its determination that  specific risk factors do or do not lead to susceptibility to significant  improper payments. According to Treasury officials, Treasury considered  the severity of the impact on the program\u2019s improper payments when  developing its weights for each question. However, Treasury officials  stated that they did not have documentary support for this analysis.  Without documenting the basis for the assigned weights, Treasury cannot  demonstrate, and we cannot determine, that its process for determining  its programs\u2019 susceptibility to significant improper payments was  reasonable.", "Federal internal control standards state that management should develop  control activities to achieve objectives and respond to risks and  implement control activities through policies. As part of these standards,  management should clearly document internal controls and other  significant events in a manner that allows the documentation to be readily  available for examination. Additionally, management should periodically  review policies, procedures, and related control activities for continued  relevance and effectiveness. Further, federal internal control standards  state that management should use quality information to achieve the  entity\u2019s objectives. As such, to reasonably determine if a program is  susceptible to significant improper payments, agencies\u2019 risk assessments  would have a logical connection with, or bearing upon, the statutory  definition of significant improper payments. Until Treasury revises its risk  assessment process to help ensure that it results in reliable assessments,  it will not be certain whether Interest on the Public Debt or HAMP may be  susceptible to significant improper payments and therefore require an  estimate of improper payments."], "subsections": []}, {"section_title": "DOJ\u2019s Improper Payment Risk Assessment for Law Enforcement Lacked Documentation to Support Its Low Risk Determination", "paragraphs": ["In its fiscal year 2017 risk assessment, DOJ assessed its Law  Enforcement program as at low risk of susceptibility to significant  improper payments. However, DOJ did not have sufficient  documentation for how it developed its risk assessments, so we could not  determine if the risk assessment process was designed to provide a  reasonable basis for making risk determinations.", "Although DOJ conducted a quantitative evaluation as part of its improper  payment risk assessment for its Law Enforcement program, the  evaluation did not reliably indicate the program\u2019s susceptibility to  significant improper payments. Specifically, our analysis of Law  Enforcement\u2019s improper payment risk assessment found that the  quantitative evaluation\u2019s baseline was largely based on the prior fiscal  year\u2019s improper payment amount identified through recovery activities,  which may not reliably represent the estimated improper payment amount  that the agency incurred. For example, improper payment recovery  activities do not include underpayments.", "DOJ\u2019s qualitative analysis on improper payments also did not document  or effectively demonstrate whether the program may be susceptible to  significant improper payments. Although DOJ\u2019s risk assessment template  did take into account the nine risk factors, among other factors, and  descriptors of how the components should consider each risk factor, DOJ  did not document or effectively demonstrate how each specific risk factor  affected the program\u2019s susceptibility to significant improper payments.  Further, although DOJ used a risk assessment template to assess each  of the risk factors, which included a voluntary comments section for each  risk factor so that components can explain answers or justify the risk  ratings, the components frequently left the comment sections blank. As  such, DOJ did not always provide sufficient documentation or support for  us to determine how the components arrived at their risk determinations  for each risk factor.", "DOJ\u2019s risk assessment for Law Enforcement also did not document or  effectively demonstrate how the total score for all risk factors led to the  determination that the program was not susceptible to significant  improper payments. For example, in its risk assessment, DOJ\u2019s Offices,  Boards, and Divisions\u2019 responses indicated risks for contract payments  related to (1) changes in funding, authorities, practices, or procedures;   (2) results of monitoring activities; (3) results of recapture audit activities;  (4) volume and dollar amount of payments; (5) inherent risks; and (6)  capability of personnel. DOJ\u2019s risk assessment did not document or  support how it determined Law Enforcement to be at low risk for  susceptibility to significant improper payments given the identified risks  for certain risk factors. Without supporting documentation, DOJ cannot  demonstrate, and we cannot determine, if DOJ\u2019s low risk determination  for Law Enforcement was reasonable. Additionally, based on our analysis  of DOJ\u2019s risk assessment template, a component could identify areas of  risk related to each of the nine risk factors, but because of the assigned  weight given to each of the nine risk factors, DOJ\u2019s final risk calculation  would still not determine the program to be at high risk of susceptibility to  significant improper payments.", "According to DOJ, the fiscal year 2017 improper payment qualitative risk  assessment template used for Law Enforcement was designed to  calculate an overall risk rating of low, medium, or high based on  component responses to each individual risk factor. However, DOJ did  not have documentation to demonstrate how it determined the weighting  of the risk factors or the numerical risk level ranges from the template  related to the program\u2019s susceptibility to significant improper payments.  Additionally, DOJ did not have documentation demonstrating the basis for  its determination that specific risk factors do or do not lead to  susceptibility to significant improper payments. Further, DOJ\u2019s qualitative  risk assessment template indicated that the overall risk determination  does not relate to the program\u2019s susceptibility to significant improper  payments. For example, the template stated that \u201ca risk rating of high risk  for the purposes of this assessment does not mean that the payment type  is susceptible to significant improper payments but may indicate that  additional focus and testing should be placed on that payment type to  better estimate the improper payment rate for the payment type.\u201d DOJ  officials stated that DOJ held internal discussions and considered the  severity of the impact on the program\u2019s improper payments when  developing its weights for each risk factor. When asked for supporting  documentation, DOJ officials stated that OMB guidance does not direct  agencies to demonstrate how the weights for each risk factor or overall  risk ratings relate to the definition of significant improper payments.", "However, without documenting the basis for the assigned weights, DOJ  cannot demonstrate, and we cannot determine, that its process for  determining Law Enforcement\u2019s susceptibility to significant improper  payments was reasonable.", "Federal internal control standards state that management should develop  control activities to achieve objectives and respond to risks and  implement control activities through policies. As part of these standards,  management should clearly document internal controls and other  significant events in a manner that allows the documentation to be readily  available for examination. Additionally, management should periodically  review policies, procedures, and related control activities for continued  relevance and effectiveness. Further, although OMB does not direct  agencies to demonstrate how the weights for each risk factor or overall  ratings relate to the definition of significant improper payments, federal  internal control standards state that management should use quality  information to achieve the entity\u2019s objectives. As such, to reasonably  determine if a program is susceptible to significant improper payments,  agencies\u2019 risk assessments would have a logical connection with, or  bearing upon, the statutory definition of significant improper payments.  Until DOJ revises its risk assessment process to help ensure that it  results in a reliable assessment, it will be uncertain whether Law  Enforcement may be susceptible to significant improper payments and  therefore require an estimate of improper payments."], "subsections": []}, {"section_title": "USDA\u2019s Improper Payment Risk Assessment for ARC/PLC Provided a Reasonable Basis for Its Risk Determination", "paragraphs": ["USDA\u2019s fiscal year 2017 improper payment risk assessment for ARC/PLC  consisted of a qualitative analysis and a quantitative evaluation. Both  assessments determined that the program was not susceptible to  significant improper payments. We found that the quantitative evaluation,  based on statistical sampling, provided a reasonable basis for USDA\u2019s  determination that the program was at low risk for susceptibility to  significant improper payments. Specifically, based on its statistical  sample, USDA estimated that ARC/PLC\u2019s improper payment rate was  0.73 percent of program outlays with an estimated improper payment  amount of $38.6 million. As such, the analysis clearly demonstrated that  ARC/PLC did not meet the statutory definition of significant improper  payments under IPIA\u2014estimated improper payments that may have  exceeded either (1) 1.5 percent of program outlays and $10 million or   (2) $100 million (regardless of the improper payment rate)."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Properly executed improper payment risk assessments are a cornerstone  of government-wide efforts to estimate and reduce such payments.  Although the qualitative risk assessments we reviewed for HHS,  Treasury, and DOJ considered the nine risk factors required by IPIA or  directed by OMB, none of them demonstrated how the factors affected a  program\u2019s susceptibility to significant improper payments. Additionally,  despite the agencies identifying multiple factors as areas of risk in  individual program risk assessments, each of the agencies\u2019 overall  determinations for the risk assessments we reviewed was \u201clow risk,\u201d and  none of the agencies had documentation with which to explain the basis  for their assessments.", "Revising their processes for conducting improper payment risk  assessments, including preparing sufficient documentation to support the  assessments, would better position HHS, Treasury, and DOJ to  demonstrate the reliability of the assessments. Without properly designed  risk assessments, the departments will continue to be uncertain whether  improper payment estimates should be prepared for most programs we  reviewed, potentially affecting the completeness of their improper  payment estimates and hampering efforts to reduce improper payments."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations\u2014two to HHS, one to  Treasury, and one to DOJ:  The Secretary of Health and Human Services should revise HHS\u2019s  process for conducting improper payment risk assessments for Head  Start to help ensure that it results in a reliable assessment of whether the  program is susceptible to significant improper payments. This should  include preparing sufficient documentation to support its risk  assessments. (Recommendation 1)", "The Secretary of Health and Human Services should revise HHS\u2019s  procedures for conducting improper payment risk assessments to help  ensure that all programs and activities are assessed for susceptibility to  significant improper payments at least once every 3 years, as required by  IPIA. (Recommendation 2)", "The Secretary of the Treasury should revise Treasury\u2019s processes for  conducting improper payment risk assessments for Interest on the Public  Debt and HAMP to help ensure that the processes result in reliable  assessments of whether the programs are susceptible to significant  improper payments. This should include preparing sufficient  documentation to support its risk assessments. (Recommendation 3)", "The Attorney General should revise DOJ\u2019s process for conducting  improper payment risk assessments for Law Enforcement to help ensure  that it results in a reliable assessment of whether the program is  susceptible to significant improper payments. This should include  preparing sufficient documentation to support DOJ\u2019s risk assessments.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for comment to OMB, HHS, DOJ,  Treasury, and USDA. DOJ and HHS provided written comments, which  are reproduced in appendixes II and III, respectively. OMB, HHS, and  Treasury provided technical comments, which we incorporated as  appropriate. Treasury\u2019s Acting Director of its Risk and Control Group  notified us by email that Treasury concurred with the report and  recommendation. A USDA management analyst notified us by email that  USDA had no comments on the report.", "In its written comments, HHS stated that it concurs with both  recommendations and is committed to reducing improper payments in all  of its programs. HHS also described actions it plans to take to address  these recommendations, including (1) issuing a written policy directing  divisions to maintain supporting documentation for risk assessments,   (2) documenting the agency review procedures for risk assessments that  the divisions perform and the rationale for assigning weights to the risk  factors, and (3) developing an automated program identification process  for monitoring and inclusion in risk assessments to help ensure that all  programs and activities are reviewed. The actions described by HHS, if  implemented effectively, would address our recommendations.", "In its written comments, DOJ stated that it disagreed with our conclusions  and recommendation. DOJ explained that its risk assessment  methodology includes a qualitative evaluation and a quantitative analysis,  and that it considers the nine risk factors likely to contribute to improper  payments. Additionally, DOJ provided an overview of its risk assessment  tool and guidance and stated that its methodology includes all steps  required by OMB. We acknowledged in the draft report that DOJ did take  into account the nine risk factors, among others, as directed by OMB and  provided an overview of DOJ\u2019s risk assessment template and process.", "DOJ stated that it believes that some of our interpretations exceed the  risk assessment requirements, and believes that its methodology  complies with requirements and adequately demonstrates whether a  program may be susceptible to significant improper payments. DOJ  stated that the risk factor ratings summarized in its risk assessment  provided a clear link of how the individual risk factor ratings support the  overall assessed risk of significant improper payments. Further, DOJ  stated that the risk assessment tool provides sufficient documentation for  the formulas and logic for the risk rating conversions and weight-based  summarization of risk factor scoring.", "We disagree that our interpretations exceed the risk assessment  requirements, and we continue to believe that DOJ\u2019s risk assessment did  not adequately demonstrate whether a program is or is not susceptible to  significant improper payments. We believe that while agencies are not  specifically directed to demonstrate how the weights for each risk factor  or overall ratings relate to the definition of significant improper payments,  management should use quality information to achieve the entity\u2019s  objectives as stated in federal internal control standards. As such, to  reasonably determine if a program is susceptible to significant improper  payments, agencies should have documentation to support how their risk  assessments provided a logical connection with, or bearing upon, the  statutory definition of significant improper payments. DOJ did not provide  sufficient support for how it determined the weighting of the risk factors or  the numerical risk level ranges. Because DOJ did not have sufficient  documentation for how it developed its risk assessment template, we  could not determine if the risk assessment was designed to provide a  reasonable basis for the risk determinations.", "DOJ stated that the report does not accurately portray DOJ\u2019s risk  assessment process. Specifically, DOJ stated that we incorrectly reported  that DOJ\u2019s quantitative evaluation did not include improper payments  related to lack of documentation. Based on the information DOJ provided,  we removed the lack of documentation example from our report.", "DOJ also stated that it was misleading to report that although DOJ\u2019s risk  assessment template included a voluntary comments section for each risk  factor for components to explain answers or justify risk ratings, the  comment sections were frequently left blank. DOJ stated that its  components only need to provide a comment when they believe it is  necessary to qualify their responses and that obvious answers do not  need to be explained. However, as previously noted, DOJ did not provide  sufficient documentation or support for us to determine how the  components arrived at their risk determinations for each risk factor.  Without such documentation, DOJ cannot demonstrate, and we cannot  determine, whether DOJ\u2019s assessment for each risk factor was  reasonable.", "Further, DOJ stated that the Offices, Boards, and Divisions example was  inaccurate and misleading. DOJ stated that the summary table in its risk  assessment questionnaire documented that the risks identified were  determined to be low risk and therefore supported the conclusions  reached. DOJ also stated that its approach acknowledges that risks exist  in every disbursement process and allows process owners to assess the  level of risk that exists and determine whether a program may be  susceptible to significant improper payments. We disagree that the  Offices, Boards, and Divisions example is inaccurate or misleading.  Although we recognize that DOJ\u2019s summary table, or scoring template as  referred to in the report, documented that the risks identified were  determined to be low risk, we do not believe that it provided support for  that determination. Specifically, the summary table was populated based  on component responses and predetermined weights to calculate an  overall risk rating of low, medium, or high; however, DOJ did not provide  documentation to demonstrate how it determined the weights of the risk  factors or the numerical risk level ranges involved in that calculation.  Without documenting the basis for the assigned weights, DOJ cannot  demonstrate, and we cannot determine, that its process for determining  Law Enforcement\u2019s susceptibility to significant improper payments was  reasonable.", "We continue to believe that our recommendation to DOJ is valid to help  ensure that DOJ\u2019s risk assessment reliably results in determining whether  Law Enforcement may be susceptible to significant improper payments.", "We are sending copies of this report to the appropriate congressional  committees, the Director of the Office of Management and Budget, the  Secretary of Agriculture, the Secretary of Health and Human Services,  the Secretary of the Treasury, the Acting Attorney General, and other  interested parties. In addition, this report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["This report examines the extent to which certain federal agencies\u2019  improper payment risk assessments for selected programs provided a  reasonable basis for determining susceptibility to significant improper  payments.", "To address our objective, we reviewed improper payment risk  assessment requirements in the Improper Payments Information Act of  2002, as amended (IPIA), and the related guidance in Office of  Management and Budget (OMB) Circular A-123, Appendix C,  Requirements for Effective Estimation and Remediation of Improper  Payments (OMB M-15-02). We analyzed this statute and guidance to  identify key criteria that agencies must meet when conducting improper  payment risk assessments. IPIA identifies seven risk factors and OMB  guidance includes two additional risk factors that agencies must consider,  at a minimum, in their improper payment risk assessments to determine  susceptibility to significant improper payments. IPIA also directs agencies  to conduct risk assessments for all programs and activities at least once  every 3 years. We also reviewed relevant internal control standards to  determine the relevant processes and procedures needed to help ensure  that agencies conduct effective improper payment risk assessments to  determine the susceptibility to significant improper payments.", "For this objective, we selected a nongeneralizable sample of 4 agencies  and five programs to review. To select the agencies, we considered data  for the 24 agencies subject to the Chief Financial Officers Act of 1990  (CFO Act). Specifically, we considered the timing of the agencies\u2019  improper payment risk assessments, findings reported by the agencies\u2019  inspectors general (IG), the number of programs and activities for which  the agencies reported improper payment estimates for fiscal year 2017,  the types of programs and activities that the agencies administered, and  agency gross outlays in fiscal year 2017. To ensure we were including  agencies that had most recently conducted improper payment risk  assessments, we limited our selection to agencies that conducted  improper payment risk assessments for any programs or activities in  fiscal year 2017. In order to avoid duplicate efforts, we also eliminated  agencies that reported IG findings related to risk assessments. We then  selected a mix of agencies with and without improper payment estimates  for fiscal year 2017, and ultimately selected 4 agencies based primarily  on their fiscal year 2017 outlays for programs determined to be not  susceptible to improper payments. Specifically, we selected one agency  that did not report any improper payment estimates, one agency that  reported a few improper payment estimates (for three or fewer programs  or activities), and one agency that reported several improper payment  estimates (for five or more programs or activities). We also selected one  agency that administered eligibility-based programs in fiscal year 2017  because of the unique application and approval processes generally  associated with eligibility determinations and their increased risk of  improper payments.", "We then selected up to two programs or activities at each agency, for a  total of five programs. To facilitate our program selection, we requested a  listing of all programs and activities at the selected agencies that  underwent a risk assessment in fiscal years 2015 through 2017 (the most  recent 3-year period at the time of our review) along with the gross outlay  amounts associated with these programs and activities. Through our  selection process, we noted that the Department of Health and Human  Services (HHS) did not assess at least 140 of its programs and activities  in the 3-year period from fiscal years 2015 through 2017, and therefore  our program selection for HHS was limited to approximately 70 programs  or activities.", "To select programs, we considered outlay data, the timing of the most  recent improper payment risk assessment conducted for each program or  activity, and whether eligibility determinations were required for payments  under each program or activity. Our selection was primarily based on the  size of program and activity gross outlays reported for fiscal year 2017.  We focused on outlays because the overall impact of any issues identified  with an agency\u2019s risk assessment process may be greater for programs  and activities with higher gross outlays, as a higher volume of payments  or higher payment amounts could potentially involve higher improper  payments. Based on these data, we selected five programs for review.  Our findings are limited to the five selected programs and cannot be  generalized to all programs and activities at the 24 CFO Act agencies.  The agencies and relevant programs selected for review are shown in  table 3.", "We interviewed officials at the selected agencies on their processes for  conducting improper payment risk assessments and reviewed  documented policies and procedures. We obtained the most recent  improper payment risk assessments that the agencies conducted on the  selected programs during the latest 3-year period at the time of our  review (fiscal years 2015 through 2017). We then analyzed those risk  assessments against relevant IPIA requirements, OMB guidance, and  internal control standards to determine whether the agencies had  evaluated the appropriate risk factors for improper payments,  appropriately considered those risk factors in their risk assessments, and  provided a reasonable basis for the risk determination. For any agencies  that did not adhere to the improper payment risk assessment  requirements, lacked supporting documentation for their risk  assessments, or did not provide a reasonable basis for the risk  determinations, we interviewed appropriate agency officials to determine  the reasons they did not. We also interviewed OMB staff regarding their  roles in developing risk assessment guidance.", "We conducted this performance audit from December 2017 to January  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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Justice", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Matthew Valenta (Assistant  Director), Stephanie Adams (Auditor in Charge), Marcia Carlsen, Pat  Frey, Gina Hoover, Diana Lee, Zhen Li, and Charles Varga made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-696T", "url": "https://www.gao.gov/products/GAO-18-696T", "title": "Electronic Health Records: Clear Definition of the Interagency Program Office's Role in VA's New Modernization Effort Would Strengthen Accountability", "published_date": "2018-09-13T00:00:00", "released_date": "2018-09-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2008 included provisions that VA and DOD jointly develop and implement electronic health record systems or capabilities and accelerate the exchange of health care information. The act also required that these systems be compliant with applicable interoperability standards. Further, the act established a joint Interagency Program Office to act as a single point of accountability for the efforts, with the function of implementing, by September 30, 2009, electronic health record systems that allow for full interoperability.", "This testimony discusses GAO's previously reported findings on the establishment and evolution of the Interagency Program Office over the last decade. In developing this testimony, GAO summarized findings from its reports issued in 2008 through 2018, and information on the departments' actions in response to GAO's recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["Since its establishment in 2008, the Department of Defense (DOD) and Department of Veterans Affairs (VA) Interagency Program Office has been involved in various approaches to increase health information interoperability. However, the office has not been effectively positioned to function as the single point of accountability for the departments' electronic health record system interoperability efforts. For example,", "Between July 2008 and January 2010, GAO issued reports on VA's and DOD's efforts to set up the office, which highlighted steps the departments had taken, but also identified deficiencies, such as vacant leadership positions and a lack of necessary plans. GAO recommended that the departments improve management of their interoperability efforts by developing a project plan and results-oriented performance goals and measures.", "In April 2009, the Interagency Program Office was assigned responsibility for establishing a lifetime electronic record for servicemembers and veterans, called the Virtual Lifetime Electronic Record. GAO reported in February 2011 that, among other things, the office had not developed and approved an integrated master schedule, a master program plan, or performance metrics for the initiative, as outlined in the office's charter. Accordingly, GAO recommended that the departments correct these deficiencies to strengthen their efforts to establish the Virtual Lifetime Electronic Record.", "In March 2011, VA and DOD committed to jointly developing a new, common integrated electronic health record system and empowered the Interagency Program Office with increased authority, expanded responsibilities, and increased staffing levels for leading the integrated system effort. However, in February 2013, the departments abandoned their plan to develop the integrated system and stated that they would again pursue separate modernization efforts. In February 2014, GAO reported on this decision and recommended that VA and DOD take steps to better position the office to function as the single point of accountability for achieving interoperability between the departments' electronic health record systems.", "VA and DOD stated that they agreed with the above GAO recommendations. However, in several cases the departments' subsequent actions were incomplete and did not fully address all recommendations.", "In June 2017 VA announced that it planned to acquire the same electronic health record system that DOD has been acquiring. GAO testified in June 2018 that a governance structure had been proposed that would be expected to leverage existing joint governance facilitated by the Interagency Program Office. At that time, VA's program officials had stated that the department's governance plans for the new program were expected to be finalized in October 2018. However, the officials have not yet indicated what role, if any, the Interagency Program Office is to have in the governance process. Ensuring that the role and responsibilities of the office are clearly defined within these governance plans is essential to VA successfully acquiring and implementing the same system as DOD."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VA clearly define the role and responsibilities of the Interagency Program Office in the governance plans for acquisition of the department's new electronic health record syst"]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to participate in today\u2019s hearing on the  Department of Defense (DOD) and Department of Veterans Affairs (VA)  Interagency Program Office and the office\u2019s role regarding VA\u2019s Electronic  Health Record Modernization (EHRM) program. As you know, these  departments operate two of the nation\u2019s largest health care systems,  which provide coverage to millions of veterans and active duty service  members and their beneficiaries. The use of information technology (IT) is  crucial to helping the departments effectively serve the nation\u2019s veterans  and, each year, the departments spend billions of dollars on information  systems and assets.", "Both VA and DOD have long recognized the importance of advancing the  use of shared health information systems and capabilities to make patient  information more readily available to their health care providers, reduce  medical errors, and streamline administrative functions. Toward this end,  the two departments have an extensive history of working to achieve  shared health care resources. Over many years, however, the  departments have experienced challenges in managing a number of  critical initiatives related to modernizing major systems. Such initiatives  include modernizing VA\u2019s electronic health information system\u2014the  Veterans Health Information Systems and Technology Architecture  (VistA).", "To expedite the departments\u2019 efforts to exchange electronic health care  information, Congress included in the National Defense Authorization Act  for Fiscal Year 2008, provisions that required VA and DOD to jointly  develop and implement electronic health record systems or capabilities  and to accelerate the exchange of health care information. The act also  required that these systems or capabilities be compliant with applicable  interoperability standards, implementation specifications, and  certification criteria of the federal government.", "Further, the act established a joint Interagency Program Office to act as a  single point of accountability for the electronic health care exchange  efforts. The office was given the function of implementing, by September  30, 2009, electronic health record systems or capabilities that would allow  for full interoperability of personal health care information between the  departments.", "In addition, the act included a provision that GAO report on the progress  that VA and DOD have made in achieving the goal of fully interoperable  personal health care information. Our reports in response to this  requirement included information on the departments\u2019 efforts to set up the  joint Interagency Program Office. We also subsequently produced  reports that have discussed the Interagency Program Office in relation to  VA\u2019s efforts to develop a lifetime electronic health record capability for  servicemembers and veterans, develop a joint electronic record  capability with DOD, and promote increased electronic health record  system interoperability.", "At your request, my testimony today summarizes findings from our prior  work that examined the establishment and evolution of the Interagency  Program Office over the last decade. The testimony also discusses the  roles this office has played in VA\u2019s and DOD\u2019s efforts to increase  interoperability and electronic health record capabilities, and any  challenges the office has faced in doing so.", "In developing this testimony, we relied on our previous reports and  testimonies related to the Interagency Program Office, as well as VA\u2019s  and DOD\u2019s electronic health record system programs and modernization  efforts. We also incorporated information on the departments\u2019 actions in  response to recommendations we made in our previous reports. In  addition, we discussed this testimony with the Executive Director of VA\u2019s  EHRM office. The reports cited throughout this statement include detailed  information on the scope and methodology of our prior reviews.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Historically, patient health information has been scattered across paper  records kept by many different caregivers in many different locations,  making it difficult for a clinician to access all of a patient\u2019s health  information at the time of care. Lacking access to these critical data, a  clinician may be challenged in making the most informed decisions on  treatment options, potentially putting the patient\u2019s health at risk.", "The use of technology to electronically collect, store, retrieve, and transfer  clinical, administrative, and financial health information has the potential  to improve the quality and efficiency of health care. Electronic health  records are particularly crucial for optimizing the health care provided to  military personnel and veterans. While in active military status and later  as veterans, many DOD and VA personnel, along with their family  members, tend to be highly mobile and may have health records residing  at multiple medical facilities within and outside the United States.", "VA and DOD operate separate electronic health record systems that they  rely on to create and manage patient health information. In particular, VA  currently uses its integrated medical information system\u2014VistA\u2014which  was developed in-house by the department\u2019s clinicians and IT personnel  and has been in operation since the early 1980s. Over the last several  decades, VistA has evolved into a technically complex system comprised  of about 170 modules that support health care delivery at 170 VA Medical  Centers and over 1,200 outpatient sites. In addition, customization of  VistA, such as changes to the modules by the various medical facilities,  has resulted in about 130 versions of the system\u2014referred to as  instances.", "For its part, DOD relies on its Armed Forces Health Longitudinal  Technology Application (AHLTA), which comprises multiple legacy  medical information systems that were developed from commercial  software products and customized for specific uses. For example, the  Composite Health Care System (CHCS), which was formerly DOD\u2019s  primary health information system, is used to capture information related  to pharmacy, radiology, and laboratory order management. In addition,  the department uses Essentris (also called the Clinical Information  System), a commercial health information system customized to support  inpatient treatment at military medical facilities.", "In July 2015, DOD awarded a contract for a new commercial electronic  health record system to be developed by the Cerner Corporation. Known  as MHS GENESIS, this system is intended to replace DOD\u2019s existing  AHLTA system. The transition to MHS GENESIS began in February 2017  and implementation is expected to be complete throughout the  department in 2022."], "subsections": [{"section_title": "Interoperability: An Overview", "paragraphs": ["The sharing of health information among organizations is especially  important because the health care system is highly fragmented, with care  and services provided in multiple settings, such as physician offices and  hospitals, that may not be able to coordinate patient medical care  records. Thus, a means for sharing information among providers, such as  between DOD\u2019s and VA\u2019s health care systems, is by achieving  interoperability.", "The Office of the National Coordinator for Health IT, within the  Department of Health and Human Services, has issued guidance,  describing interoperability as:  the ability of systems to exchange electronic health information and  the ability to use the electronic health information that has been  exchanged from other systems without special effort on the part of the  user.", "Similarly, the National Defense Authorization Act for Fiscal Year 2014  defines interoperability, per its use in the provision governing VA\u2019s and  DOD\u2019s electronic health records, as \u201cthe ability of different electronic  health records systems or software to meaningfully exchange information  in real time and provide useful results to one or more systems.\u201d Thus, in  these contexts, interoperability allows patients\u2019 electronic health  information to be available from provider to provider, regardless of where  the information originated.", "Achieving interoperability depends on, among other things, the use of  agreed-upon health data standards to ensure that information can be  shared and used. If electronic health records conform to interoperability  standards, they potentially can be created, managed, and consulted by  authorized clinicians and staff across more than one health care  organization, thus providing patients and their caregivers the information  needed for optimal care. Information that is electronically exchanged from  one provider to another must adhere to the same standards in order to be  interpreted and used in electronic health records, thereby permitting  interoperability.", "In the health IT field, standards may govern areas ranging from technical  issues, such as file types and interchange systems, to content issues,  such as medical terminology. On a national level, the Office of the  National Coordinator has been assigned responsibility for identifying  health data standards and technical specifications for electronic health  record technology and overseeing the certification of this technology.", "In addition to exchanging the information, systems must be able to use  the information that is exchanged. Thus, if used in a way that improves  providers\u2019 and patients\u2019 access to critical information, electronic health  record technology has the potential to improve the quality of care that  patients receive and to reduce health care costs. For example, with  interoperability, medical providers have the ability to query data from  other sources while managing chronically ill patients, regardless of  geography or the network on which the data reside."], "subsections": []}, {"section_title": "VA and DOD Have a Long History of Efforts to Achieve Electronic Health Record Interoperability", "paragraphs": ["Since 1998, DOD and VA have relied on a patchwork of initiatives  involving their health information systems to exchange information and  increase electronic health record interoperability. These have included  initiatives to share viewable data in existing (legacy) systems; link and  share computable data between the departments\u2019 updated health data  repositories; develop a virtual lifetime electronic health record to enable  private sector interoperability; implement IT capabilities for the first joint  federal health care center; and jointly develop a single integrated system.  Table 1 provides a brief description of the history of these various  initiatives.", "In addition to the initiatives mentioned in table 1, DOD and VA previously  responded to provisions in the National Defense Authorization Act for  Fiscal Year 2008 directing the departments to jointly develop and  implement fully interoperable electronic health record systems or  capabilities in 2009. The act also called for the departments to set up  the Interagency Program Office to be a single point of accountability for  their efforts to implement these systems or capabilities by the September  30, 2009, deadline."], "subsections": []}]}, {"section_title": "The Interagency Program Office Has Not Functioned as the Single Point of Accountability for VA and DOD\u2019s Efforts to Increase Electronic Health Record Interoperability", "paragraphs": ["The Interagency Program Office has been involved in the various  approaches taken by VA and DOD to increase health information  interoperability and modernize their respective electronic health record  systems. These approaches have included development of the Virtual  Lifetime Electronic Record (VLER) and a new, common integrated  electronic health record (iEHR) system. However, although the  Interagency Program Office has led efforts to identify data standards that  are critical to interoperability between systems, the office has not been  effectively positioned to be the single point of accountability as called for  in the National Defense Authorization Act for Fiscal Year 2008. Moreover,  the future role of the office with respect to VA\u2019s current electronic health  record modernization program is uncertain."], "subsections": [{"section_title": "The Interagency Program Office Became Operational, but Was Not Positioned to Be the Single Point of Accountability for Achieving Interoperability", "paragraphs": ["Although VA and DOD took steps to set up the Interagency Program  Office, the office was not positioned to be the single point of  accountability for the departments\u2019 efforts to achieve electronic health  record interoperability by September 30, 2009. When we first reported in  July 2008 on its establishment, VA and DOD\u2019s efforts to set up the office  were still in their early stages. Leadership positions in the office were  not yet permanently filled, staffing was not complete, and facilities to  house the office had not been designated. Further, the implementation  plan for setting up the office was in draft and, although the plan included  schedules and milestones, the dates for several activities (such as  implementing a capability to share immunization records) had not yet  been determined, even though all capabilities were to be achieved by  September 2009.", "We concluded that without a fully established program office and a  finalized implementation plan with set milestones, the departments could  be challenged in meeting the required date for achieving interoperability.  Accordingly, we recommended that the departments give priority to fully  establishing the office by putting in place permanent leadership and staff,  as well as finalizing the draft implementation plan. Both departments  agreed with this recommendation.", "We later reported in January 2009 that VA and DOD had continued to  take steps to set up the Interagency Program Office. For example, the  departments had developed descriptions for key positions within the  office. In addition, the departments had developed a document that  depicted the Interagency Program Office\u2019s organizational structure; they  also had approved a program office charter to describe, among other  things, the mission and functions of the office.", "However, we pointed out that VA and DOD had not yet fully executed  their plan to set up the office. For example, among other activities, they  had not filled key positions for the Director and Deputy Director, or for 22  of 30 other positions identified for the office.", "Our report stressed that, in the continued absence of a fully established  Interagency Program Office, the departments would remain ineffectively  positioned to assure that interoperable electronic health records and  capabilities would be achieved by the required date. Thus, we  recommended that the departments develop results-oriented performance  goals and measures to be used as the basis for reporting interoperability  progress. VA and DOD agreed with our recommendation.", "Nevertheless, in a subsequent July 2009 report, we noted that the  Interagency Program Office was not effectively positioned to function as a  single point of accountability for the implementation of fully interoperable  electronic health record systems or capabilities between VA and DOD.  While the departments had made progress in setting up the office by  hiring additional staff, they continued to fill key leadership positions on an  interim basis. Further, while the office had begun to demonstrate  responsibilities outlined in its charter, it was not yet fulfilling key IT  management responsibilities in the areas of performance measurement (as we previously recommended), project planning, and scheduling,  which were essential to establishing the office as a single point of  accountability for the departments\u2019 interoperability efforts. Thus, we  recommended that the departments improve the management of their  interoperability efforts by developing a project plan and a complete and  detailed integrated master schedule. VA and DOD stated that they agreed  with this recommendation.", "In our January 2010 final report in response to the National Defense  Authorization Act for Fiscal Year 2008, we noted that VA and DOD  officials believed they had satisfied the act\u2019s September 30, 2009,  requirement for full interoperability by meeting specific interoperability- related objectives that the departments had established. These  objectives included: refine social history data, share physical exam data,  and demonstrate initial document scanning between the departments.", "Additionally, the departments had made progress in setting up their  Interagency Program Office by hiring additional staff, including a  permanent director. In addition, consistent with our recommendations in  the three previously mentioned reports, the office had begun to  demonstrate responsibilities outlined in its charter in the areas of  scheduling, planning, and performance measurement.", "Nevertheless, the office\u2019s efforts in these areas did not fully satisfy the  recommendations and were incomplete. Specifically, the office did not  have a schedule that included information about tasks, resource needs,  or relationships between tasks associated with ongoing activities to  increase interoperability. Also, key IT management responsibilities in the  areas of planning and performance measurement remained incomplete.  We reiterated that, by not having fulfilled key management  responsibilities, as we had previously recommended, the Interagency  Program Office continued to not be positioned to function as a single  point of accountability for the delivery of the future interoperable  capabilities that the departments were planning."], "subsections": []}, {"section_title": "The Interagency Program Office Was to Be the Single Point of Accountability for Establishing a Lifetime Electronic Record for Servicemembers and Veterans, but VA and DOD Did Not Develop Complete Plans for the Effort", "paragraphs": ["Although the Interagency Program Office charter named the office as the  single point of accountability for the initiative, the office did not have key  plans to define and guide the effort. In April 2009, the President  announced that VA and DOD would work together to define and build  VLER to streamline the transition of electronic medical, benefits, and  administrative information between the two departments. VLER was  intended to enable access to all electronic records for service members  as they transition from military to veteran status, and throughout their  lives. Further, the initiative was to expand the departments\u2019 health  information sharing capabilities by enabling access to private sector  health data.", "Shortly after the April 2009 announcement, VA, DOD, and the  Interagency Program Office began working to define and plan for the  VLER initiative. Further, the office was rechartered in September 2009  and named as the single point of accountability for the coordination and  oversight of jointly approved IT projects, data, and information sharing  activities, including VLER.", "In our February 2011 report on the departments\u2019 efforts to address their  common health IT needs, we noted that, among other things, the  Interagency Program Office had not developed an approved integrated  master schedule, master program plan, or performance metrics for the  VLER initiative, as outlined in the office\u2019s charter. We noted that if the  departments did not address these issues, their ability to effectively  deliver capabilities to support their joint health IT needs would be  uncertain. Thus, we recommended that the Secretaries of VA and DOD  strengthen their efforts to establish VLER by developing plans that would  include scope definition, cost and schedule estimation, and project plan  documentation and approval. Although the departments stated they  agreed with this recommendation, they did not implement it."], "subsections": []}, {"section_title": "The Interagency Program Office Was Responsible for the Development of a Joint Electronic Health Record System for VA and DOD, but the Office Was Not Positioned for Effective Collaboration", "paragraphs": ["The Interagency Program Office was assigned responsibility for the  development of an electronic health record system that VA and DOD  were to share. However, the departments did not provide the office with  control over the resources (i.e., funds and staff) it needed to facilitate  effective collaboration.", "In March 2011, the Secretaries of VA and DOD committed the two  departments to developing the iEHR system, and in May 2012 announced  their goal of implementing it across the departments by 2017. To oversee  this new effort, in October 2011, VA and DOD re-chartered the  Interagency Program Office to give it increased authority, expanded  responsibilities, and increased staffing levels for leading the integrated  system effort. The new charter also gave the office responsibility for  program planning and budgeting, acquisition and development, and  implementation of clinical capabilities. However, in February 2013, the  Secretaries of VA and DOD announced that they would not continue with  their joint development of a single electronic health record system.", "In February 2014, we reported on the departments\u2019 decision to abandon  their plans for iEHR. Specifically, we reported that VA and DOD had not  addressed management barriers to effective collaboration on their joint  health IT efforts. For example, the Interagency Program Office was  intended to better position the departments to collaborate, but the  departments had not implemented the office in a manner consistent with  effective collaboration. Specifically, the Interagency Program Office  lacked effective control over essential resources such as funding and  staffing. In addition, decisions by the departments had diffused  responsibility for achieving integrated health records, potentially  undermining the office\u2019s intended role as the single point of accountability.", "We concluded that providing the Interagency Program Office with control  over essential resources and clearer lines of authority would better  position it for effective collaboration. Further, we recommended that VA  and DOD better position the office to function as the single point of  accountability for achieving interoperability between the departments\u2019  electronic health record systems by ensuring that the office has authority  (1) over dedicated resources (e.g., budget and staff), (2) to develop  interagency processes, and (3) to make decisions over the departments\u2019  interoperability efforts. Although VA and DOD stated that they agreed with  this recommendation, they did not implement it."], "subsections": []}, {"section_title": "The Interagency Program Office Subsequently Took Steps to Improve Interoperability Measurement and Additional Actions Are Planned", "paragraphs": ["In light of the departments\u2019 not having implemented a solution that  allowed for seamless electronic sharing of medical health care data, the  National Defense Authorization Act for Fiscal Year 2014 included  requirements pertaining to the implementation, design, and planning for  interoperability between VA and DOD\u2019s separate electronic health record  systems. Among other things, the departments were each directed to (1)  ensure that all health care data contained in VA\u2019s VistA and DOD\u2019s  AHLTA systems complied with national standards and were computable  in real time by October 1, 2014, and (2) deploy modernized electronic  health record software to support clinicians while ensuring full standards- based interoperability by December 31, 2016.", "In August 2015, we reported that VA and DOD, with guidance from the  Interagency Program Office, had taken actions to increase interoperability  between their electronic health record systems. Among other things, the  departments had initiated work focused on near-term objectives, including  standardizing their existing health data and making them viewable by  both departments\u2019 clinicians in an integrated format. The departments  also developed longer-term plans to modernize their respective electronic  health record systems. For its part, the Interagency Program Office  issued guidance outlining the technical approach for achieving  interoperability between the departments\u2019 systems.", "However, even with the actions taken, VA and DOD did not certify by the  October 1, 2014, deadline established in the National Defense  Authorization Act for Fiscal Year 2014 for compliance with national data  standards that all health care data in their systems complied with national  standards and were computable in real time.", "We also reported that the departments\u2019 system modernization plans  identified a number of key activities to be implemented beyond December  31, 2016\u2014the deadline established in the act for the two departments to  deploy modernized electronic health record software to support clinicians  while ensuring full standards-based interoperability. Specifically, DOD  had issued plans and announced the contract award for acquiring a  modernized system to include interoperability capabilities across military  operations. VA had issued plans describing an incremental approach to  modernizing its existing electronic health records system. These plans\u2014if  implemented as described\u2014indicated that deployment of the new  systems with interoperability capabilities would not be completed across  the departments until after 2018.", "With regard to its role, the Interagency Program Office had taken steps to  develop process metrics intended to monitor progress related to the data  standardization and exchange of health information consistent with its  responsibilities. For example, it had issued guidance that calls for tracking  metrics, such as the percentage of data domains within the departments\u2019  current health information systems that are mapped to national standards.", "However, the office had not yet specified outcome-oriented metrics and  established related goals that are important to gauging the impact that  interoperability capabilities have on improving health care services for  shared patients. As a result, we recommended that VA and DOD, working  with the Interagency Program Office, take actions to establish a time  frame for identifying outcome-oriented metrics, define goals to provide a  basis for assessing and reporting on the status of interoperability-related  activities and the extent to which interoperability is being achieved by the  departments\u2019 modernized electronic health record systems, and update  Interagency Program Office guidance to reflect the metrics and goals  identified.", "Subsequently, we reported that VA and DOD had certified in April 2016  that all health care data in their systems complied with national standards  and were computable in real time.  However, VA acknowledged that it  did not expect to complete a number of key activities related to its  electronic health record system until sometime after the December 31,  2016, statutory deadline for deploying modernized electronic health  record software with interoperability.", "Further, in following up on implementation of the recommendations in our  August 2015 report, we found that VA, DOD, and the Interagency  Program Office had addressed the recommendations in full by updating  guidance to include goals and objectives and an approach to developing  metrics that would improve the departments\u2019 ability to report on the status  of interoperability activities."], "subsections": []}, {"section_title": "The Interagency Program Office\u2019s Role in Governing VA\u2019s New Electronic Health Record System Acquisition Is Uncertain", "paragraphs": ["In June 2017, the former VA Secretary announced a significant shift in the  department\u2019s approach to modernizing the department\u2019s electronic health  record system. Specifically, rather than continue to use VistA, the  Secretary stated that the department planned to acquire the same Cerner  electronic health record system that DOD has been acquiring.", "Accordingly, the department awarded a contract to Cerner in May 2018  for a maximum of $10 billion over 10 years. Cerner is to replace VistA  with a commercial electronic health record system. This new system is to  support a broad range of health care functions that include, for example,  acute care, clinical decision support, dental care, and emergency  medicine. When implemented, the new system will be expected to  provide access to authoritative clinical data sources and become the  authoritative source of clinical data to support improved health, patient  safety, and quality of care provided by VA.", "Deployment of the new electronic health record system at three initial  sites is planned for within 18 months of October 1, 2018, with a phased  implementation of the remaining sites over the next decade. Each VA  medical facility is expected to continue using VistA until the new system  has been deployed at that location.", "As we testified in June 2018, VA has taken steps to establish a program  management office and has drafted a structure for technology, functional,  and joint governance of the electronic health record implementation.  Specifically, in January 2018, the former VA Secretary established the  Electronic Health Record Modernization (EHRM) program office that  reports directly to the VA Deputy Secretary.", "Further, VA has drafted a memorandum that describes the role of  governance bodies within VA, as well as governance intended to facilitate  coordination between the department and DOD. According to EHRM  program documentation, VA is in the process of establishing a Functional  Governance Board, a Technical Governance Board, and a Governance  Integration Board comprised of program officials intended to provide  guidance and coordinate with DOD, as appropriate. Further, a joint  governance structure between VA and DOD has been proposed that  would be expected to leverage existing joint governance facilitated by the  Interagency Program Office.", "Nevertheless, while VA\u2019s plans for governance of the EHRM program  provide a framework for high-level oversight for program decisions  moving forward, EHRM officials have noted that the governance bodies  will not be finalized until October 2018. Accordingly, the officials have not  yet indicated what role, if any, the Interagency Program Office is to have  in the governance process."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The responsibilities of the Interagency Program Office have been  intended to support the numerous approaches taken by VA and DOD to  increase health information interoperability and modernize their  respective electronic health record systems. Yet, while the office has led  key efforts to identify data standards that are critical to interoperability  between systems, the office has not been effectively positioned to be the  single point of accountability originally described in the National Defense  Authorization Act for Fiscal Year 2008. Further, the future role of the  Interagency Program Office remains unclear despite the continuing need  for VA and DOD to share the electronic health records of servicemembers  and veterans. In particular, what role, if any, that the office is to have in  VA\u2019s acquisition of the same electronic health record system that DOD is  currently acquiring is uncertain."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to VA:  The Secretary of Veterans Affairs should ensure that the role and  responsibilities of the Interagency Program Office are clearly defined  within the governance plans for acquisition of the department\u2019s new  electronic health record system. (Recommendation 1)", "Chairman Banks, Ranking Member Lamb, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact Carol C. Harris, Director, Information Technology Management  Issues, at (202) 512-4456 or harrisc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony statement. GAO staff who made key  contributions to this testimony are Mark Bird (Assistant Director), Jennifer  Stavros-Turner (Analyst in Charge), Rebecca Eyler, Jacqueline Mai, Scott  Pettis, and Charles Youman.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-486", "url": "https://www.gao.gov/products/GAO-18-486", "title": "Unemployment Insurance: Actions Needed to Ensure Consistent Reporting of Overpayments and Claimants' Compliance with Work Search Requirements", "published_date": "2018-08-22T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The UI program, which is overseen by DOL and administered by states, paid $30 billion to about 5.7 million individuals in 2017. Under federal law, to be eligible for benefits, individuals are generally required to actively search for work, but the specific work search requirements vary by state. Yet, states found that some benefits were overpaid to UI claimants who were ineligible because they were not meeting work search requirements. GAO was asked to review improper payments due to UI claimants' failure to actively search for work. Building on GAO's prior work ( GAO-18-133R ), this report examines (1) state administrative practices associated with work search overpayments; (2) selected states' approaches to address work search overpayments; and (3) DOL's oversight and support of states' efforts.", "GAO analyzed DOL data, including the results of state reviews of a representative random sample of UI payments made from fiscal years 2013 through 2017. GAO also reviewed UI information from six states selected for variation in work search requirements and overpayment rates, interviewed DOL and state officials, and reviewed relevant federal laws, regulations, and guidance."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's analysis of Department of Labor (DOL) data found that certain state administrative practices, such as reviewing a higher percentage of claimant-reported work search activities and frequent use of formal warnings, were associated with lower estimated work search overpayment rates for the Unemployment Insurance (UI) program. According to DOL data, 22 states were warning claimants after the first discovered occurrence of their failure to meet work search requirements (i.e., issuing formal warnings) rather than reporting that an overpayment was made, while the other states were reporting such cases as overpayments. In 2017, DOL determined that federal law does not permit states to use such policies. GAO's analysis of DOL data shows that in fiscal year 2017, estimated work search overpayments were nearly $1.4 billion (see fig.), but would have been an estimated $1.8 billion (+/-$0.2 billion) greater if states had not issued formal warnings and established overpayments. DOL officials told GAO in July 2017 that the agency would issue a letter to states informing them that federal law does not permit them to warn claimants instead of establishing an overpayment. To date, DOL has not issued the letter. Until DOL provides states with such notification, states may continue to report inconsistent information on overpayments.", "State officials GAO interviewed reported using multiple approaches to address work search overpayments, including using their online systems that automate collecting information on claimants' work search activities; conducting audits of claimants work search activities beyond those required; and sending automated messages to claimants regarding their work search requirements. Officials said that their approaches encouraged claimants to conduct a more active work search and prevented work search overpayments in some cases.", "DOL monitors states' work search overpayment rate estimates and has helped states address such overpayments, but lacks clear procedures for how states should verify claimants' work search activities. DOL directs states to verify a \u201csufficient\u201d number of work search activities during their audits but has not provided information on what is considered sufficient. DOL data show that some states did not review claimants' work search activities for a majority of audited cases. DOL officials said that the agency plans to clarify its procedures after issuing a letter about formal warnings. By clarifying these procedures, DOL will have greater assurance that states are complying with verification requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to DOL, including that it provide states information about its determination that the use of state formal warning policies is no longer permissible and clarify its work search verification requirements. DOL agreed with GAO's recommendations and stated that it would take action to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal-state Unemployment Insurance (UI) program provides  temporary income support to eligible workers who become unemployed  through no fault of their own. Individuals who claim unemployment are  generally required to actively search for work as a condition of receiving  benefits. However, the specific work search requirements\u2014such as the  number of weekly contacts a claimant must have with potential  employers\u2014vary by state, according to the Department of Labor (DOL).", "Overseen by DOL, and administered by states, the UI program paid  approximately $30 billion to about 5.7 million individuals in 2017. The UI  program had the seventh-highest reported improper payment estimate  among all federal programs in fiscal year 2017 (about $4 billion or about  12.5 percent of benefits paid). Currently, the leading reported cause of  UI improper payments is overpayments to claimants who failed to meet  work search requirements, according to DOL data.", "You asked us to review states\u2019 and DOL\u2019s approaches to address  improper payments that result from UI claimants\u2019 failure to actively search  for work. In November 2017, we reported that some states use formal  warnings for claimants who fail to actively seek work instead of counting  them as overpayments, which affects DOL\u2019s improper payment estimates,  and that additional instruction from DOL could help. In this report, we  build on the findings from that prior report and provide additional  information on how selected states and DOL are addressing  overpayments due to claimants\u2019 failure to meet work search  requirements, i.e., work search overpayments.", "Specifically, we examine (1) the extent to which state administrative  practices are associated with reported work search overpayments, (2) the  approaches that selected states have used to address work search  overpayments, and (3) the extent to which DOL oversees and supports  states\u2019 progress in reducing work search overpayments.", "To examine the extent to which state administrative practices are  associated with reported work search overpayments, we analyzed DOL\u2019s  Benefit Accuracy Measurement (BAM) Program data for fiscal years 2013  through 2017, the most recent data available. We estimated work search  overpayment rates and amounts overpaid, produced descriptive statistics,  and conducted a regression analysis. (See app. I for more information on  our regression analysis.) We assessed the reliability of the data by (1)  performing electronic testing of relevant data elements, (2) reviewing  existing information about the data and the system that produced them,  including results from prior audits, and (3) collecting information from DOL  officials knowledgeable about the data. Based on these reviews, we  determined that the data were sufficiently reliable for our purposes.  Related to these administrative practices, we also reviewed relevant  federal laws, regulations, and DOL guidance. We assessed DOL actions  against its internal procedures and federal internal controls standards  related to monitoring and communication.", "To identify approaches states have used to address work search  overpayments, we reviewed documentation, such as work search  verification procedures, and interviewed state UI officials from six states\u2013 Indiana, Nevada, New Jersey, Mississippi, Pennsylvania, and Utah\u2013 selected for variation in work search requirements, overpayment rates,  and DOL region. The information we obtained from those states is not  generalizable to all states.", "To determine the extent to which DOL oversees and supports states\u2019  efforts to address work search overpayments, we interviewed DOL  officials from the national office and collected information from all six DOL  regional offices on how they oversee state BAM systems, such as  monitoring procedures and state plans submitted by our selected states.  We also reviewed relevant federal laws, regulations, and DOL guidance.  We assessed DOL actions against its internal procedures and relevant  federal internal controls standards.", "We conducted this performance audit from January 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "UI Program Administration and Funding", "paragraphs": ["The federal-state UI program provides temporary cash benefits to eligible  workers who lose their jobs through no fault of their own. Under this  arrangement, states administer their own programs according to certain  federal requirements and under the oversight of DOL\u2019s Office of  Unemployment Insurance. States have considerable flexibility to set  benefit amounts and their duration, or the maximum period of time that  the state pays benefits, and establish eligibility requirements.", "UI benefits are funded primarily through state payroll taxes on employers,  and administrative costs are primarily funded through a federal payroll tax  on employers. The states collect taxes that will be used to pay UI  benefits, and the U.S. Department of the Treasury holds these funds in  trust on behalf of the states in the Unemployment Trust Fund. DOL  certifies for payment to the states administrative grants to operate their UI  programs, which amounted to about $2.7 billion in fiscal year 2017. DOL  is responsible for ensuring that state UI laws include certain provisions,  which is a condition of the state receiving its UI administrative grant.", "Individuals typically claim their UI benefits by filing claims with their state  UI agency online or by phone on a weekly or bi-weekly basis. In fiscal  year 2017, the average weekly UI benefit was about $350, and claimants  remained on the program for an average of 15 weeks, according to DOL  data."], "subsections": []}, {"section_title": "Work Search Requirements for UI Claimants", "paragraphs": ["Federal law establishes a work search requirement for UI eligibility, but  the specific work search activities UI claimants are expected to conduct  vary by state, according to a DOL report. To be eligible for  unemployment benefits, individuals are generally required to actively  search for work under federal law. The Middle Class Tax Relief and Job  Creation Act of 2012 amended the Social Security Act to, among other  things, require states to have work search requirements for UI claimants  specified in their laws as a condition of eligibility for the states\u2019 UI  administrative grants. Specifically, states must have laws that require UI  claimants to be \u201cactively seeking work\u201d as a condition of eligibility for  unemployment compensation for any week. Because federal law does not  specifically define actively seeking work, states have some discretion to  establish a reasonable definition, according to DOL\u2019s 2013 guidance to  states. For example, a state can specify a minimum number of weekly  contacts a claimant must have with potential employers. Acceptable work  search activities might also include searching for jobs online, submitting  job applications, visiting a job center, attending a networking event, or  establishing a LinkedIn account, according to a DOL report.", "Depending on the state, UI claimants may be directed to register for work  with their state\u2019s Employment Service, which provides job search  assistance, job placement assistance, and referrals to employers. In  addition, in some cases UI claimants may be directed to participate in  reemployment services at an American Job Center. In 2017, DOL  provided $115 million in grants to states to provide Reemployment  Services and Eligibility Assessments (RESEA). RESEA services include  in-person reemployment services and eligibility assessments in American  Job Centers for ex-service members and UI claimants determined to have  a high likelihood of exhausting their UI benefits. RESEA-funded activities  include developing an individual reemployment plan, providing labor  market information, identifying job skills and prospects, and reviewing the  claimant\u2019s continued eligibility for UI benefits."], "subsections": []}, {"section_title": "Process for Identifying Work Search Overpayments in State Benefit Accuracy Measurement Audits", "paragraphs": ["DOL uses its Benefit Accuracy Measurement (BAM) system to determine  the accuracy of UI benefit payments and estimate the amount and rate of  improper payments. Under the BAM system, each state reviews a  number of randomly selected cases on a weekly basis and reconstructs  the UI claims process to assess the accuracy of the payments that were  made. The state determines what the benefit payment should have  been according to its laws and policies. States report the results of their  BAM case reviews to DOL\u2014including overpayments and  underpayments\u2014through an online data system. DOL uses the data to  estimate improper payment rates by state, as well as to calculate a  nationwide rate.", "State BAM audits involve reviews of existing records in the state\u2019s UI  claims information system as well as original fact-finding by the state  BAM investigator. DOL requires states to use a standard claimant  questionnaire when conducting BAM audits. The questionnaire includes  numerous questions about the claimant\u2019s circumstances\u2014including their  work search efforts\u2014during the week under review. The questionnaire  includes questions that could indicate that a claimant qualifies for an  exemption from work search requirements, or made specific job contacts  and the results of the job contacts, such as whether the claimant  submitted an application and received a job offer.", "State BAM investigators are also expected to take steps to verify the  information reported by the claimant by collecting documentation from  claimants and contacting employers or other third parties. According to  DOL\u2019s 2016 BAM annual report and BAM procedures, state BAM  investigators are to review a sufficient number of work search activities to  determine whether the claimant has complied with the state\u2019s minimum  requirement for the number of weekly work search activities. The BAM  program assigns one of three classifications to each of the work search  activities reviewed:", "Acceptable \u2013 Documentation exists that the work search activity  reported by the claimant, such as an employer contact, employment  application, or other state approved work search activity, was made  by the claimant and was acceptable according to the state\u2019s law or  policy.", "Unverifiable \u2013 The investigator was unable to establish sufficient  information to make a judgment of whether the work search activity  was either acceptable or unacceptable according to the state\u2019s law or  policy.", "Unacceptable \u2013 Written documentation exists that the work search  activity reported by the claimant was not made at all by claimant, or  was made but was unacceptable according to the state\u2019s law or  policy.", "According to DOL\u2019s BAM annual report, work search activities classified  as acceptable or unverifiable may be considered in calculating whether  the claimant has satisfied the state\u2019s required number of work search  activities for purposes of BAM. If the state investigator finds that the  claimant\u2019s work search is unacceptable and does not meet the state\u2019s  requirements, he or she may determine the claimant was ineligible for  benefits and establish an overpayment, depending on state law (see fig.  1). Currently, several states have formal warning policies and provide  claimants warnings for the first instance of noncompliance with work  search requirements, whereas states without these policies count these  cases as overpayments, according to DOL."], "subsections": []}, {"section_title": "Reported Causes of UI Improper Payments", "paragraphs": ["Since 2002, federal agencies have been required to identify and report  improper payments. The leading reported cause of UI improper  payments in fiscal year 2017 was overpayments to claimants who failed  to meet work search requirements. DOL data show that states made an  estimated $1.36 billion in overpayments to such claimants in fiscal year  2017. Other major reported causes of UI improper payments in fiscal year  2017 included payments made to individuals who continue to make  claims even after returning to work (benefit year earnings) and payments  made to claimants who were determined ineligible due to disqualifying job  separations, such as quitting a job without good cause or being  discharged for misconduct (separation issues). (See fig. 2. Table 8 in app.  II provides greater detail.)", "According to DOL officials, many UI improper payments cannot be  prevented given certain legal requirements that states pay claims in a  timely manner and provide claimants with due process when the state  finds an eligibility issue. Specifically, according to DOL, federal law  requires that when an eligibility issue is detected, the claimant has a right  to receive notice and provide the state information before being denied  benefits. In addition, if an eligibility issue associated with work search,  or any other matter, is detected but not resolved, the state is still required  to pay for a claimed week no later than the week after an eligibility issue  is detected, according to DOL. The time it takes to work through the  necessary due process steps can prevent states from stopping the  payment before it must be paid."], "subsections": []}, {"section_title": "Trend in Reported Work Search Overpayments", "paragraphs": ["Nationally, the estimated work search overpayment rate and the  estimated amount of work search overpayments have risen in recent  years. Specifically, in fiscal year 2013, approximately $1 billion in  estimated work search overpayments were made to claimants who were  not actively searching for work and, in fiscal year 2017, the amount  increased to close to an estimated $1.36 billion (see fig. 3). The national  work search overpayment rate for such claimants also increased during  this time. (See table 9 in app. II for additional details.) According to DOL  officials, some states implemented more stringent work search  requirements, which may account for the recent trend. As work search  requirements become more stringent, the opportunities for non- compliance and errors increase and thus higher improper payment rates,  according to DOL officials. While the national work search overpayment  rate was 4.5 percent in fiscal year 2017, state work search overpayment  rates varied widely from an estimated 0 to 41 percent of the UI benefits  that states paid in fiscal year 2017. (See table 10 in app. II for state-by- state estimates of work search overpayment rates and amounts.)", "States use various methods to recover overpayments to UI claimants,  including setting up payment plans, off-setting UI benefits, or deducting  refunds from federal or state income tax returns. Like all recovered UI  overpayments, recoveries of work search overpayments must be  deposited in the unemployment trust fund of the state that recovered the  money and can be used only for the payment of UI benefits, according to  DOL officials. National data are not available on the amount of work  search overpayments that states have recovered because, although DOL  collects recovery data from states, it does not require states to separate  out work search overpayment recoveries from other types of recoveries in  their reporting."], "subsections": []}]}, {"section_title": "Conducting More Work Search Investigations Is Associated With Lower Estimated Work Search Overpayment Rates, As Is the Use of Formal Warnings", "paragraphs": ["Based on our analysis of DOL data, we found that certain state  administrative practices, including investigating a higher percentage of  claimant-reported work search activities and frequent use of formal  warnings, were associated with lower reported state work search  overpayment rates. However, DOL recently determined that federal law  does not permit states to warn claimants the first time they failed to meet  work search requirements (i.e., issue formal warnings) instead of  establishing that an overpayment was made. Additionally, a higher  percentage of claimants required to search for work is associated with  higher reported state work search overpayment rates."], "subsections": [{"section_title": "Investigating Claimant- Reported Job Contacts Is Associated with Lower Work Search Overpayment Estimates, but the Extent to Which States Verified Contacts Varied", "paragraphs": ["One of the administrative practices significantly associated with lower  work search overpayment estimates was investigations of claimants\u2019  reported job contacts. Specifically, a higher percentage of cases with  claimants whose contacts were investigated by the state UI agency as  part of the state\u2019s BAM audit was associated with a lower work search  overpayment rate estimate. According to our analysis, for every 1  percentage point increase in the percentage of cases with claimants\u2019  whose job contacts were investigated, there was a 0.072 percentage  point decrease in the work search overpayment rate estimate.", "The extent to which states attempted to verify claimants\u2019 reported job  contacts through these investigations varied, according to our analysis of  DOL data. Nationally, in fiscal year 2017, states investigated job contacts  in about 80 percent of BAM cases where claimants were required to  search for work. However, among the states, the proportion of cases in  which job contacts were investigated was less than 50 percent in 5  states. (Table 11 in app. II shows the percentage of contacts that were  investigated for each state.)", "Furthermore, states often were not able to verify the information claimants  reported. Of the job contacts that were investigated, states reported that  about 48 percent of the job contacts were acceptable, about 8 percent  were unacceptable, and about 45 percent could not be verified (see fig.  5).", "Our analysis of BAM data for fiscal year 2017 also shows that for the  overpayments that states were able to detect, that a large portion were  found through investigating and verifying claimants\u2019 work search contacts.  Specifically, 47 percent of reported work search overpayments were  found through this practice. Interviewing claimants about their work  search was the next most common way states detected work search  overpayments. States reported identifying 32 percent of work search  overpayments in fiscal year 2017 using this practice.", "Although overpayments can be the result of actions taken by the claimant  or the agency administering the program, states reported that most work  search overpayments are associated with claimants. For example,  claimants may provide inadequate or incorrect information needed by the  UI agency to determine if the claimant met work search requirements. In  fiscal year 2017, states attributed about 99 percent of overpayments at  least partially to claimant action, while they attributed about 2 percent at  least partially to administrative errors at the state agency."], "subsections": []}, {"section_title": "Frequent Use of Formal Warnings Is Associated with Reporting Lower Work Search Overpayments, but DOL Recently Determined Their Use Is Legally Impermissible", "paragraphs": ["According to DOL data, 22 states issued formal warnings to one or more  claimants at some point between fiscal year 2013 and fiscal year 2017 for  failure to meet work search requirements instead of finding that the  claimants were overpaid. Although the states that made use of these  warnings varied over this period, the number of states issuing formal  warnings has generally increased over time from 13 states issuing formal  warnings in fiscal year 2013 to 19 states in fiscal year 2017. Overall,  states that most frequently issued formal warnings had lower reported  work search overpayment rates than states that did not issue formal  warnings. However, their work search overpayment rates are lower  because, under their state policies, they did not count an overpayment  when they issued a formal warning.", "Our analysis indicates that states which issued formal warnings  frequently\u2014in 75 percent or more of cases involving work search errors\u2014 had estimated work search overpayment rates that were 3.5 percentage  points lower, on average, than states that did not issue formal warnings.  However, states that use formal warnings less frequently\u2014in fewer than  75 percent of cases involving work search errors\u2014reported work search  overpayment rates that were between 3 and 4 percentage points higher  than states that did not issue formal warnings. See appendix I for a  detailed discussion of our econometric analysis.", "Table 1 shows the average work search overpayment rate estimates for  each of these groups of states when formal warnings are not counted as  overpayments, and the potential average work search overpayment rate  when formal warnings are counted as overpayments. Excluding formal  warnings, two of the groups\u2014frequent and low users of formal  warnings\u2014had average work search overpayment rate estimates lower  than the average for states that did not use formal warnings. However,  when formal warnings are included in the overpayment rate, only low  users of formal warnings have a work search overpayment rate estimate  lower than the average for states that did not use formal warnings.", "GAO\u2019s analysis of DOL data shows that in fiscal year 2017, estimated  work search overpayments were nearly $1.4 billion, but potentially would  have been an estimated $1.8 billion greater if states had not issued  formal warnings and established overpayments. Our analysis further  shows that if formal warning cases had been included in DOL\u2019s  calculation of the UI overpayment rates for fiscal year 2017, the  nationwide UI overpayment rate would have increased by about 6  percentage points, from an estimated 12 percent to an estimated 18  percent. Moreover, these figures represent an increase from the fiscal  year 2016 figures we presented in our previous report on states\u2019 use of  formal warnings related to work search requirements. At that time, we  found the nationwide UI overpayment rate would have increased by about  5 percentage points from an estimated 11 percent to an estimated 16  percent with the inclusion of formal warning cases. The amount of UI  payments made to claimants for weeks in which they received formal  warnings in fiscal year 2016 was about $1.6 billion. Table 12 in appendix  II shows how the estimated UI overpayment rate in each state issuing  formal warnings in fiscal year 2017 may have increased if formal  warnings were not used.", "State use of formal warnings has resulted in inconsistent reporting of  work search overpayments, which affects DOL\u2019s reported improper  payment rate for the UI program. Specifically, states that issue formal  warnings have not counted as overpayments cases in which claimants  did not actively search for work and received a UI benefit payment. On  the other hand, states that did not have formal warning policies counted  such cases as overpayments, which are factored into DOL\u2019s reported  improper payments rate. The variation among states related to formal  warning policies makes it difficult for DOL and others to understand the  reasons behind states\u2019 reported work search overpayments.", "DOL has determined and documented in its FY 2017 Agency Financial  Report that the use of formal warnings is no longer allowed under the  2012 federal law, which generally requires UI claimants to actively seek  work. DOL officials told us in July 2017 they would soon issue a letter to  states to inform them that they are no longer permitted to use formal  warnings when they determine that claimants failed to meet work search  requirements. To date, DOL has not issued such a letter. In May 2018,  DOL officials told us that they expect to issue the letter by the end of  calendar year 2018. Federal internal control standards direct agency  management to remediate identified internal control deficiencies on a  timely basis. Federal internal controls standards also state that  management should externally communicate the necessary quality  information to achieve the entity\u2019s objectives. Additionally, these  standards state that agency management should establish and operate  monitoring activities to monitor the internal control system and evaluate  the results.", "According to DOL officials, they began discussing the need for a potential  discontinuation of formal warnings at conferences with states in the first  half of 2017. However, we found that states continued to implement their  formal warning policies, potentially resulting in an increase in the  estimated amounts of overpayment dollars associated with formal  warnings between fiscal year 2016 and 2017. Until DOL informs states of  the need to discontinue the use of formal warnings through a letter or  another mechanism, states will continue to be inconsistent in whether  they count as overpayments cases in which claimants who failed to  search for work in any week were provided benefits. Additionally, once  DOL provides additional information to states on formal warnings, it  should monitor states\u2019 responses to help ensure that DOL achieves its  desired results. Furthermore, having more consistent information on  overpayments related to work search issues could help DOL assess how  the program is working nationwide and whether further federal and state  actions would be needed to address this leading source of reported  improper payments in the UI program.", "DOL officials stated that the national work search overpayment rate is  likely to increase in the future as states begin to eliminate their formal  warning practices. Officials also stated that this may take some time as  some states may need to amend laws or regulations in order to do so."], "subsections": []}, {"section_title": "Higher Percentages of Claimants Required to Search for Work Are Associated with Higher Work Search Overpayment Rate Estimates", "paragraphs": ["State work search overpayment rate estimates were higher for states  where a higher proportion of claimants were required to search for work.  Based on our analysis, for every one percentage point increase in the  fraction of cases with claimants required to search for work, there was a  0.084 percentage point increase in the work search overpayment rate  estimate on average, all else being equal.", "Nationwide in fiscal year 2017, states reported that work searches have  been required in 80 percent of cases, with requirements in individual  states ranging from 38 to 100 percent of cases. Three states reported  requiring fewer than 50 percent of claimants to perform work searches,  while five states reported requiring more than 95 percent of their  claimants to perform work searches. The most common reasons states  exempted claimants from work searches were because claimants were  \u201cjob-attached\u201d (e.g. temporarily laid-off, recalled), or they had union  deferrals because they were seeking employment through their union,  according to DOL data. The map in figure 6 shows the range among all  the states in the percentage of UI claimants required to search for work,  according to our analysis of DOL data for fiscal year 2017."], "subsections": []}]}, {"section_title": "Selected States Used Multiple Approaches to Address Work Search Overpayments, but Cited Challenges Verifying Claimants\u2019 Work Search Activities", "paragraphs": ["Selected states used multiple approaches to address work search  overpayments, including online systems to facilitate the work search  reporting and verification process, work search audits beyond the BAM  audits, and messaging to inform claimants of their work search  responsibilities. For example, three of six states in our review had online  systems where claimants could report specific work search activities as  part of filing their weekly claims, according to state officials (see table  2). Some of the approaches states used were specifically designed for  UI claimants participating in state reemployment programs.", "State officials cited several benefits of the approaches they use to  address work search overpayments. The online systems, work search  audits, and messaging helped prompt work search activities and prevent  work search overpayments in some cases, according to state officials.  According to officials from the selected states that used them and a study  on work search improper payments, online systems can facilitate the work  search reporting and verification in several ways:", "Automatically documenting the claimants\u2019 work search activities.", "Online reporting of work search activities can help prevent  overpayments because their work search is documented in the online  claims system, which means the claimant does not need to keep a  work search log. In addition, online job search/training systems can  be used to track the work search activities completed by claimants,  making it easier for the state to verify that the work search was  completed. For example, officials in Mississippi and Indiana told us  they piloted an online system called NextJob and required RESEA  program participants to conduct work search activities through the  system. Mississippi officials reported that NextJob motivated  claimants to conduct their job search and increased the speed of  reemployment among these individuals. Similarly, New Jersey officials  told us that UI claimants selected to participate in New Jersey\u2019s  RESEA program are required to use an online job search and training  system called OnRamp, which, for example, allows job seekers to  create or upload their resume on the website, search for jobs, access  online training, and receive email alerts on potential job matches. In  addition, officials in Nevada said that the online reporting system is  beneficial because the work search activities are documented in the  system and are more reliably retrieved if the claimant is selected for a  BAM audit because few claimants maintain and retain their work  search effort logs.", "Performing automated checks on data the claimants submit. The  online claims systems can identify potentially duplicate job contacts  and check whether the claimant reported the required number of job  contacts. For example, Utah officials reported that if a claimant enters  job contacts from another week, officials would follow up with the  claimant by phone after it is flagged by their online system. If  claimants report self-disqualifying information, such as an insufficient  number of job contacts, the system can automatically put a hold on a  claim until the issue is resolved.", "Facilitating communication with the claimant. Some states added  messages to their online claims system that pop up if the claimant  enters incorrect or insufficient information. For example, Mississippi  officials stated that they used messaging to better inform claimants of  their responsibilities and to encourage them to report accurate  information. According to the officials, if claimants do not report the  required number of work search activities in the online system, a  questionnaire will pop up requesting that the claimants explain why  they did not do so. The system requires the claimants to enter more  information in order to submit their claims and to receive their benefit  payments. Mississippi officials also stated that adding targeted  messaging resulted in fewer denials of benefits due to claimant failure  to meet work search requirements and also reduced the number of  appeals related to this type of denial. Some state officials said that  messaging encouraged accurate reporting. For example, Indiana  officials told us that at the end of the online claim filing process,  claimants receive a message notifying them of the state\u2019s work search  requirements and informing them that they are required to search for  work to continue receiving benefits. In Utah, officials developed a  video that covers claimants\u2019 responsibilities, including work search  requirements, which claimants must view before receiving their initial  benefit payment, according to state officials.", "Officials in three of the states we reviewed reported using additional work  search audits beyond BAM to help reinforce their state policies.  Pennsylvania officials reported conducting 7,182 work search audits for  RESEA program participants in 2016. As a result, officials reported that  the state issued 1,300 warnings to claimants. The two other states\u2014 Mississippi and Utah\u2014report that their random work search audits,  coupled with their online systems, helped prevent work search  overpayments as they are able to disqualify claims before the payment  goes out. Mississippi and Utah officials also reported that they were also  able to identify and recover some work search overpayments (see table  3).", "Despite implementing these approaches, state officials in five of the six  states we contacted told us they face challenges with verifying work  search activities. These officials stated that they have difficulty verifying  work search activities as some claimants do not understand the work  search requirements or do not keep accurate records of their work search  activities, which makes it difficult for the state to confirm compliance with  the state requirements. In addition, state officials also said that many  employers do not keep records of job seekers\u2019 inquiries or do not respond  to state requests for information when they are trying to verify claimants\u2019  work search activities. For example, Nevada officials said that work  search contacts are often virtually unverifiable as many companies  outsource their hiring processes to contractors who refer the job  candidate for a job posting and keep the job application. Officials said  these contractors also rarely respond to state inquiries about claimants\u2019  job applications. As discussed later, DOL has provided states tools to  help address this issue, such as a messaging toolkit to help states  improve communications with claimants and employers."], "subsections": []}, {"section_title": "DOL Monitors States\u2019 Work Search Overpayment Rate Estimates and Provides Assistance, but Lacks Clear Procedures on Work Search Verification", "paragraphs": [], "subsections": [{"section_title": "DOL Monitors States\u2019 Work Search Overpayment Rate Estimates and Has Identified Strategies and Provided Tools to Help States Reduce Their Rates", "paragraphs": ["DOL uses UI performance data to monitor state progress in reducing the  estimated improper payment rate, including data on overpayments to  claimants who failed to meet work search requirements. To do so, DOL  requires states to submit State Quality Service Plans, which serve as the  performance reporting and grant application documents through which  states receive administrative funding. The plans include a summary of  state performance on various measures related to operating the UI  program, including the improper payment rate, according to DOL  documentation we reviewed. States with estimated improper payment  rates of 10 percent or more are required to submit corrective action plans  to DOL. For example, data from two of the six states we reviewed\u2013 Nevada and New Jersey\u2013had estimated improper payment rates above  10 percent during DOL\u2019s most recent planning cycle and developed  corrective action plans. Nevada\u2019s corrective action plan noted that the  state expects their rate to decline due to their June 2017 implementation  of online work search reporting as part of their UI claims system. New  Jersey\u2019s corrective action plan noted that the state plans to implement  new online tools that will help them verify wage and employment  information. DOL separately monitors each state\u2019s estimated work search  overpayment rate. In addition, all states, including those who estimated  improper payment rates of less than 10 percent, are required to prepare a  state-specific action plan that describes the root causes of improper  payments and the state\u2019s strategies to address them. According to  agency officials, DOL reviews plans to monitor state performance and  help states identify strategies to improve performance.", "Although DOL requires states with estimated improper payment rates of  10 percent or more to develop corrective action plans, according to DOL,  the agency has limited options to require state UI agencies to take actions  to respond to high improper payment rates. DOL officials told us that,  beyond routine monitoring and providing states with technical assistance  to help reduce their improper payments rate, their enforcement options  are limited to withholding the state\u2019s administrative funding or removing  federal tax credit reductions, which is, in effect, a tax increase for the  state\u2019s employers. According to DOL officials, both are considered  extraordinary sanctions that require significant due process. The agency  has not withheld state administrative funding to address improper  payments, according to DOL officials. DOL officials also told us that they  are concerned about the effects on UI claimants if they were to withhold  administrative funding. The administration\u2019s fiscal year 2019  congressional budget justification includes a legislative proposal that  would authorize the Secretary of Labor to require states to implement  corrective action measures for poor state performance in the UI program,  helping to reduce improper payments in states with the highest estimated  rates.", "DOL has identified strategies to address the leading causes of UI  improper payments\u2014including work search issues\u2014and provided states  tools and funding to help implement them. For example:", "Pathway to Reemployment Framework. In 2016, DOL and the  National Association of State Workforce Agencies published a  framework that contained a broad menu of work search options that  states could adopt to better reflect how individuals search for work,  such as allowing use of online job search tools to count as an  approved work search activity. The framework also includes  suggestions for how states could document or verify claimants\u2019 work  search activities for eligibility purposes.", "Messaging toolkit. In 2012, DOL published a messaging toolkit  designed in part to improve claimants\u2019 understanding of work search  requirements as a condition of eligibility for benefits. According to  DOL, claimants who fully understand their responsibilities and the  consequences of not fulfilling them may be more likely to complete the  required work search activities, thereby reducing instances of  claimants\u2019 failing to search for work. DOL provided states  supplemental funding to support improved messaging and tracked  state implementation of the strategies.", "Online tool to record work search activities. In 2011, DOL  provided supplemental funding to New York to develop an online work  search record that could be replicated by other states. This tool is  designed to reduce improper payments that result from inadequate  documentation of work search activities. Claimants can use the tool to  record their work search online when they file their UI claims. The  work search record is automatically shared with state job centers,  which in turn act to enhance claimants\u2019 work search and connect  claimants with jobs. New York used open source technologies when  designing the tool in an effort to help more states replicate the product  at a lower cost.", "UI Integrity Center. The DOL-funded UI Integrity Center of  Excellence (UI Integrity Center) was established as a way to help  states develop and share innovative strategies to prevent and detect  UI improper payments, reduce fraud, and improve program integrity.  For example, the UI Integrity Center funded a pilot project in 2016 to  support a state in implementing an online tool that trains claimants on  how to effectively search for jobs and allows claimants to use the tool  to complete their work search activities. The UI Integrity Center also  hosted national conferences in 2016 and 2018 that included  presentations on state practices to address work search improper  payments."], "subsections": []}, {"section_title": "DOL Directs States to Investigate a Sample of Claimants\u2019 Work Searches, but Has Not Clarified Procedures on Verifying Work Search", "paragraphs": ["Although DOL monitors states\u2019 work search overpayment rate estimates  and has provided assistance to help states address such overpayments,  it has provided limited direction to states on the level of effort states must  make to verify whether claimants are actively searching for work.  Specifically, DOL\u2019s BAM procedures direct states to investigate a  sufficient number of work search contacts in its BAM sample of UI cases  to determine if the claimants met the state\u2019s work search requirement.  However, DOL has not provided states any additional direction on what is  considered \u201csufficient.\u201d As previously mentioned, the extent to which  states attempted to verify job contacts from claimants\u2019 work searches  varied across states. Some states reported to DOL that they did not  investigate work search activities for a majority of their BAM cases even  though work search was required and the claimant reported job contacts.", "Federal internal control standards state that agency management should  externally communicate the necessary quality information to achieve its  objectives, including addressing related risks. According to DOL  officials, the agency plans to clarify its BAM procedures, to include  providing more definitive instructions to states on work search verification  requirements, after the agency issues its planned letter to states about  discontinuing the use of formal warning policies. As of May 2018, the  agency said it plans to issue the letter on formal warning policies by the  end of calendar year 2018. However, as previously stated, it has been  nearly a year since DOL initially told us they were planning to issue the  letter to states.", "Effective monitoring of state compliance with the clarified work search  verification requirements will also be important once DOL revises its BAM  procedures. Federal internal control standards state that agency  management should establish and operate monitoring activities to monitor  the internal control system and evaluate the results. Monitoring states\u2019  responses could help ensure that DOL achieves its desired results. By  providing clear direction to states about work search verification  requirements and monitoring states\u2019 implementation of these  requirements, DOL would have greater assurance that states are  complying with its requirements."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The health of the UI program depends, in part, on the ability of states to  control its benefit payments by accurately determining individuals\u2019  eligibility. Improper payments, including overpayments, in the UI program  have led to billions of federal and state funds being used inappropriately.", "Actively seeking work has generally been an eligibility requirement for  individuals receiving unemployment benefits under federal law since  2012, but states have not consistently implemented the requirement for  claimants in similar circumstances. States with formal warning policies  reported lower work search overpayments not necessarily because they  are better at ensuring claimants\u2019 compliance with requirements, but  because they are not counting cases where claimants receive formal  warnings as overpayments. Furthermore, although DOL determined in  2017 that states are not permitted to issue formal warnings rather than  reporting an overpayment, it has not officially told states to stop using  warnings. Without providing states with this information and monitoring  their response, states will continue to report inconsistent information on  the extent of work search overpayments.", "State efforts to check whether claimants are meeting work search  requirements also vary. Our evidence suggests that states making a  greater effort to investigate work search activities tend to have lower  overpayment rate estimates associated with this issue. However, some  states are not investigating claimant-reported work search activities as  part of their BAM audits despite DOL\u2019s procedures directing them to do  so. Until DOL provides clear direction to states about verifying work  search and monitors state compliance, DOL has little assurance that  states are complying with its requirements."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the Department of  Labor:", "The Assistant Secretary of DOL\u2019s Employment and Training  Administration should provide states with information about its  determination that the use of state formal warning policies is no longer  permissible under federal law. (Recommendation 1)", "The Assistant Secretary of DOL\u2019s Employment and Training  Administration should monitor states\u2019 efforts to discontinue the use of  formal warning policies. (Recommendation 2)", "The Assistant Secretary of DOL\u2019s Employment and Training  Administration should clarify information on work search verification  requirements in its revised Benefit Accuracy Measurement  procedures. The revised procedures should include an explanation of  what DOL considers to be sufficient verification of claimants\u2019 work  search activities. (Recommendation 3)", "The Assistant Secretary of DOL\u2019s Employment and Training  Administration should monitor states\u2019 compliance with the clarified  work search verification requirements. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Labor (DOL) for  review and comment. In its written comments, reproduced in appendix IV,  DOL agreed with all four of our recommendations and stated that it would  take action to address them. DOL also provided technical comments,  which we incorporated as appropriate. Additionally, we provided excerpts  of the draft report to state UI officials in the selected six states we  included in our review. We incorporated their technical comments as  appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Department of Labor, 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 202-512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Econometric Analysis of Estimated State Work Search Overpayment Rates", "paragraphs": [], "subsections": [{"section_title": "Data", "paragraphs": ["We used the Department of Labor\u2019s (DOL) Unemployment Insurance  Benefit Accuracy Measurement (BAM) data. The BAM program is  designed to determine the accuracy of paid and denied claims for  unemployment insurance (UI) in three major UI programs\u2014state UI,  Unemployment Compensation for Federal Employees (UCFE), and  Unemployment Compensation for Ex-Servicemembers (UCX). The BAM  data covers claimants in the 50 U.S. states, the District of Columbia, and  Puerto Rico. Each week, state workforce agencies select random  samples of paid and denied unemployment insurance claims (i.e., cases).  State BAM investigators then audit these cases to determine whether the  claimant was properly paid or was properly denied benefits in the week  for which the claim was made (i.e., key week). The bases for determining  whether paid and denied claims were accurate are federal and state law,  regulations, and policy.", "We used BAM cases for paid claims for all UI programs and all states for  fiscal years 2013 through 2017. The number of cases for each state is  determined by DOL for each year. Cases are chosen randomly each  week from the population of claims for that week. The normal weekly  number of paid claims sampled in most states is 9, with a minimum of 6,  for an annual sample of around 480 cases. For the 10 states with the  smaller UI workloads, the normal weekly number of paid claims sampled  is 7, with a minimum of 5, for an annual sample of around 360 cases.", "For each paid claim case, the BAM data include variables describing the  claimant, as well as information on their UI benefit year, separation from  their last job, monetary eligibility, benefit payment history, employment  services registration and work search, and the outcome of the BAM  investigation. For cases for which BAM auditors identify errors, the BAM  data also include information on the errors. In 2016, work search issues,  benefit year earnings, and separation issues were the most common  causes of reported overpayments:", "Work search issues. These occur when the state finds that claimants  did not actively search for work during the key week. Federal law  generally requires people receiving unemployment compensation to  be actively searching for work. States have discretion to establish  requirements for what constitutes active work search, and these  requirements vary by state.", "Benefit year earnings issues. These occur when claimants have  earnings that exceed the threshold for UI eligibility in their state or  when these earnings are not properly reported.", "Separation issues. These occur when claimants are ultimately  determined to be ineligible for UI due to disqualifying job separations,  such as quitting a job without good cause or being discharged for  misconduct under the state UI law.", "Other causes of overpayments include incorrect reporting of wages used  to calculate benefits, able and available to work issues, employment  service registration issues, and other issues. For some cases, BAM  investigators identify multiple errors with different causes. When this  occurs, BAM investigators determine the overpayment amount associated  with each cause.", "BAM sample data is weighted to make inferences about the population. In  accordance with DOL\u2019s method, we calculated the weight on each BAM  sample case as (1) the number of unemployment compensation  payments to claimants for the state and the week from which the BAM  sample case was selected divided by, and (2) the number of completed  BAM sample cases for that week, as long as there were two or more  completed cases for the week.", "Because each state followed a probability procedure based on random  selections to pick cases, the BAM sample is only one of a large number of  samples that they might have drawn. Since each sample could have  provided different estimates, we express our confidence in the precision  of the BAM sample\u2019s results using confidence intervals. For example, a  95 percent confidence interval is the interval that would contain the actual  population value for 95 percent of the samples that could have been  drawn. In some tables we provide the margin of error instead of the  confidence interval, where the margin of error is the half-width of the  confidence interval.", "Our analysis sample consists of cases with no missing or invalid values of  variables used in our analysis that also have positive sample weights. Our  analysis sample includes 98.1percent of all cases."], "subsections": [{"section_title": "Estimated Overpayment Rates Due to Failure to Meet Work Search Requirement", "paragraphs": ["In accordance with DOL\u2019s method, the estimated overpayment rate is  equal to the amount of UI benefits overpaid as a percentage of the total  amount of UI benefits paid. The amount of UI benefits overpaid includes  fraud, nonfraud recoverable, and nonfraud nonrecoverable  overpayments; and overpayments from all causes and responsible  parties. The amount overpaid excludes overpayments that DOL considers  as technically proper. An overpayment may be considered technically  proper by DOL under a finality rule, which generally means that too much  time has passed between the decision to pay the claimant and the  detection of the eligibility issue, or for some other reason. Our estimated  work search overpayment rate is calculated using the same method as  the official overpayment rate and is generally comparable to work search  overpayment rates reported by DOL.", "More specifically, we used the BAM data to identify cases with  overpayments and with overpayments due to work search, excluding  formal warnings and other payments DOL considers to be technically  proper. Next, we applied DOL\u2019s proration algorithm to allocate  overpayment amounts for each error associated with a case so that the  total amount of overpayments from all errors does not exceed the key  week amount paid. Then, we calculated the total overpayment amount  and work search overpayment amount for cases with overpayments and  work search overpayments, respectively. Finally, we tracked the key  week amount paid for each case. To estimate the work search  overpayment rate for each state and fiscal year, we calculated the  weighted sum of work search overpayment amounts as a percentage of  the weighted sum of amounts paid.", "Table 4 shows the estimated national work search overpayment rate, the  average estimated state work search overpayment rate, and the median  estimated state work search overpayment rate for each fiscal year. The  national work search overpayment rate estimate has increased from 2.4  percent in 2013 to 4.5 percent in 2017. Over the same time period, the  average state work search overpayment rate estimate has increased from  2.6 to 4.6 percent, and the median state work search overpayment rate  estimate has increased from 1.4 percent to 2.7 percent. Most states\u2019  work search overpayment rate estimates are less than 5 percent, but  some states\u2019 rates are more than 10 percent.", "To identify state practices and other factors that may be associated with  state work search overpayment rates, we reviewed DOL documents  describing the BAM program and summarizing key features of states\u2019 UI  programs, as well as research on factors associated with time claimants  spend searching for employment. Based on our review, we identified  factors that may be associated with work search overpayments that can  be measured using variables in the BAM data:", "Exemptions from work search requirements. According to DOL, while  federal law generally requires claimants to be actively seeking work, it  does allow states to exempt claimants in some circumstances. For  example, according to DOL, because states may not deny benefits to  an individual in approved training, all states provide an exemption  from the requirements to be able and available for work and  conducting an active work search for any week the individual is in  approved training. In addition, according to DOL, some states allow  work search exemptions if the worker is union-attached and finds  work through the union hall, or if a separation is classified as a  temporary lay-off and there is a reasonable expectation that the  worker will return to work soon. According to DOL, other state work  search exemptions include that the worker has a specified start date  for new employment, has jury duty, has a compelling personal reason,  is in a labor dispute with the employer, is the victim of domestic  violence, or labor market or other information indicates no suitable  employment.", "It is possible for a case with a claimant who indicated he or she was  not required to search for work to have a work search error if the  claimant provided an invalid reason for being exempt from his or her  state\u2019s work search requirement. For example, the claimant may have  said that he or she was a member of a union with a hiring hall and  obtained employment through union referrals or that he or she had a  definite recall date, and therefore, the work search requirement was  waived. However, the BAM investigator\u2019s verification with the union  found that the claimant was not in good standing, or the investigator\u2019s  verification with the employer found that the claimant had no definite  recall date. In such a situation, the claimant might be held ineligible for  a failure to conduct an active work search because the exemption was  invalid.", "Claimant response. According to DOL, the claimant interview anchors  the BAM audit and is a major error detection point, and the claimant  questionnaire is a required standard form. Claimants may provide  information for the BAM audit either in person, over the phone, or via  mail or some other method. Some claimants may not respond to the  audit at all. For the period from 2013 to 2017, of the work search  overpayments that BAM auditors detected in their BAM sample of  cases, about 37 percent of cases were uncovered during the claimant  interview.", "State investigation of job contacts. Claimants are asked to provide  information about job contacts as evidence that they were actively  searching for work as part of the required claimant questionnaire. In  addition, even if the claimant does not respond to the BAM audit, job  contacts may be available for BAM auditors to investigate if the state\u2019s  continued claim process captured the claimant\u2019s work search  information. BAM staff must investigate a sufficient number of  contacts to establish whether the claimant has met the state\u2019s work  search requirement. For the period from 2013 to 2017, of the work  search overpayments that BAM auditors detected in the BAM sample  of cases, about 45 percent were uncovered by investigating claimant- provided job contacts.", "State use of formal warnings. If the BAM audit of a case determines  that the claimant\u2019s work search during the key week was not  acceptable, the state might issue a formal warning to the claimant  instead of finding that the claimant received a work search  overpayment, and these cases are not included in the calculation of  the work search overpayment rate for that state. Over the period from  2013 to 2017, of the BAM sample of cases for which work search  errors were identified, state workforce agencies issued formal  warnings for about 46 percent.", "Claimant demographic and other characteristics. Characteristics of  claimants that are associated with the amount of time claimants spend  searching for work include age, education, gender, length of time  between initial claim and key week, and weekly benefit amount as a  percentage of the normal weekly wage in the claimant\u2019s industry. To  the extent that they affect time spent searching for work, these  characteristics may also be associated with the likelihood of claimants  receiving a work search overpayment.", "Some factors that may be associated with work search overpayments  cannot be measured using variables in the BAM data and, thus, are  excluded from our analysis. Examples include:", "Minimum number of work search activities. According to DOL, the  minimum number of work search activities required per week varies  across states and can vary based on labor market conditions, which  can, for example, produce different requirements in a rural area  versus an urban area. However, some states do not specify a  required number of work search activities and instead require that the  number of work search activities be \u201creasonable,\u201d according to a DOL  report.", "Type of required employer contacts. According to DOL, some states  allow claimants to search for part-time work as well as full-time work,  while others do not. In addition, according to DOL, some states  specify that participation in reemployment services counts as a  contact, and some states require claimants to make at least one  contact through the state online system.", "Frequency and method of reporting. According to DOL, some states  require weekly claimant reporting of work search activities, while  others require bi-weekly reporting. In addition, according to DOL,  some states require claimants to report online as part of their  continued claim, while others require claimants to keep a log of their  work search activities."], "subsections": []}, {"section_title": "Econometric Mode", "paragraphs": ["Our econometric model is the following:  work search overpayment rates, = \u03b1 + \u03b2\u2217work search requireds, +  \u03b3*n-person responses, + \u03b3*telephone responses, + \u03b3*mail, email,  fax, or other responses, + \u03b4*contacts investigateds, + \u03c6 + X\u2019\u0398 + year indicators + \u03b5,  where s and y denote state and year, respectively, and the explanatory  variables in the model are the following:", "Work search required is the estimated fraction of cases with claimants  for whom work search is required, according to the BAM data.", "In-person response, telephone response, and mail, email, fax, or  other response are the estimated fractions of cases with claimants  who responded to the BAM audit in person, by telephone, or by mail,  email, fax, or other method, respectively.", "Contacts investigated is the estimated fraction of cases for which  BAM auditors investigated one or more job contacts.", "Low, moderate, and frequent formal warning use are binary indicator  variables equal to 1 if the state issued a low, moderate, or high  number of formal warnings in the fiscal year as a percentage of BAM  cases with work search errors, respectively, and 0 otherwise. We  defined low formal warning states as those that issued formal  warnings for some but less than 25 percent of the cases with work  search errors, moderate formal warning states as those that issued  formal warnings for at least 25 percent but less than 75 percent of  cases with work search errors, and high formal warning states as  those that issued formal warnings for anywhere from 75 to 100  percent of cases with work search errors. The omitted group is states  that issued no formal warnings during the fiscal year.", "X is a list of other characteristics of claimants that may be associated  with work search, including the estimated distributions of cases across  claimants\u2019 age groups, education levels, gender, length of time  between initial claim and key week, and weekly benefit amount as a  percentage of the normal weekly wage for their occupation.  \u03b5 is an error term.", "The parameters of interest in our econometric model are \u03b2, \u03b3, \u03b3, \u03b3, \u03b4,  \u03c6 is an estimate of the change in the work search  overpayment rate associated with a 1 percentage point increase in the  fraction of cases with claimants who responded to the BAM audit in  person, all else being equal. The parameters \u03b3 and \u03b3 are estimates  of the change in the work search overpayment rate associated with a  1 percentage point increase in the fraction of cases with claimants  who responded to the BAM audit by telephone and by mail, email, fax,  or other method, respectively, all else being equal.", "The parameter \u03b4 is an estimate of the change in the work search  overpayment rate associated with a 1 percentage point increase in the  fraction of cases for which BAM auditors investigated one or more job  contacts, all else being equal.", "The parameters \u03c6Table 5 shows descriptive statistics for the explanatory variables, other  than formal warnings.", "Table 6 shows descriptive statistics for states\u2019 use of formal warnings.", "Our analysis is subject to several limitations, and the results we discuss  below should be interpreted with caution.", "No causality. Our econometric approach can establish correlations  between state work search overpayment rate estimates and the  factors we analyzed, but it cannot establish causal relationships. This  limitation is especially important when it comes to interpreting the  relationship between work search overpayment rate estimates and the  fraction of cases for which BAM auditors investigated job contacts.  BAM investigations can only detect work search overpayments, not  prevent them, because BAM investigators are reviewing cases after  the payment has already been made. Preventing work search  overpayments is the only way to reduce the work search overpayment  rates. Thus, the relationship between investigation of claimant- provided contacts and work search overpayment rates likely reflects  not a causal relationship but an equilibrium relationship in which  claimants who know that their job contacts will be investigated are  more likely to search for work, all else being equal.", "Nongeneralizability. Our results do not generalize to other time  periods with different labor market conditions, different rules and  regulations about unemployment insurance, or other differences.", "Omitted variables. As discussed above, we have excluded from our  models some state practices that may be associated with work search  overpayments because those variables were not included in the BAM  data. For example, we do not account for the fact that, according to  DOL, some states require claimants to engage in more work search  activities than other states, which could affect the likelihood that a  claimant receives a work search overpayment. In addition, according  to DOL, some states require claimants to report their work search  activities in order to continue receiving benefits, which might prevent  some work search overpayments from occurring. We have also likely  excluded some relevant claimant characteristics as well. For example,  total income for a claimant\u2019s household and a claimant\u2019s number of  dependents may affect their work search efforts. However, variables  describing a claimant\u2019s household income and composition are not  included in the BAM data and thus are omitted from our analysis. To  the extent that these factors are correlated with the factors we  included, our estimates of the relationships between work search  overpayment rates and the included factors could be biased.", "Measurement error. Our variables may have been measured with  error, which could bias our coefficient estimates. If the measurement  error is random, our coefficient estimates would be biased down, but if  the measurement error is systematic, then we cannot say whether our  coefficient estimates would be biased down or up."], "subsections": []}]}, {"section_title": "Results", "paragraphs": ["Our baseline specification suggests that some state practices are  associated with state work search overpayment rates estimates (see  column 1 of table 7). We used the 10 percent level of significance as our  threshold for statistical significance because we have a relatively small  number of observations (259).", "State work search overpayment rate estimates were higher in states  with more cases with claimants who were required to search for work.  A 1 percentage point increase in the fraction of cases with claimants  required to search for work was associated with a 0.084 percentage  point increase in the work search overpayment rate estimates on  average, all else being equal.", "Work search overpayment rate estimates were lower in states with  more cases for which the BAM auditors investigated one or more job  contacts. A one percentage point increase in the fraction of cases for  which the BAM auditors investigated contacts was associated with a  0.072 percentage point reduction in the work search overpayment rate  on average, all else being equal.", "Compared to states that did not issue any formal warnings, work  search overpayment rate estimates were higher in states that made  low or moderate use of formal warnings but lower in states that issued  formal warnings frequently. Work search overpayment rate estimates  in states that were low and moderate users of formal warnings were  3.9 and 3.1 percentage points higher on average than those in states  that issued no formal warnings, all else being equal. Work search  overpayment rate estimates in states that were frequent users of  formal warnings were 3.5 percentage points lower on average than  those in states that issued no formal warnings.", "Our state-level analysis also suggests that some characteristics of cases  are not associated with state work search overpayment rate estimates,  but others are. State work search overpayment rate estimates were not  significantly associated with the distribution of cases by claimant age,  gender, duration of unemployment benefits receipt, or key week amount  as a percentage of the normal weekly wage in their occupation, or with  the number of cases. However, state work search overpayment rate  estimates were higher in states with more cases with claimants with some  college or an associate\u2019s degree relative to cases with claimants without a  high school degree or GED. A one percentage point increase in the  estimated fraction of cases with claimants with some college or an  associates degree was associated with a 0.192 percentage point increase  in estimated work search overpayment rates on average, all else being  equal.", "To assess the sensitivity of our results, we estimated fractional response  models with robust standard errors instead of clustered standard errors  (see column (2) of table 7). We also estimated fractional response models  that replaced the fractions of cases by claimant response method with the  fraction of cases with claimants who responded to the BAM audit by all  methods combined, with both types of standard errors. Finally, we  estimated linear models, also with both types of standard errors. While  the direction and magnitude of the relationship between estimated work  search overpayment rates and the fraction of cases with claimants  required to search for work was generally similar across specifications, it  was not always statistically significant. The direction, magnitude, and  statistical significance of the relationship between estimated work search  overpayment rates and the fraction of cases for which BAM auditors  investigated job contacts was generally similar across specifications, with  the exception of the linear model with clustered standard errors, where it  was not statistically significant. The directions, magnitudes, and statistical  significance of the relationship between estimated work search  overpayment rates and estimated state formal warning use were  generally similar across specifications."], "subsections": []}]}, {"section_title": "Appendix II: Additional Benefit Accuracy Measurement Data Tables", "paragraphs": ["This appendix contains several tables that show the underlying data used  throughout this report, using the Department of Labor\u2019s Benefit Accuracy  Measurement (BAM) data for fiscal years 2013 through 2017.", "According to DOL, because the BAM data are based on a statistical  survey, estimates produced from our analysis of the BAM data are  subject to sampling and non-sampling errors. Sampling errors are errors  that arise in a data collection process as a result of taking a sample from  a population rather than using the whole population. Non-sampling errors  are errors or biases that arise in a data collection process as a result of  factors other than taking a sample, such as the timeliness of data  collection, data entry errors, biased questions in fact-finding, biased  decision-making, and inappropriate analysis and conclusions completed  by state investigators or false or inaccurate information provided by  survey respondents. We express our confidence in the precision of our  results by reporting the margins of error associated with 95 percent  confidence intervals. This is the interval that would contain the actual  population value for 95 percent of the samples the respective agency  could have drawn.", "In addition, it may be misleading to compare one state's work search  overpayment rates with another state's rates. According to DOL, no two  states' written laws, regulations, and policies specifying eligibility  conditions are identical, and differences in these conditions influence the  potential for error.", "The following tables and information are included in this appendix:", "Table 8: The estimated overpayment amounts for the Unemployment  Insurance (UI) program by cause in fiscal year 2017 (also represented  in fig. 2 in the letter portion).", "Table 9: The national work search overpayment rate estimates and  dollar amounts for fiscal years 2013 through 2017 (also represented in  fig. 3 in the letter portion).", "Table 10: The work search overpayment rates estimates and dollar  amount of work search overpayments in each state in fiscal year  2017, excluding cases where formal warnings were given.", "Table 11: The percentage of cases in which claimants were required  to search for work and the percentage of those cases in which job  contacts were investigated in each state in fiscal year 2017.", "Table 12: For states that issued formal warnings in 2017, the UI  overpayment rate estimates excluding and including cases in which  formal warnings were issued, and the difference in the dollar amount  of overpayments if formal warnings were not used."], "subsections": []}, {"section_title": "Appendix III: Summary of Six States\u2019 Work Search Requirements for Unemployment Insurance Claimants", "paragraphs": ["Work search requirements for Unemployment Insurance claimants vary  by state. According to our review of program documents in our six  selected states, the minimum number of work search activities required  per week ranged from not specified to four. Three of the states limited the  work search activities to applying for jobs or contacting employers in other  ways and the three other states had broader definitions of what would  qualify as a work search activity. See table 13 below for a summary of the  work search requirements, confirmed by state officials, for the six states  included in our review."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Cindy Brown Barnes 202-512-7215 or brownbarnesc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact names above, Danielle Giese (Assistant  Director), Cathy Roark (Analyst in Charge), Carl Barden, Rachel Beers,  Deborah Bland, Beryl Davis, Holly Dye, Alex Galuten, Dana Hopings, Joel  Marus, Phillip McIntyre, Sheila R. McCoy, Jean McSween, Courtney  LaFountain, Stacy Spence, Almeta Spencer, Matt Valenta made  significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-91", "url": "https://www.gao.gov/products/GAO-18-91", "title": "Federal Pay: Opportunities Exist to Enhance Strategic Use of Special Payments", "published_date": "2017-12-07T00:00:00", "released_date": "2017-12-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies can provide additional compensation by using seven broadly available special payment authorities to recruit and retain employees to address needed skills. Though special payments can help fill mission-critical skills gaps, agencies also face constrained budgets, which underscores the importance of cost-effective use of authorities. OPM and the CHCO Council play important roles in assuring effective federal human capital management.", "GAO was asked to examine agency use, challenges, and improvements needed, if any. This report 1) describes CHCO agencies' use of special payment authorities in fiscal years 2014-2016; 2) assesses to what extent CHCO agencies examined effectiveness; and 3) evaluates how OPM has helped agencies address recruitment and retention needs. GAO obtained information from CHCO agencies on use of authorities through a questionnaire. GAO also analyzed OPM personnel data and agency documents, and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Generally, federal agencies have seven broadly available government-wide special payment authorities to help address recruitment and retention challenges. Chief Human Capital Officer (CHCO) Council agencies reported using these authorities to varying degrees but overall for few employees in fiscal years 2014-2016. For example, in fiscal year 2016, less than 6 percent of the over 2 million CHCO agencies' employees received compensation from at least one of the authorities (see figure). The two most frequently used\u2014special rates and retention incentives\u2014were used for over 74,000 employees and over 13,000 employees, respectively, each year. The least-used\u2014critical position pay\u2014was used for as few as seven employees a year. CHCO agencies also reported using the range of authorities to help address skills gaps, particularly for science, technology, engineering, and mathematics occupations.", "CHCO Agency Employees Receiving Special Payments, Fiscal Year 2016", "CHCO agencies reported that these authorities had positive impacts\u2014such as on-staff retention and applicant quality\u2014but had few documented effectiveness assessments. Nine of 10 agencies that reported having documented assessments provided them, but GAO found that only 3 had information on effectiveness, such as its impact on meeting staffing needs.", "The Office of Personnel Management (OPM) collects agency data on use but has not tracked data to analyze how much authorities help agencies improve recruitment and retention government-wide. OPM may be missing opportunities to promote strategic use by providing guidance and tools on assessing effectiveness. For example, OPM has not explored reasons for trends in use of critical position pay or consistently shared best practices and innovative ways to use authorities. Without tracking data and providing guidance to help agencies assess effectiveness, OPM will be unable to determine whether use of special payment authorities helps agencies to improve recruitment and retention."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that OPM should work with the CHCO Council on tracking data and providing guidance and tools to assess effectiveness of authorities, among others. OPM concurred or partially concurred with all recommendations, and described planned steps to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies can provide additional payments to current employees  and offer additional compensation to prospective employees in certain  circumstances to support their recruitment and retention efforts, and  address human capital challenges. These special payments can be  strategic tools to help recruit and retain highly qualified personnel.  However, balancing constrained budgets with a potential wave of  employee retirements and the need to fill gaps in mission-critical skills  within the federal workforce underscores the need for agencies to cost  effectively use special payment authorities. These include special pay  rates, incentives, and student loan repayments.", "The Office of Personnel Management (OPM) works with agency chief  human capital officers (CHCOs) to provide human capital tools and  guidance to support agency missions. Continued collaborative efforts  between OPM and the CHCO Council assist agencies in using  compensation flexibilities to address human capital challenges. Our prior  work has shown that increasing agencies\u2019 awareness of available  flexibilities and evaluating existing tools are key aspects for successfully  managing the range of human capital flexibilities. Moreover, we have  reported that building agency capacity in using human capital flexibilities  increases the likelihood of agencies using these tools appropriately and  cost effectively to address human capital challenges.", "You asked us to examine how much agencies use various available  special payment authorities, challenges agencies face, and improvements  needed to better ensure that agencies use these authorities to more  effectively recruit and retain employees. This report (1) describes what is  known about how much CHCO Council agencies used selected special  payment authorities in fiscal years 2014-2016; (2) assesses the extent to  which CHCO agencies evaluate the effectiveness of these authorities and  identifies challenges, if any, the agencies reported facing in using the  authorities to address mission-critical skills gap areas; and (3) evaluates  how OPM has helped agencies address federal recruitment and retention  needs.", "To address our first objective, we administered a questionnaire to the 27  CHCO agencies to collect data on frequency of use, dollars spent, and  whether agencies used the authorities to help address recruitment and  retention needs in mission-critical skills gap areas in fiscal years 2014- 2016. All 26 CHCO agencies that reported use of the authorities  responded to our questionnaire. We also analyzed OPM\u2019s Enterprise  Human Resources Integration (EHRI) personnel data for fiscal year 2014  to describe the use of authorities by occupational family, and for fiscal  year 2016 to determine the total number of federal employees at the  CHCO agencies.", "In addition, we analyzed OPM reports on the student loan repayment and  the critical position pay authorities to describe government-wide use by  occupation in calendar year 2015\u2014the most recent available reports at  the time of our review. To assess the reliability of the CHCO agency  reported data and the OPM EHRI data, we compared frequencies in the  two data sets by agency for fiscal year 2014 (the one year of available  overlapping data); reviewed OPM documentation; and interviewed OPM  officials. We determined that the data were sufficiently reliable to describe  agency use of these authorities over this time period.", "To address our second objective, we analyzed CHCO agency responses  from our questionnaire on the extent to which these agencies assessed  the effectiveness of using these authorities, agency-reported challenges  in using these authorities, and potential changes to operations or  procedures to help agencies more effectively use these authorities.", "To address our third objective, we reviewed OPM procedures to collect  and analyze data, and provide tools and guidance on the effective use of  special payment authorities. We also reviewed the processes OPM uses  to review and approve agencies\u2019 requests to use certain special payment  authorities. We also interviewed OPM officials to discuss the review and  approval processes and procedures. We compared the data collection,  analysis, guidance, and approval processes for consistency and to  determine whether they meet criteria for designing and implementing  control activities in Standards for Internal Control in the Federal  Government. See appendix I for a more detailed discussion of our  objectives, scope, and methodology, and appendix II for a copy of our  questionnaire.", "We conducted this performance audit from September 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Title 5 Special Payment Authorities", "paragraphs": ["Generally, federal agencies have seven broadly applicable special  payment authorities available government-wide under Title 5 of the United  States Code (hereinafter \u201cTitle 5\u201d)\u2014listed below in table 1\u2014for  recruitment and retention. Table 1 describes each authority\u2019s legal  reference, purpose, payment ranges, and whether an agency must seek  OPM approval prior to use."], "subsections": []}, {"section_title": "Mission-Critical Skills", "paragraphs": ["Federal agencies face mission-critical skills gaps that pose a risk to  agencies\u2019 ability to cost effectively serve the public and achieve results.  Agencies can have skills gaps for different reasons. For example, skills  gaps may arise in the form of: (1) staffing gaps, in which an agency has  an insufficient number of individuals to complete its work; (2) competency  gaps, in which an agency has individuals without the appropriate skills,  abilities, or behaviors to successfully perform the work; or (3) both staffing  and competency gaps. Mission-critical skills gaps may be broad\u2014 affecting several agencies\u2014or may be specific to a given agency.", "We, and others including OPM and federal agencies, have identified and  reported on mission-critical skills gap areas across the government and  within specific agencies. In 2015, OPM and the CHCO Council worked  with agencies to refine their inventory of government-wide and agency- specific skills gaps. They identified 6 government-wide and 48 agency- specific mission-critical skills gap areas for closure. The six government- wide areas identified were Cybersecurity; Acquisition; Human Resources;  Auditing; Economics; and Science, Technology, Engineering, and  Mathematics (STEM). Some of the agency-specific skills gaps included  border patrol agents at the Department of Homeland Security and nurses  at the Veterans Health Administration and the Department of Health and  Human Services. Skills gaps played a contributing role in 15 of the 34  high-risk areas identified in our most recent report on government  operations with greater vulnerabilities to fraud, waste, abuse, and  mismanagement, or that are in need of transformation to address  economy, efficiency, or effectiveness challenges."], "subsections": []}, {"section_title": "Office of Personnel Management", "paragraphs": ["OPM is responsible for performing a number of functions to assist  agencies in using the compensation flexibilities, including issuing  regulations and, as necessary, providing approval authority, to ultimately  help agencies build successful, high-performance organizations. OPM  provides agencies with guidance and assistance on using special  payment authorities via individual consults, memorandums, its website,  training, and initiatives that focus on specific issues. OPM\u2019s website has  guidance on each special payment authority including references to  regulations.", "For special payment authorities requiring OPM approval, OPM  regulations provide agencies instruction concerning the information  needed for OPM to review and decide whether to approve or deny  requests. Although the information needs vary by authority, generally  agencies are to submit information and evidence reflecting recruitment  and retention challenges for the specific position(s), previous efforts to  address the problem, and the basis for requested payment amounts.", "OPM is responsible for oversight of the federal government\u2019s use of  special payment authorities to ensure agencies are acting in accordance with applicable requirements. For example, as a part of its delegated  examination audits and human resource management evaluations, OPM  reviews selected samples of agency\u2019s personnel actions to assess how  well they complied with statutory and regulatory requirements. In cases  where agencies used certain special payment authorities, OPM uses a  checklist to guide its review of documents agencies must develop and  maintain to justify their uses.", "OPM also is responsible for reporting to Congress on the federal  government\u2019s use of certain special payment authorities. Annually, OPM  requests or receives data from agencies and reports to Congress on  agency use of two authorities\u2014critical position pay and the student loan  repayment. The reports include information on the use of these  authorities each calendar year\u2014such as data showing how many  received payments\u2014and the total dollar or relative amounts of special  payments. OPM was required to annually report to Congress on  agencies\u2019 use of the recruitment, relocation, and retention (3R) incentives  in calendar years 2005-2009."], "subsections": []}, {"section_title": "Chief Human Capital Officers Council", "paragraphs": ["The Chief Human Capital Officers Act of 2002 established the CHCO  Council to advise and coordinate the activities of member agencies on  such matters as the modernization of human resources systems,  improved quality of human resources information, and legislation affecting  human resources operations and organizations. The Director of OPM is  the Chairperson of the CHCO Council, and the Deputy Director for  Management in OMB is the Vice Chairperson. The council includes  CHCOs of the executive departments and any other members designated  by OPM. It serves to coordinate and collaborate on the development  and implementation of federal human capital policies. For example, the CHCO Council manages the Human Resources University (HRU)  website, which is a web-based platform to share knowledge, training, best  practices, and resources across agencies."], "subsections": []}]}, {"section_title": "Agencies Reported Using Special Payment Authorities to Varying Degrees but for Few Employees in Fiscal Years 2014-2016", "paragraphs": [], "subsections": [{"section_title": "Agencies Reported Using a Range of Special Payment Authorities", "paragraphs": ["CHCO agencies used a range of special payment authorities to recruit  and retain employees. Our analysis of CHCO agency data found that for  six selected authorities, 20 or more agencies used each between fiscal  years 2014-2016, as shown in figure 1. Seven agencies reported having  used the critical position pay authority."], "subsections": []}, {"section_title": "Agency Data Show, Overall, Few Employees Received Compensation from Special Payment Authorities", "paragraphs": ["We found that CHCO agencies reported using the seven authorities for a  small number of federal employees overall. For example, in fiscal year  2016, less than 6 percent of the over 2 million federal employees at  CHCO agencies received compensation under at least one of the seven  special payment authorities, as shown in figure 2.", "Moreover, many agencies reported using most of these authorities for a  limited number of employees each year. For example, of the 24 agencies  that reported using superior qualifications and special needs pay  setting\u2014the authority reportedly used by the highest number of CHCO  agencies\u2014over half (13 agencies) reported using the authority for fewer  than 100 employees per year. In addition, of the 23 agencies that  reported using recruitment incentives in fiscal years 2014-2016, 11  agencies reported using the authority for 10 or fewer employees per year.", "As shown in table 2, agencies reported that more employees received  compensation from the special rates authority, followed by use of  retention incentives in fiscal years 2014-2016. Specifically, agencies  reported using special rates for over 74,000 employees, of the over 2  million CHCO agency employees, in each of these fiscal years. On the  other end of the spectrum, agencies reported using the critical position  pay authority for fewer than 40 employees in each of these years.", "Special rates: Although CHCO agencies reported that more employees  received special rates compensation than the other authorities in fiscal  years 2014-2016, our analysis showed usage generally declined from  between 2001- 2005, when over 139,000 employees received a special  rate. An OPM official said that over time agencies have relied less on  these special rates due to the introduction of locality pay. For example,  in its 2005 annual review of special rates, OPM reported that 14 special  rates schedules would be terminated because higher locality rates  applied at all steps of each covered grade.", "Critical position pay: We found that the critical position pay authority  was used for the lowest number of employees of these authorities each  year in fiscal years 2014-2016. The authority\u2019s lower use relative to the  other authorities is to be expected to some extent because of the  government-wide cap of 800 positions for this authority."], "subsections": []}, {"section_title": "Agencies Reported Spending about $800 Million on 3R Incentives and Student Loan Repayments", "paragraphs": ["Our analysis of CHCO agency questionnaire responses found that these  agencies reported spending about $805 million total on 3R incentives and  the student loan repayment authorities in fiscal years 2014-2016. In  addition, we found that these agencies reported spending more on  retention incentives than on the other three authorities in each of these  years, as shown in figure 3. Specifically, over 40 percent (about $333  million) of this total reported spending was for retention incentives.", "In addition, the agency reported use of recruitment and relocation  incentives increased in each year. Overall, recruitment and relocation  incentives were about $174 million and $149 million, respectively, of the  total approximately $805 million in reported spending between fiscal  years 2014-2016. OPM officials stated that until recently agency spending  on 3R incentives had been frozen, and many agencies had to limit their  use of these incentives. Finally, agency reported use of the student loan  repayment authority increased in each of these years and was  approximately $148 million of the total approximately $805 in reported  spending."], "subsections": []}, {"section_title": "Agencies Used the Range of Authorities to Address Skills Gaps", "paragraphs": [], "subsections": [{"section_title": "CHCO Agencies Reported Using Authorities to Help Address Different Skills Gaps, Particularly for STEM Occupations", "paragraphs": ["All 26 CHCO agencies reported using special payment authorities to  support mission-critical skills gap areas in fiscal years 2014-2016. We  found that the number of CHCO agencies that used each of these  authorities varied by skills gap area, as shown in table 3. For example, we  found that superior qualifications and special needs pay setting was the  authority used by the largest number of CHCO agencies in two of the five  skills gap areas\u2014STEM and Cybersecurity. We also found that 19 or  more agencies reported using at least one authority to support four skills  gap areas\u2014STEM, Cybersecurity, Acquisitions, and Human Resources.  Some CHCO agencies reported that certain skills gap areas were not  mission critical for them. Specifically, 11 agencies reported that  healthcare was not a skills gap area for them as compared to 2 or 3  agencies each for the other skills gap areas.", "STEM: Our analysis of the CHCO agency data found that, of the five  skills gap areas, more agencies generally reported using the special  payment authorities to support STEM occupations. Of the 21 agencies  that reported using at least one authority to support the STEM area, we  found that 18 agencies reported using the superior qualifications and  special needs pay setting authority for these occupations in fiscal years  2014-2016. The Department of Agriculture (USDA), for example, reported  that this authority had been a valuable tool in recruiting for critical STEM  positions from a small and highly competitive Ph.D. applicant pool. The  Department of the Treasury (Treasury) reported using special payment  authorities generally to match private-sector salaries or to help mitigate  disparities between private- and public-sector compensation for STEM  occupations.", "Cybersecurity: Similarly, of the 21 agencies that reported using at least  one authority to support the cybersecurity area, 16 reported using  superior qualifications and special needs pay setting to support these  positions in fiscal years 2014-2016, and 13 agencies reported using  recruitment incentives. For example, the Small Business Administration  reported that the superior qualifications and special needs pay setting  authority has helped to attract top cybersecurity talent by narrowing the  gap between public- and private-sector salaries.", "Acquisitions: Of the 20 agencies that reported using at least one  authority to support the acquisitions area, 14 agencies reported using the  student loan repayment authority, and 13 agencies reported using the  superior qualifications and special needs pay setting authority for these  positions. For example, the Department of Education reported using  student loan repayments to help retain acquisitions employees, and in  one instance, had retained an expert in multiple functional areas of  government contracting.", "Other agency-identified skills gap areas: We also found that 20 of the  26 CHCO agencies reported using special payment authorities to varying  degrees to help address other or agency-specific skills gap areas. For  example, Treasury reported using recruitment incentives for auditors,  while the Department of Homeland Security (DHS) reported using  multiple authorities, including the 3R incentives for law enforcement  positions in fiscal years 2014-2016."], "subsections": []}, {"section_title": "Agencies Frequently Used the Student Loan Repayment Authority to Support Mission- Critical Occupations", "paragraphs": ["Our analysis of OPM\u2019s Federal Student Loan Repayment Program  Calendar Year 2015 Report on government-wide use found that agencies  frequently used the student loan repayment authority for employees in  mission-critical occupations (MCOs). Specifically, we found that for the  five agencies that most frequently used student loan repayments that  year\u2014the Departments of Defense (DOD), Veterans Affairs (VA), Justice  (DOJ), and State (State), and the Securities and Exchange Commission (SEC)\u2014over 50 percent of the employees at each agency who received  these benefits were in agency-specific MCOs. For example, SEC  reported to OPM that approximately 72 percent of its student loan  repayments were made to employees in MCOs such as accountants,  attorneys, and securities compliance examiners. We also found that other  agencies used the authority for employees in MCOs. For example, the  Department of the Interior (Interior) reported to OPM that using the  authority has been helpful in filling MCOs such as petroleum engineers,  geophysicists, and biologists.", "Our analysis of OPM\u2019s 2015 report also found that the 32 agencies that  had used the authority that year did so for over 200 occupations. Overall,  we found that agencies most frequently used student loan repayments for  attorney-, engineer-, and contracting-related occupations, as shown in  figure 4.", "Our review of OPM\u2019s report to Congress on critical position pay in  calendar year 2015 found that, as of calendar year 2015, all four positions  that received the critical position pay authority were for director or other  senior executive positions. For example, the positions of Administrator  of the Transportation Security Administration and the Director of the  National Institutes of Health received compensation under this authority in  calendar year 2015. Since OPM\u2019s 2015 report, OPM officials told us that  they had approved 68 additional positions for the critical position pay  authority for certain Medical Center Director positions at VA. According to  data provided by VA in response to our questionnaire, the agency  reported using its recently approved authority in fiscal year 2016 for 27 of  these positions."], "subsections": []}]}]}, {"section_title": "Agencies Generally Reported Positive Impacts but Few Documented Their Assessments of Special Payment Authorities", "paragraphs": [], "subsections": [{"section_title": "Agencies Generally Reported Positive Impacts", "paragraphs": ["CHCO agencies generally reported that special payment authorities  positively affected areas of operation. More specifically, these agencies  reported the authorities somewhat or very positively affected at least one  of seven areas we identified in our questionnaire such as staff retention,  ability to meet staffing needs, or ability to fill mission-critical positions (see  appendix III for the results for the other special payment authorities). For  example, the 19 agencies that reported using the special rates authority  said it had somewhat or very positively impacted their ability to meet their  staffing needs, and 17 reported the same for staff retention and achieving  their missions (see table 4).", "CHCO agencies generally reported that special payment authorities  somewhat or very positively affected their ability to fill mission critical  positions. Agencies provided specific examples of the positive impact of  special payment authorities and ways they responded to challenges using  special payment authorities:", "Student loan repayment authority: The Department of Commerce  reported that multiple components found this authority useful for  competing with the private sector and for building a pipeline of top  talent given that most of these employees were at the beginning of  their careers.", "Relocation incentives: The Department of Energy reported using  these incentives to relocate employees to meet emergency needs,  including a shutdown of the Waste Isolation Plant Project in Carlsbad,  New Mexico.", "Recruitment incentives: DOD reported that it would not have been  able to effectively recruit individuals in several career fields, including  engineering and nursing, without these incentives. Moreover, the  Social Security Administration credited these incentives for its  success in hiring experts from major corporations for cybersecurity  and other program policy area positions.", "Retention incentives: The Environmental Protection Agency credited  a retention incentive for successfully retaining a senior research  scientist, thereby addressing a mission-critical skills gap and allowing  the agency\u2019s mission to continue uninterrupted and at significant  savings. Moreover, State explained how using a retention incentive  helped to address its Bureau of Medical Services\u2019 severe staffing  shortages due to uncompetitive base salaries. VA also stated that  these incentives helped create a smooth transition of institutional  knowledge to newer employees and facilitate continuity of operations.  DHS responded to its need to attract and retain employees in  information technology (IT) and cybersecurity by developing a unique  retention incentive plan that focused on specialized certification for  employees in these fields. The Department of Health and Human  Services\u2019 (HHS) Centers for Disease Control and Prevention (CDC)  used retention incentives to retain employees that might have moved  to the private sector.", "Superior qualifications and special needs pay: HHS\u2019s CDC  reported it has been successfully using this authority to attract IT  specialists, an occupation series designated as \u201chard-to-fill.\u201d HHS  credited this authority with attracting highly qualified applicants who  would otherwise have accepted higher starting salaries outside the  federal government. USDA included use of this authority in its  approach to addressing challenges recruiting and retaining employees  in the remote oil boom Bakken region in North Dakota and Montana."], "subsections": []}, {"section_title": "Most Agencies Reported Assessing Special Payment Authorities, but Few Agencies Documented Their Effectiveness Assessments", "paragraphs": ["Twenty-five of 26 CHCO agencies reported assessing the effectiveness  of at least one special payment authority used in fiscal years 2014-2016.  However, our analysis found in many cases agencies did not document  their assessments. Moreover, agencies often did not assess the  effectiveness of all authorities they used. For example,", "4 agencies reported having no assessments for the majority of the  special payment authorities they used, and", "11 agencies reported not assessing at least one of the authorities they  used.", "As seen in table 5, overall, CHCO agencies reported conducting informal  effectiveness assessments more often than documenting assessments of  their uses of special payment authorities.", "Our analysis of CHCO agency responses found the extent to which these  agencies documented assessments of effectiveness varied by payment  authority. For example, agencies reported most frequently documenting  assessments for recruitment incentives and the student loan repayment  authority. On the other hand, 3 of the 24 agencies using the superior  qualifications and special needs pay setting authority reported  documented assessments. For each of the authorities, a small number of  agencies reported not assessing effectiveness at all. For instance, 5 of  the 21 agencies using retention incentives did not assess their  effectiveness. OPM said it did not document assessments of the  effectiveness of the authorities the agency used for its own employees  because meaningful analyses were not possible due to the few  employees who received compensation under the authorities OPM used.", "CHCO agencies that reported documenting assessments identified the  various impacts they assessed for the special payment authorities they  used. More specifically, of the 10 CHCO agencies that reported having  documented assessments, agencies most frequently reported evaluating  the impact of these authorities on meeting staffing needs and on their  effectiveness relative to other human capital flexibilities. This included  DOD, which reported documenting assessments for five authorities\u2014 special rates, the 3Rs, and student loan repayments\u2014on its operations.", "We requested copies of documented assessments from the 10 CHCO  agencies that reported having them and 9 responded. Three of the nine  responding agencies provided documents with information on authorities\u2019  effectiveness, such as the impact on meeting staffing needs. Specifically,  Interior provided documentation that showed the agency tracked  workforce data, such as the number of vacancies and turnover rates  related to using the 3Rs and special rates focused on oil and gas  extraction. DOD and DHS included information on the student loan  repayment authority in their annual reports to OPM, and credited student  loan repayments with helping to retain highly qualified employees. Six of  the nine responding agencies provided documentation that justified or  reported on the use of special payment authorities rather than  documentation that assessed the impacts that using authorities had on  agency operations. For example, three of these six agencies provided  examples of reviews or information addressing compliance with  regulations relevant to the use of special payment authorities. Three other  of these six agencies provided documents to justify and request approval  to use 3R incentives, such as to show applicants\u2019 qualifications or current  employees\u2019 performance appraisals."], "subsections": []}, {"section_title": "The Most Frequently Identified Challenge Was Insufficient Resources, but Most Agencies Reported Rarely or Never Experiencing Other Types of Challenges", "paragraphs": ["CHCO agencies reported that, among the six potential challenges we  identified in our questionnaire, insufficient resources was the most  common challenge they experienced in using special payment authorities.  Most CHCO agencies reported they rarely or never experienced other  challenges. With respect to insufficient resources, 13 of the 26 agencies  said they regularly or always experienced this challenge (see figure 5).  According to three of these agencies, budget constraints prevented them  from using special payment authorities more frequently or limited their  use to filling only the most critical vacancies.", "Four CHCO agencies said they regularly or always experienced  challenges with burdensome documentation or complex approval process  when using special pay authorities.", "We also sought feedback on certain agencies\u2019 experiences with OPM\u2019s  approval processes for special payment authorities. Below are details of  challenges that agencies provided.", "Interior stated that the department and its components were required  to provide a significant amount of historical data to justify the need for  special salary table, and that publicly-available data on market  analyses and trends should drive the special pay rate process,  thereby making it easier for agencies to submit requests and to adapt  to current conditions.", "HHS reported that documenting special payment authorities was  overly complicated for some of its divisions with smaller human  resources (HR) staffs.", "The Department of Transportation (DOT) commented on the  timeliness of OPM and OMB approvals for using the critical position  pay authority. DOT said this delay\u2013approximately 5 months\u2013could  have been a driving factor that negatively affected recruitment for a  position, as other agencies could negotiate to offer the candidate  higher salaries.", "Interior similarly cited a concern with approval process timeliness due  to OPM\u2019s limited staff and expertise coordinating between all the  involved federal agencies with which it must deal.", "Interior suggested that when an agency must request pay flexibilities  that can be approved by only OPM, OPM should train the agency\u2019s  HR staff and managers on the processes and materials needed to  justify their requests, and should provide a clear understanding of  timelines for approvals.", "However, multiple CHCO agencies reported only rarely or never  experiencing documentation or process challenges. For example, Interior  credited OPM with collaborating to establish special rates to address  challenges in competing with the oil and gas industry for the talent  needed to meet Interior\u2019s mission. DOD and DOJ also conveyed positive  views on OPM\u2019s approval process, crediting it with expediting a waiver  request for a group retention incentive limitation and use of special rates,  respectively."], "subsections": []}, {"section_title": "Agencies Reported That Manager Training Would Likely Improve Use of Special Payment Authorities", "paragraphs": ["CHCO agencies most frequently said training for agency managers is a  change that would very likely or certainly improve the agency\u2019s ability to  effectively use special payment authorities (see figure 6). Conversely,  about a quarter of responding agencies said legislative changes very  likely or certainly would improve their ability to use special payment  authorities.", "CHCO agencies provided examples of how potential changes would  improve their ability to effectively use special pay authorities. VA  responded that its central HR office was developing a pay authority toolkit  to provide information on processes and procedures for using the  authorities and related training for HR specialists and managers.  According to VA, the toolkit, mandatory training, and regularly-scheduled  refresher training were likely to increase staff\u2019s knowledge and ease with  using pay flexibilities to develop competitive compensation packages to  help recruit and retain quality talent and fill critical positions. HHS also  expressed concerns about the use of special payment authorities in the  context of ongoing budget constraints. Specifically, HHS noted that  budget restraints over the last several years have led to retirements and  resignations among its more experienced HR staff. This resulted in a loss  of institutional knowledge on complex pay and leave authorities, including  those affecting special payments. HHS officials said the loss of  experienced HR staff diminishes the agency\u2019s internal capacity to train  remaining staff. In addition, budgetary controls result in fewer resources  for external training. Also, Interior commented that, for special payment  authorities that can be approved by only OPM, OPM should provide  training for their HR staff and managers responsible for using them."], "subsections": []}]}, {"section_title": "OPM Has Provided Some Guidance and Collects Some Data, but Has Not Assessed Effectiveness or Documented Approval Processes", "paragraphs": [], "subsections": [{"section_title": "OPM Provided Guidance and Other Assistance", "paragraphs": ["OPM has taken a number of steps to provide agencies with additional  guidance and assistance on using special payment authorities. For  example, in April 2015, OPM and the CHCO Council held a web-based,  virtual human resources conference for agency officials which included a  session on special payment authorities for recruitment and retention.  Moreover, in January 2016, OPM issued a memorandum to agency  CHCOs that stated that OPM recognized the 3Rs are essential pay  flexibilities for agencies facing serious staffing challenges. The  memorandum provided guidance on exceptions to spending limits on 3R  incentives and OPM website links to related guidance on using the  authorities. In August 2017, OPM posted a web-based training course  for agency officials on special payment authorities and other flexibilities,  including examples of their use and resources for additional information.", "OPM has also pursued initiatives that focus attention on addressing  mission-critical skills gaps areas. As part of government-wide efforts to  develop and strengthen the cybersecurity workforce, in November 2016,  OPM issued a memorandum and guidance to CHCOs on strategic and  cost-effective use of the various flexibilities agencies may employ to  recruit and retain employees in cybersecurity positions. The guidance  included checklists of steps agencies need to complete to use various  special payment authorities, and described ways to combine use of  special payment authorities, when appropriate, to make federal agencies  more competitive in recruiting and retaining cybersecurity employees.", "OPM also formed Federal Agencies Skills Teams (FASTs) for  occupations as an effort to help agencies address mission-critical skills  gaps areas. As part of FASTs, OPM collected and reviewed information  from agencies on the root causes of skills gaps and found that  compensation levels play a role in skills gaps, in some cases. As of  August 2016, OPM\u2019s approach included a strategy to hold agencies  accountable for closing skills gaps in their MCOs, and to monitor metrics  and progress through fiscal year 2020. In January 2015, we reported that  the measures agencies had in place limited OPM and the CHCO  Council\u2019s ability to track progress in closing skills gaps government- wide.  Accordingly, we recommended that OPM strengthen the  approach and methodology for addressing skills gaps by working with the  CHCO Council to develop targets that are clear, measurable, and  outcome oriented. OPM partially concurred with the recommendation."], "subsections": []}, {"section_title": "OPM Does Not Track Special Payment Authorities to Assess Whether Using Them Improves Recruitment and Retention", "paragraphs": ["It is important to identify the necessary data and establish measures to  track a program\u2019s effectiveness, as well as establish a baseline to  measure changes over time and assess the program in the future. We  have reported that agencies can use these measurements to help them  determine if a program is worth the investment, and to distinguish which  of the available human capital flexibilities is better suited to address  recruitment and retention needs. Standards for Internal Control in the  Federal Government also state that management should obtain relevant  data from reliable sources that can be used to effectively monitor  programs. We have reported that understanding the relative  effectiveness of various flexibilities can help identify any changes needed  for agencies to more effectively use them. As we also recently reported,  collecting and using data to assess the effectiveness of authorities would  be a critical first step in making more strategic use of flexibilities to  effectively meet hiring needs.", "OPM collects agency data on the use of special payment authorities via  annual reporting on certain authorities and EHRI, but has not analyzed  whether the payment authorities help agencies to improve recruitment  and retention government-wide. Nor has OPM assessed trends and  factors that can affect the use of these authorities. As required by statute,  OPM annually collects data from agencies to report to Congress on the  use of the student loan repayment and critical position pay authorities.", "Student loan repayment: OPM collects some information from  agencies about their use of student loan repayment authority and  invites agencies to provide details about their experiences in  administering the authority, but has not conducted an analysis of the  authority\u2019s effectiveness for addressing recruitment and retention  needs. As discussed previously, we analyzed the government-wide  use of this authority by occupation and identified those occupations  for which agencies most frequently used the authority (see figure 4).  In addition, we used OPM\u2019s 2015 report and information from its  FASTs skills gap initiative to identify the use of this authority for  MCOs. These are two examples of analyses that OPM could perform  to help understand how agencies are using this authority.", "Critical position pay: OPM collects data on agency use of critical  position pay from the agencies with existing OPM approval, but the  information does not help OPM understand how the payment authority  supports recruitment or retention. OPM collects data that it is required  by statute to report to Congress such as who received the higher rate  and the rate paid, but does not include information on the impact on  recruitment and retention.", "OPM has stopped regularly collecting and analyzing data for the 3R  incentives, except on the use of retention incentives for employees likely  to leave for other federal agencies, and does not collect and analyze data  for special rates, leaving a void for conducting government-wide analysis  that would help determine whether special payment authorities help  address agency recruitment and retention needs:", "3R incentives: In a February 2010 memorandum to agency CHCOs  on 3R incentives, OPM called for it and agencies to more actively  manage the program and track data. OPM said that validated data  would help OPM and agencies to understand the nature and trends of  use of the incentives and better track incentives on an ongoing basis.  OPM and agencies would also, if necessary, be better able to  investigate any 3R data anomalies and take corrective actions. Based  on its request to agencies in October 2011, OPM prepared a draft  report on its analysis of agency-provided data and information on use  of 3R incentives in calendar years 2010 and 2011, including what  agencies reported as barriers to using the authorities and whether 3R  improved recruitment and retention. However, OPM did not  distribute the report or take action on it. Although OPM said it  planned to conduct periodic reviews on an ongoing basis, since the  3R reporting requirement expired and OPM\u2019s October 2011 agency  data request, OPM does not regularly collect and review government- wide information on the level of use and potential barriers.", "Special rates: In conducting its annual review of special rates, each  year OPM asks that agencies review their respective applicable  special pay rate tables to determine whether the rates should be  terminated, reduced, or increased. OPM considers requests to make  changes based on the agency reviews, but according to OPM  officials, in recent years, agencies have not identified any needed  changes to special rates during that annual review process.", "Moreover, OPM has not used its EHRI data to better understand trends in  the use of these authorities government-wide and how agencies are using  them to address their recruitment and retention challenges. As an  example, we analyzed EHRI data to describe government-wide use of  selected authorities by occupational family in fiscal year 2014. From that  analysis, we identified differences in use across various occupational  families that could be helpful in understanding how agencies are using  these authorities. For example, we found that the Medical, Hospital,  Dental, and Public Health family was the top occupational family for four  of the five authorities. See appendix IV for additional information.", "OPM also has not explored trends in agency use of the critical position  pay authority. OPM has not pursued reasons why agencies have not  requested approval for over 750 available slots or why agencies have  used only 4 of the 36 authorized positions as of calendar year 2015. As  part of an initiative to close skills gaps for the STEM workforce, in October  2014, the White House Office of Science and Technology Policy, OPM,  and OMB identified the critical position pay authority as a potentially  underused flexibility. However, according to the 2015 OPM report, OPM  had authorized critical position pay for 36 positions in 10 agencies as of  calendar year 2015. And, only four of those agencies reported using the  critical position pay authority in 2015 for four current employees (see  table 6).", "In July 2017, the Treasury Inspector General for Tax Administration  (TIGTA) recommended that the Internal Revenue Service (IRS) pilot the  use of critical position pay authority to recruit highly-qualified experts to  lead IRS\u2019s cybersecurity and related specialized functions. According to  TIGTA, IRS would enhance its recruitment efforts by using the authority.  OPM officials attribute low use of critical position pay to: (1) agencies\u2019  views that the approval process is cumbersome; (2) management  resistance or cultural issues based on views about pay inequity between  employees, or employees receiving higher salaries than their managers;  and (3) agencies using other compensation flexibilities that do not require  prior OPM approval.", "OPM is not tracking government-wide data on the use of the range of  special payment authorities to better understand whether or how various  authorities improve recruitment and retention. OPM officials said the  information they collect on special payment authorities depends on  reporting requirements for the specific payment authority. For example,  they said they collect information on assessing the effectiveness of  student loan repayments because of the reporting requirements in the  law. However, the reporting requirement does not include assessments to  examine effectiveness or impediments to help OPM determine whether  potential changes may be needed to address recruitment and retention  challenges. Instead, OPM\u2019s annual data request memorandums invite  agencies to provide additional details on their experiences in  administering the student loan repayments.", "OPM officials said they may sometimes perform ad hoc analyses of EHRI  data on certain authorities but do not regularly analyze EHRI data on the  use of the various authorities government-wide. For example, OPM  officials said they have queried the EHRI database on the use of selected  special payment authorities for cybersecurity employees and found the  numbers of 3R incentives and agencies using them increased from fiscal  year 2015 to 2016, while use of student loan repayments decreased  during that period. However, OPM does not regularly conduct such  analyses on this or other uses of special payment authorities to  understand how they are used to address skills gaps.", "By not tracking and analyzing data on the use of special payment  authorities, OPM and the CHCO Council do not have the information they  need to help determine what potential changes may be needed, and have  limited assurance that special payment authorities are helping agencies  meet their needs and achieve recruitment and retention goals."], "subsections": []}, {"section_title": "OPM May Be Missing Opportunities to Promote Strategic Use of Special Payment Authorities", "paragraphs": ["Standards for Internal Control in the Federal Government requires that  agency management design and implement control activities, which are  the actions management puts in place through policies and procedures to  achieve objectives and respond to risks. We have reported on OPM\u2019s  important leadership role and the CHCO Council\u2019s support in assisting  agencies with identifying and applying human capital flexibilities across  the federal government. In its most recent strategic plan, OPM reported  it would lead federal human capital management by partnering with its  stakeholders\u2014including federal agencies\u2014to develop and implement  effective and relevant human resources solutions to build an engaged,  productive, and high-performing workforce and develop effective  compensation packages, among other things. OPM also has  acknowledged its leadership role in strategically promoting the effective  use of at least one special payment authority\u2014student loan repayment\u2014 and assisting agencies in the strategic use of this and other recruitment  and retention tools as necessary to attract and retain a well-qualified  federal workforce and support agency mission and program needs.", "We have also previously reported on the lack of awareness among  federal managers about using flexibilities to address human capital  challenges. In 2014, we reported that in a forum of CHCO Council  agencies we convened, CHCOs said they wanted OPM to do more to  raise awareness and assess the utility of tools and guidance it provides to  agencies to address key human capital challenges. Accordingly, we  recommended that OPM evaluate the communication strategy for and  effectiveness of relevant tools, guidance, or leading practices created by  OPM or the agencies to help ensure agencies are getting the guidance  and tools that they need. OPM concurred with the recommendation."], "subsections": [{"section_title": "Guidance on Assessing Effectiveness", "paragraphs": ["OPM does not provide guidance on assessing effectiveness of special  payment authorities in the agency\u2019s handbook on human capital  flexibilities for any of the authorities we reviewed. For example, OPM  does not offer examples of assessments to illustrate what data are  needed and what methodologies are available for determining whether  special payment authorities improve recruitment and retention. OPM has  provided supplemental information on assessing effectiveness in some  student loan repayment authority annual reports and provided links to  those reports on its website, but has not done so for other payment  authorities. OPM officials said that they believe agencies are in the best  position to collect and analyze data to determine which special payment  authorities are effective for addressing recruitment and retention needs at  their agency.", "However, we found that CHCO agencies often did not document  assessments for the special payment authorities they used. The  documents agencies prepared were most often focused on justifying or  reporting on use of authorities rather than on evaluating their  effectiveness in improving recruitment and retention. As mentioned  previously, documents addressed compliance with regulations and  justifications that agencies prepared to request approval for using the  authorities.", "Our review found examples of data and methodologies that agencies  could use to help assess whether an authority helped improve recruitment  and retention. For example, DOD used data from interviews with  employees hired into its entry-level developmental trainee programs to  gather feedback on student loan repayment. The feedback consistently  indicated that the program was a major contributing factor in employees\u2019  decisions to accept these positions. Also, Interior collected and monitored  data on retention rates to assess the effectiveness of special rates in  retaining its oil and gas workforce. State said that it conducted some  informal assessments of its use of retention incentives but could add a  question to its employee exit survey to collect data on how these  incentives affect attrition. Some CHCO agency questionnaire responses  included examples of other types of data or analyses that could be used  to assess special payment authorities such as (1) the reduced level of  resignations in a department that had experienced staffing shortages; (2)  an increased rate of filling certain hard-to-fill positions; and (3) counts of  the numbers of employees successfully recruited into mission-critical  skills gap areas."], "subsections": []}, {"section_title": "Tools and Guidance to Support Strategic Decisions", "paragraphs": ["OPM does not provide consistent information via tools and guidance to  support effective use of special payment authorities. OPM\u2019s website  guidance for the student loan repayment authority provides agencies with  tools including best practices, sample agency plans, and answers to  frequently asked questions. However, its website guidance for superior  qualifications and special needs pay setting authority, for example, only  has fact sheets which generally restate and reference the related  regulations. Table 7 summarizes the various types of tools and guidance  information on the agency\u2019s website about special payment authorities.", "In addition to the tools and guidance noted above, the student loan  repayment website includes links to OPM annual reports which include  details that could support agency use of this authority. In OPM\u2019s annual  requests for data on student loan repayments, OPM regularly invites  agencies to submit information for these reports, including on these  topics: establishing a business case, program impediments, and ways to improve the student loan repayment program.", "OPM\u2019s guidance on using special pay authorities to address cybersecurity  skills gaps illustrates how OPM provides useful information which could  be applied in other mission-critical skills areas. In assisting agencies on  ways to combine authorities to hire cybersecurity specialists, the  guidance includes hypothetical scenarios where desirable job candidates  have competing job offers or are currently employed, and provides  example competitive compensation packages for entry-, mid-, and  senior/expert-level employees. Such information could be useful for other  government-wide or agency-identified mission-critical skills gaps or other  positions where agencies face serious recruitment or retention  challenges.", "OPM officials said they recognized tension between any effort to promote  use of special payment authorities and OPM\u2019s role of providing oversight  of special payment authorities. OPM officials said the agency promotes  the use of the authorities when agencies seek OPM\u2019s help, rather than  undertaking efforts to more broadly ensure agencies are fully aware of the  potential benefits and innovative ways to use authorities. Further, OPM  has not worked with the CHCO Council to gather and disseminate  illustrative examples of data needed and methodologies to assess the  effectiveness of the authorities.", "With guidance to assess effectiveness and consistent tools and guidance  across the range of authorities, OPM and CHCO agencies could more  fully support strategic use of special payment authorities to improve  recruitment and retention across the federal government."], "subsections": []}]}, {"section_title": "OPM Approval Processes Are Not Fully Documented", "paragraphs": ["Standards for Internal Control in the Federal Government require  management to design and implement control activities through policies  to achieve objectives and respond to risks. Documentation and periodic  review of policies and procedures are important parts of the standards  and are necessary to design, implement, and operate controls effectively.  Documentation provides a means to retain organizational knowledge and  mitigate the risk of having that knowledge limited to a few personnel.  Documentation is also evidence that controls can be monitored and  evaluated. As we previously reported, streamlining administrative  processes is a key practice for effectively using human capital  flexibilities. Since agency officials must view administrative processes  as worth their time compared to the expected benefit to be gained,  perceived burdens and slow approval processes could dissuade them  from seeking approval to use special payment authorities that could  address recruitment and retention needs.", "OPM regulations implementing the statutory provisions set forth the basic  criteria for OPM approval of certain special payment authorities, but OPM  does not have documented procedures to guide OPM staff in assessing  agency requests for approval. For example, OPM does not have  documented criteria to assess the sufficiency of the information to support  the request, such as  the soundness of the methodology or reliability of underlying data for  calculating payment amounts, or  the sufficiency of prior agency efforts to recruit and retain employees  without having to resort to additional pay.", "OPM officials noted that the complexity and nature of recruitment and  retention difficulties can vary significantly between agencies and the  authority requested. To make decisions about an agency\u2019s request for  approval, OPM officials said they apply the criteria in law, regulations, and  guidance posted on OPM\u2019s website.", "Our analysis shows that, since January 2009, OPM generally took 4 to 6  months to make approval decisions on CHCO agency special rates and  critical position pay requests. OPM officials said they have  conversations with agency officials about their views on the process, but  do not have procedures to systematically monitor or evaluate the process,  such as to seek agency feedback on whether the approval processes are  burdensome, complex, and a barrier to wider use. As noted earlier, we  sought feedback on certain agencies\u2019 experiences with OPM\u2019s approval  processes for special payment authorities. Although some had positive  comments, others expressed concerns about the timeliness of the  process, including that the length of the process may lead to missed  opportunities to hire desirable candidates.", "The July 2017 Treasury Inspector General for Tax Administration (TIGTA)  report also said that lengthy approval processes for using critical position  pay is a reason for low overall use of the authority. If pursued by IRS, the  approval process would include getting the request cleared internally,  approved by the Secretary of the Treasury and then, in turn, by OPM and  OMB. OPM has not established a time frame within which agencies could  expect a decision from OPM and OMB. OPM officials estimated that it  may take several weeks or up to several months to complete the approval  process, according to TIGTA. As part of its recommendation to IRS,  TIGTA recommended tracking in detail the time and effort to get the  request for approval cleared internally and approved by the Secretary of  the Treasury, OPM, and OMB.", "OPM officials said they do not have documented procedures with criteria  for approving use of special payment authorities because the complexity  and nature of the requests vary significantly between agencies and the  authority requested. OPM officials noted that in reviewing applications  they need to be able to take into account relevant and important variables  necessary to make fact-specific and reasonable determinations to help an  agency find the most appropriate solution to its staffing problems. They  said there is no \u201cone-size-fits-all\u201d formula for approving or denying  requests.", "However, without documented procedures for assessing requests for  approval, OPM lacks a means to review and assure that approval  processes achieve their objectives. Without such documents, OPM also  increases the likelihood of inconsistent decisions to grant or decline  approval for the use of special pay authorities. Moreover, it also increases  the risk of losing organizational knowledge of the personnel with expertise  in assessing requests. Additionally, by not periodically examining the  procedures, OPM is not well-positioned to consider alternatives for  streamlining the approval process."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["To deal with staffing challenges resulting from skills gaps, reduced  budgets, and the upcoming wave of retirements, agencies have  compensation tools at their disposal that can be coupled with other  flexibilities to produce an attractive package for potential and current  employees. CHCO agencies generally reported that special payment  authorities positively contributed to areas such as employee retention,  applicant quality, and ability to meet staffing needs, among others.", "OPM has acknowledged its leadership role in strategically promoting the  effective use of at least one special payment authority\u2014student loan  repayment\u2014and assisting agencies in strategic use of this and other  human capital tools. However, OPM has not tracked or analyzed the  government-wide data on agencies\u2019 use of various special payment  authorities to better understand whether or how various authorities  improve recruitment and retention. By tracking and analyzing these data,  OPM could have information it needs to determine what potential  changes may be needed, and have better assurance that special  payment authorities are helping agencies meet their needs and achieve  recruitment and retention goals. Moreover, OPM has not been consistent  in providing guidance on assessing effectiveness of the range of special  payment authorities in attracting and retaining a well-qualified federal  workforce to support agency mission and program needs. Few agencies  are documenting assessments. OPM has not worked with the CHCO  Council agencies to provide illustrative examples of data needed and  methodologies to assess the effectiveness of the authorities. By providing  guidance on assessing effectiveness of these authorities, OPM and  CHCO agencies could be better positioned to know whether use of the  authorities is improving recruitment and retention or what changes might  be needed to improve their effectiveness.", "Agency officials may also perceive documentation and approval  processes as time consuming or burdensome barriers to using  compensation tools. Perceived delays or inefficiency in OPM\u2019s approval  processes could discourage agencies from seeking to use Title 5 special  payment authorities that could address recruitment and retention  challenges. OPM also had not documented procedures for assessing the  sufficiency of the information agencies submit to request approval. By  establishing documented procedures and periodically reviewing them,  OPM would increase the likelihood of consistent decisions to grant or  decline agency requests for approval to use these authorities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to OPM.", "The Director of OPM, together with the CHCO Council, should track  government-wide data to establish a baseline and analyze the extent to  which the seven Title 5 special payment authorities are effective in  improving employee recruitment and retention, and determine what  potential changes may be needed to improve the seven authorities\u2019  effectiveness. (Recommendation 1)", "The Director of OPM, together with the CHCO Council, should provide  guidance on assessing effectiveness and tools\u2014such as best practices or  frequently asked questions\u2014for the range of Title 5 special payment  authorities. (Recommendation 2)", "The Director of OPM should establish documented procedures to assess  special payment authority requests requiring OPM approval and  periodically review approval procedures to consider ways to streamline  them. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OPM for review and comment. We  also provided relevant draft report excerpts to CHCO agency officials for  comment in cases where we more extensively reported an agency\u2019s  illustrative examples, or where an agency\u2019s views were more significant in  context of the report. OPM provided written comments, which are  reproduced in appendix V and summarized below. Of our three  recommendations, OPM concurred with one and partially concurred with  the other two. OPM also outlined its planned steps to implement the  recommendations. OPM and CHCO Council agency officials also  provided technical comments, which we incorporated as appropriate.", "In response to our first recommendation, OPM partially concurred and  outlined its plans to track data that cover a limited period to analyze  agencies\u2019 use of certain Title 5 special payment authorities. OPM said it  planned to analyze both student loan repayment authority data by  occupation for one calendar year (2016) and the most recently available  data for five of the other six special payment authorities covered in this  report. This includes use for government-wide mission-critical  occupations. While these actions may provide some degree of insight into  the extent to which and how agencies use some of the special pay  authorities, examining only recent and available data will not support  establishing a baseline to measure changes over time, tracking  effectiveness, or determining any changes needed in future years. We  made revisions to the recommendation to clarify the value of tracking data  over time for the seven special payment authorities. OPM stated that  tracking government-wide workforce data available to them will not  provide a complete assessment of the effectiveness of the special  payment authorities because agencies are in the best position to analyze  such information. We agree that agencies have first-hand information on  use of special payments. Agencies also have data that can inform  discussions between OPM and the CHCO Council on potential strategies  for a government-wide approach to enhance strategic use of these  authorities to address mission-critical skill gaps. By working with the  agencies through the CHCO Council, OPM is better positioned to track  government-wide data to analyze the extent to which Title 5 special  payment authorities improve employee recruitment and retention and  determine what potential changes may be needed to improve authorities\u2019  effectiveness.", "In response to our second recommendation, OPM concurred and outlined  plans such as issuing guidance with examples of assessments to  illustrate what data are needed and what methodologies are available for  determining whether special payment authorities help improve  recruitment and retention. We believe OPM could also assist agencies by  providing tools or other guidance for the authorities that OPM does not  approve\u2014such as on establishing a business case, best practices,  answers to frequently asked questions, or lessons learned\u2014to help  ensure consistent information is shared with agencies to support effective  use for the range of Title 5 special payment authorities. OPM could also  provide agencies with tools and guidance for other mission-critical skills  areas similar to those shared for addressing cybersecurity skills gaps.  Such tools and guidance could include hypothetical recruitment  scenarios, checklists of required steps, and examples of competitive  compensation packages. OPM stated it would work on any guidance that  the CHCO Council identifies to improve use of special payment  authorities. With consistent tools and guidance across the range of  authorities, OPM and CHCO agencies can be positioned to fully support  strategic use of special payment authorities to improve recruitment and  retention across the federal government.", "In response to our third recommendation, OPM partially concurred and  commented that there is no \u201cone-size-fits-all\u201d formula for approving or  denying agency requests. It added that applying a rigid formula could  result in unwarranted disapprovals. OPM also stated that it would  document additional procedures to guide staff in evaluating agency  requests and periodically review the procedures. We believe establishing  documented procedures would guide staff in considering such complex  factors such as the soundness of the methodology and the reliability of  underlying data for calculating payments amounts. Documentation of  policies and procedures is an important part of internal control standards.   By documenting procedures to review requests, OPM will help ensure  consistency in approval decisions and retain organizational knowledge of  personnel with expertise in assessing requests.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 14 days from the  report date. At that time, we will are send copies of this report to  appropriate congressional committees, the Acting Director of OPM, and  other interested parties. In addition, the report will be available at no  charge on the GAO Web site at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2717 or jonesy@gao.gov. Contact points for our offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes what is known about how much Chief Human  Capital Officer (CHCO) Council agencies used selected special payment  authorities in fiscal years 2014-2016; (2) assesses the extent to which  CHCO agencies evaluate the effectiveness of these authorities and  identifies challenges, if any, the agencies reported facing in using the  authorities to address mission-critical skills gap areas; and (3) evaluates  how the Office of Personnel Management (OPM) has helped agencies  address federal recruitment and retention needs. We limited our scope to  the seven broadly available special payment authorities generally  available government-wide under Title 5 of the United States Code to  address federal agencies\u2019 recruitment and retention issues: (1) special  rates, (2) recruitment incentives, (3) relocation incentives, (4) retention  incentives, (5) superior qualifications and special needs pay setting, (6)  student loan repayments, and (7) critical position pay.", "To describe what is known about how much CHCO Council agencies  used selected special payment authorities in fiscal years 2014-2016, we  developed and administered a questionnaire to the 27 CHCO agencies to  collect their fiscal years 2014-2016 data\u2014to the extent available\u2014on  frequency of use, dollars spent, and whether they used the authorities to  help address recruitment and retention needs in mission-critical skills gap  areas. All 26 CHCO agencies that reported use of the authorities  responded to our questionnaire. We asked agencies to not report  information related to agency-specific or non-Title 5 authorities. In our  report, we use the aggregate CHCO agency reported data by authority.  Federal employees may receive compensation under more than one  authority in a given fiscal year, and in these instances would be counted  for each authority received. For example, an employee who received a  recruitment incentive and student loan repayments in the same fiscal year  would be counted once for each authority in that year. We did not verify  the amounts agencies reported spending.", "In addition, we used CHCO reported data to determine the total use of  these authorities and OPM Enterprise Human Resources Integration  (EHRI) personnel data, which contains personnel action and workforce  data for most federal civilian employees, to identify the approximate  percentage of employees who received at least one of these seven  authorities in fiscal year 2016. In calculating the percentage, we used  CHCO agency reported data for the numerator and OPM EHRI data for  the total number of federal employees at the 26 CHCO agencies\u2014as of  September 30, 2016\u2014for the denominator.", "We also analyzed OPM EHRI personnel data for fiscal year 2014 to  describe the government-wide use of certain authorities by occupational  family. To do so, we calculated the number of unique employees who  received a certain authority in each fiscal year. We included federal  employees on permanent and nonpermanent appointments, and all work  schedules (seasonal, nonseasonal, intermittent, and full-time and part- time). Individual employees who switched occupational families during a  fiscal year could be counted more than once if they received a special  payment authority under both occupational families. We primarily relied  on the following EHRI data variables to describe agencies\u2019 use of certain  authorities:", "Special rates: We used the \u201cpay rate determinant\u201d to identify  employees who were receiving a special rate as of the end of the  applicable fiscal year, and then used the \u201cspecial pay table identifier\u201d  to limit our analysis to special rates authorized under 5 U.S.C \u00a7 5305.  OPM officials provided a list of all authorized Title 5 special rate tables  active during the fiscal years included in our review.", "3R incentives: We used the \u201clegal authority\u201d and \u201cnature of action\u201d  codes to identify employees for whom 3R incentives were authorized  during the fiscal year.", "Superior qualifications and special needs pay setting: We used  the \u201cpay rate determinant\u201d and \u201cnature of action\u201d codes for new  appointments to identify the number of employees who had received a  superior qualifications and special needs pay setting authority during  the fiscal year.", "We reviewed OPM documentation, including OPM\u2019s Guide to Data  Standards\u2014the guidance document that describe data elements in  EHRI\u2014to identify the specific codes used to designate employees who  had received these authorities.", "We also analyzed OPM calendar year 2015 reports\u2014the most recently  available at the time of our review\u2014on the student loan repayment  authority and the critical position pay authority to describe agencies\u2019 use  of these two authorities by occupation. For the student loan repayment  authority, we calculated the top occupations series that received this  authority government-wide. We aggregated the 18 engineering-related  occupations into one engineering series. In addition, for the agencies  that most frequently used the authority, we calculated the approximate  percentage of occupations that received the authority that were identified  as mission critical by these agencies as part of OPM\u2019s and the CHCO  Council\u2019s initiative to close skills gaps.", "To assess the reliability of the CHCO agency reported data and OPM  data, we compared frequencies from the various data sources by agency  for fiscal year 2014 (the one year of available overlapping data); reviewed  OPM documentation; and interviewed OPM officials. We determined that  the data were sufficiently reliable to present agency use of special  payment authorities over this time period.", "To assess the extent to which CHCO agencies evaluate the effectiveness  of special payment authorities and to identify challenges they reported  facing in using the authorities, in our questionnaire to agencies we asked  about their views on the impacts of each authority used in fiscal years  2014-2016. We analyzed and summarized closed-ended question  response data agencies reported on authorities\u2019 impacts on agency  operations, including the extent of positive or negative effects in areas  such as employee retention, applicant quality, and ability to achieve the  agency mission. We also asked whether and how they assessed each  authority\u2019s effectiveness. We summarized closed-ended question  response data on whether agencies had done documented, informal, or  no effectiveness assessments of authorities in impact areas such as  agency mission, meeting staffing needs, or addressing mission-critical  skills gap areas. We contacted the 10 agencies that reported having  documented assessments for one or more authorities to request copies of  them. Nine agencies provided requested documents. We analyzed the  documents to determine the type of information they provided, including  whether they had information on how use of the authority had been  effective in the impacts the questionnaire asked about. To learn more  about agencies views on authorities\u2019 effectiveness, we also asked an  open-ended question for agencies to provide examples of how authorities  helped address mission-critical skills gaps. We reviewed the narratives  agencies provided to identify and report examples appropriate to illustrate  the various effects agencies reported.", "We also asked agencies about their views on any challenges they  experienced in using special payment authorities and potential changes  to operations or procedures to help improve effective use of authorities.  We analyzed and summarized the closed-ended question response data  agencies reported on how often they experienced certain challenges,  including insufficient resources, management resistance, burdensome  documentation, and complex approval process. For the two most  common challenges agencies reported other than insufficient resources\u2014 burdensome documentation and the complex approval process\u2014we  followed up with the three agencies that reported regularly or always  experiencing both challenges. Two agencies responded. We also asked  an open-ended question for agencies to provide narrative examples of  how they identified and responded to challenges in using these  authorities. We analyzed the content of the narrative responses to identify  and report examples appropriate to illustrate various challenges and  responses to challenges agencies reported.", "To learn more about agencies\u2019 experiences with OPM\u2019s approval  processes for special payment authorities, we analyzed OPM\u2019s data on  agency requests to use the special payment authorities that OPM  approves. In addition to our CHCO agency questionnaire response follow- up, we contacted selected agencies that OPM data identified as having  requested approval to use a special payment authority since 2009. We  asked seven agencies to provide narrative of their views on such topics  as what worked well, challenges experienced, and any suggestions for  improving the process. To provide an opportunity to learn how approval  processes could affect agency decisions to not seek such approvals, we  included two agencies\u2014EPA and HHS\u2014that had not made such  requests to ask for narrative explanations of why they had not sought  such approvals. All agencies provided their views. We analyzed  agencies\u2019 narrative responses to illustrate examples of the experiences  agencies reported.", "We also analyzed and summarized the closed-ended question response  data agencies reported on how likely potential changes would improve  use of special payment authorities. We followed up with five agencies that identified the three most common potential changes that would very likely  or certainly improve their ability to effectively use special pay authorities\u2014 changes to training for agency managers, training for agency human  resources employees, and OPM regulations. We asked them to provide  narrative descriptions of changes they had in mind and how changes  would improve their agency\u2019s effective use of special payment authorities.  Four agencies responded. We reviewed the narratives agencies  provided to identify examples appropriate to illustrate the various views  on potential changes agencies reported.", "To evaluate how OPM has helped agencies address federal recruitment  and retention needs, we interviewed OPM officials and reviewed OPM\u2019s  procedures to collect and analyze data on agency use of special payment  authorities, including through automated systems (EHRI) and information  requests and reporting. We reviewed the procedures to assess whether  OPM tracks data to assess the level and effective use of the payment  authorities to improve recruitment and retention. We also reviewed and  summarized the various ways OPM provides agencies information on  special payment authorities, including through OPM\u2019s memorandums,  opm.gov website tools and guidance on each special payment authority,  and guidance for using special payment authorities to address  cybersecurity skills gaps. We compared the types of information and  consistency of the various ways OPM provides information to promote the  strategic use of special payment authorities to include supporting agency  effectiveness assessments and increased awareness and strategic  decision making on the use special payment authorities. We reviewed  procedures to collect information on the use of critical position pay  authority and a July 2017 Treasury Inspector General for Tax  Administration report on the topic. We also interviewed OPM officials and  reviewed available documents on OPM\u2019s processes to review and  approve agencies\u2019 requests to use certain special payment authorities,  and analyzed OPM data to determine the average months it took OPM to  make approval decisions on CHCO agency requests received from  January 2009 through January 2017. We compared OPM\u2019s procedures  for collecting, analyzing, and providing information on the effective,  strategic use of special payment authorities, and its procedures for approving use of special payment authorities, to criteria identified in our  related reports on federal human capital management and in Standards  for Internal Control in the Federal Government, including standards that  agency management design and implement controls and document  procedures.", "We conducted this performance audit from September 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Special Payment Authorities Questionnaire Sent to Chief Human Capital Officer Agencies", "paragraphs": [], "subsections": [{"section_title": "Section I: Definitions", "paragraphs": ["1.  Mission critical skills gaps are one or more of the following and may  impede the federal government from cost-effectively serving the public  and achieving results:  staffing gap in which an agency has an insufficient number of  individuals to complete its work; and/or a  competency gap in which an agency has individuals without the  appropriate skills, abilities, or behaviors to successfully perform  the work.", "Mission critical skills gaps may be identified broadly as affecting  several agencies or may be specific to a given agency (such as  mission-critical occupations agencies have identified to the Office of  Personnel Management (OPM) for skills gap closure)."], "subsections": []}, {"section_title": "Section 2: Use of Special Pay Authorities at Your Agency", "paragraphs": ["1.  For the special pay authorities below, does your agency have agency- specific guidance (including documented policies or plans) on the use  of the special pay authorities below? (Check all that apply) agency  level(s)", "2.  In the last three fiscal years (2014-2016), how many federal  employees in your agency received compensation under the following  special pay authorities? (if none, enter zero) (FY 2014) (FY 2015) (FY 2016)", "3.  In Fiscal Years 2014-2016, what was your agency\u2019s total spending (in  dollars) for the following special pay authorities?", "4.  In the last three fiscal years (2014-2016), how often has your agency  experienced the following challenges related to using special pay  authorities?", "5.  In your opinion, how likely would changes in the following areas  improve your agency\u2019s ability to effectively utilize special pay  authorities at your agency?", "Instructions: If your agency utilized  during FY2014-2016,  please complete this section, otherwise continue onto the next Section.  1.  In Fiscal years 2014-2016, did your agency use  to  support the following mission critical skills gap areas? at my agency  (not mission  critical)", "Acquisitions (e.g. Contract Specialist)", "Healthcare Professionals (non-Title 38)", "2.  Does your agency assess the following to determine the effectiveness  of using ?", "3.  In your opinion, how has the use of  impacted the  following?"], "subsections": []}, {"section_title": "Section 10: Agency- specific Examples of Special Pay Authorities Use", "paragraphs": ["1.  In what ways have special pay authorities helped your agency to  successfully address mission critical skills gaps? (Please provide at  least one specific example)  2.  In what ways has your agency identified and responded to challenges  related to the use of special pay authorities? (Please provide at least  one specific example)"], "subsections": []}]}, {"section_title": "Appendix III: CHCO Agencies Reported Use of Special Payment Authorities Affecting Selected Areas of Operation", "paragraphs": ["The following six tables present data on the responses reported by CHCO  agencies on the impacts on selected areas of operation from using the  following special payment authorities\u2014superior qualifications, critical  position pay, recruitment incentives, retention incentives, relocation  incentives, and student loan repayment."], "subsections": []}, {"section_title": "Appendix IV: Office of Personnel Management Data on Use of Special Payment Authorities by Occupational Family", "paragraphs": ["Our analysis of OPM data found that, overall, agencies used five special  payment authorities\u2014special rates; superior qualifications and special  needs pay setting; and the recruitment, relocation, and retention (3R)  incentives\u2014to varying extents for different occupational families. When  we analyzed OPM data to identify the top five occupational families for  each of these five special payment authorities, we found certain  occupational families appeared among the top groups for multiple  authorities (see those highlighted in table 14). Specifically, we found that  two occupational families\u2014(1) Medical, Hospital, Dental, and Public  Health; and (2) Engineering and Architecture\u2014were among the top five  families for four and five of these special payment authorities,  respectively. The Medical family was the top occupational family for four  of the five authorities\u2014superior qualifications and special needs pay  setting, and the 3R incentives. Further, we found that certain occupational  families were among the top five for one or two authorities but not for the  other authorities. For example, the Information Technology and  Copyright, Trademark, and Patent occupational families were among the  top five families for special rates and superior qualifications and special  needs pay setting, but not for the other three authorities."], "subsections": []}, {"section_title": "Appendix V: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "Contact", "paragraphs": ["Yvonne D. Jones, Director, (202) 512-2717 or jonesy@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Signora May, Assistant Director;  Ronald W. Jones, Analyst-in-Charge; Melinda Cordero, Ann Czapiewski,  Sara Daleski, Christopher Falcone, Karin Fangman, Kerstin Hudon, John  Hussey, Steven Putansu, Alan Rozzi, and Albert Sim contributed to this  report."], "subsections": []}]}], "fastfact": ["Federal agencies can tap an array of incentives when they need to recruit or retain experts in cyber security, engineering, or some other in-demand field.", "Seven special payment authorities allow agencies to pay higher wages, help pay off student loans, and offer other incentives.", "We found that less than 6% of employees received special payments. Agencies reported that incentives were helpful, but few documented their impacts, and the Office of Personnel Management has not assessed their effectiveness.", "We recommended that OPM track incentive impacts, identify needed improvements, and guide agencies on assessing effectiveness."]}
{"id": "GAO-18-139", "url": "https://www.gao.gov/products/GAO-18-139", "title": "Defense Contracting: DOD's Use of Lowest Price Technically Acceptable Source Selection Procedures to Acquire Selected Services", "published_date": "2017-11-30T00:00:00", "released_date": "2017-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD obligated about $300 billion through contracts for goods and services in fiscal year 2016. When awarding a contract competitively, DOD may use the LPTA source selection process to select the lowest-priced offer that is technically acceptable. In contrast, DOD may use the trade-off source selection process to award a higher-priced contract to a firm if the firm's offer provides greater benefit and it is worth paying the additional cost. The National Defense Authorization Act for Fiscal Year 2017 calls on DOD to avoid using the LPTA process for information technology, cybersecurity, and other knowledge-based professional support services.", "The Act also included a provision for GAO to report on DOD's use of LPTA procedures for contracts valued at more than $10 million. This report assesses the (1) extent to which DOD used LPTA procedures for certain services, and (2) factors that contracting officials considered when deciding to use LPTA procedures.", "GAO reviewed data from the Federal Procurement Data System-Next Generation to identify 781 contracts valued at $10 million or above awarded by the Army, Navy, and Air Force in the first half of fiscal year 2017, the most recent period for which data were available. GAO then selected 133 of these contracts for information technology and support services, which include services reflected in the Act. GAO identified that 9 contracts used LPTA procedures and reviewed 7 of these, including interviewing officials and reviewing contract documents.", "DOD had no comments on the draft report."]}, {"section_title": "What GAO Found", "paragraphs": ["During the first half of fiscal year 2017, the Army, Navy, and Air Force rarely used lowest price technically acceptable (LPTA) source selection procedures when awarding contracts valued at $10 million or more for the types of services identified by the National Defense Authorization Act, such as information technology services. Department of Defense (DOD) guidance states that LPTA procedures are typically for requirements that are well-defined, commercial, or non-complex products or services with a minimal risk of unsuccessful contract performance. The figure shows the military departments' limited use of LPTA procedures for contracts for selected services.", "For the 7 contracts that GAO reviewed, contracting officials determined that the government would not receive a benefit for paying more than the lowest price. Contracting officials also stated that LPTA was used, in part, because the requirements were well-defined, non-complex, or reoccurring. For example, the Navy used LPTA procedures to award a contract for commercially available monthly telephone maintenance services. In addition, the Air Force used LPTA procedures to award a contract for mail sorting and delivery. Section 813 of the fiscal year 2017 National Defense Authorization Act requires DOD to amend its regulations to require contracting officers to consider specific criteria when deciding to use LPTA procedures. DOD has not yet revised its regulations to implement Section 813. Nevertheless, for the 7 contracts GAO reviewed, contracting officials' considerations when choosing to use LPTA procedures were often consistent with most of these new criteria. DOD officials are currently developing the revisions to the Defense Federal Acquisition Regulation Supplement that are contemplated by Section 813."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) obligated about $300 billion through  contracts for goods and services in fiscal year 2016. When awarding a  contract competitively, DOD has several source selection procedures it  can use to evaluate firms\u2019 proposals. For example, DOD may use a best  value, lowest price technically acceptable (LPTA) process. In the LPTA  process, DOD awards the contract to the firm presenting the lowest  priced proposal that is technically acceptable, and no tradeoffs are  permitted. Alternatively, it can use a best value tradeoff process, in which  it can vary the relative importance of cost or price to other factors such as  technical capability or past performance in its solicitations to firms. In  these cases, DOD may award a contract to a firm presenting other than  the lowest-priced proposal if it determines that a higher-priced firm  provides a greater benefit to the department, and this greater benefit is  worth paying an additional cost.", "Section 813 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 calls for DOD to avoid using LPTA procedures when doing so  would deny DOD the benefits of making cost and technical tradeoffs in  the source selection process. To implement this policy, Section 813  requires that DOD revise the Defense Federal Acquisition Regulation  Supplement (DFARS) to allow the use of LPTA procedures only when  certain criteria are met. For example, one criterion is that contracting  officials must determine that no, or little, value would be gained from a  proposal exceeding the solicitation\u2019s minimum technical requirements.  The specific criteria are discussed in the background section of this  report.", "Section 813 also requires that LPTA procedures must be avoided to the  \u201cmaximum extent practicable\u201d in procurements of:  Information technology (IT) services, cybersecurity services, systems  engineering and technical assistance services, advanced electronic  testing, audit or audit readiness services, or other knowledge-based  professional services;", "Personal protective equipment, such as body armor; and", "Knowledge-based training or logistics services in contingency or other  operations outside the United States.", "Further, Section 813 included a provision that we report on the number of  instances where DOD used LPTA procedures for contracts exceeding  $10 million, as well as an explanation of how acquisition officials  considered the new criteria identified in Section 813. The objectives of  this report were to assess the (1) extent to which DOD used LPTA  procedures for contracts awarded in the first half of fiscal year 2017 for  certain services and products identified in Section 813 valued at  $10 million and above, and (2) factors that contracting officials considered  when deciding to use LPTA procedures for these contracts. We selected  the first half of fiscal year 2017 because that was the most recent time  period for which data were available.", "To determine the extent to which DOD used LPTA source selection  procedures in the first half of fiscal year 2017, we used data from the  Federal Procurement Data System-Next Generation (FPDS-NG) to  identify a population of contracts valued at $10 million or above that were  awarded between October 1, 2016 and March 31, 2017 by the  Departments of the Army, Navy, and Air Force. These military  departments represented almost 80 percent of DOD procurement  spending in fiscal year 2016, and collectively accounted for 781, or over  64 percent, of DOD\u2019s 1,212 new contracts reported in FPDS-NG with total  estimated values of $10 million or above awarded during the 6-month  period we reviewed. We determined that FPDS-NG was sufficiently  reliable for the purposes of identifying these contracts by tracing relevant  FPDS-NG data to the contracts we reviewed and related documents. We  identified a population of 781 new contract awards that were within the  scope of our review. Our scope includes stand-alone contracts and the  initial award of indefinite delivery, indefinite quantity (IDIQ) contracts, but  excludes subsequent orders issued under these contracts because  solicitation data is not readily available for orders. Our scope also  excluded blanket purchase agreements and basic ordering agreements.", "We focused our review on contracts for categories of products and  services that could include those listed in Section 813 of the fiscal year  2017 NDAA for which DOD should, to the maximum extent practicable,  avoid using LPTA source selection procedures. Through analysis of  FPDS-NG product and service code information, we identified the  following four categories which could contain such products or services:  Information technology and telecommunications;", "Support services, which include", "Ammunition and explosives, which include tactical sets that may  include personal protective equipment; and", "Clothing and individual equipment, which includes protective clothing  and personal armor (or in other words, personal protective  equipment).", "From the 781 contracts that were within the scope of our review, we  identified 147 contracts in one of these four categories. Fourteen of these  were in the ammunition category. We did not identify any contracts in the  clothing category. We reviewed descriptions of what was purchased  under these 14 awards and also requested that DOD identify any  contracts that included the purchase of personal protective equipment.  The Army, Navy, and Air Force confirmed that none of the 14 contracts in  the ammunition category included personal protective equipment. The  remaining 133 contracts identified were for services coded as IT or  support services, which include knowledge-based professional services.", "Because FPDS-NG does not identify the source selection procedure used  to award contracts, we provided contract numbers for these 133 contracts  to the Army, Navy, and Air Force and requested that these departments  identify contracts for which LPTA procedures were used, and provide  supporting documentation for that determination.", "Of the 133 contracts valued at $10 million and over, DOD officials  responded to us that 9 were awarded through LPTA source selection  procedures and 124 were not. To assess the accuracy of LPTA status  information provided by DOD, we reviewed 36 of the 75 unique  solicitations for the 124 contracts that DOD identified as non-LPTA. We  could not find information for 39 solicitations, likely because these  solicitations were no longer available through online portals, and so for  these solicitations, we could not verify the source selection method. For  the 36 solicitations we examined, we found that all had been properly  classified by DOD as non-LPTA. We excluded 2 of the 9 contracts  awarded through LPTA procedures from further study because those  awards were protested, resulting in 7 contracts awarded through LPTA  procedures that were included in our review for more detailed  assessment. Each of these 7 contracts was for IT or support services.", "To identify the factors contracting officials considered when deciding to  use LPTA procedures on these 7 contracts, we obtained and analyzed  relevant contract documents including the acquisition plan, solicitation,  and source selection decision memorandum. In addition, we interviewed  contracting officials for each of these 7 contracts. We also reviewed  applicable sections of the Federal Acquisition Regulation (FAR), the  DFARS, and DOD\u2019s March 2016 Source Selection guide. Finally, we  assessed contract documents and interviewed contracting officials to  determine whether they were aware of the new policy of Section 813.  Because the criteria in Section 813 have not yet been incorporated into  the DFARS, we also determined the extent to which criteria similar to  those in Section 813 had been considered in the decision to use LPTA  procedures in the 7 procurements we examined.", "We conducted this performance audit from March 2017 through  November 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The FAR establishes several types of source selection procedures, which  include the tradeoff procedure on one end of the best value continuum  and LPTA procedures on the other end. (see fig. 1).", "DOD may elect to use the LPTA procedure where the requirement is  clearly defined and the risk of unsuccessful contract performance is  minimal. In such cases, DOD has determined that cost or price should  play a dominant role in the source selection. When using LPTA  procedures, DOD specifies its minimum requirements in the solicitation.  Firms submit their proposals and DOD determines which of the proposals  meet or exceed those requirements, no tradeoffs between cost or price  and non-cost factors (for example, technical capabilities or past  performance) are permitted, and the award is made based on the lowest  price technically acceptable proposal submitted to the government. Non- cost factors are rated on an acceptable or unacceptable basis.", "By contrast, DOD may elect to use tradeoff procedures in acquisitions  where the requirement is less definitive, more development work is  required, or the acquisition has a greater performance risk. In these  instances, non-cost factors may play a dominant role in the source  selection process. Tradeoffs between price and non-cost factors allow  DOD to accept other than the lowest priced proposal. The FAR requires  DOD to state in the solicitation whether all evaluation factors other than  cost or price, when combined, are significantly more important than,  approximately equal to, or significantly less important than cost or price.", "DOD\u2019s March 2016 Source Selection guide offers additional guidance  regarding the use of LPTA source selection procedures. The guidance is  mandatory for acquisitions conducted as part of a major system  acquisition program and all competitive FAR part 15 procurements with  an estimated value over $10 million. The guidance states that LPTA  procedures may be used in situations where there would not be any value  on a product or service exceeding the required technical or performance  requirements. The guidance also states that such situations may include  acquisitions for well-defined, commercial, or non-complex products or  services and where risk of unsuccessful contract performance is minimal,  and when it has been determined there would be no need or value to pay  more for higher performance.", "Section 813 of the fiscal year 2017 NDAA required that DOD revise the  DFARS to require that LPTA procedures only be used in situations when  the following six criteria are met.  1.  DOD can clearly describe the minimum requirements in terms of  performance objectives, measures, and standards that will be used to  determine acceptability of offers;  2.  DOD would realize no, or little, value from a proposal exceeding the  solicitation\u2019s minimum technical requirements;  3.  The proposed technical approaches can be evaluated with little or no  subjectivity as to the desirability of one versus the other;  4.  There is a high degree of certainty that a review of technical proposals  other than that of the lowest-price offeror would not identity factors  that could provide other benefits to the government;  5.  The contracting officer has included a justification for the use of LPTA  procedures in the contract file; and  6.  The lowest price reflects full life-cycle costs, including for operations  and support.", "Section 813 also established that implementing revisions to the DFARS  were to be completed within 120 days of enactment of the NDAA, but the  revisions had not been put in place as of October 2017. DOD officials  stated that the changes to the DFARS are currently in progress."], "subsections": [{"section_title": "Past GAO Reports on DOD Source Selection Procedures", "paragraphs": ["In 2010 and 2014, we reported on DOD\u2019s use of best value tradeoff  source selection procedures. In 2010, we found that, for 60 of the 88  contracts reviewed, DOD used a tradeoff process and weighted non-cost  factors as more important than price. In these cases, DOD was willing to  pay more when a firm demonstrated it understood complex technical  issues more thoroughly, could provide a needed good or service to meet  deadlines, or had a proven track record in successfully delivering  products or services of a similar nature. In addition, we determined that  when making tradeoff decisions, DOD selected a lower priced proposal  nearly as often as it selected a higher technically rated, but more costly,  proposal. In so doing, DOD chose not to pay more than $800 million in  proposed costs by selecting a lower priced offer over a higher technically  rated offer in 18 contracts. The majority of solicitations where non-cost  factors were equal to or less important than cost were for less complex  requirements. DOD faced several challenges when using best value  tradeoff procedures, including:  the difficulties in developing meaningful evaluation factors,  the additional time investment needed to conduct best value  procurements, and  the greater level of business judgment required of acquisition staff  when compared to other acquisition approaches.", "To help DOD effectively employ the best value tradeoff process, we  recommended that DOD develop training elements such as case studies  that focus on reaching tradeoff decisions. DOD concurred and  implemented the recommendation in August 2012.", "In 2014, we found that DOD had increased its use of LPTA procedures  for new contracts with obligations over $25 million\u2014using LPTA source  selection procedures to award an estimated 36 percent of new fiscal year  2013 contracts compared to 26 percent in fiscal year 2009\u2014and that  officials\u2019 decisions on which source selection method would be used was  generally rooted in knowledge about the requirements and contractors.  For contracts with obligations over $25 million, DOD used LPTA source  selection procedures primarily to acquire commercial products such as  fuel, and we identified relatively few uses of LPTA to acquire higher dollar  services. For contracts with obligations over $1 million and under  $25 million, DOD used LPTA procedures an estimated 45 percent of the  time for a mix of products and services, including fuel, aircraft parts,  computer equipment, construction-related services, engineering support  services, and ship maintenance and repairs. We did not make  recommendations to DOD in this report."], "subsections": []}]}, {"section_title": "DOD Used LPTA Procedures Infrequently for Contracts Valued at $10 Million or More for Information Technology or Support Services", "paragraphs": ["The Army, Navy, and Air Force rarely used LPTA source selection  procedures for IT and support services contracts valued at $10 million or  more that were awarded in the first half of fiscal year 2017. Our analysis  found that the three military departments awarded 781 new contracts  valued at $10 million or more during this time frame. Of these 781  contracts, 133 contracts were awarded for IT and support services.  However, only 9 of the 133 contracts used LPTA source selection  procedures (see fig. 2).", "Table 1 provides information on the 7 contracts we reviewed that were  awarded in the first half of fiscal year 2017 that used LPTA source  selection procedures. As previously noted, we excluded 2 of the 9  contracts from further review due to bid protests."], "subsections": []}, {"section_title": "Factors DOD Officials Considered When Determining to Use LPTA Procedures", "paragraphs": [], "subsections": [{"section_title": "DOD Officials Considered Several Factors, Including the Nature of the Requirement, When Determining to Use LPTA Procedures", "paragraphs": ["Contracting officials cited a number of factors that were considered when  determining to use LPTA procedures in the 7 selected contracts we  reviewed. For all of the contracts, officials determined that the  government would not receive a benefit for paying more than the lowest  price. For these contracts, contracting officials also stated that LPTA  procedures were used, in part, because the requirements were well- defined, non-complex, or reoccurring. Additional details on the contracts  follow.", "The Army awarded an IDIQ contract, with a one-year base period and  four 1-year options, for support services in Afghanistan with an  estimated ceiling value of $85,000,000. This is a reoccurring  requirement to hire Afghan nationals to provide on-site construction  management, engineering, and technical support services for  reconstruction projects throughout Afghanistan. The acquisition plan  states that Afghan nationals can more freely move about the country  compared to U.S. personnel. Further, a contracting official stated that  it was determined that no additional value would be gained by paying  a premium for these services and that the lowest price was the best  choice. In addition, to mitigate risk of poor performance, one  requirement of the contract is to maintain a qualified workforce.  Officials stated that approximately 90 percent of personnel performing  on the previous contract are working on the current contract.", "The Air Force awarded three contracts for base operation support  services\u2014vehicle maintenance, airfield maintenance, fuel  management, and traffic management\u2014at an Air Force Reserve Base  and two Air Reserve Stations. All of the contracts were awarded with  a one-month orientation period, one-year base period, four 1-year  options, and a final 6-month option, with total estimated values  ranging from $24.7 million to $38.2 million. Acquisition plans for these  requirements stated that the services were well defined. Additionally,  contracting officials stated that there is at least a decade of past  experience with these requirements, and, as a result, the  requirements are well known.", "The Air Force awarded a contract for centralized mail sorting services  in Germany. The contract consists of a 2-month phase-in period, a 2- month base period, four 1-year options, and one 8-month option, with  a total estimated value of approximately $21.5 million. The acquisition  plan for this requirement stated that a LPTA source selection  procedure was chosen because the requirement was well-defined and  not technically complex. For example, the acquisition plan noted that  there was more than a decade of historical data that helped define  and estimate the volume of mail that would need to be sorted.  Contracting officials reiterated that LPTA was used since the service  was well-defined, the risk of poor performance was low, and that it  was determined that additional trade-offs would not provide an  additional benefit to the taxpayer.", "The Army awarded an IDIQ contract to look for vulnerabilities in  software code. The contract, which was set aside for small  businesses, had a 5-year ordering period and an estimated ceiling  value of $17.1 million. The contractor was required to perform a  software review using several government approved code analysis  tools and then characterize any potential vulnerabilities identified by  the tools in terms of risk levels prescribed by established government  cybersecurity standards. Army requirements officials stated that they  determined there was no additional value to be gained from additional  innovations in doing either task. Our review found some indication that  the requirement, however, might not have been clearly understood by  offerors. For example, the Army received 12 offers which ranged from  $800,177 to $46,680,003. The contracting officer attributed the range  of offers to the inexperience of some offerors with preparing proposals  or misunderstanding this type of requirement, and the two lowest  offers were determined to be technically unacceptable.", "The Navy awarded a contract to perform commercially available  monthly telephone maintenance, which includes preventive and  remedial maintenance on a specific brand of phone systems that  Navy locations in California use. The contract consists of a one-year  base period and two 1-year options, with an estimated total value of  approximately $15.9 million. The acquisition plan stated that only  certified authorized dealers could perform maintenance on these  phones. A contracting official stated the requirement was well-defined  and required the highest tier of maintenance options that could be  offered, and, as a result, there was no tradeoff available. The highest  tier requires that maintenance be available 24 hours a day, 7 days a  week in multiple Navy locations, and that the contractor must respond  to emergencies within 15 minutes during normal business hours. The  contract also includes maintenance for all switches, inside wiring and  any necessary relocation services, among other support  requirements."], "subsections": []}, {"section_title": "Factors Cited by Contracting Officials When Choosing LPTA Procedures Were Generally Consistent with Criteria Listed in Section 813", "paragraphs": ["1.  One contracting official determined that minimum performance  requirements for the $15.9 million contract for monthly telephone  maintenance services could be described using objective  performance measures, and the contract documents showed the  technical acceptability of offers was tied to the description of these  requirements in the statement of work. In another example,  documents related to the award of a $27.9 million Air Force contract  for base operations services show performance objectives and  standards set forth as evaluation factors. procedures may be used only when DOD would realize little or no  value from a proposal that exceeds the solicitation\u2019s minimum  technical requirements. Our interviews with contracting officials and  review of contract documents found that in each case, DOD officials  assessed whether the department could receive value from a contract  awarded on a tradeoff basis where the proposal exceeded the  minimum technical requirements, and determined that there would be  no additional value to be gained.", "3.  Most officials said they felt that it was possible to evaluate the  proposals they received with little subjectivity, although they had not  always explicitly made and documented this assessment. Officials for  two contracts stated, for example, that the threshold question of  technical acceptability for their contracts was whether the offering  firms possessed certain licenses or accreditation to perform services  on specific equipment or in specific locations. No subjectivity was  involved in this assessment; therefore, they viewed the question of  technical acceptability as essentially objective. However, because  they were not required to document this assessment, contract  documents did not provide evidence of an assessment of subjectivity.  4.  Officials for most of the contracts we reviewed stated they had  determined that a review of technical proposals other than that of the  lowest-price offeror would not identity factors that could provide other  benefits. In one case officials ultimately reviewed additional proposals,  which is allowed under current DOD source selection guidance.", "DOD\u2019s March 2016 source selection guidance does not require  contracting officers to consider the fifth and sixth criteria listed in Section  813. Accordingly, we found that contracting officers did not always  document justifications for choosing LPTA procedures and did not  determine that the lowest price offered reflected full life-cycle costs.  Specifically, we found that:  5.  Although the files for all 7 contracts contained some record of the  choice of LPTA source selection procedures, files for 3 of the 7  contracts simply stated that LPTA procedures would be used and did  not include an explanation or justification for the choice. Only the  documents for the four Air Force contracts included some explanation  of the reasons for choosing LPTA source selection procedures. While  not required by DOD source selection guidance when our selected  contracts were approaching source selection, providing a justification  for using LPTA is one of the criteria that Section 813 requires DOD to  include among the revisions to the DFARS.  6.  None of the officials for our selected contracts had confirmed that the  lowest price offered reflected full life-cycle costs, which is one of the  criteria that Section 813 requires DOD to include among the revisions  to the DFARS. For the mail delivery, telephone maintenance, and  base operations support contracts we reviewed, two contracting  officials noted that full life-cycle costs were not applicable and a third  stated that life-cycle costs cannot be determined for a service  contract. As previously noted, all of the contracts in our review were  for services, not for products. A Defense Procurement and Acquisition  Policy official acknowledged that the application of the criterion could  cause confusion and that DOD officials are considering this issue as  part of efforts to revise the DFARS.", "As previously noted, DOD is currently developing the revisions to the  DFARS that are contemplated by Section 813. DOD officials could not  provide a specific timeframe for when the DFARS would be revised,  noting that the revisions would need to be reviewed by the Office of  Information and Regulatory Affairs at the Office of Management and  Budget, and then released for public comment before the revisions could  be finalized."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We are not making any recommendations in this report. We provided a  draft of this report to DOD for comment. DOD had no comments on the  draft report.", "We are sending copies of this report to appropriate congressional  committees and the Secretary of Defense. The report will be available at  no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@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 I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following staff members  made key contributions to this report: Justin Jaynes (Assistant Director),  Matthew T. Crosby, Lorraine Ettaro, Stephanie Gustafson, Julia Kennon,  Victoria Klepacz, W. William Russell, Roxanna Sun, Ann Marie Udale,  Khristi Wilkins, and Lauren Wright."], "subsections": []}]}], "fastfact": ["Savvy customers may seek the lowest prices when choosing to have their neighbor\u2019s kid mow their lawn, but may think twice when selecting a surgeon.", "DOD faces a similar choice\u2014it may use the \"lowest price technically acceptable\" process and pay less or use a \"trade-off\" process and possibly pay more if additional benefits outweigh the higher cost.", "Recent legislation states DOD should avoid using the lowest price process for complex services like cybersecurity. We found that for contracts worth over $10 million, DOD seldom used the lowest price process for complex services, but rather for services like phone maintenance."]}
{"id": "GAO-19-8", "url": "https://www.gao.gov/products/GAO-19-8", "title": "K-12 Education: Public High Schools with More Students in Poverty and Smaller Schools Provide Fewer Academic Offerings to Prepare for College", "published_date": "2018-10-11T00:00:00", "released_date": "2018-10-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Poverty can have a profound effect on academic outcomes and college readiness and students from low-income families are less likely to go to college. The low rates of degree attainment for low-income students raises questions about whether the students who wish to pursue higher education have access to courses that support their readiness for college. GAO was asked to review college preparatory course offerings in U.S. high schools.", "This report (1) examines the extent to which high schools of different poverty levels offer courses to prepare students academically for college, and (2) describes the challenges students in high-poverty schools face being prepared to attend college. GAO analyzed 2015-16 Education data on course offerings by school poverty level, type, and size, and developed a generalized linear regression model to explore whether certain school-level characteristics may be associated with course offerings; reviewed a generalizable sample of public 4-year college websites for course requirements for admission; and interviewed officials from Education and the Department of Justice. GAO also conducted site visits to 12 high-poverty high schools in 3 states selected to provide variation in course offerings, among other things. In this review, GAO focused on public 4-year colleges because they offer a bachelor's degree and are generally a more affordable 4-year option."]}, {"section_title": "What GAO Found", "paragraphs": ["Students in relatively poor and small schools had less access to high school courses that help prepare them for college, according to GAO's analysis of Department of Education (Education) data for school year 2015-16 (the most recent available). While most public high schools, regardless of poverty level, offered courses like algebra and biology, disparities in access were associated with school poverty level for more advanced courses like calculus, physics, and those that may allow students to earn college credit, like Advanced Placement (AP) courses (see figure). High-poverty schools were less likely to offer the math and science courses that most public 4-year colleges expect students to take in high school, according to GAO's analysis of college websites. GAO's regression analysis also showed that smaller schools and certain types of schools, like charter schools, are less likely to offer the college preparatory math or science courses that many colleges look for during the admissions process.", "Officials GAO interviewed in selected high-poverty high schools said their students can face a number of complex challenges in preparing for college. For instance, officials said that many students are academically behind when they enter high school and are unable to progress to more advanced courses. Further, high-poverty schools may not offer rigorous courses, such as AP courses, due to lack of resources or teaching staff. Students in high-poverty schools also face other stressors that can make going to college challenging. Officials at 9 of the 12 schools GAO visited cited the effects of poverty on their students, such as homelessness, hunger, and trauma, that make preparing for college difficult. School officials also said the steps involved in applying to and enrolling in college can be difficult to navigate for many students in high-poverty schools. Officials in selected schools reported efforts to address these challenges, such as offering free college courses and obtaining outside supports to assist with college advising."]}], "report": [{"section_title": "Letter", "paragraphs": ["Students from low-income families earn bachelor\u2019s degrees at rates that  are significantly lower than their more affluent peers. This is concerning  because higher levels of education are associated with higher lifetime  earnings, and a bachelor\u2019s degree, in particular, can be a powerful tool for  lifting individuals out of poverty. One study found that among individuals  who started out in the lowest 20 percent income group, those earning a  college degree were over four times more likely to move to the highest  income group than those who did not finish college. Similarly, another  study found that adults with a bachelor\u2019s degree or higher are more likely  to report that they are at least doing okay financially than those with a  high school degree or less. Not all students are interested in pursuing a  4-year college degree. However, the low rates of degree attainment for  low-income students raises questions about whether the students who  wish to pursue higher education have access to courses that support their  admission to college.", "You asked us to review the spectrum of college preparatory course  offerings available in high-poverty schools and challenges students in  these schools face preparing for college. Specifically, we (1) examined  the extent to which high schools of different poverty levels offer courses  to prepare students academically for college, and (2) described  challenges that students in high-poverty schools face in being prepared to  attend college.", "To determine the extent to which schools offer courses to prepare  students academically for college, we analyzed U.S. Department of  Education (Education) data on course offerings, among other things, on  the nation\u2019s public schools. Specifically, we analyzed data from  Education\u2019s school year 2015-16, the most recent available, Civil Rights  Data Collection (CRDC), which collects data on course offerings in  schools, among other things, such as characteristics of students  attending schools (e.g., race, sex, disability), school type (e.g., traditional,  charter), and school size. To explore whether course offerings varied by  level of school poverty, we matched schools in the CRDC to the same  schools in another Education data collection, the Common Core of Data  (CCD), which contains information on the percentage of students in a  school eligible for free or reduced-price lunch, for school year 2015-16,  and sorted them into poverty quartiles. To understand the interplay of  poverty and race, we further analyzed the student demographics of  schools in these poverty quartiles. In addition, this descriptive analysis  also examined the variation in course offerings by school size, type, and  locale. Both the CRDC and CCD are school-level data collections of K-12  public schools. We determined these data were sufficiently reliable for the  purposes of this report by reviewing documentation, conducting electronic  testing, and interviewing Education officials.", "Colleges often look for students to have taken certain courses or a  sequence of courses in preparation for college. To test whether offering  certain courses or sequences of courses were associated with school  characteristics, like its poverty level, we conducted an additional analysis  using Education\u2019s data. Specifically, we used a generalized linear  regression with a logistic regression model to test whether a school  offering: at least three math courses (algebra I, geometry, and algebra II);  at least three science courses (biology, chemistry, and physics); and any  Advanced Placement (AP) courses was associated with particular school  characteristics, like poverty, while controlling for other school  characteristics, like school size and demographic makeup. Similarly, we  conducted a separate regression for individual course offerings (algebra I,  calculus, biology, etc.). By controlling for other related school  characteristics that might also be associated with offering a given course  or sequence of courses, the model tests whether an association with a  particular school characteristic of interest, such as poverty, remains when  controlling for other related school characteristics. To better understand  the courses that colleges expect students to take in high school, we  reviewed the academic admission criteria posted on the websites of a  nationally-representative random sample of public 4-year colleges in the  Unites States. We focused on public 4-year colleges because these  institutions offer a bachelor\u2019s degree and are generally a more affordable  4-year option because they often offer lower tuition to in-state residents.", "To gather information on the challenges students in high-poverty schools  face in being prepared for college, we conducted site visits to 12 high  schools: 4 schools in each of 3 states (California, Georgia, and  Wisconsin). We selected high-poverty schools that provided us with a  range in the numbers of different types of math, science, and AP courses  offered. We also selected high schools that provided variation in size,  school type, and location. At each of the 12 high schools, we interviewed  the principal and other key leadership staff, and high school counselors.  We interviewed by phone state educational agency officials in each of the  three states, as well as school district officials for most of the high schools  we visited. For each state, we also interviewed college admission officials  representing at least one public, 4-year college, and representatives of  college advising organizations. In selecting the states in our review, we  considered variation in state policies on college readiness and geographic  diversity.", "We conducted this performance audit from May 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. See appendix I for more  information on our objectives, scope, and methodology."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Poverty in U.S. High Schools", "paragraphs": ["Poverty can adversely affect academic and other outcomes in profound  ways. Specifically, living in poverty is linked with negative conditions for  children at home, in schools, and in neighborhoods and communities, and  can include substandard housing, homelessness, inadequate nutrition  and food insecurity, inadequate home-based child care, increased health  care costs, and unsafe neighborhoods. Poverty has a particularly  adverse effect on the academic outcomes of children that starts in early  childhood and continues through the academic pipeline. Chronic stress  associated with living in poverty has been shown to adversely affect  children\u2019s concentration and memory which may impact their ability to  learn. Census data from 2014 show a relationship between the rate at  which students dropped out (left school without obtaining a high school  credential) and family income. The dropout rate of students from high- income families was 2.8 percent, while the dropout rate for individuals  from low-income families was 11.6 percent.", "Our prior work describes how the nation\u2019s schools have become  increasingly comprised of students in poverty. In school year 2015-16,  of the 12.5 million students in public high schools (schools with grades 9- 12), over 5 million (40 percent) attended schools where at least half of the  students were experiencing poverty, as indicated by eligibility for free or  reduced-priced lunch. Nearly 1.8 million (over 14 percent) attended  schools where at least three-quarters of the students were experiencing  poverty (see table 1).", "Our prior work has also discussed the association between poverty and  race or ethnicity. High schools with a relatively large proportion of  students in poverty also tend to have a higher proportion of minority  students, students with disabilities, and English learners. The link  between racial and ethnic minorities and poverty is long-standing, and  studies have noted concerns about this segment of the population that  falls at the intersection of poverty and minority status in schools and how  this affects their access to quality education."], "subsections": []}, {"section_title": "Characteristics of U.S. High Schools and the College Preparation Process", "paragraphs": ["Of the roughly 12.5 million students who were enrolled in public high  schools during the 2015-16 school year, about 87 percent attended  traditional public schools, according to Education data; the remaining  students were enrolled at charters, magnets, and other types of public  schools (see table 2).", "While not all students will decide to pursue college, those who do  generally must prepare for and navigate the college admissions process  while in high school. This process can involve multiple administrative and  financial steps, according to information from Education and college  advising organizations. (See figure 2 for more information on the college  application and admissions process.)"], "subsections": []}, {"section_title": "U.S. Department of Education College Readiness Initiatives", "paragraphs": ["The Department of Education plays a role in helping students be  prepared for college through initiatives in several of its offices. For  example, Education\u2019s Office of Postsecondary Education (OPE)  administers several discretionary grant programs designed to increase  college readiness among students from disadvantaged backgrounds,  such as the Gaining Early Awareness and Readiness for Undergraduate  Programs (GEAR UP). GEAR UP aims to increase the number of low- income students who are prepared to enter and succeed in  postsecondary education. In 2016, OPE awarded approximately $323  million in grants through GEAR UP. In addition, Education\u2019s Office of  Elementary and Secondary Education (OESE) provides grants and  technical assistance to states and districts to encourage advanced course  opportunities and college and career readiness initiatives. OESE also  oversees states\u2019 and districts\u2019 use of Title I, Part A funds under the  Elementary and Secondary Education Act, as amended. These funds  provide financial assistance to school districts and schools with high  numbers or high percentages of children from low-income families to help  ensure that all children meet challenging state academic standards, and  can be used to provide additional courses and college readiness  programs in schools. Finally, Education\u2019s Office of Federal Student Aid  (FSA) is responsible for managing the student financial assistance  programs authorized under Title IV of the Higher Education Act of 1965.  These programs provide grants, loans, and work-study funds to students  attending college or career school. FSA also publishes guidance and  other resources related to federal student aid and college costs. These  resources are designed for students and parents who are navigating the  college application and financial aid processes. (For more information on  Education\u2019s grant programs relevant to college readiness, see appendix  II.)"], "subsections": []}, {"section_title": "Federal Efforts to Promote Equitable Access to Educational Resources", "paragraphs": ["Education and the Department of Justice (Justice) promote equitable  access to education resources as part of their missions in two key ways:  (1) conducting investigations of discrimination complaints; (2) issuing  guidance on ways to address potential disparities; and (3) providing  technical assistance. Education and Justice are responsible for  enforcing a number of civil rights laws that prohibit discrimination in public  schools on the basis of race, sex, disability, color, and national origin.  (For examples of cases resolved by Education and Justice related to  access to college preparation resources, see appendix IV.)", "To enforce relevant civil rights laws, Education carries out complaint- driven and agency-initiated investigations, which are called compliance  reviews and which target problems that Education has determined are  particularly acute. For example, in a recent review, Education\u2019s OCR  reviewed whether Black students in a Virginia school district had the  same access to educational opportunities as other students. OCR found a  significant disparity between the numbers of Black and White high school  students who take AP, advanced courses, and dual credit programs.  These discrimination cases can be resolved through several means,  including voluntary resolution, dismissal, or closure due to insufficient  evidence. Education may also terminate federal funds if Education  determines that a recipient is in violation of civil rights laws and the  agency is unable to reach agreement with the parties involved.", "Justice has the authority to file suit in federal court to enforce the civil  rights of students in public education. Specifically, Justice investigates  discrimination in school resources based on complaints filed under  federal civil rights laws and monitors and enforces open federal school  desegregation orders where Justice is a party to the litigation. For  example, in 2015 Justice entered into a court-approved agreement with a  Louisiana city school board after finding that more college preparatory  courses were offered in schools that predominantly serve White students  than in schools that predominately serve Black students. This agreement  required, among other things, that the district ensure that all students  were given the opportunity to take all courses offered in the district.", "In addition to enforcement actions, Education and Justice help promote  equitable access to education resources by issuing guidance and  providing technical assistance. For example, in 2014, OCR issued  guidance addressing equitable access to educational resources, in part,  to address chronic and widespread racial disparities in access to rigorous  courses, academic programs, and extracurricular activities which can  hinder the education of students of color. In this guidance, OCR describes  proactive ways to address potential disparities in academic and  extracurricular programs that are differentiated based on academic rigor  (e.g., gifted and talented or college preparatory programs) or content  (e.g., business, music, art, or career and technical education programs).  This guidance includes the following steps that states and school districts  can take to help ensure equal access to educational resources: designating an employee to review policies governing how resources  are distributed to and within schools; evaluating resource access across and within schools; notifying parents, students, and community members of avenues to  raise concerns about resource access; and  taking proactive steps to identify disparities in access to resources.", "Education also offers technical assistance, through various means, such  as conducting webinars, sponsoring and presenting at conferences, and  disseminating resource guides to schools and school districts."], "subsections": []}]}, {"section_title": "High-Poverty Schools Offer Fewer of the Courses That Prepare Students for Public 4- Year College", "paragraphs": ["At a Glance: Student Access to College Preparation Courses and  Admissions Expectations", "Poverty and Student Demographics", "Schools with the highest concentration of poor students were  predominantly comprised of Black and Hispanic students.", "Access to more advanced math and science courses (e.g.,  calculus and physics) decreased as the level of school poverty  increased.", "Larger high schools offered more advanced math and science  courses than smaller schools, regardless of poverty level.", "Charter schools offered fewer advanced math and science  courses than traditional and magnet schools, regardless of  poverty level.", "Public 4-year colleges generally expect applicants to have  completed three or four math and three or four science credits  in high school, but we found that the percentage of schools  offering these recommended courses decreased as poverty  level increased."], "subsections": [{"section_title": "High-Poverty High Schools Largely Comprised of Black and Hispanic Students", "paragraphs": ["Our analysis of Education data for school year 2015-16 showed that high- poverty high schools were predominately comprised of Black and  Hispanic students, while low -poverty schools had a higher proportion of  White students. Specifically, roughly 80 percent of students attending  high-poverty schools were either Black or Hispanic, but were less than 20  percent of students enrolled in low-poverty schools (see fig. 3)."], "subsections": []}, {"section_title": "Access to Advanced High School Courses Varies Based on School Poverty Level, Size, and Type", "paragraphs": [], "subsections": [{"section_title": "Poverty Level", "paragraphs": ["Our analysis of Education data for school year 2015-16 showed that  students\u2019 access to more advanced high school courses decreased as  the level of school poverty increased. High-poverty schools represented  17 percent of all high schools in 2015-16.", "College Admissions Perspective  Admissions officials from all four public, 4- year universities we interviewed reported that  they look for students to take advanced  coursework in high school in order to be more  competitive applicants.  Some college admissions officials and college  advising organizations reported that students  face academic difficulties when they get to  college if they did not take advanced courses  that help prepare for the rigor of college.  A college admissions official we interviewed  reported that over 90 percent of the  university\u2019s incoming freshmen took courses  in high school that could earn college credit,  such as Advanced Placement (AP),  International Baccalaureate (IB), or dual  enrollment courses.", "Across all poverty levels, almost all schools offered the basic math  courses (algebra I and geometry); however, disparities in offering  advanced math courses grew as school poverty level increased (see fig.  4). For calculus in particular, the percentage of schools offering the  course decreased as school poverty level increased, with the gap  between low- and high-poverty schools widening to nearly 35 percentage  points (85 percent of low-poverty schools versus about 50 percent of  high-poverty schools). Generally, a similar pattern emerged for science  courses. Again, the majority of all schools, at least 90 percent across all  poverty levels, offered biology; but for chemistry and physics, disparities  grew as poverty increased. For example, almost 90 percent of low- poverty schools offered physics, with the percentage decreasing steadily  to 62 percent for high-poverty schools.", "For courses that allow students to earn college credit and that can help  make students more competitive applicants (see text box), our analysis  showed a similar trend, with disparities that deepened as school poverty  increased. For Advanced Placement (AP) courses overall, our analysis  showed that the gap in courses offered was widest between the lowest  and highest poverty schools\u2014with over 80 percent of low-poverty schools  offering at least one AP course compared to about 60 percent of high- poverty schools. We found a similar pattern for AP math and science  courses. Among schools that offered any AP courses, nearly all low- poverty schools offered AP math compared to 75 percent of high-poverty  schools, a nearly 20 percentage point gap (see fig. 5).", "Advanced Placement courses:  Upon successful completion of the course and  a standardized AP exam, a student may be  qualified to receive college credit and/or  placement into advanced college courses.  International Baccalaureate courses:  The International Baccalaureate (IB) courses  are designed as an academically challenging  and balanced program of education, with final  examinations, that prepares students, usually  aged 16 to 19, for success in college.  Dual Enrollment/Credit programs:  Dual enrollment/dual credit programs provide  opportunities for high school students to take  college-level courses offered by colleges, and  earn concurrent credit toward a high school  diploma and a college degree while still in  high school.", "Across all poverty levels, larger public high schools offered more  advanced math and science courses than smaller schools, according to  our analysis of Education\u2019s school year 2015-16 data. As illustrated in  figure 7, this pattern held true for all math and science courses. In  particular, among high-poverty schools, 90 percent of large schools  offered calculus, compared to 54 percent and 11 percent of medium and  small schools, respectively. Similarly, among high-poverty schools, over  90 percent of large schools offered physics compared to about two-thirds  of medium and about a third of small schools.", "A similar pattern was evident for AP courses (see fig. 8). Among high- poverty schools, 97 percent of large schools offered AP courses  compared to 68 percent of medium and 11 percent of small schools.", "Across all poverty levels, access to advanced courses differed by school  type. We found that, in general, fewer charter schools, across all poverty  levels, offered math, science, and AP courses, compared to traditional  and magnet schools, according to our analysis of Education\u2019s school  year 2015-16 data (see fig. 9). Further, a higher percentage of magnet  schools offered advanced courses (such as physics and AP courses),  compared to traditional schools. We also analyzed alternative schools  and special education schools. When analyzing Education\u2019s data by  school type, these schools had the lowest percentage of schools offering  college preparatory courses. We focused our analyses in the body of the  report on traditional, magnet, and charter schools, the school types with  larger enrollments. Alternative and special education schools enroll fewer  than 1.5 percent of high school students. See appendix V for full data  tables, which include breakouts for alternative and special education  schools.", "For AP courses, across all poverty levels, a lower percentage of charter  schools offered these courses compared to traditional and magnet  schools (see fig. 10). In particular, among high-poverty schools, 33  percent of charter schools offered any AP courses compared to 71  percent of traditional and 94 percent of magnet schools.", "We also analyzed high school course offerings based on whether schools  were located in an urban, suburban, or rural location, but our regression  model did not find a consistent association between school locale and  course offerings. For example, a lower percentage of high-poverty  schools in rural areas offered advanced math and science courses  compared to high-poverty urban or suburban schools. However, a higher  percentage of low-poverty rural schools offered advanced math and  science courses than did low-poverty urban schools. For full results by  school locale, see appendix V."], "subsections": []}]}, {"section_title": "High-Poverty Schools Were Less Likely to Offer Math and Science Courses Needed for College Admission", "paragraphs": ["Colleges often look for students to have completed multiple credits of a  subject in high school, such as math or science; however, our analysis  suggests that some high-poverty schools may not offer the math and  science courses needed to meet basic admission expectations for public  4-year colleges. Based on our analysis of a generalizable sample of U.S.  public 4-year college websites, an estimated 95 percent of colleges  expected applicants to have completed three or four credits of math (see  text box). Further, a majority of public 4-year colleges specifically  recommended that applicants take algebra I, geometry, and algebra II.  With respect to science an estimated 76 percent of colleges expected  students to have completed three or four credits of science, with many  specifically recommending biology, chemistry, or physics. (See fig. 11).", "Our analysis of Education data for school year 2015-16, however, found  that the percentage of schools offering these recommended math and  science courses decreased as poverty level increased. With respect to  math courses, 7 percent of low-poverty schools did not offer the  recommended math courses (at least algebra I, geometry, and algebra II),  compared to 17 percent of high-poverty schools that did not offer these  courses. Further, while 12 percent of low-poverty schools did not offer the  recommended science courses (at least biology, chemistry, and physics),  41 percent of high-poverty schools did not. (See fig. 12).", "Odds of offering at least algebra I,  geometry, and algebra II  Generally, no statistically   significant association.", "Odds of offering at least biology,  chemistry, and physics  Higher poverty schools were  associated with lower odds of  offering these courses compared   to lower poverty schools.", "Odds of offering   any AP courses  Higher poverty schools were  generally associated with lower   odds of offering any AP courses,  compared to lower poverty schools."], "subsections": [{"section_title": "Race", "paragraphs": ["Higher levels of Hispanic or Asian  students were associated with   lower odds of offering these  courses.", "Higher levels of Black, Hispanic,   or American Indian/Alaskan Native  students were associated with lower  odds of offering these courses.", "Generally, no statistically   significant association."], "subsections": []}, {"section_title": "School Size", "paragraphs": ["Smaller schools were associated  with lower odds of offering these  courses, compared to larger  schools.", "Smaller schools are associated   with lower odds of offering these  courses, compared to larger  schools.", "Smaller schools were associated  with lower odds of offering AP  courses, compared to larger   schools."], "subsections": []}, {"section_title": "School Type", "paragraphs": ["Alternative schools were   associated with lower odds of  offering these courses compared   to traditional schools; however,   the results were not statistically  significant for other school types.", "Charter schools and alternative  schools were associated with   lower odds of offering these   courses compared to traditional  schools.", "Charter schools were associated  with lower odds of offering any AP  courses and magnet schools were  associated with higher odds of  offering any AP courses, compared  to traditional schools."], "subsections": []}]}]}, {"section_title": "Officials from All 12 High-Poverty Schools Stated That Their Students Face Multiple, Complex Challenges to Prepare for College, and Some Had Efforts in Place to Help", "paragraphs": [], "subsections": [{"section_title": "Students in High-Poverty Schools Confront Complex Challenges to Prepare for College", "paragraphs": ["Across the three selected states, officials representing the 12 high- poverty schools we visited consistently reported that students confront  multiple challenges to being prepared to attend college. They cited a  range of academic roadblocks to college, including that students are  behind academically before they get to high school; that the schools they  attend lack rigorous courses, such as AP courses; and that students  struggle to attain grade point averages (GPA) high enough for admission  to some 4-year colleges. Officials explained that family challenges and  obligations can compound the academic challenges and make navigating  the college admissions and enrollment process difficult for their students.", "Students have not made sufficient academic progress to be admitted to  college, according to officials we interviewed at 12 high-poverty schools  (see fig. 13). Officials representing most of these schools (10 of 12)  reported that their students were often academically behind. For example,  at one urban and predominantly Black Wisconsin high school, officials  said that 80 percent of 9th graders were performing below grade-level  targets for reading and math, and at a Georgia high school where nearly  all of the students were eligible for free or reduced-price lunch, officials  said that over 30 percent of freshman students in school year 2016-17  had to repeat the 9th grade.", "Insufficient academic progress can be compounded by challenges high- poverty schools face in offering advanced coursework. For example,  officials at five schools said they did not offer calculus; officials at three of  these schools noted this was because most students typically did not take  algebra I in middle school and, therefore, did not have the time to  progress to calculus. Officials at a high school with over 900 students  reported they did not offer calculus or AP math courses due to low  student demand and that they must weigh the cost of providing a course  with the number of students who would benefit. Two high-poverty high  schools we visited that did not offer calculus courses were exploring  offering the courses to students through videoconference. However, an  official from one school district we interviewed said the district uses  videoconference as a last resort because they have found students learn  better with a teacher physically present allowing for more exchange of  dialogue. In addition, the challenge of finding and retaining high-quality  teachers can exacerbate the difficulties high-poverty schools face in  offering advanced courses, according to state educational agency officials  in two of the states we visited. Offering advanced courses is important to  providing challenging opportunities for students and avoiding remedial  coursework once in college, according to college and high school officials  we interviewed. Officials we interviewed stressed that taking advanced  courses provides students with challenging academic opportunities that  help to prepare students for the rigor of college courses, whether they  pass their AP exams or not. A representative of a college advising  organization said that while it is possible to get into college without  higher-level math courses, these courses often determine if a student  needs remedial math in college. Officials from two college advising  organizations said that when students are required to take remedial  courses in college, it can have a detrimental effect. They said remedial  courses generally cost money but do not provide credits towards  graduation and can delay graduation, and sometimes can contribute to  students leaving college without a degree.", "School officials for almost all the schools we visited (11 of 12) also said  that students often had low GPAs and SAT or ACT scores, which made  them less competitive applicants for admission or scholarships to 4-year  colleges. For example, the average GPA for 11th grade students at three  Wisconsin high schools we visited was below 2.0; officials at one school  told us that last year\u2019s valedictorian had a 3.0 GPA. Further, officials at  multiple schools said students feared they would not do well on the ACTs  or SATs; and one counselor said this means that many students did not  even try. Low GPAs and college entrance exam scores may be a  particularly acute roadblock to 4-year college in areas where the state  university system has grown increasingly competitive due to high  demand, according to a counselor at one predominantly Hispanic  California high school who said the state system is looking for students  with 4.0 GPAs."], "subsections": [{"section_title": "Difficult Life Circumstances", "paragraphs": ["In addition to insufficient academic progress, a confluence of family,  financial, and social-emotional challenges often confronts students in  high-poverty schools, making it difficult for them to prepare for college,  according to our interviews with school officials (see fig. 14).", "School and state education officials said that a range of stressors can  compound the difficulties poor students face with learning and academic  achievement. Officials at most of the schools (9 of 12) we visited and one  state educational agency cited adverse conditions associated with  poverty\u2013\u2013such as hunger, homelessness, living in foster care, witnessing  or experiencing violence or abuse\u2014that made it hard for students to  focus on school work. In one high school, officials reported that a school  staff member handed out care packages to students every Friday to  ensure students had something to eat on the weekend. Officials also  reported that students demonstrated behavioral and emotional issues in  their schools. Officials at one Wisconsin school said they have noticed a  large increase in anxiety among students. This anxiety can be paralyzing  for some students and, for others, can result in explosive and violent  behavior that affects other students\u2019 ability to learn, according to the  school officials.", "Officials in 11 of the high-poverty schools we visited said that going to  college often conflicts with a student\u2019s need to help support their families  or that the cost of college can be prohibitive. Some students provide an  important source of income for their family or are the caregiver for family  members, according to officials in nine schools. Family obligations can  also affect students\u2019 decisions about whether to take college preparation  courses, according to one school administrator. For example, the  principal of a California charter school said a high-performing student  dropped an AP course because the demands from family were so great.  In addition, officials in six schools said that the cost of college can deter  low-income students. One of these officials reported that even with  financial aid and scholarships, their students may not be able to cover  even small gaps in funding. According to one high school counselor, the  cost of going to college plus the practicalities of getting to and from school  and figuring out how to pay for meals during breaks if dorms or the  cafeteria are closed, are concerns for low-income students.", "Parents struggling with poverty may not expect their children to go to  college, according to college advising officials and officials at most  schools (10 of 12) we visited. For example, officials at one Georgia high  school said that many students are aiming to be the first in the family to  graduate high school (first generation high school graduates), and do not  prioritize college. Similarly, at another school, officials said parents and  students do not have the expectation of going to college because the  parents had not been to college themselves. Students from high-poverty  schools may continue to harbor low expectations upon admission to  college because they feel they do not belong, according to a principal and  a college advising official. In addition, first generation students usually do  not have the family support and knowledge to feel confident in their  abilities to navigate college life, as a college admissions official noted.  School officials at one high school we visited said their students, who  attend high school in a highly segregated area, have felt overwhelmed  and intimidated trying to transition to a college with a predominately white  student population."], "subsections": []}, {"section_title": "Barriers to Navigating College Processes", "paragraphs": ["A variety of factors\u2014from the availability of high school counselors to  taking college entrance exams\u2014can make the college admissions and  enrollment processes difficult for students in high-poverty schools,  according to school, college, and college advising organizations in the  communities we visited (see fig. 15).", "College admission officials in two of the states we visited noted the  importance of the high school counselor in navigating the college  admissions process, such as taking students to college fairs and building  relationships with colleges. However, counselors often face high  caseloads and competing priorities, such as getting kids to graduate and  handling emotional and social issues, according to multiple school  officials and local college advising organizations. In one rural school we  visited, one counselor handled the needs of about 400 students and was  also the bus driver and occasional substitute nurse. Taking the SAT and  ACT exams can also pose challenges for students. For example,  according to administrators at one school, the cost of the exams may be a  deterrent. At another high school, counselors noted that students may  lack transportation to the test site and, at another school, officials said  weekend jobs kept students from taking the tests.", "Applying for financial aid can also be challenging for students from high- poverty schools, according to school and college advising organization  officials. At six of the schools we visited, officials said that sometimes  parents are reluctant to report their income, because they are  undocumented or because the process is unfamiliar. In addition, some  school officials told us that even families with legal immigration status can  be reluctant to submit personal information to government websites  because they distrust how the information will be used. College advising  officials we interviewed in two states said that complicated family financial  situations, such as when a student cannot obtain income information from  a parent, can also make the financial aid process difficult. In addition,  officials from two college advising organizations said that financial aid  award packages can be difficult to understand. For instance, they said  that these packages may not clearly explain what amount the student is  responsible for paying. Further, the aid letters may not indicate the  additional cost associated with room and board, books, and  transportation, according to one of these officials.", "Finally, even after a student has been admitted to college, they still may  experience obstacles before classes begin, according to our interviews.  Four officials reported that lack of college advisement over the summer  after high school graduation has led to \u201csummer melt,\u201d when students do  not attend college as planned. Officials from a college advising  organization said that sometimes students missed a step in the  enrollment process, such as paying deposits or tuition balances before  the semester begins."], "subsections": []}]}, {"section_title": "Some High-Poverty Schools Are Trying to Ease Roadblocks to College", "paragraphs": ["Officials representing selected state educational agencies, school  districts, and high-poverty schools we visited reported that they try to  mitigate the barriers students in high-poverty schools face in being  prepared to attend a 4-year college, despite resource challenges.", "Free access to college courses. Providing students with free access to  college courses was one way some states and schools have been able to  help students prepare for college. For example, Georgia\u2019s dual enrollment  program allows high school students to earn college credit for free while  working on their high school diploma. The program covers tuition,  mandatory fees, and books. Administrators at a Georgia high school  reported that the program has allowed some students to earn an  associate\u2019s degree upon graduation from high school, helping to ease the  cost burden of college. A charter school we visited in California partners  with local colleges and covers tuition, text books, and transportation for  college courses. The school principal said that the school does not offer  calculus, but students can take it at a local community college and  receive college credit.", "Outside supports for college advising. In Georgia, officials from a  college advising organization reported helping with the college admission  process in selected schools, including registering students to take the  ACT or SAT, organizing college visits, helping students research  colleges, and helping students and parents apply for financial aid. They  also said they used text messages as a way to reach out to students and  remind them to complete certain steps in the enrollment process. In  addition, officials from half of the schools we visited (6 of 12) reported  their schools had, or previously had, federal grants that supported college  readiness activities for disadvantaged students. For example, one  Wisconsin high school where most students are eligible for free or  reduced-priced lunch (90 percent) and are Black (82 percent) or Hispanic  (14 percent) had a GEAR UP grant that supported students in the classes  of 2017 and 2018 since middle school, according to the school  administrators.", "Strategies to exhibit a college-going culture. To help encourage  students to consider college as a possibility, officials at some high-poverty  schools we visited reported using strategies to exhibit a \u201ccollege-going  culture\u201d within the school. For example, based on our site visit interviews  and observations, schools displayed college banners; opened college and  career counseling centers; provided incentives, such as prizes, to  complete financial aid applications; and posted testing and scholarship  information in prominent locations (see figs. 16 and 17). At one urban  high school we visited in Georgia, teachers displayed their alma maters  on their classroom doors and the school held \u201cCollege Fridays\u201d so  students could learn about different colleges, according to school  administrators.", "All-hands-on deck approach. One California school reported using an  \u201call-hands-on-deck\u201d approach to getting students through the college  admission process. Teachers, counselors, and administrators work  together to track and follow up with students to ensure they take the  needed coursework and do not miss a step in the admissions process.  Officials reported that school staff built personal connections with the  students and with the community outside of the school to encourage buy- in surrounding the college application process. At a high school in  Georgia where 100 percent of students were eligible for free or reduced- priced lunch, school officials said they also used an all-hands-on-deck  approach to help students persevere through personal challenges they  face, such as balancing work and school or dealing with trauma. The  school provides a team of administrators and counselors for each grade  level to better identify when a student may be struggling and help support  students\u2019 college preparation goals, according to school administrators.", "Alignment of graduation requirements and college admission  requirements. Wisconsin officials reported that the state made changes  to better align high school requirements with college and career readiness  expectations, and universities\u2019 expectations by increasing its math and  science graduation requirements from two units to three units of each,  starting with the 2017 graduating class. According to a 2014 analysis by  the Education Commission of the States, 18 states have complete or  partial alignment between state high school graduation requirements and  statewide higher education minimum admission requirements. In  addition, the University of California and the California State University  systems have established a uniform minimum set of courses, known as  A-G requirements, required for admission as a freshman. These courses,  offered in California high schools and online schools, are designed to  ensure students have attained a body of general knowledge for more  advanced study, according to information from the University of  California. Even though it is not a state requirement, one Georgia school  district reported that it requires two units of foreign language because it is  a requirement of the University System of Georgia.", "Free college admission tests. In two of the states we visited, officials  reported that students may take select college entrance exams or  preparatory exams during a school day free of charge. Georgia pays for  all 10th graders in public schools to take the Preliminary SAT (PSAT).  Wisconsin officials reported that the state requires and provides the  funding for all 11th graders in the state to take the ACT. A school district  in California we visited noted that it covers the cost of the PSAT for 9th,  10th, and 11th graders in the district, as well as the SAT for 11th graders.  In addition, officials at several schools said they offer students free online  test preparation tools.", "College initiatives to improve access and retention. Officials at  colleges in all three states we visited reported having initiatives that  helped increase admissions or ease the transition to college for low- income or first-generation students. For example, officials at the  University of Georgia said the college guarantees admission to the  valedictorian of every accredited high school in the state. Admissions  officials said this helped students with fewer educational opportunities to  be competitive for admissions. California State University (CSU)\u2013Los  Angeles, as well as other CSU campuses, has a program to help improve  access and retention of low-income and educationally disadvantaged  students. Under the program, the university accepts a limited number of  students who do not meet regular admission criteria and provides  academic, and in some cases financial, assistance to these students. The  university also offers a 6-week \u201csummer bridge\u201d program for first  generation students since they are most in danger of dropping out  between high school graduation and the first day of college classes in the  fall. At the University of Wisconsin-Milwaukee, an admissions official said  the university develops transfer plans for students who start at a 2-year  community college, to ease the transition to a 4-year college."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Education and  Justice for review and comment. These agencies provided technical  comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committee, the Secretary of Education, the Attorney  General, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0580 or nowickij@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 VIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": [], "subsections": [{"section_title": "Overview", "paragraphs": ["The objectives of this report were to (1) examine the extent to which high  schools of different poverty levels offer courses to prepare students  academically for college and (2) describe challenges that students in  high-poverty schools face in being prepared to attend college.", "For our first objective, we analyzed federal data on college preparatory  course offerings by school poverty level quartiles; and within these  quartiles, we analyzed the demographic composition of students in those  schools. We also analyzed course offerings of schools in each poverty  quartile by school type, size, and locale. Further, we reviewed college  admissions expectations for a generalizable random sample of public 4- year colleges and compared course offerings from schools in each  poverty quartile to these expectations. Lastly, we conducted a regression  analysis to explore whether and to what extent certain school-level  characteristics were associated with higher rates of college preparatory  course offerings.", "For our second objective, we visited selected high-poverty high schools in  three states to provide illustrative examples of challenges students face in  being prepared for college. In those states, we also interviewed officials  from state educational agencies, school districts, college advising  organizations, and public 4-year colleges. We focused on public 4-year  colleges because these institutions offer a bachelor\u2019s degree and are  generally a more affordable 4-year option, compared to private colleges.  The following sections contain detailed information about the scope and  methodology for this report."], "subsections": []}, {"section_title": "Analysis of College Preparatory Courses National Data", "paragraphs": ["To determine the extent to which schools offer courses to prepare  students academically for college, we conducted statistical analyses  using the U.S. Department of Education\u2019s (Education) Civil Rights Data  Collection (CRDC) and the Common Core of Data (CCD). Specifically,  the CRDC is a biennial survey that is mandatory for every public school  and district in the United States. Conducted by Education\u2019s Office for  Civil Rights (OCR), the survey collects data on the nation\u2019s public schools  (pre-K through 12th grade), including course offerings, student  characteristics and enrollment, and disciplinary actions. The CRDC  collected data from nearly every public school in the nation  (approximately 17,000 school districts, 96,000 schools, and 51 million  students in school year 2015-16). The course offering variables we used  in our analysis are for those courses typically associated with and  reported by high schools. As a result, our analysis only includes high  schools that have all grades 9, 10, 11, and 12 (a total of 14,111 high  schools). We thus excluded schools that had any grades K-8. Further, we  excluded juvenile justice facilities\u2014because the provision of educational  offerings may function differently in those schools\u2014and schools with  fewer than 10 students. Our analysis was conducted using the public-use  data file of the CRDC for school year 2015-16, the most recent data  available at the time of our analysis. We matched schools in the CRDC  for school year 2015-16 to schools in the CCD for school year 2015-16 to  enable us to perform certain analyses based on variables that are unique  to the different datasets, and excluded schools for which there was not a  match. CRDC data are self-reported by districts and schools, and  consequently there is potential for misreporting of information. Although  our analyses of these data showed disparities, taken alone, these  disparities do not establish whether unlawful discrimination has occurred.", "The 2015-16 CRDC survey collected data on several math and science  courses that are considered by Education to be college-preparatory  courses. The college-preparatory math courses included in the CRDC  are: algebra I; geometry; algebra II; advanced mathematics; and  calculus. The college preparatory science courses included in the CRDC  are: biology; chemistry; and physics. The CRDC also collected data on a  number of variables related to Advanced Placement (AP) course offerings  as well as other course offerings that potentially offer students college  credit. See table 4 for full definitions of key variables."], "subsections": [{"section_title": "Analysis by Poverty and Student Demographics", "paragraphs": ["To analyze course offerings by the poverty level of the school, we pulled  in data on free or reduced-price lunch (FRPL) eligibility from the 2015- 2016 CCD, and matched it to our universe of 14,111 high schools in the  2015-16 CRDC, given that the CRDC does not collect FRPL eligibility  data. The CCD is administered by Education\u2019s National Center for  Education Statistics (NCES), and annually collects nonfiscal data about  all public schools in the nation. A student is generally eligible for free or  reduced-price lunch based on federal income eligibility guidelines that are  tied to the federal poverty level and size of the family. State educational  agencies supply these data for their schools and school districts.", "We then sorted high schools into poverty quartiles based on the  percentage of students eligible for free or reduced-price lunch as follows:  schools with 0 to 24.9 percent of students that are FRPL eligible, which  we call low-poverty schools; schools with 25 to 49.9 percent of students  that are FRPL eligible; schools with 50 to 74.9 percent of students that  are FRPL eligible; and schools with 75 to 100 percent of students that are  FRPL eligible, which we call high-poverty schools (see table 5). The  poverty thresholds and measure of poverty discussed here and  throughout this report were commonly used in the literature and also  aligned with how Education analyzed its data. Further, to understand  which students attend schools in the different poverty quartiles, we  analyzed student demographic composition for each group of schools.", "Beginning in the 2014-15 school year, the National School Lunch  Program included a new provision for providing free meals to all students  in the school, without needing to collect individual applications from  students to determine eligibility. This provision\u2014known as the  Community Eligibility Provision (CEP)\u2014was implemented to expand  access to free meals to all students and decrease household and  administrative burdens for participating schools. We assessed whether  the CEP variable had the potential to make sorting schools into quartiles  based on the percentage of students eligible for free or reduce-price  lunch unreliable. Our analysis showed that the number of schools in each  poverty quartile remained roughly the same as in prior years and thus, we  concluded the reported FRPL data was reliable for our purposes."], "subsections": []}, {"section_title": "Analysis by School Size", "paragraphs": ["To analyze course offerings by the size of public school a student  attended, we sorted the 14,111 high schools in our universe into three  groups, based on the number of students enrolled in the school,  according to the 2015-16 CRDC data (see table 6). We excluded schools  with fewer than 10 students because (1) schools of this size likely do not  have the resources or infrastructure to offer advanced courses and (2) to  prevent minor fluctuations in the data from having large effects on our  results.", "We grouped schools into one of three size categories based on the  number of students enrolled. The Department of Education and the  CRDC do not have classifications of schools by size, so we determined  reasonable size categories based on our analysis of the data. To arrive at  these categories, we looked at average number of advanced course  offerings by school size strata in groupings of 100 students. This analysis  led to three categories based on the distribution of the data: 1 to 200  students (small schools); 201 to 1000 students (medium schools); and  1,001 or more students (large schools)."], "subsections": []}, {"section_title": "Analysis by School Type", "paragraphs": ["To analyze course offerings by the type of public school a student  attended, we sorted the 14,111 schools in our universe into mutually  exclusive categories using the self-reported school type variable in the  CRDC. The CRDC allowed schools to self-identify as special education,  magnet, charter, and alternative schools (see table 7).", "The categories of public schools in the CRDC were not mutually  exclusive; that is, schools could select multiple school types to describe  their schools, such as a charter school that was also an alternative  school. To create mutually exclusive categories for analytical purposes,  we applied the following criteria:", "Alternative school: all schools that selected \u201calternative\u201d as the school  type in the CRDC, even if they selected other types as well.", "Special education school: schools that selected \u201cspecial education\u201d as  the school type in the CRDC, except those schools that also selected  the alternative school type.", "Charter school: schools that selected \u201ccharter\u201d as the school type,  except those schools that also selected the alternative school type or  the special education school type.", "Magnet school: schools that selected \u201cmagnet\u201d as the school type,  except those schools that also selected the alternative school type,  the special education school type, or the charter school type.", "Traditional school: schools that did not select any other school type in  the CRDC.", "Table 8 provides the breakdown of students and schools captured in the  2015-16 CRDC after applying these criteria."], "subsections": []}, {"section_title": "Analysis by School Locale", "paragraphs": ["To analyze courses offerings by the locale of public school a student  attended, we pulled in the school locale variable from the 2015-16 CCD  and matched it to schools in the CRDC, which did not collect data on  school locale. The locale variable in the CCD is primarily based on a  school\u2019s location relative to populous areas. The locale variable is divided  into four main types: City, Suburb, Town, and Rural. For the purposes of  our analyses, we combined the Town and Rural variables into one  Town/Rural variable because they are defined similarly (see table 9).", "Table 10 provides the breakdown of students and schools captured in the  2015-16 CRDC after applying the GAO Categories above."], "subsections": []}]}, {"section_title": "CRDC and CCD Data Reliability", "paragraphs": ["We determined that the data we used from the CRDC and CCD were  sufficiently reliable for the purposes of this report by reviewing technical  documentation, conducting electronic testing, and interviewing officials  from Education\u2019s OCR and NCES. Past releases of the CRDC have  subsequently been updated by Education to correct errors and omissions  in the data. For our analysis of the 2015-16 CRDC, we used the data file  that was publically available as of April 24, 2018."], "subsections": []}, {"section_title": "Regression Analysis", "paragraphs": ["We conducted a generalized linear regression with a logistic regression  model using the 2015-16 CRDC and CCD data to explore whether and to  what extent certain school-level characteristics were associated with  higher rates of college preparatory course offerings, while controlling for  other factors. Such a model allowed us to test the association between  the offering of college preparatory courses and school characteristics,  including poverty, while holding other school characteristics constant  (school type, school size, school locale, student demographics). Table 11  lists the variables we included in our regression model. We conducted a  separate regression for each of the course offerings or sequence of  offerings listed as an outcome variable.", "Our regression model used the same universe of 14,111 schools as our  descriptive analysis of the CRDC data. Since the regression model is  based on observations across all independent variables, and some  variables had a small number of missing data points, our final model had  13,278 observations.", "All regression models are subject to limitations and for this model the  limitations included:", "Data we analyzed were by school rather than student. Consequently,  we were not able to describe the association between our  independent variables and a student\u2019s access to college preparatory  courses, while controlling for characteristics of an individual student,  such as sex, race or ethnicity, disability status, or grade level. Instead,  the school-level nature of the CRDC data limited our description of the  associations between school characteristics and course offerings to  whether there was an increase, decrease, or no effect on course  offerings for schools with a given characteristic, controlling for other  characteristics of the entire school\u2019s population, such as school type.", "Some variables that may be related to student access to advanced  courses are not available in the data. For example, in this context, it  could be that parent education level or household type (single- versus  multiple-headed household) could be related to course access.", "Results of our analyses are associational and do not imply a causal  relationship.", "Typically, a logistic regression model, which is a generalized linear  regression model, is appropriate when the model assumption of normality  is not appropriate, as is the case with a binary (yes/no) outcome. A  logistic regression model provides an estimated odds ratio, where a value  greater than one indicates a higher or positive association, in this case,  between whether a course is offered and the independent variable of  interest, such as being a charter school or having a higher percentage of  Black students. An estimated odds ratio less than one indicates lower  odds of offering a given college preparatory course when a factor is  present.", "Given the limitations of our model as described above, we present the  results of our regression model in tables 12, 13, and 14 by describing the  direction of the associations, rather than the estimated odds of outcome  variables. For categorical variables in these tables, we provided the  comparison school characteristic in brackets. For example, the results in  these tables should be interpreted as charter schools were significantly  less likely than traditional schools to offer AP courses, because the  association is negative. For continuous variables (i.e., those starting with  \u201cPercent\u201d), the results in these tables should be interpreted as the  likelihood of offering courses decreased, if the association was negative,  as the percentage of students in the school with a given characteristic  increased. For example, as the percentage of Black students increased,  we found that the likelihood of offering the sequence of at least three  science courses decreased."], "subsections": []}, {"section_title": "Review of College Admission Criteria", "paragraphs": ["To determine which academic courses colleges expect applicants to take  while in high school, we reviewed websites from a generalizable stratified  random sample of 100 public 4-year colleges in the United States. The  sample was selected from Education\u2019s 2015-16 Integrated Postsecondary  Education Data System (IPEDS), which contains data for colleges that  participate in federal student aid programs authorized under Title IV of the  Higher Education Act of 1965, as amended. Our sampling frame  consisted of all public 4-year degree granting colleges that participated in  Title IV federal student aid programs, predominately award baccalaureate  degrees, have full-time first-time undergraduate students, and that are  located in a U.S. state or the District of Columbia, yielding a universe of  555 colleges. We stratified the sample by groupings colleges based on  admission rates into four strata. We computed the sample size of 100  schools to achieve a precision of at least plus or minus 10 percentage  points for an estimate of a population proportion at the 95 percent  confidence level. We then proportionally allocated the sample size across  the defined strata. This sample allowed us to make national estimates  about the admission criteria for expected high school coursework at  public 4-year colleges.", "To review comparable information across the sampled schools, we  developed a standardized web-based data collection instrument that we  used to examine the admission criteria for first-time freshman applicants  posted on each college\u2019s website. Specifically, we attempted to identify  the minimum required or recommended units of math, science, social  studies, English, Foreign Language, and Fine Arts courses applicants are  expected to take in high school to be considered for admission to the  college. For math and science courses, we also attempted to identify any  specified courses the colleges provide to meet the required or  recommended units for those subject. We also collected information on  whether or not each college required students to submit SAT or ACT  exam scores to be considered for admission. We reviewed websites from  September 2017 through November 2017. One analyst recorded  information in the data collection instrument. The information was then  checked and verified by another analyst. We collected complete  information for all 100 colleges in our sample. We then analyzed the  information across colleges. We did not, as part of our review of college  websites, assess whether the information provided on the website  accurately reflected the current admission policies of the college. Instead,  this review was intended to better understand the courses that colleges  expect students to take in high school."], "subsections": []}, {"section_title": "High School Site Visits", "paragraphs": ["To obtain information on the challenges students attending high-poverty  high schools face in being prepared to attend public 4-year colleges, we  selected three states\u2014California, Georgia, and Wisconsin\u2014and  conducted site visits to four high schools in each of the states (for a total  of 12 high schools). To select states for our site visits, we used the 2013- 14 CRDC data\u2014the most recent available at the time of our selection\u2014to  sort states based on the percentage of their schools offering courses  commonly associated with college readiness. We selected states that  fell below the national average in percentage of schools offering Algebra  II. We also considered states that were at or above the national average  in percent of high-poverty schools offering two or fewer math and science  courses. We also selected states providing us with a mix of state policies  on college readiness and geographic diversity.", "Within each of the three states we used 2013-14 CRDC data to select  high schools to visit that had greater than 75 percent of students eligible  for free or reduced-price lunch (FRPL) and that offered a range of math  and science courses. We also considered the number of AP courses  offered by the school. As secondary criteria, we selected schools to  achieve variation in school size, school type, and locale, to gather  perspectives from officials in a diverse array of high-poverty schools. At  each of the 12 schools, we interviewed the principal and other key  leadership staff, and high school counselors.", "To supplement our site visits, we interviewed by phone state educational  agency officials in each of the three states, as well as school district  officials for most of the schools we visited. We interviewed officials from  at least one local college advising organization in each of these states. In  addition, we interviewed officials from at least one public 4-year university  in each of the three states, for a total of four public 4-year universities. We  selected universities that admit a high percent of in-state students, to  attempt to talk to officials who were familiar with the high schools that we  selected. These interviews provided us with information about what  college admission officers view as challenges in admitting students from  high poverty schools and the challenges students face in being  successful in completing college.", "Because we selected the schools judgmentally, based on our criteria, the  findings about the challenges these schools reported or the strategies  they used to help students address those challenges cannot be  generalized to all schools nationwide."], "subsections": []}, {"section_title": "Additional Interviews", "paragraphs": ["In addition to interviews in our site visit states, we interviewed officials  from the Education Commission of the States, National Association for  College Admission Counseling, and the College Board. We also held  interviews and reviewed documentation from the U.S. Departments of  Education and Justice to gather information on their programs supporting  access to college preparation opportunities. We also reviewed relevant  literature, as appropriate.", "We conducted this performance audit from May 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: U.S. Department of Education Discretionary Grant Programs to Increase College Readiness in K-12 Students", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Federal Agencies Responsible for Enforcing Civil Rights Laws in Public Schools", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Selected Federal Civil Rights Enforcement Cases Related to Access to College Preparation Courses and Programs", "paragraphs": [], "subsections": [{"section_title": "Department of Education", "paragraphs": ["According to administrative data from the U.S. Department of Education  (Education), the Office for Civil Rights (OCR) received over 480 civil  rights cases related to college and career readiness and resource  comparability from FY 2011 through 2017. Some of these cases were  initiated by external complaints and other reviews were initiated by  Education. In the selected cases described below Education found  underrepresentation of minority students or English learners in advanced,  honors, or Advanced Placement (AP) middle and high school courses or  in other types of college preparatory programs. This selection of cases is  not generalizable, and was selected for illustrative purposes only.", "Education Case 1: Equitable Access to Advanced Courses for Black  Students in an Ohio School District. In a 2016 investigation, OCR  identified a number of potential Title VI compliance concerns regarding  equitable access to certain resources for Black students at some  schools. Specifically, OCR found that students at three schools,  including two predominantly Black high schools, did not have the  opportunity to take advanced courses taught live at their schools and,  therefore, could not engage in-person with the course instructors.  According to OCR\u2019s investigation, students participated remotely,  watching the class through a video system. When the classes first started  during the 2011-12 school year, the district staffed the distance classroom  with paraprofessionals to assist the students. For that year, the district  reported using technology to offer greater curriculum choices to its  students through distance learning, especially when a sufficient number  of students did not sign up for an advanced course at a specific school.  After OCR notified the district of its concerns regarding this practice, the  district placed teachers in these classrooms effective the 2014-15 school  year. The district reported to Education that it was also pursuing efforts  that would allow students to earn college credit, increase the number of  courses, and improve the courses to provide high-level course choices for  students. Before OCR concluded its investigation, district school officials  voluntarily entered into a resolution agreement with Education, which  committed the district to take certain actions, such as implementing  programs designed to ensure that equally effective and qualified teachers  are equitably distributed throughout the district and ensure Advanced  Placement and other higher-level college preparatory courses are taught in the district\u2019s predominantly Black high schools, and provide students  the opportunity to engage in-person with course instructors.", "Education Case 2: Equitable Access to College Preparatory  Programs for Black, Hispanic, and English Learner (EL) Students in  a New York School District. In 2013, OCR investigated whether a New  York school district discriminated against Black, Hispanic, and EL  students by establishing and implementing policies and procedures that  resulted in their exclusion from college and career ready programs and  courses, such as honors courses and AP courses. OCR reviewed  information that the district provided regarding its high school honors  courses and analyzed data from the district that revealed that Black,  Hispanic, and EL students were underrepresented to a statistically  significant degree in high school honors courses and AP courses. OCR  also reviewed information concerning the district\u2019s gifted and talented  program at the elementary and middle school levels and its advanced  courses at the middle school level. Data provided by the district indicated  that Black, Hispanic and EL students were underrepresented to a  statistically significant degree in middle school advanced courses, as well  as in some of the district\u2019s enrichment programs. OCR noted that  enrollment in these programs and courses could potentially have an effect  on later enrollment in high school honors and AP courses. Before the  conclusion of OCR\u2019s investigation, the district voluntarily entered into a  resolution agreement with Education. The agreement committed the  district to take specific actions including hiring a consultant with expertise  in addressing the underrepresentation of Black, Hispanic, and EL  students in advanced and enrichment courses. According to the  agreement, the consultant was to study the underrepresentation and  make specific recommendations, as appropriate, for improving the  district\u2019s efforts to provide all students with equal access to and an equal  opportunity to participate in its advanced courses and programs.", "Education Case 3: Representation of Black Students in Advanced  Courses and Enrichment Programs in a New Jersey School District.  In 2014, OCR determined that Black students in a New Jersey school  district were underrepresented in high school AP courses. Specifically,  OCR found that Black students comprised 51.5 percent of high school  students in the district, but only 18.7 percent of students in AP courses in school year 2012-13. In addition, OCR determined that in middle schools,  Black students were underrepresented in the district\u2019s advanced math  courses, as well as in the math enrichment programs at certain schools in  the district. Before the conclusion of OCR\u2019s investigation, the district  voluntarily entered into a resolution agreement with Education. The  agreement committed the district to take specific actions including hiring a  consultant with expertise in addressing the underrepresentation of Black  students in college and career preparatory courses. According to the  agreement, the consultant was to study the underrepresentation and  make recommendations, as appropriate, for improving the district\u2019s efforts  to provide all students with equal access to and an equal opportunity to  participate in its advanced courses and programs.", "Education Case 4: College Preparation Opportunities for Black  Students in a Virginia School District. In 2014, OCR investigated  whether a Virginia school district discriminated against Black students by  failing to provide them with the same resources and educational  opportunities that it provided to White students to prepare them for  postsecondary education or careers. As part of this review, OCR  reviewed information regarding the district\u2019s high school higher-level  learning opportunities, including advanced courses, AP courses, and dual  credit programs (where students enroll in courses at a local community  college). In addition, OCR collected and reviewed information about other  possible barriers to college and career readiness, including student  discipline. OCR found a significant disparity between the numbers of  Black and White high school students who take AP, advanced courses,  and dual credit programs. Preliminary information provided by the district  indicated disproportion in the representation of Black students in  advanced math classes, gifted programs, and accelerated reading  programs in elementary schools. When speaking with students about  what they considered in determining whether to enroll in these courses,  many students informed OCR that they took AP or advanced courses if  they took advanced courses in middle school and elementary school.  OCR also reviewed student discipline, particularly exclusionary  disciplinary that removes students from the school setting, because,  according to OCR, such removals can serve as a potential barrier to  college and career readiness. Before OCR concluded its investigation,  the district voluntarily entered into a resolution agreement with Education  to resolve the case. The agreement committed the district to retain the  services of a consultant with expertise in addressing the  underrepresentation of Black students in gifted programs, elementary and  middle school advanced courses, and high school AP and dual credit  courses. The consultant\u2019s role was to examine the root causes for  underrepresentation and to make recommendations about what  measures, if any, the district should take as part of its on-going efforts to  provide all students with equal access to advanced courses and  programs. According to the agreement, the consultant was to study the  underrepresentation and make recommendations, as appropriate, for  improving the district\u2019s efforts to provide all students with equal access to  and an equal opportunity to participate in its advanced courses and  programs."], "subsections": []}, {"section_title": "Department of Justice", "paragraphs": ["Justice also investigates allegations of discrimination related to school  resources in response to complaints filed under federal civil rights  statutes and monitors and enforces open federal school desegregation  orders where Justice is a party to the litigation. Justice sometimes  partners with OCR on these cases. In September 2017, Justice officials  stated that there were 172 open cases to which the agency was a party.  The selected cases described below summarize Justice\u2019s findings and  the agreed upon remedies. This selection of cases is not generalizable,  and was selected for illustrative purposes only.", "Justice Case 1: Equal Educational Opportunities in an Alabama  School District. As part of an ongoing civil rights lawsuit against an  Alabama school district, in 2015, the U.S. District Court for the Northern  District of Alabama approved a consent order filed by Justice and the  district to reconfigure school attendance zones, improve access to quality  course offerings, and address racial discrimination in student discipline,  among other areas. The proposed consent order required the district to  provide equal educational opportunities to Black students by revising  attendance zones and growing and strengthening magnet programs to  improve diversity at many of its schools. It also required the district to  expand access for Black students by taking a number of steps, including  expanding access for Black students to college counseling and advance course offerings such as AP and International Baccalaureate (IB). It also  required the district to expand access for Black students to pre- kindergarten, gifted programs, and academic afterschool programs. The  district agreed to implement measures to promote faculty and  administrator diversity and to ensure that all students are aware of and  can equally participate in extracurricular activities.", "Justice Case 2: Equitable Access to Course Offerings in a Louisiana  School District. As part of an ongoing civil rights lawsuit against a  Louisiana School Board, in 2015, the U.S. District Court for the Western  District of Louisiana approved a consent decree between Justice and the  school board. This consent decree addressed district\u2019s fulfillment of its  desegregation obligations, terminating long-standing judicial supervision  of the district in this matter. Prior to this consent decree, in 2010, the court  directed the district to offer the same courses at every high school.  However, 5 years later, the court found that a high school in the district,  which predominantly served White students, offered 32 more courses,  including college preparatory courses, than another high school, which  predominantly served Black students. Similarly, across all schools in the  district (elementary, middle, and high), the schools that were racially  identifiable as White had far more gifted and talented course offerings  than other schools. In the consent decree, the district agreed, among  other things, to strive to have all courses listed in its course catalog taught  at each high school. Further, if a course is ultimately not taught at a given  school, students at that school would be given the opportunity to take the  course at another school in the district. The district also agreed to provide  free transportation, at the student\u2019s request, and to adjust the student\u2019s  schedule and the scheduling and location of the course, as necessary, to  facilitate the student\u2019s attendance at the course.", "Justice Case 3: Access to College and Career Readiness Programs  and Courses for American Indian Students in a New Mexico School  District. In 2017, Justice and OCR resolved a compliance review of a  New Mexico school district. The purpose of the review was to determine  whether the district discriminated against American Indians by excluding  them from college and career readiness programs and courses, such as  gifted and talented, AP, and honors courses. Justice and OCR also  evaluated whether the district discriminated against American Indian  parents by not providing them with information surrounding the  aforementioned programs and courses in a language they understand.  District staff surveyed during this review recommended ways to address  American Indian student underrepresentation in college and career  readiness programs and courses. On February 14, 2017, the district  entered into a resolution agreement with OCR and Justice, committing to  take specific actions to ensure that it is providing an equal opportunity  and equal access for all students to its advanced and higher level  learning opportunities. The district agreed to several actions including  reaching out to an equity assistance center or consultant for technical  assistance in addressing the underrepresentation of American Indian  students in the college and career readiness programs and courses and  improving outreach to the American Indian community."], "subsections": []}]}, {"section_title": "Appendix V: Additional Data Tables", "paragraphs": ["This appendix contains several tables that show the underlying data used  throughout this report, as well as additional analyses we conducted using  the Department of Education\u2019s Civil Rights Data Collection (CRDC) and  Common Core of Data (CCD) for school year 2015-16. The following  tables and information are included in this appendix:", "Table 17: High schools offering math and science courses, by school  poverty level.", "Table 18: High schools offering math and science sequences, by  school poverty level.", "Table 19: High schools offering Advanced Placement courses,  International Baccalaureate program, and Dual Enrollment options, by  school poverty level.", "Table 20: High schools offering different numbers of Advanced  Placement courses, by school poverty level.", "Table 21: High schools offering math courses, by school size and  poverty level.", "Table 22: High schools offering science courses, by school size and  poverty level.", "Table 23: High schools offering math and science sequences, by  school size and poverty level.", "Table 24: High schools offering Advanced Placement courses,  International Baccalaureate program, and Dual Enrollment options, by  school size and poverty level.", "Table 25: High schools offering math courses, by school type and  poverty level.", "Table 26: High schools offering science courses, by school type and  poverty level.", "Table 27: High schools offering math and science sequences, by  school type and poverty level.", "Table 28: High schools offering Advanced Placement courses,  International Baccalaureate program, and Dual Enrollment options, by  school type and poverty level.", "Table 29: High schools offering math courses, by school locale and  poverty level.", "Table 30: High schools offering science courses, by school locale and  poverty level.", "Table 31: High schools offering math and science sequences, by  school locale and poverty level.", "Table 32: High schools offering Advanced Placement courses,  International Baccalaureate program, and Dual Enrollment options, by  school locale and poverty level."], "subsections": []}, {"section_title": "Appendix VI: Additional Figures", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: College Admission Website Review", "paragraphs": ["As described in Appendix I, we reviewed websites from a nationally- representative sample of 100 public 4-year colleges in the United States  to determine which academic courses colleges expect applicants to take  while in high school. Our sampling frame consisted of all public 4-year  degree granting colleges that participated in Title IV federal student aid  programs, predominately award baccalaureate degrees, have full-time  first-time undergraduate students, and that are located in a U.S. state or  the District of Columbia, yielding a universe of 555 colleges. Based on our  review, an estimated 88 percent of public 4-year colleges posted  recommended or required high school coursework as admission criteria  for applicants. Of the colleges that had coursework criteria posted on their  websites, the results are shown in table 33 below."], "subsections": []}, {"section_title": "Appendix VIII: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sherri Doughty (Assistant  Director), Cady Panetta (Analyst-in-Charge), James Ashley, James  Bennett, David Dornisch, Holly Dye, Alison Grantham, Connor Kincaid,  Grant Mallie, Benjamin Sinoff, Walter Vance, and Sonya Vartivarian made  key contributions to this report. Also contributing were Deborah Bland,  Aaron Karty, Sheila R. McCoy, and Margie Shields."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-476", "url": "https://www.gao.gov/products/GAO-18-476", "title": "NASA Commercial Crew Program: Plan Needed to Ensure Uninterrupted Access to the International Space Station", "published_date": "2018-07-11T00:00:00", "released_date": "2018-07-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2014, NASA awarded two firm-fixed-price contracts to Boeing and SpaceX, worth a combined total of up to $6.8 billion, to develop crew transportation systems and conduct initial missions to the ISS. In February 2017, GAO found that both contractors had made progress, but their schedules were under mounting pressure. The contractors were originally required to provide NASA all the evidence it needed to certify that their systems met its requirements by 2017.", "A House report accompanying H.R. 5393 included a provision for GAO to review the progress of NASA's human exploration programs. This report examines the Commercial Crew Program, including (1) the extent to which the contractors have made progress towards certification and (2) how NASA's certification process addresses safety of the contractors' crew transportation systems. GAO analyzed contracts, schedules, and other documentation and spoke with officials from NASA, the Commercial Crew Program, Boeing, SpaceX, and two of NASA's independent review bodies that provide oversight."]}, {"section_title": "What GAO Found", "paragraphs": ["Both of the Commercial Crew Program's contractors, Boeing and Space Exploration Technologies Corporation (SpaceX), are making progress finalizing designs and building hardware for their crew transportation systems, but both contractors continue to delay their certification milestone (see figure). Certification is the process that the National Aeronautics and Space Administration (NASA) will use to ensure that each contractor's system meets its requirements for human spaceflight for the Commercial Crew Program.", "Further delays are likely as the Commercial Crew Program's schedule risk analysis shows that the certification milestone is likely to slip. The analysis identifies a range for each contractor, with an earliest and latest possible completion date, as well as an average. The average certification date was December 2019 for Boeing and January 2020 for SpaceX, according to the program's April 2018 analysis. Since the Space Shuttle was retired in 2011, the United States has been relying on Russia to carry astronauts to and from the International Space Station (ISS). Additional delays could result in a gap in U.S. access to the space station as NASA has contracted for seats on the Russian Soyuz spacecraft only through November 2019. NASA is considering potential options, but it does not have a contingency plan for ensuring uninterrupted U.S. access.", "NASA's certification process addresses the safety of the contractors' crew transportation systems through several mechanisms, but there are factors that complicate the process. One of these factors is the loss of crew metric that was put in place to capture the probability of death or permanent disability to an astronaut. NASA has not identified a consistent approach for how to assess loss of crew. As a result, officials across NASA have multiple ways of assessing the metric that may yield different results. Consequently, the risk tolerance level that NASA is accepting with loss of crew varies based upon which entity is presenting the results of its assessment. Federal internal controls state that management should define risk tolerances so they are clear and measurable. Without a consistent approach for assessing the metric, the agency as a whole may not clearly capture or document its risk tolerance with respect to loss of crew."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that NASA develop a contingency plan for ensuring a U.S. presence on the ISS and clarify how it will determine its risk tolerance for loss of crew. NASA concurred with three recommendations; partially concurred on the recommendation related to loss of crew; and non-concurred with a recommendation to report its schedule analysis to Congress. GAO believes these recommendations remain valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Following the retirement of the Space Shuttle in 2011, the United States  was left with no domestic ability to provide crew access to the  International Space Station (ISS). Since then, the National Aeronautics  and Space Administration (NASA) has relied on obtaining seats on the  Russian Soyuz spacecraft to maintain a U.S. presence on the station.  NASA\u2019s Commercial Crew Program is facilitating the commercial  development of a crew transportation system that can provide safe,  reliable, and cost-effective transportation to and from the ISS and that  would end this dependency. NASA\u2019s goal is to have one or more  contractors that can provide crew transportation services to the ISS.  NASA is planning for the ISS to be operational until at least 2024.", "NASA\u2019s acquisition strategy for the Commercial Crew Program is similar  to the one it used on the Commercial Cargo Program, but different from  other spacecraft it has built for humans, from Mercury to Gemini and  Apollo to the Space Shuttle. Each contractor is to design, develop, build,  own, and operate its own spaceflight system and infrastructure. The  contractors will have access to NASA\u2019s expertise and resources  throughout the development process, but NASA engineers are not the  ones making design decisions and NASA personnel will be less involved  in processing, testing, launching, and operating the crew transportation  system. In the end, NASA will buy a crew transportation service\u2014a ride  for its astronauts to and from the ISS\u2014much like it does for ISS cargo.", "In the most recent phase of the Commercial Crew Program, NASA  awarded firm-fixed-price contracts in 2014 to Boeing and Space  Exploration Technologies Corporation (SpaceX), valued at up to $4.2  billion and $2.6 billion, respectively, for the development of crew  transportation systems that meet NASA requirements and for the initial  service missions to the ISS. According to the contracts, the companies  were originally supposed to complete certification\u2014the process by which  each contractor provides NASA the evidence it needs to certify that its  systems meet performance and safety requirements\u2014by 2017.", "The House Report accompanying H.R. 5393, Commerce, Justice,  Science, and Related Agencies Appropriations Bill, 2017 includes a  provision for GAO to review the acquisition progress of NASA\u2019s human  exploration programs, including the Commercial Crew Program. For this  review, we assessed (1) the extent to which the contractors have made  progress towards meeting NASA\u2019s certification requirements and NASA\u2019s  plans to ensure continued access to the ISS; and (2) how NASA\u2019s  certification process addresses safety of the contractors\u2019 crew  transportation systems. To assess the contractors\u2019 progress toward  certification, we reviewed Commercial Crew Program and contract  documents, including quarterly progress updates, monthly risk charts, and  monthly schedule summaries. We also interviewed program and contract  officials to identify steps being taken to mitigate risks and assess the  extent of cost or schedule effects if the risk is realized. For each  contractor, we compared the original contract schedule to the most  current contract schedule and the contractors\u2019 internal development  schedules to determine upcoming events and expected delays. We also  spoke with ISS program officials to determine how NASA plans to  mitigate the effects of these delays on its access to the ISS.", "To assess how NASA\u2019s certification process addresses safety of the  contractors\u2019 crew transportation systems, we reviewed agency safety  policies, program plans, and contract documents to establish when  certification approval would be granted, what safety assessments were  required of the program, and which safety factors would be considered in  certification reviews. For each contractor, we compared agency  requirements to contract requirements for a key safety metric known as  \u201closs of crew,\u201d and interviewed program and agency officials to determine  how loss of crew would be assessed and considered throughout the  certification process. We reviewed program and agency documentation  and interviewed program and agency officials to determine the role of the  safety and mission assurance technical authority in the program. We also  met with two organizations that provide NASA with independent  assessments of the program, the program\u2019s standing review board and  the Aerospace Safety Advisory Panel, to gain their perspectives on the  contractor\u2019s progress and how NASA addresses safety in its certification  process. Appendix I contains detailed information about our scope and  methodology.", "We conducted this performance audit from April 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["NASA\u2019s Commercial Crew Program is a multi-phased effort that began in  2010. Across the phases, NASA has engaged several companies, using  both agreements and contract vehicles to develop and demonstrate crew  transportation capabilities. As the program has passed through these  phases, NASA has generally narrowed down the number of participants.  The early phases of the program were under Space Act agreements,  which is what NASA calls the agreements entered into pursuant to its  other transaction authority. These types of agreements are generally not  subject to the Federal Acquisition Regulation (FAR) and allow the  government and its contractors greater flexibility in many areas. Under  these Space Act agreements, NASA relied on the commercial companies  to propose specifics related to their crew transportation systems,  including their design, the capabilities they would provide, and the level of  private investment. In these phases, NASA provided technical support  and determined whether the contractors met certain technical milestones.  In most cases, NASA also provided funding.", "For the final two phases of the program, NASA awarded FAR-based  contracts. By using FAR-based contracts, NASA gained the ability to  procure missions to the ISS, while continuing to provide technical  expertise and funding to the contractors. NASA levied two sets of  requirements on the contractors:  the ISS program requirements, which must be met by all spacecraft  visiting the ISS whether they carry cargo or crew; and  the Commercial Crew Program requirements, which have a focus on  system capabilities and safety rather than design.", "The program also established a verification closure notice process, in  which the contractors submit data to NASA to verify they have met all the  requirements to be certified. This certification must occur before  contractors are allowed to fly initial crewed missions to the ISS."], "subsections": [{"section_title": "Current Program Contracts", "paragraphs": ["In September 2014, NASA awarded firm-fixed-price contracts to Boeing  and SpaceX, valued at up to $4.2 billion and $2.6 billion, respectively, for  the Commercial Crew Transportation Capability phase. Under a firm- fixed-price contract, the contractor must perform a specified amount of  work for the price negotiated by the contractor and government. This is in  contrast to a cost-reimbursement contract, in which the government  generally agrees to pay the contractor\u2019s allowable costs regardless of  whether work is completed. During this phase, the contractors will  complete development of crew transportation systems.", "Boeing\u2019s spacecraft\u2014CST-100 Starliner\u2014is composed of a crew module  and a service module.", "The crew module will carry the crew and cargo. It also includes  communication systems, docking mechanisms, and return systems for  Earth landing.", "The service module provides propulsion on-orbit and in abort  scenarios as well as radiators for thermal control.", "SpaceX\u2019s spacecraft\u2014Dragon 2\u2014is composed of a capsule, which we  refer to as the crew module, and a trunk, which we refer to as the support  module.", "The crew module is composed of a pressure section and a service  section. This module will carry the crew and cargo. It also includes  avionics, docking mechanisms, and return systems for a water  landing.", "The support module includes solar arrays for on-orbit power and  guidance fins for escape abort scenarios.", "Figure 1 shows the spacecraft and launch vehicles for Boeing and  SpaceX\u2019s crew transportation systems.", "The Commercial Crew Transportation Capability phase contracts include  three types of services:", "Contract Line Item 001 encompasses the firm-fixed-price design,  development, test, and evaluation work needed to support NASA\u2019s  certification of the contractor\u2019s spacecraft, launch vehicle, and ground  support systems.", "Contract Line Item 002 covers any service missions that NASA  orders to transport astronauts to and from the ISS. Under this  indefinite-delivery, indefinite-quantity line item, NASA has ordered six  post-certification missions from each contractor. Each service  mission is its own firm-fixed-price task order. NASA must certify the  contractors\u2019 systems before they can fly these missions.", "Contract Line Item 003 is an indefinite-delivery, indefinite-quantity  line item for any special studies, tests, and analyses that NASA may  request. These tasks do not include any work necessary to  accomplish the requirements under contract line item 001 and 002. As  of April 2018, NASA had funded studies worth approximately $30  million to Boeing, including approximately $27 million for additional  testing of the parachute system. NASA had funded studies worth  approximately $44 million to SpaceX, including approximately $34  million for additional testing of the parachute system. For each  contractor, the maximum value of this contract line item is $150  million.", "NASA has made changes to the contracts that have increased their  value. While the contracts are fixed-price, their values can increase if  NASA adds work or otherwise changes requirements, among other  means. As of April 2018, NASA requirement changes had increased the  value of contract line item 001 for Boeing by approximately $191 million  and for SpaceX by approximately $91 million."], "subsections": []}, {"section_title": "Certification", "paragraphs": ["NASA divided the certification work under contract line item 001 into two  acceptance events: the design certification review and the certification  milestone. An acceptance event occurs when NASA approves a  contractor\u2019s designs and acknowledges that the contractor\u2019s work is  complete and meets the requirements of the contract.", "The first acceptance event\u2014the design certification review\u2014verifies the  contractor\u2019s crew transportation system\u2019s capability to safely approach,  dock, mate, and depart from the ISS, among other requirements. After the  contractor has successfully completed all of its flight tests, as well as  various other activities, the second acceptance event\u2014the certification  milestone\u2014determines whether the crew transportation system meets the  Commercial Crew Program\u2019s requirements. Following this contract  milestone is an agency certification review, which authorizes the use of a  contractor\u2019s system to transport NASA crew to and from the ISS. Figure 2  shows a notional path leading up to the agency certification review.", "The Commercial Crew Program\u2019s certification plan outlines how the  program will incrementally review required deliverables leading up to, and  supporting, the agency certification review. For each review, the plan  describes the information that the contractor and the program will present.  At the agency certification review, which is chaired by the Associate  Administrator of the Human Exploration and Operations Mission  Directorate, the agency will review the program\u2019s formal recommendation  to certify the contractor\u2019s crew transportation system. Program officials  said that their goal is to develop and review certification evidence  incrementally in order to reduce the risk that issues will be identified  during the agency certification review."], "subsections": []}, {"section_title": "Prior GAO Work", "paragraphs": ["In our February 2017 report, we evaluated the progress made by the two  contractors on the Commercial Crew Program and found the following:", "Both of the Commercial Crew Program\u2019s contractors had made  progress developing their crew transportation systems, but both also  had aggressive development schedules that were increasingly under  pressure. We reported that both Boeing and SpaceX had determined  that they would not be able to meet their original 2017 certification  dates, and both expected certification to be delayed until 2018. We  found that the schedule pressures were amplified by NASA\u2019s need to  provide a viable crew transportation option because its contract with  Russia\u2019s space agency was to provide crew transportation to the ISS  for six astronauts through 2018 with rescue and return through late  spring 2019. Purchasing additional seats from Russia involves a  contracting process that typically takes 3 years. Without a viable  contingency option for ensuring uninterrupted access to the ISS in the  event of further Commercial Crew delays, we concluded that NASA  was at risk of not being able to maximize the return on its multibillion  dollar investment in the space station.", "The Commercial Crew Program was using mechanisms laid out in its  contracts to gain a high level of visibility into the contractors\u2019 crew  transportation systems, but maintaining that level of visibility through  certification could add schedule pressures. We noted that, for  example, due to NASA\u2019s acquisition strategy for this program, its  personnel were less involved in the testing, launching, and operation  of the crew transportation system. While the program developed  productive working relationships with both contractors, obtaining the  level of visibility that the program required had also taken more time  than the program or contractors had anticipated. Ultimately, we noted  that the program had the responsibility for ensuring the safety of U.S.  astronauts, and its contracts gave it deference to determine the level  of visibility required to do so. We concluded that the program office  could face difficult choices moving forward about how to maintain the  level of visibility it feels it needs without adding to the program\u2019s  schedule pressures.", "In order to ensure that the United States had continued access to the ISS  if the Commercial Crew Program\u2019s contractors experienced additional  schedule delays, we recommended in our February 2017 report that the  NASA Administrator develop a contingency plan for maintaining a  presence on the ISS beyond 2018, including options to purchase  additional Russian Soyuz seats, and report to Congress on the results.  NASA concurred with this recommendation, and in February 2017, NASA  executed a contract modification that purchased two seats and included  an option to purchase three additional crewmember seats from Boeing on  the Russian Soyuz vehicle. These seats represent a contingency plan for  U.S. access to the ISS through 2019. In April 2017, NASA informed the  Congress of this action."], "subsections": []}]}, {"section_title": "Contractors Have Made Progress, but NASA Has Not Finalized Plans to Ensure ISS Access Given Persistent Delays", "paragraphs": ["Boeing and SpaceX continue to make progress developing their crew  transportation systems, but both contractors have further delayed the  certification milestone to early 2019. These changes have occurred as the  contractors continue to work to aggressive schedules, and they have had  to delay key events regularly. Further delays are likely as the Commercial  Crew Program\u2019s schedule risk analysis shows that the certification  milestone is likely to further slip. In addition, as of mid-June 2018, NASA  officials told us that these dates may change soon but that both  contractors have not yet provided official updates to their schedules to  NASA. NASA has not fully shared information with Congress regarding  the risks of future schedule delays for the contractors and, as a result,  Congress lacks insight into when the contractors will be certified. Also,  there may be a gap in access to the ISS if the Commercial Crew Program  experiences additional delays. While NASA has begun to discuss  potential options, it currently does not have a contingency plan for how to  ensure an uninterrupted presence on the ISS beyond 2019."], "subsections": [{"section_title": "Contractors Continue to Make Progress, but Risks Remain", "paragraphs": ["Boeing and SpaceX have continued to make progress finalizing their  designs and building hardware as they work toward their certification  milestones. The contractors are manufacturing test articles to  demonstrate system performance and flight spacecraft to support the  uncrewed and crewed flight tests, which are expected to demonstrate the  ability to meet contract requirements. As table 1 shows, these test articles  and spacecraft vary in levels of completion. Some are built and  undergoing testing while others are starting the manufacturing phase.  Should any issues arise during integration and test or the flight tests, the  contractors may have to complete rework on the spacecraft already under  construction.", "While both contractors are making progress, the Commercial Crew  Program is tracking risks that each contractor has to address through  testing and other means as they work towards the certification milestone.", "As we have previously reported, these types of risks are inherent in  NASA\u2019s major acquisitions, which are highly complex, specialized, and  often pushing the state of the art in space technology, but they could also  delay the contractors\u2019 progress if issues arise during testing.", "The Commercial Crew Program\u2019s top programmatic risks identified for  Boeing include challenges related to its abort system performance,  parachutes, and launch vehicle.", "Abort System: Boeing is addressing a risk that its abort system, which  it needs for human spaceflight certification, may not meet the  program\u2019s requirement to have sufficient control of the vehicle through  an abort. In some abort scenarios, Boeing has found that the  spacecraft may tumble, which could pose a threat to the crew\u2019s safety.  To validate the effectiveness of its abort system, Boeing has  conducted extensive wind tunnel testing and plans to complete a pad  abort test in July 2018.", "Parachute System: Boeing is also addressing a risk that during  descent, a portion of the spacecraft\u2019s forward heat shield may re- contact the spacecraft after it is jettisoned and damage the parachute  system. Boeing\u2019s analysis indicates the risk exists only if one of two  parachutes that pull the forward heat shield away from the spacecraft  does not deploy as expected, and that potential re-contact is non- detrimental. However, NASA\u2019s independent analysis indicates that  this may occur even if both parachutes deploy as expected. If the  program determines this risk is unacceptable, Boeing would need to  redesign the parachute system, which the program estimates could  result in at least a 6-month delay.", "Launch Vehicle Data: One of the program\u2019s top programmatic and  safety concerns is that it may not have enough information from  Boeing\u2019s launch vehicle provider, United Launch Alliance, to assess  whether the Atlas V launch vehicle prevents or controls cracking that  could lead to catastrophic failures. NASA estimates that unfinished  work in this area could take Boeing and the United Launch Alliance  until the fourth quarter of 2018 to complete. Additionally, the first stage  of the Atlas V is powered by the Russian built RD-180 engine, and,  according to program and Boeing officials, access to its data is highly  restricted by agreements between the U.S. and Russian  governments. Since our last report, the Commercial Crew Program  has lowered the risk that certification of the launch vehicle might not  occur by negotiating steps to access necessary data, but work is still  ongoing.", "The Commercial Crew Program\u2019s top programmatic risks identified for  SpaceX are in part related to ongoing design and development efforts  related to its launch vehicle design, the Falcon 9 Block 5.", "Composite Overwrap Pressure Vessel: This Block 5 design includes  SpaceX\u2019s redesign of the composite overwrap pressure vessel, which  is intended to contain a gas under high pressure. SpaceX officials  stated the newly designed vessel aims to eliminate risks identified in  the older design, which was involved in an anomaly that caused a  mishap in September 2016. SpaceX plans to qualify the updated  design for flight prior to the uncrewed flight test design certification  review.", "Engine Turbine Cracking: The Block 5 design also includes design  changes to address cracks in the turbine of its engine identified during  development testing. NASA program officials told us that they had  informed SpaceX that the cracks were an unacceptable risk for  human spaceflight. SpaceX officials told us that they have made  design changes to this Block 5 upgrade that did not result in any  cracking during initial testing. However, this risk will not be closed until  SpaceX successfully completes qualification testing in accordance  with NASA\u2019s standards without any cracks. As of March 2018,  SpaceX had not yet completed this testing.", "Propellant Loading Procedures: Both the program and a NASA  advisory group have raised SpaceX\u2019s plan to fuel the launch vehicle  after the astronauts are on board the spacecraft to be a potential  safety risk. In the May 2018 meeting minutes, however, the  Aerospace Safety Advisory Panel stated that with appropriate controls  in place, this approach could be a viable option for the program to  consider. SpaceX\u2019s perspective is that this operation may be a lower  risk to the crew because it reduces the crew exposure time while the  launch vehicle is being loaded with propellant. To better understand  the propellant loading procedures, the program and SpaceX agreed to  demonstrate the loading process five times from the launch site in the  final crew configuration prior to the crewed flight test. The five events  include the uncrewed flight test and the in-flight abort test. Therefore,  delays to those events would lead to delays to the agreed upon  demonstrations, which could in turn delay the crewed flight test and  certification milestone."], "subsections": []}, {"section_title": "Program\u2019s Schedule Risk Analysis Indicates More Delays Likely to Certification Milestone", "paragraphs": ["Both contractors have notified NASA that their certification milestones  have slipped to January 2019 for Boeing and February 2019 for SpaceX,  but the Commercial Crew Program\u2019s schedule risk analysis indicates  more delays are likely. This analysis identifies a range for each  contractor, with an earliest and latest possible completion date, as well as  an average. In April 2018, the program\u2019s schedule risk analysis found  there was zero percent chance that either contractor would achieve its  current proposed certification milestone. The analysis\u2019s average  certification date was December 2019 for Boeing and January 2020 for  SpaceX. Figure 3 shows the original Boeing and SpaceX contract  schedules and the current proposed schedule for five key events in each  contract, as well as NASA\u2019s schedule risk analysis for the certification  milestone.", "Each month, the program updates its schedule risk analysis based on the  contractors\u2019 internal schedules as well as program officials\u2019 perspectives  and insight into specific technical risks. The Commercial Crew Program  manager told us that differences between the contractors\u2019 proposed  schedules and the program\u2019s schedule risk analysis include:", "The contractors are aggressive and use their schedule dates to  motivate their teams, while NASA adds additional schedule margin for  testing.", "Both contractors assume an efficiency factor in getting to the crewed  flight test that NASA does not factor into its analysis.", "The program manager also told us that the program meets with each  contractor monthly to discuss schedules and everyone agrees to the  relationships between events in the schedule even if they disagree on the  length of time required to complete events. The program manager added,  however, that she relies on her prior experience to estimate schedule  time frames as opposed to relying on the contractors\u2019 schedules, which  are often optimistic.", "Our analysis also shows that the contractors often delay their schedules.  Both contractors have repeatedly stated that their schedules are  aggressive and have set ambitious\u2014rather than realistic\u2014dates, only to  frequently delay them. Since the current contracts were awarded in 2014,  the Commercial Crew Program has held 13 quarterly reviews for each  contractor. For the five key events identified above, Boeing has reported  a delay at 7 of those quarterly reviews and SpaceX has reported a delay  at 9 of them.", "In mid-June 2018, NASA officials told us that the dates for these key  events may change soon. The information presented in Figure 3 above is  based on first quarter calendar year 2018 data. NASA officials stated both  contractors have not yet officially communicated new schedule dates to  NASA as of the second quarter calendar year 2018. We found that both  contractors have updated schedules that indicate delays are forthcoming  for at least one key event, but NASA officials told us they lack confidence  in those dates until they are officially communicated to NASA by the  contractors. As a result, NASA is managing a multibillion dollar program  without confidence in its schedule information as it approaches several  big events, including uncrewed and crewed flight tests."], "subsections": []}, {"section_title": "NASA Has Neither Shared Complete Information on Delay Risk with Congress nor Developed a Contingency Plan", "paragraphs": ["The risk of future delays in the contractors\u2019 schedules is critical  information that NASA has not fully shared with Congress. Moreover,  NASA has not yet developed a contingency plan to address the potential  gaps that these delays could have on U.S. access to the ISS after 2019.  Specifically, in the Explanatory Statement accompanying the fiscal year  2018 Consolidated and Further Continuing Appropriations Act, the House  Appropriations Committee stated its expectation that NASA report  quarterly to the Senate and House Committees on Appropriations on the  status of the Commercial Crew Program contracts. Previously,  members of Congress had asked for this information in order to ensure  that Congress had adequate insight into this program. While NASA  includes both contractors\u2019 proposed schedules in its quarterly report to  Congress, NASA does not include the results of its own schedule risk  analysis. Given the frequency with which the contractors delay key events  in their schedules, the program\u2019s schedule risk assessment provides  valuable insight into potential delays that NASA currently is not providing  to Congress.", "In addition, as previously mentioned, NASA executed a contract  modification that purchased two seats and included an option to purchase  three additional crew member seats through Boeing for an undisclosed  value and reported this action to Congress in April 2017. Ultimately, the  option was exercised, and NASA purchased a total of five seats on four  different Soyuz flights. Boeing obtained these seats through a separate  settlement with the Russian firm RSC Energia, which manufactures the  Soyuz.", "These seats were intended to serve as a contingency plan based on  schedule information available at that time. However, subsequent delays,  as well as the risk of future delays as discussed above, indicate that this  contingency plan will likely no longer be sufficient. The earliest and latest  possible completion dates for certification in NASA\u2019s April 2018 schedule  risk analysis indicate it is possible that neither contractor would be ready  before August 2020, leaving a potential gap in access of at least 9  months. We calculated the potential gap based on the contractor  certification milestone dates, but there could be some additional time  required between that review and the first post-certification service  mission to the ISS.", "As seen in figure 4, if the contractors can maintain their current proposed  schedules for their respective certification milestones, a gap in access to  the ISS is not expected. However, there would be a gap in access to the  ISS if neither contractor has its certification milestone before November  2019, which is when NASA expects the final Russian Soyuz seat for a  U.S. astronaut to return.", "Senior NASA officials told us that sustaining a U.S. presence on the ISS  is essential to maintain and operate integral systems, without which the  ISS cannot function. Given the importance of maintaining a U.S. presence  on the ISS, NASA officials have stated they are working on options to  address the potential gap in access. However, officials told us that  planning for contingencies is difficult given the extensive international  negotiations required for some options. Obtaining additional Soyuz seats  seems unlikely, as the process for manufacturing the spacecraft and  contracting for those seats typically takes 3 years\u2014meaning additional  seats would not be available before 2021. As a result, according to  NASA\u2019s Associate Administrator for Human Exploration and Operations,  the options NASA is considering include:", "Refine the remaining Soyuz launch schedule to allow for a return in  January 2020, as opposed to November 2019. This would provide 2  additional months of access to the ISS before the commercial crew  flights need to start.", "Use the crewed flight tests as operational flights to transport U.S.  astronauts to and from the ISS. In March 2018, NASA modified  Boeing\u2019s contract to allow NASA to add a third crew member and  extend the length of the flight test, if NASA chooses to do so. This  would have limited usefulness, however, in filling a potential gap in  access to the ISS if the schedule for Boeing\u2019s crewed flight test slips  past the return date for the last Soyuz flight and SpaceX also  continues to experience delays.", "NASA\u2019s Associate Administrator for Human Exploration and Operations  stated that he is \u201cbrainstorming\u201d other options to ensure access to the ISS  but does not have a formal plan. While options are not unlimited and  decisions have to be made within the context of the current geopolitical  environment, Congress stated in the NASA Authorization Act of 2005 that  it is U.S. policy to possess the capability for human access to space on a  continuous basis. In 2010, Congress further stated that one of the key  objectives of the United States\u2019 human spaceflight policy is to sustain the  capability for long-duration presence in low-Earth orbit through full  utilization of the ISS. If NASA does not develop options for ensuring  access to the ISS in the event of further Commercial Crew delays, it will  not be able to ensure that the U.S. policy goal and objective for the ISS  will be met."], "subsections": []}]}, {"section_title": "Agency Certification Process Includes Mechanisms to Assess Safety, but Is Complicated by Assessment of Key Safety Metric and Oversight Structure", "paragraphs": ["The Commercial Crew Program relies on several contractual mechanisms  to assess safety throughout the certification process, and those  mechanisms are in varying stages of completion. The program itself, its  contractors, and two of NASA\u2019s independent review organizations have  raised concerns about the program\u2019s ability to assess and evaluate all of  the deliverables in a timely manner. In addition, one of the key safety  requirements levied by the program is loss of crew, which captures the  probability of death or disability to a crew member. NASA does not have a  consistent approach for how to incorporate key inputs to assess this  metric, which means the agency as a whole may not clearly capture or  document its risk tolerance with respect to loss of crew. Further, the  program\u2019s chief safety and mission assurance officer is dual hatted to  serve simultaneously in a programmatic position as well as the program\u2019s  safety technical authority. This approach creates an environment of  competing interests because it relies on the same individual to manage  technical and safety aspects on behalf of the program while also serving  as the independent oversight of those same areas."], "subsections": [{"section_title": "Program Has Several Contractual Mechanisms to Assess Safety", "paragraphs": ["The contractors are required to provide several key deliverables to the  Commercial Crew Program, which inform the agency certification review  and help NASA determine the level of risk it is accepting with respect to  safety of each spacecraft. As described below, these deliverables are in  varying stages of completion and the program itself, its contractors, and  two of NASA\u2019s independent review organizations have raised concerns  about the program\u2019s ability to assess and evaluate all of the deliverables  in a timely manner.", "Certification Data Package. Among other things, the certification data  package includes a list of seven system safety assessments. For  example, the certification data package includes a fault tolerance  assessment, which describes the system\u2019s ability to sustain a certain  number of undesired events, such as software or operational anomalies.  A human error analysis\u2014one of the seven assessments in the data  package\u2014evaluates human errors to minimize their negative effects on  the system.", "Boeing held its uncrewed flight test design certification review in  December 2017 and submitted its certification data package for NASA  approval. Boeing plans three more updates to this data package prior  to the final certification milestone.", "SpaceX has begun to submit data and plans to submit its final  certification data package as part of its crewed flight test design  certification review, which is scheduled for September 2018.", "According to the program\u2019s certification review plan, program officials will  review and approve the contractors\u2019 certification data packages, which  will be used to inform the agency certification review.", "Phased Safety Review Process. A three-phased safety review process  informs the program\u2019s quality assurance activities, and it is intended to  ensure that the contractors have identified all safety-critical hazards and  implemented associated controls prior to the first crewed flight test.", "In phase one, the contractors identified risks in their designs and  developed reports on potential hazards, the controls they put in place  to mitigate them, and explanations for how the controls will mitigate  the hazards.", "In phase two, which is nearing completion, the program reviews and  approves the contractors\u2019 hazard reports and develops strategies to  verify and validate that the controls are effective. For example, if a  control requires that an item be waterproofed, verification and  validation strategies could include inspections and tests to confirm  that the item is waterproof. As of April 2018, the program had yet to  complete this phase, having approved 97 percent of Boeing\u2019s phase  two reports and 72 percent of SpaceX\u2019s phase two reports.", "In phase three, the contractors will conduct the verification activities  and submit the hazard reports to the program for approval. The  program has begun phase three, including approving 19 percent of  Boeing\u2019s phase three reports.", "Program Requirements. While the program manager told us that all of  the requirements contribute to the safety of the commercial systems,  safety officials are required to approve a subset of these requirements.  Examples of requirements approved by safety officials include the ability  to leave the spacecraft in an emergency or to abort a launch. When a  contractor is ready for NASA to verify that it has met a requirement, the  contractor submits data for NASA to review through a verification closure  notice. We define \u201csafety-specific notices\u201d as those requiring safety  officials\u2019 approval. As shown in table 2, as of March 2018, the program  had approved 2 percent of Boeing\u2019s safety-specific notices and 0 percent  of SpaceX\u2019s safety-specific notices.", "Testing. The program also requires testing to verify and validate the crew  transportation system. Agency officials emphasized the importance of  testing to safety, stating that testing reduces uncertainty about a system\u2019s  performance and can uncover unknown problems. As noted above, both  contractors will be conducting an uncrewed and a crewed flight test prior  to being certified. While a certain level of risk needs to be accepted to  conduct human spaceflight, these flight tests help to mitigate this risk by  validating the integrated performance of the hardware and software.  Agency and program officials stated that the contractors\u2019 flight tests are  critical evidence to support certification of a safe and reliable system.", "As evidenced by the data above, the program still has a significant  amount of work ahead with respect to approving certification packages  and closing hazard reports and verification closure notices. We have  previously found that the program\u2019s workload was an emerging schedule  risk, and the contractors have continued to express concern about  program officials\u2019 ability to process and approve certification paperwork in  a timely manner. Workload has also been a concern for two of NASA\u2019s  independent review organizations. For example, the Aerospace Safety  Advisory Panel noted in its January 2018 annual report that the sheer  volume of work that remains for the program in terms of closing hazard  reports and verification closure notices is significant. In addition, the  program\u2019s safety and mission assurance office identified the upcoming  bow wave of work in a shrinking time period as a top risk to achieving  certification."], "subsections": []}, {"section_title": "NASA Lacks a Consistent Approach to Assess Key Safety Metric", "paragraphs": ["One mechanism the program put in place to assess the overall safety of  each spacecraft\u2014loss of crew\u2014has been a focus of the Aerospace  Safety Advisory Panel, Members of Congress, our prior work, and the  program itself. Loss of crew captures the probability of death or  permanent disability to one or more crew members. It has received a lot  of attention, in part, because it has been a top risk for the program since  2015. Specifically, the program has been concerned that neither  contractor would be able to meet the contract requirement of a 1 in 270  probability of incurring loss of crew. We identified two key concerns with  how NASA is using the loss of crew metric: (1) inconsistent approaches to  assess the loss of crew metric and (2) no identified plan to share lessons  learned about using the loss of crew metric as a safety threshold.", "A loss of crew value is generated through a probabilistic safety analysis,  which models scenarios that could result in the loss of crew using various  inputs. According to the program\u2019s analysis, the probability of on-orbit  debris damaging the vehicle has the greatest effect on a loss of crew  value. This probability is informed by an orbital debris (debris) model,  which was updated in 2014, after the loss of crew requirement was  established. The updated debris model makes it harder to meet a loss of  crew value, in part, because the modeling environment where the  contractors\u2019 systems will operate has changed. For example, the updated  model includes a larger span of orbit, greater range of debris sizes, and  the addition of material density classifications, which were not included in  the former model. Further, the probabilistic safety analysis may include  operational mitigations, such as on-orbit inspections that would include  using cameras on the ISS to visually survey the spacecraft for damage,  which, according to officials, makes it easier to meet a loss of crew value.", "NASA describes the probabilistic safety analysis as a powerful tool that  should be used as part of the overall risk management process to ensure  the risk associated with development and operation of a system is  understood, evaluated, managed, and mitigated. However, we found  differences in the approaches that officials plan to use to assess loss of  crew as well as in the loss of crew value being measured that could limit  the usefulness of this tool.", "Agency Certification. The agency certification review for each  contractor will include an assessment of whether its crew  transportation system meets a loss of crew threshold of 1 in 150 for  missions to the ISS, which is based on a May 2011 safety memo from  the Office of Safety and Mission Assurance. A loss of crew value with  a higher denominator, such as 1 in 270, is harder to meet than with a  lower denominator, such as 1 in 150. According to the Chief of the  Office of Safety and Mission Assurance, he will assess the 1 in 150  threshold using a probabilistic safety analysis that includes the  updated debris model and operational mitigations, such as the on- orbit inspections cited above.", "Program Office. According to program officials, they will assess  whether either contractor meets a 1 in 270 loss of crew value based  on a probabilistic safety analysis using the former debris model (not  the updated model) and not including operational mitigations.", "Contracting Officer. According to the contracting officer, each  contractor\u2019s loss of crew requirement is 1 in 270 without including  operational mitigations. The contracting officer stated that SpaceX\u2019s  contract requirement uses the updated debris model in the  probabilistic safety analysis, whereas Boeing\u2019s contract requirement  uses the former debris model in the probabilistic safety analysis.", "Program\u2019s Chief Safety and Mission Assurance Officer. According  to the program\u2019s chief safety and mission assurance officer, he will  conduct a probabilistic safety analysis using the updated debris model  and will not include operational mitigations to assess whether each  contractor meets a 1 in 200 loss of crew value. This loss of crew value  stems from a program update that occurred after the initial contracts  were signed.", "These different approaches are summarized in table 3 below.", "Agency policy requires human spaceflight programs to set a safety  threshold, which NASA did for the Commercial Crew Program when it  identified the 1 in 150 loss of crew threshold in the May 2011 safety  memo. Subsequently, the program set more rigorous loss of crew values  in contract and program documents. NASA also updated the debris  model, which we previously noted makes it more difficult to meet a loss of  crew value. As a result, NASA does not have a consistent approach for  how to incorporate key inputs to the probabilistic safety analysis, including  changes to the debris model. Instead, the risk tolerance that NASA is  accepting with loss of crew varies based upon which entity is presenting  the results of its probabilistic safety analysis. For example, it is possible  that the program\u2019s assessment will determine that neither contractor will  meet the 1 in 270 contract requirement, but that the agency\u2019s assessment  will determine that the contractors meet the 1 in 150 agency certification  value because that analysis will include operational mitigations. Or the  program\u2019s assessment could determine that Boeing meets the 1 in 270  contractual loss of crew requirement, but the agency\u2019s assessment may  determine that Boeing does not meet the 1 in 150 agency certification  value because that analysis will use the updated debris model.", "Federal internal controls state that agency management should define  objectives clearly to enable the identification of risks and define risk  tolerances. Specifically, management should define risk tolerances in  specific and measurable terms, so they are clearly stated and can be  measured. In this case, because there will be multiple analyses  conducted using different inputs, NASA risks not clearly capturing or  documenting, in a coherent manner, its overall risk tolerance with respect  to loss of crew before a final decision must be made on whether to certify  either crew transportation system.", "Moreover, capturing the challenges and lessons learned from using the  loss of crew metric is critical, particularly because agency officials told us  that this is the first time this metric has been used as a safety threshold.  Also, there are different viewpoints about the utility of the metric as a  safety threshold across the agency. The program manager repeatedly  told us that loss of crew is best used as a design tool. For example,  program officials told us that both contractors incorporated additional  orbital debris shielding into their designs to mitigate the orbital debris risk  and improve their loss of crew values. In addition, the Aerospace Safety  Advisory Panel reported in 2018 that loss of crew should not be viewed  as an absolute measure of actual risk during operations. However, the  May 2011 agency safety memo states that a breach of the loss of crew  threshold would initiate a termination review of the Commercial Crew  Program, which is a more strict application of the loss of crew metric.", "Both program and safety officials told us that, after the agency  certification is complete and lessons learned are available to be compiled,  sharing those lessons learned across NASA would be a good idea given  the complexities associated with assessing the loss of crew metric. As of  April 2018, however, agency officials said they did not have a plan for  loss of crew knowledge-sharing. We have previously found that lessons  learned provide a powerful method of sharing good ideas for improving  work processes, facility or equipment design and operation, quality,  safety, and cost-effectiveness. Further, according to NASA\u2019s Knowledge  Policy on Program and Projects, which is managed through the Office of  the Chief Engineer, a principle of each center and mission directorate\u2019s  knowledge strategy is that knowledge is the cornerstone of NASA\u2019s ability  to achieve mission success. The policy acknowledges that NASA faces  continuous challenges in using what it knows effectively. These  challenges include, but are not limited to, enabling the identification and  flow of knowledge across organizational boundaries; preserving  knowledge at risk of being lost; and providing means for individuals,  teams, and the organization to learn from experiences. If NASA does not  capture lessons learned from the Commercial Crew Program on using the  loss of crew requirement to set a program\u2019s safety threshold and whether  it met the agency\u2019s intended goal, future programs will not be able to  benefit from the knowledge gained from this multibillion dollar investment."], "subsections": []}, {"section_title": "The Commercial Crew Program\u2019s Organizational Structure Impairs Independence of Safety Technical Oversight Supporting the Certification Process", "paragraphs": ["NASA\u2019s governance model prescribes a management structure that  employs checks and balances among key organizations to ensure that  decisions have the benefit of different points of view and are not made in  isolation. As part of this structure, NASA established the technical  authority process as a system of checks and balances to provide  independent oversight of programs and projects in support of safety and  mission success through the selection of specific individuals with  delegated levels of authority. The technical authority process has been  used in other parts of the government for acquisitions, including the  Department of Defense and Department of Homeland Security.", "The Commercial Crew Program is organizationally connected to three  technical authorities within NASA: the Office of the Chief Engineer  technical authority, the Office of Chief Health and Medical technical  authority, and the Office of Safety and Mission Assurance (safety)  technical authority. The safety technical authority is responsible for  ensuring from an independent standpoint that the program\u2019s products and  processes satisfy NASA\u2019s safety, reliability, and mission assurance  policies. The NASA safety technical authority has delegated authority  through the Kennedy Space Center Director to the Chief Safety and  Mission Assurance Officer for the Commercial Crew Program.", "We have previously reviewed how NASA has organized its technical  authorities for its Exploration Systems Development organization\u2014an  organization that oversees the development of the Space Launch  System, Orion crew capsule, and associated ground systems that have  the goal of extending human presence beyond low-Earth orbit. In October  2017, we found that the Exploration Systems Development organization  had established an organizational structure in which the technical  authorities for engineering and safety and mission assurance were dual  hatted simultaneously in programmatic positions. We found that having  the same individual simultaneously fill both a technical authority role and  a program role created an environment of competing interests, where the  technical authority\u2019s ability to impartially and objectively assess the  programs while at the same time acting on behalf of the Exploration  Systems Development organization in programmatic capacities may be  subject to impairments.", "We found that this was in contrast to a recommendation from the  Columbia Accident Investigation Board report\u2014the result of an in-depth  assessment of the technical and organizational causes of the 2003 Space  Shuttle Columbia accident\u2014for NASA to establish a technical authority to  serve independently of the Space Shuttle program, so that employees  would not feel hampered to bring forward safety concerns or  disagreements with programmatic decisions. The board\u2019s findings that  led to this recommendation included a broken safety culture in which it  was difficult for minority and dissenting opinions to percolate up through  the hierarchy; dual center and programmatic roles vested in one person  that had confused lines of authority, responsibility, and accountability and  made the oversight process susceptible to conflicts of interest; and  oversight personnel in positions within the program, increasing the risk  that these staffs\u2019 perspectives would be hindered by too much familiarity  with the programs they were overseeing. In October 2017, we  recommended that the division no longer dual hat two individuals who  had both programmatic and technical authority responsibilities. As of  April 2018, NASA had taken steps to separate the engineering technical  authority position from the programmatic position, and NASA\u2019s Chief of  Safety and Mission Assurance said he planned to separate the safety  position but had not yet completed that action.", "The Commercial Crew Program employs a similar structure to the  Exploration Systems Development organization in that the safety  technical authority is dual hatted simultaneously in a programmatic  position as the Commercial Crew Program\u2019s Safety and Mission  Assurance Manager. According to the program\u2019s safety technical  authority, in his programmatic role for the program, he helps set priorities  for safety issues, including how staff will be utilized to meet those  priorities. In the technical authority role, he provides independent  oversight in support of safety and mission success. In his dual-hatted  role, this official will be responsible for endorsing the program\u2019s  certification recommendations in two different capacities: as the technical  authority and as a program authority.", "As a result, this structure relies on the same individual to completely  separate two roles\u2014one to manage the Commercial Crew Program\u2019s  safety issues within programmatic cost and schedule constraints, and the  other to assess the same issues in an independent oversight role. While  the Commercial Crew Program may have an additional level of separation  between the safety technical authority and the program\u2019s involvement in  the design of commercial systems due to its shared assurance model with  the commercial providers, the Commercial Crew Program still maintains a  structure where one individual simultaneously serves in both technical  authority and programmatic roles. Figure 5 describes some of the  conflicting roles and responsibilities of this official in his two different  positions.", "During our review, officials cited several factors in support of a dual- hatted approach:", "The safety technical authority retains independence because his  technical authority reporting path and performance reviews are not  under the purview of the Commercial Crew Program chain of  command.", "Due to the Commercial Crew Program\u2019s shared assurance model with  commercial providers, the program is operating in a quality assurance  role that provides an additional level of separation between the safety  technical authority and the program\u2019s involvement in the design of  commercial systems.", "For safety decisions involving cost and schedule where the individual  who is dual hatted with both technical authority and programmatic  responsibilities may feel conflicted, he stated that he would discuss  these matters with his management to validate the logic behind his  decision.", "There are cost and knowledge efficiencies gained from one individual  serving in both programmatic and safety technical authority  capacities.", "NASA\u2019s Chief of Safety and Mission Assurance stated that he has great  confidence in the individual currently serving in the dual hatted role for the  Commercial Crew Program, but acknowledged there is inherent conflict  even with the program\u2019s shared assurance model. In December 2017, he  stated that, based on our previous work and current discussions, he  intends to decouple the programmatic and technical authority  responsibilities for the Commercial Crew Program but had not done so as  of April 2018. Federal internal control standards state that an agency  should design control activities to achieve objectives and respond to risks,  which includes segregation of key duties and responsibilities to reduce  the risk of error, misuse, or fraud. By overlapping technical authority and  programmatic responsibilities, NASA will continue to run the risk of  creating an environment of competing interests for the Commercial Crew  Program\u2019s safety technical authority."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["NASA\u2019s Commercial Crew Program is a multibillion dollar effort to  facilitate the commercial development of a crew transportation system  that can end the United States\u2019 reliance on Russia to maintain an  uninterrupted presence on the ISS. Boeing and SpaceX continue to make  progress developing a capability to fly to the ISS, but both have continued  to experience delays. Program analysis indicates risks of further delays in  each contractor\u2019s current schedule, but NASA has not provided that  information to Congress in its routine briefings. Without this information,  Congress does not know the full extent of potential delays to inform  decision making. Additional delays could also disrupt U.S. access to the  ISS. While NASA is working on potential solutions, there is no  contingency plan in place to address this potential gap. Without a viable  contingency plan, NASA puts at risk achievement of the U.S. goal and  objective for the ISS.", "NASA must balance safety with acceptable risk for human spaceflight. As  part of the certification process for each contractor\u2019s spacecraft, NASA  has developed one key safety metric, loss of crew. However, the  complicated nature of this metric is further muddled by the inconsistent  approaches being used across NASA about what inputs to be considered.  As a result, there is no clear articulation of what level of risk NASA will  accept with respect to this program. In addition, NASA does not have  plans to capture lessons learned from how the Commercial Crew  Program has used this metric to assess safety and is missing an  opportunity to capture this knowledge for future human spaceflight  programs.", "Finally, a space program\u2019s management and oversight approach is an  integral part of ensuring that human spaceflight is as safe and successful  as possible. Independence of the program management and oversight  functions is key to achieving the balance between safety and success.  The Commercial Crew Program\u2019s approach, however, burdens the safety  technical authority with both programmatic and independent technical  authority responsibilities. As a result, NASA has limited assurance that  independence can be maintained as part of its institutional process to  ensure safety and success."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to NASA:  The NASA Associate Administrator for Human Exploration and  Operations should direct the Commercial Crew Program to include the  results of its schedule risk analysis in its mandatory quarterly reports to  Congress. (Recommendation 1)", "The NASA Administrator should develop and maintain a contingency plan  for ensuring a presence on the ISS until a Commercial Crew Program  contractor is certified. (Recommendation 2)", "The NASA Administrator should direct the Chief of Safety and Mission  Assurance, the NASA Associate Administrator for Human Exploration and  Operations, the Commercial Crew Program Manager, and the  Commercial Crew Program Contracting Officer to collectively determine  and document before the agency certification review how the agency will  determine its risk tolerance level with respect to loss of crew.  (Recommendation 3)", "After completing the agency certification review, NASA\u2019s Chief Engineer  and Chief of Safety and Mission Assurance, with support from the NASA  Associate Administrator for Human Exploration and Operations and the  Commercial Crew Program Manager, should document lessons learned  related to loss of crew as a safety threshold for future crewed spaceflight  missions, given the complexity of the metric. (Recommendation 4)", "The NASA Chief of Safety and Mission Assurance should restructure the  technical authority within the Commercial Crew Program to ensure that  the technical authority for the Office of Safety and Mission Assurance is  no longer dual hatted with programmatic and independent technical  authority responsibilities. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to NASA for review and comment.  NASA provided written comments that are reprinted in appendix II.", "In its response, NASA concurred with three of our recommendations, did  not concur with one, and partially concurred with another.", "NASA concurred with our recommendation to develop and  maintain a contingency plan to ensure a U.S. presence on the ISS  and expects to take action to close this recommendation by the  end of December 2018.", "NASA concurred with our recommendation to document lessons  learned related to the loss of crew requirement and expects to  take action to close this recommendation by the end of May 2019.", "NASA concurred with our recommendation to restructure the  safety technical authority so that it is no longer dual hatted with  programmatic and independent technical authority responsibilities.  NASA expects to take action to close this recommendation by the  end of August 2018.", "NASA did not concur with our recommendation that the Commercial Crew  Program should include the results of its schedule risk analysis in its  quarterly reports to Congress. NASA stated that it uses the contractors\u2019  schedules as a baseline to provide qualitative statements in the NASA  summary that accompanies each contractor\u2019s quarterly reports to  Congress. NASA believes that this approach is appropriate and is in  accordance with the explanatory statement accompanying the  Consolidated and Further Continuing Appropriations Act, 2015. NASA  also stated that it will be working to ensure that the contractors\u2019 schedules  and the program\u2019s internal assessments sync up as the program gets  closer to launch. As a result, NASA explained that there will not be a  requirement for a detailed NASA assessment, because the contractors\u2019  schedule will either match NASA\u2019s analysis or NASA will discuss its  position as it has done in previous reports to Congress.", "We continue to believe the recommendation is valid because the  program\u2019s schedule risk analysis would provide Congress with valuable  insight into potential delays, which are likely. Both contractors have  repeatedly stated that their schedules are aggressive and that the dates  are ambitious. As a result, we found that the contractors frequently delay  dates for key events. For example, Boeing has delayed its certification  milestone by 17 months and SpaceX by 22 months since the original  schedules were established. The program\u2019s recent schedule risk analysis  indicates that more delays to certification are likely, but that information is  not presented to Congress in NASA\u2019s quarterly reports. Without this  information, Congress does not know the full extent of potential delays to  inform decision making.", "NASA partially concurred with our recommendation that the Chief of  Safety and Mission Assurance, the NASA Associate Administrator for  Human Exploration and Operations, the Commercial Crew Program  Manager, and the Commercial Crew Program Contracting Officer should  collectively determine and document how the agency will determine its  risk tolerance level with respect to loss of crew before the agency  certification review. In its response, NASA stated that it documented the  agency\u2019s risk tolerance level with respect to loss of crew for the program  in its May 2011 safety memo. Further, NASA stated that it documented  the requirement to limit risks to the loss of crew in a certification  requirements document. NASA stated that ultimately the Commercial  Crew Program is accountable for ensuring that the contractors\u2019 systems  meet the loss of crew value in this certification requirements document,  which is a loss of crew value of 1 in 270. If a contractor\u2019s system cannot  meet that loss of crew value, or any other requirement, the program will  request a waiver as part of the human rating certification process to  ensure transparency.", "NASA acknowledged in its response that the existence of multiple  documents defining residual risk requirements and an agency threshold  for loss of crew can be confusing. NASA\u2019s response, however, does not  address our finding that it does not have a consistent approach for how to  incorporate key inputs, including which debris model should be used or  whether to include operational mitigations. NASA stated that it had taken  action to address this recommendation; however, NASA did not outline  any steps it took to resolve the concern that the risk tolerance for the loss  of crew requirement depends on which entity is presenting the results of  its analysis. We continue to believe that, before the agency certification  review, the key parties must collectively determine how the agency will  determine its risk tolerance with respect to loss of crew. We believe this  approach will reduce confusion and increase transparency.", "We are sending copies of this report to NASA Administrator and  interested congressional committees. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202)512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to assess (1) the extent to which the  contractors have made progress towards meeting the National  Aeronautics and Space Administration\u2019s (NASA) certification  requirements and NASA\u2019s plans to help ensure continued access to the  International Space Station (ISS); and (2) how NASA\u2019s certification  process addresses safety of the contractors\u2019 crew transportation systems.", "To assess the contractors\u2019 progress towards certification, we obtained  and reviewed program and contractor documents, including monthly and  quarterly updates from April 2017 through May 2018. We interviewed  program and contractor officials to discuss the contractors\u2019 recent  progress, including upcoming events and any expected delays, and to  understand technical risks, potential consequences, and planned  mitigation activities. To identify total delays to date, we compared original  contract schedules to Boeing and SpaceX\u2019s calendar year 2018 first  quarter proposed schedules, which are the most recent. Based on our  review of program and contractor documents, we defined the contractors\u2019  key events as: the uncrewed and crewed flight tests, the design  certification reviews for each of those flights, and the certification  milestone. We selected the two flight tests for each contractor as key  events because they are intended to test key system capabilities,  including the ability to launch, dock with the ISS, and return safely to  Earth. We selected the design certification reviews because they verify  the contractors\u2019 crew transportation systems\u2019 capability to safely  approach, dock, mate, and depart from the ISS, among other  requirements. We selected the certification milestone because it  determines whether the crew transportation system meets the  Commercial Crew Program\u2019s requirements.", "To determine the extent to which contractors have delayed these key  events over time, we analyzed the contractors\u2019 schedule data from the 13  quarterly progress reports to date, from first quarter 2015 through first  quarter calendar year 2018. We also obtained the results of the program\u2019s  April 2018 schedule risk analysis. We presented the schedule analysis  range from the end of the month of the earliest possible completion date  to the end of the month of the latest possible completion date. We  reviewed the program\u2019s Congressional requirements to report on cost,  schedule, and technical status. Finally, to assess the potential effects of  any certification delays on NASA\u2019s access to ISS, we reviewed NASA\u2019s  contracts with Boeing and the Russian Federal Space Agency for  transportation on the Soyuz vehicle. We interviewed officials from the ISS  program and NASA\u2019s Human Exploration and Operations Mission  Directorate to determine if the agency had developed contingency plans  to mitigate the effects of any certification delays on its access to the ISS.", "To assess how NASA\u2019s certification process addresses safety of the  contractors\u2019 crew transportation systems, we reviewed agency safety  policies, program plans, and contract documents to identify what safety  assessments were required of the program, which safety factors would be  considered in certification reviews, and when certification approval would  be granted. We also interviewed program officials and the contractors  about their safety policies and procedures as well as about the  certification process. We identified the loss of crew requirements for the  program and the contractors, and interviewed program and agency  officials to determine how loss of crew would be assessed and  considered throughout the certification process. To gain a broader  understanding of the relative importance of loss of crew, we reviewed  NASA safety policies, prior GAO reports, and annual reports from the  Aerospace Safety Advisory Panel. To determine how the Orbital Debris  Engineering Model (ORDEM) was updated and to assess differences  between the former and updated models, we reviewed NASA  documentation about the ORDEM 2000 and ORDEM 3.0 models and  obtained information about the models from NASA\u2019s Orbital Debris  Program Office.", "To assess the program\u2019s progress in closing requirements, including  those requirements specifically related to safety, we reviewed program  data for each contractor on contract requirements and closure status. We  limited this analysis to requirements included in the CCT-REQ-1130 ISS  Crew Transportation and Services Requirements Document because  these requirements are verified by the Commercial Crew Program,  whereas requirements contained within SSP 50808 ISS to Commercial  Orbital Transportation Services Interface Requirements Document are  managed by the ISS Transportation and Integration Office. We classified  requirements as \u201csafety-specific\u201d when the program\u2019s Office of Safety and  Mission Assurance was listed as a verification closure notice signatory  (i.e., approver). We then analyzed the program\u2019s data to determine how  many verification closure notices had been approved for all requirements  and for the subset of safety-specific requirements. We reviewed program  and agency documentation, such as organizational charts, program  plans, and safety policies as well as interviewed program and agency  officials, to determine the role of the safety and mission assurance  technical authority in the program. We also reviewed the 2003 Columbia  Accident Investigation Board\u2019s Report\u2019s findings and recommendations  related to culture and organizational management of human spaceflight  programs. We reviewed annual briefings and reports and met with  representatives from two organizations that provide NASA with  independent assessments of the program, the program\u2019s standing review  board and the Aerospace Safety Advisory Panel, to gain their  perspectives on the contractor\u2019s progress and how NASA addresses  safety in its certification process. We also met with representatives from  the National Transportation Safety Board and three experts with  background on safety in human spaceflight in order to increase our  contextual understanding of the role of safety in human spaceflight  missions.", "We conducted this performance audit from April 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Cristina T. Chaplain, (202) 512-4841 or chaplainc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Molly Traci, Assistant Director;  Kazue Chinen; Lorraine Ettaro; Lisa Fisher; Laura Greifner; Kurt Gurka;  Miranda Riemer; Juli Steinhouse; Roxanna T. Sun; Hai Tran; Kristin Van  Wychen; and Alyssa Weir made significant contributions to this report."], "subsections": []}]}], "fastfact": ["NASA contracted with two companies, Boeing and SpaceX, to develop vehicles to transport astronauts to the International Space Station. Neither is expected to be ready until 2019.", "Before any missions happen, NASA will have to certify that both contractors' vehicles are safe for human spaceflight. One way that NASA will assess safety is the loss of crew metric, which captures the probability of a crew member's death or disability. However, NASA doesn't have a consistent approach for calculating this metric, so results can vary based on who within NASA is conducting the analysis.", "We recommended that NASA clarify how it will assess loss of crew."]}
{"id": "GAO-18-545", "url": "https://www.gao.gov/products/GAO-18-545", "title": "NIH Research: Action Needed to Ensure Workforce Diversity Strategic Goals Are Achieved", "published_date": "2018-08-10T00:00:00", "released_date": "2018-08-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NIH's success depends on its ability to attract, retain, develop, and otherwise support biomedical investigators\u2014including those employed in its intramural research program as well as those working in its extramural program at universities, academic health centers, and other research institutions. For decades, the agency has faced challenges in supporting early career investigators and those from underrepresented groups, including ethnic and racial minorities and women. The 21st Century Cures Act included provisions that NIH coordinate policies and programs to promote early research independence and enhance the diversity of the scientific workforce.", "The act also contained a provision that GAO examine NIH's efforts. GAO reviewed the actions NIH has taken to support (1) investigators beginning their biomedical careers; and (2) investigators from underrepresented groups and women. GAO analyzed NIH data from fiscal years 2013 through 2017 on grant funding for investigators by career phase and demographic status. GAO also reviewed relevant laws and NIH policies, programs, and initiatives, and interviewed NIH officials and stakeholders from the scientific research community."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Institutes of Health (NIH), within the Department of Health and Human Services (HHS), plays a prominent role in the nation's biomedical research. While it employs investigators in its intramural research program, over 80 percent of its budget supports its extramural program, primarily through grant funding to investigators at other research institutions. Given this, NIH has a vested interest in supporting a robust national biomedical workforce, but the agency has acknowledged that the environment is highly competitive and many investigators find that it takes years to obtain the type and amount of funding that typically spurs research independence. GAO's analysis found that extramural investigators who had received at least one large NIH research grant during fiscal years 2013 through 2017 were more likely to receive such grants in subsequent application cycles than investigators who had not yet received such grants. In response to the 21st Century Cures Act, enacted in December 2016, NIH introduced an initiative to prioritize these grants for (1) early stage investigators, who are beginning their careers and have never received a large research grant, and (2) intermediate stage investigators, who are within 10 years of receiving their first large grant as an early stage investigator. However, it is too early to assess this new initiative, which was introduced in August 2017. NIH is currently considering revising the program to include investigators whose careers are more advanced.", "NIH implemented recommendations made by internal advisory bodies to support investigators from racial and ethnic groups considered by NIH to be underrepresented in biomedical research. GAO's analysis shows disparities for underrepresented racial and ethnic groups, and for female investigators, from 2013 through 2017. For example, in 2017, about 17 percent of investigators from underrepresented racial groups\u2014African Americans, American Indians/Alaska Natives, and Native Hawaiian/Pacific Islanders combined\u2014who applied for large grants received them. In contrast, about 24 percent of Hispanic or Latino applicants, an underrepresented ethnic group, received such grants. Asians and whites\u2014well represented groups\u2014were successful in receiving large grants about 24 and 27 percent of the time, respectively. Though women represent about half of all doctorates in biological science, GAO found that women investigators employed by NIH in its intramural program comprised about one-quarter of tenured investigators. NIH has taken positive steps such as establishing the position of Chief Officer of Scientific Workforce Diversity, who in turn created a strategic workforce diversity plan, which applies to both extramural and intramural investigators. The plan includes five broad goals for expanding and supporting these investigators. However, NIH has not developed quantitative metrics, evaluation details, or specific time frames by which it could measure the agency's progress against these goals."]}, {"section_title": "What GAO Recommends", "paragraphs": ["The Director of NIH should develop quantitative metrics, evaluation details, and time frames to assess NIH's efforts to diversify its scientific workforce against its diversity strategic plan goals, and take action as needed. HHS agreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The National Institutes of Health (NIH), within the Department of Health  and Human Services (HHS), is the nation\u2019s leader in supporting  biomedical research. Its mission is to advance scientific knowledge and  innovation that enhances health, lengthens life, and reduces illness and  disability. The agency plays a prominent role in researching life processes  and many diseases and conditions, including those that are among the  leading causes of death both in the United States and globally. In fiscal  year 2018, NIH invested over $37 billion in medical research. NIH relies,  in part, on biomedical scientists, known as \u201cinvestigators,\u201d who are  employed by the agency in its intramural research program. However,  most of the agency\u2019s budget\u2014over 80 percent\u2014is devoted to funding  research that supports investigators and research personnel working at  universities, medical schools, and other research institutions in its  extramural research program. Given NIH\u2019s prominent role in biomedical  research, its success depends on its ability to attract, retain, develop, and  otherwise support a robust national biomedical workforce, at the agency  as well as in the overall biomedical field. Through its research grants NIH  provides a significant source of financial support for investigators participating in its extramural research program. In addition, the agency  provides certain incentives, such as its Loan Repayment Program (LRP),  which, according to NIH, offers educational loan repayment benefits to  qualifying intramural or extramural investigators conducting research in  NIH mission-critical research areas.", "However, over the past several decades, NIH and its stakeholder  community have been concerned about the long-term growth and stability  of the nation\u2019s biomedical research workforce. For example, some have  reported on the challenges extramural investigators face when beginning  careers in this field. NIH has acknowledged that the environment is highly  competitive and many investigators may find that it takes years to obtain  the type and amount of funding that typically spurs research  independence. A review of NIH\u2019s research grants going back to 1982  has shown a steady drop in the number of investigators younger than age  46, despite a period when funding for NIH almost tripled. Even with long- standing congressional support for early research independence and NIH  funding, investigators at the early stages of their careers find it  increasingly difficult to obtain their first large NIH research grant, and  retain that support in subsequent years, according to NIH.", "Reports have shown that increasing the number of investigators from  diverse backgrounds can help maintain a stable U.S. biomedical research  workforce and contributes greatly to scientific innovation; however, some  have reported that achieving a diverse scientific workforce has been a  challenge. Though women have seen gains in some scientific fields, they  continue to lag behind men in academic and professional advancement.  Further, the representation of some racial and ethnic minority groups in  the biomedical sciences remains at low levels despite public and private  initiatives to increase the diversity of the nation\u2019s biomedical research  workforce. Certain racial groups have been found by research institutions  and government agencies to be underrepresented in the biomedical  research workforce. For example, the number of American Indians and  Alaska Natives, African Americans or blacks, and Native Hawaiian and  Pacific Islanders working in the biomedical sciences was reported by the  National Academies of Sciences, Engineering, and Medicine to be  disproportionately low relative to their representation in the general  population. Hispanics and Latinos were also reported by the National  Academies to be an underrepresented ethnic group in biomedical  research. NIH considers the following racial groups to be  underrepresented in biomedical research: Blacks or African Americans,  American Indians or Alaska Natives, and Native Hawaiians and other  Pacific Islanders. NIH considers Hispanics and Latinos to be an ethnic  group underrepresented in biomedical research. For this report, we use  the same definitions.", "The 21st Century Cures Act (Cures Act), which was enacted in December  2016, included provisions that NIH coordinate efforts to promote and  provide opportunities for investigators beginning their biomedical research  careers through the Next Generation Researchers Initiative (NGRI). NIH  launched this initiative and announced details regarding its  implementation in August 2017. The Cures Act also included new  authorities for NIH to expand its LRP\u2014a recruitment and retention tool for  both intramural and extramural investigators\u2014to help the agency address  gaps in certain research areas and also in the nation\u2019s biomedical  research workforce. The act also provides the NIH Director with the  authority to raise the maximum annual loan repayment amount.  Additionally, the law included a provision that we examine NIH\u2019s efforts to  support\u2014that is attract, retain, and develop\u2014investigators beginning their  biomedical research careers as well as those from underrepresented  groups, such as women, racial and ethnic minorities.", "This report examines the actions NIH has taken to support investigators  (1) beginning their biomedical research careers; and  (2) from underrepresented groups.", "For both of our audit objectives, we reviewed relevant laws, policies,  research studies, and reports about the agency\u2019s efforts and initiatives to  support investigators in the beginning of their biomedical research  careers, investigators from underrepresented groups, and biomedical  research workforce diversity. Given the lack of data exclusive to the newly  implemented Next Generation Researchers Policy\u2014which was called for  in the Cures Act and had been in place less than a year at the time we did  our work\u2014we reviewed data on NIH research grants and the  demographics of the biomedical research community from fiscal years  2013 through 2017. This allowed us to provide information on NIH\u2019s  funding of certain grants both before and after the enactment of the Cures  Act in 2016, and to describe the agency\u2019s recent efforts to attract, retain,  and develop early career investigators and biomedical research workforce  diversity. We examined NIH data in the following ways:", "To identify the support provided to extramural investigators and  research funding trends by gender and racial and ethnic group, we  examined data on NIH applications, applicants, awardees, and  awards for research project grants, career development grants, and  LRP payments.", "To identify trends in the representation of women and racial and  ethnic groups, we examined data on the NIH intramural and  extramural workforce.", "We assessed the reliability of these data by reviewing related  documentation, performing data reliability checks (such as examining the  data for missing values and checking values against other  documentation), and interviewing relevant agency officials with  knowledge of NIH\u2019s biomedical grants programs. On the basis of these  steps, we determined that the data were sufficiently reliable for the  purposes of our reporting objectives.", "Finally, we interviewed relevant NIH officials about the agency\u2019s efforts to  attract, retain, and develop investigators beginning their research careers  and enhance diversity in the biomedical research workforce. We also  interviewed stakeholders from a variety of entities within the scientific  research community to obtain their perspectives on NIH\u2019s efforts. Their  comments are not representative of the views of the scientific research  community and our reporting of stakeholders\u2019 comments should not be  interpreted as an endorsement of their views. We considered NIH\u2019s  actions to address these workforce challenges in the context of federal  internal control standards for monitoring and evaluation, and best  practices for strategic workforce planning and diversity management.", "We conducted this performance audit from October 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "NIH Institutes and Centers and Biomedical Research", "paragraphs": ["NIH, which had total budgetary resources of $32 billion in fiscal year  2016, is comprised of the Office of the Director and 27 institutes and  centers that focus on specific diseases, particular organs, or stages in life,  such as childhood or old age. As the central office at NIH, the Office of  the Director establishes agency policy and is responsible for overseeing  the institutes and centers to ensure that they operate in accordance with  NIH\u2019s policies. The institutes and centers accomplish their missions  primarily through extramural research programs. Most extramural  research funding is provided for investigator-initiated research projects for  which researchers, through their institutions, submit applications in  response to NIH announcements. In addition to these announcements,  the institutes and centers may issue more narrowly scoped solicitations,  through request for proposals, for research targeting specific areas.", "All extramural research project applications are to follow NIH\u2019s process of  peer review, which includes two sequential levels of review. The first level  involves non-governmental experts assessing the scientific merit of the  proposed applications and assigning them a priority score. The second  level involves advisory councils at the institute or center associated with  the grant application, that, in addition to scientific merit, consider the  institutes\u2019 and centers\u2019 missions and strategic plan goals and public  health needs. Advisory councils review grant applications and their  scores, and, based on this review, make recommendations about which  grant applications should be awarded funding. The director of each  institute or center makes the final extramural funding decisions.", "NIH investigators also conduct research through NIH\u2019s intramural  research program. These efforts accounted for approximately 10 percent  of NIH\u2019s total budgetary resources of $32 billion in fiscal year 2016. NIH  employs about 3,600 investigators working in its own laboratories and  clinics. In addition, this research relies on another 6,000 investigators at  various stages of research training who come to NIH for a few years to  work as non-employee trainees, including about 2,500 who are  postdoctoral fellows. According to NIH officials, intramural investigators  are generally not allowed to apply for extramural or private grants,  because their salaries are funded with the agency\u2019s appropriations."], "subsections": []}, {"section_title": "Career Path of Independent Extramural Investigators", "paragraphs": ["The career path to become an independent extramural investigator  generally consists of students completing graduate level education (i.e.,  research doctorate or clinical doctorate), postdoctoral research, or  medical residency. When postdoctoral research is completed, the  researcher will generally seek opportunities to become an investigator at  a medical research center or as a faculty member at a university and  begin the process of obtaining academic tenure\u2014that is, a full-time,  permanent faculty position. Once the postdoctoral researcher becomes a  faculty member, he or she can generally begin applying for large NIH  research project grants. Some researchers may become affiliated with  other types of research institutions and also apply for grants.", "Investigators in medical research centers and university faculty are  generally dependent on external funding to cover the cost of their  research. Although biomedical investigators may be funded by other  federal agencies\u2014such as the National Science Foundation\u2014and  nonfederal sources, studies have shown that NIH is the most likely source  of government funding for biomedical research."], "subsections": []}, {"section_title": "NIH Grants", "paragraphs": ["NIH\u2019s research support for extramural investigators includes research  project grants, fellowships, training grants, and career development  grants. Some of the main funding mechanisms provided to institutions by  NIH that fund investigators beginning their research careers include the  following extramural grants:", "Large grants. NIH awards large renewable research project grants:  R01 and R01-equivalent (R01e) grants. According to NIH, in fiscal  year 2016, the average size of large grants was typically in excess of  $460,000 total. R01and R01e grants are NIH\u2019s most common type of  grant, according to NIH. They are generally the largest type of grant  available to investigators beginning their careers and, for purposes of  this report, are therefore referred to as \u201clarge\u201d grants. Large grants  provide 3 to 5 years of financial support for discrete, specified  research projects. According to NIH, it is generally expected that  within that period a project can be completed, results published, and  sufficient time will remain for the investigator to prepare a subsequent  application for a renewal or new award before funding ends.", "Smaller grants. While some non-R01 equivalent (non-R01e) grants  may match or exceed the amount of some R01e grants, they are  generally of a lesser amount and, for purposes of this report, are  therefore referred to as \u201csmaller\u201d grants. According to NIH, in fiscal  year 2016, smaller grants were, on average, amounts that ranged  from about $61,000 to about $1.1 million total. These grants provide  limited funding for a relatively short period of time to support a variety  of exploratory or developmental projects, including pilot or feasibility  studies, collection of preliminary data, and secondary analysis of  existing data.", "Career development grants. Also known as K-series grants, these  grants are intended to provide mentored research opportunities and  career enhancement experiences to support investigators or  postdoctoral fellows at various stages of their research careers.  NIH\u2019s data show that in fiscal year 2016, career development grants  were, on average, about $178,000 total."], "subsections": []}, {"section_title": "Extramural Investigator Career Status", "paragraphs": ["NIH generally classifies the career status of an extramural investigator  based on whether the investigator has received a large NIH research  grant. NIH considers early career investigators to be those who meet the  definition of early stage and intermediate stage investigators. NIH also  recognizes established and \u201cother\u201d investigators among those who apply  for research grants. Table 1 lists NIH extramural investigators\u2019 career  stages and descriptions of these stages.", "According to NIH, it generally takes an early stage investigator up to 2  years to develop a successful application for a large grant and receive  funding. Typically, investigators devote between 6 months to 1 year to  write their first large NIH grant application. Most of these grants, with a  funding period of over 3 years, require significant preliminary data to  support the proposed hypothesis contained in the application. In addition,  the median average time elapsed for applicants to learn whether they  have been awarded a grant is 270 days, or 9 months. According to NIH,  because most investigators beginning their careers do not receive large  NIH research grants on their first attempt, these investigators might apply  for smaller grants. They may also apply for career development grants  that are intended to provide mentored research or training opportunities."], "subsections": []}, {"section_title": "Concerns Regarding the Stability and Diversity of the Biomedical Research Workforce", "paragraphs": ["According to research by the National Academies of Sciences,  Engineering, and Medicine, and others, the biomedical research  workforce is growing older at a rate that is disproportionate to the general  American labor force. Some stakeholders in the scientific community  have voiced concerns that large NIH research grants that can launch  early career investigators are often being awarded to established  investigators rather than early stage and intermediate stage investigators.  For example, a recent National Academies report pointed out that  between 1998 and 2003, the NIH budget grew from $13 billion to $27  billion, but the percentage of grants awarded to investigators who were in  the early stages of their careers steadily declined. Many in the field have  reported on the need to support investigators who are researching varied  biomedical issues in order to maximize the number of new discoveries.  Further, stakeholders within the scientific research community have  reported on the uncertain path that investigators may encounter early in  their careers and the prospect that they will ultimately pursue other career  options.", "Several reports have found that certain racial and ethnic groups are  underrepresented in the biomedical research workforce and in science.  These reports have also provided data on gender workforce disparities.  For example, a 2011 publication by the National Academies of Sciences,  Engineering, and Medicine showed that, in 2006, underrepresented  minorities made up about 29 percent of the U.S. population, but, in 2007,  were awarded about 5 percent of science and engineering doctorates.  Other studies have shown significant research funding disparities for  investigators from underrepresented groups that apply to NIH for large  research grants, such as R01 grants. In 2011, NIH funded a study that  examined the association between grant recipients and the applicants\u2019  race and ethnicity. The study found that R01 applicants that self-identified  as African American were 13 percentage points less likely than white  applicants to receive these grants. After controlling for other variables\u2014 including educational background, training, previous research grants, and  publication record\u2014African American applicants were 10 percentage  points less likely to be awarded such a grant than a white applicant.  Further, while women comprise about half of the postdoctoral graduates  for the biological sciences in the United States, studies have shown a  disparity in the number of female investigators in senior science research  positions at universities. This disparity may result in a smaller number of  female investigators among NIH grant applicants and may further  contribute to their underrepresentation in certain facets of science.  However, we previously reported that once female investigators apply for  NIH grants, their likelihood of receiving NIH grants is the same as their  male counterparts."], "subsections": []}]}, {"section_title": "NIH Has Promoted Efforts to Support Early and Intermediate Stage Investigators, but Those Who Have Not Yet Received a Large NIH Research Grant Remain Less Competitive", "paragraphs": [], "subsections": [{"section_title": "NIH Has Promoted Programs and Policies to Support Early and Intermediate Stage Extramural Investigators, but It Is Too Early to Assess Its Most Recent Initiative", "paragraphs": ["Over the last 10 years, NIH has introduced programs and policies to  support extramural investigators competing for their first large NIH  research grant that leads to research independence. NIH developed  certain programs to fund extramural researchers with the goal of  stabilizing the biomedical research workforce. These targeted programs  were intended to promote support for extramural investigators that had  not yet received a large NIH research grant. The various programs  include both large and smaller research grants, career development  grants, and student loan repayments. Of particular note are the NIH  Director\u2019s New Innovator Award, which is intended to support  investigators beginning their research careers with reviewer-determined  highly novel research; and the Director\u2019s Early Independence Award,  which is intended to support reviewer-determined exceptional  investigators who wish to pursue independent research directly, forgoing  the traditional postdoctoral training period. In addition, the Pathway to  Independence Award provides investigators beginning their research  careers with a mentored research experience, which may lead to  independent research positions.", "Some institutes and centers have established their own programs to  support investigators beginning their research careers. For example, a  subset of the National Institute of General Medical Sciences\u2019 \u201cMaximizing  Investigators\u2019 Research Award program\u201d targets funding for laboratories  led by an early stage investigator. In addition, the National Institute of  Arthritis and Musculoskeletal and Skin Diseases\u2019 \u201cSupplements to  Advance Research from Projects to Programs,\u201d supports intermediate  stage investigators by providing supplemental funding to existing  research projects to encourage broader innovation and exploration of  high-risk ideas.", "In addition, NIH\u2019s LRP is designed to help recruit and retain highly  qualified individuals into biomedical research careers. This program  provides student loan repayments in return for a commitment to engage  in NIH mission-relevant and certain statutorily-defined approved  research. We examined the funding rates of early stage and  intermediate stage extramural and intramural investigators who applied  for both initial and renewal LRP payments.", "LRP payments to extramural investigators: The LRP funding  rate (awardees/applicants) for extramural investigators applying  for total (both initial and renewal) payments between fiscal years  2013 through 2017 was about 50 percent. During this period,  8,186 extramural investigators applied for initial LRP payments  and 3,206 received them; 5,131 extramural investigators applied  for renewal payments and 3,426 received them. Therefore, the  funding rates were 39 percent for initial applicants and 67 percent  for renewal applicants. Early stage and intermediate stage  investigators had similar funding rates in receiving LRP payments  during the 5-year period, though there was some variation each  year. Early stage and intermediate stage investigators seeking  initial LRP payments had funding rates of about 40 percent and 35  percent, respectively. Both of these categories of investigators  seeking renewal LRP payments had a funding rate of 67 percent.", "LRP payments to intramural investigators: The LRP funding  rate (awardees/applicants) for intramural investigators applying for total (both initial and renewal) LRP payments from fiscal years  2013 through 2017 was about 87 percent; 397 intramural  investigators applied for both initial and renewal LRP payments,  and NIH funded 345 of the applicants. The funding rate for  applicants seeking initial LRP payments during this 5-year period  was about 83 percent, whereas the funding rate for those applying  to renewal LRP payments was 90 percent.", "NIH also implemented policies to improve opportunities for early and  intermediate stage extramural investigators. For example, to address the  concerns about established investigators receiving a disproportionate  share of research funds, NIH established its Early Stage Investigator  Priority Policy in 2008. The policy specified that early stage investigator  status would be considered a factor when applications were being  selected for award. Studies have shown that under the Early Stage  Investigator Priority Policy, grants being awarded to early stage  investigators stopped declining and remained flat for several years. They  also showed that the field of biomedical research continued to be very  competitive for early stage investigators.", "However, some have expressed concern that these accomplishments are  not sufficient. For example, according to a recent report by the National  Academies of Sciences, Engineering, and Medicine, a variety of steps  have been taken over the years to address the challenges facing early  and intermediate stage investigators, but these efforts have not resolved  the underlying problems that make it difficult for them to establish their  careers.", "More recently, the Cures Act required that NIH implement the NGRI,  which the agency established in August 2017. NIH\u2019s Office of the  Director, which oversees the initiative and its implementation, directed the  NIH institutes and centers to reprioritize large NIH research grant support  for early stage and intermediate stage investigators. The policy\u2019s stated  goal for fiscal year 2017 was to increase the number of large NIH  research grants provided to both early stage investigators and  intermediate stage investigators by 200 grants each compared to the  number that were awarded in fiscal year 2016. These 400 grants would  redirect approximately $210 million from NIH\u2019s base budget to support  additional early career investigators in the first year of NGRI\u2019s  implementation. However, with only one month to implement the policy,  NIH did not meet this goal. From fiscal year 2016 to fiscal year 2017, the  number of large NIH research grants awarded increased by 57 for early  stage investigators and decreased by 2 for intermediate stage  investigators. Similarly, the goal to increase funding for the additional 400  grants was not met; funding increased by about $107 million during this  period. Given that this initiative is in the early stages and its goals were  set late in fiscal year 2017, it is too early to fully assess the impact of this  effort.", "According to NIH officials, the agency is in the process of reevaluating  which investigators should be the focus of the NGRI initiative and may  revise the program to include investigators whose careers are more  advanced. NIH officials stated that the NGRI policy\u2019s intention to direct  more research funding to early stage investigators will remain in place.  However, NIH\u2019s NGRI Working Group no longer designates intermediate  stage investigators\u2014or what it calls \u201cearly established investigators\u201d\u2014as  a distinct group. NIH\u2019s current definition\u2014that of being within 10 years of  receiving a first large NIH research grant as an early stage investigator\u2014 includes investigators who could have completed their graduate level  education (i.e., research doctorate or clinical doctorate), postdoctoral  research, or medical residency between 15 and 20 years ago. According  to NIH officials, NIH\u2019s working group is considering broadening this  definition even further. It is concerned that intermediate stage  investigators, facing increasing pressure to secure additional sources of  research funding to prevent the closure of their laboratories if their first  large NIH research grant is not renewed, could lose all NIH support and  become likely to leave the biomedical research workforce. Therefore, the  working group is considering a different approach for all established  investigators, with a focus on all meritorious investigators (regardless of  career stage) who are doing high quality research, yet are still at risk for  losing all NIH funding. Specifically, NIH officials said the working group  plans to reevaluate ways that it can provide additional, prioritized support  to these investigators in order to further their career trajectories. The  working group may recommend to NIH that the NGRI be expanded to  also target support for certain investigators whose careers are in more  advanced stages, rather than just those in the early stages of their  careers.", "In addition, NIH has not yet implemented the expansion of its LRP as  directed by the Cures Act. The Cures Act amended the LRP by  increasing the eligible annual loan repayment amount from a maximum of  $35,000 to a maximum of $50,000. The act also gave the NIH Director  the discretion to amend the research categories that are eligible for  intramural or extramural loan repayment based on emerging scientific  priorities or workforce needs. The agency has established a working  group to provide recommendations to the NIH Director regarding any  suggested structural changes and associated timelines for  implementation. NIH officials told us that they are awaiting  recommendations from this working group on how to use the agency\u2019s  new authorities. They said that they expect to implement program  changes to the LRP, as permitted by the Cures Act, by fiscal year 2020."], "subsections": []}, {"section_title": "Investigators Who Had Received at Least One Large NIH Grant Had Higher Funding Rates for All Grant Types Compared to Those Who Had Not", "paragraphs": ["Our analysis shows that intermediate stage investigators are more  successful at competing for grants than early stage investigators. Our  examination of the trends of NIH grant data showed that the applicant  funding rates (awardees/applicants) for investigators who had previously  received an initial large NIH research grant was greater than the applicant  funding rates for investigators who had never received such a grant. We  analyzed 5 years of grant data to determine an overall perspective of  funding rates from fiscal years 2013 through 2017. We found that  intermediate stage and established investigators\u2014groups comprised of  investigators who had already received their first large grant award\u2014had  greater applicant funding rates for all three grant types compared to early  stage and other investigators. For example, we found that in fiscal year  2017, the most recent year for which data were available, intermediate  stage investigators had funding rates that were comparable to those of  established investigators. Investigators that had not yet been awarded  their first large NIH research grant\u2014early stage investigators and other  investigators\u2014were not as successful when competing for large NIH  research grants, small grants, or career development grants. (See table  2.)", "We also found that over time\u2014from fiscal years 2013 through 2017\u2014 intermediate stage investigators and established investigators had greater  applicant funding rates for all three grant types compared to early stage  and other investigators. Of the investigators that had not yet been  awarded their first large NIH research grant, early stage investigators  were more successful in competing for NIH grants than the other  investigators that were outside of the 10-year period of having completed  their graduate level education (i.e., research doctorate or clinical  doctorate), postdoctoral research, or medical residency. For instance, we  found that early stage investigator funding rates ranged from about 5 to  11 percentage points lower than intermediate stage or established  investigators for each of the five fiscal years examined. Similarly, other  investigator funding rates ranged from about 12 to 14 percentage points  lower than intermediate stage or established investigators for each of the  five fiscal years examined. (See fig. 1.)", "Finally, we found that during this 5-year period, two of the four extramural  investigator groups were more likely to receive large, small, and career  development grants than the other two groups. Specifically, investigators  beginning their research careers\u2014the early stage and intermediate stage  investigators\u2014were more likely to receive these grants. Although early  stage investigators were more likely than intermediate stage investigators  to apply for smaller research grants (about 4,500 applicants compared to  about 2,000 applicants, respectively) and career development grants  (about 2,000 applicants compared to about 50 applicants, respectively),  intermediate stage investigators were still more successful in competing  for these grants, as well as the large NIH research grants. For more  information on the trends in the number of grants awarded to early stage  and intermediate stage investigators, by award type, for fiscal years 2013  through 2017, see appendix I."], "subsections": []}]}, {"section_title": "NIH Has Taken Steps to Support a Diverse Scientific Workforce, but Disparities Persist and Its Diversity Efforts Have Not Been Fully Evaluated", "paragraphs": [], "subsections": [{"section_title": "NIH Established Working Groups and Programs to Support Investigators from Underrepresented Groups", "paragraphs": ["Over the last 7 years, NIH established advisory groups and other  programs to determine how best to support extramural and intramural  investigators from underrepresented groups.  NIH\u2019s Working Group on  Diversity in the Biomedical Research Workforce was established in  response to the 2011 NIH study that examined the association between  R01 grant recipients and the applicants\u2019 race and ethnicity. NIH directed the group to provide recommendations to improve retention of  underrepresented minorities, the disabled, and scientists from  disadvantaged backgrounds. In June 2012, the working group issued 13  recommendations, which, we found that NIH uses as the foundation of  some NIH-wide efforts to diversify the extramural and intramural  biomedical research workforce. Other advisory groups that have  examined or are currently examining related topics include the following:", "NIH Working Group on Women in Biomedical Careers was  established in 2007 in response to a report from the National  Academies of Sciences, Engineering, and Medicine on barriers  women in biomedical science experience in advancing their careers.  It produced a workshop and report in 2008 on best practices for  sustaining the careers of women in biomedical research;", "Addressing Gender Inequality in the NIH Intramural Research  Program Action Task Force was established in 2016 in response to  data showing women are underrepresented in top NIH research  positions. It produced recommendations in 2017 aimed at ensuring  that female and male investigators have equal opportunities in the  intramural research program at NIH, among other things; and", "African-American/Black R01 Funding Disparities Working Group was  established in response to the 2011 NIH study that found a funding  disparity between blacks and whites applying for R01 grants. This  group analyzed data on the funding rates of applicants that self- identify as African American or black compared to other racial  groups.", "NIH has acted on some of the advisory groups\u2019 recommendations. For  example, in response to recommendations made by the Diversity in the  Biomedical Research Workforce advisory group, the agency hired a Chief  Officer of Scientific Workforce Diversity in 2014; implemented the three- tiered Diversity Program Consortium, which includes the Building  Infrastructure Leading to Diversity program, the National Research  Mentoring Network, and the Coordination and Evaluation Center; and  established a permanent advisory group on diversity. NIH also  developed a \u201ctoolkit\u201d that includes training modules to educate intramural  investigator search committee members on biases that can lead to a less  diverse workforce, among other things. In fiscal year 2017, NIH created  an Equity Committee to address recommendations made by the  Addressing Gender Inequality in the NIH Intramural Research Program  Action Task Force to further examine concerns about parity between  male and female intramural investigators and other diversity issues.", "Other NIH-wide policies and programs may also help to attract, retain,  and develop investigators from underrepresented groups. The 24 NIH  institutes and centers that fund research and the Office of the Director  provide funds for its investigators, called research supplements, to recruit  graduate students, postdoctoral fellows, and others from  underrepresented racial and ethnic groups, as well as those with  disabilities and from economically disadvantaged backgrounds. These  funds provide graduate students, postdoctoral fellows, and others an  opportunity to conduct research and be mentored by an investigator  supported by the specific NIH institute or center or office. Some  stakeholders we interviewed said that the agency\u2019s LRP also may help to  retain investigators from underrepresented groups, noting that the student  loan debt for African American or black graduate students is higher than  that of white graduate students. Physicians from a professional  organization we interviewed said that the LRP helps to attract physician  scientists from underrepresented groups into research careers.  Physicians we interviewed stressed the importance of the LRP to attract  physician scientists into research careers, because these scientists often  have significant medical school debt. Our analysis of extramural LRP data  showed that, in 2017, African Americans or black, non-Hispanics had a  funding rate of about 34 percent for receiving an LRP payment. White,  non-Hispanic applicants had a funding rate for receiving an LRP payment  of about 52 percent. More recently, the National Academies of  Sciences, Engineering, and Medicine recommended that NIH make the  LRP available to all individuals pursuing biomedical physician-scientist  researcher careers, regardless of their research area or clinical specialty.  They also suggested NIH increase the monetary value of loan repayment  to reflect the debt burden of current medical trainees. Some  stakeholders said that NIH\u2019s family friendly policies, such as  reimbursement for child care expenses and parental leave, may also help  address work-life balance issues for female investigators that may  otherwise forego some research duties to care for young children.", "Additionally, many\u2014at least 17 of 27\u2014of NIH\u2019s institutes and centers  have established their own policies and programs to attract, retain, and  develop investigators from underrepresented groups. For example, the  National Cancer Institute initiated the Continuing Umbrella of Research  Experiences program to provide training and career development  opportunities to enhance and increase diversity in the cancer research  workforce. This program offers research opportunities and development  to future and current scientists from underrepresented groups from middle  school students to investigators who have yet to achieve research  independence."], "subsections": []}, {"section_title": "NIH Research Funding and Workforce Data Shows that Disparities Persist for Underrepresented Groups", "paragraphs": ["Although NIH has implemented numerous diversity-related efforts, our  analysis of NIH research grant funding and intramural workforce data  from fiscal years 2013 through 2017 shows that some disparities persist  for investigators from underrepresented racial and ethnic groups, and for  female investigators."], "subsections": [{"section_title": "NIH Research Grant Applicants", "paragraphs": ["Our analysis of NIH data shows that investigators from underrepresented  racial and ethnic groups comprise a small percentage of applicants. For  example, in fiscal year 2017, applicants from underrepresented racial  groups\u2014that is, American Indian or Alaskan Native, African American or  black, and Native Hawaiians and Pacific Islanders\u2014were 0.2 percent, 1.8  percent, and 0.1 percent, respectively, of all applicants for large NIH  research grants. Applicants from underrepresented ethnic groups\u2014 Hispanics or Latinos\u2014 comprised 4.3 percent of the applicants for large  NIH research grants. (See table 3.) In contrast, white applicants were  about 64 percent of all applicants for large NIH grants in fiscal year 2017.  Investigators from underrepresented racial and ethnic groups also  comprise a smaller number of applicants than other groups for smaller  NIH grants and career development grants.", "Among grant applicants from underrepresented racial groups, African  American or black applicants were consistently the largest group  represented. For example, in 2017, among underrepresented racial  groups, African American or black applicants were named as  investigators on about 88 percent of applications for large NIH research  grants, about 89 percent of applications for smaller NIH grants, and about 92 percent of career development grant applications. Hispanics and  Latinos were about 5 percent of applicants for smaller NIH grants and  about 6 percent of applicants for career development grants in 2017.", "According to data published by the National Science Foundation in 2017,  women represent slightly more than half of all doctorates in biological  sciences. However, from 2013 through 2017, women represented less  than one-quarter of all tenured NIH intramural investigators. For  example, in 2017, 191, (23 percent) of NIH\u2019s 822 intramural tenured  investigators were women. In addition, in 2017, 79, (37 percent), of NIH\u2019s  211 tenure-track intramural investigators were women. Further, in fiscal  years 2013 through 2017, nearly one-third of all extramural investigators  that applied for large grants were women. (See table 4.) Nearly one-third  of all applicants for smaller research grants, and close to half of all  applicants for NIH career development grants, were women. (See app. II  for information on the number of smaller and career development grant  applicants by racial and ethnic groups and gender.)", "Stakeholders from 8 of the 12 entities we interviewed suggested potential  reasons why the number of NIH research grant applicants among  underrepresented racial and ethnic groups and for women may be limited.  Attrition of biomedical science doctoral students and early career  investigators from these groups is one explanation. Some stakeholders  said that, while in graduate school, students from these groups may be  discouraged from pursuing a biomedical research career as a result of  implicit bias that they encountered with their mentors. Some stakeholders  said lower numbers among women investigators is the result of decisions  of some to start a family in the early stages of their careers, and further  noted the difficulty in re-entering the biomedical research workforce. In  addition, some stakeholders said that students from underrepresented  groups may lack exposure to a sufficiently rigorous education in  mathematics or the sciences prior to entering college, resulting in the low  numbers of biomedical researchers from these groups. Others said the  low numbers of investigators from these groups makes studying this issue  difficult due to a small sample size. Additional administrative demands  placed on individuals who pursue careers as investigators also affect the  number of applicants. For example, some stakeholders said that once  investigators from an underrepresented group attain faculty positions\u2014 particularly if there are few faculty members from such groups\u2014they are  frequently tasked with additional administrative duties. We were told that,  often, they are selected because they may be one of a handful of  members of underrepresented groups at some institutions. Their  additional duties include participation on institutional committees as well  as mentoring, particularly undergraduate or graduate students from  underrepresented groups. In addition, representatives of one stakeholder  group said that some research faculty from underrepresented groups feel  additional pressure to participate in such activities, because their absence  would be more apparent and they worry that this may adversely affect  them. Stakeholders also told us that additional duties are time consuming  and leave less time to devote to applying for grant funding. They said that  some biomedical graduate students from underrepresented groups  decide to pursue other fields, because of the competing demands  associated with being an academic, such as grant writing and teaching  responsibilities."], "subsections": []}, {"section_title": "NIH Research Grant Applicant Funding Rates", "paragraphs": ["Our analysis of NIH data from fiscal years 2013 through 2017 also shows  that the funding rate for applicants from underrepresented racial groups  applying for large and small NIH grants lags behind that of white  applicants. For example, in fiscal year 2017, the applicant funding rate for  large grants was about 17 percent for underrepresented racial groups and  about 24 percent for Hispanics and Latinos. The funding rate for white  applicants was about 27 percent. (See fig.2.)", "Among underrepresented racial groups, African American or black  applicants consistently had a lower funding rate for large and smaller  grants than well represented groups during this period (see table 5).", "The applicant funding rate for career development grants for  underrepresented racial groups increased from about 22 percent to about  32 percent from fiscal years 2013 to 2017, and, for Hispanic and Latino  applicants, from about 30 percent to about 36 percent during the same  period. The applicant funding rate was about 34 percent for white  applicants throughout this period.", "The large grant funding rate for female investigators was slightly lower  than male investigators. (See fig. 3.)", "When looking exclusively at R01 grants, as opposed to all large grants,  research has shown that women are less likely to have their initial R01  grant renewed. Our analysis of R01 grant renewal funding showed that,  in fiscal year 2017, the R01 grant renewal funding rate for female  applicants was about 31 percent compared to about 38 percent for male  applicants. (See fig 4.) According to research by NIH, some applicants  that are unsuccessful in obtaining an initial R01 grant may have greater  success if they reapply; however, some stakeholders we interviewed said  women, and some underrepresented racial groups, are less likely to  reapply for an initial R01 grant if they are unsuccessful with their first  attempt. (See app. III for information on the applicant funding rates for  smaller grants and career development grants by gender.)", "Many stakeholders attributed the underrepresented groups\u2019 lower funding  rates to two factors. First, many stakeholders cited a perceived implicit  bias within the peer review process, which they said may affect the  funding rates for investigators from underrepresented racial and ethnic  groups. They stressed that, many times, peer reviewers approve grants  for investigators from top tier institutions that they are familiar with and  are reluctant to provide high scores to grant applications from other  institutions. Some stakeholders advocated for anonymizing grant  applications to some extent to address this issue. NIH\u2019s Center for  Scientific Review\u2014the center responsible for organizing peer reviews for  grants\u2014is conducting a study that anonymizes certain large grant  applications, and a training module on implicit bias is currently being  offered to NIH peer reviewers. In addition, NIH\u2019s African American/Black  R01 Funding Disparities Working Group has conducted an analysis on  the R01 funding disparities for African American or black applicants from  fiscal years 2010 through 2015, and is currently pursuing several efforts  to address its findings. Lower grant application priority scores and  application resubmission rates among African American or black  applicants were among their findings. The working group is also pursuing  a randomized control trial to assess the effect of mentoring and coaching  on R01 resubmissions and award rates. Second, some stakeholders told  us that only a very small percentage of biomedical science professors at  top tier research schools are from underrepresented racial or ethnic  groups. Some stakeholders suggested that many investigators from  underrepresented groups seeking grants are affiliated with institutions  outside of the top tier that may lack the infrastructure, grant writing  support, and mentoring opportunities, which could help ensure their  success. As a consequence, many investigators from underrepresented  groups are at a disadvantage compared to their peers at top tier  institutions, according to the stakeholders we interviewed."], "subsections": []}]}, {"section_title": "The Effect of NIH\u2019s Efforts to Strengthen Diversity Is Unclear; Assessments of Some Targeted Efforts Are Incomplete, and Strategic Goals Lack Quantitative Metrics and Time Frames", "paragraphs": ["Although NIH has taken steps to address concerns about the diversity of  the biomedical research workforce, its accomplishments have not been  fully evaluated."], "subsections": [{"section_title": "Stakeholders Reported Mixed Views on NIH\u2019s Efforts to Strengthen Diversity", "paragraphs": ["Positive comments from some stakeholders we interviewed included  praise for the steps NIH has taken to diversify the biomedical research  workforce, the value of the National Research Mentoring Network, and  the research supplements and other training grants offered by NIH\u2019s  centers and institutes, which provide opportunities for students and  postdoctoral fellows from underrepresented groups to work with  established investigators. NIH\u2019s support of conferences and programs,  such as the Annual Biomedical Research Conference for Minority  Students and the Institutional Research and Academic Career  Development Award, was also well regarded by stakeholders. They also  noted NIH\u2019s commitment to diversity and willingness to investigate  diversity issues through advisory groups, and commended the agency on  working to address recommendations from the Working Group on  Diversity in the Biomedical Research Workforce, including hiring a Chief  Officer of Scientific Workforce Diversity. Some stakeholders were actively  engaged in working with NIH on diversity issues. For example, some  physicians from an organization we interviewed said they are working  with the National Institutes on Minority Health and Health Disparities on  issues related to research workforce diversity.", "Stakeholders, though, also offered less favorable views and characterized  NIH\u2019s efforts as stagnant, ineffective, or in need of better coordination.  For example, some stakeholders  suggested that for NIH\u2019s National Research Mentoring Network, the  matching of mentees to mentors could be improved or mentioned  uncertainty about the program; questioned how often research supplements are utilized, or noted that  better mentoring and follow-up after the postdoctoral fellow\u2019s work is  completed is warranted;  reported that while their organizations initially collaborated with the  scientific workforce diversity office, that office is not very active or  communication eventually dissipated; expressed concern about NIH\u2019s outreach to minority serving  institutions and organizations, such as historically black colleges and  universities, when it began creating programs like the Building  Infrastructure Leading to Diversity program and the National Research  Mentoring Network and for other efforts; and  stressed that NIH should collaborate more with organizations that  represent underrepresented groups, which have already implemented  programs shown to be effective in engaging these communities in  biomedical research."], "subsections": []}, {"section_title": "Multiple Assessments of Targeted Diversity Efforts Are Ongoing", "paragraphs": ["According to NIH officials, evaluations of various NIH efforts are ongoing  and have not been completed. Some examples include the following:", "Data collection and analysis by the Diversity Program Consortium\u2019s  Coordination and Evaluation Center began in 2017, and is ongoing.", "In 2017, NIH\u2019s Center for Scientific Review began conducting a study  to anonymize R01 grant applications from African American or black  and white applicants to detect potential reviewer bias during peer  review. The results of this study are expected in 2019.", "An evaluation of the National Cancer Institute\u2019s Continuing Umbrella  of Research Experiences program, which provides training and career  development opportunities to enhance diversity in the cancer research  workforce, was submitted for publication in a scientific journal and is  currently pending review.", "Some NIH institutes and centers have conducted evaluations of their  specific diversity efforts. For example, in 2015, the National Institute of  General Medical Sciences analyzed the research supplements provided  to graduate students and postdoctoral fellows from underrepresented  racial and ethnic groups between 1989 and 2006. The study found that  about 65 percent of graduate students and postdoctoral fellows supported  by the program entered research careers in academia, industry, and  government research. About 41 percent of doctoral graduates and 45  percent of postdoctoral fellows supported by this program entered careers  in academic research or teaching compared to about 43 percent of the  U.S. doctoral degree workforce. In 2011, the National Institute on Aging  evaluated its research supplement program and found that the NIH  research grant applicant success rate of former participants from 2002 to  2010 was about 21 percent. The average research grant success rate for  National Institute on Aging grants was about 18 percent during this same  period."], "subsections": []}, {"section_title": "NIH Has Developed a Scientific Workforce Diversity Strategic Plan, but It Does Not Include Quantitative Metrics or Time Frames to Assess the Progress of Its Strategic Goals", "paragraphs": ["In 2016, NIH\u2019s Chief Officer of Scientific Workforce Diversity established a  5-year strategic plan that describes the agency\u2019s five workforce diversity  goals and supporting objectives. The strategic plan includes goals and  objectives that apply to both extramural and intramural investigators.  During the course of our audit work, NIH updated this plan to describe  progress made on each of its diversity goals, which are to: expand scientific workforce diversity as a field of inquiry, build and implement evidence related to diversity outcomes, understand the role of sociocultural factors in biomedical recruitment  sustain nationwide workforce diversity with seamless career  transitions, and promote the value of scientific workforce diversity.", "NIH officials provided us with performance measures that its scientific  workforce diversity office will use to gauge the agency\u2019s progress in  achieving each of its five strategic plan\u2019s goals. However, these items  outline the particular areas that NIH plans to evaluate, rather than provide  quantitative metrics, evaluation details, or time frames associated with  any of the areas by which to evaluate progress in fulfilling the goals of the  strategic plan. For example, for the first scientific workforce diversity goal  \u201cexpand scientific workforce diversity as a field of inquiry\u201d one of the  performance measures is \u201cnumber of publications stored in the scientific  workforce diversity office\u2019s online database.\u201d Neither the strategic plan  nor the additional documentation that NIH provided specifies a  quantitative metric for the number of publications to be stored in its  database and the time frame for doing so. Similarly, for the second  scientific workforce diversity goal, to \u201cbuild and implement evidence  related to diversity outcomes\u201d one of the performance measures identified  by NIH is to compare the large grants awarded to African American or  black scientists to those received by scientists who are white or from  other racial and ethnic groups. However, there is no description in either  the strategic plan or the additional documentation provided by NIH that  indicates how and when these comparisons will be made, how the results  of these comparisons will be assessed, and what will be considered as  fulfilling this goal. All of the other areas or \u201cperformance measures\u201d  associated with each of the five goals also do not include such details or  time frames. According to documentation provided by NIH its strategic  plan does not explicitly list \u201cspecific metrics\u201d because they will be defined  within \u201cthe implementation phase of the plan.\u201d However we are at the  midpoint of the implementation of NIH\u2019s 5-year plan, which covers the  period of 2016 through 2020. As of May 2018, these specific metrics were  not yet available.", "Without quantitative metrics, evaluation details, or time frames for  assessing the agency\u2019s performance against the five goals in its strategic  plan, NIH will be unable to hold itself accountable for fulfilling its goals.  This is inconsistent with best practices for strategic workforce planning,  which call for agencies to monitor and evaluate their progress toward their  human capital goals. These best practices also call for performance  metrics to be specified at the outset to avoid a biased determination of  what counts as \u201csuccess\u201d after the results are known. Further, this is  inconsistent with federal internal control standards for monitoring, which  require that an agency evaluate and document the results of ongoing  monitoring to determine whether its management strategies are  effectively supporting its objectives, or need corrective action. NIH\u2019s  establishment of goals and associated areas of future evaluation are  positive steps, but absent specific measures by which to hold itself  accountable, the agency will not have a basis to judge its success."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["NIH\u2019s ability to fulfill its mission of advancing scientific knowledge and  innovation to enhance health, lengthen life, and reduce illness and  disability is dependent on its success in sustaining a thriving and diverse  workforce. For decades, concerns have been raised by the biomedical  research community about NIH\u2019s ability to support investigators beginning  their research careers. Similar concerns have been expressed regarding  support for investigators from groups underrepresented in the sciences,  including those from racial and ethnic groups and women. While the  agency has taken many steps during this time, disparities in its research  grant funding persist. NIH has conducted some evaluations of individual  programs and activities, but these have been relatively narrow in focus  and the results of many efforts are not yet available. More recently, NIH  has taken positive steps such as by establishing the position of Chief Officer of Scientific Workforce Diversity, who in turn, created a strategic  workforce diversity plan and related goals and identified areas of future  evaluation. However, NIH does not have quantitative metrics, evaluation  details, and time frames to assess its progress in meeting its strategic  workforce diversity goals. Without these elements, NIH\u2019s ability to assess  how its diversity strategic plan goals are being achieved is hindered.  Thus, NIH is missing an opportunity to better position itself to support  underrepresented groups and address longstanding disparities."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The NIH Director should develop quantitative metrics, evaluation details,  and specific time frames to assess its current efforts to support  investigators from underrepresented groups against its scientific  workforce diversity strategic goals, and use the results of its assessment  to guide any further actions. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for comment. In its written  comments, which are reproduced in appendix IV, HHS concurred with our  recommendation and outlined the steps NIH is taking to implement it.  Notably, for example, HHS indicated that NIH is establishing time frames  to assess its progress in meeting its workforce diversity goals. HHS also  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Health and Human Services. 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) 512-7114 or crossem@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."], "subsections": []}]}, {"section_title": "Appendix I: Trends in the Number of Grants Awarded to Early Career Extramural Investigators by Award Type, for Fiscal Years 2013 through 2017", "paragraphs": ["Table 6 provides details on the number of grants awarded, number of  awardees and award type for early stage and intermediate stage  investigators from fiscal year 2013 through fiscal year 2017."], "subsections": []}, {"section_title": "Appendix II: Total Number of Applicants for Smaller Grants and Career Development Grants for Fiscal Years 2013 through 2017", "paragraphs": ["Tables 7 through 10 provide details on the demographics of NIH grant  applicants during fiscal years 2013 through 2017."], "subsections": []}, {"section_title": "Appendix III: Applicant Funding Rates for Smaller Grants and Career Development Grants for Fiscal Years 2013 through 2017", "paragraphs": ["Figures 5 and 6 provide details on the demographics of NIH grant  applicants during fiscal years 2013 through 2017."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Geri Redican-Bigott (Assistant Director),  Carolina Morgan (Analyst-in-Charge), Jackie Hamilton, Toni Harrison,  and Drew Long made key contributions to this report. Muriel Brown,  Giselle Hicks, and Hayden Huang also made contributions to this report."], "subsections": []}]}], "fastfact": ["The National Institutes of Health plays a key role in biomedical research to reduce illness and lengthen life. It has its own scientific staff but more than 80% of its budget goes to researchers working in universities and other institutions.", "NIH funding can be critical to careers and competition is intense. Grants tend to be awarded to experienced researchers. Researchers with less experience and from some underrepresented groups have found it difficult to secure NIH funding.", "NIH has a diversity strategic plan but lacks certain measures of plan progress. We recommended it develop these measures and assess plan progress."]}
{"id": "GAO-19-95", "url": "https://www.gao.gov/products/GAO-19-95", "title": "Food Insecurity: Better Information Could Help Eligible College Students Access Federal Food Assistance Benefits", "published_date": "2018-12-21T00:00:00", "released_date": "2019-01-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Increasing evidence indicates that some college students are experiencing food insecurity, which can negatively impact their academic success. However, college students are only eligible for SNAP in certain cases. Given the substantial federal investment in higher education and the risk posed if students do not complete their degrees, GAO was asked to review food insecurity among college students.", "This report examines (1) what is known about the extent of food insecurity among college students and their use of SNAP; (2) how selected colleges are addressing student food insecurity; and (3) the extent to which federal programs assist students experiencing food insecurity. GAO reviewed relevant federal laws and agency documents and studies on student food insecurity; analyzed 2016 federal student data (the most recent available), and visited four states, selected based on actions taken to address student food insecurity, geographic diversity, and other factors. GAO interviewed researchers; officials from Education, FNS national and regional offices; and officials at 14 colleges, including students at 8 of these colleges. GAO also emailed all state SNAP agencies about their efforts related to students."]}, {"section_title": "What GAO Found", "paragraphs": ["There is limited information about the national prevalence of food insecurity among college students. GAO reviewed 31 studies that identified a wide range of food insecurity rates among the students studied, but the studies did not provide national estimates. College students at risk of food insecurity may be eligible for benefits from the Food and Nutrition Service's (FNS) Supplemental Nutrition Assistance Program (SNAP). However, GAO's analysis of Department of Education (Education) data shows that almost 2 million at-risk students who were potentially eligible for SNAP did not report receiving benefits in 2016. According to GAO's analysis, having a low income is the most common risk factor for food insecurity among college students. Among low-income students, most have one additional risk factor associated with food insecurity, such as being a first-generation student or a single parent.", "The 14 selected colleges that GAO contacted were addressing student food insecurity in a number of ways. For example, all 14 were providing free food to students through on-campus food pantries, and most were offering emergency funds to help students pay for living expenses that might otherwise force them to choose between buying food or staying in school. Many of these colleges had centralized student services to better address their students' basic needs and provide other support, such as screening students for potential eligibility and helping them apply for federal benefit programs like SNAP.", "Federal student aid generally does not cover all college costs for low-income students, and college students may have limited access to federal food assistance programs such as SNAP because of program eligibility restrictions. Some state SNAP agencies reported that they are taking steps to help students access SNAP by conducting outreach to colleges and developing guidance. Nevertheless, at 9 of the 14 colleges GAO contacted, some college officials and students said that they were unfamiliar with or did not fully understand SNAP's student eligibility rules. Some college officials said that they would like information from FNS to better explain SNAP student rules, but FNS has not made such information easily accessible on its website. Further, college officials and state SNAP agencies noted that FNS does not share examples of actions taken by other states to help eligible students access SNAP. Clarification of SNAP student eligibility rules and enhanced information sharing about state efforts could help ensure that potentially eligible college students can access federal food assistance programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FNS (1) improve student eligibility information on its website and (2) share information on state SNAP agencies' approaches to help eligible students. FNS partially concurred, and plans to review its information. GAO continues to believe additional action is warranted, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the federal government spent over $122 billion in  grants, loans, and work-study funds through federal student aid programs  to help make college accessible to students. This substantial federal  investment in higher education is at risk if college students drop out  because they cannot afford basic necessities like food. The federal  government also spent $98 billion in fiscal year 2017 on nutrition  assistance programs, including $68 billion on the Supplemental Nutrition  Assistance Program (SNAP), the nation\u2019s largest nutrition assistance  program, to combat food insecurity. College students enrolled at least half  time, however, are generally not eligible for SNAP benefits unless they  fall into certain categories designed to more narrowly target students in  need of assistance. According to some studies, college students who  experience food insecurity, which the U.S. Department of Agriculture  (USDA) defines as the condition of limited or uncertain access to  adequate food, may also experience decreased academic performance,  symptoms of depression and anxiety, and other negative mental health  indicators. In light of the potential obstacles to college students\u2019  academic success posed by lack of access to adequate food, you asked  us to review the issue of food insecurity among college students.", "This report examines: (1) what is known about the extent of food  insecurity among college students and their use of SNAP; (2) how  selected colleges are addressing student food insecurity; and (3) the  extent to which federal programs assist college students experiencing  food insecurity.", "To determine what is known about the extent of food insecurity among  college students, we conducted an in-depth review of studies. To be  included, studies had to: (1) be based on research conducted in and  published in the United States; (2) be published after 2007; and (3)  contain original, direct estimates of food insecurity rates among college  students. We identified 35 studies that met these criteria, but  subsequently eliminated 4 of these from our in-depth review due to  concerns about their methodological limitations. We reviewed and  summarized the remaining 31 studies.", "We also analyzed National Postsecondary Student Aid Study (NPSAS)  data from the 2015-2016 academic year, the most recent year available,  to estimate the prevalence of risk factors for food insecurity among  college students. Nationally representative survey data that would support  direct estimates of the prevalence of food insecurity among college  students do not currently exist. However, the National Center for  Education Statistics at the Department of Education (Education) regularly  collects NPSAS data, which contain nationally representative, detailed  demographic and financial data about college students. We assessed  the reliability of the NPSAS data by reviewing existing information about  the data and the system that produced them and by interviewing agency  officials knowledgeable about the data. As a result, we determined that  the data were sufficiently reliable for the purposes of this report. We  identified risk factors associated with food insecurity through a literature  review and through interviews with academic researchers, college  officials, state and federal officials, and relevant policy organizations. We  also analyzed NPSAS data to estimate SNAP participation among  potentially eligible students.", "To understand how selected colleges address student food insecurity, we  conducted site visits in California, Kentucky, Massachusetts, and  Michigan. We selected a geographically diverse group of states where  colleges or state SNAP agencies were actively addressing food insecurity  among college students. In selecting these states, we reviewed literature  and asked researchers we interviewed about colleges and states that  were actively addressing food insecurity on campus. In each state, we  met with administrators, faculty, and students at selected 2- and 4-year  public colleges and with officials from the state agencies that administer  the SNAP program and other relevant organizations. Overall, we  contacted 14 colleges\u2014seven 2-year and seven 4-year colleges\u2014that  were actively addressing food insecurity among their students. We also  interviewed researchers and staff at policy organizations knowledgeable  about SNAP and college student food insecurity.", "To assess the extent to which federal programs assist college students  experiencing food insecurity, we reviewed relevant federal laws,  regulations, and agency guidance and program documents. We emailed  the 51 state SNAP agency directors (all 50 states and the District of  Columbia) to ask whether their state agency is taking any action to  address college student food insecurity and received responses from 50  of them. We interviewed state SNAP agency directors in our site visit  states of California, Kentucky, Massachusetts, and Michigan, as well as in  Washington because of its innovative partnerships with colleges. We also  interviewed USDA Food and Nutrition Service (FNS) officials at the  national office as well as at four of the seven FNS regional offices. We  compared FNS\u2019s communication and information sharing activities  against federal internal control standards. Further details on our  methodology are available in appendix I.", "We conducted this performance audit from July 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government, states, colleges, students and their families all  play important roles in financing higher education costs. Under Title IV of  the Higher Education Act of 1965, as amended, the federal government  offers students at all types of colleges financial assistance to help pay for  their education, such as through the William D. Ford Federal Direct Loan  (Federal Direct Loan), the Federal Pell Grant (Pell Grant), and the  Federal Work-Study programs. Some of this aid is targeted toward  students based on their financial need. For example, Education provided  almost $27 billion in Pell Grants to low-income students in fiscal year  2017. States also provide funding to public colleges through state  appropriations for operating expenses and grant programs that provide  financial aid directly to students based on financial need, merit, or a  combination of both. Despite the substantial federal expenditure in higher  education, rising college costs have outpaced federal and state grant aid  and, over time, have led to an increasing share of the cost being borne by  students and their families. For example, over the past 30 years, the  average in-state net price for a full-time undergraduate student at a public  4-year college\u2014after taking into account all grant aid and education tax  benefits\u2014has nearly doubled, from about $8,000 in 1990-1991 to nearly  $15,000 in 2017-2018. At public 2-year colleges, the net price for full-time  students increased over the same time period from about $6,800 to  $8,000.", "To plan for the cost of college, students and their families must consider  the full cost of attendance, which includes not only tuition and fees, but  also room and board and other miscellaneous expenses. The federal  government requires colleges to estimate and distribute information on  the full cost of attendance to prospective and enrolled students. The  amount of need-based federal aid a student is eligible for is based, in  part, upon the school\u2019s estimated cost of attendance."], "subsections": [{"section_title": "Changes in College Student Demographics", "paragraphs": ["National data show that, over the past several decades, an increasing  percentage of students from low-income households are enrolling in  college. According to NPSAS data, the percentage of all undergraduates  who had a household income at or below 130 percent of the federal  poverty line increased from 28 percent in 1996 to 39 percent in 2016. In  addition, the percentage of college students receiving a Pell Grant has  nearly doubled over roughly the same time period. For example, in 1999- 2000, approximately 23 percent of college students received a Pell Grant,  and in 2016, this figure was about 40 percent. Some researchers have  suggested that reductions in federal and state funding of higher education  relative to the increasing cost of college have coupled with these student  demographics to increase the share of college costs borne by students,  which can reduce the amount students have to support their basic needs,  such as food and housing.", "A traditional college student is generally considered to be someone who  is enrolled in college full time immediately after graduating from high  school, is financially dependent on his or her parents, and either does not  work during the school year or works part time. However, these  students represent a minority of students enrolled in college today.  According to NPSAS data, about half of all undergraduate students  enrolled in college in 2016 were considered financially independent from  their parents. About 22 percent had dependent children themselves, and  14 percent were single parents. The average college student in 2016 was  26 years old and first enrolled at age 21. Sixty-four percent of college  students in 2016 worked at least part time while enrolled, and a quarter  worked full time. See figure 1 for the percentages of traditional and  nontraditional students in 2016 and for Education\u2019s list of traditional and  nontraditional student characteristics."], "subsections": []}, {"section_title": "Federal Food Assistance Programs Available to College Students", "paragraphs": ["FNS oversees the states\u2019 administration of SNAP, the main federal  benefit program to address food insecurity for low-income households. In  fiscal year 2017, the program provided benefits to about 42 million  individuals in more than 20 million households. The purpose of the SNAP  program is to safeguard the health and well-being of the nation\u2019s  population by providing a monthly cash benefit to raise the purchasing  power and nutrition level of low-income households. FNS is responsible  for establishing program regulations and ensuring that state officials  administer SNAP in compliance with program rules. Officials in seven  FNS regional offices assist officials from the FNS national office in this  oversight work. FNS shares information and policy guidance with state  SNAP agencies in part through its regional offices, the FNS website, and  annual conferences. The states, or in some cases counties within a state,  administer SNAP by determining whether households meet the program\u2019s  eligibility requirements, calculating monthly benefits for qualified  households, issuing benefits to participants on an electronic benefits  transfer card, and investigating and prosecuting recipient fraud. States  are also allowed to establish some state-specific modifications in how  they administer SNAP policy.", "Beyond SNAP, the Special Supplemental Nutrition Program for Women,  Infants, and Children (WIC) is another federal food assistance program  available to eligible college students who are pregnant or postpartum.  FNS also oversees the WIC program, which is administered by state and  local agencies through approximately 10,000 clinic sites."], "subsections": []}, {"section_title": "College Student Eligibility for SNAP", "paragraphs": ["SNAP eligibility is largely based on a household\u2019s income and certain  other characteristics. However, in 1980 federal law restricted college  students who are enrolled at least half time from receiving SNAP  benefits. This law generally prevents traditional college students\u2014who  may appear to have a low income while attending college but receive  financial support from their parents\u2014from receiving SNAP benefits.  Federal law establishes several exemptions to this restriction so that  college students who are enrolled at least half time and have a legitimate  need can access SNAP. For example, assuming that they meet all other  SNAP eligibility criteria, a full-time college student may be exempt from  the college student restriction if they are:  younger than age 18 or age 50 or older; a parent caring for a child under age 6; a parent caring for a child aged 6 to 11 who is unable to obtain  childcare to attend school and work; a single parent caring for a child under 12 years old and enrolled full working a minimum of 20 hours per week at paid employment; participating in a state- or federally-financed work-study program;  receiving Temporary Assistance for Needy Families (TANF)  benefits; not physically or mentally fit (e.g., have a disability); or enrolled in certain programs for the purpose of employment and  training.", "FNS officials told us that states have flexibility regarding which programs  may qualify a student for the exemption pertaining to enrollment in certain  programs for the purpose of employment and training. These programs  must be operated by a state or local government, target low-income  households, and increase participants\u2019 employability. State SNAP  agencies have discretion to determine which programs in their state  qualify. These employment and training programs may be operated at  community colleges, among other community partners.", "FNS officials said that in 2014 the agency expanded its focus on SNAP  Employment & Training (E&T) program services, which are intended to  help individuals in SNAP households acquire skills, training, and work  experience that will increase their ability to obtain regular employment  that will ultimately lead to greater self-sufficiency and reduce their reliance  on SNAP. State agencies have flexibility in designing SNAP E&T  program services, and FNS encourages states to enter into partnerships  with established providers, including community colleges, to deliver SNAP  E&T program services. For example, a SNAP recipient could train to  become a Certified Nursing Assistant at a community college as part of a  state\u2019s SNAP E&T program. In addition to providing employment and  training services, state SNAP E&T programs are required to provide  participants with necessary supportive services, such as transportation,  childcare, and textbooks."], "subsections": []}]}, {"section_title": "Information about the Prevalence of Food Insecurity among College Students Nationally is Limited and Many Potentially Eligible, At-Risk Students Do Not Receive SNAP", "paragraphs": [], "subsections": [{"section_title": "Studies Identify a Range of Food Insecurity Rates among Respondents, but Results Cannot Be Generalized to All Students", "paragraphs": ["Our review of 31 studies provided some information regarding food  insecurity among college students, but all of the studies have limitations  and none provide estimates of food insecurity for this population in  general. Estimates of food insecurity among college students included  in the studies we reviewed ranged from 9 percent to well over 50 percent,  with 22 of these of 31 studies estimating food insecurity rates of over 30  percent. These results reflect the studies\u2019 different samples and  methods, and the estimates from the studies included in our review are  not generalizable to the college student population as a whole. None of  these studies are based on a sufficiently large or diverse random sample  of college students to constitute a representative study. The studies  addressed the difficulty of sampling the college student population in  different ways, including by extrapolating from household data, surveying  students in a particular degree program or on a particular campus, or  targeting particular, non-random sub-groups of the college student  population. Most of the studies were also conducted on only one campus, although some studies gathered data from more than one campus.  Despite the limitations, these studies as a whole help shed some light on  the range of food insecurity that exists among some groups of college  students.", "Of the 31 studies we reviewed, 2 used nationally representative  household data sets, the Current Population Survey and the Survey of  Income and Program Participation. The study that used the Current  Population Survey data from 2011-2015 found that an estimated:", "11 percent of households with a student in a 4-year college", "14 percent of households with a student in vocational/technical  education experienced food insecurity, and", "17 percent of households with a student in a community college  experienced food insecurity.", "These national household surveys assess the food security of households  with a college student member, but they do not directly survey college  students and only measure food security at the household, and not the  individual, level. For example, these household data may not capture a  college student\u2019s food insecurity in situations where the student member  of the household does not live at home for most of the year.", "The remaining 29 studies we reviewed collectively surveyed college  students on approximately 200 campuses across multiple states,  including two large state university systems, and produced a wide range  of estimates of food insecurity. In most cases, the results can be  characterized as applying only to the respondents of the survey. The 29  studies based on campus surveys provide a range of food insecurity rates  among respondents, from 9 percent to over 50 percent.", "For example, a study first published in 2017 found that 15 percent of  student respondents at one 4-year college experienced food  insecurity, with an additional 16 percent of student respondents at that  college estimated to be at-risk for food insecurity.", "Two recent surveys of college systems in California found that 40  percent of respondents from University of California campuses and 42  percent of respondents from California State University campuses  experienced food insecurity.", "Estimates of food insecurity rates in the studies we reviewed tended to be  higher at 2-year than at 4-year colleges. Four studies examined only 2- year college students and three of these studies estimated food insecurity  rates among respondents at 2-year colleges to be 40 percent or higher.  Three studies looked at both 2-year and 4-year colleges and estimated  food insecurity to be higher among students at 2-year colleges. For  example, a large, multi-college study conducted in 2017 found that during  the 30 days preceding the survey, 42 percent of community college  students who responded and 36 percent of students at 4-year colleges  who responded indicated they were food insecure. Further, the two  studies that used national household data sets found that households  with community college and vocational education student members had  higher food insecurity levels than households with students at 4-year  colleges."], "subsections": []}, {"section_title": "Federal Data Show Most Low-Income Students Had Multiple Risk Factors Associated with Food Insecurity in 2016", "paragraphs": ["We identified and analyzed the prevalence of risk factors associated with  food insecurity among students through our review of peer-reviewed  publications on food insecurity and through interviews with academic  researchers, college officials, state and federal officials, and officials from  relevant policy organizations. In the studies we reviewed and in our  interviews with researchers, having a low income was consistently  identified as a key risk factor for food insecurity. The other risk factors we  included in our analysis are: being a first-generation college student,  receiving SNAP, being a single parent, being disabled, being homeless or  at risk of homelessness, and being a former foster youth.", "In our analysis, we focused on students with a household income at or  below 130 percent of the federal poverty line, which represents 39  percent of all undergraduates. While having a low income is itself the  most common risk factor for food insecurity among college students, our  analysis found that the majority of low-income students also experience  additional risk factors for food insecurity. The three most common risk  factors for food insecurity among low-income students were being a first- generation college student; receiving SNAP (receiving SNAP can be  considered a risk factor in that it may reduce, but not entirely eliminate,  food insecurity); and being a single parent. Of the approximately 7.3  million low-income students, 31 percent were first-generation college  students, 31 percent reported receiving SNAP, and 25 percent were  single parents. The prevalence of risk factors among low-income  students was lower at 4-year colleges compared to other colleges. For  example, about 21 percent of low-income 4-year college students were  single parents in 2016 compared to about 42 percent of low-income  students in less than 2-year programs. Low-income individuals enrolled in  less than 2-year programs had the highest prevalence for almost all risk  factors (see table 1).", "Twenty-nine percent of all U.S. undergraduates had a low income and  experienced at least one additional risk factor for food insecurity,  according to our analysis of 2016 NPSAS data\u201414 percent had a low  income and one other risk factor and 15 percent had a low income and  two or more additional risk factors associated with food insecurity (see  table 2). Risk factors associated with food insecurity are more prevalent  among low-income students than among the general student population,  with 75 percent of low-income students experiencing one or more  additional risk factors. Students at 2-year colleges and those in less than  2-year programs were also more likely to have multiple risk factors."], "subsections": []}, {"section_title": "Fifty-Seven Percent of Potentially Eligible Low- Income Students with Food Insecurity Risk Factors in 2016 Did Not Participate in SNAP", "paragraphs": ["In our analysis of SNAP participation among students, we focused on  low-income students with at least one additional risk factor for food  insecurity because these students would likely meet the income threshold  for SNAP eligibility and have an additional risk factor that could put them  in need of food assistance. Our analysis of 2016 NPSAS data identified  about 5.5 million low-income students with at least one additional risk  factor for food insecurity and found that about 59 percent of these  students (3.3 million) reported being enrolled at least half time and  meeting a SNAP student eligibility exemption. About 1.8 million of these  low-income students with an additional risk factor reported meeting a  student exemption and also that they were not receiving SNAP  benefits. In other words, among potentially SNAP eligible low-income  students with at least one additional factor for food insecurity, 57 percent  did not report participating in SNAP in 2016 (see fig. 2).", "About one-quarter of the 5.5 million low-income students with at least one  additional risk factor for food insecurity did not meet any of the student  exemptions we could identify in the NPSAS data and reported that they  did not receive SNAP benefits. These students would likely be ineligible  to participate in SNAP unless they begin meeting one of the student  eligibility exemptions in the future, such as working 20 hours per week."], "subsections": []}]}, {"section_title": "Selected Colleges Are Using a Range of Approaches to Address Student Food Insecurity", "paragraphs": ["The 14 selected colleges we contacted are addressing student food  insecurity in three main ways: by educating faculty, staff, and students; by  providing students free food and emergency assistance; and by  centralizing and coordinating their student services and helping students  apply for federal and state benefits. Officials at 9 of these colleges said  that they viewed student food insecurity as part of students\u2019 increasing  inability to meet their basic needs as a result of the decreasing  affordability of higher education or the high cost of living. This sentiment  was echoed by selected students we spoke with during discussion groups  (see text box).", "All of the colleges we contacted have implemented on-campus initiatives  to combat students\u2019 food insecurity with the goal of improving their  student outcomes, such as retention, completion, and loan repayment  rates. As one community college official told us: \u201cWe have come to realize  that we can\u2019t address retention and completion without addressing  students\u2019 basic needs.\u201d See figure 3 for the range of initiatives the 14  colleges we contacted were taking to address food insecurity among  college students on their campuses.", "Educating the campus community. Officials at several of the selected  colleges told us that many administrators, faculty, staff, and students on  their campus are unaware that students experience food insecurity, which  hinders their college\u2019s efforts to address the issue (see text box). At all 14  colleges we contacted, officials said they are educating their campus  community about available resources, both on campus and off, to  address student food insecurity.", "All of the 14 colleges we contacted also educate their students about the  resources available to address food insecurity in a variety of ways, such  as by providing information during student orientations, on flyers and  pamphlets, or through social media and text messages. Eight of the 14  colleges we contacted hold trainings or distribute information to faculty  and staff about the on-campus and community resources available to  students. Nine of these colleges have created supplemental or for-credit  courses on topics such as financial literacy or cooking and nutrition. For  example, one college we visited runs a workshop for first-year students  on writing a spending plan and a food budget. At several of the selected  colleges, faculty members include blurbs about basic needs-related  resources, such as campus food pantries, in their syllabi.", "Providing food and emergency financial assistance. All of the 14  colleges we contacted address student food insecurity by providing  students free food and most provide students emergency financial  assistance. Nationwide, the College and University Food Bank Alliance  has reported that at least 656 colleges have or were developing food  pantries as of September 2018. Each of the 14 colleges we contacted  had a food pantry, with 7 having started their pantry in the past 5 years.", "According to college officials, individual faculty and staff members are  often first to identify food insecurity as a campus concern and provide  food to students. For example, officials at several of the colleges we  contacted traced the origins of their college\u2019s food pantry to a drawer of  food a faculty or staff member kept in their office for students, or to a  professor who brought jars of peanut butter or bagels for any student who  wanted one.", "The college food pantries we visited varied in terms of their size and  location, which can depend upon the space available on campus. For  example, some pantries we visited consisted of only a couple of shelves  of non-perishable items, while others spanned multiple rooms containing  refrigerators and freezers. Directors at four of the selected food pantries  said that student need was great enough to support expanding the food  pantry, but that they had been unable to expand because space on  campus is at a premium (see text box).", "Several pantries also had separate sections providing students personal  health items and clothing and offered auxiliary services, such as  information about cooking, food budgeting, or SNAP enrollment (see fig. 4  for pictures of some of the college food pantries at selected colleges).", "Officials at 11 of the selected colleges we contacted said that a major  barrier they face is overcoming the stigma some students associate with  accepting help for their basic needs, such as using the food pantry (see  text box). Concern about this stigma led at least 3 of the colleges we  contacted to place their food pantry in a less-public area of campus to  address students\u2019 privacy concerns. In contrast, 3 other colleges we  contacted centrally located their food pantry to advertise its existence and  normalize its use. One college president we spoke with said that \u201cuntil   normalized  and pulled it to the center of  campus, it was underutilized,\u201d and stated that moving the food pantry to  the center of campus quadrupled its use.", "Officials at 9 of the 14 colleges we contacted reported that their campus  food pantry had seen an increased number of users over time as the  student body became aware of this resource. One student we spoke with  said that his college\u2019s food pantry was his only source of food, while  another estimated that the food pantry allowed him to save about $100  per month on food.", "Officials at 10 of the 14 selected colleges we contacted told us they  partner with national organizations or campus dining services or both to  try to respond to the needs of students who might be experiencing food  insecurity. For instance, public colleges in California receive state funding  to incentivize them to address student food insecurity in a variety of ways,  including by establishing campus food pantries, providing information to  students about SNAP benefits, and establishing meal point donation  programs. Two California colleges we contacted were working with a  national organization to set up a meal point donation program. One  college in another state we visited included in their contract with their  private dining services vendor funding for several initiatives, such as a  campus-wide survey of student food insecurity, on-campus farmer\u2019s  markets, and a learning kitchen that teaches students hands-on cooking  skills. Additionally, 2 of the colleges we contacted are working to have  SNAP benefits accepted at campus markets.", "Beyond providing students with free food, officials at 12 of the 14 colleges  we contacted said that their college makes emergency cash assistance  available to students through small loans, grants, or grocery store or gas  station gift cards. These emergency funds are intended to help students  pay bills for one-time financial emergencies, such as buying groceries or  paying for a car repair or a utility bill. One community college we visited  directly ties this assistance to its retention efforts, providing a one-time  amount of up to $500 for students judged to have sufficient need and who  are likely to remain in school if the bill is paid.", "Centralizing and coordinating student services and access to  benefits. Officials at many of the colleges we contacted told us they have  centralized their student support and financial aid services, among others,  and several have introduced a case management approach to better  collaborate across departments and more efficiently and holistically  address their students\u2019 basic needs (see text box). Of the 14 colleges we  contacted, 8 had centralized some or all of their student services. For  example, one community college we visited has co-located many of its  student services\u2014including its financial aid, academic counseling, payroll,  food pantry, veterans\u2019 services, and women\u2019s resource center, among  others\u2014around a central hub of the student union. Students visiting this  central hub may be assigned a caseworker to connect them with the on- campus, community, state, and federal benefits for which they are  eligible. Officials at a few of the colleges we contacted said that centrally  locating student services also helped faculty and staff by providing a  single point of contact to refer students. One official said that she tells  faculty and peer mentors: \u201cIf you see a student in any kind of distress at  all\u2014mental health, hunger, homelessness, anything\u2014send them to us.\u201d  She added that it is too much to ask faculty to figure out which office or  official to send students to for specific concerns.", "Officials at 8 of the 14 colleges we contacted told us their campus has  established a coordinated benefits access program or is actively  screening students for potential eligibility for, and helping them enroll in,  federal and state benefit programs like SNAP, WIC, Medicaid, and the  Earned Income Tax Credit. For example, one community college we  contacted had a staff member build a statistical model to analyze the  college\u2019s existing data on first-time students, such as data on students\u2019  household income, demographics, and course enrollment, to identify  students at risk of not returning to college and to provide these students,  their professors, and their faculty advisors with information about on- campus resources. Officials at one college we visited told us the campus  hosts weekly clinics with county SNAP eligibility analysts to screen  students for SNAP eligibility and help them apply for benefits. At a  community college system we visited, the administration told us they were  working with the state SNAP agency to identify which students were  receiving SNAP benefits and they plan to send targeted information on  SNAP to those potentially eligible students not receiving benefits.", "Officials at three of the colleges we contacted said that their college was  purchasing software that creates a centralized portal where faculty and  staff can share information about a student\u2019s situation with student  support providers so they can better provide help. For example, at a  college we visited that is using such software, officials said that a  professor might note in the centralized portal that an at-risk student was  either failing or not attending a class, and that student would be flagged in  the portal to notify academic advisors, counselors, and other college staff  who can direct the student to the on-campus resources they may need,  such as the food pantry or help in completing a SNAP application."], "subsections": []}, {"section_title": "While SNAP Can Supplement Other Federal Aid for Some Low-Income Students, FNS Does Not Share Key Information to Help States Better Leverage SNAP to Assist Students", "paragraphs": [], "subsections": [{"section_title": "Federal Programs Are Limited in the Extent to Which They Can Address the Needs of College Students Experiencing Food Insecurity", "paragraphs": [], "subsections": [{"section_title": "Federal Student Aid Generally Does Not Cover All College Costs for Low-Income Students", "paragraphs": ["Federal grant aid is available to help low-income college students and  their families pay for college, but for many students, the maximum  amount of grant aid available to them does not cover all of the costs  associated with attending college. Officials from many of the  organizations we interviewed said that the federal Pell Grant Program for  low-income college students was a major source of financial support for  these students, but that it does not cover the full cost of college  attendance for many students, and particularly for those at 4-year  colleges or in areas with high costs of living. Most low-income students  also work while attending college. Despite this, several college officials we interviewed told us that the gap between the amount of financial aid  available and what it costs to attend college is continuing to grow. One  financial aid director told us that students used to be able to pay for  groceries or rent with some of their financial aid \u201crefund\u201d money (that is,  financial aid funds refunded to a student after tuition, fees, and other  school charges are paid, which can be used to pay for other education  and living expenses); however, he said students rarely receive a refund  any more. According to data from Education\u2019s National Center for  Education Statistics, the average Pell Grant used to cover more of the  cost of college than it does today. For example, about 40 years ago\u2014 soon after the Pell Grant Program was established\u2014the average award  covered about 50 percent of the average cost of in-state tuition, fees,  room, and board at public 2-year colleges, and 39 percent at public 4- year colleges. Today, the average Pell Grant award amount covers just  37 percent of these costs at public 2-year colleges, and 19 percent at  public 4-year colleges. Federal Work-Study Program employment  opportunities may be available to qualifying students, but several officials  we interviewed noted that funding for this program is extremely limited,  especially at community colleges where there are more students at risk of  food insecurity.", "When grant funds and student earnings are insufficient to cover the full  cost of college, students can take out federal student loans to make up  the difference. Officials at a national association of community colleges  and at a few colleges we visited told us that low-income students often  use federal loans to help them pay for basic living expenses\u2014such as  food or rent. While these loans can be helpful for some students who  need additional funds to support themselves while in college, officials at a  few community colleges also cautioned that loans may not be the best  choice for all students, and may worsen the financial position of already  vulnerable students. For example, at one 4-year college we visited, the  financial aid director said that many of their students have reached their maximum federal lifetime loan limit (see text box for an example). He  also noted that graduates have, on average, $25,000 of student loan  debt. He said his college has historically trained its students for public  sector careers, e.g., teachers or counselors, and he worries that salaries  in these professions will not allow graduates to repay this amount of  student loans."], "subsections": []}, {"section_title": "College Students Have Limited Access to Federal Food Assistance Programs", "paragraphs": ["Given the limitations of federal student aid funding, officials from several  organizations we interviewed spoke about the importance of leveraging  other federal benefits, such as food assistance programs, to help address  the needs of college students experiencing food insecurity. According to  research on the effect of SNAP benefits, these benefits can provide some  help to students, although they may not completely eliminate their food  insecurity. However, college students have limited access to several key  federal food assistance programs that could help address some of their  needs. For example, several college officials we spoke with noted that  many low-income students received federally subsidized free or reduced  price lunch while in elementary and secondary school, but a comparable  program does not exist for college students, even though many face the  same level of need. In addition, many college students are prohibited  from receiving federal SNAP benefits because of restrictions on student  eligibility. Several college officials told us that when students are unable  to meet one of the student exemptions for SNAP benefits, they will try to  connect them to community resources or to the on-campus food pantry,  but a few characterized these as short-term solutions to their students\u2019  problems. We also heard from officials at several colleges that students  who are pregnant or postpartum may qualify for the WIC program, which  provides food assistance to mothers with infants and young children;  however, this program serves only a small minority of college students  who may be experiencing food insecurity."], "subsections": []}]}, {"section_title": "Some State SNAP Agencies Are Assisting Potentially Eligible Students to Access SNAP Benefits", "paragraphs": ["About one-third of state SNAP agencies reported they were taking actions  to inform college students about SNAP and help them access SNAP  benefits. These state SNAP agencies reported assisting college  students in various ways, including by developing guidance or training for  state and college officials on student eligibility rules, by conducting  outreach at local colleges, or by providing students with options to qualify  for a SNAP student exemption by participating in employment and  training services."], "subsections": [{"section_title": "Several States Are Clarifying Student Rules and Conducting Training and Outreach about SNAP Student Eligibility", "paragraphs": ["Eleven state SNAP agencies reported clarifying policy on college student  eligibility to SNAP staff who determine eligibility for benefits or providing  training to third-party partners to increase awareness of students\u2019  potential eligibility for SNAP. For example, in 2015 and 2017 California\u2019s  state SNAP agency issued policy letters to its county offices clarifying  college student eligibility rules and expanding the list of college programs  that qualify a student for an exemption under the employment and training  provision. Minnesota\u2019s state SNAP agency reported that it conducts  technical assistance training on student eligibility issues for its  caseworkers twice a year.", "State SNAP agencies also reported partnering with colleges to increase  awareness of potential student SNAP eligibility or to reduce the burden of  the application process for students. For example, Missouri\u2019s state SNAP  agency reported that it recently began a partnership with the state\u2019s  community college association to increase students\u2019 awareness of their  potential eligibility for SNAP. To reduce the burden students face in  applying for SNAP benefits, Rhode Island\u2019s state SNAP agency reported  that its outreach partner holds regular \u201coffice hours\u201d at state community  college campuses to answer questions about SNAP, screen students for  potential eligibility, and assist with application completion. Officials from  California\u2019s state SNAP agency stated that its county SNAP agencies  periodically hold SNAP enrollment clinics on college campuses. At one  time, a community college in California had a county SNAP staff member  located on campus to assist their students with benefit applications.", "Finally, two of the states we visited partially fund their state higher  education grants for low-income college students with some of their  federal TANF block grant dollars. Because these grant recipients  receive TANF benefits, they are eligible for the corresponding SNAP  student exemption. For example, the California state SNAP agency  issued guidance in February 2017 to all of its county offices to explain  that this SNAP student exemption applies to any student who receives  the state\u2019s higher-education grant for low-income students. In  Massachusetts, the state SNAP agency issued similar guidance in August  2017 to state SNAP staff who determine eligibility for benefits."], "subsections": []}, {"section_title": "Some States Are Implementing Approaches that Provide Additional Employment and Training Options for Certain Students", "paragraphs": ["Some state SNAP agencies are taking steps related to the exemption for  students who are enrolled in certain employment and training programs,  which can be offered at 2-year colleges and other community-based  organizations. Seven states reported taking steps to designate specific  programs at their community colleges to qualify as employment and  training programs to make it easier for students and SNAP staff who  determine eligibility for benefits to identify students who could meet this  exemption. In these states, according to the SNAP agency, they have  determined that certain programs at community colleges qualify enrolled  students for one of the student SNAP exemptions because they are  programs for low-income households, aimed at employment, and run by a  state or local government.", "According to FNS, state SNAP agencies have the authority to decide  which programs would qualify enrolled students for this exemption, and  several states have identified qualifying programs at community colleges  in their state. Students in these designated community college programs  who attend at least half time and do not meet one of the other student  exemptions can be eligible for SNAP under this provision if they meet all  other eligibility criteria. In 2010, Massachusetts\u2019 state SNAP agency  began using a dedicated form that provides community college students  in these state-designated employment and training programs support for  their SNAP application. According to officials at the state SNAP agency,  this form has helped to streamline the application process for both  students and state SNAP agency staff who determine eligibility for  benefits.", "Other states are developing opportunities for students to meet the  employment and training exemption through partnerships with the states\u2019  SNAP Employment & Training (E&T) programs. Twenty-four state SNAP  agencies reported that they have implemented a third-party partnership  with at least one community college to deliver SNAP E&T program  services on campus. Under these state SNAP E&T program  partnerships, the state SNAP agency works with community colleges to  enroll SNAP recipients in programs that are designed to increase the  employability of the participant. One FNS official told us that state SNAP  E&T programs were an ideal way to provide college students who qualify  for SNAP benefits with additional services and support, such as  counseling or transportation assistance, and that they can help students  persist in their community college program and ultimately improve their  self-sufficiency.", "According to FNS, state agencies can enroll individuals in these SNAP  E&T programs in one of two ways. A SNAP recipient may enroll in the  designated community college training program affiliated with the state\u2019s  SNAP E&T program, which allows them to continue receiving SNAP  benefits even if they attend the program more than half time. Or, the  community college partner can refer individuals already enrolled at the  college to the state SNAP agency to determine if they are eligible for state  SNAP E&T program services\u2014a process known as a \u201creverse referral.\u201d In  the case of a reverse referral, individuals who are enrolled in certain  training programs and who are experiencing food insecurity may be able  to qualify for a student exemption to receive SNAP, as well as additional  services through state SNAP E&T programs. According to Washington\u2019s  state SNAP agency, SNAP E&T programs operate at all 34 community  colleges in the state, and have served approximately 20,000 students  each fiscal year since 2015. A senior program official at Washington\u2019s  state SNAP agency told us that the vast majority of incoming community  college students in Washington are screened for potential eligibility and  reverse referral into the state\u2019s SNAP E&T program services."], "subsections": []}]}, {"section_title": "College and State Officials Reported That FNS Does Not Share Key Information That Could Help Them Assist Students Experiencing Food Insecurity", "paragraphs": ["At 9 of the 14 colleges we contacted, some officials and students we  spoke with indicated that they either did not know about or found it difficult  to understand the SNAP student rules. For example, in a student  discussion group at one community college, some students said they  were uncertain about how SNAP student rules applied to them when they  lived with their parents but received no financial support or food from  them. Officials at another college told us that many students are not even  aware of or do not realize that the SNAP student rules apply to them. In a  student discussion group we held at another college, some students told  us that they had been unaware that they may be eligible for SNAP until  they spoke to someone at their college. Further, we found college officials  may also have difficulty understanding SNAP student rules\u2014for example,  officials at one college said that they believed that college students are  not eligible for SNAP. College officials can be an important source of  information for students regarding SNAP, but this can create barriers to  access if college officials do not have the correct information. For  example, at one college we visited, two students said they were  misinformed by officials at their college or their state SNAP agency about  their potential eligibility for SNAP.", "Officials we met with at three colleges said that they would like  information from FNS about college student eligibility rules so they can  help educate and enroll students in SNAP, but FNS has not developed  such targeted information to distribute to colleges and students. Officials  at one college said they requested information from FNS to distribute to  students, but the general SNAP eligibility brochure FNS provided did not  reference college student eligibility requirements. A senior FNS official  said developing printed materials expressly explaining the college student  eligibility requirements is primarily a state agency responsibility, and that  information about this topic was available on the FNS website. However,  we found that the information specifically related to college student  eligibility requirements on the FNS website was not easy to find. For  example, the main webpage of FNS\u2019s SNAP eligibility website lists the  special circumstances under which certain specific populations may be  SNAP eligible, but it does not include college students nor does it link to  the webpage listing the student exemptions. Further, the webpage  containing information on SNAP for college students restates the list of  student exemptions from the regulations, using legal and technical  language that is not always easy to understand. For example, the  webpage states that students \u201cmay be able to get SNAP benefits if  otherwise eligible, and they \u2018get public assistance benefits under a Title  IV-A program of the Social Security Act.\u2019\u201d Many college officials and  students may not realize this refers to TANF benefits. In addition, the  website does not list being \u201cnot physically or mentally fit\u201d (e.g., having a  disability) as one of the ways to qualify for a student exemption, nor does  it provide information relevant to how students may qualify for an  exemption because they are assigned to or placed in certain employment  and training programs.", "A senior official from the FNS national office said that college student  eligibility and the student exemptions were among the most complicated  SNAP policies to explain and that they frequently receive questions from  the general public about how the rules apply to certain students in certain  situations. This official said that because the student SNAP rules are so  difficult to navigate, FNS responds to these individual questions and  circumstances as they arise, rather than developing materials that could  apply broadly to every situation, and that state SNAP agencies are  primarily responsible for assisting students. Officials at all four FNS  regional offices we spoke with said materials explaining the student rules  tailored to colleges and college students would prove useful to states and  colleges in their regions. While developing clear written materials about a  complicated policy is challenging, Standards for Internal Control in the  Federal Government states that agencies should communicate key  information to their internal and external stakeholders. Further, a core  activity of the SNAP program is to work with its partners to ensure that  those eligible for nutrition assistance can make informed decisions about  applying for the program. The lack of clear and easily accessible information on student SNAP eligibility requirements can make it difficult  for potentially eligible students to make informed choices about applying  for SNAP, and for colleges to develop their own materials to help  potentially eligible students apply for SNAP. As a result, students could  miss opportunities to obtain the additional support they may need to stay  in college and graduate.", "In addition, we found that some state SNAP agencies had limited  information about approaches that they could take to help potentially  eligible college students who may qualify for a student exemption.  Specifically, officials at four of the five state SNAP agencies and at three  of the four FNS regional offices that we spoke with said that it is not  entirely clear to them under which circumstances college students may be  eligible for a student exemption if they are enrolled in a qualifying  employment and training program run by a community college. State  SNAP agency officials in four of the five states, as well as officials in three  of the four FNS regional offices, told us that they would like more  information from FNS about how to implement the approach some state  SNAP agencies are taking to help college students who may qualify for  an employment and training exemption access SNAP. One state SNAP  agency official said that she believes that the lack of guidance and  leadership from FNS on this issue leaves many state SNAP agencies  operating with uncertainty, and, as a result, many of them do not take any  actions to identify those college students who may qualify for an  employment and training exemption under SNAP rules.", "Several of the FNS regional office officials we interviewed agreed that the  FNS national office was uniquely positioned to collect and share  information about potential approaches that states are using to implement  the student exemption for employment and training programs so that  other states could also consider using such approaches to assist low- income college students who may qualify. Officials at one FNS regional  office said that an FAQ-type document on college student eligibility  scenarios would be helpful. At the same time, a few FNS regional office  officials said that the national office is cautious about developing  information for all states when each state\u2019s SNAP program operates  slightly differently. According to FNS national office officials, FNS issued  the most recent document discussing general SNAP eligibility for students  in August 2010. This document explained that certain employment and  training services provided by a state or local government may qualify a  student for a SNAP student exemption. In November 2016, six federal  agencies including USDA (on behalf of FNS) released an interagency  letter, Aligning Federal Supports and Program Delivery for College  Access and Completion, that includes information from FNS related to  general student eligibility for SNAP.", "However, neither of these documents included specific strategies or  examples of approaches states have used or can use to help potentially  eligible college students access SNAP benefits. Standards for Internal  Control in the Federal Government states that agency management  should internally communicate the necessary information to achieve the  program\u2019s objectives. In addition, part of the role of the FNS national  office is to work with its partners, including its regional offices and the  state SNAP agencies, to improve program administration and ensure  access to benefits for eligible individuals. FNS officials told us FNS has  several existing mechanisms for information sharing with the regional  offices and the state SNAP agencies, including policy memos, webinars,  and annual conferences. However, a senior FNS official told us that she  was not aware of any plans to share additional information with state  SNAP agencies or regional offices on this topic, noting that college  students are a relatively small population compared to other SNAP  recipients. As a result, state SNAP agencies may not be aware of  approaches other states have used that they could take to assist college  students experiencing food insecurity in accessing SNAP benefits, and  FNS may not be fulfilling its role to ensure program access for college  students who are eligible.", "In addition to noting how complicated the college student SNAP eligibility  rules are, most state higher education and SNAP policy organization  officials we interviewed remarked that the student exemptions can make it  challenging for many students who are food insecure to obtain SNAP  benefits that could help them succeed in college. Specifically, a few  researchers and state higher education officials said the eligibility  restrictions were instituted when college students were generally from higher-income households, whereas many students enrolled in college  today are from low-income households. Several higher education officials  and one researcher noted that when a student qualifies for a student  exemption by working 20 hours a week, it can have a detrimental impact  on college completion. For example, research has shown that full-time  college students who work more than 15 hours a week or who reduce  their college course load and attend part time in order to increase their  work hours are less likely to complete their degree or educational  program.", "At the same time, FNS officials and officials at one state SNAP agency  stressed the importance of having proper controls in place to prevent  certain students from improperly receiving benefits. A senior FNS official  noted that the college student restrictions were established to prohibit  traditional college students who are supported by their parents from  receiving SNAP benefits. This official said that the student eligibility rules  should ensure that middle-class and wealthy students do not access  SNAP while attending college. Further, officials at a few organizations  and one state SNAP agency we interviewed expressed support for some  of the student exemptions, such as the exemption for college students  who work 20 hours per week."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The federal government invests billions of dollars annually in higher  education through grants and loans to low-income students. Partially as a  result of this investment, a college education is accessible to more low- income Americans than ever before. Despite this federal support, many  low-income college students struggle to meet their basic needs, including  obtaining the food that they need, and may drop out of college as a result.  SNAP can be an important source of support for low-income students,  although it may not completely ameliorate food insecurity. However,  because the SNAP eligibility requirements for college students can be  difficult for students and colleges to understand, students may be  unaware of or misinformed about their potential eligibility for SNAP. FNS  has not made information that clearly explains student SNAP eligibility  requirements easily accessible to students and college officials and, as a  result, students experiencing food insecurity may remain unaware that  they could be eligible for SNAP.", "In addition, some states are exercising existing state flexibilities to help  students experiencing food insecurity to access SNAP, but FNS does not  actively share this information among state SNAP agencies. By collecting  and sharing information on approaches taken by state SNAP agencies  active in this area, FNS could potentially help state SNAP agencies  identify ways to help eligible students who are experiencing food  insecurity. Better supporting these students will also help the Department  of Agriculture and the Department of Education meet their respective  goals and make good use of the substantial federal investment in higher  education while improving the health and nutrition of individuals  experiencing food insecurity."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to FNS:  The Administrator of FNS should make information on their website  regarding student SNAP eligibility requirements easier to understand and  more accessible, as a resource for colleges and state SNAP agencies.  (Recommendation 1)", "The Administrator of FNS should coordinate with its regional offices to  collect and review information about existing SNAP flexibilities and  examples of approaches state SNAP agencies are taking to assist eligible  college students to access SNAP benefits, and share such information  with state SNAP agencies. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Agriculture and the  Department of Education for review and comment. The Department of  Education provided technical comments, which we incorporated into the  report as appropriate. On November 28, 2018, and December 7, 2018,  the Directors of the FNS SNAP Program Development Division and Office  of Employment and Training met with us to provide the agency\u2019s  comments orally. At the December 7, 2018 meeting, FNS officials told us  they partially concur with our recommendations and believe that FNS has  sufficient guidance in place for states to provide further information to  colleges. However, the agency agrees with the intent of GAO\u2019s  recommendations and plans to review its existing guidance to determine  if any improvements are warranted. We continue to believe that additional  action is necessary to address our recommendations. While reviewing its  existing information would be helpful, we believe that changes to FNS\u2019s  existing information are also needed to improve the clarity and  accessibility of information about SNAP student eligibility requirements on  FNS\u2019s website, and that FNS needs to work with its regional offices to  identify and share additional information about state approaches to assist  eligible college students with access to SNAP benefits. In response to  FNS officials\u2019 comments, we also clarified both recommendations to focus  more on actions that fall under the responsibility of the FNS National  Office. FNS also provided technical comments, which we incorporated  into the report as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretaries of Agriculture, Education, appropriate congressional  committees, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what is known about the extent of food insecurity  among college students and their use of the Supplemental Nutrition  Assistance Program (SNAP); (2) how selected colleges are addressing  student food insecurity; and (3) the extent to which federal programs  assist college students experiencing food insecurity. This appendix  provides details of the data sources used to answer these questions, the  analyses we conducted, and any limitations to our analysis.", "We used multiple methodologies to conduct this review. We conducted a  review of academic studies based on original research to determine what  is known about food insecurity among college students. We assessed the  quality of these studies by evaluating their research methods and  determined that the studies we included in our review were sufficiently  reliable for our use. To describe the prevalence of risk factors for food  insecurity among college students, we used data on student  characteristics from the nationally representative National Postsecondary  Student Aid Study (NPSAS). We assessed the reliability of NPSAS data  by reviewing existing information about the data and the system that  produced them and by interviewing agency officials knowledgeable about  the data. We determined that the data were sufficiently reliable for the  purposes of describing the prevalence of risk factors for food insecurity  among college students and students\u2019 participation in SNAP.", "To understand how selected colleges address student food insecurity, we  conducted four state site visits (California, Kentucky, Massachusetts, and  Michigan) selected based on whether colleges and/or state government  agencies were taking steps to address food insecurity among students,  and geographic diversity, among other criteria. In each state, we visited  public colleges and universities, where we met with college officials,  students, and researchers. We also interviewed state higher education  and SNAP officials, as well as experts from relevant policy organizations.  To assess federal efforts, we identified federal programs that may assist  college students in need of food, interviewed officials from Education and  USDA, and reviewed relevant federal laws, regulations, and agency  guidance and program documents, as well as federal internal controls  standards applicable to these programs.", "To understand what is currently known about the extent of food insecurity  among college students, we conducted an in-depth review of studies. Our  preliminary search in Scopus identified a recent systematic literature  review on food insecurity on college campuses. Upon reviewing the  article\u2019s scope and methodology, we chose to update rather than  duplicate their efforts. We expanded the original search terms to include  \u201chigher education\u201d and \u201cpostsecondary\u201d among others, and searched two  additional research databases (ProQuest and Scopus) in addition to the  original list of sources (MEDLINE, PSYCHINFO, and Web of Science).  We identified peer-reviewed journal articles and other published research  through this search. Through news reports on food insecurity and  interviews with researchers, we also identified studies published up to  August 31, 2018 that may not have been included in our initial review. We  included studies in our review if they met the following criteria: (1) were  based on research conducted and published in the United States; (2)  were published since 2007; and (3) contained original, direct estimates of  food insecurity rates among college students.", "We identified a total of 35 studies that met these criteria and conducted  an initial review to determine if the studies met generally accepted social  science standards and were appropriate for our purpose to provide  information on the prevalence of food insecurity among college students.  We eliminated some studies if we determined that the methods were not  appropriate or rigorous\u2014specifically, we concluded that we could not  report the results of four studies due to research design limitations. For  instance, some studies did not fully disclose their methods, had small  sample sizes, used data based on low survey response rates, or did not  attempt to correct for or address potential biases in their methodology.  For studies included in this report, we performed an initial in-depth review  of the findings and methods, and a GAO methodologist performed a  second review to confirm our reported analysis of the findings. As a  result, we determined 31 studies to be of sufficient quality and we  summarized the findings of these 31 studies in our report (see table 3).", "While these 31 studies are of sufficient quality to provide information on  what is known about food insecurity among college students, the  generalizability of their findings require significant caveats. Most of the  survey results in these studies are not generalizable to a population larger  than their sample size, meaning that the findings apply only to the  respondents of the survey. None of the studies in our review conducted  non-response bias analyses or attempted to address potential selection  bias in the sample. Despite these limitations, the studies collectively offer  assessments of food insecurity conducted on over 200 campuses in more  than 30 states, at both 2- and 4-year schools, and all but three of the  studies used adapted versions of the USDA food insecurity measure.", "We analyzed data from the Department of Education\u2019s (Education)  National Postsecondary Student Aid Study (NPSAS). Because no federal  datasets contain food insecurity data specifically about college students,  we chose to analyze NPSAS data for the prevalence of risk factors  associated with food insecurity. Additionally, we used some summary  statistics from frequencies presented in the 2016 NPSAS data codebook.", "NPSAS data contain nationally representative, detailed demographic and  financial aid data for college students enrolled in less than 2-year, 2-year,  4-year, and graduate postsecondary programs. These data come from  institutional records, government databases, and interviews with students.  Because the NPSAS data are based on probability samples, estimates  are calculated using the appropriate sample weights provided which  reflect the sample design. Each of these samples follows a probability  procedure based on random selection, and they represent only one of a  large number of samples that could have been drawn. Since each sample  could have provided different estimates, we express our confidence in the  precision of our particular sample\u2019s results as a 95 percent confidence  interval. This is the interval that would contain the actual population value  for 95 percent of the samples we could have drawn. Unless otherwise  noted, all percentage estimates from the NPSAS data analysis have 95  percent confidence intervals within plus or minus 5 percentage points of  the percent estimate, and other numerical estimates have confidence  intervals within plus or minus 5 percent of the estimate itself. We  compared 95 percent confidence intervals to identify statistically  significant differences between specific estimates and the comparison  groups. The information provided in the NPSAS data, particularly those  from the interview portion of the study, are self-reported and not all of the  data are based on federal determinations or cross-verified with outside  sources. For example, students self-report their disability status, their  hours worked, and so on. Such self-reported data are subject to several  sources of nonsampling error, including the inability to obtain information  about all sample cases; difficulties of definition; differences in the  interpretation of questions; respondents\u2019 inability or unwillingness to  provide correct information; and errors made in collecting, recording,  coding, and processing data. These nonsampling errors can influence the  accuracy of information presented in the report, although the magnitude  of their effect is not known.", "Identification of Risk Factors for Food Insecurity  In order to identify risk factors associated with food insecurity among  college students, we reviewed published articles and reports on the topic  of food insecurity and interviewed researchers, college and state officials,  and officials at relevant policy organizations. We present the list of risk  factors for food insecurity we considered in table 4. Not all of the risk  factors we identified have a corresponding NPSAS variable. For example,  NPSAS does not ask respondents about unmet medical needs or  childhood food insecurity. Additionally some of the risk factors overlapped  and were thus not included in our analysis. For example, the NPSAS  dataset contains multiple variables pertaining to student and student  household income, such as household income, financial aid, and receipt  of public benefits. Many indicators of low-income status likely overlap  (e.g., being eligible for a Pell Grant and receiving other financial aid), and  many students who have one indicator will likely have others.", "Although this is not an exhaustive list of risk factors, individuals who  experience one of the following seven characteristics may be at risk of  food insecurity: being disabled, homeless or housing insecure, being a  former foster youth, receiving SNAP benefits, being a single parent, and  being the first-generation in a student\u2019s family to attend college. Table 5  shows how we compared these risk factors with corresponding variables  from the 2016 NPSAS data.", "Table 5. Selected Risk Factors and Corresponding Variables in the 2016 National Postsecondary Student Aid Study Data Set  Description  Indicates student has some type of disability or condition.", "Includes some students who were determined by a professional to be homeless (via the  Free Application for Federal Student Aid or FAFSA), but predominantly measures student- determined \u201crisk of homelessness.\u201d This is not a direct measure of homelessness.", "Indicates student is an orphan, ward of court, emancipated minor, or in legal guardianship.", "Indicates whether any member of the student\u2019s household received Food Stamp (SNAP)  Benefits during the 2013 or 2014 calendar year.", "Identifies independent students who were single parents/caretakers during the 2015-2016  academic year.", "Indicates total 2014 income as a percentage of the federal poverty level thresholds for  2014. For our purposes, low income is defined as having a household income level at or  below 130 percent of the federal poverty level.", "Indicates the highest level of education achieved by a parent, stepparent, or guardian of  the student. Per previous Department of Education studies, we define first generation as  college students whose parents\u2019 maximum educational attainment was a high school  diploma or less. Note that students who did not know their parent\u2019s highest education were  not counted as first generation students.", "The data are self-reported. The student may not be eligible for or receiving federal disability benefits.  The data are reported by the student and their family on the FAFSA or during the student interview.  National level, individual SNAP enrollment data are not available to verify this variable, as states  provide aggregate statistics to FNS.", "Because our analysis does not include some of the risk factors for food  insecurity listed in table 4, our findings may underestimate the number of  college students who have a risk factor for food insecurity. For example,  we heard in some of our interviews with researchers and in our  discussions with students that being an undocumented or an international  student was a risk factor for food insecurity. Such students are generally  ineligible for federal financial aid and are restricted in the type of other  federal aid they can receive. Undocumented students are also more likely  than other students to be poor. However, NPSAS does not contain  detailed data about undocumented or international students, so we could  not include this risk factor for food insecurity in our analysis. The risk  factors for food insecurity we included in our analysis may also be  correlated with one another and can co-occur. For example, youth who  were formerly in foster care are more likely than other youth to be low- income. Indeed, the prevalence of additional risk factors for food  insecurity is higher among low-income than wealthier students. We did  not analyze the extent to which some risk factors are more strongly  associated with food insecurity than others or attempt to rank or weight  the relative importance of risk factors.", "To calculate potential student SNAP eligibility, we first calculated the  number of students who might qualify for SNAP based upon having a  household income at or below 130 percent of the federal poverty line,  which is the standard income requirement for households that do not  include a member who is 60 years of age or older or disabled to qualify  for SNAP benefits. Next, we analyzed NPSAS variables to identify those  that corresponded with SNAP student eligibility rules. We deemed all  students who met the income requirements, were enrolled in school at  least half time, and met one of the student eligibility exemptions we were  able to identify in the data as potentially eligible for SNAP.", "However, our analysis has limitations and does not precisely identify all  students who are SNAP eligible. The 2016 NPSAS data set contains  several variables that match up closely with certain student eligibility  exemptions. For example, the exemptions related to age, having young  dependents, working 20 hours per week, and receiving certain federal  benefits have corresponding NPSAS variables (see table 6). For two of  the exemptions, we used variables from the NPSAS data set that do not  perfectly correspond to the statute but were the closest available proxies  in the data. For the eligibility exemption that covers parents caring for a  child 6-11 years old who are unable to obtain childcare to attend school  and work, we identified students who have a child 6-11 years old and  indicate they have no paid childcare. However, some individuals may  have unpaid childcare, such as family members, and be able to work and  attend school despite not having paid childcare, meaning they would not  meet this SNAP student eligibility exemption. For the disability exemption,  we used the NPSAS variable based on an interview question that asks  students if they have a mental or physical disability. However, because of  different definitions, the NPSAS disability variable may include students  with disabilities who would not qualify for the SNAP student exemption  related to disability. Specifically, to qualify for this SNAP student  exemption, the student must not be \u201cphysically or mentally fit,\u201d, while the  NPSAS interview question asks students if they have some type of  disability or condition, including a long-lasting condition such as serious  difficulty hearing; blindness or serious difficulty seeing; difficulty  concentrating, remembering or making decisions, a serious learning  disability, depression, or Attention Deficit Hyperactivity Disorder; or  serious difficulty walking or climbing stairs. As a result, we may  overestimate the number of students who would qualify for the student  exemption related to having a disability or caring for a child age 6-11.  Lastly, NPSAS does not contain a variable to capture the student  eligibility exemption related to enrollment in certain programs aimed at  employment, such as the Workforce Innovation and Opportunity Act or  Temporary Assistance for Needy Families employment and training  programs. Therefore, we could not identify any students who met this  eligibility exemption for SNAP and may have therefore underestimated  the number of students who were potentially eligible for SNAP.", "Additionally, SNAP eligibility for college students depends not only on  income and meeting a student exemption, but also on other  determinations such as the level of the individual\u2019s financial assets,  including savings and any state policy waivers that may apply to the  individual\u2019s eligibility. Given that our analysis relied on self-reported  information, and did not capture all aspects of student SNAP eligibility, we  did not make any legal determinations about whether individuals were  eligible for SNAP, and therefore our analysis can be characterized as  providing only a rough estimate of those students who may potentially be  eligible for SNAP benefits.", "To understand how selected colleges address student food insecurity, we  conducted four state site visits (California, Kentucky, Massachusetts, and  Michigan). We selected these states based on the following criteria:", "Mentioned in interviews with researchers or government officials as  being a state that is: actively addressing college food insecurity, or  has at least one public college that is taking action to address food  insecurity among college students (number of mentions).", "School or state program on hunger or food insecurity featured in  research papers or policy briefs (number of mentions).", "FNS data on food insecurity rates in the state, to indicate whether  food insecurity among college students might also be a problem (rank  by state).", "FNS data on SNAP enrollment and participation in the state, to  indicate the level of SNAP usage in the state (rank by state).", "FNS information regarding the number of SNAP waivers a state has  received, as a proxy for SNAP policy activity in the state (rank by  state).", "We also sought geographic diversity in our site visit states. To achieve  this, we created summary rank ordering of states based upon our criteria,  then, from those states that ranked in the top 15, we selected one state  from the Northeast, South, Midwest, and West census regions. Some of  our criteria were purely qualitative in nature, such as information from  interviews, research papers, and policy briefs regarding states and  colleges with promising practices. Our site visit selection focused  specifically on states and colleges with documented activity addressing  college student food insecurity, and is therefore biased toward those that  had taken action to address college student food insecurity. Our selection  strategy did not capture situations where there was high food insecurity  among students but the college or state was taking no action to address  it, nor did we seek to identify or visit locations where food insecurity had  not been identified as a problem. In addition to our site visits, we  conducted interviews with officials from one college in Texas and one  college in Ohio to learn about specific campus food insecurity initiatives in  these states.", "In each site visit state, we visited several colleges that were taking action  to address food insecurity among their student populations, selected  based on recommendations from researchers and college officials. We  also considered geographic proximity when selecting colleges to visit.  Overall, we spoke with officials representing 14 2- and 4-year public  colleges (12 in-person and 2 telephone interviews). In each of our site  visit states, we visited at least one large public university and one  community college. See table 7 for a list of the 2- and 4-year colleges we  interviewed in each state.", "At colleges, we asked members of the leadership team, financial aid  officers, student affairs administrators, and other staff members questions  about how they recognize, measure, and address college student food  insecurity. We also conducted discussion groups with students at seven  colleges we visited and asked about their experiences with food insecurity  and federal assistance programs, such as SNAP. Students were invited  by college officials to participate in these meetings. In each state we  visited, we also met with officials from the state agencies that administer  SNAP and any state governmental agencies, such as those overseeing  higher education or involved in addressing food insecurity among college  students. Lastly, in each site visit state, we identified and interviewed staff  members at policy organizations, such as legal policy institutes or hunger  advocacy groups, involved in efforts to address food insecurity among  college students.", "Assessing Federal Efforts to Address Food Insecurity  We assessed the extent to which federal programs assist college  students experiencing food insecurity by reviewing relevant federal laws,  regulations, and agency guidance and program documents related to  specific SNAP requirements for college students and we interviewed FNS  national office officials, including representatives of the Divisions of SNAP  Program Development, Employment and Training, and Retailer Policy.  We also interviewed FNS regional office officials in four of the seven FNS  regions about their experiences working with the FNS national office and  with state SNAP agencies in their regions to address college student food  insecurity and access to SNAP.", "We also sent an email to all 51 state SNAP agency directors (all 50 states  plus the District of Columbia) to ask about any actions their state has  taken to address college student food insecurity. We received responses  from 50 of the 51 state SNAP agencies, for a 98 percent response rate.  This email inquiry was conducted in March and April 2018 and may not  include all state actions that have occurred since April 2018.", "We conducted in-depth interviews with officials at five state SNAP  agencies and asked about any specific policies or actions their agencies  have taken to address college student food insecurity or to assist  potentially eligible college students to access SNAP. We conducted these  interviews in person with state SNAP agencies during our four state site  visits, and interviewed the Washington state SNAP agency by phone.", "We conducted this performance audit from July 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michelle L. St. Pierre (Assistant  Director), Nora Boretti (Analyst-In-Charge), Jessica K. Rider, and  Stephen C. Yoder made significant contributions to this report. Also  contributing to this report were Holly A. Dye, Barbara J. El Osta, Sarah C.  Gilliland, Alison E. Grantham, Gina M. Hoover, Saida B. Hussain, Sheila  R. McCoy, John W. Mingus Jr., Mimi Nguyen, Monica P. Savoy, Benjamin  A. Sinoff, Almeta Spencer, Rachel R. Stoiko, Elaine L. Vaurio, and David  A. Watsula."], "subsections": []}]}], "fastfact": ["Many college students may not have enough to eat\u2014but nobody knows exactly how many. Studies show a range of estimates, but none of the 31 we reviewed provided a national estimate. We also looked at student use of the Supplemental Nutrition Assistance Program. Of the 3.3 million students who were potentially eligible in 2016, less than half said they participated.", "Colleges have responded to student hunger by opening food pantries and helping students understand complicated SNAP rules.", "We recommended the Food and Nutrition Service clarify the rules and share information on how states help eligible students use SNAP."]}
{"id": "GAO-19-145", "url": "https://www.gao.gov/products/GAO-19-145", "title": "Army Corps of Engineers: Information on Shellfish Aquaculture Permitting Activities", "published_date": "2019-02-21T00:00:00", "released_date": "2019-02-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Entities undertaking shellfish aquaculture activities (i.e., the breeding and harvesting of oysters, clams, and mussels) may need to submit an application to the Corps in certain circumstances for authorization to conduct these activities. The Corps authorizes such activities using various permits, as long as the activities comply with various environmental and other laws.", "GAO was asked to review the Corps' process for authorizing shellfish aquaculture activity in U.S. coastal waters. This report describes, for 2012 through 2017, (1) the number and outcomes of the applications the Corps received for shellfish aquaculture activities and the types of permits the Corps used to authorize such activities, and (2) the experiences of permit applicants in selected districts in seeking Corps' authorization for their shellfish aquaculture activities.", "GAO reviewed laws and permitting documents and analyzed data on the number, outcomes, and types of permits the Corps used for 2012 through 2017 from the Corps' permitting database and assessed its reliability. GAO also reviewed detailed information from a non-generalizable sample of 15 permit applications and interviewed the applicants and Corps officials from four Corps districts, selected to reflect variation in geographic location and shellfish activity; the information from the four districts is not generalizable to other Corps districts."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Army Corps of Engineers (Corps) authorized most (87 percent) of the 3,751 shellfish aquaculture applications it received from 2012 through 2017, according to Corps data. Of the 19 Corps districts that have coastal waters within their geographic areas of responsibility, 17 districts received and authorized applications. The majority of those districts (13 of 17) authorized applications using Nationwide Permit 48, a type of permit intended to streamline the authorization process for shellfish aquaculture activities. Additionally, districts may add conditions to nationwide permits or develop region-specific permits to address state or regional environmental concerns. Of the four districts GAO reviewed in detail, two districts added regional conditions applicable to Nationwide Permit 48, such as prohibiting shellfish activity within submerged aquatic vegetation beds or saltmarshes.", "The 15 permit applicants from the four districts GAO reviewed had mixed views on their experiences with seeking authorization for their shellfish aquaculture activities. For example, 10 applicants across the four districts described the length of time to authorize their activities\u2014ranging from 1 day to about 4 months\u2014as reasonable, with several applicants indicating the Corps was efficient in reviewing their applications. In contrast, five applicants from three Corps districts said that the amount of time it took for the Corps to authorize their shellfish aquaculture activities\u2014ranging from 18 days to about 8 months\u2014was unreasonable. Corps officials from the four districts indicated they have taken some steps to help reduce authorization review time. For example, the four districts took steps to more efficiently conduct reviews under the Endangered Species Act. This has in turn helped reduce the Corps' time frames for issuing authorizations, according to Corps officials GAO interviewed. For instance, officials from one district said their review time declined from over 30 days to 1 to 2 days as a result of the change in the review process."]}], "report": [{"section_title": "Letter", "paragraphs": ["Shellfish aquaculture\u2014the breeding, rearing, and harvesting of oysters,  clams, and mussels\u2014plays a vital role in supplying commercial seafood,  supporting jobs in coastal communities, and contributing to healthy  ecosystems. In 2016, U.S. shellfish growers produced 37 million pounds  of oysters, 10 million pounds of clams, and 900,000 pounds of mussels at  an estimated value of $340 million, according to a National Oceanic and  Atmospheric Administration (NOAA) report. With a trade deficit in  seafood, there has been growing interest in expanding U.S. seafood  production, including generating new opportunities for shellfish  aquaculture across U.S. coastal waters. In 2011, NOAA established a  National Shellfish Initiative in partnership with shellfish growers and  others to increase shellfish populations through commercial production  and conservation activities. Following the launch of the National Shellfish  Initiative, several states developed state initiatives to further promote  shellfish aquaculture production.", "Shellfish aquaculture activities often involve a complex regulatory path.  Various local, state, tribal, and federal requirements may apply to  aquaculture activities. For example, state and local authorities may  require licenses, aquatic leases, and food safety provisions, among other  things, for commercial aquaculture activities. At the federal level, the U.S.  Army Corps of Engineers (Corps), under section 10 of the Rivers and  Harbors Act of 1899 and section 404 of the Clean Water Act, issues  permits respectively for activities affecting navigable waterways and  discharges of dredged or fill material into waters of the United States,  which can include shellfish aquaculture activities in coastal waters. The  Corps authorizes activity under these permits subject to, among other  things, a determination that a regulated activity is not contrary to the  overall public interest, including consideration of compliance with other  applicable federal laws, such as the Endangered Species Act and the  National Environmental Policy Act. Entities who wish to undertake  shellfish aquaculture activities may need to submit an application to the  Corps for written authorization to conduct such activities under permits  issued by the Corps.", "You asked us to review the Corps\u2019 process for authorizing shellfish  aquaculture activity in U.S. coastal waters. This report describes, for 2012  through 2017, (1) the number and outcomes of the applications the Corps  received for shellfish aquaculture activities and the types of permits the  Corps used to authorize such activities, and (2) the experiences of permit  applicants in selected districts in seeking Corps authorization for their  shellfish aquaculture activities.", "To conduct our work, we reviewed relevant federal laws, regulations, and  Corps documents on permitting, and interviewed officials from Corps  headquarters. We also selected a non-generalizable sample of four Corps  districts for a closer examination of the nature of shellfish aquaculture  activities and the types of permits used by districts to authorize such  activity. The four districts were Baltimore, New Orleans, Norfolk, and  Seattle. We selected these districts based on several factors, including  geographic region, the commercial value of shellfish cultivated, and the  type and level of shellfish aquaculture activity authorized by the Corps.  We conducted site visits from July 2017 to March 2018 to each of the four  Corps districts to observe aquaculture activities and learn about the types  of permits the districts use to authorize shellfish aquaculture activities.  During our site visits, we interviewed state agency officials in Maryland,  Louisiana, Virginia, and Washington involved in permitting at the state  level to learn about state permitting requirements and coordination with  the Corps districts on various aspects of shellfish aquaculture permitting.  We also interviewed other stakeholders such as federal agencies  involved in permitting activities, including regional officials from the  Department of the Interior\u2019s U.S. Fish and Wildlife Service and NOAA\u2019s  National Marine Fisheries Service, within the Department of Commerce.  The information we obtained from the four districts and stakeholders is  not generalizable to other Corps districts or stakeholders but illustrates  the variation in the Corps\u2019 shellfish aquaculture permitting at the district  level.", "To examine the number, outcomes, and types of permits the Corps used  to authorize shellfish aquaculture activity, we obtained and analyzed data  from the Corps\u2019 permitting database: the Operations and Maintenance  Business Information Link Regulatory Module 2. Specifically, we analyzed  nationwide data on shellfish aquaculture applications submitted to Corps  district offices with a decision date from January 1, 2012, through October  26, 2017, which were the most recent data available at the time of our  review. These applications covered various types of shellfish aquaculture  activities, including commercial operations, as well as oyster reef  restoration activities. For all Corps districts, we analyzed the number of  applications received, authorized, withdrawn, or denied, and under which  type of permit an application was submitted to the Corps. We took steps  to determine the reliability of the Corps\u2019 permitting data, including  comparing the data to the administrative files for three to five randomly  selected applications from four districts we reviewed. We also reviewed  agency guidance on data entry and interviewed agency officials  knowledgeable about the Corps\u2019 permitting data, including officials from  the four districts and headquarters. Based on these steps, we found the  data to be sufficiently reliable to provide nationwide and district-level  summary information on applications, authorizations, and the types of  permits the Corps used during the period of our review.", "To determine the experiences of permit applicants in selected districts in  seeking Corps authorization for their shellfish aquaculture activities, we  randomly selected 15 applications submitted by different applicants  during the time period of our review to the four Corps districts in our  review. We reviewed the documents included in the Corps\u2019 administrative  files and conducted semi-structured interviews with each of the applicants  and Corps officials responsible for reviewing these applications about  their experiences with the application process. We then analyzed and  categorized the interview responses based on common themes that we  identified across the interviews. The information we obtained from the  permit applicants and Corps officials we interviewed is not generalizable  to other applicants, but illustrates the types of experiences permit  applicants in the four districts had in seeking authorization for their  shellfish aquaculture activities. We also interviewed Corps officials in the  four districts and headquarters to identify any steps the Corps has taken  to address difficulties raised by the permit applicants and reviewed  documentation related to these steps. Appendix I presents a more  detailed description of our objectives, scope, and methodology.", "We conducted this performance audit from June 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": ["According to NOAA documentation on domestic aquaculture production,  shellfish aquaculture represents a large and growing segment of seafood  production in the United States, with aquaculture operations present in all  coastal regions of the United States (see table 1). The economic value of  shellfish varies based on factors such as market, location, and species.  For example, one species of clam, the geoduck\u2014a large saltwater clam  found in the Pacific Northwest\u2014has sold for as much as $100 per pound  in the Asian market, where it is valued as a luxury food.", "NOAA and scientific research have recognized the role that shellfish  aquaculture can play in supporting healthy coastal ecosystems. For  example, scientific research has shown that the filter feeding activity of  oysters can help improve water clarity and quality by reducing  concentrations of suspended materials such as algae. Additionally,  research has demonstrated that oyster reefs can serve as natural  breakwaters that may protect shorelines against damage from wind,  waves, and flooding. In contrast, some effects of shellfish aquaculture are  less well known or understood. For instance, there are knowledge gaps of  the effects that aquaculture activities may have on submerged aquatic  vegetation, according to NOAA reports.", "Geoduck clams are the world\u2019s largest  burrowing clam, generally weighing between 1  and 3 pounds, with a shell length that can  exceed 7 inches. Geoducks can be found in  the wild in the Pacific Northwest, and growers  in Washington State have cultivated geoducks  through aquaculture on a commercial scale  since the 1990s. Washington State produced  about 90 percent of farmed geoducks globally  in 2013, according to a report by the University  of Washington. In Asian markets, geoducks  are sought-after in high-end seafood  restaurants where they can be prepared for  cooked or raw consumption.", "In general, commercial growers cultivate shellfish by two methods: on the  bottom of coastal waters, or in the water column, which extends from the  surface to the bottom of those waters. Commercial growers harvest  oysters and clams grown on the bottom of waters by hand or by  mechanical means such as dredging, raking, or other tilling activities.  Commercial growers who cultivate shellfish within the water column  generally grow them in racks or cages suspended in the water (see fig.  1). Growers use different methods of cultivation depending on the target  commercial market, the environment for cultivation, and the need to  protect the shellfish from predatory species such as fish or crabs.", "Shellfish aquaculture activities can be subject to various requirements at  local, state, tribal, and federal government levels. For example, local  authorities in the county, town, or other jurisdiction where shellfish  activities are planned may require a shellfish grower to ensure  compliance with local policies before commencing cultivation activities. In  addition, some states have specific regulations that apply to shellfish  aquaculture activities. These can include, for example, a certification that  aquaculture activities meet state water quality standards, or a  requirement that the activities are covered by an aquatic lease. Treaties  grant certain tribes the rights to a portion of shellfish harvest in a  particular area.", "At the federal level, a shellfish grower may need authorization from the  Corps to undertake shellfish aquaculture activities. The Corps is  responsible for ensuring compliance with Section 10 of the Rivers and  Harbors Act of 1899, which requires authorization for structures in or work  affecting navigable waters of the United States, or both, that could  interfere with navigation. Structures used in shellfish aquaculture activities  may include buoys, floats, racks, nets, and lines. The Corps is also  responsible for ensuring compliance with section 404 of the Clean Water  Act, which requires authorization for the discharge of dredged or fill  material, or both, into waters of the United States. Shellfish aquaculture  activities such as seeding, rearing, cultivating, transplanting, and  harvesting shellfish may affect waters of the United States, and the Corps  reviews these activities in accordance with applicable laws and  regulations.", "Nineteen Corps districts have coastal waters within their geographic  areas of responsibility and therefore may authorize shellfish aquaculture  activities (see fig. 2). Under the direction of eight regional division offices  and headquarters, the district offices are responsible for reviewing,  authorizing, and ensuring appropriate levels of coordination for shellfish  aquaculture activities in their districts.", "In authorizing shellfish activities, the Corps must implement various legal  requirements, which may entail consulting or coordinating with other  federal agencies, states, tribes, the public, and other parties. These legal  requirements include:", "National Environmental Policy Act. Under the act, the Corps  generally must evaluate the potential environmental effects of projects  proposed for approval (e.g., by permit), such as shellfish aquaculture  activities, by preparing either an environmental assessment or a more  detailed environmental impact statement.", "Endangered Species Act. Under section 7 of this act, if a proposed  Corps action may affect a listed species or designated critical habitat,  formal consultation is required with the U.S. Fish and Wildlife Service  or the National Marine Fisheries Service. The Corps may also  undertake programmatic consultations with these agencies, which  generally combine reviews for similar activities into one consultation.", "Magnuson-Stevens Fishery Conservation and Management Act.", "Under this law, the Corps must consult with the National Marine  Fisheries Service if a proposed federal action may adversely affect  essential fish habitat that a regional fisheries management council has  identified.", "National Historic Preservation Act. Under section 106 of the act,  the Corps must take into account the effects of shellfish aquaculture  activities on historic properties and afford the Advisory Council on  Historic Preservation a reasonable opportunity to comment on such  activities. The Corps must also consult with the relevant state or tribal  historic preservation officer, as appropriate.", "The Corps uses different types of general and individual permits to  authorize a wide range of activities, including shellfish aquaculture  activities, as shown in table 2.", "In some cases, if an entity\u2019s shellfish aquaculture activities comply with  the terms and conditions laid out in a general permit, then the entity may  undertake the activities without written authorization from the Corps. In  such instances, according to its permitting guidance, the Corps would  consider those activities to be authorized under the specified general  permit.", "In other cases, however, entities who wish to undertake shellfish  aquaculture activities under a general permit may need to submit an  application to the Corps for written authorization to conduct such  activities. For example, some terms and conditions may require entities to  notify the Corps if their proposed activities may affect areas inhabited by  submerged aquatic vegetation or endangered species or their designated  critical habitats. In such instances, entities must submit applications to the  Corps with required information, including the location and technical  information about the proposed activity. Based on Corps guidance, the  agency then assesses the applicant\u2019s proposed activities to determine  whether they comply with all of the general permit\u2019s terms and conditions.", "If the Corps verifies compliance, it issues a written authorization for the  entity to undertake the proposed activities.", "In March 2007, the Corps developed a nationwide permit\u2014Nationwide  Permit 48\u2014to help streamline the process for authorizing existing  commercial shellfish aquaculture activities, effective for a 5-year period.  In 2012, the Corps revised and reissued Nationwide Permit 48 to, among  other things, authorize new activities and to clarify some reporting  requirements. The Corps most recently reissued Nationwide Permit 48 in  March 2017, which defined the activities that constitute new commercial  aquaculture activities, among other revisions, and remains in effect until  March 2022. Corps districts may also develop and use other types of  programmatic and regional general permits to authorize shellfish  aquaculture activities. Generally, entities that submit an application and  receive authorization under a general permit need to resubmit their  application upon expiration of their permit to re-seek authorization to  continue their aquaculture activities."], "subsections": []}, {"section_title": "The Corps Authorized Most of the 3,751 Applications Received for Shellfish Aquaculture Activities from 2012 through 2017 Using Various Types of Permits", "paragraphs": ["Based on our analysis of data from the Corps\u2019 permitting database, we  found that the Corps authorized most of the 3,751 shellfish aquaculture  applications it received from 2012 through 2017 using various types of  general and individual permits. Of the 19 Corps districts that have coastal  waters within their geographic areas of responsibility, 17 Corps districts  received shellfish aquaculture applications, with the Seattle District  receiving the most applications and the New England District receiving  the next highest amount (see table 3). The number of applications does  not correspond to the level of shellfish activity in a particular district,  however, as some activities may be authorized under a general permit  without triggering the need for an entity to submit an application for Corps  authorization, as previously noted.", "Of the 3,751 applications the Corps received from 2012 through 2017, the  Corps authorized 3,281, or about 87 percent of the applications,  according to our analysis of Corps data. Four applications (less than 1  percent) were denied, and the remaining 466 applications (about 12  percent) were withdrawn. Applications were denied or withdrawn for a  variety of reasons. For example, Corps officials we interviewed said that  the Corps would deny an application if the applicant was denied the  necessary approvals from state or other relevant regulatory authorities.  An application may have been withdrawn, according to the Corps officials,  if the applicant decided to seek an individual rather than a general permit  or did not provide sufficient information in its application for the Corps to  determine that the applicant could meet the terms and conditions of the  requested permit, among other reasons.", "According to Corps data, the applications the Corps authorized from 2012  through 2017 corresponded to 2,631 unique shellfish aquaculture  projects. Almost half of these projects (49 percent) were located in the  Seattle District, about 29 percent were located in the New England  District, and the remaining 22 percent were spread across 15 other  coastal districts.", "The majority of Corps districts (13 of 17) authorized shellfish aquaculture  applications using Nationwide Permit 48, according to our analysis of  Corps data. Specifically, nearly two-thirds of the applications (2,138 of  3,281) were authorized under Nationwide Permit 48, as shown in table 4.  Four districts did not authorize activity under Nationwide Permit 48, but  instead used a different type of general permit to authorize shellfish  aquaculture activity. For example, the New England District, which  includes the states of Connecticut, Rhode Island, and Maine, authorized  shellfish activity using state-specific general permits. The majority of  districts (13 of 17) also authorized shellfish activities under individual  permits, but overall individual permits represented about 3 percent (85 of  3,281) of authorized activity.", "While many applications were authorized under Nationwide Permit 48, we  found that Corps districts added conditions to this or other general  permits to account for state or regional environmental or other relevant  regulatory concerns. For example, two districts we reviewed\u2014Norfolk  and Seattle\u2014generally used Nationwide Permit 48 to authorize shellfish  aquaculture activities in their districts, but added conditions to the  nationwide permit to address concerns specific to their regions as follows:  In the Norfolk District, the Corps developed several regional  conditions applicable to the Nationwide Permit 48 issued in March  2017. These regional conditions prohibit activity within submerged  aquatic vegetation beds or saltmarshes and prohibit removing or  damaging vegetation in these areas, among other things. Norfolk  District officials said that these regional conditions align with  requirements under Virginia state regulations. As long as shellfish  aquaculture growers meet those requirements, according to these  officials, then growers may conduct their projects without a state  permit or submitting an application to the Corps for authorization.", "Because these growers do not submit applications to either the state  of Virginia or the Corps for authorization for their activities, district  officials said they do not know how much shellfish activity may be  occurring under Nationwide Permit 48 in the district, but Virginia is  among the largest shellfish producing states.", "In the Seattle District, the Corps also developed several regional  conditions applicable to Nationwide Permit 48. For example, one  regional condition prohibits harvesting clams using certain hydraulic  harvesting equipment. Any entity seeking to undertake shellfish  aquaculture activities in the Seattle District needs to submit an  application to the Corps for authorization, district officials explained.  According to the National Marine Fisheries Service, almost all  locations for shellfish activity in Washington State are designated as  critical habitat for one or more threatened or endangered species  listed under the Endangered Species Act. The presence of listed  species or their designated critical habitats is one trigger under  nationwide permits, including Nationwide Permit 48, requiring entities  to submit an application to the Corps for review and authorization for  conducting those activities.", "In certain instances, Corps headquarters officials said that some districts  may find that a nationwide permit, such as Nationwide Permit 48, does  not address the activity or requirements in their districts. Corps officials  said that in such cases a district may have a region-specific general  permit that more closely follows state or local requirements. Two Corps  districts we reviewed\u2014New Orleans and Baltimore\u2014generally used or  have used regional permits to authorize shellfish aquaculture activities in  their regions. Specifically,  In the New Orleans District, when Nationwide Permit 48 was first  issued in 2007, Corps officials said that the district was generally  using a programmatic permit that incorporated existing Louisiana  regulations on coastal development. The New Orleans District was  generally using this programmatic permit to authorize shellfish  aquaculture and other coastal activities in Louisiana. Among the  conditions in the permit are prohibitions on structures with proximity to  flood control and hurricane damage risk-reduction levees, and  activities that would impact barrier islands, bird rookeries, and coral  reefs\u2014coastal areas of Louisiana that are regarded by the state as  environmentally sensitive. As a result, district officials said they  continue to use their programmatic permit to allow the state of  Louisiana a lead role in regulating coastal activities.", "The Baltimore District used a regional permit to authorize shellfish  aquaculture activities until August 2016. According to district officials,  Maryland had few existing commercial shellfish aquaculture projects  before 2010, and at that time the Corps restricted the use of  Nationwide Permit 48 to existing shellfish aquaculture activities. Any  new activities required an individual permit, which involved a more  extensive review process. The state of Maryland began to promote  shellfish aquaculture in 2010, and many new growers entered the  industry, district officials said. In response, the Baltimore District  created a regional permit for new shellfish aquaculture projects, which  district officials said allowed for a more streamlined process than the  process needed for an individual permit. The regional permit expired  in August 2016; instead of updating it, the Baltimore District replaced  it with Nationwide Permit 48. Nationwide Permit 48 issued in March  2012 and in March 2017 covers new as well as existing shellfish  aquaculture activities, and district officials said that there was no  longer a need to use their regional permit and could use the  Nationwide Permit 48 upon expiration of the regional permit."], "subsections": []}, {"section_title": "Applicants Across the Four Selected Districts Had Mixed Views on their Experiences in Seeking Authorization for their Shellfish Activities", "paragraphs": ["Through our interviews with 15 permit applicants from the four districts we  reviewed and with Corps district and headquarters officials, we found that  applicants had mixed views on their experiences in seeking authorization  for their various shellfish aquaculture activities. Overall, 10 of the 15  applicants across the four districts said they understood the application  process. Several of these applicants said that their knowledge stemmed  from previous experience seeking authorization from the Corps or from  information provided by state or Corps officials. Similarly, 10 applicants  from the four districts described the length of time the Corps took to  authorize their activities as reasonable, with several applicants  commenting that the Corps was efficient in reviewing and authorizing their  application. For these applications, the length of time ranged from 1 day  to about 4 months.", "In contrast, 11 permit applicants across the four districts cited facing one  or more difficulties with various aspects of the application process. For  example, 5 of the 15 applicants indicated they were unclear about what  steps were involved in the application process such as the information  they needed to submit as part of the application or how to meet the  requirements outlined in the permit terms and conditions. One applicant in  the Seattle District said it was difficult to know how to address a condition  in Nationwide Permit 48 that restricts shellfish activity in areas adjacent to  potential spawning habitat for certain species of forage fish. When  seeking clarification from the Corps, he said Corps officials could not  specify how far away from spawning habitat his project should be located.  Seattle Corps District officials said the Corps has been reviewing how to  consistently define adjacent spawning areas, among other requirements,  but had not yet made a determination when this application was  reviewed.", "Eight of the 15 permit applicants from three Corps districts expressed  concern that they did not receive sufficient information about the status of their application after submitting it to the Corps for review. Two of these  applicants said they contacted the Corps to get information on the status  of their applications but that sometimes it was difficult to reach Corps  officials. The applicants said their shellfish activities had time-sensitive  needs and that not knowing the status or time frames associated with the  permitting process was problematic. For example, one permit applicant in  the New Orleans District said not knowing when permitted activity would  be authorized jeopardized the ability to take advantage of the naturally  occurring seasonal oyster spawn that was critical to the viability of the  project. New Orleans District officials agreed that it may be difficult for  applicants to quickly determine the status of their applications, as a phone  call to the Corps is the only way to obtain such information. Officials from  two districts we reviewed said their goal is to generally respond to  inquiries within 2 days, but this is not always possible due to heavy  workloads or staffing constraints. For example, in the New Orleans  District, officials said the workload across their permitting program is high,  with a typical project manager responsible for reviewing 35 to 40 permit  applications at any one time.", "In addition, five permit applicants from three Corps districts said they  believed that the amount of time it took for the Corps to authorize their  shellfish aquaculture activities was unreasonable. For these applications,  the length of time ranged from 18 days to about 8 months. One applicant  from the Seattle District who waited about 8 months to receive  authorization for the application in 2012 said that he continued his  shellfish operations while waiting authorization, but was concerned that  operating without the Corps\u2019 authorization put his operations at risk from  potential legal challenges. Officials in the Seattle District said they have  seen an increase in applications for shellfish aquaculture authorizations  over the last several years, which has significantly increased their  workload and, in some cases, affected their ability to issue authorizations  in a timely manner. Corps officials from headquarters and the four  districts said it is generally their goal to authorize applications within 60  days, but limited staffing, heavy workloads, and the need to coordinate or  consult with other federal, state, or tribal agencies may prevent them from  doing so.", "Corps officials from the four selected districts have taken some steps to  address difficulties applicants have experienced with understanding  permit terms and conditions. For example, officials in the Seattle and  Baltimore Districts have taken steps to help explain some permit terms  and conditions. In Seattle, district officials said they have held quarterly  meetings since 2015 for interested applicants and other stakeholders to  address concerns or clarify certain Nationwide Permit 48 conditions.  Seattle District officials said that attendees generally provided positive  feedback about these quarterly meetings and that they plan to continue  holding such meetings to discuss permit conditions or other issues that  may arise. Similarly the Baltimore District has held aquaculture  workshops on an as-needed basis for applicants and other stakeholders  to clarify permit conditions. For example, in September 2016, the  Baltimore District held a workshop to explain a permit condition intended  to prevent endangered sea turtles from entanglements in aquaculture  gear. One applicant we interviewed said this workshop was helpful and  provided a better understanding of permit conditions. Officials from the  Baltimore District said that they plan to conduct additional aquaculture  workshops in 2019 and will invite representatives from the Maryland  Department of Natural Resources to participate.", "The four Corps districts have also taken some steps to address difficulties  applicants have experienced with the time it takes to authorize shellfish  aquaculture activities. For example, in 2017, the Seattle District  developed an approach to expedite its application process for the  Nationwide Permit 48 issued in March 2017. Specifically, for those  applicants who had previously been authorized under Nationwide Permit  48 in 2012 and who did not anticipate changes to their activities for the  2017 permitting cycle, district officials said they could base their review on  previously submitted documentation from the applicants, allowing them to  more quickly reauthorize those activities. The five permit applicants we  interviewed from the Seattle District said that the Corps\u2019 expedited  process initiated in March 2017 improved the timeliness of receiving their  authorizations. For instance, one applicant who waited about 8 months to  receive his authorization in 2012 said the Corps issued his most recent  authorization in 2017 in 2 months.", "In addition, Corps officials from across the four districts said they have  taken steps to reduce the time needed to review applications through  efforts to more efficiently conduct reviews under the Endangered Species  Act. For example:", "Corps officials from the Baltimore and Norfolk Corps districts worked  with the National Marine Fisheries Service in 2017 to develop a  regional programmatic consultation to help streamline Endangered  Species Act assessments of the potential impact that shellfish  aquaculture activities may have on listed species or their designated  critical habitats. Corps officials from the Baltimore District said the  review process, developed in association with the programmatic  consultation, decreased their review time from over 30 days to 1 to 2  days, which in turn has helped reduce the Corps\u2019 time frames for  issuing authorizations.", "In 2015, New Orleans District officials said they implemented a  standardized process for evaluating applications for Endangered  Species Act compliance. The district developed a standardized form,  called the Standard Local Operating Procedure for Endangered  Species in Louisiana, which district officials said helps to facilitate  evaluations by allowing program managers to quickly assess whether  or not an application requires further review and consultation and  reducing the overall time to process shellfish aquaculture-related  applications.", "Corps officials from the Seattle District worked with the National  Marine Fisheries Service and U.S. Fish and Wildlife Service to  develop a programmatic consultation, issued in 2016. The  programmatic consultation identified methods for carrying out shellfish  aquaculture activities that would avoid adverse environmental effects  on listed species and their critical habitats, and reduce water quality  impacts. Corps officials from the Seattle District said that this  programmatic consultation has resulted in a more efficient review  process for applicants seeking authorization under Nationwide Permit  48 by reducing the amount of time needed to assess whether an  applicant\u2019s proposed activities may have the potential to affect listed  species or their critical habitats.", "To further improve the application process, Corps headquarters officials  said that they are initiating training in fiscal year 2019 through online  modules that will cover various aspects of permitting such as clarifying  the necessary elements needed from entities in submitting an application.  Also, in October 2018, Corps headquarters launched a community of  practice on shellfish aquaculture permitting, which officials said will allow  project managers and others with an interest in shellfish aquaculture to  share lessons learned and to collaborate on relevant issues in the future.  A Corp official said the Corps plans to hold quarterly meetings for the  shellfish aquaculture permitting community of practice going forward."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Defense for review  and comment. The department provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Army, the Chief of Engineers and  Commanding General of the U.S. Army Corps of Engineers, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or FennellA@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report describes, for 2012 through 2017, (1) the number and  outcomes of the applications the Corps received for shellfish aquaculture  activities and the types of permits the Corps used to authorize such  activities, and (2) the experiences of permit applicants in selected districts  in seeking Corps authorization for their shellfish aquaculture activities.", "To conduct our work, we reviewed relevant federal laws, regulations, and  Corps documents on permitting, and interviewed officials from Corps  headquarters. We selected a non-generalizable sample of four Corps  districts\u2014Baltimore, New Orleans, Norfolk, and Seattle\u2014for a closer  examination of the nature of shellfish aquaculture activities and the types  of permits used by districts to authorize such activity. We selected these  districts based on several factors:", "Geographic region. We selected at least one district from each of the  Pacific, Atlantic, and Gulf coasts to cover any differences in shellfish  activity by geographic location.", "Commercial value of shellfish. The states in which the four districts  reside\u2014Washington (Seattle District); Maryland (Baltimore District);  Virginia (Norfolk District); and Louisiana (New Orleans District)\u2014 account for more than 60 percent of the commercial shellfish sales in  the United States as of 2013, the most recent data available as of  December 2018.", "Type and level of permitting activity authorized by the Corps. We  also chose districts to represent different types of general and  individual permits the Corps districts used to authorize shellfish  aquaculture as well as the level of permitting activity. The four districts  received more than half of the shellfish aquaculture applications  authorized by the Corps during 2012 through 2017.", "We conducted site visits from July 2017 to March 2018 to each of the four  selected districts to observe aquaculture activities and learn about the types of permits the districts use to authorize shellfish aquaculture  activities. We also interviewed stakeholders with a regulatory role in  shellfish aquaculture and non-governmental organizations with an  advocacy role, as follows:", "Federal Officials. We interviewed officials from three regional offices  of the National Marine Fisheries Service and U.S. Fish and Wildlife  Service to understand how they work with the four Corps districts on  shellfish aquaculture permitting. We gained their perspectives on how  they coordinate with the Corps to meet various legal requirements,  such as those under the National Environmental Policy Act,  Endangered Species Act, and Magnuson-Stevens Fishery  Conservation and Management Act.", "State Officials. We interviewed state agency officials involved in  permitting at the state level to learn about state permitting  requirements and coordination undertaken with the Corps districts on  various aspects of shellfish aquaculture permitting. Specifically, we  interviewed officials from the Maryland Department of Natural  Resources, Washington Department of Ecology, Virginia Marine  Resources Commission, Louisiana Department of Natural Resources,  and Louisiana Department of Wildlife and Fisheries.", "Non-governmental Officials. We also interviewed non-governmental  organizations with an advocacy role related to shellfish aquaculture or  conservation to gain their perspectives on the Corps\u2019 permitting  process. We interviewed officials from the Chesapeake Bay  Foundation, The Nature Conservancy, Pacific Coast Shellfish  Growers Association, East Coast Shellfish Growers Association,  Oyster South, Center for Food Safety, the Coalition to Protect Puget  Sound Habitat, the Coalition to Restore Coastal Louisiana, and the  Coastal Protection and Restoration Authority of Louisiana. We  selected these organizations because each had interacted with one or  more of the four Corps districts we reviewed on shellfish aquaculture  issues during the period of our review.", "The information we obtained from officials from the four districts and  stakeholders is not generalizable to other Corps districts or stakeholders  but illustrates the variation in Corps\u2019 shellfish aquaculture permitting at the  district-level.", "To examine the number, outcomes, and types of permits the Corps used  to authorize shellfish aquaculture activity, we obtained and analyzed data  from the Corps\u2019 permitting database, the Operations and Maintenance  Business Information Link Regulatory Module 2. Specifically, we analyzed  nationwide data on shellfish aquaculture applications submitted to Corps  district offices with a decision date from January 1, 2012, through October  26, 2017, which were the most recent data available at the time of our  review. The information we analyzed from the database included  applications for various types of shellfish aquaculture activities for which  entities sought Corps authorization, including commercial operations, as  well as shellfish aquaculture and oyster reef restoration activities. For all  Corps districts, we analyzed the number of applications received,  authorized, withdrawn, or denied, and under which type of permit an  application was submitted to the Corps. We took steps to determine the  reliability of the Corps\u2019 data, including comparing the data to the  administrative files for three to five randomly selected applications from  the four districts we reviewed. We also reviewed agency guidance on  data entry and interviewed agency officials knowledgeable about the  Corps\u2019 permitting data, including officials from the four districts and  headquarters. Based on these steps, we found the data to be sufficiently  reliable to provide nationwide and district-level summary information on  applications, authorizations, and the types of permits the Corps used  during the period of our review.", "To determine the experiences of permit applicants in selected districts in  seeking Corps\u2019 authorization for their shellfish aquaculture activities, we  randomly selected 15 applications submitted by different applicants  during the time period of our review to the four Corps districts in our  review. We reviewed the materials included in the Corps\u2019 administrative  files to determine the nature of activities being proposed, documentation  of any interactions between the Corps\u2019 and the applicants throughout the  review process, and the time frames for the review, among other things.  We conducted semi-structured interviews with each of the applicants to  gain their experience during the application process, including their  perspectives on the steps involved in submitting an application, the times  frames for receiving authorization, their understanding of permit terms  and conditions, and the nature of any interactions with the Corps, among  other things. We also conducted semi-structured interviews with the  Corps managers responsible for reviewing these applications to obtain  their perspectives about their review process for the selected  applications. We then analyzed and categorized the interview responses  based on common themes that we identified across the interviews. The  information we obtained from the permit applicants and Corps officials we  interviewed is not generalizable to other applicants, but illustrates the  types of experiences permit applicants in the four districts have had in  seeking authorization for their shellfish aquaculture activities.", "In addition, we also interviewed Corps officials in the four districts and  headquarters and reviewed related documentation to identify any steps  the Corps has taken to address difficulties raised by the permit applicants.  We then requested and reviewed supporting documentation when  officials identified examples of steps they have taken to help improve the  application process.", "We conducted this performance audit from June 2017 to January 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."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Alyssa M. Hundrup (Assistant  Director), Ginny Vanderlinde (Analyst in Charge), Justin Fisher, Melissa  Greenaway, Rich Johnson, Ying Long, Danny Royer, Sheryl Stein, and  Jina Yu made key contributions to this report. Mark Braza, Juan Garay,  and Gina Hoover also made contributions to this report."], "subsections": []}]}], "fastfact": ["Shellfish aquaculture projects\u2014the breeding, rearing, and harvesting of oysters, clams, and mussels\u2014may require authorization from the U.S. Army Corps of Engineers. Among other things, the Corps examines compliance with navigation and environmental laws.", "We reviewed permit applications for such projects from 2012 through 2017 and found the Corps approved 87% of the 3,751 applications it received. It denied less than 1%. The rest were withdrawn.", "We also reviewed the experiences of 15 applicants. Ten said the time it took to get a permit, which ranged from 1 day to 4 months, was reasonable. Five said their 18-day to 8-month waits were not."]}
{"id": "GAO-18-183", "url": "https://www.gao.gov/products/GAO-18-183", "title": "Federal Rulemaking: OMB Should Work with Agencies to Improve Congressional Review Act Compliance during and at the End of Presidents' Terms", "published_date": "2018-03-13T00:00:00", "released_date": "2018-03-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Presidential Transitions Improvements Act of 2015 includes a provision for GAO to assess multiple characteristics of final significant regulatory actions promulgated by executive departments during presidential transition periods (September 23 through January 20) at the end of Presidents Clinton, Bush, and Obama's administrations and compare them to each other and to regulations issued during the same 120-day period in nontransition years since 1996.", "Among other objectives, GAO assessed the extent to which there was variation in 1) the number of regulations, their scope, and other indicators; and 2) agencies' reported compliance with procedural requirements for promulgating the regulations. To address these objectives, GAO reviewed the text of the regulations published in the Federal Register , and reviewed the universe of all 527 economically significant final regulations (generally those with an annual effect of $100 million or more) published during the specified transition and nontransition periods and a generalizable stratified random sample of 358 of the 1,633 significant final regulations published during the same time periods."]}, {"section_title": "What GAO Found", "paragraphs": ["During transition periods at the end of presidential administrations, agencies published more final regulations and more frequently provided advanced notice to the public on those regulations compared to nontransition periods. The Clinton, Bush, and Obama administrations published on average roughly 2.5 times more economically significant regulations during transition periods than during nontransition periods. But agencies more often, relative to nontransition periods, provided the public an opportunity to influence the development of the transition-period regulations by providing advanced notice of their issuance and opportunities to comment on proposed regulations before they were finalized.", "In their published regulations, agencies reported that compliance with four of five procedural requirements was high during both transition and nontransition periods, but not with the Congressional Review Act (CRA). During all periods, agencies reported complying with requirements, such as the Regulatory Flexibility Act, for nearly all economically significant regulations and the majority of significant regulations. Agencies less often complied with one or more CRA requirements. (See figure.) Though agencies are responsible for complying with CRA, the Office of Management and Budget (OMB) is responsible for oversight of agencies' rulemaking, consistent with law, and reviews regulations before publication, which provides an opportunity to identify and help agencies avoid potential noncompliance. The most common CRA deficiency was agencies' failure to provide Congress the required time to review and possibly disapprove regulations, which GAO has also identified as a deficiency in previous work. Economically significant regulations for which OMB completed its review within 3 months before the planned effective date were at high risk of not complying with CRA, thus increasing the risk that agencies would not provide Congress with the required time for its reviews.", "Economically Significant Regulations Determined to be Noncompliant with the Congressional Review Act"]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that OMB, as part of its regulatory review process, identify economically significant regulations at potential risk of not complying with CRA and work with agencies to ensure compliance. OMB staff did not agree or disagree with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Prior studies have indicated that agencies typically issue a larger number  of regulations during the transition from the end of one presidential  administration to the beginning of the next administration, relative to  comparable periods earlier in the administration. This phenomenon is  often referred to as \u201cmidnight rulemaking.\u201d Officials from outgoing  administrations generally attribute this increased regulatory activity to  agencies completing long-planned regulatory initiatives. However, the  Congressional Research Service (CRS) has noted that some members of  Congress and individuals outside the government have expressed  concerns that \u201cmidnight rules\u201d may be rushed through the analytical and  procedural processes agencies are expected to use, providing fewer  opportunities for the public to provide input, and therefore resulting in  lower quality regulations. CRS has also pointed out that presidential  transitions in which party control of the White House changes\u2013which  occurred during the four most recent transitions in 1993, 2001, 2009, and  2017\u2013may increase the incentive for Presidents and agencies to engage  in midnight rulemaking because it may be difficult for the subsequent  administration to change or eliminate regulations after they have taken  effect.", "Section 5 of the Edward \u201cTed\u201d Kaufman and Michael Leavitt Presidential  Transitions Improvements Act of 2015 includes a provision for us to  assess final significant regulatory actions promulgated by executive  departments during specified presidential transition periods and to  analyze and compare multiple characteristics of regulations issued during  these transition periods to each other and to regulations issued during the  same 120-day periods in nontransition years since 1996. The transition  periods identified in the act are those ending on January 20 in 2001,  2009, and 2017, which occurred at the end of the administrations of  Presidents Clinton, Bush, and Obama. For the transition periods, and  among these transition periods and the same 120-day periods in  nontransition years, our objectives were to assess the extent to which  there were variations in (1) the number of regulations and other indicators  related to the scope and transparency of these regulations; (2) agencies\u2019  reported compliance with procedural requirements for promulgating the  regulations; and (3) the anticipated economic effects agencies reported  would result from the regulations.", "For each of the three transition periods and the 18 other periods cited in  the mandate, we reviewed what the act defines as \u201ccovered regulations\u201d  published by executive agencies in the Federal Register. For purposes of  this review, executive agencies are those cabinet departments and other  agencies that answer directly to the President and exclude the  independent regulatory agencies. The definition of a \u201ccovered regulation\u201d  in the mandate is the same as the definition of a final significant  regulatory action under Executive Order (E.O.) 12866. Under E.O.  12866, the Office of Management and Budget (OMB) reviews significant  proposed and final regulations from all federal agencies (other than  independent regulatory agencies) before they are published in the  Federal Register. The order defines significant regulatory actions as  those that are likely to result in a rule that may  1.  Have an annual effect on the economy of $100 million or more, or  adversely affect in a material way the economy, a sector of the  economy, productivity, competition, jobs, the environment, public  health or safety, or state, local, or tribal governments or communities  (generally referred to as \u201ceconomically significant\u201d regulations);  2.  Create a serious inconsistency or otherwise interfere with an action  taken or planned by another agency;  3.  Materially alter the budgetary effects of entitlements, grants, user  fees, or loan programs or the rights and obligations of recipients  thereof; or  4.  Raise novel legal or policy issues arising from legal mandates, the  President\u2019s priorities, or the principles set forth in the executive order.", "For the purposes of this report, we differentiate between the results for  \u201ceconomically significant\u201d regulations (criterion 1 above, i.e., generally  those with annual economic effects greater than $100 million) and the  results for other significant regulations (criteria 2-4 above, i.e., those  expected to have less than $100 million in economic effects but are  deemed significant under the order\u2019s other three definitions of  significance). We will refer to the latter category as \u201csignificant  regulations.\u201d We primarily relied on OMB\u2019s Reginfo.gov database on  regulations reviewed under E.O. 12866 to compile a list of final  economically significant and final significant regulations published during  the specified periods. We refined and supplemented the lists from the  Reginfo.gov database with information from our database on rules  submitted to us under the Congressional Review Act (CRA), and the  Government Printing Office\u2019s Federal Digital System database on the  Federal Register. To test the reliability of these databases, we reviewed  relevant documentation, interviewed knowledgeable agency officials,  looked for missing data and outliers (for example, by identifying missing  records or those included in error), traced a sample of entries to source  documents, and conducted additional checks. We concluded that the data  were sufficiently reliable for our purposes.", "We reviewed the universe of all 527 final economically significant  regulations published during the specified periods and a generalizable  stratified random sample of 358 final significant regulations from the  population of 1,633 final significant regulations published during the  specified periods. For economically significant regulations, we can  provide precise statistics on the extent of a finding, because we reviewed  the universe. For significant regulations, our findings are based upon a  sample designed to achieve a margin of error no greater than plus or  minus 7 percentage points at the 95 percent level of confidence for each  presidential transition period and the nontransition periods combined. Our  findings for the sample are generalizable for the population of all covered  significant regulations published in each transition period and, collectively,  all nontransition periods, but are not generalizable to the individual  agencies that published those regulations.", "To assess the number of regulations and other variations related to the  scope and transparency of these regulations, we tallied total numbers of  final regulations published during each specified period. We identified  whether the regulations were economically significant or significant, and  which agencies had published the regulations to assess scope. We also  reviewed other indicators, such as whether the final regulation had a prior  proposed rule and whether the agency had provided advanced notice that  the regulation was being developed in the Unified Agenda, to provide  insights on the type of rulemaking procedures that agencies used and the  transparency of those rulemakings.", "To assess variations in agencies\u2019 compliance with procedural  requirements and the anticipated economic effects of regulations, we  reviewed the published text of the regulations and, for regulations that  were also major rules, the reports that we prepared for Congress under  CRA. We reviewed agencies\u2019 reported compliance with procedural  requirements for promulgating regulations under five statutes\u2014CRA, the  Regulatory Flexibility Act (RFA), the Paperwork Reduction Act (PRA), the  Unfunded Mandates Reform Act of 1995 (UMRA), and the Small  Business Regulatory Enforcement Fairness Act (SBREFA). We also  reviewed the published regulations to see whether agencies identified  expected economic effects (benefits, costs, and transfers). Consistent  with our prior governmentwide review of regulations, we did not evaluate  the agencies\u2019 decisions regarding procedural requirements or their  determinations regarding the potential effects of their regulations. Instead,  we are providing information about what the agencies published in the  Federal Register. Appendix I contains more information on our objectives,  scope, and methodology.", "We conducted this performance audit from May 2016 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies implement specific elements of laws through  regulations, which typically require or prohibit certain actions. Congresses  and Presidents have required agencies to comply with multiple procedural  and analytical requirements prior to issuing regulations.", "Administrative Procedure Act (APA). APA established the basic  framework of administrative law governing federal agency action,  including rulemaking. Before promulgating a regulation, agencies are  generally required to publish a notice of proposed rulemaking (NPRM)  in the Federal Register and take comments concerning the proposed  rule. However, agencies may issue final rules without the use of an  NPRM in certain cases, including when the agency determines for  \u201cgood cause\u201d that notice and comment procedures are \u201cimpracticable,  unnecessary, or contrary to the public interest.\u201d Further, Congress  sometimes enacts laws that direct an agency to issue regulations  without notice and comment.", "Regulatory Flexibility Act. RFA was enacted in response to  concerns about the effect that federal regulations can have on small  entities. RFA requires agencies to consider the impact of their  regulations on small entities and to prepare regulatory flexibility  analyses, unless the head of the agency certifies that the rule would  not have a \u201csignificant economic impact upon a substantial number of  small entities.\u201d", "Paperwork Reduction Act. PRA was enacted to help minimize the  burden that federal information collections (e.g., forms, surveys, or  questionnaires) impose on the public, while maximizing their public  benefit. PRA requires agencies to provide public notice, solicit  comments, and request approval by OMB before imposing new  information collection requirements.", "Unfunded Mandates Reform Act of 1995. UMRA was enacted to  address concerns about federal statutes and regulations that require  nonfederal parties to expend resources to achieve legislative goals  without being provided funding to cover the costs. Among other  things, UMRA generally requires federal agencies to prepare a written  statement containing a \u201cqualitative and quantitative assessment of the  anticipated costs and benefits\u201d for any rule that includes a federal  mandate that may result in the expenditure of $100 million or more in  any 1 year by state, local, and tribal governments in the aggregate, or  by the private sector.", "Small Business Regulatory Enforcement Fairness Act. Under  SBREFA, the Environmental Protection Agency (EPA) and the  Occupational Safety and Health Administration (OSHA) are required  to convene Small Business Review Panels (also known as SBREFA  panels) for rulemaking efforts that are expected to have a significant  economic impact on a substantial number of small entities. These  panels are intended to seek direct input early in the rulemaking  process from small entities that would be impacted by the  rulemakings.", "Congressional Review Act. CRA was enacted to better ensure  that Congress has an opportunity to review and possibly disapprove  regulations, in certain cases, before they become effective. CRA  established expedited procedures by which Congress may disapprove  agencies\u2019 regulations by introducing a resolution of disapproval that, if  adopted by both Houses of Congress and signed by the President,  can nullify an agency\u2019s action. CRA states that an agency may not  reissue the regulation in \u201csubstantially the same form,\u201d as a regulation  Congress disapproved. CRA requires us to provide Congress with a  report on rules OMB\u2019s Office of Information and Regulatory Affairs  (OIRA) determines to be major rules, including our assessment of the  issuing agency\u2019s compliance with the procedural steps required by  various acts and executive orders governing the rulemaking  process. CRA\u2019s definition of a major rule is similar to E.O. 12866\u2019s  definition of economically significant rules, and generally,  economically significant regulations are classified for purposes of  CRA as major rules and significant regulations are classified as  nonmajor rules. CRA generally provides Congress time to review  major rules before those rules take effect.", "Executive Orders and Relevant Guidance. In addition to the  statutory requirements described above, executive agencies must  also follow requirements Presidents have set in executive orders and  related guidance:", "Role of OIRA: Under E.O. 12866, issued in 1993, OIRA reviews  regulations deemed significant. The Administrator of OIRA is  responsible for providing meaningful guidance and oversight with  respect to regulatory planning and review to the extent permitted  by law. Further, the order states that OIRA is to be the repository  of expertise concerning regulatory issues.", "Role of agencies and assessment of costs and benefits:  Among other things, under E.O. 12866 agencies are responsible  for developing regulations and assuring that the regulations are  consistent with applicable law. The order also requires agencies to  prepare an agenda of all regulations under development or  review. For economically significant regulations, E.O. 12866  requires agencies to provide to OIRA (unless prohibited by law) an  assessment, including the underlying analysis, of the costs and  benefits anticipated from the regulatory action and feasible  alternatives. For significant regulations, E.O. 12866 requires  agencies to provide to OIRA an assessment of the potential costs  and benefits anticipated from the planned regulatory action.  Circular A-4, published in 2003, provides guidance to agencies on  how to conduct the required analysis and, among other things,  directs agencies to estimate the costs and benefits of a regulation  and \u201ctransfer\u201d payments that may result from the regulation.  Transfer regulations redistribute income from (usually) taxpayers  to program beneficiaries (e.g., Medicare recipients), but generally  do not result in economic benefits or costs."], "subsections": []}, {"section_title": "Agencies Published More Final Regulations and More Frequently Provided Advanced Notice to the Public during Transition Periods", "paragraphs": ["The three administrations published a higher number of economically  significant and significant final regulations at the end of each President\u2019s  second term compared to the nontransition periods. (See figures 1 and  2.) The administrations published on average roughly 2.5 times more  economically significant regulations during their transition periods than  during nontransition periods.", "Our analysis also showed that within their transition periods (September  23 through January 20), the administrations of Presidents Clinton and  Obama increased their rate of economically significant rulemaking  following the elections held in 2000 and 2016 (between Election Day in  November and January 20), while President Bush\u2019s administration  decreased the rate of economically significant rulemaking following the  2008 election. (See appendix II.)"], "subsections": [{"section_title": "Economically Significant Regulations Published in Both Transition and Nontransition Periods Were Concentrated in Certain Agencies", "paragraphs": ["We found that the majority of economically significant regulations were  published by a subset of agencies across the three administrations and  between transition and nontransition periods. In particular, the  Department of Health and Human Services (HHS) published one-third of  the economically significant regulations we reviewed across all periods  and was the most active agency in both transition and nontransition  periods. (See table 1.) For example, the Centers for Medicare & Medicaid  Services typically published regulations every calendar year describing  reimbursement rates for medical providers serving Medicare patients.", "For significant regulations, HHS was the most active agency during both  transition and nontransition periods. (See table 2.) However, significant  rulemaking was less concentrated in a subset of agencies than was  economically significant rulemaking. Specifically, five of the agencies that  published the largest number of economically significant regulations  accounted for between 65 and 70 percent of these regulations during  both transition and nontransition periods, while the five agencies that  published the largest number of significant regulations accounted for 42  percent of these regulations during both transition and nontransition  periods."], "subsections": []}, {"section_title": "For Economically Significant Regulations, Agencies More Frequently Provided Advanced Notice to the Public during Transition Periods", "paragraphs": ["To provide perspective on the transparency of regulatory activity and the  types of rulemaking procedures agencies used during transitions, we  examined two indicators: 1) whether regulations were advertised in the  previous spring\u2019s Unified Agenda and 2) whether the final regulation was  preceded by a proposed rule or NPRM:", "Prior Appearance in the Unified Agenda: The semi-annual Unified  Agenda was established by E.O. 12866 and provides uniform  reporting of data on those regulatory and deregulatory activities under  development or review throughout the federal government. By  including a planned regulation in the previous spring\u2019s Unified  Agenda, policy makers provided members of the public with several  months of notice before a final regulation was published during any of  the transition or nontransition periods.", "Notice of Proposed Rulemaking: The notice and comment process  was established by the APA and gives the public an opportunity to  provide information to agencies on the potential effects of a regulation  or to suggest alternatives for agencies to consider before the agency  publishes the final regulation. By publishing an NPRM, policy makers  provided members of the public with an opportunity to influence the  development of the regulation.", "Overall, we found that agencies more frequently provided advanced  notice of regulations to the public during transition periods by announcing  planned activities in the Unified Agenda and publishing NPRMs. A higher  percentage of economically significant regulations appeared in the  previous spring\u2019s Unified Agenda during Presidents Bush\u2019s and Obama\u2019s  transition periods compared to nontransition periods. (See figure 3.)  President Clinton\u2019s administration published a smaller percentage of  regulations in the Unified Agenda during its transition period compared to  its nontransition periods. This decrease is explained by the Department of  the Interior (Interior) and HHS not entering four regulations they typically  update each year into the spring 2000 Unified Agenda pertaining to  migratory bird hunting and Medicare.", "For significant regulations, we estimate that a higher percentage of  regulations published during Presidents Bush\u2019s and Obama\u2019s transition  periods appeared in the previous spring\u2019s Unified Agenda compared to  President Clinton\u2019s transition period. However, we found no statistical  differences between the nontransition periods combined and any of the  three transition periods. (See figure 4.)", "Across all three administrations, economically significant regulations  published during transition periods were more often preceded by  proposed regulations compared with those published during nontransition  periods. (See figure 5.)", "We estimated that significant regulations published during Presidents  Clinton\u2019s and Bush\u2019s transition periods were more often preceded by  proposed regulations than significant regulations published during  nontransition periods. However, we found no statistical differences  between President Obama\u2019s transition period and the other transition and  nontransition periods. (See figure 6.)"], "subsections": []}]}, {"section_title": "Nearly All Economically Significant Regulations Reported to the Public Compliance with Four Procedural Requirements, but a Quarter Did Not Comply with the Congressional Review Act", "paragraphs": [], "subsections": [{"section_title": "Agencies Reported to the Public that They Complied with Four Procedural Requirements for Nearly All Economically Significant Regulations and the Majority of Significant Regulations", "paragraphs": ["Regulatory Flexibility Act (RFA), Paperwork Reduction Act (PRA),  and the Unfunded Mandates Reform Act of 1995 (UMRA): We found  that 91 percent of economically significant regulations across all periods  reviewed explained to the public the determinations the agencies made  regarding these three procedural requirements. Further, there was little  difference between transition and nontransition periods in whether  agencies provided explanation of these three procedural requirements.  For the regulations that did contain explanation, agencies indicated that  more economically significant regulations published during transition  periods than in nontransition periods: (1) would not have a significant  impact on a substantial number of small entities (RFA), (2) contained  information collection requirements on nonfederal entities (PRA), and (3)  generally could impose federal mandates on nonfederal entities (UMRA).  For significant regulations, we estimate that 64 percent across all periods  reviewed provided explanation to the public of the determinations the  agencies made regarding these three procedural requirements. More specific information about the determinations agencies reached is  presented in appendix II.", "For economically significant and significant regulations that did not  contain explanations of one or more of these procedural requirements,  this does not necessarily indicate noncompliance by the agency. An  agency may not need to address a particular procedural requirement if  the substance of the rule or exceptions and thresholds in the requirement  lead the agency to determine that a specific regulation did not trigger the  requirement. For example, regulations that were significant but not  economically significant under E.O. 12866 would not be expected to  contain a federal mandate that would result in the expenditure of $100  million or more in any 1 year, so would not trigger the requirement for an  UMRA written statement.", "Small Business Regulatory Enforcement Fairness Act (SBREFA):  EPA and OSHA reported holding small business review panels for 16  economically significant regulations reviewed, and we confirmed that the  proceedings of all but one of these panels had been documented on the  Small Business Administration\u2019s website. EPA also reported holding a  small business review panel for one of the significant regulations we  reviewed, and we confirmed that this proceeding also had been  documented."], "subsections": []}, {"section_title": "Over 25 Percent of Economically Significant Regulations and an Estimated 15 Percent of Significant Regulations Did Not Comply with the Congressional Review Act", "paragraphs": ["CRA requires agencies to submit regulations to Congress and to us and  to delay the effective date of certain regulations in order to provide  Congress an opportunity to review and possibly disapprove of regulations  before they become effective. We reviewed agencies\u2019 compliance with  the requirements to: (1) submit the regulation to Congress and to us, (2)  provide the required delay between submission of the regulation to  Congress and us and its effective date, and (3) provide the required delay  between publication of the regulation and its effective date. See figure 7  for these requirements regarding delays in effective dates.", "Our analysis determined that 132 of the 527 economically significant  regulations across all periods reviewed failed to meet at least one of the  requirements described above, and none of these regulations included  agencies claiming \u201cgood cause,\u201d which would have allowed them to delay  the effective date. (See figure 8.)", "We found that noncompliance for economically significant regulations was  primarily associated with agencies\u2019 failure to delay the effective date of  their regulations, while the failure to submit regulations to Congress and  us accounted for a smaller proportion of the deficiencies. Of the 132  noncompliant economically significant regulations:", "95 did not provide the required delay between the submission of the  regulation to Congress and us and the effective date. Further,  agencies generally missed the deadline by more than 5 days (70 of 92  regulations). It is our practice to alert the relevant congressional  committees when we observe this particular deficiency in our major  rule reports. Further, we also reported to Congress in 2007 that  there appeared to be a broader pattern of noncompliance with this  requirement, noting: \u201cA consistent difficulty in implementing CRA has  been the failure of some agencies to delay the effective date of major  rules for 60 days as required by CRA.\u201d", "74 did not provide the required delay between publication in the  Federal Register and the effective date. Once again, agencies  generally missed this deadline by more than 5 days (62 of 74  regulations). It is our practice to alert the relevant congressional  committees when we observe this particular deficiency in our major  rule reports.", "10 had not been submitted to us as of November 13, 2017.", "Among the most active regulatory agencies for economically significant  regulations, HHS and the Department of Transportation (Transportation)  had higher rates of noncompliance than the government-wide  percentages for both the transition and nontransition periods we  reviewed. (See table 10 in appendix II.) However, noncompliance was  not limited to HHS and Transportation; 17 of the 23 agencies that  published economically significant regulations during the periods we  reviewed had at least one noncompliant regulation. As noted previously,  our sample of significant regulations was not designed to provide  estimates concerning individual agencies\u2019 noncompliance with CRA.", "In addition, we estimate that 15 percent of significant regulations  published across all periods reviewed failed to meet at least one of the  CRA requirements we reviewed. (See figure 9.) We did not identify any  statistical differences in the noncompliance rate among the three  transition periods and nontransition periods combined.", "For significant regulations, we developed estimates for the following CRA  deficiencies:", "Regulations submitted after the stated effective date: An estimated 15  percent of significant regulations published during all periods reviewed  were not submitted to Congress and us before the stated effective  date as required. Significant regulations were generally nonmajor  rules, which do not have a requirement to delay the effective date by  60 days. There were no statistical differences among the three  transition periods and the nontransition periods regarding this  deficiency.", "Regulations not submitted to us: An estimated 7 percent of significant  regulations published during all periods reviewed had not been  submitted to us as of November 17, 2017, with no statistical  differences among the three transition periods and nontransition  periods.", "Agencies\u2019 noncompliance with CRA has the overall effect of making it  more difficult for Congress to exercise its oversight role under CRA;  however, the precise effects of noncompliance depend on the type of  regulation and the specific deficiencies. CRA provides expedited  procedures that make it easier to overturn a regulation compared to  following the regular legislative process. For economically significant  regulations, which are generally classified as major rules under CRA,  failing to provide the required delay for congressional review means that  Congress has a shorter amount of time to use these expedited  procedures to disapprove the regulation before the agency potentially  starts enforcement actions. Furthermore, in general, if a rule is not  submitted to Congress as required by CRA, Congress cannot use these  expedited procedures. Moreover, not submitting a rule to Congress can  potentially create legal uncertainty for agencies and regulated parties  because courts have differed on the impact of noncompliance with CRA  on the enforceability of the regulation.", "OIRA staff noted that CRA states that agencies are responsible for  complying with the act\u2019s requirements, and E.O. 12866 states that  agencies are responsible for adhering to applicable laws. However under  E.O. 12866, OIRA is also responsible for oversight of agencies\u2019  rulemaking, consistent with law, and reviews regulations before  publication, which provides it an opportunity to identify and help agencies  avoid potential noncompliance. OIRA staff asserted that they already  take steps to check agencies\u2019 compliance with CRA. However, we found  that OIRA completed its E.O. 12866 reviews for 110 of the 132  noncompliant economically significant regulations within 90 days of the  stated effective date. OIRA staff noted that they cannot monitor every  action agencies take following their review of draft final regulations, such  as the specific date a regulation is published in the Federal Register or  whether an agency submits a copy of the regulation to Congress or us.  However, because economically significant regulations are generally  classified as major rules under CRA, this indicates that OIRA frequently  completes its review in close proximity to the start of the 60-day period  intended for congressional review, and in such cases the regulation is at  high risk of noncompliance with CRA.", "This close proximity to the 60-day period provides an opportunity for  OIRA to identify potentially noncompliant regulations before agencies  publish them and work with agencies on actions that would avoid  noncompliance. Our analysis identified such actions agencies could use  to comply with CRA. For example, we found instances of agencies  explaining to the public that CRA requires a 60-day review period for  major rules and therefore identifying an effective date more than 2  months after publication in the Federal Register. In other instances,  agencies stated that the regulation would take effect 60 days after  publication in the Federal Register, which ensures compliance with CRA  provided that the regulation is submitted to Congress and us on or before  the day it is published. In other cases, agencies stated they had \u201cgood  cause,\u201d to not delay the effective delay, such as a statutory or judicial  deadline or an emergency situation."], "subsections": []}]}, {"section_title": "Variations Existed between Transition and Nontransition Periods in Agencies\u2019 Anticipated Types of Economic Effects for Economically Significant Regulations", "paragraphs": ["Agencies anticipated that economically significant regulations published  during transition periods were more likely to result in economic costs and  benefits and generally less likely to result in \u201ctransfers\u201d of income from  taxpayers to program beneficiaries. To identify the types of economic  effects that agencies anticipated, we placed the 527 economically  significant regulations reviewed across all periods into one of four  categories based on information agencies provided in the published  regulation concerning the anticipated costs, benefits, or transfers resulting  from a regulation:", "Expected economic costs, benefits, or both: For 197 of the 527  economically significant regulations (or 37 percent), agencies  expected costs or benefits or both to result and made no mention of  transfers. Our previous work has noted that regulations typically  require a desired action or prohibit certain actions by regulated  parties. Such requirements may impose costs on private-sector  parties, such as businesses and individuals, and may also provide  benefits to society as a whole. Examples we reviewed included EPA  regulations limiting emissions from industrial facilities with the goal of  improving air quality and Labor Department regulations intended to  improve workplace safety.", "Transfers: For 184 of the 527 economically significant regulations (or  35 percent), agencies expected transfers to result from the regulation  and made no mention of either costs or benefits. Examples we  reviewed included HHS regulations stating how much Medicare will  reimburse Medicare providers and Department of Agriculture  regulations providing disaster assistance to farmers. While these  payments increase the incomes of Medicare providers and farmers,  Circular A-4 directs agencies to avoid misclassifying these transfers  as economic costs or benefits because they do not change aggregate  social welfare.", "Combination of economic costs, benefits, or transfers: For 108 of  the 527 economically significant regulations (or 20 percent), agencies  expected costs or benefits or both to occur and also expected  transfers to occur. Examples we reviewed included regulations that  expanded access to health insurance for tribal employees and  established paid sick leave for federal contractors that were  anticipated to result in both administrative costs and transfers.", "No economic analysis: The remaining 38 of the 527 economically  significant regulations (or 7 percent) provided no economic analysis.  Of these regulations, 22 were updates to migratory bird hunting  regulations Interior published during Presidents Clinton\u2019s  Administration and President Bush\u2019s first term. During the 2003-2004  nontransition period of President Bush\u2019s Administration, Interior began  providing a brief summary of the economic effects anticipated to result  from hunting these birds.", "Comparing these reported effects between transition and nontransition  periods, we found that agencies indicated that economically significant  regulations published during transition periods were more likely to result  in costs and benefits to society than those published during nontransition  periods across all three administrations. (See figure 10.) In contrast,  regulations involving only transfers became a smaller proportion of the  economically significant regulations published during Presidents Bush\u2019s  and Obama\u2019s transition periods. Regulations that involved various  combinations of costs, benefits, and transfers became a larger proportion  of regulations published during Presidents Bush and Obama\u2019s transition  periods and overall became a larger proportion of economically significant  regulatory activity that occurred during President Obama\u2019s transition  period.", "Executive guidance encourages agencies to quantify and monetize  expected costs and benefits to help decision makers understand the  consequences of regulatory approaches. E.O. 12866 states that for  economically significant regulations agencies should analyze costs and  benefits to the extent feasible, and Circular A-4 encourages agencies, to  the extent possible, to provide monetized estimates of these costs and  benefits. For economically significant regulations, we found that agencies  were more likely to monetize anticipated costs and transfers compared to  benefits and were more likely to monetize anticipated costs during  Presidents Clinton and Bush\u2019s transition periods. (See figures 11-13.) For  economically significant regulations, we also did additional analysis of the  extent to which agencies anticipated the benefits would justify the costs  and the extent to which net costs or benefits were calculated. (See  appendix II.)", "In examining the extent to which agencies anticipated that costs, benefits,  and transfers would result from significant regulations, we found that an  estimated 57 percent across all periods reviewed provided information on  the anticipated costs, benefits, transfers, or some combination of these,  with no statistical differences among the three transition periods and the  nontransition periods combined. An estimated 43 percent of significant  regulations across all periods reviewed did not include any information on  the anticipated costs, benefits, transfers, or some combination of these,  with no statistical differences among the three transition periods and the  nontransition periods combined."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Although we confirmed that agencies published a larger number of  regulations during transition periods than during the same months in  nontransition periods, the variety of other indicators we examined  generally suggest that there were few significant differences\u2014other than  their numbers\u2014when comparing regulations published during the three  transitions to each other and to those published during nontransition  periods. Among the few exceptions, economically significant regulations  published during the transition periods were more likely to have provided  advanced notice to the public and more likely to result in private sector  costs and potential benefits to society.", "However, agencies\u2019 noncompliance with the requirements of CRA for  economically significant regulations (major rules under CRA) grew worse  over time. Under CRA, agencies must allow additional time for Congress  to review these most impactful regulations before they take effect unless  the agency claims good cause for not delaying the effective date. Our  review did highlight a potential opportunity for OIRA to work with agencies  to improve CRA compliance going forward. Specifically, OIRA staff have  the unique opportunity to work with agencies before economically  significant regulations and regulations deemed significant for other  reasons are published in final form in the Federal Register. OIRA staff  should use this opportunity to identify economically significant regulations  whose planned effective dates appear at risk of not providing Congress  with sufficient time to review the regulation.", "To do this, our analysis points to a simple \u201crule of thumb\u201d OIRA reviewers  could use. If an agency is planning to make an economically significant  regulation effective in less than 3 months from the time OIRA is  completing its review, OIRA staff should discuss with agency officials  strategies for ensuring compliance with CRA. These could include  delaying the planned effective date, stating in the submission to the  Federal Register that the regulation will go into effect 60 days after  publication and ensuring prompt submission to Congress and us, or  discussing whether the agency has a reasonable basis to claim \u201cgood  cause\u201d for not delaying the effective date and ensuring that the use of  \u201cgood cause\u201d is clearly explained in the regulation. Ensuring that agencies  consistently provide Congress with the required time to review, and  possibly disapprove regulations, is important throughout a President\u2019s  term, and particularly following a presidential transition when Congress  typically has a larger number of regulations to potentially review."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to the Director of OMB:", "The Director of OMB should ensure that OIRA\u2019s staff, as part of the  regulatory review process, examine the planned timeframes for  implementing economically significant regulations or major rules and  identify regulations that appear at potential risk of not complying with  the Congressional Review Act\u2019s delay requirements and then work  with the agencies to ensure compliance with these requirements  (Recommendation 1)."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Director of OMB on January 18,  2018. In oral comments received on February 22, 2018, staff from OIRA  and the Office of General Counsel discussed the findings, conclusions,  and recommendation. OMB staff did not agree or disagree with our  recommendation. However, they identified some concerns regarding the  recommendation to improve agencies\u2019 compliance with CRA. They noted  that: (1) CRA states that agencies are responsible for complying with the  act\u2019s delay and submission requirements; (2) agencies determine when  their regulations will take effect and when they submit the regulations to  Congress and us, neither of which OMB has direct control over; and (3)  where OMB does exercise authority\u2014the regulatory review process  under E.O. 12866\u2014OIRA staff already take steps to check agencies\u2019  compliance with CRA, and they do not see what more they could do to  improve agencies\u2019 compliance with the act. The staff also provided  technical comments that were incorporated as appropriate.", "Regarding the first two concerns raised by OIRA staff, we believe our  report sufficiently recognizes agencies\u2019 responsibilities under CRA.  Regarding the third concern, we disagree that OMB has done all that it  can to improve compliance with CRA. As noted above, OMB staff  asserted that they do take steps to check for CRA compliance, and these  checks could provide a starting point for OMB to address our  recommendation. However, our analysis raises questions about how  effective these checks have been. OIRA completed its review for 110 of  the 132 noncompliant economically significant regulations within 90 days  of the stated effective date. This analysis points to a simple \u201crule of  thumb\u201d for OIRA reviewers to use. If a regulation has a planned effective  date in less than 90 days, it is at high risk of noncompliance with CRA.  Further, our report identifies three specific strategies OIRA staff could  discuss with agency officials on how to comply with CRA. Thus, we  believe that our report shows that OMB could do more to ensure CRA  compliance and identifies specific ways OMB could help agencies  accomplish this.", "We are sending copies of this report to the Director of OMB as well as  appropriate congressional committees and other interested parties. In  addition, this report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-6806 or krauseh@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Section 5 of the Edward \u201cTed\u201d Kaufman and Michael Leavitt Presidential  Transitions Improvements Act of 2015 includes a provision for us to  assess final significant regulatory actions promulgated by executive  departments during specified presidential transition periods and to  analyze and compare multiple characteristics of regulations issued during  these transition periods to each other and to regulations issued during the  same 120-day period (September 23 to January 20) in nontransition  years since 1996. The transition periods identified in the act are those  ending on January 20 in 2001, 2009, and 2017, which occurred at the end  of the administrations of Presidents Clinton, Bush, and Obama.", "For purposes of this review, executive agencies are cabinet departments  and other agencies that answer directly to the President and exclude the  independent regulatory agencies. The definition of what the mandate  refers to as a \u201ccovered regulation\u201d is the same as the definition of a final  significant regulatory action under Executive Order (E.O.) 12866. Under  E.O. 12866, the Office of Management and Budget\u2019s (OMB) Office of  Information and Regulatory Affairs (OIRA) reviews significant proposed  and final regulatory actions from all federal agencies (other than  independent regulatory agencies) before they are published in the  Federal Register. The order defines significant regulatory actions as  those that are likely to result in a regulation that may:  1.  Have an annual effect on the economy of $100 million or more or  adversely affect in a material way the economy, a sector of the  economy, productivity, competition, jobs, the environment, public  health or safety, or State, local, or tribal governments or communities  (generally referred to as \u201ceconomically significant\u201d regulations);  2.  Create a serious inconsistency or otherwise interfere with an action  taken or planned by another agency;  3.  Materially alter the budgetary impact of entitlements, grants, user  fees, or loan programs or the rights and obligations of recipients  thereof; or  4.  Raise novel legal or policy issues arising out of legal mandates, the  President\u2019s priorities, or the principles set forth in the executive order.", "For each of the three transition periods, and among these transition  periods and the same 120-day periods in the 18 nontransition periods,  our objectives were to assess the extent to which there were variations in:  1.  The number of regulations and other indicators related to the scope  and transparency of these regulations;  2.  Agencies\u2019 reported compliance with procedural requirements for  promulgating the regulations; and  3.  The anticipated economic effects agencies reported would result from  the regulations.", "In general, to address each of these objectives we reviewed the universe  of all 527 final economically significant regulations published during the  specified time periods and a generalizable stratified random sample of  358 final significant regulations from the population of the 1,633 final  significant regulations published during those same periods. For  economically significant regulations, we can provide precise statistics on  the extent of a finding, because we reviewed the universe of final  economically significant regulations. For significant regulations, our  findings are based on a sample designed to achieve a 7 percent margin  of error and 95 percent level of confidence for each stratum in the  population of all covered significant regulations published in each  transition period and, collectively, all nontransition periods. Our findings  for the sample are not generalizable to the individual agencies that  published those regulations. We divided the significant regulations into  four strata depending on when the regulation was published: 1) the 2000- 2001 transition period; 2) the 2008-2009 transition period; 3) the 2016- 2017 transition period; and 4) all the nontransition periods consolidated  into one stratum. We made two modifications to the data for each  stratum before we selected our sample: 1) We added to the sampling  frames additional significant regulations that we had become aware of  during our review of economically significant regulations; and 2) we  reviewed the sampling frames and filtered out duplicate entries. Because  we followed a probability procedure based on random selections, our  sample is only one of a large number of samples that we might have  drawn. Since each sample could have provided different estimates, we  express our confidence in the precision of our particular sample\u2019s results  as a 95 percent confidence interval (for example, plus or minus 7  percentage points). This is the interval that would contain the actual  population value for 95 percent of the samples we could have drawn.  Table 3 summarizes the population and sample size by stratum for  significant regulations.", "We primarily relied on the Reginfo.gov database on OMB\u2019s regulatory  reviews under E.O. 12866 to compile lists of final economically significant  and significant regulations published during each of the transition and  nontransition periods. As described in more detail below, we refined and  supplemented the lists from the Reginfo.gov database with information  from our database of rules submitted to us under the Congressional  Review Act (CRA), and the Government Printing Office\u2019s Federal Digital  System database on the Federal Register. To test the reliability of these  databases, we reviewed relevant documentation, interviewed  knowledgeable agency officials, looked for missing data and outliers (for  example, by identifying missing records or those included in error), traced  a sample of entries to source documents, and conducted additional  checks. We concluded that the data were sufficiently reliable for our  purposes.", "Further for all objectives and for both economically significant and  significant regulations, our primary source was the text of the published  regulation. However, as described below, we did sometimes supplement  that information with information from other publicly available sources. We  downloaded copies of published regulations from the website maintained  by the Government Printing Office, which securely controls content to  ensure the integrity and authenticity of the Federal Register. We used a  data collection instrument to collect standardized information about  individual regulations as described below. We did not evaluate the  agencies\u2019 decisions regarding procedural requirements or their  determinations regarding the effects of their rules. Instead, consistent with  our practice in preparing major rule reports to Congress under CRA and  prior reports on federal rulemaking, we are providing information about  what the agencies published in the Federal Register.", "To assess the number of regulations and other variations related to the  scope and transparency of these regulations, we first reviewed and  refined our lists of economically significant and significant regulations  published during each of the transition and nontransition periods. For  economically significant regulations, we compared the initial lists  compiled from Reginfo.gov against lists of major rules agencies had  submitted to us under CRA to look for potential omissions. We then  reviewed each of the published regulations to identify explanations  agencies may have provided of a selected regulation\u2019s classification as  economically significant under E.O. 12866 to tally total numbers of  economically significant regulations published during each of the time  periods and the agencies publishing them. To identify economically  significant regulations published annually, we looked for indications in the  title or summary of the regulation and confirmed that these regulations  appeared in multiple time periods reviewed. For significant regulations,  we obtained data from Reginfo.gov concerning the number of regulations  reportedly published and the agencies reported to have published them.  We also reviewed the published regulations for explanations of the  regulations\u2019 classification under E.O. 12866. Our sample of significant  regulations was not designed to make estimates for individual agencies,  so we used data from Reginfo.gov instead. For both economically  significant and significant final regulations, we compiled information on  the rulemaking procedures used by agencies to determine whether the  agencies had published a prior notice of proposed rulemaking (NPRM).", "We did this by looking for discussion of a proposed regulation in the  published final regulation. As necessary, we supplemented that review  with information from our major rule reports, if available, and data from  Reginfo.gov concerning the rulemaking history. To describe the extent to  which regulations had been advertised in the previous spring\u2019s Unified  Agenda, we searched for the regulation\u2019s identification number(s) in the  online database for the Unified Agenda.", "To assess the extent to which there were variations in agencies\u2019 reported  compliance with procedural requirements for promulgating the  regulations, we reviewed the published text of the regulations and, for  regulations that were also major rules, the major rule reports that we  prepared for Congress under CRA. We reviewed agencies\u2019 reported  compliance with procedural requirements for promulgating regulations  under five statutes\u2014CRA, the Regulatory Flexibility Act (RFA), the  Paperwork Reduction Act (PRA), the Unfunded Mandates Reform Act of  1995 (UMRA), and the Small Business Regulatory Enforcement Fairness  Act (SBREFA)\u2014including whether and, if so, how the agency addressed  the requirement in the published regulation. To determine whether the  Environmental Protection Agency and the Occupational Safety and  Health Administration held the panels they were required to hold under  SBREFA, we also reviewed the information on the Small Business  Administration\u2019s website summarizing these panels.", "We took multiple steps to identify noncompliance with CRA. We first  determined whether every regulation had been submitted to us, and for  regulations that had been submitted, we recorded the date we received  it. We used the date a regulation had been submitted to us when  assessing whether a regulation\u2019s stated effective date was consistent with  CRA requirements. We also reviewed whether agencies had claimed  \u201cgood cause\u201d for not delaying the effective date. For regulations not  submitted to us or those regulations submitted to us after they should  have been submitted, we conducted additional checks of the  Congressional Record to see if we could find evidence that the agency  had provided a copy of the regulation to either of the Houses of Congress  in time for the regulation\u2019s stated effective date to be consistent with CRA  requirements. If we could find evidence that any of these requirements  had been met, we removed the regulation from further consideration as  potentially noncompliant. As such, our methodology was designed to  identify instances of noncompliance. Our methodology does not allow us  to conclude that the remaining regulations were fully compliant. In  addition, it was beyond the scope of our review to evaluate the  appropriateness of agencies claiming \u201cgood cause\u201d for not providing the  required delay.", "To assess the extent to which there were variations in agencies\u2019 reported  anticipated economic effects resulting from the regulations, we reviewed  the published regulations to see whether they contained a section clearly  identified as economic analysis or discussion of the analytical  requirements concerning E.O. 12866. We used selected elements from  OMB Circular A-4 to review the analyses included in the published  regulations to identify expected costs, benefits, or transfers, and whether  that information was provided in monetary, quantitative, or qualitative  terms. To help identify regulations that involved transfers, we also  reviewed the annual reports OMB prepares for Congress on the costs  and benefits of federal regulations. OMB includes in these reports a list  of transfer regulations and has used a consistent definition over time.  We also looked for indication in the published regulation\u2019s economic  analysis that the regulation involved such topics as transfers, or federal  payments to certain groups in society (for example, Medicare recipients),  subsidies for certain economic activities, or user fees or royalties people  pay the government to name several common examples. To determine  the extent to which agencies discussed whether they expected that the  benefits would justify the costs, we looked for \u201cbottom line\u201d or other  concluding statements agencies may have provided in their economic  analysis. We also looked, when relevant, for a discussion of what the  net benefits or costs were expected to be. For transfer regulations that  were economically significant, we examined the extent to which agencies  quantified or monetized the expected transfers. If available, we used accounting statements agencies may have prepared summarizing the  anticipated economic effects to help collect all of this information. We did  not assess whether the agencies\u2019 determinations regarding the benefits  and costs were reasonable. In addition, we did not assess whether the  agencies analyzed regulatory alternatives and uncertainty.", "We conducted this performance audit from May 2016 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Additional GAO Analysis of Final Regulations Published During Specified Periods, 1996-2017", "paragraphs": ["The figures and tables in this appendix provide more detailed information  on the results of additional analyses we completed for this report related  to each of our three objectives. For economically significant regulations,  we provide precise statistics on the extent of a finding, because we  reviewed the universe. For significant regulations, our findings are based  on a sample and include the upper and lower bounds of confidence  intervals for estimated values."], "subsections": [{"section_title": "Analyses of Indicators Related to the Numbers, Scope, and Transparency of Regulations", "paragraphs": ["In this section, we provide additional information from our analyses of:  the extent to which economically significant regulations were  published before or after the presidential elections in 2000, 2008, and  2016;  the most active rulemaking agencies for economically significant and  significant regulations among the three administrations\u2019 transition and  nontransition periods;  the number of economically significant regulations for which agencies  reported they were under a statutory or judicial deadline to promulgate  the regulation; and  the median length, in days, of Office of Information and Regulatory  Affairs (OIRA) regulatory reviews under Executive Order (E.O.) 12866  for draft final economically significant and significant regulations  during transition and nontransition periods.", "We reviewed the extent to which economically significant regulations  were published before or after the presidential elections in 2000, 2008,  and 2016 and found that Presidents Clinton and Obama\u2019s administrations  increased their rate of rulemaking following the election, while President  Bush\u2019s administration decreased its rate of rulemaking. (See figure 14.)", "We identified the most active rulemaking agencies for economically  significant regulations among the three administrations\u2019 transition and  nontransition periods and did the same for significant regulations. (See  tables 4-9.)", "Agencies can indicate on Reginfo.gov whether they are required by a  statutory or judicial deadline to promulgate a regulation. We did additional  analysis for economically significant regulations and found agencies were  less likely to indicate they were under such a deadline during the three  administrations\u2019 transition periods compared to nontransition periods.", "Under E.O. 12866, agencies are expected to submit regulations deemed  significant to OIRA for review. Nearly all regulations we reviewed had  been reviewed by OIRA. For a small number of economically significant  regulations (13 across all periods or approximately 2 percent of the  economically significant population), we could not find evidence on  Reginfo.gov that OIRA reviewed the regulation. However, the absence of  evidence on Reginfo.gov does not necessarily mean that OIRA did not  review those regulations and may instead indicate that the review dates  were not entered into Reginfo.gov. Our review found that the median  length of OIRA\u2019s review increased for economically significant regulations  during each transition. (See figure 15.) For significant regulations, there  were no statistical differences among the three transition periods and  compared to nontransition periods combined. (See figure 16.)"], "subsections": []}, {"section_title": "Analyses of Indicators Related to Agencies\u2019 Reported Compliance with Selected Procedural Requirements for Promulgating Regulations", "paragraphs": ["In this section, we provide additional information from our analyses of: agencies\u2019 determinations regarding their regulations under the  Regulatory Flexibility Act (RFA); agencies\u2019 determinations regarding their regulations under the  Paperwork Reduction Act (PRA); agencies\u2019 determinations regarding their regulations under the  Unfunded Mandates Reform Act of 1995 (UMRA); and", "Congressional Review Act (CRA) noncompliance rates for the  agencies publishing the largest number of regulations.", "We reviewed agencies\u2019 discussions of three procedural requirements\u2013 RFA, PRA, and UMRA\u2013for economically significant regulations. (Figures  17-19 summarize the determinations agencies reached.)", "We reviewed agencies\u2019 discussions of three procedural requirements\u2013 RFA, PRA, and UMRA\u2013for significant regulations. Figures 20-22  summarize the determinations agencies reached. We found the following  statistical differences in comparing the determinations agencies reached  for significant regulations:", "RFA: There were no statistical differences among the three transition  periods and nontransition periods in the determination that regulations  might have a significant economic impact on a substantial number of  small entities. Regulations published during President Clinton\u2019s  transition period were less likely than regulations published during  President Bush\u2019s transition period and nontransition periods to  determine that the regulation would not have a significant economic  impact on a substantial number of small entities. There were no  statistical differences between Presidents Clinton\u2019s and Obama\u2019s  transition periods for this determination under RFA. We also found  statistical differences in the remaining two categories\u2013regulations not  subject to RFA and those not discussing RFA.", "PRA: Significant regulations published during Presidents Obama\u2019s  and Clinton\u2019s transition periods more frequently contained information  collection requirements covered by PRA compared to nontransition  periods. In addition, significant regulations published during President  Clinton\u2019s transition period more frequently contained information  collections requirements compared to President Bush\u2019s transition  period. There were no other statistical differences in significant  regulations containing information collection requirements. For the  other categories, there were no statistical differences, except that  significant regulations published during nontransition periods were  less likely to discuss PRA than those published during President  Obama\u2019s transition period.", "UMRA: There were no statistical differences among the transition and  nontransition periods in potential federal mandates covered by UMRA.", "We examined the CRA noncompliance rates for the agencies publishing  the largest number of economically significant regulations. (See table 10)."], "subsections": []}, {"section_title": "Analyses of Indicators Related to the Anticipated Economic Effects Agencies Reported would Result from the Regulations", "paragraphs": ["In this section, we provide additional information from our analyses of the  extent to which: agencies indicated benefits justified costs for economically significant agencies estimated net costs or benefits for economically significant agencies anticipated costs, benefits, or transfers resulting from  significant regulations.", "We examined additional indicators related to the economic analyses that  E.O. 12866 and Circular A-4 encourage agencies to conduct when  promulgating regulations. E.O. 12866 states that an agency should  propose or adopt a regulation only upon a reasoned determination that  the benefits of the intended regulation justify its costs. We examined the  extent to which agencies indicated that the anticipated benefits from  economically significant regulations would justify their costs and found  that agencies during Presidents Clinton\u2019s and Obama\u2019s transition periods  were more likely to indicate that benefits justified costs compared to these  administrations\u2019 nontransition periods. (See figure 23.) During President  Bush\u2019s transition period, agencies were less likely to indicate that the  anticipated benefits of the regulation would justify its anticipated costs.  We did not extend this analysis to significant regulations because the  examples were too limited to provide statistically reliable estimates for the  three transition periods and nontransition periods combined.", "Monetizing both costs and benefits potentially allows an agency to  calculate the net costs or benefits of a regulation and thus estimate how  much better or worse off society will be as a result of the chosen  regulatory approach. We found that agencies during Presidents Bush\u2019s  and Obama\u2019s administrations, during both transition and nontransition  periods, were more likely to calculate net costs or benefits than agencies  during President Clinton\u2019s transition and nontransition periods. (See figure  24.) We did not extend this analysis to significant regulations because the  examples were too limited to provide statistically reliable estimates for the  three transition periods and nontransition periods combined.", "For significant regulations that did identify anticipated costs, benefits, or  transfers, we found the following statistical differences in comparing the  three transition periods and nontransition periods combined as explained  below and in figure 25:", "Economic Costs or Benefits or Both: For regulations falling into this  category, the only statistical difference we found was that agencies  were more likely during President Clinton\u2019s transition period to identify  anticipated economic costs or benefits or both compared to President  Bush\u2019s transition period.", "Transfers: For regulations falling into this category, the only statistical  difference we found was that agencies were less likely during  President Obama\u2019s transition period to identify anticipated transfers  compared to President Bush\u2019s transition period and all three  administrations\u2019 nontransition periods combined.", "Both economic costs or benefits and transfers: For regulations  falling into this category, the only statistical difference we found was  that agencies were less likely during President Clinton\u2019s transition  period to indicate this compared to President Bush\u2019s transition period.", "No economic analysis: An estimated 43 percent of significant  regulations across all periods reviewed contained no economic  analysis and there were no statistical differences among the three  transition periods reviewed and the nontransition periods combined."], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Tim Bober (Assistant Director),  Michael O\u2019Neill (Analyst in Charge), Carl Barden, Tim Guinane, Krista  Loose, Ned Malone, Alexander Ray, Cynthia Saunders, Christie Stassel,  and Andrew J. Stephens made key contributions to this report. Donna  Miller, John Hussey, Steven Flint, and Rob Letzler also contributed."], "subsections": []}]}], "fastfact": ["Studies have found that federal agencies issue more regulations shortly before a president leaves office. This is often called \"midnight rulemaking.\"", "We looked at the last 120 days of the Clinton, Bush, and Obama administrations and compared the activity level to non-transition years. We found agencies in these periods:", "published about 2.5 times as many regulations,", "were more likely to provide advanced notice and opportunities for public comment, and", "were less likely to provide Congress the required time to review and possibly disapprove a regulation.", "We recommended that OMB work with agencies to bolster Congressional Review Act compliance."]}
{"id": "GAO-18-258", "url": "https://www.gao.gov/products/GAO-18-258", "title": "K-12 Education: Discipline Disparities for Black Students, Boys, and Students with Disabilities", "published_date": "2018-03-22T00:00:00", "released_date": "2018-04-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Research has shown that students who experience discipline that removes them from the classroom are more likely to repeat a grade, drop out of school, and become involved in the juvenile justice system. Studies have shown this can result in decreased earning potential and added costs to society, such as incarceration and lost tax revenue. Education and Justice are responsible for enforcing federal civil rights laws that prohibit discrimination in the administration of discipline in public schools.", "GAO was asked to review the use of discipline in schools. To provide insight into these issues, this report examines (1) patterns in disciplinary actions among public schools, (2) challenges selected school districts reported with student behavior and how they are approaching school discipline, and (3) actions Education and Justice have taken to identify and address disparities or discrimination in school discipline. GAO analyzed discipline data from nearly all public schools for school year 2013-14 from Education's Civil Rights Data Collection; interviewed federal and state officials, as well as officials from a total of 5 districts and 19 schools in California, Georgia, Massachusetts, North Dakota, and Texas. We selected these districts based on disparities in suspensions for Black students, boys, or students with disabilities, and diversity in size and location. We also reviewed federal laws and a non-generalizable sample of seven recently resolved federal school discipline investigations (selected in part based on the type of alleged discrimination). We incorporated technical comments from the agencies as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Black students, boys, and students with disabilities were disproportionately disciplined (e.g., suspensions and expulsions) in K-12 public schools, according to GAO's analysis of Department of Education (Education) national civil rights data for school year 2013-14, the most recent available. These disparities were widespread and persisted regardless of the type of disciplinary action, level of school poverty, or type of public school attended. For example, Black students accounted for 15.5 percent of all public school students, but represented about 39 percent of students suspended from school\u2014an overrepresentation of about 23 percentage points (see figure).", "Officials GAO interviewed in all five school districts in the five states GAO visited reported various challenges with addressing student behavior, and said they were considering new approaches to school discipline. They described a range of issues, some complex\u2014such as the effects of poverty and mental health issues. For example, officials in four school districts described a growing trend of behavioral challenges related to mental health and trauma. While there is no one-size-fits-all solution for the issues that influence student behavior, officials from all five school districts GAO visited were implementing alternatives to disciplinary actions that remove children from the classroom, such as initiatives that promote positive behavioral expectations for students.", "Education and the Department of Justice (Justice) documented several actions taken to identify and address school discipline issues. For example, both agencies investigated cases alleging discrimination. Further, to help identify persistent disparities among the nation's schools, Education collects comprehensive data on school discipline every other year through its Civil Rights Data Collection effort."]}], "report": [{"section_title": "Letter", "paragraphs": ["Students who face certain types of discipline in school may be affected in  profound ways that influence their lives as adults. Starting in pre-school,  children as young as 3 and 4 have been suspended and expelled from  school, a pattern that can continue throughout a child\u2019s education.  Research has shown that students who are suspended from school lose  important instructional time, are less likely to graduate on time, and are  more likely to repeat a grade, drop out of school, and become involved in  the juvenile justice system. The effects of certain discipline events, such  as dropping out, can linger throughout an individual\u2019s lifetime and lead to  individual and societal costs. For example, one study of California youth  estimated that students who dropped out of high school due to  suspensions would result in about $2.7 billion in costs for the state,  stemming from lost wages and tax revenue, increased crime, and higher  welfare and health costs. Another study estimated that Florida high  school students who drop out earn about $200,000 less over their  lifetimes than high school graduates.", "We were asked to report on the issue of discipline in schools. This report  examines (1) the patterns in disciplinary actions among public schools,  (2) the challenges selected school districts reported with student behavior  and how they are approaching school discipline, and (3) the actions the  Department of Education (Education) and the Department of Justice  (Justice) have taken to identify and address any disparities or  discrimination in school discipline.", "To obtain information on the patterns in disciplinary actions among public  schools, we analyzed Education\u2019s Civil Rights Data Collection (CRDC) for  2013-14 (the most recent available). CRDC collects a range of  information, including discipline data, from nearly every public school by  student demographics (e.g., race, sex, disability) and school type (e.g.,  magnet or charter). The CRDC captures data on six broad categories of  discipline: (1) out-of-school suspensions, (2) in-school suspensions, (3)  referrals to law enforcement, (4) expulsions, (5) corporal punishment, and  (6) school-related arrests. It does not capture data on less severe  disciplinary actions, such as detentions. Using the CRDC, we also  developed a regression model to explore whether certain school  characteristics, such as the poverty level of the school, were associated  with higher rates of certain disciplinary actions. Our analyses of these  data, taken alone, do not establish whether unlawful discrimination has  occurred. We determined these data were sufficiently reliable for the  purposes of this report by reviewing documentation, conducting electronic  testing, and interviewing Education officials.", "To obtain information on how selected school districts are addressing  discipline issues, we interviewed state education, school district, and  school officials in five states (California, Georgia, Massachusetts, North  Dakota, and Texas). We selected one district in each state, and 19  schools within those districts, to serve as illustrative (non-generalizable)  examples based on several criteria, including the presence of disparities  in suspensions from school for Black students, boys, or students with  disabilities, as reported in Education\u2019s CRDC data, size of the district,  and geographic diversity.", "To determine how Education and Justice are identifying and addressing  discipline disparities and discrimination, we interviewed agency officials  and reviewed agency documentation, administrative data, federal laws  and regulations, and a non-generalizable selection of resolved school  discipline investigations undertaken by Education and Justice (which we  refer to as cases). We selected four school discipline cases from  Education and three from Justice that covered pre-kindergarten through  grade 12 students, included a mix of types of alleged discrimination (e.g.,  based on race or disability status) and types of discipline (e.g.,  suspension, expulsion, arrest, etc.), and were resolved between 2014 and  May 2017. Regarding administrative data, Education provided information  from its internal database on the number of complaints received and cases investigated that were categorized as being related to school  discipline. We assessed the reliability of this source through discussion  with knowledgeable officials and reviewing key documents and  determined the data to be reliable for our purposes. See appendix I for  detailed information about our scope and methodology.", "We conducted this performance audit from November 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Research on Student Behavior and School Discipline", "paragraphs": ["The issue of who gets disciplined and why is complex. Studies we  reviewed suggest that implicit bias\u2014stereotypes or unconscious  associations about people\u2014on the part of teachers and staff may cause  them to judge students\u2019 behaviors differently based on the students\u2019 race  and sex. Teachers and staff sometimes have discretion to make case- by-case decisions about whether to discipline, and the form of discipline  to impose in response to student behaviors, such as disobedience,  defiance, and classroom disruption. Studies show that these decisions  can result in certain groups of students being more harshly disciplined  than others. Further, the studies found that the types of offenses that  Black children were disciplined for were largely based on school officials\u2019  interpretations of behavior. For example, one study found that Black girls  were disproportionately disciplined for subjective interpretations of  behaviors, such as disobedience and disruptive behavior. A separate  study used eye-tracking technology to show that, among other things,  teachers gazed longer at Black boys than other children when asked to  look for challenging behavior based on video clips. The Department of  Health and Human Services (HHS) reported that this research has  highlighted implicit bias as a contributing factor in school discipline and  may shed some light on the persistent disparities in expulsion and  suspension practices, even though the study did not find that teacher  gazes were indicative of how they would discipline students.", "Children\u2019s behavior in school may be affected by health and social  challenges outside the classroom that tend to be more acute for poor  children, including minority children who experience higher rates of  poverty. Research shows that experiencing trauma in childhood may  lead to educational challenges, such as lower grades and more  suspensions and expulsions; increased use of mental health services;  and increased involvement with the child welfare and juvenile justice  systems, according to HHS\u2019s Substance Abuse and Mental Health  Services Administration (SAMHSA). Further, a substantial share of  children nationwide are estimated to have experienced at least one  trauma, referred to as an adverse childhood experience (ACE), according  to the National Survey of Children\u2019s Health. Additionally, as we recently  reported, there has been an increase in certain mental health issues  within the school age population. For example, from 2005 to 2014, the  suicide rate of youth ages 15 to 19 rose slightly, with older youth having a  much higher rate of suicide than younger youth, and since 2007, the  percentage of youth ages 12-17 experiencing a major depressive episode  increased."], "subsections": []}, {"section_title": "K-12 Students and Discipline", "paragraphs": ["About 50 million students were enrolled in K-12 public schools during the  2013-14 school year, according to the CRDC. About 90 percent of  students attended traditional public schools; the remainder were enrolled  at public charters, magnets, and other types of schools (see table 1).", "About half of all public school students were White and the other half fell  into one of several minority groups, with Hispanic and Black students  being the largest minority groups (see fig. 1). The number of boys and  girls in public schools was almost evenly split. A larger percentage of  boys were students with disabilities.", "Nearly half of all public school students went to schools where 50 percent  or more of the students were low-income, and about a quarter went to  schools where 75 percent or more of the students were low-income (see  table 2).", "Discipline of students dropped between 2011-12 and 2013-14 over the six  broad categories of discipline reported in Education\u2019s CRDC, which were  (1) out-of-school suspensions, (2) in-school suspensions, (3) referrals to  law enforcement, (4) expulsions, (5) corporal punishment, and (6) school- related arrests. For example, in school year 2011-12 about 3.4 million (or  6.9 percent) of K-12 public school students were suspended out-of-school  at least once, and in school year 2013-14 these suspensions fell to about  2.8 million (or 5.7 percent). Other disciplinary actions affected a much  smaller portion of the student body\u2014specifically, less than 0.5 percent of  all K-12 public school students were expelled, referred to law  enforcement, had a school-related arrest, or experienced corporal  punishment in 2013-14, according to Education\u2019s reported data."], "subsections": []}, {"section_title": "Education and Justice Enforcement Responsibilities", "paragraphs": ["Education\u2019s Office for Civil Rights and Justice\u2019s Civil Rights Division are  responsible for enforcing a number of civil rights laws, which protect  students from discrimination on the basis of certain characteristics (see  table 3). As part of their enforcement responsibilities, both agencies  conduct investigations in response to complaints or reports of possible  discrimination. Education also carries out agency-initiated investigations,  which are called compliance reviews and which target problems that  Education has determined are particularly acute. Education may also  withhold federal funds if a recipient is determined to be in violation of the  civil rights laws and the agency is unable to reach agreement with the  parties involved. In addition, Justice has the authority to file suit in  federal court to enforce the civil rights of students in public education.", "Education and Justice have also issued guidance to assist public schools  in meeting their obligations under federal law to administer school  discipline without unlawfully discriminating against students on the basis  of race, color, or national origin. According to the guidance, public  schools are prohibited by federal law from discriminating in the  administration of student discipline based on protected characteristics.  Further, Education and Justice have noted in their guidance that  disciplinary policies and practices can result in unlawful discrimination  based on race, for example, in two ways: first, if students are intentionally  subject to different treatment on account of their race; and second, if a  policy is neutral on its face but has a disproportionate and unjustified  effect on students of a particular race, referred to as disparate impact.", "According to Education and Justice guidance, significant and unexplained  racial disparities in student discipline give rise to concerns that schools  may be engaging in racial discrimination that violates federal civil rights  laws; however, data showing such disparities, taken alone, do not  establish whether unlawful discrimination has occurred."], "subsections": []}, {"section_title": "Selected Recently Enacted Federal Laws with Provisions Related to School Discipline", "paragraphs": ["Two significant, recently enacted laws include provisions related to school  discipline: the Every Student Succeeds Act (ESSA) and the Child Care  and Development Block Grant Act of 2014 (CCDBG Act of 2014).  ESSA, enacted in December 2015, amended Title I program  requirements to allow states\u2019 accountability systems to use multiple  indicators of success, which can include measures of school climate and  safety. As we previously reported in 2017, some states were  considering measures related to suspension rates or school attendance.  Additionally, ESSA amended the Elementary and Secondary Education  Act of 1965 to authorize the Student Support and Academic Enrichment  Program, under which school districts may use grant funding to, among  other things, design and implement a locally-tailored plan to reduce  exclusionary discipline practices in elementary and secondary schools.  These grants also allow the use of funding to expand access to school- based mental health services, including counseling.", "In addition, the CCDBG Act of 2014 allows states to use certain funds to  support the training and professional development of child care workers  through activities such as behavior management strategies and training  that promote positive social and emotional development and reduce  challenging behaviors, including reducing expulsions of young children for  those behaviors."], "subsections": []}]}, {"section_title": "Black Students, Boys, and Those with Disabilities Were Disproportionately Disciplined Regardless of Type of Discipline, Level of School Poverty, or Type of School", "paragraphs": ["Black students, boys, and students with disabilities were  disproportionately disciplined in K-12 public schools, according to our  analysis of Education\u2019s most recent CRDC data. This pattern of  disproportionate discipline persisted regardless of the type of disciplinary  action, level of school poverty, or type of public school these students  attended."], "subsections": [{"section_title": "Type of Disciplinary Action", "paragraphs": ["Across each disciplinary action, Black students, boys, and students with  disabilities experienced disproportionate levels of discipline. Black  students were particularly overrepresented among students who were  suspended from school, received corporal punishment, or had a school- related arrest (see fig. 2). For example, Black students represented 15.5  percent of all public school students and accounted for 39 percent of  students suspended from school, an overrepresentation of about 23  percentage points. Differences in discipline were particularly large  between Black and White students. Although there were approximately  17.4 million more White students than Black students attending K-12  public schools in 2013-14, nearly 176,000 more Black students than  White students were suspended from school that school year. See  appendix IV, table 12 for additional data on the disciplinary experiences of  different racial or ethnic groups. For example, American Indian and  Alaska Native students had higher than average rates of receiving each  of the six disciplinary actions.", "This pattern of disproportionate discipline affected both Black boys and  Black girls\u2014the only racial group for which both sexes were  disproportionately disciplined across all six actions. For example, Black  girls were suspended from school at higher rates than boys of multiple  racial groups and every other racial group of girls (see fig. 3).", "Further, boys as a group were overrepresented, while girls were  underrepresented among students disciplined across each action.  Specifically, boys accounted for just over half of all public school  students, but were at least two-thirds of students disciplined across each  of the six actions, according to our analysis of Education\u2019s school year  2013-14 data. Boys were particularly overrepresented among students  who received corporal punishment, by about 27 percentage points (see  fig. 4). These kinds of disparities presented as early as pre-school (see  sidebar). Additional information about discipline for pre-school students is  in appendix IV, table 17.", "Regardless of the level of school poverty, Black students, boys, and  students with disabilities were suspended from school at  disproportionately higher rates than their peers (see fig. 6). This was  particularly acute for Black students in high-poverty schools, where they  were overrepresented by nearly 25 percentage points in suspensions  from school. This pattern persisted across all six disciplinary actions, as well. A similar pattern emerged for boys and students with disabilities.  However, unlike Black students, boys and students with disabilities were  particularly overrepresented among students suspended from low-poverty  public schools (poverty less than 25 percent).", "Effect of School Poverty on Discipline  GAO used a regression model to examine the  independent effect of school poverty on  discipline in school year 2013-14. The model  showed that increases in the percentage of  low-income students in a school were  generally associated with significantly higher  rates for each of the six disciplinary actions  GAO reviewed (in-school and out-of-school  suspensions, referrals to law enforcement,  expulsions, corporal punishment, and school- related arrests).", "In these schools, boys and students with disabilities were  overrepresented by approximately 24 and 20 percentage points,  respectively. See appendix IV, table 14 for more information on discipline  by the poverty level of the school. In addition, see sidebar for regression  results that were relevant to poverty and school discipline. Full results  from our regression model are in appendix I, table 10."], "subsections": []}, {"section_title": "Type of Public School", "paragraphs": ["Regardless of the type of public school a student attended\u2014traditional,  magnet, charter, alternative, or special education\u2014Black students, boys,  and students with disabilities were disciplined at disproportionately higher  rates than their peers, with few exceptions (see fig. 7). For example,  Black students were disproportionately suspended from all types of public  schools, and this was particularly acute in charter schools. That is,  although they represented about 29 percent of all students in charter  schools, Black students accounted for more than 60 percent of the  students suspended from charter schools (about 32 percentage points  higher than their representation in those schools). Boys and students with  disabilities were particularly overrepresented among students suspended  from traditional public schools (roughly 19 and 14 percentage points,  respectively, above their representation in traditional public schools).", "Effect of School Type on Discipline  GAO used a regression model to examine the  independent effect of attending different types  of public schools on disciplinary outcomes.  The model showed several significant  associations between school type and the  likelihood of receiving discipline. For example,  attending an alternative school was  associated with a significantly higher  likelihood of being suspended (in-school or  out-of-school), expelled, referred to law  enforcement, or arrested for a school-related  incident, compared to attending a traditional  public school. The model also showed that  students were significantly less likely to be  suspended (in-school or out-of-school) if they  attended a magnet, charter, or special  education school as compared to a traditional  public school.", "We found a few exceptions to the general pattern of Black students, boys,  and students with disabilities receiving disproportionately high rates of  discipline by school type. For example, Black students attending special  education schools did not receive corporal punishment at disproportionate  levels. See appendix IV, table 15 for additional information on discipline  by the type of public school. In addition, see sidebar for regression results  that were relevant to school type and school discipline. Full results from  our regression model are in appendix I, table 10. We also found a  regional component to discipline in public schools. For example, corporal  punishment generally occurred in southern states. See appendix II for  maps showing the rates of disciplinary actions by public school district."], "subsections": []}]}, {"section_title": "Five Selected Districts Reported Changing Their Approach to Discipline in Order to Address Student Behavior Challenges", "paragraphs": [], "subsections": [{"section_title": "Selected School District and School Officials Said Complex Issues Confronting Students Make It Challenging to Address Student Behavior", "paragraphs": ["We spoke with school officials at five school districts about how they are  addressing discipline, including challenges they face in responding to  student conduct given the complex issues influencing student behavior.  Several school officials noted a range of issues, including complex issues  such as the effects of poverty, mental health issues, and family  dysfunction, that they said contributed to behavior that leads to discipline  (see fig. 8). For example, officials at a high-poverty Georgia high school  said that their students have additional responsibilities, such as raising or  watching siblings or working to support their family, which may cause  students to be late to, or skip, class. This observation is consistent with  our recent report on child well-being, which cited research showing that  children in poverty are more likely to face academic and social challenges  than their peers, and with our analysis of CRDC data, which showed that  rates of chronic absenteeism (being absent 15 or more days in a school  year), were higher in high-poverty schools. See appendix IV, table 19  for detailed data on chronic absenteeism. At one high school in Georgia,  officials said that attendance issues were the reason for a majority of  disciplinary actions at their school. They said that if students were repeatedly late to school or did not get to their next class within the set  amount of time, students could amass enough infractions to warrant  suspension from school. In contrast, an official at an elementary school in  Georgia said that they usually do not discipline their students for being  late to school, as they have found that it was often due to circumstances  beyond the child\u2019s control. According to several school officials, some  groups such as homeless youth, American Indian, or Lesbian, Gay,  Bisexual, Transgender, or Questioning (LGBTQ) students have had  greater attendance problems than others. For example, education officials  in California said that homeless and foster youth frequently miss school  because of all the transitions and instability in their lives. In a school in  Texas, officials also reported attendance issues with students who are  homeless or in foster care because they lack transportation and clothing.  Similarly, we previously reported that American Indian students face  school attendance challenges, including access to reliable  transportation. In addition, American Indian and Alaska Native students  had the highest rates of chronic absenteeism in school year 2013-14,  compared to students of other races, according to our analysis of CRDC  data (see appendix IV). LGBTQ students are at a high risk of suicide and  other emotional issues during adolescence, and often feel disconnected  from their peers and families, according to county education officials in  California. According to these officials, this can contribute to attendance  problems.", "Officials in our five selected school districts also described what they  perceived as a growing trend of behavioral challenges or provided  examples related to mental health and trauma, such as increased  anxieties, thoughts of and attempts at suicide, and depression among  students. For example, state education officials in Georgia said they  viewed a growing number of their students as being \u201ctrauma complex.\u201d  Officials at one school in Massachusetts said that they involve the mental  health clinicians or social worker for additional support when students are  dealing with traumatic experiences, depression, or are struggling to self- regulate. Further, officials at another school in Massachusetts said that  many of their students have experienced trauma and this may lead to  more aggressive behaviors at the elementary school level, and to more  self-destructive behaviors at the middle school level. Specifically, these  officials said that children who have experienced trauma may kick, bite,  and punch others when they are younger and cut themselves or become  suicidal when older. Similarly, officials at a school in Texas said that they  have seen a growth in suicidal ideation and self-harm among the  students. Some school officials also said that they felt ill-equipped or that  schools lacked resources to deal with the increase in students with  mental health issues and the associated behaviors.", "School officials in all five of the selected states also said that social media  results in conflicts or related behavioral incidents among students, such  as related bullying and arguments. Officials at a school in Georgia said  that social media arguments can cause students who were not part of the  original situation to be pulled in, creating classroom disruptions that end  in discipline for a larger group. Moreover, officials in a North Dakota  middle school said that disagreements on social media last for longer  periods of time. They said that social media has also been used to  facilitate the purchase of illegal drugs, which can result in students being  arrested in school and expelled.", "Use of Corporal Punishment in School for  Five Selected States  California, Massachusetts, and North Dakota:  Corporal punishment in schools is prohibited.  Texas: If a school district adopts a policy to  permit corporal punishment, school staff may  use corporal punishment unless the student\u2019s  parent has provided a written, signed  statement prohibiting it. None of the schools  GAO visited used corporal punishment,  according to officials.  Georgia: Boards of education are authorized  to determine policies related to corporal  punishment, including allowing school staff, at  their discretion, to administer corporal  punishment in order to maintain discipline.  However, none of the schools GAO visited  used corporal punishment, according to  officials.", "School district officials from three of the five selected districts we visited  stated that officials at individual schools generally have a lot of discretion  in determining what discipline a student receives. In several schools,  officials said they often try other avenues first to address behavior, such  as detention, alerting or having a discussion with the parent, or taking  away certain privileges such as making the student eat lunch with the  teacher instead of with their friends. However, for certain offenses,  officials in most districts said that discipline was automatically more  severe. Gun possession, for example, prompts an automatic expulsion at  most of the school districts we visited. In another example, school  district officials in Texas said drug-related incidents, physical assault of a  teacher or student, or extreme sexual behaviors can result in a student  being placed in an alternative school. School officials at one alternative  school we visited stated that 80 to 90 percent of their students are there  due to drug-related incidents. Officials in several of the school districts  said their districts had School Resource Officers who only become  involved in school disciplinary issues when requested by school  administrators. In a Texas high school with over 3,800 students, a school  official said School Resource Officers patrol school grounds, monitor  gang activity, and may become involved when there are illegal drug  issues. Officials also said that School Resource Officers sometimes  provide trainings for students, parents, or school staff on subjects such as  safety, good decision making, substance abuse, and peer pressure.  Further, although corporal punishment was legal in two of the five states  we visited (see sidebar), the school district officials with whom we spoke  in those states said it was not used anymore in their districts. Our  analysis of schools nationwide using school year 2013-14 data showed  that corporal punishment tended to be most prevalent in southern states  (see maps in appendix II)."], "subsections": []}, {"section_title": "All Selected School Districts Described Changing Their Approach to Discipline", "paragraphs": ["While there is no one-size-fits-all solution to addressing challenging  student behavior, or to the evident disparities in discipline for certain  student groups, officials in two school districts we visited told us they  recognize the importance of finding alternatives to discipline that  unnecessarily removes children from the learning environment. Some  school officials said they have begun to specifically address disparities for  certain student groups. Officials in all selected school districts reported  they are implementing efforts to better address student behavior or  reduce the use of exclusionary discipline. For example, officials in all  school districts said that they are implementing alternative discipline  models that emphasize preventing challenging student behavior and  focus on supporting individuals and the school community, such as  positive behavioral interventions and supports (PBIS), restorative justice  practices, and social emotional learning (SEL) (see sidebar). For  example, officials at a selected school district in Texas said they have  implemented a classroom management model that uses positive behavior  techniques. Texas state law allows schools to develop and implement  positive behavior programs as disciplinary alternatives for very young  students. This was also true in California, where state law specifically  lists suggested alternatives to suspension, including restorative justice, a  positive behavior support approach with tiered interventions, and  enrollment in programs that teach positive social behavior or anger  management.", "Examples of Alternatives to Discipline that  Removes Students from the Classroom  Positive Behavioral Interventions and  Supports (PBIS): A school-wide framework  that focuses on positive behavioral  expectations. By teaching students what to do  instead of what not to do, the school can  focus on the preferred behaviors. All of the  selected school districts used some form of  positive behavioral intervention and supports.  One school official told us that PBIS has  significantly reduced their discipline referral  numbers and provided teachers more tools to  get behavior situations under control.  Restorative Justice Practices: This approach  focuses on repairing harm done to  relationships and people. The aim is to teach  students empathy and problem-solving skills  that can help prevent inappropriate behavior  in the future. For example, according to  officials we interviewed at one school, their  restorative practices help students take  ownership of their actions and work  collaboratively to restore relationships that  may have been strained. Officials at another  school said schools use mediation techniques  as alternatives to suspensions.  Social and Emotional Learning (SEL): SEL  enhances students\u2019 abilities to deal effectively  and ethically with daily tasks and challenges.  SEL integrates the following five core  competencies: self-awareness, self- management, social awareness, relationship  skills, and responsible decision making. At a  school implementing this model, officials said  that they are strengthening their SEL program  to improve the whole child instead of treating  discipline and mental and behavioral health  separately.", "With regard to directly addressing disparities in school discipline, officials  at one school district in California said they created a new leadership  team for equity, culture, and support services, and developed a district- wide equity plan that includes mandatory training on implicit bias for  principals. Officials from that district also said they had recently changed  a policy to increase the consistency of discipline actions across the  district\u2019s schools. Similarly, officials at a school district in Massachusetts  reported they were working to build awareness among school leadership  to address racial bias and the achievement gap through multiyear  trainings. Officials we spoke with at a school within that district said they  conduct trainings for staff on implicit bias and other related issues to  reduce school discipline disparities. As some of the schools and districts  we visited have begun implementing alternative discipline models and  efforts to reduce the use of exclusionary discipline in recent years, we  heard from officials in two districts that there has been difficulty with  implementation due to limited resources, staffing turnover, and resistance  on the part of some parents.", "During our visits to schools, we observed classroom spaces that school  officials used to manage student behavior, including through various  alternative approaches to discipline (see fig. 9). Officials in two school  districts said they are moving away from exclusionary discipline because  it decreases the amount of academic instruction. Officials at one school  district in Georgia said that the district had a history of overusing  exclusionary discipline and they understood that schools cannot \u201csuspend  their way out of behavioral and discipline issues.\u201d Officials at that district  said they are currently rolling out PBIS to their schools, although progress  has been slow. While they said discipline rates have decreased and they  have received fewer parent and staff complaints, change is difficult  because of limited resources, staff turnover, and some resistance to  alternative discipline versus punitive discipline on the part of both some  school staff and parents.", "State education officials in all five states said that changes to state law  were made or considered related to school discipline in the past several  years. For example, California officials said that state law now prohibits  suspensions and expulsions for children in grades K-3 for willful  defiance. For all ages suspensions may only be used when other  means of correction fail to bring about proper conduct. Similarly,  Massachusetts law requires that during a student meeting or a hearing to  decide disciplinary consequences for a student, school administrators  consider ways to re-engage students in the learning process and that  expulsion only be used after other remedies and consequences have  failed. Massachusetts also revised its state law effective July 2014 to  require that schools provide educational services for expelled students.  Georgia state law includes a preference for reassignment of disruptive  students to alternative educational settings in lieu of suspending or  expelling such students. In addition, most of the selected states plan to  include school discipline or absenteeism as measures of school quality in  their state ESSA Title I plans (see sidebar)."], "subsections": []}]}, {"section_title": "Education and Justice Identify and Address School Discipline Issues by Investigating Cases, Analyzing Data, and Providing Guidance and Support", "paragraphs": [], "subsections": [{"section_title": "Education Has Investigated and Found Instances of Discrimination and Disparities in School Discipline", "paragraphs": ["According to administrative data from Education, the Office for Civil  Rights (OCR) resolved over 2,500 K-12 school discipline cases between  2011 and summer 2017 through several means, including voluntary  resolution (leading to agreed-upon actions and subsequent monitoring),  dismissal, or closure due to insufficient evidence. These cases  stemmed both from external complaints and reviews self-initiated by  Education. When we analyzed a non-generalizable sample of resolved  cases, we found that most of them focused on alleged racial  discrimination or disability status. In the four cases we selected for more  in-depth review, the school districts agreed to address discipline issues  by, for example, designating a discipline supervisor, training staff, revising  district policies, holding student listening sessions, and regularly  reviewing data to identify disparities (see case descriptions below).  Some of these remedies are designed to reduce exclusionary discipline  or improve overall school climate, and others are more directly focused  on addressing disparities in school discipline. For example, having school  leadership regularly review data, particularly when disaggregated by race  and other student characteristics, would increase awareness of  disparities.", "Education Case 1: Race and Exclusionary Discipline in a Mississippi  School District. OCR\u2019s 2014 investigation of the Tupelo Public School  District found that Black students were disproportionately disciplined in  nearly all categories of offenses. These commonly included subjective  behaviors like disruption, defiance, disobedience, and \u201cother misbehavior  as determined by the administration.\u201d The consequences for \u201cother  misbehavior\u201d in high school could be severe, ranging from detention to  referral to an alternative school. Once at the alternative school, students  were searched thoroughly each day upon entry, escorted by security  officers when changing classes, and not allowed to carry purses or book  bags. OCR concluded that the district\u2019s discipline codes afforded  administrators broad discretion, and found different treatment of Black  students when looking at specific disciplinary records. For example,  among several students who were disciplined for the first offense of using  profanity, Black students were the only ones who were suspended from  school, while White students received warnings and detention for  substantially similar behavior. To address these issues, the district entered into a voluntary resolution agreement whereby it committed to  taking specific actions to ensure that all students have an equal  opportunity to learn in school. It agreed, among other things, to revise its  student discipline policies, practices, and procedures to include clear and  objective definitions of misconduct, eliminate vague and subjective  offense categories, and describe criteria for selection within the range of  possible penalties when imposing sanctions. The district also agreed to  require that alternatives to suspension and other forms of exclusionary  discipline be considered in all cases except where immediate safety of  students or staff is threatened, and where the behavior in question is such  that the disruption to the educational environment can only be remedied  by removal, or where the student\u2019s removal is a result of the district\u2019s  progressive discipline policy.", "Education Case 2: Disability and Restraint & Seclusion in a Non- Public California School. This 2016 OCR investigation focused on  restraint and seclusion of a student with disabilities who was placed at the  non-public school with which Oakland Unified School District contracted  to provide the student with certain services, including developing and  implementing behavior intervention plans. OCR found the use of prone  restraint on this student to be severe, persistent, and pervasive: staff held  the student face-down 92 times over a period of 11 months, with the  longest duration of a single face-down restraint being 93 minutes.  Examples of behaviors that led to the use of restraint included disruptive  behavior, not following directions, pushing desks, and ripping up  assignments. Staff said that the student wanted to be disciplined and  understood prone restraint to be disciplinary. OCR determined that the  district allowed the student to be treated differently for non-dangerous  behavior on the basis of disability. The district entered into a resolution  agreement, committing to resolve these issues by offering individual relief  to the student\u2014arranging for an evaluation of the student for adverse  effects of the restraint and seclusion, with recommendations for  addressing areas of harm\u2014and implementing district-wide policy changes  related to restraint and seclusion. The latter included establishing a  protocol for responding to any contracted non-public schools\u2019 reports of restraining or secluding district students, and providing training on  positive interventions.", "Excerpt from Christian County, KY Case  An African American 10th grader was  assigned 1-day out-of-school suspension for  skipping school. In comparison, a white 12th  grader was assigned a conference with the  principal for skipping school. The African  American student had 19 previous disciplinary  referrals, while the white student had 28  previous disciplinary referrals. Education  reported that it would be difficult for the district  to demonstrate how excluding a student from  attending school in response to the student\u2019s  efforts to avoid school meets an important  educational goal.", "Education Case 3: Race and Exclusionary Discipline in a Kentucky  School District. In this 2014 case, OCR found that Christian County  School District disciplined Black students more frequently or harshly than  similarly situated White students. Specifically, Black students were more  than 10 times more likely than White students to receive out-of-school  suspension for disorderly conduct, and Black students were more likely to  be assigned to an \u201cIsolated Classroom Environment\u201d when discipline was  for a violation that afforded discretion. OCR also found that the district\u2019s  discipline code did not define 61 types of violations, including ones that  involve interpretation, such as disorderly conduct, failure to follow  directions, deliberate classroom disruption, and profanity. OCR found that  administrators had wide discretion in determining the consequences for  such actions, and noted that the discipline code allowed for virtually every  type of sanction, including expulsion, for each type of violation. OCR also  found inconsistencies in treatment of students in different racial groups  when looking at individual records (see sidebar). Although district officials  said they were aware of the higher rates of discipline for Black students,  OCR found that there were no safeguards to ensure that discretion would  be exercised in a nondiscriminatory manner. To resolve these issues, the  district agreed to ensure as much as possible that misbehavior is  addressed in a way that avoids exclusionary discipline, collaborate with  experts on research-based strategies to prevent discrimination in  discipline, and provide support services to decrease behavioral  difficulties, among other things.", "Education Case 4: Race and Informal Removals in a California  Charter School. In this 2015 case, OCR investigated whether Black  students were disproportionately disciplined at a charter school which  emphasizes Hmong culture and language. The complaint noted that the  student\u2019s parents had been asked to take him home on a few occasions  because he was disruptive in class. School administrators confirmed the  practice of \u201cearly dismissal\u201d in response to misbehavior, but said they did  not consider the dismissal to be disciplinary. Because the school did not  maintain records of these removals, OCR was unable to determine if the  student was subjected to discriminatory discipline. However, OCR noted  that the practice of removing students from school for disciplinary reasons  without appropriate recordkeeping and due process makes it almost  impossible for the school to assess whether it is fully meeting its duty of  ensuring nondiscrimination with respect to discipline. To resolve these  issues, the school agreed, among other things, to revise its discipline  policies, provide due process and alternatives to exclusionary discipline,  and clearly prohibit the kinds of informal suspensions that OCR observed."], "subsections": []}, {"section_title": "Justice Has Investigated Discrimination in School Discipline Based on Long- standing Desegregation Orders and Public Complaints", "paragraphs": ["Justice also investigates discrimination in school discipline based on  complaints filed under federal civil rights statutes and as part of  monitoring desegregation orders. Three recently-resolved cases  investigated exclusionary discipline or restraint and seclusion for students  of color and those with disabilities (see case descriptions below).", "Justice Case 1: Race and Exclusionary Discipline in an Arkansas  School District. This Justice case, originally stemming from a  desegregation order, focused on whether the Watson Chapel School  District was discriminating against Black students in its administration of  school discipline. Justice found that the district suspended and expelled  Black students at significantly higher rates than White students, and that  district policies and procedures were responsible for this difference. The  parties signed a Consent Order in 2016, under which the school district  agreed to implement positive interventions and supports, transition away  from exclusionary discipline, revise the code of conduct to list specific  levels of disciplinary infractions and consequences, prohibit corporal  punishment, establish a memorandum of agreement with any law  enforcement agency that supplies school resource officers, and provide  training to staff. In addition, the district agreed to provide due process  before students receive out-of-school suspensions, expulsions, or  referrals to the alternative education program because of disruptive  behavior.", "Justice Case 2: Race and Disability in a Maryland School District.  Justice investigated complaints that discipline policies in the Wicomico  County Public School District resulted in the discriminatory suspension of  Black and Latino students and students with disabilities. After the  investigation, Justice and the district negotiated and entered into a  voluntary out-of-court settlement agreement in January 2017. The district  agreed to hire a consultant to implement positive behavioral interventions  and supports and restorative practices, revise the code of conduct to  include objective definitions of behavioral infractions and incorporate  alternatives to exclusionary discipline, establish clear guidelines for when  law enforcement intervention is appropriate, and provide appropriate due  process procedures.", "Justice Case 3: Race and Restraint & Seclusion in a Kentucky  School District. This 2017 Justice case investigated whether  Covington Independent Schools\u2019 disciplinary practices, including the use  of exclusionary discipline, restraint, and seclusion, discriminated on the  basis of race, national origin, or disability. The parties agreed to  negotiate a settlement agreement under which the district agreed to  develop a process to regularly identify students who disproportionately  had disciplinary referrals, with a focus on offenses that may be the result  of unaddressed behavioral needs such as disruptive behavior or  aggression, defiance, and being \u201cbeyond control.\u201d The district also agreed  to discontinue the use of \u201ccalm rooms\u201d (where students are isolated  during an episode of misbehavior) and prohibit the use of physical  restraint except in the case of imminent danger that could not be  addressed through de-escalation techniques. The district agreed to adopt  an intervention procedure to meet the needs of students with disabilities  who may need support beyond the standard discipline policies. In  addition, if parents of students with disabilities were asked to come to the  school to become involved in an ongoing instance of misbehavior, the  district could no longer require the parent to take the student home unless  the student had been assigned an out-of-school suspension or expulsion."], "subsections": []}, {"section_title": "Education and Justice Provide Guidance and Resources on School Discipline and Related Issues, Including How to Identify and Address Disparities", "paragraphs": ["Education and Justice collaborated on a \u201cRethink Discipline\u201d campaign in  2014 to address what they viewed as widespread overuse of suspensions  and expulsions. This awareness campaign included comprehensive  guidance to help states and schools implement alternatives to  exclusionary discipline, reduce discrimination, and identify root causes of  disparities (see sidebar). The agencies have also collaborated to  provide guidance encouraging school districts that use school resource  officers to formalize partnerships with local law enforcement agencies and  clarify that school resource officers should not administer discipline in  schools.", "Education has also issued special guidance related to the discipline of  students with disabilities, including an explanation of the requirement to  provide appropriate strategies to address behavior in students\u2019  individualized education programs (IEPs). This guidance stated that  when a student with a disability is regularly sent home early from school  for behavior reasons, it is likely that the child\u2019s opportunity to make  progress in the general education curriculum is significantly impeded (see  sidebar). The guidance states that being sent home regularly in this way  constitutes a disciplinary removal, which comes with statutory reporting  obligations and other considerations. For further information on available  federal guidance related to discipline in public schools, see appendix III. available could result in an inappropriately  restrictive placement.  demonstrates that disciplinary measures  such as short-term removals from the  current placement (e.g., suspension), or  other exclusionary disciplinary measures  that significantly impede the  implementation of the individualized  education program (IEP), generally do not  help to reduce or eliminate reoccurrence  of the misbehavior.", "Education and other federal entities have also awarded grants and  established special initiatives related to student behavior and school  discipline, many of which started around the same time as the federal  Rethink Discipline campaign and were designed to be complementary.  For example, Education awarded about $130 million from 2014-2016 to  states and school districts through the School Climate Transformation  Grant, which was established in 2014 to support districts taking steps to  improve behavioral outcomes. According to Education, nearly 3,000  schools have worked to implement these behavioral support systems  through the grant, and preliminary outcomes data have shown increased  student attendance and fewer disciplinary referrals. In addition, Education  awarded about $68 million for fiscal years 2015-2019 to over 20 school  districts under Project Prevent\u2014a grant to promote conflict resolution  skills in students, particularly when they have been exposed to pervasive  violence. According to the districts\u2019 grant summary documents, these  districts have experienced nearly 10,000 fewer violent behavioral  incidents and have provided access to mental health services for over  5,000 students. Justice\u2019s research arm, the National Institute of Justice,  also started the Comprehensive School Safety Initiative in 2014 and has  since provided about $84 million to fund nearly 40 research projects and  interventions that address school discipline and safety, such as  implementing restorative practices and studying the root causes of the  school-to-prison pipeline. More recently, Education collaborated with HHS  to fund the Pyramid Equity Project for early learning programs, which is  designed to address implicit bias in school discipline, implement culturally  responsive practices in addressing student behavior, and use data  systems to understand equity issues.", "For ongoing technical assistance related to student behavior and school  discipline, Education sponsors centers on supportive learning  environments, improving student engagement and attendance, and  implementing positive behavioral interventions and supports (PBIS). For  example, the National Center on Safe Supportive Learning Environments  provides information and resources on addressing school discipline,  mental health, substance abuse, physical safety, student engagement,  and other related issues. Justice funds a technical assistance center on  school-justice partnerships that works to enhance collaboration among  schools, mental and behavioral health specialists, and law enforcement  officials. This center recently published a bulletin on the intersection of  exclusionary school discipline and the juvenile justice system, which  offers tips for judges who handle school-related cases and information on  successful efforts to reduce the number of school-based referrals to law  enforcement. For a list of other technical assistance centers related to  student behavior or discipline, see appendix III.", "Lastly, to help identify discipline disparities among the nation\u2019s schools,  Education collects comprehensive data on school discipline every other  year through the CRDC. The agency publicly releases highlights from  these data through their \u201cFirst Look\u201d documents and in annual reports,  which typically focus on a limited number of disciplinary actions (primarily  suspensions) and student demographics (usually race and disability  status). Education\u2019s public analyses of school discipline data have not  included school characteristics like poverty level or type of school.  Education encourages districts and schools to disaggregate their data by  various student demographics and examine it for disparities. In addition,  Education\u2019s Office of Special Education and Rehabilitative Services  recently examined racial and ethnic disparities for students with  disabilities using data collected under IDEA, Part B. This IDEA report  provides the public with information on whether districts had significant  disproportionality on the basis of race or ethnicity in the discipline of  students with disabilities."], "subsections": []}]}, {"section_title": "Agency Comments, Third Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Education and  Justice for review and comment. These agencies provided technical  comments, which we incorporated as appropriate. We also provided  selected draft excerpts relevant to officials we interviewed in state  agencies, school districts, and school officials. We received technical  comments from those officials in four of our five selected states, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Education, the Secretary of  Health and Human Services, the Attorney General, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0580 or nowickij@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to examine (1) the patterns in  disciplinary actions among public schools, (2) the challenges selected  school districts reported with student behavior and how they are  approaching school discipline, and (3) the actions the Department of  Education (Education) and the Department of Justice (Justice) have taken  to identify and address any disparities or discrimination in school  discipline.", "To conduct this work we (1) analyzed federal discipline data by student  demographics and school characteristics; (2) visited five school districts  to provide illustrative examples of approaches to school discipline; and (3)  interviewed federal agency officials and reviewed agency documentation,  federal laws, regulations and policies, selected state laws, and a selection  of resolved school discipline cases. To inform all aspects of our work, we  interviewed representatives from several nonfederal civil rights  organizations and advocacy organizations that represent parents and  families, individuals with disabilities, and people from specific racial or  ethnic backgrounds, such as Hispanic, African-American, and American  Indian communities. We also met with academic subject matter experts to  discuss issues related to school discipline, including disparities in school  discipline and initiatives intended to reduce exclusionary discipline. In  addition, we reviewed two dozen articles containing research that had  been published since 2010 to further understand the context of school  discipline issues and programs. We evaluated the methods used in the  research and eliminated the research if we felt the methods were not  appropriate or rigorous. The following sections contain detailed  information about the scope and methodology for this report."], "subsections": [{"section_title": "Analysis of School Discipline National Data", "paragraphs": ["To determine the patterns in disciplinary actions among public schools,  we used Education\u2019s Civil Rights Data Collection (CRDC) to analyze  discipline data from all public schools by student demographics (e.g.,  race, sex, disability) and school characteristics (e.g., school type, such as  charter or magnet school). Our analyses of this data, taken alone, do not  establish whether unlawful discrimination has occurred. The CRDC is a  biennial survey that is mandatory for every public school and district in the  United States. Conducted by Education\u2019s Office for Civil Rights, the  survey collects data on the nation\u2019s public schools (pre-K through 12th  grade), including disciplinary actions as well as student characteristics  and enrollment, educational and course offerings, and school  environment, such as incidents of bullying. CRDC data are self-reported  by districts and schools, and consequently there is potential for  misreporting of information. In school years 2011-12 and 2013-14, the  CRDC collected data from nearly every public school in the nation  (approximately 17,000 school districts, 96,000 schools, and 50 million  students in school year 2013-14). Using the public-use data file of the  CRDC, we focused our analysis primarily on data for school year 2013- 14, the most recent data available at the time of our analysis. We also  compared disciplinary data from school years 2011-12 and 2013-14 to  analyze how discipline may have changed over that period.", "The 2013-14 CRDC collected data on six broad types of disciplinary  actions: (1) out-of-school suspensions, (2) in-school suspensions, (3)  referrals to law enforcement, (4) expulsions, (5) corporal punishment, and  (6) school-related arrests. The CRDC did not collect data on less severe  forms of discipline, such as detentions, Saturday school, or removing  privileges to engage in extracurricular activities, such as athletic teams or  field trips. As shown in table 4, we combined related variables for out-of- school suspension and expulsion; we also provide a crosswalk of  discipline variables used in this report and those captured in the CRDC.", "For each of the six disciplinary actions in our review, we examined  discipline counts and rates both overall and disaggregated by student  demographic characteristics. Specifically, we examined counts and rates  for each disciplinary action by student sex (boy or girl), race or ethnicity  (see table 5), disability status (students with or without disabilities), and  English Language Learners. Using the CRDC, we also examined race  and sex intersectionally, for example, disciplinary rates for Black boys or  White girls.", "In order to analyze discipline counts and rates by the poverty level of the  school, we pulled in data on free or reduced-price lunch eligibility from the  2013-14 Common Core of Data (CCD), and matched it to schools in the  2013-14 CRDC, which did not collect eligibility data. The CCD is  administered by Education\u2019s National Center for Education Statistics, and  annually collects nonfiscal data about all public schools in the nation. A  student is generally eligible for free or reduced-price lunch based on  federal income eligibility guidelines that are tied to the federal poverty  level and the size of the family. State education agencies supply these  data for their schools and school districts.", "We then sorted schools into quartiles based on the percentage of  students eligible for free or reduced-price lunch as follows: 0 to 25  percent, 25.1 to 49.9 percent, 50 to 74.9 percent, and 75 to 100 percent  (see table 6). The poverty thresholds and measure of poverty discussed  here and throughout this report were commonly used in the literature and  also aligned with how Education analyzed its data.", "To analyze discipline counts and rates by the type of public school a  student attended, we sorted schools into mutually exclusive categories  and reviewed disciplinary data by student demographic information. The  2013-14 CRDC allowed schools to self-identify as special education,  magnet, charter, and alternative schools (see table 7).", "The categories of public schools in the CRDC were not mutually  exclusive; that is, schools could select multiple school types to describe  their school, such as a charter school that was also an alternative school.  To create mutually exclusive categories for analytical purposes, we  applied the following criteria:", "Alternative school: all schools that selected \u201calternative\u201d as the school  type in the CRDC, even if they selected other types as well.", "Special education school: schools that selected \u201cspecial education\u201d as  the school type in the CRDC, except those schools that also selected  the alternative school type.", "Charter school: schools that selected \u201ccharter\u201d as the school type in  the CRDC, except those schools that also selected the alternative  school type and/or the special education school type.", "Magnet school: schools that selected \u201cmagnet\u201d as the school type in  the CRDC, except those schools that also selected the alternative  school type, the special education school type, and/or the charter  school type.", "Traditional school: schools that did not select any other school type in  the CRDC.", "Table 8 provides the breakdown of students and schools captured in the  2013-14 CRDC after applying these criteria.", "For each of our school discipline analyses, we also examined disparities  in disciplinary rates by student demographics. Specifically, we compared  each student groups\u2019 representation among students disciplined to their  representation in the overall student population. For example, if boys  accounted for 50 percent of all K-12 public school students, but  represented 75 percent of students that received a given disciplinary  action, then boys would be overrepresented among students that  received that type of discipline by 25 percentage points. We also  compared disciplinary rates across student groups and similarly  examined disparities based on school poverty level and school type for all  students.", "We also analyzed CRDC data on discipline of pre-school students. The  disciplinary data for pre-school students that was collected in the CRDC  for school year 2013-14 was different than disciplinary data collected for  K-12 students. Specifically, data on pre-school discipline was limited to  out-of-school suspensions and expulsions. Findings from our analysis of  pre-school discipline data are included where applicable in the report and  additional data are provided in appendix IV, table 17.", "In addition to analyzing data on school discipline, we also analyzed data  on chronic absenteeism, which was defined as students who were absent  15 or more days during the school year for any reason, which could  include for suspensions and expulsions. The CRDC also collected data  on instances in which students were restrained\u2014both physically and  mechanically\u2014or secluded at school. Education has provided a resource  document with principles to school districts that indicates restraint and  seclusion should only be used in instances where a student\u2019s \u201cbehavior  poses imminent danger of serious physical harm to self or others,\u201d and  should never be used as punishment or discipline. However, multiple  sources, including civil rights complaints filed with Education, news  stories, and other reports have alleged that these practices have been  used in response to student misbehavior, in particular for students with  disabilities. We included data on chronic absenteeism and restraint and  seclusion in our analyses, and present related findings in appendix IV,  tables 18 and 19.", "We determined that the data we used from the CRDC and CCD were  sufficiently reliable for the purposes of this report by reviewing technical  documentation, conducting electronic testing, and interviewing officials  from Education\u2019s Office for Civil Rights and National Center for Education  Statistics. For our analysis of the 2013-14 CRDC, we used the final data  file that was publicly available as of June 2017 because it corrected errors  in the original data previously submitted by several school districts."], "subsections": []}, {"section_title": "Regression Analysis", "paragraphs": ["We conducted a generalized linear regression using the 2013-14 CRDC  and CCD data to explore whether and to what extent certain school-level  characteristics were associated with higher rates of each disciplinary  action. Such a model allowed us to test the association between a given  school characteristic and the percentage of students receiving a given  disciplinary action, while holding other school characteristics constant.  We selected different school characteristics (our independent variables)  for the regression based on factors that Education\u2019s Office for Civil Rights  and other researchers have identified as potential drivers of school  discipline rates (our dependent, or outcome variables). Table 9 lists the  variables we included in our regression model. We conducted a  separate regression for each of the six disciplinary actions listed as an  outcome variable.", "We excluded some schools from our regression model. Specifically, we  excluded schools that met one or more of the following criteria:", "Data were not available in both the CRDC and CCD data sets, and  therefore we were unable to determine the percentage of students  eligible for free or reduced-price lunch in these schools or whether  these schools were located in rural, suburban, or urban areas.", "School was listed as \u201cungraded\u201d in the CRDC because we could not  determine if these schools offered grade 6 or above.", "School only offered pre-school because pre-school disciplinary data  were reported separately and differently than K-12 disciplinary data in  the CRDC.", "School identified as a juvenile justice facility in the CRDC. In the  2013-14 CRDC, schools could identify as a juvenile justice facility,  and select one of the other school types in our analysis (i.e.,  traditional, magnet, charter, alternative, and special education  schools). Due to this overlap, and because it is reasonable to expect  discipline within a juvenile justice facility could function differently than  discipline in other schools, we excluded these schools from our  regression model.", "School had less than 10 students enrolled because in smaller schools  minor fluctuations in the numbers of students receiving a given  disciplinary action could have a large effect on disciplinary rates.", "In the 2013-14 data, these exclusions reduced the total number of public  schools in our regression model from a universe of 95,507 public schools  to 86,769 public schools.", "All regression models are subject to limitations and for this model the  limitations included:", "Data we analyzed were by school rather than student. Consequently,  we were not able to describe the association between our  independent variables and a student\u2019s rate of different disciplinary  actions, while controlling for characteristics of an individual student,  such as sex, race or ethnicity, disability status, or grade level. Instead,  the school-level nature of the CRDC data limited our description of the  associations between school characteristics and disciplinary rates to  whether there was an increase, decrease, or no effect on disciplinary  rates for schools with a given characteristic, controlling for other  characteristics of the entire school\u2019s population, such as percent of  students who are boys or are Black.", "Some variables that may be related to student behavior and discipline  are not available in the data. For example, in this context, it could be  that parent education or household type (single- versus multiple- headed household) could be related to student behaviors, such as  those that lead to receiving the six disciplinary actions we analyzed.", "Results of our analyses are associational and do not imply a causal  relationship because, for example, CRDC data were not gathered by  a randomized controlled trial, where students would be randomized to  attend schools with certain characteristics.", "Typically, a generalized linear regression model provides an estimated  incidence rate ratio, where a value greater than one indicates a higher or  positive association, in this case, between the disciplinary outcome and  the independent variable of interest, such as being a charter school or  having a higher percentage of Black students. An estimated incidence  rate ratio less than one indicates a lower incidence of a given disciplinary  action when a factor is present.", "Given the limitations of our model as described above, we present the  results of our regression model in table 10 by describing the direction of  the associations, rather than an estimated rate (incidence) of disciplinary  outcomes. For categorical variables in table 10, we provided the  comparison school characteristic in brackets and italics. For example, the  results in this table should be interpreted as students attending alternative  schools were significantly more likely than students attending traditional  schools to be suspended out of school. For continuous variables (i.e.,  those starting with \u201cPercent\u201d), the results in this table should be  interpreted as the likelihood of receiving a given disciplinary action as the  percentage of students in the school with a given characteristic increased.  For example, as the percentage of students eligible for free or reduced- price lunch increased, we found that the likelihood of receiving each of  the six disciplinary actions also increased.", "It should be noted that interactions (i.e., where we combine both race and  sex variables) should be interpreted differently than other variables in  table 10. Though an interaction may be \u201cnegative,\u201d it does not necessarily  imply that the group presented in the interaction was significantly less  likely to receive the given disciplinary action because interactions are  interpreted relative to the main effect of each variable in the interaction.  For example, as shown in table 10, the interaction for percentage of Black  boys was negative for out-of-school suspensions; however, the estimated  incidence of out-of-school suspensions for a school with a higher than  average percentage of Black students and a higher than average  percentage of boys was positive. Since the contribution for an interaction  coefficient is relative, in this example the contribution of the main effects  outweighed that of the interaction, resulting in a positive effect altogether,  despite the negative interaction."], "subsections": []}, {"section_title": "School District Site Visits", "paragraphs": ["To obtain information on how selected school districts are addressing  discipline issues, including any challenges they face in doing so, we  selected five school districts to serve as illustrative examples. To select  school districts, we used CRDC data to sort school districts into  categories based on district size; the presence of disparities in out-of- school suspension rates for boys, Black students, or students with  disabilities; and whether the out-of-school suspension rate was increasing  or decreasing between the two most recent CRDC collections. With  regard to size, we collapsed several categories that Education has  previously used into three groupings, each with roughly one-third of all  students attending public schools in school year 2013-14:", "Large School District: 25,000 or more students (34.7% of all  students in 2013-14)", "Medium School District: 5,000 to 24,999 students (33.2% of all  students in 2013-14)", "Small School District: Less than 5,000 students (32.1% of all  students in 2013-14)", "Further, we focused on out-of-school suspensions for selection purposes  because this disciplinary action was one of the most frequently reported  disciplinary actions employed by schools in Education\u2019s two most recent  data collection efforts on the issue (2011-12 and 2013-14 CRDC).  Moreover, out-of-school suspensions are an exclusionary disciplinary  action; that is, they remove or exclude students from the usual  instructional or learning environment. Selecting districts with a range of  out-of-school suspension rate was intended to generate a mix of districts  that commonly use exclusionary discipline, as well as those that may  employ alternatives.", "For site selection, we used out-of-school suspension data in two ways.  First, we excluded districts that did not have a disparity in out-of-school  suspension rates for Black students, boys, or students with disabilities.  Prior GAO work and Education\u2019s data showed that these groups were  particularly vulnerable to discipline disparities, and the purpose of this  research objective was to understand district efforts to identify and  address such disparities. Second, we grouped school districts by whether  their out-of-school suspension rate increased or decreased between  2011-12 and 2013-14. Exploring school districts that changed in different  ways over time was intended to help us identify successful efforts to  reduce suspensions as well as challenges districts face in addressing  disparate discipline.", "Using the above criteria, we grouped school districts into the following  categories:", "Category 1 and 2: Large school district and out-of-school suspension  rate that increased (or decreased) from 2011-12 to 2013-14", "Category 3 and 4: Medium school district and out-of-school  suspension rate that increased (or decreased) from 2011-12 to 2013- 14", "Category 5 and 6: Small school district and out-of-school suspension  rate that increased (or decreased) from 2011-12 to 2013-14.", "After sorting school districts into the above categories, we randomized the  list within each category to improve the methodological rigor of selecting  school districts. In addition, we applied a series of post-checks to our list  of districts in each grouping to ensure we had appropriate variety to  consider other key factors in school discipline. Specifically, we checked  for variety in:  types of public schools in the district, geographic diversity both in terms of region of the country and use of corporal punishment in the district, and use of restraint or seclusion in the district.", "To select specific districts, we started with the district in each category  that was at the top of the randomized list and then applied the above  post-checks. We then conducted outreach to district superintendents or  their designees via telephone and email to obtain their agreement to  participate in this review. When school districts were unresponsive to our  outreach or unwilling to participate, we contacted additional districts that  had similar characteristics in order to achieve variety in our final  selections. This resulted in the selection of five schools districts, one each  in California, Georgia, Massachusetts, North Dakota, and Texas (see  table 11).", "We visited each district and interviewed district-level officials involved in  school discipline and school climate initiatives. These officials included  superintendents, assistant superintendents, program managers, and  directors of applicable district departments (e.g., student support services  and special education). We also reviewed district-level discipline data,  school district discipline policies, and relevant state laws related to school  discipline to better understand the local context in each selected district.", "In the five districts we visited, we also interviewed officials at a total of 19  schools. At each school, we typically met with principals and/or assistant  principals, and in some instances, spoke with other personnel at the  school, such as counselors, attendance coordinators, school resource  officers (i.e., law enforcement officers), and teachers. In each district, we  selected a variety of schools to visit based on grade level, school type,  and disciplinary data.", "For each selected district, we also interviewed officials from the state  educational agency that oversees that district to better understand the  statewide context around discipline, such as state laws that may affect  district disciplinary policies, statewide initiatives related to discipline, and  state-level monitoring of district-level disciplinary actions. In California, we  also met with the county office of education that oversees the district we  selected because, in that state, counties have a primary role in the local  school district accountability structure.", "Because we selected these school districts judgmentally, we cannot  generalize the findings about these districts\u2019 approaches to discipline, and  the challenges they face, to all school districts and schools nationwide."], "subsections": []}, {"section_title": "Review of Federal Actions", "paragraphs": ["To determine the extent to which, and in what ways, Education and  Justice are identifying and addressing discipline disparities and  discrimination, we interviewed agency officials at headquarters and  regional offices, reviewed agency documentation and administrative data,  reviewed federal laws and regulations, and reviewed a non-generalizable  sample of seven recently resolved school discipline investigations  undertaken by Education and Justice (which we refer to as cases). With  both agencies, we interviewed officials about each agency\u2019s  responsibilities with respect to federal civil rights laws and regulations, as  well as the actions the agencies took to enforce them. We also discussed  each agency\u2019s guidance, support to school districts on these issues (e.g.,  grants and technical assistance), and data collection activities. In  addition, we collected and reviewed relevant agency procedures and  guidance documents. We also requested and reviewed Education\u2019s data  on the number of civil rights complaints received and cases related to  school discipline investigated from 2011 to August 2017 to better  understand the scope of the agency\u2019s efforts. Education provided these  data from their internal database, where investigators categorized cases  as being related to school discipline. We assessed the reliability of this  source through discussion with knowledgeable officials and reviewing key  documents and determined the data to be reliable for our purposes.", "To select resolved school discipline cases to review, we searched  Education\u2019s and Justice\u2019s respective online repositories of resolved  investigations and compliance reviews, as well as Education\u2019s annual  reports, to create a list of resolved cases related to school discipline. We  then narrowed the list to cases resolved in approximately the past 3 years  (from 2014 to May 2017) and excluded long-standing cases that were  opened several decades ago to help ensure the information in the cases  reflected recent policies and practices in each agency. We also excluded  cases regarding institutions of higher education because they were  outside the scope of this review. This resulted in a list of 12 relevant  resolved cases\u20149 for Education and 3 for Justice. From this list, we  selected 7 cases to review in depth to better understand Education\u2019s and  Justice\u2019s investigatory processes and resolutions with regard to school  discipline cases in pre-K through 12th grade, and to provide illustrative  examples in our report. We selected 4 cases from Education that  provided a mix of the type of alleged discrimination (e.g., race or  disability) and type of discipline (e.g., suspension, expulsion, arrest, etc.).  We selected all 3 relevant cases from Justice. For each case, we  reviewed the type of investigation (complaint investigation or compliance  review); the reason for the investigation; any applicable findings or  recommendations; and the ultimate resolution of the investigation, such  as a voluntary agreement with the school district or remedies to address  findings. In all instances, we are presenting Education\u2019s and Justice\u2019s  findings and do not reach any independent conclusions regarding the  cases.", "We conducted this performance audit from November 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Maps of Disciplinary Actions by School District", "paragraphs": ["This appendix contains maps showing rates of disciplinary actions by  school district for each of the six disciplinary actions captured in the  Department of Education\u2019s Civil Rights Data Collection for school year  2013-14."], "subsections": []}, {"section_title": "Appendix III: Key Federal Resources Related to Student Behavior and School Discipline", "paragraphs": [], "subsections": [{"section_title": "Technical Assistance Centers", "paragraphs": ["Funded by Department of Education (Education):", "National Center on Safe Supportive Learning Environments:  offers information and technical assistance focused on improving  student supports and academic enrichment. This includes resources  on using positive approaches to discipline, as well as promoting  mental health for students and ensuring the safety and effectiveness  of physical learning environments.  https://safesupportivelearning.ed.gov/.", "National Student Attendance, Engagement, and Success Center:  a center that disseminates evidence-based practices and facilitates  communities of practice to help students attend school every day, be  engaged in school, and succeed academically, so that they graduate  high school prepared for college, career, and civic life. It offers  webinars on identifying the root causes of chronic absence, linking  school climate and exclusionary discipline to absenteeism, and  improving attendance for vulnerable students.  http://new.every1graduates.org/nsaesc/", "National Technical Assistance Center for the Education of  Neglected or Delinquent Children and Youth: provides technical  assistance to state agencies with Title I, Part D programs and works  to improve education services for children and youth who are  neglected, delinquent, or at risk. This includes running the Supportive  School Discipline Communities of Practice, which brings together  education and justice leaders for knowledge-sharing events and offers  webinars on discipline initiatives such as restorative practices.  https://www.neglected-delinquent.org/", "Positive Behavioral Interventions and Supports Technical  Assistance Center: funded by Education\u2019s Office of Special  Education Programs, this center supports implementation of a multi- tiered approach to social, emotional and behavior support. In addition,  it offers resources on cultural responsiveness, addressing discipline  disproportionality, and interconnecting mental health with behavior  support systems, among other issues. https://www.pbis.org/.", "Funded by Department of Health and Human Services (HHS):", "Center of Excellence for Infant and Early Childhood Mental  Health Consultation: supports states, tribes, and communities in  promoting mental health and school readiness. It provides training to  leaders in early childhood education around mental health and school  readiness issues. https://www.samhsa.gov/iecmhc", "Center for School Mental Health: works to strengthen policies and  programs in school mental health to improve learning and promote  success for youth. This center is supported in full by HHS\u2019s Maternal  and Child Health Bureau, Division of Child, Adolescent and Family  Health Adolescent Health Branch in the Health Resources and  Service Administration. http://csmh.umaryland.edu/", "National Center for Trauma-Informed Care and Alternatives to  Seclusion and Restraint: works to develop approaches to eliminate  the use of seclusion, restraints, and other coercive practices and to  further advance the knowledge base related to implementation of  trauma-informed approaches. https://www.samhsa.gov/nctic", "National Child Traumatic Stress Network: works to improve access  to care, treatment, and services for children and adolescents exposed  to traumatic events. The group provides a comprehensive focus on  childhood trauma by collaborating with the health, mental health,  education, law enforcement, child welfare, juvenile justice, and military  family service systems. http://nctsn.org/", "National Resource Center for Mental Health Promotion and Youth  Violence Prevention: offers resources and technical assistance to  states, tribes, territories, and local communities to promote overall  child wellness and prevent youth violence.  http://www.healthysafechildren.org/", "Now Is the Time Technical Assistance Center: provides national  training and technical assistance to recipients of the Healthy  Transitions (youth access to mental health) and Project Advancing  Wellness and Resilience Education (AWARE) grants.  https://www.samhsa.gov/nitt-ta/about-us  Funded by Department of Justice (Justice):", "School-Justice Partnership National Resource Center: provides  trainings and webinars, and partners with stakeholders in the law  enforcement, juvenile justice, mental health, and public education  arenas. The National Council of Juvenile and Family Court Judges  operates this center. https://schooljusticepartnership.org/", "Office of Juvenile Justice and Delinquency Prevention (OJJDP)"], "subsections": []}, {"section_title": "Key Federal Guidance", "paragraphs": [], "subsections": []}, {"section_title": "Other Related Resources", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix IV: Additional Discipline and Discipline-Related Data Tables", "paragraphs": ["This appendix contains several tables that show the underlying data used  throughout this report, as well as additional analyses we conducted using  the Department of Education\u2019s Civil Rights Data Collection (CRDC) and  Common Core of Data (CCD) for school year 2013-14. Our analyses of  Education\u2019s data, as reflected in these tables, taken alone, do not  establish whether unlawful discrimination has occurred. The following  tables and information are included in this appendix:", "Table 12: students who received disciplinary actions captured in the  CRDC, disaggregated by student sex, race or ethnicity, and English  Language Learner status.", "Table 13: students with or without disabilities who received  disciplinary actions captured in the CRDC, disaggregated by student  sex and race or ethnicity.", "Table 14: students who received disciplinary actions captured in the  CRDC, disaggregated by the poverty level of the school and other  student characteristics.", "Table 15: students who received disciplinary actions captured in the  CRDC, disaggregated by the type of public school and other student  characteristics.", "Table 16: students who received disciplinary actions captured in the  CRDC, disaggregated by the grades offered in the school and other  student characteristics.", "Table 17: pre-school students who were suspended from school,  disaggregated by student sex and race or ethnicity, as well as the  poverty level of school and the type of public school.", "Table 18: students who were restrained\u2014mechanically or  physically\u2014or secluded, disaggregated by student sex, race or  ethnicity, and disability status as well as the poverty level of school  and the type of public school.", "Table 19: students who were chronically absent, disaggregated by  student sex, race or ethnicity, and disability status, as well as the  poverty level of school and the type of public school.", "Table 20: schools that reported having access to a school counselor  or sworn law enforcement officer, disaggregated by the poverty level  of school and the type of public school.", "Table 21: students disciplined for harassment or bullying,  disaggregated by student sex, race or ethnicity, and disability status."], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sherri Doughty (Assistant  Director), Amy Moran Lowe (Analyst-in-Charge), James Bennett, Holly  Dye, Aaron Karty, Jean McSween, John Mingus, James Rebbe, Sonya  Vartivarian, and David Watsula made key contributions to this report. Also  contributing were Johana Ayers, Deborah Bland, Irina Carnevale, Caitlin  Croake, Vijay D\u2019Souza, Gretta Goodwin, Gloria Hernandez-Saunders,  Reginald Jones, DuEwa Kamara, John Karikari, Ted Leslie, Sheila R.  McCoy, Brittni Milam, Cady Panetta, Moon Parks, Caroline Prado, Steven  Putansu, Maria Santos, Margie K. Shields, Ruth Solomon, Alexandra  Squitieri, and Barbara Steel-Lowney."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-285", "url": "https://www.gao.gov/products/GAO-18-285", "title": "Rural Housing Service: Better Data Controls, Planning, and Additional Options Could Help Preserve Affordable Rental Units", "published_date": "2018-05-17T00:00:00", "released_date": "2018-05-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Under its rural housing program, RHS provides mortgages and rental assistance to support affordable rental units for low-income tenants (see figure). When these mortgages reach the end of their terms (mature), property owners may exit the program; current law does not allow RHS to continue providing rental assistance when such exiting occurs. As a result, tenants in properties with mortgages that are maturing may face rent increases or lose their housing altogether.", "GAO was asked to examine how RHS is addressing the risks posed by maturing mortgages. This report examines RHS's efforts to (1) estimate rural housing property exit dates and (2) preserve the affordability of rural rental properties with maturing mortgages. GAO reviewed RHS mortgage loan data and preservation documents, and interviewed RHS officials and industry stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Department of Agriculture's Rural Housing Service (RHS) implemented an automated tool to estimate when properties could exit the rural rental housing program, but RHS lacked sufficient controls to ensure the accuracy, completeness, and timeliness of those estimates. In 2016, RHS developed its Multi-Family Housing Property Preservation Tool to replace a manual process of estimating exit dates. RHS data suggest that a smaller number of properties could exit RHS's program in the near term, but between 2028 and 2050, over 90 percent of RHS's properties and units could exit the program (about 13,000 properties with 407,000 units). However, RHS lacked controls that would better ensure the accuracy and completeness of these estimated exit dates, such as the verification of key data input at mortgage origination. In addition, RHS had not established a regular process to update the preservation tool's underlying data due to staff turnover and data system challenges. Without these controls, RHS may lack assurance that is has reliable data for calculating exit dates and initiating preservation efforts.", "While RHS has taken actions to address properties with maturing mortgages, such as offering property owners options designed to prevent property exits, about 60 percent of properties with maturing mortgages exited the program between 2014 through 2017. The agency's planning efforts lacked key steps such as (1) establishing preservation goals, (2) developing metrics for evaluating preservation efforts, and (3) analyzing and responding to risks facing its portfolio such as resource limits and growing capital rehabilitation needs. Without taking these actions, RHS is not well positioned to preserve affordable housing in the near term or when much larger numbers of properties and units could exit the program starting in 2028. Although taking the steps above would help RHS's preservation efforts, some tenants may still be at risk of losing rental assistance when mortgages mature. Accordingly, allowing RHS to renew rental assistance after mortgage maturity could protect assisted low-income tenants from increased rents or displacement from their units. When the Department of Housing and Urban Development (HUD) faced a similar loss of affordable housing subsidies, Congress authorized the department in 2011 to continue providing rental assistance at properties after contracts expired."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider granting RHS authority to continue providing rental assistance to tenants in properties with maturing mortgages. GAO is also making five recommendations, including that RHS improve data quality and take steps to comprehensively plan for preserving properties with maturing mortgages. We provided a draft of this report for review and comment to RHS and HUD. RHS agreed with all five of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Department of Agriculture\u2019s (USDA) rural rental housing  program was created in the 1960s and 1970s to help provide funding for  the development of affordable multifamily rental properties. Through the  department\u2019s Rural Housing Service (RHS), USDA has provided  mortgage loans (mortgages), interest subsidies, and rental assistance for  more than 14,000 properties with 400,000 units of affordable rental  housing for low- and very-low income rural tenants, including vulnerable  residents such as the elderly and people with disabilities.", "Some of RHS\u2019s oldest rural rental mortgages have begun to mature\u2014that  is, reach the end of their repayment schedules, at which point they could  exit the affordable housing program. Property owners whose RHS  mortgages have matured are no longer required to provide housing to  low-income tenants and no longer receive RHS rental assistance, which  covers the difference between the tenant\u2019s contribution and the unit\u2019s  rent. As a result, tenants in properties whose mortgages have matured  may no longer be able to afford their rents. RHS has therefore identified  ways to preserve affordable housing for tenants in properties with  maturing mortgages.", "You asked us to examine what information RHS has on rural rental  housing maturing mortgages and the extent to which RHS has tools and  strategies to preserve those properties. This report examines RHS\u2019s  efforts to (1) estimate the dates that properties may exit the rural rental  housing program due to mortgage maturity and (2) preserve the  affordability of rural rental properties with maturing mortgages.", "To examine RHS\u2019s efforts to estimate property exit dates, we analyzed  RHS documentation and interviewed RHS officials about the data the  agency uses to identify and preserve properties with maturing mortgages.  To assess the accuracy and completeness of data used to determine  property exit dates, we reviewed and analyzed two different types of data.  First, we analyzed a stratified random sample of RHS mortgage loan  documents in five selected states\u2014California, Illinois, Minnesota,  Pennsylvania, and Virginia. We selected these states based on their  geographic diversity and number of rural rental properties, and because  they had a high number of mortgages nearing maturity. Second, we  reviewed and assessed the underlying data the agency uses to estimate  property exit dates. To assess the reliability of these data, we reviewed  RHS documentation, tested the data for missing or erroneous values, and  interviewed RHS officials. As discussed later in this report, we identified a  selected number of errors in the data for the sample of RHS mortgage  documents and underlying data that we reviewed. However, we  determined the data we used were sufficiently reliable for purposes of  estimating the number of properties, units, and units with rental  assistance that could exit the rural rental housing program between 2017  and 2050, and for properties that are eligible to prepay their mortgages.", "To examine steps RHS has taken to preserve properties with maturing  mortgages, we reviewed RHS guidance and documentation on the  agency\u2019s options for preventing properties from exiting the program. In  addition, we interviewed RHS national and state officials about what tools,  resources, and plans were in place for addressing maturing mortgages  and rehabilitating properties. We also interviewed officials from a  judgmental sample of rural housing industry organizations that we  selected by identifying stakeholders that represented a diverse range of  roles in the rural housing industry including: developers, borrower and  tenant advocacy organizations, and organizations advocating for the  retention or expansion of affordable housing. To determine how other  agencies approached expiring rental assistance contracts and low- income housing preservation, we reviewed past GAO reports and  interviewed officials from the Department of Housing and Urban  Development. Appendix I describes our objectives, scope, and  methodology in greater detail.", "We conducted this performance audit from May 2016 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Mortgages under RHS\u2019s program can be used to build, acquire, and  rehabilitate rental housing in rural areas and are generally 30-year loans  with 50-year amortization periods and include subsidized interest rates as  low as 1 percent. To help finance housing projects and keep rents  affordable to low-income tenants, RHS offers rental assistance subsidies  to some property owners, which cover the difference between the tenant\u2019s  contribution and a unit\u2019s rent.", "The rental assistance program, authorized in 1974, provides the rental  subsidies through agreements with property owners for an amount  estimated to last for 1 year as required under the program\u2019s  appropriations acts. Eligible tenants pay no more than 30 percent of their  income toward the rent, and RHS pays the balance to the property owner.  Tenants must be low-income (incomes above 50 percent of area median  income but not more than 80 percent of area median income) or very-low- income (with incomes not more than 50 percent of area median income)  to be eligible for rental assistance. The agreements with the owners  expire when the original dollar amount obligated is fully expended.  Agreements specify that owners will receive payments on behalf of  tenants in a designated number of units at the property. In addition,  property owners must certify tenants\u2019 incomes annually or when a tenant  experiences a substantial change in income. Statutorily, rental assistance  is tied to RHS loans for rural rental housing and is no longer provided to  property owners once mortgages mature.", "The program supports five general types of rural rental housing projects\u2014 family; elderly (units may be occupied by an income-eligible household  that includes a tenant or co-tenant who has a disability or is age 62 or  older, or both); mixed (project has both family and elderly units);  congregate housing (project may be occupied by income-eligible elderly  households that need meals or other services); and group homes (may  be occupied by income-eligible elderly persons or individuals with  disabilities who share living space within a rental unit).", "Properties with RHS rental housing mortgages can exit the program in  three ways\u2014foreclosure, prepayment, and natural maturity of the  mortgage. When an owner defaults on loan payments and the property is  foreclosed, it may exit RHS\u2019s program. Properties can also exit the  program when loans mature naturally, meaning the loan is paid off as  scheduled by the original loan term. Loans can also be prepaid, meaning  payments are made ahead of schedule, which ends the loan term early.  Only those loans made on or after December 15, 1989, are ineligible to  prepay. As previously noted, once a property exits RHS\u2019s program,  owners are generally no longer required to provide housing for low- income tenants and properties are no longer eligible to receive rental  assistance that is used to keep rents affordable for tenants.", "Some owners that are reaching the end of their RHS mortgage terms may  wish to exit the program. Other owners may wish to remain in the  program and continue renting to low-income tenants. RHS has offered  tools and incentives to help owners stay in the program and preserve the  affordability of rural rental housing. Some of these tools involve extending  mortgage terms, which extends the availability of rental assistance to  properties.", "RHS\u2019s June 2017 data showed that the program had approximately  14,000 properties containing 427,000 rental units. Of these,  approximately 12,000 properties (85 percent) and 282,000 units (66  percent) received rental assistance. According to RHS, the agency has  not financed any new rental housing properties since 2011. Instead, RHS  has generally used program funding to repair and rehabilitate existing  program properties.", "RHS properties are geographically dispersed, but one-quarter of the RHS  program, or about 3,500 properties, was concentrated in six states as of  June 2017: Texas (670 properties); Missouri (609); North Carolina (595);  Michigan (564); Illinois (534); and Minnesota (509) (see fig. 1). Appendix  II provides data in table form for RHS properties, units, and units with  rental assistance.", "RHS\u2019s Multi-Family Housing Portfolio Management Division and the Multi- Family Preservation-Direct Loan Division administer USDA\u2019s rural rental  housing loan program. RHS\u2019s national office also maintains the  Automated Multi-Family Housing Accounting System (AMAS) and Multi- Family Information System (MFIS) databases, develops program policy,  and oversees management of the program. RHS state offices administer  the day-to-day operations of the rural rental housing program, including  entering key mortgage and project information contained in hard copy  mortgage closing documents into the AMAS and MFIS databases."], "subsections": []}, {"section_title": "RHS Developed a Tool That Estimates That Large Numbers of Mortgages Will Mature Starting in 2028, and Better Controls Could Improve Data Accuracy", "paragraphs": [], "subsections": [{"section_title": "RHS Developed a Tool to Estimate Property Exit Dates", "paragraphs": ["In March 2016, RHS developed the Multi-Family Housing Property  Preservation Tool (preservation tool), an electronic system designed to  use data from AMAS and MFIS to estimate mortgage maturity and  property exit dates and to calculate new dates that may result from RHS\u2019s  preservation efforts. Before introducing the preservation tool in 2016,  RHS officials manually calculated exit dates for rural rental properties, a process that was subject to errors and inconsistencies due to properties  with multiple mortgages and mortgages that could be prepaid. AMAS and  MFIS track loan closing dates; loan amounts; interest rates; and property  location, among other information, but were not designed to estimate  property exit dates.", "According to RHS officials, the preservation tool and the underlying data it  uses are publicly accessible via the Internet and are intended to improve  program transparency and help support the agency\u2019s preservation  efforts. Users can search for the date a property began operating; total  number of units; units receiving RHS rental assistance; mortgage amount  and interest rate; mortgage prepayment eligibility; and property exit date  estimates, among other information. The preservation tool enables RHS  to look at trends in property exits across years and help determine when  RHS will need to take preservation actions. As of April 2018, RHS had  estimated property exit data available from 2017 to 2050, but not  information on properties whose mortgages may mature in 2051 or  beyond. RHS officials said that data will be released publically on its  website when available."], "subsections": []}, {"section_title": "RHS Data Show a Significant Increase in Maturing Mortgages after 2027", "paragraphs": ["Our analysis of data used by the preservation tool showed that  approximately 900 properties (6 percent of the program\u2019s portfolio),  including 20,000 units (5 percent), will have maturing mortgages and  could exit the program between 2017 and 2027. Industry stakeholders  said that low-income tenants living in these properties could face  escalating rents or lose their housing altogether. In addition, over 13,000  properties (94 percent) and about 407,000 units (95 percent) are  estimated to have mortgages that will mature between 2028 and 2050  (see fig. 2).", "Our analysis of RHS\u2019s June 2017 data, the most recent data available,  also showed that 35 percent of RHS\u2019s rural rental properties (4,944 out of  14,075 properties) have mortgages that are eligible for prepayment and  could exit the RHS program ahead of their original mortgage maturity  date. This earlier exit could cause tenants to face rent increases or  search for alternative affordable housing earlier than expected (see fig.  3). According to RHS, if an owner prepays and a property exits the RHS  program, rental assistance is no longer available to assist that property\u2019s  tenants. Concerns about the loss of affordable units led Congress to  enact legislation that precluded prepayment for loans made on or after  December 15, 1989. For those properties that are eligible for  prepayment, RHS officials said they cannot predict which owners might  make this choice and the agency has not been collecting data on  borrower\u2019s prepayment choices. As a result, outreach to these owners is  particularly important for possible preservation of affordable housing."], "subsections": []}, {"section_title": "Better Controls Could Improve the Accuracy and Utility of Maturing Mortgage Data", "paragraphs": ["Our review identified three internal control shortcomings that could impact  the accuracy, completeness, and timeliness of RHS\u2019s data on properties  with maturing mortgages.", "First, RHS lacks sufficient controls to help ensure the accuracy of all loan  information for each mortgage at the time of initial data entry because it  only retroactively reviews a sample of loan document information entered  into AMAS and MFIS. Although RHS staff reviews some loan information  through the agency\u2019s State Internal Review process, officials noted that  the review of mortgage data entered into AMAS and MFIS only occurs for  each field office at least once every 5 years and includes a step for staff  to review and reconcile AMAS information with loan documents to help  ensure the accuracy of RHS debt instruments. RHS officials added that  they improved the guidance in October 2017 by adding specific data  checks intended to help ensure that loan amount, interest rate, and  amortization period information were correct. In addition, during our  review of RHS\u2019s rural rental housing loan documents, we identified  mismatches between loan document information and the data in AMAS  and MFIS used by the preservation tool. We found errors in the data on  mortgage amounts, closing dates, and repayment periods in an estimated  3 percent to 5 percent of the properties in five states we examined.  While the data we reviewed had limited errors, without appropriate  internal controls, RHS cannot be assured that the data that is used by the  preservation tool will be reliable in the future, and the mismatches  suggest that RHS could improve how data are entered into AMAS and  MFIS.", "According to RHS officials, these systems were not designed to estimate  the expected maturity of rural rental housing mortgages. At the time of the  systems\u2019 development, officials said that it was not a priority to build in  controls to ensure the accuracy of such estimates. RHS officials said that  rural rental housing mortgages would not mature for many years after  they were originated. As a result, RHS did not create controls intended to  ensure the accuracy of data related to mortgage maturity and did not  prioritize establishing a process to check that data.", "Federal internal control standards state that management is responsible  for designing control activities for information systems and information  processing objectives to support the completeness, accuracy, and validity  of information processing. Without these controls, mortgage information  used by the preservation tool to estimate property exit dates may be  inaccurate and could affect the reliability of exit date estimates needed to  identify properties for possible preservation.", "Second, RHS lacked controls to check the accuracy and completeness of  underlying data used by the preservation tool. When we examined the  underlying data the preservation tool uses to estimate property exit dates,  we observed missing (blank) values for some property address; property  state; borrower address; and management company name information.  For example, borrower address and property address were missing for  588 and 141, respectively, of the roughly 14,000 properties. In addition,  some properties in RHS\u2019s data included estimated property exit dates but  contained incomplete information (\u201cN/A\u201d designations) for key variables  such as property name; property address; property state; number of units;  and type of housing.", "Although RHS has been developing and implementing the preservation  tool since 2016 and has made the preservation tool\u2019s exit date estimates  available on its website, the agency has not yet developed a control  process to identify potential issues with its underlying data. As noted  above, federal internal control standards require activities to help ensure  the completeness, accuracy, and validity of program information. Without  information that has been checked for accuracy, RHS might not be  assembling the most complete and accurate information with which to  estimate exit dates and begin possible preservation of rural rental housing  for low-income tenants. In addition, RHS is missing an opportunity to  improve data on properties with maturing mortgages and be better  positioned to address those properties to protect low-income tenants.", "Third, the agency has not developed a regular, timely process for  updating the preservation tool\u2019s underlying data and exit date information.  Since RHS developed the tool in March 2016, RHS updated the  underlying data for September and December 2016 and June 2017 but  not for 2018. RHS staff said the data were intended to be updated  quarterly because information that affects exit date calculations changes  as RHS preserves rural rental housing or properties exit the RHS  program. However, RHS officials said that they have been unable to  update the preservation tool quarterly due to staff attrition and competing  program demands across RHS.", "Federal internal control standards require activities to help ensure the  accuracy and validity of program information. For RHS\u2019s information to be  accurate and valid, it needs to be as current as possible for program  management purposes. Since the mortgage maturity dates of properties  are affected by RHS\u2019s preservation options and the exit dates of  properties can change over time as mortgages mature, it is critical for  RHS to have accurate, complete, and timely rural rental housing  information.", "Without controls to help ensure that RHS, industry stakeholders, and the  public have the most recent data available, they might not have the most  current information that could be used for estimating property exit dates  and starting preservation."], "subsections": []}]}, {"section_title": "RHS Has Taken Steps to Address Properties with Maturing Mortgages, but Lacked Comprehensive Planning and Faces Statutory Constraints That Limit Preservation", "paragraphs": ["While RHS has taken steps to address properties with maturing  mortgages, such as identifying various options and incentives intended to  preserve the affordability of properties for low-income tenants, a majority  of properties with maturing mortgages from 2014 to 2017 have exited  RHS\u2019s rural rental housing program. Moreover, RHS has not taken  important steps to comprehensively plan and prepare for the much larger  number of potential property exits in future years, such as developing  goals and metrics to assess the effectiveness of its preservation efforts  and analyzing risks to its ability to preserve properties. While taking these  steps would help RHS\u2019s preservation efforts, some tenants may still be at  risk of losing rental assistance when mortgages mature because RHS  cannot continue to provide rental assistance. RHS also cannot provide  vouchers to tenants residing in properties whose mortgages have  matured."], "subsections": [{"section_title": "RHS has Taken Steps to Preserve Properties with Maturing Mortgages with Limited Success to Date", "paragraphs": ["In addition to developing the preservation tool as a first step in preserving  properties with maturing mortgages, RHS officials said they  commissioned two studies on the impacts of maturing mortgages to  advance the agency\u2019s understanding of key issues. Officials said they  hoped the two studies would help the agency prepare for maturing  mortgages. In September 2016, the Housing Assistance Council  completed its first study for RHS, which identified the characteristics of  RHS\u2019s rural housing program and the impact that maturing mortgages  may have on tenants and geographic regions. The report noted that  understanding these characteristics and effects is important for planning  and implementing strategies to preserve the properties. According to  officials, the second study, which was under review by the agency as of  December 2017, was intended to outline issues facing RHS\u2019s multifamily  housing program, such as the estimated $5.6 billion needed to  rehabilitate properties program-wide, and possible policy solutions for  addressing potential property exits.", "RHS has offered property owners several options to prevent property  exits and preserve the access to and affordability of housing for low- income tenants (see fig. 4).", "Reamortization: Loan reamortization and a shortened reamortization  process (known as \u201cRe-Am Lite\u201d) allow borrowers to repay  outstanding loan balances over new, longer repayment periods. By  extending the term of the loan, officials said that the agency can  continue providing rental assistance to that property. Re-Am Lite does  not require borrowers to have their properties appraised, which  officials said can shorten the reamortization application process by 60  to 90 days.", "Deferral: Borrowers can defer repayment of direct loans for up to 20  years. This prevents property exits and preserves affordability for low- income tenants by continuing the payment of rental assistance to  property owners. Loan deferrals can be offered under the Multi- Family Housing Preservation and Revitalization program. This 12- year-old demonstration program offers a combination of property  rehabilitation funding and the opportunity for owners to reamortize or  defer loan payments to help keep rents affordable. Officials said the  program can also be used to attract new owners who wish to stay in  the affordable housing program by offering a funding source for  property rehabilitation.", "Prepayment Offer: If borrowers decline RHS\u2019s options that extend  loan terms (reamortization, Re-Am Lite, and deferral), but wish to  remain in the RHS portfolio, the agency encourages property owners  to submit a request to prepay their mortgage, if eligible to do so and if  their mortgages are 12 or more months from maturity. After an owner  submits a prepayment request, RHS is authorized to offer owners  incentives to avert prepayment. These incentives include increased  returns on investment to for-profit owners, additional rental assistance  units, and equity loans.", "Prepayment: If borrowers decline RHS\u2019s options, the agency  encourages property owners to prepay their loans. While owners who  prepay would no longer have rural rental housing loans with RHS or  be eligible to receive rental assistance from the agency, prepayment  of a loan allows RHS to provide vouchers to tenants affected by the  loss of affordable housing. According to RHS data, only about 5,000  of the 14,000 properties within RHS\u2019s multifamily housing program are  eligible to prepay loans.", "Transfer: RHS has taken steps to facilitate the sale (transfer) of  properties to new owners to prevent property exits. Officials described  this as a key preservation tool because new RHS mortgage terms  typically accompany the sale and allow for rental assistance to  continue at properties where applicable. First, the agency  established a more centralized and standardized transfer process  based on input from developers, owners, and other stakeholders,  which officials say reduced the average property transfer time from  156 to 112 days. Second, RHS maintains a spreadsheet available on  the agency\u2019s website, called the Preliminary Assessment Tool, which  officials said streamlines and provides greater transparency to the  property transfer process for potential buyers and sellers. The agency  also hosted three conferences in 2016 designed to help find new  buyers for RHS properties whose owners were seeking to sell their  properties. Finally, in September 2016, RHS announced a 2-year  pilot program to encourage nonprofit organizations to purchase rural  rental properties with maturing mortgages, which could create new  loan terms that would extend the repayment period and continue the  properties\u2019 affordability. Prior to the pilot, nonprofit owners were not  required to make an initial equity contribution to projects and therefore  could not earn any return on investment. Under the pilot, loan  transfers to nonprofits would allow nonprofits to earn returns on their  own resources initially invested in the property.", "Despite the preservation options and incentives identified by RHS, 61  percent (148 of 244) of the properties with mortgages that matured  between January 2014 and December 2017 exited the agency\u2019s rural  rental housing program (see table 1). Some industry stakeholders said  that options and incentives did not adequately or broadly appeal to  property owners. They added that existing options and incentives would  be used primarily by owners who have no other choice but to stay in the  program. Stakeholders explained that owner choice might be limited  because of the condition of their property or because their property is  located in a market that would not accommodate the sale of a property or  rent increases to market levels. Some stakeholders also said options that  extend loan terms only offer a short-term solution to preservation  challenges because mortgages cannot be extended indefinitely."], "subsections": []}, {"section_title": "RHS Has Not Comprehensively Planned to Preserve Properties with Maturing Mortgages", "paragraphs": ["RHS\u2019s efforts lacked a number of important steps that would better  position the agency to preserve properties. First, RHS lacked  documented goals for preserving its program and has not created  measures for tracking progress toward those goals. In the absence of  documented goals, RHS national officials stated that the agency\u2019s goal is  to preserve all properties within its program that are needed to ensure  sufficient affordable housing, though they acknowledged that current  resource levels would preclude that possibility and that some owners may  leave the program regardless of the options the agency offers.", "Second, RHS is not monitoring and assessing options and incentives it is  providing in a way that would inform or improve the use of these options.  While the agency can track preservation status\u2014meaning whether a  property is still within the program or not\u2014through its preservation tool  discussed above, it is not actively tracking preservation outcomes. RHS is  also not systematically collecting data for monitoring purposes. RHS  officials said agency databases contain variables that would show which  options owners choose to use, but added that this information is not  available in a single source. RHS is also not collecting information that  would help them assess options. For example, the agency is not  collecting information from property owners on what options and  incentives appeal to them. This information would help the agency assess  preservation options on how well they are being received by borrowers.  Similarly, RHS is not monitoring the results of efforts to preserve  properties, including information on how many properties were transferred  as a result of its three buyers-sellers conferences.", "Finally, RHS has not fully analyzed or responded to the risks facing its  rural rental housing program, such as the following:", "Owner behavior\u2014RHS officials told us a key risk to preserving its  rural rental housing program is that the agency cannot predict whether  owners will choose to leave the program or stay. To help respond to  this risk, the agency directed staff to notify owners 3 years in advance  that their loan is maturing and that options are available for preserving  the property within the program. While this window could provide RHS  with the time to plan for property exits, RHS is not collecting  information from owners on why they may choose to exit rather than  stay in the affordable housing portfolio. The agency\u2019s effort to predict  owner behavior would be aided by collecting and analyzing data on  how many owners choose to leave the program and why.", "Resource constraints\u2014During a May 2017 conference, a senior RHS  official highlighted the issue of agency resource constraints for  addressing maturing mortgages, saying that the agency does not  have the ability or the financial resources to preserve all of the  properties that could leave the program once the loans mature. RHS  has also acknowledged that, even at lower levels of about 80  maturing mortgages each year, the agency does not have the  resources to provide all preservation options to every owner who  wishes to use them. RHS has also not analyzed or planned for how it  would prioritize the use of limited resources. RHS national office  officials said there is some guidance that could be used by state  offices to prioritize the use of resources, but this guidance was not  specific to addressing maturing mortgages and was in the process of  being updated to include information that could be used to help  prioritize limited resources for preserving properties. That update is  expected by January 2019.", "Management of maturing mortgages\u2014RHS has not analyzed or  responded to risks involving staff management of maturing  mortgages. For example, the agency\u2019s national office said that staff  attrition and turnover in the national, state, and field offices that  manage mortgages have resulted in fewer staff managing its program  in general and that they were not sure what the effect of maturing  mortgages would have on staff workloads. RHS staff in some of the  states we visited expressed concern that workloads are already heavy  and that any increase caused by maturing mortgages, including  smaller numbers occurring now, might affect their ability to be  responsive to program needs. Similarly, some state office staff  expressed concerns that they were not trained for managing and  responding to properties with maturing mortgages and needed  additional guidance from the national office. RHS national office  officials said that while the agency does not provide training specific to  maturing mortgages, it does provide training on loan servicing, which  includes the use of preservation options, and the national office  conducts monthly conference calls that all state offices participate in,  which have included maturing mortgages as a topic and which can be  used to answer staff questions about maturing mortgages.", "Rehabilitation Costs\u2014RHS has commissioned two studies on the  risks that program-wide rehabilitation costs pose to its ability to  preserve its program, but has not analyzed or planned for how it  would address the estimated $5.6 billion needed to rehabilitate its  aging portfolio of properties. Officials said that they have met with  industry stakeholders and Congress about capital needs estimates,  but no additional steps such as requesting additional funding were  taken. Officials added that federal budget uncertainties caused by  years of continuing resolutions and a sequestration have made  planning for maturing mortgages and program-wide rehabilitation  more difficult. However, RHS has been aware of growing rehabilitation  needs since at least 2004, when the agency released a commissioned  study that said capital needs program-wide would continue to  increase and cost more if not addressed.", "Federal internal control standards call for agencies to define objectives in  specific and measurable terms to enable management to identify,  analyze, and respond to risks related to achieving those objectives.  Specifically, these standards call for agencies to establish goals and performance measures for tracking progress toward achieving goals;  establish activities that monitor performance and assess results so that  appropriate action is taken; and identify, analyze, and respond to risks  related to achieving their goals.", "RHS officials said that, as of December 2017, they had not taken steps to  develop goals and measures, perform key monitoring and assessments,  and analyze and respond to risks because the larger number of potential  property exits is not expected to begin for another 10 years (2028). RHS  officials said that they were using this time to see how their existing  options and resources perform, and that the agency would make resource  and other adjustments over time as they gained experience with  preservation. However, as discussed above, mortgages have already  begun to mature and the majority of properties with maturing mortgages  between 2014 and 2017 exited the agency\u2019s rural rental housing program.  Some property owners may have chosen to exit the program regardless  of additional actions or incentives. For example RHS officials noted that  many of the property owners whose mortgages are currently maturing are  nearing retirement or prefer market returns to RHS\u2019s options and  incentives. However, the percentage of exits (61 percent) suggests that  RHS\u2019s current planning efforts have not proven sufficient to prevent the  majority of properties with mortgages that have matured from exiting its  rural housing program.", "By not having taken the planning steps identified above, RHS is not well  positioned to respond to properties that currently have maturing  mortgages and require action, nor is the agency prepared for the future  larger number of potential property exits that starts in 2028. In particular,  without developing goals and measures, conducting sound monitoring  and assessments of rural rental housing program developments, and  analyzing and responding to risks, RHS may not have the key  information, staff, tools, and resources in place to effectively preserve  properties and prevent the financial hardship that increasing housing  costs could cause rural low-income tenants or the loss of their housing  altogether."], "subsections": []}, {"section_title": "Law Limits RHS\u2019s Ability to Offer Rental Assistance and Vouchers to Low- income Tenants", "paragraphs": ["RHS has options to extend loan terms in order to continue rental  assistance at properties but cannot continue providing rental assistance  to tenants once the loan is paid off and the property exits RHS\u2019s  affordable housing program. Some owners of properties with maturing  mortgages may be open to continue offering rental assistance and agree  to restrict the units to eligible low-income tenants after mortgage maturity.  Further, some industry stakeholders cited that having the ability to extend  existing rental assistance contracts after mortgage maturity would be  useful in protecting tenants from rent increases or displacement.", "However, in some cases, property owners may not want to extend rental  assistance contracts after mortgage maturity. Tenants living in these  properties could be subject to rent increases or the risk of displacement.  RHS lacks the authority to provide vouchers to tenants in these situations.  Voucher assistance would allow RHS to provide assistance to the tenants  to help pay for rent in their existing unit or at other rental housing in the  private market without requiring the owner to serve low-income tenants  exclusively.", "In 2016, legislation was introduced that would have allowed RHS to  continue providing rental assistance to properties through new contracts  with owners after their loans matured or to provide vouchers to tenants  under different circumstances, including mortgage maturity. In exchange  for accepting rental assistance payments on behalf of eligible tenants, the  legislation would have required the property owners to enter into an  agreement with RHS to ensure that the property remained subject to low- income use restrictions for an additional period of time. In cases where a  new rental assistance contract is not possible, RHS would offer vouchers  to tenants after mortgage maturity. The proposed legislation was  introduced on April 12, 2016, but no further action on the bill was taken.", "In the past, Congress has taken legislative action to continue rental  assistance to low-income tenants and protect them from the impact of  terminated assistance. For example, beginning in fiscal year 2006,  Congress has authorized RHS to provide vouchers to tenants affected by  loan prepayments, which leads to the property owners\u2019 exit of the RHS\u2019s housing program. Tenants receiving vouchers after the prepayment of a  loan could use them to remain in the property after it exits RHS\u2019s program  or to find other suitable housing in the private market. Congress has  limited the amount that RHS paid in subsidies. The amount of a voucher  is limited to the difference between the comparable fair market rent for the  housing unit occupied by a tenant and the rent paid by the tenant on the  date of prepayment or foreclosure.", "In addition, when the Department of Housing and Urban Development  (HUD) faced a similar loss of affordable housing, Congress gave the  department authority in 2011 to further protect tenants through the  creation of the Rental Assistance Demonstration (RAD). Before the  RAD program, HUD had limited authority to extend rental assistance at  these properties when contracts expired or owners terminated  contracts. However, this demonstration, among other things, allowed  HUD to continue providing rental assistance to property owners after the  original contracts expired. In 2014, we reported that the conversion of  rental assistance should not have an effect on voucher program costs  because HUD uses the same calculation for providing budget authority for  the project-based vouchers converted under RAD as it does for  calculating budget authority for tenant-protection vouchers.", "Without the authority to continue providing rental assistance or to provide  vouchers to tenants at existing properties whose mortgages have  matured, RHS is not well positioned to protect tenants from potential  increased rents or displacement from their units. The agency could lose  important sources of low-income housing, which for some communities  may be the only source of affordable housing. Further, without the  authority to offer vouchers to tenants living in units that received rental  assistance at mortgage maturity, tenants may also face rent increases  and not be able to afford their rents in properties where the owners  choose not to extend their rental assistance contracts. Continued  provision of rental assistance could be limited to units or tenants that  were receiving rental assistance at mortgage maturity and would not  represent an expansion of the number of units or tenants assisted.  Furthermore, Congress could structure this to have no or limited  budgetary impact, similar to what was done under HUD\u2019s RAD program.  For example, subsidies could be kept at a level that is similar to what was  provided at mortgage maturity."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["RHS\u2019s preservation tool is a positive first step to help the agency estimate  property exit dates, alert stakeholders to properties with maturing  mortgages, and begin to preserve their affordability. However, the lack of  data controls for information on RHS rural rental properties raises  concerns about data used by the preservation tool, especially as RHS  applies preservation options that extend mortgages and result in new exit  dates. The lack of controls for underlying data used by the preservation  tool, and missing information on some properties, demonstrate that RHS  has opportunities to improve rural housing program data as properties  continue to have maturing mortgages. RHS has not been able to update  the preservation tool\u2019s data on a regular basis. Developing controls with  clear guidance on the frequency and process for routinely updating data  on RHS\u2019s website could help ensure that preservation efforts are based  on the most current information available. Regular updated information  would also help ensure that industry and other stakeholders have the  most recent information available on RHS\u2019s rural rental housing program.", "While RHS has taken steps to better understand maturing mortgage  challenges and preserve properties, RHS\u2019s strategy to use the next  several years to plan for the larger number of expected future maturations  and test available preservation options does not address the significant  number of mortgages that will mature before then. The agency has also  not taken important planning steps required by federal internal control  standards to establish goals and performance measures for tracking  progress toward achieving goals; establish activities that monitor  performance and assess results so that appropriate action is taken; and  identify, analyze, and respond to risks related to achieving their goals.  Actions to enhance the agency\u2019s data and controls, and strengthen its  comprehensive planning and program evaluation processes, would better  position RHS to respond to maturing mortgages, preserve its rural rental  housing program, and maintain affordable housing for low-income  tenants.", "Further, the agency lacks the authority to continue rental assistance to  properties with matured mortgages and is limited in its ability to issue  vouchers to tenants affected by property exits. Even if the agency takes  additional steps to plan for maturing mortgages or increases options and  incentives for preserving housing, these limits to rental assistance and  vouchers restrict RHS\u2019s ability to protect tenants. These limits also effect  RHS\u2019s ability to meet the agency\u2019s objective of providing decent, safe,  and sanitary housing to low-income rural residents. Expanding RHS\u2019s  ability to protect existing tenants would give the agency tools that are  available to other affordable rental housing programs, and could be  implemented in a way to maintain, rather than increase, program size and  costs."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration:", "For RHS properties whose mortgages have matured, Congress  should consider granting RHS the authority to renew annual rental  assistance payments to owners who wish to continue to receive them  and provide vouchers to tenants living in rental assistance units in  properties whose owners choose to no longer receive rental  assistance."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to RHS:", "The RHS Administrator should establish additional controls to check  the accuracy of all loan information entered into RHS information  technology systems, to help ensure complete, accurate, and reliable  data for estimating rural rental housing property exit dates.  (Recommendation 1)", "The RHS Administrator should establish a process to help ensure  regular and frequent updates for the preservation tool and its  underlying data. (Recommendation 2)", "The RHS Administrator should establish performance goals and  measures for its rural rental housing preservation and rehabilitation  efforts and report out these outcomes. (Recommendation 3)", "The RHS Administrator should monitor the results of rural rental  housing preservation efforts and assess the degree to which those  efforts yielded intended outcomes. (Recommendation 4)", "The RHS Administrator should identify, analyze, and respond to risks  to achieving its preservation goals, including resource and staffing  limitations. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to RHS and  HUD. RHS provided technical comments, which we incorporated into the  report, and stated that it agreed with all five of our recommendations but  did not provide a formal agency comment letter. HUD stated that it had no  comments on the draft.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, the Secretary of Housing and  Urban Development, 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) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on   the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine the Rural Housing Service\u2019s (RHS)  efforts to (1) estimate the dates that properties may exit the rural rental  housing program due to mortgage maturity, and (2) preserve the  affordability of rural rental properties with maturing mortgages.", "To examine RHS\u2019s efforts to estimate property exit dates, we analyzed  RHS documentation and interviewed RHS officials about the data the  agency uses to identify and preserve properties with maturing mortgages.  To determine what steps RHS has taken to help ensure the accuracy and  reliability of RHS\u2019s Multi-Family Housing Property Preservation Tool  (preservation tool), we reviewed documentation that included the  preservation tool\u2019s user guide, and the capabilities it offered the agency  and the public. We also conducted interviews with RHS national and state  office officials about the preservation tool and about how the agency\u2019s  Automated Multi-Family Housing Accounting System (AMAS) and the  Multi-Family Housing Information System (MFIS) operate. AMAS contains  data on loans and rental assistance contracts and MFIS tracks monthly  loan and rental assistance payments and contains data on the location of  RHS\u2019s rural rental properties. Both systems provide data used by the  preservation tool to calculate mortgage maturity and exit dates for rural  rental housing properties. To determine how the preservation tool was  built and the main information it uses to determine mortgage maturity and  property exit dates, and the information it calculates for users, we  interviewed the contractor hired by the agency to create and populate the  preservation tool.", "To analyze the accuracy of AMAS and MFIS data used by the  preservation tool to calculate mortgage maturity and property exit dates,  we reviewed mortgage documents that RHS uses to populate those  systems. We reviewed loan documents for a generalizable stratified  random sample of 100 properties in five states\u2014California; Illinois;  Minnesota; Pennsylvania; and Virginia\u2014to determine if loan information  found within mortgage documents matched data contained in AMAS and  MFIS for selected variables relevant to mortgage maturity and property  exit date calculations. We stratified the population of 2,152 loan  documents in the five states by state, number of loans per property, and  age groups. We computed an initial sample size of 60 properties for a  simple random sample to achieve an upper bound of no more than 5  percentage points, an expected error (inaccurate data field) rate of 0  percent, and a 95 percent confidence level. We then proportionally  allocated the sample across the strata and increased sample sizes in  stratum within each state so that we selected at least 10 properties with  more than 1 loan and 10 properties older than 20 years old. States we  visited were selected based on their geographic diversity, diversity (age  and size of program) of rural rental housing properties, and their proximity  to GAO offices.", "To select properties\u2019 loan files for this review, we created a  nongeneralizable sample of 20 properties in each of the five states. We  also interviewed agency officials knowledgeable about the data\u2014 including officials from RHS, Rural Development\u2019s Office of Operations  and Management, and the U.S. Department of Agriculture\u2019s (USDA)  National Financial and Accounting Operations Center\u2014about the  processes used to populate these systems and any quality checks in  place for ensuring that data were inputted completely and accurately,  including any available documentation on these steps. We also  interviewed RHS state office officials, who service loans, about the  process for identifying errors in these systems and making corrections.", "To determine which rural rental housing properties were estimated to exit  the RHS program and where these properties were located, we analyzed  RHS\u2019s raw data from June 2017 (the latest available RHS data). We  analyzed the data to determine the number of properties, units, and rental  assistance units with property exit dates by state and by year from 2017  to 2050. We also generated summary statistics on the number of  properties that were eligible to prepay their mortgages. In assessing  RHS\u2019s data we also conducted checks on the data for outliers and  missing information. Although we found a selected number of data  anomalies that point to the need for better data controls, we determined  the data we used were sufficiently reliable for purposes of describing the  estimated number of properties that could exit the RHS program between  2017 and 2050.", "To better understand the calculations used by the preservation tool, we  reviewed the logic or code it uses to calculate mortgage maturation dates.  For this analysis, we used documentation on the program used to  generate estimates and compared this documentation to the code to see  if there were any operational differences. Additionally, we reviewed each  of the functions within the logic and looked for inconsistencies in logic or  deviations from financial convention that might cause incorrect  predictions.", "To examine steps RHS has taken to preserve properties with maturing  mortgages, we reviewed documents that listed options available for  retaining properties with maturing mortgages. We gathered and analyzed  documentation on any comprehensive planning efforts by RHS to address  rural rental housing maturing mortgages, including documentation  showing preservation goals and measures, and any assessments of  RHS\u2019s plans, efforts, or resources needed to address maturing  mortgages. We also analyzed documentation and interviewed national  and state RHS officials about any training and guidance that was being  provided to staff on maturing mortgages. In addition, we interviewed RHS  national and state officials about what tools, resources, and plans were in  place for addressing maturing mortgages and their limits. Further, we  asked about ongoing efforts to address maturing mortgages, including  any plans to obtain additional resources for managing maturing  mortgages now and in the future when a larger number of properties are  expected to have loans mature. We reviewed and interviewed officials  about studies commissioned by RHS on the effects of maturing  mortgages on the rural affordable rental housing program and affected  communities and on program-wide rehabilitation needs and cost  estimates. We also assessed how the studies and reports were  conducted for any flaws in their approaches and methodologies.", "To determine stakeholder perspectives on how RHS was managing  maturing mortgages, we interviewed officials from a judgmental sample of  rural housing industry organizations. We took multiple steps to identify  these industry organizations. First, we met with an affordable housing  organization with a national membership that represents owners;  developers; housing advocates; and tenants. We asked this national  organization to identify industry organizations that work with RHS. From  that list, we focused on organizations that also had a multi-state or  national focus. Second, during interviews with these organizations, we  requested additional contacts. We interviewed organizations that were  named during multiple interviews. This selection process allowed us to  identify stakeholders that represented a diverse range of roles in the rural  housing industry including: developers, borrower and tenant advocacy  organizations, and organizations advocating for the retention or  expansion of affordable housing.", "To determine how other agencies approached expiring rental assistance  contracts and low-income housing preservation, we also interviewed  Department of Housing and Urban Development officials. More  specifically, we determined what key steps and best practices the  department used to preserve its multifamily housing program properties,  including properties with maturing mortgages, and what tools and  resources were required for managing its housing program.", "We conducted this performance audit from May 2016 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Number of Properties and Units That Could Exit the Rural Housing Service\u2019s Program between 2017 and 2050", "paragraphs": [], "subsections": [{"section_title": "State", "paragraphs": [], "subsections": []}, {"section_title": "State", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Harry Medina (Assistant  Director); Steve Ruszczyk (Analyst in Charge); Holly Hobbs; Enyinnaya  David Aja; Jim Ashley; Stephen Brown; William Chatlos; DuEwa Kamara;  John McGrail; Marc Molino; and Tovah Rom made key contributions to  this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-222", "url": "https://www.gao.gov/products/GAO-18-222", "title": "Highway and Transit Projects: Evaluation Guidance Needed for States with National Environmental Policy Act Authority", "published_date": "2018-01-30T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 2005, over 30 provisions have been enacted in law to speed up the delivery of highway and transit projects, mainly by streamlining the NEPA review process. NEPA requires federal agencies to evaluate the potential environmental effects of proposed projects on the human environment. These project delivery provisions included new categorical exclusions to streamline the review process, and a provision allowing DOT to assign federal NEPA approval authority to states.", "Congress included provisions in statute for GAO to assess the use of these provisions and whether they have accelerated project delivery. This report examines: (1) which project delivery provisions were used by state DOTs and selected transit agencies and the reported effects, and (2) the extent to which DOT has assigned NEPA authority to states and the reported effects, among other objectives. GAO surveyed all state DOTs and interviewed federal and state DOT officials and 11 selected transit agencies GAO determined were likely to have been affected by the provisions, and analyzed information from NEPA assignment states."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Transportation's (DOT) Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) are responsible for National Environmental Policy Act (NEPA) compliance on highway and transit projects. Project sponsors that receive federal funds, typically a state DOT or transit agency, develop documents necessary for NEPA compliance for FHWA and FTA to evaluate and approve. Project sponsors prepare an environmental impact statement (EIS) when a project will have a significant environmental impact, or an environmental assessment to determine if a project will have a significant impact. Projects that fit within a category of activities pre-determined to have no significant impact (such as repaving a road) can receive a categorical exclusion, and an EIS or environment assessment is generally not needed. GAO found:", "State DOTs and selected transit agencies reported using provisions enacted in law to speed up the delivery of highway and transit projects, and while state DOTs reported that a number of provisions they used sped up delivery of highway projects, the effects on transit projects were less clear. For example, according to GAO's survey responses, 10 of 17 provisions that mainly created new \u201ccategorical exclusions\u201d were used by 30 or more state DOTs and generally sped up projects. The provision state DOTs and transit agencies most often reported using was one that authorizes parkland or a historic site to be used for a transportation project if that project has a minimal impact on the environment. A majority of the 11 transit agencies GAO reviewed were not clear whether provisions they used sped up project delivery because these agencies did not track how long it took projects to complete the NEPA process, among other reasons.", "DOT assigned NEPA authority to six states: Alaska, California, Florida, Ohio, Texas, and Utah. Under agreements with FHWA, state DOTs calculate time savings by comparing NEPA completion times before (the baseline) and after assuming the authority. Only California and Texas have reported results; California reported that it reduced EIS review time 10 years from a 16-year baseline. However, these reported time savings are questionable because the comparisons do not consider other factors, such as funding, that can affect timelines. In establishing baselines, both states have also faced challenges, such as how many and which projects to include. California reported to its legislature that its baseline may not be meaningful because of the relatively small sample of five projects, but nevertheless presents these data on its web site as evidence of \u201csignificant\u201d time savings.", "FHWA does not review the states' timeliness measures and time savings estimates, but has broad authority to offer guidance and technical assistance, which can include helping states develop sound evaluation methodologies and baselines. FHWA officials stated that they provide general technical assistance, but that no state has requested help developing evaluation methodologies. Offering and providing such assistance could help ensure that states considering applying for NEPA assignment base their decisions on reliable information, and that FHWA and Congress have reliable information to assess whether NEPA assignment results in more efficient environmental reviews."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FHWA should offer and provide guidance or technical assistance to NEPA assignment states on developing evaluation methodologies, including baseline time frames and timeliness measures. DOT partially concurred with the recommendation, saying it would clarify environmental review start times. GAO continues to believe further evaluation guidance is needed, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The National Environmental Policy Act of 1969 (NEPA)\u2014which requires  federal agencies to evaluate the potential environmental effects of  proposed projects on the human environment\u2014has been identified by  critics as containing time-consuming requirements and praised by  proponents for, among other things, helping protect the environment and  bringing public participation into the government\u2019s decision making. The  Department of Transportation\u2019s (DOT) Federal Highway Administration  (FHWA) through its division offices in each state and the Federal Transit  Administration (FTA) through its 10 regional offices are the federal  agencies responsible for NEPA compliance on highway and transit  projects, respectively. Project sponsors\u2014typically a state department of  transportation (state DOT) or a local transit agency\u2014receive FHWA and  FTA grant funds, oversee the construction of highway and transit projects,  develop the documents on which FHWA and FTA base their evaluations  of environmental effects, and collaborate with federal and state  stakeholders. In short, project sponsors generally prepare the documents  necessary for NEPA compliance, while the federal agencies must  ultimately approve the documents. In this report we refer to these  activities collectively as \u201cenvironmental review\u201d or \u201cNEPA review.\u201d", "We have previously reported that environmental review is one of a  number of factors affecting the time frame for completing transportation  projects (delivery). The past three surface transportation  reauthorizations\u2014the Safe, Accountable, Flexible, Efficient  Transportation Equity Act: A Legacy for Users (SAFETEA-LU) in 2005;  the Moving Ahead for Progress in the 21st Century Act (MAP-21) in 2012;  and the Fixing America\u2019s Surface Transportation Act (FAST Act) in  2015\u2014contain a number of provisions, called \u201cproject delivery  provisions\u201d\u2014aimed at accelerating the delivery of highway and transit  projects, mainly by streamlining the NEPA review process. These  provisions include, for example, the NEPA Assignment Authority  provision, which provides authority for the relevant DOT administration,  under certain circumstances, to assign federal NEPA authority to states  and thereby eliminate the federal approval role with respect to individual  projects. In this case, FHWA and FTA are the relevant DOT  administrations to assign NEPA authority to states for highway and transit  projects, respectively.", "MAP-21 and the FAST Act included provisions for GAO to assess, among  other things, whether project sponsors have used the project delivery  provisions and the extent to which the provisions have sped up the  delivery of highway and transit projects. This report:  identifies provisions aimed at accelerating the delivery of highway and  transit projects that were included in the last three surface  transportation reauthorizations; examines which provisions were used by state DOTs and selected  transit agencies and the provisions\u2019 reported effects, if any, on  accelerating the delivery of projects; and evaluates the extent to which DOT has assigned NEPA authority to  states and the reported effects.", "In addition, in appendix I, we identify available information on the number  and percentage of the different types of NEPA reviews and the costs of  conducting NEPA reviews.", "To address the first objective, we reviewed the past three surface  reauthorizations to identify highway and transit project delivery provisions  and categorized these provisions. To determine states\u2019 use and reported  effects of the provisions on highway projects, we surveyed state DOTs  within all 50 states, the District of Columbia, and Puerto Rico. We had a  100 percent response rate. Based on the survey results, we conducted  follow-up interviews with officials from 10 state DOTs to discuss their  perceived effects of the provisions in greater detail. We selected these  state DOTs to include geographically diverse states and states that  reported varying levels of use of the provisions and effects. To determine  use and the perceived effects of the provisions applicable to selected  transit projects, we selected 11 transit agencies and interviewed officials  at those agencies. We selected these agencies based primarily on the  number of times they issued a notice of intent to prepare an  environmental impact statement (EIS) in the Federal Register from 2005  through 2016 to identify those transit agencies that may have experience  preparing EISs or some another NEPA review and experience using  transit project delivery provisions. We also considered other factors, such  as ridership and geographic location, to select the 11 transit agencies.  The results of the states\u2019 and transit agencies\u2019 interviews are not  generalizable.", "To evaluate the extent to which DOT has assigned NEPA authority to  states, and the effects states have reported from assuming NEPA  authority, we identified the states that have been assigned NEPA  authority, based on information from FHWA, and interviewed state DOT  officials in those states. However, we did not include one of these states  because that state did not assume NEPA authority until November 2017.  For the states we included, we interviewed state DOT officials and  reviewed relevant documentation including memorandums of  understanding and analyses the state DOTs conducted on NEPA  assignment authority, such as methodologies for calculating NEPA  assignment time savings. In addition, we interviewed FHWA officials  about procedures to oversee the performance of NEPA assignment  states and interviewed FHWA division officials from those states. We  compared FHWA\u2019s procedures to oversee NEPA assignment states  against standards for information and communication contained in  Standards for Internal Control in the Federal Government.", "To determine available information on the number and percentage of the  different NEPA reviews and costs of conducting NEPA reviews for  highway and transit projects, we reviewed relevant publications,  documents, and analyses, and discussed these with FHWA and FTA  officials.", "For all objectives, we interviewed agency officials and stakeholders  involved in highway and transit projects including FHWA, FTA, and  relevant transportation and environmental organizations. We conducted  this performance audit from August 2016 to January 2018 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives. For more information on our objectives, scope, and  methodology, see appendix II."], "subsections": [{"section_title": "Background", "paragraphs": ["FHWA and FTA fund and oversee highway and transit projects,  respectively. FHWA funds highway projects through formula grants to  state DOTs, provides technical expertise to state DOTs, and conducts  oversight of highway projects through its division offices in each state.  FTA funds a variety of transit programs through formula and competitive  grants and conducts oversight of transit projects\u2019 planning and design  through 10 regional offices. Completing major highway and transit  projects involves complex processes that depend on a wide range of  stakeholders conducting many tasks. Project sponsors\u2014the state DOTs  and local transit agencies\u2014are the entities that develop the  environmental review documents to be approved by the federal agencies.  Examples of highway projects that may undergo environmental review  are bridge construction or roadway repaving, and examples of transit  projects include extension of light rail lines or construction of passenger  ferry facilities. Project sponsors that do not use federal funds for a project  generally do not need to meet NEPA requirements, but may still need to  satisfy state or local environmental review requirements.", "As we have previously reported, highway projects typically include four  phases, and transit projects also follow similar processes.  1.  Planning: Project sponsors assess the need for a project in relation to  other potential transportation needs.  2.  Preliminary design and environmental review: Project sponsors  identify potential transportation solutions based on identified needs,  the potential environmental and social effects of those solutions, a  project\u2019s cost, and construction location. They then analyze the effect,  if any, of the project and potential alternatives on the environment.  Based on the analysis as well as public input the preferred alternative  is selected.  3.  Final design and right-of-way acquisition: Project sponsors finalize  design plans and, if necessary, acquire private real property for the  project right-of-way and relocate any affected residents and  businesses.  4.  Construction: Project sponsors award construction contracts, oversee  construction, and accept the completed project.", "In the preliminary design and environmental review phase, many activities  are to be carried out by the project sponsor pursuant to NEPA and other  federal laws. NEPA\u2019s two principal purposes are to ensure (1) that an  agency carefully considers detailed information concerning significant  environmental impacts and (2) that environmental information is available  to public officials and citizens before decisions are made and actions are  taken. For highway and transit projects, the project sponsor is  responsible for preparing documentation showing the extent of the  project\u2019s environmental impacts, in accordance with NEPA, and  determining which of the three following documentation types is needed:", "An environmental impact statement (EIS), the most comprehensive of  the three documentation types, is required for projects that have a  significant effect on the environment. In broad terms, the lead federal  agency, FHWA or FTA, starts the EIS process by publishing a notice  of intent in the Federal Register. The lead agency then must engage  in an open process\u2014inviting the participation of affected government  agencies, Indian tribes, the proponent of the action, and other  interested persons\u2014for determining the scope of issues to be  addressed and for identifying the significant issues related to a  proposed action. The lead agency then is to coordinate as appropriate  with resource agencies, such as the U.S. Army Corps of Engineers or  the Fish and Wildlife Service, solicit comments from the public on a  draft EIS, incorporate comment responses as appropriate into a final  EIS, and issue a record of decision.", "Project sponsors are to prepare environmental assessments when,  among other things, it is not clear whether a project is expected to  have significant environmental impacts. An environmental  assessment is intended to be a concise document that, among other  things, briefly provides sufficient evidence and analysis for  determining whether to prepare an EIS. If the agency determines that  there are no significant impacts from the proposed action, then the  agency prepares a Finding of No Significant Impact that presents the  reasons why the agency made that determination. If the agency  determines the project may cause significant environmental impacts, it  conducts an EIS.", "Categorical exclusions refer to projects that would not individually or  cumulatively have a significant effect on the environment. These  projects generally require no or limited environmental review or  documentation under NEPA. Examples of highway projects that are  generally processed as categorical exclusions include resurfacing  roads, constructing bicycle lanes, installing noise barriers, and  landscaping.", "While FHWA and FTA are the federal agencies responsible for ensuring  NEPA compliance on highway and transit projects, if certain requirements  are met, FHWA or FTA may assign a state and that state may assume  federal NEPA authority. States assume this authority subject to the same  procedural and substantive requirements as would apply to FHWA or  FTA. Specifically, the NEPA Assignment Authority provision provides  authority for FHWA to assign federal NEPA authority to states for  approving an EIS, environmental assessment, or categorical exclusion.  States must apply to FHWA or FTA, which reviews the state\u2019s suitability  to assume the authority based on meeting certain regulatory  requirements and the state\u2019s capability to assume the responsibility.  States must enter into a written memorandum of understanding (MOU)  and must, among other things, expressly consent to the jurisdiction of  federal courts by waiving sovereign immunity for any responsibility  assumed for NEPA. The MOU is for a term of not more than 5 years and  is renewable. MOUs are unique to each state; however they all contain  certain sections such as assignments of authority, acceptance of  jurisdiction, and performance measures. For the first 4 years, FHWA is to  conduct an annual audit to ensure compliance with the MOU, including  compliance with all federal laws. After the fourth year, FHWA is to  continue to monitor state compliance with the MOU, using a more limited  review.", "In prior reports, we identified a number of factors that can affect the  length of time required to complete transportation projects. For highway  projects, we found that the large number of stakeholders and steps  (which include environmental reviews) in the project delivery process,  availability of funding, changing priorities, and public opposition can lead  to longer project time frames. For transit projects, we found that local  factors specific to each project determine the project development time  frame, including the extent of community support and extent of local  planning prior to approval of funding. We found that for 32 projects we  reviewed, the environmental review process was tied with stakeholder  coordination as the third most frequently cited factor by transit project  sponsors contributing to the length of the project development process."], "subsections": []}, {"section_title": "The Three Most Recent Transportation Authorizations Included Numerous Provisions for Accelerating Highway and Transit Project Delivery", "paragraphs": ["We identified 34 project delivery provisions that apply to highway projects  and 29 such provisions that apply to transit projects. These provisions  are intended to streamline various aspects of the NEPA process, making  it more efficient and timely. Most of the provisions apply to both types of  projects. Based on our review, we grouped the provisions into four  general categories: Accelerated NEPA Review, Administrative and  Coordination Changes, NEPA Assignment, and Advance Planning (see  table 1). See appendix III for the full list and a description of each project  delivery provision we identified.", "The Accelerated NEPA Review category\u2019s provisions generally establish  certain conditions that permit projects, if the specific conditions are  applicable, to exclude certain actions from a more detailed NEPA review.  For instance, these provisions are primarily comprised of new categorical  exclusions. Additionally, the Minor Impacts to Protected Public Land  provision authorizes a historic site, parkland, or refuge to be used for a  transportation project if that project is determined to have a de minimis  impact on the environment.", "The Administrative and Coordination Changes category\u2019s provisions are  more process oriented. These provisions, for example: (1) establish time  frames for parts of the NEPA review process, (2) encourage the use of  planning documents and programmatic plans as well as a coordination  plan for public and federal agency participation in the environmental  review process, and (3) seek to avoid duplication in NEPA review  documents.", "The NEPA Assignment category\u2019s provisions authorize FHWA or FTA, as  discussed above, to assign their NEPA authority to states. The first of the  two provisions\u2014the \u2018NEPA Assignment Authority\u2019 provision\u2014authorizes  FHWA or FTA to assign federal NEPA authority to states for reviewing  EIS, environmental assessment, and some categorical exclusion reviews,  so long as the categorical exclusion does not require an air-quality review  that involves the Environmental Protection Agency. The second  provision\u2014the Categorical Exclusion Determination Authority provision\u2014 allows FHWA or FTA to assign limited NEPA authority to states to review  categorical exclusions. This authority can apply to categorical  exclusions with air-quality reviews, as well as all other categorical  exclusions.", "The Advance Planning category\u2019s provisions are not part of the agency\u2019s  environmental review process and are not applicable to transit projects.  These provisions allow for certain activities in the highway project  development cycle, such as land acquisition, to occur prior to NEPA  approval. The three provisions in this category include the following:", "The Advance Design-Build Contracting provision permits a state to  release requests for proposals and award design-build contracts prior  to completing the NEPA process; however, a contractor may not  proceed with final design or construction during the NEPA process.", "The Advance Acquisition of Real Property provision authorizes states  to acquire real property interests, such as land, for a project before  completion of the NEPA process.", "The 2-phase Contracts provision authorizes the awarding of contracts  on a competitive basis for preconstruction services and preliminary  project design before the completion of the NEPA process.", "Most of the project delivery provisions are optional, which we define to  mean that the relevant entities (a federal agency or state or local  transportation agency), can choose to use the provision if circumstances  allow. For example, a state highway project within an existing operational  right-of-way may have the option to use the categorical exclusion for  projects within an existing operational right-of-way. Specifically, 22 of the  34 highway project delivery provisions and 17 of the 29 transit project  delivery provisions are optional. By contrast, 12 provisions are  requirements for both highway and transit projects, which we define to  mean that federal agencies, or state or local transportation agencies that  are subject to a provision must adhere to the requirements and  obligations in the provision, if all the conditions for its use have been  satisfied. Required provisions are primarily contained in the  Administrative and Coordination Changes category. For example, for  highway projects, the Programmatic Agreements for Efficient  Environmental Review provision, enacted in 2012, requires FHWA to  seek opportunities with states to enter into agreements that establish  streamlined processes for handling routine projects, such as highway  repair. Prior to 2012, FHWA actively encouraged programmatic  agreements between state DOTs and FHWA division offices, but seeking  opportunities to enter such agreements were not required."], "subsections": []}, {"section_title": "State DOTs Reported That a Number of Provisions They Used Sped Up Highway Project Delivery, While for Most Selected Transit Agencies Effects Were Unclear", "paragraphs": [], "subsections": [{"section_title": "More Than Half of Optional Provisions Were Reported to Be Used by a Majority of State DOTs on Highway Projects", "paragraphs": ["According to survey responses, 10 of the 17 optional provisions included  in the survey\u2014which primarily fall under the Accelerated NEPA Review  category\u2014were each used by 30 or more state DOTs (see fig. 1). Fifty  state DOTs reported using the Minor Impacts to Protected Public Land  provision\u2014the most of any of the provisions. Some of the less widely  used provisions\u2014the 7 provisions reported to be used by 21 or fewer  states\u2014only apply to specific circumstances or highway projects that  many state DOTs undertake less frequently. For example, the Categorical  Exclusion for FHWA-funded Ferry Facility Rehabilitation or  Reconstruction provision would only apply to states that operate ferry  services, a circumstance that may explain its relatively low use. Also, for  3 of these 7 provisions, 10 or more states reported that they plan to use  the provision in the future. For example, while 21 state DOTs used the  Reduce Duplication by Eliminating Detailed Consideration of Alternative  Actions provision, an additional 17 state DOTs reported that they plan to  use it. All of the optional provisions were reported to be used by at least  14 state DOTs.", "Some states reported that they have not used certain provisions and have  no plans to do so. Our survey served as a nationwide review of the use of  the provisions and was not designed to determine why each state did or  did not use each provision. However, our discussions with selected states  and optional comments provided in the survey provided some additional  insight into states\u2019 use of the provisions. Officials at some state DOTs  reported that they had not used certain categorical exclusions because  other categorical exclusions could also apply to those projects.  Specifically, officials in 4 state DOTs told us that they did not use 4  categorical exclusion provisions for this reason. For example, officials at  the Colorado DOT said that the Categorical Exclusion for Geotechnical  and Archeological Investigations provision has not been used in Colorado  because other categorical exclusions were more applicable. Similarly,  officials at the Oklahoma DOT said that they had not used the Categorical  Exclusion for Projects within the Existing Operational Right-of-Way  provision because most of those projects already qualify for a categorical  exclusion under other criteria. For other provisions, such as the  Categorical Exclusion for Multimodal Projects provision, some state  DOTs, such as the Nebraska DOT, indicated that they do not conduct  multimodal projects and have no plans to do so for the foreseeable  future."], "subsections": []}, {"section_title": "About Two-Thirds of the Optional Provisions Reportedly Sped Up Highway Project Delivery for the Majority of Users", "paragraphs": ["For 11 of the 17 optional provisions included in our survey, a majority of  state DOTs that indicated they used the provisions (users) reported that  the provisions sped up project delivery (see fig. 2).", "Over 90 percent of users of the Minor Impacts to Protected Public Land  provision reported that it sped up project delivery (46 out of 50 state  DOTs using the provision). FHWA officials said that without the Minor  Impacts to Protected Public Land provision, a state DOT would need to  complete an environmental assessment to show that performing even a  small project, such as adding a small bus stop on the periphery of a park,  would not have significant effects on the environment. The Minor  Impacts to Protected Public Land provision now allows a state DOT to  complete transportation projects that have a minimal environmental effect  on historic sites and parklands more quickly because the state DOT can  bypass the environmental assessment process. In our survey and  discussions with state DOTs, some officials noted how much time the  provision can help them save. Officials at the Virginia DOT estimated  that a 9-month to 1-year review could be cut to 2 to 4 months. An official  at the Colorado DOT said that reviews that used to take 6 months now  take 30 days. And officials at the Mississippi DOT said that they used the  provision when adding turn lanes near parks and were able to bypass a  review process that previously took 6 to 12 months.", "Other examples of sped-up project delivery provided by state DOTs  include the following:", "Categorical Exclusion in Emergencies provision: Mississippi DOT  officials said that this provision has been helpful, particularly given  project delivery lessons learned since Hurricane Katrina. They said  the provision allows the state DOT to use a categorical exclusion,  which takes 6 to 8 months for some projects, in place of an  environmental assessment, which can take 12 to 18 months and  involves additional review steps such as providing evidence and  analysis as to why a project does not require an EIS.", "Use of Federal Highway or Transit Funds to Support Agencies  Participating in the Environmental Review Process provision: Arizona  DOT officials said that the state DOT funds positions in the Army  Corps of Engineers and the Fish and Wildlife Service that help lessen  the time it takes for those agencies to provide comments on Arizona  DOT project\u2019s NEPA reviews. The officials estimated these positions  reduce review time by about one month compared to when these  agencies did not have Arizona DOT-funded positions.", "For the remaining six optional provisions, 41 to 58 percent of users  reported that the provisions had no effect on project delivery. Based on  discussions with selected state DOTs and comments included with survey  responses, officials at some state DOTs reported that the provisions did  not have any effect because the states had already developed similar  processes, either through programmatic agreements with their FHWA  division office or at their own initiative. As a result, the state DOTs did not  realize any new time savings after the provisions were enacted in law. For  example, for each of three provisions that allow for certain documentation  to be eliminated for categorical exclusions, officials at seven state DOTs  reported that they had already developed similar processes through  programmatic agreements with their FHWA division office. Further, five  state DOTs reported that the Early Coordination Activities in  Environmental Review Process provision had no effect because they  already had a similar coordination process in place. Some states used  such a process at their own initiative and others in conjunction with their  FHWA division office."], "subsections": []}, {"section_title": "Among Required Provisions, about Three- Quarters of State DOTs Reported That \u201cProgrammatic Agreements\u201d Helped Speed Up Highway Projects, While the Effects Are Mixed for Other Provisions", "paragraphs": ["Of the 12 required provisions\u2014which fall into the Administrative and  Coordination Change category\u2014only the Programmatic Agreements for  Efficient Environmental Review provision was reported by a majority of  state DOTs (39) to have sped up project delivery (see fig. 3). For  example, officials at the Mississippi DOT reported that a programmatic  agreement with the FHWA division office can allow it to save 6 to 8  months when processing categorical exclusions for projects with minimal  right-of-way acquisition. They explained that they no longer had to wait for  the FHWA division office to process the categorical exclusion. As  previously discussed, prior to 2012, FHWA actively encouraged, but did  not require, programmatic agreements between state DOTs and FHWA  division offices. In interviews and optional comments from the survey,  officials reported that programmatic agreements, both those entered into  before and after the enactment of the provision, had sped up project  delivery. We did not determine the number of state DOTs that attributed  the speed up in project delivery to the 2012 provision, as opposed to  those who attributed it to the earlier programmatic agreements with their  FHWA division offices. All of the required provisions reportedly sped up  project delivery for at least 4 state DOTs.", "For 5 of the 12 provisions, between 10 and 18 states responded that the  provisions sped up project delivery. For example, officials at the Ohio  DOT estimated that the Combine Final Environmental Impact Statement  and Record of Decision in Certain Cases provision saves them a  minimum of 3 months. For the remaining 6 provisions, between 4 and 7  states reported that the provisions sped up project delivery, but each of  these provisions also had at least 16 states that reported the provision  had no effect on project delivery. Our survey served as a broad-based  review of the effects of the provisions and was not designed to determine  why each provision had the reported effects; however, some states  provided voluntary comments in the survey. As with various optional  provisions, some state DOT officials reported no effect because the state  had already developed processes and practices that they said achieved  what the provisions formalized, for example:", "Coordination Plan for Public and Agency Participation provision: In  discussions and from optional comments, 4 state DOTs said that they  already had a similar process in place. Officials at the Louisiana DOT  stated that they performed a similar process prior to the \u2018Coordination  Plan for Public and Agency Participation\u2019 provision\u2019s enactment in law  in an effort to coordinate with the public and other government  agencies.", "45-Day Limit to Identify Resource Agencies provision: In interviews  and optional survey comments, officials at 2 state DOTs said that they  already had a similar process in place to promptly identify stakeholder  agencies.", "Issue Resolution Process provision: Wyoming DOT officials said that  they had been performing a similar process prior to this provision\u2019s  enactment in law to ensure consensus among stakeholders.", "Some state DOTs reported that it was too early to determine the effects of  several provisions, particularly more recently enacted provisions. For 5 of  the 12 required provisions, more than one third of state DOTs (over 17  states) reported that it was too soon to judge the provisions\u2019 effects. Four  of these 5 provisions were enacted in the FAST Act in 2015.  Consequently, state DOTs that used the provision had a short window of time to assess any potential effect on project delivery\u2014particularly given  that highway projects often take a number of years to complete. Also,  while our survey did not ask state DOTs when they had most recently  initiated an EIS, several state DOTs voluntarily noted that they had not  done so since the FAST Act. Certain provisions apply only to projects  undergoing an EIS; states that have not done an EIS since such  provisions were enacted would not have had the opportunity to use the  provision. One such provision is the 45-Day Limit to Identify Resource  Agencies provision, for which 19 state DOTs reported that it was too early  to judge the effects.", "For 5 of the 12 provisions, a relatively few state DOTs, between one and  eight, reported that the provision had slowed down project delivery. Eight  states reported that the Coordination Plan for Public and Agency  Participation provision slowed down project delivery, the most for any  provision. According to the Minnesota DOT, this provision slowed down  project delivery because it formalized and required a specific coordination  process in addition to those that had already been voluntarily occurring  with relevant federal and state resource agencies. Formalizing this  process resulted in resource agencies taking longer to provide responses  to the Minnesota DOT. Other states similarly said that this provision\u2019s  additional formal processes slowed down project delivery.", "We defined required provisions to mean that federal agencies or state or  local transportation agencies that are subject to the provision must  adhere to requirements and obligations in the provision, if all the  conditions for its use have been satisfied. States may not have had the  opportunity to apply some of the required provisions that apply to them  because they did not have exposure to the circumstances and conditions  that would invoke this provision\u2019s use. For example, a state would not be  exposed to the 150-Day Statute of Limitations provision if it had not been  subject to a lawsuit. Unlike the optional provisions, we did not ask states  whether they elected to use the required provisions since state DOTs, if  subject to the provision, must adhere to the requirements and obligations  in the provision."], "subsections": []}, {"section_title": "Selected State DOTs Reported Using the Three Advance Planning Provisions That Affect Project Delivery but Precede NEPA Review", "paragraphs": ["Two of the three provisions from the Advance Planning category were  used by a majority of the 10 state DOTs we interviewed, and most of the  state DOTs that used each provision stated that it sped up project  delivery. This use is illustrated more specifically:", "Advance Design-Build Contracting provision: 8 state DOTs used this  provision, 5 of which reported it sped up highway project delivery.", "Advance Acquisition of Real Property provision: 6 state DOTs used  this provision, 4 of which reported it sped up highway project  delivery.", "2-phase Contracts provision: 5 state DOTs used this provision, 4 of  which reported it sped up highway project delivery.", "Some state DOT officials provided examples of how the provisions  affected their project delivery. For example, California DOT officials said  that the Advance Acquisition of Real Property provision saved them a few  months on small projects, involving one or two parcels of land; for a large  project involving hundreds of commercial and residential parcels, they  estimated time savings of more than a year. Similarly, Illinois DOT  officials said that the provision has yielded time savings of 6 months to a  year in instances where the DOT needs to purchase residential property."], "subsections": []}, {"section_title": "Most Project Delivery Provisions Were Used by Selected Transit Agencies, but the Provisions\u2019 Effects on Project Delivery Were Generally Unclear", "paragraphs": ["More than two-thirds of the provisions designed to speed up transit  project delivery were reportedly used by 11 selected transit agencies. We  asked officials in selected transit agencies to report their use of 29 project  delivery provisions applicable to transit agencies, 17 of which are optional  and 12 of which are required. Of the 29 provisions, 6 were used by 4 or  more selected transit agencies (see fig. 4). The most used optional  provision, by 7 transit agencies, was the Minor Impacts to Protected  Public Land provision described earlier followed by the Planning  Documents Used in NEPA Review provision, used by 6 transit agencies.", "Some transit agencies told us that the provisions they used sped up  project delivery. In addition, some provided estimated time savings.", "Chicago Transit Authority (CTA) officials told us that the Minor  Impacts to Protected Public Land provision was extremely helpful for  recent CTA projects involving historic properties. For example, CTA  has implemented projects that involve track work at a station that is  adjacent to a historic boulevard. They estimated that the Minor  Impacts to Protected Public Land provision has reduced the time to  complete documentation by several months. Similarly, a Tri-County  Metropolitan Transportation District of Oregon official stated the Minor  Impacts to Protected Public Land provision has been instrumental  since in the past, the agency would have to stop the project if it  affected a park land.", "Southeastern Pennsylvania Transportation Authority (SEPTA) officials  told us that they used the Categorical Exclusion for Minor Rail  Realignment provision one or two times within the past 2 years.  SEPTA estimated the provision saved the agency several months in  time savings per project. Officials stated that the provision allowed the  SEPTA to use a categorical exclusion in place of an environment  assessment. SEPTA officials also said they saved staff time and  approximately $100,000 a year in consultant fees and agency staff  resources by using the Categorical Exclusion for Preventative  Maintenance to Culverts and Channels provision.", "Capital Metro officials in Austin, Texas, told us they used the  Categorical Exclusion for Projects within the Existing Operational  Right-of-Way provision for a rail right-of-way project. They estimated  the provision helped save at least 4 to 6 months in project delivery  because the agency was not required to do an environmental  assessment.", "While some selected transit agencies reported using some provisions and  added that this provision\u2019s use helped speed up project delivery or lower  costs, the effects of the provisions\u2014whether they sped up project delivery  or streamlined the NEPA review process\u2014were not clear to a majority of  the selected transit agencies. Because transit agencies in our review do  not track NEPA reviews\u2014including their start and end dates\u2014they were  not able to assess how project time frames or costs were affected by the  provisions. Officials from several selected transit agencies told us that  their understanding of the project delivery provisions\u2019 effects was also  limited by their reliance on engineering and environmental-planning  consultants to prepare their NEPA documents. Officials from 4 of the 11  transit agencies told us that they rely on these consultants\u2019 knowledge of  the provisions to prepare their NEPA documents. Further, officials from 1  transit agency said they required the assistance of their consultants to  respond to our requests for information.", "Nine of the 29 provisions were not used by any of the agencies, and no  provision was used by more than 7 agencies. Our discussions with  selected transit agency and FTA officials provided some insight into  transit agencies\u2019 use of the provisions, specifically:", "Limited transit projects needing EISs: Transit agencies that do not  prepare EISs may have fewer opportunities to use some of the  provisions. Following discussions with FTA officials, we examined the  number of times transit agencies filed a notice of intent to prepare an  EIS in the Federal Register from 2005 through 2016 as a proxy to  identify those transit agencies that would likely use a number of the  project delivery provisions. We found that 48 transit agencies (out of  several hundreds of transit agencies) filed notices of intent from fiscal  year 2005 through 2016 but that of the 48 transit agencies, 34 had  filed a notice of intent only once during that time. In general, the vast  majority of transit agencies have little recent experience preparing EIS  documentation and using the provisions that are triggered by an  EIS. For example, only one transit agency (Tri-County Metropolitan  Transportation District of Oregon) had filed a notice of intent to  prepare an EIS after the FAST Act was enacted in 2015.", "Duration of transit projects: Some instances where transit project  delivery provisions were not used could be due to the number of years  it takes to complete transit projects. According to FTA officials, where  sponsors for highway projects may have new projects initiating and  requiring NEPA reviews on a rolling basis, transit agencies operate  differently. A transit agency may have a project that goes through a  NEPA review and then begins construction of the project that can last  a number of years. The transit agency may not have another project  that requires an EIS for several years. For example, New York  Metropolitan Transportation Authority (MTA), the largest transit  agency by ridership in the country, completed its last EIS review in  2004 and has since been working on construction of that project,  according to FTA officials. While MTA has been receiving FTA funds  for construction, no additional project has undergone an EIS.", "Changing provisions and delayed guidance: Some transit agency  officials told us that the changing provisions across the three enacted  surface transportation authorization acts pose challenges to using the  project delivery provisions. Understanding the changes in the project  delivery provisions\u2014for example, changes in categorical exclusions\u2014 included in SAFETEA-LU, MAP-21, and the FAST Act was  challenging according to some selected transit agencies. Further,  some transit agency officials stated that the lag time in receiving  guidance from FTA on the changing provisions also posed challenges  to using some of the provisions."], "subsections": []}]}, {"section_title": "DOT\u2019s FHWA Has Assigned Six States NEPA Authority, and Two States Reported Time Savings, but FHWA Has Not Provided Guidance on Measuring Effects", "paragraphs": ["DOT, specifically FHWA, has assigned its NEPA approval authority to six  states, and other states are interested in this authority. Of the six states,  California and Texas have completed some NEPA reviews and  determined they have achieved time savings through state approval of  NEPA documents rather than federal approval. However, we found the  reported time savings to be questionable for several reasons, including  challenges faced by California and Texas in establishing sound baselines  for comparison. Despite this finding, the reported time-savings information  is used by other states to seek out NEPA authority and in reporting to  DOT and Congress. FHWA focuses its oversight of NEPA assignment  states on ensuring these states have the processes in place to carry out  FHWA\u2019s NEPA responsibilities, according to a written agreement between  each state and FHWA, and does not focus on determining whether states  are achieving time savings."], "subsections": [{"section_title": "FHWA Has Assigned Six States NEPA Authority, and Additional States Are Interested", "paragraphs": ["FHWA has assigned its NEPA authority to six states, enabling those state  DOTs to assume FHWA\u2019s authority and approve state-prepared NEPA  documentation for highway projects, in lieu of seeking federal approval.  California\u2019s NEPA authority began in 2007, as the first state in the then- pilot program, and continued when the program was made permanent in  2012. Once eligibility expanded to all states, Texas became the second  state to be assigned NEPA authority, in 2014, followed more recently by  Ohio in 2015, Florida in 2016, and Utah and Alaska in 2017.", "The 2005 Conference Report accompanying SAFETEA-LU indicates that  the NEPA Assignment Authority provision was created to achieve more  efficient and timely environmental reviews, which are a key benefit sought  by participating states. The report states that the NEPA assignment  program was initially created as a pilot program to provide information to  Congress and the public as to whether delegation of DOT\u2019s  environmental review responsibilities resulted in more efficient  environmental reviews. In addition, in MAP-21, Congress declared that  it is in the national interest to expedite the delivery of surface  transportation projects by substantially reducing the average length of the  environmental review process. State DOT officials from the five NEPA  assignment states we reviewed cited anticipated time savings or greater  efficiency in environmental review as a reason for taking on this authority.  For example, Texas DOT officials said they expected to save time by  eliminating FHWA approval processes that they described as time  consuming. With NEPA authority, the state puts in place its own approval  processes to carry out the federal government\u2019s NEPA review  responsibilities, and agrees to take on the risk of legal liability for  decisions made in this capacity.", "Additional states have expressed interest and have taken steps to apply  for NEPA authority. Officials from three state DOTs told us they plan to  apply for NEPA authority, and one of these, the Arizona DOT, has taken  the first step in the process and obtained the requisite changes in state  law. In explaining the anticipated benefits of NEPA assignment to the  state legislature, an Arizona DOT official cited time savings reported by  California and Texas as a reason for taking on the application process.  Time savings\u2019 results had been shared by California and Texas DOT  officials during a peer exchange event held by an association of state  highway officials in 2015 for states that are in the early stages or are  considering applying for NEPA authority. Also, the Texas DOT had  testified before a congressional committee in 2015 and described the time  savings for environmental assessment reviews under its NEPA authority  and its role communicating this information to other states pursuing NEPA  authority."], "subsections": []}, {"section_title": "State DOTs Calculate Time Savings, but Reported Savings Are Questionable", "paragraphs": ["The MOUs, signed with FHWA by each of the five states we reviewed, set  out performance measures for comparing the time of completion for  NEPA approvals before and after the assumption of NEPA responsibilities  by the states. To calculate time savings, each state has established a  baseline\u2014of the time it took to complete NEPA review before it assumed  NEPA authority\u2014to compare to the time it takes to complete NEPA  review after assuming NEPA authority. The baseline is to serve as a key  reference point in determining the efficiency of state-led NEPA reviews.  Thus far, the two states that have had NEPA authority long enough to  report results are California and Texas, and only California has reported  results for EISs. The California DOT reported that its EIS reviews now  take about 6 years to approve, which it determined to be a 10-year  improvement over the 16-year (15.9 years) baseline the state DOT  established. For environmental assessment reviews, the California DOT  reported completion times of about 3.5 years, which it determined to be a  1-year improvement over the established baseline. The Texas DOT has  not started and completed an EIS review since assuming NEPA authority  but reported that its environmental assessment reviews have taken about  1.5 years, compared to the baseline of almost 2.5 years.", "However, we found California and Texas DOTs\u2019 reported time savings to  be questionable due to the methods used to compare time frames and  challenges associated with establishing baselines. First, there is an  inherent weakness in comparing the NEPA review time frames before  and after NEPA authority because the comparison does not isolate the  effect of assuming NEPA authority on NEPA review time frames from  other possible factors. As discussed earlier, we have previously found  that such factors include the extent of public opposition to a project and  changes in transportation priorities, among other factors. Further,  according to a report from the American Association of State Highway  and Transportation Officials, such a comparison does not include  information to control for non-environmental factors that are important to  project delivery time frames, including delay in completion of design work  necessary to advance the environmental review and changes in project  funding that put a project on hold. Moreover, neither California nor  Texas DOTs\u2019 time frame comparisons isolate the effects of NEPA  assignment from other streamlining initiatives that may have helped  accelerate delivery of projects, such as potential benefits realized from  other project delivery provisions.", "Second, California and Texas have faced challenges creating appropriate  baselines. States are responsible for determining how many and which  projects to include in baseline calculations and adopting their own  methodologies. While circumstances and conditions are different across  states and states can be expected to have different experiences,  California\u2019s current 16-year EIS baseline is over double that of Texas\u2019 EIS  baseline. In 2012, we found that for the 32 projects in which FHWA was  the lead agency and signed the EIS in fiscal year 2009, the average time  to complete the process was about 7 years. According to information  contained in California DOT reports to the state legislature from 2007 and  2009, California\u2019s original baseline for EISs was comprised of 1 project  that resulted in an EIS baseline of 2.5 years. In 2009 state DOT officials  increased the number of EIS projects in order to achieve what they  viewed as a more representative mix. This process increased California\u2019s  EIS baseline six-fold, which has been consistently used since that time.  Specifically, California used the median of five projects that had review  times of around 2.5 years, 6.2 years, 15.9 years, 16.6 years, and 17.3  years. These projects were selected because they were among the final  EIS projects that were reviewed prior to California\u2019s assuming NEPA  authority.", "However, the EIS baseline may not be meaningful. First, it includes outlier  projects, which are projects that take much longer than usual to complete.  According to California DOT officials, this factor is a limitation to  determining time savings because the outliers increased the EIS baseline  and therefore makes subsequent time savings look greater than they are.  Next, despite the increase in EIS projects included in the baseline, a 2016  California DOT report to the state legislature stated that this new EIS  baseline may still not be meaningful because of the relatively small  sample size, and therefore the inferences that can be made from EIS  analysis on time savings are limited. The report caveats that \u201cthe EIS  analysis should not be used as a major indicator of the effectiveness of  NEPA assignment,\u201d but still reports the EIS analysis results. However,  California DOT uses the figure in determining and reporting time savings.  For example, information available on the California DOT\u2019s web site as of  November 2017 presents these data and states that they are evidence of  saving \u201csignificant time in reviewing and approving its NEPA documents  since undertaking NEPA assignment.\u201d", "Moreover, the California DOT\u2019s reported median time frame of 6 years for  EIS reviews only accounts for those projects that have both started and  completed their environmental review since the state assumed NEPA  authority. As only 10 years have passed since California assumed NEPA  authority in 2007, all EIS reviews started and completed since 2007  automatically have shorter time frames than the 16-year baseline. Thus, it  will be 2023 before any EIS reviews in California could equal the  baseline, let alone exceed it, making any EIS review started after  assumption of NEPA authority and completed before 2023 appear to  demonstrate time savings.", "Texas DOT officials stated that they had challenges determining a  baseline for environmental assessments because there is no nationally  accepted standard definition of when an environmental assessment  begins. Moreover, Texas DOT recently revised its environmental  assessment baseline, reducing it from 3 years to 2.5 years and including  projects over a 2-year period instead of a longer 3-year period due to  uncertainties with quality of the older data, according to Texas DOT  officials. Texas also included, then excluded three outliers from its revised  baseline (reviews that took between 6 and 9 years to complete) because  officials determined they were not representative of typical environmental  assessment reviews. While improving project data to create more  accurate baselines is beneficial, it also results in different time savings\u2019  estimates over time and illustrates the challenges of constructing sound  baselines.", "As previously discussed, states that are considering or have recently  decided to assume NEPA assignment authority have relied, at least in  part, on time savings reported by California and Texas. As additional  NEPA assignment states begin calculating and reporting time savings as  outlined in their MOUs with FHWA, the inherent weakness of a pre- and  post-assignment baseline comparison, combined with challenges  establishing sound baselines, creates the potential for questionable  information about the program\u2019s effects to be reported and relied upon by  other states considering applying for NEPA assignment. Questionable  information also negatively affects DOT\u2019s and Congress\u2019 ability to  determine whether NEPA assignment is having its intended effect and  resulting in more efficient environmental reviews."], "subsections": []}, {"section_title": "FHWA Has Focused on States\u2019 Compliance and Processes but Has Played a Limited Role in Time Savings Measures", "paragraphs": ["FHWA focuses its oversight of NEPA assignment states through audits  and monitoring to ensure that states have the processes in place to carry  out FHWA\u2019s role in the NEPA process and that they comply with the MOU  agreed to between FHWA and each of the NEPA assignment states.  According to the MOUs, FHWA\u2019s annual audits include evaluating the  attainment of performance measures contained in each MOU. Each of the  five MOUs contains four performance measures including: (1)  documenting compliance with NEPA and other federal laws and  regulations, (2) maintaining internal quality control and assurance  measures for NEPA decisions including legal reviews, (3) fostering  communication with other agencies and the general public, and (4)  documenting efficiency and timeliness in the NEPA process by comparing  the completion of NEPA documents and approvals before and after NEPA  assignment.", "According to FHWA officials, the agency interprets evaluating the  attainment of performance measures contained in the MOU as ensuring  that the state has a process in place to assess attainment. For the  efficiency and timeliness measures, FHWA does not use its audits to  measure whether the state is achieving performance goals. FHWA only  ensures that the state has a process in place to track the completion of  NEPA documents and approvals before and after NEPA assignment, and  that states follow the process, according to FHWA officials. For example,  FHWA officials from the California division office stated that they did not  assess the baseline methodology or assess its validity or accuracy.  FHWA\u2019s Texas division officials added that setting the baseline has not  been an FHWA role. FHWA does not assess or collect information on  states\u2019 calculations of their time savings from NEPA assignment.", "FHWA officials stated that their focused approach on compliance and  processes is consistent with the authority they have been granted and  that it is not required by statute to measure environmental review  efficiency and timeliness performance of participating states. Moreover,  according to these officials, this authority limits their ability to request  state information on issues related to, and otherwise assess, states\u2019  performance measures, including time savings, specifically:", "According to an FHWA program document, FHWA is statutorily  authorized to require the state to provide any information that FHWA  reasonably considers necessary to ensure that the state is adequately  carrying out the responsibilities assigned to the state. Further, a  request for information is reasonable if it pertains to FHWA\u2019s  reviewing the performance of the state in assuming NEPA assignment  responsibilities. However, FHWA officials told us they do not consider  an assessment of efficiency and timeliness measures to be necessary  to ensure that the state is adequately carrying out its responsibilities.", "Additionally, FHWA considers timeliness performance measures to be  a state role. FHWA officials told us that the timeliness performance  measures in the NEPA assignment MOUs were added by the states,  not FHWA. For instance, California added a timeliness performance  measure based on its state legislature\u2019s reporting requirements. Each  of the subsequent four NEPA assignment states we reviewed also  included timeliness performance measures in their respective MOUs.  However, the DOT Office of Inspector General reported in 2017 that  while FHWA is not statutorily required to measure performance  regarding the environmental review process for NEPA assignment  states, the lack of data collection and tracking inhibits FHWA\u2019s ability  to measure the effectiveness of NEPA assignment in accelerating  project delivery. The DOT Office of Inspector General recommended  that FHWA develop and implement an oversight mechanism to  periodically evaluate the performance of NEPA assignment states,  which has not yet been implemented.", "While FHWA does not, according to officials, have the authority to assess  states\u2019 measurement of timeliness performance, FHWA has a role and  the authority to provide guidance or technical assistance to states to help  find solutions to particular problems and to ensure complete and quality  information is provided to Congress, state DOTs, and the public to help  make informed policy choices. Federal standards for internal control state  that agencies should use quality information to determine the extent to  which they are achieving their intended program outcomes.  Characteristics of quality information include complete, appropriate, and  accurate information that helps management make informed decisions  and evaluate the entity\u2019s performance in achieving strategic outcomes.  FHWA\u2019s mission to advance the federal-aid highway program is  articulated in its national leadership strategic goal, which states that  FHWA \u201cleads in developing and advocating solutions to national  transportation needs.\u201d To carry out its mission, FHWA engages in a range  of activities to assist state DOTs in guiding projects through construction  to improve the highway system. Specifically, according to agency  documents, FHWA provides technical assistance and training to state  DOTs and works with states to identify issues and develop and advocate  solutions. Its broad authority to offer guidance and technical assistance  can include helping states develop sound program methodologies. Such  assistance or guidance could also include sharing best practices and  lessons learned on evaluation methodologies, including creation of  baselines, and potentially result in better quality information to assess the  results of NEPA assignment. Without quality information reported from  NEPA assignment states on time savings, questionable information about  the program effects may be relied upon by other states considering  applying for NEPA authority, and may negatively impact DOT\u2019s and  Congress\u2019 ability to determine whether NEPA assignment is having its  intended effect and resulting in more efficient environmental reviews.", "FHWA officials stated that they advise NEPA assignment states on  process improvements and technical assistance, but that no state has  requested assistance developing evaluation methodologies or baselines.  However, offering guidance or technical assistance on evaluation  methodologies to measure time savings can help ensure that states are  basing decisions to participate on reliable information and that, in turn,  those NEPA assignment states can provide reliable information to FHWA  and Congress to help assess whether NEPA assignment results in more  efficient environmental reviews."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["A number of factors can affect the time it takes to complete highway and  transit projects, including the NEPA review process. Congress has stated  that it is in the national interest to expedite the delivery of surface  transportation projects by substantially reducing the average length of the  environmental review process, and has taken a number of steps in this  direction, including allowing DOT to assign NEPA authority to the states.  We found that the time savings results publicly shared by current NEPA  assignment states have spurred interest among other states seeking  NEPA authority. However, states are making program decisions\u2014taking  on risk and assuming federal authority\u2014based on questionable  information and reports of success.", "Given questions about participating states\u2019 reported time savings, FHWA  can help provide some assurance that the performance measures states  develop and use to report out are based on sound methodologies. FHWA  has the authority to issue program guidance and offer and provide  technical assistance to help state DOTs find solutions to particular  problems, including the development of sound evaluation methodologies.  Without such assistance, states may continue to face difficulties  establishing sound baselines. And without a sound baseline, the time  savings states calculate\u2014which may continue to be subsequently publicly  reported\u2014may be of questionable accuracy and value. And Congress, in  turn, would not have reliable information on whether the assignment of  NEPA authority to states is having its intended effect."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The FHWA Administrator should offer and provide guidance or technical  assistance to NEPA assignment states on developing evaluation  methodologies, including baseline time frames and timeliness measures.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOT for review and comment. DOT  provided a written response (see app. VI), as well as technical comments,  which we incorporated as appropriate. DOT partially concurred with our  recommendation. Specifically, DOT stated that it would clarify  environmental review start times and communicate this to all FHWA  divisions and states. DOT also stated it would provide the NEPA  assignment states with any new federal government-wide guidance  developed on performance measures of environmental reviews. DOT also  stated that it already provides technical assistance to NEPA assignment  states in other areas and that FHWA is not required by statute to measure  the environmental review efficiency and timeliness of NEPA assignment  states. Further, DOT stated that focusing only on timeliness metrics for  environmental reviews overlooks other significant benefits of NEPA  assignment, such as state control over when and how to conduct  environmental reviews, which according to DOT is one of the most  significant factors that a state considers in deciding whether to request  NEPA assignment authority.", "We are encouraged that DOT stated it would clarify environmental review  start times. This step can improve the accuracy of environmental  assessment review time frames, which is a part of developing sound  baselines. In addition, while providing general guidance related to  performance measures of environmental reviews would be helpful, we  continue to believe that FHWA needs to provide further guidance or  technical assistance to NEPA assignment states on developing sound  evaluation methodologies. We recognize that FHWA has stated that it is  not required by statute to measure environmental review efficiency;  however, FHWA does have broad authority to offer guidance and  technical assistance to help states develop sound program  methodologies, including sharing practices and lessons learned on  evaluation methodologies. As we reported, Congress indicated its interest  in more efficient and timely environmental reviews when it created the  NEPA assignment program. FHWA can help provide reasonable  assurance that the performance measures states develop and use to  report information are based on sound methodologies, which would in  turn help provide Congress reliable information on whether the  assignment of NEPA authority to states is having its intended effect.  Further, while we acknowledge that other benefits of NEPA assignment  may be important to states, all the NEPA assignment states we reviewed  consistently identified time savings as a reason for taking on this  authority. Offering guidance on evaluation methodologies to measure  time savings can help FHWA ensure that additional states interested in  NEPA authority for this reason are basing decisions to participate on  reliable information.", "We are sending copies of this report to interested congressional  committees, the Secretary of the Department of Transportation, and other  interested parties. In addition, this report will be available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Available Information about the Number, Percentage, and Costs of NEPA Reviews for Highway and Transit Projects", "paragraphs": ["Based on 2009 data, we previously reported that 96 percent of  environmental reviews are completed through categorical exclusions and  a smaller number of highway projects undergo EISs and environmental  assessments, 1 and 3 percent respectively. We have previously reported  that government-wide data on the cost of NEPA reviews are not readily  available because agencies do not routinely track the cost of completing  NEPA reviews and there is no government-wide mechanism to do so. To  comply with congressional reporting requirements, FHWA maintains the  Project and Program Action Information (PAPAI) system, which is a  monitoring database that tracks projects\u2019 NEPA review progress at major  milestones. FHWA developed PAPAI in 2013 in response to statutory  reporting requirements on NEPA time frames. PAPAI tracks EIS and  environmental assessment start and end dates, among other information,  allowing FHWA to track the processing time for these reviews. FTA does  not have a similar monitoring system that tracks NEPA reviews, but has  developed a new grant management system, the Transit Award  Management System (TrAMS), which FTA also uses to track EIS and  environmental assessment start and end dates. However, FTA officials  told us that TrAMS is still in the early phases of deployment and may  contain incomplete information on NEPA time frames on transit projects."], "subsections": [{"section_title": "Highway Projects", "paragraphs": ["While some information is available on the number of NEPA reviews (i.e.,  NEPA review time frames) for highway projects, little to no information is  known about the percentage breakdown of the three types of NEPA  reviews that have been conducted for these projects and their associated  costs.", "Number of NEPA Reviews: Some information is available regarding  the number of EIS and environmental assessments; however, less is  known about the number of categorical exclusions. In an October  2017 report to Congress, FHWA stated that 29 EISs were initiated  since 2012, of which 3 EISs were completed and 26 EISs remain  active. In its October 2013 report to Congress and consistent with  MAP-21 reporting requirements, FHWA reported the number of EISs  that state DOTs \u201cinitiated\u201d from 2002 through 2012. In this report,  FHWA stated that the number of EISs that initiated decreased over  time. For example, FHWA reported that 38 EISs were initiated in  fiscal year 2002 compared to 15 EISs that were initiated in 2012.", "Regarding the number of environmental assessments state DOTs  conduct for highway projects, FHWA\u2019s October 2017 report to  Congress stated 232 environmental assessments were initiated since  2012, of which 103 environmental assessments were completed and  129 environmental assessments remain active. FHWA\u2019s October  2013 report to Congress did not report on the number of  environmental assessments. FHWA officials told us that prior to fiscal  year 2013, FHWA division offices were not required to submit data on  environmental assessments.", "While some information on categorical exclusions exists, the total  number of categorical exclusions is unknown. FHWA does not actively  track categorical exclusions because state DOTs process most  categorical exclusions without involvement from FHWA, as allowed by  established programmatic agreements.", "Percentage of NEPA Reviews by Type: The percentage breakdown of  EIS, environmental assessments, and categorical exclusions  conducted by state DOTs for federal-aid highway projects is largely  unknown since FHWA has systematically collected numerical data  only on EIS reviews and environmental assessments since fiscal year  2013. We previously reported that, FHWA estimated that  approximately 96 percent of NEPA reviews were categorical  exclusions, 3 percent were environmental assessments, and 1  percent were EISs. While the current percentage breakdown of  NEPA reviews is not known, FHWA officials told us that categorical  exclusions still constitute the vast majority of NEPA reviews for  highway projects. Furthermore, highway projects requiring an EIS  likely remain the smallest portion of all projects and are likely to be  high-profile, complex, and expensive.", "Costs of NEPA Reviews: The costs of completing NEPA reviews are  unknown according to officials we interviewed. Officials from FHWA  and the National Association of Environmental Professionals believe  that data on the cost of processing NEPA reviews do not exist and are  not tracked. In our survey of state DOTs, we found that a majority (37  of the 52 state DOTs surveyed) do not collect cost data. For example,  officials from Virginia DOT stated that they do not track NEPA costs  and that compiling this information would be difficult and labor- intensive."], "subsections": []}, {"section_title": "Transit Projects", "paragraphs": ["Number and Percentage of NEPA Reviews: FTA has some data on  the number of categorical exclusions that transit agencies process,  but has just begun to collect data on the number of EIS reviews or  environmental assessments. According to an August 2016 report,  FTA reported that 24,426 categorical exclusions were processed for  6,804 projects between February 2013 and September 2015.  However, the same report cited a number of limitations and  challenges with the underlying data, and as a result, the data may not  be accurate. FTA officials told us that its new internal grant  management system, TrAMS, also has the capability to track EIS  reviews and environment assessments, but they are in the early  stages of collecting this information. Given that data on the number of  NEPA reviews are either not available (EIS and environmental  assessments) or potentially unreliable (categorical exclusions), data  on the percentage of NEPA reviews are also not available. However,  FTA officials believe that similar to highway projects, the most  common type of NEPA reviews that transit agencies process are  categorical exclusions.", "Costs of NEPA Reviews: FTA and transit agencies do not track costs  of processing NEPA reviews for transit projects. According to FTA and  our previously issued work, separating out the costs for NEPA reviews  (versus \u201cplanning\u201d costs or \u201cpreliminary design\u201d costs) within the  project delivery process would be difficult to determine."], "subsections": []}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["Our work focused on federal-aid highway and transit projects and the  provisions included in the past three surface transportation  reauthorizations that are intended to accelerate the delivery of such  projects (i.e., project delivery provisions). In particular, this report: (1)  identifies the provisions aimed at accelerating the delivery of highway and  transit projects that were included in the last three surface transportation  reauthorizations; (2) examines the extent to which the provisions were  used by state departments of transportation (state DOT) and transit  agencies and the provisions\u2019 reported effects, if any, on accelerating the  delivery of projects; and (3) evaluates the extent to which DOT has  assigned National Environmental Policy Act of 1969 (NEPA) authority to  states and the reported effects. In addition, in appendix I, we identify  available information on the number and percentage of the different types  of NEPA reviews, and costs of conducting NEPA reviews.", "To identify all relevant project delivery provisions, we reviewed language  in the three most recent surface transportation reauthorizations and  included those provisions with the goal to accelerate the delivery of  federal-aid highway or transit projects. The three reauthorizations we  reviewed are as follows:  the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A  Legacy for Users (SAFETEA-LU)\u2014the seven project delivery  provisions we used were derived from provisions we had previously  identified from SAFETEA-LU, Title VI, on Transportation Planning and  Project Delivery;  the Moving Ahead for Progress in the 21st Century Act (MAP-21),  Division A, Title 1, Subtitle C, entitled Acceleration of Project Delivery  (Sections 1301 through 1323); and  the Fixing America\u2019s Surface Transportation Act (FAST Act), Division  A, Title 1, Subtitle C, entitled Acceleration of Project Delivery  (Sections 1301 through 1318).", "One provision (MAP-21 \u00a71318(a)-(c)) included statutory language  directing the Department of Transportation (DOT) to develop additional  project delivery provisions through rulemaking. Accordingly, we reviewed  the DOT regulations promulgated in response to that requirement (23  C.F.R. \u00a7\u00a7 771.117(c)(24)-(30), 771.118(c)(14)-(16), 771.118(d)(7)-(8) and  identified 12 additional project delivery provisions. We combined  provisions that were modified in later statutory language and did not  specify between different versions of the provisions, as this precision was  not necessary for our purposes. For example, the 150-Day Statute of  Limitations provision was created in SAFETEA-LU (section 6002) as a  180-day statute of limitations and amended in MAP-21 (section 1308) to  150 days, which is the version we used. We also grouped the provisions  into categories for ease of understanding; determined if provisions were  applicable to highway projects or transit projects, or both; and specified if  provisions were required or optional, based on professional judgement  and legal review. We define \u201crequired\u201d provisions to mean that federal  agencies or state or local transportation agencies that are subject to a  provision must adhere to the requirements and obligations in the  provision, if all the conditions for its use have been satisfied. We define  \u201coptional\u201d provisions to mean that the relevant entity (a federal agency or  state or local transportation agency) can choose to use the provision if  circumstances allow.", "We met with officials from the Federal Highway Administration (FHWA)  and the Federal Transit Administration (FTA) to confirm that we had a  complete list of project delivery provisions for highway and transit  projects.", "To determine states\u2019 awareness, use, and perceived effects of the project  delivery provisions on highway projects over the previous 5 years, we  surveyed state DOTs within all 50 states, the District of Columbia, and  Puerto Rico. We directed the survey to officials in state DOTs that  oversee environmental compliance for highway projects under NEPA.  Because these officials do not have responsibilities with respect to three  Advance Planning category\u2019s provisions that allow certain activities to  occur prior to the completion of a NEPA review, we excluded these  project delivery provisions from the survey. We also excluded two  provisions from the survey that are related to DOT assignment of federal  NEPA authority, because their use requires a written agreement between  FHWA and state DOTs, and we addressed those provisions separately  through interviews with states that have such written agreements in  place. Our survey response rate was 100 percent. In order to ensure that  respondents would interpret our questions as intended, prior to  administering the survey, we conducted pretests with state DOTs in four  states: Georgia, Ohio, Texas, and Washington. In each pretest, we  conducted a session with state DOT officials during which the officials  completed the survey and then provided feedback on the clarity of the  questions. Based on the feedback, we refined some questions and  restructured parts of the survey. After the four pretests were completed,  we provided a draft copy of the survey to FHWA and the American  Association of State Highway and Transportation Officials (AASHTO) for  their review and comment. Both provided technical comments that we  incorporated, as appropriate. Based on early interviews with highway  project stakeholders and our pretests, we determined that the survey  should be sent to environmental officials at the state DOTs. Additional  information about our survey methodology includes the following:", "To determine whom we should send the pretest and survey to (i.e.,  the survey respondent), we used a list of environmental officials at the  state DOTs compiled by AASHTO. We took steps, such as sending  early notification e-mails, to help ensure that the list of respondents  we created was accurate.", "We launched our survey on March 7, 2017. We sent e-mail reminders  and telephoned survey respondents who had not completed the  survey after two weeks, urging them to do so as soon as possible. We  reviewed survey responses for omissions and analyzed the  information provided. The survey and aggregated responses\u2014with  the exception of open-ended responses and information that would  identify individual state DOTs\u2014are provided in appendix IV.", "For each of the provisions included on the survey, we included  references to legal citations in order to minimize confusion among  provisions or versions of provisions.", "We provided space in the survey for respondents to provide optional  comments for each individual provision and for each category of  provisions. We analyzed these comments primarily for additional  context and as a source of illustrative examples.", "Because all state DOTs were included in our survey, our analyses are  not subject to sampling errors. However the practical difficulties of  conducting any survey may introduce non-sampling errors. For  example, differences in how a particular question is interpreted or the  sources of information available to respondents can introduce errors  into the survey results. We included steps both in the data collection  and data analysis stages, including pretesting, to minimize such non- sampling errors. We also sent a draft of the questionnaire to FHWA  and AASHTO for review and comment.", "We examined the survey results, reviewed survey responses during  follow-up interviews with selected states, and performed computer  analyses to identify inconsistencies and other indications of error and  addressed such issues, where necessary. A second, independent  analyst checked the accuracy of all computer analyses to minimize  the likelihood of errors in data processing.", "Based on the survey results, we conducted follow-up interviews with  officials from 10 state DOTs to discuss their views about the effects the  project delivery provisions had on the duration of highway projects in their  states in the past 5 years. We did not independently verify state DOT  officials\u2019 estimates of time savings. We selected state DOTs that reported  a range of use and effects of the provisions; we also selected  geographically diverse states. The 10 states we selected were Arizona,  California, Colorado, Illinois, Maine, Minnesota, Mississippi, Texas,  Virginia, and Wyoming. We also asked these state DOTs about their use  and experiences with the three Advance Planning category\u2019s provisions  we excluded from the survey. These interviews are not generalizable to  all states but provide additional context for responses.", "To determine transit agencies\u2019 awareness, use, and views about the  effects of the project delivery provisions applicable to transit, we selected  a non-generalizable sample of 11 transit agencies, provided a \u201cchecklist\u201d  of the provisions to the officials regarding their awareness and use of the  provisions, and interviewed officials at those agencies that oversee NEPA  reviews for transit projects. We selected these agencies based primarily  on the number of times they issued a notice of intent to prepare an EIS in  the Federal Register from 2005 through 2016 to identify those transit  agencies that may have experience preparing EISs or some another  NEPA review and experience using transit project delivery provisions.  While notices of intent to prepare an EIS do not always result in a transit  agency\u2019s conducting an actual EIS review, they indicate instances in  which a transit agency plans to conduct an EIS review. Other factors,  such as ridership and geographic location, were also considered to select  the 11 transit agencies. We identified contacts for the transit agencies by  calling the transit agencies\u2019 Planning and Environmental Review  departments and identifying individuals that had experience with  environmental reviews and project delivery provisions. We interviewed  officials at the following transit agencies:", "Capital Metro (Austin, Texas),", "Chicago Transit Authority,", "Houston Metropolitan Transit Authority,", "Los Angeles County Metropolitan Transportation Authority,", "Metropolitan Atlanta Rapid Transit Authority,", "Sacramento Regional Transit District,", "San Francisco Bay Area Water Emergency Transportation Authority,", "San Francisco Municipal Transportation Agency,", "Sound Transit (Seattle, Washington),", "Southeastern Pennsylvania Transportation Authority, and", "Tri-County Metropolitan Transportation District of Oregon.", "Similar to the survey we provided to state DOTs regarding highway  projects, we provided the transit agencies with a \u201cchecklist\u201d of the  provisions in which the transit agency officials indicated whether they had  heard of and used the provisions. To understand why the provisions may  not be used by selected transit agencies, we also examined the  frequency in which transit agencies filed a notice of intent to prepare an  EIS in the Federal Register. After discussions with FTA, we used the  number of times transit agencies filed a notice of intent to prepare an EIS  as a proxy because agencies that have performed multiple EISs, which  are typically complex in nature, are more likely to use the provisions and  be able to offer insight. Transit agencies may also have experience using  provisions related to categorical exclusions since transit agencies process  their NEPA reviews more commonly using categorical exclusions.  However, we did not examine the extent to which categorical exclusions  are used by transit agencies as a proxy to identify agencies that have  experience using the provisions in part because FTA\u2019s current database,  TrAMS, does not have comprehensive data on categorical exclusions.  We discussed transit agency officials\u2019 views about the effects of the  provisions during our interviews. These interviews are not generalizable  to all transit agencies but provide anecdotal information and context.", "To evaluate the extent that DOT has assigned NEPA authority to states  and the effects states have reported from assuming NEPA authority, we  identified states that have assumed NEPA authority based on information  from FHWA: Alaska, California, Florida, Ohio, Texas, and Utah. We did  not include Alaska in our review because that state did not assume NEPA  authority until November 2017. For the five states we reviewed, we  interviewed state DOT officials and reviewed relevant documentation  including memorandums of understanding and analyses the state DOTs  conducted on NEPA assignment authority, such as methodologies for  calculating NEPA assignment time savings. We also surveyed the state  DOTs that have not yet sought NEPA authority to assess their interest in  assuming NEPA authority. In addition, we interviewed FHWA officials  about procedures to oversee the performance of NEPA assignment  states and interviewed FHWA division officials from those states. We  compared FHWA\u2019s procedures to oversee NEPA assignment states  against standards for information and communication contained in  Standards for Internal Control in the Federal Government.", "To determine available information on the number and percentage of the  different NEPA reviews and costs of conducting NEPA reviews for  highway and transit projects, we reviewed relevant publications, obtained  documents and analyses from federal agencies, and interviewed federal  officials and individuals from professional associations with expertise in  conducting NEPA analyses. We also included a question on costs of  conducting NEPA reviews in the survey we administered to state DOTs.", "For all objectives, we interviewed agency officials and stakeholders  involved in highway and transit projects from FHWA and FTA  headquarters and transportation industry and environmental  organizations that are familiar with project delivery and environmental  review.", "We conducted this performance audit from August 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Project Delivery Provisions Included in the Three Most Recent Federal Transportation Reauthorization Acts That Apply to Highway and Transit Projects", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Highway Questionnaire and Summarized Responses", "paragraphs": ["This appendix provides a copy of the survey sent to state departments of  transportation in all 50 states, the District of Columbia, and Puerto Rico  concerning their use of the project delivery provisions for highway  projects. The appendix also includes the responses received for each of  the provisions; it does not include information on non-responses, which  resulted either from the survey\u2019s skip patterns or from state officials  voluntarily declining to respond.", "GAO also developed names for the provisions in the survey; we  subsequently modified the names of several of the provisions for the text  of our report to make them more intuitive for readers. The following list  matches the provisions that have different names in our report than in the  survey."], "subsections": [{"section_title": "Report Name", "paragraphs": [], "subsections": []}, {"section_title": "\u2022 Categorical Exclusion for Projects within the", "paragraphs": [], "subsections": []}, {"section_title": "Report Name", "paragraphs": [], "subsections": []}, {"section_title": "\u2022 Procedures for Initiation of Environmental Review", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix V: Transit Agency Provisions Checklist and Responses Regarding Awareness and Use", "paragraphs": [], "subsections": [{"section_title": "Provision", "paragraphs": ["Description  Authorizes the lead agency of a multimodal project to  apply categorical exclusions from the NEPA implementing  regulations or procedures of a cooperating DOT operating  administration.", "Designates the repair or reconstruction of any road,  highway, or bridge that was damaged by an emergency as  a categorical exclusion, subject to certain conditions.", "Designates a project within an operational right-of-way as  a categorical exclusion, subject to certain conditions.", "Authorizes the designation of a categorical exclusion for  projects receiving less than $5 million in federal funds, or  less than 15 percent federal funds for a project under $30  million, subject to an annual inflation adjustment.", "For transit projects, designates bridge removal and bridge  removal related activities, such as in-channel work,  disposal of materials and debris as a categorical  exclusion.", "For transit projects, designates preventative maintenance,  including safety treatments, to culverts and channels  within and adjacent to transportation right-of-way as a  categorical exclusion.", "For transit projects, designates geotechnical and  archeological investigations to provide information for  preliminary design, environmental analyses, and  permitting purposes as a categorical exclusion  For transit projects, designates minor transportation facility  realignment for rail safety reasons, such as improving  vertical and horizontal alignment of railroad crossings, as a  categorical exclusion.", "For transit projects, designates modernization or minor  expansions of transit structures and facilities outside  existing right-of-way, such as bridges, stations, or rail  yards, as a categorical exclusion.", "Authorizes a historic site, park land, or refuge to be used  for a transportation program or project if it is determined  that \u201cde minimis impact\u201d would result.", "Bars claims seeking judicial review of a permit, license, or  approval issued by a federal agency for projects unless  they are filed within 150 days after publication of a notice  in the Federal Register announcing the final agency  action, unless a shorter time is specified in the federal law  under which the judicial review is allowed."], "subsections": []}, {"section_title": "Provision", "paragraphs": ["Description  Authorizes the lead agency for a project to use planning  products, such as planning decisions, analysis, or studies,  in the environmental review process of the project.", "Requires that any federal agency responsible for  environmental review to give substantial weight to a state  or metropolitan programmatic mitigation plan, if one had  been developed as part of the transportation planning  process, when carrying out responsibilities under NEPA or  other environmental law.", "Allows the lead agency of a project, in order to expedite  decisions, to use an errata sheet attached to a final EIS,  instead of rewriting it, if the comments are minor. Also, to  the maximum extent practicable, combines the final EIS  and record of decision in certain cases.", "Authorizes the operating administrations of DOT to adopt  a draft EIS, EA, or final EIS of another operating  administration without recirculating the document for public  review if the proposed action is substantially the same as  the project considered in the document to be adopted.", "Establishes a 45-day limit after the notice of intent date for  a lead agency to identify other agencies to participate in  the environmental review process on EIS projects.", "To the maximum extent practicable and consistent with  federal law, requires lead agencies to develop a single  NEPA document to satisfy the requirements for federal  approval or other federal action, including permits.", "Creates several requirements at the start of a project\u2019s  Section 139 environmental review process, such as 1)  establishing a 45-day deadline for DOT to provide a  written response to the project sponsor on initiation of the  environmental review process; 2) establishing a 45-day  deadline for DOT to respond to a request for designation  of a lead agency; and 3) requiring the development of a  checklist by the lead agency to help identify natural,  cultural, and historic resources, to identify agencies and  improve interagency collaboration.", "Authorizes the lead agency to reduce duplication, by  eliminating from detailed consideration an alternative  proposed in an EIS if the alternative was already proposed  in a planning process or state environmental review  process, subject to certain conditions.", "Allows a state to use its federal funds to support a federal  or state agency or Indian tribe participating in the  environmental review process on activities that directly  contribute to expediting and improving project planning  and delivery."], "subsections": []}, {"section_title": "Provision", "paragraphs": ["Description  Establishes procedures to resolve issues between project  sponsors and relevant resource agencies.", "At the request of a project sponsor or a governor of the  state in which the project is located, requires DOT to  provide additional technical assistance for a project where  EIS review has taken 2 years, and establish a schedule for  review completion within 4 years.", "Requires DOT to seek opportunities with states to enter  into programmatic agreements to carry out environmental  and other project reviews.", "Encourages early cooperation between DOT and other  agencies, including states or local planning agencies, in  the environmental review process to avoid delay and  duplication, and suggests early coordination activities.  Early coordination includes establishment of MOUs with  states or local planning agencies.", "Limits the comments of participating agencies to subject  matter areas within the special expertise or jurisdiction of  the agency.", "Requires a coordination plan for public and agency  participation in the Section 139 environmental review  process within 90 days of a Notice of Intent or the initiation  of an Environmental Assessment, including a schedule.", "Issues that are resolved by the lead agency with  concurrence from stakeholders cannot be reconsidered  unless there is significant new information or  circumstances arise.", "Permits states or local transportation agencies to release  requests for proposals and award design-build contracts  prior to the completion of the NEPA process; however, it  precludes a contractor from proceeding with final design or  construction before completion of the NEPA process.", "Authorizes states to acquire real property interests for a  project before completion of the NEPA process.", "Authorizes the awarding of contracts for the  preconstruction services and preliminary design of a  project using a competitive selection process before the  completion of the NEPA process."], "subsections": []}]}, {"section_title": "Appendix VI: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Steve Cohen (Assistant Director);  Brian Chung (Analyst-in-Charge); Rich Johnson; Delwen Jones; Hannah  Laufe; Ethan Levy; Ned Malone; Josh Ormond; Tina Paek; Cheryl  Peterson; and Joe Thompson made significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-45", "url": "https://www.gao.gov/products/GAO-18-45", "title": "Solid Rocket Motors: DOD and Industry Are Addressing Challenges to Minimize Supply Concerns", "published_date": "2017-10-26T00:00:00", "released_date": "2017-10-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD relies on a multi-tiered supply chain to provide SRMs, the propulsion systems behind the various missile systems that provide defense capabilities to meet U.S. national security objectives. The SRM industrial base includes manufacturers that turn to an extensive network of suppliers that provide the raw materials, components, and subsystems needed to build SRMs. DOD is responsible for developing a strategy for the national industrial base that ensures that defense contractors and their suppliers are capable of providing the goods and services needed to achieve national security objectives.", "GAO was asked to review the state of the U.S. industrial base for SRMs. This report addresses (1) SRM industry trends, (2) single source supplier risks, and (3) opportunities for SRM manufacturers' engineering workforce development. GAO analyzed DOD's annual industrial capabilities reports to Congress for fiscal years 2009 through 2016, which reflect DOD's most current information on SRM risks, and reviewed DOD budget data and information from missile prime contractors and SRM manufacturers. GAO also interviewed missile prime contractors, SRM manufacturer representatives, and officials from DOD and the military departments."]}, {"section_title": "What GAO Found", "paragraphs": ["Over the past two decades, the solid rocket motor (SRM) industrial base has undergone various changes including consolidation and recent expansion. Specifically, since 1995, the industry has consolidated from six U.S. manufacturers to two U.S. manufacturers. With regard to expansion, a foreign supplier entered the market in 2012, and in 2017, a U.S. firm, which is ultimately foreign-owned, was also established. According to the Department of Defense (DOD) while it supports competition, its current demand for SRMs can only sustain two manufacturers. Although at this stage it is too early to know how, or if, these new entrants will impact the economic viability of the more long-standing U.S. manufacturers.", "The consolidation in the SRM industrial base has also been accompanied by a decrease of suppliers throughout the supply chain. For example, one SRM manufacturer estimated a decrease in suppliers, from approximately 5,000 to 1,000, over the last 20 years. This increases the risk of production delays and disruptions in the event that key components and materials available from a single source become unavailable from that source. GAO found that DOD and industry are taking steps to identify and mitigate these risks, such as by establishing alternative sources and requiring advance notice when suppliers are considering exiting the market.", "In its annual industrial capabilities reports to Congress, DOD has consistently stated that the limited number of new missile development programs inhibits its ability to provide opportunities to help SRM manufacturers maintain their workforce capabilities. Specifically, with few new missile programs being initiated, engineers have had fewer opportunities to develop their engineering skills related to SRM concept designs, system development, and production, which are critical if SRM performance issues arise. However, in 2016, DOD funded a 4-year project to enhance engineering design skills for less experienced engineers working for the two U.S. manufacturers and help them develop advanced SRM technologies."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations at this time."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) relies on multiple types of missiles\u2014 including tactical missiles used for short distances, longer-range strategic  missiles, and missile defense systems to intercept enemy missiles\u2014to  provide essential defense capabilities. Many of these missiles are  powered by solid rocket motor (SRM) propulsion systems, which provide  the thrust the missiles need to reach their intended targets. DOD acquires  missiles from prime contractors, which in turn contract with other  manufacturers to acquire SRMs. Over the past two decades, the number  of U.S. companies that manufacture SRMs has consolidated to two  manufacturers. These manufacturers rely on a network of suppliers,  which have also experienced consolidation, to obtain the raw materials,  components and parts needed for the SRM. The consolidation of the  supplier base at various levels in the supply chain and decreased  demand for SRM materials has reduced competition, and single source  suppliers have become more common throughout the supplier network.", "Within DOD, the Manufacturing and Industrial Base Policy (MIBP) office  claims responsibility for ensuring the health, viability and resiliency of the  industrial capabilities that DOD needs. For nearly a decade, MIBP has  reported on various challenges that, if left unaddressed, could impede a  supplier\u2019s ability to provide SRMs for DOD\u2019s missile programs. Since at  least 2009, DOD has identified the health of the SRM industrial base as  an area of concern, driven, in part, by constrained budgets that have led  to decreased spending to procure missiles that use SRMs. The Senate  Appropriations Committee has also weighed in with concerns\u2014 particularly regarding SRMs for tactical missiles such as the Advanced  Medium Range Air-to-Air Missile (AMRAAM)\u2014about reduced spending  and the use of foreign suppliers.", "As a result of these concerns, you asked us to review the state of the  U.S. supplier base that provides SRMs for tactical missiles. We  examined (1) SRM industry trends, (2) single source supplier risks, and  (3) opportunities for SRM manufacturers\u2019 engineering workforce  development.", "To determine SRM industry trends, supplier risks, and workforce  opportunities, we reviewed DOD industrial capabilities reports provided to  Congress from 2009 to 2016. Three of these reports focused exclusively  on DOD\u2019s assessment of SRM industrial capabilities\u2014contractors\u2019  knowledge, skills, facilities, manufacturing processes, equipment and  technologies that enable the production of SRMs. These reports  provided insight into the risks to the SRM industrial base and helped us  determine actions that DOD has taken to address such risks. Given new  entrants to the SRM market for tactical missiles, we reviewed DOD\u2019s  fiscal year 2009 through 2017 budget data to gain additional insight into  its demand for tactical missile programs. We also reviewed information  provided by the prime contractors and SRM manufacturers. We  interviewed officials from MIBP and the military departments responsible  for identifying industrial base risks to determine their processes for  identifying, analyzing, and responding to industrial base risks. We also  interviewed representatives from the two prime contractors that produce  missiles for all of DOD\u2019s tactical missile programs as well as some  strategic and missile defense programs. In addition, we spoke with  officials from the three SRM manufacturers with facilities in the United  States to understand the risks to them and their suppliers.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Solid Rocket Motors (SRM)", "paragraphs": ["SRMs are the propulsion systems that propel various types of missiles  and are also used in space launch activities, including the National  Aeronautics and Space Administration\u2019s (NASA) Space Shuttle program.  Across the military departments, DOD has approximately 40 missile  programs that currently use SRMs, including tactical programs such as  the Army\u2019s Guided Missile Launch Rocket System and the Navy and Air  Force AIM-9X Sidewinder.", "As shown in figure 1, an SRM consists of a casing filled with solid  propellant that, when ignited, expels hot gases through a nozzle to  produce thrust. DOD describes the overall SRM components as being  consistent among the missile types, although size and scale of propellant  requirements vary. For example, tactical missiles use the smallest  SRMs\u2014ranging from about 3 inches up to 24 inches in diameter\u2014and  require between 3 and almost 1,600 pounds of propellant. Strategic  missiles use large SRMs that exceed 40 inches, while missile defense  systems utilize both small and large SRMs. Space launch SRMs can  exceed 150 inches and can require more than a million pounds of  propellant.", "In order to be used in a missile, the SRM and its components, such as the  propellant ingredients or casing materials, are subject to testing to  demonstrate that they meet DOD\u2019s technical specifications and  requirements. For instance, this testing can confirm that the construction  of the SRM allows it to function at certain altitudes or in certain  temperatures or environments required by the missile. The SRM is tested  as a stand-alone item and as part of the overall missile system before  production begins. By successfully completing testing, the missile  becomes qualified, and the SRM and its components are deemed  suitable to meet the missile\u2019s specific requirements going forward. Any  changes in the SRM or its components may require additional testing  and, if the changes are significant or if there are multiple changes, may  require the missile to be retested and thus, requalified\u2014which DOD has  noted is an expensive and time-consuming process that can take years  and cost millions of dollars."], "subsections": []}, {"section_title": "SRM Supply Chain", "paragraphs": ["DOD relies on a multi-tiered supply chain to provide the SRMs that are  used for missile propulsion. Industry representatives we spoke to  estimate the supply chain extends to more than 1,000 suppliers that  provide the raw materials, components, and sub-systems needed to  manufacture the SRM. The missile\u2019s prime contractors are ultimately  responsible for delivering the missiles and for selecting and managing the  subcontractors that manufacture the SRM. The SRM manufacturers then  subcontract with suppliers that provide the components and materials  used to manufacture the SRM. Those suppliers might, in turn, work with  another tier of suppliers to meet their needs. For example, an SRM  manufacturer may obtain the materials needed for the casing from a first- tier supplier. The first-tier supplier may obtain the materials and  components it needs from multiple second-tier suppliers, and so on.  According to DOD reports, the SRM supplier base, including the sub-tier  suppliers, is nearly identical across missile defense, tactical, and strategic  missile systems that use SRMs. Figure 2 is an illustrative version of the  SRM supply chain.", "Historically, the demand for SRMs was mostly driven by their use in solid  rocket boosters for NASA space programs, such as the Space Shuttle  program. DOD has reported that NASA\u2019s retirement of the Space Shuttle  program in 2011 had a negative impact on the SRM supply chain as it led  to decreased demand for SRMs and the related raw materials and  components. Similarly, we reported in August 2017 that the demand for  solid rocket motor propellant had dropped by more than 75 percent, from  20 million pounds to 5 million pounds, since the end of the Space Shuttle  program. DOD has reported that these changing market conditions have  resulted in excess capacity, where production demand is less than what  is optimal to sustain the suppliers. Thus, excess capacity keeps SRM  manufacturers from being cost competitive, which can jeopardize the  viability of the manufacturers as well as their sub-tier suppliers."], "subsections": []}, {"section_title": "MIBP\u2019s Role in Identifying Industrial Base Risks", "paragraphs": ["MIBP, which is part of the Under Secretary of Defense for Acquisition,  Technology, and Logistics, is DOD\u2019s primary representative for issues  affecting the defense industrial base. MIBP officials told us they conduct  analyses of risks affecting defense supply chains and provide information  to decision makers, including required annual reports to Congress. These  reports cover a wide range of industrial capabilities for various types of  systems, including missiles. For example, in fiscal year 2014, MIBP  assessed the fragility and criticality risks facing missile production, by  analyzing factors that would cause potential disruptions and would be  difficult to replace if disrupted. This assessment identified solid rocket  motors as one of the key risks.", "While individual program offices and military departments are generally  responsible for identifying risks within their own areas, MIBP officials  stated that they coordinate and share information with relevant  stakeholders for issues that affect multiple programs within or across the  military departments. MIBP\u2019s coordination role, according to these  officials, includes participating in or leading various coordinating bodies  within DOD or other federal departments. For example, MIBP leads the  Joint Industrial Base Working Group, which shares industrial base  information across DOD agencies and military departments. In addition,  MIBP co-leads the Critical Energetic Materials Working Group, a DOD- sponsored entity that focuses on ensuring the near- and long-term  availability of energetic materials such as those used in SRMs, and  suggesting risk mitigation strategies.", "MIBP officials told us that they also conduct an annual data collection  effort among the military departments and other DOD agencies to identify  defense industrial base areas of risk and to learn about ongoing issues  across the industrial base. In addition, they noted that MIBP works closely  with the Industrial Analysis Group within the Defense Contract  Management Agency (DCMA), which conducts assessments to identify  industrial base risks facing individual acquisition programs at various  points in the program\u2019s life cycle and makes recommendations to  program offices to help sustain a resilient and innovative defense  industrial base. Additionally, DOD officials we spoke to said weapon  program-specific risks are communicated through the military  departments and to MIBP, which tracks them and determines their  implications for the industrial base."], "subsections": []}]}, {"section_title": "Industry Trends Create Uncertainty for U.S. Solid Rocket Motor Suppliers", "paragraphs": ["Over the last 20 years, the SRM industrial base has consolidated from six  to two U.S. manufacturers\u2014Aerojet Rocketdyne and Orbital ATK. Both  manufacturers produce the small and large SRMs used in tactical and  missile defense systems, and Orbital ATK also produces SRMs for  strategic missiles. A senior MIBP official told us that current DOD needs  require two SRM manufacturers, but there is not enough demand to keep  three companies economically viable.", "In DOD\u2019s industrial base reports to Congress, MIBP has reported that,  while other industrial sectors are supported by commercial markets in  addition to government needs, SRM manufacturers cater largely to the  defense and space missions of the government and generally do not  have a commercial base that can sustain production when the federal  government\u2019s demand fluctuates. As a result, similar to the impact of  NASA\u2019s Space Shuttle retirement on the SRM supplier base, trends or  decisions made in a particular program area can have broader effects  and potentially result in cost increases for other programs. For example,  we found that a company that is supporting space launch has decided to  source its SRMs from Orbital ATK instead of Aerojet Rocketdyne, which  had previously produced the motors. This arrangement will take effect in  2019, and Aerojet Rocketdyne officials said that it is consolidating its  facilities to reduce costs due to excess production capacity for these  types of large SRMs. According to DOD, the resulting impact may affect  costs in Aerojet Rocketdyne\u2019s remaining business units, including those  that provide the smaller SRMs used for tactical missiles. DOD says that  these costs would likely be passed on to the missile systems programs.  Additionally, if Aerojet Rocketdyne decides to exit the large SRM market  altogether, the lack of competition is likely to result in increased costs for  other DOD programs that use large SRMs.", "When there is limited demand, then a small supplier base can also be  impacted by competition from foreign suppliers. Specifically, in the past  several years, the two U.S. manufacturers have faced competition from a  foreign supplier, Nammo Raufoss, and, more recently in 2017, a newly  established U.S. corporation, Nammo Energetics Indian Head, Inc.  (NEIH). These two new entrants are both ultimately wholly owned by the  same Norwegian parent company and, according to an MIBP official,  have the potential to take away market share from the two longstanding  domestic SRM manufacturers. Figure 3 shows the industry trends among  SRM manufacturers.", "Nammo Raufoss, the foreign SRM manufacturer, began providing SRMs  for the AMRAAM program in 2012, after the U.S. SRM manufacturer had  encountered production challenges. According to an MIBP official, no  U.S. SRM manufacturer, including the supplier at the time, was offered  the opportunity to design a new SRM, which would have solved the  production issues. Further, according to the MIBP official, the Norwegian  government contributed funding to this effort. Additional funding was  provided by the prime contractor\u2014Raytheon\u2014and the program offices, to  develop, test, and produce the new SRM for AMRAAM.", "Currently, Nammo Raufoss provides SRMs for two tactical missile  programs used by DOD\u2014Evolved Sea Sparrow Missile and AMRAAM.  The programs for which Nammo Raufoss provides SRMs accounted for  approximately 4 percent of the tactical missiles procured by DOD in fiscal  year 2017, a slight increase over the 3 percent share since it first  provided SRMs for the AMRAAM missiles in fiscal year 2012. The  remaining missile programs use SRMs produced by Aerojet Rocketdyne  and Orbital ATK.", "While the missile prime contractor found it viable to turn to a foreign  source for the AMRAAM program, Congress and DOD have been  concerned about the potential negative impacts the addition of a foreign  supplier could have on a fragile domestic SRM industrial base. For  example, the Senate Appropriations Committee recently noted concerns  about reduced spending and the use of foreign suppliers. Similarly, even  though DOD recognizes that access to global markets provides the  necessary competitive pressures to incentivize U.S. suppliers to remain  competitive and control costs, it has also noted that there needs to be a  commitment to investing in the U.S. SRM industrial base to develop and  produce critical technologies for the next generation of weapon systems.  Further, by law, DOD must limit specific conventional ammunition  procurements to sources within the industrial base if it determines such  limitation is necessary to maintain a facility, producer, manufacturer, or  other supplier available for furnishing an essential item of ammunition or  ammunition component in cases of national emergency or to achieve  industrial mobilization. According to MIBP officials, the current threat to  the existing U.S. SRM manufacturer from a foreign supplier is not great  enough to force it from the market. Therefore, it is difficult to restrict SRM  procurements to the U.S. industrial base. Instead, an MIBP official told us  they have raised concerns to DOD program offices and missile prime  contractors about expanding the use of the Norwegian SRM supplier,  Nammo Raufoss, as this potentially could have a negative impact on the  near- or long-term survivability of U.S. manufacturers.", "Moreover, our review found that the newly established NEIH as a U.S.  SRM manufacturer also creates competition within the existing domestic  supplier base and also raises uncertainty for Aerojet Rocketdyne and  Orbital ATK. Specifically, NEIH is in the early stages of establishing its  production capabilities, which includes remodeling the manufacturing  facility at Indian Head, over the next three years. Further, an MIBP official  told us that MIBP plans to monitor the competitive landscape among the  three companies, but as NEIH is a U.S. company, it is considered a part  of the domestic industrial base and would not be subject to DOD  restrictions on foreign suppliers. At this stage, it is too early to tell how, if  at all, the newest competitor, whose product line is focused on small  SRMs, will disrupt the business of the two long-standing U.S. SRM  manufacturers that produce large and small SRMs."], "subsections": []}, {"section_title": "Single Source Suppliers Drive Material Availability Risks but Mitigation Actions Underway", "paragraphs": ["During our review, we found that the decreased demand for SRMs has  resulted in a loss of suppliers in the supply chain, increasing the risk that  key components and materials are only available from single sources.  Should such components and materials become unavailable, production  delays could result. MIBP\u2019s industrial base reports to Congress and our  discussions with industry representatives showed increased awareness of  supply chain risks and steps taken to identify and mitigate risks before  they affect SRM production, including coordination of efforts to address  key chemicals needed for SRM propulsion."], "subsections": [{"section_title": "Single Source SRM Suppliers Increase Risk", "paragraphs": ["As decreased demand for SRMs has contributed to the consolidation of  manufacturers, a main concern for DOD and industry is the impact of  similar reductions among the manufacturers\u2019 sub-tier suppliers. According  to MIBP\u2019s reports to Congress, relying on a decreased number of sub-tier  suppliers exacerbates the risk that needed SRM materials become  unexpectedly unavailable and disrupt missile production. MIBP  emphasizes that in the current lower-production environment, sub-tier  suppliers who are primarily supporting defense and space missions rather  than commercial businesses, must determine how to remain viable or  decide to exit the SRM market. SRMs contain few commercial off-the- shelf components and a great number of defense-unique components,  which leads to an extensive reliance on sole-source suppliers.", "Further, DOD reported that the missiles that are powered by SRMs  experience rapid production during times of conflict. While surge  production can create additional business opportunities, it is greatly  impacted by the availability of materials and components that comprise  the SRM for the missile. Industry representatives told us that managing  complex supply chains is a part of their business, but noted that there has  been a great deal of consolidation among SRM suppliers in recent years.  One SRM manufacturer estimated that the supply chain has dropped  from approximately 5,000 sub-tier suppliers to about 1,000 suppliers over  the last 20 years. As a result, manufacturers are heavily dependent on  only one supplier for some of the raw materials and key components of  the SRM. For example, manufacturers provided us with information  showing that they rely on a single company for ignition components for  most of the tactical missiles they produce.", "Single Source Supplier Issues for the  Advanced Medium-Range Air-to-Air Missile  (AMRAAM)   A U.S. manufacturer experienced problems  with the propellant mixture used in the  AMRAAM solid rocket motor (SRM). The root  cause was not discovered, but experts  believe that variation in the raw material for a  particular propellant ingredient resulted in the  SRM functioning differently than intended. As  a result, Raytheon, the prime missile  contractor, stopped accepting the  manufacturer\u2019s SRMs in 2010 and AMRAAM  production was disrupted for about 2 years. At  the time, Raytheon had been working to  qualify a second SRM supplier. According to  DOD, the qualification process was  accelerated to speed up production of the  missiles that were needed to support military  operations. AMRAAM production resumed  approximately 2 years after the SRM issues  occurred.", "These dependencies increase as they move into the lower tiers of the  supply chain. Components can be available from one source for either of  the following two instances: (1) only one sole source is available for the  material, component, or chemical and no other alternative exists; or (2)  other suppliers exist, but only one single source supplier has been  qualified or chosen to produce the item. Either situation poses a risk of  disrupting the supply of SRMs and ultimately, the production of the  missile. DOD officials noted that, even if other suppliers exist, it can be  costly and time-consuming for them to be qualified as alternative sources.  For example, in its assessments, DCMA has stated that energetic  materials\u2014which are used in SRM propellants\u2014are among the most  expensive components to requalify. As there are approximately 25 to 30  ingredients in the typical SRM\u2019s propellant, changes in any of the  ingredients require that the propellant be retested for effectiveness.", "Further, disruptions among single source suppliers can take place for  other reasons besides leaving the market. Production changes, such as  altering manufacturing processes or even relocating production facilities,  can affect the material or component produced in unexpected ways. In  addition, there has been a long-standing concern that SRM  manufacturers are dependent on a single source supplier for an SRM  propellant ingredient\u2014ammonium perchlorate\u2014as only one U.S.  company is certified to provide this ingredient. The House version of the  Fiscal Year 2018 National Defense Authorization Act calls for DOD to  study the future costs and availability of ammonium perchlorate. MIBP  officials told us they have conducted extensive analysis of the issues for  this critical component, including two studies conducted in 2016."], "subsections": []}, {"section_title": "Industry\u2019s Efforts to Manage Its Supply Chain", "paragraphs": ["Industry representatives from missile prime contractors and SRM  manufacturers we spoke with said that managing their supply chain to  ensure the availability of needed materials is a primary concern. Prime  contractor representatives said that SRM subcontractors are generally  expected to manage their suppliers and ensure that they suppliers can  meet their contract requirements. However, the prime contractors said  they are particularly involved when the risks relate to material availability.  While losing a supplier is always a risk, they try to mitigate this through  increased awareness of their supply chains and taking quick actions  when risks are identified.", "To increase awareness, prime contractor representatives said they  consider potential availability issues before contracts are awarded and  include requirements that they be notified of these issues in their  subcontracts, which the SRM manufacturers apply to their subcontract  suppliers, in order to minimize surprises. One SRM manufacturer  confirmed that it includes subcontract requirements for its own sub-tier  suppliers to report any changes in the product, materials, or  production location as soon as the change is known.", "In addition, both of the U.S. SRM manufacturers noted that they have  staff dedicated to monitoring potential issues with supply chain  availability. In one case, a manufacturer conducted a business  continuity study that analyzed suppliers\u2019 business plans for the next 5  years to identify potential problems.", "After issues\u2014such as a financially fragile supplier\u2014are identified,  representatives said the key factor is the amount of time they have to  mitigate the issue. In this respect, the U.S. SRM manufacturers we  spoke with said their processes have improved in recent years and  they receive more advanced notice when suppliers plan to exit the  market, allowing them to take steps such as stockpiling supplies or  making last buys while additional suppliers are identified. Taking such  steps also allows time to more fully assess and take necessary  steps\u2014including qualifying a new supplier, if needed."], "subsections": []}, {"section_title": "DOD Efforts to Respond to Supply Chain Risks", "paragraphs": ["MIBP officials told us that they coordinate regularly with industry and the  affected DOD program offices to be informed of potential issues in the  supply chains, but noted that it can be challenging to be aware of SRM  suppliers beyond the initial tiers. However, the officials said that through  their coordination efforts\u2014which include participating in multiple working  groups with the military departments and DOD components, as well as  NASA and industry\u2014they are aware of the SRM sub-tier suppliers that  are at the greatest risk. For example, MIBP co-leads the Critical Energetic  Materials Working Group to track availability issues with the chemicals  that DOD relies on, including SRM propellant ingredients. Officials said  that MIBP also works closely with DCMA, which conducts industrial base  assessments that provide additional insights into contractors\u2019 supply  chains. Further, officials said that MIBP is in the early stages of  developing a business analytics tool to help them better understand the  interdependencies in the sub-tier supplier base. Their hope is to be able  to proactively identify risks, rather than wait for program offices or DCMA  to elevate concerns to MIBP.", "DOD officials and industry representatives identified cases in which  actions were taken when essential materials\u2014typically chemicals\u2014were  at risk of becoming unavailable. For example, MIBP coordinated with  other DOD stakeholders and industry to mitigate risks in the cases  summarized in table 1.", "Additionally, an official said that MIBP is conducting a munitions industrial  base resiliency study in 2017 that addresses, among other issues, how  DOD plans for risks in the missile sector, particularly those related to the  loss of qualified suppliers, including for SRMs.", "In September 2017, we reported that DOD program offices have limited  information from contractors that would help them to identify and  proactively manage risks stemming from a single source of supply for  missile systems, among other items. We recommended that DOD  develop a mechanism to ensure that program offices, such as those for  missile programs, obtain information from contractors on single sources  of supply risks. DOD concurred with this recommendation and indicated  that modifications to current contractual regulations and policy would be  beneficial. In light of DOD\u2019s planned actions in response to our previous  recommendation, we are not making any additional recommendations at  this time."], "subsections": []}]}, {"section_title": "Manufacturing Engineers\u2019 Solid Rocket Motor Design Skills Declining but Workforce Project Initiated", "paragraphs": ["MIBP\u2019s annual industrial capabilities reports to Congress have  consistently stated that the limited number of new missile development  programs inhibits DOD\u2019s ability to provide opportunities that maintain the  workforce capabilities SRM manufacturers need to meet current and  future national security objectives. These capabilities include engineering  skills related to SRM concept designs, system development, and  production, which are critical to meeting potential requirements for new  SRM designs. With few new-start missile programs being initiated and  decades-old programs having reached a steady state of design, SRM  engineers are not typically engaged at the early stages of development  and newer engineers have not fielded new SRM designs, thus creating a  skills gap. According to reports from DOD, the lack of new programs for  missiles has also limited opportunities to recruit and train the next  generation of SRM scientists and engineers. The SRM manufacturers we  spoke with also acknowledged experiencing attrition among workers with  the requisite experience, as design experts are at or near eligibility for  retirement. Industry representatives noted that engineers and chemists do  not typically go to school to become SRM engineers, but must be trained  by the SRM manufacturers. In a report to Congress, MIBP stated that one  SRM manufacturer estimated that it can take up to 5 years to fully train  SRM engineers or production workers.", "Key to this issue is the limited number of new missile programs or  updates requiring new SRM designs, which would provide the workforce  with development opportunities that DOD and industry find to be critical.  Current research and development efforts are generally limited to updates  or modifications for legacy missile programs, rather than for new missile  programs. For example, the Joint Air-to-Ground Missile, a tactical missile  program that officials said has started and stopped development several  times since the late 1990s, had planned to incorporate a new SRM  design. However, due to budget limitations and affordability concerns  related to the SRM, the program opted to use a legacy SRM from the  Hellfire missile, which has been in production since 1982. While the  legacy SRM requires some modifications to change the casing material  from steel to composite materials that are stable enough to withstand fire,  mechanical shocks, and shrapnel, yet still burn correctly to propel the  warhead and destroy the intended target, it does not involve the same  level of skill as is needed to design new SRMs. Similarly, a DOD official  said the AIM-9X program proposed designing a new SRM, but this plan  was later abandoned due to concerns about the overall program costs.  There are currently only two missile programs\u2014Army\u2019s Long Range  Precision Fire missile and the Navy\u2019s Advanced Anti-Radiation Guided  Missile Extended Range\u2014planning to use new solid rocket motor  designs. Although these programs present opportunities for industry to  develop SRM design skills, MIBP does not believe it will close the current  skills gap. Further, MIBP officials said they have raised concerns that the  use of foreign SRM suppliers results in fewer opportunities for domestic  SRM manufacturers such as exercising their design skills. For example,  MIBP noted that domestic engineers did not have the chance to design  the new SRM used by AMRAAM.", "In its reports to Congress, MIBP has stated that the loss of design  capabilities could result in costly delays and unanticipated expenses and  impair DOD\u2019s readiness to support existing systems and field new  capabilities. One of the elements that heighten SRM criticality for missile  systems is the long lead time for restarting production in the event of  stoppage. Specifically, one MIBP report stated that SRM manufacturers  estimated that it can take from 3 to 5 years to fully restart if there is some  ongoing production, and up to 8 years if production has completely  ceased. In addition, according to MIBP, restarting production processes  would incur costs, including those associated with retraining engineers.  MIBP also indicated that the loss of SRM capabilities could delay future  development of missile programs by 5 to 10 years.", "MIBP has an effort underway intended to address these diminishing  design skills. According to MIBP officials, in 2016 they awarded a 4-year  risk mitigation project that will provide approximately $14 million to Orbital  ATK and Aerojet Rocketdyne during the course of the project. The  purposes of the project are to provide opportunities for the SRM  manufacturers to develop new SRM design skills for less experienced  engineers and mature advanced technologies. The engineers will  incorporate technology into a new SRM as designed by each company.  According to an official, MIBP provided general guidelines for the  resulting SRM, but purposely did not provide strict specifications in an  effort to allow engineers to identify their own solutions for a new motor  design."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We are not making recommendations in this report. We provided a draft  of this report to DOD for comment. DOD reviewed the draft and offered  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in the appendix."], "subsections": []}]}, {"section_title": "Appendix: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Marie A. Mak, (202) 512-4841 or makm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Candice Wright (Assistant  Director), Alyssia Borsella, Jennifer Dougherty, Leigh Ann Haydon, Emily  Bond, Lorraine Ettaro, Kurt Gurka, and Roxanna Sun made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Solid rocket motor (SRM) propulsion systems play an important role in the nation's defense. Using a solid propellant that expels hot gases when combusted, SRMs provide the thrust behind a variety of DOD's missiles\u2014from short-range tactical missiles to longer-range strategic ones.", "But the industrial base for SRMs has shifted. U.S. manufacturers have consolidated, and foreign-owned manufacturers have entered the market. According to one estimate, the number of suppliers of raw materials, components, and sub-systems fell from 5,000 to 1,000 over the last 20 years. In this report, we examine SRM trends, risks, and opportunities."]}
{"id": "GAO-18-600", "url": "https://www.gao.gov/products/GAO-18-600", "title": "Coast Guard Acquisitions: Polar Icebreaker Program Needs to Address Risks before Committing Resources", "published_date": "2018-09-04T00:00:00", "released_date": "2018-09-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To maintain heavy polar icebreaking capability, the Coast Guard and the Navy are collaborating to acquire up to three new heavy polar icebreakers through an integrated program office. The Navy plans to award a contract in 2019. GAO has found that before committing resources, successful acquisition programs begin with sound business cases, which include plans for a stable design, mature technologies, a reliable cost estimate, and a realistic schedule.", "Section 122 of the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to assess issues related to the acquisition of the icebreaker vessels. In addition, GAO was asked to review the heavy polar icebreaker program's acquisition risks. This report examines, among other objectives, the extent to which the program is facing risks to achieving its goals, particularly in the areas of design maturity, technology readiness, cost, and schedule. GAO reviewed Coast Guard and Navy program documents, analyzed Coast Guard and Navy data, and interviewed knowledgeable officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Coast Guard\u2014a component of the Department of Homeland Security (DHS)\u2014did not have a sound business case in March 2018, when it established the cost, schedule, and performance baselines for its heavy polar icebreaker acquisition program, because of risks in four key areas:", "Design. The Coast Guard set program baselines before conducting a preliminary design review, which puts the program at risk of having an unstable design, thereby increasing the program's cost and schedule risks. While setting baselines without a preliminary design review is consistent with DHS's current acquisition policy, it is inconsistent with acquisition best practices. Based on GAO's prior recommendation, DHS is currently evaluating its policy to better align technical reviews and acquisition decisions.", "Technology. The Coast Guard intends to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies prior to setting baselines. Coast Guard officials indicated such an assessment was not necessary because the technologies the program plans to employ have been proven on other icebreaker ships. However, according to best practices, such technologies can still pose risks when applied to a different program or operational environment, as in this case. Without such an assessment, the program's technical risk is underrepresented.", "Cost. The lifecycle cost estimate that informed the program's $9.8 billion cost baseline substantially met GAO's best practices for being comprehensive, well-documented, and accurate, but only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program.", "Schedule. The Coast Guard's planned delivery dates were not informed by a realistic assessment of shipbuilding activities, but rather driven by the potential gap in icebreaking capabilities once the Coast Guard's only operating heavy polar icebreaker\u2014the Polar Star \u2014reaches the end of its service life (see figure).", "GAO's analysis of selected lead ships for other shipbuilding programs found the icebreaker program's estimated construction time of 3 years is optimistic. As a result, the Coast Guard is at risk of not delivering the icebreakers when promised and the potential gap in icebreaking capabilities could widen."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations to the Coast Guard, DHS, and the Navy. Among other things, GAO recommends that the program conduct a technology readiness assessment, re-evaluate its cost estimate and develop a schedule according to best practices, and update program baselines following a preliminary design review. DHS concurred with all six of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Coast Guard, a component within the Department of Homeland  Security (DHS), is developing the first heavy icebreakers it has bought in  over 40 years. Overall, the Coast Guard and the Navy plan to invest up  to approximately $9.8 billion in lifecycle costs for the acquisition,  operations, and maintenance of three heavy polar icebreakers (HPIB).  These ships will enable the Coast Guard to maintain heavy polar  icebreaking capability and recapitalize its icebreaking fleet. Congressional  committees have expressed concern regarding the Coast Guard\u2019s ability  to ensure year-round access to the Arctic and Antarctic with the current  fleet, which affects U.S. economic, maritime, and national security  interests in these regions. As the only operating HPIB nears the end of its  service life, the Coast Guard is planning for delivery of the lead ship by as  early as 2023 to avoid a gap in capability, with subsequent ship deliveries  anticipated in 2025 and 2026. In 2016, in response to a Congressional  report, the Navy and the Coast Guard established an integrated program  office (IPO) to leverage the Navy\u2019s shipbuilding expertise for acquiring the  icebreakers for Coast Guard operations. In March 2018, the Navy  released the solicitation for a contract to design and construct up to three  HPIBs. The Navy indicated that it anticipates awarding the contract in the  third quarter of fiscal year 2019 with $270 million in Navy funding that  Congress has appropriated for the program.", "Section 122 of the National Defense Authorization Act for Fiscal Year  2018 included a provision for us to assess issues related to the  procurement of the HPIB vessels. We were asked to review any risks to  the HPIB program\u2019s ability to carry out its planned acquisition. This report  examines (1) the extent to which the HPIB program has taken steps to  develop mature designs and technologies consistent with best practices,  (2) the extent to which the HPIB program has taken steps to set realistic  cost and schedule estimates, and (3) the status of the HPIB program\u2019s  contracting efforts and funding considerations.", "To assess the extent to which the HPIB program has taken steps to  develop mature designs and technologies consistent with GAO-identified  best practices, we reviewed program performance and design  requirements, including the program\u2019s operational requirements  documents, specifications, and technical baseline. We also reviewed the  program\u2019s alternatives analysis study, tailored systems engineering plan,  test and evaluation master plan, model testing results; cooperative  agreements with Canada related to the HPIB; excerpts from industry  studies; and the March 2018 detail design and construction request for  proposals and subsequent amendments. We also reviewed relevant  DHS, Coast Guard, and Department of Defense (DOD) acquisition  guidance and instructions. From these documents, we determined the  program\u2019s design and technology efforts and compared them to GAO\u2019s  various best practices, including the knowledge-based approaches to  shipbuilding and major acquisitions in general, and approaches to  evaluating technology readiness.", "To assess the extent to which the HPIB program has taken steps to set  realistic cost and schedule estimates, we determined the extent to which  the estimates were consistent with best practices as identified in GAO\u2019s  Cost Estimating and Assessment and Schedule Assessment guides. To  assess the cost estimate, we reviewed the HPIB\u2019s January 2018 lifecycle  cost estimate used to support the program\u2019s initial cost baselines,  examined Coast Guard and Navy documentation supporting the estimate,  relevant program briefs to Coast Guard leadership, and HPIB program  documentation containing cost, schedule, and risk information, among  other steps. To assess the program\u2019s schedule, we compared the HPIB  schedule documents, including the program\u2019s initial schedule baselines,  delivery schedules from the HPIB\u2019s request for proposals for the detail  design and construction contract, and integrated master schedule, to  selected GAO best practices for project schedules. These best practices  include establishing the duration of activities, conducting a schedule risk  analysis, and ensuring reasonable total buffer or margin. In addition, we  compared the HPIB program schedule to other shipbuilding programs\u2019  schedules, among other steps.", "To determine the status of the HPIB program\u2019s contracting efforts and  funding considerations, we reviewed the program\u2019s acquisition plan,  March 2018 request for proposals and subsequent amendments,  certification of funds memorandum, budget justifications, program  lifecycle cost estimate, and the Coast Guard\u2019s fiscal year 2019 Capital  Investment Plan. For all objectives, we interviewed knowledgeable DHS,  Coast Guard, and Navy officials. Appendix I presents a more detailed  description of the scope and methodology of our review.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of the Polar Icebreakers and Icebreaking Capability Gap", "paragraphs": ["The Coast Guard has been responsible for carrying out the nation\u2019s polar  icebreaking missions since 1965\u2014when it assumed primary responsibility  for the nation\u2019s polar icebreaking fleet. The Coast Guard\u2019s  responsibilities are outlined in various statutes, policies, and interagency  agreements.", "A 2010 Coast Guard study identified gaps in the Coast Guard\u2019s ability to  support and conduct missions in the Arctic and Antarctic. As a result, in  June 2013, the Coast Guard established the need for up to three heavy  polar icebreakers and three medium icebreakers to adequately meet  these Coast Guard mission demands. More recently, in November 2017,  Coast Guard officials reiterated that they will be able to fulfill all mission  requirements\u2014which include support to agencies with Arctic  responsibilities such as DOD, the National Science Foundation (NSF),  Department of State, National Oceanic and Atmospheric Administration,  and National Aeronautics and Space Administration\u2014with a fleet of three  heavy and three medium polar icebreakers. Coast Guard officials told us they are not currently assessing acquisition of the medium polar  icebreakers because they are focusing on the HPIB acquisition and plan  to assess the costs and benefits of acquiring medium polar icebreakers at  a later time.", "The Coast Guard currently has two active polar icebreakers in its fleet\u2014 the Polar Star, a heavy icebreaker, and the Healy, a medium icebreaker.  An additional Coast Guard heavy icebreaker, the Polar Sea, has been  inactive since 2010 when it experienced a catastrophic engine failure.  Commissioned in 1976, the Polar Star is the world\u2019s most powerful active  non-nuclear icebreaker. The less powerful Healy primarily supports Arctic  research. Although the Healy is capable of carrying out a wide range of  activities, it cannot operate independently in the ice conditions in the  Antarctic or ensure timely access to some Arctic areas in the winter. See  figure 1 for the Coast Guard\u2019s active icebreakers.", "The Coast Guard has faced challenges in meeting the government\u2019s  icebreaking needs in recent years. For example, in June 2016, we found  that when neither the Polar Sea nor the Polar Star was active in 2011 and  2012, the Coast Guard did not maintain assured, year-round access to  both the Arctic and Antarctic, as the Healy cannot reach ice-covered  areas with more than 4\u00bd feet of ice. According to a January 2017 Coast  Guard assessment, the Coast Guard does not plan to recommission the  Polar Sea because it would not be cost-effective."], "subsections": []}, {"section_title": "Polar Star Sustainment Efforts", "paragraphs": ["According to Coast Guard planning documents, the Polar Star\u2019s service  life is estimated to end between fiscal years 2020 and 2023. This creates  a potential heavy polar icebreaker capability gap of about 3 years,  assuming the Polar Star\u2019s service life ends in 2020 and the lead HPIB is  delivered by the end of fiscal year 2023 as planned. If the lead ship is  delivered later than planned in this scenario, the potential gap could be  more than 3 years. As a result, according to a 2017 polar icebreaking  bridging strategy, the Coast Guard is planning to recapitalize the Polar  Star\u2019s key systems starting in 2020 to extend the service life of the ship  until the planned delivery of the second HPIB (see figure 2).", "In September 2017, we found that the Coast Guard\u2019s $75 million cost  estimate for the Polar Star life extension project may be unrealistic, in part  because it was based on the assumption of continuing to use parts from  the decommissioned Polar Sea, as has been done in previous  maintenance events. Because of the finite number of parts available  from the Polar Sea, the Coast Guard may have to acquire new parts for  the Polar Star that could increase the $75 million estimate. As a result, we  recommended that the Coast Guard complete a comprehensive cost  estimate and follow cost estimating best practices before committing to  the life extension project. The Coast Guard concurred with this  recommendation.", "As of May 2018, Coast Guard officials told us they were still conducting  ship engineering inspections on the Polar Star to determine the details of  the work needed for the limited service life extension, which will then  inform the development of a cost estimate. In January 2018, the Coast  Guard completed its ship structures and machinery evaluation board  report. Coast Guard officials told us that this report will help to determine  the details of the work needed for the limited life extension. The January  2018 report estimated the remaining service life of the Polar Star as 5  years or less. In April 2018, the Coast Guard approved the Polar Star life  extension project to establish requirements and evaluate the feasibility of  alternatives that will achieve the requirements. Coast Guard officials  stated they completed a notional cost estimate in April 2018 and plan to  complete a detailed formal cost estimate by June 2020."], "subsections": []}, {"section_title": "Coast Guard\u2019s and Navy\u2019s Roles in the Heavy Polar Icebreaker Program", "paragraphs": ["The Coast Guard and the Navy established the IPO to collaborate and  develop a management approach to acquire three HPIBs. Through the  IPO, the Coast Guard planned to leverage the Navy\u2019s shipbuilding  expertise and pursue an accelerated acquisition schedule. A Coast Guard  program manager heads the IPO, which includes embedded Navy  officials who provide acquisition, contracting, engineering, cost- estimating, and executive support to the program. The IPO has  responsibility for managing and executing the HPIB\u2019s acquisition  schedule, acquisition oversight reviews, budget and communications, and  interagency coordination. In addition, the IPO coordinates with several  key organizations within the Coast Guard and Navy that contribute to the  HPIB program, including:", "Coast Guard Capabilities Directorate: This directorate is  responsible for identifying and providing capabilities, competencies,  and capacity and developing standards to meet Coast Guard mission  requirements. The directorate sponsored the HPIB\u2019s operational  requirements document, which provides the key performance  parameters the HPIB must meet\u2014such as icebreaking, endurance,  and interoperability thresholds and objectives.", "Ship design team: The ship design team includes Coast Guard and  Navy technical experts that develop ship specifications based on the  HPIB operational requirements document. The ship design team is  under the supervision of a Coast Guard ship design manager, who  provides all technical oversight for development of the HPIB design,  including development of \u201cindicative,\u201d or concept, designs used to  inform the ship\u2019s specifications and the program\u2019s lifecycle cost  estimate. Generally, the purpose of an indicative design is to  determine requirements feasibility, support cost estimating, and  provide a starting point for trade studies.", "Naval Sea Systems Command (NAVSEA) Cost Engineering and  Industrial Analysis Group (NAVSEA 05C): The group developed  the HPIB lifecycle cost estimate, which informs the program\u2019s cost  baselines and affordability constraints. NAVSEA 05C developed the  HPIB\u2019s lifecycle cost estimate based on the ship design team\u2019s  indicative design and the technical assumptions outlined in the  program cost estimating baseline document.", "NAVSEA Contracts Directorate (NAVSEA 02): This directorate  includes the Navy contracting officer who released the HPIB detail  design and construction contract\u2019s solicitation in March 2018 and  plans to award the contract under Navy authorities. The contracting  officer performs contract management services and provides  guidance to the IPO to help ensure the HPIB\u2019s contract adheres to  DOD and Navy contracting regulations and guidance.", "Figure 3 shows key organizations that support the HPIB program and  their responsibilities prior to the award of the contract.", "Since establishing the IPO, the Coast Guard, DHS, and the Navy  formalized agreements on their approach for the HPIB acquisition in three  2017 memorandums of agreements and understanding. These  agreements define the Navy\u2019s and Coast Guard\u2019s roles in the HPIB  acquisition with respect to funding responsibilities, acquisition oversight  functions, and contracting and program management authorities, among  other things."], "subsections": []}, {"section_title": "Heavy Polar Icebreaker Program\u2019s Acquisition Framework", "paragraphs": ["DHS, the Coast Guard, and the Navy have agreed to manage and  oversee the HPIB program using DHS\u2019s acquisition framework, as Coast  Guard is a component within DHS. DHS\u2019s acquisition policy establishes  that a major acquisition program\u2019s decision authority shall review the  program at a series of predetermined acquisition decision events (ADE)  to assess whether the major program is ready to proceed through the  acquisition life-cycle phases (see figure 4).", "As we found in April 2018, the Coast Guard and the Navy will adhere to a  tailored DHS acquisition framework for the HPIB program that  supplements DHS ADE reviews with additional \u201cgate\u201d reviews adopted  from the Navy\u2019s acquisition processes. The DHS Under Secretary for  Management retains final decision authority for the HPIB\u2019s ADEs as the  acquisition decision authority.", "The HPIB program achieved a combined ADE 2A/2B in February 2018,  when DHS approved the program\u2019s baselines and permitted the program  to enter into the Obtain Phase of the DHS acquisition framework. The  corresponding acquisition decision memorandum was signed in March  2018. The Coast Guard and the Navy plan to start detail design work for  the HPIB in June 2019, once the detail design and construction contract  is awarded. In Navy shipbuilding, detail design work can include outlining  the steel structure of the ship; determining the routing of systems, such as  electrical and piping, throughout the ship; and developing work  instructions for constructing elements of the ship, such as installation  drawings and material lists.", "The program\u2019s ADE 2C, or the low-rate initial production decision,  corresponds with the approval to start construction of the lead ship, which  is planned to begin no later than June 2021. Key steps typically taken in  the construction phase of a Navy ship include steel cutting and block  fabrication, assembly and outfitting of blocks, keel laying and block  erection, launch of the ship from dry dock, system testing and  commissioning, sea trials, and delivery and acceptance (see appendix II  for more detailed information on each shipbuilding phase). ADE 3,  scheduled to be held no later than March 2026, authorizes the program to  start follow-on test and evaluation.", "Figure 5 shows the HPIB\u2019s acquisition framework, including ADE  milestones and major program decision points, and how they relate to the  shipbuilding phases.", "DHS acquisition policy establishes that the acquisition program baseline  is the fundamental agreement between programs, component, and  department-level officials establishing what will be delivered, how it will  perform, when it will be delivered, and what it will cost. Specifically, the  program baseline establishes a program\u2019s schedule, costs, and key  performance parameters, and covers the entire scope of the program\u2019s  lifecycle. The HPIB acquisition program baseline serves as an agreement  between the Coast Guard and DHS that the Coast Guard will execute the  acquisition within the bounds detailed in the document. The acquisition  program baseline establishes objective (target) and threshold (maximum  acceptable for cost, latest acceptable for schedule, and minimum  acceptable for performance) baselines. Tables 1, 2, and 3 show selected  cost, schedule, and performance baselines that DHS approved for the  HPIB program at ADE 2A/2B in March 2018.", "After DHS approved the HPIB\u2019s program baselines, the Navy released  the solicitation for the program\u2019s detail design and construction contract in  March 2018. As revised, the solicitation requires offerors to submit their  technical proposals in August 2018 and their price proposals in October  2018. The Navy plans to competitively award the HPIB detail design and  construction contract to a single shipyard for all three ships in June 2019.  The contract award would include design (advance planning and  engineering) and long lead time materials, with separate options for detail  design and construction of each of the three ships. The HPIB contract  award and administration will follow DOD and Navy contracting  regulations and policies, including the Defense Federal Acquisition  Regulation Supplement. Although the Navy is planning to award the  contract, the source selection authority is from the Coast Guard, with both  Coast Guard and Navy personnel serving on the source selection  evaluation board."], "subsections": []}, {"section_title": "Starting Programs with Sound Business Cases", "paragraphs": ["Our prior work has found that successful programs start out with solid,  executable business cases before setting program baselines and  committing resources. For Coast Guard programs, such a business  case would be expected at ADE 2A/2B. A sound business case requires  balance between the concept selected to satisfy operator needs and the  resources\u2014technologies, design knowledge, funding, and time\u2014needed  to transform the concept into a product\u2014or in the HPIB\u2019s case, a ship. At  the heart of a business case is a knowledge-based approach\u2014we have  found that successful shipbuilding programs build on attaining critical  levels of knowledge at key points in the shipbuilding process before  significant investments are made. We have previously found that key  enablers of a good business case include firm, feasible requirements;  plans for a stable design; mature technologies; reliable cost estimates;  and realistic schedule targets. Without a sound business case, acquisition programs are at risk of breaching the cost, schedule, and  performance baselines set when the program was initiated\u2014in other  words, experiencing cost growth, schedule delays, and reduced  capabilities.", "In November 2016, we found that a particular challenge for Congress is  the fact that committees must often consider requests to authorize and  fund a new program well ahead of program initiation\u2014the point at which  key business case information would be presented. Given the time lag  between budget requests and the decision to initiate a new acquisition  program, Congress could be making critical funding decisions with limited  information about the soundness of the program\u2019s business case.  Although the HPIB program has already proceeded through ADE 2A/2B  and established acquisition program baselines, information about the  soundness of the HPIB\u2019s business case will be helpful for decision  makers as the Coast Guard and the Navy request funding in preparation  for the detail design and construction contract award in June 2019 and  anticipated construction start by the end of June 2021\u2014two points at  which significant resource commitments will need to be made."], "subsections": []}]}, {"section_title": "The Coast Guard Did Not Assess Design Maturity or Technology Risks Prior to Setting the Polar Icebreaker Program\u2019s Baselines", "paragraphs": ["The Coast Guard set the HPIB\u2019s acquisition program baselines at ADE  2A/2B without conducting a preliminary design review to assess the  design maturity of the ship or a technology readiness assessment to  determine the maturity of key technologies. This approach meets DHS  acquisition policy requirements but is contrary to our best practices (see  figure 6).", "While the Coast Guard is committed to a stable design prior to the start of  lead ship construction, it established baselines without clear knowledge of  the ship design because it does not plan to assess design maturity until  after the planned June 2019 award of the detail design and construction  contract. In addition, without a technology readiness assessment, the  Coast Guard does not have full insight into whether the technologies are  mature, potentially underrepresenting technical risk and increasing design  risk. As a result, the Coast Guard will be committing resources to the  HPIB program without key elements of a sound business case, increasing  the risk that the program will exceed its planned costs and schedule."], "subsections": [{"section_title": "Polar Icebreaker Program Took Steps to Identify Design Risks but Did Not Assess Design Maturity Prior to Setting Baselines", "paragraphs": [], "subsections": [{"section_title": "Early Efforts to Identify Design Risks", "paragraphs": ["To help inform the HPIB\u2019s key performance parameters, specifications,  and design considerations prior to setting the acquisition program  baselines, the Coast Guard conducted design studies and partnered with  Canada (with which the United States has an existing cooperative  agreement) to gain knowledge on the HPIB\u2019s design risks. For example:", "Starting in November 2016, the HPIB ship design team developed an  indicative (or concept) design, which has undergone several revisions  as more information became available, completing a fifth iteration in  September 2017. To inform the HPIB indicative design, the ship  design team told us they used design elements with validated  characteristics, such as the hull form, from existing Coast Guard  icebreakers, including the Polar Star, Polar Sea, Healy, and the  Mackinaw (a Great Lakes icebreaker). Collectively, these icebreakers  informed elements of the indicative design such as the size and  producibility of the ship. The indicative design represents an  icebreaker design that meets the threshold key performance  parameter of breaking 6 feet of ice at a continuous speed of 3 knots  rather than the objective parameter of 8 feet of ice at a continuous  speed of 3 knots. Coast Guard officials stated that based on  preliminary analysis, a design that meets the HPIB\u2019s objective key  performance parameters would be an entirely separate design and  would be too costly to construct. Coast Guard officials told us that in  addition to price, the shipbuilders\u2019 HPIB proposals will be evaluated  on design factors, including how much the potential design exceeds  the threshold icebreaking performance parameters.", "In February 2017, the Coast Guard contracted with five shipbuilders,  who teamed with icebreaker design firms, to conduct a series of  iterative design studies. These studies examined major design cost  drivers and technology risks for the HPIB program. Coast Guard  officials stated the results of these studies helped inform and refine  the ship\u2019s specifications and provided them with a better  understanding of the technology risks and schedule challenges. As of  February 2018, each contract was valued at about $5.6 million. Under  these contracts, each shipbuilder completed five detailed industry  study iterations. For example, the shipbuilders analyzed various hull  forms, propulsion systems, cold weather operations, space  arrangements, and icebreaking enhancements.", "In April 2017, the Coast Guard completed an alternatives analysis  study\u2014an independent study required prior to ADE 2A that identifies  the most efficient method of addressing an identified capability gap.  The study examined various options, including whether existing  foreign icebreakers could meet the Coast Guard\u2019s HPIB performance  requirements. The Coast Guard analyzed 18 domestic and foreign  icebreaker designs against the HPIB\u2019s key performance parameters  and other requirements, such as seakeeping and habitability. The  icebreaker designs included a variety of icebreakers in terms of  propulsion power and size, such as nuclear-powered Russian  icebreakers and polar research and supply vessels from Australia,  Finland, and Germany.", "The alternatives analysis found that only a Russian nuclear-powered  icebreaker and a design for a Canadian diesel-electric-powered  icebreaker, which has yet to be constructed, passed initial screening  for design maturity and performance requirements. Given a previous  independent study analyzing the cost-effectiveness of nuclear- powered icebreakers, the Coast Guard deemed a nuclear-powered  icebreaker design as infeasible. The alternatives analysis also noted  that the Canadian design met icebreaking requirements. However,  Coast Guard officials told us the Canadian design did not meet  requirements such as habitability and military-oriented multi-mission  tasks, but the design could potentially be modified to meet those  needs. In addition, IPO officials stated the Canadian design was  designed for science missions rather than military missions. The  Canadian design was considered among some of the shipbuilders as  a starting point in examining HPIB design risks.", "From May to August 2017, the Coast Guard tested two scale models  of icebreakers at the Canadian National Research Council\u2019s ice tank  facility in Newfoundland. Coast Guard officials told us the testing  helped to mitigate potential design risks with the hull form and  propulsors\u2014a mechanical device that generates thrust to provide  propulsion for the ship. The Coast Guard tested the resistance,  powering, and maneuvering of the model icebreakers\u2019 hull form and  propulsion to inform their indicative design and discovered that the  ship\u2019s maneuverability was a challenge during model testing.  However, through model testing, the Coast Guard was able to validate  general characteristics of its indicative design, including power needs  and the hull form. In addition to model testing, Canadian Coast Guard  officials told us that the U.S. Coast Guard has engaged with them in  formal and informal exchanges regarding icebreaker acquisitions  more generally.", "As a result of its indicative design, industry studies, and model testing  efforts, the Coast Guard identified the integrated power plant, propulsors,  and hull form as key design considerations for the HPIB. Because these  design elements work together to ensure the HPIB can meet its  icebreaking requirements, we determined that these are the HPIB\u2019s main  design risks (see figure 7).", "Although the Coast Guard undertook early efforts to identify design risks,  it did not conduct a preliminary design review for the HPIB program prior  to setting program acquisition baselines at ADE 2A/2B. These baselines  inform DHS\u2019s and Coast Guard\u2019s decisions to commit resources. Our best  practices for knowledge-based acquisitions state that before program  baselines are set, programs should hold key systems engineering events,  such as a preliminary design review, to help ensure that requirements are  defined and feasible and that the proposed design can be met within cost,  schedule, and other system constraints. Similarly, in November 2016,  we found that establishing a preliminary design through early detailed  systems engineering results in better program outcomes than doing so  after program start. During the HPIB\u2019s preliminary design review, the  Coast Guard plans to verify that the contractor\u2019s design meets the  requirement of the ship specifications and is producible, and the schedule  is achievable, among other activities.", "The Coast Guard has yet to conduct a preliminary design review for the  HPIB program because DHS\u2019s current acquisition policy does not require  programs to do so until after ADE 2A/2B. The Coast Guard plans to hold  the preliminary design review by December 2019, after the award of the  detail design and construction contract. Holding a preliminary design  review after ADE 2A/2B is consistent with DHS policy. However, in April  2017, we found that DHS\u2019s sequencing of the preliminary design review is  not consistent with our acquisition best practices, which state that  programs should pursue a knowledge-based acquisition approach that  ensures program needs are matched with available resources\u2014such as  technical and engineering knowledge, time, and funding\u2014prior to setting  baselines. In that report, we found that by initiating programs without a  well-developed understanding of system needs through key engineering  reviews such as the preliminary design review, DHS increases the  likelihood that programs will change their user-defined key performance  parameters, costs, or schedules after establishing their baselines. As a  result, we recommended that DHS update its acquisition policy to require  key technical reviews, including the preliminary design review, to be  conducted prior to approving programs\u2019 baselines. DHS concurred with  this recommendation and stated that it planned to initiate a study to  assess how to better align its processes for technical reviews and  acquisition decisions. Upon completion of the study, DHS plans to update  its acquisition policies, as appropriate.", "Instead of establishing the HPIB program\u2019s acquisition program baselines  after assessing the shipbuilder\u2019s preliminary design, the Coast Guard  established cost baselines based on a cost estimate that used the ship  design team\u2019s indicative design. Coast Guard officials told us that the  selected shipbuilder will develop its own HPIB design as part of the detail  design and construction contract, independent of the indicative design.  The ship design team noted that the indicative design informed the ship\u2019s  specifications but is not meant to be an optimized design, does not  represent a design solution, and will not be provided to the shipbuilders.  Coast Guard officials stated that the shipbuilders that respond to the  request for proposals will propose their own designs based on their  production capabilities, which will drive where they will place components,  such as bulkheads, within the design. As a result, the shipbuilder\u2019s design  will be different from the indicative design.", "By setting the HPIB\u2019s acquisition program baselines prior to gaining  knowledge on the shipbuilder\u2019s design, the Coast Guard has established  cost, schedule, and performance baselines without a stable or mature  design. Although completing the preliminary design review after setting  program baselines is consistent with DHS policy, this puts the Coast  Guard at risk of breaching its established baselines and having to revise  them later in the acquisition process, after a contract has been signed  and significant resources have already been committed to the program.  At that point, the program will be well underway and it will be too late for  decision makers to make appropriate tradeoff decisions between  requirements and resources without causing disruptions to the program.", "Consistent with DHS acquisition policy, DHS and the Coast Guard must  monitor the HPIB program against the acquisition program baselines set  at ADE 2A/2B; however, DHS acquisition policy does not require an  official update to the baseline unless the program breaches its baselines  or until the next major milestone, whichever occurs first. For the HPIB, the  next milestone is ADE 2C, which is currently planned for no later than  June 2021. ADE 2C corresponds to the approval of low-rate initial  production and in the case of the HPIB, the start of construction for the  lead ship. Evaluating the HPIB\u2019s baselines at ADE 2C\u2014immediately  before the shipbuilder is authorized to start construction\u2014is too late  because the funding required for the construction phase likely would have  already been requested and provided. On the other hand, evaluating the  acquisition program baselines after the preliminary design review but  before ADE 2C would help to ensure that the knowledge gained during  the preliminary design review is used to inform the program baselines and  business case for investing in the HPIBs before significant resource  commitments are made.", "Although the Coast Guard set the acquisition program baselines prior to  gaining knowledge on the feasibility of the selected shipbuilder\u2019s design, it  has expressed a commitment to having a stable design prior to the start  of lead ship construction. In Navy shipbuilding, detail design typically  encompasses three design phases:", "Basic design. Includes fixing the ship steel structure; routing all major  distributive systems, including electricity, water, and other utilities; and  ensuring the ship will meet the performance specifications.", "Functional design. Includes providing further iteration of the basic  design, providing information on the exact position of piping and other  outfitting in each block, and completing a 3D product model.", "Production design. Generating work instructions that show detailed  system information and including guidance for subcontractors and  suppliers, installation drawings, schedules, material lists, and lists of  prefabricated materials and parts.", "Shipbuilding best practices we identified in 2009 found that design  stability is achieved upon completion of the basic and functional  designs. At this point of design stability, the shipbuilder has a clear  understanding of the ship structure as well as how every system is set up  and routed throughout the ship. Consistent with our best practices, prior  to the start of construction on the lead ship, the Coast Guard will require  the shipbuilder to complete basic and functional designs, develop a 3D  model output, and provide at least 6 months of production information to  support the start of construction. IPO officials have stated that they are  committed to ensuring that the HPIB\u2019s design is stable before  construction of the lead ship begins, given the challenges prior Navy  shipbuilding programs have experienced when construction proceeded  before designs were completed."], "subsections": []}]}, {"section_title": "Coast Guard Intends to Use Proven Technologies for the Polar Icebreaker Program but Has Not Assessed Their Maturity", "paragraphs": ["The Coast Guard intends on using what it refers to as proven  technologies for the HPIB but has not conducted a technology readiness  assessment to determine maturity of key technologies that drive  performance of the ship prior to ADE 2A/2B, which is inconsistent with our  best practices. A technology readiness assessment is a systematic,  evidence-based process that evaluates the maturity of critical  technologies\u2014hardware and software technologies critical to the  fulfillment of the key objectives of an acquisition program. This  assessment does not eliminate technology risk but, when done well, can  illuminate concerns and serve as a basis for realistic discussions on how  to mitigate potential risks. According to our best practices, a technology  readiness assessment should be conducted prior to program initiation.  DHS systems engineering guidance also recommends conducting a  technology readiness assessment before ADE 2A to help ensure that the  program\u2019s technologies are sufficiently mature by the start of the program.", "The Coast Guard intends on using what it has deemed \u201cstate-of-the- market\u201d or \u201cproven\u201d technologies for the HPIB. DHS\u2019s technical  assessment of the HPIB noted that the February 2017 design studies  resulted in industry producing designs that used commercially available,  state-of-the-market, and proven technologies. From the studies and  industry engagement, Coast Guard officials determined that the  technologies required for the HPIB, such as the integrated power plant  and azimuthing propulsors\u2014thrusters that rotate up to 360 degrees and  provide propulsion to the ship\u2014are available commercially and do not  need to be developed. Coast Guard officials further stated that the  integrated power plant is the standard power plant used on domestic and  foreign icebreakers. Coast Guard officials told us that similarly, market  survey data on azimuthing propulsors shows that ice-qualified azimuthing  propulsors in the power range have been used on foreign icebreakers.  The Coast Guard has also communicated to industry through the request  for proposals that the HPIB should have only proven technology and  plans to have the shipbuilders provide information on the maturity of the  technologies when they submit their proposals. As a result, Coast Guard  officials stated the HPIB program does not have any critical technologies,  as defined by DHS systems engineering guidance, and does not need to  conduct a technology readiness assessment.", "However, according to DHS systems engineering guidance, a technology  element is considered critical if the system being acquired depends on  this technology to meet operational requirements, and if the technology or  its application is new, novel, or in an area that poses major technological  risk during detailed design or demonstration. The guidance further states  that technologies can become critical if they need to be modified from  prior successful use or expected to operate in an environment beyond  their original demonstrated capability. Similarly, according to our best  practices for assessing technology readiness, critical technologies are not  just technologies that are new or novel. Technologies used on prior  systems can also become critical if they are being used in a different  form, fit, or function.", "Our technology readiness assessment guide notes that program officials  sometimes disregard critical technologies when they have longstanding  history, knowledge, or familiarity with them. The best practices guide cites  examples of organizations not considering a technology critical if it has  been determined to be mature, has already been fielded, or does not  currently pose a risk to the program. Additionally, our guide notes that  contractors may be overly optimistic about the maturity of critical  technologies, especially prior to contract awards. According to our best  practices guide, presuming a previously used technology as mature is  problematic when the technologies are being reapplied to a different  program or operational environment.", "As a result, based on our analysis of available Coast Guard information,  we believe the HPIB\u2019s planned integrated power plant and azimuthing  propulsors should be considered critical technologies given their criticality  in meeting key performance parameters, their use in a different  environment from prior ships, and the extent to which they pose major  cost risks (see table 4).", "Without conducting a technology readiness assessment, the Coast Guard  does not have insight into how mature these critical technologies are.  According to our best practices, evaluating critical technologies requires  disciplined and repeatable steps and criteria to perform the assessment  and make credible judgments about their maturity. The evaluation of each  critical technology must be based on evidence such as data and test  results. In addition, the team that assesses the technologies must be  objective and ideally independent. Instead, the Coast Guard has relied  on industry to provide information on the maturity of the HPIB\u2019s  technologies and uses terms such as \u201cstate-of-the-market\u201d or \u201cproven,\u201d  which do not translate into meaningful measures for systematically  communicating the technology readiness, especially when discussing  new applications of existing technologies.", "Additionally, even if the Coast Guard determines the maturity levels of the  HPIB\u2019s technologies through an objective and independent technology  readiness assessment, the program\u2019s planned level of maturity for the  ship\u2019s technologies falls short of our best practices. According to the  HPIB\u2019s systems engineering tailoring plan and request for proposals, the  program intends on implementing only proven technologies that have  been demonstrated in a relevant environment, commensurate with a  technology readiness level (TRL) of 6. However, our best practices do  not consider a technology to be mature until it has been demonstrated in  an operational environment, commensurate with a TRL 7. Specifically,  our best practices for shipbuilding recommend that programs should  require critical technologies to be matured into actual prototypes and  successfully demonstrated in an operational or a realistic environment  (TRL 7) before a contract is awarded for the detail design of a new ship.  DHS\u2019s systems engineering guidance also states that critical technologies  below TRL 7 should be identified as technical risks.", "By not conducting a technology readiness assessment and identifying,  assessing, and maturing its critical technologies prior to setting the  HPIB\u2019s program baselines and prior to awarding the detail design  contract, the Coast Guard is underrepresenting the program\u2019s technical  risks and understating its cost, schedule, and performance risks.  Technology risks that manifest later could require the shipbuilder to  redesign parts of the ship, which increases the risk of rework and  schedule delays during the construction phase."], "subsections": []}]}, {"section_title": "The Coast Guard Based the Polar Icebreaker Program\u2019s Baselines on a Cost Estimate That Is Not Fully Reliable and an Optimistic Schedule", "paragraphs": ["The cost estimate and schedule that informed DHS\u2019s decision to  authorize the HPIB program do not reflect the full scope of the program\u2019s  risks. We found that while the Navy substantially adhered to a number of  best practices when it developed the HPIB\u2019s cost estimate, the estimate is  not fully reliable, primarily because it does not reflect the full range of  possible costs over the HPIB\u2019s 30-year lifecycle. We also found the HPIB  schedule was not informed by a realistic assessment of the work  necessary to construct the ship. Rather, the schedule was driven by the  potential gap in icebreaking capabilities once the Coast Guard\u2019s only  operating HPIB reaches the end of its service life. Reliable cost estimates  and schedules are key elements of an executable business case, and are  needed at the outset of programs\u2014when competitive pressures to obtain  funding for the program are high\u2014to provide decision makers with insight  into how risks affect a program\u2019s ability to deliver within its cost and  schedule goals."], "subsections": [{"section_title": "Polar Icebreaker Program\u2019s Cost Estimate Substantially Met Best Practices but Is Not Fully Reliable Because It Does Not Include Full Range of Possible Costs", "paragraphs": ["We found that the lifecycle cost estimate used to inform the HPIB  program\u2019s baselines substantially adheres to most cost estimating best  practices; however, the estimate is not fully reliable. The cost estimate  only partially met best practices for being credible primarily because it did  not quantify the range of possible costs over the entire life of the program.  We assessed the program\u2019s lifecycle cost estimate, which was performed  by NAVSEA 05C, against our best practices for cost estimating. For our  reporting purposes, we collapsed 18 of our applicable best practices into  the four general characteristics of a reliable cost estimate:  comprehensive, well-documented, accurate, and credible. Figure 8  provides a summary of our assessment of the HPIB\u2019s lifecycle cost  estimate.", "Comprehensive. We found the HPIB cost estimate substantially met the  best practices for being comprehensive. For example, the estimate  includes government and contractor costs over the full lifecycle of all  three ships and contains sufficient levels of detail in the program\u2019s work  breakdown structure\u2014a hierarchical breakdown of the program into  specific efforts, including system engineering and ship construction. The  estimate also documents detailed ground rules and assumptions, such as  the learning curve used to capture expected labor efficiencies for follow- on ships. However, we found that the costs for disposal of the three ships  were not at a level of detail to ensure that all costs were considered and  not all assumptions, particularly regarding operating and support costs,  were varied to reflect the impact on cost should these assumptions  change.", "Well-Documented. We also found the cost estimate substantially met the  best practices for being well-documented. Specifically, the cost estimate\u2019s  documentation mostly captured the source data used as well as the  primary methods, calculations, results, rationales, and assumptions used  to generate each cost element. However, the documentation alone did  not provide enough information for someone unfamiliar with the cost  estimate to replicate what was done and arrive at the same results. For  example, NAVSEA officials discussed and showed us how historical data  from the analogous ships were used to create the estimate, but these  specific sources were not found in the cost estimate documentation.", "Accurate. We found the estimate substantially met best practices for  being accurate. In particular, the estimate was properly adjusted for  inflation, and we did not find any mathematical errors in the estimate  calculations we inspected. Officials stated that labor and material cost  data from recent, analogous programs were used in the estimate. While  the documentation does not discuss the reliability, age, or relevance of  the cost data, NAVSEA officials provided us with additional information  regarding those data characteristics. Additionally, officials provided  documentation that demonstrated that they had updated the cost estimate  several times in the last 2 years.", "Credible. We found the HPIB cost estimate partially met the best  practices associated with being credible. A credible cost estimate should  analyze the sensitivity of the program\u2019s expected cost to changes among  key cost-driving assumptions and risks. It should also quantify the cost  impact of risks related to assumptions changing and variability in the  underlying data used to create the cost estimate. Credible cost estimates  should also be cross-checked internally and reconciled with an  independent cost estimate that is performed by an outside group. These  two best practices ensure that the estimate has been checked for any  potential bias. Our review of the HPIB cost estimate determined it  partially met the best practices for being credible due to the following:", "Exclusions of major costs from sensitivity analysis and risk and  uncertainty analysis. The cost estimators conducted sensitivity  analysis as well as risk and uncertainty analysis on only a small  portion of the total lifecycle costs. For both the sensitivity analysis  and risk and uncertainty analysis, we found that NAVSEA only  modeled cost variation in the detail design and construction portion of  the program and excluded from its analyses any risk impacts related  to the remainder of the acquisition, operating and support, and  disposal phases, which altogether comprise about 75 percent of the  lifecycle cost. The cost estimate documents that the limited number of  active icebreakers and available data prevented NAVSEA from  identifying accurate risk bounds for the operating and support and  disposal phases. Further, NAVSEA officials told us because they used  historical data, including average maintenance costs from the Healy,  they felt that their estimate was reasonable. However, similar to how  NAVSEA consulted with the ship design team to establish high and  low-end costs using analogous ships, NAVSEA could have used cost  ranges in the historical data to develop risk bounds for the remaining  costs in the acquisition, operations and support, and disposal phases.  Without performing a sensitivity analysis on the entire life cycle cost of  the three ships, it is not possible for NAVSEA to identify key elements  affecting the overall cost estimate. Further, without performing a risk  and uncertainty analysis on the entire life cycle cost of the three ships,  it is not possible for NAVSEA to determine a level of confidence  associated with the overall cost estimate. By not quantifying important  risks, NAVSEA may have underestimated the range of possible costs  for about three-quarters of the entire program.", "Lack of applied correlation in the risk and uncertainty analysis. In  its independent assessment of the HPIB cost estimate, the DHS Cost  Analysis Division similarly found that the results of the risk and  uncertainty analysis may understate the range of possible cost  outcomes for the HPIB. The DHS assessment noted that NAVSEA did  not use applied correlation\u2014which links costs for related items so that  they rise and fall together during the analysis\u2014in its cost model.  According to a joint agency handbook on cost risk and uncertainty,  applied correlation helps to ensure that cost estimates do not  understate the possible variation in total program costs. Omitting  applied correlation when assessing a cost estimate for risk can cause  an understated range of possible program costs and create a false  sense of confidence in the cost estimate. For example, absent applied  correlation, the DHS assessment noted that the Navy calculated with  a 99-percent level of confidence that the program will not exceed its  threshold (maximum acceptable) acquisition cost. Navy officials  explained that they will incorporate applied correlation in future  updates to the cost estimate when better data are available. However,  by applying correlation factors from the joint agency handbook to the  same data that NAVSEA used, DHS\u2019s Cost Analysis Division  determined that NAVSEA overstated the likelihood of the program not  exceeding its threshold acquisition cost.", "Cost estimate not fully reconciled with a comparable  independent cost estimate. While the Naval Center for Cost  Analysis performed an independent cost estimate of the HPIB  program, the office used a different methodology from NAVSEA\u2019s, and  its estimate was based on an earlier version of the indicative ship  design and associated technical baseline. NAVSEA officials told us  that before the Coast Guard\u2019s ship design team updated the indicative  ship design and technical baseline, NAVSEA met twice with Naval  Center for Cost Analysis to reconcile their results. However, NAVSEA  officials told us that due to the speed at which the program was  progressing, no reconciliation occurred after the ship design team  finalized the indicative ship design. While we did not find any specific  ground rules and assumptions that differed between the two  estimates, some ship characteristics had changed, such as the weight  estimates for propulsion and auxiliary systems, among others. The  use of two different technical baselines creates differences in the two  estimates and makes them less comparable to one another.", "For additional details on our assessment of the HPIB\u2019s cost estimate  against our 18 cost estimating best practices, see appendix III.", "By excluding the majority of the HPIB program\u2019s lifecycle costs from the  sensitivity analysis as well as the risk and uncertainty analysis, and  reconciling the estimate with an independent cost estimate based on a  different iteration of the ship design, the cost estimate does not provide a  fully credible range of costs the program may incur. Moreover, the  exclusion of applied correlation further provides a false sense of  confidence that the program will not exceed its threshold cost. As a result,  the estimate provides an overly optimistic assessment of the program\u2019s  vulnerability to cost growth should risks be realized or current  assumptions change. This, in turn, may underestimate the lifecycle cost  of the program and calls into question the cost baselines DHS approved  and used to inform the HPIB\u2019s budget request. Without a reliable cost  estimate to inform the business case for the HPIB prior to award of the  contract option for lead ship construction, Congress is at risk of  committing to a course of action without a complete understanding of the  program\u2019s longer-term potential for cost growth."], "subsections": []}, {"section_title": "Polar Icebreaker Program\u2019s Optimistic Schedule Is Driven by Capability Gap and Does Not Reflect Robust Analysis", "paragraphs": ["The Coast Guard set an optimistic schedule baseline for the HPIB based  on operational need, but its approach does not reflect a robust analysis of  what is realistic and feasible. According to DHS and Coast Guard  acquisition guidance, the goal of ADE 2A/2B is, among other things, to  ensure that the program\u2019s schedule baseline is executable at an  acceptable cost. Rather than building a schedule based on  knowledge\u2014including determining realistic schedule targets, analyzing  how much time to include in the schedule to buffer against potential  delays, and comprehensively assessing schedule risks\u2014the Coast Guard  used the estimated end date of the Polar Star\u2019s service life as the primary  driver to set the lead ship\u2019s objective (or target) delivery date of  September 2023 and threshold (latest acceptable) delivery date of March  2024."], "subsections": [{"section_title": "Analysis Conducted to Determine Lead Ship Construction Schedule Not Robust", "paragraphs": ["The Coast Guard and the Navy did not conduct a robust analysis to  determine how realistic the 2.5- to 3-year construction cycle time is for the  lead HPIB before setting the schedule baseline. Our best practices for  developing project schedules state that, rather than meeting a particular  completion date, estimating how long an activity takes should be based  on the effort required to complete the activity and the resources  available. Doing so ensures that activity durations and completion dates  are realistic and supported by logic.", "The Coast Guard and the Navy validated the reasonableness of the 2.5-  to 3-year construction time by comparing this duration to historical Navy  ship construction data. Program officials told us that they used 211 Navy  ships in their analysis and determined that the HPIB\u2019s construction  schedule was within historical norms given its weight. However, program  officials told us they included both lead and follow-on ships in their  analysis. As we have found in our prior Navy shipbuilding work, schedule  delays tend to be amplified for lead ships in a class. Therefore, we  believe the program\u2019s analysis for the lead ship was overly optimistic.", "The Coast Guard also sought industry feedback to determine whether 2.5  to 3 years to build the lead HPIB was feasible. Design study information  provided to the Coast Guard by several shipbuilders estimated that they  would need between 2.5 to 3.5 years to build the lead ship. We  determined that the Coast Guard used the more optimistic estimate of 2.5  years for the objective delivery date and 3 years for the threshold delivery  date. Three years was also the time frame reflected in the request for  proposals for the detail design and construction contract. The request for  proposals lists December 2023 as the target delivery date for the lead  ship, which is approximately 3 years from the objective construction start  date.", "Further, we compared the HPIB\u2019s planned construction schedule to the  construction schedules of delivered lead ships for major Coast Guard and  Navy shipbuilding programs active in the last 10 years as well as the  Healy. We found that the HPIB\u2019s lead ship construction cycle time of 2.5  to 3 years is optimistic, as only three of the ten ships in our analysis were  constructed in 3 years or less. For the purposes of our analysis, we  included information on each ship\u2019s weight and classification, both of which can affect complexity and, therefore, construction times (see figure  9).", "The Coast Guard also did not conduct any analysis to identify a  reasonable amount of margin to include in the program schedule baseline  to account for any delays. Estimating and documenting schedule margin  based on an analysis of schedule risks helps to ensure that a program\u2019s  baseline schedule is achievable despite delays that may unexpectedly  arise. Program officials told us that the only margin included in the HPIB  schedule is the 6 months between the objective and threshold dates\u2014the  maximum time between objective and threshold dates before DHS policy  requires additional rationale and justification. According to the request  for proposals, the winning shipbuilder will examine schedule risks while  preparing an integrated schedule. In addition, Coast Guard officials told  us that the current schedule will remain largely notional until the winning  shipbuilder provides detailed updates to the schedule.", "Delays in project schedules, whether they are in the program\u2019s control or  not, should be expected. For example, in prior shipbuilding programs we  have reviewed, we have found that delays have resulted from a number  of issues, including redesign work to address issues discovered during  pre-delivery testing, key system integration problems, and design quality  issues. Delays outside of the program\u2019s control such as funding  instability, late material delivery, and bid protests have previously affected  a program\u2019s ability to meet schedule. Program officials told us these and  other schedule risks are not accounted for in the HPIB schedule.", "Further, our analysis of 12 selected shipbuilding acquisition programs  active in the last 10 years shows that the Navy and the Coast Guard have  delayed delivery of all but one lead ship from their original planned  delivery dates by more than 6 months, with delays occurring both before  and after the start of construction. The delays in lead ship deliveries  ranged from 9 months to 75 months. For the purposes of our analysis, we  included the lead ships of major Coast Guard and Navy shipbuilding  programs that have been active from 2008 to 2018. We excluded the  Navy submarines and aircraft carriers from our analysis because we  determined that their size and complexity did not make them reasonable  comparisons to the HPIB (see figure 10).", "By supporting the lead ship construction time with overly optimistic  analysis and by not conducting analysis to estimate a reasonable amount  of margin, the Coast Guard\u2019s HPIB schedule does not fully account for  likely or unforeseen delays, which would help ensure that the planned  delivery date for the lead ship is feasible."], "subsections": []}, {"section_title": "Schedule Risks after Construction Start Not Identified", "paragraphs": ["The Coast Guard has set the HPIB\u2019s schedule baselines, including when  all three ships are planned to achieve full operational capability, but has  not yet identified risks for the program\u2019s schedule that could occur after  the start of lead ship construction, such as risks related to the  construction schedule or concurrency between ship testing and  construction of subsequent ships. According to the HPIB risk  management plan, the program should formally track risks, which  includes developing risk mitigation plans and reporting risks to DHS. Prior  to setting its baselines, the Coast Guard formally tracked some schedule  risks that affect the program\u2019s ability to start construction on time, such as  an aggressive schedule for releasing the request for proposals for the  detail design and construction contract. IPO officials told us they retired  that risk because the Navy released the request for proposals in March  2018. However, our analysis of the HPIB construction schedule and 6- month margin for delays found the program\u2019s schedule was optimistic,  thereby warranting additional risk tracking and management.", "The DHS Office of Systems Engineering also identified and  recommended the Coast Guard track and take steps to mitigate HPIB\u2019s  schedule risks, including those related to concurrency. In its technical  assessment, this office noted that the program plans to deliver the first  two ships prior to completing initial operational testing and evaluation for  the lead ship. The assessment further noted that construction on the third  ship is planned to be nearly three-quarters finished prior to completing  initial operational testing and evaluation. DHS\u2019s Office of Systems  Engineering found that this concurrency creates cost, schedule, and  technical risk resulting from rework that may be necessary to address  deficiencies found during initial testing. By not comprehensively and  formally tracking risks to the HPIB schedule that occur after the start of  lead ship construction, the program may not sufficiently identify and take  timely risk management actions to address this key phase in the  acquisition.", "By not conducting a robust analysis to inform whether the HPIB\u2019s  schedule baselines are feasible, the Coast Guard is not providing  Congress with realistic dates of when the ships may be delivered before  requesting funding for the construction of the lead ship. While the Coast  Guard is planning a service life extension of the Polar Star starting in  2020, as noted above, the HPIB\u2019s optimistic schedule may put the Polar  Star at risk of needing to operate longer than planned. The HPIB  schedule\u2019s optimism also puts the Coast Guard at risk of not fully  implementing a knowledge-based acquisition approach to meet its  aggressive schedule goals. Our prior work on shipbuilding programs has  shown that establishing optimistic program schedules based on  insufficient knowledge can create pressure for programs to make  sacrifices elsewhere. For example, we found that the Navy moved  forward with construction with incomplete designs and when key  equipment was not available when needed. Additionally, some Navy  programs pushed technology development into the design phase or  pushed design into the construction phase. These concurrencies often  result in costly rework to accommodate changes to the design, further  delays, or lower than promised levels of capability."], "subsections": []}]}]}, {"section_title": "Polar Icebreaker Program\u2019s Anticipated Contract May Be Funded by Both the Coast Guard and the Navy, but They Have Not Fully Documented Responsibility for Addressing Cost Growth", "paragraphs": ["According to the IPO, the HPIB\u2019s anticipated detail design and  construction contract may be funded by both Coast Guard and Navy  appropriations, but how certain types of cost growth will be addressed  between the Coast Guard and the Navy has not been fully documented.  The HPIB\u2019s acquisition strategy anticipates award of a contract that will  have options, includes efforts aimed at mitigating cost risks, and  acknowledges the use of foreign suppliers to provide components and  design services as allowable under statute and regulation. Since 2013,  the program has received $360 million in funding, which includes both  Coast Guard and Navy appropriations. Moving forward, it is unclear how  much Coast Guard and Navy funding will be used to fund the contract.  The Coast Guard and the Navy have an agreement in place for funding  issues, but the agreement does not fully address how they plan to  address cost growth on the program."], "subsections": [{"section_title": "Acquisition Strategy Anticipates Use of Contract Options, Ways to Mitigate Cost Risks, and Foreign Suppliers", "paragraphs": ["As part of the HPIB\u2019s acquisition strategy, the Navy structured the detail  design and construction of each of the ships as contract options in the  March 2018 request for proposals. Specifically, the request for proposals  structured the detail design and construction work into four distinct  contract line items, all under a fixed-price incentive (firm-target) contract  type. Generally, this contract type allows the government and shipbuilder  to share cost savings and risk through a specified profit adjustment  formula, also known as a share ratio; ties the shipbuilder\u2019s ability to earn  a profit to performance by decreasing the shipbuilder\u2019s profit after costs  reach the agreed upon target cost; and, subject to other contract terms,  fixes the government\u2019s maximum obligation to pay at a ceiling price.  Table 5 provides information on the HPIB\u2019s request for proposals as of  May 2018.", "According to the request for proposals, in addition to potentially earning  profit by controlling costs, the shipbuilder may also earn up to $34 million  in incentives for achieving other programs goals, such as quality early  delivery, reducing operations and sustainment costs, and production  readiness. IPO officials stated that they based the incentives on prior  Navy shipbuilding contract examples. However, in March 2017, we found  that the Navy had not assessed the effectiveness of added incentives for  the reviewed fixed-price incentive contracts in terms of improved contract  outcomes across the applicable shipbuilding portfolio. As a result, we  recommended that DOD direct the Navy to conduct a portfolio-wide  assessment of the Navy\u2019s use of additional incentives on fixed-price  incentive contracts across its shipbuilding programs. DOD concurred with  this recommendation, but the Navy has not yet taken steps to implement  it.", "As part of the HPIB acquisition strategy, the IPO is striving to control  costs on the detail design and construction contract through the following:", "A fixed-price incentive (firm-target) contract type. Because the  shipbuilder\u2019s profit is linked to performance, fixed-price incentive  contracts provide an incentive for the shipbuilder to control cost. Most  of the Navy\u2019s proposed share ratios and ceiling prices for the detail  design and construction work are consistent with DOD\u2019s November  2010 Better Buying Power memo, which states a 50/50 share ratio  and 120 percent ceiling price should be the norm, or starting point, for  fixed-price incentive contracts.", "Full and open competition. The Navy plans to competitively award  the HPIB\u2019s detail design and construction contract. From market  research and industry engagement, the IPO determined that there  were multiple viable competitors. In March 2017, we found that  competition helped to strengthen the Navy\u2019s negotiating position with  shipbuilders when setting contract terms, such as the share line and  ceiling price for fixed-price incentive type contracts.", "Providing offerors the government\u2019s estimated ship costs. The  request for proposals does not set affordability caps but does include  information on the government\u2019s estimated cost for the ships,  including $746 million for the lead ship\u2019s advance planning,  engineering, detail design, and construction, and an average ship  price of $615 million across all three ships. Navy contracting officials  explained that offers will not be disqualified from the source selection  solely for being higher than the estimated costs. Instead, the  estimated costs provide the offerors with cost bounds to help  appropriately scope the capabilities. For example, IPO officials stated  that they are striving to appropriately size the integrated power plant  so that it is generating sufficient power to meet key performance  parameters but not so much power that it drives up the cost.", "Inquiries on block buys and economic order of quantity  purchases. The Navy gave offerors an opportunity to provide the  estimated savings that the government could achieve if it were to take  a \u201cblock buy\u201d approach in purchasing the ships or purchasing supplies  in economic order quantities. The Navy did not include a definition of  \u201cblock buy\u201d in the HPIB request for proposals synopsis. Based on our  prior work, block buy contracting generally refers to special legislative  authority that agencies seek on an acquisition-by-acquisition basis to  purchase more than one year\u2019s worth of requirements. The request  for proposals synopsis stated a preference for submission of the  estimated savings within 60 days of the release of the request for  proposals, or by May 2018. As of June 2018, the Navy had not  received any formal responses from industry on potential savings from  block buys or economic order quantities. For the HPIB request for  proposals, the Navy stated that any information on block buys or  economic order of quantities would be optional and would not be used  as part of the evaluation of proposals submitted by offerors.", "Our prior work on block buy contracting approaches for the Littoral  Combat Ship and F-35 Joint Strike Fighter programs found that the  terms and conditions of the contracts affect the extent to which the  government achieves savings under a block buy approach. For  example, the Littoral Combat Ship\u2019s block buy contracts indicated that  a failure to fully fund the purchase of a ship in a given year would  make the contract subject to renegotiation. DOD has pointed to this as  a risk that the contractors would demand higher prices if DOD  deviated from the agreed to block buy plan.", "In its HPIB acquisition strategy, the IPO has also considered the use of  foreign suppliers as allowable under the law. According to the February  2018 HPIB acquisition plan, the HPIB must be constructed in a U.S.  shipyard given statutory restrictions, including restrictions on construction  of Coast Guard vessels and major components in foreign shipyards  unless authorized by the President. However, foreign suppliers will be  permitted to provide components and design services to the extent  applicable statutes and regulations allow. According to Coast Guard  officials, foreign design firms have extensive expertise and knowledge to  produce the design for HPIBs. As a result, the U.S. shipbuilders planning  to submit proposals on the HPIB solicitation may partner with these  foreign design firms when submitting proposals. Similarly, Coast Guard  officials stated that the azimuthing propulsors that have the necessary  power and ice classification for the HPIB are manufactured by foreign  companies. Therefore, the selected shipbuilder may subcontract with  these companies to acquire the propulsors.", "In addition, Navy contracting officials stated that the program did not need  to obtain a waiver from the Buy American Act\u2014which generally requires  federal agencies to purchase domestic end products when supplies are  acquired for use in the United States, and use domestic construction  materials on contracts performed in the United States\u2014for certain  components. The Act includes exceptions, such as when the domestic  end products or construction materials are unavailable in sufficient and  reasonably available commercial quantities and of a satisfactory quality."], "subsections": []}, {"section_title": "Program Has Received Both Coast Guard and Navy Funds, but Unclear How Program Will Be Funded Moving Forward", "paragraphs": ["From 2013 through 2018, the program has received $360 million in  funding\u2014$60 million in the Coast Guard\u2019s Acquisition, Construction, and  Improvement appropriations (hereafter referred to as Coast Guard  funding) and $300 million in Navy\u2019s Shipbuilding and Conversion, Navy  advance procurement appropriations (hereafter referred to as Navy  appropriations). In addition, according to Coast Guard officials, in fiscal  year 2017, Coast Guard reprogrammed $30 million in fiscal year 2016  appropriations for the HPIB from another program (see figure 11).", "According to IPO and Navy contracting officials, the Navy plans to use  $270 million of the $300 million in Navy appropriations to award the detail  design and construction contract in fiscal year 2019, which would fund the  advanced engineering, long lead time materials, and detail design work.  Navy officials stated the remaining $30 million in Navy appropriations will  be held in reserves for potential scope changes. Of the $60 million in  Coast Guard funding, the IPO has used $41 million for program office  costs and the February 2017 design study contracts, and plans to use the  remaining $19 million for program office costs. Coast Guard officials  stated that they used the $30 million in reprogrammed 2016  appropriations to fund the design studies, model testing, and Navy  warfare center support.", "As the program prepares to award a contract worth billions of dollars if all  the options are exercised, Congress, the Coast Guard, and the Navy face  key funding considerations. These include the extent to which the  program will be funded using Coast Guard and Navy appropriations in the  future and whether each of the ships will be fully or incrementally  funded. Navy contracting officials stated that by structuring the  contract\u2019s construction work as options, the contract has flexibility to  accommodate any type of additional funding the program may receive.", "The National Defense Authorization Act for Fiscal Year 2018 authorized  procurement of one Coast Guard heavy polar icebreaker vessel. The  Navy did not request any funding in fiscal year 2019 for the HPIB, while  Coast Guard requested $30 million. Subsequently, after discretionary  budget caps were relaxed by Congress, the Administration\u2019s fiscal year  2019 budget addendum requested an additional $720 million in fiscal year  2019 Coast Guard appropriations for the program. Although the Navy  did not request fiscal year 2019 funding for the lead ship, and Navy  officials told us they have no plans to budget for the HPIB program  moving forward, Congress may still choose to appropriate funds for the  HPIB to the Navy. For example, in fiscal years 2017 and 2018, the Navy  did not request funding but received $150 million in appropriations each  year for the HPIB (see figure 12).", "Additionally, the Coast Guard has been expressly authorized to use  incremental funding for the HPIB. This authorization is reflected in the  Coast Guard\u2019s January 2018 affordability certification memo, submitted to  DHS leadership. These memos are required to certify that a program\u2019s  funding levels are adequate and identify tradeoffs needed to address any  funding gaps. However, as noted above, with the addition of the  Administration\u2019s fiscal year 2019 budget request addendum, the Coast  Guard requested $750 million in full funding for the lead ship. The Navy  has informed us that it plans to award the advance planning, design,  engineering, long lead time material contract line item with its $270 million  in appropriations. Navy officials also told us they are in the process of  determining whether it needs to be authorized by Congress to use an  incremental funding approach to fund the detail design and construction  options if full funding is not received by the Navy.", "According to the Office of Management and Budget\u2019s A-11 budget  circular, full funding helps to ensure that all costs and benefits of an  acquisition are fully taken into account at the time decisions are made to  provide resources. The circular goes on to say that when full funding is  not followed, without certainty if or when future funding will be available,  the result is sometimes poor planning, higher acquisition costs,  cancellation of major investments, or the loss of sunk costs. The circular,  however, also notes that Congress may change the agency\u2019s request for  full funding to incremental funding to accommodate more projects in a  year than would be allowed with full funding."], "subsections": []}, {"section_title": "Plans to Address Cost Growth Not Fully Documented", "paragraphs": ["Regardless of the funding strategy and which service funds the contract,  the Coast Guard and the Navy do not have a clear agreement on how  certain types of cost growth within the program will be addressed. The  budgeting and financial management appendix of the July 2017  agreement between the Coast Guard and Navy for the HPIB notes that  any cost overruns will be funded by the originating source of the  appropriation and be the responsibility of the organization that receives  the funding. However, the Coast Guard and the Navy have interpreted  \u201ccost overruns\u201d differently in the context of the agreement.", "Coast Guard and Navy officials are in agreement that given the fixed- price incentive contract type, the government\u2019s share of cost overruns  between the target cost and ceiling price (based on the share ratio) will be  the responsibility of the organization that provided the funding for the  contract line item. Navy officials also noted that because the contract type  is fixed-price incentive, any cost overruns above the ceiling price are  generally the responsibility of the contractor, not the government.", "However, the Coast Guard and the Navy have not addressed in an  agreement how they plan to handle any cost growth stemming from  changes to the scope, terms, and conditions of the HPIB detail design  and construction contract. For example, if the Coast Guard or the Navy  revises the program\u2019s requirements, this could increase the scope and  value of the contract and result in additional contract costs. It is unclear in  this instance, which organization is responsible for paying for the  additional costs. Further, our 2005 work on Navy shipbuilding programs  found that the most common causes of cost growth in these programs  were related to design modifications, the need for additional and more  costly materials, and changes in employee pay and benefits, some of  which required changes in contract scope.", "IPO officials told us that unplanned changes to the program\u2019s scope and  any corresponding funding requests for unanticipated cost growth would  require discussions and agreements with both Coast Guard and Navy  leadership. Coast Guard and Navy officials stated that they are in the  process of reviewing the July 2017 budget appendix of the agreement to  clarify the definition of cost overruns and plan to finalize revisions no later  than September 2018. Our prior work on implementing interagency  collaborative mechanisms found that agencies that articulate their  agreements in formal documents can strengthen their commitment to  working collaboratively, which can help better overcome significant  differences when they arise. Different interpretations or disagreements  on financial responsibility between the Coast Guard and the Navy on cost  growth for the HPIB program could result in funding instability for the  program, which could affect the program\u2019s ability to meet its cost and  schedule goals."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In the last several years, the Coast Guard and the Navy have made  significant strides in their efforts to acquire heavy polar icebreakers. It has  been over 40 years since the United States has recapitalized its aging  heavy polar icebreaker fleet, and Congress has expressed the need for  investment in the HPIB program to help ensure our continued presence in  the polar regions. The Coast Guard and the Navy have taken steps to  examine design risks and expressed commitment to design maturity  before starting construction on the lead ship.", "However, the Coast Guard and the Navy did not take key steps to reduce  risks on the HPIB program before setting the HPIB\u2019s program baselines\u2014 namely, conducting a preliminary design review, conducting a technology  readiness assessment, developing a fully reliable cost estimate, and  conducting analysis to determine a realistic schedule and risks to that  schedule. By setting the program\u2019s baselines prior to obtaining sufficient  knowledge in the design, technologies, cost, and schedule of the HPIB,  DHS, the Coast Guard, and the Navy are not establishing a sound  business case for investing in the HPIB nor putting the program in a  position to succeed. There is risk that the program will cost more than the  planned $9.8 billion and the lead ship will not be delivered by 2023 as  planned. Further, without clear agreement between the Coast Guard and  the Navy on which service will be responsible for any cost growth on the  HPIB, the program is at further risk of not meeting its ambitious goals. In  the current budget environment, it is imperative that the Coast Guard and  the Navy obtain sufficient acquisition knowledge and put together a sound  business case before asking Congress and taxpayers to commit  significant resources to the HPIB program."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making six recommendations total to the Coast Guard, DHS, and  the Navy:", "The Commandant of the Coast Guard should direct the polar  icebreaker program to conduct a technology readiness assessment in  accordance with best practices for evaluating technology readiness,  identify critical technologies, and develop a plan to mature any  technologies not designated to be at least TRL 7 before detail design  of the lead ship begins. (Recommendation 1)", "The Commandant of the Coast Guard, in collaboration with the  Secretary of the Navy, should direct the polar icebreaker program and  NAVSEA 05C to update the HPIB cost estimate in accordance with  best practices for cost estimation, including (1) developing risk bounds  for all phases of the program lifecycle, and on the basis of these risk  bounds, conduct risk and uncertainty analysis, as well as sensitivity  analysis, on all phases of the program lifecycle, and (2) reconciling  the results with an updated independent cost estimate based on the  same technical baseline before the option for construction of the lead  ship is awarded. (Recommendation 2)", "The Commandant of the Coast Guard should direct the polar  icebreaker program office to develop a program schedule in  accordance with best practices for project schedules, including  determining realistic durations of all shipbuilding activities and  identifying and including a reasonable amount of margin in the  schedule, to set realistic schedule goals for all three ships before the  option for construction of the lead ship is awarded. (Recommendation  3)", "The Commandant of the Coast Guard should direct the polar  icebreaker program office to analyze and determine appropriate  schedule risks that could affect the program after construction of the  lead ship begins to be included in its risk management plan and  develop appropriate risk mitigation strategies. (Recommendation 4)", "The DHS Under Secretary for Management should require the Coast  Guard to update the HPIB acquisition program baselines prior to  authorizing lead ship construction, after completion of the preliminary  design review, and after it has gained the requisite knowledge on its  technologies, cost, and schedule, as recommended above.  (Recommendation 5)", "The Commandant of the Coast Guard, in collaboration with the  Secretary of the Navy, should update the financial management and  budget execution appendix of the memorandum of agreement  between the Coast Guard and the Navy to clarify and document  agreement on how all cost growth on the HPIB program, including  changes in scope, will be addressed between the Coast Guard and  the Navy. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DHS and DOD for review and  comment. In its comments, reproduced in appendix IV, DHS concurred  with all six of our recommendations and identified actions it planned to  take to address them. The Navy stated that it deferred to DHS and the  Coast Guard on responding to our recommendations. DHS, the Coast  Guard, and the Navy also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of Homeland  Security, the Commandant of the Coast Guard, the Secretary of the Navy,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to the report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the extent to which the heavy polar icebreaker  (HPIB) program has taken steps to develop mature designs and  technologies consistent with best practices, (2) the extent to which the  HPIB program has taken steps to set realistic cost and schedule  estimates, and (3) the status of the HPIB program\u2019s contracting efforts  and funding considerations.", "To assess the extent to which the HPIB program has taken steps to  develop mature designs and technologies consistent with GAO-identified  best practices, we reviewed program performance and design  requirements, including the program\u2019s operational requirements  documents, system specifications such as the power plant, propulsion  system, and hull, and technical baseline; the program\u2019s alternatives  analysis study, tailored systems engineering plan, test and evaluation  master plan, and model testing results; cooperative agreements with  Canada related to the HPIB; excerpts from industry studies; and the  March 2018 detail design and construction request for proposals and  subsequent amendments. We also reviewed relevant Department of  Homeland Security (DHS), Coast Guard, and Department of Defense  (DOD) acquisition guidance and instructions. From these documents, we  determined the program\u2019s design and technology efforts and compared  them to GAO\u2019s various best practices, including using a knowledge-based  approach to shipbuilding, knowledge-based approach to major  acquisitions, and evaluating technology readiness. We also interviewed  knowledgeable officials from the Coast Guard\u2019s Capabilities Directorate,  Research and Development Center, and Marine Transportation Systems  Directorate; DHS\u2019s Science and Technology Directorate\u2019s Office of  Systems Engineering; the Canadian Coast Guard; and the National  Science Foundation.", "To assess the extent to which the HPIB program has taken steps to set  realistic cost and schedule estimates, we determined the extent to which  the estimates were consistent with best practices as identified in GAO\u2019s  Cost Estimating and Assessment and Schedule Assessment guides. To  assess the cost estimate, we reviewed the HPIB\u2019s January 2018 lifecycle  cost estimate used to support the program\u2019s initial cost baselines, Coast  Guard and Navy documentation supporting the estimate, relevant  program briefs to Coast Guard leadership, and HPIB program  documentation containing cost, schedule, and risk information. We met  with Naval Sea Systems Command (NAVSEA) officials responsible for  developing the cost estimate to understand the processes used by the  cost estimators, clarify information, and request additional documentation  to support the estimate. Because we did not have direct access to the  HPIB cost model, we observed portions of the model during a  presentation and discussion with Navy cost estimators. We also reviewed  the Naval Center for Cost Analysis\u2019 September 2017 independent cost  estimate for the HPIB program, the DHS Cost Analysis Division\u2019s January  2018 independent cost assessment of the HPIB lifecycle cost estimate,  and DHS Office of Systems Engineering\u2019s January 2018 technical  assessment of the HPIB program. We also conducted interviews with  officials from the Naval Center for Cost Analysis, DHS Cost Analysis  Division, and the DHS Office of Systems Engineering.", "To assess the program\u2019s schedule, we compared the HPIB program\u2019s  schedule, including the program\u2019s initial schedule baselines, delivery  schedules from the HPIB\u2019s request for proposals for the detail design and  construction contract, and integrated master schedule, to selected GAO  best practices for project schedules, including establishing the duration of  activities, ensuring reasonable total buffer or margin, and conducting a  schedule risk analysis. To specifically assess the HPIB lead ship\u2019s 3- year construction schedule estimate, we reviewed the Coast Guard\u2019s and  the Navy\u2019s analysis supporting the HPIB schedule. We did not assess the  reliability of the historical ship construction data the Coast Guard and  Navy used for this analysis. We also compared the HPIB lead ship\u2019s 3- year construction schedule to historical construction cycle times of lead  ships among a nongeneralizable sample of major Navy and Coast Guard shipbuilding programs. We selected programs that were active within the  last 10 years and have completed construction of the lead ship. We also  included the Coast Guard\u2019s Healy medium polar icebreaker, even though  it is not a recent shipbuilding program, because it is the most recent polar  icebreaker to be built in the United States. We excluded the Coast Guard  Fast Response Cutter, Navy submarines, and Navy aircraft carriers  because we determined that their size and complexity did not make them  reasonable comparisons to the HPIB for construction times. This resulted  in an analysis of construction schedules for 10 shipbuilding programs. We  obtained data on these programs\u2019 construction schedules from program  documentation, such as acquisition program baselines, Navy selected  acquisition reports, and Navy and Coast Guard budget documentation.  We selected only lead ships for comparison because we have found in  our prior work that schedule delays are amplified for lead ships in a class.  Lead ships are thus more comparable to the HPIB lead ship than follow- on ships. We reviewed ship displacement data from the Naval Vessel  Registry and the Coast Guard to control for the size of the ships. To  assess the reliability of Naval Vessel Registry data, we reviewed the  Navy\u2019s data collection and database maintenance documentation, cross- checked select data across Navy websites, and interviewed cognizant  Navy officials regarding internal controls for the database. We determined  the ship displacement data were reliable for our purposes. To assess the  degree to which the 6-month schedule margin that the HPIB baseline  affords the lead ship is in keeping with historical ship delivery delays, we  reviewed Coast Guard, Navy, and DHS acquisition documentation from a  nongeneralizable sample of major Navy and Coast Guard shipbuilding  programs. We selected programs active within the last 10 years and  analyzed changes in lead ship delivery dates. We excluded Navy  submarines and aircraft carriers because we determined that their size  and complexity did not make them reasonable comparisons to the HPIB  for delivery delays. We included programs that have not yet delivered  their lead ships. This resulted in an analysis of construction schedules for  12 shipbuilding programs. For delivered ships, we used the actual  delivery date; for ships not yet delivered, such as the Offshore Patrol  Cutter and DDG 1000, we used the most recent, planned delivery date in  the program baseline.", "To determine the status of the HPIB program\u2019s contracting efforts and  funding considerations, we reviewed the program\u2019s acquisition plan,  March 2018 request for proposals and subsequent amendments,  certification of funds memorandum, budget justifications, lifecycle cost  estimate, and the Coast Guard\u2019s fiscal year 2019 Capital Investment  Plan. We also interviewed knowledgeable officials from the Coast Guard\u2019s  Office of Budget and Programs, NAVSEA Contracts Directorate, NAVSEA  Comptroller Directorate, and the Office of the Assistant Secretary of  Navy\u2019s Financial Management and Comptroller.", "For all objectives, we reviewed relevant DHS and Coast Guard policies  and interviewed knowledgeable officials from DHS, the Coast Guard\u2019s  and the Navy\u2019s HPIB integrated program office, and ship design team.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Shipbuilding Phases", "paragraphs": ["There are four primary phases in shipbuilding: pre-contracting activities  and contract award, detail design and planning, construction, and post- delivery activities (see table 6)."], "subsections": []}, {"section_title": "Appendix III: Summary of Results of Heavy Polar Icebreaker Program\u2019s Cost Estimate Assessed against GAO\u2019s Best Practices", "paragraphs": ["The GAO Cost Estimating and Assessment Guide (GAO-09-3SP) was  used as criteria in this analysis. Using this guide, GAO cost experts  assessed the heavy polar icebreaker (HPIB) program\u2019s lifecycle cost  estimate against measures consistently applied by cost-estimating  organizations throughout the federal government and industry that are  considered best practices for developing reliable cost estimates. For our  reporting purposes, we grouped these best practices into four  categories\u2014or characteristics\u2014associated with a reliable cost estimate:  comprehensive, accurate, well documented, and credible. A cost estimate  is considered reliable if the overall assessment ratings for each of the four  characteristics are substantially or fully met. If any of the characteristics  are not met, minimally met, or partially met, then the cost estimate does  not fully reflect the characteristics of a high-quality estimate and cannot  be considered reliable. After reviewing documentation the Navy submitted  for its cost estimate, conducting interviews with the Navy\u2019s cost  estimators, and reviewing other relevant HPIB cost documents, we found  the HPIB lifecycle cost estimate substantially met three and partially met  one characteristic of reliable cost estimates.", "We determined the overall assessment rating by assigning each  individual rating a number: Not Met = 1, Minimally Met = 2, Partially Met =  3, Substantially Met = 4, and Met = 5. Then, we took the average of the  individual assessment ratings to determine the overall rating for each of  the four characteristics. The resulting average becomes the Overall  Assessment as follows: Not Met = 1.0 to 1.4, Minimally Met = 1.5 to 2.4,  Partially Met = 2.5 to 3.4, Substantially Met = 3.5 to 4.4, and Met = 4.5 to  5.0. See table 7 for a high level summary of each best practice and the  reasons for the overall scoring."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition the contact named above, the following staff members made  key contributions to this report: Rick Cederholm (Assistant Director),  Claire Li (Analyst-in-Charge), Peter Anderson, Brian Bothwell, Juan\u00e1  Collymore, Laurier Fish, Kristine Hassinger, Karen Richey, Miranda  Riemer, Roxanna Sun, David Wishard, and Samuel Woo."], "subsections": []}]}], "fastfact": ["The Coast Guard and Navy are planning to invest up to $9.8 billion to build and maintain three heavy polar icebreakers to conduct missions in the Antarctic and Arctic. The first ship is scheduled for delivery in 2023.", "We found the icebreaker program faces risks in 3 key areas:", "the program has not fully assessed how well key technologies will work in this particular effort,", "its cost estimate may underestimate the funding needed, and", "it set ship delivery dates that are optimistic and not based on a realistic shipbuilding assessment.", "We made six recommendations to address these and other risks."]}
{"id": "GAO-19-138", "url": "https://www.gao.gov/products/GAO-19-138", "title": "Federal Building Security: Actions Needed to Help Achieve Vision for Secure, Interoperable Physical Access Control", "published_date": "2018-12-20T00:00:00", "released_date": "2018-12-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["A 2004 federal directive and the related standard set forth a vision for using information technology to verify the identity of individuals accessing federal buildings. The vision calls for secure and reliable forms of identification that work in conjunction with access control systems. Interoperability of these systems across departments and agencies is part of the vision. OMB and GSA have government-wide responsibilities related to this effort. ISC provides guidance to non-military executive branch agencies on physical security issues. GAO was asked to examine PACS implementation efforts.", "This report discusses (1) steps OMB and GSA have taken to fulfill their government-wide responsibilities related to PACS and (2) challenges selected federal agencies face in meeting current requirements. For review, GAO analyzed documents from Commerce, GSA, ISC, and OMB. GAO selected five non-military agencies based on factors including number of buildings and geographic location. GAO reviewed relevant requirements and key practices. GAO also interviewed federal agency officials, PACS vendors, and knowledgeable industry officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Management and Budget (OMB) and the General Services Administration (GSA) have taken steps to help agencies procure and implement secure, interoperable, GSA-approved \u201cphysical access control systems\u201d (PACS) for federal buildings. PACS are systems for managing access to controlled areas within buildings. PACS include identification cards, card readers, and other technology that electronically confirm employees' and contractors' identities and validate their access to facilities (see figure). Steps taken include the following:", "OMB issued several memos to clarify agencies' responsibilities. For example, OMB issued a 2011 memo citing Department of Homeland Security (DHS) guidance that agencies must upgrade existing PACS to use identity credentials before using relevant funds for other activities. But, GAO found OMB's oversight efforts are hampered because it lacks baseline data on agencies' implementation of PACS. Without such data, OMB cannot meet its responsibility to ensure agencies adhere to PACS requirements or track progress in implementing federal PACS requirements and achieving the vision of secure, interoperable systems across agencies.", "GSA developed an Approved Products List that identifies products that meet federal requirements through a testing and evaluation program. Federal agencies are required to use the Approved Products List to procure PACS equipment. GSA also has provided procurement guidance to agencies through its identity management website.", "Officials from the five selected agencies that GAO reviewed identified a number of challenges relating to PACS implementation including cost, lack of clarity on how to procure equipment, and difficulty adding new PACS equipment to legacy systems. Officials from OMB, GSA, and industry not only confirmed that these challenges exist but also told GAO that they were most likely present across the federal government. The Interagency Security Committee (ISC), chaired by the DHS and consisting of 60 federal departments and agencies, has a mission to develop security standards for non-military agencies. In this capacity the ISC is well-positioned to determine the extent that PACS implementation challenges exist across its membership and to develop strategies to address them. An ISC official told GAO that the ISC has taken steps to do so including setting up a working group to assess what additional PACS guidance would be beneficial."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends (1) that OMB determine and regularly monitor a baseline level of progress on PACS implementation and (2) that ISC assess the extent of, and develop strategies to address, government-wide challenges to implementing PACS. OMB had no comment on the recommendation. DHS concurred with the recommendation to ISC."]}], "report": [{"section_title": "Letter", "paragraphs": ["In an effort to increase the security of federal facilities and information  systems where there is potential for terrorist attacks such as those that  occurred on September 11, 2001, Homeland Security Presidential  Directive 12 (HSPD-12) established the requirement for a mandatory,  government-wide identification standard for federal government  employees and contractor personnel in August 2004. The standard  specifies the technical requirements for physical access control systems  to issue secure and reliable identification credentials to federal employees  and contractors for gaining access to federal facilities and information  systems. In order to meet this standard, agencies have begun  implementing enhanced physical access control systems for controlling  employees\u2019 and contractors\u2019 access to buildings. These systems use  personal identity verification (PIV) cards that operate with networked  physical access control systems, so that agencies can make sure that the  employees and contractors who enter federal buildings are who they  claim to be and have the proper authority to enter. To implement this  vision and in response to HSPD-12, standards and guidance also call for  the interoperability of these systems across agencies.\u201d", "Several federal agencies have key government-wide responsibilities for  this effort. The Office of Management and Budget (OMB) is responsible  for the program\u2019s overall direction and oversight. The General Services  Administration (GSA) is responsible for testing physical access control  systems to ensure they meet security and interoperability standards and  identifying such systems through its Approved Products List. OMB and  the Federal Acquisition Regulation require agencies to use the Approved  Products List when buying physical access control systems to achieve an  integrated approach to physical security. The Interagency Security  Committee (ISC), chaired by the Department of Homeland Security  (DHS), plays a key role in ensuring the protection of nondefense buildings  and facilities and security for them in the United States. The Department  of Commerce\u2019s National Institute of Standards and Technology (NIST)  sets technical specifications that form the basis of standards, including for  example, the minimum requirements for a federal PIV system that meets  the control and security objectives of HSPD -12.", "Implementation of physical access control systems at federal agencies  represents a significant federal investment. For example, over the next 5  years, TSA plans to spend about $73 million to implement physical  access control systems with the bulk of these funds ($51 million) going  toward the acquisition of new systems from the Approved Products List.  TSA is one of hundreds of federal agencies. In addition, according to  GSA officials, GSA has spent millions of dollars to test these systems.  However, a congressional committee and some industry stakeholders  have raised questions about the implementation of this directive,  specifically about the extent to which agencies are using the Approved  Products List to purchase physical access control systems. Not only could  purchasing products not on the Approved Products List lead to wasteful  spending, but such purchases could result in security breaches if, for  example, elements of access credentials are counterfeited, cloned, or  copied, and physical access control systems fail to detect them.", "In support of congressional oversight of federal buildings\u2019 security, you  asked that we examine issues related to agencies\u2019 implementation of  federal physical access control system requirements. Our objectives were  to (1) assess steps OMB and GSA have taken to fulfill their government- wide responsibilities related to requirements for implementing physical  access control systems and (2) identify challenges selected federal  agencies face in meeting requirements for federal physical access control  systems.", "To address these objectives, we interviewed OMB and GSA about their  efforts to fulfill their government-wide responsibilities in this area. We also  asked them to provide data on agencies\u2019 Approved Products List usage.  We interviewed private sector companies that have key roles in  government-wide implementation of HSPD-12, specifically: seven  manufacturers of physical access control systems, five integrators  (contractors who install the equipment and connect it to agency networks  with software), as well as other industry organizations, including a trade  association, GSA\u2019s contractor that tests physical access control systems  for the Approved Products List, and a long-time industry consultant.", "To identify illustrative examples of the progress that individual agencies  have made in using the Approved Products List to implement HSPD-12  requirements, as well as the challenges that they have faced in doing so,  we selected five executive branch agencies: (1) the U.S. Coast Guard in  DHS; (2) the Bureau of Prisons in the Department of Justice (Justice); (3)  the Transportation Security Agency (TSA) in DHS; (4) the Environmental  Protection Agency (EPA); and (5) the General Services Administration.  Our criteria for agency selection included, but were not limited to,  agencies with facilities (1) held by non-defense executive branch  agencies; (2) located in the United States; and (3) totaling 200 or more  buildings. We limited our scope to non-defense agencies because we  also have other ongoing work related to these issues at the Department  of Defense. We interviewed knowledgeable officials at these agencies  about the Approved Products List and reviewed information on agencies\u2019  purchases of GSA-approved physical access control systems equipment  using the Approved Products List since 2013, the year GSA began  conducting more rigorous testing and approval of physical access control  system equipment. Our use of the term stakeholders in this report may  refer to agencies, physical access control manufacturers, integrators, and  knowledgeable organizations or officials. Results from our interviews with  the selected agencies cannot be generalized. To identify challenges  selected federal agencies face in adhering to federal physical access  control system requirements, we reviewed relevant trade industry  literature and conducted an analysis of our interviews with agency  officials. In addition to considering the range of federal requirements  related to physical access control, we evaluated agency activities related  to monitoring and oversight against pertinent standards for internal  controls in the federal government and leading practices for collaboration  identified in prior GAO work. See Appendix I for more detail about our  methodology.", "We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Personal Identity Verification Cards", "paragraphs": ["Developed in response to HSPD-12, Personal Identity Verification (PIV)  cards are a common authentication mechanism used across the federal  government, and are a component of physical access control systems.  PIV cards are used to securely identify federal government employees  and contractor personnel seeking access to valuable and sensitive  federal resources, including facilities and information systems. Also  known as a \u201csmart card,\u201d a PIV card is similar in size to a credit card and  contains information that is either printed on the outside or stored on the  card\u2019s integrated circuit chip (see fig. 1 below). PIV cards are required to  be interoperable with all GSA-approved physical access control system  equipment included on the Approved Products List, regardless of that  equipment\u2019s manufacturer. Likewise, GSA-approved physical access  control system equipment is required to be interoperable with all PIV  cards."], "subsections": []}, {"section_title": "Access to Controlled Areas", "paragraphs": ["Physical access control systems are used to manage access to controlled  areas, such as a building or a room in a building. Physical access control  products include devices such as card readers and the ID cards used to  validate an individual\u2019s authorization to enter a building (see fig.2 below).  This report focuses on physical access and does not address logical  (computer network) access.", "A physical access control system works as follows. When employees or  contractors who are PIV cardholders attempt to enter a controlled area  managed by a physical access control system, they will encounter the  physical access control system at the \u201cfront end.\u201d At this point, depending  on the controlled area\u2019s level of security, the cardholder will  scan their PIV cards via a card reader,  insert their PIV cards and enter personal identification numbers (PIN)  via an input device such as a keypad, or  insert their PIV cards, enter PINs, and provide biometric identification  (such as a fingerprint) via an input device.", "After the cardholders present their identification information, the  cardholders\u2019 identification information from a PIV card\u2019s integrated circuit  chip is transmitted to the physical access control system\u2019s \u201cback end,\u201d  which consists of physical and logical access control systems and  authorization data. At the back end, the physical access control system  determines the validity of the cardholder\u2019s access authorization. The  cardholder will be able to access the area only if the authorization is valid.", "When deciding which access control mechanisms to implement, agencies  must first understand the level of risk associated with the facility. The  higher the risk level, the greater the need there is for agencies to  implement a high-assurance-level access control system. Physical  access control systems can be electronically connected in different ways,  including within a given building or across an agency or department. The  level of interoperability determines the level at which PIV cards and  access authorization will be accepted. For example, a PIV card and  corresponding access authorization may be accepted within a single  building, across an agency, or potentially across the federal government.  In this report, we describe a system in which a PIV card works in multiple  physical access control systems as \u201cinteroperable\u201d. In order to realize the  full security benefit of PIV cards, physical access control systems must  have a network connection that enables them to validate a given  cardholder\u2019s access credentials."], "subsections": []}, {"section_title": "Federal Requirements", "paragraphs": ["Homeland Security Protection Directive-12: HSPD-12 is a 2004  presidential directive establishing the requirement for a mandatory,  government-wide standard for secure and reliable forms of identification  (PIV cards) issued by the federal government to its employees and  contractors. It specified that the standard must include criteria  authenticating employees\u2019 identities and permissions at graduated levels  of security, depending on the agency environment and the sensitivity of  facilities and data accessed.", "Federal Information Processing Standards (FIPS) 201: The  Department of Commerce\u2019s NIST initially published the Federal  Information Processing Standards (FIPS) 201 in 2005 to support HSPD- 12. The FIPS 201 standard established the PIV card as a common  authentication mechanism across the federal government. FIPS 201 set  standards for PIV systems in three areas: (1) identity proofing and  registration, (2) card issuance and maintenance, and (3) protection of  card applicants\u2019 privacy. In addition, the standard provides technical  specifications for the implementation and use of interoperable smart  cards in physical access control systems. An update to FIPS 201 (called  FIPS 201-2), was released in August 2013. Among other things, it made  the collection of a facial image mandatory for PIV cards and changed the  maximum lifespan of a card from 5 to 6 years.", "Approved Products List \u2013 The Approved Products List is a list of all  physical access control system equipment that is compliant with FIPS  identification standards. Agencies must acquire federally-approved  products and services from this list in order to help ensure government- wide interoperability of physical access control systems. All products on  the Approved Product List have gone through end-to-end testing and  evaluation, as part of a complete physical access control system.  Federal agencies are required to use the Approved Products List when  purchasing physical access control system equipment. The Approved  Products List is intended to provide assurance to federal agencies that  listed vendors\u2019 products comply with the various federal standards and  requirements."], "subsections": []}, {"section_title": "Government-wide Roles and Responsibilities", "paragraphs": [], "subsections": [{"section_title": "Office of Management and Budget (OMB)", "paragraphs": ["HSPD-12 designates OMB as the lead entity with responsibility for  ensuring that federal government departments and agencies implement  this directive in a manner consistent with ongoing government-wide  activities and existing OMB policies and guidance."], "subsections": []}, {"section_title": "General Services Administration (GSA)", "paragraphs": ["GSA supports OMB by administering product testing through a contractor,  managing the Approved Products List, and making the physical access  control system\u2019s products and services available to federal agencies via  GSA\u2019s Federal Acquisition Service. The Federal Acquisition Service  manages a large portion of GSA\u2019s Federal Supply Schedules program  (GSA Schedule), which establish long-term government-wide contracts  with commercial firms to provide federal agencies access to millions of  commercial products and services at volume discount pricing.  Further,  GSA\u2019s Office of Government-wide Policy (OGP) provides tools and  support for identity, credential, and access management activities across  the federal government, including for physical access control systems.  GSA also has a government-wide landlord role through its Public  Buildings Service and installs physical access control systems in many  GSA-owned and leased buildings that it manages."], "subsections": []}, {"section_title": "Interagency Security Committee", "paragraphs": ["The ISC is chaired by DHS and consists of 60 federal departments and  agencies. ISC\u2019s mission is to develop security standards, best practices,  and guidelines for nonmilitary federal facilities in the United States. Each  of the five selected agencies included in our report, or their home  departments, is a member of the ISC. The ISC has the authority to  convene working groups from its member agencies to produce  documents, which are task-based and provide ISC\u2019s members with a  forum for information sharing to address a wide range of issues related to  physical security at federal buildings. ISC also produces standards and  best practices guidance for agencies to use when addressing security  issues. For example, in December 2015 ISC released Best Practices for  Planning and Managing Physical Security Resources: An Interagency  Security Committee Guide. This document is intended to identify  practices most beneficial for physical security programs, determine the  extent to which federal agencies currently use these practices, and  compile and circulate best practices agencies can use as a supplement to  the ISC\u2019s existing security standards."], "subsections": []}]}]}, {"section_title": "OMB and GSA Have Taken Steps to Fulfill Their Responsibilities to Implement Physical Access Control Systems, but Oversight Is Limited", "paragraphs": [], "subsections": [{"section_title": "OMB and GSA Have Supported Implementing Physical Access Control Systems", "paragraphs": ["OMB and GSA have taken steps to help agencies procure and implement  secure and interoperable GSA-approved physical access control systems  across the federal government. For example, OMB has issued three  guidance memorandums to clarify agency responsibility to use GSA\u2019s  Approved Products List.  1.  In 2005, OMB designated GSA as the \u201cexecutive agent for  government-wide acquisitions of information technology\u201d for the  products and services required for physical access control and  delineated agency responsibilities with regard to implementing HSPD- 12. Also, to ensure government-wide interoperability, all agencies  must acquire products and services that are compliant with standards  and included on the Approved Products List.  2.  In 2006, OMB reiterated that agencies must purchase physical access  control systems from GSA\u2019s Approved Products List and that GSA will  make approved products and services available through acquisition  vehicles (Schedules) that are available to federal agencies.  3.  In 2011 OMB issued a memo that cited DHS guidance that stated  effective in fiscal year 2012 agencies must upgrade existing physical  and logical access control systems to use PIV credentials prior to  using relevant funds for other activities. The memorandum further  stated that the upgrades must be in accordance with NIST standards.", "In addition, GSA, as the lead agency for government-wide acquisition of  information technology, has undertaken a number of efforts to promote  the implementation of GSA-approved physical access control systems:  1)  Testing and evaluation: GSA administers and conducts testing and  evaluation to develop an Approved Products List. Testing is  performed by either third-party accredited testing labs or GSA- managed testing labs. GSA tests a variety of products and services  including smart cards; physical access control systems; which include  card readers and infrastructure for example; and integrators which  provide or install access control services. According to GSA officials,  GSA has fully tested all physical access control system equipment  included on the Approved Products List and evaluated and approved  the suitability of vendors and system integrators. GSA shares  information about vendors, system integrators and Approved Products  List equipment with federal agencies.  2)  Guidance and support: GSA has taken several actions to improve  guidance and facilitate the implementation of physical access control  systems. First, GSA manages IDManagement.gov, which guides  federal agencies through the process of identifying Approved  Products List-compliant physical access control system equipment.  Second, GSA established the U.S. Access program to enable federal  civilian agencies to issue common HSPD-12 approved credentials to  their employees and contractors. Finally, GSA developed a list of  system integrators that can be used to install physical access control  systems that have been approved for the Approved Products List.  These integrators (there are 25 as of November 2018) are listed on  the GSA\u2019s IDManagement.gov website.  3)  Information sharing: According to GSA officials, GSA responds to  email questions from agencies about the Approved Products List, and  GSA makes subject matter experts available to any agency  representatives with questions.  4)  Procurement support: According to GSA officials, GSA provides  standard procurement language for agencies to include in statements  of work before their requests for proposal go out for physical access  control systems. However, according to officials, GSA has no control  over whether agencies decide to include the language that it provides.", "Stakeholders including agencies and manufacturers that we interviewed  generally considered the Approved Products List to have achieved its  intent. For example, government and industry officials said that they  believe the list provides assurance to government agencies that physical  access control systems will work as intended and will help facilitate a  more interoperable system government-wide, thereby enhancing security.  Moreover, stakeholders we interviewed said they generally thought the  associated costs and burdens of going through GSA\u2019s testing and  evaluation have been worth the effort. Without the Approved Products  List, these stakeholders believe that the quality and interoperability of  products would diminish. According to some stakeholders, prior to the  current end-to-end testing of products, companies submitted products to  the Approved Products List that either did not work as intended or were  not compatible with other products. Stakeholders also commented on the  improvements to the Approved Products List since GSA took over the  certification testing, noting that use of manufacturer self-testing prior to  2012 was not successful. In addition, the cost to industry to do self-testing  was high, according to vendors, and some companies did not do it well,  according to GSA, EPA, and TSA officials."], "subsections": []}, {"section_title": "OMB Lacks Necessary Information to Conduct Oversight", "paragraphs": ["We found that neither OMB nor GSA currently collect data on agency  efforts to implement physical access control system requirements,  including use of the Approved Products List. This is significant because  our interviews with physical access control systems\u2019 manufacturers,  integrators, and selected agencies indicate that government-wide  implementation of physical access control systems may be limited and  raises questions about government-wide progress. Officials from four of  the five selected agencies we reviewed told us that, since 2013, when  physical access control system end-to-end testing requirements began,  they had only purchased GSA-approved physical access control system  equipment for a limited number of their facilities. Moreover, they said that  where purchasing occurred, it was sometimes for physical access control  systems that required replacement because they were nearing the end of  their useful life.", "For the five selected agencies, we found the following:", "General Services Administration: According to GSA officials, a  limited number of GSA facilities have physical access control systems  that fully adhere to the latest requirements. According to GSA  officials, GSA has met federal physical access control system  requirements for 70 out of approximately 340 of its non-courthouse  buildings with another 90 being partially in line with requirements  (e.g., PIV access credentials are used). The remaining facilities do not  yet meet federal physical access control system requirements. GSA  staff also told us that GSA administers the public spaces in  approximately 360 courthouse buildings and is developing a security  implementation plan for these spaces. GSA officials told us that GSA  also administers about 8,000 leased buildings where the tenants in  these spaces are generally responsible for setting up physical access  control systems and GSA does not track this information.", "Environmental Protection Agency: According to EPA officials, none  of EPA\u2019s 72 facilities (including, for example, its headquarters building  in the District of Columbia and 10 regional headquarters buildings)  currently adhere to the latest physical access control system  requirements. Specifically, EPA officials told us that the agency used  GSA\u2019s Approved Products List to purchase physical access control  system equipment in the past. However, because requirements have  changed over time, the 72 buildings where EPA is responsible for  physical access control need to be upgraded to the latest  requirements. To do so, EPA officials said they will procure these  systems using the Approved Products List and prioritize  implementation in the future to those facilities with the highest  assessed risk. EPA officials said that in August 2013, changes to  physical access control systems\u2019 standards required the agency to  purchase and install complete physical access control systems that  GSA has tested end-to-end and that adhere to the latest  requirements. EPA officials said they expect the end-to-end tested  physical access control systems to lead to systems that are more  secure and interoperable.", "Bureau of Prisons: The Bureau of Prisons has implemented  Approved Products List-compliant physical access control system  equipment in regional and central offices according to agency officials  we interviewed. According to officials, the Bureau of Prisons  purchased physical access control systems using the Approved  Products List for its headquarters complex (three buildings) and six  regional offices beginning in 2009 and made upgrades to this  equipment in 2015 to adhere to federal physical access control  system requirements at the time. However, Bureau of Prisons officials  told us that the agency has not implemented physical access control  systems at its institutions (prisons). Bureau of Prisons officials told us  that physical security and screening procedures at prisons are more  stringent than those that occur with typical building-access procedures  as persons and belongings are scanned and searched. Physical  access control system equipment at these prisons may in fact be  problematic because, according to Bureau of Prisons officials, doors  should not automatically be opened based on a PIV card without  manual checks to ensure staff are not under duress or fraudulent  access is being attempted. Bureau of Prisons officials said that at the  prisons, identification credentials are first visually examined by prison  personnel before access is granted, and all gates and points of entry  are controlled by prison personnel.", "Transportation Security Administration: According to TSA officials,  since 2013, 64 TSA facilities have implemented some physical access  control system upgrades using products from the Approved Products  List, while an additional 75 leased facilities have been upgraded by  GSA.  While the 139 facilities are not fully compliant, the only item  missing to make these facilities compliant, according to TSA officials,  is the capability for interoperable, secure identification checks among  federal agencies. This would allow TSA\u2019s physical access control  systems to recognize revoked PIVs from any federal agency.  TSA  told us that it plans to roll out this capability in fiscal year 2019.  Our  review of TSA\u2019s 2015 plan to meet the latest physical access control  system requirements indicates that the agency is taking steps toward  full compliance. TSA\u2019s implementation plan was developed in  response to DHS\u2019s 2012 Modernization Strategy for Physical Access  Control Systems, which provides guidance to DHS for implementing  secure and compliant end-to-end physical access control systems  from GSA\u2019s Approved Products List. Over the next 5 years, TSA plans  to spend about $73 million in physical access control system  implementation with the bulk of these funds ($51 million) going toward  the acquisition of new systems from the Approved Products List.", "United States Coast Guard: Coast Guard officials told us that none  of the agency\u2019s 1,400 facilities where it has security responsibilities  fully adhere to the latest federal physical access control system  requirements. However, 53 of these facilities have been prioritized for  physical access control system implementation. In addition, since  2013, four Coast Guard locations have begun to implement GSA- approved physical access control systems using the Approved  Products List. These locations are Jacksonville, FL; New York, NY;  Corpus Christi, TX; and the Coast Guard\u2019s Security Center in  Chesapeake, VA. Decisions about physical access control system  equipment are made on a facility-by-facility basis, according to Coast  Guard officials. These officials said that due to the decentralized  nature of Coast Guard\u2019s decision-making process for physical access  control systems, it is difficult to say where purchases have been  made, and there is no systematic tracking. The Coast Guard does not  have a formal plan for upgrading its physical access control systems,  but Coast Guard officials told us that they continue to pursue  opportunities to upgrade facilities with physical access control system  equipment using the Approved Products List. For example, Coast  Guard officials told us that they currently emphasize system upgrades  for those systems that reach the end of their useful life or otherwise  necessitate replacement.", "These five selected agencies are illustrative of the oversight difficulties  that OMB faces because it does not have baseline information about  agencies\u2019 efforts to implement physical access control systems, including  implementation of GSA-approved systems. This lack of information  hampers OMB\u2019s efforts to (1) meaningfully track and monitor agencies\u2019  adherence to physical access control system requirements, or (2) provide  an incentive for agencies to be more accountable with regard to where  their physical access control systems stand in terms of their ability to  prevent security breaches. Federal internal-control standards state that  establishing a baseline is an internal control that can be used to perform  monitoring activities. Baseline data allow organizations to identify and  address performance issues and deficiencies. Establishing a baseline to  understand the current status of physical access control system  implementation could improve efforts to evaluate progress federal  agencies are making and could also provide an incentive to agencies to  further improve. Moreover, federal internal-control standards also direct  agencies to hold organizations accountable for their assigned  responsibilities.", "OMB staff said that OMB oversees physical access control systems\u2019  requirements as part of its normal process of reviewing agencies\u2019 budget  submissions but does not conduct oversight outside of this process. This  approach, however, does not allow OMB to identify or monitor the extent  to which agencies are purchasing physical access control systems that  meet the latest requirements or take action if agencies lag in this area."], "subsections": []}]}, {"section_title": "Selected Agencies Have Faced Various Challenges in Meeting Physical Access Control Systems\u2019 Requirements and May Benefit from Additional Government-wide Support", "paragraphs": ["Selected federal agencies face cross-cutting, as well as agency-specific,  challenges to acquiring and integrating physical access control system  equipment, according to agency representatives and industry  stakeholders we spoke to. These challenges include cost, confusion  regarding GSA Schedule\u2019s use, lack of trained agency officials, adapting  legacy systems, and security concerns about integrating physical access  control systems.", "Cost: Officials from most of the five selected agencies, from physical  access control system manufacturers, and from integrators we  interviewed told us that the cost of buying GSA-approved physical  access control systems using the Approved Products List and  installing them in adherence to federal physical access control system  requirements is a challenge in the current budget environment.  Agency representatives also told us they view the regulatory and  OMB requirement to upgrade physical access control systems as a  costly unfunded mandate that these agencies have difficulty meeting.  For example, TSA officials estimate that TSA will need over $14  million per year to continue implementing GSA-approved physical  access control systems using the Approved Products List in its 625  facilities, an expense for which the agency receives no additional  funds. However, OMB staff told us that agencies have had 13 years in  which to replace physical access control systems\u2019 technology with  products that meet federal requirements, and that the issue may be  agencies\u2019 training and planning, rather than cost. OMB staff told us  that the expectation was, that over time, agencies would implement  physical access control systems that used equipment that was  exclusively from the APL and compliant with FIPS.", "Confusion regarding GSA Schedules: Officials from some of the  five selected agencies and some stakeholders told us that there is  some uncertainty in government and industry about which GSA  contracting Schedule should be used to acquire GSA-approved  physical access control system equipment and services. For example,  some stakeholders are unsure which GSA Schedule they should use  to provide their services. GSA Schedule 70 is generally used for  information technology purchases.", "GSA Schedule 84 is generally used for physical security equipment  purchases, including products such as security alarms and  surveillance equipment. However, some stakeholders told us they  found federal guidance unclear as to whether Schedule 70 or 84  should be used for GSA-approved physical access control system  purchases. For example, some integrators told us that it was not  always clear for what Schedule they should seek approval to be on to  sell their services. Federal regulations and an OMB memo both  mention Schedule 70 as being the appropriate Schedule for  purchasing physical access control systems, but do not explicitly  exclude the use of Schedule 84.", "Complicating matters, some stakeholders told us some companies  are only approved for Schedule 84 because getting approved for both  Schedules was time-consuming and costly, and not worth the effort  given the lack of clarity regarding which Schedule is required.  According to OMB staff, guidance is clear that Schedule 70 should be  used to purchase physical access control equipment because this  equipment is considered to be information technology. OMB staff  explained that their memo on this subject was not intended to  introduce ambiguity on the issue of what Schedule is appropriate for  use, but to accommodate practices at the Department of Defense,  which performs some of its own product testing separate from GSA\u2019s  testing program. According to GSA\u2019s Office of Government-wide  Policy (OGP), GSA is aware of the confusion among GSA\u2019s federal  customers regarding GSA Schedule use. To address this situation,  GSA convened a \u201creverse industry\u201d training event in September 2018,  at which industry representatives provided feedback to GSA on the  acquisition process and ways that it could be improved, including  issues pertaining to acquisitions related to physical access control  systems. According to federal officials, one point of emphasis by  industry was that purchasing physical access control equipment from  the Approved Products List was not sufficient for having a functioning  physical access control system; system integration was also  necessary. During this event, GSA officials took the position that both  Schedule 70 and Schedule 84 could be used to purchase physical  access control systems, but OMB staff maintain that Schedule 70 is  preferred. OMB staff explained that Schedule 84 does not have the  testing and evaluation requirements for PACS equipment on it that  Schedule 70 does.  According to OMB, this frustrates industry  vendors that follow the Schedule 70 approval process because these  vendors are spending time and money to get approved for Schedule  70, while others are still selling their equipment on Schedule 84 and  skirting this process because GSA allows the sale of physical access  control system equipment on both Schedules.  Schedule 84 has  historically been used for security hardware while Schedule 70 is used  for information technology.  Since physical access control systems are  essentially information technology systems today, OMB believes that  Schedule 70 should be used exclusively for physical access control  system equipment.", "Adapting legacy systems: According to officials at most of the five  selected agencies, most manufacturers, and all integrators we spoke  to, integrating new physical access control systems\u2019 equipment with  existing legacy systems can be challenging. Some stakeholders told  us that integrating new physical access control systems with old  equipment is often more difficult and more costly than starting from  scratch. As an illustration of this difficulty, TSA officials told us that  integrating new physical access control system equipment with legacy  systems has contributed to delays in the integration of TSA\u2019s newly  installed physical access control system equipment. Partly as a result,  only one TSA region is currently integrated into DHS\u2019 agency-wide  network.", "Security concerns about integrating physical access control  systems: Officials at two of the selected agencies and one system  integrator we spoke to told us that some agency officials are reluctant  to more fully integrate their physical access control systems. This  reluctance is due to concern about a perceived increase in security  risks resulting from more broadly networking physical access control  systems\u2019 equipment and access credentials like PIV cards. However,  other federal officials told us that this concern is unfounded. According  to these officials, integrating agencies\u2019 physical access control  systems will enhance security, increase government efficiency,  reduce identity fraud, and protect personal privacy by electronically  authenticating the validity of access credentials.", "Lack of trained agency officials: Stakeholders told us they believe  that some federal agency officials have limited knowledge of physical  access control system requirements. According to most physical  access control systems\u2019 manufacturers and integrators we spoke to,  federal agencies\u2019 contracting officers commonly lack sufficient  understanding of federal physical access control system  requirements. This insufficient understanding of physical access  control system requirements may lead contracting officers to award  contracts for the installation of physical access control systems to  under-qualified integrators, which can lead to systems being  improperly deployed or integrated. These experts said that this  situation could lead to security vulnerabilities at these agencies and  expensive future costs. OMB staff told us that it may be desirable to  raise agencies\u2019 awareness of federal physical access control system  requirements, and a DHS official told us that this issue could be  addressed by the training of program staff by GSA who support  contracting officers.", "OMB staff and officials from ISC and GSA indicated that they are aware  of some of the challenges described above, as well as the possibility that  some may be more broadly present across the federal government. Staff  said that OMB and GSA are working with ISC to develop a consolidated  guidance document concerning federal identification credentials.  However, OMB staff told us that this guidance is primarily intended to  consolidate and replace existing guidance documents, and does not  contain new information related to the challenges identified by the  selected agencies or other stakeholders we spoke to. Best practices that  we have previously identified indicate that an interagency mechanism,  such as an interagency group led by component or program-level staff,  can help federal agencies address policy and program challenges. The  guidance of such an interagency group could help agencies to address  the challenges that we identified and that are related to implementing  physical access control systems.", "ISC, with its unique role in addressing interagency security issues, is well- positioned to assess how the physical security community can help to  address the government-wide challenges with physical access control  system implementation. For example, ISC is well-positioned to determine  through its membership the extent to which the challenges we identified  are present across the federal government. In addition, ISC may be able  to harness recent interagency efforts, such as the interagency information  sharing and collaboration that produced ISC\u2019s guidance on planning and  managing security resources, to develop guidance addressing agencies\u2019  cost issues through the mechanisms that we have previously identified,  such as leveraging resources. Further, working with GSA, ISC could help  to resolve confusion about which Schedule is the appropriate contracting  vehicle, to the extent that this lack of clarity persists. ISC may also be  positioned to provide a venue for information sharing to allow agencies to  address training needs, such as those related to technical challenges,  associated with legacy equipment and establish compatible policies to  address this challenge. Finally, ISC\u2019s experience with interagency  communication and collaboration could also facilitate agencies\u2019 response  to concerns about the benefits of interoperable physical access control  systems, and could work to reach consensus on the matter. According to  a senior ISC official, the ISC has updated its countermeasures standard  to assist the physical security community to better understand the  references and policies associated with procuring and installing physical  access control systems. Additionally, an ISC official told GAO that the ISC  has approved commissioning a working group to assess what additional  guidance related to physical access control would be beneficial for to the  federal physical security community. However, without a government- wide review of the challenges we have identified, those challenges will be  difficult to overcome. If these issues are not addressed, the fully  interoperable, physical access control system network envisioned post  September 11, 2001, and the increased security and efficiency that it  would entail, will be difficult to attain."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["OMB and GSA have taken various actions to help federal agencies  implement GSA-approved physical access control systems. However,  selected agencies have made limited progress, and have faced  challenges that impede their progress. Lacking a baseline level of  information on adherence to physical access control system requirements  prevents OMB from gauging the level of progress being made by  agencies. Likewise, an increased understanding of the extent and nature  of the challenges that federal agencies may face as they implement  physical access control systems may help enhance adherence to physical  access control system requirements. This two-pronged approach, the  establishment of a baseline and a better understanding of the challenges  agencies face as they implement physical access control systems, could  prove beneficial in achieving the vision of secure, interoperable systems  across departments and agencies."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making one recommendation to OMB, and one recommendation  to DHS.", "The Director of OMB should determine a government-wide baseline  level of progress in meeting physical access control system  requirements, including implementation of GSA-approved systems,  and should monitor progress in meeting these requirements.  (Recommendation 1)", "The Secretary of Homeland Security should direct the ISC, in  collaboration with member agencies, to assess the extent of, and  develop strategies to address, government-wide challenges to  implementing physical access control systems. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Commerce,  Justice, and Homeland Security, EPA, GSA, and OMB for their review  and comment. DHS, GSA, and OMB provided technical comments, which  we incorporated as appropriate. DHS provided written comments and  concurred with our recommendation.  DHS\u2019s comments are reprinted in  appendix II. OMB staff told us that they did not have a comment on our  recommendation. The Departments of Commerce and Justice and EPA  did not have any comments on our report.", "We will send copies of this report to the Ranking Member, Subcommittee  on Oversight and Management Efficiency, Committee on Homeland  Security, House of Representatives and the Secretaries of Commerce  and Homeland Security, the Assistant Attorney General for the  Department of Justice, the Administrator of the General Services  Administration, the Director of the Office of Management and Budget, and  the Acting Administrator of the Environmental Protection Agency.  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) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were: (1) to assess the steps the Office of Management  and Budget (OMB) and the General Services Administration (GSA) have  taken to fulfill their government-wide responsibilities related to physical  access control system implementation requirements and (2) to identify  challenges selected federal agencies face in adhering to federal physical  access control system requirements.", "To assess the steps OMB and GSA have taken to fulfill their government- wide efforts to implement Homeland Security Presidential Directive 12\u2019s  (HSPD-12) requirements, and to assess progress in these efforts, we  interviewed OMB and GSA about their efforts to ensure that agencies  meet the requirement to use GSA\u2019s Approved Products List. We also  asked them to provide data, if available, on agencies\u2019 Approved Products  List usage. We interviewed seven physical access control system  manufacturers (AMAG, Gallagher Group, HID Global, Identiv, Lenel,  Software House, and XTec), five integrators (contractors that install the  equipment and connect it to agency networks with software) (Convergint  Technologies, Chenega Corporation, MC Dean, Parsons, and Systems  Engineering, Inc.), as well as other industry organizations\u2014GSA  Schedules Inc., the Secure Technology Alliance, and CertiPath\u2014 based  on multiple recommendations from previous interviews.", "To identify illustrative examples of the progress that individual agencies  have made in using the Approved Products List and implementing other  HSPD-12 requirements, as well as the challenges that they have faced in  doing so, we selected five executive branch agencies. These included (1)  U.S. Coast Guard in the Department of Homeland Security (DHS); (2)  Bureau of Prisons in the Department of Justice; (3) Transportation  Security Agency in DHS; (4) Environmental Protection Agency (EPA); and  (5) GSA. We interviewed officials from these agencies about the  Approved Products List and collected data on agencies\u2019 purchases of  GSA-approved physical access control system equipment using the  Approved Products List since 2013. Our criteria for agency selection  included agencies with facilities (1) held by non-defense executive branch  agencies; (2) located in the United States; (3) totaling 200 or more  buildings; and, (4) that are geographically dispersed (having buildings in  10 or more states). We also gave consideration to agencies with large  numbers of buildings (choosing four larger, one smaller) and selected at  least two agencies with homeland security responsibilities. We limited our  scope to non-defense agencies because we have ongoing work related to  these issues at the Department of Defense. We also requested and  reviewed documents concerning Approved Products List usage and  physical access control systems\u2019 deployment from each of these five  selected agencies. Our use of the term stakeholders may include  agencies, physical access control manufacturers, integrators, and  knowledgeable organizations or officials. Results from our interviews with  the selected agencies cannot be generalized. To identify the challenges  most frequently cited by agencies, manufacturers, integrators, and other  stakeholders, we conducted an analysis of our interviews, reviewed  documents provided by agencies, and performed a literature review. In  addition to considering the range of federal requirements related to  physical access control, we considered relevant internal control standards  from federal standards for internal-control in the areas of monitoring,  enforcement, planning, and training and collaboration best practices  identified in prior GAO work. Further, we reviewed other relevant  documents including GAO reports, GSA documentation, OMB  memorandums, National Institute of Standards and Technology  standards, Interagency Security Committee guidance, a report from the  DHS Office of the Inspector General, and additional federal guidance  related to physical access control systems.", "We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual name above, Dave Sausville (Assistant  Director); Kieran McCarthy (Analyst in Charge); Adam Gomez; Cam  Flores; Elizabeth Wood; Josh Ormond; and Melissa Bodeau made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Efforts are underway to improve security with a government-wide approach to regulate access to controlled areas in federal buildings. Access control systems use ID cards, card readers, and other technologies to confirm identities and access rights.", "The Office of Management and Budget and the General Services Administration have helped agencies move toward an interoperable system. However, OMB lacks information on agency progress and this hampers its oversight.", "Agencies reported high costs and difficulty adding new equipment to existing systems.", "Among other things, we recommended that OMB determine and monitor agencies' progress."]}
{"id": "GAO-19-27", "url": "https://www.gao.gov/products/GAO-19-27", "title": "Drug Control: DOD Should Improve Its Oversight of the National Guard Counterdrug Program", "published_date": "2019-01-17T00:00:00", "released_date": "2019-01-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 1989, DOD has received billions of dollars to fund the National Guard's participation in a counterdrug program focused on domestic drug interdiction activities. DOD received $261 million for this program in fiscal year 2018. This program provides military support to assist state, local, and tribal law enforcement organizations with counterdrug activities and operates in 54 states and territories across the United States.", "Senate Report 115-125 included a provision for GAO to evaluate the National Guard counterdrug program. This report (1) evaluates the extent to which DOD has strategy and implementing guidance for the National Guard counterdrug program, and (2) assesses DOD's processes to approve states' counterdrug plans and distribute funding to the program, among other things. GAO reviewed DOD's counterdrug strategy and guidance; DOD funding and personnel data; and its processes to distribute funding."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) lacks current strategy and guidance to implement the National Guard counterdrug program. Although a number of key national-level strategies, such as the National Drug Control Strategy, have been updated since 2011 to address changing drug threats, GAO found that DOD's 2011 Counternarcotics and Global Threats Strategy has not been updated to reflect these changes. In addition, the National Guard lacks detailed procedures and processes for the states to implement the National Guard counterdrug program, such as how to conduct cross-state aerial reconnaissance. Without current strategy or guidance, it will be difficult for the National Guard to operate its counterdrug program effectively.", "DOD's processes to approve state counterdrug plans and distribute funding to the state-level counterdrug programs could be improved. Since at least 2009, DOD has provided funding to the states without first approving state plans for counterdrug activities, as required by statute. GAO found that the delay in approval of state counterdrug plans has worsened since fiscal year 2009; in fiscal year 2018, approval took over 9 months (283 days); see figure below. In 2018, DOD took some steps to address the timely review of state plans, but GAO found that those steps did not rectify the problem.", "GAO also found that the process used by the National Guard to distribute funding to the states within the program does not incorporate DOD's strategic counternarcotics priorities, such as the U.S. southwest and northern border areas. GAO's work on results-oriented management states that strategy should inform program activities and resourcing. Until National Guard's process to distribute funding to state counterdrug programs is improved, it risks directing funding toward lower priority counterdrug activities at the expense of higher priority activities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making a total of five recommendations, including, among others, that DOD issue a strategic framework that addresses current drug threats, the National Guard issue guidance with detailed procedures on how states should administer the program, DOD assess the revised process for approving state plans, and the National Guard incorporate DOD's strategic counternarcotics priorities into its funding distribution process. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 1989, Congress has provided billions of dollars to the Department  of Defense (DOD) to fund the National Guard\u2019s participation in domestic  drug interdiction and counterdrug activities. The type of military support  provided by the National Guard can range from reconnaissance to  analytical support, but it generally reflects the drug interdiction priorities of  the Governors of the 50 states, the District of Columbia, and three U.S.  territories; the capabilities of each state\u2019s National Guard; and the needs  of interagency partners. These interagency partners include state, local,  and tribal law enforcement organizations, as well as several federal  agencies\u2014 including the Departments of Justice, Homeland Security, and  Treasury\u2014all of which are involved in efforts to disrupt and dismantle the  infrastructure of major drug-trafficking organizations. According to the  National Guard Bureau, in fiscal year 2017, the National Guard  counterdrug program employed over 3,700 personnel who supported law  enforcement\u2019s efforts to remove over 3.3 million pounds, or nearly $11.2  billion, in illicit drugs from U.S. communities. In addition to providing  support to law enforcement partners, the National Guard Bureau operates  five counterdrug schools that provide training in drug interdiction and  counterdrug activities. According to the National Guard Bureau, these  schools trained over 41,400 law enforcement officers, community based  organization members, and military personnel in fiscal year 2017.", "Senate Report 115-125 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 contained a provision that we  evaluate the National Guard counterdrug program and its approach to  resource allocation. This report: (1) evaluates the extent to which DOD  has strategy and implementing guidance for the National Guard  counterdrug program, (2) describes the actions taken by the National  Guard Bureau to improve the availability of funds when operating under  continuing resolutions, and (3) assesses DOD\u2019s processes to approve  states\u2019 counterdrug plans and distribute funding to the program.", "To address our objectives, we reviewed documentation and interviewed  officials from the Office of the Deputy Assistant Secretary of Defense for  Counternarcotics and Global Threats; the National Guard Bureau; select  state counterdrug programs; Office of the Under Secretary of Defense,  Comptroller; and Army and Air National Guard Budget Execution Offices.  Our analysis of the National Guard counterdrug program focused on Title  32 state activities, which includes five specific projects: 1) state plans, 2)  counterdrug schools, 3) counterthreat finance, 4) linguist support, and 5)  linguist and data analysis.", "In addition, we used a non-generalizable sample of 9 of the 54  participating states, territories, and the District of Columbia as case  studies and interviewed officials in those states to get their perspectives  on strategy, policy, guidance, and funding for the program. The nine  states we included in our review were: Alaska, California, Maine,  Mississippi, Missouri, New Mexico, New York, Tennessee, and Texas. To  select these case studies for our sample, we relied on five criteria. First,  we selected states from each of the four counterdrug program regions:  Northeast, Northwest, Southeast, and Southwest. Second, we selected  both low and high drug threat level states from each region, as  determined by the National Guard Bureau\u2019s funding distribution model  known as the threat-based resource model in 2018. Third, we selected  states that experienced large fluctuations in their threat level between  fiscal years 2016 and 2018 as a consequence of changes to the National  Guard Bureau\u2019s threat-based resource model for fiscal year 2018, such  as the expansion in the number of drug threat variables in the model and  the institution of seizure thresholds to better distinguish which drug  seizures would be considered within the model. Fourth, we selected  states that received what National Guard Bureau officials referred to as a  \u201cfunctional\u201d level of funding for fiscal year 2018, meaning that funding was  provided at a level necessary to support two counterdrug missions in that  state or territory, regardless of its threat level. Finally, we selected from  states that have an international border and that border international  waters.", "To address our first objective, we reviewed DOD\u2019s 2011 Counternarcotics  and Global Threats Strategy and other executive branch strategy  documents, including the Office of National Drug Control Policy\u2019s National  Drug Control Strategy and geographic drug control strategies. We  evaluated DOD\u2019s strategy to determine the extent to which it aligned with  current national-level strategies and drug threats. We also reviewed a  DOD Inspector General assessment of the National Guard counterdrug  program that addresses the counternarcotics and global threats strategy.  In addition, we reviewed whether the National Guard Bureau has issued  guidance on counterdrug support in accordance with Chief National  Guard Bureau policy that assigns responsibility for the issuance of  supporting guidance for the National Guard counterdrug program.", "To address our second objective, we analyzed DOD\u2019s budget requests  and congressionally-directed increases for fiscal years 2004 through  2018. We also analyzed the National Guard counterdrug program\u2019s total  budget authority and obligation amounts by project code and calculated  overall obligation rates for fiscal years 2010 through 2017. Further, we  examined the number of personnel on-orders by month supporting  National Guard counterdrug program activities for October 2012 through  August 2018. Finally, we reviewed DOD\u2019s process to distribute funds to  the National Guard counterdrug program and funding received under  each appropriation period\u2014including continuing resolutions and final  appropriations\u2014for fiscal years 2014 and 2018, including the timing and  amount of funds received.", "To address our third objective, we reviewed DOD\u2019s process for approving  state drug interdiction and counterdrug activities plan submissions and  distributing funding to state counterdrug programs for fiscal years 2009  through 2018. We compared DOD\u2019s process for approving state plan  submissions to the law governing the use of funds for state counterdrug  activities and to DOD policy. Finally, we examined the National Guard  Bureau\u2019s threat-based resource model and its process to distribute  funding to the program and assessed it based on GAO\u2019s work on results- oriented management.", "We assessed the reliability of the following types of data on the National  Guard counterdrug program: DOD\u2019s budget requests and  congressionally-directed increases for fiscal years 2004 through 2018;  total budget authority and obligations amounts for fiscal years 2010  through 2017; program personnel on orders by month for October 2012  through August 2018; threat-based resource model percentages for fiscal  years 2015 through 2018 and planned funding levels by state or territory  program for fiscal years 2012 through 2018; and state plans approval  dates for fiscal years 2009 through 2018. We assessed the reliability of  all sources of data by examining them for missing values, outliers, and  obvious errors as well as by interviewing knowledgeable agency officials  regarding their accuracy and completeness. For data on DOD\u2019s budget  requests, congressionally-directed increases, total budget authority, and  obligation amounts, we examined other sources that provide the same  types of data to ensure consistency. In addition, we also assessed data  on DOD\u2019s budget requests and congressionally-directed increases by  comparing them to amounts presented in a prior GAO report. We  determined that all the data we report on were sufficiently reliable for the  purposes of our review.", "We conducted this performance audit from August 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "National Guard Counterdrug Program", "paragraphs": ["The National Guard counterdrug program is part of DOD\u2019s broader  counterdrug mission, which focuses on supporting local, state, federal,  and foreign government agencies in addressing the illegal drug trade and  narcotics-related terrorism. The program was originally conceived as a  reconnaissance support mission largely focused on marijuana eradication  efforts. In 1977, the Hawaii National Guard became the first state National  Guard to assist law enforcement agencies in counterdrug missions.  Hawaii law enforcement officials sought Hawaii National Guard helicopter  transport to support Operation Green Harvest, a marijuana eradication  mission. By 1984, four additional states\u2019 National Guards were supporting  state law enforcement agencies with counterdrug efforts. That number  grew to 32 states in 1988. However, this assistance was limited in scope  and generally conducted as Guard units performed normal training  activities, and costs associated with this assistance were paid for by the  states.", "The National Defense Authorization Act, Fiscal Year 1989 tasked DOD  with the mission to ensure the availability of military support to law  enforcement agencies nationwide. This law established DOD as the  single lead agency of the federal government for the detection and  monitoring of aerial and maritime transit of illegal drugs into the United  States, and it amplified the National Guard\u2019s role as a support agency  for state law enforcement in counterdrug support missions under the  Governor of each state, territory, and the District of Columbia. By 1994,  the program was in operation in 54 states and territories across the  United States.", "As of fiscal year 2018, National Guard Bureau policy allows state  counterdrug programs to perform 15 support activities grouped into five  broad mission categories\u2014(1) technical support (including linguist and  translator, operational and investigative case and criminal analyst, and  counterthreat finance support), (2) general support (including domestic  cannabis suppression and eradication operations and transportation  support), (3) reconnaissance and observation (including ground and  aerial reconnaissance), (4) civil operations and coalition development,  and (5) counterdrug training."], "subsections": []}, {"section_title": "Legal Authorities of the National Guard Counterdrug Program", "paragraphs": ["The National Guard counterdrug program conducts activities under the  authority of two titles in the United States Code\u2014Title 32 and Title 10.  Section 502 of title 32 allows a member of the National Guard to be  ordered to full-time National Guard duty status under regulations  prescribed by the Secretary of the Army or Secretary of the Air Force. In  addition, Section 112 of title 32 authorizes personnel of the National  Guard of a State, under regulations prescribed by the Secretary of  Defense, to be ordered to perform full-time National Guard duty under  section 502 for the purposes of carrying out drug interdiction and  counterdrug activities in accordance with state plans. Section 112 also  authorizes the Secretary of Defense to provide funds to support the  approved drug interdiction and counter-drug activities plan of state  governors.", "In addition, Title 10 allows the Secretary of the Army or Air Force to order  a member of the National Guard, under the Secretary\u2019s jurisdiction, to  active duty with the consent of the member and the governor of that  state. Under Section 284 of title 10, DOD provides support to a number  of partners, such as federal agencies, in their counterdrug activities, at  times using National Guard personnel on active duty. Table 1 provides a  summary of the Title 32 and Title 10 authorities."], "subsections": []}, {"section_title": "Funding for the National Guard Counterdrug Program", "paragraphs": ["To fund DOD\u2019s counterdrug mission, Congress appropriates amounts to  DOD\u2019s Drug Interdiction and Counterdrug Activities, Defense account.  The categories of activities funded by the account include: detection and  monitoring; international support; intelligence, technology, and other;  domestic support, which includes the National Guard counterdrug  program; and drug demand reduction. Of all the activities, the domestic  support activity, which includes the National Guard counterdrug program,  receives the largest amount of funding from DOD\u2019s Drug Interdiction and  Counterdrug Activities account. In fiscal year 2018, Congress  appropriated about $934.8 million to the Drug Interdiction and  Counterdrug Activities, Defense account, of which about $261.4 million,  or 28 percent, was appropriated for the National Guard counterdrug  program. Figure 1 shows the program funding in DOD\u2019s Drug  Interdiction and Counterdrug Activities Account for fiscal year 2018.", "DOD\u2019s budget request to the President for the National Guard  counterdrug program was generally steady from fiscal year 2004 through  fiscal year 2012, but was reduced significantly in fiscal year 2013. Since  then, congressionally-directed increases have generally accounted for 50  percent or more of the program\u2019s total funding, as shown in figure 2  below.", "In fiscal year 2018, the Senate Committee on Appropriations expressed  concerns that DOD reduced overall funding for the National Guard  counterdrug program from the fiscal year 2017 enacted levels and failed  to include an individual budget line in its budget request for the National  Guard counterdrug schools program. DOD\u2019s budget request for fiscal  year 2018 was about $116.4 million, while the final appropriation  designated $261.4 million for the program\u2014approximately a 125 percent  increase."], "subsections": []}, {"section_title": "Roles and Responsibilities", "paragraphs": ["On July 31, 2002, the Deputy Secretary of Defense issued a  memorandum that, among other things, assigned responsibility for DOD\u2019s  counternarcotics program to the Deputy Assistant Secretary of Defense  for Counternarcotics. The responsibilities include developing and  implementing DOD\u2019s counternarcotics policy, conducting analyses,  making recommendations, and issuing guidance regarding DOD\u2019s  counternarcotics plans and programs. In addition, the office is responsible  for coordinating and monitoring DOD\u2019s counternarcotics plans and  programs to ensure adherence to this policy.", "Chief National Guard Bureau Instruction 3100.01A, National Guard  Counterdrug Support, establishes policy and assigns responsibilities for  the National Guard counterdrug program. The instruction assigns the  Director of the National Guard Domestic Operations and Force  Development as the proponent for the program. The Director\u2019s  responsibilities include publishing supporting documents for the  instruction, verifying that the plans outlining each state\u2019s proposed  activities are consistent with annual instructions published by the Office of  the Deputy Assistant Secretary of Defense for Counternarcotics and  Global Threats and are processed efficiently and on-time, and conducting  periodic evaluations of program operations at the state level."], "subsections": []}]}, {"section_title": "DOD Lacks a Current Strategy and Guidance for the National Guard Counterdrug Program", "paragraphs": [], "subsections": [{"section_title": "DOD Counternarcotics and Global Threats Strategy Is Outdated", "paragraphs": ["DOD\u2019s 2011 Counternarcotics and Global Threats Strategy, the governing  strategy for the National Guard counterdrug program, is outdated and  does not reflect current drug threats outlined in more recent executive  branch strategies. While the 2011 Counternarcotics and Global Threats  Strategy shares common themes with the updated executive branch  strategies, such as the importance of combatting transnational criminal  organizations involved in drug trafficking, it has not been updated to  reflect changes in the drug threats faced by the United States that are  outlined by the more recent executive branch strategies. Table 2 provides  details on national-level strategies that have been released since 2011.", "The Office of National Drug Control Policy released a new National Drug  Control Strategy each year between 2011 and 2016. Each update  discussed the threat posed by opioids, which the 2016 update labeled as  the greatest drug threat facing the nation. The 2017 National Security  Strategy also addressed opioids by emphasizing the need to dismantle  transnational criminal organizations that feed the illicit opioid epidemic.  However, DOD\u2019s 2011 Counternarcotics and Global Threats Strategy  does not address the domestic opioid epidemic. In addition, the 2016  National Southwest Border Counternarcotics Strategy states that the  increased role of Mexican heroin manufacturers and traffickers is altering  previously established trafficking patterns. While the 2011  Counternarcotics and Global Threats Strategy considers the illicit  trafficking of cocaine from the Southwest border, it does not consider  changes in the heroin threat. Further, because DOD\u2019s Counternarcotics  and Global Threats Strategy has not been updated, it does not take into  consideration other strategies that have since been issued, such as the  2015 Caribbean Border Counternarcotics Strategy. According to officials  from the National Guard Bureau, DOD\u2019s 2011 counternarcotics strategy  only addresses the National Guard counterdrug program in a limited  capacity and therefore they are challenged to provide strategic direction  to the state counterdrug programs.", "DOD\u2019s 2011 Counternarcotics and Global Threats Strategy states that  officials will ensure that the strategy remains consistent with and  integrates key DOD and executive branch strategies, such as National  Drug Control Strategy. It also states that, given the dynamic environment  within which the challenges related to the flow and impact of illegal drugs  exist, the strategy is meant to be a living document, to be modified  regularly. However, officials from the Office of the Deputy Assistant  Secretary of Defense for Counternarcotics and Global Threats  acknowledged that they have not regularly modified the strategy and that  the security environment has changed. These officials stated that they  have been in the process of developing an updated Counternarcotics and  Global Threats Strategy with revised strategic goals and objectives since  2013, but the document has not been signed and released by the  Secretary of Defense. DOD officials stated that after the 2018 National  Defense Strategy was issued, they delayed the release of an updated  Counternarcotics and Global Threats Strategy in order to ensure  alignment between the two documents. However, according to DOD  officials, the 2018 National Defense Strategy, which was issued in  January 2018, did not address DOD counternarcotics efforts as they had  anticipated, requiring them to reconsider their approach.", "Officials from the Office of the Deputy Assistant Secretary of Defense for  Counternarcotics and Global Threats stated that they now plan to issue a  strategic framework, which would allow them to respond to changes in the  security environment more quickly because updates to the framework  would not require Secretary of Defense approval, as is the case with a  DOD strategy. However, they stated that they are now waiting for the  release of a new National Drug Control Strategy before issuing the  framework. Officials with the Office of National Drug Control Policy  stated that, while they have drafted a new National Drug Control Strategy,  they have not committed to an issuance date and are waiting for their new  director to be confirmed by the Senate before proceeding with reviewing  and issuing the draft. However, a substantial amount of time has lapsed  since DOD\u2019s counternarcotics strategy was last issued\u2014over 7 years\u2014 and there have been significant developments during that time in the  nature of the drug threats facing the United States. DOD officials  acknowledged that because the process to update its strategic framework  requires less review than a full strategy, DOD could quickly update it, if  necessary, to ensure that it aligns with a new National Drug Control  Strategy once one is released. Without a DOD counternarcotics and  global threats strategic framework that reflects DOD\u2019s current strategic  priorities and drug threats, the National Guard counterdrug program risks  focusing activities and resources in areas that are less imperative to  address than others and that do not counter current drug threats."], "subsections": []}, {"section_title": "The National Guard Bureau Does Not Have Guidance for Operating and Administering the Counterdrug Program", "paragraphs": ["The National Guard Bureau had guidance\u2014National Guard Regulation  500-2\u2014that prescribed policies, procedures, and responsibilities for the  National Guard counterdrug program, but it was rescinded in September  2014 by Chief National Guard Bureau Instruction 3100.01 to conform with  new National Guard publications guidance, according to National Guard  Bureau officials. Chief National Guard Bureau Instruction 3100.01A,  which replaced Chief National Guard Bureau Instruction 3100.01 in June  2015, establishes policies and assigns responsibilities for the National  Guard counterdrug program, but it does not provide detailed procedures  and processes that states can use to implement these policies. For  example, National Guard Regulation 500-2 provided information on how  states should operate and administer the National Guard counterdrug  program, including how to perform counterdrug financial management,  acquisition and logistics management, personnel and administration,  records and reports, and operate the counterdrug schools. Chief National  Guard Bureau Instruction 3100.01A does not provide these types of  instructions. State counterdrug program officials we interviewed stated  that without the detailed procedures and processes included in National  Guard Regulation 500-2, they have no administrative guidance regarding  hiring, retirement, budgeting, and planning for their counterdrug  programs. Additionally, National Guard Bureau officials stated that they  do not have procedures and processes instructing states on how to  provide cross-state support. For example, there are currently no  guidelines on how a state that can perform aerial reconnaissance  activities could provide these resources to another state upon request.  National Guard Bureau officials told us they should have guidelines to  facilitate cross-state support. Table 3 provides an overview of National  Guard Bureau publications.", "To help implement policy established by Chief National Guard Bureau  instructions, the National Guard Bureau can issue more detailed guidance  on the corresponding procedures and processes in the form of a Chief  National Guard Bureau Manual. Additionally, Chief National Guard  Bureau Instruction 3100.01A, National Guard Counterdrug Support,  assigns the Director of National Guard Domestic Operations and Force  Development the responsibility to publish supporting documents to  implement the instruction and counterdrug program when required.  However, the National Guard Bureau officials acknowledge that they have  not issued a manual that provides detailed procedures and processes to  implement National Guard counterdrug program policies since the prior  operating guidance in the National Guard regulation was rescinded in  September 2014.", "National Guard Bureau officials stated that they intended to publish a  Chief National Guard Bureau Manual in September 2014, concurrent with  Chief National Guard Bureau Instruction 3100.01, which would have  provided additional operating guidance for administering and operating  the counterdrug program. However, according to National Guard officials,  issuance of the manual was delayed because of disagreements among  National Guard Bureau officials about its content. Specifically, some  National Guard Bureau officials stated that the draft manual was too  focused on support for Title 10 activities and did not adequately address  Title 32 support, which reflects the bulk of the activities conducted by the  program. National Guard Bureau officials stated that they intended to re- issue National Guard Regulation 500-2 as interim guidance until they  completed the Chief National Guard Bureau Manual; however, they have  yet to do so because they have been focused on other efforts. National  Guard Bureau officials stated that they have now worked with state  counterdrug program officials to more adequately address Title 32  support activities and intend to publish a Chief National Guard Bureau  Manual in June 2019.", "The draft manual is in the beginning of the review process. However, the  National Guard Bureau will not have guidance to operate the counterdrug  program until at least June 2019. Without interim guidance that provides  detailed procedures and processes for the National Guard counterdrug  program, such as reissuing National Guard Regulation 500-2, states will  continue to be left without clear instructions on how to operate and  administer the program, such as how and when to provide support across  state lines and to interagency partners."], "subsections": []}]}, {"section_title": "The National Guard Bureau Has Taken Steps to Improve the Availability of Funds When Operating under Continuing Resolutions", "paragraphs": ["The federal government has operated under a continuing resolution for 36  of the last 40 years. National Guard counterdrug program officials stated  that they have experienced program disruptions during these periods.  The disruptions described by the officials are similar to the problems that  other programs experience during continuing resolutions. For example,  National Guard Bureau officials stated that continuing resolutions have  created challenges for the National Guard counterdrug program in fully  obligating its funds. DOD data show that the program obligated 84 and 82  percent of total budget authority amounts in fiscal year 2011 and 2013  respectively, although the gap between total budget authority amounts  and obligations has decreased since then. According to National Guard  officials, the differences over the years between the amounts obligated  and total budget authority amounts were partly due to the timing and  amount of funding received by the program. Specifically, they stated that  it is difficult to fully obligate funds when DOD provides them with a  significant portion of their funding close to the end of the fiscal year.", "Remaining unobligated amounts are transferred back to DOD\u2019s Drug  Interdiction and Counterdrug Activities, Defense account. Figure 3  details the counterdrug program\u2019s obligations from fiscal years 2010  through 2017.", "State counterdrug program officials stated that the timing of DOD\u2019s  distribution of funds also creates program execution challenges. For  example, state counterdrug program officials stated that prior to fiscal  year 2017, they began each year with a minimal number of personnel  performing state drug interdiction and counterdrug activities until DOD provided more funding to the program after the enactment of the  appropriation for the remainder of the fiscal year. Thereafter, state  program officials stated that they increased the number of National Guard  personnel supporting National Guard counterdrug program activities.  However, state program officials said that after the appropriation expired  at the end of each fiscal year, they were once again forced to reduce the  number of personnel performing state drug interdiction and counterdrug  activities until the enactment of another final appropriation was passed.  Figure 4 provides a summary of the number of National Guard personnel  performing state drug interdiction and counterdrug activities by month  during fiscal years 2012 through 2017.", "According to state counterdrug program officials, the majority of funds  provided after a final appropriation is passed fund temporary personnel  and seasonal work, rather than analysis support activities deemed a  priority for the National Guard counterdrug program by the Office of the  Deputy Assistant Secretary of Defense for Counternarcotics and Global  Threats. State counterdrug program officials stated that this is because  they cannot hire, train, and integrate personnel on a full-time basis and  that law enforcement agencies are looking more for long-term, rather than  temporary support. State counterdrug officials told us that as a result of  the funding uncertainty they experience significant fluctuations in the  number of personnel performing state drug interdiction and counterdrug  activities and that they are challenged in obtaining and retaining highly  qualified National Guard personnel. Additionally, state counterdrug  program officials stated that withdrawing National Guard personnel from  partner organizations after appropriations expire can severely affect their  operations and diminish trust between counterdrug programs and law  enforcement partners.", "According to National Guard Bureau officials, the National Guard Bureau  revised its process for funding the National Guard counterdrug program in  fiscal year 2017 to try to mitigate the effects of DOD\u2019s process for  providing funds under continuing resolutions on the program. Specifically,  the National Guard Bureau worked with the Army and Air National Guard  budget execution offices to establish a process to expedite funding made  available to the state-level counterdrug programs. Under the revised  process, the Army and Air National Guard budget execution offices  reprogram available amounts from other programmatic activities, such as  funds for annual training, to the counterdrug program earlier in the fiscal  year. According to Army and Air National Guard budget execution  officials, amounts provided through reprogramming are based on a  number of factors, including prior years\u2019 appropriations for the program,  execution levels, current-year appropriations and congressional  directions, and an assessment of risk to the other activities.", "The National Guard Bureau and state counterdrug program officials  stated that this revised funding process has helped mitigate challenges  arising from uncertainty of when and how much funding would be  provided to the states. For example, state counterdrug program officials  said that in fiscal year 2017, the funding process enabled them to retain  more personnel on orders and decrease the amount of funds that went  unspent. The total number of personnel assigned to the National Guard  counterdrug program at the beginning of fiscal year 2018 was  approximately 2,250. Conversely, the program began fiscal year 2016  with approximately 1,350 personnel on orders. In addition, program  officials stated that the process to provide funding earlier in the fiscal year  helped them to obligate almost 97 percent of the total budget authority in  fiscal year 2017, a higher percentage compared to many of the previous  fiscal years. National Guard officials stated that while reprogramming  amounts from other programmatic activities has helped to address the  fiscal challenges of the National Guard counterdrug program, they cannot  provide assurance that this funding process will continue from year to  year. However, National Guard Bureau officials have assessed the risks  and believe this is the best solution available for funding the program  during a continuing resolution until the enactment of the final  appropriation."], "subsections": []}, {"section_title": "DOD Could Improve Its Processes for Approving and Distributing Funds to State Counterdrug Programs DOD Has Provided Funding to State Counterdrug Programs without Approved Plans", "paragraphs": ["DOD has established a process for development and review of the state  plans\u2014an annual plan of each state\u2019s counterdrug activities\u2014to ensure  that state counterdrug program activities reflect DOD\u2019s counternarcotics  strategic priorities. However, since at least 2009 DOD has not met the  statutory requirement to examine the adequacy of state plans prior to  distributing funding to state counterdrug programs.", "To develop the state plans, counterdrug coordinators in each state  counterdrug program use guidance in annual memorandums issued by  DOD. According to the guidance, the plans should identify the state\u2019s  counterdrug priorities and how each state counterdrug program intends to  obligate its available funds. Counterdrug coordinators then work with their  state\u2019s Adjutant General, Attorney General, and Governor, who each  review and sign them, before the plans are sent to the National Guard  Bureau for further review. Once the National Guard Bureau reviews the  plans, they are forwarded to the Office of the Deputy Assistant Secretary  of Defense for Counternarcotics and Global Threats. Officials from that  office review the plans and make recommendations to the Secretary of  Defense to approve or disapprove the plans. Based on these  recommendations, the Secretary of Defense reviews the plans for  adequacy, and when satisfied, signs a memorandum of agreement  approving the plans. Figure 5 provides an outline of the process to  approve state plans for their counterdrug activities.", "However, since at least 2009, DOD has provided funding to the state  counterdrug programs prior to the Secretary of Defense approving states\u2019  plans for their counterdrug activities, according to National Guard Bureau  officials. This is inconsistent with section 112 of title 32 of the United  States Code, which requires that before funds are provided to the  Governor of a state for counterdrug activities and before members of the  National Guard of that State are ordered to full-time National Guard duty,  the Secretary of Defense must examine the adequacy of the plan  submitted by the Governor. We found that that the delay in approval of  states\u2019 plans for their counterdrug activities has worsened since 2009,  and in fiscal year 2018, approval took over 9 months (283 days) after  funding was provided at the beginning of the fiscal year. Figure 6  provides information on the number of days between the beginning of the  fiscal year, when states received funding, and when all plans were  approved in fiscal years 2009 through 2018.", "Officials from the Office of the Deputy Assistant Secretary of Defense for  Counternarcotics and Global Threats and the National Guard Bureau  stated that several factors have contributed to delays in the state plan  approval process. First, officials stated that, prior to fiscal year 2016, the  National Guard Bureau submitted state plans to the Office of the Deputy  Assistant Secretary of Defense for Counternarcotics and Global Threats  signed by the Division Chief of the National Guard counterdrug program,  a colonel in the Army or the Air Force. However, in fiscal year 2016,  officials from the Office of the Secretary of Defense found the  Counterdrug Program Division Chief\u2019s review and approval of the state  plans to be insufficient because the approving official did not have the  appropriate rank to approve state plans on behalf of the National Guard  Bureau. As a result, officials from the National Guard Bureau elevated the  level of approval within the National Guard Bureau to the National Guard  Bureau Joint Staff Director of Domestic Operations and Force  Development, a Major General in the Army National Guard or Air National  Guard. Officials from the Office of the Deputy Assistant Secretary of  Defense for Counternarcotics and Global Threats stated that this resulted  in an increase in the number of days that it took the National Guard  Bureau to provide reviewed state plans. Officials stated that they are  working to develop an updated timeline to address delays created by the  approval process. Specifically, officials stated that they are working to  submit the plans for review earlier in order to allow enough time to ensure  that state plans are approved before funds are provided to state  counterdrug programs.", "Second, officials from the Office of the Deputy Assistant Secretary of  Defense for Counternarcotics and Global Threats stated that their office  required state plans to include information, such as narratives detailing  states\u2019 planned activities that were not critical to determining plans\u2019  alignment with DOD priorities. In addition, officials stated that, over time,  states had expanded the narratives in their plans, which increased the  length of each submission. As a result of this required information,  officials stated that the department\u2019s review of state plans took longer  than had the extra information not been included. Officials from the Office  of the Deputy Assistant Secretary of Defense for Counternarcotics and  Global Threats stated they have reviewed the statutory requirements for  the plans to identify which components are necessary and streamlined  the format of the plans for use in fiscal year 2019.", "Third, officials from the Office of the Deputy Assistant Secretary of  Defense for Counternarcotics and Global Threats stated that in the past  the Office of the Secretary of Defense would not accept state plans from  the National Guard Bureau in batches, but instead insisted on receiving  and reviewing them altogether, delaying the review process. These  officials noted that they have since begun accepting state plans from  National Guard Bureau in batches in order to speed up the approval  process.", "On June 7, 2018, the Office of the Deputy Assistant Secretary of Defense  for Counternarcotics and Global Threats issued a memorandum to the  Chief of the National Guard Bureau that required all states and territories  to submit their plans, through National Guard Bureau and the Joint Staff,  to his office no later than August 31, 2018. According to officials from the  Office of the Deputy Assistant Secretary of Defense for Counternarcotics  and Global Threats, the state plans were to detail fiscal year 2019  National Guard counterdrug program activities and provide the Office of  the Deputy Assistant Secretary of Defense for Counternarcotics and  Global Threats additional time to review state plans prior to the beginning  of the fiscal year.", "However, in October 2018, officials from the National Guard Bureau and  the Office of the Deputy Assistant Secretary of Defense for  Counternarcotics and Global Threats told us that none of the fiscal year  2019 plans had been approved prior to the beginning of the fiscal year,  and that DOD had provided state counterdrug programs with funding for  fiscal year 2019. As of mid-November, officials from the Office of the  Deputy Assistant Secretary of Defense for Counternarcotics and Global  Threats told us that 39 of the 54 state plans had been approved. DOD  has not assessed why the steps it took to improve the state plan review  process did not result in timely approval of the state plans. GAO\u2019s  Standards for Internal Control in the Federal Government note that  management should monitor activities and evaluate the results of  programmatic changes. Assessing the revised process for reviewing  states\u2019 plans would enable DOD to determine what additional actions are  needed to ensure the plans are approved by the Secretary of Defense  before funding is provided to state counterdrug programs, as statutorily  required by section 112 of title 32."], "subsections": [{"section_title": "National Guard Bureau\u2019s Funding Distribution Process Does Not Incorporate DOD Strategic Counternarcotics Priorities", "paragraphs": ["We found that the National Guard Bureau\u2019s funding distribution process  does not consider DOD\u2019s strategic counternarcotics priorities. For  example, while DOD\u2019s 2011 Counternarcotics and Global Threats  Strategy prioritizes efforts on the southwest and northern borders, the  National Guard Bureau\u2019s funding distribution process does not specifically  account for this. Rather than taking into account established DOD  counternarcotics priorities to inform funding distribution, the National  Guard Bureau uses survey results and statistics on drugs from a number  of national-level databases to develop a distribution percentage for each  state within its threat-based resource model that reflects its relative drug  threat. Each state\u2019s threat-based resource model percentage is then  applied to the funding transferred to the National Guard Bureau from the  Drug Interdiction and Counterdrug Activities, Defense account and  disbursed to the 54 state programs. For example, Arizona\u2019s threat  percentage was determined to be 6.25 percent based on existing drug  threats; as a result, Arizona received about $11.8 million in funding for  state plans in fiscal year 2018.", "National Guard Bureau officials stated that while the threat-based  resource model\u2019s variables and the data that feed the model relate to  DOD strategic counternarcotics priorities, they do not adjust the process  to reflect these priorities when distributing funding. When we asked  National Guard Bureau officials why its funding distribution process does  not consider DOD\u2019s strategic counternarcotics priorities, National Guard  Bureau officials stated that they were focused on identifying variables and  data sources within the threat-based resource model to reflect relative  drug threats and did not consider incorporating DOD\u2019s strategic  counternarcotics priorities as part of the funding distribution process.", "Our work on results-oriented management states that strategy should  inform program activities and resourcing. In addition, the National Guard  Bureau reported that the goal of the threat- based resource model is to  prioritize the most pressing threats from a national perspective, informed  by current national and DOD counternarcotics strategies. Both the Office  of the Deputy Assistant Secretary of Defense for Counternarcotics and  Global Threats and National Guard Bureau officials stated that  incorporating DOD\u2019s strategic counternarcotics priorities into the National  Guard Bureau\u2019s funding distribution process would help ensure that DOD  priorities are resourced. National Guard Bureau officials stated that they  are considering how to align the funding distribution process with DOD\u2019s  strategic counternarcotics priorities. They added that the next time they  could make changes to their funding distribution process would be for use  in fiscal year 2020. Until the National Guard Bureau incorporates DOD\u2019s  strategic counternarcotics priorities into the funding distribution process,  the National Guard Bureau risks directing funding toward lower priority  counterdrug activities at the expense of higher priority activities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The National Guard counterdrug program was established nearly 30  years ago to assist efforts of the Governors of the 50 states, District of  Columbia, and three U.S. territories in addressing illicit drug production,  trade, and consumption. The drug threats facing the nation are complex  and continue to evolve over time, and efforts to combat those threats will  require continued support from DOD, to include the National Guard  counterdrug program.", "DOD lacks current strategy and guidance for the National Guard  counterdrug program. Although DOD has a counternarcotics and global  threats strategy from 2011, it is outdated and does not reflect current drug  threats or changes in national-level strategies, which are critical for  informing DOD\u2019s strategic counternarcotics priorities. Issuing a strategic  framework will ensure that DOD\u2019s counterdrug priorities are aligned with  the priorities of other agencies involved in counternarcotics efforts,  provide direction for DOD\u2019s counternarcotics activities, and ensure that  the National Guard counterdrug program addresses current drug threats.  Further, the National Guard Bureau guidance to operate and administer  the program was rescinded and has not been replaced, leaving state  counterdrug programs officials without clear instructions on how to  operate and administer program activities. Issuing interim guidance would  provide detailed processes and procedures that states could use to  operate their counterdrug programs. Without current strategy or guidance  for the National Guard counterdrug program, it will be difficult for the  program to operate effectively.", "In addition, it is important to ensure that funding is distributed to the state- level programs in support of DOD\u2019s strategic counternarcotics priorities.  Although the Secretary of Defense is statutorily responsible for reviewing  the adequacy of states\u2019 plans prior to providing funds to the states, these  reviews have not occurred before state counterdrug programs received  funding. Also, the National Guard Bureau has not incorporated DOD\u2019s  strategic counternarcotics priorities into its funding distribution process,  which is instead wholly reliant on survey responses and drug data. While  these are important factors to consider when distributing funding,  incorporating DOD strategic counternarcotics priorities into the National  Guard Bureau\u2019s funding distribution process would better inform such  decisions. Until DOD\u2019s process to approve state plans and the National  Guard Bureau\u2019s process to distribute funding are improved, DOD may not  be able to ensure that resources are applied to its strategic  counternarcotics priorities.", "Taken together these actions should improve the Department\u2019s oversight  of the National Guard counterdrug program and help ensure that the  program uses resources effectively and achieves positive results."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making five recommendations to DOD.", "The Secretary of Defense should ensure that the Office of the Deputy  Assistant Secretary of Defense for Counternarcotics and Global Threats  issues its counternarcotics and global threats strategic framework that  incorporates relevant national-level strategies and reflects current drug  threats, and update it, as appropriate, upon issuance of the new National  Drug Control Strategy. (Recommendation 1)", "The Secretary of Defense should ensure that the Chief of the National  Guard Bureau issues interim guidance that provides detailed procedures  and processes on how to operate and administer the National Guard  counterdrug program. (Recommendation 2)", "The Secretary of Defense should ensure that the Chief of the National  Guard Bureau take steps to ensure it issues a manual to accompany  Chief National Guard Bureau Instruction 3100.01A, National Guard  Counterdrug Support, by June 2019. (Recommendation 3)", "The Secretary of Defense should ensure that the Office of the Deputy  Assistant Secretary of Defense for Counternarcotics and Global Threats,  in coordination with the Chief of the National Guard Bureau, assess the  revised process for reviewing states\u2019 plans for their counterdrug activities,  and take actions based on the assessment to ensure the plans are  approved by the Secretary of Defense before funding is provided to state  counterdrug programs, as statutorily required. (Recommendation 4)", "The Secretary of Defense should ensure that the Chief of the National  Guard Bureau incorporate the strategic counternarcotics priorities, to be  outlined in DOD\u2019s counternarcotics and global threats strategic  framework, into the National Guard Bureau\u2019s funding distribution process.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["In written comments on a draft of this report, DOD concurred with all five  of our recommendations and identified actions it plans to take to improve  its oversight of the National Guard counterdrug program. DOD\u2019s  comments are reprinted in their entirety in appendix VI. DOD also  provided technical comments on a draft of this report, which we  incorporated as appropriate. For example, we adjusted the wording of our  fifth recommendation, replacing threat-based resource model with funding  distribution process, to reflect the department\u2019s technical comment that it  is unlikely that the National Guard Bureau would change the threat-based  resource model, but rather add strategic priorities to the funding  distribution process to meet the intent of our recommendation.", "We are sending copies of this report to appropriate congressional  committees, the Acting Secretary of Defense, the Assistant Secretary of  Defense for Special Operations/Low-Intensity Conflict, and the Chief of  the National Guard Bureau. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff has any questions about this report, please contact me  at (202) 512-2775 or fielde1@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: National Guard Counterdrug Program Funding by Project Code", "paragraphs": ["Department of Defense (DOD) budgets for National Guard counterdrug  program activities using 5 projects codes:  7403\u2014State Plans\u2014funds DOD support to U.S. State Governors in  accordance with State requests in the form of drug interdiction and  counter-drug activities plans submitted in accordance with 32 U.S.C. \u00a7  112(c).  7415\u2014Counterdrug Schools\u2014funds five National Guard Counterdrug  Schools as authorized by \u00a7901 of the Office of National Drug Control  Policy Reauthorization Act of 2006, as amended, and as identified in  plans submitted by host State Governors to the Secretary of Defense in  accordance with 32 U.S.C. \u00a7 112(c).  9301\u2014Counterthreat Finance\u2014funded reserve military pay and  associated support costs for National Guard personnel in support of  State, Federal, and Combatant Command efforts to identify, target, and  disrupt illicit financial systems that enable drug trafficking, and when vital  to U.S. national security interests\u2014terrorism and transnational organized  crime.  1295\u2014Linguist and Data Analysis\u2014funds DOD support for combatant  command and interagency law enforcement efforts to detect and disrupt  transnational criminal organizations\u2019 operations using linguistic and  analytical skills of National Guard personnel.  9498\u2014Linguist Support\u2014funds language transcription, translation, and  data analysis support to the U.S. Department of Justice and Drug  Enforcement Administration using Utah National Guard personnel.", "DOD\u2019s budget request for the National Guard counterdrug program  increased steadily from fiscal year 2004 through fiscal year 2012, peaking  at just more than $205 million. However, in fiscal year 2013 DOD\u2019s  budget request for the program decreased substantially and continued to  decline through fiscal year 2017. The decrease in requested funding amounts for the program is primarily in the State Plans and Counterdrug  Schools project codes. In fiscal year 2018, the budget request for the  program increased slightly and included additional funding amounts within  the State Plans and Counterdrug Schools project codes. Table 4 provides  a summary of DOD\u2019s budget request for the National Guard counterdrug  program, by project code, in fiscal years 2004 through 2018.", "Since at least 2004, Congress has directed increases above DOD\u2019s  budget request level for the activities of the National Guard counterdrug  program. Congressionally-directed increases have been directed to the  State Plans and Counterdrug Schools project codes. Beginning in fiscal  year 2013, congressionally-directed increases have generally made up  half or more of the total funding appropriated to the National Guard  counterdrug program. Table 5 provides a summary of congressionally- directed increases for the National Guard counterdrug program, by  project code, in fiscal years 2004 through 2018.", "According to DOD\u2019s data, total budget authority for the National Guard  counterdrug program varied from fiscal year 2010 through fiscal year  2017. Total budget authority may be above or below congressionally- enacted amounts because DOD can transfer or reprogram amounts into  other authorized accounts and activities based on program requirements.  Table 6 provides a summary of total budget authority for the National  Guard counterdrug program, by project code, in fiscal years 2010 through  2017.", "According to DOD\u2019s data, obligation amounts for the National Guard  counterdrug program varied from fiscal year 2010 through fiscal year  2017. According to National Guard officials, variation was partly due to  the timing and amount of allocations received by the program. Funds  transferred from the Drug Interdiction and Counterdrug Activities, Defense  account to various other DOD drug interdiction accounts or programs,  including the National Guard program, can be transferred back to the  account upon a determination that all or part of the funds are not  necessary and remain unobligated. Once funds are returned to the Drug  Interdiction and Counterdrug Activities, Defense account, they are  available for transfer to other DOD counterdrug programs for obligation.  Table 7 details the counterdrug program\u2019s obligations from fiscal years  2010 through 2017."], "subsections": []}, {"section_title": "Appendix II: Overview of State Counterdrug Program Planned Support Activities, Fiscal Year 2018", "paragraphs": ["As of fiscal year 2018, National Guard Bureau policy allows state  counterdrug programs to perform 15 approved support activities grouped  into five broad mission categories. The five mission categories are  technical support (including linguist and translator, operational and  investigative case and criminal analyst, and counterthreat finance  support), general support (including domestic cannabis suppression and  eradication operations and transportation support), reconnaissance and  observation (including ground and aerial reconnaissance), civil operations  and coalition development, and counterdrug training. Of the 15 approved  support activities, the investigative case and analyst support activity was  the most frequently provided activity; it accounted for 42 percent of all  support provided in fiscal years 2011 to 2014. Among all of the supported  organizations from fiscal year 2011 to fiscal year 2014, law enforcement  agencies received about 38 percent of all support provided by the  National Guard counterdrug program. Table 8 lists the fiscal year 2018  approved state plan mission categories and support activities."], "subsections": []}, {"section_title": "Appendix III: Process to Fund the National Guard Counterdrug Program", "paragraphs": ["After Congress appropriates amounts to the Drug Interdiction and  Counterdrug Activities, Defense account, there are multiple steps  performed by various organizations before counterdrug funds are  provided to each individual state program. To begin the process to  distribute funding, the Department of Defense (DOD) Counternarcotics  and Global Threats program officials prepare and submit to the Office of  the Under Secretary of Defense (Comptroller) a reprogramming action  (DD1415-3), which details the allocation of funds by appropriation or  budget activity account for each program they manage. DOD  Comptroller officials review and approve the DD1415-3 and forward it to  the Office of Management and Budget. Once approved by the Office of  Management and Budget, the DOD Comptroller issues a funding  authorization document to transfer funds to the military services  appropriation accounts (such as military personnel or operation and  maintenance). The military services then transfer funds to appropriation  accounts managed by Army National Guard and Air National Guard,  which, in turn, distribute the funds onto each state National Guard  participating in the program. The National Guard Bureau\u2019s Counterdrug  Program office coordinates the process involving the Office of the Deputy  Assistant Secretary of Defense for Counternarcotics and Global Threats,  the Army and Air National Guard budget and financial management  offices, and the individual state counterdrug programs. According to  officials from the Office of the Deputy Assistant Secretary of Defense for  Counternarcotics and Global Threats, the process to complete the  DD1415-3 takes 3 full weeks and then an additional 8 weeks, on average,  for the funding to become available for state counterdrug programs.  Figure 7 outlines the process to fund the National Guard counterdrug  program."], "subsections": []}, {"section_title": "Appendix IV: Funding Provided by the Department of Defense under Congressional Appropriations", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Threat-Based Resource Model", "paragraphs": ["The National Guard Bureau\u2019s threat-based resource model has been  used since fiscal year 2012 to help determine funding distribution  percentages for the state counterdrug programs. Between fiscal years  2013 and 2015, National Guard Bureau officials stated that they  determined planned funding amounts based on a combination of  historical funding levels and threat-based resource model threat  percentages. According to officials, beginning in fiscal year 2016, funding  aligned more closely with threat-based resource model threat  percentages. However, National Guard Bureau officials stated that  funding distribution percentages from the threat-based resource model  were deemed unusable in fiscal year 2017 due to concerns they had with  the amount of reporting and the quality of the data that was reported. As a  result, officials stated that the fiscal year 2016 threat-based resource  model funding percentages were used to distribute fiscal year 2017  funding to state programs while National Guard Bureau officials revised  the model for use in fiscal year 2018. Updates to the model included  expanding the number of variables to better respond to changes in drug  threats, adjusting the model so that it did not treat all drug seizure  incidents and amounts equally, and increasing the number of data  sources. Table 10 provides threat-based resource model percentages  and table 11 funding amounts, by state, for fiscal years 2012 through  2018."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Status of October 2015 Recommendations on National Guard Counterdrug Program", "paragraphs": ["In October 2015, GAO issued a report on the National Guard counterdrug  program titled Drug Control: Additional Performance Information Is  Needed to Oversee the National Guard\u2019s State Counterdrug Program.  In  that report, we made two recommendations aimed at ensuring that  resources are being efficiently applied to meet the National Guard  counterdrug program\u2019s objectives. Table 12 provides an update on the  status of the recommendations from that report."], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Rich Geiger (Assistant Director),  Joy Booth, Carol Henn, Jesse T. Jordan, Amie M. Lesser, Shari Nikoo,  Tobin J. McMurdie, Carol D. Petersen, Clarice Ransom, Michael D.  Silver, Alexandra L. Stewart, and Sarah B. Warmbein, made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The National Guard counterdrug program has supported domestic law enforcement counterdrug activities for more than 30 years.", "In our review of the program, we found:", "DOD's strategy is out of date and doesn't reflect current drug threats.", "In 2014, the National Guard rescinded its guidance for states on how to operate and administer the program\u2014and hasn't replaced it yet.", "DOD has funded state counterdrug activities without first approving their plans.", "We recommended ways for DOD and the National Guard to address these issues."]}
{"id": "GAO-18-669", "url": "https://www.gao.gov/products/GAO-18-669", "title": "Humanitarian Assistance: USAID Should Improve Information Collection and Communication to Help Mitigate Implementers\u2019 Banking Challenges", "published_date": "2018-09-20T00:00:00", "released_date": "2018-09-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 2012, the United States has provided approximately $36 billion in humanitarian assistance to save lives and alleviate human suffering. Much of this assistance is provided in areas plagued by conflict or other issues that increase the risk of financial crimes. The World Bank and others have reported that humanitarian assistance organizations face challenges in accessing banking services that could affect project implementation.", "GAO was asked to review the possible effects of decreased banking access for nonprofit organizations on the delivery of U.S. humanitarian assistance. In this report, GAO examines (1) the extent to which State and USAID partners experienced banking access challenges, (2) USAID partners' reporting on such challenges, and (3) actions U.S. agencies have taken to help address such challenges. GAO selected four high-risk countries\u2014Syria, Somalia, Haiti, and Kenya\u2014based on factors such as their inclusion in multiple financial risk-related indices, and selected a non-generalizable sample of 18 projects in those countries. GAO reviewed documentation and interviewed U.S. officials and the 18 partners for the selected projects."]}, {"section_title": "What GAO Found", "paragraphs": ["Implementing partners (partners) for 7 of 18 Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance projects that GAO selected noted encountering banking access challenges, such as delays or denials in transferring funds overseas. Of those 7 projects, 1 partner told us that banking access challenges adversely affected its project and 2 additional partners told us that the challenges had the potential for adverse effects. Moreover, the majority of partners (15 out of 18) for the 18 projects noted experiencing banking access challenges on their global portfolio of projects over the previous 5 years.", "USAID's partners' written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that encountered challenges were USAID-funded. Of those 6 USAID projects, 5 partners told us that these challenges did not rise to the threshold of affecting project implementation that would necessitate reporting, and 1 did not report challenges although its project was adversely affected. Additionally, GAO's review of about 1,300 USAID partner reports found that the few instances where challenges were mentioned lacked sufficient detail for GAO to determine their type, severity, or origin. Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives.", "The Department of the Treasury (Treasury) and State have taken various actions to help address banking access challenges encountered by nonprofit organizations (NPO), but USAID's efforts have been limited. Treasury's efforts have focused on engagement between NPOs and U.S. agencies, while State has issued guidance on the topic to its embassies and designated an office to focus on these issues. In contrast, USAID lacks a comparable office, and NPOs stated that it is difficult to find USAID staff to engage with on this topic. Further, GAO found that awareness of specific challenges was generally limited to USAID staff directly overseeing the project. Without communicating these challenges to relevant parties, USAID may not be aware of all risks to agency objectives and may not be able to effectively engage with external entities on efforts to address these challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that USAID should take steps to (1) collect information on banking access challenges experienced by USAID's partners and (2) communicate that information both within USAID and with external entities, such as other U.S. agencies and partners. USAID concurred with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States, primarily through the Department of State (State) and  the U.S. Agency for International Development (USAID), has provided  approximately $36 billion in humanitarian assistance over the previous 6  years in order to save lives, alleviate human suffering, and reduce the  social and economic impact of disasters worldwide. Partners including  nonprofit organizations (NPO) implement much of this assistance in areas  experiencing conflict, instability, or other issues that increase the risk of  financial crimes.", "The World Bank and others have expressed concerns that derisking and  decreased banking access make it more difficult for NPOs to transfer  funds to areas that are perceived as high-risk, in part because of  concerns about possible terrorist abuse or money laundering risks. For  example, a recent survey by the Charity and Security Network (CSN), a  trade association for NPOs, found that two-thirds of U.S.-based NPOs  with international operations experienced banking access challenges,  including delays in transferring funds, increased fees, and account  closures. As a result, there have been concerns that NPOs, including  State and USAID implementing partners (partners), may face long delays  in transferring funds or be unable to transfer funds at all to implement  projects or respond to humanitarian disasters, such as those in Syria,  Somalia, and elsewhere. In addition, NPOs may be forced to move  money through less transparent, less traceable, and riskier channels.  Further, a large group of NPOs, banks, and others gathered at a World  Bank meeting on derisking stated that the inability to get humanitarian  assistance to refugees from political conflicts or natural disasters could  result in death from starvation, exposure, and disease.", "This is one of four GAO reports addressing a congressional request to  review the various effects of derisking, including on the delivery of  humanitarian assistance. In this report, we examine (1) the extent to  which State and USAID partners experience banking access challenges  that affect their implementation of humanitarian assistance projects, (2)  USAID partners\u2019 reporting on banking access challenges, and (3) actions  relevant U.S. agencies have taken to help address banking access  challenges encountered by NPOs. In addition, we provide information on  the extent to which State and USAID experience banking access  challenges in providing assistance in high-risk countries in appendix I.", "To address these objectives, we selected 18 U.S.-funded humanitarian  assistance projects in four high-risk countries \u2013 Syria, Somalia, Haiti, and  Kenya \u2013 and interviewed the 18 unique partners for each of these  projects. We selected the four high-risk countries based on factors  including the high level of humanitarian assistance they received from  U.S. agencies, their inclusion on multiple financial-risk-related indices  showing they are at higher risk for financial crimes, and to obtain  geographical diversity. The conclusions drawn from the information we  obtained from our interviews and the examination of projects in these four  countries cannot be generalized beyond our selected partners and  projects. See appendix II for a description of the countries we selected for  this review.", "To examine the extent to which State and USAID partners experienced  banking access challenges that affected their implementation of  humanitarian assistance projects, we conducted semi-structured  interviews with 18 partners about (1) the specific project we had selected  in one of our high-risk countries and (2) their experiences implementing  their global portfolio of humanitarian assistance projects over the previous  5 years. We did not ask the partners to quantify the number of projects  they had implemented over the previous 5 years, nor did we ask them to  quantify the number of projects in their global portfolio for which they had  experienced banking access challenges. To determine our sample, we  selected 18 projects from our selected countries (7 projects in Syria, 5 in  Somalia, 3 in Haiti, and 3 in Kenya). We selected more projects in Syria  and Somalia because those countries had received a greater proportion  of the U.S. humanitarian assistance. We selected our projects to ensure  that we included 18 unique partners (15 NPOs and 3 United Nations  organizations), as well as a mix of State and USAID projects (3 State and  15 USAID). Our sample included several partners that operate in over  100 countries, as well as a few that operate in less than 20 countries.", "The partners in our sample had fiscal year 2016 annual revenues ranging  from $5.9 billion to just over $10 million.", "We also interviewed several NPOs not included in our sample and  several NPO groups to obtain their views on banking access challenges  faced by those providing humanitarian assistance. Lastly, we reviewed  relevant studies on banking access challenges for NPOs conducted by  the World Bank and CSN. A survey conducted for the CSN study was  designed to be generalizable to all U.S. NPOs working internationally and  received more than 300 responses from these organizations, of which  more than 70 reported that they had received U.S. government funding.  We examined their aggregate responses in detail. We also reviewed  documentation and interviewed the officials responsible for the survey  and determined that they had used a reasonable methodology to conduct  the survey.", "To examine USAID partners\u2019 reporting on banking access challenges, we  reviewed fiscal year 2017 progress reports for our 18 sample projects to  determine if banking access challenges the partners told us about had  been reported in accordance with requirements in the award agreement.  We also reviewed over 1300 USAID partner reports for fiscal years 2016  and 2017 from a wider selection of high-risk countries to determine the  extent to which banking access challenges are being reported to  USAID.", "To examine actions relevant U.S. agencies have taken to help address  banking access challenges encountered by NPOs, we reviewed  documentation from and conducted interviews with State, USAID, and the  Department of the Treasury (Treasury) on actions they have taken to  help address these challenges. We also interviewed relevant staff at the World Bank on efforts undertaken to address banking access challenges.  See appendix III for additional details about our scope and methodology.", "We conducted this performance audit from July 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "U.S. Humanitarian Assistance Funds Sent Overseas Often Rely on Multiple Banks to Reach Their Final Destination", "paragraphs": ["International financial transactions, including the transfer of U.S.  humanitarian assistance funds, rely on a system of correspondent  banking relationships. State and USAID provide humanitarian  assistance through funding awards to partners. Funds to U.S. partners  are deposited into the partners\u2019 bank accounts located in the United  States. The partners are then responsible for transferring the funds to  recipient countries for project implementation. These transfers typically  involve the use of a correspondent, or intermediary, bank to transfer the  funds from a U.S.-based account to an account held at the recipient  country, where the funds are then used by in-country staff to implement  the project. See appendix IV for more information on the State and  USAID offices providing humanitarian assistance.", "According to research by the Bank for International Settlements, the  number of correspondent banking relationships has declined over the  past several years, especially for banks that are located in higher-risk  jurisdictions (such as those subject to sanctions), have customers  perceived as higher-risk, and who generate revenues insufficient to  recover compliance costs. Further, the Financial Stability Board noted  that a decline in the number of correspondent banking relationships could  affect the ability to send and receive international payments and may  drive some payment flows underground, with potential consequences on  growth, financial inclusion, and the stability and integrity of the financial  system."], "subsections": []}, {"section_title": "U.S. Banks Must Comply with Anti-Money Laundering Regulations and U.S. Sanctions", "paragraphs": ["When performing overseas money transfers, U.S. banks and financial  institutions must comply with the Bank Secrecy Act\u2019s (BSA) anti-money  laundering (AML) regulations and relevant regulations that implement  U.S. sanctions.", "The BSA has established reporting, recordkeeping, and other AML  requirements for financial institutions. BSA/AML regulations require that  each bank tailor a compliance program that is specific to its own risks  based on factors such as products and services offered, and customers  and locations served. By complying with BSA/AML requirements, U.S.  financial institutions assist government agencies in the detection and  prevention of money laundering and terrorist financing by, among other  things, maintaining compliance policies, conducting ongoing monitoring of  customers and transactions, and reporting suspicious financial activity.", "In addition to BSA regulations established by Treasury, federal banking  regulators have issued their own BSA regulations. These regulations  require banks to establish and maintain a BSA compliance program that,  among other things, identifies and reports suspicious activity. The  banking regulators are also required to review banks\u2019 compliance with  BSA/AML requirements and regulations, and they generally do so every  12 to 18 months as a part of their routine safety and soundness  examinations. Among other things, examiners review whether banks  have an adequate system of internal controls to ensure ongoing  compliance with BSA/AML regulations. The federal banking regulators  may take enforcement actions using their prudential authorities for  violations of BSA/AML requirements. They may also assess civil money  penalties against financial institutions and individuals.", "Banks must also comply with relevant regulations that implement U.S.  sanctions in certain countries. When the United States imposes sanctions  on an entity or individual, it freezes assets subject to U.S. jurisdiction. All  U.S. transactions with the entity or individual are prohibited, including  transactions by banks and NPOs. When appropriate, Treasury\u2019s Office of  Foreign Assets Control (OFAC) may issue a general license authorizing  the performance of certain categories of transactions, including funds  transfers for the provision of humanitarian assistance. OFAC also issues  specific licenses on a case-by-case basis under certain limited situations  and conditions."], "subsections": []}, {"section_title": "Treasury Helps Prevent Financial Crimes and Considers NPOs Providing Humanitarian Assistance in High-Risk Areas Potentially Vulnerable to Exploitation", "paragraphs": ["Treasury, as a lead agency in fighting financial crimes and as an issuer of  regulations that have a significant effect on charities\u2019 access to the  banking system, takes actions to help prevent financial crimes, and  considers NPOs operating in conflict areas and other high risk zones as  potentially vulnerable to such crimes. Treasury leads U.S. efforts to fight  various financial crimes primarily through its Office of Terrorism and  Financial Intelligence (TFI). TFI develops and implements U.S.  government strategies to combat terrorist financing domestically and  internationally, and develops and implements the National Money  Laundering Strategy as well as other policies and programs to fight  financial crimes. Relevant offices under TFI include:", "The Office of Terrorist Financing and Financial Crimes  (TFFC). TFFC, the policy development and outreach office for TFI,  works across all elements of the national security community \u2013  including the law enforcement, regulatory, policy, diplomatic, and  intelligence communities \u2013 and with the private sector and foreign  governments to identify and address the threats presented by all  forms of illicit finance to the international financial system.", "The Office of Foreign Assets Control (OFAC). OFAC  administers and enforces economic and financial sanctions based  on U.S. foreign policy and national security goals against targeted  foreign countries and regimes, terrorists, international narcotics  traffickers, transnational criminal organizations, human rights  abusers and corrupt actors, those engaged in activities related to  the proliferation of weapons of mass destruction, and other threats  to the national security, foreign policy, or economy of the United  States.", "The Financial Crimes Enforcement Network (FinCEN). FinCEN,  among other duties, is responsible for administering the BSA, has  authority for enforcing compliance with its requirements and  implementing regulations, and also has the authority to enforce  the BSA, including through civil money penalties. FinCEN issues  regulations under the BSA and relies on the examination functions  performed by other federal regulators, including federal banking  regulators. FinCEN also collects, analyzes, and maintains the  reports and information filed by financial institutions under BSA  and makes those reports available to law enforcement and  regulators.", "According to Treasury, organizations, including NPOs, implementing  humanitarian assistance in high-risk areas may be vulnerable to  exploitation by terrorist groups and their support networks. These terrorist  groups and support networks may establish or abuse charities to raise  and move funds, or provide other forms of support, that benefit the  terrorist groups. As of May 2017, Treasury, through OFAC, had  designated 67 charities, branches, and foreign terrorist organizations\u2019  potential fundraising front organizations for violations of U.S. sanctions."], "subsections": []}]}, {"section_title": "The Majority of Selected State and USAID Implementing Partners Experienced Banking Access Challenges", "paragraphs": ["For 7 of our 18 selected projects, State and USAID partners told us that  they had experienced banking access challenges. Additionally, 15 of the  18 partners we interviewed noted that they had experienced banking  access challenges on their global portfolio of humanitarian assistance  projects over the previous 5 years. Most of the 18 partners we  interviewed told us that they were able to mitigate these challenges  through various actions or the challenges were not significant enough to  affect project implementation. Nevertheless, a few partners noted that  projects they were implementing were adversely affected by such  challenges. For example, 1 of our 18 selected projects faced repeated  delays as a result of banking access challenges. Additionally, 2 partners  noted that they had to reduce the scope of implementation or suspend  projects in their global humanitarian assistance portfolio because of  banking access challenges. Furthermore, several partners and other  NPOs told us that such challenges posed potential risks to project  implementation. Lastly, a recent study found that more than two-thirds of  all U.S.-based NPOs that work internationally experienced banking  access challenges, but that few NPOs canceled programs as a result of  those challenges."], "subsections": [{"section_title": "Funds Transfer Delays and Denials Were among the Most Frequently Cited Banking Access Challenges Banking Access Challenges Experienced on Selected U.S.- Funded Projects", "paragraphs": ["For our 18 selected U.S.-funded projects, 7 of the partners told us that  they had experienced banking access challenges in implementing their  projects, with the majority citing delays or denials of funds transfers.  Specifically, 3 (of 5) partners in Somalia and 4 (of 7) partners in Syria told  us that they had experienced banking access challenges related to the  selected project. None of the partners implementing selected sample  projects in Haiti or Kenya noted that they had experienced any banking  access challenges. Denials of funds transfers to the destination country  was the most frequently cited banking access challenge (experienced by 5 of the 7 projects), followed by delays of funds transfers (experienced by  3 of the 7 projects) (see fig. 2).", "Fifteen of the 18 partners that we interviewed noted that they had  experienced banking access challenges on their global portfolio of  humanitarian assistance projects implemented over the previous 5 years  (see fig. 3). The most frequently cited challenges were funds transfer  delays and denials. Twelve partners noted that they had experienced  transfer delays, with 8 noting that the delays occurred occasionally and 6  noting that the delays lasted weeks or months. Most partners that noted  experiencing delays told us that the delays were caused exclusively by  intermediary banks. Eleven partners noted that they had experienced  transfer denials, including 5 that told us the denials occurred occasionally.  Five partners also noted that transfers were denied by intermediary  banks.", "In addition, 2 partners noted that they had experienced challenges  opening new bank accounts; 3, increased costs to transfer funds; 1, a  bank-initiated account closure; and 2, other challenges. For more  information on the types of banking access challenges that partners  identified, including details on the duration of delays and the frequency of  denials, see appendix V."], "subsections": []}, {"section_title": "Some Banking Access Challenges Adversely Affected or Posed a Potential Risk to Project Implementation", "paragraphs": ["Some partners that experienced banking access challenges told us that  those challenges had adversely affected or posed a potential risk to  implementation of projects. Of those partners experiencing challenges, 3  partners noted that banking access challenges had adversely affected a  project\u2019s implementation. Specifically, 1 partner that experienced  challenges on one of our selected projects and 2 partners that  experienced challenges on projects outside of our sample noted that the  challenges they had experienced resulted in a project being adversely  affected in some form, such as:", "Reduced scope of implementation. One partner told us that its  project in the Democratic People\u2019s Republic of Korea was scaled  back significantly because of difficulty transferring funds to the  country.", "Delays implementing a project. One partner told us that for one  of our selected projects, in part because of banking access  challenges, implementation of the project was delayed and  required approval for two no-cost extensions from USAID. The  partner noted that it had experienced recurring issues with funds  transfers to Syria, including 3- to 6-week delays and frequent  denials of transfers.", "Suspension of an in-progress project. One partner told us that  an ongoing project it implemented in Syria (outside of our sample  of projects) to deliver food assistance had been suspended for  about a week because its funds transfers to the country were  denied.", "While some projects were adversely affected, 6 of the 7 partners of our  selected projects that noted experiencing banking access challenges told  us that the challenges they had experienced did not adversely affect  project implementation. Similarly, 12 of the 15 partners that noted  experiencing banking access challenges on their global portfolio of  humanitarian assistance told us that the challenges did not affect project  implementation. Additionally, for both our selected projects and their  global portfolio of humanitarian assistance projects, the challenges  experienced were either not significant enough to affect project  implementation, or were mitigated through various actions. For example,  partners told us that they had mitigated challenges by:", "Maintaining a funding buffer. Partners may keep enough  funding to operate a project for several weeks in order to mitigate  delays and denials of funds transfers. For example, one partner  noted that projects maintain approximately 4 weeks of operating  funds on hand, which is enough to mitigate transfer delays that  last up to 3 weeks.", "Using alternate methods to move funds. Partners may use  alternate methods to move funds, such as using different  intermediary banks or money transmitters, or by carrying cash.  For example, one partner told us that when its U.S. bank stopped  allowing funds transfers to Syria, the partner opened an account  with a different bank. That partner also told us that because it was  unable to reliably transfer funds to Syria, it regularly transfers  funds to Lebanon\u2014either to intermediaries or to the personal  accounts of individuals involved in the projects\u2014and manually  moves the physical currency to Syria.", "Maintaining multiple bank accounts. Partners may maintain  accounts with multiple banks in order to mitigate the risk of a  bank-initiated account closure. For example, one partner told us  that after a bank closed all of its accounts without warning or  explanation, the partner opened accounts across three different  banks in order to mitigate the effects of any individual bank closing  its account.", "While most partners\u2019 projects did not experience adverse effects as a  result of banking access challenges, three USAID partners\u2014as well as  another NPO that we spoke with\u2014told us that banking access challenges  posed a potential risk to project implementation, such as:", "Potential for physical violence. One partner told us that, for one  of our selected projects, there were concerns of violence if  payments were halted because of funds transfer delays, while  another partner told us that violence was a concern if it was  unable to pay vendors on time. An NPO also told us that there  was a potential for physical violence if local staff were not paid on  time.", "Potential for insolvency of vendors. One partner told us that,  for one of our selected projects, transfer delays prevented it from  reimbursing a money transmitter it used to move funds to Somalia,  which in turn caused that money transmitter to experience  financial difficulties. The partner stated that the delays were  almost significant enough to affect operations, though it was able  to resolve the situation in time to prevent its vendor from  becoming insolvent.", "Potential for project suspension. One partner told us that it  provides advance funding for projects to account for delays, but at  times transfer delays have come close to exhausting the advance  funding. For example, the partner told us that it provided funding  for projects 4 weeks in advance and experienced transfer delays  averaging 3 weeks. In addition, an NPO told us that staff are  sometimes not paid for several months because of such delays;  thus, if transfer delays worsened or staff were unwilling to work  without being paid, project implementation may be adversely  affected."], "subsections": []}, {"section_title": "Approximately Two-Thirds of U.S. NPOs That Operate Internationally Experienced Banking Access Challenges, According to a Trade Association Survey", "paragraphs": ["A recent study by Charity and Security Network on banking access for  U.S. NPOs, which included NPOs that received U.S. government funds,  found widespread banking challenges for U.S.-based NPOs. Data for a  survey conducted as part of this study indicated that about two-thirds of  the responding U.S.-based NPOs that work internationally experienced  banking access challenges. The challenges included delays of wire  transfers, unusual requests for documentation, and increased fees. Some  NPOs also cited experiencing account closures and refusals to open  accounts.", "About 15 percent of the NPOs that responded to the survey noted that  they experienced these banking access challenges constantly or  regularly, and about 3 percent of NPOs reported cancelling a project  because of banking access challenges. Furthermore, transfers to all  parts of the globe were affected, and the challenges were not limited to  conflict zones. According to the report, NPOs with 500 or fewer staff were  more likely to experience delayed wire transfers, fee increases, and  account closures. Smaller organizations were more likely to receive  unusual requests for documentation, according to the report. The smallest  NPOs, those with 10 or fewer employees, reported experiencing more  trouble opening accounts than larger organizations. According to the  report, as a result of the challenges they experienced, NPOs were  sometimes forced to move money through less transparent, less  traceable, and less safe channels, such as carrying cash.", "As shown in table 1, survey data from the Charity and Security Network  study indicated that there were only minor differences between NPOs  receiving and not receiving U.S. government funding in terms of  experiencing banking access challenges. For example, about 15 percent  of responding NPOs, regardless of whether or not they received U.S.  funds, noted experiencing banking access challenges regularly or  constantly, with transfer delays the challenge most frequently cited by  both groups. Additionally, about the same proportion of NPOs that  received or did not receive U.S. funds reported that they rarely or never  experienced banking access challenges. Both groups of NPOs also noted  taking similar measures to deal with banking access challenges."], "subsections": []}]}, {"section_title": "USAID Implementing Partners\u2019 Reports Do Not Capture Potential Risks Posed by Banking Access Challenges", "paragraphs": ["USAID\u2019s partners\u2019 written reports do not capture potential risks posed by  banking access challenges because USAID generally does not require  most partners to report in writing any challenges that do not affect  implementation. Six of the 7 projects that noted experiencing banking  access challenges were USAID projects. None of those 6 USAID partners  reported on the banking access challenges they had experienced to  USAID in their regular project reporting. USAID requires partners to report  adverse effects to their projects, but 1 partner that faced delays on its  project as a result of banking access challenges did not identify these  challenges as the reason for delays in its reporting to USAID. We also  reviewed over 1,300 USAID partner reports for fiscal years 2016 and  2017 from high-risk countries and found no explicit discussion of banking  access challenges."], "subsections": [{"section_title": "USAID Generally Requires Implementing Partners Only to Report Banking Access Challenges That Affect Project Implementation", "paragraphs": ["USAID generally requires partners implementing humanitarian assistance  projects to report challenges that affect project implementation. USAID,  through the Office of U.S. Foreign Disaster Assistance (OFDA) and the  Office of Food For Peace (FFP), provides humanitarian assistance and  monitors the implementation of projects through various methods,  including periodic performance reports. USAID\u2019s reporting requirements,  as well as the number of partners of selected projects that told us they  had experienced banking access challenges, are as follows:", "USAID/OFDA. USAID/OFDA agreements for the selected projects  we reviewed require the awardee to report via email (1)  developments that have a significant effect on the activities  supported by the agreement, and (2) problems, delays, or adverse  conditions that materially impair the ability to meet the objectives  of this agreement. The agreements also require Program  Performance Reports that must address reasons why established  goals were not met, the impact on the program objectives, and  how the impact has been or will be addressed. Four of the 6  USAID partners that told us they had experienced banking access  challenges were implementing USAID/OFDA projects.", "USAID/FFP. USAID/FFP\u2019s Fiscal Year 2017 Annual Program  Statement for International Emergency Food Assistance requires  partners to report, as part of their quarterly reporting, any  challenges that the project has faced during the quarter and how  they were resolved and discuss any potential challenges or delays  that may affect the program\u2019s ability to achieve its objectives.  Each of the agreements\u2014both for NPOs and for public  international organizations\u2014that we reviewed require the partner  to notify USAID of any developments, problems, or delays that  may have an adverse effect on the project. Two of the 6 USAID  partners that told us they had experienced banking access  challenges were implementing USAID/FFP projects."], "subsections": []}, {"section_title": "USAID Implementing Partners That Noted Experiencing Banking Access Challenges Did Not Include These Challenges in Their Program Performance Reports", "paragraphs": ["Five of the 6 USAID partners of selected sample projects that noted  experiencing banking access challenges told us those challenges did not  adversely affect project implementation and therefore did not need to be  reported. The sixth\u2014a partner that noted its project was adversely  affected by banking access challenges\u2014did not include these challenges  in its reporting to USAID, although the challenges met the reporting  threshold of adversely affecting project implementation. While both  USAID and the partner told us that the delays were communicated to  USAID through emails and conversations with a designated USAID  contact and in the justification for the no-cost extensions submitted to  USAID, our review of the partner\u2019s program performance reports to  USAID and the no-cost extensions found no explicit discussion of banking  access challenges."], "subsections": []}, {"section_title": "USAID Partner Reports Did Not Include Any Explicit Mention of Banking Access Challenges for Fiscal Years 2016 and 2017", "paragraphs": ["Our review of the over 1,300 publicly available USAID partner reports for  fiscal years 2016 and 2017 from high-risk countries found no explicit  discussion of banking access challenges. Overall, we identified 5  reports out of the over 1,300 that included some mention of challenges  related to banking access. However, those reports lacked sufficient detail  for us to determine the type, severity, or origin of the challenges. For  example, one report stated that there are sometimes delays in the  payment of salaries through foreign accounts, with no further details  about the delays, while another report stated that subgrantees  experienced delays in payments without identifying the reasons for these  delays, which could include late reports, late verification, late processing,  or banking issues.", "While most of the partners we interviewed noted that they did not report  banking access challenges because the challenges did not adversely  affect their projects, an NPO advocacy group and a large international  NPO told us that NPOs may be reluctant to discuss or report banking  access challenges publicly because of concern about being perceived as  high-risk or unable to carry out their mission, and that any public mention  of banking access challenges could adversely affect their ability to raise  funds. Standards for Internal Control in the Federal Government require  agencies to identify and respond to risks related to achieving their goals,  and USAID currently has no other process for collecting information on  banking access challenges affecting its partners. Without this information,  USAID does not have a record of the frequency and prevalence of the  challenges and may not be aware of the full extent of risks to achieving its  humanitarian assistance objectives. Further, as mentioned previously,  two USAID partners stated that their projects faced potential adverse  effects from banking access challenges. Documenting the prevalence and  frequency of banking access challenges experienced by USAID partners  is important given the potential adverse effects that these challenges can  have on project implementation."], "subsections": []}]}, {"section_title": "Treasury and State Have Taken Various Actions to Help Address Banking Access Challenges Encountered by NPOs, While USAID Efforts Have Been Limited by a Lack of Communication Both within the Agency and Externally", "paragraphs": ["Both Treasury and State have taken actions to help address banking  access challenges encountered by NPOs; however, USAID\u2019s efforts to  address these challenges have been limited by a lack of communication  about them\u2014both within the agency and with external entities. Treasury,  as a lead agency in fighting financial crimes and as an issuer of  regulations that have a significant effect on charities\u2019 access to the  banking system, has conducted meetings between charities, banks, and  government officials to discuss banking access challenges and released  guidance on sanctions and other related issues. State, as a provider of  funding for humanitarian assistance, has issued guidance to its overseas  posts on banking access challenges. In addition, both State and Treasury  are involved in international efforts led by the World Bank and the  Financial Action Task Force (FATF) to help address banking access  challenges. Although USAID\u2019s partners have experienced banking access  challenges, USAID has had more limited engagement than State and  Treasury with other agencies, international organizations, and NPOs on  addressing such challenges\u2014in part because of a lack of communication  about them, both within the agency and with external entities."], "subsections": [{"section_title": "Treasury Is Involved in Several Efforts to Help Address Banking Access Challenges Experienced by NPOs", "paragraphs": ["Treasury\u2019s efforts to help address banking access challenges  encountered by NPOs include holding roundtable meetings and issuing  guidance and resources for charitable organizations. Treasury, in its role  as a regulator of the banking system, serves as a nexus between the  banks and the U.S. agencies providing humanitarian assistance. Treasury  has organized several roundtable meetings with the charitable sector to  facilitate a dialogue on banks\u2019 expectations. These sessions brought  together representatives from charities, banks, financial supervisors, and  the U.S. government to discuss the factors that banks consider related to  charity accounts and that examiners use in their review of banks\u2019  procedures. Since 2013, Treasury\u2019s Office of Terrorist Financing and  Financial Crimes (TFFC) has dedicated three of these roundtable  meetings specifically to banking access challenges affecting charities, as  follows:", "December 17, 2013: This initial Treasury / TFFC working group  meeting with charities included a discussion of terrorist financing  risk mitigation guidance. There was also a discussion of banking  access challenges, during which TFFC provided an overview of  the NPO section of the manual used by bank examiners to  conduct bank examinations and explained the bank examination  process to the charities.", "March 21, 2014: This meeting focused on a discussion of access  to financial services for charities. A Muslim-American charity  delivered a presentation on how it has managed its banking  relationships over the past several years. Several banks also  delivered presentations to help charities better understand the  factors that banks consider and the complex processes related to  banking transactions and opening or maintaining bank accounts.", "November 12, 2015: This meeting included a stakeholder  discussion of banking access challenges for charities, with  charities, bankers, and regulators presenting each of their  perspectives and discussing the challenges faced on all sides.", "In addition, in May 2015, Treasury, with the Department of Homeland  Security, conducted a roundtable on banking access challenges with  Syrian-American charities, U.S. regulators, and bankers. This event was  focused on challenges affecting the Syrian-American charitable  community and delivering humanitarian assistance to Syria during the  worsening conflict. Treasury provided guidance related to OFAC\u2019s  general license 11a for U.S. charities to provide humanitarian assistance  for Syria. Further, officials reported that Treasury also maintains contact  with the charitable sector through various domestic and international  events, and holds frequent meetings with members of the charitable  sector in Washington, D.C. and around the United States. Treasury has  also issued guidance and resources on its website for charities, including  frequently asked questions and best practices. Treasury\u2019s website  provides information and resources for all stakeholders in four strategic  areas\u2014private sector outreach, coordinated oversight, targeted  investigations, and international engagement. The guidance includes:  voluntary best practices regarding anti-terrorist financing for  charities,  lists of frequently asked questions regarding sanctions and  charities,  list of charities that have been designated by OFAC for assisting  or having ties to terrorist organizations,  several international multilateral organization reports on banking  access challenges and terrorist exploitation of charities, and", "OFAC guidance specifically related to the provision of  humanitarian assistance.", "Lastly, Treasury has taken actions on derisking challenges more  generally. According to Treasury officials, these more general actions  focused on encouraging dialogue and making clear to financial institutions  that they are expected to make individual risk-based decisions rather than  wholesale, indiscriminate policies for entire sectors or classes of  customers.", "Treasury officials noted that banks retain the flexibility to make business  decisions such as which clients to accept, since banks are in the best  position to know whether they are able to implement controls to manage  the risk associated with any given client. These officials indicated that  Treasury pursues market-driven solutions and cannot order banks to  open or maintain accounts. The officials have stated that Treasury does  not view the charitable sector as presenting a uniform or unacceptably  high risk of money laundering, terrorist financing, or sanctions violations.  However, charities delivering critical assistance in high-risk conflict zones  have, in some cases, had terrorist organizations and their support  networks exploit donations and operations to support terrorist activities."], "subsections": []}, {"section_title": "State Has Issued Guidance to All of Its Overseas Posts to Help Address Banking Access Challenges", "paragraphs": ["State has issued guidance to its staff overseas to help address banking  access challenges encountered by NPOs and others and identified a  focal point for banking access challenges within the agency. In July 2017,  State issued internal guidance, through a document issued to all of its  overseas embassies, regarding derisking. State, based on guidance from  Treasury, developed guidance for all personnel that provides background  on \u201cde-risking\u201d and related talking points, additional web-based  resources, and an assessment framework tool to evaluate the current  state of banking relationships in a given market. The guidance includes  links to resources from Treasury, U.S. banking regulators, and various  international organizations, such as the World Bank, International  Monetary Fund, and FATF. The guidance is designed to give embassy  staff some tools to work with host governments on these issues and to  help identify countries and markets where further U.S. government  engagement is necessary.", "In addition, State\u2019s Office of Threat Finance Countermeasures serves as  the main focal point for all banking access challenges brought to the  attention of State. This office provides assistance to State\u2019s embassies  when banking-access-related issues are raised through the embassy to  State headquarters. All embassy staff, as part of the guidance issued on  derisking, have been instructed to direct all questions received on  banking access issues to the Office of Threat Finance Countermeasures.  In addition, this office is responsible for interfacing with Treasury on  banking access issues and staff from this office have attended all of the  relevant Treasury-hosted roundtable meetings focused on banking  access challenges encountered by charities."], "subsections": []}, {"section_title": "Treasury and State Are Also Involved in Efforts Undertaken by the World Bank and the Financial Action Task Force Aimed at Addressing Banking Access Challenges", "paragraphs": ["The World Bank and FATF have several efforts underway\u2014with  participation from Treasury and State\u2014to address banking access  challenges for NPOs. The World Bank, in collaboration with the  Association of Certified Anti-Money Laundering Specialists (ACAMS), is  working with humanitarian organizations, banks, and U.S. regulators on  the question of how humanitarian organizations can maintain access to  the financial system. More specifically, the World Bank and ACAMS have  launched three primary work streams focused on different aspects of  banking access to improve NPOs\u2019 understanding of what the financial  institutions require and to improve the banks\u2019 understanding of how NPOs  operate. According to a World Bank official, the three workstreams are as  follows:", "Work Stream 1: This work stream aims to ensure a better  understanding of bank examiners of the NPO sector and to enable  more risk differentiation on the part of those examiners when they  conduct on-site supervision and examine bank client accounts.", "Work Stream 2: This work stream aims to help banks conduct  due diligence on charities more easily through the use of  technological tools, such as databases that contain key  information on charities.", "Work Stream 3: This work stream aims to work with the  regulatory bodies to help bank examiners change their  perceptions of the risk potential of charities.", "In addition, the World Bank and ACAMS have organized roundtable  meetings as part of the ongoing Stakeholder Dialogue on De-Risking. The  objectives of a January 2017 meeting were to promote access of  humanitarian organizations to financial services and to discuss practical  measures to foster the relationship between NPOs and financial  institutions, improve the regulatory and policy climate for financial access  for NPOs, and build coalitions and create opportunities for sharing  information and good due diligence practices. Officials from Treasury  and State have been involved with the dialogues and various work  streams.", "FATF, with participation from both Treasury and State, also has several  efforts underway to help address banking access challenges, including  revising its recommendations and issuing guidance. Derisking has been a  stated FATF priority since October 2014. In June 2016, FATF revised its  recommendation that pertains to how countries should review NPOs and  its interpretive note to better reflect how to implement measures to protect  NPOs from terrorist abuse, in line with the proper implementation of the  risk-based approach. According to Treasury, this approach emphasizes that not all charities are considered high-risk. Specific changes included  defining NPOs, removal of the words \u201cparticularly vulnerable\u201d from  previous language, and emphasis on a risk-based approach for  evaluating NPOs. The FATF has also issued guidance and best practices  to guide both financial institutions and regulators on how to properly  implement the risk-based approach, in line with the revised FATF  recommendations. Additionally, according to Treasury, the FATF updated  a report analyzing the global terrorist threat to the charitable sector,  gathering over 100 examples of terrorist abuse of charities to pinpoint  which types of charities are considered higher-risk. This report and its  findings were published in June 2014."], "subsections": []}, {"section_title": "USAID\u2019s Efforts to Address Banking Access Challenges Are Limited by Lack of Communication, Both within the Agency and with External Entities, on Challenges Faced by Partners", "paragraphs": ["USAID efforts to address banking access challenges have been limited,  in part because of a lack of communication within the agency and with  external entities about challenges faced by USAID\u2019s partners.", "Within USAID, we found that information on banking access challenges  faced by partners was not always communicated beyond staff directly  overseeing the project. We found that the USAID staff who had direct  responsibility for managing the project were generally aware of banking  access challenges that affected project implementation, and had taken  steps to help mitigate these challenges on a project-level basis. However,  other relevant staff, such as USAID management and country-level  headquarters staff, were not aware of these challenges. For example,  partners in Syria and Somalia that we interviewed noted experiencing  banking access challenges, but the USAID officials representing these  countries in headquarters told us they were not aware of such challenges  occurring recently. This situation may be, in part, because USAID has no  designated office or process that focuses on communicating these issues  throughout the agency to other relevant officials, including USAID  management. Federal standards for internal control note that  management should use quality information to achieve the entity\u2019s  objectives, and that entity management needs access to relevant and  reliable communication related to internal as well as external events. If  information on banking access challenges experienced by USAID  partners is only reported to program-level staff and not communicated to  a wider audience within the agency, then the agency as a whole may not  fully recognize the overall risks posed by banking access challenges to  USAID\u2019s ability to achieve its objectives. Further, the agency may miss  opportunities to assist other partners that might be experiencing similar  issues based on lessons learned from previous experiences, if staff are  not aware of the banking access challenges that have been experienced  by its partners implementing other projects or working in other countries.", "USAID participation in interagency and partner efforts to address banking  access challenges has been limited, in part because of a lack of  communication with these external entities. According to Treasury  officials, because there is no main focal point at USAID for banking  access challenges, there is no consistency on who attends, or whether  anyone attends, the Treasury-hosted roundtable meetings on banking  access challenges from USAID. Further, an NPO trade association and  other NPOs told us that it is difficult to find a person at USAID to engage  with on banking access challenges. Lastly, a USAID/OFDA official stated  that USAID has had limited engagement on issues related to banking  access challenges. The OFDA official stated that once OFDA fully staffs  its new Award, Audit, and Risk Management Team, it will be able to more  fully engage on these issues. Federal standards for internal control state  that management should communicate the necessary quality information  both internally and externally to achieve the organization\u2019s objectives.  Without effective communication with partners and other government  agencies about banking access challenges its partners face, USAID\u2019s  ability to effectively and consistently engage with these entities or  contribute to efforts to help address these challenges is limited."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The United States provides humanitarian assistance in countries that are  often plagued by conflict, instability, or other issues that increase the risk  of financial crimes. Some of these countries also face U.S. sanctions that  are aimed at their governments or other actors that engage in terrorism or  illicit activities. Additionally, to ensure that the U.S. financial system is not  used for money laundering or financing terrorism, financial institutions  such as banks are subject to various U.S. laws and regulations that  require banks to conduct proper due diligence on entities, such as those transferring funds to high-risk countries. However, there is concern  among some organizations that banks\u2019 higher level of due diligence,  especially for clients such as charitable organizations that provide  humanitarian assistance in high-risk countries, may create undue  difficulties, including delays, for these organizations.", "Charitable organizations and others believe that because the United  States and a key multilateral organization previously labeled charitable  organizations as high-risk, banks remain reluctant to serve these  organizations even though a case-by-case assessment of risk is now  recommended. As such, we found that the majority of implementing  partners\u2014many of which are charitable organizations\u2014of U.S.  government assistance that we interviewed had experienced some  banking access challenges.", "Despite our findings and others\u2019 findings on the prevalence of banking  access challenges facing humanitarian assistance organizations,  USAID\u2019s current partner reporting does not capture information related to  the potential risks of banking access challenges faced by its partners.  Without collecting this information, USAID cannot help the partners  mitigate banking access challenges. Additionally, if these challenges are  not documented and shared throughout the agency, the prevalence of the  challenges and potential risks cannot be fully assessed. Further, without  communicating about banking access challenges faced by its partners  throughout the agency and to others, the potential risk to agency  objectives will not be known and USAID\u2019s ability to engage with other  agencies and organizations in helping to address these challenges is  limited."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to USAID:  The Administrator of USAID should take steps to collect information on  banking access challenges experienced by USAID\u2019s implementing  partners. (Recommendation 1)", "The Administrator of USAID should take steps to communicate  information on banking access challenges faced by partners both within  USAID and with external entities, such as other U.S. agencies and U.S.  implementing partners. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to State, USAID, and Treasury for  comment. We received written comments from USAID that are reprinted  in appendix VI. USAID concurred with our recommendations. Treasury  provided technical comments, which we incorporated as appropriate.  State told us that it had no comments on the draft report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Administrator of the U.S. Agency  for International Development, the Secretary of the Treasury, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Banking Access Challenges Experienced by State and USAID Did Not Affect Operations in High Risk Countries", "paragraphs": [], "subsections": [{"section_title": "State and USAID Experience Some Banking Access Challenges, Such as Delays in Overseas Transfers of Funds", "paragraphs": ["While the Department of State (State) and the U.S. Agency for  International Development (USAID) have encountered some banking  access challenges, such as closed accounts and delays in transferring  funds, these challenges did not affect their operations for providing  assistance to high-risk countries. To send funds overseas, State, through  two U.S. disbursement offices managed by State\u2019s Bureau of the  Comptroller and Global Financial Services (CGFS), maintains foreign  currency bank accounts in 172 countries. Funds are transferred from a  Federal Reserve Bank to a U.S. dollar bank account maintained by State,  after which the funds are directed through a correspondent bank or a  foreign exchange broker to a foreign bank account maintained by State.  A correspondent bank serves as the intermediary between the bank  sending a transfer, in this case a U.S. dollar denominated bank account,  and the bank issuing payment to the recipient, in this case the State-held  account in the recipient country. Both the bank sending the transfer and  the bank receiving the transfer hold an account at the correspondent  bank, which is used for fund transfers, cash management, and other  purposes.", "According to State, all State transfers overseas, as well as the majority of  USAID payments overseas, are managed by CGFS, and in fiscal year  2017 CGFS\u2019s two disbursement offices processed approximately 3 million  payments through accounts managed by State in 172 countries. State  officials told us that State encounters occasional banking access  challenges, including short delays in funds transfers, denials of funds  transfers to certain countries, and one bank-initiated account closure."], "subsections": []}, {"section_title": "Banking Access Challenges Do Not Affect State and USAID Operations", "paragraphs": ["State officials told us that they are able to mitigate the occasional banking  access challenges that they encounter to ensure operations are not  affected. For example:", "State\u2019s transfers to countries sanctioned by the Office of Foreign  Asset Control (OFAC) are occasionally flagged by intermediary  banks. According to State, in fiscal year 2017 approximately one- tenth of one percent (0.1%) of payments were delayed because of  OFAC sanctions. When this occurs, State receives questions on  the details of those transfers. According to officials, this is an  ongoing challenge, but State resolves such delays within 2  weeks\u2014and typically within days\u2014and there are no operational  effects as a result of the delays.", "In some instances\u2014including once in 2012, and once in 2018\u2014an  intermediary bank used by CGFS\u2019s U.S. bank stopped processing  transfers to a recipient bank in a specific country. According to  State officials, in both cases State identified an alternative  intermediary bank to transfer funds to the destination country. In  both cases, there were no operational effects.", "In 2014, an intermediary bank used by CGFS\u2019s U.S. bank ended  its banking relationship with an OFAC-sanctioned country (Syria),  and State was unable to move funds from its U.S.-dollar  denominated accounts to that country. State, with the advice of  the recipient bank in the OFAC-sanctioned country, identified an  alternative intermediary bank that was able to move funds to that  country using euro-denominated accounts.", "In 2014, a U.S. bank\u2014at which State maintained an account and  that State used to fund its operations in Brunei\u2014notified State that  it would be closing State\u2019s account with 29 days\u2019 notice. State  worked with Treasury to identify an alternative bank that would be  willing to maintain a State bank account. The operation was not  affected."], "subsections": []}]}, {"section_title": "Appendix II: GAO-Selected Countries Have an Increased Risk of Financial Crimes", "paragraphs": ["For this review, we selected four countries\u2014Syria, Somalia, Haiti, and  Kenya\u2014that may have a higher risk of financial crimes because of  conflict, instability, or other issues. We selected them based on factors  including the level of humanitarian assistance they received from U.S.  agencies, their inclusion on multiple financial-risk-related indices, and  geographical diversity.", "Syria. Since 2011, Syria has been plagued by an ongoing  multisided armed conflict fought primarily between the government  of President Bashar al-Assad, along with its allies, and various  forces opposing both the government and each other. Syria\u2019s  economy has deeply deteriorated amid the ongoing conflict,  declining by more than 70 percent from 2010 to 2017. During  2017, the ongoing conflict and continued unrest and economic  decline worsened the humanitarian crisis, necessitating high  levels of international assistance, as more than 13 million people  remained in need inside Syria and the number of registered Syrian  refugees increased from 4.8 million to more than 5.4 million.  Multiple terrorist groups operate inside Syria, raising the potential  risk of terrorist financing. Additionally, according to a Central  Intelligence Agency report, Syria is a transit point for opiates,  hashish, and cocaine bound for regional and Western markets,  and weak anti-money-laundering controls and bank privatization  may leave it vulnerable to money laundering. The U.S. maintains  a comprehensive Syria sanctions program. A general license in  the Syria regulations authorizes nonprofit organizations to provide  services, including financial services, to Syria in support of certain  not-for-profit activities, such as activities to support humanitarian  projects to meet basic human needs and support education in  Syria. Organizations providing humanitarian assistance that is not  authorized by the general license may apply for a specific license  to engage in those transactions. The United States has provided  approximately $3.3 billion in humanitarian assistance for Syria  since 2012.", "Somalia. Since 1969, Somalia has endured political instability and  civil conflict, and is the third-largest source of refugees, after Syria  and Afghanistan. Somalia lacks effective national governance and  maintains an informal economy largely based on livestock, money  transfer companies, and telecommunications. In the absence of a  formal banking sector, money transfer companies have sprung up  throughout the country, handling up to $1.6 billion in remittances  annually. According to a 2016 State report, Somalia remained a  safe haven for terrorists who used their relative freedom of  movement to obtain resources and funds, recruit fighters, and plan  and mount operations within Somalia and neighboring countries.  The United States maintains a targeted list-based Somalia  sanctions program. Organizations providing humanitarian  assistance may apply for a specific license to engage in  transactions that otherwise would be prohibited by the Somalia  sanctions regulations. The United States has provided  approximately $1.2 billion in humanitarian assistance for Somalia  since 2012.", "Haiti. Currently the poorest country in the western hemisphere,  Haiti has experienced political instability for most of its history.  Remittances are the primary source of foreign exchange,  equivalent to more than a quarter of GDP, and nearly double the  combined value of Haitian exports and foreign direct investment.  In January 2010, a catastrophic earthquake killed an estimated  300,000 people and left close to 1.5 million people homeless.  Hurricane Matthew, the fiercest Caribbean storm in nearly a  decade, made landfall in Haiti on October 4, 2016, creating a new  humanitarian emergency. An estimated 2.1 million people were  affected by the category 4 storm, which caused extensive damage  to crops, houses, livestock, and infrastructure across Haiti\u2019s  southern peninsula. Haiti is identified as a fragile state by the  Organisation for Economic Co-operation and Development, and  as a jurisdiction of primary concern for money laundering in  State\u2019s International Narcotics Control Strategy Report. According  to USAID, the agency has provided $187.8 million in humanitarian  assistance for Haiti since 2012.", "Kenya. Kenya is the economic, financial, and transport hub of  East Africa. Since 2014, Kenya has been ranked as a lower  middle income country because its per capita GDP crossed a  World Bank threshold. Al-Shabaab aims to establish Islamic rule  in Kenya\u2019s northeastern border region and coast and carried out a  spate of terrorist attacks in Kenya. Kenya is identified as a fragile  state by the Organisation for Economic Co-operation and  Development, and as a jurisdiction of primary concern for money  laundering in State\u2019s International Narcotics Control Strategy  Report. The United States has provided approximately $807  million in humanitarian assistance for Kenya since 2012."], "subsections": []}, {"section_title": "Appendix III: Objectives, Scope and Methodology", "paragraphs": ["This report examines (1) the extent to which implementing partners of the  Department of State (State) and the U.S. Agency for International  Development (USAID) experience banking access challenges that affect  their implementation of humanitarian assistance projects, (2) USAID  implementing partners\u2019 reporting on banking access challenges, and (3)  actions relevant U.S. agencies have taken to help address banking  access challenges encountered by nonprofit organizations (NPO). In  addition, we provide information on the extent to which State and USAID  experience banking access challenges in providing assistance in high-risk  countries in appendix I.", "To address these objectives, we examined U.S.-funded projects and their  implementers in four high-risk countries\u2014Syria, Somalia, Haiti, and  Kenya. We selected these countries based on factors including the high  level of humanitarian assistance they received from U.S. agencies, their  higher propensity for the occurrence of financial crimes based on their  inclusion on multiple financial-risk-related indices, and to obtain  geographical diversity. More specifically, to identify our list of high-risk  countries in terms of banking or financial risk, we used several indices  including ones based on financial risk, money laundering risk, and  counterterrorism-related risk. The indices we chose to use were", "State\u2019s International Narcotics Control Strategy Report (2014- 2016) (Money Laundering Risks),  the Department of the Treasury\u2019s (Treasury) Office of Foreign  Assets Control (OFAC) sanctions,  the Organisation for Economic Co-operation and Development\u2019s  (OECD) Fragile State Index (2014-2016),  the 2017 Financial Action Task Force (FATF) High Risk and Non- Cooperative Jurisdictions list, and  the BASEL AML Index, 2017.", "We then identified 19 countries that appeared on at least two of the five  lists and received at least $100 million in U.S. based humanitarian  assistance from 2012 through 2017, based on data from the United  Nations Office for the Coordination of Humanitarian Affair\u2019s financial  tracking system. We then applied the following primary selection criteria  to select our four countries: whether they (1) appeared on at least three of  the five identified lists and (2) have received at least $100 million in U.S.  humanitarian assistance since 2012. Secondary considerations that  informed our selection included whether a country had been identified as  having banking access challenges by USAID, geographical diversity, and  ensuring we had at least one country from each of the five indices we  chose. The data we obtained for these four countries cannot be  generalized beyond our selected projects and partners.", "For our first objective, to examine the extent to which implementing  partners of State and USAID experienced banking access challenges that  affected their implementation of humanitarian assistance projects, we  conducted semi-structured interviews with 18 partners about (1) one of 18  specific projects we had selected in one of our high-risk countries and (2)  their experiences implementing their global portfolio of humanitarian  assistance projects over the previous 5 years. In order to determine our  sample of partners, we selected a weighted, non-generalizable sample of  18 projects located in our four selected high-risk countries. We selected  our projects from a list, provided by State and USAID, of 195 projects that  were active as of the end of fiscal year 2017 in these countries. In making  our selection of projects we made sure that our sample included a mix of  projects from each country (7 projects for Syria, 5 for Somalia, 3 for Haiti,  and 3 for Kenya), and a mix of State and USAID projects (3 State and 15  USAID). We selected those numbers for each country and each agency  based on the number of projects in each country and the proportion of  assistance provided. We selected one State project in each of the three  countries where they were active.", "Once we had determined these parameters for our non-generalizable  sample, we made the final selections of the projects at random, making  sure that we did not select more than one project for any one partner.  Several of the implementing partners in our sample operate in over 100  countries in every part of the world, while a few operate in 20 or fewer  countries. Three of the partners are United Nations organizations. The  implementing partners in our sample had fiscal year 2016 annual  revenues ranging from $5.9 billion to just over $10 million. We conducted  semi-structured interviews with each of the 18 implementing partners on  potential banking access challenges, such as the ability to open and  maintain new accounts and make transfers in a timely fashion, and the  effect of those challenges on project implementation. Our interviews were  separated into two distinct sets of questions\u2014one on banking access  challenges the implementing partner encountered on the selected project,  and the other on any banking access challenges the implementing  partner encountered in its global portfolio of humanitarian assistance  projects over the previous 5 years (2013-2017).", "When discussing their global humanitarian assistance portfolios, the  partners did not limit their responses to projects funded by U.S.  government agencies, but instead considered projects funded by all of  their donors. We did not ask the partners to quantify the number of  projects they had implemented over the previous 5 years, nor did we ask  them to quantify the number of projects in their global portfolio of  humanitarian assistance for which they had experienced banking access  challenges. Our interview followed a protocol that asked both closed and  open-ended questions. For most banking access challenges, when  interview respondents indicated that their project or organization had  experienced a banking access challenge, we probed for details of the  challenge, including whether the challenge had caused an adverse effect  on the project, such as project delays or cancellations. After the  interviews had been conducted, we content-coded some of the open- ended answers we received. Specifically, we developed codes on  whether any challenges reported had adversely affected the projects, the  extent and duration of delays in transferring funds, and the extent and  frequency of denials of international fund transfers. Two analysts  independently coded each interview. The analysts then compared their  coding and reconciled any initial disagreements.", "We also reviewed relevant studies on banking access challenges for  NPOs conducted by the World Bank and the Charity and Security  Network (CSN). The study conducted by CSN included a survey that was  designed to be generalizable to the population of all U.S. NPOs with  activities outside the U.S., including providing humanitarian assistance.  This survey received more than 300 responses, which constituted a  reported response rate of about 38 percent. The researchers conducting  the survey indicated that this response rate could be considered high for  a public opinion telephone survey but low for a survey like the Census.  The study determined the survey findings to be representative of the  population with some qualifications, such as the fact that smaller  organizations were more likely to complete the survey than larger  organizations. The maximum margin of error was estimated to be 5.4  percent. More than 70 of the NPOs reported that they had received U.S.  government funding. We requested and received some additional data  analysis from the researchers who had conducted this survey. We  examined the aggregate survey responses in detail and compared them  to the responses we received to our semi-structured interview questions,  which probed into similar aspects of financial access. We reviewed  documentation and interviewed the officials responsible for the survey  and determined that they had used a reasonable methodology to conduct  the survey. We also interviewed several NPOs and NPO groups that were  not part of our sample to obtain their views on banking access challenges  affecting those delivering humanitarian assistance.", "For our second objective, to examine USAID implementing partners\u2019  reporting on banking access challenges, we reviewed the fiscal year 2017  progress reports, including quarterly, semi-annual, and annual reports,  that USAID provided for our selected projects to determine if banking  access challenges the implementing partners told us about in the  interviews had been reported in accordance with requirements in the  individual award agreements. In total, we reviewed 26 reports from these  partners. We also interviewed USAID agreement officers for the projects  that stated they had experienced banking access challenges about  implementing partners\u2019 reporting of those banking access challenges. To  obtain a broader context, we also reviewed over 1300 USAID  implementing partner reports for fiscal years 2016 and 2017 from a wider  selection of high-risk countries to determine the extent to which banking  access challenges are being reported to USAID.", "To identify the relevant USAID progress reports, we searched USAID\u2019s  Development Experience Clearinghouse (DEC) for all periodic progress  reports filed for fiscal years 2016 and 2017 by implementing partners  working in selected 19 high-risk countries for instances of reporting on  financial access challenges. Using these criteria, we identified 1,369  reports from fiscal years 2016-2017 from our selected 19 high-risk  countries. The reports included annual reports, final contractor / grantee  reports, final evaluation reports, and periodical and periodic reports (such  as quarterly or semi-annual reports). The 1,369 reports constituted our  universe of reports for which we used a textual analysis program to  automatically scan and search for words and phrases that we identified in  a lexicon of financial access terms. We developed this lexicon of financial  access terms based on a review of relevant research, interviews with  industry organizations, and a manual review of USAID progress reports.  Using the lexicon, our textual analysis program identified all mentions of  identified terms in the universe of reports. Next, two analysts  independently reviewed the mentions identified through our textual  analysis software program to determine whether the mentions actually  constituted a reporting of a financial access challenge. The analysts then  reconciled any differences in their reviews. For the purposes of this  review, we considered a relevant financial access challenge to be any  challenge encountered by the implementing partner in obtaining U.S.  banking services, or in transferring funds from the United States to the  destination country. We did not conduct a similar review of State partner  reporting because we only had a sample of three State projects and one of the projects did not require direct written reporting to State. In addition,  State does not have a central depository for partner reports that we could  search, such as USAID\u2019s DEC.", "For our third objective, to examine actions relevant U.S. agencies have  taken to help address banking access challenges encountered by NPOs,  we conducted interviews with and reviewed documentation from State,  USAID, and Treasury on actions they have taken to help address these  challenges. We also discussed U.S. agency involvement in efforts to help  address these challenges with relevant organizations that represent  NPOs. In addition, we reviewed relevant documentation published by the  World Bank and the Financial Action Task Force on actions they have  taken to help address banking access challenges encountered by NPOs,  and interviewed relevant staff at the World Bank on efforts undertaken to  address banking access challenges.", "To examine the extent to which State and USAID encountered banking  access challenges in providing assistance in high-risk countries, we  interviewed State officials responsible for conducting overseas transfers  of funds for both State and USAID to determine if any banking access  challenges exist that are specific to our case study countries as well as  for U.S. assistance worldwide. We also interviewed State and USAID  officials with responsibility for overseeing programs in our four selected  countries to determine if they had seen any effects of banking access  challenges. We focused primarily on these agencies\u2019 ability to access  banking services in the United States and on the transfer of funds to the  ultimate destination.", "We conducted this performance audit from July 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: State and USAID Are the Primary Providers of U.S. Humanitarian Assistance", "paragraphs": ["The United States provides humanitarian assistance primarily through  offices and bureaus within the Department of State (State) and the U.S.  Agency for International Development (USAID). The primary humanitarian  offices and bureau are:", "State\u2019s Bureau of Population, Refugees, and Migration (PRM).  PRM\u2019s stated mission is to provide protection, ease suffering, and  resolve the plight of persecuted and uprooted people around the  world by providing life-sustaining assistance, working through  multilateral systems to build global partnerships, promoting best  practices in humanitarian response, and ensuring that  humanitarian principles are integrated into U.S. foreign and  national security policy. PRM does not operate refugee camps or  give aid directly to refugees, but rather works with entities that  operate these programs, including the United Nations, other  international organizations, and nonprofit organizations.", "USAID\u2019s Office of U.S. Foreign Disaster Assistance (OFDA).  OFDA states that it helps countries prepare for, respond to, and  recover from humanitarian crises. According to USAID, OFDA  works with the international humanitarian community to give  vulnerable populations resources to build resilience and  strengthen their ability to respond to emergencies. Assistance  includes provision of emergency relief supplies, establishing early  warning systems, and training on search and rescue efforts, as  well as programs to help victims of disasters recover.", "USAID\u2019s Office of Food For Peace (FFP). FFP\u2019s stated mission  is to partner with others to reduce hunger and malnutrition, and  help ensure that all individuals have adequate, safe, and nutritious  food to support a healthy and productive life. According to FFP, it  works to mobilize resources to predict, prevent, and respond to  hunger overseas. FFP\u2019s emergency activities include food  assistance to help reduce suffering and support the early recovery  of people affected by conflict and natural disaster emergencies."], "subsections": []}, {"section_title": "Appendix V: Prevalence of Delays and Denials of Funds Transfers Experienced by Selected Implementing Partners", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Mona Sehgal (Assistant  Director), Michael Maslowski (Analyst in Charge), Ming Chen, Debbie  Chung, Martin de Alteriis, Leia Dickerson, Mark Dowling, Erin Guinn- Villareal, Chris Keblitis, and Benjamin L. Sponholtz made key  contributions to this report."], "subsections": []}]}], "fastfact": ["U.S. agencies partner with nonprofit organizations to deliver humanitarian assistance around the world.", "Unstable or high-conflict areas, where aid is often needed, have a higher risk of financial crimes such as money laundering and terrorism financing. Banks may limit risk by limiting services to those areas\u2014which we found can reduce agency partners' ability to deliver assistance.", "The U.S. Agency for International Development\u2014a major source of aid\u2014should address its partners' banking access challenges to ensure the agency can meet its humanitarian objectives. We recommended collecting and sharing information to help mitigate the challenges."]}
{"id": "GAO-17-775", "url": "https://www.gao.gov/products/GAO-17-775", "title": "Managing for Results: Further Progress Made in Implementing the GPRA Modernization Act, but Additional Actions Needed to Address Pressing Governance Challenges", "published_date": "2017-09-29T00:00:00", "released_date": "2017-09-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Full implementation of GPRAMA could facilitate efforts to reform the federal government and make it more effective. GPRAMA includes a provision for GAO to review the act's implementation. This report assesses how GPRAMA implementation has affected the federal government's progress in resolving key governance challenges in (1) addressing cross-cutting issues, (2) ensuring performance information is useful and used, (3) aligning daily operations with results, and (4) building a more transparent and open government.", "To address these objectives, GAO reviewed statutory requirements, OMB guidance, and GAO's recent work related to GPRAMA implementation and the key governance challenges. GAO also interviewed OMB staff and surveyed a stratified random sample of 4,395 federal managers from 24 agencies on various performance and management topics. With a 67 percent response rate, the survey results are generalizable to the government-wide population of managers."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Management and Budget (OMB) and agencies have made some progress in more fully implementing the GPRA Modernization Act (GPRAMA), but GAO's work and 2017 survey of federal managers highlight numerous areas where improvements are needed.", "Cross-cutting issues: Various GPRAMA provisions are aimed at addressing cross-cutting issues, such as cross-agency and agency priority goals and related data-driven reviews of progress towards those goals. To ensure alignment with the current administration's priorities, OMB's 2017 guidance removed the priority status of those goals, which stopped quarterly data-driven reviews and related public progress reports until new goals are published. OMB plans to resume implementation of these provisions in February 2018. GPRAMA also requires OMB and agencies to implement an inventory of federal programs, which could help decision makers better identify and manage fragmentation, overlap, and duplication. OMB and agencies implemented the inventory once, in May 2013. In October 2014, GAO found several issues limited the usefulness of that inventory. Since then, OMB has postponed updating the inventory, citing among other reasons the passage of subsequent laws. OMB has yet to develop a systematic approach for resuming implementation of the inventory and specific time frames for doing so. A systematic approach to developing the inventory could help ensure it provides useful information for decision makers and the public.", "Performance information: Survey results show federal managers generally reported no improvements in their use of performance information in decision making for various management activities, or practices that can enhance such use, since GAO's 2013 survey. For example, the use of performance information to streamline programs to reduce duplicative activities (an estimated 33 percent in 2017) is statistically significantly lower relative to 2013 (44 percent). In contrast, managers who were familiar with and whose programs were subject to quarterly data-driven reviews reported that those reviews were used to make progress toward agency priority goals. Identifying and sharing practices to expand the use of such reviews\u2014for other performance goals and at lower levels within agencies\u2014could lead to increased use of performance information.", "Daily operations: Agencies have made progress in developing results-oriented cultures but need to take additional actions. GAO's past work found that high-performing organizations use performance management systems to help individuals connect their daily activities to organizational goals. In 2017, about half of federal managers reported using performance information when setting expectations with employees (no change from GAO's last survey in 2013).", "Transparent and open government: GAO's past work identified a number of needed improvements to Performance.gov, the central government-wide website required by GPRAMA. The site is to provide quarterly updates on priority goals in effect through September 2017, but those updates stopped in December 2016. According to OMB, the existing information for cross-agency priority goals is the final update, and agencies should publish final updates on their priority goals in annual performance reports. Performance.gov does not provide users with this information, thereby limiting the transparency and accessibility of those results."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In addition to following through on plans to resume implementation of key GPRAMA provisions, GAO recommends that OMB (1) consider a systematic approach to developing the program inventory, (2) revise guidance to provide specific time frames for inventory implementation, (3) identify and share practices for expanding the use of data-driven reviews, and (4) update Performance.gov to explain that reporting on priority goals was suspended and provide the location of final progress updates. OMB staff agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The performance planning and reporting framework originally put into  place by the Government Performance Results Act of 1993 (GPRA), and  significantly enhanced by the GPRA Modernization Act of 2010  (GPRAMA), provides important tools that can help decision makers  address challenges facing the federal government. Full and effective  implementation of GPRAMA could facilitate efforts to reform the federal  government and make it more efficient, effective, and accountable. In  April 2017, the Office of Management and Budget (OMB) announced that  agencies are to develop and submit to OMB reform plans by September  2017, and OMB will develop crosscutting proposals that are to leverage  many of GPRAMA\u2019s \u201cperformance tracking and accountability\u201d tools.  OMB is to work with agencies to finalize agency reform plans and release  a final government-wide plan as part of the President\u2019s fiscal year 2019  budget request.", "The federal government faces a number of significant budget,  management, and performance challenges as it seeks to achieve diverse  and complex results. For example, since 2011, our series of annual  reports has identified 724 actions for Congress or executive branch  agencies to address fragmentation, overlap, and duplication; achieve  other cost savings; or enhance revenue in 249 different areas. In  addition, weaknesses in management capacity, both government-wide  and in individual agencies, impair efficient and effective government  operations. In the latest update to our High-Risk List, we identified 34  areas that need broad-based transformation or are vulnerable to fraud,  waste, abuse, or mismanagement. Addressing these challenges will  require tough choices in setting priorities and reforming programs and  management practices.", "GPRAMA includes a statutory provision for us to periodically evaluate and  report on (1) how implementation of the act is affecting performance  management at the 24 major departments and agencies subject to the  Chief Financial Officers (CFO) Act of 1990, as amended, including  whether performance management is being used to improve the  efficiency and effectiveness of agency programs; and (2) crosscutting  goal implementation. Since 2012, we have issued over 30 products in  response to this provision; this is the third summary report. This report  assesses how implementation of GPRAMA has affected the federal  government\u2019s progress in resolving key governance challenges in (1)  addressing crosscutting issues, (2) ensuring performance information is  useful and used in decision making, (3) aligning daily operations with  results, and (4) building a more transparent and open government.", "We reviewed relevant statutory requirements, related OMB guidance, and  our recent work related to GPRAMA implementation and the four key  governance challenges included in our reporting objectives. Since our last  summary report in September 2015, we examined various aspects of  GPRAMA implementation in 12 products that covered 34 agencies,  including the 24 CFO Act agencies. (See figure 1.) We also interviewed  OMB and Performance Improvement Council (PIC) staff to obtain (1) their  perspectives on GPRAMA implementation and progress on the four  governance challenges and (2) updates on the status of our past  recommendations.", "To supplement this review, we administered and analyzed the results of  our periodic survey of federal managers on organizational performance  and management issues. We surveyed a stratified random sample of  4,395 individuals from a population of 153,779 mid-level and upper-level  civilian managers and supervisors at the 24 CFO Act agencies. We  obtained the sample from the Office of Personnel Management\u2019s  Enterprise Human Resources Integration (EHRI) database as of  September 30, 2015, which was the most recent fiscal year data available  at the time. We administered the web-based survey between November  2016 and March 2017. The overall survey results are generalizable to the  population of managers government-wide. The survey\u2019s results are  comparable to other surveys we conducted in 1997, 2000, 2003, 2007,  and 2013.", "Concurrently with this report, we are issuing online supplemental material  that shows responses to all survey items at the government-wide and  individual agency levels. For the 2017 survey, we received usable  questionnaires from about 67 percent of the eligible sample. The  weighted response rate at each agency generally ranged from 57 percent  to 82 percent, except the Department of Justice, which had a weighted  response rate of 36 percent.", "Since each sample could have provided different estimates, we express  our confidence in the precision of our particular sample\u2019s results as a 95  percent confidence interval. This is the interval that would contain the  actual population value for 95 percent of the samples we could have  drawn. The percentage estimates presented in this report based on our  sample for the 2017 survey have 95 percent confidence intervals within  plus or minus 5.5 percentage points of the estimate itself, unless  otherwise noted. We also note in this report when we are 95 percent  confident that changes from 1997 or 2013 relative to 2017 are statistically  significant. The supplemental material also shows the percentage  estimates and associated 95 percent confidence intervals for each item  for each agency and government-wide.", "To help determine the reliability and accuracy of the EHRI database  elements used to draw our sample of federal managers for the 2017  survey, we checked the data for reasonableness and the presence of any  obvious or potential errors in accuracy and completeness and reviewed  our past analyses of the reliability of this database. We believe the data  used to draw our sample are sufficiently reliable for the purpose of the  survey. Appendix I provides additional information about our objectives,  scope, and methodology.", "We conducted this performance audit from January 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["GPRAMA significantly enhances GPRA, the centerpiece of a statutory  framework that Congress put in place during the 1990s to help resolve  longstanding performance and management problems in the federal  government and provide greater accountability for results. Congress  passed GPRAMA in 2010 to address a number of persistent federal  performance challenges, including focusing attention on crosscutting  issues and enhancing the use and usefulness of performance  information."], "subsections": [{"section_title": "Goals and Objectives", "paragraphs": ["OMB and agencies are to establish various government-wide and  agency-specific performance goals, in line with GPRAMA requirements or  OMB guidance. These include the following:", "Cross-agency priority (CAP) goals: CAP goals are crosscutting and  include outcome-oriented goals covering a limited number of policy  areas as well as goals for management improvements needed across  the government. OMB is to coordinate with agencies to establish CAP  goals at least every 4 years. OMB is also required to coordinate with  agencies to develop annual federal government performance plans to,  among other things, define the level of performance to be achieved  toward the CAP goals.", "Strategic objectives: A strategic objective is the outcome or impact  the agency is intending to achieve through its various programs and  initiatives. Agencies establish strategic objectives in their strategic  plans and may update the objectives during the annual update of  performance plans.", "Agency priority goals (APG): At the agency level, every 2 years,  GPRAMA requires that the heads of certain agencies, in consultation  with OMB, identify a subset of agency performance goals as APGs.  These goals are to reflect the agencies\u2019 highest priorities. They should  be informed by the CAP goals as well as consultations with relevant  congressional committees and other interested parties.", "In a schedule established by GPRAMA, OMB and agencies are to  develop and publish new CAP goals, APGs, and strategic plans (with  updated strategic objectives) in February 2018."], "subsections": []}, {"section_title": "Performance Reviews", "paragraphs": ["GPRAMA and related OMB guidance require agencies to regularly  assess their progress in achieving goals and objectives through  performance reviews.", "Data-driven reviews: Agency leaders and managers are to use  regular meetings, at least quarterly, to review data and drive progress  toward key performance goals and other management-improvement  priorities. For each APG, GPRAMA requires agency leaders to  conduct reviews at least quarterly to assess progress toward the goal,  determine the risk of the goal not being met, and develop strategies to  improve performance. Similarly, the Director of OMB, with relevant  parties, is to review progress toward each CAP goal.", "Strategic reviews: OMB guidance directs agency leaders to annually  assess progress toward achieving each strategic objective using a  broad range of evidence."], "subsections": []}, {"section_title": "Leadership Positions and Council", "paragraphs": ["GPRAMA establishes certain senior leadership positions and a council,  as described below.", "Chief Operating Officer (COO): The deputy agency head, or  equivalent, is designated COO, with overall responsibility for  improving agency management and performance.", "Performance Improvement Officer (PIO): Agency heads are to  designate a senior executive within the agency as the PIO. The PIO  reports directly to the COO and assists the agency head and COO  with various performance management activities.", "Goal leaders: Goal leaders are responsible for developing strategies  to achieve goals, managing execution, and regularly reviewing  performance. GPRAMA requires goal leaders for CAP goals and  agency performance goals, including APGs. OMB guidance directs  agencies to designate goal leaders for strategic objectives.", "Performance Improvement Council (PIC): The PIC is charged with  assisting OMB to improve the performance of the federal government  and achieve the CAP goals. The PIC is chaired by the Deputy  Director for Management at OMB and includes agency PIOs from  each of the 24 CFO Act agencies as well as other PIOs and  individuals designated by the chair. Among its responsibilities, the PIC  is to work to resolve government-wide or crosscutting performance  issues, and facilitate the exchange among agencies of practices that  have led to performance improvements within specific programs,  agencies, or across agencies."], "subsections": []}, {"section_title": "Transparency and Public Reporting", "paragraphs": ["GPRAMA includes several provisions related to providing the public and  Congress with information, as described below.", "Performance.gov: GPRAMA calls for a single, government-wide  performance website to communicate government-wide and agency  performance information. Among other things, the website\u2014 implemented by OMB as Performance.gov\u2014is to include (1) quarterly  progress updates on CAP goals and APGs; (2) an inventory of all  federal programs; and (3) agency strategic plans, annual performance  plans, and annual performance reports.", "Reporting burden: GPRAMA establishes a process to reexamine the  usefulness of certain existing congressional reporting requirements.  Specifically, GPRAMA requires an annual review (including  congressional consultation), based on OMB guidance, of agencies\u2019  reporting requirements to Congress. Additionally, OMB is to include in  the budget a list of plans and reports determined to be outdated or  duplicative and may submit legislation to eliminate or consolidate such  plans or reports."], "subsections": []}, {"section_title": "The Administration\u2019s Plans for Federal Performance Management", "paragraphs": ["In early 2017, the administration announced several efforts that are  intended to improve government performance. The 2018 Budget Blueprint  states that the President\u2019s Management Agenda will seek to improve the  federal government\u2019s effectiveness by using evidence-based approaches,  balancing flexibility with accountability to better achieve results, improving  mission support functions, and developing and monitoring critical  performance measures. In addition, OMB issued several memoranda  detailing the administration\u2019s plans to improve government performance  by reorganizing the government, reducing the federal workforce, and  reducing federal agency burden.", "A number of these efforts, which are to leverage GPRAMA and our past  work, have the potential to further progress in addressing key governance  challenges. As part of reorganization efforts, OMB and agencies are  developing government-wide and agency reform plans, respectively, that  are to leverage various GPRAMA provisions. For example, an April 2017  memorandum states that OMB intends to monitor implementation of the  reform plans using CAP goals, APGs, annual strategic reviews, and  Performance.gov. The government-wide plan also is to include  crosscutting reform proposals, such as merging agencies or programs  that have similar missions. To that end, the memorandum states agencies  should consider our reports, including our work on fragmentation, overlap,  and duplication, as well as inspectors general reports."], "subsections": []}]}, {"section_title": "Despite Progress in Selected Areas, the Executive Branch Needs to Take Additional Actions to Manage Crosscutting Issues", "paragraphs": [], "subsections": [{"section_title": "Agencies Have Made Progress in Some Areas, but Continued Attention Is Needed to Better Manage Crosscutting Issues", "paragraphs": ["Many of the meaningful results that the federal government seeks to  achieve, such as those related to ensuring public health, providing  homeland security, and promoting economic development, require the  coordinated efforts of more than one federal agency, level of government,  or sector. For more than 2 decades, we have reported on agencies\u2019  missed opportunities for improved collaboration through the effective  implementation of GPRA and, more recently, GPRAMA. Our reports  also have demonstrated that collaboration across agencies is critical to  address issues of fragmentation, overlap, and duplication as well as many  of the areas on our High-Risk List.", "Fragmentation, Overlap, and Duplication: Since 2011, our annual  reports have identified 133 crosscutting areas that require the coordinated  effort of more than one federal organization, level of government, or  sector. For instance, for the area of federal grant awards, we found in  January 2017 that the National Park Service (NPS), Fish and Wildlife  Service, Food and Nutrition Service, and Centers for Disease Control and  Prevention (CDC) had not established guidance and formal processes to  ensure their grant-management staff review applications for potential  duplication and overlap among grants in their agencies before awarding.  We recommended that these agencies do so, and they agreed. As of  August 2017, these agencies had taken several actions to address the  recommendation. For example, the Department of the Interior (Interior)  provided documentation showing that the Fish and Wildlife Service now  requires discretionary grant applicants to provide a statement that  addresses whether there is any overlap or duplication of proposed  projects or activities to be funded by the grant. Fish and Wildlife also  updated its guidance to grant awarding offices instructing them to perform  a potential overlap and duplication review of all selected applicants prior  to award. Our Action Tracker provides details on the status of actions  from our annual reports.", "Within the 133 crosscutting areas, since 2011 we have identified 315  targeted actions where opportunities exist to better manage  fragmentation, overlap, and duplication, including 29 new actions in our  most recent report issued in April 2017. We found that the executive  branch and Congress addressed 145 (46 percent) of the 315 actions. For  example, in November 2014, we recommended that the U.S. Coast  Guard and Consumer Product Safety Commission establish a formal  approach to coordination (such as a memorandum of understanding) to  facilitate information sharing; better leverage their resources; and address  challenges, including those related to fragmentation and overlap that we  identified. In response to this recommendation, the two agencies signed  a formal policy document to govern their coordination in May 2015. This  policy document outlined procedures for determining jurisdictional authority for recreational boat-associated equipment and marine safety  items. Specifically, the procedures clarified that upon receiving notice of a  possible defect, the agency receiving such notice shall determine whether  the item properly falls within its jurisdiction, and if not, initiate discussions  to determine the appropriate jurisdiction. These new procedures should  help the agencies share information and leverage each other\u2019s resources  so they can better ensure that recreational boat-associated equipment  and marine safety items are fully regulated.", "However, more work is needed on the remaining 170 actions (54 percent)  that have not been fully addressed. For example, in July 2016, we  reported that four federal agencies\u2014the Departments of Defense,  Education, Health and Human Services, and Justice\u2014manage at least 10  efforts to collect data on sexual violence, which differ in target population,  terminology, measurements, and methodology. We found that data  collection efforts use 23 different terms to describe sexual violence. Data  collection efforts also differed in how they categorized particular acts of  sexual violence, the context in which data were collected, data sources,  units of measurement, and time frames. We recommended that OMB  convene an interagency forum to better manage fragmentation of efforts  to collect sexual violence data. In commenting on that report, OMB stated  it would consider implementing the action in the future but did not believe  it was the most effective use of resources at that time, in part because the  agencies were not far enough along in their research. In response, we  stated that given the number of federal data collection efforts, the range  of differences across them, and the potential for causing confusion, it  would be beneficial for agencies to discuss these differences and  determine whether they are, in fact, necessary. As of July 2017, OMB had  not provided an update on the status of this recommendation.", "High-Risk List: Since the early 1990s, our high-risk program has focused  attention on government operations with greater vulnerabilities to fraud,  waste, abuse, and mismanagement or that are in need of transformation  to address economy, efficiency, or effectiveness challenges. As of  February 2017, there were 34 high-risk areas covering a wide range of  issues including human capital management, modernizing the U.S.  financial regulatory system, and ensuring the security of federal  information systems and cyber critical infrastructure. Many of these high- risk areas require a coordinated response from more than one branch of  government, agency, or sector.", "In the time between our 2015 and 2017 High-Risk Updates, many of  these high-risk areas on our list demonstrated solid progress. During that  period, 15 high-risk areas fully met at least one of the five criteria required  for removal from the High-Risk List. In many cases, progress was  possible through the joint efforts of Congress and leadership and staff in  agencies. For example, Congress passed over a dozen laws following our  2015 High-Risk Update to help address high-risk issues. In addition, in  2017, we removed one high-risk area on managing terrorism-related  information, because significant progress had been made to strengthen  how intelligence on terrorism, homeland security, and law enforcement is  shared among federal, state, local, tribal, international, and private sector  partners. Despite this progress, continued oversight and attention is also  warranted given the issue\u2019s direct relevance to homeland security as well  as the constant evolution of terrorist threats and changing technology.", "Our February 2017 High-Risk Update also highlighted a number of long- standing high-risk areas that require additional attention. We also added  three new crosscutting areas to incorporate the management of federal  programs that serve tribes and their members, the government\u2019s  environmental liabilities, and the 2020 decennial census. Based on our  body of work on federal programs that serve tribes and their members,  we concluded that federal agencies had (1) ineffectively administered  Indian education and health care programs and (2) inefficiently fulfilled  their responsibilities for managing the development of Indian energy  resources. For example, we identified numerous challenges facing  Interior\u2019s Bureau of Indian Education (BIE) and Bureau of Indian Affairs,  and the Department of Health and Human Services\u2019 (HHS) Indian Health  Service (IHS), in administering education and health care services. We  concluded that these challenges put the health and safety of American  Indians served by these programs at risk. In May 2017, we issued two  additional reports on accountability for school construction and safety at  schools funded by BIE. Although these agencies have taken some  actions to address recommendations we made related to Indian  programs, about 50 recommendations have yet to be fully resolved. We  are monitoring federal efforts to address the unresolved  recommendations. We also are reviewing IHS\u2019s workforce, and tribal  nations\u2019 management and use of their energy resources."], "subsections": []}, {"section_title": "The Executive Branch Could Better Leverage GPRAMA Implementation to Work across Organizational Boundaries", "paragraphs": ["Many of the crosscutting areas highlighted by our annual reports on  fragmentation, overlap, and duplication and designated as high-risk would  benefit from enhanced collaboration among the federal agencies involved  in them. GPRAMA establishes a framework aimed at taking a more  crosscutting and integrated approach to focusing on results and  improving government performance. Our survey results and past work  demonstrate that agencies continue to face difficulties when working  together on crosscutting issues, but also that implementing certain  GPRAMA requirements can have a positive effect on collaboration.", "An item related to coordination in our survey of federal managers is  statistically significantly lower in 2017, relative to our previous survey in  2013 and our initial survey in 1997. In 2017, an estimated 43 percent of  managers agreed that they use information obtained from performance  measurement to a great or very great extent when coordinating program  efforts with internal or external organizations (compared to an estimated  50 percent in 2013 and an estimated 57 percent in 1997). Moreover, our  past work has found that agencies face a variety of challenges when  working across organizational boundaries to deliver programs and  improve performance. For example, our work has found that  interagency groups have, at times, encountered difficulty clarifying roles  and responsibilities or developing shared outcomes and performance  measures.", "In contrast, our past work demonstrates that implementing GPRAMA  provisions can improve collaboration. For example, in May 2016, we  found that OMB and the PIC updated the governance structure for CAP  goals to include both agency-level and Executive Office of the President  goal leaders and held regular, senior-level reviews on CAP goal  progress. Moreover, CAP goal teams told us that the CAP goal  designation increased leadership attention and improved interagency  collaboration on their crosscutting issues. Furthermore, our prior work has  found that priority goals and related data-driven reviews have also been  used to help manage crosscutting issues and enhance collaboration."], "subsections": [{"section_title": "Priority Goals and Related Reviews Can Help Address Crosscutting Issues", "paragraphs": ["Various GPRAMA requirements are aimed at improving agencies\u2019  coordination of efforts to address crosscutting issues. As with our 2013  survey, our 2017 survey continues to show that CAP goals, APGs, and  related data-driven reviews\u2014also called quarterly performance reviews  (QPR)\u2014are associated with reported higher levels of collaboration with  internal and external stakeholders. For example, our 2017 survey data  indicate that about half of federal managers (an estimated 54 percent)  reported they were somewhat or very familiar with CAP goals. Among  these individuals, those who viewed their programs as contributing to  CAP goals to a great or very great extent (36 percent) were more likely to  report collaborating outside their program to a great or very great extent  to help achieve CAP goals (62 percent), as shown in figure 2. Our  analysis shows a similar pattern exists for APGs and QPRs.", "Our past work also has highlighted ways in which OMB and agencies  could better implement GPRAMA\u2019s crosscutting provisions\u2014many of  which have been addressed. A continued focus on fully and effectively  implementing these provisions will be important as OMB and agencies  establish new CAP goals and APGs, and assess progress toward them  through related QPRs.", "Cross-agency priority (CAP) goals: In May 2012 and June 2013, we  found that OMB had not always identified relevant agencies and program  activities as contributors to the initial set of CAP goals. OMB took  actions in response to our recommendations to include relevant  contributors. Our most recent review, in May 2016, found that all relevant  contributors had been identified for a subsequent set of CAP goals. In  that report, we also found that OMB and the PIC had improved  implementation of the CAP goals, in part, by helping agencies build their  capacity to contribute to implementing the goals. Appendix II summarizes  our past recommendations related to GPRAMA and the actions agencies  have taken to address them.", "Agency priority goals (APGs): In April 2013, we found that agencies did  not fully explain the relationship between their APGs and crosscutting  efforts.", "Identify contributors: Similar to OMB\u2019s responsibilities with the CAP  goals, agencies are to identify the various organizations and programs  that contribute to each of their performance goals, including APGs.  We found that agencies identified internal contributors for their APGs,  but did not list external contributors in some cases. We recommended  that the Director of OMB ensure that agencies adhere to OMB\u2019s  guidance for website updates by providing complete information about  the organizations, program activities, regulations, tax expenditures,  policies, and other activities\u2014both within and external to the agency\u2014 that contribute to each APG. In response, in April 2015, OMB asked  agencies to identify organizations, program activities, regulations,  policies, tax expenditures, and other activities contributing to their  2014-2015 APGs. Based on an analysis of the final quarterly updates  for those APGs, published in December 2015, we found that agencies  made progress in identifying external organizations and programs for  their APGs.", "Describe how agency goals contribute to CAP goals: Agencies  generally did not identify how their APGs contributed to CAP goals.  We recommended that OMB direct agencies to describe in their  performance plans how the agency\u2019s performance goals\u2014including  APGs\u2014contribute to any of the CAP goals as required by GPRAMA.  In response, in July 2013, OMB updated its guidance directing  agencies to include a list of the CAP goals to which the agency  contributes and explain the agency\u2019s contribution to them in their  strategic plans, performance plans, and performance reports.", "Data-driven reviews: For their data-driven reviews of agency priority  goals, agencies are to include, as appropriate, relevant personnel within  and outside the agency who contribute to the accomplishment of each  goal. However, in February 2013, we found that most Performance  Improvement Officers (PIO) we surveyed (16 of 24) indicated that there  was little to no involvement in these reviews from external officials who  contribute to achieving agency goals. We recommended that OMB and  the PIC help agencies extend their QPRs to include, as relevant,  representatives from outside organizations that contribute to achieving  their APGs. OMB staff told us that they generally concurred with the  recommendation, but believed it would not always be appropriate to  regularly include external representatives in agencies\u2019 data-driven  reviews, which they considered to be internal management meetings.", "In a subsequent review, we found in July 2015 that PIOs at 21 of the 22  agencies we surveyed said that their data-driven reviews had a positive  effect on collaboration among officials from different offices or programs  within the agency. Despite the positive effects, most agency PIOs (17)  indicated that there continued to be little to no involvement in the reviews  from external officials who contribute to achieving agency goals. In May  2016, OMB and PIC staff reported that, in response to our earlier  recommendation, they were working with agencies to identify examples  where agencies included representatives from outside organizations in  data-driven reviews, and to identify promising practices based on those  experiences. PIC staff told us they would disseminate any promising  practices identified through the PIC Internal Reviews Working Group and  other venues. In August 2017, OMB staff told us they plan to hold a  summit with agencies later in the year to discuss implementing various  performance management requirements, which could include agencies  highlighting experiences and promising practices related to involving  external officials in their data-driven reviews. We continue to believe data- driven reviews should include any relevant contributors from outside  organizations and will continue to monitor progress.", "Despite the important role priority goals and related reviews can play in  addressing crosscutting issues and enhancing collaboration, OMB  recently removed the priority status of the current sets of priority goals.  According to OMB staff, removing the priority designation from CAP goals  and APGs returned them to regular performance goals, which are not  subject to quarterly data-driven reviews or updates on the results of those  reviews on Performance.gov. In a June 2017 memorandum, OMB stated  that CAP goals and APGs are intended to focus efforts toward achieving  the priorities of current political leadership, and therefore reporting on the  priority goals of the previous administration on Performance.gov was  discontinued for the remainder of the period covered by the goals  (through September 30, 2017, the end of fiscal year 2017). The  memorandum further noted that agencies and teams working on those  goals should continue working on the current goals where they align with  the priorities of the current administration. Moreover, the memorandum  states that agencies have flexibility in structuring their data-driven reviews, but they should continue such reviews focused on agency  priorities.", "When asked about these actions, OMB staff told us that they believed  they were working in line with the intentions of GPRAMA, which realigned  the timing of goal setting with presidential terms, to better take into  account changes in priorities. This is the first presidential transition since  GPRAMA was enacted, and OMB staff told us they thought the act was  unclear on how to handle priority goals during the changes in  administrations and priorities. They stated that it was not practical to  continue reporting on the priority goals of the prior administration as  agencies worked to develop new strategic plans and priority goals for  publication in February 2018. Hence, they told us OMB ended the current  round of CAP goals and directed agencies to remove the priority  designation from the APGs, returning them to regular performance goals.  OMB staff further told us that although the guidance was published in a  June 2017 memorandum, these decisions had been made and previously  communicated to agencies during the transition in administrations.  Therefore, reporting on the fiscal year 2014-2017 CAP goals, fiscal year  2016-2017 APGs, and related reviews stopped much earlier in the year,  well before goal cycles were planned to be completed on September 30,  2017.", "OMB staff further stated that although the goals no longer had priority  designations, work towards them largely continued in 2017. For example,  one of the prior administration\u2019s CAP goals was to modernize the federal  permitting and review process for major infrastructure projects. OMB  staff told us that they and agencies have continued many of the activities  intended to achieve that goal, but they are no longer subject to quarterly  data-driven reviews or updates on the results of these reviews on  Performance.gov. Moreover, they expect most of this work will continue  towards a new and refocused CAP goal on infrastructure permitting  modernization.", "OMB staff reaffirmed to us their intentions to resume implementation of  CAP goals, APGs, and related data-driven reviews when the new  planning and reporting cycle begins in February 2018. This is in line with  stated plans to leverage various GPRAMA provisions to track progress of  proposed government-wide and agency-specific reforms, as outlined in  OMB\u2019s April 2017 memorandum on the reform plans. In addition, OMB\u2019s  July 2017 update to its guidance for implementing GPRAMA similarly  focuses on continued implementation of the act."], "subsections": []}, {"section_title": "Strategic Reviews and Program Inventory Also Could Help with Crosscutting Issues", "paragraphs": ["Additional aspects of GPRAMA implementation could similarly help  improve the management of crosscutting issues.", "Strategic reviews: OMB\u2019s 2012 guidance implementing GPRAMA  established a process in which agencies, beginning in 2014, were to  conduct leadership-driven, annual reviews of their progress toward  achieving each strategic objective established in their strategic plans.  As we found in July 2015, effectively implementing strategic reviews  could help identify opportunities to reduce, eliminate, or better manage  instances of fragmentation, overlap, and duplication. Under OMB\u2019s  guidance, agencies are to identify the various organizations, program  activities, regulations, tax expenditures, policies, and other activities that  contribute to each objective, both within and outside the agency. Where  progress in achieving an objective is lagging, the reviews are intended to  identify strategies for improvement, such as strengthening collaboration to  better address crosscutting challenges, or using evidence to identify and  implement more effective program designs. If successfully implemented  in a way that is open, inclusive, and transparent\u2014to Congress, delivery  partners, and a full range of stakeholders\u2014this approach could help  decision makers assess the relative contributions of various programs to  a given objective. Successful strategic reviews could also help decision  makers identify and assess the interplay of public policy tools that are  being used to ensure that those tools are effective and mutually  reinforcing, and that results are being efficiently achieved.", "In July 2017, OMB released guidance which updated the status of the  2017 strategic reviews. Because agencies are currently developing new  strategic goals and objectives, OMB stated that agencies may forego the  reporting and categorization requirements for any current strategic  objectives that an agency determines will be substantively different or no  longer aligned with the current administration\u2019s policy, legislative,  regulatory, or budgetary priorities. In addition, OMB stated that while  there will be no formal meetings between OMB and the agencies to  discuss findings and related progress from the 2017 strategic reviews, it  expects that agencies will continue to conduct strategic reviews or assess  progress made toward strategic goals and objectives aligned with  administration policy. Furthermore, OMB stated that during this  transition year, updates of progress on agency strategic objectives will  only be published in the agency\u2019s annual performance report and will not  be reported to Performance.gov. Full reporting through Performance.gov  is to resume after new agency strategic plans are published in February  2018. Agencies are to include a progress update for strategic objectives  as part of their progress update in their fiscal year 2017 annual  performance reports. Agencies also must address next steps for performance improvement as part of their fiscal year 2019 annual  performance plans.", "Program inventories: GPRAMA requires OMB to publish a list of all  federal programs, along with related budget and performance information,  on a central government-wide website. Such a list could help decision  makers and the public fully understand what the federal government  does, how it does it, and how well it is doing. An inventory of federal  programs could also be a critical tool to help decision makers better  identify and manage fragmentation, overlap, and duplication across the  federal government.", "Agencies developed initial program inventories in May 2013, but since  then have not updated or more fully implemented these inventories. In  October 2014, we found several issues limited the completeness,  comparability, and usefulness of the May 2013 program inventories.  OMB and agencies did not take a systematic approach to developing  comprehensive inventories. For example, OMB\u2019s guidance in Circular No.  A-11 presented five possible approaches agencies could take to define  their programs and noted that agencies could use one or more of those  approaches in doing so. We found that because the agencies used  inconsistent approaches to define their programs, the comparability of  programs was limited within agencies as well as government-wide. In  addition, we found that the inventories had limited usefulness for decision  making, as they did not consistently provide the program and related  budget and performance information required by GPRAMA. Moreover, we  found that agencies did not solicit feedback on their inventories from  external stakeholders\u2014which can include Congress, state and local  governments, third party service providers, and the public. Doing so  would have provided OMB and agencies an opportunity to ensure they  were presenting useful information for stakeholder decision making. We  concluded that the ability to tag and sort information about programs  through a more dynamic, web-based presentation could make the  inventory more useful. In October 2014, we made several  recommendations to OMB to update relevant guidance to help develop a  more coherent picture of all federal programs and to better ensure  relevant information is useful for decision makers. For example, we  recommended that OMB revise its guidance to direct agencies to consult  with relevant congressional committees and stakeholders on their  approach to defining and identifying programs when developing or  updating their inventories.", "OMB staff generally agreed with these recommendations, but have not  yet taken any actions to implement them. OMB\u2019s guidance for the  program inventory has largely remained unchanged since 2014, when  OMB postponed further development of the program inventory and  eliminated portions of the guidance. For example, the guidance no longer  describes, or provides directions for agencies to meet, GPRAMA\u2019s  requirements for presenting related budget or performance information for  each program. OMB decided to postpone implementing a planned May  2014 update to the program inventory in order to coordinate with the  implementation of the public spending reporting required by the Digital  Accountability and Transparency Act of 2014 (DATA Act). OMB  subsequently stated that it would not begin implementing the program  inventory until after the DATA Act was implemented in May 2017, despite  requirements for regular updates to the program inventory to reflect  current budget and performance information.", "The DATA Act is now being implemented, but OMB has postponed  resuming the development of the program inventory. In July 2017, OMB  staff told us that they are now considering how to align GPRAMA\u2019s  program inventory provisions with future implementation of the Program  Management Improvement Accountability Act (PMIAA). This was  reflected in OMB\u2019s July 2017 update to its guidance, which states that  OMB is working with agencies to determine the right strategy to merge  the implementation of the DATA Act and PMIAA with GPRAMA\u2019s program  inventory requirements to the extent possible to avoid duplicating  efforts. For example, PMIAA requires OMB to coordinate with agency  Program Management Improvement Officers to conduct portfolio reviews  of agency programs to assess the quality and effectiveness of program  management.", "GPRAMA requires OMB to issue guidance for implementing the program  inventory requirements, among other things. Moreover, federal internal  control standards state that organizations should clearly define what is to  be achieved, who is to achieve it, how it will be achieved, and the time  frames for achievement. As described above, OMB\u2019s current guidance  for the program inventory lacks some of those details\u2014such as  describing and providing direction to meet GPRAMA\u2019s requirements for  budget and performance information\u2014in part because OMB is working  with agencies to determine a strategy for implementation. Ensuring all  GPRAMA requirements are covered and taking action on our past  recommendations would help OMB improve its guidance to more fully  implement the program inventory and improve its usefulness.", "To that end, in a report issued earlier this month, we identified a series of  iterative steps that OMB could use in directing agencies to develop a  useful inventory, as described in figure 3. A useful inventory would  consist of all programs identified, information about each program, and  the organizational structure of the programs. Our work showed that the  principles and practices of information architecture\u2014a discipline focused  on organizing and structuring information\u2014offer an approach for  developing such an inventory to support a variety of uses, including  increased transparency for federal programs. Such a systematic  approach to planning, organizing, and developing the inventory that  centers on maximizing the use and usefulness of information could help  OMB ensure the inventory is implemented in line with GPRAMA  requirements and meets the needs of decision makers and the public,  among others.", "OMB\u2019s guidance also lacks specific time frames, with associated  milestones for resuming implementation of the program inventory  requirements. As part of PMIAA\u2019s requirements, OMB is to issue  standards, policies, and guidelines for program and project management  for agencies by December 2017. OMB staff told us that, within a year  after that, they expect to issue further guidance on moving forward with  resuming the program inventory. However, that general time frame was  not reflected in the July 2017 update to OMB\u2019s guidance. Providing  specific time frames and associated milestones would bring the program  inventory guidance in line with other portions of OMB\u2019s guidance for  implementing GPRAMA requirements, which contains a timeline of  various performance planning and reporting requirements, including  specific dates for meeting those requirements and related descriptions of  required actions. For example, OMB\u2019s July 2017 guidance identifies over  30 actions agencies should take between June 2017 and December 2018  to implement various GPRAMA provision. More specific time frames  and milestones related to the program inventory requirements would help  agencies prepare for resumed implementation by allowing them to know  what actions they would be expected to take and by when. Moreover,  publicly disclosing planned implementation time frames and associated  milestones also would help ensure that external stakeholders are  prepared to engage with agencies as they develop and update their  program inventories."], "subsections": []}]}, {"section_title": "The Executive Branch Does Not Systematically Assess the Results Achieved by Tax Expenditures, Which Represent Over $1 Trillion in Annual Forgone Revenue", "paragraphs": ["Effectively implementing various GPRAMA tools could help inform  assessments of the performance of tax expenditures, which are  reductions in tax liabilities that result from preferential provisions (figure  4). In fiscal year 2016, tax expenditures represented an estimated $1.4  trillion in forgone revenue, an amount greater than total discretionary  spending that year. Despite the magnitude of these investments, our  work has also shown that little has been done to determine how well  specific tax expenditures work to achieve their stated purposes and how  their benefits and costs compare to those of spending programs with  similar goals.", "GPRAMA requires OMB to identify tax expenditures that contribute to the  CAP goals. In addition, OMB guidance directs agencies to identify tax  expenditures that contribute to their strategic objectives and APGs.  However, our past work reviewing GPRAMA implementation found that  OMB and agencies rarely identified tax expenditures as contributors to  these goals. Fully implementing our recommendation to identify how tax  expenditures contribute to various goals could help the federal  government establish a process for evaluating the performance of tax  expenditures.", "To that end, in May 2017, we provided the Director of OMB with three  priority recommendations that require attention:", "Develop framework for reviewing performance: In June 1994, and  again in September 2005, we recommended that OMB develop a  framework for reviewing tax expenditure performance. We explained  that the framework should (1) outline leadership responsibilities and  coordination among agencies with related responsibilities, (2) set a  review schedule, (3) identify review methods and ways to address the  lack of credible tax expenditure performance information, and (4)  identify resources needed for tax expenditure reviews. Since their  initial efforts in 1997 and 1999 to outline a framework for evaluating  tax expenditures and preliminary performance measures, OMB and  the Department of the Treasury (Treasury) have ceased to make  progress and retreated from setting a schedule for evaluating tax  expenditures.", "Inventory tax expenditures: In October 2014, we found that OMB  had not included tax expenditures in the federal program inventory,  and therefore was missing an opportunity to increase the  transparency of tax expenditures and the outcomes to which they  contribute. We recommended that OMB should designate tax  expenditures as a program type in relevant guidance, and develop, in  coordination with the Secretary of the Treasury, a tax expenditure  inventory that identifies each tax expenditure and provides a  description of how the tax expenditure is defined, its purpose, and  related budget and performance information. OMB staff said they  neither agreed nor disagreed with these recommended actions. As  noted earlier, OMB has not resumed updates to the program  inventory. Therefore, OMB had not taken any actions in response to  this recommendation, according to OMB staff as of July 2017.", "Identify contributions to agency goals: In July 2016, we found that  agencies had made limited progress identifying tax expenditures\u2019  contribution to agency goals, as directed by OMB guidance. As of  January 2016, 7 of the 24 CFO Act agencies identified tax  expenditures as contributing to their missions or goals. The 11 tax  expenditure they identified\u2014out of the 169 tax expenditures included  in the President\u2019s Budget for Fiscal Year 2017\u2014represented  approximately $31.9 billion of the $1.2 trillion in estimated forgone  revenues for fiscal year 2015. (See figure 5.) To help address this  issue, we recommended that OMB, in collaboration with the  Department of the Treasury, work with agencies to identify which tax  expenditures contribute to their agency goals, as appropriate. In  particular, we recommended that they identify which specific tax  expenditures contribute to specific strategic objectives and APGs. In  July 2017, OMB staff said they had taken no actions to address the  recommendation.", "Our July 2016 report also identified options for policymakers to further  incorporate tax expenditures into federal budgeting processes, several of  which options align with the recommendations discussed above. These  options could help achieve various benefits, but we also reported that  policymakers would need to consider challenges and tradeoffs in deciding  whether or how to implement them. For example, one option was to  require that all tax expenditures, or some subset of them, expire after a  finite period. This option could result in greater oversight, requiring  policymakers to explicitly decide whether to extend more or all tax  expenditures. One consideration with this option is that it could lead to  frequent changes in the tax code, such as from extended or expired tax  expenditures, which can create uncertainty and make tax planning more  difficult."], "subsections": []}]}, {"section_title": "Long-standing Weaknesses Persist in Ensuring Performance Information Is Useful and Used; Expanded Use of Data-Driven Reviews Could Help Agencies Better Achieve Results", "paragraphs": [], "subsections": [{"section_title": "Federal Managers Generally Did Not Report Improvements in Their Use of Performance Information in Decision Making", "paragraphs": ["Our previous work has shown that using performance information in  decision making is essential to improving results. Performance  information can be used across a range of management activities, such  as setting priorities, allocating resources, or identifying problems to be  addressed. However, our work continues to show that agencies can  better use performance information in decision making, as shown in the  example in the text box below.", "Department of Justice (DOJ) Could Better Analyze Performance  Information to Reduce Backlog in Immigration Courts  In June 2017, we found that the case backlog\u2014cases pending from previous  years that remain open at the start of a new fiscal year\u2014at DOJ\u2019s Executive  Office for Immigration Review (EOIR) courts more than doubled from fiscal  years 2006 through 2015. Stakeholders identified various factors that  potentially contributed to the backlog, including continuances\u2014temporary case  adjournments until a different day or time. Our analysis of continuance records  showed that the use of continuances increased by 23 percent from fiscal years  2006 through 2015.  We found that EOIR collects continuance data but does not systematically  assess them. Systematically analyzing the use of continuances could provide  EOIR officials with valuable information about challenges the immigration courts  may be experiencing, such as with operational issues like courtroom technology  malfunctions, or areas that may merit additional guidance for immigration  judges. Further, using this information to potentially address operational  challenges could help that office meet its goals for completing cases in a timely  manner.  We recommended that the Director of EOIR systematically analyze immigration  court continuance data to identify and address any operational challenges faced  by courts or areas for additional guidance or training. EIOR agreed with this  recommendation. EOIR stated that it supports conducting additional analysis of  immigration court continuance data and recognizes that additional guidance or  training regarding continuances may be beneficial to ensure that immigration  judges use continuances appropriately in support of EOIR\u2019s mission to  adjudicate immigration cases in a careful and timely manner. We will monitor  EOIR\u2019s progress in taking these actions.", "Our 2017 survey of federal managers shows little change in their reported  use of performance information. Using a set of survey questions, we  previously developed an index that reflects the extent to which managers  reported that their agencies used performance information for various  management activities and decision making. The index suggests that  government-wide use of performance information did not change  significantly between 2013 and 2017, and it is statistically significantly  lower relative to our 2007 survey, when we created the index. Figure 6  shows the questions included in the index and the government-wide  results.", "In regard to individual survey items, in 2017 federal managers reported  no changes or decreases in their use of performance information when  compared to our last survey and when those survey items were first  introduced. These results are generally consistent with our last few  surveys. For example, in 2008 we found that there had been little  change in federal managers\u2019 reported use of performance information  government-wide from 1997 to our 2007 survey. Citing those results, the  Senate Committee on Homeland Security and Governmental Affairs  report accompanying the bill that would become GPRAMA stated that  agencies were not consistently using performance information to improve  their management and results. The report further stated that provisions  in GPRAMA are intended to address those findings and increase the use  of performance information to improve performance and results.  However, five items that were highlighted in our 2008 statement on the  2007 survey results generally show no improvement when compared to  the 2017 results, as shown in figure 7.", "The one exception is for managers\u2019 reported use of performance  information to refine program performance measures. While this item was  statistically significantly higher in 2013 relative to 2007\u2014an estimated 46  percent to 53 percent\u2014the 2017 result (43 percent) is a statistically  significant decrease relative to 2013 and is not statistically different from  the 2007 results. Another item, the use of performance information to  adopt new program approaches or change work processes, also was  statistically significantly lower in 2017 (47 percent) when compared to  2007 and 2013 (53 and 54 percent, respectively). This is of particular  concern as agencies are developing their reform plans. Moreover, when  compared to our 1997 survey, the 2017 results show four of the five items  are statistically significantly lower, and the remaining item\u2014allocating  resources\u2014has not changed.", "Similarly, we found there was no improvement in 2017 for more recent  survey items on other uses of performance information compared to the  years in which they were introduced, as shown in figure 8.", "Although one item, on the use of performance information to develop  program strategy, was statistically significantly higher in 2013 relative to  2007 (an estimated 58 and 51 percent, respectively), the 2017 result (53  percent) does not represent a statistically significant change from either of  those years. Another item, on the use of performance information to  streamline programs to reduce duplicative activities, is statistically  significantly lower relative to 2013, when it was introduced (from 44 to 33  percent in 2017). This is especially concerning because streamlining and  reducing duplication are to be key parts of agencies\u2019 reform plans.", "There is one area in the survey where we saw improvement: an  estimated 46 percent of managers agreed to a great or very great extent  that employees who report to them pay attention to their agency\u2019s use of  performance information in management decision making. That is  statistically significantly higher relative to 2013 (40 percent), as well as  when compared to when the item was introduced in 2007 (37 percent).  For a new and related item in the 2017 survey that asked managers the  amount of attention their employees pay to the use of performance  information in decision making when compared to 3 years ago, we found an estimated 48 percent reported that employees pay about the same", "33 percent reported that employees pay somewhat or a great deal  more attention."], "subsections": []}, {"section_title": "Federal Managers Generally Did Not Report Changes in Applying Management Practices That Promote the Use of Performance Information", "paragraphs": ["In September 2005, we identified five practices that agencies can apply to  enhance the use of performance information in their decision making and  improve results: demonstrating management commitment;  communicating performance information frequently and efficiently;  improving the usefulness of performance information, such as by  ensuring the accessibility of the information; developing the capacity to use performance information; and aligning agency-wide goals, objectives, and measures.", "Many of the requirements put in place by GPRAMA reinforce the  importance of these practices. Our 2017 survey of federal managers  includes a number of items related to these practices. However, the 2017  results suggest that managers have not effectively adopted them. In the  following sections, we examine several of the practices to enhance the  use of performance information and their related survey items further. In  doing so, we also highlight a subset of six survey items related to these  practices that, while separate from those in our use of performance  information index, we found in September 2014 to have a statistically  significant and positive relationship with it."], "subsections": [{"section_title": "Demonstrating Management Commitment", "paragraphs": ["The commitment of agency leaders to results-oriented management is  critical to increased use of performance information for policy and  program decisions. GPRAMA requires top leadership involvement in  performance management, including leading data-driven performance  reviews. However, we have previously reported that improvements are  needed to strengthen leadership\u2019s commitment to use performance  information, as discussed in the text box below.", "Department of Defense Should Strengthen Leadership Responsibilities for  Using Performance Information  In January 2005, we designated the Department of Defense\u2019s (DOD) approach  to business transformation as high-risk because DOD had not taken the  necessary steps to achieve and sustain business reform on a broad, strategic,  department-wide, and integrated basis. In the February 2017 update to our  High-Risk List, we found that DOD had taken some positive steps to improve its  business transformation efforts.continuing to hold business function leaders accountable for diagnosing  performance problems and identifying strategies for improvement, and  leading regular DOD performance reviews regarding transformation goals  and associated metrics and ensuring that business function leaders attend  these reviews to facilitate problem solving.", "In July 2017, DOD officials told us that the department\u2019s performance reviews  have been put on hold until after the new Agency Strategic Plan is issued. We  will review DOD\u2019s updated Agency Strategic Plan when it is issued (expected in  February 2018, as required by GPRAMA) to see if it addresses continuing to  hold business function leaders accountable for diagnosing performance  problems and identifying strategies for improvement. We will continue to  monitor the status of these actions.", "GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on  Others, GAO-17-317 (Washington, D.C.: Feb. 15, 2017).", "Results from our 2017 survey show no statistically significant difference  relative to 2013 in managers\u2019 perceptions of leaders\u2019 and supervisors\u2019  attention and commitment to the use of performance information. (See  figure 9.)", "Three items are statistically significantly different from the years when  they were introduced. Two items increased between 1997 and 2017:  changes by management to my program(s) are based on results-oriented  information (from an estimated 16 to 25 percent), and the individual I  report to periodically reviews with me the outcomes of my program(s)  (from 42 to 54 percent). For the third item, top leadership demonstrates  a strong commitment to using performance information to guide decision  making, results decreased from 49 percent in 2007 to 42 percent in  2017.", "New items in the 2017 survey show some improvement in management  commitment to the use of performance information in decision making. An  estimated 36 percent of federal managers reported that, when compared  to 3 years ago, the individual they report to pays somewhat or a great  deal more attention to the use of performance information in decision  making, while 46 percent said they pay about the same amount of  attention. Additionally, an estimated 21 percent of federal managers  said that, when compared to 3 years ago, the head of their agency pays  somewhat or a great deal more attention to the use of performance  information in decision making, while 33 percent said they pay about the  same amount of attention."], "subsections": []}, {"section_title": "Communicating Performance Information", "paragraphs": ["Communicating performance information frequently and effectively  throughout an agency can help to achieve the agency\u2019s goals.  GPRAMA includes requirements for communicating performance  information, such as reporting progress updates for APGs at least  quarterly. However, our prior work has found that some agencies could  continue to improve in the communication of performance information, as  illustrated by the example in the text box below.", "Department of Education (Education) Could Better Share Effective  Practices across States in Grant Program  Education awards 21st Century Community Learning Centers grants to states,  which in turn competitively award funds to local organizations that use them to  offer academic enrichment and other activities to improve students\u2019 academic  and behavioral outcomes. In April 2017, we found that states are experiencing  substantial difficulty in sustaining their programs after 21st Century funding  ends. We further found that Education was missing opportunities in its  monitoring efforts to collect information on states\u2019 strategies and practices for  program sustainability\u2014information that could be useful for sharing promising  practices across states.  We recommended that Education use the information it collects from its  monitoring visits and ongoing interactions with states to share effective  practices across states for sustaining their 21st Century programs once  program funding ends. Education neither agreed nor disagreed with the  recommendation but outlined steps it is taking to address it. We will continue to  monitor progress on the implementation of this recommendation.", "There is no difference for two survey items on federal managers  communicating performance information relative to 2013 or since those  items were introduced in 2007. In 2017, we estimate that 44 percent of  federal managers agreed to a great or very great extent that agency  managers at their level effectively communicate performance information  on a routine basis. In addition, 34 percent agreed to a great or very  great extent that managers at their level use performance information to  share effective program approaches with others.", "Our 2017 survey data also indicate that agencies may not be effectively  communicating to their employees about contributions to CAP goals or  progress toward achieving APGs. Of the estimated 54 percent of federal  managers who indicated they were familiar with CAP goals, 23 percent  reported that their agency has communicated to its employees on those  goals to a great or very great extent. Of the 74 percent of federal  managers who indicated familiarity with APGs, 44 percent reported that  their agency has communicated on progress toward achieving those  goals to great or very great extent."], "subsections": []}, {"section_title": "Improving the Usefulness of Performance Information", "paragraphs": ["Our prior work has shown that agencies should consider users\u2019 differing  needs\u2014for accessibility, accuracy, completeness, consistency, ease of  use, timeliness, and validity, among others things\u2014to ensure that  performance information will be both useful and used. GPRAMA  introduced several requirements that could help to address aspects of  usefulness, such as requiring agencies to disclose more information  about the accuracy and validity of their performance data and actions to  address limitations to the data. However, agencies face challenges in  ensuring their performance information is useful, with one instance from  our past work described in the text box below.", "The Environmental Protection Agency (EPA) Could Improve Usefulness of  Information in Planned Grantee Portal  EPA monitors performance reports and program-specific data from grantees to  ensure that grants achieve environmental and other program results. However,  in July 2016, we found that EPA\u2019s 2014 internal analysis of its grants  management business processes identified improvements that, if implemented  into EPA\u2019s planned web-based portal, could improve the accessibility and  usefulness of information in grantee performance reports for EPA, grantees,  and other users.  We recommended, among other actions, that EPA incorporate expanded  search capability features, such as keyword searches, into its proposed web- based portal for collecting and accessing performance reports to improve their  accessibility. EPA agreed with our recommendation but stated that it is a long- term initiative, subject to the agency\u2019s budget process and replacement of its  existing grants management system. As of May 2017, EPA officials said that  they have not begun work on the web-based portal project, which is subject to  the availability of funds.", "Federal managers generally responded similarly in 2017 on a variety of  survey items related to usefulness, relative to earlier surveys. On a  broadly worded item, less than half of managers agreed to a great or very  great extent that agency managers at their level take steps to ensure that  performance information is useful and appropriate. At an estimated 43  percent in 2017, this represents no statistically significant change  compared to our last surveys in 2013 or 2007, when the item was  introduced.", "Responses to four survey items indicate no changes in hindrances  related to the usefulness of performance information. There is no  statistically significant change in managers reporting hindrances  compared to 1997 or 2013, as shown in figure 10.", "In addition, there was a statistically significant increase when compared  to 2013 on only one of six items about managers\u2019 views on the usefulness  of performance information, as shown in figure 11.", "As the figure shows, approximately one-third to half of managers agreed  to a great or very great extent on each item related to the usefulness of  performance information. Although less than half of managers reported  having sufficient information on validity of performance data used to make  decisions, this represents a statistically significant increase to an  estimated 42 percent in 2017 compared to 36 percent in 2013, and from  28 percent in 2000, when this item was introduced. This is a notable  improvement because our September 2014 report found that the  strongest driver of the use of performance information was whether  federal managers had confidence in its validity.", "Our analysis suggests that easy access to performance information is  related to the effective communication of performance information. Of the  estimated 49 percent of federal managers in 2017 who agreed to a great  or very great extent that performance information is easily accessible to  managers at their level, 63 percent also agreed that agency managers at  their level effectively communicate performance information on a routine  basis to a great or very great extent. Conversely, of the 20 percent that  agreed to a small or no extent that performance information is easily  accessible to managers at their level, 12 percent also agreed that agency  managers at their level effectively communicate performance information  on a routine basis to a great or very great extent."], "subsections": []}, {"section_title": "Developing the Capacity to Use Performance Information", "paragraphs": ["Our prior work has shown that building capacity\u2014including analytical  tools and staff expertise\u2014is critical to using performance information in a  meaningful manner. GPRAMA lays out specific requirements that  reinforce the importance of staff capacity to use performance information.  GPRAMA directed the Office of Personnel Management (OPM) to take  certain actions to support agency hiring and training of performance  management staff. Specifically, by January 2012, OPM was to identify  skills and competencies needed by government personnel for setting  goals, evaluating programs, and analyzing and using performance  information for improving government efficiency and effectiveness. By  January 2013, OPM was to incorporate these skills and competencies  into relevant position classifications and to work with each agency to  incorporate the identified skills into employee training.", "In April 2013, we found that OPM had completed its work on the first two  responsibilities and taken steps to work with agencies to incorporate  performance management staff competencies into training. However,  OPM did not assess competency gaps among agency performance  management staff to inform its work. Without this information, OPM,  working with the PIC, was not well-positioned to focus on the most- needed resources and help other agencies use them. We recommended  that the Director of OPM, in coordination with the PIC and the Chief  Learning Officer Council, work with agencies to take the following three  actions:  1.  Identify competency areas needing improvement within agencies.  2.  Identify agency training that focuses on needed performance  management competencies.  3.  Share information about available agency training on competency  areas needing improvement.", "In July 2017, PIC staff stated they have not focused on identifying  competency areas because the competencies do not resonate strongly  with the performance community. Instead, staff said they identified a need  for introductory training on performance management, which they have  developed and piloted. They said that they are not sure when they will  implement the training, since the PIC is reviewing priorities with its new  executive director. We continue to believe that identifying the competency  areas would be useful, and will monitor the PIC\u2019s efforts to identify and  share training.", "The need for performance management training is further highlighted by  our survey results. Our 2017 survey shows no statistically significant  change in managers\u2019 responses about the availability of training on  various performance management activities relative to 2013, including the  use of performance information to make decisions. However, the  response to each of the six questions related to specific training is  statistically significantly higher relative to the year in which it was  introduced, as shown in figure 12.", "Similarly, in 2017 there was no statistically significant change on four  survey items related to agencies\u2019 analysis and evaluation tools and staff\u2019s  skills and competencies when compared to 2013 or when these items  were introduced. We estimate that in 2017", "29 percent of managers agreed to a great or very great extent that  their agencies were investing in resources to improve the agencies\u2019  capacity to use performance information;", "28 percent of managers agreed to a great or very great extent that  their agencies were investing the resources needed to ensure that  performance data are of sufficient quality;", "33 percent of managers reported that they agreed to a great or very  great extent that their agencies have sufficient analytical tools for  managers at their levels to collect, analyze, and use performance  information; and", "33 percent of managers reported that they agree to a great or very  great extent that the programs they are involved with have sufficient  staff with the knowledge and skills needed to analyze performance  information."], "subsections": []}]}, {"section_title": "Conducting Additional Data-Driven Reviews Could Increase the Use of Performance Information in Decision Making", "paragraphs": ["Performance reviews can serve as a strategy to bring leadership and  other responsible parties together to review performance information and  identify important opportunities to drive performance improvements.  Our prior work has examined how different types of performance  reviews\u2014strategic reviews, data-driven reviews, and retrospective  regulatory reviews\u2014can contribute to agencies assessing progress  toward desired results.", "Strategic reviews: As previously mentioned, in implementing GPRAMA,  OMB established a review process in which agencies are to annually  assess their progress in achieving each strategic objective in their  strategic plans, known as strategic reviews. Given the long-term and  complex nature of many outcomes, the strategic review should be  informed by a variety of evidence regarding the implementation of  strategies and their effectiveness in achieving outcomes. OMB\u2019s guidance  states that the strategic review process should consider multiple  perspectives and sources of evidence to understand the progress made  on each strategic objective. It further states that the results of these  reviews should inform many of the decision-making processes at the  agency, as well as decision making by the agency\u2019s stakeholders, in  areas such as long-term strategy, budget formulation, and risk  management. In 2017, agencies are completing their fourth round of  these reviews.", "Our prior work has identified ways in which agencies can effectively  conduct these reviews and leverage the results that come from them. In  July 2015, we identified seven practices federal agencies can employ to  facilitate effective strategic reviews. (See sidebar.) In addition, earlier  this month we reported on selected agencies\u2019 experiences in  implementing these reviews. Specifically, we found that (1) strategic  reviews helped direct leadership attention to progress on strategic  objectives, (2) agencies used existing management and performance  processes to conduct the reviews, and (3) agencies refined their reviews  by capturing lessons learned.", "Data-driven reviews: GPRAMA requires agencies to review progress  toward APGs at least once a quarter. The Senate Committee on  Homeland Security and Governmental Affairs report accompanying the  bill that would become GPRAMA stated that this approach is aimed at  increasing the use of performance information to improve performance  and results. In February 2013, we identified nine leading practices to  promote successful data-driven performance reviews in the federal  government. (See sidebar.) In July 2015, we found that most of the 24  CFO Act agencies were conducting their reviews in line with GPRAMA  requirements and our leading practices. Moreover, agencies reported  that their data-driven performance reviews had positive effects on  progress toward agency goals, collaboration between agency officials, the  ability to hold officials accountable for progress, and efforts to improve the  efficiency of operations.", "Our 2017 survey shows that federal managers remain largely unfamiliar  with their agency\u2019s data-driven performance reviews, also known as  quarterly performance reviews (QPRs). An estimated 35 percent of  managers reported familiarity with their agency\u2019s QPRs. Survey results  show that a greater percentage of Senior Executive Service (SES)  managers than non-SES managers reported that they were familiar with  QPRs. Approximately 50 percent of SES managers reported being  somewhat or very familiar with QPRs; 34 percent of non-SES reported  the same.", "However, for the estimated 35 percent of managers who reported  familiarity with QPRs, the more they viewed their programs being subject  to a QPR, the more likely they were to report their agency\u2019s QPRs were  driving results and conducted in line with our leading practices. Figure 13  shows several illustrative examples of these survey items. For example,  of the estimated 48 percent of federal managers who reported their  programs being subject to QPRs to a great or very great extent, 83  percent also reported their agencies use QPRs to identify problems or  opportunities associated with agency performance goals. Conversely,  for the 24 percent of managers who reported their programs were subject  to QPRs to a small or no extent, 22 percent also reported the reviews  were used for these purposes to a great or very great extent.", "Being subject to a QPR is also positively related to viewing QPRs as  having led to similar meetings at lower levels. An estimated 62 percent of  federal managers who reported being subject to QPRs to a great or very  great extent also reported their agencies have similar meetings at lower  levels to a great or very great extent. An estimated 16 percent of federal  managers subject to QPRs to a small or no extent reported the same.", "Despite the reported benefits of and results achieved through QPRs, as  found by our past work and survey data, these reviews are not  necessarily widespread. GPRAMA requires agencies to conduct QPRs  for APGs, which represent a small subset of goals\u2014generally 2 to 8  priority goals at each designated agency, with approximately 100 total  government-wide. Moreover, these required reviews are at the  department (or major independent agency) level. These reasons may  explain why most managers reported they were not familiar with the  reviews.", "As was described previously, our 2017 survey data show that the  reported use of performance information in decision making generally has  not improved and in some cases is lower than it was 20 years ago.  Survey data also show that managers generally have not reported  increases in their employment of practices that further promote the use of  performance information in decision making. This suggests that agencies  could increase the use of performance information in decision making and  the likelihood of achieving desired results by going beyond the specific  GPRAMA requirements and expanding their use of data-driven  performance reviews\u2014in line with leading practices\u2014to more broadly  cover other agency-wide performance goals, as well as goals at lower  levels within the agency. For example, such reviews at the program level  could help inform the previously mentioned portfolio reviews required by  the Program Management Improvement Accountability Act (PMIAA).", "We have already suggested expanding reviews to other performance  goals. Our management agenda for the presidential and congressional  transition includes a key action to expand the use of data-driven  performance reviews to assess progress toward meeting agency  performance goals. Our prior work has stated that although GPRAMA\u2019s  requirements apply at the agency-wide level, they can also serve as  leading practices at other organizational levels, such as component  agencies, offices, programs, and projects. In addition, federal internal  control standards call for the design of appropriate control activities, such  as top-level reviews of actual performance and reviews by management  at the functional or activity level. The standards also recommend that  management design control activities at the appropriate levels in the  organizational structure.", "The July 2017 update to OMB\u2019s guidance states that agency leaders,  including various chief officer positions, are to conduct frequent data- driven reviews to drive improvements on various management  functions. For example, the agency Chief Human Capital Officer is to  conduct quarterly data-driven reviews (known as HRStat) to monitor the  progress of human capital goals and measures contained in the human  capital operating plan. Beyond these management areas, OMB\u2019s  guidance also states that agencies may expand quarterly progress  reviews beyond APGs to include other goals and priorities. However,  OMB\u2019s guidance does not identify practices for agencies to expand the  use of these reviews to other goals, such as other agency-wide  performance goals or those at lower levels within the agency. As  mentioned previously, one of the responsibilities of the Performance  Improvement Council (PIC) is to facilitate the exchange among agencies  of practices that have led to performance improvements within specific  programs, agencies, or across agencies. By working with the PIC to  identify and share among agencies practices to expand the use of data- driven reviews, OMB could help agencies increase the use of  performance information in decision making and achieve results.", "Retrospective regulatory reviews: In retrospective reviews, agencies  evaluate how existing regulations are working in practice and whether  they are achieving expected outcomes. GPRAMA requires agencies to  identify and assess how their various program activities and other  activities, including regulations, contribute to APGs. However, in April  2014, we found that agencies reported mixed experiences linking  retrospective analyses to APGs. We recommended that OMB  strengthen these reviews by issuing guidance for agencies to take actions  to ensure that contributions made by regulations toward achieving APGs  are properly considered, and improve how retrospective regulatory  reviews can be used to help inform assessments of progress toward  these APGs. OMB staff agreed with this recommendation and stated  that the agency was working on strategies to help facilitate agencies\u2019  ability to use retrospective reviews to inform APGs.", "To that end, in April 2017, OMB issued guidance to agencies that, among  other things, emphasized the importance of performance measures  related to evaluating and improving the net benefits of their respective  regulatory programs. OMB included explicit references to section 6 of  Executive Order 13563, which directed agencies\u2019 efforts to conduct  retrospective regulatory reviews. Specifically, the updated guidance  encourages agencies to establish and report \u201cmeaningful performance  indicators and goals for the purpose of evaluating and improving the net  benefits of their respective regulatory programs.\u201d The guidance further  states that agencies\u2019 efforts to improve such net benefits may be  conducted as part of developing agency strategic and performance plans  and priority goals. In July 2017, OMB confirmed that the updated  guidance was issued, in part, to address our April 2014  recommendation."], "subsections": []}, {"section_title": "Evidence-Based Tools Can Help Federal Agencies Use Performance Information for Decision Making", "paragraphs": ["For several years, OMB has encouraged agencies to expand their use of  evidence\u2014performance measures, program evaluation results, and other  relevant data analytics and research studies\u2014in budget, management,  and policy decisions with the goal of improving government  effectiveness. In particular, OMB has encouraged agencies to  strengthen their program evaluations\u2014systematic studies that use  research methods to address specific questions about program  performance. Evaluation is closely related to performance  measurement and reporting. Evaluations can be designed to better  isolate the causal impact of programs from other external economic or  environmental conditions in order to assess a program\u2019s effectiveness.  Thus, an evaluation study can provide a valuable supplement to ongoing  performance reporting by measuring results that are too difficult or  expensive to assess annually, explaining the reasons why performance  goals were not met, or assessing whether one approach is more effective  than another.", "Despite the valuable insights and information that program evaluations  can provide, we continue to find that most federal managers lack access  to or awareness of such studies. Our 2017 survey shows that an  estimated 40 percent of managers reported that an evaluation had been  completed within the past 5 years of any program, operation, or project in  which they were involved\u2014comparable to the results in our 2013 survey,  when questions about program evaluations were added. In recent  years, OMB has encouraged agencies to explore evidence-based tools to  strengthen agency and grantee evaluation capacity, consider the  effectiveness of their programs, and foster innovation rooted in research  and rigorous evaluation. During the past 2 years, we examined several of  those tools, as described below.", "Pay for success: Also known as social impact bonds, pay for success is  a contracting mechanism under which investors provide the capital the  government uses to provide a social service. The government specifies  performance outcomes in pay for success contracts and generally  includes a requirement that a program\u2019s impact be independently  evaluated. The evaluators also are to regularly review performance data,  while those managing and investing in a project focus on performance  and accountability, as shown in the figure 14.", "In September 2015, we found that the federal government\u2019s involvement  in pay for success had been limited. In addition, a formal mechanism  for federal agencies to collaborate on pay for success did not exist. We  concluded that, given the evolving nature of pay for success, a  mechanism for federal agencies to collaborate would increase access to  leading practices. We therefore recommended that OMB establish a  formal means for federal agencies to collaborate on pay for success.  OMB concurred and, in February 2016, announced that it had developed  the Pay for Success Interagency Learning Network with representatives  from 10 federal agencies to share lessons, hone policy, and strengthen  implementation.", "Tiered evidence grants: Tiered evidence grants seek to incorporate  evidence of effectiveness into grant making. Federal agencies establish  tiers of grant funding based on the level of evidence grantees provide on  their approaches to deliver social, educational, health, or other services.  (See figure 15.)", "Smaller awards are used to test new and innovative approaches, while  larger awards are used to scale up approaches that have strong evidence  of effectiveness. This creates incentives for grantees to use approaches  supported by evidence and helps them build the capacity to conduct  evaluations.", "In September 2016, we found that interagency collaboration had helped  federal agencies that administer tiered evidence grants address  challenges and share lessons learned. At that time, such collaborative  efforts relied on informal networks. We recommended that OMB establish  a formal means for agencies to collaborate on tiered evidence grants.  OMB had no comment on the recommendation. In July 2017, OMB staff  told us that they had established an interagency working group and other  mechanisms to facilitate collaboration and disseminate information on  tiered evidence grants.", "Performance partnerships: Performance partnerships allow federal  agencies to provide grant recipients flexibility in how they use funding  across two or more programs along with additional flexibilities. In  exchange, the recipient commits to improve and assess progress toward  agreed-upon outcomes. Figure 16 provides an overview of the  performance partnership model.", "In April 2017, we examined two performance partnership initiatives  authorized by Congress: the Environmental Protection Agency\u2019s  Performance Partnership Grants and the Performance Partnership Pilots  for Disconnected Youth, which allows funding from multiple programs  across multiple agencies to be combined into pilot programs serving  disconnected youth. For the Performance Partnership Pilots for  Disconnected Youth, we found that the agencies involved in the initiative  had not fully identified the key financial and staff resources each agency  would need to contribute over the lifetime of the initiative in line with  leading practices for interagency collaboration. This was because  agencies primarily had been focused on meeting near-term needs to  support design and implementation. We also found that agencies had not  developed criteria to help determine whether, how, and when to  implement the flexibilities tested by the pilots in a broader context. (This is  known as scalability.) Officials involved in the pilots told us it was too  early in pilot implementation to determine such criteria. However, by not  identifying these criteria while designing the pilots, they were risking not  collecting needed data during pilot implementation. We recommended  that OMB coordinate with federal agencies to identify (1) agency resource  contributions needed for the lifetime of the pilots and (2) criteria and  related data for assessing scalability. OMB neither agreed nor disagreed  with these recommendations. We continue to monitor progress on these  recommendations."], "subsections": []}]}, {"section_title": "Agencies Have Made Some Progress in Aligning Daily Operations with Results, but Could Take Additional Actions", "paragraphs": [], "subsections": [{"section_title": "Agencies Could Take Additional Actions to Further Develop Results- Oriented Cultures", "paragraphs": ["In 2003, we identified nine key practices for effective performance  management that collectively create a \u201cline of sight\u201d between individual  performance and organizational success. (See sidebar on next page.)  Our recent work and the results of our 2017 survey of federal managers  highlight areas where agencies have made progress but could take  additional action to better reflect several of these practices, thereby better  instilling results-oriented cultures.", "Align individual performance expectations with organizational goals:  Our 2003 report found that high-performing organizations use their  performance management systems to help individuals see the connection  between their daily activities and organizational goals. The executive  branch has taken several steps to link individual and organizational  results. For example, in October 2000, OPM issued guidance to link SES  performance expectations with GPRA-required goals. In January 2012,  OPM and OMB released a government-wide SES performance appraisal  system that provided agencies with a standard framework to manage the  performance of SES members.", "However, our work continues to identify areas for improvement.", "Goal leaders and deputy goal leaders are responsible for achieving  APGs, but our July 2014 review found that the performance plans for  a sample of goal and deputy goal leaders generally did not link their  individual performance and the broader goal. We recommended  that OMB ensure that those plans demonstrate a clear connection  with APGs. OMB staff generally agreed with our recommendation. In  July 2017, OMB staff stated that components of both OMB and OPM  guidance support accountability for agency priority goals. Despite this,  we continue to believe that ensuring an explicit connection in  performance plans to APGs will improve accountability, and that  additional action is needed to do so.", "In May 2016, we found that the Federal Emergency Management  Agency (FEMA) had not aligned Federal Disaster Recovery  Coordinators\u2019 performance expectations with its organizational goals  for implementing the National Disaster Recovery Framework. We  concluded that without this linkage, FEMA could not evaluate how  effectively the coordinators performed in implementing the framework.  We recommended that FEMA align performance expectations  consistent with leading practices. The Department of Homeland  Security concurred with our recommendation. In July 2017, FEMA  stated that it is preparing the Field Leader Manual, which will define  the core competencies and duties of coordinators. We will continue to  monitor FEMA\u2019s actions to implement this recommendation.", "Our 2017 survey also shows that this linkage could be improved for other  federal employees. An estimated 58 percent of federal managers  reported using performance information to a great or very great extent in  setting expectations for employees they manage or supervise. The  2017 responses do not represent a statistically significant change when  compared to our last survey in 2013 (62 percent) or to 1997 (61 percent),  the year this survey item was introduced.", "Address organizational priorities: Our prior work showed that, by  requiring and tracking follow-up actions on performance gaps, high- performing organizations underscore the importance of holding  individuals accountable for making progress on their priorities. Our past  and 2017 surveys have identified differences in responses between SES  and non-SES managers reporting being held accountable for results.  For example, in 2017, our survey results indicate that there was a  statistically significant difference between SES and non-SES managers  reporting to a great or very great extent that they were held accountable  for results of the programs for which they are responsible. However, our  2017 survey shows no change compared to our last survey in either SES  or non-SES managers reporting they were held accountable for results.  There are statistically significant increases when compared to 1997, when  these survey items were introduced. For example, an estimated 79  percent of SES managers and 64 percent of non-SES managers reported  being held accountable to a great or very great extent for results of the  programs for which they are responsible in 2017. This does not represent  a statistically significant change from our 2013 survey (80 percent and 67  percent, respectively), but it is statistically significantly higher than the 62  percent of SES managers and 54 percent of non-SES managers in 1997.  (See figure 17.)", "Similarly, as shown in figure 18, an estimated 71 percent of SES  managers reported being held accountable to a great or very great extent  for accomplishing agency strategic goals in 2017. This represents no  statistical change since 2013 (73 percent), but it is a statistically  significant increase compared to when this item was introduced in 2003  (61 percent). Additionally, as figure 18 shows, a gap between being held  accountable for strategic goals and having the decision-making authority  needed to help accomplish those goals has nearly closed, due to an  increase in the latter survey item. The estimated 69 percent of SES  managers who reported having such authority to a great or very great  extent in 2017 is a statistically significant increase relative to both 2013  (61 percent) and 1997 (51 percent).", "As noted earlier, GPRAMA requires goal leaders for CAP goals and  APGs. Our past work has generally found that they are in place.  GPRAMA also requires agencies to identify an agency official responsible  for resolving major management challenges, which can help ensure  accountability. (See sidebar.) However, in June 2016 we found that 17  of the 24 CFO Act agencies had not identified an agency official  responsible for resolving each of their challenges, partly because OMB  guidance was not clear that major management challenges should be  identified in agency performance plans. We recommended that the 17  agencies identify such officials in their performance plans, and that OMB  clarify its guidance. OMB revised its guidance accordingly in July 2016,  and, as of July 2017, 7 of the 17 agencies had identified officials  responsible for resolving major management challenges.", "Link pay to individual and organizational performance: High- performing organizations seek to create pay, incentive, and reward  systems that clearly link employee knowledge, skills, and contributions to  organizational results. Our work has found that agencies have made  progress in this area. For example, in July 2013, we found that the  Securities and Exchange Commission (SEC) lacked mechanisms to  monitor how supervisors used its performance management system to  recognize and reward performance. To help enhance the credibility of  SEC\u2019s performance management system, we recommended that it create  mechanisms to monitor how supervisors use the performance  management system. In a subsequent (December 2016) report, we found  that, in response to our recommendation, SEC began monitoring how  supervisors provide feedback, recognize and reward staff, and address  poor performance.", "However, federal managers generally reported no change on three items  related to recognizing and rewarding employee performance since our  last survey in 2013 (figure 19). One of those items\u2014managers agreeing  to a great or very great extent that employees in their agency receive  positive recognition for helping the agency to accomplish its strategic  goals\u2014had a statistically significant increase between 1997 and 2017  (from an estimated 26 percent to 46 percent).", "Make meaningful distinctions in performance: Effective performance  management requires the organization\u2019s leadership to meaningfully  distinguish between acceptable and outstanding performance of  individuals and to appropriately reward those who perform at the highest  level. For example, in January 2015, we found disparities in  performance ratings for SES among agencies. Across the 24 CFO Act  agencies, the percent of SES rated at the highest level ranged from about  22 percent to 95 percent in fiscal year 2013. To help address these  disparities, we recommended that the Director of OPM consider the need  to refine the performance certifications guidelines addressing distinctions  in performance. To address this recommendation, OPM informed us, in  June 2015, that it had convened a cross-agency working group that  developed a standard template for agencies to complete and post on a  website to more transparently justify their SES ratings distributions.", "In May 2016, we found that about 74 percent of non-SES employees  under a five-level appraisal system\u2014the most commonly used system\u2014 were rated in the top two of five performance categories in 2013. We  explored this issue further in our December 2016 review of human capital  challenges at the Veterans Health Administration (VHA), which illustrates  the importance of making meaningful distinctions in performance for non- SES employees. We found that in fiscal year 2014, about 73 percent of  VHA employees were rated in the top two of five performance categories.  This may have been due, in part, to a policy that did not require standards  to be defined for each level of performance. We recommended that VHA  ensure that meaningful distinctions are being made in employee  performance ratings by reviewing and revising performance management  policies consistent with leading practices, among other actions. The  Department of Veterans Affairs partially concurred with our  recommendation. In May 2017, the department stated that it had begun  piloting a new performance management process and would analyze  results at the end of fiscal year 2017."], "subsections": []}, {"section_title": "Additional OMB Actions Could Help Address Long- Standing Performance Measurement Issues", "paragraphs": ["One key aspect of connecting daily operations to results is aligning  program performance measures to agency-wide goals and objectives.  However, in 2017, an estimated 50 percent of federal managers agreed  to a great or very great extent that managers at their level took steps to  create such an alignment. There has been no statistically significant  change since this item was introduced in 2007.", "In addition, GPRAMA calls for agencies to develop a balanced set of  performance measures, which reinforces the need for agencies to have a  variety of measures across program areas. Our 2017 survey shows that  managers have not reported any difference in the availability of  performance measures for their programs when compared to the 2013  results. However, the 2017 result (an estimated 87 percent) represents a  statistically significant increase when compared to 1997 (76 percent).  When asked about the availability of certain types of performance  measures, three of the five types (outcome, output, and efficiency) were  statistically significantly higher in 2017 when compared to our initial 1997  survey. However, when comparing 2017 results to those in 2013, two of  the five types (output and quality) showed a statistically significant  decrease, and the other types did not change. These are illustrated in  figure 20.", "Beyond the survey results, our work has found that some agencies had  not developed or used outcome measures, but have taken steps to do so.  Agencies have been responsible for measuring program outcomes since  GPRA was enacted in 1993. The text box below describes two illustrative  examples from our past work.", "Examples of Agencies That Did Not Develop or Use Outcome Measures  Patient access to electronic health information: In March 2017, we found that the  Department of Health and Human Services (HHS) had invested over $35 billion  since 2009 to enhance patient access to electronic health information, among  other things. HHS had not developed outcome measures to gauge the  effectiveness of these efforts, which meant the department did not have  information to determine whether the efforts were contributing to its overall  goals. We recommended that HHS develop relevant outcome measures and  HHS concurred.  Safety interventions: According to the Federal Motor Carrier Safety  Administration (FMCSA), between 2011 and 2015, over 4,000 people died in  crashes involving motor carriers each year.", "GAO, Motor Carriers: Better Information Needed to Assess Effectiveness and Efficiency of Safety  Interventions, GAO-17-49 (Washington, D.C.: Oct. 27, 2016).", "Further OMB actions could also help agencies make progress in  measuring the performance of different program types. In our June 2013  report on initial GPRAMA implementation, we found that agencies  experienced common issues in measuring the performance of various  types of programs, such as contracts and grants. We recommended  that OMB work with the PIC to develop a detailed approach to examine  those difficulties. Although they took some actions, OMB and the PIC  have not yet developed a comprehensive and detailed approach to  address these issues. We concluded that, without such an approach, it  would be difficult for the PIC and agencies to fully understand these  measurement issues and develop a crosscutting approach to help  address them. In August 2017, OMB staff stated that efforts related to the  future implementation of the Program Management Improvement  Accountability Act (PMIAA) could help address this recommendation. As  highlighted in table 1, our work continues to show why it is important for  OMB and the PIC to take actions to more fully address our  recommendation."], "subsections": []}]}, {"section_title": "Increased Transparency and Public Engagement Could Improve Government Oversight and Foster Innovation", "paragraphs": [], "subsections": [{"section_title": "Further OMB Action Could Improve the Transparency of Government-wide Performance and Financial Data", "paragraphs": ["Congress has passed legislation to increase the transparency and  accessibility of federal performance and financial data. For example,  GPRAMA modernized agency reporting requirements to ensure that they  make timely, relevant data available to inform decision making by  Congress and agency officials as well as improve transparency for the  public. Results of our 2017 survey, however, show the need for  improvements in the public availability of agency performance  information. An estimated 17 percent of managers reported that their  agency\u2019s performance information is easily accessible to the public to a  great or very great extent, the same percentage as in 2013. Moreover,  of the 87 percent of managers that reported there are performance  measures for the programs they are involved in, 25 percent reported that  they use information obtained from performance measurement when  informing the public about how programs are performing to a great or very  great extent. This is not statistically different from the 30 percent  estimated in 2013.", "The DATA Act, enacted in 2014, built on previous transparency legislation  by expanding what federal agencies are required to report regarding their  spending. The act significantly increases the types of data that must be  reported, requires government-wide data standards, and regular reviews  of data quality to help improve the transparency and accountability of  federal spending data. OMB provides websites and guidance to make  agency performance and financial information available to the public;  however, our prior work has identified a number of areas related to  Performance.gov and the DATA Act where OMB action is needed to  improve the transparency and accessibility of this information.", "Performance.gov: Since 2013, our work has identified a number of  issues with Performance.gov, the website intended to serve as a central  source of information on the federal government\u2019s goals and  performance. Over time, we have recommended that OMB take a number  of specific actions to improve the website. For example, in June 2013, we  found that the website offered an inconsistent user experience and  presented accessibility and navigation challenges. To clarify the purpose  of the website and enhance its usability, we recommended that OMB take  steps to systematically collect customer input.", "In August 2016, we reported that OMB was not meeting all of the  reporting requirements for Performance.gov, and did not have a plan to  develop and improve the website. We recommended that OMB ensure  that information presented on Performance.gov consistently complies with  reporting requirements and develop a plan for the website that includes,  among other things, a customer outreach plan. OMB agreed with these  recommendations and, in July 2017, OMB staff informed us that they will  be partnering with a vendor to redesign Performance.gov to improve the  accessibility of information on the website. To inform this redesign, OMB  staff said that they will consider our previous recommendations and plan  to engage a wide group of stakeholders, including Congress, agency  staff, and interested members of the public and outside organizations.  OMB staff anticipated releasing updated agency reporting guidance in the  fall of 2017 and the redesigned website in February 2018.", "Under GPRAMA, OMB is required to make available, through  Performance.gov, quarterly updates on progress toward CAP goals and  APGs. As described earlier, in June 2017 OMB announced that reporting  to Performance.gov has been discontinued through the end of fiscal year  2017 as agencies develop new priority goals. However,  Performance.gov does not state that it will not be updated, nor does it  provide the location of the final progress updates for these goals. OMB\u2019s  guidance states that agencies should report the results of progress on  their previous APGs in their annual performance reports for fiscal year  2017. Moreover, OMB staff told us that the existing updates on  Performance.gov for CAP goals, last updated in December 2016,  represent the final updates on those goals, although they are not labeled  as such on the website. As a result, those interested in progress updates  and reported results for the previous priority goals may not know where  they will be able to find this information, limiting the transparency and  accessibility of those results for decision makers and the public.", "DATA Act: The DATA Act requires federal agencies to disclose their  spending and link this to program activities so that policymakers and the  public can more effectively track federal spending. The act has the  potential to improve the accuracy and transparency of federal spending  information and increase its usefulness for government decision making  and oversight. Since the DATA Act became law, OMB and Treasury have  taken significant steps to make more complete and accurate federal  spending data available. These have included standardizing data element  definitions to make it easier to compare different federal agencies\u2019  financial information, and issuing guidance to help agencies submit  required data. In May 2017, federal agencies started to report data under  the standardized definitions developed under the act.", "We have made a number of recommendations to address challenges that  could affect the consistency and quality of the data. Addressing these  recommendations could help ensure that financial data are provided to  the public in a transparent and useful manner. For example, in January  2016, we found some standardized data element definitions were  imprecise or ambiguous, which could result in inconsistent or potentially  misleading reporting. We recommended that OMB provide agencies with  additional guidance to address potential issues with the clarity,  consistency, and quality of reported data. OMB released guidance in  May and November 2016, but in April 2017 we found that additional  guidance was needed to help agencies implement certain data definitions  to produce data that would be consistent and comparable across  agencies. We are in the process of examining the quality of the data  that was submitted by agencies in May 2017 and was made available to  the public on an early version of the USAspending.gov website. We  expect to issue the results of this work in fall 2017."], "subsections": []}, {"section_title": "More Complete Public Reporting of Performance Information Could Enhance Oversight and Accountability", "paragraphs": ["Our past work also identified a number of actions agencies need to take  to make performance information more transparent. Increasing the  accessibility of this information could enhance oversight and  accountability of agency performance and results.", "CAP goals: In May 2016, we found that while selected CAP goal teams  were working to develop performance measures to track progress, they  were not consistently reporting on their efforts to develop these  measures. We recommended that OMB report on Performance.gov the  actions that CAP goal teams are taking to develop performance  measures and quarterly targets to help ensure that measures are aligned  with major activities, and ensure that it is possible to track teams\u2019  progress toward establishing measures. While OMB agreed with this  recommendation, it did not address it before reporting on the CAP goals  was discontinued, as discussed earlier.", "Customer service standards: As we described earlier, in 2017, an  estimated 48 percent of federal managers that indicated they have  performance measures for the programs they are involved in also agreed  to a great or very great extent that they have customer service  performance measures. There has been no statistically significant change  relative to our last survey in 2013, or the initial survey in 1997.  Relatedly, in October 2014, we reviewed customer service standards at  five federal agencies. Customer service standards inform customers  about what they have a right to expect when they request services, and  the standards should include goals for the quality and timeliness of a  service an agency provides to its customers. They should also be easily  available to the public so that customers know what to expect, when to  expect it, and from whom. In our review of standards at five agencies,  however, we found that only Customs and Border Protection had  standards that were easily available to the public. We recommended the  other four agencies\u2014the United States Forest Service, Federal Student  Aid, the National Park Service (NPS), and the Veterans Benefits  Administration (VBA)\u2014make their standards more easily accessible to  the public. As of July 2017, only VBA had done so.", "Major management challenges: In June 2016, we found that 14 of the  24 CFO Act agencies did not describe their major management  challenges in their performance plans, as required by GPRAMA.  Furthermore, 22 of the 24 agencies reviewed did not report complete  performance information for each of their major management challenges,  including performance goals, milestones, indicators, and planned actions  that they have developed to address such challenges. As a result, it was  not always transparent what these agencies considered to be their major  management challenges or how they planned to resolve these  challenges. We recommended that the 22 agencies describe their major  management challenges in their agency performance plans and include  goals, measures, milestones, and information on planned actions and  responsible officials. As of August 2017, 8 agencies\u2014the U.S. Agency for  International Development, Small Business Administration, Nuclear  Regulatory Commission, OPM, National Aeronautics and Space  Administration (NASA), and the Departments of Education, State, and  Veterans Affairs\u2014had fully implemented our recommendations; the other  14 agencies had not.", "Quality of performance information: In September 2015, we found that  six selected agencies reported limited information on the actions they are  taking to ensure the quality of their performance information for selected  APGs, as required by GPRAMA. We recommended that all six of the  agencies work with OMB to fully report this information. In response, the  Department of Homeland Security and NASA described how they ensure  reliable performance information is reported to external audiences. As of  June 2017, the Departments of Agriculture, Defense, the Interior, and  Labor had not yet taken actions to address this recommendation by  providing more specific explanations of how they ensure reliable  performance information is reported for their APGs.", "Unnecessary reports: GPRAMA requires that OMB guide an annual  review of agencies\u2019 plans and reports for Congress and include in the  President\u2019s budget a list of those plans and reports determined to be  outdated or duplicative. However, in July 2017, we found that OMB did  not implement the report review process on an annual basis, as  required. We also found that OMB published the list of agency plans  and reports on Performance.gov, rather than in the President\u2019s annual  budget, where they may be more visible and useful to congressional  decision makers and others. Therefore, we recommended that OMB  instruct agencies to identify outdated or duplicative reports on an annual  basis and submit or reference the list of identified plans and reports with  the President\u2019s annual budget. OMB agreed with these  recommendations. In July 2017, OMB stated it would include a list of  report modification proposals in the President\u2019s fiscal year 2019 budget  as required by GPRAMA.", "For all of the unimplemented recommendations described above, we will  continue to monitor agencies\u2019 actions."], "subsections": []}, {"section_title": "Open Innovation Can Help Agencies Engage the Public to Achieve Results, but Guidance for Implementing Initiatives Should Be Improved", "paragraphs": ["In addition to providing access to performance and financial information,  federal agencies can directly engage and collaborate with citizens,  nonprofits, academic institutions, and other levels of government using  open innovation strategies. Open innovation involves using various tools  and approaches to harness the ideas, expertise, and resources of those  outside an organization to address an issue or achieve specific goals. In  October 2016, we found that in recent years agencies had frequently  used five open innovation strategies\u2014singularly or in combination\u2014to  collaborate with citizens and encourage their participation in agency  initiatives. (See figure 21.)", "Our October 2016 report found that agencies can use these strategies for  a variety of purposes.", "To develop new ideas, solutions to specific problems, or new  products: For example, from April 2015 to November 2016, the  Department of Energy held a prize competition to create more efficient  devices that would double the energy captured from ocean waves.  According to the competition\u2019s website, the winning team achieved a  five-fold improvement.", "To enhance collaboration and agency capacity by leveraging  external resources, knowledge, and expertise: For example, every  2 years since 2009, the Federal Highway Administration has regularly  engaged stakeholders to identify and implement innovative ideas that  have measurably improved the execution of highway construction  projects.", "To collect the perspectives and preferences of a broad group of  citizens and external stakeholders: For example, the Food and  Drug Administration used in-person and online dialogue to engage  outside stakeholders in the development of an online platform  designed to make key datasets easily accessible to the public.", "Subsequently, in June 2017, we found that OMB, the Office of Science  and Technology Policy (OSTP), and the General Services Administration  (GSA) developed resources to support the use of open innovation  strategies by federal agencies. These resources included guidance,  staff to assist agencies in implementing initiatives, and websites to  improve access to relevant information. For example, GSA developed a  step-by-step implementation guide, program management team, and  website to help agency staff carry out prize competitions and challenges.  Agencies have also developed their own resources, including guidance,  staff positions, and websites, to reach specific audiences and to provide  tailored support for open innovation strategies they use frequently. For  example, NASA\u2019s Solve website provides a central location for the public  to find the agency\u2019s challenges and citizen science projects, as well as  links to relevant resources.", "We also evaluated key government-wide guidance for the five strategies  listed above to determine the extent to which the guidance reflects  leading practices for effectively implementing open innovation initiatives.", "We identified these practices in our October 2016 report. We found that  the guidance for each strategy reflected these practices to differing  extents, as shown in figure 22.", "We made 22 recommendations to GSA, OMB, and OSTP to enhance the  guidance. GSA and OMB generally agreed with these recommendations  and OSTP neither agreed nor disagreed. We will monitor their progress  toward implementing these recommendations."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["GPRAMA provides important tools that can help decision makers better  achieve results and address the federal government\u2019s significant and  long-standing governance challenges. Although OMB and agencies have  made progress in improving implementation of the act over the years, our  work has highlighted numerous opportunities for further improvements.", "In 2017, OMB removed the priority designation of CAP goals and APGs.  For those goals, this action stopped related data-driven reviews and  quarterly updates of progress on Performance.gov until new priority goals  are published next year. What OMB considers to be the final results of  CAP goals for fiscal years 2014 to 2017 already are on Performance.gov  (although not labeled as such). In addition, agencies may report on their  former APGs in their annual fiscal year 2017 performance reports.  However, Performance.gov does not state that it will not be updated or  provide the location of the final progress updates for these goals, limiting  transparency and its value to the public. OMB has stated its plans to  restart implementation of those provisions in February 2018, with the start  of a new goal cycle. We believe it is critical for OMB to do so, given the  important role those tools play in addressing key governance challenges  and the results we have seen in better managing crosscutting areas and  driving performance improvements across the government.", "In addition, OMB has postponed implementation of the federal program  inventory. To date, the inventory has only been developed once, in 2013,  despite requirements for regular updates to reflect current budget and  performance information. OMB has given a variety of reasons for the  delays over the past 4 years\u2014most recently, to determine the right  strategy to merge implementation of the DATA Act and PMIAA with  GPRAMA\u2019s program inventory requirements. Although OMB staff told us  that they expect to issue guidance by the end of 2018 to resume  implementation of the program inventory requirements, they have not  provided more specific time frames and milestones related to the program  inventory requirements. Doing so would help agencies prepare for  resumed implementation. Moreover, publicly disclosing planned  implementation time frames and associated milestones would help  ensure that interested stakeholders, such as federal decision makers and  the public, are prepared to engage with agencies as they develop and  update their program inventories, which in turn could help ensure the  inventories meet stakeholders\u2019 needs.", "A well-developed inventory would provide key program, budget, and  performance information in one place to help federal decision makers  better understand the federal investment and results in given policy  areas, and better identify and manage fragmentation, overlap, and  duplication. Information architecture offers one approach to developing an  inventory. As OMB determines a strategy for implementing the program  inventory and develops its guidance, considering such a systematic  approach to planning, organizing, and developing the inventory that  centers on maximizing the use and usefulness of information could help it  ensure the inventory meets GPRAMA requirements as well as the needs  of decision makers and the public. Moreover, such an approach could  also help OMB implement our past recommendations related to the  program inventory, which are intended to ensure the inventory provides  more complete information and is useful to various stakeholders.", "Our survey of federal managers continues to generally show no  improvement in their reported use of performance information in decision  making, nor in the employment of practices that can enhance such use.  One area where our survey data and past work show promise is through  the use of regular, leadership-driven reviews of performance data at  agencies, especially when conducted in line with related leading  practices. However, GPRAMA only requires these data-driven reviews for  APGs, which represent a small subset of goals, both within individual  agencies as well as across the government. This is probably why most  federal managers were not familiar with the reviews. Identifying and  sharing practices for expanding the use of those reviews\u2014such as for  additional agency-wide performance goals and at lower levels within  agencies\u2014could significantly enhance the use of performance  information and drive to better and greater results."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to OMB:  The Director of OMB should update Performance.gov to explain that  quarterly reporting on the fiscal year 2014 through 2017 CAP goals and  fiscal year 2016 and 2017 APGs was suspended, and provide the  location of final progress updates for these goals. (Recommendation 1)", "The Director of OMB should revise and publicly issue OMB guidance\u2014 through an update to its Circular No. A-11, a memorandum, or other  means\u2014to provide time frames and associated milestones for  implementing the federal program inventory. (Recommendation 2)", "The Director of OMB should consider\u2014as OMB determines its strategy  for resumed implementation of the federal program inventory\u2014using a  systematic approach, such as the information architecture framework, to  help ensure that GPRAMA requirements and our past recommendations  for the inventory are addressed. (Recommendation 3)", "The Director of OMB should work with the Performance Improvement  Council to identify and share among agencies practices for expanding the  use of data-driven performance reviews beyond APGs, such as for other  performance goals and at lower levels within agencies, that have led to  performance improvements. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Director of the Office of  Management and Budget for review and comment. In comments provided  orally and via email, OMB staff agreed with the recommendations in this  report.", "OMB staff also asked us to (1) consider revising the draft title of the  report, to better reflect progress in GPRAMA implementation, and (2)  clarify our recommendations on issuing guidance for implementing the  federal program inventory and expanding the use of data-driven  performance reviews, by describing possible actions that could be taken  to implement them. We agreed and made revisions accordingly.", "We are sending copies of this report to interested congressional  committees, the Director of the Office of Management and Budget, and  other interested parties. This report will also be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or mihmj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of our report. Key contributors to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The GPRA Modernization Act (GPRAMA) includes a statutory provision  for us to periodically evaluate implementation of the act. Since 2012, we  have issued over 30 products in response to this provision; this is the  third summary report. This report assesses how implementation of  GPRAMA has affected the federal government\u2019s progress in resolving key  governance challenges in (1) addressing crosscutting issues, (2) ensuring  performance information is useful and used in decision making, (3)  aligning daily operations with results, and (4) building a more transparent  and open government.", "We reviewed relevant statutory requirements, related Office of  Management and Budget (OMB) guidance, and our recent work related to  GPRAMA implementation and the four key governance challenges  included in our reporting objectives. Specifically, since our last summary  report in September 2015, we examined various aspects of GPRAMA  implementation in 12 products that covered 35 agencies, including the 24  agencies covered under the Chief Financial Officers (CFO) Act of 1990,  as amended (identified in table 2). We interviewed OMB and Performance  Improvement Council staff to obtain (1) their perspectives on GPRAMA  implementation and progress on the four governance challenges, and (2)  updates on the status of our past recommendations. We also received  updates from other agencies on the status of our past recommendations  to them related to GPRAMA implementation.", "To supplement this review, we administered our periodic survey of federal  managers on organizational performance and management issues from  November 2016 through March 2017. This survey is comparable to five  previous surveys we conducted in 1997, 2000, 2003, 2007, and 2013.  We selected a stratified random sample of 4,395 people from a  population of approximately 153,779 mid-level and upper-level civilian  managers and supervisors working in the 24 executive branch agencies  covered by the CFO Act, as shown in table 2. We obtained the sample  from the Office of Personnel Management\u2019s (OPM) Enterprise Human  Resources Integration (EHRI) database as of September 30, 2015, which  was the most recent fiscal year data available at the time. We used file  designators indicating performance of managerial and supervisory  functions. In reporting survey data, we use the term \u201cgovernment-wide\u201d  and the phrases \u201cacross the government\u201d or \u201coverall\u201d to refer to the 24  CFO Act executive branch agencies. We use the terms \u201cfederal  managers\u201d and \u201cmanagers\u201d to collectively refer to both managers and  supervisors.", "We designed the questionnaire to obtain the observations and  perceptions of respondents on various aspects of results-oriented  management topics. These topics include the presence and use of  performance measures, any hindrances to measuring performance and  using performance information, agency climate, and program evaluation  use. To assess implementation of GPRAMA, the questionnaire included  questions to collect respondents\u2019 views on various provisions of  GPRAMA, such as cross-agency priority goals, agency priority goals, and  related quarterly performance reviews.", "Similar to the five previous surveys, the sample was stratified by agency  and by whether the manager or supervisor was a member of the Senior  Executive Service (SES). The management levels covered general  schedule (GS) or equivalent schedules at levels comparable to GS-13  through GS-15 and career SES or equivalent. Stratifying the sample in  this way ensured that the population from which we sampled covered at  least 90 percent of all mid- to upper-level managers and supervisors at  the departments and agencies we surveyed.", "Most of the items on the questionnaire were closed-ended, meaning that  depending on the particular item, respondents could choose one or more  response categories or rate the strength of their perception on a 5-point  extent scale ranging from \u201cno extent\u201d to \u201cvery great extent.\u201d On most  items, respondents also had an option of choosing the response category  \u201cno basis to judge/not applicable.\u201d A few items had other options, such as  \u201cyes,\u201d \u201cno,\u201d or \u201cdo not know,\u201d or a 3-point familiarity scale (\u201cnot familiar,\u201d  \u201csomewhat familiar,\u201d and \u201cvery familiar\u201d).", "We asked many of the items on the questionnaire in our earlier surveys,  though we introduced a number of new items in 2013, including the  sections about GPRAMA and program evaluations. For 2017, we added a  new question on use of performance information (question 12) and a new  question on program evaluation (question 24). Before administering the  survey, questions were reviewed by our staff, including subject matter  experts, a survey specialist, and a research methodologist. We also  conducted pretests of the new questions with federal managers in several  of the 24 CFO Act agencies. We changed the wording of subquestions or  added clarifying examples based on pretester feedback.", "To administer the survey, we e-mailed managers in the sample to notify  them of the survey\u2019s availability on our website and we included  instructions on how to access and complete the survey. To follow up with  managers in the sample who did not respond to the initial notice, we  emailed or called multiple times to encourage survey participation or  provide technical assistance, as appropriate.", "Similar to our last survey, we worked with OPM to obtain the names of  the managers and supervisors in our sample, except for those within  selected subcomponents whose names were withheld from the EHRI  database. Since Foreign Service officials from the Department of State  (State) are not in the EHRI database, we drew a sample for that group  with the assistance from State. We worked with officials at the  Department of Homeland Security (DHS) and the Department of the  Treasury (Treasury) to gain access to these individuals to maintain  continuity of the population of managers surveyed from previous years.  The Department of Justice (DOJ) was concerned about providing  identifying information (e.g., names, e-mail addresses, and phone  numbers) of federal agents to us, so we administered the current survey  to DOJ managers in our sample through DOJ officials. To identify the  sample of managers whose names were withheld from the EHRI  database, we provided DOJ with the last four digits of Social Security  numbers, the subcomponent, duty location, and pay grade information.  To ensure that DOJ managers received the same survey administration  process as the rest of the managers in our sample to the extent possible,  we provided DOJ with text for the survey activation and reminder e-mails  similar to ones we emailed to managers at other agencies. DOJ  administered the survey to these managers and emailed them one  reminder to complete the survey.", "To help determine the reliability and accuracy of the EHRI data elements  used to draw our sample of federal managers, we checked the data for  reasonableness and the presence of any obvious or potential errors in  accuracy and completeness and reviewed past analyses of the reliability  of this database. For example, we identified cases where the managers\u2019  names were withheld and contacted OPM to discuss this issue. We also  checked the names of the managers in our selected sample provided by  OPM with the applicable agency contacts to verify these managers were  still employed with the agency. We noted discrepancies when they  occurred and excluded them from our population of interest, as  applicable. On the basis of these procedures, we believe the data we  used from the EHRI database are sufficiently reliable for the purpose of  the survey.", "Of the 4,395 managers selected for the 2017 survey, we found that 388 of  the sampled managers had retired, separated, or otherwise left the  agency or had some other reason that excluded them from the population  of interest. These exclusions included managers that the agency could  not locate, and therefore we were unable to request that they participate  in the survey. We received usable questionnaires from 2,726 sample  respondents, for a weighted response rate of about 67 percent of the  remaining eligible sample. The weighted response rate across 23 of the  24 agencies ranged from 57 percent to 82 percent, while DOJ had a  weighted response rate of 36 percent. See the supplemental material for  each agency\u2019s response rate.", "We conducted a nonresponse bias analysis using information from the  survey and sampling frame as available. The analysis confirmed  discrepancies in the tendency to respond to the survey related to agency  and SES status. The analysis also revealed some differences in response  propensity by age and GS level; however, the direction and magnitude of  the differences on these factors were not consistent across agencies or  strata. Our data may be subject to bias from unmeasured sources for  which we cannot control. Results, and in particular estimates from  agencies with low response rates such as DOJ, should be interpreted  with caution because these estimates are associated with a higher level  of uncertainty.", "The overall survey results are generalizable to the government-wide  population of managers as described above. The responses of each  eligible sample member who provided a usable questionnaire were  weighted in the analyses to statistically account for all members of the  population. All results are subject to some uncertainty or sampling error  as well as nonsampling error, including the potential for nonresponse bias  as noted above. Because we followed a probability procedure based on  random selections, our sample is only one of a large number of samples  that we might have drawn.", "The magnitude of sampling error will vary across the particular surveys,  groups, or items being compared because we (1) used complex survey  designs that differed in the underlying sample sizes, usable sample  respondents, and associated variances of estimates, and (2) conducted  different types of statistical analyses. For example, the 2000 and 2007  surveys were designed to produce agency-level estimates and had  effective sample sizes of 2,510 and 2,943, respectively. However, the  1997 and 2003 surveys were designed to obtain government-wide  estimates only, and their sample sizes were 905 and 503, respectively.  Consequently, in some instances, a difference of a certain magnitude  may be statistically significant. In other instances, depending on the  nature of the comparison being made, a difference of equal or even  greater magnitude may not achieve statistical significance.", "Because each sample could have provided different estimates, we  express our confidence in the precision of our particular sample\u2019s results  as a 95 percent confidence interval. This is the interval that would contain  the actual population value for 95 percent of the samples we could have  drawn. The percentage estimates presented in this report based on our  sample for the 2017 survey have 95 percent confidence intervals within  plus or minus 5.5 percentage points of the estimate itself, unless  otherwise noted. We also note in this report when we are 95 percent  confident that changes from 1997 or 2013 relative to 2017 are statistically  significant. Online supplemental material shows the questions asked on  the survey along with the percentage estimates and associated 95  percent confidence intervals for each item for each agency and government-wide. In a few instances, we report estimates with larger  margins of error because we deemed them reliable representations of  given findings due to the statistical significance of larger differences  between comparison groups. In all cases, we report the applicable  margins of error.", "In addition to sampling errors, the practical difficulties of conducting any  survey may also introduce other types of errors, commonly referred to as  nonsampling errors. For example, difficulties in how a particular question  is interpreted, in the sources of information available to respondents, or in  how the data were entered into a database or analyzed can introduce  unwanted variability into the survey results. With this survey, we took a  number of steps to minimize these nonsampling errors. For example, our  staff with subject matter expertise designed the questionnaire in  collaboration with our survey specialists. As noted earlier, the new  questions added to the survey were pretested to ensure they were  relevant and clearly stated. When the data were analyzed, a second  independent analyst on our staff verified the analysis programs to ensure  the accuracy of the code and the appropriateness of the methods used  for the computer-generated analysis. Since this was a web-based survey,  respondents entered their answers directly into the electronic  questionnaire, thereby eliminating the need to have the data keyed into a  database, thus avoiding a source of data entry error.", "To supplement descriptive analysis of the survey questions, we  generated an index to gauge government-wide use of performance  information. The index, which was identical to one we reported in 2014,  averaged manager\u2019s responses to 11 questions deemed to relate to the  concept of performance information use. The index runs from 1  (corresponding to an average value of \u201cto no extent\u201d) to 5 (corresponding  to an average value of \u201cto a very great extent\u201d). We used Cronbach\u2019s  alpha to assess the internal consistency of the scale. Our government- wide index score weights each agency\u2019s contribution equally, and  provides a relative measure of the use of performance information over  time rather than an absolute indicator of the government-wide level of use  of performance information.", "We conducted this performance audit from January 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Recommendations from GAO\u2019s Work Related to the GPRA Modernization Act", "paragraphs": ["The Office of Management and Budget (OMB) and agencies have taken  some actions to address our recommendations related to implementation  of the GPRA Modernization Act of 2010 (GPRAMA); however, the  majority of recommendations remain open. Since GPRAMA was enacted  in January 2011, we have made 100 recommendations in 18 reports to  OMB and agencies aimed at improving the act\u2019s implementation (table  3). Of those 100, OMB and the agencies have implemented 42  recommendations. Fifty-eight recommendations require additional action.", "Nearly half (47) of our recommendations are directed to OMB. For the 23  recommendations that OMB has implemented, many represent revisions  to guidance to better reflect GPRAMA\u2019s requirements or to enhance  implementation. Many of the 24 recommendations to OMB that are not  implemented deal with long-standing or complex challenges, on which  OMB has taken limited action to date. Of those, we have designated 3 as  priorities for OMB to address. Agencies have also taken some action on  our recommendations, implementing 19 of the 53 recommendations we  have made.", "The following tables present each of the 100 recommendations along with  a summary of actions taken to address it. Tables 4 and 5 provide  information about our recommendations to OMB that are implemented  and not implemented, respectively. Tables 6 and 7 provide information  about our recommendations to other agencies that are implemented and  not implemented, respectively."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the above contact, Benjamin T. Licht (Assistant Director)  and Shannon Finnegan (Assistant Director) supervised this review and  the development of the resulting report. Leah Q. Nash (Assistant  Director), Elizabeth Fan (Analyst-in-Charge), and Adam Miles (Analyst-in- Charge) supervised the development and administration of the Federal  Managers Survey and the resulting supplemental material. Peter Beck,  Valerie Caracelli, Karin Fangman, Steven Flint, Robert Gebhart, Ricky  Harrison Jr., John Hussey, Jill Lacey, Won Lee, Krista Loose, Meredith  Moles, Anna Maria Ortiz, Steven Putansu, Alan Rozzi, Cindy Saunders,  Stephanie Shipman, Shane Spencer, Andrew J. Stephens, and Brian  Wanlass also made key contributions. Ann Czapiewski and Donna Miller  developed the graphics for this report. John Ahern, Divya Bali, Jeff  DeMarco, Alexandra Edwards, Ellen Grady, Jyoti Gupta, Erinn L. Sauer,  and Katherine Wulff verified the information presented in this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": [], "subsections": [{"section_title": "Prior Summary Reports on the Government Performance and Results Act (GPRA) Modernization Act (GPRAMA) Implementation", "paragraphs": ["Managing for Results: Implementation of GPRA Modernization Act Has  Yielded Mixed Progress in Addressing Pressing Governance Challenges.  GAO-15-819. Washington, D.C.: September 30, 2015.", "Managing For Results: Executive Branch Should More Fully Implement  the GPRA Modernization Act to Address Pressing Governance  Challenges. GAO-13-518. Washington, D.C.: June 26, 2013."], "subsections": []}, {"section_title": "Results of the Periodic Surveys on Organizational Performance and Management Issues", "paragraphs": ["Supplemental Material for GAO-17-775: 2017 Survey of Federal  Managers on Organizational Performance and Management Issues.  GAO-17-776SP. Washington, D.C.: September 29, 2017.", "Program Evaluation: Annual Agency-wide Plans Could Enhance  Leadership Support for Program Evaluations. GAO-17-743. Washington,  D.C.: September 29, 2017.", "Managing for Results: Agencies\u2019 Trends in the Use of Performance  Information to Make Decisions. GAO-14-747. Washington, D.C.:  September 26, 2014.", "Managing for Results: Executive Branch Should More Fully Implement  the GPRA Modernization Act to Address Pressing Governance  Challenges. GAO-13-518. Washington, D.C.: June 26, 2013.", "Managing for Results: 2013 Federal Managers Survey on Organizational  Performance and Management Issues, an E-supplement to GAO-13-518.  GAO-13-519SP. Washington, D.C.: June 26, 2013.", "Program Evaluation: Strategies to Facilitate Agencies\u2019 Use of Evaluation  in Program Management and Policy Making. GAO-13-570. Washington,  D.C.: June 26, 2013.", "Government Performance: Lessons Learned for the Next Administration  on Using Performance Information to Improve Results. GAO-08-1026T.  Washington, D.C.: July 24, 2008.", "Government Performance: 2007 Federal Managers Survey on  Performance and Management Issues, an E-supplement to  GAO-08-1026T. GAO-08-1036SP. Washington, D.C.: July 24, 2008.", "Results-Oriented Government: GPRA Has Established a Solid  Foundation for Achieving Greater Results. GAO-04-38. Washington, D.C.:  March 10, 2004.", "Managing for Results: Federal Managers\u2019 Views on Key Management  Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.:  May 25, 2001.", "Managing for Results: Federal Managers\u2019 Views Show Need for Ensuring  Top Leadership Skills. GAO-01-127. Washington, D.C.: October 20,  2000.", "The Government Performance and Results Act: 1997 Governmentwide  Implementation Will Be Uneven. GAO/GGD-97-109. Washington, D.C.:  June 2, 1997."], "subsections": []}, {"section_title": "Reports Related to GPRAMA Implementation", "paragraphs": ["Federal Programs: Information Architecture Offers a Potential Approach  for Inventory Development. GAO-17-739. Washington, D.C.: September  28, 2017.", "Managing for Results: Selected Agencies\u2019 Experiences in Implementing  Strategic Reviews. GAO-17-740R. Washington, D.C.: September 7, 2017.", "Federal Reports: OMB and Agencies Should More Fully Implement the  Process to Streamline Reporting Requirements. GAO-17-616.  Washington, D.C.: July 14, 2017.", "Open Innovation: Executive Branch Developed Resources to Support  Implementation, but Guidance Could Better Reflect Leading Practices.  GAO-17-507. Washington, D.C.: June 8, 2017.", "Performance Partnerships: Agencies Need to Better Identify Resource  Contributions to Sustain Disconnected Youth Pilot Programs and Data to  Assess Pilot Results. GAO-17-208. Washington, D.C.: April 18, 2017.", "Open Innovation: Practices to Engage Citizens and Effectively Implement  Federal Initiatives. GAO-17-14. Washington, D.C.: October 13, 2016.", "Tiered Evidence Grants: Opportunities Exist to Share Lessons from Early  Implementation and Inform Future Federal Efforts. GAO-16-818.  Washington, D.C.: September 21, 2016.", "Performance.gov: Long-Term Strategy Needed to Improve Website  Usability. GAO-16-693. Washington, D.C.: August 30, 2016.", "Tax Expenditures: Opportunities Exist to Use Budgeting and Agency  Performance Processes to Increase Oversight. GAO-16-622.  Washington, D.C.: July 7, 2016.", "Managing for Results: Agencies Need to Fully Identify and Report Major  Management Challenges and Actions to Resolve them in their Agency  Performance Plans. GAO-16-510. Washington, D.C.: June 15, 2016.", "Managing for Results: OMB Improved Implementation of Cross-Agency  Priority Goals, But Could Be More Transparent About Measuring  Progress. GAO-16-509. Washington, D.C.: May 20, 2016.", "Managing for Results: Greater Transparency Needed in Public Reporting  on the Quality of Performance Information for Selected Agencies\u2019 Priority  Goals. GAO-15-788. Washington, D.C.: September 10, 2015.", "Pay for Success: Collaboration among Federal Agencies Would Be  Helpful as Governments Explore New Financing Mechanisms.  GAO-15-646. Washington, D.C.: September 9, 2015.", "Managing for Results: Practices for Effective Agency Strategic Reviews.  GAO-15-602. Washington, D.C.: July 29, 2015.", "Managing for Results: Agencies Report Positive Effects of Data-Driven  Reviews on Performance but Some Should Strengthen Practices.  GAO-15-579. Washington, D.C.: July 7, 2015.", "Program Evaluation: Some Agencies Reported that Networking, Hiring,  and Involving Program Staff Help Build Capacity. GAO-15-25.  Washington, D.C.: November 13, 2014.", "Government Efficiency and Effectiveness: Inconsistent Definitions and  Information Limit the Usefulness of Federal Program Inventories.  GAO-15-83. Washington, D.C.: October 31, 2014.", "Managing for Results: Selected Agencies Need to Take Additional Efforts  to Improve Customer Service. GAO-15-84. Washington, D.C.: October  24, 2014.", "Managing for Results: Enhanced Goal Leader Accountability and  Collaboration Could Further Improve Agency Performance. GAO-14-639.  Washington, D.C.: July 22, 2014.", "Managing for Results: OMB Should Strengthen Reviews of Cross-Agency  Goals. GAO-14-526. Washington, D.C.: June 10, 2014.", "Managing for Results: Implementation Approaches Used to Enhance  Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.:  February 14, 2014.", "Managing for Results: Leading Practices Should Guide the Continued  Development of Performance.gov. GAO-13-517. Washington, D.C.: June  6, 2013.", "Managing for Results: Agencies Should More Fully Develop Priority Goals  under the GPRA Modernization Act. GAO-13-174. Washington, D.C.:  April 19, 2013.", "Managing for Results: Agencies Have Elevated Performance  Management Roles, but Additional Training Is Needed. GAO-13-356.  Washington, D.C.: April 16, 2013.", "Managing for Results: Data-Driven Performance Reviews Show Promise  But Agencies Should Explore How to Involve Other Relevant Agencies.  GAO-13-228. Washington, D.C.: February 27, 2013.", "Managing for Results: A Guide for Using the GPRA Modernization Act to  Help Inform Congressional Decision Making. GAO-12-621SP.  Washington, D.C.: June 15, 2012.", "Managing for Results: GAO\u2019s Work Related to the Interim Crosscutting  Priority Goals under the GPRA Modernization Act. GAO-12-620R.  Washington, D.C.: May 31, 2012.", "Managing for Results: Opportunities for Congress to Address  Government Performance Issues. GAO-12-215R. Washington, D.C.:  December 9, 2011."], "subsections": []}]}], "fastfact": ["The GPRA Modernization Act was designed to help the federal government address longstanding performance and management problems. Among other things, it requires agency leaders to set goals and use data to review progress toward them.", "We surveyed more than 4,000 federal managers and found overall use of performance data in decision making has dropped since 2007. However, the survey shows that data-driven reviews agencies conducted for a subset of goals did improve program performance.", "We recommended that OMB work with agencies to identify and share practices for conducting performance reviews for additional goals."]}
{"id": "GAO-18-381", "url": "https://www.gao.gov/products/GAO-18-381", "title": "Paperwork Reduction Act: Agencies Could Better Leverage Review Processes and Public Outreach to Improve Burden Estimates", "published_date": "2018-07-11T00:00:00", "released_date": "2018-08-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies collect a wide variety of information to ensure the public is kept safe from harm, receives benefits to which they are entitled, and fulfill their missions. Such collections can also impose significant burdens on the public. The goal of the PRA is to minimize the burden of these collections and maximize their utility. To help accomplish this, the PRA requires agencies to estimate the burden, and consult with the public on these estimates.", "This report examines (1) how agencies estimate burden hours and costs of their collections, and any limitations of agencies' approaches; and (2) the extent to which agencies consult with the public on estimated burden. To address these objectives, GAO selected four agencies with the largest burden hour estimates, reviewed the 50 ICRs with the largest burden hour estimates at each agency, with a focus on the 2 largest ICRs at each as case studies, and interviewed agency officials and OMB staff."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies GAO reviewed\u2014the Departments of Agriculture (USDA), Health and Human Services (HHS), and Transportation (DOT), and the Internal Revenue Service (IRS)\u2014generally used existing data, such as historical data, to estimate the time, or \u201cburden hours,\u201d it takes for the public to complete an information collection request (ICR). IRS reported gathering original data on public burden through surveys of taxpayers to help estimate the burden for its two largest ICRs. When data were unavailable for one or more elements of the burden calculation (e.g., average time per response), agencies relied on professional judgment, informed in some instances by internal consultation with issue area experts.", "GAO found two limitations with the agencies' current approaches for estimating burden. First, 76 of 200 ICRs that GAO reviewed, including the 2 largest ICRs at IRS and DOT, did not translate burden hours into dollars, or estimated \u201crespondent time costs.\u201d Although the Office of Management and Budget (OMB) requires agencies to include these costs, it reviewed and approved all 76 ICRs. ICRs that included respondent time costs did not consistently include fringe benefits, such as insurance contributions, in part because of a lack of clear guidance from OMB. Inconsistencies in estimating respondent time costs could lead to inconsistent implementation of new requirements under Executive Order 13771 that agencies offset the incremental costs of new regulations with reductions in regulatory burden, including paperwork burden, elsewhere.", "Second, while all agencies and OMB reported having independent review processes in place, as required by the Paperwork Reduction Act (PRA), GAO found instances where 3 of the 4 selected agencies\u2014USDA, HHS, and DOT\u2014did not detect math errors through these review processes or inconsistencies among estimates provided on Reginfo.gov, and in the more detailed ICR supporting statements. For example, GAO found that one ICR underestimated burden by as much as $270 million, and another overestimated burden time by more than 12 million hours. Agencies acknowledged they followed their review processes but not detect the errors and inconsistencies. OMB also did not detect the errors and inconsistencies in its review of the ICRs. Until agencies ensure that their review processes detect errors or inconsistencies, the public may have less confidence in agencies' ability to effectively manage and minimize burden.", "While the agencies solicited public comments through the Federal Register , as required by the PRA, IRS and DOT did not always provide the level of information in the notices (e.g., the frequency of the collection) needed to allow the public to evaluate the burden estimates. Also, agencies did not always consult with the public beyond these notices, as required under the PRA. Of the 200 ICRs GAO reviewed, 113 contained information in their supporting statements indicating public consultation beyond the Federal Register notices. Only 6 of these 113 indicated that public outreach was related to the burden hour estimates. OMB could help ensure that agencies consistently obtain public input by directing agencies to consult with the public beyond the Federal Register notices on each ICR, as required in the PRA. However, OMB continues to believe that additional consulting should occur only for ICRs where important information may be missed by the public notice and comment period. Congressional action to clarify the PRA requirement may be needed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider more explicitly requiring agencies to consult with the public beyond the Federal Register notices. GAO is also making 11 recommendations: 1 to OMB on ensuring consistent application of the requirement for estimating respondent time costs; 4 on reexamining processes for reviewing ICRs to OMB, USDA, HHS, and DOT; 2 on improving public notices to IRS and DOT; and 4 on better leveraging existing public consultation to USDA, HHS, DOT, and IRS. USDA, HHS, DOT, and IRS agreed with the recommendations. OMB staff did not agree or disagree."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies collect a wide variety of information to ensure that the  public is kept safe from harm, that qualified recipients receive benefits to  which they are entitled, and that agencies otherwise fulfill their respective  missions. For example, the Internal Revenue Service (IRS) collects  information from individuals and businesses to help taxpayers meet their  tax responsibilities and help IRS enforce the law with integrity and  fairness. Overall, based on government-wide estimates, the public spent  about 9.8 billion hours responding to federal information collections in  fiscal year 2015.", "The primary goal of the Paperwork Reduction Act (PRA) is to minimize  the burden of these collections on the public and maximize their utility.  To accomplish this, the Act requires agencies to (1) justify, or describe  the necessity, of the information collected; (2) provide estimates of the  burden they will impose (i.e., the time and costs required to comply with  the collection); and (3) publish notices in the Federal Register and  otherwise consult with the public to obtain input. Reliable, publicly  informed burden estimates are essential to assist federal agencies to  minimize the burden and maximize the utility of their information  collections, and to effectively measure agencies\u2019 progress toward burden  reduction goals.", "Executive Order 13771 required executive agencies to identify at least  two existing regulations to be repealed whenever they publicly propose or  otherwise promulgate a new regulation, unless prohibited by law. The  Executive Order also required that for fiscal year 2017, the total cost of all  new regulations, including the savings for regulations that have been  repealed, must be zero or less, unless otherwise required by law or  consistent with advice provided in writing by the Director of the Office of  Management and Budget (OMB). According to OMB guidance  implementing the Executive Order, meaningful burden reduction through  the repeal or streamlining of mandatory paperwork requirements qualifies  as savings that can be used to offset new regulations.", "You asked us to review the methodologies agencies used to estimate  burden and the steps agencies take to obtain input on their information  requests. This report examines (1) how agencies estimate both the  burden hours and costs of their information collections, and any  limitations of their approaches; and (2) the extent to which agencies  consult with and receive comments from the public on the collections\u2019  estimated burden.", "To address both of these objectives, we selected four agencies as case  studies based on OMB data of federal information collection requests  (ICR) available on Reginfo.gov as of April 7, 2017. We selected IRS,  which is responsible for the majority of the federal government\u2019s burden  hours, and the three departments with the next highest percentages of  the federal government\u2019s total information collection burden hours: the  Departments of Health and Human Services (HHS), Agriculture (USDA),  and Transportation (DOT). Together, the four selected agencies  represent more than 85 percent of the total estimated burden hours  across the federal government.", "For each of these four agencies, we selected the 50 largest information  collections based on total burden hours (for a total of 200 information  collections) to obtain information about estimated burden hours and  resource costs, and the agencies\u2019 efforts to consult with the public.", "To examine how agencies prepare burden estimates, we selected the two  largest information collection requests from the 50 ICRs with the largest  burden hour estimates at each of the four agencies as case studies. For  these ICRs, we reviewed the data used to develop burden estimate,  checked the math used to calculate the burden estimate, and interviewed  agency officials about the review process for approving the ICR (see table  1 for list of case study ICRs).", "These eight case study ICRs represent the majority of information  collection burden at each agency, and roughly 59 percent of the federal  government\u2019s total burden hours.", "We reviewed documents related to the eight case study ICRs, including  the supporting statements that accompanied each ICR. We also  reviewed Federal Register notices issued by the agencies to solicit  comments from the public on these ICRs. Additionally, we reviewed  agency and OMB requirements under the PRA as well as OMB guidance  issued to assist agencies in developing and reviewing their information  collections. We interviewed officials at the four selected agencies about  the methodologies for estimating burden. We also interviewed agency  officials and OMB staff about the processes for reviewing ICRs more  generally. Appendix I provides additional information about our objectives,  scope, and methodology.", "To assess the reliability of data on ICR burden estimates in Reginfo.gov,  we compared them with the data found in the supporting statements. We  interviewed agency officials and OMB staff about discrepancies between  these two data sources. We reviewed documentation on the Reginfo.gov  website and the underlying system that agencies use to track information  collection requests. We found that the data were sufficiently reliable for  the purpose of selecting case study agencies and ICRs.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["According to OMB\u2019s regulation implementing the PRA, \u201cinformation\u201d is  broadly defined as any statement or estimate of fact or opinion,  regardless of form or format, whether in numerical, graphic, or narrative  form, and whether oral or maintained on paper, electronic, or other  media. Federal agencies collect this information in various formats, such  as forms and applications, recordkeeping information maintained by  entities, and third-party disclosures (see figure 1). Agencies collect this  information to ensure that the public is kept safe from harm, that qualified  recipients receive benefits to which they are entitled, and that agencies  otherwise fulfill their respective missions.", "For example, DOT requires commercial motor vehicle drivers to record  information about the hours drivers spend operating their vehicles with  the goal of improving operational safety and reducing crashes, injuries,  and fatalities involving trucks or buses. USDA oversees SNAP, which  provides food assistance to low-income individuals and families, and state  agencies that administer the program must collect information from  applicants in order to determine eligibility. HHS collects compliance  information from entities and businesses to ensure that they are  appropriately safeguarding individuals\u2019 health information. While such  information collection activities are important for the fulfillment of agency  missions, they have the potential to impose significant burdens on  individuals, businesses, and other entities.", "The PRA created the Office of Information and Regulatory Affairs (OIRA)  within OMB to review and approve individual ICRs and oversee how  agencies implement the PRA. OIRA provides agencies with instructions  for preparing the supporting statements required for each ICR submitted  for review. OIRA also provides agencies with guidance documents on  specific information collection requirements, including how to conduct pre- testing on new or complex information collections, and how PRA applies  to the use of social media."], "subsections": [{"section_title": "Estimating Information Collection Burden", "paragraphs": ["An integral part of an agency\u2019s ICR submission is the estimated burden  on the public associated with the collection\u2014in terms of both time (i.e.,  burden hours) and costs (i.e., dollars spent). Under the PRA and OMB  regulations, agencies are required to develop a specific, objectively  supported estimate of the burden associated with each collection. OMB  directs agencies to estimate burden hours and costs to respondents for  each information collection as part of the ICR justification in the  supporting statement. According to OMB staff, estimated costs to  respondent should include the wage rate and any applicable employee  fringe benefits, such as paid leave, insurance, and retirement  contributions. The formulas shown in figure 2 illustrate the calculations  generally used by agencies to determine burden hours and costs  associated with the collections.", "ICRs are subject to multiple levels of review to ensure that they comply  with the requirements of the PRA. Programs or components within an  agency (e.g., bureaus) often perform an initial review. In addition, PRA  requires that agencies have an independent review process, whereby  agency staff who are independent of program responsibilities review the  ICRs. During this review, staff evaluate the need for the information  collection and the burden estimate, including whether the information  collection minimizes burden on the public, among other things. Before an  information collection is submitted by an agency to OMB for final review  and approval, the independent reviewer must certify that the collection  meets the standards that are set forth in the PRA. These standards  include ensuring that the collection contains sufficient information to allow  respondents to evaluate the estimated burden.", "Once an ICR has been submitted to OMB, OMB will then review it for  compliance with procedural requirements of the PRA and OMB\u2019s PRA  regulations. OMB can approve an ICR without changes or request  changes or additional information from the agency. OMB can approve a  collection for up to 3 years at one time. If the agency wants to continue to  collect the information after the approval period, it must submit another  ICR to OMB for approval and provide the public with an opportunity to  comment on the continuation of the collection."], "subsections": []}, {"section_title": "Public Comment and Consultation", "paragraphs": ["The PRA requires agencies to solicit public input on their ICRs as a  means of validating their burden estimates. Agencies can engage the  public in a variety of ways such as through a notice of proposed  rulemaking (NPRM), a PRA 60-day notice published in the Federal  Register, or other agency-specific mechanisms. Figure 3 shows the  process that agencies generally use to engage the public, which involves  a PRA 60-day notice published in the Federal Register. In some  circumstances, an NPRM in the Federal Register can be used to solicit  input on an information collection in lieu of the 60-day notice where an  information collection is part of larger rulemaking."], "subsections": []}]}, {"section_title": "Selected Agencies Used Data and Professional Judgment to Estimate Burden, but Limitations Include Inconsistent Cost Estimates and Insufficient Review", "paragraphs": [], "subsections": [{"section_title": "IRS Used Original Data to Estimate Burden, While Other Agencies Used Existing Data and Professional Judgment", "paragraphs": ["When estimating burden hours, USDA, HHS, DOT, and IRS used data  and professional judgment to develop their estimates. The PRA requires  that agencies develop an objectively supported burden hour estimate, but  neither the act, nor OMB regulations, prescribe how agencies should  develop these estimates. Among our four agencies, IRS was the only one  to report gathering original data on public burden through surveys of  individual taxpayers and businesses to help inform the estimates for its  two largest ICRs. Each year, IRS surveys a representative sample of  taxpayers who submitted completed tax returns, according to IRS  officials. The surveys collect information on the actual time and cost that  taxpayers invest in paperwork-related activities.", "For the U.S. Individual and Business Tax Return ICRs\u2014the federal  government\u2019s two largest information collections\u2014IRS used its Taxpayer  Burden Model to combine original survey results with existing taxpayer  data to estimate taxpayer burden in terms of both time and out-of-pocket  costs. The survey results also help IRS forecast its burden hour estimates  each year, taking into account changes in law, regulations, and  technology.", "For the remaining six case study ICRs that we reviewed, USDA, HHS,  and DOT used already existing data and information to estimate at least  one burden hour element (i.e., number of respondents, frequency of  responses, or average burden time per response), such as in the  following examples:", "Historical data. To estimate the number of respondents for the SNAP  ICR, USDA\u2019s Food and Nutrition Service used historical program data  on the number of applicants in previous years.", "Other internal agency data. To estimate the number of respondents,  such as drivers and motor carriers, for the Hours of Service of Drivers  Regulations ICR, DOT\u2019s Federal Motor Carrier Safety Administration  (FMCSA) used data from the 2014 Pocket Guide to Large Truck and  Bus Statistics, according to agency officials. This publication  compiles data from the Federal Highway Administration, the National  Highway Traffic Safety Administration, and FMCSA\u2019s Motor Carrier  Management Information System, including data on the number of  commercial motor vehicle drivers operating in the United States.", "Third-party data. To estimate the frequency of response for some of  the third-party disclosures included in its Prescription Drug Labeling  ICR, HHS\u2019s Food and Drug Administration used data from a survey  conducted by the National Association of Boards of Pharmacy,  according to agency officials. The data included the number of drugs  on the market and the percentage of drugs requiring medication  guides. These data helped Food and Drug Administration staff  estimate how often the pharmaceutical industry might need to comply  with the information collection.", "Research studies. To help estimate the burden of applying for SNAP  benefits, USDA\u2019s Food and Nutrition Service relied, in part, on a  program research study. Specifically, a 2004 Food Stamp Program  Access Study estimated that applicants spend, on average, 2.2 hours  travelling for face-to-face interviews during the application process.  Food and Nutrition Service staff incorporated this information in its  burden hour estimates to determine the average burden time per  response for the SNAP ICR.", "In cases where data did not exist to inform burden hour estimates, such  as for average burden time per response, the selected agencies relied on  their professional judgment to develop estimates, informed in some  instances by internal consultation or public input. For example, HHS\u2019s  Office for Civil Rights (OCR) did not have data for the average burden  time per response for some Health Insurance Portability and  Accountability Act (HIPAA) Privacy, Security, and Breach Notification  Rules information collection activities. The information collection  addresses HIPAA requirements related to the use, disclosure, and  safeguarding of individually identifiable health information. According to  HHS officials, some of the reporting or recordkeeping activities required  by HIPAA may be conducted by security experts. To help estimate the  average burden time for these particular activities, OCR officials stated  that they consulted with internal HHS security experts to determine the time it might take a security expert to complete the applicable information  collection activities.", "When available, public input helped some agencies refine their burden  hour estimates. For example, as part of its Prescription Drug Labeling  information collection, HHS\u2019s Food and Drug Administration had originally  estimated that it would take approximately 5 seconds for a pharmacist to  provide a patient with a medication guide. During the 2001 renewal of the  ICR, however, the agency received a comment from a distributor stating  that such disclosure could take additional time, especially if the  pharmacist did not already receive the medication guides and had to print  them on-site, according to agency officials. After receiving this comment,  agency officials considered that some distributions of medication guides  to patients may take longer than others, and revised its previous estimate  from 5 seconds to 3 minutes."], "subsections": []}, {"section_title": "Agencies Did Not Always Estimate Time Costs nor Estimate Time Costs Consistently", "paragraphs": ["In some cases, the four agencies did not estimate respondent time costs  as a monetized dollar amount in their supporting statement, as required  by OMB. Of the 200 ICRs reviewed (including the 8 largest ICRs), 76  ICRs did not include respondent time cost estimates.", "Specifically, of the 50 ICRs with the largest burden hours at each agency,  we found agencies did not include total annual respondent time costs for  IRS\u2014all 50, including its 2 largest ICRs;", "DOT\u201419, including its 2 largest ICRs;", "HHS\u20145, including its second-largest ICR; and", "USDA\u20142 ICRs.", "OMB requires agencies to include estimated respondent time costs in the  ICR supporting statements. Supporting statements provide the public with  detail information about the burden estimates and underlying  methodology used to calculate them, among other things. However, OMB  reviewed and approved all 76 ICRs we identified that did not include  these estimates.", "Agencies provided a variety of reasons for not including these estimates  in the supporting documents. For example:", "According to IRS officials the model they used to generate burden  estimates for all but their two largest information collection requests is  unable to calculate respondent time costs. They told us that the  model they used to generate burden estimates for their two largest  collections\u2014called the Taxpayer Burden Model\u2014 does calculate  respondent time cost, but the IRS did not include this information in  the supporting statement. According to IRS officials, OMB is aware  of the old model\u2019s limitation and told IRS its resources should be  devoted to transitioning these collections to its Taxpayer Burden  Model. IRS officials said that the agency plans, but has not developed  a timeline, to use the Taxpayer Burden Model on future ICRs and to  phase in use of the new model over a number of years, giving higher  priority to tax forms that affect the most taxpayers.", "DOT officials stated that some respondent time costs were not  included in ICR supporting statements because, based on their  professional judgment, the information collection activities are  incidental to routine business operations and therefore should not be  included in respondent time cost estimates. While OMB\u2019s guidance  states that agencies should not include burden hour estimates for  customary and usual business practices, the guidance also instructs  agencies to estimate respondent time costs for any estimated burden  hours included in the supporting statement. That is, any estimated  burden hours should have a corresponding time cost for carrying out  the information collection activities. DOT\u2019s inclusion of burden hours in  the supporting statement in these cases indicates that the information  collection activities are not incidental to routine business operations,  and that respondent time costs should have been provided based on  OMB\u2019s guidance.", "An HHS official told us that, in general, while costs are not ignored,  they are also not considered high-impact information.", "USDA officials said that it did not include respondent time costs in the  supporting statement in part because an ICR had been merged with  another information collection, but stated the agency would include  these costs in the ICR renewal\u2019s supporting statement.", "Unless OMB takes action to ensure that agencies consistently follow its  guidelines to include respondent time costs, agencies will likely continue  to not meet the requirement and omit this information. The PRA requires  that OMB establish and oversee standards and guidelines by which  agencies are to estimate the burden to comply with a proposed collection  of information. As part of its guidelines, OMB directs agencies to provide  certain standard information in its supporting statements, including  estimated respondent time costs. According to OMB staff, OMB reviews  these supporting statements as part of its ICR review process and has  the option of requesting changes from the agency prior to approving the  ICR. However, OMB staff said that the process is decentralized with  individual OMB desk officers responsible for managing their own review  of ICRs. OMB reviewed and approved all 76 ICRs we identified that did  not include these estimates. OMB officials told us that they will review the  findings in this report to determine what response is needed. Monetized  respondent time cost estimates will be particularly important if agencies  can use reductions in paperwork to offset new regulations under  Executive Order 13771.", "For ICRs with monetized respondent time costs, agencies were  inconsistent in whether they included fringe benefits, such as paid leave,  insurance, and retirement contributions. OMB\u2019s instructions for submitting  ICRs direct agencies to provide respondent time costs, but the  instructions do not specify how to calculate such costs. Of the 119 ICRs  we identified where employees might complete an information collection  activity on behalf an employer, 35 applied fringe benefits to their  respondent time cost estimates and 84 did not, as shown in table 2.", "Table 3 shows that including fringe benefits in respondent time cost  estimates can have a significant effect on the total estimated respondent  time costs for an information collection. Of the two ICRs with the largest  burden hour estimates at USDA, the Mandatory Country of Origin  Labeling of Covered Commodities ICR includes fringe benefits, while the  SNAP ICR does not. The SNAP ICR\u2019s respondent time cost for state  employees would have been $118 million higher if it had applied the  same fringe benefit estimate (33 percent of the wage rate) as the  Mandatory Country of Origin Labeling ICR. While different types of  respondents (e.g., state employees, farmers, or doctors) may not receive  the same percentage of wages as fringe benefits, the exclusion of such  benefits leads to an underestimate of respondent time costs.", "OMB has not provided agencies with any formal, final guidance for  calculating respondent time costs or applying fringe benefits. The PRA  requires the Director of OMB to develop standards and guidelines for  information collections. Additionally, Standards for Internal Control in the  Federal Government states that management should externally  communicate the necessary quality information to external parties to  achieve the entity\u2019s objectives. OMB provided non-binding draft  guidance on reviewing agency information collections in 1999 that states  that any wage rates used to estimate respondent time costs should be  \u201cfully-loaded\u201d to reflect the full cost of labor, including employee fringe  benefits, such as paid leave, insurance, and retirement contributions.  OMB staff told us that OMB continues to believe that using \u201cfully-loaded\u201d  wage rates is important. Without formal, final guidance clearly  communicating how agencies should apply fringe benefits to respondent  time cost estimates, agencies may continue to calculate costs  inconsistently.", "Agencies\u2019 inconsistent application of fringe benefits could contribute to  agencies underestimating the burden costs. Such underestimation could  contribute to inconsistent implementation of Executive Order 13771. As  previously stated, OMB guidance implementing the Executive Order  states that agencies may offset the incremental costs of new regulations  through the repeal or streamlining of mandatory information collection  burdens. HHS officials said that they have considered potential  information collection burden reductions as part of their efforts to comply  with the order. While USDA and IRS officials said that the agencies were  aware of the order, they did not yet have specific plans to reduce  information collection burden for the purposes of the order. Without clear  guidance about how to consistently estimate respondent time costs,  Congress and the administration cannot effectively compare information  collection cost savings for the public."], "subsections": []}, {"section_title": "Agencies\u2019 Independent Review Processes Did Not Detect Errors in Burden and Cost Estimates or Other Discrepancies", "paragraphs": ["While our selected agencies reported having multiple levels of  independent review processes in place as part of the overall process for  preparing ICR burden estimates, we found instances where USDA, HHS,  and DOT did not detect math errors or inconsistencies. We found  multiple calculation errors in the supporting statements at three of the four  selected agencies\u2014USDA, HHS, and DOT\u2014that over- or underestimated  burden hours and costs to varying degrees, sometimes by millions of  hours or hundreds of millions of dollars. We also found inconsistencies  among estimates in Reginfo.gov and supporting statements. Reginfo.gov  provides summary information to the public on information collections,  including information on the estimated time and cost burdens. Supporting  statements provide the public with more detailed information on the  underlying methodology used to estimate burden, among other things.", "The PRA requires that agencies establish a process independent of  program responsibility to review each ICR before submission to OMB for  approval, including a specific, objectively supported estimate of the  burden. Agency officials reported that reviewers assessed the  reasonableness of burden estimates by reviewing calculations, comparing  current estimates to previously approved estimates, or reading the  accompanying narrative in the supporting statement, which contains the  assumptions used in calculating burden hours and costs. However, the  agencies we reviewed did not adequately follow their own review  processes, resulting in estimates that misrepresented the burden hours  and costs of information collection activities, as described in the following  examples.", "Department of Agriculture: We found math errors in the supporting  statement of USDA\u2019s second largest ICR based on estimated burden  hours. Specifically, we found that USDA\u2019s Agricultural Marketing Service  did not follow its stated assumptions in calculating burden hours and  respondent time costs for the Mandatory Country of Origin Labeling ICR,  resulting in an overestimation of hours and an underestimation of costs.  By using the incorrect number of respondents when calculating burden  hours, the Agricultural Marketing Service overestimated the Mandatory  Country of Origin Labeling ICR\u2019s total burden by 171,444 hours.", "In addition, the agency did not consistently apply its stated assumptions  (e.g., about the average burden time per response) in the development of  respondent time cost estimates, resulting in underestimated costs  presented to the public, as shown in table 4. For instance, the ICR  contained two different maintenance recordkeeping costs: one described  in the narrative and another in the summary tables in the supporting  statement. Both underestimated recordkeeping costs. Our review found  that, had the agency\u2019s stated assumptions been consistently applied, the  actual cost estimate would have been approximately $463.2 million, or  $104.5 million higher than the largest maintenance recordkeeping cost  estimate in the supporting statement. According to Agricultural Marketing  Service officials, external pressure and accelerated timelines resulted in a less effective review of the ICR. Agency officials acknowledged that they  did not follow review processes or adequately review the supporting  statement. An official said that the agency will ensure that estimates for  this ICR are corrected in the future.", "Department of Health and Human Services: We found both math  errors in the supporting statements and inconsistencies between the  supporting statements and Reginfo.gov for some of HHS\u2019s 50 largest  IRCs based on estimated burden hours. Specifically, HHS did not detect  calculation errors in the supporting statements in 6 of 50 ICRs (none of  which were the top two case study ICRs for HHS) that we reviewed,  resulting in incorrect burden hour or cost estimates. For example, in a  Centers for Medicare & Medicaid Services (CMS) ICR, we found that the  agency correctly stated its assumptions in the supporting statement but,  due to a math error that was not detected during the review process,  incorrectly calculated the respondent time cost in the second year of the  collection based on these assumptions. Because it did not detect this  error, HHS underestimated respondent time costs by approximately $14.4  million or about 40 percent of the published total respondent time costs in  the second year for that ICR, as shown in table 5.", "In another ICR, published in July 2013, CMS overestimated the public\u2019s  burden by approximately 12.8 million hours. Agency officials attributed  the discrepancy to two significant math errors. Officials said that these  math errors were resolved and the burden hours recalculated in a  subsequent renewal of the information collection in 2017. According to  HHS officials, ICRs go through multiple levels of review before HHS  approves the ICR. Program offices conduct an initial review of ICRs  before passing them on to the Office of the Chief Information Officer  (OCIO), which then conducts a final review of ICRs before final  submission to OMB, including a basic check of the math used in  calculating burden hours.", "Additionally, in 19 of the 50 HHS ICRs we reviewed, including HHS\u2019s  largest ICR and the two CMS examples above, we identified  discrepancies in reported burden hours between the supporting  statements and Reginfo.gov (see table 6). For the public to evaluate the  methodology used to develop the final burden estimate posted on  Reginfo.gov, the two sources need to be consistent. Reasons for such  discrepancies, according to HHS officials, included data entry errors,  estimate changes made in supporting statements that were not reflected  on Reginfo.gov, and calculation errors. We also found 14 instances where  HHS did not include an ICR supporting statement on Reginfo.gov. Based  on our findings, HHS examined the discrepancies in table 6, and in June  2018 reported that all of the issues that we identified had been corrected.  CMS said that in general most of the issues identified can be attributed to  human error due in part to staff shortages and tight ICR submission  timelines. CMS said that it takes the errors very seriously and will continue to work to refine its internal review processes to improve the  quality of its ICR submissions.", "HHS officials attributed some the discrepancies between the burden  estimates found in the supporting statements and the estimates found on  Reginfo.gov to instances when OMB works directly with program offices  within the department on revisions to a burden estimate without involving  OCIO. For example, according to HHS officials, in one instance shown in  table 6, the supporting statement reported an initial estimate of 30,708  burden hours. Later, the estimate was revised based on input that OMB  provided directly to the program office and was reported on Reginfo.gov  as 12,845,827 burden hours. OCIO was not aware that the change had  been made. Officials from HHS OCIO said the office is working to  improve coordination and serve more as an intermediary between OMB  and HHS components.", "Department of Transportation: We found, and DOT officials  acknowledged, a calculation error in the supporting statement for the  Inspection, Repair, and Maintenance ICR, DOT\u2019s second largest ICR  based on estimated burden hours. In the ICR\u2019s supporting statement,  DOT calculated its total annual burden hours by using an average burden  time per response of 170 seconds for one information collection activity.  However, DOT did not include 30 seconds for one of the inspection tasks  that was stated in the calculation\u2019s assumptions found in the supporting  statement. Officials said that this error may have been an inadvertent  miscalculation and identified 200 seconds as the accurate average  burden time per response. As a result, DOT underestimated the ICR\u2019s  total annual burden by approximately 450,000 hours, nearly 4 percent of  the reported total annual burden hours for the ICR (see table 7).", "As part of its review process, DOT uses a checklist for reviewing ICRs,  which includes checking the math for burden hours and costs in  supporting statements. An official acknowledged that, while DOT follows  its review process, the agency missed this calculation error at multiple  steps. The official said that the information collection had been active for  a long period of time and that not detecting the error was not material in  terms of PRA compliance. However, this example illustrates that a small  error of 30 seconds per response can have a large impact on the overall  burden hour and cost estimate. The DOT official said that it will correct  the error in a revised ICR.", "In the examples above, both OMB and agencies reviewed and approved  the ICRs\u2014including some of the largest ICRs at each of the agencies\u2014 but did not detect or address the math errors in the supporting  statements, inconsistencies between published estimates in supporting  statements and Reginfo.gov, or missing supporting statements during the  review process, allowing incorrect burden hour and cost estimates to be  publicly released. The PRA requires OMB to provide directions and  oversee the review and approval of collections of information and the  reduction of the information collection burden. OMB reviews the ICRs to  ensure they are consistent with applicable laws and policies related to  information quality. According to OMB officials, OMB desk officers check  the burden calculations for consistency and reasonableness. The desk  officers also check that the estimates are properly and consistently  calculated. This includes reviewing the burden calculations to ensure that  they are mathematically accurate. When we asked OMB officials about  the ICRs cited in this report where we detected mathematical errors, they  told us that they will review these ICRs to determine what response is  needed.", "Until agencies ensure that their review processes adequately detect  errors and inconsistencies, the agencies cannot ensure that their burden  estimates are reliable, may result in less confidence in agencies\u2019 ability to  accurately compute and report burden and as such, less confidence in  agencies\u2019 ability to effectively manage and minimize the burden they  impose on the public. According to the Standards for Internal Control in  the Federal Government, management should periodically review  policies, procedures, and related control activities for continued relevance  and effectiveness in achieving the entity\u2019s objectives. Therefore, if  agencies\u2019 review processes do not detect errors or inconsistencies in  supporting documents, then the public may have inaccurate or incomplete  information on the burden imposed by an information collection.  Additionally, without reliable burden estimates and complete information,  Congress and the administration cannot ensure that agencies\u2019 efforts to  reduce burden to comply with Executive Order 13771 are effective."], "subsections": []}]}, {"section_title": "Agencies We Reviewed Conducted Varying Levels of Public Consultation and Received Little Input on Burden Estimates", "paragraphs": [], "subsections": [{"section_title": "Agencies Conducted Public Outreach, but Public Notices Received Few Comments and Did Not Always Contain Needed Information to Evaluate Burden Estimates", "paragraphs": ["Agencies met the PRA requirement to post Federal Register notices and  solicit public comments for all 200 information collections that we  reviewed. They generally received few, if any, comments from the public  in response. We found that 161 ICRs solicited comments through 60- day notices. Table 8 shows that while 35 of the 161 ICRs received  comments (including 3 of the top 8 case study ICRs), only 10 received  comments that were related to the burden estimates (including only one  case study ICR), according to the ICR supporting statement and related  documents.", "Based on our review of these 10 comments, 2 comments resulted in  increases to agencies\u2019 burden estimates while another 5 resulted in no  burden estimate change, but allowed the agency to further explain the  basis for its estimates, and provided increased transparency for the  public. For example, as a result of feedback from a trade association, USDA revised its burden hour estimate for a particular component of the  National Organic Program ICR from 1 hour to 10 hours. The trade  association said it would take 10 to 60 hours to develop a label and get it  approved. Because this estimate was not based on a formal survey,  USDA did not use the upper range provided by the commenter but did  acknowledge that it may have underestimated the burden, according to  the ICR supporting statement. In the other example, DOT officials revised  the overall burden for an ICR on drivers\u2019 medical certificates from 9.8  million hours to 10.2 million hours based on a comment that called to their  attention an incorrect assumption about the collection\u2019s frequency. The  agencies also made more transparent the specific sources used to  determine the burden estimates for five of the ICRs in response to public  comments. For example, one comment prompted HHS to provide  additional details on the components of the burden hour estimate for the  ICR and identify the relevant source data.", "Officials at DOT and HHS said that, in some cases, they rely on public  input in response to the 60-day Federal Register notices to validate their  burden estimates, and if they do not receive any comments, they do not  make any changes to the ICRs. For example, according to DOT officials,  FMCSA relies on public comments to suggest revisions to ICRs that are  up for renewal. In cases where no one has submitted any comments on  the burden estimate, DOT officials reported that they assume the burden  hour estimate per respondent is accurate and do not change the  estimate.", "Despite the value of public input, agencies\u2019 Federal Register notices did  not always contain a complete description of the elements that make up  the burden estimates. As a result, the public may not have had enough  information to comment on the reasonableness of the estimates. PRA  and OMB regulations require that agencies solicit comments from the  public both in the Federal Register and through other means, in part to  evaluate the accuracy of the agency\u2019s burden estimate, including the  validity of the methodology and assumptions used to calculate the  burden. Generally, three basic elements of the burden estimate formula in  the Federal Register notices provide the public with sufficient information  to review the burden estimates. As previously stated, these elements are:  (1) the number of respondents, (2) the frequency of response, and (3) the  average burden time per response. However, agencies do not  consistently include all of these elements in the Federal Register notices.", "Figures 4 and 5 show two examples of 60-day Federal Register notices in  which agencies provided varying levels of detail on the burden hour  estimates. In figure 5, USDA has provided burden information in its SNAP  information collection by using tables and a summary that provides the  estimated number of respondents, the frequency of response (i.e.,  number of responses per respondent), and the average burden time per  response. In addition to providing data on these three elements, USDA  grouped burden estimates by activity and type of respondent. This made  it possible for the public to be able to review and comment on the specific  assumptions used to develop the estimated hours per response. In  particular, the notice shows burden data for time spent on the application,  recertification application, reports, and notices for both state agencies and  households.", "Conversely, figure 5 shows an example where IRS has only provided the  estimated total annual burden hours for the ICR without providing any of  the elements used to calculate the estimated burden hours\u2014the  frequency of the information collection, the number of respondents, and  the average burden time per response.", "A member of the public is more likely to be able to meaningfully comment  on the average burden time per response (e.g., 19 minutes for a  household to complete the initial SNAP application, as shown in figure 4)  than an aggregate estimate (e.g., 284,599 total burden hours to complete  a form used to report and summarize income from rents, royalties,  partnerships, and other sources, as shown in figure 5).", "In 9 of the 10 instances in which USDA, HHS, and DOT received  comments related to the burden estimates, the 60-day notices contained  either all of these required elements or sufficient information to be able to  calculate all of these elements. Agencies that do not consistently  include these basic elements of the burden estimate reduce the likelihood  that the public will be able to provide meaningful input to improve the  accuracy of their burden estimates. For the two ICRs that resulted in a  change in the burden estimate, USDA and DOT included detailed  information for the burden time per response in their respective 60-day  notices, which allowed the public to comment on these estimates.", "As shown in table 9, of the 200 ICRs that we reviewed, 25 did not contain  enough information to allow the public to reasonably determine the  frequency of response, number of respondents, or average burden time  per response: 13 at IRS, 11 at DOT, and 1 at HHS. In general, if  agencies do not provide sufficient data for the elements needed to  evaluate burden estimates, they may not benefit from receiving well- informed comments to ensure more reliable estimates, or to provide an  opportunity for greater transparency concerning their rationale for existing  burden estimates.", "Our analysis found that 13 IRS ICRs (none of which were case study  ICRs) did not have enough information on the frequency of the collection  to allow the public to reasonably review the burden estimate and thereby  provide meaningful input. IRS officials said that they did not always  include data on the frequency of the collection because it might cause  confusion for those instances where only a portion of the respondent  population will respond to the collection more than once in a given year.  Instead, IRS officials noted that their current policy is to include the  estimated number of respondents, the estimated time per response, and  the estimated total burden hours in each Federal Register notice for ICRs.", "In early 2017, IRS established a new position to review ICRs and ensure  that the agency\u2019s PRA policies are properly implemented. According to  IRS, this has helped to ensure that IRS includes estimated number of  respondents, the estimated time per response, and the estimated total  burden hours in each Federal Register notice. However, if IRS does not  also report on the frequency of the collection and the frequency cannot be  calculated using the other elements, the public may not be able to fully  evaluate the burden estimate.", "According to a DOT official, in some instances, program officials did not  follow DOT\u2019s prescribed templates for Federal Register notices, which  direct officials to include the number of respondents, the frequency of  response, and burden time per respondent to be able to calculate the  total annual burden hours in each notice. According to the DOT official, in  response to our findings, DOT\u2019s Office of General Counsel is conducting  an education campaign to reinforce the necessity of providing fully  transparent information regarding ICR burden during all stages of the  notice process.", "In addition, DOT did not always include the average burden time per  response in its Federal Register notices, in part because DOT\u2019s templates  do not direct officials to provide this information. A DOT official said that  the templates presume that the individual reading the notice will have  sufficient information to calculate this element. However, we found that  average burden time per response could not reasonably be calculated  using the other information provided in 10 of the notices that we reviewed  in part because one or more other elements of the burden estimate were  missing. Average burden time per response is a key element for the  public to be able to reasonably evaluate the burden. A DOT official said  that DOT plans to update the template based on our findings."], "subsections": []}, {"section_title": "Agencies Did Not Always Consult with the Public beyond Public Notices and Did Not Solicit Input about Burden Estimates", "paragraphs": ["The agencies we reviewed did not always consult with the public on  information collections beyond Federal Register notices, as required by  the PRA and regulations. While the PRA requires consultation on every  ICR, OMB guidance only recommends public consultation in general but  does not direct agencies to consult beyond the publication of the notices.  When they did consult with the public, agencies did not always use these  consultations as an opportunity to explicitly ask about burden hour  estimates. Of the 200 information collections we reviewed, 113  contained information in their supporting statements indicating that the  agencies performed public consultations beyond the Federal Register  notices (see table 10). Only 3 of the 8 case study ICRs that we reviewed  indicated that the agencies performed public consultations beyond the  Federal Register notices.", "In the 50 ICRs we reviewed, DOT provided information about public  consultation in about one-quarter of its ICR supporting statements. A  DOT official stated that DOT generally conducts outreach through the  rulemaking process through discussions with stakeholders about the  activities and fundamentals of the rule. Through this outreach process,  rather than speaking explicitly about estimated burden hours, DOT and  stakeholders discuss what the regulations require and whether those  requirements are burdensome. According to the official, stakeholders will  tell OMB if the burden estimate is incorrect. But DOT generally does not  conduct additional outreach about burden estimates during ICR renewals,  which occur at least every 3 years. HHS also provided information about  public consultation in about one-third of its ICRs.", "Agencies\u2019 public consultation beyond the publication of Federal Register  notices include federal advisory committee meetings, board meetings,  webinars, and periodic stakeholder meetings. In addition, the outreach  targeted a wide range of stakeholders, including associations, individuals  subject to the information collection, and industry representatives.", "OMB\u2019s guidance directs agencies to include descriptions in ICR  supporting statements of efforts to consult with the public about  information collection burden. However, only 6 of these 113 ICR  supporting statements\u20144 at USDA and 2 at DOT\u2014indicated that public  outreach was related to the burden hour estimates, despite OMB\u2019s  guidance. Agencies generally did not use public consultation beyond the  publication of Federal Register notices to seek input on burden estimates.  For example, USDA officials said that the Agricultural Marketing Service  engages industry on a regular basis through meetings and seminars, but  that it does not explicitly ask for feedback on the ICR burden hour or cost  estimates and assume that industry representatives will raise any existing  issues with the ICRs at these meetings.", "At HHS, Office for Civil Rights (OCR) officials stated that there are  instances where they receive feedback during conferences or through  communications initiated by the public or members of Congress.  However, OCR officials let people bring up the subject of the accuracy of  OCR\u2019s burden hour estimates on their own. At DOT, for five of the six  Federal Railroad Administration ICRs we reviewed that involved  consultation with the Railroad Safety Advisory Committee, the supporting  statements do not show evidence of discussions of the ICRs\u2019 burden  estimates during committee meetings, and the agency did not reference  any comments on these estimates or summarize them in the supporting  statements. At IRS, 40 of the 43 IRS ICR supporting statements that  identified public consultation specifically highlighted periodic meetings to  discuss tax laws and tax forms with representatives of professional  associations in the fields of law and accounting. IRS officials said that  they do not specifically raise the issue of burden hour estimates during  these meetings, but only ask stakeholders for general comments.", "The lack of public consultation beyond Federal Register notices is due, in  part, to a lack of guidance from OMB. In 2005, we recommended that  OMB alter its current guidance to all federal agencies to direct agencies  to consult with potential respondents beyond the publication of Federal  Register notices. OMB disagreed with this recommendation, stating that  it interprets publication in the Federal Register as the principal means of  agency consultation with the public, with PRA notices on forms providing  an opportunity for further public input. OMB staff told us in January 2018  that they still hold this view. Specifically, OMB staff said that additional  consulting should occur for those ICRs where important information may  be missed by the notice and comment period. In a June 2018  conversation, OMB staff acknowledged that public consultation could be  particularly beneficial the first time that an ICR is renewed after the initial  approval. At that point, the public will have had its first experiences  responding to the information collection, which can inform its feedback to  agencies. However, given the different types of changes that can occur  over time that could affect burden estimates\u2014such as changes in  technology, the economy, and the original source data used to generate  burden estimates\u2014we continue to believe that it is important to actively  consult with the public on each renewal, particularly given the low level of  response that agencies receive in response to Federal Register notices  for ICR renewals.", "In our 2005 report, agencies also expressed concerns that consultation  for every ICR would not be a good use of agency resources. Officials  stated that the greatest opportunity is at the rulemaking stage. However,  as previously discussed, agencies have existing public outreach efforts  whose broader use would not require significant additional time and  resources. Without leveraging opportunities to engage in direct public  consultation with the public for every ICR, agencies may miss  opportunities to obtain additional comments on ICRs, which some  agencies stated they rely on to check the accuracy of their estimates and  in two cases have resulted in significant revisions. Further, emphasizing  those elements of the burden estimate where quality data are limited and  stakeholder experiences are most relevant (e.g., the time per response)  could help agencies focus outreach on the most pertinent information.", "We maintain that the PRA requirement regarding public consultation in  addition to the 60-day Federal Register notice is clear: both requirements  are introduced together, with no distinction between them: agencies shall  \u201cprovide 60-day notice in the Federal Register, and otherwise consult with  members of the public and affected agencies concerning each proposed  collection.\u201d Based on our review of the four agencies, we believe that  such consultation can be completed in an efficient and effective  consultation manner using many of the outreach mechanisms currently in  place. However, given OMB\u2019s continued disagreement with our 2005  recommendation, congressional action may be needed to clarify the  language in the PRA to more explicitly require federal agencies to consult  with potential respondents on each information collection beyond the  publication of Federal Register notices."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["One of the PRA\u2019s key requirements is for agencies to produce estimates  of the burden that information collections will impose on the public. This  information is essential for agencies to appropriately balance the burden  of these information collections with their public benefit and for properly  measuring progress toward applicable burden reduction goals. The PRA  provides two mechanisms to help ensure the quality of these estimates: a  multi-layered independent review process and mandatory public  consultation requirements. However, the errors, omissions, and other  discrepancies that we found in agencies\u2019 ICRs indicate these  mechanisms are not operating as effectively as they could be.", "Independent review processes are only able to ensure an accurate and  reliable estimate when agencies and OMB use them consistently to  detect errors and correct them. However, we found that USDA, HHS, and  DOT failed to adequately apply their own review processes, resulting  errors and discrepancies between the supporting statement and  Reginfo.gov. Similarly, OMB approved ICRs containing mathematical  errors in the supporting statements and inconsistencies between the  supporting statements and Reginfo.gov. If the agencies\u2019 and OMB\u2019s  review processes do not detect mathematical errors and inconsistencies,  then Congress and the public may have inaccurate or incomplete  information on the estimated burden imposed by an information collection  may result in less confidence in agencies\u2019 abilities to accurately compute  and report the burden and as such, less confidence in agencies\u2019 ability to  effectively manage and minimize the burden they impose on the public.", "As part of its review process, OMB also reviews ICRs for compliance with  PRA and applicable regulations, and policies. However, OMB approved  numerous ICRs without the required respondent time cost information. If  OMB does not take action to ensure that agencies consistently follow its  guidance to include respondent time costs, agencies will likely continue to  and omit this information. In addition, OMB\u2019s current formal guidance  does not offer specific instructions on when and how to include fringe  benefits like paid leave and retirement contributions in respondent time  costs. Without clear guidance, agencies may continue to inconsistently  estimate respondent time costs, which could potentially result in  underestimated time costs at some agencies as well as inconsistent  implementation of efforts to reduce regulatory burden.", "Public input, when available, often resulted in improvements in the quality  of agencies\u2019 burden estimates. However, the four agencies are missing  opportunities to improve the quality of their estimates by not better  leveraging existing public outreach efforts. While Federal Register notices  provide the public with an opportunity to comment on the burden  estimates, we found that DOT and IRS did not always provide sufficient  information in their notices on the methodologies used to calculate the  burden to allow the public to meaningfully comment on agencies\u2019 burden  estimates.", "At the same time, given the few comments that agencies receive in  response to these notices, it is clear that Federal Register notices alone  are not sufficient. We found that agencies are already actively engaging  with stakeholders through a number of means, including federal advisory  committee meetings, periodic stakeholder meetings, and webinars, but  are not fully using these opportunities to explicitly seek input on their  burden estimates. Emphasizing those elements of the burden estimate  (e.g., average time per response) during these events could help the  agencies target their outreach on the most pertinent information.", "IRS uses a methodically rigorous process to develop the initial burden  estimates for the federal government\u2019s two largest information  collections\u2014U.S. Individual and Business Tax Return ICRs. This process  includes gathering detailed information from the public on the time and  money spent on tax preparation through its taxpayer surveys. IRS plans  to transition additional information collections to this more rigorous  approach in the coming years. This could improve the quality of burden  hour estimates and provide the cost estimates that IRS is currently  lacking for other collections. IRS could also do more do consult with the  public after the initial burden estimate has been developed. IRS reported  that it already periodically meets with representatives from professional  associations to discuss tax laws and tax forms. If IRS used these  opportunities to explicitly seek input on the initial burden estimate, the  agency could both obtain valuable feedback on burden estimates and  comply with the consultation requirements in PRA.", "OMB could help ensure that agencies more consistently obtain valuable  public input on each of their ICRs by providing guidance directing  agencies to consult with the public beyond the Federal Register notices  on every ICR, as required in the PRA and as we previously  recommended. However, while we consider the PRA requirement  regarding public consultation in addition to the 60-day Federal Register  notice for each ICR to be clear, OMB continues to believe that additional  consulting should occur for those ICRs where important information may  be missed by the public notice and comment period. We maintain that  agencies should comply with the additional consultation requirement in  the PRA. We acknowledge OMB\u2019s concerns that public consultation not  overly be burdensome to agencies. However, we found that the agencies  we reviewed have already identified efficient and effective mechanisms  for gathering input from the public, such as through periodic stakeholder  meetings and webinars. Given that OMB continues to disagree with our  2005 recommendation, congressional action to clarify the legal  requirement may be required."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration:  Congress should consider amending the Paperwork Reduction Act to  more explicitly require federal agencies to consult with potential  respondents on each information collection beyond the publication of  Federal Register notices using efficient and effective consultation  methods. (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 11 recommendations, including 2 to OMB; 2  each to the Departments of Agriculture and Health and Human Services;  3 to the Department of Transportation; and 2 to the Internal Revenue  Service.", "The Director of OMB should ensure the consistent application of the  requirement for respondent time costs, including clarifying instructions for  when and how to include fringe benefits. (Recommendation 1)", "The Director of OMB should review the policies, procedures, and related  control activities to ensure that the agency\u2019s Paperwork Reduction Act  review process is operating effectively. (Recommendation 2)", "The Secretary of Agriculture should review the policies, procedures, and  related control activities to ensure that the agency\u2019s Paperwork Reduction  Act review process is operating effectively. (Recommendation 3)", "The Secretary of Agriculture should leverage existing consultation with  stakeholders and the public to explicitly seek input on the burden imposed  by information collections. (Recommendation 4)", "The Secretary of Health and Human Services should review the policies,  procedures, and related control activities to ensure that the agency\u2019s  Paperwork Reduction Act review process is operating effectively.  (Recommendation 5)", "The Secretary of Health and Human Services should leverage existing  consultation with stakeholders and the public to explicitly seek input on  the estimated burden imposed by information collections.  (Recommendation 6)", "The Secretary of Transportation should review the policies, procedures,  and related control activities to ensure that the agency\u2019s Paperwork  Reduction Act review process is operating effectively. (Recommendation  7)", "The Secretary of Transportation should leverage existing consultation  with stakeholders and the public to explicitly seek input on the estimated  burden imposed by information collections. (Recommendation 8)", "The Secretary of Transportation should include enough information in  Federal Register notices to allow the public to reasonably calculate or  determine the number of respondents, the frequency of response, and the  average burden time per response for each information collection activity.  (Recommendation 9)", "The Commissioner of Internal Revenue should leverage existing  consultation with stakeholders and the public to explicitly seek input on  the estimated burden imposed by information collections.  (Recommendation 10)", "The Commissioner of Internal Revenue should include enough  information in Federal Register notices to allow the public to reasonably  calculate or determine the number of respondents, the frequency of  response, and the average burden time per response for each information  collection activity. (Recommendation 11)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Director of OMB; the Secretaries  of USDA, HHS, DOT; and the Commissioner of the IRS for comment,  respectively. OMB did not provide written comments, and OMB staff  informed us that OMB neither agreed nor disagreed with our  recommendations to the agency. The Audit Liaison from the USDA\u2019s  Office of the Chief Information Officer informed us in an email that USDA  concurs with our recommendations to the agency. HHS, DOT, and IRS  provided written comments, which we have reprinted in appendixes II, III  and IV.", "In its written comments, HHS and DOT concurred with our  recommendations to the agencies. HHS said it intends to continually  review PRA processes and procedures as well as closely monitor their  implementation to further reduce human error. DOT stated that the  agency has taken action to improve its PRA program, and reported that it  issued a new Federal Register notice for its Inspection, Repair, and  Maintenance ICR to address mathematical errors identified in this  report.", "In its written comments, IRS also concurred with our recommendations to  the agency. However, IRS stated that its existing PRA policies and  procedures sufficiently address the PRA requirements. In response to our  recommendation on leveraging existing consultation mechanisms to  obtain public comments on ICR burdens, IRS noted its public participation  process includes consultation with stakeholders. Specifically, IRS said  that, as resources allow, it partners with industry and stakeholder groups  to consult with taxpayers on tax product development and assess the  burden experience in understanding the tax forms and complying with  requirements to complete them.", "However, we believe that IRS could better leverage this stakeholder  consultation. Our analysis of supporting statements and interviews with  IRS officials indicates that IRS did not explicitly seek input on burden  estimates for its largest collections during these consultations. Soliciting  input through the published forms themselves provides additional  opportunities to obtain valuable stakeholder input, but it is not a substitute  for actively reaching out to stakeholders for input on its burden estimates  prior to approval, which could be readily accomplished through the  mechanisms IRS already has in place for stakeholder consultation.", "In response to our recommendation on providing the public with sufficient  information in its public notices to allow the public to evaluate an ICR\u2019s  burden, IRS acknowledged that public notices issued before February  2017 may not have included all the elements needed by the public to be  able to evaluate the burden estimates (number of respondents, frequency  of response, and average burden time per response). However,  according to IRS, the agency has since implemented a procedure to  ensure that these elements are in the ICRs and that recent ICR public  notices contain all three elements. If effectively implemented, these new  procedures could help ensure that the public has the information it needs  to review and provide input to on the specific assumptions used to  develop the burden estimates.", "The public notices we reviewed for this report were all published prior to  February 2017. When we spoke with IRS officials in February 2018, they  said that their current policy is to include the estimated number of  respondents, the estimated time per response, and the estimated total  burden hours in each Federal Register notice for ICRs. IRS officials  added that they did not always include data on the frequency of the  collection because it might cause confusion for those instances where  only a portion of the respondent population will respond to the collection  more than once in a given year. Although IRS stated in its written  comments that it had implemented new procedures to include all the  necessary elements, we found some ICRs issued after February 2017  that do not contain the necessary elements, including frequency, to allow  the public to evaluate the specific assumptions used to develop the  burden estimates. We will follow-up with IRS to ensure that new ICR  procedures fully address the issues we identified.", "OMB, USDA, HHS, and DOT also provided technical comments, which  we incorporated as appropriate throughout our report.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Director of the Office of Management and  Budget; the Secretaries of the Departments of Agriculture, Health and  Human Services, and Transportation; and the Commissioner of the  Internal Revenue Service, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff has any questions about this report, please contact  Tranchau (Kris) T. Nguyen at (202) 512-2660 or Nguyentt@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of our report. Key contributors to  this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how agencies estimate both the burden hours  and costs of their information collections, and any limitations of their  approaches, and (2) the extent to which agencies consult with and  receive comments from the public on the collections\u2019 estimated burden.", "To address both of these objectives, we reviewed Office of Management  and Budget (OMB) data on federal information collection requests (ICR)  available on Reginfo.gov as of April 7, 2017. To obtain more information  about the ICR process at the agency level, we selected four agencies to  serve as case studies. We identified the four agencies with the largest  number of total annual estimated burden hours across the federal  government based on the Reginfo.gov data. The selected agencies are  the Internal Revenue Service (IRS)\u2014which alone accounts for  approximately 70 percent of the federal government\u2019s total information  collection burden hours\u2014and the Departments of Health and Human  Services (HHS), Agriculture (USDA), and Transportation (DOT). HHS  represents 12 percent of the total burden hours in the federal  government, while USDA and DOT each represent 2 percent of the  federal information collections burden. The four selected agencies  represent more than 85 percent of the total estimated burden hours  across the federal government.", "For each of the four agencies, we selected the 50 largest ICRs based on  total annual burden hours, for a total of 200 ICRs, to provide us with  information about the agencies\u2019 efforts to consult with the public and their  approach for estimating burden hours, respondent time costs, and  resource costs related to each ICR. As part of this analysis, we reviewed  information about (1) burden hour and (2) cost estimates and public  consultation from Reginfo.gov and the ICR supporting statement.", "To obtain a more detailed understanding of the methodologies, policies,  and public outreach efforts related to estimating and reviewing the burden  associated with each ICR, we selected the two ICRs with the largest  burden hour estimates from each selected agency as case studies. The  eight case study ICRs, shown in table 11, represent the majority of  information collection burden at each agency and roughly 59 percent of  the federal government\u2019s total burden hours. We reviewed the supporting  statements for each case study ICR to determine how the agencies  calculated burden hours, respondent time costs, and respondent resource  costs.", "We reviewed the Federal Register notices issued by the agencies to  solicit comments from the general public on these ICRs, as well as the  comments received in response to the 60-day notices. We reviewed the  Paperwork Reduction Act and OMB guidance issued to assist agencies in  developing and reviewing their information collections. We interviewed  knowledgeable officials at the four selected agencies to obtain information  on the methodologies used to estimate burden time and costs, the  processes and policies for ICR review and submission, and public  participation in providing comments about the burden estimates. In  addition, we interviewed OMB staff to obtain information about its role in  reviewing ICRs submitted by agencies, as well as its relationship with the  selected agencies.", "To assess the reliability of Reginfo.gov data on burden hours and  annualized costs for each ICR, we interviewed OMB staff and reviewed  documentation of the Reginfo.gov website and the Regulatory Information  Service Center/Office of Information and Regulatory Affairs Consolidated  Information System (ROCIS), which is the system that agencies use to  track information collection requests and that underlies information  provided on Reginfo.gov. We compared the data from Reginfo.gov with  the data found in the supporting statements. We interviewed agency  officials and OMB staff about the discrepancies between these two  information sources. We found that the Reginfo.gov data were sufficiently  reliable for the purpose of selecting the case study agencies and ICRs  subject to our review.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the above contact, Thomas J. McCabe (Assistant Director)  and Joseph L. Santiago (Analyst-in-Charge) supervised the development  of this report. Michael Bechetti, Tim Bober, Alyssia Borsella, Jaqueline  Chapin, Steven Flint, Tim Guinane, Heather Krause, Ying Long, Sharon  Miller, Ed Nannenhorn, Kayla Robinson, Robert Robinson, Cindy  Saunders, Wesley Sholtes, and Chris Zakroff made major contributions to  this report. Dawn Bidne, Jeffrey DeMarco, Jessica Nierenberg, and Laurel  Plume verified the contents of this report."], "subsections": []}]}], "fastfact": ["Each year, nearly every adult and business provides some form of information to a federal agency, whether via tax forms or benefits applications. Agencies estimate the time and resources it takes to provide this information to help manage the paperwork burden placed on the public. How do they ensure their estimates are accurate?", "The law requires agencies to solicit public input on information collections to validate their estimates. While agencies often consulted the public via stakeholder and board meetings, they often did not explicitly ask for input on estimates. We recommended that they better leverage public outreach to improve estimates.", "(This figure was updated to include a source line.)"]}
{"id": "GAO-19-160", "url": "https://www.gao.gov/products/GAO-19-160", "title": "Military Personnel: Strategy Needed to Improve Retention of Experienced Air Force Aircraft Maintainers", "published_date": "2019-02-05T00:00:00", "released_date": "2019-02-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Air Force aircraft maintainers are responsible for ensuring that the Air Force's aircraft are operationally ready and safe for its aviators\u2014duties critical to successfully executing its national security mission. With more than 100,000 maintainers across the Air Force's active and reserve components, according to Air Force officials, aircraft maintenance is the Air Force's largest enlisted career field\u2014accounting for about a quarter of its active duty enlisted personnel.", "The conference report accompanying the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the adequacy of the Air Force's aircraft maintainer workforce. This report assesses the extent to which, from fiscal years 2010 through 2017, the Air Force (1) had aircraft maintainer staffing gaps, (2) experienced attrition of maintainers and took steps to help retain maintainers, and (3) met its annual technical school completion rate goals for maintainers.", "GAO analyzed aircraft maintainer staffing levels, loss and reenlistment rates, and technical school completion rates from fiscal years 2010-2017, the most recent data available; conducted five non-generalizable discussion groups with maintainers; and interviewed aviation industry, Department of Defense, and Air Force officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Air Force has reduced overall aircraft maintainer staffing gaps, but continues to have a gap of experienced maintainers. The Air Force reduced the overall gap between actual maintainer staffing levels and authorized levels from 4,016 maintainers (out of 66,439 authorized active component positions) in fiscal year 2015, to 745 in fiscal year 2017 (out of 66,559 positions). However, in 7 of the last 8 fiscal years, the Air Force had staffing gaps of experienced maintainers\u2014those who are most qualified to meet mission needs and are needed to train new maintainers. Maintainers complete technical school as 3-levels and initially lack the experience and proficiency needed to meet mission needs. Following years of on-the-job training, among other things, maintainers upgrade to the 5- and 7-levels. In fiscal year 2017, the Air Force had gaps of more than 2,000 5-level and 400 7-level maintainers, and a surplus of over 1,700 3-levels. Air Force officials anticipate that staffing gaps will continue off and on through fiscal year 2023.", "Over the past 8 fiscal years, the Air Force has increasingly lost experienced aircraft maintainers, and it does not have goals and a strategy to help retain maintainers. While overall maintainer loss rates have remained generally stable, loss rates of 5-levels increased from 9 percent in fiscal year 2010 to 12 percent in fiscal years 2016 and 2017 (see figure). Air Force officials expect 7-level loss rates to also increase. Air Force officials stated that they need to retain more maintainers to help address experience gaps, but the Air Force has not developed annual retention goals for maintainers. In addition, while the Air Force has increased its use of retention bonuses since fiscal year 2015, according to Air Force officials, it does not have a strategy to improve retention. Without goals to measure progress and a retention strategy to guide efforts, the Air Force could face further challenges in managing its maintenance workforce, including ensuring there are enough experienced maintainers to meet mission needs.", "The Air Force consistently met technical school completion rate goals for aircraft maintainers from fiscal years 2010 through 2017. In fiscal year 2017, about 9,600 active component maintainers completed technical school, an increase from about 5,700 in fiscal year 2015. This increase in completions has helped to address overall staffing gaps, but cannot immediately resolve experience imbalances, due to the time and training needed to reach the 5- and 7- levels."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Air Force develop annual retention goals and a retention strategy for aircraft maintainers. The Air Force concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Air Force aircraft maintainers are responsible for ensuring that the Air  Force\u2019s aircraft are operationally ready and safe for its aviators\u2014duties  that are critical to ensuring that the department is able to successfully  execute its national security mission. Maintainers at the squadron-level  perform a wide range of duties, including conducting inspections before  and after flights, diagnosing and repairing system malfunctions, and  loading and unloading munitions and explosives on aircraft, among many  others. With more than 100,000 maintainers across the Air Force\u2019s active  and reserve components, according to Air Force officials, aircraft  maintenance is the Air Force\u2019s largest enlisted career field\u2014accounting  for about a quarter of its active duty enlisted personnel.", "In September 2016, we reported that the Air Force cited aircraft  maintainer staffing gaps\u2014actual staffing levels that are lower than  authorized levels\u2014as a factor limiting its ability to produce the number of  aircraft required to meet certain annual training requirements and that,  while the Air Force was taking steps to address these gaps, it could take  several years to improve aircraft availability rates. The conference report  accompanying the National Defense Authorization Act for Fiscal Year  2018 included a provision for us to review the adequacy of the Air Force\u2019s  aircraft maintainer workforce. This report addresses, from fiscal years  2010 through 2017, the extent to which the Air Force: (1) had aircraft  maintainer staffing gaps, (2) experienced attrition of aircraft maintainers,  including any effects of competition with the commercial aviation industry,  and took steps to help retain maintainers, and (3) met its annual technical  school completion rate goals for aircraft maintainers.", "For our first objective, we compared staffing levels authorized by the Air  Force for enlisted aircraft maintainers\u2014for the active and reserve  components\u2014with the actual number of maintainers available to staff  those positions for fiscal years 2010 through 2017. We selected this  timeframe to capture staffing levels before and after the Air Force\u2019s fiscal  year 2014 reduction in end strength, and fiscal year 2017 was the most  recent year for which complete data were available at the time of our  review. Specifically, we analyzed the data to identify overall maintainer  staffing gaps as well as any gaps by maintenance specialty and skill level.  In addition, we compared maintainer personnel requirements to  authorized staffing levels\u2014the number of those requirements that were  funded. To assess the reliability of the Air Force\u2019s requirements,  authorized staffing levels, and actual staffing levels, we reviewed related  documentation; assessed the data for errors, omissions, and  inconsistencies; and interviewed officials. We determined that the data  were sufficiently reliable to describe the Air Force\u2019s aircraft maintainer  staffing levels and associated gaps from fiscal years 2010 through 2017.  Additionally, we conducted interviews with relevant Air Force, Air National  Guard, and Air Force Reserve Command officials to identify reasons for  staffing challenges and actions the Air Force has taken to address them.", "For our second objective, we calculated maintainer loss rates\u2014the  number of maintainers who leave the career field or the Air Force within  the fiscal year over the number of maintainers at the start of the fiscal  year\u2014for the active and reserve components from fiscal years 2010  through 2017. We also analyzed overall aircraft maintainer reenlistment  rates\u2014the number of maintainers reenlisting each fiscal year over the  number of maintainers eligible to reenlist\u2014for the active component for  fiscal years 2010 through 2017. To assess the reliability of the Air Force\u2019s  maintainer loss and reenlistment rate data, we reviewed related  documentation; assessed the data for errors, omissions, and  inconsistencies; and interviewed officials. We determined that the data  were sufficiently reliable to describe both the Air Force\u2019s aircraft  maintainer loss and reenlistment rates from fiscal years 2010 through  2017. In addition, we reviewed the Air Force\u2019s 2015 and 2017 aircraft  maintainer retention survey analyses and conducted five discussion  groups with a non-generalizable sample of aircraft maintainers to obtain  their views on factors affecting maintainer retention, on-the-job training  capacity, and commercial aviation industry opportunities, among other  things.", "We also reviewed the state of the commercial labor market for aircraft  mechanics and aerospace engineers. We analyzed data from the  Department of Labor\u2019s Bureau of Labor Statistics\u2019 Current Population  Survey on the unemployment rate, employment, and median weekly  earnings from 2012 through 2017, in accordance with economic literature.  We chose this period because we previously reported on the data from  2000 through 2012. We reviewed documentation about the Bureau of  Labor Statistics data and the systems that produced them, as well as our  prior report, and determined the data were sufficiently reliable for the  purposes of our indicator analysis. In addition, we conducted interviews  with four commercial aviation industry stakeholders regarding any  imbalances in aircraft mechanic demand and supply. We selected three  of these organizations based on our previous work and one based on a  recommendation from one of the three organizations. To determine what  is known about the effects of the commercial aviation industry on the Air  Force\u2019s aircraft maintainer workforce, we conducted a literature search  and review. We chose fiscal year 2010 as a starting point to match the  timeframe for which we analyzed Air Force maintainer loss rates. We  identified and screened 49 studies using a multi-step process to gauge  their relevance and evaluate their methodology. We identified 1 study that  had reliable and relevant information and we discuss the associated  findings of this study below.", "To assess the extent to which the Air Force has taken steps to help retain  maintainers, we analyzed the number and total costs of selective  retention bonuses (retention bonuses) that the Air Force awarded by  maintenance specialty and skill level from fiscal years 2010 through 2017  for the active and reserve components. To assess the reliability of the Air  Force\u2019s retention bonus data, we reviewed related documentation;  assessed the data for errors, omissions, and inconsistencies; and  interviewed officials. We determined that the data were sufficiently  reliable to describe the number and total costs of the Air Force\u2019s aircraft  maintainer retention bonuses from fiscal years 2010 through 2017. In  addition, we conducted interviews with relevant Air Force officials  regarding retention goals and monetary and non-monetary incentives to  improve maintainer retention. We compared this information to Standards  for Internal Control in the Federal Government related to monitoring  activities and key principles of strategic workforce planning that we have  identified in our prior work, such as developing strategies that are tailored  to address gaps in numbers of people, skills, and competencies.", "For our third objective, we calculated technical school completion rates\u2014 the number of aircraft maintainers completing technical school compared  to the number of programmed or expected completions\u2014for the active  component for fiscal years 2010 through 2017. We compared those  completion rates to the Air Education and Training Command (AETC)  established completion rate goal for the active component. For the Air  National Guard and Air Force Reserve Command, we compared  programmed completions to actual completions to determine their ability  to meet training needs. To assess the reliability of the technical school  completion data, we assessed the data for errors, omissions, and  inconsistencies, and interviewed officials. We determined that the data  were sufficiently reliable to describe the Air Force\u2019s aircraft maintainer  technical school completion rates from fiscal years 2010 through 2017,  rounded to the nearest hundreds up to fiscal year 2013, and more- precisely from fiscal years 2014 and beyond. In addition, we observed  maintainer technical school training at Sheppard Air Force Base in Texas  and Eglin Air Force Base in Florida. We selected these locations because  they are two of the primary locations where aircraft maintainer technical  school training occurs. Finally, we conducted interviews with technical  school instructors about the training process, as well as AETC, Air  National Guard, and Air Force Reserve Command officials about training  challenges and programmed training needs. Our scope and methodology  is described in detail in appendix I.", "We conducted this performance audit from April 2018 to February 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Air Force Aircraft Maintenance Specialties", "paragraphs": ["Air Force aircraft maintainers are assigned to a specific maintenance  specialty and, in some cases, also to a specific aircraft on which they are  qualified to perform maintenance. As of April 2018, the Air Force had 37  enlisted maintenance specialties, each designated by an Air Force  Specialty Code. See table 1 for examples of various Air Force  maintenance specialties and examples of aircraft specific to those  specialties, if applicable."], "subsections": []}, {"section_title": "Maintainer Training Process and Skill Level Advancement", "paragraphs": ["According to officials, following basic training, most airmen assigned to  the aircraft maintenance career field attend some portion of technical  school at Sheppard Air Force Base in Texas. Depending on the  maintenance specialty, some maintainers may continue their technical  training at a second location. For example, maintainers specializing on  the F-35 complete additional training at Eglin Air Force Base in Florida  after completing initial courses at Sheppard Air Force Base. Maintainers  spend anywhere from 23 to 133 academic days in technical school  learning about aircraft maintenance fundamentals and their specific  maintenance specialties through a mix of classroom instruction and  hands-on training. Hands-on training is conducted on both partially- functioning components of aircraft\u2014called \u201ctrainers\u201d\u2014that replicate tasks  on working aircraft, and on ground instructional training aircraft. Figure 1  shows various training equipment used by maintainers during technical  school.", "Air Force aircraft maintainers complete technical school as 3-levels, or  apprentices. Maintainers are eligible to advance to the 5-level  (journeyman) after completing additional coursework and a minimum of  12 months of on-the-job training. According to Air Force data, depending  on the maintenance specialty, it takes an average of 1 to 2 years to  advance to the 5-level. Maintainers are eligible to enter upgrade training  to advance to the 7-level after being selected for the rank of Staff  Sergeant. According to Air Force officials, the average time in service for  promotion selection is 4.4 years. The 7-level is achieved by completing  additional coursework, and completing a minimum of 12 months of on- the-job training. Depending on the maintenance specialty, it takes  maintainers an average of 1 to 2 years after entering upgrade training to  advance to the 7-level. Figure 2 shows an overview of the Air Force\u2019s  aircraft maintainer training process and skill-level advancement."], "subsections": []}, {"section_title": "Air Force Process for Determining Maintainer Positions", "paragraphs": ["Department of Defense (DOD) Directive 1100.4 states that staffing  requirements are driven by workload and shall be established at the  minimum levels necessary to accomplish mission and performance  objectives. In addition, assigned missions shall be accomplished using  the least costly mix of personnel (military, civilian, and contract)  consistent with military requirements and other needs of DOD as  prescribed in Title 10, United States Code. Air Force officials reported  that they fill their requirements based on the number of those  requirements that are funded\u2014called authorized staffing levels\u2014and the  number of trained and qualified personnel available to be staffed to those  positions. In this report, we refer to the number of maintainers available to  fill authorized staffing levels as actual staffing levels.", "The Air Force uses the Logistics Composite Model to determine  maintainer staffing requirements. The model is a statistical simulation  that estimates monthly labor-hours and personnel required to accomplish  direct maintenance tasks. According to an Air Force official, locations are  staffed according to the worldwide average for each particular  maintenance specialty. For example, if the crew chief maintenance  specialty worldwide is staffed at 88 percent, the Air Force would staff  each overseas Major Command at 88 percent and distribute those  resources to ensure the bases are staffed at that worldwide average,  followed by domestic locations. An Air Force official stated that there are  a number of reasons why a particular location may be staffed below or  over the worldwide average, such as early releases from tours."], "subsections": []}, {"section_title": "Commercial Aviation Industry and Airframe and Power Plant Certificates", "paragraphs": ["Maintainers in the commercial aviation industry are commonly employed  by commercial air carriers, corporate flight departments, repair stations,  or manufacturers of aircraft or aircraft components. Aircraft mechanics  inspect, service, and repair aircraft bodies (airframe) and engines (power  plant). Aircraft mechanics can earn a mechanic certificate from the  Federal Aviation Administration with an airframe rating, power plant  rating, or combined airframe and power plant rating, and are referred to  as certificated mechanics. According to Federal Aviation Administration  data, almost all certificated mechanics hold airframe and power plant  ratings. Certification is not necessary to work as an aircraft mechanic;  however, without it, a mechanic cannot approve an aircraft for return to  service and must be supervised by a certificated mechanic. Certificated  mechanics that hold airframe and power plant ratings generally earn a  higher wage and are more desirable to employers than mechanics who  are not certificated, according to the Bureau of Labor Statistics.", "For an applicant to be authorized to take the mechanics examination for  the combined airframe and power plant rating, the applicant must either  (1) complete a Federal Aviation Administration-certificated aviation  maintenance technician school, and demonstrate and document relevant  airframe and power plant work experience gained through on-the-job  training, or (2) demonstrate and document work experience or some  combination of work experience and education gained through the military  working with airframes and engines.", "Since 2002, the Community College of the Air Force has administered the  Federal Aviation Administration-approved Joint Services Aviation  Maintenance Technician Certification Council (the Joint Services Council)  program that, upon completion, confers a certificate of eligibility\u2014 equivalent to a training program diploma\u2014to take the airframe and power  plant exam. According to Community College of the Air Force officials,  although the airframe and power plant certificate is not required for Air  Force maintainer work, it does benefit maintainers\u2019 potential career  prospects. The Joint Services Council\u2019s program is available to members  of all services who have attained minimum requirements in aviation  maintenance\u2014typically after 3 years of experience in a related position\u2014 and includes three self-paced courses taken online in addition to on-the- job training. Additionally, the Air Force has established its Credentialing  Opportunities On-Line program to help airmen find information on  certifications and licenses related to their jobs. The program requires that  the courses be accredited and be sought after within their industry or  sector as a recognized, preferred, or required credential. The program  also provides some funding assistance in obtaining airframe and power  plant certificates."], "subsections": []}]}, {"section_title": "The Air Force Has Significantly Reduced Overall Aircraft Maintainer Staffing Gaps but Continues to Lack Experienced Maintainers", "paragraphs": ["Since fiscal year 2016, the Air Force has taken steps to significantly  reduce the gap between actual aircraft maintainer staffing levels and  authorized levels, a gap which exceeded 4,000 maintainers in fiscal year  2015. However, gaps remain for experienced maintainers\u2014those at the  5- and 7-levels who are most qualified to meet mission needs. The Air  Force\u2019s reserve component has also experienced aircraft maintainer  staffing gaps over the past 8 fiscal years, although the Air National  Guard\u2019s gaps have been more consistent and significant than those of the  Air Force Reserve Command."], "subsections": [{"section_title": "The Air Force Has Made Significant Reductions to Overall Aircraft Maintainer Staffing Gaps", "paragraphs": ["Since fiscal year 2016, the Air Force has taken steps to significantly  reduce overall enlisted aircraft maintainer staffing gaps. According to our  analysis of Air Force data, for all aircraft maintenance specialties  combined, the Air Force reduced the gap between actual staffing levels  and authorized levels from a peak of 4,016 maintainers (94 percent of  authorized levels filled) in fiscal year 2015 to 745 maintainers (99 percent)  in fiscal year 2017. In addition to a reduction in overall gaps, the number  of maintenance specialties experiencing staffing gaps also decreased  over this period. Specifically, while 12 maintenance specialties had actual  staffing levels that were less than 90 percent of authorized levels in fiscal  year 2015, only 4 did in fiscal year 2017. Additionally, in fiscal year  2017, actual staffing levels for 18 of the Air Force\u2019s maintenance  specialties met or exceeded authorized levels.", "While the Air Force had a surplus of 1,705 maintainers in fiscal year 2010  (103 percent of authorized levels filled), actual staffing levels decreased  to 99 percent of authorized levels in fiscal year 2011, and continued to  decrease through fiscal year 2015. Air Force officials attributed these  staffing gaps to an increase in authorized positions\u2014due to the  acquisition of the F-35 and increased maintenance needs for legacy  aircraft, such as the F-15, F-16, and B-52\u2014and a decrease in actual  staffing levels, due to a reduction in end-strength from fiscal years 2014  through 2015. These officials stated that the Air Force reduced its actual maintainer staffing levels through involuntary separations and reduced  accessions due, in part, to the planned divestiture of the A-10 and other  aircraft. However, these officials stated that the divestiture did not occur,  which contributed to further staffing gaps.", "Since fiscal year 2016, the Air Force has taken a number of steps to  reduce aircraft maintainer staffing gaps, such as increasing accessions  and, beginning in fiscal year 2017, contracting out some maintenance  positions. The Air Force also issued memorandums in August 2016 and  September 2017 that restricted the ability of certain maintainers to retrain  to a career field outside of aircraft maintenance. Additionally, from fiscal  years 2016 through 2018, through the High Year of Tenure Extension  Program, the Air Force extended the maximum number of years that  maintainers in certain maintenance specialties could remain on active  duty. According to October 2018 testimony, the Secretary of the Air Force  stated that the Air Force planned to eliminate the overall maintainer  staffing gap by December 2018. Air Force officials acknowledged that  while staffing levels have started to improve since the reduction in end- strength, they anticipate that the Air Force will continue to experience  maintainer staffing gaps off and on through fiscal year 2023, when the  gap is projected to be about 500 maintainers, due, in part, to an increase  in F-35 maintenance requirements. According to these officials, this  estimate is based on recruitment cycles and retention trends, and could  change if there are any programmatic changes, such as the addition or  divestment of any aircraft types.", "Over the past 8 fiscal years, the Air Force has accepted some level of risk  in deciding how much of its maintainer requirements to fund. For  example, according to our analysis, from fiscal years 2010 through 2017,  the Air Force authorized or funded 95 to 97 percent of its maintainer  requirements across maintenance specialties\u2014that is, about 1,800 to  3,900 requirements were not funded each year. According to DOD  officials, across all Air Force specialties decisions have to be made about  how to fund requirements, and it is not uncommon for authorized levels to  fall below requirements. Figure 3 compares the Air Force\u2019s active  component aircraft maintainer staffing levels, authorized levels, and  requirements for all maintenance specialties combined over the past 8  fiscal years.", "Air Force officials acknowledged that when taking into account increases  in requirements\u2014due in part to aging aircraft systems\u2014maintainer  staffing gaps have been higher than reported. Specifically, while the gap  between actual and authorized staffing levels exceeded 4,000  maintainers in fiscal year 2015, when considering the number of  requirements that were not funded, the gap was about 5,800 maintainers.  Moreover, while maintainer requirements increased by about 1,200  between fiscal years 2015 and 2017, the number of authorized positions  only increased by 120."], "subsections": []}, {"section_title": "The Air Force Continues to Have Staffing Gaps of Experienced Aircraft Maintainers", "paragraphs": ["Our analysis of Air Force data found that the Air Force has had staffing  gaps of experienced aircraft maintainers\u2014those at the 5- and 7-levels\u2014in  7 of the past 8 fiscal years. While the Air Force\u2019s actual maintainer  staffing levels were 99 percent of authorized levels in fiscal year 2017, 3- level maintainers were the only skill level without a staffing gap.  Specifically, in fiscal year 2017, the Air Force had a gap of 2,044 5-level  maintainers (94 percent of authorized levels filled) and a gap of 439 7- level maintainers (97 percent). However, the Air Force had a surplus of  1,745 3-level maintainers (112 percent). Figure 4 compares, by skill level,  actual aircraft maintainer staffing levels with authorized levels for all  active component maintenance specialties combined over the past 8  fiscal years.", "In fiscal years 2015 and 2016, the Air Force had significant gaps of 3- level maintainers\u20143,536 and 2,401, respectively\u2014due to a decrease in  accessions as part of its reduction in end strength. Air Force officials  stated that these previous staffing gaps of 3-level maintainers have  contributed to the current staffing gap of 5-level maintainers, since  maintainers who were at the 3-level in fiscal years 2015 and 2016 would  have likely upgraded to the 5-level by fiscal year 2017. These officials  stated that, similarly, the current staffing gap of 5-level maintainers is  expected to contribute to an increase in the size of the 7-level maintainer  staffing gap over the next few fiscal years.", "In fiscal year 2017, certain maintenance specialties and aircraft faced  greater experience gaps than others. For example, the advanced fighter  aircraft integrated avionics specialty had a gap of 140 7-level maintainers  (70 percent of authorized levels filled) and a gap of 56 5-level  maintainers\u2014all specifically trained on the F-35 (78 percent). In  contrast, the aerospace ground equipment specialty had a surplus of 28  7-level maintainers (104 percent). Table 2 shows authorized versus  actual staffing levels for select active component maintenance specialties  and aircraft, by skill level, in fiscal year 2017.", "Air Force officials stated that it is important to have a balance of  maintainer experience levels, but noted that current experience  imbalances cannot be corrected as quickly as overall staffing gaps  because rebuilding experience takes time. As previously discussed,  depending on the maintenance specialty, the average time to upgrade  from a 3-level to a 5-level ranges from 1 to 2 years, and the average time  to upgrade from a 5-level to a 7-level after entering upgrade training is 1  to 2 years. Air Force officials highlighted that there is no substitute for  experience.", "Noting that new 3-level maintainers will initially lack the experience and  proficiency needed to meet mission needs\u2014and will require supervision  to oversee their technical progression\u2014the Air Force has taken steps to  ensure that experienced maintainers are assigned to maintenance roles  that will improve operational readiness and influence the growing  workforce. Specifically, the Air Force Deputy Chief of Staff for Logistics,  Engineering and Force Protection issued a memorandum in July 2016 to  all of the Major Command Vice Commanders noting the importance of  maximizing utilization of experienced maintenance personnel in mission  generation and repair network jobs. Air Force officials stated that it is  critical that experienced maintainers be in the field training the surplus of  new 3-level maintainers and getting them the experience they need. In  addition, beginning in fiscal year 2017, in order to retrain 600 experienced  maintainers on the F-35, the Air Force contracted some aircraft  maintenance for three legacy aircraft in certain locations. These  maintenance contracts are to run from fiscal years 2017 through 2020."], "subsections": []}, {"section_title": "The Air National Guard Has Had Consistent Aircraft Maintainer Staffing Gaps, While Air Force Reserve Gaps Have Been Smaller", "paragraphs": ["Over the past 8 fiscal years, the Air Force\u2019s reserve component has also  experienced aircraft maintainer staffing gaps; however, the Air National  Guard\u2019s gaps have been more consistent and significant than those of the  Air Force Reserve Command. Figure 5 compares actual aircraft  maintainer staffing levels with authorized levels for the Air National Guard  and the Air Force Reserve Command over the past 8 fiscal years.", "According to our analysis, the Air National Guard has had consistent  aircraft maintainer staffing gaps from fiscal years 2010 through 2017\u2014 ranging from 84 percent to 89 percent of authorized levels filled. In fiscal  year 2017, the Air National Guard had a staffing gap of 3,219 maintainers  (87 percent of authorized levels filled), which was primarily spread evenly  across 5- and 7-level maintainers. The Air National Guard\u2019s staffing gaps  have remained despite a significant decrease in authorizations over this  period. Specifically, the Air National Guard\u2019s authorized positions  decreased from 28,654 in fiscal year 2010, to 24,198 in fiscal year 2017.  Air National Guard officials stated that the decrease in authorizations is a  result of mission and aircraft changes\u2014in particular, while the Guard has  increased its use of unmanned aerial systems, it primarily relies on  contract maintenance for those systems, reducing the need for Air Force  maintainers.", "In comparison, the Air Force Reserve Command experienced smaller  maintainer staffing gaps over the past 8 fiscal years. According to our  analysis, the percent of authorized levels filled ranged from a low of 95  percent in fiscal year 2010 (a gap of 733 maintainers), to a high of 103  percent in fiscal year 2013 (a surplus of 514). In fiscal year 2017, the Air  Force Reserve Command had an overall staffing gap of 374 maintainers  (97 percent of authorized levels filled), which primarily consisted of 7-level  maintainers. Specifically, in fiscal year 2017, the Air Force Reserve  Command had a gap of 777 7-level maintainers (89 percent of authorized  levels filled), and a surplus of 566 5-level maintainers (108 percent).", "Officials from both the Air National Guard and the Air Force Reserve  Command stated that aircraft maintainer staffing levels differ by wing and  location. For example, Air Force Reserve Command officials noted that  maintainer requirements have recently increased at certain Air Force  bases due to the arrival of fifth-generation fighter aircraft, and that while  those locations are working to increase their maintainer staffing levels,  they are currently below authorized levels. Air Force Reserve Command  officials identified a strong economy with multiple civilian employment  opportunities, disparities in active duty versus technician pay, and long  hiring processes as factors affecting its full-time maintainer staffing levels.  As a result, these officials noted that that they are looking at ways to  improve maintainer retention. Air National Guard officials stated that any  maintainer-specific recruitment or retention challenges would be identified  and addressed at the local level and that, as a result, they were unable to  describe challenges Air National Guard-wide."], "subsections": []}]}, {"section_title": "The Air Force Has Increasingly Lost Experienced Aircraft Maintainers and Does Not Have Goals and a Strategy to Improve Retention", "paragraphs": ["The Air Force has had challenges retaining experienced maintainers, with  loss rates of 5-level maintainers increasing over the past 8 fiscal years.  While the commercial aviation industry is experiencing similar staffing  challenges, the effects of these challenges on the Air Force\u2019s maintainer  workforce are unknown. In addition, since fiscal year 2015, the Air Force  has increased retention bonuses to improve retention among certain  critical maintenance specialties, but the Air Force does not have retention  goals or an overall strategy to help retain maintainers and sustain recent  staffing level improvements."], "subsections": [{"section_title": "Air Force Losses of Experienced Maintainers Have Increased since Fiscal Year 2010", "paragraphs": ["The Air Force monitors maintainer retention through loss rates\u2014the  percentage of maintainers who leave the career field or the Air Force  during a given fiscal year for reasons such as separation or retirement\u2014 and reenlistment rates, according to Air Force officials. Our analysis of Air  Force data found that overall enlisted aircraft maintainer loss rates have  remained relatively stable over the past 8 fiscal years. Specifically, overall  loss rates ranged from 9 to 10 percent\u2014mirroring overall enlisted loss  rates across the Air Force\u2014with the exception of fiscal year 2014, when  the loss rate was 13 percent due, in part, to reductions in end strength.  Air Force officials stated that they need to retain more maintainers than in  past fiscal years to help address experience gaps. However, gaps of  experienced maintainers\u2014those at the 5-level\u2014have increased.  Specifically, loss rates among 5-level maintainers increased from 9  percent in fiscal year 2010 to 12 percent in fiscal years 2016 and 2017.  Loss rates of 7-level maintainers were 8 and 9 percent in fiscal years  2016 and 2017, respectively. Figure 6 compares, by skill level, active  component maintainer loss rates with loss rates for all Air Force enlisted  personnel over the past 8 fiscal years.", "While loss rates of 7-level maintainers were comparable to overall  maintainer loss rates in fiscal years 2016 and 2017, Air Force officials  expect those rates to increase over the next few fiscal years due to  changes in reenlistment behaviors and the current staffing gap of 5-level  maintainers. According to our analysis of Air Force data, overall  reenlistment rates for aircraft maintainers have generally decreased since  fiscal year 2010, from a peak rate of 82 percent in fiscal year 2011, to a  low of 73.4 percent in fiscal year 2017\u2014similar to reenlistment rates for  all Air Force enlisted personnel. Over this period, reenlistment rates  decreased most significantly for maintainers making their first  reenlistment decision\u2014from 70.5 percent in fiscal year 2010, to 58.3  percent in fiscal year 2017. Reenlistment rates at the second reenlistment  decision point decreased as well\u2014from 88 percent in fiscal year 2010, to  81.3 percent in fiscal year 2017. Table 3 provides reenlistment rates for  active component aircraft maintainers over the past 8 fiscal years.", "In 2015 and 2017, the Air Force conducted aircraft maintenance retention  surveys in order to identify areas of opportunity to improve career  experiences, job satisfaction, and to understand retention drivers. Air  Force officials stated that these surveys and reports are used as  informational tools, but that they are researching methods to further dive  into specific concerns. Maintainers who responded to the 2017 survey  cited job stress, overall job satisfaction, and satisfaction with the career  field as top factors influencing them to leave the Air Force. Survey  respondents also stated that military benefits, the retirement program,  and job security were the top reasons to remain in the Air Force. The  survey also found that mid-tier enlisted personnel\u2014Senior Airmen, Staff  Sergeants, and Tech Sergeants\u2014reported lower levels of satisfaction  with leadership than did higher enlisted ranks.", "Participants in all five of our discussion groups with maintainers cited job  dissatisfaction as a factor affecting their reenlistment decisions.  Specifically, participants discussed the stress of the job, physical toll of  the work, heavy workload, and undesirable working conditions. In  addition, participants in all discussion groups noted challenges in  providing on-the-job training to the large number of 3-level maintainers  arriving at their squadrons due to staffing gaps of 5- and 7-level  maintainers\u2014who are needed to supervise that training. Participants  stated that the lack of experienced maintainers has increased workloads  and stress levels, which they stated may negatively affect reenlistment  decisions. Some participants in all five discussion groups were interested  in retraining into other specialties outside of aircraft maintenance as a  way to continue their Air Force careers. However, as previously  discussed, since 2016, the Air Force has placed certain restrictions on  retraining to non-maintenance career fields in an effort to address  maintainer staffing challenges."], "subsections": []}, {"section_title": "Hiring Difficulties May Exist in the Commercial Aviation Industry, but Its Effects on the Air Force\u2019s Maintainer Workforce Are Unknown", "paragraphs": ["According to our analysis of Bureau of Labor Statistics data from 2012  through 2017, unemployment rate, employment, and wage earnings for  the aircraft mechanic and service technician, and aerospace engineer  occupations were consistent with the existence of hiring difficulties. While  no single metric can be used to say whether a labor shortage exists, it is  possible to look at certain \u201cindicators\u201d in conjunction with views of  stakeholders. Specifically, we previously found that according to  economic literature, if a job shortage were to exist, one would expect (1) a  low unemployment rate signaling limited availability of workers in that  profession, (2) increases in employment due to increases in demand for  that occupation, and (3) increases in wages offered to draw people into  that profession. Table 4 shows these specific indicators from 2012 to  2017, since we last reported, measured using the Bureau of Labor  Statistics\u2019 Current Population Survey.", "As table 4 indicates, the direction of all three of these indicators is  consistent with difficulty in hiring of both aircraft mechanics and  aerospace engineers. However, the indicators should be viewed with  appropriate caveats. First, from 2012 to 2017, median wages for  aerospace engineers and aircraft mechanics increased at a greater  percentage than wages for all occupations, approximately 1.5 and 2.0  percent per year, respectively, compared to about 1 percent for all  occupations. However, while median wages increased for aerospace  engineers and aircraft mechanics during this entire period, it did not  increase in every year, and it exhibited swings by as much as 13 percent.  Second, from 2012 to 2017, employment for aerospace engineers and  aircraft mechanics increased by approximately 1.3 and 1.2 percent per  year, respectively. In comparison, for all occupations, employment  increased by about 2 percent per year over this period. Finally, over this  period, the average unemployment rate for aerospace engineers and  aircraft mechanics was approximately 1.5 and 2.5 percent on average,  respectively, compared to about 6 percent for all occupations.", "In addition, according to the Bureau of Labor Statistics Occupational  Outlook Handbook, overall employment of aircraft and avionics  equipment mechanics and technicians is projected to grow 5 percent from  2016 to 2026, about as fast as the average for all occupations. Job  opportunities are expected to be good because there will be a need to  replace those workers leaving the occupation. Industry stakeholders we  spoke with anticipate similar growth in demand for labor, and cited ways  companies were recruiting maintainers into the industry, such as raising  wages, incorporating additional training, and paying maintainers during  their airframe and power plant certificate coursework.", "The effects of the commercial aviation industry\u2019s hiring difficulties on the  Air Force\u2019s maintainer workforce are unknown. Air Force officials stated  that the Air Force has not assessed the effects, and that while some  maintainers will leave the Air Force to work for the commercial aviation  industry, they do not believe it is an overarching issue. However, Air  National Guard and Air Force Reserve Command officials noted that a  base\u2019s location, in particular its proximity to commercial aviation industry  opportunities, may affect its ability to recruit and retain maintainers. While  the industry stakeholders we spoke with noted that military maintainers  are attractive to the commercial aviation industry because of their  previous training, work ethic, and discipline, they also noted challenges in  recruiting military maintainers. Specifically, one stakeholder stated that  many military maintainers require similar training for private sector  positions as their non-military peers, citing to the specificity of training  military maintainers receive compared to the broader approach taken by  the commercial aviation sector.", "Only one study we identified through our literature search examined the  potential effects of the commercial aviation industry\u2014specifically the  commercial airlines\u2014on Air Force aircraft maintainer staffing levels. This  study, published in 2016 by RAND and reviewing data from fiscal years  2004 through 2013, did not estimate the effect of any specific  development in the commercial aviation industry on the Air Force.  However, it identified several factors that suggest that the effects, if any,  are likely to be limited. It found this based on four indicators: (1) the Air  Force kept steady maintainer retention rates while the airline maintainer  population fluctuated over the same period of time; (2) the Air Force  offered competitive maintainer salaries compared with several airlines,  making it unlikely that maintainers would separate or retire for better  earnings potential alone; (3) few Air Force maintainers seemed to be  pursuing airframe and power plant certification, which is often a  prerequisite to employment in the airline industry; and (4) on average,  there were considerably more qualified Air Force maintainers separating  or retiring than projected airline maintenance jobs available. However, the  report focused only on the commercial airlines. Air Force officials stated  that they are more likely to experience outside recruitment of maintainers  from defense contractors than from commercial airlines.", "Participants in four of our five discussion groups with maintainers cited  better pay as a reason to transition from the Air Force to the commercial  aviation industry. They also noted consistent schedules, 8-hour work  days, and overtime pay as additional benefits. However, participants in all  of our discussion groups also discussed an interest in careers outside of  aircraft maintenance, such as police work, firefighting, cyber security,  information technology, and real estate, among others.", "For maintainers who want to pursue a career in the commercial aviation  industry upon separation or retirement from the Air Force, DOD has  undertaken several actions to facilitate airframe and power plant  certification of its servicemembers. For example, as previously discussed,  since 2002 the Community College of the Air Force has administered the  Federal Aviation Administration-approved Joint Services Council program  that, upon completion, confers a certificate of eligibility to take the  airframe and power plant exam. According to Community College of the  Air Force data, in fiscal year 2017, there were 95 graduates from the Joint  Services Council\u2019s airframe and power plant preparation program. Table  5 shows the number of Air Force personnel that enrolled in and graduated  from the Joint Services Council\u2019s airframe and power plant program from  fiscal years 2010 through 2017.", "Air Force officials noted a decrease in enrollments since fiscal year 2015  due to additional enrollment requirements, including completing initial  coursework. From fiscal years 2015 through 2017, about 900 personnel  used Air Force funding for airframe and power plant certificates through  the Air Force Credentialing Opportunities On-Line program, which was  established in fiscal year 2015."], "subsections": []}, {"section_title": "The Air Force Has Increased Its Use of Retention Bonuses for Some Maintenance Specialties, but Does Not Have Retention Goals or a Maintainer Specific Strategy to Improve Retention", "paragraphs": ["The Air Force has increased its use of retention bonuses since fiscal year  2015 to help retain critical maintenance specialties. Per DOD Instruction  1304.31, the secretary of a military department may use service retention  bonuses to obtain the reenlistment or voluntary extension of an enlistment  in exchange for a military service member\u2019s agreement to serve for a  specified period in at least one of the following categories: a designated  military skill, career field, unit, or grade; or to meet some other condition  of service. In fiscal year 2015, the Air Force awarded 1,590 bonuses to  aircraft maintainers in certain specialties, totaling more than $60 million.  Bonuses increased in fiscal year 2016\u2014with 2,415 bonuses awarded at a  total cost of more than $87 million. Bonuses decreased slightly in fiscal  year 2017\u2014with 1,797 bonuses awarded primarily to 5-level maintainers,  at a total cost of over $65 million. Figure 7 shows the increases in the number and total costs of Air Force active component retention bonuses  awarded to aircraft maintainers over the past 8 fiscal years.", "According to Air Force officials, retention bonuses remain a critical  incentive for reenlistment. Participants in four of our five discussion  groups with maintainers highlighted retention bonuses as a motivating  factor to remain in the Air Force. Some participants stated that they were  a major factor in their decision-making, while others were unsure of the  availability or amount of bonuses, making it difficult to appropriately  consider them in their decisions.", "Air Force officials have stated that they need to retain more maintainers  than in past fiscal years to help address experience gaps, but the Air  Force has not established retention goals for maintainers. Standards for  Internal Control in the Federal Government states that management  should establish and operate monitoring activities and evaluate the  results. In addition, the Standards provide that, in reviewing actual  performance, management tracks achievements and compares them to  plans, goals, and objectives. While the Air Force has mechanisms to  monitor the health of the maintenance career field, such as through loss  and reenlistment rates, it has not developed annual retention goals for  maintainers. As a result, the Air Force cannot identify how many 5-level  and 7-level maintainers it needs to retain to support new 3-level  maintainers in training and certification of flight line work. Given increases  in losses of experienced maintainers and decreasing reenlistment rates,  the Air Force faces challenges in managing the overall maintenance  workforce, including ensuring that there are enough experienced  maintainers to fulfill mission and training needs. Without annual retention  goals\u2014for both loss and reenlistment rates\u2014the Air Force cannot assess  how many maintainers it needs to retain each year, by skill level, to  sustain recent staffing level improvements and, ultimately, to ensure the  health of its maintenance workforce.", "The Air Force also lacks a retention strategy to focus its efforts in  retaining maintainers. As previously discussed, the Air Force has  conducted aircraft maintenance retention surveys to gauge the health of  the workforce and identify opportunities to improve the career field, but Air  Force officials have stated that these surveys are currently used only for  informational purposes. In addition, while the Air Force offers retention  bonuses for certain maintenance specialties\u2014and has extended the  maximum number of years maintainers in certain specialties can remain  on active duty through the High Year of Tenure Extension Program\u2014 according to Air Force officials, it does not have a maintainer specific  strategy or other initiatives (either monetary or non-monetary) that  address the factors the Air Force has identified through its biennial  surveys as negatively influencing maintainer retention. A key principle of  strategic workforce planning is developing strategies that are tailored to  address gaps in number, deployment, and alignment of human capital  approaches for enabling and sustaining the contributions of all critical  skills and competencies.", "Without a retention strategy\u2014including initiatives that are tailored to the  specific needs and challenges of maintainers\u2014the Air Force may be  missing opportunities to retain experienced 5- and 7-level maintainers,  who are needed to train the recent increase of new 3-level maintainers in  the field. According to participants from our discussion groups with  maintainers, increases in 3-level maintainers could negatively affect  retention of experienced maintainers if this increase continues to affect  their workloads. While the Air Force has some tools in place to monitor  retention and identify factors affecting reenlistment decisions, such as its  retention surveys, without a retention strategy to address concerns raised  in these surveys, and goals against which to measure progress, it may  not be able to sustain recent staffing level improvements or improve the  overall health of the maintenance workforce as effectively."], "subsections": []}]}, {"section_title": "The Air Force Has Consistently Met Technical School Completion Rate Goals for Aircraft Maintainers", "paragraphs": ["Over the past 8 fiscal years, the Air Force has consistently met overall  aircraft maintainer technical school completion rate goals. However, after  technical school, additional on-the-job training is required to produce a  fully qualified maintainer. In addition, the Air Force reserve component\u2019s  programmed technical school completions have consistently exceeded  actual completions over this period."], "subsections": [{"section_title": "The Air Force Has Met Overall Technical School Completion Rate Goals for Aircraft Maintainers Since Fiscal Year 2010", "paragraphs": ["Our analysis of Air Force data found that the Air Force consistently met  technical school completion rate goals from fiscal years 2010 through  2017. According to Air Education and Training Command (AETC)  officials, AETC established a maintainer technical school completion rate  goal for the active component of 90 percent\u2014that is, the number of actual  technical school completions compared to the number of programmed or  expected completions. According to AETC officials, the goal is not  documented, but it has been in place since at least fiscal year 2010 and is  intended to measure the health and well-being of the training program. In  fiscal year 2017, the completion rate was 97 percent, with all but two  maintenance specialties meeting their goals. According to AETC  officials, there are a number of reasons a particular maintenance  specialty may not meet its technical school completion rate goals, such as  low technical school entry rates, security clearance delays, and  challenging course topics. Figure 8 shows the Air Force\u2019s active  component technical school completion rates for all maintenance  specialties combined over the past 8 fiscal years.", "In fiscal year 2017, approximately 9,600 active component maintainers  completed technical school, an increase from about 7,200 and 5,700 in  fiscal years 2016 and 2015, respectively. While increased technical  school completions help to address overall aircraft maintainer staffing  gaps, they cannot immediately resolve staffing imbalances across  experience levels. Air Force officials noted that while they track the  number of maintainers they are producing by technical school  completions (the number of new 3-level maintainers), maintainers are not  fully qualified for the job until they are 5-levels, which requires, as  previously discussed, at least a year of on-the-job training, among other  things. Technical school instructors agreed that while technical school is  important for teaching basic concepts, on-the-job training is what  produces a fully-qualified maintainer.", "AETC officials stated that the technical schools continue to have the  capacity to meet completion rate goals even with the increase in students,  but that they have experienced significant challenges in recent years  receiving enough instructors in a timely manner\u2014both civilian and  military\u2014and getting them qualified to teach. These officials stated that  this is a result of issues with the formula that determines instructor  staffing needs, the instructor staffing process for military personnel, and  civilian hiring delays, among other things. According to AETC officials,  they have been able to consistently meet completion rate goals despite  these challenges by waiving some course requirements for multiple  instructors (except when there are safety concerns), contracting some  instruction, and assigning temporary duty personnel to serve as  instructors. These officials noted that while those actions have allowed  them to continue to meet their mission, they have also masked the  severity of the instructor staffing challenges and increased existing  instructors\u2019 stress and workloads. This was confirmed by the technical  school instructors with which we spoke. Additionally, AETC officials noted  challenges with aging infrastructure and hangars, and in obtaining high  fidelity, realistic aircraft and trainers. However, they did highlight a recent  success in acquiring updated avionics trainers.", "Over the past few fiscal years, AETC has conducted annual field  interviews with technical school graduates and graduate supervisors to  evaluate the technical school training program. Specifically, AETC uses  the interviews to gauge satisfaction with the graduates\u2019 abilities to perform  tasks required in the career field, and to identify areas to improve training  quality or revise training standards. In the memorandum resulting from  the fiscal year 2017 field interviews, AETC made a number of  recommendations to improve maintainer technical school training, such  as improving knowledge and task retention by increasing hands-on  repetition and decreasing delays between technical school and a  maintainer\u2019s first assignment, reexamining aspects of the technical school  training curriculum, and improving instruction related to maintenance  forms and technical orders.", "The memorandum also noted that while there are initiatives that the  technical schools can undertake to increase overall satisfaction, there are  some disconnects between supervisor expectations in the field and the  training program that should be resolved. Technical school instructors  agreed that there is a disconnect between what students learn in  technical school and what their supervisors in the field expect them to  have learned in technical school versus on the job. The memorandum  identified opportunities to clarify these expectations, such as workshops  to identify training requirements."], "subsections": []}, {"section_title": "The Air Force Reserve Component\u2019s Programmed Technical School Completions Have Consistently Exceeded Actual Completions", "paragraphs": ["Over the past 8 fiscal years, the Air Force reserve component\u2019s  programmed technical school completions for aircraft maintainers have  consistently exceeded actual completions. Specifically, according to our  analysis, from fiscal years 2010 through 2017, the Air National Guard\u2019s  actual technical school completions, as compared to programmed  completions, ranged from about 60 to 95 percent. Similarly, the Air Force  Reserve Command\u2019s completion rates ranged from about 50 to 85  percent. The highest completion rate for both was in fiscal year 2017.  According to Air National Guard and Air Force Reserve Command  officials, they do not have technical school completion rate goals like the  active component since they also recruit prior servicemembers, as  discussed below. Table 6 compares the Air Force reserve component\u2019s  programmed versus actual technical school completions over the past 8  fiscal years.", "According to an AETC official, it is common for the reserve component to  have significantly more programmed completions than actual technical  school completions in a given fiscal year. For example, this official stated  that the Air National Guard and Air Force Reserve Command program  their training spaces 2 to 3 years in advance and it can be difficult to  anticipate training needs. Specifically, Air National Guard officials stated  that the number of training spaces requested each year are to fill  vacancies and that those vacancies are filled by both prior  servicemembers (who may have already attended maintainer technical  school and do not need to do so again) and non-prior servicemembers  (who will need to attend technical school). An AETC official noted that the  number of personnel that will fall into each category each year is difficult  to anticipate. For example, according to Air Force Reserve Command  officials, the number of non-prior service accessions has decreased over  the past 8 fiscal years, accounting for about 33 percent of accessions in  fiscal year 2017, a decrease from about 43 percent in fiscal year 2010. Air  National Guard officials stated that if they do not program enough training  spaces, it can be difficult to add spaces later.", "Air National Guard officials stated that they have been conservative in  programming training spaces since fiscal year 2016\u2014to minimize unfilled  spaces\u2014which, along with high maintainer turnover, is reflected in  increased completion rates. Specifically, in fiscal year 2017, the Air  National Guard programmed 1,528 completions and the number of actual  completions was 1,418, amounting to a completion rate of 93 percent\u2014its  highest rate over the past 8 fiscal years. Air National Guard officials noted  that the training spaces it did not fill over the past 2 fiscal years were  generally due to last minute cancellations for health, family, or civilian  employment issues. AETC officials stated that they can fill unused  reserve component training spaces with active duty maintainers or  students from international partners, which has provided AETC more  flexibility to increase active duty maintainer training over the past few  fiscal years."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Air Force has significantly reduced overall aircraft maintainer staffing  gaps since fiscal year 2016, in part by increasing accessions. While the  Air Force has consistently met its technical school completion rate goals  for newly accessed aircraft maintainers, it continues to have staffing gaps  of experienced maintainers\u2014who are needed to supervise and provide  on-the-job training to those new maintainers following technical school.  Air Force officials have highlighted the need to retain more aircraft  maintainers to help address experience gaps, but losses of experienced  maintainers have increased since fiscal year 2010, and the Air Force  expects losses to continue to increase for certain maintainers over the  next few fiscal years. While the Air Force has increased its use of  retention bonuses for some critical maintenance specialties, it does not  have annual retention goals for aircraft maintainers or a maintainer- specific retention strategy to help it meet such goals and to sustain recent  staffing level improvements. As a result, the Air Force may continue to  face challenges in managing its largest enlisted career field and may miss  opportunities to retain a sufficient number of experienced maintainers to  meet mission needs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  The Secretary of the Air Force should develop annual retention goals for  aircraft maintainers by skill level\u2014for both loss and reenlistment rates\u2014in  alignment with authorized levels. (Recommendation 1)", "The Secretary of the Air Force should develop an aircraft maintainer  retention strategy, including initiatives that are tailored to the specific  needs and challenges of maintainers to help ensure that the Air Force  can meet and retain required staffing levels. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["In written comments on a draft of this report, the Air Force concurred with  both of the recommendations. The Air Force also noted initial actions it  has taken to develop an aircraft maintainer retention strategy. The Air  Force\u2019s comments are reprinted in appendix III.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Defense, and the Secretary of the Air  Force. In addition, this report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions regarding this report, please  contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made significant contributions  to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To assess the extent to which the Air Force had aircraft maintainer  staffing gaps, we compared staffing levels authorized by the Air Force for  enlisted aircraft maintainers\u2014for the active and reserve components\u2014 with the actual number of maintainers available to staff those positions for  fiscal years 2010 through 2017. We selected this timeframe to capture  staffing levels before and after the Air Force\u2019s fiscal year 2014 reduction  in end strength, and fiscal year 2017 was the most recent year for which  complete data were available at the time of our review. Specifically, we  analyzed the data to identify overall maintainer staffing gaps, as well as  any gaps by maintenance specialty and skill level. In addition, we  compared maintainer personnel requirements to authorized staffing  levels\u2014the number of those requirements that are funded\u2014for the overall  maintainer population, each maintenance specialty, and each skill level.  To assess the reliability of the Air Force\u2019s requirements, authorized  staffing levels, and actual staffing levels (for both the active and reserve  components), we reviewed related documentation; assessed the data for  errors, omissions, and inconsistencies; and interviewed officials. We  determined that the data were sufficiently reliable to describe the Air  Force\u2019s aircraft maintainer staffing levels and associated gaps from fiscal  years 2010 through 2017. Additionally, we conducted interviews with  relevant Air Force, Air National Guard, and Air Force Reserve Command  officials to identify reasons for staffing challenges and actions the Air  Force has taken to address them.", "To assess the extent to which the Air Force experienced attrition of  aircraft maintainers, we calculated maintainer loss rates\u2014the number of  maintainers who leave the career field or the Air Force within the fiscal  year (for reasons such as separation or retirement) over the number of  maintainers at the start of the fiscal year\u2014for fiscal years 2010 through  2017. We calculated loss rates for the overall maintainer population as  well as by skill level and maintenance specialty for the active and reserve  components. We also analyzed overall aircraft maintainer reenlistment  rates\u2014the number of maintainers reenlisting each fiscal year over the  number of maintainers eligible to reenlist\u2014for the active component for  fiscal years 2010 through 2017. To assess the reliability of the Air Force\u2019s  maintainer loss and reenlistment rate data, we reviewed related  documentation; assessed the data for errors, omissions, and  inconsistencies; and interviewed officials. We determined that the data  were sufficiently reliable to describe the Air Force\u2019s aircraft maintainer  loss and reenlistment rates from fiscal years 2010 through 2017.", "In addition, we reviewed the Air Force\u2019s 2015 and 2017 aircraft maintainer  retention survey analyses and conducted discussion groups with a non- generalizable sample of aircraft maintainers to obtain their views on  factors affecting maintainer retention, on-the-job training capacity, and  commercial aviation industry opportunities, among other things. We  selected Tinker Air Force Base in Oklahoma and Eglin Air Force Base in  Florida as the locations for these discussion groups based on geographic  diversity, base size, and the types of aircraft maintained at each base. At  each location, we moderated two to three discussion groups with aircraft  maintainers for a total of five discussion groups ranging from between 3  and 12 maintainers per group. While these discussion groups allowed us  to learn about many important aspects of the aircraft maintenance  workforce from the perspective of aircraft maintainers, they were  designed to provide anecdotal information and not results that would be  representative of all the Air Force\u2019s more than 100,000 aircraft  maintainers as of fiscal year 2017.", "To review the state of the commercial labor market for aircraft mechanics  and aerospace engineers, we analyzed data from the Department of  Labor\u2019s Bureau of Labor Statistics\u2019 Current Population Survey on the  unemployment rate, employment, and median weekly earnings from 2012  through 2017, in accordance with economic literature we reviewed for a  prior report. These data can be used as indicators of whether labor  market conditions are consistent with a shortage. We chose this period  because we had previously reported on the data from 2000 through 2012,  and 2017 was the most recent data at the time of our review. We  reviewed documentation about the Bureau of Labor Statistics data and  the systems that produced them, as well as our prior report that used the  data. Based on prior testing of the data from these systems, we  determined the data were sufficiently reliable for the purposes of our  indicator analysis to provide context on the labor market. We also  reviewed the Bureau of Labor Statistics\u2019 Occupational Outlook for Aircraft  and Avionics Equipment Mechanics and Technicians for 2016 to 2026 to  determine anticipated future workforce trends. In addition, we conducted  interviews with four commercial aviation industry stakeholders regarding  any imbalances in demand and supply, and actions the industry is taking  to address them. Specifically, we conducted interviews with officials from  the Aeronautical Repair Station Association, the Aerospace Industries  Association, Aerotek, and the General Aviation Manufacturers  Association. We selected three of these organizations based on our  previous work and one based on a recommendation from one of the three  organizations.", "To determine what is known about the extent to which the commercial  aviation industry affects the Air Force\u2019s aircraft maintainer staffing levels,  we conducted a literature search and review to identify relevant studies.  Specifically, we conducted a literature search for studies published in  books, reports, peer-reviewed journals, and dissertations since fiscal year  2010. We chose fiscal year 2010 as a starting point so that the scope of  the search would match the timeframe for which we analyzed Air Force  maintainer loss rates. We searched five databases, including ProQuest,  Scopus, and EBSCO. Our search used Boolean search phrases,  including variations of words such as aviation, maintenance, and  retention. We identified and screened 49 studies using a multi-step  process to gauge their relevance and evaluate their methodology. We  excluded studies that did not specifically focus on our objective, military  maintainers, or the U.S. commercial aviation industry. We retained 1  study after screening and reviewed its methodology, findings, and  limitations. Three GAO staff (two analysts and an economist) were  involved in the screening and a systematic review of the study, which was  determined to be sufficiently relevant and methodologically rigorous.", "We also analyzed data on the number of Air Force personnel completing  the Joint Services Aviation Maintenance Technician Certification Council  (Joint Services Council) airframe and power plant certificate program from  fiscal years 2010 through 2017, and the number of Air Force personnel  receiving airframe and power plant certificate funding from the  Community College of the Air Force\u2019s Air Force Credentialing  Opportunities On-line program from fiscal years 2015 through 2017. We  selected this timeframe because the Air Force\u2019s airframe and power plant  funding program began in fiscal year 2015, and fiscal year 2017 was the  most recent data available at the time of our review. To assess the  reliability of the Air Force\u2019s airframe and power plant certificate program  data, we interviewed officials. We determined that the data were  sufficiently reliable to describe the number of Air Force personnel  completing the Joint Services Council\u2019s airframe and power plant  certificate program from fiscal years 2010 through 2017 and the number  of personnel receiving funding from fiscal years 2015 through 2017.", "To assess the extent to which the Air Force has taken steps to help retain  maintainers, we analyzed the number and total costs of selective  retention bonuses (retention bonuses) that the Air Force awarded, by  maintenance specialty and skill level, from fiscal years 2010 through 2017  for the active and reserve components. We normalized the cost data to  constant fiscal year 2017 data. To assess the reliability of the Air Force\u2019s  retention bonus data, we reviewed related documentation; assessed the  data for errors, omissions, and inconsistencies; and interviewed officials.  We determined that the data were sufficiently reliable to describe the  number and total costs of the Air Force\u2019s aircraft maintainer retention  bonuses from fiscal years 2010 through 2017. In addition, we conducted  interviews with relevant Air Force officials regarding retention goals and  monetary and non-monetary incentives to improve maintainer retention,  and Department of Defense officials regarding retention bonuses. We  compared this information to Standards for Internal Control in the Federal  Government related to monitoring activities and key principles of strategic  workforce planning that we have identified in our prior work, such as  developing strategies that are tailored to address gaps in numbers of  people, skills, and competencies.", "To assess the extent to which the Air Force met its annual technical  school completion rate goals for aircraft maintainers, we calculated  technical school completion rates\u2014the number of aircraft maintainers  completing technical school compared to the number of programmed or  expected completions\u2014for the overall maintainer population and each  maintenance specialty for the active component, for fiscal years 2010  through 2017. We compared those completion rates to the Air Education  and Training Command (AETC) established active component completion  rate goal. For the Air National Guard and Air Force Reserve Command,  we compared programmed completions to actual completions to  determine the extent to which they met their technical school training  needs. To assess the reliability of the technical school completion data  (for both the active and reserve components), we assessed the data for  errors, omissions, and inconsistencies, and interviewed officials. We  determined that the data were sufficiently reliable to describe the Air  Force\u2019s aircraft maintainer technical school completion rates from fiscal  years 2010 through 2017, rounded to the nearest hundreds up to fiscal  year 2013, and more-precisely from fiscal years 2014 and beyond.", "In addition, we observed maintainer technical school training\u2014both  classroom-based and hands-on\u2014as well as training equipment at  Sheppard Air Force Base in Texas and Eglin Air Force Base in Florida.  We selected these locations because they are two of the primary  locations where aircraft maintainer technical school training occurs.  Specifically, according to Air Force officials, the majority of aircraft  maintainers receive at least a portion of their technical school training at  Sheppard Air Force Base, and all F-35-specific maintainer training occurs  at Eglin Air Force Base. Additionally, as part of our previously discussed  non-generalizable sample of discussion groups with aircraft maintainers,  we obtained maintainers\u2019 perspectives on technical school and on-the-job  training. We also reviewed training policies as well as other  documentation, such as Career Field Education and Training Plans and  training evaluations. Finally, we conducted interviews with technical  school instructors and supervisors about the maintainer training process  as well as AETC, Air National Guard, and Air Force Reserve Command  officials about training challenges and programmed training needs.", "We conducted this performance audit from April 2018 to February 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."], "subsections": []}, {"section_title": "Appendix II: Air Force Reserve Component Aircraft Maintainer Retention from Fiscal Years 2010-2017", "paragraphs": ["According to Air National Guard and Air Force Reserve Command  officials, they monitor retention of aircraft maintainers through loss rates\u2014 the number of maintainers who leave the career field or the Air Force  within the fiscal year, over the number of maintainers at the start of the  fiscal year\u2014and have used selective retention bonuses (retention  bonuses) and taken other actions to improve retention.", "According to our analysis of Air National Guard data, aircraft maintainer  loss rates have fluctuated over the past 8 fiscal years. For example, loss  rates increased significantly for all maintenance specialties and skill levels  combined, from 12 percent in fiscal year 2010, to 36 percent and 30  percent in fiscal years 2012 and 2013, respectively. While Air National  Guard maintainer loss rates decreased from fiscal years 2014 through  2017, they remained higher than fiscal year 2010 rates. Table 7 provides  loss rates for Air National Guard aircraft maintainers over the past 8 fiscal  years.", "Air National Guard officials stated that maintainer loss rates are often  location dependent, and that retention bonuses are the primary tool used  to improve retention. According to these officials, while the Air National  Guard looks at nationwide staffing when determining which occupational  specialties are eligible for bonuses, some locations may have more  critical needs than others. The number of retention bonuses that the Air  National Guard has awarded to aircraft maintainers has decreased over  the past 8 fiscal years, while the total cost has increased. Specifically, in  fiscal year 2010, the Air National Guard awarded 1,587 retention bonuses  at a total cost of $4,580,295. However, in fiscal year 2017, the Air  National Guard awarded 653 retention bonuses at a total cost of  $5,373,000. Over the past 8 fiscal years, the majority of its retention  bonuses were awarded to 7-level maintainers.", "The Air Force Reserve Command\u2019s aircraft maintainer loss rates over the  past 8 fiscal years have ranged from 10 to 13 percent. In addition, the  loss rates of 5- and 7-level maintainers have been similar to the loss rates  of all skill levels combined over this period. Similar to the Air National  Guard, Air Force Reserve Command officials stated that maintainer  staffing challenges and loss rates are partly location dependent, though  they also cited opportunities and higher pay in the civilian labor market;  high operations tempo; lack of career growth, opportunities, and flexibility;  and pay disparities with the active component as factors affecting  retention. Table 8 provides loss rates for Air Force Reserve Command  aircraft maintainers over the past 8 fiscal years.", "The Air Force Reserve Command has also used retention bonuses to  help improve retention. Specifically, over the past 8 fiscal years, the Air  Force Reserve Command has increased the number of retention bonuses  awarded and their total costs. For example, in fiscal year 2012, the Air  Force Reserve Command awarded 15 retention bonuses totaling  $242,593. In fiscal year 2015, it increased to 572 bonuses awarded  totaling $8,913,229. In fiscal year 2017, the Air Force Reserve Command  awarded 317 retention bonuses at a total cost of $4,550,000. According  to Air Force Reserve Command officials, the Air Force Reserve  Command has taken a number of steps to help improve technician  retention, such as paid permanent change of station and student loan  repayment. These officials stated that they are also currently working to  improve career path options and medical benefits for technicians. Further,  Air Force Reserve Command officials highlighted Human Capital  Management 2.0 as an effort focused on balancing the human capital  supply and demand across the Air Force Reserve Command, including  improving recruitment and retention."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Lori Atkinson (Assistant  Director), Benjamin Bolitzer, Molly Callaghan, Timothy Carr, Christopher  Curran, Matthew Dobratz, Amie Lesser, Grant Mallie, Mike Silver, Carter  Stevens, and Lillian M. Yob made significant contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["DOD Depot Workforce: Services Need to Assess the Effectiveness of  Their Initiatives to Maintain Critical Skills. GAO-19-51. Washington, D.C.:  December 14, 2018.", "Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare  for the Future. GAO-19-120T. Washington, D.C.: October 10, 2018.", "Military Aviation Mishaps: DOD Needs to Improve Its Approach for  Collecting and Analyzing Data to Manage Risks. GAO-18-586R.  Washington, D.C.: August 15, 2018.", "Military Personnel: Collecting Additional Data Could Enhance Pilot  Retention Efforts. GAO-18-439. Washington, D.C.: June 21, 2018.", "Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce  Requirements. GAO-18-113. Washington, D.C.: April 11, 2018.", "Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "Military Compensation: Additional Actions Are Needed to Better Manage  Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.:  February 3, 2017.", "Unmanned Aerial Systems: Air Force and Army Should Improve Strategic  Human Capital Planning for Pilot Workforces. GAO-17-53. Washington,  D.C.: January 31, 2017.", "Air Force Training: Further Analysis and Planning Needed to Improve  Effectiveness. GAO-16-864. Washington, D.C.: September 19, 2016.", "Unmanned Aerial Systems: Further Actions Needed to Fully Address Air  Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington,  D.C.: March 16, 2016.", "Unmanned Aerial Systems: Actions Needed to Improve DOD Pilot  Training. GAO-15-461. Washington, D.C.: May 14, 2015.", "Air Force: Actions Needed to Strengthen Management of Unmanned  Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014.", "Aviation Workforce: Current and Future Availability of Airline Pilots.  GAO-14-232. Washington, D.C.: February 28, 2014.", "Aviation Workforce: Current and Future Availability of Aviation  Engineering and Maintenance Professionals. GAO-14-237. Washington,  D.C.: February 28, 2014.", "Military Cash Incentives: DOD Should Coordinate and Monitor Its Efforts  to Achieve Cost-Effective Bonuses and Special Pays. GAO-11-631.  Washington, D.C.: June 21, 2011."], "subsections": []}], "fastfact": ["Aircraft maintenance is the Air Force\u2019s largest enlisted career field, with more than 100,000 active and reserve maintainers to ensure its fleet is safe and ready to operate.", "However, the Air Force still needs more aircraft maintainers\u2014particularly those with more skills and experience. It has struggled to retain the ones it has, in part due to the workload and stress from not having enough experienced maintainers on staff.", "The Air Force uses retention bonuses to keep maintainers with certain critical skills, but does not have a comprehensive strategy or goals to help retain experienced maintainers. We recommended it develop both."]}
{"id": "GAO-18-203", "url": "https://www.gao.gov/products/GAO-18-203", "title": "Federal Criminal Restitution: Most Debt Is Outstanding and Oversight of Collections Could Be Improved", "published_date": "2018-02-02T00:00:00", "released_date": "2018-02-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["One of the goals of federal criminal restitution is to restore victims of federal crimes to the position they occupied before the crime was committed by providing compensation. Various entities within the federal government are involved in the process of requesting, ordering, and collecting restitution for crime victims, including DOJ and the judiciary.", "The Justice for All Reauthorization Act of 2016 includes a provision for GAO to review the federal criminal restitution process for fiscal years 2014 through 2016. This report addresses, among other things: (1) the extent to which information is available on restitution requested by DOJ and ordered by courts; (2) the amount of restitution debt DOJ collected and the amount that remains outstanding; and, (3) the extent to which DOJ has conducted oversight on the collection of restitution. GAO analyzed laws, policies and procedures as well as USSC data on restitution orders and DOJ data on restitution collected from fiscal years 2014 through 2016. GAO also selected a non-generalizable sample of six federal judicial districts based on restitution collections and spoke with USAO officials and federal probation officers."]}, {"section_title": "What GAO Found", "paragraphs": ["Officials from selected U.S. Attorney's Offices (USAO) stated that they document requests for restitution in case files and employ other internal controls, such as the use of templates and forms, throughout the prosecution process to ensure that prosecutors request restitution as appropriate. GAO's analysis of U.S. Sentencing Commission (USSC) data\u2014an agency within the judiciary\u2014showed that information on restitution orders was available for 95 percent of all offenders sentenced from fiscal years 2014 through 2016. Specifically, 214,578 federal offenders were sentenced during this time period and restitution was ordered for 33,158, or 15 percent, of those offenders. Collectively, courts ordered these offenders to pay $33.9 billion in restitution. Most federal offenders sentenced during these years were sentenced for immigration or drug-related offenses. In interviews, USAO officials stated that these offenses do not typically have victims requiring restitution. GAO found that data on reasons why restitution was not ordered were incomplete for 5 percent of all offenders sentenced from fiscal years 2014 through 2016. Determining why data on restitution orders are incomplete may inform the judiciary of the cause of the incomplete data and any efforts needed to improve USSC data.", "GAO's analysis of Department of Justice (DOJ) data showed that USAOs collected $2.95 billion in restitution debt in fiscal years 2014 through 2016, see figure below. However, at the end of fiscal year 2016, $110 billion in previously ordered restitution remained outstanding, and USAOs identified $100 billion of that outstanding debt as uncollectible due to offenders' inability to pay.", "DOJ identified improving debt collection\u2014including restitution\u2014as a major management initiative in its 2014-2018 Strategic Plan. While DOJ is developing analytical tools to monitor the collection of restitution, it has not established performance measures or goals. Performance measures and goals would allow DOJ to gauge USAOs' success in collecting restitution and, by extension, the department's success in achieving a major management initiative."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations. GAO is making one to the judiciary to determine why data on restitution orders are incomplete. GAO is making two recommendations to DOJ, including one to implement performance measures and goals for the collection of restitution. The judiciary and DOJ concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The impact of crime on victims often has significant emotional,  psychological, physical, financial, and social consequences. One of the  goals of federal criminal restitution is to restore victims of federal crimes  to the position they occupied before the crime was committed. Various  entities within the federal government are involved in the process of  requesting, ordering, and collecting restitution for crime victims, including  the Department of Justice (DOJ) and the judiciary. Prosecutors within  DOJ have the burden of proving a victim\u2019s losses in court; victims are  those who suffered a physical injury or financial loss as a direct and  proximate result of the offense. When restitution is ordered by the court,  it is to be in the full amount of each victim\u2019s losses without consideration  of the economic circumstances of the defendant. Once restitution is  ordered by the court, DOJ is responsible for collecting restitution  payments and has delegated these activities to Financial Litigation Units  (FLU) within each U.S. Attorney\u2019s Office (USAO). FLUs are also to  coordinate with federal probation officers supervising offenders to ensure  offenders pay restitution ordered.", "The collection of federal criminal restitution has been a longstanding  challenge. We reported in 2001 that the amount of uncollected criminal  debt\u2014of which restitution is a component\u2014had more than doubled from  September 30, 1995 to September 30, 1999. Specifically, we found that  DOJ had not collected most of the outstanding criminal debt due to,  among other factors, the nature of the debt, and a lack of coordination  between relevant DOJ components. To address these findings, we made  24 recommendations, including 14 to DOJ, among other agencies. DOJ  implemented 11 of our recommendations, including that DOJ develop  performance measures for criminal debt collection and better coordinate  internally and with federal courts. In 2005, we reported that although DOJ  had taken some steps to address our recommendations, prospects for  collecting restitution for victims were poor and court-ordered restitution far  exceeded amounts likely to be repaid in selected cases we reviewed.  We found that, among other reasons, this situation occurred because  there were minimal negative consequences when offenders did not pay  restitution as ordered by the courts.", "More recently in 2015, the DOJ Inspector General recommended DOJ  improve its prioritization of debt collection as well as collaboration among  DOJ component offices to better use forfeited assets to pay restitution  debt. DOJ took action to address the Inspector General\u2019s  recommendations by reviewing the system it uses to prioritize debt  collection actions, by incorporating discussion of asset recovery into its  training program, and by initiating a comprehensive study to review  existing protocols and structures to improve DOJ\u2019s ability to collect debts  owed to crime victims.", "The Justice for All Reauthorization Act of 2016 contained a provision for  us to review and assess the federal criminal restitution process for fiscal  years 2014 through 2016. This report addresses the following four  questions:  1.  To what extent is information available on restitution requested by  DOJ and ordered by courts for eligible federal criminal cases for fiscal  years 2014 through 2016?  2.  How much restitution debt did DOJ collect for fiscal years 2014  through 2016 and how much restitution remains outstanding?  3.  To what extent are DOJ\u2019s recommended practices for restitution  considered effective?  4.  To what extent has DOJ conducted oversight on the collection of  restitution?", "To answer all four questions, we analyzed relevant laws, including the  Mandatory Victims Restitution Act of 1996 (MVRA) and the Justice for All  Reauthorization Act of 2016. We also reviewed agency documentation  and spoke with officials from DOJ components and the judiciary. Within  DOJ, these included officials from the Executive Office for U.S. Attorneys  (EOUSA), the Criminal Division, the Money Laundering and Asset  Recovery Section within the Criminal Division and the Justice  Management Division. Within the judiciary, these included officials from  the Administrative Office of the U.S. Courts (AOUSC), the Judicial  Conference, the U.S. Sentencing Commission (USSC), and Probation  and Pretrial Services within AOUSC.", "We further selected six federal judicial districts throughout the country  and conducted semi-structured interviews with USAO officials and federal  probation officers within those districts to obtain their views on the  restitution process. Because the collection of restitution has been a  longstanding challenge, we selected districts to study based on the extent  of the USAO\u2019s collection of restitution within that district. Specifically, we  selected USAOs for three districts that had relatively high levels of  restitution collected and USAOs for three districts that had relatively low  levels of restitution collected from fiscal years 2014 through 2015\u2014the last 2 years of data available when we began our review. In particular, we  spoke with USAO and probation officials within the District of Connecticut,  the Southern District of California, the District of New Jersey, the  Southern District of Ohio, the District of South Dakota and the District of  Wyoming. Additionally, we ensured that our selected districts reflected  geographical diversity to capture a range of perspectives and  experiences. Since we selected a non-probability sample of districts, the  information we obtained cannot be generalized more broadly to all  districts. However, the information provides important context and insights  into how the restitution process works across the country. We also  obtained perspectives from stakeholders from associations representing  victims, federal prosecutors and defense counsel, as well as four  individuals knowledgeable about the federal restitution process referred to  us by EOUSA officials and other restitution experts.", "To address the first question on the extent information is available on  restitution requested by DOJ and ordered by courts for eligible federal  criminal cases for fiscal years 2014 through 2016, we reviewed DOJ  guidance for requesting restitution and AOUSC and Judicial Conference  guidance for ordering restitution. To determine the extent of information  available on restitution requested by DOJ, we interviewed DOJ and  EOUSA officials as well as USAO officials in the six districts mentioned  above to determine how prosecutors are to document requests for  restitution. To determine the extent of information available for restitution  ordered by courts, we analyzed USSC data on restitution orders for fiscal  years 2014 through 2016. We assessed the reliability of these data by  reviewing system documentation and interviewing knowledgeable officials  about system controls. We determined that these data were sufficiently  reliable for the purposes of our reporting objectives. We also analyzed the  extent to which these data contained required information about the  reasons restitution was not ordered and then compared the results of our  analysis against Standards for Internal Control in the Federal  Government.", "To address the second question on the amount of restitution debt DOJ  collected for fiscal years 2014 through 2016 and the amount outstanding, we analyzed data from DOJ\u2019s debt management system (the  Consolidated Debt Collection System) from fiscal years 2014 through  2016. We assessed the reliability of these data by reviewing system  documentation, interviewing knowledgeable officials about system  controls, and conducting electronic testing. We determined that these  data were sufficiently reliable for the purposes of our reporting objectives.  We used these data to determine the amount of restitution collected by  each USAO during fiscal years 2014 through 2016 as well as the amount  of debt outstanding during this time. Further, during our interviews with  DOJ and judiciary officials as well as USAO and probation officials in the  six districts mentioned above, we obtained perspectives on potential  factors contributing to outstanding debt.", "To address the third question on the extent to which DOJ\u2019s recommended  practices for restitution are considered effective, we reviewed agency  documentation, including guidance manuals for USAO prosecutors and  financial litigation unit staff. We interviewed EOUSA officials responsible  for developing this guidance and USAO officials in the six districts to  determine the extent to which they find this guidance helpful for  requesting, facilitating orders for, and collecting restitution.", "To address the fourth question on the extent to which DOJ has conducted  oversight on the collection of restitution, we reviewed our prior work and  reports by the DOJ Office of the Inspector General to identify prior  recommendations made to DOJ and interviewed EOUSA officials to  assess the extent to which these recommendations have been  implemented. We also analyzed DOJ\u2019s 2014-2018 Strategic Plan and  EOUSA\u2019s internal evaluation program to assess the extent to which  DOJ\u2019s oversight mechanisms provide sufficient information on USAOs\u2019  performance in meeting initiatives outlined in DOJ\u2019s Strategic Plan and  the Justice for All Reauthorization Act of 2016. We compared the results  of our analysis to the Government Performance and Results Act of 1993  (GPRA), as updated by the GPRA Modernization Act of 2010  (GPRAMA). We further obtained agency documentation and interviewed  DOJ officials on the extent to which DOJ\u2019s Asset Forfeiture Program  supports the collection of restitution and compared this information to federal regulations, DOJ\u2019s 2014-2018 Strategic Plan, and Standards for  Internal Control in the Federal Government.", "We conducted this performance audit from January 2017 through  February 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Restitution Roles and Responsibilities", "paragraphs": ["DOJ and its components, as well as the judiciary, play important roles in  requesting and collecting restitution.", "DOJ and select components: Prosecutors in DOJ\u2019s Criminal Division  and the Criminal Divisions of the 94 USAOs are responsible for  overseeing criminal matters, including identifying and notifying victims,  determining their losses as part of a case investigation, prosecuting cases  and negotiating the terms of plea agreements, of which restitution may be  a part. Within DOJ\u2019s Criminal Division, the Money Laundering and Asset  Recovery Section manages DOJ\u2019s Asset Forfeiture Program. As  previously stated, FLUs within each USAO undertake activities to collect  restitution from offenders in their district. Additionally, all USAOs have  asset forfeiture staff responsible for forfeiting property seized by law  enforcement agencies because the property was used in criminal  activities or purchased with the proceeds of criminal activities.  According to EOUSA guidance, coordination between the FLU and Asset  Forfeiture units is highly encouraged to use forfeited assets as a means  to collect on unpaid restitution debts.", "DOJ requires each USAO to have its own policies and procedures related  to debt collection efforts but allows them discretion in developing these  policies and procedures to ensure that they are appropriate for local  conditions. DOJ also requires USAOs to have policies and procedures  to make early, effective, and coordinated asset investigations and  recovery a routine part of every case involving victims but allows USAOs  to specify these policies and procedures.", "DOJ\u2019s EOUSA provides USAOs with management assistance, guidance,  training, and administrative support. Among other activities, EOUSA  provides management assistance to USAOs by administering internal  evaluations for each USAO, which are intended to provide on-site  management support for that office. Further, EOUSA provides guidance  to enhance offices\u2019 efforts to request and collect restitution.", "Judiciary: Within the judiciary, the 94 federal district courts order  restitution, receipt restitution payments, and disburse restitution to  victims. Within the federal district where the offender was convicted, a  probation officer prepares the presentence investigation report (PSR) for  the court, which includes information on the victim\u2019s losses and an  offender\u2019s financial information. Probation officers may obtain this  information from DOJ, which has the statutory responsibility for the  enforcement and collection of criminal debt. The court uses the PSR,  among other things, to determine whether to order restitution. If an  offender is released to the community by the court and placed on  supervision, probation officers are responsible for ensuring the offender  abides by the terms of release, including paying any restitution owed to  victims. The Clerk of each District Court is responsible for the receipt of  restitution from offenders and for disbursing payments to victims.", "The Judicial Conference is the national policy-making body for the federal  courts. The Conference operates through a network of committees  created to address and advise courts on a wide variety of subjects such  as information technology, personnel, probation and pretrial services,  space and facilities, security, judicial salaries and benefits, budget,  defender services, court administration, and rules of practice and  procedure. The Judicial Conference has taken policy positions on  restitution-related issues and has supported legislative proposals to  improve the restitution process.", "AOUSC is the agency within the judiciary that provides a broad range of  legislative, legal, financial, technology, management, administrative, and  program support services to federal courts. AOUSC is responsible for  carrying out Judicial Conference policies and a primary responsibility of  AOUSC is to provide staff support and counsel to the Judicial Conference  and its committees.", "USSC is an independent agency within the judiciary which, among other  activities, establishes and promulgates detailed sentencing guidelines  that judges are to consider in sentencing offenders convicted of federal  crimes, including guidelines on when and how to order restitution.  Additionally, each district court is required to submit to USSC a report of  each offender\u2019s sentence that includes, among other information, details  on the offenses for which the offender was convicted; the sentence  imposed on the offender; and if the judge departed from the sentencing  guidelines, information on reasons why. USSC maintains a database  containing sentencing data on federal offenders convicted of felonies or  serious misdemeanors, analyzes it and publishes these data on an  annual basis. USSC is also statutorily required to annually report to  Congress its analysis of sentencing-related documents, including an  accounting of districts USSC believes have not submitted appropriate  information to the commission, among other things."], "subsections": []}, {"section_title": "Restitution Overview", "paragraphs": ["During the course of a federal criminal investigation, federal prosecutors  identify and notify victims, as well as determine their losses in conjunction  with the federal agents investigating the case. If a defendant pleads guilty  or is found guilty at trial, the prosecutor has the burden of proving the  victims\u2019 losses in court. To facilitate this, a Victim-Witness coordinator  within the USAO responsible for the case provides victims the opportunity  to explain their losses in detail, usually through a Victim Impact  Statement. This information is then to be provided to a federal probation  officer who uses it to begin a PSR.", "To develop the PSR, probation officers use information provided by the  USAO and may contact victims and verify the loss amounts. Additionally,  probation officers will investigate an offender\u2019s economic circumstances\u2014 such as if the offender has a job, any assets or any dependents. If a  judge determines that restitution is to be ordered, the judge must order  restitution for the full amount of a victim\u2019s losses for offenses without  consideration of the economic circumstances of the defendant. Judges  may decline to order restitution in certain instances, for example, where  restitution is discretionary, or in certain cases where the number of  identifiable victims makes restitution impracticable or the complexity of  calculating restitution would unduly prolong the sentencing process. If the  court does not order restitution, or orders only partial restitution, the judge  must provide the reason, and judges usually do so in a written Statement  of Reasons document. Figure 1 provides an overview of the federal  restitution process.", "Upon imposition of a restitution debt by the court, FLU staff use two  mechanisms to determine the collectability of the debt and what collection  actions to take. First, FLU staff classify the debt into one of four  categories to determine the extent to which the FLU will pursue  enforcement actions to collect upon the debt. FLUs classify debts from a  Priority Code 1 debt (indicating that FLUs will make collection of this debt  the highest priority) to a Priority Code 4 debt (indicating that FLUs will  make collection of this debt the lowest priority). Second, FLUs may  suspend collection action on criminal debts, regardless of their  categorization, under certain circumstances if they determine the debts  are uncollectible. FLU staff may also determine that debts are  permanently uncollectible and categorize them as Priority Code 4 debts.", "If a debtor does not provide payment, FLU staff then use various  enforcement actions to collect the restitution debt. These can include,  among other actions, filing liens against an offender\u2019s property,  coordinating with asset forfeiture staff to use forfeited assets to pay the  restitution debt, and garnishing wages an offender may earn.", "Victims can be compensated for losses with the proceeds of forfeited  assets through DOJ\u2019s Asset Forfeiture Program and in accordance with  law and regulation. Federal regulations provide that the proceeds from  forfeited assets are first used to cover program costs associated with  forfeiture-related activities and next to pay valid owners, lien-holders, and  federal financial regulatory agencies. Forfeited assets can then be  distributed to other victims of crime as compensation for their losses if  their loss is a direct result of the commission of the offense underlying  forfeiture or a related offense. Any remaining funds from the forfeited  asset may be placed into official use, distributed to foreign governments,  state or local law enforcement agencies as part of the equitable sharing  program to enhance cooperation with federal investigations.", "When victims are eligible for compensation using forfeited assets, DOJ  employs two processes: restoration and remission. The restoration  process involves the USAO staff requesting funds on behalf of a victim  when there is both an order of forfeiture and an order of restitution. Under  the restoration process, USAO staff request DOJ\u2019s Money Laundering  and Asset Recovery Section to use the forfeited asset to pay a restitution  debt. If DOJ approves the request for restoration, the funds from the  forfeited property are then transferred to the Clerk of the Court who  disburses this money to the victim. The remission process requires a  victim of a crime to directly petition DOJ to receive funds from the  forfeited property. According to officials in DOJ\u2019s Criminal Division, the  courts may not order restitution on behalf of victims who suffered a  specific actual loss as a direct result of a crime for a variety of reasons,  and therefore the remission process serves as a complement to the  restoration process to ensure victims are made whole. For example,  these officials stated that, among other reasons, the courts may not order  restitution if a defendant dies prior to sentencing or if the case is one in  which a court is not required to, and does not, order restitution, but the  victim has suffered eligible losses."], "subsections": []}]}, {"section_title": "Select USAOs Reported Documenting Requests for Restitution, but the Judiciary Did Not Always Document Reasons It Was Not Ordered EOUSA and Officials in Six USAOs Told Us Their Offices Document Requests for Restitution in Case Files", "paragraphs": ["EOUSA and USAO officials in all six of the offices with whom we spoke  told us that prosecutors document requests for restitution in their case  files and that their offices employ other internal controls, such as the use  of templates and forms, throughout the prosecution process to ensure  that prosecutors request restitution as appropriate. EOUSA officials told  us that although the agency does not track this information, they believed  all USAOs generally document requests for restitution in their offices\u2019  case files. Further, USAO officials in all six offices told us that  prosecutors document requests for the court to order restitution in their  case files by including this information in a written memorandum. To  support prosecutors in documenting this information, all six offices we  selected provide prosecutors with a prosecution memorandum template.  Of the six templates we reviewed, four explicitly include a section for  prosecutors to indicate whether victims have been identified and the  extent of any victim losses.", "In addition to these templates, four of six USAOs we selected had forms  that prosecutors could use to identify whether cases have victims and  their need for restitution when drafting criminal charging documents.  Moreover, officials from two of the six USAOs told us their offices use this  form as an internal control to ensure prosecutors have identified all  victims and considered their need for restitution, if applicable. All six  offices we selected also provided prosecutors templates for drafting plea  agreements, and templates we reviewed from all six USAOs included  language requesting the offender pay restitution, if applicable. However,  prosecutors are not required to use plea agreement templates, nor are  they required to request restitution as part of a plea agreement. USAO  officials from one office stated that including this language in the plea  agreement template served to remind prosecutors of their requirement to  consider requesting restitution as stated in the U.S. Attorney\u2019s Manual.", "Select USAO officials also described various forms of management  oversight to ensure prosecutors request restitution as appropriate.  Specifically, four USAOs we selected require supervisory review of the  form that prosecutors fill out when drafting criminal charging documents,  which includes information on victims. Additionally, officials in all six USAOs told us that they require supervisory review of plea agreements  for every case. For example, officials from two USAOs told us their office  requires the Criminal Chief, the supervisor of all criminal cases, to  approve documents in the plea agreement, which may include requests  for restitution."], "subsections": [{"section_title": "USSC Has Information on Restitution Orders for 95 Percent of All Offenders Sentenced From Fiscal Years 2014 through 2016", "paragraphs": ["Federal courts sent information on sentencing decisions to USSC and  USSC had information on restitution decisions for 95 percent of all  offenders from fiscal years 2014 through 2016. According to our analysis  of USSC data, 214,578 federal offenders were sentenced from fiscal  years 2014 through 2016 and restitution was ordered for 33,158 of those  offenders, or 15 percent. Collectively, courts ordered these offenders to  pay $33.9 billion in restitution during this period. Courts did not order  restitution for the remaining 181,420 offenders, or 85 percent. Table 1  shows the number of federal offenders sentenced and ordered to pay  restitution for fiscal years 2014 through 2016, as well as the total amount  of restitution ordered by the courts.", "The majority of federal offenders were sentenced for immigration or drug- related offenses, and USAO officials in all six offices we selected told us  that these types of offenses do not typically have victims with actual  losses. For example, from fiscal years 2014 through 2016, USSC data  showed that 131,088 offenders, 61 percent of offenders sentenced, were  sentenced for immigration or drug-related offenses and courts ordered  999 (or less than 1 percent) of these offenders to pay restitution.", "USSC data show that courts ordered restitution more often for offenders  sentenced for other offenses, such as fraud. For example, courts  sentenced 21,551 offenders for fraud offenses from fiscal years 2014  through 2016, and courts ordered restitution for 15,902 of these  offenders, or 74 percent. Table 2 shows the number of offenders  sentenced and the number ordered to pay restitution by offenses for  which restitution was most often and least often ordered by courts from  fiscal years 2014 through 2016.", "The percentage of federal offenders ordered to pay restitution varied  across federal court districts; from 2 percent of offenders in one district to  42 percent in another district. USAO officials we interviewed stated that  some of this variation may be due to the types of offenses prosecuted  within different districts. For example, officials from one USAO stated  that their office, which had a high volume of immigration\u2013related  offenders, had few cases in which restitution was applicable. Our analysis  of USSC data showed that from fiscal year 2014 through fiscal year 2016  and across all districts, districts with a higher than average rate of  immigration-related offenders had lower than average rates of restitution  ordered. Conversely, districts with above-average rates of offenders  convicted of financial offenses such as fraud, embezzlement, money  laundering, tax offenses, counterfeiting or bribery had higher than  average rates of restitution ordered, as shown in table 3.", "Judges indicated on documents sent to USSC that restitution was not  applicable and thus did not order it for most offenders sentenced from  fiscal years 2014 through 2016\u2014167,230 offenders\u2014or 78 percent of all  offenders sentenced during this time period. Our analysis of sentencing  information for the remaining offenders found that courts ordered  restitution at a higher rate as compared to all offenders. Specifically, after  excluding offenders for whom restitution was not applicable and were not  ordered to pay it, we found that courts ordered restitution for 70 percent of  the remaining 47,348 offenders.", "EOUSA and USAO officials told us that in cases where there are  identifiable victims, restitution may not be ordered for other reasons.  EOUSA officials told us that restitution may not be ordered for several  reasons, such as when victims provide no proof of their losses or when victims recover compensation through other means, such as through civil  proceedings. Further, officials from one USAO told us that victims must  provide documentation of their losses for restitution and, if victims are not  able to provide this documentation, courts may decline to order  restitution. Also, in certain cases, courts are not required to order  restitution\u2014such as when there is no identifiable victim or, on the other  hand, when the number of identifiable victims is so large as to make  restitution impractical, among other reasons. Additionally, the court might  not order, or order only partial restitution for other reasons, such as when  the value of property the defendant returned to the victim was deducted  from the restitution award or because the victim received compensation  from insurance."], "subsections": []}, {"section_title": "Data on Five Percent of Restitution Orders Were Incomplete", "paragraphs": ["If a court does not order restitution, or orders partial restitution, it is  required to provide the reason for its decision and to provide that reason  to USSC, but our analysis showed USSC did not always have these  data. Specifically, from fiscal years 2014 through 2016, we found that  restitution was not ordered\u2014and no reason was documented in USSC  data for that decision\u2014for 9,848 offenders (5 percent of the 214,578  offenders sentenced during this time period). Information on offenders\u2019  sentences, including restitution, assists USSC in its continuous  reexamination of its guidelines and policy statements and ensures that  various sentencing practices are achieving their stated purposes. Further,  Standards for Internal Control in the Federal Government state that  management should evaluate issues identified through monitoring  activities or reported by personnel to determine whether any of the issues  rise to the level of an internal control deficiency.", "In response to our questions about the missing information on reasons  why restitution was not ordered, AOUSC and USSC officials stated that  they were unaware of the missing information or why it was missing.  Judiciary officials stated that because various entities within the judiciary  participate in the process of collecting and recording information on  reasons restitution was not ordered, they did not know which entities  could take action to improve USSC data. However, as previously  discussed, if the court does not order restitution, or orders only partial  restitution, the judge must provide the reason, and judges usually do so in  a written Statement of Reasons form. The Judicial Conference, along  with USSC, has developed guidance to help judges fill out the Statement  of Reasons form and AOUSC supports the Judicial Conference in  carrying out its policies. Further, courts must provide USSC the written  Statement of Reasons form for sentences imposed. USSC is also  responsible for collecting, analyzing, and distributing information on  federal sentences provided by each district court, including information  related to orders for restitution. However, judicial officials, including from  the entities listed above, agreed that further studying the missing data  may inform the judiciary of the cause of the missing data, as well as any  efforts needed to improve USSC information.", "Courts are required to provide reasons for not ordering restitution and to  provide this information to USSC so that the agency can analyze and  report on sentencing data. Determining why USSC data are incomplete  could help inform the judiciary whether the issue rises to the level of an  internal control deficiency and whether additional action can be taken to  improve the transparency of sentencing decisions. Doing so could help  the judiciary ensure reasons for not ordering restitution are provided  consistently in all cases and potentially improve data provided to USSC,  in turn supporting its mission to promote transparency in sentencing  decisions."], "subsections": []}]}, {"section_title": "DOJ Collected $2.95 Billion in Restitution Debt from Fiscal Years 2014 through 2016, but Most Debt Remains Outstanding Due to Offenders\u2019 Inability to Pay", "paragraphs": [], "subsections": [{"section_title": "DOJ Generally Collected More on Newer Debts, Though Not All Collected Restitution Is Disbursed", "paragraphs": ["Our analysis of DOJ data showed that DOJ collected $2.95 billion in  restitution debt from fiscal years 2014 through 2016, half of which was  collected on debts imposed during this period. The extent of collections  across the 94 USAOs ranged from a high of $848 million in one USAO to  a low of $1.2 million in another USAO. The median amount collected for  USAOs was $10.7 million.", "DOJ was more successful at collecting restitution on newer debts\u2014debts  imposed from fiscal years 2014 through 2016. Of the $2.95 billion in  restitution debt collected, about half was collected from new debts  imposed by courts during this time period. Specifically, DOJ collected  $1.5 billion (4 percent), of the $34 billion ordered from fiscal years 2014  through 2016. The remaining half of the debt collected during this time  frame was collected from debts imposed between fiscal year 1988 and  fiscal year 2014.", "New debts\u2014imposed in fiscal years 2014 through 2016\u2014were also more  likely to be fully paid during this time period compared to all debts.  Specifically, from fiscal years 2014 through 2016, DOJ collected the full  amount of restitution on 4,003 of the 24,950 debts imposed during this  time, 16 percent. However, across all debts, including debts imposed  prior to fiscal year 2014, DOJ collected the full amount of restitution  ordered on only 5 percent of debts. Across all restitution debts, DOJ  collected at least some of the debt for one-third of debts and did not  collect any restitution on the remaining two-thirds.", "More than 60 percent of the restitution DOJ collected in fiscal years 2014  through 2016 was owed to non-federal victims ($1.8 billion), including  individuals, corporations and state and local governments. An additional  37 percent of restitution was collected on behalf of federal agencies that  were victims of crimes. One percent of restitution collected was  community restitution, which is restitution collected for drug offenses that  otherwise have no victims and which is disbursed to state victim  assistance agencies and state agencies dedicated to the reduction of  substance abuse, as shown in table 4.", "AOUSC officials noted that some collected restitution is not disbursed to  non-federal victims due to a lack of accurate contact information for these  victims. Specifically, according to AOUSC, as of June 2017, courts had  more than $132 million in restitution due to 113,260 victims that could not  be disbursed because of a lack of accurate contact information for these  victims. DOJ is required to provide courts with victim contact  information, and victims are to notify DOJ if their contact information  changes. However, AOUSC and USAO officials told us that this  notification by victims may not always occur. For example, officials in one  USAO told us that due to the length of court proceedings, victims may  move without notifying the court prior to the disbursement of restitution  and, as a result, the court is unable to disburse restitution to those  victims."], "subsections": []}, {"section_title": "Of $110 Billion in Outstanding Debt, 91 Percent Is Uncollectible Because Offenders Have Little Ability to Pay", "paragraphs": ["According to our analysis of DOJ data, at the end of fiscal year 2016,  $110 billion in restitution was outstanding and USAOs had identified $100  billion of that debt as uncollectible, as shown in figure 2. USAOs may  identify debts as uncollectible and suspend collection actions on a debt  for a variety of reasons, including that the offender has no, or only a  nominal, ability to pay the debt.", "Probation officials, EOUSA officials, and officials from five of six USAOs  we interviewed stated that most outstanding restitution debt is identified  as uncollectible and collection action is suspended because many  offenders have little ability to pay the debt\u2014a conclusion supported by  USSC data. For example, according to USSC data, 95 percent of  offenders ordered to pay restitution from fiscal years 2014 through 2016  received a waiver from paying a court-ordered fine, indicating their  inability to pay. While courts are allowed to take an offender\u2019s economic  circumstances into consideration when issuing fines, they generally may  not do so when ordering restitution. As a result, EOUSA and federal  probation officials with whom we spoke stated that offenders ordered to  pay restitution often do not have an ability to do so and therefore a large  amount of restitution orders is uncollectible."], "subsections": []}]}, {"section_title": "Select USAO Officials View DOJ\u2019s Recommended Practices for Requesting, Ordering and Collecting Restitution as Generally Effective", "paragraphs": ["Through various guidance documents, DOJ has identified and  recommended numerous practices for DOJ prosecutors and FLU staff to  use throughout the restitution process to help ensure full and timely  restitution for victims. USAO officials in all six offices with whom we spoke  stated that, based on their experience, these practices were generally  effective. Specifically, DOJ and EOUSA officials identified practices for  prosecutors and FLU staff to use when requesting restitution, facilitating  court orders for restitution, and collecting restitution and documented  these practices in several guidance manuals. Officials we interviewed  from all six USAOs stated they were generally satisfied with the guidance  from EOUSA and that they thought most of DOJ\u2019s recommended  practices were effective when requesting restitution, facilitating court  orders for restitution, and collecting restitution.", "Requesting restitution. Officials we interviewed from three USAOs  identified coordination between prosecutors and case investigators prior  to sentencing to identify victims and their losses as an important practice  for requesting restitution. USAO officials from three of the six offices  stated that gathering detailed information on an offender\u2019s financial  resources, which include assets that could be forfeited and used to pay a  restitution debt, was a very effective practice related to requesting  restitution.", "Facilitating court orders of restitution. Although the courts, and not  prosecutors, are responsible for ordering restitution, DOJ guidance  identifies several practices that prosecutors can use to facilitate orders of  restitution that may increase the likelihood of full and timely restitution for  victims. Officials from three of six USAOs stated that the most effective  practice related to ordering restitution was ensuring courts ordered  restitution as due and payable immediately. Specifically, when offenders  cannot pay restitution in an immediate lump-sum payment, the courts  must specify a payment schedule through which the offender will pay  restitution based on the offender\u2019s ability to pay. In these cases, USAO  officials stated that it is effective for prosecutors to ensure the restitution  order specifies that restitution is due and payable immediately. According  to an EOUSA official, this permits the agency to immediately pursue all  collection remedies allowed by law whenever the debtor has or  subsequently obtains the ability to pay.", "Collecting restitution. Officials from all six USAOs stated that using the  Treasury Offset Program (TOP), a program that allows for the reduction  or withholding of a debtor\u2019s federal benefits, such as a tax refund, was  one of the most effective practices for collecting restitution. Specifically,  officials in one USAO told us that TOP requires minimal effort for FLU  staff and can result in a high amount of collections. As an example,  officials from two USAOs told us their respective offices each recovered  more than $500,000 dollars in restitution debt in fiscal year 2016 through  TOP. Officials from three of the six offices also identified using wage  garnishment as an effective practice for collecting restitution.", "Across all parts of the restitution process, USAO officials we spoke with  also consistently identified DOJ recommended practices related to  internal and external communication and collaboration as effective for  improving the restitution process. Specifically, the officials identified  collaboration between various units in the USAO as an effective practice  to ensuring restitution for victims. For example, USAO officials in two of  the six offices highlighted coordination between Victim-Witness  coordinators and prosecutors to help identify victims and quantify their  losses as effective to assisting in the request for restitution. Additionally,  USAO officials in all six offices stated that strong coordination between  FLU personnel and criminal prosecutors to identify an offender\u2019s financial  resources and available assets was an effective practice to help ensure  FLU staff could collect restitution using those resources or assets.", "USAO officials from five of six offices identified external communication  between FLU and the federal probation office as an effective practice.  Specifically, officials from these USAOs stated that FLUs coordinating  with probation officers during the offender\u2019s supervision period to enforce  restitution terms was an effective practice for collecting restitution.  Additionally, according to EOUSA guidance, FLU staff can use outreach  and training with other partners such as the probation office to facilitate  information sharing on restitution collection issues and officials from five  of six USAOs told us that FLUs conducting training and outreach is a very  effective practice.", "In addition, probation officials we interviewed in each of the six federal  judicial districts we selected stated that ongoing communication between  USAO staff and probation officers is effective to ensuring victims are  identified and receive full and timely restitution. Probation officials from  one court district emphasized the importance of a good working  relationship with the USAO, stating that the probation office and USAO  are better able to ensure victims and their losses are accurately identified and defendants\u2019 ability to pay is adequately addressed when working  collaboratively. A probation official from another office said that probation  officers regularly coordinated with the USAO\u2019s FLU, and this coordination  was particularly important on cases involving complex financial crimes,  where the offender has a complicated financial portfolio. Further,  probation officials from five of six probation offices also stated that  attending training conducted by the FLU is a very effective practice.", "EOUSA and selected USAO officials told us that while these practices  may be useful in some circumstances, they may not be effective or  applicable in all cases or in all districts. Specifically, practices DOJ  recommends may be effective when offenders have the ability to pay  restitution but are simply unwilling to do so; however, USAO officials in  five of six offices stated that these practices cannot mitigate the fact that  many offenders lack the ability to pay restitution because they lack assets  and income. Additionally, while EOUSA guidance recommends that FLU  staff contact co-defendants or victims for information on the whereabouts  or assets of offenders who owe restitution, officials from three USAOs told  us this was not effective. According to one official, although co- defendants are sometimes eager to share information, the information is  usually unreliable. USAO officials also identified some recommended  practices as not applicable to their district. For example, EOUSA  recommends that FLU units request Asset Investigation assistance from  EOUSA for complex cases involving large amounts of valuable assets.  However, USAO officials in a small, rural district with whom we spoke  stated that the types of cases their office prosecutes tend not to be the  type of financial cases that warranted use of this resource."], "subsections": []}, {"section_title": "DOJ Could Improve Oversight of the Collection of Federal Restitution, Including the Use of Forfeited Assets to Pay Restitution Debt DOJ Does Not Have Measures or Goals to Assess Performance in the Collection of Restitution", "paragraphs": ["DOJ has identified improving debt collection\u2014including court-ordered  restitution\u2014as a major management initiative in its 2014-2018 Strategic  Plan. However, it does not have any measures or goals in place to  assess its performance in meeting this initiative or meet requirements that  it evaluate its performance in seeking and recovering restitution as  required by statute. In 2001, we recommended that DOJ adequately  measure its criminal debt collection performance against established  goals to help improve collections and stem the growth in uncollected  criminal debt. DOJ concurred with this recommendation, and as of fiscal  year 2003, annually assessed each district based on established  collection goals for that district. However, as of September 2017, DOJ  no longer evaluates each district based on established goals. EOUSA  officials stated that DOJ no longer uses these performance goals and that  the agency did not maintain records for when or why it stopped.", "EOUSA officials stated that while the agency does not have any  measures or goals to assess USAOs\u2019 performance in improving debt  collection, including the collection of federal restitution, they are working  with DOJ\u2019s Justice Management Division to develop a suite of analytical  tools to monitor the collection of debt across all offices. According to DOJ,  some of these analytical tools have been implemented and additional  tools will be implemented by March 2018. EOUSA officials stated that  these tools will help the agency determine which cases are most likely to  result in significant collections and the types and timing of enforcement  actions that generate maximum debt recovery results. EOUSA officials  further stated the analytical tools will allow the agency to compare  districts\u2019 efforts based on a variety of factors (e.g., caseload, staff size,  and enforcement actions). These analytical tools may provide EOUSA  with valuable insight into the present condition of the collection of  restitution across USAOs, but they will not provide DOJ with a baseline  performance standard that could be used to indicate if USAOs\u2019 efforts to  collect restitution debts are having a measurable impact in meeting DOJ\u2019s  objective of improving debt collection.", "Additionally, EOUSA conducts evaluations of each USAO every 4 years,  which include a review of FLU operations, but EOUSA officials stated that  these reviews do not include oversight of the collection of restitution.  Among other aspects of USAO operations, these internal evaluations  review the extent to which each FLU is complying with statutory and DOJ  requirements related to debt collection, has sufficient program resources,  and adequately manages its caseload. However, DOJ and EOUSA  officials told us that it did not plan to use these internal evaluations to  meet the Justice for All Reauthorization Act of 2016 requirement to  evaluate each USAO on its performance in seeking and recovering  restitution for victims. Specifically, the officials stated that these internal  evaluations are not an appropriate mechanism to meet the law\u2019s  requirements because the internal evaluations do not specifically review  the seeking and recovery of restitution for victims. According to DOJ  officials responsible for the internal evaluation program, these evaluations  are largely intended to provide onsite management assistance and  analysis of how the USAO allocates its administrative and legal personnel  resources rather than the office\u2019s efficacy in collecting restitution.", "Consistent with requirements outlined in the Government Performance  and Results Act Modernization Act of 2010 (GPRAMA), performance  measurement is the ongoing monitoring and reporting of program  accomplishments\u2014particularly towards pre-established, objective and  quantifiable goals\u2014and agencies are to establish performance measures  to assess progress towards those goals. While GPRAMA is applicable  to the department or agency level, performance measures and goals are  important management tools at all levels of an agency, including the  program, project, or activity level. Agencies can use performance  measurement to make various types of management decisions to  improve programs and results, such as developing strategies and  allocating resources, including identifying problems and taking corrective  action when appropriate. Further, the Justice for All Reauthorization Act  of 2016 requires DOJ to evaluate each USAO in its performance in  recovering restitution for victims.", "DOJ and EOUSA officials told us that DOJ does not require USAOs to  establish performance measures or goals to assess their progress in  improving the collection of restitution. DOJ and EOUSA officials also told  us that each USAO could develop performance goals but that they were  unaware of the extent to which USAOs did so, and further, they do not  track the extent to which USAOs met performance goals. Additionally,  these officials stated that because each USAO faces different constraints  in its ability to collect restitution, establishing a uniform and consistent  performance measure and goal would be challenging. EOUSA officials  noted that some USAOs may have more resources, such as more FLU  staff or specialized asset investigators, available to pursue collections as  compared to other offices and therefore offices with fewer resources  could have difficulty meeting a performance goal. Further, EOUSA and  USAO officials stated that the extent to which DOJ can collect on a debt  is heavily influenced by factors outside of the agency\u2019s control, such as  an offender\u2019s ability to pay.", "USAOs could use information provided by performance measures and  goals\u2014such as an office\u2019s ability to meet a performance goal\u2014to make  managerial decisions to help address these constraints, such as by  increasing the allocation of staff resources. Further, to avoid comparing  USAOs to a nationally set performance goal that does not account for  specific constraints faced by each office, DOJ could\u2014as it did in fiscal  year 2003\u2014require each USAO to establish its own objective,  quantitative collection goals based on historical, district-specific collection  statistics. Finally, as previously discussed, each USAO already accounts  for external factors that affect the collectability of a debt, such as an  offender\u2019s ability to pay, by suspending collection action on debts it  identifies as uncollectible. Therefore, any performance measures and  goals developed could be based solely on debts that the USAO already  has determined to be collectible.", "Stakeholders we interviewed\u2014including officials from one USAO,  probation officials in two districts, and officials with DOJ\u2019s Office of Crime  Victims\u2014noted that receiving restitution is both emotionally and  financially important to victims. Specifically, officials from one USAO and  one probation office noted that while many victims may never receive the  full amount of restitution ordered, receiving even a minimal amount of  restitution is a symbolic victory and that it is important for victims to know  the government is making efforts to collect restitution on their behalf. The  legislative history of the MVRA echoes these sentiments, providing that  even nominal restitution payments have benefits for the victim of crime,  and that orders of restitution are largely worthless without enforcement.  Yet, according to our analysis, $10 billion of restitution debt DOJ identified  as collectible remained outstanding at the end of fiscal year 2016.  Further, the extent to which USAOs collected restitution varied widely\u2014 from a high of one USAO district collecting nearly 350 percent of all  collectible debt in fiscal years 2014 through 2016 to a low of one district  collecting less than one percent of collectible debt in the same period.", "Without performance measures, including the establishment of goals,  DOJ cannot assess if this variation is due to factors outside the control of  USAOs or due to management deficiencies that require corrective action.", "Developing performance measures and goals for each USAO related to  the collection of restitution would allow DOJ to assess its progress in  achieving its major management initiative in improving debt collection\u2014 including debts owed to victims as court-ordered restitution. Doing so  would also better position DOJ to meet the requirements of the Justice for  All Reauthorization Act of 2016 to evaluate offices in their performance in  recovering restitution on behalf of victims and to use performance  information to improve the practices of offices as needed."], "subsections": [{"section_title": "DOJ Could Improve Its Information on Forfeited Assets Available for Victims", "paragraphs": ["Although asset forfeiture and restitution are separate parts of a criminal  sentence, DOJ guidance states that using forfeited assets to benefit  victims is a way that DOJ can help ensure eligible victims of crime are  compensated for their losses. Further, DOJ regulations and policy  require that eligible victims receive compensation from forfeited assets  before certain other uses, such as official use or equitable sharing.  However, while DOJ tracks the amount of compensation provided to  victims through forfeited assets, it does not have assurances that forfeited  assets are being used to compensate victims to the greatest extent  possible.", "According to DOJ information, the agency made payments of about $595  million to eligible victims other than owners of the property from the  Assets Forfeiture Fund from fiscal years 2014 through 2016, or 15  percent of $3.9 billion in paid expenditures during this period, as shown in  table 5.", "As table 5 shows, DOJ can account for cases in which forfeited assets  were used to compensate eligible victims who were not owners or  lienholders. However, DOJ does not have information on the overall  universe of victims who could have been eligible to receive compensation  from forfeited assets. Further, it does not have insight into any reasons  why funds from forfeited assets were not used for these victims.  Specifically, DOJ officials stated that the department collects information  on whether victims have been identified in cases associated with forfeited  assets, and if restitution is anticipated in these cases, but it does not track  the extent to which these victims were ultimately compensated using  forfeited assets. Further, DOJ also does not collect information on  reasons why victims were not compensated using funds from forfeited  assets. While DOJ is required to use forfeited assets to compensate  victims before using those assets for certain other purposes, the agency  is unable to provide assurances that it is always doing so because it does  not have information on the overall universe of victims or reasons why  victims were not compensated using forfeited assets. As a result, DOJ  does not have a basis to know whether the $595 million provided to  victims from fiscal years 2014 through 2016 is the maximum amount of  compensation the agency could have provided to victims using forfeited  assets.", "Full use of forfeited assets for victim compensation has long been, and  continues to be, a goal of DOJ. In 2005, an interagency task force\u2014led  by DOJ and including the Department of Treasury, Office of Management  and Budget and AOUSC\u2014developed a strategic plan to improve the  collection of criminal debt. Among other goals included in its strategic  plan, the task force stated a goal of examining how asset seizure and  forfeiture procedures can be used to maximize recoveries for victims.  More recently, DOJ reported in its 2014-2018 Strategic Plan that it would  make every effort to recover full and fair restitution for victims using the  federal forfeiture statutes to preserve and recover criminal proceeds.  Specifically, DOJ stated that using federal forfeiture statutes to recover  full and fair restitution for victims is one part of its strategy to protect the  rights of the American people and enforce the rule of law. Finally, DOJ  officials told us they considered providing compensation to victims as one  goal of the Asset Forfeiture Program and EOUSA stated in guidance that  asset forfeiture is the most widely available and effective tool to seize  assets for restitution purposes. Standards for Internal Control in the  Federal Government call on federal managers to design control activities  to achieve the agency\u2019s objectives. These controls can include using  quality information to make informed decisions, evaluate the entity\u2019s  performance in achieving key objectives, and address risks.", "DOJ officials told us that they do not track the extent to which victims  were not compensated using forfeited assets because USAO staff are not  required to request that these assets be used for victim compensation.  DOJ officials explained that staff are required to indicate in the agency\u2019s  forfeited asset database, the Consolidated Asset Tracking System, if  victims exist in cases associated with forfeited assets and if restitution is  anticipated in these cases. However, these officials stated that staff are  not required to then compensate these victims using the forfeited assets  or to indicate why these assets were not used for this purpose. DOJ  officials told us that decisions to compensate victims using forfeited  assets are best left to the judgment of the USAO staff familiar with the  case, such as the prosecuting attorney or asset forfeiture staff.", "DOJ officials pointed to informal communication and coordination among  prosecutors, the FLU, and the Asset Forfeiture unit in each USAO as a  means to provide compensation to victims as appropriate. However,  communication and coordination among these groups has been a  challenge for USAOs, as the DOJ Inspector General found in a June  2015 review of DOJ\u2019s debt collection program. Similarly, during our  current review, EOUSA and USAO officials we spoke with identified  communication and coordination as an area for improvement. EOUSA  officials told us that while they thought that FLU staff and Asset Forfeiture  unit staff were collaborating more frequently to use forfeited assets to  collect restitution debts since the issuance of the DOJ Inspector General\u2019s  report, the extent of collaboration between these two units still varied  across USAOs. Further, officials we talked to in two USAOs and one  probation office noted that USAO staff could improve their use of forfeited  assets for restitution payments. For example, officials in one probation  office noted that it was their practice to identify forfeited assets that could  be used for compensation in the PSR because they had observed that  USAO staff were frequently not applying such assets to victim  compensation.", "While DOJ may allow USAO staff to use discretion when requesting  restoration or alerting victims to assets available for compensation,  increasing the agency\u2019s understanding of the extent to which assets could  have been\u2014but were not\u2014used for victim compensation, and the  reasons for those decisions, does not affect that discretion. There are  legitimate reasons why victims might not be compensated using forfeited  assets; for example, the assets may have other owners or lienholders that  must be compensated prior to victims, or offenders may have other  means by which to pay victims restitution. However, there are also  instances where victims may have not received compensation through  forfeited assets as a result of unintentional circumstances. For example,  according to DOJ\u2019s Asset Forfeiture Manual, forfeiture actions can  proceed faster than the parallel criminal case. Consequently, assets  might be equitably shared, placed into official use, or remitted to victims  who file petitions long before restitution is ordered, and therefore would  not be available for other victims who wait for restitution to be ordered  after an offender is sentenced. To avoid this outcome, DOJ recommends  that USAOs coordinate to ensure the retention of property for victim  compensation. However, although DOJ officials responsible for leading  DOJ\u2019s asset forfeiture efforts highlighted the need for expedient  coordination when USAO staff are considering using forfeited assets to  compensate victims, they stated this may not always occur. As a result,  otherwise eligible victims may not always be compensated through  forfeited assets.", "By gathering information about the extent to which assets were used for  victim compensation\u2014including when they were not used and reasons  why not\u2014DOJ could have a better understanding of potential instances  where victims could be, but are not, receiving compensation through  forfeited funds and could take steps to address them accordingly. Options  for gathering such information could include doing a one-time  retrospective study of forfeited assets with victims or anticipated  restitution to determine the extent that assets were used for victim  compensation, or creating a tracking mechanism through its forfeited  assets database, or another system.", "Gathering information on the extent to which forfeited assets were used  for victim compensation, including when not used and reasons why not,  could position DOJ to take action to increase the use of these assets for  victim compensation if warranted. These actions could include providing  funds for increased asset forfeiture staff in USAOs, providing additional  training or changing policies or procedures for using forfeited assets to  compensate victims. Fully and systematically understanding the extent to  which issues, such as a lack of coordination within USAOs, result in  victims not being compensated using forfeited assets would give DOJ a  basis upon which to develop improvements to the Asset Forfeiture  Program. Such information would also provide DOJ and staff at all  USAOs with information to evaluate its performance in achieving one of  the goals of the Asset Forfeiture Program and taking action to meet the  agency goal of protecting the rights of the American people\u2014including  the right to full and fair restitution for victims."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Restitution serves the criminal justice goal of holding offenders  accountable and, to the extent possible, restoring victims of federal  crimes to their prior position had the crime not occurred. Many victims are  unlikely to receive any meaningful portion of court-ordered restitution  owed to them because of offenders\u2019 inability to pay these debts. However,  the fact that restitution is difficult to collect does not negate the important  responsibilities of the judiciary and DOJ to properly manage and oversee  all aspects of the restitution process.", "By law, courts are to state why they did not order restitution and provide  that information to USSC. While this information was collected and  recorded in USSC data for most offenders, we found that this information  was missing for thousands of offenders. It is important for the judiciary to  ensure that this information is consistently collected and recorded to  assist USSC in its continuous re-examination of its guidelines and policy  statements and ensure that various sentencing practices are achieving  their stated purposes. The judiciary could support USSC in this endeavor  by determining why this information is missing. Results from this study  could help inform the judiciary whether this issue rises to the level of an  internal control deficiency and whether additional action can be taken to  improve the transparency of sentencing decisions.", "While DOJ has delegated collection activities for restitution to USAOs, it  could provide better oversight to ensure it is making reasonable efforts to  collect restitution and meeting its responsibility to victims. USAOs have  identified a significant portion of outstanding restitution debt as  uncollectible, but they have also identified $10 billion of outstanding  restitution debt that could be collected. Developing and implementing  performance measures and goals for each USAO would allow DOJ to  gauge USAOs\u2019 success in collecting this restitution and, by extension, the  department\u2019s success in achieving its major management initiative to  increase the collection of debt. Further, DOJ could use performance  information to improve the practices of offices in seeking and recovering  restitution, consistent with a requirement in the Justice for All  Reauthorization Act of 2016.", "Finally, DOJ could gain greater visibility into the use of forfeited assets to  compensate victims by gathering information on cases in which victims  have been identified and restitution is anticipated but forfeited assets are  not used, and any reasons why. Doing so would better position DOJ to  take action to increase the use of forfeited assets to compensate eligible  victims if warranted and to provide assurance that it is maximizing the use  of asset forfeiture in satisfying restitution debts, one of the agency\u2019s most  effective mechanisms for satisfying restitution."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making three recommendations, including one to the judiciary and  two to DOJ. Specifically:  Judiciary officials, including AOUSC, USSC, and the Judicial Conference,  should determine why USSC data on the reasons restitution was not  ordered are incomplete. Additionally, if warranted based on this  information, judiciary officials should take action to ensure USSC data  records include all required information for orders of restitution.  (Recommendation 1)", "To improve oversight of the collection of restitution we recommend that  the Attorney General:", "Develop and implement performance measures and goals for each  USAO related to the collection of restitution, and measure progress  towards meeting those goals. (Recommendation 2)", "In cases where forfeited assets were not used to compensate victims,  gather information on reasons why forfeited assets were not used for  victims. If warranted based on this information, take action to increase  the use of forfeited assets to compensate eligible victims.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to DOJ, the  Judicial Conference of the United States, AOUSC, USSC, and the  Federal Judicial Center. DOJ concurred with our recommendations and  provided technical comments, which we incorporated as appropriate.  AOUSC provided written comments, which are reproduced in appendix  III. In its written comments, AOUSC noted that it would work with the  USSC to address our recommendation.", "We are sending copies of this report to the appropriate congressional  committees and the Attorney General, the Judicial Conference of the  United States, the Directors of AOUSC, the Staff Director of USSC, the  Federal Judicial Center and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you and your staff have any questions about this report, please contact  me at (202) 512-8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Number and Percentage of Federal Offenders Ordered to Pay Restitution, Fiscal Years 2014 through 2016", "paragraphs": ["According to our analysis of data from the U.S. Sentencing Commission  (USSC), 214,578 federal offenders were sentenced from fiscal years  2014 through 2016. Table 6 shows the number of offenders sentenced  and the number and percentage of offenders ordered to pay restitution for  each primary offense of conviction in fiscal years 2014 through 2016."], "subsections": []}, {"section_title": "Appendix II: Views on DOJ-Recommended Restitution Practices from Officials in Selected in U.S. Attorneys\u2019 Offices", "paragraphs": ["The Department of Justice (DOJ) has identified and recommended  numerous practices for federal prosecutors and Financial Litigation Unit  (FLU) staff to use throughout the restitution process through various  guidance documents. We conducted semi-structured interviews with  officials from six U.S. Attorneys\u2019 Offices (USAO) to obtain their views on  the restitution process and the extent to which they believed DOJ- recommended restitution practices related to the restitution process were  effective. In particular, we spoke with USAO officials from the District of  Connecticut; the Southern District of California; the District of New Jersey;  the Southern District of Ohio; the District of South Dakota; and the District  of Wyoming.", "Tables 7 through 9 show the results of our semi-structured interviews. In  particular, table 7 shows practices related to requesting restitution and the  extent to which USAO officials found these practices effective. Table 8  shows practices related to facilitating orders of restitution and the extent  to which USAO officials found these practices effective. Table 9 shows  practices related to collecting restitution and the extent to which USAO  officials found these practices effective. Each table also indicates  practices that officials we interviewed considered as most important or  effective for helping ensure victims receive full and timely restitution."], "subsections": []}, {"section_title": "Appendix III: Comments from the Administrative Office of the U.S. Courts", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Chris Ferencik (Assistant  Director); Kathleen Donovan (Analyst-in-Charge); Enyinnaya David Aja;  David Alexander; Lacinda Ayers; Carla Brown; Emily Hutz; Janet Temko- Blinder; and Adam Vogt, made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-99", "url": "https://www.gao.gov/products/GAO-19-99", "title": "Army Corps of Engineers: Budget Requests Included Construction Projects Located in Over 30 States, Selected Using a Multi-level Process", "published_date": "2018-12-19T00:00:00", "released_date": "2018-12-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Through its civil works program, the Corps plans, designs, constructs, operates, and maintains a range of water resources projects for purposes such as aquatic ecosystem restoration, flood risk management, and navigation. To support these projects, the Corps requests funding through the annual budget and appropriation process. For fiscal year 2017, the President's budget requested $4.6 billion for Corps' water resources projects, of which about $1 billion was for construction projects.", "GAO was asked to review budget requests for construction projects under the Corps' civil works program, including the geographic distribution of those projects. This report examines for fiscal years 2008 through 2017 (1) the geographic distribution of the construction projects included in the President's budget requests for the Corps, and (2) how the Corps prioritized such projects for inclusion in the President's budget requests. GAO summarized available budget data for fiscal years 2008 through 2017; reviewed the Corps' budget guidance and documents; mapped locations for construction projects in budget requests for years when sufficient information was available; and interviewed Corps headquarters and division officials."]}, {"section_title": "What GAO Found", "paragraphs": ["For fiscal years 2008 through 2017, construction projects included in the President's budget requests to Congress for the U.S. Army Corps of Engineers (Corps) were geographically distributed in 31 states, the District of Columbia, and Puerto Rico. During this 10-year period, the President requested over $12.9 billion for 164 construction projects included in the Corps' three main missions\u2014aquatic ecosystem restoration, flood risk management, and navigation. The Corps provided GAO with detailed information on the location of construction projects included in the budget requests for the 3 most recent fiscal years at the time of its review\u20142015 through 2017. These projects, shown in the figure below, spanned 26 states and Puerto Rico. They were typically located near sources of water or Corps-constructed water infrastructure.", "To prioritize construction projects to include in the President's budget requests for fiscal years 2008 through 2017, the Corps used a process involving each of its three organizational levels\u2014districts, divisions, and headquarters. Districts divided projects into work packages and assigned 1 of 6 priority levels to indicate the order in which work packages from the same project should be completed. Districts grouped these work packages by business line or appropriations account based on the Corps' budget guidance for the fiscal year and then ranked them. Then Corps divisions and headquarters ranked the work packages. To assign rankings, Corps officials applied criteria specific to the business line of each project. These criteria often varied by fiscal year to address changes to policy guidance. Across the organization, Corps officials ranked more than 25,000 packages for fiscal year 2017. After assigning rankings, headquarters developed final budget recommendations to submit to the Assistant Secretary of the Army for Civil Works, who in turn provided the recommendations to the Office of Management and Budget for review and potential inclusion in the President's budget requests."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report. The Department of Defense stated that they had no comments on the draft report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Army Corps of Engineers (Corps) is one of the world\u2019s largest  public engineering, design, and construction management agencies. The  Corps provides public engineering services across the nation and the  world to strengthen the nation\u2019s security, protect and manage aquatic  ecosystems, reduce risks from disasters, and support commerce. More  specifically, through its civil works program, the Corps plans, designs,  constructs, operates, and maintains water resources projects to address  the three primary missions of the program: (1) restoration, protection, and  management of aquatic ecosystems; (2) flood risk management; and (3)  support of commercial navigation.", "The Corps seeks funding for these water resources projects through the  annual budget and appropriations process. Under this process, the Corps  prioritizes projects to recommend for inclusion in the President\u2019s annual  budget request to Congress. The Assistant Secretary of the Army for Civil  Works reviews the Corps\u2019 requested funding amounts and selected  projects before submitting the finalized recommendation to the Office of  Management and Budget (OMB). OMB reviews the recommendation  before submitting the Corps\u2019 budget request to the President for review  and approval. The fiscal year 2017 budget presentation for the Corps  stated that the President\u2019s budget requested $4.62 billion in discretionary  funding for water resources projects under the Corps\u2019 civil works  program. Of this total, the President\u2019s budget request included $1.09  billion for the Corps\u2019 construction account; the remainder was largely for  operations and maintenance of existing infrastructure. In fiscal year  2017, Congress appropriated $1.88 billion for the Corps\u2019 construction  account, of which $985.6 million was to be used for to specific projects.", "You asked that we review the budget requests for construction projects  under the Corps\u2019 civil works program, including the geographic  distribution of those projects. This report examines, for fiscal years 2008  through 2017, (1) the geographic distribution of the construction projects  included in the President\u2019s budget requests for the Corps and (2) how the  Corps prioritized construction projects for inclusion in the President\u2019s  budget requests.", "To examine the geographic distribution of the construction projects  included in the President\u2019s budget requests for the Corps, we obtained  and summarized descriptive data on construction projects\u2014such as  project name, state, business line, and requested funding amount\u2014 included in the budget requests from the Corps\u2019 annual Press Books and  Congressional Budget Justifications for fiscal years 2008 through 2017.  Our work focused on the projects that the Corps prioritized within the  construction appropriations account\u2019s three main business lines, which  correspond to the three primary missions of the civil works program.  These three main business lines are aquatic ecosystem restoration, flood  risk management, and navigation. We also obtained detailed data from  the Corps on the locations of the construction projects included in the  budget requests. The detailed data we obtained was limited to fiscal  years 2015 through 2017 because the Corps did not maintain the data for  earlier years in its current database for budget development\u2014the Civil  Works Integrated Funding Database\u2014and did not maintain the historic  data in an accessible form. We analyzed the detailed data to map the  locations of projects within states and Corps regional divisions. To assess the reliability of the detailed data and the descriptive data, we  conducted electronic testing and compared the descriptive data with  information from the annual Press Books; we found that they were  sufficiently reliable for the purposes of our reporting objectives. We also  interviewed Corps headquarters and division officials about the  geographic distribution of the projects included in the President\u2019s budget  requests.", "To examine how the Corps prioritized construction projects for inclusion in  the President\u2019s budget requests for fiscal years 2008 through 2017, we  reviewed federal and Corps guidance on methods for evaluating  construction projects. We reviewed and summarized the Corps\u2019 policy  guidance for budget development (budget guidance) from fiscal year  2008 through fiscal year 2017, along with the guidance\u2019s annexes and  business-line-specific appendixes, on the process and criteria for  evaluating and prioritizing construction projects in the Corps\u2019 three main  business lines for inclusion in the budget requests. We also reviewed  additional guidance from the Assistant Secretary of the Army for Civil  Works on how to prepare the Corps\u2019 budget requests. We compared the  Corps\u2019 budget guidance across fiscal years 2008 through 2017 and  tracked differences in the eligibility criteria and business-line-specific  criteria. We interviewed Corps headquarters officials to gain perspective  on any significant changes in the guidance, process, or criteria used. We  interviewed and obtained information from Corps headquarters and  division officials responsible for prioritizing projects for the budget  requests, as well as from officials in the Assistant Secretary\u2019s office,  about the application of the criteria and factors to consider when  preparing the budget requests for fiscal years 2008 through 2017.", "We conducted this performance audit from April 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Headquartered in Washington, D.C., the Corps has eight regional  divisions and 38 districts that carry out its domestic civil works\u2019 program  (see fig. 1). Corps headquarters primarily develops policies based on  administration guidance; plans the direction of the organization; and  approves projects to recommend for inclusion in the President\u2019s annual  budget request to Congress. The divisions approve projects for  submission to headquarters and coordinate projects within their districts,  while the districts plan and implement the projects. The Corps\u2019  construction appropriations account has three main business lines\u2014 aquatic ecosystem restoration, flood risk management, and navigation\u2014 that correspond to the three primary missions of its civil works program.  Some projects may be multipurpose and fit into more than one business  line within the program.", "For fiscal years 2008 through 2017, the President\u2019s budgets requested  about $4.78 billion per year, on average, in discretionary funding for the  Corps\u2019 civil works program to plan, construct, operate, and maintain a  wide range of water resources projects (see fig. 2). Of this total, the  budget requested an average of about $1.39 billion total per year for  construction projects in the aquatic ecosystem restoration, flood risk  management, and navigation business lines.", "The total construction amounts in Corps budget documents include  funding for the hydropower business line; hydropower funding is  represented in the other discretionary funding in this figure. We excluded  those funding amounts from our business line totals, in part because  these projects are now mainly funded through the operations and  maintenance account. They represented less than 4 percent of the  construction account requests from fiscal years 2008 through 2017.", "Discretionary funding refers to the level of budget authority, outlays, or  other budgetary resources (other than those for mandatory programs)  that is provided in, and controlled by, appropriation acts."], "subsections": []}, {"section_title": "Construction Projects Included in the President\u2019s Budget Requests for the Corps Located In Over Half of the States", "paragraphs": ["For fiscal years 2008 through 2017, the President\u2019s budget requests for  the Corps included 164 construction projects located in 31 states, the  District of Columbia, and Puerto Rico. The five states for which the most  funds were requested in this period were:", "Florida, with $2.4 billion requested for 15 construction projects,  Illinois, with $2.3 billion requested for 15 construction projects,", "California, with $1.6 billion requested for 24 construction projects,", "Washington, with $924 million requested for 9 construction projects,", "Kentucky, with $646 million requested for 6 construction projects.", "The projects in these five states accounted for 61 percent of the $12.9  billion that the President requested for Corps construction projects in  these years. Figure 3 shows the total number of construction projects and  funds included in the President\u2019s budget requests for fiscal years 2008  through 2017, by state, within the Corps\u2019 three main business lines\u2014 aquatic ecosystem restoration, flood risk management, and navigation.  See appendix I for the number of construction projects and funds  requested for each fiscal year during this period, by state. See appendix II  for a list of the names of construction projects, locations, business lines,  and funds requested per year during this period.", "For fiscal years 2015 through 2017, the Corps provided us with detailed  data for the construction projects included in the President\u2019s budget  requests. This information included latitudinal and longitudinal  coordinates to locate projects within states and divisions, as well as  business-line-specific data. A total of 71 projects were included in the  budget requests for these business lines during this period. Construction  projects included in the President\u2019s budget requests for the Corps\u2019 three  main business lines for fiscal years 2015 through 2017 were  geographically distributed in 26 states and Puerto Rico. According to our  analysis of Corps budget data, most of the projects were near either  water sources or Corps-constructed water infrastructure. Figure 4, which  is an interactive map, identifies the locations and describes budget data  for each construction project (see interactive instructions). See appendix  III for a list of these construction projects by Corps division, state,  business line, and funds requested for each fiscal year.", "Corps headquarters officials said that the Corps does not specifically use  geographic locations to select construction projects to recommend for  inclusion in the President\u2019s budget requests. However, Corps officials  explained that geographic characteristics, such as population, might have  affected how they considered including construction projects within  specific business lines. For example, Corps officials within the flood risk  management business line may have considered a construction project  located in a population center that could be severely impacted by a  flooding event to be a higher priority over other projects in less populated  areas.", "For fiscal years 2015 through 2017, the Corps requested more than $3  billion for the 71 construction projects that fell within the three main  business lines:", "Aquatic ecosystem restoration. The President\u2019s budget requested  $618 million for 15 Corps construction projects in the aquatic  ecosystem restoration business line, which were located in California,  Florida, Georgia, Illinois, Louisiana, Maryland, Minnesota, Oregon,  and Washington. According to the Corps budget guidance, these  projects were located in areas of federal significance that have some  degree of habitat scarcity, connectivity, and special-status species,  among other characteristics. Moreover, according to the Corps  budget guidance, construction projects in this business line  emphasize the restoration of nationally or regionally significant  habitats where the solution primarily involves modifying the hydrology  and geomorphology. For example, the goals of the South Florida  Ecosystem Restoration program\u2014a collection of several projects\u2014 includes improving the health of over 2.4 million acres of the south  Florida ecosystem (including Everglades National Park), enhancing  water supply, and maintaining flood mitigation, according to a Corps  document and Corps officials. According to a Corps document,  since 2000, the Corps has invested a total of $2.4 billion in the  program including other initiatives, such as the Comprehensive  Everglades Restoration Plan and Central and Southern Florida.", "Flood risk management. The President\u2019s budget requested $1.33  billion for 33 Corps construction projects in the flood risk management  business line, which were located in California, Florida, Illinois,  Kansas, Kentucky, Massachusetts, Missouri, New Jersey, Ohio,  Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, and West  Virginia. According to the Corps\u2019 budget guidance and strategic plan,  these projects are located in areas that may experience riverine and  coastal flooding, and they are to provide water supply storage. For  example, the Bluestone Lake project, in West Virginia, is to address  deficiencies that could lead to a breach of a dam built by the Corps in  the 1940s. According to the Corps, the dam\u2019s spillway cannot  discharge enough water without substantially increasing the potential  for a breach of the dam. According to the Corps, a breach could  cause catastrophic flooding along the largest river valleys in West  Virginia, including locations of major manufacturing and chemical  industries, and put 165,000 lives at risk. The Corps started the project  in 1998, and plans to award the next phase of the project in 2022. A  draft supplementary study has been completed to identify a plan to  address this additional deficiency, according to the Corps. The Corps  is planning for a 10-year construction period, with an estimated cost of  $575 million, according to a Corps document and a headquarters  official.", "Navigation. The President\u2019s budget requested $908 million for 20  Corps construction projects in the navigation business line, which  were located in coastal, inland, and intracoastal navigation systems in  California, Georgia, Illinois, Louisiana, Missouri, New Jersey, New  York, Ohio, Oregon, South Carolina, Texas, Virginia, Washington, and  Wisconsin. According to Corps\u2019 budget guidance, these projects are  intended to provide safe, reliable, cost-effective and environmentally  sustainable waterborne transportation systems for the movement of  commercial goods. For example, the Corps\u2019 Olmsted Locks and Dam  project is located on the Ohio River, which connects to the  Tennessee, Cumberland, and Mississippi rivers and is considered  critical for commercial navigation. According to the Corps, the project  consists of two 110-foot by 1,200-foot locks, which are located  adjacent to the Illinois bank, and a dam comprising of five tainter  gates, which control the amount of water that flows downstream.  According to a Corps document, over the last several years,  approximately 80 million tons of bulk commodities (for example, coal,  grain, rock, and sand) per year, on average, have passed through  navigation structures that are part of the project. The Corps estimates  that this project has been under construction for nearly 30 years.", "According to Corps documents and headquarters officials, the project  became operational as of September 2018, with a total estimated cost  of $3 billion by the time of project completion."], "subsections": []}, {"section_title": "Corps Used a Multi- level Process to Prioritize Construction Projects", "paragraphs": ["To prioritize construction projects to recommend for inclusion in the  President\u2019s budget requests for fiscal years 2008 through 2017, the Corps  used a process involving the three levels of its organization\u2014districts,  divisions, and headquarters."], "subsections": [{"section_title": "Districts Prepared Work Packages for Ranking", "paragraphs": ["To begin the process, Corps district officials divided projects into work  packages\u2014increments of work that can be considered for inclusion in the  budget. According to Corps policy guidance for budget development  (budget guidance), these work packages should contribute to the overall  project and be executed without being dependent on the funding of  additional work packages. According to a district official, district officials  then assigned one of six priority levels to indicate the order in which work  packages for the same project should be completed for that fiscal year.  Priority levels are categories used to differentiate work packages within  the same project. Corps budget guidance instructed district officials to  assign priority levels based on criteria including whether a project is new  or continuing and where a work package falls within a project\u2019s overall  work plan. Corps budget guidance also instructed officials to group work  packages either by business line or appropriations account, depending on  the fiscal year, based on the budget guidance for that fiscal year."], "subsections": []}, {"section_title": "Districts, Divisions, and Headquarters Ranked Work Packages", "paragraphs": ["Corps districts, divisions, and headquarters consecutively ranked the  work packages, as shown in figure 5. In doing so, they established criteria  specific to the business line for each project. Corps budget guidance  provided instructions on which criteria to use for each business line to  determine rankings in a particular year. The ranking criteria in the  guidance\u2014such as the rate of economic return, populations at risk, or the  environmental impact\u2014varied nearly every year from fiscal years 2008 to  2017 for two of the three main business lines: flood risk management and  navigation (see appendix IV for the criteria used, by business line and  fiscal year). Corps officials said they routinely revised the criteria while  developing the annual budget guidance, for reasons such as addressing  changes in the policy guidance from the Assistant Secretary of the Army  for Civil Works or OMB, or improving the ranking process.", "Corps officials we interviewed noted that although each level used the  same criteria to rank work packages, the districts, divisions and  headquarters had different focuses and increasing numbers of work  packages to rank and compare. Specifically, officials at each level  considered the overall needs of their respective jurisdictions when making  ranking decisions: districts had a local focus; divisions had a regional or  watershed focus; and headquarters had a national focus. The number of  work packages to be ranked increased at each level according to Corps  officials: districts ranked local work packages; divisions re-ranked work  packages from four to seven districts; and headquarters re-ranked work  packages from all of the divisions nationwide.", "After ranking all work packages within their respective jurisdictions by  business line or appropriations account, officials from all three levels  entered the rankings into the database for use in the budget review  process. According to information from the Civil Works Integrated  Funding Database, the Corps ranked more than 25,000 work packages  for the fiscal year 2017 budget recommendation."], "subsections": []}, {"section_title": "Headquarters Developed Final Recommendations for Budget Requests", "paragraphs": ["According to one headquarters official, Corps officials in the Program  Development Branch at headquarters facilitated discussions among  business line and account managers to develop the final rankings of all  work packages. As part of this process, headquarters officials noted that  business line managers compared work packages with different  characteristics across business lines or accounts. According to Corps  budget guidance and headquarters officials, business line managers and  account managers are instructed to consider two key factors when  determining their final rankings each fiscal year. Specifically, those  managers are instructed to give top priority to work packages that  significantly impact the risk to human life posed by potential disasters. In  addition, the managers are to prioritize work packages that address a  legal requirement to mitigate potential negative effects caused by  construction, such as adverse environmental effects.", "Using the final rankings, Corps headquarters officials said they developed  the final budget recommendations for each fiscal year, including a  recommended funding amount for each project, with input from various  levels of the organization. More specifically, to determine the budget  recommendations, Corps headquarters officials obtained feedback from  district commanders, generals, directors, and the Chief of Engineers. In  fiscal year 2017, the Corps used its final rankings to determine  recommended funding amounts for 89 construction projects, each of  which included one or more work packages; ultimately, these projects  comprised about 298 work packages. Once the Corps headquarters  officials developed these recommendations, they briefed the Assistant  Secretary of the Army for Civil Works on their recommendations. An  official from the Assistant Secretary\u2019s office said they reviewed the Corps  recommendations and compared them with the Assistant Secretary\u2019s  priorities, after which they developed the final recommendations to send  to OMB for review and potential inclusion in the President\u2019s budget  requests. According to a Corps official, 34 percent of construction projects  included in the fiscal year 2017 President\u2019s budget request received  funding."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to the  Department of Defense. The department told us they had no comments  on the draft report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Chief of Engineers and  Commanding General of the U.S. Army Corps of Engineers, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last   page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Corps Construction Projects Included in the President\u2019s Budget Requests, by State, Fiscal Years 2008 through 2017", "paragraphs": ["Table 1 lists the 164 construction projects and funds requested, by state,  within the U.S. Army Corps of Engineers\u2019 (Corps) three main business  lines\u2014aquatic ecosystem restoration, flood risk management, and  navigation\u2014for fiscal years 2008 through 2017."], "subsections": []}, {"section_title": "Appendix II: Corps Construction Projects Included in the President\u2019s Budget Requests, Fiscal Years 2008 through 2017", "paragraphs": ["Table 2 lists the names and locations of the 164 construction projects the  U.S. Army Corps of Engineers (Corps) identified as included in the  President\u2019s budget requests for its three main business lines for fiscal  years 2008 through 2017. The Corps\u2019 three main business lines are  aquatic ecosystem restoration, flood risk management, and navigation."], "subsections": []}, {"section_title": "Appendix III: Corps Construction Projects Included in the President\u2019s Budget Requests, by Division, Fiscal Years 2015 through 2017", "paragraphs": ["Table 3 lists the names of the 71 construction projects, their locations,  and the agency divisions that manage them, as shown in interactive  figure 4 of this report, and includes the figure\u2019s rollover information. The  U.S. Army Corps of Engineers (Corps) identified these projects as  included in the President\u2019s budget requests for its three main business  lines for fiscal years 2015 through 2017. The Corps\u2019 three main business  lines are aquatic ecosystem restoration, flood risk management, and  navigation."], "subsections": []}, {"section_title": "Appendix IV: U.S. Army Corps of Engineers\u2019 Criteria Used to Rank Construction Projects in Main Business Lines", "paragraphs": ["Table 4 lists the criteria included in the U.S. Army Corps of Engineers\u2019  (Corps) annual budget guidance for its three main business lines for fiscal  years 2008 through 2017. The Corps\u2019 three main business lines are  aquatic ecosystem restoration, flood risk management, and navigation."], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Anne-Marie Fennell, (202) 512-3841 or fennella@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Vondalee R. Hunt (Assistant  Director), Leah E. English, Kerstin Hudon, Susan Malone, and Cynthia  Norris made significant contributions to this report. Important contributions  were also made by Melinda Cordero, Justin Fisher, Juan Garay, Patricia  Moye, and Danny Royer."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Army Corps of Engineers: Factors Contributing to Cost Increases and  Schedule Delays in the Olmsted Locks and Dam Project. GAO-17-147.  Washington, D.C.: February 16, 2017.", "Standards for Internal Control in the Federal Government. GAO-14-704G.  Washington, D.C.: September 2014.", "Army Corps of Engineers: The Corps Needs to Take Steps to Identify All  Projects and Studies Eligible for Deauthorization. GAO-14-699.  Washington, D.C.: August 21, 2014.", "Army Corps of Engineers: Cost Increases in Flood Control Projects and  Improving Communication with Nonfederal Sponsors. GAO-14-35.  Washington, D.C.: December 20, 2013.", "Army Corps of Engineers: Budget Formulation Process Emphasizes  Agencywide Priorities, but Transparency of Budget Presentation Could be  Improved. GAO-10-453. Washington, D.C.: April 2, 2010.", "A Glossary of Terms Used in the Federal Budget Process. GAO-05- 734SP. Washington, D.C.: September 2005."], "subsections": []}], "fastfact": ["The President's annual budget request to Congress usually includes more than a billion dollars for U.S. Army Corps of Engineers water resource construction projects. These projects help protect people from flooding, improve navigation, and restore ecosystems.", "In fiscal years 2008-2017, there were 164 such projects in 31 states. Florida, Illinois, California, Washington, and Kentucky accounted for 61% of requested funds.", "To prioritize the work outlined in its 2017 request, Corps officials ranked more than 25,000 discrete sets of tasks that make up its projects. They did so using criteria such as population at risk and benefits vs. cost."]}
{"id": "GAO-18-606", "url": "https://www.gao.gov/products/GAO-18-606", "title": "Adolescent and Young Adult Substance Use: Federal Grants for Prevention, Treatment, and Recovery Services and for Research", "published_date": "2018-09-04T00:00:00", "released_date": "2018-09-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to the Surgeon General, adolescence and young adulthood are critical at-risk periods for illicit substance use, and such use can harm the developing brain. Congress included a provision in law for GAO to review how federal agencies, through grants, are addressing substance use prevention, treatment, and recovery among adolescents and young adults.", "Related to prevention, treatment, and recovery targeting adolescents (aged 12 to 17) and young adults (aged 18 to 25), this report describes (1) grant programs to provide services; (2) NIDA grant-funded research, and (3) gaps stakeholders identified in related services or research.", "GAO selected four agencies to review\u2014HHS, ONDCP, DOJ, and Education\u2014the key agencies that fund grant programs for services for adolescents and young adults. GAO analyzed documents on grant programs and on research funded by NIDA. GAO interviewed officials from the four agencies and 20 stakeholder groups (including advocacy and education, and research organizations, as well as a non-generalizable selection of state substance abuse, education, and judicial agencies in four states) about gaps in services or research and agency efforts to help address them. States were selected for variation in geography and overdose rates.", "HHS, DOJ, and ONDCP provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identified 12 federal grant programs within three federal agencies that funded substance use prevention, treatment, and recovery services in fiscal year 2017 and targeted adolescents' and young adults' use of illicit substances such as marijuana and nonmedical use of prescription opioids. The three agencies included the Department of Health and Human Services (HHS), the Office of National Drug Control Policy (ONDCP), and the Department of Justice (DOJ). While the Department of Education (Education) has grant programs that can fund prevention services for adolescents, they do not specifically target such services.", "Eight programs targeted substance use prevention. In total, they had 1,146 active grantees in fiscal year 2017 and provided about $266 million in awards that year.", "Four programs targeted treatment and recovery services. In total, they had 57 active grantees in fiscal year 2017. Two of the 4 grant programs awarded about $23 million in funding in that year (the other two awarded funding in prior years).", "In addition, other grant programs beyond these 12 also fund substance use prevention, treatment, and recovery services across age groups, but are not specifically targeted to adolescents and young adults.", "HHS's National Institute on Drug Abuse (NIDA)\u2014the agency that is the primary funder of research on illicit substance use\u2014also had 186 active grant-funded research projects focused on substance use prevention, treatment, and recovery among adolescents and young adults as of October and November 2017.", "Most of these research projects\u2014126\u2014were examining prevention, 45 were examining treatment, 4 were examining recovery, and 11 were examining a combination of research categories.", "In total, these 186 research projects received about $61 million from NIDA in fiscal year 2017.", "Most of the 20 stakeholders GAO interviewed identified gaps in services for adolescents and young adults, including insufficient access to recovery services and a shortage of treatment providers, and described financial and other reasons that likely contribute to these gaps. Federal agency officials GAO interviewed agreed that these gaps exist, and described grant programs and other efforts to help address them, such as a grant program that HHS established in 2018 to expand recovery services for these age groups. Stakeholders also identified gaps in research, such as too few treatment studies with adolescent participants, and described reasons for these gaps, including too few federal grants focused on adolescent research. NIDA officials agreed that these gaps exist, and stated that NIDA had eight grant opportunities (as of May 2018) that focused on these age groups or included them as a population of interest, three of which were new in 2018."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the Surgeon General, adolescence and young adulthood are  critical at-risk periods for the misuse of substances, including the use of  illicit substances such as marijuana and opioids. In 2016, about 4 million  adolescents aged 12 to 17 in the United States had used illicit substances  within the past year, representing about 16 percent of all adolescents in  the country. That same year, an estimated 13 million young adults aged  18 to 25 used illicit substances\u2014about 38 percent of all young adults.  The repeated use of illicit substances among adolescents and young  adults can result in substance use disorders, which are characterized by  symptoms such as the inability to fulfill work, school, and family  obligations. According to the Surgeon General, most people who develop  a substance use disorder begin using substances during adolescence  and develop a disorder by young adulthood, and the use of illicit  substances can adversely affect the developing brain. In addition, the  use of illicit substances can lead to death. In 2016 about 5,400  adolescents and young adults between the ages of 15 and 24 died as a  result of a drug overdose\u2014a rate that has increased nearly 300 percent  since 1999.", "In fiscal year 2016 the federal government spent $11.3 billion on  substance use prevention, treatment, and recovery services and  research. Out of this total amount, $1.5 billion supported prevention  services and research\u2014for example, to help discourage the first-time use  of substances, to educate individuals about the negative effects of  substance use and to test the effectiveness of prevention interventions.  Federal agencies used the remaining $9.8 billion to support treatment and  recovery services and research\u2014for example, to help individuals  discontinue the use of substances and improve health and wellness, and  to test new strategies to effectively treat individuals with substance use  disorders. Various federal agencies provide funding for such services or  research through grant programs, including the Department of Health and  Human Services (HHS), Department of Justice (DOJ), Department of  Education (Education), and the Office of National Drug Control Policy  (ONDCP). HHS funds the majority of substance use research through the  National Institute on Drug Abuse (NIDA), an Institute within HHS\u2019s  National Institutes of Health (NIH).", "The Comprehensive Addiction and Recovery Act of 2016 included a  provision for us to review federal grant programs that support substance  use prevention, treatment, and recovery services and research  specifically for adolescents and young adults; and any gaps in such  services and research. This report describes  1.  federal grant programs that fund substance use prevention, treatment,  or recovery services targeting adolescents and young adults;  2.  NIDA grant-funded research projects focused on substance use  prevention, treatment, or recovery among adolescents and young  adults; and  3.  gaps stakeholders identified related to services or research for  substance use prevention, treatment, or recovery among adolescents  and young adults.", "To describe federal grant programs that fund substance use prevention,  treatment, or recovery services targeting adolescents and young adults,  we reviewed information about grant programs funded by four federal  agencies\u2014HHS, DOJ, Education, and ONDCP. We selected these  agencies because our prior work and consultations with ONDCP  identified them as key federal agencies that provide prevention,  treatment, or recovery grant programs that support services for  adolescents or young adults. We included in our review grant programs  identified by these federal agencies that met the following criteria: (1)  substance use prevention, treatment, or recovery was a primary purpose  or goal; (2) adolescents and young adults ranging from anywhere  between 12 to 25 years of age were the targeted population; (3) all or part  of the grants were used for direct services (rather than only for  infrastructure development, for example); and (4) the program addressed  the use of illicit substances (including nonmedical use of prescription  opioids). We excluded grant programs that focused solely on tobacco,  alcohol, or e-cigarettes because the use of these substances is legal for  certain young adults. We reviewed documentation and interviewed  officials from each of the four agencies to obtain information about each  of the grant programs, including the number of grantees, award amounts,  and any planned evaluations. We did not identify grant programs  administered by Education that met all of our criteria. While several of  Education\u2019s grant programs allow grantees to use funds for prevention  services, they do not specifically target such services.", "In addition to the grant programs targeting adolescents and young adults,  we analyzed data on HHS\u2019s Substance Abuse Prevention and Treatment  Block Grant, which is the largest federal grant program that funds  prevention, treatment, and recovery services across age groups.  Specifically, we analyzed the Substance Abuse Prevention and  Treatment Block Grant data included in HHS\u2019s 2017 annual report, which  were the most current data available and reflected data pertaining to its  2014 grants. We analyzed these data nationally and by grantee\u2014which  included states, territories, and one federally recognized tribe\u2014to  determine the percentages of all persons provided prevention, treatment,  and recovery services with grants who were adolescents and young  adults. To assess the reliability of these data, we reviewed  documentation about the data and interviewed knowledgeable agency  officials and determined the data were sufficiently reliable for the  purposes of our reporting objective.", "To describe NIDA grant-funded research projects focused on substance  use prevention, treatment, or recovery among adolescents and young  adults, we examined applicable project information, which included  research project abstracts and the 2017 funding received. The research  projects were identified by NIDA through searches conducted in October  and November of 2017 of active projects in the NIH RePORTER  database. We included in our review research projects that (1) primarily  focused on adolescent and young adult substance use prevention,  treatment, or recovery research; (2) were not animal research; and (3) did  not focus exclusively on tobacco, alcohol, or e-cigarettes. We reviewed  the individual research abstracts for reference to brain imaging to count  how many of those prevention, treatment, and recovery studies involved  research on the physical brain. We also obtained from NIDA grant  information for the Adolescent Brain Cognitive Development study, a  large longitudinal study examining the effects of substance use and other  factors on development of the adolescent brain. To verify the reliability of  the information obtained from NIDA, we interviewed knowledgeable  officials and reviewed relevant documentation. We determined that the  data were sufficiently reliable for the purposes of our reporting objective.", "To describe gaps stakeholders identified related to services or research  for substance use prevention, treatment, or recovery among adolescents  and young adults, we interviewed 20 stakeholder organizations and  agencies, in total, to obtain their perspectives on these topics. The  organizations included 5 national advocacy and education organizations  and 3 research organizations. We selected advocacy and education  organizations that broadly represented the views of state substance  abuse agencies, community coalitions, juvenile drug treatment courts,  private foundations that fund substance use related services, and  recovery community organizations. We selected stakeholders from the 3  research organizations because they had expertise in research in  substance use prevention, treatment, or recovery among adolescents and  young adults. We also interviewed 12 state substance abuse, education,  and judicial agencies from four states. The four states included New  Hampshire, West Virginia, Oregon, and Michigan, and were selected to  achieve variation in geography, median family income, opioid overdose  rates, and the percentage of all persons provided treatment and recovery  services (funded by the Substance Abuse Prevention and Treatment  Block Grant) that were adolescents and young adults. Finally, we  interviewed federal officials from HHS\u2019s Substance Abuse and Mental  Health Services Administration (SAMHSA), Indian Health Service (IHS),  and NIDA; DOJ\u2019s Office of Juvenile Justice and Delinquency Prevention  (OJJDP), within DOJ\u2019s Office of Justice Programs; ONDCP; and  Education about any ongoing efforts they have to help address the gaps  that stakeholders identified.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Grant Programs", "paragraphs": ["The federal government uses grants to address national priorities\u2014such  as substance use prevention, treatment, and recovery\u2014through  nonfederal parties, including state and local governments, federally  recognized tribes, educational institutions, and nonprofit organizations.  While there is variation among different grant program goals and grant  types, most federal grants follow a common life cycle that includes an  award, implementation, and closeout stage for administering the grants.  During the award stage, the federal awarding agency enters into an  agreement with the grantee stipulating the terms and conditions for the  use of grant funds including the period that funds are available for the  grantee\u2019s use. During the implementation stage, the grantee carries out  the requirements of the agreement and requests payments, while the  awarding agency monitors the grantee and approves or denies payments.  The grantee and the awarding agency close the grant once the grantee  has completed all the work associated with a grant agreement, the grant  period of performance end date (or grant expiration date) has arrived, or  both.", "Federal grant programs may fund various types of grants, including  discretionary grants, formula grants, and cooperative agreements.  Discretionary grants are generally awarded on a competitive basis for  specified projects that meet eligibility and program requirements. Formula  grants are noncompetitive awards based on a predetermined formula,  typically established in statute, and are provided to eligible applicants that  meet specified criteria outlined by statute or regulation, such as a state. A  cooperative agreement is a type of federal financial assistance similar to  a grant, except the federal government is more substantially involved with  the implementation."], "subsections": []}, {"section_title": "Substance Use Prevention, Treatment, and Recovery Services", "paragraphs": ["Substance use prevention programs and services (which we refer to  collectively as \u201cprevention services\u201d in this report) are designed to prevent  or delay the early use of substances and stop the progression from use to  problematic use or to a substance use disorder. Prevention services  generally focus on reducing a variety of risk factors and promoting a  broad range of protective factors through various activities that include,  for example, setting policies that reduce the availability of substances in a  community, teaching adolescents how to resist negative social influences,  and communicating the harms of substances such as the nonmedical use  of prescription opioids and marijuana through media campaigns. In  addition, prevention services can be targeted at all members of a given  population without regard for risk factors, such as all adolescents, or to  particular subgroups of individuals or families, such as those who are at  increased risk of substance use due to their exposure to risk factors.  Targeted audiences for such services may include families living in  poverty or children of substance-using parents.", "When substance use progresses to a point that it is clinically diagnosed  as causing significant impairments in health and social functioning, it is  characterized as a substance use disorder. Treatment services for  substance use disorders are designed to enable an individual to reduce  or discontinue substance use and to address health problems, and  typically include behavioral therapy. Behavioral therapies use various  techniques to modify an individual\u2019s behaviors and improve coping skills,  such as incentives and reinforcements to reward individuals who reduce  their substance use. For opioid use disorders, treatment may involve  combining behavioral therapy with medications\u2014an approach commonly  referred to as medication-assisted treatment. Some of these treatment  services may be paid for by private insurers, public health coverage  programs, nonprofit organizations, or consumers (out-of-pocket), but  federal grant programs and various state and local programs also provide  funding for these services.", "Substance use recovery services are designed to help engage and  support individuals with substance use disorders in treatment and provide  ongoing support after treatment. There are a variety of recovery services  such as peer recovery coaching, which involves the use of coaches\u2014 peers who identify as being in recovery and use their knowledge and  experience to inform their work\u2014to help individuals who are transitioning  out of treatment to connect with community services and address barriers  that may hinder the recovery process. Other examples include recovery  housing, which provides a substance-free environment and support from  fellow recovering residents, and recovery high schools, which help  students recovering from substance use disorders focus on academic  learning. Some recovery services may be paid for through various  sources, including Medicaid programs in certain states, some private  insurers, and federal grant programs. In addition, some recovery services  may be offered by member-led, voluntary associations that charge no  fees, such as 12-step groups."], "subsections": []}]}, {"section_title": "Three Federal Agencies Operated 12 Grant Programs That Funded Services Specifically Targeting Adolescents and Young Adults in Fiscal Year 2017", "paragraphs": [], "subsections": [{"section_title": "Eight of the 12 Federal Grant Programs for Adolescents and Young Adults Funded Substance Use Prevention Services", "paragraphs": ["We identified 12 federal grant programs within three of the four agencies  in our review that funded substance use prevention, treatment, and  recovery services in fiscal year 2017 and targeted adolescents\u2019 and  young adults\u2019 use of illicit substances. Eight of these programs focused  on prevention, and all 8 remain active in fiscal year 2018. The 8 grant  programs have varying purposes and were administered by two entities  within HHS\u2014SAMHSA or IHS\u2014or by ONDCP. For example, the Drug- Free Communities Support Program is funded and directed by ONDCP to  support community coalitions in preventing and reducing substance  abuse among youth aged 18 and younger. As another example, the  Strategic Prevention Framework for Prescription Drugs program,  administered by SAMHSA, is designed to raise awareness about the  dangers of sharing prescription medications such as opioids, and to  promote collaboration between states and pharmaceutical and medical  communities to understand the risks of overprescribing to youth (aged 12  to 17) and adults (aged 18 and older). In addition, this program is  intended to provide prevention activities and education to schools,  communities, and parents.", "In total, the 8 grant programs targeting the prevention of substance use  among adolescents and young adults had 1,146 active grantees in fiscal  year 2017. The Drug-Free Communities Support Program had the  largest number of active grantees\u2014713 community coalitions\u2014and the  other 7 programs had a combined total of 434 that included states and  federally recognized tribes. The total number of active grantees in fiscal  year 2017 includes those that received a single- or multi-year award in  fiscal year 2017, as well as those that received a multi-year award in  fiscal year 2016 for a project that was ongoing in fiscal year 2017.  Grantees were awarded a total amount of about $266 million in fiscal year  2017, with SAMHSA\u2019s Strategic Prevention Framework-Partnerships for  Success program providing the largest amount of funding (about $95  million). (See table 1.)", "All 8 prevention grant programs had ongoing or planned evaluations to  assess the effectiveness of their grantees in accomplishing a variety of  program goals, according to agency officials. For example, ONDCP is  overseeing the ongoing evaluation of the Drug-Free Communities  Support Program through semi-annual progress reports and through the  collection of data, such as data on past 30-day substance use, from  coalitions that received awards. A recent evaluation of this program found  that coalitions included about 19,000 community members who were  targeting prevention services to about 20 percent of the population in the  United States (including 2.5 million middle school and 3.5 million high  school youth) in fiscal year 2015. In addition, this evaluation found that  middle and high school youth in communities with a coalition reported a  significant decrease in the past 30-day use of marijuana, prescription  drugs, alcohol, and tobacco, from 2002 to 2016. However, at the same  time, the perceptions of the risk of marijuana use decreased significantly  among high school youth in communities with community coalitions,  according to the evaluation. As another example, IHS\u2019s planned  evaluation of the Methamphetamine and Suicide Prevention Initiative- Generation Indigenous grant program will focus on measures such as the  types of services that grantees implemented to prevent  methamphetamine use and promote positive development among  American Indian and Alaska Native youth, according to agency officials.  For the other 6 prevention grant programs, planned evaluations will  examine the extent to which reductions in substance use are observed  over time among the grantees\u2019 targeted adolescents or young adults."], "subsections": []}, {"section_title": "Four of the 12 Federal Grant Programs for Adolescents and Young Adults Funded Substance Use Treatment and Recovery Services", "paragraphs": ["Of the 12 federal grant programs targeting adolescents\u2019 and young adults\u2019  use of illicit substances, we identified 4 that focused on the provision of  substance use treatment and recovery services and had active grantees  in fiscal year 2017. Two of the 4 programs ended at the close of fiscal  year 2017 and the other 2 remained active in fiscal year 2018. The 4  programs had different purposes and were administered by OJJDP or  SAMHSA, within DOJ and HHS, respectively. For example, the  Cooperative Agreements for Adolescent and Transitional Aged Youth  Treatment Implementation, administered by SAMHSA, is still active, and  intends to increase the capacity of states to provide treatment and  recovery services to adolescents (aged 12 to 18) and transitional-aged  youth (aged 16 to 25) that have substance use disorders or co-occurring  substance use disorders and mental disorders. This program aims to  increase states\u2019 capacity by increasing the number of qualified treatment  providers. The other 3 grant programs were designed to improve different  aspects of the existing juvenile drug treatment courts, which DOJ defines  as a court calendar or docket that provides specialized treatment and  services for youth with substance use or co-occurring mental health  disorders. As an example, the Fiscal Year 2017 Juvenile Drug Treatment  Court Program, which is still active and administered by OJJDP, aims to  deliver services that are consistent with DOJ\u2019s Juvenile Drug Treatment  Court Guidelines\u2014a set of best practices for effective juvenile drug  treatment courts.", "In total, the 4 grant programs that targeted substance use treatment and  recovery services among adolescents and young adults had 57 active  grantees in fiscal year 2017. SAMHSA\u2019s Cooperative Agreements for  Adolescent and Transitional Aged Youth Treatment Implementation had  the largest number of active grantees (36), which included state  substance abuse agencies and federally recognized tribes. The three  juvenile drug treatment court programs had a total of 21 active grantees  that included, for example, county juvenile drug treatment courts and a  state judicial department. The total number of active grantees in fiscal  year 2017 included those that received a single- or multi-year award in  fiscal year 2017 as well as active grantees that received multi-year  awards in prior years. In total, active grantees from 2 of the 4 programs  were awarded about $23 million in fiscal year 2017. (See table 2.)", "Two of the 4 treatment and recovery grant programs had ongoing or  planned evaluations to assess the effectiveness of their grantees in  accomplishing a variety of program goals, according to agency officials.  SAMHSA officials told us that its ongoing evaluation of the Cooperative  Agreements for Adolescent and Transitional Aged Youth Treatment  Implementation is assessing the types of treatment services provided to  adolescents and young adults as well as the extent to which they  abstained from substance use. Officials added that the evaluation is  examining grantees\u2019 efforts to expand the qualified workforce of treatment  providers for adolescents and young adults. A recent evaluation that was  completed for this program found that most grantees provided training to  treatment providers on evidence-based treatment services and other  topics, and about one-third of grantees identified additional training needs  such as training on co-occurring disorders and trauma-informed services.  This evaluation also found a decrease in substance use among  adolescents and young adults who received treatment services after 6  months and that enhanced provider training was associated with this  decrease. OJJDP\u2019s Fiscal Year 2017 Juvenile Drug Treatment Court  Program includes a planned evaluation of the impact of the DOJ juvenile  drug treatment court guidelines on participant outcomes. That is, OJJDP  plans to compare the outcomes of participants in courts aligned with the  guidelines to participants in other court programs that will serve as  \u201ccomparison courts.\u201d OJJDP officials told us that the evaluation plans to  assess youth outcomes such as recidivism in substance use, quality of  relationships with parents and peers, and mental wellbeing. OJJDP  officials stated that while they are not evaluating their fiscal year 2015 and  2014 juvenile drug treatment court grant programs, grantees must report  on various performance measures related to substance use to assist DOJ  with fulfilling its responsibilities under the Government Performance and  Results Act of 1993 and the GPRA Modernization Act of 2010. For  example, grantees must report on a semiannual basis the number of drug  and alcohol tests performed on juveniles and the number of positive tests  recorded."], "subsections": []}, {"section_title": "Other Federal Grant Programs Fund Prevention, Treatment, and Recovery Services, but Do Not Specifically Target Adolescents and Young Adults", "paragraphs": ["Other federal grant programs beyond the 12 we identified provide funds  for substance use prevention, treatment, and recovery services across  age groups but do not specifically target adolescents and young adults.  The Substance Abuse Prevention and Treatment Block Grant is the  largest of such grant programs that fund prevention, treatment, and  recovery services across age groups. SAMHSA, which administers this  grant, awarded a total of $1.8 billion in fiscal year 2017 to grantees which  included states, the District of Columbia, territories, and one federally  recognized tribe. The amount of awards that states receive is based on a  formula that takes into account a grantee\u2019s: population at risk of  substance abuse; relative costs of providing prevention and treatment  services; and relative ability to pay for prevention and treatment  services.", "States have some flexibility in determining how to use their Substance  Abuse Prevention and Treatment Block Grant funds, and our analysis  shows variation in the extent to which grantees used these funds to  provide prevention, treatment, and recovery services to adolescents and  young adults in 2014, the most recent year for which data were available.  For prevention services that target individuals, such as those delivered to  middle school students in the classroom, the percentage of persons  served that grantees could identify as being adolescents and young  adults ranged from 0.1 percent (Oklahoma) to 100 percent (American  Samoa and United States Virgin Islands). However, most of the grantees  reported percentages that fell in the range of 23 to 61 percent. For  prevention services that target populations rather than individuals, such  as media campaigns, grantees similarly reported that the percentage of  adolescents and young adults served ranged from 0.1 percent (Indiana)  to 100 percent (United States Virgin Islands). However, most of the  grantees reported percentages that fell in the range of 18 to 46 percent.", "For treatment and recovery services, grantees reported that the  percentage of all persons served who were adolescents and young adults  ranged from 8 percent (District of Columbia) to 100 percent (Red Lake  Band of Chippewa Indians). However, most of the grantees reported  percentages that fell in the range of 17 to 26 percent. (See app. I for the  percentages of persons served that were adolescents and young adults,  by grantee.)", "In addition to the Substance Abuse Prevention and Treatment Block  Grant, other federal grant programs provide funds for prevention,  treatment, and recovery services across age groups, but do not  specifically target adolescents and young adults. For example, the State  Targeted Response to the Opioid Crisis grant program, administered by  SAMHSA, aims to help states and others reduce the number of opioid  overdose related deaths by providing funds for prevention, treatment, and  recovery services for opioid use disorders. In fiscal year 2017, SAMHSA  awarded about $485 million in grants to 50 states, the District of  Columbia, and 6 territories through this program. As another example, the  Targeted Capacity Expansion: Medication Assisted Treatment \u2013  Prescription Drug and Opioid Addiction grant program, also administered  by SAMHSA, provides funding to states to expand access to medication- assisted treatment services as well as recovery services among  individuals with opioid use disorders. In fiscal year 2017 SAMHSA  awarded $31 million in additional grants to 6 states through this program."], "subsections": []}]}, {"section_title": "NIDA Had 186 Active Grant-Funded Research Projects Focused on Substance Use Prevention, Treatment, and Recovery among Adolescents and Young Adults in 2017", "paragraphs": [], "subsections": [{"section_title": "Most of NIDA\u2019s 186 Active Grant-Funded Research Projects for Adolescents and Young Adults in 2017 Focused on Substance Use Prevention", "paragraphs": ["Our analysis found that HHS\u2019s NIDA had 186 active grant-funded  research projects focused on illicit substance use prevention, treatment,  or recovery among adolescents and young adults in October and  November 2017, and most of these projects addressed substance use  prevention. Specifically, 126 research projects, or about 68 percent of  NIDA\u2019s ongoing research projects for this population, involved research  related to preventing the use of illicit substances, such as the use of  marijuana or nonmedical use of opioids and other prescription drugs. The  remaining 60 projects, or about 32 percent, involved research related to  treatment for or recovery from the use of illicit substances among  adolescents and young adults, or a combination of categories (e.g.,  substance use prevention, treatment, and recovery). Among the  categories of research projects, the fewest involved research exclusively  about recovery (4 out of 186 projects, or about 2 percent), as shown in  table 3. Our analysis also found that about 12 percent of the ongoing  projects (22 of 186) involved the use of brain imaging in research on  prevention, treatment, or recovery. In total, of the 186 research projects  that were active in October and November 2017, 135 received $61.3  million in grants from NIDA in fiscal year 2017. NIDA did not provide  awards in fiscal year 2017 for the remaining 51 projects that were active  in October and November 2017.", "The following examples illustrate the types of research activities funded  by the prevention, treatment, and recovery grants identified in our  review:", "Prevention research projects. One research project involved  testing whether a parenting intervention is associated with lower  substance use and other high-risk behaviors among adolescents  in the long term, including how such outcomes relate to genetic  risk factors. The project\u2019s participants included 731 adolescents to  be assessed over multiple years. The project planned to collect  DNA; observations of family interaction; parent, youth, and  teacher reports regarding adolescents\u2019 conduct; and assessments  of their peer environments.", "Treatment research projects. One research project involved  testing the effectiveness of the use of the medication naltrexone  (extended release), compared to the use of buprenorphine in  treating adolescents and young adults with opioid use disorders.  The project\u2019s participants included 340 adolescents and young  adults and the project planned to provide counseling to the  participants during the course of the study. The project planned to  assess a variety of outcomes after 3 and 6 months, including the  number of days participants were in treatment, participants\u2019 use of  opioids as well as other drug and alcohol use, and the cost- effectiveness of the treatment.", "Recovery research projects. One research project involved  testing the effectiveness of a smartphone application to deliver  recovery services to adolescents after they received treatment for  a substance use disorder, compared to a control group of  adolescents that received recovery services via traditional  methods. Examples of recovery services delivered with a  smartphone application include participating in online recovery  group discussions and receiving motivational messages. The  project\u2019s participants included 400 adolescents to be assessed  over a 9-month period. The project planned to collect a variety of  information, such as how frequently participants used the  smartphone application, how long they abstained from substance  use, and their quality of life."], "subsections": []}, {"section_title": "In Fiscal Year 2017, NIDA and Nine Other HHS Entities Funded a Large Study Examining the Effects of Substance Use on Adolescent Brain Development", "paragraphs": ["In fiscal year 2017, NIDA and nine other entities within HHS provided  grant funding for a large study\u2014the Adolescent Brain Cognitive  Development study\u2014designed to examine the effects of substance use  and other factors on development of the adolescent brain. This study  was established as a result of the collaboration of several federal  agencies that determined such a study was needed because of gaps in  knowledge about how substance use and other factors affect brain  development. This study is a longitudinal study that plans to collect data  from a sample of about 11,000 children across the country for 10 years,  beginning when they are 9 or 10 years old. Twenty-one research sites  across the country were selected to collect information from children  about their brain development, genetics, substance use, mental health,  physical health, environment, and other measures. In addition, this study  is funding a data analysis and informatics center to develop the  procedures for data collection, create and maintain a common database  pooling data from all of the research sites, and conduct data analysis.  According to NIDA officials, data from the Adolescent Brain Cognitive  Development study will be made available to researchers for future use  through a data archive. In fiscal year 2017, 15 federal grants provided  funding for this study, of which NIDA contributed $18.1 million."], "subsections": []}]}, {"section_title": "Stakeholders Identified Gaps in Services and Research for Adolescents and Young Adults, and Ongoing Federal Efforts Aim to Address Gaps Stakeholders Identified Gaps in Services for Adolescents and Young Adults, and Federal Agencies Have Ongoing Efforts to Address Them", "paragraphs": ["Stakeholders that we interviewed identified various gaps in services, and  among the most frequently cited were a lack of available recovery  services and treatment providers for adolescents and young adults with  substance use disorders. They also identified gaps in substance use  prevention services such as a lack of prevention services tailored for  certain subgroups within these ages. In general, officials from the  agencies in our review agreed that these gaps exist, and described  actions the agencies are taking that may help address them."], "subsections": [{"section_title": "Stakeholders Identified Gaps in Research, Such as for Adolescent-Specific Substance Use Treatment Services, and in Recovery Services for both Adolescents and Young Adults", "paragraphs": ["Stakeholders that we interviewed commonly identified gaps in research  concerning adolescent-specific substance use treatment approaches, as  well as in recovery services for both adolescents and young adults. They  also identified other gaps, such as a lack of knowledge about how to  effectively communicate to adolescents and young adults the harms of  substance use. Officials from HHS\u2019s NIDA agreed that such gaps in  research exist.", "Gaps in substance use research related to adolescents and young  adults. Stakeholders commonly identified the following gaps in research:", "Substance use disorder treatment with adolescents. Four of  the stakeholders we interviewed identified gaps in adolescent- specific substance use disorder treatment research. Officials  from one research organization said that it can be challenging to  recruit a sufficient number of adolescents with a substance use  disorder to participate in research studies focused on substance  use treatment, both because fewer adolescents have such  disorders compared to adults, and because adolescents\u2014or  potentially their parents\u2014may be in denial about the need for  treatment. These officials further stated that having too few  funding announcements that focus on adolescent-specific  research contributes to the gaps in research in this area, because  it is easier for researchers to simply work with adults when  announcements do not specify an age group of interest. An official  from another research organization said there is also a gap in  knowledge about how to deliver treatment services to adolescents  in ways that are developmentally appropriate. The official stated  that adolescents who receive treatment services generally are  less likely to complete substance use disorder treatment, and, as  a result, additional research is needed to identify how to engage  and retain adolescents in a developmentally appropriate way. The  official explained that adolescents often do not believe they need  treatment and are not certain they want to stop using substances.", "Recovery services. Three of the stakeholders we interviewed  identified gaps in recovery service research for adolescents and  young adults. Officials from one advocacy and education  organization said there has been little research conducted to  determine the types of recovery services that are most effective  for adolescents in preventing relapse. Officials from one research  organization said that it would be beneficial to develop a variety of  recovery services, since services are likely to vary in effectiveness  for different groups of adolescents and young adults.", "Translating research into practice. Three of the stakeholders  we interviewed identified gaps in knowledge about how to  translate evidence-based services from research into sustainable,  real world practices. For example, an official from one research  organization explained that translating evidence-based treatment  services from research into real world settings can be difficult for a  variety of reasons\u2014such as, because services that are grant- funded may have components that are impractical to implement or  are not reimbursable. The official said one example of such an  impractical component would be having an expert observer  periodically rate the fidelity of providers\u2019 implementation of the  service\u2014a component that makes sense when testing the efficacy  of the service under the grant, but which can be disruptive to  workflow and may not be reimbursable by insurers once the grant  ends. Officials from another research organization similarly  commented that more research is needed to identify which  components of services make them effective.", "Communicating harms of substance use. Officials from two of  the three research organizations identified a gap in knowledge  about how to effectively communicate the harms of substance use  to adolescents and young adults. They stated that it is particularly  difficult to effectively communicate the harms of cannabis to  adolescents and young adults. One official explained that societal  changes in attitudes towards cannabis have made it more difficult  to convince adolescents of both its harm and of the need for  treatment when its use develops into a substance use disorder.", "Federal response to gaps in research. Officials from NIDA agreed that  these gaps in research exist and explained that while additional research  is needed to address them, the process by which NIDA funds research  through grants ultimately relies on researchers to submit proposals for  consideration. While NIDA officials stated that researchers can submit  proposals for research projects addressing adolescent or young adult  substance use prevention, treatment, or recovery under general funding  announcements for grants, NIDA also had eight funding announcements  (as of May 2018) that either focused on these age groups or included  them as a population of interest, three of which were new as of fiscal year  2018."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS, DOJ, ONDCP, and Education  for comment. HHS, DOJ, and ONDCP provided technical comments,  which we incorporated as appropriate. Education did not have comments  on our draft.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of the Departments of Health and Human  Services, Justice, and Education; the Director of the Office of National  Drug Control Policy; 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 staffs have any questions about this report, please contact  me at (202) 512-7114 or dickenj@gao.gov. Contact points for 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."], "subsections": []}]}, {"section_title": "Appendix I: The Use of Substance Abuse Prevention and Treatment Block Grant Funds for Adolescents and Young Adults", "paragraphs": ["Table 4 shows the percentage of persons who were provided services  with Substance Abuse Prevention and Treatment Block Grant funds in  2014, and who were also identified by grantees as being adolescents or  young adults. Percentages are listed for two broad types of substance  use prevention services (individual and population-based), as well as  substance use disorder treatment and recovery services. Substance  Abuse Prevention and Treatment Block Grant grantees include states,  territories, and one federally recognized tribe."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Gerardine Brennan, Assistant  Director; Pamela Dooley, Analyst-in-Charge; Spencer Barr; and Brandon  Nakawaki made key contributions to this report. Also contributing were  Kaitlin Farquharson, Derry Henrick, and Laurie Pachter."], "subsections": []}]}], "fastfact": ["About 16 percent of adolescents and 38 percent of young adults used illicit substances in 2016. Most young adults who develop substance use disorders begin using in adolescence.", "There are federal grants that fund drug addiction treatment for adolescents and young adults. But most of the stakeholders we talked to believed that there are too few studies about drug addiction treatment for adolescents, too few providers to treat these patients, and too few services to sustain their recovery.", "Federal agencies are working to address these shortages, including a new grant to expand access to recovery services for adolescents and young adults."]}
{"id": "GAO-19-122", "url": "https://www.gao.gov/products/GAO-19-122", "title": "Federal Protective Service: DHS Should Take Additional Steps to Evaluate Organizational Placement", "published_date": "2019-01-08T00:00:00", "released_date": "2019-01-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FPS, within DHS's NPPD, conducts physical security and law enforcement activities for about 9,000 federal facilities and the millions of employees or visitors who work in or visit these facilities. FPS moved from GSA to DHS's ICE in 2003 and to NPPD in 2009. GAO has reported that FPS faced challenges in each location. Legislation enacted in November 2018 requires DHS to review placement options for FPS and could result in FPS moving again within DHS or to another executive branch agency.", "GAO was asked to review issues related to organizational placement options for FPS. This report examines (1) the potential effects of FPS's placement in selected agencies and (2) steps DHS has taken to assess placement options for FPS. GAO identified five key organizational placement criteria based on prior work and identified eight agencies as potential placement options. The agencies were selected because they have the largest number of law enforcement officers or perform physical security, among other reasons. GAO reviewed documentation and interviewed officials from FPS, selected agencies, and key stakeholders. GAO compared agencies to FPS to determine if they meet the organizational placement criteria. An agency meets the criteria if it has similarities to FPS."]}, {"section_title": "What GAO Found", "paragraphs": ["In considering organizational placement options for the Department of Homeland Security's (DHS) Federal Protective Service (FPS), GAO found that none of the eight agencies GAO selected met all the key organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade-offs. For example, keeping FPS in DHS's National Protection and Programs Directorate (NPPD) could provide FPS some benefits because FPS and NPPD have missions that include the protection of infrastructure or specific facilities, facility protection responsibilities, and access to and sharing of information related to national homeland security. However, unlike FPS, NPPD does not perform both physical security and law enforcement activities, which is a potential trade-off. In another example, the General Services Administration (GSA) and the United States Marshals Service (Marshals) could provide benefits because they currently coordinate with FPS on facility protection. However, Marshals does not have a mission or goals that explicitly focus on the protection of infrastructure or facilities and GSA does not perform law enforcement, which are potential trade-offs.", "DHS has not taken key steps to fully assess potential placement options. Specifically, DHS has not assessed the organizational structure of FPS, such as its placement in NPPD, even though FPS and NPPD have evolved since FPS was placed in NPPD in 2010. Standards for Internal Control state that agency management should establish an organizational structure to achieve the agency's objectives and that an effective management practice for attaining this outcome includes periodically evaluating the structure to ensure that it has adapted to changes. Additionally, because DHS did not analyze FPS's current placement in NPPD, DHS does not have a benchmark for comparison to other agencies. DHS recently established a working group to assess the placement of FPS. However, the group's planned activities are limited in several ways. For example, the group's draft charter does not indicate that the working group will describe what DHS expects to achieve by changing FPS's placement. Further, the draft charter does not indicate that the working group will evaluate the benefits and trade-offs of placement options. GAO has previously identified these and other steps as key to successful organizational change or analysis of alternatives. These steps would help DHS address the 2018 legislation to review placement options for FPS\u2014including, how DHS considered the results of GAO's review. Regardless of the legislation, DHS may not be positioning itself to make an informed decision as to what organization best supports FPS."]}, {"section_title": "What GAO Recommends", "paragraphs": ["DHS should identify the expectations for changing FPS's placement and take steps to fully evaluate placement options. DHS concurred with the recommendations and outlined steps it plans to take to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["For almost 50 years, the Federal Protective Service (FPS) has been  charged with protecting federal facilities and the employees and  individuals who work in or visit them. Specifically, FPS provides physical  security and law enforcement services at about 9,000 facilities, a majority  of which are held or leased by the General Services Administration  (GSA). In the 1970s, GSA created FPS as part of its Public Buildings  Service (PBS). Since then, FPS has been moved twice\u2014in 2003 to the  Department of Homeland Security\u2019s (DHS) Immigration and Customs  Enforcement (ICE) and in 2009 to DHS\u2019s National Protection and  Programs Directorate (NPPD).", "The organizational placement of an office or agency can affect its  performance and ability to meet its mission. During FPS\u2019s current and  previous organizational placements, FPS experienced a number of  operational, management, and funding challenges, which had a bearing  on FPS\u2019s ability to accomplish its mission. FPS has made progress in  addressing some issues, but others persist. Legislation enacted in  November 2018 could lead to FPS moving again.", "Given your interest in ensuring that FPS fully addresses challenges so  that it can effectively carry out its duties, as well as any statutory changes  that may result in FPS moving again, you asked us to review issues  related to current or future organizational placement options for FPS. This  report examines:  the potential effect of FPS\u2019s placement in selected agencies based on  key criteria for evaluating organizational placement, and  steps DHS has taken to assess placement options for FPS.", "To conduct this work, we reviewed our prior work related to organizational  transformation, work in which we identified organizational and  accountability criteria that Congress should consider when determining  which agencies to include or exclude from the newly created DHS (at that  time, 2002). The criteria are relevant to our review of FPS\u2019s  organizational placement as Congress considers whether (or where) to  place FPS in various agencies within or outside it. For each criterion, we  also identified elements (i.e., characteristics) that are specific to FPS  based upon our review of FPS documents and our prior work on topics  related to the criteria, our discussions with federal officials, an association  representing federal law enforcement officers, and a former high-ranking  official in NPPD with knowledge of FPS.", "We applied these key criteria to eight agencies that could be potential  organizational placement options for FPS. We identified these agencies  based upon: agencies with the largest number of law enforcement officers, agencies that provide physical security services, agencies where FPS was previously, or is currently placed, or", "FPS\u2019s management preference (see table 1).", "At FPS and each of the selected agencies, we reviewed documentation  and interviewed officials to identify similarities, differences, and other  considerations with regard to each of the five key criteria. For the first four  key criteria\u2014(1) mission, goals, and objectives; (2) responsibilities; (3)  organizational culture; and (4) information sharing and coordination\u2014we  determined that a selected agency met the criteria if the agency or its  subcomponents have any similarities to FPS. For the last criterion\u2014 mission support\u2014we determined that a selected agency met the criterion  if the agency or its subcomponents have mission support similar to FPS  or could provide mission support that FPS needs. Although we used the  key criteria to assess the eight agencies we selected, the criteria can be  used to assess any potential placement option for FPS. Our analysis is  based on the selected agencies\u2019 operations at the time of our review.", "We also obtained views from stakeholders on the alignment between FPS  and the selected agencies as well as on the potential placement options.  These stakeholders include officials from FPS, the selected agencies, as  well as:  representatives from unions that represents NPPD employees,  including FPS employees, and Protective Security Officers (i.e.,  contract guards);   representatives from associations of federal law enforcement officers  and contract guard companies; officials from selected agencies that coordinate with or use FPS for", "Department of Justice for law enforcement coordination;  Internal Revenue Service and the Social Security Administration  as large users of FPS facility protection; officials from DHS\u2019s Interagency Security Committee, which develops  the security standards for non-military federal facilities; and  staff from the Office of Management and Budget (OMB).", "We also obtained views from a former high-ranking official in NPPD with  knowledge of FPS. The results of these interviews are non-generalizable  to all of FPS\u2019s stakeholders but provide useful examples of considerations  related to various placement options.", "We also reviewed Standards for Internal Control in the Federal  Government for relevant management responsibilities, such as  determining if FPS\u2019s current organizational placement in NPPD is optimal  and effectively achieves the agency\u2019s objectives. And, we reviewed our  prior reports on key practices and questions for organizational change  and best practices for an analysis of alternatives process. We used  practices identified in these reports as well as internal controls to assess  the steps DHS has taken to assess placement options for FPS. See  appendix I for more details on our scope and methodology.", "We conducted this performance audit from June 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": ["While its core mission of protecting federal facilities has remained  constant as FPS moved from one agency to another, its responsibilities  have changed. While in GSA\u2019s PBS, FPS was responsible for protecting  GSA held-or\u2013leased facilities, providing both physical security and law  enforcement services. To protect buildings, FPS officers developed  physical security risk assessments, installed security equipment, and  oversaw contract guard services. As a part of its law enforcement  services, among other duties, FPS officers enforced laws and regulations  aimed at protecting federal facilities and the persons in such facilities and  conducted criminal investigations. Following the September 11, 2001  attacks, the Homeland Security Act of 2002 was enacted; it created  DHS and moved FPS from GSA to the new department, effective in  March of 2003. Within DHS at ICE, FPS\u2019s responsibilities grew beyond  solely protecting GSA buildings to include homeland security activities  such as implementing homeland security directives and providing law  enforcement, security, and emergency-response services during natural  disasters and special events.", "In 2009, DHS proposed transferring FPS from ICE to NPPD. In explaining  the proposed transfer in DHS\u2019s fiscal year 2010 budget justification to  Congress, DHS noted that this move would allow ICE to focus on its law  enforcement mission of protecting the American people by targeting the  people, money, and materials that support terrorist and criminal activities  relating to our nation\u2019s borders. DHS noted that FPS should reside  within NPPD given that both agencies had responsibilities for  implementing the National Infrastructure Protection Plan. DHS further  noted that FPS would be able to gain synergy by working alongside  NPPD\u2019s Office of Infrastructure Protection and that having FPS and the  Office of Infrastructure Protection in the same organization would further  solidify NPPD as DHS\u2019s lead for critical infrastructure protection. The  fiscal year 2010 DHS appropriations act, which was signed into law on  October 28, 2009, funded FPS under NPPD via revenue and collections  of security fees. While in NPPD, FPS continued to lead physical security  and law enforcement services at GSA-held or GSA-leased facilities and  continued its efforts in homeland security activities.", "Throughout FPS\u2019s different organizational placements in DHS, we have  reported that FPS faces persistent challenges meeting its mission to  protect facilities. In 2003, we designated federal real-property  management as a high-risk area, in part, because of physical security  challenges at federal facilities, such as the need for a risk-based  approach to determining the level of security required. In 2011, we  reported on FPS\u2019s challenges in transferring mission support functions  when transitioning from ICE into NPPD. While FPS has been in NPPD,  we also reported on challenges FPS faced, such as in performing risk  assessments, managing and overseeing contract guards, collaborating  with GSA and the Marshals on facility security, and funding its  operations. We made recommendations to help address these  challenges, and FPS has made progress in addressing some of these  recommendations. For example, FPS (1) developed a Modified  Infrastructure Survey Tool to help it more effectively perform risk  assessments, (2) coordinated with GSA and other agencies to reduce  unnecessary duplication in risk assessments, (3) implemented new  procedures to better manage and oversee contract guards, and (4) as of  September 2018, established a formal agreement with GSA on roles and  responsibilities related to facility protection. However, as we discuss later  in this report, challenges related to other aspects of overseeing contract  guards, collaborating with GSA and Marshals, and funding persist.", "In November 2018, legislation was enacted that could result in FPS  moving for a third time, although the location has not been determined.  This legislation\u2014which reorganizes NPPD to an organization that has a  greater statutory focus on managing cyber risks\u2014requires the Secretary of Homeland Security to, within 90 days after the completion of our  review, determine the appropriate placement for FPS within DHS and  begin transfer of FPS to that entity. If the Secretary determines that  DHS is not an appropriate placement for FPS, the Secretary would be  required to submit to the Director of OMB and Congress an explanation  for the reasons of such a determination\u2014including, among other things,  how DHS considered the results of our current review\u2014and a  recommendation on the appropriate placement of FPS within the  executive branch of the federal government.", "When DHS was established, we identified organizational and  accountability criteria for the department. From this prior work, we  identified key criteria that are relevant to assessing potential placement  options for FPS, as shown in table 2.", "In addition, other practices provide valuable insights for agency officials to  consider when evaluating or implementing a reorganization or  transformation. For example, we have previously reported (1) on key  practices and questions for organizational transformations, mergers and  consolidations, and agency reform efforts and (2) on best practices for the  analyses of alternatives. We reported that organizational  transformations, such as a change in organizational placement, can take  many years to fully implement, can result in reduced productivity and  morale in the short-term, and may require up-front investments.  Therefore, we found that these practices and questions offer valuable  insights for agency officials to consider when evaluating or implementing  a reorganization or transformation. For example, in May 2012, we  reported that a key practice in organizational change is for agency  officials to identify and agree on the specific goals of the change\u2014that is,  what the agency expects to achieve by making the change\u2014or the  problems a change will solve. In July 2003, we reported that  implementing a large-scale organizational transformation requires the  concerted efforts of both leadership and employees to accomplish new  organizational goals. In October 2015, we identified best practices for  analyzing alternatives, such as defining criteria to assess alternatives,  identifying a range of alternatives to assess, and analyzing the benefits  and trade-offs of each alternative."], "subsections": []}, {"section_title": "Moving FPS to Any of the Selected Agencies Evaluated Would Result in Both Benefits and Trade- offs", "paragraphs": ["We found that none of the selected agencies met all the organizational  placement criteria; thus, any of the organizational placement options  could result in both benefits and trade-offs. Officials from FPS and some  of the selected agencies as well as representatives from other  stakeholders we interviewed (e.g., an association of federal law  enforcement officers, a union representing FPS employees, and others)  provided us with examples of how those benefits and trade-offs might  affect FPS.", "In instances where selected agencies met organizational placement  criteria (that is, in instances where selected agencies were similar to  FPS), FPS could experience benefits. See table 3 for a summary of how  selected agencies met and did not meet key organizational placement  criteria, and appendix II and III for additional details. For example, for the  mission, goals, and objectives criterion, DHS, NPPD, and Secret Service  could provide benefits to FPS because, like FPS, their mission or goal  statements as noted in their strategic plans include an explicit focus on  the protection of infrastructure or specific facilities. Also, GSA has a  statutory facility protection mission. Our prior work found that placing an  agency into an organization that has a similar mission may help ensure  that the agency\u2019s mission receives adequate funding, attention, visibility,  and support. For the responsibilities criterion, DHS, CBP, Secret  Service, Justice, and the Marshals could provide benefits to FPS,  because all of these agencies, like FPS, perform both physical security  and law enforcement activities. In the past, FPS faced challenges  ensuring that both these activities were prioritized, according to FPS  officials. Officials explained that a parent agency that is able to focus on  both activities could help ensure equal and adequate attention in both  areas. While there are similarities in responsibilities between FPS and  these agencies, there are differences in the extent to which and for what  purpose these agencies perform the responsibilities, some of which we  discuss following table 3.", "Because none of the agencies met all criteria, placing FPS in any of the  selected agencies would require trade-offs. For example:", "While placing FPS in DHS, NPPD, or the Secret Service may provide  FPS benefits in areas related to mission, responsibilities, and  information sharing, there could be some adverse effect on FPS\u2019s law  enforcement operations or other activities. Specifically, as discussed  above, placement in DHS, NPPD, or the Secret Service could provide  FPS benefits because these agencies have similar missions and  facility protection responsibilities, and have access to and share  information related to national homeland security that FPS needs to  carry out its mission. However, NPPD, for example, does not perform  law enforcement activities. Therefore, according to FPS officials,  FPS\u2019s law enforcement activities may not continue to receive full  attention. Further, keeping FPS in NPPD may not address some of  the challenges related to culture, such as morale issues that,  according to an official from the association of law enforcement  officers, stem in part from FPS not being placed in a law enforcement  organization. If placed in the Secret Service, this agency may not  have the administrative capacity to handle the additional FPS human  capital workload. Secret Service officials told us that they have a  staffing shortage, which is exacerbated by the time it takes to vet  applicants and process new staff through background checks and  security clearances.", "As another example, FPS\u2019s placement in GSA or Marshals could  enhance coordination among these agencies, but there could be  some adverse effect on FPS\u2019s ability to carry out its mission or  responsibilities. Specifically, GSA and Marshals could be appropriate  choices as these agencies currently coordinate with FPS on facility  protection. For GSA\u2019s held or leased facilities, FPS is primarily  responsible for protecting federal employees and visitors in those  facilities while GSA, as the federal government\u2019s landlord, performs  some physical security activities, such as funding and repairing  security fixtures. At federal courthouses, FPS is the primary federal  agency responsible for patrolling and protecting the perimeter while  Marshals is responsible for the security of the federal judiciary and as  such provides for security inside the building. However, we have  found challenges FPS has faced in coordinating with these agencies.  In December 2015, for example, we found that FPS and GSA had not  agreed on a common outcome related to facility protection or the roles  and responsibilities to accomplish their missions. Further, in  September 2011, we reported that FPS and Marshals faced  challenges related to coordination, such as in the implementation of  roles and responsibilities and the use or participation in existing  collaboration mechanisms. In September 2018, NPPD and GSA  signed a memorandum of agreement that, among other things,  describes FPS\u2019s and GSA\u2019s roles and responsibilities, and FPS,  Marshals, and other agencies involved in protecting courthouses (i.e.,  GSA and the Administrative Office of the U.S. Courts) are working to  finalize a separate agreement for courthouse security. As these  agreements are implemented, coordination between these agencies  should improve as we have previously reported that establishing clear  roles and responsibilities, in agreements or through other  mechanisms, contribute to effective coordination. In addition,  Marshals may be a good placement option for FPS since both  agencies perform physical security and law enforcement activities,  and because both agencies use a large number of contract guards.  However, because FPS does not share mission and goals with  Marshals, it may be less equipped to prioritize FPS\u2019s activities in the  law enforcement and physical security areas. Justice and Marshals  officials said that, in their view, Marshals is different from FPS  because Justice and Marshals perform limited physical security  activities and have an extensive law enforcement mission, while the  opposite is the case for FPS. Further, Marshals officials said that  FPS\u2019s and Marshal\u2019s law enforcement activities support different  purposes\u2014with Marshals supporting a violent-crime reduction mission  and FPS supporting a facility protection mission. As a result, Marshals  officials said that FPS\u2019s facility protection mission may not receive full  attention. Regarding contract guards, Marshal\u2019s guard force is  smaller, performs different activities, and has different requirements  compared to FPS\u2019s guard force. Regarding GSA, while GSA performs  some physical security activities, it does not perform law enforcement,  which is a critical part of FPS\u2019s responsibilities and, according to some  stakeholders we interviewed, a key aspect of FPS\u2019s culture. GSA also  does not have the same access to information related to national  homeland security as FPS currently has, and therefore, FPS\u2019s access  to this information could be affected, according to officials.", "Finally, various placement options could help FPS address some of its  long-standing challenges such as in overseeing contract guards,  collaborating with GSA and the Marshals, and funding. However,  these placements could also affect whether FPS\u2019s needs are  prioritized. For example, placing FPS in GSA or the Marshals may  further help address coordination challenges. Additionally, placing  FPS in GSA could address challenges FPS faces with funding. If  placed in GSA, GSA and FPS could consider whether to use the  Federal Buildings Fund for security projects related to facility  management, such as installing cameras. OMB staff said that there  are limitations with the Federal Buildings Fund, such as the amount of  funding available for security projects. Further, the adverse effect of  placing FPS in either GSA or the Marshals is that Marshals does not  share mission and goals with FPS and that GSA does not have law  enforcement responsibilities; therefore, these agencies may not  prioritize FPS\u2019s needs.", "For additional information on how the various agencies met each  criterion, see appendixes II and III."], "subsections": []}, {"section_title": "DHS Has Not Taken Key Steps to Fully Assess Potential Placement Options", "paragraphs": ["When managing an agency or considering an organizational change,  such as that of FPS\u2019s placement within or outside of DHS, our prior work  has stated that an agency can benefit from periodically evaluating its  organizational structure, identifying what a change is expected to achieve,  and analyzing alternatives. Specifically, Standards for Internal Control in  the Federal Government states that agency management should  establish an organizational structure to achieve the agency\u2019s objectives.  According to the Standards, an effective management practice for  attaining this outcome includes periodically evaluating the organizational  structure to ensure that it meets its objectives and has adapted to  changes. We have also reported that a key practice in organizational  change is to identify and agree on what a change is expected to achieve  or the problems the change will solve. The process of defining such  expected outcomes can help decision makers reach a shared  understanding of what challenges need to be addressed. Furthermore,  we have reported on best practices for analyzing alternatives to help  ensure that agencies select the option that best meets their needs.  These practices can be applied to a wide range of activities or programs  in which an alternative must be selected from a set of possible options.  The practices include assessing the current environment to provide a  basis for comparison with other alternatives and identifying and assessing  benefits and trade-offs of each alternative.", "However, DHS has not taken key steps to fully assess potential  placement options. Specifically, DHS has not assessed the organizational  structure of FPS, such as its placement in NPPD, even though both have  evolved since FPS was placed in NPPD in 2010. For example, NPPD has  increased its focus on protecting the nation\u2019s cyber infrastructure as  threats in this area have grown, and its funding for this purpose has  increased. In light of these changes, in 2015 and 2016, DHS proposed  that NPPD restructure itself to increase its focus on cybersecurity.  However, the proposals did not include an assessment of FPS\u2019s  organizational placement. The November 2018 legislation gave NPPD a  greater statutory focus on cyber risk and may result in additional changes  to the organization\u2019s activities. Additionally, while in NPPD, FPS also  has been increasingly engaged in providing law enforcement for  homeland security, with the establishment of a rapid protection force of  that can respond to heightened threat situations. Given these changes,  without an assessment, DHS cannot be certain that FPS is currently  placed in an agency that enables FPS to meet its mission.", "Additionally, because DHS did not analyze FPS\u2019s current placement in  NPPD, it does not have a benchmark for comparison to other agencies.   Without such an analysis, it is unclear whether FPS needed to be moved  from NPPD. On one hand, FPS made progress while placed in NPPD in  addressing many of our recommendations, and some stakeholders we  spoke with (officials from DHS and NPPD) said that FPS was in the right  place in NPPD. For example, a DHS official stated that from a resource  perspective there was no good reason to move FPS out of NPPD as the  official had not seen a business case to do so. Additionally, an NPPD  official stated that mission alignment and an opportunity to influence the  national facility-security policy were compelling reasons for FPS to stay in  NPPD. Further, NPPD officials said that FPS was meeting its mission and  objectives. On the other hand, FPS continued to experience challenges in  carrying out its mission in NPPD\u2014such as in overseeing contract guards,  collaborating with GSA and the Marshals, and having adequate funding\u2014 such that questions have been raised as to whether placing FPS in NPPD  was successful.", "DHS has recently initiated an effort to evaluate FPS\u2019s placement, but it  lacks several of the elements for a successful evaluation. Specifically, in  August 2018, DHS, NPPD, and FPS established a working group with a  draft charter with the objective of making a recommendation to the  Secretary of Homeland Security on the organizational placement of FPS  within DHS. The working group\u2019s evaluation criteria for FPS placement  consist of mission, command and control, resources, implementation schedule, and workforce and culture. While establishing this group and  identifying criteria are positive steps in assessing FPS\u2019s placement, the  group\u2019s planned activities are limited in several ways. For example, while  the charter is a draft, it does not indicate that the working group will  describe what changing FPS\u2019s placement is expected to achieve. This  factor is particularly important given that each placement option has its  benefits and trade-offs and that stakeholders\u2019 opinions of the options  varied. Changing FPS\u2019s placement could include: addressing one or more of the key criteria previously discussed in this addressing some or all of the challenges that persist, such as in  collaboration or contract guard oversight; or a combination of both.", "Further, the draft charter does not indicate that the working group will  evaluate agencies outside of DHS or incorporate best practices for  analyzing alternatives, such as evaluating FPS\u2019s current placement in  NPPD and the benefits and trade-offs of placement options. Without  conforming to the best practices, DHS will not have assurance that the  working group recommends the alternative that best meets mission  needs.", "DHS\u2019s current approach to evaluating FPS\u2019s placement limits DHS\u2019s  ability to reliably assess the merits of placement options supported by  GSA and FPS. GSA officials said GSA would take FPS and moving FPS  back to GSA could benefit tenants in federal facilities, strengthen security  support, and reduce redundancies because both agencies have federal  facility protection responsibilities. Further, according to GSA, if  consolidated under GSA, FPS could become more efficient, better  manage costs, and leverage acquisition processes by making use of  GSA\u2019s existing services. FPS officials stated that they prefer FPS to be a  standalone entity that reports directly to DHS leadership. According to  FPS, being a standalone agency in DHS would establish the protection of  federal facilities as a critical mission of DHS and provide FPS with the  direct support of DHS leadership. Further, according to FPS officials,  having this support would better enable them to carry out their mission.  However, neither GSA nor FPS has conducted analyses to support their  preferences, and DHS is not planning to look at options outside of DHS at  this time. As a result, DHS cannot fully assess FPS\u2019s or GSA\u2019s positions.", "Once DHS identifies what it expects to achieve by moving FPS, in line  with key practices for organizational change, and establishes an  evaluation approach that reflects best practices for an analysis of  alternatives, it will be in a position to best assess benefits and trade-offs  previously discussed. In absence of these steps, DHS may not be  positioning itself to make an informed decision as to what organization  best supports FPS."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Over the past 15 years, FPS has been located in three different agencies  (GSA, ICE, and NPPD), and there continues to be disagreement about  whether it is currently in the best place to achieve its objectives. Further,  agency and stakeholder opinions vary about where and whether FPS  should move. DHS has established a working group to evaluate  placement options for FPS. However, the working group\u2019s planned  activities do not include key steps to fully assess potential placement  options. Specifically, while the group\u2019s charter is a draft, it does not state  whether it plans to assess FPS\u2019s current placement in NPPD, what DHS  expects to achieve by changing FPS\u2019s placement, or effective placement  options for relocating FPS.", "These steps would help DHS address legislation enacted in November  2018 requiring the review of placement options for FPS\u2014including how  DHS considered the results of our review. Regardless of the legislation,  DHS cannot have a complete discussion that leads to an informed  decision on FPS\u2019s placement without taking these steps. Identifying the  expected outcomes of changing FPS\u2019s placement and performing  analyses are critical because organizational change can take many years  to fully implement, can result in reduced productivity and morale in the  short-term, and may require up-front investments. Without determining  what it expects to achieve by moving FPS and conducting an evaluation  using appropriate criteria, DHS may not be well-positioned to identify an  organization that best supports FPS."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Secretary of  Homeland Security:  The Secretary of Homeland Security\u2014in consultation with NPPD and  FPS\u2014should identify the specific goals of a change in FPS\u2019s placement\u2014 that is, what DHS expects to achieve by moving FPS to another agency.  (Recommendation 1)", "The Secretary of Homeland Security\u2014in consultation with NPPD, FPS,  and other agencies as relevant\u2014should fully evaluate placement options  for FPS based on what DHS expects to achieve by changing FPS\u2019s  placement, an assessment of FPS\u2019s current placement, and other best  practices such as an analysis of alternatives assessing the benefits and  trade-offs discussed in this report. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to DHS, GSA, Justice, and OMB for  comment. In its comments, reproduced in appendix IV, DHS concurred  with our recommendations and outlined steps it plans to take to address  them. DHS also provided technical comments, which we incorporated as  appropriate. GSA, Justice, and OMB only provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Administrator of  General Services, the Attorney General, the Director of OMB, 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 has any questions about this report, please contact me  at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["To address our objectives, we reviewed our prior work related to  organizational transformation, where we identified organizational and  accountability criteria that Congress should consider when determining  which agencies to include or exclude from the newly created DHS. The  criteria are relevant to our review of FPS\u2019s organizational placement as  Congress considers whether to include or exclude FPS in various  agencies within and outside DHS. We selected a subset of the criteria  that are the most relevant to FPS\u2019s organizational placement to include in  our review. For each criterion, we also identified elements (i.e.,  characteristics) that are specific to FPS based upon our review of FPS  documents and our prior work on topics related to the criteria, and our  discussions with federal officials with experience in facility security, the  Federal Law Enforcement Officers Association, and a former high-ranking  official in NPPD with knowledge of FPS.", "To identify challenges facing FPS, we reviewed our past work and the  status of our prior recommendations, and interviewed stakeholders and  agency officials. We reviewed pertinent proposed and enacted legislation  related to DHS\u2019s reauthorization and FPS. We reviewed Standards for  Internal Control in the Federal Government for relevant management  responsibilities. And, we reviewed our prior reports on key practices and  questions for organizational change and best practices for an analysis of  alternatives process. We used practices identified in these reports as  well as internal controls to assess the steps DHS has taken to assess  placement options for FPS.", "We applied the key criteria to eight selected agencies in DHS, GSA, and  the Department of Justice (Justice) that we determined could be potential  organizational placement options for FPS, as shown in table 4.", "We selected three of our eight placement options (CBP, ICE, and Secret  Service) based upon our review of the most recently available data from  the Department of Justice on the number of federal law enforcement  officers. We selected these three agencies because they employed the  largest number of law enforcement officers within DHS. Our selection of  agencies with federal law enforcement officers is relevant because FPS  employs such officers. We selected three options (GSA, NPPD, and a  standalone entity in DHS) because FPS was previously organizationally  placed within GSA, is currently placed in NPPD, and because of FPS\u2019s  preference to be a standalone entity reporting directly to the Deputy  Secretary of DHS. We selected our remaining two options (a standalone  entity within Justice and the Marshals) because the duties of the Marshals  include law enforcement and protection of federal courthouses and  because legislation proposed during our review would have, if enacted,  instructed the Secretary of Homeland Security to recommend the  appropriate placement of FPS within the executive branch of the federal  government. We also identified DHS\u2019s Office of the Chief Security  Officer as an office within DHS that has the facility security responsibility  for managing contract guards at DHS\u2019s former headquarters at the  Nebraska Avenue Complex in Washington, D. C. We determined that this  security office is a policy office within DHS\u2019s Management Directorate  with its primary mission being the security of DHS employees and a focus  on expanding internal security policy. For the purposes of our review, we  did not include OCSO as a potential placement option for FPS because  the security office does not have a large number of law enforcement  officers, plans to divest operational security responsibilities, and was not  a previous, current or FPS desired placement. Our exclusion of OCSO  does not preclude DHS from assessing OCSO as a placement option for  FPS.", "We reviewed documentation and interviewed officials from FPS and the  selected agencies to identify similarities, differences, and other  considerations with regard to each of the key criteria. For the first four key  criteria\u2014(1) mission, goals, and objectives; (2) responsibilities; (3)  organizational culture; and (4) information sharing and coordination\u2014we  determined that a selected agency met the criteria if the agency or its  subcomponents have any similarities to FPS. For the last criterion\u2014 mission support\u2014we determined that a selected agency met the criterion  if the agency or its subcomponents have mission support similar to FPS  or could provide mission support that FPS needs. Although we used the  key criteria to assess eight agencies we selected, the criteria can be used  to assess any potential placement option for FPS.", "We also reviewed documentation and conducted interviews with  stakeholders including:  representatives from the Federal Law Enforcement Officers  Association;  representatives from the American Federation of Government  Employees Local 918 (the union that represents NPPD employees\u2014 including FPS);  representatives from two unions that represent a large number of  Protective Security Officers (i.e., contract guards),  the United Government Security Officers of America and Security  and", "Security, Police and Fire Professionals Association of America;  representatives from the National Association of Security Companies  (an association of contract guard companies); officials from agencies that coordinate with or use FPS for facility  the Department of Justice for law enforcement coordination and  the Internal Revenue Service and the Social Security  Administration as large users of FPS facility protection;  staff from the Office of Management and Budget; and officials from DHS\u2019s Interagency Security Committee, which develops  the security standards for non-military federal facilities.", "We also obtained views from a former high-ranking official in NPPD with  knowledge of FPS. Additionally, we obtained views from officials, staff,  and representatives from FPS, the selected agencies and stakeholders  on the alignment between FPS and the agencies as well as on the  potential placement options. The results of these interviews are non- generalizable to all of FPS\u2019s stakeholders but provide useful examples of  considerations related to various placement options.", "We conducted this performance audit from June 2017 to January 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."], "subsections": []}, {"section_title": "Appendix II: Comparison of Selected Agencies and the Federal Protective Service (FPS) in Elements Associated with Key Organizational-Placement Criteria", "paragraphs": ["Based on our prior work related to organizational transformation, we  identified five key criteria to consider when assessing placement options  for FPS: (1) mission, goals, and objectives; (2) responsibilities; (3)  organizational culture; (4) information sharing and coordination; and (5)  mission support. For each criterion, we identified elements that are  specific to FPS. We identified these elements from documentation and  interviews from federal officials with experience in facility security, the  Federal Law Enforcement Officers Association, a former high-ranking  official in NPPD with knowledge of FPS, and our review of prior work on  topics related to the criteria. We compared selected agencies that could  be placement options to FPS in each of the elements\u2014see tables below.  The selected agencies are the Department of Homeland Security (DHS),  U.S. Customs and Border Protection (CBP), U.S. Immigration and  Customs Enforcement (ICE), National Protection and Programs  Directorate (NPPD), United States Secret Service (Secret Service),  General Services Administration (GSA), Department of Justice (Justice),  and the U.S. Marshals Service (Marshals). We assumed that FPS would  be a standalone entity in DHS, GSA, and Justice.", "For elements in the first four criteria\u2014(1) mission, goals, and objectives;  (2) responsibilities; (3) organizational culture; and (4) information sharing  and coordination\u2014a \u201cyes\u201d in the table means that any function of the  selected agency or its subcomponents have similarities to FPS. For  elements in the last criterion\u2014mission support\u2014a \u201cyes\u201d means that any  function of the selected agencies or its subcomponents have mission  support similar to FPS or could provide mission support that FPS needs.  For all criteria, the \u201cyes\u201d designation does not account for the magnitude  of the effort or activities performed by each of the selected agencies."], "subsections": []}, {"section_title": "Appendix III: Summary of Selected Agencies\u2019 Similarities and Differences Related to Key Organizational-Placement Criteria", "paragraphs": ["We identified five key organizational placement criteria that are relevant  to consider when assessing FPS\u2019s placement: (1) mission, goals, and  objectives; (2) responsibilities; (3) organizational culture; (4) information  sharing and coordination; and (5) mission support. We evaluated whether  selected agencies that could be placement options for FPS met the key  organizational placement criteria. The selected agencies are the  Department of Homeland Security (DHS); U.S. Customs and Border  Protection (CBP); U.S. Immigration and Customs Enforcement (ICE);  National Protection and Programs Directorate (NPPD); United States  Secret Service (Secret Service); General Services Administration (GSA);  Department of Justice (Justice); and the U.S. Marshals Service  (Marshals). We assumed that FPS would be a standalone entity in DHS,  GSA, and Justice.", "For the first four criteria\u2014(1) mission, goals, and objectives; (2)  responsibilities; (3) organizational culture; and (4) information sharing and  coordination\u2014we determined that a selected agency met the criteria if the  agency or its subcomponents have similarities to FPS in relevant  elements identified in appendix II. We determined that a selected agency  met the mission support criterion if the agency or its subcomponents have  similarities to FPS or could provide FPS needed mission support in  relevant elements."], "subsections": [{"section_title": "Mission, Goals, and Objectives", "paragraphs": ["FPS\u2019s mission focuses on the protection of federal facilities and the  people working in and visiting those facilities.", "In table 10 and subsequent paragraphs, we describe how selected  agencies met the mission, goals, and objectives criterion\u2014that is, the  selected agencies that were similar to FPS for this criterion\u2014areas of  consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.", "DHS, NPPD, and Secret Service are similar to FPS in that their mission  statements or goals as stated in their strategic plans include an explicit  focus on the protection of infrastructure or specific facilities. GSA has a  statutory facility protection mission. Our prior work found that placing an  agency into an organization that has a similar mission may help ensure  that the agency\u2019s mission receives adequate funding, attention, visibility,  and support. One of DHS\u2019s goals\u2014as noted in its strategic plan covering  fiscal years 2014 to 2018\u2014is to reduce risk to the nation\u2019s critical  infrastructure. In addition, NPPD\u2019s mission is to lead the national effort to  protect and enhance the resilience of the nation\u2019s physical and cyber  infrastructure. To carry out this mission, NPPD coordinates efforts to  protect infrastructure in 16 critical infrastructure sectors, including a  government facilities sector. Further, the Secret Service\u2019s mission is to  ensure, among other things, the security of the United States President,  Vice President, and other individuals. The Secret Service\u2019s Uniformed  Division protects locations necessary for accomplishing its mission of  protecting these individuals. Per statute, GSA is responsible for the  operation, maintenance, and protection of buildings and grounds  occupied by the federal government and under the jurisdiction, custody,  and control of GSA.", "While DHS, NPPD, Secret Service, and GSA may be good placement  options for FPS given their similarities in mission or goals (i.e., focus on  infrastructure or facility protection), stakeholders we interviewed identified  some key areas of consideration that may have a bearing on how well  FPS would fit in NPPD, Secret Service, and GSA.", "NPPD: FPS and NPPD officials expressed concerns about the fit  between the two agencies given differences in how they perform their  infrastructure protection missions. Specifically, FPS has employees  who directly protect federal facilities, while NPPD\u2019s physical  infrastructure protection efforts provide guidance and resources to  federal, state, and local governments, and private sector companies  so that they can protect their facilities. Furthermore, officials from  FPS, NPPD, the union representing FPS officials, an association  representing federal law enforcement officers, and a former high- ranking official in NPPD said that a difference between the two  agencies is that FPS performs law enforcement activities to carry out  its protection mission while NPPD does not.", "Secret Service: Officials from FPS and Secret Service said that  placing FPS in the Secret Service could present challenges because  the two agencies\u2019 missions have some fundamental differences\u2014FPS  focuses on protecting federal facilities and Secret Service focuses on  protecting individuals such as the United States President and Vice  President. Furthermore, another difference is that the scope of  facilities that the Secret Service protects is smaller and narrower than  FPS, according to FPS and Secret Service officials. FPS protects  about 9,000 facilities throughout the United States, while Secret  Service\u2019s Uniformed Division\u2014which is responsible for protecting  facilities\u2014protects a limited number of facilities in the National Capital  Region (e.g., the White House, the Vice President\u2019s residence). FPS  officials said that another consideration between the two agencies is  that FPS\u2019s mission of protecting federal facilities would get lost in  Secret Service\u2019s mission of protecting the President of the United  States and other key individuals.", "GSA:  Stakeholders provided differing views on how well FPS would  fit in GSA. An official from CBP and officials from Justice said that  FPS should be placed in GSA because FPS focuses on GSA-held or- leased facilities. Furthermore, GSA officials stated FPS and GSA  could merge as both have the authority to protect federal facilities,  and there is an intuitive relationship between GSA\u2019s focus on the  management and operations of federal facilities and FPS\u2019s mission of  the security of federal facilities. Conversely, officials from FPS, staff  from OMB, and officials of an association that represents security  companies, said that FPS should not move to back to GSA. These  officials and staff said that FPS should not move to GSA because,  among other reasons, the two agencies have different missions: GSA  focuses on federal real estate and some physical security activities  not homeland security or law enforcement.", "CBP, ICE, Justice, and Marshals do not have mission statements or goals  that focus explicitly on infrastructure or facility protection. Nonetheless, as  we discuss in the next section of this report, CBP, Justice, and Marshals  have some facility protection responsibilities.", "In addition, FPS and the selected agencies share few or no operational  objectives. DHS, ICE and NPPD share one or two operational objectives  with FPS\u2014DHS shares objectives that focuses on mitigating risks and  responding to incidents, ICE shares one that focuses on intelligence  gathering, and NPPD shares one that focuses on facility assessments.  FPS, Justice, and Marshals have a few similar operational objectives. The  three agencies have objectives that focus on the integration and use of  intelligence information. FPS and Marshals also have similar objectives that focus on facility assessments, mitigating risks, and on rapidly  responding to emergencies and incidents."], "subsections": []}, {"section_title": "Responsibilities", "paragraphs": ["To carry out its facility protection mission at about 9,000 federal facilities,  FPS performs physical security as well as law enforcement activities. As  a part of its physical security activities, FPS conducts facility security  assessments, identifies countermeasures (e.g., equipment and contract  guards) best suited to secure a facility, and oversees contract guards. As  a part of its law enforcement activities, FPS proactively patrols facilities,  responds to incidents, and conducts criminal investigations, among other  things. FPS also provides additional operational law enforcement support,  at the direction of the Secretary of Homeland Security, to address  emerging threats and homeland security incidents. According to FPS  officials, previous placements have focused on physical security or law  enforcement, but not both. For example, FPS officials told us that  because of ICE\u2019s focus on law enforcement, FPS\u2019s physical security  activities took a backseat to ICE\u2019s law enforcement mission. Similarly,  according to FPS officials, NPPD has not prioritized FPS\u2019s law  enforcement activities because NPPD does not have a focus on law  enforcement.", "One of FPS\u2019s most critical activities is overseeing about 13,500 contract  guards who are posted at federal facilities and are responsible for  controlling access to facilities, responding to emergency situations  involving facility safety and security, and performing other duties. FPS is  responsible for overseeing these guards to ensure, among other things,  that they are performing their assigned duties and have the necessary  training and certifications. We have reported on challenges FPS faces in  overseeing contract guards. For example, in August 2012, we reported  that FPS faced challenges ensuring that contract guards have the  necessary training and certifications. We found that although FPS verifies  contractor-reported guard certification and training information by  conducting monthly audits, FPS does not independently verify the  contractor\u2019s information.", "In table 11 and subsequent paragraphs, we describe how selected  agencies met the \u201cresponsibilities\u201d criterion\u2014that is, the selected  agencies that were similar to FPS for this criterion\u2014areas of  consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.", "Like FPS, DHS, the selected agencies in DHS (except ICE), GSA,  Justice, and Marshals have responsibilities for federal facility protection.  As discussed above, DHS, NPPD, and the Secret Service have mission  or goal statements that explicitly address infrastructure or facility  protection. CBP\u2019s, GSA\u2019s, Justice\u2019s, and Marshals\u2019 mission or goal  statements do not explicitly state a focus on infrastructure or facility  protection, but these agencies have some facility protection  responsibilities to help achieve their missions. For example, GSA has  some protection responsibilities for about 8,700 GSA-held or GSA-leased  facilities in support of its mission of managing the federal real estate  portfolio. GSA conducts repairs that affect the operation of building  security equipment and develops policy and requirements for the building  security used in the design and construction of GSA buildings. Marshals  have security responsibilities at federal courthouses in support of its  mission to protect, defend, and enforce the nation\u2019s justice system.", "Stakeholders we interviewed identified some areas of consideration that  may have a bearing on how well FPS would fit in agencies that have  facility protection responsibilities:", "Officials from FPS and Marshals questioned how FPS would meld  with agencies that protect facilities on a smaller scale. CBP, Justice,  and Marshals perform facility protection at a smaller number of  facilities as compared to FPS and GSA: CBP has facility protection  responsibilities at about 1,200 border patrol stations, ports of entry,  and other facilities; Justice (excluding Marshals) at 36 facilities; and  Marshals at about 430 facilities with a judicial presence, while FPS  and GSA have protection responsibilities at about 9,000 and 8,700  facilities, respectively.", "Justice and Marshals officials said that there are some differences  between their agencies and FPS\u2019s facility protection responsibilities.  Specifically, these officials said that unlike FPS, Justice and Marshals  have limited responsibilities for facility protection, and in the case of  Marshals, this responsibility is related to the protection of the federal  judiciary."], "subsections": [{"section_title": "Physical Security and Law Enforcement Activities", "paragraphs": ["FPS most closely aligns with DHS, CBP, Secret Service, Justice, and  Marshals because these agencies perform both physical security and law  enforcement activities. However, as discussed in the paragraph below,  there are differences in the extent to which and for what purpose these  agencies perform these activities. The remaining agencies perform either  physical security (NPPD, GSA) or law enforcement activities (ICE), but  not both.", "While DHS, CBP, Secret Service, Justice, and Marshals align with FPS  with regard to the two types of activities it performs, there are differences  in how these agencies perform these activities because these agencies\u2019  activities and missions differ from FPS. For example, Justice and  Marshals officials explained that in their view, Justice and Marshals are  different from FPS because Justice and Marshals perform limited physical  security activities and have extensive law enforcement missions, whereas  FPS has a limited law enforcement mission and an extensive facility  protection mission. Further, Marshals officials said that FPS\u2019s and  Marshal\u2019s law enforcement activities support different purposes\u2014with  Marshals supporting a violent-crime reduction mission and FPS  supporting a facility protection mission. As a result, Marshals officials said  that FPS\u2019s facility protection mission may not receive full attention.  Further while FPS performs law enforcement activities relevant to federal  facility protection, the Secret Service performs law enforcement relevant  to protecting key individuals, such as the President. Furthermore,  although GSA does not perform law enforcement activities, GSA officials  said that if FPS moved to GSA, its leadership would provide FPS  organizational support that would enable both FPS\u2019s law enforcement and  physical security activities. FPS officials stated that if FPS moved outside  of DHS, the Secretary of Homeland Security\u2014who is responsible for  protecting the nation\u2014may lose protection responsibilities for federal  facilities as well as the ability to use FPS for law enforcement support  when needed for homeland security."], "subsections": []}, {"section_title": "Contract Guard Responsibilities", "paragraphs": ["Like FPS, Marshals also employs a large number of contract guards for  facility protection. The remaining agencies (DHS, CBP, ICE, NPPD,  Secret Service, GSA, and Justice) use FPS\u2019s contract guards, procure a  limited number of guards or use their own federal officers for facility  protection, according to officials from these agencies. Similar to FPS,  Marshals also performs compliance reviews of training and certification  information maintained by its contractors, and Marshals officials explained  that these reviews are performed periodically.", "Staff from OMB and an association of security companies said that  Marshals may be a good fit for FPS because Marshals, like FPS, uses a  contract guard force. We have previously reported that a consideration of  moving one agency into another is whether the move can help improve  the efficiency and effectiveness of agency missions by, among other  things, addressing gaps. In this regard, one consideration is whether  FPS could leverage the Marshals\u2019 oversight of its own contract guards to  address its ongoing challenges in this area.", "However, differences between FPS\u2019s and Marshals\u2019 contract guard  programs exist. For example, Marshals\u2019 guard force is smaller than FPS\u2019s  with about 4,400 guards and the day-to-day duties of FPS\u2019s contract  guards are different from Marshals\u2019 contract guards. Both FPS\u2019s and  Marshals\u2019 contract guards control access to facilities. However, Marshals  contract guards also provide security for the judicial process, such as  providing armed escort services to judges, jurors, and other court  personnel and providing security in a courtroom during hearings.  Furthermore, some requirements between the two guard forces vary. For  example, Marshals has more stringent requirements for contract guards  in the areas of education and law enforcement experience."], "subsections": []}]}, {"section_title": "Organizational Culture", "paragraphs": ["While there are many areas relevant to organizational culture, law  enforcement is a key aspect of FPS\u2019s organizational culture, according to  officials from an association of security companies and a former high- ranking official in NPPD. One area that has affected FPS\u2019s culture,  particularly morale, according to an official from the association of law  enforcement officers, is that FPS\u2019s criminal investigators receive federal  law enforcement officer retirement benefits, while its inspectors\u2014who  also perform some law enforcement and who form the majority of FPS\u2019s  workforce\u2014do not.", "In table 12 and subsequent paragraphs, we describe how selected  agencies met the organizational culture criterion\u2014that is, the selected  agencies that were similar to FPS for this criterion\u2014areas of  consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.", "DHS, nearly all the selected agencies in DHS, and Justice have cultures  similar to FPS because they are all law enforcement agencies, but NPPD  and GSA do not. An official from an association of federal law  enforcement officers said moving FPS to a law enforcement agency may  improve FPS\u2019s employee satisfaction. Specifically, this official explained  that one advantage of moving FPS to a law enforcement agency is that it  could mean that FPS inspectors could be reclassified into positions that  would receive federal law enforcement officer retirement benefits, leading  to improved employee satisfaction and retention. FPS officials said that  Justice\u2019s long-standing culture that is focused on law enforcement is  something that FPS sees as one of Justice\u2019s advantages.", "Although FPS and some of the selected agencies are similar in that their  cultures focus on law enforcement, there are differences among their  cultures. For example, FPS officials questioned how their agency would  meld with the Secret Service since it has long history, and Marshals  officials said that FPS and the Marshals do not have comparable  legacies. The Secret Service and Marshals have been around for about  150 and 230 years, respectively, while FPS has a 47-year history. In  addition, FPS and the law enforcement agencies may have different  hiring practices, which can influence the culture of the workforce. Secret  Service, for example, requires that all its employees hold a top-secret  security clearance. This level of clearance is not required for all of FPS\u2019s  employees, according to an FPS official. If FPS moved to Secret Service,  Secret Service officials stated that there may be a need to create different  workforce categories due to differences in the hiring requirements, a  situation that may affect FPS\u2019s and the Secret Service\u2019s employee  morale."], "subsections": []}, {"section_title": "Information Sharing and Coordination", "paragraphs": ["Regarding information sharing, in 2016, DHS designated a division within  FPS as a Component Intelligence Program (CIP). CIPs are organizations  in DHS that collect, gather, process, analyze, produce, or disseminate  information related to national homeland security. According to FPS  officials, FPS\u2019s participation in meetings held by the CIPs is important  because it provides FPS more visibility on the threats that other DHS  agencies have identified and actions they plan to take. Further, FPS  shares information obtained in CIP meetings with federal agencies across  the United States to support emergency preparedness, security, and  employee safety. Additionally, as a CIP, FPS has an opportunity to  provide input on the national homeland-security information that the  Secretary of Homeland Security receives. Finally, FPS has greater  access to information than it might otherwise receive without the CIP  designation. FPS officials said that FPS\u2019s designation as a CIP was a  \u201cgame changer\u201d for FPS\u2019s abilities to identify and share information on  emerging threats. FPS officials explained that FPS\u2019s placement could  influence whether FPS continues to have direct access to information  related to national homeland security that it needs to carry out its mission.", "Regarding coordination, FPS currently coordinates with both GSA and  Marshals to fulfill its facility protection mission; however, we have  reported on challenges FPS has faced in coordinating with these  agencies.", "FPS\u2019s coordination with GSA: FPS and GSA share responsibility for  protecting federal facilities. FPS is primarily responsible for protecting  federal employees and visitors in federal facilities held or leased by  GSA. GSA serves as the federal government\u2019s landlord and, in this  role, performs some physical security activities such as funding and  repairing security fixtures. In December 2015, we found that FPS and  GSA had not agreed on a common outcome related to facility  protection or the roles and responsibilities to accomplish their  missions.", "FPS\u2019s coordination with Marshals: FPS coordinates with Marshals to  protect about 430 federal courthouses. At courthouses held or leased  by GSA, FPS is the primary federal agency responsible for patrolling  and protecting the perimeter of the facilities and for enforcing federal  laws and regulations in those facilities. Marshals has primary  responsibility for the security of the federal judiciary, including the safe  conduct of court proceedings and the security of federal judges, court  personnel, jurors, and the visiting public. In September 2011, we  reported that FPS, Marshals, and other agencies involved in  protecting courthouses (i.e., GSA and the Administrative Office of the  U.S. Courts) faced challenges related to coordination, such as in the  implementation of roles and responsibilities and the use or  participation in existing collaboration mechanisms.", "In table 13 and subsequent paragraphs, we describe how selected  agencies that met the information sharing and coordination criterion\u2014that  is, the selected agencies that were similar to FPS for this criterion\u2014areas  of consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.", "Like FPS, all of the selected agencies except GSA have access to and  can share information related to national homeland security, and these  agencies could share that same information with FPS. Specifically, like  FPS, the selected agencies in DHS are CIPs or participate in other  groups that have access to and can share information related to national  homeland security. Justice and Marshals have access to homeland  security information through the Federal Bureau of Investigation and  participate in separate groups where national homeland security  information is shared, including the Joint Terrorism Task Force and the  National Counterterrorism Center.", "While selected agencies in DHS and Justice are similar to FPS in the  area of information sharing, there are some differences and challenges  that decision makers would need to consider before placing FPS in these  agencies. For example, FPS and the selected agencies in DHS and  Justice require different types of information to meet respective mission  needs. In previous organizational placements, FPS has faced challenges  with information sharing. For example, FPS officials told us that when  FPS was part of ICE, they relied on ICE to provide them with information,  which slowed down FPS\u2019s ability to react to information specific to facility  protection. This may not be an issue if FPS continues to have direct  access to information as a CIP.", "While GSA does not have access to national homeland security  information, GSA has access to and shares information pertinent to the  security of government facilities through, among other sources,  participation in the government facilities sector of the Government  Coordinating Council and Interagency Security Committee. Officials from  FPS, an association of security companies, and a former high-ranking  official in NPPD\u2014said if FPS moved to GSA, FPS could lose direct  access to critical information that is necessary for it to accomplish its  mission. Furthermore, staff from OMB said FPS\u2019s participation in DHS\u2019s  homeland security groups has given the agency some level of credibility.  Thus, if FPS moved to an agency that does not have access to national  homeland security information, such as GSA, there may be resistance  from DHS agencies and others in sharing information with FPS, according  to the OMB staff. If FPS moved to Justice or Marshals, FPS officials said  that they would be able to continue to access and share homeland  security information through Justice\u2019s information sharing community.  Thus, a move to either of these two agencies would not have as great an  impact to their access to homeland security information as a move to  GSA would, according to FPS officials."], "subsections": [{"section_title": "Coordination", "paragraphs": ["Based on the coordination challenges we found in our prior work, FPS  and GSA or Marshals may continue to disagree on roles and  responsibilities if FPS is placed in these agencies. However, in  September 2018, NPPD and GSA signed a memorandum of agreement  that, among other things, describes FPS\u2019s and GSA\u2019s roles and  responsibilities, and FPS, Marshals, GSA, and the Administrative Office  of the U.S. Courts are working to finalize a separate agreement for  courthouse security. Accordingly, coordination between these agencies  should improve with the implementation of these agreements as we have  previously reported that establishing clear roles and responsibilities, in  agreements or through other mechanisms, contribute to effective  coordination.", "Moving one agency into another does not necessarily mean that the two  agencies will coordinate better. As discussed earlier in this report, FPS  moved from ICE to NPPD so that FPS could gain synergy with NPPD\u2019s  Office of Infrastructure Protection, which is responsible for coordinating  infrastructure protection across government and the private sector.  According to OMB staff we interviewed, this synergy has not happened in  part because NPPD and FPS missions are self-contained\u2014with FPS  focused on federal facility infrastructure and the Office of Infrastructure  Protection focused on other types of infrastructure, including privately  owned infrastructure.", "DHS, CBP, ICE, NPPD, and Secret Service do not have joint  responsibilities for coordinating facility protection because these agencies  rely on FPS to provide security services or provide their own security  services."], "subsections": []}]}, {"section_title": "Mission Support", "paragraphs": ["FPS officials told us that over the course of its previous organizational  placements, FPS\u2019s mission support capabilities have matured and that it  is now able to provide its own mission support in most areas. For  example, FPS owns and uses many of the key operational and business- related information technology (IT) systems and applications it needs to  carry out its mission. Despite the maturation of FPS\u2019s in-house mission  support activities, FPS still receives some mission support services from  other agencies in DHS, such as human capital and some aspects of  information technology. FPS would need mission support in these areas if  it changed its organizational placement. Separately, FPS has faced  challenges in the area of financial management, and changing FPS\u2019s  placement could help address those challenges. Finally, FPS offers its  own training courses and has access to DHS\u2019s Federal Law Enforcement  Training Centers (FLETC), and therefore it does not need mission support  from a parent agency in this area.", "In table 14 and subsequent paragraphs, we describe how selected  agencies met the mission support criterion\u2014that is, the selected agencies  that had mission support that FPS needs\u2014areas of consideration if FPS  is placed in those agencies, and how the selected agencies did not meet  the criterion.", "Among the agencies we reviewed, GSA has the infrastructure to support  FPS in its funding approach. FPS officials told us that one of the key  challenges they experienced in ICE was that ICE did not have institutional  knowledge on FPS\u2019s funding approach, particularly FPS\u2019s fee structure,  and FPS experienced changes in fees that were not aligned to what was  needed to cover its efforts. FPS funds its operations by collecting security  fees from federal agencies that use FPS for facility protection. GSA is well  positioned to support FPS\u2019s funding approach because it is the only  agency we reviewed that also collects monies from multiple federal  agencies to support some of its operations. According to documentation  we reviewed and interviews with officials from selected agencies, we  found that among the remaining agencies, some do not collect fees  (NPPD, Secret Service) and others collect fees to support operations, but  not from other federal agencies (DHS, CBP, ICE, Justice, Marshals).", "Further, based on our review of FPS\u2019s fiscal year 2019 budget request to  Congress and our past work, we found that FPS faces challenges in  generating enough revenue to cover its operational costs. If placed in  GSA, GSA and FPS could consider whether to use the Federal Buildings  Fund for security projects related to facility management, such as  installing cameras. OMB staff said that there are limitations with the  Federal Buildings Fund, such as the amount of funding available for  security projects. Further, OMB staff said that finding cost-effective ways  for FPS to carry out its operations will help the agency address its funding  challenges."], "subsections": [{"section_title": "Human Capital", "paragraphs": ["Any of the selected agencies could provide FPS needed human capital  support. FPS performs some human capital activities, such as estimating  the number of staff it needs to perform its mission but does not have  delegated examining authority that allows it to fill competitive civil service  jobs. NPPD\u2014FPS\u2019s current parent agency\u2014has this authority and is  responsible for recruiting, hiring, and performing other human capital  services on behalf of FPS. All the selected agencies we reviewed have  delegated examining authority. Thus, any one of these agencies could  provide human capital services on behalf of FPS. Officials from three of  the selected agencies\u2014ICE, the Secret Service, and Marshals\u2014said that  they already face challenges with hiring enough staff to fulfill their own  missions or may not have the administrative capacity to handle an  additional human capital workload for FPS. For example, officials from the  Secret Service and Marshals said they have staffing shortages, which  negatively affects their ability to fulfil their missions. The shortage is  exacerbated by the time it takes to vet applicants and process new staff  through background checks and security clearances, according to the  officials. Marshals officials said absorbing FPS would not help the agency  address the staffing shortage because FPS employees perform a  different mission, including a different law enforcement mission, which  require different skill sets, training, etc. Further, Marshals officials said  that given the time it takes to vet its own applicants and process its own  staff, it lacks the administrative capacity to take on a new agency. Finally,  Justice officials said that if FPS moved into Marshals, FPS staff would  require ongoing human resources support for such things as performance  management, payroll, personnel action processing, and benefits  counseling. They said that Marshals is not staffed to assume the full  human capital services required of another agency. Separately, an official  from ICE said that the agency\u2019s human capital office is currently  undergoing a major realignment of service functions and that given FPS\u2019s  large workforce, ICE would not have the administrative capacity to take  on the additional human capital workload for FPS.", "NPPD may experience some gaps in providing some human capital  functions if FPS moved out of NPPD. According to NPPD, FPS provides  NPPD 23 staff positions to help NPPD carry out its human capital  activities. If FPS moved out of NPPD, NPPD staff said that 15 of the  positions could be realigned back to FPS. The remaining 8 positions,  which perform major functions including processing pay and managing  information technology systems for human capital needs, would need to  remain in NPPD if they are not replaced by NPPD. According to NPPD  officials, the human capital teams that perform these functions are  already understaffed and the skillsets for these functions are not plentiful  in the workforce. Thus, if NPPD were unable to retain these positions,  NPPD officials said that there may be significant gaps, such as in  processing pay."], "subsections": []}, {"section_title": "Information Technology (IT)", "paragraphs": ["FPS\u2019s operational and business-related IT systems and applications  would not be greatly affected by a change in FPS\u2019s organizational  placement because FPS owns many of the systems and applications it  needs to carry out its mission. For example, FPS owns a system to help  agency officials conduct and track facility security assessments and  another system to track law enforcement activities (e.g., tracking  investigative cases and incidents). If FPS\u2019s placement changed, the  agency could take its systems with it, though there may be some  transition or integration costs, according to FPS officials.", "FPS uses some IT systems or applications that it does not own and that  would need some consideration if FPS changed its organizational  placement, particularly if FPS moved outside DHS. For example, FPS  uses ICE\u2019s system for managing financial transactions and ICE\u2019s IT  network. If FPS moved outside of DHS, resources would be needed to  remove FPS from this ICE system and network, according to FPS  officials. GSA and Justice have financial management systems that FPS  could use. Marshals do not have its own financial management but uses  Justice\u2019s system. According to Justice and Marshals officials, Justice\u2019s  financial management system is currently not configured to support the  collection of fees that support operations. Any changes to the  configuration of Justice\u2019s financial management system, such as the  inclusion of FPS\u2019s fee-based collections, would require the approval of  Justice and possibly other Justice components that use the system. If  FPS stayed within DHS, including as a standalone entity within DHS, it  could potentially continue to use ICE\u2019s system or use CBP or the Secret  Service\u2019s systems."], "subsections": []}, {"section_title": "Training", "paragraphs": ["DHS, CBP, ICE, Secret Service, Justice, and Marshals provide law  enforcement training, but FPS would not need access to such training if  placed in these agencies because FPS provides its own training on topics  related to facility protection. For example, FPS provides training to its  inspectors on physical security activities, such as identifying  countermeasures needed at facilities. FPS officials said that there would  be no efficiency gained in merging FPS and these agencies\u2019 training  programs because FPS performs activities that most other law  enforcement agencies do not perform. NPPD and GSA do not perform  law enforcement activities and therefore do not have law enforcement  training programs. If moved to either of these two agencies, FPS could  continue to use its own training courses.", "Furthermore, CBP, ICE, Secret Service, and Marshals are Federal Law  Enforcement Training Centers (FLETC) Partner Organizations, meaning  that they have access to training provided at FLETC training facilities.  FPS is also currently designated as a FLETC Partner Organization and  therefore would not need to rely on these agencies to obtain this  designation. All Partner Organizations, regardless of whether they are  DHS agencies or not, share the same equal privileges at FLETC,  including priority scheduling for basic and advanced law enforcement  training. Nonetheless, Justice and Marshals officials explained that their  FLETC training curriculum, planning, and structure are vastly different  than other Partner Organizations due to the differing mission sets. NPPD  and GSA are not FLETC Partner Organizations. According to FLETC  officials, however, because FPS is currently a FLETC Partner  Organization, it would continue to have access to FLETC while in NPPD  or GSA."], "subsections": []}]}]}, {"section_title": "Appendix IV: Comments from the U.S. Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Amelia Bates Shachoy  (Assistant Director); Roshni Dav\u00e9 (Analyst-in-Charge); Ben Atwater;  Jazzmin Cooper; George Depaoli; Adam Gomez; Geoffrey Hamilton;  Malika Rice; Amy Rosewarne; Kelly Rubin; Sarah Veale; and Amelia  Michelle Weathers made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Federal Protective Service protects about 9,000 federal facilities and their occupants.", "FPS is part of the Department of Homeland Security, but it's been moved to two \"parent agencies\" within the department in the last 15 years. Reorganization can affect an agency's performance; after each move, FPS faced new duties and challenges.", "But where's the best fit? We reviewed 8 potential parent agencies and found benefits and trade-offs for each.", "Homeland Security is also assessing the issue, and should follow best practices for doing so. For example, we recommended setting goals and expectations for a move."]}
{"id": "GAO-18-352", "url": "https://www.gao.gov/products/GAO-18-352", "title": "VA Disability Benefits: Improved Planning Practices Would Better Ensure Successful Appeals Reform", "published_date": "2018-03-22T00:00:00", "released_date": "2018-03-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA's disability compensation program pays cash benefits to veterans with disabilities connected to their military service. In recent years, the number of appeals of VA's benefit decisions has been rising. For decisions made on appeal in fiscal year 2017, veterans waited an average of 3 years for resolution by either VBA or the Board, and 7 years for resolution by the Board. The Veterans Appeals Improvement and Modernization Act of 2017 makes changes to VA's current (legacy) appeals process, giving veterans new options to have their claims further reviewed by VBA or appeal directly to the Board. The Act requires VA to submit to Congress and GAO a plan for implementing a new appeals process, and includes a provision for GAO to assess VA's plan.", "This report examines the extent to which VA's plan (1) addresses the required elements in the Act, and (2) reflects sound planning practices identified in prior GAO work. GAO reviewed and assessed VA's appeals plan and related documents against sound planning practices, and solicited VA's views on its assessments."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs' (VA) plan for implementing a new disability appeals process while attending to appeals in the current process addresses most, but not all, elements required by the Veterans Appeals Improvement and Modernization Act of 2017 (Act). VA's appeals plan addresses 17 of 22 required elements, partially addresses 4, and does not address 1. For example, not addressed is the required element to include the resources needed by the Veterans Benefits Administration (VBA) and the Board of Veterans' Appeals (Board) to implement the new appeals process and address legacy appeals under the current process. VA needs this information to certify, as specified under the Act, that it has sufficient resources to implement appeals reform and make timely appeals decisions under the new and legacy processes.", "VA's appeals plan reflects certain sound planning practices, but it could benefit from including important details in several key planning areas:", "Performance measurement : VA's plan reflects steps taken to track performance, but could articulate a more complete and balanced set of goals and measures for monitoring and assessing performance on a range of dimensions of success. Specifically, the plan reports that VA is developing a process to track timeliness of the new and legacy processes. However, contrary to sound planning practices, the plan does not include timeliness goals for all five appeals options available to veterans, does not include goals or measures for additional aspects of performance (such as accuracy or cost), and does not explain how VA will monitor or assess the new process compared to the legacy process. Unless VA clearly articulates a complete and balanced set of goals and measures, it could inadvertently incentivize staff to focus on certain aspects of appeals performance over others or fail to improve overall service to veterans.", "Project management : VA's plan includes a master schedule for implementing the new appeals plan. However, this schedule falls short of other sound practices for guiding implementation and establishing accountability, such as articulating interim goals and needed resources for, and interdependencies among, activities. Unless VA augments its master schedule to include all key activities and reflect sound practices, VA may be unable to provide reasonable assurance that it has the essential program management information needed for this complex and important effort.", "Risk assessment : VA has taken steps to assess and mitigate some risks related to appeals reform by, for example, pilot testing two of the five appeals options through its Rapid Appeals Modernization Program (RAMP). However, as designed, RAMP does not include key features of a well-developed and documented pilot test. For example, VA has not articulated how it will assess RAMP before proceeding with full implementation. In addition, RAMP is not pilot testing three options and, as a result, VA will not have data on the extent to which veterans will appeal directly to the Board when given the option. Unless VA identifies and mitigates key risks associated with implementing a new process, VA is taking a chance that untested aspects will not perform as desired."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VA (1) fully address all legally required elements in its appeals plan, (2) articulate how it will monitor and assess the new appeals process as compared to the legacy process, (3) augment its master schedule for implementation, and (4) address risk more fully. VA agreed with GAO's recommendations and outlined its planned actions to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) provides cash benefits to  veterans for disabling conditions incurred in or aggravated by military  service, paying an estimated $67 billion to about 4.3 million veterans in  fiscal year 2016. If veterans are dissatisfied with VA\u2019s initial decision they  can appeal\u2014first to the Veterans Benefits Administration (VBA) and then,  if not satisfied there, to the Board of Veterans\u2019 Appeals (Board), a  separate agency within VA. In recent years, the number of appeals of  VA\u2019s benefit decisions has been rising. For appeals resolved in fiscal year  2017, veterans waited an average of 3 years from the date they initiated  their appeal to resolution by either VBA or the Board\u2014and a cumulative  average of 7 years for appeals resolved by the Board. Due in part to the  challenges VA faces managing large workloads and deciding disability  claims and appeals in a timely manner, GAO in 2003 designated VA  disability compensation and other federal disability programs as one of  the government\u2019s highest management risks.", "In a March 2017 report, we examined VA\u2019s approaches to address  challenges it identified as contributing to lengthy appeals processing  times\u2014including VA efforts to hire staff, propose reform legislation to  Congress in April 2016, and upgrade its information technology (IT)  systems\u2014and the extent to which those approaches were consistent with  sound planning practices. We made five recommendations to improve  VA\u2019s ability to implement its proposed appeals process reform while  addressing a growing appeals workload. VA agreed in principle with our  five recommendations, which remain open as of March 2018. We  recommended, in essence, that VA develop: (1) a detailed workforce  plan, (2) a complete schedule of IT updates, (3) better estimates of future  workloads and timeliness, (4) a robust plan for monitoring appeals reform, and (5) a strategy for assessing whether the new process improves  veterans\u2019 experiences over the current process. We also suggested that  Congress require VA to pilot test appeals reform.", "Enacted on August 23, 2017, the Veterans Appeals Improvement and  Modernization Act of 2017 (Act) will make changes to VA\u2019s appeals  process. Specifically, the Act replaces the current appeals process with  one that gives veterans various options to have their claim reviewed  further by VBA or to bypass VBA and appeal directly to the Board. The  Act also requires VA to submit a comprehensive plan for implementing  the new appeals process and processing legacy appeals (appeals that  remain pending in the current process prior to fully implementing appeals  reform) to the appropriate committees of Congress and GAO. The Act  delineates the required elements of this plan, and required VA to submit  its plan within 90 days of enactment. VA submitted its plan on November  22, 2017. The Act also includes a provision for GAO to assess VA\u2019s  appeals plan, including whether the plan comports with sound planning  practices and/or contains gaps.", "This report examines the extent to which VA\u2019s appeals plan (1) addresses  the required elements in the Act; and (2) reflects sound planning practices  identified in prior GAO work.", "To assess the extent to which VA\u2019s plan addresses the required elements  in the Act, we identified the required elements under section 3(a) and (b)  of the Act; compared VA\u2019s appeals plan and supplemental materials VA  provided at our request to those elements; and made a preliminary  determination as to whether VA\u2019s plan addressed, partially addressed, or  did not address each element. We then shared the results of this review  with VA officials, and considered their comments in arriving at our  assessment.", "To address the extent to which VA\u2019s plan reflects sound planning  practices, we compared the appeals plan and supplemental materials  against relevant sound planning practices and other criteria identified in  our prior work.", "For both assessments, our analyses focused on the information and  elements VA presented in its appeals plan and in supplemental materials  rather than auditing the underlying information. We shared our findings  related to both assessments with VA. Specifically, in advance of a  January 30, 2018 hearing based on our ongoing work, we provided VA a  draft of our testimony statement for review and comment. At a January  17, 2018 meeting, VA officials provided us with comments on our  findings, including our findings of how VA\u2019s plan compared to sound  practices, which we have incorporated in this report, as appropriate.", "We conducted this performance audit from October 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "VA\u2019s Disability Compensation Claims Process", "paragraphs": ["VA\u2019s process for deciding veterans\u2019 eligibility for disability compensation  begins when a veteran submits a claim to VA. The veteran submits his or  her claim to one of VBA\u2019s 56 regional offices, where staff members assist  the veteran by gathering additional evidence, such as military and  medical records, that is needed to evaluate the claim. Based on this  evidence, VBA decides whether the veteran is entitled to compensation  and, if so, how much.", "A veteran dissatisfied with the initial claim decision can generally appeal  within 1 year from the date of the notification letter sent by VBA. Under  the current appeals process (now referred to by VA as the legacy  process), an appeal begins with the veteran filing a Notice of  Disagreement. VBA then re-examines the case and generally issues a  Statement of the Case that represents its decision.", "A veteran dissatisfied with VBA\u2019s decision can file an appeal with the  Board. In filing that appeal, the veteran can indicate whether a Board  hearing is desired. Before the Board reviews the appeal, VBA prepares  the file and certifies it as ready for Board review. If the veteran requests a  hearing to present new evidence or arguments, the Board will hold a  hearing by videoconference or at a local VBA regional office. The Board\u2019s  members, also known as Veterans Law Judges, review the evidence and  either issue a decision to grant or deny the veteran\u2019s appeal or refer (or  remand) the appeal back to VBA for further work."], "subsections": []}, {"section_title": "New Appeals Process", "paragraphs": ["The 2017 Act made changes to VA\u2019s legacy appeals process that will  generally take effect no earlier than February 2019, which is  approximately 18 months from the date of enactment. According to its  appeals plan, VA intends to implement the Act by replacing the current  appeals process with a process offering veterans who are dissatisfied  with VBA\u2019s decision on their claim one of five options: two of those  options afford the veteran an opportunity for an additional review of VBA\u2019s  decision within VBA, and the other three options afford them the  opportunity to bypass additional VBA review and appeal directly to the  Board.", "Under the new appeals process, the two VBA options will be:  1.  Request higher-level review: The veteran asks VBA to review its  initial decision based on the same evidence but with a higher-level  official reviewing and issuing a new decision.  2.  File supplemental claim: The veteran provides additional  evidence and files a supplemental claim with VBA for a new  decision on the claim.", "The three Board options will be:  3. Request Board review of existing record: The veteran appeals  to the Board and asks it to review only the existing record without  a hearing.  4. Request Board review of additional evidence, without a  hearing.  5. Request Board review of additional evidence, with a hearing."], "subsections": []}, {"section_title": "VA\u2019s Appeals Plan", "paragraphs": ["The Act also requires VA to submit to the appropriate committees of  Congress and GAO, within 90 days of the date of enactment, a  comprehensive plan for (1) processing appeals under the legacy process  until there are no more to process, (2) implementing the new appeals  process, (3) processing of claims under the new appeals process in a  timely manner, and (4) monitoring implementation of the new appeals  process. In addition to these four broad elements, the Act lists 18  elements required to be included in the plan that relate to, among other  things:  staffing, IT, and other resources required to implement the plan; estimated timelines for hiring and training VA employees; and a description of risks associated with each element of the plan.", "The Act also includes a provision for GAO to assess the plan within 90  days after VA submits it.", "The Act also requires VA to provide progress reports to the appropriate  committees of Congress and GAO at least once every 90 days (starting  after VA submits its plan), until the date the Act\u2019s legal changes to the  appeals process generally go into effect and then at least once every 180  days after this date for 7 years."], "subsections": []}, {"section_title": "Rapid Appeals Modernization Program (RAMP)", "paragraphs": ["The Act also authorized VA to carry out a program to test any  assumptions relied upon in developing its comprehensive plan and test  the feasibility and advisability of any facet of the new appeals process. In  its appeals plan, VA reported its decision to pilot test two of the five new  options by allowing veterans with pending appeals in the legacy process  (known as legacy appeals) to elect the VBA higher-level review or VBA  supplemental claim options beginning in November 2017. This program,  which VA refers to as RAMP, is intended to reduce legacy appeals by  providing veterans with a chance for early resolution of their claims within  VBA while the Board focuses on reducing its inventory of legacy appeals,  according to VA. Participation in RAMP is voluntary, but veterans must  withdraw their pending legacy appeal to participate, according to VA.  Veterans dissatisfied with their RAMP decisions must wait until VA fully  implements the new appeals process (in February 2019 at the earliest)  before pursuing an appeal with the Board under the new process,  according to VA officials."], "subsections": []}]}, {"section_title": "VA\u2019s Plan Addresses Most of the Act\u2019s Required Elements for the New and Legacy Disability Appeals Processes", "paragraphs": ["VA\u2019s appeals plan addresses 17 of the Act\u2019s 22 required elements,  partially addresses 4 related to monitoring implementation and workforce  planning, and does not address 1 element related to identifying total  resources. For example, VA\u2019s appeals plan addresses the required  elements related to, among others, identifying legal authorities for hiring  and removing employees, estimating timelines for hiring and training  employees, and outlining the outreach VA expects to conduct. For the  elements in the Act that VA\u2019s appeals plan partially addresses or does not  address, see table 1. For a detailed list of the 22 required elements in the  Act, see appendix I.", "When we provided VA with our preliminary assessment, VA officials said  they disagreed and that their appeals plan addresses all 22 of the  required elements. In general, they said that data are not available, and  VA cannot yet forecast the information required by the Act until aspects of  the new appeals process are tested or implemented. However, in  discussing our assessment at a January 2018 House Committee on  Veterans\u2019 Affairs hearing, the Deputy Secretary of Veterans Affairs stated  that the agency agreed with our assessment and will work with us to  address these gaps in VA\u2019s appeals plan.", "Until VA\u2019s appeals plan has complete information on all 22 of the required  elements, Congress does not have the information it needs to fully  conduct oversight of the plan and the agency\u2019s efforts to implement and  administer the new process while addressing legacy appeals. VA also  needs information on resources, among other areas, to certify that the  agency is prepared to carry out timely processing of appeals under the  new and legacy appeals process. Further, as discussed below,  addressing required elements through a more comprehensive plan and  underlying analysis is consistent with sound planning practices and would  better position VA to implement the new appeals process while attending  to legacy appeals. For example, such an appeals plan would provide for  carefully monitoring the new and legacy appeals processes against  balanced goals and metrics, and clearly articulates resources, milestones  and other information needed for effective program management."], "subsections": []}, {"section_title": "VA\u2019s Appeals Plan Reflects Certain Sound Planning Practices, but Could Improve on Others", "paragraphs": ["VA\u2019s appeals plan reflects certain sound planning practices, such as  convening a working group on performance tracking; however, the plan  could benefit from including important details related to three key planning  areas:  1.  articulating a balanced set of goals and related measures to monitor  and assess the performance of the new appeals process, in  conjunction with the legacy process;  2.  developing a high-quality and reliable implementation schedule to  manage key steps and activities of the project; and  3.  assessing key risks in a comprehensive manner, including respective  mitigation strategies, articulating clear criteria and an assessment  plan for RAMP, and more fully testing or analyzing all appeals options."], "subsections": [{"section_title": "VA\u2019s Appeals Plan Indicates Steps to Assess Process Changes, but Should Also Include Goals and Measures to Provide Full Picture of Success", "paragraphs": ["VA\u2019s appeals plan reflects steps taken to track performance, but it could  improve its planning practices related to monitoring and assessing  performance on a range of key dimensions of success. Sound planning  practices suggest that agencies develop overall goals tied to meaningful  and balanced performance measures. These measures include a mix of  outcome, output, and efficiency measures to ensure that an  organization\u2019s priorities\u2014as well as government-wide priorities such as  quality, timeliness, and cost of service\u2014are addressed.", "VA\u2019s appeals plan reports that the agency convened a working group to  design a process for tracking timeliness of both the legacy appeals and  appeals within the new process. In supporting documentation that we  requested, VA officials stated they are also determining the best way to  measure veterans\u2019 satisfaction with the new appeals process. VA\u2019s  appeals plan and supporting documentation also identify timeliness goals  for the two VBA-only options and one of the three Board options.  Nevertheless, its appeals plan does not articulate a set of goals and  measures that cover all aspects of its new appeals process, such as  accuracy of decisions and cost. The plan also does not provide details on  the metrics the agency will develop, how it will assess if the new appeals  process is an improvement over the legacy appeals process, and how it  will monitor the allocation of resources between legacy and new appeals  claims. More specifically:", "VA\u2019s reported timeliness measures are incomplete: VA\u2019s appeals  plan outlines timeliness goals for the two VBA options (average  processing time of 125 days) and for the Board option that does not  include new evidence or a hearing (average processing time of 365  days). However, VA\u2019s plan does not establish timeliness goals for  the other two Board options: Board review of additional evidence  without a hearing and Board review of additional evidence with a  hearing. In commenting on our findings, while VA officials indicated  they expect the new process to be more efficient than the legacy  process (and, therefore, more timely), they also said data to inform  goal setting for all Board options will not be available until VA fully  implements these options. Establishing timeliness goals for all options  would provide a more complete picture of VA\u2019s vision for the new  appeals process, and help VA to develop concrete, objective, and  observable performance measures to show progress in achieving that  vision, as well as inform resource estimates.", "VA\u2019s reported measures lack adequate balance: Other than  including certain timeliness goals, VA\u2019s appeals plan does not  articulate additional aspects of performance important for managing  appeals, such as accuracy of decisions, veteran satisfaction with the  process, or cost. We previously reported that VA officials said they  wanted to also use veteran survey results, wait times, and inventories  as sources of information to measure progress under the new appeals  process. Further, VA\u2019s fiscal year 2018 annual performance plan  includes an overall customer satisfaction score for veterans\u2019  benefits. However, these and other potential measures of success  are not specified in VA\u2019s appeals plan for monitoring the new appeals  process as compared with legacy appeals. By not articulating a set of  comprehensive and balanced goals and measures in its appeals plan,  VA could be inadvertently creating skewed incentives by focusing on  one area of program performance to the detriment of other areas  (e.g., processing claims quickly but inaccurately).", "In commenting on our findings, VA officials recognized the need to  develop additional goals and measures. They indicated, for example,  that they are developing and testing whether the existing quality  assurance goal\u201492 percent accuracy\u2014is appropriate for the new  process. According to VA officials, once they have developed these  other goals and measures, VA will communicate this information as  part of the required progress reports to the appropriate committees of  Congress and GAO. Moreover, at a January 2018 House Committee  on Veterans\u2019 Affairs hearing, the Deputy Secretary of Veterans Affairs  acknowledged that their performance goals and measures are not yet  complete and indicated that the agency will address these gaps in  measuring performance.", "VA\u2019s plan does not reflect how it will establish baseline data:  VA\u2019s approach for evaluating the efficiency and effectiveness of the  implementation of the new appeals process falls short of sound  practices for using baseline data to assess performance. Our prior  work has demonstrated that by developing and tracking a  performance baseline for all measures, including those that  demonstrate the effectiveness of a program, agencies can better  evaluate progress made and whether or not goals are being  achieved. However, VA\u2019s appeals plan did not provide important  details about what aspects of the new appeals process\u2019 performance  will be compared to what aspects of the legacy process\u2019 performance.", "In particular, section 5 of the Act lists a number of metrics VA is  required to report periodically, including some that could be used as  baseline measures. For example, VA is required to periodically  publish on its website the average time that elapsed between the filing  of an initial claim and the final resolution of the claim, for legacy  appeals as well as appeals under the new system, which is consistent  with our prior recommendation. However, VA\u2019s appeals plan does  not explain how or when the agency would collect and use these or  other data about the legacy and new processes\u2019 performance\u2014such  as accuracy, veteran satisfaction, and cost\u2014to assess their relative  performance.", "As we had previously reported, VA\u2019s business case for reform in some  instances relied on unproven assumptions and limited analyses of its  legacy process to identify root causes of performance problems.  Specifically, VA determined that the open-ended nature of its legacy  appeals process, whereby a veteran can submit additional evidence  numerous times at any point, can cause additional cycles of re- adjudication, a process VA refers to as \u201cchurning.\u201d According to VA,  this re-adjudication can occur multiple times and can add years to the  time needed to reach a final decision on an appeal. Without fully  articulating a plan for collecting and using baseline and trend data, VA  cannot determine the extent to which the new appeals process, which  also allows for multiple appeal opportunities, will achieve final  resolution of veterans\u2019 appeals sooner, on average, than the legacy  process.", "In commenting on our assessment, VA indicated that it is working  toward capturing the metrics listed in section 5 of the Act. VA officials  also noted that reporting on the new appeals process will require IT  system functionality that currently does not exist, but stated that  efforts are underway to add this functionality.", "VA\u2019s plan does not explain how the agency will monitor  processing of legacy versus new appeals: In addition, VA\u2019s  appeals plan does not fully articulate how the agency will monitor  whether resources are being appropriately devoted to both the new  and legacy appeals process and how it will track both sets of  workloads. An appeals plan that does not specifically articulate how  VA will manage the two processes in parallel exposes the agency to  risk that veterans with appeals in the legacy process may experience  significant delays or otherwise poor results relative to those in the new  appeals process or vice versa. In commenting on our findings, VA  officials noted that VA was not required under section 3 of the Act to  provide a description of its plans to capture metrics listed in section 5.  Even if not required by the Act, developing an approach for carefully  monitoring the management of new and legacy appeals would help  VA track progress being made and achievement of goals.", "Until VA establishes complete and balanced goals and measures,  identifies baseline data, and develops a plan for monitoring and  assessing both the new and legacy processes, VA runs the risk of  promoting skewed behaviors, or not fully understanding whether the new  process is an improvement or whether veterans with appeals in the  legacy process are experiencing poor results."], "subsections": []}, {"section_title": "VA\u2019s Appeals Plan Needs a Reliable Implementation Schedule to Manage the Project", "paragraphs": ["VA\u2019s appeals plan reflects certain aspects of sound planning practices  related to managing the implementation of process change; however,  other key components are not addressed. Sound planning practices for  implementing process change suggest establishing a transition team.  Consistent with such practices, VA\u2019s appeals plan states that the agency  convened an agency-wide governance structure to coordinate  implementation of its new appeals process; it is comprised of senior-level  employees with authority to make necessary decisions to keep the project  on track. VA\u2019s appeals plan also includes a copy of a master schedule. In  its plan, VA asserts that the master schedule reflects timelines, interim  goals and milestones, reporting requirements, and established deadlines,  and that it will be used to guide implementation. VA\u2019s appeals plan also  reports that VA is consulting with project management professionals, who  are using the master schedule, among other tools, to monitor  implementation. In addition, VA made progress addressing some of the  issues we previously identified by developing steps and timetables for  updating training in anticipation of implementing the new appeals  process.", "However, VA\u2019s master schedule for implementing reform is missing  elements of a high-quality and reliable implementation schedule for key  activities. We have previously reported that having a well-planned  schedule is a fundamental management tool. Generally recognized sound  practices from the Project Management Institute (PMI) and GAO call for  organizations to employ an integrated and reliable master schedule that  defines when work activities will occur, who will complete the work, how  long they will take, how they are related to one another, and the  constraints affecting the start and completion of work elements, as well as  whether resources will be available when they are needed. Such a  project management schedule not only provides a road map for  systematic project execution, but also provides the means by which to  gauge progress, identify and address potential problems, and promote  accountability.", "The master schedule VA provided in its appeals plan should have  included other sound practices for project management related to a  reliable schedule. Specifically:", "Key activities and their duration are not included: VA\u2019s master  schedule does not capture specific Board-related activities, such as  efforts to develop metrics, and the schedule and other project plans  we reviewed do not go beyond February 2019. For example, the  schedule does not indicate the period of time when VA expects to no  longer be processing legacy appeals. Also, VA\u2019s master schedule  submitted with its November 2017 appeals plan did not include the  Rapid Appeals Modernization Program (RAMP) activities, even  though this pilot test is occurring at the same time VA is preparing for  full implementation of appeals options at VBA and the Board.  However, VA\u2019s updated schedule that accompanied its comments on  our draft report was updated to include RAMP.", "When all key and necessary activities are not included, it raises  questions about whether all activities are scheduled in the correct  order, resources are properly allocated, or the estimated completion  dates are reliable. In addition, if the schedule does not fully and  accurately reflect VA\u2019s efforts, it will not serve as an appropriate basis  for analysis and may result in unreliable completion dates and delays.", "Sequencing and linkages among activities are not identified: For  the high-level activities VA\u2019s appeals plan identifies, VA\u2019s master  schedule does not indicate whether there were sequencing or  linkages among them, which is not consistent with sound scheduling  practices. Sequencing and linkages would show, for example, if any of  these activities or sub-activities must finish prior to the start of other  activities, or the amount of time an activity could be delayed before  the delay affects VA\u2019s estimated implementation date. For example,  VA cannot train new employees until after it hires them.", "The activities VA identifies also do not appear supported by lower- level project schedules. Specifically, when we requested  documentation to support VA\u2019s high-level summary of activities and  milestones, VA officials did not provide intermediate or more detailed  schedules that reflected these practices. In particular, VA\u2019s appeals  plan lacks a complete schedule for IT modifications that clearly  defines what is to be achieved and the time frames for achievement.", "We previously recommended that VA develop a schedule for IT  updates that explicitly addresses when and how process reform will  be integrated into new systems and when these systems will be ready  to support the new appeals process at its onset. For example, VA\u2019s  appeals plan references several required IT modifications that do not  appear in its master schedule. Schedules that are defined at too  high a level may disguise risk that is inherent in lower-level  activities.", "Interim goals are not reflected: VA officials stated that they have  interim goals and milestones, though VA\u2019s appeals plan and  supporting documentation generally do not include this information.", "Sound planning and redesign practices suggest closely monitoring  implementation and developing project goals that include a mix of  intermediate goals to be met at various stages. We previously made a  recommendation that VA develop a more robust plan for closely  monitoring implementation of process reform, including metrics and  interim goals to help track progress, evaluate efficiency and  effectiveness, and identify trouble spots\u2014all of which are consistent  with sound planning practices. Without interim goals and milestones,  VA lacks information to support sequencing of activities and to track  and ensure accountability for steady progress.", "Resources are not assigned to all identified activities: The high- level summary schedule that VA provided us also lacks details  regarding the assignment of resources for all activities. Specifically,  while the plan identifies workgroups responsible for coordinating  elements in the plan, such as regulations, training, and outreach, the  schedule does not assign resources to the 40 listed activities. As  discussed previously, VA\u2019s appeals plan also does not provide  information on the total resources required for this reform effort.  Assigning resources to the listed activities, as well as providing other  information, could provide a better indication of the estimated total  resources required to implement the new appeals process and  address legacy appeals.", "In commenting on our findings, VA officials stated that the agency is  developing lower-level project schedules for key activities\u2014such as  RAMP and IT requirements\u2014and will provide these schedules as part of  the required progress reports to the appropriate committees of Congress  and GAO. VA officials also noted that future updates will include  additional dependencies and risks, which VBA and the Board are still  developing. Further, in discussing our findings at a January 2018 House  Committee on Veterans\u2019 Affairs hearing, the Deputy Secretary of  Veterans Affairs reiterated VA\u2019s commitment to developing more robust  project plans, particularly for IT. Until VA has a robust integrated master  schedule, supported by detailed project plans that adhere to sound  practices, VA\u2019s appeals plan does not provide reasonable assurance that  decision makers have the essential program management information  needed for this complex and important effort."], "subsections": []}, {"section_title": "VA\u2019s Plan Addresses Some but Not All Key Risks Related to the New Appeals Process", "paragraphs": ["VA\u2019s appeals plan includes an assessment of risks involved in  implementing the new appeals system, but could more comprehensively  reflect key risks posed by such a significant reform effort. VA\u2019s appeals  plan and supplemental materials include a \u201crisk register\u201d that describes  risks associated with many elements of its plan, and the remaining level  of risk after its planned response to these risks. VA\u2019s appeals plan also  states that senior leaders will receive regular updates of risks and  mitigation strategies. However, because VA has not yet articulated a  balanced set of performance goals and measures in its appeals plan, it is  hindered in its ability to identify and assess risks.", "Federal internal control standards state, and our previous work at VA and  other agencies demonstrates, that establishing clear performance goals  and objectives is a necessary pre-condition to effectively assessing risk.  Having, for example, more complete timeliness goals, and goals and  measures reflecting other areas of performance, would allow VA to better  identify and target risks associated with managing two processes in  parallel, including the potential that veterans with appeals in the legacy  process may experience significant delays relative to those in the new  appeals process.", "Importantly, VA is missing an opportunity to fully benefit from RAMP by  not testing and assessing other aspects of the new appeals process. The  Act authorizes VA to test the feasibility and advisability of any facet of the  new appeals process, and VA is taking a positive step to mitigate some  risks by testing the two review options available within VBA (review of a  claim by a higher-level official based on the same evidence and review of  a supplemental claim with additional evidence) through RAMP. In  November 2017, VA began RAMP by inviting 500 veterans whose  appeals have been pending the longest to participate. According to VA  officials, VA plans to continue offering RAMP to additional eligible  veterans with pending legacy appeals each month until January 2019\u2014a  month before VA anticipates fully implementing the new appeals system.  However, as designed, RAMP does not include features\u2014consistent with  a well-developed and documented pilot test program\u2014that would provide  VA with an opportunity to evaluate fully the soundness of new processes  and practices on a smaller scale. Specifically:", "VA\u2019s plan does not clearly define success criteria for RAMP: VA\u2019s  appeals plan states that the agency will collect certain data from  RAMP, such as the rate at which eligible veterans opt into the  process, timeliness of claims processing, and individual employee  productivity. VA also established an overall average processing time  goal of 125 days for the two VBA options; however, the plan and  supporting documentation did not clearly articulate whether RAMP  reviews are expected to meet this timeliness goal. The plan also did  not identify other success criteria for RAMP or the types of results  expected before fully implementing the new appeals process. For  example, VA\u2019s plan does not articulate the expected number and type  of subsequent appeals to the Board that result from RAMP.", "In commenting on our findings, VA noted that its intent in  implementing RAMP was to collect data and test aspects of the new  process, and that RAMP was not an initiative in and of itself. However,  developing performance measures and data gathering procedures  and defining success criteria for a pilot test before proceeding to full  implementation are sound practices for process redesign and pilot  testing. In addition, because RAMP was not included in VA\u2019s risk  assessment, we asked VA if it had identified any risks or mitigation  strategies specific to RAMP. In its supplemental materials, VA stated  that the greatest risk to RAMP is a low participation rate among  eligible veterans with legacy claims. VA also indicated that it would  need 10 percent of eligible veterans to opt into RAMP to yield  meaningful results. However, this threshold is not articulated in VA\u2019s  appeals plan as an explicit success criterion or objective. According to  data provided by VA, as of January 22, 2018, 238 veterans opted in.", "Of veterans with pending claims in RAMP, two-thirds chose the  higher-level review option. VA also reported that 47 RAMP decisions  have been made so far. As of yet, no appeals of RAMP decisions  have been filed.", "VA\u2019s plan does not articulate how it will assess RAMP before  proceeding with full implementation: Although VA\u2019s appeals plan  describes a \u201cclose-out\u201d phase in which VA intends to assess the  results of RAMP, it does not detail the conditions that would have to  be met (or not met) to trigger changes. For example, VA\u2019s plan does  not explain when or how it might respond to low opt-in rates for  RAMP\u2014other than stating it will increase outreach to eligible  veterans\u2014or to unexpectedly high appeal rates to the Board resulting  from RAMP decisions. Sound redesign and change management  practices both suggest that pilot tests be rigorously monitored and  evaluated, and that further roll-out occur only after an agency\u2019s  transition team takes any needed corrective action and determines  that the new process is achieving previously identified success  criteria. Without fully articulating its plan for deciding how and when to  roll out changes more broadly, it is not clear whether VA would be  prepared to fully implement a new appeals process that achieves its  aim of better serving veterans.", "RAMP does not test all aspects of the new appeals process:  RAMP provides an opportunity to learn about experiences at VBA  under the new system, such as the rate at which eligible veterans  choose those options and the resources that will be required to  process their appeals. However, RAMP was not designed to test how  many veterans would choose to appeal directly to the Board and,  therefore, it will not provide comparable information on the Board  appeals options. Sound workforce planning practices suggest that  agencies identify the total resources needed to manage the risk of  implementing new processes and conduct scenario planning to  determine those needs.", "In addition, although we previously recommended VA conduct additional  sensitivity analyses to inform projections of future appeals inventories,  VA\u2019s appeals plan does not reflect VA\u2019s use or intended use of sensitivity  analyses when projecting staffing needs for new appeals options at the  Board. In commenting on our findings, VA officials said they do not plan  to conduct additional sensitivity analyses to project future workloads until  they have more information from RAMP to inform their assumptions. As a  result, VA will lack data on scenarios in which veterans may  overwhelmingly choose options available at the Board over those at VBA  when the appeals plan is fully implemented. This presents a risk that VA\u2019s  early production projections and initial resource allocations may not be  properly balanced between the Board and VBA. This, in turn, may result  in an unexpectedly large number of appeals pending with the Board, and  corresponding lengthy average wait and decision times for some, if not  all, Board options.", "Having information on the number of veterans who are likely to appeal to  the Board is particularly critical, given that similar efforts to create  additional review options at VBA did not achieve their goals of reducing  the percentage of appeals that continue on to the Board. In 2001, VA  established the Decision Review Officer (DRO) process\u2014in which senior  staff have the authority to overturn an initial disability claim decision  without any new evidence\u2014to resolve more appeals at the regional level  and avoid long waits at the Board. However, we reported in 2011 that,  although the DRO process helped some veterans get additional benefits  at the regional office level, it did not accomplish the program\u2019s primary  goal of reducing the percentage of appeals continuing on to the Board.", "In responding to our findings, VA officials reiterated their plans to increase  outreach in the event of low opt-in rates for RAMP and indicated they  recently began to send follow-up RAMP invitation letters. With respect to  assessing all appeals options, VA officials stated that, while no legal bar  prevents testing of the Board options, the Board is focused on reducing  its inventory of pending appeals while RAMP provides early resolution of  appeals within the new VBA-only options. Officials conceded that this  approach means they cannot collect data on the rate at which veterans  opt to appeal directly to the Board (e.g., bypassing additional VBA review)  until the new process is fully implemented. However, they noted that they  can collect some data on the rate at which veterans whose appeals go  through RAMP file subsequent appeals to the Board, even though the  Board will not begin processing those appeals until full implementation. At  a January 2018 House Committee on Veterans\u2019 Affairs hearing, the  Deputy Secretary of Veterans Affairs stated that given our assessment,  VA will adjust its approach to identify and mitigate risks associated with  implementing all of the appeals options, including those at the Board.", "Until VA pursues an approach that identifies and mitigates significant  risks associated with implementing a new process, VA is taking a chance  that untested aspects will not perform as desired. The Act provides VA  authority to pilot aspects of the process and flexibility on the timing of  implementing the new process, which could allow some additional time  for VA to carefully measure performance under RAMP and determine  whether any corrective actions are necessary. If VA does not take full  advantage of this authority, it risks moving forward without knowing  whether the new appeals process improves experiences for veterans, and  potentially implementing a process that is more expensive or results in  longer wait times than originally anticipated."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In implementing appeals reform after the enactment of the Veterans  Appeals Improvement and Modernization Act of 2017, VA is undertaking  a complex endeavor that has the potential to affect the lives of hundreds  of thousands of veterans with service-connected disabilities. Such an  endeavor demands a commensurate level of planning to be successful.  While the Act required VA to submit its plan within 90 days of enactment,  VA had proposed and began to plan for appeals reform much earlier, and  had our March 2017 recommendations to guide its planning efforts from a  foundation of sound practices.", "VA\u2019s November 2017 appeals plan is a positive step forward. Certain  elements of the plan\u2014such as establishing an agency-wide governance  structure to oversee implementation and testing aspects of reform prior to  full implementation\u2014are notable gains since our March 2017 report. At  the same time, the plan partially addresses or does not address five of  the required elements called for by the Act, such as delineating the total  resources required by VBA and the Board to implement and administer  the new appeals process and address legacy appeals. The plan also is  not fully responsive to our past recommendations and does not reflect a  number of sound planning practices that are essential for gauging  progress, establishing accountability, and linking resources to results.", "One such key practice is articulating a desired \u201cend state\u201d\u2014a vision for  what successful implementation would look like for the new appeals  process as well as the wind-down of the legacy process, such as  accurate and timely processing of appeals while ensuring veteran  satisfaction. Without establishing a complete and balanced set of goals  and related performance measures to achieve this end state, and  monitoring and assessing progress along the way, VA risks falling short of  its overarching objective\u2014to improve timeliness of appeals decisions for  veterans overall. By not fully articulating how it plans to monitor workloads  and devote resources to both the new and legacy processes, VA runs the  risk of disadvantaging veterans with legacy appeals relative to those in  the new process, or vice versa.", "Just as important is establishing a robust integrated master schedule\u2014 rather than a high-level timeline\u2014that is built upon and clearly reflects  extensive detailed planning and includes all activities necessary to  execute the program and interdependencies between these activities.  Without such a road map, VA\u2019s appeals plan does not provide reasonable  assurance that decision makers have the essential information needed to  manage this complex and important program.", "We are encouraged that VA has taken some steps toward assessing  risks, including establishing a risk register and implementing RAMP to  collect information on the two VBA appeals options. However, unless VA  assesses risks against a balanced set of goals and measures, VA may  not be fully aware of risks that may impede successful implementation of  appeals reform. Further, although VA will undoubtedly learn from the  RAMP experience, it may not learn all that it should from its efforts  without (1) establishing clear criteria for what success looks like (or the  circumstances that would cause VA to consider making course  corrections), and (2) building in time to take stock of the lessons learned  before moving to full implementation.", "VA\u2019s plan places a lot of weight on RAMP to, among other efforts,  mitigate risk and generate estimates of the resources needed for  successful implementation after fiscal year 2018, even though RAMP  does not fully test options for appealing to the Board that will be available  to veterans after full implementation. Unless VA addresses key risks  associated with fully implementing appeals reform\u2014by either testing or  conducting sensitivity analyses for all five appeals options, to better  understand potential workloads at the Board\u2014VA runs the risk of fully  implementing the process without knowing if it is improving the process  for veterans."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to VA:  The Secretary of Veterans Affairs should address all of the required  elements in the Act in VA\u2019s appeals plan to Congress\u2014including  delineating resources required for all VBA and Board appeals options\u2014 using sensitivity analyses and RAMP results, where appropriate and  needed. (Recommendation 1)", "The Secretary of Veterans Affairs should clearly articulate in VA\u2019s appeals  plan how VA will monitor and assess the new appeals process compared  to the legacy process, including specifying a balanced set of goals and  measures\u2014such as timeliness goals for all VBA appeals options and  Board dockets, and measures of accuracy, veteran satisfaction, and  cost\u2014and related baseline data. (Recommendation 2)", "The Secretary of Veterans Affairs should augment the master schedule  for VA\u2019s appeals plan to reflect all activities\u2014such as modifications to IT  systems\u2014as well as assigned responsibilities, interdependencies, start  and end dates for key activities for each workgroup, and resources, to  establish accountability and reduce overall risk of implementation failures.  (Recommendation 3)", "The Secretary of Veterans Affairs should ensure that the appeals plan  more fully addresses risk associated with appeals reform\u2014for example,  by assessing risks against a balanced set of goals and measures,  articulating success criteria and an assessment plan for RAMP, and  testing or conducting sensitivity analyses of all appeals options\u2014prior to  fully implementing the new appeals process. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  (VA) for comment. In its comments, reproduced in appendix II, VA  outlined its planned actions to address the recommendations. VA clarified  in a subsequent communication that the agency agreed with all our  recommendations. VA did not provide technical comments.", "With respect to our first recommendation that VA address all the required  elements in the Act in VA\u2019s appeals plan (including delineating total  resources), VA stated that both VBA and the Board will use existing  resources to implement the new appeals process. VA also stated it plans  to take additional steps to determine resource requirements for  addressing workloads under both the legacy and new appeals process.  For VBA, VA stated that it will continue to rely on RAMP to project  resource requirements, while acknowledging the need to augment its  analysis of RAMP data by adopting additional strategies to project  resource requirements. VA did not describe these strategies, but stated  that it will share them with Congress and GAO in the near future.  Meanwhile, VA noted that its 2019 budget request includes 605 additional  FTEs for VBA to process appeals, but did not indicate how it developed  this budget request. For the Board, VA stated that it plans to develop  better predictions regarding resource allocations among dockets by  leveraging project management and other support within the agency. We  will continue to monitor VA\u2019s efforts to delineate needed resources,  including how it uses the results of pilot tests and prediction analysis.", "With respect to our second recommendation to articulate how it will  monitor and assess the new appeals process compared to the legacy  process, VA stated that it is working to develop a complete and balanced  set of measures for the new appeals process, and timeliness goals for all  appeals options. Further, VA indicated it will track performance for Board  appeal options using an existing process. We are encouraged by VA\u2019s  proposed actions, which will provide a more complete picture of VA\u2019s  vision for the new appeals process. However, VA does not detail whether  or how the agency will develop a baseline or compare performance of the  new appeals process to the legacy process. Until VA develops a baseline  and a plan for monitoring and assessing both the new and legacy  processes\u2014using a complete and balanced set of goals and measures\u2014 VA risks not fully understanding whether the new process is an  improvement.", "With respect to our third recommendation to augment its master  implementation schedule to manage the project, VA provided an updated  schedule with additional key activities and responsibilities, such as  RAMP. Moreover, VA restated its plans to use an agency-wide  governance structure to coordinate and track implementation of its new  appeals process. We are encouraged by VA\u2019s efforts to develop a more  detailed implementation schedule. However, the updated schedule VA  provided does not include major activities, such as integrated IT system  testing, and completion dates for major activities, for example, adding  functionality to VA\u2019s primary claims processing system. In addition, VA  provided an updated calendar for six major IT activities through the end of  calendar year 2018. However, we continue to believe that VA will need to  develop a longer term schedule that projects when processes will be  integrated into new systems and when new systems will be ready to  support the new appeals process. The schedule also does not indicate  whether activities are interrelated, such that a delay in one activity could  affect other activities and thereby affect VA\u2019s estimated implementation  date. This sound planning practice is especially important because VA  stated the agency is concurrently executing many of the activities.", "With respect of our fourth recommendation to more fully assess risks  associated with appeals reform prior to its full implementation, VA stated  that it will assess risks against a balanced set of goals it plans to select.  Moreover, using its existing risk management process, VA stated it has  identified additional risks and mitigation strategies after submitting its  November 2017 plan. For example, VA states that it is addressing the  continued low opt-in rate for RAMP, which is testing the new VBA-only  options. VA is also acknowledging that delays in the development of IT  required to implement the appeals process may prevent the agency from  certifying readiness in January 2019. Importantly, VA states that the  Board is exploring the development of a pilot program to identify needs  and concerns related to full implementation\u2014including all Board appeals  options\u2014and to make predictions about timeliness and productivity under  the new appeals process. However, VA did not define success criteria for  its current pilot test, RAMP, or clearly articulate how the agency will  assess results of either RAMP or a new test of Board appeals options  before proceeding to full implementation. Implementing our  recommendation in a complete and timely manner is important because it  would improve VA\u2019s ability to identify and mitigate significant risks  associated with implementing a new process.", "We will continue to monitor the status of VA\u2019s actions to address our  recommendations and how they are implemented, to help ensure that VA  is undertaking a level of planning appropriate to implementing a complex  endeavor, and thereby improving VA\u2019s chance of success.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, and other interested  parties. In addition, the report is available at no charge on GAO\u2019s website  at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Elizabeth Curda at (202) 512-7215 or curdae@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 contributed to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Our Assessment of VA\u2019s Appeals Plan Against Required Elements in the Act", "paragraphs": ["To assess the extent to which VA\u2019s appeals plan addresses the required  elements in the Veterans Appeals Improvement and Modernization Act of  2017 (Act), we first identified and developed a checklist reflecting each  required element for VA\u2019s appeals plan (including sub-parts) under  section 3(a) and (b) of the Act. To compare the required elements and  their sub-parts against VA\u2019s appeals plan and supplemental materials  provided by VA, we developed decision rules for determining whether  VA\u2019s appeals plan addressed, partially addressed, or did not address  each required element (see table 2). Specifically, we concluded that VA\u2019s  plan addressed (or partially addressed) a required element if the plan  included information related to all (or some) subparts of the requirement.  We focused on the plan as presented, rather than auditing the information  VA relied on in developing the plan. For example, the Act\u2019s section  3(b)(10) required VA\u2019s plan to include a description of the modifications to  the information technology (IT) systems required to carry out the new  appeals system, including cost estimates and a timeline. We concluded  that VA\u2019s plan addressed all sub-parts of this element because it provided  a description of required IT modifications, a reference to costs included in  the Appeals Modernization IT budget, and a timeline. However, our  determination that VA addressed this element should not be construed to  necessarily mean that VA fully identified or described all IT requirements,  or provided complete estimated costs and timelines associated with those  requirements, or that the information in VA\u2019s appeals plan comported with  sound planning practices. This type of assessment was outside the scope  of this objective."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Elizabeth H. Curda, (202) 512-7215 or curdae@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, the following staff members made  significant contributions to this report: Michele Grgich (Assistant Director),  James Whitcomb (Analyst in Charge), and Rachael Chamberlin.", "In addition, key support was provided by Susan Aschoff, Mark Bird, David  Chrisinger, Daniel Concepcion, Clifton Douglas, Alex Galuten, Nisha  Hazra, Melissa Jaynes, Benjamin Licht, Patricia McClure, Sheila McCoy,  Lorin Obler, Gloria Proa, Almeta Spencer, James Sweetman, Walter  Vance, and Greg Whitney."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-116", "url": "https://www.gao.gov/products/GAO-18-116", "title": "Government Procurement: Effect of Restriction on DHS's Purchasing of Foreign Textiles Is Limited", "published_date": "2017-11-21T00:00:00", "released_date": "2017-11-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The U.S. textile industry sustained significant losses when textile production fell from $71 billion in 2006 to $46 billion in 2009, according to the U.S. Bureau of Economic Analysis. As a part of the American Recovery and Reinvestment Act of 2009, Congress passed the Kissell Amendment, which placed a restriction on DHS's procurement of certain textiles from foreign sources. DHS has applied this restriction to uniforms and body armor. The amendment was intended to increase opportunities for American textile and apparel manufacturers, according to the Senate Committee on Appropriations.", "The Senate report that accompanied Senate Bill 1619, a bill related to the Consolidated Appropriations Act, 2016, includes a provision for GAO to review DHS's implementation of the Kissell Amendment and its effectiveness. This report addresses the extent to which (1) DHS has incorporated the Kissell Amendment into its procurement policies and procedures and (2) the Kissell Amendment affects DHS's procurement of textiles. To perform this work, GAO analyzed DHS policies and procedures, procurement obligations data, textile contract files, and vendor ordering data from DHS's current uniforms contract. GAO also interviewed DHS and U.S. Trade Representative officials and private sector representatives, including the vendor for the current DHS uniforms contract. GAO received technical comments from DHS, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Department of Homeland Security (DHS) has updated its policies and procedures to incorporate a restriction on its procurement of certain textiles as specified in the \u201cKissell Amendment.\u201d In August 2009, DHS amended its procurement policies to reflect the Kissell Amendment restriction and describe the limitations on DHS's procurement of specified textiles from sources outside the United States. All 11 contracts GAO reviewed for uniforms and body armor entered into by a DHS component since August 2009 included language regarding the Kissell Amendment restriction. In addition, according to officials, DHS has several procedures to ensure that contracting officers adhere to the requirements of the Kissell Amendment. These include a required acquisition review process; a requirement for all DHS components to use department-wide contracts; verification procedures; and training for contracting personnel on the Kissell Amendment restriction.", "In practice, the Kissell Amendment restriction affects a limited number of procurements due to multiple factors and has not fully restricted DHS from purchasing textiles from foreign sources. The restriction applies only to certain textile purchases directly related to U.S. national security interests above the simplified acquisition threshold of $150,000, and must be applied consistent with U.S. obligations under international agreements. For most of DHS, this restriction limits only procurements that fall between $150,000 and $191,000, the World Trade Organization Government Procurement Agreement threshold. However, because procurements by the Transportation Security Administration (TSA) of textiles are excluded from most international agreements, the Kissell Amendment prevents TSA's purchasing of certain textiles above $150,000 from all but three foreign countries. In September 2014, DHS signed a uniforms contract, the largest procurement covered by the Kissell Amendment. Under this contract, DHS has ordered 58 percent of the $164.6 million in uniform items from foreign sources through June 2017 (see figure)."]}], "report": [{"section_title": "Letter", "paragraphs": ["Historically, the U.S. textile and apparel industries have faced intense  foreign competition in the U.S. marketplace from countries with low labor  costs. According to the U.S. Bureau of Labor Statistics, the apparel,  textile, and leather manufacturing industries lost 228,000 jobs from 2005  to 2016, representing a 26 percent decrease in employment in those  fields. In particular, the U.S. textile industry sustained significant losses  during the recession of 2007 to 2009. According to the U.S. Department  of Commerce\u2019s Bureau of Economic Analysis, textile production fell from  $71 billion in 2006, the year prior to the start of the U.S. recession, to $46  billion in 2009, a 35 percent decrease.", "The American Recovery and Reinvestment Act of 2009 was enacted, in  part, to preserve and create jobs and promote economic recovery. As part  of this act, Congress passed the \u201cKissell Amendment,\u201d which, according  to the Senate Committee on Appropriations, was intended to increase  opportunities for American textile and apparel manufacturers. The Kissell  Amendment generally restricts the Department of Homeland Security  (DHS) from using its funds to procure certain fibers, textiles, and clothing  that are not grown, reprocessed, reused, or produced in the United  States.", "Various administrations and congressional bills have supported similar  efforts to increase opportunities for American manufacturers and  producers. The current administration has also placed an emphasis on  the procurement of domestically produced goods, products, and materials  by the federal government in an effort to stimulate growth and create jobs  in the United States. In April 2017, the President of the United States  issued the Presidential Executive Order on Buy American and Hire  American stating, in part, that it shall be a policy of the executive branch  to maximize the use of domestic goods.", "A Senate Report accompanying Senate Bill 1619, a bill related to the  Consolidated Appropriations Act, 2016, includes a provision for us to  review DHS implementation of and compliance with the Kissell  Amendment, as well as the policy\u2019s effectiveness. This report examines  the extent to which (1) DHS has incorporated the Kissell Amendment into  its procurement policies and procedures and (2) the Kissell Amendment  affects DHS\u2019s procurement of textiles.", "To address these objectives, we reviewed U.S. laws, regulations, and  international trade agreements, and interviewed officials from DHS and  the Office of the U.S. Trade Representative (USTR) to understand the  legal context for the Kissell Amendment. To determine the extent to which  DHS incorporated the Kissell Amendment into its procurement policies  and procedures, we reviewed relevant DHS documents and procurement  files and interviewed DHS officials. We also reviewed 11 uniforms and  body armor contracts that DHS components entered into after August  2009.", "To determine the extent to which the Kissell Amendment affects DHS\u2019s  procurement of textiles from U.S. and foreign sources, we reviewed  obligations data from the Federal Procurement Data System \u2013 Next  Generation (FPDS-NG), and analyzed uniform cost estimate data from  DHS and uniform ordering data from the vendor for the current DHS  uniforms contract. We tested the reliability of both FPDS-NG data and  DHS ordering data from the vendor and determined the data to be  sufficiently reliable for the purposes of this report. See appendix I for  more information on our scope and methodology.", "We conducted this performance audit from January 2017 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Kissell Amendment", "paragraphs": ["The Kissell Amendment applies to contracts entered into by DHS as of  August 16, 2009, and, according to the Congressional Record, would  require DHS to purchase uniforms made in the United States. According  to the Congressional Record, the amendment was intended to extend  some of the provisions found in the Berry Amendment to DHS. The Berry  Amendment generally restricts the Department of Defense\u2019s (DOD)  procurement of textiles, among other items, to those produced within the  United States. Pursuant to the Kissell Amendment, subject to  exceptions, funds appropriated, or otherwise available to DHS, may not  be used to procure certain textile items directly related to the national  security interests of the United States if the item is not grown,  reprocessed, reused, or produced in the United States. The Kissell  Amendment specifies categories and types of textiles including items  such as clothing, tents, tarpaulins, covers, and protective equipment, as  well as the fibers used for fabrics such as cotton and other natural and  synthetic fabrics. We refer to these textile items that are directly related  to the national security interests of the United States as \u201cKissell-covered  items.\u201d", "The Kissell Amendment also has multiple exceptions to the procurement  restriction, including:", "Small Purchases Exception \u2013 procurements under the simplified  acquisition threshold (currently set at $150,000).", "Availability Exception \u2013 satisfactory quality and sufficient quantity of  any Kissell-covered item cannot be procured when needed at U.S.  market prices.", "Procurements Outside the United States \u2013 procurements by vessels  in foreign waters or emergency procurements outside the United  States.", "De Minimis Exception \u2013 DHS may accept delivery of a Kissell-covered  item if it contains non-compliant (i.e., foreign) fibers as long as the  total value of those fibers does not exceed 10 percent of the total  purchase price of the item.", "In addition to the exceptions noted above, the Kissell Amendment also  states that the Amendment shall be applied in a manner consistent with  U.S. obligations under international agreements. As a result, purchases  of Kissell-covered items, including uniforms and body armor, by DHS and  its components must be procured consistent with U.S. obligations under  relevant U.S. trade agreements. These agreements include the World  Trade Organization (WTO) Government Procurement Agreement (GPA)  and 14 bilateral or regional free trade agreements (FTAs) with 20  countries. These agreements generally require each party\u2019s goods and  services to be given treatment comparable to what is given to domestic  goods and services in certain government procurements. The United  States implements these obligations through the Trade Agreements Act  of 1979 (TAA) and subpart 25.4 of the Federal Acquisition Regulation  (FAR). According to DHS and its components, officials apply the Kissell  Amendment by following the TAA as implemented in FAR subpart 25.4.  As a result, when an international trade agreement applies to a DHS  procurement of a Kissell-covered item, the Kissell Amendment does not  restrict DHS\u2019s purchasing of textile items from that foreign source,  regardless of the item\u2019s relationship to the national security interests of  the United States."], "subsections": []}, {"section_title": "The Buy American Act", "paragraphs": ["The Buy American Act (BAA) can also apply to DHS procurements. The  BAA restricts the U.S. government from purchasing nondomestic end  products, unless an exception applies. Examples of exceptions include:", "Where the cost of the domestic end product would be unreasonable.", "Where sufficient commercial quantities of domestic end products of a  satisfactory quality are not reasonably available.", "In acquisitions covered by the WTO GPA or FTAs, USTR has waived the  Buy American statute and other discriminatory provisions for eligible  products. The BAA could apply to procurements of certain textile items  valued below the $150,000 simplified acquisition threshold, to which the  Kissell Amendment does not apply. The applicability of the act to a  particular procurement depends on a number of factors such as the  existence of a waiver or whether an exception applies."], "subsections": []}, {"section_title": "DHS Obligations for Textile Procurements", "paragraphs": ["DHS and its components procure textiles and fabrics for numerous  purposes, including clothing and equipping its officers and employees.  From October 2009 through June 2017, of DHS\u2019s more than $105 billion  in obligations for procurements, $774 million, or less than one percent,  was for textile products, according to FPDS-NG. The majority of textiles  and fabrics procured by DHS components are for uniforms and body  armor. In particular, of the $774 million, DHS obligated $516 million (or 67  percent) to procure uniforms and body armor for DHS personnel (see fig.  1)."], "subsections": []}]}, {"section_title": "DHS Updated Policies and Procedures to Incorporate the Kissell Amendment Restriction", "paragraphs": [], "subsections": [{"section_title": "DHS Procurement Policies Contain the Kissell Amendment Restriction", "paragraphs": ["In August 2009, DHS updated its procurement regulations, the HSAR, to  incorporate the Kissell Amendment restriction on the procurement of  textiles from foreign sources; since then DHS inserted language  incorporating the restriction into the 11 uniform and body armor contracts  we reviewed. The HSAR establishes standardized DHS policies for all  procurement activities within the department; according to DHS officials,  all DHS components are to follow these policies. Pursuant to the Kissell  Amendment, the restriction on the procurement of textiles became  effective for DHS on August 16, 2009. One day later, DHS published an  interim rule with a request for comments from the public that amended  relevant HSAR sections to reflect the statutory change limiting the  procurement of products containing textiles from sources outside the  United States (i.e., the Kissell Amendment). On June 9, 2010, after  receiving comments from the public, DHS adopted the amendments  issued under the interim rule as final and without change. The amended  sections detail the restriction on procurements of foreign textiles. They  also provide a list of the types of textile items included in the restriction  (i.e., yarn, wool, cotton), the exceptions noted in the Kissell Amendment,  and provide detail on the specific application of trade agreements. Under  the regulations, unless an exception applies, a specific clause shall be  inserted in solicitations and contract actions detailing the requirement to  use domestic goods for any procurement of a Kissell-covered item.", "Some components within DHS issued additional, supplemental guidance  to the HSAR, while other components determined that additional  guidance would be duplicative, according to officials. For example,  Transportation Security Administration\u2019s (TSA) Internal Guidance and  Procedure Memorandum, updated in June 2016, provides additional  guidance to contracting officers at TSA on the procurement of textiles.  This guidance specifically states that for certain textile products, TSA\u2019s  contracting officers can only evaluate and/or accept offers from specified  countries. Other components determined that additional guidance was not  needed because the HSAR adequately covers the requirements of the  Kissell Amendment for their purposes. For example, U.S. Secret Service  officials stated that, for any procurement of textiles, they insert the  required language from the HSAR into the request for proposals in case  an item could be considered directly related to U.S. national security  interests and thereby subject to the Kissell Amendment restriction.", "DHS officials stated that contracts for the procurement of uniforms and  body armor are their only contracts for textile-related products that are  directly related to national security interests. See figure 2 for examples of  DHS uniforms and body armor.", "According to DHS officials, other textile or apparel procurements, such as  curtains for DHS offices, would likely not be subject to the foreign  procurement restriction under the Kissell Amendment because they are  not directly related to national security interests. DHS components can  also procure textiles through the Federal Supply Schedules (FSS)  program. When ordering from these contracts, DHS contracting officers  would make the determination of whether or not the purchase is directly  related to national security interests and therefore subject to the Kissell  Amendment restriction, according to DHS officials. DHS officials also  explained that if the purchase under the FSS program contract is subject  to the Kissell Amendment, the contracting officer would be responsible for  inserting the required language from the HSAR into the delivery order.", "All 11 of the contracts we reviewed for uniforms and body armor entered  into by a DHS component since August 2009 included language  regarding the restriction of the Kissell Amendment. Many of DHS\u2019s  components that buy uniforms, including TSA and U.S. Customs and  Border Protection (CBP), were already under contract with a vendor to  supply uniforms when the Kissell Amendment took effect in August 2009.  The Kissell Amendment specified that it applied to contracts entered into  by DHS 180 days after the enactment of the American Recovery and  Reinvestment Act of 2009. Therefore, DHS and its components did not  apply the Kissell restriction to contracts signed before August 16, 2009.  Several components separately signed contracts with uniform vendors  after prior contracts expired and the Kissell restriction was in effect. For  example, in February 2010, TSA signed a contract for uniforms with a  vendor that included language restricting the foreign procurement of  those uniforms per the Kissell Amendment.", "In 2012, DHS decided to enter into a single, department-wide contract for  the procurement of uniforms for all of its components. While that  contract was being developed, several components signed additional  contracts for uniforms with vendors to ensure a continuous supply of  uniform items for their officers. This included a \u201cbridge\u201d contract between  TSA and a vendor in February 2013, which also included language  referencing the Kissell Amendment and language restricting the foreign  procurement of those uniforms. In September 2014, DHS entered into its  current 5-year, department-wide uniforms contract that provides eight  DHS components with uniform clothing items. One vendor holds this  uniforms contract."], "subsections": []}, {"section_title": "DHS Has Procedures to Ensure That the Kissell Amendment Restriction Is Properly Applied", "paragraphs": ["DHS employs multiple procedures, according to officials, in an effort to  ensure that the restriction on the procurement of foreign textiles from the  Kissell Amendment was and is properly applied, including (1) a  standardized procurement contract review process; (2) a requirement for  all DHS components to use established department-wide contracts; (3)  verification procedures to ensure the stated country of origin is correct;  and (4) trainings on foreign procurement restrictions.", "First, the DHS official review process for all procurements helps ensure  that the Kissell restriction is applied, if appropriate, to contracts for textiles  and apparel, according to officials. Specifically, each procurement goes  through a standardized review process that includes several levels of  acquisition supervisors and DHS legal counsel, depending on the  estimated dollar amount of the procurement. The DHS Acquisition Manual  requires this review and approval process, which is designed to ensure  compliance with all relevant federal acquisition laws, regulations, policies,  and procedures. Through this process, officials evaluate the proposed  contract for a number of restrictions, such as the appropriate use of a  small business set-aside or a sole-source contract, which must also be  reviewed by supervisors and legal departments before contract approval.", "According to DHS officials, while the applicability of the Kissell  Amendment is part of the standard review process, there is no separate  review for whether the foreign procurement restriction should be applied  to the procurement. Officials also stated that the small number of  contracting officers handling these textile procurements are aware of the  requirements.", "Second, DHS now uses department-wide contracts for uniforms and body  armor rather than each component entering into its own contracts for  those items. Establishing and using these department-wide contracts  increases efficiencies and reduces duplication in the department\u2019s  procurement processes, according to DHS documentation. According to  agency officials, the establishment of a department-wide uniforms  contract for use by all DHS components reduces opportunities for  mistakes, including the possibility of a contracting officer issuing a  contract that does not include the required restriction for a Kissell-covered  item.", "Third, the department relies on the vendor to verify that the item is in  compliance with all applicable restrictions. It is not the responsibility of the  agency or department to verify the country of origin of an item procured  through a contract. According to the FAR, the contracting officer may rely  on the vendor\u2019s certification of the country of origin for an end product  when evaluating a foreign offer. DHS officials told us that, for each  contract, the vendor is responsible for certifying the country of origin and  notifying DHS if a uniform item from a previously approved country is no  longer available and a replacement must be located. According to  representatives from the current uniforms vendor, both its manufacturing  facilities and its subcontractors have measures and internal controls in  place to ensure that all items under the current uniforms contract are  sourced from designated countries. Furthermore, if an item is being  misrepresented, or not from the reported country of origin, other vendors  in the industry could report such suspected violations to DHS and the  department would investigate possible false claims. According to DHS  officials, no reports have been made against the vendor for the current  uniforms contract.", "In addition, CBP\u2019s Textiles and Trade Agreements Division is responsible  for the Textile Production Verification Team Program. Under this program,  CBP deploys teams of personnel drawn from many DHS components to  FTA partner countries to visit manufacturers of textiles imported into the  United States. These teams review textile production and verify  compliance with the terms of the FTA. CBP provided information that  showed it had made numerous verification visits to factories used by  DHS\u2019s uniform vendor since October 2011. However, CBP officials said  they did not know the degree to which the vendor\u2019s imports from these  factories were used to fulfill the DHS uniform contract.", "Fourth, DHS provided training in 2009 and in 2017 to contracting  personnel who conduct textile and apparel procurements subject to the  Kissell Amendment and other Buy American-like provisions to ensure that  the requirements are applied appropriately. The Kissell Amendment  required that the Secretary of DHS ensure that each member of DHS\u2019s  acquisition workforce \u201cwho participates personally and substantially in the  acquisition of textiles on a regular basis receives training during fiscal  year 2009 on the requirements\u201d of the Kissell Amendment and the  regulations implementing the amendment. The amendment further  states that any training program developed after August 2009 include  comprehensive information on the Kissell Amendment restriction.  According to officials, appropriate DHS contracting personnel were  trained on the requirements of the Kissell Amendment through a  presentation to DHS\u2019s Acquisition Policy Board in July 2009. DHS  officials, however, were unable to identify the number of personnel  present during this meeting or the materials associated with this training.", "According to DHS officials, no further training on Kissell requirements was  conducted until June and July 2017, when DHS officials conducted two  webinars that included approximately 570 DHS acquisition professionals  on the requirements of the Kissell Amendment and its implications under  the President\u2019s Buy American and Hire American Executive Order from  April 2017. Our review on the implementation of the Kissell Amendment,  as well as the President\u2019s new actions to increase opportunities for  government agencies to buy American and hire American, precipitated  the trainings, stated DHS officials. We observed the July 2017 training, at  the invitation of DHS, and confirmed that the materials and topics covered  included Kissell Amendment requirements."], "subsections": []}]}, {"section_title": "The Kissell Amendment Restriction Has a Limited Effect on DHS Textile Procurements", "paragraphs": ["In practice, the Kissell Amendment affects DHS textile purchases in a  limited manner due to multiple factors. For most DHS components, these  factors limit the effect of the Kissell Amendment restriction to certain  foreign textile procurements directly related to U.S. national security  interests that fall between $150,000 and $191,000. Specifically, from  October 2009 to June 2017, only 14 DHS-awarded textile contracts,  excluding TSA, fell within this range, according to FPDS-NG data. TSA  textile procurements, unlike most DHS components, are excluded from  the coverage of most U.S. international agreements. Therefore, the  Kissell Amendment restricts TSA\u2019s procurement of certain foreign textiles  above $150,000 from all but three foreign countries. According to DHS  officials, the current contracts to which the Kissell Amendment applies are  department-wide contracts for uniforms and body armor. As of June 2017,  under the current uniforms contract, 58 percent of the value of ordered  uniform items by DHS came from foreign sources. In addition, DHS  officials stated that the current body armor contracts source all textile  items from the United States."], "subsections": [{"section_title": "The Kissell Amendment Restriction Affects a Limited Number of DHS Textile Procurements Due to Multiple Factors", "paragraphs": ["The number of DHS\u2019s textile procurements that could be affected by the  Kissell Amendment restriction is limited by multiple factors. The Kissell  Amendment restriction applies only to those textile items that are directly  related to national security interests for procurements above the $150,000  simplified acquisition threshold, and must be applied in a manner  consistent with U.S. obligations under international agreements. In  practice, this limits the number of procurements that could be affected by  the amendment\u2019s restriction to those of Kissell-covered items between the  current simplified acquisition threshold and the current WTO GPA  threshold of $191,000, a $41,000 range, for most DHS components.  Furthermore, statutory and regulatory provisions generally require that  government agencies acquire U.S.-made or designated country end  products and services for procurements covered by the WTO GPA. For  most of DHS, the procurement of certain textiles is covered by the WTO  GPA. Therefore, due to these regulations, most DHS components are  limited in their textile procurements at or above $191,000 to the United  States or designated countries, regardless of the Kissell Amendment.  However, the number of TSA contracts that could be affected by the  Kissell Amendment restriction is potentially greater since procurement of  textiles by TSA is not subject to statutory and regulatory provisions that  affect the rest of DHS\u2019s procurement of textiles.", "U.S. obligations under international agreements, as implemented by the  TAA and FAR, require that offers of eligible products receive equal  consideration with domestic offers. The FAR additionally specifies that  agencies, \u201cin acquisitions covered by the WTO GPA, acquire only U.S.- made or designated country end products unless offers for such end  products are either not received or are insufficient to fulfill the  requirements.\u201d To be a U.S. procurement covered by the WTO GPA,  the procurement must (1) be performed by a covered government entity;  (2) be for a covered item; and (3) be at or above the WTO GPA threshold,  which is currently $191,000. Other international trade agreements have  their own thresholds currently ranging from $25,000 to $191,000. Figure  3 outlines the various key procurement thresholds that may affect the  designated and non-designated countries from which DHS could source  textiles with respect to the Kissell Amendment. Most of these dollar  thresholds are subject to revision approximately every 2 years.", "Due to the multiple factors that affect DHS\u2019s textile procurements, most of  DHS\u2019s components may source eligible textiles from up to 128 designated  countries outside the United States in procurements at or above $191,000  (see fig. 4). This is because most DHS components\u2019 textile procurements  are considered covered items under the WTO GPA. Therefore, most DHS  components\u2019 foreign textile procurements that either meet or exceed the  current $191,000 threshold are restricted to designated countries  regardless of the Kissell Amendment, due to the FAR. These  designated countries include WTO GPA countries, Free Trade Agreement  countries, least developed countries, and Caribbean Basin countries.", "As noted above, multiple factors influence DHS\u2019s procurement of textiles  and the number of contracts that could be affected by the Kissell  Amendment restriction. Based on our analysis of contract data from  FPDS-NG, from October 2009 to June 2017, DHS awarded 111 textile  contracts above the simplified acquisition threshold. Of the 111  contracts, only 14 DHS textile contracts, excluding TSA, were valued  between the simplified acquisition threshold and $191,000, the current  threshold for coverage under the WTO GPA. In part, because FPDS-NG  does not designate whether or not a contract is directly related to the  national security interests of the United States, we could not determine  whether these contracts were subject to the provisions of the Kissell  Amendment. According to DHS officials, the only current contracts  considered directly related to U.S. national security and therefore subject  to the Kissell Amendment are for uniforms and body armor.", "The Kissell Amendment includes additional language regarding the use of  any availability exception and states that any availability exception issued  by DHS shall be publically posted on a government procurement internet  site within 7 days of the contract. However, according to agency  officials, since the passage of the Kissell Amendment, DHS has not  issued any waivers for availability exceptions and has therefore been  limited to procuring certain textile items from the United States and  designated countries identified in the FAR."], "subsections": []}, {"section_title": "TSA Procurement Is Excluded from Coverage of Most U.S. International Trade Agreements", "paragraphs": ["The Kissell Amendment restriction affects TSA textile procurements  differently than other DHS components. As implemented, the Kissell  Amendment restricts TSA\u2019s procurement of certain textiles above  $150,000 to the United States, Canada, Mexico, and Chile. TSA\u2019s  procurement of textiles is different because it is not included in the U.S.  coverage schedules of the WTO GPA and all U.S. free trade agreements,  with the exception of the North American Free Trade Agreement and the  U.S.-Chile Free Trade Agreement. According to USTR officials, some of  TSA\u2019s security functions were originally held by the Federal Aviation  Administration (FAA), which is not subject to the FAR. Furthermore, TSA  was also not subject to the FAR prior to 2008, until Congress passed  legislation removing the requirement that TSA procurements be subject to  the acquisition management system established by the administrator of  the FAA. Those circumstances resulted in TSA\u2019s exclusion from the  WTO GPA for textiles and most other international trade agreements,  according to USTR officials. Figure 5 illustrates when the Kissell  Amendment could affect TSA procurements and the applicability of  international trade agreements. Based on our analysis of FPDS-NG data,  from October 2009 to June 2017, TSA entered into 13 textile contracts  above the simplified acquisition threshold."], "subsections": []}, {"section_title": "DHS Procured Over Half of the Value of Textile Items for the Current Uniforms Contract from Foreign Sources", "paragraphs": ["From October 2014 to June 2017, 58 percent of the value of uniform  items ordered by DHS came from outside the United States. In  September 2014, DHS entered into its current department-wide uniforms  contract, the largest value textile contract since the passage of the Kissell  Amendment in 2009. In the request for proposals, DHS included a clause  detailing the Kissell restriction on the purchase of foreign items in the  uniforms contract documentation. As implemented, when combined with  the purchasing restriction in the TAA, the clause in the Kissell  Amendment that states the act shall be applied consistent with U.S.  obligations under international agreements allows the uniforms contract  vendor to source items from up to 128 designated countries. In the  request for proposal for the current uniforms contract, DHS components  included a list of over 900 uniform items including shirts, pants, shoes,  and insignias. The vendor that was awarded the contract then reported  the cost and expected country of origin for each item, which DHS  approved. Table 1 shows the estimated cost and quantity of items  estimated to be procured under the contract for components that primarily  have a national security function.", "After the uniform contract was entered into by DHS in September 2014,  DHS components began ordering uniform items under the contract. In  addition to more than 900 types of uniform items that were agreed upon  at the initiation of the contract, DHS components issued contract  modifications to add or remove uniform items from the approved list.  Common types of items expected to be ordered included uniform shirts,  pants, socks, and shoes that met DHS component specifications.", "From October 2014 to June 2017, $164.6 million in uniform items was  ordered by DHS components that primarily have a national security  function. Of that amount, 58 percent, or $96 million, in uniform items  ordered by DHS came from a reported 12 countries outside the United  States. The remaining 42 percent, or $69 million, in uniform items was  reported as originating in the United States. By value, Mexico, the largest  source of uniform items from outside of the United States, accounted for  30 percent of the ordered uniform items. In addition, 8 percent of the  value of uniform items was sourced from least developed countries,  including Cambodia (5 percent) and Bangladesh (2 percent). Figure 6  illustrates the percentage value of DHS procurement of uniform items by  reported country of origin for the current contract by components that  primarily have a national security function.", "Based on our analysis of the vendor\u2019s ordering data, the majority of the  value of uniform items ordered by all five components were sourced from  outside the United States. In addition, a larger value of the uniform  items ordered by three of the five components were sourced from Mexico  than from any other country, including the United States. Table 2 shows  the total value of the uniform ordering data for the five DHS components  that primarily have a national security function under the current uniforms  contract.", "From October 2014 through June 2017, CBP ordered approximately  $101.1 million in uniform items under the contract, and TSA ordered  approximately $53.5 million. CBP and TSA accounted for the majority of  the dollar value of uniform orders from October 2014 through June 2017,  representing 94 percent of the value of uniform items ordered by DHS  components that primarily have a national security function under the  contract. Specifically, 32 percent of the value of TSA ordered uniform  items were from the United States, with the other 68 percent sourced  from Mexico. As mentioned above, the Kissell Amendment, as  implemented, restricts TSA\u2019s foreign procurement of certain textiles  above $150,000 to Canada, Mexico, and Chile."], "subsections": [{"section_title": "Sourcing Only from the United States Could Be More Costly for DHS", "paragraphs": ["According to DHS officials and representatives of the current uniforms  vendor, both the price of the uniform items and the time it would take to  find appropriate U.S. sources could potentially increase if current  statutory and trade agreements requirements changed and DHS was  required to source all of its uniform items from the United States.  According to the FAR, it is the responsibility of agencies to obtain the best  value for the U.S. government. According to DHS officials, the best value  may be sourced from foreign countries, especially when the country is a  party to an international trade agreement with the United States. DHS  officials and representatives of the vendor stated that it would be possible  to source most of the items in the current uniforms contract from the  United States. However, representatives of the vendor speculated that  sourcing only from the United States could result in a 50 to 150 percent  price increase for items that are currently sourced from foreign countries.  Therefore, DHS costs could increase for over half of the uniform items  currently procured from foreign sources. Additionally, DHS officials stated  that the domestic availability of some items, such as footwear, is limited  and that it could take approximately 2 years to find U.S. suppliers for all  items currently procured from foreign sources."], "subsections": []}]}, {"section_title": "DHS Reported Procuring All Body Armor from U.S. Sources", "paragraphs": ["The second largest current textile contract is the department-wide  contract for body armor. Effective November 1, 2016, the department- wide contract for body armor is not to exceed $93.8 million. As of June  2017, DHS had obligated $6.8 million under these body armor  contracts. DHS did not provide GAO documentary evidence that the  body armor is produced in the United States. However, according to DHS  officials, textile items under the current body armor contracts are  produced in the United States. According to DHS officials, to verify that  materials are produced in the United States, DHS visited the site where  these materials are produced and assembled in the United States. In  addition, the contract contains specific language restricting the vendor  from procuring items that are not in compliance with the Kissell  Amendment."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to DHS and  USTR. DHS did not provide written comments on the draft report but  provided a number of technical comments that we incorporated as  appropriate. USTR did not provide written or technical comments to the  draft report.", "We are sending copies of this report to the appropriate congressional  committees, to the Secretary of Homeland Security, the U.S. Trade  Representative, 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) 512-8612 or gianopoulosk@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["A Senate Report accompanying Senate Bill 1619, a bill related to the  Consolidated Appropriations Act, 2016, includes a provision for us to  review the Department of Homeland Security\u2019s (DHS) implementation and  compliance with the Kissell Amendment, as well as the effectiveness of  the policy. This report examines the extent to which (1) DHS has  incorporated the Kissell Amendment into its procurement policies and  procedures and (2) the Kissell Amendment affects DHS\u2019s procurement of  textiles.", "To address these objectives, we reviewed relevant laws and policies,  such as Section 604 of the American Recovery and Reinvestment Act of  2009 (the \u201cKissell Amendment\u201d), the Trade Agreements Act of 1979  (TAA) as amended, the Federal Acquisition Regulations (FAR),  Homeland Security Acquisition Regulations (HSAR), and the DHS  Acquisition Manual, as well as select U.S. free trade agreements. We  interviewed officials from DHS and the office of the U.S. Trade  Representative (USTR). We also interviewed officials from the U.S. textile  and apparel industry, including the National Council of Textile  Organizations and the American Apparel and Footwear Association.  Finally, we spoke with officials from the vendor for DHS\u2019s current  department-wide uniforms contract, VF Imagewear.", "To determine the extent to which DHS incorporated the Kissell  Amendment into its procurement policies and procedures, we reviewed  relevant DHS documents and policies, including the HSAR, interim and  final rules on the implementation of the Kissell Amendment, and  component-level procurement guidance. We also interviewed officials  from DHS\u2019s Office of the Chief Procurement Officer and from the  components in DHS that have their own contracting authority, including  U.S. Customs and Border Protection (CBP), Federal Emergency  Management Agency (FEMA), U.S. Immigration and Customs  Enforcement (ICE), Transportation Security Administration (TSA), U.S.  Coast Guard, and U.S. Secret Service.", "To analyze whether or not language indicating the restriction on the  procurement of foreign textiles from the Kissell Amendment was included  in DHS and component level contracts, we reviewed contract files for 11  available uniforms and body armor contracts entered into since August  16, 2009, the date the Kissell Amendment became effective. We  reviewed contract files from DHS uniform and body armor contracts  because these are the only DHS textile contracts that are directly related  to U.S. national security and therefore subject to the Kissell Amendment,  according to DHS officials. We identified these uniforms and body armor  contracts through reviews of Federal Procurement Data System\u2013Next  Generation (FPDS-NG) data for DHS and components contracts in  groups 83 and 84 since August 16, 2009, and through discussions with  CBP, DHS, and TSA officials. We were not, however, able to review  every uniforms contract all DHS components have entered into since  August 16, 2009, because, for example, some of the contract files were  no longer available, consistent with federal document retention policies,  according to DHS officials. The results of our reviews of selected  contracts are not generalizable to all DHS textile contracts entered into  since August 16, 2009.", "To determine the extent to which the Kissell Amendment affects DHS\u2019s  procurement of textiles, we reviewed relevant government regulations  and laws, U.S. international agreements, DHS contract files, and ordering  data for the largest textile contract since the effective date of the Kissell  Amendment. We reviewed the FAR to evaluate which international  agreements are applicable to DHS textile procurements, the thresholds  for each international trade agreement, and the countries from which DHS  may procure certain textiles. We reviewed the U.S. central government  coverage schedule of the World Trade Organization (WTO) Government  Procurement Agreement (GPA) to determine which procurements by  DHS component are covered by the WTO GPA and therefore subject to  the purchasing restriction in the TAA, as implemented in the FAR.", "To identify the dollar range for textile contracts that could be affected by  the Kissell Amendment, we reviewed the Kissell Amendment and the  relevant provisions of the FAR. We also interviewed USTR officials and  DHS officials from the Office of the Chief Procurement Officer, CBP, and  TSA to understand how international trade agreements affect DHS\u2019s  textile procurement under the Kissell Amendment. We reviewed award  and obligation data from the FPDS-NG to identify the number of textile  contracts awarded by DHS components and delivery orders through the  General Services Administration\u2019s Federal Supply Schedules program  above the simplified acquisition threshold and those that could be  affected by the Kissell Amendment. To assess the reliability of  procurement data from FPDS-NG, we reviewed relevant documentation  and performed verification through electronic testing. We determined the  data to be sufficiently reliable for the purposes of this report.", "To evaluate DHS\u2019s procurement of uniform items from the United States  versus foreign sources, we reviewed the ordering estimates, which were  provided as an attachment to DHS\u2019s request for proposals for the current  uniforms contract, and ordering data provided by the vendor for the  current uniforms contract. The current uniform and body armor contracts  are the only two active contracts to which the Kissell Amendment applies,  according to DHS officials. For the purposes of ordering data and  estimates, we did not review previous contracts. In addition, since all  body armor items are sourced from the United States, we focused our  ordering analysis on the current uniforms contract. Because we did not  evaluate ordering data for previous DHS uniforms contracts, these values  cannot be extrapolated to all DHS uniforms contracts.", "To calculate the ordering estimates for the current uniforms contract, we  analyzed data created by DHS and the uniform vendor during the  development phase of the contract. To focus on the DHS components  that primarily have a national security function under the current uniforms  contract, we analyzed ordering estimates to identify the number of  uniform items that DHS components reported as being directly related to  national security. Under the current uniforms contract estimates, CBP,  ICE, National Protection and Programs Directorate (NPPD), TSA, and  U.S. Secret Service are the five DHS components that reported the  majority of uniform items as being directly related to national security. As  a result, we included these five DHS components in our analysis of the  ordering estimates under the current uniforms contract. We did not  include FEMA or Federal Law Enforcement Training Center (FLETC) in  our analysis because FEMA did not list any uniform items as related to  national security and FLETC identified only one item out of 88 as related  to national security. We also did not include ordering estimates from the  Food and Drug Administration, which is a party to the contract but is not a  DHS component. In addition, the U.S. Coast Guard did not provide  ordering estimates since it was not included in the original proposal for  the current uniforms contract.", "For each of the identified DHS components that reported the majority of  uniform items as directly related to national security, we analyzed the  estimated data based on description, the estimated quantity, the unit  price, and the country of origin. While we did not analyze the value of any  contract modifications that added or removed uniform items from the  contract, we did review select modifications and found that contract  modifications were generally consistent with the original contract  estimates for that non-generalizable sample. To obtain insights into the  countries of origin in the modifications, we reviewed a small, non- generalizable sample of 10 modifications. We concluded that the  breakdown between domestic and foreign sourced items for the items  added through the modifications was generally consistent with the  breakdown between domestic and foreign sourced items in the original  contracts\u2019 estimates.", "To determine the reasonableness of the processes by which DHS and its  vendors generated these estimates, we interviewed knowledgeable  officials, reviewed documents submitted by the vendor, and performed  data reliability testing. DHS officials told us that they had provided the  contractor with detailed lists of the textile items it required, and the vendor  reported that they determined the prices and countries of origin based on  prevailing market conditions. DHS officials then reviewed the estimates  provided by the vendor and approved the items, price, and country of  origin under the contract. DHS officials and the vendor informed us that  because these estimates reflected market conditions when the contract  was signed, actual purchases of items might be from countries other than  those listed in the contract, depending on changes in those conditions  and availability of the items. We determined these estimates were  sufficiently reliable to represent DHS\u2019s intended purchases of textile  products by country of origin under this contract.", "To analyze the orders of uniform items, we relied on ordering data  provided by the vendor for the current uniform contract. We reviewed  uniform ordering data for the five DHS components that reported the  majority of uniform items as being directly related to national security:  CBP, ICE, NPPD, TSA, and the U.S. Secret Service. The uniform  ordering data included items ordered by individual DHS employees  through an allowance system and by DHS components through bulk  orders. We did not include the U.S. Coast Guard in our analysis since it  primarily orders U.S.-made uniform items through the Department of  Defense\u2019s Defense Logistics Agency, according to Coast Guard officials.  We analyzed the value of uniform items procured from the United States  and foreign sources based on the reported country of origin and  component from October 2014 to June 2017.", "To assess the reliability of the ordering data provided by the vendor, we  reviewed the data for inconsistencies. We clarified with the vendor the  relevant data sets for our analysis and any discrepancies we identified in  the data. DHS relies on the vendor to provide the countries of origin, and  it was beyond the scope of this engagement for us to verify the vendor  provided country of origin. We determined that the ordering data were  sufficiently reliable for the purposes of comparing orders to estimates by  countries of origin for uniforms under the contract, and presenting details  about purchases from the United States versus other countries of origin.  The result of our analysis is limited to the current department-wide  uniforms contract with DHS and cannot be extrapolated to other DHS  textile contracts.", "For the body armor contracts, we relied on FPDS-NG data for the  obligations under the current and previous contracts. We also interviewed  DHS officials who identified the country of origin of the items purchased  under the current body armor contracts; it was beyond the scope of this  engagement to verify the agency-provided country of origin. To assess  the reliability of the obligations data from FPDS-NG, we reviewed relevant  documentation performed verification through electronic testing. We  determined the data to be sufficiently reliable for the purposes of this  report.", "We conducted this performance audit from January 2017 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual mentioned above, Adam Cowles (Assistant  Director), Christopher J. Mulkins (Analyst-in-Charge), Martin Wilson, Lynn  Cothern, Martin de Alteriis, Neil Doherty, Grace Lui, and Julia Kennon  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Passed in 2009, the Kissell Amendment restricts the Department of Homeland Security to procuring uniforms and other textiles from U.S. manufacturers, with certain exceptions. DHS has incorporated the restriction into its procurement policies and practices.", "But we found, due in part to the exceptions, that the restriction has limited effect. For example, procurements must be made in accordance with U.S. trade agreements, which means most DHS offices must treat certain textiles made in 128 countries the same as domestic products. As a result, 58 percent of funds spent to order uniforms under the current DHS contract are for imported items."]}
{"id": "GAO-18-702T", "url": "https://www.gao.gov/products/GAO-18-702T", "title": "Identity Theft: Strengthening Taxpayer Authentication Efforts Could Help Protect IRS Against Fraudsters", "published_date": "2018-09-26T00:00:00", "released_date": "2018-09-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's June 2018 report, entitled Identity Theft: IRS Needs to Strengthen Taxpayer Authentication Efforts ( GAO-18-418 )."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) has identified over 100 interactions requiring taxpayer authentication based on potential risks to IRS and individuals. IRS authenticates millions of taxpayers each year via telephone, online, in person, and correspondence to ensure that it is interacting with legitimate taxpayers. IRS's estimated costs to authenticate taxpayers vary by channel.", "IRS has made progress on monitoring and improving authentication, including developing an authentication strategy with high-level strategic efforts. However, it has not prioritized the initiatives supporting its strategy nor identified the resources required to complete them, consistent with program management leading practices. Doing so would help IRS clarify relationships between its authentication efforts and articulate resource needs relative to expected benefits. Further, while IRS regularly assesses risks to and monitors its online authentication applications, it has not established equally rigorous internal controls for its telephone, in-person, and correspondence channels, including mechanisms to collect reliable, useful data to monitor authentication outcomes. As a result, IRS may not identify current or emerging threats to the tax system.", "IRS can further strengthen authentication to stay ahead of fraudsters. While IRS has taken preliminary steps to implement National Institute of Standards and Technology's (NIST) new guidance for secure digital authentication, it does not have clear plans and timelines to fully implement it by June 2018, as required by the Office of Management and Budget. As a result, IRS may not be positioned to address its most vulnerable authentication areas in a timely manner. Further, IRS lacks a comprehensive process to evaluate potential new authentication technologies. Industry representatives, financial institutions, and government officials told GAO that the best authentication approach relies on multiple strategies and sources of information, while giving taxpayers options for actively protecting their identity. Evaluating alternatives for taxpayer authentication will help IRS avoid missing opportunities for improving authentication."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the Internal Revenue Service\u2019s  (IRS) efforts to monitor and improve taxpayer authentication. In fiscal year  2017, IRS issued approximately $383 billion in individual tax refunds,  including overpayment refunds and refundable tax credits, an increase of  about $16 billion from the previous fiscal year. In an environment with an  increasing risk of fraud, identity theft (IDT), and cyberattacks, IRS must  ensure that its preventative security controls provide the agency with  reasonable assurance that it is interacting with the legitimate taxpayer.  Authentication\u2014the process by which IRS verifies taxpayers are who they  claim to be\u2014is a critical step in both protecting sensitive taxpayer  information and preventing potentially billions of dollars of refunds from  being paid to fraudsters each year. According to IRS\u2019s most recent data, it  estimates that in 2016, at least $12.2 billion in IDT tax refund fraud was  attempted; of this amount, at least $1.6 billion was paid out to fraudsters.", "IRS\u2019s ability to continuously monitor its current authentication methods  while also looking ahead to new identity verification technologies is critical  to keeping ahead of fraudsters, who constantly adapt their schemes to  thwart IRS\u2019s defenses. The agency must also strike a balance in  designing its authentication programs. Authentication must be strong  enough to prevent fraudsters from gaining access to IRS services using  stolen personally identifiable information, without being overly  burdensome on legitimate taxpayers who also must authenticate.", "My remarks today highlight selected findings of our June 2018 report on  IRS\u2019s efforts monitor and improve taxpayer authentication. Specifically,  this testimony addresses (1) IRS\u2019s efforts to address its authentication  challenges, (2) IRS\u2019s progress in implementing its authentication strategy,  and (3) additional steps we identified that IRS could take to enhance its  authentication programs and stay ahead of fraudsters.", "To conduct the work for our June report, we reviewed IRS documents and  information related to taxpayer authentication including authentication  policies, risk assessments, and performance metrics. We compared IRS\u2019s  authentication efforts to applicable activities in the IRS Identity Assurance  Strategy and Roadmap (Roadmap), Standards for Internal Control in the  Federal Government, and relevant National Institute of Standards and  Technology (NIST) guidance, among others. We also interviewed IRS  officials knowledgeable about the agency\u2019s taxpayer authentication  programs, as well as IRS, state, and industry co-leads from two Security  Summit workgroups to understand IRS\u2019s collaborative efforts to improve  taxpayer authentication. To assess how IRS can improve its  authentication programs going forward, we met with knowledgeable  officials from NIST to discuss its guidelines for online identity-proofing and  authentication. We also compared IRS\u2019s authentication programs and  plans for future improvements to its Roadmap, federal internal controls,  guidance from NIST and the Office of Management and Budget (OMB),  principles for project planning, and our prior work on information  technology investment management and cost estimating. We also  interviewed officials from three other federal agencies and a  nongeneralizable selection of representatives from state revenue offices,  industry, and financial institutions to understand the range of  authentication technologies other organizations are using. Our report  includes a detailed explanation of the methods used to conduct our work.  The work on which this testimony is based was performed in accordance  with generally accepted government auditing standards.", "In brief, Madam Chairman, our work found that IRS has taken some steps  to improve taxpayer authentication, including working with external  partners to identify solutions for combating IDT refund fraud and  developing an authentication strategy to address its most pressing  authentication challenges. However, we also found that IRS has not  prioritized the initiatives supporting its authentication strategy nor  identified the resources required to complete them. Further, we found that  IRS does not have clear plans and timelines to fully implement NIST\u2019s  new guidance for secure online authentication and also lacks a  comprehensive process to evaluate potential new authentication  technologies, which could provide taxpayers additional options to actively  protect their identity. We made 11 recommendations to address these  and other weaknesses identified in our report. IRS agreed with all 11  recommendations and stated that it is taking action to address them."], "subsections": [{"section_title": "IRS Has Broad Efforts Underway to Address Authentication Challenges", "paragraphs": ["Our report noted that IRS has established organizational structures  essential to supporting its taxpayer authentication efforts. Specifically,  IRS created an Identity Assurance Office (IAO) in 2015 to work with  stakeholders across IRS to review and assess the agency\u2019s various  authentication programs and efforts. In 2016, IAO led an effort that  identified over 100 interactions between IRS and taxpayers that require  authentication and categorized these interactions based on potential risks  to the agency and taxpayers. Further, in December 2016, IAO released  its Roadmap for developing a modern and secure authentication  environment for all taxpayers regardless of how they interact with IRS\u2014 online, over the telephone, in person, or via correspondence.", "We also found that IRS is working to address its authentication  challenges by collaborating with industry members and state partners via  the Security Summit. The Security Summit was established in 2015 as an  ongoing effort between industry experts from tax software companies,  paid preparers, financial institutions, and states to improve information  sharing and fraud detection and to address common IDT challenges. The  Security Summit\u2019s authentication workgroup leads several initiatives  aimed at verifying the authenticity of the taxpayer and the tax return at the  time of filing. One initiative involves analyzing data elements\u2014such as  trusted customer requirements and other characteristics of the return\u2014 that are collected during the tax return preparation and electronic filing  process. In addition, in 2016 the authentication workgroup recommended  improved account password standards to help protect taxpayers\u2019  accounts from being taken over by criminals.", "Overall, we found that officials\u2014representing IRS, industry, and states\u2014 expressed positive views about the level of commitment and cooperation  guiding the group\u2019s authentication efforts. Officials with whom we spoke  stated that they are dedicated to continuing to address authentication  issues collaboratively because they have a mutual interest in improving  authentication to reduce tax refund fraud."], "subsections": []}, {"section_title": "IRS Has Begun to Implement Its Authentication Strategy, but Has Not Articulated Priorities and Resource Needs", "paragraphs": ["In its Roadmap, IRS outlined six core authentication objectives, 10 high- level strategic efforts, and 14 foundational initiatives to help it address  authentication challenges and identify opportunities for future investment.  While we found that IRS has made progress on some efforts identified in  its Roadmap, it has not prioritized the initiatives supporting its strategy nor  identified the resources required to complete them, consistent with  program management leading practices.", "For example, one of IRS\u2019s foundational initiatives is to send event-driven  notifications to taxpayers, such as when they file a return or request a tax  transcript. Such notifications could help IRS and taxpayers detect  potentially fraudulent activity at the earliest stage and help improve  authentication of tax returns. The Roadmap identifies seven supporting  activities for this foundational initiative. One is to provide taxpayers with  greater control over their online accounts. Another supporting activity is to  determine methods for sending notifications to taxpayers about activity on  their account.", "However, IRS has not identified the resources required to complete these  activities, and the Roadmap notes that six of the seven activities will take  between 6 months to 3 years to complete. In December 2017, IRS  officials stated that they had developed business requirements for the  foundational initiative to give taxpayers greater control over their online  accounts. However, IRS has not identified funding for the initiative\u2019s other  supporting activities\u2014such as developing requirements to send push  notifications to taxpayers\u2014and implementation will depend on the  availability of future resources.", "In December 2017, IRS officials stated that each of the strategic efforts  and foundational initiatives identified in the Roadmap are a high priority,  and they are working to address them concurrently while balancing the  availability of resources against the greatest threats to the tax  environment. As noted in our report, we recognize that a strategy is  necessarily high-level and that IRS must remain flexible and use available resources to respond to unexpected threats. Identifying resources and  prioritizing activities in its Roadmap will help IRS clarify tradeoffs between  costs, benefits, and risks and aid in decision making.", "Further, such efforts may also help IRS establish clearer timelines and  better respond to unexpected events. As such, we recommended that  IRS estimate the resources (i.e., financial and human) required for the  foundational initiatives and supporting activities identified in its Roadmap  and prioritize its foundational initiatives. IRS agreed with our  recommendations and is currently working to finalize its overall  authentication approach."], "subsections": []}, {"section_title": "Additional Actions Could Help IRS Enhance Security and Stay Ahead of Fraudsters", "paragraphs": ["Given the widespread availability of personally identifiable information  that fraudsters can use to perpetrate tax fraud, it is essential for IRS to  further strengthen taxpayer authentication to stay ahead of fraudsters\u2019  schemes. In our report, we identified two additional areas that IRS must  address to better position the agency and protect taxpayers against future  threats.", "First, we found that IRS has taken preliminary steps to implement NIST\u2019s  June 2017 guidance for secure online authentication, however it had not  yet established detailed plans, including timelines, milestone dates, and  resource needs to fully implement it. Among other things, NIST\u2019s new  guidance directs agencies to assess the risk for each component of  identity assurance\u2014identity proofing, authentication, and federation\u2014 rather than conducting a single risk assessment for the entire process.  According to NIST officials, this approach gives agencies flexibility in  choosing technical solutions; aligns with existing, standards-based market  offerings; is modular and cost-effective; and enhances individual privacy.  In short, following NIST\u2019s new guidance will help provide IRS with better  risk-based assurance that the person trying to access IRS\u2019s online  services is who they claim to be.", "As noted in our report, IRS has taken preliminary steps to implement the  new NIST guidance. These efforts include forming a task force to guide  IRS\u2019s implementation of NIST guidance and working with the Security  Summit to develop an implementation framework for state and industry  partners. IRS has also begun analyzing gaps between IRS\u2019s current  authentication procedures and the new guidance. In addition, in  December 2017, IRS implemented a more secure online authentication  option consistent with the new guidance through its mobile application,  IRS2Go. After taxpayers link their IRS online account with the mobile app,  they can use it to generate a security code to log into their account. This  option provides taxpayers with an alternative to receiving the security  code via a text message, which NIST considers to be less secure.", "We recommended that IRS develop a plan\u2014including a timeline,  milestone dates, and resources needed\u2014for implementing changes to its  online authentication programs consistent with new NIST guidance, and  also implement these improvements. IRS agreed with our  recommendations, but noted that its ability to complete these efforts will  depend on the availability of resources.", "Second, we found that IRS lacks a comprehensive, repeatable process to  identify and evaluate potential new authentication technologies and  approaches. Our discussions with representatives from industry and  financial institutions and with government officials indicate that there is no  single, ideal online authentication solution that will solve IRS\u2019s challenges  related to IDT refund fraud. These representatives advocate an approach  to authentication that relies on multiple strategies and sources of  information, while giving taxpayers options for further protecting their  information.", "We identified several authentication options in our report that IRS could  consider, including the following:", "Possession-based authentication. This type of authentication offers  users a convenient, added layer of security when used as a second  factor for accessing websites or systems that would otherwise rely on  a username and password for single-factor authentication. For  example, as noted in our report, according to an industry official,  authentication using a trusted device or \u201csecurity key\u201d based on  Universal Second Factor standards complies with NIST\u2019s new  guidance for digital authentication. While IRS is not likely to provide  the devices to taxpayers, it could enable its systems to accept these  trusted devices as authenticators for taxpayers who elect to use them.", "Working with trusted partners. IRS could partner with organizations  it trusts that are accessible to taxpayers and enable the partners to  identity-proof and authenticate taxpayers. Trusted partners could  include tax preparers, financial institutions, or other federal or state  agencies. In the course of our work, IRS officials stated that they had  been exploring such options with both the Social Security  Administration and the U.S. Postal Service; however, at the time of  our report, the agencies had not yet made decisions about next steps.", "Expanding existing IRS services to further protect taxpayers. IRS  could expand the functionality of its online account to further protect  taxpayers from IDT refund fraud. For example, IRS could develop  additional functionality that allows the taxpayer to designate a bank  account or a preference for a paper check for receiving a tax refund. If  a fraudster filed a return with different information, the return would be  automatically rejected.", "IRS officials told us the agency continually researches new identity  assurance processes and technologies and has talked with other  agencies, industry groups, and vendors to better understand how  particular technology solutions could apply to IRS\u2019s environment.  However, during the course of our work, IRS could not provide us  evidence of a repeatable, comprehensive process to identify and evaluate  available authentication technologies and services. Such a process could  compare options for in-house authentication solutions with off-the-shelf  solutions based on estimates of cost, schedule, and benefits, as  applicable. To this end, we recommended that IRS develop a process to  identify and evaluate alternative options for improving taxpayer  authentication, including technologies in use by industry, states, or other  trusted partners; and based on this approach, include and prioritize these  options, as appropriate, in its Roadmap. IRS agreed with these  recommendations, but did not provide additional details on how it plans to  address them.", "In conclusion, IRS\u2019s authentication environment is one component of a  broad, complex information technology infrastructure, and we have  previously reported on the many challenges the agency faces as it  modernizes its tax systems. Taxpayer authentication has become more  difficult with the wide availability of personally identifiable information and  fraudsters\u2019 ability to develop more complex and sophisticated methods to  commit fraud undetected. Addressing the issues we describe above could  better position IRS to identify and mitigate vulnerabilities in its  authentication efforts and better protect taxpayers and the Treasury.", "Chairman Jenkins, Ranking Member Lewis, and members of the  Subcommittee, this concludes my prepared remarks. I look forward to  answering any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact James R. McTigue, Jr. at (202) 512-9110 or mctiguej@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Key contributors  to this testimony include Neil Pinney, Assistant Director; Heather A.  Collins, Analyst-in-Charge; Dawn Bidne; and Bryan Sakakeeny.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["IRS estimated that criminals used stolen identities to try to claim $12.2 billion in refunds in 2016. IRS protected $10.5 billion but paid at least $1.6 billion. To help address this issue, which we added to our High Risk list in 2015, IRS checks whether millions of taxpayers are who they say they are.", "We testified that IRS has improved its taxpayer authentication efforts, but should take additional actions to stay ahead of fraudsters.", "In our related report, we made 11 recommendations, including that IRS prioritize its authentication initiatives and develop a process to evaluate potential authentication technologies."]}
{"id": "GAO-18-455", "url": "https://www.gao.gov/products/GAO-18-455", "title": "Historically Black Colleges and Universities: Action Needed to Improve Participation in Education's HBCU Capital Financing Program", "published_date": "2018-06-26T00:00:00", "released_date": "2018-07-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HBCUs play a prominent role in our nation's higher education system. For example, about one-third of African-Americans receiving a doctorate in science, technology, engineering, or mathematics received undergraduate degrees from HBCUs. To help HBCUs facing challenges accessing funding for capital projects, in 1992, federal law created the HBCU Capital Financing Program, administered by Education, to provide HBCUs with access to low-cost loans. GAO was asked to review the program.", "This report examines HBCUs' capital project needs and their funding sources, and Education's efforts to help HBCUs access and participate in the HBCU Capital Financing Program. GAO surveyed all 101 accredited HBCUs and 79 responded, representing a substantial, but nongeneralizable, portion of HBCUs. GAO analyzed the most recent program participation data (1996-2017) and finance data (2015-16 school year); reviewed available HBCU master plans; visited nine HBCUs of different sizes and sectors (public and private); and interviewed Education officials and other stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["Historically Black Colleges and Universities (HBCUs), stakeholders, and planning documents identified extensive and diverse capital project needs at HBCUs and GAO found HBCUs rely on a few funding sources\u2014such as state appropriations and tuition and fees\u2014to address those needs. HBCUs responding to GAO's survey reported that 46 percent of their building space, on average, needs repair or replacement. Based on a review of master plans\u2014which assess the condition of HBCU facilities\u2014and visits to nine HBCUs, GAO identified significant capital project needs in the areas of deferred maintenance, facilities modernization, and preservation of historic buildings. The Department of Education's (Education) HBCU Capital Financing Program has provided access to needed funding for some HBCUs and has helped modernize their facilities to improve student recruitment. However, fewer than half of HBCUs have used the program, according to Education data, which was specifically designed to help them address capital project needs (see figure).", "Education has undertaken several efforts to help HBCUs access and participate in the HBCU Capital Financing Program. For example, Education conducts outreach through attending conferences. However, some HBCUs in GAO's survey and interviews were unaware of the program. Moreover, public HBCUs in four states reported facing participation challenges due to state laws or policies that conflict with program requirements. For example, participants are required to provide collateral, but public HBCUs in two states reported they cannot use state property for that purpose. In March 2018, a federal law was enacted requiring Education to develop an outreach plan to improve program participation. An outreach plan that includes direct outreach to individual HBCUs and states to help address these issues could help increase participation. Without direct outreach, HBCUs may continue to face participation challenges. In addition, two HBCUs recently defaulted on their program loans and 29 percent of loan payments were delinquent in 2017. Education modified a few loans in 2013 and was recently authorized to offer loan deferment, but has no plans to analyze the potential benefits to HBCUs and the program's cost of offering such modifications in the future. Until Education conducts such analyses, policymakers will lack key information on potential options to assist HBCUs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends Education (1) include direct outreach to individual HBCUs and steps to address participation challenges for some public HBCUs in its outreach plan, and (2) analyze the potential benefits and costs of offering loan modifications in the program. Education outlined plans to address the first recommendation, and partially agreed with the second. GAO continues to believe both recommendations are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["Historically Black Colleges and Universities (HBCUs) in the United States  play an important and unique role in our nation\u2019s higher education  system. For example, they educated over 220,000 African-American  students pursuing a higher education degree in 2016, the most recent  year of data available. In addition, more than one-third of African- Americans receiving a doctorate in science, technology, engineering, or  mathematics fields obtained their undergraduate degrees from an  HBCU, and many received their doctorates from an HBCU. Like many of  the nation\u2019s approximately 4,400 colleges and universities (colleges), the  101 HBCUs undertake capital projects to help ensure their students have  well-maintained, safe, and functional facilities. Despite their prominent  role providing access to higher education for African-Americans and  others, HBCUs have faced challenges acquiring the robust revenue  streams needed to undertake capital projects. Moreover, a study in 2015  examined HBCU activity in the bond market and found that HBCUs have  a harder time finding investors, which results in higher costs compared to  similar, non-HBCU colleges.", "Recognizing these challenges, in 1992 the HBCU Capital Financing  Program (Capital Financing Program) was created to provide HBCUs with  access to low-cost loans for campus repair, renovation, and construction.  Our 2006 review of this program found that just 14 HBCUs participated in  the Capital Financing Program, despite extensive and diverse capital  project needs reported by HBCU officials.", "In light of these issues, you asked us to review funding for capital projects  at HBCUs, and the Department of Education\u2019s (Education) administration  of the Capital Financing Program. This report examines (1) the capital  project needs of HBCUs; (2) the funding sources HBCUs use to meet  their capital project needs; and (3) the extent to which Education helps  HBCUs access and successfully participate in the Capital Financing  Program.", "To address all three objectives, we conducted a web-based survey of all  101 accredited HBCUs in the United States in June through August  2017. We reviewed HBCUs\u2019 master plans, where documentation was  available, to supplement survey responses. We interviewed officials at  Education and its contracted designated bonding authority which  administers aspects of the program; officials at 15 HBCUs in 7 states  (Alabama, Georgia, Louisiana, Mississippi, North Carolina, Ohio, and  Virginia) and at 4 state university systems (Florida, Georgia, Mississippi,  and North Carolina). We also interviewed stakeholders at two HBCU  organizations representing most HBCUs, three higher education  organizations that focus on facilities, and from foundations and research  organizations. In addition, we visited nine selected HBCUs to tour  facilities in three states (Alabama, Louisiana, and North Carolina). To  further examine challenges HBCUs might face funding capital projects,  we analyzed data from Education\u2019s Integrated Postsecondary Education  Data System (IPEDS) to learn more about select financial characteristics  of all HBCUs. We also used these data to examine differences between  HBCUs\u2019 and similar non-HBCUs\u2019 institutional, student, and financial  characteristics. We identified the comparison group of similar non-HBCUs  using a statistical matching technique. We used data from the 2015-16  school year, the most recent data available at the time of our analysis.  We assessed the reliability of these data by reviewing related  documentation and interviewing officials responsible for maintaining the  data system, and we found the data to be reliable for our purposes. We  also reviewed relevant federal laws, regulations, and guidance, including  information about Education\u2019s programs that HBCUs identified as other  sources for financing capital projects.", "To determine the extent to which Education helps HBCUs access and  successfully participate in the Capital Financing Program, we reviewed  data on program participation from 1996, when the program first issued a  loan, to 2017, and documentation on program performance and  administration. We assessed the reliability of these data by reviewing  related documentation and interviewing knowledgeable agency officials,  and we found these data to be reliable for the purposes of our reporting  objectives. We also reviewed Education documentation from selected  HBCUs affected by Hurricanes Katrina and Rita that received loan  modifications in 2013. We assessed Education\u2019s outreach with states and  HBCUs against federal internal control standards, which state that agency  management should externally communicate the necessary quality  information to achieve its objectives. We reviewed Education\u2019s  coordination efforts against best practices for coordinating with relevant  stakeholders and reviewed Education\u2019s strategic plan, which prioritizes  coordinating with external stakeholders to achieve its goals of supporting  educational institutions and increasing college access. We also  assessed Education\u2019s actions to help HBCUs experiencing financial  challenges successfully participate in the program against federal internal  control standards, which state that agency management should  communicate key information needed to achieve its objectives and plan  for significant changes, including economic changes, and analyze the  effects of such plans and appropriately respond. Appendix I describes our  objectives, scope, and methodology in greater detail.", "We conducted this performance audit from October 2016 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "HBCU Capital Financing Program", "paragraphs": ["The Capital Financing Program provides loans to eligible HBCUs for the  repair, renovation, construction, or acquisition of capital projects or to  refinance existing capital debt. Several offices at Education are involved  in administering the program, including the Office of Postsecondary  Education and the budget office, with one official responsible for overall  program management. Education contracts with a designated bonding  authority to manage the program\u2019s operations. The authorizing legislation  also establishes the HBCU Capital Financing Advisory Board (Advisory  Board) to provide advice to Education and its designated bonding  authority on implementing the program. (See table 1.)", "The loan process for an HBCU to participate in the Capital Financing  Program consists of multiple steps. HBCUs must first complete a  preliminary application with the designated bonding authority that includes  information such as enrollment, financial data\u2014including a description of  existing debt\u2014and proposed capital projects. The designated bonding  authority reviews this information to assess the ability of an HBCU to take  on debt and determine whether the college should formally complete an  application. The application includes more detailed financial information,  such as audited financial statements, as well as capital improvement  plans and assessments. To be approved for the loan, an HBCU must  satisfy certain credit criteria and have qualified projects. Upon reviewing  the college\u2019s application, designated bonding authority representatives  may visit the HBCU and will recommend to Education whether the college  should receive a Capital Financing Program loan. If Education agrees  and approves the loan, it goes through a closing process during which  certain terms and conditions of the loan may be negotiated. (See table 2.)", "The Capital Financing Program\u2019s statute caps total outstanding loans at  $1.1 billion, but since fiscal year 2012, Congress has annually passed  appropriation bills allowing Education to lend above that amount. As of  November 2017, Education has lent over $2 billion in total with $1.8 billion  outstanding."], "subsections": [{"section_title": "Loan Modifications for Selected HBCUs Following 2005 Gulf Coast Hurricanes", "paragraphs": ["In 2005, Hurricanes Katrina and Rita struck New Orleans and surrounding  areas, resulting in significant damage to four HBCUs in the Gulf Coast  region: Dillard University, Southern University at New Orleans, Xavier  University of Louisiana, and Tougaloo College. The Emergency  Supplemental Appropriations Act for Defense, the Global War on Terror,  and Hurricane Recovery, 2006 (Emergency Act) was enacted in June  2006, in part to assist these colleges in their recovery efforts. The  Emergency Act amended certain provisions of the Capital Financing  Program for these colleges. For example, the Emergency Act included  provisions such as a lower interest rate and lower fees for cost of  issuance (both set at one percent or less), elimination of the escrow  requirement, and deferment of both principal and interest payments for a  3-year period. Despite these more generous loan provisions, these four  HBCUs experienced challenges repaying these loans due to difficulties  they faced rebuilding their enrollment and finances to the levels before  the hurricanes. In 2011, federal law authorized Education to further  modify the terms and conditions of the Capital Financing Program loans  made to these four HBCUs under the Emergency Act. To assist these  four colleges, Education used this authority to modify Emergency Act loan  terms in the following ways:", "Payment forbearance: The HBCUs were granted a 5-year  forbearance on their loan payments starting in 2013. During the  forbearance period, the colleges were not responsible for making  payments toward the principal, interest, or associated fees, but  interest and fees continued to accrue during that time. At the end of  the forbearance period, the colleges would be responsible for the  outstanding principal, accrued interest, and fees.", "Expense-based repayment: After the forbearance period, colleges  would pay the lesser of an amount based on a percentage of each  college\u2019s operating expenses or the reamortized payment schedule.", "Debt adjustment: Any unpaid loan amounts at the original loan  maturity date\u2014June 1, 2037\u2014would be forgiven. The HBCUs would  not be held responsible for any unpaid balances as of that date.", "In February 2018, before the end of the forbearance period, Congress  passed the Bipartisan Budget Act of 2018 which authorized the Secretary  of Education to forgive any outstanding balance owed by these HBCUs.  In March 2018, Education forgave these colleges\u2019 loans, eliminating over  $300 million of outstanding debt."], "subsections": []}]}, {"section_title": "Strengthening HBCU Program", "paragraphs": ["Education also administers the Strengthening HBCU Program to eligible  HBCUs. These grants can be used for a number of purposes, including  physical infrastructure, financial management, academic resources, and  endowment-building. The program is non-competitive and Education  awards funds on a 5-year cycle through formula-based grants. In 2017,  Education awarded 98 new grants totaling about $245 million."], "subsections": []}, {"section_title": "Bond Financing", "paragraphs": ["Municipal bonds are debt securities issued by states, cities, counties and  other governmental entities to fund day-to-day obligations and to finance  capital projects. Municipal borrowers can also issue bonds on behalf of  private entities such as private colleges, or those colleges can issue their  own debt that would not be tax exempt. To issue a bond, entities are  typically rated by a credit rating agency. This rating indicates the credit  quality of the bonds and likelihood of default. The entity may hire  municipal advisors and is required to have an underwriter to prepare and  sell the bonds to investors. Entities are provided the funding up front to  finance the project and then pay the principal, interest, and any fees to  investors until the bond matures, often up to 30 years."], "subsections": []}]}, {"section_title": "HBCUs, Stakeholders, and Planning Documents Identified Extensive and Diverse Capital Project Needs", "paragraphs": [], "subsections": [{"section_title": "HBCUs, Stakeholders, and Planning Documents Cited Substantial Need for Repairs and Building Replacement", "paragraphs": ["Almost all the HBCUs responding to our survey (70 of 79) reported that,  on average, 46 percent of their building space needed to be repaired or  replaced. For example, of the 35 public HBCUs that responded to our  survey question on building condition, 8 reported more than three- quarters of their building space is in need of repair or replacement. Like  all institutions of higher education, HBCUs are facing increasing capital  project needs due to aging campus facilities, according to higher  education organization officials and facilities experts. HBCUs\u2019 planning  documents we reviewed also support our survey findings around capital  project needs. For example, consultants hired by one public HBCU found  that a quarter of its buildings were in poor condition with the potential for  demolition, according to the college\u2019s master plan. Severe weather was  also cited as a challenge by officials at another public HBCU we visited  where nearly all their building space had been damaged, requiring them  to shut down portions of their functional buildings, construct new  buildings, and build flood walls. According to officials from this college,  however, damages remain unaddressed in part due to a lack of funding  (see fig. 1)"], "subsections": []}, {"section_title": "HBCUs, Planning Documents, and GAO Site Visits Identified Deferred Maintenance, Modernization Efforts, and Historical Buildings as Key Reasons for Needs", "paragraphs": ["Through our survey, site visits, and review of master plans, we identified  three main reasons for capital project needs: a backlog of deferred  maintenance, HBCUs\u2019 efforts to modernize campuses to be more  competitive, and historical building requirements. A majority of HBCUs  responding to a survey question on planned capital projects over the next  5 to 10 years reported plans to prioritize repairing or replacing academic  buildings or residence halls (see fig.2).", "Half of HBCUs that responded to our survey question on their current  deferred maintenance backlog (24 of 48)\u2014repairs that were not  performed when they should have been\u2014reported a backlog of $19  million or more. In addition, 30 HBCUs reported in our survey that their  deferred maintenance backlog had increased in the last 3 years (2015  through 2017), and 7 HBCUs reported their backlog decreased. Public  HBCUs, on average, reported deferred maintenance backlogs of $67  million and private HBCUs of $17 million. To better understand deferred  maintenance, colleges hire consultants to conduct facilities condition  assessments. For example, consultants conducted a facility condition  assessment to understand a public HBCU\u2019s deferred maintenance  backlog, among other things, and found the backlog was $9.7 million for  various repair or replacement projects ranging from repairing HVAC  systems to needing a new roof for an administrative building. A higher  education association reported deferred maintenance can erode safe  physical conditions, financial health, and the morale of an institution.", "Officials from most HBCUs we interviewed (11 of 15) said they attempt to  prioritize their deferred maintenance but that financial emergencies or  funding constraints prevent them from doing so. For example, officials at  an HBCU we visited said that the main pipes that feed into three  residence halls and their student center burst, and this unplanned capital  project cost the college nearly $1 million. This HBCU had to borrow  funding from its operating budget, which took away from funds that could  have been used to address planned deferred maintenance projects."], "subsections": [{"section_title": "Modernization Efforts", "paragraphs": ["Officials from all 15 HBCUs we interviewed said that student interests in  updated residence halls or academic programs require modern building  spaces in order for a college to remain competitive. Officials from several  HBCUs we interviewed (7 of 15) said residence halls on their campuses  are outdated or in need of repairs (see fig. 3). For example, officials at  one HBCU we visited said some of their residence halls were built in the  1960s and 1970s and the concrete block construction only allowed  minimal changes. Officials at some HBCUs (3 of 15) said students\u2019  interest in living on-campus increased their need for housing. Officials at  one HBCU said student enrollment impacts their capital project planning  and that they have plans to repair residence halls and to build new  housing facilities as enrollment increases, but have not yet identified  funding. One HBCU\u2019s master plan cited anticipated growth in its student  population between 2014 and 2024 will continue to impact capital project  needs, including a need for additional buildings for academics and  student services.", "Officials from several HBCUs we interviewed (5 of 15) also reported  building new facilities to remain competitive in certain academic fields.  For example, officials from one HBCU reported investments in building  new facilities and repairing existing buildings to better accommodate  Science, Technology, Engineering and Mathematics (STEM) majors (see  fig. 4).", "Most HBCUs responding to our survey (42 of 79) reported having  buildings designated as historic, making up, on average 11 percent of  their building space. Many of those HBCUs indicated historical building  needs are significant or often take priority. According to officials from two  HBCUs we visited and another we interviewed, historical buildings require  maintenance that can be expensive, especially for buildings designated  as historic by the National Register of Historic Places. Further, the  Department of the Interior reported in 2018 that HBCUs have historic  building rehabilitation needs and these colleges lack the resources to  repair them. For instance, a 2016 master plan for a public HBCU shows  that a historic building constructed in 1916, which serves as a residence  hall and has only been updated once in 1971, needs over $6 million in  repairs to better accommodate students. An official at another HBCU we  visited also said that the prohibitive cost of repairing the campus\u2019 historic  building has made it non-functional. This historic building had previously  been used as a residence hall (see fig. 5)."], "subsections": []}]}]}, {"section_title": "HBCUs Use A Few Funding Sources for Capital Project Needs and Fewer than Half Use Education\u2019s Capital Financing Program", "paragraphs": [], "subsections": [{"section_title": "HBCUs Rely on a Few Funding Sources to Address Capital Project Needs", "paragraphs": ["HBCUs primarily rely on a few sources of funding to address capital  project needs, such as state grants and appropriations for public HBCUs  and private giving and tuition and fees for private HBCUs, according to  HBCUs responding to our survey and our interviews. Officials from almost  half of the HBCUs we interviewed (7 of 15) said relying on a few funding  sources can affect a college\u2019s ability to fund capital projects. Education  officials and several stakeholders also said this reliance can put the  HBCUs at a financial disadvantage when seeking additional external  funding, such as from the bond market. Diversity of revenues is a key  metric when determining a college\u2019s credit rating, which uses a college\u2019s  financial profile to assess its ability to pay its financial obligations.  Colleges with lower credit ratings, for example, may face challenges  accessing the bond market, or pay more to issue a bond, according to  several stakeholders. Using IPEDS data from the 2015-16 school year,  we found that HBCUs may face challenges with revenue diversity  because a large proportion of their revenue is from government funding  (federal, state, and local) and tuition and fees. A college\u2019s wealth, such as  the size of its endowment, can also affect a college\u2019s credit rating,  according to officials from two credit rating agencies. Officials from a  higher education association and a foundation noted that many HBCUs  have small endowments and as a result may face challenges accessing  financing. Our analysis of IPEDs data shows that HBCUs\u2019 median  endowments are about half the size of similar non-HBCUs (see table 3).", "Not all HBCUs face these challenges, however. According to a  representative of one higher education facilities association, some more  affluent private HBCUs have more diversified revenue streams and have  successfully raised funds from private giving and public-private  partnerships to address their capital project needs. Nevertheless, many  HBCUs face continued challenges securing external funding."], "subsections": [{"section_title": "Funding Sources Used by Public HBCUs", "paragraphs": ["Public HBCUs generally rely on state funding\u2014such as annual  appropriations for repairs or one-time grants for new construction\u2014to  address their capital project needs; however, those funds are often  insufficient to meet their needs, according to some stakeholders and  HBCU officials. A majority of public HBCUs (28 of 41) reported using  state grants and appropriations to address capital project funding,  according to survey responses (see fig.6). Officials from most public  HBCUs we interviewed (5 of 6), however, said state appropriations are  often limited to academic or administrative buildings, and colleges are  responsible for financing and maintaining other projects and building  spaces, such as residence halls or student centers. Furthermore, officials  from all public HBCUs we interviewed (6 of 6) reported that state funds  are often not sufficient to adequately address both routine repairs and  their deferred maintenance backlog. Declines in state funding for higher  education in recent years have also introduced financial uncertainty,  particularly for HBCUs, according to officials from half of the public  HBCUs and many stakeholders we spoke with. For example, officials at  one public HBCU we visited said that as a result of cuts in the state\u2019s  capital budget, the college does not have enough funding to address  emergency or deferred maintenance needs and they are running a deficit.  Officials from one credit rating agency said that because public HBCUs  rely more on state funding than their public non-HBCU counterparts, they  are potentially more vulnerable than other colleges.", "Over half of public HBCUs in our survey (22 of 38) reported that they  used state-issued bonds to address their capital project funding for the  last 5 years. Officials from most public HBCUs we interviewed (4 of 6)  said the state or university system often issues general obligation bonds  on behalf of the state and disperses funding to colleges to finance large  scale capital projects. For example, one state issued a $2 billion bond for  the 16 colleges in its university system and provided one of its public  HBCUs with $30 million for a new college of business. Similar to state  appropriations, officials from some public HBCUs noted that state-issued  bonds are also typically restricted to academic or administrative buildings  rather than residence halls or student centers. Officials from 12 public  HBCUs also reported in our survey issuing bonds themselves to finance  capital projects. Officials from most public HBCUs we interviewed (4 of 6)  said colleges issue bonds, with their state system\u2019s permission, to finance  capital projects when state funding is limited or if the projects are for non- academic buildings. For example, one public HBCU issued a $90 million  bond to fund a new student center."], "subsections": []}, {"section_title": "Funding Sources Used by Private HBCUs", "paragraphs": ["More than half of private HBCUs reported using alumni and private giving  or revenue from tuition and fees to address their capital needs (see fig  7). However, private HBCUs may face challenges using these sources  to address their capital needs due to competing priorities for these  revenue streams and difficulty raising additional funds from these  sources, according to HBCUs and stakeholders we interviewed.", "Officials from most private HBCUs we interviewed (7 of 9) said they use  some funding from alumni and private gifts for small capital projects, but  that donors do not usually contribute to larger projects or help address  deferred maintenance or repairs. While a majority of private HBCUs  responding to our survey (21 of 37) reported using alumni and private  giving to address their capital project needs, this funding source only  accounted for 10 percent of their overall capital project funding. Several  stakeholders we interviewed (4 of 10) said that some private HBCUs do  not have robust fundraising offices and may face challenges raising  additional funding from alumni or other private sources.", "A majority of surveyed private HBCUs (20 of 37) reported using tuition  and fees to address their capital project needs over the last 5 years.  Education officials and officials from 5 of 9 private HBCUs said relying on  tuition and fees to address capital project needs\u2014in addition to other  expenses such as operations and academics\u2014can strain a college\u2019s  finances. Many officials from private HBCUs we interviewed (6 of 9) told  us that because they are so tuition-dependent, drops in enrollment make  it difficult to maintain their facilities or repay capital debt. Officials from  one higher education association noted that some HBCUs face  constraints raising additional tuition revenue needed to cover capital  projects and other expenses because they are generally smaller colleges:  more than half of private HBCUs have less than 1,000 students. Private  HBCUs also have lower tuition compared to similar private non-HBCUs,  according to our analysis of IPEDS data. Additionally, two stakeholders  told us HBCUs may face challenges raising tuition and fee revenue, in  part, because the student population at HBCUs tends to be more low  income and relies more heavily on federal student aid. Based on our  analysis of IPEDS data, for example, a higher proportion of students at  private HBCUs received Pell Grants in the 2015-16 school year compared  to similar private non-HBCUs\u201477 percent and 43 percent, respectively."], "subsections": []}, {"section_title": "Strengthening HBCU Program", "paragraphs": ["A majority of HBCUs responding to our survey (49 of 77) reported using  federal grants to finance capital projects, and most indicated using  Education\u2019s Strengthening HBCU Program. We analyzed the program\u2019s  2016 annual reports, the most recent data available at the time of our  review, and found that more than three-quarters of HBCUs that received  grants in 2016 (79 of 98) used the funds to address capital project  needs. Our analysis found that HBCUs in the Strengthening HBCU  Program used an average of 22 percent of their funding from this source  for capital projects in 2016. According to our analysis of the annual  reports, 15 of the 98 HBCUs in the program reported that the grant  helped decrease the number of instructional facilities with deferred  maintenance backlogs. Officials we interviewed from one HBCU said they  used grants from the Strengthening HBCU Program to address some of  their deferred maintenance backlog and to renovate classrooms to better  meet students\u2019 academic needs. For example, they said the grant funded  capital projects that support its physics and chemistry programs (see fig.  8). In another instance, a private HBCU reported using the program\u2019s  funds to support technological updates and modernize classrooms. Such  updates could help with student recruitment and, ultimately, help increase  student enrollment."], "subsections": []}]}, {"section_title": "Fewer than Half of Eligible HBCUs Used Loans from Education\u2019s Capital Financing Program", "paragraphs": ["Fewer than half of HBCUs, or 46 of the 99 HBCUs that are eligible, have  used the HBCU Capital Financing Program to fund capital projects,  according to Education data. HBCUs have borrowed over $2 billion, with  private HBCUs representing about two-thirds of the loan volume (see fig.  9). After 2007, Education saw an increase in the number of loans made  and the amount borrowed by HBCUs due in part to the program\u2019s  expansion to help colleges affected by Hurricanes Katrina and Rita in  2005 and Education\u2019s efforts to improve outreach.", "Education tracks how Capital Financing Program funds are used, which  can fall into three broad categories: refinancing, deferred maintenance  and repair, and building replacement. According to our analysis of  Education data, since 1996, rather than use these loans for new capital  projects, participants have used the program most frequently to refinance  outstanding debt (see fig. 10). For instance, one public HBCU used a  portion of a $36.6 million Capital Financing Program loan to refinance  outstanding debt, which saved the college about $9 million. In addition  to refinancing, program participants used the remaining funds to address  deferred maintenance and repair or to replace buildings. For example, the  most frequent type of project funded through the program was building or  renovating residence halls, according to Education data. A private HBCU  responded in our survey that it used the program to refinance outstanding  debt for student housing and to help construct a new student center.", "HBCUs responding to our survey and HBCU officials we interviewed  reported using the Capital Financing Program because of its low interest  rate. Survey respondents most frequently cited the program\u2019s low  interest rate as a reason for participating (33 of 37), as did officials from  HBCUs we interviewed that use the program (10 of 11). According to  Education and designated bonding authority officials, the program  provides HBCUs with rates they might not receive in the private market.  For example, program loans used for refinancing from 2012 through 2016  had a median true interest cost\u2014the interest rate plus fees charged to the  college\u2014of 3.15 percent. While officials from three state university  systems noted their HBCUs can issue bonds with other colleges in their  system to receive a more competitive interest rate, this option is not  available to all HBCUs. According to officials at the designated bonding  authority, HBCUs may lack high credit ratings, and the Capital Financing  Program allows these colleges to access lending at rates comparable to  highly rated colleges.", "Survey respondents also frequently cited the opportunity to refinance  existing, more expensive capital debt and lack of access to other funding  options as reasons for participating in the Capital Financing Program.  Specifically, over two-thirds of survey respondents (24 of 35) cited the  opportunity to refinance existing debt. According to officials from  Education and the designated bonding authority, HBCUs can see  substantial savings using the program. Data provided by the designated  bonding authority showed that HBCUs that refinanced debt in the  program from 2012 through 2016 saved a median of 14 percent of the  overall loan cost. One survey respondent, for example, reported that as  a result of the savings generated by refinancing existing bonds the  college was able to purchase a residence hall. Almost half of the  participating HBCUs that responded to the survey question on why they  used the program (15 of 32) reported that they did not have access to  other funding. Officials from one organization representing almost three- quarters of the private HBCUs told us this program is particularly  important for small private HBCUs that have limited resources and for  private HBCUs that do not have access to state funding and may not  have the capacity to issue bonds. Officials from most public HBCUs we  interviewed (4 of 6) also noted that because states do not typically fund  buildings such as residence halls or student centers, the Capital  Financing Program can help address that funding gap."], "subsections": []}]}, {"section_title": "Education Has Taken Some Steps to Help HBCUs Participate in the Capital Financing Program, but Further Action Is Needed", "paragraphs": [], "subsections": [{"section_title": "Education Conducts Outreach, but Some HBCUs Reported Being Unaware of the Capital Financing Program", "paragraphs": ["Education and its designated bonding authority have taken some steps to  increase awareness of the Capital Financing Program, but some HBCUs  and university system officials reported in our survey and interviews that  they were unaware of the 26-year-old program. Officials from Education  and its designated bonding authority said they attend a range of  conferences and events in the HBCU and higher education communities  to increase awareness of the program, such as conferences with higher  education business officers and an annual national HBCU conference. A  senior Education official said, when possible, Education visits individual  public and private non-participating HBCUs that may be good candidates  for the program based on their credit. In addition, a senior designated  bonding authority official said designated bonding authority staff visits  every HBCU that applies or expresses interest in the program. However,  about a quarter of non-participating HBCUs that responded to our survey  said they were unaware of the program. Officials we interviewed at one  state university system also reported they had not heard of the program.", "HBCUs and state university systems may be unaware of the Capital  Financing Program because Education does not target its outreach in two  key ways.", "Lack of outreach and communication with state university systems:  Stakeholders we interviewed and a senior Education official said  Education does not reach out to nor communicate program  information directly with state university systems, which oversee  groups of public universities\u2014both HBCUs and non-HBCUs\u2014 supported by an individual state, even though public colleges  accounted for half of all HBCUs in 2016. A senior Education official  told us Education staff does not reach out to state university systems  because program loans are made directly to individual HBCUs.  Nonetheless, according to officials at three state university systems,  these systems generally play a role in coordinating colleges\u2019 capital  budget requests, and their awareness of the Capital Financing  Program could help Education in its efforts to increase participation  among public HBCUs. For example, officials at one state university  system told us they are always interested in learning about low-cost  ways to help their colleges with capital projects, and they would be  interested to learn more about how the Capital Financing Program  could help their public HBCUs. In addition, one surveyed public HBCU  that was unaware of the program suggested Education work with  state university system offices, as they are the ones responsible for  facilitating and approving colleges\u2019 capital funds. Officials at the state  university system for this HBCU also said they were unaware of the  program.", "Lack of formal outreach plan to address HBCU leadership changes:  When possible, Education officials said they reach out to HBCUs as  new presidents or chief financial officers come on board. However,  Education officials said they do not track this particular type of  outreach. In 2016, about three-quarters of HBCUs experienced a  change in at least one key leadership position, according to our  analysis of Education reports, and several stakeholders we talked to  cited the frequency of leadership change as a challenge. Given the  frequency of changes in key leadership positions at HBCUs,  consistent outreach to this group is particularly important.", "This lack of program awareness among individual HBCUs and state  university systems can hinder participation. Since our 2006 report on the  Capital Financing Program, participation has increased from 14 to 46  HBCUs, but the total remains at fewer than half of all HBCUs. While the  program is only available for capital financing of projects that meet  specific criteria, it serves as a potentially important resource for HBCUs  that continue to face challenges diversifying their funding sources to meet  capital project needs. The Consolidated Appropriations Act, enacted in  March 2018, requires Education to create and execute an outreach plan  to work with states and the Capital Financing Advisory Board to improve  outreach to states and help additional public HBCUs participate in the  program. Taking steps, such as reaching out directly to officials in  facilities departments at state university systems, could help to address  several of the issues we have identified in this report related to  communication with state university systems.", "Federal internal control standards state that management should  communicate information needed to achieve an agency\u2019s objectives to  key external stakeholders. As Education develops its outreach plan it is  important that the agency also ensure that officials at individual HBCUs,  who engage in capital planning\u2014presidents, chief financial officers, and  facilities managers, are aware of the program. Indeed, over half of non-participating HBCUs (23 of 34) responded in our survey that improved  communication from Education was \u201cmoderately\u201d or \u201cextremely\u201d important  to increase program participation. In addition to working with the Capital  Financing Advisory Board\u2014which includes representatives of public and  private HBCU organizations\u2014to reach out to state university systems,  Education could also further leverage the resources of its designated  bonding authority. While the designated bonding authority reaches out to  some prospective program participants, it could help Education further  ensure that program information reaches all HBCUs. Without these efforts  as part of the agency\u2019s outreach plan, HBCUs eligible for the Capital  Financing Program\u2014the institutions that the program is designed to  serve\u2014may remain unaware of the program and miss opportunities to  access low-cost capital financing."], "subsections": []}, {"section_title": "Some Program Features Contribute to Low Participation by Public HBCUs", "paragraphs": ["Some public HBCUs report being prohibited from participating in the  Capital Financing Program by state law or policy because of certain  program features, and Education has taken limited steps to coordinate  with states to address those issues. According to our analysis of survey  responses and interviews, about one-third of non-participating public  HBCUs across four states (13 of 37) report being unable to use the  program due to at least one federal requirement placed on the college,  which conflicts with state law, policy, or practice. These features include  requirements for pooling escrow funds, collateral, and lending directly to  HBCUs (see table 4).", "Education has taken steps to address public HBCUs\u2019 concerns with the  escrow requirement, but not the other state-level provisions that create  challenges. In 2006, GAO recommended that Education consider  alternatives to the escrow pool requirement, and Education submitted a  legislative proposal to Congress, most recently in 2017, to require fees  instead. However, Education has not systematically coordinated with  states to address other laws or policies that create challenges or to  identify potential solutions to help more public HBCUs participate in the  program. For example, based on one college\u2019s interpretation of state law,  officials from Education and the designated bonding authority told us  HBCUs in that state could not participate because of the state\u2019s  requirement that such loans be issued to a third-party. However, state  university system officials in this state told us this requirement may not  prohibit participation. They said a clearer explanation of the benefits and  obligations of the program from Education would be helpful to determine  whether the state\u2019s HBCUs could participate. Officials at an HBCU in  another state with restrictions suggested that Education work with the  states to help states develop regulations that do not hinder access to the  program. Officials from the university system in that state said they would  be open to working with Education to find a way to allow their HBCUs to  participate.", "Some state university systems and colleges have successfully developed  solutions that could also be helpful for states whose laws or policies  create similar challenges. For example, officials we spoke with from one  state university system said a state statute was recently changed after an  HBCU\u2019s application to the program had to be withdrawn because of a  state law prohibiting using tuition revenue as collateral. Those changes  were enacted in early 2018, and state university system officials said they  are moving forward on HBCU participation in the program.", "Our prior work highlights the importance of coordinating among key  stakeholders to achieve results. Education\u2019s strategic plan prioritizes  supporting educational institutions and increasing college access, and  coordinating with external stakeholders such as state university systems  to achieve those goals. While Education is aware that many public  HBCUs face state-level restrictions on participating in the Capital  Financing Program, a senior Education official said the Capital Financing  Program does not provide support to states whose laws or policies create  such challenges. Education officials said they work with colleges on a  case-by-case basis, and only work directly with state university systems  when invited to by the interested HBCU. However, officials from one  university system noted that it would be helpful for Education to keep both  the college and the system informed of the program given the system  office\u2019s level of involvement in capital financing decisions. Officials we  interviewed from three of the four public HBCUs in states with laws or  policies that create these challenges said they are interested in  participating in the Capital Financing Program. One HBCU official said  given the low interest rate, his HBCU would refinance all its existing  capital debt into the program if given the opportunity. As Education  develops an outreach plan, it will be important for the plan to include  coordination with key stakeholders such as state university systems to  address state-level challenges to participation and share potential solutions and leverage the designated bonding authority and Advisory  Board in that effort."], "subsections": []}, {"section_title": "Education Has Taken Steps to Help Some HBCUs Experiencing Financial Hardship, but Additional Analysis Could Better Inform Policymakers", "paragraphs": ["The number of loan defaults in the Capital Financing Program and the  number of HBCUs having difficulty making timely loan payments have  increased recently, but Education has not fully assessed the potential use  of loan modifications to assist such HBCUs. For example, two HBCUs  defaulted on their Capital Financing Program loans in the last 2 years,  and 29 percent of loan payments were delinquent in 2017. HBCU  officials we interviewed reported that financial challenges stemming from  two events\u2014the 2008 economic recession and a recent change to federal  student financial aid\u2014have decreased enrollment at some HBCUs and  affected HBCUs\u2019 ability to repay their loans on time. For example, officials  from two private HBCUs told us that they experienced declining  enrollment as a result of the 2008 recession. In addition, changes made  in 2011 to the Parent PLUS loan program\u2014a program used by parents to  help pay for their student\u2019s tuition\u2014resulted in increased denials of these  loan applications, according to Education and officials from several  HBCUs. As a result, some students could no longer afford to attend  college, and the loss of tuition revenue created additional financial  hardship for the colleges, according to officials from several HBCUs and  an HBCU organization official. Education issued new regulations in 2014  that revised the Parent PLUS loan criteria, enabling more families to  qualify for these loans. However, HBCUs had already lost significant  amounts of tuition revenue as a result of the 2011 changes, according to  Education officials.", "HBCUs and stakeholders have called for loan modifications to potentially  assist colleges in financial distress and help them avoid defaulting on  their Capital Financing Program loans. According to key stakeholders and  officials from eight HBCUs, there is a need for the program to have ways  to assist HBCUs facing financial difficulties. For example, officials from  four HBCUs we interviewed and four additional HBCUs we surveyed  suggested additional program flexibility, such as forgiving, reducing, or  temporarily suspending loan payments, could be helpful for some  colleges. Stakeholders also suggested that loan deferment\u2014allowing  colleges to postpone payments without penalty\u2014or other flexible payment  options could help some colleges facing financial hardship. The  Consolidated Appropriations Act, enacted in March 2018, appropriated  $10 million for Education to defer participating HBCUs\u2019 Capital Financing  Program loans to assist colleges experiencing financial difficulties.  Under this provision, loans can be deferred for up to 6 years for  participating HBCUs demonstrating financial need and meeting certain  conditions. These funds are available for Education to authorize loan  deferments until the end of fiscal year 2018. Little is known, however,  about how loan modifications would affect participating HBCUs or the  program.", "According to a senior Education official, the agency assessed the  potential for loan deferment in 2010 and estimated that it would cost the  federal government about $150 million annually. However, neither the  program office nor Education\u2019s budget office, which is responsible for  estimating the costs of policy changes, were able to provide any  information on how Education arrived at this estimate. Furthermore,  Education has not assessed whether several other types of loan  modifications identified by stakeholders, or those used for HBCUs  impacted by Hurricanes Katrina and Rita, could be beneficial to other  participating HBCUs that are having trouble making timely loan  payments.", "Federal internal control standards state that agency management should  plan for significant external events, analyze its effects on achieving  program goals, and appropriately respond to those events. While  Education and its designated bonding authority review each applicant\u2019s  credit and ability to take on a Capital Financing Program loan, this review  reflects an HBCU\u2019s current financial health at the time of its application.  Given that Capital Financing Program loans can be up to 30 years, major  external changes such as an economic recession are possible over the  life of the loan. Such events may affect an HBCU\u2019s ability to make timely  loan payments and may increase the potential of an HBCU to default on  its Capital Financing Program loan. According to Education\u2019s fiscal year  2019 budget request, the HBCU portfolio is experiencing greater financial  stress as evidenced by an increase in loan delinquencies, and the federal  government is at risk of incurring additional costs to manage the  program. Analyzing the effects of deferring loans and other types of loan  modifications on program participation and on program costs could help  Education determine how best to assist participating HBCUs experiencing  financial difficulties while minimizing the federal government\u2019s costs.  However, a senior Education official said the agency does not plan to  analyze (1) whether loan modifications could be helpful to program  participants; or (2) the effect offering these modifications could have on  the cost of the program. According to Education officials, modifications to  the terms of Capital Financing Program loans cannot occur without  statutory change. Nonetheless, Education is responsible for providing  advice to Congress about what additional steps might be taken to  improve the operation and implementation of the program. Conducting  analyses on the effect of loan modifications, including recently authorized  deferments, to help colleges avoid default and successfully participate in  the program, and on the potential costs absorbed by Education of  delayed or reduced payments, would enable Education to fulfill this  responsibility."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["HBCUs play a vital role in providing higher education opportunities for  African-Americans. However, HBCUs continue to face challenges in  securing financing to undertake needed capital projects. As a result,  these colleges may be unable to make the campus improvements  necessary to attract and retain students, potentially jeopardizing their  long-term sustainability. Education\u2019s Capital Financing Program is  intended to be a key funding source for HBCUs\u2019 capital needs, yet fewer  than half of these colleges participate in the program.", "As Education develops its statutorily mandated outreach plan, it will be  important for the plan to address the outreach issues we have identified.  Increasing outreach to individual HBCUs will encourage more college  participation in the Capital Financing Program. Similarly, coordination with  state university systems to address state-level provisions that create  challenges and share potential solutions can increase public HBCU  participation in the program. Education can leverage the resources not  only of the Advisory Board, but also of the designated bonding authority,  in these outreach efforts. If Education does not include these activities in  its outreach plan, many of the HBCUs the program is intended to serve  may continue to be unaware of the program or unable to participate in it.", "Some HBCUs have faced declining enrollment as a result of changing  economic conditions and recent changes in federal student aid policy. At  the same time, the number of defaults and delinquencies has increased in  the Capital Financing Program, potentially increasing the federal  government\u2019s responsibility for these losses. In addition, stakeholders  have called for additional loan modifications for colleges in financial  distress. The Consolidated Appropriations Act, enacted in March 2018,  authorized Education to offer loan deferments to financially struggling  HBCUs. As Education begins offering these loan deferments, it is  important that Education analyze the effects of these deferments and  other prior loan modifications, such as those given to certain HBCUs  affected by Hurricanes Katrina and Rita, to ensure that they are having  the intended effect. Analyzing the potential benefits of loan modifications  to all participating HBCUs against the potential risks to the program, such  as increased program costs, could further help policymakers enhance the  overall effectiveness of the Capital Financing Program. This will be  especially important as Education implements its required outreach plan,  which may increase program participation."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to Education:", "As Education develops the required HBCU Capital Financing Program  outreach plan, the Executive Director of the program should include in  the plan (1) ways to increase outreach to individual HBCUs so that  HBCU officials are informed of the program; (2) steps to coordinate  directly with state university systems to specifically address state-level  challenges to participation and share potential solutions to increase  public HBCU participation; and (3) ways to further leverage the  designated bonding authority in its efforts. (Recommendation 1)", "The Executive Director of the HBCU Capital Financing Program  should lead an agency effort to analyze various Capital Financing  Program loan modifications, including the effects of the loan  deferments authorized in the 2018 Consolidated Appropriations Act as  well as other potential modifications, to assess the potential benefits  to HBCUs participating in the program, the potential cost of these  options to the government, and their effect on the program\u2019s overall  financial stability. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education for review and comment.  Education\u2019s comments are reproduced in appendix V.", "In response to our recommendation on actions that Education should  include in its required outreach plan, Education identified steps it plans to  take to address each of the three components we recommended. First, to  increase outreach to individual HBCUs, Education stated it will send  letters to presidents and chancellors of eligible HBCUs that are not yet  participating, in addition to existing activities. Second, Education stated  that it plans to use methods similar to those currently used to reach out to  public HBCUs, depending on resources, to coordinate directly with state  university systems. Third, Education noted it plans to explore ways to  leverage the designated bonding authority to do so. Education also stated  that an HBCU\u2019s ability to use the program depends on its financial  strength, and government resources alone will not ensure financial  strength among struggling institutions. We agree; however, it is important  to make HBCUs aware of the resources available to them, particularly a  federal program that was created to help address HBCUs\u2019 capital  financing challenges.", "With regard to our second recommendation on analyzing the potential  benefits and costs of offering loan modifications, Education partially  agreed with the recommendation. Education commented that it disagreed  with the recommendation to the extent that it suggests a modification of  loan terms. Our recommendation does not endorse providing loan  modifications to colleges. Rather, our recommendation is focused on  analyzing the costs and benefits of modifications authorized by law, as  well as other potential modifications. Education noted it will continue to  analyze loan modifications and develop cost estimates. As we note in the  report, however, Education was not able to provide evidence of analysis it  conducted on potential loan modifications. We continue to believe that  analysis of costs and benefits is needed to determine whether additional  loan modifications are necessary or beneficial for the program.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of  Education, appropriate congressional committees, and other interested  parties. In addition, the report will be made available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["We examined (1) Historically Black Colleges and Universities\u2019 (HBCUs)  capital project needs; (2) funding sources HBCUs use to address their  capital project needs; and (3) the extent to which the Department of  Education (Education) helps HBCUs access and successfully participate  in the HBCU Capital Financing Program (Capital Financing Program). In  addition to the methodologies discussed below, we reviewed relevant  federal laws, regulations, and guidance on the Capital Financing Program  and Strengthening HBCU Program. To determine the extent to which  Education helps HBCUs access and successfully participate in the  Capital Financing Program, we reviewed documentation on program  performance and administration and Education documentation from  selected HBCUs affected by Hurricanes Katrina and Rita that received  loan modifications in 2013. We assessed Education\u2019s communication to  states and HBCUs against federal internal control standards on  communicating quality information to key stakeholders. We reviewed  Education\u2019s coordination efforts against best practices for coordinating  with relevant stakeholders and reviewed Education\u2019s strategic plan which  prioritizes coordinating with external stakeholders to achieve its goals of  supporting educational institutions and increasing college access. We  also assessed Education\u2019s actions to help HBCUs experiencing financial  challenges successfully participate in the program against federal internal  control standards, which state that agency management should  communicate key information needed to achieve its objectives and plan  for significant changes, including economic changes, analyze the effects  of such plans, and respond appropriately."], "subsections": [{"section_title": "Survey of Historically Black Colleges and Universities and Review of Capital Plans", "paragraphs": ["To address all three objectives, we conducted a web-based survey of  accredited HBCUs in the United States (including the U.S. Virgin Islands)  in June through August 2017. To identify the list of HBCUs, we ran a  query using Education\u2019s Integrated Postsecondary Education Data  System (IPEDS) for colleges that were designated as an HBCU in IPEDS  and participated in Title IV, and were therefore accredited. IPEDS uses  Section 322(a) of the Higher Education Act of 1965, as amended to  define an HBCU as \u201cany historically Black college or university that was  established prior to 1964, whose principal mission was, and is, the  education of Black Americans, and that is accredited by a nationally  recognized accrediting agency or association determined by the  Secretary of Education to be a reliable authority as to the quality of  training offered or is, according to such an agency or association, making  reasonable progress toward accreditation.\u201d Additionally, any branch  campus of a southern institution of higher education that prior to  September 30, 1986, received a Strengthening HBCUs Grant and was  formally recognized by the National Center for Education Statistics as a  Historically Black College or University is also considered an eligible  institution. All 101 colleges identified as HBCUs in IPEDS were also  identified as participating in Title IV.", "We addressed our survey to senior leadership\u2014presidents and chief  financial officers\u2014at HBCUs because capital planning and financing  generally fall under their purview. We obtained a list of contact  information for presidents and chief financial officers from Education for  some participating HBCUs. In cases where contact information was not  available, current, or correct, we identified appropriate contact information  by reviewing HBCUs\u2019 websites or by following up with the president\u2019s  office. Our survey included questions on capital project needs (i.e., repair  or replacement) and plans, funding sources HBCUs use to address those  needs, and HBCU experiences with Education\u2019s Capital Financing  Program and Strengthening HBCU Program. We also asked HBCU  officials to provide a copy of their master plans to supplement their survey  responses, and we reviewed those plans.", "To enhance data quality and to minimize nonsampling errors, we  employed recognized survey design practices in the development of the  survey and in the collection, process, and analysis of the survey data. To  develop our survey questions, we interviewed Education officials, HBCU  administrators, higher education facilities experts, and HBCU organization  officers. Additionally, we pretested the survey with five HBCUs, over the  phone, to standardize survey language and to reduce variability in  responses that should be qualitatively the same. In some cases, we used  the results of our pretests to change the wording of questions or added  clarifying examples based on feedback. We chose the five pretest HBCUs  to include representation across the major subgroups of responding  HBCUs: private non-profits (private) and public HBCUs, 2-years and 4- years, and participants and non-participants of the Capital Financing  Program. We also reviewed examples of master plans and facility  assessment guides from higher education associations to help frame our  survey questions. For example, we reviewed public and private HBCU  capital plans to understand the type of information they collect,  methodologies for assessing their capital project needs, and how they  prioritize their needs. Furthermore, we consulted higher education  facilities associations\u2019 definitions on key terms and facility indicators.  Facilities experts from a higher education association indicated that  master plans can change over time depending on an HBCU\u2019s emerging  capital project needs and funding availability.", "To increase the survey response rate, we implemented an outreach plan  to engage key HBCU officials. When we completed the final survey  questions and format, we sent an email announcement of the survey in  June 2017 to key HBCU officials\u2014presidents, chief financial officers,  Strengthening HBCU Program coordinators, and facilities managers.  They were notified that the survey was available online and were given  unique usernames and passwords. To reduce nonresponse, we followed  up by email and by phone with HBCUs that had not responded to the  survey to encourage them to complete it. We received responses from 79  of 101 HBCUs\u201438 of 51 private and 41 of 50 public HBCUs, achieving a  78 percent response rate. As this was not designed as a sample survey,  we make no claims about the generalizability of the results. However, 79  HBCUs captures a substantial portion of the HBCU population. We  received master plans from 20 HBCUs.", "We reviewed the data for missing or ambiguous responses and followed  up with HBCUs when necessary to clarify their responses. In some cases,  we updated responses after following up with the survey respondent. For  example, as a part of our reliability check, we followed up with HBCUs  whose answers were extreme outliers on reporting dollar values for their  deferred maintenance. In three cases, separate from deferred  maintenance, HBCUs corrected their answers, and we updated the  survey results accordingly. To analyze the survey, we calculated  descriptive statistics and reviewed open-ended responses to identify  themes. We also reviewed select HBCUs\u2019 master plans to supplement  survey responses."], "subsections": []}, {"section_title": "Education Data", "paragraphs": [], "subsections": [{"section_title": "HBCU Capital Financing Participation Data", "paragraphs": ["We analyzed Capital Financing Program loan data from Education and  the designated bonding authority to better understand participation in the  program. Specifically, we reviewed data from 1996 to 2017, which  included participating HBCUs with sector information (public and private);  loans each HBCU received; original loan amount; and status of each loan  (paid off or in progress). We used the data to determine the total number  of participating HBCUs by sector and total value of loans provided.", "Additionally, we gathered information from Education\u2019s Capital Financing  Program website to understand how HBCUs used their loans from 1996  to 2016. The website includes information on the purpose of each loan.  Based on the wording of the purpose, we developed the following  categories: refinance, deferred maintenance, repair and renovation,  alteration, and new construction. For the purpose of reporting, we  combined deferred maintenance, repair, renovation, and alteration into a  deferred maintenance and repair category. For instances where HBCUs  listed a similar or related purpose, we used professional judgement to  categorize it. The categorization was conducted by one analyst then  independently confirmed by a second analyst. Based on our review of  Education\u2019s data, review of loan contracts, and interviews with relevant  Education and designated bonding authority officials, we found the HBCU  Capital Financing participation data to be sufficiently reliable for the  purpose of describing participation and use of the program."], "subsections": []}, {"section_title": "Integrated Postsecondary Education Data System (IPEDS)", "paragraphs": ["To provide context on challenges HBCUs face financing capital projects  identified through interviews with officials from Education, HBCUs, HBCU  organizations, other stakeholders, and through our survey, we analyzed  data from IPEDS from the 2015-16 school year, the most recent data  available at the time of our review. We assessed the reliability of the data  by reviewing related documentation and interviewing officials responsible  for maintaining data in the system, and found the data to be reliable for  our purposes. We examined HBCUs\u2019 institutional, student, and financial  characteristics and compared those characteristics with a matched set of  similar non-HBCUs. These characteristics include information on the  colleges\u2019 charges for tuition and fees; the percentage of students who  receive financial aid overall, and Pell Grants specifically; information on  key revenue streams such as tuition and fees, private grants and  contracts, and government funding; and data on the college\u2019s  endowment. Colleges report financial information to IPEDS, such as  revenue, using different accounting standards: public colleges generally  use standards issued by the Governmental Accounting Standards Board,  and private colleges use standards issued by the Financial Accounting  Standards Board. Due to variation in how colleges report some revenue  data under these two different accounting standards, we excluded one  public HBCU from our analysis that used standards issued by the  Financial Accounting Standards Board and analyzed 100 HBCUs.", "Under 1,000; 1,000-4,999; 5,000-9,999; 10,000- 19,999; 20,000 and above  Public 4-year; public 2-year; private 4-year; private 2- year  Any degree prior to a 4-year Bachelor\u2019s degree; a 4- year Bachelor\u2019s degree; any degree following a 4-year  Bachelor\u2019s degree  HBCU state or Census division  States with HBCUs or Census divisions (Pacific,  Mountain, West North Central, East North Central,  Middle Atlantic, New England, South Atlantic, East  South Central, and West South Central)", "Using a multi-stage approach to create matched sets of HBCUs and non- HBCUs, we first identified non-HBCUs that matched the HBCU using the  institution\u2019s size, sector, and highest degree offered. We then constrained  the set of non-HBCUs to those within the same state as respective  HBCUs. Each matched set may contain multiple HBCUs and/or multiple  non-HBCUs. If none of the non-HBCUs identified using institution size,  sector, and highest degree offered lied within the same state as the  HBCUs, we used Census-based divisions to create the matched set of  HBCUs and non-HBCUs.", "Table 5 summarizes the number of institutions within each matched set.  Seventy-three of the 100 HBCUs were matched using state, while 27  were matched using Census-based divisions.", "We conducted this matched analysis because an unmatched analysis of  the 100 HBCUs and all 3,529 non-HBCUs is potentially vulnerable to  spurious differences in outcomes between HBCUs and non-HBCUs that  arise from an imbalance of key factors underlying these two types of  institutions. For example, public 2-year institutions make up a smaller  proportion of HBCUs compared to non-HBCUs (10 and 28.6 percent,  respectively), while public 4-year institutions make up a larger proportion  of HBCUs compared to non-HBCUs (39 and 19.6 percent, respectively).  This imbalance could lead to differences in outcomes arising from  characteristics inherent in the type of institution, not a comparison of  HBCUs to non-HBCUs. Matching HBCUs to non-HBCUs would lead to a  similar underlying distribution of key factors, which improves the  comparability of HBCUs and non-HBCUs.", "We used the matched sets to compare HBCUs to non-HBCUs on student  financial aid and financial outcomes. For each of these variables and  across the matched sets, we estimated descriptive statistics (mean,  median, range) for HBCUs and non-HBCUs. However, in order to  compare HBCUs to non-HBCUs, we accounted for similarities within each  matched set. The varying number of HBCUs and non-HBCUs within each  matched set required an analysis which is, in principle, an extension of a  paired t-test. In this analysis, differences and correlations within each  matched set are accounted for when estimating the overall difference  between HBCUs and non-HBCUs. More specifically, we performed a  linear mixed effects model with the basic form:  yij ~ \u03b2ijHBCUij + bijClusterij + \u03c3ij, for the jth institution in the ith cluster  bik ~ N(0, \u03b7), for the kth institution in the ith cluster  where y is the outcome variable of interest; \u03b2 is the parameter of interest,  the fixed-effect coefficient that quantifies the overall difference between  HBCUs and non-HBCUs; \u03c3 is the residual error that is not accounted for  by HBCU status or clusters; b is the random-effect coefficient that  accounts for correlations within clusters and quantifies the different  effects of the k institutions within each cluster set (i.e., the k HBCU and  non-HBCU institutions are nested within each cluster set); and b  estimates the separate and distinct effects for each cluster set and is  assumed to have a multivariate normal distribution, with a variance of \u03b7.", "The p-value estimated was used to assess whether there was a  statistically significant difference between HBCUs and non-HBCUs for the  outcome variables of interest.", "We stratified the matched sample by public and private education sector  and used the model above to obtain estimates specific for public and  private colleges. This education sector specific analysis was not further  stratified by 2- and 4-year college types due to small sample sizes.", "In order to further explore differences with public and private colleges, we  expanded the model above as such:  yij ~ \u03b2ijHBCUij + \u03b3ijSectorij + \u03b5ijHBCUij*Sectorij + bijClusterij + \u03c3ij, for  the jth institution in the ith cluster  Where the parameters described above remain the same and \u03b3 is the  difference between public and private colleges, after adjusting for being  an HBCU and \u03b5 is the difference within difference, assessing whether the  HBCU\u2013non-HBCU difference within public colleges is different from the  HBCU\u2013non-HBCU difference within private colleges.", "Wilcoxon Test for Clustered Data  The linear mixed effects model above assumes that data are normally  distributed (i.e., follow a bell-shaped curve). In order to assess whether  these assumptions hold, we performed a Wilcoxon test that is extended  for clustered data. The Wilcoxon test ranks values and is free of  distributional assumptions, and assumes that all data are independent  (i.e., not correlated). Overall consistency between tests of significance  from the linear mixed effects model and Wilcoxon tests indicates that  model assumptions hold."], "subsections": []}, {"section_title": "Strengthening HBCU Annual Reports", "paragraphs": ["To describe the extent to which HBCUs used the Strengthening HBCU  Program to finance capital projects, we analyzed annual reports  submitted by participating HBCUs for the 2016 grant year. Participating  HBCUs submit annual performance reports which include information on  how the funds were used and the amount spent on each activity, among  other information. The reports also include information on whether the  HBCUs experienced leadership turnover in that reporting year. Because  colleges submit a report for each type of Strengthening HBCU funding  they receive or to carry over funding from the previous year, each college  could have submitted up to three reports in 2016. In total, we reviewed  236 reports for 98 grant recipients. We also used these reports to identify  leadership turnover at HBCUs."], "subsections": []}]}, {"section_title": "Interviews of HBCU Stakeholders", "paragraphs": ["To address all three objectives, we conducted over 40 interviews with  HBCU stakeholders and colleges to learn about HBCU capital project  needs (i.e., repair, renovation, and new construction of buildings);  challenges HBCUs face accessing and securing funding, particularly through Education\u2019s Capital Financing Program; and steps Education has  taken, if any, to help HBCUs better access and successfully participate in  their programs. We conducted the following interviews:", "Education: We interviewed senior officials at Education to learn more  about HBCUs\u2019 access to and successful participation in the Capital  Financing Program and participation in the Strengthening HBCU  Program.", "Designated Bonding Authority: We interviewed officials at the  designated bonding authority, with whom Education contracts to help  administer the Capital Financing Program, to learn more about  HBCUs\u2019 access to and successful participation in the Capital  Financing Program.", "HBCU officials: We interviewed senior officials such as presidents,  chief financial officers, and facilities managers from 15 HBCUs to  learn more about the state of their capital project needs and  challenges they face accessing and securing funding, particularly  though the Capital Financing Program and Strengthening HBCU  Program. We selected HBCUs that included different sectors (public  and private), varying enrollments and state locations, and a mix of  participation in the Capital Financing Program.", "State university system officials: We interviewed officials from four  state university systems in states where public HBCUs did not  participate and that were identified by Education as having state-level  challenges accessing the program (North Carolina, Florida, Georgia,  and Mississippi).", "HBCU organizations: We interviewed officials at the United Negro  College Fund, which represents private HBCUs; and the Thurgood  Marshall College Fund, which represents public and publically  supported HBCUs. Both organizations are members of Education\u2019s  Capital Financing Program Advisory Board. We consulted with  officials from both organizations on different mechanisms that could  help borrowers successfully participate in the Capital Financing  Program.", "Higher education facilities experts: We interviewed higher education  facilities experts at the National Association of College and University  Business Officers, APPA: Leadership in Educational Facilities, and  Sightlines\u2014a higher education facilities consultant\u2014to learn about  industry best practices in identifying and addressing capital project  needs and what differences, if any, exist for capital funding between  HBCUs and non-HBCUs.", "Financial experts: We interviewed officials at Moody\u2019s, Standard &  Poor\u2019s (S&P), the Municipal Securities Rulemaking Board (MSRB),  and a financial consulting group to learn more about the municipal  bond market, how colleges are rated, and how access and successful  participation in the market differs between HBCUs and non-HBCUs.", "Other stakeholders: We interviewed other stakeholders, such as the  Association of Public and Land Grant Universities (APLU), which  represent HBCU public land-grant universities; the Kresge  Foundation, which has provided HBCUs with funding for capital  projects; and researchers at the University of Pennsylvania\u2019s Center  for Minority Serving Institutions and the authors of a study on HBCU  participation in the bond market, \u201cWhat\u2019s in a (school) name? Racial  discrimination in higher education bond markets.\u201d"], "subsections": []}, {"section_title": "Site Visits", "paragraphs": ["We visited nine HBCUs across three states\u2014Alabama, Louisiana, and  North Carolina\u2014to interview senior HBCU officials to learn about their  capital project needs, to tour their facilities, and to learn more about the  benefits and challenges the HBCUs faced in accessing funding and  participating in Education\u2019s two key programs. We selected our nine site  visit HBCUs to obtain a mix of sector (public and private), enrollment size,  participation in Education\u2019s programs, and the existence of state-level  laws or policies that have created challenges to participating in the  Capital Financing Program. We also chose to visit Louisiana to learn  more about the loans HBCUs received after Hurricanes Katrina and Rita  and the colleges\u2019 recovery efforts. During our site visits, we met with  senior leadership\u2014presidents, chief financial officers, facilities managers,  Strengthening HBCU grant coordinators\u2014because they generally make  decisions on capital project planning. While we did not inspect or evaluate  the state of these colleges\u2019 buildings, HBCU officials explained in detail  the capital project needs. In particular, we toured campuses to better  understand their capital project needs and the extent to which Education\u2019s  two key programs have helped address those needs."], "subsections": []}]}, {"section_title": "Appendix II: Additional Survey Results on Capital Project Needs and Funding for Historically Black Colleges and Universities", "paragraphs": ["We received responses from 79 of 101 Historically Black Colleges and  Universities (HBCUs): 38 of 51 private non-profit (private) and 41 of 50  public HBCUs. By survey design, not all respondents reported information  for each question. As a result, the denominator (number of survey  respondents for a particular question) may change. This appendix  presents selected survey responses from HBCUs and calculations made  by GAO based on selected responses as a snapshot of capital project  needs for HBCUs."], "subsections": [{"section_title": "Capital Project Needs: Condition of Building Space for Responding HBCUs", "paragraphs": ["Survey respondents reported information on their institution\u2019s real  property portfolio, historical building space, and the condition of their  building space."], "subsections": []}, {"section_title": "Capital Project Needs: Deferred Maintenance Backlog for Responding HBCUs", "paragraphs": ["Survey respondents provided information on their deferred maintenance  backlogs\u2014repair put off to a later date.", "The Federal Accounting Standards Advisory Board defines deferred maintenance as  maintenance that was not performed when it should have been or was scheduled to be  and which was put off or delayed for a future period. Activities include preventive  maintenance; replacement of parts, systems, or components; and other activities needed  to preserve or maintain the asset. Maintenance and repairs exclude activities directed  towards expanding the capacity of an asset or otherwise upgrading it to serve needs  different from, or significantly greater than, its current use."], "subsections": []}, {"section_title": "Capital Projects: Top 5 Capital Projects for Next 5 to 10 Years for Responding HBCUs", "paragraphs": ["Survey respondents provided information on their documented top 5  capital project needs over the next 10 years. Survey respondents  provided information on the type of capital project (e.g., repairs,  renovations and alterations, new buildings or facilities) and purpose of the  project (e.g., academic, administrative, athletics, etc.)."], "subsections": []}, {"section_title": "Capital Project Funding: Funding Sources to Address Capital Project Needs for Responding HBCUs", "paragraphs": ["Survey respondents provided information on funding sources they use to  address their capital project needs and the percentage of funding from  that source."], "subsections": []}, {"section_title": "HBCU Capital Financing Program: Perspectives on Participation by Responding HBCUs", "paragraphs": ["Survey respondents provided information on their participation in the  HBCU Capital Financing Program. We asked these respondents  questions about the type of projects the program funds, reasons for  pursuing this funding, and challenges they face in participating in the  program."], "subsections": []}, {"section_title": "Strengthening HBCU Program: Capital Projects for Responding HBCUs", "paragraphs": ["Survey respondents provided information on their participation in the  Strengthening HBCU Program. We asked about why they participate and  how the program supports capital project needs."], "subsections": []}]}, {"section_title": "Appendix III: Select Institutional, Student, and Financial Data on Historically Black Colleges and Universities (HBCUs)", "paragraphs": ["Appendix III: Select Institutional, Student, and  Financial Data on Historically Black Colleges  and Universities (HBCUs)", "Using a multi-stage matching technique, we created a matched set of  non-HBCUs for comparison purposes. Using data from the Department of  Education\u2019s Integrated Postsecondary Education Data System (IPEDS)  for the 2015-16 school year, the most recent data available, we matched  accredited HBCUs and non-HBCUs on four key characteristics: sector  (i.e., public or private non-profit (private)), highest degree offered, size  (enrollment), and location. For each of the 100 HBCUs, we established  respective matched sets that included a total of 382 non-HBCUs. For  more information about our methodology, see appendix I."], "subsections": []}, {"section_title": "Appendix IV: Location of Historically Black Colleges and Universities (HBCUs) and Their Sector (Public and Private Non-profit)", "paragraphs": ["Appendix IV: Location of Historically Black  Colleges and Universities (HBCUs) and Their  Sector (Public and Private Non-profit)"], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals making key  contributions to this report were Nyree Ryder Tee, Assistant Director;  Rachel Beers, Analyst-in-Charge; Grace Cho; Kris Nguyen; and Manuel  Antonio Valverde. In addition, key support was provided by Michael  Armes, Susan Aschoff, Allison Bawden, Deborah Bland, Marcia Carlsen,  Gina Hoover, DuEwa Kamara, John Karikari, Risto Laboski, Eunice  LaLanne, Won Lee, Sheila McCoy, Jean McSween, Jeffrey G. Miller,  John Mingus, Mimi Nguyen, Anna Maria Ortiz, Christopher Ross,  Benjamin Sinoff, and Karen Tremba."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-44", "url": "https://www.gao.gov/products/GAO-18-44", "title": "Opioid Use Disorders: HHS Needs Measures to Assess the Effectiveness of Efforts to Expand Access to Medication-Assisted Treatment", "published_date": "2017-10-31T00:00:00", "released_date": "2017-10-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The misuse of prescription opioid pain relievers and illicit opioids, such as heroin, has contributed to increases in overdose deaths. According to the most recent Centers for Disease Control and Prevention data, in 2015 over 52,000 people died of drug overdose deaths, and about 63 percent of them involved an opioid. For those who are addicted to or misuse opioids, MAT has been shown to be an effective treatment.", "GAO was asked to review HHS and other efforts related to MAT for opioid use disorders. This report (1) describes HHS's key efforts to expand access to MAT, (2) examines HHS's evaluation, if any, of its efforts to expand access to MAT, and (3) describes efforts by selected stakeholders (states, private health insurers, and national associations) to expand access to MAT. GAO gathered information from HHS officials as well as a non-generalizable selection of 15 stakeholders selected based on their MAT expansion activities, among other factors. GAO also assessed HHS's evaluation plans using internal control standards for defining objectives and evaluating results."]}, {"section_title": "What GAO Found", "paragraphs": ["In an effort to reduce the prevalence of opioid misuse and the fatalities associated with it, the Department of Health and Human Services (HHS) established a goal to expand access to medication-assisted treatment (MAT). MAT is an approach that combines behavioral therapy and the use of certain medications, such as methadone and buprenorphine. HHS has implemented five key efforts since 2015 that focus on expanding access to MAT for opioid use disorders\u2014four grant programs that focus on expanding access to MAT in various settings (including rural primary care practices and health centers) and regulatory changes that expand treatment capacity by increasing patient limits for buprenorphine prescribers and allowing nurse practitioners and physician assistants to prescribe buprenorphine.", "Some of the grant awards were made in 2015, while others were made as recently as May 2017. (See figure.) As of August 2017, efforts under all the grant programs were ongoing. Grant recipients can use funding to undertake a range of activities, such as hiring and training providers and supporting treatments involving MAT. In addition, certain providers and grant recipients are required to develop plans for preventing MAT medications from being diverted for nonmedical purposes.", "HHS officials told GAO that as of August 2017, the department was in the process of finalizing its plans to evaluate its efforts to address the opioid epidemic. In September 2016, HHS awarded a contract to conduct the evaluation. HHS officials told GAO that they are still working with the contractor to finalize the evaluation approach and that it will focus on whether HHS's efforts to address the opioid epidemic have been implemented as intended. HHS officials said that in the future, HHS may also evaluate whether, or to what extent, its efforts have been effective in expanding access to MAT, in addition to evaluating implementation.", "While HHS has some of the information that could be used in a future evaluation of the effectiveness of its efforts to expand access to MAT, it has not adopted specific performance measures with targets specifying the magnitude of the increases HHS hopes to achieve through its efforts to expand access to MAT, and by when. For example, HHS has not established a long-term target specifying the percentage increase in the number of prescriptions for buprenorphine HHS would like to achieve, which would help to show whether efforts by HHS and others are resulting in a sufficient number of prescriptions for MAT medications. HHS has also not chosen a specific method of measuring treatment capacity or established targets associated with it, which would help determine whether a sufficient number of providers are becoming available to evaluate and treat patients who may benefit from MAT.", "Without specifying these performance measures and associated targets, HHS will not have an effective means to determine whether its efforts are helping to expand access to MAT or whether new approaches are needed. Gauging this progress is particularly important given the large gap identified nationwide between the total number of individuals who could benefit from MAT and the limited number who can currently access it based on provider availability.", "In addition, GAO also found that as of August 2017, HHS had not finalized its approach for its planned evaluation activities, including timeframes. Without timeframes for the evaluation's activities, HHS increases the risk that the evaluation will not be completed as expeditiously as possible.", "In addition to HHS efforts to expand access to MAT, officials from selected states, private health insurers, and national associations reported using several efforts to expand patients' access to MAT for opioid use disorders. For example, several stakeholders provided GAO with the following examples of their efforts:", "States. State health officials from all five selected states have implemented or are planning approaches that focus on integrating the use of MAT into primary care, such as by providing services for centralized intake and initial management of patients or through telehealth that connects patients in rural areas with addiction specialists in a different location.", "Private health insurers. Three private health insurers reported removing prior authorization requirements for MAT medications so patients can avoid a waiting period before receiving the medications.", "National associations. Officials told GAO that they are conducting outreach and training for their members and developing tools and resource guides. For example, one association developed a road map with strategies that state policymakers can use to address the opioid epidemic, including strategies for reducing the stigma associated with MAT through educating the public and potential providers."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that HHS take two actions: (1) establish performance measures with targets related to expanding access to MAT, and (2) establish timeframes for its evaluation of its efforts to expand access to MAT. HHS concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The misuse of and addiction to prescription opioid pain relievers and illicit  opioids, such as heroin, contributes to significant morbidity and mortality  in the United States. Substance Abuse and Mental Health Services  Administration (SAMHSA) data show that in 2014 almost 2.3 million  people aged 12 years and older misused or were dependent on opioids,  up from almost 1.7 million in 2005. According to the most recent Centers  for Disease Control and Prevention data, in 2015 there were over 52,000  drug overdose deaths in the United States, and about 63 percent of these  deaths involved an opioid.", "For those who misuse or are addicted to opioids\u2014a condition known as  opioid use disorder\u2014research shows that medication-assisted treatment  (MAT) is an effective treatment. MAT\u2014which combines behavioral  therapy and the use of certain medications (methadone, buprenorphine,  and naltrexone)\u2014has been shown to reduce opioid use and to increase  treatment retention compared with other treatments. Treatment can  occur as part of federally regulated opioid treatment programs (OTP) or in  other settings, such as office-based settings, within certain restrictions.", "While MAT has been shown to be effective, several reports have also  highlighted that accessing MAT services may be challenging for many.  For example, in a 2016 report we identified several factors that affect  access to MAT, including lack of insurance coverage and an insufficient  number of existing treatment programs or practicing physicians offering  MAT. Similarly, a 2016 Surgeon General\u2019s report on Alcohol, Drugs, and  Health noted barriers to accessing treatment, such as the cost of care  and challenges accessing providers who offer treatment services. In part  because of these challenges, it is likely that only a portion of the  individuals who need MAT are receiving it. The 2016 Surgeon General\u2019s  report and a 2015 study on MAT treatment capacity have both highlighted  this \u201ctreatment gap.\u201d The 2015 study, for instance, found that the  availability of MAT has not kept pace with the incidence of opioid use  disorders in the United States, as more are in need of the treatment than  can currently access it\u2014a treatment gap estimated to be nearly 1 million  people in 2012.", "In March 2015, the Department of Health and Human Services (HHS)  established the HHS Opioid Initiative, which aimed to decrease (1) opioid  overdoses and overall overdose mortality, and (2) the prevalence of  opioid use disorders. Led by the Office of the Assistant Secretary for  Planning and Evaluation (ASPE) in coordination with the Immediate  Office of the Secretary, the HHS Opioid Initiative had three priorities  related to opioid use disorders, one of which was to expand access to  MAT. Although the HHS Opioid Initiative ended in January 2017, HHS  activities related to improving access to treatment for opioid use disorders  have continued under the new administration\u2019s five-point Opioid Strategy,  which was announced in April 2017. Several agencies within HHS, such  as SAMHSA and the Health Resources and Services Administration  (HRSA), are overseeing various efforts to expand access to MAT, with  ASPE responsible for leading efforts to collectively evaluate the results of  these efforts.", "You requested that we provide information on HHS and other efforts to  expand access to MAT for opioid use disorders. In this report, we  1.  describe HHS\u2019s key efforts to expand access to MAT;  2.  examine HHS\u2019s evaluation, if any, of its key efforts to expand access  3.  describe efforts by selected stakeholders (states, private health  insurers, and national associations) to expand access to MAT.", "To describe HHS\u2019s key efforts to expand access to MAT, we reviewed  HHS documents that describe the HHS Opioid Initiative and the activities  associated with it, such as HHS press releases, the ASPE Issue Brief on  the Opioid Initiative, and HHS funding announcements for grants to  expand access to MAT. We also reviewed HHS\u2019s April 2017  announcement of the Opioid Strategy, as well as relevant federal laws  and regulations relating to MAT. In addition, we interviewed officials at  relevant federal agencies, such as ASPE, SAMHSA, HRSA, the Agency  for Healthcare Research and Quality (AHRQ), and the Food and Drug  Administration (FDA) with knowledge of MAT expansion efforts within  HHS. We specifically asked the officials to identify their key efforts to  expand access to MAT and to confirm the key efforts that we identified  independently through our document reviews. Our review focused on  those efforts implemented from fiscal year 2015 through August 2017. We  also inquired about the extent to which diversion control plans\u2014 procedures that reduce the possibility that controlled substances will be  transferred or used illicitly\u2014are included in HHS\u2019s efforts to expand  access to MAT, and we reviewed relevant documents.", "To examine any HHS evaluation of its key efforts to expand access to  MAT, we reviewed relevant documentation that describes HHS\u2019s  evaluation plans to assess MAT expansion efforts. These documents  included a 2016 report by Mathematica Policy Research that describes a  proposed evaluation approach developed under contract with HHS and  the solicitation for a contractor to conduct the evaluation. We assessed  these plans using criteria for defining objectives and evaluating results in  federal internal control standards. We also interviewed ASPE officials  about their evaluation approach and the status of the evaluation.", "To describe efforts by selected stakeholders to expand access to MAT,  we first identified relevant stakeholder organizations that represent states,  private health insurance plans, and national associations. Through our  interviews with HHS officials, background interviews with officials from  organizations, such as the America\u2019s Health Insurance Plans and Blue  Cross Blue Shield Association, and background research, we identified a  non-generalizable selection of 15 stakeholders in the following groups\u2014 states, private health insurance plans, and national associations\u2014to  obtain information about their efforts to expand access to MAT.  Specifically, we gathered information from officials at (1) state health  departments and behavioral health services agencies in five states:  Rhode Island, Maryland, Washington, West Virginia, and Indiana; (2)  seven private health insurance plans; and (3) three national associations  that represent providers, government officials, and public health officials:  the American Society of Addiction Medicine, the National Governors  Association, and the Association of State and Territorial Health Officials.  In addition to identifying and selecting stakeholders with efforts to expand  access to MAT for opioid use disorder based on background interviews  and research, we considered (1) geographic diversity and Centers for  Disease Control and Prevention data on states with high opioid death  rates when selecting the five states; and (2) health insurers with large  market share when selecting the seven private health insurers. We also  asked several stakeholders about their views on the diversion of MAT  medications as part of their efforts to expand access to MAT, and we  reviewed relevant documents.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Health care practitioners prescribe opioid medications to treat pain and  sometimes for other health problems, such as severe coughing. Opioid  medications are available as immediate or extended release and in  different forms, such as a pill, liquid, or a patch worn on the skin. Opioids  slow down some processes of the body, such as breathing and heartbeat,  by binding with certain receptors in the body."], "subsections": [{"section_title": "Opioid Use Disorders and MAT", "paragraphs": ["Over time, the body becomes tolerant to opioids, which means that larger  doses of opioid medications are needed to achieve the same effect.  People may use opioids in a manner other than as prescribed\u2014that is,  they can be misused. Because opioids are highly addictive substances,  they can pose serious risks when they are misused, which can lead to  addiction and death. Symptoms of an opioid use disorder include a strong  desire for opioids, the inability to control or reduce use, and continued use  despite interference with major obligations or social functioning. Another  concern associated with prescribed opioids is the potential for diversion  for illegal purposes, such as nonmedical use or financial gain.", "Research has shown that MAT\u2014which combines behavioral therapy and  the use of certain medications (methadone, buprenorphine, and  naltrexone)\u2014can be more effective in reducing opioid use and increasing  retention (i.e., reducing dropouts) compared to abstinence based  treatment\u2014that is when patients are treated without medication. Three  medications are currently approved by FDA for use in MAT for opioid use  disorders\u2014methadone, buprenorphine, and naltrexone.", "Methadone: Methadone is a full opioid agonist, meaning it binds to  and activates opioid receptors to help prevent withdrawal symptoms  and reduce drug cravings. It has a long history of use for the  treatment of opioid dependence in adults. Methadone suppresses  withdrawal symptoms during detoxification therapy, which involves  stabilizing patients who are addicted to opioids by withdrawing them in  a controlled manner. Methadone also controls the craving for opioids  during maintenance therapy, which is ongoing therapy meant to  prevent relapse and increase treatment retention. Methadone can be  administered to patients as an oral solution or in tablet form.", "Buprenorphine: Buprenorphine is a partial opioid agonist, meaning it  binds to opioid receptors and activates them, but not to the same  degree as full opioid agonists. It reduces or eliminates opioid  withdrawal symptoms, including drug cravings. It can be used for  detoxification treatment and maintenance therapy. It is available for  MAT for opioid use disorder in tablet form for sublingual (under the  tongue) administration, in film form for sublingual or buccal (inside the  cheek) administration, and as a subdermal (under the skin) implant.", "Naltrexone: Naltrexone is an opioid antagonist, meaning it binds to  opioid receptors but does not activate them. It is used for relapse  prevention following complete detoxification from opioids. Naltrexone  prevents opioid drugs from binding to and activating opioid receptors,  thus blocking the euphoria the user would normally feel. It also results  in withdrawal symptoms if recent opioid use has occurred. It can be  taken daily in an oral tablet form or as a once-monthly injection given  in a doctor\u2019s office."], "subsections": []}, {"section_title": "Authorized Settings for MAT Medications", "paragraphs": ["Two of the three medications used to treat opioid use disorders\u2014 methadone and buprenorphine\u2014are drugs that carry a potential for  misuse. Under the Controlled Substances Act (CSA), treatment involving  these medications can take place in certain authorized settings: as part of  federally regulated OTPs or in other settings, such as a physician\u2019s office,  within certain restrictions.", "OTPs. OTPs provide MAT, including methadone and buprenorphine,  for people diagnosed with an opioid use disorder. Methadone may  generally only be administered or dispensed within an OTP, as  prescriptions for methadone cannot be issued when used for opioid  use disorder treatment. Buprenorphine may be administered or  dispensed within an OTP, or may also be prescribed by a qualifying  practitioner who has received a waiver from SAMHSA. Naltrexone is  not a controlled substance and can be used in OTPs and other  settings.", "Office-Based and Other Settings. Under a Drug Addiction Treatment  Act of 2000 (DATA 2000) waiver, practitioners may prescribe  buprenorphine to up to 30 patients in the first year of their waiver, 100  patients in the second year, and up to 275 patients in the third year.", "Practitioners at the 275-patient level must meet additional  qualifications and requirements. Naltrexone does not have similar  restrictions."], "subsections": []}]}, {"section_title": "HHS Uses Grant Programs and Other Efforts to Expand Access to MAT for Opioid Use Disorders", "paragraphs": ["HHS has implemented five key efforts from 2015 through August 2017  that focus on expanding access to MAT for opioid use disorders. Four of  these are grant programs, including programs focused on health centers  or primary care practices in rural areas.", "Targeted Capacity Expansion: Medication Assisted Treatment \u2013  Prescription Drug and Opioid Addiction (MAT-PDOA). This grant  program is administered by SAMHSA and provides funding to states  to increase their capacity to provide MAT and recovery support  services to individuals with opioid use disorders. Grant recipients  are expected to identify a minimum of two high-risk communities  within the state and partner with local government or community- based organizations to address the MAT-related treatment needs in  these communities. Among other things, recipients are to use  outreach and other engagement activities to increase participation in  and access to MAT for diverse populations at risk for opioid use  disorders. In August 2015, SAMHSA awarded 3-year grants to 11  states, under which each of the states will receive up to $1 million in  each grant year. In September 2016, SAMHSA awarded 11 additional  3-year grants to other states. Total funding is expected to be up to  $66 million for all 22 grants. SAMHSA announced the availability of up  to 5 additional 3-year grants for fiscal year 2017. Applications for  these grants of up to $2 million per year were due in July 2017 and as  of August 2017 they had not been awarded.", "Substance Abuse Service Expansion Supplement to Health  Centers. This grant program is administered by HRSA and provides  funds for existing health centers to improve and expand their delivery  of substance abuse services, including services with a specific focus  on MAT for opioid use disorders in underserved populations. Health  centers that receive these grants are required to increase the number  of patients with health center-funded access to MAT for opioid use or  for other substance abuse disorders treatment by adding at least one  full-time substance abuse provider and supporting new or enhanced  existing substance abuse services. HRSA awarded 2-year grants in  March 2016 to 271 health centers. According to HRSA documents,  total funding could be up to $200 million for all grants over 2 years.  HRSA announced the availability of another set of grants to health  centers for fiscal year 2017. Applications for these grants were due in  July 2017, and as of August 2017 they had not been awarded.", "Increasing Access to Medication-Assisted Treatment in Rural  Primary Care Practices. This grant program is administered by  AHRQ and funds demonstration research projects that aim to expand  access to MAT for opioid use disorders in primary care practices in  rural areas of the United States. Grant recipients are expected to  recruit and engage primary care providers and their practices, provide  training, and support physicians and their practices in initiating  treatment. The program also identifies and tests strategies for  overcoming the challenges associated with implementing MAT in  primary care settings and creates training and other resources for  implementing MAT. AHRQ awarded these 3-year grants of up to $1  million per year to four recipients\u2014the recipients are teams of state  health departments, academic health centers, local community  organizations, physicians, and others\u2014with project start dates of  September 30, 2016. According to AHRQ documents, total funding is  expected to be up to $12 million for the four grants over 3 years.", "State Targeted Response to the Opioid Crisis Grants (Opioid  STR). This grant program is administered by SAMHSA and provides  funding to states and others to increase access to treatment services  for opioid use disorders, including MAT; reduce unmet treatment  needs; and reduce opioid overdose deaths. Grant recipients are  expected to implement or expand access to evidence-based  practices, particularly the use of MAT, and to report on the number of  people who receive opioid use disorder treatment, the number of  providers implementing MAT, and the number of providers trained to  use MAT. SAMHSA awarded 2-year grants starting in May 2017 to 50  states, the District of Columbia, four U.S. territories and the free  associated states of Micronesia and Palau. According to SAMHSA  documents, total funding could be up to $970 million for all grants over  2 years.", "Figure 1 displays the implementation timeframes, the number of grants,  and funding levels for the four HHS grant programs related to MAT. As  the figure shows, some of these awards were made in fiscal year 2015,  while others were made as recently as May 2017. As of August 2017,  these efforts were ongoing.", "In addition to these four grant programs, HHS\u2019s fifth key effort increases  treatment capacity by expanding the waivers that practitioners may  receive to prescribe buprenorphine. Specifically, SAMHSA issued a  regulation that became effective August 8, 2016 increasing the number of  patients that eligible practitioners can treat with buprenorphine outside of  an OTP (e.g., in an office-based setting). Previously, qualified  practitioners could request approval to treat up to 30 patients at a time,  and after 1 year the limit could increase to 100 patients at a time upon  SAMHSA approval. The new regulation expanded access to MAT by  allowing eligible practitioners who have had waivers to prescribe  buprenorphine to 100 patients for at least 1 year to request approval to  treat up to 275 patients thereafter. Similarly, SAMHSA has implemented  provisions of the Comprehensive Addiction and Recovery Act of 2016  (CARA) that expanded the types of practitioners who can receive a  waiver to prescribe buprenorphine in an office-based setting to include  qualifying nurse practitioners and physician assistants. CARA generally  requires that these nurse practitioners and physician assistants complete  24 hours of training to be eligible for a waiver. According to HHS  documents, as of early 2017, nurse practitioners and physician assistants  who have completed this training could request a waiver from SAMHSA  to treat up to 30 patients at a time.", "In addition to its five key efforts focused specifically on expanding access  to MAT for opioid use disorders, HHS has other efforts with broader  focuses, such as treating multiple types of substance abuse. While these  efforts are not specifically focused on expanding access to MAT for opioid  use disorders, they may result in expanded access to MAT. For example,  CMS has approved section 1115 Medicaid demonstration projects to  allow states to undertake comprehensive reforms of their delivery of  substance abuse services, including provisions to enhance the use of  MAT for opioid use disorders. In July 2015, CMS issued a state  Medicaid Director letter informing states that they may seek approval of  section 1115 demonstrations to undertake comprehensive substance use  service reforms. According to CMS, all participating states are using the  demonstration authority to develop a full continuum of care for individuals  with substance abuse disorders, including coverage of short-term  residential treatment services not otherwise covered by Medicaid.", "In addition, FDA has programs to help expedite development and to  provide for faster review of marketing applications for certain drugs.  According to FDA, it has conducted expedited reviews of Suboxone  (buprenorphine and naloxone sublingual film), Vivitrol (extended release  naltrexone injection) and Probuphine (buprenorphine subdermal  implant).", "According to some federal officials and other stakeholders that we  interviewed, as part of efforts to expand access to MAT for opioid use  disorder, steps are being taken to prevent the possibility that the MAT  medications could, in some cases, be diverted for illicit use, misuse, or for  purposes not intended by a prescriber. For example, OTPs and  practitioners who request and receive a waiver to prescribe  buprenorphine to treat up to 275 patients outside of an OTP setting are  required under federal regulations to maintain a diversion control plan.  In addition, the MAT-PDOA grant program explicitly requires grant  recipients to implement a diversion control plan, though the other grant  programs do not have similar additional requirements. (See appendix I for  an overview of the diversion control plan requirements for OTPs and the  practitioners who prescribe buprenorphine outside of an OTP.) The 2016  Surgeon General\u2019s report on Alcohol, Drugs, and Health noted that  decades of research have shown that the benefits of MAT greatly  outweigh the risks associated with diversion, and that withholding these  medications greatly increases the risk of relapse to illicit opioid use and  overdose death."], "subsections": []}, {"section_title": "HHS is Finalizing Its Approach for Evaluating MAT Expansion Efforts but Lacks Performance Measures with Targets and Implementation Timeframes", "paragraphs": ["HHS officials told us that as of August 2017, the department is in the  process of finalizing its approach for evaluating the implementation of its  agencies\u2019 collective efforts to address the opioid epidemic that were  undertaken as part of the HHS Opioid Initiative and will continue under  the new administration\u2019s Opioid Strategy. HHS officials provided a draft of  the evaluation\u2019s schedule. According to the officials, the evaluation will  include, but not be limited to, efforts to expand access to MAT. In  September 2016, HHS awarded a 2-year contract to Research Triangle  Institute International (RTI) to evaluate HHS agencies\u2019 collective efforts.  HHS officials told us that they are still working with RTI to finalize the  evaluation approach given new leadership priorities. Specifically, in April  2017, the new Secretary of HHS announced a revised strategy for  addressing the opioid epidemic that will continue to address access to  MAT for opioid use disorders but also include additional priority areas.  According to HHS officials, to be responsive to the new priorities, the  evaluation will focus initially on whether HHS\u2019s efforts have been  implemented as intended, and officials expect the evaluation to also  provide information on any challenges HHS has faced in implementing  these efforts.", "According to HHS officials, while the evaluation of MAT expansion efforts  will use information from several sources, they have not yet determined  exactly which information will be used or how it will be used. This  information may include, for example, results from a separate, planned  evaluation of one of the grant programs, Opioid STR, as well as other  information HHS agencies collect as part of their ongoing monitoring  efforts for each of their individual MAT grant programs. While the  reporting requirements vary across the four MAT grant programs, the  grantees provide HHS with information related to expanding access to  MAT. Specifically,", "Targeted Capacity Expansion: Medication Assisted Treatment \u2013  Prescription Drug and Opioid Addiction (MAT-PDOA): Every 6  months, grant recipients are expected to submit progress reports to  SAMHSA on the planned and actual number of patients treated, as  well as information on other performance measures.", "Increasing Access to Medication-Assisted Treatment in Rural  Primary Care Practices: Grant recipients are expected to submit  quarterly progress reports to AHRQ with various information, such as  information on the number of physicians who have been certified to  prescribe buprenorphine and the number of primary care practices  successfully initiating the delivery of MAT services as a result of the  grant project.", "Substance Abuse Service Expansion Supplement to Health  Centers: Health centers that received these grants were expected to  submit quarterly progress reports to HRSA through the second  quarter of 2017 on the number of physicians who have obtained a  DATA 2000 waiver and the number of patients who received MAT  from these physicians. Health centers must now report these data  elements in their annual performance reporting along with information  on the number of certified nurse practitioners and physician assistants  who have received a DATA 2000 waiver.", "State Targeted Response to the Opioid Crisis Grants (Opioid  STR): Every 6 months, grant recipients are expected to submit  progress reports to SAMHSA on the number of individuals who  receive opioid use disorder treatment, the number who receive opioid  use disorder recovery services, and the number of providers  implementing MAT, among other measures.", "While HHS\u2019s evaluation will focus on whether HHS\u2019s efforts have been  implemented as intended, officials told us that in the future an evaluation  may also focus on the effectiveness of these efforts, including the  effectiveness of efforts to expand access to MAT. Doing so would be  consistent with federal standards for internal control, which call for  agencies to evaluate results. HHS has some of the information that  could be used in a future evaluation of the effectiveness of its efforts to  expand access to MAT. In particular, an HHS document describing the  department\u2019s fiscal year 2016 \u2013 2017 goals identifies expanding MAT  access as an important strategy for the success of HHS\u2019s longer-term  goal of reducing opioid use disorders and opioid overdoses. In addition,  HHS has identified three potential ways to measure access to MAT:  the number of prescriptions for MAT medications,  the treatment capacity of practitioners who are authorized to prescribe  buprenorphine for opioid use disorders through a DATA 2000 waiver,  and  the treatment capacity of OTPs certified to administer methadone and  other medications.", "In addition, HHS has data that could be useful for tracking progress in  these areas (see table 1).", "However, HHS has not adopted specific performance measures with  targets specifying the magnitude of the increases HHS hopes to achieve  through its efforts to expand access to MAT, and by when. For example,  HHS has not established a long-term target specifying the percentage  increase in the number of prescriptions for buprenorphine HHS would like  to achieve, which would help to show whether efforts by HHS and others  are resulting in sufficient progress in increasing prescriptions for this MAT  medication. HHS has also not chosen a specific method of measuring  treatment capacity or established targets associated with it, which would  help to show whether a sufficient number of providers are becoming  available to evaluate and treat patients who may benefit from MAT.", "Without specifying these performance measures and associated targets,  HHS will not have an effective means to determine whether its efforts are  helping to expand access to MAT. The lack of such performance  measures with associated targets is inconsistent with federal internal  control standards that specify that management should define objectives  and evaluate results. According to these standards, using performance  information such as performance measures can help agencies monitor  results and determine progress in meeting program goals. In the context  of HHS\u2019s efforts to expand access to MAT, establishing appropriate  performance measures with associated targets would allow HHS to  determine whether its efforts are making sufficient progress or whether  they need to be improved. Gauging this progress is particularly important,  given the large nationwide MAT treatment gap identified in 2015 between  the total number of individuals who could benefit from MAT and the  limited number who can access it based on provider availability. This gap  was estimated at nearly 1 million people as of 2012, and according to  HHS officials and other stakeholders, lack of providers continues to be a  challenge. Until HHS establishes performance measures with  associated targets for the factors related to access to MAT, the  department will be unable to evaluate its progress expanding access to  MAT for opioid use disorders.", "In addition, as of August 2017, HHS has not finalized its approach for the  planned evaluation activities, including timeframes. ASPE officials said  that timeframes for a finalized evaluation approach had not been  established because they were still working with RTI to finalize the  evaluation approach given the new leadership priorities. When we spoke  with the officials, they provided us with a draft evaluation schedule that  covered the contract period ending September 2018. As of October 2017,  HHS had not provided a finalized evaluation approach or schedule.  Federal internal controls call for management to establish and operate  monitoring activities and evaluate results. Without an implementation  timeframe for the evaluation\u2019s activities, HHS increases the risk that its  evaluation of its agencies\u2019 efforts will not be completed as expeditiously  as possible, including an evaluation of HHS\u2019s efforts to expand access to  MAT."], "subsections": []}, {"section_title": "Selected Stakeholders Reported Using Outreach, Training, and Other Efforts to Help Expand Access to Medication- Assisted Treatment for Opioid Use Disorders", "paragraphs": ["Officials from selected state health departments and behavioral health  agencies, private health insurers, and national associations reported  using several different efforts to help expand patients\u2019 access to MAT for  opioid use disorders. All of the stakeholders we interviewed reported  conducting outreach efforts to communicate information about the  importance of MAT and how to access it, or providing training to educate  providers on prescribing MAT medications.", "Efforts by states. State health officials we spoke to described several  planned or ongoing efforts to expand access to MAT, some of which are  supported by federal funding, including federal grant programs. Officials  from all five selected states told us that they are offering outreach to and  training for providers to help expand access to MAT. For example,  several state officials told us that they are promoting training to (1)  encourage physicians to obtain authorization (DATA 2000 waivers) to  prescribe buprenorphine and (2) encourage physicians with waivers to  treat patients up to their patient limit or to request a higher patient limit.", "According to the stakeholders, all five selected states have implemented  or are planning to implement a health care delivery model or approach  that will expand access to MAT. Specifically, these models or  approaches focus on integrating the use of MAT into primary care  settings. For example, health officials from three states described use of a  hub-and-spoke model. This model generally involves centralized intake  and initial management of patients at a \u201chub\u201d (e.g., an OTP) and then  connecting these patients to community providers at \u201cspokes\u201d (e.g.,  primary care clinics) for ongoing care, with ongoing support provided by  the hub as needed. Additionally, officials from two states described  offering remote MAT-related consultations through telehealth that  connects patients in rural areas with addiction specialists. According to  a 2017 Healthcare Fraud Prevention and Partnership whitepaper,  telehealth expands the reach of the addiction professional workforce and  the existing pool of MAT providers, and it supports remote forms of  behavioral therapy to make trained professionals more accessible to  those in underserved or isolated communities.", "Officials from three states described focusing their MAT expansion efforts  in various settings, such as in the criminal justice setting and emergency  room departments. State health officials from four of the five states told us  that programs in their states are using peer specialists (individuals who  have successfully recovered from substance abuse disorders) in  emergency rooms and other settings to engage with addicted patients  and refer them to addiction specialists or behavioral health counselors.  Officials from the selected states said that some of these and other efforts  are funded through federal sources, such as MAT expansion grants  awarded by SAMHSA, or with state funds to the extent they are available.", "Efforts by private health insurers. Officials from private health insurers  reported that they are expanding access to MAT through outreach or  training for providers and through the following three efforts:", "Eliminating the need for prior authorization to prescribe MAT  medications. Officials from three insurers reported removing prior  authorization requirements for MAT medications, thereby making it  easier for patients to access needed MAT medications more readily,  rather than undergoing a waiting period for approval to receive the  medications. Other private health insurers told us that they continue to  require prior authorization, intended for safety reasons and to reduce  drug misuse, and officials from one insurer told us that they will allow  a patient to access a limited amount of MAT medications for a period  of 24 to 72 hours while making a determination about the appropriate  treatment services for the patient.", "Modifying health benefit coverage. Officials from one private health  insurance plan told us that the company is redesigning the benefit  coverage for methadone and has removed member copays. This  effort is intended to make MAT medications more affordable and allow  members who are not able to use buprenorphine to have an  alternative, such as methadone, that is not cost-prohibitive.", "Incentivizing providers and health insurance plan members to use  MAT. Officials from four private health insurance plans described  plans to offer incentives to providers or patients to use MAT. For  example, officials from three health plans stated that they are offering  alternative payment models or paying higher rates to providers that  offer MAT, and another private health insurer is offering incentives to  its members who are enrolled in behavioral health programs that  provide access to MAT.", "Efforts by national associations. Officials we interviewed from the  national associations\u2014including the American Society of Addiction  Medicine, the National Governors Association, and the Association of  State and Territorial Health Officials\u2014told us that they are helping to  expand access to MAT through outreach and training for their members  and by developing tools and resource guides for their members. An  official from one association told us that it shares federal grant  announcements, including those that are focused on expanding access to  MAT, with its members. Officials from another association said it provides  training to providers on how to appropriately prescribe MAT medications.  In addition, officials from one association told us that they developed an  opioid-related road map that identifies examples of strategies\u2014including  MAT\u2014that state policymakers can use in their ongoing efforts to address  the opioid epidemic. Examples of strategies include reducing the stigma  associated with MAT through educating the public and potential  providers. Another strategy in the road map is changing payment policies  to expand access to MAT services, such as ensuring that Medicaid and  other state health programs adequately cover all MAT medications and  behavioral interventions and encouraging or requiring commercial health  plans to adopt similar policies."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["HHS funds grant programs and has taken other steps to expand access  to MAT, which has been shown to be effective in reducing the prevalence  of opioid use disorders and with them, the likelihood of drug overdoses.  HHS\u2019s Opioid Initiative began in 2015, and the grants that support it are  ongoing, so it is likely too early to determine how effective HHS\u2019s efforts  have been in expanding access to MAT and in meeting HHS\u2019s other  priorities related to addressing the opioid epidemic. According to HHS,  access to MAT can be measured in terms of the number of prescriptions  for MAT and by the treatment capacities of OTPs and practitioners who  are authorized to prescribe buprenorphine.", "Our review suggests, however, that HHS may not be ready to perform  this evaluation. While HHS told us that it may evaluate the effectiveness  of its efforts in the future, the department has not established  performance measures with targets that would specify the results that  HHS hopes to achieve through its efforts, and by when. Furthermore,  HHS has not established timeframes for the activities that will make up its  planned evaluation of whether HHS\u2019s efforts have been implemented as  intended. Without performance measures with targets and evaluation  timeframes, HHS increases the risk that the evaluation will not be  completed in a timely manner or that HHS will not know whether its MAT- related efforts are successful or whether new approaches are needed.  The evaluation is particularly important, given the hundreds of millions of  dollars HHS has invested in its MAT-related grant programs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to HHS.", "The Assistant Secretary for Planning and Evaluation should establish  performance measures with targets related to expanding access to MAT  for opioid use disorders. (Recommendation 1)", "The Assistant Secretary for Planning and Evaluation should establish  timeframes in its evaluation approach that specify when its evaluation of  efforts to expand access to MAT will be implemented and completed.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for review, and HHS provided  written comments, which are reprinted in appendix II. HHS also provided  technical comments, which we incorporated as appropriate. In its written  comments, HHS concurred with both of our recommendations.  Specifically, for our first recommendation to establish performance  measures with targets related to expanding access to MAT for opioid use  disorders, HHS stated that developing such measures is appropriate and  that the department will continue to work to develop robust performance  measures, including measures related to MAT, as part of its overall  Opioid Strategy, which includes the department\u2019s most recent efforts to  address the opioid epidemic. For our second recommendation to  establish timeframes in its evaluation approach that specify when its  evaluation of efforts to expand access to MAT will be implemented and  completed, HHS agreed that timeframes are important to any evaluation.  HHS noted that its evaluation is being conducted under a 2-year contract  that is scheduled to end in September 2018. HHS has also provided us  with a draft evaluation schedule. We clarified in our report, however, that  HHS has not yet provided a finalized approach for the planned evaluation  or a finalized schedule establishing timeframes for the activities that will  make up the evaluation. Until it finalizes its evaluation approach and  establishes related timeframes, HHS increases the risk that it will not  complete its planned evaluation by September 2018.", "We are sending copies of this report to the HHS, and appropriate  congressional committees. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have questions about this report, please contact me at  (202) 512-7114 or curdae@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Diversion Plan Requirements for Opioid Treatment Programs and Practitioners Who Prescribe Buprenorphine", "paragraphs": ["According to the Department of Health and Human Services, a diversion  control plan is a set of documented procedures intended to reduce the  possibility that controlled substances will be transferred or used illicitly.  Opioid treatment programs (OTPs) and practitioners who prescribe  buprenorphine at the highest patient level through a Drug Addiction  Treatment Act of 2000 (DATA 2000) waiver are required to have these  plans. OTPs are programs that may administer or dispense medication- assisted treatment (MAT) for people diagnosed with an opioid use  disorder, including the use of methadone and buprenorphine. In addition,  under a DATA 2000 waiver, practitioners may prescribe buprenorphine  for patients, up to a 30-, 100-, or 275 patient limit."], "subsections": [{"section_title": "Diversion Control Plan Requirement for OTPs", "paragraphs": ["An OTP must maintain a current diversion control plan that contains  specific measures to reduce the possibility of diversion of controlled  substances from legitimate treatment use. Per federal guidelines, the  goal of the diversion control plan is to reduce the scope and significance  of diversion and its impact on communities. The guidelines state that  each OTP\u2019s diversion control plan should make every effort to balance  diversion control against the therapeutic needs of the individual patient.  They also state that diversion control plans should address at least four  general areas of concern: program environment, dosing and take-home  medication, prevention of multiple program enrollment, and prescription  medication misuse. The guidelines include details about each of these  areas:", "Program environment: Diversion in the program environment can be  deterred and detected by regular surveillance and the monitoring of  areas in and around the program, where opportunities for diversion  may exist. A visible human presence at a program\u2019s location gives  community members the opportunity to approach staff with concerns  and communicates the program\u2019s commitment to assuring a safe  environment and a positive impact on the surrounding community.", "Dosing and take-home medication: In the area of dosing and take- home medication, diversion control encompasses careful control of  inventory, attentive patient dosing, and close supervision of take- home medication. Observing a patient take his or her dose and having  each of them drink and speak after dosing are fundamental  components of diversion control. Take-home dosing should be  provided with careful attention to regulatory compliance and the  therapeutic benefit and safety these regulations are meant to  promote.", "Prevention of multiple program enrollment: Reasonable measures  should be taken to prevent patients from enrolling in treatment  provided by more than one clinic or individual practitioner. An OTP,  after obtaining patient consent, may contact other OTPs within a  reasonable geographic distance (100 miles) to verify that a patient is  not enrolled in another OTP.", "Misuse of prescription medication: The misuse of prescription  medication has become an area of great concern nationally and  impacts diversion control planning at OTPs. All OTP physicians and  other healthcare providers, as permitted, should register to use their  respective state\u2019s prescription drug monitoring program (PDMP) and  query it for each newly admitted patient prior to initiating dosing. The  PDMP should be checked periodically (for example, quarterly) through  the course of each individual\u2019s treatment and, in particular, before  ordering take-home doses as well as at other important clinical  decision points."], "subsections": []}, {"section_title": "Diversion Control and Plans for Practitioners Prescribing Buprenorphine Outside of an OTP", "paragraphs": ["SAMHSA\u2019s best-practice guidelines for using buprenorphine for treating  opioid use disorders include multiple references to diversion, including  monitoring for diversion, storage of this medication to minimize diversion,  and use of formulations that may be less likely to be diverted. Specifically,  the best practices state that, when possible, practitioners should use the  combination buprenorphine/naloxone product, which increases safety and  decreases the likelihood of diversion and misuse. Further, physicians  who request and receive a waiver to prescribe buprenorphine to treat up  to 275 patients outside of an OTP are required to have a diversion control  plan. According to an HHS official, as of July 13, 2017, roughly 3,330 of  the over 39,000 practitioners with a waiver had a 275-patient limit waiver.", "The majority of these practitioners, just over 27,000, have a 30-patient  limit.", "According to SAMHSA guidance, the diversion plan should contain  specific measures to reduce the possibility of diversion of buprenorphine  from legitimate treatment use and should assign specific responsibilities  of the medical and administrative staff of the practice setting for carrying  out these measures. Further, the guidance states that the plan should  address how:  the environment at the practice setting can prevent onsite diversion;  to prevent diversion with regard to dosing and take-home medication;  and  to prevent patients from receiving a prescription from more than one  practitioner and later diverting some of the prescribed medication."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Elizabeth H. Curda, Director, (202) 512-7114 or curdae@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Will Simerl, Assistant Director;  Natalie Herzog, Analyst-in-Charge; La Sherri Bush; and Emily Wilson  made key contributions to this report. Also contributing were Muriel  Brown, Krister Friday, Sandra George, and Christina Ritchie."], "subsections": []}]}], "fastfact": ["Over 52,000 people died of drug overdoses in 2015\u2014and 63% of these involved opioids. For those who are addicted to or misuse opioids, medication-assisted treatment (MAT)\u2014behavioral therapy combined with medication (such as buprenorphine)\u2014can help. However, many people who need it don't have access to it.", "The Department of Health and Human Services implemented a number of efforts to improve access to MAT for opioids, such as grant programs for rural primary care settings and allowing additional providers to prescribe buprenorphine. We recommended that HHS 1) set targets to measure improvements in access and 2) establish evaluation timeframes."]}
{"id": "GAO-18-40", "url": "https://www.gao.gov/products/GAO-18-40", "title": "Drug Industry: Profits, Research and Development Spending, and Merger and Acquisition Deals", "published_date": "2017-11-17T00:00:00", "released_date": "2017-12-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Retail prescription drug expenditures were estimated to account for about 12 percent of total personal health care service spending in the United States in 2015, up from about 7 percent through the 1990s. Much of this growth was driven by use of expensive brand-name drugs, but price increases have been reported for some generic drugs as well. Prior GAO reports have identified multiple reasons for drug price increases, including limited competition. Experts have questioned whether consolidation among drug companies could reduce competition and R&D investment in new drugs.", "GAO was asked to examine changes in the drug industry. This report describes: (1) how the financial performance and structure of the industry have changed over time, (2) how reported R&D spending and new drug approvals have changed, and (3) what is known about the potential effects of consolidation on drug prices and new drug development. GAO analyzed Bloomberg drug industry financial data for 2006 through 2015, and examined select publicly available estimates of company market shares for 2014 and market shares for certain therapeutic classes for 2016. GAO also analyzed estimates of company self-reported R&D spending and federal funding for biomedical R&D data, aggregate tax credit claims data, and drug approval data for the same approximate time period. All data were the most current available. In addition, GAO also reviewed published research and interviewed federal agency officials, economists, and representatives from industry and advocacy groups."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's analysis of revenue, profit margin, and merger and acquisition deals within the worldwide drug industry from 2006 through 2015 identified key trends:", "Estimated pharmaceutical and biotechnology sales revenue increased from $534 billion to $775 billion in 2015 dollars.", "About 67 percent of all drug companies saw an increase in their annual average profit margins from 2006 to 2015. Among the largest 25 companies, annual average profit margin fluctuated between 15 and 20 percent. For comparison, the annual average profit margin across non-drug companies among the largest 500 globally fluctuated between 4 and 9 percent.", "The number of reported mergers and acquisitions generally held steady during this period, but the median disclosed deal value increased.", "The largest 10 companies had about 38 percent of the drug industry's sales revenue in 2014. However, concentration was higher for narrower markets, such as for certain drugs in the same therapeutic class. In addition, experts noted that market pressures such as rising research and development (R&D) costs, fewer drugs in development, and competition from generic drugs, have driven structural changes in the industry such as increased use of acquisition by large drug companies to obtain access to new research.", "From 2008 through 2014, worldwide company-reported R&D spending, most of which went to drug development (rather than research), increased slightly from $82 billion to $89 billion in 2015 dollars. During the same period, federal spending, which funded a greater amount of basic research relative to industry, remained stable at around $28 billion. In addition to grants, several federal tax provisions provided incentives for industry R&D spending, including the orphan drug credit, available for companies developing drugs intended to treat rare diseases, which increased more than five-fold from 2005 through 2014. Pertaining to drug approvals, the total number of new drugs approved for marketing in the United States fluctuated between 2005 and 2016, ranging from 179 to 263 drug approvals annually. Novel drugs\u2014innovative products that serve previously unmet medical need or help advance patient care\u2014accounted for about 13 percent of all approvals each year. Biologics\u2014drugs derived from living rather than chemical sources\u2014and orphan drugs accounted for growing shares of drug approvals, reflecting market and policy incentives to invest in these areas, according to experts GAO interviewed.", "Research GAO reviewed indicates that fewer competitors in the drug industry are associated with higher prices, particularly for generic drugs. Research also suggests that drug company mergers can have varied impacts on innovation as measured by R&D spending, patent approvals, and drug approvals. Certain merger retrospective studies have found a negative impact on innovation.", "The Department of Health and Human Services, Federal Trade Commission, Internal Revenue Service, and National Science Foundation provided technical comments on a draft of this report, which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2015, expenditures for prescription drugs sold through retail  pharmacies were estimated to account for nearly 12 percent of total  personal health care services spending in the United States, up from  approximately 7 percent of such spending through the 1990s. Use of  expensive brand-name drugs accounted for much of the growth in recent  years, but price increases have been reported for some generic drugs as  well. Recent concerns about drug prices have sparked interest in drug  company profitability and competition in the industry. Limited competition  for particular drugs due to market exclusivity\u2014granted by law after the  Food and Drug Administration (FDA) approves certain drugs\u2014is one  factor that often has been noted as influencing drug prices. Prior GAO  reports have identified multiple reasons for drug price increases, including  limited competition. Further, some drug companies have undergone  mergers and acquisitions, leading to concerns about reduced competition  and higher drug prices. Economists have expressed apprehension that  reduced competition may also decrease the amount of industry research  and development (R&D) invested into new drugs, which could result in  fewer drug choices for consumers and fewer treatment options for  providers.", "Amid these questions, you asked us to provide an overview of the drug  industry and the potential effects of consolidation on drug prices and new  drug development. This report describes:  1.  how the financial performance and structure of the drug industry have  2.  how reported research and development spending and new drug  approvals have changed over time; and  3.  what is known about the potential effects of consolidation on drug  prices and new drug development.", "To describe how the financial performance and structure of the drug  industry have changed over time, we: analyzed Bloomberg data on revenues, profit margins, and mergers  and acquisitions for drug companies and, for comparison, software  companies and the largest 500 companies by worldwide revenue from  2006 through 2015; and examined overall industry concentration using data from QuintilesIMS  from 2007 through 2014, and reports from EvaluatePharma to discuss  concentration across smaller markets. All data were the most current  available.", "To describe how reported research and development spending and new  drug approvals have changed, we: analyzed data from the National Science Foundation\u2019s (NSF) National  Center for Science and Engineering Statistics\u2019 Business Research,  Development, and Innovation Survey on company-reported R&D  expenditures and sales data for drug companies for years 2008  through 2014 and, for comparison, select other industries for 2013  and 2014; analyzed data from NSF\u2019s National Center for Science and  Engineering Statistics\u2019 Federal Funds for Research Survey on federal  obligations for research in biomedical related fields made by agencies  identified as funding drug-related research from fiscal year 2008  through 2014; analyzed aggregate tax return data from the Internal Revenue Service  (IRS) for income tax credits and deductions for research investment  for relevant industries for years 2005 through 2014; and analyzed data from FDA on drugs approved by its Center for Drug  Evaluation and Research between 2005 and 2016. All data were the  most current available.", "To describe what is known about the potential effects of consolidation on  drug prices and new drug development, we reviewed studies obtained  from a literature search of scholarly peer reviewed studies, government  reports, select working papers, and policy research organization  publications published from 2005 through August 2017 that examined the  impact of consolidation or competition on drug price and drug  development.", "In addition, for all objectives, we interviewed industry experts, including  representatives from industry groups, advocacy organization, economists,  and federal agencies. For all of the data analyzed, we took steps to  assure their reliability, including interviewing knowledgeable officials,  conducting data checks, and comparing to published information when  available. After taking these steps, we determined that the data were  sufficiently reliable for the purposes of our reporting objectives. Appendix  I provides additional details on our scope and methodology, including  limitations of our analyses and steps we took to assure the reliability of  the data we analyzed.", "We conducted this performance audit from April 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings based  on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The drug industry encompasses a variety of companies involved in the  research, development, distribution, and payment for chemically  synthesized and biologic drugs. For the purpose of our review, the drug  industry includes pharmaceutical companies that traditionally concentrate  on developing or manufacturing drugs derived from chemicals and  biotechnology companies that develop or manufacture biologics\u2014more  complex drugs derived from living cells.", "The federal government plays a role in various aspects of the drug supply  chain as well. To market drugs in the United States, drug companies must  apply and receive approval from the FDA that their drugs are safe and  effective. The federal government also supports R&D for new drugs, such  as through grants by the National Institutes of Health (NIH), NSF, and  other agencies, and through tax incentives administered by the IRS. In  addition, mergers and acquisitions affecting the drug industry are subject  to review by the federal government to ensure compliance with applicable  antitrust laws."], "subsections": [{"section_title": "Drug Research, Discovery, Development, and Approval Process", "paragraphs": ["The process of bringing a new drug to the market is long and costly and  involves multiple public and private entities that fund and perform R&D.  (See fig. 1.) For a new drug, the entire drug discovery, development, and  review process can take up to 15 years, often accompanied by high  costs. The process consists of several main stages:", "Basic research: This is research aimed at acquiring new knowledge  or understanding without immediate commercial application or use.  Basic research is often federally funded and conducted to better  understand the workings of disease, which increases the potential of  discovering and developing innovative drugs.", "Drug discovery: This is undertaken by numerous researchers from  drug companies, academia, and government searching for and  identifying promising chemical entities, or chemical and biological  compounds, capable of curing or treating diseases.", "Preclinical testing: During preclinical testing, compounds are tested  in laboratories and in animals to predict whether a drug is likely to be  safe and effective in humans. If the compound is found to be  promising, a drug company may decide to test it as a new drug on  humans and it proceeds to the clinical trials stage. Before doing so,  the company must submit to FDA and have in effect an investigational  new drug application that summarizes the data that have been  collected on the compound and outlines plans for the clinical trials.", "Clinical trials: Clinical trials test potential drugs in human volunteers  to determine if they should be approved for wider use in the general  population. An investigational new drug typically goes through three  phases of clinical trials before it is submitted to FDA for marketing  approval. Clinical trials proceed through Phases I, II, and III, beginning  with testing in a small group of healthy volunteers and then moving on  to testing in larger groups of patients whom the drug is intended to  treat to assess the compound\u2019s effectiveness, rate of adverse events,  and uses in combination with other drugs.", "FDA Review and Approval: To market a drug in the United States,  drug companies submit their research in a new drug application  (NDA) or biologic license application (BLA) to FDA, which then  reviews and approves the drug for marketing if it is shown to be safe  and effective for its intended use. An NDA is an application to market  a new chemically synthesized drug\u2014either an innovative drug or a  variation of a previously marketed drug. A BLA is an application for a  license to market a new biological product (complex drugs derived  from living organisms). Companies may also submit a supplement to  an already approved NDA or BLA\u2014known as an efficacy  supplement\u2014to propose changes to the way an approved drug is  marketed or used, such as adding or modifying an indication or claim,  revising the dose or dose regimen, providing a new route of  administration, or changing the marketing status from prescription to  over-the-counter use.", "For the purposes of its review, FDA classifies certain NDAs as new  molecular entities\u2014products that contain active chemical substances  that have not been approved by FDA previously\u2014and certain BLAs as  new therapeutic biologics. FDA generally considers drugs approved  either as new molecular entities or new therapeutic biologics to be  \u201cnovel\u201d drugs\u2014products that are often innovative and serve previously  unmet medical needs or otherwise significantly help to advance  patient care and public health.", "Post-approval: After FDA has approved a drug for marketing, the  drug company may begin marketing and large-scale manufacturing of  the drug. FDA also continuously monitors the safety of the drug which  includes, amongst other activities, oversight of postmarket clinical  studies that it can require or request companies to complete (known  as phase IV clinical trials). Drug companies may also undertake these  studies independently to identify modifications to the drug such as  new delivery mechanisms or additional indications for use. The  company may then submit a new application or supplement  application with new clinical data to FDA to market the modification as  a new drug, or market it for the new use."], "subsections": []}, {"section_title": "Patent and Market Exclusivity and Other Incentives for Drug Development", "paragraphs": ["Patents and market exclusivity periods are two ways brand-name drug  companies may recoup their R&D investments by limiting competition for  specified periods of time. Typically, early in the R&D process, companies  developing a new brand-name drug apply for a patent on the active  ingredient and may additionally apply for patents on other aspects of the  drug, such as the method of use, from the U.S. Patent and Trademark  Office. Once a patent is granted, other drug companies are excluded  from making, using, or selling the patented aspect of the drug during the  term of the patent, which generally expires after 20 years from filing. In  addition, federal law authorizes certain periods of exclusive marketing rights, or market exclusivity, for new FDA-approved drugs, during which  time FDA generally cannot approve a similar competing version of the  drug for marketing. These exclusivities are independent of the rights  granted under patent and can relate to chemical entities never approved  before by FDA (5 years of exclusivity); new biologics (12 years); approval  of a supplement for a new condition or use or other change to a  previously approved chemically synthesized drug based on new clinical  studies (3 years); and orphan drugs\u2014drugs designated to treat rare  diseases or conditions (7 years); among others. Patent protection and  market exclusivity are independent of one another and can run  concurrently or not.", "When brand-name drug products\u2019 patents expire and exclusivity periods  end, similar versions of the drug product that have been approved by  FDA may enter the market. These are referred to as generics for  chemically synthesized drugs and biosimilars for biologics. The Drug  Price Competition and Patent Term Restoration Act of 1984\u2014commonly  known as the Hatch-Waxman Amendments\u2014facilitated earlier, and less  costly, market entry of generic drugs. A generic drug must generally be  demonstrated to be equivalent to the brand-name drug product in active  ingredient, dosage form, safety, strength, route of administration, quality,  performance characteristics, and intended use. For biologics, the  Biologics Price Competition and Innovation Act of 2009 provided an  abbreviated pathway for companies to obtain approval of \u201cbiosimilar\u201d and  \u201cinterchangeable\u201d biological products. A biosimilar must be demonstrated  to be highly similar to an already approved biological product and to have  no clinically meaningful differences in terms of safety and effectiveness  from the reference product. See table 1 for a description of drug  application types.", "In addition to incentivizing drug development through patent and market  exclusivity, the federal government supports new drug research both  directly, through grants from\u2014and intramural research by\u2014agencies  such as NIH and indirectly through tax incentives for companies that  develop new drugs. Specifically, the Internal Revenue Code includes  incentives for research-related spending in three ways: through two  income tax credits\u2014the credit for clinical testing expenses for certain  drugs for rare diseases (known as the orphan drug credit) and the credit  for increasing research activities (known as the research credit)\u2014and  through special methods for treatment and reporting of research and  experimental expenditures, including current-year deduction to arrive at  net income. In general, the credit incentives are available to companies  with qualified research spending in the United States. Companies include  businesses organized as corporations or non-corporate businesses such  as partnerships. These provisions are described below:", "Orphan drug credit: Companies may claim the orphan drug credit for  half the \u201cqualified clinical testing expenses\u201d for drugs intended to treat  rare diseases. Expenditures that give rise to the orphan drug credit  may include expenses related to testing outside the United States. A  company may claim foreign clinical testing expenses if there is an  insufficient testing population in the United States to test the safety  and efficacy of the drug. The orphan drug credit is nonrefundable;  that is, while the credit can be used to reduce a company\u2019s income tax  liability generally, the credit cannot be used to generate a refund if the  business has no tax liability or fully used if the credit would reduce tax  liability below zero. The credit is also a component of and subject to  the limitations of the general business credit.", "Research credit: Companies may claim a research credit for  qualified research expenditures they undertake in a given year that  exceed a threshold or base amount. This incremental design of the  credit is intended to create an incentive for companies to do more  research than they otherwise would. Qualified research expenses are  certain expenses for qualified research incurred by the taxpayer  during the taxable year in carrying on a trade or business. Qualified  research is research that is undertaken for the purpose of discovering  information that is technological in nature and the application of which  is intended to be useful in the development of a new or improved  business component of the taxpayer. In general, substantially all the  activities that constitute a process of experimentation relating to new  or improved functions, performance, or reliability or quality are  qualified research. The rate of credit can be 14 or 20 percent. Like the  orphan drug credit, the research credit is nonrefundable and is a  component of, and subject to, the limitations of the general business  credit.", "Deductions of qualified research expenses: If elected, the tax code  allows businesses to currently deduct \u201cresearch or experimental  expenditures\u201d from gross income in the tax year they are incurred  rather than depreciate (or amortize) the assets the R&D created over  time. Research and experimental expenditures include all costs  incident to research, including research conducted outside the United  States. Since \u201cqualified research expenses\u201d and \u201cqualified clinical  testing expenses\u201d are a particular subset of research and  experimental expenditures, expenditures that can give rise to either  the research or orphan drug tax credits can be deducted in the year  that they occur. However, these deductions must be reduced by the  amount of tax credits claimed in order to prevent expenses from both  generating a tax credit and being deducted from income."], "subsections": []}, {"section_title": "Drug Distribution, Payment, and Pricing", "paragraphs": ["The distribution of, and payment for, prescription drugs involve  interactions and negotiated transactions among multiple commercial  entities along the supply chain from the drug manufacturer to the  consumer (see fig. 2). Brand-name and generic drug manufacturers  typically sell their drugs to drug wholesalers, who in turn sell the drugs to  retail pharmacies or to health care providers (such as hospitals, clinics,  and physicians). Pharmacies or providers dispense or administer  prescription drugs to consumers. Most consumers purchasing drugs pay  a portion of the drug\u2019s price in the form of a copayment or coinsurance,  with the specifics of this cost sharing dictated by the consumers\u2019  insurance plan. Insurance plans often use pharmacy benefit managers  (PBMs) to help them manage their prescription drug benefits, including  negotiating prices with manufacturers, processing claims, and negotiating  with retail pharmacies to assemble networks where the beneficiaries can  fill prescriptions. PBMs negotiate with manufacturers for rebates on behalf  of the insurance plan based on market share, volume, and formulary  placement. PBMs also contract with pharmacies; contract terms and  conditions may include specifics about negotiated reimbursement rates  (how much the pharmacy will be paid for dispensed drugs) and payment  terms. Health care providers may also negotiate with insurers for the  drugs they administer. The price that payers, PBMs, and ultimately  consumers pay for prescription drugs depends in part on the amount of  competition and the purchasers\u2019 negotiating power. The negotiating  power is influenced by the ability to choose from competing drugs and the  volume of drug purchased.", "According to economic experts, the usual mechanisms that enforce  market discipline may not work in the same way in the health care market  as they do in other markets. In most markets\u2014automobiles, for  example\u2014consumers are expected to be conscious of the price of goods.  If a company raises the price of its goods, consumers would likely  purchase fewer goods, causing the company\u2019s revenues to decline.  However, in the health care market, the purchase of goods and services  is largely influenced by health care providers, who may not be well- informed about, or incentivized to consider, the prices involved. In the  case of drugs, some experts argue that marketing and advertising may  further distort provider decision making. In addition, if the patients\u2019  medical bills are largely paid by insurance plans (other than copayment or  coinsurance costs), then patients\u2019 demand may not be significantly  influenced by changes in price to the extent that it might be in other  markets where the consumers see and pay the bill themselves.", "Certain payment policies may also limit the negotiating power of insurers.  For example, Medicare Part D is required to cover all drugs in six  protected classes, which some experts argue reduces the negotiating  power of its contractors (known as plan sponsors). In addition, some  brand-name drug companies are providing coupons to consumers to  mitigate patient drug costs when a company\u2019s drugs are not covered by  payer formularies or require higher patient costs than preferred drugs.  Some research and experts we interviewed have noted that this practice  erodes the negotiating power of insurers and the cost management utility  of formularies, which may result in lower prices for the patient using the  coupon but higher prices overall. In addition, patients and providers in  many cases may not have clear information about the benefit relative to  cost of one drug over another drug or treatment."], "subsections": []}, {"section_title": "Consolidation and the Antitrust Review Process", "paragraphs": ["Experts have said that consolidation as a result of mergers and  acquisitions is one of multiple factors that could influence competition.  Fewer companies producing and marketing drugs can lead to greater  market dominance by certain companies and less competition.", "The Federal Trade Commission (FTC) and the U.S. Department of  Justice (DOJ) enforce federal antitrust laws that prohibit activities, such  as price fixing and mergers and acquisitions where the effect may be  substantially to lessen competition or tend to create a monopoly. Drug  companies are subject to these antitrust laws. Companies are required to  notify FTC and DOJ of certain pending mergers, also known as the  premerger notification program. As part of its premerger review process,  these agencies can approve mergers contingent on company divestiture  of assets, including those related to products in development\u2014a process  known as a negotiated merger remedy. These agreements are subject to  public notice and comment and result in an enforceable order. The goal of  a merger remedy is to preserve or restore competition in the relevant  markets. Although FTC and DOJ each have authority and  responsibilities under the antitrust laws, FTC typically examines proposed  drug industry mergers. In addition, FTC has authority to investigate and  take action against unfair methods of competition in or affecting  commerce, as well as mergers and acquisitions that may substantially  lessen competition or tend to create a monopoly, including in the drug  industry."], "subsections": []}]}, {"section_title": "Drug Industry Profit Margins and Merger and Acquisition Deal Values Increased, and the Industry Underwent Structural Changes", "paragraphs": ["Among the worldwide drug companies included in the data we reviewed,  reported pharmaceutical and biotechnology revenues and profit margins  for most companies grew from 2006 through 2015. The number of  mergers and acquisitions among companies in the industry generally held  steady from 2006 through 2015, but merger and acquisition deal values  increased. Market concentration varied by the specific market level  considered. Industry experts we interviewed noted that market pressures  have driven structural changes in the industry."], "subsections": [{"section_title": "Company-Reported Revenues and Profit Margins Grew from 2006 through 2015", "paragraphs": ["According to the data we reviewed, between 2006 and 2015 estimated  aggregate worldwide pharmaceutical and biotechnology sales revenue for  drug companies grew from $534 billion to $775 billion in real 2015 dollars  (about 45 percent), with most of the growth occurring between 2006 and  2011. The largest 25 of these companies (by 2015 pharmaceutical and  biotechnology revenue) saw their aggregate sales revenue increase from  $448 billion in 2006 to $569 billion in 2015, or about 27 percent.  Aggregate sales revenue for all other drug companies in our data grew  more sharply, from $86 billion in 2006 to $206 billion in 2015\u2014an  increase of about 140 percent (see fig. 3).", "Drug companies\u2019 average profit margins also grew from 2006 to 2015,  though the trends differed for the largest 25 companies compared to the  remaining companies in our data. Overall, about 67 percent of  companies saw their profit margins increase between 2006 and 2015.  While there was some fluctuation over time, the average profit margin  was 17.1 percent in 2015 for all drug companies; profit margins were  higher for the largest 25 companies (20.1 percent in 2015) than for all  others (8.6 percent in 2015; see fig. 4).", "To better place large drug companies\u2019 profit margins into context, we  conducted a similar examination of profit margins for large companies in  other industries, specifically software companies and the largest 500  companies (by 2015 total worldwide revenue as reported in Bloomberg)  representing a wide range of industries. We included the software  industry separately because, like the drug industry, it has been cited as  having high R&D investment and low production and distribution costs,  though caution should be taken in making this comparison. Among the  largest 25 software companies (by 2015 software revenue), the average  profit margin began at 21.7 percent in 2006 and remained relatively stable  through 2014, before decreasing to 13.4 percent in 2015 (see fig. 5). As  a broader comparison, the average profit margin among the largest 500  companies was consistently lower than the average among the largest 25  drug companies and software companies. Among the largest 500  companies, the average profit margin decreased from 8.9 percent in 2006  to 6.7 percent in 2015."], "subsections": []}, {"section_title": "The Number of Mergers and Acquisitions Generally Held Steady from 2006 through 2015, but the Values Fluctuated", "paragraphs": ["The annual number of mergers and acquisitions involving drug  companies generally held steady between 2006 and 2015, with some  fluctuations in intervening years, based on our review of Bloomberg  data. Overall, the number of transactions generally held steady, with  312 in 2006 and 302 transactions in 2015 (see fig. 6). The number of  mergers and acquisitions involving one of the largest 25 companies (by  2015 pharmaceutical and biotechnology revenue) increased from 29  transactions in 2006 to 61 transactions in 2015. In contrast, the number  of transactions in our data for the smaller drug companies decreased  from 283 transactions in 2006 to 241 transactions in 2015. See appendix  II for additional information on merger and acquisition activity of 10 large  companies in the drug industry as of 2014.", "While the number of transactions generally held steady between 2006  and 2015, the total value of transactions completed over this period  fluctuated considerably. These fluctuations were driven by a small  number of high value transactions, which tended to occur among the  largest 25 companies (see fig. 7). For example, in 2009, there were three  transactions each valued above $20 billion in real dollars, all of which  were conducted by companies in the largest 25:", "Pfizer Inc. acquired Wyeth LLC for about $71 billion,", "Merck & Co Inc. acquired Schering-Plough Corp. for about $56 billion,", "Roche Holding AG acquired Genentech Inc. for about $48 billion.", "In 2015, about half of the total merger and acquisition transaction value  came from five transactions each valued over $10 billion in real dollars,  including one very large transaction by Allergan for about $72 billion. The  other four transactions also involved companies among the largest 25.  Much as the total value of mergers and acquisitions fluctuated  considerably from year to year, median disclosed transaction values  generally increased between 2006 and 2015, with considerable  fluctuation among years."], "subsections": []}, {"section_title": "Concentration in the Drug Industry Varied by the Level of the Industry Considered", "paragraphs": ["For the overall drug industry, the share of total sales accounted for by the  10 largest companies\u2014a measure of concentration\u2014declined between  2007 and 2014, the years for which public data were available from  QuintilesIMS. The largest 10 companies (by 2014 pharmaceutical  revenue) had 48.9 percent of the drug industry\u2019s sales revenue in 2007;  by 2014, their share of the industry sales revenue declined to 38.2  percent. Concentration, which can be measured by share of sales,  provides a basic indication of the competitiveness of companies in an  industry or specified market level within an industry. Competition in the  drug industry generally is examined at the level where products are  viewed as substitutes, according to FTC officials. Substitutes can be  products that are the same molecular entity or, in some cases, different  molecular entities that treat the same condition.", "At levels narrower than the entire industry, such as drugs within the same  therapeutic class or of the same molecular entity (levels that are more  relevant to competition), concentration in shares of sales can be higher  than in the overall industry. For example, EvaluatePharma reported that  the three largest companies in the anti-diabetics market accounted for  67.5 percent of the sales in that market in 2014. Similarly, the three  largest companies in the anti-rheumatics market accounted for 56.8  percent of the sales in that market in 2014, and the three largest  companies in the anti-virals market accounted for 72.4 percent of the  sales in that market, with the leading anti-viral manufacturer accounting  for over half (52.8 percent) of worldwide anti-viral sales.", "Concentration can also vary for drugs of the same molecular entity, as  some generic drugs may have different numbers of manufacturers than  others. For example, as of 2017, 14 companies have approved ANDAs  for lisinopril, a drug for hypertension\u2014that is, 14 companies have generic  versions of the drug approved for manufacture. By comparison, only  one company has an approved ANDA for efavirenz, a drug used to treat  HIV infection. Greater numbers of generic manufacturers generally  reduce concentration, as generic manufacturers compete with one  another in addition to brand-name manufacturers. More broadly, one  recent study found that of the novel drugs approved in tablet or capsule  formulation since the 1984 Hatch-Waxman Act and eligible for generic  competition, more than one-third had three or fewer generic approvals."], "subsections": []}, {"section_title": "Industry Experts Noted Market Pressures Have Driven Structural Changes in the Industry, Such as in the Types of Acquisitions and Increased Specialization in Therapeutic Areas", "paragraphs": ["Experts we interviewed noted that market pressures such as rising R&D  costs, fewer drugs in the R&D pipeline, and the growth in sales of generic  drugs have driven various structural changes in the drug industry, such as  in the types of acquisitions being sought. Not all companies respond to  those pressures in identical ways. For example, some experts said that  some companies that traditionally manufactured brand-name drugs are  expanding into the manufacturing of generic drugs. These brand-name  companies may acquire a generics manufacturer to adjust the portfolio of  drugs they manufacture or gain access to a generics business. Similarly,  some traditionally generic manufacturers are expanding into brand-name  manufacturing to acquire product lines with more generous profit margins.  For both brand-name and generic manufacturers, expanding the size of  their drug portfolio may improve their bargaining position with PBMs,  according to two economists we interviewed. Experts also said that  traditionally large companies are increasingly relying on mergers and  acquisitions to obtain access to new research and are conducting less of  their own research in-house. In addition, experts told us that investment in  the development of traditional chemically synthesized drugs has  produced increasingly lower financial returns, resulting in some traditional  pharmaceutical companies turning to invest more in the development of  more complicated and costly biologics. Many experts highlighted the  proliferation of biotechnology companies as large pharmaceutical  companies seek to acquire promising new research developments.", "Many experts told us that market pressures have also driven some drug  companies to move towards specialization in certain therapeutic areas,  including through mergers and acquisitions. As one example,  GlaxoSmithKline acquired most of Novartis\u2019s vaccine business in 2015,  bolstering its own line of vaccines and helping to raise its share of sales  of the worldwide vaccine market. Simultaneously, Novartis acquired  GlaxoSmithKline\u2019s oncology business, enabling both companies to shed  one line of business and focus on the newly acquired therapeutic areas.", "Experts again noted that one reason companies may be specializing  through mergers and acquisitions is because of the increasing cost of  R&D\u2014acquiring promising new or developed research or product lines  helps companies mitigate R&D investment risk. Acquiring existing lines of  business from competitors within a therapeutic area may also help a  company increase its presence in a particular therapeutic area.", "Another widely cited factor influencing structural changes in U.S.  industries\u2014including the drug industry\u2014involves tax-influenced mergers,  called corporate inversions. An inversion is a type of merger where a U.S.  corporation merges with or acquires a company located in a foreign  jurisdiction\u2014often a lower-tax country\u2014and reorganizes so the resulting  parent corporation is located in the foreign country. This can reduce a  corporation\u2019s overall tax liability\u2014often by reducing its U.S. tax liability.  While taxes are one of many factors that may influence trends in mergers  and acquisitions as discussed above, the incentive for drug companies to  reduce tax burdens through inversions can be significant. In 2016, the  Treasury Department issued new regulations to curb inversions."], "subsections": []}]}, {"section_title": "Pharmaceutical Company-Reported Research and Development Spending Grew Slightly, while Biologics and Orphan Drugs Were a Greater Share of New Drug Approvals", "paragraphs": ["Pharmaceutical company-reported R&D spending grew slightly from 2008  through 2014, while federally funded spending decreased slightly over the  period. Industry spending focused on drug development rather than  earlier-stage research, whereas direct federal spending, such as through  NIH grants, funded a greater amount of basic research. Claims for the  orphan drug credit, one of several federal tax incentives encouraging drug  development, increased sharply from 2005 through 2014. Biologics and  orphan drugs accounted for an increasing share of new drug approvals  from 2005 through 2016. Studies we reviewed and experts we  interviewed suggested that potential revenues, costs, and policy  incentives influenced brand-name drug company R&D investment  decisions."], "subsections": [{"section_title": "Pharmaceutical Company- Reported Research and Development Spending Increased Slightly, While Federally Funded Spending Decreased Slightly, from 2008 through 2014", "paragraphs": ["Our analysis of industry survey data from NSF indicate that worldwide  R&D spending by U.S.-owned pharmaceutical companies and U.S.-based  R&D by foreign companies increased slightly (8 percent) in real dollars  from $82 billion in 2008 to $89 billion in 2014, the years for which  comparable data were available (see fig. 8). According to NSF survey  data, the share of this spending that pharmaceutical companies paid  others to perform also increased over the period. Estimates of worldwide  R&D expenditures as a percentage share of total worldwide sales  averaged 13 percent and ranged from 11.5 to 14.2 percent over the  period 2008 to 2014. This amount, according to estimates from  QuintilesIMS, is larger than the 7.6 percent of total pharmaceutical sales  revenue that the industry spent on marketing and promotion in 2014;  however, due to differences in the different sources\u2019 methodology and  data, publicly reported figures are not necessarily comparable.", "The NSF Business Research, Development, and Innovation Survey data  indicated worldwide R&D spending for respondent biotechnology  companies was $9.2 billion in 2009, dropped to $2.7 billion in 2010, rose  to $6.7 billion in 2011, then decreased to $1.7 billion in 2013, the years  for which worldwide data were available. The percentage of  biotechnology company-reported R&D to worldwide biotechnology sales  ranged widely from 43 percent in 2011 to 7 percent in 2013.", "Pharmaceutical companies reported spending a greater share of sales on  R&D than comparably large, R&D-intensive industries and all aggregated  manufacturing and non-manufacturing industries, according to  comparable Business Research, Development, and Innovation Survey  data (see table 2). For example, in 2014, self-reported R&D expenditures  as a percentage of total sales were higher for pharmaceutical companies  than for other comparably large, R&D-intensive sectors such as  semiconductor and other electronic components, software publishers, and  computer system design services.", "Direct federal spending for biomedical research, primarily funded through  NIH, decreased 3.8 percent in real dollars from $27 billion in fiscal year  2008 to $26 billion in fiscal year 2014, after a peak of $32 billion in 2010,  according to our analysis of federal survey data from NSF. NIH was the  primary federal source for biomedical research and accounted for $26  billion of spending in 2008 and $25 billion in 2014. According to federal  officials we interviewed, other agencies that fund biomedical research that  could be relevant to drug R&D were the Department of Defense and the  NSF.", "In addition, state and local governments, foundations, charities, and  venture capital also funded biomedical R&D, according to studies and  experts we interviewed. Estimates of this spending are much smaller than  those for industry and federal agencies. In 2015, National Health  Expenditure estimates show that state and local governments spent $6.7  billion on research and non-industry private funders spent $5.3 billion."], "subsections": []}, {"section_title": "Pharmaceutical Company- Reported Spending Focused on Drug Development and Federal Spending Focused on Basic Research", "paragraphs": ["Pharmaceutical company spending from 2008 through 2014 focused on  drug development, while federal spending focused on earlier-stage basic  research. For example, in 2014 pharmaceutical companies reported  allocating 13 percent of total reported domestic R&D spending on basic  research, 21 percent on applied research, and 66 percent on  development (see fig. 9).", "By comparison, federal spending consistently funded a greater amount of  basic research, according to our analysis of data from NSF\u2019s Survey of  Federal Funds for Research and Development. Studies show that basic  research often supplies the innovation upon which the industry develops  drugs. For example, as shown in figure 10 below, NIH obligated 54  percent, or $13.6 billion of its total $25 billion of drug related spending, for  basic research in fiscal year 2014. This is more than twice as much as the  $6.3 billion that NSF data show pharmaceutical companies reported  spending domestically for basic research that year. NIH also funded  applied research that includes more targeted research and activities  aimed at translating basic research into new treatments for patients. For  example, NIH supports clinical research through the National Center for  Advancing Translational Sciences and several other NIH Institutes and  Centers. This includes supporting pre-clinical and early-stage clinical  trials; promoting and initiating collaborations and partnerships among  industry, academia, and other stakeholder communities, such as patient  advocacy groups, to address research barriers; and facilitating data  sharing, according to agency officials. In accordance with the definition of  \u201cdevelopment\u201d provided by NSF for the Survey of Federal Funds for  Research and Development, NIH classifies R&D activities as \u201cresearch.\u201d  Therefore, NIH does not report any of its activities as strictly drug  development, according to agency officials.", "Studies and experts we interviewed suggested that the relative roles of  R&D funders and performers are evolving. For example, some experts  noted that there is less distinction between public and private investment  in R&D than in the past because publicly funded research institutions,  such as universities, are frequently involved in financial relationships with  industry for commercial development. Some industry experts also noted  NIH\u2019s role in fostering these collaborations. As previously noted, there  has been a proliferation of smaller, biotechnology-focused companies and  greater use of acquisition and licensing agreements by larger, traditional  pharmaceutical and biotechnology companies to build their earlier-stage  product pipelines rather than conducting early research in-house. Experts  suggested that this trend is a response to the increasing complexity and  cost of R&D concurrent with the advent of biotechnology and waves of  patent and exclusivity expirations for large companies.", "In addition, traditional pharmaceutical companies also performed less  R&D internally than in the past, according to NSF data. Worldwide R&D  spending paid for and performed by pharmaceutical companies  decreased in real dollars from $61.7 billion in 2008 to $58.2 billion in 2014  and as a share of total worldwide R&D spending. Conversely, the share  of the worldwide pharmaceutical R&D spending that was paid for by the  company and performed by others, such as through purchased R&D  services, increased from 25 percent in 2008 to 35 percent in 2014."], "subsections": []}, {"section_title": "Federal Tax Provisions Encourage Drug R&D, with Claims for the Orphan Drug Credit Increasing Sharply", "paragraphs": ["Similar to the R&D spending trend identified above from the NSF data,  various IRS tax data consistently indicate that drug R&D activities did not  change significantly\u2014with the exception of the orphan drug credit, which  over time increased sharply. Inflation-adjusted claims by all industries for  the orphan drug credit increased five-fold between 2005 and 2014, from  about $280 million to about $1.5 billion (see fig 11).", "Claims for the other tax credit that incentivizes drug development\u2014the  research credit\u2014were more stable than the orphan drug credit between  2005 and 2014. As shown below in figure 12, IRS estimates of research  credit claims for pharmaceutical-related corporations reached a high of  $1.5 billion in 2007, but then fell to about $1.2 billion in 2014, a level close  to the beginning of the period. This may be due in part to the fact that we  were not able to obtain a specific estimate for the research credits  claimed by biotechnology companies. By comparison, research credit  claims grew for all industries over the period, particularly from 2012 to  2014.", "According to IRS data, between 2005 and 2014 the pharmaceutical  manufacturing industry spent, on average, about $22.5 billion per year (in  real dollars) in qualified research spending that factored into the  calculation of the research credit (see fig. 13). Spending peaked in 2007  at $25.5 billion and then generally declined from 2007 to 2014. This  amount of spending\u2014reported on tax returns as meeting the  requirements of qualified research spending as noted above\u2014is less than  half of the research spending reported by NSF\u2019s Business Research,  Development, and Innovation Survey data. These research spending  differences can reflect both differences in the definitions of research  spending in each data source and in the specific industry definitions used  in the different data sources.", "The ability of companies to deduct research expenditures in the year they  are incurred simplifies tax accounting for research spending and reduces  the after-tax cost of research investments. The amount of research  spending deducted by large pharmaceutical corporations that submitted  an IRS form M-3 has been largely consistent between 2010 and 2013, the  years for which data were available (see table 3). Specifically, research  expenditure deductions in real dollars increased to $30.7 billion in 2013  after a low over the period of $24.9 billion in 2012. The table also shows  that the amounts shown as research expense on the financial statements  of the same corporations were slightly higher than the amount deducted  on tax returns in each year."], "subsections": []}, {"section_title": "Novel Drugs Consistently Accounted for About Thirteen Percent of New Drugs Approved in the United States from 2005 through 2016, and Biologics and Orphan Drugs Each Grew as a Share of Approvals", "paragraphs": ["The number of approvals for drugs FDA considered novel drugs  increased from 20 in 2005 to 45 in 2015 but declined to 22 approvals in  2016, according to FDA data and reports (see fig. 14). Novel drugs  accounted for between 8 and 18 percent of all drug approvals each year  and averaged 13 percent over the period. The remaining majority of  drug approvals each year included those not considered novel because  they had chemical substances that were previously approved by FDA or  were modifications to existing drugs.", "Biologics and orphan drugs each represented an increasing share of all  drug approvals from 2005 through 2016. As shown in figure 15, biologics  grew from 8 percent of all drug approvals in 2005 to 17 percent in 2016.", "Biologics also represented an increasing share of the subset of all  approvals that were considered novel drugs\u2014from 10 percent of novel  drugs approved in 2005 to 32 percent in 2016.", "Orphan-designated drugs as a share of all drug approvals grew even  more dramatically from 5 percent of all drug approvals in 2005 to 21  percent in 2016 (see fig.15). Orphan drugs as a share of novel drug  approvals ranged from 22 percent in 2007 to 42 percent in 2015.", "We also examined drug approval trends by product category. The product  categories that led the largest number of drug approvals fluctuated over  time, but oncology drugs were among the most frequently approved in all  but 2 years from 2005 through 2016. Of the 263 drugs approved by FDA  in 2016, the most common product categories were oncology (55  approvals) and metabolism and endocrinology (38 approvals). For the 22  novel drug approvals in 2016, the most common product categories were  oncology (5 approvals) and neurology (4 approvals)."], "subsections": []}, {"section_title": "Studies and Experts Suggest Potential Revenues, Costs, and Policy Incentives Influenced Drug Industry Research and Development Investment Decisions", "paragraphs": ["Studies and industry experts we interviewed, including economists and  industry association officials, suggested several drivers for drug company  R&D investment decisions. These investment choices were influenced by  revenue, cost, and regulatory and other policy incentives:", "Potential revenues: High revenue potential, typically associated with  a large potential number of patients or the potential for high drug  prices, is an important incentive for R&D investment, according to  experts and some research. Studies show that potential market size,  measured by revenue, is a determinant of R&D investment and  market entry for both brand-name and generic drug companies.  Companies also seek to maximize potential revenues by investing in  the development of drugs that can command high prices, and drugs  that address unmet medical needs or differentiate them from  competitors. This includes investment in drugs for niche markets that  may have limited competition, such as orphan drugs. Experts also  noted that some companies invest to extend patent protection or  exclusivity periods for existing drugs as a means to extend revenue  generation by delaying or limiting the effect of generic competition\u2014 sometimes referred to as \u201cevergreening\u201d or \u201cpatent hopping.\u201d", "Cost reduction: Drug development costs, particularly for novel drugs,  are increasing and companies have sought various ways to reduce  their costs or limit risk. Experts we interviewed suggested that drug  companies have attempted to reduce costs by focusing on drugs for  which clinical trials are perceived to be less costly, drugs perceived as  more likely to receive FDA approval, modifications to existing drugs  rather than the development of novel drugs, outsourcing of clinical  trials, and acquisition of R&D projects already underway.", "Policy incentives: Often regulatory and other policy incentives  influence potential revenues and risks and, in turn, R&D investment,  according to experts. For example, exclusivity periods and patent  protection, expedited review programs, and tax incentives were cited  as influencing R&D investment. The supply of new science from  federally funded research may also influence company investment  decisions. Expectations about payer reimbursement could also  influence potential pricing and investment decisions, according to  some experts. For example, one expert noted that payers typically do  not resist high prices for oncology drugs.", "These drivers may also explain the observed brand-name drug approval  trends for biologics, orphan drugs, and drugs for certain disease areas.  For example:", "Biologics: Some experts noted that recent technological advances  have spurred opportunity and investment in new biologics. The longer  period of FDA market exclusivity for biologics relative to traditional  chemically synthesized drugs may also be attractive to drug  developers. In addition, there are currently few biosimilar drugs  available to compete for market share once BLA exclusivity expires.  Though FDA had approved seven biosimilars for marketing between  2010\u2014the year the approval pathway for biosimilar biological  products was established\u2014and September 2017, and was reviewing  additional applications, some experts suggest that the added cost and  difficulty in developing biosimilars may hinder entry of biologics\u2019  competitors relative to the entry seen for traditional generics.", "Orphan drugs: In addition to the exclusivity and orphan drug credit  incentives to develop orphan drugs, an industry expert we interviewed  also suggested that it is easier to get FDA approval for orphan drugs,  and another suggested that it is less costly to develop them. In  addition, orphan drugs can often garner high prices compared to non- orphan drugs, according to an industry report.", "Disease areas: Certain drug classes or disease areas, such as drugs  for oncology or multiple sclerosis drugs, can garner higher prices and,  in turn, more R&D investment because they often have fewer  competitors, are often administered by providers who are insensitive  to price, or are perceived as particularly life-saving, according to some  experts we interviewed. In addition, some experts suggested that NIH  investment in oncology research and gains in personalized medicine  have resulted in many more research opportunities in which  companies can invest. For example, many new oncology drugs are  approved for treatment of tumors with specific genetic markers, and  research suggests these drugs are more likely to succeed in clinical  trials and face a less-elastic demand curve that, in turn, can facilitate  higher pricing.", "According to several experts we interviewed, a company\u2019s R&D focus on  fewer therapeutic areas of more profitable drugs or niche markets may  come at the expense of drug development in less lucrative disease  areas\u2014those that affect many patients but in which drugs are more costly  to bring to market or have existing generic competition\u2014for example,  cardiovascular disease. According to a study of drug development  pipeline data, the number of new drugs in all phases of clinical  development to treat cardiovascular disease, a leading cause of death in  the United States, declined from 1990 to 2012, whereas the number of  new cancer drugs increased over the period."], "subsections": []}]}, {"section_title": "Research Suggests Market Concentration Affects Drug Prices, and Mergers May Affect Drug Company Innovation", "paragraphs": ["Research we examined in our literature review suggests that the level of  competition in a relevant market influences drug prices. Competition also  matters for innovation. Certain empirical economic studies suggest that  mergers among brand-name drug companies can negatively impact  companies\u2019 innovation post-merger."], "subsections": [{"section_title": "Research Finds High Market Concentration Is Associated with Higher Drug Prices", "paragraphs": ["The relationship between competition and drug price is well documented  in the drug industry, and industry experts and available research point out  that competition dynamics differ for brand-name and generic drugs. Brand  name companies producing drugs under patent or exclusivity protection  have monopoly pricing power unless alternative drugs that treat the same  condition are available. For brand-name products that face competition  from such therapeutic alternatives, companies compete on price,  differentiation from competitors, or both. We and others have reported  that brand-name drug companies consider the availability and price of  therapeutic alternatives along with potential market size, the perceived  value of the drug relative to competitors, and other factors when  determining the price for a new drug. Conversely, generic drugs  compete on price with the brand-name or other generic manufacturers of  the same drug. As we have reported, and as experts we have interviewed  agreed, generic drug companies compete primarily on price.", "Based on our literature review, we did not identify any empirical studies  that examined the impact of drug industry concentration changes from  mergers and acquisitions on drug prices post-merger. However, empirical  studies we reviewed suggest that less competition\u2014that is, a more highly  concentrated market\u2014is associated with higher drug prices, particularly  for generic drugs. The following summarizes studies we reviewed on the  effect of generic and brand-name competition:", "Generic competition: Most notably, once brand-name drugs lose  patent and marketing exclusivity and generic versions of drugs enter  the market, drug prices fall and continue to decline as additional  generic manufacturers enter. The price moderating effect of generic  competition is well documented by FDA, FTC, the IMS Institute for  Healthcare Information, and other research. FDA found that for drugs  sold from 1999 through 2004, the first generic competitor reduced the  drug price only slightly lower than the brand-name on average, but the  second generic competitor reduced the drug price by nearly half. For  drugs that attracted nine or more generic manufacturers, the average  generic price fell 80 percent or more. The IMS Institute for Healthcare  Information reported similar findings in 2016 based on its review of  generics that entered the market between 2002 and 2014. The  introduction of generics reduced the price of those drugs by 51  percent in the first year and 57 percent in the second year with price  reductions driven, in part, by the increasing number of competitors. In  addition, a 2017 study of 1,120 drugs available as generics between  2008 and 2013 determined that drugs with less market competition,  measured by higher concentration, had higher price increases over  the period compared to drugs in the cohort with the lowest  concentration.", "Brand-name competition: For brand-name drugs, studies show that  the presence of therapeutic alternatives in the market reduces the  launch price\u2014the price the company sets for a new drug. For  example, an often-cited 1998 study of launch prices for 130 new  molecular entities showed that a greater number of brand-name  therapeutic alternatives was associated with substantially lower  launch prices for new brand-name drugs compared to their  predecessors. More recently, there are examples of therapeutic  alternatives creating market pressure on, and thus reducing prices of,  brand-name drugs, such as multiple brand-name hepatitis C therapies  that became available between 2013 and 2014.", "Research has also found that some brand-name drug companies are able  to maintain or even raise prices for their drugs\u2014despite competition from  therapeutic or generic alternatives\u2014for various reasons, such as product  differentiation or brand loyalty stemming from marketing or prescribing  patterns. For example, brand-name companies may actually increase  prices for some of their drugs to capture the price-insensitive segment of  the market. Research also suggests that the extent of price reductions  resulting from the entry of generic drugs into a market can differ by the  characteristics of the drug and may be less dramatic for biosimilar drugs  than traditional generic drugs. For example, the 2016 IMS report noted  that price reductions under these circumstances occurred faster for oral  drugs than for injectable drugs, which often attract fewer generic  competitors. Another 2017 study examining the state of generic  competition found that injectables and drugs with other formulations, such  as topical or inhaled drugs, were more likely than oral drugs to have only  one or two manufacturers. Certain literature we reviewed and experts we interviewed suggested that biosimilars will moderate prices for biologic  drugs, but not to the same extent as traditional generics do because they  are more costly to manufacture and may be less consistently substituted  for the brand-name drug; however, more time and research will be  needed to understand the effects given the small number of biosimilars  on the market."], "subsections": []}, {"section_title": "Studies Find Competition Matters for Innovation, and Some Suggest a Negative Impact of Mergers on Drug Company Innovation", "paragraphs": ["Competition is also relevant to innovation, according to economic studies  we examined. As noted, brand-name drug companies compete to  develop new products and differentiate their products from therapeutic  alternatives. The analysis of how competition affects innovation is a fact- specific process. There is empirical evidence suggesting that, in certain  circumstances the incentive to invest in R&D could be enhanced with  more competitors. For example, a 2014 study examining multiple  manufacturing and non-manufacturing industries demonstrated a positive  relationship between competition and innovation (measured by patents),  productivity, and R&D expenditures. While drug innovation comes from  multiple sources and increasingly from smaller innovative biotechnology  companies, the industry relies on large drug companies to invest in the  expensive clinical trials needed to develop and bring new innovations to  market.", "We also identified several merger retrospective studies. These studies  suggest that there are varied impacts of drug company merger and  acquisition on innovation, including both inputs (e.g., R&D spending) and  outputs (e.g., patents and new drug approvals).", "A 2009 study of 27 large, brand-name drug company mergers found that the mergers had a statistically significant negative impact on company R&D spending and patent issuance in the third year post- merger compared to non-merging companies. The authors concluded that the findings contradict the idea that mergers deliver advances in innovation that could outweigh possible anticompetitive risks.", "A 2007 study of 165 large mergers between 1988 and 2000 suggested that large companies sought to merge in response to patent expiration or product pipeline gaps, and small companies sought to merge as a response to financial trouble. When controlling for companies\u2019 propensity to merge, small merging companies\u2014 defined as companies valued less than $1 billion\u2014grew more slowly in R&D spending, sales, and R&D employees post-merger compared to similar non-merging companies. However, the study did not find these effects to last beyond one year and did not find differences in these growth rates between large merging companies and non- merging companies. Overall, the authors concluded that while merger in the drug industry is a response to being in trouble for both large and small companies, there is no evidence that it is a solution.", "Another 2009 study examined the number of approvals for new molecular entities\u2014innovative drugs\u2014as a means to examine outputs rather than only R&D spending. The study suggests that while mergers and acquisitions may help small companies, they are not an effective way for larger companies to increase output of new molecular entities. For example, for a sample of 30 mergers and acquisitions with 10 years of data before and after the merger, the study found that for large companies the number of new molecular entities did not increase and may actually have declined slightly following merger or acquisition. Smaller companies, however, experienced an increase in new molecular entities after merger or  acquisition.", "Other studies suggest mergers and acquisitions may have a positive impact on innovation using certain measures. For example, a 2006 study of 160 acquisitions involving drug companies between 1994 and 2001 estimated that companies with declining R&D pipeline and sales were more likely to engage in acquisition and that outsourcing R&D through acquisitions was a successful strategy to stabilize declines in drug R&D pipelines. This study estimated that 71 percent of acquiring companies either maintained or improved the health of their research pipelines after merger."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Health and Human  Services, FTC, IRS, and NSF for review. These agencies provided  technical comments, which we incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, relevant agencies, and other interested  parties.", "In addition, the report will be available at no charge on the GAO website  at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  John E. Dicken at (202) 512-7114 or DickenJ@gao.gov or Oliver Richard  at (202) 512-8424 or RichardO@gao.gov. Contact points for our Office of  Congressional Relations and Office of Public Affairs can be found on the  last page of this report. Other major contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["This appendix provides further details on our scope and methodology in  addressing each of our three reporting objectives, which are to describe:  (1) how the financial performance and structure of the drug industry have  changed over time; and (2) how reported research and development  spending and new drug approvals have changed; and (3) what is known  about the potential effects of consolidation on drug prices and new drug  development. In addition, the appendix describes how we selected  officials to interview and the steps we took to assure the reliability of the  data we analyzed."], "subsections": [{"section_title": "How the Financial Performance and Structure of the Drug Industry Have Changed Over Time", "paragraphs": [], "subsections": [{"section_title": "Analysis of Sales Revenue and Profit Margins", "paragraphs": ["To describe reported pharmaceutical and biotechnology sales revenue  and profit margins, we used the Bloomberg Terminal to identify  pharmaceutical and biotechnology companies that were still active as of  the time of our review. Bloomberg uses a proprietary hierarchical  classification system (the Bloomberg Industry Classification System) to  categorize companies into different primary industries. We used the  Bloomberg Terminal\u2019s company classification browser to obtain an initial  set of companies that currently have reported pharmaceutical or  biotechnology revenue. We restricted the drug companies in our review to  those that were categorized under the \u201cPharmaceutical & Biotechnology\u201d  Bloomberg Industry Classification System (BICS) level 2 category, which  indicated that Bloomberg characterizes the company as being primarily a  pharmaceutical or biotechnology company. Using this list, we downloaded  each company\u2019s reported pharmaceutical and biotechnology sales  revenue, total sales revenue, profit margin, return on assets, and return  on equity for each company\u2019s fiscal years 2006 through 2015, which were  the most current data available. To provide a comparison, we followed the  same procedure to obtain data for software companies over the same  period. We selected software companies as a comparison because they  have high research and development (R&D) and low manufacturing costs  similar to drug companies. Sales revenues were adjusted to reflect real  2015 U.S. dollars using the gross domestic product price index.", "When examining sales revenues, profit margins, return on assets, and  return on equity, analyses were limited to the subset of companies with  complete data over the 10-year period for the variables included in the  analysis. We did not have a count of how many companies might have  existed throughout the review period, but which had no data available on  any of the variables we examined. Profit margin, return on assets, and  return on equity were each weighted by the company\u2019s industry-specific  sales revenue (pharmaceutical and biotechnology or software) prior to  averages being computed. To identify the \u201clargest 25\u201d companies for  analyses, we first restricted data to companies that had data for the  variables being examined for 2006 through 2015, then identified the 25  drug companies with the largest pharmaceutical and biotechnology  revenue in 2015. This provided a consistent cohort of large companies to  examine longitudinally for each analysis.", "We also examined profit margins for the largest 500 companies by total  worldwide 2015 sales revenue. We obtained a list of the largest 500  companies in 2015 from the Bloomberg Terminal that were still active  during our review. Using this list, we downloaded each company\u2019s BICS  level 2 category; total sales revenue; pharmaceutical, biotechnology, and  software revenues; and profit margins for each company for fiscal years  2006 through 2015. We removed any companies primarily classified by  Bloomberg under one of those industries since we had analyzed these  separately. For the remaining companies in our largest 500, we  subtracted any reported pharmaceutical, biotechnology, and software  revenues from their total sales revenues since some companies may  have reported such revenues despite not being classified primarily as one  of these types of companies. We then weighted each of the remaining  companies\u2019 profit margins by their remaining total sales revenue prior to  calculating an average. This weighting differed slightly from the industry- specific sales weighting used in the earlier analyses of drug and software  companies\u2019 profit margins. For the software industry, the Congressional  Budget Office only indicated that it had high R&D and low manufacturing  costs similar to drug industry; it did not suggest the same for other lines of  business that software companies might additionally be involved in.  Because we had no reason to isolate industry-specific revenues for our  remaining largest 500 companies, we weighted their profit margins by  their total sales revenues. As with the prior profit margin analyses,  analysis of the largest 500 sales weighted profit margins were limited to  companies with data available for each of company fiscal years 2006  through 2015."], "subsections": []}, {"section_title": "Analysis of Mergers and Acquisitions", "paragraphs": ["For analyses of mergers and acquisitions, we again relied on data from  the Bloomberg Terminal. We restricted our search to mergers and  acquisitions that were completed from January 1, 2006, to December 31,  2015, and which featured a drug company on both sides of the  transaction (e.g., as the acquirer and as the acquired company in the  case of acquisition of a full company). The \u201clargest 25\u201d companies were  determined by their 2015 pharmaceutical and biotechnology sales  revenue only\u2014because not every company could be expected to have a  merger or acquisition transaction in every year, we did not make this a  requirement to be included in the merger and acquisition analyses. We  used what Bloomberg reported to be the completed transaction values in  our analyses, and we adjusted the values to consistently reflect real 2015  dollars.", "Many companies were not included in analyses due to incomplete data,  therefore the results of our analyses of these data do not reflect the entire  industry. Bloomberg obtains much of its information from public filings,  which provide companies considerable leeway in deciding what to report  and how. For mergers and acquisitions, approximately 40 to 50 percent of  the completed transactions in Bloomberg\u2019s data between 2006 and 2015  did not have disclosed transaction values. Bloomberg officials told us that  transaction values are often missing for private companies."], "subsections": []}, {"section_title": "Analysis of Concentration", "paragraphs": ["To examine overall industry concentration we used pharmaceutical  industry and company-specific sales data from QuintilesIMS from 2007  through 2014, the years for which data were publicly available. We also examined publicly available industry reports and generic drug approvals  data for discussion of concentration across different therapeutic areas.  Our findings on industry concentration and the variation of concentration  across therapeutic classes is limited to these examples."], "subsections": []}]}, {"section_title": "How Reported Research and Development Spending and New Drug Approvals Have Changed", "paragraphs": [], "subsections": [{"section_title": "Analysis of Research and Development Spending", "paragraphs": ["To examine how reported R&D spending changed over time, we analyzed  data from the Business Research, Development and Innovation Survey  maintained by the National Science Foundation\u2019s (NSF) National Center  for Science and Engineering Statistics for years 2008 through 2014, the  most recent years for which data were consistently available. The  Business Research, Development and Innovation Survey data are  collected annually from a probability sample of for-profit companies with a  U.S. presence, which are classified in select manufacturing and  nonmanufacturing industries based on their North American Industry  Classification System (NAICS) code. We analyzed aggregate company- reported worldwide R&D expenditures and worldwide sales for  respondent companies designated with NAICS code 3254 for  pharmaceuticals and medicines. We also examined pharmaceutical company-reported domestic R&D expenditures by character of work\u2014 basic research, applied research, or development\u2014as defined by NSF as  well worldwide and domestic R&D expenditure by performer (whether  R&D was paid for and performed by the company, or paid for by the  company to be performed by others). We also examined worldwide  expenditures and sales for companies designated as biotechnology  research and development companies (NAICS 541711); however  estimates were not available for 2008 or 2014 and were less reliable in  the years between. We therefore reported biotechnology expenditures  and sales separately from pharmaceutical companies and limited the  majority of our analysis to pharmaceutical companies. For comparison,  we also examined worldwide R&D expenditure and sales for comparably  large industries with high R&D intensity as well as all manufacturing and  all non-manufacturing industries. All spending and sales data were  adjusted to real 2015 U.S. dollars using the gross domestic product price  index. We also examined the Business Research, Development and  Innovation Survey sample selection and sampling error information for  each year of the survey. Finally, we compared worldwide and domestic  R&D expenditure and sales trends to spending and sales reported by  Pharmaceutical Research and Manufacturers of America (PhRMA)\u2014a  national trade association.", "To examine federal spending trends, we analyzed publicly available data  from NSF\u2019s National Center for Science and Engineering Statistics\u2019  Survey of Federal Funds for Research and Development on obligations  for research in biomedical related fields made by federal agencies  identified as funding drug-related research between fiscal years 2008 and  2014, years consistent with available industry data from NSF\u2019s Business  Research, Development, and Innovation Survey. Data represent federal  agency obligations for basic and applied research in the fields of  biological sciences, medical sciences, and other life sciences as reported  by federal agencies. Obligations were adjusted to real fiscal year 2015 U.S. dollars using the gross domestic product price index. We identified  agencies that fund drug-related research based on interviews with  officials from the National Institutes of Health (NIH), NSF, and other  industry experts. The Survey of Federal Funds for Research and  Development is a census of federal agencies that conduct R&D, and  provides data on obligations by agency and field of science rather than by  specific industry or use. Our estimates of federal spending may be  imprecise because the data preclude us from pinpointing spending  specific to drug R&D projects, and because the type of research that  federal agencies typically fund often has an impact on many different  research areas that may not be specific to drugs. We also reviewed  budget documents from NIH and reviewed select studies for spending  estimates by non-federal or industry sources.", "In addition, we obtained estimates of R&D spending by state and local  governments and non-industry private funders for 2015 from National  Health Expenditure account estimates. These estimates include spending  for all biomedical research by these categories and thus also likely  overestimate spending specific to drug development."], "subsections": []}, {"section_title": "Analysis of Tax Incentives", "paragraphs": ["To identify tax provisions that provide incentives for drug research and  development, we reviewed reports by the Joint Committee on Taxation  and the Congressional Research Service. We obtained and analyzed  aggregate tax return data from the Internal Revenue Service (IRS)  Statistics of Income division for the orphan drug credit and research credit  claimed by relevant industries and all returns (all industries) for years  2005 to 2014, the latest ten years for which data were available.  Specifically, we analyzed claims from companies with IRS Principle  Business Activity codes for pharmaceutical manufacturing, drug  wholesalers, and scientific research. IRS\u2019s industry codes are based on  NAICS definitions, and corporations are instructed to report the industry  code for which it derives the highest percentage of its total receipts.  These data are reviewed by Statistics of Income division staff for  accuracy. The scientific research industry category includes corporations  conducting biotechnology research and development, but also includes  firms conducting research in nanotechnology and physical, engineering,  and life sciences. As a result, we chose not to report research credits  claimed by corporations in the broader scientific research industry  category as being related to drug development, but we do report orphan  drug credits claimed by corporations in this industry category. We also  obtained and examined reported qualified research expenses for  pharmaceutical manufacturing companies for years 2005 to 2014. IRS\u2019  Statistics of Income division produces estimates based on a  representative stratified sample of corporate returns. IRS provided  additional information on the corporations that reported claiming the  orphan drug and research credits; in both cases a high percentage of the  claims came from large corporations that are included in the stratified  sample with certainty. As a result, we concluded that the estimated credit  totals are reliable given that the estimates are largely based on returns  that were certain to be included in the sample. The amount of research  and orphan drug credits claimed represents claims rather than amounts  utilized due to limitations of the general business credit. Reported  estimates therefore may reflect the upper bounds of what was utilized  from claimed amounts. IRS also provided additional data on total  deductions claimed for qualified research expenditures and amounts  reported on financial statements from Form M-3, for 2010 to 2013. These  data were limited to large corporations that filed form M-3, which is  required for corporations with $10 million or more of assets. All claims  were adjusted to 2015 U.S. dollars using the gross domestic product price  index."], "subsections": []}, {"section_title": "Analysis of Drug Approvals", "paragraphs": ["To examine trends in new drug approvals, we obtained and analyzed  data from the Food and Drug Administration (FDA) for new drug  applications (NDA) and biologic license applications (BLA) and NDA- and  BLA-efficacy supplements approved by the FDA\u2019s Center for Drug  Evaluation and Research between 2005 and 2016, the most recent ten  years of available data at the time of our review. We determined which  drugs FDA considered novel drugs by reviewing publicly available reports  and resolving any discrepancies with agency officials. We analyzed  these data to determine the type of drugs FDA approved, such as the  product category and whether the drug was designated an orphan drug.", "Finally, we interviewed agency and industry experts and reviewed  relevant academic, government, and industry literature on R&D  investment trends and reasons for such trends."], "subsections": []}]}, {"section_title": "What Is Known about the Potential Effects of Consolidation on Drug Prices and New Drug Development", "paragraphs": [], "subsections": [{"section_title": "Literature Search on Consolidation Impacts", "paragraphs": ["To determine what is known about the impact of drug industry  consolidation on drug price and drug development, we reviewed studies  obtained from a literature search. To identify relevant publications, we  used a number of bibliographic databases, including ProQuest, Scopus,  PubMed, National Technical Information Service, Lexis, Social Science  Research Network, and the National Bureau of Economic Research. We  reviewed the following document types: scholarly peer reviewed material,  government reports, working papers, and policy research organization  publications published by a U.S. publication from 2005 forward. We  concluded our searches in August 2017. To the resulting list of  publications, we added articles identified in our own background research  and articles suggested by industry experts, including certain heavily cited  papers published prior to 2005. From the revised list, we selected  publications that empirically evaluated the effect of drug industry  consolidation (mergers and acquisitions) on drug price or innovation (new  drug development or R&D spending). We also selected publications that  included empirical analyses of drug industry or subindustry concentration  or competition and drug price or drug development. Finally, we reviewed  the data sources and methodology used to support the assertions of each  publication and included those that met our methodological criteria. See  the bibliography at the end of this report for the 22 publications included  in our review."], "subsections": []}]}, {"section_title": "Interviews", "paragraphs": ["To inform our understanding of the drug industry for all three objectives  including structural changes that have taken place, reasons for  consolidation trends, drivers of drug company R&D investment trends,  and any impacts of consolidation on drug price or innovation, we  interviewed drug industry experts including three drug trade associations,  four advocacy organizations, two financial ratings agencies, and officials  from the FDA, IRS, NSF, Federal Trade Commission (FTC), and NIH.  We selected these experts to obtain a variety of industry perspectives.  We also interviewed seven academic economic experts about economic  factors influencing consolidation and other structural changes, R&D  investments, and potential consolidation impacts. We selected these  economic experts based on citations in our literature review and  suggestions from FDA and FTC officials."], "subsections": []}, {"section_title": "Data Reliability", "paragraphs": ["To ensure that the data used to produce this report were sufficiently  reliable, we took several steps. We performed data reliability checks on  the data we obtained from the Bloomberg Terminal, such as comparing  select companies\u2019 financial data to company annual reports, checking for  outliers, and discussing reliability issues with Bloomberg representatives.  We did not independently verify the accuracy or completeness of the  information reported by the companies. We verified the reliability of NSF\u2019s  Business Research, Development and Innovation Survey data used in  this report by reviewing relevant documentation, including relative  standard errors for specific measures, and by interviewing agency  officials who were knowledgeable with the data. We also interviewed  knowledgeable NSF officials regarding the reliability of reported Federal  Funds for Research and Development survey data and compared  reported obligations to NIH budget documents. To verify the reliability of  aggregate tax return information, we reviewed relative standard errors for  reported measures and interviewed knowledgeable agency officials. We  verified the reliability of FDA-provided information by cross-referencing it  against other published FDA sources and by interviewing knowledgeable  agency officials. After taking these steps, we determined the data were  sufficiently reliable for the purposes of our reporting objectives.", "We conducted this performance audit from April 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings based  on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Mergers and Acquisitions of Ten Large Drug Companies from 2006 through 2015", "paragraphs": ["The following table reflects mergers and acquisition transactions from  2006 through 2015 for 10 large drug companies, as measured by their  2014 pharmaceutical and biotechnology revenue. Transactions reflect  those reported in Bloomberg that were completed from January 1, 2006,  through December 31, 2015, and had values of at least $500 million in  real 2015 dollars."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Robert Copeland, Assistant  Director; Yesook Merrill, Assistant Director; Rebecca Abela, Analyst-in- Charge; Reed Meyer; Brandon Nakawaki; Edward Nannenhorn; Laurie  Pachter; and Matthew Rabe made key contributions to this report. Also  contributing were George Bogart, Muriel Brown, Sandra George, Sarah  Gilliland, and Giselle Hicks."], "subsections": []}]}, {"section_title": "Bibliography of Research Articles Used in GAO Literature Review", "paragraphs": ["We reviewed literature to identify what is known about the impact of drug  industry consolidation on drug price and drug development. We included  publications that empirically evaluated the effect of drug industry  consolidation (mergers and acquisitions) on drug price, of which we did  not identify any publications. We also reviewed publications that included  empirical analyses of the impact of concentration or competition on drug  price.", "Berndt, Ernst R., and Murray L. Aitken, Brand Loyalty, Generic Entry and  Price Competition in Pharmaceuticals in the Quarter Century after the  1984 Waxman-Hatch Legislation, National Bureau of Economic Research  Working Paper 16431 (October 2010).", "Berndt, Ernst R., and Rena M. Conti, Specialty Drug Prices and Utilization  After Loss of U.S. Patent Exclusivity, 2001-2007, National Bureau of  Economic Research Working Paper 20016 (March 2014).", "Berndt, Ernst R., Rena M. Conti, and Stephen J. Murphy, The Landscape  of US Generic Prescription Drug Markets, 2004-2016, National Bureau of  Economic Research Working Paper 23640 (July 2017).", "Dave, Chintan V., Aaron S. Kesselheim, Erin R. Fox, Peihua Qiu, and  Abraham Hartzema. \u201cHigh Generic Drug Prices and Market Competition:  A Retrospective Cohort Study.\u201d Annals of Internal Medicine, vol. 167, no.  3 (2017): 145-151.", "Department of Health and Human Services. U.S. Food and Drug  Administration. \u201cGeneric Competition and Drug Prices.\u201d 2015. Accessed  July 31, 2017.  https://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsa ndTobacco/CDER/ucm129385.htm  Grabowski, Henry G., David B. Ridley, and Kevin A. Schulman. \u201cEntry  and Competition in Generic Biologics.\u201d Managerial and Decision  Economics, vol. 28, no. 4/5 (2007): 439-451.", "Iacocca, Kathleen, James Sawhill, and Yao Zhao. \u201cWhy Brand Drugs  Priced Higher Than Generic Equivalents.\u201d International Journal of  Pharmaceutical and Healthcare Marketing, vol. 9, no. 1 (2015): 3-19.", "IMS Institute for Healthcare Informatics. Price Declines After Branded  Medicines Lose Exclusivity in the U.S. (Parsippany, N.J.: IMS Institute for  Healthcare Informatics, 2016).", "Lu, Z. John, and William S. Comanor. \u201cStrategic Pricing of New  Pharmaceuticals.\u201d The Review of Economics and Statistics, vol. 80, no. 1  (1998): 108-118.", "Olson, Luke M., and Brett W. Wendling, Working Paper No. 317: The  Effect of Generic Drug Competition on Generic Drug Prices During the  Hatch-Waxman 180-Day Exclusivity Period, Bureau of Economics,  Federal Trade Commission (Washington, D.C.: April 2013).", "Regan, Tracy L. \u201cGeneric Entry, Price Competition, and Market  Segmentation in the Prescription Drug Market.\u201d International Journal of  Industrial Organization, vol. 26, no. 4 (2008): 930-948.", "Richard, Oliver, and Larry Van Horn. \u201cPersistence in Prescriptions of  Branded Drugs.\u201d International Journal of Industrial Organization, vol. 22,  no. 4 (2004): 523-540.", "Tenn, Steven, and Brett W. Wendling. \u201cEntry Threats and Pricing in the  Generic Drug Industry.\u201d The Review of Economics and Statistics, vol. 96,  no. 2 (2014): 214-228.", "We also reviewed publications that empirically evaluated the effect of  drug industry consolidation on innovation\u2014including new drug  development or R&D spending\u2014as well as publications on the impact of  concentration or competition on innovation.", "Banerjee, Tannista, and Arnab Nayak. \u201cComparing Domestic and Cross- Border Mergers and Acquisitions in the Pharmaceutical Industry.\u201d Atlantic  Economic Journal, vol. 43, no. 4 (2015): 489-499.", "Comanor, William S., and F.M. Scherer. \u201cMergers and Innovation in the  Pharmaceutical Industry.\u201d Journal of Health Economics, vol. 32 (2013):  106\u2013 113.", "Danzon, Patricia M., Andrew Epstein, and Sean Nicholson. \u201cMergers and  Acquisitions in the Pharmaceutical and Biotech Industries.\u201d Managerial  and Decision Economics, vol. 28, no. 4/5 (2007): 307-328.", "Higgins, Matthew J., and Daniel Rodriguez. \u201cThe Outsourcing of R&D  Through Acquisitions in the Pharmaceutical Industry.\u201d Journal of Financial  Economics, vol. 80 (2006): 351-383.", "Getz, Kenneth A., Rachael Zuckerman, Joseph A. DiMasi, and Kenneth I.  Kaitin. \u201cDrug Development Portfolio and Spending Practices After  Mergers and Acquisitions.\u201d Drug Information Journal, vol. 43, no. 4  (2009): 493-500.", "Grabowski, Henry, and Margaret Kyle. \u201cMergers and Alliances in  Pharmaceuticals: Effects on Innovation and R&D Productivity,\u201d in The  Economics of Corporate Governance and Mergers. Northampton, M.A.:  Edward Elgar Publishing, Inc., 2008.", "Munos, Bernard. \u201cLessons from 60 Years of Pharmaceutical Innovation.\u201d  Nature Reviews Drug Discovery, vol. 8 (2009): 959-968.", "Ornaghi, Carmine. \u201cMergers and Innovation in Big Pharma.\u201d International  Journal of Industrial Organization, vol. 27, no. 1 (2009): 70-79.", "Thakor, Richard T., and Andrew W. Lo. Competition and R&D Financing  Decisions: Theory and Evidence from the Biopharmaceutical Industry,  National Bureau of Economic Research Working Paper 20903  (September 2015)."], "subsections": []}, {"section_title": "Related GAO Products", "paragraphs": ["Investigational New Drugs: FDA Has Taken Steps to Improve the  Expanded Access Program but Should Further Clarify How Adverse  Events Data Are Used. GAO-17-564. Washington, D.C.: July 11, 2017.", "Generic Drug User Fees: Application Review Times Declined, but FDA  Should Develop a Plan for Administering Its Unobligated User Fees.  GAO-17-452. Washington, D.C.: May 25, 2017.", "Physician-Administered Drugs: Comparison of Payer Payment  Methodologies. GAO-16-780R. Washington, D.C.: August 1, 2016.", "Generic Drugs Under Medicare: Part D Generic Drug Prices Declined  Overall, but Some Had Extraordinary Price Increases. GAO-16-706.  Washington, D.C.: August 12, 2016.", "Medicare Part B: Data on Coupon Discounts Needed to Evaluate  Methodology for Setting Drug Payment Rates. GAO-16-643. Washington,  D.C.: July 27, 2016.", "Drug Shortages: Certain Factors Are Strongly Associated with This  Persistent Public Health Challenge. GAO-16-595. Washington, D.C.: July  7, 2016.", "Medicare Part B: CMS Should Take Additional Steps to Verify Accuracy  of Data Used to Set Payment Rates for Drugs. GAO-16-594. Washington,  D.C.: July 1, 2016.", "Corporate Income Tax: Most Large Profitable U.S. Corporations Paid Tax  but Effective Tax Rates Differed Significantly from the Statutory Rate.  GAO-16-363. Washington, D.C.: March 17, 2016.", "Drug Safety: FDA Expedites Many Applications, But Data for  Postapproval Oversight Need Improvement. GAO-16-192. Washington,  D.C.: December 15, 2015.", "Medicare Part B: Expenditures for New Drugs Concentrated among a  Few Drugs, and Most Were Costly for Beneficiaries. GAO-16-12.  Washington, D.C.: October 23, 2015.", "Prescription Drugs: Comparison of DOD, Medicaid, and Medicare Part D  Retail Reimbursement Prices. GAO-14-578. Washington, D.C.: June 30,  2014.", "Drug Shortages: Public Health Threat Continues, Despite Efforts to Help  Ensure Product Availability. GAO-14-194. Washington, D.C.: February  10, 2014.", "Corporate Tax Expenditures: Evaluations of Tax Deferrals and Graduated  Tax Rates. GAO-13-789. Washington, D.C.: September 16, 2013.", "Prescription Drugs: Comparison of DOD and VA Direct Purchase Prices.  GAO-13-358. Washington, D.C.: April 19, 2013.", "Medicare Part D Coverage Gap: Discount Program Effects and Brand- Name Drug Price Trends. GAO-12-914. Washington, D.C.: September  28, 2012.", "International Taxation: Information on Foreign-Owned but Essentially  U.S.-Based Corporate Groups Is Limited. GAO-12-794. Washington,  D.C.: July 16, 2012.", "Prescription Drugs: FDA Has Met Performance Goals for Reviewing  Applications. GAO-12-500. Washington, D.C.: March 30, 2012.", "Drug Pricing: Research on Savings from Generic Drug Use.  GAO-12-371R. Washington, D.C.: January 31, 2012.", "Prescription Drugs: Trends in Usual and Customary Prices for Commonly  Used Drugs. GAO-11-306R. Washington, D.C.: February 10, 2011.", "Brand-Name Prescription Drug Pricing: Lack of Therapeutically  Equivalent Drugs and Limited Competition May Contribute to  Extraordinary Price Increases. GAO-10-201. Washington, D.C.:  December 22, 2009.", "Tax Policy: The Research Tax Credit\u2019s Design and Administration Can Be  Improved. GAO-10-136. Washington, D.C.: November 6, 2009.", "Prescription Drugs: Improvements Needed in FDA\u2019s Oversight of Direct- to-Consumer Advertising. GAO-07-54. Washington, D.C.: November 16,  2006.", "New Drug Development: Science, Business, Regulatory, and Intellectual  Property Issues Cited as Hampering Drug Development Efforts.  GAO-07-49. Washington, D.C.: November 17, 2006."], "subsections": []}], "fastfact": ["The amount of money people spend on prescription drugs has nearly doubled since the 1990s. Much of this increase is due to expensive brand-name drugs, but the prices of some generics have also gone up.", "We looked into changes in the drug industry and found that pharmaceutical and biotechnology sales revenue increased from $534 billion to $775 billion between 2006 and 2015. Additionally, 67% of drug companies increased their annual profit margins during the same period\u2014with margins up to 20 percent for some companies in certain years. Drug industry spending for research and development increased from $82 billion in 2008 to $89 billion in 2014."]}
{"id": "GAO-18-402", "url": "https://www.gao.gov/products/GAO-18-402", "title": "Energy Storage: Information on Challenges to Deployment for Electricity Grid Operations and Efforts to Address Them", "published_date": "2018-05-24T00:00:00", "released_date": "2018-05-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Power plants' electricity output must be matched continuously with demand, which varies depending on the time of day and year. To maintain a reliable supply of electricity, operators of the electricity grid\u2014a complex network of power plants and power lines managed by utility companies and other operators\u2014take steps to ensure power plants are available to generate electricity when needed. Increasingly, renewable sources of energy, such as solar and wind, are being integrated into the grid.", "Energy storage allows for electricity to be stored and used later when it is needed and could change the operating capabilities of the electricity grid. Batteries and other energy storage technologies can store energy in one form\u2014such as chemical, mechanical, or thermal energy\u2014and transform that energy to generate electrical power at a later time.", "GAO was asked to provide information on the role of energy storage in grid operations. This report describes (1) how energy storage can be used to enhance grid operations and performance; (2) factors that affect the deployment of energy storage for grid operations; and (3) federal and state policies and other efforts that address the deployment of energy storage. GAO reviewed studies published from 2012 through 2017; and interviewed 41 stakeholders, including officials from government agencies and representatives of industry and other groups based on their knowledge of energy storage and grid operations."]}, {"section_title": "What GAO Found", "paragraphs": ["Energy storage can be used in various ways to enhance the reliability, resilience, and efficiency of grid operations, according to studies GAO reviewed and stakeholders GAO interviewed. Such storage can be deployed throughout the electricity system and act as a generation, transmission, distribution, or customer-sited asset to provide various services, address operational challenges and needs, and potentially reduce costs, as shown in the figure below. For example, storage can help grid operators address supply disruptions and the variability of renewable energy resources, such as solar and wind; relieve transmission congestion; defer the need for transmission or distribution system upgrades; and provide backup power during a power outage.", "Examples of Potential Storage Applications on the Electricity Grid", "Various factors affect energy storage deployment. These include industry and technology readiness, safety concerns and stringency of siting requirements, increasing use of renewable resources, cost-competitiveness of storage and challenges with quantifying the value of storage, and the regulatory environment, according to studies GAO reviewed and stakeholders GAO interviewed. For example, industry and technical challenges include uncertainty about the performance of certain technologies over time and in various operating conditions.", "Federal and state policymakers have used various policies and other efforts to encourage the deployment of storage and address market barriers. For example, the Department of Energy has undertaken various efforts, including research and development focused on improving factors that affect the cost and capacity of certain storage technologies. In addition, the Federal Energy Regulatory Commission has issued proposed and final rules to address market barriers to storage deployment in wholesale markets. Lastly, state policies and other efforts that aim to encourage the deployment of storage or to address market barriers include establishing mandates and targets for storage adoption, revising planning requirements, and offering financial incentives and funding."]}], "report": [{"section_title": "Letter", "paragraphs": ["Electricity is supplied through a complex network of power plants and  power lines\u2014the electricity grid\u2014managed by utility companies and other  operators. The operation of electric power systems involves a complex  process of forecasting the demand for electricity, and scheduling and  operating power plants to meet that varying demand. Generally, electricity  cannot be easily stored, so power plants\u2019 electricity output must be  matched continuously with demand, which varies significantly depending  on the time of day and year. To maintain a reliable supply of electricity,  operators of the electricity grid take steps to ensure that power plants are  available to generate electricity when needed. The ability to store  electricity more easily could change the operating capabilities of the  electricity grid.", "The traditional model for generating and selling electricity in the United  States is changing. According to the Department of Energy (DOE), the  electric utility industry, regulators, and other stakeholders are working to  understand the role of energy storage in grid operations and how to  integrate it into the grid. Simultaneously, utilities in the United States are  investing in an aging grid with a growing segment in need of replacement  and modernization. One trend across the electric sector is a reduced  reliance on large, central power plants and greater use of more diverse  resource portfolios. The increasing use of variable energy resources such  as wind and solar power, the interaction of distributed energy resources\u2014 including energy storage\u2014with traditional generation sources, and the  changing role of electricity customers have increased the complexity of  matching electricity supply with demand at all times.", "Batteries and other energy storage technologies can store energy in one  form\u2014such as chemical, mechanical, or thermal energy\u2014and transform  the energy to generate electrical power. Energy storage technologies are  in various stages of development and deployment, and activities are  under way in the United States and elsewhere to improve the economic  and technical performance of storage options. Historically, electricity  storage has consisted of pumped hydroelectric storage projects, which  pump water to higher-elevation reservoirs when electricity demand is low  and allow it to flow downhill through electricity-generating turbines when  demand increases. Other energy storage technologies include electrochemical technologies such as batteries (lead acid, lithium ion,  sodium sulfur, and flow); electromechanical technologies such as flywheels (mechanical  devices that harness rotational energy to store and deliver energy)  and compressed air energy storage (that uses electricity to compress  air, then release it through a turbine to generate electricity later); and other forms of storage such as thermal storage.", "The Federal Energy Regulatory Commission (FERC), which regulates  interstate electricity transmission and oversees wholesale interstate  electricity markets, plays a role in addressing barriers to competition in  electricity markets as part of its statutory duty to ensure that market rates  are just and reasonable and not unduly discriminatory or preferential.  State entities, such as public utility commissions, regulate utility  management, operations, electricity rate structures, and capacity  acquisition within their state. Additionally, in some regions, regional  transmission organizations manage electricity transmission and  wholesale electricity markets. DOE conducts research and development  and provides analytical support for federal and other efforts that support  energy storage\u2019s role in modernizing the electricity grid.", "You asked us to review issues related to the role of energy storage in grid  operations. This report examines (1) how energy storage can be used to  enhance grid operations and performance; (2) factors that affect the  deployment of energy storage for grid operations; and (3) federal and  state policies and other efforts that address the deployment of energy  storage.", "To address the first two objectives, we reviewed studies and documents  from research institutions, such as DOE\u2019s national laboratories, FERC,  and stakeholder groups. The studies we reviewed were published from  2012 through 2017, the five most recent years for which studies were  available, and we identified them by conducting database and Internet  searches and asking stakeholder groups for recommendations.  Specifically, we searched sources including ProQuest and WorldCat,  among others, and the websites of national laboratories. We selected  studies to review based on their relevance to energy storage, its role in  grid operations, and factors affecting deployment of storage for grid  operations. We selected 29 studies from the Congressional Research  Service (CRS); DOE; national laboratories; government-sponsored  research; non-governmental organizations such as nonprofits and  research institutes; industry associations; and peer-reviewed scientific  and trade journals. We reviewed the methodologies of these studies and  determined that they were sufficiently sound for describing the ways  energy storage can be used to enhance grid operations and factors  affecting deployment. We also reviewed other documents including FERC  proposed and final rules, guidance, and conference and meeting  transcripts; reports from state agencies, DOE, and national laboratories;  and industry papers and reports on topics relevant to our work. We  identified the ways energy storage can be used to enhance grid  operations and the factors affecting deployment often cited by  stakeholders, studies, and documents. Given our methodology, we may  not have identified every relevant study and every potential use of storage  and factor that affects deployment of storage, therefore our findings may  not be generalizable to all energy storage technologies but provide  examples of such technologies.", "To address the third objective, we reviewed and described documentation  of energy storage efforts at DOE and relevant FERC orders and proposed  and final rules addressing the deployment of storage. In addition, we  reviewed documentation of Internal Revenue Service efforts to solicit  comments on regulations that affect how a tax credit can be used for  storage projects. We identified state policies and efforts addressing  storage deployment by reviewing documents from federal and state  agencies, stakeholder groups, relevant databases, and industry news  sources and asking stakeholders. To describe these state policies and  efforts, we reviewed state government documents, reports, policies, and  legislation. Given our methodology, we identified examples that illustrate  the range of state policies and other efforts that may encourage the  deployment of energy storage or that address market barriers; however,  these examples do not represent a comprehensive list of all state policies  and efforts.", "For all of the objectives, we conducted interviews with officials and  representatives of 41 stakeholder groups including federal and state  government agencies, industry, and other stakeholders. Specifically, we  interviewed officials and representatives from 4 federal agencies (DOE,  FERC, CRS, and the Internal Revenue Service); 3 national laboratories  (the National Renewable Energy Laboratory, the Pacific Northwest  National Laboratory, Sandia National Laboratories); 8 state government  agencies; 11 grid operators and utilities; 7 industry associations; 2  nongovernmental organizations; and 6 other market participants,  including storage project developers and consultants. We identified  stakeholders that were knowledgeable about energy storage, grid  operations, and state and federal policies and other efforts by reviewing  prior GAO and CRS reports; the 29 studies from research institutions,  such as DOE\u2019s national laboratories, and other groups; and by asking  stakeholder groups for recommendations. Because this was a  nonprobability sample of stakeholders, views are not generalizable to all  potential stakeholders. For interviews with state entities, we selected a  nonprobability sample of four states that have policies encouraging  storage deployment, which stakeholders identified as leading in the  development and establishment of such policies, and that vary based on  geographic location because factors affecting deployment tend to vary in  different parts of the country. We also considered information on the  extent of energy storage deployed in the state. Throughout the report, we  use the following categories to quantify statements identified by studies  and stakeholders: \u201csome,\u201d which we define as two to five studies and  stakeholders collectively; \u201cseveral,\u201d which we define as six to 10 studies  and stakeholders collectively; and \u201cmany,\u201d which we define as more than  10 studies and stakeholders collectively.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes (1) electricity grid functions, operations, and  planning; (2) energy storage operational characteristics, technologies,  and deployment; and (3) the electricity regulatory framework."], "subsections": [{"section_title": "Electricity Grid Functions, Operations, and Planning", "paragraphs": ["The electricity grid involves four distinct functions: generation, electricity  transmission, electricity distribution, and grid operations (see fig. 1).  Electricity is generated at power plants by burning fossil fuels; through  nuclear fission; or by harnessing renewable sources such as wind, solar,  geothermal, or hydropower. Once electricity is generated, it is sent  through the electricity grid, which consists of high-voltage, high-capacity  transmission systems, to areas where it is transformed to a lower voltage  and sent through the local distribution system for use by residential and  other customers. Throughout this process, a grid operator, such as a local  utility, must constantly balance the generation and consumption of  electricity. To do so, grid operators monitor electricity consumption from a  centralized location using information systems, and send minute-by- minute signals to power plants to adjust their output to match changes in  the demand for electricity.", "As we previously reported, continuously balancing the generation and  consumption of electricity can be challenging for grid operators because  customers may use sharply different amounts of electricity over the  course of a day and throughout the year. For example, in many areas,  customer demand for electricity rises throughout the day and reaches its  highest point\u2014or peak demand\u2014in late afternoon or early evening.  Throughout the day, grid operators direct power plants to adjust their  output to match changes in demand for electricity. Grid operators typically  first use electricity produced by baseload power plants that are the least  expensive to operate, then progressively increase the supply of electricity  generated by power plants that are more expensive to operate as needed  to match increases in electricity demand. As a result, providing electricity  to meet peak demand is generally more expensive than during other parts  of the day, because to do so, grid operators use power plants that are  more expensive to operate. Peak periods are generally short and account  for only a few hours per day and, overall, a small percentage of the hours  during a year, but can significantly contribute to the overall costs of  serving customers.", "Grid operators conduct planning to assess the adequacy of existing grid  infrastructure, identify capacity needs, and evaluate the cost and  effectiveness of potential solutions to address these needs. As we  previously reported, to ensure that grid infrastructure has sufficient  capacity to meet future peak demand, grid operators typically develop  forecasts of future electricity demand based on historical information  about customer electricity use combined with assumptions about how  customer demand will change in the future based on population growth,  economic conditions, and other factors.", "Utilities deal with uncertainty partly by producing a range of forecasts  based on demographic and economic factors, and by maintaining excess  generating capacity, known as reserves. Models help utilities choose the  least-cost combination of generating resources to meet demand. If  demand forecasts are too high or low, a utility could end up with more or  less generating capacity than it needs to serve its customers reliably, or it  could end up with a mix of generating capacity that is not cost effective.  These outcomes can affect electricity rates as well as the utility\u2019s financial  situation. To meet demand for electricity, utilities can construct new  plants, upgrade existing plants, purchase power from others, build new  transmission and distribution lines, and provide incentives to customers to  reduce and shift their demand for electricity through energy efficiency or  demand-response programs. In addition, utilities may use time-based  pricing\u2014prices that vary throughout the day and year to reflect the costs  of serving consumers\u2014to encourage consumers to lower their electricity  use at times of high prices or shift their use to times of the day when  prices are lower, which can lower their electricity bills."], "subsections": []}, {"section_title": "Energy Storage Operational Characteristics, Technologies, and Deployment", "paragraphs": ["Energy storage includes a number of different technologies that have the  ability to store energy for use at a later time. Energy storage systems can  be designed with a range of technologies, such as pumped hydro,  compressed air, batteries, and flywheels, according to DOE. Each  technology has its own performance characteristics that make it more  suitable for certain grid services than for others. Specifically, compressed  air and pumped hydro are capable of discharge times\u2014the length of time  that a storage device can discharge electricity\u2014in tens of hours and have  large capacities that can reach 1,000 megawatts (MW). According to  DOE and CRS, storage projects involving these types of technologies  generally have unique siting requirements, including specific geographical  features, or long construction times. In contrast, other storage  technologies such as batteries and flywheels are smaller in terms of  capacity and have shorter discharge times, ranging from a few seconds to  several hours, and these technologies can generally be built without  specific geographical features at the site. These energy storage systems  are comprised of storage technologies and other system components  such as inverters, wiring, temperature regulation, and other equipment.", "According to DOE\u2019s Global Energy Storage Database, about 24 gigawatts  (GW) of grid-connected energy storage were in operation in the United  States and about 2 GW of storage capacity was under development as of  March 20, 2018. Pumped hydro comprises about 93 percent of this  storage capacity in operation. Many of the operational pumped hydro  systems in the United States were commissioned during the 1960s  through the 1980s; the most recent became operational in 2012. See  figure 2 for information about the proportion of energy storage capacity in  operation or under development in the United States that comes from  certain types of technology.", "While pumped hydro comprises the majority of energy storage in  operation, batteries are driving the recent growth in energy storage. Since  2013, the capacity of utility-scale (1 MW or greater) battery deployments  grew by 283 percent (from about 185 MW to about 709 MW), though such  utility-scale batteries comprised about 0.07 percent of utility-scale  generating capacity on the U.S. electric grid, according to data from the  Energy Information Administration. See figure 3 for information on the  capacity of utility-scale battery installations each year from 2003 through  2017.", "Figure 4 shows how grid-connected storage of all technology types was  distributed nationwide as of March 20, 2018, according to DOE\u2019s Global  Energy Storage Database."], "subsections": []}, {"section_title": "The Electricity Regulatory Framework", "paragraphs": ["Responsibility for regulating the electricity industry is divided between the  states and the federal government. Most electricity customers are served  by electric utilities on the retail level that are regulated by the states,  generally through state public utility commissions or equivalent  organizations. As the primary regulator of electricity on the retail level,  state public utility commissions have a variety of responsibilities, such as  approving utility investments in generation and distribution assets, the  rates retail customers pay, and how those rates are set. Before  electricity is sold to retail customers, it may be bought, sold, and traded in  wholesale electricity markets that the federal government oversees  through FERC. FERC is responsible for overseeing regional  transmission organizations\u2019 (RTO) development and operation of  markets to ensure that wholesale electric rates are \u201cjust and reasonable\u201d  and not \u201cunduly discriminatory or preferential.\u201d To do so, FERC reviews  and approves RTO market rules and monitors the competitiveness of  RTO markets. Figure 5 indicates the location of major RTOs that have  developed in certain regions of the United States.", "RTOs serve as grid operators by managing regional networks of electric  transmission lines and also operate wholesale electricity markets to buy  and sell services needed to maintain a reliable grid. These markets  include  capacity markets\u2014auctions through which owners of power plants  can be compensated for agreeing to make their plants available to  provide electricity at a specified time in the future\u2014designed to  incentivize the building and retention of enough generation and other  resources to meet future power demands; energy markets for scheduling which power plants will generate  electricity throughout the day to maintain the balance of electricity  generation and consumption, and at what prices; and ancillary services markets, which are designed to maintain electric  reliability and ensure that supply and demand remain in balance from  moment to moment so that grid operators can deliver electricity within  technical standards, such as at the right voltage and frequency.", "RTOs are responsible for developing and implementing market rules,  approved by FERC, that provide the framework for the design and  operation of wholesale electricity markets. RTO market operations  encompass multiple services that are needed to provide reliable and  economically efficient electric service to customers. Each of these  services has its own parameters and pricing. The RTOs use markets to  determine the providers and prices for many of these services.", "In regions of the country without RTOs, electric utilities generally serve in  the role of grid operator. In these regions, the local utility often integrates  the delivery of electricity services\u2014energy to maintain the balance of  electricity generation and consumption, capacity to meet demand, and a  range of ancillary services. Utilities in these regions may build and  operate power plants to provide electricity to serve their retail customers.  These utilities may also buy electricity from other power plant owners."], "subsections": []}]}, {"section_title": "Energy Storage Can Be Used in Various Ways to Enhance the Reliability, Resilience, and Efficiency of Grid Operations", "paragraphs": ["Energy storage can be used in various ways to enhance the reliability,  resilience, and efficiency of grid operations, according to studies we  reviewed and stakeholders we interviewed. Storage can be deployed  throughout the electricity system and act as a generation, transmission,  distribution, or customer-sited asset to provide various services, address  operational challenges and needs, and potentially reduce costs. For  example, storage can help grid operators address supply disruptions,  relieve transmission congestion during periods of high demand, defer the  need for transmission or distribution system upgrades, and provide  backup power during a power outage. Figure 6 illustrates examples of  potential applications across the electricity grid.", "Energy storage can support the reliability of grid operations by helping  grid operators respond to fluctuations in electricity supply resulting from  the variability of renewable energy resources, such as solar or wind, or  disruptions to the grid, such as the loss of a transmission line or a  generating unit. Specifically, according to some studies we reviewed, the  fast-ramping nature of some storage technologies that can change  generation output quickly\u2014within a few seconds or minutes\u2014makes  them suitable for addressing short-term changes in variable energy  generation resources (referred to as variable resources) such as when  the sun sets and output from solar resources quickly declines. Moreover,  storage can provide ancillary services needed to maintain system  reliability and support the transmission of electricity. Specifically,  according to some studies we reviewed, storage can provide frequency  regulation services\u2014which entail moment-to-moment reconciliation of the  difference between supply and demand\u2014to maintain the stability of the  system. The services that storage provides can be performed by  traditional assets but because certain storage technologies are fast- ramping they can be better-suited to provide certain services, according  to several studies we reviewed and stakeholders we interviewed.", "Systems with a large portion of generating capacity from variable  resources can face reliability challenges because the intermittent nature  of these sources can cause fluctuations in voltage and frequency,  according to some studies we reviewed. Grid operators are adopting  storage to support increasing use of renewable energy and address the  associated challenges. For example, in 2017, San Diego Gas & Electric  deployed a 30 MW energy storage facility at its Escondido substation to  help improve regional reliability and support greater amounts of  renewable energy in the region\u2019s energy supply (see fig. 7). According  to San Diego Gas & Electric, the Escondido storage facility is helping to  enhance grid reliability and increase the use of renewable energy; the  facility is capable of the equivalent of serving 20,000 customers over a  period of 4 hours.", "Similarly, in 2017, according to Tucson Electric Power documents, the  utility installed two 10 MW battery storage projects to support its ability to  achieve long-term renewable energy goals without compromising the  reliability of service. According to representatives from the utility, the  projects provide frequency control and voltage support and the  deployment shortened the reaction time to system disruptions and  supported the utility\u2019s compliance with reliability standards in its role as  balancing authority.", "Storage can also provide services that support resilience by helping the  grid adapt to changing conditions and potentially disruptive events and, if  a disruptive event occurs, to rapidly recover, according to several studies  we reviewed and stakeholders we interviewed. Specifically, in the event  of an outage during which power sources or power lines become  unavailable, storage can respond quickly to provide backup power or  black start services\u2014the provision of the power necessary to restore a  generation plant when power from the grid is unavailable during a major  outage. In addition, storage can also support microgrids\u2014systems that  can connect and disconnect from the grid depending on operating  conditions\u2014that could maintain power for a small area independent of the  grid. For example, in 2015 a Vermont utility installed a 4 MW energy  storage system in conjunction with a 2.5 MW solar project at a school that  serves as an emergency shelter. In case of grid failure or an extended  emergency, the facility can separate from the rest of the grid and operate  independently. In addition, in 2016 in Massachusetts, the Sterling  Municipal Light Department installed a storage system that can isolate  from the main grid in the event of a power outage and provide emergency  backup power to the Sterling police station and dispatch center, a facility  providing first responder services. In the event of an outage, the 2 MW  storage system could provide the police station with up to 12 days of  power, according to the utility.", "Storage also has the potential to improve efficiency of grid operations and  help reduce operating costs, according to studies we reviewed and  stakeholders we spoke with. For example, storage has the potential to  reduce costs by capturing energy generated during low-cost periods to be  used to meet demand later during more expensive periods, according to  studies we reviewed. Specifically, energy time-shift, also referred to as  arbitrage, involves utilities purchasing inexpensive electric energy,  available during periods when prices or system marginal costs are low, to  charge the storage system so that the stored energy can be used or sold  at a later time when the price or costs are high. In addition, storage can  help make the capacity of variable resources more consistent by storing  electricity during periods of high generation, such as a sunny afternoon,  and releasing it later during periods of high demand, such as the early  evening. Moreover, storage can provide similar energy time-shift by  storing excess energy production from renewable sources, which could  otherwise be curtailed.", "Storage also has the potential to reduce costs by avoiding or delaying  investments in infrastructure. Specifically, storage may be used to reduce  the capacity demands on existing generation, transmission, and  distribution infrastructure. As a result, according to many studies and  stakeholders we interviewed, utilities may be able to avoid or delay  investments in generation, transmission, and distribution infrastructure  that would otherwise be necessary to maintain adequate supply. For  example, in 2017, a utility that serves customers in Massachusetts  announced plans to install a 6 MW energy storage system with an 8-hour  duration alongside a new diesel generator on Nantucket Island to provide  backup power and postpone the need to construct a costly submarine  transmission cable to bring electricity from the mainland to meet  anticipated growth in electricity demand. In some cases, an investment in  a storage system could be a more cost-effective way to manage peak  demand, and in such cases, utilities could reduce the need for operation  of peaking resources or investment in new peaking resources, such as a  natural gas plant.", "Additionally, according to many studies we reviewed and stakeholders we  interviewed, storage can help customers reduce demand charges.  Demand charges are fees included on electricity bills in many parts of the  country to cover the cost of ensuring that sufficient generation and  transmission resources are available to serve customers during periods of  peak demand. Energy storage provides an opportunity for potential  savings by helping a customer to manage their peak demand. Using  storage can also allow some utilities to avoid charges that they might  incur when purchasing wholesale electricity to serve their customers  during a system\u2019s peak demand; this could allow them to pass savings on  to their customers in the form of lower rates. For example, although the  Sterling, Massachusetts, Municipal Light Department installed its storage  system to provide emergency backup power, the primary benefits of the  project since its installation have resulted from using it to reduce peak  demand which has reduced the utility\u2019s transmission charges, and, in  turn, has allowed it to reduce rates paid by its customers, according to  utility representatives."], "subsections": []}, {"section_title": "Various Factors Affect the Deployment of Storage for Grid Operations, Including Industry and Technology Readiness, Cost- Competitiveness, and the Regulatory Environment", "paragraphs": ["Studies we reviewed and stakeholders we interviewed identified a variety  of factors that affect energy storage deployment. These factors include  industry and technology readiness, safety concerns and stringency of  siting requirements, increasing use of renewable resources, the cost- competitiveness of storage and challenges with quantifying the value of  storage, and the regulatory environment."], "subsections": [{"section_title": "Industry and Technology Readiness", "paragraphs": ["Grid operators and utilities have limited experience with storage and face  technical challenges integrating storage into existing systems, according  to studies we reviewed and stakeholders we spoke with. For example,  according to some studies and stakeholders, grid operators may not have  experience planning for the integration and operation of storage and they  may not consider it as an option. The models that grid operators typically  use to help make decisions about investments in generation, transmission  and distribution infrastructure are based on traditional resources with  better-understood capabilities. Moreover, storage can be more  challenging to integrate than other resources, such as solar, because it  changes its function in the system from charging\u2014consuming electricity\u2014 to discharging\u2014generating electricity, according to some stakeholders.", "Because storage must provide power when called upon but also must be  recharged from another resource at a later time, tools that planners rely  on must keep an accurate accounting of the amount of energy stored and  available to supply power to meet demand. According to one stakeholder,  installation of storage requires grid operators to develop operating  requirements and identify control and mitigation strategies for proper  coordination with larger grid operations. In addition, existing utility  systems may not be designed to incorporate storage and may require  customization to integrate storage, according to several stakeholders.", "Industry and technical challenges affecting deployment of storage include  uncertainty about the performance of certain storage technologies over  time and in various operating conditions. Energy storage systems  generally are expected to last for a decade or more, but the actual  degradation of battery storage under various conditions is still largely  unknown, according to some studies we reviewed and stakeholders we  spoke with. The electric utility industry has historically been slow to adopt  new technologies and, unless new storage technologies prove highly  reliable, utilities may be slow to deploy these assets, according to several  studies we reviewed and stakeholders we spoke with."], "subsections": []}, {"section_title": "Safety Concerns and Stringency of Siting Requirements", "paragraphs": ["Although the adoption of storage has been increasing, safety codes and  standards for storage are still under development, and questions have  been raised about safety risks and how to mitigate those risks, according  to studies we reviewed and stakeholders we interviewed. Efforts are  under way to ensure that safety codes and standards address energy  storage systems, but these types of standards tend to lag behind the  development of storage technologies, according to some studies and  stakeholders. Until existing codes and standards are updated, or new  ones are developed and adopted, entities seeking to deploy energy  storage or needing to verify a storage system\u2019s safety may face  challenges with applying existing codes and standards, according to  some studies we reviewed.", "In addition, concerns about the operational safety of large storage  systems as a fire hazard can be a barrier to their deployment in urban  areas or in proximity to other grid resources such as substations, and  local entities such as fire departments may not allow the deployment of  storage on certain sites. Moreover, local jurisdictions and emergency  responders, along with storage system installers, insurers, and others  may not have a complete understanding of the hazards associated with  storage and best approaches to addressing these hazards, such as the  appropriate fire protection measures, according to some studies and  stakeholders. In addition, local entities\u2019 review of energy storage systems,  for example, can add additional time to the permitting process, given that  these entities may not be familiar with storage systems and potential  safety concerns, according to some studies.", "On the other hand, in some locations siting requirements may be less  stringent for some types of energy storage projects than for other  resources such as a large power plant that must comply with more  stringent environmental requirements, according to some studies and  stakeholders. In some cases, according to some studies, the permitting  process may be simpler for storage projects and construction timelines  considerably shortened for a variety of reasons, including that energy  storage systems do not need to complete modifications to comply with air  quality standards because they do not produce emissions. In addition,  certain storage projects require a much smaller footprint than  conventional power plants, whereas building new power plants or  transmission lines can involve large land requirements."], "subsections": []}, {"section_title": "Increasing Use of Renewable Resources", "paragraphs": ["As mentioned previously, storage can help address reliability issues  associated with the variability of renewable energy generation resources  making them attractive to grid operators. Consequently, the increased  use of solar and other renewable energy resources has in turn  encouraged the installation of storage, according to some studies we  reviewed and stakeholders we interviewed. According to the Energy  Information Administration, utility-scale solar installations grew at an  average rate of 72 percent per year between 2010 and 2016, faster than  any other generating technologies. Moreover, increasing use of these  resources is expected to continue, which could drive the adoption of  storage deployment in the future, according to some studies we reviewed  and stakeholders we spoke with. The Energy Information Administration  estimated in January 2018 that nearly half of the approximately 25 GW of  new utility-scale electric generating capacity added to the grid in 2017  used renewable technologies, particularly wind and solar.", "Moreover, according to some studies and stakeholders, states with  aggressive renewable portfolio standards\u2014such as Hawaii, which aims to  achieve 100 percent renewable sources by 2045\u2014will need to adopt  storage resources to meet those goals. In addition, California\u2019s  renewables portfolio standard includes targets of 33 percent by 2020 and  50 percent by 2030. According to some stakeholders and documents we  reviewed, California is experiencing excess solar and wind generation  and curtailment at certain times of the day and year and, as the state  moves toward a target of 50 percent renewables, storage could help  address these challenges. According to some stakeholders we spoke  with, long-duration technologies will support greater integration of  renewable energy on the grid. As mentioned previously, pumped hydro  and compressed air energy storage can provide long duration storage,  and other technologies, including flow and lithium ion batteries, have the  potential to provide for long duration storage, according to some studies  we reviewed and stakeholders we spoke with."], "subsections": []}, {"section_title": "Cost-Competitiveness and Challenges with Quantifying the Value of Storage", "paragraphs": ["Grid operators\u2019 decisions to invest in energy storage must consider both  costs and benefits. While the cost of some technologies has fallen in  recent years, the cost of storage systems\u2014including all the system  components, installation, and integration costs\u2014is still high when  compared to more traditional resources available to electric utilities,  according to many studies we reviewed and stakeholders we spoke with.  On the other hand, the adoption of storage for certain purposes, such as  supporting increased use of renewable resources or providing backup  power, includes potential benefits such as reducing greenhouse gas and  other harmful emissions, or enhancing the resilience of the grid.", "While the cost of lithium-ion batteries has declined in recent years, the  storage device is one component of a storage system, and estimates of  the device\u2019s share of the total cost of an energy storage system range  from about 25 percent to 50 percent of the total costs, according to  studies we reviewed. According to some stakeholders, the cost of the  system components and other costs to integrate storage with the grid can  be substantial and are not declining as quickly as the cost of storage  devices. In addition to the cost of the storage device, other system  component costs include power conversion electronics, software, and  monitoring and control systems, among others, that are essential to  maintain the health and safety of the entire system, according to some  studies.", "Moreover, valuing investments in energy storage must consider both the  cost and benefits, but assessing the potential benefits and costs of  storage can prove challenging, according to several studies we reviewed  and stakeholders we spoke with. These challenges identified in these  studies and by these stakeholders include the following:", "Quantifying benefits. Benefits can be difficult to quantify, as they  depend on the application, location, and ability to capture multiple  benefits. Specifically, the compensation for services that storage can  provide reflects local market conditions, and these vary across  regions. In addition, the value of certain storage applications can be  harder to quantify than for others. For example, if a utility is  considering deployment of storage in order to defer an investment in a  transmission and distribution infrastructure upgrade, then determining  the value of the storage asset involves analyzing the avoided cost of  that investment, which is quantifiable. However, it is more difficult to  quantify the value of less tangible benefits of storage, such as  improvements to operational flexibility and grid resilience, which are  not monetized and therefore are difficult to quantify.", "Life expectancy. For certain storage technologies, much is still  unknown about their useful life, which depends on the number of  charge and discharge cycles, among other things. Reliable estimates  of the expected life of an asset are necessary for accurately  estimating lifecycle costs and benefits. Given the fact that battery  technologies are evolving, the lack of data makes it more challenging  for utilities to estimate expected costs and benefits to justify their  investment expense.", "Limited information on cost. Sufficient information on the cost of  storage systems is not readily available, limiting utilities\u2019 ability to  include storage in modeling and investment decisions, according to  some stakeholders. Energy storage price and cost data vary among  sources because of aggregation to protect proprietary interests, which  unit is chosen to present price and cost data, and limited information  about how projects operate. Specifically, information on the  operational conditions, specifications, and performance of energy  storage systems is difficult to obtain. In addition, according to some  studies we reviewed, uncertainty exists about the future cost outlook  and pace of technological maturity."], "subsections": []}, {"section_title": "Regulatory Environment", "paragraphs": ["The regulatory environment can pose barriers to the deployment of  energy storage. Specifically, market rules and regulations do not always  clearly address whether entities may own and operate storage assets and  how, if at all, the cost of investments in storage assets can be recovered,  according to several studies we reviewed and stakeholders we  interviewed. In addition, each RTO establishes the rules in a different  way, and their implementation of reforms to accommodate storage varies,  according to studies and documents we reviewed and stakeholders we  spoke with. According to a FERC document, under current market rules,  resource bidding parameters\u2014the physical and operational constraints  that a resource identifies when submitting offers to sell services in  electricity markets\u2014vary greatly among the RTOs. Moreover, state  regulators and RTOs may be slow to change their policies and rules to  address energy storage, and delays in such changes hinder deployment,  according to some studies we reviewed.", "In RTO regions, some states do not allow utilities to own generation  assets, and when storage is classified as a generation asset, an electric  utility can be prevented from owning storage. Moreover, when market  rules do not clearly define what type of asset they consider storage to be,  this can make it difficult to determine whether storage can participate in  the market or to receive compensation, making storage in that market  financially unviable, according to some studies and stakeholders. One  RTO, the California Independent System Operator (ISO), has established  participation models to accommodate resources, such as storage, that  are operationally unique. In addition, uncertainty exists about the ability  of storage project owners to recover costs of storage used for multiple  applications, according to documents and studies we reviewed and  stakeholders we spoke with.", "Moreover, the variation in rules and regulations across regions makes it  difficult for energy storage project developers to navigate different  potential markets because each has its own characteristics, stakeholders,  regulations, and market designs, according to some stakeholders.  Storage project developers must keep abreast of the activities of multiple  regulatory agencies and the variation by region makes potential revenue  streams difficult to predict. In addition, according to one study we  reviewed, the inconsistency of rules adds a level of complexity for project  developers that want to deploy storage resources across multiple markets  because they must conduct separate analyses to determine the  regulatory outlook, market requirements, and profit potential in each  region."], "subsections": []}]}, {"section_title": "Various Federal and State Policies and Other Efforts Aim to Encourage the Deployment of Energy Storage and Address Market Barriers", "paragraphs": ["Federal and state policymakers have used a variety of policies and other  efforts to encourage the deployment of storage and address market  barriers. For example, DOE has undertaken various efforts in response to  several challenges to the deployment of storage, but funding to continue  these efforts is uncertain. In addition, FERC has taken steps to address  market barriers to storage deployment in wholesale markets but the final  impact of these steps depends on implementation by RTOs. Moreover,  the Department of the Treasury and the Internal Revenue Service (IRS)  are considering changes that could clarify the eligibility of energy storage  for a tax credit. Lastly, state policies and other efforts aim to encourage  the deployment of energy storage or to address market barriers; these  include establishing mandates and targets for storage adoption, revising  interconnection rules and planning requirements, and offering financial  incentives and funding."], "subsections": [{"section_title": "DOE Has Undertaken Various Efforts to Address Challenges Affecting Storage Deployment, but Funding to Continue these Efforts Is Uncertain", "paragraphs": ["According to documents we reviewed, DOE has undertaken various  efforts in response to the challenges to deploying energy storage  identified in a 2013 report, including challenges concerning the safety  and reliability of such storage, its acceptance by industry, the regulatory  environment, and cost-competitiveness.", "Efforts to Address Safety and Reliability Challenges. In 2017,  DOE developed, through its Pacific Northwest National Laboratory  (PNNL) and Sandia National Laboratories, the DOE safety roadmap,  which established a goal to foster confidence in the safety and  reliability of energy storage systems. The roadmap built on previous  efforts including an Energy Storage Safety Forum that Sandia held in  2017 for stakeholders to share information and identify future needs.  The objectives of the roadmap include research and development,  codes and standards, and collaborative resources with a focus on  electrical safety, fire and smoke hazard detection and mitigation,  health and environmental hazards, natural and man-made disasters,  ventilation and thermal management, and system controls. The  roadmap aims to cover the development of energy storage systems  through their decommissioning or refurbishment and includes design,  installation, commissioning, operation and maintenance, repair,  decommissioning, and reuse.", "DOE has also supported efforts to develop and deploy energy storage  safety codes with industry groups, according to documents we  reviewed. For example, DOE established working groups focused on  safety and standards, including the Energy Storage Systems Safety  Working Group, which aims to facilitate the timely development and  deployment of safe energy storage systems by implementing the DOE  safety roadmap through collaboration with stakeholders. In addition,  as part of these efforts, a DOE working group on codes, standards,  and regulations monitors the development of standards and model  codes and provides input to those activities. Additionally, DOE  coordinates with industry-led and international code-setting agencies  such as the National Fire Protection Association and the International  Code Council, as well as companies that conduct testing. In addition,  PNNL published several resources including an inventory of codes  and standards, an overview of the development and deployment of  codes and standards, and a compliance guide. The compliance  guide prepared by PNNL and Sandia, which includes safety codes  and standards, aims to facilitate the timely deployment of storage  systems and assist with documenting compliance with current safety- related codes and standards and verifying compliance with codes and  standards.", "Efforts to Support Industry Acceptance. DOE has provided  technical assistance and funded demonstration projects to help  utilities and other entities install, procure, and evaluate storage  projects, according to documents we reviewed. For example, DOE  provided funding and technical support in the deployment of a storage  project at an emergency shelter in Vermont that can separate from the  rest of the grid and operate independently in case of an emergency.  DOE also supported the development of documentation and tools to  assist utilities in the design, deployment, and operation of energy  storage systems including valuation models, procurement guidelines,  commissioning procedures, and data acquisition guidelines. In  addition, Sandia published guidance to provide information for  municipalities on the elements that should be included in a solicitation  for procurement and installation of an energy storage project and a  handbook to provide information and tools to guide investors\u2019  evaluations of energy storage opportunities. DOE has a proposal  under way for a study to gather pricing information for energy storage  technologies that will be used as part of future updates to the  handbook. DOE also held a financial summit in June 2017 to provide  information to the financial community on solicitations and contracts.  In addition, to evaluate storage projects, DOE and the Washington  Department of Commerce established a memorandum of  understanding to have PNNL characterize and analyze the technical  and economic attributes of storage projects. DOE also supports new  deployments through funding, including the Grid Modernization  Laboratory Consortium awards aimed at integrating conventional and  renewable sources with energy storage.", "Provide Technical Assistance to Regulators. According to  documents we reviewed, DOE has hosted workshops and provided  technical assistance for several state public utility commissions and  other entities aimed at providing them with information on storage  technology development, project procurement, and valuation. In  addition, in 2012 Sandia developed guidance for state regulatory  authorities and planning personnel to provide information about  opportunities for energy storage to play a greater role in the electricity  grid.", "Research and Development to Improve Cost-Competitiveness.", "DOE\u2019s Energy Storage Program\u2019s research and development  activities focus on improving materials and system factors that affect  the cost, efficiency, and capacity of certain energy storage  technologies, including flow batteries. DOE\u2019s fiscal year 2018  budget request includes a performance goal to improve the cost- benefit ratio of storage to compete with current peak generation  resources and, by 2020, increase to 5 percent the commercial use of  grid-scale storage to buffer renewables.", "A DOE advisory committee in 2016 conducted an assessment of DOE\u2019s  energy storage-related research, development, and deployment programs  that produced 15 recommendations. The recommendations included,  among others, improving the visibility of DOE\u2019s efforts; addressing the  need for storage models and studies of market impediments; and  providing additional funding and resources for energy storage research,  development, and deployment programs.", "While DOE has undertaken a range of efforts over the past several years  to address challenges to deployment, future funding of these efforts is  uncertain. In 2017, DOE allocated $31 million to work on energy storage  within its Office of Electricity Delivery and Energy Reliability. DOE\u2019s  fiscal year 2018 budget request proposed reducing this funding by about  74 percent, to $8 million, and proposed eliminating, among other efforts,  work related to engagements with states, utilities, and storage providers for  conducting tests and trials; engagements with state and federal regulatory officials on efforts to  understand regional market barriers to deployment;  validation of system performance and analysis of regional use cases;  support to states and regional entities for the procurement,  commissioning, and analysis of deployed systems;  the development of enhanced tools and data for sharing with industry  for the development and use of grid-scale batteries; and participation in both industry-led and international codes and  standards development.", "Because fiscal year funding through March was provided under  continuing resolutions, energy storage funding remained on par with fiscal  year 2017 levels for the first half of the fiscal year, and the Consolidated  Appropriations Act, 2018, increased funding for energy storage to $41  million. However, DOE\u2019s fiscal year 2019 budget request again proposes  reducing the funding for energy storage work to $8 million. According to  DOE\u2019s fiscal year 2019 budget request, DOE plans to focus on  accelerating the development of new materials and technologies that can  lead to improvements in the cost and performance of utility-scale energy  storage systems and accelerate the adoption of energy storage systems  into the grid infrastructure."], "subsections": []}, {"section_title": "FERC Has Taken Steps to Address Market Barriers to Storage Deployment, but the Final Impact of these Efforts Depends on Implementation by RTOs", "paragraphs": ["FERC has taken several steps to address market barriers to energy  storage deployment, but the impact of these efforts will depend on  implementation by RTOs. In March 2018, FERC published a final rule that  aims to address barriers to integrating storage into organized wholesale  markets. The rule requires that RTOs establish participation models  consisting of market rules that recognize the physical and operational  characteristics of electric storage resources to facilitate their participation  in the RTO markets. In prior years, FERC issued several orders that  also aimed to address barriers to storage participation in organized  wholesale electric markets. For example, FERC Order 792\u2014issued in  2013\u2014revised the definition of a small generating facility in the pro forma  Small Generator Interconnection Agreement\u2014which establishes the  terms and conditions for interconnection of resources no larger than 20  MW\u2014to specifically include energy storage devices. In addition, FERC  Order 755\u2014issued in 2011\u2014required RTOs to compensate frequency  regulation resources in a manner that acknowledges the performance of  faster-ramping resources, such as batteries and flywheels.", "Additionally, in May 2018, FERC published a final rule that revised the  definition of a generating facility in the pro forma Large Generator  Interconnection Procedures and pro forma Large Generator  Interconnection Agreement\u2014which establishes the terms and conditions  for interconnection of resources larger than 20 MW\u2014to explicitly include  electric storage resources. FERC also published guidance in February  2017 on the ability of electric storage resources to provide transmission or  grid support services at cost-based rates, while providing other electric  storage services, such as power sales, at market-based rates.", "According to some studies we reviewed and stakeholders we spoke with,  FERC orders have helped alleviate some of the barriers to storage  participation in wholesale markets, but the impact of these orders  depends on RTO implementation. Moreover, RTO implementation of  FERC\u2019s requirement to establish participation models to accommodate  storage may not occur until the end of 2019 or later. Figure 8 shows the  timeline of key FERC efforts that aim to address market barriers to the  deployment of storage and time frames for implementation from  November 2016 through 2019.", "According to FERC\u2019s final rule, RTO implementation of the requirement to  establish participation models could take 21 months from the publication  of the final rule. RTOs will need to develop the participation models,  obtain input through their stakeholder review processes, and may need to  update modeling and dispatch software."], "subsections": []}, {"section_title": "IRS May Revise Regulations to Clarify the Eligibility of Storage for a Tax Credit", "paragraphs": ["Treasury and the IRS are considering changes that could clarify the  eligibility of energy storage for a business tax credit under section 48 of  the Internal Revenue Code, according to IRS documents. Currently,  customers who install storage systems may be eligible for this tax credit  when they use the storage system to store energy from renewable energy  systems more than 75 percent of the time; however, at this time there is  no federal tax incentive for stand-alone storage. Since 2011, the IRS  has issued some written determinations that the storage portion of a  renewable energy system would be eligible for the credit. However, only  the specific taxpayer addressed by a determination can rely on it as  precedent.", "In October 2015, Treasury and IRS solicited comments from the public on  how to define certain types of property that qualify for this tax credit,  including whether property such as storage devices may also be  considered energy property. According to IRS documents, comments  filed in response requested revisions to the tax credit that include, among  other things, providing a technology-neutral definition of energy storage  property, providing a specific list of types of energy storage property that qualify for the credit, and determining that storage is eligible for the credit  on a stand-alone basis. According to some stakeholders we interviewed,  the requirement for storage to be paired with renewable energy to obtain  the tax credit is limiting because there are other potential applications and  benefits storage can provide to the grid that are unrelated to renewable  energy integration. Additionally, one stakeholder we spoke with said that  regions with relatively small renewable energy resource capacities are  unable to receive federal support for energy storage, even though it may  benefit their grid."], "subsections": []}, {"section_title": "State Policies and Other Efforts Include Mandates and Targets, Revision of Rules and Planning Requirements, and Financial Incentives and Funding", "paragraphs": ["Through interviews with stakeholders and our review of documents, we  identified examples of state policies and other efforts that have  encouraged the deployment of energy storage or aim to address market  barriers. Appendix I includes a detailed list of state policies and other  efforts encouraging deployment of energy storage we identified. In  summary, these policies and other efforts include:  Mandates and Targets. Several states have established or proposed  mandates or targets that require or encourage electric utilities to procure  a specific amount of energy storage capacity. States have taken a range  of approaches to implementing these mandates and targets. For  example:", "The California Public Utilities Commission requires investor-owned  utilities to collectively procure 1.3 GW of energy storage by 2020.", "Oregon is in the process of implementing a requirement for certain  utilities serving more than 25,000 retail customers to procure energy  storage systems with at least 5 megawatt hours of energy storage  capacity by January 1, 2020.", "The Massachusetts Department of Energy Resources adopted a 200  megawatt-hour energy storage target for electric distribution  companies to collectively meet by January 2020.", "In November 2017, New York State enacted legislation requiring the  state public service commission to adopt an energy storage target. In  January 2018, the Governor of New York announced an energy  storage goal of 1.5 GW by 2025.", "A number of other states are also considering the adoption of targets  for storage capacity in the state.", "Mandates and targets that require or encourage utilities to procure energy  storage can help create certainty in the market for energy storage by  assuring that there is a demand for storage, according to some  stakeholders we interviewed. Additionally, according to one document we  reviewed, mandates and targets may impact deployment by encouraging  the development of model regulatory frameworks that serve as examples  to other states. States with storage mandates and targets may also serve  as case studies to demonstrate the impact of energy storage deployment  on a large scale and provide the industry with operational experience,  examples of how to best integrate storage, and opportunities to evaluate  storage.", "Changes to Interconnection Rules. Some states have changed or are  considering changes to interconnection rules to account for energy  storage. States are taking a number of approaches to revising  interconnection rules. For example:  In 2015, Hawaii\u2019s Public Utility Commission made changes to  interconnection standards and energy policies to provide for the  interconnection of energy storage to the grid.", "The Arizona Corporation Commission is developing statewide  interconnection rules for distributed generation. Draft rules include  interconnection requirements for energy storage systems and  Commission officials told us that stakeholders are debating the scope  and nature of those requirements.", "Planning. Some states allow for the inclusion of energy storage in  integrated resource and transmission planning processes; grid operators  and utilities undertake these planning processes to ensure that the grid  infrastructure has sufficient capacity and grid operators are able to meet  future power demands. For example:", "The New Mexico Public Utility Commission\u2019s integrated resource  planning rules require investor-owned utilities to evaluate all feasible  energy resources as part of their resource planning process. When  the Commission\u2019s integrated resource planning rules were originally  implemented, energy storage was not commercially feasible;  however, the state commission recently amended these rules to  include energy storage as a resource in planning.", "The Oregon Public Utility Commission directed Portland General  Electric to address energy storage in its future integrated resource  plans.", "Washington\u2019s Utilities and Transportation Commission directs utilities  to demonstrate that, when considering a new resource acquisition,  their analysis should include an evaluation of the costs and benefits of  a storage alternative. The Commission also directs utilities procuring  resources to issue requests for proposals that are technology neutral,  allowing energy storage to bid.", "Several states are also incorporating storage into broader energy  planning efforts, including conducting research to identify the benefits of  and opportunities for storage in the state. For example:", "North Carolina passed legislation directing the North Carolina Policy  Collaboratory, at the University of North Carolina, to conduct a study  on energy storage to address how and if storage may benefit  consumers, the feasibility of storage in the state, and policy  recommendations.", "Massachusetts has also undertaken a number of efforts including  launching the Energy Storage Initiative, an initiative administered by  the Massachusetts Department of Energy Resources and the  Massachusetts Clean Energy Center to facilitate the deployment of  storage and provide environmental and ratepayer benefits. As part of  this initiative the 2016 State of Charge report was released and,  among other things, identified barriers to energy storage adoption in  the state and made recommendations to increase deployment of  storage, setting a target of 600 MW of energy storage capacity by  2025.", "Financial Incentives and Funding. Several states offer financial  incentives including tax credits, tax exemptions, and rebate programs that  encourage the deployment of residential, commercial and industrial  energy storage systems by offsetting costs. For example:", "California\u2019s Self Generation Incentive Program\u2014designed to help  reduce emissions, demand, and customer electricity costs\u2014provides  rebates to support existing, new, and emerging distributed energy  resources installed on the customer\u2019s side of the utility meter. This  program is open to many different technologies, but according to the  California Public Utilities Commission, the largest share of funding is  allotted for energy storage projects.", "In 2017, Maryland established a state tax credit for a percentage of  certain installed costs of energy storage systems on residential and  commercial property.", "Legislation has also been proposed in New York that would create a  state tax credit for residential energy storage systems equal to 25  percent of costs up to $7,000.", "A number of states offer funding for energy storage pilot and  demonstration projects. For example:", "Massachusetts launched a $20 million grant program to pilot energy  storage use cases to increase deployment of storage.", "The Washington Clean Energy Fund supports demonstration projects,  including projects at utilities working with the Pacific Northwest  National Laboratory to support understanding approaches to integrate  and optimize storage control systems and development of a  framework for evaluating the technical and financial benefits of  storage.", "In addition to the efforts described above, we found that several states  have proposed or undertaken a range of other efforts that may encourage  the deployment of energy storage or address market barriers. For  example, the Arizona Corporation Commission required two electric  utilities to develop residential battery storage programs in order to lower  customers\u2019 energy use during peak demand. In addition, Maryland\u2019s  Public Service Commission initiated a grid modernization rulemaking that,  among other things, will define residential energy storage, determine a  classification for storage in the Commission\u2019s rules, and create criteria to  evaluate storage investments. Similarly, state legislation directs Oregon\u2019s  Public Utility Commission to create a framework for utilities to use when  conducting storage evaluations. Moreover, the California Public Utility  Commission has approved rules that increase the ways for energy  storage systems to obtain revenue for multiple uses, or grid services, for  example, from frequency regulation, capacity, or other services."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOE, FERC, and IRS for review and  comment. In its comments, reproduced in appendix II, FERC generally  agreed with our findings. DOE and FERC provided technical comments  which we incorporated as appropriate. IRS did not provide written or  technical comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Chairman of FERC, the  Commissioner of IRS, and other interested parties. In addition, the report  is available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@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 members who made major  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: State Policies and Other Efforts Encouraging Deployment of Energy Storage", "paragraphs": ["Through interviews with stakeholders and our review of documents, we  identified examples of policies and other efforts that have encouraged the  deployment of energy storage or aim to address market barriers,  including the establishment of mandates and targets for storage adoption,  the revision of interconnection rules and planning requirements, financial  incentives, and funding. Table 1 describes examples of a range of state  policies and other efforts that may encourage the deployment of energy  storage."], "subsections": []}, {"section_title": "Appendix II: Comments from the Federal Energy Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Frank Rusco, (202) 512-3841 or ruscof@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karla Springer (Assistant  Director), Antoinette Capaccio, Janice Ceperich (Analyst-in-Charge),  Philip Farah, Kristen Farole, Paul Kazemersky, and Daniel Kojetin made  key contributions to this report. Also contributing to this report were   Tara Congdon, R. Scott Fletcher, Cindy Gilbert, and Dan C. Royer."], "subsections": []}]}], "fastfact": ["Supplying electricity requires power plant operators to instantaneously and precisely match output to varying demand. Technologies like batteries and flywheels can store one form of energy and then transform it to generate power as needed.", "For example, interviews with government and industry officials and our review of studies indicated that energy storage can help:", "Address supply disruptions", "Provide peaking capacity", "Defer the need for transmission or distribution system upgrades", "Provide backup power during an outage", "The federal government and states are taking steps to reduce technological and market barriers to energy storage deployment."]}
{"id": "GAO-18-608", "url": "https://www.gao.gov/products/GAO-18-608", "title": "Nonimmigrant Visas: Outcomes of Applications and Changes in Response to 2017 Executive Actions", "published_date": "2018-08-07T00:00:00", "released_date": "2018-08-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Previous attempted and successful terrorist attacks against the United States have raised questions about the security of the U.S. government's process for adjudicating NIVs, which are issued to foreign nationals, such as tourists, business visitors, and students, seeking temporary admission into the United States. For example, the December 2015 shootings in San Bernardino, California, led to concerns about NIV screening and vetting processes because one of the attackers was admitted into the United States under a NIV. In 2017, the President issued executive actions directing agencies to improve visa screening and vetting, and establishing nationality-based visa entry restrictions, which the Supreme Court upheld in June 2018.", "GAO was asked to review NIV screening and vetting. This report examines (1) outcomes and characteristics of adjudicated NIV applications from fiscal years 2012 through 2017, and (2) key changes made to the NIV adjudication process in response to executive actions taken in 2017.", "GAO analyzed State NIV adjudication data for fiscal years 2012 through 2017, the most recent and complete data available. GAO visited seven consular posts selected based on visa workload and other factors. GAO reviewed relevant executive orders and proclamations, and documents related to implementing these actions.", "This is a public version of a sensitive report issued in June 2018. Information that DHS, State, and the Office of the Director of National Intelligence deemed sensitive has been removed."]}, {"section_title": "What GAO Found", "paragraphs": ["The total number of nonimmigrant visa (NIV) applications that Department of State (State) consular officers adjudicated annually peaked at about 13.4 million in fiscal year 2016, and decreased by about 880,000 adjudications in fiscal year 2017. NIV adjudications varied by visa group, country of nationality, and refusal reason:", "Visa group. From fiscal years 2012 through 2017, about 80 percent of NIV adjudications were for tourists and business visitors. During this time, adjudications for temporary workers increased by about 50 percent and decreased for students and exchange visitors by about 2 percent.", "Country of nationality. In fiscal year 2017, more than half of all NIV adjudications were for applicants of six countries of nationality: China (2.02 million, or 16 percent), Mexico (1.75 million, or 14 percent), India (1.28 million, or 10 percent), Brazil (670,000, or 5 percent), Colombia (460,000, or 4 percent), and Argentina (370,000, or 3 percent).", "Refusal reason. State data indicate that over this time period, 18 percent of adjudicated applications were refused; more than 90 percent were because the applicant did not qualify for the visa sought, and a small percentage (0.05 percent) were due to terrorism and security-related concerns.", "In 2017, two executive orders and a proclamation issued by the President required, among other actions, visa entry restrictions for nationals of certain listed countries of concern, the development of uniform baseline screening and vetting standards, and changes to NIV screening and vetting procedures.", "GAO's analysis of State data indicates that, out of the nearly 2.8 million NIV applications refused in fiscal year 2017, 1,338 applications were refused due to visa entry restrictions implemented per the executive actions.", "State, the Department of Homeland Security (DHS), and others developed standards for screening and vetting by the U.S. government for all immigration benefits, such as for the requirement for applicants to undergo certain security checks.", "Further, State sought and received emergency approval from the Office of Management and Budget in May 2017 to develop a new form to collect additional information from some visa applicants, such as email addresses and social media handles."]}], "report": [{"section_title": "Letter", "paragraphs": ["Key Visa Adjudication Process Terms  Screening: Reviewing visa application  information for matches to derogatory  information in relevant databases.  Vetting: Researching and investigating  screened applicants with possible matches in  those databases or based on other criteria. had been fragmented across several U.S. government databases.  Federal agencies have reported that they have taken actions to address  these weaknesses in the security of the NIV process. Further, recent  events have also highlighted the increased threat of one group of high- risk individuals, namely foreign fighters\u2014individuals who leave home,  travel abroad to terrorist safe havens, and join or assist violent extremist  groups. Beginning in calendar year 2017, the President issued executive  actions aimed at improving the screening and vetting protocols and  procedures associated with the visa issuance process, including the  imposition of visa entry restrictions for certain categories of foreign  nationals from designated countries.", "The Department of State (State) is responsible for the adjudication of NIV  applications, and manages the application process at U.S. embassies  and consulates overseas in coordination with several departments and  agencies. In deciding to issue a visa, State\u2019s consular officers are on the  front line of defense in protecting the United States against potential  terrorists and others whose entry would likely be harmful to U.S. national  interests. Consular officers must balance this security responsibility  against the need to facilitate legitimate travel. Since its establishment, the  Department of Homeland Security (DHS) has had authority to issue  regulations with respect to the issuance and refusal of visas. Other  federal entities, such as the Office of the Director of National  Intelligence\u2019s (ODNI) National Counterterrorism Center (NCTC) and the  Department of Justice\u2019s (DOJ) Federal Bureau of Investigation (FBI), also  contribute to the NIV screening and vetting process by providing  intelligence and information against which applicants are screened,  among other activities.", "In light of continued concerns about the security of the visa process, you  asked us to review the NIV screening and vetting process. This report is a  public version of a sensitive report that we issued in June 2018. Our  June 2018 report addressed three objectives, including one describing  NIV screening and vetting processes. DHS, ODNI, and State deemed  some of the information in that report to be Sensitive But Unclassified,  Law Enforcement Sensitive, or For Official Use Only, which must be  protected from public disclosure. Although such sensitive information  appeared throughout the report, the objective on NIV screening and  vetting processes was predominately based on sensitive information.  Consequently, this version only includes information on objectives (1)  outcomes and characteristics of adjudicated NIV applications from fiscal  years 2012 through 2017, and (2) key changes to the NIV screening and  vetting process in response to executive actions taken in calendar year  2017 and related guidance.", "To identify outcomes and characteristics of adjudicated NIV applications  from fiscal years 2012 through 2017, we analyzed State NIV data for  fiscal years 2012 through 2017\u2014the most recently available full year  data. The data fields we analyzed included month and year of  adjudication; type of NIV; location of application; applicant nationality;  outcome of application (e.g., issuance and refusal); and, if applicable,  reason for refusal. To assess the reliability of these data, we interviewed  State officials who use and maintain the data and checked the data for  missing information, outliers, and obvious errors, among other actions.  On the basis of these steps, we determined that the data were sufficiently  reliable for the purposes of our reporting objectives, including providing  summary statistics on NIV adjudications, issuances, and refusal reasons.", "To assist in our analysis of NIV data, we placed the majority of NIVs into  one of seven groups (e.g., tourists and business visitors). We developed  the seven groups of related NIVs based on the purpose of the NIV and its  eligibility criteria as defined in statute and as described by State and DHS  documentation, among other factors. Similarly, to assist in our analysis  of the grounds upon which NIVs were refused, we grouped the grounds  for refusal into one of seven categories (e.g., immigration-related  ineligibility). We developed the seven categories based on the reason  for refusal as described in statute and in State documentation. We shared  our NIV groups and refusal categories with State officials, who stated that  our categories were generally appropriate for the analysis we conducted.", "To identify key changes to the NIV screening and vetting process in  response to executive actions taken in calendar year 2017 and related  guidance, we reviewed executive actions taken in calendar year 2017  relevant to NIV screening and vetting, including Executive Order 13769,  Executive Order 13780, and Presidential Proclamation 9645. We also  reviewed State and DHS guidance, the Immigration and Nationality Act  (INA), standard operating procedures, and documentation related to  implementing requirements in the executive actions, and we interviewed  State and DHS headquarters officials on their efforts to implement these  requirements. We conducted site visits to seven consular posts to  observe NIV screening and vetting operations and interview State, DHS,  and DOJ officials implementing the new requirements from March through  May 2017. We selected these posts on the basis of their relatively high  visa workloads; State and DHS data on the percentage of NIV applicants  that potentially matched to derogatory information in fiscal year 2016; and  geographic distribution to help account for variations in visa applicant  populations and potential threats that consular officials encounter in  different locations. Further, we visited posts that also had DHS\u2019s Visa  Security Program, which provides an additional level of NIV screening  and vetting by deploying agents to certain posts overseas to work with  consular officers and review NIV applications. Our observations from  these site visits are illustrative and provide insights about NIV operations,  but are not generalizable to all posts. Further, we analyzed State\u2019s fiscal  year 2017 NIV adjudication and refusal data to identify NIV applications  that were refused solely due to visa entry restrictions implemented in  accordance with the executive actions.", "The performance audit upon which this report is based was conducted  from November 2016 to June 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DHS, ODNI, and State from June to August  2018 to prepare this nonsensitive version of the original sensitive report  for public release. This public version was also prepared in accordance  with these standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Roles and Responsibilities", "paragraphs": ["Several U.S. agencies have roles and responsibilities related to the  screening and vetting of NIV applicants, as shown in table 1.", "Key Visa Adjudication Process Terms  Validity period: The length of time during  which a nonimmigrant visa (NIV) is valid for  use by a foreign national seeking to travel to a  U.S. port of entry and apply for admission into  the United States.  Entries: The number of applications for  admission into the country permitted under a  single NIV.  Reciprocity arrangements: An understanding  or arrangement between the U.S. government  and another country on the length of time  visas issued by either or both nations are valid  for admission.", "There are many NIVs, and for the purposes of this report, we have placed  the majority of NIVs into one of seven groups, as shown in table 2. The  validity period and number of entries varies depending on (1) the  particular NIV and (2) reciprocity arrangement with an individual\u2019s country  of nationality, among other factors. For example, a foreign national of one  country may be issued a tourist visa valid for 1 year that allows for a  single U.S. entry, while a foreign national of another country may be  issued a tourist visa valid for 5 years and that permits multiple entries.  However, the authorized period of stay\u2014that is, the amount of time that  the nonimmigrant is permitted to remain in the United States after being  admitted\u2014has no relation to the validity period. For more information on  the various NIVs, see appendix I."], "subsections": []}, {"section_title": "NIV Adjudication Process", "paragraphs": ["State is generally responsible for the adjudication of NIV applications, and  manages the NIV application process, including the consular officer corps  and its functions at more than 220 visa-issuing posts overseas.  Depending on various factors, such as the particular NIV sought, the  applicant\u2019s background, and visa demand, State officials noted that the  length of the visa adjudication process can vary from a single day to  months. This screening and vetting process for determining who will be  issued or refused a visa contains several steps, as shown in figure 1:", "Petitions. Prior to State\u2019s adjudication process, some NIVs require  applicants to first obtain an approved petition from U.S. Citizenship  and Immigration Services (USCIS), as shown in table 3. For  example, applicants seeking an employment-based NIV or a U.S.  citizen\u2019s foreign national fianc\u00e9(e) seeking U.S. entry to conclude a  valid marriage, must obtain an approved petition from USCIS prior to  applying for their NIV. The petitioner (i.e., a U.S. citizen,  organization or business entity) completes the petition on behalf of the  applicant (i.e., the beneficiary), and the petition would be submitted to  a U.S.-based USCIS service center for adjudication.", "USCIS Background Checks. As part of the adjudication process for  visas requiring a USCIS-approved petition before the NIV application  is submitted to State, USCIS conducts background checks on U.S.- based petitioners and foreign beneficiaries. For example, petitioner  and beneficiary information is screened against TECS\u2014DHS\u2019s  principal law enforcement and antiterrorism database that includes  enforcement, inspection, and operational records. Further, for U.S.  citizens petitioning for a K-1 visa on behalf of their fianc\u00e9(e), an FBI  fingerprint check may also be required of the U.S. citizen petitioner.  If the background checks identify a potential match to derogatory  information, the background check unit at the USCIS service center  that received the petition is to conduct further research to confirm the  match, such as running checks against other government systems  and collaborating with other government agencies. If all background  check hits have been resolved and documented, and there is no  reason not to proceed, USCIS will adjudicate the petition. In fiscal  year 2017, USCIS reported that it received about 640,000 petitions for  NIVs, and approved over 550,000.", "NIV Application. After having obtained USCIS approval of the NIV  petition, as applicable, the foreign national begins the consular  process by completing an online NIV application, known as a DS-160.  Upon submitting an application, the applicant can schedule an  interview at a post overseas and pays the processing fee.", "Key Visa Adjudication Process Terms  Inadmissible: Individuals are inadmissible to  the United States if they fall within the classes  of foreign nationals defined as such under the  Immigration and Nationality Act (INA), as  amended, Pub. L. No. 82-414, tit. II, ch. 2, \u00a7  212(a), 66 Stat. 163, 182-87 (1952)  (classified, as amended, at 8 U.S.C. \u00a7  1182(a)), such as foreign nationals who have  engaged in terrorist or criminal activities or  previously violated U.S. immigration law. If a  visa applicant is found inadmissible, and has  not obtained a waiver from the Department of  Homeland Security, the applicant would be  statutorily ineligible for a visa.  Ineligible: An individual is ineligible for a visa if  it appears to the Department of State consular  officer, based on the application or supporting  documentation, that the applicant is not  qualified to receive a visa under any provision  of law. If the consular officer decides that an  applicant is ineligible for visa issuance, the  refusal may be based on statutory grounds of  inadmissibility under INA \u00a7 212(a), or may be  due to the individual\u2019s failure to otherwise  satisfy the applicable eligibility requirements  for the particular visa, as defined in the INA.  For example, a consular officer may refuse a  J-1 exchange visitor visa to an applicant  coming to the United States to perform  services as a member of the medical  profession if the applicant does not either  demonstrate competency in oral and written  English or hold a degree from an accredited  school of medicine, as required of such visa  applicants under INA \u00a7 212(j). eligibility concerns related to visa applicants. Prior to adjudicating  the visa application, consular officers must review all such security  check results. Some applicants are not subjected to all of the  security checks depending on certain characteristics, such as age and  visa category. For example, State does not generally require that  fingerprints be collected for applicants who are either under 14 years  old or over 79 years old, or for foreign government officials seeking  certain visas.", "As needed, some applicants undergo an interagency review process  called a security advisory opinion (SAO), which is a multi-agency,  U.S-based review process for certain NIV applicants. For example,  SAOs are mandatory in cases of certain security check hits, a foreign  national\u2019s background, or a foreign national\u2019s intention while in the  United States. In addition, consular officers have the discretion to  request an SAO for any visa applicant. Through the SAO process,  consular officers send additional information on applicants to U.S.- based agencies, who review that information against their holdings.  Department of State data indicate that consular officers made over  180,000 requests for SAOs for NIV applicants in fiscal year 2017.", "Adjudication. If the consular officer determines that the applicant is  eligible for the visa on the basis of the application, supporting  documentation, and other relevant information such as statements  made in an interview, he or she will take the applicant\u2019s passport for  final processing, but the visa cannot be printed until all security  checks have been returned and reviewed. If the consular officer  determines that the applicant is inadmissible to the United States or  otherwise ineligible under the applicable visa eligibility criteria, he or  she informs the applicant that the visa has been refused, and  identifies the provision(s) of law under which the visa was refused.", "Recurrent vetting. In March 2010, shortly after the December 2009  attempted bombing by a foreign national traveling to the United States  on a valid visa, CBP began vetting individuals with NIVs on a  recurrent basis. This program has led State to revoke visas after they  have been issued when information was later discovered that  rendered the individual inadmissible to the United States or otherwise  ineligible for the visa. In addition, CBP analysts may take other  actions as needed after identifying new derogatory information, such  as recommending that the airline deny boarding to the traveler  because the traveler is likely to be deemed inadmissible upon arrival  in the United States (known as a no-board recommendation) or  making a referral to ICE, which may seek to remove the individual if  already within the United States. According to NCTC, KFE also  conducts recurrent vetting of NIV holders against emerging threat  information."], "subsections": []}]}, {"section_title": "Number of NIV Adjudications and Refusal Rates Increased Through Fiscal Year 2016, and Declined in Fiscal Year 2017; NIV Application Characteristics Vary", "paragraphs": [], "subsections": [{"section_title": "Number of NIV Applications Adjudicated Increased Annually from Fiscal Years 2012 through 2016 and Declined in Fiscal Year 2017", "paragraphs": ["The total number of NIV applications that consular officers adjudicated  annually (or, NIV adjudications) peaked at about 13.4 million in fiscal year  2016, which was an increase of approximately 30 percent since fiscal  year 2012. In fiscal year 2017, NIV adjudications decreased by about  880,000 adjudications, or about 7 percent. Figure 2 shows the number of  applications adjudicated each year from fiscal year 2012 through 2017.  Appendix II includes additional data on NIV adjudications related to this  and the other figures in this report.", "Annual Monthly Trends. State data from fiscal years 2012 through 2016  indicate that NIV adjudications generally followed an annual cycle, ebbing  during certain months during the fiscal year; however, adjudications in  fiscal year 2017 departed slightly from this trend. Specifically, from fiscal  years 2012 through 2016, the number of NIV adjudications typically  peaked in the summer months. State officials noted that the summer peak  is generally due to international students who are applying for their visas  for the coming academic year. However, in fiscal year 2017, the summer  months did not experience a similar increase from previous months,  departing from the trend over the previous five fiscal years, according to  State data. Instead, NIV adjudications peaked in December of fiscal year  2017. State officials attributed some of the decline in fiscal year 2017 to a  decrease in Chinese NIV applicants, which we discuss later in this report.  Figure 3 shows monthly NIV adjudications for fiscal years 2012 through  2017."], "subsections": []}, {"section_title": "Most NIV Adjudications from Fiscal Years 2012 through 2017 Were for Tourist and Business Visitor Visas, and Approximately Half of All Applicants Came from Six Countries", "paragraphs": ["State data on NIV applications adjudicated from fiscal years 2012 through  2017 indicate that the number of adjudications by visa group, applicant\u2019s  country of nationality, and location of adjudication were generally  consistent, with some exceptions.", "Visa Group. From fiscal years 2012 through 2017, about 80 percent of  NIV adjudications were for tourist and business visitors as shown in figure  4. The next largest groups were visas for students and exchange visitors  and temporary workers, which accounted for an average of 9 percent and  6 percent, respectively, of all adjudications during this time period.", "Although adjudications for visas in some categories increased, others  decreased over time. For example, as shown in figure 5, NIV  adjudications for temporary workers increased by approximately 50  percent from fiscal years 2012 through 2017 (592,000 to 885,000). During  the same time period, adjudications for tourist and business visitors also  increased by approximately 20 percent overall (from 8.18 million to 9.97  million), but decreased from fiscal years 2016 to 2017. However, NIV  adjudications for student and exchange visitor visas decreased by about  2 percent from fiscal years 2012 through 2017 (1.01 million to 993,000)  overall, but experienced a peak in fiscal year 2015 of 1.2 million.  Appendix I includes additional information on NIV adjudication by visa  group from fiscal years 2012 through 2017.", "State officials identified reasons to explain these trends:", "Temporary Workers. Although there was an increase in  adjudications across all types of temporary worker visas, the largest  percentage increase was for H-2A visas, which are for foreign workers  seeking to perform agricultural services of a temporary or seasonal  nature. Specifically, adjudications of H-2A visas increased by 140  percent from fiscal years 2012 to 2017 (from about 71,000 to  170,000). State officials noted that H-2A visas are not numerically  limited by statute. Further, State officials stated that they believe  U.S. employers are increasingly less likely to hire workers without  lawful status and are petitioning for lawfully admitted workers, which in  part led to an increase in H-2A visa demand.", "Tourist and Business Visitors. State officials partly attributed the  overall changes to tourist and business visitor visas to the extension  of the validity period of such visas for Chinese nationals, which  represented the largest single country of nationality for tourist and  business visitor visas in fiscal year 2017 (17.7 percent). In  November 2014, the United States and the People\u2019s Republic of  China reciprocally increased the validity periods of multiple-entry  tourist and business visitor visas issued to each other\u2019s citizens for up  to 10 years. The change in policy was intended to support improved  trade, investment, and business by facilitating travel between the two  countries. According to State officials, extending validity periods can  create an initial increase in demand for such visas, followed by a  period of stabilization or even decline as NIV holders would be  required to apply for renewal less frequently. According to State  officials, in early fiscal year 2015, the increase in the validity period to  10 years for such visas created a spike in Chinese demand in fiscal  year 2015, and by fiscal year 2016, the initial demand for these visas  had been met and Chinese economic growth was simultaneously  slowing, resulting in fewer adjudications for such visas in fiscal year  2017. State data for this time period indicate that the number of  adjudications for tourist and business visitor visas for Chinese  nationals increased from 1.58 million in fiscal year 2014 to 2.54 million  in fiscal year 2015, followed by a decline to 2.34 million in fiscal year  2016 and 1.76 million in fiscal year 2017.", "Student and Exchange Visitors. Similar to tourist and business  visitors, State officials partly attributed the overall changes in student  and exchange visitor visa adjudications to the extension of the validity  period of such visas for Chinese nationals, which represented the  largest single country of nationality for student and exchange visitor  visas in fiscal year 2017 (19 percent). In November 2014, the United  States extended the validity period of the F visa for academic students  from 1 year to 5 years. State officials noted that similar to tourist and  business visitor visas, there was an initial surge in Chinese F-visa  applicants due to the new 5-year F-visa validity period that began in  fiscal year 2015, but the number dropped subsequently because  Chinese students with such 5-year visas no longer needed to apply as  frequently for F visas. State data for this time period indicate that the  number of visa adjudications for F visas for Chinese nationals  increased from about 267,000 in fiscal year 2014 to 301,000 in fiscal  year 2015, followed by a decline of 172,000 in fiscal year 2016 and  134,000 in fiscal year 2017.", "Applicant\u2019s Country of Nationality. In fiscal year 2017, more than half  of all NIV adjudications were for applicants of six countries of nationality:  China (2.02 million, or 16 percent), Mexico (1.75 million, or 14 percent),  India (1.28 million, or 10 percent), Brazil (670,000, or 5 percent),  Colombia (460,000, or 4 percent), and Argentina (370,000, or 3 percent),  as shown in figure 6.", "Location of Adjudication. State data indicate that the geographic  distribution of NIV adjudications across visa-issuing posts worldwide  remained relatively consistent from fiscal years 2012 through 2017. NIV  adjudications from visa-issuing posts in the Western Hemisphere  comprised the largest proportion worldwide during this time period;  however, this proportion decreased from 48.8 percent in fiscal year 2012  to 41.7 percent in fiscal year 2017. During the same time period, the  proportion of NIV adjudications at visa-issuing posts in other regions  increased slightly. For example, the percentage of NIV adjudications from  posts in Africa increased from 3.8 percent to 5.5 percent, and the  percentage of adjudications from posts in South and Central Asia  increased from 7.9 percent to 11.2 percent from fiscal years 2012 through  2017. Figure 7 provides the proportion of NIV adjudications at visa- issuing posts from each region from fiscal years 2012 through 2017."], "subsections": []}, {"section_title": "NIV Refusal Rate Has Increased Since Fiscal Year 2012 and Varies By Visa Group", "paragraphs": ["The percentage of NIVs refused\u2014known as the refusal rate\u2014increased  from fiscal years 2012 through 2016, and was about the same in fiscal  year 2017 as the previous year. As shown in figure 8, the NIV refusal  rate rose from about 14 percent in fiscal year 2012 to about 22 percent in  fiscal year 2016, and remained about the same in fiscal year 2017;  averaging about 18 percent over the time period. As a result, the total  number of NIVs issued peaked in fiscal year 2015 at about 10.89 million,  before falling in fiscal years 2016 and 2017 to 10.38 million and 9.68  million, respectively.", "The NIV refusal rate can fluctuate from year to year due to many factors.  For example, according to State officials, removing a large, highly- qualified set of travelers from the NIV applicant population can drive up  the statistical refusal rate. State officials also noted that when a country  joins the Visa Waiver Program or a visa for certain nationalities increase  from 1-year to 10-year visa validity periods, these individuals no longer  apply for visas and affect the overall refusal rate. Further, State officials  noted that changes in political and economic conditions in individual  countries can affect visa eligibility, which in turn affects the overall refusal  rate. State officials noted that the degree to which an applicant might  seek to travel to the United States unlawfully is directly related to political,  economic, and social conditions in their countries. For example, if global  or regional economic conditions deteriorate, more applicants may have  an incentive to come to the United States illegally by, for example,  obtaining a NIV with the intent to unlawfully stay for a particular time  period or purpose other than as permitted by their visa, which then would  increase the number of NIV applications that consular officers are  refusing.", "From fiscal years 2012 through 2017, the refusal rate varied by visa  group. The highest refusal rate was for tourists and business visitors,  which rose from about 15 percent in fiscal year 2012 to over 25 percent in  fiscal year 2017, as shown in figure 9. Other visa categories, such as  foreign officials and employees, transit and crewmembers, and fianc\u00e9(e)s  and spouses, had refusal rates below 5 percent during this time period.  State officials noted that because different visa categories have different  eligibility and documentary requirements, they have different refusal  rates. For example, F, J, and H visas require documentation of eligibility  for student, exchange, or employment status, respectively."], "subsections": []}, {"section_title": "Most NIV Applications Refused from Fiscal Years 2012 through 2017 Were for Reasons Other than Terrorism-Related Ineligibilities", "paragraphs": ["According to State data, while the majority of NIV refusals from fiscal  years 2012 through 2017 were a result of consular officers finding the  applicants ineligible, a relatively small number of refusals were due to  terrorism and other security-related concerns. NIV applicants can be  refused a visa on a number of grounds of inadmissibility or other  ineligibility under U.S. immigration law and State policy. For the purposes  of this report, we have grouped most of these grounds for refusal into one  of seven categories, as shown in table 4.", "State data indicate the more than 90 percent of NIVs refused each year  from fiscal years 2012 through 2017 were based on the consular officers\u2019  determination that the applicants were ineligible nonimmigrants\u2014in other  words, the consular officers believed that the applicant was an intending  immigrant seeking to stay permanently in the United States, which would  generally violate NIV conditions, or that the applicant otherwise failed to  demonstrate eligibility for the particular visa he or she was seeking. For  example, an applicant applying for a student visa could be refused as an  ineligible nonimmigrant for failure to demonstrate possession of sufficient  funds to cover his or her educational expenses as required. Similarly, an  applicant could be refused as an ineligible nonimmigrant for indicating to  the consular officer an intention to obtain a student visa to engage in  unsanctioned activities while in the United States, such as full-time  employment instead of pursuing an approved course of study.", "According to State data, the second most common reason for refusal  during this time period was inadequate documentation, which accounted  for approximately 5 percent of refusals each year. In such cases, a  consular officer determined that the application failed to include  necessary documentation for the consular officer to ascertain whether the  applicant was eligible to receive a visa at that time. If, for example, the  applicant provides sufficient additional information in support of the  application, a consular officer may subsequently issue the visa, as  appropriate.", "Our analysis of State data indicates that relatively few applicants\u2014 approximately 0.05 percent\u2014were refused for terrorism and other  security-related reasons from fiscal years 2012 through 2017. Security- related reasons can include applicants who have engaged in genocide,  espionage, or torture, among other grounds. Terrorism-related grounds of  inadmissibility include when an applicant has engaged in or incited  terrorist activity, is a member of a terrorist organization, or is the child or  spouse of a foreign national who has been found inadmissible based on  terrorist activity occurring within the last five years, among other  reasons. As shown in figure 10, in fiscal year 2017, State data indicate  that 1,256 refusals (or 0.05 percent) were based on terrorism and other  security-related concerns, of which 357 refusals were specifically for  terrorism-related reasons."], "subsections": []}]}, {"section_title": "Executive Actions Taken in Calendar Year 2017 Resulted in Some NIV Refusals and Agencies Are Implementing Additional Changes to NIV Screening and Vetting Processes", "paragraphs": [], "subsections": [{"section_title": "Executive Actions Taken in Calendar Year 2017 Introduced New Visa Entry Restrictions and Requirements to Enhance Screening and Vetting, Including for NIVs", "paragraphs": ["In calendar year 2017, the President issued two executive orders and a  presidential proclamation that required, among other actions, visa entry  restrictions for nationals of certain countries of concern, a review of  information needed for visa adjudication, and changes to visa (including  NIV) screening and vetting protocols and procedures (see timeline in  figure 11). Initially, the President issued Executive Order 13769,  Protecting the Nation from Foreign Terrorist Entry Into the United States  (EO-1), in January 2017. In March 2017, the President revoked and  replaced EO-1 with the issuance of Executive Order 13780 (EO-2), which  had the same title as EO-1. Among other things, EO-2 suspended entry  of certain foreign nationals for a 90 day period, subject to exceptions and  waivers. It further directed federal agencies\u2014including DHS, State, DOJ  and ODNI\u2014to review information needs from foreign governments for  visa adjudication and develop uniform screening and vetting standards for  U.S. entities to follow when adjudicating immigration benefits, including  NIVs. In September 2017, as a result of the reviews undertaken pursuant  to EO-2, the President issued Presidential Proclamation 9645, Enhancing  Vetting Capabilities and Processes for Detecting Attempted Entry into the  United States by Terrorists or Other Public-Safety Threats (Proclamation),  which imposes certain conditional restrictions and limitations on the entry  of nationals of eight countries\u2014Chad, Iran, Libya, North Korea, Somalia,  Syria, Venezuela and Yemen\u2014into the United States for an indefinite  period. These restrictions are to remain in effect until the Secretaries of  Homeland Security and State determine that a country provides sufficient  information for the United States to assess adequately whether its  nationals pose a security or safety threat. Challenges to both EOs and  the Proclamation have affected their implementation and, while EO-2\u2019s  entry restrictions have expired, the visa entry restrictions outlined in the  Proclamation continue to be fully implemented as of June 2018,  consistent with the U.S. Supreme Court\u2019s June 26, 2018, decision, which  held that the President may lawfully establish nationality-based entry  restrictions under the INA, and that Proclamation 9645 itself \u201cis squarely  within the scope of Presidential authority.\u201d A more detailed listing of the  executive actions and related challenges to those actions brought in the  federal courts can be found in appendix III."], "subsections": []}, {"section_title": "Some NIV Applications in Fiscal Year 2017 Were Refused Due to the Executive Actions Taken in 2017; Adjudications of Applications for Nationals of Affected Countries Decreased from Prior Fiscal Years", "paragraphs": ["Our analysis of State data indicates, out of the nearly 2.8 million NIV  applications refused in fiscal year 2017, 1,338 were refused due to visa  entry restrictions implemented in accordance with the executive actions.  To implement the entry restrictions, in March 2017, State directed its  consular officers to continue to accept all NIV applications and determine  whether the applicant was otherwise eligible for a visa without regard to  the applicable EO or Proclamation. If the applicant was ineligible for the  visa on grounds unrelated to the executive action, such as having prior  immigration violations, the applicant was to be refused on those grounds.  If the applicant was otherwise eligible for the visa, but fell within the scope  of the nationality-specific visa restrictions implemented pursuant to the  applicable EO or Proclamation and was not eligible for a waiver or  exception, the consular officer was to refuse the visa and enter a refusal  code into State\u2019s NIV database indicating that the applicant was refused  solely due to the executive actions. More than 90 percent of the NIV  applications refused in fiscal year 2017 pursuant to an executive action were for tourist and business visitor visas, and more than 5 percent were  for students and exchange visitors.", "State data also indicate that the number of applications adjudicated for  nationals of the 7 countries identified in EO-1\u2014Iran, Iraq, Libya, Somalia,  Sudan, Syria and Yemen\u2014decreased by 22 percent in fiscal year 2017,  as compared to a 7 percent general decrease in NIV adjudications  worldwide that year. For example, as shown in table 5, the decrease in  adjudications from fiscal years 2016 to 2017 for nationals of the 7  countries identified in EO-1 ranged from around 12 percent to more than  40 percent."], "subsections": []}, {"section_title": "State, DHS, and Other Agencies Are Implementing Changes to NIV Screening and Vetting Processes Consistent with the Executive Actions and Associated Guidance", "paragraphs": ["As directed by the executive actions, DHS, State, DOJ, and ODNI took  several steps to enhance NIV screening and vetting processes given their  responsibilities for implementing the presidential actions. Among other  things, the responsibilities included: (1) a review of information needed for  visa adjudication; (2) the development of uniform screening standards for  immigration programs; and (3) implementation of enhanced visa  screening and vetting protocols and procedures.", "Review of information needed for visa adjudication. In accordance  with EO-2, DHS conducted a worldwide review, in consultation with State  and ODNI, to identify additional information needed from foreign countries  to determine that an individual is not a security or public-safety threat  when adjudicating an application for a visa, admission, or other  immigration benefit. According to State officials, an interagency working  group composed of State, DHS, ODNI, and National Security Council  staff was formed to conduct the review. To conduct this review, DHS  developed a set of criteria for information sharing in support of  immigration screening and vetting, as shown by table 6. According to  DHS officials, to develop these criteria, DHS, in coordination with other  agencies, identified current standards and best practices for information  collection and sharing under various categories of visas to create a core  list of information needed from foreign governments in the visa  adjudication process. For example, State sent an information request to  all U.S. posts overseas requesting information on host nations\u2019  information sharing practices, according to State officials.", "To assess the extent to which countries were meeting the newly  established criteria, DHS officials stated that they used various  information sources to preliminarily develop a list of countries that were or  were not meeting the standards for adequate information sharing. For  example, DHS officials stated that they reviewed information from  INTERPOL on a country\u2019s frequency of reporting lost and stolen passport  information, consulted with ODNI for information on which countries are  terrorist safe havens, and worked with State to obtain information that  State officials at post may have on host nations\u2019 information sharing  practices. According to the Proclamation, based on DHS assessments of  each country, DHS reported to the President on July 9, 2017, that 47  countries were \u201cinadequate\u201d or \u201cat risk\u201d of not meeting the standards.  DHS officials identified several reasons that a country may have been  assessed as \u201cinadequate\u201d with regard to the criteria. For example, some  countries may have been willing to provide information, but lacked the  capacity to do so. Or, some countries may not have been willing to  provide certain information, or simply did not currently have diplomatic  relations with the U.S. government.", "As was required by EO-2, State engaged with foreign governments on  their respective performance based on these criteria for a 50-day  period. In July 2017, State directed its posts to inform their respective  host governments of the new information sharing criteria and request that  host governments provide the required information or develop a plan to  do so. Posts were directed to then engage more intensively with countries  DHS\u2019s report preliminarily deemed \u201cinadequate\u201d or \u201cat risk\u201d. Each post  was to submit an assessment of mitigating factors or specific interests  that should be considered in the deliberations regarding any travel  restrictions for nationals of those countries. DHS officials stated that they  reviewed the additional information host nations provided to State and  then reevaluated the initial classifications to determine if any countries  remained \u201cinadequate.\u201d", "On September 15, 2017, in accordance with EO-2, DHS submitted to the  President a list of countries recommended for inclusion in a presidential  proclamation that would prohibit certain categories of foreign nationals of  such countries from entering the United States. The countries listed  were Chad, Iran, Libya, North Korea, Syria, Venezuela, and Yemen\u2014 which were assessed as \u201cinadequate,\u201d and Somalia, which was identified  as a terrorist safe haven. The Presidential Proclamation indefinitely  suspended entry into the United States of certain nonimmigrants from the  listed countries (see table 7) and directed DHS, in consultation with State,  to devise a process to assess whether the entry restrictions should be  continued, modified or terminated.", "In September 2017, State issued additional guidance to posts on  implementation of the Presidential Proclamation. As of July 2018, State  continues to accept and process the NIV applications of foreign nationals  from the eight countries covered by the Proclamation. Such applicants  are to be interviewed, according to State guidance, and consular officers  are to determine if the applicant is otherwise eligible for the visa, meets  any of the proclamation\u2019s exceptions, or qualifies for a waiver.", "Development of uniform screening standards for U.S. immigration  benefit programs. Consistent with EO-2, State, DHS, DOJ, and ODNI  developed a uniform baseline for screening and vetting standards and  procedures by the U.S. government. According to State officials, an  interagency working group comprised of State, DHS, DOJ, and ODNI  staff is implementing these requirements. Based on its review of existing  screening and vetting processes, DHS officials stated that the working  group established uniform standards for (1) applications, (2) interviews,  and (3) security system checks (i.e., biographic and biometric).", "Regarding applications, DHS officials stated that the group identified  data elements against which applicants are to be screened and  vetted. In February 2018, DHS Office of Policy officials stated that  they had taken steps to create more consistency across U.S.  government forms that collect information used for screening and  vetting purposes, such as State\u2019s DS-160 NIV application as well as  12 DHS forms. For example, officials stated that they anticipate  issuing Federal Register notices announcing the intended changes to  such forms.", "Regarding interviews, DHS officials stated that the working group  established a requirement for all applicants seeking an immigration  benefit, including NIV applicants, to undergo a baseline uniform  national security and public safety interview. DHS officials stated that  the working group modeled its interview baseline on elements of the  refugee screening interview. To help implement this standard, DHS  officials stated that the department is offering more training courses in  enhanced communications (i.e. detecting deception and eliciting  responses) and making such courses accessible to other U.S.  government entities and U.S. officials overseas.", "Regarding security checks, the working group identified certain  checks that should be conducted for all applicants seeking an  immigration benefit, including NIV applicants. For example, DHS  officials stated that the working group concluded that all applicants for  U.S. immigration benefits should be screened against DHS\u2019s TECS,  among other federal databases. In February 2018, DHS Office of  Policy officials stated that they were also exploring the extent to which  current screening and vetting technologies can be expanded. For  example, technology that is being used to screen applicants for  counterterrorism concerns can potentially be modified to screen  applicants for other concerns such as public safety or participation in  transnational organized crime. However, these officials noted such  changes to technology can take a long time.", "DHS officials stated that each department and agency is responsible for  implementing the uniform standards for their relevant immigration  programs. For example, with regard to maintaining information  electronically, State officials stated that for nonimmigrant and immigrant  visas, as of May 2018, they collected most, but not all, of the application  data elements.", "In addition to executive actions taken in calendar year 2017, the  President issued National Security Presidential Memorandum 9 on  February 6, 2018, which directed DHS, in coordination with State, DOJ,  and ODNI, to establish a National Vetting Center to optimize the use of  federal government information in support of the national vetting  enterprise. This memorandum stated that the U.S. government must  develop an integrated approach to the use of intelligence and other data,  across national security components, in order to improve how  departments and agencies coordinate and use information to identify  individuals presenting a threat to national security, border security,  homeland security, or public safety. The center is to be overseen and  guided by a National Vetting Governance Board, consisting of six senior  executives designated by DHS, DOJ, ODNI, State, the Central  Intelligence Agency, and the Department of Defense. Further, within 180  days of the issuance of the memorandum, these six departments and  agencies, in coordination with the Office of Management and Budget, are  to jointly submit to the President for approval an implementation plan for  the center, addressing, among other things, the initial scope of the  center\u2019s vetting activities; the roles and responsibilities of agencies  participating in the center; a resourcing strategy for the center; and a  projected schedule to reach both initial and full operational capability. On  February 14, 2018, the Secretary of Homeland Security selected an  official to serve as the Director of the National Vetting Center and  delegated the center\u2019s authorities to CBP.", "DHS Office of Policy officials stated in February 2018 that the center is  intended to serve as the focal point of the larger screening and vetting  enterprise, and will coordinate policy and set priorities. The center will use  the uniform baselines for screening and vetting standards and procedures  established per EO-2 to set short- and long-term priorities to improve  screening and vetting across the U.S. government. Further, these officials  stated screening and vetting activities will continue to be implemented by  the entities that are currently implementing such efforts, but roles and  responsibilities for screening and vetting for immigration benefits may be  modified in the future based on the work of the center. According to DHS  Office of Policy officials, efforts to implement National Security  Presidential Memorandum 9, such as the development of an  implementation plan, are ongoing as of June 2018.", "Implementation of new visa screening and vetting protocols and  procedures. In response to the EOs and a March 2017 presidential  memorandum issued the same day as EO-2, State has taken several  actions to implement new visa screening and vetting protocols and  procedures. For example, State sought and received emergency  approval from the Office of Management and Budget in May 2017 to  develop a new form, the DS-5535. The form collects additional  information from a subset of visa applicants to more rigorously evaluate  applicants for visa ineligibilities, including those related to national  security and terrorism. The new information requested includes the  applicant\u2019s travel history over the prior 15 years, all phone numbers used  over the prior 15 years, and all email addresses and social media handles  used in the last 5 years. State estimated that, across all posts, the groups  requiring additional vetting represented about 70,500 individuals per  year."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of the sensitive version of this report to DHS, DOJ,  State, and ODNI. DHS, DOJ, and State provided technical comments,  which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until seven days from the  report date. At that time, we will send copies of this report to the  Secretaries of Homeland Security and State, the Attorney General, and  the Director of National Intelligence. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777or GamblerR@gao.gov. Key contributors to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Enclosures on Nonimmigrant Visa Groups", "paragraphs": ["There are many nonimmigrant visas (NIV), which are issued to foreign  nationals such as tourists, business visitors, and students seeking  temporary admission into the United States. For the purposes of this  report, we placed the majority of NIVs into one of seven groups. In the  following enclosures, we provide a descriptive overview of each group on  the basis of our analysis of the Department of State\u2019s (State) fiscal years  2012 through 2017 NIV data. Each enclosure also contains the following:", "Description of the group. In this section, we provide a narrative  description of the group, as well as a table of the specific NIVs that  comprise the group.", "Characteristics of the applicants. In this section, we provide the  number of annual NIV adjudications for fiscal years 2012 through 2017,  the specific NIVs adjudicated in fiscal year 2017 within the group, the  regions to which applicants applied for these NIVs in fiscal year 2017, and the top five nationalities that applied for NIVs in the group in fiscal  year 2017.", "Issuances. In this section, we provide the number of NIVs issued within  this group for fiscal years 2012 through 2017.", "Refusals. In this section, we provide the refusal rate for the entire NIV  group for fiscal years 2012 through 2017. For the NIVs that were refused  in fiscal year 2017 for this group, we also provide the top ground for  refusal. NIV applicants can be refused a visa on a number of grounds of  inadmissibility or other ineligibility under U.S. immigration law and State  policy. However, across all visa groups, the top categories were either  ineligible nonimmigrant or inadequate documentation:  Ineligible nonimmigrant. For most NIV categories, the applicant  is presumed to be an intending immigrant until the applicant  establishes to the satisfaction of the consular officer that he or she  is entitled to a nonimmigrant status. An applicant may be refused  under this provision if, among other things, the consular officer  determines the applicant lacks sufficient ties to his or her home  country, or intends to abandon foreign residence; that evidence  otherwise indicates an intent to immigrate to the United States  permanently; or that the applicant is likely to violate the terms of  the visa after being admitted.", "Inadequate documentation. The consular officer determined that  the application is not in compliance with the INA because, for  example, it lacks necessary documentation to allow the consular  officer to determine visa eligibility. In such cases, the applicant  would not be found eligible for the visa unless and until  satisfactory documentation is provided to the consular officer or  after the completion of administrative processing, such as security  advisory opinions."], "subsections": [{"section_title": "Tourist and business visitor visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in millions)", "paragraphs": ["Visa types (FY 2017) (9,968,157 adjudications)", "Region in which applicant applied (FY 2017) (9,968,157 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf Issued tourist and business visitor visas rose 22", "paragraphs": ["percent from fiscal years 2012 through 2015, and declined by about 13 percent from fiscal years 2015 to 2017. \u25cf The refusal rate for tourist and business visitor visas generally increased each year from fiscal year 2012 through fiscal year 2017. \u25cf The vast majority of refusals in fiscal year 2017 were due to the applicant\u2019s inability to overcome the presumption of his or her intent to immigrate or meet the visa\u2019s eligibility criteria.", "Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}, {"section_title": "Student and exchange visitor visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in thousands)", "paragraphs": ["Visa types (FY 2017) (992,855 adjudications)", "Region in which applicant applied (FY 2017) (992,855 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf Generally, student and exchange visitor visa", "paragraphs": ["\u25cf The refusal rate for student and exchange visitor issuances decreased each year from fiscal years 2015 through 2017. visas peaked in fiscal year 2016, and slightly declined in fiscal year 2017. \u25cf The vast majority of refusals in fiscal year 2017 were due to the applicant\u2019s inability to overcome the presumption of his or her intent to immigrate or meet the visa\u2019s eligibility criteria.", "Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}, {"section_title": "Temporary worker visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in thousands)", "paragraphs": ["Visa types (FY 2017) (884,667 adjudications)", "19% 10% 16% Region in which applicant applied (FY 2017) (884,667 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf Issued H-2A visas more than doubled from fiscal", "paragraphs": ["\u25cf Generally, the refusal rates for temporary worker years 2012 through 2017. visas decreased from fiscal years 2012 through 2017. \u25cf Department of State officials noted, for example, that H-2A visas are not numerically limited by statute. They also stated that they believe U.S. employers are increasingly less likely to hire workers without lawful status and are petitioning for lawfully admitted workers. \u25cf In fiscal year 2017, temporary worker visas were most frequently refused because the applicant did not provide adequate documentation to the consular officer.", "Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}, {"section_title": "Transit and crewmember visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in thousands)", "paragraphs": ["Visa types (FY 2017) (330,117 adjudications)", "Region in which applicant applied (FY 2017) (330,117 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf Issued transit and crewmember visas increased by", "paragraphs": ["\u25cf The refusal rates for transit and crewmember visas about 8 percent from fiscal years 2012 through 2017 (from about 295,000 to 320,000). varied over the period of fiscal years 2012 through 2017. \u25cf Specifically, issued C-1/D visas increased over the \u25cf The majority of refusals in fiscal year 2017 were same time period, but the number of issued visas for the remaining visa types in this category have decreased. due to the applicant\u2019s inability to overcome the presumption of his or her intent to immigrate or meet the visa\u2019s eligibility criteria.", "Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}, {"section_title": "Foreign official and employee visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in thousands)", "paragraphs": ["Visa types (FY 2017) (166,187 adjudications)", "Region in which applicant applied (FY 2017) (166,187 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf Issued foreign official and employee visas remained generally stable over the period of fiscal years 2012 through 2017.", "paragraphs": ["\u25cf The refusal rates for foreign official and employee visas remained under 4 percent. \u25cf In fiscal year 2017, foreign official and employee visas were most frequently refused because the applicant did not provide adequate documentation to the consular officer.", "Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}, {"section_title": "Treaty trader and investor visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in thousands)", "paragraphs": ["Visa types (FY 2017) (68,580 adjudications)", "Region in which applicant applied (FY 2017) (68,580 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf Overall, issued treaty trader and investor visas", "paragraphs": ["\u25cf Generally, refusal rates for treaty trader and investor increased over the period of fiscal years 2012 through 2017. visas increased slightly over the period of fiscal years 2012 through 2017. \u25cf Issuances for E-3 visas nearly doubled from fiscal \u25cf The majority of refusals in fiscal year 2017 were year 2012 through 2017, but comprise a small percentage of this category overall. due to the applicant\u2019s inability to overcome the presumption of their intent to immigrate or meet the visa\u2019s eligibility criteria.", "Issued visas, fiscal years 2012 through 2017 (in thousands) Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}, {"section_title": "Fianc\u00e9(e) and spouse visas", "paragraphs": [], "subsections": [{"section_title": "Characteristics of the applicant pool", "paragraphs": [], "subsections": [{"section_title": "Number of adjudications (in thousands)", "paragraphs": ["Visa types (FY 2017) (40,533 adjudications)", "Region in which applicant applied (FY 2017) (40,533 adjudications)"], "subsections": []}]}, {"section_title": "Issuances", "paragraphs": [], "subsections": [{"section_title": "\u25cf The number of issued fianc\u00e9(e) and spouse visas", "paragraphs": ["\u25cf Refusal rates for fianc\u00e9(e) and spouse visas were fluctuated over the period of fiscal years 2012 through 2017, but increased overall during this time period. relatively low during the period of fiscal years 2012 through 2017. \u25cf Most refusals in fiscal year 2017 were due to inadequate documentation from the visa applicant, potentially indicating that such applications failed to include necessary documentation for the consular officer to ascertain whether the applicant was eligible to receive a visa at that time.", "Issued visas, fiscal years 2012 through 2017 (in thousands)", "Visa refusal rates, fiscal years 2012 through 2017 (percentage)"], "subsections": []}]}]}]}, {"section_title": "Appendix II: Nonimmigrant Visa Statistics, Fiscal Years 2012 through 2017", "paragraphs": ["Nonimmigrant visas (NIV) are issued to foreign nationals such as tourists,  business visitors, and students seeking temporary admission into the  United States. The Department of State (State) is generally responsible  for the adjudication of NIV applications, and manages the application  process, including the consular officer corps and its functions at more  than 220 U.S. embassies and consulates (i.e., visa-issuing posts)  overseas. Depending on various factors, such as the particular NIV  sought, the applicant\u2019s background, and visa demand, State officials  noted that the length of the visa adjudication process can vary from a  single day to months.", "This appendix provides descriptive statistics of NIV adjudications,  issuances, and refusals for fiscal years 2012 through 2017. Specific  details are shown in table 8 below.", "State data from fiscal years 2012 through 2016 indicate that NIV  adjudications generally followed an annual cycle, ebbing during certain  months during the fiscal year; however, adjudications in fiscal year 2017  departed slightly from this trend. Specifically, from fiscal years 2012  through 2016, the number of NIV adjudications typically reached its  highest peak in the summer months, as shown in table 9. For example,  State officials noted that a summer peak is generally due to international  students who are applying for their visas for the coming academic year.", "There are many NIVs, and for the purposes of this report, we have placed  the majority of NIVs into one of seven groups. Table 10 includes the  annual NIV adjudications, issuances, and refusal rates, for each visa  group for fiscal years 2012 through 2017.", "NIV applicants seeking to travel to the United States represent many  different nationalities, but the countries of nationality with the most NIV  adjudications have remained relatively consistent in recent years. Table  11 provides the top 25 countries of nationality for NIV adjudications for  fiscal years 2012 through 2017.", "NIV applicants can apply for their NIVs at more than 220 visa-issuing U.S.  posts overseas. Table 12 describes the regions to which NIV applicants  applied from fiscal years 2012 through 2017.", "NIV applicants can be refused a visa on a number of grounds of  inadmissibility or other ineligibility under U.S. immigration law and State  policy. For the purposes of this report, we have grouped most of these  grounds for refusal into one of seven categories, and group the remaining  into a miscellaneous category, as shown in table 13."], "subsections": []}, {"section_title": "Appendix III: Foreign National Entry Restrictions and Related Litigation, January 2017 Through June 2018", "paragraphs": ["From January through October 2017, the administration took various  executive actions establishing nationality-based entry restrictions for  certain categories of foreign nationals from designated countries. This  appendix supplements information included in this report to provide a  more comprehensive presentation of changes to U.S. immigration policy  affecting nonimmigrant and immigrant entry into the United States, and  outlines the legal standards applied, and precedent developed and relied  upon, by federal courts in resolving challenges to the executive actions. In  particular, it describes relevant aspects of the executive actions  specifically addressed in this report\u2014Executive Orders 13769 and 13780,  both titled Protecting the Nation from Foreign Terrorist Entry into the  United States, and Presidential Proclamation 9645, Enhancing Vetting  Capabilities and Processes for Detecting Attempted Entry into the United  States by Terrorists or Other Public-Safety Threats\u2014that imposed visa  entry restrictions on certain countries\u2019 nationals and included provisions  addressing NIV screening and vetting, as well as other executive actions  on immigration issued by the current administration. Furthermore, this  appendix provides a detailed account of the interrelated challenges to  these executive actions brought in the federal courts through June 2018.", "In summary, on March 6, 2017, the President issued Executive Order  (EO) 13780, Protecting the Nation from Foreign Terrorist Entry Into the  United States, which instituted visa and refugee entry restrictions, and an  accompanying memorandum addressed to the Secretaries of State and  Homeland Security and the Attorney General, calling for heightened  screening and vetting of visa applications and other immigration benefits.", "EO 13780 stated that it is U.S. policy to improve the screening and vetting  protocols and procedures associated with the visa-issuance process and  U.S. Refugee Admissions Program (USRAP). Enforcement of sections  2(c) and 6(a) of EO 13780 which established visa entry restrictions for  nationals of six countries of particular concern\u2014Iran, Libya, Somalia,  Sudan, Syria, and Yemen\u2014for a 90-day period, and suspended all  refugee admissions for 120 days, was enjoined by federal district court  orders issued in March 2017. On appeal, the U.S. Courts of Appeals for  the Fourth and Ninth Circuits generally upheld these decisions. Upon  review by the U.S. Supreme Court in June 2017, the injunction was  partially lifted except with respect to foreign nationals who have bona fide  ties to the United States Implementation of EO 13780 commenced on  June 29, 2017.", "On September 24, 2017, pursuant to section 2(e) of EO 13780, the  President issued Presidential Proclamation 9645, Enhancing Vetting  Capabilities and Processes for Detecting Attempted Entry Into the United  States by Terrorists or Other Public-Safety Threats. This proclamation  restricts entry into the United States of certain categories of foreign  nationals from eight countries\u2014Chad, Iran, Libya, North Korea, Somalia,  Syria, Venezuela, and Yemen\u2014for an indefinite period. Preliminary  injunctions issued by the U.S. District Courts for the Districts of Maryland  (Maryland federal district court) and Hawaii (Hawaii federal district court)  in October 2017 prohibited implementation of these visa entry restrictions  except with respect to North Korean and Venezuelan nationals. On  December 4, 2017, the U.S. Supreme Court issued two orders staying  these district court injunctions; and on January 19, 2018, the Supreme  Court granted the government\u2019s petition for review of the December 22,  2017, decision of the Ninth Circuit, which partially affirmed the Hawaii  federal district court\u2019s preliminary injunction. As of June 2018, these latest  visa entry restrictions continue to be fully implemented consistent with the  Supreme Court\u2019s June 26, 2018, decision, which held that the President  may lawfully establish nationality-based entry restrictions, and that  Proclamation 9645 itself \u201cis squarely within the scope of Presidential  authority.\u201d The following sections describe these executive actions and  related litigation in greater detail."], "subsections": [{"section_title": "Executive Actions and Related Litigation", "paragraphs": [], "subsections": [{"section_title": "Executive Order 13769", "paragraphs": ["On January 27, 2017, the President issued EO 13769, Protecting the  Nation from Foreign Terrorist Entry Into the United States, which directed  a review of information needs for adjudicating visas and other immigration  benefits to confirm individuals seeking such benefits are who they claim  to be, and are not security or public-safety threats. To temporarily  reduce investigative burdens during the review period, the EO suspended  U.S. entry for nationals of seven countries of particular concern\u2014Iran,  Iraq, Libya, Somalia, Sudan, Syria, and Yemen. In addition, EO 13769 put  USRAP on hold for 120 days and indefinitely barred admission of Syrian  refugees. Shortly after its issuance, however, the EO faced numerous  legal challenges in federal courts across the country involving various  constitutional and statutory issues such as detainee applications for writs  of habeas corpus, alleged religious or nationality-based discrimination,  and the extent of the EO\u2019s applicability to certain categories of foreign  nationals, including U.S. lawful permanent residents (LPR) and dual  nationals holding passports issued by a listed country as well as another  nation not subject to visa entry restrictions.", "On February 3, 2017, the Washington federal district court entered a  nationwide temporary restraining order (TRO) prohibiting enforcement of  the EO\u2019s entry restrictions. In rejecting the government\u2019s argument that  a TRO only cover the particular states at issue, the court reasoned that  partial implementation would \u201cundermine the constitutional imperative of  \u2018a uniform Rule of Naturalization\u2019 and Congress\u2019s instruction that the  \u2018immigration laws of the United States should be enforced vigorously and  uniformly.\u2019\u201d On February 9, 2017, the Ninth Circuit affirmed the  nationwide injunction, thereby denying the government\u2019s emergency  motion for a stay of the Washington federal district court\u2019s TRO pending  appeal, because the government did not show a likelihood of success on  the merits of its appeal, or that failure to enter a stay would cause  irreparable injury. On March 6, 2017, however, the President issued EO  13780, which revoked and replaced EO 13769, and established revised  restrictions on entry for nationals of the same countries of particular  concern, except Iraq."], "subsections": []}, {"section_title": "Executive Order 13780", "paragraphs": ["On March 6, 2017, the President signed EO 13780, Protecting the Nation  from Foreign Terrorist Entry Into the United States, which revoked and  replaced EO 13769 and put in place revised visa and refugee entry  restrictions, and issued an accompanying memorandum calling for  heightened screening and vetting of visa applications and other  immigration benefits. In general, sections 2(c) and 6(a) of EO 13780  barred visa travel for nationals of six designated countries\u2014Iran, Libya,  Somalia, Sudan, Syria, and Yemen\u2014for 90 days, and all refugee  admission for 120 days. On March 15, 2017, sections 2 and 6 of the EO  were enjoined on statutory grounds (i.e., based on potential violation of  U.S. immigration law) pursuant to the order of the Hawaii federal district  court granting the plaintiffs\u2019 motion for a TRO. On March 16, 2017, the  Maryland federal district court issued a preliminary injunction barring  implementation of visa entry restrictions on a nationwide basis with  respect to nationals of the six listed countries.", "On May 25, 2017, the Fourth Circuit affirmed the Maryland federal district  court\u2019s injunction on constitutional grounds (i.e., based on potential  violation of the Establishment Clause of the First Amendment to the U.S.  Constitution). On June 12, 2017, the Ninth Circuit generally affirmed the  Hawaii federal district court\u2019s ruling, but vacated the district court\u2019s order  to the extent it enjoined internal review procedures not burdening  individuals outside the Executive Branch, therefore permitting the  administration to conduct the internal reviews of visa information needs  as directed in the EO. On June 14, 2017, the President issued a  memorandum to the Secretaries of State and Homeland Security,  Attorney General, and Director of National Intelligence, directing that  sections 2 and 6 of EO 13780 were to be implemented 72 hours after all  applicable injunctions are lifted or stayed.", "On June 26, 2017, the Supreme Court granted, in part, the government\u2019s  application to stay the March 15 and 16 injunctions of the Hawaii and  Maryland federal district courts, as generally upheld on May 25 and June  12 by the Fourth and Ninth Circuits. The Court explained that the  administration may enforce visa and refugee travel restrictions under  sections 2 and 6 except with respect to an individual who can \u201ccredibly  claim a bona fide relationship with a person or entity in the United States.\u201d  In the case of a visa or refugee applicant who is the relative of a person in  the United States, such foreign national would be exempt from entry  restrictions provided the family connection with their U.S. relative meets  the \u201cclose familial relationship\u201d standard. The Court further explained that  a qualifying relationship with a U.S. entity would have to be formal,  documented, and formed in the ordinary course, and not for the purpose  of evading EO 13780.", "On June 29, 2017, the day that implementation of EO 13780 began, the  State Department issued guidance providing that a close familial  relationship exists for the parents, spouse, children, adult sons or  daughters, sons and daughters-in-law, and siblings of a person in the  United States, but not for such person\u2019s grandparents, grandchildren,  uncles, aunts, nephews, nieces, sisters-in-law, brothers-in-law or other  relatives. The State of Hawaii filed a motion with the Hawaii federal  district court seeking, among other things, a declaration that the partial  injunction in place after the Supreme Court\u2019s ruling prohibited application  of travel restrictions to fianc\u00e9s, grandparents, grandchildren, brothers and  sisters in-law, aunts, uncles, nieces, nephews, and cousins of persons in  the United States. On July 13, 2017, the Hawaii federal district court  ruled, among other things, that section 2 of the EO, generally barring  travel to the United States for nationals of certain countries, does not  apply to the grandparents, grandchildren, brothers and sisters in-law,  aunts, uncles, nieces, nephews and cousins of persons in the United  States, who were initially excluded from the administration\u2019s interpretation  of \u201cclose family.\u201d The government appealed this decision to the  Supreme Court.", "On July 19, 2017, the Supreme Court denied the government\u2019s motion  seeking further clarification of its June 26 ruling, stayed the Hawaii federal  district court\u2019s order to the extent it included refugees covered by a formal  assurance from a U.S.-based resettlement agency within the scope of the  preliminary injunction, pending appeal to the Ninth Circuit, and left  unchanged the district court\u2019s broader formulation of exempt \u201cclose  family.\u201d On September 7, 2017, the Ninth Circuit upheld the Hawaii  federal district court\u2019s definition of close family members who are not to  be subjected to travel restrictions, and rejected the government\u2019s  argument that refugees who had undergone a stringent review process  and been approved by U.S.-based resettlement agencies lack a bona fide  relationship to the United States, thus allowing admission of such  refugees. On September 11, 2017, the Supreme Court temporarily  enjoined aspects of the Hawaii federal district court\u2019s holding that would  permit admission of certain refugees with formal assurances from a U.S.  resettlement entity. The next day, on September 12, 2017, the Supreme  Court indefinitely stayed the Ninth Circuit\u2019s September 7 ruling with  respect to refugees covered by a formal assurance, thereby permitting  the administration to suspend entry of such refugees.", "On September 24, 2017, pursuant to section 2(e) of EO 13780, the  President issued Presidential Proclamation 9645, Enhancing Vetting  Capabilities and Processes for Detecting Attempted Entry Into the United  States by Terrorists or Other Public Safety Threats, which expanded the  scope and duration of visa entry restrictions from six to eight countries,  and from a 90-day to an indefinite period for the listed countries. On  September 25, 2017, in light of the September 24 proclamation, the  Supreme Court directed the parties to file briefs addressing whether, or to  what extent, the cases before it regarding EO 13780 are moot. On  October 10, 2017, after receiving the parties\u2019 supplemental briefs, the  Supreme Court decided that because section 2(c) of EO 13780 expired  on September 24, there was no live case or controversy; and without  expressing a view on the merits, the Court vacated and remanded the  Maryland case to the Fourth Circuit with instructions to dismiss as moot  the challenge to EO 13780. On October 24, 2017, consistent with its  October 10 ruling, the Supreme Court also vacated and remanded the  Hawaii case related to EO 13780 to the Ninth Circuit with instructions to  dismiss it as moot. Consequently, after challenges to EO 13780 visa  and refugee entry restrictions, as curtailed by the Supreme Court\u2019s ruling  of June 26, 2017, were rendered moot, litigation continued with respect to  the President\u2019s proclamation of September 24, 2017."], "subsections": []}, {"section_title": "Presidential Proclamation 9645", "paragraphs": ["On September 24, 2017, pursuant to section 2(e) of EO 13780, the  President issued Presidential Proclamation 9645 (the Proclamation),  Enhancing Vetting Capabilities and Processes for Detecting Attempted  Entry Into the United States by Terrorists or Other Public-Safety Threats,  which imposes certain conditional restrictions and limitations on entry into  the United States of nationals of eight countries\u2014Chad, Iran, Libya, North  Korea, Somalia, Syria, Venezuela, and Yemen\u2014for an indefinite period.  According to the Proclamation, travel restrictions are tailored to each  nation\u2019s information sharing and identity management deficiencies based  on standard immigration screening and vetting criteria established by the  Secretary of Homeland Security, and are to remain in effect until such  time as the Secretaries of Homeland Security and State determine that a  country provides sufficient information for the United States to assess  adequately whether its nationals pose a security or safety threat.", "On October 17, 2017, the Hawaii federal district court issued a TRO, on  statutory grounds, enjoining on a nationwide basis the implementation  and enforcement of travel restrictions provided for under the  Proclamation, except with respect to North Korean or Venezuelan  nationals. On the same day, the Maryland federal district court granted  in part plaintiffs\u2019 motion for preliminary injunction, primarily on  constitutional grounds, thereby prohibiting implementation of visa entry  restrictions nationwide, except for nationals of North Korea and  Venezuela as well as other covered foreign nationals who lack a credible  claim of a bona fide relationship with a person or entity in the United  States. On October 20, 2017, the Hawaii federal district court converted  its October 17 TRO into a preliminary injunction, thereby continuing the  nationwide prohibition on enforcement or implementation of the  suspension on entry for nationals of Chad, Iran, Libya, Somalia, Syria,  and Yemen. The district court did not stay its ruling or hold it in  abeyance should an appeal be filed in the Ninth Circuit.", "On November 13, 2017, the Ninth Circuit granted, in part, the  government\u2019s request for an emergency stay of the Hawaii federal district  court\u2019s preliminary injunction, thereby allowing visa entry restrictions to go  into effect with respect to the nationals of Chad, Iran, Libya, Somalia,  Syria, and Yemen. However, consistent with the Supreme Court\u2019s June  2017 ruling, the court ordered that those with a bone fide relationship to a  person or entity in the United States not be subject to such travel  restrictions. On November 20, 2017, the government petitioned the  Supreme Court for a stay of the preliminary injunction issued by the  Hawaii federal district court, pending consideration and disposition of the  government\u2019s appeal from that injunction to the Ninth Circuit and, if that  court affirms the injunction, pending filing and disposition of a petition for  a writ of certiorari and any further proceedings in the Supreme Court.", "On November 28, 2017, plaintiffs in the challenge to the Proclamation  arising out of Hawaii asked that the Supreme Court deny the  government\u2019s request to lift the partial injunction left in place by the Ninth  Circuit. On the same day, plaintiffs in the case arising out of Maryland  requested that the Supreme Court not grant a stay of the federal district  court\u2019s preliminary injunction. In both cases, plaintiffs assert that the  more expansive visa entry restrictions violate U.S. immigration law;  additionally, for the Maryland case, plaintiffs argue that such restrictions  are unconstitutional as a form of discrimination based on national origin.", "On December 4, 2017, the Supreme Court issued two orders staying the  Maryland and Hawaii federal district courts\u2019 orders of October 17 and 20  that preliminarily enjoined implementation of the Proclamation, pending  decisions of the Ninth and Fourth Circuits in the government\u2019s appeals,  and of the Supreme Court regarding a petition for a writ of certiorari (if  sought). As a result, the Proclamation\u2019s visa entry restrictions were  permitted to go into full effect unless and until they are either enjoined by  the courts of appeals and a writ of certiorari is not sought thereafter, or  the Supreme Court either denies a petition for certiorari (thereby resulting  in termination of the Supreme Court\u2019s stay order) or grants such petition  followed by a final injunction prohibiting current or future implementation  of the Proclamation\u2019s restrictions. The Supreme Court further noted its  expectation that the courts of appeals will render decisions \u201cwith  appropriate dispatch,\u201d in light of both courts having decided to consider  their respective cases on an expedited basis. On December 8, 2017, the  Department of State announced that it began fully implementing the  Proclamation, as permitted by the Supreme Court, at the opening of  business at U.S. embassies and consulates overseas.", "On December 22, 2017, the Ninth Circuit affirmed in part and vacated in  part the Hawaii federal district court\u2019s October 20 order enjoining  enforcement of visa entry restrictions under the Proclamation, while  limiting the preliminary injunction\u2019s scope to foreign nationals who have a  bona fide relationship with a person or entity in the United States.  Without reaching plaintiffs\u2019 constitutional claims, the court of appeals  concluded that the Proclamation exceeded the scope of authority  delegated to the President by Congress under the Immigration and  Nationality Act (INA), in particular, sections 202(a)(1)(A) (immigrant visa  nondiscrimination) and 212(f) (presidential suspension of, or imposition of  restrictions on, alien entry), by deviating from statutory text, legislative  history and prior executive practice; not including the requisite finding that  entry of certain foreign nationals would be detrimental to U.S. interests;  and contravening the INA\u2019s prohibition on nationality-based discrimination  in the issuance of immigrant visas. However, the court stayed its decision,  given that the Supreme Court\u2019s December 4 order lifted the federal district  courts\u2019 injunctions pending not only review by the courts of appeals, but  also \u201cdisposition of the Government\u2019s petition for a writ of certiorari, if  such writ is sought.\u201d", "On January 5, 2018, the government filed a petition for a writ of certiorari  seeking review of the December 22, 2017, judgment of the Ninth Circuit  which left in place the Hawaii federal district court injunction of the  Proclamation\u2019s visa entry restrictions for individuals with bona fide ties to  the United States. On January 19, 2018, the Supreme Court granted the  government\u2019s certiorari petition and will therefore consider, and issue an  opinion on the merits of, the Ninth Circuit\u2019s decision.", "On February 15, 2018, the Fourth Circuit affirmed the preliminary  injunction granted by the Maryland federal district court on constitutional  grounds, but stayed its decision pending the outcome of the Ninth Circuit  case before the Supreme Court. The court of appeals found that  \u201claintiffs offer undisputed evidence that the President has openly  and often expressed his desire\u201d to bar the entry of Muslims into the United States. Therefore, the court concluded that, in light of the  President\u2019s official statements, the Proclamation likely violates the  Establishment Clause as it \u201cfails to demonstrate a primarily secular  purpose,\u201d and also goes against the basic principle that government is not  to act with religious animus.", "On February 23, 2018, Fourth Circuit challengers filed a petition for a writ  of certiorari seeking for the Supreme Court to consolidate their case with  the Court\u2019s ongoing review of the Ninth Circuit decision. These petitioners  requested that the Court additionally consider their argument that the  preliminary injunction should not have been limited to individuals with a  bona fide relationship to a person or entity in the United States. On  February 26, 2018, the Supreme Court granted Fourth Circuit petitioners\u2019  motion to expedite consideration of their certiorari petition.", "On April 10, 2018, the President issued a proclamation announcing that  because Chad has improved its identity-management and information  sharing practices sufficiently to meet U.S. baseline security standards,  nationals of Chad will again be able to receive visas for travel to the  United States.", "On June 26, 2018, the Supreme Court held that the President lawfully  exercised the broad discretion granted to him under INA \u00a7 212(f)  (presidential suspension of, or imposition of restrictions on, alien entry),  by issuing Proclamation No. 9645, which established nationality-based  visa entry restrictions applicable to categories of foreign nationals from  eight (now seven) countries for an indefinite period. In addition, while  three individual plaintiffs had standing to bring an Establishment Clause  challenge to entry restrictions prohibiting their relatives from coming to the  United States, the Court found the Proclamation to be legitimate on its  face as a way to prevent entry of certain foreign nationals where the  government determines there is insufficient information for visa vetting.", "As a result of the Supreme Court\u2019s June 26, 2018, decision, which held  that the establishment of nationality-based entry restrictions is a lawful  exercise of the President\u2019s broad discretion in matters of immigration and  national security, the visa entry restrictions imposed on categories of  foreign nationals from certain countries pursuant to Presidential  Proclamation 9645 continue to be fully implemented , as they have been  since the Supreme Court\u2019s December 4, 2017, orders staying the lower  courts\u2019 injunctions."], "subsections": []}, {"section_title": "Executive Order 13815", "paragraphs": ["On October 24, 2017, the same day the 120-day suspension of refugee  admissions under EO 13780 expired, the President signed EO 13815,  Resuming the United States Refugee Admissions program With  Enhanced Vetting Capabilities, which resumed USRAP and directed that  special measures be applied to certain categories of refugees posing  potential threats to the security and welfare of the United States. On  December 23, 2017, the Washington federal district court issued a  nationwide preliminary injunction on aspects of EO 13815 (and its  accompanying memorandum), thus prohibiting the administration from:  (1) temporarily suspending admission of refugees from 11 previously  identified countries of concern, and reallocating resources from the  processing of their applications during the 90-day review period (except  for those lacking a bona fide relationship with a person or entity in the  United States); and (2) indefinitely barring admission of, and application  processing for, all following-to-join refugees.", "On January 5, 2018, the Washington federal district court denied the  government\u2019s motion for reconsideration of the court\u2019s December 23,  2017, order temporarily halting enforcement of refugee entry restrictions  that were to be implemented as part of the resumption of USRAP under  the EO. Specifically, the government \u201cask the court to \u2018modify its  preliminary injunction to exclude from coverage refugee applicants who  seek to establish a  on the sole ground that they  have received a formal assurance from a resettlement agency.\u2019\u201d In  denying the government\u2019s motion for reconsideration, the court relied on  the September 7, 2017, decision of the Ninth Circuit which, among other  things, rejected the notion that refugees with formal assurances from  U.S.-based resettlement agencies do not meet the Supreme Court\u2019s bona  fide relationship standard. The court treated this Ninth Circuit ruling as  binding precedent given that the Supreme Court\u2019s indefinite stay of  September 12 neither vacated the Ninth Circuit\u2019s decision, nor provided  any underlying reason(s) that would allow another court to discern its  rationale. On January 9, 2018, the Washington federal district court also  denied the government\u2019s emergency motion for a stay of the court\u2019s  December 23, 2017, preliminary injunction, pending appeal to the Ninth  Circuit.", "On January 31, 2018, DHS announced additional security measures to  prevent exploitation of USRAP. Specifically, these security measures  include additional screening for certain nationals of high-risk countries, a  more risk-based approach to administering USRAP, and a periodic review  and update of the refugee high-risk countries list and selection criteria.", "Therefore, as of June 2018, while the administration has announced  additional security measures to strengthen the integrity of USRAP, the Washington federal district court\u2019s December 23, 2017, preliminary  injunction of EO 13815 continues to: (1) prohibit implementation of the  temporary suspension of admission, and reallocation of resources from  processing applications, of refugees from 11 previously identified  countries of concern; and (2) forbid enforcement of the indefinite bar on  entry of following-to-join refugees."], "subsections": []}]}]}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Kathryn Bernet (Assistant  Director), Colleen Corcoran, Eric Hauswirth, Thomas Lombardi, Amanda  Miller, Sasan J. \u201cJon\u201d Najmi, Erin O\u2019Brien, Garrett Riba, and Dina Shorafa  made significant contributions to this report."], "subsections": []}]}], "fastfact": ["Nonimmigrant visas (NIV) are issued to foreign tourists, students, and others seeking temporary admission to the United States.", "In 2017, the President restricted issuance of visas for people from certain countries and called for changes to NIV screening and vetting procedures.", "State Department data indicated that about 2.8 million NIV applications were refused in fiscal year 2017. We found that over 90% were because the applicant did not qualify for the visa, and 1,338 were refused due to the President's visa entry restrictions."]}
{"id": "GAO-18-513", "url": "https://www.gao.gov/products/GAO-18-513", "title": "Defense Management: DOD Senior Leadership Has Not Fully Implemented Statutory Requirements to Promote Department-Wide Collaboration", "published_date": "2018-06-25T00:00:00", "released_date": "2018-06-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries and would benefit from the use of cross-functional teams. Additionally, DOD is to establish cross-functional teams to support this strategy, issue guidance on these teams, and provide training to team members and civilian leaders in the Office of the Secretary of Defense.", "The NDAA also included a provision for GAO to periodically assess DOD's actions in response to section 911. This is GAO's third report on the implementation of section 911. It assesses the status of DOD's efforts to (1) establish cross-functional teams, (2) issue an organizational strategy, and (3) issue guidance on cross-functional teams and provide training to team members and Office of the Secretary of Defense leaders.", "GAO reviewed documentation on DOD's implementation of its cross-functional teams and DOD's draft organizational strategy, draft guidance on establishing cross-functional teams, and draft training curricula. GAO also interviewed DOD officials on efforts to implement section 911.", "GAO is not making new recommendations in this report. DOD concurred and is taking actions to address GAO's previous recommendations on DOD's implementation of section 911. DOD also concurred with the findings in a draft of this report."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has implemented some statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, enacted in December 2016, to address organizational challenges. However, senior leadership has not implemented several requirements intended to support cross-functional teams and promote department-wide collaboration (see table).", "DOD has established 10 cross-functional teams, which are in various stages of implementation. Specifically, DOD is in the early stages of establishing one cross-functional team to address the backlog of the department's personnel security clearance background investigations and has assigned an interim leader and seven members to this team. In addition, DOD established 9 cross-functional teams to implement reform initiatives intended to improve the efficiency of the department's business operations. DOD generally appointed senior department officials to lead these teams, and the size of the teams, as of May 2018, ranged from 5 to 12 members.", "DOD has drafted, but not issued, an organizational strategy. DOD officials stated that they have not completed the strategy because they want to align it with two department-wide strategy documents\u2014the National Defense Strategy, which was issued in January 2018, and the National Defense Business Operations Plan, which was issued in May 2018.", "DOD also has not fulfilled three statutory requirements related to guidance and training for cross-functional teams and civilian leaders in the Office of the Secretary of Defense. Specifically, DOD has not (1) provided training to cross-functional team members, (2) issued guidance on cross-functional teams, or (3) provided training to presidential appointees in the Office of the Secretary of Defense. DOD officials stated that they plan to send the guidance and training curricula to the Secretary of Defense for review and approval after DOD issues the organizational strategy. Fully implementing these requirements and GAO's prior recommendations related to the organizational strategy, guidance, and training, will better position DOD to effectively implement its cross-functional teams and advance a collaborative culture as required by the NDAA."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) maintains military forces with  unparalleled capabilities, but continues to confront organizational and  management challenges that hinder collaboration and integration across  the department. In particular, DOD\u2019s military departments and functional  organizations have not always worked well together to accomplish  departmental objectives. For example, in our prior work, we found that  DOD\u2019s efforts to implement a hierarchical, portfolio-based approach to  strategically acquire contracted services had not been successful. In part,  we found that the cultural barriers and military commanders\u2019 reluctance to  give up certain responsibilities for determining how and which services  were needed to meet their missions hindered DOD\u2019s efforts. We have  also highlighted these challenges in our High-Risk List, which calls  attention to agencies and program areas that are high risk because of  their vulnerabilities to fraud, waste, abuse, and mismanagement, or are  most in need of transformation. Our criteria for removal from the High- Risk List underscore the importance of a demonstrated strong  commitment and top leadership support to address the risks.", "To help advance a more collaborative culture within the department,  section 911 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 directs the Secretary of Defense to, among other things,  formulate and issue an organizational strategy for DOD. The  organizational strategy, the act states, should identify the critical  objectives and other organizational outputs that span multiple functional  boundaries and would benefit from the use of cross-functional teams to  ensure collaboration and integration across the department. The act also  requires DOD to establish cross-functional teams whose leaders report  directly to the Secretary of Defense and that, among other things,  address the critical objectives and outputs outlined in the department\u2019s  organizational strategy. The act further requires DOD to issue guidance  on cross-functional teams and to provide training to members of those  established teams and their supervisors on elements of successful cross- functional teams. Under the act, DOD is also required to provide training  on leadership, modern organizational practice, collaboration, and the  operation of cross-functional teams to individuals\u2014within 3 months of  their appointment\u2014who have been appointed by the President and  confirmed by the Senate to a position within the Office of the Secretary of  Defense. DOD can request waivers from the President for this  requirement. The Chief Management Officer (CMO) is leading the  department\u2019s efforts to implement section 911.", "Section 911 of the NDAA for Fiscal Year 2017 also included a provision  for us\u2014every 6 months after the date of enactment on December 23,  2016, through December 31, 2019\u2014to submit to the defense committees  a report setting forth a comprehensive assessment of the actions that  DOD has taken pursuant to section 911 during each 6-month period and  cumulatively since the NDAA\u2019s enactment. In June 2017, we issued our  first report and found that DOD had taken steps in several areas to begin  implementing the requirements of section 911. In February 2018, we  issued our second report and found that DOD had implemented some of  the statutory requirements outlined in section 911, but could do more to  promote department-wide collaboration, as required under the statute.  We recommended, and DOD concurred, that the CMO take four actions  to improve the department\u2019s implementation of section 911. Appendix I  identifies the four recommendations from our February 2018 report and  the status of DOD\u2019s implementation.", "This is our third report on DOD\u2019s implementation of section 911. In this  report, we assess the status of DOD\u2019s efforts to (1) establish cross- functional teams, (2) issue an organizational strategy to advance a  collaborative culture, and (3) issue guidance on cross-functional teams  and provide training to cross-functional team members and senior civilian  leaders in the Office of the Secretary of Defense. Appendix II lists the  requirements of section 911 of the NDAA for Fiscal Year 2017, the  corresponding due date, and the date completed, if applicable, for each  requirement as of May 2018.", "For the first objective, we reviewed documentation and interviewed Office  of the CMO (OCMO) officials and other DOD officials on the department\u2019s  steps to establish cross-functional teams. Based on discussions with  OCMO officials, we included 10 cross-functional teams in the scope of  our review because the officials consider these teams to be responsive to  section 911.", "For the second objective, we reviewed the most recent version of DOD\u2019s  draft organizational strategy, dated February 2018. In addition, we  interviewed OCMO officials on their efforts to collaborate with key  stakeholders, such as the Secretary of Defense, the military departments,  the combatant commands, and defense agencies, during development of  the organizational strategy. We evaluated DOD\u2019s efforts to issue an  organizational strategy against the requirements in section 911, as well  as leading practices from our prior work on mergers and organizational  transformations.", "For the third objective, we reviewed DOD\u2019s draft guidance on cross- functional teams and draft training curriculum for cross-functional team  members and their supervisors. Further, we reviewed documentation on  the number of individuals appointed by the President and confirmed by  the Senate to a position within the Office of the Secretary of Defense as  of May 2018\u2014the latest month available at the time of our review\u2014and  DOD\u2019s efforts to provide the required training or to develop criteria for  requesting waivers for these individuals. Lastly, we interviewed OCMO  officials on DOD\u2019s efforts to finalize the guidance and training required by  section 911.", "We conducted this performance audit from December 2017 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "DOD Has Established 10 Cross-Functional Teams That Are in Various Stages of Implementation", "paragraphs": ["DOD has established 10 cross-functional teams that OCMO officials  consider responsive to section 911, and these teams are in various  stages of implementation. The Secretary of Defense established a cross- functional team to manage the transfer of background investigations for  DOD personnel security clearances from the Office of Personnel  Management to DOD. This team is required to report directly to the  Secretary. In addition, the Deputy Secretary of Defense established 9  additional cross-functional teams to implement reform initiatives for  improving DOD\u2019s business operations. These teams report to the CMO."], "subsections": [{"section_title": "DOD Is in the Early Stages of Establishing a Cross-Functional Team to Manage the Transfer of Background Investigations to DOD", "paragraphs": ["In August 2017, the Secretary of Defense issued a memorandum  authorizing its first cross-functional team in response to section 911 to  address challenges with personnel vetting and background investigation  programs. The memorandum notes that a backlog of background  investigations affects DOD\u2019s mission readiness, critical programs, and  operations. According to the memorandum, this cross-functional team will  conduct a full review of current personnel vetting processes to identify a  redesigned process for DOD\u2019s security, suitability and fitness, and  credential vetting. The cross-functional team\u2019s objectives are to develop  options and recommendations to mitigate shortcomings, ensure  necessary resourcing, and transform the personnel vetting enterprise.  The Office of the Under Secretary of Defense for Intelligence and the  Defense Security Service are leading the efforts to establish the team.", "Since we last reported on DOD\u2019s efforts to establish the team, DOD has  taken some steps, such as assigning some team members, but has not  completed other key steps to staff and establish a direction for the team.  In February 2018, we reported that DOD had selected an interim leader  for the team. As of May 2018, this person, a non-Senior Executive  Service individual from the Defense Security Service, was still serving as  the interim leader. Section 911 requires DOD to assign a senior qualified  and experienced individual as the leader of the team. According to Office  of the Under Secretary of Defense for Intelligence officials, the  department plans to seek nominations from DOD components for a  permanent leader from the Senior Executive Service, but does not have a  specific timeframe for doing so. DOD also assigned seven full-time  personnel to the team, who are now co-located, in accordance with  requirements under section 911. These personnel are from the Army,  Defense Civilian Personnel Advisory Service, DOD Consolidated  Adjudications Facility, OCMO, Office of the Under Secretary of Defense  for Intelligence, and MITRE Corporation. Office of the Under Secretary of  Defense for Intelligence officials estimated that the team may have 20  members when it is fully staffed, but they did not have an estimate of  when DOD will assign the remaining team members.", "In addition, the Office of the Under Secretary of Defense for Intelligence  has established priorities for the cross-functional team. For example, the  team is required to prepare a project plan incorporating all key  components for a DOD enterprise vetting mission\u2014including key  milestones, specific objectives, performance metrics, a resourcing plan,  and an action plan for tracking key initiatives\u2014which are key steps for  establishing the team\u2019s direction. According to Office of the Under  Secretary of Defense for Intelligence officials, as of May 2018, the interim  leader was outlining a project plan. Filling key leadership and staff  positions will be important for ensuring that the team has the knowledge  and expertise from components across the department to effectively  develop and implement the plan."], "subsections": []}, {"section_title": "DOD Has Established 9 Cross-Functional Teams to Improve DOD\u2019s Business Operations", "paragraphs": ["The Deputy Secretary of Defense has established 9 additional cross- functional teams since October 2017 to implement reform initiatives  intended to improve the quality and productivity of the department\u2019s  business operations, including moving toward more use of enterprise  services. According to the memoranda appointing the team leaders,  these teams support the Secretary of Defense\u2019s focus on creating a more  lethal and effective force by allowing the department to reallocate  resources from business operations to readiness and to recapitalization of  the combat force. OCMO officials stated that they consider these teams  to be responsive to section 911 of the NDAA for Fiscal Year 2017.", "Section 911 requires DOD to assign senior qualified and experienced  individuals to lead the teams, and the Deputy Secretary of Defense  generally appointed senior DOD officials as leaders. Seven leaders  were appointed in October 2017, one in November 2017, and one in  January 2018. According to OCMO officials, these leaders report to the  CMO. As of May 2018, the size of the teams ranged from 5 to 12  members; OCMO officials stated that the size of the teams can vary  based on the knowledge and expertise the team needs to implement its  initiatives. The teams include representatives from the military  departments, functional organizations relevant to the reform topic, and  external experts. According to OCMO officials, the team leaders chose  their team members from candidates proposed by the military  departments and functional organizations. In addition, the members may  be assigned on a full-time or part-time basis, and all of the teams have  co-located space. Figure 1 provides additional details on the structure of  these 9 teams.", "OCMO officials stated that these 9 teams are in various stages of  implementing their initiatives. For example, the Human Resources team  was the most recent team to be established, and OCMO officials stated  the team is in the process of finalizing the identification and beginning the  implementation of its reform initiatives. Other teams, such as the  Financial Management and Information Technology and Business  Systems teams, have identified and are in the process of implementing  initiatives related to their reform areas.", "DOD established the Reform Management Group to identify opportunities  for reform and provide support to these 9 cross-functional teams. Chaired  by the Deputy Secretary of Defense and facilitated by the CMO and  Director of Cost Assessment and Program Evaluation, the Reform  Management Group provides oversight and guidance, makes decisions  on team recommendations, and monitors the teams\u2019 progress, according  to OCMO officials. These officials also told us that the Reform  Management Group holds weekly meetings to discuss the status of the  reform teams\u2019 efforts and provides monthly comprehensive reports on  these efforts to the Secretary of Defense."], "subsections": []}]}, {"section_title": "DOD Has Not Issued Its Organizational Strategy That Outlines Steps for Advancing a Collaborative Culture", "paragraphs": ["OCMO has drafted an organizational strategy, but DOD has not issued  the strategy, which section 911 required to be completed by September 1,  2017. OCMO officials told us that they have not completed the strategy  because they want to align it with the National Defense Strategy, which  was issued in January 2018, and the National Defense Business  Operations Plan, which was issued in May 2018. OCMO officials told us  that, once the organizational strategy is reviewed internally to align with  the National Defense Strategy and the National Defense Business  Operations Plan, the CMO plans to coordinate the review and approval of  the strategy across components within the department. We previously  recommended, and DOD concurred, that the CMO should obtain input on  the development of the strategy from key stakeholders, such as the  military departments and defense agencies. The officials estimated that  DOD components would have about 2 to 3 weeks to provide input on the  strategy and that the strategy could be issued as early as July 2018.", "We found that, consistent with our recent recommendations, a revised  version of the draft organizational strategy addresses the requirements in  section 911, including outlining steps for advancing a collaborative culture  within the department. In February 2018, we found that the August 2017  version of the draft organizational strategy that we reviewed addressed  the two required elements under section 911, but did not outline how it  would achieve several future outcomes that advance a collaborative  culture within the department, as required by the NDAA. We  recommended, and DOD concurred, that the CMO should revise the  organizational strategy to outline how it would achieve these outcomes  and, in doing so, should consider our nine leading practices on mergers  and organizational transformations.", "Based on our review of a February 2018 version of the draft  organizational strategy, we found that OCMO officials have taken steps to  address our recommendation, including identifying potential action steps  for the department that align with each of the nine leading practices. For  example, consistent with the leading practice for establishing a coherent  mission and integrated strategic goals to guide the transformation, OCMO  officials revised the draft strategy to propose that the CMO, in  coordination with stakeholders, could develop an implementation plan  with detailed initiatives for increasing collaboration and information  sharing across the department. According to the draft strategy, this plan  could include goals and milestones for these initiatives, and the CMO  could report periodically on the achievement of the goals. Further,  consistent with the leading practice to involve employees to obtain their ideas and gain their ownership for the transformation, OCMO officials  proposed that a representative from OCMO could chair an action officer- level governance body to plan and share performance information related  to this effort. According to the draft strategy, this governance body would  solicit feedback about the related changes, propose changes to new  policies and procedures based on the feedback, and manage the  implementation and tracking of the established goals. Issuing the  organizational strategy\u2014in accordance with section 911 and our prior  recommendation\u2014will better position DOD to advance a collaborative  culture."], "subsections": []}, {"section_title": "DOD Has Not Implemented Training or Issued Guidance for Its Cross- Functional Teams or Provided Training to Presidential Appointees", "paragraphs": ["DOD has not fulfilled three related requirements of section 911 to guide  the implementation of its cross-functional teams, namely to (1) provide  training to cross-functional team members and their supervisors, (2) issue  guidance on cross-functional teams, and (3) provide training to  presidential appointees. OCMO officials stated that they plan to send the  guidance and training curricula to the Secretary of Defense for review and  approval after the organizational strategy is issued. Table 1 shows the  three requirements of section 911, the due dates, and the status of DOD  actions, if any, as of May 2018."], "subsections": [{"section_title": "DOD Has Not Implemented Training or Issued Guidance for Its Cross-Functional Teams", "paragraphs": ["As of May 2018, OCMO had developed a draft training curriculum for  cross-functional team members and their supervisors, but had not  provided the required training. In February 2018, we reported that the  draft training curriculum addressed all requirements in section 911.  OCMO officials stated that after the Secretary of Defense reviews and  approves the training curriculum, which will occur after the organizational  strategy is issued, they will provide training to the members of the cross- functional team on personnel vetting for background investigations and to  the 9 teams implementing reform initiatives.", "OCMO has also drafted guidance on cross-functional teams, but DOD  has not issued the guidance and did not meet the statutorily-required date  of September 30, 2017. Section 911 requires the guidance to address  areas such as the decision-making authority of the teams and key  practices that senior leaders should follow with regard to leadership,  organizational practice, collaboration, and the functioning of cross- functional teams. In February 2018, we reported that OCMO had  developed draft guidance for cross-functional teams that addressed six of  seven statutorily-required elements and incorporated five of eight leading  practices for effective cross-functional teams that we identified in prior  work. We recommended, and DOD concurred, that the CMO should  fully address all requirements in section 911 and incorporate these  leading practices into the guidance. DOD has taken steps to address our  recommendation. For example, consistent with the practice for open and  regular communication, OCMO revised the guidance to state that the  cross-functional team leaders and OCMO will encourage and facilitate  continuous communication and information sharing. According to the  revised guidance, the team leaders and OCMO will accomplish this  through co-location of team members, management practices by cross- functional team leaders that promote a unified team culture and trust, and  use of collaborative information technology tools maintained by OCMO.  However, as of May 2018, DOD had not issued the guidance. As we  reported in February 2018, without initial guidance that fully addresses  the required statutory elements in section 911 and incorporates our  leading practices, DOD\u2019s cross-functional teams may not be able to  consistently and effectively pursue the Secretary of Defense\u2019s strategic  objectives or further promote a collaborative culture within the  department."], "subsections": []}, {"section_title": "Over Two-Thirds of Presidential Appointees in the Office of the Secretary of Defense Have Been Appointed, but None Have Received Required Training or Waivers", "paragraphs": ["OCMO has developed a draft training curriculum for individuals filling  presidentially-appointed, Senate-confirmed positions in the Office of the  Secretary of Defense. However, as of May 2018, DOD had filled 26 of 36  such positions, and none had received the training or been granted a  training waiver. Further, section 911 requires these individuals to  complete the training within 3 months of their appointment, but 22 have  been in their positions longer than 3 months, as shown in figure 2.", "In February 2018, we reported that the draft curriculum addressed only  one of the four required elements in section 911. Specifically, we found  that the draft curriculum addressed the required statutory element for  training on the operation of cross-functional teams, but did not incorporate  the required statutory elements for leadership, modern organizational  practice, or collaboration. We recommended, and DOD concurred, that  the CMO should either (1) provide training that includes all of the required  elements in section 911 or (2) develop criteria for obtaining a waiver and  have the Secretary of Defense request such a waiver from the President  for these required elements if the individual possesses\u2014through training  and experience\u2014the skill and knowledge otherwise to be provided  through a course of instruction. Once the training curriculum is reviewed  and approved by the Secretary of Defense, which will occur after the  organizational strategy is issued, OCMO officials plan to provide the  training on the operation of cross-functional teams to the presidential  appointees. These officials stated that DOD plans to develop criteria for  presidential appointees who are eligible for a waiver from the training on  leadership, modern organizational practice, and collaboration, and to  recommend that the Secretary of Defense approve these waivers. Until  DOD finalizes actions on this recommendation, the department may have  difficulty advancing a collaborative culture, as top leadership commitment  is a key practice for a successful organizational transformation."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We are not making recommendations in this report. We provided a draft  of this report to DOD for review and comment. DOD concurred with our  report. In addition, DOD provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and DOD\u2019s Chief Management  Officer. In addition, the report is available at no charge on our website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Prior GAO Reports on the Department of Defense\u2019s Implementation of Section 911 of the National Defense Authorization Act for Fiscal Year 2017", "paragraphs": ["Section 911 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 included a provision for us\u2014every 6 months after the date of  enactment on December 23, 2016, through December 31, 2019\u2014to  submit to the defense committees a report setting forth a comprehensive  assessment of the actions that DOD has taken pursuant to section 911  during each 6-month period and cumulatively since the NDAA\u2019s  enactment. We issued our first report in June 2017, and did not make  recommendations. We issued our second report in February 2018, and  made four recommendations to improve DOD\u2019s implementation of section  911. Table 2 identifies the two prior GAO reports on DOD\u2019s  implementation of section 911 and the status of the four  recommendations from our February 2018 report."], "subsections": []}, {"section_title": "Appendix II: Summary of Requirements in Section 911 of the National Defense Authorization Act for Fiscal Year 2017", "paragraphs": ["Section 911 of the National Defense Authorization Act for Fiscal Year  2017 requires the Secretary of Defense to take several actions. Table 3  summarizes some of these requirements, the due date, and the date  completed, if applicable, as of May 2018."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Margaret Best (Assistant  Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Adelle  Dantzler, Michael Holland, William Lamping, Amie Lesser, Ned Malone,  Judy McCloskey, Sheila Miller, Richard Powelson, Terry Richardson, Ron  Schwenn, Jared Sippel, Sarah Veale, and Tina Won Sherman made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-487", "url": "https://www.gao.gov/products/GAO-18-487", "title": "U.S. Customs and Border Protection: Progress and Challenges in Recruiting, Hiring, and Retaining Law Enforcement Personnel", "published_date": "2018-06-27T00:00:00", "released_date": "2018-06-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CBP is responsible for securing U.S. borders and employs nearly 45,000 law enforcement officers across its three operational components at and between U.S. ports of entry, in the air and maritime environment, and at certain overseas locations. In recent years, CBP has not attained target staffing levels for its law enforcement positions, citing high attrition rates in some locations, a protracted hiring process, and competition from other law enforcement agencies. GAO was asked to review CBP's efforts to recruit, hire, and retain law enforcement personnel.", "This report examines CBP's efforts to (1) recruit qualified law enforcement officers, (2) more efficiently hire law enforcement applicants, and (3) retain law enforcement officers. GAO analyzed CBP data on recruitment, hiring, and retention from FY 2013 through 2017, as well as selected data for the first two quarters of FY 2018. GAO also reviewed CBP strategies and the recent contract it awarded to augment its recruiting and hiring activities and interviewed officials from CBP and three other selected law enforcement agencies."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. Customs and Border Protection (CBP) increased its emphasis on recruitment by establishing a central recruitment office and increasing its participation in recruitment events, among other things. As a result, the number of applications it received for law enforcement positions across its operational components\u2014the Office of Field Operations, U.S. Border Patrol, and Air and Marine Operations\u2014from fiscal years (FY) 2013 through 2017 more than tripled. Also, in November 2017, CBP hired a contractor to more effectively target potential applicants and better utilize data to enhance CBP's recruitment efforts. However, it is too early to gauge whether the contractor will be effective in helping CBP to achieve its goal to recruit and hire more law enforcement officers.", "CBP improved its hiring process as demonstrated by two key metrics\u2014reducing its time-to-hire and increasing the percentage of applicants that are hired. As shown in the table, CBP's time-to-hire has decreased since FY 2015. CBP officials stated these improvements, paired with increases in applications, have resulted in more hires. For example, the number of Border Patrol agents hired in the first half of FY 2018 increased by about 83 percent when compared to the same period for FY 2017. However, the hiring process remains lengthy\u2014for example, in FY 2017 it took more than 300 days, on average, for CBP officer applicants to complete the process. Certain factors contribute to the lengthy time-to-hire, including process steps that can be challenging and time-consuming for applicants to complete\u2014such as the polygraph exam\u2014as well as CBP's reliance on applicants to promptly complete certain aspects of the process\u2014such as submitting their background investigation form.", "CBP enhanced its efforts to address retention challenges. However, staffing levels for law enforcement positions consistently remained below target levels. For example, CBP ended FY 2017 more than 1,100 CBP officers below its target staffing level. Officials cited employees' inability to relocate to more desirable locations as a key retention challenge. CBP has offered some relocation opportunities to law enforcement personnel and has recently pursued the use of financial incentives and other payments to supplement salaries, especially for those staffed to remote or hard-to-fill locations. However, CBP does not have a formal process for capturing information on all departing employees, such as an exit survey. Ensuring that operational components are systematically collecting and analyzing such information would better position CBP to understand its retention challenges and take appropriate action to address them."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CBP systematically collect and analyze data on departing law enforcement officers and use this information to inform retention efforts. DHS concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security\u2019s (DHS) U.S. Customs and Border  Protection (CBP) is responsible for, among other things, securing U.S.  borders to prevent acts of terrorism and stopping the unlawful movement  of people, illegal drugs, and other contraband across U.S. borders. To  carry out these objectives, CBP employs nearly 45,000 law enforcement  personnel across its three operational components\u2014the Office of Field  Operations (OFO), U.S. Border Patrol (Border Patrol), and Air and Marine  Operations (AMO)\u2014at and between U.S. ports of entry, at certain  overseas locations, and in the U.S. air and maritime environment.  However, in recent years, CBP has not been able to attain its statutorily- established minimum staffing levels for its Border Patrol agent positions  or its staffing goals for other law enforcement officer positions, citing high  attrition rates in some locations, a protracted hiring process, and  competition from other federal, state, and local law enforcement  agencies. Additionally, Executive Order 13767, issued in January 2017,  called for CBP to hire 5,000 additional Border Patrol agents, subject to  available appropriations. Consistent with this directive, Border Patrol is  aiming to attain a staffing level of 26,370 Border Patrol agents (5,000  agents above the fiscal year 2016 statutorily-established level).", "We have previously reported on human capital and workforce planning  issues across the federal government and particularly at DHS. For  example, in September 2013, we reported on department-wide  recruitment and hiring efforts. Specifically, while we found that DHS  components were generally filling mission-critical positions, we also  recommended that the department take steps to better track the costs of  its coordinated recruiting efforts. In response to this recommendation,  DHS began collecting quarterly data on each of its components\u2019  recruitment expenditures, including the cost of recruitment events with  multiple DHS attendees, and we closed the recommendation as  implemented in August 2015. Further, in 2003, we designated  strengthening DHS\u2019s human capital management functions as a high-risk  area. In our 2017 high-risk update, we found that DHS had made  progress improving human capital management by, for example, linking  its workforce planning efforts to strategic and program planning efforts.  However, we also found that DHS had more work ahead to improve  employee morale, among other things. In November 2017, we reported  on Border Patrol\u2019s agent deployment strategy and, among other things,  found that Border Patrol faced challenges in optimally deploying agents  due to staffing shortages. We also reported on CBP\u2019s trade enforcement  activities in June 2017 and found that CBP had not met the authorized  staffing levels for its trade positions. We recommended that CBP  develop a long-term hiring plan outlining how the agency will meet its  staffing targets for these positions. CBP concurred with this  recommendation and, as of January 2018, had taken steps toward  addressing hiring gaps for its trade positions, such as evaluating  approaches for assessing and selecting candidates, but has not yet  developed a long-term hiring plan.", "Additionally, the DHS Office of Inspector General (OIG) has reported on  CBP recruitment and hiring challenges. Specifically, the DHS OIG found  that CBP faced significant challenges in meeting its hiring goals and  expressed concern about CBP\u2019s ability to hire law enforcement personnel  in a timely manner, citing the agency\u2019s lengthy hiring process and its need  for additional human resources personnel. Further, in August 2017, the  DHS OIG recommended improving certain aspects of CBP\u2019s polygraph  examination for law enforcement officers, including developing  procedures to ensure that active polygraph examinations are immediately  stopped if an applicant makes a disqualifying statement, such as  admitting to certain instances of illegal drug use.", "You asked us to review CBP\u2019s efforts to recruit, hire, and retain law  enforcement personnel. This report examines the extent to which CBP  has (1) developed and implemented an approach to recruit qualified law  enforcement officers, (2) revised its hiring process and made efforts to  more efficiently hire law enforcement applicants, and (3) developed and  implemented an approach to retain law enforcement officers.", "To determine the extent to which CBP has developed and implemented  an approach to recruit qualified law enforcement officers, we reviewed  pertinent recruitment strategy documents, such as DHS\u2019s Coordinated  Recruiting and Outreach Strategy and CBP\u2019s National Frontline  Recruitment Command Strategy, and assessed CBP\u2019s recent and  planned recruitment activities. We analyzed data on CBP\u2019s recruitment  efforts for the last 5 fiscal years\u20142013 through 2017\u2014including  application numbers, recruitment budgets, financial recruitment  incentives, and the number and type of agency recruitment events, to  identify trends over time and assess how CBP uses these data to inform  its recruitment efforts. We also analyzed selected information from fiscal  year 2018, such as recruitment events, to help identify possible trends.  We interviewed CBP officials from all three operational components as  well as CBP\u2019s Office of Human Resources Management (HRM) and the  National Frontline Recruitment Command (NFRC) to identify and discuss  the challenges CBP faces in recruiting for law enforcement positions.  We assessed the key efforts and initiatives CBP has undertaken to  address these challenges to determine the extent to which CBP\u2019s efforts  have had an effect on its ability to recruit qualified applicants.", "To determine the extent to which CBP has revised its hiring process and  made efforts to more efficiently hire law enforcement applicants, we  reviewed CBP\u2019s step-by-step hiring process for all law enforcement  positions across its three operational components. We also reviewed key  hiring documents such as the Office of Personnel Management\u2019s (OPM)  End-to-End Hiring Roadmap and CBP\u2019s draft Frontline Hiring and  Recruiting FY 18 to FY 24 Strategy & Implementation Plan. We also  analyzed key hiring data from fiscal years 2015 through 2017, including  CBP\u2019s time-to-hire\u2014the average number of calendar days that elapsed  between the closing date of a job announcement and an applicant\u2019s entry- on-duty date\u2014and overall applicant pass rate\u2014the estimated percentage  of applicants who successfully completed the hiring process and entered  on duty\u2014to identify trends. We also analyzed data on each individual  hiring process step, including the pass rate and average duration\u2014the  average amount of time it took applicants to complete a given step\u2014to  identify specific aspects of CBP\u2019s process that posed challenges. As  these data were not systematically tracked in fiscal years 2013 and 2014,  we selected fiscal years 2015 through 2017, the 3 most recent fiscal  years for which complete data were available at the time of our review.  Further, we reviewed CBP documentation and interviewed officials in  HRM, the three operational components, and the Office of Professional  Responsibility\u2014which manages the background investigation and  polygraph examination portions of the hiring process. We used this  information to identify and assess revisions to the hiring process as well  as key hiring initiatives to determine the extent to which these efforts have  had an effect on the agency\u2019s time-to-hire and overall applicant pass  rates. We also reviewed the November 2017 contract CBP awarded to  Accenture Federal Services, LLC, to help meet the staffing requirements  outlined in Executive Order 13767 (issued in January 2017) and  interviewed CBP officials responsible for managing the contract.", "To determine the extent to which CBP has developed and implemented  an approach to retain law enforcement personnel, we analyzed CBP data  on attrition rates and law enforcement officer losses by component,  position, and location for the last 5 fiscal years\u20142013 through 2017\u2014as  well as selected data from fiscal year 2018, such as the number of law  enforcement officers that departed the agency. We assessed  documentation and data on CBP\u2019s use of relocation programs and human  capital flexibilities, including financial retention incentives and special  salary rates, to determine the extent to which CBP has made efforts to  retain qualified law enforcement officers. We interviewed officials in HRM  and all three CBP operational components as well as officials from the  National Border Patrol Council union and National Treasury Employees  Union\u2014which represent CBP officers\u2014to gain insights into the  challenges the agency faces in retaining law enforcement personnel and  assess the key efforts and initiatives CBP has pursued to address these  challenges. Additionally, we assessed CBP\u2019s retention efforts against  federal internal control standards related to using quality information to  inform management decision making.", "We assessed the reliability of CBP data on recruitment, hiring, and  retention that we used for our analysis for all three objectives. We  obtained and analyzed documentation on CBP\u2019s systems capabilities and  data controls, interviewed data users and managers responsible for these  systems, and, to the extent possible, cross-checked data across  disparate sources to ensure consistency. We found these data to be  sufficiently reliable for the purposes of this report. Further, we reviewed  our work on federal human capital issues and conducted a literature  search to identify leading practices that may be applicable to federal law  enforcement agencies in recruiting, hiring, and retaining officers. We  assessed the extent to which CBP\u2019s processes and key activities aligned  with leading practices in areas such as identifying recruitment  responsibilities, processing applicants, and determining pay and  compensation. We also reviewed documentation and data and  interviewed officials from three other selected federal law enforcement  agencies\u2014U.S. Immigration and Customs Enforcement (ICE), the U.S.  Secret Service, and the federal Bureau of Prisons (BOP)\u2014to identify their  efforts and activities in recruiting, hiring, and retaining qualified law  enforcement personnel. We included these other selected law  enforcement agencies in our review to help provide context for  understanding CBP\u2019s efforts and outcomes in recruiting, hiring, and  retaining law enforcement personnel relative to these agencies. We  selected ICE because it is a DHS component that also has an  immigration-related mission and because CBP data indicate that ICE is  the top destination for departing CBP law enforcement personnel. We  selected the Secret Service because it is also a DHS component and its  application process\u2014like CBP\u2019s\u2014includes a polygraph examination.  Last, we selected BOP as a non-DHS comparison agency because it has  also faced challenges in recruiting and retaining law enforcement  personnel in hard-to-fill locations.", "We conducted this performance audit from August 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "CBP\u2019s Law Enforcement Positions", "paragraphs": ["Within CBP\u2019s three operational components\u2014OFO, Border Patrol, and  AMO\u2014there are five categories of law enforcement officer positions, each  with different job requirements and responsibilities. First, OFO\u2019s CBP  officers conduct immigration and customs inspections at ports of entry to  prevent the illicit entry of travelers, cargo, merchandise, and other items.  Second, Border Patrol agents are responsible for securing the U.S.  border between ports of entry and responding to cross-border threats.  Third, AMO has three categories of law enforcement officers\u2014Air  Interdiction Agents, Aviation Enforcement Agents, and Marine Interdiction  Agents\u2014who interdict and disrupt threats to the United States in the air  and maritime environments at and beyond the border. For more  information on CBP\u2019s law enforcement officer positions, see figure 1."], "subsections": []}, {"section_title": "CBP Staffing Levels for Law Enforcement Officer Positions", "paragraphs": ["In recent years, CBP has not been able to attain statutorily-established  minimum staffing levels for its Border Patrol agent positions or meet its  staffing targets for other law enforcement officer positions. Figure 2  shows the difference between CBP\u2019s onboard staffing levels and its  authorized staffing levels from fiscal years 2013 through 2017."], "subsections": []}, {"section_title": "CBP\u2019s Hiring Process for Law Enforcement Officer Positions", "paragraphs": ["CBP\u2019s law enforcement applicants undergo a lengthy and rigorous hiring  process that includes nearly a dozen steps, including a background  investigation, medical examination, physical fitness test, and polygraph  examination. Several of these steps can be done concurrently\u2014for  example, CBP can begin the background investigation while the  candidate completes the physical fitness test and medical examination  process steps. Figure 3 depicts the hiring process for Border Patrol agent  and CBP officer positions."], "subsections": []}, {"section_title": "Financial Incentives and Other Human Capital Flexibilities Available to CBP", "paragraphs": ["CBP is able to use financial incentives and other compensation-based  human capital flexibilities to help recruit and retain qualified law  enforcement personnel. According to OPM, federal agencies have  broad discretionary authority to provide additional compensation in certain  circumstances to support workforce needs and address human capital  challenges, including through the use of financial incentives such as  recruitment, relocation, and retention incentives. Table 1 below provides  an overview of these incentives.", "In addition to these incentives, CBP can also offer other compensation- based human capital flexibilities to employees. For example, with OPM  approval, CBP may establish a special salary rate, or a higher rate of pay  for employees, either nationwide or in a specific geographic area where  CBP\u2019s recruitment or retention efforts are, or would likely become,  significantly handicapped without those higher rates."], "subsections": []}]}, {"section_title": "CBP Has Enhanced Its Recruitment Efforts and Applications for Law Enforcement Officer Positions Have Increased", "paragraphs": [], "subsections": [{"section_title": "CBP Established a Centralized Recruitment Office to Manage Recruitment Efforts across Components", "paragraphs": ["CBP officials stated they established the National Frontline Recruitment  Command (NFRC)\u2014a formal task force housed within CBP\u2019s Office of  Human Resources Management (HRM)\u2014in February 2016. The NFRC is  charged with, among other things, developing recruitment strategies,  providing strategic guidance, and managing recruitment efforts across all  three operational components. CBP officials stated that, prior to the  creation of the NFRC, the recruitment and hiring of law enforcement  officers was done at the component level and there was no integrated  CBP-wide approach to coordinate efforts and address challenges. Based  on our literature search, we identified leading practices that may be  applicable to federal law enforcement agencies in recruiting, hiring, and  retaining law enforcement personnel. Having a centralized entity or office  in charge of developing recruitment strategies and overseeing recruitment  activities is consistent with leading practices we identified for recruiting for  law enforcement positions specifically. All three other selected law  enforcement agencies we reviewed also had recruitment strategies that  outlined their respective agencies\u2019 recruitment roles and responsibilities,  while two had a centralized entity in charge of recruitment. In particular,  officials from both ICE and the Secret Service stated they have a central  office in charge of recruitment efforts while BOP officials told us that  recruitment for Correctional Officers is mainly handled at the local prison  level.", "The NFRC is responsible for setting CBP\u2019s strategic recruitment goals  and overseeing agency-wide recruitment initiatives. For example, CBP  officials are finalizing the Frontline Hiring and Recruiting FY 18 to FY 24  Strategy & Implementation Plan, which outlines specific initiatives  designed to increase the number and quality of applicants applying for  law enforcement officer positions. The strategy describes ways CBP can  target its recruitment efforts more effectively and develop brand identities  for each component to provide the foundation for a comprehensive  marketing strategy.", "In addition to setting strategic initiatives, the NFRC manages the  recruitment budget and allocates recruitment funding for CBP and the  operational components. For example, NFRC officials stated that the  NFRC funds CBP-wide recruitment initiatives such as Special Emphasis  Recruitment Teams\u2014teams of specially trained recruiters from each  component who attend events specific to different demographic groups  such as females or veterans. The NFRC also funds other initiatives such  as strategic partnerships with major businesses, which allow CBP to  advertise and recruit at their events. For example, CBP previously  participated in strategic partnerships with the Big 10 and Big XII athletic  conferences, and in 2016 and 2017, the NFRC spent $500,000 for a  strategic partnership with the Spartan Race program, which allowed CBP  and its components to advertise, set up recruitment booths, and sign up  applicants at events. NFRC officials told us they ended their partnership  with the Spartan Race in December 2017 and are evaluating options for  future strategic partnerships.", "The NFRC also allocates funding for both joint recruitment events\u2014those  attended by two or three components\u2014and single-component events  attended by one operational component. For example, NFRC officials  stated that career and job fairs provide opportunities for CBP to leverage  its resources and attract potential applicants to all three components. At  these events, applicants can talk to uniformed recruiters to learn more  about their respective career paths. NFRC officials stated that in addition  to CBP-wide efforts, the NFRC manages and allocates recruitment  funding for each operational component to cover the cost of recruitment  events or other initiatives that meet the specific needs of that  component. For example, AMO officials stated that they use NFRC  funding to attend events such as helicopter shows where there is a higher  potential to attract qualified pilots.", "As shown in table 2, CBP\u2019s recruitment budget allocated by the NFRC  almost doubled from approximately $6.4 million in fiscal year 2015 to  more than $12.7 million in fiscal year 2017. The budget allocated by the  NFRC specific to the operational components\u2014while a small percentage  of CBP\u2019s overall recruitment budget\u2014increased during this time frame as  well. For example, Border Patrol\u2019s recruitment budget increased from  approximately $433,000 in fiscal year 2015 to more than $1 million in  fiscal year 2017, while OFO\u2019s budget increased from approximately  $116,000 to nearly $525,000.", "In addition to recruitment funding managed by the NFRC, components  may use additional funding from their own budgets that is not allocated or  managed by the NFRC to fund recruitment initiatives. For example, two of  the three components funded their own strategic partnerships. Border  Patrol officials stated they spent $1.5 million on a strategic partnership  with the Professional Bull Riders Association which allowed them to target  specific applicants who fit Border Patrol\u2019s applicant profile. This  partnership provided Border Patrol with the opportunity to advertise and  recruit at more than 70 events over the course of 18 months. Likewise,  OFO officials told us they spent $15,000 to be the sole sponsor of the  2018 National Police Week race in Washington, D.C., which includes a  recruitment booth, a logo on the official T-shirt, and a prominent speaker  at the start of the race. AMO officials stated that while they generally do  not use their own funding to pay for strategic partnerships, they do  partner with the University of North Dakota, which has a large flight  school, where they give presentations in classrooms and recruit on  campus."], "subsections": []}, {"section_title": "CBP Has Increased Its Participation in Recruitment Events and Standardized Its Recruiter Training", "paragraphs": ["CBP has increased its emphasis on recruitment and increased the  number of recruitment events it has participated in since fiscal year  2015. Specifically, CBP more than tripled the total number of  recruitment events it participated in, from 905 events in fiscal year 2015 to  roughly 3,000 in both fiscal years 2016 and 2017 (see fig. 4).", "CBP components generally attend two different types of recruitment  events\u2014outreach events designed to promote CBP\u2019s brand and events  such as job and career fairs designed to actively cultivate potential  applicants. For example, AMO officials stated their attendance at the  2018 Border Security Expo technology trade fair was an outreach event  designed to promote the component at a high-visibility event despite the  low likelihood of directly reaching qualified applicants, such as pilots.  AMO officials also stated they participate in the HELISUCCESS career  fair at the annual Heli-Expo trade show where individuals from across the  helicopter industry gather to attend seminars and interact with recruiters.  They noted that this event provides a great opportunity to recruit qualified  applicants who have a license to fly helicopters.", "While CBP increased its participation in recruitment events from fiscal  years 2015 through 2017, officials across all three components told us the  NFRC canceled a number of events during the first half of fiscal year  2018 because of a lack of certainty regarding the agency\u2019s budget while  functioning under continuing resolutions, which extended fiscal year 2017  funding until the enactment of the Consolidated Appropriations Act, 2018,  in March 2018. Additionally, CBP officials stated that the agency was  responsible for providing humanitarian support for multiple hurricanes  during this time frame which put a strain on CBP\u2019s resources. Overall,  these officials explained that the NFRC canceled 36 percent of all  recruitment events during the first half of fiscal year 2018 until the  enactment of the Consolidated Appropriations Act, 2018. They stated that  during this period, they focused on attending free local events and online  events such as webinars, but noted that the lack of consistent year-to- year funding for recruitment activities directly affected their ability to  attend recruitment events and thus to recruit qualified personnel.", "To attend recruitment events and promote their brand, CBP components  utilize their own law enforcement personnel to act as recruiters. As shown  in table 3, as of March 2018, CBP had 1,663 recruiters across the three  components, which included 57 full-time and 1,606 part-time recruiters.  CBP officials stated that most recruiters do not conduct recruitment  activities on a full-time basis and recruitment is considered a collateral  responsibility in addition to regular duties. In addition, officials stated  these recruiters must be approved by their component leadership and  funding for their positions comes from the components\u2019 budgets.", "In July 2017, CBP implemented a 5-day standardized training program for  all component recruiters focused on effective public speaking and  engagement tactics as well as specific, in-depth information on each  operational component and the CBP hiring process. CBP officials stated  that a goal of this training, among other things, is to ensure that recruiters  provide standardized, accurate information to all potential applicants. As  of April 2018, 636 recruiters had completed the training, according to CBP  officials, and the agency plans to train 1,300 recruiters by the end of fiscal  year 2018."], "subsections": []}, {"section_title": "CBP Increased Its Use of Recruitment Incentives, Although Use by Components Varied", "paragraphs": ["In addition to establishing the NFRC and increasing participation in  recruitment events, CBP has increased its use of recruitment incentives  from fiscal years 2015 through 2017 to help staff hard-to-fill locations. A  recruitment incentive may be paid to a newly-appointed employee if an  agency determines that a position is likely to be difficult to fill in the  absence of such an incentive. From fiscal years 2015 through 2017, OFO  increased the number of recruitment incentives it paid to CBP officers  from 9 incentives in 2 locations at a total cost of about $77,600 to 446  incentives across 18 locations at a cost of approximately $4.3 million.  AMO and Border Patrol did not use recruitment incentives from fiscal  years 2015 through 2017 (see fig. 5).", "OFO officials told us that recruitment incentives have been effective in  filling staffing shortages at hard-to-fill locations. For example, they noted  that since they began offering recruitment incentives in fiscal year 2015,  14 of the 18 locations where these incentives are used have not  experienced a decrease in staffing levels as of February 2018.  Additionally, OFO officials told us that in larger ports-of-entry\u2014such as  San Ysidro, California, where staffing levels have consistently remained  below authorized targets\u2014staffing levels have increased by up to 15  percent. AMO officials stated while they did not use recruitment incentives  from fiscal years 2015 through 2017, as of April 2018 they are using them  to fill remote locations in the Caribbean. Specifically, AMO paid two  recruitment incentives for Air Interdiction Agents and two for Marine  Interdiction Agents at locations in Puerto Rico and the U.S. Virgin Islands.  AMO officials stated that they began using these incentives to staff hard- to-fill locations because of a nationwide shortage of pilots as well as  increased competition with commercial airlines. However, as AMO has  only recently started using these incentives, it is too early to gauge  whether it will be effective in increasing staffing levels at these hard-to-fill  locations. Border Patrol officials stated the main reason they do not use  recruitment incentives is that in the past these incentives created  resentment among current employees that did not receive extra pay to do  the same job in the same location. Additionally, these officials told us that  job announcements for Border Patrol agent positions do not specify  particular duty locations, but represent a general announcement that can  be used to fill numerous duty locations, as necessary."], "subsections": []}, {"section_title": "Applications for Law Enforcement Positions Have Tripled since Fiscal Year 2013", "paragraphs": ["As a result of its efforts, CBP has experienced an increase in the number  of applications it received for law enforcement officer positions across all  three operational components from fiscal years 2013 through 2017. For  example, with the exception of fiscal year 2014, applications for Border  Patrol agent positions increased every year from roughly 27,000  applications in fiscal year 2013 to more than 91,000 applications in fiscal  year 2017. Further, during the same period, applications for CBP officer  positions increased from approximately 22,500 to more than 85,000, and  applications for AMO\u2019s law enforcement officer positions increased from  roughly 2,000 to more than 5,800 (see fig. 6)."], "subsections": []}, {"section_title": "CBP\u2019s Accenture Contract Is Intended to Further Enhance CBP\u2019s Recruitment Efforts", "paragraphs": ["In November 2017, CBP signed a contract with a total potential period of  5 years at a not-to-exceed value of $297 million with Accenture Federal  Services, LLC, to help the agency recruit and hire the 5,000 Border Patrol  agents called for in Executive Order 13767 as well as an additional 2,000  CBP officers and 500 AMO personnel. Under this performance-based  contract, Accenture will be responsible for enhancing CBP\u2019s recruitment  efforts and managing the hiring process for those applicants it recruits.  The contract includes a base year and four 1-year option periods which  CBP may exercise at its discretion for a total potential period of 5 years.  The $297 million represents the maximum amount CBP may obligate on  the contract during the potential 5-year period. CBP obligated $43 million  on the Accenture contract in November 2017 for startup costs, security- related services, and for the hiring of 440 CBP officers, 150 Border Patrol  agents, and 23 AMO law enforcement officers. Under the terms of the  contract, CBP will pay the contractor a set dollar amount for each law  enforcement officer hired. For example, in the first year of the contract,  CBP has agreed to pay Accenture approximately $40,000 for each Border  Patrol agent hired with 80 percent paid when a candidate receives an  official job offer and the remaining 20 percent paid upon the candidate\u2019s  entry-on-duty date.", "The Accenture contract is intended to enhance CBP\u2019s recruitment efforts  by improving its marketing strategy and utilizing new ways to capture and  analyze data to better inform recruitment efforts, according to CBP  officials. For example, HRM officials stated that, in February 2018,  Accenture began its digital marketing campaign and started posting  electronic ads to target potential applicants for CBP\u2019s law enforcement  positions. In addition, Accenture is using advertisements, e-mail blasts,  and other strategic marketing tools to specifically target various  categories of potential applicants, such as women, veterans, minorities,  and current law enforcement officers. CBP officials told us that they are  not concerned about Accenture\u2019s recruiting efforts encroaching on the  agency\u2019s current applicant pool as Accenture\u2019s activities will largely target  populations that CBP has not historically pursued. They also stated that  for populations that CBP does target (e.g., veterans and women), the  agency expects to benefit from Accenture\u2019s recruitment efforts by  increasing the number of applicants from these populations to all job  announcements for CBP positions. Further, they noted that if Accenture\u2019s  tactics are successful, there is nothing prohibiting the agency from  replicating such tactics to garner more applicants.", "CBP officials also stated that Accenture plans to provide opportunities to  better enhance the agency\u2019s data analytics on its recruitment efforts. For  example, Accenture is using recruitment data and software to identify  potential candidates and increase traffic to websites where these  individuals can submit applications. CBP officials told us they would  benefit from these and other insights that Accenture\u2019s data analytics will  provide as CBP can evaluate the contractor\u2019s recruitment efforts and  initiatives and, based upon Accenture\u2019s success, incorporate them into  CBP\u2019s own efforts. While these efforts seem promising, it is too early to  determine whether these initiatives will help increase the number and  quality of applicants for CBP\u2019s law enforcement officer positions."], "subsections": []}]}, {"section_title": "CBP Has Taken Steps to Improve Its Hiring Process, but the Process Remains Lengthy", "paragraphs": [], "subsections": [{"section_title": "CBP Has Improved Its Performance in Two Key Hiring Metrics", "paragraphs": ["Since fiscal year 2015, CBP\u2019s performance in two key metrics that it uses  to assess the efficiency and effectiveness of its hiring process for law  enforcement officer positions has generally improved. Specifically, CBP  reduced its time-to-hire and increased its overall applicant pass rates for  all three components.", "Time-to-Hire. CBP\u2019s average time-to-hire metric calculates the average  number of calendar days that elapsed between the closing date of a job  announcement and an applicant\u2019s entry-on-duty date. CBP\u2019s time-to-hire  for all law enforcement officer positions decreased from fiscal years 2015  through 2017. Specifically, during this period, the time-to-hire for CBP  officers decreased by 78 days (20 percent) to an average of 318 days for  fiscal year 2017. For AMO Air and Marine Interdiction Agents, CBP\u2019s  time-to-hire decreased by 103 days (28 percent) to an average of 262  days for fiscal year 2017. The agency\u2019s time-to-hire for Border Patrol  agents was the longest at 628 days in fiscal year 2015. As discussed  earlier, Border Patrol officials stated that there were no job  announcements for Border Patrol agent positions in fiscal year 2014;  therefore, many of the agents hired in fiscal year 2015 had applied in  fiscal year 2013, accounting for this protracted time-to-hire. Even so, from  fiscal year 2016 to 2017, CBP\u2019s time-to-hire for Border Patrol agents  decreased by 32 days (11 percent) to an average of 274 days for fiscal  year 2017 (see table 4).", "We also compared CBP\u2019s time-to-hire with that of the Secret Service  because its hiring process for law enforcement officers is the most similar  to CBP\u2019s. Specifically, the Secret Service\u2019s hiring process comprises  roughly the same number of hiring steps and also includes a polygraph  examination\u2014one of the more challenging and time-consuming steps in  the process\u2014as well as a written assessment, background investigation,  medical examination, and interview. We found that CBP\u2019s time-to-hire  for its law enforcement positions was shorter than the Secret Service\u2019s in  fiscal years 2016 and 2017. For example, in fiscal year 2017, CBP\u2019s  time-to-hire for CBP officers and Border Patrol agents was 73 days and  117 days shorter, respectively, than the Secret Service\u2019s. Further, CBP\u2019s  time-to-hire for AMO\u2019s law enforcement positions was shorter than the  Secret Service\u2019s in every fiscal year from 2015 through 2017.", "Overall Applicant Pass Rates. CBP\u2019s overall applicant pass rate metric  calculates the estimated percentage of applicants who successfully  complete the hiring process and enter on duty. CBP data indicate that  overall applicant pass rates more than doubled for CBP officer and  Border Patrol agent positions from fiscal years 2016 to 2017 (see table  5).", "CBP officials told us that higher overall applicant pass rates paired with  recent increases in the number of applications received by the agency are  starting to result in an increase in the number of law enforcement officers  hired as applicants complete CBP\u2019s hiring process and officially enter on  duty. As shown in table 6, CBP data indicate that more law enforcement  officers entered on duty in the first half of fiscal year 2018 than entered on  duty in the first half of fiscal year 2017. Specifically, the total number of  CBP officers and Border Patrol agents that entered on duty in the first half  of fiscal year 2018 increased by roughly 50 percent and 83 percent,  respectively, when compared to the same period of the prior fiscal year.  Further, the total number of AMO law enforcement officers that entered  on duty in the first half of fiscal year 2018 more than doubled from the  same period of fiscal year 2017.", "CBP officials noted that they hope to consistently maintain this trend of  increased hires to offset attrition and attain target staffing levels. For  example, although 328 Border Patrol agents entered on duty in the first  half of fiscal year 2018, 404 agents departed Border Patrol during this  same period, resulting in a net loss of 76 agents. Likewise, in the first half  of fiscal year 2018, a total of 449 CBP officers entered on duty while 488  officers departed OFO, resulting in a net loss of 39 officers. These data  indicate that CBP continues to face challenges in retaining qualified law  enforcement personnel and attaining target staffing levels for these  positions. We discuss this issue later in this report."], "subsections": []}, {"section_title": "CBP Has Taken Steps to Improve Its Hiring Process for Law Enforcement Officers", "paragraphs": ["CBP has made efforts to improve its hiring process by revising certain  aspects of the process and piloting two key hiring initiatives\u2014Hiring Hub  events and the Applicant Care program. According to agency officials,  these efforts to streamline and improve CBP\u2019s overall hiring process have  collectively resulted in the decreased time-to-hire and increased overall  applicant pass rates discussed above. In addition to these efforts, CBP\u2019s  contract with Accenture is designed to provide surge hiring capacity to  help supplement the agency\u2019s efforts to meet its staffing goals, according  to agency officials.", "Hiring Process Revisions. CBP has implemented changes aimed at  streamlining its hiring process for law enforcement officers and made  adjustments to specific hiring steps. For example, among other changes,  CBP took the following steps:  In fiscal year 2015, CBP replaced its paper-based fingerprinting  process with an electronic format, reducing the costs and effort  required to physically process and mail paper fingerprinting cards.", "In fiscal year 2016, CBP increased the frequency of its job  announcements on USAJOBS.gov to solicit applications on a  continuous basis instead of only posting announcements for set  periods of time. In addition, DHS was directed by statute to enhance  its efforts to recruit members of the Armed Forces to serve as CBP  officers through identifying shared activities and opportunities for  reciprocity related to steps in hiring so as to minimize the time  required to hire qualified applicants.", "In March 2017, CBP was granted the authority to waive the polygraph  examination for veterans who meet certain criteria, including those  who hold a current, active top-secret/sensitive-compartmented- information clearance.", "In April 2017, CBP received OPM approval to use direct-hire authority  for law enforcement positions, which allows CBP to expedite the  typical hiring process by eliminating competitive rating and ranking  procedures and veterans\u2019 preference. As of March 31, 2018, 77  CBP officers and 107 Border Patrol agents had entered on duty  through this authority, but HRM officials told us that more applicants  continue to progress through CBP\u2019s hiring pipeline.", "CBP has also made revisions to specific steps in its hiring process,  including the application, entrance examination, physical fitness test, and  polygraph examination, among others. For example, in May 2014, CBP  incorporated questions into its electronic application that are designed to  automatically disqualify applicants who, based on their responses, could  not pass CBP\u2019s background investigation. Specifically, applicants that  provide a disqualifying response to any of these questions would not be  able to submit an application, thereby saving CBP the effort and  resources associated with processing nonviable applicants. Further, in  fiscal year 2016, CBP reordered its hiring process to place the entrance  examination as the first step directly after an applicant submitted an  application. Prior to this change, CBP conducted qualification reviews on  applicants to ensure they met position requirements before inviting them  to take the entrance exam. According to CBP officials, this updated  process provided applicants with the opportunity to obtain a realistic  preview of the job they were applying for earlier in the hiring process.  These officials explained that this helps to ensure that only those  applicants who are committed to completing the hiring process and  entering on duty at CBP continue through the hiring pipeline, which may  help to address high applicant discontinue rates (e.g., roughly half of all  eligible applicants in fiscal year 2015 did not take the exam). According  to CBP documentation, this revision also created efficiencies as the  agency no longer has to spend time and resources on completing  qualification reviews for applicants who either did not show up to take the  exam or failed the exam itself.", "CBP data show recent improvements in both the pass rates for the  entrance examination process step as well as its average duration\u2014the  average amount of time it took applicants to complete this step.  Specifically, from fiscal years 2016 to 2017, pass rates increased by  about 40 percent for both CBP officer and Border Patrol agent  candidates, and the average duration shortened from 17 days to 13 days  for CBP officer candidates and from 19 days to 12 days for Border Patrol  agent applicants. CBP officials told us they are also exploring options to  allow applicants to complete the entrance examination remotely\u2014 eliminating the need for candidates to travel to physical testing sites and  potentially further reducing the amount of time spent completing this step.", "In fiscal year 2016, the physical fitness test process step was amended  for all law enforcement officer applicants to provide those who fail another  chance to complete this requirement, according to CBP officials. Further,  in fiscal year 2017, CBP eliminated the second physical fitness test\u2014 which had been the last process step in CBP\u2019s hiring process\u2014for CBP  officer, Border Patrol agent, and AMO applicants. In addition to  shortening the overall process, officials told us this change provided the  small percentage of applicants that passed every other hiring process  step with an opportunity to demonstrate they meet CBP\u2019s physical ability  standards during basic training.", "CBP has also made several changes to its polygraph examination  process step, which has consistently had the lowest pass rate of any step  in its hiring process. For example, among other things, CBP has  increased the number of polygraph examiners available to administer the  test, according to agency officials, and is piloting a new type of polygraph  exam\u2014the Test for Espionage, Sabotage, and Corruption. According to  CBP officials, the new examination focuses on identifying serious crimes  and is sufficiently rigorous to ensure that only qualified applicants are able  to pass. Preliminary data from CBP\u2019s pilot show that this new exam has  demonstrated higher pass rates when compared with CBP\u2019s traditional  polygraph exam while also taking less time, on average, per test to  complete. In addition, in response to recommendations made by the  DHS OIG in August 2017, CBP implemented a policy requiring polygraph  examiners to take steps to terminate an ongoing examination if  disqualifying information is obtained from an applicant during the exam.  Further, CBP officials told us they are continuing to work on developing  and deploying a presecurity interview to identify unsuitable applicants  prior to spending resources on conducting the polygraph examination.  While it remains too early to tell if these efforts will result in improvements  to the polygraph examination step, available CBP data indicate mixed  results. Specifically, while the average duration to complete this step  decreased for all law enforcement officer positions from fiscal years 2015  through 2017, pass rates also declined slightly over this same period (see  table 7).", "Hiring Hub Events. In August 2015, CBP piloted its first Hiring Hub event  where applicants could complete the structured interview and polygraph  examination in one location over the course of several days. In fiscal year  2016, CBP expanded its use of these events, holding additional Hiring  Hubs in New York, New York; San Diego, California; and Laredo, Texas;  among other locations. The use of consolidated hiring events is  consistent with a leading practice we identified in hiring for law  enforcement officer positions, and officials at both ICE and the Secret  Service stated their agencies are using similar events to process  applicants. Although CBP could not provide specific data on its Hiring  Hub events, CBP officials stated that the use of these events reduced the  agency\u2019s time-to-hire by consolidating hiring process steps that  traditionally took applicants weeks to complete into just a few days\u2014 effectively enhancing the applicant experience and helping to reduce the  number of individuals that drop out of the hiring process.", "Despite attributing a reduction in the agency\u2019s time-to-hire to the Hiring  Hubs, CBP discontinued their use in fiscal year 2017 because of their  high costs, according to CBP officials. Specifically, CBP officials told us  the agency spent $878,000 and $426,000 in fiscal years 2016 and 2017,  respectively, which included renting physical space for the Hiring Hub  events and funding the travel expenses of CBP employees sent to staff  them. However, CBP officials told us that the best practices and process  improvements CBP learned from these events have been incorporated  into the agency\u2019s new expedited hiring model, which has been used to  process all CBP law enforcement applicants since April 2017. According  to CBP officials, this model utilizes existing CBP facilities where  applicants can complete the structured interview and polygraph  examination near where they live while also providing CBP with cost  savings by avoiding the need to rent physical office space.", "Applicant Care. In fiscal year 2017, CBP supplemented its traditional  applicant outreach efforts by piloting the Applicant Care program across  all three components. This program is intended to pair viable applicants  with a trained recruiter who can answer questions and provide individuals  with guidance and support throughout the lengthy hiring process.  Formally pairing trained recruiters with applicants is a leading practice we  identified in hiring for law enforcement positions, and of the three other  selected agencies we reviewed, the Secret Service also had a similar  program, according to Secret Service officials. According to CBP data,  806 applicants across all three operational components have participated  in the Applicant Care pilot program and, as of May 2018, 28 of these have  entered on duty at CBP. CBP officials in OFO, AMO, and HRM told us  that the Applicant Care program had been useful in providing an effective  way to communicate with applicants. According to a senior AMO official,  AMO has fully incorporated the program into its hiring efforts and has  paired every applicant since June 2017 with an AMO recruiter.  Specifically, this official told us the program has been beneficial by  keeping candidates engaged and steadily progressing through the  process. HRM officials concurred, stating that the Applicant Care program  has been successful in reducing the number of individuals that fail to  complete CBP\u2019s lengthy hiring process. According to CBP officials, the  Applicant Care program also helps to reduce CBP\u2019s time-to-hire since  recruiters can actively encourage candidates to promptly progress  through aspects of the hiring process that applicants are responsible for  completing, such as the submission of OPM\u2019s Standard Form 86 (SF- 86).", "CBP officials told us that the agency is collecting data to evaluate the  effectiveness of the Applicant Care pilot, including the average time-to- hire and overall pass rates of participating applicants. However, since the  pilot is ongoing and some applicants continue to progress through CBP\u2019s  hiring pipeline, information on the program\u2019s effectiveness remains  preliminary. CBP officials also told us that scaling the Applicant Care  initiative to include all applicants may present a challenge, especially  given the recent increase in the number of law enforcement applications  CBP has received. For example, a senior AMO official noted that, as of  January 2018, 10 AMO recruiters were managing a total of about 200  applicants as part of the program, and that more recruiters would be  needed to reduce employee workload to a more manageable level.  Further, Border Patrol officials said that scaling the initiative to include the  tens of thousands of individuals that annually apply for Border Patrol  agent positions will be challenging as recruiters do not have the capacity  to directly communicate with each one.", "Accenture Contract. According to CBP officials, the Accenture contract  is intended to enhance the agency\u2019s ability to achieve its primary goal\u2014 hiring law enforcement officers to meet target staffing levels\u2014by  augmenting CBP\u2019s current hiring infrastructure and pursuing new and  innovative hiring initiatives.", "HRM officials told us that Accenture will establish its own hiring  infrastructure where Accenture personnel will administer most of the  hiring process steps to those applicants it recruits. Specifically, the  contractor is responsible for implementing the same hiring process steps  and maintaining CBP\u2019s standards to ensure that all applicants recruited  by Accenture meet those standards. According to HRM officials,  Accenture\u2019s efforts are expected to provide CBP with surge hiring  capacity without affecting CBP\u2019s current hiring infrastructure, which will  continue to function throughout the contract\u2019s duration. According to CBP  officials, Accenture began processing an initial trial group of random  applicants in May 2018 to ensure that the contractor is able to process  candidates through its hiring pipeline as required by the contract.", "CBP officials also told us that Accenture has the flexibility to pursue novel  hiring tactics and pilot initiatives that CBP may not have considered or  been able to undertake. For example, Accenture plans to pilot innovative  ways to reduce the time-to-hire, including by streamlining steps in the  hiring process, which could help to improve CBP\u2019s overall process and  generate increased hires for law enforcement positions. Further, because  the contractor will only be paid for individuals that receive final job offers  and enter on duty\u2014and not for implementing these new methods and  initiatives\u2014CBP does not bear the financial risk if such initiatives prove  not to be cost-effective. On the other hand, if hiring methods piloted by  Accenture are successful in reducing CBP\u2019s time-to-hire and generating  increased law enforcement officer hires, CBP can incorporate these  methods into its own process.", "As of March 2018, some key issues were still being negotiated between  CBP and the contractor. For example, while HRM officials told us that the  main metric used to assess Accenture\u2019s effectiveness will be the total  number of hires the contractor produces, they were still working to finalize  other key metrics for evaluating the contractor\u2019s effectiveness as well as  an oversight plan to ensure the contractor operates according to agency  requirements. In addition, a senior HRM official told us that the costs  associated with hiring a law enforcement officer are generally the same  regardless of whether an applicant is processed by Accenture or CBP.  Specifically, CBP officials explained that the requirements to hire a law  enforcement officer are rigorous and include administering entrance  examinations, background investigations, physical fitness and medical  tests, and polygraph examinations, among other process steps. CBP  officials stated that the costs associated with conducting these process  steps for all applicants\u2014and not just the small percentage who  successfully complete the hiring process and enter on duty at CBP\u2014are  incurred whether the process is administered by Accenture or CBP. As a  result, these officials explained that CBP is most focused on processing  as many qualified candidates as possible to increase law enforcement  officer staffing levels. As Accenture\u2019s hiring infrastructure will not become  fully operational until June 2018, it is too early to evaluate whether the  contractor will be able to efficiently and effectively provide the surge hiring  capacity CBP needs to achieve its staffing goals."], "subsections": []}, {"section_title": "Certain Factors Affect CBP\u2019s Hiring Process for Law Enforcement Positions", "paragraphs": ["While CBP has reduced its time-to-hire and made efforts to improve its  hiring process for law enforcement officers, CBP officials have noted that  the hiring process remains lengthy, which they said directly affected the  agency\u2019s ability to recruit and hire for law enforcement positions. CBP  officials also stated that their ability to further improve CBP\u2019s time-to-hire  and increase law enforcement hires is affected by hiring process steps  that can be challenging and time-consuming for applicants to complete as  well as CBP\u2019s reliance on applicants to promptly complete certain aspects  of the process.", "As noted above, in fiscal year 2017, it took an average of 274 days for  Border Patrol agent applicants and more than 300 days for CBP officer  applicants to complete all hiring steps and enter on duty. According to a  leading practice we identified in hiring for such positions, agencies should  ensure that the hiring process is not protracted or onerous for applicants.  While OPM\u2019s time-to-hire target for federal agencies is 80 days, officials  at CBP, ICE, and the Secret Service told us that such a target is not  feasible for law enforcement positions given the rigor and complexity of  the hiring process. Further, according to CBP officials, the agency\u2019s  multistep hiring process for its law enforcement officer positions is  intentionally rigorous and involves extensive applicant screening to  ensure that only qualified candidates meet the technical, physical, and  suitability requirements for employment at CBP. Even so, CBP officials  across several components told us that the agency\u2019s time-to-hire was too  long and directly affected the component\u2019s ability to recruit and hire for  law enforcement positions. For example, OFO officials told us that the  longer the hiring process takes to complete, the more likely it is that an  applicant will drop out. Further, qualified applicants may also decide to  apply for employment at a competing law enforcement agency such as  ICE that may have a less rigorous process than CBP\u2019s, according to CBP  officials.", "One factor that affects CBP\u2019s ability to efficiently process and onboard  law enforcement officers are specific hiring process steps that are time- consuming and challenging for candidates to complete. For example,  CBP officials across all three operational components and HRM cited the  polygraph examination as a significant bottleneck within CBP\u2019s hiring  process. In addition to having the lowest pass rate of any step in CBP\u2019s  process, as noted above, the polygraph examination also took CBP  officer and Border Patrol agent applicants, on average, the longest  amount of time to complete in fiscal year 2017\u201474 days and 94 days,  respectively. Further, Border Patrol and HRM officials both told us that  these already lengthy time frames may increase further because of the  growing number of applicants for CBP\u2019s law enforcement positions. In  addition, CBP\u2019s background investigation and medical examination  process steps as well as the SF-86 submission and preemployment  complete hiring phases had the five longest average durations for law  enforcement applicants in fiscal year 2017. For example, on average, it  took CBP law enforcement officer applicants across all three components  55 days or more to complete the medical examination and more than 60  days to complete the background investigation. For more information on  the average durations of these selected aspects of CBP\u2019s hiring process,  see table 8.", "Another factor that affects CBP\u2019s ability to reduce its time-to-hire is CBP\u2019s  reliance on applicants to complete certain aspects of the hiring process in  a timely manner. While the agency has taken steps to mitigate this  issue\u2014most notably through its Applicant Care program and the  Accenture contract\u2014its ability to ensure that applicants quickly complete  those aspects of the hiring process they are responsible for remains  limited. For example, as discussed above, applicants are responsible for  completing their own SF-86, and CBP officials noted that applicants often  take weeks to accurately complete and submit this form. Further, one  senior HRM official told us that each time a mistake is identified in this  paperwork, applicants receive an additional 5 days to fix the error, which  adds up over time. CBP data indicate that while the average duration for  this process step has decreased since fiscal year 2015, it continues to  take more than 45 days for the average applicant to complete, as noted in  table 8 above. As this completed paperwork is required to begin the  background investigation and, according to CBP officials, schedule a  structured interview, this inherently affects CBP\u2019s ability to reduce its  time-to-hire. Further, for the medical examination process step, applicants  are responsible for, among other things, scheduling the examination itself  and providing pertinent documentation, such as any medical waivers  required to pass the exam. According to a senior HRM official, as of  February 2018, CBP had to conduct follow-up outreach to roughly 65  percent of applicants during this process step to obtain the information  required to complete this step."], "subsections": []}]}, {"section_title": "CBP Has Enhanced Its Retention Efforts, but Does Not Systematically Collect and Analyze Data on Departing Law Enforcement Personnel", "paragraphs": [], "subsections": [{"section_title": "CBP\u2019s Retention of Law Enforcement Officers Varies by Position", "paragraphs": ["From fiscal years 2013 through 2017, CBP\u2019s annual rates of attrition  varied across its five law enforcement officer positions. Specifically,  OFO\u2019s annual attrition rates for the CBP officer position were consistent  at roughly 3 percent, while rates for Border Patrol agent and AMO\u2019s  Marine Interdiction Agent positions were below 5 percent in 4 out of the 5  fiscal years we reviewed. When we compared CBP\u2019s annual attrition rates  for these positions to those of the other selected law enforcement  agencies, we found that CBP\u2019s attrition rates were similar to ICE\u2019s annual  attrition rates for its law enforcement positions and generally lower than  those of the Secret Service and BOP. Annual attrition rates for AMO\u2019s  aviation positions were higher, ranging from 5.0 percent to 9.2 percent for  the Air Interdiction Agent position and 7.8 percent to 11.1 percent for the  Aviation Enforcement Agent position. Even so, in the last 3 fiscal years,  attrition rates for these positions have generally remained lower than  those of the Secret Service and BOP (see table 9).", "In addition, from fiscal years 2013 through 2017, CBP\u2019s ability to hire  more law enforcement officers than it lost varied across positions.  Specifically, CBP consistently hired more CBP officers and Aviation  Enforcement Agents than it lost. Further, while CBP generally maintained  its staffing levels for Marine Interdiction Agents, the agency consistently  lost more Border Patrol agents and Air Interdiction Agents than it hired.  Even so, onboard staffing levels for all five of CBP\u2019s law enforcement  officer positions have consistently remained below authorized staffing  levels.", "OFO. With the exception of fiscal year 2016, CBP hired more CBP  officers than it lost each fiscal year. Specifically, from fiscal years 2013  through 2017, CBP hired an average of 978 CBP officers and lost an  average of 719 officers each year, resulting in an average annual gain of  258 CBP officers and an increase in its overall staffing level of nearly  1,300 officers over this 5-year period. However, as OFO\u2019s staffing  targets for CBP officers also increased each year during this period, OFO  remained below its authorized levels from fiscal years 2014 through 2017.  In fact, OFO ended fiscal year 2017 more than 1,100 CBP officers below  its annual staffing target (see fig. 7).", "Border Patrol. From fiscal years 2013 through 2017, CBP hired an  average of 522 Border Patrol agents and lost an average of 890 agents  each year, resulting in an average annual loss of 368 Border Patrol  agents over this 5-year period. Therefore, despite having an annual  attrition rate that mostly remained below 5 percent, Border Patrol was not  able to replace departing Border Patrol agents with new hires from fiscal  years 2014 through 2017. As a result, staffing levels for Border Patrol  agents decreased by 1,838 total agents over our review period and the  gap between Border Patrol\u2019s onboard staffing levels and its  congressionally-mandated minimum staffing floor has expanded each  year from fiscal years 2014 through 2017. Border Patrol ended fiscal year  2017 with 19,437 agents\u2014nearly 2,000 agents below its fiscal year 2016  statutorily-established minimum and 7,000 below the staffing target  established in response to Executive Order 13767 (see fig. 8).", "AMO. From fiscal years 2013 through 2017, CBP (1) gained Aviation  Enforcement Agent staff, (2) generally maintained staffing levels for its  Marine Interdiction Agent position, and (3) consistently lost Air Interdiction  Agent staff. First, despite the Aviation Enforcement Agent position  generally having CBP\u2019s highest annual attrition rates, CBP hired more  Aviation Enforcement Agents than it lost each fiscal year and increased  its overall staffing level by 79 positions during our review period. Even so,  AMO staffing levels for these positions remained below its authorized  targets in 4 out of the 5 fiscal years we reviewed. Second, AMO staffing  levels for the Marine Interdiction Agent position remained level as AMO  lost a net total of 3 Marine Interdiction Agents from fiscal years 2013  through 2017. Nevertheless, onboard staffing levels for these positions  remained below the annual authorized levels in 4 of the 5 fiscal years we  reviewed. Third, on average, CBP hired 25 Air Interdiction Agents and  lost 52 agents each fiscal year, resulting in an average annual loss of 27  agents and a net decrease of 136 positions between fiscal years 2013  and 2017. Further, even though the authorized staffing targets for these  positions decreased every year since fiscal year 2013, AMO\u2019s onboard  Air Interdiction Agent staffing levels remained below authorized levels in 4  of the 5 fiscal years we reviewed (see fig. 9)."], "subsections": []}, {"section_title": "Retaining Law Enforcement Officers in Hard-to-Fill Locations Has Been Challenging for CBP", "paragraphs": ["CBP has acknowledged that improving its retention of qualified law  enforcement personnel is critical in addressing staffing shortfalls, but  officials identified difficulties in retaining key law enforcement staff as a  result of geographically remote and hard-to-fill duty locations. CBP  officials across all three operational components and HRM cited  location\u2014and specifically employees\u2019 inability to relocate to posts in more  desirable locations\u2014as a primary challenge facing the agency in retaining  qualified personnel.", "Border Patrol officials explained that duty stations in certain remote  locations present retention challenges due to quality-of-life factors\u2014for  example, agents may not want to live with their families in an area without  a hospital, with low-performing schools, or with relatively long commutes  from their homes to their duty station. Border Patrol\u2019s difficulty in retaining  law enforcement staff in such locations is exacerbated by competition  with other federal, state, and local law enforcement organizations for  qualified personnel. According to Border Patrol officials, other agencies  are often able to offer more desirable duty locations\u2014such as major  cities\u2014and, in some cases, higher compensation. CBP data indicate that  Border Patrol agents consistently leave the component for employment  with other law enforcement agencies, including OFO as well as other  DHS components such as ICE. For example, while retirements accounted  for more than half of annual CBP officer losses from fiscal years 2013  through 2017, they accounted for less than a quarter of annual Border  Patrol agent losses, indicating that the majority of these agents are not  retiring but are generally leaving to pursue other employment. Further,  according to CBP data, the number of Border Patrol agents departing for  employment at other federal agencies increased steadily from 75 agents  in fiscal year 2013 to 348 agents in fiscal year 2017\u2014or nearly 40 percent  of all Border Patrol agent losses in that fiscal year (see fig. 10).", "Further, of the 113 Border Patrol agents who departed CBP for other  federal agencies during the first half of fiscal year 2018, 72 agents (64  percent) went to ICE. Border Patrol officials told us that working a  standard day shift at ICE in a controlled indoor environment located in a  major metropolitan area for similar or even lower salaries presents an  attractive career alternative for Border Patrol agents who often work night  shifts in extreme weather in geographically remote locations. The  President of the National Border Patrol Council also cited this challenge,  stating that unless Border Patrol agents have a strong incentive to remain  in remote, undesirable locations\u2014such as higher compensation when  compared with other law enforcement agencies\u2014they are likely to leave  the agency for similar positions located in more desirable locations.", "While OFO officials told us the component did not face an across-the- board challenge in retaining CBP officers, they have had difficulty  retaining officers in certain hard-to-fill locations that may be  geographically remote or unattractive for families, such as Nogales,  Arizona, and San Ysidro, California. As a result, CBP officer staffing  levels in these locations have consistently remained below authorized  targets. For example, OFO ended fiscal year 2017 approximately 300  positions below its authorized staffing level in both its Tucson, Arizona,  field office, which includes the port of Nogales, and its San Diego,  California, field office, which includes the port of San Ysidro. See figure  11 for more information on the OFO field offices with the four largest gaps  between onboard and authorized staffing levels for CBP officer positions  from fiscal years 2015 through 2017.", "OFO officials stated that CBP officers regularly leave posts in remote or  hard-to-fill locations to transfer to similar positions in more desirable  locations, both internally within OFO as well as at other law enforcement  agencies. In addition, officials from the National Treasury Employees  Union, which represents CBP officers, told us that excessive overtime  and stressful employment conditions\u2014including forced temporary duty  travel\u2014also contributed to CBP officers leaving the agency for positions  at other law enforcement entities. CBP data indicate that the number of  CBP officers who left CBP for employment at other federal agencies  increased from 33 in fiscal year 2013 to 108 in fiscal year 2017\u2014or 15  percent of all CBP officer losses in that fiscal year. Likewise, of the 66  CBP officers who departed CBP for other federal agencies during the first  half of fiscal year 2018, 34 officers (52 percent) went to ICE.", "AMO has also had difficulty retaining its law enforcement personnel\u2014and  particularly its Air Interdiction Agent staff\u2014in hard-to-fill locations, such as  Aguadilla, Puerto Rico, and Laredo, Texas. However, given the unique  qualifications and competencies required for the Air Interdiction Agent  position, AMO does not compete with other law enforcement  organizations. Instead, AMO officials told us they compete with the  commercial airline industry for qualified pilots. Specifically, they stated  that this competition is exacerbated by a nationwide shortage of pilots. In  addition, AMO officials explained that there is a perception among  applicants that commercial airlines are able to offer pilots more desirable  locations and higher compensation. However, they told us that AMO  generally provided pilots with higher starting salaries than many regional  airlines as well as most career options available to helicopter pilots."], "subsections": []}, {"section_title": "CBP Has Taken Steps to Address Retention Challenges", "paragraphs": ["All three CBP operational components have taken steps to retain qualified  law enforcement personnel by offering opportunities for employees to  relocate to more desirable locations and pursuing the use of financial  incentives, special salary rates, and other payments and allowances.", "Relocation Opportunities. Border Patrol, OFO, and AMO have formal  programs providing law enforcement officers with opportunities to  relocate. For example, in fiscal year 2017, Border Patrol implemented its  Operational Mobility Program and received initial funding to relocate  about 500 Border Patrol agents to new locations based on the  component\u2019s staffing needs. According to Border Patrol officials, retaining  current employees is a top focus for leadership at the component and this  program provides Border Patrol agents with opportunities for a paid  relocation to a more desirable location at a lower cost to CBP than an  official permanent change of station transfer. As of April 2018, Border  Patrol officials told us that 322 Border Patrol agents had accepted  reassignment opportunities through the program so far and the  component hopes to continue receiving funding to provide these  opportunities.", "Likewise, OFO\u2019s National Reassignment Opportunity Bulletin provides  CBP officers with opportunities to voluntarily relocate to new ports of entry  at their own expense. CBP officers are able to submit reassignment  requests multiple times throughout the year and selections are made  based on OFO\u2019s staffing needs as well as employees\u2019 seniority and other  eligibility requirements. According to OFO officials, the program has been  in place since February 2012, and OFO data indicate a recent increase in  reassignments from 122 participating CBP officers in calendar year 2016  to 202 officers in 2017. Further, these officials noted that CBP officers are  also able to relocate to new duty stations through partner swaps\u2014when  two employees assigned to different duty locations agree to switch\u2014and  hardship reassignments\u2014for example, when a CBP officer must relocate  because a spouse has been transferred to a new location for work.", "Also, AMO personnel who are non-bargaining unit employees and have  served for at least 3 years in their current location are eligible for  noncompetitive paid relocations. AMO officials told us that opportunities  for relocations are posted every few months in which eligible personnel  can apply for transfers to specific duty locations based on the needs of  the operational component.", "Financial Incentives and Other Payments and Allowances. CBP\u2019s  three operational components have also recently taken steps to  supplement employees\u2019 salaries through the use of human capital  flexibilities\u2014such as retention and relocation incentives and special  salary rates\u2014as well as other payments and allowances. CBP\u2019s goal in  pursuing these human capital flexibilities is to retain current employees\u2014 especially in remote or hard-to-fill locations\u2014who are likely to internally  relocate within CBP to more desirable duty locations or depart the agency  for similar positions at other law enforcement organizations or commercial  airlines. Supplementing the salaries of its employees is consistent with a  leading practice we identified in retaining qualified law enforcement  personnel\u2014specifically, agencies should ensure they are offering pay and  compensation comparable with other law enforcement agencies. Further,  two of the three other selected law enforcement agencies we reviewed  regularly used retention incentives and other human capital flexibilities to  help retain qualified law enforcement personnel in cases where filling the  position would be difficult or recruitment costs would be high. However,  we found that from fiscal years 2013 through 2017, CBP\u2019s use of such  financial incentives and other payments was limited as the agency paid a  total of 4 retention incentives and 13 relocation incentives, and  implemented 1 special salary rate for all positions during this 5-year  period.", "From fiscal year 2013 through 2017, Border Patrol did not offer retention  incentives to agents and paid 2 relocation incentives to transfer Border  Patrol agents to Artesia, New Mexico, and Washington, D.C., at a cost of  roughly $78,000. However, in fiscal year 2018, Border Patrol increased its  use of relocation incentives to facilitate the transfer of agents to duty  stations along the southwest border that are less desirable due to the  remoteness of the location and lack of basic amenities and infrastructure.  Specifically, as of April 2018, 67 Border Patrol agents had received such  incentives to relocate to duty stations in Ajo, Arizona; Calexico, California;  and the Big Bend region in Texas; among others.", "While Border Patrol did not offer retention incentives during our review  period, it submitted a formal request to CBP leadership in February 2018  for a 10 percent across-the-board retention incentive for all Border Patrol  agents at the GS-13 level and below, which represents the majority of the  component\u2019s frontline workforce. According to Border Patrol  documentation, these incentives, if implemented, could help reduce  Border Patrol\u2019s attrition rate\u2014which has consistently outpaced its hiring  rate\u2014by helping retain agents who may have otherwise left Border Patrol  for similar positions in OFO, ICE, or other law enforcement agencies.  According to HRM officials, as of April 2018, CBP leadership was  evaluating Border Patrol\u2019s group retention incentive request, including the  costs associated with implementing this 10 percent across-the-board  incentive. In addition, as the incentive would benefit Border Patrol agents  in all of the component\u2019s duty locations, the extent to which this effort  would be effective in targeting agent attrition in the remote locations that  represent CBP\u2019s largest staffing challenges remains to be seen.", "In addition, as of May 2018, CBP was planning to submit a request to  OPM for a $10 per day remote duty location allowance for Border Patrol  agents staffed to 17 geographically remote stations. These stations meet  OPM\u2019s definition of \u201cremote worksites\u201d and have quality-of-life conditions  that are substantially below the standard at most other CBP duty  locations. According to the agency, this allowance could help to address  the attrition of Border Patrol agents at these duty stations. However, like  its group retention incentive request, it is not yet known whether this  proposal will be approved.", "From fiscal years 2013 through 2017, OFO paid a total of 4 retention  incentives at a cost of $149,000 to retain CBP officers in Tucson, Arizona;  Detroit, Michigan; Carbury, North Dakota; and Laredo, Texas. Further,  OFO paid 7 relocation incentives at a cost of approximately $160,000 to  relocate personnel to the hard-to-fill ports of Alcan and Nome, Alaska;  Coburn Gore, Maine; and Detroit, Michigan. One OFO official told us  OFO did not regularly use retention incentives because its relatively low  annual attrition rates make it difficult to propose a persuasive business  case to CBP leadership that such incentives are necessary. Further,  another OFO official explained that OFO\u2019s strategy is focused on using  recruitment incentives to staff hard-to-fill locations with new employees.  As discussed above, OFO officials told us this strategy has been effective  in retaining CBP officers in most of the hard-to-fill locations where  recruitment incentives have been used since fiscal year 2015.", "In addition to relocation and retention incentives, OFO received OPM  approval in fiscal year 2017 to implement a special salary rate for CBP  officers staffed to the hard-to-fill location of Portal, North Dakota\u2014a port  that consistently experienced CBP officer losses of more than 10 percent  each year. Specifically, this special salary rate supplements CBP officers\u2019  base salaries up to 40 percent and, according to OFO officials as of  February 2018, there had not been any CBP officer departures from the  port since this rate was implemented in June 2017. OFO officials stated  that while recruitment incentives can bring applicants to hard-to-fill  locations, special salary rates may be able to retain them for longer  periods. However, while OFO officials have cited the effectiveness of this  special salary rate in retaining personnel, this rate only applies to one  hard-to-fill location and does not address OFO\u2019s ongoing staffing  challenges in other chronically understaffed locations. According to OFO  officials, the component is considering requesting additional special  salary rates for such locations where attaining authorized staffing levels  has proved difficult, but these officials noted that such discussions are in  the preliminary stage due to the extensive effort and amount of time  required to pursue this option. Specifically, these officials told us that  requesting OPM approval for a special salary rate in Portal, North Dakota,  was an onerous and extensive process that took CBP and OPM more  than 2 years to complete from start to finish.", "From fiscal years 2013 through 2017, AMO did not offer retention  incentives to law enforcement personnel and paid a total of 4 relocation  incentives to transfer three Air Interdiction Agents and one Marine  Interdiction Agent to Puerto Rico at a cost of approximately $84,000.  However, AMO has taken steps to pursue additional human capital  flexibilities to address its difficulty in retaining Air Interdiction Agents,  including a group retention incentive and a special salary rate.  Specifically, in September 2017, AMO submitted an official request to  HRM for a 10 percent group retention incentive for Air Interdiction Agents  staffed to duty locations in Yuma and Sierra Vista, Arizona; Grand Forks,  North Dakota; Laredo, Alpine, and McAllen, Texas; and Aguadilla, Puerto  Rico. According to the request, the incentive is intended to help AMO  retain qualified pilots in these hard-to-fill locations by raising their salaries  to be more competitive with commercial airlines. HRM officials told us in  March 2018 they were working with AMO and CBP\u2019s Office of Finance to  assess the proposal\u2019s cost.", "In addition, as of April 2018, AMO was in the process of drafting a special  salary rate request for all Air Interdiction Agents from GS-11 through GS- 13 at all AMO locations. HRM officials confirmed they were working with  AMO officials on this request, including evaluating whether AMO meets  OPM\u2019s criteria. HRM officials told us that OPM\u2019s criteria for approving the  use of special salary rates represent a high bar and AMO will have to  present a strong business case that demonstrates a regular pattern of  component-wide Air Interdiction Agent losses."], "subsections": []}, {"section_title": "CBP Does Not Have a Systematic Process to Capture and Analyze Data on Departing Law Enforcement Officers", "paragraphs": ["CBP does not have a systematic process for capturing and analyzing  information on law enforcement officers who are leaving, such as an exit  interview or survey. As a result, the agency does not have important  information it could use to help inform future retention efforts. CBP  officials across all three components confirmed that they do not  systematically conduct formal exit interviews to collect data on departing  employees. Officials from OFO and AMO told us that departing law  enforcement officers receive the DHS exit survey and therefore have the  option to provide these data. However, while CBP officials explained that  DHS provides the survey response data to CBP on a quarterly basis,  AMO officials told us that this information was of limited value due to low  response rates. Further, when we requested these data, CBP was unable  to provide the survey response data\u2014or the percentage of departing  employees who had completed the survey\u2014citing a technical reporting  error in DHS\u2019s system. In addition, according to CBP officials, in August  2017, DHS communicated that it no longer required CBP (or DHS\u2019s other  components) to use the DHS exit survey.", "In the third quarter of fiscal year 2017, Border Patrol implemented its own  exit survey, which includes questions gauging departing employees\u2019  reasons for leaving, length of service, and, if applicable, what  organization they are departing for, among other questions. While such  questions should provide CBP with useful data on the factors affecting  Border Patrol agent departures, Border Patrol officials told us that the  response rate was 9 percent as of January 2018. When we asked these  officials about the steps they were taking to improve this response rate,  they replied that individual Border Patrol sectors were responsible for  disseminating these surveys and the headquarters officials were unsure  of the extent to which sector-level officials were sending the surveys to  departing employees. To ensure the surveys were being sent, a senior  Border Patrol headquarters official explained that sector-level officials  have been told to copy him on all e-mails disseminating the survey.", "According to CBP officials, in April 2018, the agency launched an initiative  to develop a CBP-wide exit survey. The agency plans to develop  customized questions for the survey, conduct a pilot of the survey in July  2018, and integrate the survey into CBP\u2019s off-boarding process by the  beginning of fiscal year 2019. While CBP provided us with these project  milestone dates, the agency did not provide any documentation  describing key aspects of the initiative, such as whether CBP will develop  a strategy focused on encouraging departing employees to complete the  survey to foster higher response rates. Further, CBP did not provide any  information on how the agency planned to analyze and use data collected  by the exit survey to inform its efforts to retain qualified law enforcement  personnel.", "Two of the other selected law enforcement agencies we reviewed\u2014BOP  and the Secret Service\u2014use exit surveys to collect a wide range of  information on departing employees, while ICE is currently developing its  own survey. For example, similar to Border Patrol\u2019s exit survey, BOP\u2019s  uses a mix of multiple-choice and open-ended questions to assess  reasons for departures as well as employee attitudes toward  compensation, work-life balance and other working conditions, and  supervisors. Further, both BOP\u2019s and the Secret Service\u2019s surveys inquire  about actions the agencies could have taken that would have prevented  the employee\u2019s departure.", "CBP officials said that management is generally aware of the factors that  influence law enforcement officer departures, including the main reason\u2014 they want to relocate to more desirable locations. Specifically, Border  Patrol officials stated that managers have anecdotal knowledge through  informal conversations or meetings at the local level with departing  Border Patrol agents, and OFO officials stated that when a CBP officer  leaves, there is a general understanding among their colleagues as to the  reasons for their departure. In contrast to OFO and Border Patrol officials,  AMO officials stated that because of the low participation rates on the  DHS survey, the component does not have enough data to understand  and address the factors that influence employees\u2019 decisions to leave.  Standards for Internal Control in the Federal Government state that  management should obtain relevant data from reliable sources and  process these data into quality information to make informed decisions in  achieving key objectives. Taking steps to ensure that the agency\u2019s  operational components are systematically collecting and analyzing  complete and accurate information on all departing law enforcement  officers\u2014including the factors that influenced their decision to separate\u2014 would better position CBP to understand its retention challenges and take  appropriate action to address them."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["CBP has made progress in improving its recruitment, hiring, and retention  of law enforcement officers, including increasing the total number of  applications it receives for these positions and reducing the amount of  time it takes to hire applicants. Further, CBP has taken steps to address  its primary challenge in retaining qualified law enforcement officers by  offering opportunities for these personnel to relocate and pursuing the  use of financial incentives and other payments to supplement employee  salaries. Even so, retaining law enforcement officers in hard-to-fill  locations continues to be challenging for CBP.", "Although CBP management may be aware of the primary reason law  enforcement personnel leave the agency, CBP does not have a  systematic process in place across its three operational components to  capture and analyze information on these departures, such as an exit  interview or survey. Taking steps to ensure that the agency\u2019s operational  components are systematically capturing and analyzing a wide range of  information on all departing law enforcement officers and the factors that  influenced their decisions to leave would better position CBP to  understand its retention challenges and take appropriate action to  address them."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Commissioner of CBP should ensure that its operational components  systematically collect and analyze data on departing law enforcement  officers and use this information to inform retention efforts.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to DHS for review and comment. DHS  provided written comments, which are noted below and reproduced in full  in appendix I, and technical comments, which we incorporated as  appropriate. We also provided the draft report to the Federal Bureau of  Prisons for review and comment, which indicated via e-mail that it did not  have any comments on the draft report.", "DHS concurred with our recommendation and described the actions it  plans to take in response. Specifically, DHS stated that CBP is taking  steps to develop an agency-wide exit survey to collect information on  departing law enforcement officers for implementation in fiscal year 2019.  DHS also stated that CBP is working to develop a mass communications  plan to facilitate the completion of the survey by exiting employees to  ensure an effective response rate. Systematically capturing and analyzing  quality information on departing law enforcement officers will help CBP to  understand its retention challenges. To fully address the intent of our  recommendation, CBP will also need to use this information to address its  retention challenges and inform its overall retention efforts.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, 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) 512-8777 or gamblerr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Adam Hoffman (Assistant  Director), Bryan Bourgault, Eric Hauswirth, Tyler Kent, Amanda Miller,  Sasan J. \u201cJon\u201d Najmi, Leslie Sarapu, Michael Steinberg, and Adam Vogt  made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-243", "url": "https://www.gao.gov/products/GAO-18-243", "title": "UN Peacekeeping: Cost Estimate for Hypothetical U.S. Operation Exceeds Actual Costs for Comparable UN Operation", "published_date": "2018-02-06T00:00:00", "released_date": "2018-02-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To promote international peace and security, the UN had 16 ongoing peacekeeping operations worldwide as of June 30, 2017, with a total budget of almost $8 billion in UN fiscal year 2017 and contributions of over 100,000 military, police, and civilian personnel from more than 120 countries. The United States is the largest financial contributor to UN peacekeeping operations, providing an average of about 28 percent of total funding annually.", "The Department of State Authorities Act, Fiscal Year 2017, includes a provision for GAO to compare the costs, strengths, and limitations of UN and U.S. peacekeeping operations. This report (1) compares the reported costs of a specific UN operation to the estimated costs of a hypothetical, comparable operation implemented by the United States; (2) identifies factors that affect cost differences; and (3) identifies stakeholder views on the relative strengths of UN and U.S. peacekeeping operations.", "GAO worked with the UN, DOD, and State to generate a cost estimate of a hypothetical U.S.-led operation in the Central African Republic comparable to MINUSCA. GAO developed this estimate using DOD's cost estimating tool for contingency operations and State data on civilian costs, assuming a U.S. operation using roughly the same levels of military and civilian personnel as MINUSCA. The cost estimate should not be construed as suggesting that the United States would likely implement such an operation in the Central African Republic or that it would implement such an operation in the same way.", "GAO is making no recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["Based on United Nations (UN) and Departments of Defense (DOD) and State (State) data, GAO estimates that it would cost the United States more than twice as much as it would cost the UN to implement a hypothetical operation comparable to the UN Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA). MINUSCA cost the UN approximately $2.4 billion for the first 39 months of the operation. GAO estimates that a hypothetical U.S. peacekeeping operation in the Central African Republic of roughly the same size and duration would cost nearly $5.7 billion\u2014almost eight times more than the $700 million the United States contributed to MINUSCA over the same time period.", "Various factors affect differences between the actual cost of MINUSCA and the estimated cost of a hypothetical, comparable U.S. operation in the Central African Republic. The United States and the UN would source and transport some supplies and equipment differently, affecting the cost of both operations; for example, the United States would airlift water into the Central African Republic, while the UN does not do so to the same extent. The United States also would incur the cost of civilian police and military reservist salaries, while the UN does not pay any troop or police salaries. Finally, some higher standards for facilities, intelligence, and medical services increase the U.S. cost estimate relative to UN costs for similar operational elements.", "UN and U.S. peacekeeping operations have various relative strengths, according to U.S. and UN officials. These officials said that, because the UN is a multilateral organization, UN peacekeeping operations have international acceptance and are more likely to be viewed as impartial. Officials also said that the UN enjoys global access to expertise and experience, and can leverage assistance from multilateral donors and development banks. Relative strengths of a U.S. peacekeeping operation would include faster deployment and superior command and control, logistics, intelligence, and counterterrorism capability, according to U.S. and UN officials."]}], "report": [{"section_title": "Letter", "paragraphs": ["To promote international peace and security, the United States supports  United Nations (UN) peacekeeping operations worldwide. As of June 30,  2017, the United Nations had 16 such operations ongoing with a total  budget in UN fiscal year 2017 of almost $8 billion. These operations  deployed over 100,000 military, police, and civilian personnel from more  than 120 contributing countries in UN fiscal year 2017. The United States  is the single largest financial contributor to these operations, contributing  on average approximately 28 percent of total funding annually.", "The Department of State Authorities Act, Fiscal Year 2017, includes a  provision for GAO to compare the costs, strengths, and limitations of UN  and U.S. peacekeeping operations. This report (1) compares the  reported costs of a specific UN operation to the estimated costs of a  hypothetical, comparable operation implemented by the United States; (2)  identifies factors that affect cost differences; and (3) identifies stakeholder  views on the relative strengths of UN and U.S. peacekeeping operations.", "To compare the costs of a current UN peacekeeping operation with the  costs of a hypothetical, comparable operation implemented by the United  States, we selected the UN Multidimensional Integrated Stabilization  Mission in the Central African Republic (MINUSCA) as a case study.  Using UN data for MINUSCA, we developed a comparable scenario for a  hypothetical U.S. operation. The scenario assumes deployment of  roughly the same number of U.S. military, civilian, and police personnel in  the Central African Republic (CAR) as the UN deployment for MINUSCA  over the same approximately 3-year period. We did not attempt to  determine how many military or civilian personnel the United States would  deploy if it implemented a peacekeeping operation in CAR. We selected  MINUSCA because it is in sub-Saharan Africa, where most UN  peacekeeping operations established since 2003 have taken place, and  has a typical scope and budget compared to other UN peacekeeping  operations in sub-Saharan Africa, according to U.S. and UN officials. In  addition, established in 2014, MINUSCA is one of the most recent UN  peacekeeping operations; thus, initial expenditures for the operation are  relatively current.", "To identify the costs of MINUSCA, we analyzed relevant UN budget and  expenditure data, as well as relevant UN reports related to MINUSCA for  the start-up and first 3 full UN fiscal years of the operation, from April 10,  2014, to June 30, 2017. We assessed these data through discussions  with cognizant UN officials and a review of external audits of UN  budgetary information and found them reliable for our purposes. For the  military portion of the hypothetical U.S. operation, we worked with the  Department of Defense (DOD) and the Institute for Defense Analyses  (IDA) to develop a cost estimate using IDA\u2019s Contingency Operations  Support Tool (cost estimating tool). DOD uses this tool to develop cost  estimates for all military contingency operations. We assessed the  applicability of DOD\u2019s cost estimating tool to developing a hypothetical  cost estimate for the purposes of this report through discussions with  DOD and IDA officials and compared the tool to the accurate and  comprehensive characteristics of a high-quality cost estimate, as  described in the GAO Cost Estimating and Assessment Guide. While we  found the DOD cost estimating tool generated a sufficiently reliable cost  estimate for a hypothetical U.S. peacekeeping operation, we did not  assess the overall reliability of the tool or its capability to generate  accurate or comprehensive estimates for future U.S. operations.", "For the civilian portion of the U.S. operation, we determined the number  of Foreign Service officers, locally employed staff and civilian police  based on deployment levels of UN international and national civilian staff,  and individual UN civilian police officers serving in CAR as part of  MINUSCA. We based the costs of U.S. civilian personnel on average  salaries published by the Department of State (State) and the Office of  Personnel Management and various allowances, published by State, for  serving in CAR, such as cost-of-living adjustments, danger pay, and post  hardship differential. We also met with State officials to estimate other  costs, including for housing, administrative support, and travel, but did not  assess the reliability of these costs provided by State.", "To identify factors that affect cost differences between MINUSCA and the  hypothetical U.S. operation, we identified cost categories where  differences between MINUSCA and the U.S. estimate were significant  and interviewed U.S. and UN officials regarding UN standards and  policies that explain these differences.", "To identify stakeholder views on the relative strengths of UN and U.S.  peacekeeping operations, we reviewed UN reports on peacekeeping  operations and interviewed U.S. and UN officials. In addition, we  reviewed GAO\u2019s 2006 report comparing the costs and relative strengths  of a UN peacekeeping operation in Haiti with those of a hypothetical U.S.  operation. See appendix I for a complete description of our objectives,  scope, and methodology.", "We conducted this performance audit from February 2017 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of UN Peacekeeping Operations since 1948", "paragraphs": ["As of June 30, 2017, the UN had carried out 71 peacekeeping operations  since 1948, and had 16 active UN peacekeeping operations worldwide.  Eight of these UN peacekeeping operations were in sub-Saharan Africa  (see fig. 1).", "In their earliest days, UN peacekeeping operations were primarily military  in nature and limited to monitoring cease-fire agreements and stabilizing  situations on the ground while political efforts were being made to resolve  conflicts. Today, in response to increasingly complex situations in which  conflicts may be internal, involve many parties, and include civilians as  deliberate targets, UN peacekeeping operations are more commonly  \u201cmultidimensional\u201d\u2014deploying civilian and police personnel in addition to  military personnel. Multidimensional peacekeeping operations seek to  create a secure and stable environment while working with national  authorities and actors to make sure the peace agreement or political  process is implemented. According to the UN, multidimensional  peacekeeping operations are designed to protect civilians and often  assist in the disarmament, demobilization and reintegration of former  combatants; support the organization of elections; protect and promote  human rights; and assist in restoring the rule of law. Figure 2 shows  examples of UN peacekeepers serving in different capacities as part of  MINUSCA in Bangui, CAR.", "Each UN peacekeeping operation, including its mandated size and tasks,  is authorized through a UN Security Council resolution. The operation\u2019s  budget and resources are subject to General Assembly approval. The  UN\u2019s approved budget for global peacekeeping operations in UN fiscal  year 2017 was about $7.9 billion. Individual operation budgets ranged  from about $36 million for the peacekeeping operation in Kosovo to more  than $1.2 billion for the peacekeeping operation in the Democratic  Republic of the Congo (see table 1).", "The UN reported in June 2017 that it maintained 95,544 uniformed  peacekeepers, 5,004 international civilians, 10,149 local civilians, and  1,597 UN volunteers in support of its operations around the world.  According to UN documents, civilian peacekeeping personnel are  generally recruited to peacekeeping operations as individuals, while  police and military personnel are volunteered by member states to  participate as part of their country\u2019s contribution to UN peacekeeping  operations."], "subsections": []}, {"section_title": "U.S. Contributions to UN Peacekeeping Operations", "paragraphs": ["The United States is the largest financial contributor to UN peacekeeping  operations. From fiscal years 2014 to 2017, the United States contributed  an average of about $2.1 billion per year to these operations. The UN  General Assembly sets the assessment levels for UN member  contributions to peacekeeping operations every 3 years. The United  States\u2019 assessment has averaged about 28.5 percent of the UN  peacekeeping budget; however, Congress has authorized payment with  appropriated funds at about 27 percent for U.S. fiscal years 2014 through  2016, and 25 percent for U.S. fiscal year 2017."], "subsections": []}, {"section_title": "Overview of MINUSCA", "paragraphs": ["In April 2014, UN Security Council Resolution 2149 established  MINUSCA following escalating sectarian violence in CAR that resulted in  the destruction of state institutions, thousands of deaths, and 2.5 million  people\u2014more than half of CAR\u2019s entire population\u2014in need of  humanitarian aid, according to a UN report. The conflict also resulted in  174,000 people being internally displaced and over 400,000 fleeing to  neighboring countries, according to the UN report. MINUSCA\u2019s tasks  include protecting civilians, given the security, humanitarian, human rights,  and political crisis in CAR;  supporting the implementation of the transition process, including  efforts to extend state authority and preserve territorial integrity;  facilitating the delivery of humanitarian assistance and promoting and  protecting human rights;  supporting justice and the rule of law; and  facilitating the disarmament, demobilization, reintegration, and  repatriation processes.", "On November 15, 2017, UN Security Council Resolution 2387 (2017)  extended MINUSCA\u2019s mandate for a fourth time, through November 15,  2018.", "MINUSCA\u2019s approved personnel levels for UN fiscal year 2017 comprised  10,750 military personnel, 400 individual police officers, and 1,680 formed  police unit personnel, as well as 790 international civilian and 696  national civilian personnel, 238 UN volunteers, and 40 government- provided personnel, according to a UN Secretary-General report. Table  2 shows average annual personnel deployment for MINUSCA and the  number of authorized positions for the first 3 full fiscal years of the  operation."], "subsections": []}]}, {"section_title": "Cost Estimate for a Hypothetical U.S. Operation in CAR Exceeds Actual Costs for a Comparable Ongoing UN Operation in CAR, as Well as U.S. Contributions to That UN Operation", "paragraphs": ["Based on data and other input from the UN, DOD, and State, we estimate  that it would cost the United States more than twice as much as it would  cost the UN to implement a hypothetical operation comparable to  MINUSCA, the ongoing UN operation in the Central African Republic  (CAR). In addition, the estimated cost of a U.S. operation in CAR far  exceeds U.S. contributions to MINUSCA."], "subsections": [{"section_title": "Estimated Cost of a Hypothetical U.S. Operation in CAR Is More than Twice the Cost of a Comparable Ongoing UN Operation in CAR", "paragraphs": ["Based on an estimate we developed in conjunction with DOD and State  officials, a hypothetical, comparable U.S. operation would likely cost  nearly $5.7 billion, more than twice as much as MINUSCA, the ongoing  UN operation in CAR. Our comparison covers the time from which  MINUSCA was established in April 2014 through the end of UN fiscal  year 2017, which ended on June 30, 2017\u2014a total of 3 years and 3  months, the first 39 months of MINUSCA. Over this time period, UN costs  for MINUSCA totaled approximately $2.4 billion. Using roughly the same  basic parameters for MINUSCA, including similar deployment levels of  military and civilian personnel over the same time period, in consultation  with DOD and State officials, we estimate that a comparable, hypothetical  U.S. operation would likely cost nearly $5.7 billion, more than twice the  UN cost for MINUSCA (see table 3 for a detailed comparison of estimated  U.S. costs and actual UN costs). This estimate does not include, among  other things, the cost for State diplomatic security and office space for  civilian staff, the inclusion of which could further increase the total  estimated U.S. cost for such an operation."], "subsections": []}, {"section_title": "Estimated Cost of a Hypothetical U.S. Operation in CAR Far Exceeds U.S. Contributions to MINUSCA", "paragraphs": ["During the same time period, from April 10, 2014 through June 30, 2017,  the United States contributed approximately $700 million to the UN to  support MINUSCA. Therefore, the estimated cost of a U.S. operation  (nearly $5.7 billion) would be almost eight times greater than the United  States\u2019 contribution to MINUSCA. See figure 3 for a comparison of these  costs with the U.S. estimate."], "subsections": []}]}, {"section_title": "Various Factors Affect Differences between the Actual Cost of MINUSCA and the Estimated Cost of a Hypothetical, Comparable U.S. Operation", "paragraphs": ["Various factors contribute to the differences in costs between actual UN  expenditures for MINUSCA from April 10, 2014 through June 30, 2017\u2014 the first 39 months of MINUSCA\u2014and a hypothetical, comparable U.S.  operation over the same time period, including disparities in the cost of  sourcing and transporting equipment and supplies, staffing and  compensating military and police personnel, and maintaining facilities and  communications and intelligence systems. These disparities reflect  operational, structural, and doctrinal differences in the way the United  States likely would undertake a hypothetical, comparable operation,  should such an operation be deemed in the U.S. national interest."], "subsections": [{"section_title": "Different Methods for Sourcing and Transporting Equipment and Other Supplies Contribute to Higher Estimated U.S. Costs", "paragraphs": ["High U.S. costs to source and transport supplies and equipment to the  Central African Republic (CAR) contribute to the difference between our  cost estimate for the hypothetical U.S. peacekeeping operation and the  UN\u2019s actual costs for MINUSCA. In the hypothetical U.S. operation, based  on input from DOD and IDA officials and the output of the IDA cost  estimating tool, the United States would fly in most of its consumable  supplies from outside CAR. Specifically, materials such as water, ice,  food, and other subsistence items would be airlifted into CAR from Italy, a  supply location validated as reasonable by DOD and IDA officials given  its proximity to the operation and because MINUSCA relies on a UN  global service center there, one of two such UN centers in Europe. The  estimated U.S. cost of airlifting water alone over the 39-month time period  for the hypothetical operation would total nearly $700 million. The United  States would still deploy its equipment and personnel to CAR from the  United States, at a cost of nearly $600 million. Transportation of  equipment and supplies within CAR would cost an additional estimated  $316 million.", "In contrast, the UN does not fly in water or consumables on the same  scale as the United States would in the hypothetical operation. Instead,  the UN relies on some in-country or local infrastructure and consumables.  Military and formed police unit equipment is provided by the troop- and  police-contributing countries. The UN reimburses these countries for  equipment at set rates. The UN cost of reimbursing countries for  deploying their equipment to CAR likely would be less than the amount  the United States would spend on airlifting the equipment to CAR alone.  For example, the UN cost of freight, deployment, and country  reimbursements for military and formed police equipment was  approximately $229 million over a 2-year period (July 2014 through June  2016), while in the hypothetical operation the U.S. cost of deploying  equipment alone would be over $382 million, which is about $154 million  more than the UN cost over a similar 2-year period (September 2014  through August 2016)."], "subsections": []}, {"section_title": "Differing Staffing and Compensation Practices for Military and Police Personnel Contribute to Higher U.S. Costs", "paragraphs": ["The United States would staff and compensate its military and police  personnel differently than the UN, leading to differences between the  estimated U.S. costs and actual UN costs. While neither the hypothetical  U.S. cost estimate nor UN expenditures include the cost of salaries for  active duty personnel or troops contributed by other countries,  respectively, the United States would bear the additional cost of salaries  for the share of personnel drawn from military reserves. According to  DOD officials, 10 percent of infantry unit personnel would have been  reservist personnel in a hypothetical, comparable U.S. operation, based  on the average ratio of active to reserve personnel deployed by the  United States in fiscal years 2015 through 2017, roughly the same time  period as the first 39 months of MINUSCA. As a result, the total estimated  cost of the hypothetical U.S. operation reflects the additional U.S.  expense of paying full salaries and hardship duty pay for U.S. reservist  military personnel. The estimate also includes the incremental costs the  United States would incur for deploying active duty military personnel,  including hardship duty pay that is not incurred when those personnel are  in the United States. For military troops deployed to MINUSCA, the UN  pays a standard troop cost reimbursement to the troop-contributing  countries, which is intended also to cover incremental expenses but not  the cost of troops\u2019 salaries.", "U.S. costs for civilian police also are significantly higher than UN costs.  The United States would pay over $167 million for U.S. civilian police for  the duration of the hypothetical operation, while the UN spent $41 million  on its individual police officers over the same time frame. The U.S.  estimate includes the cost of police salaries and the additional costs of  deployment, whereas UN costs for deploying individual police officers do  not include salaries, which are borne by the police-contributing countries."], "subsections": []}, {"section_title": "U.S. Standards for Facilities, Communications and Intelligence Systems, and Medical Capability Contribute to Higher Estimated U.S. Cost", "paragraphs": ["Higher U.S. standards for certain aspects of the hypothetical  peacekeeping operation in CAR would contribute to costs that exceed  those of MINUSCA.", "Facilities. The higher estimated U.S. costs reflect higher U.S.  standards for facilities, according to State officials. The U.S. cost  estimate includes more than $1.1 billion for facilities and related costs,  which include facility maintenance, food service, laundry,  management and administration, and residential leases for civilian  personnel. In contrast, the actual UN cost for facilities as part of  MINUSCA totaled $292 million over the same time period.", "Communications and intelligence systems. The United States incurs  costs associated with meeting U.S. intelligence standards that are not  part of UN operations, which lack comparable intelligence capabilities.  The U.S. cost estimate includes $140 million for the cost of  Command, Control, Communications, Computers, and Intelligence  Systems, which represents additional operational costs to meet higher  U.S. standards for U.S. communications and intelligence capabilities.", "Medical capability. Higher U.S. standards for medical care and  medical evacuation capability as compared to the UN are another  factor that would contribute to higher U.S. medical costs for a  hypothetical operation, according to DOD and State officials. Some  UN hospitals may not meet U.S. minimum standards for medical care,  according to DOD officials. Although medical costs do not constitute a  significant portion of the U.S. cost estimate, estimated U.S. medical  costs ($132 million) greatly exceed actual UN medical costs ($8  million) over the same time period."], "subsections": []}]}, {"section_title": "Officials Cited Relative Strengths of UN and U.S. Peacekeeping Operations", "paragraphs": ["UN and U.S. peacekeeping operations have various relative strengths,  according to U.S. and UN officials we met with. Relative strengths of UN  peacekeeping operations include international and local acceptance,  access to global expertise, and the ability to leverage assistance from  multilateral donors and development banks, according to these officials.  Relative strengths of U.S. peacekeeping operations would include faster  deployment and superior command and control, logistics, intelligence,  and counterterrorism capabilities, according to U.S. and UN officials."], "subsections": [{"section_title": "Relative Strengths of UN Peacekeeping Operations Include Acceptance, Global Expertise, and Ability to Leverage Multilateral Assistance", "paragraphs": ["According to U.S. and UN officials, UN peacekeeping operations benefit  from greater international and local acceptance, access to global  expertise, and the ability to leverage assistance from multilateral donors  and development banks. UN peacekeeping operations also provide  indirect benefits to the military capacity of participating countries.", "International and local acceptance. As a multilateral organization, the  UN benefits from greater international and local acceptance for its  peacekeeping operations, according to State, DOD, and UN officials.  These officials noted that the UN\u2019s multinational character contributes  to a reputation for local impartiality. Conversely, the United States  acting alone may not be viewed as impartial and could face  challenges gaining or maintaining international or local support for  peacekeeping operations, according to State and DOD officials.", "Global expertise. UN officials noted that the UN has unmatched  convening power and access to expertise and experience from across  the globe to implement the objectives of multidimensional  peacekeeping operations. The UN is able to bring in people with  subject matter expertise, native language skills, and knowledge of  local customs to work for these operations, according to U.S. and UN  officials.", "Leveraging multilateral assistance. U.S. officials told us that the UN is  better able to leverage assistance from multilateral donors and  multilateral development banks to expand the scope of assistance  provided in support of the goals of peacekeeping operations. For  example, according to a UN report, MINUSCA is partnering with the  UN Development Fund to provide capacity building related to  elections, police, courts, and prisons. The report also noted that the  UN, European Union, and World Bank supported the Central African  Republic government in developing a \u201cNational Recovery and  Peacebuilding Plan\u201d while harmonizing humanitarian and  development funding to ensure complementarity with the UN  peacekeeping operation.", "Developing international military capacity. U.S. officials told us that  UN peacekeeping operations provide an indirect benefit of helping to  professionalize the military units from many developing countries that  contribute troops to the UN. We have previously reported that building  military capacity of foreign partners to address security-related threats  is an important goal of U.S. national security strategy and foreign  policy."], "subsections": []}, {"section_title": "Relative Strengths of U.S. Peacekeeping Operations Would Include Faster Deployment and Superior Command and Control, Logistics, Intelligence, and Counterterrorism Capabilities", "paragraphs": ["According to U.S. and UN officials, the relative strengths of U.S.  peacekeeping operations would be faster deployment and superior  command and control, logistics, intelligence, and counterterrorism  capabilities.", "Deployment speed. State, DOD, and UN officials highlighted the  United States\u2019 ability to deploy troops and police to peacekeeping  operations more quickly than the UN. Unlike the U.S. military, which  can draw from a ready pool of military personnel, the UN must seek  troops from UN member states, which takes time. UN officials told us  that the UN faces a shortage of both troops and UN police, which  slows deployment. Further, a 2015 report by the UN High-level Panel  on Peacekeeping stated that the UN \u201chas struggled to get sufficient  forces on the ground quickly enough and relies on under-resourced  uniformed capabilities.\u201d The report also stated that aviation, medical,  and engineering specialists, among others, are difficult to mobilize in  advance of infantry units.", "Command and control. State, DOD, and UN officials told us that U.S.  operations would enable the U.S. military to have direct command and  control, whereas UN operations, which are inherently multinational,  face challenges with command and control over troops from several  different countries. The UN High-level Panel report noted that UN  peacekeeping operations\u2019 weak command and control is a well-known  constraint that limits the type of operations the UN can undertake.", "Logistics support. U.S. and UN officials told us that U.S. operations  have superior logistics systems. U.S. procurement likely would be  faster than UN procurement, which lacks a standing supply chain and,  therefore, relies on third-party vendors, according to UN officials. In  addition, the UN High Level Panel report stated that UN peacekeeping  operations\u2019 logistics systems and structures in the field are under  severe strain, which can limit the mobility of these operations.", "Intelligence capability. U.S. and UN officials agreed that U.S.  operations would involve superior intelligence capability. The UN only  recently established an intelligence policy\u2014in May 2017\u2014having  recognized that some peacekeeping operations had been deployed in  fragile political and security environments with asymmetrical and  complex threats. However, UN officials acknowledged that the  scope of UN intelligence capability remains limited.", "Counterterrorism capability. DOD officials told us that a U.S.  peacekeeping operation would have the capability to include a  counterterrorism component and would not be constrained in the use  of force, if needed, in response to terrorist threats. UN peacekeeping  operations, on the other hand, lack the capabilities and specialized  military preparation to engage in counterterrorism operations,  according to the UN High-level Panel report. The UN report stated  that counterterrorism should be undertaken by the host government, a  capable regional force, or an ad hoc coalition authorized by the UN  Security Council. According to the UN report, UN peacekeeping  operations may engage in proactive and preemptive use of force to  protect civilians and UN personnel from threats; however, offensive  force to degrade, neutralize or defeat an opponent is a fundamentally  different type of posture that should be authorized by the Security  Council only under limited and exceptional circumstances."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD, State, and the UN for review  and comment. DOD provided a letter, reproduced in appendix II, which  stated that it had no comments. State did not provide comments. The UN  provided technical comments, which we incorporated into our report as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense and State, and the Secretary- General of the United Nations. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made significant contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to (1) compare the reported costs of a  specific United Nations (UN) peacekeeping operation to the estimated  costs of a hypothetical, comparable operation implemented by the United  States; (2) identify factors that affect cost differences; and (3) identify  stakeholder views on the relative strengths of UN and U.S. peacekeeping  operations.", "To compare the reported costs of a specific UN peacekeeping operation  to the estimated costs of a hypothetical, comparable operation  implemented by the United States, we selected the UN Multidimensional  Integrated Stabilization Mission in the Central African Republic  (MINUSCA) as a case study. We compared the reported UN expenditures  for MINUSCA, which included both military and civilian components, with  estimated costs for a hypothetical U.S. operation with a similar level of  military and civilian personnel. Our comparison covers a total of 3 years  and 3 months\u2014from MINUSCA\u2019s establishment in April 2014 through  June 30, 2017, the end of UN fiscal year 2017. We selected MINUSCA  because it is in sub-Saharan Africa, where most UN peacekeeping  operations established since 2003 have taken place, and has a typical  scope and budget compared to other UN peacekeeping operations in  sub-Saharan Africa, according to U.S. and UN officials. In addition,  MINUSCA is one of the most recent UN peacekeeping operations; thus,  initial expenditures for the operation are relatively current. Because the  results of our cost comparison are based on a single case study, they  cannot be generalized to all UN peacekeeping operations.", "To determine the UN\u2019s costs for MINUSCA, we analyzed UN budget and  expenditure data covering the initial start-up period (April 2014 to June  2014) and the first 3 UN fiscal years (July 1, 2014 to June 30, 2017). We  spoke with officials of the UN Departments of Peacekeeping Operations,  Field Support, and Management at UN Headquarters in New York, New  York, to better understand the characteristics of MINUSCA and the  different costs affecting MINUSCA\u2019s budget and expenditures. We  assessed UN expenditure data through discussions with cognizant UN  officials and a review of external audits of UN budgetary information and  found them sufficiently reliable for our purposes. We also analyzed data  on U.S. contributions to UN peacekeeping operations for fiscal years  2014 through 2017 from the Department of State\u2019s (State) Bureau of  International Organization Affairs to determine total U.S. contributions to  MINUSCA, and UN peacekeeping operations overall.", "To estimate the costs of a hypothetical, comparable operation  implemented by the United States, we developed a hypothetical scenario  for a U.S. operation based on the MINUSCA budget and supporting  documents, assuming deployment of the same number of military,  civilian, and police personnel in the Central African Republic (CAR) over  the same time period (April 2014 through June 2017). To estimate the  military portion of the operation, we interviewed Department of Defense  (DOD) officials and staff at the Institute for Defense Analyses (IDA), a  DOD-sponsored non-profit corporation involved in developing cost  estimates for U.S. contingency operations. The Office of the  Undersecretary of Defense-Comptroller and IDA generated a cost  estimate for the military components included in the hypothetical  operation using the Contingency Operations Support Tool (cost  estimating tool). DOD uses this tool to develop cost estimates for all  military contingency operations. The cost estimate included only the  incremental costs of the operation\u2014those directly attributable to the  operation that would not be incurred if the operation did not take place.  For example, the estimate produced by the cost estimating tool did not  include the direct salaries of active duty personnel as those costs would  be incurred by the United States regardless of a possible decision to  undertake the hypothetical operation. We assessed the cost estimating  tool\u2019s applicability to developing a hypothetical cost estimate for the  purposes of this report through discussions with DOD and IDA officials,  and compared the tool to the accurate and comprehensive characteristics  of a high-quality cost estimate, as described in the GAO Cost Estimating  and Assessment Guide. While we found the DOD cost estimating tool  generated a sufficiently reliable cost estimate for a hypothetical U.S.  peacekeeping operation, we did not assess the overall reliability of the  tool or its capability to generate accurate or comprehensive estimates for  future U.S. operations.", "To generate our estimate of U.S. military costs using the DOD\u2019s  estimating tool, we used UN military deployment numbers as a baseline  for the scale of a hypothetical, comparable U.S. peacekeeping operation,  while using unit sizes and rotations in deployment that were considered  appropriate for the U.S. military, according to DOD and IDA officials. We  based the hypothetical U.S. operation, and hence the cost estimate, on  the following assumptions, which correspond approximately with  MINUSCA\u2019s actual UN personnel deployments:", "Theater of operation: Central African Republic (CAR)", "Type of operation: military contingency", "Operation time frame: April 10, 2014 through June 30, 2017", "Military contingents: as of June 30, 2017, 11,495 total personnel  Infantry: 10 units of 630-785 personnel per unit, approximately 90  percent active duty / 10 percent reserves", "Communication / signals: 1 unit, 124 personnel per unit", "Engineering: 4 units, 200 personnel per unit", "Military police: 1 unit, 120 personnel per unit", "Formed police units (military police): 12 units, 140 personnel per", "Hospital / medical: 1 level III hospital, 248 beds, 495 personnel", "Helicopter units: 2 UH-60 C3 units, 1 MH-60M Assault attack  helicopter unit, 100 personnel per unit", "Quick reaction force: 1 unit, 160 personnel per unit", "Special forces: 1 tactical civilian affairs unit, 1 Marine special  operations intelligence unit, 160 personnel per unit", "Unmanned aerial vehicle: 1 unit, 84 personnel", "Transportation: 1 heavy transport unit, 120 personnel per unit", "Operational tempo: 1.0 for all phases of operation and units,  except aviation units (set at 1.5)", "Deployment schedule and phasing: phased deployment, including  14 days for predeployment (e.g., training), 5 days for deployment,  180 days for active duty unit sustainment and 270 days for  reserve unit sustainment, 5 days for redeployment, and 0 days for  reconstitution", "Housing: contractor-provided semi-permanent housing", "Transportation: personnel and equipment transported by airlift  from the United States (primarily Fort Hood, Texas), material  (such as water, food, and other consumables) transported by airlift  from Italy  We obtained input on the operational design for the military portion of the  cost estimate from DOD officials in the Joint Chiefs of Staff, the Office of  the Undersecretary of Defense-Policy, and the Office of the  Undersecretary of Defense-Comptroller, and IDA officials. However, the  military portions of the scenario and their corresponding cost estimate  have some limitations. As a result of rounding for some units, U.S. military  personnel numbers do not exactly match the MINUSCA deployment  levels. In addition, based on input from DOD officials, we attempted to  select military units that would provide an essential function per U.S.  common practices while keeping the overall personnel deployment level  as close as possible to MINUSCA\u2019s deployment level. An actual U.S.  military plan may differ significantly from the UN plan as a result of  differences between U.S. and UN military operations, structure, doctrine,  and circumstances at the time of the operation.", "To estimate U.S. civilian costs, we matched the number of U.S. civilian  police and personnel to the number serving in MINUSCA. We then  estimated the costs of deploying these U.S. civilian personnel in CAR for  the same time period as MINUSCA. We did not attempt to determine how  the U.S. government would actually implement civilian components of a  peacekeeping operation in CAR.", "To estimate U.S. civilian police costs, we met with State\u2019s Bureau of  International Narcotics and Law Enforcement Affairs (INL) to identify  State\u2019s costs for civilian police contractors providing police training and  technical assistance in sub-Saharan Africa. Based on INL\u2019s input we  assumed that the base salary of civilian police would be grade 13, step 5  on the Office of Personnel Management\u2019s general schedule salary tables  for federal employees. In addition to the average base salary, we  identified other costs\u2014with input from INL\u2014including, among others,  personal equipment, travel from the United States, and State\u2019s published  allowances specific to CAR for local cost of living, post hardship  differential, danger pay, and living quarters. We applied the average cost  per officer to the average number of UN civilian police officers deployed in  MINUSCA.", "To estimate U.S. civilian personnel costs, we met with State\u2019s Bureau of  Budget and Planning to identify the costs of State Foreign Service officers  and locally employed staff, based on the number of UN international and  national civilian staff deployed to MINUSCA, respectively. We matched  the number of State Foreign Service officers for the U.S. cost estimate to  the number of UN international staff in MINUSCA, with input from State to  align the grade levels. The estimated costs for Foreign Service officers  include average salaries based on State\u2019s Foreign Service salary tables  and State\u2019s allowances specific to CAR, including local cost of living, post  hardship differential, and danger pay. We also met with State Bureau of  Budget and Planning officials to estimate other costs for Foreign Service  officers, which we included in our cost estimate, including post  assignment travel, administrative support costs, residential furnishings,  and residential guards, among others, but we did not assess the reliability  of these additional costs provided by State. In addition, State\u2019s Bureau of  Overseas Buildings Operations provided the actual costs of residential  leases for Foreign Service officers in CAR in fiscal year 2017, which we  used to estimate the cost of housing Foreign Service officers in CAR. We  also matched the number of State locally employed staff to the number of  UN national staff deployed to MINUSCA and added their average salaries  and other costs in CAR based on data provided by State\u2019s Bureau of the  Comptroller and Global Financial Services.", "While MINUSCA\u2019s expenditures also included costs for sending an  annual average of up to about 200 UN volunteers to CAR, State officials  told us that the United States generally would not send volunteers  through its assistance efforts to a high-risk post, such as CAR. Therefore,  we did not include any costs related to volunteers in the cost estimate.  We also did not include costs related to host-government-provided  personnel serving in MINUSCA. In addition, UN expenditures included  about $7 million for \u201cquick-impact projects\u201d to support local government  infrastructure and civil society initiatives. We did not include comparable  costs for quick-impact projects in our U.S. cost estimate because we did  not have a basis for matching these costs.", "To identify factors that affect cost differences between MINUSCA and a  hypothetical, comparable operation implemented by the United States, we  reviewed the U.S. cost estimate generated in conjunction with DOD, IDA,  and State officials, and identified significant areas of cost for the United  States and the assumptions incorporated in the estimate or factors  specified by U.S. officials that drive those costs. We compared the U.S.  cost estimate, including these significant areas of cost, to UN costs to  identify differences. We interviewed U.S. and UN officials regarding U.S.  and UN standards and policies that explain differences between  MINUSCA costs and the estimated costs of a U.S. operation.", "To identify stakeholder views on the relative strengths of UN and U.S.  peacekeeping operations, we reviewed UN reports on peacekeeping  operations and interviewed UN, DOD, and State officials. In addition, we  reviewed GAO\u2019s 2006 report comparing the costs as well as the strengths  of a UN peacekeeping operation in Haiti with those of a hypothetical U.S.  operation.", "We conducted our review from February 2017 through February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Drew Lindsey (Assistant  Director), Howard Cott, Juan Pablo Avila-Tournut, Debbie Chung, Martin  de Alteriis, Neil Doherty, Jennifer Leotta, Caitlin Mitchell, Elizabeth  Repko, and Alex Welsh made significant contributions to this report."], "subsections": []}]}], "fastfact": ["The UN reported a cost of about $2.4 billion to carry out 39 months of peacekeeping operations in the Central African Republic.", "What if the U.S. had carried out that operation instead? How might costs differ?", "We estimated it would have cost the U.S. more than twice as much, nearly $5.7 billion, to carry out a comparable operation. Higher U.S. costs would result from higher standards for facilities, intelligence, and medical services, and greater airlifting of supplies and equipment.", "We also found that while U.S. peacekeeping operations would have greater military capability, the UN would have greater international acceptance."]}
{"id": "GAO-19-139", "url": "https://www.gao.gov/products/GAO-19-139", "title": "State Department: Better Oversight and Controls Could Improve Timely Delivery of Legal Documents for Terrorism Victims", "published_date": "2018-12-12T00:00:00", "released_date": "2018-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["While foreign states generally cannot be sued in a U.S. court, under FSIA, parties can sue governments for certain crimes such as injury or death from an act of terrorism, if certain factors are present. State is required by statute to serve notice of such suits or default judgments when other means for effecting service are not available, and charges plaintiffs a fee of $2,275 to complete this task. Plaintiffs in such cases may also qualify for compensation from a fund that Congress established called the U.S. Victims of State Sponsored Terrorism Fund.", "In this report, GAO examines (1) how State completes this service and the length of time it takes to complete requests, and (2) whether State has implemented key controls for executing service requests promptly. GAO reviewed State regulations, guidance, case files, and data from 2007 through 2017; and interviewed State officials in Washington, D.C., the Czech Republic, Germany, and Switzerland, which handle the vast majority of cases. GAO assessed State's controls against federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of State (State) notifies sovereign defendants of court proceedings under the Foreign Sovereign Immunities Act (FSIA) in a four stage process that has taken on average about 5 months to complete. State headquarters has overall responsibility for delivering legal documents but U.S. embassies and foreign governments play key roles as well. From 2007 through 2017, State completed 229 requests for delivery of legal documents in an average of about 5 months, but about 28 percent of the requests took longer than 6 months and 7 requests took more than a year. Slow delivery could adversely affect a plaintiff's ability to obtain compensation from a special victims' fund that Congress set up in 2015.", "State's guidance and federal internal control standards require controls such as accurate and complete record-keeping, continuous monitoring, and analysis of data; however, GAO found that State lacks several key controls to manage its delivery of legal documents. First, State's records are incomplete. For example, for 82 percent of the cases, State had no information about when it received court requests. Second, State did not monitor the progress of cases, resulting in slow service. This slow service led State to waive fees of about $57,000 because checks had expired. Third, State did not analyze case data to identify factors contributing to slow service, or establish timeframes for completing service. As a result, managers lack a sound basis for making decisions on how to improve timeliness. In June 2018, State took some actions based on GAO's review to improve its performance, including preparing step-by-step guidance and developing a new record-keeping system, but further actions could fill the gaps that have impaired program performance."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations to State, including that it update its record-keeping guidance to ensure its records are accurate and complete, monitor the progress of requests, periodically analyze data to identify causes of slow service and take corrective actions, and establish timeframes for completing service. State concurred with all five of GAO's recommendations and identified actions it plans to take to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Victims and their families can sue a state sponsor of terrorism in a U.S.  court, but may need to rely on the Department of State (State) to deliver  legal documents. While foreign states generally cannot be sued in a U.S.  court, the Foreign Sovereign Immunities Act (FSIA) does allow private  parties to sue a foreign government in a U.S. court for specified reasons,  including for personal injury or death caused by an act of torture,  extrajudicial killing, aircraft sabotage, or hostage taking if the defendant  government caused or provided material support for that act and is  designated as a state sponsor of terrorism. Service of process (service)  is the procedure by which the defendant is given proper notice of the  initiation of court proceedings. Under FSIA, when plaintiffs bring legal  action against foreign governments and are otherwise unable to achieve  service using the three other methods set forth in the Act, they may  request that the State provide service through diplomatic channels to the  foreign state. In these instances, State is responsible for completing  service on the foreign government on behalf of U.S. courts at the request  of the plaintiffs by transmitting the necessary documents, and for sending  the clerk of court a certified copy of the diplomatic note indicating when  the documents were transmitted. Plaintiffs filing lawsuits under the FSIA,  including lawsuits on behalf of victims and their families against state  sponsors of terrorism, have won judgments against a number of foreign  governments, including Iran, Syria, and Sudan. Those who have won  judgments can also apply for compensation from a special fund that  Congress set up in 2015. Plaintiffs awarded compensation from this fund  have included Iran hostages held from 1979 to 1981 and their spouses  and children, and victims of the bombings of U.S. Embassies in Kenya  and Tanzania.", "You asked us to review how State conducts service of process. In this  report, we examine (1) how State completes service and how long it takes  to perform this function; and (2) whether State has implemented key  controls in record-keeping, monitoring, analysis, and performance  management for completing service requests. To describe how State  completes service, we reviewed State and embassy documentation such  as regulations, official guidance, and case files. In Washington, D.C., we  also interviewed officials of State\u2019s Bureau of Consular Affairs (CA);  Bureau of Near Eastern Affairs, and Bureau of Administration.  Specifically, we interviewed officials in Consular Affairs\u2019 Directorate of  Overseas Citizens Services/Office of Legal Affairs (OCS/L) and  Administration\u2019s Diplomatic Pouch and Mail Office. We met with consular  officials from the U.S. Embassies in Berlin, Germany; Bern, Switzerland; and Prague, Czech Republic. We also met with court officials from three  of the principal courts that have requested service from State. Using  these sources, we developed a process map that we provided to State  officials for their review and comment. State officials did not indicate any  concerns about the process map.", "To document the length of time it took for State to complete service from  2007 through 2017, we reviewed State\u2019s spreadsheet, or case tracker, for  tracking service requests (cases), which documents various milestones in  the completion of service requests made during this time period\u2014for  example, when State received the request and when it notified the court  that service had been completed. Because the data in its spreadsheet  were incomplete, we improved the spreadsheet by supplementing it with  data from other sources such as court records. After making the  appropriate modifications to the data in the spreadsheet, we determined  that the data were sufficiently reliable for our purposes. We analyzed the  data in the improved spreadsheet to determine the length of time it took  for State to complete service for the period 2007 through 2017\u2014the most  recent full-year data available at the time of our review\u2014as well as for key  stages of the process.", "To determine whether State implemented key controls in record-keeping,  monitoring, analysis and performance management for completing  service requests, we reviewed the FSIA and applicable guidelines,  including State and federal guidelines and met with State officials in  Washington, D.C. to discuss how they manage the completion of service,  as well as with consular officials from the U.S. Embassies in Berlin, Bern,  and Prague. These embassies were responsible for completing about 70  percent of all service requests. We also reviewed two State case trackers  to determine to what extent they were complete and accurate, and were  consistent with State record-keeping guidance. Similarly, we reviewed the  59 case files for service requests received in 2015 and 2016 to determine  to what extent the documentation contained in these files was consistent  with State guidance in the Foreign Affairs Manual (FAM) and the Foreign  Affairs Handbook (FAH).", "We used the improved spreadsheet we developed, and worked with State  officials and the responsible plaintiffs\u2019 attorneys, to identify 16 cases that  took more than, less than, or about the average amount of time to  process to identify the factors that affect the length of time it takes to  complete service requests. We also identified the principal courts that  have requested service through State. We discussed with court officials  and private attorneys and a firm familiar with service requirements under  the FSIA their experience obtaining service through State. We also met  with officials of the U.S. Victims of State Sponsored Terrorism Fund,  which was established by Congress to provide compensation to a specific  group of victims harmed by state-sponsored terrorism. We assessed  State\u2019s implementation of its key controls against relevant State  Department guidance and relevant federal standards for internal  controls. Appendix I contains a full description of our scope and  methodology.", "We conducted this performance audit from September 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In Federal courts, civil actions, such as lawsuits, begin with the filing of a  complaint with the court. On or after filing a complaint, a plaintiff obtains a  summons to the defendant from the court. The summons, among other  things, names the court and the parties, states the time within which the  defendant must appear before the court to defend against the complaint,  and notifies the defendant that a failure to appear and defend will result in  a default judgment against the defendant for the relief demanded in the  complaint. Plaintiffs are responsible for providing defendants both the  summons and a copy of the complaint. This procedure, known as service  of process, gives parties formal notice of the initiation of court  proceedings. In the event of a default judgment against a foreign state in  which the defendant has not responded to a summons or complaint and  the court has ruled in favor of the plaintiff, FSIA requires that service of a  copy of the judgment be completed.", "The FSIA prescribes a sequential process for completing service on  foreign governments that plaintiffs must follow before requesting that  State complete service through the diplomatic channel. Federal  regulations require State to complete service \u201cpromptly\u201d although neither  the regulations nor State guidance further define the term. Pursuant to  these regulations, where there are no diplomatic or consular relations  between the United States and the defendant foreign government or  where the United States has suspended diplomatic or consular  operations, service may be accomplished pursuant to the arrangement  the United States has with a friendly government known as a protecting  power arrangement. The protecting power arrangement specifies the  consular services that the friendly government will provide in assisting the  United States. As of November 2018, the United States had protecting  power arrangements with the governments of the Czech Republic,  France, Sweden, and Switzerland. Each of the arrangements with the  Czech Republic and Switzerland contains a provision for service  respectively on Syria and Iran.", "Based on our analysis of State and U.S. court data, from 2007 through  2017, State received 289 service requests to 33 countries. Iran alone  accounted for over 60 percent of all service requests, followed by Syria  with about 7 percent, and Sudan with about 5 percent. Because  Switzerland and the Czech Republic serve as protecting powers for the United States in Iran and Syria, respectively, about two-thirds of all  service requests were accounted for by the U.S. Embassies in Bern and  Prague. Figure 1 shows the breakdown of FSIA service requests by  defendant country from 2007 through 2017. Over the last 2 years, 2016  and 2017, State completed 31 and 48 cases respectively. The 48 cases  represent the highest number of cases in any year for the 11-year period  we reviewed (see App. II for further data on State\u2019s provision of service  since 2007.)", "Service requests to State were made through at least 31 federal, state,  and county courts. The vast majority of service requests were made  through federal district courts. One court\u2014the U.S. District Court for the  District of Columbia\u2014was the venue for 73 percent of all completed  service requests, followed by 8 percent for the U.S. District Court for the  Southern District of New York and 3 percent for the U.S. District Court for  the Southern District of Florida. According to some plaintiffs\u2019 attorneys  with whom we spoke, the U.S. District Court for the District of Columbia  has jurisdiction over most cases involving victims of state-sponsored  terrorism. Figure 2 provides information on the service requests  completed from 2007 through 2017 based on the court used to make the  request.", "According to plaintiffs\u2019 attorneys, victims of state-sponsored terrorism who  have obtained judgments against a foreign state generally seek  compensation in two ways: (1) by attaching and directly seizing assets of  that state pursuant to the FSIA and other applicable provisions of law  and (2) from a temporary special fund called the U.S. Victims of State  Sponsored Terrorism Fund (Fund). The Fund was established by  Congress in 2015 with about $1 billion in appropriations. Congress  established the Fund for a period of 10 years ending in 2026 and  mandated that certain forfeiture proceeds, penalties, and fines be  deposited into the Fund if paid to the United States after the Fund\u2019s  establishment. The Fund can provide compensation to those, who (1)  have secured final judgments in a U.S. district court against a state  sponsor of terrorism for a claim arising from an act of international  terrorism for which the state was not found immune from the FSIA, (2)  were held hostage at the U.S. Embassy in Tehran, Iran from November  1979 to January 1981,  or (3) are the personal representatives of the  estate of a deceased individual in one of these two categories. Victims  must file appropriate documentation with the Fund, and be found to  qualify. Compensation for victims is calculated on a pro-rata basis on the  amount of available funds for each distribution, and is subject to certain  statutory caps. The first payments from the Fund were authorized in  December 2016; the second distribution is scheduled for authorization in  January 2019. After 2019, eligible claims will be paid annually out of  available funds, until all eligible amounts have been paid in full or the  Fund terminates in 2026."], "subsections": []}, {"section_title": "State Completes Service in Several Stages That Take 5 Months to Complete On Average", "paragraphs": [], "subsections": [{"section_title": "State\u2019s Process for Completing Service Has Four Stages", "paragraphs": ["State completes service through four stages involving the courts, the  Department of State, U.S. embassies, and foreign ministries through a  process that took about 5 months to complete on average for the period  2007 through 2017. State\u2019s OCS/L within the Bureau of Consular Affairs  administers the diplomatic service provisions of the FSIA. Figure 3  summarizes how State completes service in countries where a protecting  power assists in the completion of service under the FSIA.", "The steps involved are numerous and require action by litigants, courts,  and the State Department, but can be summarized in four stages:  1.  Preparing and submitting a request for service to State. Plaintiffs\u2019  attorneys compile and submit the required documentation to the  relevant clerk of court, who transmits the package to State. This  documentation must include two copies of the complaint, summons  and a notice of suit, together with a translation of each into the official  language of the foreign state, or where a plaintiff has obtained a  default judgment against a foreign state, translated copies of that  default judgment and a notice of default judgment, as well as a  cashier\u2019s check made out to the appropriate U.S. embassy for the  applicable fee.  2.  Receiving and processing the request at State. OCS/L receives  the package from the clerk of the court where the suit was filed,  verifies that the package is complete and the check is written for the  proper fee amount, works with plaintiff\u2019s attorney or the clerk of court  to resolve any errors or issues with the package, prepares language  for the diplomatic note and instructions for the embassy staff, and  circulates the diplomatic note and instructions for clearances from  relevant Department of State offices. OCS/L sends, via diplomatic  pouch, this package to the appropriate embassy depending on the  defendant. In cases involving the assistance of a protecting power for  the United States to serve documents under the FSIA, OCS/L sends  the package via diplomatic pouch to the U.S. embassy in the country  that serves as the protecting power for U.S. interests in the defendant  country. In the case of suits against the government of Syria, for  example, the protecting power is the Czech Republic. In cases  involving countries where the United States has diplomatic relations  and an embassy the package goes to the U.S. embassy in the  defendant country.  3.  Receiving and processing a request at U.S. embassies and  working with protecting powers. At the U.S. embassy, an American  consular officer prepares a diplomatic note in accordance with OCS/L  guidance that is added to the package and sends the package to the  Ministry of Foreign Affairs. In cases involving the assistance of a  protecting power for the United States to serve documents under the  FSIA, the Ministry of Foreign Affairs prepares instructions for the  consular officer at the foreign interest section of the embassy in the  defendant country and sends him the package. A consular officer in  the U.S. interest section of the protecting power\u2019s embassy in the  defendant country prepares a diplomatic note to add to the package  and delivers the package, or arranges for its delivery, to the Ministry  of Foreign Affairs of the defendant country.  4.  Notifying the court that service has been completed. Once service  has been completed, the package is sent back to OCS/L for delivery  to the clerk of court. In the instance of protecting power assistance,  the package will include certifications from the foreign interest section  of the protecting power that process was served on a specific date as  well as other certifications by the protecting power\u2019s Ministry of  Foreign Affairs and the U.S. embassy."], "subsections": []}, {"section_title": "From 2007 through 2017, State Completed Requests In About 5 Months On Average", "paragraphs": ["Our analysis of State and court data shows that for the 229 service  requests that we analyzed, the average (mean) time for State to complete  the requests over the past 11 years was about 158 days\u2014or about 5  months. About 50 percent of the service requests took State between  90 and 179 days to complete, and about 28 percent took 180 days or  more. Seven requests took longer than 1 year. The longest request took  695 days to complete. Figure 4 shows the completion times of service  requests measured in the number of days taken for 2007 to 2017, by 30- day intervals.", "Our analysis shows the most time-consuming stage to complete service  was the period in Washington, D.C. in which State Headquarters  completes document review and clearance, as shown in table 1."], "subsections": []}, {"section_title": "Slow Service Could Adversely Affect Victims\u2019 Ability to Obtain Compensation", "paragraphs": ["Although neither the FSIA, State\u2019s implementing regulations, nor federal  rules of civil procedure establish a time limit for State to complete service,  the length of time State takes to complete service can affect plaintiffs\u2019  compensation. According to plaintiffs\u2019 attorneys we interviewed, State\u2019s  taking a long time to complete service could adversely affect victims\u2019  ability to gain compensation for two reasons. First, slow service can  lengthen the time it takes to obtain a final judgment against a foreign  government, thereby delaying plaintiffs\u2019 ability to meet the requirements  necessary to satisfy judgments through asset seizures or to apply for  compensation from the U.S. Victims of State Sponsored Terrorism Fund.  For efforts to collect judgments through asset seizures, plaintiffs\u2019  attorneys explained that the first plaintiff to successfully make such a  claim is awarded the entire asset. Thus they are competing to be first in  making such claims. Second, slow service can also reduce the total  award that claimants receive from the Victims Fund. For example, slow  service could result in plaintiffs being unable to provide the required  documentation before the deadline of a particular round of distributions  for the Fund. The deadline for the 2019 distribution was September 14,  2018.", "The Fund\u2019s procedures allow victims to apply for compensation after a  court has issued a default judgment that includes compensation against  the defendant government in their case and following their transmittal of a  request for service of the default judgment through State. Of the 10 firms  that submitted requests for service to State that we interviewed, 6  expressed concern that slow service could adversely affect their clients\u2019  compensation from the Fund for one of the reasons described. Three of  the firms also cited ongoing cases where compensation could be  adversely affected if they are unable to obtain a default judgment and  apply for service through State by the deadline established by the Fund  for the next round of distribution. According to Fund officials the Fund has  allocated approximately $1.095 billion for second-round payments. The  Special Master will authorize second-round payments on a pro rata basis  to claimants with eligible claims by January 1, 2019."], "subsections": []}]}, {"section_title": "State Has Not Implemented Key Controls to Manage the Completion of Service", "paragraphs": [], "subsections": [{"section_title": "OCS/L Did Not Maintain Complete and Accurate Records", "paragraphs": ["OCS/L did not maintain complete and accurate records of the status of  service requests completed during calendar years 2007 through 2017.  State\u2019s record-keeping guidance stresses the importance of creating and  preserving records so that documentation of an office\u2019s activities is  complete and accurate.", "To document and manage State\u2019s completion of service, OCS/L officials  rely primarily on two forms of documentation. The first type of  documentation or record is a \u201ccase tracker\u201d spreadsheet that OCS/L uses  to document the status of service requests (cases). The second type of  record OCS/L relies on is case files which include various documents  related to the completion of service.", "We analyzed the case tracker that OCS/L provided to us in November  2017. We determined that it did not contain complete and accurate data  about the service requests from 2006 through 2016 because it did not  contain any fields documenting the start of the process at State\u2014for  example, the date when the court sent the request to OCS/L or the date  when OCS/L received the request. Without this, OCS/L lacked any data  about when it first received and began working on a request. In addition,  OCS/L lacked data about the status of any service request during the  initial document review and clearance stage of the process, which as  previously discussed, is the most time consuming stage. In response to  our request for additional data to use in analyzing the timeliness of State\u2019s  service completions, in December 2017, OCS/L provided us with an  updated tracker containing three fields not in the previous tracker. The  three fields were designed to capture the start of the process, but were  often blank. For example, 82 percent of the cases did not contain the date  when OCS/L received the request from the court. By contrast, our  analysis of both the November 2017 and December 2017 case trackers  showed that OCS/L almost always recorded the \u201cend dates\u201d in the  process when service was completed and when OCS/L notified the court  that service had been completed.", "We also reviewed the 59 case files OCS/L provided for the 2015 and  2016 service completions and determined that OCS/L did not consistently  keep copies of several critical documents. We chose these years  because OCS/L officials said that providing case files for the entire period  under review would present a significant logistical challenge and the case  files for the prior years were less complete. As table 2 summarizes, all but  three files contained a copy of the memorandum providing instructions to  the embassy and language for the diplomatic notes. Nine case files were  missing a copy of the diplomatic note. There were also 16 case files  missing the certification that service was completed on a specific date.  These two documents are critical to demonstrating that service has been  completed. There were also 47 case files lacking a signed copy of the  notification to the court. None of the 59 case files we reviewed included a  copy of an email required by State guidance providing key information on  the completion of service. The Foreign Affairs Manual requires embassies  to send OCS/L an email documenting when documents required for  service were received by the embassy, when those documents were  transmitted to a foreign ministry, and the date an executed request was  sent to OCS/L for relay to a court (including invoice, registry, and pouch  numbers by which the documents were returned to State headquarters),  but none of the files we reviewed contained this documentation. Table 2  summarizes the results of our review of the case files.", "In discussing why their case tracker and case files are incomplete and  sometimes inaccurate, OCS/L officials noted that State\u2019s agency-wide  record-keeping guidance does not prescribe what kind of records they  must keep for service requests. Federal internal control standards state  that management should implement control activities through policies  such as through day-to-day procedures or guidance. Additionally, these  standards state that management should design controls to achieve  objectives and respond to risks. These controls could, for example,  document significant events in a manner that allows the documentation to  be readily available for examination or require edit checks during  information processing. Further these control activities should ensure  that documentation and records are properly managed and maintained. In  September 2018, after reviewing our analysis, State officials said that as  a matter of practice they had begun digitally scanning service documents,  but still did not have a standard list of documents to be maintained in  case files. They also acknowledged that the level of completeness of the  \u201ccase tracker\u201d and case files varied depending on the individual  maintaining the files.", "Additionally, in June 2018 State launched a new case tracker using a  database management application. According to OCS/L officials, the new  tracker will facilitate the recording and updating of key milestone  information. The new tracker allows for including some information not  documented in the previous case tracker spreadsheet. However, it does not capture the date the court sent the request to OCS/L. According to  OCS/L officials and our analysis, the time between when the court sent  the request to OCS/L and OCS/L receives the request can vary  significantly. In nine instances, it took from about 3 weeks to over a year  for the service request to travel from the court to OCS/L. OCS/L officials  explained the new tracker does not capture the date when the court sent  the package because they believe the key information they need to use in  analyzing and managing the program begins at the point where OCS/L  receives the package and not before. However, without capturing this  data, OCS/L will not be able to determine the extent to which service  requests are delayed in CA\u2019s mailroom before being delivered to  OCS/L\u2014one of the four key stages of the process for completing service.  Further, without guidance that specifies the information OCS/L must  maintain in the case tracker and case files, State officials will continue to  lack complete and accurate information."], "subsections": []}, {"section_title": "OCS/L Does Not Monitor Progress in Completing Service Requests", "paragraphs": ["OCS/L does not continuously monitor service requests to determine their  progress in moving through the four stages. State\u2019s guidance stresses the  importance of continuous monitoring to achieve office, bureau, and  agency-wide goals and objectives. Among other things, the Foreign  Affairs Manual states that monitoring data can help determine if  implementation is on time or if any timely corrections or adjustments may  be needed to improve efficiency or effectiveness. Additionally, federal  standards for internal control state that management should establish  monitoring activities, evaluate the results, and remediate any  deficiencies. OCS/L officials indicated that they have not continuously  monitored service requests because they are not required to do so.  OCS/L has no specific guidance requiring monitoring of the status of  service requests during any stage of the service completion process and,  as of October 2018, State had not established performance standards or  timeframes for completing service of process and associated tasks, as  discussed later in the report.", "Based on our analysis of data and a sample of requests, we found that  OCS/L\u2019s lack of monitoring meant that State missed opportunities to  ensure the timely processing of some requests, particularly during the  document review and clearance stage. To identify the factors that affect  the amount of time that State takes to process service requests, we  analyzed a non-generalizable sample of 16 requests that we selected to  ensure we obtained detailed information on cases that took above the  average amount of time, below the average amount of time, and about  the average amount of time to complete. We discussed the  circumstances of each of the 16 requests with OCS/L and embassy  officials, as well as with plaintiff\u2019s attorneys. We identified several reasons  that cases took longer than average to complete:", "Two cases took longer than average to complete because of staff  turnover in the relevant Department of State offices in Washington,  D.C.", "One case took longer than average to complete when an OCS/L  contractor in Washington, D.C. failed to promptly distribute the  packages received by mail. In that instance, it took OCS/L 323 days to  clear and send the service request to the embassy after having  received the request from the court.", "One case took longer than average to complete when a State official  at an embassy in Africa forgot to complete the service request. The  request was completed only after the official\u2019s successor arrived and  noticed that the service request had not been completed. In this  instance, service took 563 days to complete, of which 475 days were  spent at the embassy.", "One case took longer than average to complete because a State  official overseas misplaced two boxes of supporting documents that  accompanied the service request. According to plaintiff\u2019s attorneys,  only after they called to ask about its status did OCS/L contact the  embassy to determine why the necessary documents had not been  delivered to the defendant state.", "Two cases took longer than average to complete because State  officials failed to notice that the protecting power had not recorded the  date of service completion on the diplomatic note for two service  requests. In one case, the missing date was noticed by the plaintiffs\u2019  attorneys only after OCS/L had notified the court that service had  been completed. Once alerted to the error by plaintiffs\u2019 attorneys,  OCS/L took prompt action by requesting an amended diplomatic note  from the protecting power\u2019s Ministry of Foreign Affairs, but it took 2  additional months to obtain the document.", "OCS/L\u2019s lack of monitoring also contributed to a loss of revenue. Based  on our analysis of available data and records kept by the U.S. Embassy  Bern we determined that the time it took OCS/L to review and clear  service requests led to OCS/L\u2019s waiving the fees because checks for  payment of services had expired by the time they reached the U.S.  Embassy in Bern. In one such instance, OCS/L took 131 days to send  the request to Bern. OCS/L directed consular officials to proceed with the  provision of service without receiving payment. Our analysis showed that  this occurred in approximately 27 percent of all available service requests  handled by Bern in 2016 and 2017. The amount of revenue lost was  approximately $57,000.", "In June 2018, OCS/L officials developed a new manual that provides a  written description of the roles and responsibilities of various officials in  OCS/L in completing service requests. However, the manual does not  require periodic monitoring of the time spent completing service by  embassies. Without monitoring by OCS/L, State cannot ensure timely  processing of service requests or prevent losses in revenue."], "subsections": []}, {"section_title": "OCS/L Has Not Analyzed Data on Its Completion of Service", "paragraphs": ["OCS/L officials said that they had not conducted any analysis that might  identify the opportunities to improve their performance. State\u2019s guidance  in the Foreign Affairs Manual stresses the importance of assessing what  is and is not working well in a program. However, OCS/L officials told us  that they had not conducted an assessment because they did not have  good data and documentation to use in assessing what was and was not  working well in their completion of service.", "OCS/L officials provided several reasons for some cases taking longer  than average in the process, in addition to those previously discussed,  but these reasons were not informed by data. These included: (1)  incomplete packages provided by plaintiffs\u2019 attorneys; (2) the time it takes  to deliver diplomatic pouches to embassies, which can vary by post; (3)  delays due to some foreign governments\u2019 avoidance or delay in accepting  meetings with consular staff; and (4) consular officials\u2019 level of familiarity  with service requirements as well as heavy consular workloads. Our  analysis of available data showed that the document review and  clearance stage in Washington, D.C. took longer than the other stages.  However, we were unable to determine the extent to which the longer  time taken in Washington, D.C. was due to documentation that was  missing from the package that was sent by plaintiffs\u2019 attorneys because  OCS/L only recorded a handful of cases where this occurred and did not  record the date when OCS/L first received the service request or the date  it determined the request was complete and free of errors. Moreover,  while OCS/L officials attributed most of the time it took to complete the  process to the time it takes to deliver documents overseas, our analysis  showed that most of the time spent processing requests was consumed  by OCS/L in the document review and clearance stage in Washington,  D.C. Without periodically analyzing data on service requests, as called for  in the Foreign Affairs Manual, OCS/L will not have a sound basis for  determining the causes for delays in completing service and how to make  improvements to eliminate those delays and reduce service completion  times. In September 2018, OCS/L officials told us that they planned to  begin using data to, among other things, measure current and past FSIA  workload and performance and identify areas for improvement. However,  they could not provide details or documentation of this effort."], "subsections": []}, {"section_title": "State\u2019s Bureau of Consular Affairs Has Not Established Performance Standards to Manage and Improve Its Provision of Service Under the FSIA", "paragraphs": ["Consular Affairs has not established performance standards for the full  process used to complete service requests. Consular Affairs officials said  they have not established performance measures for the full process  because they do not have good data to do so. When we began our  review, Consular Affairs did not have any time frames for completing  service requests. However, in June 2018, OCS/L issued a new manual  that includes timeframes for certain steps of completing service within  OCS/L. For example, the manual states that once OCS/L has received a  service request package, the package must be reviewed within 2  business days to determine whether it contains any errors, omissions, or  other issues that must be resolved. The manual also states that if OCS/L  does not get clearance to send the package to the embassy within 2  weeks, then a senior OCS/L official must be notified for further action.  However, the manual does not specify a deadline for staff to contact the  plaintiff\u2019s attorney to correct any problems with the package, such as  missing documents, nor does the manual establish an overall timeframe  for State to complete the document reviews and clearances in  Washington, D.C. and U.S. embassies.", "GAO\u2019s prior work has demonstrated the importance of setting  performance standards that can be used across a range of management  functions to improve results. In addition, federal internal control  standards state that management should design control activities\u2014such  as setting of performance standards\u2014to achieve objectives. Setting  performance standards, among other things, can provide managers with  crucial information on which to base their organizational and management  decisions.", "Consular Affairs has established performance standards for some of its  other activities. For example, in fiscal year 2017 Consular Affairs  established performance standards for processing passport applications  within published timeframes and ensuring that visa applicants were  interviewed within a 3-week period. For fiscal years 2018 and 2019,  among other goals, the Bureau established a performance standard of  100 percent to activate appropriate consular crises response tools, such as travel warnings and security and emergency messages, within 6 hours  after notification of a crisis event. Without performance standards for  completing service requests, Consular Affairs and OCS/L managers are  limited in their ability to monitor performance and perform effective  program management and oversight."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Plaintiffs suing foreign states in courts of the United States including  some victims of state-sponsored terrorism, sometimes rely on State to  promptly serve legal documents to foreign countries to receive  compensation for their losses. We found that the process of serving legal  documents to foreign countries takes an average of 5 months, but that  some cases take considerably longer. In analyzing cases from 2007  through 2017, we identified multiple opportunities to improve the  management and oversight of the process. Despite State\u2019s recent steps  to improve how it completes service, additional actions could help to  ensure that service is completed in a timely manner. For example,  guidance that specifies information that OCS/L must maintain in its case  tracker and case files would help ensure that State has complete and  accurate information on service requests. By having better record- keeping and more accurate and complete data, State will be able to  monitor its progress in completing service requests and develop  performance standards to measure timeliness. Additionally, periodically  analyzing the data could help identify ways to improve timeliness."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to the Department of  State:  The Secretary of State should ensure that the Assistant Secretary of  State for Consular Affairs requires OCS/L to update guidance to specify  the data to be recorded in the service request case tracker. The required  data should include key dates for all four stages of the process for  completing service, such as the date the court sent the request to OCS/L.  (Recommendation 1)", "The Secretary of State should ensure that the Assistant Secretary of  State for Consular Affairs requires OCS/L to update its record-keeping  guidance for service requests to include a standard list of documents to  maintain in service request case files. (Recommendation 2)", "The Secretary of State should ensure that the Assistant Secretary of  State for Consular Affairs requires OCS/L to monitor the status of service  requests. (Recommendation 3)", "The Secretary of State should ensure that the Assistant Secretary of  State for Consular Affairs requires OCS/L to periodically analyze its data  on service requests to identify the causes of any delays in State\u2019s  completion of service and take corrective actions as appropriate.  (Recommendation 4)", "The Secretary of State should ensure that the Assistant Secretary of  State for Consular Affairs establishes performance standards for  completing service, including timeframes for completing the various  processes at State and at U.S. embassies. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to State, the Department of Justice  (Justice), and the Administrative Office of the U.S. Courts for review and  comment. We received written comments from State that are reprinted in  appendix III. In its comments, State concurred with all five of our  recommendations and identified actions it planned to take to address  them. Justice and the Administrative Office of the U.S. Courts told us that  they had no formal comments on the draft report. State, Justice, and the  Administrative Office of the U.S. Courts also provided technical  comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Deputy Attorney General, and the  Director of the Administrative Office of the U.S. Courts. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any further questions about this report, please  contact me at (202) 512-6881 or BairJ@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope and Methodology", "paragraphs": ["In this report, we examine (1) how the Department of State (State)  completes service under the Foreign Sovereign Immunities Act (FSIA)  and how long it takes to perform this function and (2) whether State has  implemented key controls in record-keeping, monitoring, analysis and  performance management for completing service requests.", "To describe how State completes service, we obtained and reviewed  State and embassy documentation such as regulations, official guidance,  and case files. We also met with officials of State\u2019s Bureau of Consular  Affairs. Consular Affair\u2019s Directorate of Overseas Citizens Services/Office  of the Legal Affairs (OCS/L) is responsible for managing State\u2019s  completion of service. Based on discussions with OCS/L and  documentation, we mapped how OCS/L manages the process in  Washington, D.C and confirmed the process that we mapped with State  officials. We met with officials from State\u2019s Diplomatic Pouch and Mail  Office, who described how they put together and track diplomatic  pouches from State to embassies overseas. Because the role of consular  and other officials at embassies overseas in completing service to  defendant foreign governments is crucial, we also met with consular and  other officials at the U.S. Embassies in Berlin, Germany; Bern,  Switzerland; and Prague, Czech Republic.", "We selected these embassies based on (1) the number of service  requests each handled, and (2) the method each uses to complete  service. The U.S. Embassies in Bern and Prague ranked first and second  on the list of embassies managing service requests, while the U.S.  Embassy in Berlin ranked fourth. In the Czech Republic, we met with  officials of the Czech Ministry of Foreign Affairs, who described how they  receive and complete service requests from the U.S. Embassy in Prague.  Similarly, the Swiss Ministry of Foreign Affairs provided us with a detailed  description of how it receives and completes service on the Iranian  government. We cannot generalize our findings from these two countries  to any other countries, and note that the majority of the other countries  received five or fewer requests for the 11 years we reviewed.", "To describe the process used by courts and attorneys that represent  plaintiffs filing lawsuits against foreign governments under FSIA to  request service from State, we met with court officials and plaintiffs\u2019  attorneys. Using a spreadsheet that State provided us in December 2017,  we identified the top four federal courts that requested service from State  from 2007 to 2017 (the most recent full year available) and met with  officials from three of these courts. We based our description of the  procedure followed by court officials and attorneys say they follow at the  United States District Court for the District of Columbia because about  three-fourths of all service requests were made through that court. Using  a spreadsheet that State had provided, we also identified and met with 10  firms that had requested service from State. The firms that we met with  had a mix of experience requesting service from State. Some firms had  extensive experience and others had little experience requesting service  from State. We cannot generalize the responses to these firms to all firms  that requested service from State.", "To determine the length of time it took for State to complete service from  2007 through 2017, in December 2017 we obtained a spreadsheet that  OCS/L developed. This spreadsheet documents various milestones in the  completion of service requests made during this period\u2014for example,  when the court sent the request to OCS/L, when OCS/L received the  request, when OCS/L sent the request to the appropriate embassy, and  when OCS/L notified the court that service had been completed. Because  OCS/L officials provided data that was not complete, we developed an  improved spreadsheet, using the spreadsheet we received in December  2017 as our starting point and improving the spreadsheet through the use  of supplemental data. To develop the improved spreadsheet, we first  identified requests for service, based on our examination of the original  spreadsheet, which appeared to have not been completed or were not  related to FSIA service. We requested clarification from State about  whether we should keep those requests in our improved spreadsheet,  and where appropriate, removed some service requests. We then  checked the remaining requests in the original spreadsheet against court  data obtained from the Lexis-Nexis database Courtlink. After completing  this process, we once again asked OCS/L officials for clarification about  certain service requests and incorporated their feedback. In June 2018,  State provided us with a copy of a new case tracker that OCS/L officials  had created. We incorporated data from 2017 into our improved  spreadsheet and once again checked the service requests in our  improved spreadsheet against court records. After making the appropriate  modifications, we had 289 requests for service between 2007 and 2017.  We processed the data in our improved spreadsheet using data analysis  software.", "We estimated, among other things, the mean and median lengths of time  it took for State to complete service from 2007 through 2017, as well as  for the three of the four key stages of the process for which State is fully  responsible. We estimated the time elapsed as the difference in calendar  days between the key dates that were available, for example, between  the date State notified the court that service was completed and the date  the court had sent to OCS/L the request for service. The three stages for  which we were able to estimate timeliness were (1) the days between the  date State received the request from the court and the date OCS/L sent  the request to the appropriate U.S. embassy overseas and, (2) the days  between the date OCS/L had sent the request to the embassy and the  date when service was completed overseas and, and (3) the days  between the date that service had been completed by the embassy or  protecting power and the date when OCS/L notified the court that service  was completed. The time taken for these stages includes the times for a  number of activities that we could not precisely estimate, such as the time  it took for the court\u2019s request to reach OCS/L and the time taken for  service documentation to be sent via diplomatic pouch to and from the  appropriate embassy. We used the date the court sent its request to  OCS/L as our start date because that was the most complete start date  data among the three options available. We restricted our analysis to  those cases for which State had completed service.", "One limitation that we had to address in our analysis was the lack of  certain key dates in OCS/L\u2019s spreadsheet for some of the requests. In  particular, while the date we used as the start date (which was the date  on which the court sent its request for service to OCS/L) had the most  complete data of the three possible start dates, the data were missing for  59 of the 289 requests for service that we were able to document. We  calculated overall time elapsed for the document review and clearance  stage using that date, but then had to do some sensitivity analysis to  check that the missing dates were not skewing our results. To perform the  sensitivity analysis, we identified those instances when the date the court  sent its request to OCS/L was missing, but an alternative start date, either  the date of the request letter, or the date when OCS recorded receiving  the request, was present. We were able to identify 40 instances where  this happened for the 59 missing cases. Our calculations using  estimations of the missing \u201ccourt sent to OCS/L\u201d dates indicated that the  results we present would likely have changed minimally if we could have  included them. In addition, we conducted further analysis of the  characteristics of the 17 service requests that had no start date of any  kind and found that these were generally similar to ones for which we had  start dates. However because these simulations indicated that there  would be minor changes, we present qualified rounded numbers in the  main body of the report.", "We also used the improved spreadsheet to extract other information, and  calculate timeliness by the years for which the requests were made, the  courts making requests for service, the countries for service, and the date  of service requested. In addition, we estimated the time elapsed for  service for each case for which we had data and generated a list of  service requests sorted from the ones that took the longest to those that  took the least amount of time to complete.", "To determine whether State has implemented key controls in record- keeping, monitoring, analysis, and performance management for  completing service requests, we met with OCS/L officials in Washington,  D.C. to discuss how they manage the process, as well as with consular  officials from the U.S. Embassies in Berlin, Bern, and Prague. We also  examined the 59 service request case files for requests received in 2015  and 2016. This sample is not generalizable to all requests for service  between 2007 and 2017. We determined to what extent these files were  missing key documents, such as a signed copy of the notification letter or  the diplomatic note. We also reviewed the December 2017 spreadsheet  that we had obtained from State to determine to what extent the  spreadsheet contained missing data as well as a November 2017  spreadsheet. As discussed earlier, because OCS/L officials did not  provide complete data, we created a separate improved spreadsheet  using court data. We analyzed the data in the improved spreadsheet we  created to determine where bottlenecks were occurring. We also used the  improved spreadsheet to help identify and review 16 service requests in  more depth with OCS/L officials. We selected these 16 service requests  to include: 6 requests that took well above the average number of days to  complete, 5 that took about the average amount of time to complete, and  5 that took below the average amount of time to complete. We met with  OCS/L and consular officials, as well as plaintiffs\u2019 attorneys to discuss  events related to the 16 requests we had identified for review. We  obtained documentation from the U.S. Embassies in Bern and Prague for  the actions taken in providing service, the controls implemented, and the  records of transactions that they maintained. We met with officials from  three principal courts that request service, as well as officials of the U.S.  Victims of State Sponsored Terrorism Fund (Fund) to discuss how service  could affect the progress of court cases and the compensation awarded.  Finally, we assessed State\u2019s implementation of key controls against  applicable laws, including the FSIA and Government Performance and  Results Act of 1993, as well as State guidance and federal internal control  standards.", "To determine the reliability of the data used in the report, we manually  checked State\u2019s December 2017 spreadsheet as well as the improved  spreadsheet that we developed for logical and other errors\u2014for example,  for dates that seemed out of order. We also performed electronic checks  on the improved spreadsheet to identify logical and other errors. Where  appropriate, we made adjustments to the improved spreadsheet. Based  on the results obtained, we determined that the improved spreadsheet  that we developed is sufficiently reliable for our use, though we note the  limitations in terms of the start dates, which required us to conduct  sensitivity analyses, as described earlier in this OSM, to increase our  confidence in the overall estimates for timeliness and for the document  review and clearance stage of the process (stage 2). As noted above, we  are rounding our estimates to reflect this limitation and qualifying them as  approximations.", "We conducted this performance audit from September 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Additional Data on How Long It Takes to Complete Service", "paragraphs": ["We identified a total of 289 verified requests for service from 2007 to  2017. Verified requests are those that remained after we compiled the  lists the State Department provided, scrubbed them for duplicates and  instances when the requests were subsequently withdrawn, and checked  the data against court records in the Court Link database. Figure 5 shows  how those cases were distributed by year over this period.", "The average number of days State took to complete service varied  notably by year from 2007 to 2017, as Figure 6 demonstrates. The  average (mean) ranged from 77 days in 2011 to 206 days in 2008. We  can also see variation in the most recent years. The mean in 2015 was  130 days while in 2016 it was 205 days.", "We also found that cases for European and Eurasian countries, such as  Switzerland and Germany, had much lower means and medians than  those sent through protecting powers to Iran and Syria. While the  averages for Iran and Syria were 158 and 215 days respectively, the  cases for Germany, Switzerland, the Holy See, Russia, and Poland all  had averages of 106 days or less. In table 3 we provide information on  the length of time it took to complete service requests by country.", "We looked more broadly at country type, and created three groups, one  for the two countries where the State Department has to rely on the  protecting powers for service, namely Iran and Syria, another group for  the European and Eurasian nations, and another group for all remaining  countries. Service completion was fastest for the European nations. This  information by country groupings is presented in table 4."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements:", "paragraphs": ["In addition to the contact named above, Kim Frankena (Assistant  Director), Claude Adrien, Jos\u00e9 M Pe\u00f1a III, Martin De Alteriis, Candace  Caruthers, Mark Dowling, Chris Keblitis, Aldo Salerno and Hannah  Heidrich made key contributions to this report. Travis Cady and Jeff  Isaacs provided technical assistance."], "subsections": []}]}], "fastfact": ["Some victims of state-sponsored terrorism can sue the responsible government and may also be eligible for compensation from a special victims' fund. However, they often rely upon the State Department to deliver the necessary legal documents for a fee. State did this more than 200 times from 2007 through 2017. Those cases took:", "5 months to complete on average", "longer than 6 months about 29% of the time", "longer than a year 7 times", "Delays caused the State Department to waive $57,000 in fees it would have collected, and may have affected victims' compensation eligibility. We recommended ways to improve performance."]}
{"id": "GAO-18-200", "url": "https://www.gao.gov/products/GAO-18-200", "title": "Federal Buildings: GSA Should Establish Goals and Performance Measures to Manage the Smart Buildings Program", "published_date": "2018-01-30T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To help comply with federal policies aimed at improving federal building energy and environmental management, GSA has implemented a smart buildings program nationwide in federally owned buildings under its custody and control. Two key technologies included in the program are Internet-connected advanced utility meters and an analytical software application, GSAlink, which alerts staff to potential building system problems, such as equipment operating outside of normal hours.", "GAO was asked to review GSA's smart buildings program. This report examines: (1) what is known about the costs and benefits of the program, (2) the extent to which GSA has developed performance goals and measures to help it manage the performance of the program, and (3) any challenges GSA faces in implementing the technologies used in the program and GSA's actions to mitigate those challenges. GAO reviewed relevant GSA documentation, interviewed officials at GSA's central and regional offices, and visited a sample of GSA smart buildings in San Francisco, California, and Washington, D.C. that were selected based on the high concentration of GSA smart buildings located in each city."]}, {"section_title": "What GAO Found", "paragraphs": ["Limited quantified information exists on the costs and benefits of the General Services Administration's (GSA) smart buildings program's key technologies. GSA officials stated that the approximate cost of equipping a building with these technologies ranged between about $48,000 to $155,000. However, they stated that accurately calculating installation costs is challenging because GSA typically installs these technologies in selected buildings incrementally and sometimes as part of other capital improvement projects. Additionally, GSA officials identified perceived operational benefits of the smart buildings program's key technologies, including that these technologies enable officials to more precisely identify building system problems and more closely monitor contractors. However, existing data on the smart buildings program are of limited usefulness in quantifying the program's benefits. For example, according to GSA officials, while data from an application within GSAlink that estimates avoided costs from addressing each fault that GSAlink identifies are useful for prioritizing maintenance actions, the imprecise estimates preclude their use as a measure of actual avoided costs in quantifying program benefits.", "GSA does not have documented, clearly defined goals for the smart buildings program, nor has GSA developed performance measures that would allow it to assess the program's progress. These omissions are contrary to leading practices of results-oriented organizations identified in previous GAO work. GSA officials verbally described broad goals for the smart buildings program to GAO, but the agency has not documented these goals. Further, because GSA has not clearly defined its verbally expressed goals, it cannot demonstrate progress in achieving them. For example, GSA officials said that the agency cannot measure progress for the stated goal of improving tenant productivity and comfort because of the subjective nature of individual tenant preferences, such as for office temperatures. Additionally, GSA has not developed performance measures to assess the program, and GSA's lack of data that can be used to quantify benefits of the program impedes its ability to measure the success of the program. Without clearly defined goals, related performance measures, and data that can be used to measure its progress, GSA is limited in its ability to make informed decisions about the smart buildings program.", "GSA faces challenges in implementing the smart buildings program and has taken steps to mitigate these challenges. Since smart building technologies are Internet-connected, they are potentially vulnerable to cyberattacks that could compromise security or cause harm to facilities or their occupants. GSA has taken actions intended to mitigate cybersecurity challenges, such as instituting policies to address threats and known vulnerabilities and moving Internet-connected building systems to GSA's secured network. Separately, according to GSA officials, GSA faces implementation challenges related to the limited technological proficiency of some GSA building managers and contractors or lack of buy-in from them. GSA is taking actions intended to address these challenges. For example, it has provided training to staff and contractors, and its central office monitors the extent to which staff address problems detected by the smart buildings program's key technologies."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that GSA establish clearly defined performance goals and related performance measures for the smart buildings program, and identify and develop data to measure progress. GSA concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. General Services Administration (GSA) maintains custody and  control of a diverse buildings portfolio that includes approximately 1,600  federally owned buildings across the United States which cost over $1  billion annually to operate and maintain. Numerous federal policies aim to  improve federal building energy and environmental management through  the implementation of sustainable practices intended to reduce energy  use, lower operating costs, and limit the environmental impact of federal  buildings. To help comply with these policies, GSA implemented key  \u201csmart buildings technologies\u201d nationwide in federally owned buildings  under its custody and control starting around 2005. According to GSA  officials, the smart buildings program uses technologies that allow for  more precise monitoring of energy use, costs, and system operations  than in buildings without these technologies. These officials told us that  analyzing data from buildings equipped with smart building technologies  allows GSA building managers to more directly oversee the operations of  these buildings.", "You asked us to review GSA\u2019s smart buildings program. This report  addresses: (1) what is known about the costs and benefits of the smart  buildings program\u2019s key technologies, (2) the extent to which GSA has  developed performance goals and measures to help it manage the  performance of the smart buildings program, and (3) any challenges GSA  faces in implementing the technologies used in the smart buildings  program and GSA\u2019s actions to mitigate those challenges.", "To describe the costs and benefits of the smart buildings program\u2019s key  technologies, we reviewed information from GSA regarding these costs  and benefits. We also interviewed officials at GSA\u2019s central office, as well  as conducted semi-structured interviews with officials at each of GSA\u2019s 11  regional offices. In addition, we conducted site visits and interviewed GSA  building managers and operations and maintenance services contractors  who work at selected GSA smart buildings in San Francisco, California,  and Washington, D.C. We selected these locations because of the high  number of GSA smart buildings located in each city. To obtain a wider  perspective on smart buildings in general, we interviewed officials at three  other federal agencies that have implemented smart building efforts,  including the Department of Energy, the Department of Defense, and the  National Aeronautics and Space Administration. We also interviewed  seven industry stakeholders\u2014including five service contractors and two  university researchers\u2014who were near the GSA smart buildings we  visited and had experience in operating smart buildings or researching  related technologies. The results of our site visits and interviews with  GSA smart building officials, federal agencies, and industry stakeholders  are not generalizable to all GSA smart buildings, but provide illustrative  examples of smart building technologies in general, and the  implementation of the GSA smart buildings program specifically.  Appendix I provides a complete list of the organizations we contacted.", "To evaluate the extent to which GSA has developed performance goals  and measures to help it manage the performance of the smart buildings  program, we reviewed GSA reports and documents concerning the smart  buildings program and interviewed knowledgeable agency officials. We  compared GSA\u2019s actions to leading practices of results-oriented  organizations that we have identified in our prior work, as well as federal  standards for internal control.", "To describe the challenges GSA faces in implementing the technologies  used in the smart buildings program and its actions to mitigate those  challenges, we reviewed GSA, prior GAO, and other reports concerning  building management issues. We also gathered information during our  site visits and interviews noted above with officials at GSA\u2019s central office,  GSA regional offices, federal agencies, and industry stakeholders. We did  not evaluate the effectiveness of the actions GSA has taken to mitigate  challenges facing implementation of the technologies used in the smart  buildings program. Related to cybersecurity risks, however, our past work  has reported on GSA\u2019s efforts to address cyber risks in federal buildings  in compliance with relevant statute and guidance.", "We conducted this performance audit from October 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["GSA maintains custody and control of real property for many civilian  federal agencies and has a large portfolio of federally owned and leased  properties that GSA rents to its federal agency customers. It is  responsible for approximately 1,600 federally owned buildings, and the  agency generally provides operations and maintenance services for  building systems\u2014such as heating, cooling, and lighting systems\u2014used  in building operations. According to GSA officials, their federally owned  smart buildings are managed by a GSA building manager who oversees a  private operations and maintenance services contractor.", "According to GSA officials, the agency began implementing what would  become its smart buildings program around 2005 in response to  numerous federal policies aimed at improving federal building energy and  environmental management. These officials told us that the smart  buildings program includes two key technologies: advanced utility meters  and a computer software program known as \u201cGSAlink.\u201d According to GSA  officials, outfitting buildings with these technologies allows for more  precise monitoring of energy use and equipment operations in these  buildings, and was initially based on the use of advanced utility meters to  meet federal mandates. Later, this concept was expanded to include use  of analytics, through GSAlink, aimed at reducing energy consumption and  increasing the efficiency of operations and maintenance activities.  According to GSA officials, GSA\u2019s smart buildings use these technologies  to connect and monitor multiple pieces of building equipment, such as  heating and air conditioning system components. Further, according to  these officials, the program is intended to achieve efficiencies in energy  use and in operations and maintenance activities while also providing a  comfortable workplace potentially conducive to improved tenant  productivity. As GSAlink and advanced meters are Internet-connected,  GSA officials told us that they implemented protections that are intended  to help mitigate potential cyberattacks, including using firewalls.", "Advanced Utility Meters: In response to energy reduction and  advanced metering requirements established in the Energy Policy Act  of 2005\u2014as well as subsequent amendments and an Executive  Order\u2014GSA began installing advanced meters in its federally owned  buildings starting around 2005. Internet-connected advanced utility  meters measure utility use in real-time, which GSA officials told us  allows GSA\u2019s building managers to identify opportunities to reduce  energy use or anomalies that contribute to energy waste. For  example, GSA officials said that advanced utility meters can be used  to monitor energy consumption patterns and detect lights or other  building systems being used after normal business hours. According  to a senior GSA official, GSA currently has 675 advanced meters  installed in the agency\u2019s approximately 1,600 federally owned  buildings.", "GSAlink: GSA officials told us that GSAlink is a computer software  program that collects and analyzes data from advanced meters\u2014 including gas, electric, and water meters\u2014and from a facility\u2019s  \u201cbuilding automation system\u201d and uses this information to alert  building staff to potential problems. Further, GSA officials said that  GSAlink allows them to identify building problems that occur over time  that may not be readily observable through the building automation  system, which generally presents information to building personnel on  how a building system is operating in real-time, not over a longer time  frame. For example, GSA officials told us that GSAlink can collect  data on the temperature and pressure of chilled water that is being  circulated through a building\u2019s cooling system and identify equipment  that is operating outside of normal parameters or normal business  hours when a building automation system may not be actively  monitored. If GSAlink detects a potential issue, GSA officials told us  the software creates a record so that building maintenance staff can  investigate and remedy that issue. GSA building managers as well as  GSA staff at the regional and national levels told us they can log in to  GSAlink to check on the status of building system issues. According  to GSA officials, the contract for GSAlink was awarded in 2012 and  GSAlink is currently in use in 81 buildings, with at least one GSAlink- equipped building in each of GSA\u2019s 11 regions. A senior GSA official  told us that eighty of these buildings are also equipped with advanced  meters. Further, in September 2017, this official told us that GSA  contracted to equip 4 additional buildings with GSAlink. According to  GSA officials, GSA generally plans to limit installation of GSAlink in  additional buildings until more is learned about using the technology in  the buildings in which it is currently installed.", "Figure 1 illustrates an example of a GSA smart building that includes  advanced meters, GSAlink, and the building systems monitored by these  technologies."], "subsections": []}, {"section_title": "Limited Quantified Information Exists on the Costs and Benefits of Key Smart Buildings Program Technologies", "paragraphs": [], "subsections": [{"section_title": "The Smart Buildings Program\u2019s Installation Costs Are Affected by Building Characteristics and Can Be Difficult to Quantify", "paragraphs": ["According to GSA officials, the approximate cost of equipping a building  with smart building technologies ranged from between about $48,000 to  $155,000. This includes costs for installing: advanced utility meters (approximately $25,000 to $55,000), and", "GSAlink (approximately $23,000 to $100,000).", "The cost of installing GSAlink depends on the condition of the building  automation system to which GSAlink is connected as well as the number  of individual building components (e.g., chilled water pumps, cooling  tower fans, thermostats) to be monitored by GSAlink. GSA officials  anticipate that advances in system architecture and reduced software  licensing costs will lower the cost of future installations. For example, a  senior GSA official told us in October 2017 that the cost to install GSAlink  in four additional buildings\u2014the most recent buildings in which GSAlink  was installed\u2014ranged between $23,000 and $25,000.", "In addition, GSA is undertaking a broader effort to upgrade building  automation systems in its buildings to enable these systems and  connected applications, such as GSAlink, to operate on GSA\u2019s protected  information technology network. According to GSA officials, GSA can only  install GSAlink in buildings whose building automation system operates  on GSA\u2019s protected network. To date, GSA has upgraded building  automation systems to operate on the agency\u2019s protected network in  approximately 400 buildings. GSA officials told us that the cost of these  upgrades has varied by building and depends on several factors,  including the size of the building, the complexity or condition of its building  automation system, and its age. According to GSA officials, upgrading  building automation system components to enable them to operate on the  protected network has cost approximately $90,000 per building, on  average. However, in some cases, these costs can be much higher;  integrating older systems in larger buildings has cost up to $3 million,  according to GSA officials.", "Further, according to GSA officials, accurately calculating smart building  implementation costs can be difficult because GSA typically installs key  technologies\u2014that is, advanced meters and GSAlink\u2014and makes  upgrades necessary to install GSAlink in selected buildings incrementally,  sometimes as part of other capital improvement projects. For example,  the American Recovery and Reinvestment Act of 2009 and annual  appropriations have provided funding to GSA for energy and  conservation measures, including the purchase and installation of  advanced meters."], "subsections": []}, {"section_title": "GSA Has Taken Steps toward Assessing Benefits of the Smart Buildings Program, but Efforts to Quantify Benefits Have Been Limited", "paragraphs": ["GSA officials we interviewed at the central office, regional, and individual  building levels identified perceived operational benefits from implementing  the smart buildings program, including that it (1) enables them to identify  problems with building equipment or system operations more quickly and  more thoroughly and (2) allows for their greater oversight of operations  and maintenance services contractors relative to other GSA buildings. For  example, according to GSA regional staff we spoke to, both advanced  meters and GSAlink could detect if the cooling system was operating  when tenants were not occupying the building, thereby allowing the  building managers to adjust operations to avoid unneeded energy use  and wear on the cooling system equipment. Regarding contractor  oversight, GSA building managers stated that GSAlink allows the agency  to better monitor operations and maintenance contractors\u2019 performance,  potentially yielding a better-run building with lower operations and  maintenance costs. For example, GSA officials described how the  analytic capability of GSAlink might allow building managers to precisely  identify and address a problem with a building before that problem is  noticed by tenants. This may result in, for example, a reduction in the  number of maintenance service requests from tenants and contribute to  lower building operating costs. In addition, GSA officials told us that  GSAlink allows GSA building managers to confirm the information  operations and maintenance services contractors present to them on the  status of issues identified by GSAlink. Further, according to these  officials, GSAlink allows building managers to monitor contractor  compliance with GSA\u2019s requirement that contractors address building  issues identified by GSAlink within 30 days, thereby giving GSA officials  closer oversight of contractor performance.", "GSA has taken some steps in the past to quantify the benefits associated  with the smart buildings program. While those efforts have identified  benefits, they have had some limitations. For example, in 2009\u2014after  having begun installing advanced meters but before installing GSAlink\u2014 GSA attempted to forecast benefits of the smart buildings program by  commissioning a business case analysis. The business case concluded  that GSA\u2019s energy and operating costs could be reduced by a smart  buildings program and that such a program would pay for itself in 1.7  years based on combined energy and operational savings. However,  this business case\u2019s estimates of the program\u2019s benefits have limited  usefulness for evaluating the current program because this study took  place before the program was fully implemented and did not account for  constraints affecting building operations. For example, a senior GSA  official told us that GSA\u2019s operations and maintenance service contracts  are generally for multiple years at a fixed price, calling into question  whether operational cost savings can be realized to achieve payback  within the time frame estimated by the study.", "In addition, GSA\u2019s service contractor developed an application within  GSAlink that automatically estimates the costs that would be avoided by  addressing each type of fault that GSAlink identifies. According to GSA  officials, these estimates are imprecise and do not reflect actual avoided  costs, which thereby precludes their use in quantifying program benefits.  However, according to these officials, these estimates can be used to  compare the relative benefits expected to be achieved by addressing  identified faults and to prioritize maintenance and repair actions. GSA  officials told us that they took steps in June 2017 to improve the accuracy  of avoided cost estimates produced by this application, for example, by  enabling adjustments to account for differences in weather conditions and building size, and plan to continue their efforts to adjust and refine this  tool.", "In a separate study in October 2016, GSA\u2014in collaboration with  researchers at Carnegie Mellon University\u2014analyzed the energy use  changes associated with both capital upgrades and operational initiatives,  including the use of smart building technologies. Capital upgrades  include actions such as installing new energy-efficient building systems  and equipment, whereas operational initiatives include, among other  things, changes to building operations based on the analysis of advanced  meter and GSAlink data. While the researchers concluded that the use of  advanced meter and GSAlink data led to reductions in energy use, the  researchers found that GSA\u2019s utility consumption records were  incomplete and that GSA records of capital upgrades often do not include  key details, such as project start or completion dates, to indicate when  GSA would have received the benefit derived from the capital project.  This lack of complete data adds to the difficulty of estimating the reduced  energy consumption attributable to specific factors, including use of  advanced meters and GSAlink."], "subsections": []}]}, {"section_title": "GSA Does Not Have Documented, Clearly Defined Performance Goals or Measures to Help It Manage the Smart Buildings Program", "paragraphs": ["We have previously found that results-oriented organizations set  performance goals to clearly define desired program outcomes and  develop performance measures that are clearly linked to the performance  goals. Program goals communicate what results the agency seeks and  allow agencies to assess or demonstrate the degree to which those  desired results are achieved. Performance measures also show the  progress the agency is making toward achieving program goals. We have  previously reported that performance measurement gives managers  crucial information to identify gaps in program performance and plan any  needed improvements.", "GSA has not documented the smart buildings program\u2019s goals, contrary  to leading practices we identified in our prior work, which call for program  goals to clearly define desired program outcomes. GSA officials verbally  described to us broad goals for the smart buildings program: (1) reducing  energy consumption, (2) generating operations and maintenance cost  savings, and (3) creating a comfortable work environment conducive to  improved tenant productivity. However, GSA has not documented these  goals\u2014for example, in the agency\u2019s performance plan or in other program  documents. GSA officials could not provide a reason for why the agency  has not documented the smart buildings program\u2019s goals.", "Further, because GSA has not clearly defined its verbally expressed  goals, it cannot demonstrate progress in achieving them. This lack of  clearly defined goals is contrary to federal internal control standards,  which state that agency management should define objectives in  measurable terms so that performance toward those objectives can be  assessed. GSA could potentially measure progress toward its stated  smart buildings program goals of reducing energy consumption and  generating operations and maintenance cost savings, if data were  available to do so, as these goals seek to identify changes in quantifiable  outcomes, specifically energy use and cost savings. However, GSA  officials said that the agency cannot measure progress toward the stated  goal of improving tenant productivity and comfort because of the  subjective nature of individual tenant preferences, such as for office  temperatures. This subjectivity is consistent with statements from the  industry stakeholders we spoke with, who also said that identifying the  existence of a causal relationship between a building\u2019s environment and  the productivity of its inhabitants is challenging. For example, an industry  stakeholder we spoke to told us that different building occupants have  different temperature or ventilation preferences and may accordingly be  the most productive at different ambient temperatures, making it  challenging to determine a building\u2019s optimal temperature. Without  documented, clearly defined goals, it will be challenging for GSA to  determine what type of evaluative information it will need to monitor the  progress of the smart buildings program.", "In addition, contrary to the leading practices we have identified in our  previous work, GSA has not developed performance measures for the  smart buildings program. According to these leading practices,  performance measures allow for an assessment of progress toward  achieving goals by including concrete, objective, and observable ways to  measure the program\u2019s performance and compare this with the program\u2019s  expected results. Further, federal internal control standards call for  federal program managers to use quality information to achieve that  program\u2019s objectives and make informed decisions. However, GSA  lacks quality information that can be used to measure program  performance. As discussed in the previous section, GSA\u2019s efforts to  quantify the smart buildings program\u2019s benefits, including energy  reductions and cost savings, have been limited because GSA has had  difficulty in compiling data that would allow it to do so. For example,  GSAlink\u2019s calculation of avoided costs estimated to be achieved by  addressing identified faults is useful for prioritizing maintenance actions  but not for measuring program performance because, according to GSA  officials, the estimates lack precision and relation to actual costs. In  addition, GSA\u2019s October 2016 study on energy use reductions attributable  to the program faced problems owing to incomplete records on utility  consumption and capital upgrades. While we recognize that determining  what data can be collected in a cost-effective manner and can be used to  measure the performance of the smart buildings program may be difficult,  without such data and measures, GSA lacks the ability to determine the  program\u2019s progress and make informed decisions about its current and  future operations."], "subsections": []}, {"section_title": "GSA Faces Some Challenges in Implementing Smart Building Technologies and Is Taking Steps to Mitigate Them", "paragraphs": [], "subsections": [{"section_title": "GSA Is Taking Actions That May Mitigate Challenges Related to Cybersecurity", "paragraphs": ["GSA faces cybersecurity challenges to its buildings, but is taking steps  intended to mitigate these challenges. According to GSA officials,  advanced meters and GSAlink operate in conjunction with Internet- connected building automation systems on the protected GSA information  technology network. GSA regional staff and industry stakeholders we  interviewed stated that cybersecurity presents challenges to those  operating smart building technologies, including GSA. Specifically,  because these building automation systems are connected to the  Internet, they provide a potential pathway for cyberattacks on GSA\u2019s  network. According to our prior work, this connectivity could  compromise security, hamper GSA\u2019s ability to carry out its mission, or  cause physical harm to GSA\u2019s facilities or their occupants.", "GSA has taken several actions that are intended to help mitigate  cybersecurity challenges to its buildings, including those that affect the  smart buildings program:", "GSA has instituted policies and procedures addressing cybersecurity  threats and known vulnerabilities in its building systems. In December  2015, GSA published an information technology security policy,  defining the roles and responsibilities of GSA staff and establishing  controls to ensure compliance with federal regulations, laws, and GSA  directives. For example, this policy defines the role of the Federal  Government Authorizing Official whose responsibilities include  ensuring that monthly operating system scans, database scans, and  web application scans are performed and that all vulnerabilities  identified are resolved.", "According to a GSA senior official, under GSA\u2019s Building Monitoring  and Controls Program, which provides the infrastructure support  needed to connect a building to GSA\u2019s network, GSA is taking steps  to mitigate the effects of potential external cyberattacks by moving  building automation systems of GSA-controlled buildings away from  public networks to GSA\u2019s secured network. GSA officials told us that  there are currently approximately 400 federally owned buildings on  GSA\u2019s secured network, which includes the 81 buildings equipped  with GSAlink. According to GSA officials, a building automation  system must be on GSA\u2019s secured network before GSAlink can be  installed.", "According to GSA officials, GSA also performs regular assessments  to validate that GSAlink system controls comply with relevant statutes,  such as the Federal Information Security Management Act of 2002,  National Institute of Standards and Technology security standards,  and GSA policies and procedures. In December 2014, we reported  on GSA\u2019s efforts to address cyber risks in federal buildings in  compliance with relevant statute and guidance, finding that GSA had  not conducted security control assessments for all of its systems in  about 1,500 federally owned facilities. We recommended that GSA  assess its building control systems in a manner fully consistent with  federal law and related implementation guidelines. GSA has since  implemented this recommendation.", "According to GSA documentation and officials, GSA conducts regular  vulnerability scanning of the equipment and systems involved in the  smart buildings program. For example, according to GSA regional  staff, a recent vulnerability in the GSA system that manages  maintenance requests was identified by GSA central office and was  remedied through a software upgrade."], "subsections": []}, {"section_title": "GSA Is Taking Actions That May Mitigate Challenges with Stakeholder Support", "paragraphs": ["GSA faces smart building technology implementation challenges related  to the limited technological proficiency of or lack of buy-in from some GSA  building managers and operations and maintenance services contractors,  but the agency is taking steps that are intended to engage these  stakeholders and ensure they are learning to use the smart buildings  program\u2019s technologies. GSA regional staff acknowledge that there can  be inconsistencies among building managers and operations and  maintenance services contractors in terms of their familiarity and comfort  with using computers and computer-based analytical tools. According to  GSA officials, GSAlink proficiency and adoption varies by building and as  such, some buildings may obtain greater benefits from the system than  others. A lack of proficiency among building managers in smart building  technologies not only affects GSA, but is also an industry-wide concern,  according to industry stakeholders we interviewed. Industry stakeholders  we interviewed stated that operations and maintenance services  contractors are generally not well trained on smart building operations or  the differences between managing a smart building and managing a  traditional building.", "GSA regional staff and GSAlink\u2019s support contractor we interviewed also  identified operations and maintenance services contractors\u2019 limited buy-in  to the smart buildings technologies as a challenge affecting  implementation of the program. According to GSA officials, this limited  buy-in to the smart buildings technologies could potentially lead to loss of  support for the program among operations and maintenance services  contractors, posing a risk to the program\u2019s successful implementation.  GSA officials, regional staff, and GSAlink\u2019s support contractor  acknowledge it is important to demonstrate how GSAlink, for example,  can make the operations and maintenance services contractors\u2019 jobs  easier. According to GSA officials, if GSAlink can help a building\u2019s  systems operate more efficiently, that improvement should result in less  unscheduled maintenance and fewer work orders for the contractor.  Additionally, industry stakeholders we interviewed suggested that  operations and maintenance services contractors do not currently have a  stake in whether a smart buildings program is successful.", "According to those we interviewed, GSA has taken several actions that  are intended to help address these challenges:", "GSA officials and regional staff told us that GSA provided initial  training to building managers and operations and maintenance  services contractors when GSAlink was first installed. According to  GSA officials, refresher training is available online through recorded  training sessions. Additionally, GSA regional staff told us that  knowledgeable GSA staff provide training to newly hired staff as  needed.", "GSAlink\u2019s support contractor staff told us that they lead regularly  scheduled teleconferences with each smart building\u2019s staff either  monthly or quarterly depending on each building\u2019s needs. At these  meetings, the support contractor remotely accesses GSAlink data for  a particular building to discuss the status of GSAlink notifications of  building system issues and recommend adjustments to building  equipment or systems to ensure optimal operations. GSA regional  staff we spoke with stated that this meeting serves as a form of  training and helps educate participants on how to use GSAlink.", "To ensure that building personnel are using smart buildings  technologies, GSA officials told us that GSA\u2019s central office monitors a  key performance indicator requiring GSA building managers and  operations and maintenance services contractors to address all  GSAlink notifications of building system issues within 30 days.  According to GSA officials, GSA central office and regional staff also  have the ability to remotely monitor advanced meter and GSAlink data  for individual buildings.", "According to a senior GSA official, new operations and maintenance  services contracts will expressly require contractors to use smart  building technologies as part of their efforts to optimally operate GSA  buildings."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["According to GSA officials, the agency\u2019s smart buildings program is  intended to allow its staff and contractors to more efficiently manage  energy consumption and operations and maintenance actions aimed at  promoting cost-efficient operation of building systems and creating a  comfortable work environment for tenants in GSA\u2019s buildings. Given  GSA\u2019s recent decision to expand the use of GSAlink technology, it is  important that the agency be able to determine whether use of the  technology achieves these intended results. However, without  documented, clearly defined goals, performance measures linked to  those goals, and quality information to measure progress, GSA is limited  in its ability to make informed decisions about the smart buildings  program\u2019s current or future operations as it develops plans to enlarge the  program to serve a greater proportion of its buildings portfolio. As a result,  GSA risks continuing to expend resources on a program that the agency  cannot demonstrate is meeting its intended objectives."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to GSA:  The Administrator of the General Services Administration should establish  clearly defined goals and related performance measures for the smart  buildings program. (Recommendation 1)", "The Administrator of the General Services Administration should identify  and develop data that can be used to measure progress in achieving the  smart buildings program\u2019s goals. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to GSA for comment. In its written  comments, reproduced in appendix II, GSA stated that it concurred with  our recommendations and is developing a plan to address them. In  addition, GSA clarified that the agency has been upgrading building  automation systems across its buildings inventory for a variety of reasons,  to include providing needed safeguards to comply with GSA\u2019s information  technology security protocols. GSA also provided information on the  methodology used and results reported in its October 2016 study on  energy savings realized from combined investments in advanced  metering and GSAlink.", "We are sending copies of this report to the appropriate congressional  committees and the Administrator of the General Services Administration.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Organizations Contacted", "paragraphs": [], "subsections": [{"section_title": "Federal Government", "paragraphs": [], "subsections": []}, {"section_title": "GSA Smart Buildings \u2013 Washington, DC", "paragraphs": [], "subsections": []}, {"section_title": "GSA Smart Buildings \u2013 San Francisco, California", "paragraphs": [], "subsections": []}, {"section_title": "Industry Stakeholders", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Comments from the General Services Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michael Armes (Assistant  Director); Daniel Paepke (Analyst in Charge); Edward Alexander, Jr.;  Jenny Chanley; John de Ferrari; Peter Haderlein; Geoffrey Hamilton;  Thomas Johnson; Nick Marinos; Malika Rice; Stephen Schluth; Elaine  Vaurio; Jack Wang; Michelle Weathers; and Dave Wise made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-9", "url": "https://www.gao.gov/products/GAO-18-9", "title": "Coast Guard: Actions Needed to Close Stations Identified as Overlapping and Unnecessarily Duplicative", "published_date": "2017-10-26T00:00:00", "released_date": "2017-10-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Coast Guard, within the Department of Homeland Security (DHS), is charged with preventing loss of life, injury, and property damage in the maritime environment through its SAR mission. It maintains over 200 stations with various assets, such as boats and helicopters (depending on the station), along U.S. coasts and inland waterways to carry out this mission, as well as its other missions such as maritime security. Resource limitations and changes to operations require the Coast Guard to periodically reexamine the need for these stations. GAO was asked to review these efforts.", "This report addresses, among other objectives, the extent to which the Coast Guard has (1) a sound process for analyzing the need for its boat stations and (2) taken actions to implement its boat station process results. GAO reviewed Coast Guard laws, standards, and guidance; analyzed Coast Guard data on station locations and SAR coverage; and analyzed the process and criteria used to evaluate its station needs and compared it with established evaluation design practices and internal control standards. GAO also interviewed Coast Guard officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the U.S. Coast Guard has a sound process for analyzing its boat stations that includes clear and specific steps for analyzing the need for stations using terms that can be readily defined and measured. In 2013, following this process, the Coast Guard and its contractor identified 18 unnecessarily duplicative boat stations with overlapping coverage that could be permanently closed without negatively affecting the Coast Guard's ability to meet its 2-hour search and rescue (SAR) response standard and other mission requirements. The process was designed to ensure the Coast Guard met or exceeded requirements to maintain SAR coverage and to account for such factors as boat downtime and surge capacity to respond to certain incidents. Further, the boat station analysis did not consider potential SAR responses by the Coast Guard's air stations and facilities, which can provide additional overlapping coverage. Coast Guard officials said that the closures would, among other things, help improve operations by consolidating boat station caseloads to help ensure personnel were active enough to maintain training requirements.", "In 2017, the Coast Guard affirmed that its leadership believes the 2013 study remains valid, but so far the agency has not taken actions to implement the closures identified by its sound process. Instead, the Coast Guard is recommending conversion of some year-round stations to seasonal stations that would operate during the summer. Coast Guard officials stated that seasonal closures are preferable to no action, given its limited resources, the significant overlapping SAR coverage, and potential to improve operations. However, permanently closing unnecessarily duplicative stations may better position the Coast Guard to improve its operations. It could also achieve up to $290 million in cost savings over 20 years, if stations were permanently closed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including one recommendation that the Coast Guard close unnecessarily duplicative stations that its analysis identified. DHS concurred with the recommendations and stated it plans to act to eliminate unnecessary duplication."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States Coast Guard (Coast Guard), within the Department of  Homeland Security (DHS), is the principal federal agency charged with  preventing loss of life, injury, and property damage in the maritime  environment through its search and rescue (SAR) mission, which it  conducts along with 10 other missions including marine environmental  protection and drug interdiction. To fulfill its SAR responsibilities, along  with its other missions, the Coast Guard maintains multimission boat  stations, air stations, and air facilities, with associated assets such as  boats, helicopters, and fixed wing aircraft, along our coasts and inland  waterways. While some missions conducted out of these stations, such  as ports, waterways, and coastal security, have increased in recent years,  annual Coast Guard search and rescue caseloads have decreased from  about 32,000 cases per year in 2004 to about 17,000 in 2016, a reduction  of 47 percent. The need to balance a broad array of missions, while  operating under constrained budgets in recent years, underscores the  importance for the Coast Guard to ensure its stations are needed and  optimally located.", "Many factors help determine the placement of stations and the allocation  of Coast Guard resources for their operations. These include population,  historical factors, environmental conditions such as water temperature,  and the availability of other rescue resources and partners. For example,  some geographic regions have boat stations in closer proximity because  when many of them were established, the crews used rowboats (which  moved at slow speeds for shorter distances) to conduct search and  rescue cases. In 1990, we reported that the Coast Guard and its  predecessor agencies had established over 400 stations since 1844, and  that about 200 of these stations had since been closed, destroyed by  storms, or transferred to other government entities. Since that 1990  report, the Coast Guard has attempted to close additional stations it  considered unnecessary, but met resistance from impacted communities  and others. Following the terrorist attacks of September 11, 2001, the  Coast Guard was tasked with expanded security-related mission  responsibilities and subsequently established eight additional stations.  However, the need for stations at particular locations has generally  decreased with changes in boating activity, boating equipment, and the  capabilities of other search and rescue providers such as local police and  fire departments.", "Changes to Coast Guard operations, such as additional mission  requirements to address emerging security issues, and resource  limitations, require the Coast Guard to periodically review the allocation of  these resources, including those directed toward stations to ensure they  are positioned to meet the Coast Guard\u2019s missions while not  unnecessarily duplicating efforts. Given the importance of the Coast  Guard\u2019s SAR and other missions, you asked us to review whether its  efforts to optimize station locations and allocate resources were sound  (i.e., defendable). This report addresses the extent to which the Coast  Guard (1) has a sound process for analyzing the need for its boat  stations, and the outcomes of the process; (2) has a sound process for  analyzing the need for its air stations and air facilities, and the outcomes  of the process; and (3) has taken actions to implement the results of its  process for analyzing the need for stations.", "To identify the extent to which the Coast Guard has a sound process for  analyzing the need for its boat stations, we reviewed laws, policies, and  procedures related to its SAR mission. We reviewed Coast Guard  documentation of processes it used to analyze the need for boat stations,  including a 2013 study documenting a contractor analysis that followed  the Coast Guard process, reviewed resource and budget factors, and  analyzed station activity levels. We also reviewed prior GAO reports on  the Coast Guard\u2019s previous attempts to close stations. To verify and  validate the Coast Guard\u2019s specific analytical process used to determine  overlapping SAR coverage among these stations, we obtained and  analyzed the Coast Guard\u2019s analytical assumptions, the operational  parameters of the assets assigned to the stations (e.g., boat speeds), and  station locations. This analysis also allowed us to verify the soundness of  the Coast Guard\u2019s model used to identify overlap. We then independently  recreated and visually depicted overlapping SAR coverage provided by  the boat stations, based on Coast Guard data, assumptions, and  documentation, and compared it with SAR case data by geographic area.  We then analyzed Coast Guard data on single-boat SAR responses  (sorties) by station for fiscal years 2010 through 2016, the most recent  data available at the time of our review. We visited a nongeneralizable  sample of 12 boat stations we selected from within Coast Guard districts  where the Coast Guard had identified overlap, and interviewed Coast  Guard officials to identify local policies, station characteristics, local  coordination with emergency responders and federal agencies, and local  input to the Coast Guard\u2019s process for assessing station needs and  implementing changes to the locations of boat stations, if any. We  compared Coast Guard actions to evaluate boat stations against criteria  for sound evaluation design practices established in GAO\u2019s Designing  Evaluations guidance, the Coast Guard\u2019s SAR response standard, and  statutory requirements to conduct public outreach.", "To assess the reliability of Coast Guard SAR data, we interviewed  knowledgeable officials, reviewed documentation, and electronically  tested the data for obvious errors and anomalies. We interviewed Coast  Guard officials to discuss the reliability issues we identified, and officials  informed us of ongoing actions to resolve the issues. We determined that  the data are sufficiently reliable for the purposes of this report to  demonstrate selected station caseloads. Details of our scope and  methodology are described in appendix I.", "To identify the extent to which the Coast Guard has a sound process to  analyze the need for its air stations and air facilities, we reviewed laws,  policies, and procedures related to its SAR mission. We reviewed Coast  Guard documentation of processes it used to analyze the need for  selected air facilities in 2014. We obtained and analyzed Coast Guard air  station and air facility locations and assumptions made for determining  overlapping SAR coverage in 2014 and used a mapping program to  visually depict overlapping coverage provided by aviation assets, based  on Coast Guard data, assumptions, and documentation. Additionally, we  interviewed Coast Guard officials to obtain information on the extent to  which the Coast Guard used findings and recommendations from  selected studies, strategies, and plans in its analyses of the need for and  locations of its air stations and air facilities. We also compared Coast  Guard actions to evaluate air stations and air facilities against criteria  established in GAO\u2019s Designing Evaluations guidance.", "To determine the extent to which the Coast Guard has taken actions to  implement the results of its analyses of its need for stations, we analyzed  Coast Guard documents and reports to identify proposals put forth by the  Coast Guard for permanently or seasonally closing stations it has  identified as overlapping and unnecessary. We analyzed these proposed  actions to determine whether proposed plans or decisions regarding  permanent and seasonal station closures aligned with the results of the  Coast Guard analyses. Specifically, we reviewed the 2013 contractor  study, memoranda detailing field input on the results of the study and  their verification of the stations the study identified as unnecessarily  duplicative, and compared the recommended closures from the various  analyses to determine if the outcomes were consistent. We also  compared Coast Guard actions against its response standard and  statutory requirements for conducting public outreach. Finally, we  reviewed documents and information on these proposals and compared  them against criteria in Standards for Internal Control in the Federal  Government and leading practices identified in the Project Management  Institute\u2019s Standard for Program Management.", "We conducted this performance audit from July 2016 through October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Coast Guard is required to develop, establish, maintain, and operate  rescue facilities for the promotion of safety and may aid distressed  persons, and protect and save property in waters subject to the  jurisdiction of the United States. To carry out its responsibilities, the  Coast Guard maintains a search and rescue system on the Atlantic,  Pacific, and Gulf coasts; the Great Lakes; and other inland lakes and  waterways. This system consists of about 190 boat stations, 183 of which  are located in the contiguous United States. The Coast Guard also  operates aircraft from 24 air stations and four air facilities. As of August  2017, these stations and facilities operated about 700 boats and about  200 aircraft. In fiscal year 2016, the Coast Guard reported that its SAR  operations saved 5,174 lives and protected more than $63 million in  property from loss."], "subsections": [{"section_title": "Laws Governing the Optimization of the Coast Guard\u2019s Boat Station, Air Station, and Air Facility Locations", "paragraphs": ["The Coast Guard\u2019s boat stations, air stations, and air facilities are subject  to laws which require the Coast Guard to maintain specific minimum  capabilities\u2014such as a requirement to maintain at least one vessel at  each station that is fully capable of operating within the prevailing weather  and marine conditions in that station\u2019s area of responsibility. In addition  to maintaining capabilities requirements, if the Coast Guard reevaluates  its station location needs and intends to close a boat station, air station,  or air facility, it also must follow a statutorily defined process, which  includes making a determination that adequate SAR coverage will remain  in place. To close an air facility, the Coast Guard must also submit a  proposal to close the facility to Congress in the President\u2019s annual budget  and notify members of Congress who represent the impacted  communities, as well as certain committees."], "subsections": []}, {"section_title": "The Coast Guard\u2019s Structure and Stations That Conduct Search and Rescue", "paragraphs": ["The Coast Guard\u2019s field structure is divided into two Area Commands,  Atlantic and Pacific, within which are nine Districts consisting of 37  Sectors and the stations within them (see figure 1).", "Stations are traditionally associated with search and rescue but they may  perform the full range of Coast Guard missions. Coast Guard personnel  live and work at or near their stations so they can rapidly respond to  emergencies as they arise. This model facilitates the Coast Guard\u2019s  search and rescue response resource planning standard. Under this SAR  standard, Coast Guard plans for its units with SAR responsibilities to  arrive on the scene of a case within 2 hours of receiving a distress call.  Stations vary in their mission mix and pace of operations (i.e., operational  tempo) by geographic region or District, and by season. For example,  Coast Guard boat stations in D7 (Florida, Puerto Rico, South Carolina,  and the Caribbean) commonly conduct migrant interdiction operations,  whereas boat stations located along the Great Lakes (D9) rarely conduct  this mission. In some locations, SAR cases may be more common during  the summer boating season than in the winter. Stations in D9 have a  shorter boating season than stations in D7. According to Coast Guard  officials, while D7 has more total SAR cases than D9, cases in D9 are  concentrated in a shorter time period than in D7 (i.e., shorter boating  season). Boat stations also vary widely in size and function. For example,  Station New York in New York City has an authorized strength of 88  personnel, whereas Station Frankfort in Frankfort, Michigan, has an  authorized strength of 15 personnel. Both stations perform SAR and  other missions, but Station New York also conducts a high level of  homeland security missions, while Station Frankfort provides ice rescue  capability during the winter. Additionally, the Coast Guard operates 18  seasonal boat stations called \u201cStations (Small),\u201d which are detached  subunits of larger parent stations; the Coast Guard generally operates  these during the summer boating season."], "subsections": []}, {"section_title": "How the Coast Guard Conducts a Search and Rescue Mission", "paragraphs": ["When the Coast Guard receives notification of a distressed mariner, a  search and rescue mission coordinator evaluates the case and assigns  assets, such as boats or aircraft, to respond. Cases may involve  multiple assets depending on the complexity of the case, such as the  need to locate a mariner whose position is only generally known or to  operate in severe weather conditions. Figure 2 depicts the general steps  for conducting a SAR case.", "The Coast Guard uses several different types of assets to carry out its  search and rescue and other missions. These assets include boats, rotary  wing aircraft (helicopters), fixed wing aircraft (planes), and cutters  (including patrol boats and ships). Additional details regarding some of  these assets, including boat speeds, are described in appendix II."], "subsections": []}, {"section_title": "Prior GAO Work on Station Optimization", "paragraphs": ["Over time, the need for Coast Guard stations at particular locations has  changed due to changes in Coast Guard asset capabilities, boating  activity, boating equipment, safety technology, and the capabilities of  other search and rescue service providers, such as private towing firms.  However, the Coast Guard\u2019s decisions to close or reduce operations at  boat stations based on changing conditions or budget reductions have  been sensitive. We previously reported that these sensitivities were  based on the perception that reducing operations or closing stations  would reduce the agency\u2019s ability to save lives and property. In 1990, we  reported that the Coast Guard\u2019s attempts to close stations in 1988 were  not successful because the Coast Guard did not have policies or  procedures for what criteria should be used or how the criteria should be  applied, and because the Coast Guard applied its evaluation criteria to a  limited universe\u2014only 34 stations instead of all stations. We also found  that the Coast Guard did not adequately address how closing stations  would impact the Coast Guard\u2019s effectiveness in saving lives or  performing other missions.", "In 1994, we reported that the Coast Guard had created a new process for  determining the need for boat station changes. We also found that the  new process included detailed criteria to evaluate the appropriate need  for stations, such as boating and economic trends and the availability of  alternative SAR resources. The Coast Guard then unsuccessfully  attempted to close stations in 1995 using this process, and again in 2008,  efforts which we describe later in this report."], "subsections": []}, {"section_title": "Prior Work on Fragmentation, Overlap, and Duplication", "paragraphs": ["In 2010, federal law required that we identify programs, agencies, offices,  and initiatives with duplicative goals and activities within departments and  government-wide, and report annually. The annual reports describe  areas in which we have found evidence of fragmentation, overlap, or  duplication among federal programs and have resulted in $136 billion in  financial benefits for the federal government. Figure 3 outlines the  definitions we have used since 2011 in our work to address  fragmentation, overlap and duplication."], "subsections": []}]}, {"section_title": "Coast Guard Has a Sound Process for Analyzing the Need for Boat Stations and the Results Identified Overlap and Unnecessary Duplication", "paragraphs": ["The Coast Guard has a sound process for analyzing the need for boat  stations that is consistent with GAO\u2019s Program Evaluation guidance,  which calls for choosing well-regarded criteria against which to make  comparisons in order to achieve strong, defensible conclusions. The  primary criteria Coast Guard subject matter experts established,  consistent with statutory requirements that the Coast Guard make a  determination that adequate SAR coverage would remain in place, were  (1) a minimum threshold of overlapping SAR coverage had to be  maintained and (2) the Coast Guard\u2019s ability to meet its nationwide 2-hour  SAR response standard had to be maintained. By applying these  criteria, the Coast Guard\u2019s process identified overlapping search and  rescue coverage where three or more stations can respond to a single  SAR case within 2 hours, and unnecessary duplication where stations  could be closed without negatively impacting the Coast Guard\u2019s ability to  meet mission requirements, such as its 2-hour SAR response standard.", "In June 2012, the Coast Guard established a Station Optimization  Process Charter that called for the Coast Guard to develop a defendable  process with criteria for analyzing stations for potential closure. The  charter stated and Coast Guard officials confirmed that the process was  developed to ensure that closure recommendations would be based on  solid justifications for stations selected, and would stand up to rigorous  scrutiny. The charter called for (1) the process to be data driven; (2)  criteria to be applied consistently; (3) consideration of previous GAO  recommendations on assessing stations for closure; and (4) adherence to  statutory requirements to conduct outreach to affected communities.", "The Coast Guard then established a working group of subject matter  experts who developed a Station Optimization Process with nine  analytical steps. The Station Optimization Process included criteria for  analyzing the need for boat stations based on data analysis, consistent  application of criteria, and legal requirements. Figure 4 shows the Station  Optimization Process and its nine steps."], "subsections": [{"section_title": "Coast Guard Used Its Station Optimization Process to Analyze Boat Stations and Identified Overlap and Unnecessary Duplication", "paragraphs": ["In April 2013, the Coast Guard initiated its 9-step Station Optimization  Process to analyze its boat stations, and the results identified 18 stations  that could be closed because they provide overlapping and unnecessarily  duplicative SAR coverage. The Coast Guard hired a contractor to carry  out the analysis and identify potential cost savings from permanent  closures of such stations. Although focused on SAR coverage, the  process also included consideration of all Coast Guard missions carried  out at these stations. The contractor followed the 9-step process, with  certain steps conducted by the Coast Guard\u2013\u2013such as step 1, which  analyzed the system and identified overlapping SAR coverage\u2013\u2013and  developed and ranked different closure options to maximize cost savings.  Coast Guard officials provided additional district input on unique  characteristics of certain stations to further refine the closure options. The  final study identified 18 stations for closure that it estimated would  achieve cost savings without impeding the Coast Guard\u2019s ability to meet  its SAR response standard and carry out its other missions. We discuss  this further later in this report.", "The Coast Guard considers some overlap or redundancy to be  necessary, to account for such things as operational challenges, boat  maintenance downtime, personnel training requirements, and the need  for surge capacity to respond to certain incidents. Therefore, the Coast  Guard directed the contractor to analyze areas with triple or greater  station coverage as its baseline for analyzing whether stations were  unnecessarily duplicative. Based on the Coast Guard\u2019s review of this  coverage, it determined that the greatest extent of overlapping coverage  existed in Districts 1, 5, and 9, and directed the contractor to focus on  stations in those areas. Figure 5 shows the extent of overlapping Coast  Guard boat station SAR coverage as of September 2013 that was used  for the contractor study and is still accurate as of May 2017. It shows for  Districts 1, 5, and 9, up to quadruple or greater SAR coverage provided  by boat stations with overlapping response capabilities. According to the Coast Guard, in an attempt to be conservative in maintaining SAR  coverage, the optimization process did not consider the use of Coast  Guard air assets such as helicopters\u2014an additional layer of coverage\u2014 nor did it consider the availability of some local agencies that respond to  SAR cases, such as police departments and emergency responders.  Therefore, overlapping coverage depicted in figure 5 excludes air asset  responses and any responses or assistance provided by state and local  agencies. The extent of coverage in 2017 was the same as the Coast  Guard\u2019s 2013 contractor study reported.", "We determined that the actions taken to complete the station optimization  process are sound, consistent with our Program Evaluation guidance  which calls for, among other things, evaluating programs based on well- regarded criteria to achieve strong, defensible conclusions. In addition to  using the 2-hour response standard as a criterion, the optimization steps  identified actions to systematically analyze quantitative measures using a  documented ranking system to remove critical stations from consideration  for closure. For example, step 4 of the process evaluated the number of  security boardings conducted by selected stations, among other metrics,  and removed certain stations for consideration from closure based on a  systematic application of criteria related to other mission responsibilities.  Further, as described in table 1, the process began with consideration of  all boat stations in the contiguous United States, included steps to ensure  that data were reliable and appropriate, clearly identified limitations of the  analysis, and conducted simulations to assess how well the Coast Guard  would be prepared to carry out its responsibilities under different closure  alternatives, such as whether a station closure reduces or changes the  Coast Guard\u2019s ability to meet its response standard\u2014all actions included  in our Program Evaluation guidance. Table 1 provides details of actions  taken by the contractor and the Coast Guard to complete the 9-step  station optimization process."], "subsections": []}, {"section_title": "Additional District Input Helped Refine List of Closure Recommendations", "paragraphs": ["Consistent with the 9-step optimization process and to validate the  closure scenario results, the contractor and Coast Guard Headquarters  obtained regional input from district officials to gain context about the  stations under consideration for closure such as unique rescue  characteristics that were not quantifiable. Coast Guard officials within  Districts 1, 5, and 9 generally supported the contractor recommendations  to close some stations, with a few exceptions. For example, District 1\u2019s  input stated that one station recommended for closure by the contractor  analysis had a unique surf rescue capability that was not available at  adjacent or other nearby stations and thus this station did not provide  unnecessarily duplicative SAR coverage since no nearby station could  provide this capability. Thus, District 1 recommended that the station remain open. Given this input, the contractor removed this station from  consideration for closure. In another example, District 5 officials reported  that closure of one of its stations would increase response times from  adjacent stations due to the presence of shoaling and barrier island  conditions that could not be accounted for in the quantitative modeling.  Therefore, the contractor eliminated that station from consideration for  closure and recommended an alternative station for closure. This process  of obtaining regional input and validation from district officials was carried  out such that if a station identified for closure would negatively impact  critical missions, it was removed from closure consideration. This  additional district input resulted in a final contractor study that  recommended station closures that would achieve the greatest cost  saving without negatively impacting the Coast Guard\u2019s ability to meet  mission requirements.", "In addition to identifying stations with unique characteristics that  warranted keeping them open, additional district input also confirmed  contractor recommendations that some stations should be permanently  closed. For example, District 5\u2019s input concurred with the closure of six  stations, including one where officials we interviewed on site confirmed its  steadily diminishing SAR caseload. Our analysis of Coast Guard data  validated this station\u2019s low workload showing an average of seven single- boat response SAR cases annually from fiscal years 2010 through  2016. We also found that this station had been recommended for  closure in the past. In another example, District 9 input sought an  additional, seasonal closure of one station that the contractor analysis did  not evaluate for permanent closure due to one criterion applied by the  process. District 9\u2019s input provided additional context for this station,  saying that seasonal closure was preferable to taking no action because  there was significant response redundancy in this region. Moreover, the  district input noted that the acquisition of modern boats has increased the  range and reduced the response time of many stations. District input also  noted that improvements in public education and awareness of safe  boating practices, technology and availability of communications  equipment, and the increase in non-Coast Guard response resources has  resulted in a steady and dramatic decline in the stations\u2019 SAR workloads.  Our analysis of all Coast Guard single-boat response data for cases  within the contiguous United States for fiscal years 2010 through 2016  confirmed this decline, showing an annual average of 46 cases per  station in 2010 to an annual average of 39 cases per station in 2016, a  decline of about 15 percent. Appendix IV provides details from our  analysis of the number of single-boat response SAR cases conducted by  selected stations."], "subsections": []}]}, {"section_title": "A 2014 Analysis of Selected Coast Guard Air Stations and Air Facilities Identified Unnecessary Duplication but Coast Guard Would Benefit from a Comprehensive Process", "paragraphs": ["In 2014, the Coast Guard contracted for an analysis of selected air  stations and air facilities that identified overlap and unnecessary  duplication but it did not comprehensively review all air stations and air  facilities. Specifically, the criteria-based analysis reviewed search and  rescue capabilities, operational case data, and other mission  requirements, and determined that certain air facilities provided  overlapping search and rescue coverage, some of which was  unnecessarily duplicative. Coast Guard officials said they used the results  of this analysis to support proposed closures of air facilities in Newport,  Oregon, and Charleston, South Carolina, in the President\u2019s Fiscal Year  2014 Budget. Subsequent appropriations for fiscal year 2014 also did  not include funding for the operation of the two air facilities. However,  shortly before their planned closure date, the Coast Guard encountered  strong opposition to the closures at the local, state, and Congressional  levels, and did not close them.", "As with boat stations, the Coast Guard considers some overlapping  coverage among air stations and air facilities desirable to mitigate  potential risks such as those posed by asset maintenance downtime,  limitations in the number of qualified personnel, restrictive weather  conditions, or case complexity. Coast Guard officials stated that the 2014  analysis considered many factors to address potential impacts of the  closure of the Newport and Charleston air facilities. For example, the  Coast Guard used modeling tools to determine the operational impact of  altering facility locations and the availability of aviation assets. Coast  Guard officials told us they also conducted outreach to the affected  communities and their political representatives in advance of the  proposed closure date, as required by law.", "Further, Coast Guard officials explained that the fiscal outlook at the time  (e.g., sequestration) required changes to optimize assets, and their  proposal accomplished this without sacrificing operational capability  because the response time of neighboring SAR units would remain within  the Coast Guard\u2019s SAR standards. The 2014 analysis also determined  that the majority of SAR cases involving these two facilities occurred  close to shore, with boat responses generally arriving on scene and  conducting the search and rescue instead of air assets. Circles in figure  6 represent air asset response capabilities nationwide, as of August 2017,  with darker shades reflecting greater overlapping coverage.", "In 2014 and 2016, two laws were enacted that required the Coast Guard  to keep the air facilities open for a specific period of time, and  established a number of requirements the Coast Guard is required to  follow if it proposes closing or terminating operations at its air facilities.  Thus, the two air facilities remained open. As of May 2017, Coast Guard  officials told us they have no plan to close air facilities or air stations, nor  do they plan to develop a process to comprehensively review air stations  or facilities to optimize their locations because previous attempts to close  stations or facilities have been prohibited by law or subject to certain  requirements. However, the Coast Guard has responsibility for evaluating  the need for its air stations and air facilities to ensure that it is using  resources as effectively and efficiently as possible. The Coast Guard\u2019s  station optimization charter calls for a defendable (i.e., sound) and data- driven analysis of boat stations that meets statutory requirements. This  charter could be a template for establishing a parallel process for  comprehensively analyzing the need for its air stations and air facilities.", "GAO\u2019s Program Evaluation guidance calls for evaluating programs based  on well-regarded criteria to achieve strong, defensible conclusions.  Program evaluations can also provide accountability for the use of public  resources (e.g., to determine the \u201cvalue added\u201d by the expenditure of  those resources), such as whether scarce resources are being spent on  unnecessarily duplicative air facilities. Having a sound and reproducible  process for comprehensively analyzing the need for air stations and air  facilities will better position the Coast Guard to make decisions to  enhance the efficiency of its operations and more effectively allocate its  resources. These actions will also better inform Congress as to the status  of the Coast Guard\u2019s resource needs and the efficiency of its operations."], "subsections": []}, {"section_title": "Coast Guard Has Not Taken Actions nor Developed a Plan to Close Unnecessarily Duplicative Stations Its Analyses Identified", "paragraphs": ["The 2013 analysis of Coast Guard stations identified unnecessary  duplication and recommended certain stations for potential closure;  however, as of August 2017 the Coast Guard had not closed any stations,  nor developed a plan with time frames for closing stations. In their input to  the station optimization process, Coast Guard officials in affected districts  supported recommended station closures to achieve operational  improvements, and Coast Guard leadership continues to believe the  study results are valid. Implementing station closures could also result in  costs savings."], "subsections": [{"section_title": "Coast Guard Has Attempted to Close Stations At Least Eight Times since 1973", "paragraphs": ["The need to close some Coast Guard stations that provide unnecessarily  duplicative SAR coverage to efficiently respond to changed  circumstances such as improved technology is not a new issue. Coast  Guard officials reported, and our prior work has shown, that the Coast  Guard has attempted to permanently or seasonally close stations at least  eight times since 1973. However, closing unneeded stations has  historically been difficult due to public concern about the effect of closures  on local communities and other factors. In some cases over the years,  Congress has intervened and enacted federal laws that have affected  Coast Guard\u2019s proposed closures. For example, in 1988 the Department  of Transportation and Related Agencies Appropriations Act, 1989,  required the Coast Guard to reopen boat stations 1 year after they had  been closed, and at the same time provided that GAO was to evaluate  the methods behind the Coast Guard decision. Responding to this  provision in 1990, we reported that the Coast Guard\u2019s 1988 closure  decisions were based on flawed methods, incomplete analysis, and  incomplete data. The Coast Guard subsequently updated its process and  by 1994 we reported that that it was using a reasonable approach to  recommend stations for closure.", "Despite the improved Coast Guard process, no stations have been closed  since 1988. Coast Guard officials reported that Congress continues to  oversee and manage the closure of stations, such as by establishing new  requirements in the Coast Guard Authorization Act of 1996, which must  be met to change any boat stations, after the Coast Guard attempted to  close 23 stations in 1995. Similarly, after the Coast Guard attempted to  close two air facilities in 2014, legislation was passed in 2014 and 2016  that prohibited Coast Guard air facility closures until January 2016 and  2018, respectively.", "Figure 7 provides a timeline of Coast Guard station change proposals or  actions, including at least eight Coast Guard attempts to close stations  between 1973 and 2014. The figure also includes statutory requirements  established in 1989, 1996, 2014, and 2016, and two data-driven analyses  and studies with recommendations to address unnecessary duplication,  among other information.", "Past Coast Guard efforts to analyze and close stations have frequently  identified the same stations as candidates for closure. For example, prior  to the 2013 contractor study, at least two Coast Guard districts conducted  their own station analyses to identify opportunities to improve their  stations\u2019 operations. These analyses also recommended permanent and  seasonal closures of some stations. Specifically, in 2010, Coast Guard  District 9 began conducting a data-driven analysis of its stations to  optimize its boat forces. District 9 officials told us they initiated the  analysis due to budget constraints, the challenges they had in fully  staffing their stations, and their awareness of overlapping SAR coverage  within the district. District 9\u2019s analysis reviewed more than 16,000 SAR  cases over a 5-year period (2008\u20132012) to understand and quantify  potential response inefficiencies. According to Coast Guard officials, their  analysis determined that overall SAR caseload in District 9 was extremely  high in the summer months, but there was little or no SAR caseload for  some stations during the winter, a factor which also affected training  proficiency as personnel were not able to respond to enough cases to  maintain required qualifications. Based on the results of this analysis, in  December 2012, District 9 requested approval to permanently close five  stations and seasonally close three stations to achieve more effective  operations and improve maritime safety in the Great Lakes region.", "According to Coast Guard district officials, these recommended closures  provided no calculated savings to taxpayers because they involved  movement of personnel positions and assets to other stations, not their  elimination. Instead, the recommendations showed an effort to improve  operational efficiency and conserve Coast Guard resources. Furthermore,  among those stations in Districts 1, 5, and 9 recommended for permanent  closure in 2013, at least five\u2014Ashtabula, Ohio; Frankfort, Michigan;  Harbor Beach, Michigan; Shark River, New Jersey; and Block Island,  Rhode Island\u2014were also recommended for closure between 1985 and  1988.", "When we compared the 2012 recommendations from the District 9  analysis, the 2013 contractor analysis recommendations that used the 9- step Station Optimization Process, and additional 2013 district input, we  found similar results among the various analyses with respect to which  stations should be permanently or seasonally closed. Based on our  review of documentation and interviews with District 9 officials, as well as  our comparison of the results of the District 9 analysis with the results of  the contractor analysis, the 2013 recommendations are affirmed by the  District 9 analysis. We provide a comparison of selected  recommendations and Coast Guard Headquarters\u2019 tentatively planned  actions in table 2."], "subsections": []}, {"section_title": "District 9 and Station Input Supported Recommended Permanent and Seasonal Station Closures", "paragraphs": ["Input from District 9, which had the greatest number of affected stations in  the 2013 analysis, supported recommended changes and stated that \u201cthe  existing unnecessary redundancies, unsustainable complexities, and  unacceptable resource gaps negatively affected mission execution in the  Great Lakes, where staffing shortfalls exist.\u201d District 9\u2019s input further  stated that in some regions, four stations could respond to SAR cases  within the Coast Guard\u2019s SAR standard, and that while some redundancy  is merited, these areas demonstrate redundancy that is operationally  unnecessary, inefficient, and detrimental to the training needs of station  personnel.", "Our interview with officials at one affected station confirmed some of the  complexities facing the region. For example, officials told us that because  one station recommended for seasonal closure does not operate a boat  capable of offshore SAR responses, adjacent stations are already  directed to respond to certain offshore SAR cases in that station\u2019s area of  responsibility to meet the Coast Guard\u2019s 2-hour SAR standard. Officials  we interviewed from each of the seven stations we visited in District 9  noted their station\u2019s high SAR caseload concentration during the summer  months and the low or nonexistent SAR caseload during the winter. For  example, officials from two stations that the Coast Guard would like to  seasonally close during the winter told us that their stations had not  responded to an ice rescue in more than 7 years. Officials we interviewed  at one station recommended for permanent closure noted that  commercial boating traffic and the local population have been declining  for many years, that the station was not busy during the winter season,  and that the station had not conducted an ice rescue since 2002.", "In 2017, the Coast Guard affirmed that its leadership believed that the  results of the 2013 study remained valid as station workloads have  remained relatively consistent. Headquarters officials also told us that the  2013 study criteria and subsequent recommendations for permanent  closures were conservative because of previous unsuccessful attempts to  close stations, and to meet statutory requirements to maintain a certain  level of SAR coverage. They also told us that the analysis did not  consider additional layers of response even though these layers could  provide some additional SAR response backup for Coast Guard stations.  For example, the contractor\u2019s analyses of boat stations did not consider  SAR support provided by Coast Guard aviation assets, which generally  provide an additional layer of SAR coverage for boat stations. Moreover,  district officials told us that aviation assets in District 9 were recently  realigned to provide even greater response capability, including longer  range helicopters with de-icing capability to improve winter response  capability.", "The contractor analysis also did not take into account the potential SAR  capabilities of commercial towing operators and local first responders  which can also provide another layer of coverage to assist Coast Guard  stations with SAR coverage. For example, officials from each of the seven  stations we visited in District 9 told us that they coordinate with other  entities, such as commercial towing operators, who can conduct  responses for non-life-threatening incidents, such as providing fuel to or  towing disabled boats in their station\u2019s area of responsibility. Officials from  one station also told us that the local fire department has performed ice  rescues in the past, because people who require ice rescues tend to dial  911 first rather than call the Coast Guard, and thus local emergency  responders are able to respond faster than the Coast Guard. Officials  from another station told us that the local sheriff has two response boats,  and that the Coast Guard coordinates with local government and  responders."], "subsections": []}, {"section_title": "Station Closures Could Achieve Cost Savings", "paragraphs": ["Station closures could also achieve cost savings in addition to the  aforementioned efficiency improvements. For example, based on our  analysis of the contractor study, if its recommendations to permanently  close the 18 stations from D1, D5, and D9 were implemented, and  personnel and boat assets were moved or reduced in accordance with  the study recommendations, the study reported that these closures could  achieve potential cost savings of about $290 million over 20 years. In  addition, land disposition estimates were excluded from the study, which  could result in one-time proceeds from the sale of the land on which the  stations are sited, if the land value exceeded remediation costs.", "In addition to lost opportunities to improve operational efficiency and  effectiveness because stations were not closed previously, some of these  stations have also fallen into physical disrepair and will require funding for  repairs if the stations remain open, even if they are only operated  seasonally. For example, officials at one station we visited showed us a  boat dock that was improperly installed and thus was subsequently  damaged by waves and will need to be repaired or replaced. At this same  station, officials informed us that the furnace system requires daily,  manual adjustments to address temperature fluctuations that could cause  damage to the station. One official also told us that this station\u2019s building  structure is too big and costly, and its condition too poor, to be worth  keeping. Therefore, even if this station were seasonally closed, as  currently recommended\u2014despite the analysis results suggesting  permanent closure\u2014the station will continue to require personnel to be at  the station on a daily basis year round. Another station, which multiple  studies recommended for permanent closure because of unnecessary  duplication and a caseload insufficient to sustain the training  requirements of personnel stationed there, was rebuilt as a result of  extensive damage from Hurricane Sandy. According to Coast Guard  budget data, more than $2.3 million was expended to restore this station  as of March 2017 using funds appropriated by the supplemental  appropriations act enacted in response to Hurricane Sandy."], "subsections": []}, {"section_title": "Actions Needed to Address Unnecessary Duplication", "paragraphs": ["Given the extent of overlapping SAR coverage identified by the Coast  Guard\u2019s analyses and its attempts to address unnecessary duplication,  we considered the stations\u2019 levels of overlapping coverage in the context  of the definitions we use for identifying overlap and duplication. Figure 8  depicts the extent of the Coast Guard\u2019s overlapping boat and air station  SAR coverage, with darker shading representing greater overlapping  coverage, some of which the Coast Guard determined to be  unnecessarily duplicative. Boat station coverage is represented by  shading while aviation coverage is shown by the largest circle sizes.", "In April 2016, the Coast Guard completed statutory requirements  associated with closing eight stations in District 9 by conducting outreach  to regional and local communities that would be affected by seasonal  closures. The Coast Guard held these meetings to explain why it was  necessary to optimize station locations and reallocate personnel from  closed stations to their adjacent stations; address overlapping SAR  coverage; and seasonally close unnecessarily duplicative stations. Coast  Guard officials from one station told us they held a public meeting with the  local fire department, police, and commercial towing operators to describe  planned changes for seasonal operations at the station, despite this  station having been recommended for permanent closure by studies and  district input. According to Coast Guard officials, while some local  responders in the District 9 area expressed some concerns, they  understood the need for change. In addition, according to headquarters  officials, the Coast Guard has also completed outreach efforts with  members of Congress who represent these communities. They further  stated that they plan to follow the same outreach process when they  finalize decisions about whether to permanently or seasonally close  stations in Districts 1 and 5.", "The Coast Guard has not taken action to implement the results of its  analyses which recommended closures even though it has completed  requirements to pursue station closures in District 9. Officials stated that  the Coast Guard has not implemented the results of its sound process  because past station closure efforts have been met with resistance from  affected communities. As a result, Coast Guard leadership decided to  pursue a more cautious approach by maintaining seasonal daily  operations rather than closing stations outright as recommended in  multiple analyses.", "Standards for Internal Control in the Federal Government state that  agencies should have policies and procedures for ensuring that findings  of audits or other reviews, such as the Coast Guard\u2019s 2013 station  optimization study, are promptly resolved. The guidance further states  that managers are to (1) correct identified deficiencies, (2) produce  improvements, or (3) demonstrate that the findings and recommendations  do not warrant management action.", "Coast Guard officials stated they recognize that their planned actions do  not fully match the identified recommendations, but given historical  challenges with closing stations, seasonal closures are preferable to  taking no action. In March 2017, Coast Guard officials told us they  intended to begin the process for seasonal closures of stations in District  9 at the end of the 2017 boating season while actions in Districts 1 and 5  are pending as the Coast Guard has not finalized its decisions about  these stations.", "The Project Management Institute\u2019s Standard for Program Management  describes, among other things, how resource planning, goals, and  milestones are good practices that can enhance management for most  programs. By executing decisions to close stations based on the results  of its analyses and developing a plan with milestones to execute actions it  has identified to address unnecessary duplication, the Coast Guard will  be better positioned to follow through with both permanent and seasonal  closures of unnecessary stations, can improve its operational and training  proficiency by consolidating the remaining stations\u2019 workloads to allow for  sufficient training, and may realize cost savings."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Coast Guard\u2019s 2013 analysis, based on a sound, data-driven process  that applied established criteria\u2014its 2-hour SAR response standard\u2014 supports permanently closing some boat stations. Nevertheless, Coast  Guard officials do not intend to follow the recommendations to  permanently close the stations the study recommended, due, in part, to  views expressed by community representatives. The Coast Guard\u2019s 2014  air station and air facilities study also supported closing two air facilities  and was criteria-based, but was not comprehensive. An optimization  process similar to that applied to boat stations could make a better case  for closing selected air stations and air facilities, if it is methodologically  sound.", "The need to close Coast Guard stations that provide unnecessary  duplication of SAR coverage, in response to changing circumstances, is  not a new issue. Closing unneeded stations has historically been difficult,  but with improvements in technology, severely decreased workloads, and  continuing budget constraints, the importance of reevaluating the  operations of these stations is even greater. In addition to lost  opportunities to improve operational efficiency and effectiveness that  would be gained by closing unnecessary stations, some of these stations  have fallen into physical disrepair and will require funding for repairs if  they remain open. Given these factors, Coast Guard action is clearly  warranted."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are recommending the following three actions to the Coast Guard:", "The Commandant of the Coast Guard should establish and follow a  sound air station optimization process similar to its process for  analyzing boat stations to allow it to comprehensively analyze its need  for air stations and air facilities and determine what changes may be  needed. (Recommendation 1)", "The Commandant of the Coast Guard should establish a plan with  target dates and milestones for closing boat stations that it has  determined, through its 9-step process and subsequent analysis,  provide overlapping search and rescue coverage and are  unnecessarily duplicative. (Recommendation 2)", "The Commandant of the Coast Guard should take action to close the  stations identified according to its plan and target dates.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. In its  comments, reproduced in appendix V, DHS concurred with our  recommendations. DHS, through the Coast Guard, also provided  technical comments, which we incorporated as appropriate.", "DHS concurred with our first recommendation that the Coast Guard  establish and follow a sound air station optimization process similar to its  process for analyzing boat stations so it may comprehensively analyze its  air station and air facility needs. DHS further stated that the Coast Guard  would utilize its fiscal year 2020 Planning, Programming, Budget, and  Execution cycle to identify efficiencies in air station optimization using  best practices employed in its boat station optimization efforts. DHS  expects this effort to be completed in September 2019.", "DHS concurred with our second recommendation that the Coast Guard  establish a plan with target dates and milestones for closing boat stations  that it has determined provide overlapping search and rescue coverage  and are unnecessarily duplicative.  DHS stated that Coast Guard  headquarters and appropriate district commands will continue to analyze  operational coverage across the nation through the 9-step optimization  process and recommend closures or seasonalization (e.g., seasonal  closures) of boat stations to eliminate unnecessary duplication and  overlap in search and rescue coverage. The Coast Guard\u2019s internal  analysis is expected to be completed in September 2020.", "DHS concurred with our third recommendation that the Coast Guard take  action to close the identified stations according to its plan and target  dates, stating that Coast Guard headquarters personnel and appropriate  district commands will continue to analyze closing or seasonalizing  operations at boat stations identified according to its plan and target  dates. DHS further stated that it must complete implementation of the  second recommendation before beginning to implement the third and that  the estimated completion date for the third recommendation was to be  determined.  Given the robustness of the Coast Guard\u2019s review process  and the clear results showing unnecessary duplication among some boat  stations, in addition to other valid analyses completed in previous years  supporting the closure of unneeded boat stations, the Coast Guard  should move forward with minimal delay to implement this third  recommendation, once the plan as outlined in the second  recommendation is completed. We will continue to monitor the Coast  Guard\u2019s actions to close unnecessarily duplicative stations in a timely  manner through our annual report on duplication, overlap, and  fragmentation in the federal government.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Homeland Security, and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To identify the extent to which the U.S. Coast Guard (Coast Guard) has a  sound process for analyzing the need for its boat stations, we reviewed  laws, policies, and procedures related to its search and rescue (SAR)  mission. We reviewed Coast Guard documentation of processes it used  to analyze the need for boat stations, reviewed resource and budget  factors, and analyzed station activity levels. We also reviewed prior GAO  reports on the Coast Guard\u2019s resource allocation process and its previous  attempts to close stations. To verify and validate the Coast Guard\u2019s  specific analytical process used to determine overlapping coverage, we  obtained and analyzed the Coast Guard\u2019s analytical assumptions,  including the operational parameters of the assets assigned to the  stations (e.g., boat speeds), and station locations. This analysis also  allowed us to verify the soundness of the Coast Guard\u2019s model used to  identify overlap. We then independently recreated and visually depicted  overlapping SAR coverage provided by the stations, based on Coast  Guard data, assumptions, and documentation, and compared it with SAR  case data by geographic area. We then analyzed Coast Guard data on  single boat SAR responses (sorties) by station for fiscal years 2010  through 2016, the most recent data available at the time of our review.  We visited a nongeneralizable sample of 12 stations we selected from  within districts where the Coast Guard had identified overlap, and  interviewed officials to identify local policies, station characteristics, local  coordination with emergency responders and federal agencies, and local  input to the Coast Guard\u2019s process for assessing station needs and  implementing changes to the locations of stations, if any.", "Additionally, we interviewed Coast Guard officials, including field and  headquarters personnel, to determine the extent to which the Coast  Guard had assessed maritime activity trends and leveraged resources  from outside entities, such as local first responders, federal agencies, and  private industry. We also interviewed Coast Guard officials to obtain  information on the extent to which the Coast Guard used findings and  recommendations from selected studies, strategies, and plans in its  analyses of the need for its boat stations.", "To assess the reliability of Coast Guard SAR data, we interviewed  knowledgeable officials, reviewed documentation, and electronically  tested the data for obvious errors and anomalies. We interviewed Coast  Guard officials to discuss the reliability issues we identified, such as the  inability to attribute multi-boat SAR case responses to individual stations,  as well as inconsistent data related to the types of boats used to conduct  SAR cases. Regarding attributing multi-boat responses to individual  stations, Coast Guard officials told us that some cases involve multiple  boats and that the outcome of a SAR case may not be attributable to an  individual station. Regarding boat assets used to conduct SAR cases, in  February 2017, officials informed us that in 2015 the Coast Guard  implemented changes to its Marine Information for Safety and Law  Enforcement (MISLE) system and added around 500 controls, such as  built-in data entry checks, to prevent potential data entry errors. Officials  told us that this change could have caused some inconsistences in how  the data is captured, but that the implementation of the changes includes  testing and ongoing actions to resolve the issues. We determined that the  data were sufficiently reliable for the purposes of this report to  demonstrate selected station caseloads in our report. We compared  Coast Guard actions to evaluate stations against criteria established in  GAO\u2019s Designing Evaluations guidance, which call for adhering to  established evaluation design practices in order to achieve reliable  results, the Coast Guard\u2019s SAR response standard, and statutory  requirements to conduct public outreach.", "To identify the extent to which the Coast Guard has a sound process to  analyze the need for its air stations and air facilities, we reviewed laws,  policies, and procedures related to its SAR mission. We reviewed Coast  Guard documentation of processes it used to analyze the need for  selected air facilities in 2014. We obtained and analyzed Coast Guard  assumptions and station locations for determining overlapping SAR  coverage in 2014 and used a mapping program to visually depict  overlapping coverage provided by aviation assets, based on Coast Guard  data, assumptions, and documentation. Additionally, we interviewed  Coast Guard officials to obtain information on the extent to which the  Coast Guard used findings and recommendations from selected studies,  strategies, and plans in its analyses of the need for and locations of its air  stations. We compared Coast Guard actions to evaluate air stations and  air facilities against criteria established in GAO\u2019s Designing Evaluations  guidance which calls for adhering to established evaluation design  practices in order to achieve reliable results, to determine if the Coast  Guard\u2019s methodological steps were sound.", "To determine the extent to which the Coast Guard has taken actions to  implement the results of its analyses of its need for boat and air stations,  we analyzed Coast Guard documents and reports to identify proposals  put forth by the Coast Guard for permanently or seasonally closing  stations it has identified as overlapping and unnecessary. We analyzed  these proposed actions to determine whether proposed plans or  decisions regarding stations aligned with the results of the Coast Guard  analyses. Specifically, we reviewed the study reports, memoranda  detailing district input on the results of the 2013 contractor study and their  verification of the stations the study identified as unnecessarily  duplicative, and compared the recommended closures from the various  studies to determine if the outcomes were consistent. We also compared  Coast Guard actions against its response standards and statutory  requirements to conduct public outreach. Finally, we reviewed documents  and information on these proposals and compared them against criteria in  Standards for Internal Control in the Federal Government, and leading  practices identified in the Project Management Institute\u2019s Standard for  Program Management.", "We conducted this performance audit from July 2016 through October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Selected Coast Guard Assets", "paragraphs": ["The U.S. Coast Guard (Coast Guard) uses several different types of  assets to carry out its missions, including search and rescue. Coast  Guard assets include boats, rotary wing aircraft (helicopters), fixed wing  aircraft (planes), and cutters (including patrol boats and ships)."], "subsections": [{"section_title": "Boats", "paragraphs": ["The Coast Guard\u2019s primary boat station search and rescue (SAR) assets  are its boats, which it uses to conduct searches near shore and on inland  waterways, such as harbors and bays that are too shallow for its larger  cutters to access. Different boats have different capabilities (see table 3).  For example, 47-foot motor life boats are slower than other boats, but can  operate in heavy weather and up to 50 nautical miles offshore."], "subsections": []}, {"section_title": "Aircraft", "paragraphs": ["The Coast Guard operates two types of aircraft: rotary wing (helicopters)  and fixed wing (airplanes). Rotary wing aircraft operate from air stations,  air facilities, cutters equipped with flight decks, and other locations that  can support flight operations. The Coast Guard uses its rotary wing  aircraft for search and rescue in coastal waters, among other mission  uses. Rotary wing aircraft can hover and are equipped with hoists, which  can allow rescue of distressed individuals from the water. Fixed wing  aircraft operate from Coast Guard air stations, air facilities, and airports,  and are used to conduct over-water searches and other missions."], "subsections": []}, {"section_title": "Cutters", "paragraphs": ["Coast Guard cutters are ships 65 foot or longer. They operate under the  control of District or Area commands. According to the Coast Guard,  cutters are suitable for conducting extended search and rescue  operations because of their high endurance, communications systems,  and ability to operate in heavier weather than other assets. Cutters carry  boats that can directly rescue mariners in distress. Cutters with flight  decks can serve as launch platforms for helicopters, which can help with  SAR operations.", "The Coast Guard generally allocates boats to stations based on the  needs and conditions of those stations. The Coast Guard also has other  types of boats in its inventory that are used for a variety of missions that  may include SAR missions. Table 3 provides details of selected boats  used for search and rescue."], "subsections": []}]}, {"section_title": "Appendix III: Extent of Search and Rescue Coverage by Coast Guard Boat Stations in the Contiguous United States", "paragraphs": ["Figures 9 through 12 show the extent of search and rescue coverage by  U.S. Coast Guard (Coast Guard) boat stations in the contiguous United  States and selected Coast Guard districts reported in September 2013.  The extent of coverage in 2017 was the same as the Coast Guard\u2019s 2013  contractor study reported."], "subsections": []}, {"section_title": "Appendix IV: Reported Single-Boat Search and Rescue Responses by Selected Stations, Fiscal Years 2010 through 2016", "paragraphs": ["Table 4 provides details of selected U.S. Coast Guard (Coast Guard)  stations recommended for permanent or seasonal closure and the search  and rescue (SAR) caseloads they reported for fiscal years 2010 through  2016, as well as estimated fiscal year 2015 annual operating costs. Our  analysis of Coast Guard SAR single-boat response case data from fiscal  years 2010 through 2016 found that the 18 stations recommended for  closure reported an average of about 15 single-boat SAR responses  annually, compared to an annual average of about 41 single-boat  responses for all boat stations. These numbers are based on station  reported data in the Coast Guard\u2019s Marine Information for Safety and Law  Enforcement (MISLE) case management system, and only include cases  in which a single boat was launched to conduct a SAR mission. Some  SAR missions result in multiple stations launching due to factors such as  close proximity of stations, case complexity such as weather conditions,  or other factors such as boat availability or training. Including multilaunch  cases could result in double counting of SAR cases and therefore these  cases were excluded from our analysis. Due to flexibility in how Coast  Guard stations report SAR responses, some seasonal stations, which are  detached subunits of larger parent stations, report the number of cases to  which they respond in combination with the parent station. Because we  could not disaggregate this information, we do not report on individual  cases from these stations.", "Table 5 provides details of selected stations recommended for permanent  or seasonal closure and the SAR caseloads they reported during the  winter months, for fiscal years 2010 through 2016."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Dawn Hoff (Assistant Director), Andrew  Curry (Analyst-in-Charge), Chuck Bausell, Dorian Dunbar, Michele Fejfar,  Peter Haderlein, Eric Hauswirth, Tracey King, John Mingus, Claire  Peachey, and Christine San all made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-198", "url": "https://www.gao.gov/products/GAO-19-198", "title": "Whistleblower Protection: Analysis of DOD's Actions to Improve Case Timeliness and Safeguard Confidentiality", "published_date": "2019-03-07T00:00:00", "released_date": "2019-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Safeguarding confidentiality to the maximum extent possible is essential for encouraging whistleblowers to report wrongdoing without fear of reprisal. In fiscal year 2018, DODIG received over 12,000 contacts from potential whistleblowers related to fraud, waste, abuse, employee misconduct, or other violations. The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to review the integrity of DOD's whistleblower program. This report assesses the extent to which DODIG and the military service IGs (1) met and took steps to achieve key fiscal year 2018 timeliness and quality goals, (2) established processes to protect whistleblower confidentiality, and (3) are able to safeguard sensitive information necessary to handle whistleblower complaints. It also evaluates (4) the extent to which select cases involving certain senior DOD civilian officials met key requirements.", "GAO assessed fiscal year 2018 IG performance data, surveyed all 108 DODIG employees who directly handle whistleblower complaints, reviewed IT security controls, and analyzed all 125 cases involving civilian DOD Presidential appointees with Senate confirmation dismissed by DODIG in fiscal years 2013-2017."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense Office of Inspector General (DODIG) and military service offices of inspector general (IG) met some but not all fiscal year 2018 timeliness and quality goals for handling whistleblower complaints. For example, DODIG met its goals related to referring complaints to the appropriate agency within a certain number of days. All IGs also generally met goals related to the quality of investigations. However, about 85 percent of DODIG reprisal and senior official misconduct investigations exceeded statutory and internal timeliness goals. Further, military service IGs did not meet most goals for handling cases within prescribed timeframes. For example, the service IGs averaged between 17 and 84 days to notify DODIG of their receipt of whistleblower reprisal allegations, exceeding the 10-day goal. The IGs have various initiatives underway to improve timeliness, such as a Naval IG program to reduce timeframes for initial credibility determinations. However, additional actions could provide a more targeted approach to improving performance against unmet timeliness goals\u2014such as for senior official misconduct investigations\u2014and better assure whistleblowers that their cases will be handled expeditiously.", "DODIG and the military service IGs have policies to protect whistleblower confidentiality, but some gaps exist. For example, DODIG guidance for protecting whistleblowers who report internal DODIG misconduct does not specify key steps investigators should take to protect confidentiality, such as not identifying complainants during interviews with case subjects. Also, Air Force, Naval, and Marine Corps IG guidance does not specify when whistleblower identities can be disclosed without consent. Without updated guidance, the IGs cannot ensure the consistent implementation of confidentiality protections.", "The IGs have taken steps to safeguard whistleblower information in their information technology (IT) systems and applications, such as by restricting access to case information through unique user permissions and by taking actions to follow DOD's IT risk management process. However, between 2016 and 2018, employees in all of the IGs have been able to access sensitive whistleblower information without a need to know. For example, DODIG determined that numerous restricted whistleblower records in its document repository were accessible to DODIG personnel without a need to know. Similarly, the Air Force IG's application did not restrict users from other DOD components from viewing Air Force IG case descriptions and complainant identities, while the Army IG's application and the Naval IG's system did not restrict personnel within those IGs from viewing allegations or investigations involving other personnel within those IGs. Additionally, employees in Marine Corps IG offices were able to see whistleblower cases assigned to other IG offices without a need to know. While some actions have been taken to address these issues, additional steps are needed to restrict access to case information in order to mitigate ongoing risks to whistleblower confidentiality.", "DODIG generally met key documentation requirements for the 125 cases it dismissed without investigation involving civilian DOD Presidential appointees with Senate confirmation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 12 recommendations, including that the IGs take additional actions to improve timeliness, develop additional procedures to protect whistleblower confidentiality, and take steps to further limit IG employee access to sensitive whistleblower information. DOD concurred with all of the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The integrity of the Department of Defense (DOD) whistleblower program  is paramount to establishing a culture that encourages the reporting of  potential fraud, waste, abuse, misconduct, and other complaints.  DOD  offices of inspector general (IG)\u2014including the DOD Office of Inspector  General (DODIG) and the IGs of the Air Force, the Army, the Navy, and  the Marine Corps\u2014rely in part on whistleblowers to help improve  government operations. Because whistleblowers also risk reprisal\u2014such  as demotion, reassignment, and firing\u2014IGs have a special responsibility  to protect whistleblower identity to the greatest extent possible, and to  investigate allegations in a timely, confidential, independent, and  objective manner.", "Congress and the former administration established a statutory and policy  framework which defines responsibilities for investigating whistleblower  allegations of DOD employee misconduct and for protecting DOD  whistleblowers from reprisal. Under this framework, DODIG is responsible  for investigating and overseeing the investigation of misconduct and  reprisal allegations from certain DOD civilian employees, contractors, and  military servicemembers, while the IGs of the military services are  responsible for investigating and reporting allegations involving military  servicemembers to DODIG. In recent years, members of Congress and  the public have expressed concerns regarding the integrity of misconduct  and reprisal investigations, including those involving senior DOD officials  and DODIG employees. Further, DODIG has designated ensuring ethical  conduct as a top management challenge for the department. In fiscal  year 2018, DOD\u2019s Hotline received 12,470 complaints from potential  whistleblowers.", "We have previously reported on DOD\u2019s whistleblower reprisal program. In  February 2012, May 2015, and September 2017, we found that DOD  faced challenges in overseeing its program and made 25  recommendations to help improve the timeliness, quality, independence,  and performance measurement of military, civilian, and contractor  investigations, among other things. DOD concurred with all of our  recommendations, and as of November 2018, has implemented 18 of  them.", "Section 536 of the National Defense Authorization Act for Fiscal Year  2017 included a provision for us to review the integrity of DOD\u2019s  whistleblower program. This report assesses the extent to which DODIG  and the military service IGs (1) met and took steps to achieve key fiscal  year 2018 timeliness and quality goals related to the handling of  whistleblower complaints, (2) established processes to protect the  confidentiality of whistleblowers, and (3) are able to access and  safeguard classified and sensitive information necessary to handle  whistleblower complaints. It also evaluates (4) the extent to which select  misconduct and reprisal cases involving certain senior DOD civilian  officials met key documentation and reporting requirements.", "For the first objective, we reviewed documentation and interviewed  officials on DODIG and military service IG timeliness and quality goals,  performance measures, and associated performance data for fiscal year  2018, along with ongoing and planned efforts to improve performance.  We selected data from this period because they constituted the most  complete and recent performance data available. Using the data, we  assessed the extent to which DODIG and the military service IGs met  timeliness and quality goals defined by statute and internal IG policy.  To  identify factors affecting timeliness and quality, we interviewed IG officials  and reviewed performance documentation. We also compared DODIG  and military service IG efforts to improve timeliness and quality, both  planned and completed, against Council of the Inspectors General on  Integrity and Efficiency (CIGIE) standards for federal IGs related to  establishing performance plans with goals and performance measures, as  well as Standards for Internal Control in the Federal Government related  to assessing and improving performance. We assessed the reliability of  DODIG and military service IG data by administering questionnaires on  data collection, storage, and compilation; interviewing cognizant officials;  and reviewing case management system documentation and quality  assurance procedures. We determined that these data were sufficiently  reliable for the purpose of assessing the extent to which DODIG and  military service IGs met fiscal year 2018 timeliness and quality  performance goals related to the handling of whistleblower complaints.", "For the second objective, we assessed DODIG and military service IG  policies and procedures for handling whistleblower allegations against DOD policy, CIGIE standards for federal IGs, and statutory protections  related to safeguarding whistleblower confidentiality.  We also reviewed  the results of DODIG\u2019s quality assurance reviews of the Air Force (2017),  Army (2018), and Naval (2016) IGs, and surveyed all 108 DODIG  employees directly involved with the handling of whistleblower cases to  ascertain whether, in their view, confidentiality processes are being  implemented in accordance with guidance and standards, identify  potential confidentiality issues, and to gather perceptions on the integrity  of the internal process for reporting misconduct, among other things. The  survey achieved an 80 percent response rate.", "For the third objective, we reviewed documentation and interviewed  officials on the extent to which DODIG and the military service IGs have  developed, implemented, and assessed key information technology (IT)  security controls, and authorized the IT systems and applications used to  process, store, and transmit sensitive whistleblower information. These  reviews were based on requirements and standards prescribed by  DOD, the Office of Management and Budget,  and the National  Institute of Standards and Technology (NIST).  We also reviewed  documentation and interviewed cognizant officials on the development  and implementation of the Defense Case Activity Tracking System  enterprise (D-CATSe)\u2014DOD\u2019s future system for managing whistleblower  information across DODIG and the military service IGs. Separately, we  reviewed data and information on the number and percentage of DODIG and military service IG classified cases closed in fiscal year 2017, and the  number and allocation of DODIG and military service IG staff possessing  security clearances. We also reviewed the processes and procedures for  storing and accessing classified information within DODIG and the  military service IGs against DOD policy related to establishing controls to  ensure access to classified information is limited to authorized persons.", "To determine the extent of substantiated and potential confidentiality  violations and retaliatory investigations involving DODIG employees, we  also obtained and analyzed fiscal years 2013\u20132018 data on known or  perceived violations of confidentiality standards and retaliatory  investigations from DODIG, the service IGs, the Office of Special  Counsel, and the CIGIE Integrity Committee. We selected the data  covering this period of time because they were the most recent and  reliable data available. We assessed the reliability of these data by  administering questionnaires, interviewing cognizant officials, and  reviewing the methods used to query IG case management systems for  the data. We determined the data to be sufficiently reliable for the limited  purpose of identifying potential confidentiality violations and retaliatory  investigations.", "For the fourth objective, we reviewed all 125 administrative misconduct  and reprisal cases involving civilian DOD PAS subjects that were  dismissed by DODIG in fiscal years 2013 through 2017. We chose to  review cases from this period because they constituted the most recent  and complete data in DODIG\u2019s case management system and because  they would most accurately reflect the extent to which the majority of  DODIG\u2019s cases included required documentation. To conduct this review,  we developed and used a data collection instrument to capture  information regarding general case characteristics and the presence of  information and documentation required by DOD policies and CIGIE best  practices. Core elements of this instrument were shared with DODIG officials to ensure alignment with the policies and practices in place when  the cases were dismissed.", "To help ensure the accuracy of the information we collected, two analysts  reviewed each casefile and coded for the presence of required  information using the data collection instrument. In the event that  disagreement between the two analysts occurred, the analysts discussed  and resolved the disagreement by identifying and reviewing supporting  database information or documentation, and obtained the input of a third  analyst, if necessary. We reviewed all cases dismissed during this period;  as a result, the dismissed case data in this report do not have a sampling  error. Separately, we also reviewed documentation from DODIG on  civilian DOD PAS official allegations and investigation results reported to  the Secretary of Defense and Congress since fiscal year 2013. Appendix  I provides additional details about our scope and methodology.", "We conducted this performance audit from October 2016 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.", "While this audit was initiated in October 2016, work was suspended from  December 2016 until September 2017 due to other engagement work."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DOD Personnel Misconduct", "paragraphs": ["The Inspector General Act of 1978, as amended, provides that the IG  may receive and investigate complaints or information from an employee  concerning the possible existence of an activity constituting a violation of  law, rules or regulations; gross mismanagement; gross waste of funds;  abuse of authority; or a substantial and specific danger to public health or  safety. Violation of the law may also include a violation of a provision of  criminal law, including the Uniform Code of Military Justice, which is  codified in Title 10 of the United States Code."], "subsections": []}, {"section_title": "Whistleblower Protections for DOD Personnel", "paragraphs": ["Whistleblowers are protected from reprisal as a result of making a  protected disclosure through various statutes, regulations, and  presidential policy covering different DOD personnel groups. Table 1  summarizes the statutory and policy authorities covering DOD personnel,  along with selected protected disclosures and prohibited personnel  actions\u2014which are two required elements of the test for determining  whether there was reprisal against a complainant for whistleblowing. A  protected disclosure is a disclosure of wrongdoing by a whistleblower to a  party that is an eligible recipient of that disclosure, while prohibited  personnel actions include those actions that are taken or threatened in  response to a protected disclosure, such as termination, reassignment, or  a significant change in duties, responsibilities, or working conditions."], "subsections": []}, {"section_title": "DODIG and Military Service IG Roles and Responsibilities for Investigating Whistleblower Reprisal Complaints", "paragraphs": ["DODIG and the military service IGs share responsibility for investigating  misconduct and whistleblower reprisal complaints. Allegations of  misconduct and other whistleblower complaints, including those involving  senior officials, may be investigated by DODIG or a military service IG  depending on the nature of the allegation or the DOD employees  involved. Responsibilities for investigating whistleblower reprisal  complaints differ according to DOD personnel type. Specifically, DODIG  is responsible for investigating and overseeing DOD component  investigations of complaints alleging reprisal against certain DOD  civilian employees, and for investigating complaints alleging reprisal  against DOD contractor, subcontractor, grantee, and subgrantee  employees. For complaints alleging reprisal against a military  servicemember, DODIG has the authority to either investigate the  complaint or refer it to a military service IG for action.  Most reprisal  cases involving military servicemembers are investigated by the military  services IGs, with DODIG oversight.", "In order to carry out its responsibilities, DODIG has established several  directorates to facilitate the handling and investigation of misconduct and  reprisal complaints. Figure 1 provides a high-level depiction of the DODIG  and military service IG processes for handling reprisal, senior official  misconduct, and internal DODIG employee complaints, along with the  basic roles of the DODIG directorates."], "subsections": []}, {"section_title": "Protecting Whistleblower Confidentiality", "paragraphs": ["Whistleblowers confidentiality protections are codified in federal law. The  Inspector General Act of 1978, as amended, restricts DODIG and military  service IGs from disclosing a whistleblower\u2019s identity without the consent  of the whistleblower unless the IG determines that such disclosure is  unavoidable during the course of the investigation. For example, if a  complaint includes information that poses a personal or public safety  concern, disclosing the identity of the complainant may be unavoidable.  Additionally, the Privacy Act of 1974 prohibits the disclosure of records on  any person to another agency without the consent of the person the  record relates to, but allows for the disclosure of an employee\u2019s identity if  the purpose is for routine use\u2014that is, a use that is disclosed for a  purpose compatible with the purpose for which it was collected.  For  example, referring an allegation from an IG hotline to an appropriate  investigative unit would be considered routine use."], "subsections": []}, {"section_title": "Federal Law and Standards Establish Information Security Requirements to Protect Federal Systems", "paragraphs": ["The Federal Information Security Modernization Act of 2014 is intended to  provide a comprehensive framework for ensuring the effectiveness of  information security controls over information resources that support  federal operations. The law requires each agency to develop,  document, and implement an agency-wide information security program  to provide risk-based protections for the information and information  systems that support the operations and assets of the agency. The law  also requires agencies to comply with NIST standards and the Office of  Management and Budget requires agencies to comply with NIST  guidelines for protecting federal IT systems.", "Among other things, NIST defines how agencies should determine the  security category of their information and information systems based on  the potential impact or magnitude of harm that could occur should there  be a loss in the confidentiality, integrity, or availability of the information or information system. NIST also prescribes an array of activities associated  with the selection, implementation, and assessment of IT security  controls\u2014and the authorization to operate federal IT systems and other  products.", "DOD Instruction 8510.01, Risk Management Framework for DOD  Information Technology, established a risk management framework for  DOD information technology that is consistent with the principles  established in NIST Special Publication 800-37. This framework includes  requirements and procedures for identifying, implementing, assessing,  and managing security controls."], "subsections": []}, {"section_title": "Council of the Inspectors General on Integrity and Efficiency (CIGIE) Standards", "paragraphs": ["CIGIE\u2019s Quality Standards for Investigations and Quality Standards for  Federal Offices of Inspectors General collectively provide a set of  overarching principles that IGs should adhere to in conducting their  operations. They also provide a framework for conducting high-quality  investigations through the definition of general and qualitative  standards. General standards, among other things, address the  qualifications of investigators, independence, and the concept of due  professional care and confidentiality protections throughout the course of  an investigation. Qualitative standards focus on the establishment of  policies, procedures, and instructions for confidentially handling and  processing complaints, along with investigative planning, execution,  reporting, and information management.", "The CIGIE Integrity Committee receives, reviews, and refers for  investigation allegations of wrongdoing made against Inspectors General,  designated staff members of an IG, and the Special Counsel and Deputy  Special Counsel of the Office of Special Counsel.  Each Inspector  General, including the DODIG, is required to submit a list of designated  staff members to the CIGIE Integrity Committee Chairperson annually."], "subsections": []}]}, {"section_title": "IGs Met Some Timeliness and Many Quality Goals, but More Actions Could Improve Performance against Unmet Goals", "paragraphs": [], "subsections": [{"section_title": "DODIG Met Some, but Not All, Fiscal Year 2018 Timeliness Goals", "paragraphs": ["DODIG met some but not all internal timeliness goals for fiscal year 2018  related to the intake and referral of whistleblower allegations, as well as  the oversight of DOD component investigations. DODIG also did not meet  internal goals related to the timeliness of senior official misconduct  investigations or internal and statutory goals related to the timeliness of  reprisal investigations. Intake is the initial process to determine whether a  complaint contains a prima facie allegation  of whistleblower reprisal or a  credible allegation of misconduct by senior officials. Oversight reviews  are conducted by the DODIG whistleblower reprisal and senior official  investigations directorates to ensure the quality of DOD component  investigations.", "DODIG officials cited several reasons for not meeting timeliness goals,  including a backlog of cases and a lengthy report review process. Further,  DODIG officials noted that the number of whistleblower reprisal cases  increased from 1,013 to 2,002 (98 percent) over the past 5 years, while  an internal DODIG fiscal year 2018 performance report cited other  reasons for not meeting timeliness goals, including the assumption of  responsibility for all sexual assault victim reprisal cases by the  whistleblower reprisal investigations unit, the number of high-priority  senior official cases concurrently open, and the increasing scope and  complexity of investigations."], "subsections": [{"section_title": "Timeliness of DODIG Intake and Oversight Reviews", "paragraphs": ["DODIG met its fiscal year 2018 timeliness goals for civilian and contractor  case intakes and senior official misconduct oversight reviews goals, but  did not meet goals related to the average days of senior official  misconduct and military reprisal intakes, and the average days for reprisal  oversight reviews (see figure 2). In fiscal year 2018, DODIG resolved and  closed 631 senior official misconduct cases during the intake review  process and it performed intake reviews for 1,032 whistleblower reprisal  cases. It also conducted oversight reviews for 157 senior official  misconduct cases and 995 reprisal cases.", "By comparison, DODIG met its fiscal year 2017 targets related to the  percentage of intakes and oversight reviews meeting timeliness goals, but  it did not meet its goals for the average days of reprisal and senior official  misconduct intakes."], "subsections": []}, {"section_title": "Timeliness of DODIG Senior Official Misconduct and Reprisal Investigations", "paragraphs": ["DODIG did not meet internal or statutory timeliness goals related to the  percentage or average days for senior official or reprisal investigations  (see figure 3). DODIG closed 73 investigations in fiscal year 2018,  including 13 senior official misconduct cases and 60 military, contractor,  and civilian reprisal cases. Overall, about 85 percent of all investigations  did not meet the timeliness goal.", "DODIG similarly did not meet its investigation timeliness goals for senior  official misconduct and reprisal investigations in fiscal year 2017.  However, DODIG officials noted that the record closure of 60 reprisal  investigations in fiscal year 2018 was a significant improvement over the  37 closed in fiscal year 2017, and DODIG data showed that the average  age of closed and open investigations peaked in April 2018 and June  2018, respectively, and that both were lower as of January 1, 2019.  Additionally, DODIG officials stated that they expected to eliminate the  case backlog and reach a sustainable state of timeliness during fiscal  year 2019."], "subsections": []}, {"section_title": "Timeliness of DOD Hotline Referrals and Completion Report Reviews", "paragraphs": ["In fiscal year 2018, the DOD Hotline referred 3,872 cases to other  entities for inquiry, and it performed oversight of 945 completion reports  from DOD components. As shown in figure 4, the DOD Hotline met its  timeliness goals, except for the percentage of referrals meeting the goal  for priority 1 complaints.", "Comparatively, in fiscal year 2017, the DOD Hotline did not meet  timeliness goals for the average days or percentage of referrals, but did  meet its goal for completion reports."], "subsections": []}]}, {"section_title": "DODIG Generally Met Fiscal Year 2018 Internal Quality Goals", "paragraphs": ["Quality goals can enhance the ability of organizations to provide  reasonable assurance that they are exercising appropriate safeguards for  federal programs, as demonstrated by our prior work.  DODIG generally  met its fiscal year 2018 internal quality goals related to the thoroughness  and completeness of senior official misconduct and whistleblower reprisal  investigations, as well as the completeness and accuracy of information  in DOD Hotline referrals. DODIG\u2019s internal quality goals for senior  official misconduct and reprisal investigations pertain to the thoroughness  of required case-file documentation and the integrity and completeness of  data in its case management system. Criteria for assessing these goals  include whether or not key documentation of the investigation\u2014such as  the incoming complaints and required notifications\u2014are present in the  proper folders in the case file, and whether start, end, or milestone dates  have been recorded in the case management system. Criteria for  assessing the completeness and accuracy of information in DOD Hotline  referrals include checks on whether whistleblower consent is accurately  documented and whether correspondence is addressed to the correct  recipient. According to DOD Hotline officials, a weighted checklist was  created in June 2018 that has greater focus on those criteria associated  with protecting confidentiality.", "In fiscal year 2018, DODIG reported that it conducted quality reviews for  59 whistleblower reprisal cases and 13 senior official misconduct cases.  DODIG further reported conducting reviews related to the quality of DOD  component investigations for 80 whistleblower reprisal cases and 80  senior official misconduct cases, while the Hotline reviewed the  thoroughness of 1,954 referrals. As shown in table 2, DODIG either met  or partially met its quality goals except for the data integrity and  completeness goal for senior official investigations and the documentation  goal for senior official oversight reviews.", "While we have reported DODIG\u2019s performance against its quality  measures, we recommended in September 2017 that DODIG develop  quality performance measures and enhance then-existing timeliness  measures to reflect key attributes of successful performance measures,  and DODIG concurred. In November 2018, DODIG officials stated that  DODIG is currently using the quality measures it had in place prior to  fiscal year 2017, and noted that DODIG had developed DOD-wide quality  performance measures for 2018 that measure the thoroughness of  military service investigations. As a result, we continue to believe that our  2017 recommendation is valid in that DODIG\u2019s performance measures  should reflect key attributes of successful performance measures."], "subsections": []}, {"section_title": "Military Service IGs Generally Did Not Meet Fiscal Year 2018 Timeliness Goals", "paragraphs": ["Military service IGs generally did not meet internal and statutory  timeliness goals related to the notification of receipt of allegations of  reprisal and misconduct, intake reviews, or senior official misconduct and  reprisal investigations.", "Military service IG officials provided several reasons for not meeting the  internal and statutory timeliness goals for notifications, intake reviews,  and investigations. Specifically, officials cited an increasing number of  complaints; the increasing complexity of complaints, such as those that  include multiple allegations and subjects; staffing challenges, such as  training related to the rotation of military staff; and the use of reservists,  who only work part-time. In addition, a senior official from one military  service IG noted that service IGs should be provided greater latitude in  dismissing complaints without DODIG review and approval, such as for  reprisal complaints where there is no protected communication or  personnel action."], "subsections": [{"section_title": "Timeliness of Military Service IG Notifications and Intake Reviews", "paragraphs": ["The military service IGs did not meet fiscal year 2018 timeliness goals for  notifying DODIG of allegation receipts, or conducting intake reviews for  reprisal cases (see figure 5). In fiscal year 2018, the military service IGs  sent 141 senior official misconduct notifications and 876 reprisal  notifications to DODIG, and performed 618 reprisal intake reviews.", "The military service IGs did not meet statutory or internal timeliness goals  for senior official misconduct and whistleblower reprisal investigations,  with exception of the Marine Corps IG\u2014which met its goal for senior  official misconduct investigations (see figure 6). In fiscal year 2018, the  military service IGs closed 424 investigations, including 347 reprisal  investigations, and 77 senior official misconduct investigations."], "subsections": []}]}, {"section_title": "Military Service IGs Met DODIG and Internal Quality Goals for Investigations", "paragraphs": ["Military service IGs met fiscal year 2018 quality goals established by  DODIG related to the thoroughness of investigations conducted by the  service IGs. Specifically, 89 percent of DODIG\u2019s thoroughness criteria  were met in the 93 senior official misconduct investigations conducted by  the military service IGs and other DOD components, exceeding the 81  percent goal established by DODIG.  Similarly, 85 percent of DODIG\u2019s  thoroughness criteria were met in the 310 whistleblower reprisal  investigations conducted by the military service IGs and other DOD  components, exceeding the 81 percent goal established by DODIG.  DODIG has established six criteria for assessing the thoroughness of  senior official investigations, including whether all allegations were  addressed, whether the complainant and subject were interviewed, and  whether relevant documents were obtained. DODIG has seven criteria for  assessing the thoroughness of reprisal investigations, including whether  protected communications and personnel actions were identified, and  whether the report of investigation was approved.", "The Army, the Air Force, and the Marine Corps IGs also met internal  quality goals for fiscal year 2018 related to the percentage of cases  returned by DODIG for rework due to quality issues. Specifically, Army IG  officials stated that they met their goal of having no more than 5 percent  of the investigations they submitted to DODIG for review returned by  DODIG due to quality issues, and Air Force IG officials stated that they  met their goals of obtaining DODIG concurrence on all of the senior  official investigations they submitted for review, and having no more than  5 percent of reprisal investigations returned for rework. Similarly, the  Marine Corps IG achieved its goal of having no investigations returned for  rework, according to a senior Marine Corps IG official. The Naval IG did  not provide us with any internal quality goals.", "Aside from the quality goals, DODIG also conducted quality assurance  reviews for the Air Force (2017), Army (2018), and Naval (2016) IGs, in  which the quality of a sample of case files was examined. The reviews  concluded that the military service IGs reviewed were generally  complying with internal regulations and CIGIE standards for quality. In  addition, in accordance with recommendations made in the quality  assurance reviews, each of the service IGs reviewed by DODIG has  developed or plans to develop checklists to help ensure that all required  documentation is present in their case files, according to service IG  officials and documentation."], "subsections": []}, {"section_title": "IGs Have Implemented and Planned Initiatives to Improve Timeliness, but Initiatives Do Not Target All Aspects of Timeliness", "paragraphs": ["DODIG and the military service IGs have implemented and planned  various initiatives to improve the timeliness of their processing of senior  official misconduct and reprisal complaints. Table 3 shows examples of  recent DODIG and military service IG initiatives.", "While these initiatives are positive steps, given that the performance of  some measures is far below the goals, additional efforts could be made to  improve performance against unmet timeliness goals\u2014including those  pertaining to senior official misconduct investigations conducted by the  military service IGs, military service IG notifications made to DODIG, and  military service IG intake reviews for reprisal cases. Additionally, DODIG  and some of the military service IGs do not agree on the timeframes  prescribed by DOD policy for military service IGs to notify DODIG of the  receipt of a complaint, thereby complicating achievement of these goals.  For example, officials from the Air Force IG stated that they notify DODIG  of the receipt of misconduct allegations only after making a credibility  determination, instead of within the five working days of receipt  prescribed by DOD policy for senior official allegations.  Similarly, Marine  Corps IG officials stated that senior official allegations should be reported  to DODIG within five days of a credibility determination.", "Standards for Internal Control in the Federal Government state that  management should complete and document corrective actions to  remediate internal control deficiencies in a timely manner.  Expanding  initiatives to target unmet goals related to military service senior official  investigations, notifications, and intakes could provide DODIG and the  military service IGs a more comprehensive approach to improving  timeliness and better position the IGs to improve upon the timeliness  goals prescribed by DOD policy. In addition, resolving disagreements  related to notification timeliness could improve the military service IGs\u2019  ability to achieve those goals. Further, additional initiatives could provide  greater assurance to potential whistleblowers that their cases will be  handled expeditiously."], "subsections": []}]}, {"section_title": "IGs Have Processes to Protect Whistleblower Confidentiality, but Some Gaps Exist", "paragraphs": [], "subsections": [{"section_title": "DODIG Has Policies and Procedures to Protect DOD Whistleblower Confidentiality", "paragraphs": ["DODIG has established policies and procedures to implement key  statutory requirements and CIGIE standards for protecting the  confidentiality of whistleblowers from the receipt of a whistleblower  complaint through its investigation. The Inspector General Act of 1978, as  amended, states that the Inspectors General shall not, without consent  from the employee, disclose the identity of an employee who reports  misconduct or provides information, unless the Inspector General  determines that such disclosure is unavoidable during the course of the  investigation. Further, CIGIE\u2019s Quality Standards for Investigations states  that policies, procedures and instructions for handling and processing  complaints should be in place to ensure that basic information is  recorded, held confidential, and tracked to final resolution. Table 4 shows  examples of key confidentiality protections included in DOD Hotline and  senior official misconduct and whistleblower reprisal investigation policies.", "DODIG officials stated that they routinely emphasize the importance of  protecting whistleblower confidentiality and that confidentiality policies  and procedures are addressed through internal training, staff meetings,  and on-the-job instruction. Further, 69 of 86 (80 percent) DODIG  respondents to our survey reported believing that the guidance they  received on protecting confidentiality is sufficient to maintain the  confidentiality of individuals involved in IG investigations, citing many of  the processes identified in table 4 above as examples of guidance they  have received."], "subsections": []}, {"section_title": "DODIG Guidance for Protecting the Confidentiality of Whistleblowers Who Report Internal DODIG Misconduct Lacks Sufficient Detail", "paragraphs": ["The DODIG Office of Professional Responsibility\u2019s investigations  manual on handling misconduct complaints against internal DODIG  employees requires that complainant information be strictly controlled in  order to protect the integrity of the investigative process and to avoid  potential harm to the privacy and reputation of the employee. This  guidance also includes some steps to protect whistleblower information  such as redacting substantiated reports of investigation to be provided to  investigation subjects. As previously noted, DOD Hotline guidance also  includes steps to protect the confidentiality of internal DODIG  whistleblowers. However, the Office of Professional Responsibility  guidance does not include several key steps and procedures that some  DODIG officials reported taking to protect whistleblower confidentiality,  such as excluding complainant information from notifications sent to  subjects and not identifying complainants during interviews with case  subjects. In addition, DODIG\u2019s Office of General Counsel does not have  documented procedures for controlling access to cases involving  designated DODIG staff members subject to review by the CIGIE Integrity  Committee. DODIG designated staff members include the Principal  Deputy Inspector General, Deputy Inspectors General, General Counsel,  and Senior Advisor to the Inspector General, among other staff members.", "Guidance on handling complaints alleging internal DODIG misconduct is  also outdated and does not reflect recent organizational changes. In  particular, the Office of Professional Responsibility\u2019s investigations  manual does not reflect its updated roles and responsibilities since  splitting from the Quality Assurance and Standards directorate in October  2016, and certain chapters do not recognize that it now reports directly to  the Inspector General. Further, sections of the manual have been  revised at different points in time and do not align with the office\u2019s current  functions. For example, the section covering the office\u2019s organization,  mission, and authorities has not been updated since July 2009. Similarly,  the section detailing investigation policies and procedures has not been  updated since November 2012.", "Some of the DODIG employees we surveyed reported concern that  DODIG\u2019s process for reporting employee misconduct and resolving  internal complaints may not protect whistleblower confidentiality. For  example, 14 (16 percent) survey respondents reported believing that  DODIG\u2019s internal process for reporting misconduct did not protect DODIG  employee confidentiality or only protected it slightly. Also, 36 (42 percent)  survey respondents reported not knowing whether or not DODIG\u2019s  internal process for reporting misconduct protects confidentiality, and 36  (42 percent) reported believing that it protects confidentiality somewhat or  very well. Additionally, 14 of 86 (16 percent) and 9 of 86 (10 percent)   employees surveyed reported having considered but ultimately choosing  not to resolve an issue through the Office of the Ombuds\u2014which may  receive some internal misconduct complaints\u2014or report misconduct  through DODIG\u2019s internal process on or after October 1, 2016,  respectively, because they feared that their confidentiality could be  compromised. Table 5 shows the distribution of these responses.", "Survey respondents identified some concerns related to the  confidentiality, objectivity, and independence of DODIG\u2019s internal process  for reporting misconduct and suggested some related improvements.  For example, although it has separated from the Quality Assurance and  Standards directorate, the Office of Professional Responsibility continues  to share office space with the directorate and hold complainant and  witness interviews in the shared space.  Also, it was suggested that an  online form could be used so that internal complaints are routed directly  to the Office of Professional Responsibility instead of through the DOD  Hotline. DODIG officials told us that there are record-keeping and  performance measure-related bases for continuing to use the DOD  Hotline to receive complaints of internal misconduct, but that they would  carefully evaluate the suggestion.", "CIGIE Quality Standards for Federal Offices of Inspector General state  that IGs should establish and follow policies and procedures for receiving  and reviewing allegations and ensure that whistleblower identities are not  disclosed without consent, unless the IG determines that such disclosure  is unavoidable during the course of the investigation. CIGIE Quality  Standards for Investigations also state that policies and procedures  should be revised regularly to align with current laws and regulations.  DODIG officials told us in November 2018 that the Office of Professional  Responsibility investigations manual is in the process of being updated  but were unable to provide a timetable for the completion of these  updates, and stated that all of the provisions\u2014including the confidentiality  protections\u2014are subject to changes and updates. In addition, in January  2019 DODIG officials noted, after discussion with GAO, that they  intended to implement guidance for making referrals to the CIGIE Integrity  Committee. Until DODIG develops guidance that incorporates procedures  to protect confidentiality and documents how to maintain whistleblower  confidentiality throughout the CIGIE referral process, it will lack  reasonable assurance that its process for investigating internal  misconduct allegations can fully protect the confidentiality of  whistleblowers."], "subsections": []}, {"section_title": "Military Service IGs Have Guidance for Protecting Whistleblower Confidentiality, but It is Not Comprehensive", "paragraphs": ["Military service IG guidance identifies confidentiality as a core tenet of  handling and investigating whistleblower complaints. For example,  military service IG guidance states that consent should generally be  obtained from complainants before each military service IG can share a  complainant\u2019s identity with officials who will investigate the allegations,  and provides that complaints may be redacted or summarized to omit  personally identifiable information\u2014such as when consent is not given or  for other purposes. In addition, military service IG guidance state that a  complainant\u2019s identity may only be disclosed without consent when an  authorized official has determined that such disclosure is unavoidable in  order to investigate an allegation.", "Aside from these shared provisions, each of the military service IGs\u2019  guidance includes additional precautions aimed at protecting  whistleblower confidentiality. For example, Air Force Instruction 90-301  instructs Hotline personnel to coordinate communication between the  complainant and investigator if a complainant does not give consent to  disclose his or her identity. In addition, Army and Marine Corps IG  guidance stipulate that whistleblowers will be notified if it becomes  necessary to disclose their identity without their consent, and Naval IG  guidance requires investigators to inform complainants that although the  use of their testimony may be necessary under administrative action  procedures, their identity will be released as a witness, not a complainant,  to safeguard their identity.", "While all military service IGs acknowledge the need to preserve  confidentiality, we found gaps in confidentiality protections in Air Force,  Naval, and Marine Corps IG guidance, but not Army IG guidance. For  example, we found that Air Force, Naval, and Marine Corps IG guidance  did not include requirements outlined in DOD Instruction 7050.01 related  to the specific conditions under which information disclosures may be  made without complainant consent. According to DOD Instruction  7050.01, these include circumstances when a complainant has made it  known outside IG channels that he or she submitted the complaint, there  is an emergency situation or health or safety issue, or the allegation is  being transferred outside of DOD to another IG. Air Force, Naval, and  Marine Corps IG guidance predate DOD Instruction 7050.01, updated in  October 2017, and reference an older instruction that omits this  disclosure guidance.", "Additionally, DODIG\u2019s 2016 and 2017 quality assurance reviews of the  Naval IG and Air Force IG concluded that confidentiality protections could  be improved. Specifically, DODIG found that the Air Force IG did not have  written procedures for handling and restricting IG employee access to  complaints against individuals with access to the Air Force IG\u2019s  whistleblower database, including both IG employees and contractors that  support the database. In addition, DODIG found that the Naval IG Hotline  program instruction needed to be updated and that it did not have a  hotline standard operating procedure with guidance to redact complainant  identities before releasing investigation reports to installation  commanders or other military officials.", "Air Force, Naval, and Marine Corps IG officials stated that they are  currently in the process of updating their guidance to better incorporate  confidentiality protections. For example, Naval IG officials told us that the  Naval IG is updating its Hotline instruction, which will provide guidance to  obtain consent from complainants prior to releasing investigation reports  to installation commanders or other military officials, or redact the  complainant\u2019s name. According to Naval IG officials, the updated  instruction should be finalized in the first quarter of fiscal year 2019.", "CIGIE Quality Standards for Federal Offices of Inspector General state  that IGs should establish and follow policies and procedures for receiving  and reviewing allegations and ensure that whistleblower identities are not  disclosed without consent, unless the IG determines that such disclosure  is unavoidable during the course of the investigation. Further, CIGIE  Quality Standards for Investigations state that policies and procedures should be revised regularly to align with current laws and regulations, and  that confidentiality should be considered throughout an investigation, to  include drafting reports, validating contents, and submitting the final  report. Without updated policies and procedures that fully implement  confidentiality standards for complaint handling and investigation, the Air  Force IG, the Naval IG, and the Marine Corps IG may not be able to  ensure the consistent implementation of confidentiality protections within  their offices."], "subsections": []}]}, {"section_title": "IGs Are Able to Access Whistleblower Information to Perform Their Duties and Have Taken Some, but Not All, Required Steps to Safeguard It", "paragraphs": [], "subsections": [{"section_title": "IGs Are Able to Access Information Needed to Handle Whistleblower Complaints, and Have Taken Steps to Safeguard Classified Information", "paragraphs": ["DODIG and military service IGs do not experience significant challenges  in accessing sensitive or classified information necessary to handle  whistleblower complaints, according to cognizant IG officials. Such  information includes documentary evidence or witness statements.  Similarly, 79 of 86 (92 percent) DODIG respondents to our survey  reported that they are generally able to access all types of unclassified  information necessary to perform the duties of their position, while 82 of  86 (95 percent) respondents stated that they are either able to access  classified information as necessary or do not require access to classified  information.", "DODIG and the military service IGs have also taken steps to safeguard  physical and electronic classified whistleblower information in accordance  with DOD policy, which requires that DOD components establish a  system of technical, physical, and personnel controls to ensure access to  classified information is limited to authorized persons. Cases including classified information constituted a small percentage of cases closed by  DODIG and the military service IGs in fiscal year 2017, with the  percentage of those closed by DODIG directorates\u2014including the DOD  Hotline and the whistleblower reprisal and senior official investigations\u2014 ranging from 0.2 percent to 0.5 percent, according to DODIG officials.   Officials from each of the military service IGs reported closing no  classified cases in fiscal year 2017. In addition, DODIG and military  service IG officials reported having an adequate number of staff with  clearances at the requisite levels (e.g., SECRET) to handle classified  case information, along with processes for physically and electronically  storing and accessing information at different classification levels."], "subsections": []}, {"section_title": "Most IGs are Following DOD\u2019s IT Risk Management Process", "paragraphs": ["DODIG and most military service IGs are following DOD\u2019s IT risk  management process, which involves the assessment of and  authorization to operate IT used to manage DOD information\u2014including  sensitive but unclassified whistleblower information.  The Naval IG has  not authorized its case management system in accordance with DOD  policy, which implements NIST  and Office of Management and Budget  federal IT security guidelines related to IT systems and applications,  including those used by the IGs.  However, it is taking steps to do so.  DODIG and the Naval IG use IT systems to manage sensitive  whistleblower information, while the Air Force, Army, and Marine Corps  IGs use IT applications\u2014which are not subject to the full IT risk  management authorization process, as discussed below."], "subsections": [{"section_title": "DODIG and Naval IG IT Systems", "paragraphs": ["DODIG has followed the DOD IT risk management process by authorizing  the Defense Case Activity Tracking System (D-CATS)\u2014its whistleblower  case management system\u2014to operate in accordance with DOD policy  and federal IT security guidelines. DOD\u2019s risk management process  requires that IT systems be authorized to operate using a multistep  process that entails the identification, implementation, and assessment of  system security controls, along with the corresponding development and  approval of a system security plan, security assessment report, and plan  of action and milestones. The process requires systems to be  reassessed and reauthorized every 3 years in order to ensure the  continued effectiveness of security controls, and allows for ongoing  authorizations through a system-level strategy for the continuous  monitoring of security controls employed within or inherited by the  system. The strategy should include a plan for annually assessing a  subset of system security controls. DOD policy states that component  heads may only operate systems with a current authorization to operate,  and that authorization termination dates must be enforced.", "DODIG last authorized D-CATS to operate in May 2017, determining that  overall system security risk was acceptable based on a review of the  system security plan, security assessment report, and plan of action and  milestones. Our review of DODIG\u2019s system authorization documents also  found that they addressed key, required content elements. For example,  the system security plan specified the security controls intended to be in  place based on the system\u2019s risk classification, and the security  assessment report documented findings of compliance and the methods  used by the assessor to evaluate security controls when implementing  DODIG\u2019s continuous monitoring strategy. Additionally, the plan of action  and milestones identified tasks needed to mitigate identified  vulnerabilities along with resources and milestones to accomplish the  tasks.", "However, as of December 2018, the Naval IG had not authorized its case  management system in accordance with the DOD risk management  process, and the system remained in operation. The Naval IG was  issued an interim authorization to operate its case management system in  March 2017 by the Commander, U.S. Fleet Cyber Command. The interim  authorization\u2014which expired in January 2018\u2014required the Naval IG to  transition from the department\u2019s prior IT risk management process to the  current process by the time of its expiration, noting that the overall risk of  the system was high due to incomplete testing.  Subsequently, in June  2018, the Naval IG requested and was eventually granted, in September  2018, a conditional authorization to continue operating the case  management system through October 2018.", "In early December 2018, the Naval IG requested another conditional  authorization to operate the case management system until September  2019. According to Naval IG officials, the conditional authorization is  needed because the whistleblower case management system\u2019s host  environment is not expected to attain its authorization until September  2019. As a result, the Naval IG was taking steps beyond the conditional  authorization request to manage IT security risks as it works towards  compliance with the new DOD risk management process. For example,  Naval IG officials stated that new leadership was put in place to oversee  the case management system; that a senior system administrator would  be hired to help maintain IT security; and that the case management  system was undergoing regular scans to assess security risks, with any  resultant issues being remediated.", "NIST guidelines state that organizations should design and prioritize  activities to mitigate security risks, and that alternative strategies may be  needed when an organization cannot apply controls to adequately reduce  or mitigate risk. As noted, the Naval IG\u2019s case management system was  not authorized as of December 2018 and it was not yet able to transition  to the current DOD risk management process. However, if completed, the  actions planned and underway\u2014including the conditional authorization  and security scans\u2014should help to mitigate system security risks and  provide greater assurance that existing system security controls  safeguard sensitive whistleblower information."], "subsections": []}, {"section_title": "Air Force, Army, and Marine Corps IG IT Applications", "paragraphs": ["The IGs of the Air Force, the Army, and the Marine Corps are following  DOD\u2019s IT risk management procedures for their primary case  management applications, which are not subject to the full IT risk  management authorization process. According to DOD Instruction  8510.01, Risk Management Framework (RMF) for DOD Information  Technology (IT), DOD IT such as applications must be securely  configured in accordance with applicable DOD policies, and application  security controls must undergo special assessment of their functional and  security-related capabilities and deficiencies. The results of such  assessments are to be documented within an application-level security  assessment report and reviewed by a security manager to ensure that the  product does not introduce vulnerabilities into its host system.", "We found that while the Army, Air Force, and Marine Corps IGs have not  produced the required application-level security assessment reports for  their primary applications, they have met the intent of these requirements  through other actions. Specifically, we noted that the Air Force and Army  IGs\u2019 primary case management applications reside in host systems that  were authorized to operate under the risk management process within the  last 3 years, and that the assessments associated with the host system  authorizations included a review of application-level security controls,  according to IG officials. Similarly, the Marine Corps IG\u2019s case  management application was exempted from assessment by its  authorizing official because it was determined that the application did not  introduce additional risk into its authorized host system."], "subsections": []}]}, {"section_title": "DODIG Does Not Fully Restrict Employee Access to Sensitive Whistleblower Information", "paragraphs": [], "subsections": [{"section_title": "DODIG\u2019s Case Management System Does Not Include Some Controls to Restrict Internal Employee Access", "paragraphs": ["As previously discussed, DODIG has taken steps to restrict employee  access to whistleblower information, such as by restricting access to  cases in which a complainant has not consented to releasing his or her  identity. DOD Hotline also applies additional restrictions to all cases  involving internal misconduct referrals to the Office of Professional  Responsibility and CIGIE Integrity Committee, and it has the capability to  further restrict records, according to DODIG officials. Beyond restricting  records, the case management system also includes user roles, which  govern users\u2019 view of information. However, employees at the three  DODIG directorates that are principally responsible for handling  whistleblower information are generally able to access sensitive  whistleblower information belonging to other directorates in both the  Defense Case Activity Tracking System (D-CATS)\u2013DODIG\u2019s  whistleblower case management system\u2014and an associated document  repository, that is not necessary to accomplish assigned tasks. NIST  Special Publication 800-53, Security and Privacy Controls for Federal  Information Systems and Organizations, states that organizations should  employ the core security principle of least privilege, which allows only  authorized access for users that is necessary to accomplish assigned  tasks in accordance with organizational missions and business  functions.", "DODIG employees in the DOD Hotline, senior official investigations  directorate, and whistleblower reprisal investigations directorate are able  to access whistleblower information belonging to other DODIG  directorates in both D-CATS and its associated document management  repository because DODIG has not developed sufficient system controls  needed to restrict access across the three directorates. For example, a  DODIG employee in either the senior officials or reprisal investigations  directorates can access Hotline records in D-CATS that the employee  does not have a need to access, with the exception of cases specifically  restricted by the DOD Hotline to prevent unauthorized access. According  to an August 2018 internal DODIG memo, the lack of controls to restrict  access to information across the three directorates has been known since  the system was established in 2012.", "DODIG plans to establish controls to restrict access among the DODIG  directorates in a new enterprise system (D-CATSe), which will eventually  replace D-CATS and the case management systems used by the military  service IGs. D-CATSe is intended to provide a common case activity  tracking system capable of supporting mandatory reporting requirements  and collecting, storing, and exchanging IG records related to complaints  and administrative investigations throughout a complaint\u2019s lifecycle.  According to DODIG officials, D-CATSe will restrict access both within  and among user IGs, including the DODIG directorates and military  service IGs, each of which may have unique access requirements based  on their different types of user groups. According to DODIG officials, this  will be accomplished through the establishment of unique business units  at different organizational levels, teams, and user roles, which will  collectively determine what information a user can access. However, as  shown in figure 7 below, the incremental release schedule for D-CATSe  has been delayed, and the IGs are not expected to fully transition to the  new system until fiscal year 2021.", "NIST guidelines state that organizations should design and prioritize  activities to mitigate security risks, and that alternative strategies (such as  plans) may be needed when an organization cannot apply controls to  adequately reduce or mitigate risk.  Further, NIST guidelines state that  addressing assurance-related controls during system development can  help organizations obtain sufficiently trustworthy information systems and  components that are more reliable and less likely to fail.  However,  DODIG does not plan to take other actions to address the lack of cross- directorate controls before the advent of the enterprise system.  Additionally, while DODIG is designing such controls and plans for each  system release to provide a requirements basis for subsequent releases,  it has not developed an assurance plan for testing controls, according to  DODIG officials, or fully defined the system requirements needed to  implement these controls and ensure it has achieved least privilege both  within and across the user IGs. Without considering interim actions to  address the lack of D-CATS cross-directorate access controls, DODIG  may be unable to sufficiently mitigate security risks while D-CATSe is  developed. Also, without developing a plan with assurance controls for  achieving least privilege in D-CATSe, DODIG may be unable to ensure the confidentiality and integrity of sensitive whistleblower information  during its implementation."], "subsections": []}, {"section_title": "DODIG Has Identified Instances Involving Improper Employee IT Access Rights to Whistleblower Information", "paragraphs": ["Separate from the lack of cross-directorate controls, DODIG has identified  multiple instances in which sensitive but unclassified whistleblower  information in the DODIG Administrative Investigations directorate  whistleblower case management system and document repository was  accessible to DODIG personnel who did not have a need to know this  information. These instances involve DOD Hotline records that are  specifically restricted to protect complainants requesting confidentiality,  along with records belonging to DODIG\u2019s Office of Professional  Responsibility\u2014which handles internal DODIG misconduct complaints.", "Table 6 shows examples of recent instances in which DODIG determined  that sensitive whistleblower records were accessible to DODIG personnel  without a need to know. According to DODIG officials, as of January  2019, there were no known instances of anyone without a need to know  actually accessing these records. These officials also stated that  corrective action had been taken for each instance in table 6, including by  blocking access to information while the underlying issues were resolved;  that at no time was information available to the public; and that the  instances did not result in any disclosure outside of DODIG.", "NIST guidelines state that the need for certain user privileges may  change over time, necessitating the periodic review of assigned user  privileges in order to determine if the rationale for assigning such  privileges remains valid. DODIG has determined that its user access  issues are broadly attributable to system administration and application  problems, including permission changes resulting from system updates.  To address such issues, DODIG has taken several remedial actions and  identified additional recommended steps, including:  reconciling user accounts and validating permissions related to  restricted records;  reviewing policies related to protecting complainant confidentiality and  conducting awareness training with personnel, as appropriate; and developing enhanced user management procedures and internal  controls related to establishing user accounts, reconciling current user  permissions, and controlling access to restricted records.", "In addition, in October 2018, DODIG instituted a process whereby user  privileges associated with its case management system and document  repository will be reviewed, validated, and corrected, if necessary, on a  quarterly basis. If fully implemented, this process, along with the  proposed actions, should help ensure that assigned user privileges are  periodically validated and aligned with business needs. However,  DODIG\u2019s process does not include steps to test document repository  permissions after case management system updates, which were  determined by DODIG to be the cause of some permission issues.   Without including such steps in its process, DODIG lacks assurance that  system permissions will align with business needs on an ongoing basis,  and therefore may not be able to appropriately control user accounts to  prevent unauthorized access by system users."], "subsections": []}]}, {"section_title": "Sensitive Whistleblower Information Has Been Accessible to Military Service IG Employees without a Need to Know", "paragraphs": ["The military service IGs\u2019 case management systems and applications  incorporate IT controls, such as authenticated user accounts and unique  permissions, to protect certain whistleblower information. However,  service IG systems and applications do not fully restrict employee access  to sensitive whistleblower information only to information that is  necessary to accomplish assigned tasks. As previously discussed, NIST  guidelines state that organizations should only provide authorized access  to users which is necessary to accomplish assigned tasks in accordance  with organizational missions and business functions. As shown in Table  7, DODIG\u2019s quality assurance reviews and our work identified issues  related to IG employee access restrictions.", "At the time of our review, the military service IGs had not taken steps to  fully address the identified access issues. Specifically, Air Force officials  stated that they did not plan to address the application access issues  because they did not have funding to continue developing their existing  application prior to transitioning to D-CATSe, although they would explore  whether solutions were possible within current fiscal constraints during  the next system maintenance evaluation. Similarly, Army IG officials  stated that while the Army IG had resources to further develop its existing  case management application, they had elected to not use those  resources to remedy the identified access issue in light of the future  arrival of D-CATSe. In addition, Naval IG officials reported taking action to  restrict senor official investigations, but did not provide information to us  on actions taken to address DODIG\u2019s recommendation to restrict cases  involving internal Naval IG personnel. Finally, Marine Corps IG officials  stated that access restrictions would be implemented as part of an  application redesign scheduled to be complete by the end of 2018.  However, these officials also noted that they have not identified the root  of the access problem or developed a plan to ensure that needed access  restrictions are implemented and functioning properly, raising questions  as to whether the redesign will fully restrict access on a continuing basis.  As mentioned previously, the Marine Corps\u2019 case management  application is also exempt from testing under the DOD IT risk  management process, and therefore is not subject to routine security  assurance testing.", "Federal Standards for Internal Control state that management should  analyze and respond to risks, and evaluate and remediate internal control  deficiencies on a timely basis, including those related to audit findings.   Further, NIST guidelines state that organizations should design and  prioritize activities to mitigate security risks, and that alternative  strategies, such as plans, may be needed when an organization cannot  apply controls to adequately reduce or mitigate risk. These guidelines  also encourage organizations to obtain assurance-related evidence on an  ongoing basis in order to maintain the trustworthiness of information  systems. As previously discussed, D-CATSe is being implemented  incrementally, with releases for the Naval IG and the Air Force and Army  IGs not scheduled to occur until fiscal years 2020 and 2021, respectively.  By considering actions prior to the advent of D-CATSe, the Air Force,  Army, and Naval IGs could mitigate existing risks to whistleblower  confidentiality by reducing the potential for unauthorized employee  access of whistleblower records. Also, by developing a plan to ensure  that access restrictions function properly, the Marine Corps IG could  better ensure the confidentiality and integrity of sensitive whistleblower  information in its redesigned case management application on a  continuing basis."], "subsections": []}, {"section_title": "IGs Report Few Instances of Confidentiality Violations but IT Access Issues Create This Potential", "paragraphs": ["Potential violations of whistleblower confidentiality may be reported to  DODIG, the service IGs, the Office of Special Counsel, or CIGIE. IGs  identified some substantiated violations of whistleblower confidentiality  between fiscal years 2013 and 2018. Specifically, DODIG identified 8  substantiated violations of whistleblower confidentiality between fiscal  years 2013 and 2018, representing approximately .01 percent of the  95,613 contacts handled by DODIG during that timeframe, according to  DODIG officials. Army IG identified 6 substantiated violations of  whistleblower confidentiality between these years. These violations  include the improper release of IG information, disclosures made to  individuals who do not have a need to know, and unauthorized access to  whistleblower records by IG personnel. DODIG officials noted that in  some instances, violations were determined not to result from employee  misconduct because the complainant\u2019s identify was disclosed unwittingly.  According to DODIG and Army IG officials, disciplinary or corrective  action was taken in all but one of the 14 substantiated violations because  the DODIG employee involved resigned prior to action being taken.  Officials from the Air Force, Naval, and Marine Corps IGs stated that they  were unaware of any substantiated incidences of confidentiality violations  between fiscal years 2013 and 2018 and that they were unable to  specifically track such incidents in their case management systems.   Similarly, CIGIE Integrity Committee and Office of Special Counsel  officials stated that they were unaware of and do not specifically track  confidentiality violations, and we did not identify any confidentiality  violations in the fiscal year 2013-2018 data they provided to us that  involved DODIG employees.", "Respondents to our survey of DODIG employees separately reported  potential violations of whistleblower confidentiality. Specifically, 15 of the  86 respondents (about 17 percent) reported being aware of at least one  instance since June 1, 2017, where the identity of a complainant or  source was avoidably disclosed by a DODIG employee to an organization  or individual without a need to know, and nine of these 15 were aware of  more than one instance. These responses are not intended to be a count  of separate instances because respondents may have recalled the same  instance(s), including one or more of the 8 substantiated violations  reported to us by DODIG. The most common avoidable disclosure  described by survey respondents involved distributing whistleblower  materials to the wrong official or agency. Survey respondents reported  that in such instances corrective action included recalling the complaint  and deleting the erroneously sent record, or, in some cases, sending a  complaint to DODIG\u2019s Office of Professional Responsibility for the  investigation of possible misconduct.", "While the number of known violations is small, IT access issues related to  the case management systems and applications used by DODIG and the  military service IGs create the potential for additional violations of  whistleblower confidentiality. As previously discussed, issues such as  the absence of cross-directorate access controls within DODIG\u2019s case  management system and the ability for non-Air Force IG users of the Air  Force IG case management system to view IG case information allow for  the improper access of sensitive whistleblower information. Recognizing  this potential, a senior DODIG official noted concern regarding the  possible extent of confidentiality violations stemming from these and the  other access issues previously discussed in this report. Additionally,  DODIG requested that the Defense Criminal Investigative Service  investigate the April 2018 incident involving 946 case folders to determine  who accessed the identified records. Without steps to address these  ongoing IT access issues, the potential for additional violations of  whistleblower confidentiality will persist."], "subsections": []}]}, {"section_title": "DODIG Generally Met Documentation Requirements in Senior Official Cases that GAO Reviewed and Reported Most Credible Allegations", "paragraphs": [], "subsections": [{"section_title": "DODIG Dismissed Most Cases Involving Civilian DOD Presidential Appointees with Senate Confirmation and Generally Included Required Data and Documentation", "paragraphs": ["DODIG closed 129 misconduct and reprisal cases in fiscal years 2013  through 2017 with complaints involving a civilian DOD Presidential  appointee with Senate confirmation (PAS)  subject. Of the 129 cases  closed, DODIG dismissed without investigation 125 cases and  investigated the remaining four. Figure 8 shows the number of cases  closed in each fiscal year, by case disposition.", "Our review of the 125 case files for dismissed misconduct and reprisal  cases found that key documentation and data needed to demonstrate  compliance with significant aspects of the case-handling process were  generally present. Key documentation and data for dismissed cases  include the case open and close dates, the incoming complaint,  disposition of the case, and the dismissal approval and rationale. CIGIE  standards state that the degree to which an organization efficiently  achieves its goals is affected by the quality and relevance of information  that is collected, stored, retrieved, and analyzed, and that the results of  investigative activities should be accurately and completely documented  in the case file.", "Examples of data and documentation consistently present. Our  review of 125 case files for dismissed cases closed in fiscal years 2013  through 2017 found that key documentation and data were generally  present. For example:", "100 percent of the cases we reviewed included the incoming  complaint.", "Approximately 99 percent of the dismissed misconduct cases included  a dismissal rationale that aligned with dismissal criteria in DODIG  policy.", "100 percent of the dismissed reprisal cases that involved a closure  letter informing the complainant of case dismissal listed a rationale for  dismissal in the closure letter.", "100 percent of the dismissed reprisal cases that did not involve a  closure letter to the complainant had a rationale for dismissal  elsewhere in the case file.", "Approximately 99 percent of dismissed misconduct cases included a  required entry recording the intake disposition.", "Documents or data that were not material. Our review of case files for  dismissed cases closed in fiscal years 2013 through 2017 found that  some other documentation or data that are needed to demonstrate  compliance with DODIG policy were missing. The deficiencies we found  were not material to case outcomes. For example, approximately 77  percent of dismissed misconduct cases did not include a recording of  case dismissal approval by IG supervisory staff. However, DODIG  officials told us that the presence of the required entry recording the  intake disposition indicated that the case dismissal had been approved by  the appropriate authority. Similarly, approximately 55 percent of  dismissed misconduct cases did not include a notification letter to the  appropriate military service IG in the case file. DODIG officials stated that  while there is guidance to send these letters, it is not a required  practice."], "subsections": []}, {"section_title": "DODIG Has Reported Most Credible Misconduct Allegations to the Secretary of Defense and Some Investigation Results to Congress", "paragraphs": ["DODIG reported most credible allegations concerning civilian DOD PAS  officials to the Secretary of Defense as required. DODIG also reported  some investigation results involving these officials to Congress prior to  the enactment of the Inspector General Empowerment Act of 2016, which  required the reporting of results of substantiated investigations involving  DOD senior officials. DODIG investigated four of the 129 cases closed  in fiscal years 2013 through 2017, with two of those investigations leading  to substantiated allegations of misconduct.", "DODIG generally met DOD requirements to report credible allegations of  misconduct against civilian DOD PAS officials to the Secretary of  Defense. DOD Directive 5505.06 requires that DODIG notify the  Secretary of Defense of all credible allegations or investigations involving  presidential appointees and others of significance, including Senate- confirmed civilian officials. We found documentary evidence that  DODIG notified the Secretary of credible allegations in three of the four  misconduct and reprisal investigations closed from fiscal years 2013  through 2017, and the secretary of a military service was notified in the  fourth case. In addition, DODIG officials stated that the Principal Deputy  IG provides the Secretary of Defense periodic updates on current  investigations and other periodic updates of incoming allegations, as  necessary and appropriate.", "Separately, the Inspector General Empowerment Act of 2016 requires  that DODIG report in its semiannual reports to Congress on all  substantiated allegations of misconduct involving senior officials. Prior to  2016, there was no requirement to notify Congress of substantiated  allegations of misconduct involving senior officials. We found evidence  that DODIG communicated investigation results to Congress in two of the  four civilian DOD PAS official investigations closed between fiscal years  2013 and 2017, but not in the other two because it was not required.   For one investigated case, a report of investigation was provided to  Congress upon request, and for another investigation, which had a  substantiated allegation, the results of the investigation were published in  narrative detail in a semi-annual report to Congress. DODIG now reports  in its semi-annual reports to Congress summary results of substantiated  and unsubstantiated cases closed during the corresponding period, but it  has not closed any civilian DOD PAS official allegations since the  statutory requirement to report to Congress on all substantiated cases  was established."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Maintaining a program that instills trust and confidence for potential  whistleblowers to come forward is critical to minimizing fraud, waste,  abuse, and personnel misconduct in the federal government. Important  components of a credible whistleblower program are timeliness of case  processing and safeguarding confidentiality to the maximum extent  possible. It is encouraging that DODIG and the service IGs have met  some key goals and have policies that address whistleblower  confidentiality. In addition, DODIG generally met key documentation and  data requirements for the 125 cases dismissed by DODIG involving  civilian DOD PAS officials, and reported most credible allegations, as  required.", "However, the IGs face challenges in addressing unmet timeliness goals  and updating guidance to ensure full alignment with current confidentiality  requirements. By pursuing more targeted, collective efforts with additional  initiatives aimed at improving performance against unmet timeliness  goals, the IGs can better assure current and potential whistleblowers that  their complaints will be processed expeditiously. Additionally, without  formal guidance documenting procedures for protecting the confidentiality  of whistleblowers reporting potential internal DODIG employee  misconduct, those employees lack assurance that DODIG can fully  protect their identities. Similarly, without updated policies and procedures, the Air Force, Naval, and Marine Corps IGs may not be able to fully  ensure whistleblower confidentiality in their organizations.", "The integrity of a whistleblower program also extends to ensuring that  sensitive information in IT systems remains secure and inaccessible by  employees without a need to know. The IGs have existing controls for  safeguarding whistleblower information, but additional efforts are  warranted. Specifically, without further steps\u2014such as considering interim  actions to mitigate the lack of cross-directorate access controls,  developing a plan, along with the military service IGs for achieving least  privilege in the future enterprise case management system, and  enhancing the process for periodically validating user privileges\u2014DODIG  may not be able to ensure that access controls in its existing and future  case management systems align with business needs on an ongoing  basis. Similarly, without considering actions to further restrict IG  employee access in existing IT, the Air Force, Army, and Naval IGs may  be unable to mitigate ongoing risks to whistleblower confidentiality.  Finally, without a plan for ensuring that access restrictions in its  redesigned case management system function properly, the Marine  Corps IG may be unable to fully ensure whistleblower confidentiality."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 12 recommendations to DOD. Specifically:  The DOD Inspector General should coordinate with the IGs of the  military services to take additional actions to improve performance  against unmet timeliness goals. This includes steps to improve  performance of senior official misconduct investigations and military  service reprisal intakes, and to resolve disagreement on notifications.  (Recommendation 1)", "The DOD Inspector General should issue formal guidance  documenting procedures for protecting the confidentiality of  whistleblowers throughout its internal misconduct investigation  process. (Recommendation 2)", "The Air Force Inspector General should establish procedures to fully  reflect and implement DOD policy on the protection of whistleblower  confidentiality. (Recommendation 3)", "The Marine Corps Inspector General should establish procedures to  fully reflect and implement DOD policy on the protection of  whistleblower confidentiality. (Recommendation 4)", "The Naval Inspector General should establish procedures to fully  reflect and implement DOD policy on the protection of whistleblower  confidentiality. (Recommendation 5)", "The DOD Inspector General should consider interim actions as the  whistleblower enterprise case management system is being  developed to help ensure that access to sensitive whistleblower  information in the current case management system and associated  document repository is limited to information that is necessary to  accomplish assigned tasks. (Recommendation 6)", "The DOD Inspector General should coordinate with the IGs of the  military services to develop a plan to fully restrict case access in the  future whistleblower enterprise case management system so that user  access is limited to information necessary to accomplish assigned  tasks in accordance with organizational missions and business  functions. (Recommendation 7)", "The DOD Inspector General should enhance its process for  periodically reviewing whistleblower case management system and  document repository user privileges by including steps to ensure that  such privileges remain valid after system updates, as appropriate.  (Recommendation 8)", "The Air Force Inspector General should consider interim actions as  the whistleblower enterprise case management system is being  developed to help ensure that access for users of existing applications  is limited to information that is necessary to accomplish assigned  tasks in accordance with organizational missions and business  functions. (Recommendation 9)", "The Army Inspector General should consider interim actions as the  whistleblower enterprise case management system is being  developed to help ensure that access for users of existing applications  is limited to information that is necessary to accomplish assigned  tasks in accordance with organizational missions and business  functions. (Recommendation 10)", "The Marine Corps Inspector General should develop a plan to ensure  that its redesigned whistleblower case management application  restricts user access to information based on what is needed to  accomplish assigned tasks in accordance with organizational  missions and business functions. (Recommendation 11)", "The Naval Inspector General should consider interim actions as the  whistleblower enterprise case management system is being  developed to help ensure that access for users of existing applications  is limited to information that is necessary to accomplish assigned  tasks in accordance with organizational missions and business  functions. (Recommendation 12)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DODIG and the military service IGs  for review and comment. In written comments, DODIG and the military  service IGs concurred with each of our 12 recommendations. Comments  from DODIG and the Air Force, Army, and Marine Corps IGs are  reproduced in appendix V; the Naval IG concurred in an email. These IGs  also provided technical comments, which we have incorporated as  appropriate.", "In its comments, DODIG stated that it will seek to implement the  recommendations. In addition to highlighting recent and planned  improvements, DODIG provided additional comments on some of the  report\u2019s findings and statements. In particular, DODIG noted that the  report understated its improvements in timeliness, such as by stating that  DODIG did not meet timeliness goals related to average days of senior  official and military reprisal intakes, and average days for reprisal  oversight reviews. Citing figure 2, DODIG further stated that it met its  timeliness goals in more than 60 percent of all senior official and reprisal  intake cases, including 87 percent of senior official oversight review  cases, and that it met its 15-day goal in more than 70 percent of senior  official intakes. We agree that DODIG achieved these percentages and  present the associated data in figure 2. However, as described in the  report, and shown in figure 2, DODIG did not meet its goals for the  average days of senior official misconduct and military reprisal intakes,  and the average days for reprisal oversight reviews. Nonetheless, it is  encouraging that DODIG has taken and planned actions to improve  timeliness as its caseload has increased, including by increasing its staff  by about 29 percent since fiscal year 2016, during which time it reported  that its caseload similarly increased by about 26 percent.", "DODIG also noted that the report presented some information in a  manner that could create an incomplete impression of the agency\u2019s  commitment to protecting whistleblower confidentiality. Specifically, DOD  stated that the report\u2019s presentation of survey data related to DODIG  employee concerns about internal DODIG processes may give a  misleading impression because of the focus on the small number of  respondents who had a negative impression. In particular, DODIG noted  that more than 80 percent of respondents either believed that DODIG\u2019s  internal process for reporting misconduct protected confidentiality  somewhat or very well, or did not know if it did so. However, a positive  perspective cannot be inferred from the respondents that reported not  knowing whether or not DODIG\u2019s internal process protects confidentiality  (42 percent). Also, it should be recognized that the respondents that held  negative views on DODIG\u2019s process for reporting internal misconduct (16  percent) accounted for a substantial proportion of respondents (28  percent) that held either positive or negative views on this issue.  Importantly, these and other survey information presented in the report  also provide valuable information on the degree to which DODIG  employees have confidence in the integrity of these important internal  processes, and, as mentioned, align with other information obtained  during our review. As such, this information may help to inform DODIG\u2019s  efforts in addressing our recommendation to issue formal guidance  documenting procedures for protecting the confidentiality of  whistleblowers throughout its internal misconduct process, along with any  future efforts to instill employee confidence in internal misconduct  reporting mechanisms.", "DODIG also noted that portions of the report addressing restrictions on  DODIG employee access to sensitive whistleblower records need further  context, stating specifically that no DODIG employees outside of the  Administrative Investigations directorate, Office of Professional  Responsibility, and Office of General Counsel had access to any of the  records, and that there was no evidence that any person without a need  to know accessed any such records. However, information provided to us  by DODIG does not show that accessibility was limited in all instances to  employees within one of those DODIG offices. Also, the ability of any  employee to access records that were specifically restricted to protect  complainant identities or internal records belonging to the Office of  Professional Responsibility is problematic given the increased sensitivity  of such records. Further, while DODIG did not identify instances in which  anyone without a need to know accessed the records, DODIG did not  provide evidence that all cases of improper access were thoroughly  investigated, as we state in our report, and the instances included in the  report are examples and not inclusive of all instances of improper access  identified by the DODIG. Nevertheless, it is positive that DODIG has  reported taking corrective action to address instances of improper  accessibility. It is also encouraging that DODIG plans to implement our  recommendations, as the potential for unauthorized access will persist  until it establishes cross-directorate controls in the case management  system and enhances its processes for periodically reviewing user  privileges for its whistleblower case management system and document  repository.", "All of the military service IGs concurred with the recommendations  directed to them. The Air Force and the Army IGs also provided  comments on some of the report findings. In particular, the Air Force IG  noted in relation to our third recommendation that language in Air Force  Instruction 90-301, updated in December 2018, is essentially the same as  5 U.S.C. Appendix \u00a7 7, and that this language precludes Air Force  officials at any level from waiving the requirement to inform complainants  and employees of the requirement to not disclose their identities without  their consent, unless the Inspector General determines such disclosure to  be unavoidable. However, as stated in our report, Air Force guidance did  not include requirements outlined in DOD Instruction 7050.01 related to  the specific conditions under which information disclosures may be made  without complainant consent. These include circumstances wherein a  complainant has made it known outside IG channels that he or she  submitted the complaint, there is an emergency situation or health or  safety issue, or the allegation is being transferred outside of DOD to  another IG. As a result, we continue to believe that without updated  policies and procedures that fully implement confidentiality standards, the  Air Force IG may not be able to ensure the consistent implementation of  confidentiality protections.", "Separately, in relation to IG employee access of information, the Army IG  stated that the processes it has in place provide judicious access and  control of whistleblower information to achieve an appropriate balance  between efficient operations and minimized risk. As stated in our report,  DODIG\u2019s 2018 quality assurance review of the Army IG found that the  Army IG\u2019s application did not restrict personnel without a need to know  from accessing allegations involving Army IG personnel, contrasting with  NIST guidelines, which predicate user access on the need to accomplish  assigned tasks. Army IG officials acknowledged this issue, but stated that  the Army IG had elected to not use existing resources to further develop  its case management application in light of the enterprise system being  developed by DODIG. As a result, we continue to believe that by  considering actions prior to the advent of the enterprise system\u2014which is  not expected to be released to the Army IG until fiscal year 2021\u2014the  Army IG could mitigate risks to whistleblower confidentiality by reducing  the potential for unauthorized IG employee access of whistleblower  records.", "We are sending copies of this report to congressional committees; the  Acting Secretary of Defense; the Department of Defense Principal Deputy  Inspector General performing the duties of the Inspector General; the  Inspectors General of the Air Force, the Army, the Navy, and the Marine  Corps; the Office of Special Counsel; 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) 512-3604 or farrellb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To determine the extent to which the Department of Defense Office of  Inspector General (DODIG) and the military service offices of inspector  general (IG) met and took steps to achieve key fiscal year 2018  timeliness and quality goals related to the handling of whistleblower  complaints, we reviewed performance documentation and interviewed  officials on DODIG and military service IG timeliness and quality goals,  performance measures, and associated performance data for fiscal year  2018, along with ongoing and planned efforts to improve performance.  We also reviewed fiscal year 2017 performance data for comparison  purposes. We selected data from this period because they constituted the  most complete and recent performance data available. Using the data, we  assessed the extent to which DODIG and the military service IGs met  timeliness and quality goals defined by statute and internal IG policy.  Specifically, we assessed the timeliness of DOD Hotline referrals and  completion reports against its internal goals, along with DODIG senior  official misconduct and whistleblower reprisal intakes, investigations, and  oversight reviews against internal and statutory goals. We also assessed  the timeliness of military service IG senior official and reprisal  notifications, intakes, and investigations against DOD and statutory goals,  and reviewed the results of DODIG quality assessments for DOD Hotline  referrals, military service investigations, and DODIG senior official and  whistleblower reprisal investigations.", "We assessed the reliability of DODIG and military service IG data by  administering questionnaires, interviewing cognizant officials, and  reviewing case management system documentation and quality  assurance procedures. We also compared select electronic data to fiscal  years 2013 through 2017 case file documentation associated with our  review of case files to determine whether dates had been properly  recorded in the system. We determined that these data were sufficiently  reliable for our purposes.", "To identify factors affecting timeliness and quality, we interviewed IG  officials and reviewed relevant documentation including strategic plans,  briefing materials, and semiannual reports to Congress. We also  compared DODIG and military service IG completed and planned efforts  to improve timeliness and quality against Council of the Inspectors  General on Integrity and Efficiency (CIGIE) standards for federal IGs  related to establishing performance plans with goals and performance  measures, and Standards for Internal Control in the Federal Government  related to assessing performance and improving performance.", "To determine the extent to which DODIG and the military service IGs  have established processes to protect the confidentiality of  whistleblowers, we assessed DOD and military service IG policies and  procedures for handling whistleblower allegations against DOD policy,  CIGIE standards for federal IGs, and statutory protections related to  safeguarding whistleblower confidentiality. We also reviewed the results  of DODIG\u2019s quality assurance reviews of the Air Force (2017), Army  (2018), and Naval (2016) IGs. We performed a web-based survey of the  entire population of 108 DODIG Administrative Investigations directorate  employees directly involved with the handling of whistleblower cases to  ascertain whether, in their view, confidentiality processes are being  implemented in accordance with guidance and standards, identify  potential confidentiality violations, and to gather perceptions on the  integrity of the internal process for reporting misconduct, among other  things. We removed four employees from our initial population of 112  employees because two employees left DODIG prior to the initiation of  our survey and two employees were new to the organization and  therefore likely not familiar with the issues covered by the survey.", "To conduct the survey, we developed 27 questions covering (1) access to  and protection of sensitive and classified whistleblower information; (2)  confidentiality guidance, safeguards and identity disclosures; (3) resolving  internal conflict through DODIG\u2019s Office of the Ombuds; and (4) reporting  misconduct through the internal DODIG process for DODIG employees to  report misconduct. A survey specialist helped to develop these questions,  and another survey specialist provided independent feedback on the  questions to ensure that content necessary to understand the questions  was included and that the questions could be answered accurately and  completely. To minimize errors that might occur from respondents  interpreting our questions differently than we intended, we pretested our  survey with seven DODIG employees to ensure the clarity and  reasonableness of the questions. During the pretests, conducted in  person and by phone, DODIG employees read the instructions and each  question out loud and told us whether (1) the instructions and questions  were clear and unambiguous, (2) the terms we used were accurate, and  (3) they could offer a potential solution to any problems identified. We  also asked them for a mock answer to ensure that the questions were  understood as intended. We noted any potential problems identified by  the reviewers and through the pretests and modified the questionnaire  based on the feedback received. A full listing of survey questions is  provided in appendix IV.", "We conducted the survey between June 14, 2018, and July 6, 2018. To  maximize  our response rate, we sent reminder emails and contacted non- respondents by telephone to encourage them to complete the survey. In  total, we received responses from 86 DODIG employees, achieving a  response rate of 80 percent. Although not required, we assessed the  potential for non-response bias by analyzing differences in the percent of  DODIG employees per directorate and job position (e.g., investigator) that  responded to our survey and the percent of potential DODIG respondents  in each directorate and position. We found no meaningful differences  between respondents and our population of potential respondents,  indicating no evidence for non-response bias. Also, we took steps in the  development of the survey, data collection, and data analysis to minimize  nonsampling errors and help ensure the accuracy of the answers that  were obtained. For example, a social-science survey specialist helped to design the questionnaire, in collaboration with analysts having subject- matter expertise. Then, as noted earlier, the draft questionnaire was  pretested to ensure that questions were relevant, clearly stated, and easy  to comprehend, and it was also reviewed by another specialist with  expertise in survey development.", "We calculated the frequency of responses to our closed-ended survey  questions and performed content analysis on the open-ended questions  to identify common themes from across the responses and to determine  their frequencies. The quantitative analysis was performed by one analyst  and independently reviewed by another analyst. For the qualitative  analysis, a standard coding scheme was developed to identify common  themes and determine their frequencies. We also used professional  judgment to identify other themes that were determined to be important  based on our review of case files, discussions with DODIG management,  and review of guidance and relevant standards.", "To determine the extent to which DODIG and the military service IGs are  able to access and safeguard classified and sensitive information  necessary to handle whistleblower complaints, we reviewed  documentation and interviewed officials on the extent to which DODIG  and the military service IGs have developed, implemented, and assessed  key information technology (IT) security controls, and authorized the  systems and applications used to process, store, and transmit sensitive  whistleblower information per requirements and standards prescribed by  DOD, the Office of Management and Budget,  and the National Institute  of Standards and Technology. Collectively, these documents delineate  an array of documentary and procedural requirements related to the  assessment of IT security controls and the authorization to operate IT  systems and applications. We also reviewed plans and interviewed  cognizant officials on the development and implementation of the  Defense Case Activity Tracking System enterprise (D-CATSe)\u2014DOD\u2019s  future system for managing whistleblower information across DODIG and  the military service IGs, and reviewed DODIG\u2019s quality assurance reviews  of the Air Force (2017), Army (2018), and Naval IGs (2016). Separately,  we reviewed data and information on the number and percentage of  DODIG and military service IG classified cases closed in fiscal year  2017, the number and allocation of DODIG and military service IG staff  possessing security clearances, and the processes and procedures for  storing and accessing classified information within DODIG and the  military service IGs against DOD policy related to establishing controls to  ensure access to classified information is limited to authorized persons.  We assessed the reliability of classified case data by administering  questionnaires to cognizant officials, and determined the data were  sufficiently reliable for the purpose of reporting the number of classified  cases closed in fiscal year 2017.", "To determine the extent of substantiated and potential confidentiality  violations and retaliatory investigations involving DODIG employees, we  obtained and analyzed available fiscal year 2013 through 2018 data on  known or perceived violations of confidentiality standards and retaliatory  investigations from DODIG and the military service IGs. We selected data  covering this period of time because they constituted the most recent and  reliable data available, and because DODIG officials told us that data  prior to fiscal year 2013 were unreliable. We also reviewed fiscal year  2013\u20132018 complaint data from the Office of Special Counsel and the  CIGIE Integrity Committee in order to identify possible violations of  confidentiality standards or retaliatory investigations. We assessed the  reliability of DODIG and service IG data by administering questionnaires,  interviewing cognizant officials, and reviewing the methods used to query IG case management systems for this information. We determined the  data to be sufficiently reliable for the limited purpose of identifying  potential confidentiality violations and retaliatory investigations.", "To evaluate the extent to which select misconduct and reprisal cases  involving civilian DOD Presidential appointee with Senate confirmation  (PAS) officials met key documentation and reporting requirements, we  reviewed all 125 administrative misconduct and reprisal cases involving  Senate-confirmed civilian official subjects that were dismissed by DODIG  in fiscal years 2013 through 2017. We chose to review cases from this  period because they constituted the most recent and complete data in  DODIG\u2019s case management system and would therefore most accurately  reflect the extent to which the majority of DODIG\u2019s cases included  required documentation. Also, DODIG officials informed us that  information on cases prior to the implementation of the current case  management system in fiscal year 2013 were both incomplete and  unreliable. During the course of our review, we removed five out-of-scope  cases from the original population of 130 cases, reducing the number of  cases in our population from 130 to 125. Four cases were removed  because the related allegations were investigated, and one case was  removed because it was a record used to track an investigation occurring  at a military service IG. Table 8 shows the distribution per fiscal year of  closed misconduct and reprisal cases involving civilian DOD PAS  subjects by the result of the case.", "To conduct the case-file review, we developed and used a data collection  instrument to guide our review regarding general case characteristics and  the presence of information and documentation required by DOD  policies and CIGIE best practices. Core elements of this instrument were shared with DODIG officials to ensure the instrument aligned with  the policies and practices in place when the cases were dismissed. These  core elements represented individual documents and data elements. We  incorporated DODIG\u2019s feedback into our instrument before commencing  the file review. Examples of elements in our review that represent key  data in DODIG\u2019s database or constitute documentation of key steps of the  case-handling process include the following: case open date, case close date, disposition of the matter at intake, dismissal rationale.", "To validate the data collection instrument and ensure consistency in its  application, we developed and followed standard procedures to review a  test sample of 11 case files that were selected from each stratum of  cases (e.g., misconduct) to ensure that each case type was tested at  least once. In reviewing the sample, we adjusted the relevant case file  elements for each case based on its type and circumstances and  captured responses in our data collection instrument accordingly. To help  ensure the accuracy of the information we collected, one analyst  reviewed each casefile and coded for the presence of required  information using the data collection instrument, and another analyst  reviewed the first analyst\u2019s work. In the event that disagreement between  the two analysts occurred, the analysts discussed and resolved the  disagreement by identifying and reviewing supporting database  information or documentation, and obtaining the input of a third analyst, if  necessary, until a final resolution was made. We reviewed all cases  dismissed during this period; for this reason, the results of this analysis do  not have a sampling error.", "To identify other characteristics of DODIG cases involving civilian DOD  PAS officials, we also analyzed fiscal years 2013-2017 case data to  determine the number of cases closed by fiscal year, case types, case  dispositions, source organizations, and the frequency and type of alleged  misconduct. Separately, we also reviewed documentation from DODIG on  civilian DOD PAS official allegations and investigation results reported to  the Secretary of Defense and Congress since fiscal year 2013.", "In addressing our objectives, we met with officials from the organizations  identified in table 9.", "We conducted this performance audit from October 2016 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.", "While this audit was initiated in October 2016, work was suspended from  December 2016 until September 2017 due to other engagement work."], "subsections": []}, {"section_title": "Appendix II: Additional Examples of DODIG Initiatives to Improve Timeliness", "paragraphs": ["This appendix provides additional examples of Department of Defense  Office of Inspector General (DODIG) timeliness improvement initiatives.  According to DODIG officials, recent steps to improve the timeliness of  whistleblower reprisal and senior official misconduct intakes,  investigations, and oversight reviews include:", "Transferring the intake of most military reprisal complaints to the  DODIG oversight branch for increased consistency.", "Changing the intake metric from 30 to 45 days for non-military reprisal  cases to allow for more robust intakes.", "Not requiring a clarification interview when a written reprisal complaint  is clear.", "Requesting documents from the employer at the intake stage in  contractor reprisal cases.", "Interviewing subjects early in the investigation, when appropriate.", "Conducting investigative travel only when doing so would save time or  for other compelling reasons. Otherwise, most interviews are  conducted by phone or video teleconference and information is  requested in opening letters for investigations to facilitate early receipt  of documentary evidence.", "Using summary reports of investigation to facilitate timelier report- writing and review. DODIG issued 24 summary reports in fiscal year  2018, starting in May, for simple, non-substantiated investigations.", "Eliminating the requirement to conduct peer reviews of the reprisal  reports of investigation, except at supervisors\u2019 discretion.", "Using standardized complaint notification and determination forms  across DOD to formalize the processing of complaints received by  component and service IGs.", "Implementing a more robust intake process for senior official  misconduct investigations, which includes complaint clarifications and  more investigative work. According to DODIG officials, most of the  complaints reviewed during this new process would have otherwise  been investigated by DODIG or the military service IGs, with a  negative impact on the overall timeliness of investigations.", "Authorizing the military service IGs to close and simultaneously notify  the DODIG reprisal investigations directorate of actions taken for  complaints relating to uncooperative complainants, untimely  complaints, and withdrawn complaints. This has increased notification  rates and decreased processing time, according to DODIG officials."], "subsections": []}, {"section_title": "Appendix III: Characteristics of Closed Misconduct and Reprisal Cases Involving Civilian DOD Presidential Appointees with Senate Confirmation", "paragraphs": ["This appendix provides information on the characteristics of closed and  dismissed misconduct and reprisal cases involving civilian DOD  Presidential appointee with Senate confirmation (PAS) officials based on  our analysis of fiscal year 2013 through fiscal year 2017 case data from  the Department of Defense Office of Inspector General (DODIG) case- management system and our review of dismissed cases. DODIG closed  129 cases from October 1, 2012, through September 30, 2017, of which  125 were dismissed. Of the 125 dismissed cases, 117 were misconduct  cases and eight were reprisal cases."], "subsections": [{"section_title": "Organizational Source of Complaints Dismissed in Fiscal Years 2013-2017", "paragraphs": ["DODIG dismissed 125 civilian DOD PAS official misconduct and reprisal  cases. The largest number of cases\u201440 (32 percent)\u2014were submitted  by defense agency employees. Employees from the Navy submitted the  next highest number of complaints, with 31 (25 percent), followed by the  Army, which accounted for 26 (21 percent) of the complaints. Figure 9  shows the percentage of dismissed cases closed from fiscal years 2013  through 2017, by organizational source."], "subsections": []}, {"section_title": "DODIG Number of Days to Close Dismissed Cases, Fiscal Years 2013-2017", "paragraphs": ["Our review of the 125 dismissed civilian DOD PAS official cases closed  by DODIG from fiscal years 2013 through 2017 showed that the majority  of cases were closed in 30 days or less. Specifically, approximately 81  percent of the cases were closed in 30 days or less, and 58 percent of the  cases were closed in 10 days or less. Table 10 groups the cases  dismissed in each fiscal year from fiscal years 2013 through 2017 by the  number of days to close."], "subsections": []}, {"section_title": "DODIG Closed Misconduct Case Allegations, Fiscal Years 2013-2017", "paragraphs": ["We reviewed data on the number and type of allegations made against  civilian DOD PAS officials in the 117 closed misconduct cases from fiscal  years 2013 through 2017. In total, there were 152 allegations across the  117 closed cases. Allegations are grouped into 13 broad categories and  38 sub-allegation categories. From fiscal years 2013 through 2017, we  found that the greatest proportion of allegations, at 47 percent, were  personal misconduct and ethical violations. Personnel matters\u2014at 14  percent\u2014and \u201cother\u201d\u2014an indeterminate category at 12 percent\u2014were  the next two largest in proportion of allegations. Figure 10 provides the  percentages of allegations in closed misconduct cases from fiscal years  2013 through 2017."], "subsections": []}]}, {"section_title": "Appendix IV: Survey of Select DODIG Employees", "paragraphs": ["GAO administered the survey questions shown in this appendix to learn  more about DODIG processes related to the access and protection of  whistleblower records, and the avenues available to DODIG employees to  resolve conflict and report alleged misconduct themselves. The survey  was divided into four sections: information access and protection,  confidentiality, resolving internal conflict, and reporting misconduct.  Survey questions without response options were open-ended. This  appendix accurately shows the content of the web-based survey but the  format of the questions and responses options have been changed for  readability in this report. For more information about our methodology for  designing and administering the survey, see appendix I.  1.  How long have you worked in Administrative Investigations (AI)?", "Please consider your full tenure across all AI directorates (DOD  Hotline, Investigations of Senior Officials, and Whistleblower Reprisal  Investigations) if you have worked in more than one directorate.  (Response options provided: radio buttons labeled \u201cLess than 1 year,\u201d  \u201c1 year or more but less than 5 years,\u201d \u201c5 years or more but less than  10 years,\u201d and \u201c10 years or more.\u201d)", "SECTION I: Information Access and Protection  2.", "Formal  training  (in-person/w eb-based)", "Informal  training  (staff meetings/briefings)", "Please  describe any other guidance  you have received . ii.  Do you believe the guidance identified above is sufficient or  insufficient in specifying requirements for properly securing  whistleblower records in your directorate? Select only one  \u0000  Sufficient \uf0e8 SKIP to Question 4  Insufficient \uf0e8 Continue to 1 below  \u0000  Not sure \uf0e8 SKIP to Question 4  1.  Why do you believe the guidance is insufficient? SKIP to  iii.  Would guidance that specifies access restrictions and security  controls for handling whistleblower records be helpful?  (Response options provided: radio button labeled \u201cyes\u201d and  \u201cno.\u201d)  1.  Please explain why guidance would or would not be  helpful.  4.  Are you aware of any controls in place to restrict access to D-CATS  records to only DODIG employees (either within or outside your  directorate) with a need to know? Select only one  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to Question 5  I\u2019m not sure \uf0e8 SKIP to Question 5  i.", "Please describe the control(s) in place to restrict access to D- CATS records.  5.  During your tenure at DODIG, have you or other DODIG employees  (either within or outside your directorate) been able to access records  in D-CATS without a need to know? This applies to potential access  to records, regardless of whether anyone actually accessed records  or not.  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to Question 6  I don\u2019t know \uf0e8 SKIP to Question 6  i.  Which DODIG directorate\u2019s records have you or other DODIG  employees been able to access without a need to know?  (Response options provided: checkboxes labeled \u201cDOD  Hotline,\u201d \u201cInvestigations of Senior Officials,\u201d \u201cWhistleblower  Reprisal Investigations,\u201d and \u201cOffice of Professional  Responsibility.\u201d) ii.", "Are you aware of any actions taken to address the ability of  DODIG employees to access records without a need to know?  Examples of actions taken include a policy or procedure  change, additional guidance, or other actions taken.  \u0000  Yes \uf0e8 Continue to 1 below  \u0000  No \uf0e8 SKIP to 2 below  1.  Please describe the action(s) taken.  2.  What improvements, if any, could be made to address the  ability of DODIG employees to access records without a  need to know?  6.  Do you believe protections are sufficient or insufficient to ensure only  DODIG employees with a need to know can access records in D- CATS? Select only one  \u0000  Sufficient \uf0e8 Continue to i  \u0000  Not sure \uf0e8 SKIP to Question 7  i.  Why do you believe the protections are sufficient or  insufficient?  7.  Are you able to access classified information when needed to perform  the duties required of your position? Select only one  \u0000  Yes \uf0e8 SKIP to Question 8  \u0000  No \uf0e8 Continue to i  I do not require access to classified information to perform the  duties of my position \uf0e8 SKIP to Question 8  i.", "Formal  training  (in-person/w eb- based)", "Informal  training  (staff  meetings/briefings)", "Please  describe any other guidance  you have received.", "Formal  training  (in-person/w eb- based)", "Informal  training  (staff  meetings/briefings)", "Please  describe any other guidance  you have received. ii.  Do you believe the guidance identified above is sufficient or  insufficient in specifying how to determine whether disclosing  the identity of a complainant or source (e.g., witness) is  unavoidable?  \u0000  Sufficient \uf0e8 SKIP to 2 below  Insufficient \uf0e8 Continue to 1 below  \u0000  Not sure \uf0e8 SKIP to 2 below  1.  Why do you believe the guidance is insufficient?  2.  What improvements, if any, do you think could be  made to guidance specifying how to determine whether  disclosing the identity of a complainant or source (e.g.,  witness) is unavoidable? (After answering, SKIP to  Question 12)  iii.  Would guidance that specifies how to determine whether  disclosing the identity of a complainant or source (e.g.,  witness) is unavoidable be helpful? (Response options  provided: radio buttons labeled \u201cyes\u201d and \u201cno.\u201d)  1.  Please explain why guidance would or would not be  helpful.  12. To your knowledge, is there one or more official(s) who is  responsible for determining whether disclosing the identity of a  complainant or source (e.g., witness) is unavoidable?  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to Question 13  I don\u2019t know \uf0e8 SKIP to Question 13  i.  Who is responsible for determining whether disclosing the identity  of a complainant or source (e.g., witness) is unavoidable?  13. While working in AI, have you ever encountered a situation where  disclosing the identity of a complainant or source (e.g., witness) was  unavoidable?  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to Question 14  i.  Please describe the general circumstance(s) and the steps you  took to verify that the circumstance(s) required disclosing the  identity of a complainant or source (e.g., witness). Please do not  provide individual names related to the actors involved.  14. Between June 1, 2017, and today, are you aware \u2014 either by  experiencing firsthand or directly observing actions of another person  \u2013 of an instance where the identity of a complainant or source (e.g.,  witness) was disclosed by a DODIG employee to an organization or  individual without a need to know (i.e., an avoidable disclosure)?  Please check only one below.  \u0000  No, I am not aware of any avoidable disclosures \uf0e8 SKIP to  \u0000  Yes, I am aware of one or more avoidable disclosure(s) \uf0e8  Continue to i  i.  How many avoidable disclosures are you aware of between  June 1, 2017, and today? For example, if the identity of a  complainant was revealed to one person who did not have a  need to know, please consider that event as one instance.  Similarly, if the identity of a source was revealed separately to  two different people who did not have a need to know, please  consider those events as two instances.  ii.  Please describe any actions taken in response to the  avoidable disclosure(s) you are aware of between June 1,  2017, and today. Examples of actions taken include but may  not be limited to retracting/recalling a referred complaint, a  change to policy, procedure or guidance, and notifying the  complainant or source, among other actions.  15. What improvements, if any, could be made to prevent avoidable  disclosures from happening in the future?  16. Please describe any best practices that you follow to help prevent  avoidable disclosures.", "SECTION III: Resolving Internal Conflict  17. Have you ever contacted the DODIG Office of the Ombuds or  participated in a DODIG Office of the Ombuds activity in order to  address conflict among DODIG employees? Examples of DODIG  Office of the Ombuds activities include but are not limited to providing  confidential advice for resolving conflict among peers and supervisors  and participating in an Ombuds-led mediation among DODIG  employees.  \u0000  Yes \uf0e8 Continue to i  \u0000  No, but I know about the DODIG Office of the Ombuds \uf0e8  I do not know about the DODIG Office of the Ombuds \uf0e8 SKIP  to the next section  i.  Do you believe the DODIG Office of the Ombuds provided or is  providing sufficient or insufficient assistance to address the  conflict(s) for which you contacted the Ombuds or participated in  an Ombuds activity?  \u0000  Sufficient \uf0e8 Continue to 1  Insufficient \uf0e8 Continue to 1  \u0000  Too soon to tell \uf0e8 Continue to 1  1.  Please describe, in general terms, your latest experience  working with the DODIG Office of the Ombuds. Please do  not provide the names of individuals involved with your  experience.  18. Have you ever considered reaching out to the DODIG Office of the  Ombuds, but ultimately chose not to?  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to the next section  i.  How much, if at all, did each of the following contribute to  your decision not to utilize DODIG Office of the Ombuds  services? Select one in each row.", "Resolved  the issue  through another  avenue  Not  sure how  to initiate  contact w ith the Ombuds  Concern  about length  of  process  Concern  about objectivity  or conflict of interest  w ithin the Office of the  Ombuds  Fear that confidentiality  w ould be compromised  Fear of retaliation  or  reprisal from w ithin  DODIG  Please  describe any other factor(s) that contributed  to your decision not to utilize  DODIG  Office of the Ombuds  services.", "SECTION IV: Reporting Misconduct  19. As a DODIG employee, have you ever personally reported  misconduct against another DODIG employee through DODIG\u2019s  internal process for investigating alleged misconduct? For the  purposes of this survey, \u201cmisconduct\u201d refers to (1) a violation of a  provision of criminal law, (2) a violation of a recognized standard,  such as a federal or DOD regulation, or (3) a matter of concern  involving DOD leadership that could reasonably be expected to be of  significance to DODIG.  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to iii  i.  Did you report misconduct on or before September 30, 2016?  \u0000  Yes \uf0e8 Continue to 1 below  \u0000  No \uf0e8 SKIP to ii  1.  Do you believe your report(s) of misconduct on or before  September 30, 2016 were investigated in a fair and objective  manner? (Response options provided: radio buttons labeled  \u201cyes\u201d and \u201cno.\u201d)  a.  Please describe your general experience(s) in reporting  misconduct against a DODIG employee on or before  September 30, 2016, including why you do or do not  believe your report(s) of misconduct were investigated in a  fair and objective manner. Please do not provide the  names of individuals related to the misconduct you  reported.  ii.  Did you report misconduct on or after October 1, 2016?  \u0000  Yes \uf0e8 Continue to 1 below  \u0000  No \uf0e8 SKIP to Question 20  1.  Do you believe your report(s) of misconduct on or after  October 1, 2016 were investigated in a fair and objective  manner? (Response options provided: radio buttons  labeled \u201cyes,\u201d \u201cno,\u201d and \u201ctoo early to have an opinion\u201d)  a.  Please describe your general experience(s) in  reporting misconduct against a DODIG employee on or  after October 1, 2016, including why you do or do not  believe your report(s) of misconduct were investigated  in a fair and objective manner. Please do not provide  the names of individuals related to the misconduct you  reported.  iii.  Do you know how to report misconduct against another DODIG  employee through DODIG\u2019s internal process? (Response options  provided: radio buttons labeled \u201cyes\u201d and \u201cno.\u201d)  20. Thinking about the time period on or before September 30, 2016, did  you ever consider reporting misconduct against a DODIG employee  through DODIG\u2019s internal process, but ultimately choose not to?  \u0000  Yes \uf0e8 Continue to i  \u0000  No \uf0e8 SKIP to Question 21  i.  How much, if at all, did each of the following contribute to your  decision not to report incident(s) of misconduct on or before  September 30, 2016? Select one in each row.", "Resolved  the issue through  another avenue  Not  sure how  to report  misconduct  Concern  about length  of  process  Concern  about objectivity or  conflict of interest w ithin  DODIG\u2019s  internal  process to  report misconduct    Fear that confidentiality  w ould  be compromised  Fear of retaliation  or reprisal  from w ithin DODIG  Please  describe any other factor(s) that contributed  to your decision not to report  incidents  of misconduct  on or before September  30, 2016.", "21. Thinking about the time period on or after October 1, 2016, did you  ever consider reporting misconduct against a DODIG employee  through DODIG\u2019s internal process, but ultimately choose not to?  \u0000  Yes \uf0e8 Continue to i below  \u0000  No \uf0e8 SKIP to Question 22  i.  How much, if at all, did each of the following contribute to your  decision not to report incident(s) of misconduct on or after October  1, 2016? Select one in each row.", "Resolved  the issue through  another avenue  Not  sure how  to report  misconduct  Concern  about length  of  process  Concern  about objectivity or  conflict of interest w ithin  DODIG\u2019s  internal  process to  report misconduct    Fear that confidentiality  w ould  be compromised  Fear of retaliation  or reprisal  from w ithin DODIG  Please  describe any other factor(s) that contributed  to your decision not to report  incidents  of misconduct  on or after October  1, 2016.", "22. How well, if at all, do you believe DODIG\u2019s internal process for  reporting misconduct protects the confidentiality of DODIG  employees? (Response options provided: radio buttons labeled \u201cNot  at all,\u201d \u201cSlightly,\u201d \u201cSomewhat,\u201d \u201cVery well,\u201d and \u201cI don\u2019t know.\u201d)  23. What improvements, if any, do you think could be made to DODIG\u2019s  internal process for reporting misconduct to protect the confidentiality  of DODIG employees?  24. How well, if at all, do you believe DODIG\u2019s internal process handles  misconduct allegations against DODIG employees? This includes  activities associated with both assessing incoming complaints and  subsequently investigating them, as appropriate. (Response options  provided: radio buttons labeled \u201cNot at all,\u201d \u201cSlightly,\u201d \u201cSomewhat,\u201d  \u201cVery well,\u201d and \u201cI don\u2019t know.\u201d)  25. What factors contribute to your opinion about DODIG\u2019s internal  process for handling misconduct allegations against DODIG  employees?  26. What improvements, if any, do you think could be made to DODIG\u2019s  internal process to improve the handling of misconduct allegations?  27. If you would like to comment on any of the topics covered by this  survey, or anything else that you feel might be relevant to our review  on the DOD whistleblower program, please do so below."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Alissa Czyz (Assistant  Director),Tracy Barnes, Amy Bush, Nicole Collier, Ryan D\u2019Amore, Chad  Hinsch, Linda Keefer, Kevin Keith, Amie Lesser, Serena Lo, Michael  Silver, and Lillian Yob made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Office of Special Counsel: Actions Needed to Improve Processing of  Prohibited Personnel Practice and Whistleblower Disclosure Cases.  GAO-18-400. Washington, D.C.: June 14, 2018.", "NASA Contractor Whistleblowers: Steps Taken to Implement Program but  Improvements to Timeliness and Guidance Needed. GAO-18-262.  Washington, D.C.: March 8, 2018.", "Whistleblower Protection: Opportunities Exist for DOD to Improve the  Timeliness and Quality of Civilian and Contractor Reprisal Investigations.  GAO-17-506. Washington, D.C.: September 29, 2017.", "Contractor Whistleblower Protections Pilot Program: Improvements  Needed to Ensure Effective Implementation. GAO-17-227. Washington,  D.C.: March 2, 2017.", "Whistleblower Protection: Additional Actions Would Improve Recording  and Reporting of Appeals Data. GAO-17-110. Washington, D.C.:  November 28, 2016.", "Whistleblower Protection: DOD Has Improved Oversight for Reprisal  Investigations but Can Take Additional Actions to Standardize Process  and Reporting. GAO-16-860T. Washington, D.C.: September 7, 2016.", "Department of Energy: Whistleblower Protections Need Strengthening.  GAO-16-618. Washington, D.C.: July 11, 2016.", "Whistleblower Protection: DOD Needs to Enhance Oversight of Military  Whistleblower Reprisal Investigations. GAO-15-477. Washington, D.C.:  May 7, 2015.", "Whistleblower Protection: Additional Actions Needed to Improve DOJ\u2019s  Handling of FBI Retaliation Complaints. GAO-15-112. Washington, D.C.:  January 23, 2015.", "Whistleblower Protection Program: Opportunities Exist for OSHA and  DOT to Strengthen Collaborative Mechanisms. GAO-14-286.  Washington, D.C.: March 19, 2014.", "Whistleblower Protection: Actions Needed to Improve DOD\u2019s Military  Whistleblower Reprisal Program. GAO-12-362. Washington, D.C.:  February 22, 2012."], "subsections": []}], "fastfact": ["People can report potential misconduct, fraud, and other wrongdoing involving DOD personnel to one of several DOD Inspector General offices. Those offices safeguard whistleblowers' personal information in order to protect them from retaliation\u2014such as a demotion. Confidentiality can also encourage reporting.", "Yet, we found that some of the guidance for the investigators doesn\u2019t specify some key steps to protect confidentiality, and Inspector General offices have not fully restricted access to information to only those who need to know.", "We made 12 recommendations to help protect whistleblowers and improve investigations."]}
{"id": "GAO-19-128", "url": "https://www.gao.gov/products/GAO-19-128", "title": "Weapon Systems Cybersecurity: DOD Just Beginning to Grapple with Scale of Vulnerabilities", "published_date": "2018-10-09T00:00:00", "released_date": "2018-10-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD plans to spend about $1.66 trillion to develop its current portfolio of major weapon systems. Potential adversaries have developed advanced cyber-espionage and cyber-attack capabilities that target DOD systems. Cybersecurity\u2014the process of protecting information and information systems\u2014can reduce the likelihood that attackers are able to access our systems and limit the damage if they do.", "GAO was asked to review the state of DOD weapon systems cybersecurity. This report addresses (1) factors that contribute to the current state of DOD weapon systems' cybersecurity, (2) vulnerabilities in weapons that are under development, and (3) steps DOD is taking to develop more cyber resilient weapon systems.", "To do this work, GAO analyzed weapon systems cybersecurity test reports, policies, and guidance. GAO interviewed officials from key defense organizations with weapon systems cybersecurity responsibilities as well as program officials from a non-generalizable sample of nine major defense acquisition program offices."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) faces mounting challenges in protecting its weapon systems from increasingly sophisticated cyber threats. This state is due to the computerized nature of weapon systems; DOD's late start in prioritizing weapon systems cybersecurity; and DOD's nascent understanding of how to develop more secure weapon systems. DOD weapon systems are more software dependent and more networked than ever before (see figure).", "Automation and connectivity are fundamental enablers of DOD's modern military capabilities. However, they make weapon systems more vulnerable to cyber attacks. Although GAO and others have warned of cyber risks for decades, until recently, DOD did not prioritize weapon systems cybersecurity. Finally, DOD is still determining how best to address weapon systems cybersecurity.", "In operational testing, DOD routinely found mission-critical cyber vulnerabilities in systems that were under development, yet program officials GAO met with believed their systems were secure and discounted some test results as unrealistic. Using relatively simple tools and techniques, testers were able to take control of systems and largely operate undetected, due in part to basic issues such as poor password management and unencrypted communications. In addition, vulnerabilities that DOD is aware of likely represent a fraction of total vulnerabilities due to testing limitations. For example, not all programs have been tested and tests do not reflect the full range of threats.", "DOD has recently taken several steps to improve weapon systems cybersecurity, including issuing and revising policies and guidance to better incorporate cybersecurity considerations. DOD, as directed by Congress, has also begun initiatives to better understand and address cyber vulnerabilities. However, DOD faces barriers that could limit the effectiveness of these steps, such as cybersecurity workforce challenges and difficulties sharing information and lessons about vulnerabilities. To address these challenges and improve the state of weapon systems cybersecurity, it is essential that DOD sustain its momentum in developing and implementing key initiatives. GAO plans to continue evaluating key aspects of DOD's weapon systems cybersecurity efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations at this time. GAO will continue to evaluate this issue."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) plans to spend about $1.66 trillion to  develop its current portfolio of weapon systems. These weapons are  essential to maintaining our nation\u2019s military superiority and for  deterrence. It is important that they work when needed, yet cyber attacks  have the potential to prevent them from doing so. Cyber attacks can  target any weapon subsystem that is dependent on software, potentially  leading to an inability to complete military missions or even loss of life.  Examples of functions enabled by software\u2014and potentially susceptible  to compromise\u2014include powering a system on and off, targeting a  missile, maintaining a pilot\u2019s oxygen levels, and flying aircraft. An attacker  could potentially manipulate data in these systems, prevent components  or systems from operating, or cause them to function in undesirable ways.", "Some advanced threat actors are aware of this and have well-funded  units that focus on positioning themselves to potentially undermine U.S.  capabilities. For example, according to the National Security Agency  (NSA), advanced threats are targeting national security systems.  According to the Department of Homeland Security\u2019s U.S. Computer  Emergency Readiness Team and industry reports, advanced threats may  conduct complex, long-term cyber attack operations. These reports show  that threats may employ cyber reconnaissance, such as probing systems,  and cyber espionage, such as cyber theft, to develop detailed knowledge  of the target system to design and deploy more damaging attacks.", "Furthermore, in 2017, the Director of National Intelligence testified that  some adversaries remain undeterred from conducting reconnaissance,  espionage, influence, and even attacks in cyberspace.", "Cybersecurity is the process of protecting information and information  systems by preventing, detecting, and responding to attacks. It aims to  reduce the likelihood that attackers can access DOD systems and limit  the damage if they do. Since 1997, we have designated federal  information security\u2014another term for cybersecurity\u2014as a government- wide high-risk area. We have also reported and made hundreds of  recommendations on a wide range of topics related to cybersecurity, such  as information security programs across the federal government, privacy  of personally identifiable information, critical infrastructure, and federal  facility cybersecurity. We have found that the federal government needs  to, among other things, improve its abilities to detect, respond to, and  mitigate cyber incidents and expand its cyber workforce planning and  training efforts.", "You asked us to conduct a series of reviews on DOD\u2019s efforts to improve  the cybersecurity of the weapon systems it develops. This report  addresses (1) factors that contribute to the current state of DOD weapon  systems cybersecurity, (2) vulnerabilities in weapons that are under  development, and (3) steps DOD is taking to develop more cyber resilient  weapon systems. We focused primarily on weapon systems that are  under development.", "To identify factors that contribute to the current state of DOD weapon  systems cybersecurity, we reviewed reports issued from 1991 to the  present on software, information technology (IT), networking, and weapon  systems from the National Research Council, the Defense Science Board  (DSB), GAO, and other organizations as well as key DOD policies and  guidance. To identify vulnerabilities in weapon systems under  development, we reviewed cybersecurity assessment reports from  selected weapon systems that were tested between 2012 and 2017. To  determine the steps DOD is taking to develop more cyber resilient  weapon systems, we analyzed DOD information assurance/cybersecurity,  acquisition, requirements, and testing policies and guidance that have  been updated since 2014, when DOD began more concerted efforts to  address weapon systems cybersecurity.", "To inform each objective, we interviewed Office of the Secretary of  Defense officials, including Office of the Director, Operational Test and  Evaluation; Office of the Deputy Assistant Secretary of Defense for  Developmental Test and Evaluation; Office of the Chief Information  Officer including the Defense Information Systems Agency; Office of the  Chairman of the Joint Chiefs of Staff; Office of the Under Secretary of  Defense (Acquisition and Sustainment) and Office of the Under Secretary  of Defense (Research and Engineering). We interviewed officials from all  military test organizations, NSA, and DOD program offices. To select the  program offices, we used a purposeful sample of 9 major defense  acquisition programs representing each service, multiple domains, and  programs that are extensively connected to other weapons systems. We  also interviewed other organizations with cybersecurity expertise. See  appendix I for additional information on our scope and methodology.", "To present information in an unclassified format, we do not disclose  details regarding weapon system vulnerabilities, which program offices  we interviewed, or which cybersecurity assessments we reviewed. The  examples we cite from cybersecurity assessments are unique to each  weapon system and are not applicable to all weapon systems.  Furthermore, cybersecurity assessment findings are as of a specific date,  so vulnerabilities identified during system development may no longer  exist when the system is fielded. In addition, we illustrated some concepts  using fictitious depictions. In some cases, we were deliberately vague and  excluded some details from examples to avoid identifying specific weapon  systems. We also presented examples of publicly known attacks in  sidebars to illustrate how poor cybersecurity can enable cyber attacks.  DOD conducted a security review of the report and cleared it for public  release. We will provide a classified briefing of our findings to Congress.", "This is our first report specific to cybersecurity in the context of weapon  systems acquisitions. For that reason, we did not look in depth at related  issues in the context of weapon systems, such as the security of  contractor facilities, so-called \u201cInternet of Things\u201d devices,  microelectronics, contracting, and industrial control systems. In addition,  we are not making recommendations in this report, but plan to continue  evaluating key aspects of DOD\u2019s weapon systems cybersecurity efforts in  the future.", "We conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Weapon Systems Are Unique In Many Ways, but Face Common Cyber Vulnerabilities", "paragraphs": ["Cybersecurity issues can vary widely across different types of systems,  so weapon systems cybersecurity challenges may be very different than  those of some IT systems. Despite variation across systems,  cybersecurity can be described using common terminology, such as the  key terms below used by the National Research Council.", "Key Concept  Security Controls are safeguards or  countermeasures to protect the confidentiality,  integrity, and availability of a system and its  information.   For example, a firewall is a common control  to allow or block traffic based on a set of  rules. Because it is impossible to define a rule  for every scenario, attackers look for ways to  access a system that are not covered by the  rules. For example, a firewall may block traffic  from a specific country, but attackers may  make it appear that they are in a country that  is not blocked. They may use tools to avoid  the firewall, such as embedding malicious  software in an e-mail and waiting for a user to  open it and inadvertently install the code.", "A cyber vulnerability is a weakness in a system that could be  exploited to gain access or otherwise affect the system\u2019s  confidentiality, integrity, and availability.", "A cybersecurity threat is anything that can exploit a vulnerability to  harm a system, either intentionally or by accident.", "Cybersecurity risk is a function of the threat (intent and capabilities),  vulnerabilities (inherent or introduced), and consequences (fixable or  fatal).", "Although some weapon systems are purely IT systems, most\u2014such as  aircraft, missiles, and ships\u2014are what the National Institute of Standards  and Technology (NIST) and sometimes DOD refer to as \u201ccyber-physical  systems.\u201d NIST defines these systems as \u201cco-engineered interacting  networks of physical and computational components.\u201d These cyber  systems can affect the physical world so the consequences of a cyber  attack may be greater than those of attacks on other types of systems.  For example, an attack on a weapon system could have physical  consequences that may even result in loss of life.", "Nevertheless, weapon systems share many of the same cyber  vulnerabilities as other types of automated information systems. Weapon  systems are large, complex, systems of systems that have a wide variety  of shapes and sizes, with varying functionality. Despite obvious  differences in form, function, and complexity, weapon systems and other  types of systems are similar in some important, if not obvious, ways. For  example, DOD reports state that many weapon systems rely on  commercial and open source software and are subject to any cyber  vulnerabilities that come with them. Weapon systems also rely on  firewalls and other common security controls to prevent cyberattacks.  Weapon system security controls can also be exploited or bypassed if the  system is not properly configured. Finally, weapon systems are operated  by people\u2014a significant source of cybersecurity vulnerability for any  system."], "subsections": []}, {"section_title": "Anatomy of a Cyber Attack", "paragraphs": ["One common way to discuss cybersecurity is through the activities  necessary to defend (or attack) a system. System developers and  operators take steps to protect the system from cyber attacks, while  attackers attempt to defeat those protections as depicted in figure 1. The  cyber attack sequence is also referred to as a cyber kill chain or cyber  attack lifecycle. There are multiple models for understanding cyber  attacks, each with their own terminology and sequence of steps. The  attack sequence below is simpler, but generally consistent with existing  cybersecurity models. We identified the defend sequence below based  on the steps included in cybersecurity test reports that we reviewed."], "subsections": []}, {"section_title": "Attack Sequence: Discover \uf0e0 Implement \uf0e0 Exploit", "paragraphs": ["Example: Importance of Patching in a  Timely Manner  In the 2017 Equifax cyber attack, personal  data for over 145 million people were  exposed. Attackers took advantage of a  vulnerability in a commonly used web  application to access Equifax\u2019s credit  reporting system. A patch for the vulnerability  was available in March, but Equifax had not  applied it by the time of the attack\u2014in mid- May.", "A cyber attacker looks for ways to get around security controls in order to  obtain full or partial control of the system. An attacker typically starts by  learning as much as possible about the system\u2014potentially through cyber  reconnaissance\u2014to identify vulnerabilities in the system. The more  attackers know about the system, the more options they have when  designing an attack. An attacker may identify a previously unknown  vulnerability that the system owner is unaware of. Or the attacker could  look for system components that had not applied known security  updates\u2014also called \u201cpatches.\u201d Developers of commercial components  usually publicly announce any security patches and, ironically, provide a  roadmap for an attacker to attack a system or component.", "An attack may not happen all at once\u2014an attacker may find the easiest  way to gain initial access and then look for ways to expand their access  until they reach their ultimate goal. Even once they achieve full access to  a system, an attacker may wait for an opportune time to attack the  confidentiality, integrity, or availability of a system. Types of attacks are  described in appendix II."], "subsections": []}, {"section_title": "Security Goals: Protect \uf0e0 Detect \uf0e0 Respond/Recover", "paragraphs": ["The system owner wants to prevent, or at least limit, attempts to  adversely affect the confidentiality, integrity, or availability of the system.  The owner implements security controls such as firewalls, role-based  access controls, and encryption to reduce the number of potential attack  points. Many controls need to be designed into the system early in the  development cycle. Ideally, the controls are designed to work together  and there may be layers of controls that an attacker would have to defeat  in order to gain control of the system\u2014referred to as \u201cdefense in depth.\u201d", "Key Concepts   Role-based access entails allowing users to  only access information and features  necessary to carry out their job.  Encryption is a way of transforming  information so that only authorized users are  able to read it.", "Protecting a system also includes administrative processes, such as  requiring users to regularly change their passwords and applying patches  on a regular schedule\u2014referred to as cyber hygiene. However, no system  can be completely secure, so system owners must also constantly  monitor their systems for suspicious activity. Logging is a common  system feature that automatically records system activity. Unusual  patterns such as numerous failed log-in attempts from a remote location  could indicate that an unauthorized person is trying to gain access to the  system. Once such a cyber activity is detected, the system owner needs  to take steps to end the attack and restore any system capabilities that  were degraded as a result of the attacker\u2019s actions."], "subsections": []}, {"section_title": "Attack Sophistication Levels", "paragraphs": ["We reported in 2015 that federal and contractor systems face an evolving  array of cyber-based threats, including criminals, hackers, adversarial  nations, and terrorists. Threats can range from relatively unskilled \u201cscript  kiddies\u201d who only use existing computer scripts or code to hack into  computers, to well-resourced and highly skilled advanced threats who not  only have sophisticated hacking skills, but also normally gather detailed  knowledge of the systems they attack. Table 1 provides brief descriptions  of the terminology DOD uses to categorize threats."], "subsections": []}, {"section_title": "DOD Weapon Systems Requirements and Acquisition Processes", "paragraphs": ["Weapons systems are developed, acquired, and deployed within the  defense acquisition system, a system of statutes and regulations. Subject  to control of the DOD, the Army, Air Force, Navy, and Marine Corps by  law have authority to \u201corganize, train, and equip\u201d their services. Their  decisions regarding what to develop and how best to do so are informed  by documents and deliberations under DOD\u2019s requirements and  acquisition processes respectively. Early in the acquisition lifecycle, the  requirements process identifies what capabilities are needed and  evaluates options to best meet those needs. The acquisition process is  a gated review process that assesses programs against established  review criteria, such as the program\u2019s cost, schedule, performance, and  whether the weapon system is ready to move forward in the acquisition  process. Numerous military-service entities are involved in these  processes. Key enterprise-level organizations include the Joint Staff and  Office of the Secretary of Defense organizations, such as the Office of the  Under Secretary of Defense (Acquisition and Sustainment), Office of the  Under Secretary of Defense (Research and Engineering), and the  Director of Operational Test and Evaluation (DOT&E)."], "subsections": []}, {"section_title": "Organizations Responsible for Weapon Systems Cybersecurity", "paragraphs": ["Example: Increased Reliance on Software  In the 2015 JEEP Cherokee cyber attack,  researchers remotely took physical control of  a JEEP, including shutting off the engine and  controlling the brakes. In 2016, we reported  that electronic systems control multiple  passenger vehicle functions and that vehicles  include multiple interfaces that leave them  vulnerable to cyber attacks.   Researchers studied a JEEP to understand its  systems, including the characteristics of its  software code and its \"CAN Bus,\" which  connects to units that control core vehicle  functions. They remotely accessed an  Internet-connected component and used it as  an initial entry point to access the vehicle's  CAN Bus, which then allowed them to control  many of the JEEP\u2019s functions.", "Just as many DOD organizations are responsible for weapon systems  acquisitions, many have responsibilities related to cybersecurity during  the acquisition process. For example, program offices are responsible  for planning and implementing cybersecurity measures for the system  under development. Authorizing officials are responsible for overseeing  programs\u2019 adherence to security controls and for authorizing a system\u2019s  entry into operations based on the system having an acceptable level of  cyber risk. At key decision points, the Office of the Under Secretary of  Defense (Research and Engineering) is responsible for advising the  Secretary of Defense and providing independent technical risk  assessments that address a variety of topics, including the system\u2019s  cybersecurity posture. Military test organizations conduct cybersecurity  assessments of weapon systems. DOT&E oversees those tests and is  funding research on the cybersecurity of some weapon system  components that pose particular cybersecurity challenges.", "Organizations that are traditionally associated with cybersecurity, such as  NSA and Cyber Command, support some aspects of weapon systems  cybersecurity. However, they are not responsible for reviewing the  designs of most weapon systems to identify potential vulnerabilities,  although NSA officials said that they will provide advice to acquisition  programs if asked to do so. More information about these roles and  responsibilities is included in appendix III."], "subsections": []}]}, {"section_title": "Multiple Factors Make Weapon Systems Cybersecurity Increasingly Difficult, but DOD Is Just Beginning to Grapple with the Challenge", "paragraphs": ["Multiple factors contribute to the current state of DOD weapon systems  cybersecurity, including: the increasingly computerized and networked  nature of DOD weapons, DOD\u2019s past failure to prioritize weapon systems  cybersecurity, and DOD\u2019s nascent understanding of how best to develop  more cyber secure weapon systems. Specifically, DOD weapon systems  are more software and IT dependent and more networked than ever  before. This has transformed weapon capabilities and is a fundamental  enabler of the United States\u2019 modern military capabilities. Yet this change  has come at a cost. More weapon components can now be attacked  using cyber capabilities. Furthermore, networks can be used as a  pathway to attack other systems. We and others have warned of these  risks for decades. Nevertheless, until recently, DOD did not prioritize  cybersecurity in weapon systems acquisitions. In part because DOD  historically focused on the cybersecurity of its networks but not weapon  systems themselves, DOD is in the early stage of trying to understand  how to apply cybersecurity to weapon systems. Several DOD officials  explained that it will take some time, and possibly some missteps, for the  department to learn what works and does not work with respect to  weapon systems cybersecurity."], "subsections": [{"section_title": "DOD Weapon Systems Are Increasingly Complex and Networked, Increasing Cyber Vulnerabilities", "paragraphs": ["DOD\u2019s weapon systems are increasingly dependent on software and IT to  achieve their intended performance. The amount of software in today\u2019s  weapon systems is growing exponentially and is embedded in numerous  technologically complex subsystems, which include hardware and a  variety of IT components, as depicted in figure 2.", "Nearly all weapon system functions are enabled by computers\u2014ranging  from basic life support functions, such as maintaining stable oxygen  levels in aircraft, to intercepting incoming missiles. DOD has actively  sought ways to introduce this automation into weapon systems. For  example, we have reported that for decades, the Navy has sought to  reduce ship crew size based, in part, on the assumption that some  manual tasks could be automated and fewer people would be needed to  operate a ship.", "Yet this growing dependence on software and IT comes at a price. It  significantly expands weapons\u2019 attack surfaces. According to DOT&E,  any exchange of information is a potential access point for an adversary.  Even \u201cair gapped\u201d systems that do not directly connect to the Internet for  security reasons could potentially be accessed by other means, such as  USB devices and compact discs. Weapon systems have a wide variety of  interfaces, some of which are not obvious, that could be used as  pathways for adversaries to access the systems, as is shown in figure 3.", "DOD systems are also more connected than ever before, which can  introduce vulnerabilities and make systems more difficult to defend.  According to the DSB, nearly every conceivable component in DOD is  networked. Weapon systems connect to DOD\u2019s extensive set of  networks\u2014called the DOD Information Network\u2014and sometimes to  external networks, such as those of defense contractors. Technology  systems, logistics, personnel, and other business-related systems  sometimes connect to the same networks as weapon systems.  Furthermore, some weapon systems may not connect directly to a  network, but connect to other systems, such as electrical systems, that  may connect directly to the public Internet, as is depicted in figure 4.", "These connections help facilitate information exchanges that benefit  weapon systems and their operators in many ways\u2014such as command  and control of the weapons, communications, and battlespace  awareness. If attackers can access one of those systems, they may be  able to reach any of the others through the connecting networks. Many  officials we met with stated that including weapon systems on the same  networks with less protected systems puts those weapon systems at risk.  Furthermore, the networks themselves are vulnerable. DOT&E found that  some networks were not survivable in a cyber-contested environment and  the DSB reported in 2013 that \u201cthe adversary is in our networks.\u201d", "Further complicating matters, weapon systems are dependent on external  systems, such as positioning and navigation systems and command and  control systems in order to carry out their missions\u2014and their missions  can be compromised by attacks on those other systems. A successful  attack on one of the systems the weapon depends on can potentially limit  the weapon\u2019s effectiveness, prevent it from achieving its mission, or even  cause physical damage and loss of life."], "subsections": []}, {"section_title": "Despite Warnings, Cybersecurity Has Not Been a Focus of Weapon Systems Acquisitions", "paragraphs": ["We and other organizations have identified risks associated with  increased reliance on software and networking since at least the early  1990s, as is shown in table 2.", "Nevertheless, DOD has only recently begun prioritizing weapon systems  cybersecurity. Instead, for many years, DOD focused cybersecurity efforts  on protecting networks and traditional IT systems, such as accounting  systems, rather than weapons. Experts we interviewed as well as officials  from program offices, the Office of the Secretary of Defense, and some  military test organizations explained that, until around 2014, there was a  general lack of emphasis on cybersecurity throughout the weapon  systems acquisition process. Others have reported similar findings. For  example, the DSB reported in 2013 that although DOD had taken great  care to secure the use and operation of the hardware of its weapon  systems, it had not devoted the same level of resources and attention to  IT systems that support and operate those weapons and critical IT  capabilities embedded within the weapon systems. The National  Research Council reported in 2014 that much broader and more  systematic attention to cybersecurity was needed in the acquisition  process and that the Navy was in the \u201ccrawl\u201d stage of a \u201ccrawl-walk-run\u201d  journey. Similarly, the Navy reported in 2015 that there was a lack of  attention to cybersecurity in the acquisition process and platform IT  systems were not engineered with cybersecurity as a key component.", "In the past, consideration of cybersecurity was not a focus of the key  processes governing the development of weapon systems. It was not a  focus of key acquisition and requirements policies nor was it a focus of  key documents that inform decision-making. For example, until a few  years ago, DOD\u2019s main requirements policy did not call for programs to  factor cyber survivability into their key performance parameters. Key  performance parameters are the most important system capabilities,  called \u201crequirements,\u201d that must be met when developing weapon  systems. They are established early on in an acquisition program and  drive system design decisions. They are also used as a benchmark to  measure program performance and are reviewed during acquisition  decisions and other oversight processes. Because cybersecurity key  performance parameters were not required, Joint Staff officials and some  program officials said that many current weapon systems had no high- level cybersecurity requirements when they began, which in turn limited  emphasis on cybersecurity during weapon system design, development,  and oversight. In addition, Joint Staff officials said that, historically,  cybersecurity was not a factor in analyses of alternatives. This analysis is  an important early step in acquiring a new weapon system and informs  decisions about the relative effectiveness, costs, and risks of potential  systems that could be developed. By not considering cybersecurity in  these analyses, decisions about which system to develop were made  without consideration of whether one proposed system might be more  inherently vulnerable from a cyber perspective than others.", "Programs\u2019 lack of cybersecurity requirements may have also contributed  to challenges with incorporating cybersecurity into weapon systems  testing. Specifically, DOT&E and service test agencies said that prior to  around 2014, program offices tried to avoid undergoing cybersecurity  assessments because they did not have cybersecurity requirements and  therefore thought they should not be evaluated. Furthermore, test officials  said that many within DOD did not believe cybersecurity applied to  weapon systems. As a result, fewer cybersecurity assessments were  conducted at that time in comparison to recent years.", "By not incorporating cybersecurity into key aspects of the requirements  and acquisition processes, DOD missed an opportunity to give  cybersecurity a more prominent role in key acquisition decisions.  Numerous officials we met with said that this failure to address weapon  systems cybersecurity sooner will have long-lasting effects on the  department. Due to this lack of focus on weapon systems cybersecurity,  DOD likely has an entire generation of systems that were designed and  built without adequately considering cybersecurity. Bolting on  cybersecurity late in the development cycle or after a system has been  deployed is more difficult and costly than designing it in from the  beginning. Not only is the security of those systems and their missions at  risk, the older systems may put newer systems in jeopardy. Specifically, if  DOD is able to make its newer systems more secure, but connects them  to older systems, this puts the newer systems at risk. Furthermore, even if  they are not connected, if the newer systems depend on the older  systems to help fulfill their missions, those missions may be at risk."], "subsections": []}, {"section_title": "DOD Is Still Learning How to Address Weapon Systems Cybersecurity", "paragraphs": ["DOD is still determining how best to address weapon systems  cybersecurity given weapon systems\u2019 different and particularly  challenging cybersecurity needs. Although there are similarities between  weapon systems and traditional IT systems, DOD has acknowledged that  it may not be appropriate to apply the same cybersecurity approach to  weapon systems as traditional IT systems. RAND reported and several  program officials we met with stated that DOD\u2019s security controls were  developed with IT systems, and not weapon systems, in mind. DOD  policies and guidance acknowledge that tailoring may be warranted, but  they do not yet specify how the approaches to the security controls  should differ.", "Key Concept  Industrial control system is a general term  that encompasses several types of control  systems including supervisory control and  data acquisition systems, distributed control  systems, and programmable logic controllers.  Industrial control systems monitor or control  other systems and processes and may be  used to automate tasks such as opening and  closing valves.", "DOD is still in the process of determining how to make weapon system  components with particular cyber vulnerabilities as secure as possible.  For example, many weapon systems use industrial control systems to  monitor and control equipment, and like computers, they include software.  Many weapon systems use such systems to carry out essential functions.  For example, a ship may use industrial control systems to control engines  and fire suppression systems. According to NIST, industrial control  systems were originally designed for use in trusted environments, so  many did not incorporate security controls. Government and industry  reports state that attacks on these systems are increasing. However,  DOD officials said that program offices may not know which industrial  control systems are embedded in their weapons or what the security  implications of using them are. Over the past few years, DOD has begun  funding work to improve its understanding of how to best secure these  systems. In addition, Office of the Secretary of Defense officials informed  us that, in response to section 1650 of the National Defense Authorization  Act for Fiscal Year 2017, they are working to better understand the  dependency of industrial control systems on mission impact, including  other key infrastructure nodes that could be vulnerable to a cyber attack  and have significant impact to mission accomplishment.", "Key Concept  Vulnerability chaining is when attackers  take advantage of multiple vulnerabilities\u2014 which could be low or moderate risk in  isolation\u2014to perform a more significant attack  on a system.", "Several weapon system-specific factors make it important to tailor  cybersecurity approaches, but also make cybersecurity difficult. Because  weapon systems can be very large, complex, systems of systems with  many interdependencies, updating one component of a system can  impact other components. A patch or software enhancement that causes  problems in an email system is inconvenient, whereas one that affects an  aircraft or missile system could be catastrophic. Officials from one  program we met with said they are supposed to apply patches within 21  days of when they are released, but fully testing a patch can take months  due to the complexity of the system. Even when patches have been  tested, applying the patches may take additional time. Further, weapon  systems are often dispersed or deployed throughout the world. Some  deployed systems may only be patched or receive software  enhancements when they return to specific locations. Although there are  valid reasons for delaying or forgoing weapon systems patches, this  means some weapon systems are operating, possibly for extended  periods, with known vulnerabilities.", "Exacerbating matters, some program offices may also not yet have a  solid understanding of the cybersecurity implications of their systems\u2019  designs, including their systems\u2019 connectivity. This situation makes it  difficult to secure the system. Experts and officials from some test  organizations we met with stated that programs have generally not  understood the multitude of ways that information flows in and out of their  systems, although this may be improving. Several program officials we  met with felt that weapon systems were more secure than other types of  systems and noted that they typically did not have direct connections to  the Internet. In fact, weapon systems have more potential avenues of  attack than may be apparent, such as radio communications receivers  and radar receivers. Furthermore, the National Research Council  reported in 2014 that individual warfare domains do not fully grasp risks  within their own domain, let alone those that can be introduced through  other domains. For example, if a space system is connected to a land  system\u2014even indirectly\u2014an attacker may be able to move from one to  the other or limit the operations of one by attacking the other."], "subsections": []}]}, {"section_title": "Tests Revealed that Most Weapon Systems Under Development Have Major Vulnerabilities, and DOD Likely Does Not Know the Full Extent of the Problems", "paragraphs": ["We found that from 2012 to 2017, DOD testers routinely found mission- critical cyber vulnerabilities in nearly all weapon systems that were under  development. Using relatively simple tools and techniques, testers were  able to take control of these systems and largely operate undetected. In  some cases, system operators were unable to effectively respond to the  hacks. Furthermore, DOD does not know the full scale of its weapon  system vulnerabilities because, for a number of reasons, tests were  limited in scope and sophistication."], "subsections": [{"section_title": "Weapon Systems Cybersecurity Assessments Identified Mission-Critical Vulnerabilities", "paragraphs": ["Nearly all major acquisition programs that were operationally tested  between 2012 and 2017 had mission-critical cyber vulnerabilities that  adversaries could compromise. DOT&E\u2019s 2017 annual report stated that  tests consistently discovered mission-critical vulnerabilities in acquisition  programs, echoing a similar finding by the DSB in 2013 about DOD IT  systems and networks. Cybersecurity test reports that we reviewed  showed that test teams were able to gain unauthorized access and take  full or partial control of these weapon systems in a short amount of time  using relatively simple tools and techniques. We saw widespread  examples of weaknesses in each of the four security objectives that  cybersecurity tests normally examine: protect, detect, respond, and  recover."], "subsections": [{"section_title": "Protect", "paragraphs": ["Key Concepts  An insider is a user who is authorized to use  a system (e.g., has a username and  password) and has physical access to all or  parts of a system.  A near-sider is an unauthorized user who has  physical access to all or part of a system. For  example, someone taking a tour of a Navy  ship would be a near-sider.  A remote user is not authorized to use the  system and does not have physical access to  the system.", "Test teams were able to defeat weapon systems cybersecurity controls  meant to keep adversaries from gaining unauthorized access to the  systems. In one case, it took a two-person test team just one hour to gain  initial access to a weapon system and one day to gain full control of the  system they were testing. Some programs fared better than others. For  example, one assessment found that the weapon system satisfactorily  prevented unauthorized access by remote users, but not insiders and  near-siders. Once they gained initial access, test teams were often able  to move throughout a system, escalating their privileges until they had  taken full or partial control of a system. In one case, the test team took  control of the operators\u2019 terminals. They could see, in real-time, what the  operators were seeing on their screens and could manipulate the system.  They were able to disrupt the system and observe how the operators  responded. Another test team reported that they caused a pop-up  message to appear on users\u2019 terminals instructing them to insert two  quarters to continue operating. Multiple test teams reported that they  were able to copy, change, or delete system data including one team that  downloaded 100 gigabytes, approximately 142 compact discs, of data.", "Example: Poor Password Management  The 2016 cyber attack on Dyn, a company  that serves as a key intermediary in directing  Internet traffic, disabled websites, such as  Twitter, Netflix, and CNN and brought down  the Internet in some regions. The attack used  malware to search the Internet for unsecured  devices, such as those that used factory- default usernames and passwords, and then  used those devices to send junk traffic to  online targets until they could not function.", "The test reports indicated that test teams used nascent to moderate tools  and techniques to disrupt or access and take control of weapon systems.  For example, in some cases, simply scanning a system caused parts of  the system to shut down. One test had to be stopped due to safety  concerns after the test team scanned the system. This is a basic  technique that most attackers would use and requires little knowledge or  expertise. Poor password management was a common problem in the  test reports we reviewed. One test report indicated that the test team was  able to guess an administrator password in nine seconds. Multiple  weapon systems used commercial or open source software, but did not  change the default password when the software was installed, which  allowed test teams to look up the password on the Internet and gain  administrator privileges for that software. Multiple test teams reported  using free, publicly available information or software downloaded from the  Internet to avoid or defeat weapon system security controls.", "Test reports we reviewed make it clear that simply having cybersecurity  controls does not mean a system is secure. How the controls are  implemented can significantly affect cybersecurity. For example, one test  report we reviewed indicated that the system had implemented role- based access control, but internal system communications were  unencrypted. Because the system\u2019s internal communications were  unencrypted, a regular user could read an administrator\u2019s username and  password and use those credentials to gain greater access to the system  and the ability to affect the confidentiality, integrity, or availability of the  system.", "Programs Had Not Addressed Some Previously Identified  Vulnerabilities  Program offices were aware of some of the weapon system vulnerabilities  that test teams exploited because they had been identified in previous  cybersecurity assessments. For example, one test report indicated that  only 1 of 20 cyber vulnerabilities identified in a previous assessment had  been corrected. The test team exploited the same vulnerabilities to gain  control of the system. When asked why vulnerabilities had not been  addressed, program officials said they had identified a solution, but for  some reason it had not been implemented. They attributed it to contractor  error. Another test report indicated that the test team exploited 10  vulnerabilities that had been identified in previous assessments."], "subsections": []}, {"section_title": "Detect", "paragraphs": ["Example: Poor Detection  In the 2014 Office of Personnel  Management (OPM) cyber attack, attackers  exfiltrated personnel files of 4.2 million  government employees, security clearance  background information on 21 million  individuals, and fingerprint data of 5.6 million  of these individuals. Attackers used a  contractor\u2019s OPM credentials to log into the  OPM system, installed malware, and created  a backdoor to the network. These attackers  were in OPM\u2019s networks for at least 14  months. Over 2,000 pieces of malware were  later identified on OPM devices. detection. One test team emulated a denial of service attack by  rebooting the system, ensuring the system could not carry out its mission  for a short period of time. Operators reported that they did not suspect a  cyber attack because unexplained crashes were normal for the system.  Another test report indicated that the intrusion detection system correctly  identified test team activity, but did not improve users\u2019 awareness of test  team activities because it was always \u201cred.\u201d Warnings were so common  that operators were desensitized to them.", "A common way to detect cyber activity is to review logs of system activity  looking for unusual occurrences. Multiple test reports indicated that test  team activity was documented in system logs, but operators did not  review them. One test report noted that the system had no documented  procedures for reviewing logs."], "subsections": []}, {"section_title": "Respond/Recover", "paragraphs": ["Multiple test reports indicated that operators did not effectively respond to  test team activities. In multiple tests, operators did not respond because,  as noted above, they were simply unaware of the test team activities. In  some cases, however, operators were unable to effectively respond even  when they identified or were notified that the test team had carried out an  attack. One test report indicated that operators identified test team  intrusion attempts and took steps to block the test team from accessing  the system. However, the test team was able to easily circumvent the  steps the operators took. In another case, the test team was able to  compromise a weapon system and the operators needed outside  assistance to restore the system."], "subsections": []}]}, {"section_title": "DOD Has Limited Insight into Weapon Systems Cybersecurity", "paragraphs": ["DOD does not know the full extent of its weapon systems cyber  vulnerabilities due to limitations on tests that have been conducted.  Cybersecurity assessments do not identify all vulnerabilities of the  systems that are tested. This is, in part, because cybersecurity  assessments do not reflect the full range of threats that weapon systems  may face in operation. Test teams reported that they portray realistic  threats and environments. However, the nature of tests imposes  limitations on testers that do not apply to potential adversaries. For  example, DOD officials said that most cybersecurity assessments are  conducted over a few days to a few weeks. One test report indicated that  the cybersecurity assessment was cut short due to external factors so the  test team only had 41 hours to work with the system. In contrast, DOD  officials we spoke to said that a determined adversary could spend  months or years targeting our systems.", "Further, because test teams have a limited amount of time with a system,  they look for the easiest or most effective way to gain access, according  to DOD officials we met with and test reports we reviewed. They do not  identify all of the vulnerabilities that an adversary could exploit. DOT&E  noted that longer-term tests generally identify more cyber vulnerabilities  than shorter tests. DOD officials we spoke to said that the department has  increased the amount of long-term assessments it conducts in recent  years. Weapon systems cybersecurity assessments may also be limited  in the types of attacks that are portrayed so entire categories of  vulnerabilities are not currently addressed in some cyber assessments.  The test reports we reviewed tended to portray nascent to moderate  threats and generally did not target special components like industrial  control systems and non-Internet enabled devices which our adversaries  could target. Similarly, counterfeit parts pose cybersecurity risks to  weapon systems, but were not within the scope of the cybersecurity tests  that we reviewed.", "System-specific limitations can also affect test results. Officials from one  service test agency noted that in at least one case, they could not fully  assess a system\u2019s cybersecurity because portions of the system\u2019s  networks and data were proprietary. The system utilized the contractor\u2019s  corporate networks, which the test team was not allowed to attack. In  several tests, a weapon system\u2019s connections to external systems were  either limited or had to be simulated. One test report we reviewed noted  that the test team was not allowed to use classified networks to attack a  weapon system due to security concerns. Another test was conducted in  a lab environment so the test team had to simulate external  communications. Although there are practical reasons for limiting the  duration and scope of cybersecurity assessments, these limitations mean  that DOD may not fully understand the extent of weapon system cyber  vulnerabilities, as is reflected in figure 5.", "Many program officials we met with indicated that their systems were  secure, including some with programs that had not had a cybersecurity  assessment. Some systems have not yet undergone testing either  because they are not far enough along in the acquisition process,  because they were fielded prior to DOD\u2019s emphasis on penetration  testing, or out of concern that cybersecurity tests would interfere with  operations. Systems that have not been tested are not necessarily more  or less secure than systems that have been assessed. DOD does not  know the extent to which these systems have cyber vulnerabilities.", "Program officials cited the security controls they applied as the basis for  their belief that their systems were secure. For example, officials from a  DOD agency we met with expressed confidence in the cybersecurity of  their systems, but could not point to test results to support their beliefs.  Instead, they identified a list of security controls they had implemented.  However, security controls must be properly designed and implemented  in order to be effective. As we noted earlier, test teams routinely found  and defeated poorly implemented security controls. Officials we spoke to  stated that controls are necessary, but not sufficient, and penetration test  results\u2014rather than compliance documentation\u2014are better indicators of  a system\u2019s security.", "For programs that have had cybersecurity assessments, some program  officials we met with questioned the validity of the results because of  concerns about the realism of the assessments. For example, officials  from one program noted that the testers were given more system  information and access than an adversary would have. Officials from  another program noted that testers asked for detailed information about  the system\u2019s design. These officials stated that cyber assessments were  unrealistic if they relied on the program office to identify problem areas for  the test team. However, test organizations and NSA officials we met with  dismissed these observations, noting that adversaries are not subject to  the types of limitations imposed on test teams, such as time constraints  and limited funding\u2014and this information and access are granted to  testers to more closely simulate moderate to advanced threats."], "subsections": []}]}, {"section_title": "DOD Has Begun Taking Steps to Improve Weapon Systems Cybersecurity", "paragraphs": ["Over the past few years, DOD has taken several major steps to improve  weapon systems cybersecurity. DOD issued and updated numerous  policies and guidance to improve the department\u2019s development of cyber  resilient systems. These include improvements such as specifying that  cybersecurity policies apply to weapon systems and requiring more focus  on cybersecurity throughout a weapon system\u2019s acquisition life cycle.  DOD and Congress have also begun promising initiatives to help DOD  improve its understanding of its weapon systems cyber vulnerabilities and  take steps to mitigate their risks. However, DOD faces barriers that may  limit its ability to achieve desired improvements. For example, DOD is  struggling to hire and retain cybersecurity personnel, who are essential to  implementing these changes. In addition, DOD faces barriers to  information sharing, which hinder its ability to share vulnerability and  threat information within and across programs. To improve the state of  weapon systems cybersecurity, it is essential that DOD sustain its  momentum in developing and implementing key initiatives."], "subsections": [{"section_title": "DOD Has Issued and Updated Policies and Guidance", "paragraphs": ["Since 2014, DOD has issued or updated at least 15 department-wide  policies, guidance documents, and memorandums intended to promote  more cyber secure weapon systems, some of which are highlighted in  table 3.", "One of the more significant changes is that DOD\u2019s existing cybersecurity  policies now explicitly apply to weapon systems. DOD officials said the  department has had cybersecurity policies in place for decades, but  applied them to weapon systems only in the past few years. For example,  DOD\u2019s Risk Management Framework (RMF) is similar to its  predecessor\u2014DOD\u2019s Information Assurance Certification and  Accreditation Process\u2014which called for application of an extensive series  of controls to protect DOD networks and information systems. However,  RMF applies these controls more widely to weapon systems  cybersecurity. Another important change is that, in recognition that  systems cannot be 100 percent secure, DOD has begun to emphasize  cyber resiliency in some of its policies. The idea behind cyber resiliency is  to identify and protect key elements of a system to ensure that they can  continue to operate, possibly with limited capabilities, during a cyber  attack. This entails designing in features such as durability, redundancy,  and added protections for certain components.", "Lastly, key policies that govern the requirements and acquisition  processes now address cybersecurity. These changes have the potential  to bring greater attention to cybersecurity in weapon systems  acquisitions. Rather than being treated as distinct from the acquisition  process, cybersecurity is to be integrated into key acquisition activities,  such as requirements development, technology maturation, and testing.  Examples of this, as called for in various policies, include the following:", "Requirements. Identify cybersecurity requirements and how the  information flows into, out of, and through the systems. This helps  identify the system\u2019s attack surface and informs the system\u2019s design  and cybersecurity controls. Cybersecurity should become part of the  requirements trade space.", "Technology maturation. Focus early prototyping in part on buying  down cybersecurity risks prior to system development. Cybersecurity  controls should be applied and assessed during prototyping to  evaluate cyber risks and inform down-selection and adjustment of  requirements.", "Department of Defense, DOD Program Manager\u2019s Guidebook for Cybersecurity (Sept.  2015).", "Developmental testing. Test the cybersecurity of weapon systems  as they are developed, including integration of larger subsystems and,  ultimately, the entire system. Perform cybersecurity assessments in  representative operating environments during developmental testing.", "Operational testing. Conduct operational cybersecurity testing of  weapon systems to include other systems that exchange information  with the system under test (system-of-systems to include the network  environment), end users, administrators, and cyber defenders. Reflect  representative cyber threats.", "These extensive changes to policies and guidance, which adopt a similar  risk-based framework to that already generally in place government-wide,  appear to be a step in the right direction to increase the department\u2019s  emphasis on weapon systems cybersecurity. However, they are also  relatively new for DOD, so it is too early to assess whether they are  resulting in improved weapon systems cybersecurity. For example,  changes to the requirements process apply primarily to new programs so  it could be many years before systems that have gone through the new  process undergo operational testing and are fielded."], "subsections": []}, {"section_title": "DOD Has Undertaken Initiatives, in Part Directed by Congress, to Help Understand and Address Weapon Systems\u2019 Cyber Vulnerabilities", "paragraphs": ["Section 1647 of the National Defense Authorization Act for Fiscal Year  2016 requires the Secretary of Defense to evaluate the cyber  vulnerabilities of each DOD weapon system by the end of 2019 and  develop strategies to mitigate risks stemming from those vulnerabilities.  In response to this direction and The DOD Cyber Strategy, which also  calls for DOD to assess and initiate improvements to the cybersecurity of  current and future weapons systems, DOD is taking steps to improve its  understanding of its weapon systems\u2019 vulnerabilities, determine how to  mitigate risks from those vulnerabilities, and inform future development of  more secure systems. The Office of the Under Secretary of Defense  (Acquisition and Sustainment) is leading this initiative in collaboration with  military test organizations. DOD is compiling existing vulnerability  information and conducting some new tests to provide information about  the cybersecurity posture of individual systems, concentrating mostly on  fielded systems. These assessments are important, in part because some  of those systems did not undergo cybersecurity testing prior to fielding  and DOD does not have a permanent process in place to periodically  assess the cybersecurity of fielded systems. Furthermore, vulnerabilities  and risks can change after fielding as system software becomes obsolete.", "As part of this initiative, for two mission areas, the Office of the Under  Secretary of Defense (Acquisition and Sustainment) has been trying to  incorporate cybersecurity into large scale military exercises to take a  more integrated look at impacts of vulnerabilities across systems. The  goal is to understand how vulnerabilities in some systems may affect  DOD\u2019s ability to achieve its mission and to identify what other options are  available to complete a mission if certain capabilities were disabled or  degraded. This work is also important, but for different reasons. DOD\u2019s  developmental and operational tests focus primarily on vulnerabilities in  individual systems rather than across broader mission areas. However,  as previously discussed, attackers do not necessarily limit themselves to  one system and may move from one system to others. Furthermore, DOD  has not previously had a process in place to examine how cyber attacks  on one system could affect entire missions.", "Taken together, the system-specific and mission-focused activities could  help DOD develop a more comprehensive understanding of its  cybersecurity posture\u2014the overall strength of its cybersecurity. Officials  working on these assessments plan to use what they learn to help inform  the acquisition of future weapon systems. Specifically, they plan to share  lessons with DOD test organizations, the Office of the Chief Information  Officer, Office of the Under Secretary of Defense (Research and  Engineering), and others in the Office of the Under Secretary of Defense  (Acquisition and Sustainment).", "Similarly, the military services have established weapon system  cybersecurity-focused offices to improve their cybersecurity posture,  which are described briefly in table 4.", "Although all of these activities promise to help DOD improve its  cybersecurity posture over time, they are also relatively new for DOD.  They will need sustained momentum to achieve changes over the  lifecycle of acquisition programs, so it is too early to tell if they will be  successful over the long term. According to multiple agency officials and  our analysis of policy and guidance changes since 2014, DOD leadership  has become more aware of cybersecurity issues over the past several  years and has driven many of these cybersecurity activities. However, our  prior work has found sustained leadership support of DOD initiatives to be  key to maintaining their momentum. We also reported that there is risk  that DOD will not fully implement some tasks it has begun to improve  weapon systems cybersecurity if leadership does not continue to monitor  their progress. For example, we reported in 2017 that DOD\u2019s Principal  Cyber Advisor closed out the task on assessing weapon systems called  for under The DOD Cyber Strategy. We recommended that the Cyber Advisor modify criteria for closing tasks to reflect whether tasks have  been implemented and re-evaluate tasks that have been previously  determined to be completed."], "subsections": []}, {"section_title": "DOD Faces Systemic Barriers to Improving Weapon Systems Cybersecurity", "paragraphs": ["DOD faces barriers that will challenge its ability to develop more cyber  resilient weapon systems and make it more difficult for DOD\u2019s recent  policy changes and new initiatives to be as effective as possible."], "subsections": [{"section_title": "Cybersecurity Workforce Challenges", "paragraphs": ["DOD struggles to hire and retain cybersecurity personnel, particularly  those with weapon systems cybersecurity expertise. Our prior work has  shown that maintaining a cybersecurity workforce is a challenge  government-wide and that this issue has been a high-priority across the  government for years. Program officials from a majority of the programs  and test organizations we met with said they have difficulty hiring and  retaining people with the right expertise, due to issues such as a shortage  of qualified personnel and private sector competition. Test officials said  that once their staff members have gained experience in DOD, they tend  to leave for the private sector, where they can command much higher  salaries. According to a 2014 RAND study, personnel at the high end of  the capability scale, who are able to detect the presence of advanced  threats, or finding the hidden vulnerabilities in software and systems, can  be compensated above $200,000 to $250,000 a year, which greatly  exceeds DOD\u2019s pay scale.", "Even when cybersecurity positions are filled, it may not necessarily be  with the right expertise. Officials from some program offices said that  general cybersecurity expertise is not the same as weapon systems  cybersecurity expertise. For example, officials said that professional IT  certifications are not the same as systems security engineering expertise,  which is essential to designing cyber-resilient systems. According to  various program officials, weapon systems cybersecurity is a specialized  area. Cybersecurity subject matter experts require knowledge of (1)  DOD\u2019s acquisition process; (2) technical knowledge of the specific  weapon system\u2014such as radar or aircraft, and (3) cybersecurity  knowledge. However, it is difficult to hire and maintain a workforce with  the needed knowledge due to its highly specialized nature. Without this  expertise, it will be difficult for programs to effectively implement  cybersecurity policies and guidance. For example, the RMF allows  programs to determine which controls are most appropriate to apply, but  a knowledgeable workforce is necessary for making such decisions.", "DOD has various efforts underway to recruit and develop the skills of  DOD\u2019s cybersecurity workforce, according to several DOD officials. For  example, the services are aiming to recruit cybersecurity analysts by  using internships and engaging in partnerships with secondary schools  and universities. In addition, the services are developing and offering  courses to grow expertise within their existing acquisition workforce. DOD  is determining how to share specialized expertise related to weapon  systems cybersecurity. Specific efforts related to this include the Cyber  Developmental Test Cross Service Working Group that meets quarterly  and invites industry expertise to present cutting edge techniques as well  as a \u201ccapture the flag\u201d competition, which will now be offered to other  services as well. In addition, Navy Systems Commands employees  participate in periodic regional cyber competitions to hone knowledge  learned in classroom environments and use training funds to pursue  additional or higher degrees and cyber certificate programs.", "Officials from many of the offices we interviewed, as well as the National  Research Council, DSB, and RAND have expressed concerns about  barriers to information sharing. It is difficult to find the correct balance  between protecting information, so that it is not accessible to potential  adversaries, and sharing it, so that DOD has an informed workforce. For  example, classification is important because it protects information about  vulnerabilities, and in some cases, intelligence methods. Access to  information about vulnerabilities makes it easier for potential adversaries  to attack DOD systems. Similarly, limiting the distribution of classified  information to those who have the need to know is likewise important  because it reduces the likelihood that internal and external threats will  access it. Although DOD officials explained that there is no DOD-wide  cybersecurity classification guidance, Air Force guidance and DOD  officials indicated that vulnerabilities in fielded systems are typically  classified as at least Top Secret or Top Secret/Sensitive Compartmented  Information, and details of threats are more restricted. This high level of  classification for weapon systems cyber vulnerabilities and threats helps  protect sensitive information, but it makes it difficult for DOD to share  information about aspects of weapon systems cybersecurity with  cybersecurity personnel across DOD. For example, some experts told us  that flawed designs can still be found in new systems if their designers  were not aware that they resulted in vulnerabilities in other systems. More  generally, because they are not sharing vulnerability and threat  information across programs, programs are unaware of their full risk  exposure and DOD may have less insight into vulnerabilities across its  weapon systems portfolio. Officials from most organizations we spoke to,  including NSA, acknowledged challenges with sharing information across  all levels within DOD. Examples of these challenges are listed in table 5.", "Although limitations to information sharing can lead to inefficiencies and  other challenges, DOD has so far opted to favor protection of  information\u2014perhaps because the stakes are so high if it does not. As we  mentioned previously, one of the reasons potential adversaries collect  information on weapon systems is because the better they understand a  weapon system, and especially what vulnerabilities it may have, the more  options they have to attack it. Reports over the years about cyber  espionage attacks on defense contractors show that concerns about  protecting sensitive information are warranted."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. DOD  provided technical comments, which we incorporated where appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; and the Secretaries of the Army,  Navy, and Air Force. In addition, the report will be available at no charge  on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at 202-512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To identify factors that contribute to the current state of Department of  Defense (DOD) weapon systems cybersecurity, we reviewed reports  published from 1991 to the present on software, information technology,  networking, and weapon systems from the National Research Council,  the Defense Science Board, GAO, DOD\u2019s Director of Operational Test  and Evaluation, DOD\u2019s Joint Chiefs of Staff, and the RAND Corporation.  To inform our discussion of networking, we also reviewed concepts of  operations for selected systems of systems. To determine the extent to  which DOD focused on cybersecurity in weapon system acquisitions, we  analyzed selected information assurance, acquisition, requirements, and  testing policies and guidance. For this and all other objectives, we  conducted interviews with or obtained written responses from the  following organizations:", "Office of the Secretary of Defense organizations: Office of the  Director, Operational Test and Evaluation; Office of the Deputy  Assistant Secretary of Defense for Developmental Test and  Evaluation; Office of the Chief Information Officer including the  Defense Information Systems Agency; Office of the Chairman of the  Joint Chiefs of Staff; Office of the Under Secretary of Defense  (Acquisition and Sustainment); and Office of the Under Secretary of  Defense (Research and Engineering).", "Military service test organizations: Air Force Operational Test and  Evaluation Center, Army Operational Test and Evaluation Command,  Navy\u2019s Commander Operational Test and Evaluation Force, and  Marine Corps Operational Test and Evaluation Activity.", "Selected program offices reflecting a purposeful sample of nine major  defense acquisition program offices. We identified a variety of  program offices to represent each service, multiple domains, and  programs that are extensively connected to other weapons systems.  We are not listing the names of these offices for sensitivity reasons.", "Other key DOD organizations with cybersecurity responsibilities: the  National Security Agency, Defense Information Systems Agency, and  U.S. Cyber Command.", "Selected organizations with cybersecurity expertise, referred to as  \u201cexperts\u201d in the report: Carnegie Melon\u2019s Software Engineering  Institute, the MITRE Corporation, the RAND Corporation, Pacific  Northwest National Laboratory, Sandia National Laboratory, and  Renaissance Strategic Advisors. We selected these based on their  research or roles advising DOD on weapon systems cybersecurity- related topics.", "To identify vulnerabilities in weapon systems under development, we  reviewed cyber assessment reports of selected weapon systems  conducted between 2012 and 2017. We selected at least one program  from each service as well as different types of weapon systems (e.g.,  aircraft vs ships vs communication systems). To gain further insights into  assessment findings and understand their limitations, we interviewed  officials from the Office of the Secretary of Defense and military test  service organizations. We discussed the cybersecurity of individual  programs, implementation of controls, and assessment findings with  program offices. We also interviewed officials from several organizations  with cybersecurity expertise to discuss weapon system vulnerabilities and  test limitations. Vulnerabilities for specific weapon systems are classified,  so we have not identified the programs covered in these test reports. The  examples we cite are unique to each weapon system and are not  applicable to all weapon systems. Furthermore, cybersecurity  assessment findings are as of a specific date so vulnerabilities identified  during system development may no longer exist when the system is  fielded.", "To determine the steps DOD is taking to develop more cyber resilient  weapon systems, we analyzed key DOD information  assurance/cybersecurity, acquisition, requirements, and testing policies  and guidance that have been updated since 2014 to better address  weapon systems cybersecurity. We selected 2014 because DOD began  revising several policies at that time. These include DOD\u2019s Risk  Management Framework, Department of Defense Instruction 8500.01,  Cybersecurity; the Department of Defense Instruction 5000.2, Operation  of the Defense Acquisition System; DOD Program Manager\u2019s Guidebook  for Integrating the Cybersecurity Risk Management Framework into the  System Acquisition Lifecycle; the Joint Capabilities Integration and  Development System Manual; the Cyber Survivability Endorsement  Implementation Guide; and the DOD Cybersecurity Test and Evaluation  Guidebook. To identify barriers DOD faces in developing cyber resilient  systems and implementing updated cybersecurity policies and guidance,  we interviewed Office of the Secretary of Defense, military service test  organizations, selected program offices, other DOD organizations,  experts, and operators.", "We took additional precautions to avoid revealing sensitive information.  We illustrated some concepts using notional depictions. In some cases,  we were deliberately vague and excluded details from examples to avoid  identifying specific weapon systems. We also presented examples of  publicly known attacks in sidebars to illustrate how poor cybersecurity can  enable cyber attacks. DOD conducted a security review of the report and  approved it for public release."], "subsections": []}, {"section_title": "Appendix II: Examples of Types of Cyber Attacks", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Roles and Responsibilities for Cybersecurity in the Department of Defense", "paragraphs": [], "subsections": [{"section_title": "Cybersecurity Roles and Responsibilities", "paragraphs": ["The Department of Defense (DOD) is responsible for defending the U.S.  homeland and interests from attack, including those that occur in  cyberspace and has developed capabilities for cyber operations. In order  to achieve this objective, the department must be able to defend its own  networks, systems, and information from cyber attack. To establish a  cybersecurity program to protect and defend DOD information and  information technology, DOD has assigned some of its components and  senior officials with a variety of cybersecurity responsibilities, some of  which are described below."], "subsections": []}]}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Cristina T. Chaplain (202) 512-4841 or chaplainc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Raj Chitikila (Assistant Director),  Brandon Booth, Laura Greifner, L.T. Holliday, Katherine Pfeiffer, James  Tallon, Jacqueline Wade, and Robin Wilson made key contributions to  this report. Assistance was also provided by Tommy Baril, Nabajyoti  Barkakati, Mark Canter, Virginia Chanley, Kurt Gurka, Joseph  Kirschbaum, Jeff Knott, Duc Ngo, and Gregory Wilshusen."], "subsections": []}]}], "fastfact": ["In recent cybersecurity tests of major weapon systems DOD is developing, testers playing the role of adversary were able to take control of systems relatively easily and operate largely undetected.", "DOD's weapons are more computerized and networked than ever before, so it's no surprise that there are more opportunities for attacks. Yet until relatively recently, DOD did not make weapon cybersecurity a priority. Over the past few years, DOD has taken steps towards improvement, like updating policies and increasing testing.", "Federal information security\u2014another term for cybersecurity\u2014has been on our list of High Risk issues since 1997."]}
{"id": "GAO-18-117", "url": "https://www.gao.gov/products/GAO-18-117", "title": "Personnel Security Clearances: Plans Needed to Fully Implement and Oversee Continuous Evaluation of Clearance Holders", "published_date": "2017-11-21T00:00:00", "released_date": "2017-11-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Continuous evaluation is a key executive branch initiative to more frequently identify and assess security-relevant information, such as criminal activity. Implementing a continuous evaluation program has been a long-standing goal, with implementation milestones as early as 2010 and DOD pilots dating back to the early 2000's.", "GAO was asked to review efforts to implement continuous evaluation. This report assesses the extent to which (1) ODNI has implemented an executive branch-wide program and developed plans to monitor and measure its performance; (2) DOD and other agencies have designed, piloted, and evaluated continuous evaluation and (3) agencies completed timely periodic reinvestigations from fiscal years 2012-2016, and the potential effects of continuous evaluation on reinvestigations. GAO reviewed documentation, analyzed timeliness data, and interviewed officials from ODNI and other agencies. This is a public version of a sensitive report that is being issued concurrently. Information that ODNI and State deemed sensitive has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["In October 2016, the Office of the Director of National Intelligence (ODNI) took an initial step to implement continuous evaluation\u2014a process to review the background of clearance holders and individuals in sensitive positions at any time during the eligibility period\u2014across the executive branch, but it has not yet determined key aspects of the program, and it lacks plans for implementing, monitoring, and measuring program performance. For the first phase, agencies are to conduct certain continuous evaluation record checks against a portion of their national security population by the end of fiscal year 2017. However, ODNI has not formalized its policy on what continuous evaluation encompasses, determined what the future phases will entail or when they will occur, or developed an implementation plan. According to all seven agencies GAO interviewed, this uncertainty has affected their ability to plan for the program and estimate its costs. Without a continuous evaluation policy and a fully developed plan, full implementation\u2014which has been delayed since 2010\u2014may be further delayed. Moreover, ODNI lacks a plan to monitor and measure program performance, including for the first phase, which is underway. Without developing such a plan, ODNI cannot ensure that the program is being implemented consistently across the executive branch or that it is effectively identifying risks to national security.", "The Department of Defense (DOD) and the Department of State (State) have designed, piloted, and evaluated continuous evaluation. Their approaches have varied in scope, size, and duration, as they pre-date ODNI's efforts to implement continuous evaluation executive branch-wide. DOD's pilot involves the most record checks and the largest population. DOD had 500,000 employees enrolled in December 2016, and it plans to enroll 1 million by the end of calendar year 2017 and all clearance holders by the end of fiscal year 2021.", "Executive branch agencies meeting established timeliness goals for completing periodic reinvestigations decreased from fiscal years 2012 through 2016, and the potential effects of continuous evaluation, including on reinvestigations and resources, are unknown. While 84 percent of the executive branch agencies reviewed by GAO reported meeting the executive branch's 195-day timeliness goal for at least three of four quarters in fiscal year 2012, only 22 percent did so in fiscal year 2016. Also, a 2008 report outlined a plan to replace reinvestigations with continuous evaluation, but ODNI documentation indicates that this is no longer the intent. While agencies expressed varying views about changes to reinvestigations\u2014such as modifying their scope\u2014officials from five agencies stated that the continuous evaluation program will increase their workloads and costs if no other changes are made to the requirements. DOD officials said they cannot afford to conduct both continuous evaluation and reinvestigations, as DOD estimates that more frequent reinvestigations for certain clearance holders will cost $1.8 billion for fiscal years 2018 through 2022. Although agencies have identified increased resources as a risk of the program, ODNI has not assessed the program's potential effects on agency resources. Without assessing the potential effects once ODNI has further defined the program, implementing continuous evaluation could lead to further delays and backlogs in reinvestigations, and could increase agency costs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that ODNI formalize its policy on continuous evaluation, develop an implementation plan as well as a plan to monitor and measure program performance, and assess the potential effects of continuous evaluation on agency resources. ODNI concurred with the recommendations, but disagreed with aspects of GAO's conclusions. GAO continues to believe the conclusions are valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Continuous evaluation\u2014a process to review the background of an  individual who has been determined to be eligible for access to classified  information or to hold a sensitive position at any time during the period of  eligibility\u2014is a key executive branch initiative to more frequently identify  and assess security-relevant information between periodic  reinvestigations. Implementing a continuous evaluation program has  been a long-standing goal of security clearance reform efforts, with  implementation milestones set by the government-wide reform effort  dating back to the 4th quarter of fiscal year 2010 and Department of  Defense (DOD) pilot studies dating back to the early 2000\u2019s. Specifically,  since 2001, DOD\u2019s Defense Personnel and Security Research Center  (PERSEREC) has conducted a number of studies related to continuous  evaluation, such as the usefulness of various data sources, the technical  capability to conduct automated record checks, and the value and utility  of such checks.", "Following the September 2013 shooting at the Washington Navy Yard,  the Office of Management and Budget (OMB) conducted a 120-day  review of the government\u2019s security clearance procedures. OMB\u2019s  February 2014 Suitability and Security Processes Review Report to the  President, resulting from that review, highlighted 37 recommendations to  improve, among other things, the federal government\u2019s processes for  granting security clearances, including the acceleration of the  implementation of continuous evaluation across all agencies and security  levels. The report also included a milestone for the Office of the Director  of National Intelligence (ODNI) to develop an initial continuous evaluation  capability for certain clearance holders by September 2014. However, in  April 2015, we found, among other things, that the milestone for  implementing continuous evaluation had been adjusted to December  2016, and that executive branch agencies faced challenges in  establishing a continuous evaluation policy and implementing the  process.", "You asked us to review executive branch efforts to implement a  continuous evaluation program for personnel security clearances. Our  objectives were to assess the extent to which: (1) ODNI has implemented  an executive branch-wide continuous evaluation program and developed  plans for monitoring and measuring the performance of the program; (2)  DOD and other executive branch agencies, if any, have designed, piloted,  and evaluated continuous evaluation; and (3) executive branch agencies  completed periodic reinvestigations in accordance with established  timeliness goals from fiscal year 2012 through fiscal year 2016, and the  potential effects of continuous evaluation on periodic reinvestigations.  This report is a public version of a sensitive report that we issued in  November 2017. ODNI and State deemed some of the information in our  November report to be sensitive, which must be protected from public  disclosure. Therefore, this report omits sensitive information about  ODNI\u2019s continuous evaluation program and State\u2019s pilot. Although the  information provided in this report is more limited, the report addresses  the same objectives as the sensitive report and uses the same  methodology.", "For our first objective, we reviewed relevant Executive Orders identifying  ODNI\u2019s responsibilities for developing a continuous evaluation program.", "We also analyzed ODNI memorandums and other documents describing  continuous evaluation and conducted interviews with ODNI officials  managing the program about the status of the program and any plans to  monitor and measure its performance. We compared the status of the  continuous evaluation program against recommendations resulting from  the February 2014 120-day review. We also conducted interviews with  officials from DOD, the Department of State (State), the Department of  Homeland Security, U.S. Customs and Border Protection, the Department  of Justice, the U.S. Bureau of Alcohol, Tobacco, Firearms, and  Explosives, and the Federal Bureau of Investigation to determine the  extent to which those agencies have developed plans to implement  continuous evaluation and determined potential costs. We selected these  seven agencies based on their management of the data sources to be  checked as part of continuous evaluation and because they are among  those subject to ODNI\u2019s continuous evaluation requirements. We  compared ODNI program documentation against relevant program  management criteria for developing project management plans, key  attributes of successful performance measures identified in our prior  work, and Standards for Internal Control in the Federal Government  related to communication with external partners and monitoring activities.", "For our second objective, we reviewed pilots underway at DOD and  State\u2014the two agencies that have piloted continuous evaluation in  advance of its implementation across the executive branch. Specifically,  we analyzed DOD documentation related to its continuous evaluation  process and reviewed PERSEREC reports on DOD\u2019s continuous  evaluation pilots, including lessons learned. We also interviewed officials  who developed those reports and analyzed available metrics to determine  how DOD has evaluated and tracked the results of its pilots. In addition,  we conducted interviews with DOD officials from the Defense Security  Service, the Defense Manpower and Data Center, the Consolidated  Adjudications Facility, and the Office of the Under Secretary of Defense  for Intelligence, which all have roles in the department\u2019s continuous  evaluation program. We also reviewed metrics and lessons learned from  State\u2019s pilot and conducted interviews with officials conducting the pilots  at State\u2019s Bureau of Diplomatic Security. Finally, we observed a  demonstration of the information technology (IT) system that DOD is  developing for use in conducting continuous evaluation.", "For our third objective, we obtained data from ODNI on the timeliness of  periodic reinvestigations at specific executive branch agencies from fiscal  year 2012 through fiscal year 2016, by quarter. The number of agencies  included in our review was omitted because the information was  sensitive. We excluded the data reported by State to ODNI from our  analysis due to a July 2017 report by the State Office of Inspector  General, which identified a number of errors in the department\u2019s security  clearance timeliness data. As such, we report on the timeliness of the  remaining executive branch agencies for which ODNI provided data. To  assess the reliability of the data for the remaining executive branch  agencies, we reviewed relevant documentation and interviewed officials  about data quality control procedures. Based on these steps, we  determined that the data were sufficiently reliable for the purposes of this  report. For that reason, we did not independently test the accuracy of the  agencies\u2019 databases. We selected the fiscal year 2012 to 2016 timeframe  for our analysis because the executive branch has not publicly reported  on the timeliness of individual executive branch agencies since fiscal year  2011. We analyzed the timeliness data to determine the extent to which  agencies are meeting OMB-established timeliness goals for completing  the fastest 90 percent of periodic reinvestigations within 195 days.", "We also conducted interviews with officials from DOD; State; ODNI; the  Security, Suitability, and Credentialing Performance Accountability  Council (PAC) Program Management Office; and the National  Background Investigations Bureau (NBIB) regarding the potential risks  and effects of continuous evaluation on periodic reinvestigation timeliness  and plans to offset anticipated workload increases. We compared this  information against relevant program management criteria for performing  a quantitative risk analysis and Standards for Internal Control in the  Federal Government related to defining objectives and risk tolerances.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of Personnel Security Clearance Process", "paragraphs": ["ODNI estimates that, as of October 1, 2015, approximately 4.2 million  government and contractor employees were eligible to hold a security  clearance. Personnel security clearances are required for access to  certain national security information. National security information may be  classified at one of three levels: confidential, secret, or top secret. The  level of classification denotes the degree of protection required for  information and the amount of damage that unauthorized disclosure could  reasonably be expected to cause to national security. Specifically,  unauthorized disclosure could reasonably be expected to cause (1)  \u201cdamage,\u201d in the case of confidential information; (2) \u201cserious damage,\u201d in  the case of secret information; and (3) \u201cexceptionally grave damage,\u201d in  the case of top secret information. According to the Office of Personnel  Management (OPM) Federal Investigations Notice 16-02, tier 3  investigations are required for eligibility for access to secret and  confidential information, or for noncritical sensitive positions, or \u201cL\u201d  access. OPM Federal Investigations Notice 16-07 indicates that tier 5  investigations are required for eligibility for access to top secret or  sensitive compartmented information, or for critical sensitive or special  sensitive positions, or \u201cQ\u201d access.", "Once an executive branch agency determines that a position requires a  certain level of access to classified information, the employee in that  position completes a questionnaire for national security positions, which  the requesting agency sends to an investigative service provider. NBIB\u2014 the bureau within OPM with responsibility for conducting personnel  background investigations\u2014conducts background investigations for most  of the federal government; however, some agencies have authority  delegated to them to conduct their own investigations. The investigative  service provider then conducts a background investigation and submits  an investigative report to the requesting agency. Adjudicators from the  requesting agency use the information from the investigative report to  determine whether to grant or deny the employee eligibility for a security  clearance by considering guidelines in 13 specific areas that address (1)  conduct that could raise security concerns and (2) factors that could allay  those security concerns and permit granting a clearance. Individuals  granted security clearances are investigated periodically\u2014for as long as  they remain in a position requiring access to classified information\u2014to  ensure their continued eligibility. The 2012 Federal Investigative  Standards changed the frequency of periodic reinvestigations for certain  clearance holders."], "subsections": []}, {"section_title": "Continuous Evaluation Is Intended to Supplement the Personnel Security Clearance Process", "paragraphs": ["According to Executive Order 13467, as amended, continuous evaluation  is a vetting process to review the background of an individual who has  been determined to be eligible for access to classified information or to  hold a sensitive position at any time during the period of eligibility.  Continuous evaluation is intended to fill the gap that exists between  periodic reinvestigations in which issues relevant to an individual\u2019s  continued eligibility for a security clearance may go unreported or  unknown. For example, while the Federal Investigative Standards have  allowed for periodic reinvestigations to be conducted at any time following  the completion of the previous investigation or reinvestigation, agencies  have not been required to conduct them more frequently than every 5  years, at most, depending on the clearance level and investigative  standards in effect. Like periodic reinvestigations, the purpose of  continuous evaluation is to assist agencies in evaluating an individual\u2019s  continued eligibility for access to classified information.", "Continuous evaluation involves automated record checks conducted on a  more frequent basis, whereas periodic reinvestigations are conducted  less frequently and may include, among other things, subject and  reference interviews. The types of records checked as part of continuous  evaluation are the same as those checked for other personnel security  purposes. Security-relevant information discovered in the course of  continuous evaluation is to be investigated and adjudicated under the  existing standards. According to ODNI, implementation of continuous  evaluation will not alter clearance holders\u2019 existing rights or  responsibilities and it will incorporate protections for privacy and civil  liberties."], "subsections": []}, {"section_title": "Continuous Evaluation Is a Key Initiative of the Personnel Security Clearance Reform Effort", "paragraphs": ["The enactment of the Intelligence Reform and Terrorism Prevention Act  of 2004 initiated a reform effort including goals and requirements for  improving the personnel security clearance process government-wide.  In June 2008, Executive Order 13467 established the PAC as the  government-wide governance structure responsible for driving the  implementation of and overseeing security and suitability reform efforts.  The PAC presently has four principal members: the Deputy Director for  Management of OMB; the Director of National Intelligence, who is the  Security Executive Agent; the Director of OPM, who is the Suitability  Executive Agent; and the Under Secretary of Defense for Intelligence.  The Executive Order also designated the Deputy Director for  Management of OMB as the chair of the PAC. Among other things, the  PAC is to work with agencies to implement continuous performance  improvement programs, policies, and procedures; establish annual goals  and progress metrics; and prepare annual reports on results. It is also to  develop and continuously reevaluate and revise outcome-based metrics  that measure the quality, efficiency, and effectiveness of the vetting  enterprise. In April 2014, the PAC established the Program  Management Office to implement security clearance reforms. This office  includes subject-matter experts with knowledge of personnel security  clearances and suitability determinations from OMB, ODNI, OPM, DOD,  the Department of Homeland Security, the Department of Justice, the  Department of the Treasury, and the Federal Bureau of Investigation.", "In March 2014, OMB established Insider Threat and Security Clearance  Reform as a government-wide, cross-agency priority goal to improve  interagency coordination and implementation within the area of personnel  security clearances. Through this goal, the PAC and executive-branch  agencies are to work to improve oversight to ensure that investigations  and adjudications meet government-wide quality standards. Included  among the goal\u2019s key milestones are implementing a continuous  evaluation policy for the executive branch that regularly assesses trusted  insiders who have been granted, or are eligible for, access to classified  national security information, and overseeing the establishment of  continuous evaluation capabilities. ODNI is identified as the lead agency  for achieving both of these milestones. In addition, continuous evaluation  is identified as a key initiative in the PAC\u2019s strategic framework for fiscal  years 2017 through 2021 as part of an effort to modernize the vetting  process.", "While the PAC is responsible for driving the implementation of and  overseeing the overall government-wide reform effort, individual agencies  are responsible for various aspects of the effort. For example, as the  Security Executive Agent, ODNI is responsible for developing and issuing  uniform and consistent policies and procedures to ensure the effective,  efficient, timely, and secure completion of investigations, polygraphs, and  adjudications relating to determinations of eligibility for access to  classified information or eligibility to hold a sensitive position. In  addition, Executive Order 12968, as amended, indicates that ODNI is  responsible for setting the standards for continuous evaluation of those  individuals who have access to classified information. According to  ODNI, under these Executive Orders, it has responsibility for and  oversight of continuous evaluation, as it is an investigative activity that  supports eligibility determinations. As such, ODNI established a program  office within the National Counterintelligence and Security Center to,  among other things, establish policy, guidance, and standards for the  implementation of continuous evaluation across the executive branch."], "subsections": []}, {"section_title": "DOD Has Conducted Research on Continuous Evaluation for More Than a Decade", "paragraphs": ["DOD has been piloting aspects of continuous evaluation for more than a  decade\u2014with pilot tests of automated record checks conducted as early  as 2002. Specifically, PERSEREC has conducted several studies dating  back to 2001 that have informed and evaluated DOD\u2019s continuous  evaluation pilots, including the utility of and costs associated with various  data sources. These studies have focused on the technical capability to  conduct automated record checks from over 40 government and  commercial databases, the value and utility of automated record checks  in tier 5 investigations, and investigative alternatives to the traditional  periodic reinvestigation, among other things. The studies have also  included recommendations to further improve DOD\u2019s continuous  evaluation program, as well as areas for future research. PERSEREC  noted that it undertook these studies to identify ways to make the  personnel security system more efficient, fair, and effective. According to  PERSEREC, starting in 2004 with the formation of the government-wide  security clearance reform effort, it began to plan for a broader application  of its research beyond the department.", "Using this body of knowledge, DOD has incrementally improved its  automated record check capabilities and therefore its ability to implement  a continuous evaluation program, which it did in 2014 at the  recommendation of the Secretary of Defense. Specifically, following the  September 2013 shooting at the Washington Navy Yard, the Secretary of  Defense directed concurrent internal and independent reviews to identify  and recommend actions to address any gaps or deficiencies in DOD  programs, policies, and procedures regarding, among other things, the  granting and renewing of security clearances for department and  contractor personnel. In March 2014, the Secretary of Defense identified  four key recommendations based on the findings and recommendations  from those reviews. One of those recommendations was to implement  continuous evaluation to provide automated record checks of personnel  with access to DOD facilities or classified information. In addition, DOD  Instruction 5200.02, which was also issued in March 2014, states that all  personnel in national security positions shall be subject to continuous  evaluation. Consistent with the recommendation and the DOD  Instruction, the department implemented a continuous evaluation pilot in  October 2014, the details of which are discussed later in the report."], "subsections": []}]}, {"section_title": "ODNI Has Taken an Initial Step to Implement Continuous Evaluation across the Executive Branch but Has Not Determined Key Program Aspects or How it Will Monitor and Measure Performance", "paragraphs": ["In October 2016, ODNI took an initial step to implement continuous  evaluation across the executive branch in a phased approach, but as of  May 2017, it had not yet formalized the program in policy. The seven  agencies we spoke with have been limited in their abilities to plan for the  implementation of continuous evaluation, including developing estimated  costs, in accordance with ODNI\u2019s phased approach. This is due, in part,  to the fact that ODNI has not yet determined key aspects of the program,  such as when the future phases of implementation will occur or what they  will entail, and none of the agencies has completed implementation plans.  Further, ODNI lacks plans for monitoring and measuring the performance  of continuous evaluation across the executive branch."], "subsections": [{"section_title": "ODNI Has Taken an Initial Step to Implement Continuous Evaluation across Executive Branch Agencies, but Has Not Yet Formalized the Program in Policy", "paragraphs": ["ODNI has taken an initial step to implement continuous evaluation across  all executive branch agencies in a phased approach, but it has not yet  formalized the program in policy. Specifically, in October 2016, ODNI  initiated the first phase of continuous evaluation and outlined  requirements for this phase in interim guidance distributed to  implementing agencies in December 2016. For the first phase of  implementation, executive branch agencies are to conduct certain  continuous evaluation record checks against a portion of their national  security population. Specific details of the requirements were omitted  from this report because the information is sensitive. According to OPM  Federal Investigations Notice 17-03, the first phase of continuous  evaluation is to be implemented by the end of fiscal year 2017. These  checks are conducted in addition to any initial investigations or periodic  reinvestigations occurring in fiscal year 2017. ODNI provided agencies  with prioritization guidance to help them select individuals for continuous  evaluation. Nearly 80 executive branch agencies are subject to the  requirements for this first phase of implementation.", "ODNI has taken steps to establish the executive branch-wide continuous  evaluation program in coordination with key stakeholders. For example, in  June 2013, ODNI established a Continuous Evaluation Working Group\u2014 consisting of 12 core voting member agencies\u2014as a mechanism to  effectively coordinate continuous evaluation implementation among  executive branch departments and agencies. According to the group\u2019s  charter, it meets on at least a quarterly basis and is responsible for  coordinating the development of continuous evaluation standards,  policies, and procedures, among other things. Since January 2015, ODNI  has also issued interim guidance to executive branch agencies that are  subject to its continuous evaluation requirements informing them about  the purpose of continuous evaluation and providing them with some  details of the program. Further, to inform the establishment of the  executive branch-wide program, ODNI itself began a 1-year continuous  evaluation pilot in September 2016, according to ODNI officials. Specific  details of ODNI\u2019s pilot were omitted from this report because the  information is sensitive.", "In addition to developing standards for continuous evaluation and its  oversight role, ODNI is also developing a system that agencies can use to  conduct continuous evaluation. According to ODNI, its system is under  development and will be available to all executive branch agencies with a  full suite of continuous evaluation data sources. Agencies may opt to: (1)  use ODNI\u2019s system, (2) develop their own technical solution, (3) partner  with another agency to fulfill their continuous evaluation requirements, or  (4) some combination of the above options. ODNI asked agencies in  December 2016 to provide a preliminary determination as to how they will  satisfy future automated records checks requirements to allow ODNI\u2019s  continuous evaluation program to adequately plan for system enrollee  volume and data usage. Specific details regarding the response of  executive branch agencies to this request were omitted from this report  because the information is sensitive. Some executive branch agencies  stated the following:", "Department of Justice and State officials stated that they plan to use  ODNI\u2019s system once its development is complete;", "DOD officials stated that they plan to use their own internal system  that they are developing to conduct continuous evaluation, but that  they may use ODNI\u2019s system to conduct certain checks; and", "Department of Homeland Security officials noted that they plan to use  a combination of existing internal agency systems and ODNI\u2019s  system.", "Standards for Internal Control in the Federal Government states that  management should externally communicate the necessary information to  achieve an entity\u2019s objectives. Effective information and communication  are vital for enabling an entity to achieve its objectives, which can be  accomplished through written guidance.", "While ODNI has provided some details of the program to implementing  executive branch agencies through interim guidance, it has not yet  formalized the continuous evaluation program through a Security  Executive Agent Directive. Specifically, in May 2017, ODNI officials stated  that ODNI had not yet issued a Security Executive Agent Directive for  continuous evaluation, but that a draft directive was undergoing  interagency coordination. ODNI officials stated that the directive will  contain a definition of continuous evaluation that is consistent with, but  expands upon, the definition contained in the relevant Executive Order.  These officials stated that the expanded definition will help to clarify  continuous evaluation and ensure that agencies have a common  understanding of the program. In addition, ODNI officials stated that they  have developed draft implementation guidelines, which they plan to issue  after the directive is finalized. ODNI officials stated that the interim  guidance will remain in effect until the Security Executive Agent Directive  or follow-on interim guidance is issued.", "DOD\u2019s continuous evaluation program\u2014which it began in October 2014,  in advance of implementation of continuous evaluation executive branch- wide by ODNI\u2014identified, in a requirements document for its continuous  evaluation IT system, that the most important gap in the development of  the department\u2019s program was the lack of a national or DOD-level policy.  Specifically, the requirements document notes the lack of a policy that  fully describes the continuous evaluation process or purpose, or the end  uses of data. The requirements document further notes that there are  multiple definitions of continuous evaluation and, due to the lack of policy, there is not a common lexicon of terms used in the continuous evaluation  program, thereby creating an additional gap.", "While ODNI reports that the policy is under review, it has not prioritized  the implementation of continuous evaluation and, as a result, has missed  numerous milestones in issuing the policy since 2014. Specifically, the  original Insider Threat and Security Clearance Reform cross-agency  priority goal milestone for ODNI to issue a continuous evaluation policy  was July 2014. This milestone was not attained, and it was adjusted to  September 2016, a milestone that was also missed. The current  milestone for issuing the policy is October 2017. Additionally, ODNI has  missed other milestones for implementing a continuous evaluation  program, as discussed later in the report.", "Furthermore, ODNI has initiated the first phase of continuous evaluation  without a government-wide issued policy or an expanded definition of  continuous evaluation. As a result, agencies may develop inconsistent  approaches to implementing continuous evaluation. For example, DOD  officials stated that DOD has developed its own path for continuous  evaluation from ODNI\u2019s limited guidance and that in the absence of a  government-wide policy, DOD is developing its own internal guidance. As  a result, the approach to continuous evaluation taken by DOD\u2014the  executive branch agency with the majority of security clearance holders\u2014 may differ from that of other executive branch agencies once fully  implemented. Ultimately, such inconsistent approaches to continuous  evaluation could affect reciprocity among agencies\u2014another key  objective of government-wide security clearance reform efforts. Without  issuing a Security Executive Agent Directive in advance of the next phase  of implementation\u2014the timeframe for which ODNI has not yet  determined\u2014that includes, among other things, an expanded definition of  continuous evaluation, agencies may develop inconsistent approaches to  continuous evaluation, resulting in an uneven and perhaps ineffective  implementation across the federal government."], "subsections": []}, {"section_title": "ODNI Has Not Yet Determined Key Aspects of the Continuous Evaluation Program, and Executive Branch Agencies Have Been Limited in Their Ability to Plan for Implementation", "paragraphs": ["ODNI has not yet determined key aspects of its continuous evaluation  program, which has limited the ability of executive branch agencies to  plan for implementation in accordance with ODNI\u2019s phased approach. For  example, while ODNI has initiated the first phase of continuous evaluation  in coordination with implementing executive branch agencies, it has not  yet determined what the future phases of implementation will entail, or  when they will occur. Specifically, ODNI officials stated that they have not  set any further timeframes for implementing continuous evaluation or  determined agency requirements for future phases.", "Moreover, the timeframes for the implementation of continuous evaluation  across the executive branch have been extended over time. For example,  the original milestone set by the government-wide reform effort for  implementing continuous evaluation was the 4th quarter of fiscal year  2010, and it was not attained. The PAC subsequently set an Insider  Threat and Security Clearance Reform cross-agency priority goal  milestone for developing an initial continuous evaluation capability for the  most sensitive top secret clearance holders by September 2014\u2014which  was extended to December 2014\u2014and a milestone for implementing the  capability for additional clearance holders by December 2016. These  milestones were also missed. As of May 2017, continuous evaluation had  not yet been fully implemented, and ODNI had not set a milestone for  when it would occur.", "Although ODNI is one of the goal leaders for the Insider Threat and  Security Clearance Reform cross-agency priority goal, a senior ODNI  official stated that the milestones were arbitrarily set, and that  implementing continuous evaluation has proven to be challenging as a  result of several technical and legal issues that need to be resolved.  Further, ODNI officials highlighted the complexities associated with  developing a whole-of-government continuous evaluation program and  noted that a number of challenges have come to light as they have been  developing the program, which have contributed to missed milestones.  However, ODNI has not prioritized the setting of internal milestones for  the future phases of implementation that it considers to be reasonable.  ODNI officials stated that because continuous evaluation is a new  initiative, no realistic timeline for full implementation will be set until the  initial results of implementation are analyzed and technical capabilities  have matured. Further, they stated that although they are unable to  develop a timeline for full implementation at this time, they are actively  working to implement the program. In addition, as previously discussed,  ODNI\u2019s milestone for issuing a continuous evaluation policy has also  been adjusted over time. Figure 1 shows the adjusted executive branch  milestones for issuing a continuous evaluation policy and implementing a  continuous evaluation program, including developing a technical  capability.", "The uncertainty regarding the requirements and timeframes for the future  phases of the program has affected the ability of executive branch  agencies to plan to implement continuous evaluation and estimate the  associated costs. First, although OPM Federal Investigations Notice 17- 03 notes that the first phase of continuous evaluation is to be  implemented by the end of fiscal year 2017, none of the seven executive  branch agencies we spoke with has completed an agency-specific  implementation plan. While some agencies, such as DOD and State\u2014 both of which have established continuous evaluation programs in  advance of implementation across the executive branch\u2014have  developed concepts of operations or standard operating procedures for  continuous evaluation, all seven agencies we spoke with stated that they  are waiting for additional information from ODNI before completing their  implementation plans. Department of Homeland Security officials stated  that they are waiting for ODNI to define and schedule the future phases of  implementation and to finish developing its continuous evaluation IT  system, because there could be unknown policy implications that would  affect the Department\u2019s planning efforts. In August 2017, ODNI officials  described plans to distribute information to executive branch agencies  regarding continuous evaluation requirements for fiscal year 2018.  Specific details of these plans were omitted from this report because the  information is sensitive.", "Second, six of the seven agencies we spoke with noted challenges  associated with estimating the costs of implementation. For example,  while the Federal Bureau of Investigation has developed some cost  estimates for implementing continuous evaluation, officials noted that it is  challenging to estimate the full costs of the program until they receive  additional information from ODNI, such as the requirements for future  phases of implementation, as well as information about record check,  technology, and personnel requirements. DOD officials stated that the  number of individuals enrolled in continuous evaluation directly relates to  the amount of agency resources required, for example, to validate,  respond to, and adjudicate alerts. Two agencies we spoke with stated  that they had not yet taken any steps to estimate costs because they are  waiting for additional information from ODNI. In August 2017, ODNI  officials stated that they plan to leverage an upcoming OMB budget data  request, administered through the PAC, to obtain agency funding  estimates for expenses related to conducting continuous evaluation from  fiscal years 2017 through 2019.", "We have previously identified weaknesses associated with estimating the  costs of personnel security clearance reform. Specifically, in April 2015  we found, among other things, that long-term costs of implementing the  2012 Federal Investigative Standards\u2014including the implementation of  continuous evaluation\u2014were not addressed in personnel security  clearance background investigation reform planning documentation.  Further, we found that OMB did not have current and detailed cost- estimate information from executive-branch agencies, because it did not  begin to solicit the information from the agencies until almost 2 years after  the updated standards were approved. As such, we recommended in  April 2015, among other things, that the Deputy Director for Management  of OMB, in the capacity as Chair of the PAC, develop long-term funding  estimates for changes to the federal government\u2019s investigation practices  resulting from the implementation of the standards, including but not  limited to costs related to: (1) information technology adjustments to  enable government-wide data sharing; (2) implementation of continuous  evaluation of clearance holders; and (3) additional personnel resources  for twice-as-frequent reinvestigations. OMB concurred with the  recommendation. However, as of October 2017, this recommendation  remained open. We continue to believe that this recommendation is  valid and should be implemented.", "In addition, the seven executive branch agencies we spoke with identified  other areas related to agency expectations for which they need  information from ODNI. For example, officials from the Department of  Justice; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and  the Federal Bureau of Investigation stated that while they would like to  use ODNI\u2019s IT system to conduct all or at least some of the record checks  that will be required, they will need to develop an interface with ODNI\u2019s  system to do so. However, these officials stated that they were unaware  of ODNI\u2019s technical requirements for that interface. These officials further  stated that without information related to the technical requirements, they  are unable to sufficiently plan or budget for continuous evaluation. ODNI  officials stated that although ODNI\u2019s IT system remains under  development, information on technical interface requirements is available  to all stakeholders and that they meet with agencies to discuss agency- specific IT requirements. According to ODNI, several executive branch  agencies have expressed an interest in using ODNI\u2019s IT system to  conduct at least some, if not all, of the checks that will be required once  continuous evaluation is fully implemented. ODNI officials acknowledged  that agencies will need to develop an interface to use the system, and  that agencies will be responsible for the associated costs.", "The Project Management Institute\u2019s Guide to the Project Management  Body of Knowledge (PMBOK\u00ae Guide) provides guidelines for managing  individual projects, including developing a project management plan\u2014in  advance of executing the project\u2014that describes how the project will be  executed, monitored, and controlled. The plan should include, among  other things, project schedules and stakeholder roles and responsibilities.  The guide notes that updates may be made to the project management  plan as changes may occur as the project progresses.", "ODNI officials managing the continuous evaluation program stated that  they have not developed a project management plan for the  implementation of continuous evaluation, to include an implementation  schedule, because they are still in the planning stage. However, ODNI  has already started to implement the program. Without a plan that, among  other things, identifies reasonable milestones for the future phases of  implementation, ODNI does not have a schedule against which it can  track its progress or to which it is accountable. Further, without a plan for  implementing continuous evaluation executive branch-wide that includes  a schedule and agency requirements for future implementation phases,  full implementation\u2014which has been delayed for almost 7 years\u2014may be  further delayed.", "While a phased approach to implementation provides agencies time to  adapt their personnel security clearance programs to changing  requirements, without an implementation plan outlining ODNI\u2019s  expectations of agencies\u2019 roles and responsibilities, agencies are unable  to sufficiently plan for the implementation of continuous evaluation,  including identifying required resources and estimating potential costs.  Further, without clearly defining expectations for agencies\u2014including  information such as the planned requirements for future phases of  implementation\u2014continuous evaluation may not be fully implemented  across the executive branch. Incomplete implementation could potentially  prevent the federal government from identifying security-relevant  information in a timely manner, thereby exposing it to further national  security risks, such as unauthorized disclosures of classified information.  Limited planning, both by ODNI and at the agency level, ultimately puts  the success of the continuous evaluation program\u2014a key aspect of the  security clearance reform effort\u2014at risk."], "subsections": []}, {"section_title": "ODNI Lacks Plans for Monitoring and Measuring Continuous Evaluation Program Performance", "paragraphs": ["ODNI lacks a plan to monitor and measure the performance of continuous  evaluation across executive branch agencies. Specifically, ODNI officials  stated that ODNI has not developed a plan to monitor or assess the  performance of continuous evaluation across the executive branch,  including for the first phase of implementation, which is underway. ODNI  officials stated that, ideally, agencies will report that they have met the  fiscal year 2017 requirements for the first phase of implementation, and  that ODNI will follow up with agencies that do not report. The officials  added that, in the long term, ODNI would like to incorporate continuous  evaluation into its Security Executive Agent National Assessment  Program, through which it conducts oversight of the security clearance  process at executive branch agencies, but that continuous evaluation is  not currently included in the oversight program. As previously discussed,  according to Executive Order 13467, ODNI, as the Security Executive  Agent, is to direct the oversight of investigations, reinvestigations,  adjudications, and, as applicable, polygraphs for individuals\u2019 eligibility for  access to classified information, or eligibility to hold a sensitive position  made by any agency. Similarly, Executive Order 12968, as amended,  indicates that ODNI is responsible for determining standards for  continuous evaluation. According to ODNI, its authorities under the  Executive Orders include responsibility for and oversight of continuous  evaluation as it is an investigative activity that supports eligibility  determinations.", "Standards for Internal Control in the Federal Government emphasizes the  importance of assessing performance over time, noting that ongoing  monitoring should be built into operations, performed continually, and  responsive to change. The PMBOK\u00ae Guide also states that project  management includes monitoring and controlling work to meet  performance objectives.", "Without developing a plan to monitor continuous evaluation\u2014including  assessing continuous evaluation at various phases of implementation\u2014 ODNI cannot ensure that continuous evaluation is being conducted  consistently across the executive branch, and it may experience  challenges in identifying any needed modifications to the program.  Further, ODNI cannot ensure that continuous evaluation is effectively  meeting its critical purpose of filling the information gap between  investigative cycles to identify risks to national security.", "Additionally, we reported in 2012 that federal agencies engaging in large  projects can use performance measures to determine how well they are  achieving their goals and to identify any areas for improvement.  Reporting on these measures can help key decision makers within  agencies, as well as stakeholders, to obtain feedback for improving both  policy and operational effectiveness. Moreover, performance measures  need to provide managers and other stakeholders with timely, action- oriented information in a format that helps them make decisions that  improve program performance. Throughout our body of work on leading  performance management practices we have identified several attributes  of successful performance measures, which include, among other things,  measures that are clear, quantifiable, and objective, and that are linked to  measurable goals.", "However, ODNI has not developed and distributed to executive branch  agencies performance measures to assess the effectiveness of  continuous evaluation once it is implemented executive branch-wide.  ODNI officials stated that they would like to collect metrics in order to  determine the potential effects of continuous evaluation, in particular on  agency resources. Although these officials stated that they have had  some discussions with DOD about the types of metrics it might want to  collect, such as the number of false positives and the resources required  to address the workload, ODNI has not prioritized the development of  performance measures. In February 2017, ODNI officials stated that they  had not developed\u2014or distributed to DOD or other agencies conducting  continuous evaluation\u2014any performance measures for continuous  evaluation. These officials stated that once continuous evaluation has  matured, ODNI plans to identify appropriate measures and determine a  mechanism to collect and analyze them. In August 2017, ODNI officials  stated that they had developed a draft list of metrics for fiscal year 2017.", "Once the metrics are finalized, these officials stated that they would issue  guidance to agencies requesting them to report these metrics to ODNI.", "However, since ODNI initiated the first phase of continuous evaluation in  October 2016, without developing and distributing performance measures  to executive branch agencies, it is unclear whether agencies are  positioned to collect and report the information to ODNI for fiscal year  2017. Developing performance measures before the program fully  matures could help it to identify potential program modifications needed  prior to the next phase of implementation, as well as prior to full  implementation. Further, without developing clear, quantifiable, and  objective performance measures that are linked to measurable goals for  agencies to track, and without determining a process and schedule for  agencies to regularly report those measures, ODNI cannot ensure that  the first phase of the program it has already initiated is effective or  achieving similar results at all agencies, which could ultimately affect  reciprocity."], "subsections": []}]}, {"section_title": "DOD and State Have Designed, Piloted, and Evaluated Continuous Evaluation to Varying Extents", "paragraphs": ["DOD and State have designed, piloted, and evaluated continuous  evaluation, although their respective approaches have varied in scope,  size, and duration\u2014with DOD\u2019s pilot involving the most record checks,  the largest population, and the longest duration. As previously discussed,  DOD\u2019s efforts to design, pilot, and evaluate continuous evaluation have  been ongoing for more than a decade, and they pre-date efforts at ODNI  to develop and implement an executive branch-wide continuous  evaluation program. According to ODNI officials, as of February 2017,  DOD and State were the only agencies, other than ODNI, that had piloted  continuous evaluation. ODNI officials stated that DOD and State\u2019s pilots  were conducted at the discretion of those agencies, and that while ODNI  did not oversee them, the results of the pilots have helped inform ODNI\u2019s  development of an executive branch-wide program. These pilots were  ongoing prior to ODNI\u2019s December 2016 interim guidance outlining the  fiscal year 2017 continuous evaluation requirements for executive branch  agencies, and as a result, both DOD and State have taken different  approaches to developing their programs."], "subsections": [{"section_title": "DOD\u2019s Continuous Evaluation Pilot", "paragraphs": ["In October 2014, consistent with the Secretary of Defense\u2019s March 2014  recommendation to implement continuous evaluation and DOD  Instruction 5200.02, DOD initiated a continuous evaluation pilot that  included approximately 100,000 military, civilian, and contractor clearance  holders, using a limited set of trusted commercial and government data  sources. DOD has conducted this pilot in a phased approach, increasing  the number of cleared individuals enrolled over time, in accordance with  enrollment milestones set as part of the Insider Threat and Security  Clearance Reform cross-agency priority goal. Specifically, the department  expanded enrollment to 225,000 DOD clearance holders in December  2015 and 500,000 in December 2016, and it plans to increase the  enrolled population to 1 million by the end of calendar year 2017. The  department has also set an internal goal to enroll all clearance holders  department-wide by the end of fiscal year 2021.", "DOD has developed its own continuous evaluation IT system\u2014which is  called Mirador, and is separate from the IT system that ODNI is  developing\u2014to conduct automated record checks of commercial and  government data sources on the enrolled population, with the goal of near  real-time identification of adverse information to be considered in the  evaluation of an individual\u2019s continued eligibility for access to classified  information. DOD officials developing the system stated that while they  are currently using Mirador to conduct automated record checks for  continuous evaluation, the system remains under development, and they  are integrating additional data sources and user requirements as those  are identified. As of February 2017, the department had implemented  seven data sources in Mirador, which provide information about  suspicious financial and criminal activity, among other things. Another  nine sources were undergoing testing or were otherwise in progress. The  department expects Mirador to reach initial operating capacity in fiscal  year 2018. DOD officials stated that aspects of Mirador are still manual,  such as enrolling individuals, but that they plan to take steps to automate  them.", "DOD officials stated that, depending on the data source, they run record  checks on enrolled individuals daily, monthly, quarterly, or annually.  According to DOD officials, if a record check results in an alert, such as  for criminal activity, Mirador forwards the alert to DOD\u2019s continuous  evaluation validation cell\u2014within the Defense Security Service, which  manages the department\u2019s continuous evaluation program\u2014to ensure  that: (1) the alert applies to the correct individual; (2) the issue was not  previously known; and (3) the issue is adjudicatively relevant. DOD  officials stated that if an analyst determines that an alert is valid\u2014 meaning that all three of the above statements are believed to be true\u2014 then the analyst generates a report and forwards it to the individual\u2019s  designated security manager. Alerts are prioritized for analyst review  according to business rules designed around the severity of the alert, and  according to DOD officials, all alerts are reviewed by a supervisor  following an analyst\u2019s initial determination. The officials stated that  currently, if additional investigative work is required based on the alert,  the results of that investigation are forwarded to an adjudicator to make a  determination as to whether the alert affects the individual\u2019s continued  eligibility for a security clearance. The officials added that the due process  safeguards in place for periodic reinvestigations are also in place for  continuous evaluation. Figure 2 provides an overview of DOD\u2019s  continuous evaluation process.", "DOD has collected and analyzed metrics on the results of its current pilot.  For example, according to DOD data, as of February 2017, continuous  evaluation had identified 12,400 alerts. Of those alerts, 2,064\u2014pertaining  to 1,816 individuals\u2014were determined to be valid, meaning that they  were adjudicatively relevant and not previously known. According to  DOD, action has been completed on 1,307 of those cases. Specifically,  859 cases were closed with a favorable decision, but context was added  to the individuals\u2019 records; in 375 cases the subject separated and/or no  longer needed access; and 62 cases involved a clearance revocation,  condition, or warning. For DOD\u2019s secret-eligible population, continuous  evaluation helped to identify risk, on average, 6 years 7 months sooner  than the traditional 10-year periodic reinvestigation model, and 1 year 5  months earlier for the top secret-eligible population, which is to be  reinvestigated every 5 years. DOD officials stated that these metrics are  presently tracked manually by the Consolidated Adjudications Facility,  and they identified a need to automate the process, going forward.", "In addition, DOD officials stated that they have shared the results of the  pilot and lessons learned with ODNI through the Continuous Evaluation  Working Group. For example, DOD identified lessons learned related to  identifying the right data sources, eliminating duplicate alerts, the  frequency of record checks, methods for achieving identity resolution, and  the need for operational access to reporting data. Most recently, DOD  issued Department of Defense Manual 5200.02 in April 2017, which  includes continuous evaluation among the responsibilities and procedures  of the DOD Personnel Security Program."], "subsections": []}, {"section_title": "State\u2019s Continuous Evaluation Pilot", "paragraphs": ["State began its continuous evaluation pilot in January 2015 to evaluate  the coverage and reliability of public records information, using a public  records service provider. Specifically, it compared information received  from public record checks, such as criminal and financial activity, against  information contained in personnel security files for approximately 8,600  personnel. State found, among other things, that while public records can  provide coverage beyond the traditional scope of investigations, the  quality of the information varies, and not all jurisdictions participate. State  continued its pilot in 2016 and expanded the enrolled population to  include its entire tier 5 population. Additionally, the focus of the pilot  shifted from evaluating the usefulness of public records information to  evaluating the alerts received. State officials stated that the results of the  public record checks are reviewed by the department\u2019s continuous  evaluation team, which determines whether the information is new,  accurate, and relevant, and if so, whether it needs further review and  investigation. These officials stated that because State has authority to  conduct its own investigations, it is easy to conduct investigative follow- up. According to officials, minor issues, such as traffic violations, are  added to personnel files for consideration during the individual\u2019s next  periodic reinvestigation.", "According to State officials, as of March 2017, they had not revoked any  clearances as a result of the identification of derogatory information  through continuous evaluation. As of April 2017, State had invested  approximately $2.4 million in its continuous evaluation pilot for contract  costs and personnel to administer the program, and, according to State  officials, ODNI provided approximately one-third of that funding. State  officials stated that because ODNI provided funding, State has voluntarily  shared some lessons learned with ODNI, although it was not tasked to do  so. Some details of State\u2019s pilot were omitted because the information is  sensitive."], "subsections": []}]}, {"section_title": "Number of Agencies Meeting Periodic Reinvestigation Timeliness Goals Decreased from Fiscal Years 2012- 2016, and Potential Continuous Evaluation Effects Are Unknown", "paragraphs": ["The number of executive branch agencies meeting established timeliness  goals for completing periodic reinvestigations decreased from fiscal years  2012 through 2016. Additionally, while executive branch agencies have  already initiated the first phase of continuous evaluation, the potential  effects of continuous evaluation on periodic reinvestigations and agency  resources are unknown, as they have not been assessed."], "subsections": [{"section_title": "Executive Branch Agencies Meeting Established Timeliness Goals for Completing Periodic Reinvestigations Decreased from Fiscal Years 2012 through 2016", "paragraphs": ["Our analysis of timeliness data for specific executive branch agencies  showed that the percent of agencies meeting timeliness goals decreased  from fiscal year 2012 through 2016. As part of the Insider Threat and  Security Clearance Reform cross-agency priority goal, since the second  quarter of fiscal year 2014, the PAC has reported quarterly on agency  timeliness. Among other things, the PAC reports on the average number  of days taken, for the executive branch as a whole, to complete the end- to-end process for periodic reinvestigations, as compared with the  following goals for the fastest 90 percent of periodic reinvestigations: 15  days to initiate a case, 150 days to conduct the investigation, and 30 days  to adjudicate\u2014totaling 195 days to complete the end-to-end processing of  the periodic reinvestigation.", "For fiscal year 2016, the PAC reported that the executive branch as a  whole: did not meet the goal of conducting the investigative portion of  periodic reinvestigations within 150 days for the fastest 90 percent of  cases for any quarter. The average number of days ranged from 175  days to 192 days. did not meet the goal of completing periodic reinvestigations\u2014the  end-to-end goal\u2014within 195 days for any quarter of fiscal year 2016.  The average ranged from 209 days to 227 days.", "Our analysis of timeliness data for specific executive branch agencies  showed that the percent of agencies that reported meeting timeliness  goals decreased from fiscal year 2012 through 2016. Specifically, while 84 percent of the executive branch agencies met the 150-day  investigative goal for at least three of four quarters for the fastest 90  percent of periodic reinvestigations in fiscal year 2012, only 18  percent of the agencies met the investigative goal in fiscal year  2016. while 84 percent of the executive branch agencies met the end-to-end  processing goal of 195 days for at least three of four quarters for the  fastest 90 percent of periodic reinvestigations in fiscal year 2012, only  22 percent of the agencies completed their fastest 90 percent of  periodic reinvestigations within 195 days for at least three of four  quarters in fiscal year 2016.", "Of the agencies we reviewed, we found that agencies which use NBIB as  their investigative service provider and agencies with delegated authority  to conduct their own investigations both experienced challenges in  meeting established timeliness goals for periodic reinvestigations in fiscal  years 2015 and 2016. For example, 50 percent of the agencies with  delegated authority completed investigations for at least three of four  quarters for the fastest 90 percent of periodic reinvestigations within 150  days in fiscal year 2015, and 44 percent of agencies with delegated  authority met the timeliness goal in fiscal year 2016. Of the executive  branch agencies for which we obtained timeliness data from ODNI and  which use NBIB as their investigative service provider, NBIB completed  the investigative portion within 150 days for 0 percent of the agencies in  fiscal year 2015, and completed it within that timeframe for 6 percent of  the agencies in fiscal year 2016 for at least three of four quarters for the  fastest 90 percent of reinvestigations. Of the executive branch agencies  we reviewed, 67 percent met the adjudication timeliness goal of 30 days  in fiscal year 2016 for at least three of four quarters for the fastest 90  percent of reinvestigations. Specific details on the timeliness of individual  executive branch agencies\u2019 periodic reinvestigations were omitted from  this report because the information is sensitive.", "According to NBIB officials, as of June 2017, NBIB\u2019s investigation backlog  totaled approximately 673,000 cases\u2014about 183,000 of which were  periodic reinvestigations for both tier 3 and tier 5 clearances. NBIB cited  the September 2014 decision to not exercise the option of one of its  investigative fieldwork contracts\u2014which led to a loss in capacity and an  increase in the program\u2019s contract costs\u2014and difficulties attracting and  retaining investigative resources as two main challenges to timeliness.  NBIB officials stated that they are taking steps to address the backlog for  background investigations, including periodic reinvestigations. These  steps include hiring additional federal and contract investigators,  implementing a number of workload management initiatives, and  conducting a business process reengineering review to identify potential  process efficiencies. Additionally, executive branch agencies noted the  increased requirements stemming from the 2012 Federal Investigative  Standards, such as continuous evaluation and more frequent periodic  reinvestigations for certain clearance holders, as additional challenges to  meeting timeliness goals.", "In 2008, the Joint Security and Suitability Reform Team issued Security  and Suitability Process Reform, a report to the President that, among  other things, includes OMB-issued interim government-wide processing  goals for security clearances for calendar year 2008. The calendar year  2008 government-wide goal for the fastest 90 percent of periodic  reinvestigations is the same as the goal currently in place: 195 days to  complete the end-to-end processing of the periodic reinvestigation. The  report states that OMB issued the interim goal to assist agencies in  projecting workload and resource requirements.", "However, the timeliness goals on which the PAC currently reports for  periodic reinvestigations are the same as those identified by OMB as  interim goals for calendar year 2008. Unlike initial investigations, for  which timeliness objectives are established by statute, the 195-day goal  for the end-to-end timeliness of periodic reinvestigations was an interim  goal set by OMB for calendar year 2008. The 2008 report to the  President does not detail how the goals were developed or what data, if  any, were used to establish them. ODNI officials initially stated that they  did not know how the 195-day goal was developed or where it was  documented, and did not know whether subsequent, finalized goals were  ever established, but they later provided a copy of the 2008 report. A  senior NBIB official stated that OMB\u2019s interim calendar year 2008  timeliness goals were developed based on the average timeliness of the  fastest 90 percent of periodic reinvestigations at that time. Since the  establishment of OMB\u2019s interim goals, the executive branch has  measured periodic reinvestigation timeliness against those goals, and it  has not conducted an evidence-based review to ensure that 195 days\u2014 and the associated goals of the different phases of periodic  reinvestigations\u2014are realistic goals for periodic reinvestigations.", "Standards for Internal Control in the Federal Government states that  management evaluates and, if necessary, revises defined objectives so  that they are consistent with requirements and expectations. Without  conducting an evidence-based review of the goals, the executive branch  will continue to compare the timeliness of its periodic reinvestigations  against goals that it established almost a decade ago and that may no  longer be appropriate. Further, without ensuring that 195 days, along with  the associated goals of the different phases of periodic reinvestigations,  are appropriate goals, agencies may not be adequately planning for the  amount of time and resources actually required to conduct periodic  reinvestigations, and, as a result, they may experience further timeliness  delays. Moreover, if an agency does not plan for sufficient time to conduct  periodic reinvestigations, it may allow individuals to retain access to  sensitive documents when it has not yet confirmed those individuals\u2019  continued eligibility, which could have potential repercussions for national  security."], "subsections": []}, {"section_title": "Potential Effects of Continuous Evaluation on Periodic Reinvestigations Are Unknown", "paragraphs": ["The potential effects of continuous evaluation on periodic  reinvestigations, such as possible changes to their frequency or scope,  remain unknown. In addition, the executive branch\u2019s plans for replacing  periodic reinvestigations with continuous evaluation have evolved over  time. For example, the 2008 Security and Suitability Process Reform  report to the President outlined plans to replace the periodic  reinvestigation model with continuous evaluation, conducting continuous  evaluation annually or at least once every 5 years, depending on an  individual\u2019s security clearance level. The report identified a June 2009  milestone to develop an implementation plan to transition from periodic  reinvestigations to continuous evaluation, and as previously discussed,  an estimated operational date of the fourth quarter of fiscal year 2010  (see figure 1). The purpose of the change was to reveal security-relevant  information earlier and to provide increased scrutiny on populations that  could potentially represent risk to the government because they already  have access to classified information. However, ODNI documentation  states that continuous evaluation supplements and enhances, but does  not replace, established personnel security processes.", "Executive branch agencies have expressed varying views about potential  changes to the periodic reinvestigation model. For example, DOD officials  stated that with workload and funding issues, they see no alternative but  to replace periodic reinvestigations for certain clearance holders with  continuous evaluation, as the record checks conducted are the same for  both processes. In addition, DOD officials stated that they believe  continuous evaluation will not only result in the more timely identification  of security-relevant information, but will also help to change individuals\u2019  behaviors\u2014for example, that individuals will be more likely to self-report  such information once they are enrolled in the program. DOD officials  also noted that if changes are not made to the periodic reinvestigation  process, the investigation backlog will persist, because continuous  evaluation alerts will continue to add to the investigative workload.", "In addition, in September 2016, PERSEREC issued a report on a study it  conducted on the effectiveness, timeliness, and cost of various  automated record checks-based investigative strategies as compared  with traditional periodic reinvestigations. The analysis found that some of  the automated record checks strategies were effective, improved the  timeliness of issue detection, and lowered costs. However, DOD officials  noted that because ODNI is the Security Executive Agent, it must  approve the change to the investigative process. These officials stated  that they hope to influence this change by demonstrating the  effectiveness of continuous evaluation at DOD. Additionally, NBIB officials  stated that continuous evaluation will increase their workload and costs,  since it is an additional layer to the personnel security clearance process.  Accordingly, they hope that ODNI will identify efficiencies that can be  made to the process. Further, PAC Program Management Office officials  stated that there may be changes to the periodic reinvestigation model in  the future, but that any changes to the model will be determined by data  and will be made under the authority of ODNI and OPM as the Security  Executive Agent and the Suitability Executive Agent, respectively.", "Other agencies, such as State, do not share DOD\u2019s view. For example,  State officials stated that although a reduction in costs would result from  replacing periodic reinvestigations with continuous evaluation, they have  concerns that relevant information, such as state and local law  enforcement records that are not yet automated, would be missed if they  did not conduct periodic reinvestigations. Similarly, officials from the  Department of Justice and the Department of Homeland Security stated  that they do not intend to replace periodic reinvestigations, and that  continuous evaluation is to be a supplement to the personnel security  clearance process. However, officials from all three of these agencies  stated that it may be possible to change the frequency or scope of  periodic reinvestigations at some point in the future. ODNI officials stated  that, at this time, they have no intention of replacing periodic  reinvestigations with continuous evaluation, and that the Security  Executive Agent Directive for continuous evaluation, once issued, will  clarify that continuous evaluation is intended to supplement and not  replace periodic reinvestigations.", "In May 2017, ODNI officials stated that ODNI is not opposed to further  improving the security clearance process, and that once continuous  evaluation is operational, it plans to determine the efficiencies and  mitigation of risks associated with the approach. Specifically, these  officials stated that once continuous evaluation is further implemented  and ODNI has gathered sufficient data\u2014which they estimated would take  about a year from May 2017\u2014they can perform analysis and research to  determine whether any changes are needed to the periodic  reinvestigation model.", "While executive branch agencies have different views about potential  changes to the periodic reinvestigation process, officials from five of the  seven executive branch agencies we spoke with identified the potential  expenditure of increased resources, such as workload and costs, as a  risk associated with the implementation of continuous evaluation.  Specifically, all five agencies stated that continuous evaluation will  increase their workloads\u2014and therefore costs\u2014if no other changes are  made to the personnel security process. For example, DOD officials  noted that adjudicator workloads will increase as new investigative  leads\u2014identified through continuous evaluation\u2014require adjudication.  Senior DOD officials stated that DOD cannot afford to conduct both  continuous evaluation and periodic reinvestigations. Specifically, DOD  estimates that implementing the 2012 Federal Investigative Standards  requirement to conduct more frequent periodic reinvestigations for certain  clearance holders will cost approximately $1.8 billion for fiscal years 2018  through 2022. In addition, State officials stated that they anticipate that  continuous evaluation will increase their personnel security workload  because alerts will have to be validated, and potentially investigated, and  then adjudicated.", "Standards for Internal Control in the Federal Government states that  management should identify, analyze, and respond to risks related to  achieving defined objectives. Risk assessment is the identification and  analysis of risks related to achieving defined objectives to form a basis for  designing risk responses. In addition, the PMBOK\u00ae Guide states that  entities should perform a quantitative risk analysis to numerically analyze  the effect of identified risks on overall project objectives. The key benefit  of this process is that it produces quantitative risk information to support  decision-making in order to reduce project uncertainty.", "Although executive branch agencies have identified increased resources  as a risk associated with implementing continuous evaluation, and ODNI  has acknowledged that risk, ODNI, in coordination with the PAC, has not  assessed the potential effects of continuous evaluation on an agency\u2019s  resources. Further, ODNI has not developed a plan, in consultation with  implementing agencies, to address such effects, to include modifying the  scope or frequency of periodic reinvestigations or replacing periodic  reinvestigations for certain clearance holders. While ODNI is  implementing continuous evaluation in a phased approach, having a plan  in place to address the increased workload once continuous evaluation is  fully implemented is critical to ensuring the sustainability and  effectiveness of executive branch agencies\u2019 personnel security programs.  Further, without assessing the potential impacts on agency resources and  developing a plan to address them\u2014once ODNI has further defined the  program\u2014implementing continuous evaluation could further increase the  periodic reinvestigation backlog and agency costs. With delays in  determining continued eligibility, executive branch agencies are assuming  greater risk, which runs counter to the purpose of continuous evaluation."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Continuous evaluation has been a key and long-standing initiative of  security clearance reform efforts, intended to assist agencies in the timely  identification of security-relevant information that may affect an  individual\u2019s continued eligibility for access to classified information.  However, ODNI has not demonstrated the leadership necessary to make  continuous evaluation a priority. Accordingly, the program\u2019s  implementation has been delayed for almost 7 years. Although ODNI has  taken an initial step to implement it in a phased approach, it has not yet  formalized the program in policy or provided an expanded definition of  continuous evaluation to implementing agencies. In addition, ODNI has  not yet determined key aspects of the program, including future phases of  implementation and agency requirements. Key executive branch  agencies have deemed information about the future phases necessary to  plan for the implementation of continuous evaluation and to estimate  potential costs. The absence of this information has limited their ability to  prepare for the next phases of implementation. This could further delay  the full implementation of continuous evaluation executive branch-wide  and result in inconsistencies among agencies\u2019 approaches. Specifically,  in the absence of ODNI policy and comprehensive guidance, DOD and  State continue to develop their current continuous evaluation programs.  The ultimate effects of such inconsistencies could negatively affect  reciprocity\u2014another key government-wide security clearance reform  effort.", "Although ODNI is to have oversight of continuous evaluation, it has not  incorporated it into its oversight program or developed a plan to ensure  that agencies implement it. Without a Security Executive Agent Directive  for continuous evaluation that provides an expanded definition of  continuous evaluation and relevant terms to help ensure consistent use; a  plan for implementing continuous evaluation across the executive branch,  that includes future phases of implementation and expectations for  agencies; and a plan for monitoring program performance throughout the  implementation process, as well as performance measures by which to  track and report progress, ODNI is not well-positioned to ensure the  success and effectiveness of the continuous evaluation initiative. Further,  ODNI does not know whether it is meeting the critical purpose of filling the  information gap between investigative cycles to identify risks to national  security.", "Executive branch timeliness in completing periodic reinvestigations has  declined over the past five years. Further, the executive branch does not  know whether the timeliness goals\u2014set nearly a decade ago\u2014are still  relevant and appropriate, given changes to the personnel security  clearance process. Without conducting an evidence-based review to  ensure that goals for the timely completion of periodic reinvestigations are  appropriate, executive branch agencies may not be planning sufficient  time and resources to complete periodic reinvestigations and therefore  may be challenged to ensure the continued eligibility of the entire national  security workforce. Finally, executive branch agencies have identified  increased resources, such as workload and costs, as a challenge to  implementing continuous evaluation. However, the executive branch has  not determined the potential expected effects of continuous evaluation on  periodic reinvestigations, and agencies have varying views about what, if  any, additional changes should be made to the personnel security  clearance process. Without an assessment of the potential effects of  continuous evaluation and a plan to address those effects\u2014once ODNI  has further defined the program\u2014agencies may not be able to effectively  integrate continuous evaluation into their personnel security clearance  programs, which in turn could lead to further delays in the clearance  process."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to ODNI:", "The Director of National Intelligence should issue a Security Executive  Agent Directive for continuous evaluation to formalize the program,  which includes, among other things, an expanded definition of  continuous evaluation in advance of the next phase of  implementation. (Recommendation 1)", "The Director of National Intelligence should, in coordination with the  Continuous Evaluation Working Group, develop an implementation  plan for continuous evaluation across the executive branch that  includes a schedule with timeframes and expectations for agencies,  such as the requirements (e.g., the size of the enrolled population in  continuous evaluation) for future phases of implementation.  (Recommendation 2)", "The Director of National Intelligence should develop a plan for  monitoring continuous evaluation performance, to include assessing  continuous evaluation at various phases of implementation.  (Recommendation 3)", "The Director of National Intelligence should develop performance  measures for continuous evaluation that agencies must track and  determine a process and schedule for agencies to regularly report  those measures to ODNI. At minimum, these performance measures  should be clear, quantifiable, objective, and linked to measurable  goals. (Recommendation 4)", "The Director of National Intelligence should, in coordination with the  Deputy Director for Management of the Office of Management and  Budget in the capacity as Chair of the Security, Suitability, and  Credentialing Performance Accountability Council, conduct an  evidence-based review of the timeliness goal of 195 days for  completing the fastest 90 percent of periodic reinvestigations and the  associated goals for the different phases of periodic reinvestigations,  and adjust the goal if appropriate, taking into consideration available  resources, the additional workload of continuous evaluation, and the  risks associated with individuals retaining access to classified  information without determining their continued eligibility.  (Recommendation 5)", "The Director of National Intelligence should, once ODNI has further  defined the continuous evaluation program, to include issuing a  Security Executive Agent Directive and developing an implementation  plan, in coordination with the Deputy Director for Management of the  Office of Management and Budget in the capacity as Chair of the  Security, Suitability, and Credentialing Performance Accountability  Council, assess the potential effects of continuous evaluation on  agency resources and develop a plan, in consultation with  implementing agencies, to address those effects, such as modifying  the scope of periodic reinvestigations, changing the frequency of  periodic reinvestigations, or replacing periodic reinvestigations for  certain clearance holders. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to ODNI, DOD, OMB, State, NBIB, the  Department of Justice, and the Department of Homeland Security for  review and comment. Written comments from ODNI are reprinted in their  entirety in appendix I. DOD, OMB, NBIB, and the Department of  Homeland Security did not provide comments. ODNI, State, and the  Department of Justice provided technical comments, which we  incorporated in the report as appropriate.", "In its written comments, ODNI stated that it generally concurred, with  comments, with our six recommendations. However, ODNI stated that it  did not concur with aspects of our overall conclusions and provided  observations in four specific areas. We continue to believe that our  conclusions are valid, as discussed below.", "First, ODNI disagreed with our conclusion that it has not demonstrated  the leadership necessary to make continuous evaluation a priority. ODNI  noted that it has taken recent actions to better prioritize the  implementation of continuous evaluation. While these recent steps are  positive and may help position ODNI for success, historically ODNI has  not demonstrated the leadership necessary to make the implementation  of a continuous evaluation program a priority. Specifically, while ODNI  refers to continuous evaluation as a new initiative, the original milestone  for implementing the program was the fourth quarter of fiscal year 2010,  which was not attained. Since then, as discussed in the report, a number  of revised milestones for implementing the program have been missed.  For example, the PAC, of which ODNI is a principal member,  subsequently set a milestone for developing an initial continuous  evaluation capability for other clearance holders by September 2014\u2014 which was extended to December 2014\u2014and a milestone for  implementing the capability for other clearance holders by December  2016. These milestones were also missed. As of August 2017,  continuous evaluation has not yet been fully implemented, and ODNI has  not set a milestone for when full implementation would occur. As such, we  recommended specific actions that are needed to better position ODNI for  success, including issuing a Security Executive Agent Directive for  continuous evaluation, developing plans for implementing the program  and monitoring its performance, and developing performance measures.", "Second, ODNI disagreed with our conclusion that it has not yet  determined key aspects of the continuous evaluation program, including  future phases of implementation and agency requirements. ODNI stated  that the Security Executive Agent Directive for continuous evaluation is  undergoing interagency coordination and that it has provided executive  branch agencies with interim guidance until that process is completed,  which we acknowledge in the report. While ODNI has provided interim  guidance for continuous evaluation, it only details the requirements for  fiscal year 2017 and not for the future phases of implementation. In  August 2017, after receiving a draft of our report, ODNI officials stated  that they planned to provide additional guidance to agencies clarifying  that the requirements for fiscal year 2018 will be the same as those for  fiscal year 2017. While this correspondence, once issued, will help  agencies with their immediate program planning, ODNI officials stated  that they have not yet determined the requirements for fiscal year 2019 or  beyond, which limits agencies\u2019 abilities to plan beyond the next fiscal year  for the future phases of implementation.", "Additionally, ODNI stated that the technical development milestones of  the Continuous Evaluation System it is developing are well-established,  tracked, and shared with stakeholders. As discussed in the report,  according to ODNI officials, they have established technical milestones  for the development of ODNI\u2019s Continuous Evaluation System. While this  is an important step in implementing the program, ODNI has not  developed similar programmatic milestones for the overall implementation  of the program, such as when future phases of implementation will occur,  to include full implementation. As discussed in the report, this has limited  the ability of executive branch agencies to plan for implementation in  accordance with ODNI\u2019s phased approach. As a result, full  implementation\u2014which has been delayed for almost 7 years\u2014may be  further delayed.", "Third, ODNI did not agree with our conclusion that although it is to have  oversight of continuous evaluation, it has not incorporated it into its  oversight program or developed a plan to ensure agencies implement it.  In its response, ODNI identified its intention to take certain actions and  future mechanisms that could position it to monitor continuous evaluation.  Specifically, ODNI stated that continuous evaluation metrics will be  collected and analyzed when the initial phase of continuous evaluation  implementation ends on September 30, 2017. Additionally, ODNI stated  that it will leverage a pending OMB budget data request and that its  Security Executive Agent National Assessments Program will be  responsible for analysis and oversight of agency implementation and  operation of continuous evaluation.", "However, as we note in the report, ODNI has not developed and  distributed plans to monitor or assess the performance of continuous  evaluation across the executive branch, including for the first phase of  implementation. As we note in our report, ODNI officials stated that ODNI  did not oversee the pilots that were conducted by DOD and State, as they  were performed at the discretion of those agencies. State officials noted  that while they have shared lessons learned on their continuous  evaluation pilot, they were not tasked to do so. While ODNI stated in its  written comments that it has specific expertise in researching, measuring,  analyzing, and monitoring personnel security performance across the  executive branch, it has not yet demonstrated these actions with regard to  continuous evaluation. For example, DOD\u2014the executive branch agency  with the majority of security clearance holders\u2014has conducted research  on continuous evaluation since 2001, piloted its program since October  2014, and plans to increase the number of personnel enrolled in the  program to 1 million by the end of calendar year 2017. However, ODNI, in  the capacity as the Security Executive Agent, has not overseen DOD\u2019s  pilot.", "Moreover, as discussed in the report, as of August 2017\u201410 months into  fiscal year 2017\u2014ODNI has not yet developed and distributed to  executive branch agencies continuous evaluation performance measures.  At the end of our review, in August 2017, ODNI officials stated that they  have developed a draft list of metrics for continuous evaluation for fiscal  year 2017 and that once the metrics are finalized, they will issue guidance  to executive branch agencies requesting them to report these metrics to  ODNI. While metrics can help to establish a baseline and inform aspects  of a program\u2019s status\u2014and ODNI\u2019s development of draft metrics is a  positive step\u2014performance measures are linked to a goal and inform how  well an agency is doing against that goal. As ODNI has not developed  and distributed performance measures that are clear, quantifiable, and  objective, and that are linked to measurable goals prior to initiating, or  earlier in the first phase of implementation, executive branch agencies  may not be positioned to collect and report these metrics at the end of the  fiscal year. Additionally, as discussed in the report, according to ODNI  officials, while they would like to incorporate continuous evaluation into  their Security Executive Agent National Assessments Program, it is not  currently part of the program. While ODNI has identified steps that could  position it to monitor continuous evaluation in the future, it has not yet  implemented mechanisms to monitor and measure program performance.", "Fourth, ODNI did not agree with our conclusions that it is not well- positioned to ensure the success and effectiveness of the continuous  evaluation initiative, and that it does not know if it is meeting the critical  purpose of filling the information gap between investigative cycles to  identify risks to national security. However, in its written comments, ODNI  stated that successful implementation of continuous evaluation across the  executive branch requires formal Security Executive Agent policy  guidance, implementation and technical guidance and milestones,  performance measures, and a monitoring program, which we  recommended in the report. ODNI states that it is well-postured to  achieve these goals, and refers to its intention to apply Security Executive  Agent National Assessments Program best practices as a mechanism to  use to monitor and ensure compliance. Although this action could be a  step in better positioning ODNI as continuous evaluation implementation  further proceeds, as noted above and in our report, ODNI has not yet  finalized, distributed, and implemented these and other actions to ensure  that it is currently positioned to ensure success, even while it has initiated  the first phase of continuous evaluation implementation.", "As noted in our report, although ODNI has taken steps to implement  continuous evaluation in a phased approach, executive branch efforts to  implement continuous evaluation have been a long-standing component  of overall security clearance reform. The actions ODNI intends to take as  it further implements continuous evaluation, as well as the mechanisms it  identified, may better position it and the implementing agencies for  success. However, given the challenges that the executive branch has  faced in implementing continuous evaluation thus far and the continued  delays it has faced, without a fully defined program in place, we believe  that our conclusions remain valid.", "Finally, in its written comments, ODNI suggested a revision to our sixth  recommendation. Specifically, ODNI suggested adding an explicit  timeframe for completing the action. We believe that ODNI is best  positioned to set an appropriate timeframe for completion based on its  familiarity with the progress of the program and, as such, did not  incorporate this change in our report. We agree with ODNI that  establishing such a timeframe is a positive step.", "We are sending copies of this report to the appropriate congressional  committees, the Director of National Intelligence, the Secretary of  Defense, the Director of OMB, the Secretary of State, the Secretary of  Homeland Security, the Director of OPM, the Director of NBIB, the  Attorney General, the Director of the Federal Bureau of Intelligence, and  the Director of the Bureau of Alcohol, Tobacco, Firearms, and Explosives.  In addition, this report will also be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your members of your staff have any questions regarding this  report, please contact me at (202) 512-3604 or farrellb@gao.gov. GAO  staff who made significant contributions to this report are listed in  appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Office of the Director of National Intelligence", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kimberly C. Seay (Assistant  Director), Chris Businsky, Molly Callaghan, Jenny Chanley, Dawn  Godfrey, Saida Hussain, James Krustapentus, Michael Shaughnessy,  Rachel R. Stoiko, John Van Schaik, Cheryl Weissman, and Jina Yu made  significant contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Personnel Security Clearances: Funding Estimates and Government- Wide Metrics Are Needed to Implement Long-Standing Reform Efforts.  GAO-15-179SU. Washington, D.C.: April 23, 2015.", "Personnel Security Clearances: Additional Guidance and Oversight  Needed at DHS and DOD to Ensure Consistent Application of Revocation  Process. GAO-14-640. Washington, D.C.: September 8, 2014.", "Personnel Security Clearances: Actions Needed to Ensure Quality of  Background Investigations and Resulting Decisions. GAO-14-138T.  Washington, D.C.: February 11, 2014.", "Personnel Security Clearances: Opportunities Exist to Improve Quality  Throughout the Process. GAO-14-186T. Washington, D.C.: November  13, 2013.", "Personnel Security Clearances: Full Development and Implementation of  Metrics Needed to Measure Quality of Process. GAO-14-157T.  Washington, D.C.: October 31, 2013.", "Personnel Security Clearances: Further Actions Needed to Improve the  Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June  20, 2013.", "Managing for Results: Agencies Should More Fully Develop Priority Goals  under the GPRA Modernization Act. GAO-13-174. Washington, D.C.:  April 19, 2013.", "Security Clearances: Agencies Need Clearly Defined Policy for  Determining Civilian Position Requirements. GAO-12-800. Washington,  D.C.: July 12, 2012.", "Personnel Security Clearances: Continuing Leadership and Attention Can  Enhance Momentum Gained from Reform Effort. GAO-12-815T.  Washington, D.C.: June 21, 2012.  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue.  GAO-12-342SP. Washington, D.C.: February 28, 2012.", "Background Investigations: Office of Personnel Management Needs to  Improve Transparency of Its Pricing and Seek Cost Savings.  GAO-12-197. Washington, D.C.: February 28, 2012.", "GAO\u2019s 2011 High-Risk Series: An Update. GAO-11-394T. Washington,  D.C.: February 17, 2011.", "High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February  16, 2011.", "Personnel Security Clearances: Overall Progress Has Been Made to  Reform the Governmentwide Security Clearance Process. GAO-11-232T.  Washington, D.C.: December 1, 2010.", "Personnel Security Clearances: Progress Has Been Made to Improve  Timeliness but Continued Oversight Is Needed to Sustain Momentum.  GAO-11-65. Washington, D.C.: November 19, 2010.", "DOD Personnel Clearances: Preliminary Observations on DOD\u2019s  Progress on Addressing Timeliness and Quality Issues. GAO-11-185T.  Washington, D.C.: November 16, 2010.", "Personnel Security Clearances: An Outcome-Focused Strategy and  Comprehensive Reporting of Timeliness and Quality Would Provide  Greater Visibility over the Clearance Process. GAO-10-117T.  Washington, D.C.: October 1, 2009.", "Personnel Security Clearances: Progress Has Been Made to Reduce  Delays but Further Actions Are Needed to Enhance Quality and Sustain  Reform Efforts. GAO-09-684T. Washington, D.C.: September 15, 2009.", "Personnel Security Clearances: An Outcome-Focused Strategy Is  Needed to Guide Implementation of the Reformed Clearance Process.  GAO-09-488. Washington, D.C.: May 19, 2009.", "DOD Personnel Clearances: Comprehensive Timeliness Reporting,  Complete Clearance Documentation, and Quality Measures Are Needed  to Further Improve the Clearance Process. GAO-09-400. Washington,  D.C.: May 19, 2009.", "High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January  2009.", "Personnel Security Clearances: Preliminary Observations on Joint  Reform Efforts to Improve the Governmentwide Clearance Eligibility  Process. GAO-08-1050T. Washington, D.C.: July 30, 2008.", "Personnel Clearances: Key Factors for Reforming the Security Clearance  Process. GAO-08-776T. Washington, D.C.: May 22, 2008.", "Employee Security: Implementation of Identification Cards and DOD\u2019s  Personnel Security Clearance Program Need Improvement.  GAO-08-551T. Washington, D.C.: April 9, 2008.", "Personnel Clearances: Key Factors to Consider in Efforts to Reform  Security Clearance Processes. GAO-08-352T. Washington, D.C.:  February 27, 2008.", "DOD Personnel Clearances: DOD Faces Multiple Challenges in Its Efforts  to Improve Clearance Processes for Industry Personnel. GAO-08-470T.  Washington, D.C.: February 13, 2008.", "DOD Personnel Clearances: Improved Annual Reporting Would Enable  More Informed Congressional Oversight. GAO-08-350. Washington, D.C.:  February 13, 2008.", "DOD Personnel Clearances: Delays and Inadequate Documentation  Found for Industry Personnel. GAO-07-842T. Washington, D.C.: May 17,  2007.", "High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January  2007.", "DOD Personnel Clearances: Additional OMB Actions Are Needed to  Improve the Security Clearance Process. GAO-06-1070. Washington,  D.C.: September 28, 2006.", "DOD Personnel Clearances: Some Progress Has Been Made but Hurdles  Remain to Overcome the Challenges That Led to GAO\u2019s High-Risk  Designation. GAO-05-842T. Washington, D.C.: June 28, 2005.", "High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January  2005."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-38", "url": "https://www.gao.gov/products/GAO-19-38", "title": "Department of Housing and Urban Development: Better Guidance and Performance Measures Would Help Strengthen Enforcement Efforts", "published_date": "2018-10-30T00:00:00", "released_date": "2018-10-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HUD established DEC in 1998 to consolidate enforcement functions. In fiscal year 2017, DEC received about 2,800 referrals from program offices for oversight of and enforcement actions against property owners, public housing agencies, and state and local grantees that do not comply with requirements.", "The Joint Explanatory Statement accompanying the Consolidated Appropriations Act, 2017, included a provision for GAO to assess DEC's effectiveness addressing noncompliance. GAO examined (1) the processes selected program offices have in place to make referrals, (2) how DEC assesses its performance, and (3) challenges that may affect the ability of DEC to achieve its mission. GAO reviewed agreements and referral data between DEC and three of the nine HUD program offices that made referrals to DEC from fiscal years 2014 to 2017 (accounting for 73 percent of the total referrals during that period), and interviewed HUD staff in headquarters and field offices."]}, {"section_title": "What GAO Found", "paragraphs": ["The three program offices of the Department of Housing and Urban Development (HUD) that GAO examined have a process in place for referring cases of potential noncompliance to the Departmental Enforcement Center (DEC), but two of the offices do not provide their staff with specific guidance on when to make referrals. The Office of Multifamily Housing makes referrals to DEC based on defined thresholds for noncompliance, such as for properties that do not pass physical inspections. In contrast, the Offices of Public and Indian Housing (PIH) and Community Planning and Development (CPD) have broad guidelines but not specific thresholds for when to refer an entity to DEC. These two offices do not provide field staff with specific guidance to help determine which housing agencies or grantees to refer to DEC for possible enforcement action. As a result, the offices cannot ensure that decisions on whether to make referrals are made on a well-supported and consistent basis, potentially limiting DEC's effectiveness in fulfilling its mission of providing independent oversight of HUD's programs. In addition, PIH and CPD have targets for how many annual referrals the program office will make to DEC, but the targets are not based on program risk. According to federal internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives. Without a target number of referrals based on program risk, PIH and CPD cannot be confident that the number of cases referred to DEC is appropriate and that DEC resources are being used efficiently.", "DEC tracks some performance measures, but it largely measures outputs, such as number of work assignments completed, rather than outcomes, such as financial performance improvements resulting from its work, that would help assess the impact of its activities. DEC also does not track the status of recommendations it makes to program offices or measure indicators of its timeliness in completing its reviews for the referrals it receives. In addition, GAO found that DEC staff did not consistently record two key data elements (including the corrective action taken) in the spreadsheet used to track referrals. Improving DEC's performance measurement system and data recording would be consistent with federal internal control standards and allow DEC to better assess its effectiveness, ensure accountability, and identify potential improvements.", "DEC has experienced various information technology challenges that have affected its ability to carry out its mission. For example, DEC's current system is not designed to allow staff to easily determine the basis for certain referrals or identify and analyze trends in referrals over multiple years. In addition, DEC has experienced continuing outages and breaks in service. HUD has developed plans for a replacement system, but funding constraints have delayed the implementation of the new system. DEC staff also noted that the organizational location of DEC within the Office of General Counsel was a challenge to carrying out its mission because it limited DEC's ability to hold program offices accountable for corrections. HUD disagreed and also stated that the department has no plans to relocate DEC. Based on GAO's review, other factors, such as the lack of guidance for making referrals (discussed above), may better explain why DEC may not be utilized more effectively."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making eight recommendations to HUD related to DEC, including for staff guidance on when to make referrals; targets for the number of DEC referrals based on program risk; outcome measures to track performance; and controls to ensure consistent data recording. HUD agreed with five of the eight recommendations, noting that setting referral targets was inconsistent with basing them on program risk. GAO maintains that setting referral targets can help ensure that program offices make referrals to DEC."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Housing and Urban Development (HUD) administers  a wide variety of programs that help households obtain quality, affordable  housing and that seek to build and strengthen communities. Each year,  these programs provide rental assistance to millions of lower-income  households, mortgage insurance to hundreds of thousands of home  buyers, and community development grants to hundreds of state and  local governments. In 1997, HUD announced a management reform  initiative, HUD 2020, designed to improve the agency\u2019s performance and  eliminate waste, fraud, and abuse. One of the main reforms was to  implement a new system of assessment, monitoring, and enforcement to  ensure the quality of HUD-assisted housing. HUD established the  Departmental Enforcement Center (DEC) in 1998 to help ensure program  participants\u2019 compliance with HUD program requirements and consolidate  non-civil rights enforcement actions across HUD into a single center.  HUD program offices make referrals of potential noncompliance to DEC  under formal agreements between the parties. In fiscal year 2017, HUD  data shows that DEC received about 2,800 referrals from 9 program  offices.", "The Joint Explanatory Statement accompanying the Consolidated  Appropriations Act, 2017, included a provision for GAO to assess the  effectiveness of DEC in resolving owners\u2019 noncompliance with physical,  financial, and other requirements for public housing and multifamily  housing properties. This report examines (1) the processes that selected  HUD program offices have in place to make referrals to DEC, (2) how  DEC assesses its performance, and (3) challenges that may affect the  ability of DEC to achieve its mission.", "We focused our review on DEC and three HUD program offices:  Community Planning and Development (CPD), Multifamily Housing  (MFH), and Public and Indian Housing (PIH). Collectively, these three  program offices accounted for 73 percent of the total referrals DEC  received from fiscal years 2014 through 2017. To address the first  objective, we reviewed the formal agreements between DEC and CPD,  MFH, and PIH, as well as the guidance these program offices developed  for monitoring multifamily properties, public housing agencies, and  grantees. We compared this guidance against internal control standards  for designing control activities and communicating internally. We  analyzed data from DEC\u2019s system for managing referrals from program  offices (extracted as of March 2018) and a spreadsheet DEC maintains to  track referrals from CPD and PIH (as of March 2018). To assess the  reliability of the data, we performed various tests\u2014including searching for  missing data and dates, and checking for completeness of the data. We  concluded that the data from DEC were sufficiently reliable for purposes  of describing general trends.", "To address the second objective, we reviewed DEC\u2019s performance  measures and other information DEC collects and reports on its  performance. We compared DEC\u2019s practices against federal internal  control standards and leading practices of results-oriented organizations  that we have identified in prior work. To address the third objective, we  reviewed our prior reports and reports from the HUD Office of Inspector  General (OIG) that identified challenges DEC faces in achieving its  mission. We also reviewed internal HUD documents related to these  challenges, including plans for a new information technology system and  a proposal to relocate DEC. For all of the objectives, we interviewed HUD  headquarters staff from DEC, HUD Office of General Counsel (OGC) and  OIG, and program office officials at HUD headquarters and 10 field  locations. Appendix I contains more details about our scope and  methodology.", "We conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["HUD established DEC in 1998 to consolidate enforcement activities of  PIH, CPD, the Office of Fair Housing and Equal Opportunity (for non-civil  rights violations), and MFH into one new organization. The HUD 2020  management reform plan envisioned that DEC would take enforcement  action against: (1) public housing agencies that do not pass annual  assessments; (2) owners of private, HUD-assisted housing that do not  pass physical or financial audit inspections; and (3) local and state  governments and non-profit organizations that do not comply with the  requirements of grants they received from CPD and the Office of Fair  Housing and Equal Opportunity (for non-civil rights violations). In  addition, as part of the plan, HUD created the Real Estate Assessment  Center (REAC) to help monitor public housing and HUD-insured  multifamily housing projects by providing independent assessments of the  physical quality and financial condition of public housing and multifamily  developments.", "DEC\u2019s current mission is to provide independent oversight of the  administration of HUD programs and its external partners. According to  HUD, DEC\u2019s primary goal is to bring owners to full compliance so that  there is no compromise in the quality of HUD-assisted housing. In  instances where owners do not bring properties up to standard, and  where physical and financial deficiencies persist, DEC can take  appropriate enforcement action. This includes administrative sanctions,  such as civil money penalties, suspension or debarment, as well as  possible referral to HUD OIG when criminal activity is suspected, or to the  Department of Justice for civil action. DEC also conducts more targeted  oversight reviews for some program offices. These reviews are intended  to provide program offices with an independent means to analyze and  evaluate the efficiency or vulnerability of their programs and operations.", "DEC has staff in HUD headquarters and five field offices. In general,  headquarters staff develops policy and coordinates the reviews of the  referrals DEC receives from the HUD program offices while field office  staff conducts the reviews. DEC works primarily with MFH and conducts  more targeted oversight reviews for PIH and CPD. (See Appendix II for a  breakdown of DEC referrals by program office and the state where the  property is located.) These program offices have staff in headquarters  and field offices, which are organized into 10 regions. There is at least  one field office or regional office in each state, and the number of field  offices varies by region. PIH further combines these regions into six  networks.", "These program offices oversee different areas within HUD:", "MFH oversees the Federal Housing Administration\u2019s multifamily  mortgage insurance on loan originations, manages HUD\u2019s portfolio of  multifamily housing, provides rental assistance, and helps preserve  affordable housing. Additionally, MFH administers project-based  rental assistance, supportive housing for the elderly, and programs for  persons with disabilities. Collectively, the properties MFH oversees  provided affordable rental housing to more than 1.2 million low- income households in 2017.", "PIH helps low-income families through a number of programs. PIH  provides assistance to state and local public housing agencies that  generally own and administer units for eligible tenants. The Housing  Choice Voucher program provides tenant-based rental assistance that  eligible individuals and families can use to rent houses or apartments  in the private housing market. Native American programs provide  block grants and loan guarantees to tribal entities for housing  development and assistance. PIH is supporting 2.2 million vouchers  and 1.1 million public housing units in 2018.", "CPD provides financial and technical assistance to states and  localities through the Community Development Block Grant and  HOME Investment Partnerships programs\u2014the federal government\u2019s  largest block grant programs for community development and  affordable housing production, respectively. CPD also leads a number  of HUD\u2019s efforts to combat homelessness. Additionally, Congress  appropriated about $36 billion in new Community Development Block  Grant-Disaster Recovery funds in fiscal years 2017 and 2018 to states  and local governments that experienced major disasters in 2015,  2016 and 2017. CPD oversaw more than 37,000 grants in 2017.", "DEC uses an internal database to manage the referrals it receives from  HUD program offices. DEC\u2019s system is designed to capture various data,  including the date DEC received the referral, name of the property owner  or grantee being referred, cause of the referral, status of the referral, final  action to close the referral, and corrections made related to the referral,  among other things."], "subsections": []}, {"section_title": "Two of Three HUD Program Offices We Examined Lack Guidance for Making Referrals and Targets Based on Program Risk", "paragraphs": ["DEC and the three HUD program offices we examined have agreements  in place that generally describe the process the offices follow to make  referrals to DEC and the responsibilities of the parties. However, two of  the three program offices (PIH and CPD) do not provide their staff with  specific guidance for making referrals, and the target number of referrals  these two offices have established to send to DEC does not address the  risk of noncompliance."], "subsections": [{"section_title": "Multifamily Housing Office Makes Referrals to DEC Based on Defined Thresholds", "paragraphs": ["MFH makes automatic and elective referrals to DEC based on specific  thresholds for program noncompliance defined in its agreement with  DEC. MFH properties are automatically referred to DEC if: (1) the  property scores below a certain threshold on a REAC physical inspection;  (2) the owner fails to submit audited financial statements to HUD within  60 days following the end of the owner\u2019s fiscal year; or (3) REAC\u2019s  automated compliance review of the property\u2019s financial statements  identifies unauthorized uses of project funds greater than an agreed-to  threshold (see figure 1).", "MFH also may make an elective referral to DEC based in part on specific  situations of program noncompliance defined in their agreement, such as  the failure to comply with program regulations or use agreements. MFH  officials told us that they make these referrals on a case-by-case basis if  they believe that DEC\u2019s expertise could help resolve the concerns. In  addition, MFH officials distributed a 2017 DEC notice that clarified the  procedures for making an elective referral to DEC. Whereas automatic  referrals are system-generated, MFH can use its discretion whether to  make an elective referral to DEC.", "From fiscal years 2014 through 2017, the total number of referrals DEC  received on MFH properties increased by 23 percent. However, as seen  in figure 2, the composition of those referrals varied. Referrals related to  failure to submit timely financial statements increased by about 59  percent, while referrals related to other instances of financial  noncompliance decreased by about 6 percent. Referrals for physical  noncompliance, while relatively few overall, increased by 113 percent.", "MFH officials told us that the increase in referrals for failure to file timely  financial statements was due, in part, to new program participants from  2011 to 2013 who did not understand the requirements. In addition,  according to MFH officials, MFH changed certain thresholds of financial  noncompliance from automatic to elective referrals in 2013, which officials  believe resulted in fewer referrals for those types of financial  noncompliance.", "MFH officials also noted that the increase in physical noncompliance  referrals in fiscal year 2016 likely resulted from the informal  encouragement given to field offices to make more elective referrals. In  addition, during this period HUD\u2019s inspection process came under  additional scrutiny due to concerns about a multifamily property in Florida.  The property had received a passing REAC inspection score in August  2015 but city code inspectors subsequently found multiple and serious  deficiencies. The case attracted attention from the media and Congress  and culminated in a Senate hearing in September 2016. Subsequently  HUD reviewed the integrity of the REAC inspection and DEC referral  processes.", "DEC officials told us that one reason there are fewer referrals for physical  noncompliance compared to financial noncompliance is that a relatively  small number of properties reach the threshold for an automatic referral  based on physical noncompliance (inspection score less than or equal to  30 out of 100). According to HUD data, REAC conducted approximately  8,700 physical inspections in 2017. Of these inspections, our analysis of  DEC data showed that DEC received 64 referrals (0.7 percent of the  inspections conducted) for physical noncompliance."], "subsections": []}, {"section_title": "PIH and CPD Program Offices Lack Specific Guidance for Making Referrals", "paragraphs": ["PIH and CPD do not provide specific guidance to staff on when a referral  should be made to DEC. This stands in contrast to MFH, whose  agreement with DEC includes a more detailed discussion of what  problems should result in a risk-based referral.", "PIH. A PIH official told us that they periodically send an email to field  offices requesting potential candidates for referrals to DEC, and that the  email cites factors that might warrant such referrals\u2014such as potential  violations of statute, regulation, or agreement. However, beyond that,  there is no guidance to help field staff decide when to make a referral. In  addition, PIH does not provide direction to field offices on how to use the  results of their quarterly risk assessment to identify high-risk PHAs for  potential DEC referrals. According to PIH officials, PIH has not issued  more detailed guidance because it did not want to be too prescriptive in  telling field office staff when to refer a public housing agency to DEC, as a  DEC referral may not always be appropriate.", "CPD. An official from a CPD field office told us that they may refer a  grantee to DEC for an oversight review\u2014for example, if they identify a  complex financial issue requiring an in-depth financial investigation  beyond the capacity of the field office. However, beyond that, neither  DEC nor CPD have developed guidance to help field offices determine  when to refer a grantee to DEC. In addition, CPD does not provide  direction to field offices on how to use the results of their risk-based  assessment of grantees to identify potential DEC referrals. CPD officials  told us that they do not provide guidance because they believe that their  current approach where field offices make referrals to DEC on a case-by- case basis is better and more effective.", "As shown in figure 3, in recent years, the number of referrals has declined  slightly for PIH and varied for CPD. DEC has agreed with PIH and CPD  on a target number of elective referrals they should aim to make to DEC  each fiscal year. However, neither program office met their targets for  referrals to DEC in fiscal years 2016 and 2017: PIH made 25 and 12  referrals, respectively, but had an annual target of 40, while CPD referred  6 each year but had a target of 10. A number of factors may help explain  the decline in referrals and failure to meet targets. For example, PIH  officials told us that a new requirement that PIH field offices make every  attempt to satisfy oversight review recommendations may have resulted  in hesitation to make referrals among some field staff.", "However, the lack of formal guidance for field staff may also play a role in  the number of referrals made. According to officials from two CPD field  offices, many field offices do not understand the role of DEC or the  assistance it can provide, and officials from one field office told us that  providing formal guidance would be helpful in this regard. Our analysis  found that half of the CPD field offices had not made a referral to DEC  during the previous two fiscal years and, according to PIH officials, the  number of PIH referrals varied for reasons not related to noncompliance  risks. The 2016 HUD OIG report noted that when program field offices  requested DEC services, they did so largely because of personal  relationships and trust between DEC and some field office managers, an  observation reiterated by officials from one field office we interviewed.", "According to the Office of Management and Budget, a \u2018\u2018guidance  document\u2019\u2019 is an agency statement of general applicability and future  effect, other than a regulatory action, that sets forth a policy on a  statutory, regulatory or technical issue or an interpretation of a statutory  or regulatory issue. The office notes that guidance documents, used  properly, can channel the discretion of agency employees, increase  efficiency, and enhance fairness by ensuring equal treatment of similarly  situated parties. In addition, federal internal control standards state that  agencies should design control activities to achieve objectives and  respond to risks, such as by documenting the responsibilities for these  activities through policies and procedures. Because two of the program  offices (PIH and CPD) we examined have not developed specific  guidance for making referrals for oversight reviews, these offices cannot  ensure that field staff are identifying and making referrals on a well- supported, risk-based, and consistent basis, and this may limit DEC\u2019s  effectiveness in fulfilling its mission of providing independent oversight of  HUD\u2019s programs. Such additional guidance could include information on  how the field offices should incorporate the results from their risk  assessments, more detailed criteria on when the field office should make  a referral, and examples of potential noncompliance that could be  referred."], "subsections": []}, {"section_title": "Target Number of Referrals for Two HUD Program Offices Are Not Based on Program Risk", "paragraphs": ["The target number of referrals for two program offices, PIH and CPD,  appears to have been selected somewhat arbitrarily, rather than based on  the risks to the programs. As noted earlier, DEC, PIH and CPD have  agreed to set targets annually for the number of elective referrals they will  make. PIH\u2019s quarterly target of 10 public housing agency referrals  represents less than 2 percent of the total number of agencies PIH  designates as very high-risk and high risk each quarter. In addition,  CPD\u2019s target of 10 referrals per year represents about .03 percent of the  grantees overseen by CPD and about 1 percent of the grantees  monitored by CPD each year.", "However, PIH and CPD officials could not explain the basis for selecting  these targets, nor is it clear how these targets are related to the overall  risk these program offices face. Both program offices\u2019 agreements with  DEC state that they will review the agreements each year. PIH officials  said this review typically has included a general discussion of the  appropriate number of referrals to set as the target. DEC officials told us  that future reviews will take a more risk-based approach to selecting that  number, but they could not tell us when this would occur. In addition,  according to a HUD official, program offices such as CPD are reviewing  their processes for managing risk, which could impact the target number  of referrals to DEC needed for them to adequately manage their risk.", "According to federal internal control standards, management should  identify, analyze, and respond to risks related to achieving the defined  objectives, and management should design control activities in response  to the entity\u2019s objectives and risks to achieve an effective internal control  system. Without a target number of referrals based on the risks to the  programs, PIH and CPD offices cannot be confident that DEC resources  are being used most efficiently to address the risks of noncompliance by  housing agencies and grantees."], "subsections": []}]}, {"section_title": "DEC Lacks Measures Needed to Fully Assess Its Performance", "paragraphs": ["While DEC currently tracks some measures related to its performance, its  performance measurement system is lacking in key respects that limit  DEC\u2019s ability to fully assess its performance. DEC\u2019s performance  measures include the number of work assignments completed, reduction  in number of aged referrals (2 or more years old), and the number of  families impacted by its enforcement activities. DEC officials told us that  they also track other measures, such as the dollar amounts of recoveries, and the numbers of suspensions and debarments. These measures are  contextual indicators\u2014measures intended to provide a broader  perspective on the conditions that may influence an agency\u2019s ability to  achieve its performance goals. As shown in table 1, HUD data shows  that for these contextual indicators DEC has recovered millions of dollars  in inappropriately used HUD program funds and suspended or debarred  some individuals. HUD data shows that DEC generally exceeded its  targets for the performance measures.", "Federal internal control standards state that agency management should  define objectives in measurable terms so that performance toward those  objectives can be assessed. Consistent with those standards, we  identified several challenges with DEC\u2019s system of performance  measurement."], "subsections": [{"section_title": "Lack of Outcome Measures", "paragraphs": ["DEC\u2019s performance measures do not include outcome measures, which  track the results of products and services. Instead, the performance  measures track outputs, which are the direct products and services  delivered by a program. Prior work and guidance that we have issued  stress that performance measurement should evaluate outcomes related  to program activities to judge program effectiveness. Previously, DEC  tracked some outcome measures, such as the increase in the percentage  of residents living in acceptable insured or assisted multifamily housing as  a result of civil or administrative enforcement actions. However, DEC no  longer tracks those measures, and officials were unable to explain why  they stopped tracking them. Similarly, the 2014 agreement between DEC  and PIH included examples of outcome measures for program offices\u2013 such as financial performance improvements and early detection or  prevention of fraud\u2014but these measures are not in the current  agreement.", "Measuring outcomes can help assess a program\u2019s activities and  operations, identify areas that need improvement, and ensure  accountability for results. DEC officials told us that outcome measurement  is challenging because it can be difficult to establish a direct correlation  with DEC\u2019s work. We attempted to independently examine the outcome of DEC\u2019s work. Specifically, we tried to measure the extent to which  referrals to DEC resulted in suspensions or debarments of multifamily  owners, but, in general, DEC\u2019s data did not readily allow for this type of  assessment. Outcome measures such as timeliness and monetary  outcomes can still be used to capture essential program information and  help assess program effectiveness. By not measuring and reporting on  outcomes, DEC cannot fully assess the effectiveness or impact of its  activities, or determine where improvement is needed."], "subsections": []}, {"section_title": "Lack of Recommendation Tracking", "paragraphs": ["DEC does not track the status of its recommendations. DEC\u2019s oversight  reviews sometimes result in recommendations to program offices to  ensure program compliance with regulatory and policy requirements;  streamline operations; improve customer service; and reduce program  vulnerabilities to fraud, waste, abuse, or mismanagement. According to  PIH and CPD\u2019s agreements, the program offices will make every attempt  to satisfy the recommendations, but the program offices are not required  to implement them. However, according to DEC officials, DEC does not  gather information on the status of its recommendations or assess  program offices\u2019 progress in implementing them. OGC officials told us that  they were concerned about the burden that would be placed on program  staff for providing such information, but PIH and CPD officials told us it  would not require much additional work. We have previously reported that  successful performance measures demonstrate results and provide  useful information for decision makers. Without tracking the status of its  recommendations and the extent to which program offices are  implementing its recommendations, DEC is limited in its ability to assess  its effectiveness in improving program operations, such as better program  compliance."], "subsections": []}, {"section_title": "Lack of Measure of Timeliness", "paragraphs": ["DEC does not have a performance measure to assess the timeliness of  its reviews for the referrals it receives. DEC does not measure how much  time it takes to complete a referral from MFH, PIH, or CPD. DEC\u2019s  guidance and its agreements with CPD and PIH state that DEC will  complete oversight reviews and issue a final report to program offices  within 90 business days of the referral. These reviews are intended to be  completed within this timeframe so that CPD and PIH program offices will have prompt feedback to address any areas of concern. According to  HUD officials, DEC tracks the timeliness of its oversight work. However,  DEC has not created a performance measure to track the extent that it is  meeting its goals. In addition, DEC has no target timeframe for MFH  referrals because, according to DEC officials, these referrals require  varying strategies for fact gathering, analysis, and determining a course  of action. Our analysis of HUD data showed that from fiscal years  2014-2017, DEC took an average of 168 days to complete its review after  receiving a referral from MFH for failure to file financial statements, and  an average of 254 days to complete its review for referrals related to  financial noncompliance. We have previously reported that one attribute  of a successful performance measure was whether the measure covered  a government-wide priority, such as timeliness. Because it does not  have a measure related to its timeliness in completing its reviews nor  report on that information, DEC cannot ensure accountability or evaluate  its efficiency for completing the reviews."], "subsections": []}, {"section_title": "Lack of Consistent Recording of Dates and Corrective Actions Taken", "paragraphs": ["DEC did not consistently record two pieces of information that could be  relevant in assessing its performance\u2014date of referral and corrective  action taken. We analyzed an internal spreadsheet DEC uses to track the  referrals it received from CPD and PIH to conduct oversight reviews of  grantees and housing agencies. DEC did not record the date that the  referral was assigned a DEC lead analyst (the point DEC begins tracking  the referrals) or the date DEC signed the final report for 36 percent of the  CPD referrals and 20 percent of the PIH referrals DEC completed from  fiscal years 2015-2017. Consequently, we could not reliably evaluate  DEC\u2019s average timeframes for completing an oversight review referral.", "In addition, DEC did not consistently record information on the corrective  actions taken by DEC or MFH following a DEC review. DEC\u2019s MFH  referral-tracking database includes an \u201cOutcomes\u201d module with a  \u201cCorrections Made\u201d field where DEC analysts can choose a description of  the corrections made as a result of the review by either MFH or by the  owner of the property, such as filing an annual financial statement.  However, based on our review of this database, DEC analysts are not  regularly using the \u201cCorrections Made\u201d field.", "According to DEC officials, the inconsistent recording of dates and  corrective actions was likely due to human error. This may suggest the  lack of a process or controls to ensure accurate and complete recording  of this information. Federal internal control standards state that an  agency\u2019s managers should use quality information, such as the accurate  and timely recording of transactions, to achieve the agency\u2019s objectives  and manage risk. Without such controls, DEC will continue to have  unreliable data to measure its timeliness in completing reviews and will  not be able to reliably track the status of its recommendations to MFH and  hold that office accountable for their implementation."], "subsections": []}]}, {"section_title": "Information Technology Challenges Have Affected DEC\u2019s Ability to Achieve Its Mission", "paragraphs": ["Information technology challenges have affected the ability of DEC to  achieve its mission. Although DEC has experienced staffing declines over  time, there is disagreement about the extent to which these declines have  impacted DEC\u2019s ability to achieve its mission. Further, disagreement  exists over DEC\u2019s placement within HUD and the impact on DEC\u2019s ability  to achieve its mission."], "subsections": [{"section_title": "Information Technology", "paragraphs": ["DEC has experienced various information technology challenges that  have affected its ability to achieve its mission. For example, the system  does not allow DEC to easily determine the basis for a financial referral it  receives from REAC on MFH properties. Instead, according to HUD, to  determine the issues that triggered the referral, DEC staff must review  each property\u2019s financial statements\u2014a labor-intensive process. In  addition, DEC\u2019s information technology system is designed to share  information among staff but not to analyze or track information. Its referral  data are stored in databases that generally cover one fiscal year each,  according to OGC officials, which makes it challenging to identify trends.  Further, DEC officials told us that the system has experienced continuing  outages and breaks in service.", "HUD has acknowledged that DEC needs more robust information  technology to carry out its enforcement and tracking functions. The HUD  Enforcement Management System is part of the department\u2019s efforts to  streamline, consolidate, and automate its enforcement business  processes. According to HUD, the system will consolidate six  enforcement-related systems into one and automate the monitoring and  compliance review processes for several offices within HUD. Officials said  this will help DEC manage its workflow and reviews and enable it to more  easily track the focus of a review and any monetary findings. OGC  officials noted that the department implemented the first phase of the  HUD Enforcement Management System in December 2015, initially  focusing on HUD\u2019s Office of Fair Housing. However, HUD\u2019s development  contract expired in March 2017. Due to funding constraints, as of June  2018, HUD had not awarded a new contract that would incorporate DEC,  and such funding is not expected to be allocated until at least fiscal year  2020, according to OGC officials."], "subsections": []}, {"section_title": "Staff Resources", "paragraphs": ["Although DEC has experienced staffing declines over time, disagreement  exists within HUD about the impact of these staffing declines on DEC\u2019s  ability to achieve its mission. DEC\u2019s staff level in fiscal year 2017 (an  estimated 95 full-time equivalents) represented its lowest staff level since  fiscal year 1999. HUD OIG reported in 2016 that limits on DEC  resources resulted in lost opportunities to improve program effectiveness  and strengthen conditions that discouraged waste, fraud, and abuse.  The report also noted that these limits had prevented DEC from extending  comprehensive enforcement activities to all program offices, which had  reduced its effectiveness. OIG\u2019s report further noted that DEC said it  would need additional staff to perform financial analysis and enforcement  if DEC were to expand its efforts with PIH and CPD. OIG recommended  that OGC provide DEC with the resources and support to strengthen  enforcement across HUD programs.", "HUD disagreed with the OIG\u2019s conclusion that staffing declines limited  DEC\u2019s ability to achieve its mission. HUD noted that DEC\u2019s decrease in  workload over time mitigated the effect of reduced staffing. In addition,  HUD said that despite its reduced resources, DEC had succeeded in  preventing some individuals from participating in MFH programs through  suspension or debarment, and in encouraging compliance. HUD stated  that DEC had sufficient staffing to handle MFH referrals under current  protocols and serve as HUD\u2019s troubleshooter by conducting oversight  reviews for CPD and PIH. As of August 2018, HUD had not provided the  department\u2019s status of actions taken or planned related to OIG\u2019s  recommendation to the OIG."], "subsections": []}, {"section_title": "Organizational Structure", "paragraphs": ["Disagreement also exists regarding the placement of DEC within HUD. At  its creation in 1998, DEC was located within HUD\u2019s Office of the Deputy  Secretary, but in 2002 it was moved to OGC. HUD OIG and DEC officials  have stated that DEC\u2019s placement within OGC limits DEC\u2019s ability to  achieve its mission. OIG reported in its 2016 report that DEC\u2019s initial  placement within the Deputy Secretary\u2019s office provided DEC with  independent enforcement authority. In addition, DEC officials told us  that DEC\u2019s initial placement highlighted HUD\u2019s commitment to  enforcement and that its current placement limits its authority to oversee  program areas and hold them accountable for corrections.", "In a December 2017 internal paper, DEC proposed returning to the  Deputy Secretary\u2019s office. It noted that DEC\u2019s oversight of programmatic  operations began to decline in 2016, and that PIH referrals to DEC  through December 2017 represented less than one-half of the goal of one  percent of PIH\u2019s inventory. DEC\u2019s paper also noted that a return to the  Deputy Secretary\u2019s office would highlight HUD\u2019s responsibility to develop  and maintain effective internal controls, independent of the program  areas. Finally, DEC stated that its placement within the Deputy  Secretary\u2019s office would provide an opportunity to consolidate the  department\u2019s enterprise risk management functions. According to HUD officials, as of August 2018, the department had no plans to move DEC  and did not request funding for such a move in HUD\u2019s fiscal year 2019  budget.", "In response to the 2016 OIG report, HUD stated that DEC\u2019s current  location within OGC had not affected DEC\u2019s ability to make referrals for  enforcement or initiate suspension or debarment actions. HUD added that  placing DEC within OGC achieved significant efficiencies by consolidating  DEC\u2019s administrative, information technology, and legal functions without  affecting the ability of either office to carry out its mission. OGC officials  told us that DEC\u2019s current placement within OGC is similar to the Federal  Bureau of Investigation\u2019s placement within the Department of Justice.  They also noted that DEC\u2019s enforcement and compliance analysts and  attorneys coordinate enforcement activities and that DEC field office  directors routinely seek legal advice from OGC attorneys. According to  OGC, returning DEC to the Deputy Secretary\u2019s office would have adverse  effects on the administrative efficiencies achieved.", "It is unclear whether DEC\u2019s placement within OGC has adversely affected  DEC\u2019s ability to fulfill its mission. We asked DEC staff for documentation  that would support a move to the Deputy Secretary\u2019s office, but the  information we received did not provide specific examples of how DEC\u2019s  current placement limited its ability to achieve its mission. Furthermore,  as part of their 2017 paper discussing a proposed relocation, DEC  officials did not identify how DEC\u2019s placement in OGC adversely impacted  it. Other factors besides DEC\u2019s current location may explain why DEC  may not be utilized more effectively. For example, we previously identified  findings related to the lack of guidance that might contribute to program  offices\u2019 underutilization of DEC. In addition, as we note above, the  absence of guidance on when program offices should make referrals may  limit DEC\u2019s ability to assess its enforcement efforts. These findings  generally are independent of DEC\u2019s organizational location."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DEC has recovered millions of dollars in inappropriately used HUD  program funds, suspended or debarred some individuals, and helped  strengthen program offices\u2019 monitoring efforts. However, our review  identified opportunities for DEC to better achieve its mission and assess  its impact:", "Guidance. PIH and CPD field office staff use their discretion in  deciding which cases to refer to DEC, but these decisions do not  appear to always be based on well-supported assessments of risk.", "Without specific guidance to help staff direct their decision making,  DEC and the program offices cannot ensure that referrals are made  using a consistent and risk-based approach, limiting DEC\u2019s  effectiveness in fulfilling its mission of providing independent oversight  of HUD\u2019s programs.", "Target number of referrals. The target number of referrals that PIH  and CPD aim to make to DEC has not been chosen based on a risk- based process and it is not clear how these targets related to the  programs\u2019 overall risks. Without a determination of appropriate risk- based target numbers, PIH and CPD cannot ensure that they are  using DEC resources efficiently to address the risks of noncompliance  by housing agencies and grantees.", "Performance measurement. Although DEC reports on some aspects  of its performance, it lacks measures that assess outcomes rather  than outputs and does not report on the timeliness of its reviews or  track program offices\u2019 implementation of its recommendations.  Without improvements in its performance measurement, it will be  difficult for DEC to fully assess and demonstrate its effectiveness,  ensure accountability, and identify and prioritize potential  improvements.", "Data recording. Controls to ensure that analysts consistently record  referral dates and corrective actions taken would give DEC more  reliable data with which to assess its timeliness and the impact of its  enforcement activities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following eight recommendations to HUD:  The Director of the Departmental Enforcement Center and the Assistant  Secretary for Community Planning and Development should develop  written guidance for CPD\u2019s field offices to use when determining whether  to make a referral to the Departmental Enforcement Center.  (Recommendation 1)", "The Director of the Departmental Enforcement Center and the Assistant  Secretary for Public and Indian Housing should develop written guidance  for PIH\u2019s field offices to use when determining whether to make a referral  to the Departmental Enforcement Center. (Recommendation 2)", "The Director of the Departmental Enforcement Center and the Assistant  Secretary for Community Planning and Development should develop  targets for the number of referrals that CPD should make to DEC that are  based on program risk. (Recommendation 3)", "The Director of the Departmental Enforcement Center and the Assistant  Secretary for Public and Indian Housing should develop targets for the  number of referrals that PIH should make to DEC that are based on  program risk. (Recommendation 4)", "The Director of the Departmental Enforcement Center should develop  and implement performance measures that assess the outcomes, or  desired results, of its enforcement activities. (Recommendation 5)", "The Director of the Departmental Enforcement Center should develop  and implement performance measures of its timeliness in completing  oversight reviews. (Recommendation 6)", "The Director of the Departmental Enforcement Center should track the  implementation of the recommendations that it makes to program offices  as a result of its oversight reviews. (Recommendation 7)", "The Director of the Departmental Enforcement Center should develop  controls to ensure that analysts consistently and reliably record dates  related to referral activity, corrective action taken, and other key  information used to determine DEC\u2019s impact. (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HUD for review and comment. HUD  provided written comments that are reprinted in appendix III. HUD  disagreed with three of the eight recommendations and agreed with the  other five. In its general comments, HUD indicated that it planned to use  DEC to address the most egregious violators of HUD\u2019s programs. HUD  also anticipated assessing the current agreements between DEC and  HUD program offices and, where appropriate, revising those agreements  to incorporate current agency goals and priorities, among other things.  HUD further noted that DEC\u2019s work would continue to be a part of HUD\u2019s  agency-wide risk and fraud management mitigation activities.", "HUD disagreed with the third and fourth recommendations that DEC  should work with CPD and PIH to develop targets for the number of  referrals that the program offices should make to DEC that are based on  program risk. In its written comments, HUD said that developing \u201ctargets\u201d  for the number of referrals made to DEC could potentially be inconsistent  with the methodology of basing referrals on program risk and that a single  measure of risk-based referrals would be a more effective strategy. As  discussed in the report, the current target numbers of referrals for the  program offices to make to DEC appear to have been selected somewhat  arbitrarily and the officials could not explain the basis for selecting these  targets. By identifying a target number of referrals based on the  anticipated need for DEC reviews, the program offices can more  efficiently plan the use of their resources. Setting the targets will also  allow DEC and the program offices to better assess whether they are  achieving their goals and objectives, and may encourage program offices  to refer entities to DEC.", "HUD also disagreed with our sixth recommendation that DEC should  develop and implement performance measures that measure its  timeliness in completing reviews, noting that DEC has tracked the  timeliness of its oversight work since 2014. However, as we discuss in the  report, DEC has not included performance measures related to the  timeliness of its reviews, which is separate from tracking the information.  We revised the language in the final report to note that DEC tracks this  information, but has not created a related performance measure.", "HUD agreed with our remaining five recommendations and provided  information about planned steps to implement them. HUD noted in its  response to our first and second recommendations that CPD and PIH  would establish parameters for when a referral will be made to DEC. With  respect to our fifth recommendation, HUD stated that DEC would work  with relevant offices in fiscal year 2019 to develop performance measures  that assess outcomes of enforcement activities and would consult with  federal enforcement agencies to understand how they measure  outcomes. In response to our seventh recommendation, HUD stated that  DEC would make improvements to its information system to track the  implementation of the oversight review recommendations. Finally, HUD  noted that it anticipates incorporating quality control components into  DEC\u2019s data collection efforts to ensure that dates, corrective actions  taken, and other key information are captured consistently and reliably to  address our eighth recommendation.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Housing and Urban Development. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or GarciaDiazD@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in Appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) the processes that selected  Department of Housing and Urban Development (HUD) program offices  have in place to make referrals to the Departmental Enforcement Center  (DEC), (2) how DEC assesses its performance, and (3) challenges that  may affect the ability of DEC to achieve its mission.", "We focused our review on DEC and three HUD program offices:  Community Planning and Development (CPD), Multifamily Housing  (MFH), and Public and Indian Housing (PIH). Collectively, these three  program offices accounted for 73 percent of the total referrals DEC  received from fiscal years 2014 through 2017 (6,724 of the 9,258 total  referrals). To address the first objective, we reviewed DEC\u2019s formal  agreements with CPD, MFH, and PIH to determine the roles and  responsibilities of the parties, any criteria for making referrals, and any  goals on number of reviews. In addition, we reviewed guidance  developed by program offices for monitoring multifamily properties, public  housing agencies, and grantees to determine what, if any, criteria existed  for making referrals to DEC. We also observed demonstrations of the  system DEC uses to manage referrals and the risk assessment tool PIH  uses in its reviews of public housing agencies. We compared the  guidance and the processes for determining the role DEC should play  against federal internal control standards.", "We analyzed data from DEC\u2019s system for managing referrals from  program offices (extracted as of March 2018) and a spreadsheet DEC  maintains to track referrals from CPD and PIH (as of March 2018). We  used the data extract to compute the number and type of referrals DEC  received from the program offices from fiscal years 2014 through 2017.  We interviewed DEC and program office staff about the number of  referrals that program offices made during this time period. To assess the  reliability of the data, we performed various tests\u2014including searching for  missing data and dates, and checking for completeness of the data. We  concluded that the data from DEC were sufficiently reliable for purposes  of describing general trends.", "We interviewed DEC and program office officials at HUD headquarters to  discuss how program offices make referrals to DEC and any guidance or  training DEC or program offices provide regarding the referral process.  We also conducted interviews with staff in each of HUD\u2019s six PIH  networks and in CPD field offices in Atlanta, Georgia; Denver, Colorado;  Fort Worth, Texas; and Los Angeles, California. We selected the Fort  Worth and Los Angeles CPD field offices because they had made  referrals to DEC between fiscal years 2016 and 2017, and selected  Atlanta and Denver because they had not.", "To address the second objective, we reviewed the current and previous  performance measures used by DEC. We compared DEC\u2019s practices  against federal internal control standards and against practices GAO has  previously identified as being associated with agencies that were  successful in measuring their performance. We used the data extract  discussed above to compute the average number of days DEC took to  complete referrals on multifamily properties and the extent that  information was not recorded. We also interviewed DEC and OGC  officials regarding the performance information DEC collects and reports.", "To address the third objective, we reviewed prior reports from GAO and  from the HUD Office of Inspector General that identified and discussed  challenges DEC faces in achieving its mission. We also reviewed  internal HUD documents related to these challenges, including plans for a  new information technology system, historical staff levels, and a proposal  DEC officials created to relocate DEC back to the Deputy Secretary\u2019s  Office. We also interviewed officials from various HUD headquarters and  field offices, HUD\u2019s Office of Inspector General, and DEC about  challenges DEC may face in achieving its mission.", "We conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Location of Entities That Were Referred to the Departmental Enforcement Center, Fiscal Years 2014-2017", "paragraphs": ["From fiscal year 2014 through 2017, the Department of Housing and  Urban Development\u2019s Departmental Enforcement Center received about  8,000 referrals from the agency\u2019s program offices. Table 3 provides  details on the number of referrals by program and state from fiscal years  2014 through 2017."], "subsections": []}, {"section_title": "Appendix III: Comments from Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, GAO staff who made key  contributions to this report include Marshall Hamlett (Assistant Director),  Daniel Newman (Analyst-in-Charge), William R. Chatlos, Laura Gibbons,  John McGrail, Marc Molino, and Tovah Rom."], "subsections": []}]}], "fastfact": ["HUD seeks to help millions of Americans find quality, affordable housing through its rental assistance and other programs.", "Recipients of HUD funding, such as private owners of HUD-assisted housing, must meet regulations and may face inspections. If housing does not pass inspection, HUD employees may refer the case to its Departmental Enforcement Center for enforcement.", "Our review found ways the Center, which has recovered millions of dollars in inappropriately used funds, can better achieve its mission. Our recommendations include", "developing guidance for HUD staff on when to make referrals", "better tracking of Center performance."]}
{"id": "GAO-18-232", "url": "https://www.gao.gov/products/GAO-18-232", "title": "Older Adult Housing: Future Collaborations on Housing and Health Services Should Include Relevant Agencies and Define Outcomes", "published_date": "2018-04-26T00:00:00", "released_date": "2018-04-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to the Census Bureau, by 2030, about 1 in 5 Americans will be 65 and older. This aging of the population presents challenges and opportunities for policymakers and service providers in helping ensure that the older population's needs\u2014including housing and health services\u2014are met. Federal agencies with programs that provide housing assistance to low-income older households include HUD and USDA. Several HHS programs provide those households with health services.", "This report assesses the extent to which the three agencies collaborated to address the housing and health service needs of older adults living in federally assisted housing.", "GAO compared agency efforts to leading collaboration practices it has identified (including written agreements; roles and responsibilities; leveraged resources; relevant participants; and defined outcomes) and interviewed HUD, HHS, and USDA officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Departments of Housing and Urban Development (HUD) and Health and Human Services (HHS) have collaborated on older adult housing and health issues, but these efforts did not fully demonstrate leading practices GAO identified for effective collaboration.", "The HUD-HHS efforts demonstrated some leading practices. For example, the agencies have written agreements for data-sharing projects and have leveraged resources to conduct research on older adults.", "The Department of Agriculture (USDA) was not included in the efforts although it provides housing assistance to older rural households. GAO identified the inclusion of all relevant participants as a leading practice. According to HUD, the efforts were intended to explore the health of HUD-assisted households. However, by not including USDA in future collaborations, HUD and HHS may miss opportunities to leverage expertise and USDA may not be able to benefit from any resulting insights and improvements.", "The HUD-HHS collaborative efforts also did not define common outcomes, another leading practice GAO identified, likely because their collaboration is relatively new. Without common outcomes (for instance, focused on recipient impact or cost savings), the agencies lack measures against which to monitor, evaluate, and report the results of any collaborations.", "Future collaborations would benefit from consistent USDA involvement. And by defining common outcomes, the agencies would help inform Congress and stakeholders of results achieved and strategies or areas on which to focus."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations (one each to HUD, HHS, and USDA). They focus on including USDA in collaborations on older adult housing and health services and defining outcomes for the efforts. The three agencies concurred with GAO's recommendations. HUD stated that it had begun examining challenges relating to services for low-income rural older adults."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Census Bureau projects that by 2030, about 74 million people (nearly  21 percent of the U.S. population) will be 65 and older\u2014up from 49  million (15 percent) in 2016 and 35 million (12 percent) in 2000. This  growth presents challenges as well as opportunities for policymakers and  service providers in planning for and helping to address the needs of the  older population, including housing and health services. Researchers  predict a shortage over the next two decades of housing suitable for the  needs of older people.", "A number of federal programs assist older households with housing. The  Department of Housing and Urban Development (HUD) and the  Department of Agriculture (USDA) administer housing programs to assist  older households through rental subsidies, home loans, loan guarantees,  and mortgage insurance. Many of these programs serve the most  economically insecure older adults by allowing them access to adequate  and affordable housing. While it does not administer housing programs,  the Department of Health and Human Services (HHS) funds health  services for older adults through the Medicare and Medicaid programs,  and a range of home and community-based services through the Older  Americans Act of 1965 and Medicaid.", "At the same time that the older population is growing, programs that  target or serve a significant number of older adults are challenged in a  number of ways. For example, housing assistance programs have lost  housing stock. In addition, a significant number of federally assisted units  are occupied by older households that often receive health care and other  services from different agencies than those providing the housing  assistance. In this context, programs may face challenges with planning,  researching, and collaborating across multiple agencies.", "Under the authority of the Comptroller General, this report assesses the  extent to which selected federal agencies collaborate to address the  housing needs of an aging population living in federally assisted housing.  This is the first of two reports that examine issues related to housing for  older adults, including those who are low-income. The second report will  address future demand for housing by older households and older adults\u2019  housing-related needs.", "For this report, we examined housing programs that target or serve a  significant number of older adults and are administered by HUD and  USDA\u2019s Rural Housing Service, two agencies that provide housing  assistance to renters and homeowners. We reviewed program  regulations; our prior reports; Congressional Research Service reports;  other agency documents; and reports and studies related to housing a  growing older population. According to research studies, housing can  serve as a platform for overall well-being and for health services for older  adults, and access to health services can be integral to aging in place.  Thus, we reviewed documentation on relevant collaborations involving  HUD, USDA, and HHS. We compared the efforts to leading collaboration  practices identified in our prior work. To describe any goals related to  older adults, we reviewed HUD\u2019s and USDA\u2019s strategic plans for fiscal  years 2014\u20132018, and an HHS (Administration for Community Living)  strategic plan for fiscal years 2013\u20132018. We also interviewed and  obtained documentation from HUD, USDA, and HHS officials on their  programs, goals, and ongoing collaborations.", "We conducted our work from April 2015 to April 2018 in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Housing Programs That Assist Older Adults", "paragraphs": ["Older adults may receive federal housing assistance through a number of  programs, but only a few programs specifically target older households.  To be eligible for those programs, the head of household or spouse must  be 62 or older."], "subsections": [{"section_title": "Programs Targeting Older Households", "paragraphs": ["HUD has two programs specifically targeted to older households\u2014the  Supportive Housing for the Elderly (Section 202) program for renters and  the Home Equity Conversion Mortgage program for homeowners.", "HUD\u2019s Section 202 program is the only program that provides  supportive housing targeted to very low-income older adults.  Supportive housing is defined as non-institutionalized housing that  connects residents with the services they need to live independently,  such as in-home care, meal delivery, and transportation. Until fiscal  year 2012, the Section 202 program funded the development of new  units.", "The Home Equity Conversion Mortgage program, administered by the  Federal Housing Administration (FHA), a component of HUD, allows  older homeowners to access FHA-insured mortgages to convert some  of the equity in their homes into monthly streams of income or lines of  credit (reverse mortgage). In addition to being at least 62 years old,  borrowers must occupy the property as a principal residence, and any  existing lien on the property must be small enough to be paid off at  settlement. In a reverse mortgage, the loan balance increases and  home equity decreases over time. As the borrower receives payments  from the lender, the lender adds the principal and interest to the loan  balance, reducing the homeowner\u2019s equity. The homeowner  remains responsible for paying insurance and property taxes.", "The Rural Housing Service has one homeownership program that  specifically serves households aged 62 and older. The Section 504 Rural  Home Repair and Rehabilitation Grant program finances the removal of  health and safety hazards or remodels dwellings to make them accessible  for disabled household members. According to USDA officials, grants  often are made in conjunction with Section 504 loans that have a 1  percent interest rate."], "subsections": []}, {"section_title": "Other Programs That Can Serve Older Households", "paragraphs": ["HUD has rental assistance programs that do not target, but serve a  significant number of older households. According to HUD officials,  HUD\u2019s primary rental assistance programs, including the Housing Choice  Voucher, Public Housing, and Project-Based Section 8 programs, serve  nearly 1.5 million such households. In addition, FHA\u2019s Section 221(d)(3)  and Section 221(d)(4) Multifamily Rental Housing for Moderate-Income  Families provide mortgage insurance to finance multifamily properties,  some of which may be designated for the elderly. The HOME Investment  Partnerships Program provides formula grants to states and localities that  communities use to fund a range of activities including building,  purchasing, and rehabilitating affordable housing for rent or  homeownership or providing direct rental assistance to low-income  households.", "HUD Public Housing Designated for Older  Households  Local public housing agencies can apply to  HUD for approval to designate public housing  developments (or portions of developments,  such as buildings or floors) for occupancy only  by elderly families, by disabled families, or  both. HUD refers to this as \u201cdesignated public  housing\u201d. 42 U.S.C. \u00a7 1437e. However, HUD  officials stated that HUD had fewer than  40,000 units of designated public housing and  the majority of elderly persons were not  assisted through such housing.", "Similarly, the Rural Housing Service administers a number of  homeownership and rental programs not targeted to older rural  households, but that can serve them. They include the Section 502 Rural  Direct Home Loan; Section 502 Home Loan Guarantee; Section 504  Rural Housing Repair and Rehabilitation Loan; and the Section 521 Rural  Rental Assistance programs. The Section 521 program provides rental  subsidies to low-income, elderly, or disabled households living in  properties funded by the Section 515 Rural Rental Housing program and  others.", "Finally, the Low-Income Housing Tax Credit, established under the Tax  Reform Act of 1986 and administered by the Internal Revenue Service, is  the largest source of federal assistance for developing affordable rental  housing for low-income households, including elderly households, and as  of 2017, had financed about 2.9 million rental units. It provides tax credits  to encourage private-equity investment in affordable housing  development."], "subsections": []}]}, {"section_title": "Supply of Federally Assisted Housing", "paragraphs": ["Worst-Case Needs for Rental Housing  HUD tracks older adults in its biennial Worst  Case Housing Needs report. HUD defines  households with worst-case needs as very  low-income renters who do not receive  government housing assistance and paid  more than half of their income for rent, lived in  severely inadequate conditions, or both. The  latest report (2017) indicated that severe  housing problems were on the rise among  unassisted renter households in 2015. This  included older renters, for whom the number  and proportion of households with worst-case  needs increased from 2013, by 382,000 and  2.6 percentage points, respectively. In 2015,  1.85 million such households experienced  worst-case housing needs, including  unaffordable rents. The report noted that low- income older households that rely on fixed  incomes rather than wages may be less likely  to benefit from economic recovery trends that  raised incomes for others in recent years.", "In recent years, HUD and USDA have lost subsidized housing stock.  Losses can happen under several scenarios, including when federal  rental assistance contracts expire, federally subsidized mortgages reach  maturity or are paid off and owners convert the units to market-rate  rentals, or units fall into disrepair. In its fiscal year 2014\u20132018 strategic  plan, HUD reported that its public housing stock faced a capital needs  backlog, estimated at $26 billion, which would be difficult to meet given  federal fiscal constraints. The decreasing supply of adequate affordable  housing may affect older low-income renters (see sidebar), who were well  represented in HUD- and USDA-assisted housing.", "In addition to losing housing stock, HUD and USDA have programs that  previously added to the supply of affordable housing but no longer do so.  One example is HUD\u2019s Section 202 program, which specifically serves  very low-income older adults. Except for $10 million in its fiscal year 2017  appropriation that could contribute to capital advances, since fiscal year  2012, the program has primarily funded contract renewals for existing  rental assistance and for service coordinators. According to USDA  officials, the Section 515 program (direct loans for multifamily housing)  had no funds for new construction. They told us that Section 515 funds  almost exclusively were being used for unit rehabilitation, and that only  the Section 538 loan guarantee program was funding new construction.  According to USDA officials, many of the rehabilitated Section 515  properties are described in loan applications as properties serving the  elderly, as are some newly constructed properties funded by the Section  538 program."], "subsections": []}, {"section_title": "Reports on Integration of Housing and Health Services", "paragraphs": ["Federal and other entities have reported on a lack of integration among  housing and health programs and services and the benefits of closing  gaps.", "In 2002, the congressionally mandated Commission on Affordable  Housing and Health Facility Needs for Seniors in the 21st Century  reported that a lack of integration between housing and health care for  older adults resulted in inefficiencies, noting that the basis was partly  historical differences in policies, funding systems, and regulatory  structures. The Commission found that, with few exceptions, older  adults obtained their housing from one source and health care and  supportive services from a different source.", "In July 2015, the White House Conference on Aging highlighted the  importance of collaboration across sectors and the need to better  integrate housing, transportation, health care, and long-term services  and supports to encourage healthy aging. It noted that opportunities  existed to leverage approaches taken by states and localities to  consider how best to serve older adults.", "In 2016, the Bipartisan Policy Center\u2019s Health and Housing Task  Force reported that bridging the current policy gap between housing  and health had the potential to provide a number of benefits, including  improving health outcomes for older adults, reducing costs incurred by  the health care system, and enabling many older adults to age in their  own homes and communities.", "Senior leadership in HUD\u2019s Office of Policy Development and  Research recently amplified the discussion about housing and health,  noting that the Housing Act of 1937 recognized the linkage between  the two. That office also has observed that efforts to better link  housing and health services hold promise to improve the ability of  older adults to safely, comfortably, and more affordably age in place."], "subsections": []}]}, {"section_title": "Collaboration on Housing Assistance and Health Services for Older Adults Did Not Include USDA or Define Common Outcomes", "paragraphs": ["Collaborations that were focused on coordinating housing and health  services for older adults involved HUD and HHS. While these  collaborations demonstrated some leading practices we identified, they  did not include USDA (a relevant participant) and did not define common  outcomes for these efforts."], "subsections": [{"section_title": "USDA, HUD, and HHS Collaborated on Some Housing and Health Service Efforts That Did Not Focus on Older Adults", "paragraphs": ["USDA has collaborated with HUD on two efforts related to housing, and  with HUD and HHS on one effort that addressed both housing and health  services, although these efforts were not focused specifically on older  adults. Officials at HUD and USDA told us that they primarily collaborated  on administrative initiatives through the Rental Policy Working Group.  For example, in 2016, HUD, USDA, and the Department of the Treasury  entered into a memorandum of understanding to formalize the activities of  the Rental Policy Working Group, such as reducing duplicative physical  unit inspections at properties assisted by one or more of the agencies.  While older renter households may benefit from administrative  improvements made through the Rental Policy Working Group, its efforts  were not intended to focus on any particular household type served by  HUD and USDA. Under a 1991 memorandum of understanding, HUD and  USDA also are required to coordinate where both agencies\u2019 rental  programs could overlap in serving rural families.", "In 2016, USDA started participating in interagency training intended to  help coordinate the provision of home and community-based services and  supports to vulnerable populations, including older adults. The training  was initiated by HHS, and since 2011, HHS and HUD have conducted it  for program staff as part of their efforts to strengthen cross-agency  collaboration. In 2017, the 1-day training session focused on housing as a  platform for improving the quality of life of persons with disabilities, older  adults, and other at-risk populations. USDA participated in a discussion  on housing and health collaboration between federal, state, local, and  community partners. Representatives of both HUD and HHS said that  USDA\u2019s increased participation had been positive. HUD officials also told  us that in 2018, the agenda for the 1-day training would focus on housing  and health supports for older and disabled persons living in rural areas.", "Additionally, in 2016, HUD and USDA began coordinating on developing  topics for HUD\u2019s research agenda. Specifically, HUD\u2019s Office of Policy  Development and Research develops a research agenda with input from  external stakeholders, and both HUD and USDA officials told us of efforts  to develop rural housing topics for inclusion in HUD\u2019s research. HUD  Policy Development and Research officials stated that HUD conducted  extensive research in rural areas and was interested in coordinating more  with USDA, though this research has not been specific to older adult  issues. In response to HUD\u2019s outreach, USDA submitted topics to HUD,  some of which were incorporated into HUD\u2019s 2017 research agenda  update. They include the relationship between housing, food, and health  and the impact of home equity loss on rural homeowners, particularly  those who are aging."], "subsections": []}, {"section_title": "HUD and HHS Have Had Several Collaborations on Services and Data Sharing for Older Adults", "paragraphs": ["HUD and HHS have undertaken multiple collaborative efforts that link  data on housing and health services and often have focused on older  adults.", "The Support and Services at Home demonstration was launched in  2011 to connect older residents of affordable housing properties with  home and community-based supportive services and promote health  care coordination. The latest evaluation report was published in  January 2016 and described the program\u2019s ongoing implementation  and impact from 2011 through 2014. It found lower rates of growth in  Medicare expenditures among program participants than among a  comparison group. As of August 2017, HUD representatives told us  that the departments were still collaborating on evaluating the  demonstration.", "Data sharing between HUD and HHS on another demonstration  program\u2014the Supportive Services Demonstration for Elderly  Households in HUD-Assisted Multifamily Housing\u2014began in 2014.  Like the Support and Services at Home demonstration, the Supportive  Services Demonstration is intended to test aging-in-place models that  show potential for delaying or avoiding the need for nursing home  care. HUD has been conducting a 4-year, two-part evaluation, which  includes an evaluation of the implementation process and an impact  evaluation that will match Medicare claims data from HHS\u2019s Centers  for Medicare and Medicaid Services and HUD administrative data.  HUD and HHS completed a pilot of the data match in 2014, and HUD  has submitted two semi-annual reports to Congress on program  implementation, the latest in May 2017. HUD officials stated that in  October 2017, HUD secured a contract to conduct a full evaluation of  the Supportive Services Demonstration, as described above.  According to the officials, the demonstration implementation team  conducted an in-person, 2-day training event for care coordination  teams in November 2017.", "The National Center for Health Statistics at the Centers for Disease  Control and Prevention, also a component of HHS, in 2014 began to  link national health survey participant data to HUD administrative data  covering HUD\u2019s largest housing assistance programs through 2014.  The data linkage is intended to help those agencies and other federal  entities and researchers complete independent projects for statistical  and research purposes. The first linkage included two household  surveys (National Health Interview Survey and National Health and  Nutrition Examination Survey) that covered 1999\u20132012 and it was  completed in July 2016. HUD officials told us that HUD and HHS were  working on the second data linkage project. HHS confirmed that the  second linkage was underway as of February 2018, with an expected  completion date of summer 2018. It will add survey years 2013\u20132016  and administrative data years through 2016. While the project was not  focused specifically on older adults, it could include a significant  proportion of older adults living in non-institutionalized settings who  receive housing assistance from HUD.", "HHS\u2019s Office of the Assistant Secretary for Planning and Evaluation  and HUD completed a study on health care utilization among HUD- assisted older adults in 12 jurisdictions, and published a final report in  August 2016. The study, which began in 2009, explored the  feasibility of matching administrative data from HUD and HHS\u2019s  Centers for Medicare and Medicaid Services to determine if doing so  could help track housing and health outcomes, and reliably support  future research and policy analysis. More specifically, it linked HUD  individual tenant-level data to Medicare and Medicaid beneficiary  enrollment, payment, and claims data. In the 2016 report, HHS and  HUD found that, controlling for previously identified factors, HUD- assisted dual Medicare-Medicaid beneficiaries were less likely to use  some Medicare-covered services such as acute hospital stays, but  more likely to use Medicaid-covered home and community-based  supportive services. According to the report, the study demonstrated  that linking the agencies\u2019 data could inform decisions about future  program investment."], "subsections": []}, {"section_title": "Select Collaborations Did Not Include USDA or Define Common Outcomes", "paragraphs": ["We found that the collaborative efforts between HUD and HHS (pilot  programs and data sharing related to older adults) demonstrated some  but not all relevant leading practices we previously identified for effective  interagency collaboration. As we reported in 2012, interagency  collaborative mechanisms can be enhanced by leading practices,  including written guidance and documenting agreements on how the  participating agencies will be collaborating, clarifying roles and  responsibilities, leveraging resources (such as funding and staffing),  including all relevant participants, and clearly defining outcomes."], "subsections": [{"section_title": "Written Guidance and Agreements", "paragraphs": ["HUD and HHS established interagency agreements or memorandums of  understanding for collaborative efforts that focused on or included older  adults. For example, HUD and HHS entered into a memorandum of  understanding for the National Center for Health Statistics data linkage  effort and had contracts for the Support and Services at Home  demonstration and other collaborations. Our leading collaboration  practices state that agencies articulating their agreements in formal  documents can strengthen their commitment to working collaboratively,  as long as they are continually updated and monitored."], "subsections": []}, {"section_title": "Roles and Responsibilities", "paragraphs": ["The roles and responsibilities of agencies participating in a collaborative  effort may be defined in a number of ways, including through laws,  policies, memorandums of understanding, or other requirements. Clarity  of roles and responsibilities allows participating agencies to understand  and agree on accountability for the joint effort, and a process for making  and enforcing decisions. In accordance with their memorandum of  understanding, HUD and HHS had clear roles and responsibilities for the  National Center for Health Statistics data linkage effort. For example, the  agreement documented specific data that HUD was to provide to the  National Center for Health Statistics and how the latter would attempt to  link HUD\u2019s data to its survey participant data. It also specified both  agencies\u2019 roles in data access, storage, and disposition."], "subsections": []}, {"section_title": "Leveraging Resources", "paragraphs": ["Collaborating agencies should identify human, information technology,  physical, and financial resources needed to initiate or sustain their  collaborative effort. And it is important that the agencies leverage  sufficient resources to accomplish their objectives. HUD\u2019s and HHS\u2019s  written agreements generally included a description of how they would  leverage each agency\u2019s resources, including staffing, funding, and data.  For the Support and Services at Home demonstration, HUD provided  resources to help evaluate the program model, while HHS funded a  wellness nurse who worked with a service coordinator to perform such  tasks as assessing residents\u2019 needs; identifying and coordinating service  delivery; monitoring receipt and follow-through of services; and building  and sustaining partnerships with providers."], "subsections": []}, {"section_title": "Relevant Participants", "paragraphs": ["HUD and HHS, including their component agencies and offices, were the  main participants in these collaborative efforts. HUD officials stated that  USDA was not included because these collaborative efforts were pilots  originally intended to better understand the health of households assisted  by HUD. But no current plan exists to include USDA in such  collaborative efforts in the future.", "As these collaborative efforts mature, USDA, which provides assistance  to low-income older adults in rural areas, may benefit from inclusion.  Effective collaborative efforts benefit from having participants with the  necessary knowledge, skills, and abilities to contribute to the outcomes of  the collaboration. Officials at HUD and HHS said they were open to  greater collaboration with USDA in the future. And while HUD has a  presence in rural communities, USDA\u2019s participation would allow the  Rural Housing Service to provide input on and help address challenges  that may be unique to rural older adults. By not including USDA in future  collaborative efforts on older adult housing and health services, HUD and  HHS may miss opportunities to identify and respond to the changing  needs of some older adults living in federally assisted housing\u2014such as  by drawing on the experience and resources of the Rural Housing Service  in serving rural populations. In addition, USDA may miss opportunities  to benefit from lessons learned or programmatic improvements that HUD  and HHS might undertake as a result of their collaborations."], "subsections": []}, {"section_title": "Outcomes", "paragraphs": ["Although HUD and HHS have established specific objectives for their  various evaluations and data-sharing initiatives, they have not defined  common outcomes for these collaborative efforts. For example, while  some of these efforts were expected to explore the housing and health  relationship and inform more evidence-based program decisions, the  agencies have not defined common outcomes for their interagency efforts  as a whole. We reported that collaborating entities should determine  whether they have clearly defined short-term and long-term outcomes,  can track their progress, and whether they each have collaboration- related performance standards against which to evaluate individual  performance.", "Such common outcomes could include both quantitative and qualitative  information. For example, a set of measures against which to track and  monitor their collaborations (including demonstrations, data matching,  and studies) might include the extent to which hospital stays were  reduced, as noted for the Support and Services at Home and Supportive  Services demonstrations, or program costs saved. Monitoring and  reporting such measures would provide greater transparency to agency  and congressional decision makers about how these collaborative efforts  have resulted in potential cost savings and other benefits across agency  lines. A more long-term common outcome could include developing  proposals for programmatic improvements that would leverage the  lessons learned from the collaborative efforts.", "Senior leadership at HUD has said that HUD considers the nexus of  housing and health to be a priority for future work, and that federal  agencies needed to continue finding ways to move beyond their  programmatic scope to engage in more comprehensive, cross-cutting  efforts. The official pointed to data-matching efforts with HHS as low-cost  initiatives that could enhance HUD\u2019s knowledge about the health status of  assisted households and potentially inform cost-saving policies.", "Because many of their collaborative efforts began in the last 5 years and  some remain ongoing, HUD and HHS may not have prioritized developing  common outcomes that relate both to older adult housing and health  services. In contrast, HUD and HHS have developed broader goals that  relate to how they serve older adults.However, without defined common  outcomes to help guide ongoing and future efforts, HUD and HHS (and  potentially USDA) lack measures against which to monitor, evaluate, and  report the results of their collaborative efforts."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Federal agencies, particularly HUD and HHS, have found opportunities to  collaborate in meaningful ways on services provided to older adults. But  collaborative federal efforts to address the housing needs of older adults  and tie into health services would benefit from consistent USDA  involvement and from defining common outcomes. Greater USDA  participation would result in a better nationwide assessment of the  housing and health needs of older Americans who live in all federally  assisted housing and leverage USDA\u2019s expertise and resources in  serving rural populations. Outcome information would help the agencies  articulate to stakeholders and Congress the results the collaborations  achieved; activities, strategies, or areas on which to focus in the future;  and how scarce federal resources were leveraged and managed."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations (one recommendation  each to HUD, HHS, and USDA):  The Secretary of Housing and Urban Development should work with HHS  and USDA\u2019s Rural Development to define common outcomes and identify  opportunities to include USDA in future collaborative efforts on older adult  housing and health services. (Recommendation 1)", "The Secretary of Health and Human Services should work with HUD and  USDA\u2019s Rural Development to define common outcomes and identify  opportunities to include USDA in future collaborative efforts on older adult  housing and health services. (Recommendation 2)", "The Assistant to the Secretary for Rural Development should work with  HUD and HHS to define common outcomes and identify opportunities to  include USDA in future collaborative efforts on older adult housing and  health services. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to HHS, HUD,  and USDA. HHS and HUD provided written comments that are  reproduced in appendixes I and II, respectively. USDA provided technical  comments, which we incorporated as appropriate. All three agencies  concurred with our recommendations. The Deputy Administrator of  Multifamily Housing Programs provided USDA\u2019s concurrence in an e-mail  dated April 11, 2018.", "In its comment letter, HUD stated that our recommendation to include an  additional agency in housing and health demonstrations is consistent with  direction provided by the Senate Committee on Appropriations in fiscal  year 2016. The committee directed HUD to partner with other federal  agencies to pursue a service coordination demonstration in non- metropolitan areas. HUD noted that the committee advised it not to delay  existing demonstration efforts while a non-metropolitan component was  being designed. HUD also stated that it convened an expert panel to  better understand challenges to service coordination for low-income older  adults in rural areas, and summarized the findings in a report. HUD said  further action on the panel report was contingent on funding availability  and direction from appropriations committees. HUD stated that, in regard  to our recommendation that additional federal agencies might benefit from  data-linkage projects similar to its project with the National Center for  Health Statistics, it would be pleased to offer assistance, guidance, and  insights to other agencies. Our recommendation is that HUD work with  HHS and USDA\u2019s Rural Development to define common outcomes and  identify opportunities to include USDA in future collaborative efforts on  older adult housing and health services. This would include data sharing,  service demonstrations, research, and other collaborations. Ongoing  housing and health collaborations among HUD, HHS, and USDA would  benefit from greater USDA involvement, which also would serve to  enhance assessments of the housing and health needs of older  Americans in federally assisted housing.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, the Secretary of Health and  Human Services, the Secretary of Housing and Urban Development, 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) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Paul Schmidt (Assistant Director),  Bernice Benta-Jackson (Analyst in Charge), Abigail Brown, Stephen  Brown, William Chatlos, Charles Culverwell, Kirsten Lauber, John McGrail,  Marc Molino, Dae Park, Nadine Garrick Raidbard, Barbara Roesmann,       Joseph Silvestri, and Jeff Tessin made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-106", "url": "https://www.gao.gov/products/GAO-19-106", "title": "Colombia: U.S. Counternarcotics Assistance Achieved Some Positive Results but State Needs to Review the Overall U.S. Approach", "published_date": "2018-12-12T00:00:00", "released_date": "2018-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Colombia is the world's leading producer of cocaine, with production levels more than tripling from 2013 through 2017 (see figure). The U.S. and Colombian governments have been longstanding partners in the fight against drug trafficking. Since the launch of Plan Colombia in 1999, the U.S. government has invested over $10 billion in counternarcotics efforts in Colombia. This assistance has supported a range of eradication, interdiction, and alternative development programs.", "GAO was asked to review U.S. counternarcotics assistance to Colombia. This report examines (1) to what extent the U.S. government has assessed the effectiveness of its counternarcotics efforts in Colombia and (2) what is known about the effectiveness of U.S.-supported eradication, interdiction, and alternative development programs in Colombia. GAO reviewed data and documentation from U.S. agencies, performed a literature review of relevant research on counternarcotics efforts in Colombia, conducted fieldwork in Colombia, and interviewed U.S. and Colombian officials."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. agencies that provide counternarcotics assistance to Colombia conduct performance monitoring of their activities, such as by tracking the hectares of coca fields eradicated and the amount of cocaine seized, but have not consistently evaluated the effectiveness of their activities in reducing the cocaine supply. The U.S. Agency for International Development (USAID) has evaluated some of its alternative development programs, but the Department of State (State), which has lead responsibility for U.S. counternarcotics efforts, has not evaluated the effectiveness of its eradication and interdiction activities, as called for by its evaluation policies. Additionally, State has not conducted a comprehensive review of the U.S. counternarcotics approach, which relies on a combination of eradication, interdiction, and alternative development. Without information about the relative benefits and limitations of these activities, the U.S. government lacks key information to determine the most effective combination of counternarcotics activities.", "GAO's review of U.S. agency performance monitoring data and third-party research offers some information about the relative effectiveness of eradication, interdiction, and alternative development activities. For example, available evidence indicates that U.S.-supported eradication efforts in Colombia may not be an effective long-term approach to reduce the cocaine supply, due in part to coca growers responding to eradication by moving coca crops to national parks and other areas off limits to eradication. Agency data show that U.S.-supported interdiction efforts in Colombia seized hundreds of tons of cocaine and arrested thousands of drug traffickers, yet the net cocaine supply has increased and third-party studies have mixed findings on the long-term effectiveness of interdiction efforts. USAID evaluations indicate that alternative development programs in Colombia have provided legal economic opportunities to some rural populations previously involved in illicit crop production. However, USAID as well as third-party research suggests that alternative development requires significant and sustained investment and some programs have had design and sustainability challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State, in consultation with relevant agencies, (1) evaluate the effectiveness of eradication and interdiction in reducing the cocaine supply in Colombia and (2) undertake a comprehensive review of the U.S. counternarcotics approach in Colombia that considers the relative benefits and limitations between eradication, interdiction, and alternative development efforts. State generally concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Coca cultivation and cocaine production in Colombia have increased  substantially in recent years, hitting record levels in 2017, according to  U.S. government and United Nations (UN) estimates. These increases  have occurred despite the longstanding partnership between the United  States and Colombia to combat illicit drug production and trafficking. In  1999, the Colombian government announced the launch of a major  initiative, known as Plan Colombia, which was designed to reduce the  production of illegal drugs and improve security in the country. At that  time, Colombia had become the world\u2019s leading producer of cocaine and  was in the midst of a violent internal conflict that had lasted for decades.  This multi-sided conflict was fueled by proceeds from illegal drug  trafficking and involved the Marxist insurgent organization the  Revolutionary Armed Forces of Colombia (known by its Spanish acronym,  FARC) and other armed left-wing groups, as well as right-wing  paramilitary groups. Since Plan Colombia\u2019s inception, the U.S.  government has provided over $10 billion in support of the  counternarcotics and security effort, according to the Department of State  (State). This support has included assistance for eradication, interdiction,  and alternative development programs. In providing counternarcotics  assistance to Colombia, the U.S. government has sought to use a whole  of government approach involving a range of agencies. The Colombian  government has also made significant investments in the fight against  illegal drugs, with its own funding representing about 95 percent of the  total spent since the start of Plan Colombia.", "When Plan Colombia was launched in 1999, some feared that Colombia  was on the brink of becoming a failed state, but it has since seen  significant improvements in security, including dramatic drops in violence  and the reassertion of state control over much of the country\u2019s territory.  For example, between 2000 and 2016, homicides in Colombia declined  by 53 percent and kidnappings declined by 94 percent. As the security  situation improved, Colombian authorities were also able to achieve  considerable reductions in coca cultivation and cocaine production,  reaching a low point in 2012. Meanwhile, the Colombian government  undertook peace negotiations with the FARC, which were formally  concluded in a peace agreement in November 2016 that the parties have  begun to implement. Starting in 2013, however, coca cultivation and  cocaine production in Colombia have been on the rise once again,  according to U.S. government and UN estimates. In addition, Colombia  continues to struggle with the presence of drug trafficking organizations  and other armed criminal actors in many parts of the country. Colombia is  currently at an important juncture as it seeks to implement the peace  agreement and address increasing illicit drug production.", "You asked us to review U.S.-supported eradication, interdiction, and  alternative development programs in Colombia and what is known about  the effectiveness of these programs in achieving U.S. counternarcotics  goals. Specifically, this report examines (1) to what extent the U.S.  government has assessed the effectiveness of its counternarcotics efforts  in Colombia, (2) what is known about the effectiveness of U.S.  government-supported eradication programs in Colombia over the last 10  years, (3) what is known about the effectiveness of U.S. government- supported interdiction programs in Colombia over the last 10 years, and  (4) what is known about the effectiveness of U.S. government-supported  alternative development programs in Colombia over the last 10 years.", "To address these objectives, we analyzed Department of Defense (DOD),  Department of Homeland Security (DHS), Department of Justice (DOJ),  State, and U.S. Agency for International Development (USAID) data and  documentation, including available evaluations and performance  monitoring data the agencies use to assess the effectiveness of their  counternarcotics activities in Colombia. We also interviewed officials  from each of these agencies to gather further information regarding what  is known about the effectiveness of U.S.-supported counternarcotics  efforts in Colombia. In assessing to what extent the U.S. government has  assessed the effectiveness of its counternarcotics efforts in Colombia, we  compared U.S. agencies\u2019 actions to requirements established in agency  evaluation policies and to federal internal control standards. As part of our  work, we also collected data from the UN and the Colombian government  related to drug production trends and counternarcotics efforts. To assess  the reliability of these data, we reviewed available documentation and  interviewed knowledgeable U.S. officials. We determined that the U.S.  government, UN, and Colombian government data were sufficiently  reliable for our purposes in this report. To validate and supplement U.S.  government information regarding the effectiveness of its  counternarcotics programs, we also conducted a literature review to  determine what relevant research has concluded about these programs in  Colombia and the extent to which relevant non-U.S. government studies  reached similar or different conclusions than the U.S. government\u2019s  findings regarding the effectiveness of U.S.-supported counternarcotics  programs in Colombia. To conduct our literature review, we developed a  list of search terms related to eradication, interdiction, and alternative  development in Colombia and conducted a search using selected  bibliographic databases. In order to narrow down the initial search results  to a priority list of studies, we considered a variety of factors including the  relevance of the study to our research questions, the extent to which the  study focused on Colombia or was more global in nature, whether the  study had been published in 2008 or later, and whether the study  included original research. In total, we selected 23 studies to include in  our review and to analyze in greater depth for this report. As part of our  work, we also conducted interviews with a nongeneralizable sample of  three non-U.S. government experts. Finally, we conducted fieldwork in  Colombia where we interviewed U.S. and Colombian officials that have  responsibility for and insights into U.S.-funded counternarcotics  programs. For more information about our scope and methodology, see  appendix I.", "We conducted this performance audit from September 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Colombia is the world\u2019s largest producer of cocaine and also continues to  be a source of heroin and marijuana. After declining most years since  2000, coca cultivation and cocaine production increased again in  Colombia beginning in 2013, hitting record highs in 2017 (see fig. 1).  Much of the cocaine produced in Colombia is consumed in the United  States. According to the Drug Enforcement Administration\u2019s (DEA)  Cocaine Signature Program, over 90 percent of cocaine found in the  continental United States is of Colombian origin. In 2017, the DEA  reported that cocaine use in the United States was increasing concurrent  with production increases in Colombia. Although the United States  continues to be the primary market for Colombian cocaine, Colombian  drug traffickers are also expanding into other markets around the world,  according to DEA and Office of National Drug Control Policy (ONDCP)  reporting.", "U.S., Colombian, and UN officials; as well as third-party researchers,  have cited a variety of reasons for the increases in coca cultivation and  cocaine production in Colombia, including:  the Colombian government\u2019s decision to end aerial eradication of  coca crops in October 2015; prior to the end of aerial spraying, coca growers\u2019 movement to areas  off limits to aerial spraying and other countermeasures employed by  growers;  the Colombian government\u2019s desire to avoid social protests in coca- growing regions controlled by the FARC during peace negotiations;  the FARC\u2019s drive to induce farmers to plant additional coca in areas  under their control in anticipation that the Colombian government  would provide subsidies for farmers to switch from coca to licit crops  after the conclusion of the peace agreement; declining Colombian and U.S. funding for counternarcotics efforts; decreases in the price of gold, which diminished criminal  organizations\u2019 revenues from illegal gold mining and led to a  redirection of resources back to cocaine production to make up  losses; and  increased demand for cocaine in the United States and other parts of  the world."], "subsections": [{"section_title": "Armed Conflicts and Drug Trafficking in Colombia over Time", "paragraphs": ["Colombia has historically been one of Latin America\u2019s more enduring  democracies and successful economies. However, Colombia has also  faced more than 50 years of internal conflict and has long been a leading  drug producing and trafficking nation. See figure 2 for a map showing  Colombia\u2019s geographic location relative to the United States.", "For several decades, Colombia has struggled with a multi-sided conflict,  involving both left-wing guerilla groups and right-wing paramilitary groups  (see sidebar for background information on Colombia). Since its start, the  conflict has resulted in at least 220,000 deaths and the displacement of  more than 5 million Colombians, according to the Congressional  Research Service. The FARC, a Marxist insurgent organization formed in  1964, was the largest of the left-wing groups. At its peak, the FARC had  an estimated 16,000 to 20,000 fighters, according to the Congressional  Research Service. In an effort to unseat the Colombian government, the  FARC, along with the second largest left-wing guerilla group in Colombia,   the National Liberation Army (known by its Spanish acronym ELN),  undertook a widespread campaign of murder, kidnapping, extortion, and  other human rights violations, according to various sources. Over time,  the two groups also became increasingly involved in drug trafficking to  fund their operations. (slightly less than twice the size of Texas)", "In response to the violence caused by the FARC and the ELN, a number  of wealthy Colombians, including drug traffickers, began to hire armed  paramilitary groups for protection during the 1980s. According to DOD  officials, initially these groups were formed legally as self-defense groups;  however, they turned to crime and drug trafficking over time. Many of  these groups subsequently united under an umbrella organization called  the United-Self Defense Forces of Colombia (known by the Spanish  acronym AUC). According to reporting from various U.S. government and  third-party sources, the AUC murdered individuals suspected of  supporting the FARC and ELN and engaged in direct combat with these  groups. From 2003 through 2006, the AUC formally dissolved after  negotiating a peace agreement with the administration of former  Colombian President \u00c1lvaro Uribe. However, some former AUC members  did not demobilize and instead joined criminal groups (known as criminal  bands, or Bacrim) that continue to be involved in drug trafficking today,  according to reporting from various U.S. government and third-party  sources.", "Throughout the 1980s and early 1990s, Peru and Bolivia were the leading  global producers of cocaine but enforcement efforts in those two  countries increasingly pushed cocaine production into Colombia. By the  late 1990s Colombia had emerged as the leading source of cocaine in the  world.", "Over time the landscape of drug trafficking in Colombia has changed. In  the 1980s and early 1990s, major drug trafficking organizations such as  the Medell\u00edn and Cali cartels controlled cocaine trafficking in  Colombia. These cartels were vertically integrated organizations with a  clearly defined leadership that controlled all aspects of cocaine production  and distribution in their respective geographic areas. By the late 1990s,  however, Colombian authorities, with the support of the United States,  had largely succeeded in dismantling these two cartels. Over time, drug  trafficking in Colombia fragmented and is now generally characterized by  more loosely organized networks that are less integrated and have less  well-defined leadership structures. Major organizations currently involved  in drug trafficking include the Clan del Golfo, the largest of the Bacrim;  FARC dissident groups that have not accepted the peace agreement; and  the ELN."], "subsections": []}, {"section_title": "Peace Agreement with the FARC", "paragraphs": ["In August 2016, the Colombian government and the FARC reached a  peace agreement ending more than five decades of conflict. The peace  agreement was the culmination of four years of formal negotiations. In  October 2016, however, Colombian voters narrowly defeated a  referendum on whether to accept the peace agreement. After the voters  rejected the agreement, the Colombian government and the FARC  worked to make certain revisions and signed a second accord. The  Colombian Congress then approved the revised agreement in November  2016. The Colombian government has estimated that it will cost $43  billion to implement the peace agreement over 15 years but State has  estimated that the cost will be between $80 billion and $100 billion.", "The peace agreement included agreements on six major topics:  land and rural development,  the FARC\u2019s political participation after disarmament,  illicit crops and drug trafficking,  victims\u2019 reparations and transitional justice,  the demobilization and disarmament of the FARC and a bilateral  cease-fire, and  verification to enact the programs outlined in the final accord.", "The agreement on illicit crops and drug trafficking addresses a range of  issues related to coca eradication and crop substitution, public health and  drug consumption, and drug production and trafficking. As part of the  agreement, the FARC committed to work to help resolve the problem of  illegal drugs in the country and to end any involvement in the illegal drug  business. Among other things, the Colombian government pledged to  prioritize voluntary drug-crop substitution programs over forced  eradication, and where forced eradication was necessary, to prioritize  manual removal over aerial spraying. Other portions of the peace  agreement also relate to counternarcotics efforts. For example, the  section on land and rural development discusses benefits for farmers who  undertake substitution of illicit crops.", "Colombian authorities and the FARC have completed several actions  called for under the peace agreement but progress on implementation  has been uneven. Since the finalization of the peace agreement in  November 2016, over 7,000 FARC members have disarmed and  surrendered almost 9,000 weapons, about 1.7 million rounds of  ammunition, and about 42 tons of explosive material, according to State  reporting. The Colombian Congress has also passed implementing  legislation, including a bill establishing the Special Jurisdiction for Peace  to support transitional justice efforts. However, a significant number of  FARC members have refused to demobilize and key FARC leaders have  been accused of violating the peace agreement through continued  involvement in the drug trade and other illegal activities. According to  State reporting, the FARC has also failed to offer information on drug  trafficking routes, contacts, and financing, as it had committed to do under  the accord. The peace agreement continues to be controversial in  Colombia with many Colombians believing that it does not do enough to  hold the FARC accountable for the violence and crimes that it committed.  Colombian President Iv\u00e1n Duque, who assumed control of the  government in August 2018, has stated his intention to revise some  elements of the agreement.", "Currently, the Colombian government is also engaged in peace  negotiations with the ELN that were formally launched in February 2017.  Although the talks continue, the negotiations have experienced several  setbacks. For example, the two parties had agreed to a temporary  ceasefire that lasted from September 4, 2017, to January 9, 2018, but  they did not reach an agreement to extend the ceasefire and the ELN  launched a number of attacks shortly thereafter, including a police station  bombing in the city of Barranquilla that killed 7 police officers and injured  more than 40."], "subsections": []}, {"section_title": "Plan Colombia and U.S. Counternarcotics Efforts in Colombia", "paragraphs": ["Colombia and the United States have a longstanding partnership on  counternarcotics efforts. Since the early 1970s, the U.S. government has  provided assistance to the Colombian government to support its efforts to  combat illicit drug production and trafficking activities. However, by the  late 1990s, Colombia had become the world\u2019s leading producer of  cocaine and a major source of heroin used in the United States. In  response, the Colombian government, with U.S. support, launched Plan  Colombia in 1999 with the goals of (1) reducing the production of illicit  drugs and (2) improving security in the country by reclaiming areas of the  country held by illegal groups.", "U.S. assistance to Colombia over the years has focused on three key  approaches for reducing the supply of illegal drugs produced in the  country and trafficked to the United States: eradication, interdiction, and  alternative development.", "Eradication. Eradication seeks to reduce coca cultivation by  destroying coca plants through either the aerial spraying of herbicides  on the crops, or the manual spraying of herbicides or uprooting of the  plants by personnel on the ground.", "Interdiction. Interdiction seeks to disrupt or dismantle drug trafficking  organizations by investigating the operations of drug traffickers;  seizing drugs and their precursors, cash, and other assets;  destroying processing facilities; blocking air, sea, and land drug  trafficking routes; and arresting and prosecuting drug traffickers.", "Alternative development. Alternative development seeks to  discourage involvement in the drug trade by providing people with  viable, legal livelihoods through training, technical assistance, and  other support; as well as by working with the private sector, civil  society, and the Colombian authorities to create the necessary  conditions in communities for legal economies to develop.", "Under the general guidance of the White House\u2019s ONDCP and the  leadership of State at the country-level, a number of U.S. agencies have  a role in supporting counternarcotics efforts in these three key areas.  ONDCP is, among other things, responsible for developing the National  Drug Control Strategy and coordinating the implementation of this  strategy. It does not implement any counternarcotics programs in  Colombia. State is the lead agency responsible for setting U.S.  counternarcotics policy in Colombia, consistent with the overall direction  provided by the National Drug Control Strategy. The ambassador at  Embassy Bogot\u00e1 has ultimate authority over all U.S. agencies operating  in the country. State is the agency primarily responsible for supporting  eradication efforts in Colombia. A number of agencies are responsible for  supporting various aspects of interdiction efforts in Colombia, including:  State; DOD; DOJ\u2019s Criminal Division, DEA, and Federal Bureau of  Investigation (FBI); and DHS\u2019s Immigration and Customs Enforcement  (ICE), Customs and Border Protection (CBP), and U.S. Coast Guard.  USAID is the agency primarily responsible for supporting alternative  development efforts in Colombia.", "The U.S. government provided about $5 billion in foreign assistance for  Colombia in fiscal years 2008 through 2017. State and USAID provide  foreign assistance to Colombia for a range of programs and activities that  extend beyond counternarcotics efforts. State and USAID provide this  assistance to Colombia through several accounts. State funds the largest  share of its programs in Colombia through the International Narcotics  Control and Law Enforcement account. It also provides funding to  Colombia through the Foreign Military Financing; International Military  Education and Training; and Nonproliferation, Anti-terrorism, Demining,  and Related Programs accounts. USAID implements its programs in  Colombia using funding from the Economic Support Fund account. DOD  provides counternarcotics funding to Colombia through its Central  Transfer Account. Figures 3 and 4 show U.S. assistance to Colombia in  fiscal years 2008 through 2017.", "The U.S. government\u2019s efforts in Colombia are part of its broader efforts  to combat drug trafficking throughout the Western Hemisphere, including  in other partner countries and in the \u201ctransit zone,\u201d which is the area from  South America through the Caribbean Sea and the eastern Pacific Ocean  used to transport illicit drugs to the United States. In addition, the U.S.  government combats the illegal drug problem through a range of  domestic law enforcement efforts and programs designed to reduce illicit  drug use. These various efforts are not addressed in this report."], "subsections": []}, {"section_title": "Recent Developments in U.S.-Colombia Efforts on Counternarcotics", "paragraphs": ["The Obama administration supported the peace process in Colombia and  announced a new initiative in February 2016, known as Peace Colombia.  Peace Colombia was designed to establish a new framework for  cooperation between the two countries and refocus U.S. assistance to  support peace agreement implementation. The administration called for  an initial $450 million in funding for Peace Colombia in fiscal year 2017.  Under Peace Colombia, U.S. assistance was to be focused in three  areas:  consolidating and expanding progress on security and  counternarcotics while reintegrating the FARC into society; expanding the Colombian state\u2019s presence and institutions to  strengthen the rule of law and rural economies, especially in former  conflict areas; and promoting justice and other essential services for conflict victims.", "More recently, the Trump administration has raised questions about  Colombia\u2019s commitment to meeting its counternarcotics obligations. As  required by law, the Trump administration in September 2017 issued a  memorandum documenting the annual presidential determination on  countries that are major drug transit or illicit drug producing countries. As  in years past, the memorandum identified Colombia as one of these  countries. The memorandum also stated that the administration had  seriously considered designating Colombia as a country that had  demonstrably failed to adhere to its obligations under international  counternarcotics agreements due to the extraordinary growth of coca  cultivation and cocaine production over the past three years. According to  the memorandum, the administration ultimately decided not to take this  step because of the close partnership between the U.S. government and  the Colombian National Police and Armed Forces. However, the  memorandum underscored that the administration would keep the  designation as an option and expected Colombia to make significant  progress in reducing coca cultivation and cocaine production.", "As part of the U.S.-Colombia High Level Dialogue in March 2018, the  U.S. and Colombian governments pledged to expand counternarcotics  cooperation over the next 5 years with the goal of reducing Colombia\u2019s  estimated coca cultivation and cocaine production by 50 percent by the  end of 2023."], "subsections": []}]}, {"section_title": "U.S. Agencies Conducted Performance Monitoring of Counternarcotics Activities in Colombia, but Have Not Evaluated Key Efforts and State Has Not Undertaken a Comprehensive Review of the Overall Approach", "paragraphs": [], "subsections": [{"section_title": "U.S. Agencies Conducted Performance Monitoring of Counternarcotics Activities in Colombia, but Have Not Evaluated the Effectiveness of Eradication and Interdiction Efforts", "paragraphs": ["U.S. agencies have conducted ongoing performance monitoring of  various counternarcotics activities in Colombia, but State, DOD, DHS,  and DOJ have not conducted evaluations of U.S. eradication and  interdiction programs. Performance monitoring is the ongoing review  and reporting of program accomplishments, particularly progress toward  pre-established goals. It is typically conducted by program or agency  management. Performance monitoring focuses on whether a program  has achieved its objectives, expressed as measurable performance  standards. In contrast, program evaluations are individual systematic  studies conducted periodically or on an ad hoc basis to assess how well a  program is working. They are often conducted by experts, either from inside or outside the agency, who are not working on the program.  Program evaluations typically examine a broader range of information on  program performance and its context than is feasible to monitor on an  ongoing basis."], "subsections": [{"section_title": "Performance Monitoring and Reporting", "paragraphs": ["U.S. agencies have conducted a range of performance monitoring efforts  to assess their counternarcotics activities in Colombia. While some  monitoring is performed through interagency mechanisms, most  monitoring is done at the individual agency level.", "Interagency monitoring mechanisms include ONDCP reports, such as its  annual Budget and Performance Summary and its annual National Drug  Control Strategy Performance Reporting System Report, and Embassy  Bogot\u00e1\u2019s annual Performance Plan and Reports. ONDCP\u2019s Budget and  Performance Summaries and Performance Reporting System Reports  are not Colombia-specific and discuss a range of domestic and  international counternarcotics efforts. These reports, however, generally  provide some limited performance information related to Colombia. For  example, ONDCP\u2019s Budget and Performance Summaries include  information, by agency, on their counternarcotics budget requests as well  as some selected performance reporting. As part of these documents,  State and USAID have reported data on certain performance metrics  specific to Colombia, such as the number of hectares of drug crops  eradicated in U.S. government-assisted areas of Colombia and the  number of rural households benefitting from U.S. government  interventions in Colombia. In addition, the reports contain narrative  related to the results of counternarcotics activities in Colombia. At the  country level, Embassy Bogot\u00e1\u2019s annual Performance Plan and Report  provides information on the embassy\u2019s progress in meeting its goals and  objectives, including those related to counternarcotics. As part of these  reports, the embassy provides data on results for the fiscal year, relative  to established targets, for a range of counternarcotics performance  metrics. These Performance Plan and Reports primarily focus on State  and USAID activities, rather than describing the results of all U.S.  agencies\u2019 activities in Colombia.", "At the agency level, State, USAID, DOD, DOJ, and DHS and their  components have, to varying degrees, conducted performance monitoring  of their counternarcotics activities in Colombia. Examples of key  performance monitoring activities, by agency, are described below:", "State: State, with input from other U.S. agencies involved in  counternarcotics efforts, produces its annual International Narcotics  Control Strategy Report, which is global in scope, but includes specific  country reports, including on Colombia. These reports describe key  steps that Colombia has taken over the year to combat drug trafficking  and how U.S. assistance has supported these efforts. In addition,  State\u2019s Bureau of International Narcotics and Law Enforcement Affairs  (INL) has developed a Colombia country plan for 2017 through 2021  that presents results data for a number of counternarcotics-related  indicators, such as the percent of coca hectares eradicated against  Colombia\u2019s national goals and the number of hours flown by the  Colombian National Police in support of counternarcotics and other  related missions. The INL country plan also establishes performance  targets for future years. State/INL implementing partners are also  responsible for producing periodic reports that describe their progress  in meeting pre-established performance targets for their projects.", "USAID: USAID has developed a Colombia-specific information  system, the Monitoring and Evaluation Clearinghouse (Monitor), that  provides the agency with information about the status and progress of  all USAID alternative development projects in Colombia. For example,  Monitor tracks metrics such as the number of hectares of licit crops  supported by USAID, the number of beneficiaries from improved  infrastructure services, and the number of households who have  obtained documented property rights as a result of USAID assistance.  USAID implementing partners are also responsible for producing  periodic reports that describe their progress in meeting pre- established performance targets for their projects.", "DOD: U.S. Southern Command (SOUTHCOM) completes annual  Program Objective Memorandums (POM) related to each of its  program areas as part of the DOD budget process. Each POM is tied  to a particular project code. For example, SOUTHCOM has a project  code for counternarcotics support in South America and a project  code for the Regional Helicopter Training Center in Colombia. As part  of each POM, SOUTHCOM reports on the activities supported under  the project code and reports on results relative to pre-established  performance targets. Examples of metrics tracked in the POMs  include the rate of operational readiness of Colombian maritime patrol  aircraft and the hours a day the Colombian Air Force was able to  provide video surveillance to support operations.", "DOJ: DEA has developed its annual Threat Enforcement Planning  Process, which guides the agency\u2019s operational strategy and serves  as a means of monitoring performance. Under this three-stage  process, DEA offices, including the one in Colombia, first identify  threats within their area of responsibility that link to agency-wide  threats that DEA has established. The offices then develop  mitigation/enforcement plans for each identified threat, and,  subsequently, produce impact statements that summarize the  outcomes and results related to each mitigation/enforcement plan. For  example, the impact statements describe key arrests that have been  made and major seizure operations. In addition, the FBI office in  Colombia produces an annual summary of statistics to monitor the  accomplishments of the Colombian vetted unit that it supports,  including the number of arrests, the amount of drugs seized, and the  commercial value of assets seized.", "DHS: ICE and CBP stated that they do not conduct performance  monitoring activities specific to Colombia. Coast Guard officials stated  that the Coast Guard compiles information that it provides to its  Colombian counterparts on a recurring basis, including data on the  number of Colombian-flagged ship interdictions it has completed and  the number of Colombian nationals apprehended. All three agencies  contribute to DHS annual performance reports. These annual reports  include some performance information related to DHS  counternarcotics efforts more broadly, such as ICE\u2019s work combatting  transnational criminal organizations that may operate in Colombia.", "State, USAID, DOD, DOJ, and DHS use a range of metrics to assist them  in both formally and informally monitoring the performance of eradication,  interdiction, and alternative development efforts in Colombia. These  agencies produce some of these data, while in other cases they use data  from other sources including implementing partners, the Colombian  government, and the UN. Examples of key metrics include:", "Eradication: hectares of coca cultivated, hectares of coca eradicated,  and coca replanting rates.", "Interdiction: amounts of cocaine seized, the number of cocaine  processing laboratories destroyed, the number of drug trafficking  organizations disrupted or dismantled, and the number of drug  trafficking suspects extradited to the United States.", "Alternative Development: the number of households involved in  coca cultivation, increases in the value of sales of legal products in  areas involved in narcotics production, the number of households  receiving land titles as a result of U.S. assistance, and the value of  agricultural and rural loans generated through U.S. assistance.", "State, USAID, DEA, and DOD have undertaken efforts to further  strengthen their performance monitoring efforts in recent years. For  example, in September 2017, State/INL signed a new monitoring and  evaluation contract for the Western Hemisphere which is designed to  strengthen its existing performance measures and identify new metrics to  better assess performance. According to a State official, the contractor is  currently working with both State officials in Washington D.C. and at  embassies in the Western Hemisphere to, among other things, develop a  list of performance measures that link to INL\u2019s goals for the region and  that involve data that can be feasibly and consistently collected across  the countries in the region. USAID officials noted that recently USAID has  been collecting data on contextual indicators and developing baseline  studies to help inform new alternative development programs it is  implementing in Colombia. According to USAID officials, these baseline  studies have collected information related to productivity, exports,  income, multidimensional poverty, citizen security, social capital, and trust  in institutions. In addition, as noted above, DEA established its new  Threat Enforcement Planning Process in fiscal year 2017. According to  DEA, this process is designed to, among other things, allow the agency to  move beyond basic output measures and better assess how its offices,  including the office in Colombia, are doing in combatting priority threats  within their area of responsibility. Finally, according to a DOD official,  DOD\u2019s Office of Counternarcotics and Global Threats is developing  guidance for assessing the counternarcotics programs it supports around  the world to help the office\u2019s leadership make better informed decisions  about how to best use DOD\u2019s limited counternarcotics resources.", "Although performance metrics are useful for monitoring progress and can  help inform evaluations of effectiveness, they are generally not intended  to assess effectiveness directly. For example, U.S. agencies track data  on the amount of cocaine seized in Colombia, but a number of U.S.  officials noted that it is unclear to what extent increases in cocaine  seizures in recent years are due to the increased effectiveness of  interdiction efforts or more cocaine being present in Colombia to seize. As  another example, some agencies track data on the number of Colombian  officials receiving counternarcotics training through their programs, but  these data are not designed to capture what, if any, improvements in  counternarcotics outcomes are achieved as a result of that training."], "subsections": []}, {"section_title": "Evaluations", "paragraphs": ["USAID has completed independent evaluations of several of its  alternative development programs. However, other agencies have not  formally evaluated the long-term effectiveness of their eradication or  interdiction activities.", "Alternative Development: Since 2008, USAID has conducted a number  of formal, independent evaluations of its alternative development  programs in Colombia. Some of these evaluations have examined  USAID\u2019s alternative development efforts more broadly, while others have  focused on the effectiveness of specific programs such as USAID\u2019s  Consolidation and Enhanced Livelihood Initiative, More Investment in  Sustainable Alternative Development, and Areas for Municipal-Level  Alternative Development programs. Many of these evaluations were done  through a 5-year monitoring and evaluation contract that USAID awarded  to Management Systems International in May 2013.", "Eradication and Interdiction: State, DOD, DEA, FBI, ICE, CBP, and the  U.S. Coast Guard all reported that they had not conducted any formal,  systematic evaluations to assess the effectiveness of U.S.-supported  eradication and interdiction efforts in Colombia since 2008. State  documents indicate that State was considering an evaluation of its  counternarcotics activities in Colombia as early as 2015; however, State  officials noted that these plans were delayed due to competing priorities.  State reported that it now plans to award a contract in 2019 for an  evaluation of its counternarcotics activities. According to State officials,  a scope of work for the evaluation has not been completed, so the details  of the planned evaluation have not yet been decided, including whether  the evaluation would assess activities in the long term and which activities  it would include. State\u2019s November 2017 evaluation policy highlights the  importance of evaluations in achieving U.S. foreign policy outcomes and  ensuring accountability. The policy establishes a requirement that all  large programs, such as State\u2019s counternarcotics program in Colombia,  be evaluated at least once in the program\u2019s lifetime, or once every 5  years for ongoing programs. According to State officials, evaluations  can be challenging to design and potentially entail significant investments  of resources and time; however, State\u2019s evaluation policy reaffirms the  importance and feasibility of conducting evaluations, including impact  evaluations. Without evaluations of U.S.-supported eradication and  interdiction efforts in Colombia, U.S. agencies do not have complete  information regarding the long-term effectiveness of these efforts in  reducing coca cultivation and the cocaine supply. As the lead agency  responsible for setting U.S. counternarcotics policy in Colombia, State is  best positioned to lead an evaluation of U.S.-supported eradication and  interdiction efforts in the country. However, such an evaluation would  benefit from the involvement and expertise of other U.S. agencies  engaged in counternarcotics activities in Colombia. State\u2019s evaluation  policy encourages such evaluations that are undertaken collaboratively  with other U.S. agencies."], "subsections": []}]}, {"section_title": "State Has Not Conducted a Comprehensive Review of the Overall U.S. Counternarcotics Approach in Colombia to Determine the Most Effective Combination of Activities", "paragraphs": ["The U.S. counternarcotics approach in Colombia has historically entailed  a combination of eradication, interdiction, and alternative development  programs. Although the U.S. government implements a wide range of  counternarcotics efforts in Colombia and can point to various results for  these activities, State and other U.S. agencies have no systematic way to  determine whether the current combination of activities is the most  effective approach to achieve U.S. goals. According to DEA officials,  measuring the effectiveness of overall U.S.-counternarcotics efforts in  Colombia has been particularly challenging in recent years due to  historical, transformational events which have taken place in that country.  Various U.S. officials acknowledged that the substantial increases in coca  cultivation and cocaine production as well as the other significant  changes that have occurred in Colombia in recent years, including the  end of aerial eradication, the conclusion of the peace agreement with the  FARC, and decreases in Colombian and U.S. counternarcotics budgets,  necessitate that the U.S. government review its approach to  counternarcotics efforts and consider adjustments to reflect these  developments.", "In addition, the U.S. government\u2019s approach is affected by Colombia\u2019s  counternarcotics priorities and key initiatives, which continue to evolve.  For example, in September 2015, Colombia announced a new  counternarcotics strategy which specified three priority areas: rural  development programs to reduce drug cultivation; law enforcement efforts  to dismantle drug trafficking organizations; and public health approaches  to reduce domestic drug consumption. Colombia has also launched an  initiative to establish Strategic Operational Centers (known by the  Spanish acronym CEO) in key regions of the country. These CEOs are  designed to bring together the Colombian military, police, and civilian  agencies to focus on a whole-of-government approach to improving  security, establishing a state presence, and fighting drug trafficking in  these areas. The Colombian government has now launched CEOs in  three areas\u2014Tumaco, San Jos\u00e9 del Guaviare, and Caucasia\u2014and plans  to open a fourth, in C\u00facuta, later in 2018 (see fig. 5). It is also  considering adding a fifth CEO in the Caquet\u00e1/Putumayo region. In  addition, the Colombian government, with support from the U.S.  embassy, launched the Antioquia Free from Coca initiative in December  2017. The initiative seeks to bring together the Colombian national  government, local governments in Antioquia, the armed forces, the  private sector, and the U.S. government to create a new model for  development and counternarcotics in the Antioquia region. State has  reported that the U.S. government plans to shift substantial resources to  the initiative.", "Various U.S. officials stated that finding an appropriate combination of  eradication, interdiction, and alternative development assistance is critical  to achieve the U.S. objective of reducing cocaine production and  trafficking in Colombia in this new context. To find this combination, U.S.  officials stated that there are a range of considerations to weigh. For  example, U.S. officials stated that they must consider to what extent to  prioritize pursuing short-term reductions in coca cultivation and cocaine  supplies versus longer-term efforts to address the underlying causes of  the drug problem in Colombia, such as the widespread lack of legal  economic opportunities in rural areas of the country. In addition, U.S.  officials and documents from various agencies noted that  counternarcotics efforts must be properly sequenced and coordinated to  be effective. DEA analysis, for example, found that farmers are unlikely to  permanently abandon coca farming without sustained and concurrent  eradication and alternative development.", "Although U.S. officials noted the importance of finding an appropriate  combination of eradication, interdiction, and alternative development  assistance, they acknowledged that they have not undertaken a  comprehensive review of their counternarcotics approach in Colombia  that considers the benefits and limitations of these efforts to determine  whether the U.S government\u2019s current combination of activities is the  most effective approach to achieve U.S. counternarcotics goals. Officials  from State and other agencies noted that such reviews are challenging to  do systematically and noted that they must generally rely on imperfect  metrics, such as the amount of coca being cultivated, to determine if their  counternarcotics approach is working. In addition, most U.S. efforts at  measuring performance and evaluating results are focused at the  individual agency level, rather than designed to determine what  combination of U.S. counternarcotics activities will best achieve U.S.  objectives of reducing the cocaine supply.", "Federal internal control standards state that agency management should  use quality information to achieve the entity\u2019s objectives. Among other  things, the standards note agency management should use quality  information to make informed decisions and evaluate the entity\u2019s  performance in achieving key objectives and addressing risks. Without a  comprehensive review of the U.S. counternarcotics approach in Colombia  that considers the combination of eradication, interdiction, and alternative  development efforts, the U.S. government lacks important information on  how to most effectively combat drug trafficking in a changing environment  in Colombia. To undertake such a review, the U.S. government might  determine the need to collect additional information and conduct further  evaluations of its counternarcotics programs, but it could also potentially  use a range of existing information on what is known about the  effectiveness of eradication, interdiction, and alternative development  programs. State, as the lead agency at the embassy in Colombia, would  be best positioned to guide an interagency effort to undertake such a  review."], "subsections": []}]}, {"section_title": "Available Evidence Indicates that U.S.- Supported Eradication Efforts in Colombia May Not Be an Effective Long- Term Supply- Reduction Approach", "paragraphs": ["State\u2019s INL has supported Colombian aerial and manual eradication  efforts over time, but these efforts have declined after the Government of  Colombia\u2019s decision to end aerial eradication and several years of limited  or no funding for manual eradication driven by decreased Colombian  government demand for this assistance, according to State officials.  Despite these declines, officials from several U.S. agencies reported  eradication should be a vital component of U.S. counternarcotics efforts in  Colombia. Nevertheless, U.S. officials and the studies and experts in our  review identified a number of factors which may reduce the effectiveness  of eradication as a supply reduction approach, including the strategies  coca growers use to mitigate the effects of eradication and potential  adverse effects it may have on Colombian citizens. Additionally, third- party research suggests that eradication efforts do not substantially affect  the long-term supply of cocaine and are potentially costly."], "subsections": [{"section_title": "Since 2008 U.S.- Supported Eradication Efforts Have Declined after Changes in Colombian Counternarcotics Policy; However, U.S. Officials Believe Eradication Is an Important Component of an Overall Counternarcotics Approach", "paragraphs": ["INL has provided financial assistance and operational support for  Colombian eradication efforts in three key areas: aerial eradication,  manual eradication, and aviation support. Overall eradication efforts,  however, have declined over time and the Colombian government  stopped aerial eradication altogether in 2015.", "Aerial Eradication: Until 2015, INL directed the largest portion of its  eradication assistance toward the Colombian National Police aerial  eradication program. The program\u2019s goal was to reduce coca  cultivation and harvests by spraying coca fields with glyphosate. INL  helped fund, plan, and operate the aerial eradication program. It  provided the pilots, planning, aircraft, logistics, maintenance, and fuel  to operate the program\u2019s two spray bases. Funding for the aerial  eradication program declined over time from $66.2 million in fiscal  year 2008 to $12.7 million in fiscal year 2014. From October 2013 to  October 2014, aerial eradication was temporarily suspended by the  U.S. Embassy in Bogot\u00e1 after two pilots were shot down during  eradication operations. In May 2015, the Colombian government  stopped the aerial eradication program amid concerns that glyphosate  had a negative impact on public health. Cessation of aerial spraying  took effect in October 2015.", "Manual Eradication: According to State officials, U.S. assistance  shifted from aerial to manual eradication after the 2015 ban on aerial  spraying. Manual eradication involves using mobile eradication teams,  which are transported into coca fields to manually remove and destroy  coca plants (see fig. 6). These teams are made up of Colombian  police and military personnel, as well as civilian contractors, according  to INL officials. Initially manual eradication was used in concert with  aerial spraying in an effort to combat replanting in areas already  subjected to aerial spraying, but with the ban on aerial spraying,  manual eradication became a stand-alone approach. INL provides a  variety of support for manual eradication teams including operational  support and equipment, such as demining and brush cutters.  Additionally, INL helps identify and fund the development of new  technologies that might improve the effectiveness of manual  eradication, such as armored ground spraying vehicles which protect  manual eradicators from the danger of improvised explosive devices  and landmines. INL funding for manual eradication varied during fiscal  years 2008 through 2016, ranging from four fiscal years where INL  provided no funding to a high of $9.5 million in fiscal year 2014. INL  funding for manual eradication increased substantially in fiscal year  2017 to $26 million. According to State, decreases in the budget for  manual eradication were driven by reduced Colombian government  demand for this assistance.", "INL Aviation Support: INL has also provided aviation support to the  Colombian National Police and the Colombian Army to assist  counternarcotics efforts. According to INL, these aviation programs  provide critical assistance for a number of counternarcotics efforts  such as eradication, but also for interdiction, and security operations.  Because Colombia is a vast country with rugged terrain, many rivers,  and poor roads, State officials indicated air mobility is critical for  effective counternarcotics operations.", "Colombian National Police (CNP): INL provides logistical,  operational, maintenance, safety, and training assistance to the  CNP\u2019s aviation brigade in support of its counternarcotics  operations. The CNP aviation program costs roughly one-third of  INL\u2019s Colombia budget, averaging about $55 million annually in  fiscal years 2008 through 2017. Under this program INL helped  the CNP procure its air fleet. Currently, the INL aviation program  supports a total of 56 CNP aircraft, of which 52 are owned by the  U.S. government (see fig. 7). Additionally, INL\u2019s aviation  program provides assistance for the CNP to build maintenance  facilities, develop training plans, implement safety programs, and  procure equipment, such as flight recorders and communications  gear. As of 2018, INL also plans to provide $21 million over 4  years for the CNP\u2019s aerial imagery collection and data analysis  system, which Colombian authorities use to map coca fields and  plan eradication missions.", "Colombian Army: INL provided aviation support for the  Colombian Army prior to Colombia\u2019s takeover of the army aviation  program in 2012\u2014a process known as nationalization. INL  provided the Colombian Army\u2019s aviation program nearly $150  million from fiscal years 2008 through 2011. According to INL, this  support contributed significantly to the Colombian Army\u2019s aerial  eradication efforts as well as efforts to dismantle armed drug  trafficking organizations, such as the FARC and ELN. In 2008, the  Colombian government began to nationalize 62 aircraft from INL  and, in 2012, assumed full responsibility for their maintenance and  operations."], "subsections": []}, {"section_title": "Multiple Factors May Limit the Effectiveness of Eradication Efforts or Undermine Their Viability as a Long-Term Supply- Reduction Strategy", "paragraphs": ["U.S. and UN officials as well as third-party studies we reviewed identified  a number of factors that reduced the effectiveness of eradication efforts at  an operational level. We previously reported that U.S. funded  counternarcotics efforts, which focused on aerial spraying, did not  achieve Plan Colombia\u2019s overarching goal to reduce the cultivation,  production, and distribution of cocaine by 50 percent, in part because  coca farmers responded with a series of effective countermeasures.  Separately, State also indicated that aerial eradication was becoming less  effective prior to the end of the spraying program in 2015. Similarly, U.S.  and UN officials noted factors that had a negative impact on the  effectiveness of manual eradication efforts.", "Crop displacement: U.S. officials, UN reports, and third-party  researchers have noted that eradication has caused coca cultivation  to move, or be displaced, to smaller plots and areas \u201coff-limits\u201d to  aerial spraying, such as national parks, territories near international  borders, and protected indigenous and Afro-Colombian areas, thus  diminishing its impact on supply reduction. According to INL, at the  beginning of the 2000s plots of 10 or more hectares were  commonplace, easy to identify, and spray, but by 2016, the average  plot size was less than a hectare, making aerial spraying more  difficult. In addition, coca cultivation in areas off-limits to aerial  spraying, such as national parks, border areas, and indigenous and  Afro-Colombian areas, has increased substantially. According to one  State cable, in 2014 over 70 percent of the nationwide cultivation  increases in cultivation occurred in these areas. The Congressional  Research Service reported that cultivation increased in these areas by  50 percent between 2014 and 2015. Likewise, a UN report noted  that between 2015 and 2016, coca cultivation had increased by 32  percent in indigenous areas, by 45 percent in Afro-Colombian areas,  and by 27 percent in national parks. According to the UN report,  these areas account for only .04 percent of Colombia\u2019s national  territory but are the source of 32 percent of the nation\u2019s coca  cultivation. Four of the studies in our literature review also concluded  that eradication led to crop displacement. One study indicated that the  displacement of coca cultivation tends to disproportionately affect  vulnerable populations by concentrating crime in the areas where  these populations tend to live. The study concluded that coca  cultivation has increased in some of the most socially and  environmentally vulnerable areas of Colombia, including  disadvantaged rural communities and has tended to further  marginalize those Afro-Colombian communities that experienced  dramatic increases in coca cultivation.", "Countermeasures: Coca growers and drug traffickers can employ  countermeasures, such as using mines and improvised explosive  devices, which create serious risks for manual eradication teams. For  example, 4 manual eradicators were killed and 39 wounded during  manual eradication operations in 2017, according to one State cable.  Likewise, aerial spraying operations were also targeted by attacks.  For example, in 2013 two pilots were shot down while conducting  aerial eradication operations. This attack led to a temporary halt in  aerial spraying operations. One State cable reported that from 1996 to  October 2015 at least five spray aircraft were downed by hostile fire,  resulting in the deaths of four pilots.", "Replanting, pruning, and other mitigation efforts: Coca growers  have developed techniques, including replanting and pruning, which  can mitigate damage to coca plants and reduce the effectiveness of  eradication efforts. According to a 2017 UN report, 80 percent of the  coca fields detected in 2016 had previously been subjected to aerial  or manual eradication efforts. One DEA report confirmed that 25  percent of coca growers in the region they studied in 2008 had  replanted their crops after spraying. Colombian government data  showed that from 2014 through 2016 areas subjected to manual  eradication were replanted between 25 and 37 percent of the time. In  addition, coca growers can prune bushes immediately after spraying  to help counter the effects of glyphosate and allow the plants to yield  fresh leaves that may be harvested. According to data provided by  State, from 2006 through 2012 areas subjected to aerial spraying  were reconstituted\u2014replanted or pruned\u2014on average about 56  percent of the time. Growers may also intersperse coca plants  alongside licit agricultural crops because aerial eradication efforts  tend to be focused on large coca fields and attempt to avoid licit  crops.", "Coca growers\u2019 economic incentives: According to a DEA study, in  2007, nearly 60 percent of coca growers were ready to abandon coca  farming. Likewise, a 2009 DEA study stated that sustained aerial  eradication efforts, lasting 5 to 8 years, would force coca growers to  give up coca farming. DEA noted that the Putumayo region, which it  used as a model in the study, was \u201cnearing a tipping point\u201d in which  coca cultivation would be abandoned after aerial eradication caused  60-80 percent losses in coca fields. However, aerial eradication efforts  were sustained at or above 100,000 hectares from 2002 to 2012  before decreasing and eventually ending altogether in 2015. By 2016,  coca cultivation had increased substantially and DEA data showed  that only 5 percent of growers were ready to abandon coca. Similarly,  a UN coca cultivation survey found that the number of households  involved in the coca trade increased steadily from roughly 60,000 in  2008 to over 100,000 in 2016. DEA officials we interviewed agreed  that it now appears that coca growers do not \u201cabandon\u201d coca farming  during periods of sustained eradication, but rather they temporarily  stop farming coca until it is economically advantageous to resume.  State officials noted that they anticipate increases in eradication levels  under President Duque and expect that increased eradication may  alter coca farmers\u2019 analysis of the benefits and risks of growing coca.  One expert we interviewed was skeptical that eradication could ever  raise the economic costs of growing coca high enough to dissuade  farmers from growing coca because they find it easy to grow and are  very responsive to price changes. The expert stated that the revenues  from growing coca are often significantly higher than the costs of  growing the plant. Given such high potential profits, there is typically  an economic incentive to grow the crop.", "A number of other factors may also undermine the viability of eradication  as a supply reduction strategy more broadly:", "Protests against eradication: According to a 2017 State cable, rural  protestors use blockading tactics at eradication sites to disrupt manual  eradication efforts. This cable reported that protesters blocked 428  manual eradication operations in 2016, and 152 operations in 2017. In  addition, these protests against manual eradication efforts have led to  violent confrontations between local populations and Colombian  security forces. One such confrontation in Nari\u00f1o\u2014Colombia\u2019s top  coca-producing region\u2014led to the deaths of a number of civilian  protesters.", "Destruction of licit agriculture: Local civil society organizations in  Colombia maintain that glyphosate spraying drifts with the wind and  kills legal crops near eradicated areas, negatively affecting local  populations. State maintains that its eradication programs had a  minimal impact on licit crops; however, those whose licit crops had  been harmed as a result of aerial spraying were eligible for  compensation. According to State, from 2001 through the end of the  aerial spraying program in October 2015, Colombians registered  nearly 18,000 complaints of accidental spraying of licit crops. Of these  complaints, State noted that only 3 percent were found to have merit  and were therefore eligible for compensation.", "Debate over adverse health effects: The debate over the purported  negative health effects of glyphosate has made aerial spraying efforts  in Colombia controversial. In March 2015, the World Health  Organization\u2019s International Agency for Research on Cancer identified  glyphosate as \u201cprobably\u201d able to cause cancer in humans. However,  two U.S. agencies dispute these findings. From 2002 through 2011,  State formally certified to Congress that the glyphosate spraying  program posed no unreasonable health risks to humans. The  Environmental Protection Agency has also generally concluded that  glyphosate exposure from aerial eradication in Colombia has not been  linked to adverse health effects. Several other studies we reviewed  discussed the potential health effects of glyphosate.", "International disputes: In 2013, Ecuador and Colombia agreed to a  settlement to a case Ecuador filed in 2008 before the International  Court of Justice in The Hague seeking a prohibition of the use of  herbicides in aerial eradication near the Colombia-Ecuador border as  well as indemnification for claimed damages associated with  Colombia\u2019s eradication program. Ecuador received $15 million in  compensation from Colombia for alleged health and environmental  harms and Colombia agreed to a 10 kilometer exclusion zone on the  border with Ecuador in which it would not conduct aerial spraying."], "subsections": []}, {"section_title": "Third-Party Research Suggests that Eradication Efforts Do Not Have a Substantial Long-Term Effect on Reducing Coca Cultivation and Cocaine Supply and Are Potentially Costly", "paragraphs": ["Third-party research we reviewed suggests that eradication efforts do not  have a substantial long-term effect on coca cultivation and cocaine supply  and are potentially costly. Eight studies in our literature review had key  findings on the effectiveness of eradication efforts in Colombia. All eight  studies raised questions regarding the effectiveness of eradication as a  strategy to substantially reduce coca cultivation and the cocaine supply.  Five studies also generally concluded it is a potentially costly supply  reduction approach.", "Five studies found that eradication has only a small effect on reducing  coca cultivation, but the estimates for reductions varied by study. For  example, one study found that a 1 percent increase in the risk of  eradication decreases coca cultivation by roughly .44 hectares. Another  study estimated that a 1 percent increase in the risk of eradication would  decrease the total area in Colombia under cultivation by .66 percent.  Likewise, a third study found that as a result of displacement, the supply  reduction effects of spraying were so small that an additional 33 hectares  must be sprayed every year in order to reduce coca cultivation by 1  hectare.", "Three other studies concluded eradication efforts had no net effect on  reducing the coca or cocaine supplies, or have led to increased coca  cultivation. For example, one of these studies reported that a 1 percent  increase in eradication actually increases the amount of land under coca  cultivation by 1 percent as growers try to compensate for losses. The  author noted that municipal level data on eradication and coca cultivation  trends was broadly compatible with their findings. In addition, the author  presented data from 2006 through 2012 which indicated a 38 percent  decrease in eradication levels as well as a 38 percent decrease in coca  cultivation. Another study concluded that the effects of eradication were  nullified by coca growers\u2019 ability to rapidly relocate their operations to  other areas.", "Several of the studies we reviewed examined aspects of the costliness of  eradication efforts, but relied on cost data that were either limited or we  were unable to substantiate. Three studies generally concluded that  eradication is costly in absolute terms, while two others suggested that  eradication appears to be more costly than other alternative  counternarcotics efforts. For example, one study suggested removing 1  kilogram of cocaine from retails markets through eradication would cost  the United States roughly $940,000. Another study estimated that an  additional $100,000 spent on eradication would reduce coca cultivation in  Colombia by 1.5 percent."], "subsections": []}]}, {"section_title": "U.S.-Supported Interdiction Efforts Seized a Substantial Amount of Cocaine and Disrupted Drug Trafficking Organizations in Colombia, but the Long-Term Effect of These Efforts is Unclear", "paragraphs": ["U.S. agencies have provided a variety of support for Colombian  interdiction efforts, including capacity building and operational support.  These efforts resulted in the seizures of a substantial amount of cocaine  and precursor chemicals and disrupted drug trafficking organizations by  arresting these organizations\u2019 leadership and seizing valuable assets.  However, the long-term effects of these efforts are unclear due to  continued increases in cocaine production and the emergence of new  drug traffickers. U.S. and Colombian officials identified a number of ways  to improve the effectiveness of interdiction. A limited number of third-party  studies on interdiction suggest mixed findings but indicate interdiction  may be more effective than eradication because it targets drug trafficking  at a more costly point in the production and distribution process."], "subsections": [{"section_title": "U.S. Agencies Have Provided Capacity Building and Operational Assistance to Support Colombian Interdiction Efforts", "paragraphs": ["Building Partner Capacity: U.S. agencies provided a range of  assistance that has improved Colombian authorities\u2019 capacity to conduct  interdiction efforts. U.S. and Colombian officials noted that because of  these efforts, Colombian security services were able to provide  counternarcotics training and support to other countries in the region. Key  examples of U.S. efforts to build partner capacity included:", "Counternarcotics forces: U.S. agencies provided a broad range of  assistance to improve the effectiveness of Colombian  counternarcotics forces. For example, INL funded the creation and  training of the Colombian Army\u2019s counternarcotics brigades\u2014military  units responsible for seizing cocaine, destroying cocaine processing  labs, and securing eradication sites. In addition, DOD and INL  provided training and expertise to the Colombian National Police\u2019s  Junglas unit, which is a highly-trained special operations unit used to  detect and destroy cocaine labs and capture high value drug  traffickers. INL funded the construction of the Colombian National  Police training facility where security services from Colombia and  neighboring countries receive counternarcotics-related training.  Likewise, DOD provided a broad array of programs designed to  improve the operational capabilities of Colombian security forces. For  instance, the agency\u2019s Regional Pilot Training School helps provide  helicopters, training, and certification for up to 50 Colombian and 24  international pilots annually. According to DOD, the goal of this  program is to increase the Colombian capacity to rapidly deploy to  remote areas of the country to conduct counternarcotics operations.", "Equipment procurement and maintenance: U.S. agencies provided  assistance to procure and maintain equipment for their Colombian  counterparts. The largest such effort is INL\u2019s Aviation Program, which  procured and maintained a fleet of aircraft for the Colombian National  Police. The aviation program allows the police to conduct interdiction  operations in areas of the country which are difficult to access,  according to INL officials. INL also procured and maintained other  equipment, including communications equipment and night vision  goggles. In addition, DOD provided equipment to vetted Colombian  security forces with counter-narcotics missions, including patrol boats;  protective gear; and specialized navigation, communications, and  surveillance equipment.", "Judicial support: For over 20 years DOJ\u2019s Office of Overseas  Prosecutorial Development Assistance and Training (OPDAT) has  provided a range of assistance to help reform the Colombian judicial  system and improve its ability to prosecute crimes. According to  OPDAT officials, this assistance is critical for the successful  prosecution of drug cases. The office assisted with prosecutor  training, case-based mentoring, case efficiency, litigation skills, and  plea bargaining. Likewise, DOJ\u2019s International Criminal Investigative  Training Assistance Program (ICITAP) provided training, including  curriculum development, seminars, and on-the-job training, to improve  the Colombian government\u2019s ability to conduct criminal investigations  and develop forensics capabilities according to agency officials.  ICITAP\u2019s training efforts in Colombia focused, in part, on reforming  Colombia\u2019s legal framework as well as fostering cooperation and  organizational development between the country\u2019s judicial and law  enforcement agencies.", "Investigative support: A number of U.S. agencies worked closely  with Colombian vetted units, to support these agencies\u2019 missions  abroad. For example, DEA provided funding, training, and vetting for  Colombian Sensitive Investigative Units (SIUs). According to DEA  officials, DEA conducted bilateral counternarcotics and money  laundering investigations with these Colombian vetted units. Similarly,  the FBI and ICE both work with Colombian vetted units and provide  investigative support for counternarcotics investigations. For example,  the FBI worked closely with its vetted unit in Colombia to investigate  transnational criminal organizations. FBI officials told us that these  cases were almost exclusively related to drug trafficking organizations  in Colombia.", "Operational Support: U.S. agencies also provided operational support  for Colombian interdiction operations. Key examples of U.S. operational  support include:", "Targeting, extraditions, and prosecutions: A number of U.S.  offices supported the targeting, extradition, and prosecution of  Colombian drug traffickers. For example, DOJ\u2019s Organized Crime  Drug Enforcement Task Forces (OCDETF) developed the  Consolidated Priority Organization Target (CPOT) list in order to  identify and target the leaders of major drug trafficking organizations.  Likewise, the FBI targets drug trafficking leadership as well as  facilitators\u2014those who support drug traffickers financially or  politically\u2014by investigating money laundering and corruption cases  according to agency officials. In addition, DOJ officials partnered with  the Colombian government to extradite drug traffickers to the U.S. for  trial. According to the DEA officials, extradition is one of the most  effective investigative tools against drug trafficking in Colombia. The  DEA officials noted that the vast majority of persons charged and  extradited to the United States from Colombia have been convicted.  Additionally, an FBI official stated that the extradition of high level  drug traffickers has the potential to degrade the operational ability of  their organizations because these extradited leaders may cooperate  with U.S. courts to get reduced sentences. This cooperation can then  create leads for new cases and provide new information and  witnesses for active cases, further undermining the operations of  criminal organizations.", "Detection and monitoring: Several U.S. agencies supported  Colombian interdiction efforts by assisting with detecting and  monitoring of drug trafficking operations. For example:", "According to DEA, during bilateral investigations the agency and  its Colombian counterparts utilized a number of investigative tools  to detect and monitor drug trafficking networks and money  laundering organizations with the ultimate goal of prosecution in  Colombia and the United States. DEA stated that information  gleaned from these efforts is shared and used to coordinate  maritime interdiction operations that can lead to additional  evidence for prosecution. One DEA official stated that these  detection and monitoring efforts yield more leads than U.S. and  Colombian security forces have the resources to interdict.", "Beginning in 2003, INL supported the CNP\u2019s Air Bridge Denial  program. This program was developed to help improve the  Colombian government\u2019s ability to detect and intercept airplanes  smuggling drugs into and out of Colombia. In 2003, Colombia  documented 60 to 70 flights per month transporting drugs into and  out of the country. Today, Colombia reports detecting no more  than two or three flights per year, according to State. The  program, including all aircraft, hangars, equipment, and facilities  was nationalized in January 2010. Following nationalization, INL\u2019s  Air Bridge Denial budget decreased from roughly $20 million in  2004 to $1 million in 2012 and, at present, INL no longer funds the  program.", "DOD also provided intelligence, surveillance, and reconnaissance  (ISR) in support of interdiction operations. According to officials  the agency uses its ScanEagle unmanned aerial vehicles to help  Colombian security forces track maritime vessels moving drugs on  Colombia\u2019s Pacific coast. For example, DOD provided various  task forces, which include Colombian police, army, navy, marines,  and coast guard units, with ISR support via ScanEagle systems,  including imaging and video to support interdiction efforts along  the Pacific coast of Colombia, according to DOD officials."], "subsections": []}, {"section_title": "Monitoring Data Show Interdiction Efforts Seized a Substantial Amount of Cocaine and Disrupted Drug Trafficking Organizations; However, the Long-Term Effects of These Efforts Are Unclear", "paragraphs": ["U.S., UN, and Colombian monitoring data indicate that interdiction  disrupts drug trafficking operations by seizing large amounts of cocaine,  precursor chemicals, and other assets used by drug trafficking  organizations. According to UN data, the amount of cocaine seized in  Colombia increased from about 198 metric tons in 2008 to an estimated  435 metric tons in 2017 (see fig. 9). These totals accounted for an  estimated 42 percent and 32 percent of the cocaine produced in those  years, respectively. From 2008 through 2017 the total financial impact of  cocaine seizures on drug trafficking organizations exceeded $4 billion.  Several factors may explain these increases in the amount of cocaine  seized. Several U.S. officials noted that increases in cocaine production  means there is more cocaine to be seized in transit, while another official  stated that seizure increases without corresponding increases in  resources indicate that interdiction efforts may be becoming increasingly  effective over time. In addition, interdiction efforts have led to the  destruction of numerous drug processing facilities. From 2008 through  2017, nearly 30,000 coca paste and cocaine processing laboratories were  destroyed, according to Colombian data.", "Since 2008, Colombian security forces have also seized over 30 million  gallons of the liquid precursor chemicals necessary for the production of  cocaine, as well as 8,087 vehicles, 1,083 boats, 18 airplane, 65,778  firearms, over 13 million rounds of ammunition, and 34,800 pieces of  communications equipment associated with drug trafficking operations,  according to Colombian government data. In addition, since 2008, ICE  estimates that Colombian authorities have seized over $35 million in bulk  cash and hundreds of millions of dollars in drug related contraband at  Colombian ports.", "U.S. supported interdiction efforts have contributed to the disruption and  dismantling of a number of drug trafficking organizations and the arrest  and extradition of high value drug trafficking suspects on the CPOT and  priority target organization (PTO) lists (see table 1). For example, as  part of an \u201cOperation Agamemnon II\u201d that sought to disrupt and dismantle  the Clan del Golfo, Colombian forces killed the group\u2019s second-in- command, Roberto Vargas Gutierrez in August 2017; captured its third-in- command, Luis Orlando Padierna Pena in November 2017; and killed or  captured many other senior and mid-level leaders. Likewise, in April  2017, Colombian forces arrested Edison Washington Prado \u00c1lava in  Tumaco and seized $25 million in cash. Prado \u00c1lava, known as the  \u201cPablo Escobar of Ecuador,\u201d had issued death threats against police,  prosecutors, and judges in both Ecuador and Colombia. In February  2018, with the cooperation of Colombian authorities, Prado \u00c1lava was  extradited to the United States, where he is facing prosecution.", "From fiscal years 2008 through 2017, OCDETF reported that Colombian  forces arrested 31 Colombians, disrupted 273 Colombian organizations  and dismantled 94 others linked to the CPOT list. From calendar years  2008 through 2017, DEA reported that U.S. and Colombian authorities  had also disrupted 83 PTOs and dismantled 201 others, including an  estimated 5,444 PTO-related arrests. DEA officials stated that nearly all  of these extraditions were for drug related crimes and these individuals  were all \u201chigh value\u201d targets.", "However, the long-term effect of these efforts is unclear. While seizures  remove roughly 40 percent of the total cocaine supply each year on  average, increases in cocaine production mean that the net supply of  cocaine destined for the United States has increased despite the  substantial amount of cocaine seized. U.S. officials also stated that while  arrests and extraditions remove drug trafficking leaders, which may  temporarily degrade the operational capabilities of drug trafficking  organizations, the lucrative nature of the cocaine market ensures that  others will replace these individuals.", "U.S. and Colombian sources identified several other challenges that may  impact the effectiveness of interdiction efforts. One FBI official stated that  as investigative efforts fragment drug trafficking organizations, it becomes  more challenging to target organizations and dismantle their command  and control structures. One of the studies we reviewed suggested that as  these organizations are dismantled, local populations may be affected by  pronounced cycles of violence as competing armed groups vie for control  of drug trafficking operations in areas formerly under the control of an  established criminal organization which has been dismantled. Sources  also stated that extraditions may become less of a deterrent to drug  traffickers over time as they and their legal counsels become more  familiar with the U.S. judicial system and are able to effectively plead to  lesser charges and get lighter sentences."], "subsections": []}, {"section_title": "U.S. and Colombian Officials Identified Opportunities to Improve the Effectiveness of Interdiction Efforts", "paragraphs": ["U.S. and Colombian officials identified a number of ways to improve  interdiction efforts and increase the effectiveness of these operations:", "Maritime/riverine boat program: State and DOD have already  provided assistance to strengthen Colombia\u2019s maritime and riverine  interdiction capabilities, but INL officials noted that they were  exploring options to provide further support for riverine interdiction  efforts given the significance of Colombia\u2019s waterways in drug  trafficking. A number of U.S. and Colombian officials, including  officials from INL, the Colombian Navy, and the U.S. and Colombian  Coast Guards, stated that an enhanced \u201cboat program,\u201d similar to  INL\u2019s aviation program, would improve the country\u2019s ability to interdict  cocaine shipments traveling along Colombian maritime routes.  Officials noted that features of such a program should include the  procurement, supply, and maintenance of boats capable of tracking  down the \u201cgo fast\u201d boats used by traffickers. These vessels cost $1  million each, and provide a significant return on investment, according  to Colombian authorities. One such boat, for example, was able to  interdict 12 tons of cocaine (valued at $60 million) in 1 year in  Tumaco, Colombian officials stated.", "Port of entry/container interdiction operations: DHS officials from  ICE and CBP have supported Colombian efforts to seize drugs and  other contraband at air and sea ports of entry. However, one ICE  official stated that container smuggling is the \u201cAchilles\u2019 heel\u201d of  cocaine interdiction efforts in Colombia. According to this official,  Colombian ports vary in their willingness to cooperate with U.S.  agencies in order to combat drug smuggling. For example, the official  stated that one port provides a lot of information to ICE and CBP  officials because it participates in CBP\u2019s Container Security Initiative,  while another port is known for corruption and smuggling. This official  believes that hundreds of tons of cocaine leave via containers  carrying licit merchandise and reported that, for example, one  interdiction operation targeting the port in Cartagena had resulted in  the seizure of 35 tons of cocaine since 2015. According to ICE  officials, assigning more personnel to Colombian air and seaports  would greatly increase seizures of cocaine and contraband.", "Drug trafficking organization funding/finance: A number of U.S.  and Colombian sources suggested that interdiction efforts can be  improved by targeting drug trafficking organizations\u2019 assets and  revenues. Because money is at the top of the value chain, disrupting  cash flow before it can return to drug traffickers would have a  significant impact on their ability to profit from criminal activities and  continue to fund their operations, according to several U.S. and  Colombian sources. One expert we spoke to indicated that interdiction  efforts could be improved by targeting money laundering, bulk cash  shipments, and contraband smuggling. According to one FBI official,  drug trafficking organizations cannot operate without financing, and as  a result it is important to focus on money laundering cases. Similarly,  one ICE official described bulk cash shipments and money laundering  as the \u201cfuel\u201d that drives drug trafficking and believes it is critical to  devote more resources in this area. DEA stated that in addition to its  bilateral investigations with Colombia, the agency also conducts  simultaneous money laundering investigations often resulting in  seizures of assets and bulk cash. However, INL officials stated that  Colombian asset forfeiture laws have made it difficult for authorities to  seize and liquidate the assets of drug traffickers. In 2017, revisions to  these laws were passed making it easier for Colombian officials to  liquidate these assets and use these resources to fund further  counternarcotics efforts; however, State noted that the revised asset  forfeiture process still faces several challenges including the limited  number of judges and long periods of time needed to adjudicate these  cases.", "Regional maritime interdiction operations: U.S. and Colombian  officials suggested that sustaining regional maritime interdiction  operations between the U.S., Colombia, and other nations in the  transit zone can significantly disrupt drug trafficking operations if  maintained long term. For example, beginning in March 2017, the  U.S. and Colombian navies\u2014along with maritime authorities from  Panama, Costa Rica, Mexico, Honduras, Ecuador, Guatemala, and  Nicaragua\u2014conducted Operation Orion, a series of coordinated  maritime interdiction operations targeting different areas of the transit  zone. One of these operations, conducted jointly by Colombia and  Panama, seized 2.5 tons of cocaine in 1 month and led to 20 arrests.  U.S. Coast Guard officials stated that Operation Orion was a  successful, short-term example of how regionally coordinated  operations can improve the effectiveness of maritime interdiction and  believe that continuous operations of this type would dramatically  improve the effectiveness of interdiction efforts overall. U.S. Coast  Guard officials also noted that these types of coordination efforts  among Colombia and other countries in the region are an important  step toward self-sufficiency and away from a reliance on U.S. funding  and law enforcement support for maritime operations. However, these  officials noted that there are currently not enough resources devoted  to interdiction to sustain these types of partnerships in the long term.  Colombian Navy officials agreed that countries in the region need to  devote more resources to sustain these types of regional efforts.  However, these officials also noted that Colombia has taken some  steps, such as developing permanent information sharing agreements  with regional partners, to develop these types of relationships."], "subsections": []}, {"section_title": "A Limited Number of Third- Party Studies on Interdiction Have Mixed Findings, but Suggest Potential Effectiveness Relative to Eradication", "paragraphs": ["Third-party research we reviewed had limited findings related to  interdiction. While seven of the studies in our literature review discussed  aspects of interdiction efforts, four studies had findings related to the  effect of these efforts on the cocaine supply. These four studies had  mixed findings about the overall effectiveness of interdiction efforts. One  study we reviewed found that an increased emphasis on interdiction  efforts in Colombia, beginning in 2006, had achieved a substantial  reduction in the net supply of cocaine. Another study indicated that  increases in the costs to produce cocaine were mainly due to the  interdiction of precursor chemicals such as gasoline. However, two  other studies concluded that increased cocaine seizures did not have a  substantial impact on either the price or the overall supply of cocaine,  which has steadily increased since 2013.", "Several of the seven studies we reviewed suggested that interdiction is  more effective or more cost-effective than eradication efforts. Two studies  indicated that interdiction policies had a greater impact on the cocaine  supply than eradication policies. For example, one study showed that the  destruction of cocaine processing labs has a greater impact on cocaine  prices than aerial or manual eradication efforts. Two other studies  concluded that interdiction was more cost effective than eradication  efforts. For example, one study indicated that the cost of removing 1  kilogram of cocaine from retail markets in the United States was $175,000  if resources were devoted to interdiction and $940,000 if resources were  devoted to eradication. However, this study relied on cost estimates that  were either limited or we were unable to substantiate.", "A number of the studies in our literature review and experts we  interviewed stated that counternarcotics resources should primarily be  devoted to interdiction efforts instead of eradication efforts because they  target drug traffickers at the top of the \u201cvalue chain\u201d. According to these  studies and experts, counternarcotics actions are more costly to drug  traffickers at this stage of the drug trafficking process. For example, two  studies indicated that the destruction of cocaine processing labs is the  most effective counternarcotics effort. One study stated that the  destruction of these labs is an effective interdiction strategy because  these labs add significant value to the final product, cocaine lost at this  stage is not easily replaced, and the destruction of labs reduces demand  for coca leaves and coca cultivation. This study indicated that for every  lab destroyed, coca cultivation decreases by 3 hectares as demand for  the leaves falls. Another study indicated that the number of processing  laboratories destroyed accounts for 75 percent of the price fluctuation of  cocaine."], "subsections": []}]}, {"section_title": "U.S.-Supported Alternative Development Programs in Colombia Have Achieved Some Positive Results, but Officials and Research Have Noted Some Implementation Challenges", "paragraphs": ["U.S.-supported alternative development programs in Colombia have  attained some positive outcomes. USAID evaluations and monitoring data  show that alternative development programs have achieved a number of  positive results in increasing opportunities to participate in the legal  economy in Colombia, but have also faced issues that reduced their  effectiveness. U.S. and Colombian officials stated that alternative  development programs are important to a long-term counternarcotics  strategy, but noted a number of implementation challenges. Third-party  research suggests that alternative development has the potential to  reduce coca cultivation if properly implemented."], "subsections": [{"section_title": "USAID Has Supported a Range of Alternative Development Programs Designed to Increase Licit Economic Opportunities in Colombia", "paragraphs": ["USAID\u2019s alternative development programs in Colombia provide support  in a number of key areas, including programs that are intended to: assist in the development of value chains for agricultural products,  such as cacao and coffee, or the development of licit businesses;  support land formalization efforts, including the issuance of land titles  and the development of Colombia\u2019s national registry of land  ownership (known as a cadaster);  increase access to rural finance;  strengthen producer associations (see fig. 10);  leverage private sector investment to support rural development; provide needed infrastructure to strengthen communities and support  legal economies including roads, schools, electricity, and sanitation;  and  support civil society organizations and strengthen governance,  including efforts to build social capital and increase the presence of  the Colombian government in areas affected by conflict.", "According to USAID, over time, it has broadened the focus of its  alternative development efforts to move beyond crop substitution  programs and to instead work to transform underdeveloped regions within  Colombia and address the underlying issues that drive the economics  and culture of drug trafficking. USAID noted that it has also sought to  prioritize particular geographic regions, rather than seeking to implement  programs throughout the whole country. Table 2 lists examples of  alternative development programs that USAID has funded in Colombia  over the past 10 years. USAID, State, and Colombian officials noted that  this broader, more comprehensive focus for alternative development is  necessary in order to create the conditions that would be conducive for  legal alternatives to coca cultivation to be viable in many parts of  Colombia. For example, Colombia faces substantial deficiencies in its  road network. Without improvements in the road network, many  Colombians in rural areas do not have a feasible way of transporting legal  crops to markets or accessing basic services. Significant numbers of  Colombian farmers also do not possess title to their land, which, among  other things, limits their ability to access credit and reduces their  incentives to make longer-term investments in legal crops such as cacao,  which take years to mature."], "subsections": []}, {"section_title": "USAID Evaluations and Monitoring Data Show that Alternative Development Programs Have Achieved Some Positive Results, but Have Also Faced Issues that Reduced Their Effectiveness", "paragraphs": ["We reviewed seven independent evaluations that USAID has  commissioned since 2008. These evaluations reported that USAID  alternative development programs have achieved a range of positive  results. For example, a 2016 midterm impact evaluation of USAID\u2019s  Consolidation and Enhanced Livelihood Initiative found that, among other  things, an increased number of program beneficiaries reported that their  economic situation was good or very good compared to the baseline at  the beginning of the project. In addition, the evaluation found that  program beneficiaries\u2019 sales of supported products had increased  significantly and had far exceeded USAID targets. A 2014 post- implementation evaluation of two USAID programs (1) More Investment in  Sustainable Alternative Development and (2) Areas for Municipal-Level  Alternative Development found positive outcomes for some beneficiaries,  including success in helping producer associations get their products to  market.", "However, the evaluations also reported that USAID alternative  development programs did not achieve all intended goals and faced  certain implementation issues including problems with project design,  program funding not being sustained for adequate periods, and a lack of  consistent support from the Colombian government, which was a partner  in these programs. For example, an April 2009 evaluation of USAID  alternative development efforts under Plan Colombia reported, among  other things, that many marketable crops in Colombia, such as cacao or  coffee, take several years to grow before they are ready to harvest and  produce income for farmers. Thus, farmers need income support during  this period as they transition from dependence on coca to legal crops,  but, according to the evaluation, USAID and the Colombian government  frequently did not provide sufficient income to cover food costs or other  expenses, making farmers highly vulnerable to resume coca cultivation.  An April 2011 evaluation of USAID\u2019s Integrated Governance Response  program reported that some funded projects were at a standstill due to  the delays by the Colombian local and regional governments in fulfilling  their commitments. USAID, for example, had funded the construction of a  cold-storage facility to assist milk producers in one region, but the facility  had not been provided with electricity because the municipal government  had not sent a building inspector to approve its construction. A February 2017 review of alternative development in Colombia reported that a  number of alternative development efforts may require longer time  horizons than allowed by most USAID contracts or cooperative  agreements.", "In addition to these evaluations, other USAID assessments have reported  that alternative development programs have achieved some positive  results. For example, data from USAID\u2019s Monitor system report that  USAID projects related to \u201cInclusive Rural Economic Growth\u201d exceeded  their targets for 23 of 44 performance indicators for which results were  reported for fiscal year 2017. Similarly, for fiscal year 2017, USAID  reported that it exceeded its targets for six of nine performance indicators  related to inclusive rural growth that were tracked in Embassy Bogot\u00e1\u2019s  Performance Plan and Report (see table 3). An internal USAID analysis  also noted that the agency had been able to increase the ratio of legal  crops grown relative to coca in areas where it had funded programs to  increase opportunities for such crops. Specifically, USAID reported that in  14 departments where it had funded such programs, the ratio of illegal to  USAID-supported legal crops under cultivation had decreased from 302:1  hectares to 13:1 hectares from 2011 to 2016.", "USAID noted different factors that resulted in three of the nine targets not  being met. For example, USAID stated that the target for households with  formalized land was not met because the Colombian government  eliminated the agency previously responsible for land formalization in  December 2015 and created two new agencies in its place. According to  USAID, these new agencies did not begin operations until March 2017,  which delayed USAID\u2019s work with the Colombian government on the  project and created uncertainty about the Colombian government\u2019s land  policy and administration.", "Data reported by UNODC also provides certain information related to the  effectiveness of alternative development efforts in Colombia. UNODC, for  example, collects and reports data on the number of households involved  in coca production as part of its annual illicit crop cultivation surveys.  These data show that the number of households in Colombia involved in  coca cultivation increased from 59,328 to 106,900 between 2008 and  2016 (an increase of 80 percent). Such data indicate that any gains  achieved in encouraging Colombians to switch from illegal to legal  livelihoods through alternative development programs have been  outweighed by other factors driving increased involvement in coca  cultivation."], "subsections": []}, {"section_title": "U.S. and Colombian Officials View Alternative Development Programs as Important to a Long-Term Counternarcotics Strategy, but Noted a Number of Implementation Challenges", "paragraphs": ["U.S. and Colombian officials stated that alternative development, and the  creation of viable opportunities for Colombians to get access to public  services and participate in the legal economy, is important to solving the  drug problem in Colombia. However, these officials acknowledged that  comprehensive alternative development is a long-term approach that  requires significant investment. They also pointed out that large portions  of rural Colombia have been marginalized for decades and that the  Colombian government will need to make substantial, sustained  investments in rural areas to establish the necessary conditions for legal  economies to develop. According to USAID officials, USAID data indicate  that the regions where USAID has intervened have fared better than the  areas where it has not, but the scope and scale of its interventions have  not been significant enough to counteract overall coca cultivation and  cocaine production trends in the country.", "U.S. government analysis and officials noted that there are also powerful  economic disincentives for farmers to shift from the cultivation of coca to  legal crops such as coffee or cacao. According to State analysis, while  prices per kilo of cacao and coffee are higher than coca, lower investment  costs, more frequent harvests, higher yields per hectare, minimal field  maintenance costs, and negligible transportation costs, make growing  coca the more profitable economic choice in most parts of Colombia. For  example, in the Nari\u00f1o region, State found that growing coca can be up to  14 times more profitable per hectare than cacao, factoring in all costs.  DEA analysis has found that average annual profit accrued by Colombian  farmers from a hectare of coca increased by more than 120 percent from  2012 to 2016. In addition, DEA analysis has found that as profitability has  increased, the number of coca farmers wanting to stop growing coca has  declined substantially.", "According to USAID documents and officials, a number of other factors  have also affected USAID\u2019s ability to effectively support alternative  development efforts in Colombia, including Colombian policy and legal  restrictions, insecure and inaccessible locations, coordination challenges  with the Colombian government, the diversity of needs within Colombian  communities, and Colombia\u2019s current alternative development focus and  U.S. legal restrictions.", "Colombian policy and legal restrictions. USAID has been limited in its  ability to implement alternative development programs in a number of  coca cultivating areas due to policy and legal restrictions. For example,  according to USAID evaluations and officials, under the Colombian  government\u2019s previous \u201czero coca\u201d policy, it was prohibited from providing  any assistance in an area until it was proved that all coca in the area had  been eradicated. As a result, USAID was unable to provide assistance for  coca growers to switch to and remain in legal livelihoods. In addition,  approximately 8 to 10 percent of coca is grown in national parks, where,  according to USAID, under Colombian law, it may not implement any  development projects.", "Insecure and inaccessible locations. USAID has been limited in its  ability to provide assistance in some key coca growing areas of the  country due to security concerns and the remote nature of the locations.  According to USAID, the Colombian government has at times prohibited it  from operating in \u201cred zones\u201d where there was active, armed conflict.  USAID stated that it has also chosen not to fund programs in some  regions because it is too dangerous for the agency\u2019s implementing  partners to safely operate. In addition, USAID noted that some of the  areas with the highest concentration of coca are largely inaccessible,  making it challenging to implement assistance programs, since many of  them have no roads and can only be reached by boat or by foot.", "Coordination challenges with the Colombian government. According  to USAID officials, USAID has also faced challenges because of the lack  of consistent, coordinated support from the Colombian government and  difficulties getting Colombian agencies to work together. For example,  after the Colombian government announced the National Consolidation  Plan in 2009, USAID focused its assistance in 40 of the 58 municipalities  that the Colombian government had selected for consolidation. Despite  evidence of progress being made in these areas, by 2013 the Colombian  government had begun to reduce its support for the policy, according to  USAID. USAID stated that impediments to the successful continuation of  the plan included, among other things, a lack of political support,  disorganization at the top levels of the Colombian government, changes  to and the politicization of the Colombian government\u2019s administrative  entity leading the effort, and challenges executing national budgets  flexibly and efficiently at the local level. As a result, USAID stated that it  was forced to adapt its efforts in the later years of the plan to focus on  working with local partners rather than the national government.", "Diversity of needs within Colombian communities. USAID has faced  challenges designing appropriate alternative development programs  given the diversity of communities within Colombia that have differing  needs in terms of alternative development support. For example, there  are a wide range of microclimates throughout Colombia which can make  it challenging to replicate the same types of technical assistance for  farming of legal crops in different parts of the country. USAID noted that it  works to tailor its alternative development programming to specific  regions. For example, USAID reported that it worked to tailor its  assistance to meet the needs of an indigenous community in Northern  Cauca. USAID was seeking to improve access to finance in the  community; however, due to communal ownership of land, the community  could not use land as collateral for loans, according to USAID. Thus,  USAID stated that it tailored its assistance by setting up a revolving fund  managed and administered by the community itself to expand financing  for local businesses. U.S. and Colombian officials noted the need for  additional information on various communities to know how to best design  programs that would work in the different areas.", "Colombia\u2019s current alternative development focus and U.S. legal  restrictions. According to USAID, its efforts to support alternative  development in Colombia have also been challenged by the Colombian  government\u2019s current program focus. According to USAID, State, and  Colombian officials, a central part of the Colombian government\u2019s  counternarcotics strategy under the peace accord is to implement a  voluntary eradication and crop substitution program. Under the program,  in exchange for voluntarily eradicating their coca crops, farmers receive  cash assistance and technical support to help them transition to the  cultivation of legal crops. However, according to USAID, the Colombian  government is implementing the program in conjunction with the FARC.  As a result, USAID officials stated that the U.S. government\u2019s ability to  support the program is restricted because the FARC is still designated as  a Foreign Terrorist Organization. USAID and State officials also pointed  out a range of implementation problems with the program and stated that  the plan has had little to no impact on the current coca cultivation trends  in Colombia. For example, USAID officials noted that the payment of  stipends to farmers has begun before the eradication of their coca has  been required or verified. As of April 2018, the Colombian government  had signed up approximately 50,000 families for the program, according  to State reporting. However, State reported that the Colombian  government has publicly acknowledged that the program is lagging in  achieving its intended results and was forced to reduce its targets under  the program from 50,000 to 22,000 hectares in 2017."], "subsections": []}, {"section_title": "Third-Party Research Suggested that Alternative Development Has the Potential to Reduce Coca Cultivation if Properly Implemented, but Noted Limitations", "paragraphs": ["Independent research and non-governmental experts we spoke to  generally suggested that alternative development programs have the  potential to strengthen legal economic activity and encourage  communities to shift away from coca cultivation, if properly implemented.  Ten studies in our literature review discussed alternative development. Of  these 10 studies, 3 included original research that found evidence  regarding the potential effectiveness of alternative development programs  in Colombia.", "One study we reviewed found that social investment in infrastructure  and human capital could be an effective and complimentary strategy  for controlling illegal crops. The study found that $5.55 spent in  social investment per inhabitant in a given municipality prevented the  cultivation of a new hectare of coca.", "A different study, looking at land titling efforts in Colombia, found that  the formalization of one additional hectare of land for small  landholders within a given municipality resulted in a decrease of  approximately 1.4 hectares of land allocated to coca cultivation within  that municipality.", "An additional study found that implementing community planning  models that involved citizen participation could be effective in  encouraging the adoption of alternative development projects and the  substitution of legal crops in place of coca.", "Several other studies did not include original research on the  effectiveness of alternative development programs, but made  recommendations to increase the emphasis placed on such efforts based  on the authors\u2019 review of existing evidence. For example, one review of  existing research recommended that policies aimed at reducing illicit crop  cultivation should be centered upon alternative livelihood programs. The  study noted that the Colombian government should consider expanding  and improving a successful alternative development program it had  previously implemented in the Macarena region of Colombia.", "Some studies and experts, however, raised issues about the  implementation of alternative development programs and noted potential  limitations in their effectiveness. For example, one study that assessed  the effectiveness of alternative development found that because coca  cultivation is unlikely to change as a result of increases in perceived risk  and relative profit, alternative development was likely to have only small  effects on coca cultivation levels. Another study noted that alternative  development programs have tended to be located far from areas where  coca crops have been grown. Thus, the study recommends pursuing  more comprehensive counternarcotics efforts in areas affected by coca  cultivation. An additional study cited the success of one regional  alternative development program, but noted that many alternative  development programs in Colombia have faced implementation  problems. One expert we interviewed stated that alternative  development can work in particular parts of Colombia, yet such efforts  were likely not viable in some key coca growing regions, where there is  little infrastructure to market legal crops. Thus, the expert stated it is  crucial to target where alternative development programs are  implemented."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since the launch of Plan Colombia almost 20 years ago, the U.S. and  Colombian governments have partnered closely to combat drug trafficking  through a mix of eradication, interdiction, and alternative development  efforts. Since then, violence in Colombia has decreased and the  successful negotiation of a peace agreement with the FARC brought an  end to that 50-year conflict. However, increasing cocaine production  levels in the past 4 years and the continued existence of a range of  violent criminal groups underscore the ongoing threat of narcotics  trafficking for Colombia.", "As the U.S. government seeks to support Colombia in this new phase of  its fight against drug trafficking, U.S. agencies should consider what  combination of eradication, interdiction, and alternative development  activities will help to best achieve their counternarcotics goals. There is a  range of available information that can help provide U.S. agencies with  insight into the effectiveness of their eradication, interdiction, and  alternative development activities. However, to date, State and other U.S.  agencies involved in eradication and interdiction activities in Colombia  have not evaluated these efforts to determine their long-term  effectiveness in reducing the cocaine supply. In addition, State has not  undertaken a comprehensive review of the U.S. government\u2019s  counternarcotics approach in Colombia. Such a review would help State  to systematically consider the relative benefits and limitations of the U.S.  government\u2019s eradication, interdiction, and alternative development  activities. With this information, State would be well positioned to ensure  that it and other U.S. agencies are prioritizing limited resources and  pursuing the combination of counternarcotics activities with the greatest  likelihood of achieving long-term success in the fight against drug  trafficking in Colombia."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to State:  The Secretary of State should, in consultation with other U.S. agencies  involved in counternarcotics efforts in Colombia, conduct an evaluation of  the long-term effectiveness of eradication and interdiction in reducing the  cocaine supply. (Recommendation 1)", "The Secretary of State should, in consultation with other U.S. agencies  involved in counternarcotics efforts in Colombia, undertake a  comprehensive review of the U.S. counternarcotics approach in Colombia  and identify what changes, if any, should be made to the types and  combination of U.S. activities, taking into consideration how the relative  benefits and limitations between eradication, interdiction, and alternative  development may impact the effectiveness of these efforts.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the report to DHS, DOD, DOJ, State, and USAID  for review and comment. DHS, DOJ, and State provided technical  comments, which we incorporated as appropriate. State and USAID also  provided written comments, which are reproduced in appendix III and IV,  respectively. In its written comments, State noted that it agreed in general  with our recommendations, but suggested that our first recommendation  be broadened to encompass an evaluation of the effectiveness of whole- of-government counternarcotics efforts, rather than focusing on  eradication and interdiction specifically. We respect State\u2019s argument in  favor of broadening the scope of our first recommendation, but we chose  not to revise our recommendation based on this rationale. We believe that  an evaluation focusing specifically on the long-term effectiveness of  eradication and interdiction in reducing the cocaine supply would provide  State with important information on two key components of the approach  that has characterized U.S. counternarcotics efforts in Colombia for  decades but have not been evaluated to date. Such an evaluation would  be consistent with analyses already undertaken for alternative  development, and would contribute to a better understanding of the  strengths and weaknesses of each of these three key efforts. In addition,  our second recommendation to State addresses the need for a broader,  comprehensive review of the overall U.S. counternarcotics approach,  which would expectedly take into account eradication, interdiction, and  alternative development, as well as other U.S. efforts to combat drug- related criminal activities. If State opts to pursue a broader evaluation of  all U.S. counternarcotics efforts in Colombia, we would consider this  responsive to our first recommendation as long as the evaluation includes  a meaningful assessment of the effectiveness of eradication and  interdiction efforts.", "Additionally, as part of its comments, State highlighted the importance of  a whole-of-government approach to counternarcotics in Colombia that  employs a range of efforts that are implemented in a coordinated manner.  Consequently, State noted that any review of the individual components  of the U.S. counternarcotics strategy will present an incomplete picture  and State expressed concern that we had considered eradication,  interdiction, and alternative development in isolation. In the report, we  note that the U.S. government\u2019s counternarcotics approach in Colombia  has long called for a mix of eradication, interdiction, and alternative  development efforts and we highlight the fact that U.S. officials believe  that finding the appropriate combination of these efforts is critical to  achieving the U.S. government\u2019s counternarcotics objectives in Colombia.  Thus, while we present more in-depth analyses of eradication,  interdiction, and alternative development, we begin our discussion with an  overall description of U.S. efforts in Colombia more generally, covering  the role of various U.S. agencies in these efforts, the nature of overall  collaboration with Colombia, and the events that shaped the current  situation.", "Finally, in its comments, State said that we had failed to consider relevant  information on eradication that had been published by various sources. In  developing our findings in this report, we reviewed available U.S.  government, Colombian government, and United Nations data and  analysis on eradication, as well as third-party research, and we sought to  accurately present this range of information in a balanced manner.  Accordingly, we have made relevant modifications to our narrative to  further describe information in UN studies related to the results of  eradication efforts in Colombia.", "In its comments, USAID stated that it concurred with our recommendation  that State lead a comprehensive review of the U.S. counternarcotics  approach in Colombia. USAID noted that it believes such a review could  help identify what changes, if any, are necessary to make to the types  and combination of U.S. activities, while taking into consideration how the  relative benefits and limitations of eradication, interdiction, and alternative  development could affect the effectiveness of these efforts.", "We are sending copies of this report to the appropriate congressional  committees and the Secretaries of Defense, Homeland Security, and  State, as well as the Attorney General and the USAID Administrator. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) to what extent the U.S. government has  assessed the effectiveness of its counternarcotics efforts in Colombia, (2)  what is known about the effectiveness of U.S. government-supported  eradication programs in Colombia over the last 10 years, (3) what is  known about the effectiveness of U.S. government-supported interdiction  programs in Colombia over the last 10 years, and (4) what is known about  the effectiveness of U.S. government-supported alternative development  programs in Colombia over the last 10 years.", "To assess to what extent the U.S. government has assessed the  effectiveness of its counternarcotics efforts in Colombia, we analyzed  Department of Homeland Security (DHS), Department of Defense (DOD),  Department of Justice (DOJ), Department of State (State), and U.S.  Agency for International Development (USAID) data and documentation  that describe U.S-supported counternarcotics efforts since 2008,  including available performance monitoring data and evaluations that the  agencies use to assess the effectiveness of their counternarcotics  activities in Colombia. In doing so, we reviewed performance reporting  that the agencies conduct through interagency mechanisms including the  Office of National Drug Control Policy\u2019s (ONDCP) annual National Drug  Control Strategy Performance Reporting System report and Budget and  Performance Summary report, as well Embassy Bogot\u00e1\u2019s annual  Performance Plan and Report. In addition, we reviewed agency-level  performance monitoring data and related reports produced by DHS, DOD,  DOJ, State, and USAID, as well as their relevant component agencies  and offices. For example, we reviewed State\u2019s annual International  Narcotics Control Strategy Report, performance data from USAID\u2019s  Monitoring and Evaluation Clearinghouse information system, U.S.  Southern Command annual program management reviews,  DEA/Colombia impact statements produced through its Threat  Enforcement Planning Process, and annual DHS performance reports.  We also reviewed evaluations that USAID had conducted of its alternative  development programs in Colombia. To identify relevant USAID  evaluations, we consulted USAID officials and conducted a search of  USAID\u2019s Development Experience Clearinghouse, which is USAID\u2019s online, publicly available repository of program documentation. In  evaluating to what extent the U.S. government has assessed the  effectiveness of its counternarcotics efforts in Colombia, we compared  State\u2019s actions to its evaluation policy. In addition, we compared U.S.  agencies\u2019 actions to applicable federal internal control standards.", "To determine what is known about the effectiveness of U.S. government  supported eradication, interdiction, and alternative development  programs, we analyzed DHS, DOD, DOJ, State and USAID data and  documentation related to counternarcotics efforts in Colombia. As part of  our work, we also analyzed data from the United Nations Office on Drugs  and Crime\u2019s (UNODC) annual surveys of territories in Colombia affected  by illicit crops, which documented coca cultivation and cocaine drug  productions trends, as well as counternarcotics efforts. In addition, we  analyzed Colombian government data and other reporting describing  counternarcotics efforts. These U.S. government, United Nations, and  Colombian government data included a range of metrics. For eradication  programs, we reviewed metrics including estimated coca cultivation  levels, eradication levels, coca plant productivity levels, coca replanting  rates, and the territorial distribution of coca cultivation. For interdiction, we  reviewed metrics including estimated cocaine production levels; the levels  of seizures of cocaine, precursor chemicals, and drug trafficking  organization assets; the number of drug trafficking organizations  disrupted or dismantled; and the number of drug trafficking organization  members arrested and extradited. For alternative development programs,  we reviewed metrics including the number of households involved in coca  cultivation, the amounts of coca cultivated relative to legal crops in areas  receiving U.S. government support, increases in the value of sales of  legal products in areas involved in narcotics production, the number of  households receiving land titles as a result of U.S. assistance, and the  value of agricultural and rural loans generated through U.S. assistance.  To assess these data, we reviewed available documentation, and  interviewed cognizant U.S. officials. In addition, we were able to compare  different sources in some instances, specifically the U.S. government and  the UN estimates of coca cultivation and cocaine production in Colombia.  We noted several limitations to these data. For example, the coca  cultivation and production figures are estimates, and while both the U.S.  government and UN have procedures to verify their estimates, there were  differences between the two sources in terms of the levels of production  and cultivation reported due to differences in their estimating  methodologies. For example, one challenge to estimating the hectares of  coca eradicated is that crop fields can be eradicated multiple times in 1  year, which means that the total number of hectares eradicated can  exceed the total number of hectares cultivated in some years. Likewise  we noted that kilograms of cocaine seized in Colombia may be the result  of a variety of actions, and can be influenced by the volume of cocaine  production, as well as the actions of law enforcement officials. We  determined that the U.S. government, United Nations, and Colombian  government data were sufficiently reliable to present general trends from  2008 through 2017.", "Further, we reviewed agency documentation from State, USAID, DOD,  and DEA in order to identify plans, reviews, strategies, and assessments  related to counternarcotics efforts in Colombia. For example, we reviewed  State\u2019s annual International Narcotics Control Strategy Reports, Embassy  Bogot\u00e1\u2019s annual Performance Plan and Reports, DOD U.S. Southern  Command performance management reviews, and DEA\u2019s Threat  Enforcement Planning Process assessment. In addition, we reviewed  seven evaluations that USAID had commissioned of its alternative  development programs in Colombia and identified relevant findings from  these evaluations regarding the effectiveness of alternative development  efforts in Colombia. Some of these evaluations related to specific  alternative development programs, while others evaluated USAID\u2019s  alternative development efforts in Colombia more broadly. It was beyond  the scope of this engagement to assess the quality of these evaluations.  We also reviewed USAID performance data in its Monitor system and in  Embassy Bogot\u00e1\u2019s annual Performance Plan and Report and compared  USAID\u2019s results to the targets it had established. We did not perform an  assessment of the underlying metrics that USAID used, as our purpose  was to compare actuals to targets.", "To gather further information regarding what is known about the  effectiveness of U.S. government supported eradication, interdiction, and  alternative development programs, we interviewed U.S. officials that have  responsibility for and insights into U.S.-supported counternarcotics efforts  in Colombia from:", "DHS, including Immigration and Customs Enforcement and the U.S.", "Coast Guard;", "DOD, including the Office of the Deputy Assistant Secretary of  Defense for Counternarcotics and Global Threats and U.S. Southern  Command;", "DOJ, including the Criminal Division, the Drug Enforcement  Administration, and the Federal Bureau of Investigation;", "State, including the Bureau of International Narcotics and Law  Enforcement Affairs and the Bureau of Western Hemisphere Affairs; and USAID\u2019s Bureau for Latin America and the Caribbean.", "In addition, we conducted fieldwork in Colombia in March 2018. During  our fieldwork, we interviewed U.S. officials from DHS, DOD, DOJ, State,  and USAID involved in counternarcotics activities at Embassy Bogot\u00e1. In  addition, we interviewed various officials from Colombian security and  civilian agencies and from the UNODC. We also visited the headquarters  of the Colombian National Police Air Service\u2019s headquarters in  Guaymaral (near Bogot\u00e1) and the Colombian National Police\u2019s  International School for the Use of Police Force for Peace (near Ibagu\u00e9).  Finally, as part of our fieldwork, we visited Tumaco in southwest  Colombia. Tumaco is the municipality with the highest levels of coca  cultivation in Colombia and is also the most significant hub for the  trafficking of cocaine out of the country. In Tumaco, we visited the  Colombian government\u2019s Strategic Operation Center, observed a manual  eradication operation, and met with a number of USAID alternative  development program beneficiaries. The information on foreign law in this  report is not the product of GAO\u2019s original analysis, but is derived from  interviews and secondary sources.", "Finally, to help validate and supplement U.S. government findings  regarding the effectiveness of its counternarcotics programs, we  conducted a literature review to determine the extent to which relevant  non-U.S. government studies either validated or reached different  conclusions than the U.S. government\u2019s findings regarding the  effectiveness of U.S.-supported counternarcotics programs in Colombia.  To conduct this review, we developed a list of search terms related to  eradication, interdiction, and alternative development in Colombia. Then,  working with a GAO research librarian, we conducted a search using  selected bibliographic databases, including Scopus and SciELO. We  conducted searches for materials in both English and Spanish. The  searches resulted in the identification of an initial list of 261 English- language articles and 45 Spanish-language articles. The team then  conducted a process to narrow down the initial search results to a priority  list of studies. In order to narrow down the results, we considered a  variety of factors including the relevance of the study to our research  questions, the extent to which the study focused on Colombia or was  more global in nature, whether the study had been published in 2008 or  later, and whether the study included original research. To validate our  priority list of studies, we shared our results with a non-U.S. government  expert who had studied counternarcotics efforts in Colombia to see if  there were further studies that we should include. We added one  additional study based upon his review. In total, we selected 23 studies to  include in our literature review and to analyze in greater depth for this  report. Within our literature review, we identified a relatively small number  of authors that had conducted research relevant to our work, in particular,  studies related to interdiction efforts in Colombia. As a result, there are  several authors who have more than 1 study included within the list of 23  studies we selected. For each of the 23 studies we selected, we  completed a data collection instrument to, among other things, identify the  study\u2019s key findings and recommendations and to make a high-level  assessment that the study was of sufficient quality to include in our  review. We ensured that our selection included studies issued or  published in 2008 or later. During our review, we noted that several  studies analyzed data from slightly earlier time periods. In addition, we  noted that some studies analyzed data for particular regions or settings  within Colombia. While this does not affect the quality of the studies, it  does raise the possibility that their findings might not fully apply to the  current situation in Colombia.", "As part of our work, we also conducted interviews with a  nongeneralizable sample of three non-U.S. government experts to gather  further information regarding what is known about the effectiveness of  U.S. counternarcotics programs. In selecting these experts, we sought to  choose people with different types of experiences studying and working  on counternarcotics efforts in Colombia, in order to get a range of  perspectives about these efforts.", "We conducted this performance audit from September 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: List of Studies Reviewed", "paragraphs": ["This bibliography contains citations for the 23 studies we reviewed  regarding the effectiveness of Colombian counternarcotics efforts.", "Beltr\u00e1n, S. \u201cLa Institucionalidad Rural en Colombia: Reflexiones para Su  An\u00e1lisis y Fortalecimiento.\u201d Mundo Agrario, vol. 17, no. 53 (2016).", "Camacho, A., and D. Mej\u00eda. \u201cThe Health Consequences of Aerial  Spraying Illicit Crops: The Case of Colombia.\u201d Journal of Health  Economics, vol. 54 (2017): 147-160.", "Ceron, C., I. De los Rios-Carmenado, and S. Fern\u00e1ndez. \u201cIllicit Crops  Substitution and Rural Prosperity in Armed Conflict Areas: A Conceptual  Proposal Based on the Working With People Model in Colombia.\u201d Land  Use Policy, vol. 72 (2018): 201-2014.", "Davalos, E. \u201cNew Answers to an Old Problem: Social Investment and  Coca Crops in Colombia.\u201d International Journal of Drug Policy, vol. 31  (2016): 121-130.", "Fisher, D., and A. Meitus. \u201cUprooting or Sowing Violence?: Coca  Eradication and Guerrilla Violence in Colombia.\u201d Studies in Conflict &  Terrorism, vol. 40, no. 9 (2017): 790-807.", "Ibanez, M., and F. Carlsson. \u201cA Survey-Based Choice Experiment on  Coca Cultivation.\u201d Journal of Development Economics, vol. 93 (2010):  249-263.", "Ibanez, M., and S. Klasen. \u201cIs the War on Drugs Working? Examining the  Colombian Case Using Micro Data.\u201d The Journal of Development Studies,  vol. 53, no. 10 (2017): 1650-1662.", "Ince, M., \u201cFilling the FARC-Shaped Void.\u201d The RUSI Journal, vol. 158, no.  5 (2013): 26-34.", "Jonsson, M., E. Brennan, and C. O\u2019Hara. \u201cFinancing War or Facilitating  Peace? The Impact of Rebel Drug Trafficking on Peace Negotiations in  Colombia and Myanmar.\u201d Studies in Conflict & Terrorism, vol. 39, no. 6  (2016): 542-559.", "L\u00f3pez, L., J. Castro, and A. Espa\u00f1a. \u201cLos Efectos Globo en los Cultivos  de Coca en la Regi\u00f3n Andina (1990-2009).\u201d Apuntes del CENES, vol. 35,  no. 61 (2016): 207-236.", "McDermott, J., \u201cLa Nueva Generaci\u00f3n de Narcotraficantes Colombianos  post-FARC: \u2018Los Invisibles\u2019.\u201d InSight Crime (2018).", "Mej\u00eda, D., \u201cPlan Colombia: An Analysis of Effectiveness and Costs.\u201d The  Brookings Institution (2015).", "Mej\u00eda, D., and P. Restrepo. \u201cThe Economics of the War on Illegal Drug  Production and Trafficking.\u201d Journal of Economic Behavior and  Organization, vol. 126 (2016): 255-275.", "Mej\u00eda, D., P. Restrepo, and S. Rozo. \u201cOn the Effects of Enforcement on  Illegal Markets: Evidence from a Quasi-experiment in Colombia.\u201d World  Bank Group (2015).", "Mu\u00f1oz-Mora, J.C., S. Tob\u00f3n, and J. d\u2019Anjou. \u201cThe Role of Land Property  Rights in the War on Illicit Crops: Evidence from Colombia.\u201d World  Development, vol. 103 (2018): 268-283.", "Quintero, S., and I. Posada. \u201cEstrategias Pol\u00edticas para el Tratamiento de  las Drogas Ilegales en Colombia.\u201d Revista Facultad Nacional de Salud  P\u00fablica, vol. 31, no. 3 (2013): 373-380.", "Reyes, L., \u201cEstimating the Causal Effect of Forced Eradication on Coca  Cultivation in Colombian Municipalities.\u201d World Development, vol. 61  (2014): 70-84.", "Rinc\u00f3n-Ruiz, A., H. Correa, D. L\u00e9on, and S. Williams. \u201cCoca Cultivation  and Crop Eradication in Colombia: The Challenges of Integrating Rural  Reality into Effective Anti-Drug Policy.\u201d International Journal of Drug  Policy, vol. 33 (2016): 56-65.", "Rinc\u00f3n-Ruiz, A., U. Pascual, and S. Flantua. \u201cExamining Spatially Varying  Relationships between Coca Crops and Associated Factors in Colombia,  Using Geographically Weight Regression.\u201d Applied Geography, vol. 37  (2013): 23-33.", "S\u00e1nchez, M., \u201cCultivos Il\u00edcitos y Confianza Institucional en Colombia.\u201d  Politica y Gobierno, vol. 21, no. 1 (2014): 95-126.", "Sandoval, L., A. Lopez, and C. C\u00e1rdenas. \u201cDeterminantes y  Caracteristicas de la Oferta de Cocaina en Colombia (1989\u20132006).\u201d  Revista Facultad de Ciencias Econ\u00f3micas: Investigaci\u00f3n y Reflexi\u00f3n, vol.  17, no. 2 (2009): 199-208.", "Seatzu, F., \u201c\u2018If Ya Wanna End War and Stuff, You Gotta Sing Loud\u2019\u2014A  Survey of the Provisional Agreement between FARC and Colombia on  Illicit Drugs.\u201d Araucaria. Revista Iberoamericana de Filosofia, Pol\u00edtica y  Humanidades y Humanidades, vol. 18, no. 36 (2016): 373-389.", "Thoumi, F., \u201cPol\u00edticas Antidrogas y La Necesidad de Enfrentar las  Vulnerabilidades de Colombia.\u201d An\u00e1lisis Politico, no. 67 (2009): 60-82."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Juan Gobel (Assistant Director),  Ryan Vaughan (Analyst-in-Charge), Owen Starlin, Pedro Almoguera,  Martin De Alteriis, Leia Dickerson, Neil Doherty, Mark Dowling, Dawn  Locke, and Aldo Salerno made key contributions to this report."], "subsections": []}]}], "fastfact": ["The U.S. government has invested over $10 billion in counternarcotics and security efforts in Colombia since 1999. Security has improved but cocaine production has more than tripled from 2013 through 2017.", "The U.S. counternarcotics approach in Colombia includes disrupting drug trafficking, destroying coca crops, and supporting alternative livelihoods for coca farmers. We found the State Department has not comprehensively reviewed this approach. Such a review could help State ensure U.S. agencies are pursuing the mix of activities with the greatest likelihood of long-term success.", "We recommended State comprehensively review the U.S. approach."]}
{"id": "GAO-19-102", "url": "https://www.gao.gov/products/GAO-19-102", "title": "Defense Health Care: Additional Assessments Needed to Better Ensure an Efficient Total Workforce", "published_date": "2018-11-27T00:00:00", "released_date": "2018-11-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The MHS includes more than 241,000 active duty, reserve, federal civilian, and contractor personnel who provide (1) operational medical care in support of war and other contingencies and (2) beneficiary medical care within DOD's hospitals and clinics.", "The Senate Report 115-125 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 contained a provision for GAO to review how DOD determines its mix of military, federal civilian, and contractor personnel. This report examines the military departments' planning processes for determining (1) operational medical personnel requirements, including an assessment of the mix of federal civilian, contractor, and active and reserve medical personnel; and (2) the most appropriate workforce mix at MTFs and any challenges in executing their desired workforce mix. GAO compared MHS staffing practices with DOD policy, and analyzed fiscal year 2017 budgetary data to determine the proportion of military, federal civilian, and contractor personnel. GAO also interviewed senior leaders at six MTFs."]}, {"section_title": "What GAO Found", "paragraphs": ["The military departments each have their own processes to determine their operational medical personnel requirements; however, their planning processes to meet those requirements do not consider the use of all medical personnel or the full cost of military personnel. Specifically:", "The Department of Defense (DOD) has not assessed the suitability of federal civilians and contractors to meet operational medical personnel requirements. Federal civilians and contractors play key roles in supporting essential missions, i.e. providing operational assistance via combat support. Military department officials expressed a preference for using military personnel and cited possible difficulties in securing federal civilian and contractor interest in such positions. An assessment of the suitability of federal civilians and contractors could provide options for meeting operational medical personnel requirements.", "When determining the balance of active and reserve component medical personnel, the military departments' processes generally do not consider full personnel costs, including education and benefits. Specifically, officials stated that the Army and the Navy do not consider personnel costs in their assessment of the appropriate balance between active and reserve personnel, and the Air Force's analysis had some limitations. DOD policy states that workforce decisions must be made with an awareness of the full costs. Further, in a 2013 report, DOD identified the cost of unit manning, training, and equipping as one of five factors that play a key role in decisions concerning the mix of active and reserve component forces. By developing full cost information for active and reserve component medical personnel, DOD can better ensure an appropriate and cost-effective mix of personnel.", "The military departments have taken actions, such as establishing policies and procedures, to assess the appropriate workforce mix for beneficiary care within Military Treatment Facilities (MTFs), but challenges remain. The military departments distribute military personnel across the MTFs and then use policies and procedures to consider risks, costs, and benefits to determine how to fill the remaining positions with federal civilians and contractors. However, a number of challenges, including lengthy hiring and contracting processes and federal civilian hiring freezes affect DOD's ability to use federal civilians and contractors. For example, senior officials at each of the six MTFs that GAO spoke with cited challenges with the federal civilian hiring process, and five of six MTFs cited challenges with the contracting process. As a result, senior officials from five of six MTFs reported discontinuing some services and referring patients to DOD's TRICARE network of private sector providers or Veterans Affairs facilities. The Military Health System (MHS) is also preparing for the phased transfer of administrative responsibility for MTFs to the Defense Health Agency (DHA), including management of the MTF workforce. According to GAO's report on agency reform efforts, strategic workforce planning should precede any staff realignments or downsizing. However, according to a senior official, the DHA has not developed a strategic workforce plan. Without developing such a plan, the DHA may continue to face the same challenges experienced by the military departments in executing an appropriate and efficient workforce mix at its MTFs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD, among other things, (1) assess the suitability of federal civilians and contractors to provide operational medical care; (2) develop full cost information for active and reserve component medical personnel; and (3) develop a strategic total workforce plan for the DHA to help ensure execution of an appropriate workforce mix at its MTFs. In commenting on a draft of this report, DOD concurred with each of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense\u2019s (DOD\u2019s) Military Health System (MHS)  operates one of the largest and most complex health systems in the  nation. DOD\u2019s total medical workforce of physicians, dentists, nurses,  medics, and other health care providers includes active and reserve  military personnel, federal civilian personnel, and private sector contractor  personnel. The MHS provides health care in two distinct settings: (1)  operational medical care, provided via deployable health care platforms  such as forward surgical teams and combat support hospitals, in support  of war, named or unnamed contingencies, and other operational  missions; and (2) beneficiary medical care, provided in DOD\u2019s military  treatment facilities (MTFs), which include 51 military hospitals, 381  ambulatory care and occupational health clinics, and 247 dental clinics  that serve to maintain the medical readiness of military personnel and the  general health of their dependents and other eligible beneficiaries, such  as retirees.", "DOD spends billions of dollars annually on its worldwide health care  system. Currently, health care costs constitute more than 8 percent of  DOD\u2019s baseline budget request. For its fiscal year 2019 budget,  according to DOD documentation, DOD requested $33.7 billion to fund  the Defense Health Program, including the cost of health care activities,  federal civilians, and contractor personnel, and an additional $8.9 billion  in military personnel costs. The federal government\u2019s fiscal challenges,  which we reported on in January 2017 and in other products, underscore  the importance of DOD employing a strategic approach to determining the  most appropriate and cost-effective mix of personnel to perform its  mission.", "Senate Report 115-125, accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018, included a provision for us to  conduct a review of DOD\u2019s approach to assess and determine its  workforce mix of active and reserve military personnel, federal civilians,  and contractors within the MHS. This report examines (1) to what extent  the military departments\u2019 planning processes for operational medical  personnel requirements include an assessment of the mix of federal  civilian, contractor, active and reserve medical personnel; and (2) the  military departments\u2019 processes for determining the most appropriate  workforce mix at MTFs and any challenges in executing an appropriate  workforce mix as responsibility for MTFs\u2019 administration transfers to the  Defense Health Agency (DHA).", "For objective one, we compared military department efforts in planning for  operational medical personnel requirements to DOD and department- level policies and guidance on workforce mix determination and  identifying the full cost of personnel. Specifically, DOD Directive 1100.4  states that authorities should consider all available sources when  determining workforce mix. Moreover, DOD\u2019s 2017 Workforce  Rationalization Plan recognizes DOD\u2019s federal civilians as an essential  enabler of its mission capabilities and operational readiness, and DOD\u2019s  National Defense Business Operations Plan for Fiscal Years 2018 to  2022 states that workforce rationalization strategies include, among other  things, reassessing military manpower allocations for military essentiality  and identifying functions and positions that are commercial in nature that  may be appropriately or efficiently delivered via private sector support. In  addition, DOD Instruction 7041.04 has guidance for departments to  identify the full cost of their active component, federal civilian, and  contractor workforces, and in a 2013 report, DOD established five factors  that play a key role in active and reserve component balance decisions,  including the cost of unit manning, training, and equipping. We  interviewed officials from the military departments to discuss: (1) how they  determine their operational medical requirements and if they identified the  full cost of its active and reserve component medical personnel, and (2)  the use of the active and reserve components for operational  requirements and any efforts to assess the balance of active and reserve  component medical personnel.", "To determine the extent to which federal civilians and contractors were  deployed to provide medical care, we reviewed federal civilian and  contractor deployment data from fiscal years 2013 through 2017. To  determine the mix of active and reserve component medical personnel,  we analyzed authorization data from the Health Manpower and Personnel  Data System for fiscal year 2017, which was the most recent year of data  at the time of our review. To assess the reliability of both the federal  civilian and contractor deployment data and the authorization data, we  electronically tested the data to identify obvious problems with  completeness or accuracy and interviewed knowledgeable agency  officials about the data. We found the authorization data to be sufficiently  reliable for the purposes described above. We found the deployment data  to be limited in that it may not be sufficiently reliable for identifying the  universe of deployments. However, we found the data to be sufficiently  reliable for the purposes of reporting that federal civilians and contractors  have been deployed to provide medical care. Finally, we interviewed  officials from the Office of the Under Secretary of Defense for Personnel  and Readiness (USD(P&R)), Office of the Assistant Secretary of Defense  for Health Affairs (OASD(HA)), Defense Civilian Personnel Advisory  Service, the military departments, selected combatant commands to  identify considerations and any challenges of using different personnel  categories as workforce alternatives for meeting operational medical  requirements.", "For objective two, we reviewed DOD and department-level policies and  guidance on workforce mix determination and the departments\u2019 efforts in  planning, staffing, and filling MTF requirements. To better understand  policy and procedure implementation at MTFs we selected six MTFs\u2014 two each from the Army, Navy, and Air Force\u2014to allow a cross-section of  views concerning the management of the departments\u2019 workforce mix at  the MTFs and hiring conditions in different types of labor markets. The  two MTFs from each department were selected based on consideration of  average daily patient load and MTF bed size, which we obtained from the  Defense Health Agency. For each MTF, we interviewed officials  responsible for the leadership and management of MTF personnel and  operations and requested and reviewed relevant documentation. We  reviewed their responses, which highlighted some challenges related to  achieving an appropriate workforce mix, and DOD\u2019s plans for addressing  these challenges. We compared these to GAO\u2019s key questions to assess  agency reform efforts, which note that strategic workforce planning should  precede any staff realignments or downsizing. We also reviewed how  the planned transfer of administrative responsibility for MTFs from the  military departments to the DHA might affect DOD management of  military personnel within the MHS. To identify (1) responsibilities of the  military departments that may be transferred to the DHA, and (2)  challenges that may continue under the new organizational structure, we  reviewed relevant documentation and interviewed knowledgeable  officials. We compared DOD\u2019s efforts to plan for these challenges to  leading practices for results-oriented government, which state that  cooperating federal agencies need to sustain and enhance their  collaboration in several ways, including the development of policies and  procedures to operate across agency boundaries and agreement on their  respective roles and responsibilities.", "To determine the proportion of reported military, federal civilian, and  contractor personnel providing or supporting care in MTFs, we obtained  budgetary data for fiscal year 2017, which was the most recent full fiscal  year of available data at the time of our review. To assess the reliability of  these data, we compared it to the information reported in the fiscal year  2017 Defense Health Program justification estimates published in  February 2018 and interviewed knowledgeable agency officials about the  data. We found the data to be sufficiently reliable for the purposes  described above.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Composition of the MHS Total Workforce", "paragraphs": ["The MHS has a dual mission of maintaining the skills of the medical force  and providing health care and beneficiary medical care in its MTFs in the  United States and overseas. It accomplishes this in part by providing (1)  operational medical care via deployable health care platforms in an  operational environment, such as forward surgical teams and combat  support hospitals, and (2) beneficiary medical care in its MTFs in the  United States and around the world. DOD\u2019s total workforce supporting  this dual mission comprises three main components: military personnel  (including active and reserve personnel), federal civilian personnel, and  private sector contractor personnel. Active duty medical personnel  simultaneously support operational medical care and the delivery of  beneficiary health care to patients across the globe. Reserve component  medical personnel generally provide health care to deployed military  personnel, but may also provide personnel to support MTFs when active  duty personnel are deployed or otherwise unavailable. Federal civilians  and contractors generally provide beneficiary care within MTFs. Figure 1  shows the number of the active and reserve components of the military,  federal civilians, and estimated contractor full-time equivalents (FTEs)  that comprised DOD\u2019s total medical workforce in fiscal year 2017."], "subsections": []}, {"section_title": "DOD\u2019s Total Workforce Provides Operational Medical Care at Four Levels", "paragraphs": ["DOD has established four levels of operational medical care provided to  servicemembers and other eligible persons. The levels of care extend  from the forward edge of the battle area to the United States, with each  level providing progressively more intensive treatment. Level 4 care  facilities are MTFs that also provide beneficiary medical care. In addition  to the four levels of medical care, en-route care to transport patients is  also provided via casualty evacuation, medical evacuation, and/or  aeromedical evacuation from the point of patient injury, illness, or  wounding. Figure 2 illustrates the different levels of care.", "The four levels of care are:", "Level 1\u2014First responder care. This level provides immediate  medical care and stabilization in preparation for evacuation to the next  level, and treatment of common acute minor illnesses. Care can be  provided by the wounded soldiers, medics or corpsmen, or battalion  aid stations.", "Level 2\u2014Forward resuscitative care. This level provides advanced  emergency medical treatment as close to the point of injury as  possible to attain stabilization of the patient. In addition, it can provide  postsurgical inpatient services, such as critical care nursing and  temporary holding. Examples of level 2 units include forward surgical  teams, shock trauma platoons, area support medical companies, and  combat stress control units.", "Level 3\u2014Theater hospital care. This level provides the most  advanced medical care available in Iraq and Afghanistan. Level 3  facilities provide significant preventative and curative health care.  Examples include Army combat support hospitals, Air Force theater  hospitals, and Navy expeditionary medical facilities.", "Level 4\u2014U.S. and overseas definitive care. This level provides the  full range of preventative, curative, acute, convalescent, restorative  and rehabilitative care. Examples of level 4 facilities include MTFs  such as Brooke Army Medical Center at Joint Base San Antonio,  Texas and Naval Medical Center Portsmouth at Portsmouth, Virginia."], "subsections": []}, {"section_title": "DOD Provides Beneficiary Medical Care in the United States and around the World", "paragraphs": ["DOD\u2019s MHS workforce provides beneficiary medical care to 9.4 million  eligible individuals, including active duty personnel and their dependents  (i.e., spouse, children), medically eligible Reserve and National Guard  personnel and their dependents, and retirees and their dependents and  survivors. Located in the United States and around the world and ranging  from small clinics to major hospitals, these facilities serve as training  platforms for active duty medical personnel to maintain their skills and  play a key role in the military departments\u2019 Graduate Medical Education  programs for training medical professionals.", "In addition to the direct provision of health care in its own hospitals and  clinics, DOD maintains its TRICARE purchased care system that is used  to augment the direct care system when needed. Through regional  contracts, TRICARE administers the purchased care system, which  comprises a civilian network of hospitals and providers. Retirees who  qualify for care under Department of Veterans Affairs\u2019 rules may also be  eligible to receive health care within the Veterans Health Administration  system of hospitals and clinics."], "subsections": []}, {"section_title": "Legislation, Policies, and Processes Governing the MHS Workforce Mix", "paragraphs": ["DOD\u2019s management of its workforce is governed by several workforce  management statutes of title 10 of the United States Code, including:", "Section 129a directs the Secretary of Defense to establish policies  and procedures for determining the most appropriate and cost- efficient mix of military, civilian, and contracted services to perform the  mission of the department.", "Section 2463 directs the Under Secretary of Defense for Personnel  and Readiness to devise and implement guidelines and procedures to  ensure that consideration is given to using, on a regular basis, DOD  civilian employees to perform new functions and functions performed  by contractors that could be performed by DOD civilian employees.", "Section 2461 directs that no DOD function performed by civilian  employees may be converted, in whole or in part, to performance by a  contractor unless the conversion is based on the results of a public\u2013 private competition that formally compares the cost of performance by  civilian employees with the cost of contractors, among other  considerations. There is currently a government-wide moratorium on  performing such public-private competitions.", "DOD\u2019s total workforce management policy generally emphasizes the  need for agencies to utilize the least costly mix of personnel while  ensuring the workforce is sufficiently sized, and comprised of the  appropriate mix of personnel to carry out the mission of DOD. The  departments use DOD guidance to assess the use of military, federal  civilian, and contractor personnel, which includes the consideration of two  key factors: (1) the risk to the military mission, and (2) the cost of the  workforce. To help assess risk, the departments determine what work  should be performed by military, federal civilian, or contractor personnel.  For example, work that is inherently governmental must be performed  only by military or civilian personnel, while work that is commercial in  nature could be performed by any personnel type. To make this  determination, DOD Instruction 1100.22 directs components to: use the  manpower mix criteria outlined in the instruction to identify inherently  governmental and commercial activities; and review the annual inventory  of commercial and inherently governmental activities. In addition, DOD  and the departments have established policies and procedures to assess  the costs and benefits of different workforce mix options. DOD Instruction  1100.22 directs components to conduct a cost comparison of personnel  when considering outsourcing new requirements that are not required to  be performed by government personnel, or when considering in-sourcing  functions that are currently performed by private sector contractors."], "subsections": []}, {"section_title": "Roles and Responsibilities for Managing the MHS Workforce", "paragraphs": ["Several officials have responsibility for governing DOD\u2019s management of  its total workforce, including", "The Under Secretary of Defense for Personnel and Readiness  (USD(P&R)). This official has overall responsibility for issuing  guidance on total workforce management to be used by the DOD  components, providing guidance on manpower levels of the  components, and developing manpower mix criteria and other  information to be used by the components to determine their  workforce mix.", "The Under Secretary of Defense (Comptroller). This official is  responsible for ensuring that the budget for DOD is consistent with the  total workforce management policies and procedures.", "The Secretaries of the military departments and heads of the  defense agencies. These officials have overall responsibility for the  requirements determination, planning, programming, and budgeting  execution for total workforce management policies and procedures,  as well as having numerous responsibilities related to total workforce  management as detailed in DOD guidance.", "The Assistant Secretary of Defense for Health Affairs (ASD(HA)).", "This official serves as the principal advisor for all DOD health related  policies, programs, and activities. The ASD(HA) has the authority to:  develop policies, conduct analyses, provide advice, and make  recommendations to the USD(P&R), the Secretary of Defense, and  others; issue guidance; and provide oversight to the DOD  Components on matters pertaining to the MHS. Further, the ASD(HA)  prepares and submits a DOD unified medical program budget which  includes, among other things, the defense health program budget to  provide resources for the DOD MHS.", "The Director of the Defense Health Agency (DHA). This official,  among other things, manages the execution of policies issued by the  ASD(HA) and manages and executes the Defense Health Program  appropriation, which partially funds the MHS."], "subsections": []}, {"section_title": "Recent MHS Personnel Reform Efforts", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2017 directed the  transfer of administrative responsibility for MTFs from the military  departments to the DHA. Specifically, the Director of the DHA shall be  responsible for the administration of each MTF, including budgetary  matters, information technology, health care administration and  management, administrative policy and procedure, military medical  construction, and any other matters the Secretary of Defense determines  appropriate. Since 2016, DHA\u2019s responsibilities in the administration of  MTFs have been further articulated in DOD memoranda and in statute. In  2018, DOD directed that the DHA shall be responsible for: (1) the  planning, programming, budgeting, and execution processes for the  MTFs; (2) clinical and health delivery services in each MTF; and (3) for  these services, the hiring and management of federal civilians and  contract staffing. Further, in 2018, Congress amended the law to specify  that at each MTF, the Director of the DHA has the authority to determine  total workforce requirements, direct joint manning, and address personnel  staffing shortages, among other things.", "Also in December 2016, Congress enacted legislation that allows the  prohibition of converting military medical and dental positions to federal  civilian positions, which had been in place since 2008, to be lifted. This  change is contingent upon DOD satisfying a reporting requirement on the  size and composition of its operational medical force. Specifically,  Congress directed DOD to report on the process established to define the  military medical and dental requirements necessary to meet operational  medical force readiness requirements, and provide a list of those military  medical and dental requirements."], "subsections": []}]}, {"section_title": "Department Planning Processes for Operational Medical Personnel Requirements Do Not Include an Assessment of All Medical Personnel or the Full Cost of Military Personnel", "paragraphs": ["The military departments each have their own process to determine their  operational medical personnel requirements. After determining the  number of medical personnel needed to support operational needs, the  military departments generally consider only military personnel when  conducting their planning processes to meet these requirements, and  have not formally assessed the extent to which federal civilians and  contractor personnel could be utilized. Further, the departments do not  generally consider the full cost of active and reserve component medical  personnel when determining their balance of active and reserve  component medical personnel, and they have not developed such  information to use in their assessment of active and reserve balance."], "subsections": [{"section_title": "Each Military Department Has Its Own Process to Plan for Operational Medical Personnel Requirements, Including the Balance of Active and Reserve Component Personnel", "paragraphs": ["Each military department has its own process to plan for operational  medical personnel requirements. The departments\u2019 operational medical  personnel requirements are based on their analysis of DOD\u2019s Defense  Planning Guidance and Defense Planning Scenarios. Specifically,  possible casualty streams are estimated based on the scenarios, and the  required medical support is determined in conjunction with department- specific medical planning factors, such as rotation policy, the population  at risk, and evacuation policy, among others. Each military department  incorporates these factors to estimate the number of medical personnel  needed. The Army integrates medical planning into its general process for  estimating all operational requirements, whereas the Navy and Air Force  have separate, medical-specific processes. The following represents an  overview of each military department\u2019s approach:", "Army. The Army uses its Total Army Analysis model to determine the  number and type of support units across the Army, including medical  forces, which will be needed to support the Army\u2019s combat forces in  operational settings.", "Navy. The Navy uses a medical-specific model, called the Medical  Manpower All Corps Requirements Estimator, to estimate its total  medical personnel readiness requirements. The Navy readiness  mission is to support all Navy and Marine Corps operational missions,  including operational operations (such as hospital ships and  expeditionary medical facilities) and day-to-day operations (such as  ships, submarines, and Special Forces).", "Air Force. The Air Force uses a medical-specific sizing model named  the Critical Operational Readiness Requirements tool to project its  minimum military personnel requirements. This tool identifies the  number of military medical personnel needed to meet requirements,  including requirements for en-route casualty support, theater  hospitals, and critical care air transport teams.", "According to military department officials, the decision to apportion  medical personnel requirements among the active and reserve  components is based on an assessment of risk across a range of factors.  In a 2013 DOD report issued in response to section 1080A of the National  Defense Authorization Act for Fiscal Year 2012. DOD noted that there  are several important factors in active component and reserve component  mix decisions, including, among others, the timing, duration, and skills  required for anticipated missions. Moreover, the report notes that active  components are best suited for unpredictable and frequent deployments,  dealing with complex operational environments, and unexpected  contingencies and the reserve components are best suited for predictable  and infrequent deployments. As noted in the report, active component  personnel typically mobilize and deploy to theater the fastest. The sum of  these considerations results in a different mix of active and reserve  component medical personnel within each military department.  Specifically, reserve personnel (as a percentage of the total workforce)  varied by military department in fiscal year 2017, with reservists  representing 41 percent of medical personnel of the Army, 17 percent of  the Navy, and 34 percent of the Air Force, as shown in figure 3."], "subsections": []}, {"section_title": "DOD Has Not Assessed Using Federal Civilians or Contractors to Meet Operational Medical Personnel Requirements", "paragraphs": ["The military departments have not assessed the extent to which federal  civilians and contractor personnel can be used to meet identified  operational medical personnel requirements. Specifically, after the military  departments have determined their operational medical personnel  requirements, they generally have designated all such positions as  \u201cmilitary-essential\u201d (i.e., the activity must be performed by a military  servicemember) and have not formally assessed the extent to which  civilians or contractors could be utilized to fill these positions, according to  officials. Army, Navy, and Air Force officials stated that they have  historically relied on active and reserve component military personnel  when planning for operational medical requirements, with a few  exceptions. For example, according to Navy officials, the few federal  civilians that are planned to fill operational medical requirements are  technical representatives who do not travel on ships for extended periods  of time.", "In interviews, military department officials cited key reasons for not  incorporating federal civilians and contractors into their planning for  operational medical care. Specifically, officials said they did not believe  that federal civilians or contractors were viable workforce alternatives to  military servicemembers for operational medical care roles and functions  due to the unique nature of such assignments (e.g. providing medical  care in a deployed setting). Moreover, officials noted that federal civilians  and contractors supporting operational medical requirements are  generally considered to be a temporary solution. Officials also expressed  concern regarding their military department\u2019s ability to identify and recruit  federal civilians and contractors for such positions. Officials stated that  while there is currently no guidance outlining the potential role of federal  civilians and contractors providing medical care in operational settings,  they noted that DOD workforce mix guidance includes a provision that  highlights the military-essential nature of medical personnel embedded in  non-medical units engaged in hostile action. However, this instruction  does not otherwise address the role of federal civilians and contractors in  providing medical care, including whether they can serve in medical- specific operational platforms, such as combat support hospitals providing  level 3 care.", "To ensure that its federal civilian employees will deploy to combat zones  and perform operational roles such as critical combat support functions in  theater, DOD established the emergency-essential civilian program in  1985. Under this program, DOD designates as \u201cemergency-essential\u201d  those federal civilian employees whose positions are required to ensure  the success of combat operations or the availability of combat-essential  systems. DOD\u2019s emergency-essential workforce is now governed under  the Expeditionary Civilian Workforce program. DOD can deploy  emergency-essential federal civilian employees either on a voluntary or  involuntary basis to accomplish the DOD mission. In certain DOD  functional communities, federal civilians and contractors play a critical  role in combat support roles. For example, as we previously reported,  DOD relies on the federal civilian personnel it deploys to support a range  of essential missions, including logistics support and maintenance,  intelligence collection, criminal investigations, and weapons system  acquisition and maintenance. Further, as we have previously reported,  DOD has long used contractors to provide supplies and services to  deployed forces. Since the early 1990s, much of this support has come  from logistics support contracts\u2014contracts that are awarded prior to the  beginning of contingencies and are available to support the troops as  needed.", "Although they are generally not a part of the military departments\u2019  planning processes, and there is no guidance dedicated to delineating the  role of federal civilians and contractors in providing care in deployed  operational settings according to officials, these personnel have deployed  within the past 5 years. Based on our analysis of DOD federal civilian  deployment data\u2014for fiscal years 2013 through 2017\u2014about 120 DOD  federal civilians, including nurses, physicians, and technicians, were  deployed to provide medical services. U.S. Central Command officials  stated that they have used federal civilians minimally, and U.S. Africa  Command officials stated they have not used federal civilians. In  addition, based on our analysis of DOD contractor deployment data for  deployments from fiscal years 2013 through 2017, there were more than  1,900 deployed contractors providing medical services. U.S. Central  Command officials told us that they have not used contractors to provide  care to military personnel. Officials noted that the deployed contractors  were not contracted by DOD for purposes of providing medical care and  instead provided medical care to other contractors as they were part of a  larger contract for other services, such as security services or logistics  support. U.S. Africa Command officials told us that they have used  contractors to provide medical care to support casualty evacuation and  personnel recovery requirements, which includes providing medical care  to military personnel and other eligible persons.", "Officials with the Joint Staff Surgeon\u2019s Office and the Surgeon\u2019s offices at  U.S. Central Command and U.S. Africa Command agreed with the  possibility of using federal civilians and contractors for certain operational  medical personnel requirements. Specifically, officials stated that federal  civilians and contractors likely represent an acceptable workforce  alternative if they are medically ready to deploy and appropriately trained  for the unique environment at a fixed facility in theater, such as a level 3  fixed expeditionary medical facility or theater hospital.", "While agreeing that the use of federal civilians and contractors for certain  operational medical personnel requirements may be acceptable, officials  also expressed concerns with this approach. A senior official with the U.S.  Central Command Surgeon\u2019s office noted concerns regarding the pre- deployment training provided to contractors. Specifically, the official  stressed the importance of such training to operating effectively in the  unique operational environment of a deployed medical team and that  such training is only required to be completed by military personnel and  DOD expeditionary civilians. U.S. Africa Command officials expressed  concerns regarding challenges in obtaining clinical privileging rights (i.e.,  the right for a physician to perform specific health care services) for  contractors supporting small teams in an operational setting. Further,  OASD(HA) officials noted that a key factor to determining if federal  civilians or contractors should be used to provide operational medical  care is whether or not using those workforces would achieve any cost  savings.", "Moreover, officials with the Defense Civilian Personnel Advisory Service  noted that they have had limited success with using DOD\u2019s Expeditionary  Civilian Workforce program for the provision of medical administrative  support and medical advising functions. A senior official from the U.S.  Central Command Surgeon\u2019s office noted this was due to relatively few  qualified federal civilians within the program with medical skills. Defense  Civilian Personnel Advisory Service officials noted that the fiscal year  2019 force pool that defines the number and types of federal civilian  requirements needed for the program included 7 medical related positions  and none of these were for medical care; 1 was administrative and 6 were  medical advisors. Defense Civilian Personnel Advisory Service officials  stated that the DHA has a responsibility to build 1 or 2 of the medical  advisor positions in the force pool into their planning as a continuing  requirement, and noted that DHA has made some recent progress with 1  medical advisor scheduled to deploy in fiscal year 2019. While there may  be challenges with utilizing federal civilian personnel to fulfill operational  medical requirements, DOD also faces challenges with regard to military  personnel. In 2018, we reported that DOD has experienced gaps between  its military physician authorizations (i.e., funded positions) and end  strengths (i.e., number of physicians), and that it did not have targeted  and coordinated strategies to address key physician shortages.", "DOD has issued several documents to guide total workforce and  personnel planning. DOD Directive 1100.4 states that authorities should  consider all available sources when determining workforce mix, including  federal civilians and contractors. Moreover, DOD\u2019s 2017 Workforce  Rationalization Plan recognizes DOD\u2019s federal civilians as an essential  enabler of its mission capabilities and operational readiness and noted  that there are numerous opportunities for the military departments,  combatant commands, and others to make well-reasoned adjustments to  workforce mix. Further, DOD\u2019s National Defense Business Operations  Plan for Fiscal Years 2018 to 2022 states that workforce rationalization  strategies include, among other things, reassessing military manpower  allocations for military essentiality, determining whether workload requires  deployments and whether traditional military performance is necessary,  and identifying functions and positions that are commercial in nature that  may be appropriately or efficiently delivered via private sector support.", "Federal civilians and contractors are not incorporated into the military  departments\u2019 planning to meet operational medical requirements because  DOD has not performed an assessment of the suitability of federal civilian  or contractor personnel to provide operational medical care. Such an  assessment could assist in developing policy for use by medical planners  in determining when, where, and how federal civilians or contractors may  serve in operational roles. For example, an assessment may include what  level(s) of care would be appropriate for federal civilians and contractors  to support, if any, and factors to take into consideration in making such  decisions, such as exposure to danger and cost. By conducting such an  assessment and incorporating the results into relevant policies, DOD can  have greater certainty that it is planning for the most appropriate and  cost-effective mix of personnel to meet the mission, and, depending on  the outcome of the assessment, more options to meet its operational  medical personnel requirements."], "subsections": []}, {"section_title": "The Military Departments Do Not Consider the Full Cost of Active and Reserve Component Medical Personnel When Planning for Operational Requirements and Do Not Have Full Cost Information", "paragraphs": ["The military departments\u2019 planning to meet DOD\u2019s operational personnel  requirements generally do not consider the full cost of active and reserve  component personnel when determining the balance of active and  reserve component medical forces. Officials from Army and Navy medical  headquarters stated that cost generally does not inform their decisions  about the balance of active and reserve personnel. Army officials noted  they consider cost of a unit when making tradeoffs within the reserve  component; however, cost was not cited by Army officials as a factor  when determining between the active and reserve components. Navy  officials noted that while it uses certain cost information when preparing  the President\u2019s budget submission, cost is not explicitly considered when  determining the balance of the active and reserve components. The Air  Force is the only military department that has performed an assessment  of the cost effectiveness of using active or reserve component medical  personnel, although it had some limitations and did not impact the Air  Force\u2019s active and reserve component mix decisions. Army, Navy, and Air  Force officials cited other key factors which they consider in determining  the balance of active and reserve component personnel, such as the  availability of forces to deploy quickly, length of time needed in theater,  capability needed, and frequency of deployments.", "Moreover, the military departments have not developed full cost  information of medical personnel to use in their assessment of active and  reserve balance. Army and Navy officials stated that they do not maintain  full cost information on its active component and reserve component  medical personnel. Navy provided programming cost for the reserve  component but these rates were averages across the reserve component  and not specific to medical. The Air Force\u2019s 2016 High Velocity Analysis  attempted to assess the cost of active and reserve medical personnel and  identify potential efficiencies within its medical workforce. However, this  study was limited because it did not include the full cost of active and  reserve component medical personnel. Specifically, the Air Force analysis  considered only compensation and did not consider other benefits, such  as medical education costs, and used average pay for officers and  enlisted personnel regardless of the specialty or skill level. However, the  full costs for certain medical personnel, such as officers, are generally  higher than average military pay, as they are eligible for a significant  number of special pays and benefits, such as graduate medical education  and training. In fiscal year 2017, DOD obligated $788 million for special  pays for active duty medical personnel, representing approximately 24  percent of the $3.3 billion obligated for all special pays across DOD, and  $707 million for medical education. While the Air Force had full cost data  for active component personnel, according to officials, they did not  include it in their analysis because they did not have comparable cost  data for the reserve component. Reserve medical personnel, when not  mobilized, receive a fraction of what active duty personnel receive, and  typically do not encumber significant education and training costs as  reserve medical personnel generally are recruited as fully trained medical  professionals.", "We have previously reported that when the reserve forces can  successfully meet deployment and operational requirements, individual  reserve-component units are generally less costly than similar active- component units. However, the full cost of medical personnel can vary  based on a number of factors. Specifically, more than one reserve- component unit may be needed to achieve the same output as a single  active-component unit. For example, the Army has a policy that states  reserve-component physicians, dentists, and nurse anesthetists shall not  be deployed for longer than 90 days. Thus, the Army would need to  deploy four different reserve component physicians for successive 90-day  rotations to fill a single 1-year active component requirement. Therefore,  in some cases, using reserve units to achieve the same operational  capacity over time may be more costly than using active units. However,  the lack of full cost information on active and reserve component medical  personnel is a barrier to an analytical-based determination on the balance  between active and reserve component medical personnel.", "In 2013, we reported limitations with the DOD-wide software tool  developed by Cost Assessment and Program Evaluation\u2014the Full Cost  of Manpower\u2014which, among other things, is used to identify the full cost  of active duty military personnel.  Specifically, we reported that this tool  has certain limitations for determining cost for certain cost elements. For  example, instead of determining training cost by specialty, it estimates  such costs by dividing total funding for such cost estimates by the number  of military personnel. We recommended, among other things, that DOD,  in order to improve its estimates and comparisons of the full cost of its  workforces, develop guidance for cost elements that users have identified  as challenging to calculate, such as general and administrative,  overhead, advertising and recruiting, and training. DOD partially  concurred with this recommendation but has not implemented this  recommendation. We continue to believe that developing such costs is  needed, especially for the medical community since training and  education costs can be higher than in other communities. Moreover, in  that report we also found that DOD did not include Reserve and National  Guard personnel in their methodology for estimating and comparing the  full cost to the taxpayer of work performed. We recommended DOD,  among other things, develop business rules for estimating the full cost of  National Guard and Reserve personnel. DOD partially concurred with this  recommendation but has not implemented the recommendation and  noted that a cost estimating function for reserve component personnel  would be more complex than for active component and DOD federal  civilian cost estimates. While we agree that developing cost estimates for  the reserve component could be more complex, we continue to believe it  is advisable for DOD to implement our recommendation.", "In a 2013 DOD report, DOD identified the cost of unit manning, training,  and equipping as one of five factors that play a key role in decisions  concerning the mix of active and reserve component forces. According  to the report, cost is often outweighed by other factors when making  active component and reserve component mix decisions, but should  always be considered in active component and reserve component mix  decisions. Further, DOD policy states that workforce decisions must be  made with an awareness of the full costs of personnel to DOD and more  broadly to the federal government, and highlights that the full cost of  active duty personnel extends beyond cash compensation, and also  includes other costs such as education and training.", "The military departments do not assess the full cost of personnel when  determining the balance of active and reserve component medical forces  because there is no DOD requirement to do so. Although DOD guidance  states that cost is one of several factors that should be considered in  active and reserve component balance decisions, the military  departments have not conducted assessments of the full cost of active  and reserve component personnel to inform their decisionmaking.  Further, DOD and the military departments are unable to conduct any such assessments because they have not developed full cost information  for active and reserve component medical personnel. Without developing  full cost information for active and reserve component medical personnel  and using that information in its determinations regarding the correct  balance of such personnel, decision makers will not have complete  information to make cost-effective choices about the balance of active  and reserve component medical personnel."], "subsections": []}]}, {"section_title": "The Military Departments Have Established a Process to Assess the Appropriate Workforce Mix for Beneficiary Care within MTFs, but Face Challenges in Executing Their Plans", "paragraphs": ["The military departments have taken actions, such as establishing  policies and procedures, to aid the execution of the appropriate workforce  mix for providing beneficiary health care within MTFs. However, the  military departments face challenges in executing their plans in several  areas, including lengthy hiring and contracting processes and  uncompetitive salaries and compensation. Further, the transfer of  administrative responsibility for MTFs from the military departments to the  DHA may present challenges to the management of the military medical  personnel."], "subsections": [{"section_title": "The Military Departments Have Established Policies and Procedures to Evaluate the Risks, Costs, and Benefits of the Use of Personnel within Its Military Treatment Facilities", "paragraphs": ["The military departments manage the workforce within their MTFs by  using various policies and procedures to determine their workforce needs  and help assess the risks, costs, and benefits of using military, federal  civilian, and contractor personnel to carry out their missions. Currently,  each military department is responsible for determining its MTF personnel  requirements: that is, the number of personnel needed to operate its  MTFs based on predicted demand for health care from their military and  beneficiary populations. To determine MTF personnel requirements, the  military departments use their respective suite of manpower models or  standards based on a number of factors, including historical medical  workload information and the size of population eligible for care.  According to Army and Navy medical command officials, the Army and  Navy suites of models respectively include at least 36 and 46 medical  specialties, and generally express historical medical workload in relative  value units, a metric of the level of professional time, skill, training and  intensity to provide a given clinical service. In contrast, according to Air  Force medical agency officials, the Air Force suite of standards includes  11 medical specialties and expresses workload in patient encounters.", "According to military department officials, when considering how to meet  their MTF personnel requirements given available resources, the number  of military personnel is fixed and must be preserved since the operational  medical personnel requirements support the readiness mission. The  military departments therefore prioritize the distribution of military  personnel across MTFs, and then consider how to fill the remaining  authorizations with federal civilian personnel or by contracting medical  services as appropriate. To make these decisions, the military  departments utilize DOD workforce guidance, which requires a balance of  risk and cost, but states that risk mitigation shall take precedence over  cost-related concerns when necessary. DOD total workforce policies  and procedures are outlined in: (1) DOD Directive 1100.4, which  establishes guidance for total workforce management; and (2) DOD  Instruction 1100.22, which outlines policies and procedures for  determining the appropriate mix of personnel. In 2018, we reported that a  DOD study found that the cost of federal civilian and contractor full-time  equivalents varied by organization, location, and function being  performed. According to Army, Navy, and Air Force officials, any  changes to funded positions are made through formal processes and  require an evaluation of the cost of the personnel options and the  approval of the military departments\u2019 respective medical commands or  agencies.", "The military departments\u2019 collective decisions determine their workforce  mix. Figure 4 shows the number and percentage of each personnel type  that provided or supported care in DOD-owned and operated MTFs for  fiscal year 2017, in the United States and overseas."], "subsections": []}, {"section_title": "Military Departments Face Challenges in Executing Workforce Mixes at Military Treatment Facilities, and DHA Does Not Plan to Develop a Strategy to Address These Challenges", "paragraphs": ["The military departments face challenges to implementing their workforce  mix of military, federal civilian, and contractor personnel. Our review,  including interviews with military department officials responsible for  medical personnel management and with the senior leadership of six  MTFs, highlighted, as discussed below, the following distinct challenges:  (1) the length of federal civilian hiring and contracting process, (2)  uncompetitive federal civilian salaries and contractor compensation, and  (3) FTE targets and hiring freezes."], "subsections": [{"section_title": "Length of Federal Civilian Hiring and Contracting Process", "paragraphs": ["Federal civilian hiring process. Senior officials at each of the six MTFs  we spoke with stated the federal civilian hiring process, including its  length and restrictions imposed by statute or policy, impedes their ability  to hire desirable federal civilian candidates. Officials primarily attributed  delays to the extended time for human resources offices to post a position  and to process and refer applicants for interviews. For federal civilian  personnel in DOD medical locations in fiscal year 2018, DOD officials  reported an average hiring time of: 121 days for the Army, 157 days for  the Navy, and 134 days for the Air Force.", "Legal restrictions can also extend the hiring process and hinder hiring  desirable federal civilian candidates. For example, senior officials at five  of six MTFs cited a statute requiring a 180-day waiting period before  retired military personnel can be hired as DOD federal civilians and noted  valuable candidates with military-specific subject matter expertise will  instead seek employment in the private sector. Senior officials from one  Air Force MTF stated they successfully submitted waivers to bypass the  180-day waiting period, but senior officials from one Army and one Navy  MTF stated that the waiver process often takes as long as the waiting  period.", "Senior officials from each of the six MTFs stated that hiring authorities,  such as direct or expedited hiring authority, can help address challenges,  but officials at four of six MTFs also expressed concerns about the  adequacy of such flexibilities. Direct-hire authority allows agencies to fill  occupations that have a severe candidate shortage or a critical hiring  need, and is meant to expedite hiring. DOD designated a number of  health care occupations as shortage category positions or critical need  occupations in accordance with this expedited hiring authority. In 2017,  DOD reported that it used expedited hiring authority in approximately 30  percent of hiring actions for its medical employees. Officials from one  Navy MTF stated they have direct hiring authority, but their human  resources office extends the process by requiring that the position be  announced within the last 90 days, or else be re-announced, before they  can utilize it. Army officials from one MTF stated interest in expanding the  list of medical specialties granted direct hiring authority. Air Force officials  from one MTF stated direct hire authority can help obtain qualified  candidates, but does not necessarily shorten the hiring process.", "Challenges in the federal hiring process are a longstanding issue. In  2003, we reported on the need to improve executive agencies\u2019 hiring  process, with the majority of federal agencies included in our review  reporting that it takes too long to hire quality employees. Our 2016  review of the extent to which federal hiring authorities were meeting  agency needs found that the Office of Personnel Management (OPM) and  other agencies do not know if the authorities are meeting their intended  purposes. In 2018, we reported that DOD\u2019s review of selected sites,  including two MTFs, found: varying use of hiring authorities, management  unfamiliarity with all available authorities, and a belief among managers  that expanded use of some authorities is needed to produce more quality  hires. Finally, our 2018 review of DOD laboratories\u2019 use of hiring  authorities found that officials used hiring authorities, but identified  challenges such as delays in processing the personnel action and the  overall length of the hiring process.", "Contracting process. Senior officials at five of six MTFs stated there are  challenges in obtaining contractor services, including the process time  before personnel are available to perform work and restrictions imposed  by statute. Senior officials from two Air Force MTFs stated that after the  contract is awarded, contractors may have up to 60 days to present a  candidate; officials from one MTF stated if the MTF rejects the candidate,  then the vendor has another 30 to 60 days to find a candidate. According  to officials at one Air Force MTF, at times they have to consider whether  to accept a subpar candidate or leave a position vacant. Further, senior  Air Force officials stated that controls on contract spending limit their  flexibility in hiring. To help fill temporary contract positions, which are less  attractive to candidates, officials stated the Air Force pays higher rates to  the vendor that include the salaries of the personnel and vendor\u2019s  overhead costs. In 2018, we reported that DOD\u2019s negotiated price of a  contract includes direct costs, such as labor and non-labor costs, and  indirect costs, such as overhead, and service contractor profit. Senior  officials from the two Army MTFs stated that the moratorium on public- private competitions is a challenge because they cannot outsource  federal civilian functions to contracted services when there are shortages  of military or federal civilian personnel, even when it is the optimal choice.  For example, according to officials, contractors cannot perform the  functions of a civilian position when a civilian position is vacated."], "subsections": []}, {"section_title": "Uncompetitive Federal Civilian Salaries and Contractor Compensation", "paragraphs": ["Federal civilian employee salaries. Senior officials at each of the six  MTFs stated it is a challenge to fill federal civilian medical positions  because of lower salaries compared to the private sector. In 2017, DOD  reported difficulty hiring and retaining health care workers due to  competition from the private sector, among other things. We have  previously reported challenges related to the ability to provide competitive  salaries for some DOD health care providers. Specifically, in 2015 we  reported that officials from all three military departments stated their  inability to create compensation packages for federal civilian mental  health providers to compete with the private sector affected their  recruiting and retention of providers. In 2018, we noted similar concerns  in recruiting military physicians.", "Senior officials from each of the six MTFs we spoke with stated that the  ability to utilize hiring flexibilities, such as special salary rates, helps  mitigate this challenge, but at four of six MTFs also expressed concerns  about their adequacy. To provide higher pay for some occupations, OPM  may establish a higher salary rate for an occupation or group of  occupations in one or more geographic areas to address existing or likely  significant handicaps in recruiting or retaining well-qualified employees.  Senior officials from four of six MTFs stated special salary rates are  helpful but not sufficient. Officials at one Navy MTF noted that two  primary care providers left within the last year for better pay in the private  sector, negatively affecting access to care. Officials at one Army MTF  noted that the application for special salary rates can take 2 years or  more, and therefore may not address short-term hiring needs. Further,  officials from one Navy MTF stated they continue to face difficulty hiring  for positions allowed special salary rates, such as pharmacist and  registered nurse positions. Our 2017 review of federal agency use of  special payment authorities approved by OPM\u2014such as special salary  rates\u2014found that agencies reported that access to authorities had  positive effects\u2014such as on staff retention and applicant quality\u2014but had  few documented effectiveness assessments.", "DOD is also authorized to offer DOD health care personnel a number of  salary rates established for Veterans Health Administration (VHA)  personnel. For example, DOD established a civilian physicians and  dentists pay plan using this authority. However, officials stated concerns  about the rates\u2019 usefulness. Senior officials from one Air Force hospital  noted that although the VHA salary levels are higher than the General Schedule levels that DOD typically offers, they may not be competitive  with the private sector. Moreover, senior officials from one Army MTF  expressed an interest in accessing VHA salary rates for additional  occupations because Army personnel often leave to work at a nearby  Veterans Affairs hospital for higher pay. In 2017, we reported on VHA  physician recruitment and retention strategies and officials from the six  VA medical centers in our review stated that physician salaries were often  below those offered by local private sector, academic, and some state  government employers.", "Contractor compensation. Senior officials from five of six MTFs stated  private sector contractor vendors face the same challenges as the  government regarding uncompetitive salaries. As a result, some contracts  have low fill rates or go unfilled. For example, senior officials at one Navy  MTF said one of its vendors has not been able to fill a clinical pharmacy  position for more than a year. Additionally, senior officials at the other  Navy MTF we spoke with stated that a vendor was not meeting its local  needs because the fill rate at their MTF is lower than the average fill rate  across all Navy MTFs, which is what the vendor is required to meet.  Further, senior officials at two of six MTFs\u2014one Navy and one Air  Force\u2014stated some of their vendors have attempted to fill positions by  sending multiple providers on a part-time basis to fill the equivalent of one  full-time position; they noted the part-time assignments are undesirable  and can affect the quality of care."], "subsections": []}, {"section_title": "FTE Targets and Hiring Freezes", "paragraphs": ["Federal civilian FTE targets. Headquarters officials from each of the  military departments stated that federal civilian FTE targets are a barrier  to effective workforce mix management because they reduce flexibility in  utilizing the most efficient personnel type to accomplish the beneficiary  mission of the MHS. From fiscal years 2012 to 2017, OSD guidance  directed the military departments to manage to a federal civilian FTE  target. These targets were intended to prevent an increase in the size of  the federal civilian workforce, even when federal civilians\u2019 performance of  work is most cost-effective. For example, Air Force headquarters officials  stated that due to the federal civilian FTE target, they generally default to  hiring contractor personnel when new personnel needs arise. Further, Air  Force headquarters officials stated they have not pursued in-sourcing of  some contracted functions even though such actions might result in cost  savings.", "The federal civilian FTE targets had varying effects on the operations of  the six MTF\u2019s we spoke with. Senior officials at two of six MTFs\u2014one  Navy and one Air Force\u2014stated that they have not been adversely  affected by the federal civilian FTE targets because the relatively high  number of vacancies in their funded federal civilian positions means that  they never exceed their target. Conversely, officials at one Air Force MTF  stated they have considered hiring additional private sector contractor  services when they reach their allowed federal civilian FTEs.", "During the course of our review, DOD issued its National Defense  Business Operations Plan for Fiscal Years 2018 to 2022, which states  that it would discontinue the use of federal civilian FTE targets because  they acted as artificial and arbitrary constraints on the workforce, and  encouraged the military departments to utilize hiring flexibilities to identify  the most appropriate and economical personnel type to achieve their  mission. In 2002 we reported that federal hiring policies should, among  other things, avoid arbitrary full-time equivalent or other arbitrary  numerical goals.", "Federal civilian hiring freezes. Senior officials at five of six MTFs stated  that federal civilian hiring freezes adversely affect MTF operations. As  part of planning for sequestration in fiscal year 2013, DOD imposed hiring  freezes on federal civilian personnel. Further, there was a federal  civilian hiring freeze from January 2017 to April 2017. Senior officials from three of six MTFs reported that hiring freezes lower morale and  elongate the already lengthy hiring process, even when they are granted  waivers to continue to hire. Further, senior officials from one Army MTF  stated hiring freezes limit their ability to shape their workforce, and often  result in higher costs when they increase the size of their contracted  workforce in accordance with their needs. We reported in 2018 that  defense laboratory officials we surveyed identified government-wide  hiring freezes as a challenge to hiring candidates, stating that candidates  accepted other offers due to delays created by the freeze and that hiring  efforts continue to be adversely affected even after a freeze is lifted.", "These three key hiring challenges limit the military departments\u2019 ability to  strategically consider the advantages of converting one source of support  to another, and limit their ability to hire the appropriate personnel type or  for contract vendors to fill positions. According to senior MTF officials,  these key hiring challenges and low fill rates in some areas can result in  personnel gaps that can adversely affect the operations of MTFs. When  personnel gaps arise, officials stated, military personnel often must work  additional hours or must be borrowed from other facilities. Senior officials  from one Navy MTF cited the example of a cost of about $16,000 in travel  expenses for the temporary transfer of an active duty nurse stationed in  Japan to work for a MTF in the United States for 3 months because the  MTF was not able to fill the position by other means. Additionally, senior  officials from one Air Force MTF noted that morale of its military staff is  negatively affected by extra hours and additional responsibilities placed  on them to ensure continued operations.", "Further, officials stated that personnel gaps can negatively affect care.  Due to concerns about patient safety, MTFs may decide to discontinue  some services at MTFs. Senior officials from five of six MTFs reported  discontinuing some services as a result of these challenges and referred  patients to the TRICARE network or to Veterans Affairs facilities.  Referring patients to the private sector can have secondary effects on  MTF operations, such as on hospital accreditations. Senior officials from  one Navy MTF noted that in the past fiscal year they had to refer patients  to private sector care after two hematology-oncology physicians resigned,  which may affect their hematology-oncology program\u2019s accreditation.  Senior officials at the other Navy MTF stated that in the last fiscal year  they could not meet the minimum staffing standards for labor and delivery  staff and therefore sent patients to the TRICARE network. They noted  they are also having difficulty filling key administrative positions related to  quality control of laboratory services and are concerned about  maintaining their pathology program accreditation.", "Senior officials from MTFs reported varying fill rates for military and  civilian personnel, and for the contractor personnel provided by private  sector vendors. However, officials from the MTFs we spoke with stated  that fill rates may not illustrate the availability of personnel. For example,  officials stated that authorizations for military personnel are counted as  filled even when a servicemember is deployed and therefore not working  at the MTF. In addition, MTF officials stated that any on-board civilians  without corresponding authorizations inflate the civilian fill rate, resulting  in a fill rate of greater than 100 percent. In addition, DOD officials noted  that DOD pays for contracted services and does not directly employ  contractor personnel. Therefore, the fill rate for contractors represents  either the number of authorized FTEs in the individual contract or  positions filled by contactors noted on the MTF\u2019s force planning  document, which could also result in fill rates of greater than 100 percent,  even as other positions remain unfilled. The MTFs that we spoke with  reported the following fill rates:", "Two Navy MTFs. The fill rates for military personnel, federal civilian  personnel, and funded positions designated for contracted services  were 79 percent, 81 percent, and 94 percent, respectively, at one  Navy MTF and 93 percent, 53 percent, and 62 percent, respectively,  at the other MTF.", "Two Air Force MTFs. The fill rates for military personnel, federal  civilian personnel, and funded positions designated for contracted  services were 98 percent, 86 percent, and 91 percent, respectively at  one Air Force MTF and 94 percent, 74 percent, and 90 percent,  respectively at the other MTF.", "Two Army MTFs. The fill rates for military personnel, federal civilian  personnel, and funded positions designated for contracted services  were 91 percent, 118 percent, and 87 percent, respectively at one  Army MTF. At the other MTF, the fill rate for military personnel fill  rate was 94 percent and for federal civilian personnel was 107  percent, but the MTF officials did not provide fill rate information for  positions designated for contracted services because there are no  corresponding authorizations on their force planning document.", "DOD has been taking some steps to attempt to address these key hiring  challenges. Specifically, DOD\u2019s 2016 Strategic Workforce Plan included  steps DOD was taking to address personnel gaps, such as a targeted  recruitment program for critical skills, including 27 harder-to-fill medical  occupations. In 2018, DOD published a Human Capital Operating Plan  which states that it replaces the previously required Strategic Workforce  Plan, but DOD does not yet have a plan of action specific to the medical  professions. Further, DOD officials stated that components are  encouraged to consider developing their own human capital operating  plans. With regard to contracting, in response to a requirement in the  National Defense Authorization Act for Fiscal Year 2017, DOD issued a status report in January 2018 on the development of its acquisition  strategy for health care services at MTFs. The report notes that  contracting for health care services is fragmented, and the report outlines  DOD\u2019s plan to move toward a single contract vehicle for health care  services and to establish metrics for the strategy, such as measurement  of contract fill rates.", "While these steps represent efforts to address these challenges,  responsibility for management of the federal civilian and contractor  workforces within the MHS will soon see significant changes. Specifically,  in December 2016, Congress directed the transfer of administrative  responsibility for MTFs from the military departments to the DHA.  Further, Congress amended the law in 2018 to specify that the transfer  should be completed by September 30, 2021. The law also states that  at each MTF, the Director of the DHA has the authority to determine total  workforce requirements, direct joint manning, and address personnel  staffing shortages, among other things.", "Although the DHA will soon begin to assume these responsibilities and  the challenges associated with them, a senior OASD(HA) official  responsible for human capital issues stated that the DHA currently has no  strategic total workforce plan, or similar document, to help ensure  execution of an appropriate workforce mix at its MTFs. According to  GAO\u2019s key questions to assess agency reform efforts, strategic workforce  planning should precede any staff realignments or downsizing, so that  changed staff levels do not inadvertently produce skills gaps or other  adverse effects that could result in increased use of overtime and  contracting. GAO\u2019s key principles for effective strategic workforce  planning and applicable federal regulations have shown that addressing a  critical human capital challenge\u2014such as closing or reducing personnel  gaps\u2014requires tailored human capital strategies and tools and metrics by  which to monitor and evaluate progress toward reducing gaps. Although  many hiring challenges are longstanding government-wide issues, GAO\u2019s  model of strategic human capital management states that agencies need  not wait for comprehensive civil service reform to modernize their human  capital approaches. In addition, according to OPM\u2019s standards for  strategic workforce planning, human capital strategies should be  integrated with acquisition plans, among other things, such as DOD\u2019s  acquisition strategy for health care services at MTFs.", "As the DHA finalizes its plans for assuming administrative control of  MTFs, senior leaders may find that they face the same challenges  reported by the military departments in executing an appropriate  workforce mix. DHA could mitigate these challenges to executing the  appropriate workforce mix in the MTFs by engaging in strategic workforce  planning, including tailored human capital strategies, tools, and metrics by  which to monitor and evaluate progress toward reducing gaps, and  integrating this planning with DOD\u2019s acquisition strategy for health care  services at MTFs."], "subsections": []}]}, {"section_title": "The Military Departments and DHA Have Not Decided How Military Personnel Will Meet Operational and Beneficiary Missions after the Transfer of Administrative Responsibility for MTFs to DHA", "paragraphs": ["The planned transfer of administrative responsibility for MTFs from the  military departments to the DHA may present challenges to DOD\u2019s  management of military personnel. Specifically, the military departments  and DHA have not determined how military personnel will meet both the  operational and beneficiary missions of the MHS after the transfer of  administrative responsibility for MTFs to the DHA. Historically, each  military department has been responsible for managing its military  personnel to ensure it meets its operational mission and appropriately  staffs its MTFs, and the challenge of balancing these missions was the  responsibility of each respective military department. However, the  transfer of administrative responsibility for MTFs to the DHA will separate  these missions\u2014the operational mission will be the responsibility of the  military departments, and the beneficiary mission will be the responsibility  of the DHA, with military personnel used to support both missions. The  plan for transfer of administrative responsibility for MTFs to the DHA  states that the military departments will retain ultimate control over  military personnel, who will work within the MTFs on a day-to-day basis to  maintain their readiness to provide operational medical care, while the  DHA will eventually assume responsibility for federal civilian and  contractor personnel and all other aspects of MTF management. DOD  officials stated that the planned transfer will allow the military departments  to focus their attention on readiness to provide operational medical care,  while the DHA will focus its attention on efficient management of  beneficiary health care operations. As a result of this separation of  missions, challenges in the management of military personnel could be  exacerbated by transfer of responsibility for achieving these missions to  separate organizations in the following three ways.", "First, DHA and the military departments have not clearly identified how  they will manage the assignment of military personnel to MTFs. The  implementation plan for transfer of administrative responsibility for MTFs  to the DHA states that the departments will continue to be responsible for  assignment of military personnel to MTFs. However, DOD\u2019s stated desire  to place greater emphasis on the readiness mission may affect current  MTF staffing practices. For example, military department officials told us  that it is common practice to assign military personnel to locations that  face challenges in hiring federal civilian and contractor medical personnel  to maintain access to medical care in these locations. However, the  transfer implementation plan states that the departments will provide  military personnel to the MTFs only to the extent that the MTFs can  provide sufficient workload to maintain providers\u2019 military medical  Knowledge, Skills, and Abilities (KSAs). KSAs are a metric for military  operational readiness that DOD has not yet finalized. Officials responsible  for planning the transfer of administrative responsibility for MTFs to the  DHA stated that the emphasis on fulfilling KSAs in the future may result in  concentrating military providers in larger MTFs, which can provide  opportunities for providers to fulfill KSAs. However, this change could  create a disadvantage for smaller facilities, which may not be able to  provide military providers with as much practice and already face  challenges in hiring federal civilian and contractor personnel.", "Second, DHA and the military departments have not clearly identified how  they will mitigate the effect of deployments of military medical personnel  on MTF operations. When medical personnel are deployed out of MTFs  to provide operational care, their absence can create a gap or reduction  in capability at the affected MTF, according to military department  officials. The military departments, prior to the transfer, manage  deployments and are responsible for ensuring appropriate staffing at the  MTFs in the absence of deployed personnel. Officials at all six of the  MTFs we visited cited challenges with mitigating the effect of  deployments on MTF operations. DOD has stated that after the transition,  there will be no barriers to the military departments\u2019 access to personnel  for deployment, and has highlighted options for addressing staffing gaps,  such as using borrowed military personnel, contractors, or referral to the  TRICARE network. However, officials at all six of the MTFs we spoke with  stated that contracting for medical services was not sufficiently timely or  effective, and officials at one MTF noted that referral to the TRICARE  network was difficult in their area.", "According to officials within the MTFs of the National Capital Region,  which is directly managed by the DHA and not the military departments,  management of deployments and their adverse effect on hospital staffing  has been a challenge. For example, officials cited a period in the summer  of 2017 when, due to overlapping deployments across military  departments, 8 of 9 general surgeons at Fort Belvoir Community Hospital  in Virginia were simultaneously deployed, and patients had to be referred  to private providers within the TRICARE network or sent to Walter Reed  National Military Medical Center in Maryland.", "Although the military departments and the DHA have executed a  Memorandum of Agreement concerning coordination for service  personnel to fill scheduled deployments, this does not always prevent  gaps in medical specialties. For example, officials noted that requests for  volunteer deployments are not always vetted through NCR management.  Further, addressing these gaps can be challenging. Specifically, officials  cited difficulties in successfully contracting for medical services and  reported that requests for backfill support from the reserve components  has associated costs and is difficult to execute.", "Third, DHA and the military departments have not clearly identified how  they will manage changes to the size or composition of the active duty  medical workforce that affect workforce balance within MTFs. Since 2008,  the military departments have been prohibited from converting medical  positions designated for military personnel to positions that can be filled  by federal civilians\u2014even when such conversions would result in cost  savings. Air Force headquarters officials noted that they have identified  more than 4,000 medical positions to review for possible conversion to  achieve cost savings, particularly in medical specialties with excess  military personnel, such as family practice and pharmacy. Air Force  officials previously identified 4,724 positions for conversion beginning in  fiscal year 2005, of which 1,449 were completed before the prohibition  was enacted. The Army planned to convert 4,340 military positions from  fiscal year 2006 through fiscal year 2011, of which 1,459 were completed  before the prohibition was enacted. The Army restored 165 of planned  conversions for fiscal year 2007, and reversed, or offset the remaining  through growth in the active duty medical force after the prohibition was  enacted.", "The National Defense Authorization Act for Fiscal Year 2017 allows for  the prohibition on such conversions to be lifted after DOD submits a  report that defines the military medical and dental requirements  necessary to meet operational medical force readiness requirements, and  lists the positions necessary to meet such requirements. However,  decisions on conversions taken by the departments could affect MTF  operations. Specifically, existing challenges with hiring federal civilian  personnel could create challenges with military-to-civilian conversions.  For example, DOD has stated that during the previous round of military to  federal civilian conversions, changes in local market conditions affected  the ability of the military departments to fill converted positions with  civilians in a timely fashion. Medical headquarters officials the Army  stated that they currently have no intention to use conversions if the  prohibition is lifted; Navy officials stated they currently do not plan to use  conversions since their military personnel requirements exceed their  authorizations. Senior officials from one Navy MTF we spoke with stated  that if conversions occurred, recruitment and retention challenges related  to hiring federal civilian employees would need to be addressed to ensure  such positions are filled.", "In addition, military department policies can affect workforce balance  within MTFs. Specifically, in its modeling for operational medical  personnel requirements, the Air Force includes a preference for  uniformed personnel to receive primary care from uniformed medical  personnel. Officials told us that this approach, known as the Critical Home  Station, is because Air Force leadership believes that performance of this  function by military personnel provides for increased accountability for  medical readiness. For example, senior officials from one Air Force MTF  stated they believe the policy is important for the Air Force to maintain  access to information about health factors that could render a  servicemember not medically qualified to deploy. Air Force medical  headquarters officials estimate that the policy results in 2,000 positons  reserved for military personnel that could be designated for federal civilian  or contractor performance.", "Leading practices for results-oriented government state that cooperating  federal agencies need to sustain and enhance their collaboration in  several ways, including the development of policies and procedures to  operate across agency boundaries and agreement on their respective  roles and responsibilities. However, planning for the transition by the  DHA and the military departments has not yet included development of  policies and procedures for management of military personnel and  agreement on specific roles and responsibilities for the military  departments and the DHA in this process. The MHS process for  collaborating across agency boundaries, known as MHS Governance,  emphasizes collaborative work in the management of the MHS. This  forum could provide an opportunity for the military departments and the  DHA to develop policies and procedures for management of military  personnel and agree on specific roles and responsibilities for the military  departments and the DHA in this process. Until DHA and the military  departments develop such policies and procedures and agrees on roles  and responsibilities, the MHS may continue to face a number of  challenges related to the transfer of administrative responsibility for MTFs  to the DHA."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given the size of the MHS, its central importance to the success of DOD\u2019s  mission, and its cost, having the right mix of military, federal civilian, and  contractor personnel providing medical care within MTFs and in deployed  operational settings should be a key priority for DOD leadership. While  the military departments have policies and procedures in place to assess  medical workforce mix in both settings, the shortcomings we have  highlighted present barriers to achieving an appropriate workforce mix.  Recently, such as in the 2018 National Defense Business Operations  Plan, DOD has emphasized the need to reassess who can most  efficiently perform all aspects of DOD\u2019s mission. However, the military  departments\u2019 planning processes for operational medical personnel  requirements continue to rely solely on military personnel, despite the use  of federal civilians and contractors in operational settings, and the military  departments have not developed full information on the cost of their  medical forces and incorporated such information into decision-making  processes about the mix of active and reserve component personnel.  Similarly, the transfer of administrative responsibility for MTFs to the DHA  represents an opportunity to reassess workforce mix at the MTFs.  However, long-standing challenges in the management of federal civilian  and contractor personnel, coupled with challenges related to the  management of medical personnel after the transfer, could overshadow  and cast doubt on the success of that reform. Without addressing the  concerns we have highlighted, DOD may miss the opportunity presented  by current transformation efforts in the MHS to ensure it has in place the  most cost-effective mix of personnel in its workforce to accomplish its  medical mission."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making five recommendations to the Department of Defense.", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Health Affairs, in coordination with the military departments,  perform an assessment of the suitability of federal civilian and contractor  personnel to provide operational medical care and incorporate the results  of the assessment into relevant policies, if warranted. (Recommendation  1)", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Personnel and Readiness require consideration of cost when  making determinations regarding the mix of active and reserve  component medical personnel. (Recommendation 2)", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Health Affairs, in collaboration with the Director of Cost  Assessment and Program Evaluation and the military departments,  develop full cost information for active and reserve component medical  personnel, and the military departments use that information in its  determinations regarding the mix of active and reserve component  medical personnel. (Recommendation 3)", "The Secretary of Defense should ensure that the Director of the Defense  Health Agency develop a strategic total workforce plan which includes,  among other things: (1) tailored human capital strategies, tools, and  metrics by which to monitor and evaluate progress toward reducing  personnel gaps, and; (2) integration of human capital strategies with  acquisition plans, such as DOD\u2019s acquisition strategy for health care  services at DOD\u2019s military treatment facilities. (Recommendation 4)", "The Secretary of Defense and the Secretaries of the Army, the Navy, and  the Air Force, respectively, should ensure that accompanying the transfer  of administrative responsibility for military treatment facilities to the  Defense Health Agency, that the Defense Health Agency and the military  departments develop policies and procedures for management of military  personnel, including agreement on specific roles and responsibilities for  the military departments and the Defense Health Agency in this process.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["In written comments on a draft of this report, DOD concurred with our five  recommendations concerning additional assessments needed to better  ensure an efficient MHS total workforce. DOD\u2019s comments are reprinted  in appendix II.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Personnel and Readiness, the Assistant Secretary of Defense for  Health Affairs, the Director of Cost Assessment and Program Evaluation,  the Director of the Defense Health Agency, and the Secretaries of the  Army, the Navy, and the Air Force. In addition, this report will be available  at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions regarding this report, please  contact me at (202) 512-3604 or farrellB@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To address the extent to which the military departments\u2019 planning process  for operational medical personnel requirements have assessed the mix of  federal civilian, contractor, active and reserve medical personnel (i.e.  workforce mix), we compared the military departments\u2019 efforts in planning  for operational medical personnel requirements to the Department of  Defense (DOD) and department-level policies and guidance on workforce  mix determination and identifying the full cost of its military medical  personnel. DOD Directive 1100.4 states that authorities should consider  all available sources when determining workforce mix. DOD Instruction  1100.22 directs the steps that workforce planning authorities must take in  planning for personnel requirements and emphasizes consideration of all  potential workforce sources and an accurate understanding of personnel  costs. We also reviewed related DOD documentation on identifying  military essential positons and the use of alternative workforces.  Specifically, DOD\u2019s National Defense Business Operations Plan for fiscal  years 2018 through 2022 states that workforce rationalization strategies  include, among other things, reassessing military manpower allocations  for military essentiality and identifying functions and positions that are  commercial in nature that may be appropriately or efficiently delivered via  private sector support. Moreover, DOD\u2019s 2017 Workforce Rationalization  Plan recognizes DOD\u2019s civilians as an essential enabler of its mission  capabilities and operational readiness and noted that there are numerous  opportunities for the military departments, combatant commands, and  others to make well-reasoned adjustments to workforce mix.", "To determine the extent to which federal civilians and contractors were  deployed to provide medical care we reviewed federal civilian and  contractor deployment data from fiscal years 2013 through 2017. We analyzed data for this timeframe to enable us to identify deployments over  the last 5 years, and fiscal year 2017 was the most recent full fiscal year  of available data at the time of our review. To assess the reliability of  these data, we electronically tested the data to identify obvious problems  with completeness or accuracy and interviewed knowledgeable agency  officials about the data. We found the data to be limited in that the  deployment data may not be sufficiently reliable for identifying the  universe of deployments. However, we found the data to be sufficiently  reliable for the purposes of reporting that federal civilians and contractors  have been deployed to provide medical care. Further, we interviewed  officials from the Office of the Under Secretary of Defense for Personnel  and Readiness (USD(P&R)), Office of the Assistant Secretary of Defense  for Health Affairs (OASD(HA)), Defense Civilian Personnel Advisory  Service, the military departments, and selected combatant commands to  identify considerations and any challenges of using different personnel  categories as workforce alternatives for meeting operational medical  requirements.", "To determine the appropriate use of the active and reserve components  for DOD\u2019s operational medical personnel military requirements, we  compared the military departments\u2019 efforts in assessing their active and  reserve balance to DOD and department-level policies and guidance.  Specifically, in a 2013 DOD report issued in response to section 1080A of  the National Defense Authorization Act for Fiscal Year 2012, DOD  established five factors that play a key role in active and reserve  component balance decisions, including the cost of unit manning, training,  and equipping. According to the report, cost is often outweighed by other  factors when making active component and reserve component mix  decisions, but should always be considered in active component and  reserve component mix decisions. DOD Instruction 7041.04 has guidance  for military departments to use to identify the full cost of their active  component, federal civilian, and contractor workforces. Moreover, we  interviewed officials from the military departments to discuss: (1) how they  determine their operational medical requirements and if they identified the  full cost of active and reserve component medical personnel, and (2) the  use of the active and reserve components for operational requirements  and any efforts to assess the balance of active and reserve component  medical personnel.", "To determine the mix of active and reserve component medical  personnel, we analyzed authorization data from the Health Manpower  and Personnel Data System for fiscal year 2017. We analyzed data for  fiscal year 2017 because this was the most recent year of available data  at the time of our review. To assess the reliability of these data, we  electronically tested the data to identify obvious problems with  completeness or accuracy and interviewed knowledgeable agency  officials about the data. We found the data to be sufficiently reliable for  reporting on the allocation of authorizations for active and reserve  component medical personnel.", "To address how the military departments determine the most appropriate  workforce mix at military treatment facilities (MTFs) and any challenges in  executing an appropriate workforce mix, we reviewed DOD and  department-level policies and guidance on workforce mix determination.  We also reviewed the military departments\u2019 efforts in planning, staffing,  and filling MTF requirements. We spoke with knowledgeable officials from  the Office of the USD(P&R), OASD(HA), DHA, and the military  departments and requested documentation related to how they oversee  or implement legal or policy requirements, such as DOD Instruction  1100.22\u2019s manpower mix criteria, and the annual inventory of inherently  governmental and commercial activity. To determine the proportion of  reported military, federal civilian, and contractor personnel providing or  supporting care in MTFs, we obtained budgetary data for fiscal year 2017,  which was the most recent full fiscal year of available data at the time of  our review. To assess the reliability of these data, we compared them to  the information reported in the fiscal year 2017 Defense Health Program  justification estimates published in February 2018 to identify key  differences and interviewed knowledgeable agency officials about the  data. We found the data to be sufficiently reliable for the purposes of  describing workforce mix of military, federal civilian, and contractor  personnel within MTFs.", "To understand how policies and procedures to determine and execute an  appropriate workforce mix are implemented at MTFs, we interviewed  military department medical command or agency officials responsible for  implementing DOD total force policy. To better understand policy and  procedure implementation at MTFs we selected six MTFs - two each from  the Army, Navy, and Air Force - to allow a cross-section of views  concerning the management of the military departments\u2019 workforce mix at  the MTFs and hiring conditions in different types of labor markets. The  two MTFs from each military department were selected based on  consideration of average daily patient load and MTF bed size, which we  obtained from the Defense Health Agency.", "For each MTF, we interviewed officials responsible for the leadership and  management of MTF personnel and operations and requested and  reviewed relevant documentation. We reviewed their responses, which  highlighted some challenges related to achieving an appropriate  workforce mix, and DOD\u2019s plans for addressing these challenges. We  compared these to GAO\u2019s key questions to assess agency reform efforts,  which note that strategic workforce planning should precede any staff  realignments or downsizing, and GAO\u2019s key principles for effective  strategic workforce planning, which state that addressing a critical human  capital challenge\u2014such as closing or reducing personnel gaps\u2014requires  tailored human capital strategies and tools and metrics by which to  monitor and evaluate progress toward reducing gaps. We also reviewed  these plans in light of OPM\u2019s standards for strategic workforce planning,  which note that human capital strategies should be integrated with  acquisition plans, among other things, such as DOD\u2019s acquisition strategy  for health care services at MTFs. Finally, we requested from officials at  each MTF information on personnel inventory and authorizations to  understand their ability to fill military and civilian positions, and the  contract vendors\u2019 ability to fill positions designated for contracted  services.", "We also reviewed how the planned transfer of administrative  responsibility for MTFs from the military departments to the DHA might  affect DOD management of military personnel within the MHS. To identify  (1) responsibilities of the military departments that may be transferred to  the DHA, and (2) challenges that may continue under the new organizational structure, we reviewed relevant documentation and  interviewed knowledgeable officials. To understand potential challenges  related to the assignment of military personnel to MTFs, we interviewed  military department officials responsible for the assignment of military  personnel. To identify how deployments affect MTF operations, if at all,  we interviewed officials responsible for the leadership and management  of MTF personnel and operations. Lastly, to understand how the military  departments manage the size and composition of the active duty medical  workforce, we requested documentation related to the development of  operational personnel requirements and interviewed knowledgeable  officials. We also reviewed previous efforts to alter the size or  composition of the active duty medical workforce, such as military to  civilian conversions. We compared DOD\u2019s efforts to plan for these  challenges to leading practices for results-oriented government, which  state that cooperating federal agencies need to sustain and enhance their  collaboration in several ways, including the development of policies and  procedures to operate across agency boundaries and agreement on their  respective roles and responsibilities.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Lori Atkinson, Assistant Director;  Tracy Barnes; Alexandra Gonzalez; Adam Howell-Smith; Kirsten Leikem;  Amie Lesser; Richard Powelson; Clarice Ransom; Stephanie Santoso;  Amber Sinclair, and John Van Schaik; made key contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Military Personnel: Additional Actions Needed to Address Gaps in Military  Physician Specialties. GAO-18-77. Washington, D.C.: February 28, 2018.", "Defense Health Reform: Steps Taken to Plan the Transfer of the  Administration of the Military Treatment Facilities to the Defense Health  Agency, but Work Remains to Finalize the Plan. GAO-17-791R.  Washington, D.C.: September 29, 2017.", "Defense Health Care Reform: DOD Needs Further Analysis of the Size,  Readiness, and Efficiency of the Medical Force. GAO-16-820.  Washington, D.C.: September 21, 2016.", "Human Capital: Additional Steps Needed to Help Determine the Right  Size and Composition of DOD\u2019s Total Workforce. GAO-13-470.  Washington, D.C.: May 29, 2013.", "Military Personnel: DOD Addressing Challenges in Iraq and Afghanistan  but Opportunities Exist to Enhance the Planning Process for Army  Medical Personnel Requirements. GAO-11-163. Washington, D.C.:  February 10, 2011.", "Military Personnel: Enhanced Collaboration and Process Improvements  Needed for Determining Military Treatment Facility Medical Personnel  Requirements. GAO-10-696. Washington, D.C.: July 29, 2010.", "Military Personnel: Status of Accession, Retention, and End Strength for  Military Medical Officers and Preliminary Observations Regarding  Accession and Retention Challenges. GAO-09-469R. Washington, D.C.:  April 16, 2009."], "subsections": []}], "fastfact": ["Over 241,000 people work in DOD's health system, which reaches from the battlefield to large hospitals in the United States. The workforce includes active and reserve military, federal civilian staff, and private sector contractors.", "Officials we spoke with at 5 of 6 selected military hospitals reported having to send patients outside the system for medical care due to challenges including:", "civilian hiring freezes", "lengthy hiring and contracting processes.", "We recommended that the Defense Health Agency, which is in the process of assuming control of DOD hospitals and clinics, develop a strategic workforce plan to address these challenges."]}
{"id": "GAO-18-585T", "url": "https://www.gao.gov/products/GAO-18-585T", "title": "Prescription Opioids: Medicare Needs Better Information to Reduce the Risk of Harm to Beneficiaries", "published_date": "2018-05-29T00:00:00", "released_date": "2018-05-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Misuse of prescription opioids can lead to overdose and death. Medicare and Medicaid, two of the nation's largest health care programs, provide prescription drug coverage that can include opioids. GAO and others have reported on inappropriate activities and risks associated with these prescriptions.", "This statement is based on GAO's October 2017 report (GAO-18-15) and discusses (1) CMS oversight of Medicare beneficiaries who receive opioid prescriptions under Part D, and (2) CMS oversight of providers who prescribe opioids to Medicare Part D beneficiaries. For the October 2017 report, GAO reviewed CMS opioid utilization and prescriber data, CMS guidance for plan sponsors, and CMS's strategy to prevent opioid misuse. GAO also interviewed CMS officials, the six largest Part D plan sponsors, and 12 national associations selected to represent insurance plans, pharmacy benefit managers, physicians, patients, and regulatory and law enforcement authorities."]}, {"section_title": "What GAO Found", "paragraphs": ["In October 2017, GAO found that the Centers for Medicare & Medicaid Services (CMS) provided guidance on the monitoring of Medicare beneficiaries who received opioid prescriptions to plan sponsors\u2014private organizations that implement the Medicare drug benefit, Part D\u2014but it lacked information on most beneficiaries at risk of harm from opioid use. Specifically, GAO found that", "CMS provided guidance to plan sponsors on how they should monitor opioid overutilization among Medicare Part D beneficiaries, and required them to implement drug utilization review systems that use criteria similar to CMS's. Prior to 2018, the agency's criteria focused on beneficiaries who did all the following: (1) received prescriptions of high doses of opioids, (2) received prescriptions from four or more providers, and (3) filled prescriptions at four or more pharmacies. According to CMS, this approach focused actions on beneficiaries the agency determined to have the highest risk of harm. For 2018, CMS revised the criteria to include more at-risk beneficiaries.", "CMS's criteria, including recent revisions, did not provide sufficient information about the larger population of potentially at-risk beneficiaries. CMS estimated that, in 2015, 727,016 beneficiaries would have received high doses of opioids regardless of the number of providers or pharmacies, but only 33,223 would have met its revised criteria. In 2016, CMS began to collect information on some of these beneficiaries using a higher dosage threshold for opioid use. However, based on Centers for Disease Control and Prevention guidelines, CMS's approach also missed some who could be at risk of harm. As a result, CMS had limited information to assess progress against the goals of the Medicare and Medicaid programs' Opioid Misuse Strategy, which includes activities to reduce risk of harm to beneficiaries.", "CMS provided oversight on prescribing of drugs at high risk of abuse through a variety of projects, but did not analyze data specifically on opioids. According to CMS officials, CMS and plan sponsors identified providers who prescribed large amounts of drugs with a high risk of abuse, and those suspected of fraud or abuse may be referred to law enforcement. However, GAO found that CMS did not identify providers who may be inappropriately prescribing large amounts of opioids separately from other drugs, and did not require plan sponsors to report actions they take when they identified such providers. As a result, CMS lacked information that it could use to assess how opioid prescribing patterns are changing over time, and whether its efforts to reduce harm are effective."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In the October 2017 report, GAO made three recommendations that CMS (1) gather information on the full number of at-risk beneficiaries receiving high doses of opioids, (2) identify providers who prescribe high amounts of opioids, and (3) require plan sponsors to report to CMS on actions related to providers who inappropriately prescribe opioids. HHS concurred with the first two recommendations, but not with the third. GAO continues to believe the recommendation is valid, as discussed in the report and in this statement."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here to discuss our October 2017 report on oversight  of opioid prescribing in the Medicare program. Misuse of prescription  opioids, which are used to treat both acute and chronic pain, has become  a serious public health problem for the U.S. population, including  Medicare and Medicaid beneficiaries. The Centers for Disease Control  and Prevention (CDC), within the Department of Health and Human  Services (HHS), reported that from 1999 to 2013 the rate of drug  poisoning deaths from prescription opioids nearly quadrupled, and that in  2016, alone, there were more than 17,000 overdose deaths from  prescription opioids.", "The Centers for Medicare and Medicaid Services (CMS), also within  HHS, administers Medicare and Medicaid, two of the nation\u2019s largest  health care programs. Medicare is a federal health insurance program for  people age 65 and older, individuals under age 65 with certain disabilities,  and individuals diagnosed with end-stage renal disease. Within Medicare  is Part D, the program\u2019s outpatient prescription drug benefit. Medicaid is  a joint federal-state program that finances health care coverage for  certain low-income and medically needy individuals. Due to concerns  about adequacy of oversight, both Medicare and Medicaid are on our list  of high-risk programs.", "HHS\u2019s Office of Inspector General (HHS-OIG) reported that 14.4 million  people (about one-third) who participated in Medicare Part D in 2016  received at least one prescription for opioids, and that Part D spending for  opioids in 2016 was almost $4.1 billion. We and the HHS-OIG have  previously reported on inappropriate activities that can be associated with  such prescriptions, including \u201cdoctor shopping\u201d to receive multiple opioid  prescriptions from different providers; the diversion of prescription drugs  for uses other than what was intended; and questionable prescribing  practices by providers.", "The Medicaid program also covers opioid prescriptions for its  beneficiaries. In our prior work, we have reported on potentially  inappropriate activities involving Medicaid\u2019s prescription drug coverage. In  2017, for example, we reported on prescriptions for opioid pain  medication among Medicaid beneficiaries. In that report, we noted that  while opioid pain medication can constitute proper medical care for  beneficiaries suffering from painful conditions, the use of these  medications among Medicaid beneficiaries with diagnosed opioid abuse  or dependence raises concerns about potential inappropriate  prescribing. In addition, in a July 2015 report, we found indicators of  potential Medicaid prescription-drug fraud and abuse, such as doctor  shopping.", "In March 2015, HHS announced plans to make addressing opioid abuse  a high priority through two broad goals: (1) decreasing opioid overdoses  and overall overdose deaths, and (2) decreasing the prevalence of opioid  use disorder. In 2016, CDC issued guidelines with recommendations for  prescribing opioids in outpatient settings for chronic pain. The guidelines  recommended that providers use caution when prescribing opioids at any  dose, carefully reassess evidence of individual benefits and risks when  increasing opioid dosage to 50 mg morphine-equivalent dose (MED) per  day or more, and avoid or carefully justify dosage at 90 mg MED or more.", "CDC guidelines also noted that providers should use additional caution in  prescribing opioids to patients aged 65 and older, because the drugs can  accumulate in the body to toxic levels. Further, in January 2017, CMS  issued its Opioid Misuse Strategy for the Medicare and Medicaid  programs, including Medicare Part D. The strategy includes the  agency\u2019s plans to address concerns about beneficiary use of opioids and  the prescribing of opioids by providers.", "My remarks today discuss the findings and recommendations from our  2017 report on CMS efforts to oversee prescription opioids in Medicare.  Accordingly, this testimony focuses on how:  (1)  CMS oversees beneficiaries who receive opioid prescriptions  under Medicare Part D, and   (2)  CMS oversees providers who prescribe opioids to Medicare Part  D beneficiaries.", "For our report, we reviewed CMS opioid utilization and prescriber data,  CMS guidance for plan sponsors\u2014private organizations, such as health  insurance companies, contracted by CMS to provide outpatient drug  benefit plans to Medicare beneficiaries\u2014and CMS\u2019s strategy to prevent  opioid misuse. We also interviewed officials from CMS, the six largest  Part D plan sponsors, and 12 national associations selected to represent  insurance plans, pharmacy benefit managers, physicians, patients, and  regulatory and law enforcement agencies. More detailed information on  our objectives, scope, and methodology for that work can be found in the  issued report. We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "CMS Delegated Monitoring of Beneficiaries who Receive Opioid Prescriptions to Plan Sponsors, but Did Not Have Sufficient Information on Those Most at Risk for Harm", "paragraphs": [], "subsections": [{"section_title": "CMS Delegated Monitoring of Individual Beneficiaries\u2019 Opioid Prescriptions to Plan Sponsors", "paragraphs": ["Our October 2017 report found that CMS provided guidance to Medicare  Part D plan sponsors on how they should monitor opioid overutilization  problems among Part D beneficiaries. The agency included this guidance  in its annual letters to plan sponsors, known as call letters; it also  provided a supplemental memo to plan sponsors in 2012. Among other  things, these guidance documents instructed plan sponsors to implement  a retrospective drug utilization review (DUR) system to monitor  beneficiary utilization starting in 2013. As part of the DUR systems,  CMS required plan sponsors to have methods to identify beneficiaries  who were potentially overusing specific drugs or groups of drugs,  including opioids.", "Also in 2013, CMS created the Overutilization Monitoring System (OMS),  which outlined criteria to identify beneficiaries with high-risk use of  opioids, and to oversee sponsors\u2019 compliance with CMS\u2019s opioid  overutilization policy. Plan sponsors may use the OMS criteria for their  DUR systems, but they had some flexibility to develop their own targeting  criteria within CMS guidance. At the time of our review, the OMS  considered beneficiaries to be at a high risk of opioid overuse when they  met all three of the following criteria:  1.  received a total daily MED greater than 120 mg for 90 consecutive  2.  received opioid prescriptions from four or more health care providers  in the previous 12 months, and  3.  received opioids from four or more pharmacies in the previous 12  months.", "The criteria excluded beneficiaries with a cancer diagnosis and those in  hospice care, for whom higher doses of opioids may be appropriate.", "We found that through the OMS, CMS generated quarterly reports that list  beneficiaries who met all of the criteria and who were identified as high- risk, and then distributed the reports to the plan sponsors. Plan sponsors  were expected to review the list of identified beneficiaries, determine  appropriate action, and then respond to CMS with information on their  actions within 30 days. According to CMS officials, the agency also  expected plan sponsors to share any information with CMS on  beneficiaries that they identified through their own DUR systems. We  found that some actions plan sponsors may take included the following:", "Case management. Case management may include an attempt to  improve coordination issues, and often involves provider outreach,  whereby the plan sponsor will contact the providers associated with  the beneficiary to let them know that the beneficiary is receiving high  levels of opioids and may be at risk of harm.", "Beneficiary-specific point-of-sale (POS) edits. Beneficiary-specific  POS edits are restrictions that limit these beneficiaries to certain  opioids and amounts. Pharmacists receive a message when a  beneficiary attempts to fill a prescription that exceeds the limit in place  for that beneficiary.", "Formulary-level POS edits. These edits alert providers who may not  have been aware that their patients are receiving high levels of  opioids from other doctors.", "Referrals for investigation. According to the six plan sponsors we  interviewed, the referrals can be made to CMS\u2019s National Benefit  Integrity Medicare Drug Integrity Contractor (NBI MEDIC), which was  responsible for identifying and investigating potential Part D fraud,  waste, and abuse, or to the plan sponsor\u2019s own internal investigative  unit, if they have one. After investigating a particular case, they may  refer the case to the HHS-OIG or a law enforcement agency,  according to CMS, NBI MEDIC, and one plan sponsor.", "Based on CMS\u2019s use of the OMS and the actions taken by plan sponsors,  CMS reported a 61 percent decrease from calendar years 2011 through  2016 in the number of beneficiaries meeting the OMS criteria of high  risk\u2014from 29,404 to 11,594 beneficiaries\u2014which agency officials  considered an indication of success toward its goal of decreasing opioid  use disorder.", "In addition, we found that CMS relied on separate patient safety  measures developed and maintained by the Pharmacy Quality Alliance to  assess how well Part D plan sponsors were monitoring beneficiaries and  taking appropriate actions. In 2016, CMS started tracking plan sponsors\u2019  performance on three patient safety measures that were directly related  to opioids. The three measures were similar to the OMS criteria in that  they identified beneficiaries with high dosages of opioids (120 mg MED),  beneficiaries that use opioids from multiple providers and pharmacies,  and beneficiaries that do both. However, one difference between these  approaches was that the patient safety measures separately identified  beneficiaries who fulfill each criterion individually."], "subsections": []}, {"section_title": "CMS Did Not Have Sufficient Information on Most Beneficiaries Potentially at Risk for Harm", "paragraphs": ["Our October 2017 report also found that CMS tracked the total number of  beneficiaries who met all three OMS criteria as part of its opioid  overutilization oversight across the Part D program. However, the agency  did not have comparable information on most beneficiaries who receive  high doses of opioids\u2014regardless of the number of providers and  pharmacies used\u2014and who therefore may be at risk for harm, according  to CDC\u2019s 2016 guidelines. These guidelines noted that long-term use of  high doses of opioids\u2014those above a MED of 90 mg per day\u2014are  associated with significant risk of harm and should be avoided if possible.", "Based on the CDC guidelines, outreach to Part D plan sponsors, and  CMS analyses of Part D data, CMS has revised its current OMS criteria to  include more at-risk beneficiaries beginning in 2018. The new OMS  criteria define a high user as an individual having an average daily MED greater than 90 mg for any duration;  receiving opioids from four or more providers and four or more  pharmacies, or from six or more providers regardless of the  number of pharmacies, for the prior 6 months.", "Based on 2015 data, CMS found that 33,223 beneficiaries would have  met these revised criteria. While the revised criteria would help identify  beneficiaries who CMS determined are at the highest risk of opioid  misuse and therefore may need case management by plan sponsors,  they did not provide information on the total number of Part D  beneficiaries who may be at risk of harm. In developing the revised  criteria, CMS conducted a one-time analysis that estimated there were  727,016 beneficiaries with an average MED of 90 mg or more, for any  length of time during a 6 month measurement period in 2015, regardless  of the number of providers or pharmacies used. According to the CDC  guidelines, these beneficiaries may be at risk of harm from opioids, and  therefore tracking the total number of these beneficiaries over time could  help CMS to determine whether it is making progress toward meeting the  goals specified in its Opioid Misuse Strategy to reduce the risk of opioid  use disorders, overdoses, inappropriate prescribing, and drug diversion.  However, CMS officials told us that the agency did not keep track of the  total number of these beneficiaries, and did not have plans to do so as  part of OMS. (See fig. 1.)", "We also found that in 2016, CMS began to gather information from its  patient safety measures on the number of beneficiaries who use more  than 120 mg MED of opioids for 90 days or longer, regardless of the  number of providers and pharmacies. The patient safety measures  identified 285,119 such beneficiaries\u2014counted as member-years\u2014in  2016. However, this information did not include all at-risk beneficiaries,  because the threshold was more lenient than indicated in CDC guidelines  and CMS\u2019s new OMS criteria. Because neither the OMS criteria nor the  patient safety measures included all beneficiaries potentially at risk of  harm from high opioid doses, we recommended that CMS should gather  information over time on the total number of beneficiaries who receive  high opioid morphine equivalent doses regardless of the number of  pharmacies or providers, as part of assessing progress over time in  reaching the agency\u2019s goals related to reducing opioid use. HHS  concurred with our recommendation."], "subsections": []}]}, {"section_title": "CMS Oversees Providers through its Contractor and Plan Sponsors, but Efforts Did Not Specifically Monitor Opioid Prescriptions", "paragraphs": ["Our October 2017 report found that CMS oversees providers who  prescribe opioids to Medicare Part D beneficiaries through its contractor,  NBI MEDIC, and the Part D plan sponsors.", "NBI MEDIC\u2019s data analyses to identify outlier providers. CMS  required NBI MEDIC to identify providers who prescribe high amounts  of Schedule II drugs, which include but are not limited to opioids.  Using prescription drug data, NBI MEDIC conducted a peer  comparison of providers\u2019 prescribing practices to identify outlier  providers\u2014the highest prescribers of Schedule II drugs\u2014and reported  the results to CMS.", "NBI MEDIC\u2019s other projects. NBI MEDIC gathered and analyzed  data on Medicare Part C and Part D, including projects using the  Predictive Learning Analytics Tracking Outcome (PLATO) system.  According to NBI MEDIC officials, these PLATO projects sought to  identify potential fraud by examining data on provider behaviors.", "NBI MEDIC\u2019s investigations to identify fraud, waste, and abuse.", "NBI MEDIC officials conducted investigations to assist CMS in  identifying cases of potential fraud, waste, and abuse among  providers for Medicare Part C and Part D. The investigations were  prompted by complaints from plan sponsors; suspected fraud, waste,  or abuse reported to NBI MEDIC\u2019s call center; NBI MEDIC\u2019s analysis  of outlier providers; or from one of its other data analysis projects.", "NBI MEDIC\u2019s referrals. After identifying providers engaged in  potential fraudulent overprescribing, NBI MEDIC officials said they  may refer cases to law enforcement agencies or the HHS-OIG for  further investigation and potential prosecution.", "Plan sponsors\u2019 monitoring of providers. CMS required all plan  sponsors to adopt and implement an effective compliance program,  which must include measures to prevent, detect, and correct Part C or  Part D program noncompliance, as well as fraud, waste, and abuse.  CMS\u2019s guidance focused broadly on prescription drugs, and did not  specifically address opioids.", "Our report concluded that although these efforts provided valuable  information, CMS lacked information necessary to adequately oversee  opioid prescribing. CMS\u2019s oversight actions focused broadly on Schedule  II drugs rather than specifically on opioids. For example, NBI MEDIC\u2019s  analyses to identify outlier providers did not indicate the extent to which  they may be overprescribing opioids specifically. According to CMS  officials, they directed NBI MEDIC to focus on Schedule II drugs, because  these drugs have a high potential for abuse, whether they are opioids or  other drugs. However, without specifically identifying opioids in these  analyses\u2014or an alternate source of data\u2014CMS lacked data on providers  who prescribe high amounts of opioids, and therefore cannot assess  progress toward meeting its goals related to reducing opioid use, which  would be consistent with federal internal control standards. Federal  internal control standards require agencies to conduct monitoring  activities and to use quality information to achieve objectives and address  risks. As a result, we recommended that CMS require NBI MEDIC to  gather separate data on providers who prescribe high amounts of opioids.  This would allow CMS to better identify those providers who are  inappropriately and potentially fraudulently overprescribing opioids. HHS  agreed, and in April 2018 reported that it is working with NBI MEDIC to  separately identify outlier prescribers of opioids.", "In addition, our 2017 report found that CMS also lacked key information  necessary for oversight of opioid prescribing, because it did not require  plan sponsors to report to NBI MEDIC or CMS cases of fraud, waste, and  abuse; cases of overprescribing; or any actions taken against providers.  Plan sponsors collected information on cases of fraud, waste, and abuse,  and could choose to report this information to NBI MEDIC or CMS. While  CMS receives information from plan sponsors who voluntarily reported  their actions, it did not know the full extent to which plan sponsors had  identified providers who prescribed high amounts of opioids, or the full  extent to which sponsors had taken action to reduce overprescribing. We  concluded that without this information, it was difficult for CMS to assess  progress in this area, which would be consistent with federal internal  control standards. In our report, we recommended that CMS require plan  sponsors to report on investigations and other actions taken related to  providers who prescribe high amounts of opioids. HHS did not concur  with this recommendation. HHS noted that plan sponsors have the  responsibility to detect and prevent fraud, waste, and abuse, and that  CMS reviews cases when it conducts audits. HHS also stated that it  seeks to balance requirements on plan sponsors when considering new  regulatory requirements. However, without complete reporting\u2014such as  reporting from all plan sponsors on the actions they take to reduce  overprescribing\u2014we believe that CMS is missing key information that  could help assess progress in this area. Due to the importance of this  information for achieving the agency\u2019s goals, we continue to believe that  CMS should require plan sponsors to report on the actions they take to  reduce overprescribing."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["In conclusion, a large number of Medicare Part D beneficiaries use  potentially harmful levels of prescription opioids, and reducing the  inappropriate prescribing of these drugs has been a key part of CMS\u2019s  strategy to decrease the risk of opioid use disorder, overdoses, and  deaths. Despite working to identify and decrease egregious opioid use  behavior\u2014such as doctor shopping\u2014among Medicare Part D  beneficiaries, CMS lacked the necessary information to effectively  determine the full number of beneficiaries at risk of harm, as well as other  information that could help CMS assess whether its efforts to reduce  opioid overprescribing are effective. It is important that health care  providers help patients to receive appropriate pain treatment, including  opioids, based on the consideration of benefits and risks. Access to  information on the risks that Medicare patients face from inappropriate or  poorly monitored prescriptions, as well as information on providers who  may be inappropriately prescribing opioids, could help CMS as it works to  improve care.", "Chairman Toomey, Ranking Member Stabenow, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgements", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact me at (202) 512-7114 or  DeniganMacauleyM@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Other individuals who made key contributions to this  testimony include Will Simerl (Assistant Director) and Carolyn Feis  Korman (Analyst-in-Charge). Also contributing were Amy Andresen,  George Bogart, Andrew Furillo, Drew Long, and Vikki Porter.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["What can Medicare do to help address the nation's opioid crisis?", "We've previously found problems such as \"doctor shopping\" and questionable prescribing practices in Medicare's prescription drug benefits. 14.4 million people were prescribed at least one opioid through Medicare in 2016. While many opioids prescribed addressed legitimate need, others may have been overprescribed.", "This testimony revisits our analysis of Medicare's efforts to reduce inappropriate opioid prescribing. We suggested ways to help Medicare collect information on doctor investigations and at-risk beneficiaries that could help it determine whether its efforts are working."]}
{"id": "GAO-18-324", "url": "https://www.gao.gov/products/GAO-18-324", "title": "Missile Defense: The Warfighter and Decision Makers Would Benefit from Better Communication about the System's Capabilities and Limitations", "published_date": "2018-05-30T00:00:00", "released_date": "2018-05-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 2002, MDA has been developing a Ballistic Missile Defense System that can identify and intercept enemy threats. MDA has received approximately $132 billion and is planning to spend an additional $47.8 billion through fiscal year 2022 to continue its efforts.", "The National Defense Authorization Act for Fiscal Year 2012 included a provision that GAO annually assess and report on the extent to which MDA has achieved its acquisition goals and objectives. This report addresses (1) the progress MDA made in achieving fiscal year 2017 goals; (2) the extent to which MDA uses contracting vehicles known as undefinitized contract actions; and (3) the extent to which models provide credible information about the system's operational performance. To do this work, GAO reviewed planned fiscal year 2017 baselines and other documentation and assessed them against baseline reviews and GAO's acquisition best practices guides. In addition, GAO interviewed relevant officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In fiscal year 2017, the Missile Defense Agency (MDA) made mixed progress in achieving its delivery and testing goals.", "MDA continued to deliver assets to the military services. However, system-level integrated capabilities, such as some discrimination and integrated cyber defense improvements, were delayed and delivered with performance limitations.", "Several programs achieved notable firsts, including the first intercept of an Intercontinental Ballistic Missile. However, one program experienced a failure, and other tests were delayed or deleted.", "Moreover, GAO found challenges in MDA's processes for communicating the extent and limitations of integrated capabilities when they are delivered. As a result, warfighters do not have full insight into the capabilities MDA delivers.", "GAO found that the average length of the undefinitized period and the not-to-exceed price of MDA's undefinitized contract actions, which authorize contractors to begin work before an agreement on terms, specifications, or price have been agreed upon, have increased over the past 5 years. While MDA policy permits use of undefinitized contracts on a limited basis, GAO and others have found that they can place unnecessary cost risks on the government.", "MDA does not completely assess BMDS performance using traditional flight tests. Instead, MDA relies on models, some of which produce data with limited credibility. According to Department of Defense and MDA policy, models used to operationally assess weapons systems must be accredited to ensure they reflect the real-world system. In addition, using unaccredited models increases the risk that test results could be distorted, and leaves decision makers without key information on how the system will perform. While MDA has taken steps to improve its models, it has used many models in system operational ground tests that were not certified for that use (see figure). Additionally, MDA does not communicate model limitations to some decision makers.", "Percentage of Accredited Models Used in Operational Assessments of Ballistic Missile Defense System Capability Deliveries, 2015 through 2017"]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations to, among other things, improve the way MDA communicates capability deliveries; better report information about MDA's use of undefinitized contract actions; and address the challenges MDA has encountered with certifying its test models and communicating limitations of those models. DOD partially concurred with the first recommendation and concurred with the other five. GAO continues to believe the recommendations are valid as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 2002, the Missile Defense Agency (MDA) has received  approximately $131.8 billion to develop, integrate, and deliver the Ballistic  Missile Defense System (BMDS). For fiscal year 2017, MDA requested  $8.2 billion to continue its missile defense efforts and is planning to spend  an additional $47.8 billion through fiscal year 2022 to continue to develop  the system to detect, track, and defeat enemy ballistic missiles. To date,  we have issued 14 reports covering MDA\u2019s annual progress and made  recommendations to address challenges in developing and fielding BMDS  capabilities, as well as other transparency, accountability, and oversight  issues. While MDA has taken steps to implement some of our  recommendations, going forward, it will continue to face important  challenges as it works to develop, integrate, and deliver capability,  increase transparency, and strengthen its investment decisions.", "Various National Defense Authorization Acts since 2002 have included  provisions for us to prepare annual assessments of MDA\u2019s progress  toward meeting its acquisition goals. Specifically, the National Defense  Authorization Act for Fiscal Year 2012, as amended, included a provision  for us to report annually on the extent to which MDA has achieved its  acquisition goals and objectives, as reported in its acquisition baselines in  the BMDS Accountability Report, and include any other findings and  recommendations on MDA\u2019s acquisition programs and accountability, as  appropriate.", "This year, our 15th annual report addresses: (1) the progress MDA and  its missile defense elements made in achieving fiscal year 2017 delivery  and testing goals; (2) the extent to which MDA uses undefinitized contract  actions and any cost or schedule risks these contracts may have; and (3)  the extent to which missile defense models and simulations used in  testing provide decision makers with credible information about  operational performance of the BMDS. In addition, later this summer, we  plan to issue a separate classified report on the extent to which MDA has  processes in place to integrate intelligence community threat  assessments into its acquisitions.", "We focused our assessment on MDA\u2019s progress towards achieving its  delivery and testing goals, including its process for reporting on and  delivering integrated capabilities. To evaluate asset delivery and testing  goals, we reviewed MDA\u2019s planned baselines as expressed in the BMDS  Accountability Report for fiscal year 2017, approved February 29, 2016,  as well as the Integrated Master Test Plan and its mid-year update. We  assessed these plans against previous years\u2019 plans as well as those for  2018, as they became available. We compared these plans to the  agency\u2019s actual delivery and testing achievements recorded in agency  documents and through interviews with agency officials, contractors, and  relevant officials in the Department of Defense\u2019s (DOD) Office of the  Director of Operational Test and Evaluation (DOT&E) and Office of the  Deputy Assistant Secretary of Defense for Developmental Test and  Evaluation as well as officials from U.S. Northern Command and the Joint  Functional Component Command for Integrated Missile Defense. We  also provided detailed questionnaires to the 10 MDA programs included  in the BMDS Accountability Report on these programs\u2019 accomplishments  as well as challenges encountered during the course of fiscal year 2017.  To assess MDA\u2019s process for delivering integrated capabilities, we  reviewed MDA\u2019s directives and instructions, interviewed relevant program  officials, and compared this information to management documents and  processes that declare new BMDS capabilities ready for operational  acceptance by one of the combatant commands.", "To assess the contracting practices used to achieve the planned fiscal  year 2017 goals, we focused on MDA\u2019s use of contract vehicles where  contract terms, specifications, or price are not agreed upon before work is  begun, known as \u201cundefinitized contract actions.\u201d To evaluate MDA\u2019s use  of undefinitized contract actions, we included questions about their use in  our questionnaires and reviewed regulations regarding these actions as  found in the Defense Federal Acquisition Regulation Supplement  (DFARS) and an MDA instruction on acquisition management. We  reviewed management documentation authorizing the use of specific  undefinitized contract actions since 2013, as well as MDA contracting  data regarding the value, timing, and terms of these actions for the same  period. We also interviewed MDA contracting officials to discuss the  factors that influence the decision to use undefinitized contract actions  and the practices they employ to protect the government\u2019s interests in the  use of these actions.", "To evaluate the extent to which missile defense models and simulations  used in ground testing provide decision makers with credible information  about operational performance of the BMDS, we reviewed modeling and  simulation planning and assessment documentation. In addition, we  reviewed operational ground test results including the BMDS Operational  Test Agency\u2019s (BMDS OTA) and MDA\u2019s Modeling and Simulation  accreditation reports to determine the accreditation status and the  limitations. We reviewed MDA and DOD\u2019s instructions and guidance  documents regarding how models are properly verified, validated, and  accredited and used in operational assessments. Specifically, we  evaluated DOD Instruction 5000.61 regarding modeling and simulation  verification, validation, and accreditation; MDA Instruction 8315.04 on  BMDS Modeling and Simulation Management; the BMDS OTA Modeling  and Simulation Accreditation Plan; and DOT&E\u2019s recent memos on  modeling and simulation verification, validation, and accreditation. We  also conducted interviews with relevant officials in MDA, Office of the  Secretary of Defense Testing Evaluators, the BMDS OTA, and experts in  the modeling and simulation field.", "We conducted this performance audit from May 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["MDA is responsible for developing a number of systems, known as  elements, with the purpose of defending against ballistic missile attacks.  MDA\u2019s mission is to combine these elements into an integrated system- of-systems, known as the Ballistic Missile Defense System. Specifically,  the goal of the BMDS is to combine the abilities of two or more elements  to achieve objectives that would not have been possible for any individual  element. These emergent abilities are known as \u201cintegrated capabilities\u201d  or \u201cBMDS-level capabilities.\u201d Table 1 provides a list and description of  elements included in our review."], "subsections": [{"section_title": "MDA\u2019s Acquisition Flexibilities and Steps to Improve Traceability and Oversight", "paragraphs": ["When MDA was established in 2002, it was granted exceptional  flexibilities to set requirements and manage the acquisition of the  BMDS\u2014developed as a single program\u2014that allow MDA to expedite the  fielding of assets and integrated ballistic missile defense capabilities.  These flexibilities allow MDA to diverge from DOD\u2019s traditional acquisition  life cycle and defer the application of acquisition policies and laws  designed to facilitate oversight and accountability until a mature capability  is ready to be handed over to a military service for production and  operation. Some of the laws and policies include such things as: obtaining the approval of a higher-level acquisition executive before  making changes to an approved baseline,  reporting certain increases in unit cost measured from the original or  current baseline, obtaining an independent life-cycle cost estimate prior to beginning  system development and/or production and deployment, and  regularly providing detailed program status information to Congress,  including specific costs, in Selected Acquisition Reports.", "In response to concerns related to MDA\u2019s flexibilities, Congress and DOD  have taken a number of actions. For example, Congress enacted  legislation in 2008 requiring MDA to establish cost, schedule, and  performance baselines\u2014starting points against which to measure  progress\u2014for each element that has entered the equivalent of system  development or is being produced or acquired for operational fielding.  MDA reported its newly established baselines to Congress for the first  time in its June 2010 BMDS Accountability Report. Since that time,  Congress has provided more detailed requirements for the content of  these baselines. Additionally, to enhance oversight of the information  provided in the BMDS Accountability Report, MDA continues to  incorporate suggestions and recommendations from us. However, not all  of our recommendations have been fully implemented."], "subsections": []}, {"section_title": "MDA\u2019s Process for Delivering Capabilities", "paragraphs": ["Because MDA is not a military service, it does not abide by the same  policies that the services use for delivering capabilities. Instead, a  process exists whereby MDA declares an asset or capability ready for  delivery for potential operational use. During this process, MDA  communicates the capabilities and limitations of its delivery, and provides  evidence supporting these assertions. Representatives from the receiving  military service or combatant command then have the ability to assess  this evidence and decide whether to accept the new capability. Because  the military services conduct minimal missile defense testing of their own,  this process is one of the only ways to convey vital performance  information. The accuracy of this information is especially important as it  informs training materials, doctrine, and deployment decisions.", "Typically, MDA makes capability deliveries through approved changes to  its Operational Capacity Baseline (OCB). Proposed changes to the  baseline are coordinated with the warfighter, including the affected  combatant commands. Subsequently, the combatant commands assess  these element capabilities to determine whether to accept them. This  process is used for the vast majority of deliveries, including relatively  minor ones such as software patches and updates.", "In recent years, MDA has declared major capabilities ready for delivery  through a process that culminates in the issuance of a Technical  Capability Declaration (TCD). According to MDA officials, the primary  purpose of a TCD is to allow MDA\u2019s senior management to manage the  delivery of integrated, BMDS-level capabilities that require more than one  element to function; however, TCDs have also been issued in response to  mandates from the President."], "subsections": []}, {"section_title": "MDA\u2019s Contracting Practices", "paragraphs": ["Though MDA has flexibilities in managing the acquisition process, it must  follow the same contracting regulations that apply to DOD, including the  Federal Acquisition Regulation and the Department of Defense Federal  Acquisition Regulation Supplement (DFARS). We reviewed MDA\u2019s use  of a particular type of contract action that authorizes a contractor to begin  work before contract terms, specifications, or price have been agreed  upon. These \u201cundefinitized contract actions\u201d are permitted by the DFARS,  with certain limitations. Undefinitized contract actions are generally used  when negotiation of a definitive contract action is not possible in sufficient  time to meet the government\u2019s requirements and the government\u2019s  interest demands that the contractor be given a binding commitment so  that contract performance can begin immediately. Under the DFARS,  undefinitized contract actions must include a specific \u201cnot-to-exceed\u201d  price. Once the action\u2019s terms, specifications, and price have been  agreed upon or determined, a process known as definitization, the  contract action converts to a \u201cdefinitive\u201d contract.", "Under the DFARS, undefinitized contract actions must contain  definitization schedules that provide for definitization by the earlier of (1)  180 days after issuance or (2) the date on which the amount of funds  obligated under the action is more than 50 percent of the not-to-exceed  price. Once the government has received a qualifying proposal from the  contractor, however, the government can extend the undefinitized period  another 180 days. Similarly, the government may obligate up to 75  percent of the not-to-exceed price, if the contractor submits the qualifying  proposal before 50 percent of the not-to-exceed price has been  obligated. The amount of funds obligated should be consistent with the  contractor\u2019s requirements for the undefinitized period. Figure 1 shows the  expected time frame and amount the government should spend within a  specified period."], "subsections": []}, {"section_title": "Models and Simulations Used in Operational Testing of the BMDS", "paragraphs": ["The BMDS is a system of systems that cannot be completely assessed  using intercept flight tests that are operationally representative because of  the system\u2019s scope and complexity and safety constraints. Consequently,  MDA, independent DOD testing organizations, and the warfighter must  rely heavily on representations of the integrated BMDS called models and  simulations in ground testing, rather than live tests, to test the operational  performance of the whole BMDS against attacks with more threats  represented. In ground testing, each BMDS element is represented by a  model and connected to a computer framework. During ground test  execution, a model of threat ballistic missiles is applied to the framework  and stimulates the modeled representations of BMDS elements to react.  The resulting simulation models a BMDS engagement. Figure 1 illustrates  the BMDS ground test sequence.", "To ensure that BMDS models and simulations accurately represent the  real-world operational BMDS capabilities and that the limitations of the  model are understood, they are verified, validated, and accredited. The  verification, validation, and accreditation process is designed to identify  and gather evidence needed to certify that the model and its associated  data used in ground testing are acceptable for operational testing. No  model is completely representative of the real world so the verification,  validation, and accreditation process is used to assess the extent to  which it reflects the operational performance of the BMDS in the real  world, and how any modeling deficiencies impacted ground test results.  Any modeling limitations identified in the verification, validation, and  accreditation process restrict the extent to which ground test data can be  used for BMDS assessment. For example, limitations in modeled sensor  tracking of the threat restrict the extent to which tracking data can be  relied on for interpreting operational real-world performance. Figure 2  illustrates the verification, validation, and accreditation process.", "The BMDS Operational Test Agency (OTA) is responsible for analyzing  the verification and validation data for the models used in operational  BMDS tests and provides accreditation recommendations to the  Commanding General, Army Test and Evaluation Command, an  independent accreditation authority for operational testing. In this role, the  BMDS OTA develops accreditation criteria and assesses if the model can  be used for operational assessments against these criteria. The BMDS  OTA is also responsible for analyzing the extent to which the threat  model, once it is applied to the ground testing framework, can be traced  back to the threat model that MDA developed and the intelligence  community\u2019s description of the threat."], "subsections": []}]}, {"section_title": "MDA Made Some Progress, but Did Not Meet Many of Its Acquisition Goals, and Has Inconsistently Applied Its Capability Delivery Processes", "paragraphs": ["In fiscal year 2017, MDA made some progress delivering assets,  including BMDS-level capabilities and conducting tests. However, MDA  did not meet many of its goals as expressed in the Ballistic Missile  Defense System Accountability Report for fiscal year 2017, its integrated  master test plan, and master integration plan. Specifically, MDA  continued to deliver interceptors for three elements and successfully  conducted its first test against an intercontinental ballistic missile target.  In addition, MDA announced the delivery of one package of integrated  BMDS-level capabilities through a technical capability declaration (TCD),  which had been delayed from the previous year, and planned to complete  the delivery of another set of capabilities by March 2018. MDA, however,  did not complete its goals for delivering assets, specifically for the THAAD  interceptors or conducting planned testing for Aegis BMD. We also  identified several deficiencies in MDA\u2019s processes for communicating  progress in delivering integrated capabilities."], "subsections": [{"section_title": "MDA Achieved Mixed Results in Delivering Assets and BMDS-Level Capabilities, Adhering to the Planned Test Schedule", "paragraphs": ["MDA made progress delivering assets against its backlogs from fiscal  year 2016, while its test program achieved several notable milestones.  MDA also delivered several new integrated capabilities, though not  always on time and often with reduced content compared to what was  planned to be delivered. In addition, not all deliveries and testing  objectives were met, and MDA made a number of changes, additions,  and deletions to its test and capability delivery schedule during the year.", "Elements: While BMDS elements made progress delivering assets,  including some that were delayed from fiscal year 2016, MDA did not  meet all of its asset delivery goals as planned. For a summary of MDA\u2019s  major asset deliveries for fiscal year 2017, see table 2 below.", "Both the Aegis Standard Missile-3 (SM-3) Block IB and Ground-based  Midcourse Defense (GMD) programs succeeded in achieving their asset  delivery goals for the fiscal year, although both included acceptance of  assets delayed from prior fiscal years. Specifically, due to quality issues  and design problems discovered during testing, production on the Aegis  SM-3 Block IB interceptor was temporarily halted in fiscal year 2016, and  as a result MDA fell short of its deliveries for that year by 15 interceptors.  To make up for this, MDA rolled over an additional 15 interceptor  deliveries into fiscal year 2017, for a total delivery of 55 interceptors. In  addition, MDA achieved its goal of delivering 44 ground-based  interceptors by the end of calendar year 2017. However, some  programs that achieved their milestones continued to employ high-risk  approaches to acquisition, which we have recommended MDA reduce in  previous reports. In addition, MDA maintains an ambitious schedule for key programs, such as for GMD\u2019s Redesigned Kill Vehicle program. For  more information regarding specific programs, see appendixes II through  X.", "Other MDA elements missed asset delivery milestones. The Command,  Control, Battle Management, and Communications (C2BMC) software  spiral (or version) 8.2-1 was previously due to be delivered in October  2017, but was delayed again from its new date of December 2017 to  second quarter of 2018. This spiral will play an important role in several  tests of integrated capabilities, such as FTM-29, which was executed in  January 2018. The Terminal High Altitude Area Defense (THAAD)  program\u2019s delivery of interceptor Lot 6 was scheduled to be delivered by  the end of June 2017, but has since been delayed to the second quarter  of 2018. THAAD officials stated this delay was due to a component  production issue as well as the addition of 12 additional interceptors to  the fiscal year 2017 procurement.", "Additionally, the Army and MDA have reached an impasse regarding the  transfer of the THAAD program from MDA to the Army. MDA and the  Army have been directed by the Deputy Secretary of Defense to develop  a memorandum of agreement that would guide the transfer of the THAAD  and AN/TPY-2 programs to the Army, and the National Defense  Authorization Act for fiscal year 2018 requires the Secretary of Defense to  transfer the acquisition authority of all missile defense programs that have  received full-rate production authority, which includes THAAD, to the  military departments not later than the date the President\u2019s fiscal year  2021 budget is submitted. The Army, however, has identified a $10.1  billion requirements gap, and the Secretary of the Army issued a memo  that he would non-concur with the transfer of the THAAD program in its  current state. There is currently no plan or timeline to resolve the issue.  We will continue to follow this issue in our future work.", "Finally, additional delays to the construction of the Aegis Ashore facility in  Poland resulted in significant schedule compression, reducing the time  allotted for installation and checkout activities from 16.5 months to 9.5  months. MDA initially maintained that the site would be delivered on  schedule, but early in fiscal year 2018 the agency announced that the site  would not be delivered until at least December 2019.", "Integrated BMDS Capability Increments: MDA also encountered  challenges delivering packages of integrated capabilities, which it refers  to as \u201cincrements.\u201d Increment deliveries signify delivery of integrated  BMDS-level capabilities, which are designed to significantly improve  effectiveness and efficiency of the BMDS over its constituent elements  working independently. MDA planned to deliver two increments in 2017,  but both were delayed, and some constituent capabilities were removed  and are planned to be delivered in future increments. For instance, MDA  was late in delivering Increment 3, known as \u201cDiscrimination  Improvements for Homeland Defense \u2013 Near Term.\u201d We previously  reported on schedule slips to this increment from its initial September  2016 delivery date to December 2016. However, program  documentation indicates that MDA encountered further challenges in  fiscal year 2017 that required an additional delay to March 2017.  According to MDA officials, this most recent delay was driven by  additional time needed to analyze testing results. However, we found that  GMD had experienced development delays for some software upgrades  leading up to assessment and integration activities.", "Moreover, MDA\u2019s Increment 4, known as \u201cEnhanced Homeland Defense,\u201d  was not completed in December 2017 as planned, because a C2BMC  and a key GMD upgrade initially planned to support four BMDS-level  capabilities intended for this increment would not be available until the  second quarter of fiscal year 2018. MDA officials told us that they will rely  on the current GMD software version, which lacks some key  improvements, until this upgrade is delivered. Additionally, MDA  significantly reduced the content of its BMDS cyberdefense capability  planned for Increment 4. MDA documentation originally planned to deliver  this capability with 10 elements and, prior to testing, the BMDS OTA  declared four elements to be priorities. Of these four, MDA has conducted  the assessment for only three. The remaining BMDS elements will deliver  cyberdefense capabilities in future increment deliveries.", "MDA\u2019s plans for delivery of future capabilities continue to be volatile. For  example, plans for Increment 6 in fiscal year 2021, which will include  delivering a new radar and kill vehicle for GMD, now require its  capabilities to be broken up into three sub-increments delivered across  several years, some as late as 2023, with multiple new capabilities added  and several others deferred to Increment 7. Many of these delays  continue to postpone achievement of BMDS integration, needed to  improve performance against realistic attacks with multiple ballistic  missiles.", "Most recently, MDA again delayed a capability designed to improve  automated coordination between regional BMD shooters\u2014that is, Aegis  BMD, THAAD, and Patriot. While initially planned for delivery in 2015 with  Increment 2, in fiscal year 2017, the capability was further delayed, from  2020 to 2023. In addition, a further integration capability that would  centralize and automate command decisions across the BMDS will not be  available until December 2025. See figure 3 for more information on how  capabilities have been delayed within and across increments.", "Testing: MDA successfully completed most of its planned tests in fiscal  year 2017 and achieved several notable milestones, though MDA  continued to add, alter, delete, or delay parts of its test schedule  throughout the year. Within the elements included in this report, MDA had  nine tests in its fiscal year 2017 test plan, of which it conducted six as  planned. MDA also added three additional tests to its plan over the  course of the year. A summary of these tests can be found in table 3.", "Many of these tests are notable firsts for MDA, though others indicate  continuing challenges.", "FTG-15 was a success, in which a Ground-Based Interceptor with a  Configuration-2 booster and a CE-II Block I Exo-atmospheric Kill  Vehicle intercepted for the first time an intercontinental ballistic missile  with threat representative characteristics. In addition, this was the first  use of the new booster avionics and upgrades to the software. The  success of this test was necessary to deliver Increment 4\u2019s  requirements for Enhanced Homeland Defense. However,  Department of Defense operational testing officials stated that the  complexity and objectives of the test had been scaled back from what  MDA originally planned.", "SFTM-01 was a success, in which an Aegis BMD SM-3 Block IIA  missile intercepted a medium-range ballistic missile target. This was  the first intercept test for the Aegis BMD SM-3 Block IIA.", "SFTM-02 was a failure, as the Aegis BMD SM-3 Block IIA interceptor  failed to intercept its medium-range ballistic missile target. MDA  officials stated that the interceptor acted \u201cas designed\u201d during the test,  and the Navy is considering whether changes to its tactics,  techniques, and procedures may be warranted. MDA officials  maintained that this developmental test existed in part for risk- reduction ahead of fiscal year 2018\u2019s FTM-29, in which the Aegis  BMD SM-3 Block IIA would have to intercept an intermediate-range  ballistic missile for the first time. Despite the failure, MDA has chosen  not to reschedule and has instead re-assigned SFTM-02\u2019s objectives  to FTM-29.", "FTT-18 was a success, in which a THAAD battery intercepted an  intermediate-range ballistic missile target. This test was originally  planned for several years ago, as part of the 2015 delivery of  Increment 2, and has been delayed in part due to issues with range  availability. This is the first demonstration of THAAD against an  intermediate-range ballistic missile target despite a THAAD battery  having been delivered to Guam for this mission in 2013.", "FET-01, previously known as FTT-15, was a success, demonstrating  THAAD\u2019s ability to intercept a target in the endo-atmospheric stage of  flight. MDA re-classified the test a \u201cFlight Experiment\u201d midway through  fiscal year 2017 to reflect its more observational and experimental  nature. The test objectives for FET-01 have changed several times,  and while the final iteration of test objectives did not include intercept  as an objective, an intercept against a medium-range ballistic missile  target was achieved nonetheless."], "subsections": []}, {"section_title": "MDA\u2019s Process for Managing the Delivery of BMDS-Level Capabilities Is Not Applied Consistently and Has Unclear Requirements", "paragraphs": ["When MDA declares a capability ready for delivery to warfighters, it  communicates the capabilities and limitations of the delivered asset. This  information is critical for allowing warfighters to make informed decisions  about whether to accept the capability, how to prepare for its deployment,  and how to plan for its use. Typically this process occurs through the  Operational Capacity Baseline (OCB) change process, which is  structured around the delivery of new capabilities to individual elements.  Alternately, as noted above, when MDA declares a key integrated,  BMDS-level capability ready for delivery, it does so through a process  which culminates in the issuance of a Technical Capability Declaration  (TCD). The TCD is a memorandum signed by the Director, MDA and is  usually reserved for significant new capabilities such as:  those mandated by the President; or delivery of integrated BMDS-level capabilities that require more than  one element to function.", "This last category of capabilities is especially important as, according  MDA\u2019s charter, the BMDS is intended to be an integrated and  interoperable system. Integration is important in order to counter the  larger-scale and more complex attacks that are likely to occur during a  conflict. We have reported since 2014 that MDA has taken steps to  improve the management and reporting of integrated capabilities, and to  increase the level of BMDS integration. While MDA has recently made  some progress in the area of integrated capabilities, the majority of  MDA\u2019s capability deliveries continue to be made at the element level.  Until recently, MDA has done little to document the requirements and  process for issuing a TCD, resulting in an inconsistent and, at times, ad- hoc process.", "We found inconsistencies in MDA\u2019s decisions regarding which integrated,  BMDS-level capabilities MDA would deliver through a TCD, and which it  would not. For example, since 2015, the agency planned to deliver 14  integrated, BMDS-level capabilities, but delivered only 7 through the TCD  process. According to MDA\u2019s prior capability delivery documents, several  of these excluded capabilities were intended to be part of the formal TCD  delivery during the planning stage, but were dropped at some later point.  According to MDA officials, those deliveries were made when all their  constituent elements were delivered via the OCB process.", "MDA officials acknowledged that distinctions between requirements for  element-level deliveries and BMDS-level capabilities were not readily  apparent in their policy and took steps in fiscal year 2017 to do so. MDA  issued a memorandum on Technical Capability Declaration Planning and  Definitions in June 2017 to help distinguish element-level OCB deliveries  and deliveries of integrated BMDS capabilities that would occur via TCD.  This document established several definitions and requirements such as  assigning responsibilities, establishing lines of authority, and defining  some requirements that are not found in the other guidance document  that MDA uses to govern TCD. The June 2017 memorandum also  identified which capabilities through 2023 that MDA will deliver via a TCD,  and identified some ways to add a new capability to the list of those  receiving a TCD.", "While MDA\u2019s new policy represents a substantial improvement in the  management of the TCD process, it does not address several important  problems with the TCD process. Specifically, although MDA has identified  capabilities that it plans to deliver using a TCD, it does not identify any  criteria or reasoning that guided this determination. It also does not  explain the criteria MDA will apply to future capabilities under  consideration for a TCD, leaving open the possibility of the same  inconsistent application MDA has used in the past. Moreover, the  capabilities it identified for a TCD are only a subset of all planned  integrated, BMDS-level capabilities. Consequently, only some integrated  capabilities are currently planned to be delivered to the warfighter with  comprehensive information about their performance and limitations at the  BMDS level. Unless MDA requires that all integrated capabilities are  delivered via the TCD process, as the BMDS becomes more integrated,  military services and other decision makers will have reduced insight into  the capabilities and limitations of the BMDS as a whole.", "MDA\u2019s June 2017 policy also establishes some processes governing the  requirements for, and development of, test plans in support of a TCD, but  it does not address some of the most problematic aspects of this process  to date. Specifically, the new policy requires convening an Assessment  Requirements Review board to develop a baseline for a planned TCD,  determine what capabilities will be included, and identify what test plans  will be necessary to generate the \u201cbody of evidence\u201d that MDA will  provide in support of the TCD\u2019s assertions regarding capabilities and  limitations.", "However, we found that Assessment Requirements Reviews can be held  shortly before the planned delivery date\u2014which affords no opportunity to  build the test plan around the requirements identified in the review. MDA  held Assessment Requirement Reviews in preparation for two of the  previous three TCDs. The timing of these reviews in relation to the date of  the TCD\u2019s issuance suggests that they had little influence on MDA\u2019s  actual test plans. MDA officials stated that an Assessment Requirement  Review is ideally held 18 months to 2 years prior to the issuance of the  related TCD. However, we found that, for recently issued TCDs, the  reviews were held much closer to the beginning of testing and the  planned TCD delivery. For example, for the TCD issued in December  2017 that delivered 44 ground-based interceptors, MDA held this review  less than 8 weeks in advance. Figure 4 depicts the timeline of the  Assessment Requirements Review as compared to the start of testing for  the TCD and the TCD delivery date.", "Because these reviews identify requirements that must be tested, the  Assessment Requirements Review would ideally inform MDA\u2019s test plans  so that each component of the integrated capability could be adequately  tested by the planned delivery date. But because the policy does not give  exact requirements, process, and key milestones necessary to issue a  TCD, MDA is able to hold an Assessment Requirements Review that  merely acknowledges the results of tests already completed.", "These practices are consistent with our prior findings on MDA, which  identified a lack of a management framework for delivering integrated  capabilities, and showed that the lack of this framework resulted in  concurrency, fragmentation of development activities, and delays for  some originally planned capabilities. According to DOD\u2019s guidance on  acquisition and testing, a program\u2019s test and evaluation strategy should  begin with a review of requirements so that management can devise a  test and evaluation strategy that generates the knowledge necessary to  inform the acquisition and operational decisions of a program. Holding the  Assessment Requirement Review so close to the planned delivery date  affords no opportunity to build the test plan around the requirements  identified in the review, and instead only ratifies the results of a test plan  that was not necessarily developed with these requirements in mind."], "subsections": []}]}, {"section_title": "MDA\u2019s Use of Undefinitized Contract Actions Poses Cost and Schedule Risks to the Government", "paragraphs": ["Undefinitized contract actions are authorized when the negotiation of a  definitive contract is not possible in sufficient time to meet the  government\u2019s requirements and government interests demand that the  contractor be given a binding commitment so that contract performance  can begin immediately, and are subject to certain limitations. Our analysis  of MDA contracting from fiscal year 2013 to fiscal year 2017 shows that  the combined not-to-exceed price of all undefinitized contract actions  entered in a given year, and the average time it takes to definitize  undefinitized contract actions, have increased. GAO has reported that  while this type of contract action may be necessary under certain  circumstances, it is considered risky in part because the government may  incur unnecessary costs if requirements change before the contract is  definitized. Though MDA reports on its contracting activities in its annual  BMDS Accountability Report, its reporting on details unique to  undefinitized contract actions is often inconsistent or even absent.", "MDA\u2019s Acquisition Management Instruction 5013.02-INS states that  undefinitized contract actions will be used only on \u201can extremely limited  basis\u201d and only when negotiating contract terms before the contractor  begins work is not feasible, such as when delay \u201cwould adversely impact  mission accomplishment.\u201d Our prior work, as well as that of the DOD  inspector general, has found that this type of contract action is considered  risky in part because the government may incur unnecessary costs if  requirements change before the contract is definitized. Under  undefinitized contract actions, substantial funds may be obligated before  essential questions of contract scope and system design have been  settled.", "Over the past 5 years, the average length of the undefinitized period and  not-to-exceed price for MDA\u2019s undefinitized contract actions have  increased. Since 2013, MDA has entered into 11 undefinitized contract  actions as shown in table 4.", "MDA\u2019s use of undefinitized contract actions has fluctuated between one  and five instances per year. The combined not-to-exceed price of all such  contract actions entered into each year has increased, however, from  $2.5 million in fiscal year 2013 to $1.4 billion in fiscal year 2017 as shown  in figure 5. The average time to definitize these contract actions has  steadily increased as well, from 78 days in fiscal year 2013, to over 600  days in fiscal year 2016 (see figure 6). Two undefinitized contracts were  awarded in fiscal year 2017 and both exceeded 180 days without  definitization.", "The value of MDA\u2019s undefinitized contract actions entered into in a given  year, as measured by their combined not-to-exceed prices, has risen  significantly. The length of the undefinitized period has also risen on  average. Together, these figures show that MDA may be initiating  contractor work with incomplete knowledge of the requirements or costs  involved.", "With regard to the increasing duration of the undefinitized period, MDA  contracting officials told us that when they do not achieve definitization  within 180 days, it is often because the contractor\u2019s proposal is not  adequately supported by a sound estimate, and negotiation past 180  days is necessary to achieve a fair and reasonable price. They added  that the task of making this determination is made more complicated by  the highly developmental nature of the work that MDA often conducts. For  example, the 2015 undefinitized contract action for Aegis BMD SM-3  Block IIA test interceptors remained undefinitized for 629 days. According  to MDA officials, this delay was due in part to the difficulty of accurately  estimating costs on a highly developmental project.", "MDA officials reported having to develop a substantial knowledge base  and consult closely with other DOD entities that would have insight into  the costs of similar projects, after the undefinitized contract action was  entered into. Using an undefinitized contract action in this case, however,  was not without risk to the government. MDA made major financial  commitments to a program before it fully understood the requirements or  the costs.", "To mitigate the risks related to these contract actions, MDA\u2019s Instruction  requires all undefinitized contract actions to be supported by a  determination and findings that articulates the requirement to begin  performance prior to a negotiated agreement, the not-to-exceed price and  the definitization schedule. The DFARS and MDA instruction require all  undefinitized contract actions to be approved by the Director, MDA. MDA  officials told us that they interpret the MDA Instruction to require that the  Director, MDA, sign determination and findings documents in support of  undefinitized contract actions. In addition, MDA contracting officials stated  that to further mitigate the risks related to undefinitized contract actions,  they, as a matter of practice, strive to obligate only the minimum amount  of funding necessary to achieve definitization. Officials indicated that  doing so limits the cost risk for the government, and forces programs to  think carefully about what work needs to be done prior to definitization  and its likely costs.", "While the Director, MDA is required to sign the determination and findings  document, in one instance, this document specifically authorized the  program to amend the requirements and not-to-exceed price without  further formal approval from the Director, MDA. This specific undefinitized  contract action was the largest MDA has entered into since fiscal year  2013. MDA entered into the undefinitized contract action in May 2017,  authorizing the design, development, and initial production of the GMD  program\u2019s Redesigned Kill Vehicle (RKV), with a not-to-exceed price of  $1.088 billion.", "This undefinitized contract action will allow MDA to continue with the RKV  program despite significant cost, schedule, and performance risks, some  of which the determination and findings document for the RKV  undefinitized contract action acknowledged. When MDA released its  acquisition strategy for the RKV in 2015, it predicted the phase covered  by this contract action would cost approximately $800 million, covering  initial testing and production of up to eight RKVs for initial fielding.  Officials stated that the current contract action, with a not-to-exceed price  of $1.088 billion, is for only four interceptors, although since it is  undefinitized, that is subject to change. If the RKV program definitizes this  contract action according to its schedule in May 2018, after 12 months,  this will result in the definitization of the contract action with less than a  year remaining before the program\u2019s critical design review. In other  words, the government will have agreed on contract terms, including  costs, after much of the design work and related costs have been  incurred. As of February 2018, MDA reports obligating $324 million, or 30  percent of the not-to-exceed price, to this undefinitized contract action.  This is in excess of the $244 million planned for the undefinitized period  at the time of award.", "As part of MDA\u2019s annual BMDS Accountability Report, MDA reports on its  planned performance and schedule for the coming fiscal year across  several baselines, one of which is dedicated to contracting performance.  MDA provides these baselines in response to statutory requirements. By  establishing these baselines and then reporting any deviations in cost,  schedule, or performance as a program proceeds, the BMDS  Accountability Report provides information for oversight by identifying  areas of program risk and their causes to decision makers. Baselines also  help ensure that the full financial commitment is considered before  embarking on major development efforts.", "These reports contain some information on undefinitized contracts.  However, the information is often inconsistently presented and distributed  throughout the report. Information specific to undefinitized contract  actions is often absent, such as the following:  the definitization schedule (that is, the expected time frame for  finalizing contract terms);  the amount of funds obligated to the action for the undefinitized  period; or any changes to the above that have occurred since award of the  action.", "As a result, decision makers in Congress have limited insight into how  MDA is handling the risks that come with undefinitized contract actions, or  how the programs enacting these contracts are performing. For example,  these reports do not typically disclose how much has been obligated  under an undefinitized contract action, or if this amount has increased  since the contract was awarded. They do not report if the not-to-exceed  value has been revised, or if the current definitization schedule adheres to  the schedule determined at the time of award."], "subsections": []}, {"section_title": "Despite Steps Taken to Improve BMDS Modeling Capabilities, Modeling Challenges Limit the Credibility and Accuracy of BMDS Performance Data", "paragraphs": ["Despite taking steps to improve the realism of the models it uses for  ground testing, MDA continues to face challenges with its models. As a  result, decision makers lack key information about BMDS performance,  which could lead to miscalculations about how best to employ the BMDS  and where to focus future capability development and investment.  Specifically, MDA continues to encounter challenges with ensuring that its  models and simulations are accredited for operational testing when they  are used to test BMDS capabilities, resulting in uncertain performance  outcomes in assessments supporting BMDS deliveries. Additionally,  accreditation status and modeling limitations for these assessments are  not communicated to most decision makers in Congress and some in the  DOD and executive branch, limiting their insight into the data limitations  underlying their decisions to make investments in and employ the BMDS.  Finally, MDA\u2019s assessment of the resources needed to validate and  accredit its current models does not match requested funding for this  effort."], "subsections": [{"section_title": "MDA Has Taken Steps to Improve Its Modeling Capabilities, but Most Delivered BMDS Capabilities Were Tested Using Unaccredited Models", "paragraphs": ["Since MDA cannot conduct enough system-level flight testing of the entire  BMDS to completely assess BMDS performance, BMDS decision makers  within MDA, DOD, Congress, and the executive branch use information  from model-based ground tests to evaluate the operational effectiveness  of the BMDS. The results from these model-based operational tests  inform many acquisition and operational decisions, including: capability  delivery, asset fielding, and interceptor inventory. Model-based testing  also informs the warfighter\u2019s tactics, techniques, and procedures to  maximize BMDS effectiveness such as how many interceptors they will  fire at a threat; and the capability gap analysis, the basis for warfighter  requests for new capabilities. Recognizing the importance of models and  simulations, MDA has taken steps to improve its ability to provide realistic  modeled representations of the integrated BMDS necessary to assess  operational performance. For instance:  In 2009, MDA adjusted its test baseline, known as the Integrated  Master Test Plan, and refocused its testing on collecting data needed  for model development and accreditation.", "In 2016, MDA developed an update to a framework that is used to  integrate the modeled representations of BMDS elements for  assessments, and in 2017 continued an effort to develop digital end- to-end models and simulations to increase modeling capabilities and  to expand the scope of BMDS assessments in the future.", "In 2017, MDA increased its collaboration with BMDS OTA to prioritize  modeling needs and to address them.", "Despite these steps, MDA continues to deliver assets and capabilities  using models that have not been accredited. In April 2016 and May 2017,  we found that MDA had delivered EPAA Phase 2 capabilities in  December 2015 using models that have not been accredited to support  the delivery. MDA continued this practice by delivering two sets of  BMDS-level capabilities since 2015, relying on operational tests  conducted with models that were not accredited for use in such an  assessment. The next delivery, expected at the end of the second quarter  of fiscal year 2018, has also been tested using mostly unaccredited  models.", "Relying on models that are not accredited for operational assessment  increases the risk that modeling errors are not discovered, and a single  undetected modeling error can distort the assessment results for the  entire BMDS. DOD\u2019s acquisition instruction requires that models and  simulations used in operational assessments be verified, validated, and  accredited. Although, as noted above, MDA is generally exempt from  DOD acquisition policies, its own modeling and simulation policy requires  that models and simulations used in operational assessments be verified,  validated, and accredited for that use. Moreover, experts at DOD, MDA,  and other institutions we interviewed agree that models should be  verified, validated, and accredited to ensure that decisions based on  models are informed by the correct data, and that the limitations of that  data are understood. Additionally, according to DOD officials, defense  acquisition programs that follow DOD acquisition regulations verify,  validate, and accredit their models before operational assessments.", "However, our analysis indicates that the accreditation of many MDA  models for operational assessment is, in most cases, not completed in  time to support testing. In fact, many of them are not complete even after  a capability has been delivered. Additionally, BMDS OTA officials said  that models that are not accredited before delivery are not generally  accredited later on. Figure 7 shows the percentage of accredited models  that were used in the operational assessment of each BMDS capability  delivery in 2015 through 2017.", "BMDS models are not accredited for operational assessment in large part  for three reasons: (1) MDA does not provide sufficient evidence to the  BMDS OTA for accreditation, (2) some models do not accurately  represent BMDS performance in the real world, and (3) the threat model  used to stimulate the test cannot be traced to the original intelligence  community assessment. These challenges affect assessments across the  entire BMDS engagement, from detection and processing of the threat to  the intercept. While modeling uncertainty in any one of these areas  affects uncertainty for the BMDS as a whole, factored together this  uncertainty is magnified.", "Lack of Data: In some cases, MDA did not provide the BMDS OTA data  needed to accredit the models used in operational ground testing, even  though it is a signatory to the BMDS OTA\u2019s accreditation plan. This plan  identifies the data needed to achieve accreditation and directs that these  data should be provided at least 60 days prior to official operational  ground testing. MDA officials noted that the BMDS OTA recently  changed its data requirements for accreditation and that they were unable  to meet the new requirements in time to inform the capability deliveries  shown above. However, we have found that MDA has encountered  similar challenges since 2009. In fact, according to BMDS OTA officials,  MDA has never completely provided the needed data on time and often  missed numerous subsequent deadlines. In many cases, MDA failed to  deliver the required data even after it tested and delivered its capabilities,  and in some instances the data MDA provided did not meet the BMDS  OTA\u2019s requirements. As we have previously reported, disruptions to  MDA\u2019s testing program\u2014such as flight test failures and delays\u2014reduce  the amount of real-world data that is available to accredit models. We  also found that MDA proceeded with model-based ground tests and  capability deliveries without leveraging the knowledge it planned to obtain  from these tests. For example, in 2016 and 2017, we found that MDA  delivered the European Phased Adaptive Approach Phase 2, even  though key models, such as the model for Aegis Ashore, were  unaccredited. Additionally, in other instances, MDA lacks technical data and other model information that is needed for accreditation, especially  for models representing older systems.", "In 2017, as noted above, MDA and the BMDS OTA increased their  collaboration to improve model accreditation status and, in 2017, co- developed a list of prioritized modeling deficiencies. Additionally, MDA is  making progress in gathering and providing model data for operational  assessment accreditation. MDA officials reported that based on this  increasing collaboration, they expect that more models will be accredited  in 2018. It is unlikely, however, that all models will achieve accreditation  prior to the upcoming December 2018 delivery of the European Phased  Adaptive Approach Phase 3.", "Modeling Deficiencies: Another reason that some models are not  accredited for operational use is that certain models contain deficiencies,  such as optimistic representations of BMDS performance and simplistic  representations of BMDS environments. In these cases, while MDA  initially supplied BMDS OTA with the relevant data, the model\u2019s  performance failed to meet the criteria for accreditation. Subsequently,  MDA did not provide supporting rationale to explain these failures, or to  explain how the modeling issues skewed the overall performance results.  For example, in 2016, the BMDS OTA compared modeled sensor  tracking data used in recent ground tests to real-world sensor tracking  data and found that the models representing some radars performed  better than the real-world radar. These modeling deficiencies can affect  other BMDS elements that rely on sensor data and can artificially inflate  BMDS performance. In one case, Aegis BMD\u2019s launch-on-remote  capabilities were over-estimated. As a result, the BMDS OTA could not  accredit the models, and thus verify that ground test results that support  Aegis\u2019s launch-on-remote capability and other tested capabilities are  credible and reliable. MDA is working to address this issue and it is too  early to assess progress.", "Additionally, some models used in operational assessments are overly  simplistic. For example, modeled representations of the battle scene in  moments after intercept do not display the resulting complex scene that is  caused by the large quantity of missile and interceptor debris. This  deficiency limits insight into how the BMDS will perform during realistic  ballistic missile attacks that could require follow-on interceptors to be  launched, and how the BMDS will determine that the incoming threats  have been destroyed. According to BMDS OTA and MDA officials, MDA\u2019s  efforts to develop digital models can help in this area, by providing more  processing power and great scalability for engagement complexity;  however, the capability is not expected to be mature until 2021 or later.", "Threat Models Cannot Be Traced Back to Underlying Threat  Assessments: The value of ground test-generated data is dependent on  the quality of the threat model that stimulates the test. However, the  BMDS OTA has never been able to accredit threat models before  operational testing, and in some cases, after testing. As is the case with  other models, in some cases, the BMDS OTA does not receive data  needed to accredit the models from MDA in a timely manner. Additionally,  the BMDS OTA cannot trace the threat model used in ground testing to  the threat model that MDA developed based on the intelligence  community\u2019s threat assessment. For example, according to BMDS OTA  officials, during a past ground test event, a model representing a BMDS  element rejected the intended threat model and instead ran its own  internal threat model. As a result, the test did not reflect real world  conditions where the entire BMDS would be exposed to the same threat  stimulus.", "BMDS OTA officials said that MDA\u2019s ground test architecture is not  designed to generate the data needed to confirm that all elements are  reacting to the same model during ground testing, meaning that  unbeknownst to testers, other BMDS elements could also reject the  approved threat model during testing. These deficiencies introduce  ambiguity into the test results including the extent to which the BMDS  operated as an integrated system of systems against a common threat  set. BMDS OTA officials said that MDA is currently working on a  pathfinder activity to help understand and rectify the traceability issue."], "subsections": []}, {"section_title": "Information about the Accreditation Status and Limitations of Models Used in Operational Assessments Is Not Communicated to Decision Makers", "paragraphs": ["Although the warfighter and other decision makers inside DOD,  Congress, and the executive branch rely on models to provide information  about BMDS effectiveness, MDA\u2019s capability delivery documentation  does not include information about the quality of modeling data.  Specifically, MDA\u2019s TCD memos and OCB change packages, which  describe technical capabilities delivered to the warfighter and their  limitations, do not discuss the extent to which the models used to assess  the new capability are verified, validated, and accredited for assessment,  or how ground test results were affected by model limitations. As a result,  decision makers do not have complete information about the validity of  the capability assertions in these documents and how much confidence  should be placed in reported BMDS performance.", "According to Standards for Internal Control in the Federal Government,  decision makers need access to reliable and timely information to make  operational decisions. Additionally, according to DOT&E guidance, in  cases where models and simulations cannot be validated and accredited,  any modeling results should be caveated with a clear explanation of  which areas of performance assessment could be affected by the lack of  accreditation. Lack of such information could lead to miscalculations  about how best to employ the BMDS or uninformed decisions about  where to focus future capability development and investment. While the  BMDS OTA has recently begun to brief some combatant commands on  how modeling limitations impact the warfighters\u2019 understanding of  delivered capabilities, these briefings are not readily available to other  stakeholders and decision makers, such as cognizant congressional  committees or others in DOD and the executive branch. In its report  accompanying a bill for the National Defense Authorization Act for Fiscal  Year 2017, the House Armed Services Committee requested that MDA  brief the House and Senate Armed Services Committees on the  accreditation status of models used in testing indicating that  congressional decision makers benefit from such information. Including  information about model accreditation and limitations in TCD and OCB  packages would ensure decision makers in DOD, Congress, and the  executive branch have the same necessary information to inform their  decisions."], "subsections": []}, {"section_title": "Funding Decisions May Delay Some Modeling Capability Development", "paragraphs": ["Moving forward, the Director, MDA will have to make difficult decisions on  balancing funding priorities, including the need to adequately fund the  validation and accreditation of models. MDA has started to make  progress validating and accrediting existing models using DOT&E and  OTA recommended criteria. However, MDA\u2019s assessment of the  resources needed to validate and accredit its current models and  simulations does not match funding levels it requested for this effort. MDA  determined that it needs an additional $99 million for fiscal years 2017- 2022 to accredit BMDS models and simulations. MDA requested $395.7  million from 2017-2022 to meet modeling and simulation needs. Figure 8  shows MDA\u2019s fiscal year 2018 funding request for model development  and the additional funding, over the 5 year period, that would be required  to verify, validate, and accredit its models.", "Additionally, funding is not requested for the verification, validation, and  accreditation of some models used in BMDS assessments because MDA  officials said that they do not have written agreements with the military  services that operate these elements defining funding and technical  requirements for this purpose. Specifically, while the Army and the Air  Force develop and accredit models to support their missions for the  Patriot, the Space-based Infrared System, and the BMDS communication  systems, these models have to be modified to accurately represent their  BMDS roles for BMDS operational assessments. While MDA does fund  the development of the Space-based Infrared System and BMDS  communication models for use in BMDS assessment, it does not fund the  verification, validation, and accreditation of these models or the Patriot  model. Additionally, MDA officials report that it currently has no written  agreements with the Army or the Air Force to define funding and technical  requirements for these models for BMDS assessment.", "Because these requirements are not formally agreed upon and  communicated between MDA and the Services, the verification,  validation, and accreditation of these models is often unfunded, further  complicating MDA\u2019s and the BMDS OTA\u2019s verification, validation, and  accreditation analyses. Standards for Internal Control in the Federal  Government states that organizations should assign responsibility and  delegate authority to achieve their objectives. Additionally, in our prior  work we found that all acquisitions efforts should have well defined roles  and responsibilities for all stakeholders. Although MDA and the BMDS  OTA were able to accredit the Space-based Infrared System and BMDS  communications models in 2017, future upgrades to these BMDS  elements will require verification, validation, and accreditation to ensure  that they continue to accurately reflect the real-world system.", "Moreover, DOD and Congress have instructed the transfer of missile  defense programs that have received full-rate production authority, which  would include THAAD and Aegis BMD, to the military services for  operations, which may increase the scope of this issue. Even though  these systems will no longer be under MDA management, they will still be  part of the BMDS and, like the Space-based Infrared System and Patriot,  will require model updates to reflect changes to the tactical systems.  However, as noted above, there are currently no agreements between  MDA and the services to fund these modeling requirements, increasing  the risk that model upgrades will not be implemented, thus preventing  their verification, validation and accreditation for operational testing. If  MDA and the services do not agree to the technical and funding  requirements for models of elements used in BMDS testing but operated  by the services before the elements are transferred, disagreements will  likely continue to impede the verification, validation, and accreditation of  those models, decreasing confidence in test results and understanding of  how the real-world BMDS will operate."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["MDA continues to make mixed progress in delivering assets and  integrated capabilities. Moreover, its processes for communicating the  extent and limitations of these capabilities can be improved. While MDA  met several significant milestones in fiscal year 2017, MDA failed to  deliver either of its two most recent packages of integrated capabilities on  time, and its plans for future capabilities, even in the near term, continue  to be characterized by a high degree of fluidity. MDA has recently taken  steps to document in policy its processes for communicating the extent  and limitations of deliveries of integrated capabilities. However, these  policies still do not clearly specify the exact requirements, process, and  key milestones needed to complete some capability deliveries. Moreover,  they do not require that all integrated BMDS capabilities are delivered  using a process that describes their performance and limitations at the  level of the BMDS, rather than at the element level, increasing the risk of  delivered capabilities not being communicated properly to their end users:  the warfighter.", "In addition, while no contracting strategy can be completely risk-free,  trends in the not-to-exceed prices and duration of MDA\u2019s undefinitized  contract actions indicate a troubling pattern. Making major commitments  to large developmental programs before important questions of scope  and price have been determined exposes the government to increasing  amounts of risk. MDA\u2019s inconsistent and incomplete reporting on its use  of undefinitized contract actions makes it even more difficult for Congress  and decision makers to exercise oversight and track these risks.", "Finally, deficiencies and limitations in the models used to support  operational testing of the BMDS, including the lack of accreditation,  provides decision makers with some flawed information about BMDS  performance. Because flight tests cannot provide complete information on  BMDS performance, it is important that ground tests can be relied upon to  provide accurate and representative data. This flawed information could  lead to miscalculations about how best to employ the BMDS and  uninformed decisions about where to focus future capability development  and investment. If steps are not taken to improve BMDS models and to  communicate their status and limitations clearly to decision makers, there  is a risk that the BMDS will not perform as expected when needed to  defend the United States at home, its regional allies, and deployed forces."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to the Under Secretary  of Defense for Research and Engineering:  The Under Secretary of Defense for Research and Engineering should  ensure that the Director, MDA, takes the following actions:  The Director, MDA should revise MDA policies to require that all  integrated capabilities\u2014capabilities that require integration of two or more  elements\u2014be included in a Technical Capability Declaration.  (Recommendation 1)", "The Director, MDA should clarify, in written policy, the exact  requirements, process, and key milestones necessary to issue a  Technical Capability Declaration, including a requirement that the  Assessment Requirements Review be held in such a time frame that it  can provide meaningful input to MDA\u2019s test plans. (Recommendation 2)", "The Director, MDA should include information on current undefinitized  contract actions in the BMDS Accountability Report, including the not-to- exceed price, the definitization schedule, the amount of funds obligated  for the undefinitized period, and any changes since the contract action  was entered into. (Recommendation 3)", "The Director, MDA should ensure that models used for operational tests  are validated and accredited for such assessments. To help achieve this,  MDA should provide the BMDS Operational Test Agency all evidence  previously agreed to and needed to accredit models before ground testing  events, as specified in the BMDS OTA accreditation plan.  (Recommendation 4)", "The Director, MDA should include in capability delivery packages, such  as the Technical Capability Declaration memos and Operational  Capability Baseline change packages, the following:  a.  The verification, validation, and accreditation status of the models  used in operational ground tests; and  b.  Modeling and simulation limitations that affect operational ground  test results. (Recommendation 5)", "The Director, MDA and the Secretaries of the Armed Services  responsible for operating BMDS elements should develop written  agreements as soon as feasible for modeling and simulations technical  and funding requirements for any BMDS elements that are service- operated but represented in BMDS performance assessments.  (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DOD provided written comments on a draft of this report. DOD\u2019s  comments are reprinted in Appendix I and summarized below. DOD and  MDA also provided technical comments which were incorporated as  appropriate.", "In its response, DOD concurred with five out of six of our  recommendations, and partially concurred with one. In addition, DOD  recommends the closure of five recommendations. However, we believe  that it is premature to close out four of the five recommendations until all  of its planned actions are fully implemented. For the remaining  recommendation, we agree with DOD and will undertake the steps to  close out the recommendation.", "DOD partially concurred with our first recommendation to revise MDA  policy to require all integrated capabilities\u2014capabilities requiring the  integration of two or more elements\u2014 be declared and delivered via the  Technical Capability Declaration (TCD) process. While DOD agreed with  the intent of this recommendation, DOD stated that the Director, MDA will  determine which major integrated capabilities should be delivered via the  TCD process. The Department also noted that the agency developed a  list of such capabilities that it will update annually. These actions are an  improvement over the current process, but they do not meet the full intent  of our recommendation. Specifically, the list of future TCDs that MDA  produced is not inclusive of all future integrated capabilities. In addition,  MDA\u2019s policy does not articulate definitive standards for identifying  capabilities requiring a TCD and leaves this decision to the discretion of  the Director, MDA. As we\u2019ve identified in this report, some capabilities  have been deleted from or added to planned TCDs without explanation.  The new policy leaves open the possibility of continued inconsistent  application of the TCD process. This poses the risk that not all integrated  capabilities will be delivered to warfighters with comprehensive  information about their performance and limitations at the BMDS level.  We continue to believe that in order for the agency to meet the full intent  of our recommendation, it should establish in policy a clear, definitive  standard for which capabilities require a TCD for delivery.", "In addition, DOD recommends the closure of the first two  recommendations to (1) revise MDA\u2019s policies to require that all  integrated capabilities be included in a TCD; and (2) clarify the exact  requirements, process, and key milestones necessary to issue a TCD as  it contends that its new Policy Memorandum 90 meets the intent of our  recommendation. This memorandum is dated March 28, 2018 and was  provided to us on May 8, 2018.  As such, we have not had an opportunity  to fully assess the memorandum and the process laid out in it. However,  as noted above, this new Policy Memorandum 90 leaves open the  possibility of continued inconsistent application of the TCD process. This  poses the risk that not all integrated capabilities will be delivered to  warfighters with comprehensive information about their performance and  limitations at the BMDS level. In order for the agency to meet the full  intent of our recommendation, MDA should establish in policy a clear,  definitive standard for which capabilities require a TCD for delivery. In  addition, DOD writes that the same Policy Memorandum 90 satisfies the  second recommendation to clarify the exact requirements, process, and  key milestones necessary to issue a TCD. We believe it necessary to wait  until MDA delivers a TCD in accordance with the new parameters set out  in the memorandum before this recommendation can be closed.", "For the third recommendation to include information on current  undefinitized contract actions in the BMDS Accountability Report, DOD  states that the BMDS Accountability Report for 2018, approved by the  Director, MDA on March 9, 2018 provides the information necessary for  closure. We concur with this assessment will take the necessary steps to  close this recommendation.", "In responding to our fourth recommendation requiring the Director, MDA  to ensure that models used for operational tests are validated and  accredited for such assessments,  DOD states that MDA is actively  working with the BMDS Operational Test Agency (BMDS OTA) to resolve  any issues associated with, and the reporting of, modeling limitations.  However, as we found in this report, according to BMDS OTA officials,  MDA has never completely provided the needed data on time and often  missed numerous subsequent deadlines to support the validation and  verification of its models from BMDS OTA. Consequently, we believe it is  premature to close out the fourth recommendation, but we will continue to  track MDA\u2019s progress and timeliness in providing the evidence previously  agreed to and needed to accredit models before ground testing events.", "In responding to our fifth recommendation to include the verification,  validation and accreditation status used in operational ground tests in  capability delivery packages, such as TCDs and Operational Capability  Baseline change packets, DOD states that MDA has made significant  progress over the last year in achieving the BMDS OTA accreditation of  MDA\u2019s models and simulations. In addition, it states that the addition of  MDA policy will ensure the verification, validation and accreditation status  of each model will be discussed and assessed by the Operational  Capability Baseline Working Group for each capability delivery package.  We agree that MDA has made significant progress over the last year,  however, we believe it premature to close out the recommendation until  BMDS OTA can ensure that the status of the models used, as stated in  our recommendation, are included in subsequent capability delivery  packages such as the Technical Capability Declaration memos and  Operational Capability Baseline change packages.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Undersecretary of Defense for  Research and Engineering, and to the Director, MDA. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix XI."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Aegis Ballistic Missile Defense (BMD) Weapons System", "paragraphs": [], "subsections": [{"section_title": "Program Overview", "paragraphs": ["Aegis Ballistic Missile Defense is the naval component of the Missile  Defense Agency\u2019s (MDA) Ballistic Missile Defense System. It consists of  the Aegis Ballistic Missile Defense Weapon System (AWS), including a  radar and Standard Missile-3 (SM-3) interceptors.", "MDA is developing the Aegis BMD weapons system in versions called  spirals that expand on preceding capabilities. Deliveries of the spirals are  planned to support MDA\u2019s capabilities for Regional and Homeland  defense. Specifically, MDA delivered Aegis BMD 5.0 Capability Upgrade  (5.0CU) in fiscal year 2016 for the European Phase Adaptive Approach  (EPAA) Phase 2, but had not verified its full capability before delivery. In  fiscal year 2017, the program delivered Aegis BMD 4.1 on ships with  legacy hardware in order to provide similar ballistic missile defense  capabilities to those of Aegis BMD 5.0 CU. MDA plans to deliver  additional upgrades for such ships in 2019 and 2023. Additionally, the  program is developing Aegis BMD 5.1 with upgrades for EPAA Phase 3,  planned for December 2018. The Aegis BMD program also plans to  deliver additional upgrades in 2023, called Aegis BMD 6.0, capitalizing on  Navy\u2019s upgrades to the Aegis radar. For specifics on Aegis Ashore and  the Aegis BMD SM-3 interceptors, see appendixes III, IV and V,  respectively. Table 5 provides key fiscal year 2017 AWS program facts."], "subsections": []}, {"section_title": "Aegis BMD resolved some prior challenges and delivered capabilities initially planned for delivery with European Phased Adaptive Approach Phase 2", "paragraphs": ["MDA resolved software challenges and testing delays for Aegis BMD 5.0  CU and delivered Aegis BMD 4.1, expanding the number of ships with  EPAA Phase 2 missile defense capabilities. While MDA delivered initial  Aegis BMD capabilities for EPAA Phase 2 with AWS 4.0.2 prior to the  December 2015 Technical Capability Delivery (TCD), planned capabilities  would not be available until the subsequent versions\u2014Aegis BMD 5.0CU  and 4.1\u2014completed development and fielding. However, both  encountered technical challenges and schedule slips, as well as testing  delays. In fiscal year 2017, MDA continued work on Aegis BMD 5.0 CU  and 4.1 and overcame some of these challenges. Specifically:", "Aegis BMD 5.0 CU: MDA completed Aegis BMD 5.0 CU certification  late in fiscal year 2017, resolving prior technical challenges and  testing delays. Specifically, MDA implemented fixes to significant  defects that were in the software at the time of initial delivery.  Additionally, in December 2016 and August 2017, MDA flight tested  fleet and ship self-defense capability against medium-range ballistic  missiles in terminal phase of flight \u2013a capability initially planned for  December 2015.", "Aegis BMD 4.1: MDA also delivered Aegis BMD 4.1 in August 2017,  after multiple schedule slips. While initially scheduled for delivery in  support of the EPAA Phase 2 TCD, the spiral was first delayed to the  middle of fiscal year 2016 due to technical and cost challenges.  Subsequently, activities for Aegis BMD 4.1 were suspended in 2016  to reassess the program and delivery was delayed to September  2019, to align it with a related Navy effort. In fiscal year 2017, MDA  resumed activities for Aegis BMD 4.1, and certified the delivery of  ballistic missile defense capabilities in August 2017. These ballistic  missile defense capabilities are currently being integrated with the  Navy\u2019s larger Aegis combat system, into a single computer program  called Aegis Baseline 5.4, which is still scheduled for delivery in  September 2019."], "subsections": []}, {"section_title": "MDA mitigated key Aegis BMD Weapons System challenges for EPAA Phase 3, but they will not be verified until 2018", "paragraphs": ["According to MDA\u2019s program management documentation, Aegis BMD  5.1 is on track for delivery in support of EPAA Phase 3 in December  2018, as the program overcame or reduced key risks. For example,  despite a lack of schedule margin, the program met a key software  development milestone in June 2017, and delivered it for system-level  ground tests, which will assess integrated BMDS capabilities for EPAA  Phase 3. It also met all objectives in a fiscal year 2017 flight test.", "Additionally, the program reduced the ongoing programmatic risk to Aegis  BMD 5.1 that could affect its interoperability with other elements.   However, testing to demonstrate the risk has been resolved is not yet  complete. According to the Aegis BMD program management  documentation, upgrades to the Aegis communication management  system, which are managed by the Navy, lag behind MDA\u2019s Aegis BMD  5.1 development schedule. The lag in development could result in  integration challenges between these upgrades, and could impact Aegis  integration with other BMD elements, including the capability to intercept  threats entirely on tracks from forward based radars \u2013 called Engage on  Remote. In fiscal year 2017, MDA and the Navy took steps to mitigate  this risk. However, MDA has yet to demonstrate the fixes in a flight test.  Moreover, MDA documentation indicates that if issues are discovered,  they could impact the Aegis BMD 5.1 mission and could result in  interoperability restrictions against Aegis BMD 5.1. Lastly, Engage on  Remote could also be affected if development challenges with C2BMC,  which forwards threat track data from forward based sensors to Aegis  BMD, are not mitigated. For more information on the C2BMC element,  see Appendix VI."], "subsections": []}, {"section_title": "Aegis BMD is developing additional capabilities for deployment in 2023 and beyond, leveraging Navy\u2019s Aegis upgrades", "paragraphs": ["In fiscal year 2017, MDA continued to develop Aegis BMD capabilities  that are expected to be deployed in 2023. Specifically, MDA continued  developing and maturing capabilities for an effort it started at the end of  fiscal year 2016 called Aegis BMD 6.0. Aegis BMD 6.0 is planned to  provide capabilities against more threat types, larger raids, better  discrimination, and improved communication with its interceptors.  Additionally, it takes advantage of the Navy\u2019s effort to replace the Aegis  SPY-1 radar with a more capable SPY-6, and to overhaul the entire Aegis  combat system. While it is early in development, MDA has begun  identifying knowledge gaps that could diminish planned capabilities and  took initial steps to address disconnects between Navy\u2019s effort and its  own. According to program management documentation, MDA plans to  develop an Aegis BMD 6.0 acquisition baseline late in fiscal year 2018.  The acquisition baseline is expected to detail Aegis BMD 6.0 planned  capabilities, its schedule, and cost.", "MDA is also planning additional upgrades to Aegis BMD 4.1, called Aegis  BMD 4.2. Specifically, MDA plans to collaborate with the Navy to  integrate and field refurbished and upgraded SPY-1 Antennas onto  legacy ships. This modification improves radar sensitivity resulting in  improved tracking capabilities and is planned for delivery in fiscal year  2023. MDA plans to begin developing and maturing technologies for this  upgrade in fiscal year 2019, and baseline the effort at the end of fiscal  year 2020."], "subsections": []}]}, {"section_title": "Appendix III: Aegis Ashore", "paragraphs": [], "subsections": [{"section_title": "Program Overview", "paragraphs": ["Aegis Ashore is a land-based, or ashore, version of the ship-based Aegis  Ballistic Missile Defense (BMD). Aegis Ashore is designed to track and  intercept ballistic missiles in the middle of their flight using Aegis BMD  Standard Missile-3 (SM-3) interceptors. Key components include a  vertical launching system, interceptors, and an enclosure, called a  deckhouse, that contains the SPY-1 radar and command and control  system.", "DOD deployed an Aegis Ashore test facility in Hawaii in April 2014. The  test facility has been used to flight test Aegis Ashore, and in some cases,  Aegis BMD SM-3 interceptors. MDA deployed its first operational site in  Romania in fiscal year 2016 as part of the European Phased Adaptive  Approach (EPAA) Phase 2, and is currently constructing a second site in  Poland for delivery in 2018 as part of EPAA Phase 3. Both operational  sites are intended to provide additional coverage for the defense of  Europe.", "Aegis Ashore will share many components with the sea-based Aegis  BMD and will use future versions of the Aegis weapon system currently in  development, including the Aegis BMD SM-3 Block IIA interceptor. The  Missile Defense Agency (MDA) plans to equip Aegis Ashore with a  modified version of the Aegis weapon system software that will share  many components with the sea-based Aegis BMD. For further details on  the Aegis Weapon System and Aegis BMD interceptors, see appendixes  II, IV, and V. Table 6 provides key fiscal year 2017 Aegis Ashore program  facts."], "subsections": []}, {"section_title": "The Aegis Ashore facility in Poland became increasingly reliant on concurrency to meet its schedule, but construction issues eventually forced a delay of at least one year", "paragraphs": ["Construction of the Aegis Ashore site in Poland has not overcome an  initial delay that was largely due to contractor performance issues. MDA  and the Army Corps of Engineers, which manages military construction at  the site, took a number of measures to mitigate or reverse these delays,  including working to modify the Army Corps of Engineers\u2019 contract to  permit joint occupancy of the site for a longer duration, and for the  contractor to provide more granular project data to the Army Corps of  Engineers. Also, the contractor has moved key personnel on site, and  added a second shift. Program officials stated that they have withheld  some award fees from the contractor over these issues. Program  documentation states the contractor continues to be late in submitting  documentation needed to move forward. If this and other issues are not  corrected, it will increase the risk of further schedule slips.", "To make up for these delays, MDA introduced increasing levels of  concurrency into its schedule, and shortened key phases of the delivery  process. MDA has reduced the time allotted for Installation and Checkout  activities from 16.5 months to 6.5 months. These activities would occur  concurrently with the final phases of construction at the site. For example,  installation of the deckhouse at the Poland site was scheduled for the end  of the fourth quarter, fiscal year 2017, but was delayed to the end of the  first quarter, fiscal year 2018. Despite this, installation and checkout  activities still began in the fourth quarter of fiscal year 2017. The Navy\u2019s  systems testing procedures, which are needed prior to operational  acceptance of the site, will have occurred mostly concurrently with the  final stages of MDA\u2019s construction and installation work on the site. MDA  maintained through all of fiscal year 2017 that the site would be ready for  delivery in December 2018 as scheduled. Program documentation noted  that further program concurrency presented risks not only to the Aegis  Ashore program, but to multiple elements relying on timely delivery of the  site, up to and including the scheduled EPAA Phase 3 declaration. Early  in fiscal year 2018, MDA announced that construction of the Poland site  would not be completed until at least December 2019."], "subsections": []}, {"section_title": "The Poland and Romania sites both experienced unforeseen program challenges", "paragraphs": ["Both Aegis Ashore sites in Europe have faced continuing challenges in  several areas. For example, attrition problems have complicated efforts to  keep the Poland site\u2019s construction on schedule. These problems led to  several persistent vacancies in important positions during the fiscal year.  At one point in fiscal year 2017, the program lacked a full-time onsite  program manager or dedicated government safety engineer, as well as  other important positions. These roles had been, up to that point, filled by  deputies in an acting capacity or were divided among others. MDA  officials have also pointed to morale problems at the Poland site, where  conditions for sailors are relatively austere.", "The Romania site has required more post-delivery support from MDA  than was originally planned, largely due to quality and design issues in  several areas. This post-construction wrap-up work was accounted for in  MDA\u2019s plans, but was originally planned to be complete by late fiscal year  2016. However, MDA has continued to provide warranty-like support in  areas such as water supply, seismic-activity certification, and compatible  electrical systems. Program officials stated that many of these issues  arose from having to adapt Aegis systems to Romanian infrastructure,  which in some cases proved to be a more complicated task than  expected. Despite the issues encountered, the Romania site has  remained operational throughout all of this work."], "subsections": []}]}, {"section_title": "Appendix IV: Aegis Ballistic Missile Defense (BMD) Standard Missile-3 (SM-3) Block IB", "paragraphs": [], "subsections": [{"section_title": "Program Overview", "paragraphs": ["The Aegis BMD Standard Missile-3 (SM-3) Block IB is a ship- and shore- based missile defense system interceptor designed to intercept short- to  intermediate-range ballistic missiles during the middle stage of their flight.  The Aegis BMD SM-3 interceptor has multiple versions in development or  production: the SM-3 Blocks IA, IB, and IIA. Compared to the Aegis BMD  SM-3 Block IA, the Block IB features an enhanced target seeker for  increased discrimination, an advanced signal processor for engagement  coordination, an improved throttleable divert and attitude control system  for adjusting its course, and increased range. The Aegis BMD SM-3 Block  IB interceptor is linked with the Aegis Ballistic Missile Defense (BMD)  Weapons System and Aegis Ashore. For additional information about the  Aegis Weapon Systems, see Appendix II and for Aegis Ashore, see  appendix III.", "Recent technical and production problems have continually delayed a  decision to authorize full production of the Aegis BMD SM-3 Block IB due  to reliability concerns. Since fiscal year 2015, Aegis BMD SM-3 Block IB  production has been delayed by several technical issues. In response to  a GAO recommendation, program officials in 2015 delayed the decision  to enter full-rate production until they could implement further testing and  design changes. In fiscal year 2016, two failures during testing forced a  suspension of interceptor deliveries, causing the program to miss its  delivery target for the year. Table 7 provides key fiscal year 2017 Aegis  BMD SM-3 Block IB program facts."], "subsections": []}, {"section_title": "The Aegis BMD SM-3 Block IB program made progress against its delivery backlog from the previous year, and mitigated some technical risks, though others remain", "paragraphs": ["The Aegis BMD SM-3 Block IB experienced two failures in fiscal year  2016, the investigation of which forced a temporary suspension of  interceptor deliveries. As a result, MDA delivered only 33 interceptors out  of a planned 47 for the year. MDA added the remaining interceptors to its  planned delivery for fiscal year 2017, resulting in a target of 54  interceptors. The program successfully delivered 55 interceptors over the  course of the year, and thus made up for the existing backlog.", "The program tracked two technical risks during fiscal year 2017, one of  which it succeeded in removing, and another which will not be  implemented into the production process until the third quarter of fiscal  year 2018. According to MDA officials, the program successfully  managed the transition of the production of the system\u2019s Throttleable  Divert and Attitude Control System to a new facility without experiencing  significant delays or quality issues. In the other case, a component that  was implicated in a previous test failure is currently undergoing a  redesign. Program officials stated that they plan to have the new design  certified by the second quarter of fiscal year 2018, and incorporated into  the production line by the end of the third quarter.", "As we reported last year, problems testing a redesigned third-stage  rocket motor on the Aegis BMD SM-3 Block IB forced the program to  postpone its planned full production decision until the second quarter of  fiscal year 2017, and successive delays have ensued. Though the tests  validating the redesign were successful, the Undersecretary of Defense  for Acquisition, Technology, and Logistics issued an Acquisition Decision  Memorandum in February 2017 requesting an additional flight test in  fiscal year 2017 as well as supporting analyses from the Director,  Operational Test and Evaluation and the office of Cost Assessment and  Program Evaluation. The memorandum issued these requirements in  support of a planned full production decision in the first quarter of fiscal  year 2018. Full-rate production for the Aegis BMD SM-3 Block IB was  initially scheduled for fourth quarter, fiscal year 2012.", "MDA had one Aegis BMD SM-3 IB flight test scheduled for fiscal year  2017 at that time (FTM-24), and added another (FTM-26) in response to  the Acquisition Decision Memorandum\u2019s requirement, but neither were  held as scheduled. MDA delayed FTM-24 to fiscal year 2020, in order to  first analyze the new target missile\u2019s performance to ensure it would work  within the parameters of the test. While FTM-24\u2019s delay was due to its  very specific test design, its timing in fiscal year 2017 would have  afforded additional information about the reliability of the interceptor that  will not now be available before the full production decision. MDA deleted  FTM-26 several months after adding it, and moved its objectives to  coincide with NATO\u2019s Formidable Shield \u2013 17 naval exercises which took  place in early fiscal year 2018 (wherein the system did achieve a  successful intercept). As a result of the delay in conducting a test for  production-readiness, the program is currently planning on a production  decision in second quarter, fiscal year 2018."], "subsections": []}]}, {"section_title": "Appendix V: Aegis Ballistic Missile Defense (BMD) Standard Missile-3 (SM-3) Block IIA", "paragraphs": [], "subsections": [{"section_title": "Program Overview", "paragraphs": ["The Aegis Ballistic Missile Defense (BMD) Standard Missile-3 (SM-3)  interceptor has multiple versions in development or production: the Aegis  BMD SM-3 Blocks IA, IB, and IIA. The latest version, the Aegis BMD SM- 3 Block IIA interceptor, provides increased speed and range, more  sensitive seeker technology, and an advanced kinetic warhead than  previous versions. It is expected to defend against short-, medium-, and  intermediate-range ballistic missiles. Additionally, most of the Aegis BMD  SM-3 Block IIA components will differ from other the prior versions, and  therefore requires new technology to be developed specifically for it. For  additional information on the Aegis BMD SM-3 Block IB interceptor, see  appendix IV.", "Initiated in 2006 as a cooperative development program with Japan, the  Aegis BMD SM-3 Block IIA program was added as a capability to support  the European Phased Adaptive Approach (EPAA) Phase 3 architecture to  defend against longer-range threats. The Aegis BMD SM-3 Block IIA  interceptor is planned to be fielded with Aegis Weapons System 5.1. For  additional information on Aegis Weapons System, see appendix II. Table  8 provides key fiscal year 2017 Aegis BMD SM-3 Block IIA program facts."], "subsections": []}, {"section_title": "The Aegis BMD SM-3 Block IIA program has experienced mixed results in testing performance and problems with program execution, with consequences for cost and schedule", "paragraphs": ["The first intercept flight test using the Aegis BMD SM-3 Block IIA  interceptor, SFTM-01, was conducted in February 2017. It was originally  scheduled for fiscal year 2016, but was delayed to evaluate technical  issues discovered during previous tests. During this test, the Aegis BMD  SM-3 Block IIA interceptor successfully engaged a medium-range ballistic  missile (MRBM) target. The next intercept flight test, SFTM-02, occurred  4 months later, in June 2017. However, the interceptor failed to reach its  MRBM target during this test. MDA convened a failure review board to  identify the cause of the failure, and concluded that the failure was not  attributable to a fault in the design or performance of the interceptor itself.  The Navy is currently considering changes to its tactics, techniques, and  procedures to address the findings from the failure review board. Two  prior non-intercept tests using the Aegis BMD SM-3 Block IIA interceptor,  although considered successful, showed potential design issues with the  missile\u2019s guidance system, which steers the interceptor to the target.  Consequently, the program decided to develop a replacement  component. The redesigned component passed initial acceptance testing  and the program plans to employ it during FTM-29, which is scheduled for  the second quarter of fiscal year 2018.", "The program continues to experience unit cost growth due to several  factors, including decreases in the total amount being procured and  increases in shipping costs. According to MDA officials, shipping costs  grew because MDA underestimated the cost to ship missile components  manufactured in Japan to the US on US-flagged ships. MDA officials  stated that they did not adequately account for these costs when  establishing the original baseline cost. Since 2014 the program\u2019s unit cost  has increased by almost 60 percent, from $24 million in fiscal year 2014  to $39 million in fiscal year 2017. Program officials stated that they do not  expect either of these issues to lead to further cost growth in the future."], "subsections": []}, {"section_title": "Further delays or technical challenges within the Aegis BMD SM-3 Block IIA program could impact the EPAA Phase 3 declaration", "paragraphs": ["The Aegis BMD SM-3 Block IIA program has limited schedule margin to  address any issues prior to operational testing to meet the EPAA Phase 3  declaration by the first quarter of fiscal year 2019. For the EPAA Phase 3  declaration, the Aegis BMD SM-3 Block IIA interceptor must demonstrate  the ability to intercept an intermediate-range ballistic missile (IRBM) target  using remote sensor data. The program has one flight test, FTM-29, prior  to its operational flight test. This test was originally scheduled for the first  quarter of fiscal year 2018, but was delayed to the second quarter, and  the launch site for the test was moved to the land-based Aegis Ashore  facility in Hawaii. Adapting the Aegis BMD SM-3 Block IIA interceptor for  a land-based test delayed this test further, from the first quarter to the  second quarter of fiscal year 2018. Despite these delays, the dates for the  operational test of the Aegis BMD SM-3 Block IIA\u2014FTO-03 E1\u2014and the  EPAA Phase 3 declaration remain unchanged: the third quarter of fiscal  year 2018 and first quarter of fiscal year 2019, respectively. That leaves  the program approximately 3 to 5 months to resolve any issues  discovered during FTM-29, prior to the operational test, which is needed  to support the EPAA Phase 3 declaration. In addition, FTM-29 will be the  Aegis BMD SM-3 Block IIA interceptor\u2019s first test against an IRBM, first  test of its ability to engage a target using remote sensor data, and the first  test with to incorporate the new missile guidance system component  incorporated. As a result of the complex test environment and limited time  between tests, any significant failure during FTM-29 could lead to a delay  in the EPAA Phase 3 declaration."], "subsections": []}]}, {"section_title": "Appendix VI: Command, Control, Battle Management, and Communications (C2BMC)", "paragraphs": ["Appendix VI: Command, Control, Battle  Management, and Communications (C2BMC)"], "subsections": [{"section_title": "Program Overview", "paragraphs": ["C2BMC is a global system of hardware\u2014workstations, servers, and  network equipment\u2014and software that integrates all missile defense  elements of the Ballistic Missile Defense System (BMDS). Specifically, it  allows users to plan operations, see the battle develop, and manage  BMDS sensors. As the integrator, C2BMC enables the defense of a larger  area than the individual BMDS elements operating independently and  against more missiles simultaneously, thereby potentially conserving  interceptor inventory. MDA is developing C2BMC in spirals, or software  and hardware upgrades designed to improve various aspects of the  integrated BMDS performance. MDA fielded Spiral 6.4 in 2011 and plans  to complete the fielding of Spiral 8.2-1 by March 2018. The program is  working on efforts for additional capabilities in the future. Table 9 provides  an overview of C2BMC spiral development and table 10 provides key  fiscal year 2017 C2BMC program facts."], "subsections": []}, {"section_title": "C2BMC Spiral 6.4 supported delivery of discrimination upgrades but cyber vulnerabilities continue to place the BMDS at risk", "paragraphs": ["At the beginning of 2017, MDA completed the Spiral 6.4 assessment,  which was designed to enable capabilities for Increment 3, Near Term  Discrimination Improvements for Homeland Defense. The spiral  performed nominally during testing, providing discrimination tasking from  a forward-positioned radar for long-range threats, multiple-radar  discrimination tasking of a threat, and several fixes related to sequencing  and timing of messages. These tests provided performance data, which  informed MDA\u2019s Technical Capability Delivery for Increment 3 in March  2017.", "Despite this success, however, the spiral continues to have cyber  vulnerabilities that place the BMDS operations in certain geographic  areas at risk. For example, Spiral 6.4 has been in use since 2011, and its  operating system (Windows XP) as well as other supporting software  products will remain in the field well past their end of life cycle and  support by vendors. According to program documentation, upgrading  these systems before they are replaced by subsequent spirals is cost  prohibitive, but program documentation does not indicate the cost. While  MDA is in the process of fielding Spiral 8.2-1 to replace Spiral 6.4 in the  Strategic, Northern and Pacific Commands by March 2018, Spiral 6.4 will  remain operational at the European and Central Commands until the  delivery of Spiral 8.2-3 in early fiscal year 2019. According to fiscal year  2017 MDA program reviews, the likelihood that critical cyber  vulnerabilities are discovered is low for the remaining two years, and,  according to MDA, no fielded system has been exploited to date.  However, known vulnerabilities have been exploited in lab experiments.  Moreover, MDA program documentation from fiscal year 2017  acknowledges that new security deficiencies could still be discovered,  and if those or known deficiencies are exploited, mission capabilities like  BMD planning, radar control, track reporting, and situational awareness  may be significantly degraded. MDA collaborated with Combatant  Commands to monitor and minimize the risks."], "subsections": []}, {"section_title": "MDA Continued its Development of C2BMC Spiral 8.2-1 and expects its fielding in Fiscal Year 2018", "paragraphs": ["In fiscal year 2017, MDA mitigated developmental risks necessary to  complete the development and testing of C2BMC Spiral 8.2-1 in fiscal  year 2018. Spiral 8.2-1\u2014planned to support Enhanced Homeland  Defense capabilities\u2014was initially planned for delivery by December  2017, but, according to MDA officials, the delivery was delayed to allow  additional time for assessment of results from BMD system-level ground  test campaign called Ground Test (GT)-07a. Prior to GT-07a, the program  identified risks that could affect interoperability with other elements and  threat tracking, but, according to recent program documentation, MDA  implemented fixes to many of them before the testing began. At the time  of our assessment, MDA\u2019s analysis was ongoing. However, MDA plans to  complete its fielding by March 2018."], "subsections": []}, {"section_title": "Spiral 8.2-3 continues to face technical challenges and cost increases", "paragraphs": ["MDA has begun testing Spiral 8.2-3, which is planned for fielding  throughout fiscal year 2019, but it continues to face technical challenges  and cost risk. This spiral is to replace Spiral 8.2-1 at the Strategic,  Northern and Pacific Command, and Spiral 6.4 at European and Central  Commands. According to MDA, the spiral is designed to enable a five-fold  increase in the size of area that can be defended by the BMDS, and is an  integral part of EPAA Phase 3. However, the program continues to track a  prior risk and identified a new risk to an element level C2BMC capability  needed for EPAA Phase 3 called Engage on Remote. Specifically,  program documentation indicates that processing of data about threat  missile flight paths, known as threat tracks, has issues that could reduce  the likelihood of the successful engagements utilizing Aegis Ballistic  Missile Defense in Engage on Remote scenarios. C2BMC has faced  similar challenges with threat tracking capabilities for prior spirals, which  required delays certain aspects of integration with Aegis BMD until fixes  were implemented. MDA is implementing fixes to these issues in Spiral  8.2-3, which once fielded should resolve these integration issues, but it  still needs to assess them in the ongoing test campaign for EPAA Phase  3.", "Since 2016, MDA Spiral 8.2-3 costs have increased by about 20 percent,  from $68 million to $82 million. According to MDA documentation, the  increase is due to several factors, including higher than expected costs  for architecture and system engineering, as well as testing and integration  requirements, and additional requirements for cybersecurity, which  increased algorithm complexity required for Engage on Remote. MDA  officials stated that some of the cost increases for cybersecurity were  driven by DOD-wide cyber requirements, implemented in March 2014.  Further cost increases, according to MDA, were driven by a warfighter  request for geographic redundancy. While the original concept for 8.2-3  had the suites for Central and European Command at each location, MDA  met the warfighter request by installing the suites at different locations so  that losing a single node would not result in the loss of all capability for  the warfighter. According to the C2BMC program, implementation of this  requirement cost about $6.4 million."], "subsections": []}, {"section_title": "MDA identified requirements for Spiral 8.2-5, but it is already facing potential technical, as well as schedule and cost challenges", "paragraphs": ["MDA identified element requirements for Spiral 8.2-5, which is planned for  delivery in fiscal year 2021. This Spiral will integrate the Long Range  Discriminating Radar and provide additional BMDS-level planning, track  processing, and battle management capabilities. While MDA currently  plans to hold the Preliminary Design Review by March 2018 and may  report its acquisition baseline for the first time in the subsequent BMDS  Accountability Report, program management documentation has already  identified two specific challenges:", "Program documentation indicates that the Northern Command has  concerns about performance issues associated with threat track  processing, called System Track, for GMD engagements. While this is  a key C2BMC function, track processing has been a challenge for  other spirals supporting prior and upcoming regional and homeland  defense capabilities. MDA is currently working with stakeholders to  address this issue.", "The program also identified disconnects between LRDR, GMD and  C2BMC, which are driving up element development and test costs,  and delayed some capabilities initially planned to be delivered along  with the LRDR. MDA developed a mitigation plan and established a  working group to coordinate with stakeholders to address these  issues."], "subsections": []}]}, {"section_title": "Appendix VII: Ground-based Midcourse Defense (GMD)", "paragraphs": ["Appendix VII: Ground-based Midcourse  Defense (GMD)"], "subsections": [{"section_title": "Program Overview", "paragraphs": ["The GMD system is a missile defense interceptor system designed to  defend the United States against a limited intermediate and  intercontinental ballistic missile attack from countries such as North Korea  and Iran. To counter such threats to the homeland, GMD, in conjunction  with a network of ground-, sea-, and space-based sensors, launches  interceptors from missile fields based in Fort Greely, Alaska and  Vandenberg Air Force Base, California. After launching from in-ground  silos, the interceptor boosts towards the incoming enemy missile and  releases an Exoatmospheric Kill Vehicle (EKV) to find and destroy the  threat. GMD also has ground support and fire control systems that the  warfighter relies upon to operate the system.  Since the program\u2019s  initiation in 1996, DOD has spent over $45 billion developing, operating,  and maintaining the GMD system, including: fielding ground station  assets and a fleet of 44 interceptors; upgrading, redesigning, refurbishing,  and retrofitting the system;  successfully performing 5 out of 9 intercept  tests and 3 out of 3 non-intercept tests; and developing Multi Object Kill  Vehicle technology.  Three of the intercept tests failed because of  problems with the EKV while one of the tests failed because of a target  failure, which is not associated with the GMD system.", "MDA has efforts ongoing to address concerns with the existing fleet of  interceptors and increase protection to the U.S. homeland. In March  2013, the Secretary of Defense directed MDA to increase the number of  fielded GMD interceptors from 30 to 44 by the end of 2017. To achieve  this fielding goal, MDA performed a limited redesign of the CE-II, called  the CE-II Block I, to fix known issues, address obsolescence, and  improve producibility and cost. MDA also performed an extensive  upgrade to the boost vehicle to improve reliability and address  obsolescence issues. Although the CE-II Block I will address some  concerns with the CE-II design, MDA determined a more complete  redesign of the CE-II was needed. MDA subsequently developed an  acquisition strategy and began developing the new kill vehicle, called the  Redesigned Kill Vehicle (RKV). The RKV is intended to be more reliable,  producible, testable, and cost effective. Table 11 provides key fiscal year  2017 GMD program facts."], "subsections": []}, {"section_title": "Fiscal Year 2017 was one of GMD\u2019s most successful years for results achieved", "paragraphs": ["Fiscal year 2017 was a seminal year for the GMD program, as it achieved  a number of major accomplishments. Over the past several years, the  GMD program developed the newest interceptor version equipped with  the CE-II Block I EKV and C2 boost vehicle. The program conducted its  first successful flight test of this interceptor in May 2017 when it  successfully intercepted a target representative of an intercontinental  ballistic missile\u2014another first for the GMD system. MDA proceeded to  produce and field eight of these new interceptors and complete the  refurbishment of Missile Field 1 in Fort Greely, Alaska, enabling the  program to meet its directive from the Secretary of Defense to field 44  interceptors by the end of 2017. The program also fielded a software  upgrade to the fire control segment of the GMD ground station, which  included some improvements for battle management and discrimination.  In addition, the program completed a preliminary design review for the  RKV in March 2017. The program was able to execute all of these  activities while also maintaining 24/7 availability of the system to the  warfighter during a heightened period of North Korean missile testing."], "subsections": []}, {"section_title": "GMD\u2019s cost now exceeds $67 Billion, the fourth highest among DOD\u2019s weapon systems", "paragraphs": ["In total, the GMD program\u2019s total cost has increased to over $67 billion  and that total is likely to continue to increase as MDA defines future  capability increments. In March 2013, we reported the total cost of the  GMD program was estimated to be approximately $41 billion. Since that  time, MDA defined new capability increments that included major GMD  initiatives, such as the RKV and Multi Object Kill Vehicle efforts, which  increased the program\u2019s total cost. GMD is now the fourth most  expensive DOD weapon system among a portfolio of 78 major defense  acquisition programs, totaling approximately $1.5 trillion. As seen in table  12 below, only the F-35 and two naval programs are projected to cost  more than the GMD system, demonstrating the department\u2019s level of  resources committed to defending the U.S. homeland against a long  range ballistic missile attack.", "In November 2017, the President submitted to Congress an amendment  to the fiscal year 2018 budget request for DOD to, among other things,  increase current missile defense capacity, expand the sensor network,  and accelerate technology development efforts. According to MDA, the  request for additional funds was in direct response to recent  demonstrations of advanced and accelerated capabilities by North Korea.  MDA\u2019s justification materials for the budget amendment includes an  addition $774 million for GMD to build a new, 20-silo missile field at Fort  Greely, begin procuring four additional interceptors, continue booster  development, accelerate RKV development, and to add a non-intercept  target to an initial RKV flight test. In total, MDA now plans to spend over  $14 billion on GMD over the next six years with 64 total interceptors  fielded by 2023."], "subsections": []}, {"section_title": "New Director, MDA revised the GMD acquisition strategy to keep the current prime contractor in place, reversing plans for MDA to lead system integration", "paragraphs": ["The new direction of the GMD program reflects a decision by the Director,  MDA to set aside a strategy approved in 2016 by the prior Director for the  government to take on the role of system integrator. Since the late 1990s,  Boeing has been the GMD prime contractor, performing the role of  system integrator. In 2011, Boeing competitively won a follow-on GMD  development and sustainment contract that runs through December 2018.  According to MDA, the government serving as the system integrator  provides several benefits, such as eliminating organizational conflicts of  interest issues\u2014where industry tests and delivers assets based on  requirements it wrote\u2014and providing an unbiased assessment of system  performance. However, a subsequent review team identified gaps and  risks with implementing the strategy and the agency determined that  transitioning to the new strategy at a time of heightened threat activity  created unacceptable levels of risk for defending the U.S. homeland. On  January 31, 2018, MDA awarded a sole-source contract modification to  Boeing to extend the current development and sustainment contract. The  contract modification has a total value of $6.56 billion and includes the  accelerated delivery of a new 20-silo missile field, development of a new  boost vehicle and the RKV, procurement of 20 new interceptors, and  ground system upgrades.", "MDA faced a difficult choice, as both options included advantages and  disadvantages. Under the prior approved strategy, MDA expected to  achieve cost savings through competition. According to MDA, the sole- sourced labor rates for new development efforts under the recently  modified development and sustainment contract have proven to be  significantly higher than originally planned. In addition, MDA stated that  the contract modification process is also often very lengthy, making it  difficult for the agency to respond to the rapidly changing threat  environment. MDA also stated that the lack of competition makes it  challenging for the government to achieve favorable contract outcomes.  Conversely, the government taking on the role of system integrator would  make it responsible for managing multiple contracts. MDA plans to  implement measures to mitigate some of the current challenges with  extending the development and sustainment contract and ultimately  provide the GMD program with a level of continuity during the current  period of heightened threat activity."], "subsections": []}, {"section_title": "MDA\u2019s plan to accelerate the Redesigned Kill Vehicle effort may instead prolong it", "paragraphs": ["In October 2017, MDA informed the Under Secretary of Defense for  Acquisition, Technology and Logistics (USD(AT&L)) that it had revised  the RKV acquisition plan that was previously established in 2015 and  approved by the USD(AT&L). This revision, in response to the  advancement of the North Korean missile threat, accelerates the RKV\u2019s  development by concurrently performing development and production and  reducing the number of necessary flight tests. MDA removed the  previously-established alignment between flight tests and production  decisions, which enables the program to begin production well before the  system\u2019s design is stabilized. In addition, MDA now plans to contract for  production, on a sole source basis with the current GMD prime contractor,  rather than through a full and open competition. According to MDA, the  acceleration plan does not change the content of the RKV\u2019s development  plan and the program will continue to execute the same engineering  processes including hardware qualifications essential to delivering the  RKV.", "However, MDA\u2019s revision of the RKV acquisition plan is more likely to  prolong the effort rather than accelerate it. Our prior best practice work  has shown that finding a balance between resources available (i.e., time  and funding) and needed operational attributes (i.e., reliability and  effectiveness) and obtaining buy-in from across the department is  essential for program success. Although some risk may be necessary,  programs that rely on heightened levels of concurrent development and  production, starting production before stabilizing the design, and other  risky practices greatly increase the likelihood a program will fail to deliver  reliable, effective capabilities in an accelerated manner. The revised RKV  plan no longer includes some of the key best practices, such as alignment  between testing and production decisions included in the 2015 RKV plan.  In addition, MDA has already experienced development delays and was  operating on the threshold schedule of the prior acquisition plan, with no  additional margin for delays. Moreover, MDA did not vet the revised plan  in a similar manner to that of the 2015 RKV acquisition plan, which  Congress required to be subject to approval by the USD(AT&L) and  include rigorous elements for systems engineering, design, integration,  development, testing and evaluation. The revised plan is also  inconsistent with the acquisition best practice to \u201cfly before you buy\u201d, as  MDA will begin production based on the results of design reviews rather  than flight testing.", "In May 2017, we recommended that the Secretary of Defense require the  Director of DOD\u2019s Office of Cost Assessment and Program Evaluation  (CAPE) perform a comprehensive review of the RKV acquisition strategy  and provide any recommendations to the Secretary of Defense that the  Director deems necessary and appropriate to obtain CAPE\u2019s concurrence  for the RKV program\u2019s acquisition strategy. DOD did not concur with our  recommendation, stating that CAPE and other organizations had  previously reviewed the strategy prior to USD(AT&L)\u2019s approval. As we  noted in our report, CAPE raised serious concerns about the plan and  expected MDA would encounter development delays. MDA justified the  prior RKV plan, in part, so that it could begin urgently replacing the less  reliable CE-Is as expeditiously as possible, which were fielded between  2004 and 2007. Under the newly accelerated plan, MDA does not plan to  begin replacing the CE-I interceptors until after it has fielded the  additional 20 RKV-equipped GBIs in 2024. However, GBIs only have an  initial service life of 20 years and MDA previously decided not to make  any upgrades to the CE-I because of initial plans to begin replacing them  with RKVs in 2020. We continue to believe that DOD should implement  our recommendation in order to ensure that MDA\u2019s plans for the RKV are  viable and meet the needs of the warfighter."], "subsections": []}]}, {"section_title": "Appendix VIII: Sensors", "paragraphs": ["A family of satellite-, sea-, and land-based radars provides worldwide  sensor coverage to enable the Ballistic Missile Defense System (BMDS)  to effectively detect and track threat missiles through all phases of their  trajectory. Land-based BMDS sensors include the Army/Navy  Transportable Radar Surveillance and Control Mode-2 (AN/TPY-2),  Upgraded Early Warning Radars (UEWR), and the future Long Range  Discrimination Radar (LRDR). Figure 16 below illustrates the locations of  select BMDS sensors world-wide.", "AN/TPY-2 is a transportable X-band high resolution radar that is capable  of tracking all classes of ballistic missiles. AN/TPY-2 in the forward-based  mode is capable of detecting and tracking missiles in all stages of flight to  support Aegis BMD and GMD engagements and provides threat missile  data to C2BMC. AN/TPY-2 in the terminal mode can track missiles in the  later stages of flight to support THAAD engagements. Five AN/TPY-2  radars for use in forward-based mode are deployed to support regional  defense: two in U.S. European Command, two in U.S. Pacific Command,  and one in U.S. Central Command. Two AN/TPY-2 radars for use in  terminal mode is also deployed to U.S. Pacific Command.", "UEWR are U.S. Air Force early warning radars that are upgraded and  integrated into the BMDS to provide sensor coverage for critical early  warning, tracking, object classification, and cueing data. Upgraded Early  Warning Radars are located in Beale, California; Fylingdales, United  Kingdom; and Thule, Greenland. MDA awarded a contract to upgrade the  early warning radars in Clear, Alaska and at Cape Cod, Massachusetts,  and both of these assets are approaching their operational acceptance for  use in the BMDS. The upgrades to the Clear and Cape Cod Early  Warning Radar sites are joint MDA / Air Force projects. Both  organizations are contributing funding to these sites.", "LRDR is being designed as an S-band radar intended to address the  need for persistent, precision tracking and discrimination capability in the  Pacific sensor architecture. MDA anticipates the addition of LRDR will  optimize the employment of the Ground-based Midcourse Defense  (GMD) interceptors and address evolving threats. The radar will be  located at Clear Air Force Station, Alaska with initial operational capability  planned for 2020. Table 13 provides key fiscal year 2017 Sensors  program facts."], "subsections": [{"section_title": "AN/TPY-2 Program transitions to a new development phase", "paragraphs": ["To address future requirements and as part of its spiral development  process, AN/TPY-2 transitioned from its Increment 2 software  development phase to its Configuration 3 software development phase.  The transition results in Configuration 3 subsuming all unfinished  Increment 2 content including 44 percent of development costs ($60  million), 31 percent of productions costs ($61 million), 88 percent of  operations and support costs ($2,281 million), and 100 percent of  disposal costs ($30 million). Four Knowledge Points and Technical  Performance Metrics for the program were also carried over from  Increment 2. New capabilities were also added in Configuration 3  including electronic protection and discrimination improvements.", "Additionally, the Conditional Materiel Release of software upgrade CX  2.1.0 was delayed from the first quarter of fiscal year 2017 to the first  quarter of fiscal year 2018. To mitigate this delay, MDA executed an  Urgent Software Release for CX 2.1.1 to support the fielding of  Command, Control and Battle Management (C2BMC) S6.4-3 in  December 2016."], "subsections": []}, {"section_title": "UEWR operational acceptances delayed for Beale, Clear, Cape Cod, and Fylingdales Sites", "paragraphs": ["The UEWR is executing a concurrent development approach to improve  UEWR Object Classification (OC), Data Processor/Signal Processor  (DP/SP), and Bias Correction capabilities, and to certify the UEWR Clear  and Cape Cod sites for use in the BMDS. Because of this concurrent  development, a delay in the Beale UEWR\u2019s operational acceptance for  the OC and DP/SP program has had cascading effects on the same  upgrades for the Clear, Cape Cod, and Fylingdales UEWRs in addition to  the BMDS Certification for the Clear UEWR, delaying the use of these  key radar capabilities. These delays are shown in figure 17 below:  The delay in Beale\u2019s Operational Acceptance was due in part to the  following:", "The contractor, Raytheon, delivered unacceptable UEWR technical  orders that required rework.", "Development and operational testing supporting the operational  acceptance were delayed because the operators required remediation  of all emergency operational maintenance issues found on the  operational UEWRs.", "Some UEWR software required fixes to address deficiencies.", "Other programs were competing for test time on needed equipment.", "The delay in operational acceptance will affect the delivery of Bias  Correction for the Clear and Cape Cod UEWRs in addition to the delivery  of and Data Processor/ Signal Processor improvements to support the  missile defense mission of Beale, Clear, Cape Cod, and Fylingdales  UEWRs. It has also delayed the BMDS Certification of the Clear UEWR.  Because the program currently has sufficient schedule margin before the  Cape Cod BMDS Certification, the delays have not yet affected the  missile defense mission for that radar. The program office is working with  Raytheon on a recovery plan to address the Technical Order issues and  other issues that arose from the developmental and operational testing  conducted in July 2017. We have previously reported that concurrent  development increases program risk for cost and schedule delays caused  by redesigns and retrofits needed after testing has occurred.", "In fiscal year 2017, MDA made progress towards stabilizing LRDR\u2019s  design, by completing a preliminary design review in March 2017 and a  critical design review in September 2017. The program also began  production of long lead radar electronic components and awarded a  military construction contract for the Mission Control Facility. However,  the program has experienced challenges integrating multiple facilities- related projects, which require synchronization between MDA, the U.S.  Air Force, the U.S. Army Corps of Engineers, and contractors. For  example, in fiscal year 2017, the LRDR program began demolishing a  decommissioned, Cold War-era radar, which sits on the planned LRDR  site at Clear Air Force Station. The program discovered that the radar\u2019s  foundation and surrounding soil contained steel and concrete coated with  polychlorinated biphenyl (PCB), which was a common industrial material  used at the time of the radar\u2019s construction in the late 1950s. PCBs do not  readily break down once in the environment and have been demonstrated  to cause a variety of adverse health effects. In April 2017, the U.S. Army  Corps of Engineers modified its contract for the removal of the PCB- contaminated foundation and soil and plans to complete excavation and  removal by early fiscal year 2018. Demolition is now expected to be  completed in 2019 and the additional costs for these complications are  not covered under the program\u2019s resource baseline.", "In June 2017, the LRDR program initiated a power study with the  commercial power supplier for the LRDR radar. The program expects to  complete the study on LRDR\u2019s power demands on the commercial  electrical grid, as well as assess updated U.S. Northern Command  concept of operations to determine the extent, if any, of system  capabilities, limitations, and mitigations. During the LRDR critical design  review, MDA officials stated that U.S. Air Force informed the agency that  it required 24/7 availability of the radar if it is to become operational.  According to MDA officials, the current LRDR design, with its reliance on  commercial power and limited back-up generators, would not provide that  capability. MDA officials stated the program plans to increase the number  of back-up generators, which may increase the military construction costs  and annual operational expense of the radar. A November 2016 study of  LRDR\u2019s power system performed for MDA by a contractor indicated that  agreements with the commercial power provider place limitations on the  warfighter\u2019s ability to operate the radar without consulting the commercial  power provider in advance and that emergency activation of the radar  could result in other commercial power provider customers having their  power supply temporarily switched off if the generators were not brought  online in time.", "The LRDR program has also encountered design challenges with the  radar\u2019s circuit card assemblies, as the planned design included the use of  pure tin parts, which are susceptible to corrosion. Lockheed Martin, the  prime contractor for the LRDR program, plans to replace some of the  pure tin parts with parts that have a lead-based finish, as available. The  program does not anticipate there to be enough of these parts available  and estimated that redesigning the pure tin parts would result in an  approximate 9-month delay. For those parts that cannot be readily  replaced, Lockheed Martin plans to use corrosion mitigation techniques,  such as applying conformal coating to the circuit card assemblies and  applying lead solder. Although MDA maintains that these mitigation  techniques will ensure corrosion-free operations, government and  industry studies show that such mitigations reduce, but do not eliminate  the risk, Lockheed Martin is conducting on-site inspections and providing  additional information on the historical use of pure tin parts in similar  systems and anticipates being able to clear the unmitigated, pure tin parts  through the MDA\u2019s Parts, Materials, and Processes control board."], "subsections": []}]}, {"section_title": "Appendix IX: Targets and Countermeasures", "paragraphs": [], "subsections": [{"section_title": "Program Overview", "paragraphs": ["The Missile Defense Agency\u2019s (MDA) Targets and Countermeasures  procures missiles to serve as targets during the developmental and  operational testing of independent or integrated ballistic missile defense  system (BMDS) elements. Specifically, this program supplies MDA with  short-, medium-, intermediate-, and intercontinental-range targets to test,  verify, and validate the BMDS elements\u2019 performance in threat relevant  environments. As targets are solely test assets, they are not  operationally fielded.", "The number of targets that the program supplies vary based on each  element\u2019s requirements and testing schedule. While some targets have  been used for years, others have been recently added or are now being  developed to more closely represent current and future threats. The  quality and availability of these targets is instrumental to the execution of  MDA\u2019s flight test schedule. Table 14 provides key fiscal year 2017  Targets and Countermeasure program facts."], "subsections": []}, {"section_title": "First successful intercept test using an ICBM was achieved during GMD flight test, FTG-15", "paragraphs": ["Despite challenges MDA has previously experienced using new targets  during intercept flight tests, in fiscal year 2017, the program successfully  flew the first intercontinental ballistic missile (ICBM) range target to  support a critical intercept test for the GMD element. The GMD element  provides the warfighter capability to engage and destroy intermediate-  and intercontinental-range ballistic missile threats for the protection of the  United States. In March 2013, the Secretary of Defense announced plans  to increase the number of deployed GMD interceptors called Ground- based interceptors (GBI) from 30 to 44 by the end of 2017. To do this, a  test\u2014FTG-15\u2014was needed to collect data on the GBI\u2019s new booster  design and demonstrate its performance against a target at the ICBM  threat range before completing this mandated fielding goal. The  successful flight of the ICBM target, the GBI\u2019s performance against the  target, and other information gathered during this test will provide the  warfighter with a better understanding of the GBI\u2019s capabilities and  limitations. For further details on the GMD element, see appendix VII."], "subsections": []}, {"section_title": "Program planning to award contract for additional targets despite cost growth, schedule delays, and unproven performance", "paragraphs": ["The Targets and Countermeasures program is planning to contract for up  to 12 additional medium range ballistic missile (MRBM) T1/T2 targets  despite cost growth, schedule delays, and the lack of demonstrated  performance. In fiscal year 2014, the program competitively awarded the  initial contract for 6 MRBM T1/T2 targets with an option for an additional  12, for a total of 18. According to program officials, the contract was  structured with a fixed price for the target and incentives to ensure  successful execution during testing. However, the contractor has been  underperforming since the award.", "First, this target\u2019s costs have continued to significantly increase as some  MDA officials originally warned. One of MDA\u2019s reasons for selecting the  current MRBM T1/T2 contractor was because it offered a lower price.  However, some officials within MDA objected to this award due to the  near certainty that the contractor would overrun costs. Since then, both  MDA and Defense Contract Management Agency (DCMA) officials have  acknowledged that the contractor did not adequately account for the costs  associated with this target. Consequently, this target\u2019s costs have been  volatile, and despite changes and rebaselines, the contractor has been  unable to meet projections. In fiscal year 2017, the program conducted  another review to address significant cost growth and set new projections,  and despite a relatively steady period of performance against these new  projections, DCMA officials believe that this contractor will continue to  have increasing costs. In addition, the first delivery of this target has been  delayed almost five years beyond the original plan primarily due to  contractor performance issues. There was an initial delay because the  contract was awarded later than planned due to an investigation of an  unsubstantiated procurement integrity allegation. However, since then,  contractor performance issues have further delayed the first target  delivery, necessitating several substitute targets for tests in the interim.  Finally, since the program will not fly the first target in a test until the  second quarter of fiscal year 2019, the target\u2019s performance has yet to be  demonstrated. Hence, buying an additional 12 targets without  confirmation of the target\u2019s performance is a significant risk for the  program, as even one failure would delay all future tests with this target,  and ultimately, the entire test program."], "subsections": []}]}, {"section_title": "Appendix X: Terminal High Altitude Area Defense (THAAD)", "paragraphs": ["Appendix X: Terminal High Altitude Area  Defense (THAAD)"], "subsections": [{"section_title": "Program Overview", "paragraphs": ["THAAD is a rapidly-deployable ground-based system able to defend  against short-, medium-, and intermediate- range ballistic missile attacks  during the middle and end stages of a missile\u2019s flight. THAAD is  organized as a battery that consists of interceptors, launchers, an Army  Navy / Transportable Surveillance (AN/TPY-2) radar, a fire control and  communications system, and other support equipment. The first two  batteries were originally conditionally accepted by the Army for  operational use. Since then, THAAD received urgent materiel release  approval from the Commanding General of the United States Army  Aviation and Missile Command to enable an earlier delivery of equipment  for THAAD batteries one through six for operational use to meet the  Army\u2019s request to support urgent warfighter needs. The MDA plans to  continue THAAD production through fiscal year 2024, for a total of 7  batteries, 503 interceptors, and 7 radars.", "MDA has two THAAD acquisition efforts\u2014THAAD 1.0 and THAAD 2.0.", "THAAD 1.0 is for the production of the batteries, interceptors, and  supporting hardware and provides the warfighter with initial integrated  defense against short- and medium-range threats in one region.", "Appendix X: Terminal High Altitude Area  Defense (THAAD)", "THAAD 2.0 is primarily software enhancements that expand THAAD\u2019s  ability to defend against threats in multiple regions and at different  ranges, and adds debris mitigation and other upgrades.", "Table 15 provides key fiscal year 2017 THAAD program facts."], "subsections": []}, {"section_title": "THAAD Successfully Completed Two Flight Tests, but Delayed Several Hardware and Software Deliveries, Impacting Warfighter Capabilities", "paragraphs": ["THAAD successfully completed two tests. In FTT-18 (previously  scheduled for fiscal year 2015), THAAD successfully intercepted an  Intermediate Range Ballistic Missile (IRBM)-representative target,  demonstrating THAAD\u2019s capability against IRBM threats. THAAD has  been deployed to Guam since 2013 to defend against IRBM threats, but  this is the first time it has demonstrated that capability in a flight test.  According to program officials, for the second planned flight test originally  named FTT-15, MDA changed the name to Flight Experiment THAAD  (FET)-01 to more accurately reflect the experimental purpose of the test.  However, an intercept was formerly a primary test objective in FTT-15,  but this objective was removed before the test name was changed to  FET-01. In FET-01, although not a primary objective, THAAD did  complete an intercept of a medium-range ballistic missile target with  countermeasures. Despite the intercept, the test revealed significant  operational limitations.", "THAAD delayed the delivery of several key hardware and software  deliveries that will impact warfighter capabilities. Figure 20 shows the  delayed hardware and software deliveries.", "Appendix X: Terminal High Altitude Area  Defense (THAAD)", "Appendix X: Terminal High Altitude Area  Defense (THAAD) interceptors due to a production issue that had cascading schedule  effects on interceptor production and delivery."], "subsections": []}, {"section_title": "Parts Quality Issues Were Resolved but Delayed Interceptor Deliveries", "paragraphs": ["In May 2017, we found that THAAD interceptor production was halted due  to a parts quality issue discovered when a connector in the interceptor  failed multiple testing iterations. Upon investigation, the contractor  learned that one of its sub-contractors changed the manufacturing  process on the connector without informing Lockheed Martin. According  to program officials, Lockheed Martin halted interceptor delivery but  continued interceptor production. The connector was redesigned and  incorporated into 20 interceptors, which again failed testing before being  deployed. After a second redesign the connector passed testing and  interceptor delivery resumed in April 2017. As of December 2017, there  were 16 interceptors that had been produced but not yet fitted with the  redesigned connector. Program officials report that the delay should  result in about 2 months of delivery delays of the last interceptor lot  currently under contract.", "According to program officials, to prevent similar problems from occurring  again, the government revised the Parts Materials and Processes Control  plan to provide improved guidance and clarity related to parts selection  and change control; added additional criteria to annual audits to enhance  review of supplier parts management, materials, and processes; and  tightened controls on suppliers to report any significant changes."], "subsections": []}, {"section_title": "MDA and Army are at an Impasse Regarding Transfer of THAAD Program to the Army", "paragraphs": ["Appendix X: Terminal High Altitude Area  Defense (THAAD)", "THAAD, that would be the Army) not later than the date the President\u2019s  fiscal year 2021 budget is submitted. However, in a memo from the  Secretary of the Army, the Army said that it would non-concur with a  transfer of the THAAD program in its current state because it cannot meet  the Army\u2019s global mission requirements.", "To meet global mission requirements for the THAAD mission, the Army  requires about $10.1 billion of additional hardware, life-cycle sustainment  funding, and AN/TPY-2 upgrades. MDA is willing to transfer to the Army  the THAAD program of record as is. An official from the Army said that  this impasse has existed before, but that the recent reprioritization of the  THAAD mission contributed to it. For further details on the AN/TPY-2  program, see appendix VIII.", "Table 16 below shows the difference between the THAAD program of  record and the Army\u2019s requirements.", "Appendix X: Terminal High Altitude Area  Defense (THAAD)", "MDA\u2019s requirements and warfighter requirements exist and can lead to  situations such as this impasse. Consequently, we recommended that the  Secretary of Defense require MDA to develop a plan to transition  operational requirements analysis currently performed within MDA\u2019s  Achievable Capabilities List to the U.S. Combatant Commanders, with  U.S. Strategic Command as the lead entity and, in the interim, require  MDA to obtain their concurrence of the Achievable Capabilities List prior  to its release. The Department of Defense (DOD) did not agree with our  recommendation. However, as evidenced by the discrepancy between  the Army\u2019s and MDA\u2019s requirements for the THAAD and AN/TPY-2  program, the difference between MDA\u2019s requirements and those of the  warfighter will continue to present substantial problems to DOD in  executing the missile defense mission, and we continue to believe that  our recommendation should be implemented."], "subsections": []}]}, {"section_title": "Appendix XI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, LaTonya Miller, Assistant  Director; Matthew Ambrose; Kristine Hassinger; Helena Johnson; Joe  Kirschbaum; Wiktor Niewiadomski; Steven Stern; Brian Tittle; Hai V. Tran;  Alyssa Weir; Tonya Woodbury; and Robin Wilson made key contributions  to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Missile Defense: Some Progress Delivering Capabilities, but Challenges  with Testing Transparency and Requirements Development Need to Be  Addressed. GAO-17-381. Washington, D.C.: May 2017.", "Missile Defense: Opportunities Exist to Reduce Acquisition Risk and  Improve Reporting on System Capabilities. Washington, D.C.: Mar. 2015.", "Missile Defense: Mixed Progress in Achieving Acquisition Goals and  Improving Accountability. GAO-14-351. Washington, D.C.: Apr. 2014.", "Missile Defense: Opportunity to Refocus on Strengthening Acquisition  Management. GAO-13-432. Washington, D.C.: Apr. 2013.", "Missile Defense: Opportunity Exists to Strengthen Acquisitions by  Reducing Concurrency. GAO-12-486. Washington, D.C.: Apr. 2012.", "Missile Defense: Actions Needed to Improve Transparency and  Accountability. GAO-11-372. Washington, D.C.: Mar. 2011.", "Defense Acquisitions: Missile Defense Transition Provides Opportunity to  Strengthen Acquisition Approach. GAO-10-311. Washington, D.C.: Feb.  2010 Defense Acquisitions: Production and Fielding of Missile Defense  Components Continue with Less Testing and Validation Than Planned.  GAO-09-338. Washington, D.C.: Mar. 2009 Defense Acquisitions: Progress Made in Fielding Missile Defense, but  Program is Short of Meeting Goals. GAO-08-448. Washington, D.C.: Mar.  2008 Defense Acquisitions: Missile Defense Acquisitions Strategy Generates  Results but Delivers Less at a Higher Cost. GAO-07-387. Washington,  D.C.: Mar. 2007 Defense Acquisitions: Missile Defense Agency Fields Initial Capability but  Falls Short of Original Goals. GAO-06-327. Washington, D.C.: Mar. 2006.", "Defense Acquisitions: Status of Ballistic Missile Defense Program in  2004. GAO-05-243. Washington, D.C.: Mar. 2005 Missile Defense: Actions Are Needed to Enhance Testing and  Accountability. GAO-04-409. Washington, D.C.: Apr. 2004."], "subsections": []}], "fastfact": ["The Missile Defense Agency is developing a system to track and destroy enemy missiles. In our annual review of this system, we found that, as in prior years, MDA has made progress developing, testing, and delivering some parts of this system but did not always complete its goals. For example, while MDA delivered some kinds of missiles to the military as planned, other missiles were delayed.", "We also found some of these assets are not delivered with information users need, like limitations about how they operate or how they were tested. Our six recommendations include actions MDA can take to better communicate this and other information."]}
{"id": "GAO-18-432T", "url": "https://www.gao.gov/products/GAO-18-432T", "title": "Social Security Administration: Continuing Leadership Focus Needed to Modernize How SSA Does Business", "published_date": "2018-03-07T00:00:00", "released_date": "2018-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SSA provides vital benefits and services that affect the lives of many Americans. In fiscal year 2017, it paid out nearly $1 trillion in retirement and disability benefits to 67 million beneficiaries, and an average of 420,000 people call or visit one of its 1,200 field offices each day.", "However, SSA has struggled to manage its disability workloads, maintain program integrity, and modernize its service delivery and information technology systems. GAO has issued a number of reports on these challenges, and placed SSA's disability programs on GAO's High Risk List, in part due to challenges with workloads and claims processing.", "GAO was asked to testify on challenges facing SSA. This statement summarizes ongoing SSA challenges described in SSA's strategic plan and past GAO work in three areas: 1) managing disability workloads and ensuring program integrity; 2) modernizing physical infrastructure and service delivery methods; and 3) modernizing information technology.", "Although GAO is not making recommendations in this statement, our prior work included recommendations to help SSA address these challenges, many of which SSA has agreed with and initiated actions on. SSA provided technical comments on a draft of this statement, which we incorporated, as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's prior work and Social Security Administration's (SSA) strategic plan for fiscal years 2018-2022 highlight significant demographic and technological challenges facing the agency. For example, SSA's workloads are increasing due to 80 million baby boomers entering their disability-prone and retirement years, and institutional knowledge and leadership at SSA will be depleted due to an expected 21,000 employees retiring by the end of fiscal year 2022. GAO's prior work has identified related management challenges and opportunities for SSA to further modernize and improve its disability programs, service delivery, and information technology (IT) systems.", "Managing disability workloads and program integrity. SSA has long struggled to process disability claims and, more recently, appeals of denied claims, in a timely manner. Consistent with our 2013 recommendation, SSA produced a broad vision for improving service delivery, including ensuring prompt and accurate disability decisions. However, SSA is still developing concrete plans to implement its vision. Although SSA has initiatives underway to improve appeals backlogs, GAO reported that some of SSA's appeals initiatives are either contingent on additional funding or have met with limited success when tried in the past. GAO's prior work also identified other challenges related to SSA's disability programs, and actions SSA could take, for example, to modernize disability criteria, prevent and recover overpayments, and manage fraud risks.", "Modernizing physical infrastructure and service delivery. Advances in technology have the potential to change how and where SSA delivers its services. For example, individuals can now apply for some disability benefits online rather than in person. However, GAO found that SSA did not have readily available data on problems customers had with online applications or why staff support was needed. Additionally, the agency had not established performance goals to determine whether new service delivery options, such as off-site kiosks, are succeeding. In addition, we found that SSA has not developed a long-term plan for its building space that, among other things, includes a strategy for downsizing offices to better reflect changes in service delivery. We recommended SSA improve building plans and do more to assess and monitor service delivery, with which SSA agreed.", "Modernizing information technology. SSA's legacy IT systems are increasingly difficult and expensive to maintain and GAO identified SSA's needed investment in infrastructure operations and maintenance as among the 10 largest expenditures at federal agencies in fiscal year 2015. GAO recommended SSA identify and plan to modernize or replace legacy systems, in accordance with forthcoming Office of Management and Budget guidance. SSA agreed, and reported that it is finalizing its Information Technology Modernization Plan.", "Continuing focus by SSA leadership is critical to addressing these broad and long-term challenges and effectively delivering benefits and services to the many Americans who depend on SSA programs."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here to discuss the significant management  challenges and structural issues currently facing the executive leadership  of the Social Security Administration (SSA).", "SSA is a vast enterprise responsible for providing benefits and services  that affect nearly every American at some point in their lives. In fiscal year  2017, SSA paid out nearly $1 trillion in Social Security retirement,  disability, and Supplemental Security Income benefits to 67 million  beneficiaries. While the services it provides are vitally important, SSA  faces significant demographic and technological challenges. For example,  as SSA noted in its 2018-2022 strategic plan and as we have previously  reported, SSA is experiencing increasing workloads due to 80 million  members of the baby boom generation entering their most disability- prone and retirement years. At the same time, SSA projects 21,000 of  its employees will retire by the end of fiscal year 2022, resulting in a loss  of institutional knowledge and impediments to succession management  and knowledge transfer. In addition, SSA noted that Americans are  increasingly relying on technology to access services while information  technology (IT) advances create opportunities for SSA to use  substantially different tools and approaches than it has in the past.", "We have issued a number of reports with recommendations addressing  shortcomings in how SSA has addressed these challenges. While SSA  has agreed with and taken action on many of our recommendations,  many others remain open, some of which we have suggested to SSA  should be given high priority. In addition, Social Security disability  programs are on our High Risk List due to persistent workload and other  challenges with processing disability claims. A common theme that cuts  across these issues is the need to modernize how SSA does business.  SSA has acknowledged the importance of modernization in its new strategic plan. The actions SSA leadership will need to take to modernize  the management of disability programs, facility planning and service  delivery, and information technology will require vision and sustained,  long-term attention.", "My testimony today summarizes the results from a number of our past  reports on SSA\u2019s operations and will focus on management challenges  and structural issues facing SSA in three key areas: 1) managing its  disability workloads and ensuring program integrity; 2) modernizing its  physical infrastructure and service delivery methods; and 3) modernizing  its information technology.", "In developing this testimony, we relied on reports that we have previously  issued. These reports, cited throughout this statement, include detailed  information on the scope and methodology for our reviews. The work on  which this statement is based was conducted in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform audits to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions.  We believe that the evidence obtained provided a reasonable basis for  our findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "SSA Programs and Functions", "paragraphs": ["The scope of SSA\u2019s operations and responsibilities is vast. One of SSA\u2019s  key responsibilities is to provide financial benefits to eligible individuals  through three benefit programs:", "Old-Age and Survivors Insurance (OASI)\u2014provides retirement  benefits to older individuals and their families and to survivors of  deceased workers.", "Disability Insurance (DI)\u2014provides benefits to eligible individuals who  have qualifying disabilities, and their eligible family members.", "Supplemental Security Income (SSI)\u2014provides income for aged,  blind, or disabled individuals with limited income and resources.", "In support of its mission, SSA maintains workers\u2019 earnings information  and in fiscal year 2017 posted over 279 million earnings items to workers\u2019  records. SSA also determines if claimants are eligible for benefits,  completing 10 million claims and more than 680,000 hearings decisions in  fiscal year 2017. SSA also maintains birth and death records and issues  Social Security Numbers. In fiscal year 2017, SSA issued almost 17  million new and replacement Social Security cards.", "Beyond administering its programs and core missions, SSA provides key  administrative support to the Medicare program, partners with the  Department of Homeland Security in verifying employment eligibility for  new hires, and assists with the administration of other programs, such as  the Supplemental Nutrition Assistance Program and programs  administered by the Railroad Retirement Board.", "SSA\u2019s workforce is large, as is its physical footprint. About 62,000 federal  employees and 15,000 state employees administer SSA programs in  about 1,500 facilities nationwide. These facilities include regional offices,  more than 1,200 field offices, teleservice centers, processing centers,  hearings offices, the Appeals Council offices, and SSA\u2019s headquarters in  Baltimore, Maryland.", "Customers can access SSA services in-person at an SSA field office; by  phone with field office staff or through a National 800 number; or online.  In 2018, SSA reported that, each day, about 170,000 people visit and  250,000 call one of its field offices for various reasons, such as to file  claims, ask questions, or update their information. SSA also reported that  its national 800 number handles over 30 million calls each year."], "subsections": []}]}, {"section_title": "Challenges to Managing SSA\u2019s Disability Workloads and Ensuring Program Integrity", "paragraphs": ["Complex eligibility rules and multiple handoffs and potential layers of  review make SSA\u2019s disability programs complicated and costly to  administer. Program complexity arguably has made it challenging for  SSA to make significant advances in efficiently managing high disability  workloads, ensuring timely and consistent disability decisions, preventing  benefit overpayments, and mitigating fraud risks.", "Our recent work highlighted some of the challenges SSA faces in making  disability decisions that are timely, consistent and based on current  concepts of disability, while also preventing and deterring fraud and  ensuring that only beneficiaries who are entitled to benefits receive them.  These findings underscore the need for SSA leadership to approach  these challenges strategically and follow through with rigorous plans in  order to achieve significant improvements in its disability programs."], "subsections": [{"section_title": "Making Timely Disability Decisions", "paragraphs": ["In recent years, SSA made noteworthy strides in reducing its backlog of  initial disability claims, but delays in deciding disability appeals continue  to worsen. SSA has reduced the number of pending claims each fiscal  year since 2010\u2014from about 842,000 in fiscal year 2010 to about  523,000 in fiscal year 2017. However, the number of appealed claims  pending at the end of 2017 was approximately 1.1 million compared to  about 700,000 in fiscal year 2010, and the average time needed to  complete appeals increased from 426 days to 605 days during that same  time.", "In our 2017 High Risk Update, we reported that SSA had taken some  steps to address its growing appeals backlog, such as hiring additional  administrative law judges (ALJ). SSA also published a plan in 2016 to  improve appeals timeliness that called for further hiring, improving  business processes, sharing workloads across offices, and making better  use of IT resources, such as increasing the number of video hearings.  However, SSA\u2019s Office of Inspector General (OIG) found that many of the  initiatives in SSA\u2019s plan duplicated past efforts that had met with limited  success. SSA also noted that some efforts, such as additional hiring, will  depend on resource availability. We also reported that SSA is still  developing plans to implement its broad vision for service delivery, Vision  2025, which addresses SSA\u2019s capacity to provide timely initial claims and  appeals decisions. To address its appeals backlog and position itself to  effectively provide timely disability decisions at all levels, SSA leadership  will need to continue to operationalize Vision 2025, plan and implement  systems support for initial claims, and implement and monitor the success  of its appeals initiatives."], "subsections": []}, {"section_title": "Modernizing Disability Criteria", "paragraphs": ["While SSA has made significant progress in updating the outdated  occupational and medical criteria it uses to make disability eligibility  decisions, some of these efforts are multi-year and will require the  continued focus of top leadership. Most significantly, SSA has made  strides updating a decades old Dictionary of Occupational Titles with a  new Occupational Information System (OIS), which contains occupational  data to make disability determinations. SSA expects to have OIS in  place by 2020, and currently plans to update OIS information every 5  years thereafter. Regarding the medical criteria used to make disability  decisions, we reported in our 2017 high risk update that SSA had  published final rules for nearly all of the 14 body systems for adults and  was on track to update criteria for all body systems every 3 to 5 years.  While SSA has addressed all our recommendations in this area, other  opportunities exist for updating aspects of SSA\u2019s disability decision  process. For example, SSA officials have acknowledged that the  vocational rules it uses to determine eligibility may no longer accurately  reflect the nature and scope of work available in the national economy  and stated that the agency is conducting a review to determine if changes  to vocational factors are necessary. Agency leadership will play a key role  in ensuring SSA pursues these opportunities to further modernize its  criteria and devotes appropriate resources to continuously updating its  occupational and medical criteria on a timely basis."], "subsections": []}, {"section_title": "Enhancing the Accuracy and Consistency of Disability Decisions", "paragraphs": ["Our recent work analyzed variation in the rate that different ALJs grant  disability benefits when claimants appeal an earlier denial, and found that  SSA\u2019s efforts to monitor the consistency of appeal hearing decisions are  incomplete. In 2017 after analyzing data on hearings decisions, we  estimated that the allowance (approval) rate could vary by as much as 46  percentage points between different judges with respect to a typical  claim. SSA conducts various reviews to monitor the accuracy and  consistency of ALJ decisions, but SSA has not systematically evaluated  whether its reviews are effective. SSA has also struggled to sustain all of  its quality review efforts, in part, because SSA reassigned staff to help  expedite claims decisions. We also reported on shortcomings in SSA\u2019s  Compassionate Allowance initiative (CAL)\u2014which fast tracks disability  claims for severe medical conditions that are most likely to be approved\u2014 that could prevent claims from being consistently and accurately identified  for expedited processing. These shortcomings include lacking a  systematic approach and clear criteria for designating medical conditions  for inclusion in CAL.", "With about one in three beneficiaries being granted benefits at SSA\u2019s  appeals hearing level, it remains crucial that SSA leadership commit to  ensuring appeal applications receive fair and consistent treatment,  including assessing persistent and unexplained variations in ALJ  allowance rates. Ensuring oversight and scrutiny of SSA\u2019s CAL initiative is  also essential to avoid potential equity issues with regards to SSA\u2019s most  vulnerable claimants."], "subsections": []}, {"section_title": "Preventing and Collecting Overpayments", "paragraphs": ["Benefit overpayments represent avoidable losses to the DI trust fund and,  for the individual who may have incurred an overpayment despite  conscientiously reporting wages, a financial hardship when required to  repay and a disincentive to pursue work. In fiscal year 2015, the most  recent year for which we have data, SSA identified $1.2 billion in new  overpayments in its DI program, and had $6.3 billion in total overpayment  debt outstanding. In 2015, we reported that the SSA process for  beneficiaries to report earnings (and consequently inform whether they  remain eligible for DI benefits) had a number of weaknesses, including  staff not following established procedures, limited oversight, and a lack of  automated reporting options for beneficiaries, such as an automated  telephone system or smart phone app. SSA has made progress  expanding electronic work reporting, but these efforts will not eliminate  vulnerabilities caused by SSA\u2019s multi-faceted processes for receiving and  handling work reports, and will require additional management focus to  shore up internal controls and avoid unnecessary overpayments.", "Once overpayments do occur, SSA will endeavor to recover those  overpayments. However, we recently found that the collection of  overpayment debts warrants more attention than SSA has demonstrated  to date. In 2016, we reported that SSA\u2019s largest source of debt recovery  is withholding a portion of beneficiaries\u2019 monthly benefits payments.  However, we found that amounts withheld may not consistently reflect  individuals\u2019 ability to pay, and that many repayment plans could take  decades to complete. We recommended SSA improve oversight and  pursue additional debt recovery options\u2014recommendations that SSA has  yet to implement. Absent clear policies and oversight procedures for  establishing and reviewing withholding plans\u2014SSA\u2019s main tool for  recovering overpayments\u2014SSA cannot be sure that beneficiaries are  repaying debts in appropriate amounts within appropriate time frames.", "Further, by not implementing additional debt collection tools that would  speed up repayment, which can extend past the beneficiaries\u2019 lifetimes  and is diminished in value by inflation, SSA is missing opportunities to  restore debts owed to the DI trust fund."], "subsections": []}, {"section_title": "Strategic Approach to Managing Fraud Risks", "paragraphs": ["Although the extent of fraud in SSA\u2019s benefit programs is unknown, high- profile cases\u2014such as one case reported by SSA\u2019s OIG involving 70  individuals and $14 million in fraudulent benefits\u2014underscore the  importance of continued vigilance on the part of SSA leadership in  managing fraud risks to prevent fraud. We reported in 2017 that SSA  established a new office responsible for coordinating antifraud programs  across the agency, and had taken steps to gather information on some  fraud risks. However, we also found that SSA had not fully assessed its  fraud risks, had not developed an overall antifraud strategy to align its  efforts with those risks, and did not have a complete set of metrics to  determine whether its antifraud efforts are effective. SSA has already  taken action on one of our recommendations by producing a fraud risk  assessment, which we will evaluate, and has stated its intent to take  action on our other recommendations. Nevertheless, leadership will be  essential for developing and implementing an antifraud strategy aligned  with the risk assessment and ensuring that SSA\u2019s efforts to prevent and  detect fraud are effective, thereby helping to safeguard the integrity of its  programs and its delivery of benefits to only eligible individuals."], "subsections": []}]}, {"section_title": "Challenges to Modernizing SSA\u2019s Physical Footprint and Service Delivery", "paragraphs": ["With one of the largest physical footprints of any federal agency, and in  light of rising facility costs, SSA may be able to achieve efficiencies by  reducing the size of its footprint and pursuing additional, cost effective  service delivery options. However, as we reported in 2013, rightsizing  SSA\u2019s physical infrastructure can be complex, politically charged, and  costly; expanding service delivery options is also challenging due to the  complexity of SSA\u2019s disability programs and the varying needs of SSA\u2019s  customers. Our recent review of SSA\u2019s plans to reconfigure its physical  footprint and expand how it delivers services confirmed a number of  challenges SSA must navigate. It also highlighted the importance of  approaching these challenges strategically and systematically, through  strong leadership that guides robust planning, data collection, and  assessment efforts."], "subsections": [{"section_title": "Reconfiguring SSA\u2019s Physical Footprint", "paragraphs": ["In our 2017 work, we identified several challenges that could hinder  SSA\u2019s ability to readily reconfigure its footprint, align it with evolving  needs and potentially achieve desirable cost savings. For example, we  found that despite progress reducing its square footage and the number  of occupied buildings, SSA\u2019s inflation-adjusted rental costs have  remained steady. SSA\u2019s ability to further reduce or enlarge its physical  space is constrained by rental markets, and by union and community  concerns. According to SSA officials, high rents, limited building stock  and complicated federal leasing processes present difficulties and  community needs and union concerns may further complicate relocating  offices. We also found that, even though SSA is expanding its remote  delivery of services\u2014online and through new technologies\u2014overall  demand for field office services has not decreased, although demand  varied greatly across SSA\u2019s offices.", "Expansion of online service\u2014such as the SSI application, which became  available online in 2017\u2014present opportunities for SSA to further reduce  or reconfigure its physical footprint. However SSA may miss those  opportunities because we found that SSA had not fully integrated its  strategic planning and facility planning, despite leading practices that  indicate facility plans should align with an agency\u2019s strategic goals and  objectives. We recommended that SSA develop a long-term facility plan  that explicitly links to its strategic goals for service delivery, and includes  a strategy for consolidating or downsizing field offices in light of  increasing use of and geographic variation in remote service delivery.", "SSA agreed with our recommendation, and has since formed a Space  Acquisition Review Board to consider space reductions in light of  operational changes. SSA executive leadership will remain an important  factor in ensuring a concerted effort to align the agency\u2019s physical  footprint with its vision for future service delivery."], "subsections": []}, {"section_title": "Expanding Remote Service Delivery", "paragraphs": ["Our recent work also found that while the complexity of SSA\u2019s programs  can make it challenging for customers to use online services, the agency  lacked data to identify and address challenges with online applications.  The online disability applications in particular can be confusing and  challenging for customers to complete, according to many SSA managers  and staff we interviewed. Applications that are submitted online often  require follow-up contacts with applicants to obtain missing information,  according to SSA front-line staff. However, while SSA has taken steps to  make its online services more user-friendly, such as adding a click-to-chat  function for customers who run into problems, the agency does not  routinely collect data on the reasons for staff follow-ups with online  applicants. Such data are critical to SSA\u2019s efforts to further improve its  online applications and ultimately allow SSA to shift more of its business  online and further reconfigure its physical footprint.", "SSA would also benefit from establishing performance goals to help it  determine whether new service delivery options are succeeding. To help  address access challenges such as limited broadband internet in some  rural areas, SSA has rolled out self-service personal computers in field  offices, icons to link to SSA services on computers in public libraries and  video services accessed from senior centers. SSA also recently  completed a trial of customer service kiosks in seven SSA offices and  third-party locations. SSA staff in field offices reported some positive  impacts from these initiatives in terms of extending remote access to  certain populations, but also cited challenges, such as with customers\u2019  varying ability to use self-service computers. While SSA collects some  data on usage, it has not developed performance targets or goals that  could help it assess these initiatives\u2019 success or identify problems.", "We recommended that SSA develop a cost-effective approach to  identifying the most common issues with online benefit claims, and develop performance goals and collect performance data for alternate  service delivery approaches. SSA agreed with our recommendations, and  has since reported taking steps to implement them. As SSA continues to  expand its service delivery options, the agency\u2019s leadership will need to  encourage data driven approaches to ensure high quality and effective  alternative service delivery."], "subsections": []}]}, {"section_title": "Challenges to Modernizing Information Technology", "paragraphs": ["In 2016, we reported that SSA faces challenges with IT planning and  management, based on over a decade of prior work that identified  weaknesses in system development practices, IT governance,  requirements management, strategic planning, and other aspects of IT.  For example, in 2012, a GAO review reported that SSA did not have an  updated IT strategic plan to guide its efforts and its enterprise architecture  lacked important content that would have allowed the agency to more  effectively plan its IT investments. In addition, SSA and others have  reported substantial difficulty in the agency\u2019s ability to implement its  Disability Case Processing System\u2014intended to replace 54 disparate  systems used by state Disability Determination Services\u2014citing software  quality and poor system performance as issues. Consequently, in June  2016, the initiative was placed on the Office of Management and Budget\u2019s  (OMB) government-wide list of 10 high-priority programs requiring  attention. In February 2018, the SSA OIG completed an assessment of  an independent contractor\u2019s analysis of options for the system. The SSA  OIG concluded that several factors that limited the analysis supporting the  contractor\u2019s recommendation for SSA to continue investing in a new,  custom-build version of the Disability Case Processing System.", "Because OMB is no longer identifying high-priority programs, in  November 2017, we recommended OMB resume identifying these  programs. We also recommended OMB ensure that the Federal Chief Information Officer is directly involved in overseeing these high-priority  programs as past experience has shown that this oversight could improve  accountability and achieve positive results. OMB neither agreed nor  disagreed with our recommendations, and has not indicated whether it  will take action on these recommendations.", "Beyond the challenges identified in these previous reports, GAO\u2019s May  2016 report on federal agencies\u2019 IT legacy systems highlighted the  increasing costs that agencies, including SSA, may face as they continue  to operate and maintain at-risk legacy systems. We identified SSA\u2019s  investment in IT infrastructure operations and maintenance as being  among the 10 largest expenditures of federal agencies in fiscal year  2015. Further, we pointed out that legacy systems may become  increasingly expensive as agencies have to deal with issues such as  obsolete parts and unsupported hardware and software, and potentially  have to pay a premium to hire staff or engage contractors with the  knowledge to maintain outdated systems. For example, SSA reported re- hiring retired employees to maintain its systems that include many  programs written in Common Business Oriented Language (COBOL).  We highlighted a group of systems for determining retirement benefits  eligibility and amounts which were over 30 years old, with some written in  COBOL. We also noted that the agency had ongoing efforts to modernize  the systems but was experiencing cost and schedule challenges due to  the complexity of the legacy systems. We recommended that the agency  identify and plan to modernize or replace legacy systems, in accordance  with forthcoming OMB guidance. SSA agreed, and reported that it is  finalizing its Information Technology Modernization Plan.", "To its credit, SSA has made progress in consolidating and optimizing its  data centers. Specifically, in August 2017, we reported that, as of  February 2017, SSA was one of only two agencies that had met three of  the five data optimization targets established by OMB pursuant to  provisions referred to as the Federal Information Technology Acquisition  Reform Act. Meeting these targets increases SSA\u2019s ability to improve its  operational efficiency and achieve cost savings.", "In conclusion, many of the challenges facing SSA today are neither new  nor fleeting because they are inherent in the complexity and massive size  of SSA\u2019s programs and the scope of broad demographic and societal  changes over time. Our past work has pointed to the need for rigorous  solutions to these complex problems, such as strategic planning,  evaluation efforts, measuring for impact, and leveraging data\u2014solutions  that invariably require leadership attention and sustained focus.", "Chairman Johnson, Ranking Member Larson, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you or other members of the  Subcommittee may have."], "subsections": []}, {"section_title": "GAO Contact and Acknowledgements", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Elizabeth Curda, Director, Education Workforce and Income  Security Issues, at (202) 512-7215 or curdae@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this testimony statement. GAO staff who made  key contributions to this statement are Michele Grgich (Assistant  Director), Daniel Concepcion (Analyst-in-Charge), Susan Aschoff, Alex  Galuten, Jean McSween, Sheila McCoy, Lorin Obler, Sabine Paul,  Almeta Spencer, and Erin McLaughlin Villas."], "subsections": []}]}, {"section_title": "Appendix I: GAO Letter to SSA on Priority Recommendations to Implement", "paragraphs": ["Appendix I: GAO Letter to SSA on Priority  Recommendations to Implement  This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-144", "url": "https://www.gao.gov/products/GAO-19-144", "title": "Cybersecurity Workforce: Agencies Need to Accurately Categorize Positions to Effectively Identify Critical Staffing Needs", "published_date": "2019-03-12T00:00:00", "released_date": "2019-03-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["A key component of mitigating and responding to cyber threats is having a qualified, well-trained cybersecurity workforce. The act requires OPM and federal agencies to take several actions related to cybersecurity workforce planning. These actions include categorizing all IT, cybersecurity, and cyber-related positions using OPM personnel codes for specific work roles, and identifying critical staffing needs.", "The act contains a provision for GAO to analyze and monitor agencies' workforce planning. GAO's objectives were to (1) determine the extent to which federal agencies have assigned work roles for positions performing IT, cybersecurity, or cyber-related functions and (2) describe the steps federal agencies took to identify work roles of critical need. GAO administered a questionnaire to 24 agencies, analyzed coding data from personnel systems, and examined preliminary reports on critical needs. GAO selected six of the 24 agencies based on cybersecurity spending levels to determine the accuracy of codes assigned to a random sample of IT positions. GAO also interviewed relevant OPM and agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The 24 reviewed federal agencies generally assigned work roles to filled and vacant positions that performed information technology (IT), cybersecurity, or cyber-related functions as required by the Federal Cybersecurity Workforce Assessment Act of 2015 (the act). However, six of the 24 agencies reported that they had not completed assigning the associated work role codes to their vacant positions, although they were required to do so by April 2018. In addition, most agencies had likely miscategorized the work roles of many positions. Specifically, 22 of the 24 agencies assigned a \u201cnon-IT\u201d work role code to 15,779 (about 19 percent) of their IT positions within the 2210 occupational series. Further, the six agencies that GAO selected for additional review had assigned work role codes that were not consistent with the work roles and duties described in corresponding position descriptions for 63 of 120 positions within the 2210 occupational series that GAO examined (see figure).", "Human resource and IT officials from the 24 agencies generally reported that they had not completely or accurately categorized work roles for IT positions within the 2210 occupational series, in part, because they may have assigned the associated codes in error or had not completed validating the accuracy of the assigned codes. By assigning work roles that are inconsistent with the IT, cybersecurity, and cyber-related positions, the agencies are diminishing the reliability of the information they need to improve workforce planning.", "The act also required agencies to identify work roles of critical need by April 2019. To aid agencies with identifying their critical needs, the Office of Personnel Management (OPM) developed guidance and required agencies to provide a preliminary report by August 2018. The 24 agencies have begun to identify critical needs and submitted a preliminary report to OPM that identified information systems security manager, IT project manager, and systems security analyst as the top three work roles of critical need. Nevertheless, until agencies accurately categorize their positions, their ability to effectively identify critical staffing needs will be impaired."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 28 recommendations to 22 agencies to review and assign the appropriate codes to their IT, cybersecurity, and cyber-related positions. Of the 22 agencies to which GAO made recommendations, 20 agreed with the recommendations, one partially agreed, and one did not agree with one of two recommendations. GAO continues to believe that all of the recommendations are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["The security of federal information systems and data is critical to the  nation\u2019s safety, prosperity, and well-being. However, federal systems and  networks are inherently at risk because of their complexity, technological  diversity, and geographic dispersion. Further, threats to federal  information technology (IT) infrastructure continue to grow in number and  sophistication, posing a risk to the reliable functioning of our government.", "A key component of the government\u2019s ability to mitigate and respond to  cybersecurity threats is having a qualified, well-trained cybersecurity  workforce. Cybersecurity professionals can help to prevent or mitigate the  vulnerabilities that could allow malicious individuals and groups access to  federal IT systems. However, skills gaps in personnel who perform IT,  cybersecurity, or other cyber-related functions may impede the federal  government from protecting information systems and data that are vital to  the nation.", "We and other organizations have previously reported that federal  agencies face challenges in ensuring that they have an effective  cybersecurity workforce. In 1997, we designated the security of federal  information systems as a government-wide high-risk area and cited the  shortage of information security personnel with technical expertise  required to manage controls in these systems.", "In 2001, we added strategic human capital management to our high-risk  list, and reported that human capital shortfalls are eroding the ability of  some agencies to perform their core missions. In addition, in our 2017  update to the high-risk list, we reported that the federal government  continued to face challenges in addressing mission critical skills gaps,  including cybersecurity skills gaps. Further, in September 2018, we  reported that effective cybersecurity workforce management was a critical  action for addressing cybersecurity challenges facing the nation.", "To address the cybersecurity skills gaps within the executive branch of  the federal government, the Federal Cybersecurity Workforce  Assessment Act of 2015 (the act) requires the Office of Personnel  Management (OPM), the National Institute of Standards and Technology  (NIST), and other federal agencies to take several actions related to  cybersecurity workforce planning. Among other things, the act requires:", "OPM, in coordination with NIST, to develop a cybersecurity coding  structure that aligns with the work roles identified in the National  Initiative for Cybersecurity Education (NICE) Cybersecurity Workforce  Framework, for agencies to identify and categorize all federal IT,  cybersecurity, and cyber-related positions.", "Federal agencies to complete the assignment of work role codes to  their filled and vacant IT, cybersecurity, or cyber-related positions that  perform these functions.", "Federal agencies to identify their IT, cybersecurity, or cyber-related  work roles of critical need in the workforce and submit a report  describing these needs to OPM.", "The act also includes a provision for us to review the agencies\u2019  implementation of these requirements and report on our assessment to  Congress. Toward this end, in June 2018, we issued an initial report on  agencies\u2019 efforts to implement selected activities that the act required  them to complete by November 2017. In that report, we made 30  recommendations to 13 agencies to develop and submit their baseline  assessment reports and to fully address the required activities in OPM\u2019s  guidance in their procedures for assigning work role codes to their civilian  IT, cybersecurity, or cyber-related positions.", "This second report addresses agencies\u2019 efforts in implementing selected  additional activities required by the act. Specifically, our objectives for this  report were to (1) determine the extent to which federal agencies have  assigned work role codes to positions performing IT, cybersecurity, or  cyber-related functions and (2) describe the steps federal agencies took  to identify work roles of critical need. The scope of our review included  the 24 major departments and agencies covered by the Chief Financial  Officers (CFO) Act of 1990.", "To address our objectives, we administered a questionnaire to the 24  CFO Act agencies to obtain information on their efforts in assigning work  role codes to positions performing IT, cybersecurity, or cyber-related  functions, and in identifying work roles of critical need. We reviewed and  analyzed the agencies\u2019 responses to the questionnaire in comparison to  the act\u2019s requirements, OPM guidance, and the NICE Cybersecurity  Workforce Framework (framework). We also obtained, reviewed, and  analyzed reports and other documents supporting questionnaire  responses to assess whether agencies assigned codes in accordance  with OPM\u2019s coding guidance.", "Further, to analyze the extent to which federal agencies have assigned  work role codes to positions performing IT, cybersecurity, or cyber-related functions, we obtained workforce data for the 24 agencies from OPM\u2019s  Enterprise Human Resources Integration system. We reviewed this  collection of data to determine its completeness and to determine the  number of positions in the 2210 IT management occupational series to  which the 24 agencies had assigned the code of \u201c000\u201d as of May 2018.  We reviewed positions from the 2210 IT management series because,  based on the definition of the series, these positions are most likely to  perform IT, cybersecurity, or cyber-related functions.", "We then identified a subset of the 24 agencies and performed an  additional review of these agencies\u2019 work role coding efforts. We selected  these agencies based on their total cybersecurity spending for fiscal year  2016, as reported by the Office of Management and Budget (OMB) in its  Federal Information Security Modernization Act annual report. We  sorted the 24 agencies\u2019 IT cybersecurity spending from highest to lowest  and then divided the agencies into three equal groups of high, medium,  and low cybersecurity spending. We then selected the top two agencies  from each group. Based on these factors, we selected six agencies: the  (1) Department of Defense (DOD), (2) Department of Homeland Security  (DHS), (3) Department of State (State), (4) National Aeronautics and  Space Administration (NASA), (5) Environmental Protection Agency  (EPA), and (6) General Services Administration (GSA).", "We randomly selected a sample of 20 positions from each of the six  selected agencies (120 total positions) within the 2210 IT management  occupational series. We also selected a second nonstatistical sample of  12 positions for each of the six agencies (72 total positions) from the 2210  IT management occupational series based on pairs of positions that had  identical position titles, occupational series, and sub-agencies, but for  which the agencies had assigned different work role codes for the  positions. For the selected positions, we reviewed the work role coding  data from the agencies\u2019 human resources systems and compared them to  the duties described in the corresponding position descriptions to  determine whether agencies had assigned work role codes that were  consistent with the duties described in the position descriptions.", "To address our second objective, we evaluated OPM\u2019s and agencies\u2019  actions to identify IT, cybersecurity, or cyber-related work roles of critical  need. To do this, we obtained and analyzed OPM\u2019s progress report to  Congress and its guidance for identifying critical needs by comparing the  contents of these documents to the act\u2019s requirements. We also reviewed  any available documentation from the 24 agencies on their progress in  identifying critical needs, such as project plans or preliminary critical  needs reports. We supplemented our analysis with interviews of the  agencies\u2019 human capital and IT officials regarding their progress in  assigning work role codes and identifying critical needs. Appendix I  provides a full description of our objectives, scope, and methodology.", "We conducted this performance audit from February 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies and our nation\u2019s critical infrastructures\u2014such as  energy, transportation systems, communications, and financial services\u2014 are dependent on computerized (cyber) information systems and  electronic data to carry out operations and to process, maintain, and  report essential information. The information systems and networks that  support federal operations are highly complex and dynamic,  technologically diverse, and often geographically dispersed. This  complexity increases the difficulty in identifying, managing, and protecting  the myriad of operating systems, applications, and devices comprising the  systems and networks.", "A resilient, well-trained, and dedicated cybersecurity workforce is  essential to protecting federal IT systems. Nevertheless, OMB and our  prior reports have pointed out that the federal government and private  industry face a persistent shortage of cybersecurity and IT professionals  to implement and oversee information security protections to combat  cyber threats.", "As we noted in our prior report, the RAND Corporation and the  Partnership for Public Service have reported on a nationwide shortage of  cybersecurity experts in the federal government. According to these  reports, the existing shortage of cybersecurity professionals makes  securing the nation\u2019s networks more challenging and may leave federal IT  systems vulnerable to malicious attacks. The persistent shortage of  cyber-related workers has given rise to the identification and assessment  of the federal cybersecurity workforce across agencies so that efforts to  increase the number of those workers can be applied in the most efficient  and accurate manner."], "subsections": [{"section_title": "The NICE Framework and OPM Coding Structure Describe Federal Cybersecurity Work Roles", "paragraphs": ["NIST coordinates the National Initiative for Cybersecurity Education  (NICE) partnership among government, academia, and the private sector.  The initiative\u2019s goal is to improve cybersecurity education, awareness,  training, and workforce development in an effort to increase the number  of skilled cybersecurity professionals.", "In August 2017, NIST revised and published the NICE Cybersecurity  Workforce Framework (framework). The framework\u2019s purpose is to help  the federal government better understand the breadth of cybersecurity  work by describing IT, cybersecurity, and cyber-related work roles  associated with the categories and specialty areas that make up  cybersecurity work. The framework organizes IT, cybersecurity, and  cyber-related job functions into categories, representing high-level  groupings of cybersecurity functions; and into specialty areas,  representing areas of concentrated work or functions.", "Figure 1 identifies the seven categories and the 33 specialty areas in the  NICE framework.", "In addition to categories and specialty areas, the NICE framework  introduced the concept of work roles. Work roles provide a more detailed  description of the roles and responsibilities of IT, cybersecurity, and  cyber-related job functions than do the category and specialty area  components of the framework. The framework defines one or more work  roles within each specialty area. For example, as depicted in figure 2, the  framework defines 11 work roles within the seven specialty areas of the  \u201cSecurely Provision\u201d category. In total, the framework defines 52 work  roles across the 33 specialty areas.", "The NICE framework work roles include, among others, the Technical  Support Specialist, IT Project Manager, and Software Developer. The  framework identifies these IT, cybersecurity, and cyber-related work roles  as essential functions. For example, a Technical Support Specialist may  have a role in identifying the occurrence of a cybersecurity event, an IT  Project Manager may need to manage cybersecurity risk to systems, and  a Software Developer may need to implement appropriate cybersecurity  safeguards.", "In October 2017, OPM updated the federal cybersecurity coding structure  to incorporate the work roles identified in the NICE framework. The  coding structure assigned a unique 3-digit cybersecurity code to each  work role, which supplanted the prior coding structure\u2019s 2-digit codes.  According to OPM, the coding of federal positions with these specific 3- digit work role codes is intended to enhance agencies\u2019 ability to identify  critical IT, cybersecurity, and cyber-related workforce needs, recruit and  hire employees with needed skills, and provide appropriate training and  development opportunities to cybersecurity employees. Appendix II  provides a summary of the IT, cybersecurity, and cyber-related work roles  and corresponding OPM codes."], "subsections": []}, {"section_title": "Federal Cybersecurity Workforce Assessment Act of 2015 Establishes Workforce Planning Requirements", "paragraphs": ["In 2015, Congress and the President enacted the Federal Cybersecurity  Workforce Assessment Act, which required OPM, NIST, and other federal  agencies to undertake a number of cybersecurity workforce-planning  activities. The act required these agencies to complete the activities  within specified time frames. We addressed the first six activities in our  prior report we issued in June 2018, and addressed the subsequent  activities 7 through 10 in this report.", "Among the required cybersecurity workforce-planning activities are the  following 10 that we selected for our review.  1.  OPM, in coordination with NIST, was to develop a cybersecurity  coding structure that aligns with the work roles identified in the NICE  Cybersecurity Workforce Framework. (Due June 2016)  2.  OPM was to establish procedures to implement a cybersecurity  coding structure to identify all federal civilian positions that require the  performance of IT, cybersecurity, or other cyber-related functions.  (Due September 2016)  3.  OPM was to submit a report to Congress on the progress that  agencies made in identifying and assigning codes to their positions  that perform IT, cybersecurity, or cyber-related functions. (Due June  2016)  4.  Each federal agency was to submit a report to Congress on its  baseline assessment and on the extent to which its employees who  perform IT, cybersecurity, or cyber-related functions held  certifications. (Due December 2016)  5.  Each federal agency was to establish procedures to identify all filled  and vacant IT, cybersecurity, or cyber-related positions and assign the  appropriate code to each position. (Due April 2017 for civilian  positions)  6.  The Department of Defense (DOD) was to establish procedures to  implement the cybersecurity coding structure to identify all federal  noncivilian (i.e., military) positions. (Due June 2017)  7.  Each agency was to complete the assignment of work role codes to  its filled and vacant positions that perform IT, cybersecurity, or cyber- related functions. (Due April 2018 for civilian positions)  8.  OPM was to identify critical needs across federal agencies and submit  a progress report to Congress on the identification of critical needs.  (Due December 2017)  9.  OPM was to provide federal agencies with timely guidance for  identifying IT, cybersecurity, or cyber-related work roles of critical  need, including work roles with acute and emerging skill shortages.  (The act did not specify a due date for this requirement).  10. Federal agencies were to identify their IT, cybersecurity, or cyber- related work roles of critical need in the workforce and submit a report  describing these needs to OPM. (Due April 2019)"], "subsections": []}, {"section_title": "Prior GAO Report Examined Agencies\u2019 Implementation of the Initial Activities Required by the Federal Cybersecurity Workforce Assessment Act of 2015", "paragraphs": ["In June 2018, we reported on federal agencies\u2019 implementation of the first  six of the 10 selected activities required by the Federal Cybersecurity  Workforce Assessment Act. Specifically, we reported that, in November  2016, OPM, in coordination with NIST, had issued a cybersecurity coding  structure that aligned with the NICE framework work roles (activity 1).  Also, these two agencies developed procedures for assigning codes to  federal civilian IT, cybersecurity, or cyber-related positions in January  2017 (activity 2). We noted that OPM had issued the cybersecurity coding  structure and procedures later than the act\u2019s deadlines because it was  working with NIST to align the structure and procedures with the draft  version of the NICE Cybersecurity Workforce Framework, which NIST  issued later than planned. Regarding activity 3, we noted that OPM had  submitted a report to Congress in July 2016 on the agencies\u2019 progress in  implementing the act\u2019s required activities, as well as OPM\u2019s efforts to  develop a coding structure and government-wide coding procedures.", "We also reported that 21 of the 24 agencies had submitted baseline  assessment reports identifying the extent to which their IT, cybersecurity,  or cyber-related employees held professional certifications (activity 4).  However, the three other agencies had not submitted such reports. In  addition, four agencies did not include all reportable information in their  reports, such as the extent to which personnel without certifications were  ready to obtain them, or strategies for mitigating any gaps, as required by  the act. We made 10 recommendations to these seven agencies to  develop and submit baseline assessment reports, including all reportable  information, to the congressional committees. As of February 2019, none  of the seven agencies had implemented any of the 10 recommendations  relating to the baseline assessment reports.", "Further, we reported that 23 of the 24 agencies had established  procedures for assigning the appropriate work role codes to civilian  positions that perform IT, cybersecurity, or cyber-related functions  (activities 5 and 6 above), as required by the act. One agency had not  established such procedures.", "Further, of the 23 agencies that had established procedures, 6 agencies  did not address one or more of seven activities required by OPM in their  procedures. For example, the agencies\u2019 procedures did not include  activities to review all filled and vacant positions and annotate reviewed  position descriptions with the appropriate work role code. In addition,  DOD had not established procedures for identifying and assigning work  role codes to noncivilian (i.e., military) positions.", "Our June 2018 report included 20 recommendations to eight agencies to  establish or update their procedures to fully address the required activities  in OPM\u2019s guidance. Subsequent to the report, the eight agencies  implemented the 20 recommendations related to establishing or  improving agencies\u2019 coding procedures to address the required OPM  activities. Specifically:", "The Department of Energy (Energy) established coding procedures  that addressed the seven OPM required activities.", "The Department of Education (Education), Department of Labor  (Labor), NASA, National Science Foundation (NSF), Nuclear  Regulatory Commission (NRC), and United States Agency for  International Development (USAID) revised their procedures to  ensure that the procedures addressed OPM\u2019s required activities.", "DOD established a consolidated government-wide and internal  procedure for identifying and assigning work role codes to noncivilian  (i.e., military) positions.", "Table 1 summarizes the status of agencies\u2019 implementation of the first six  selected activities required by the act as of October 2018. We initially  reported on the status of these activities in our June 2018 report."], "subsections": []}]}, {"section_title": "Agencies Generally Categorized Positions, but Did Not Ensure the Reliability of Their Efforts", "paragraphs": ["Regarding the selected activity for agencies to complete the assignment  of work role codes to filled and vacant positions that perform IT,  cybersecurity, or cyber-related functions (activity 7) as set forth in the  Federal Cybersecurity Workforce Assessment Act of 2015, the 24  agencies had generally assigned work roles code to their positions.  However, several agencies had not completed assigning codes to their  vacant positions. In addition, most agencies had likely miscategorized the  work roles of many positions. For example, in these instances, the  agencies had assigned a code designated for positions that do not  perform IT, cybersecurity, or cyber-related functions to positions that most  likely perform these functions.", "As indicated in table 2, federal agencies\u2019 efforts to assign work role codes  to filled and vacant positions that performed IT, cybersecurity, or cyber- related functions were ongoing as of October 2018."], "subsections": [{"section_title": "Agencies Had Generally Assigned Work Role Codes to Positions, but Six Had Not Completely Coded Vacant Positions", "paragraphs": ["To assist agencies with meeting their requirements under the Federal  Cybersecurity Workforce Assessment Act of 2015, OPM issued guidance  that directed agencies to identify filled and vacant positions with IT,  cybersecurity, or cyber-related functions and assign work role codes to  those positions using the Federal Cybersecurity Coding Structure by April  2018. As previously mentioned, this coding structure designates a  unique 3-digit code for each work role defined in the NICE framework.  According to OPM\u2019s guidance, agencies could assign up to three work  role codes to each position, and should assign the code of \u201c000\u201d only to  positions that did not perform IT, cybersecurity, or cyber-related functions.", "The 24 agencies generally had assigned work role codes to their filled  workforce positions that performed IT, cybersecurity, or cyber-related  functions. Specifically, 22 of the agencies responded to our questionnaire  that, as of April 2018, they had completed assigning work role codes to  those filled positions. In addition, data from the OPM Enterprise Human Resources Integration system showed that, as of May 2018, the 24  agencies had collectively assigned work role codes or a \u201c000\u201d code to  over 99 percent of the filled positions in their entire workforce.", "In addition, 18 of the 24 agencies reported they had identified and  assigned codes to their vacant IT, cybersecurity, or cyber-related  positions by April 2018. However, the remaining six agencies reported  that they were not able to identify or assign codes to all of their vacant  positions. For example, four agencies\u2014DOD, EPA, GSA, and NASA\u2014 responded to our questionnaire that they did not identify and assign  codes to vacant IT, cybersecurity, or cyber-related positions.", "DOD reported that, while some components assigned codes to vacant  positions, the department did not have an enterprise-wide capability to  assign codes to vacant positions and had not modified the systems to  enable the use of the 3-digit work role codes for vacant positions due  to time and funding constraints.", "EPA reported that it had assigned codes to vacant positions in April  2018, but it did not have a process for assigning codes to newly  created vacant positions.", "GSA human resources officials said that they assigned codes to  vacant positions that had been authorized and funded. However, they  did not code unfunded vacant positions because they did not  anticipate filling them. Agency officials noted that they, instead,  tracked unfunded vacant positions through staffing plans.", "NASA human resources and Office of the Chief Information Officer  officials said the agency did not identify and code vacant positions  because they did not track vacant positions.", "Further, the remaining two agencies\u2014Energy and Justice\u2014 stated that  they could not provide data regarding the number of vacant IT,  cybersecurity, or cyber-related positions that had been identified and  coded. For example, Justice said that information on vacant positions was  not available through its human resources system, and that it would need  to send a data call to components to obtain information on the number of  vacancies with an assigned work role code. However, according to  management division officials, the department would need additional time  to collect this information.", "OPM stated that it plans to issue additional guidance for tracking IT,  cybersecurity, and cyber-related vacancies by January 2019. OPM  officials said that agencies have focused on the assignment of codes to  filled positions and that tracking vacancies is challenging because  agencies vary in the way they track vacancies.", "By not completing their efforts to identify and code their vacant IT,  cybersecurity, and cyber-related positions, the six agencies lack important  information about the state of their workforces. As a result, these  agencies may be limited in their ability to identify work roles of critical  need and improve workforce planning."], "subsections": []}, {"section_title": "Most Agencies Had Likely Miscategorized the Work Roles of Many Positions", "paragraphs": ["The Federal Cybersecurity Workforce Assessment Act of 2015 required  agencies to assign the appropriate work role codes to each position with  cybersecurity, cyber-related, and IT functions, as defined in the NICE  framework. In addition, OPM guidance required agencies to assign work  role codes using the Federal Cybersecurity Coding Structure. As  previously mentioned, according to OPM\u2019s guidance, agencies could  assign up to three work role codes to each position. Agencies were to  assign a code of \u201c000\u201d only to positions that did not perform IT,  cybersecurity, or cyber-related functions. Further, the Standards for  Internal Control in the Federal Government states that agencies should  obtain relevant data from reliable sources that are complete and  consistent.", "However, the 24 agencies had likely miscategorized the work roles of  many positions. For example, the 24 agencies routinely assigned work  role codes to positions that were likely inconsistent with the positions\u2019  functions. Specifically, at least 22 of the 24 agencies assigned the code  \u201c000\u201d, which is designated for positions not performing IT, cybersecurity,  or cyber-related functions, to many positions that most likely performed  these functions.", "For example, OPM\u2019s Enterprise Human Resources Integration data from  May 2018 showed that 22 of the 24 agencies had assigned the \u201c000\u201d  code to between 5 and 86 percent of their positions in the 2210 IT  management occupational series. These positions are most likely to  perform IT, cybersecurity, or cyber-related functions, as defined by the  NICE framework. OPM and agency officials told us that they would expect  agencies to assign a NICE work role code to these positions, with a few  exceptions, such as in cases where a position\u2019s duties did not align with a  NICE work role code.", "Table 3 identifies the number and percentage of the 2210 IT management  positions that were assigned a \u201c000\u201d code by each of the 24 agencies,  according to OPM\u2019s Enterprise Human Resources Integration data, as of  May 2018. Collectively, the agencies assigned a \u201c000\u201d code to about  15,779 positions, or about 19 percent of the agencies\u2019 2210 IT  management positions.", "Agencies identified varying reasons for why they assigned the \u201c000\u201d code  to positions that most likely performed IT, cybersecurity, or cyber-related  functions. For example,", "Agency human resources and IT officials from 10 agencies said that  they may have assigned the \u201c000\u201d code in error (DOD, Education,  Energy, Justice, State, Department of Veterans Affairs (VA), NRC,  OPM, Small Business Administration (SBA), Social Security  Administration (SSA)).", "Agency human resources and IT officials from 13 agencies said they  had not completed the process to validate the accuracy of their codes  (Department of Agriculture (Agriculture), Education, Department of  Health and Human Services (HHS), DHS, Department of Housing and  Urban Development (HUD), Justice, Treasury, VA, EPA, GSA, NRC,  SBA, SSA).", "Agency human resources and IT officials from seven agencies said  that they assigned the \u201c000\u201d code to positions that did not perform  cybersecurity duties for a certain percentage of their time (Commerce,  Justice, Labor, Transportation, Treasury, GSA, and NASA).", "Agency human resources and IT officials from 12 agencies said that  OPM\u2019s guidance was not clear on whether the 2210 IT management  positions should be assigned a work role code and not be assigned  the \u201c000\u201d code (Agriculture, Energy, DHS, HUD, Interior, Labor, State,  VA, EPA, GSA, NASA, and SSA).", "Agency human resources and IT officials from three agencies stated  that they assigned the \u201c000\u201d code to IT positions when their positions  did not align with any of the work roles described in the NICE  framework (Interior, Treasury, and NRC).", "However, the work roles and duties described in the agencies\u2019 position  descriptions for the 2210 IT management positions that we reviewed  aligned with the work roles defined in the NICE framework. For example,  in examining the position descriptions that NRC officials said did not align  to work roles in the NICE framework, we were able to match duties  described in the position descriptions to work role tasks in the framework  and identify potential work role codes for those positions. Additionally,  Treasury officials said that positions in the area of cryptographic key  management did not align with the NICE framework; however, these  positions would likely align with the Communications Security Manager  (i.e., NICE code 723) work role, which covers cryptographic key  management.", "By assigning work role codes that are inconsistent with the IT,  cybersecurity, and cyber-related functions performed by positions, the  agencies in our review are diminishing the reliability of the information  they will need to identify their workforce roles of critical need."], "subsections": [{"section_title": "Agencies Assigned Work Role Codes to Sample Positions That Were Inconsistent with Duties Described In Corresponding Position Descriptions", "paragraphs": ["Similar to the work role data reported in OPM\u2019s Enterprise Human  Resources Integration system, the six agencies that we selected for  additional review had assigned work role codes to positions in their  human resources systems that were not consistent with the duties  described in their corresponding position descriptions. Of 120 randomly  selected 2210 IT management positions that we reviewed at the six  agencies, 63 were assigned work role codes that were inconsistent with  the duties described in their position descriptions.", "DHS assigned a Network Operational Specialist code (NICE code  441) to a position with duties associated with a Cyber Instructional  Curriculum Developer (NICE code 751).", "State assigned a Cyber Legal Advisor (NICE code 731) code to a  position with duties associated with a Program Manager (NICE code  801).", "Table 4 summarizes the consistency of work role coding in comparison to  corresponding position description text for the random sample of positions  for the six selected agencies.", "The six agencies had also assigned different work role codes for positions  that had identical position titles and similar functions described in  corresponding position descriptions for 46 of 72 positions that we  reviewed. For example,", "State had two positions associated with a position description that  described duties associated with the IT Program Auditor (NICE code  805). Although State assigned the \u201c805\u201d work role code to one  position, it assigned the \u201c000\u201d code to the other position.", "DOD had two positions associated with a position description that  described duties associated with the Information Systems Security  Manager work role (NICE code 722). However, DOD assigned the  \u201c000\u201d code to one position and assigned an invalid 2-digit code to the  other position.", "The six agencies provided multiple reasons for why they had assigned  codes that were not consistent with the work roles and duties described in  their corresponding position descriptions:", "DOD officials from the Office of the Chief Information Officer cited the  large number of positions that perform IT, cybersecurity, or cyber- related functions and the lack of one-to-one mapping of the NICE  framework work roles to positions as impediments.", "DHS human resources officials said that position descriptions may not  have been consistent with coding because the assignment of the work  role codes could be based on specific tasks that are described in  separate documents (e.g., job analyses or employee performance  plans) outside of the position descriptions.", "Information Resource Management officials at State said that their  system did not require all IT positions to have a work role code.  However, according to the officials, they had plans to create and  release a business rule in September 2018 to reduce data errors and  require the 2210 IT management positions series to have a work role  code.", "EPA officials in the Office of Environmental Information and the Office  of Human Resources stated that the first-line supervisor made the  final determination of each position\u2019s work role code. Officials stated  that first-line supervisors may have assigned different codes for  similar positions because they interpreted OPM guidance and work  roles differently.", "GSA human resources officials said they assigned \u201c000\u201d to IT  positions because they needed clarification and further interpretive  guidance from OPM. According to the officials, once GSA received  the guidance, the agency planned to conduct a review of IT positions  coded \u201c000.\u201d In addition, GSA had assigned the code \u201c000\u201d if the  position description did not include 25 percent or more of  cybersecurity functions.", "According to NASA officials from the Offices of the Chief Human  Capital Officer and Chief Information Officer, the agency miscoded a  few positions due to an administrative error that has since been  corrected. In addition, NASA officials said that they assigned the \u201c000\u201d  code to positions that did not perform cybersecurity duties for a  certain percentage of time (e.g., 25 percent or more of the time).", "Agencies did not provide further evidence that the positions we evaluated  as inconsistently coded were accurate. Moreover, in reviewing 87 position  descriptions provided by the six agencies\u2014DOD, DHS, State, EPA, GSA,  and NASA\u2014in no case did we find the assignment of the \u201c000\u201d work role  code to be consistent with the duties described.", "By assigning work role codes that are inconsistent with the IT,  cybersecurity, and cyber-related functions performed by positions, the  agencies in our review are diminishing the reliability of the information  they will need to identify their workforce roles of critical need."], "subsections": []}]}]}, {"section_title": "OPM and Agencies Had Taken Steps to Identify IT, Cybersecurity, and Cyber-related Work Roles of Critical Need", "paragraphs": ["As of November 2018, OPM and the 24 agencies had taken steps to  address the three selected activities that the Federal Cybersecurity  Workforce Assessment Act of 2015 required to identify IT, cybersecurity,  and cyber-related work roles of critical need. Specifically, OPM had  reported on agencies\u2019 progress in identifying critical needs (activity 8) and  had provided agencies with guidance for identifying IT, cybersecurity, and  cyber-related work roles of critical need (activity 9). In addition, the 24  agencies had submitted preliminary reports of their identified critical  needs to OPM, but their efforts to identify critical needs were ongoing  (activity 10).", "Table 5 presents the status of the agencies\u2019 efforts to identify work roles  of critical need, as of November 2018. Further, appendix III summarizes  the status of implementation of each of the 10 selected activities required  by the act."], "subsections": [{"section_title": "OPM Reported on Progress of Efforts and Provided Guidance for Agencies to Identify Cybersecurity Work Roles of Critical Need", "paragraphs": ["The Federal Cybersecurity Workforce Assessment Act of 2015 required  OPM, in consultation with DHS, to identify critical needs for the IT,  cybersecurity, or cyber-related workforce across federal agencies and  submit a progress report to Congress on the identification of IT,  cybersecurity, or cyber-related work roles of critical need by December  2017. The act also required OPM to provide timely guidance for  identifying IT, cybersecurity, or cyber-related work roles of critical need,  and including current acute and emerging skill shortages.", "In December 2017, OPM, in consultation with DHS, reported on the  progress of federal agencies\u2019 identification of IT, cybersecurity, and cyber- related work roles of critical need to Congress. In the report, OPM could  not identify critical needs across all federal agencies because agencies  were still in the process of assigning work role codes and identifying their  critical needs. As such, OPM reported that agencies were working toward  accurately completing their coding efforts by April 2018, as a foundation  for assessing the workforce and identifying needed cybersecurity skills.  OPM stated in the report that it would begin to identify and report IT,  cybersecurity, and cyber-related work roles of critical need following the  agencies\u2019 completion of their assessments and coding of the workforce.", "Further, in April 2018, OPM issued a memorandum to federal agencies\u2019  chief human capital officers that provided guidance on identifying IT,  cybersecurity, and cyber-related work roles. Specifically, this guidance  required agencies to report their greatest skill shortages, analyze the root  cause of the shortages, and provide action plans with targets and  measures for mitigating the critical skill shortages.", "In addition, in June 2018, to ensure that agencies were on track to meet  the requirements outlined in the act to submit their critical needs by April  2019, OPM required agencies to provide a preliminary report on work  roles of critical need and root causes by August 31, 2018. OPM  provided agencies with a template to collect critical information such as  critical needs and root causes. OPM guidance stated that these data  would provide the Congress with a government-wide perspective of  critical needs and insight into how to allocate future resources."], "subsections": []}, {"section_title": "Agencies Have Begun to Identify Cybersecurity Work Roles of Critical Need", "paragraphs": ["The act required agencies to identify IT, cybersecurity, or cyber-related  work roles of critical need and submit a report to OPM substantiating  these critical need designations by April 2019. OPM also required  agencies to submit a preliminary report, which included agencies\u2019  identified work roles of critical need and the associated root causes, by  August 31, 2018.", "The 24 agencies have begun to identify critical needs and submitted a  preliminary report of critical needs to OPM. Seventeen agencies  submitted their report by the August 31, 2018 deadline, and seven  submitted their report after the deadline in September 2018. Most  agencies\u2019 reports included the required critical needs and root causes.  Specifically,", "Twenty-four agencies\u2019 reports documented work roles of critical need.", "Twenty-two agencies\u2019 reports included the root cause of the critical  needs identified.", "Table 6 shows the status of the 24 agencies\u2019 submissions of preliminary  reports on cybersecurity work roles of critical need as of November 2018.", "The preliminary reports of critical needs for the 24 agencies showed that,  as of November 2018, IT project managers, information systems security  managers, and systems security analysts are among the top identified  work roles of critical need at these agencies. Twelve agencies reported  each of these work roles as a critical need. Agencies\u2019 preliminary reports  should provide a basis for agencies to develop strategies to address  shortages and skill gaps in their IT, cybersecurity, and cyber-related  workforces. For additional information on the top 12 reported work roles  of critical need, see appendix IV."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As required by the Federal Cybersecurity Workforce Assessment Act of  2015, the 24 agencies had generally categorized their workforce positions  that have IT, cybersecurity, or cyber-related functions; however, agencies  did not ensure the work role coding was reliable. For example, six of the  24 agencies had not completed assigning codes to their vacant positions.  In addition, 22 of the agencies had assigned a code designated for  positions not performing IT, cybersecurity, or cyber-related functions to  about 19 percent of filled IT management positions.", "Further, six selected agencies\u2014DOD, DHS, State, EPA, GSA, and  NASA\u2014had assigned work role codes to positions in their human  resources systems that were not consistent with the duties described in  the corresponding position descriptions. Until agencies accurately  categorize their positions, the agencies may not have reliable information  to form a basis for effectively examining their cybersecurity workforce,  improving workforce planning, and identifying their workforce roles of  critical need.", "Although OPM met its deadlines for reporting to congressional  committees on agencies\u2019 progress in identifying critical needs, the  progress report did not identify critical needs across all federal agencies  because agencies were still in the process of assigning work role codes  and identifying their critical needs. In addition, OPM has since provided  agencies with guidance that should assist them in their efforts to identify  critical needs by April 2019. Further, all of the 24 agencies have  submitted preliminary reports identifying work roles of critical need to  OPM. These efforts should assist these agencies in moving forward to  develop strategies to address shortages and skill gaps in their IT,  cybersecurity, and cyber-related workforces."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 28 recommendations to 22 agencies to take  steps to complete the appropriate assignment of codes to their positions  performing IT, cybersecurity, or cyber-related functions, in accordance  with the requirements of the Federal Cybersecurity Workforce  Assessment Act of 2015. Specifically:  The Secretary of Agriculture should take steps to review the assignment  of the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 1)", "The Secretary of Commerce should take steps to review the assignment  of the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 2)", "The Secretary of Defense should complete the identification and coding  of vacant positions in the department performing IT, cybersecurity, or  cyber-related functions. (Recommendation 3)", "The Secretary of Defense should take steps to review the assignment of  the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series, assign the appropriate NICE  framework work role codes, and assess the accuracy of position  descriptions. (Recommendation 4)", "The Secretary of Education should take steps to review the assignment of  the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 5)", "The Secretary of Energy should complete the identification and coding of  vacant positions in the department performing IT, cybersecurity, or cyber- related functions. (Recommendation 6)", "The Secretary of Energy should take steps to review the assignment of  the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 7)", "The Secretary of Health and Human Services should take steps to review  the assignment of the \u201c000\u201d code to any positions in the department in the  2210 IT management occupational series and assign the appropriate  NICE framework work role codes. (Recommendation 8)", "The Secretary of Homeland Security should take steps to review the  assignment of the \u201c000\u201d code to any positions in the department in the  2210 IT management occupational series, assign the appropriate NICE  framework work role codes, and assess the accuracy of position  descriptions. (Recommendation 9)", "The Secretary of Housing and Urban Development should take steps to  review the assignment of the \u201c000\u201d code to any positions in the  department in the 2210 IT management occupational series and assign  the appropriate NICE framework work role codes. (Recommendation 10)", "The Secretary of Interior should take steps to review the assignment of  the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 11)", "The Attorney General should complete the identification and coding of  vacant positions in the Department of Justice performing IT,  cybersecurity, or cyber-related functions in the Department of Justice.  (Recommendation 12)", "The Attorney General should take steps to review the assignment of the  \u201c000\u201d code to any positions in the Department of Justice in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 13)", "The Secretary of Labor should take steps to review the assignment of the  \u201c000\u201d code to any positions in the department in the 2210 IT management  occupational series and assign the appropriate NICE framework work role  codes. (Recommendation 14)", "The Secretary of State should take steps to review the assignment of the  \u201c000\u201d code to any positions in the department in the 2210 IT management  occupational series, assign the appropriate NICE framework work role  codes, and assess the accuracy of position descriptions.  (Recommendation 15)", "The Secretary of Transportation should take steps to review the  assignment of the \u201c000\u201d code to any positions in the department in the  2210 IT management occupational series and assign the appropriate  NICE framework work role codes. (Recommendation 16)", "The Secretary of Treasury should take steps to review the assignment of  the \u201c000\u201d code to any positions in the department in the 2210 IT  management occupational series and assign the appropriate NICE  framework work role codes. (Recommendation 17)", "The Secretary of Veterans Affairs should take steps review the  assignment of the \u201c000\u201d code to any positions in the department in the  2210 IT management occupational series and assign the appropriate  NICE work role codes. (Recommendation 18)", "The Administrator of the Environmental Protection Agency should  complete the identification and coding of vacant positions in the agency  performing IT, cybersecurity, or cyber-related functions.  (Recommendation 19)", "The Administrator of the Environmental Protection Agency should take  steps to review the assignment of the \u201c000\u201d code to any positions in the  agency in the 2210 IT management occupational series, assign the  appropriate NICE framework work role codes, and assess the accuracy of  position descriptions. (Recommendation 20)", "The Administrator of the General Services Administration should  complete the identification and coding of vacant positions at GSA  performing IT, cybersecurity, or cyber-related functions.  (Recommendation 21)", "The Administrator of the General Services Administration should take  steps to review the assignment of the \u201c000\u201d code to any positions at GSA  in the 2210 IT management occupational series and assign the  appropriate NICE framework work role codes, and assess the accuracy of  position descriptions. (Recommendation 22)", "The Administrator of the National Aeronautics and Space Administration  should complete the identification and coding of vacant positions at NASA  performing IT, cybersecurity, or cyber-related functions.  (Recommendation 23)", "The Administrator of the National Aeronautics and Space Administration  should take steps to review the assignment of the \u201c000\u201d code to any  positions at NASA in the 2210 IT management occupational series,  assign the appropriate NICE framework work role codes, and assess the  accuracy of position descriptions. (Recommendation 24)", "The Chairman of the Nuclear Regulatory Commission should take steps  to review the assignment of the \u201c000\u201d code to any positions at NRC in the  2210 IT management occupational series and assign the appropriate  NICE framework work role codes. (Recommendation 25)", "The Director of the Office of Personnel Management should take steps to  review the assignment of the \u201c000\u201d code to any positions at OPM in the  2210 IT management occupational series and assign the appropriate  NICE framework work role codes. (Recommendation 26)", "The Administrator of the Small Business Administration should take steps  to review the assignment of the \u201c000\u201d code to any positions at SBA in the  2210 IT management occupational series and assign the appropriate  NICE framework work role codes. (Recommendation 27)", "The Commissioner of the Social Security Administration should take  steps to review the assignment of the \u201c000\u201d code to any positions at SSA  in the 2210 IT management occupational series and assign the  appropriate NICE framework work role codes. (Recommendation 28)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the 24 CFO Act agencies and OMB  for their review and comment. Of the 22 agencies to which we made  recommendations, 20 agencies stated that they agreed with the  recommendations directed to them; one agency partially agreed with the  recommendation; and one agency agreed with one recommendation but  did not agree with one recommendation.", "In addition, of the two agencies to which we did not make  recommendations, one agency acknowledged its review of the report but  did not otherwise provide comments; the other agency provided technical  comments, which we incorporated into the report as appropriate. We also  received technical comments from three of the agencies to which we  made recommendations, and incorporated them into the report as  appropriate. Further, OMB responded that it had no comments on the  report.", "The following 20 agencies agreed with the recommendations in our  report:  In comments provided via email on February 19, 2019, the Director of  Strategic Planning, Policy, E-government and Audits in Agriculture\u2019s  Office of the Chief Information Officer stated that the department  concurred with the recommendation in our report.", "In written comments (reprinted in appendix V), Commerce agreed with  our recommendation and stated that it would ensure the proper  coding of 2210 IT management occupational series positions with the  appropriate NICE framework work role codes.", "In written comments (reprinted in appendix VI), DOD concurred with  our two recommendations. With regard to our recommendation that it  complete the identification and coding of vacant positions performing  IT, cybersecurity, or cyber-related functions, the department stated  that its longer-term initiative is to code positions, including vacant  positions, in DOD\u2019s manpower requirements systems to provide true  gap analysis capabilities. Regarding our recommendation that it  review the assignment of \u201c000\u201d codes, the department stated that it  would continue efforts to remediate erroneously coded positions.", "In written comments (reprinted in appendix VII), Education concurred  with our recommendation. The department stated that its Office of  Human Resources would continue to review the 2210 IT positions and  ensure the assignment of appropriate work role codes.", "In written comments (reprinted in appendix VIII), Energy concurred  with our two recommendations. Regarding our recommendation that it  complete the identification and coding of vacant IT, cybersecurity, and  cyber-related positions, the department stated that it had instituted  procedures to review and code vacant positions.", "Regarding our recommendation that it review the assignment of \u201c000\u201d  codes, the department said that it had ensured that all 2210 IT  management positions were assigned the appropriate work role codes  by April 2018. However, our review of the May 2018 data from OPM\u2019s  Enterprise Human Resources Integration System found that Energy  had assigned the \u201c000\u201d code to about 16 percent of its 2210 IT  management positions. Further, along with its comments on the draft  report, in January 2019, the department provided a report indicating  that Energy had not assigned the \u201c000\u201d work role code to its positions  in the 2210 IT management occupation series. We plan to take follow- up steps to verify the completeness of the department\u2019s actions.", "In addition to the aforementioned comments, Energy provided  technical comments, which we have incorporated into this report, as  appropriate.", "In written comments (reprint in appendix IX), HHS concurred with our  recommendation and outlined steps to identify, review, and make  necessary corrections to its 2210 IT management positions that were  coded as \u201c000.\u201d", "In written comments (reprinted in appendix X), DHS concurred with  our recommendation. The department stated that personnel in its  Office of the Chief Human Capital Officer had established processes  for periodically reviewing cybersecurity workforce coding data and for  collaborating with components to ensure positions with significant  responsibilities associated with the NICE framework\u2014including 2210  positions\u2014were properly coded.", "Nevertheless, DHS expressed concern with our finding that it had  miscategorized the work roles for some positions. The department  stated that its position descriptions are often written in a generalized  format, and are static, baseline, point-in-time documents. The  department added that, several positions may align with the same  position description, yet have specific duties and content captured in  other human capital documents such as employee performance  plans. Thus, some positions may have the same position description  yet require different cybersecurity codes.", "While we agree that position descriptions do not detail every possible  activity, according to OPM, the position descriptions should document  the major duties and responsibilities of a position. However, we  found that DHS did not always assign codes consistent with major  duties and responsibilities described in the position descriptions. For  example, the department assigned a Network Operational Specialist  code to a position with major duties associated with a Cyber  Instructional Curriculum Developer. The department did not provide  evidence that the positions we evaluated as inconsistently coded were  accurately coded. If work role codes are not consistent with position  descriptions, DHS may not have reliable information to form a basis  for effectively examining its cybersecurity workforce, improving  workforce planning, and identifying its workforce roles of critical need.", "The department also provided technical comments, which we have  incorporated into this report as appropriate.", "In comments provided via email on February 14, 2019, an audit  liaison officer in HUD\u2019s Office of the Chief Human Capital Officer  stated that the department agreed with our recommendation.", "In written comments (reprinted in appendix XI), Interior concurred with  our recommendation and stated that it had taken steps to change the  designation of the \u201c000\u201d code for the remaining personnel in the 2210  IT management occupational series.", "In comments provided via email on February 4, 2019, an audit liaison  specialist in Justice\u2019s Management Division stated that the  department concurred with the two recommendations.", "In written comments (reprinted in appendix XII), Labor concurred with  our recommendation and stated that it had taken steps to review and  code the department\u2019s 2210 IT positions using the NICE framework.", "In written comments (reprinted in appendix XIII), State concurred with  our recommendation. The department said  that it will conduct a  comprehensive review of its 2210 positions and include instructions to  change the coding of any such positions that have been assigned a  \u201c000\u201d code. In addition, the department stated that it had created a  new business rule in its human resources system to ensure that 2210  positions are assigned a primary work role code.", "In comments provided via email on December 20, 2018, an audit  relations analyst in Transportation\u2019s Office of the Secretary stated via  email that the department concurred with our findings and  recommendation.", "In written comments (reprinted in appendix XIV), VA concurred with  our recommendation and stated that the department had begun  conducting a review of its cyber coding.", "In written comments (reprinted in appendix XV), EPA concurred with  our two recommendations to the agency. With regard to our  recommendation that it complete the identification and coding of  vacant positions performing IT cybersecurity or cyber-related  functions, EPA stated that it would update its standard operating  procedures to include the requirement to code vacant positions during  the position classification process. Nevertheless, while including this  requirement in the procedures is an important step, it is imperative  that the agency implement the procedures to ensure that its vacant  positions are assigned appropriate work role codes.", "With regard to our recommendation that the agency review the  assignment of the \u201c000\u201d code to its 2210 IT management occupation  series, EPA stated that it would review all such positions and assign  the appropriate NICE framework codes to any positions that were  erroneously coded with the non-IT work role code.", "In comments provided via email on January 31, 2019, the Director of  the Human Capital Policy and Programs Division stated that GSA  agreed with our two recommendations. Also, in written comments  (reprinted in appendix XVI), GSA stated that, once it completes the  ongoing transition to a position-based human resources system, it will  explore options to include vacant positions in its new system. In  addition, GSA stated that it had completed an initial review of cyber  codes and indicated that it would update all coding by March 2019.", "In written comments (reprinted in appendix XVII), NRC agreed with  the findings in our draft report and said it had taken actions to address  our recommendation by assigning appropriate work role codes to IT  management positions previously assigned a \u201c000\u201d code.", "In written comments (reprinted in appendix XVIII), OPM concurred  with our recommendation to the agency. OPM stated that its human  resources and subject matter experts plan to assess the assignment  of \u201c000\u201d codes to personnel in the 2210 IT management occupation  series to help ensure accurate coding and appropriate application of  the NICE framework work role codes.", "In written comments (reprinted in appendix XIX), SBA concurred with  our recommendation. The agency stated that its Office of the Chief  Information Officer, Office of Human Resources Solutions, and  appropriate program offices would review the assignment of the \u201c000\u201d  code to any 2210 IT management occupation series positions and  assign the appropriate NICE framework role codes. The agency also  provided technical comments, which we have incorporated into this  report as appropriate.", "In written comments (reprinted in appendix XX), SSA agreed with our  recommendation and stated that it had taken steps to complete the  assignment of codes to the remaining 2210 IT management positions.", "In addition, one agency partially agreed with the recommendations in our  report. In comments provided via email on February 15, 2019, the Acting  Director for Treasury\u2019s Office of Human Capital Strategic Management  stated that the department partially concurred with our recommendation  that it review the assignment of \u201c000\u201d codes. According to the Acting  Director, the Deputy Assistant Secretary for Human Resources and Chief  Human Capital Officer had issued guidance to all Treasury Bureaus to  validate the coding of 2210 IT management positions.", "However, Treasury did not agree with our finding that positions in the  area of cryptographic key management could be aligned to the NICE  framework work role code for the Communications Security Manager. The  official stated that the cryptographic key management functions did not  completely align with any of the NICE framework work roles.", "We acknowledge that there may be positions that do not completely align  with work roles described in the NICE framework. However, according to  OPM, the framework currently covers a broad array of functions that  describe the majority of IT, cybersecurity, and cyber-related work. As  noted in our report, OPM officials told us that they would expect agencies  to assign a NICE work role code to 2210 IT management positions, with a  few exceptions, such as in cases where a position\u2019s duties did not align  with a NICE work role code. As such, we maintain that Treasury likely  miscategorized over 1,300 IT management positions by assigning a \u201c000\u201d  code to them, designating those positions as not performing IT,  cybersecurity, or cyber-related work and, thus, should review these  positions and assign the appropriate work role codes.", "Further, one agency did not agree with one of the two recommendations  directed to it. Specifically, in written comments (reproduced in appendix  XXI) NASA stated that it concurred with our recommendation to review  the assignment of \u201c000\u201d codes to 2210 IT management positions. In this  regard, the agency stated that it would complete a review of the  assignment of \u201c000\u201d codes to 2210 IT management positions and assign  the appropriate NICE framework work role codes.", "NASA did not concur with our other recommendation to complete the  identification and coding of vacant positions performing IT, cybersecurity,  or cyber-related functions. The agency stated that it had met the intention  of the recommendation with existing NASA processes that assign a code  at the time a vacancy is identified. However, the agency\u2019s workforce  planning process is decentralized and the agency previously noted that it  did not track vacancies.", "We maintain that the Federal Cybersecurity Workforce Assessment Act  requires agencies to identify and code vacant positions and that NASA  could compile necessary information from components to identify and  code vacant IT, cybersecurity, and cyber-related positions. These efforts  would provide important information about vacant IT, cybersecurity, and  cyber-related positions across the agency to enhance NASA\u2019s workforce  planning. Thus, we continue to believe that our recommendation is  warranted.", "In addition, of the two agencies to which we did not make  recommendations, one agency\u2014USAID\u2014provided a letter (reprinted in  appendix XXII) acknowledging its review of the report and the other  agency\u2014NSF\u2014provided technical comments, which we have  incorporated into the report as appropriate.", "We are sending copies of this report to interested congressional  committees, the Director of the Office of Management and Budget, the  secretaries and agency heads of the departments and agencies  addressed in this report, and other interested parties. In addition, this  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you have any questions regarding this report, please contact me at  (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix XXIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) determine the extent to which federal agencies  have assigned work role codes to positions performing information  technology (IT), cybersecurity, or cyber-related functions, and (2)  describe the steps federal agencies took to identify work roles of critical  need. The scope of our review included the 24 major departments and  agencies covered by the Chief Financial Officers (CFO) Act of 1990.", "To address our objectives, we reviewed the provisions of the Federal  Cybersecurity Workforce Assessment Act of 2015 and assessed the  workforce planning actions taken by the Office of Personnel Management  (OPM) and the other 23 CFO Act agencies against the selected four  activities required by the act.", "To evaluate the four selected activities of the act and objectives 1 and 2,  we reviewed the National Initiative for Cybersecurity Education (NICE)  Cybersecurity Workforce Framework and OPM\u2019s cybersecurity coding  structure and guidance. The guidance provided information on how  agencies should identify and assign work role codes to IT, cybersecurity,  and cyber-related positions. We also designed and administered a  questionnaire to each of the 24 agencies regarding their efforts to identify and assign work role codes to IT, cybersecurity, or cyber-related  positions, and identify work roles of critical need. In developing the  questionnaire, we took steps to ensure the accuracy and reliability of  responses. We pre-tested the questionnaire with OPM and the  Department of Homeland Security (DHS) officials to ensure that the  questions were clear, comprehensive, and unbiased, and to minimize the  burden the questionnaire placed on respondents. We also asked the chief  information officer and the chief human capital officer of each agency to  certify that they reviewed and validated the responses to the  questionnaires.", "We administered the questionnaire between June and October 2018. We  received completed questionnaires from each of the 24 agencies, for a  response rate of 100 percent. We examined the questionnaire results and  performed computer analyses to identify missing data, inconsistencies,  and other indications of error, and addressed such issues as necessary,  including through follow-up communications with the 24 agencies. We  reviewed and analyzed the agencies\u2019 responses to the questionnaire in  comparison to the act\u2019s requirements and OPM\u2019s and NICE\u2019s guidance.  We also obtained, reviewed, and analyzed supporting documentation of  questionnaire responses, such as reports of cybersecurity employment  code data, to assess whether agencies assigned work role codes in  accordance with the activities in OPM\u2019s coding guidance, by April 2018.", "Further, to analyze how federal agencies assigned work role codes to  positions performing IT, cybersecurity, or cyber-related functions, we  obtained IT, cybersecurity, or cyber-related workforce coding data for the  24 agencies from OPM\u2019s Enterprise Human Resources Integration  system. To assess the reliability of coding data from OPM\u2019s system, we  reviewed these data to determine its completeness, and asked officials  responsible for entering and reviewing the work role coding data a series  of questions about the accuracy and reliability of the data. In addition, we  examined the Enterprise Human Resources Integration IT, cybersecurity,  or cyber-related coding data to determine the number of positions the 24  agencies had assigned the \u201c000\u201d code to positions in the 2210 IT  management occupational series as of May 2018. We reviewed  positions from the 2210 IT management occupational series because  those positions are likely to perform IT, cybersecurity, or cyber-related  functions. In the report, we note some challenges with the reliability of  these data and are careful to present our data in line with these  limitations.", "We then identified a subset of the 24 agencies and performed an  additional review of these agencies\u2019 work role coding efforts. We selected  these agencies based on their total cybersecurity spending for fiscal year  2016, as reported by the Office of Management and Budget (OMB) in its  Federal Information Security Modernization Act annual report. We sorted  the 24 agencies\u2019 IT cybersecurity spending from highest to lowest and  then divided them into three equal groups of high, medium, and low. We  then selected the top two agencies from each group. Based on these  factors, we selected six agencies: the (1) Department of Defense (DOD),  (2) DHS, (3) Department of State (State), (4) National Aeronautics and  Space Administration (NASA), (5) Environmental Protection Agency  (EPA), and (6) General Services Administration (GSA).We performed an  additional review of the agencies\u2019 work role coding efforts. We did this by  evaluating the six selected agencies\u2019 coding processes against their  established procedures and OPM requirements. We also obtained and  reviewed coding data that included the assigned work role codes for  civilian employees from each agency\u2019s human resources system.", "To assess the reliability of coding data from the selected six agencies\u2019  systems, we reviewed related documentation such as the agencies\u2019  coding procedures, processing guides, personnel bulletins, and system  screen shots. We also conducted electronic testing for missing data,  duplicate data, or obvious errors. In addition, we asked officials  responsible for entering and reviewing the work role coding data a series  of questions about the accuracy and reliability of the data. For any  anomalies in the data, we followed up with the six selected agencies\u2019  offices of the chief information officer and chief human capital officer to  either understand or correct those anomalies. Further, we assessed the  reliability of data in terms of the extent to which codes were completely  assigned and reasonably accurate. In the report, we note some  challenges with the reliability of these data and are careful to present our  data in line with these limitations.", "We randomly selected a sample of 20 positions from each of the six  selected agencies (120 total positions) within the 2210 IT management  occupational series. We reviewed positions from the IT management  2210 series because those positions are likely to perform IT,  cybersecurity, or cyber-related functions. For the selected positions, we  requested position descriptions and reviewed whether the position work  role codes in the coding data were consistent with the corresponding  position description text. We also selected a second nonstatistical sample  of 12 positions for each of the six agencies (72 total positions) from the  2210 IT management occupational series based on pairs of positions that  had identical position titles, occupational series, and sub-agencies, but for  which the agencies had assigned different work role codes for the  positions. An analyst reviewed the work role coding data and compared  them to the duties described by the position descriptions to determine  whether they were consistent with the position duties. A second analyst  verified whether or not the position\u2019s work role code was consistent with  the position description. A third analyst adjudicated cases in which the  first and second analysts\u2019 evaluations did not match.", "Lastly, to evaluate agencies\u2019 actions to address the last three activities of  the act related to the identification of cybersecurity work roles of critical  need, we obtained, reviewed, and analyzed OPM\u2019s guidance for  identifying critical needs and its progress report to Congress by  comparing it to the act\u2019s requirements. We reviewed agencies\u2019  responses to our questionnaire regarding whether they had developed  methodologies or project plans for identifying critical needs. We also  reviewed any available documentation on the 24 agencies\u2019 progress in  identifying critical needs, such as project plans, timelines, and preliminary  reports. In addition, OPM required agencies to submit a preliminary report  on work roles of critical need by August 31, 2018. We obtained copies  of the preliminary reports from the 24 agencies. We evaluated agencies\u2019  efforts to meet the deadline, as well as for meeting OPM\u2019s requirements  for documenting work roles of critical need and determining root causes  of those needs.", "To supplement our analysis, we interviewed agency officials from human  resources and chief information officer offices at the 24 agencies  regarding their progress in coding and identifying cybersecurity work roles  of critical need.", "We conducted this performance audit from February 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."], "subsections": []}, {"section_title": "Appendix II: Office of Personnel Management Information Technology, Cybersecurity, and Cyber-related Work Role Codes", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Summary of 24 Chief Financial Officers Act Agencies\u2019 Implementation of the Federal Cybersecurity Workforce Assessment Act of 2015, as of Nov. 2018", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Top 12 Work Roles of Critical Need as Identified by the 24 Chief Financial Officers (CFO) Act Agencies in Their Preliminary Reports of Critical Need", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIV: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XV: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVI: Comments from the General Services Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVII: Comments from the Nuclear Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVIII: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIX: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XX: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XXI: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XXII: Comments from the United States Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XXIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Tammi Kalugdan (Assistant  Director), Merry Woo (Analyst-in-Charge), Carlos (Steven) Aguilar,  Alexander Anderegg, Christina Bixby, Carl Barden, Chris Businsky,  Virginia Chanley, Cynthia Grant, Paris Hawkins, Lee Hinga, James  (Andrew) Howard, Assia Khadri, David Plocher, Steven Putansu, and  Priscilla Smith made significant contributions to this report."], "subsections": []}]}], "fastfact": ["The federal government needs a qualified, well-trained cybersecurity workforce to protect vital IT systems. Not having enough of these workers is one reason why securing federal systems is on our High Risk list.", "To help agencies identify their critical workforce needs, they were required to identify and categorize all of their IT and cyber-related positions.", "However, most of the agencies we reviewed likely miscategorized the work involved in many positions. For example, 22 of 24 agencies assigned a \"non-IT\" code to 15,779 (about 19%) of their IT positions.", "We recommended agencies improve how they track and code their IT and cyber workforce."]}
{"id": "GAO-18-49", "url": "https://www.gao.gov/products/GAO-18-49", "title": "Contingent Workforce: Size, Characteristics, Compensation, and Work Experiences of Adjunct and Other Non-Tenure-Track Faculty", "published_date": "2017-10-19T00:00:00", "released_date": "2017-11-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Contingent faculty play a large role in postsecondary education but may not have the same job protections as tenured or tenure-track faculty. In 2015, GAO reported that contingent workers\u2014those in temporary, contract, or other non-standard employment arrangements\u2014earn less, are less likely to have work-provided benefits, and are more likely to experience job instability than standard workers. GAO was asked to examine issues related to contingent faculty.", "This report examines (1) what is known about the makeup and utilization of the postsecondary instructional workforce; (2) the roles different types of faculty fill at selected institutions and the factors administrators consider when determining faculty makeup; (3) what is known about how economic circumstances compare across different faculty types; and (4) what contingent faculty members report as advantages and disadvantages of their work.", "GAO analyzed data from nationally representative sources and from public institutions in three states\u2014Georgia, North Dakota, and Ohio. GAO selected these states based primarily on data availability. GAO interviewed administrators from 9 postsecondary institutions in these states and one large for-profit institution. GAO selected institutions based on factors such as institution size and percent of contingent faculty. GAO also conducted 21 discussion groups with contingent faculty.", "The Department of Education did not have comments on this report. The National Science Foundation provided technical comments, which we incorporated, as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["According to 2015 Department of Education data, contingent faculty\u2014those employed outside of the tenure track\u2014made up about 70 percent of postsecondary instructional positions nationwide, though this varied by type of institution. In addition, data from three selected states show that contingent faculty teach about 45 to 54 percent of all courses at 4-year public institutions, and higher proportions at 2-year public institutions. In terms of job stability, some full-time contingent positions with annual or longer contracts may be relatively stable while part-time positions with short-term contracts may be among the least stable, though it is unknown whether faculty in these positions have other employment. In contrast, tenure-track positions are often viewed as having a high degree of job security that is somewhat unique to postsecondary education.", "Administrators GAO interviewed at selected postsecondary institutions said full-time contingent faculty generally carry heavy teaching loads, and some also take on additional responsibilities, such as conducting research or advising students. However, administrators stated that part-time contingent faculty generally focus solely on teaching. As shown in the figure below, administrators also described factors they consider in determining their institution's faculty makeup.", "GAO examined recent data from North Dakota and Ohio public institutions and found that, among faculty who primarily teach\u2014which excludes individuals such as administrators or researchers\u2014part-time and full-time contingent faculty were paid about 75 percent and 40 percent less per course, respectively, compared to full-time tenure-track faculty. This comparison includes earnings for all of their responsibilities, including teaching and any other duties. However, when estimating faculty earnings for teaching duties only, pay disparities decreased to about 60 percent and 10 percent less per course for these contingent faculty, respectively. In addition, state and national data also showed that relatively few part-time contingent faculty received work-provided health or retirement benefits.", "In discussion groups with GAO, contingent faculty cited advantages such as the flexibility to balance professional and personal responsibilities, skill development, or working with students, and described disadvantages that included uncertainty due to short-term contracts, untimely contract renewals, and pay\u2014including a lack of compensation for some of their work. Other concerns they cited included limited career advancement opportunities, not having a voice in institutional decision-making, and not having certain types of institutional support."]}], "report": [{"section_title": "Letter", "paragraphs": ["Contingent faculty\u2014those employed outside of the tenure track, such as  full-time non-tenure-track professors and lecturers, part-time instructors  and adjuncts, and graduate student instructors\u2014are part of the broader  contingent workforce. In 2015, we reported that contingent workers\u2014 those in temporary, contract, or other non-standard employment  arrangements\u2014earn less, are less likely to have work-provided benefits  such as retirement plans or health insurance, and are more likely to  experience job instability than standard workers.", "In terms of the postsecondary instructional workforce, as a subset of the  overall workforce, tenured or tenure-track faculty may be considered  standard workers. Tenure affords faculty academic freedom\u2014the ability  to express thoughts or ideas without repercussion\u2014and economic  security by providing certain job protections, including employment that  cannot be terminated except under limited circumstances, such as for  adequate cause, financial exigencies of an institution, or closure of an  academic program. Unlike other standard employment arrangements  that may vary in terms of job security, tenured faculty are often viewed as  having essentially permanent job security because of the job protections  tenure provides. The tenure guarantee is an employment model that is  somewhat unique to academia, though other professions, such as K-12  teachers, may have similar arrangements.", "For the purposes of this work, we refer to contingent faculty as any full- or  part-time, non-tenure-track faculty. In contrast to tenure-track faculty, and  much like contingent workers in the overall workforce, contingent faculty  generally have contract employment arrangements that expire at the end  of a set term\u2014whether it be a semester, a school year, or a multi-year  term. In addition, contingent faculty may not have the same job  protections as tenured or tenure-track faculty. The employment situations  of faculty who fall under the umbrella of \u201ccontingent\u201d also may vary  considerably. For example, while some contingent faculty may have  contracts that are renewable on a continuous basis, others may resemble  contingent workers more broadly and be in precarious employment  situations with no guarantee for future work.", "We were asked to examine issues related to contingent faculty. This  report examines (1) what is known about the makeup and utilization of the  postsecondary instructional workforce; (2) what roles different types of  faculty fill at selected institutions and what factors administrators consider  when determining their faculty makeup; (3) what is known about how  economic circumstances compare across different faculty types; and (4)  what contingent faculty members report as advantages and  disadvantages of their work.", "To address the first question, we analyzed national and state data to  determine faculty makeup and utilization. Our primary source of national  data was the Department of Education\u2019s (Education) Integrated  Postsecondary Education Data System (IPEDS), which we analyzed in 4- year intervals from 1995 to 2011 and separately for 2015. Additional  sources of national data were the Department of Labor\u2019s (DOL) March  2016 Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) and survey data for 2012-13 collected by the  American Academy of Arts & Sciences (AAAS). See table 12 in appendix  I for a comprehensive list of the data sources we analyzed. We also  obtained and analyzed comprehensive faculty and course data for public  postsecondary institutions from three states\u2014Georgia, North Dakota, and  Ohio. We chose these states primarily based on the availability of these  data and also considered the state\u2019s location and the number of  institutions in the state to reflect some variation by region and size. For  the purposes of this study, we limited our analyses to instructional faculty  in order to focus on the population that is most responsible for educating  students.", "To address the second question, we interviewed administrators at  selected institutions in Georgia, North Dakota, and Ohio to obtain  information on the roles different types of faculty fill and factors  institutions consider in determining their faculty makeup. In each state, we  interviewed administrators at one 4-year public institution, one 4-year  private institution, and one 2-year public institution. We selected the  specific institutions for our interviews based on factors such as the size of  the institution, percent of contingent faculty, and whether the institution is  located in an urban, suburban, or rural area. In addition, we met with  administrators of one large online-based for-profit institution. In total, we  interviewed administrators from 10 institutions. The findings from our  discussions with administrators are not generalizable.", "To compare the economic circumstances of different types of faculty\u2014 including various earnings analyses, access to retirement and health  benefits, and satisfaction with job security and opportunities for  advancement\u2014we analyzed nationally representative data from the 2016  CPS ASEC and from the Survey of Doctorate Recipients (SDR) in  science, technology, engineering, and math (STEM), health, and social  sciences fields for 2013, which is conducted by the National Science  Foundation\u2019s (NSF) National Center for Science and Engineering  Statistics (NCSES). We also analyzed state data.", "To obtain contingent faculty members\u2019 views on the advantages and  disadvantages of their work, we conducted discussion groups with  different types of contingent faculty, the majority of which (19 out of 21)  took place at the same selected institutions where we interviewed  administrators. At each institution, we met with full- and part-time  contingent faculty and graduate student instructors, where applicable.  Administrators at the institutions solicited participants for these interviews  on our behalf. We also conducted two additional discussion groups with  part-time contingent faculty who work at multiple institutions. We did not  systematically review the specific policies these institutions have with  respect to contingent faculty. In addition, the views of faculty at  institutions in states with greater levels of unionization or with larger  metropolitan areas may differ from those in our study. Factors such as  larger pools of faculty labor, greater ability to commute between schools,  and collective bargaining dynamics could affect work experiences. The  findings from our discussions with faculty are not generalizable. We also  conducted interviews with the National Center for the Study of Collective  Bargaining in Higher Education and the Professions, the American  Association of University Professors, and the Service Employees  International Union to obtain their views.", "For all of the datasets used in our study, we reviewed documentation,  interviewed or obtained information from officials responsible for the data,  and tested the data for inaccuracies. We determined that these data are  sufficiently reliable for the purposes of this report. In addition, we  reviewed relevant federal laws and regulations related to all of the  objectives of this review. See appendix I for more detailed information  about our scope and methodology.", "We conducted this performance audit from May 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Characteristics of Postsecondary Institutions", "paragraphs": ["In fall 2015, almost 20 million students were enrolled in over 4,500 2- and  4-year postsecondary institutions, according to IPEDS data.  Postsecondary institutions vary in terms of their funding, the length and  type of programs offered, and instructional mission, among other  characteristics. Public institutions, which include state universities and  community colleges, are traditionally supported by federal, state, and  local funds, in addition to revenue from tuition and fees. Private, not-for- profit schools are owned and operated by independent or religious  organizations, and their net earnings do not benefit any shareholder or  individual. Tuition and fees as well as other revenue sources primarily  support these schools. For-profit institutions are privately owned and  earnings can benefit shareholders or individuals. Two-year institutions  often provide career-oriented programs at the certificate and associate\u2019s  degree levels. Four-year institutions tend to have a broad range of  instructional programs at the undergraduate level leading to bachelor\u2019s  degrees. Many 4-year institutions also offer master\u2019s or doctorate level  programs, and some 4-year institutions have a research focus.", "The landscape of postsecondary institutions has changed over the past  20 years, particularly with respect to for-profit institutions. The number of  public institutions remained relatively constant and the number of private  institutions declined slightly; however, the number of for-profit institutions  more than tripled between 1995 and 2011 before declining slightly to  2015 levels (see fig. 1)."], "subsections": []}, {"section_title": "How National Data Count Faculty", "paragraphs": ["IPEDS and CPS both provide data on postsecondary faculty.", "IPEDS data can provide information on positions filled by different types  of faculty across postsecondary education or by types of institutions (see  sidebar for how we categorize institutions using IPEDS data). In terms  of faculty types, IPEDS distinguishes between tenure-track and  contingent positions and also has data on graduate assistants, though we  cannot determine whether these graduate teaching assistants are the  instructors of record for courses or are instead providing classroom  support (e.g., grading, leading discussions, and lab setup). Because  IPEDS counts positions, any faculty who teach at more than one  institution are counted multiple times\u2014for each position they fill.", "CPS counts the number of actual workers in a given occupation and, in  terms of faculty, provides data on how many individuals are employed as  postsecondary teachers in colleges and universities nationwide. CPS  does not differentiate faculty by type of institution or by tenure status. For  example, CPS cannot identify full-time contingent faculty separately from  full-time tenure-track faculty."], "subsections": []}]}, {"section_title": "Contingent Faculty Fill Most Instructional Positions Nationwide and Teach Close to Half or More of All Courses at Public Institutions in Three Selected States", "paragraphs": [], "subsections": [{"section_title": "From 1995 to 2011, the Number of Instructional Positions Filled by Contingent Faculty More than Doubled While Those Filled by Full-Time Tenure- track Faculty Increased By 10 Percent", "paragraphs": ["According to IPEDS data, from 1995 to 2011, the percentage of  postsecondary instructional positions filled by contingent faculty increased  from 57.6 to 71.6 percent. During this period the number of instructional  faculty positions at all institutions nationwide grew by over 60 percent\u2014 though most of this growth was among positions held by contingent  faculty. More specifically, the number of positions held by full-time and  part-time non-tenure-track faculty\u2014which we define as contingent\u2014both  doubled during this period, while the number of positions held by full-time  tenure-track faculty grew by about 10 percent (see table 1). In addition to  full- and part-time contingent faculty, some graduate assistants may also  teach courses. During the same period, the number of graduate teaching  assistant positions grew by 63.8 percent.", "Some of the increase in the percentage of contingent faculty positions is  due to the growth of the for-profit sector and growth among 2-year  institutions, which as a whole rely primarily on contingent faculty. For  example, the number of positions nationwide across for-profit institutions  in 2011 was almost 9 times as many as in 1995. However, the shift  towards contingent faculty positions was clear even among only 4-year  public and private institutions (see fig. 2)."], "subsections": []}, {"section_title": "Contingent Faculty Fill about 70 Percent of Instructional Positions Nationwide, Though This Varies Greatly by Institution and Many of These Positions Have Some Job Stability", "paragraphs": ["Contingent faculty currently fill most instructional positions nationwide,  though these numbers cannot be compared to historical data. According  to 2015 IPEDS data, contingent faculty fill 69.5 percent of the 1,444,774  postsecondary instructional positions across all institutions nationwide,  including about 61.4 percent of instructional positions at 4-year  institutions, 83.5 percent at 2-year institutions, and 99.7 percent at for- profit institutions (see fig. 3). As noted previously, aggregated IPEDS  data count faculty who teach at multiple institutions multiple times;  therefore, there are likely more contingent faculty positions than there are  contingent faculty workers. Although it is unknown how many faculty hold  jobs at multiple institutions, this is likely to be more prevalent among  faculty filling part-time positions. To illustrate, according to CPS data\u2014 which counts individuals\u2014an estimated 31.7 percent (+/- 4.1) of  individuals employed as postsecondary teachers in colleges and  universities worked part-time in 2015. In contrast, according to IPEDS  data, part-time faculty held about 50.0 percent of instructional positions.", "Though the majority of instructional faculty positions across institutions  are contingent, employment stability among these positions may vary  widely. Many of these contingent positions may have some job stability,  depending on contract specifics. For example, about a quarter of  contingent positions across all institutions have full-time, annual, multi- year, or potentially pseudo-tenure contracts (see fig. 3). Some of these  positions may expire at the end of a set term or have no option for  renewal\u2014potentially requiring a new application process\u2014while others  may be relatively long-term with continuously repeating contracts. For  example, officials at one North Dakota institution we visited described  their non-tenure-track positions as \u201ctenure light\u201d because full-time faculty  receive 1-year contracts for their first 4 years and then, after a successful  promotion review, receive continuous 3-year contracts that can be  terminated only for adequate cause, such as gross professional  misconduct. In contrast to these more stable contingent positions, more  than half of the contingent positions across all institutions nationwide are  part-time and have less-than-annual contracts or lack faculty status\u2014 which we define as being among the least stable (see fig. 3). For some  of the faculty filling these positions, this employment may be their sole  source of income. Similar to contingent workers in the broader labor  force, as we reported previously, these faculty may face volatility and  uncertainty in their economic circumstances. Other faculty in these  positions may have employment or sources of income outside of  teaching. For example, some part-time instructors are employed full-time  in their fields and teach on the side as subject-matter experts or to stay  connected with their local university community.", "Examples of Part-Time Faculty Situations from Faculty Discussion Groups at  Selected Institutions  Two part-time faculty members at an institution in Ohio said they had jobs outside of  teaching and said they teach on the side because they love it, rather than relying on  it for subsistence.", "One part-time faculty member at an institution in Georgia said that she was retired,  but teaches courses to keep a foot in the education world while also enjoying free  time in retirement.", "One younger part-time faculty member at an institution in North Dakota stated that  she teaches on a semester-to-semester contract and that this was her primary  employment.", "While it is unknown how many faculty rely on their instructional positions  as their primary employment, nationally representative data from the  Current Population Survey (CPS) and Survey of Doctorate Recipients  (SDR) provide some limited information that suggests many part-time  faculty prefer working part-time. The CPS data show that an estimated  46.2 percent (+/- 6.3) of part-time faculty reported wanting to work part- time, while only 10.0 percent (+/- 5.1) reported working part-time because  they could only find a part-time job or because of seasonal or temporary  fluctuations in the availability of employment. Similarly, SDR data on  doctorate-holding instructional faculty in STEM (science, technology,  engineering, and math), health, and social sciences fields show that most  part-time contingent faculty report wanting to work part-time, though  among those who reported wanting a full-time job, most reported not  being able to find one (see table 2).", "According to IPEDS data, different types of postsecondary institutions rely  more heavily on different segments of the instructional workforce. As  shown in figure 4, many 4-year institutions employ tenure-track, full-time  contingent, and part-time contingent positions\u2014though the balance  varies. Far fewer 2-year institutions and very few for-profit institutions  have tenure-track positions. Part-time and short-term positions are  substantially more prevalent at these institutions. For example, part-time  contingent positions make up 67.9 percent and 80.5 percent of  instructional positions at 2-year and for-profit institutions, respectively, as  compared to 39.8 percent at 4-year institutions.", "Beyond institution type, reliance on different types of faculty positions also  varies by institutional characteristics, such as size and highest degree  offered. For example, across 4-year institutions with more than 10,000  students, 43.1 percent of positions are tenure-track, as compared to 30.6  percent across institutions with fewer than 5,000 students. Similarly, a  higher percentage of instructional positions are tenure-track across 4-year  institutions that offer doctorate degrees, compared to those institutions  that do not offer doctorate degrees (see fig. 5)."], "subsections": []}, {"section_title": "At 4-Year Public Institutions in Three Selected States, Contingent Faculty Teach Close to Half or More of All Courses and Credit Hours", "paragraphs": ["Contingent faculty fill more than half of instructional positions at 2- or 4- year public institutions in the three selected states (see fig. 6). Two-year  public institutions in North Dakota and Ohio were especially reliant on  contingent faculty, where they fill about 72 and 84 percent of instructional  positions, respectively (see sidebar for our definition of instructional  faculty in the state data, as compared to our other data analyses).", "We examined several different demographic characteristics of contingent  faculty including gender, race, educational attainment, and age."], "subsections": [{"section_title": "Gender", "paragraphs": ["According to 2015 IPEDS data, instructional positions nationwide are  divided roughly evenly between the sexes, but women fill fewer tenure- track positions and more contingent positions than men do. As shown in  figure 7, across all institutions, women hold a substantially lower  proportion of full-time tenured positions (38.4 percent) than men do,  though women fill 48.9 percent of full-time positions that are on a tenure  track but not yet tenured, and that are generally more recent hires. Across  all institutions, women also hold a slightly greater proportion of contingent  positions (about 53 percent). This imbalance in representation, in part,  reflects the higher concentration of women at 2-year and for-profit  institutions, where they fill 54.3 and 55.9 percent of positions,  respectively. These institutions generally rely more heavily on contingent  faculty positions than do 4-year institutions.", "White (non-Hispanic) faculty fill almost three-quarters of instructional  positions across all institutions nationwide. This racial/ethnic  representation is relatively consistent across full-time tenure-track, full- time contingent, and part-time positions. Though filling 27.6 percent of  positions across all institutions, racial and ethnic minorities have slightly  greater representation at institutions in large cities (33.2 percent) and at  for-profit institutions (38.4 percent)."], "subsections": []}, {"section_title": "Educational Attainment", "paragraphs": ["Our analysis of state data suggests that across 4-year public institutions  in North Dakota and Ohio, lower proportions of individuals in contingent  positions have a graduate or doctoral degree (see fig. 8). While the  differences between tenure-track and contingent faculty are substantial,  possible explanations include variation in degree requirements by  discipline or individual circumstances, such as having professional  experience in the field.", "Across public institutions in all three selected states, and excluding  positions held by instructional graduate students, most positions held by  the youngest faculty are contingent, and the most common positions held  by the oldest faculty are part-time contingent. More specifically, most  positions held by individuals under age 40 are contingent\u201460.2 percent  in Georgia, 66.9 percent in North Dakota, and 74.5 percent in Ohio  (excluding instructional graduate assistants). This suggests that newer  graduates may be more likely to be hired into contingent rather than  tenure-track positions. In addition, the most common positions held by  faculty ages 70 and older are part-time contingent positions\u201451.0  percent in Georgia, 45.5 percent in North Dakota, and 59.4 percent in  Ohio (excluding instructional graduate assistants). This suggests that a  segment of the part-time contingent workforce may consist of retirees or  workers who are approaching retirement."], "subsections": []}]}]}, {"section_title": "Administrators Said Contingent Faculty Have a Range of Responsibilities, and They Consider Multiple Needs When Determining Faculty Makeup", "paragraphs": [], "subsections": [{"section_title": "Full-Time Contingent Faculty at Institutions We Visited May Have a Variety of Responsibilities, but Part-Time Contingent Faculty Generally Focus on Teaching", "paragraphs": ["According to administrators we interviewed, institutions utilize full-time  contingent faculty for different purposes, which may involve  responsibilities beyond teaching. Administrators said full-time contingent  faculty are hired primarily to teach and generally have larger course loads  than tenure-track faculty who may teach fewer courses per semester due  to significant research responsibilities. However, they also noted that\u2014 similar to tenure-track faculty\u2014many full-time contingent faculty carry out  additional responsibilities. For example, some full-time contingent faculty  may perform service, conduct research, advise students, serve as  department chairs, or manage student recruitment efforts for their  programs. Many other full-time contingent faculty serve as instructors or  lecturers whose sole responsibility is to teach. For example,  administrators from one institution explained that they employ  professional instructors who teach four courses per semester and have  no service or research responsibilities. In addition, some full-time  contingent faculty are hired because they have certain professional  qualifications or experience. For example, one institution we visited  employed academic professionals who may teach one or two courses per  year while carrying out administrative, marketing, mentoring, or other  duties.", "While full-time contingent faculty may have a variety of responsibilities,  administrators stated that part-time contingent faculty generally focus on  teaching, though they also may fulfill different purposes. In some cases,  part-time contingent faculty serve as expert practitioners who teach  specific subject matter. For example, administrators from one institution  said that they hire part-time contingent faculty to teach instrumental music  courses because teaching each instrument requires specialized  expertise, and there may not be enough students learning any single  instrument to warrant a full-time position. In other cases, part-time  contingent faculty teach general education courses, such as Introduction  to English Composition, which most students are required to take. In  addition, while some part-time contingent faculty may have full-time jobs  outside of academia, others may be working toward long-term careers as  tenure-track professors, according to administrators. Administrators from  some institutions also told us that they hire part-time contingent faculty  help to manage lab courses (e.g., setting up laboratory equipment,  assisting students) or to serve as mentors to students in specific  programs (e.g., theological studies)."], "subsections": []}, {"section_title": "Administrators Consider Financial, Institutional, Faculty, and Student Needs When Determining Faculty Makeup", "paragraphs": ["University and college administrators we interviewed identified a number  of financial and institutional considerations as well as faculty and student  needs that affect their decisions regarding faculty makeup (see fig. 9).", "Administrators stated that utilizing contingent faculty allows for flexibility in  managing various financial considerations, including the following:", "Budget uncertainty: Administrators from several public institutions  explained that utilizing contingent faculty helps them manage  uncertainty regarding the level of public funding they may receive.  Administrators have the option not to renew contracts of contingent  faculty if they experience a decrease in their funding, whereas  institutions commit to retain tenure-track faculty until they retire. In  addition, administrators from several public institutions noted that, as  a result of decreased state funding, they have become more reliant on  tuition to meet their budget needs. They told us that hiring contingent  faculty to focus on teaching rather than research allows the institution  to offer more classes and serve additional students, which in turn,  generates more tuition revenue.", "Compensation costs: Administrators stated that, in general, they  cannot employ tenure-track faculty for all courses because they can  be more expensive to employ than contingent faculty. In addition to  the long-term commitment associated with tenure, other costs may  include spending to support research conducted by tenure-track  faculty (e.g., investment in specialized labs or equipment).", "Legal or grant program requirements: Some administrators said that  legal or grant program requirements affect their decisions regarding  the utilization of contingent faculty. For example, administrators from  several institutions told us that they had reduced teaching loads for  part-time faculty because the Patient Protection and Affordable Care  Act (PPACA) requires certain employers to provide health insurance  for employees working 30 hours or more per week. Administrators  from another institution stated that they utilized in-house faculty and  hired additional contingent faculty to staff a federal grant program  aimed at providing training for inmates at correctional facilities  because\u2014after receiving notification that they had been awarded the  grant\u2014they had approximately 2 months to staff 160 course  sections. In addition, since they did not know whether the grant  would be renewed, they did not know whether they would be able to  retain those faculty at the end of the program."], "subsections": [{"section_title": "Institutional Considerations", "paragraphs": ["Administrators said that utilizing contingent faculty also allows flexibility to  meet different institutional needs. Examples of institutional considerations  cited by administrators include the following:", "Enrollment: By utilizing contingent faculty, institutions have more  flexibility to meet course demand if there is a surge in enrollment or to  downsize if there is a drop in enrollment, according to administrators.  For example, administrators from one 2-year institution noted that  enrollment generally increases when the economy is weak and  decreases when the economy is strong. These administrators also  said that their enrollment fluctuates greatly with changes in the  economy and that, in their experience, prospective students are more  likely to choose 4-year institutions rather than 2-year institutions when  the economy is strong. In addition, when offering a course,  administrators said part-time faculty may teach that course during a  trial period while administrators decide whether to offer the course  long term.", "Location and market demand: Some administrators stated that they  offer contingent faculty positions in response to market conditions. For  example, administrators from institutions located in small towns or  rural areas said they rely on local professionals to teach certain  courses on a part-time basis, in part, because of challenges finding  qualified faculty and having fewer students enrolled at remote sites.  Some administrators also said contingent faculty positions offer  certain advantages that help them recruit high quality instructors. For  example, administrators from one university noted that their institution  offers stable, full-time employment to recent graduates looking to gain  experience before applying for tenure-track positions at other  institutions.", "Specialized experience: Contingent faculty may bring professional  expertise to certain courses. For example, administrators from several  institutions stated that their programs for health professionals rely on  contingent faculty working in their field to teach clinical courses so that  students may gain experience at an established medical practice.  Administrators said that hiring practitioners from local industry as part- time instructors is an effective way to support specialized courses that  have a limited number of sections. Administrators from one institution  also noted that practitioners may have the qualifications needed to  meet accreditation requirements for certain programs and  departments (e.g., professional and technical programs).", "Balancing priorities: Administrators said that utilizing a combination of  tenure-track and contingent faculty helps their institutions fulfill both  teaching and research missions and accommodate the hiring needs of  different programs and departments. For example, administrators  from one institution noted that the additional revenue from increased  course offerings\u2014staffed by part-time contingent faculty\u2014allows them  to invest more money in research programs for tenure-track faculty.  Administrators from two institutions explained that hiring part-time  contingent faculty in a given department allows them to reallocate  resources as needed, for example, to hire full-time contingent or  tenure-track positions in another department. In addition, while  contingent faculty may help fulfill accreditation requirements for  certain programs, administrators from several institutions also stated  that their accrediting bodies require a balance of contingent and  tenure-track faculty, or alternatively, full-time and part-time contingent  faculty. For example, administrators from one 4-year institution told us  that part-time faculty may teach no more than 25 percent of student  credit hours within their business school."], "subsections": []}, {"section_title": "Faculty Needs", "paragraphs": ["As part of faculty utilization decisions, administrators said that they  consider the personal and professional needs of faculty. Examples of  faculty needs cited by administrators include the following:", "Flexibility: Administrators told us that they offer part-time positions, in  part, because many qualified candidates want to work part-time for  professional, family, or other reasons. For example, administrators  at one institution said that part-time contingent faculty positions allow  expert-practitioners to continue working full-time in their field while  pursuing an interest in teaching. Alternatively, for those teaching as  full-time contingent faculty, in some cases, their position may offer a  more predictable schedule or other benefits compared to their  professional field.", "Course loads: Administrators at some institutions said they prioritize  the professional needs of existing full-time faculty before hiring part- time faculty by ensuring that full-time faculty have enough courses to  meet their required teaching loads.", "Career paths: Some institutions have established mechanisms to  support long-term career paths for full-time contingent faculty. For  example, administrators from one institution stated that full-time  contingent faculty may qualify for multi-year contracts that can be  terminated only for adequate cause, such as gross professional  misconduct. Administrators from several institutions said that they  offer the full set of professorial ranks (i.e., Assistant Professor,  Associate Professor, and Professor) to some full-time contingent  faculty positions in order to provide opportunities for advancement."], "subsections": []}, {"section_title": "Student Needs", "paragraphs": ["Administrators stated that having a combination of tenure-track and  contingent faculty\u2014or full-time and part-time contingent faculty at  institutions without tenure\u2014is necessary to meet different student needs.  Examples of student needs cited by administrators include the following:", "Learning opportunities: Administrators stated that different types of  faculty may offer different opportunities to students. For example,  administrators told us that tenure-track faculty may provide research  and academic networking opportunities whereas contingent faculty  may not have the same opportunities to develop professional  networks or conduct research in their field. Some administrators  also said that the academic freedom associated with tenure or having  faculty who conduct research in their field may be beneficial to  students. Nonetheless, administrators from several institutions  emphasized that contingent faculty were equally qualified to teach and  that their positions allowed them to focus on teaching. Administrators  also noted that contingent faculty may bring professional expertise  and real-world experiences to the classroom. In addition to courses  that require specialized experience, administrators from one institution  said they also value the outside experience that contingent faculty  bring to general education courses. As an example, they stated that  part-time contingent faculty with experience from other jobs or  professions may be able to relate to the real-world needs of their  students because the majority of students will seek employment  outside of academia.", "Community: Administrators said that, regardless of tenure status, they  depend on having full-time faculty to help create a sense of  community. They discussed informal ways that faculty support their  campus community. For example, some administrators noted that full- time faculty contribute by mentoring students and participating in  activities on campus. In contrast, part-time faculty are not able to  spend as much time on campus because they often have other jobs  or commitments, according to administrators."], "subsections": []}]}]}, {"section_title": "Absent National Information on Pay Rates, Contingent Faculty in Two Selected States Are Paid Less per Course, and Relatively Few Part- Time Faculty Receive Health or Retirement Benefits Data from Two States Show Contingent Faculty Are Paid Less per Course, Though Disparities Shrink If Pay for Research and Service Is Excluded", "paragraphs": ["National data on contingent faculty pay rates are not available, but data  from two states show that contingent faculty are paid less per course.  IPEDS data cannot be used to determine faculty pay rates because  salary data are not collected for part-time faculty nor are they collected at  the individual faculty level, and CPS data do not differentiate between full- time tenure-track and full-time contingent faculty. Given the limitations of  national data, we used data from two states to compare annual earnings  across different types of faculty. The differences in median annual  earnings shown in table 5 provide some insight into the generally lower  overall compensation of contingent faculty, though these data are not  generalizable. Further, particularly for part-time faculty who may be paid  on a piecemeal or per-course basis, this measure does not provide  information about whether compensation differences are due to lower pay  rates or less work performed (e.g., courses taught or hours worked).", "Thus, we use the state data to calculate and examine comparable pay  rates per course for all faculty types. Private organizations have  attempted to collect data specifically on pay-per-course rates for part-time  faculty, though efforts have been limited.", "On a per-course basis, we found that contingent faculty at public  institutions in two states are paid less per course taught, on average,  than full-time tenure-track faculty, though the extent of differences varies  depending on contingent faculty group and pay measure. We  conducted regression analyses of total pay per course and instructional  pay per course, which provide two different perspectives on faculty  compensation (see sidebar for explanations of these approaches and  see appendix I for details on our methods). These analyses controlled for  other factors that may affect earnings, such as employing institution,  discipline, highest degree earned, and demographics. As shown in  table 6, in terms of total pay per course, we found the following:", "Part-time contingent faculty in both states are paid about 75 percent  less per course regardless of whether the population includes all  faculty or is limited to \u201cprimarily teaching\u201d faculty. The primarily  teaching group excludes faculty who primarily hold other roles  unrelated to instruction (e.g., administrators and research faculty).", "Full-time contingent faculty are paid about 35 percent less per course  in North Dakota and about 40 percent less per course in Ohio, among  primarily teaching faculty\u2014differences are larger in Ohio if all faculty  are included.", "Instructional graduate assistants earn more per course than part-time  faculty (though still less than full-time tenure-track faculty). However,  compensation for these groups is fundamentally different because  instructional graduate assistants generally receive a stipend, similar to  an annual salary, rather than being paid by the course like many part- time faculty. In addition, graduate assistantships may be awarded for  academic merit or recruitment, and could also be considered as  compensation for a graduate assistant\u2019s work as a student.", "Disparities in instructional pay per course\u2014which measures pay for  equivalent work (see sidebar above)\u2014are smaller for all contingent  faculty groups than those for total pay per course. As shown in table 7,  we found the following:", "Part-time contingent faculty in both states are paid about 60 percent  less per course regardless of whether the population includes all  faculty or is limited to primarily teaching faculty.", "Among primarily teaching faculty in both states, full-time contingent  faculty are paid about 10 percent less per course than full-time tenure- track faculty.", "As with total pay, the instructional pay disparity for full-time contingent  faculty in Ohio is larger if all faculty are included. However, when all  faculty are included in North Dakota, the pay difference between full- time contingent and full-time tenure-track faculty is not significant at  the 95 percent confidence level.", "Consistent with our other findings, when we analyzed national data from  the 2013 Survey of Doctorate Recipients (SDR), we also found that  contingent faculty in sciences fields earned less annually than full-time  tenure-track faculty. Full-time contingent faculty earned 22 percent less  than full-time tenure-track faculty, on average, and part-time contingent  faculty earned 70 percent less, among instructional, doctorate-holding  faculty in STEM, health, and social sciences fields. Unlike our analyses  of state data, the SDR analysis cannot account for differences in the  number of courses taught, and thus the results represent the combined  effects of lower pay rates and smaller workloads, to the extent either  exists."], "subsections": [{"section_title": "Relatively Few Part-Time Contingent Faculty Receive Health or Retirement Benefits from Their Employment", "paragraphs": ["Data from North Dakota and Georgia, as well as national data covering  different populations, suggest that relatively few part-time contingent  faculty receive health or retirement benefits from their employment though  full-time contingent faculty may. Although not generalizable, data from  North Dakota and Georgia include data on actual benefits provided to  faculty by institutions, as opposed to self-reported rates of coverage  found in national survey data. Relatively few part-time contingent faculty  and instructional graduate assistants in the North Dakota and Georgia  data receive retirement, health, and life insurance benefits from their  employment. For example, in Georgia and North Dakota, about 98  percent or more of individuals in full-time tenure-track and full-time  contingent positions receive work-provided retirement benefits, compared  to 19.4 and 9.3 percent, respectively, of those in part-time contingent  positions (see table 8). An even smaller percentage of instructional  graduate assistants in both states receive any of these benefits from their  employment; however, instructional graduate assistants are students, so  the terms of their employment may be different than traditional full-time  and part-time employees.", "Similarly, our analysis of SDR and CPS data show that relatively few part- time contingent faculty nationwide receive retirement benefits from their  employment. According to the 2013 SDR data, among instructional,  doctorate-holding faculty in STEM, health, and social sciences fields, an  estimated 48.4 percent (+/- 4.2) of part-time contingent faculty report  having access to \u201ca retirement plan to which  employer contributed,\u201d  compared to the vast majority of full-time tenure-track and full-time  contingent faculty. According to CPS data covering employment in  2015, an estimated 16.6 percent (+/- 6.1) of part-time faculty report  participating in a work-provided retirement plan, as compared to 60.8  percent (+/- 4.7) of full-time faculty."], "subsections": [{"section_title": "National Data on Health Insurance Benefits", "paragraphs": ["While comparing health insurance coverage is complicated because  workers may be covered by other family members\u2019 plans, in both the SDR  and CPS data, smaller proportions of part-time faculty had health  insurance through their own employment. According to the 2013 SDR  data, only 39.4 percent (+/- 4.6) of part-time contingent faculty had access  to \u201chealth insurance that was at least partially paid by  employer\u201d  compared to almost all full-time tenure-track and full-time contingent  faculty. Similarly, in the CPS data, much smaller percentages of part- time faculty than full-time faculty report having health insurance through  their own employment (see table 9)."], "subsections": []}]}, {"section_title": "Data from a 2013 Sample of Faculty with Doctorates Show That Contingent Faculty Were Less Satisfied with Certain Aspects of their Economic Circumstances", "paragraphs": ["In addition to the lower pay and access to benefits experienced by some  contingent faculty, among a national sample of instructional, doctorate- holding faculty in STEM, health, and social sciences fields, contingent  faculty were less satisfied with their job security and career prospects.  Based on our analysis of 2013 SDR data, the vast majority of all  instructional faculty, including contingent faculty, stated that they are very  or somewhat satisfied with their employment overall. However, compared  to full-time tenure-track faculty, more contingent faculty reported some  level of dissatisfaction (see fig. 10). While most faculty reported  satisfaction with their employment, at least a third of both full- and part- time contingent faculty stated that they are dissatisfied with their job  security and opportunities for career advancement. For example, an  estimated 55.1 percent (+/- 4.5) of part-time contingent faculty reported  some level of dissatisfaction with opportunities for advancement (see fig.  10), and the proportion who said they were very dissatisfied\u201426.1  percent (+/- 3.8)\u2014is around 5 times greater than for full-time tenure-track  faculty."], "subsections": []}]}, {"section_title": "While Contingent Faculty at Selected Institutions Said Their Work Offers Certain Advantages, They Expressed Concerns about Contracts, Wages, and Institutional Support", "paragraphs": [], "subsections": [{"section_title": "Contingent Faculty Identified Certain Advantages of Their Work", "paragraphs": ["Contingent faculty at selected institutions said their work offers certain  advantages, including those allowing them to balance professional and  personal responsibilities, develop skills, or work with students. Part-time  contingent faculty in some discussion groups said they choose to work  part-time because it gives them needed flexibility to balance teaching with  working full-time or to meet family needs, such as childcare or caring for  sick parents. As stated previously, our analysis of nationally  representative 2013 SDR data showed that, among a sample of  instructional faculty with doctorate degrees in STEM, health, and social  sciences fields, many faculty preferred to work part-time for reasons  including family responsibilities or holding another job. In terms of  developing skills, one instructional graduate assistant told us that having  teaching experience gives her an advantage in the job market. In  addition, in both full- and part-time discussion groups, some contingent  faculty told us they primarily want to teach, and their roles allow them to  do that rather than having to conduct research or take on other  responsibilities. In some discussion groups, contingent faculty said they  are committed to teaching because they find it rewarding to interact with  students.", "Insight from a Full-Time Contingent Faculty Member about Connecting with  Students  \u201cI have yet to meet a contingent faculty member that does not say that student contact is  extremely important to them\u2026We\u2019re excellent teachers. We\u2019re interested in teaching. We  are interested in being with students.\u201d"], "subsections": []}, {"section_title": "Contingent Faculty Expressed Concerns about Short-term Contracts, Untimely Contract Renewals, and Compensation", "paragraphs": [], "subsections": [{"section_title": "Contract-Related Concerns", "paragraphs": ["Contingent faculty in some of our discussion groups expressed concerns  about contractual issues. In particular, they cited concerns regarding  contract length, untimely contract renewals, or insufficient notice about  their class schedules. Full- and part-time contingent faculty said short- term contracts\u2014annual or semester-to-semester contracts\u2014produce  anxiety about job stability because of uncertainty about whether contracts  will be renewed. Part-time faculty who teach at multiple institutions  additionally said that short-term contracts hinder their ability to form  lasting relationships with institutions or students. In some discussion  groups, full- and part-time contingent faculty said untimely contract  renewals can make it difficult to find another position if a contract is not  renewed. For example, a full-time contingent faculty member said she  received notification in August that her contract was not being renewed  for the fall semester, at which point she could not find another position  elsewhere for that semester. Part-time contingent faculty told us that  notices about the status of their class schedules are also sometimes  untimely. One full-time contingent faculty member said that, when he  worked part-time, he sometimes did not know, until the first night of class,  that a course he was scheduled to teach had been given to a full-time  faculty member instead. While some contingent faculty expressed  concerns about contract lengths and renewals, some contingent faculty  said they do not have concerns in this area. Faculty members in some  part-time discussion groups told us teaching is not their primary source of  income or they are retired, so they are not concerned about job security  and contract renewals.", "Insight from a Full-Time Contingent Faculty Member  \u201cThe lack of long term job security/stability that results from short term contracts is my  biggest concern. I find it insulting when comments like \u201cgreat work, we\u2019re committed to  you\u201d are coupled with actions like one year contracts when I have been in this position for  15 years. It does not make me feel valued.\u201d"], "subsections": []}, {"section_title": "Compensation-Related Concerns", "paragraphs": ["Contingent faculty we spoke with identified insufficient compensation as a  disadvantage of their employment (see table 10). Full-time and part-time  contingent faculty in some discussion groups said they must supplement  their teaching income to cover their living expenses. For example, one  full-time contingent faculty member said he does consulting work,  bookkeeping, and product reviews to increase his income because his  teaching salary is not adequate. In addition, some part-time faculty said  they teach at several institutions to make ends meet financially and some  instructional graduate assistants also said they take on extra work to  cover living expenses. Union officials at the national level said their  members have expressed similar concerns. Specifically, Service  Employees International Union (SEIU) officials told us some contingent  faculty members qualify for public assistance due to the low level of  compensation they receive.", "Insight from Part-Time Contingent Faculty Member Teaching at Multiple  Institutions  \u201cSociety at large, I think, associates the college professor with a rather well paid and  stable career. And I think most of us who worked in this field know that is anything but the  case.\u201d", "Some contingent faculty in both full- and part-time discussion groups said  they are not paid for all of their job requirements or are  undercompensated given their qualifications. Full- and part-time  contingent faculty and graduate student instructors said they are required  to assume extra responsibilities at no additional pay. For example, a  faculty member in a full-time discussion group told us she was given  additional duties of advising 15 students and attending meetings, neither  of which was included in her contract. Both full- and part-time faculty in  some discussion groups said their pay is not commensurate with their  academic credentials. One full-time faculty member told us an  administrator with a doctorate who works in the local school district near  her institution is paid double her salary. Similarly, a part-time faculty  member told us her salary is less than $20 an hour, a rate she considers  as too low for a professional with a doctorate."], "subsections": []}]}, {"section_title": "Some Contingent Faculty at Selected Institutions Said They Have Limited Career Advancement or Institutional Involvement Opportunities and Lack Certain Types of Professional Support Limited Career Advancement Opportunities", "paragraphs": ["Contingent faculty in some discussion groups said they would like to  move into a tenure-track or full-time position, but face barriers doing so,  and union officials expressed similar views. For example, one full-time  contingent faculty member told us teaching 6 to 10 classes per year does  not allow her time to conduct the research needed to be competitive for a  tenure-track position. In some discussion groups, both full- and part-time  faculty said that they perceive that their colleagues sometimes view them  as less capable because they are not tenure-track faculty. As a result,  these faculty may not be considered for tenure-track positions when they  become available. A part-time contingent faculty member who teaches at  multiple institutions noted that availability of full-time positions may be  limited because many institutions hire only part-time faculty. Union  officials from the American Association of University Professors (AAUP)  and SEIU also cited the decline in the availability of tenure-track positions  as a barrier regarding career advancement for contingent faculty.", "Insight from a Part-Time Contingent Faculty Member Who Teaches at Multiple  Institutions  \u201cIt wasn\u2019t that long ago that once you went to work for a college as an adjunct and you  were there a certain number of years, there was a real expectation that you would be  offered a full-time position or at least you would move to an annual contract so you only  had to worry once a year. That\u2019s disappearing. More and more colleges are moving away  from that. Also, a lot of colleges are moving away from full-time positions.\u201d"], "subsections": [{"section_title": "Limited Institutional Involvement", "paragraphs": ["Contingent faculty in some discussion groups expressed concerns that  they do not have a voice in institutional decision-making because they  cannot serve on some department or university-level committees or vote  on particular issues. They explained that sometimes a school\u2019s policy  prohibits their service or relevant policy is not clearly articulated. For  example, a full-time contingent faculty member told us that contingent  faculty members at her institution cannot participate on governance  committees, which she said leaves administrators free to ignore the  concerns of contingent faculty.", "Insight from a Full-Time Contingent Faculty Member  \u201cWe have no voice. We have no say. We have no governance. We don\u2019t have any of that.  And yet, we all\u2014every one of us around here earned the same degree, worked the same  amount. So there is huge inequality between choosing to focus on research primarily,  and therefore, getting this basic job guarantee until  die and choosing to focus on  teaching,  not having that , even though in many other ways we are  equivalent.\u201d", "Contingent faculty in some discussion groups also told us they are  reluctant to voice their views because they do not have job protections.  For example, a full-time contingent faculty member in one discussion  group told us she would feel more comfortable speaking up if she had a  continuing contract rather than her current annual contract. An official  from the National Center for the Study of Collective Bargaining in Higher  Education and the Professions said that an issue for contingent faculty  broadly is whether they are protected by due process. He said it can be  unclear for contingent faculty whether they can be terminated without due  process consideration when, for example, a student complains about the  content of a faculty member\u2019s lecture.", "Despite concerns about opportunities for institutional involvement,  contingent faculty told us they preferred to use informal mechanisms to  raise issues with the administration and had mixed views about the value  of unions. Several full- and part-time faculty members said they are  comfortable approaching their department chairperson or even university  administrators to ask questions or express concerns. In terms of unions,  some faculty in both full-time and part-time discussion groups said they  were opposed to unions based on prior experiences or not wanting to pay  dues. In contrast, some faculty said they thought a union could be  beneficial by helping with certain issues, such as compensation and  working conditions. Union officials told us there has been greater interest  in recent years from contingent faculty\u2014including graduate assistants\u2014in  learning about faculty unionization or in organizing into unions. However,  one union official noted that it can be challenging for part-time faculty to  form a union because they may move from one institution to another."], "subsections": []}, {"section_title": "Institutional Support", "paragraphs": ["Examples of Academic Associations\u2019  Efforts to Focus on Contingent Worker  Issues  The American Political Science Association  (APSA): Convened a committee in 2016 on  the status of contingent faculty in the  profession to expand ways to support  contingent faculty members. The committee  sponsored a roundtable at the APSA Annual  Meeting in August 2017 to examine a range of  topics related to contingent faculty, including  promotion paths, fairness within the  profession, and the role of unionization.  The American Sociological Association (ASA):  Formed a task force on contingent faculty in  November 2015 to examine the implications  of the recent growth of contingent  employment among sociologists. The task  force\u2019s interim report, issued in August 2017,  includes recommendations to ASA and  universities, for improving contingent faculty  working conditions.  The Modern Language Association: (MLA)  Convened a committee that will work through  June 2019 to examine issues that affect  contingent faculty, including salary and  benefits, workplace issues and conditions of  employment, demographics, participation in  departmental and institutional governance,  academic freedom, and professional  development. The committee plans to identify  effective policies and practices related to  contingent faculty.  The American Institute of Physics (AIP):  Conducted a survey of individual faculty in  2016 that included questions on school  climate and culture. As of February 2017, AIP  was in the early stages of analyzing the  survey response rates and results.", "Contingent faculty in some discussion groups also described a lack of  institutional support in areas that can affect faculty teaching duties, such  as access to information systems or office space. For example, a part- time faculty member told us her access to institutional email and the  online grading system was terminated too soon because her contract  ended a few days before she gave final examinations. Part-time faculty  and faculty teaching at multiple institutions also raised concerns that they  sometimes lack appropriate office space to ensure student privacy. Union  officials we spoke with also said contingent faculty nationwide commonly  cite these areas of limited institutional support as concerns. Some  discipline-specific academic associations have also begun to focus on  issues related to contingent faculty (see sidebar).", "Insight from a Part-Time Contingent Faculty Member Who Teaches at Multiple  Institutions  \u201cThe office space problem is a big problem. Either one doesn\u2019t have any office space or  it\u2019s a jointly shared office space, a very large space with lots of people in it. It is very  difficult to have kind of close conversations with students. I think it brings up some Family  Educational Rights and Privacy Act (FERPA) problems, anonymity problems as well.\u201d"], "subsections": []}]}]}, {"section_title": "Agency Comments, Third Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education, NSF, and experts on  contingent faculty issues or the data used in this report for their review  and comment. Education did not have any comments. NSF and expert  reviewers provided technical comments, which we incorporated, as  appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, to the Secretary of Education and the Director  of the National Science Foundation, and to other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this review were to determine (1) what is known about  the makeup and utilization of the postsecondary instructional workforce;  (2) the roles different types of faculty fill at selected institutions and the  factors administrators consider when determining their faculty makeup;  (3) what is known about how economic circumstances compare across  different faculty types; and (4) what contingent faculty members report as  advantages and disadvantages of their work.", "To address objectives 2 and 4, we interviewed administrators and  contingent faculty members during site visits at selected institutions in  three states\u2014Georgia, North Dakota, and Ohio. In each state, we visited  one 4-year public institution, one 4-year private (non-profit) institution, and  one 2-year public institution (see table 11). We selected institutions in  these states, in part, to provide context for our analysis of faculty and  course data that we obtained from their postsecondary data systems (see  Section 1 of this appendix for more information). In addition to data  availability, we considered size and geographic location as part of our  state selection process. When selecting institutions within each state, we  considered factors such as the size of the instructional faculty workforce,  the percentage of contingent faculty, and whether the institution is located  in an urban, suburban, or rural area.", "In our interviews with administrators\u2014chief academic officers, vice  presidents, or deans, among others\u2014we asked about the roles different  types of instructional faculty fill and the factors administrators consider  when determining their institution\u2019s faculty makeup. In addition to  administrators at the institutions above, we also interviewed  administrators from one large online-based for-profit institution, which we  selected primarily based on size of the institution. In total, we interviewed  administrators from 10 institutions. The findings from these interviews are  not generalizable.", "At each institution, we held discussion groups with full-time and part-time  contingent faculty and graduate student instructors, where applicable.  University administrators solicited participants for the discussion groups  on our behalf. During these discussion groups, we asked contingent  faculty broad, open-ended questions about the advantages and  disadvantages of their work and about their working conditions.  Participants were invited to complete a written questionnaire to provide  demographic information about themselves. Among the 109 contingent  faculty members who completed our questionnaire, the average age of  full- and part-time contingent faculty we met with was 53. Graduate  student instructors were younger, with an average age of 30. Contingent  faculty we interviewed came from a range of disciplines, including  English, music, engineering, and the health professions. The vast majority  of full- and part-time contingent faculty indicated that they held a master\u2019s  or doctorate degree. At the institutions we visited in Georgia, North  Dakota, and Ohio, the majority of part-time faculty worked at one  institution. To ensure we collected a broad range of perspectives, we  conducted two additional discussion groups with contingent faculty who  taught at multiple institutions. In total, we conducted 21 discussion  groups with contingent faculty.", "Finally, we conducted additional interviews to obtain background and  context for our work. We met with individuals knowledgeable about issues  related to postsecondary faculty and unions representing postsecondary  faculty, including the American Association of University Professors and  the Service Employees International Union. For all questions, we also  reviewed relevant federal laws and regulations.", "The remainder of this appendix provides detailed information about the  data and quantitative analysis methods we used in our review, as follows:", "Section 1: Key data sources", "Section 2: Quantitative analysis methods used to address the  makeup, utilization, and economic circumstances of postsecondary  instructional faculty (objectives 1 and 3)", "Section 3: Pay-per-course regression analysis methods (objective 3)", "Section 4: Annual earnings regression analysis methods (objective 3)"], "subsections": [{"section_title": "Section 1: Data Sources", "paragraphs": ["To address our objectives, we used data from multiple sources (see table  12).", "To gain an understanding of and provide context for the relevant faculty  data that we analyzed, we interviewed officials from federal, state, and  non-governmental agencies who collect and maintain the respective  datasets, including the Department of Education (Education), Labor,  National Science Foundation, North Dakota University System (NDUS),  Ohio Department of Higher Education (ODHE), University System of  Georgia (USG), and American Academy of Arts & Sciences (AAAS).", "The Integrated Postsecondary Education Data System (IPEDS) and the  state administrative data represent the entire populations they cover, and  while the Current Population Survey (CPS), the Survey of Doctorate  Recipients (SDR), and the Humanities Departmental Survey (HDS) are  sample survey data, when weighted, they also represent the populations  they cover. Because the sample surveys followed a probability procedure  based on random selections, each respective sample is only one of a  large number of samples that might have been drawn. Since each sample  could have provided different estimates, we express our confidence in the  precision of our particular sample\u2019s results as the margin of error (i.e. the  half width of the 95 percent confidence interval\u2014for example, +/- 7  percentage points). This is the interval that would contain the actual  population value for 95 percent of the samples that could have been  drawn. Throughout our analyses, for estimates from survey data we  reported the applicable margins of error. In some cases, the confidence  intervals around our estimates were asymmetrical; however, we  presented the maximum half-width for simplicity and for a consistent and  conservative representation of the sampling error associated with our  estimates. Our analyses of CPS and SDR survey data are weighted  analyses using sample design information, replicate weights, and survey  analysis software to get the proper sample survey estimates and margins  of error. Additional details about the datasets follow."], "subsections": [{"section_title": "Integrated Postsecondary Education Data System (IPEDS)", "paragraphs": ["IPEDS is a system of interrelated surveys conducted annually by  Education\u2019s National Center for Education Statistics (NCES). IPEDS  gathers information from every college, university, and technical and  vocational institution that participates in federal student financial aid  programs, as well as other institutions that report data voluntarily. In  2015, more than 7,500 institutions reported data to IPEDS. IPEDS  collects data in the following 12 areas: institutional characteristics;  completions; 12-month enrollment; fall enrollment; graduation rates;  200% graduation rates; student financial aid; outcome measures;  admissions; human resources; finance; and academic libraries. As of the  2005 IPEDS data collection, information on faculty and staff are collected  as part of the human resources survey component, and include  information on faculty demographics and types of positions, among other  things. We used IPEDS data from 1995, 1999, 2003, 2007, 2011, and  2015. We utilized IPEDS as our primary data source because we are  able to identify a universe of postsecondary institutions and also because  the data allow us to distinguish between tenure-track and contingent  positions."], "subsections": []}, {"section_title": "Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC)", "paragraphs": ["The CPS is sponsored jointly by the Census Bureau and the Department  of Labor\u2019s Bureau of Labor Statistics. It is the source of official  government statistics on employment and unemployment in the United  States. The basic monthly survey is used to collect information on  employment, such as employment status, occupation, and industry, as  well as demographic information, among other things. The survey is  based on a sample of the civilian, non-institutionalized population of the  United States. Using a multistage stratified sample design, about 54,000  households are interviewed monthly based on area of residence to  represent the country as a whole and individual states; the total sample  also includes additional households that are not interviewed for various  reasons, such as not being reachable. In addition to these interviewed  and non-interviewed households from the basic CPS monthly sample, the  ASEC includes additional households; the total sample size for the 2016  ASEC was almost 100,000 households. The ASEC provides  supplemental data on work experience, income components, such as  earnings from employment, and noncash benefits, such as health  insurance coverage, among other things. Data on employment and  income refer to the preceding calendar year, although demographic data  refer to the time of the survey. This report used data from the March 2016  ASEC, which refers to employment and income during calendar year  2015."], "subsections": []}, {"section_title": "Survey of Doctorate Recipients (SDR)", "paragraphs": ["SDR is a biennial survey conducted by the National Science Foundation\u2019s  (NSF) National Center for Science and Engineering Statistics (NCSES)  that provides demographic and career history information about  individuals with a research doctoral degree in a science, technology,  engineering, and math (STEM), health, or social sciences field from a  U.S. academic institution. The survey follows a large sample of  individuals throughout their careers from the year they received their  doctoral degree until age 75, plus a sample of new doctoral recipients  added in each cycle. The survey includes questions regarding occupation  (including discipline area for postsecondary faculty), earnings, job  satisfaction, faculty tenure status, and faculty rank, among other topics.  While some data from the survey are released publicly, other data are  restricted from public use\u2014including data on tenure and rank\u2014 in order  to protect the anonymity of survey respondents. This report used data  from the 2013 SDR, which refers to employment in February 2013. We  obtained the publicly available data and a few additional restricted-use  variables that NCSES recoded for our use."], "subsections": []}, {"section_title": "Faculty and Course Data Received from Selected States", "paragraphs": ["The data from Georgia, North Dakota, and Ohio contained variables on  faculty characteristics, earnings and benefits, and courses taught. We  developed data requests through discussions with officials in each state."], "subsections": [{"section_title": "Georgia Postsecondary Institution Administrative Data (USG data)", "paragraphs": ["The data from USG covered all 4-year public institutions in Georgia  identified in our IPEDS universe and included course and enrollment data  from an academic database merged with faculty and earnings data from  USG\u2019s Human Resources Data Mart. The Georgia data also included  information on the percentage of individual faculty members\u2019 roles  comprised of instruction, research, and other responsibilities. The course  and enrollment data covered academic year 2015-16\u2014courses taught  during fall term 2015, spring term 2016, and summer term 2016. Most  faculty data are from fall 2015. For some faculty who were not in the fall  2015 data file because they started teaching in spring 2016, for instance,  USG matched fall 2016 faculty data to the course data. Earnings data  covered calendar year 2015 and included earnings year-to-date through  November."], "subsections": []}, {"section_title": "North Dakota Postsecondary Institution Administrative Data (NDUS data)", "paragraphs": ["The data from NDUS officials covered all non-tribal 4-year and 2-year  public institutions in North Dakota identified in our IPEDS universe and  included course and enrollment data, as well as faculty and earnings  data. All of the data covered academic year 2015-16\u2014courses taught and  earnings during fall term 2015, spring term 2016, and summer term 2016.  The data included common unique identifiers that allowed us to merge  extracts we received according to faculty ID and institution. The data were  downloaded by NDUS officials from a centralized data system into which  the North Dakota institutions report their data directly."], "subsections": []}, {"section_title": "Ohio Postsecondary Institution Administrative Data (ODHE data)", "paragraphs": ["The data from ODHE covered all 4-year public institutions and most 2- year institutions in Ohio identified in our IPEDS universe and included: (1)  course and enrollment data, (2) faculty data, and (3) faculty earnings  data. All of the data were from ODHE\u2019s Higher Education Information  (HEI) system, a comprehensive relational database that includes student  enrollment, course, financial aid, personnel, finance, and other data  submitted by Ohio\u2019s colleges and universities. The course and  enrollment data covered academic year 2014-15\u2014courses taught during  summer term 2014, fall term 2014, and spring term 2015. Faculty and  earnings data covered fiscal year 2015 (i.e., July 2014 through June  2015)."], "subsections": []}]}, {"section_title": "Humanities Departmental Survey (HDS)", "paragraphs": ["The HDS is a collaborative effort to collect and analyze information from  humanities departments across a number of academic fields. The HDS is  sponsored by AAAS, and national humanities organizations and  disciplinary associations, such as the Modern Language Association and  the American Historical Association, helped develop the HDS. The survey  collects a variety of information for each humanities field, including data  on the number and types of faculty and students taught by faculty type.  The survey has been administered twice, covering academic years 2007- 08 and 2012-13. In both instances, the Statistical Research Center of the  American Institute of Physics administered the surveys to a nationally  representative stratified sample of humanities departments in four-year  colleges and universities that existed in 2007-08 and was updated for  new disciplines in 2012-13. The 2012-13 survey included 2,127  departments in its sample across 13 humanities fields, and its overall  response rate was 71 percent. Information about faculty referred to  employment levels as of fall 2012.", "We identified several other discipline-specific academic associations that  have collected or are currently collecting data on faculty makeup in their  departments, including contingent faculty. However, we did not compare  the results of other department surveys to the HDS because the response  rates in other surveys were too low to be considered generalizable or  because any observable differences in faculty composition could be  attributed to differences in survey methodology or timeframe covered."], "subsections": []}, {"section_title": "Data Reliability", "paragraphs": ["For each of the datasets described above, we conducted a data reliability  assessment of variables included in our analyses. We reviewed technical  documentation and related publications and websites with information  about the data. We spoke with the appropriate officials at each agency or  organization to review our plans for analyses, as well as to resolve any  questions about the data and any known limitations. We also conducted  electronic testing, as applicable, to check for logical consistency, missing  data, and consistency with data reported in technical documentation. We determined that the variables we used from the data we reviewed were  sufficiently reliable for the purposes of this report."], "subsections": []}]}, {"section_title": "Section 2: Quantitative Analyses of the Makeup, Utilization, and Economic Circumstances of the Postsecondary Instructional Workforce", "paragraphs": ["This section discusses the quantitative analysis methods (not including  regression analyses) we used to address the makeup, utilization, and  economic circumstances of the postsecondary instructional workforce.  We used federal data from CPS, IPEDS, and SDR, state data from  Georgia, North Dakota, and Ohio, and non-governmental data from HDS  for these analyses.", "In each of the analyses that follow, our population of analysis was  postsecondary instructional faculty. However, our definition of  instructional faculty varied depending on the data source, as different  sources provide different information regarding instructional  responsibilities. For example, IPEDS indicates whether an individual\u2019s  responsibilities are primarily instructional whereas the state data indicates  whether an individual teaches a course. For each set of analyses, we  explain what definition of instructional faculty we used. Within our  population of instructional faculty, we defined as contingent faculty any  full-time or part-time faculty who do not have tenure or are not on the  tenure track."], "subsections": [{"section_title": "IPEDS Analyses of Historical and Current Makeup", "paragraphs": ["To analyze whether and how the size of the contingent faculty workforce  has changed over time, we used IPEDS data to identify instructional staff  nationwide by type of institution in 1995, 1999, 2003, 2007, 2011, and  2015, which is the most recently available year of data. The five historical  snapshots used data from the fall staff surveys to examine counts of  faculty and any trends in postsecondary education during the period  1995-2011. The 2015 snapshot used data from the \u201cemployees by  assigned position\u201d survey to examine current counts of faculty by position  type and used data from the fall staff survey to examine counts of faculty  by gender and race. We could not compare the historical and current  snapshots of faculty counts due to a significant change in 2012-13 to how  IPEDS defines instructional staff. Prior to this change, instructional staff  included those \u201cwhose primary responsibility is instruction, research,  and/or public service\u201d combined in a single category. After the change,  instructional staff included only those whose responsibilities are primarily  instructional or those \u201cfor whom it is not possible to differentiate between  instruction or teaching, research, and public service because each of  these functions is an integral component of his/her regular assignment.\u201d", "As a result, data on instructional faculty collected since 2012 is not  comparable to data collected prior to 2012.", "For each of these years of faculty data, we merged information from the  IPEDS institutional characteristics file and focused our analyses on a  universe of institutions that fit as close as possible to the following  definition:", "Active, Title IV, degree-granting 2-year and 4-year primarily  postsecondary institutions that are generally open to the public, have  at least 15 full-time equivalent staff, and reported at least 1  instructional staff member or graduate teaching assistant.", "The number of postsecondary institutions can change from year to year  due to new schools opening or existing schools closing or consolidating  with other schools, as well as due to changes in how schools elect to  report data to IPEDS.", "Not all of the same variables were available in the 1999 and 1995 IPEDS  institutional characteristics files. As a result, for the 1999 data, we used  different variables that also identified institutions that fit this definition. For  the 1995 data, we approximated this definition by identifying institutions  that offered at least an associate\u2019s degree or higher and that were active  institutions eligible for student financial aid (to approximate Title IV  institutions).", "For the historical snapshots, we identified counts of faculty by institution  type (i.e., control: public, private, for-profit; and level: 2-year, 4-year). We  categorized faculty according to the following position types:  full-time tenure-track (both tenured and non-tenured but on a tenure  track); part-time; and graduate teaching assistant.", "The historical IPEDS data (from the fall staff surveys) do not break out  part-time tenure-track from part-time contingent.", "For the 2015 snapshot, we identified counts of faculty by institution type,  as well as by other institutional characteristics, such as size and the  highest degree offered by the institution. We categorized faculty  according the following position types:  full-time tenure-track (both tenured and non-tenured but on a tenure  track); part-time tenure-track (both tenured and non-tenured but on a tenure part-time contingent; and graduate teaching assistant.", "We also identified contingent faculty positions by their contract types: non-faculty status.", "We used the 2015 IPEDS fall staff survey data to identify faculty by  gender and race/ethnicity group. For full-time faculty, we were able to  examine the full spectrum of tenure-track versus contingent with various  contracts. However, because these data were from the 2015 IPEDS fall  staff survey, the data do not break out part-time tenure-track from part- time contingent. The IPEDS race/ethnicity categories we analyzed were:", "Black or African American", "Other or unknown (includes the IPEDS race/ethnicity categories:  American Indian or Alaska Native; Native Hawaiian or other Pacific  Islander; two or more races; and race/ethnicity unknown)", "White (non-Hispanic)", "Aggregated IPEDS data represent the universe of postsecondary  instructional faculty positions, rather than a mutually exclusive count of  unique instructional faculty members. IPEDS data are reported at the  institution level, and so for any given institution the counts they report  represent both the number of faculty at the institution and the number of  positions they fill. However, because faculty who teach at more than one  institution are counted and reported by each institution, when faculty  counts are aggregated across multiple institutions, these faculty are  counted multiple times\u2014for each position they fill. As a result, aggregated  counts based on IPEDS data represent the universe of unique  instructional faculty positions, rather than the universe of unique faculty  workers."], "subsections": []}, {"section_title": "CPS Analyses of Current Faculty Makeup and Economic Circumstances", "paragraphs": ["We used CPS data from the March 2016 ASEC to estimate the numbers  of workers employed as postsecondary teachers in colleges and  universities nationwide during calendar year 2015. We categorized as  postsecondary instructional faculty any worker whose employment was in  both the \u201cpostsecondary teachers\u201d occupation (census code 2200) and  the \u201ccolleges and universities, including junior colleges\u201d industry (Census  code 7870). We also determined whether a worker was employed full- time (35 hours or more) or part-time (less than 35 hours) using another  variable in the ASEC.", "Among other differences with IPEDS data (see discussion of IPEDS  above), CPS data capture the number of workers rather than the number  of positions in postsecondary education and counts each worker once  even if they work at multiple institutions. In addition, because CPS  represents the entire labor force, the data include workers at  postsecondary institutions that we may have excluded from our IPEDS  analyses (e.g., non-degree-granting institutions). We utilized CPS data  to provide context for the total number of postsecondary teachers and to  estimate the proportions of the instructional workforce represented by full- time and part-time faculty. However, analysis of CPS data was not a  primary component of our report because the data cannot differentiate  workers by institution or by tenure status. As a result, the estimated  population of full-time faculty includes both tenure-track and contingent  faculty. Because CPS identifies workers as opposed to positions (which  might yield a lower count than the IPEDS data) and includes workers at  postsecondary institutions that we excluded from our IPEDS analyses  (which might yield a higher count than the IPEDS data), the count of  workers in the CPS data and the count of positions in the IPEDS data are  not directly comparable.", "We also examined the reasons part-time faculty reported they worked  part-time. We focused our analysis on 3 groups of part-time faculty: (1)  those who reported wanting to work part-time; (2) those who reported  they could only find a part-time job; and (3) those who reported seasonal  or temporary fluctuations in the availability of employment (i.e., \u201cslack  work\u201d)\u2014we combined the latter two groups because they are both related  to economic circumstances.", "To analyze the economic circumstances of contingent faculty, we used  CPS data to estimate the median earnings of full-time and part-time  faculty, as well as their receipt of work-provided retirement and health  benefits. Our analysis of median earnings used ASEC data on the self- reported amount earned from a worker\u2019s employer before deductions. In  examining benefits, we used the term \u201cwork-provided\u201d rather than  \u201cemployer-sponsored\u201d because the ASEC survey questions ask about  benefits offered by a worker\u2019s employer or union. For our analysis of  access to work-provided retirement plans, we counted a worker as having  a work-provided retirement plan if they responded \u201cyes\u201d to both of the  following questions from the ASEC: (1) \u201cOther than Social Security, did  the employer or union that  worked for  have a pension  or other type of retirement plan for any of the employees?\u201d and (2) \u201cWas   included in that plan?\u201d We also estimated the percentages of full- time and part-time faculty who were covered by any private health  insurance plan; were covered by private health insurance in their own  name; or had a work-provided health insurance plan. Those individuals  without insurance could have received insurance coverage through a  family member or other means."], "subsections": []}, {"section_title": "SDR Analyses of Compensation and Employment Experiences", "paragraphs": ["To compare\u2014at the national level\u2014the compensation and employment  experiences of contingent faculty and tenure-track faculty, we used 2013  SDR data to identify different faculty types and examined the extent to  which there were differences in earnings, benefits, and job satisfaction.  SDR data only include doctorate holders in STEM, health, and social  sciences fields, and thus our estimates cannot be generalized to non- doctorate holders or to fields outside of STEM, health, and social  sciences fields. For that reason, we did not present faculty population size  estimates using SDR data.", "We created our analysis population of instructional faculty based on  responses to questions regarding work activities and institution type.  Using these variables, we classified as instructional faculty any  respondents who said that their \u201cprimary or secondary work activity is  teaching,\u201d and whose institution type was a 2-year college; 4-year college  or university; medical school; or university-affiliated research institute.  This resulted in an analysis population of 7,232 instructional faculty  respondents; however, our analyses are weighted analyses that  generalize to the population.", "Within our analysis population, we identified faculty types based on  tenure status (i.e., tenured/on the tenure track or not on the tenure track)  and whether respondents said they worked 36 hours or more per week or  less than that (i.e., full-time versus part-time). We categorized graduate  assistants separately, though we chose not to present estimated  percentages for graduate assistants. Given that SDR is a survey of  doctorate holders, it may be that graduate assistants in the SDR data  are\u2014for example\u2014working toward another doctoral degree or have  remained at their degree-granting institution in a postdoctoral position. In  either case, we believe the working arrangements and economic  circumstances of these individuals may be unique from those of most  other graduate assistants. Without more detailed information, the data  do not allow us to determine the exact nature of graduate assistant  positions in the SDR data or explain how they compare to other types of  positions. We also chose not to present estimated percentages for part- time tenure-track faculty given that they represented a small proportion of  our analysis population.", "To analyze the economic circumstances of contingent faculty, we used  SDR data to calculate median annual earnings by faculty type, as well as  data on the availability of work-provided benefits. We calculated median  earnings using data on basic annual salary from the respondent\u2019s  principal job. We analyzed data on the following types of benefits: health  insurance, pension or retirement plans, profit-sharing plans, and paid  vacation/sick/personal days. Respondents were asked whether each  type of benefit was available to them regardless of whether they chose to  take the benefits.", "To analyze the employment experiences of contingent faculty, we used  SDR data on job satisfaction, reasons for working part-time, and  attendance of professional meetings. To examine job satisfaction, we  used data on satisfaction with overall employment, job security,  opportunities for advancement, salary, and benefits, from which we  estimated the percentage of faculty who were satisfied, somewhat  dissatisfied, or very dissatisfied by faculty type.", "Our analysis of part-time work first included whether a respondent who  reported working part-time said they wanted to work full-time.  Secondly,  among those who wanted\u2014and who did not want\u2014to work full-time, we  calculated the percentage who said they worked part-time (1) for family  reasons, (2) because a full-time job was not available, (3) because they  did not need/want full-time work, and (4) because they were a student,  had an illness, or held another job. Respondents could indicate more than  one reason for working part-time. We also analyzed a variable on attendance of professional meetings to calculate the percentage of  faculty, by faculty type, who reported attending professional association  meetings or conferences during the past 12 months.", "The SDR data included other variables that identify a respondent\u2019s  academic position, such as research faculty, administrators, adjuncts, and  others. We analyzed these variables to determine whether to use them to  categorize faculty, but found that they were not the most appropriate for  our purposes. However, we observed that these variables may have  implications on the economic circumstances of different types of faculty  and so used them as control variables in two of our regression models on  annual earnings. For example, we analyzed earnings of instructional  faculty who said they were \u201cadjunct\u201d faculty or administrators. Among  full-time and part-time contingent faculty, estimated median annual  earnings decreased when we included only faculty who said that they  were adjunct faculty (see table 13). However, the data do not allow us to  explain how or whether the positions for faculty who identified as adjuncts  are different compared to the positions of those who did not identify as  adjuncts, and, based on our team\u2019s interviews with administrators,  different institutions and individuals apply different meanings to the term  \u201cadjunct.\u201d As may be expected, among full-time tenure-track and full-time  contingent faculty, estimated median annual earnings increased when we  limited the population to only those faculty who said they were  administrators (see table 13)."], "subsections": []}, {"section_title": "State Data Analyses of Makeup and Utilization", "paragraphs": ["We used consistent methods to analyze data from Georgia, North  Dakota, and Ohio on faculty workforce makeup and utilization, though we  analyzed the data from each state separately. In addition, while each  state dataset was structured slightly differently, used different variable  names, and contained some unique elements or ways of capturing  information about faculty or courses, we restructured and compiled the  information to provide consistency across the states.", "In the state data, we identified instructional faculty as any individual who  taught a course during the given academic year. This definition includes a  variety of staff (e.g., deans, administrators, coaches, research faculty,  and postdocs) who fill about 2-10 percent of positions, depending on  institution type and state. In addition, instructional graduate assistants\u2014 who are listed in the state data as instructors of record\u2014fill about 8 to 15  percent of positions at 4-year institutions in the three states.", "Each state\u2019s data were ultimately structured as a set of unique faculty- institution pair observations\u2014where faculty were listed once, by their  employing institution. Each faculty-institution pair observation had  variables describing the faculty member\u2019s and institution\u2019s characteristics,  as well as counts of courses, students, and student credit hours taught by  the faculty member at that institution (including by academic term and by  course characteristics)."], "subsections": [{"section_title": "Faculty Data Compilation and Restructuring", "paragraphs": ["For all three state datasets, we coded and grouped certain faculty  characteristics variables, including academic rank, age group,  race/ethnicity, sex, and tenure status, to ensure consistency across  states. For example, in coding tenure status, we consistently categorized faculty as \u201cnon-tenure-track\u201d if they were identified in the  source data as not in a tenure-track position, as having been denied  tenure, as being in some other status, or as being in a position for which  tenure was not applicable. Some faculty characteristics variables were  structured differently in each of the three states and thus required unique  methods of recoding, though we applied consistent approaches and logic  in each case (see table 14).", "We also identified each individual\u2019s academic discipline based on  information provided in each state\u2019s data about their department. Faculty  members\u2019 departments in the Georgia and Ohio data are identified by  their standardized Classification of Instructional Programs (CIP) code.  The North Dakota data did not include the CIP code for faculty members\u2019  departments and department names in the North Dakota data were not  consistent across institutions. Thus, we coded North Dakota departments  by matching them manually to corresponding CIP codes.", "After manually assigning CIP codes to faculty in the North Dakota data,  we identified the highest level 2-digit CIP code for each faculty member in  all three state datasets. However, because the 2-digit CIP code  identifies over 40 fields of study, we grouped these by academic  discipline for our analyses. To group departments, we used a crosswalk  provided by Ohio that listed CIP codes according to 12 possible  disciplines they were most closely associated with. Although the  Department of Education\u2019s CIP coding system does not include a  commonly accepted list of disciplines, we determined that Ohio\u2019s  convention was reasonable and we applied the coding consistently  across all three states to identify the academic discipline of each  individual.", "The North Dakota data included multiple observations for some faculty  members within a single institution and term. This occurred for a variety of  reasons, such as a faculty member holding two positions at the same  institution (e.g., both a coach and an instructor, or half time as an  instructional graduate assistant and half time as a research graduate  assistant). To compile a consistently structured dataset of unique faculty- institution pair observations, we implemented the following sequential  process to select and eliminate duplicate faculty observations. We  confirmed with North Dakota officials that our approach and methods  were appropriate.", "For faculty with multiple observations, we dropped any observations  where (1) no earnings were listed in any term or earnings were only  listed for the summer term but the faculty member taught no courses  at the given institution in the summer; or (2) the work responsibilities  associated with the faculty observation were not directly related to  teaching (e.g., graduate assistant research or grading, management,  administration, research, or coaching) and a different observation for  that faculty member at the same institution had teaching duties listed.  We dropped these duplicate observations because there was a more  appropriate observation to be used for the given faculty member at  the given institution with earnings information and an associated  instructional position.", "For the remaining faculty with multiple observations, we sequentially  kept one observation as the primary faculty position based on  hierarchical logic we developed. For example, we dropped any  additional observations with an employee status other than \u201cactive\u201d or  a position identified as \u201ctemporary.\u201d As appropriate, we either  aggregated hours worked and earnings across the multiple  observations before dropping the duplicate observations or we took  the hours worked and earnings values from the observation identified  as primary."], "subsections": []}, {"section_title": "Course Data Compilation and Restructuring", "paragraphs": ["Course data from all three states included each unique course section  taught over the academic year by institution, term, and faculty instructor.  We analyzed course sections for which there was an instructor identified  and enough information about that faculty member to categorize them by  faculty type (e.g., full-time tenure-track versus part-time contingent,  etc.). For all three states, we aggregated these data by course type and  other information to the level of the unique faculty-institution pair. For  example, a single faculty member at a single institution may have taught  10 course sections, all at the undergraduate level and spread across the  year\u20144 in fall term, 4 in spring term, and 2 in summer term. Courses are  listed in the state data at both the course number level (e.g., Biology 101)  and the course section level (e.g., Biology 101, Sections A, B, and C).  Our analyses generally examined unique course sections by faculty  member (e.g., two separate sections of Biology 101 are considered as  two courses), as that is a more accurate depiction of faculty workload.  Thus, for consistency and clarity throughout our report, we use the term  \u201ccourses\u201d to refer to our analyses of course sections. In a few special  circumstances, we counted courses at the course number level instead of  the course section level to minimize potential bias in our work (see  additional information below).", "The course data included information about courses that we  systematically coded and grouped to ensure consistency across the three  states. For example, each state identified the academic level of each  course. The Georgia and North Dakota data identified courses along a  spectrum\u2014generally developmental, freshman, sophomore, junior,  senior, or graduate. The Ohio data had a different classification series:", "Developmental: All courses which are below college level", "General Studies: All courses which are general, introductory, or core", "Technical: Only those courses which are part of an associate degree  program of technical education and are within the technical portion of  a curriculum", "Baccalaureate: All courses which are specialized within a discipline", "Master\u2019s / Doctoral / Professional \u2013 All graduate courses of various  To categorize undergraduate course levels consistently across the states,  we identified courses as (1) undergraduate lower if they were at the  freshman, sophomore, general, or technical levels; or (2) undergraduate  upper if they were at the junior, senior, or baccalaureate levels.  Developmental and graduate courses were identified consistently in each  state\u2019s data.", "We made a number of decisions about how to categorize and count  courses consistently across institutions and states. For example, we  dropped cancelled courses or courses with no student enrollment. We  also excluded from our primary analyses courses that would likely be  student-led or student-initiated and thus could be considered atypical  courses. We excluded these courses to minimize the potential bias of  inflating the percentage of courses taught and deflating the earnings per  course of one faculty type relative to another. After reviewing course  types and titles, as well as associated student enrollment numbers and  credit hours, we identified courses that met this definition and categorized  them as atypical. Among the courses we identified as student-led or  student-initiated were:", "Art or musical exhibitions, performances, or recitals  Independent, supervised, dissertation, or thesis research  Internships, fieldwork, practicums, cooperative experiences", "Varsity athletics  These atypical courses made up close to a quarter of all courses across  4-year institutions in the three states and less than 10 percent of courses  at 2-year institutions. As expected, and due to many being independent or  single-student enrollment courses, they generally represented much  smaller proportions of student credit hours across all institutions. Across  4-year public institutions in all 3 states, tenure-track faculty taught close to  75 percent or more of these courses.", "We also accounted for cross-listed courses and multiple lab sections to  more accurately capture faculty workloads. Some courses in the Georgia  and North Dakota data were cross-listed in multiple departments with  different course acronyms for each department. For example, the course  \u201cIntro Robotics Research\u201d taught by a single faculty member at one  institution was listed three times under different department acronyms,  with several students enrolled under each listing. Course sections listed  multiple times due to being cross-listed would artificially inflate counts of  courses taught, as these cross-listings actually represent only one course  section. To avoid inappropriately counting them as separate courses, we  counted cross-listed courses by using their course numbers (and also  their course name in North Dakota) without the course acronyms  attached. Thus, when we aggregated counts of courses by faculty- institution pair, term, and course type, these cross-listed courses were  counted as one course and numbers of students and student credit hours  were aggregated in association with the course. Due to inconsistencies in  how lab sections were organized in the data, we aggregated labs by their  course number (within a faculty-institution pair and term). For example,  some lab sections were listed as 4-credit courses that appeared to have  the lecture and lab components combined in a single listing, while others  had a 3-credit lecture course listed and multiple sections of a 1-credit lab.  To be as consistent across states as possible and to minimize the  potential bias of inflating the percentage of courses taught and deflating  the earnings per course of one faculty type relative to another, we  combined lab sections into a single course count. To do so, we identified  the lab sections within a particular course number, instructor, institution,  and term and then flagged the first lab section for counting. Thus, similar  to the cross-listed courses, when we aggregated counts of courses by  faculty-institution pair, term, and course type, these lab sections were  counted as one course and enrollment numbers aggregated in  association with the course.", "For outlier faculty who taught especially large numbers of course  sections, we counted their courses taught at the course number level  (e.g., Biology 101) instead of the course section level (e.g., section 1 of  Biology 101). After compiling the data and producing preliminary counts  of course sections taught, some faculty in all three states emerged as  outliers\u2014teaching large numbers of course sections in a given term, in  some cases, more than 50, for example. Though the data do not provide  exact reasons for the large numbers of course sections taught, these  outliers may have a number of possible explanations that could vary by  state and institution. Among other effects, these outlier observations  could artificially inflate the percentage of courses taught and deflate the  earnings per course of one faculty type relative to another. To mitigate  these effects, we counted courses taught for these outlier faculty at the  course number level\u2014where they are clearly distinct\u2014instead of the  course section level\u2014where it is less clear why there are multiple  sections. For example, Biology 101 is clearly a different course than  Biology 201 or Chemistry 101 (regardless of section number), whereas  section A of Biology 101 could actually be combined with section B and  they are just listed separately for other reasons. We did not set a  maximum number of courses that an individual could teach (i.e.,  individual faculty could still be listed as teaching large numbers of courses  if they were associated with large counts at the course number level). We  counted course numbers for outlier faculty because their large numbers of  course sections listed suggested the possibility of a data anomaly; for all  others (non-outlier faculty), we counted course sections. We set our  outlier threshold as 15 course sections taught over the academic year  based on an examination of the range of course sections taught by faculty  in the three states\u2019 data and conversations with administrators during our  site visits. According to preliminary counts of course sections taught after  excluding atypical courses, more than 95 percent of faculty in each state  taught 15 course sections or fewer over the entire academic year. In  addition, during our site visits, the largest number of course sections  taught per term that administrators identified was 6, which could  reasonably result in 15 course sections over the year (6 in fall term, 6 in  spring term, and 3 in summer term\u2014half the amount due to the  condensed format)."], "subsections": []}, {"section_title": "Analysis of Faculty Makeup and Utilization", "paragraphs": ["To analyze faculty makeup and utilization by institution, we merged  information about institutional characteristics from IPEDS onto our state  datasets. We analyzed faculty makeup, including counts and percentages  of faculty positions by type of position and faculty characteristics (e.g.,  age, education, and academic discipline), by the following faculty  categories (based, in part, on faculty tenure and work statuses):  We sometimes analyzed full-time and part-time contingent faculty and  instructional graduate assistants combined as \u201ccontingent faculty\u201d and  full-time and part-time tenure-track combined as \u201ctenure-track faculty.\u201d  Unlike our analyses of IPEDS data, we included instructional graduate  assistants in our combined contingent faculty group because they were  listed as teachers of record for courses in the state data. We analyzed  administrators/management as a separate group because these  individuals represent a non-traditional class of faculty. For example,  administrators may not have tenure-track status due to their management  roles, but are in positions that may not be appropriate to be considered  \u201ccontingent\u201d (e.g., a dean might not be a tenure-track faculty member, but  neither are they a contingent faculty member). We analyzed educational  attainment of faculty by calculating the percentage of faculty with  graduate or doctoral degrees by faculty type and institution type in in  North Dakota and Ohio. Table 15 shows the total number of instructional  faculty positions by institution type in each state, as well as selected  faculty demographics.", "We analyzed faculty utilization by aggregating counts of courses,  students, and student credit hours taught by each faculty category above,  and by term and type of course, and by calculating percentages taught  out of the entire population and certain subgroups. As a first step in this  process, we aggregated counts of courses, students, and student credit  hours for each faculty-institution pair by term and type of course. As a  result, each faculty-institution pair had count variables that listed, for  example, how many courses and students they taught in fall term at the  undergraduate upper level. The Georgia and Ohio data listed courses  multiple times if multiple faculty share the instructional responsibility. To  ensure course sections were not double-counted, we counted them in  fractional terms based on how many instructors were listed; for example,  if a course section was listed twice\u2014with two faculty members having  equal responsibility for the course\u2014we counted each faculty member as  teaching half of that course. We also used this fractional count to pro-rate  or assign responsibility for students and student credit hours. We  calculated this fractional count slightly differently for the Georgia and the  Ohio data:", "Georgia: The Georgia data provided a teaching responsibility  percentage for each faculty member associated with a course section.  For example, a course section that was listed 3 times (for 3 different  faculty with responsibility) might be split evenly 1/3-1/3-1/3 or might be  split as 50-30-20 percent responsibility to each of the three faculty  members. Thus, we used this individually provided fractional value.", "Ohio: The Ohio data did not provide a teaching responsibility  percentage for each faculty member associated with a course section.  Thus, we assigned equal responsibility (as the simplest assumption)  to all staff listed for a course.", "After aggregating counts to the faculty-institution pair level, we further  aggregated counts to the faculty category and institution type level. Our  analyses focused on counts and percentages of courses and student  credit hours by these faculty categories. Table 16 shows the total  number of courses taught by institution and faculty types in each state.", "We also analyzed economic circumstances by examining median annual  earnings and receipt of work-provided retirement, health insurance, and  life insurance benefits by faculty type. We calculated an annual earnings  amount for each faculty member and then analyzed median earnings by  faculty type. For benefits, we identified whether individual faculty  received a given benefit during the year, and then calculated the  percentage of each faculty type receiving those benefits. We were unable  to analyze benefits in this way for faculty in Ohio. See table 14 above for  additional details about our earnings and benefits calculations by state."], "subsections": []}]}, {"section_title": "HDS Analyses of Faculty Makeup", "paragraphs": ["To estimate population percentages by faculty type and discipline in  humanities departments at 4-year institutions, we used HDS data that  were published in a technical report sponsored by AAAS. Our  population of instructional faculty included faculty in humanities  departments at 4-year institutions. The sample was stratified by  discipline and degree level of courses taught (i.e., bachelor\u2019s, master\u2019s,  and doctoral degree courses). We were unable to access the data with  the sample design information (i.e. sampling weights and stratification  identifiers) necessary to calculate margins of errors that took into account  the sample design features. To allow us to estimate margins of error for  the estimates presented in the report, AAAS provided information on the  number of respondents associated with each response category since the  survey had unit and item nonresponse. We incorporated this information  into a simple random sampling formula, which we adjusted for the design  effect due to unequal weighting that resulted from stratification within  departments (e.g., differences in the extent to which departments may  offer bachelor\u2019s, master\u2019s, and doctoral degree courses)."], "subsections": []}]}, {"section_title": "Section 3: Pay per Course Regression Analysis (State Data)", "paragraphs": ["This section discusses the regression analysis methods we used to  analyze and compare pay-per-course rates across different types of  faculty at public institutions in North Dakota and Ohio. We used data from  the three states to conduct multivariate regression analyses that  examined rates of compensation across faculty types. Data from North  Dakota and Ohio allowed us to link faculty members\u2019 pay over the course  of an academic year with the number of courses they taught to calculate  pay-per-course rates that are comparable across faculty types. Data from  Georgia did not allow us to do this because the earnings data from  Georgia is for a calendar year that did not align with the course data for  the academic year. However, we used Georgia\u2019s data to develop  assumptions about faculty work activities (see below for more details).  The state data we used to analyze pay-per-course rates covered courses  taught and earnings from fall 2015 through summer 2016 for North  Dakota, and summer 2014 through spring 2015 for Ohio."], "subsections": [{"section_title": "Analysis Population", "paragraphs": ["The faculty populations included in our regression analyses of the North  Dakota and Ohio data begin with the same population of instructional  faculty analyzed elsewhere in our work\u2014any individual who teaches a  course at a 4-year or 2-year public institution in the state. However, due  to some faculty observations missing information for independent  variables, as well as the specifications of some of our models that  focused on subgroups within the data, the number of faculty observations  in our regression analyses differed slightly from those in our other  analyses. In assessing the association between faculty type (e.g.,  contingent faculty) and pay per course, we focused on three primary  populations: (1) all faculty; (2) primarily teaching faculty; and (3) primarily  teaching faculty at 4-year institutions. The primarily teaching faculty group  excludes faculty who primarily hold other roles unrelated to instruction  (e.g., administrators and research faculty). We also examined a  population limited to 4-year institutions because their pay and faculty  utilization structures may differ substantively from 2-year institutions.", "North Dakota: Compared to the 3,608 faculty observations with  complete faculty and course identification data across North Dakota  public institutions that we analyze for workforce makeup and  utilization, the number of observations included in our regression  analysis population is reduced to 3,486 due to our dropping of cases  where total earnings was less than one dollar or missing, or where the  number of in-scope courses taught was zero (more information below  under discussion of dependent variables). After introducing the full  range of independent variables in our complete model with all faculty  at all institutions, our population is reduced to 3,485 due to one faculty  member being omitted due to missing data. When we limit the  population to primarily teaching faculty at all institutions, there are  3,404 observations, and when we only include 4-year institutions,  there are 2,876 observations.", "Ohio: Compared to the 34,461 faculty observations with complete  faculty and course identification data across Ohio public institutions  that we analyze for workforce makeup and utilization, the number of  observations included in our regression analysis population is reduced  to 30,672 due to our dropping of cases where total earnings was less  than one dollar or missing, or where the number of in-scope courses  taught was zero (more information below under discussion of  dependent variables). After introducing the full range of independent  variables in our complete model with all faculty at all institutions, our  population is reduced to 30,656 due to 16 faculty members missing  data for covariates. When we limit the population to primarily teaching  faculty at all institutions, there are 28,811 observations, and when we  only include 4-year institutions, there are 21,482 observations."], "subsections": []}, {"section_title": "Approximating Instructional Pay from Georgia Data on Faculty Work Activities", "paragraphs": ["As explained earlier in the report, we examined instructional pay per  course as a way to isolate the earnings for comparable work across  faculty types\u2014for example, those who only teach (salaried or paid by the  course) versus those who have other responsibilities beyond teaching.  Institutions do not generally structure compensation by types of work  activities, though some faculty have work responsibility expectations  associated with their positions; for example, a full time tenure-track  assistant professor may have work responsibly expectations of 60  percent instructional, 30 percent research, and 10 percent other service  to the institution. If this faculty member earns $80,000 per year and  teaches 8 courses over the course of the year, her total pay per course,  which ignores time spent on research and other activities, would be  $80,000/8 = $10,000 per course. However, prorating the earnings to  those for instructional work activities only, the instructional pay per course  would be ($80,000*0.6)/8 = $6,000. We assessed each regression model  based on the outcomes of total pay per course and instructional pay per  course, where earnings were prorated for instructional time.", "Because information about faculty work activity was unavailable in the  North Dakota and Ohio data, but was available in the Georgia data, we  used empirical data that we received on four of the Georgia 4-year public  institutions to identify work activity percentages by faculty type. We then  assigned those percentages to similar faculty in North Dakota and Ohio.  We identified the median instructional work activity percentages for the  faculty in Georgia\u2019s 4-year public institutions within profiles based on a  combination of faculty characteristics including faculty category (e.g., full- time tenure-track, full-time non-tenure-track, part-time non-tenure-track,  etc.), job category (e.g. administration/management, teaching faculty,  research/other faculty, etc.), and when applicable, rank (e.g. full  professor, assistant professor, instructor/lecturer, etc.). We then applied  the median instructional work activity percentage from the Georgia data  by these profile groups to faculty at 4-year institutions in the North Dakota  and Ohio data with the same profile. For faculty in the job categories of  administrators/management staff, instructional graduate assistants,  coaches, and postdocs, the median instructional work activity percentage  in those groups overall was sufficiently explanatory. For the remaining  two job category groups of instructional faculty and research/other faculty, we used median work activity percentages by faculty category (e.g., full- time tenure-track) and rank (e.g., full professor). If a faculty member did  not have a rank identified in the data, we used the median work activity  percentage for the faculty category overall (see table 17). Because the  data on work responsibilities pertained to public 4-year institutions in the  Georgia data, we did not prorate faculty at 2-year institutions accordingly.  Because 2-year institutions generally do not have a research mission, we  coded all faculty at 2-year institutions as 100 percent instructional, except  for administrators/management staff. We prorated  administrators/management staff according to the same method as at 4- year institutions due to their likely having substantial non-teaching  responsibilities.", "Faculty earnings in the North Dakota and Ohio data were multiplied by  the relevant median instructional work activity percentage in order to  adjust pay to reflect instructional work activity, resulting in an  \u201cinstructional pay\u201d amount. The majority of adjustments\u2014prorating of  earnings to account for non-instructional activities\u2014were applied to  faculty in the full-time tenure-track group, who were most likely to have  other work responsibilities. Some adjustment to earnings also occurred in  the full- and part-time contingent groups, as well as for faculty who had a  job type that indicated substantial administrative and management roles.  No prorating occurred for instructional graduate assistants."], "subsections": []}, {"section_title": "Dependent Variables", "paragraphs": ["We conducted regressions using the following dependent variables:  a) Log (total pay per course) \u2013 In our analysis of the North Dakota and  Ohio data, we used the natural logarithm of the total pay per course,  which is defined as the total annual earnings (i.e., total pay) divided by  the total courses taught within that year.  b) Log (instructional pay per course) \u2013 In our analysis of the North Dakota  and Ohio data, we also used the natural logarithm of the instructional pay  per course, which is defined as total annual earnings adjusted to reflect  instructional work activity (i.e., instructional pay) divided by the total  courses taught within that year.", "We excluded cases from our analysis if they were missing values for  either total annual earnings or total courses taught within that same year  because these variables were the primary components of pay per course.  We dropped cases where total earnings were less than one dollar or  missing (19 observations in North Dakota and 2,869 observations in  Ohio) or the number of courses taught was zero (103 observations in  North Dakota and 920 observations in Ohio) since division by zero is  undefined, and our population is intended to reflect any individual who  actually teaches a course at 4-year and 2-year public institutions in the  state. We then divided pay (total or instructional) by the number of  courses taught to obtain the pay-per-course value. We use the log of total  and instructional pay per course for the dependent variables in a linear  model reflecting both the assumption that the underlying distribution is  closer to the log normal than normal, and also to present results in terms  of percentage changes in pay per course.", "In the Ohio data, because we use fractional counts for courses when  multiple faculty are listed as having responsibility for the course, 3,453  faculty in the analysis population teach less than 1 course. For those  faculty, we round all course counts that are less than 1 up to 1 to avoid  dividing faculty earnings by a fractional course count (between 0 and 1),  which would result in an inaccurate and substantially large pay-per- course value."], "subsections": []}, {"section_title": "Independent Variables", "paragraphs": ["The primary independent variable of interest in our analysis was faculty  type. We categorized faculty into five types: full-time tenure-track, full-time  contingent, part-time tenure-track, part-time contingent, and graduate  assistant. Our main interest was comparing contingent faculty and  graduate assistants to full-time tenure-track faculty. We controlled for the  part-time tenure-track group, but due to the small size of this population  (at most, 35 faculty in North Dakota and 274 faculty in Ohio), we did not  substantively examine these estimates. All regression models set the  base group for faculty type as full-time tenure-track.", "We included in our regression models additional independent variables as  controls for faculty and institution characteristics. Faculty characteristics  include sex, race, age, age squared (to account for the potential non- linear relationship between earnings and age), highest degree earned,  and academic discipline. Other faculty characteristics we controlled for in  our models included whether a faculty member had grant funds (North  Dakota only), whether a faculty member taught summer courses, and  indicators identifying non-traditional faculty roles, such as  administrators/management or coaches. We also included fixed effects  for institutions to control for differences between institutions, especially in  terms of pay due to factors such as size, sector, and research/graduate  component, among other things.", "We also examined rank of faculty (e.g. associate professor, assistant  professor, instructor/lecturer, etc.), but excluded it from our complete  models due to collinearity with the faculty type variable."], "subsections": []}, {"section_title": "Regression Model Detailed Results", "paragraphs": ["Tables 18 and 19 (below) shows the coefficients and standard errors from  each of our final pay-per-course regression models, as well as for the  unadjusted model that included only the primary independent variable of  interest (total pay-per-course results at the top and instructional pay-per- course results below). For our categorical variables, estimated  coefficients are relative to the excluded (reference) category. For  example, since the reference category for our main independent variable,  faculty type, was full-time tenure-track, the estimated coefficients for other  categories of this variable are always relative to this excluded reference  category, holding all other variables in the model constant. Thus, in model  2 for North Dakota, the coefficient for full-time contingent faculty is 0.682.  This can be interpreted as full-time contingent faculty pay per course is  0.682 that of full-time tenure-track faculty (i.e., full-time contingent faculty  are paid 68.2 percent what full-time tenure-track are, per course), holding  all other variables in the model constant. Because the dependent  variables in the earnings models are the natural logarithms of earnings,  subtracting one from the presented coefficients on categorical variables  can be interpreted as the percentage change in the dependent variable  associated with a change in the categorical variable, relative to the  reference category, holding all other variables constant. In this same  example, full-time contingent faculty are paid an estimated 31.8 percent  less than full-time tenure-track faculty, because 0.682 \u2013 1 = -0.318, or  31.8 percent less."], "subsections": []}, {"section_title": "Additional Analyses and Sensitivity Tests", "paragraphs": ["The North Dakota and Ohio data used in the regression analyses include  a small number of faculty (1.1 and 0.5 percent of observations,  respectively) who are listed as teacher of record for more than 15 courses  over the year, which may represent unusually high workloads or data  anomalies. In addition, some faculty have small or large pay-per-course  values when compared to the overall distribution. To preserve the  integrity of the data, we did not exclude these observations from the  analyses. However, we tested our models with and without these  observations to assess the effect on our substantive regression results. In  order to assess the effect of faculty with a large workload, we conducted  regression models 3 and 4 (in tables 18 and 19 above) limited to faculty  who taught 15 or fewer courses over the year. In order to assess the  effect of faculty with the outermost values of the dependent variable pay  per course, we conducted the same regression models limited to faculty  whose pay per course was within the middle 98 percent of pay-per-course  values (i.e., we trimmed the bottom and top 1 percent of observations). In  both of these sensitivity analyses, we found substantively similar results.", "We also ran our regression models on a more refined population that only  included primarily teaching faculty at 4-year institutions (faculty at 4-year  institutions represent most of our analysis population). As shown in table  18 above, in terms of total pay per course, full-time contingent faculty in  North Dakota and Ohio are paid about 40 and 43 percent less per course,  respectively, than full-time tenure-track faculty\u2014compared to 35 and 40  percent less per course, respectively, when both 4-year and 2-year  institutions are included. This slightly larger pay-per-course disparity as  compared to the population overall may be, in part, because pay and  utilization of full-time faculty vary somewhat by institution type (e.g., at 4- year institutions, pay is generally higher but less flat, and some full-time  tenure-track faculty teach fewer courses due to their more extensive  research responsibilities)."], "subsections": []}]}, {"section_title": "Section 4: Annual Earnings Regression Analysis (SDR Data)", "paragraphs": ["This section discusses the regression analysis methods we used to  analyze and compare annual earnings among different types of faculty  using national 2013 SDR data on doctorate-holding faculty in the STEM,  health, and social sciences fields."], "subsections": [{"section_title": "Dependent Variable", "paragraphs": ["We conducted regressions using the following dependent variable: Log  (annual salary)\u2014the natural logarithm of annual salary, defined as the  basic annual salary from the respondent\u2019s principal job."], "subsections": []}, {"section_title": "Independent Variables", "paragraphs": ["The primary independent variable of interest in our analysis was faculty  type. We categorized faculty into five types: full-time tenure-track, full-time  contingent, part-time tenure-track, part-time contingent, and graduate  assistant. Our main interest was comparing contingent faculty to full-time  tenure-track faculty. Though we controlled for the part-time tenure-track  and graduate assistant groups, we did not substantively examine these  estimates. All regression models set the reference group for faculty type  as full-time tenure-track.", "We included in our regression models additional independent variables as  controls for faculty and institution characteristics. Faculty characteristics  included sex, race, age, age squared, number of weeks worked per year,  and academic discipline. Other faculty characteristics we controlled for  included the year of highest degree earned\u2014which we used as proxy for  general experience\u2014and whether a respondent indicated that they were  an administrator. We also included institution type (e.g., 4-year college or  university, 2-year college or university). After introducing the full range of  independent variables in our complete model, our analysis sample was  reduced from 7,232 faculty respondents to 7,226 due to 6 faculty  respondents being omitted due to missing data.", "We examined faculty rank (e.g. professoriate, instructor/lecturer) and  academic position variables for \u201cadjunct\u201d faculty and postdocs, but we  excluded these variables from our complete model, as we determined  they did not have meaningful information for the purpose of our  analyses."], "subsections": []}, {"section_title": "Regression Model Detailed Results", "paragraphs": ["In our complete model, full-time and part-time contingent faculty earned  22 percent less and 70 percent less, respectively, than full-time tenure- track faculty annually (see table 20). Across our preliminary models (not  shown below) and complete model, the coefficients related to our main  independent variable remained relatively constant, ranging from 0.76 to  0.86 for full-time contingent faculty and 0.26 to 0.43 for part-time  contingent faculty, expressed as proportion of full-time tenure-track  faculty earnings."], "subsections": []}]}]}, {"section_title": "Appendix II: IPEDS Data on the Racial and Ethnic Distribution of Faculty Positions Nationwide, 2015", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nagla\u2019a El-Hodiri (Assistant  Director), Nisha R. Hazra (Analyst-in-charge), Sandra Baxter, Justin  Gordinas, Michael Kniss, and Alexandra Squitieri made key contributions  to this report. Also contributing significantly to this report were Melinda  Cordero, Grant Mallie, Jean McSween, Moon Parks, and Sonya  Vartivarian. Key support was provided by James Ashley, James Bennett,  Grace Cho, Jessica Orr, James Rebbe, Almeta Spencer, and Elaine  Vaurio."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-131", "url": "https://www.gao.gov/products/GAO-19-131", "title": "Information Technology: Effective Practices Have Improved Agencies' FITARA Implementation", "published_date": "2019-04-29T00:00:00", "released_date": "2019-04-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress has long recognized that IT has the potential to enable federal agencies to accomplish their missions more quickly, effectively, and economically. However, fully exploiting this potential has presented challenges to covered agencies, and the federal government's management of IT has produced mixed results.", "As part of its effort to reform the government-wide management of IT, in December 2014 Congress enacted FITARA. The law included specific requirements related to enhancing Chief Information Officers' (CIO) authorities, improving the risk management of IT investments, reviewing agencies' portfolio of IT investments, consolidating federal data centers, and purchasing software licenses. GAO has reported numerous times on agencies' effectiveness in implementing the provisions of the law and highlighted agencies that have had success in implementing selected provisions.", "In this report, GAO identifies practices that agencies have used to effectively implement FITARA. GAO selected five provisions of FITARA to review: (1) CIO authority enhancements; (2) enhanced transparency and improved risk management; (3) portfolio review; (4) data center consolidation; and (5) software purchasing. GAO then selected nine agencies that had success in implementing at least one of the five provisions. GAO compiled practices where at least one agency was better positioned to implement a provision or realized an IT management improvement or cost savings."]}, {"section_title": "What GAO Found", "paragraphs": ["Nine selected agencies (the Departments of Agriculture, Commerce, Health and Human Services, Homeland Security, Justice, and Veterans Affairs; the Agency for International Development; the National Aeronautics and Space Administration; and the General Services Administration) identified 12 practices that helped them to effectively implement one or more Federal Information Technology Acquisition Reform Act provisions (commonly referred to as FITARA). The following figure identifies the 12 practices, including the four overarching ones, considered vital to implementing all provisions.", "By applying the overarching practices, covered agencies were better positioned to implement FITARA. In addition, by implementing the practices relative to the five FITARA provisions GAO selected, covered agencies realized information technology (IT) management improvements, such as decommissioning old systems and cost savings."]}], "report": [{"section_title": "Letter", "paragraphs": ["Congress has long recognized that information technology (IT) has the  potential to enable federal agencies to accomplish their missions more  quickly, effectively, and economically. However, fully achieving this  potential has presented longstanding challenges to agencies. In this  regard, the federal government\u2019s management of IT has produced mixed  results despite a continued increase in federal IT spending, which is  planned to be more than $92 billion in fiscal year 2019.", "As part of its effort to reform the government-wide management of IT, in  December 2014, Congress enacted the Federal Information Technology  Acquisition Reform provisions (commonly referred to as FITARA) of the  Carl Levin and Howard P. \u2018Buck\u2019 McKeon National Defense Authorization  Act for Fiscal Year 2015. FITARA holds promise for improving covered  agencies\u2019 management and acquisitions of IT, facilitating Congress\u2019  monitoring of agencies\u2019 progress, and holding those agencies  accountable for reducing duplication and achieving cost savings.", "Since its enactment, we have reported numerous times on agencies\u2019  efforts toward implementing FITARA. Our work has highlighted various  agencies\u2019 successes, as well as challenges, in implementing selected  provisions of the act.", "This report responds to your request that we conduct a review of FITARA  implementation practices. Our specific objective was to identify practices  that federal agencies have used to effectively implement the provisions of  the act.", "To address this objective, we first identified the specific provisions of the  act to include in our review. To do so, we (1) reviewed our previously  issued reports that have examined various aspects of the act; (2) met  with relevant officials from the Office of Management and Budget\u2019s (OMB)  Office of Electronic Government and Information Technology; and (3)  reviewed data contained on the IT Dashboard, as well as other relevant  information supporting the House of Representatives Committee on  Oversight and Government Reform\u2019s biannual scorecards on the 24  covered agencies\u2019 progress in addressing the act\u2019s requirements.", "As a result of these activities, combined with our professional judgment,  we identified five FITARA provisions that were most relevant to enabling  agencies\u2019 IT management improvements. These provisions were: Chief  Information Officer (CIO) authority enhancements, enhanced  transparency and improved risk management in IT investments, portfolio  review, the federal data center consolidation initiative, and the  government-wide software purchasing program.", "We then identified nine agencies that had implemented at least one of the  five FITARA provisions we included in our review. Our identification of the  nine agencies was based on information in our previous reports that  indicated each agency had realized an IT management improvement or  cost savings with respect to one or more of the five selected FITARA  provisions. Additionally, we considered other relevant information  supporting the House of Representatives Committee on Oversight and  Government Reform\u2019s scorecards that indicated an agency had  effectively implemented FITARA. These nine agencies were the  Departments of Agriculture (USDA), Commerce (Commerce), Health and  Human Services (HHS), Homeland Security (DHS), Justice (Justice), and  Veterans Affairs (VA); and the Agency for International Development  (USAID); the National Aeronautics and Space Administration (NASA);  and the General Services Administration (GSA). These nine agencies  account for about $27 billion (or about 59 percent) of the $45.8 billion in  estimated non-defense IT spending for fiscal year 2019.", "To gain additional information on the nine agencies\u2019 FITARA  implementation, we obtained and reviewed relevant documentation, such  as FITARA implementation plans, capital planning and investment control  processes, data center optimization plans, and software licensing  policies. Additionally, we conducted interviews with relevant officials at  these agencies to discuss actions taken to implement the provisions of  the act. These officials included a FITARA Program Manager, a Director  of FITARA Operations, and staff within department-level CIO offices  responsible for implementing the provisions of the act.", "We compiled practices where at least one agency had taken action to  implement one of the five selected provisions that led to an IT  management improvement or cost savings. We then compiled  descriptions of the actions that the nine agencies had taken. Additionally,  we reviewed actions the agencies have taken in response to our previous  recommendations to corroborate the IT management improvements and  cost savings. Agencies also identified overarching practices that were not  unique to a specific provision but, instead, better positioned agencies to  implement one or more of the five provisions. Further, we shared the  practices with the nine agencies\u2019 Inspectors General to provide additional  assurance that the practices were consistent with the agencies\u2019 activities  to address FITARA. In addition, we solicited comments on a draft of this  report from the nine agencies included in our review and OMB.", "We conducted this performance audit from January 2018 to April 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 objective."], "subsections": [{"section_title": "Background", "paragraphs": ["Although the federal government has undertaken numerous initiatives to  better manage the billions of dollars that federal agencies annually invest  in IT, these investments too frequently fail or incur cost overruns and  schedule slippages, while contributing little to mission-related outcomes.  We have previously reported that the federal government has spent  billions of dollars on failed IT investments. These investments often  suffered from a lack of disciplined and effective management, such as  project planning, requirements definition, and program oversight and  governance. As a result of these failures, we added Improving the  Management of IT Acquisitions and Operations to our biennial high-risk  list in 2015.", "With its enactment in 2014, FITARA was also intended to improve  agencies\u2019 acquisitions of IT and facilitate Congress\u2019 efforts to monitor  agencies\u2019 progress and hold them accountable for reducing duplication  and achieving cost savings. The act included specific provisions related  to seven areas, including the five areas selected for our review:", "CIO authority enhancements\u2014Covered agencies\u2019 CIOs are  required to (1) approve the IT budget requests of their respective  agencies, (2) certify that agencies\u2019 IT investments are adequately  implementing OMB\u2019s incremental development guidance, (3) review  and approve contracts for IT, and (4) approve the appointment of  other agency employees with the title of CIO (e.g., component agency  CIOs).", "Enhanced transparency and improved risk management in IT  investments\u2014OMB and covered agencies are to make detailed  information on federal IT investments publicly available, and  department-level CIOs are to categorize their major IT investments by  risk. Additionally, in the case of major investments rated as high risk  for 4 consecutive quarters, the act required that the department- level CIO and the investment\u2019s program manager conduct a review  aimed at identifying and addressing the causes of the risk.", "Portfolio review\u2014OMB and the CIOs of covered agencies are to  implement a process to assist agencies in reviewing their portfolios of  IT investments. This review process is intended to, among other  things, identify or develop opportunities to consolidate the acquisition  and management of IT services; identify potential duplication, waste,  and cost savings; develop a multi-year strategy to identify and reduce  duplication and waste within the agencies\u2019 portfolios, including  component agency investments, and to identify projected cost savings  resulting from such a strategy.", "Federal data center consolidation initiative\u2014Agencies are required  to provide OMB with a data center inventory, a strategy for  consolidating and optimizing the data centers (to include planned cost  savings), and quarterly updates on progress made. The act also  requires OMB to develop a goal for how much is to be saved through  this initiative, and provide annual reports on cost savings achieved.", "Government-wide software purchasing program\u2014GSA is to  develop a strategic sourcing initiative to enhance government-wide  acquisition and management of software. In doing so, the law states  that, to the maximum extent practicable, GSA should allow for the  purchase of a software license agreement that is available for use by  all executive branch agencies as a single user."], "subsections": [{"section_title": "GAO Has Previously Reported on Agencies\u2019 FITARA Implementation and Identified Areas for Improvement", "paragraphs": ["We have issued a number of reports that have identified actions that  OMB and federal agencies needed to take to improve their  implementation of the FITARA provisions.", "In reporting on incremental software development in November 2017, we  noted that department-level CIOs certified only 62 percent of major IT  software development investments as implementing adequate  incremental development in fiscal year 2017. Officials from 21 of the 24  agencies in our review reported that challenges had hindered their CIOs\u2019  ability to implement incremental development. These challenges included:  (1) inefficient governance processes; (2) procurement delays; and (3)  organizational changes associated with transitioning from a traditional  software methodology that takes years to deliver a product, to  incremental development, which delivers products in shorter time frames.  We made recommendations to department-level CIOs to improve  reporting accuracy and update or establish certification policies. As of  February 2019, agencies had taken steps to address eight of the 19  recommendations.", "Additionally, our August 2018 report on department-level CIOs noted that  none of the 24 agencies had policies that fully addressed the role of their  CIOs consistent with federal laws and guidance, including FITARA. In  addition, the majority of the agencies had not fully addressed the roles of  their CIOs for any of six key areas that we identified. Although officials  from most agencies stated that their CIOs were implementing the  responsibilities even when not addressed in policy, the 24 CIOs  acknowledged in a survey that they were not always very effective in  implementing all of their responsibilities.", "Further, the shortcomings in agencies\u2019 policies were attributable, at least  in part, to incomplete guidance from OMB. We noted that, until OMB  improved its guidance to clearly address all CIO responsibilities, and  agencies fully addressed the role of CIOs in their policies, CIOs would be  limited in effectively managing IT and addressing long-standing  management challenges. We made 27 recommendations for agencies to  improve the effectiveness of CIOs\u2019 implementation of their  responsibilities. Most agencies agreed with the recommendations and  described actions they planned to take to address them.", "Enhanced transparency and improved risk management  In June 2016, we reported on rating the risk of IT investments and noted  that agencies underreported the risk of almost two-thirds of the  investments their CIOs reviewed. All 17 selected agencies incorporated  at least two of OMB\u2019s factors into their risk rating processes and nine  used all of the factors, interpreted differently, less often than on a monthly  basis. Our assessments generally showed more risk than the associated  CIO ratings.", "We also issued a series of reports about the IT Dashboard that noted  concerns about the accuracy and reliability of the data on the Dashboard.  In total, we have made 25 recommendations to OMB and federal  agencies to help improve the accuracy and reliability of the information on  the Dashboard and to increase its availability. Most agencies agreed with  the recommendations or had no comments. As of February 2019, 11 of  these recommendations remained open.", "In April 2015, we reported on actions needed by 26 federal agencies to  ensure portfolio savings were realized and tracked. We noted that these  agencies had decreased their planned PortfolioStat savings by at least  68 percent from what they reported to us in 2013. Specifically, while the  agencies initially had planned to save at least $5.8 billion between fiscal  years 2013 and 2015, these estimates were decreased to approximately  $2 billion. We made recommendations to OMB and the Department of  Defense aimed at improving the reporting of achieved savings,  documenting how savings are reinvested, and establishing time frames  for PortfolioStat action items. As of February 2019, OMB had addressed  one of the five recommendations.", "Our September 2016 report on application inventories noted that most of  the 24 agencies in the review fully met at least three of the four practices  we identified to determine if agencies had complete software application  inventories. Additionally, six of the agencies relied on their investment  management processes and, in some cases, supplemental processes to  rationalize their applications to varying degrees. However, five of the six  agencies acknowledged that their processes did not always allow for  collecting or reviewing the information needed to effectively rationalize all  their applications. We made recommendations that 20 agencies improve  their inventories and five of the agencies take actions to improve their  processes to rationalize their applications more completely. Agencies had  addressed four of the 25 recommendations as of February 2019.", "Federal data center consolidation initiative  We have reported annually on agencies\u2019 efforts to meet FITARA  requirements related to the federal data center consolidation initiative. For  example, in March 2016 we reported that, as of November 2015, the 24  agencies participating in the initiative had identified a total of 10,584 data  centers, of which they reported closing 3,125 through fiscal year 2015.  In total, 19 of the 24 agencies reported achieving an estimated $2.8 billion  in cost savings and avoidances from fiscal years 2011 to 2015. We  recommended that 10 agencies take action to address challenges in  establishing, and to complete, planned data center cost savings and  avoidance targets. We also recommended that 22 agencies take action to  improve optimization progress, including addressing any identified  challenges. As of February 2019, agencies had addressed 14 of our 32  recommendations.", "Our May 2018 report on data center consolidation noted mixed progress  toward achieving OMB\u2019s goals for closing data centers by September  2018. Over half of the agencies reported that they had either already  met, or planned to meet, all of their OMB-assigned goals by the deadline.  This was expected to result in the closure of 7,221 of the 12,062 centers  that agencies reported in August 2017. However, four agencies reported  that they did not have plans to meet all of their assigned goals and two  agencies were working with OMB to establish revised targets. No new  recommendations were made to agencies in this report because agencies  had yet to fully address our previous recommendations.", "In May 2014, we reported on 24 federal agencies\u2019 management of  software licenses and the potential for achieving significant savings  government-wide. Specifically, we found that OMB and the vast majority  of the 24 agencies reviewed did not have adequate policies for managing  software licenses. We also reported that federal agencies were not  adequately managing their software licenses because they generally did  not follow leading practices in this area. Consequently, we could not  accurately describe the most widely used software applications across  the government, including the extent to which they were over and under  purchased. We recommended that the 24 agencies improve their policies  and practices for managing licenses. Most agencies generally agreed  with the recommendations or had no comments.", "We then reported in September 2014 that the 24 agencies had either  provided a plan to address most of the recommendations we made to  them, partially disagreed with the report\u2019s prior findings, or did not provide  information on their efforts to address the recommendations. As of  February 2019, the agencies had addressed 109 of the 136  recommendations."], "subsections": []}]}, {"section_title": "Selected Agencies Identified Practices That Facilitated Effective Implementation of FITARA Provisions", "paragraphs": ["The nine selected agencies identified a total of 12 practices that helped  them to successfully implement the FITARA provisions considered in our  review. Among the practices, a number of the agencies identified four that  were overarching\u2014that is, the practices were not unique to a specific  provision, but, instead, better positioned agencies to implement the five  provisions selected for our review. In addition, agencies identified one practice that helped ensure effective implementation of CIO one practice that helped ensure enhanced transparency and improved one practice that ensured effective portfolio review,  four practices that facilitated data center consolidation, and one practice that facilitated software purchasing.", "Figure 1 identifies the 12 practices that the nine agencies used to  effectively implement the selected FITARA provisions. In addition, the  narrative following the figure provides details on how these agencies  implemented the provisions and realized associated IT management  improvements or cost savings."], "subsections": [{"section_title": "Overarching Practices Vital to Implementing FITARA", "paragraphs": ["Four of the nine agencies that we reviewed\u2014Commerce, HHS, NASA,  and USDA\u2014identified one or more overarching practices that have been  vital to their efforts in implementing FITARA: obtain support from senior leadership,  treat the implementation of FITARA as a program, establish FITARA performance measures for component agencies, appoint an executive accountable for FITARA implementation in each  component agency.", "As a result of implementing these practices, each of the agencies was  better positioned to implement FITARA.", "Obtain support from senior leadership  Three of the agencies\u2014USDA, NASA, and Commerce\u2014emphasized that  the support of senior leadership was essential to implementing  requirements in FITARA. This support was demonstrated, for example, by  senior officials highlighting the act\u2019s importance during key executive-level  meetings and in their key memorandums and other communications to  the agencies\u2019 workforce. We have previously reported that having senior  leadership support is critical to the success of major programs.", "According to USDA\u2019s Director of FITARA Operations, the agency made a  decision to raise the topic of FITARA implementation at each monthly  executive leadership meeting that is attended by the Deputy Secretary,  Chief Operating Officer, and Assistant Secretary for Administration, in  order to keep attention focused on the act\u2019s implementation. In addition,  the agency\u2019s October 2016, Concept of Operations for The Oversight,  Management, and Operations of FITARA document, which is the primary  document used by the agency to assist with the implementation and  execution of the act, was signed by the Deputy Secretary, CIO, and  Deputy CIO. The officials reported that obtaining support from senior  leadership had helped ensure buy-in to changes resulting from  implementing provisions of the act.", "NASA officials also highlighted senior leadership support as being  essential to their actions to implement FITARA. For example, the NASA  Deputy Administrator and Associate Administrator for Mission Support  signed and distributed a memorandum in August 2010 that emphasized  the agency\u2019s commitment to the data center consolidation effort. The  memorandum stated that Mission Directorate Associate Administrators  and Center Directors shall direct their staff to cooperate fully and openly  with NASA\u2019s data center consolidation plan. An official in the Office of the  CIO stated that the memorandum was evidence of the support the  agency had from senior leadership to close data centers.", "Further, a Commerce official stated that FITARA implementation activities  at the agency have had support from agency leadership, including the  Deputy Secretary and the CIO. For example, according to the official, the  Deputy Secretary provided each of the component agency FITARA  sponsors with a signed memorandum asking for assistance from the  components. This action resulted in increased cooperation throughout the  agency when components were asked to respond to FITARA-related  requests for information.", "Treat implementation of FITARA as a program  Commerce and USDA reported that treating FITARA implementation as if  it were an IT program was important to implementing the requirements of  the act. The two agencies demonstrated this practice by assigning staff to  manage implementation of FITARA and regularly discussing  implementation of the act at meetings with senior-level officials.", "According to a Commerce lessons learned document, the agency has  managed FITARA like a program by reporting regularly on its  implementation status to internal agency stakeholders. In addition, the  agency has assigned a program manager to assist with implementation of  the act and to track progress on implementing the act\u2019s provisions. As a  result, Commerce officials reported that the importance of FITARA has  been regularly discussed throughout the agency in bi-weekly meetings  within the Office of the Secretary. These meetings led to an increased  sense of cooperation between different disciplines (e.g., IT, budget,  acquisition, legal, and human resources) and reduced the impression that  FITARA was solely focused on the department-level CIO office.", "Further, USDA created the position of Executive Director for FITARA  Operations within the department-level CIO office. This position has  responsibility for, among other things, establishing the processes and  procedures to bring the agency into compliance with the act and IT  management controls that meet the FITARA requirements. The Director  stated that treating the implementation of FITARA as if it were an IT  program has led the agency to develop key documentation that has  assisted in the implementation of the act, including its Concept of  Operations for the Oversight, Management, and Operations of FITARA  and Data Center Closure Process.", "Establish FITARA performance measures for component agencies  HHS established internal FITARA performance measures for its  component agencies that officials believe have led to increased  effectiveness in implementing the act. Specifically, the agency undertook  an effort to increase its FITARA scorecard grades\u2014called \u201cA by May\u201d\u2014 with a goal to attain an \u2018A\u2019 on the May 2018 FITARA 6.0 scorecard. As  part of this effort, HHS created its own internal scorecard for each of its  component agencies that mirrored the agency\u2019s FITARA scorecard.", "According to an HHS lessons learned document, aligning the FITARA  metrics to component agency performance resulted in greater  transparency between the department-level CIO and component agency  CIOs. The effort to establish internal performance measures received  support from senior agency leadership. Specifically, it was endorsed by  the Assistant Secretary for Administration and the Principal Deputy for  Administration, which agency officials believed was a key factor in the  effort\u2019s success.", "HHS officials also reported that their internal scorecard was helpful  because it let component agencies know how well they were doing  relative to each other. The officials also believed that establishing FITARA  performance measures led to increased cooperation and communication  between component agencies and the department-level CIO office. For  example, the increased cooperation allowed HHS to more easily collect  data required to update the House Committee on Oversight and  Government Reform\u2019s FITARA scorecard.", "At the December 2018 House Committee on Oversight and Government  Reform hearing on FITARA, the HHS Acting CIO attributed the agency\u2019s  increased scorecard grade\u2014from a \u2018D\u2019 on the initial November 2015  scorecard to a \u2018B+\u2019 on the December 2018 scorecard\u2014to the \u201cA by May\u201d  initiative. According to this official, the measurement of component  agencies\u2019 performance had elevated the importance of meeting FITARA  objectives and paved the way for agency-wide participation in  improvement efforts.", "Appoint an executive accountable for FITARA implementation in  each component agency  According to a Commerce memorandum, the Assistant Secretary for  Administration asked each component agency to identify a FITARA  executive sponsor. The sponsors were assigned responsibility for  gathering the necessary information on component agencies\u2019 efforts to  implement FITARA and for alerting the agency\u2019s CIO of any issues that  needed to be addressed. Once the sponsors were identified, the  Commerce Deputy Secretary sent a letter to each sponsor, asking them  to help ensure cooperation between their component agencies and the  department\u2019s CIO office. A Commerce official reported that having a  sponsor in component agencies with responsibility for providing the  information needed to report on FITARA results to the department\u2019s CIO  office had increased component agencies\u2019 responsiveness to information  requests and improved cooperation throughout the agency."], "subsections": []}, {"section_title": "CIO Authority Enhancements", "paragraphs": ["Commerce and DHS developed policies to explain how the specific  authorities that FITARA provided to the agency CIO are to be carried out.  The agencies identified the policies as essential to their ability to  implement the CIO authority enhancements provision in FITARA.  Commerce officials stated, for example, that their agency established a  policy to ensure that the CIO certified major IT investments as adequately  implementing incremental development. Specifically, Commerce\u2019s capital  planning guidance required component agency CIOs or other  accountable officials within the component agencies to certify the  adequate implementation of incremental development for these  investments. Commerce\u2019s guidance described the role of the CIO in the  certification process and how the CIOs\u2019 certification should be  documented. The guidance also included definitions of incremental  development and time frames for delivering functionality. Officials in  Commerce\u2019s Office of the CIO reported that the certification policies  assisted them in overseeing the management of IT investments and  ensuring the use of incremental development throughout the agency, as  called for by FITARA.", "Also, Commerce changed its personnel policy to require the department- level CIO to approve all senior level IT positions, which addressed the  FITARA requirement for the CIO to approve the appointment of other staff  with the title of CIO (e.g., component agency CIOs). Specifically, in  February 2016, Commerce developed a new human capital policy to give  its department-level CIO input into the hiring of all senior level IT  positions, including component CIOs. As a result, a Commerce official  reported that the policy ensures that the CIOs\u2019 authority has been  enhanced to include significant involvement in the hiring of IT leaders  throughout the agency.", "For its part, DHS established a policy to ensure that the department-level  CIO certified major IT investments as adequately implementing  incremental development. Specifically, DHS\u2019s technical investment review  guidance states that the CIO is to conduct a review of each investment  using an investment review checklist that includes information provided  by project managers as to whether the investments have used  incremental development adequately. The CIO is to certify whether the  project is implementing incremental delivery at least every 6 months and  is to document this certification in the checklist. As a result, officials in  DHS\u2019s Office of the CIO said that they can now use information from the  incremental certification checklist to improve incremental development  processes and to make corrections to projects that were not adequately  implementing incremental development."], "subsections": []}, {"section_title": "Enhanced Transparency and Improved Risk Management", "paragraphs": ["Three agencies\u2014Commerce, DHS, and USDA\u2014identified one practice  that was key to their effective implementation of the enhanced  transparency and improved risk management provision of FITARA. The  practice is to implement a risk rating process for IT investments that  incorporates risks (e.g., funding cuts or staffing changes).", "Commerce\u2019s Office of the CIO implemented a process where this office  reviewed at least the top three risks for each investment, verified that  these risks were specific to the investment and were appropriately  managed and mitigated, and verified that the risk register was updated  regularly. In addition, DHS implemented a process that included a review  of investment risks, ensured that the risks were current, and that risk  mitigation plans were in place. Also, in November 2017, USDA updated  its risk rating process to incorporate risks. Specifically, it updated its risk  management scoring criteria to include an evaluation of the management  and risk exposure scores of risks.", "The actions that Commerce, DHS, and USDA took to incorporate reviews  of risks into their risk rating processes better positioned the agencies to  provide more detailed and accurate information on their IT investments to  the public."], "subsections": []}, {"section_title": "Portfolio Review", "paragraphs": ["Four of the agencies\u2014GSA, Justice, DHS, and USAID\u2014identified  performing application rationalization activities as vital to their effective  implementation of the portfolio review provision of FITARA. Application  rationalization activities can include establishing a software application  inventory, collecting information on each application, or evaluating an  agency\u2019s portfolio of IT investments to make decisions on applications  (e.g., retire, replace, or eliminate). We have previously reported that the  principles of application rationalization are consistent with those used to  manage investment portfolios.", "GSA and Justice performed application rationalization by engaging in  efforts to establish complete and regularly updated application  inventories. To do so, component agencies specified basic application  attributes in their inventories (e.g., application name, description, owner,  and function supported), and regularly updated the inventories. As we  have previously reported, by having an application inventory that is  complete and regularly updated, agencies such as GSA and Justice are  better positioned to realize cost savings and efficiencies through activities  such as consolidating redundant applications.", "For its part, DHS utilized application rationalization to identify duplicate  investments and consolidate systems. Part of the effort included the  regular assessment of programs against criteria such as the program\u2019s  cost, schedule, and performance relative to established targets.  According to the agency, this resulted in the consolidation of site services,  including help desk operations. DHS reported that this consolidation  resulted in savings that cumulatively accrued to $202 million by fiscal year  2015.", "In addition, as an application rationalization activity, USAID reviewed its  portfolio of IT investments in order to identify systems to potentially retire  or decommission\u2014a requirement of the portfolio review provision of  FITARA. Specifically, the agency developed an information system  decommissioning plan to retire old systems. The plan described USAID\u2019s  three-step approach to decommissioning systems: (1) identifying  decommissioning candidates, (2) conducting system reviews and  decommissioning decisions and (3) decommissioning planning and  execution.", "As a result of this approach to implementing the portfolio review provision  of FITARA, the agency reported in its Information Systems  Decommissioning Plan that it has decommissioned 78 old systems and  identified additional systems to decommission in future years. Agency  officials reported that USAID achieved cost savings of almost $10 million  since 2016 as a result of decommissioning systems."], "subsections": []}, {"section_title": "Data Center Consolidation", "paragraphs": ["GSA, Justice, NASA, USAID, and USDA identified four practices that  were essential to their effective implementation of the data center  consolidation provision of FITARA and resulted in agencies realizing cost  savings or other IT management improvements:  conduct site visits to all data centers,  transition to a virtual or cloud-based environment,  incentivize component agencies to accelerate the pace of data center  consolidation, and utilize data centers with excess capacity.", "Agencies\u2019 actions to implement these practices have led to the retirement  of older systems, increased cost savings and future cost avoidance, and  a reduction in the number of data centers. In addition, as a result of  applying these practices, the agencies were better able to make progress  in consolidating and optimizing data centers.", "Conduct site visits to all data centers  USDA and Justice conducted site visits to all of their data centers to more  effectively address the data center provision of FITARA. Both agencies  stated that the site visits had allowed them to more thoroughly document  the inventory of applications and IT hardware in each of the data centers  and to validate progress made toward closing data centers.", "USDA officials stated that conducting site visits to their data centers  played a pivotal role in the successful implementation of data center  consolidation by providing more direct communication with data center  staff to address concerns and issues that staff had about consolidation of  the centers. Additionally, agency officials reported that they were able to  obtain more detailed information necessary to meet the FITARA  requirements for reporting to OMB on USDA\u2019s data center inventory and  progress made on data center closures as a result of conducting site  visits.", "Further, Justice officials stated that site visits conducted by staff in the  CIO\u2019s office that were responsible for data center consolidation played a  key role in the closure of many of the agency\u2019s data centers. Specifically,  the officials said that conducting site visits in person showed data center  staff that data center consolidation was a priority for the agency. The  officials added that the site visits also showed data center staff that they  were valued as partners in the consolidation effort.", "Transition to a virtual or cloud-based environment  USDA, GSA, NASA, and USAID have taken actions to transition to a  virtual or cloud-based environment as a way to effectively implement the  data center consolidation provision of the act. The agencies\u2019 actions  consisted of moving data from agency-owned data centers to cloud- based environments, which helped the agencies make progress toward  meeting the cost savings and data center optimization requirements of  FITARA.", "USDA officials reported that the agency has been successful in having its  components use cloud technology to reduce the number of data centers.  For example, the USDA Forest Service developed a migration strategy to  move all of the Forest Service production systems and applications from  its data centers to USDA\u2019s Enterprise Data Center and Cloud  Infrastructure as a Service located at the National Information Technology  Center in Kansas City, Missouri. As a result of moving its production  systems and applications, the Forest Service increased virtualization,  resolved many long-term security vulnerabilities, and reduced the number  of duplicative and stand-alone applications by 70 percent. The Forest  Service reported that it had identified cost savings of up to $6.1 million  annually as a result of these efforts.", "In addition, GSA developed a data center consolidation strategy which  included migrating services from agency-owned data centers to more  flexible and optimized cloud computing environments, shared service and  co-location centers, and more optimized data centers within their own  inventory. For example, the agency migrated numerous systems to  provisioned services via cloud computing services. GSA officials reported  that their agency has encouraged virtualization and cloud computing as  preferred options above new physical implementations. The agency also  continues to migrate away from hardware-dependent operating systems  and to utilize, build upon, and mature its enterprise service virtualization  platform offerings and capabilities. As a result of these actions, the  agency has been able to more effectively retire older systems in order to  shift them to newer, virtualized technologies.", "NASA officials stated that their agency is transitioning to a cloud-based  environment to close its data centers. For example, NASA moved all of  the data from the Earth Observing System to a new commercial cloud- based model that hosts all the data in one location. The Earth Observing  System was designed over a decade ago and its data were held at  different partner locations based on science discipline (e.g., land, oceans,  and atmosphere) and provided data that were used by the public in  various capacities. The agency funded data center hardware at each of  the locations and transported data between the locations, as necessary,  to create integrated data products. According to NASA officials,  transitioning to a cloud-based environment has resulted in easier access  to NASA data by the public, elimination of recurring capital investments in  data center hardware, and improved IT security.", "USAID reported that it saved money and increased efficiency by  consolidating all of its data centers into a single data center in 2012 and  then transitioning its single data center to a cloud-based environment.  USAID completed the migration of its data center to the cloud in June  2018. According to the agency, moving to the cloud is expected to result  in $36 million in future cost avoidance for the agency.", "Incentivize component agencies to accelerate the pace of data  center consolidation  Data center consolidation activities can be costly, requiring agencies to  use resources to, for example, analyze the need for IT equipment (e.g.,  servers, processors, networking, and other hardware) and to move such  equipment between locations. Our May 2018 report on the results of  agencies\u2019 efforts to consolidate data centers noted mixed progress toward  achieving OMB\u2019s goals for closing data centers.", "Justice incentivized a component agency to accelerate its participation in  data center consolidation by providing supplemental funding for costs  associated with consolidation. For example, the agency\u2019s CIO office  provided funding for a component agency to offset the cost to move  servers and data center equipment to another location. Justice officials  noted that the agency has seen increased cooperation from component  agencies as a result of offering supplemental funding to participate in its  data center consolidation effort.", "Utilize data centers with excess capacity  A part of GSA\u2019s strategy for consolidating data centers was to move  existing data to other government data centers that had the capacity to  store its data. To do so, GSA established shared service agreements with  the Environmental Protection Agency\u2019s National Computer Center and  NASA\u2019s Stennis Space Center data centers. As a result of moving its  data to other government data centers with excess capacity, GSA was  able to consolidate numerous data centers, resulting in increased  efficiency and cost savings."], "subsections": []}, {"section_title": "Software Purchasing", "paragraphs": ["USDA, VA, GSA, NASA, and USAID identified the practice of centralizing  the management of software licenses as essential to their effective  implementation of the software purchasing provision of FITARA. These  five agencies did this by, for example, establishing a software  management team, creating contracts with vendors to centrally manage  licenses, and establishing governance processes for software license  management.", "USDA employed a centralized software license management approach by  establishing a Category Management Team. This team was responsible  for the oversight of all software license enterprise agreements, which  included collecting, reviewing, consolidating, and reporting on all software  procurements. The agency also created Enterprise IT Category  Management guidance that supported the central oversight authority for  managing enterprise software license agreements. Further, according to  USDA officials, management has been supportive in ensuring that all  organizations and components join existing enterprise contracts that are  already in place.", "USDA\u2019s actions to centralize the management of its software licenses  have led to effective agency-wide decisions regarding software purchases  that the agency reported have yielded cost savings. For example, the  agency identified instances where multiple software contracts at different  price points among component agencies could be consolidated into one  contract at the lowest price. This resulted in reducing the cost per license  for a software product from $250 to $15.75, saving the agency  approximately $85,000 between 2016 and 2017, according to USDA  documentation.", "VA established an Enterprise Software License Management Team to  centralize the management of its efforts to purchase software. According  to officials in VA\u2019s Office of Information and Technology, this team  consisted of knowledgeable staff that had experience with software  management and development, and was familiar with software that was  deployed across the entire agency. These officials also stated that the  Enterprise Software License Management Team conducted weekly  meetings with GSA to discuss software licensing and category  management to ensure they were aware of other opportunities for cost  savings. VA also established an Enterprise Software Asset  Management Technical Working Group that was formed to define and  document a framework that employed a centralized software license  management approach.", "By centralizing the management of its software licenses, VA has been  able to make effective agency-wide decisions regarding the purchase of  software products and reported that it has realized cost savings.  Specifically, VA provided documentation showing that it had implemented  a solution to analyze agency-wide software license data, including usage  and costs. The agency identified approximately $65 million in cost  savings between 2017 and 2020 due to analyzing one of their software  licenses.", "We previously reported that GSA and USAID had centralized the  management of their software licenses. We reported that GSA\u2019s server- based and enterprise-wide licenses were managed centrally, whereas  non-enterprise-wide workstation software licenses were generally  managed regionally. GSA also issued a policy that established  procedures for the management of all software licenses, including  analyzing software licenses to identify opportunities for consolidation.", "Centralizing the management of its purchase of software licenses has led  GSA to make effective agency-wide decisions regarding its software  licenses and avoid future costs, according to agency documentation. For  example, in fiscal year 2015, the agency consolidated licenses for one of  its software products, saving the agency over $400,000 and avoiding over  $3 million in future costs.", "For its part, USAID had a contract in place with a vendor for centrally  managing licenses for all of its operating units. Further, according to  officials within USAID\u2019s Office of the CIO, the agency established a  governance process to manage the introduction of new software. As part  of this governance process, USAID\u2019s Software and Hardware Approval  Request Panel was responsible for reviewing requests to procure new  software.", "USAID\u2019s actions on centralizing the management of its software licenses  have led to effective agency-wide decisions regarding software purchases  that the agency reported have yielded cost savings. For example, USAID  identified opportunities to reduce costs on its software licenses through  consolidation or elimination of software. This resulted in the agency  reporting a cumulative savings from fiscal year 2016 to fiscal year 2018 of  over $2.5 million on software licenses.", "NASA issued a software license management policy that included the  roles and responsibilities for central management of the agency\u2019s  software licenses. In addition, in May 2017, NASA\u2019s Administrator  issued a memorandum requiring component agencies to use the  agency\u2019s Enterprise License Management Team to manage software  licenses.", "By employing a centralized software license management approach,  NASA made effective agency-wide decisions on software licenses which  the agency reported led to cost avoidance. For example, the agency  increased the number of software agreements managed by its enterprise  license management team from 24 to 42 in fiscal year 2014, and  analyzed its software license data to identify opportunities to reduce costs  and make better informed investments moving forward. As a result, NASA  reported that it realized cost avoidance of approximately $224 million from  fiscal years 2014 through 2018.", "In summary, as a result of applying the practices identified in this review,  the selected agencies were better positioned to implement FITARA  provisions and realized IT management improvements and cost savings."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We requested comments on a draft of this report from each of the nine  agencies included in our review, as well as from OMB. In response, one  agency\u2014USAID\u2014provided written comments, which are reprinted in  appendix I. Another agency\u2014DHS\u2014provided technical comments, which  we incorporated in the report, as appropriate. The other 7 agencies and  OMB did not provide comments on the draft report.", "In its comments, USAID described actions that it had taken to enhance  the authority of its CIO. Specifically, the agency stated that it had  proposed that the CIO report directly to the Administrator and had notified  the congressional committees of jurisdiction about this intended action.  Further, USAID stated that, as of April 2019, the Administrator would be  expected to approve revisions to internal policy to clarify and strengthen  the authority of the CIO in line with FITARA and our report.", "We are sending copies of this report to the appropriate congressional  committees, the heads of the Departments of Agriculture, Commerce,  Health and Human Services, Homeland Security, Justice, and Veterans  Affairs; the General Services Administration; the National Aeronautics  and Space Administration; the U.S. Agency for International  Development; the Director of the Office of Management and Budget; and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staffs have any questions on matters discussed in this  report, please contact me at (202) 512-4456 or harriscc@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the US Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Carol C. Harris, (202) 512-4456 or harriscc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Dave Powner (Director), Mark  Bird (Assistant Director), Eric Trout (Analyst-in-Charge), Justin Booth,  Chris Businsky, Quintin Dorsey, Rebecca Eyler, Dave Hinchman, Valerie  Hopkins, Kaelin Kuhn, Sabine Paul, Monica Perez-Nelson, Meredith  Raymond, Bradley Roach, Andrew Stavisky, Niti Tandon, Christy Tyson,  Adam Vodraska, Kevin Walsh, Jessica Waselkow, and Eric Winter made  key contributions to this report."], "subsections": []}]}], "fastfact": ["To reform government-wide information technology management, Congress enacted the Federal Information Technology Acquisition Reform Act (commonly referred to as FITARA) in 2014.", "What practices have federal agencies put in place to implement the law?", "We reviewed nine agencies and found 12 practices officials said helped them to effectively implement one or more of the FITARA provisions.", "For example, five of the agencies said that centralizing the management of software licenses was essential to meeting the software purchasing provision of the law. By doing so, agencies were able to make agency-wide purchasing decisions that saved them money."]}
{"id": "GAO-18-554", "url": "https://www.gao.gov/products/GAO-18-554", "title": "Federal Advertising: Contracting with Small Disadvantaged Businesses and Those Owned by Minorities and Women Has Increased in Recent Years", "published_date": "2018-07-17T00:00:00", "released_date": "2018-07-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government spends close to $1 billion annually for advertising activities that, among other things, inform the public about programs and services. The government seeks to provide procurement opportunities for these services to businesses such as SDBs and those owned by minorities and women. SDBs are those primarily owned by one or more socially and economically disadvantaged individuals.", "GAO was asked to analyze federal advertising obligations to these types of businesses. This report discusses (1) the amount federal agencies have obligated towards advertising contracts over the most recent 5 fiscal years (2013 through 2017) and the amount going to SDBs and businesses owned by minorities and women; and (2) the agencies that have directed the most advertising contract obligations to these businesses and how this has changed over time.", "GAO analyzed data on advertising contracts from the Federal Procurement Data System \u2013 Next Generation database for fiscal years 2013 through 2017. GAO also interviewed Small Business Administration officials.", "The Small Business Administration provided technical comments on this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal advertising contract obligations to small disadvantaged businesses (SDB) and businesses of all sizes owned by minorities and women (specified businesses) generally increased from fiscal years 2013 through 2017, and constituted 13 percent of all advertising obligations over this period. This figure is consistent with the percentage of all federal contract obligations to these businesses over this period. Overall, advertising contract obligations to all three categories of businesses increased between fiscal years 2013 and 2017, as shown in the figure below. Within the minority-owned business category, which includes businesses owned by Asian-Pacific-, Subcontinent-Asian-, Black-, Hispanic-, and Native-Americans, over half of the obligations went to those owned by Hispanic-Americans.", "Three agencies\u2014the departments of Defense (DOD), Health and Human Services, and Homeland Security\u2014were responsible for nearly three-quarters of advertising contract obligations to the three categories of businesses from fiscal years 2013 through 2017. These agencies were associated with much of the increase in these obligations to specified businesses over the 5-year period. Although some agencies obligated higher shares of their advertising contract obligations to these businesses, they generally obligated fewer dollars than DOD and the two other agencies. For example, the National Aeronautics and Space Administration directed 98 percent of its obligations to these businesses, but the agency's total advertising contract obligations were $21 million over the 5-year period. DOD obligated $2.6 billion for these contracts over the same period."]}], "report": [{"section_title": "Letter", "paragraphs": ["In recent years, federal spending on advertising contracts has  approached $1 billion annually, making the federal government one of the  top advertisers in the country. Federal agencies contract with advertising  agencies, public relations firms, and other organizations to provide,  among other things, information to the public about programs and  services. As it does for virtually all of the products and services it  procures, the government seeks to provide procurement opportunities to  socially and economically disadvantaged small businesses as well as  minority- and women-owned businesses. For example, the Small  Business Act, as amended, requires federal agencies to, among other  things, establish annual goals for contracting with small businesses  owned and controlled by socially and economically disadvantaged  individuals.", "Given the federal government\u2019s advertising spending and its emphasis on  contracting with certain business types, you requested that we report on  federal advertising contracts with minority-owned businesses and women- owned businesses, regardless of size, and small disadvantaged  businesses (SDB)\u2014which are those that self-identify as an SDB, those  that have been certified by the Small Business Administration (SBA) as participants in the agency\u2019s 8(a) businesses development program, or  both. We determined (1) the amount federal agencies have obligated on  advertising contracts over the most recent five fiscal years (2013 through  2017) and the amount going to these business categories; and (2) the  agencies that have directed the most advertising contract obligations to  these business categories and how this has changed over time.", "To address both objectives, we analyzed data from the Federal  Procurement Data System \u2013 Next Generation (FPDS-NG) database for  fiscal years 2013 through 2017. The FPDS-NG database includes data  for most federal contract actions that have an estimated value of over  $3,500. We reviewed obligations data for contracts coded under the  \u201csupport \u2013 management: advertising\u201d or \u201csupport \u2013 management: public  relations\u201d product service codes, focusing on those contracts categorized  as being awarded to (1) SDBs, 8(a) businesses, or both, (2) businesses  owned by minorities and/ or (3) businesses owned by women.  Businesses may self-identify in the government\u2019s System for Award  Management as an SDB, minority-owned, or women-owned, among other  categories. For purposes of this report, we refer to the three categories  of businesses we examined as \u201cspecified businesses.\u201d In addition to  analyzing FPDS-NG data, we interviewed SBA officials, who are  responsible for assessing government-wide and agency contracting with  small and other business categories, about their perspectives on trends in  federal contracting.", "We assessed the reliability of FPDS-NG data through steps such as  considering known strengths and weaknesses based on our past work  and looking for obvious errors and inconsistencies in the data we used for  our analysis. We also interviewed SBA officials, who use FPDS-NG data  in assessing federal contracting, about the database\u2019s reliability. Based  on these steps, we concluded that the data were sufficiently reliable for  our purposes. Additional details on our scope and methodology can be  found in appendix I.", "We conducted this performance audit from October 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal statutes and a number of executive orders reflect the federal  government\u2019s policy to encourage the participation of small businesses,  including those owned and controlled by socially and economically  disadvantaged individuals, in federal contracting. One key statute is the  Small Business Act, which established SBA and directed it to aid,  counsel, assist, and protect the interests of small business concerns,  among other things. The Small Business Act, as amended over the  years, as well as executive orders, emphasize the government\u2019s policies  on contracting with SDBs and businesses owned by women and  minorities.", "The Small Business Act sets a minimum government-wide goal for small  business participation of not less than 23 percent of the total value of all  prime contracts for each fiscal year and makes SBA responsible for  reporting annually to the President and Congress on agencies\u2019 progress  in meeting this goal, and making this information available on a public  website. SBA reported that the federal government reached this goal for  the fifth consecutive year in fiscal year 2017, awarding about 24 percent  of total federal contract dollars to small businesses. SBA also negotiates  specific goals with agencies to ensure the government-wide goal is met.", "Each agency\u2019s progress toward meeting its goals is generally based on  the percentage of obligations on contracts with small businesses."], "subsections": [{"section_title": "Categories of Specified Businesses", "paragraphs": ["The three categories of businesses we examined for this report are small  disadvantaged, minority-owned, and women-owned.", "Small disadvantaged business. Because SBA\u2019s 8(a) business  development program and SDB criteria are similar, in this report we use  the term \u201csmall disadvantaged business\u201d or \u201cSDB\u201d to refer to both  categories of businesses. Section 8(a) of the Small Business Act  established the 8(a) business development program, which authorizes the  SBA to enter into contracts with other agencies and award subcontracts  for performing those contracts to firms eligible for program participation.  To be certified under the 8(a) program, a business must, in general,  satisfy requirements for size, be at least 51 percent unconditionally  owned and controlled by one or more socially and economically  disadvantaged individuals who are U.S. citizens, and demonstrate  potential for success. Similar to the 8(a) program, SDBs are defined as  those that are primarily owned and controlled by one or more socially and  economically disadvantaged individuals, though there are some  differences in criteria for the 8(a) program and SDB classification. For  example, businesses in the 8(a) program must demonstrate the potential  for success and business principals must demonstrate good character,  but the requirements to demonstrate these do not apply to SDB  classification. A business\u2019s self-identification as SDB in the federal  government\u2019s System for Award Management does not automatically lead  to acceptance into SBA\u2019s 8(a) business development program.", "Minority-owned business. Businesses of all sizes that are at least 51  percent owned by one or more members of a minority group may self- identify as minority-owned businesses in the federal government\u2019s  System for Award Management. Minority-owned businesses are further  broken down into businesses owned by Asian-Pacific-, Subcontinent- Asian-, Black-, Hispanic-, Native-Americans, and other.", "Women-owned business. Businesses of all sizes that are at least 51  percent owned by one or more women and whose management and daily  business operations are controlled by one or more women may self- identify as a women-owned business in the System for Award  Management.", "These three categories of specified businesses overlap. For example, an  SDB may be women-owned and therefore be counted in FPDS-NG as  both an SDB and a women-owned business. To avoid double-counting  when presenting consolidated data, we counted obligations and  businesses classified under more than one category only once."], "subsections": []}, {"section_title": "Federal Advertising Activities", "paragraphs": ["As we have previously reported, there are several types of activities that  are supported by federal advertising contracts. Table 1 provides  descriptions and examples of some of these activities."], "subsections": []}]}, {"section_title": "Federal Agencies Have on Average Directed 13 Percent of Advertising Contract Obligations to Specified Businesses over the Past 5 Years", "paragraphs": [], "subsections": [{"section_title": "Specified Businesses Generally Received an Increasing Share of Advertising Dollars", "paragraphs": ["Over the past 5 fiscal years (2013 through 2017), federal agencies have  obligated on average about $870 million annually for advertising  contracts, with about 13 percent (approximately $114 million annually) of  these obligations going to specified businesses. This share of  advertising contract obligations going to these businesses over fiscal  years 2013 through 2017 was consistent with the share of total federal  contracting obligations going to these businesses (also on average 13  percent over this period).", "Advertising contract obligations to specified businesses and the number  of these businesses receiving advertising contract obligations have both  generally increased over fiscal years 2013 through 2017. The amount of  advertising contract obligations going to these businesses nearly doubled  from fiscal year 2013 to 2017 (from $75 million to $147 million) and also  increased as a percent of total advertising contract obligations (from 9  percent of these obligations to 16 percent). Specified businesses also  represented an increasing share of businesses receiving advertising  contract obligations, from 30 percent (194 businesses) in fiscal year 2013  to 39 percent (250 businesses) in fiscal year 2017. Figure 1 shows  advertising contract obligations to specified businesses and the number  of these businesses receiving these obligations over fiscal years 2013  through 2017.", "In the 5 years from fiscal year 2013 through 2017, a relatively small  number of specified businesses received a relatively large amount of  federal advertising contract obligations. For example, the top five  businesses received about 40 percent of annual advertising contract  obligations to specified businesses over the 5-year period. Consistent  with findings from our previous work, obligations were also concentrated  among a relatively small number of contracts. Figure 2 shows the  distribution of advertising contract obligations among specified  businesses, with amounts going to the five largest businesses (in terms of  advertising contract obligations received) and all others.", "Federal advertising contract obligations to all three categories of specified  businesses generally increased between fiscal years 2013 and 2017,  although some years showed decreases. (The amount going to women- owned businesses declined between fiscal years 2014 and 2015 and the  amounts going to minority-owned businesses and SDBs declined  between fiscal years 2016 and 2017.) The most notable increase over the  5-year timeframe, both in dollars and percentage terms, was in the  women-owned category, which increased by $56 million, or 93 percent.  Figure 3 shows the amounts obligated to each specified business  category, and to the three categories combined. Table 2 in appendix II  shows the amounts obligated to each specified business category, in  dollars and as a percentage of federal advertising contract obligations, in  each of the 5 years.", "SBA officials we interviewed told us that a program they started in 2011,  the Women-Owned Small Business Federal Contracting Program, may  have accounted for some of the increase in contracting rates with women- owned businesses over the past 5 years. This is because the program  aims to help women-owned small businesses have an equal opportunity  to participate in federal contracting and to assist agencies in achieving  their goals for contracting with women-owned small businesses. The  program generally allows women-owned small businesses to compete for  set-aside contracts or receive sole source awards in industries where  these businesses are underrepresented or substantially  underrepresented.", "Changes in advertising contract obligations to specified businesses were  in some cases associated with a small number of contracts. For example,  the $29 million increase in advertising contract obligations to women- owned businesses between fiscal years 2016 and 2017 was due in large  part to two contracts with an advertising agency with combined  obligations of about $22 million in fiscal year 2017. In addition, two  contracts that had each been classified under both the SDB and minority- owned categories contributed to the decrease in these two categories  between fiscal years 2016 and 2017. Obligations to these two contracts  declined by about $16 million over this period, a substantial portion of the  overall declines in these two categories. (Obligations to SDBs declined by  about $23 million; those to minority-owned businesses declined by about  $21 million.) Although obligations to the SDB and minority-owned  categories decreased from fiscal year 2016 to 2017, the numbers of these  businesses receiving advertising contract obligations both increased. The  number of SDBs receiving these obligations went from 123 to 134; the  number of minority-owned businesses went from 95 to 98.", "Federal agencies are also required to set-aside procurements exclusively  for small businesses or businesses in the 8(a) program under certain  circumstances, and specific authorities exist to allow award of a contract  on a sole source basis to a business in the 8(a) program. However, these  authorities were in place prior to fiscal year 2013 and therefore, according  to SBA officials, it is unlikely they would have caused a change in  contracting activity over the past 5 years.", "As mentioned above, businesses may be classified as more than one  category, and thus there is overlap in obligations and contracts among  specified business categories. For example, about one-quarter ($147  million) of the $570 million in advertising contract obligations directed to  specified businesses over the 5-year period went to businesses classified  under all three categories. Figure 4 shows the amount of advertising  contract obligations going to each business category and combination of  categories."], "subsections": []}, {"section_title": "Over Half of Federal Advertising Contract Obligations to Minority- Owned Businesses Went to Those Owned by Hispanic-Americans", "paragraphs": ["Among the different types of minority-owned businesses, those classified  as being owned by Hispanic-Americans received the most obligations  (just over half) from federal advertising contracts over fiscal years 2013  through 2017. Figure 5 shows the breakdown of amounts obligated over  these fiscal years to minority-owned businesses.", "As with the other specified business categories, advertising obligations to  specific minority groups were concentrated among a relatively small  number of businesses. For example, advertising contract obligations to  one particular Native-American-owned business\u2014for graphic design,  print, and other communications services\u2014represented 34 percent of all  obligations to Native-American-owned businesses. See table 3 in  appendix II for additional details on each business category\u2019s contracts."], "subsections": []}]}, {"section_title": "DOD, DHS, and HHS Directed the Most Advertising Contract Obligations to Specified Businesses, though Other Agencies Directed Greater Percentages of These Obligations to the Businesses", "paragraphs": [], "subsections": [{"section_title": "DOD, DHS, and HHS Were Responsible for Nearly Three-Fourths of Federal Advertising Obligations to Specified Businesses", "paragraphs": ["The departments of Defense (DOD), Homeland Security (DHS), and  Health and Human Service (HHS) were responsible for 73 percent of the  $570 million of federal advertising contract obligations that went to  specified businesses over fiscal years 2013 through 2017. Thirty four  other agencies were responsible for the remaining 27 percent of these  obligations. Figure 6 shows the breakdown of total federal advertising  contract obligations, with the amount of obligations going to specified  businesses, and amounts obligated by DOD, HHS, DHS, and all other  agencies.", "For each of the 5 years we reviewed, DOD, HHS, and DHS were  consistently the top three agencies in terms of the amount of advertising  contract obligations they directed to specified businesses. Additionally, all  three generally increased the amounts they obligated to these  businesses. For example, in fiscal year 2013, these three agencies  obligated over 60 percent of all federal advertising contract obligations to  specified businesses; in 2017 they accounted for more than 80 percent of  these obligations. Figure 7 shows breakdowns of these and all other  agencies\u2019 advertising contract obligations to specified businesses.", "Much of the increase in these obligations from year to year is associated  with increases in obligations by DOD, DHS, and HHS. For example,  advertising contract obligations to these businesses increased by about  $37 million between fiscal years 2015 and 2016, with these three  agencies responsible for about $22 million, or 60 percent, of the increase.", "DOD, DHS, and HHS are also among the agencies that obligated the  most to advertising contracts overall. Together they obligated about $3.4  billion for these types of contracts over the 5-year period, which  represents 79 percent of the federal government\u2019s obligations. DOD  obligated the most\u2014over $2.6 billion\u2014to advertising contracts over the 5- year period, which accounted for over 60 percent of these obligations  over fiscal years 2013 through 2017. Table 4 in appendix II provides more  details on the agencies that obligated the most overall for advertising  contracts and those that directed the most to specified businesses.", "In our prior report on advertising contract obligations going to small  disadvantaged and minority-owned businesses, we highlighted annual  obligations data for five agencies. As an update to that analysis, we  examined annual advertising contract obligations to the five agencies that  obligated the most on advertising contracts over the past 5 years \u2013 DOD,  DHS, HHS, and the departments of Transportation (DOT) and Veterans  Affairs (VA). Figure 8 illustrates these agencies\u2019 advertising contract  obligations and the percent going to specified businesses in each year.", "As shown in the figure above, top-spending agencies\u2019 obligations to  specified businesses fluctuated over fiscal years 2013 through 2017.", "DOD. DOD\u2019s obligations to specified businesses increased for most of  the fiscal years over the 5-year period, regardless of whether its total  advertising obligations increased or decreased. For example, in fiscal  year 2016, DOD\u2019s total advertising obligations declined by over $100  million; however, its obligations to specified business categories  increased. In fiscal year 2017, DOD obligated the most of any agency  to specified businesses.", "HHS. Similarly, HHS, which obligated approximately $151 million to  specified businesses, the most of any agency over the 5-year period,  also increased its obligations to those businesses regardless of its  overall advertising obligations from year to year. For example, from  fiscal years 2016 to 2017 HHS\u2019 advertising contract obligations to  specified businesses increased from $35 to $37 million, even though  they declined as a percentage of its overall advertising contract  obligations, going from 65 percent to 57 percent.", "DOT. DOT generally increased its total advertising obligations during  the 5-year period from approximately $46 million in 2013 to $57  million in 2017. However, during this time DOT\u2019s obligations to  specified businesses generally decreased, from approximately $1.8  million in 2013 to approximately $560,000 in fiscal year 2017.", "DHS. DHS generally increased its total advertising obligations each  year of the 5-year period and generally increased its obligations to  specified businesses. DHS obligated the third largest amount of  money (behind HHS and DOD) to these businesses from fiscal years  2013 through 2017.", "VA. VA has generally decreased its total advertising obligations from  approximately $63 million in fiscal year 2013 to approximately $15  million in fiscal year 2017, and its obligations to specified businesses,  from approximately $8 million in fiscal year 2013 to approximately  $1.3 million in fiscal year 2017.", "Table 5 in appendix II shows the 20 agencies that have obligated the  most for advertising contracts over fiscal years 2013 through 2017 and  the amounts they directed to specified businesses."], "subsections": []}, {"section_title": "Agencies with Greater Percentages of Advertising Contract Obligations Going to Specified Businesses Generally Obligated Lower Amounts Overall", "paragraphs": ["In several cases agencies directed more than half of their advertising  contract obligations to specified businesses, though these agencies in  general obligated less to advertising contracts than top-spending  agencies. Ten agencies with advertising contract obligations of at least $1  million over fiscal years 2013 through 2017, such as the departments of  Justice and Energy, directed at least half of their obligations to specified  businesses. With the exception of DHS, which obligated about $200  million for advertising contracts over the 5-year period, these agencies all  obligated less than $25 million for advertising contracts over this  timeframe. In contrast, DOD directed a relatively small share (5 percent)  of its advertising contract obligations to specified businesses, making it  29th out of 37 agencies when ranked according to the percentage of  advertising contract obligations going to these businesses. However,  because the department obligated a large amount for advertising  contracts ($2.6 billion over the 5-year period), it ranked second in terms of  the amount obligated to specified businesses.", "Some agencies directed all or nearly all of their advertising contract  obligations to specified businesses, but because these agencies\u2019  advertising contract obligations were relatively low, the amounts they  directed to these businesses were also relatively low. For example, the  Nuclear Regulatory Commission directed all of its federal advertising  contract obligations\u2014totaling approximately $1 million\u2014to specified  businesses from fiscal years 2013 through 2017. Additionally, the  National Aeronautics and Space Administration directed 98 percent of its  approximately $21 million in advertising contract obligations to these  businesses from 2013 through 2017. Table 6 in appendix II shows the top  20 agencies in terms of share of advertising contract obligations going to  these businesses."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the SBA Administrator for comment.  SBA provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, SBA, 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) 512-6806 or nguyentt@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to identify and analyze (1) the amount federal  agencies have obligated on advertising contracts over the 5 most recent  fiscal years (2013 through 2017) and the amount going to small  disadvantaged businesses (SDB) and those owned by minorities and  women; and (2) the agencies that have directed the most advertising  contract obligations to these businesses and how this has changed over  time.", "To address both objectives, we analyzed data from the Federal  Procurement Data System-Next Generation (FPDS-NG) database for  fiscal years 2013 through 2017. This database captures information on  the federal government\u2019s contract awards and obligations and includes  data for most federal contract actions that have an estimated value of  more than $3,500. We reviewed obligations data for contracts coded  under the \u201csupport \u2013 management: advertising\u201d or \u201csupport \u2013  management: public relations\u201d product service codes. For reporting  purposes, we refer to these two contract types collectively as \u201cadvertising  contracts.\u201d Every contract action reported in FPDS-NG is categorized by  a product service code to indicate what was purchased. Additionally,  contracts reported in FPDS-NG are categorized by a North American  Industry Classification System (NAICS) code, which indicates the industry  within which the product or service falls. For purposes of this report, we  used the product service codes mentioned above to identify advertising  contracts because product service codes are assigned at the individual  contract or order level. The Small Business Administration (SBA) uses  NAICS codes to identify the predominant service or supply on a contract.  NAICS codes are an integral element of size standards and the  determination whether the business receiving the contract award is a  small business.", "In addition to analyzing FPDS-NG data, we interviewed SBA officials  responsible for assessing government-wide and agency contracting with  small and other business categories about their perspectives on trends in  federal contracting.", "We assessed the reliability of these data by considering known strengths  and weaknesses of FPDS-NG data, based on our past work and looking  for obvious errors and inconsistencies in the data we used for our  analysis. We also interviewed SBA officials, who use FPDS-NG data in  assessing federal contracting, about the database\u2019s reliability. Based on  these steps, we concluded that the data were sufficiently reliable for our  purposes.", "We focused our analysis of FPDS-NG data on those advertising contracts  categorized as being awarded to (1) SDBs, 8(a) businesses, or both; (2)  business owned by minorities and/ or (3) businesses owned by women.  SDBs, minority-owned, and women-owned businesses may self-identify  in the government\u2019s System for Award Management as these types of  businesses. For purposes of this report, we refer to the three categories  of businesses we examined as \u201cspecified businesses.\u201d Criteria for  certification as an 8(a) business are similar to those for SDB  classification, including that businesses be primarily owned by a person  or people who are socially and economically disadvantaged. In addition,  8(a) businesses must also demonstrate the potential for success and  business principals must demonstrate good character. Because of these  similarities, for analysis and reporting purposes we combined 8(a)  businesses and SDBs into one group, which we refer to in this report as  \u201csmall disadvantaged businesses\u201d or \u201cSDBs.\u201d We interviewed SBA  officials to obtain their perspectives on the changes, but did not attempt to  identify root causes for changes over the past 5 years, as it was beyond  our scope.", "We analyzed FPDS-NG data at the government-wide level to identify  overall trends in obligations for advertising contracts and the amounts  going to specified business categories. We focused on the amount of  advertising contract obligations going to these business categories  individually and combined, and examined how these amounts had  changed over the past 5 fiscal years. Within the minority-owned business  category, we also analyzed the amounts of obligations going to  businesses owned by Asian-Pacific-, Subcontinent-Asian-, Black-,  Hispanic-, and Native-Americans, and \u201cother minority\u201d owned businesses.  Businesses self-identify as these categories in the federal government\u2019s  System for Award Management. We also examined data on the number  of contracts and businesses receiving obligations through advertising  contracts.", "There is overlap among the three specified business categories\u2014SDBs  and those owned by minorities and women. For example, a business may  be classified as both an SDB and a women-owned business. We  accounted for this overlap when calculating and presenting data on the  amount of advertising contract obligations going to the three business  categories combined so that we did not double or triple count obligations.", "We also analyzed FPDS-NG data on specific agencies\u2019 obligations for  advertising contract obligations and the amounts they obligated to  specified businesses. We used these data to identify the agencies that  ranked highest (in dollars and as a percentage of total advertising  contract obligations) in advertising contract obligations to specified  businesses. We also examined how agency obligations to these  businesses have changed over the past 5 years.", "We conducted this performance audit from October 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Agencies\u2019 Advertising Obligations to Specified Businesses", "paragraphs": ["Table 2 shows the amounts of advertising contract obligations that went  to specified businesses over fiscal years 2013 through 2017. As shown,  the amounts directed to these business categories generally increased  both in dollars and as a percentage of total advertising obligations.", "Specified business categories each received at least $300 million in  obligations over fiscal years 2013 through 2017. There were variations in  the number of businesses receiving obligations and the concentration of  obligations among contractors. Table 3 provides additional details on  these characteristics.", "Table 4 below shows the agencies that obligated the most for advertising  contracts overall, and those that obligated the most through these  contracts to specified businesses.", "Specified businesses are those classified as small disadvantaged  businesses (including those that self-identify as small disadvantaged  businesses and those that are certified by SBA for the 8(a) business  development program); minority-owned businesses; and women-owned  businesses. Minority-owned businesses include those categorized as  being owned by Asian-Pacific-, Sub-continent-Asian-, Black-, Hispanic-,  and Native-Americans, as well as \u201cother minorities.\u201d", "Table 5 shows the 20 agencies that obligated the most for federal  advertising contracts over fiscal years 2013 through 2017, with the  percentages of these obligations going to specified businesses.", "Specified businesses are those classified as small disadvantaged  businesses (including those that self-identify as small disadvantaged  businesses, and those that are certified by SBA for the 8(a) business  development program); minority-owned businesses; and women-owned  businesses. Minority-owned businesses include those categorized as  being owned by Asian-Pacific-, Sub-continent-Asian-, Black-, Hispanic-,  and Native-Americans, as well as \u201cother minorities.\u201d", "Table 6 shows the 20 agencies that directed the greatest share of these  obligations to specified businesses."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["Other GAO staff who made contributions to this report include Carol Henn  (Assistant Director); Ann Marie Cortez; Jenny Chanley; Kristine  Hassinger; Julia Kennon; Kathleen Padulchick; and Erik Shive."], "subsections": []}]}], "fastfact": ["The federal government is one of the country's largest advertisers, spending nearly $1 billion annually on advertising contracts.", "As it does for virtually all of the products and services it buys, the government seeks to provide procurement opportunities for these contracts to certain socially and economically disadvantaged small businesses and to businesses of any size owned by minorities and women.", "We found the government has generally directed an increasing share of its advertising contract dollars to these businesses, averaging about 13 percent over the past five years."]}
{"id": "GAO-18-249", "url": "https://www.gao.gov/products/GAO-18-249", "title": "Committee on Foreign Investment in the United States: Treasury Should Coordinate Assessments of Resources Needed to Address Increased Workload", "published_date": "2018-02-14T00:00:00", "released_date": "2018-03-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States economy has historically been the largest recipient of foreign direct investment in the world\u2014receiving $373 billion in 2016, according to U.S. government statistics. Ensuring that these foreign investments do not harm national security can be a challenge. CFIUS is an interagency group that reviews transactions under its authority\u2014certain foreign acquisitions or mergers of U.S. businesses\u2014to determine their effects on U.S. national security, while maintaining an open investment climate. If CFIUS identifies concerns, it may work with parties to the transaction to mitigate them. In rare cases, CFIUS may recommend that the President block or suspend a transaction.", "GAO was asked to review the CFIUS process and possible changes to that process. This report (1) examines changes in CFIUS's workload and staffing from 2011 through 2016, and (2) provides information on stakeholder views on potential changes to CFIUS. GAO analyzed CFIUS information on staffing levels and transactions reviewed, and interviewed officials from member agencies, selected nonmember agencies that have CFIUS-related expertise, and knowledgeable external experts, such as think tanks."]}, {"section_title": "What GAO Found", "paragraphs": ["states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury\u2014the agency that leads CFIUS\u2014 has not coordinated member agencies' efforts to better understand the staffing levels needed to address the current and future workload associated with core functions of the committee. Without this information, CFIUS may be limited in its ability to fulfill its objectives and address national security concerns.", "Officials from CFIUS member agencies and selected nonmember agencies, as well as external experts, expressed a range of views on the potential benefits and drawbacks to possible changes to CFIUS. GAO organized the possible changes into three categories: (1) altering the structure of CFIUS, (2) redefining which transactions should be considered for CFIUS review, and (3) expanding the factors CFIUS considers when evaluating the impacts of a foreign transaction on national security. Agency officials were generally satisfied with CFIUS' structure, such as the committee's chair and membership. Views among officials and experts varied on redefining which transactions should be considered for review, such as requiring CFIUS to review all transactions covered by its authority regardless of notification. Officials and experts generally did not support expanding the list of national security factors CFIUS considers, such as by adding a net economic benefit test. Agency officials and experts agreed that one trade-off related to some possible changes is a likely increase to the CFIUS workload, which they noted is already straining agencies' staff resources."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Treasury, as CFIUS lead, should coordinate member agencies' efforts to better understand the staffing levels needed to address the current and projected CFIUS workload associated with core committee functions. Treasury concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States economy has historically been the world\u2019s largest  recipient of foreign direct investment, receiving $373.4 billion in 2016,  according to the Bureau of Economic Analysis. The Bureau also reported  that businesses acquired, established, or expanded by foreign direct  investors employed 480,800 workers in the United States that year.  Ensuring that these foreign investments do not harm U.S. national  security can be a challenge. Concerns have included foreign acquisitions  of U.S. companies in traditional sectors, such as semiconductors, and  cutting-edge fields, such as artificial intelligence, as well as an increase in  the number of acquisitions from certain countries. The Committee on  Foreign Investment in the United States (CFIUS) is an interagency  committee that reviews certain foreign acquisitions, mergers, or takeovers  of U.S. businesses to determine the effect of a transaction on the national  security of the United States. Informed by the committee\u2019s review, the  President of the United States has the authority to block or suspend a  transaction that threatens to impair the national security of the United  States. In the wake of concerns about the acquisition of commercial port  operations for six U.S. ports by Dubai Ports World\u2014a company based in  the United Arab Emirates\u2014Congress passed the Foreign Investment and  National Security Act of 2007 (FINSA). The FINSA amendments  currently guide the CFIUS review process. Congressional bills have been  introduced proposing ways to reform the CFIUS process.", "You asked us to review issues related to the CFIUS process and possible  changes to that process. This report (1) examines changes in CFIUS\u2019s  workload and staffing from 2011 through 2016, and (2) provides  information on stakeholder views on potential changes to CFIUS.", "To address these objectives, we reviewed relevant laws, executive  orders, and regulations. We analyzed information on workload and  staffing levels to determine the extent to which CFIUS workload and  staffing levels have changed from 2011 through 2016, the most recent  information available at the time of our review. We also conducted  individual semistructured interviews with selected stakeholders, which  consisted of officials from the 9 CFIUS voting member agencies, the 2 ex  officio nonvoting member agencies, and 3 selected nonmember agencies  that have CFIUS case-related expertise, as well as with 16 external  experts to collect views and information on the challenges, such as  workload, that CFIUS faces, potential changes to address the challenges,  and their possible benefits and drawbacks. The information obtained from  these stakeholders cannot be generalized across all stakeholders.  Appendix I provides more information on our scope and methodology.", "We conducted this performance audit from December 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "CFIUS Overview", "paragraphs": ["In 1975, an executive order established CFIUS to monitor the impact of  and coordinate U.S. policy on foreign investment in the United States. In  1988, Congress enacted the Exon-Florio amendment adding section 721  to the Defense Production Act of 1950. The amendment authorized the  President to investigate the impact of certain foreign acquisitions of U.S.  companies on national security and to suspend or prohibit acquisitions  that might threaten to impair national security. FINSA further amended  the Defense Production Act, established CFIUS as it currently exists, and  guides the committee. One of the purposes of FINSA\u2019s enactment was to  ensure national security while promoting foreign investment and the  creation of U.S. jobs.", "CFIUS reviews transactions involving a large variety of countries and  industry sectors to determine if such transactions pose a threat to national  security and whether the transactions should be allowed to proceed (for  more information on the characteristics of transactions reviewed by  CFIUS, see app. II). FINSA does not formally define national security, but  provides a number of factors for CFIUS and the President to consider in  determining whether a transaction poses a risk. These factors include the  potential national security-related effects on U.S. critical technologies and  whether the transaction could result in the control of a U.S. business by a  foreign government. CFIUS also may consider other factors that it finds  appropriate in determining whether a transaction poses a national  security risk (for a full list of factors, see app. III).", "Under FINSA, CFIUS is chaired by the Secretary of the Treasury and  includes voting members from the Departments of Commerce, Defense,  Energy, Homeland Security, Justice, and State; and the Offices of the  U.S. Trade Representative, and Science and Technology Policy. In  addition, the Office of the Director of National Intelligence (ODNI) and the  Department of Labor (DOL) are nonvoting ex officio members. Various  other White House offices also observe and, as appropriate, participate in  CFIUS activities (see fig. 1). CFIUS may also solicit perspectives and  expertise from nonmember agencies, such as the Department of  Agriculture, designating them as members for purposes of the review of  particular transactions, as appropriate, which can include negotiating or  imposing mitigation measures or referring the transaction to the President  for decision. The committee, which meets weekly at a staff level,  generally has three core functions: (1) review transactions that have been  submitted to the committee and take action as necessary to address any  national security concerns; (2) monitor and enforce compliance with  mitigation measures; and (3) identify transactions of concern that have  not been notified to CFIUS for review.", "The Secretary of the Treasury, as the chair of CFIUS, is responsible for a  number of tasks. According to Department of the Treasury (Treasury)  officials, these tasks, including coordinating operations of the committee,  facilitating information collection from parties to a transaction, reviewing  and sharing data on mergers and acquisitions with member agencies,  and managing CFIUS timeframes, are carried out by Treasury employees  specifically staffed to support CFIUS. Treasury also communicates on the  committee\u2019s behalf with the parties, members of Congress, and the  general public. When necessary, Treasury is responsible for delivering  the committee\u2019s recommendation that the President should suspend or  prohibit a transaction."], "subsections": []}, {"section_title": "Selecting Transactions for CFIUS Review", "paragraphs": ["In examining covered transactions, CFIUS members seek to identify and  address, as appropriate, any national security concerns that arise as a  result of the transaction. According to the FINSA amendment, a \u201ccovered\u201d  transaction is defined as any merger, acquisition, or takeover by or with  any foreign person that could result in foreign control of any person  engaged in interstate commerce in the United States. CFIUS reviews  \u201cnotices\u201d that have been submitted\u2014or notified\u2014to the committee by  parties to transactions. Notices to CFIUS contain information about the  nature of the transaction and the parties involved. According to guidance  on the Treasury website, with limited exceptions, a transaction receives  \u201csafe harbor\u201d when CFIUS has completed its review and determines that  the transaction may proceed. According to Treasury officials, safe harbor  provides the parties to the transaction some certainty that CFIUS and the  President will not subject the transaction to review again.", "FINSA does not require that parties notify CFIUS of a transaction;  however, CFIUS may choose to initiate a review of any covered  transaction. Transactions that have not been notified to CFIUS for  review are known as \u201cnon-notified transactions.\u201d According to member  agency officials, Treasury and several other member agencies have  processes for identifying non-notified transactions for CFIUS to potentially  review. For instance, Treasury staff compile data on mergers and  acquisitions and distribute information about potential non-notified  transactions to member agencies for review. In addition, according to  member agency officials, in 2010, the Federal Bureau of Investigation  (FBI) began a working group, now called Project Iceberg, which is  responsible for identifying and understanding counterintelligence threats  posed by foreign investments that have not been notified to CFIUS. The  working group holds monthly meetings that intelligence agencies as well  as CFIUS member agencies are invited to attend. In the absence of  voluntary reporting by the parties involved or independent discovery of  the transaction, it is possible that CFIUS may not review a covered  transaction that could pose a risk to national security."], "subsections": []}, {"section_title": "CFIUS Process for Reviewing Notified Transactions", "paragraphs": ["Based on information including FINSA and regulations, the CFIUS  process for reviewing transactions that have been notified to the  committee comprises up to four stages: pre-notice consultation, national  security review, national security investigation, and presidential action.  CFIUS reviews each transaction individually, with a focus on the aspects  of the transaction that could pose a risk. For each transaction reviewed,  the committee identifies agencies with relevant expertise to act as co-lead  with Treasury to guide the transaction through the CFIUS process.  CFIUS reviews are confidential and protected from public disclosure. A  CFIUS review could be concluded when CFIUS members reach  consensus about whether the transaction should be allowed to proceed,  including on the basis of mitigation, if necessary, or when the parties  withdraw their notice, whether for commercial reasons or in light of  CFIUS\u2019s national security concerns. Absent one of these conclusions to  a CFIUS review, the committee may send the transaction to the  President, with a recommendation that the President suspend or prohibit  it. See figure 2 for an overview of the steps that comprise the CFIUS  process for reviewing selected transactions.", "Before a transaction is reviewed by CFIUS, Treasury may conduct a pre- notice consultation with parties to a notified transaction. Upon request,  Treasury and other agencies meet with the parties, provide informal  guidance on the CFIUS review process, and may review early drafts of  the notice.", "Once the parties have developed the final draft, they submit it to the  committee for review. When Treasury, with input from member agencies,  determines that the notice of the transaction is complete, the official  CFIUS review of the transaction commences.", "CFIUS conducts a national security review of each notified transaction,  which includes determining whether it is a covered transaction and  developing a national security threat assessment. The national security  review lasts up to 30 days and begins the day after Treasury determines  the filing is complete and circulates the filing to CFIUS member agencies.  At the beginning of the national security review, CFIUS identifies co-lead  agencies. According to Treasury officials, typically within the first 10 to 12  days of the national security review, CFIUS develops a \u201ccovered  transaction analysis,\u201d which determines whether the transaction is a  covered transaction according to FINSA. According to Treasury officials,  there typically is consensus among voting members on whether the  transaction is a covered transaction. During the national security review,  CFIUS also assesses whether there is credible evidence that the foreign  party in control of that U.S. business might take action to impair the  national security of the United States as well as whether the covered  transaction is a foreign government-controlled transaction. Concurrently,  ODNI develops a national security threat assessment, with input and  support from the intelligence community, to be completed during the first  20 days of the national security review.", "If CFIUS finds that the covered transaction does not present national  security risks or that other provisions of law provide adequate and  appropriate authority to address the risks, CFIUS may end its review. If  CFIUS chooses to conclude its review at this point, CFIUS is to advise  the parties in writing that the transaction has been cleared and allowed to  proceed. According to information provided by Treasury, CFIUS has  historically concluded action on the majority of transactions during or at  the end of the 30-day national security review. The committee\u2019s  determination must be certified to specified members of Congress after  the review is completed. However, if at the end of the national security  review, CFIUS has not yet determined that there are no unresolved  national security concerns and the committee requires additional time,  CFIUS may proceed to a national security investigation, which must be  completed within 45 days.", "If, during the 45-day national security investigation, CFIUS identifies an  unresolved national security concern, it works with the parties to mitigate,  if appropriate, any national security risks that may exist. If an agency  identifies an unresolved national security concern, the agency develops  an analysis of the potential risks posed by the covered transaction and  includes recommendation for action, such as mitigation measures or  referral to the President, and shares this analysis with other members of  the committee. Mitigation measures may include ensuring that only  authorized persons have access to certain technologies, information, or  facilities, or providing the U.S. government the right to review certain  business decisions and to object if the decisions raise national security  concerns. According to Treasury officials, CFIUS member agencies aim  for mitigation that would be effective, can be monitored, and would be  enforceable. If there is a difference of opinion among CFIUS member  agencies about the level or type of mitigation that should be utilized,  CFIUS agencies discuss the matters to reach consensus.", "In some cases, parties may choose to withdraw and resubmit the notice.  If CFIUS has determined that national security concerns cannot be  mitigated, according to Treasury officials, CFIUS typically advises the  parties that the committee will refer the matter to the President for  decision. According to Treasury officials, parties have the opportunity to  withdraw and resubmit the notice if they need additional time to discuss  CFIUS\u2019s concerns or to present additional information or mitigation  proposals for CFIUS\u2019s consideration. Sometimes parties choose to  withdraw and abandon the transaction if, for instance, CFIUS proposes  mitigation measures that the parties choose not to accept. Parties may  also abandon the transaction for commercial reasons unrelated to the  CFIUS review. If parties choose to withdraw and resubmit a transaction,  the national security review begins again, and the committee has another  75 days to complete the review of the transaction.", "If CFIUS obtains consensus from committee members that there are no  unresolved national security concerns or the national security concerns  have been mitigated, the national security investigation ends, and the  covered transaction receives safe harbor. Treasury and the co-lead  agency send written certification to specified members of Congress that  there are no unresolved national security concerns. However, if the  committee concludes that a proposed foreign investment threatens to  impair the U.S. national security and the threat cannot be mitigated,  CFIUS will elevate the notice to the President for determination and  CFIUS may recommend that the President suspend or prohibit the  transaction. According to Treasury officials, parties may also withdraw  their notice at this point rather than have the President decide whether to  block the transaction.", "If, at the end of the national security investigation, CFIUS elevates a  transaction to the President for determination, the President has 15 days  from the completed investigation to decide to prohibit or suspend the  acquisition, or to take no action. Only four transactions reviewed by  CFIUS have been the subject of a presidential prohibition since the  committee was established in 1975."], "subsections": []}]}, {"section_title": "Stakeholders Have Concerns about the Increased CFIUS Workload but Treasury Has Not Coordinated Staffing Level Assessments", "paragraphs": ["CFIUS has experienced an increase in workload in recent years, but  Treasury, as CFIUS lead, has not coordinated member agency efforts to  better understand staffing levels needed to complete core committee  functions. According to CFIUS member agency officials, the volume of  transactions notified to the committee and the complexity of CFIUS  reviews in terms of technology, transaction structure, and national  security concerns have increased substantially from 2011 through 2016,  while CFIUS staffing levels have experienced a modest increase during  the same time period. Member agency officials stated that CFIUS is able  to review all transactions that have been voluntarily notified to the  committee. However, many stakeholders, including most member agency  officials and several external experts, expressed concerns that CFIUS  member agencies were limited in their ability to complete other CFIUS  functions, such as identifying non-notified transactions. In addition,  agency officials were unsure if they would have sufficient staff if the  CFIUS workload were to continue to increase. Standards for Internal  Control in the Federal Government states that management should  establish the organizational structure necessary to achieve its objectives  and periodically evaluate this structure. Treasury has not coordinated  member agency efforts to better understand the staffing levels needed to  complete the current and future workload associated with core functions  of the committee."], "subsections": [{"section_title": "The Volume of Covered Transactions CFIUS Reviewed Increased between 2011 and 2016", "paragraphs": ["Despite figures decreasing in one year, overall, the number of covered  transactions that CFIUS reported it reviewed increased from 111  transactions in 2011 to 172 transactions in 2016, or almost 55 percent  (see table 1). In 2017, CFIUS reviewed 238 transactions, according to  Treasury officials. According to member agency officials, the increased  volume of covered transactions resulted in increased work for all CFIUS  members, no matter which agency is the co-lead, because each member  agency must review each transaction notified to the committee.", "The number of reported covered transactions requiring national security  investigations almost doubled during this same period, increasing from 40  transactions in 2011 to 79 transactions in 2016. Treasury officials told us  that they estimated that the total number of transactions that proceeded  to national security investigations was greater in 2017 than it was in  2016. They said that the increase in the number of covered transactions  that require a national security investigation is another indication that the  committee\u2019s workload has increased. One Treasury official noted that the  number of times that parties withdraw and resubmit transactions can  increase the workload of the committee as it must review the transaction  each time it is submitted.", "Additionally, the number of reported covered transactions that include  mitigation measures has increased. Each year, CFIUS places mitigation  measures on a relatively small number of covered transactions. For  example, according to Treasury officials, 18 (roughly 10 percent) of 172  transactions the committee reviewed in 2016 resulted in mitigation  measures. According to member agency officials, mitigation measures  rarely expire; thus, the number of these measures increases over time, as  does the accompanying workload for co-lead agencies tasked with  overseeing the measures."], "subsections": []}, {"section_title": "The Increased Complexity of CFIUS Reviews Has Increased CFIUS Workload", "paragraphs": ["Officials from CFIUS member agencies stated that the complexity of  CFIUS reviews in terms of technology, transaction structure, and national  security concerns has increased in recent years. They said that additional  time and staff have been required to address this rise in complexity and to  complete these reviews. For instance, one member agency official told us  that reviews of transactions from parties whose companies use new and  emerging technologies, such as artificial intelligence and robotics,  typically require input from agency subject matter experts to help the  committee understand how, if at all, the acquisition of these technologies  by foreign parties could create national security concerns.", "According to member agency officials, the amount of time and number of  staff needed to review a transaction can fluctuate greatly based on,  among other things, the technology involved. One agency official said that  6 of their employees, on average, are involved in reviewing a less  complex transaction, but up to 15 employees may be necessary to  complete the review if the technology involved is more complicated. The  number of agency staff involved can increase further if senior level  management is required to participate in the review. This official also  stated that most of the transactions reviewed in the past were from  sectors that agency officials were familiar with and involved more  predictable issues, but recently, transactions more frequently involved  complex technology, which required additional expertise. Officials from  another member agency stated that a majority of their staff involved in  reviewing transactions do not have CFIUS as a primary duty and that  their agency has reallocated resources to address the increased case  load. One Treasury official stated that one case was so complex that it  required one staff member to dedicate all of their time to its review, and  the other responsibilities of this employee had to be shifted to other  members of the staff.", "Additionally, according to member agency officials, reviews of  transactions involving technologies the government frequently uses have  increased, requiring additional time and staff to understand how this  technology affects various agencies. For instance, member agency  officials said that reviewing transactions involving semiconductors, which  are commonly used in an array of products used by the government,  typically requires additional time and staff because CFIUS member  agencies must understand, among other things, how the approval of a  transaction could affect systems across government agencies.", "According to CFIUS member agency officials, the structures of the  transactions the committee reviews have also become more complex,  requiring more time and staff to assess. For example, business  arrangements\u2014such as complex corporate arrangements, joint ventures,  loan arrangements, nondisclosure agreements, and memoranda of  understanding\u2014may require the work of additional staff. Treasury officials  also stated that these arrangements can make it more difficult to  determine whether the transaction is covered by CFIUS authorities, as  there may be commercial relationships that affect the parties\u2019 decision- making. According to Treasury officials, such arrangements can also  increase the complexity of the national security review, as they may  create additional \u201cindirect threats\u201d that must also be analyzed.", "Member agency officials explained that it has become more challenging  to identify the ultimate beneficial owners\u2014the persons who ultimately own  and control a company\u2014due to the structure of the transaction. According  to Treasury officials, in certain countries, it can be difficult to distinguish  between control by a private entity and control by a state entity due to the  various relationships created by the transaction structure. In these cases,  CFIUS often requires additional information from the parties in such  transactions before the national security review can begin. Member  agency officials stated that they had been encountering these  arrangements more frequently, and additional time and staff had been  required to examine the national security implications of these  transactions.", "Finally, the nature of the national security concerns the committee  considers has expanded beyond the traditional threats, requiring more  time and staff to assess them, according to member agency officials.  National security concerns include traditional ones, such as threats to  U.S. critical infrastructure. Emerging concerns include the possibility of a  foreign entity obtaining access to personally identifiable information that, if  disclosed, could be exploited for purposes that have national security  consequences or the proximity of property to areas considered sensitive  by the U.S. government."], "subsections": []}, {"section_title": "Treasury Has Not Coordinated Assessments of Staffing Levels Needed to Complete CFIUS Core Functions", "paragraphs": ["According to agency officials, the number of staff assigned to CFIUS  activities has not kept pace with the increase in covered transactions  reviewed by CFIUS. According to one Treasury official, the more an  agency is required to act as co-lead, the more time and staff are needed  of the agency. After Treasury, which acts as co-lead on every review, the  Departments of Defense (DOD), Energy (DOE), and Homeland Security  (DHS) acted as co-lead on the largest number of CFIUS reviews in 2016  (see table 2).", "According to information provided by member agency officials, CFIUS  saw a modest increase in staff assigned to CFIUS activities since 2011,  with Treasury, DOD, DOE, DHS, and State adding a few staff, while  staffing levels did not rise at the other member agencies. The total  number of staff assigned to CFIUS activities increased from 82 in 2011 to  91 in 2016, an increase of 11 percent. During that same period, covered  transactions reviewed by CFIUS increased from 111 transactions in 2011  to 172 transactions in 2016, an increase of almost 55 percent (see fig. 3).", "Member agency officials stated that the number of staff assigned to work  on CFIUS activities may fluctuate throughout the year based on the  committee\u2019s work. For example, as previously discussed, CFIUS member  agencies may rely on experts with other responsibilities throughout each  agency to provide assistance with the review as the need arises. For  instance, in fiscal year 2016, DOE had four staff dedicated to CFIUS, but  one DOE official said he reaches out to relevant subject matter experts,  who have other responsibilities, to provide input on transactions within  their area of expertise.", "Treasury officials stated that staff have been able to review the number of  transactions that have been voluntarily notified to CFIUS to date. One  Treasury official said that, despite the increase in the number of  transactions reviewed by CFIUS, the committee has almost always  provided a determination to the parties within the timeframes required as  to whether the covered transaction should be allowed to proceed or  blocked by the President. Further, Treasury officials stated that despite  staff constraints, CFIUS has, as needed, appropriately mitigated the  national security concerns for the transactions the committee has  approved.", "However, several member agency officials and external experts  expressed concerns that, due to staff constraints, CFIUS member  agencies were limited in their ability to complete other CFIUS functions,  such as monitoring mitigation measures and identifying non-notified  transactions. First, the time and staff necessary to monitor mitigation  measures varies. For instance, according to one member agency official,  some mitigation measures require daily monitoring from officials, while  other mitigation measures require only the review of an annual report  submitted by parties to the transaction. Several member agency officials  acknowledged that they have fewer staff than they would like to devote to  monitoring mitigation measures.", "Second, these member agency officials also said that they are not able to  devote the amount of time they would like to the task of identifying non- notified transactions. CFIUS member agencies review data on mergers  and acquisitions to identify non-notified transactions of concern, those  that have not been notified to CFIUS for review. In recent years,  according to agency officials, CFIUS has seen an increase in the number  of non-notified transactions CFIUS could potentially review. One official  indicated that in 2016, their agency examined 2,683 potential non-notified  transactions, an increase of roughly 38 percent from 2014. Member  agency officials stated that because non-notified transactions are  frequently reviewed after the acquisition has been completed, the process  of mitigating potential national security concerns of non-notified  transactions can be difficult. Several member agency officials suggested  that they would like to devote more time to examining non-notified transactions, but staff constraints limit the amount of time agencies can  spend conducting this task.", "Several member agency officials said that they do not know if current  staffing levels would be able to address a further increase in CFIUS  workload. Treasury officials noted that the volume of transactions  reviewed by CFIUS will likely continue to increase. Moreover,  congressional bills have been introduced that, if enacted, would alter the  CFIUS process. As discussed later in this report, agency officials stated  that some of these potential changes would likely further increase CFIUS  workload. According to several CFIUS member agency officials, if the  CFIUS workload were to increase, additional staff would likely be  necessary to complete committee functions, such as identifying non- notified transactions and monitoring mitigation measures. Officials from  two member agencies also expressed concerns about their ability to  review transactions that have been notified to the committee if the volume  of CFIUS notices increased.", "According to Treasury officials, CFIUS does not have a centralized  budget, and Treasury does not have authority to determine CFIUS  staffing levels at committee member agencies. Treasury officials stated  that they have taken steps, in coordination with the Office of Management  and Budget (OMB), to collect data from the member agencies on current  staffing levels expended on CFIUS core functions but have not  established timeframes for this data collection. Standards for Internal  Control in the Federal Government states that management should  establish the organizational structure necessary to achieve its objectives  and periodically evaluate this structure. Treasury officials stated that they  have conducted an assessment of Treasury\u2019s staffing needs and have  encouraged other agencies to do the same. However, Treasury, as  CFIUS lead, has not coordinated member agencies\u2019 efforts to better  understand the staffing levels needed to address the current and future  CFIUS workload associated with core committee functions, such as  identifying and reviewing non-notified transactions. Without this  information, CFIUS may be limited in its ability to fulfill its objectives and  address threats to the national security of the United States."], "subsections": []}]}, {"section_title": "CFIUS Member Agencies and External Experts Provided Views on Benefits and Drawbacks of Possible Changes to CFIUS", "paragraphs": ["Officials from CFIUS member agencies (voting and nonvoting) and  selected nonmember participant agencies, as well as external experts,  expressed a range of views on the potential benefits and drawbacks to  possible changes to CFIUS. In our interviews with them, these  stakeholders discussed a variety of possible changes to CFIUS that we  organized into three categories: (1) altering the structure of CFIUS, (2)  redefining which merger and acquisition transactions should be  considered for CFIUS review, and (3) expanding the list of factors CFIUS  considers as it evaluates the impacts of a foreign transaction on national  security. For the most part, CFIUS member agencies and nonmember  participant agencies stated that the existing structure is working  effectively and described drawbacks to potential changes, such as  changing membership or voting rights. Perspectives among agency  officials and external experts varied on the potential effects of redefining  which transactions should be considered for review, such as requiring  CFIUS to review all covered transactions. Agency officials and external  experts described a range of potential effects of expanding the list of  factors CFIUS considers. They generally stated that including a net  economic benefit test in the review, for example, would not be beneficial.  Many officials and external experts agreed that one potential drawback of  many of the possible changes is a likely increase to the CFIUS workload,  generating concerns about the committee\u2019s capacity to complete its core  functions."], "subsections": [{"section_title": "Agencies Participating in CFIUS Were Generally Satisfied with the Structure of the Committee", "paragraphs": ["In general, officials from member and nonmember agencies participating  in CFIUS were satisfied with the structure of the committee. Possible  changes, which would affect the way CFIUS is organized and does its  work, include changes to the chairmanship of CFIUS, changes to the  voting membership of CFIUS (adding new voting members and giving  voting rights to current nonvoting members), and changes to the  timeframes under which CFIUS works. However, for the most part, CFIUS  member agencies and nonmember participant agencies reported that the  existing structure works effectively. See tables 3, 4, 5, and 6 for details on  the perspectives expressed on these changes."], "subsections": []}, {"section_title": "Perspectives Varied on the Effects of Changes to the Types of Transactions to Be Considered for CFIUS Review", "paragraphs": ["Member agency officials and external experts offered a range of views  about the effects of changes to the types of transactions reviewed by  CFIUS. Possible changes, which would affect which merger and  acquisition transactions would be considered for CFIUS review, include  changes to the definition of a covered transaction and changing the  voluntary notification process to make review of all or some covered  transactions mandatory. Stakeholders we spoke with identified benefits  and drawbacks to each of these changes. Many stakeholders agreed that  one potential drawback of these possible changes is a likely increase to  the CFIUS workload. See tables 7, 8, and 9 for details on the  perspectives expressed."], "subsections": []}, {"section_title": "Most Stakeholders Were Satisfied with the Factors CFIUS Currently Considers in Reviewing Foreign Transactions", "paragraphs": ["Member agency officials and external experts were generally satisfied  with the list of factors CFIUS currently considers when it reviews foreign  transactions and offered a variety of opinions on the effects of changes to  them. Possible changes include expanding the statutory national security  factors to be considered and introducing an economic impact  assessment. Stakeholders we spoke with identified benefits and  drawbacks to each of these changes. See tables 10 and 11 for details on  the perspectives expressed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The United States maintains an open investment climate that recognizes  the benefits of foreign investment to its economy. CFIUS reviews certain  foreign acquisitions, mergers, or takeovers of U.S. businesses to  determine the effect of the transaction on the national security of the  United States. The increased number of covered transactions notified to  CFIUS and the complexity of these cases compared with the modest  increase in the number of people assigned to reviewing them have,  according to member agency officials, taxed the staff of CFIUS member  agencies. Member agency officials and external experts have expressed  particular concern that CFIUS member agencies were limited in their  ability to complete core functions, such as identifying non-notified  transactions and monitoring mitigation measures. At the same time,  congressional bills have been introduced proposing changes to FINSA  that could increase the committee\u2019s workload. Officials from Treasury and  other member agencies are aware of pressures on their CFIUS staff  given the current workload and have expressed concerns about possible  workload increases. Treasury and OMB have begun to collect information  from agencies on their current CFIUS staffing levels. This is a crucial first  step that could facilitate a better understanding for both the committee  and Congress of the current staffing levels across the committee\u2019s  organizational structure. However, Treasury, as CFIUS lead, has not  coordinated member agency efforts to assess the current and future  staffing levels needed to complete the committee\u2019s core functions.  Without attaining an understanding of the staffing levels needed to  address the current and future CFIUS workload, particularly if legislative  changes to CFIUS\u2019s authorities further expand its workload, CFIUS may  be limited in its ability to fulfill its objectives and address threats to the  national security of the United States."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of the Treasury, as the chair of CFIUS, and working with  member agencies, should coordinate member agencies\u2019 efforts to better  understand the staffing levels needed to address the current and  projected CFIUS workload associated with core committee functions.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to the  Departments of Agriculture, Commerce, Defense, Energy, Health and  Human Services, Homeland Security, Justice, Labor, State, and the  Treasury as well as the Offices of the U.S. Trade Representative, Science  and Technology Policy, and the Director of National Intelligence, and the  Federal Communications Commission. We also provided a draft to the  Office of Management and Budget.", "Treasury provided written comments, which are reproduced in appendix  V. In its comments, Treasury stated that it is working with OMB to  determine current resource levels across the CFIUS member agencies  and has encouraged agencies to assess their staffing needs. Treasury  also stated that it generally concurred with the draft report\u2019s  recommendation to \u201cconduct an assessment to better understand staffing  levels needed to address the current and projected CFIUS workload.\u201d  However, Treasury noted that CFIUS does not have a centralized budget,  and Treasury does not have the authority over CFIUS staffing levels at  member agencies. We acknowledge Treasury\u2019s points and, therefore, we  modified the report and clarified the recommendation to focus on  Treasury\u2019s coordination role, since, as we note in the report, Treasury is  responsible for coordinating the operations of the committee and  communicating on the committee\u2019s behalf with the parties, members of  Congress, and the general public. Treasury stated in an email that the  clarifications to the recommendation address the point raised in its  comment letter.", "USDA also provided written comments, reproduced in appendix VI. In its  comments, USDA stated that it generally agreed with the findings in  GAO\u2019s draft report. The letter further noted that USDA is satisfied with  Treasury\u2019s willingness to include USDA in cases related to food and  agriculture and is comfortable continuing to work as a non-voting member  of CFIUS.", "The Departments of Commerce, Homeland Security, State, Treasury, and  the Offices of the U.S. Trade Representative and Science and  Technology Policy provided written technical comments, which we  incorporated as appropriate.", "The Departments of Defense, Energy, Health and Human Services,  Justice, Labor, the Office of the Director of National Intelligence, and the  Federal Communications Commission indicated via email that they did  not have comments.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Departments of  Agriculture, Commerce, Defense, Energy, Health and Human Services,  Homeland Security, Justice, Labor, State, and the Treasury as well as the  Offices of the U.S. Trade Representative, Science and Technology  Policy, and the Director of National Intelligence, and the Federal  Communications Commission. In addition, the report will be available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff have questions about this report, please contact  Kimberly Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov or  Marie A. Mak at (202) 512-2527 or makm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found   on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) examines changes in the Committee on Foreign  Investment in the United States\u2019 (CFIUS) workload and staffing from 2011  through 2016, and (2) provides information on stakeholder views on  potential changes to CFIUS.", "To address these objectives, we reviewed relevant laws, executive  orders, and regulations. We interviewed officials from each CFIUS voting  member agency, including the Departments of Commerce, Defense,  Energy, Homeland Security, Justice, State, and the Treasury as well as  the Offices of the U.S. Trade Representative and Science and  Technology Policy. We also interviewed officials from the two nonvoting  ex officio members, the Office of the Director of National Intelligence and  the Department of Labor. In addition, we interviewed officials from  nonmember agencies that have CFIUS case-related expertise, including  the Departments of Agriculture and Health and Human Services, and the  Federal Communications Commission.", "To examine the changes in CFIUS workload and staffing levels over the  past 5 years, we analyzed information on workload and staffing levels at  the voting member agencies from 2011 through 2016, the most recent  information available at the time of our review. We also reviewed the  2014 and 2015 CFIUS annual reports. In addition, we interviewed officials  from the nine CFIUS voting member agencies about their workload and  staffing levels; any changes in the volume, types, and complexity of  transactions reviewed by CFIUS; and their ability to complete the core  functions of the committee. We requested information from the 9 CFIUS  voting member agencies on the number of staff assigned to CFIUS more  than 50 percent of their time.", "To collect information on stakeholder views on potential changes to  CFIUS, we conducted individual semi-structured interviews with selected  stakeholders, which consisted of officials from the nine CFIUS voting  member agencies, the two ex officio nonvoting member agencies, and  three selected nonmember agencies that have CFIUS case-related  expertise, as well as with external experts. To identify external experts,  we asked stakeholders to recommend other stakeholders we should  speak with (i.e., snowball sampling). From our list of potential  stakeholders, we selected 16 external experts, including former  government officials, lawyers who represent parties with transactions  notified to CFIUS, and representatives from industry associations and  think tanks. In our interviews, we collected views and information on the  challenges that CFIUS faces, options for addressing the challenges, and  the possible benefits and drawbacks of these options. The information  obtained from these stakeholders cannot be generalized across all  stakeholders; however, these stakeholders provided insights into the  possible effects of implementing certain changes to CFIUS.", "We conducted this performance audit from December 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Characteristics of Transactions Reviewed by the Committee on Foreign Investment in the United States (CFIUS)", "paragraphs": ["Appendix II: Characteristics of Transactions  Reviewed by the Committee on Foreign  Investment in the United States (CFIUS)", "CFIUS reviews covered transactions from a large variety of industries, but  the largest number of transactions reviewed come from the manufacturing  sector. In 2016, the manufacturing sector represented approximately 42  percent of the 172 covered transactions reviewed by CFIUS and, in  recent years, the number of transactions reviewed from that sector has  increased from 49 transactions in 2011 to approximately 72 transactions  in 2016. Computer and electronic transactions, such as those by  companies that produce semiconductor technology, accounted for  approximately 32 of the 72 covered transactions from the manufacturing  sector that CFIUS reviewed in 2016. For instance, in 2016, CFIUS  reviewed the potential acquisition of Aixtron, a Germany-based  semiconductor firm with assets in the United States, by the Chinese firm  Fujian Grand Chip Investment Fund. That year, the President chose to  prohibit the acquisition of the U.S. business of Aixtron upon determining  that the foreign purchasers might take action that threatens to impair the  national security of the United States in exercising control of the U.S.  business of Aixtron. Treasury, as the chair of CFIUS, stated in a press  release that the national security risks posed by the transaction related to,  among other things, a Chinese firm obtaining the company\u2019s body of  knowledge and experience.", "Transactions from the manufacturing sector involve a variety of other  industries, including textiles, chemicals, and food manufacturing. For  example, in 2013, according to a report from the U.S.-China Economic  and Security Review Commission, CFIUS reviewed the acquisition of  Smithfield Foods Inc., for $7.1 billion, by China\u2019s Shuanghui International  Holdings Ltd. A letter submitted by members of the Senate Agriculture  Committee raised concerns that the transaction posed a threat to the  nation\u2019s food security; however, according to Security and Exchange  Commission filings, CFIUS ultimately completed its investigation and  cleared the transaction to proceed.", "Acquisitions by Chinese-owned companies accounted for the largest  number of covered transactions reviewed by CFIUS from 2014 through  2016. According to CFIUS, the number of covered transactions the  committee reviewed from China has increased substantially in recent  years, from 10 transactions in 2011 to 67 in 2016. In previous years,  companies from the United Kingdom were party to the largest share of  covered transactions submitted for CFIUS review; however, from 2013  through 2015, parties from the United Kingdom and Canada submitted  the second and third largest number of notices. Forty-four percent of all  covered transactions reviewed by the committee during this time period  involved companies from China, the United Kingdom, or Canada."], "subsections": []}, {"section_title": "Appendix III: Factors to Determine Whether Submitted Transactions Pose a National Security Risk", "paragraphs": ["Appendix III: Factors to Determine Whether  Submitted Transactions Pose a National  Security Risk The potential effects of the transaction on the domestic production needed for  projected national defense requirements.  The potential effects of the transaction on the capability and capacity of domestic  industries to meet national defense requirements, including the availability of human  resources, products, technology, materials, and other supplies.  The potential effects of a foreign person\u2019s control of domestic industries and  commercial activity on the capability and capacity of the United States to meet the  requirements of national security.  The potential effects of the transaction on U.S. international technological leadership  in areas affecting U.S. national security.  The potential national security-related effects on U.S. critical technologies.  The potential effects on the long-term projection of U.S. requirements for sources of  energy and other critical resources and material.  The potential national security-related effects of the transaction on U.S. critical  infrastructure, including critical physical infrastructure such as major energy assets.  The potential effects of the transaction on the sales of military goods, equipment, or  technology to countries that present concerns related to terrorism; missile  proliferation; chemical, biological, or nuclear weapons proliferation; or regional  military threats.  The potential that the transaction presents for transshipment or diversion of  technologies with military applications, including the relevant country\u2019s export control  system.", "Whether the transaction could result in the control of a U.S. business by a foreign  government or by an entity controlled by or acting on behalf of a foreign  government.  The relevant foreign country\u2019s record of adherence to nonproliferation control  regimes and record of cooperating with U.S. counterterrorism efforts.", "Other factors that the President or the committee may determine to be appropriate,  generally or in connection with a specific review or investigation."], "subsections": []}, {"section_title": "Appendix IV: Reported Number of Agency Staff Assigned to Committee Activities", "paragraphs": ["Department of the Treasury (Chair)"], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": ["Kimberly M. Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov.  Marie A. Mak, (202) 512-4841 or makm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Christine Broderick (Assistant  Director), Christina Werth (Analyst-in-Charge), Anthony Costulas, Scott  Purdy, Kendal Robinson, Lynn Cothern, Grace Lui, Justin Fisher, and Neil  Doherty contributed to this report."], "subsections": []}]}], "fastfact": ["Foreign investments in U.S. companies can benefit the economy, but could pose risks to national security.", "The Committee on Foreign Investment in the United States (CFIUS) reviews certain foreign acquisitions and mergers and can work with the parties involved to mitigate national security risks or block transactions.", "The committee reviewed over 50% more transactions in 2016 than in 2011. We recommended assessing staffing needs to address the concern that increased workload could limit the committee's effectiveness.", "We also asked stakeholders about potential changes to the committee's structure and priorities. Their views varied widely."]}
{"id": "GAO-18-703T", "url": "https://www.gao.gov/products/GAO-18-703T", "title": "Information Technology: SSA Has Improved Acquisitions and Operations, but Needs to Fully Address the Role of Its Chief Information Officer", "published_date": "2018-09-27T00:00:00", "released_date": "2018-09-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SSA delivers services that touch the lives of almost every American, and relies heavily on IT resources to do so. Its systems support a range of activities, such as processing Disability Insurance payments, to calculating and withholding Medicare premiums, and issuing Social Security numbers and cards. For fiscal year 2018, the agency planned to spend approximately $1.6 billion on IT.", "GAO has previously reported that federal IT projects have often failed, in part, due to a lack of oversight and governance. Given the challenges that federal agencies, including SSA, have encountered in managing IT acquisitions, Congress and the administration have taken steps to improve federal IT, including enacting federal IT acquisition reform legislation and issuing related guidance.", "This statement summarizes GAO's previously reported findings regarding SSA's management of IT acquisitions and operations. In developing this testimony, GAO summarized findings from its reports issued in 2011 through 2018, and information on SSA's actions in response to GAO's recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Social Security Administration (SSA) has improved its management of information technology (IT) acquisitions and operations by addressing 14 of the 15 recommendations that GAO has made to the agency. For example,", "Incremental development . The Office of Management and Budget (OMB) has emphasized the need for agencies to deliver IT investments in smaller increments to reduce risk and deliver capabilities more quickly. In November 2017, GAO reported that agencies, including SSA, needed to improve their certification of incremental development. As a result, GAO recommended that SSA's CIO (1) report incremental development information accurately, and (2) update its incremental development policy and processes. SSA implemented both recommendations.", "Software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that most agencies, including SSA, lacked comprehensive software license policies. As a result, GAO made six recommendations to SSA, to include developing a comprehensive software licenses policy and inventory. SSA implemented all six recommendations.", "However, SSA's IT management policies have not fully addressed the role of its CIO. Various laws and related guidance assign IT management responsibilities to CIOs in six key areas. In August 2018, GAO reported that SSA had fully addressed the role of the CIO in one of the six areas (see table). Specifically, SSA's policies fully addressed the CIO's role in the IT leadership and accountability area by requiring the CIO to report directly to the agency head, among other things.", "In contrast, SSA's policies did not address or minimally addressed the IT workforce and IT strategic planning areas. For example, SSA's policies did not include requirements for the CIO to annually assess the extent to which personnel meet IT management skill requirements or to measure how well IT supports agency programs. GAO recommended that SSA address the weaknesses in the remaining five key areas. SSA agreed with GAO's recommendation and stated that the agency plans to implement the recommendation by the end of this month."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made 15 recommendations to SSA to improve its management of IT acquisitions and operations from 2011 through 2018, and 1 recommendation to improve its CIO policies. While SSA has implemented nearly all of them, it would be better positioned to overcome longstanding IT management challenges when it addresses the CIO's role in its policies."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here to participate in your hearing on the Social  Security Administration\u2019s (SSA) management of information technology  (IT) and the authorities of its chief information officer (CIO). SSA is  responsible for delivering services that touch the lives of almost every  American, and the agency extensively relies on IT resources to do so. Its  computerized information systems support a wide range of activities\u2014 from processing Disability Insurance and Supplemental Security Income  payments to calculating and withholding Medicare premiums and issuing  Social Security numbers and cards. For fiscal year 2018, the agency  plans to spend approximately $1.6 billion on hardware and software,  computer maintenance, and contractor support, among other things.", "We have previously reported that federal IT projects have often failed, in  part, due to a lack of oversight and governance. Executive-level  governance and oversight across the government has often been  ineffective, in particular from CIOs. For example, our work has found that  some CIOs do not have the authority to review and approve the entire  agency IT portfolio.", "Given the challenges that federal agencies, including SSA, have long  encountered in managing IT, in December 2014, Congress enacted  federal IT acquisition reform legislation (commonly referred to as the  Federal Information Technology Acquisition Reform Act, or FITARA).  This law was intended to improve agencies\u2019 acquisitions and enable  Congress to hold agencies accountable for reducing duplication and  achieving cost savings. Among other things, the law requires agency  action to consolidate federal data centers, ensure adequate  implementation of incremental development, review and approve IT  acquisitions, purchase software government-wide, and enhance agency  CIO authority.", "In February 2015, we added improving the management of IT acquisitions  and operations to our list of high-risk areas for the federal government. In  February 2017, we issued an update to our high-risk report and noted  that, while progress has been made in addressing the high-risk area of IT  acquisitions and operations, significant work remained to be completed.  To address these shortcomings, we have made numerous  recommendations aimed at improving federal IT acquisitions and  operations.", "At your request, my testimony today summarizes our previously reported  findings regarding SSA\u2019s management of IT acquisitions and operations  and the authorities of its CIO. In developing this testimony, we relied on  reports that we previously issued between July 2011 and August 2018,  which discussed various aspects of the agency\u2019s IT management. These  reports, cited throughout this statement, include detailed information on  the scope and methodology of our prior reviews. We also incorporated  information on SSA\u2019s actions in response to recommendations we made  in our previous reports.", "We conducted the work upon which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["SSA\u2019s mission is to deliver Social Security services that meet the  changing needs of the public. The Social Security Act and amendments  established three programs that the agency administers:", "Old-Age and Survivors Insurance provides monthly retirement and  survivors benefits to retired and disabled workers, their spouses and  their children, and the survivors of insured workers who have died.  SSA has estimated that, in fiscal year 2019, $892 billion in old-age  and survivors insurance benefits are expected to be paid to a monthly  average of approximately 54 million beneficiaries.", "Disability Insurance provides monthly benefits to disabled workers  and their spouses and children. The agency estimates that, in fiscal  year 2019, a total of approximately $149 billion in disability insurance  benefits will be paid to a monthly average of about 10 million eligible  workers.", "Supplemental Security Income is a needs-based program financed  from general tax revenues that provides benefits to aged adults, blind  or disabled adults, and children with limited income and resources.  For fiscal year 2019, SSA estimates that nearly $59 billion in federal  benefits and state supplementary payments will be made to a monthly  average of approximately 8 million recipients."], "subsections": [{"section_title": "SSA Relies Extensively on IT", "paragraphs": ["SSA relies heavily on its IT resources to support the administration of its  programs and related activities. For example, its systems are used to  handle millions of transactions on the agency\u2019s website, maintain records  for the millions of beneficiaries and recipients of its programs, and  evaluate evidence and make determinations of eligibility for benefits.  According to the agency\u2019s most recent Information Resources Strategic  Plan, its systems supported the processing of an average daily volume of  about 185 million individual transactions in fiscal year 2015.", "SSA\u2019s Office of the Deputy Commissioner for Systems is responsible for  developing, overseeing, and maintaining the agency\u2019s IT systems.", "Comprised of approximately 3,800 staff, the office is headed by the  Deputy Commissioner, who also serves as the agency\u2019s CIO."], "subsections": []}, {"section_title": "SSA Has a History of Unsuccessful IT Management", "paragraphs": ["SSA has long been challenged in its management of IT. As a result, we  have previously issued a number of reports highlighting various  weaknesses in the agency\u2019s system development practices, governance,  requirements management, and strategic planning, among other areas.   Collectively, our reports stressed the need for the agency to strengthen its  IT management controls.", "In 2016, we reported that SSA\u2019s acting commissioner had stated that the  agency\u2019s aging IT infrastructure was not sustainable because it was  increasingly difficult and expensive to maintain. Accordingly, the agency  requested $132 million in its fiscal year 2019 budget to modernize its IT  environment. As reflected in the budget, these modernization efforts are  expected to include projects such as updating database designs by  converting them to relational databases, eliminating the use of outdated  code, and upgrading infrastructure.", "Among the agency\u2019s priority IT spending initiatives in the budget is its  Disability Case Processing System, which has been under development  since December 2010. This system is intended to replace the 52  disparate Disability Determination Services\u2019 component systems and  associated processes with a modern, common case processing system.  According to SSA, the new system is to modernize the entire claims  process, including case processing, correspondence, and workload  management.", "However, SSA has reported substantial difficulty in the agency\u2019s ability to  carry out this initiative, citing software quality and poor system  performance as issues. Consequently, in June 2016, the Office of  Management and Budget (OMB) placed the initiative on its government- wide list of 10 high-priority programs requiring attention."], "subsections": []}, {"section_title": "Congress and the Administration Have Undertaken Efforts to Improve Federal IT", "paragraphs": ["As previously mentioned, Congress enacted federal IT acquisition reform  legislation (commonly referred to as FITARA) in December 2014. This  legislation was intended to improve agencies\u2019 acquisitions of IT and  enable Congress to monitor agencies\u2019 progress and hold them  accountable for reducing duplication and achieving cost savings. It  includes specific requirements related to seven areas: (1) agency CIO  authority enhancements, (2) federal data center consolidation initiative,  (3) enhanced transparency and improved risk management, (4) portfolio  review, (5) IT acquisition cadres, (6) government-wide software  purchasing program, and (7) the Federal Strategic Sourcing Initiative.", "In June 2015, OMB released guidance describing how agencies are to  implement FITARA. The guidance identifies a number of actions that  agencies are to take to establish a basic set of roles and responsibilities  (referred to as the common baseline) for CIOs and other senior agency  officials and, thus, to implement the authorities described in the law.", "More recently, on May 15, 2018, the President signed Executive Order  13833, Enhancing the Effectiveness of Agency Chief Information Officers.  Among other things, this executive order is intended to better position  agencies to modernize their technology, execute IT programs more  efficiently, and reduce cybersecurity risks. The order pertains to 22 of  the 24 Chief Financial Officers Act agencies; the Department of Defense  and the Nuclear Regulatory Commission are exempt.", "For the covered agencies, including SSA, the executive order strengthens  the role of the CIO by, among other things, requiring the CIO to report  directly to the agency head; to serve as the agency head\u2019s primary IT  strategic advisor; and to have a significant role in all management,  governance, and oversight processes related to IT. In addition, one of the  cybersecurity requirements directs agencies to ensure that the CIO works  closely with an integrated team of senior executives, including those with  expertise in IT, security, and privacy, to implement appropriate risk  management measures.", "In June 2018, we issued a report that examined the cybersecurity  workforce of the government. We noted that most of the 24 agencies we  examined had developed baseline assessments to identify cybersecurity  personnel within their agencies that held certifications, but the results  were potentially unreliable. However, SSA\u2019s baseline was found to be  reliable because it addressed all of the reportable information, such as  the extent to which personnel without professional certifications were  ready to obtain them or strategies for mitigating any gaps. Further, we  found that most of the 24 agencies had established procedures to assign  cybersecurity codes to positions, including SSA. We also have ongoing  work at SSA, including reviewing its cybersecurity workforce;  standardized approach to security assessment, authorization, and  continuous monitoring; cybersecurity strategy; and intrusion detection and  prevention capabilities.", "From July 2011 through January 2018, we issued a number of reports  that addressed specific weaknesses in SSA\u2019s management of IT  acquisitions and operations and in the role of its CIO. These reports  included 15 recommendations aimed at improving the agency\u2019s efforts  with regard to data center consolidation, incremental development, IT  acquisitions, and software licenses. We also made a recommendation to  SSA to address weaknesses related to the role of the CIO in key  management areas."], "subsections": []}]}, {"section_title": "SSA Has Improved the Management of Selected Areas of IT Acquisitions and Operations, but Has Not Fully Addressed the Role of Its CIO", "paragraphs": ["SSA has taken steps to improve its management of IT acquisitions and  operations by addressing 14 of the 15 recommendations that we  previously directed to the agency regarding data center consolidation,  incremental development, IT acquisitions, and software licenses.", "Data center consolidation. OMB established the Federal Data  Center Consolidation Initiative in February 2010 to improve the  efficiency, performance, and environmental footprint of federal data  center activities. The enactment of FITARA in 2014 codified and  expanded the initiative. In addition, pursuant to FITARA, in August  2016, the Federal CIO issued a memorandum that announced the  Data Center Optimization Initiative as a successor effort to the  Federal Data Center Consolidation Initiative. Further, in August 2016,  OMB released guidance which established the Data Center  Optimization Initiative and included instructions on how to implement  the date center consolidation and optimization provisions of FITARA.  Among other things, the guidance required agencies to consolidate  inefficient infrastructure, optimize existing facilities, improve their  security posture, and achieve cost savings.", "In addition, the guidance directed agencies to develop a data center  consolidation and optimization strategic plan that defines the agency\u2019s  data center strategy for fiscal years 2016, 2017, and 2018. This  strategy is to include, among other things, a statement from the  agency CIO indicating whether the agency has complied with all data  center reporting requirements in FITARA. Further, the guidance  indicates that OMB is to maintain a public dashboard to display  consolidation-related cost savings and optimization performance  information for the agencies.", "In a series of reports that we issued from July 2011 through August  2017, we noted that, while data center consolidation could  potentially save the federal government billions of dollars,  weaknesses existed in agencies\u2019 data center consolidation plans and  data center optimization efforts. Specifically with regard to SSA, in  2011, we reported that the agency had an incomplete consolidation  plan and inventory of IT assets. In 2016, we reported that SSA did not  meet any of the seven applicable data center optimization targets, as  required by OMB. In addition, in 2017, we reported that the agency  had an incomplete data center optimization plan. We stressed that  until SSA completed these required activities, it might not be able to  consolidate data centers, as required, and realize expected savings.", "We made a total of four recommendations to SSA in our 2011, 2016,  and 2017 reports to help improve the agency\u2019s reporting of data  center-related cost savings and to achieve data center optimization  targets. As of September 2018, SSA had implemented all four  recommendations. Consequently, the agency is better positioned to  improve the efficiency of its data centers and achieve cost savings.", "In addition, we reported in May 2018 that the agencies participating  in the Data Center Optimization Initiative had communicated mixed  progress toward achieving OMB\u2019s goals for closing data centers by  September 2018. With regard to SSA, we noted that the agency had  not yet achieved its planned savings but that its data centers were  among the most optimized that we reviewed. In particular, while SSA  reported that it planned to save $1.08 million on its data center  initiative from 2016 through 2018, it had not achieved any of those  savings. However, the agency reported having met the goal of closing  25 percent of its tiered data centers.", "Further, SSA reported the most progress among the 22 applicable  agencies in meeting OMB\u2019s data center optimization targets.  Specifically, SSA reported that it had met four of the five targets. (One  other agency reported that it had met three targets, 6 agencies  reported having met either one or two targets, and 14 agencies  reported meeting none of the targets). Consequently, we did not make  any additional recommendations to SSA in our May 2018 report. We  also have ongoing work involving SSA related to agencies\u2019 progress  on closing data center and achieving optimization targets.", "Incremental development. OMB has emphasized the need to deliver  investments in smaller parts, or increments, in order to reduce risk,  deliver capabilities more quickly, and facilitate the adoption of  emerging technologies. In 2010, it called for agencies\u2019 major  investments to deliver functionality every 12 months and, since 2012,  every 6 months. Subsequently, FITARA codified a requirement that  covered agency CIOs certify that IT investments are adequately  implementing incremental development, as defined in the capital  planning guidance issued by OMB. Further, subsequent OMB  guidance on the law\u2019s implementation, issued in June 2015, directed  agency CIOs to define processes and policies for their agencies to  ensure that they certify that IT resources are adequately implementing  incremental development.", "In November 2017, we reported that 21 agencies, including SSA,  needed to improve their certification of incremental development.  We pointed out that, as of August 2016, agencies had reported that  103 of 166 major IT software development investments (62 percent)  were certified by the agency CIO for implementing adequate  incremental development in fiscal year 2017, as required by FITARA.", "With regard to SSA, we noted that only 3 of the agency\u2019s 10  investments primarily in development had been certified by the  agency CIO as using adequate incremental development, as required  by FITARA. In addition, we noted that SSA\u2019s incremental development  certification policy did not describe the CIO\u2019s role in the certification  process or how CIO certification would be documented. However,  accurate agency CIO certification of the use of adequate incremental  development for major IT investments is critical to ensuring that  agencies are making the best effort possible to create IT systems that  add value while reducing the risks associated with low-value and  wasteful investments.", "As a result of these findings, we recommended that SSA ensure that  its CIO (1) reports major IT investment information related to  incremental development accurately, in accordance with OMB  guidance; and (2) updates the agency\u2019s policy and processes for the  certification of incremental development and confirm that the policy  includes a description of how the CIO certification will be documented.  SSA agreed with our recommendations and implemented both of  them. Thus, the agency should be better positioned to realize the  benefits of incremental development practices, such as reducing  investment risk, delivering capabilities more rapidly, and permitting  easier adoption of emerging technologies.", "IT acquisitions. FITARA includes a provision to enhance covered  agency CIOs\u2019 authority through, among other things, requiring agency  heads to ensure that CIOs review and approve IT contracts. OMB\u2019s  FITARA implementation guidance expanded upon this aspect of the  legislation in a number of ways. Specifically, according to the  guidance, CIOs may review and approve IT acquisition strategies and  plans, rather than individual IT contracts, and CIOs can designate  other agency officials to act as their representatives.", "In January 2018, we reported that most of the CIOs at 22 selected  agencies, including SSA, were not adequately involved in reviewing  and approving billions of dollars of IT acquisitions. In particular, we  found that SSA\u2019s process to identify IT acquisitions for CIO review did  not involve the acquisition office, as required by OMB. In addition, we  noted that SSA had a CIO review and approval process in place that  fully satisfied the requirements set forth in OMB\u2019s guidance. However,  while SSA provided evidence of the CIO\u2019s review of most of the IT  contracts we examined, the agency had not ensured that the CIO or a  designee reviewed and approved each IT acquisition plan or strategy.  Specifically, of 10 randomly selected IT contracts that we examined at  SSA, 7 acquisitions associated with those contracts had been  reviewed and approved, as required by OMB.", "We pointed out that, until SSA ensured that its CIO or designee  reviewed and approved all IT acquisitions, the agency would have  limited visibility and input into its planned IT expenditures and would  not be effectively positioned to benefit from the increased authority  that FITARA\u2019s contract approval provision is intended to provide.", "Further, the agency could miss an opportunity to strengthen the CIO\u2019s  authority and the oversight of IT acquisitions\u2014thus, increasing the  potential to award IT contracts that are duplicative, wasteful, or poorly  conceived.", "Accordingly, we made three recommendations to SSA to address  these weaknesses. As of September 2018, the agency had made  progress by implementing two of the recommendations: to ensure that  (1) the acquisition office is involved in identifying IT acquisitions and  (2) the CIO or designee reviews and approves IT acquisitions  according to OMB guidance. By taking these actions, SSA should be  better positioned to properly identify and provide oversight of IT  acquisitions.", "However, SSA has not yet implemented our third recommendation  that it issue guidance to assist in the identification of IT acquisitions.  SSA stated that, in September 2017, it updated its policy for  acquisition plan approval to address this recommendation; however,  upon review of this policy, we did not find guidance for identifying IT  acquisitions. Without the proper identification of IT acquisitions, SSA\u2019s  CIO cannot effectively provide oversight of these acquisitions.", "Software licenses. Federal agencies engage in thousands of  software licensing agreements annually. The objective of software  license management is to manage, control, and protect an  organization\u2019s software assets. Effective management of these  licenses can help avoid purchasing too many licenses, which can  result in unused software, as well as too few licenses, which can  result in noncompliance with license terms and cause the imposition  of additional fees.", "As part of its PortfolioStat initiative, OMB has developed policy that  addresses software licenses. This policy requires agencies to  conduct an annual, agency-wide IT portfolio review to, among other  things, reduce commodity IT spending. Such areas of spending could  include software licenses.", "In May 2014, we reported on federal agencies\u2019 management of  software licenses and determined that better management was  needed to achieve significant savings government-wide. Of the 24  agencies we reviewed, SSA was 1 of 22 that lacked comprehensive  policies that incorporated leading practices.", "In particular, SSA\u2019s policy partially met four of the leading practices  and did not meet one. Further, we noted that SSA was among 22 of  the 24 selected agencies that had not established comprehensive  software license inventories\u2014a leading practice that would help the  agencies to adequately manage their software licenses.", "As such, we made six recommendations to SSA to improve its  policies and practices for managing software licenses. These included  recommendations that the agency develop a comprehensive policy for  the management of software licenses and establish a comprehensive  inventory of software licenses. SSA agreed with the recommendations  and, as of September 2018, had implemented all six of them. As a  result, the agency should be better positioned to manage its software  licenses and identify opportunities for reducing software license costs."], "subsections": [{"section_title": "SSA Needs to Further Address the CIO\u2019s Role in Its Policies", "paragraphs": ["While SSA has taken steps that improved its IT management in the areas  of data center consolidation, incremental development, IT acquisitions,  and software licenses, we reported in August 2018 that the agency had  not fully addressed the role of the CIO in its policies.", "As previously mentioned, FITARA and the President Executive Order  13833, among other laws and guidance, outline the roles and  responsibilities for agency CIOs in an attempt to improve the  government\u2019s performance in IT and related information management  functions. Within these laws and guidance, we identified IT management  responsibilities assigned to CIOs in six key IT areas:", "Leadership and accountability. CIOs are responsible and  accountable for the effective implementation of IT management  responsibilities. For example, CIOs are to report directly to the agency  head or that official\u2019s deputy and designate a senior agency  information security officer.", "Strategic planning. CIOs are required to lead the strategic planning  for all IT management functions. An example of a CIO requirement  related to the strategic planning area is measuring how well IT  supports agency programs and reporting annually on the progress in  achieving the goals.", "IT workforce. CIOs are to assess agency IT workforce needs and  develop strategies and plans for meeting those needs. For example,  CIOs are responsible for annually assessing the extent to which  agency personnel meet IT management knowledge and skill  requirements, developing strategies to address deficiencies, and  reporting to the head of the agency on the progress made in  improving these capabilities.", "IT budgeting. CIOs are responsible for the processes for all annual  and multi-year IT planning, programming, and budgeting decisions.  For example, CIOs are to have a significant role in IT planning,  programming, and budgeting decisions.", "IT investment management. CIOs are to manage, evaluate, and  assess how well the agency is managing its IT resources. In  particular, CIOs are required to improve the management of the  agency\u2019s IT through portfolio review.", "Information security. CIOs are to establish, implement, and ensure  compliance with an agency-wide information security program. For  example, CIOs are required to develop and maintain an agency-wide  security program, policies, procedures, and control techniques.", "In our August 2018 report, we noted that SSA, along with 23 other  agencies, did not have policies that fully addressed the role of the CIO in  these six key areas, consistent with the laws and guidance.", "To its credit, SSA had fully addressed the role of the CIO in the IT  leadership and accountability area. In particular, the agency\u2019s policies  addressed the requirements that the CIO report directly to the agency  head, assume responsibility and accountability for IT investments, and  designate a senior agency information security officer.", "However, the policies did not fully address the role of the CIO in the other  five areas (i.e., strategic planning, workforce, budgeting, investment  management, and information security). For example, the agency\u2019s  policies did not address the IT workforce area at all, including the  requirements that the CIO annually assess the extent to which agency  personnel meet IT management knowledge and skill requirements,  develop strategies to address deficiencies, and report to the head of the  agency on the progress made in improving these capabilities.", "Further, SSA\u2019s policies minimally addressed the requirements for IT  strategic planning. Specifically, while the agency\u2019s policies required the  CIO to establish goals for improving agency operations through IT, the  policies did not require the CIO to measure how well IT supports agency  programs and report annually on the progress in achieving the goals.", "Table 1 summarizes the extent to which SSA\u2019s policies addressed the  role of its CIO, as reflected in our August 2018 report.", "As a result of these findings, we made a recommendation to SSA to  address the weaknesses in its policies with regard to the remaining five  key management areas. In response, the agency agreed with our  recommendation and, subsequently, stated that it planned to do so by the  end of September 2018. Following through to ensure that the identified  weaknesses are addressed in its policies will be essential to helping SSA  overcome its longstanding IT management challenges.", "In conclusion, effective IT management is critical to the performance of  SSA\u2019s mission. Toward this end, the agency has taken steps to improve  its management of IT acquisitions and operations by implementing 14 of  the 15 recommendations we made from 2011 through 2018 to improve its  IT management. Nevertheless, SSA would be better positioned to  effectively address longstanding IT management challenges by ensuring  that it has policies in place that fully address the role and responsibilities  of its CIO in the five key management areas, as we previously  recommended.", "Chairman Johnson, Ranking Member Larson, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact Carol C. Harris at (202) 512-4456 or harriscc@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this testimony statement. GAO staff who  made key contributions to this statement are Kevin Walsh (Assistant  Director), Jessica Waselkow (Analyst in Charge), and Rebecca Eyler.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-72", "url": "https://www.gao.gov/products/GAO-19-72", "title": "Open Data: Treasury Could Better Align USAspending.gov with Key Practices and Search Requirements", "published_date": "2018-12-13T00:00:00", "released_date": "2018-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Open data can foster accountability and public trust by providing citizens with information on government activities and their outcomes. It can also promote private sector innovation. The DATA Act requires that the federal government collect and present open data on roughly $4 trillion in annual federal spending. The DATA Act also includes a provision requiring GAO to review its implementation.", "This report (1) identifies key practices for transparently reporting government data; and (2) evaluates the extent to which USAspending.gov is consistent with those key practices and other requirements. GAO developed the key practices by systematically evaluating and synthesizing information from literature on open data, as well as interviews with open data experts and good governance groups. GAO used these key practices as well as existing federal website standards and applicable laws to evaluate USAspending.gov."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identified five key practices for transparently reporting government data, as well as actions to implement each practice. These key practices and actions can assist managers of open government data programs in the transparent presentation of their data. Open data are information that can be freely used, modified, or shared by anyone for any purpose.", "USAspending.gov aligns with several key practices. However, the Department of the Treasury (Treasury) has not fully aligned the website with all of the key practices, the requirements of the Federal Funding Accountability and Transparency Act of 2006 (FFATA), and Office of Management and Budget (OMB) guidance (see table.) FFATA, as amended by the Digital Accountability and Transparency Act of 2014 (DATA Act), directed Treasury to develop and manage USAspending.gov to provide detailed information on federal spending."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations including that Treasury (1) establish a process to ensure that additions to USAspending.gov meet security requirements, (2) provide structured metadata and licensing information on the website, and (3) ensure that users can search for awards by city and program source as required by law. Treasury agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The increasing availability of open government data\u2014that is, government- produced information that can be freely used, modified, and shared by  anyone for any purpose\u2014holds great potential to promote government  transparency and private sector innovation. In recent years, governments  around the world have increased the availability of open data by providing  information on a wide range of topics such as health, education,  transportation networks, budgets, and performance. Such data can foster  accountability and public trust by providing citizens with information on  government activities and their outcomes. In addition, according to a 2014  study by the Department of Commerce, U.S. government data have  helped private firms in data-intensive industries generate revenues of at  least $24 billion and upwards of $221 billion annually. However, for open  data to achieve their full potential, government websites must ensure that  their data are effectively presented to a wide range of users.", "To provide more transparency for roughly $4 trillion in federal spending,  on March 2, 2018, the Department of the Treasury (Treasury) released a  new version of its USAspending.gov website. The new  USAspending.gov displays data submitted by federal agencies to comply  with the Federal Funding Accountability and Transparency Act of 2006  (FFATA), as amended by the Digital Accountability and Transparency Act  of 2014 (DATA Act), and upon release became the official source of  spending data required to be published under the DATA Act. Because of  federal spending data\u2019s broad appeal to users such as Congress, grant  recipients, journalists, and the general public, it is important that  USAspending.gov follow key practices for reporting this information as  transparently as possible.", "The DATA Act includes a provision for us to review implementation of the  act. Over the past 4 years, we have issued 13 reports assessing various  aspects of DATA Act implementation. This report builds on our body of  work on the DATA Act and (1) identifies key practices for transparently  reporting government data on a centralized website, and (2) evaluates the  extent to which the new USAspending.gov is consistent with these key  practices, as well as existing standards for federal websites.", "To identify key practices for transparently reporting open government  data on a centralized website, we conducted a literature search and  systematically reviewed articles on open government data programs and  practices. We evaluated and synthesized information from the literature  review to identify commonly-reported key practices for transparently  reporting open government data. We also interviewed experts on open  data and good governance. We first had open-ended conversations with  experts to obtain their views on what key practices exist for transparently  reporting open government data. After developing an initial list of key  practices, we then obtained experts\u2019 feedback to finalize the list. We  shared a draft of the key practices with Treasury, the Office of  Management and Budget (OMB), and the General Services  Administration (GSA).", "To obtain illustrative examples showing how those key practices can be  implemented, we selected open data practitioners from six state and local  governments:", "Kansas City, Missouri;", "Los Angeles, California;", "Montgomery County, Maryland;", "New York City, New York; and", "Ohio.", "We selected these practitioners because they have well-regarded open  data websites that include a general open data portal as well as budget or  spending data visualizations, and because they represent different  locations and levels of government, including cities, counties, and states.  We reviewed these practitioners\u2019 open data websites and related  documentation, and interviewed cognizant state and local government  officials.", "To assess the extent to which the new USAspending.gov is consistent  with key practices and existing standards for federal websites, we  compared the website to applicable laws and policies\u2014such as FFATA  and OMB guidance\u2014as well as the key practices in this report. We also  reviewed documentation related to the website, observed Treasury\u2019s  participation in a hackathon, and interviewed Treasury officials. To clarify  policies and practices for federal websites, we interviewed GSA officials  and OMB staff.", "To evaluate the extent to which specified federal award data elements on  USAspending.gov are searchable, as required by FFATA, as amended by  the DATA Act, we obtained and tested a nongeneralizable, random  sample of award data from USAspending.gov. Specifically, we  downloaded contract and financial assistance data from  USAspending.gov, generated a random sample of awards, and used the  website\u2019s search tools to search for the required data elements from 15  contracts and 15 financial assistance awards.", "For the purposes of this report, we focused on the presentation of data  and related contextual information on USAspending.gov. Our review did  not include data quality or data governance. We reported on the quality  of the data submitted under the DATA Act in November 2017. In 2019,  we will report an updated assessment of the quality of these data and,  separately, report on OMB and Treasury\u2019s efforts to develop a  governance process for maintaining the integrity of the data standards  established under the DATA Act. Detailed information on our scope and  methodology is included in appendix I.", "We conducted this performance audit from February 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Open Data Policy", "paragraphs": ["Recognizing the federal government\u2019s role as a major supplier of data,  the 2018 President\u2019s Management Agenda announced the creation of a  Federal Data Strategy. According to the agenda, this strategy promises  to leverage data as a strategic asset to grow the economy, increase the  effectiveness of the federal government, facilitate oversight, and promote  transparency. It proposes improving data dissemination by making data  available more quickly and in more useful formats, maximizing  nonsensitive data shared with the public, and enabling external users to  access and use government data for commercial and other public  purposes.", "The Federal Data Strategy builds on existing policy governing the federal  government\u2019s websites and data. In 2016, OMB memorandum M-17-06,  Policies for Federal Agency Public Websites and Digital Services,  established policy for the federal government\u2019s online information  resources, such as the need to ensure that information is searchable and  to inform users about information quality issues. In addition, in 2013,  OMB memorandum M-13-13, Open Data Policy\u2014Managing Information  as an Asset, established an information management framework to  promote interoperability and openness at each stage of the information  life cycle.", "These efforts are consistent with the international Open Government  Partnership, which aims to make governments more inclusive,  responsive, and accountable. Seventy-five countries have committed to  the Open Government Partnership by endorsing the Open Government  Declaration. In doing so, these countries have committed to increasing  the availability of information about government activities, supporting  public participation in government, and using new technologies for  openness and accountability, among other things."], "subsections": []}, {"section_title": "DATA Act and USAspending.gov", "paragraphs": ["Enacted in 2006, FFATA requires agencies to report information on  federal awards\u2014such as contracts, grants, and loans. In 2014, the DATA  Act expanded on FFATA by establishing new requirements intended to  allow policymakers and the public to more effectively track federal  spending, including:", "Reporting additional data. Agencies are required to report additional  financial data from different points in the spending life cycle.", "Setting government-wide standards. OMB and Treasury are  responsible for establishing government-wide financial data standards  for any federal funds made available to or expended by federal  agencies. These standards define and describe the data elements  that agencies must report.", "Reporting consistently. Agencies reporting financial information are  required to comply with the standards established by OMB and  Treasury so that information can be compared across the  government.", "Improving data access. The data must be made available in  machine-readable and open formats, to be downloaded in bulk, and\u2014 to the extent practicable\u2014for automated processing.", "The DATA Act required agencies to begin reporting data in accordance  with the data standards issued by Treasury and OMB within three years  of its enactment, and required that those data be displayed on  USAspending.gov or a successor system. USAspending.gov has been  the platform to provide federal spending information to the public since  2007 (see figure 1). In May 2017, Treasury released a new website,  Beta.USAspending.gov, where it began to publish information submitted  under the DATA Act. In March 2018, this new website assumed the  USAspending.gov web address and Treasury retired the old version of  USAspending.gov.", "Data on USAspending.gov come from a variety of sources, including files  that agencies began submitting quarterly for DATA Act reporting in May  2017. When agencies submit quarterly data, Treasury\u2019s DATA Act Broker  ingests the data and validates certain information before the data are  published on the website. Agency Senior Accountable Officials certify  that the agency\u2019s submission is valid and reliable. In addition to agencies\u2019  quarterly DATA Act reporting files, USAspending.gov includes data from  government-wide systems. Government-wide procurement data on the  website are updated daily, while government-wide financial assistance  data are updated biweekly. The new USAspending.gov also includes  older award data that had been available on the prior version of the  website."], "subsections": []}, {"section_title": "Our Prior Report Identified Data Quality and Website Issues", "paragraphs": ["In November 2017, we issued our first report on data quality as required  by the DATA Act. We found issues with the completeness and accuracy  of the data that agencies submitted for the second quarter of fiscal year  2017 as well as the use of data elements. For example:", "Of the 78 agencies that submitted data on time, 13 submitted the data  file intended to link budgetary and award information without providing  any data in the file.", "Between 56 and 75 percent of the newly-required budgetary records  were fully consistent with agency sources, but only between 0 and 1  percent of award records (such as grants, contracts, and loans) were  fully consistent.", "Agencies differed in how they interpreted and applied OMB\u2019s  definitions for two data elements\u2014Primary Place of Performance and  Award Description\u2014raising concerns regarding data consistency and  comparability. These two award data elements are particularly  important to achieving the transparency goals envisioned by FFATA  because they provide the public with information on where the federal  government spends money and what it spends it on, respectively.", "We also found issues with the presentation of the data on  Beta.USAspending.gov, including fragmented or incomplete search  results and insufficient disclosure of data limitations. Among other things,  we recommended that Treasury disclose known data quality issues and  limitations on the new USAspending.gov website. We provide an update on actions Treasury has taken to address this recommendation later in  this report."], "subsections": []}]}, {"section_title": "Key Practices for Transparently Reporting Government Data", "paragraphs": ["We identified five key practices that managers of open government data  programs can consider to help ensure the transparent presentation of  their data. We also identified key actions for implementing each key  practice. We identified these key practices and key actions by  systematically evaluating and synthesizing information from literature on  open data as well as interviews with open data experts and good  governance groups. These key practices and key actions are listed in  table 1.", "These key practices and actions are intended to be used in tandem with  requirements for federal government websites and open data programs,  such as relevant laws and OMB guidance. They are not intended to  replace or supersede any applicable requirements. When considering an  individual open government data program, some key practices and  actions may be more relevant than others because the purpose and  characteristics of open government data programs may vary. In addition,  while this report focuses on the presentation of open government data,  open data practitioners should also consider other elements\u2014including  data quality and data governance\u2014to ensure that the public has access  to high-quality information."], "subsections": [{"section_title": "Provide Free and Unrestricted Data", "paragraphs": ["To promote transparency, we found that open data should be freely and  equally available to users without restrictions. As such, we identified two  key actions for providing free and unrestricted data (see figure 2).", "Make government data open by default, while protecting sensitive or  restricted information. Making government data open by default  ensures that the data are equally open to all types of users; in contrast,  when government information is available by request, it may favor citizens  with greater information about and access to government institutions. In  addition, some open data practitioners we spoke with said that providing  open data can minimize the burden of responding to information requests.  For example, according to Connecticut officials, before the state\u2019s open  spending data website was launched, payroll data were the most  frequently requested information under the state\u2019s Freedom of Information  Act (FOIA). Officials said that providing open payroll data on the website  significantly reduced FOIA requests, which allowed state officials to  spend time and resources on other activities.", "However, not all government information is appropriate to publish. Some  datasets may contain sensitive information such as personally identifiable  information, information that is classified or similarly not subject to  disclosure, or intellectual property. Other legal restrictions may also  prohibit the disclosure of certain information. In some cases the  information in an individual dataset may not pose a risk of identifying  sensitive information, but may pose such a risk when combined with other  available information. For that reason, when considering whether or not  information may be disclosed, OMB M-13-13 requires agencies to  determine whether it may be combined with existing publically available  data to identify an individual or otherwise pose a security concern. In  such situations, agencies must conduct a risk-based privacy analysis to  determine whether the information can be made publicly available that  accounts for the nature of the information, the availability of other  information, and the technology in place that could facilitate the process  of identification.", "As an example of how open data practitioners can balance these types of  considerations, Montgomery County, Maryland, applies safeguards such  as a review by internal departments. Additionally, if Department officials  request a secondary fact-specific review, the Office of the County  Attorney will review the information to further ensure that protected  information is not published. In some cases, sensitive information is  removed from a dataset prior to publication. For example, according to  county officials, the names of housing assistance recipients are removed  from spending data to protect resident privacy. Users can see  nonsensitive aspects of these data, such as the amount spent, with  identifying details removed.", "Do not charge users for access to the data. Providing data for free can  help ensure equitable access to users independent of their ability to pay.  Lowering barriers, such as cost, increases the value of open data, as  more users are able to access it."], "subsections": []}, {"section_title": "Engage with Users", "paragraphs": ["Open government data only create value to the extent that they are used.  With that in mind, we identified three key actions for engaging with users  (see figure 3).", "Identify data users and their needs. By identifying who is using the data  and what content or features are important to them, data providers can  better prioritize their efforts to present information to data consumers.  Open data experts we spoke with emphasized that data providers should  engage with users both inside and outside of government, including  groups that may typically have less access to government institutions. For  example, to further New York City\u2019s Open Data for All vision to provide  open data for people from all walks of life and all five of the city\u2019s  boroughs, Columbia University students conducted user research on  behalf of the city to better understand the extent to which community  organizations use open data and what barriers they face, according to the  capstone report for this project. By surveying and interviewing these  organizations, the students learned that users found the city\u2019s data portal  interface difficult to use. In response, the city worked with users to design  and test a new, more streamlined portal.", "Solicit and be responsive to user feedback. Soliciting and being  responsive to user feedback\u2014both when the website is being developed  and on an ongoing basis\u2014can help ensure that the website meets users\u2019  needs. Feedback can also surface issues with the functionality of the  website and the quality of the data, thus enabling the data provider to  make corrections when needed. User feedback mechanisms vary and  can include online comment forms, forums, and discussion boards, as  well as in-person public forums. Open data experts we spoke with said it  is particularly helpful to list the contact information for a responsible  official on the website in case users have questions about the data. In  addition, timely response to feedback encourages engagement by  assuring users that their voices have been heard.", "Monitoring how the public is using the data can also help practitioners  determine which content and features are most useful. Web analytics can  show how the data are being used, such as by identifying commonly-used  search terms and datasets, and showing trends over time.", "Web Analytics  Web analytics is the collection, reporting, and  analysis of website data, such as the number  of users who visit the website.", "According to a city official, Los Angeles uses web analytics to measure  how frequently its datasets are accessed. Web analytics data showed  that some datasets were often accessed on certain dates or in  conjunction with current events, while other datasets were rarely used.  City officials use this information to adjust how data are presented on the  website, which has increased overall use of the city\u2019s data. For example,  the city created data visualizations and links to data\u2014including its City  Revenue and City Budget Expenditures datasets\u2014to accompany the  release of its Comprehensive Annual Financial Report.", "Reach out to potential users to encourage data use. Actively  engaging potential users can provide an opportunity to educate them on  how the data can be appropriately used and encourage innovation. Data  trainings can provide potential users with important context and  information, which can include teaching users how the data can be used.  Resources such as how-to guides can also encourage data use. For  example, as shown on the website, New York City\u2019s open data portal  includes a \u201cHow To\u201d page with a step-by-step guide to help users get  started with open data, and directs them toward additional resources such  as data dictionaries.", "We previously found that open data collaboration and prize competitions  or challenges are two strategies that agencies can use to harness the  ideas, expertise, and resources of those outside of their organization.", "Agencies engage in open data collaboration by mobilizing participants to  use their open data in innovative ways, such as sharing, exploring, and  analyzing publicly-available datasets; using the data to conduct research;  designing data visualizations; or creating web and mobile applications  and websites that help people access and use the data. In addition,  agencies use prize competitions or challenges for help solving a problem  or reaching a specific goal by asking members of the public to submit  potential solutions. The agency then evaluates these proposals and  provides a monetary or nonmonetary award to selected winners.", "New York City encourages the use of its open data using these strategies  by hosting data literacy trainings, hackathons, and contests. For example,  in the spring of 2018 the city hosted a contest to recognize projects that  effectively use its open data and showcase the diversity of potential uses,  according to city officials and contest documentation. Winning projects  were posted to a gallery on the city\u2019s open data website. As shown on the  city\u2019s open data website, one winner\u2014a project called \u201cPlan(t)wise\u201d\u2014 predicts various tree species\u2019 likelihood of survival in locations throughout  the city based on tree census data, and recommends which type of tree  to plant at a given address."], "subsections": []}, {"section_title": "Provide Data in Useful Formats", "paragraphs": ["Data are most useful when they are provided in formats that allow them to  be analyzed in a variety of ways. We identified four key actions for  providing data in useful formats (see figure 4).", "Provide users with detailed and disaggregated data. Data are most  useful when they are provided in as much granularity as possible. For  example, Ohio\u2019s online checkbook allows users to view detailed,  disaggregated data in a user-friendly checkbook format, as shown on the  website (see figure 5). The representation of the expenditure is displayed  as a check, and includes the vendor\u2019s name and address, the amount  paid, payment date, check number, and contact information for the  appropriate state office.", "Provide machine-readable data that can be downloaded in bulk and  in selected subsets. Providing data in machine-readable formats makes  them easier to process and analyze, which is particularly important for  large datasets. For example, Kansas City officials said the city has been  working to convert information from the PDF format to machine-readable  formats such as CSV because PDF documents are challenging for the  city to update and for users to navigate. In one instance, officials said that  converting the city\u2019s list of vehicles for sale in its tow lot from PDF to CSV  format allowed the city to update the data more frequently so that users  can see what vehicles are for sale at any given time.", "Making data available to download in bulk allows users who need the full  dataset to easily access it rather than retrieving information record-by- record. If the full dataset is large, allowing users to download selected  subsets can make it easier for them to work with only the data they need.  Data can also be provided to users through an Application Programming  Interface (API), which allows users to connect directly with the dataset by  enabling machine-to-machine communication. APIs can be particularly  useful for large, frequently updated, or highly complex datasets because  they offer users flexibility to obtain the data they need. In addition,  developers can use APIs to build applications based on the data.", "Non-Proprietary File Formats  File formats describe what type of information  a file contains, as well as how that information  is stored and structured. Some file formats are  proprietary, meaning that they can only be  opened by specific commercial software  applications. In contrast, non-proprietary  formats are publicly available and can be  used by all software developers. Examples of  non-proprietary file formats include:", "CSV, which stores tabular data;  RDF, which stores metadata;  TXT, which stores unformatted text; and  XML, which stores both the format and  content of data.", "Provide data downloads in a non-proprietary format. To ensure broad  and equitable access, data downloads should be available in formats that  do not require specific commercial software to access, and therefore do  not exclude users who do not have access to such software. Non- proprietary data formats include, but are not limited to, CSV, RDF, TXT,  and XML. For example, Kansas City, Missouri\u2019s, open data portal allows  users to export spatial data in an open format that does not require  proprietary mapping software, according to city officials and the city\u2019s  open data portal website. Open data experts we spoke with said that  practitioners should consult stakeholders when determining which format  is appropriate for a given program, and that the appropriate format may  change over time as technology advances.", "Make the data interoperable with other datasets. Making data  interoperable with other datasets can make them more useful because  users may want to create new opportunities for analysis by linking  datasets together. This can be done by standardizing the way that the  data are reported. For example, using standard definitions for the specific  items included in a set of data\u2014known as data elements\u2014can promote  consistency with other datasets. Additionally, documentation such as data  dictionaries can help ensure that definitions are clear and avoid  misunderstandings.", "To promote interoperability between datasets that use geographic  information, Kansas City uses standard land parcel identification numbers  across departments. This allows different datasets that contain location  information to be used in combination. For example, officials said that the  city is linking different datasets that use those identification numbers\u2014 including building code violation data, 311 calls, and dangerous buildings  data, among others\u2014to build a model to prioritize code enforcement  inspections."], "subsections": []}, {"section_title": "Fully Describe the Data", "paragraphs": ["Providing information about a dataset allows users to determine whether  it is suitable for their intended purpose, and make informed decisions  about whether and how to use it. With that in mind, we identified four key  actions for fully describing the data (see figure 6).", "Disclose known data quality issues and limitations. Disclosing data  quality issues and limitations helps users make informed decisions about  whether and how to use the data. Disclosure of data quality issues and  limitations can include descriptions of the completeness, timeliness, and  accuracy of the data, such as an explanation of why certain data may not  be disseminated. For example, we observed that Connecticut\u2019s  \u201cOpenCheckbook\u201d website includes an \u201cAbout\u201d page explaining that some  information is excluded to protect privacy, or because it is not processed  through the state\u2019s financial system, such as the state\u2019s Airport Authority,  jury duty payments, and unclaimed property.", "Disclose data sources and timeliness. Disclosing where the data come  from and how frequently they are updated provides context that helps  users judge their quality and determine whether they can be appropriately  used for the intended purpose. Without this information, users may view,  download, or use data without full knowledge of the extent to which they  are timely, complete, or accurate, and therefore could inadvertently draw  inaccurate conclusions from the data.", "Metadata  Metadata provide descriptive information  about a dataset in a structured, machine- readable format. They describe aspects of the  dataset\u2014such as the source of the data and  when it was last updated\u2014in clearly  delineated fields.", "Clearly label data and provide accompanying metadata. In addition,  data should be clearly labeled and accompanied by structured metadata  so that users can easily find information about the dataset. Metadata  describe the characteristics of data in clearly defined, machine-readable  fields, which can include attributes such as the date the data were  created or modified, or the license used, among other things. Structuring  metadata in clearly defined fields makes it possible for search tools to  filter and match content pertaining to those fields. As shown in figure 7,  Kansas City\u2019s budget data are accompanied by metadata showing when  they were last updated, the source of the data, and the name and contact  link for the dataset owner, among other things.", "Publish data under an open license and communicate licensing  information to users. Documentation for a dataset should also specify  what license applies to the data because a data license provides users  with information about how they may use the data, including whether  there are any restrictions, such as copyrights. An open license indicates  that there are few to no restrictions on how the data may be used. An  open license can encourage innovation, for example, by assuring users  that they are permitted to use the data to develop commercial  applications. To realize these benefits, licensing information should be  clearly communicated to users, ideally in machine-readable and human- readable formats. As shown in figure 7, metadata can be used to  communicate licensing information in a clear and structured way.  Including licensing information in metadata can help ensure that it is  machine readable\u2014which makes it easier to process and analyze\u2014as  well as help users discover the licensing information and compare it  across datasets."], "subsections": []}, {"section_title": "Facilitate Data Discovery for All Users", "paragraphs": ["Data discovery is facilitated by presenting the data in a way that enables  users to easily explore them. We identified five key actions for facilitating  data discovery for all users (see figure 8).", "Provide an interface that enables intuitive navigation and ensures  that the most important information is made visible. To facilitate data  discovery for all users, practitioners of open government data should  ensure that the data are provided on a website that is simple and intuitive  so that users can easily navigate it to find the information they need.  Obtaining user feedback and conducting usability testing can help  practitioners assess whether the website is easy to use, and identify any  aspects that do not work well for users. In addition, websites designed to  work on mobile devices, as well as mobile applications such as Ohio\u2019s  \u201cOhioCheckbook\u201d app (see figure 9), can allow users to access data on a  variety of devices, according to the state\u2019s website and our observations.", "Provide users with appropriate interpretations of the data, such as  visualizations or summaries. Summaries and visualizations can help  users explore data. For example, our review of Montgomery County,  Maryland\u2019s, \u201cspendingMontgomery\u201d website found that the website  provides summary data of the top five services, vendors, and expense  categories with the greatest amount of spending, as well as a chart of  annual spending along with historical averages, as shown in figure 10.  This summary information provides a starting point for users, who can  then navigate through the website to access more granular data.", "Ensure that the website\u2019s content is written in plain language. The  content of an open data website should also be written in a way that is  clear and direct, using plain language. Using commonly understood terms  rather than technical jargon can help users understand the information  provided. For example, to use well-understood terms when  communicating budget information, Kansas City officials told us they  participated in plain language training and applied that knowledge to the  city\u2019s open budget data website. In addition, we found that in cases where  it is necessary to use technical language, providing a glossary that  defines key terms can help make the information understandable to  users.", "Provide a search function that is optimized for easy and efficient  use. Open data websites should also include a search function that is  optimized for easy and efficient use so that users can find information that  is relevant to them. For example, Connecticut officials said that the  search function on the state\u2019s open spending data website is designed so  that users do not need to be familiar with the state government\u2019s structure  or terminology to find meaningful results. When a user enters a search  term, the search bar will return a list of items that include this term and a  description of what they are. For example, when we typed \u201cEducation\u201d  into the search bar, the website suggested Department of Education  spending, bilingual education programs, and a vendor called Family Life  Education.", "In addition, Connecticut officials told us that they track the most  commonly-used search terms\u2014such as \u201chousing\u201d and \u201cvoter turnout\u201d\u2014on  the state\u2019s open data portal, and test them to verify that the information is  discoverable. Similarly, Ohio\u2019s online checkbook includes a \u201cPopular  Searches\u201d tool that provides presaved searches that allow users to see  expenditures for a variety of categories\u2014such as travel, roads and  highways, or parks\u2014by clicking a single button. In addition, officials told  us that if a user\u2019s search returns a large volume of results, a pop-up  appears prompting the user to narrow their search, which could help them  focus on more relevant information.", "Use central data repositories and catalogues to help users easily  find the data they are looking for. Central data repositories and  catalogues\u2014also known as data portals\u2014are websites that provide a  \u201cone-stop shop\u201d for users to access a variety of datasets. These websites  host the data directly, link to other websites where users can access the  data, or a combination of the two. They typically provide descriptions of  the datasets, as well as structured metadata, to help users find data  suitable for their purpose. New York City\u2019s open data portal also includes  a number of tools to help users find datasets, including a search function  as well as lists of new datasets, popular datasets, and datasets by  category, as shown in figure 11."], "subsections": []}]}, {"section_title": "USAspending.gov Aligns with Several Key Practices, but Does Not Fully Meet Licensing, Search Functionality, and Other Requirements USAspending.gov Provides Free and Unrestricted Spending Data", "paragraphs": ["We found that USAspending.gov aligns with the key practices of providing  free and unrestricted data and engaging with users. However, Treasury  does not fully describe the data and two data elements required by law  are not searchable. In addition, Treasury lacks a process to ensure all  pages on the website are secure, consistent with federal requirements.", "Spending data are open by default and sensitive information is  protected. The Federal Funding Accountability and Transparency Act of  2006 (FFATA) requires the website displaying the data that agencies  must provide to be accessible to the public at no cost. In response to  requirements in FFATA, as amended by the Digital Accountability and  Transparency Act of 2014 (DATA Act), in May 2014, OMB and Treasury  developed standard definitions for data elements for agencies to report,  and Treasury displays these open data on USAspending.gov. Agencies  should not report classified or protected information, such as personally  identifiable information (PII). However, they are required to aggregate  some awards containing PII at the county or state level if they are unable  to report spending at the individual level.", "All data are available for free. Treasury has made all of the data on  USAspending.gov available to users at no cost, as required by the DATA  Act and FFATA. During the course of our work, we found that users could  only download the complete database after registering for an account with  the database host\u2014Amazon Web Services. Further, we also found that  users would incur a charge when attempting to download the entire  database. Treasury officials said they intended for the data to be available  for free and were unaware that users were being charged to access the  data. In response to our inquiries on this issue, in July 2018, Treasury  resolved this issue and provided an option for users to download the  entire database for free without creating an account."], "subsections": [{"section_title": "Treasury Engages Users by Encouraging Feedback and Data Use", "paragraphs": ["Treasury identifies data users and their needs through user  research. Treasury researches users to understand their needs when  working with USAspending data. Treasury has developed profiles for  eight types of users ranging from data consumers like \u201cCitizen\u201d or  \u201cJournalist\u201d (see figure 12) to budget analysts or chief financial officers.  These profiles are part of Treasury\u2019s user-centered design process in  which officials told us they learn from users, make changes to the  website, and test whether those changes make the website more useful  and intuitive to users.", "Treasury obtains and responds to user feedback. Treasury officials  told us that they track user feedback, which informs improvements they  make to the website. We previously found that Treasury has a variety of  user feedback mechanisms, including a community forum, one-on-one  interviews, and a \u201ccontact us\u201d link that allows users to provide feedback  by email. As of July 2017, Treasury officials said they had interviewed  more than 130 users, such as citizens, funding recipients, and federal  agency officials, regarding USAspending.gov website features. They have  since conducted 20 additional interviews about the user experience and  received feedback from another 130 users about the Data Lab, a related  website that offers visual interpretations of the spending data. Treasury  has also conducted \u201cintercept\u201d interviews where interviewers go to a  location with large groups of people and request feedback about the  website from random individuals. For example, figure 13 shows a  Treasury contractor interviewing a visitor about an early version of  USAspending.gov at the U.S. Capitol Visitor Center.", "Treasury officials said they respond to user feedback about  USAspending.gov on two websites. They respond directly to user  comments on the USAspending.gov Community website, where users  can share feedback and find answers to frequently asked questions.  Treasury officials told us they also track users\u2019 issues as \u201cstories\u201d on an  open development platform called JIRA, which is their primary way of  documenting website development decisions and tracking potential  improvements to the website. For example, Treasury added new  functionality to the Application Programming Interface (API) based on  user feedback from agencies. Officials said this feature allowed some  agencies to more efficiently manage their quarterly DATA Act  submissions. Treasury announces updates to the API and other changes  to the website via an email newsletter.", "Treasury reaches out to potential users to encourage data use.  Treasury educates the public about the use of the spending data on  USAspending.gov and the Data Lab through how-to guides and outreach  activities. For example, the website offers an \u201cAPI Guide\u201d for users  seeking to utilize computer programs to request and receive the data, and  the Data Lab features an \u201cAnalyst Guide\u201d that answers questions about  using the data.", "Treasury officials told us that they have directly engaged with various  audiences about USAspending.gov. For example, they have engaged  with the Syracuse University Maxwell School of Government to map the  use of federal funds in New York State. In April 2017, we observed  Treasury\u2019s participation in a hackathon where participants developed  ways to use federal spending data, including using the spending data to  evaluate block grant formulas and track the economic impact of stimulus  money. Treasury officials said they have held information sessions with  Congress, federal agencies, and nongovernment organizations."], "subsections": []}, {"section_title": "USAspending.gov Data Are Detailed and in Standardized Formats, but Treasury Lacks Certain Security Processes", "paragraphs": ["USAspending.gov provides users with detailed and disaggregated  data. As shown in figure 14, an award summary page on the website  displays information on specific awards, including the awarding agency,  recipient, award amount, description, and location. These pages also  include transaction histories so that spending can be tracked over time.  As of October 2018, we found that USAspending.gov listed more than 53  million pages of prime awards representing more than $33 trillion in  obligated funds between fiscal year 2008 and 2018.", "Data are machine readable and can be downloaded in bulk and in  selected subsets, but Treasury lacks a process to fully ensure  security. As shown in figure 15, USAspending.gov provides six ways for  users to download the data, including subsets of the data or the complete  database. An API is also available, which enables machine-to-machine  communication that allows real-time updates.", "During the course of our review, we found that some of the data  download web addresses did not point to a government domain and were  unsecured. OMB guidance requires that federal web pages be hosted on  a .gov domain and be encrypted by the secure HTTPS protocol. In  response to our inquiries on this issue, Treasury updated  USAspending.gov in October 2018 so that the web pages for the  database download and agency submission files use the secure HTTPS  protocol and are on a government domain. As a result, the users  requesting this information from USAspending.gov now have better  assurance of the integrity of the data requested, the privacy of their  connection to USAspending.gov, and that the website they are using is a  trusted government domain.", "Treasury officials said they take steps to ensure they meet federal  information security requirements, but had not noticed that the web pages  were unsecured or on a nongovernment domain. According to Treasury  officials, the agency has a process for the team developing a website to  vet whether proposed pages are secured and hosted properly, but they  acknowledged unintended gaps in how the process was applied in this  case, which caused some pages to be omitted. Standards for Internal  Control in the Federal Government states that management should  design control activities to achieve objectives and respond to risks.  Control activities are the policies, procedures, techniques, and  mechanisms that enforce management\u2019s directives to achieve the entity\u2019s  objectives and address related risks.", "Until the gaps in Treasury\u2019s information security process are addressed,  the agency does not have assurance that any new pages that may be  added to USAspending.gov will conform to federal information security  requirements. In response to our inquiries, Treasury provided  documentation showing that the agency is in the process of addressing  the issue to prevent future unintended gaps. The agency has taken initial  steps to revise its process to ensure that all pages on USAspending.gov  are secured and hosted properly. We will continue to monitor Treasury\u2019s  efforts to develop and implement this new process.", "Downloads are available in standard, non-proprietary formats.  Downloads of search results, agency files, and subsets of the  USAspending.gov database are available in file formats that can be  opened using common office software, including CSV and XML files.", "Spending data are potentially interoperable with other datasets. The  data in the USAspending.gov database are organized according to a  government-wide standard which can potentially support interoperability  with related government datasets. The DATA Act Information Model  Schema (DAIMS) provides standardized definitions for federal spending  information, including 57 data standards that federal agencies are  required to report for DATA Act implementation. These standards come  with technical specifications describing the format and structure of each  data element, which are intended to facilitate consistent data reporting  across the federal government, and allow for interoperability between  agencies\u2019 data submissions.", "According to Treasury\u2019s DAIMS Architecture document, DAIMS could  eventually support interoperability between USAspending.gov and related  nonfederal datasets such as state, local, and international spending  data. For example, state governments could make their data  interoperable with the federal spending data on USAspending.gov by  developing their own data standards and definitions aligned with DAIMS  as appropriate. In addition, the DAIMS Architecture document specifies  that future DAIMS content could include federal receipt and financing  balances with accounts and sources, as well as performance measures  and outcomes linked to federal grants, awards, or other financial  assistance."], "subsections": []}, {"section_title": "Treasury Improved Descriptions of Data, but USAspending.gov Lacks Metadata and Complete Licensing Information", "paragraphs": ["Website still does not completely disclose data quality issues.  Treasury has improved the disclosure of data quality issues and  limitations, but other issues have not yet been described to users. In  November 2017, we found that the website did not sufficiently disclose  known limitations affecting data quality. We recommended that Treasury  disclose known data quality issues and limitations. Treasury agreed with  the recommendation and took the following steps to disclose limitations:", "By May 2018, Treasury had added a \u201cLearn More\u201d box to the website  with information about the data, including an explanation that the  Department of Defense reports its data later than other agencies.", "In June 2018, Treasury added information on unreported spending to  the Spending Explorer tool that visualizes federal spending, clarifying  that information reported on the website does not capture the totality  of federal spending. Treasury explains to users that data might not be  reported when an agency reports incomplete data, has a submission  deadline extension, is not required to submit certain data elements,  and for accounts that are not reported to Treasury.", "While the steps Treasury has taken are positive, they do not fully address  our recommendation. This is because one purpose of the DATA Act is to  allow users to track federal spending more effectively by linking specific  awards to financial budgetary information. However, we found that award  data do not appear in the Spending Explorer for combinations of certain  agencies and program activities. For example, as figure 16 shows, there  are \u201cno associated awards\u201d for the program activity \u201cVaccines for  Children\u201d within the Department of Health and Human Services account  for Medicaid grants to states. However, the account page for this  program elsewhere on USAspending.gov shows approximately $3.6  billion in obligations and various associated awards for the first three  quarters of fiscal year 2018.There is no context for a user to understand  whether this information is required for this federal account, missing, or  searchable elsewhere on the website.", "Treasury officials informed us of a number of data limitations that could  cause spending data and award data to be disconnected in the Spending  Explorer, but these issues are not disclosed on the website. According to  Treasury officials, agencies might not currently report certain data fields  as some fields are optional, there are inconsistencies between several  agency data systems, and some agencies have not been able to link  financial and award data. As a result, the Spending Explorer does not  consistently provide a clear and complete presentation of federal  spending, and because Treasury does not disclose these limitations, it  could limit the ability of taxpayers and policy makers to fully track federal  spending with this tool.", "More broadly, we have raised concerns that USAspending.gov does not  sufficiently disclose other, broader government-wide data quality issues.  For example, we found in November 2017 that only between 0 to 1  percent of awards were fully consistent with agency records. While the  consistency of individual data elements varied, our prior report found  inconsistencies with agency records in at least 41 percent of the data for  Award Description, Current Total Value of Award, and Primary Place of  Performance Address from the second quarter of Fiscal Year 2017.", "Website discloses data sources and timeliness. The \u201cAbout\u201d page and  \u201cFrequently Asked Questions\u201d describe data sources, data quality, and  legal requirements. There is also a diagram on the \u201cAbout\u201d page showing  how the data go from agencies to the database for USAspending.gov,  and the frequency with which the data are updated, which is a useful way  to visualize how the types of award data are updated either daily, bi- monthly, or every quarter.", "Website labels some data, but lacks structured metadata. Treasury  labels some of the data on USAspending.gov in tables and data  visualizations, and describes it in narrative form. The website also  includes data dictionaries that provide definitions for the data elements.  However, the website lacks structured, machine-readable metadata. OMB  guidance requires agencies to use metadata to describe their datasets so  that all users can understand and process open data. Agencies must  consult with the best practices from Project Open Data, OMB\u2019s online  repository of tools and schema, to help agencies meet the requirements  of its open data policy. According to Project Open Data, metadata are  structured information that describe, explain, locate, or otherwise make it  easier to retrieve, use, or manage datasets like that displayed on  USAspending.gov. This guidance also indicates that making metadata  machine readable greatly increases their utility.", "Treasury officials said the types of information found in metadata are  already available in a number of separate documents on Treasury\u2019s  Fiscal Service web page. Treasury officials told us that they decided not  to provide structured metadata on USAspending.gov because it is more  efficient to provide external links to other websites. Further, Treasury  officials asserted that providing metadata on those websites is sufficient  to comply with OMB guidance.", "However, the information found on these various websites does not align  with best practices outlined in Project Open Data, or the key action to  clearly label data and provide accompanying metadata, because it is not  provided in a single place on USAspending.gov as structured metadata in  a machine-readable format. Without easy access to information that fully  describes the data, it may be difficult or time consuming for users of  USAspending.gov to find the information available on other websites, and  determine whether or how to use the data for their purposes.", "Website lacks complete licensing information. While the website  describes restrictions on the use of proprietary contract data from Dun &  Bradstreet Inc.\u2019s Data Universal Numbering System (DUNS), it does not  include general licensing information for the rest of the data. The  website includes a link to a notice specifying the \u201cLimitation on  Permissible Use of Dun & Bradstreet, Inc. Data.\u201d According to Treasury  officials, most data on USAspending.gov are in the public domain, but we  found that the website does not clearly indicate which data are openly  available to use without restrictions.", "OMB M-13-13 specifies that federal agencies \u201cmust apply open licenses,  in consultation with the best practices found in Project Open Data, to  information as it is collected or created so that if data are made public  there are no restrictions on copying, publishing, distributing, transmitting,  adapting, or otherwise using the information for non-commercial or for  commercial purposes.\u201d According to OMB staff, agencies should include  licenses in metadata so that this information is machine readable. If data  access is limited, this should also be prominently featured in the  metadata. In addition, Project Open Data specifies that licensing  information should be provided in metadata.", "Treasury officials said that the agency is evaluating options and  approaches for including open data licensing information on the website,  consistent with OMB M-13-13. In addition, Treasury officials said they had  only received one question from users about licensing.", "However, not displaying licensing information for the majority of data  elements on the website is not consistent with the key action to publish  data under an open license and communicate licensing information to  users. Without licensing information for all of the data, users will likely be  unable to determine what license, if any, applies to USAspending.gov,  and it will be unclear to the public whether there are any restrictions to  reusing data that they can download from the website."], "subsections": []}, {"section_title": "USAspending.gov Makes Data Easy to Discover, but Does Not Fully Meet Search Requirements", "paragraphs": ["Website includes a user interface to assist navigation.  USAspending.gov\u2019s top menu gives users various ways to explore,  search, download, and understand the most important information. The  menu links to the Spending Explorer, Award Search, Profiles, Download  Center, and Glossary. There is also \u201cfeatured content\u201d on the home page  guiding users to the Data Lab, and other new features such as a  download option for Federal Account data and recipient profile pages for  any entity that has received federal money in the form of contracts,  grants, loans, or other financial assistance.", "Interactive visualizations enable exploration. Search results can be  visualized by prime award or subaward aggregated in a table, in a chart  showing awards over time, in a map showing the geographic distribution  of awards (see figure 17 for an example of social security insurance  results mapped by congressional district), or in a bar chart showing the  top 10 awards by category. The visualizations show how spending has  increased over time, the regional concentration of spending, and a list of  the top recipients.", "We found that the Spending Explorer provides a simple, graphical  interface that allows users to navigate spending data by budget function,  agency, and object class. It gives users the option to drill down from  these three high-level categories to specific program activities, federal  accounts, recipients, or awards. It displays the total amount obligated for  the selected category, and a breakdown of the amounts in dollars and as  a percentage of the total.", "The Data Lab is a separate website linked to USAspending.gov that  offers users visual interpretations of the spending data. Treasury officials  said the \u201cContract Explorer Sunburst\u201d is a popular Data Lab visualization.  As shown in figure 18, it provides users an interactive overview of about  $500 billion in federal contract data organized as a set of concentric  circles starting from the funding agency (inner ring) to the recipients  (outer ring). Treasury officials noted that analyses and visualizations in  the Data Lab are updated with varying frequency because it can be a  challenge to continually update some of the visualizations.", "The website includes a glossary that provides plain language  definitions of terms that describe the spending data. To help users  understand the data on USASpending.gov, the website provides a  \u201cGlossary\u201d sidebar that is available on every page of the website, and  provides users both \u201cplain language\u201d and official definitions of financial  terms that are used on the website, as shown in figure 19. According to  the key practices we identified, using commonly understood terms rather  than technical jargon can help users understand the information provided.", "A variety of search tools are available, but program source and city  are not searchable. We found that the website features a variety of  search tools to help users find and interpret the data. Users can search  the data using generic keyword search and advanced search filters.  These features allow users to explore and quickly obtain large volumes of  award results. For example, we found that searching by funding agency  returns all spending by that particular federal agency and by award.", "However, we tested the search functionality of the website and found that  two data elements required to be searchable by FFATA, as amended by  the DATA Act, were not: (1) program source (Treasury Account Symbol  (TAS)) and (2) city. Our search testing of a nongeneralizable, random  sample of awards for data elements required by FFATA successfully  found most of the data elements, but we were unable to search for  program source (TAS) or city. TAS and city data can be downloaded  and are displayed on award web pages, but we were not able to search  for them using either the advanced or keyword search pages. Treasury  officials said they did not include functionality to search for these two  required data elements on the new website because users searching by  these data elements on the Beta version of the website had received  confusing results. This is due in part to the fact that agency submissions  with these data elements used different standards before and after the  DATA Act. Instead, according to our review of the website, users can  access TAS and city information using the website\u2019s navigation features,  which officials said meets the spirit of the FFATA requirement.", "However, simply displaying TAS or city information only on award or  federal account pages does not meet the FFATA requirement that users  be able to search for this information. Users currently have to click on a  specific award or federal account page, and scroll through the web page  to find the relevant section that shows city or TAS information. If federal  agencies and Congress are not able to search for TAS, they cannot easily  connect detailed information on financial transactions to federal accounts  for management or oversight purposes. In addition, users looking for  geographic information related to recipients or federal programs cannot  easily search USAspending.gov by city.", "Government data catalogues and repositories link to  USAspending.gov. Treasury facilitates discovery of the DATA Act data  by linking to USAspending.gov from centralized data repositories and  catalogues. Information and links to USAspending.gov can be found on  DATA.gov, which is a data catalogue for a variety of U.S. government  datasets.", "Treasury maintains a web page on GitHub, a public online collaboration  website, designed to share information about its process in meeting the  requirements of the DATA Act, including information and links to  USAspending.gov. Associated pages on this GitHub site serve as a  data repository for the computer code behind the central data submission  platform for the DATA Act, called the Data Act Broker, the API for  USAspending.gov, and the USAspending.gov website itself."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["USAspending.gov is a major open government data program with the  potential to be a model for transparently reporting government data\u2014if  Treasury takes additional steps to further align it with the five key  practices and associated key actions for open data in addition to DATA  Act requirements. USAspending.gov has already followed several key  actions such as providing the data on the website for free, engaging the  public online and in person, providing detailed and disaggregated data for  download, and making interactive tools so users can interpret and  visualize the data. Treasury has also made progress in disclosing  limitations of the data, although it has not fully addressed our prior  recommendation to do more to make users fully aware of issues that  affect its quality.", "However, Treasury has not fully aligned USAspending.gov with some key  practices or federal website standards, and has not fully implemented the  search functionality required by FFATA, as amended by the DATA Act.  As a result, users may not be able to find the information they need, and  may not have confidence in the integrity of the data. Treasury updated  USAspending.gov in October 2018 so that the web pages for the  database download and agency submission files available at that time  used the secure HTTPS protocol and a government domain. However,  without an effective control process in place, Treasury does not have  assurance that any new pages that may be added to USAspending.gov  will conform to certain federal information security requirements.  Furthermore, without easy access to structured metadata, it may be  difficult or time consuming for users of USAspending.gov to find the  information they need to determine whether or how to use the data.  Similarly, the lack of an explicit open license might discourage some  users from using the data to develop innovative commercial products.  Users are also not able to easily search award information by program  source or city, as required by FFATA, which could limit their ability to find  and use these data to inform future decision making."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations to Treasury. Specifically:  The Secretary of the Treasury should establish a process to ensure all  pages on the USAspending.gov website use the secure HTTPS protocol,  consistent with OMB requirements. (Recommendation 1)", "The Secretary of the Treasury should establish a process to ensure all  content on USAspending.gov is available from a government domain,  consistent with OMB requirements. (Recommendation 2)", "The Secretary of the Treasury should fully comply with OMB\u2019s  requirements by providing metadata in a single location that are easy to  find on the USAspending.gov website. (Recommendation 3)", "The Secretary of the Treasury should fully comply with OMB\u2019s  requirements by communicating licensing information on  USAspending.gov. (Recommendation 4)", "The Secretary of the Treasury should ensure that users can easily search  for awards by city and program source (TAS), consistent with FFATA  requirements. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments, Third-Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretary of the Treasury, the  Director of OMB, and the Administrator of GSA for review and comment.  Treasury provided written responses, which are summarized below and  reproduced in appendix II. Treasury and OMB also provided technical  comments, which we incorporated as appropriate. GSA responded that  the agency had no comments on the report.", "In its written response, Treasury highlighted areas where  USAspending.gov aligned with the key practices that we identified for  transparently reporting government data, such as engaging users and  providing the data in useful formats. Treasury agreed with our  recommendations. Treasury stated that the agency has already taken  steps to address our first two recommendations, to establish processes to  ensure that all pages on USAspending.gov use the secure HTTPS  protocol and to ensure that all content on the website is available from a  government domain. Treasury provided us with documentation of a  revised process that is intended to address these issues. We revised the  report to acknowledge that Treasury has taken these steps. We will  continue to monitor Treasury\u2019s efforts to develop and implement this new  process and update the status of our recommendations accordingly.", "We also provided excerpts of the draft report to Connecticut; Kansas City,  Missouri; Los Angeles, California; Montgomery County, Maryland; New  York City, New York; and Ohio. Los Angeles, Montgomery County, New  York City, and Ohio provided technical comments, which we incorporated  as appropriate. Connecticut and Kansas City officials responded that they  had no comments.", "We are sending copies of this report to the Secretary of the Treasury, the  Director of OMB, and the Administrator of the General Services  Administration, as well as interested congressional committees and other  interested parties. This report will be available at no charge on our  website at https://www.gao.gov.", "If you or your staff has any questions about this report, please contact  Triana McNeil 202-512-6806 or McNeilT@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of our report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Digital Accountability and Transparency Act of 2014 (DATA Act)  includes a provision for us to review implementation of the act. Over the  last 4 years, we have issued 13 reports assessing various aspects of  DATA Act implementation. This report builds on our body of work on the  DATA Act and (1) identifies key practices for transparently reporting  government data on a centralized website, and (2) evaluates the extent to  which the new USAspending.gov is consistent with these key practices,  as well as existing standards for federal websites."], "subsections": [{"section_title": "Identifying Key Practices", "paragraphs": ["To identify key practices for transparently reporting open government  data on a centralized website, we conducted a literature review and  interviewed experts on open data and representatives of good  governance groups. We also identified illustrative examples by  interviewing open data practitioners from state and local governments.", "Literature review. To conduct the literature review, we first identified  relevant publications using a number of bibliographic databases, including  ProQuest, the Organisation for Economic Co-Operation and  Development\u2019s (OECD) iLibrary, the National Technical Information  Service, and the Public Affairs Information Service. We reviewed articles  that focused on open data programs and practices in OECD countries,  including scholarly peer-reviewed articles, working papers, conference  papers, and reports by policy research organizations, nonprofit  organizations, and associations. We conducted our search in March 2017  and subsequently added relevant articles identified during our  background research. To systematically review these articles, one  analyst reviewed each article to identify relevant themes. A second  analyst then reviewed the documentation to verify categorization  decisions. Then, both analysts met to resolve any discrepancies. We  evaluated and synthesized the categorized information to identify  commonly-reported key practices for transparently reporting open  government data.", "Interviews with experts. We selected open data and good governance  experts based on recommendations made by other experts, frequent  citations in others\u2019 work, and recent contributions to the field. We also  selected experts that represent a variety of sectors and backgrounds  (such as government, academia, and nonprofit organizations). We  obtained the views of the following individuals and organizations:", "Andrew Stott, former United Kingdom Director for Transparency and", "Center for Open Data Enterprise,", "Code for America,", "Dr. Anneke Zuiderwijk-van Eijk, Delft University of Technology,", "General Services Administration (GSA),", "Global Initiative for Fiscal Transparency,", "Governance Laboratory of New York University,  IBM Center for the Business of Government,  Johns Hopkins University Center for Government Excellence,", "Project on Government Oversight,", "Results for America,", "U.S. Public Interest Research Group,", "What Works Cities, and", "World Bank.", "We first had open-ended conversations with experts to obtain their views  on what key practices exist for transparently reporting open government  data. After developing an initial list of key practices, we then conducted a  second round of interviews with experts to finalize the list. We shared a  draft of the key practices with the Department of the Treasury (Treasury),  the Office of Management and Budget (OMB), and GSA.", "Illustrative examples. To obtain illustrative examples showing how those  key practices can be implemented, we selected open data practitioners  from six selected state and local governments:", "Kansas City, Missouri;", "Los Angeles, California;", "Montgomery County, Maryland;", "New York City, New York; and", "Ohio.", "We selected these practitioners because they were identified in our  literature search and by the experts we spoke with as having well- regarded open data websites. We also selected practitioners that have  websites with both a general open data portal and visualizations showing  budget or spending data. We also selected practitioners that represent  different locations and levels of government, including cities, counties,  and states. We reviewed these practitioners\u2019 open data websites and  related documentation, and interviewed cognizant state and local  government officials."], "subsections": []}, {"section_title": "Evaluating USAspending.gov", "paragraphs": ["To assess the extent to which USAspending.gov is consistent with the  key practices and selected standards for federal websites, we reviewed  the website, reviewed agency documents, observed Treasury\u2019s  participation in a hackathon, and interviewed OMB staff and Treasury  officials. Specifically, we analyzed the USAspending.gov website to  determine how it aligned with the key practices and the extent to which  data elements were searchable as required by the Federal Funding  Accountability and Transparency Act of 2006 (FFATA). We also assessed  USAspending.gov against criteria for federal websites and open data  programs, including OMB M-17-06, Policies for Federal Agency Public  Websites and Digital Services, and OMB M-13-13, Open Data Policy\u2014 Managing Information as an Asset.", "To evaluate the extent to which the USAspending.gov search functionality  complies with FFATA requirements, as amended by the DATA Act, we  randomly selected a nongeneralizable sample of 30 awards (consisting of  15 contracts and 15 financial assistance awards) downloaded from  USAspending.gov for fiscal year 2017. We identified the required FFATA  data elements from these awards, searched for these elements on  USAspending.gov in July 2018, recorded whether each search  successfully resulted in a matching award, and observed any other issues  that occurred during testing. Finally, we interviewed Treasury officials to  corroborate our observations on search functionality and other aspects of  the website, and discussed any planned improvements to the website.  We also interviewed GSA officials and OMB staff to clarify policies and  procedures for federal websites.", "We conducted this performance audit from February 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Thomas J. McCabe, Assistant  Director, and Laurel Plume, Analyst-in-Charge, supervised the  development of this report. Colenn Berracasa, Samuel Gaffigan, and  Parke Nicholson made major contributions to this report. Also contributing  to this report in their areas of expertise were Michael Bechetti, Steven  Campbell, Mark Canter, Jenny Chanley, Jacqueline Chapin, Peter Del  Toro, Nancy Donovan, Kathleen Drennan, Sarah Gilliland, Sarah  Kaczmarek, Michael LaForge, Paula M. Rascona, Andrew J. Stephens,  and James Sweetman, Jr."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["DATA Act: Reported Quality of Agencies\u2019 Spending Data Reviewed by  OIGs Varied Because of Government-wide and Agency Issues.  GAO-18-546. Washington, D.C.: July 23, 2018.", "DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness  and Accuracy of Spending Data and Disclose Limitations. GAO-18-138.  Washington, D.C.: November 8, 2017.", "Open Innovation: Executive Branch Developed Resources to Support  Implementation, but Guidance Could Better Reflect Leading Practices.  GAO-17-507. Washington, D.C.: June 8, 2017.", "DATA Act: As Reporting Deadline Nears, Challenges Remain That Will  Affect Data Quality. GAO-17-496. Washington, D.C.: April 28, 2017.", "DATA Act: Office of Inspector General Reports Help Identify Agencies\u2019  Implementation Challenges. GAO-17-460. Washington, D.C.: April 26,  2017.", "DATA Act: Implementation Progresses but Challenges Remain.  GAO-17-282T. Washington, D.C.: December 8, 2016.", "DATA Act: OMB and Treasury Have Issued Additional Guidance and  Have Improved Pilot Design but Implementation Challenges Remain.  GAO-17-156. Washington, D.C.: December 8, 2016.", "Open Innovation: Practices to Engage Citizens and Effectively Implement  Federal Initiatives. GAO-17-14. Washington, D.C.: October 13, 2016.", "DATA Act: Initial Observations on Technical Implementation.  GAO-16-824R. Washington, D.C.: August 3, 2016.", "DATA Act: Improvements Needed in Reviewing Agency Implementation  Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29,  2016.", "DATA Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet  Goal of Reducing Recipient Reporting Burden. GAO-16-438. Washington,  D.C.: April 19, 2016.", "DATA Act: Progress Made but Significant Challenges Must Be Addressed  to Ensure Full and Effective Implementation. GAO-16-556T. Washington,  D.C.: April 19, 2016.", "DATA Act: Data Standards Established, but More Complete and Timely  Guidance Is Needed to Ensure Effective Implementation. GAO-16-261.  Washington, D.C.: January 29, 2016.", "DATA Act: Progress Made in Initial Implementation but Challenges Must  be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July  29, 2015.", "Federal Data Transparency: Effective Implementation of the DATA Act  Would Help Address Government-wide Management Challenges and  Improve Oversight. GAO-15-241T. Washington, D.C.: December 3, 2014.", "Government Efficiency and Effectiveness: Inconsistent Definitions and  Information Limit the Usefulness of Federal Program Inventories.  GAO-15-83. Washington, D.C.: October 31, 2014.", "Data Transparency: Oversight Needed to Address Underreporting and  Inconsistencies on Federal Award Website. GAO-14-476. Washington,  D.C.: June 30, 2014.", "Federal Data Transparency: Opportunities Remain to Incorporate  Lessons Learned as Availability of Spending Data Increases.  GAO-13-758. Washington, D.C.: September 12, 2013.", "Government Transparency: Efforts to Improve Information on Federal  Spending. GAO-12-913T. Washington, D.C.: July 18, 2012.", "Electronic Government: Implementation of the Federal Funding  Accountability and Transparency Act of 2006. GAO-10-365. Washington,  D.C.: March 12, 2010."], "subsections": []}], "fastfact": ["Open data\u2014like the spending data the Treasury Department shares on USAspending.gov\u2014can increase transparency to promote public trust in government. Because the data have broad appeal among users such as grant recipients, Congress, and the public, it's important to make the data as usable as possible.", "We identified 5 key practices for transparently reporting government data. For example, websites should facilitate data discovery by presenting the data in a way that allows easy exploration, such as through a search function.", "We recommended steps to better align USAspending.gov with key practices and other requirements."]}
{"id": "GAO-19-223", "url": "https://www.gao.gov/products/GAO-19-223", "title": "Nuclear Waste Cleanup: DOE Could Improve Program and Project Management by Better Classifying Work and Following Leading Practices", "published_date": "2019-02-19T00:00:00", "released_date": "2019-03-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["EM's mission is to complete the cleanup of nuclear waste at 16 DOE sites and to work to reduce risks and costs within its established regulatory framework. In December 2018, DOE reported that it faced an estimated $494 billion in future environmental cleanup costs\u2014a liability that roughly tripled during the previous 20 years.", "GAO was asked to examine EM's operations activities. This report examines, among other objectives, (1) how EM manages its cleanup work and (2) the extent to which EM's cleanup policy follows selected leading practices for program and project management.", "To do this work, GAO reviewed agency documents and interviewed DOE project management experts and EM officials. GAO compared EM's policy with selected leading practices endorsed by the Project Management Institute for program and project management related to scope, cost, schedule, and independent review."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy's (DOE) Office of Environmental Management (EM) manages most of its cleanup of nuclear waste (77 percent of its fiscal year 2019 budget) under a category that EM refers to as operations activities, using less stringent requirements than a category of work, known as capital asset projects. (See figure) Capital asset projects\u2014which involve the acquisition of land and other assets, including through environmental remediation\u2014must undergo a series of reviews by independent experts and DOE's senior leadership. In contrast, operations activities are not reviewed outside of EM. EM's policy defines operations activities as reoccurring facility or environmental operations, as well as activities that are project-like, with defined start and end dates. EM cleanup site managers have discretion on how to classify cleanup work because DOE and EM have not established classification requirements. Since 2015, experts in DOE's Office of Project Management have raised concerns that some operations activities should be classified as capital asset projects, and that managing them under less stringent requirements poses cost and schedule risks. For example, the experts stated the cleanup of tanks of radioactive liquid waste should be designated as capital asset projects. However, these experts also stated that EM did not respond to their concerns, even though the office has department-wide responsibilities for overseeing project management. Until EM works with DOE's Office of Project Management to establish requirements for classifying cleanup work, the department may incur more cost and schedule risks than it should.", "EM's cleanup policy does not follow any of 9 selected program management leading practices or 9 of 12 selected project management leading practices. For example, EM's 2017 cleanup policy does not follow the program management leading practice of conducting risk management throughout the life of a program or the project management leading practice of requiring independent reviews of operations activities. These leading practices help ensure that a program optimizes scope, cost, and schedule performance and that it achieves its goals and intended benefits. Until EM revises its cleanup policy to follow leading practices, EM's operations activities are at risk of uncontrolled changes to scope, exceeding initial budget and schedule, and failing to meet their original goals."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that EM (1) establish cleanup work classification requirements and (2) revise its cleanup policy to follow program and project management leading practices. DOE generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Fifty years of federal nuclear weapons production and energy research  during the Cold War generated millions of gallons of liquid radioactive  waste, millions of cubic meters of solid radioactive waste, thousands of  tons of spent nuclear fuel and special nuclear material, and large  quantities of contaminated soil and water. In 1989, the Department of  Energy (DOE) established its nuclear waste cleanup program by creating  the Office of Environmental Management (EM). The EM program\u2019s  mission is to complete the safe cleanup of this Cold War legacy and to  work to reduce associated risks and costs within the established  regulatory framework.", "The EM program faces substantial future cleanup costs and has decades  of additional work remaining at contaminated DOE sites. EM has spent  more than $164 billion since it began its cleanup work in 1989.  Additionally, DOE faces an estimated $494 billion in future costs over a  period of more than 70 years, a liability that has roughly tripled over the  past 20 years, according to DOE\u2019s fiscal year 2018 financial statement.  This liability may grow, even though DOE has spent roughly $6 billion  annually on its cleanup work in recent years. Because of the substantial  and increasing estimated cleanup costs to the federal government, in  2017 we added the federal government\u2019s environmental liability to our  high-risk list of agencies and program areas that are vulnerable to fraud,  waste, and mismanagement or that are most in need of transformation.  According to DOE\u2019s fiscal year 2018 financial statement, the EM  program\u2019s portion of DOE\u2019s total environmental liability is $377 billion, the  largest share of the federal government\u2019s environmental liability. From  fiscal years 2011 to 2018, EM\u2019s environmental liability increased by about  $214 billion. The new Assistant Secretary for the Office of Environmental  Management, who assumed office in March 2018, has acknowledged the  importance of improving EM\u2019s performance in addressing EM\u2019s large and  growing environmental liabilities.", "Effective program and project management are important to the success  of efforts such as the EM program, according to the Project Management  Institute (PMI). The Program Management Improvement Accountability  Act of December 2016 requires the Office of Management and Budget  (OMB) to adopt and oversee implementation of government-wide  standards, policies, and guidelines for program and project management  in executive branch agencies. In June 2018, OMB issued a  memorandum on the implementation of this law that included initial  implementation guidance and called for agencies to set their own  program management standards. The memorandum stated that the act  aims to improve program and project management practices within the  federal government. The OMB memorandum also stated that agencies  may use program management leading practices developed by us, other  agencies, and external voluntary consensus standards bodies, such as  PMI.", "EM divides its cleanup work into capital asset projects and operations  activities. According to DOE\u2019s order governing the management of capital  asset projects\u2014DOE Order 413.3B\u2014a capital asset project is a project  with defined start and end points required in the acquisition of capital  assets; capital asset projects can also include the environmental  remediation of land to make it useful. According to OMB, capital assets  are land (including park lands); structures; equipment (including motor  and aircraft fleets); and intellectual property (including software), which  are used by the federal government and which have an estimated useful  life of 2 years or more. Operations activities are reoccurring facility or  environmental operations as well as activities that are project-like, with  defined start and end dates, according to EM policy. According to EM  officials, EM manages its operations activities based on requirements  listed in a cleanup policy that it issued in July 2017.", "Over the years, we have found many problems with DOE\u2019s management  of its major capital asset projects\u2014those with a total project cost over  $750 million\u2014including uncontrolled changes to scope, exceeding  budgets and schedules, and failing to meet the original mission.  Examples of EM\u2019s capital asset projects that encountered problems  include the Waste Treatment and Immobilization Plant at the Hanford site  and the Salt Waste Processing Facility at the Savannah River site,  facilities that EM is building to process liquid radioactive waste stored in  tanks at these sites. In recent years, DOE has improved its  requirements for the management of capital asset projects by significantly  changing Order 413.3B. We recognized these DOE efforts to improve its  project management in our 2017 high-risk update. However, our 2017  high-risk update also expressed concern that EM\u2019s operations activities  are not subject to the same oversight as capital asset projects.", "You asked us to review the EM program, particularly its management of  operations activities. This report examines how the EM program manages its cleanup work,  the extent to which EM\u2019s cleanup policy follows selected program and  project management leading practices, and how EM measures the overall performance of its operations activities.", "To examine how the EM program manages its cleanup work, we  reviewed various DOE documents, including DOE\u2019s Order 413.3B, EM\u2019s  2012 operations activities protocol, EM\u2019s 2017 cleanup policy, and  documents received from cleanup sites. We also interviewed DOE and  EM officials from headquarters and 5 of EM\u2019s 16 cleanup sites. (We  contacted all sites and interviewed five sites that responded to our  request for an interview over the phone.) We then decided to conduct  site visits. We visited two of these sites\u2014Savannah River and Idaho\u2014 because they are among the sites with the highest number of operations  activities and the most diverse types of and highest cost cleanup work  remaining. Our findings from these 5 sites are not generalizable to all EM  sites, but they help explain the delineation of roles between the site  managers and EM headquarters in managing and classifying cleanup  work. We also reviewed the role of DOE\u2019s Office of Project Management  in EM\u2019s cleanup work. More specifically, we examined whether this office  played a role in the development of EM\u2019s 2017 cleanup policy and  classification of EM\u2019s cleanup work, consistent with the Office of Project  Management\u2019s designation as DOE\u2019s enterprise project management  organization.", "To examine the extent to which EM\u2019s cleanup policy follows selected  program and project management leading practices, we selected two sets  of criteria for program and project management leading practices. To select program management leading practices, we first reviewed PMI\u2019s  The Standard for Program Management \u2014Third Edition. We identified 9  program management leading practices based on PMI\u2019s standards  related to a program\u2019s management of scope, cost, schedule  performance, and to independent review of performance. To select  project management leading practices, we first identified 12 project  management leading practices listed in DOE\u2019s Order 413.3B related to  management of scope, cost, schedule performance, and to independent  review of performance for projects. We then compared these 12 project  management leading practices to PMI\u2019s A Guide to the Project  Management Body of Knowledge\u2013Fifth Edition, which includes PMI\u2019s  standards for project management, to make sure these leading practices  align with PMI\u2019s standards for project management. To validate our  selection of program and project management leading practices, we  shared these selected leading practices with PMI representatives and  incorporated their feedback, as appropriate. PMI representatives agreed  with the program and project management leading practices that we  selected.", "We then compared EM\u2019s 2017 cleanup policy and the 11 associated  standard operating policies and procedures developed by EM by the time  of our analysis (by May 2018) with the 9 program management and 12  project management leading practices we selected, and we analyzed the  extent to which the policy and associated guidance follows these leading  practices. We also interviewed EM officials to learn more about the  2017 cleanup policy. We used a 5-point scoring system to determine the  extent to which EM\u2019s cleanup policy follows program and project  management leading practices. If the score for a leading practice was  \u201cfully met\u201d or \u201csubstantially met,\u201d we concluded that EM\u2019s policy followed  that leading practice.", "To examine how EM measures the performance of its operations  activities, we analyzed EM\u2019s use of the three measures of performance  that EM policy identified as being used for this purpose: earned value  management (EVM), performance metrics, and cleanup milestones.  To evaluate EM\u2019s EVM systems, we compared EM\u2019s use of EVM with 8 of  the 10 best practices for earned value management found in our Cost  Estimating and Assessment Guide, which draws best practices from  federal cost-estimating organizations and industry. Specifically, we  reviewed the use of EVM systems in the 21 contracts EM uses to execute  its operations activities, and we compared this with EVM best practices.  To gather this information, we submitted a data collection instrument to all  16 sites to ascertain whether or not they follow these best practices for  each contract containing operations activities. We also requested  documentation, such as EVM system certification information or  surveillance reports, supporting the sites\u2019 answers. We relied mainly on  their responses but, when available, also reviewed the documentation we  received to check the sites\u2019 answers for accuracy and completeness.", "In addition, as part of our analysis, we analyzed EM headquarters\u2019 EVM  data on operations activities from October 2016 through September 2017  (the most recent data available at the time of our review) to determine  whether or not the EVM data were reliable. We checked for anomalies  such as missing or negative values for each of those months. We also  reviewed DOE and EM documents\u2014such as monthly progress reports  submitted by the 16 sites to EM headquarters for review and the monthly  reviews prepared by an EM headquarters office for senior management\u2014 to see what EVM data senior management used for decision-making.", "To provide a score for our analysis, we used a 5-point scoring system to  score the answers for each contract against each best practice. After  scoring each best practice individually, we then used these scores to  develop an average score for the three EVM characteristics: whether EM  has ensured that these EVM systems are (1) comprehensive; (2) provide  reliable data; and (3) are used by EM leadership for decision-making.", "To examine EM\u2019s use of performance metrics data, we reviewed annual  performance metrics collected by EM headquarters for every operations  activity from 2010 to 2017 (representing the period during which EM  managed cleanup work as operations activities); reviewed relevant  documentation; and interviewed agency officials knowledgeable about  those data, among other things. Specifically, we interviewed DOE and EM  officials at headquarters and from the five cleanup sites (including in- person interviews at the Savannah River and Idaho sites). We also  reviewed our prior work in GAO-19-207 related to EM\u2019s cleanup  agreements and milestones. Appendix I presents a more detailed  description of our scope and methodology.", "We conducted this performance audit from April 2017 to February 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."], "subsections": [{"section_title": "Background", "paragraphs": ["EM\u2019s cleanup sites and areas of cleanup work,", "EM\u2019s status as a program,  the history of EM\u2019s requirements for operations activities, and  key EM offices and DOE oversight bodies for EM\u2019s cleanup work."], "subsections": [{"section_title": "EM Cleanup Sites and Areas of Cleanup Work", "paragraphs": ["EM has a headquarters office and 16 sites at which the agency oversees  cleanup work. Figure 1 shows the EM sites where cleanup work remains.", "EM divides its cleanup work into six work areas. These areas, described  below, sometimes include both operations activities and capital asset  projects:  1.  spent nuclear fuel stabilization and disposition, including safe  shipping, receipt, storage, and disposition of spent nuclear fuel and  heavy water;  2.  nuclear materials stabilization and disposition, including the  management, disposition, safe surveillance, and maintenance of  nuclear materials;  3.  radioactive liquid waste stabilization and disposition, including  treatment, management, and permanent disposal of radioactive liquid  waste stored in storage tanks;  4.  nuclear facility decontamination and decommissioning, including the  deactivation, decontamination, and decommissioning of EM-owned  nuclear, radioactive, and industrial buildings and structures;  5.  solid waste stabilization and disposition, including receipt, treatment,  storage, and disposal of legacy and newly generated low-level  waste, mixed low-level waste, transuranic waste, hazardous waste,  and sanitary waste; and  6.  soil and water remediation, including cleanup of waste regulated  under the Resource Conservation and Recovery Act and the  Comprehensive Environmental Response, Compensation, and  Liability Act."], "subsections": []}, {"section_title": "EM\u2019s Status as a Program", "paragraphs": ["EM refers to itself as a program, and EM\u2019s organization and mission fit  PMI\u2019s definition of a program. According to PMI, programs include  multiple program components, such as sub-programs (in EM\u2019s case, each  cleanup site is a sub-program) and projects (in EM\u2019s case, the cleanup  work at each site), which are interrelated and managed in a coordinated  way to obtain benefits not available from managing them individually.  According to PMI officials, organizations often use the terms \u201cprogram\u201d  and \u201cproject\u201d interchangeably, but the two terms have different meanings  and apply to different levels of management. Programs are a means of  executing a strategy and achieving organizational goals and objectives. A  program may continue indefinitely. In contrast, a project is a temporary  endeavor undertaken to create a unique product, service, or result.  Projects are executed to improve the efficient implementation of a  program. The relationship between a program and a project is illustrated  in figure 2 below."], "subsections": []}, {"section_title": "History of EM\u2019s Requirements for Operations Activities", "paragraphs": ["In June 2009, EM developed the category of work that EM calls  operations activities to differentiate this work from capital asset projects.  Until then, EM managed all of its cleanup work as projects under Order  413.3B. EM documentation from that time explained that EM decided to  differentiate its cleanup work so that it could quickly make use of an  infusion of $6 billion for EM under the American Recovery and  Reinvestment Act of 2009 (Recovery Act). EM officials stated that EM  could not use the funds quickly at that time if the work had to follow the  project management requirements in Order 413.3B.", "In 2010, shortly after the initiation of the Recovery Act work, EM decided  to make the approach of managing part of its work as operations activities  permanent. EM officials could not provide any documentation from the  time supporting this decision, which was not consistent with EM findings  from 2009. In particular, according to EM documentation from 2009,  executing all cleanup work under Order 413.3B had served EM well in  defining and controlling the technical scope, project and life-cycle costs,  completion dates, and risks of its cleanup work, and had helped EM  improve its overall performance and become more efficient. EM began  managing operations activities based on a memorandum developed by  EM leadership.", "In 2012, EM developed the operations activities protocol, which  superseded the 2010 memorandum for managing operations activities.  This protocol stated that although operations activities are not subject to  DOE\u2019s Order 413.3B requirements, EM will apply the appropriate project  management principles from this order using a \u201cgraded approach.\u201d We  reviewed the 2012 operations activities protocol in October 2012 and  found that it contained less stringent requirements for operation activities  than Order 413.3B for capital asset projects. We also found that EM did  not have a clear classification policy that set out under what conditions  EM should consider particular cleanup work to be an operations activity or  a capital asset project. In the absence of such a policy, EM classified as  operations activities certain cleanup work that DOE\u2019s Office of Project  Management considered to be capital asset projects. We recommended  that EM provide DOE\u2019s Office of Project Management with information on  EM\u2019s classification decisions. In 2012, DOE agreed with our  recommendation, and EM officials stated in August 2018 that they are  developing guidance.", "In July 2017, EM developed a cleanup policy that applies to both  operations activities and capital asset projects. For managing capital  asset projects, this policy supplements Order 413.3B. For managing  operations activities, this policy supersedes the 2012 operations activities  protocol. The 2017 cleanup policy states that EM will apply DOE\u2019s  project management principles described in Order 413.3B to its  operations activities in a tailored way.", "At the time of our review, EM had developed 11 standard operating  policies and procedures that are associated with the 2017 cleanup policy  and that provide guidance on areas such as program performance  reporting, assessing contractors\u2019 performance against contract  requirements, and what officials have approval authority at major steps in  the contract process. However, according to EM officials, the standard  operating policies and procedures are not requirements."], "subsections": []}, {"section_title": "Key EM Offices and DOE Oversight Bodies for EM\u2019s Cleanup Work", "paragraphs": ["The EM program is executed by two main components: EM headquarters,  which serves as the program manager for the EM program, and 16  cleanup sites, which serve as sub-programs. The following EM  headquarters and site officials are key to managing and overseeing EM\u2019s  operations activities, according to the 2017 cleanup policy:", "The Assistant Secretary for Environmental Management serves  as the head of EM and is responsible for the execution of EM\u2019s  mission. In December 2017, the Assistant Secretary for EM began  reporting to the DOE Undersecretary of Science, who in turn reports  to the DOE Deputy Secretary of Energy. The Assistant Secretary for  Environmental Management, among other things, provides leadership  and develops mission strategies, policy, and guidance for the EM  cleanup program.", "The Principal Deputy Assistant Secretary for Environmental  Management serves as the EM management official responsible for  operations, including coordination, oversight, and leadership on  scope, cost, and schedule elements. Under the 2017 cleanup policy,  this official has approval authority for contracts equal to or greater  than $200 million. This official is also responsible for conducting  periodic contract reviews for contracts with a total estimated cost  equal to or greater than $200 million.", "The Associate Principal Deputy Assistant Secretary for Field  Operations provides leadership and develops mission strategies,  policy, and guidance for site operations. This official is responsible for,  among other things, meeting monthly with each site individually to  discuss the status of cleanup work there.", "The EM Deputy Assistant Secretary for Acquisition and Project  Management is responsible for providing independent oversight and  reports to the Associate Principal Deputy Assistant Secretary for  Corporate Services. Under the 2017 cleanup policy, this official is  responsible for programmatic peer reviews that review cleanup  activities at each site. This official is also responsible for the  implementation of Order 413.3B and review of capital asset projects.", "At each of the 16 cleanup sites, the EM site manager is responsible  and accountable for management and integration of all EM site-level  activities. Under the 2017 cleanup policy, site managers have  approval authority over contracts under $200 million. The site  manager is also required to conduct periodic contract reviews for  contracts with a total estimated cost of less than $200 million.", "Outside of EM, two DOE bodies play a role in the oversight of EM\u2019s  capital asset projects, but not of operations activities:", "DOE\u2019s Office of Project Management has served as DOE\u2019s enterprise  project management organization since July 2015, when the  Secretary of Energy gave it this responsibility as part of an initiative to  improve DOE\u2019s program and project management. As such, DOE  states that this office\u2014as an enterprise project management  organization\u2014is responsible for providing leadership and assistance  in developing and implementing DOE-wide policies, procedures,  programs, and management systems pertaining to project  management, as well as for independently monitoring, assessing, and  reporting on project execution performance. Officials from this office  are experts in project management, especially as it relates to capital  asset projects, and oversee the implementation of DOE\u2019s Order  413.3B. This office also validates project performance baselines\u2014 scope, cost, and schedule\u2014for the department\u2019s capital asset  projects, including EM\u2019s.", "The Project Management Risk Committee reviews and provides  advice on capital asset projects with a total project cost of $100 million  or more. The Risk Committee\u2019s purpose is to assess the risks  associated with projects across DOE and advise DOE senior leaders  on project management, including on cost, schedule, and technical  issues. The committee includes nine senior DOE officials from across  the department, including top project management officials from the  National Nuclear Security Administration, the Office of Science, and  EM."], "subsections": []}]}, {"section_title": "DOE\u2019s EM Program Manages Most of Its Multibillion-Dollar Cleanup Work as Operations Activities, Posing Cost and Schedule Risks", "paragraphs": ["DOE\u2019s EM program manages most of its cleanup work as operations  activities, posing cost and schedule risks. These risks stem from EM\u2019s  management of such work using less stringent requirements than for  capital asset projects even though EM spends billions of dollars annually  on operations activities. Site managers have the discretion to classify  cleanup work as operations activities, even if the work has characteristics  of capital asset projects, because DOE and EM have not established  requirements for classifying EM\u2019s cleanup work. In addition, EM has not  addressed concerns raised by DOE project management experts that  some operations activities should be classified as capital asset projects."], "subsections": [{"section_title": "DOE\u2019s EM Program Manages Most of Its Cleanup Work as Operations Activities, under Less Stringent Requirements Than Capital Asset Projects", "paragraphs": ["EM manages its cleanup work under different requirements, depending  on whether it classifies the work as a capital asset project or an  operations activity, with operations activities having less stringent  requirements. EM currently manages most of its work as operations  activities. EM\u2019s work is divided into 77 operations activities and 20 capital  asset projects. In the fiscal year 2019 budget, operations activities  accounted for 77 percent of EM\u2019s approximately $7.2 billion budget\u2014 about $5.5 billion\u2014while capital asset projects accounted for 18 percent  of EM\u2019s budget\u2014about $1.3 billion. Figure 3 illustrates how EM  classified and funded its work during fiscal year 2019.", "For capital asset projects, EM manages the work in accordance with the  requirements in DOE\u2019s Order 413.3B, which is DOE\u2019s project  management order. This order contains numerous, detailed requirements  that describe the steps and project management best practices to follow  throughout the life of a project. The DOE Secretary strengthened this  order in May 2016 by adding more stringent requirements, based in part  on our prior recommendations. Examples of the requirements included  in this order include:  \uf0b7  A capital asset project with a total project cost over $50 million must  undergo rigorous reviews outside the project\u2019s management line.  Different types of reviews are to be conducted by an independent  body within the program for capital asset projects over $50 million,  DOE\u2019s Office of Project Management and the Project Management  Risk Committee for capital asset projects over $100 million, and the  Energy Systems Acquisition Advisory Board for capital asset projects  over $750 million. Review and approval are to be received from the  Under Secretary for capital asset projects over $100 million, and the  Deputy Secretary for capital asset projects over $750 million.", "A capital asset project must complete its original scope of work within  110 percent of the original cost baseline to be considered  successful.", "The program must conduct a root cause analysis to determine the  underlying contributing causes of cost overruns, schedule delays, and  performance shortcomings, if the program, the project manager or  independent oversight offices realize a capital asset project can no  longer meet its established scope, cost or schedule baseline.", "Contingency to cover potential risks that might appear during the life  of a project must be included as part of the total project cost estimate  included in the performance baseline.", "All cost and schedule estimates developed during the life of the  project must follow GAO best practices.", "For operations activities, EM follows the requirements in its 2017 cleanup  policy, which has fewer, less detailed, and less stringent requirements  than Order 413.3B. For example, in contrast to the more stringent  requirements in Order 413.3B, under EM\u2019s 2017 cleanup policy:", "The highest level of review an operations activity must receive is by  EM\u2019s top management for contracts equal to or greater than $200  million.", "For an operations activity to be considered successful, it must be  completed within 110 percent of the current cost and scope  baseline\u2014not the original baseline established at the beginning of  cleanup work.", "There is no requirement to conduct a root cause analysis for  operations activities.", "EM does not fund contingency for operations activities.", "Cost and schedule estimates made before EM authorizes execution of  a contract are to follow GAO best practices, but the policy does not  include a requirement to follow best practices for cost estimates  developed during contract execution. Figure 4 below illustrates how  operations activities are managed under less stringent requirements  than capital asset projects.", "EM project management officials in charge of developing the 2017  cleanup policy stated that EM intentionally wrote this policy at a high level  because EM planned to develop standard operating policies and  procedures that would establish more detailed steps to implement the  policy. As noted earlier, these standard operating policies and procedures  provide guidance but are not requirements."], "subsections": []}, {"section_title": "DOE and EM Have Not Established Requirements for Classifying EM\u2019s Cleanup Work or Addressed Concerns That Some Operations Activities Should Be Capital Asset Projects", "paragraphs": ["Neither DOE nor EM has a policy on how to classify cleanup work as  either operations activities or capital asset projects. According to DOE  Office of Project Management officials, DOE does not have a department- wide policy on how to classify cleanup work. Instead, these officials stated  that DOE\u2019s general management approach is to let its individual  programs, such as EM, decide how to classify their work. EM officials  explained that EM allows each site manager to determine independently  how to classify cleanup work because according to EM\u2019s 2017 cleanup  policy, the site manager is responsible and accountable for the planning  and execution of all site-level activities.", "DOE project management experts on the Project Management Risk  Committee and in DOE\u2019s Office of Project Management have raised  concerns related to EM\u2019s 2017 cleanup policy and the classification of  cleanup work since 2015. These officials have stated that some current  operations activities should be classified as capital asset projects.  Specifically:  In November 2015, EM approached DOE\u2019s Project Management Risk  Committee with a proposal for a new cleanup policy, which later  became EM\u2019s 2017 cleanup policy. In comments on the proposal, the  committee\u2019s members expressed concerns that the proposed policy  did not address how EM would classify cleanup work, noting that if  programs or sites get to decide on what is a capital asset project and  what is not\u2014which in turn drives the level of DOE oversight\u2014then this  approach was not an appropriate governance model. The committee\u2019s  members also questioned why EM chose not to use the already  available requirements in Order 413.3B. EM did not respond to the  committee\u2019s concerns. Instead, according to the committee\u2019s meeting  minutes, the DOE Undersecretary for Management and Performance,  who at the time oversaw EM, informed the committee in November  2015 that EM was proceeding with drafting its new cleanup policy.", "In late 2016, DOE\u2019s Office of Project Management officials drafted an  appendix to Order 413.3B that sought to define operations activities  and capital asset projects. Under the classification proposal in the  draft appendix, some of the work now classified as operations  activities would have become capital asset projects and subject to  more stringent requirements. For example, under the appendix, the  cleanup of radioactive liquid waste tanks and solid waste exhumation  and disposition would have been designated as capital asset  projects. However, EM officials informed officials from the DOE  Office of Project Management that EM would continue to develop its  own policy, which it issued in July 2017. This 2017 cleanup policy did  not reclassify any of the operations activities that, in the opinion of  DOE\u2019s Office of Project Management, should be capital asset  projects.", "Officials from DOE\u2019s Office of Project Management we interviewed said  that continuing to classify and manage most of EM\u2019s cleanup work as  operations activities poses significant risks to DOE. According to these  officials, managing the work this way poses cost and schedule risks for  the following reasons, among others:", "Because the review of operations activities is conducted entirely  within EM, DOE does not have information on how EM manages  operations activities and cannot hold EM accountable for cost- effective and timely completion of this cleanup work, which represents  a $5.5 billion investment by taxpayers in operations activities in fiscal  year 2019 (see fig. 3).", "Operations activities are not required to go through a thorough upfront  planning process to determine the scope of work to be completed.  Therefore, these activities are more subject to scope creep, cost  overruns, and schedule delays, which can detract from EM\u2019s  credibility with Congress and other stakeholders.", "Because EM does not set aside contingency funds to cover risks for  its operations activities\u2014a project management best practice and  requirement under Order 413.3B\u2014if risks are realized, EM must either  reduce or delay scope to later years, which increases costs, causes  schedule delays, and undermines EM\u2019s ability to budget for activities  across the EM program.", "Officials from DOE\u2019s Office of Project Management stated that EM did not  respond to their concerns that EM\u2019s approach to classification of cleanup  work poses unwarranted cost and schedule risks. Officials in EM told us  they view the role of DOE\u2019s Office of Project Management and the Project  Management Risk Committee as limited to reviewing Order 413.3B  requirements and overseeing capital asset projects. However, since July  2015, DOE\u2019s Office of Project Management has served as DOE\u2019s  enterprise project management organization, with department-wide  responsibilities for overseeing project management. As previously noted,  DOE states that this office is responsible for, among other things,  independently monitoring, assessing, and reporting on project execution  performance. Therefore, review of classification of cleanup work that  constitutes projects is within the scope of the office\u2019s responsibilities. Until  EM works together with DOE\u2019s Office of Project management to (1)  establish requirements for classifying cleanup work as capital asset  projects or operations activities and (2) assess EM\u2019s ongoing operations  activities to determine if they should be reclassified as capital asset  projects based on the newly established requirements, the department  may incur more project management risk of cost increases and schedule  delays than it should for hundreds of billions of dollars of remaining work."], "subsections": []}]}, {"section_title": "EM\u2019s Cleanup Policy Does Not Follow Most Selected Program and Project Management Leading Practices", "paragraphs": ["EM\u2019s 2017 cleanup policy, which governs the EM program and its  operations activities, does not follow most selected leading practices for  program and project management. More specifically, EM\u2019s 2017  cleanup policy does not follow any of 9 selected program management  leading practices related to scope, cost, schedule performance, and  independent reviews. Further, EM\u2019s 2017 cleanup policy follows 3 of 12  selected project management leading practices related to these areas; it  does not follow the remaining 9. Figure 5 shows the percentage of  selected program and project management leading practices that DOE\u2019s  Office of Environmental Management\u2019s 2017 cleanup policy follows."], "subsections": [{"section_title": "EM\u2019s Cleanup Policy Does Not Follow Any of Nine Selected Leading Program Management Practices", "paragraphs": ["EM\u2019s 2017 cleanup policy does not follow (i.e., does not meet, minimally  meets, or partially meets) the nine leading practices for program  management related to scope, cost, schedule performance, and  independent reviews that we selected based on PMI\u2019s standards. More  specifically, the policy partially met two of the leading practices, minimally  met four others, and did not meet three, as discussed below:", "Having a program management plan and a roadmap that are  updated regularly. (Minimally meets.) EM\u2019s policy does not require  an overarching program management plan or strategic plan that  encompasses the work at all sites. The policy does require that each  site maintain a life-cycle baseline based on the scope, cost, and  schedule of work, which are components of a program management  plan. However, the requirement is specific to each site and not the  entire EM program.", "Having a reliable, integrated, comprehensive life-cycle cost  estimate that is updated on a regular basis. (Partially meets.)  EM\u2019s policy requires an integrated life-cycle cost estimate for the  entire EM program but does not state that the cost estimate must be  reliable or updated on a regular basis.", "Having a reliable, integrated master schedule that is updated on  a regular basis. (Does not meet.) EM\u2019s policy does not require an  integrated master schedule at the program level.", "Measuring performance against both a program\u2019s life-cycle cost  and integrated master schedule baselines. (Does not meet.)  EM\u2019s policy does not require that EM track and monitor all high-level  program components against a program\u2019s life-cycle cost and  integrated master schedule baselines for the entire EM program.", "Completing performance reporting and analysis in a way that  provides a clear picture of program performance. (Minimally  meets.) EM\u2019s policy requires performance reporting to the EM  headquarters management level, but it does not require that  performance information be analyzed to give a clear picture of  program performance.", "Having a lessons learned database. (Partially meets.) EM\u2019s policy  requires that EM collect and disseminate lessons learned, but the  policy does not specify a framework, such as a database, for how the  lessons learned should be collected and shared.", "Conducting program risk management throughout the life of the  program. (Does not meet.) EM\u2019s policy does not require EM to  conduct risk management throughout the life of the program.", "Monitoring and controlling the program, including conducting  root cause analyses and developing corrective action plans.  (Minimally meets.) EM\u2019s policy does not have any requirements  related to monitoring and controlling activities at a program level when  there is evidence that the program\u2019s cost or schedule baseline will not  be met. It does require some monitoring and controlling activities at  the site level.", "Having an independent oversight body that conducts periodic  reviews of the progress of the program in delivering its expected  benefits. (Minimally meets.) EM\u2019s policy does not require any  independent entity outside EM to review the performance of the EM  program as a whole in delivering its expected benefits. The policy  requires EM\u2019s Office of Project Management to conduct a periodic  Programmatic Peer Review of cleanup work at each site, but this  review is not independent of EM.", "EM officials stated that even though EM\u2019s policy does not follow these  program management leading practices, EM officials may take some  actions that address these leading practices. For example, to address the  leading practice of having a lessons learned database, EM officials  explained that EM\u2019s Office of Project Management generates and  distributes across EM a monthly lessons-learned bulletin on a topic of its  choosing, and these lessons learned are uploaded on a site accessible to  everyone within EM. They also explained that officials across EM could  enter lessons learned in a DOE-wide lessons-learned database managed  by DOE\u2019s Office of Environment, Health, Safety, and Security. In addition,  to address the leading practice of monitoring and controlling the program,  including conducting root cause analyses and developing corrective  action plans, the new Assistant Secretary for Environmental Management  requested the development of a root cause analysis and a corrective  action plan for the EM program in August 2018. To address the  Assistant Secretary\u2019s request, EM officials stated that in November 2018  they identified nine improvement areas for the EM program, for which  they are developing corrective measures.", "However, when we reviewed the actions EM officials cited they took to  address the selected leading practices, we found that they fell short of  following leading practices. For example, the lessons learned listed in the  bulletins we reviewed were related only to capital asset projects, and the  database cited by EM officials is not used often by EM; it contains a total  of six entries on EM-related issues from 2005 to 2017. In addition, EM  officials stated they do not apply key practices that can be used to identify  and apply lessons learned. Further, EM officials in charge of developing  a root cause analysis and a corrective action plan stated that EM does  not have a process for doing so and that EM has not prepared such an  analysis or plan since 2011. They also stated that EM does not intend to  publish this document and that EM will not develop a root cause analysis  to show the problems these corrective measures are supposed to  address.", "The selected leading practices help ensure that a program achieves its  goals and intended benefits and that it optimizes scope, cost, and  schedule performance, and independent review of performance. Without  documenting such leading practices in policy, EM officials may not be  aware of expectations to carry them out and may not do so consistently.  Under federal standards for internal control, management should design  control activities to achieve objectives and respond to risks, such as by  clearly documenting internal control in management directives,  administrative policies, or operating manuals. Furthermore, these  standards state that management periodically reviews policies,  procedures, and related control activities for continued relevance and  effectiveness in achieving the entity\u2019s objectives or addressing related  risks. Until EM reviews and revises its cleanup policy to include program  management leading practices related to scope, cost, schedule  performance, and independent review, the EM program is at risk of  continued uncontrolled changes to the program\u2019s scope, exceeding its  cost estimate and schedule, failing to meet its programmatic goals, and  increasing DOE\u2019s environmental liabilities."], "subsections": []}, {"section_title": "EM\u2019s Cleanup Policy Does Not Follow Most Selected Project Management Leading Practices", "paragraphs": ["EM\u2019s 2017 cleanup policy, which applies to operations activities, follows  (i.e., substantially or fully meets) 3 and does not follow (i.e., does not  meet, minimally meets, or partially meets) 9 of the 12 leading practices for  project management related to scope, cost, schedule performance, and  independent reviews that we selected based on PMI\u2019s standards.  Specifically, the policy follows these three selected leading practices:", "Establishing a performance baseline and tracking it from the  beginning to the end of the project. (Substantially meets.) EM\u2019s  policy requires that a contractor must establish a cost baseline and  complete key performance measures within 110 percent of the  approved, current cost baseline. The policy also requires that  managers in charge of the work be responsible for successfully  executing work within the approved performance baseline.", "Conducting monitoring and controlling activities to measure  performance at regular intervals. (Fully meets.) EM\u2019s policy  requires periodic project reviews from various levels, from the federal  cleanup director in charge of the operations activity and site manager,  all the way to EM senior leadership.", "Using an EVM system that is independently certified and  continuously monitored to assess project performance.  (Substantially meets.) EM\u2019s policy requires the implementation at the  contract level of a work control system, either an EVM system or an  approved alternative. EM guidance suggests that the EVM system  be surveilled regularly, although EM does not require the EVM system  to be independently certified.", "The policy did not follow the other 9 selected project management leading  practices; specifically, it partially met 5, while the remaining 4 were  minimally or not met, as explained below:", "Establishing a project execution plan with policies and  procedures to manage and control project planning. (Does not  meet.) EM\u2019s policy does not require a plan to establish policies and  procedures to manage and control project planning.", "Clearly and completely defining the scope of a project so that its  performance can be measured. (Partially meets.) EM\u2019s policy  requires that the scope be defined for a segment\u2014typically a 5- to 10- year contract\u2014at the beginning of the work. However, EM\u2019s policy  also states that the segment\u2019s scope may be reduced to free up  funding to cover risks. When risks occur and the scope is reduced, the  segment\u2019s performance may not be accurately and fully measured.", "Developing a cost estimate using GAO best practices. (Partially  meets.) EM\u2019s policy requires that EM follow our best practices for cost  estimating prior to starting the execution of a segment. However, once  the contractor begins executing the segment, the policy does not  require EM to follow our best practices, even when independent cost  estimates are developed during a baseline change process.", "Developing and maintaining an integrated master schedule using  GAO best practices. (Minimally meets.) EM\u2019s policy requires that  the contract specify the schedule for the segment, which could be an  input to an overall integrated master schedule for that segment. The  policy does not require that an integrated master schedule be  developed and maintained in accordance with GAO best practices.", "Conducting risk assessments throughout the life cycle of the  project; prioritizing risks in a risk register; developing risk  mitigation strategies; and determining the appropriate amount of  contingency. (Minimally meets.) EM\u2019s policy does not require a risk  management plan for projects. In addition, the policy states that EM  will not fund contingency to cover risks that may occur for operations  activities.", "Capturing lessons learned throughout the continuum of a project  in a database and disseminating them among projects. (Partially  meets.) EM\u2019s policy requires the EM Deputy Assistant Secretary for  Acquisition and Project Management to collect and disseminate  lessons learned, but the policy does not specify that this process  should be done throughout the continuum of a project or that lessons  learned should be disseminated among operations activities.", "Developing a root cause analysis and corrective action plan to  identify and address the underlying causes of cost overruns,  schedule delays, and performance shortcomings when a cost or  schedule overrun occurs. (Does not meet.) The policy does not  contain any information on the steps that EM will take, such as  developing a root cause analysis and corrective action plan, once  management becomes aware that a cost or schedule overrun is  probable for an operations activity.", "Conducting a variety of independent reviews throughout the life  of a project, including at key decision points, and on multiple  aspects of the project, such as the mission need, cost, earned- value management system, and baseline review. (Partially meets.)  EM\u2019s policy requires reviews of segments conducted or organized by  EM\u2019s Office of Project Management. However, there are no  requirements for any independent reviews conducted by DOE offices  or other entities outside EM.", "Establishing project-reporting systems/databases to provide a  clear picture of project performance to management and to keep  the contractor accountable. (Partially meets.) EM\u2019s policy  established a requirement that performance information be reported in  the Integrated Planning, Accountability, and Budgeting System  database for each operations activity. However, EM\u2019s policy does  not address how this performance information will provide a clear  picture of performance and how it will be used to keep the contractor  accountable.", "Our findings on the inclusion of project management leading practices in  EM\u2019s 2017 cleanup policy are consistent with concerns raised by DOE\u2019s  Project Management Risk Committee. According to meeting minutes from  December 2015, the committee expressed concerns that EM\u2019s proposed  cleanup policy (adopted in July 2017) appeared to run counter to the  Secretary\u2019s initiative to apply best practices to oversight of project  management. In committee meeting minutes from November 2015, the  committee expressed concern with the level of rigor that would be applied  to independent cost analysis, project reviews, general oversight, and risk  mitigation under the new cleanup policy. According to PMI, effective  project management is key to implementing an organization\u2019s strategy,  and has a dramatic impact on the bottom line; organizations that invest in  proven project management practices\u2014such as these selected leading  practices\u2014continue to experience greater success than their  underperforming counterparts.", "In addition, under federal standards for internal control, management  periodically reviews policies, procedures, and related control activities for  continued relevance and effectiveness in achieving the entity\u2019s objectives  or addressing related risks. Until EM reviews and revises its policy to  include project management leading practices related to scope, cost, and  schedule performance, and independent reviews, EM\u2019s operations  activities are at risk of scope creep or uncontrolled changes to scope,  exceeding their initial budget and schedule, and failing to meet their  goals."], "subsections": []}]}, {"section_title": "EM\u2019s Performance Measures for Operations Activities Do Not Provide a Clear Picture of Overall Performance", "paragraphs": ["EM uses three tools to measure the overall performance of operations  activities, but these tools do not provide a clear picture of overall  performance. These tools are earned value management, performance  metrics, and milestones, according to EM documentation and officials.  However, EM has not followed best practices for its contractors\u2019 EVM  systems; EM\u2019s performance metrics do not link performance to cost; and  EM postpones milestones when they are at risk of missing them and does  not consistently track or report those milestone changes over time. Figure  6 summarizes our findings on these three performance measures and  how they affect EM\u2019s ability to effectively manage the cleanup effort."], "subsections": [{"section_title": "EM Relies on Three Tools to Measure Performance of Its Operations Activities", "paragraphs": ["To measure the overall performance of its operations activities, EM relies  primarily on EVM data, supplemented by program-wide performance  metrics and cleanup milestones, according to EM documentation and  officials. EVM is a management tool used to measure the value of work  accomplished in a given period and compare it with the planned value of  work scheduled for the same period and with the actual cost of the work  accomplished. EVM data can alert project managers to potential  problems sooner than expenditures alone can. The use of EVM as a  management tool is considered a best practice for conducting cost and  schedule performance analysis for projects.", "EM\u2019s 2017 cleanup policy requires that contractors use an EVM system  or an approved alternative for monitoring and controlling work at the  contract level. We reviewed all 20 EM contracts covering operations  activities and found that EM requires its contractors to maintain EVM  systems for 17 of all 20 contracts. EM paid contractors for maintaining  these systems and providing EVM reports to EM. For example, EM has  paid one contractor $1 million annually to maintain its EVM system, and  EM has paid contractors anywhere from $10,000 to $235,000 annually to  receive their EVM reports, according to EM responses to our information  request.", "EVM by itself may not be sufficient to measure the progress of operations  activities, according to EM\u2019s 2012 operations activities protocol. The  second tool EM uses to measure performance is performance metrics.  EM developed 17 program-wide performance metrics for its cleanup  work. The goal of these metrics is to measure progress toward  completing the scope of work for the contract and the entire life of an  operations activity. EM headquarters collects information from the sites  monthly to measure how each activity has performed against a goal set at  the beginning of each year. Examples of EM\u2019s performance metrics  include  the number of cleanup sites being eliminated,  the cubic meters of transuranic waste being disposed of,  the number of containers of high-level waste packaged for final  disposition, and  the number of closed radioactive liquid waste tanks.", "The EM cleanup sites set targets for these metrics annually. According to  EM officials, many operations activities have one or more of these  performance metrics associated with them, but some do not. Appendix II  contains the full list of EM\u2019s performance metrics.", "The third tool EM uses to measure performance are cleanup milestones.  Cleanup milestones represent deadlines for various cleanup-related  activities derived from agreements DOE enters into with its regulators,  including the Environmental Protection Agency and states. There are  many different types of milestones, including enforceable and planning  milestones. Generally, an enforceable milestone has a fixed, mandatory  due date that is subject to the availability of appropriated funds while a  planning milestone is not enforceable and usually represents a  placeholder for shorter term work.", "EM collects program-wide performance information from the three  performance measures tools in a centralized database known as the  Integrated Planning, Accountability, and Budgeting System. These  performance data are used by EM to manage its program and to provide  information to DOE management, Congress, and other stakeholders.  According to DOE\u2019s Office of Inspector General and EM officials, this  database was developed as a program management tool to provide  information to", "EM headquarters officials, to ensure effective overall program  performance;", "DOE\u2019s Chief Financial Officer, for inclusion in DOE-wide reports;", "Congress and taxpayers, to identify the remaining environmental  cleanup liability and to provide transparency regarding contractor  performance; and  stakeholders, to make sure the work reported is accurate, timely,  complete, and in accordance with agreements."], "subsections": []}, {"section_title": "EM Has Not Ensured That EVM Systems Are Comprehensive, Provide Reliable Data, or Are Used by Leadership for Decision-Making", "paragraphs": ["EM relies on contractors\u2019 EVM systems to measure the performance of its  contractors\u2019 operations activities, but EM has not followed (i.e., has not  met, has minimally met, or has partially met) best practices to ensure that  these systems are (1) comprehensive, (2) provide reliable data, and (3)  are used by EM leadership for decision-making\u2014which are the three  characteristics of a reliable EVM system. Moreover, EM has allowed the  contractors to categorize a large portion of their work in a way that limits  the usefulness of the EVM data."], "subsections": [{"section_title": "EM Has Not Followed Best Practices for Its Contractors\u2019 EVM Systems", "paragraphs": ["Our analysis of EM contractors\u2019 EVM systems for operations activities  found that EM has not followed (i.e., has not met, has minimally met, or  has partially met) best practices, as discussed below. As a result, EM has  not ensured that these systems are: (1) comprehensive, (2) provide  reliable data, and (3) used by EM leadership for decision-making\u2014which  are the three characteristics of a reliable EVM system. (See app. III for  more specific information on EM\u2019s performance on each best practice  considered and app. IV for information on how each contract followed  each best practice.)", "Comprehensive: Best practices to ensure EVM systems are  comprehensive are: (1) requiring the contractor\u2019s EVM systems be  certified to meet guidelines established by the Earned Value  Management Systems EIA-748-D Intent Guide; (2) conducting an  integrated baseline review to ensure that all work is accurately  captured in the performance measurement baseline; and (3)  performing regular surveillance to ensure the contractors continue to  maintain their EVM systems in a way to meet the EIA-748-D  guidelines. We found that 17 out of 20 contractors\u2019 EVM systems  were certified to be compliant with the EIA-748-D guidelines, but of  these 17, 4 contractors had self-certified their EVM systems.  However, only about half of the EVM systems met the best practices  for conducting integrated baseline reviews and performing ongoing  surveillance. Among those, many of the reviews were not rigorous  enough to ensure that the performance measurement baseline  captured all of the work. In November 2017, EM issued a standard  operating policy and procedure, which suggests that EVM systems be  surveilled regularly. However, we discovered that EM officials were  not performing thorough surveillance reviews to ensure that EVM  systems were in alignment with the EIA-748-D guidelines and that the  data being reported by the EVM systems were reliable.", "Provide reliable data: Best practices to ensure that the contractors\u2019  EVM systems provide reliable data are (1) the EVM data do not  contain any anomalies and (2) estimates at completion\u2014 the  expected total cost of completing all work based on the contractor\u2019s  performance to date\u2014are realistic. The EVM data for contracts  covering operations activities contained numerous, unexplained  anomalies in all the months we reviewed, including missing or  negative values for some of the completed work to date. Negative  values should occur rarely, if ever, in EVM reporting because they  imply the undoing of previously scheduled or performed work. In  addition, we found problems with the estimate at completion listed in  all 20 contractors\u2019 EVM systems. More specifically, we found (1) many  instances where the actual costs exceeded the estimates at  completion even though there was still a lot of work remaining; (2)  several occasions where the estimates at completion were less than  half of the original budget at the beginning of the project; and (3)  several contractors reported estimates at completion of zero dollars  when their original budgets were for hundreds of millions of dollars.  These problems indicated that the EVM systems were not being  updated in a timely manner or were not well monitored since the  estimate at completion values were too optimistic and highly unlikely.", "Used by EM leadership for decision-making. Best practices to  ensure that the data from the contractors\u2019 EVM systems are used by  EM leadership for decision-making are: (1) reviewing EVM data,  including cost and schedule variances, on a regular basis; (2)  ensuring that EM management use EVM data to develop corrective  action plans; and (3) ensuring that the performance measurement  baseline is updated to reflect changes. We reviewed monthly  reports EM sites present to EM headquarters management for review.  We found that none of the sites adequately reported EVM variances  to EM headquarters management; they were all missing some EVM  information such as trend data or the estimate at completion. In  addition, many of the sites\u2019 monthly reports did not include corrective  action plans for addressing variances, if any, between planned and  actual performance. We also reviewed monthly reports that the EM  Office of Project Management started to present to EM headquarters  senior leadership in October 2017, and found that these reports  included most of the EVM indicators for all 15 contracts on which EM  Office of Project Management reported. However, EM Office of  Project Management officials stated that they have only started  suggesting corrective action to EM headquarters senior leadership  since early 2018; it is too soon to tell how EM headquarters senior  leadership is using this information to determine which contracts need  the most attention and which corrective actions management will  develop and take. Moreover, this monthly report uses unreliable EVM  data, as we found in the prior characteristic. Finally, regarding the  third best practice, EM provided evidence that 17 out of 20 contractors  had a formal process in place for updating the budget baseline.  However, the extent to which contractors followed their processes  was questionable given the problems we found with the estimates at  completion, as discussed in the prior characteristic.", "Even though EM requires most of its contractors for operations activities  to maintain EVM systems and pays them for doing so, EM\u2019s 2017 policy  generally does not require that EVM systems be maintained and used in  a way that follow EVM best practices. Until EM updates its cleanup  policy to require that EVM systems be maintained and used in a way that  follow EVM best practices, EM leadership may not have access to reliable  performance data to make informed decisions in managing its cleanup  work and to provide to Congress and other stakeholders on billions of  dollars\u2019 worth of cleanup work every year."], "subsections": []}, {"section_title": "Much of the Cleanup Work Is Categorized in a Way That Limits the Usefulness of the EVM Data", "paragraphs": ["Compounding the limitations with the EVM systems currently in place, EM  has categorized a large portion of its work in a way that limits the  usefulness of the EVM data. Specifically, a sizable amount of the work is  categorized as level of effort for all 14 contracts for which we could  identify the percentage of the level-of-effort work (in dollars). Work that  is categorized as level of effort does not have defined deliverables or  physical products. Progress for level-of-effort work is measured by the  passage of time, but is not measured against a scheduled amount, so no schedule variance occurs. The effectiveness of EVM systems, which  are designed to measure performance against cost and schedule targets,  will be limited if there is a high amount of level-of-effort work, according to  our best practices. Thus, according to best practices, categorizing work  as level of effort should be minimized to the extent possible if EVM is  being used to measure performance, and contracts with level-of-effort  work over 15 percent should be subject to additional scrutiny. As  shown in figure 7 below, the range for EM\u2019s contracts on operations  activities is between 36 and 83 percent. (We used letters for each  contract, rather than identifying the site or contractor).", "According to EM officials, at least half of the level-of-effort work  conducted under the cleanup contracts consists of recurring activities  necessary to maintain the sites, which EM refers to as \u201cminimum safety\u201d  work. According to EM officials, examples of such work include physical  security, health and radiation protection and services, or critical facility  and infrastructure maintenance for safe conditions. These officials said  that minimum safety work makes up 30 to 60 percent of individual sites\u2019  budgets, for a total of at least $2.7 billion, or 42 percent, of EM\u2019s $6.4  billion fiscal year 2018 budget. The Assistant Secretary for EM noted in  September 2018 that much of DOE\u2019s environmental cost liability has to do  with the management of the minimum safety work. The Assistant  Secretary also noted that significant potential cost savings could result  from reducing minimum safety work and planned to start an initiative in  fiscal year 2019 to examine how EM can reduce this work.", "EM officials agreed that some of the contractor\u2019s work currently  categorized as level of effort could in fact be measured discretely.  According to an ANSI guideline, only work not measurable or for which  measurement is impractical may be categorized as level of effort. EM  officials we interviewed stated that EM relies on its contractors to  categorize work as discrete or as level of effort, and EM approves these  decisions during the integrated baseline review. According to EM officials,  there is no EM policy or guidance on what circumstances justify  categorizing work as level of effort. Federal standards for internal controls  state that management should design control activities to achieve  objectives and respond to risks, such as by clearly documenting internal  control in management directives, administrative policies, or operating  manuals. Until EM develops a policy that ensures that work is  categorized as level of effort only in appropriate, specified circumstances,  such as when work is not measurable or when measurement is  impractical, it may not have reliable performance data to help it achieve  its objective of reducing risks and costs associated with billions of dollars\u2019  worth of cleanup work every year."], "subsections": []}]}, {"section_title": "Performance Metrics and Milestones for EM Cleanup Work Do Not Provide a Clear Picture of Performance", "paragraphs": ["We found that EM\u2019s 17 performance metrics for its cleanup work measure  the scope of work accomplished in a specific year but do not link that  work to the cost of completing it. For example, EM reported in the  Integrated Planning, Accountability, and Budgeting System database  eliminating 72,000 gallons of radioactive liquid waste out of a target of  342,000 gallons for fiscal year 2017 at the Savannah River Site, and  disposing of 1,734 cubic meters of low-level waste out of a target of 360  cubic meters at the Idaho site. However, in neither case did EM indicate  how much that work cost to accomplish. According to officials from DOE\u2019s  Office of Project Management, the scope of work accomplished is not a  good indicator of performance by itself because it does not allow the  project manager to know whether EM received good value from the  contractor. In contrast, EVM systems allow managers to measure the  value of work accomplished in a given period. As discussed above, EM  collects EVM data, but EM\u2019s performance metrics do not link to the EVM  data. According to federal standards for internal control, management  should use quality information to achieve an entity\u2019s objectives and the  quality information must be complete, among other things. In EM\u2019s  case, its objective, as stated in its mission, includes completing its  cleanup work in a way that reduces associated risks and costs. By  integrating reliable EVM data into EM\u2019s performance metrics for  operations activities, EM could provide a clearer picture of performance  and better indicate whether EM is achieving its objective of reducing risks  and costs.", "With regard to cleanup milestones, we found in February 2019 that EM  has hundreds of milestones, but the exact number cannot be determined  because of inconsistencies in tracking and defining milestones between  sites and EM headquarters, and sites have the discretion to send updated  milestone data to EM headquarters when they choose. As a result,  some sites track milestones differently than EM headquarters does. We  also found that EM does not consistently define or track met, missed, or  postponed cleanup-related milestones at selected sites, and EM\u2019s  milestone reporting to Congress is inconsistent. EM sites renegotiate  milestone dates with their regulators before they are missed, and EM  does not track the history of these changes. This is because once  milestones are changed, sites are not required to maintain or track the  original milestone dates. As a result, the new milestones become the new agreed-upon time frame, essentially resetting the deadline. Further, in its  report to Congress on enforceable milestones\u2019 status, EM reports the  most recently renegotiated milestone dates with no indication of whether  or how often those milestones have been missed or postponed. Thus, the  EM program is unable to use milestone data to provide a clear, reliable  picture of its performance. Furthermore, EM officials at headquarters and  selected sites said they had not conducted root cause analyses on  missed or postponed milestones. Thus, EM cannot address systemic  problems and consider them when renegotiating milestones with  regulators. In addition, without such analysis, EM and its cleanup  regulators lack information to set more realistic and achievable  milestones. As a result, future milestones are likely to continue to be  pushed back, further delaying the cleanup work and likely increasing  cleanup costs. In this same report, we recommended, among other  things, that EM should establish a standard definition of milestones  across the cleanup sites, track changes to the milestones, report annually  to Congress on the status of its milestones, and conduct root cause  analyses of performance shortcomings that lead to missed or postponed  milestones."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOE\u2019s EM program has the challenging mission of safely cleaning up  radioactive waste, spent nuclear fuel, and environmental contamination  from 50 years of federal nuclear weapons production and energy  research, while working to reduce associated risks and costs within the  established regulatory framework. Since its mission began in 1989, EM  has spent more than $164 billion on its cleanup work, and it faces future  cleanup costs of more than $377 billion\u2014the federal government\u2019s single  largest environmental liability.", "To improve management of projects undertaken within the department,  including EM, DOE established its Office of Project Management and  strengthened project management requirements in Order 413.3B for  managing capital asset projects. However, since 2009, when EM created  a new category of cleanup work called operations activities, EM has  opted not to apply DOE\u2019s project management requirements to almost 80  percent of its cleanup work. From fiscal years 2011 to 2018, EM\u2019s  environmental liability increased by about $214 billion. DOE\u2019s Office of  Project Management officials have raised concerns about how EM  classifies this work. Until EM works together with DOE\u2019s Office of Project  management (1) to establish requirements for classifying cleanup work as  capital asset projects or operations activities and (2) to assess EM\u2019s  ongoing operations activities to determine if they should be reclassified as  capital asset projects based on the newly established requirements, the  department may incur more project management risk of cost increases  and schedule delays than it should for hundreds of billions of dollars of  remaining work.", "In July 2017, EM released a new cleanup policy containing requirements  for managing its program and its operations activities, but this policy does  not follow most of the selected program and project management leading  practices we identified related to management of scope, cost, and  schedule performance, and independent review of performance. Until EM  reviews and revises its cleanup policy to include program and project  management leading practices related to scope, cost, schedule  performance, and independent reviews, the EM program is at risk of  uncontrolled changes to scope, exceeding its cost estimates and  schedule, failing to meet its goals, and increasing DOE\u2019s environmental  liabilities.", "The new Assistant Secretary for the Office of Environmental Management  has acknowledged the importance of improving EM\u2019s performance in  addressing the department\u2019s large and growing environmental liabilities.  However, the three tools that EM uses to measure its overall program  performance and contractors\u2019 performance on operations activities\u2014 earned value management, performance metrics, and cleanup  milestones\u2014do not provide a clear, reliable picture of performance for EM  leadership, Congress, and other stakeholders. In particular, EM\u2019s EVM  systems for operations activities are not comprehensive, do not provide  reliable data, and are not used by EM leadership to measure overall  performance of the EM program. Furthermore, a large portion of the work  performed by contractors is categorized as level of effort, limiting the  usefulness of the EVM data. In addition, EM\u2019s performance metrics are  not linked to the costs of the work performed. Until EM updates its  cleanup policy to require that EVM systems be maintained and used in a  way that follows EVM best practices, EM leadership may not have access  to reliable performance data to make informed decisions in managing its  cleanup work and to provide to Congress and other stakeholders on  billions of dollars\u2019 worth of cleanup work every year. Moreover, until EM  develops a policy that ensures that work is categorized as level of effort  only in appropriate, specified circumstances, such as when work is not  measurable or when measurement is impractical, it may not have reliable  performance data to help it achieve its objective of reducing risks and  costs associated with billions of dollars\u2019 worth of cleanup work every year.  Finally, by integrating reliable EVM data into EM\u2019s performance metrics  for operations activities, EM could provide a clearer picture of  performance and better indicate whether EM is achieving its objective of  reducing risks and costs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following seven recommendations to DOE:", "The Secretary of Energy should direct the Director of the Office of  Project Management and the Assistant Secretary of the Office of  Environmental Management to work together to establish  requirements for classifying cleanup work as capital asset projects or  operations activities. (Recommendation 1)", "The Secretary of Energy should direct the Director of the Office of  Project Management and the Assistant Secretary of the Office of  Environmental Management to work together to asses EM\u2019s ongoing  operations activities to determine if they should be reclassified as  capital asset projects based on the newly established requirements.  (Recommendation 2)", "The Secretary of Energy should direct the Assistant Secretary of the  Office of Environmental Management to review and revise EM\u2019s 2017  cleanup policy to include program management leading practices  related to scope, cost, schedule performance, and independent  reviews. (Recommendation 3)", "The Secretary of Energy should direct the Assistant Secretary of the  Office of Environmental Management to review and revise EM\u2019s 2017  cleanup policy to include project management leading practices  related to scope, cost, schedule performance, and independent  reviews. (Recommendation 4)", "The Secretary of Energy should direct the Assistant Secretary of the  Office of Environmental Management to update its cleanup policy to  require that EVM systems be maintained and used in a way that  follows EVM best practices. (Recommendation 5)", "The Secretary of Energy should direct the Assistant Secretary of the  Office of Environmental Management to develop a policy to ensure  that work is categorized as level of effort only in appropriate, specified  circumstances, such as when work is not measurable or when  measurement is impractical. (Recommendation 6)", "The Secretary of Energy should direct the Assistant Secretary of the  Office of Environmental Management to integrate EVM data into EM\u2019s  performance metrics for operations activities. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided DOE with a draft of this report for its review and comment. In  its written comments, reproduced in appendix V, DOE generally agreed  with the findings in the report and its recommendations and described  actions that it intends to take in response to our recommendations. More  specifically, of the seven recommendations, DOE concurred with four and  partially concurred with three.", "DOE partially concurred with our recommendations that the Director  of the Office of Project Management and the Assistant Secretary for  the Office of Environmental Management (EM) work together to (1)  establish requirements for classifying cleanup work as capital asset  projects or operations activities, and (2) assess EM\u2019s ongoing  operations activities to determine if they should be reclassified as  capital asset projects based on the newly established requirements.  DOE stated that the department commits (1) to reviewing its  methodology for categorizing work and revising it, as appropriate, as  well as (2) to determining the appropriate application of any revisions  to the work classification methodology to new and existing work. DOE  also stated that the Assistant Secretary for EM is ultimately  responsible for the proper classification of work and will consult with  the Office of Project Management. We appreciate DOE\u2019s commitment  to addressing these two recommendations. As we stated in our report,  in July 2015, the Secretary of Energy gave DOE\u2019s Office of Project  Management responsibility to serve as DOE\u2019s enterprise project  management organization. As such, DOE states that this office is  responsible for providing leadership and assistance in developing and  implementing DOE-wide policies, procedures, programs, and  management systems pertaining to project management, as well as  for independently monitoring, assessing, and reporting on project  execution performance. Officials from this office are experts in project  management, especially as it relates to capital asset projects. Given  (1) the high-risk posed by EM\u2019s cleanup work and the high  environmental liability, which may continue to grow; (2) the difference  in the stringency of requirements between managing and overseeing  operations activities and capital asset projects; and (3) the concerns  raised by DOE top project management experts that some current  operations activities should be classified as capital asset projects, we  encourage the Secretary to direct EM not only to consult with DOE\u2019s  Office of Project Management but to take advantage of the office\u2019s  role and expertise and direct EM to work with this office to come to an  agreement about proper classification requirements and classification  of current and future cleanup work. It is in DOE\u2019s interest to ensure its  cleanup work is classified and managed appropriately, regardless of  which office is ultimately responsible for the proper classification of  work.", "DOE concurred with our recommendations to review and revise EM\u2019s  2017 cleanup policy to include program and project management  leading practices related to scope, cost, schedule performance, and  independent reviews and to require that EVM systems be maintained  and used in a way that follows EVM best practices. DOE also  concurred with our recommendation to develop a policy to ensure that  work is categorized as level of effort only in appropriate, specified  circumstances, such as when work is not measurable or when  measurement is impractical. DOE also partially concurred with our  recommendation to integrate EVM data into EM\u2019s performance  metrics for operations activities. For all these recommendations, DOE  stated that EM is already in the process of reviewing the EM cleanup  policy for necessary updates, revisions, and modifications. DOE  further stated that EM will consider and incorporate changes relative  to these recommendations, as appropriate, during this process, and  EM will also consider any necessary changes to related guidance or  policies and procedures.", "DOE also provided technical comments, which we incorporated in our  report as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 14 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Energy, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made significant contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our report examined: (1) how the EM program manages its cleanup work,  (2) the extent to which EM\u2019s cleanup policy follows selected program and  project management leading practices, and (3) how EM measures the  overall performance of its operations activities.", "To examine how the EM program manages its cleanup work, we  reviewed various DOE documents, including DOE\u2019s Order 413.3B, EM\u2019s  2012 operations activities protocol, EM\u2019s 2017 cleanup policy, standard  operating policies and procedures associated with this cleanup policy,  EM\u2019s mission and functions document, EM\u2019s draft 45-day review  documentation, meeting minutes from the Project Management Risk  Committee, draft appendix to Order 413.3B developed by DOE\u2019s Office of  Project Management, and documents received from cleanup sites. We  also interviewed DOE officials from the Office of Project Management and  members of the Project Management Risk Committee, and EM officials  from headquarters, such as the Associate Principal Deputy Assistant  Secretary for Field Operations, the Deputy Assistant Secretary for  Acquisition and Project Management, officials from EM\u2019s Office of Project  Management, Office of Budget and Planning, Office of Program Planning,  officials in charge of managing the Integrated Planning, Accountability,  and Budgeting System database that collects monthly performance  information from the sites, and officials from 5 of EM\u2019s 16 cleanup sites.  (We contacted all sites and interviewed 5 sites over the phone that  responded to our request for an interview.) We then decided to conduct  site visits. We visited two of these sites\u2014Savannah River and Idaho\u2014 because they are among the sites with the highest number of operations  activities and the most diverse types of and highest-cost cleanup work  remaining. Our findings from these 5 sites are not generalizable to all EM  sites, but they help explain the delineation of roles between the site  managers and EM headquarters in managing and classifying cleanup  work. We also attended an EM internal training session in which EM  headquarters officials introduced the 2017 cleanup policy to officials at  the Hanford site and attended EM cleanup public conferences. Moreover,  we reviewed the role of DOE\u2019s Office of Project Management in EM\u2019s  cleanup work. More specifically, we examined whether this office played a  role in the development of EM\u2019s 2017 cleanup policy and classification of  EM\u2019s cleanup work, consistent with its designation as DOE\u2019s enterprise  project management organization. To assess the reliability of EM\u2019s fiscal  year 2019 budget data, we requested information about EM\u2019s Financial  Integration System module of the Integrated Planning, Accountability, and  Budgeting System database, from which these data were provided.  Based on the responses from officials in charge of this database, we  determined the data to be sufficiently reliable for our purposes.", "To examine the extent to which EM\u2019s cleanup policy follows selected  program and project management leading practices, we selected two sets  of criteria for program and project management leading practices using  leading practices from the Project Management Institute, which are  generally recognized as the top leading practices for program and project  management. To select program management leading practices, we first  reviewed the Project Management Institute\u2019s The Standard for Program  Management\u2014Third Edition (2013). We identified 9 program  management leading practices based on PMI\u2019s standards related to a  program\u2019s management of scope, cost, schedule performance, and  independent review of performance. To select project management  leading practices, we first identified 12 project management leading  practices listed in DOE\u2019s Order 413.3B related to a project\u2019s management  of scope, cost, schedule performance, and independent review of  performance. We then compared these 12 project management leading  practices to PMI\u2019s A Guide to the Project Management Body of  Knowledge\u2013Fifth Edition, which includes PMI\u2019s standards for project  management, to make sure these leading practices align with PMI\u2019s standards for project management. To select these leading practices, (1)  two GAO analysts separately examined the PMI and DOE  documentation, then, (2) a GAO specialist independent of the team  producing this report reviewed the leading practices we selected. All three  GAO staff agreed on these selected leading practices. To validate our  selection of program and project management leading practices, we  shared these selected leading practices with PMI representatives and  incorporated their feedback, as appropriate. PMI representatives agreed  with the program and project management leading practices that we  selected.", "We then compared EM\u2019s 2017 cleanup policy and the 11 associated  standard operating policies and procedures developed by EM by the time  of our analysis (by May 2018) with the 9 program management and 12  project management leading practices we selected. We included these  standard operating policies and procedures in our analysis because EM  officials stated that EM intentionally wrote this policy at a high level  because EM planned to develop standard operating policies and  procedures that would establish more detailed steps to implement the  policy. We analyzed the extent to which the policy and the 11 standard  operating policies and procedures follow these leading practices. We also  interviewed EM headquarters and site officials to learn more about the  2017 cleanup policy. We used a 5-point scoring system to determine the  extent to which EM\u2019s cleanup policy follows selected program and project  management leading practices. We used the following 5-point scoring  system: \u201cfully met\u201d means that complete evidence was provided that  satisfied the leading practice; \u201csubstantially met\u201d means that evidence  was provided that satisfied a large portion of the leading practice;  \u201cpartially met\u201d means that evidence was provided that satisfied about half  of the leading practice; \u201cminimally met\u201d means that evidence was  provided that satisfied a small portion of the leading practice; and \u201cdid not  meet\u201d means that no evidence was provided that satisfied the leading practice. If the score for each leading practice was \u201cfully met\u201d or  \u201csubstantially met,\u201d we concluded that EM\u2019s cleanup policy and its  associated standard operating policies and procedures followed the  leading practice. In contrast, if the score was \u201cpartially met,\u201d \u201cminimally  met,\u201d or \u201cnot met,\u201d we concluded that EM\u2019s policy did not follow the  leading practice. To determine this score, two GAO analysts separately  examined EM\u2019s policy document and then agreed on a final score for  each of the leading practices.", "To examine how EM measures the performance of its operations  activities, we analyzed EM\u2019s use of the three measures of performance  that EM policy identified: earned value management (EVM); performance  metrics; and cleanup milestones. To evaluate EM\u2019s EVM systems, we  compared EM\u2019s use of EVM with 8 of the 10 best practices for earned  value management found in our Cost Estimating and Assessment Guide,  which draws best practices from federal cost-estimating organizations  and industry. Specifically, we reviewed the use of EVM systems in the  21 contracts EM uses to execute its operations activities and compared  this review\u2019s results with EVM best practices. To gather this information,  we submitted a data collection instrument to all 16 sites to ascertain  whether or not they follow these best practices for each contract  containing operations activities. We also requested documentation, such  as EVM system certification information or surveillance reports,  supporting their answers. We relied mainly on the sites\u2019 responses but,  when available, also reviewed the documentation we received to check  the sites\u2019 answers for accuracy and completeness.", "To determine whether information on EVM is reported to EM senior  leadership, we also reviewed (1) monthly progress reports EM sites  presented to EM headquarters management that ranged from April 2017  to April 2018 depending on the site and (2) monthly reports that EM Office  of Project Management presents to EM headquarters senior leadership;  specifically the April 2018 Cleanup Program Monthly Performance and  the EM Segment Activity Portfolio Summary, or \u201cQuad Chart,\u201d reports,  which were the most recent reports available at the time of this analysis.", "In addition, as part of our analysis, we analyzed EM headquarters\u2019 EVM  data on operations activities from October 2016 through September 2017  (the most recent data available at the time of our review) to determine  whether or not the EVM data were reliable. We checked for data  anomalies, such as missing or negative values for each of those months.  We also reviewed DOE and EM documents\u2014such as monthly progress  reports submitted by the 16 sites to EM headquarters for review or the  monthly reviews prepared by an EM headquarters office for senior  management\u2014to see what EVM data senior management used for  decision-making.", "To provide a score for our analysis, we used the following 5-point scoring  system to score the answer for each contract for each best practice: \u201cfully  met\u201d means that complete evidence was provided that satisfied the best  practice; \u201csubstantially met\u201d means that evidence was provided that  satisfied a large portion of the best practice; \u201cpartially met\u201d means that  evidence was provided that satisfied about half of the best practice;  \u201cminimally met\u201d means that evidence was provided that satisfied a small  portion of the best practice; and, \u201cdid not meet\u201d means that no evidence  was provided that satisfied the best practice. For each best practice, we  color-coded the assessment at the contract level. Contracts that fully met  or substantially met the criteria were coded green, those that partially met  the criteria were coded yellow, and those that did not or minimally meet  the criteria were coded red. We then assigned a score for each color: 1  for red, 3 for yellow, and 5 for green. We determined the overall score for  each best practice by taking the average across the 20 contracts we  reviewed. After scoring each best practice individually, we then used  these scores to develop an average score for the three EVM  characteristics: whether EM has ensured that these EVM systems are (1)  comprehensive, (2) provide reliable data, and (3) are used by EM  leadership for decision-making.", "To examine EM\u2019s use of performance metrics data, we reviewed annual  performance metrics collected by EM headquarters for every operations  activity from 2010 to 2017. We chose this period because 2010 is the  time when EM started classifying work as operations activities while 2017  was the most recent available data at the time of our analysis. We  reviewed relevant documentation, and interviewed agency officials  knowledgeable about those data, among other things. Specifically, we  interviewed DOE and EM officials at headquarters and from the five  cleanup sites (including in-person interviews at the Savannah River and  Idaho sites). We also reviewed our prior work in GAO-19-207 related to  EM\u2019s cleanup agreements and milestones.", "We conducted this performance audit from April 2017 to February 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."], "subsections": []}, {"section_title": "Appendix II: EM\u2019s Program-wide Performance Metrics Presented to Congress, as of the end of Fiscal Year 2017", "paragraphs": ["Appendix II: EM\u2019s Program-wide Performance  Metrics Presented to Congress, as of the end  of Fiscal Year 2017 The information in this table is from DOE\u2019s fiscal year 2019 budget request, which was the most  recent request presented to Congress. DOE, Department of Energy: FY 2019 Congressional Budget  Request for Environmental Management, DOE/CF-0142, Vol. 5 (Washington, D.C.: March 2018)."], "subsections": []}, {"section_title": "Appendix III: GAO Assessment of How Earned Value Management Systems Used for EM\u2019s Operations Activities Met Best Practices", "paragraphs": ["GAO assessment of individual best practice   Substantially met. Seventeen out of 20 contracts we  reviewed had a certified EVM system, of which 4 self- certified. EM officials reported that the remaining three  contracts were not certified or were not required to be  certified.", "Partially met. Thirteen out of the 20 contracts we  reviewed had conducted or planned to conduct an  integrated baseline review to ensure that the  performance measurement baseline provides reliable  cost and schedule data for managing the program and  projecting accurate estimates at completion. However,  many of these reviews were not rigorous enough to  ensure that the performance measurement baseline  captured all of the work.  Not assessed.", "Partially met. Eleven out of the 20 contracts fully met  this best practice, and contractors performed self- assessments or conducted annual reviews for 5  additional contracts. However, EM field and  headquarters officials were not performing thorough  reviews to check whether the EVM systems were in  alignment with the EIA-748-D guidelines to ensure that  the data being reported by the systems were reliable.", "Partially met. The EVM data for operations activities  contracts contained numerous, unexplained anomalies  in all the months we reviewed\u2014including missing or  negative values for some of the completed work to date.  Having anomalies in the EVM data occurring each  month can cause potential distortions resulting in  inaccurate projections of estimates at completion.   Not assessed."], "subsections": [{"section_title": "Characteristic / Score", "paragraphs": ["Does EM\u2019s use of   EVM systems follow  characteristic?", "GAO assessment of individual best practice   Minimally met. We found problems with the estimate at  completion in all of the 20 contracts we analyzed. For  example, we found instances where the estimates at  completion were either (1) less than half the original  budget, (2) higher than expected, or 3) zero when the  original budget was for hundreds of millions of dollars.  These problems indicated that the EVM systems were  not being updated in a timely manner or were not well  monitored since the estimate at completion values were  too optimistic and highly unlikely.", "Partially met. We reviewed two sources of information  on earned value management reporting to EM senior  leadership for this best practice. 1) When reviewing the  monthly reports EM sites present to EM headquarters  management, we found that none of the sites  adequately reported EVM data. 2) When reviewing the  new monthly report format that EM\u2019s Office of Project  Management presents to EM headquarters senior  leadership since October 2017, we found that EM  reported on the performance of 15 out of the 20  contracts. We found that these reports included most of  EVM indicators for all 15 contracts on which EM Office  of Project Management reported. However, this monthly  report uses unreliable EVM data, as we found in the  prior characteristic.", "Partially met. We reviewed two sources of information  on earned value management reporting to EM senior  leadership for this best practice. 1) When reviewing the  monthly reports EM sites present to EM headquarters  management, we found that they contained corrective  action plans for only 3 contracts. 2) When reviewing the  new monthly reports that EM\u2019s Office of Project  Management present to EM headquarters senior  leadership since October 2017, EM Office of Project  Management officials stated that they have only started  suggesting corrective action to EM headquarters senior  leadership since early 2018; it is too soon to tell how  EM headquarters senior leadership is using this  information to determine which contracts need the most  attention and which corrective actions management will  develop and take.", "Substantially met. EM provided evidence that 17 out of  20 contractors had a formal process in place for  updating the budget baseline. However, the extent to  which contractors followed their processes was  questionable given the problems we found with the  estimates at completion, as discussed in the prior  characteristic above."], "subsections": []}]}, {"section_title": "Appendix IV: EM\u2019s Earned Value Management Systems Used by Contracts Containing Operations Activities", "paragraphs": [], "subsections": [{"section_title": "B", "paragraphs": ["Not reviewed  Assessment for each best practice: Not met\u2014provided no evidence that satisfies any of the best  practice; Minimally met\u2014provided evidence that satisfies a small portion of the best practice; Partially  met\u2014provided evidence that satisfies about half of the best practice; Substantially met\u2014provided  evidence that satisfies a large portion of the best practice; and Met \u2013 provided complete evidence that  satisfies the entire best practice. We determined the overall score for each best practice by taking the  average across the 20 contracts we reviewed.", "We did not evaluate the following two best practices: (1) the schedule reflects the work breakdown  structure, the logical sequencing of activities, and the necessary resources and (2) EVM data are  consistent among various reporting formats. We excluded these two best practices because we  examined the use of EVM by contractors at a higher program level and did not conduct in-depth  analysis of each contractor\u2019s EVM system.", "EM uses 21 contracts for its operations activities. We reviewed the use of EVM systems in 20 of  these contracts because one contract (contract K) is a fixed price contract, which does not require the  use of EVM."], "subsections": []}]}, {"section_title": "Appendix V: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nico Sloss (Assistant Director),  Cristian Ion (Analyst in Charge), Nathan Anderson, Margot Bolon, Jenny  Chow, Jennifer Echard, Juan Garay, Cindy Gilbert, Katherine Nicole  Laubacher, Cynthia Norris, Karen Richey, Dan C. Royer, Kiki  Theodoropoulos, and David Wishard made key contributions to this  report."], "subsections": []}]}], "fastfact": ["The Cold War arms race created a buildup of nuclear waste in the United States that needs to be cleaned up. This almost-30-year-old effort will take another 70 years and cost about $500 billion more.", "Yet the Department of Energy program responsible for this effort categorizes most of its work in a way that does not adequately involve independent experts and DOE senior leadership. It also has not followed leading practices for program and project management that could help keep the cleanup on schedule and control costs.", "We made 7 recommendations to address the management challenges we found."]}
{"id": "GAO-19-116", "url": "https://www.gao.gov/products/GAO-19-116", "title": "Afghanistan Security: Some Improvements Reported in Afghan Forces' Capabilities, but Actions Needed to Enhance DOD Oversight of U.S.-Purchased Equipment", "published_date": "2018-10-15T00:00:00", "released_date": "2018-10-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Developing independently capable ANDSF is a key component of U.S. and coalition efforts to create sustainable security and stability in Afghanistan under the North Atlantic Treaty Organization (NATO)-led Resolute Support mission. The United States is the largest contributor of funding and personnel to Resolute Support, providing and maintaining ANDSF equipment, along with training, advising, and assistance to help the ANDSF effectively use and sustain the equipment in the future.", "House Report 114-537 included a provision for GAO to review the ANDSF's capability and capacity to operate and sustain U.S.-purchased weapon systems and equipment. This report addresses (1) what has been reported about ANDSF capabilities and capability gaps and (2) the extent to which DOD has information about the ANDSF's ability to operate and maintain U.S.-purchased equipment. To conduct this work, GAO analyzed DOD and NATO reports and documents, examined three critical equipment types, and interviewed DOD officials in the United States and Afghanistan.", "This is a public version of a sensitive report issued in September 2018. Information that DOD deemed sensitive has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["Since the Resolute Support mission began in 2015, the Afghan National Defense and Security Forces (ANDSF) have improved some fundamental capabilities, such as high-level operational planning, but continue to rely on U.S. and coalition support to fill several key capability gaps, according to Department of Defense (DOD) reporting. DOD has initiatives to address some ANDSF capability gaps, such as a country-wide vehicle maintenance and training effort, but DOD reports it does not expect the ANDSF to develop and sustain independent capabilities in some areas, such as logistics, for several years.", "While DOD has firsthand information on the abilities of the Afghan Air Force and Special Security Forces to operate and maintain U.S.-purchased equipment, it has little reliable information on the equipment proficiency of conventional ANDSF units. U.S. and coalition advisors are embedded at the tactical level for the Air Force and Special Security Forces, enabling DOD to directly assess those forces' abilities. However, the advisors have little direct contact with conventional ANDSF units on the front lines. As a result, DOD relies on those units' self-assessments of tactical abilities, which, according to DOD officials, can be unreliable.", "GAO's analysis of three critical equipment types illustrated the varying degrees of DOD's information (see figure above). For example, DOD provided detailed information about the Air Force's ability to operate and maintain MD-530 helicopters and the Special Security Forces' ability to operate and maintain Mobile Strike Force Vehicles; however, DOD had limited information about how conventional forces operate and maintain radios and Mobile Strike Force Vehicles. DOD's lack of reliable information on conventional forces' equipment operations and maintenance abilities adds to the uncertainty and risk in assessing the progress of DOD efforts in Afghanistan."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD develop options for collecting reliable information on conventional ANDSF units' ability to operate and maintain U.S.-purchased equipment. DOD concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Developing self-sustaining Afghan National Defense and Security Forces  (ANDSF) is a key component of U.S. and coalition efforts to counter  terrorist threats and create long-term security and stability in Afghanistan.  In January 2015, the ANDSF\u2014comprising mainly the Afghan National  Army (ANA) and the Afghan National Police (ANP)\u2014formally assumed  security responsibilities for all of Afghanistan. Since this shift, the United  States has continued to aid the ANDSF through the North Atlantic Treaty  Organization (NATO)-led mission, Resolute Support. The United States  is the largest contributor of funding and personnel to the coalition effort  through which it provides and maintains equipment for these forces, and  offers training, advising, and assistance intended to enable the ANDSF to  sustain the equipment in the future. In total, the United States has  allocated approximately $84 billion for Afghan security in the 17-year  period spanning fiscal years 2002 through 2018, according to the Special  Inspector General for Afghanistan Reconstruction (SIGAR). In August  2017, the United States announced its South Asia Strategy, renewing its  commitment to helping the ANDSF become more effective and self- sustaining. The strategy removed any timelines for the United States to  withdraw support for the ANDSF and committed approximately 3,500  additional U.S. military personnel\u2014an increase of 33 percent\u2014to bolster  the Department of Defense\u2019s (DOD) efforts in Afghanistan, according to  DOD reporting.", "House Report 114-537, accompanying the National Defense  Authorization Act for Fiscal Year 2017, included a provision for us to  review the ANDSF\u2019s capability and capacity to operate and sustain U.S.- purchased weapon systems and equipment. This report is a public  version of a sensitive report that we issued on September 20, 2018. Our  September report included three objectives, including one on the extent to  which DOD considers ANDSF input and meets their needs when  identifying equipment requirements. DOD deemed the information related  to that objective to be sensitive, requiring that it be protected from public  disclosure. Consequently, we removed that objective and a related  recommendation from this public report. This version includes information  on the other two objectives: (1) what has been reported about ANDSF  capabilities and capability gaps and (2) the extent to which DOD has  information about the ANDSF\u2019s ability to operate and maintain U.S.- purchased equipment. Although the information provided in this report is  more limited, the report uses the same methodology for the two  objectives as the sensitive report.", "To identify what has been reported about ANDSF capabilities and  capability gaps as well as the steps DOD has taken to try to address those gaps, we reviewed NATO and DOD documents and reports\u2014such  as DOD\u2019s semiannual Section 1225 reports to Congress (which we  hereafter refer to as \u201cDOD reporting\u201d)\u2014created after the start of Resolute  Support on January 1, 2015. We also reviewed DOD-commissioned  assessments of ANDSF capabilities conducted by the Center for Naval  Analyses and reporting from SIGAR and the DOD Office of Inspector  General, and interviewed Center for Naval Analyses representatives and  DOD officials, including DOD officials at the Combined Security Transition  Command\u2013Afghanistan (CSTC-A) and in the Office of the Undersecretary  of Defense for Policy (OSD-P) who helped create the DOD reporting we  reviewed.", "To determine the extent to which DOD has information about the  ANDSF\u2019s ability to operate and maintain equipment, we reviewed DOD  documents and reports and interviewed DOD officials in the United States  and Afghanistan, including DOD officials who advise the ANDSF. We also  reviewed federal internal control standards to determine what  responsibilities agencies have specifically related to information  collection. To provide illustrative examples of what information DOD has  about the ANDSF\u2019s ability to operate and maintain U.S.-purchased  equipment and what that information indicates about the ANDSF\u2019s  abilities and challenges we interviewed and analyzed written responses  from DOD officials, including DOD officials who provide procurement and  lifecycle management for some ANDSF aircraft and vehicles, about three  equipment types\u2014MD-530 helicopters, Mobile Strike Force Vehicles  (MSFV), and radios. We selected these three equipment types from a list  that we developed, for an August 2017 report, of key ANDSF equipment  the United States purchased from fiscal years 2003 through 2016. (See  app. I for more information about our objectives, scope, and  methodology.)", "The performance audit upon which this report is based was conducted  from August 2016 to September 2018 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with DOD from September 2018 to  October 2018 to prepare this public version of the original sensitive report  for public release. This public version was also prepared in accordance  with those standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "U.S. Missions in Afghanistan", "paragraphs": ["Since 2001, the United States has made a commitment to building  Afghanistan\u2019s security and governance in order to prevent the country  from once again becoming a sanctuary for terrorists. To achieve its  security objectives, the United States currently has two missions in  Afghanistan: a counterterrorism mission that it leads and the NATO-led  Resolute Support train, advise, and assist mission, which it participates in  with other coalition nations. The objective of Resolute Support, according  to DOD reporting, is to establish self-sustaining Afghan security ministries  and forces that work together to maintain security in Afghanistan. The  United States is conducting these missions within a challenging security  environment that has deteriorated since the January 2015 transition to  Afghan-led security. The United Nations reported nearly 24,000 security  incidents in Afghanistan in 2017\u2014the most ever recorded\u2014and, despite a  slight decrease in the overall number of security incidents in early 2018,  the United Nations noted significant security challenges, including a spike  in high-casualty attacks in urban areas and coordinated attacks by the  insurgency on ANDSF checkpoints.", "DOD provides both personnel and funding to support its efforts in  Afghanistan. DOD documents indicate that the United States contributes  more troops to Resolute Support than any other coalition nation. As of  May 2018, the United States was contributing 54 percent of Resolute  Support military personnel, according to DOD reporting. Of the  approximately 14,000 U.S. military personnel in Afghanistan as of June  2018, about 8,500 were assigned to Resolute Support to train, advise,  and assist the ANDSF, according to DOD reporting. For fiscal year 2018,  Congress appropriated about $4.67 billion for the Afghanistan Security  Forces Fund\u2014the primary mechanism of U.S. financial support for  manning, training, and equipping the ANDSF. Other international donors  provided about $800 million, and the Afghan government committed to  providing about $500 million, according to DOD reporting.", "Under Resolute Support and the International Security Assistance Force  mission that preceded it, CSTC-A is the DOD organization responsible for  (1) overseeing efforts to equip and train the ANA and ANP; (2) validating  requirements, including equipment requirements; (3) validating existing  supply levels; (4) submitting requests to DOD components to contract for  procurement of materiel for the ANDSF; and (5) ensuring that the Afghan  government appropriately uses and accounts for U.S. funds provided as  direct contributions from the Afghanistan Security Forces Fund. OSD-P  is responsible for developing policy on and conducting oversight of the  bilateral security relationship with Afghanistan focused on efforts to  develop the Afghan security ministries and their forces."], "subsections": []}, {"section_title": "U.S.-Purchased Equipment for the ANDSF", "paragraphs": ["In August 2017, we reported that the United States had spent almost $18  billion on equipment and transportation for the ANDSF from fiscal years  2005 through April 2017, representing the second-largest expenditure  category from the Afghanistan Security Forces Fund. In that report, we  identified six types of key equipment the United States funded for the  ANDSF in fiscal years 2003 through 2016, including approximately:", "600,000 weapons, such as rifles, machine guns, grenade launchers,  shotguns, and pistols;", "163,000 tactical and nontactical radios, such as handheld radios and", "76,000 vehicles, such as Humvees, trucks, recovery vehicles, and  mine resistant ambush protected vehicles;", "30,000 equipment items for detecting and disposing of explosives,  such as bomb disposal robots and mine detectors;", "16,000 equipment items for intelligence, surveillance, and  reconnaissance, such as unmanned surveillance drones and night  vision devices; and", "208 aircraft, such as helicopters, light attack aircraft, and cargo  airplanes."], "subsections": []}, {"section_title": "ANDSF Organization and Force Levels", "paragraphs": ["The Ministry of Defense oversees the ANA, and the Ministry of the Interior  oversees the ANP. According to DOD reporting, the authorized force level  for the ANDSF, excluding civilians, as of June 2018 was 352,000:  227,374 for the Ministry of Defense and 124,626 for the Ministry of  Interior. The ANA includes the ANA corps, Afghan Air Force, Special  Mission Wing, ANA Special Operations Command, and Ktah Khas  (counterterrorism forces). The ANP includes the Afghan Uniformed  Police, Afghan Anti-Crime Police, Afghan Border Police, Public Security  Police, Counter Narcotics Police of Afghanistan, and General Command  of Police Special Units.", "The ANA Special Mission Wing, Ktah Khas, ANA Special Operations  Command, and ANP General Command of Police Special Units are  collectively referred to as the Afghan Special Security Forces. In this  report, we refer to the Afghan Air Force and the Afghan Special Security  Forces as specialized forces, and the other components of the ANDSF as  conventional forces. According to DOD reporting, the combined  authorized force level for the specialized forces as of June 2018 was  approximately 34,500, or about 10 percent of the ANDSF\u2019s total  authorized force level of 352,000, compared with the conventional forces,  which make up about 74 percent of the total authorized force level for the  ANDSF. Figure 1 shows the ANDSF\u2019s organization."], "subsections": []}, {"section_title": "Resolute Support Advising Strategy and Goals", "paragraphs": ["U.S. and coalition advisors from Resolute Support focus on capacity  building at the Ministry of Defense, Ministry of Interior, and ANDSF  regional headquarters, according to DOD reporting. Ministerial advisors  are located at Resolute Support headquarters in Kabul. At the ministerial  level, advisors provide assistance to improve institutional capabilities,  focusing on several functional areas. Table 1 summarizes the indicators  of effectiveness that ministerial advisors are to use to measure ministerial  progress in developing functioning systems that can effectively execute  each of the functional areas.", "Regional Resolute Support advisors from seven advising centers located  throughout Afghanistan provide support to nearby ANA corps and ANP  zone headquarters personnel, according to DOD reporting. Some  advisors are embedded with their ANDSF counterparts, providing a  continuous coalition presence, while others provide less frequent support,  based on proximity to and capability of their ANDSF counterparts.  Regional advisors are to track ANDSF capability development by  assessing the progress of the ANA corps and ANP zone headquarters  based on five capability pillars (see table 2). DOD and other Resolute  Support advisors are to document the results of these assessments each  quarter in an ANDSF Assessment Report.", "According to DOD reporting, in addition to ministerial and regional  advising, two tactical-level advisory commands provide continuous  support for the ANDSF\u2019s specialized forces: Train, Advise, and Assist  Command\u2013Air (TAAC-Air) advises the Afghan Air Force down to the unit  level, and NATO Special Operations Component Command\u2013Afghanistan  (NSOCC-A) primarily provides tactical-level special operations advising  for the Afghan Special Security Forces. TAAC-Air and NSOCC-A  assess capabilities at the headquarters level based on the five capability  pillars described above in table 2, and these assessments are included in  the quarterly ANDSF Assessment Report. Figure 2 shows the levels of  advising each Resolute Support advisory command type provides for the  ANDSF conventional forces and specialized forces."], "subsections": []}, {"section_title": "ANDSF Capabilities Reportedly Continue to Improve; DOD Has Identified Several Capability Gaps and Initiated Efforts to Address Them DOD Has Reported the ANDSF Generally Continue to Improve Their Capabilities but Rely on Coalition Forces to Fill Several Critical Capability Gaps", "paragraphs": ["Since Resolute Support began, the ANDSF have improved some  capabilities related to the functional areas and capability pillars described  above, but face several capability gaps that leave them reliant on coalition  assistance, according to publicly available DOD reporting. DOD defines  capability as the ability to execute a given task. A capability gap is the  inability to execute a specified course of action, such as an ANDSF  functional area or a capability pillar (see tables 1 and 2 above). According  to DOD guidance, a gap may occur because forces lack a materiel or  non-materiel capability, lack proficiency or sufficiency in a capability, or  need to replace an existing capability solution to prevent a future gap  from occurring.", "According to DOD reporting on the Afghan security ministries, ANA corps,  and ANP zones, the ANDSF generally have improved in some capability  areas since Resolute Support began, with some components performing  better than others. For example, DOD has reported that the Afghan  ministries have improved in operational planning, strategic  communications, and coordination between the Ministry of Interior and  Ministry of Defense at the national level. In general, the ANA is more  capable than the ANP, according to DOD reporting. According to DOD  officials and SIGAR reporting, this is due, in part, to the ANA having more  coalition advisors and monitoring than the ANP. DOD officials also noted  that the Ministry of Interior, which oversees the ANP, and Afghanistan\u2019s  justice system are both underdeveloped, hindering the effectiveness of  the ANP. Corruption, understaffing, and training shortfalls have also  contributed to the ANP\u2019s underdevelopment, according to DOD and  SIGAR reporting. The Afghan Special Security Forces are the most  capable within the ANDSF and can conduct the majority of their  operations independently without coalition enablers, according to DOD  reporting. DOD and SIGAR reports have attributed the Afghan Special  Security Forces\u2019 relative proficiency to factors such as low attrition rates,  longer training, and close partnership with coalition forces. The Afghan Air  Force is becoming increasingly capable, and can independently plan for  and perform some operational tasks, such as armed overwatch and aerial  escort missions, according to DOD reporting.", "However, DOD has reported that the ANDSF generally continue to need  support in several key areas. For example, as of December 2017, DOD  reported several ministerial capability gaps, including force management;  logistics; and analyzing and integrating intelligence, surveillance, and  reconnaissance information. DOD also reported that, as of December  2017, the ANA and ANP continued to have capability gaps in several key  areas, such as weapons and equipment sustainment and integrating fire  from aerial and ground forces. The ANDSF rely on support from  contractors and coalition forces to mitigate capability gaps in these key  areas. For some capability areas, such as aircraft and vehicle  maintenance and logistics, the ANDSF is not expected to be self- sufficient until at least 2023, according to DOD reporting.", "According to DOD officials and SIGAR reporting, coalition and contractor  support helps mitigate ANDSF capability gaps in the immediate term but  may make it challenging to assess the ANDSF\u2019s capabilities and gaps  independent of such support. For example, vehicle and aircraft  maintenance contractors are responsible for sustaining specific  operational readiness rates for the equipment they service. While this  helps ensure that ANDSF personnel have working equipment to  accomplish their mission, thereby closing an immediate capability gap, it  may mask the ANDSF\u2019s underlying capabilities and potentially prolong  reliance on such support, according to DOD officials and SIGAR  reporting."], "subsections": []}, {"section_title": "DOD and the ANDSF Have Plans and Initiatives in Place to Address Some ANDSF Capability Gaps", "paragraphs": ["DOD and the ANDSF have begun implementing plans and initiatives that  aim to strengthen ANDSF capabilities. These include the following,  among others:", "ANDSF Roadmap. In 2017, the Afghan government began  implementing the ANDSF Roadmap\u2014a series of developmental  initiatives that seek to strengthen the ANDSF and increase security  and governance in Afghanistan, according to DOD reporting. The  Roadmap is structured to span 4 years, but DOD has reported that its  full implementation will likely take longer than that. According to DOD  reporting, the Roadmap aims to improve four key elements: (1)  fighting capabilities; (2) leadership development; (3) unity of command  and effort; and (4) counter-corruption efforts.", "Under the Roadmap\u2019s initiative to increase the ANDSF\u2019s fighting  capabilities, DOD and the ANDSF have begun implementing plans to  increase the size of the specialized forces. Specifically, DOD reports  that the ANDSF plans to nearly double the size of the Afghan Special  Security Forces by 2020 as an effort to bolster the ANDSF\u2019s offensive  reach and effectiveness. The Afghan Special Security Forces are to  become the ANDSF\u2019s primary offensive force, the conventional ANA  forces are to focus on consolidating gains and holding key terrain and  infrastructure, and the conventional ANP forces are to focus on  community policing efforts. In addition, to provide additional aerial fire  and airlift capabilities, the ANDSF began implementing an aviation  modernization plan in 2017. The aim is to increase personnel strength  and the size of the Afghan Air Force and Special Mission Wing fleets  by 2023.", "Enhanced vehicle maintenance efforts. To help improve the  ANDSF\u2019s vehicle maintenance abilities, DOD awarded a National  Maintenance Strategy Ground Vehicle Support contract, which,  according to DOD officials, became fully operational in December  2017. The National Maintenance Strategy Ground Vehicle Support  contract consolidated five separate vehicle maintenance and training  contracts into a single contract and contains provisions for building the  capacity of ANDSF and Afghan contractors to incrementally take  control of vehicle maintenance over a 5-year period.", "Additional U.S. military personnel. As part of the South Asia  strategy, the United States committed 3,500 additional military  personnel to increase support to its missions in Afghanistan.  According to DOD reporting, most of the additional personnel will  support the Resolute Support mission, providing more advising and  combat enabler support to the ANDSF. Additionally, in March 2018,  the United States began deploying a Security Force Assistance  Brigade\u2014a new type of unit made up of U.S. Army personnel with  expertise in training foreign militaries\u2014to Afghanistan. The Security  Force Assistance Brigade will advise conventional and specialized  forces at and below the corps and zone levels and will accompany  and support ANA conventional forces at the battalion level in ground  operations as needed, according to DOD and SIGAR reporting."], "subsections": []}]}, {"section_title": "DOD Has Some Information on ANDSF Specialized Forces\u2019 Ability to Operate and Maintain U.S.-Purchased Equipment but Has Limited Reliable Information on Its Conventional Forces", "paragraphs": [], "subsections": [{"section_title": "DOD Advisors Embedded with Specialized Forces Provide Some Information on Those Forces\u2019 Capabilities", "paragraphs": ["DOD collects some reliable information about the operation and  maintenance abilities of ANDSF specialized forces, in part because  advisors are embedded at the tactical level with the specialized forces,  according to DOD officials. Specifically, U.S. and coalition forces advise  specialized forces at the tactical level under Resolute Support because  building ANDSF aviation and special operations abilities are considered  particularly important, according to DOD reporting. DOD officials told us  that since U.S. and coalition forces are embedded at the tactical level for  specialized forces, they can monitor, assess, and report on tactical  abilities, including the ability to operate and maintain equipment.", "Our analysis of information provided by DOD about the Afghan Air  Force\u2019s ability to operate and maintain MD-530 helicopters illustrates that  DOD has some detailed information about specialized forces. TAAC-Air  advisors help train Afghan pilots and maintainers and collect information  on their tactical abilities. For example, TAAC-Air advisors track the  percentage of maintenance performed by Afghan Air Force maintainers  and aircraft operational readiness rates, according to DOD officials.  According to DOD reporting and officials, as of December 2017, the  Afghan Air Force could independently conduct MD-530 helicopter  operations for short intervals without contractor support but relied on  contractors to perform the majority of maintenance and sustainment  activities. See appendix II for more information on the Afghan Air Force\u2019s  ability to operate and maintain MD-530 helicopters."], "subsections": []}, {"section_title": "DOD Advisors Have Limited Contact with Conventional Forces in the Field, Yielding Little Information on Their Ability to Operate and Maintain Equipment", "paragraphs": ["U.S. and coalition forces perform high-level assessments of the ANDSF  conventional forces\u2019 capabilities at the corps and zone levels but do not  assess their tactical abilities, such as the ability to operate and maintain  equipment, according to DOD officials. For example, U.S. and coalition  forces assess the ANA and ANP conventional forces in quarterly ANDSF  Assessment Reports, but these reports are at the corps and zone  headquarters levels, and are not meant to provide an evaluation of the  entire ANDSF, according to DOD reporting. DOD officials stated that  other U.S.- and coalition-produced reports and assessments, such as  DOD\u2019s semiannual Section 1225 reports to Congress, semiannual  periodic mission reviews, and annual Afghanistan Plans of Record,  provide some information on the ANDSF\u2019s high-level capabilities.  However, according to DOD officials, these reports do not routinely  assess the conventional forces\u2019 ability to operate and maintain  equipment.", "According to DOD officials, DOD does not assess conventional forces\u2019  tactical abilities because advisors have had little or no direct contact with  conventional units below the corps and zone levels, and thus do not  collect such information on conventional forces. Specifically, under  Resolute Support, U.S. and coalition forces have not embedded with the  conventional forces below the corps and zone levels except in limited  circumstances.", "Since U.S. and coalition forces do not collect firsthand information on the  conventional units\u2019 tactical abilities, they rely on those units\u2019 self-reporting  for information on ANDSF abilities below the corps and zone levels,  which, according to DOD officials, may be unreliable. ANDSF reporting is  not verified by U.S. officials and can be unreliable in its consistency,  comprehensiveness, and credibility, according to DOD officials and  SIGAR. For example, the ANDSF produce a monthly tracker on vehicle  availability, maintenance backlog, repair times, and personnel  productivity, but DOD officials told us that the trackers are of questionable  accuracy.", "Our analysis of information provided by DOD about the ANDSF\u2019s ability to  operate and maintain tactical and nontactical radios illustrates the limited  amount of information DOD has on ANDSF conventional forces\u2019 tactical  abilities. Specifically, DOD officials could not say how well ANDSF  personnel on the front lines operate radios in the field and had only  limited information on the ANDSF\u2019s ability to maintain radios. For  example, the officials noted that the ANA conventional forces can perform  some unit-level radio repairs but that complex ANA radio maintenance  and all ANP radio maintenance is conducted by contractors. DOD officials  at Resolute Support headquarters told us that they provide ministerial- level advising on how to manage ANDSF radio systems and do not  provide tactical advising or inventory control for radios. See appendix III  for more information on the ANDSF\u2019s ability to operate and maintain  radios.", "Our analysis of information provided by DOD about the ANDSF\u2019s ability to  operate and maintain Mobile Strike Force Vehicles (MSFV) highlights the  limited amount of information DOD has on ANDSF conventional forces\u2019  tactical abilities compared with specialized forces. DOD officials were  able to provide operation and maintenance information for MSFVs that  had transferred to the specialized forces as of January 2018 but were  unable to provide operation and maintenance information for any other  MSFVs. The ANDSF began transferring one of the ANDSF\u2019s two MSFV  brigades from the conventional to specialized forces in August 2017,  according to DOD officials. As part of this transfer, NSOCC-A  advisors\u2014who provide tactical-level advising for the Afghan Special  Security Forces\u2014assumed oversight for the first brigade from Resolute  Support headquarters advisors. DOD officials stated that the ANDSF\u2019s  ability to operate and maintain MSFVs in this brigade prior to the transfer  was unknown, as neither Resolute Support headquarters nor the ANA  had assessed this. The operation and maintenance abilities of the second  brigade, which is still in the conventional forces, remains unknown. DOD  officials at NSOCC-A were able to provide information such as inventory  and mission capability rates for the MSFVs that had transferred, but only  for the short period of time the vehicles had been under the control of the  specialized forces. DOD officials told us that NSOCC-A plans to collect  more information on the specialized forces\u2019 ability to operate and maintain  MSFVs as they are transferred. See appendix IV for more information on  the ANDSF\u2019s ability to operate and maintain MSFVs.", "In the absence of embedded advisors at the tactical level, DOD has not  implemented alternative approaches to collect reliable information about  the conventional forces\u2019 ability to operate and maintain equipment.  Federal internal control standards state that U.S. agencies should obtain  and process reliable information to evaluate performance in achieving key  objectives and assessing risks. DOD officials acknowledged that some  of the plans described above that DOD and the ANDSF have begun  implementing to address capability gaps may provide opportunities for  DOD to collect more reliable information on the conventional forces\u2019  ability to operate and maintain U.S.-purchased equipment. For example,  the National Maintenance Strategy Ground Vehicle Support contract  requires that contractors regularly report the total work orders received,  work in progress, and completed maintenance work performed by ANDSF  personnel as well as vehicle availability rates, which may be more reliable  than the ANDSF\u2019s monthly report on vehicle availability. In addition, the  Security Force Assistance Brigade may be able to collect and report on  the tactical abilities of units they advise and accompany on missions  since they are being deployed at or below the corps and zone levels.  However, as of June 2018, DOD officials had not decided which, if any, of  these options to pursue. Without reliable information on the equipment  operation and maintenance abilities of ANDSF conventional forces, which  represent nearly 75 percent of the ANDSF, DOD may be unable to fully  evaluate the success of its train, advise, assist, and equip efforts in  Afghanistan."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The United States invested nearly $84 billion in Afghan security in the 17- year period spanning fiscal years 2002 through 2018, but DOD continues  to face challenges to developing a self-sustaining ANDSF. While DOD  has reported the ANDSF have improved in several capability areas, they  continue to face critical capability gaps, impeding their ability to maintain  security and stability in Afghanistan independent of U.S. and coalition  forces. Moreover, DOD lacks reliable information about the degree to  which conventional forces\u2014which make up about three-quarters of the  ANDSF\u2014are able to operate and maintain U.S.-purchased equipment.  This limits DOD\u2019s ability to fully evaluate the success of its train, advise,  assist, and equip efforts in Afghanistan."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Defense should develop and, as appropriate, implement  options for collecting reliable information on the ANDSF conventional  forces\u2019 ability to operate and maintain U.S.-purchased equipment.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD and State for comment. DOD  declined to provide written comments specifically on this public version of  the report, but DOD\u2019s comments on the sensitive version of this report are  reprinted in appendix V. The sensitive version of this report included two  recommendations, which DOD cited in its comments on the draft of the  sensitive report. One of those recommendations related to information  that DOD deemed to be sensitive and that must be protected from public  disclosure. Therefore, we have omitted that recommendation from DOD\u2019s  comment letter in appendix V. This omission did not have a material  effect on the substance of DOD\u2019s comments. In its comments, DOD  concurred with the recommendation we made in this version of the report  and stated it will take steps to implement it. DOD also provided technical  comments, which we incorporated as appropriate. The Department of  State had no comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretary of State. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov. If you or your staff has any questions about this  report please contact me at (202) 512-7114 or farbj@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["House Report 114-537 associated with the National Defense  Authorization Act for Fiscal Year 2017 included a provision for us to  review the Afghan National Defense and Security Forces\u2019 (ANDSF)  capability and capacity to operate and sustain U.S.-purchased weapon  systems and equipment. This report is a public version of a sensitive  report that we issued on September 20, 2018. Our September report  included three objectives, including one on the extent to which DOD  considers ANDSF input and meets their needs when identifying  equipment requirements. DOD deemed the information related to that  objective to be sensitive, which must be protected from public disclosure.  Consequently, we removed that objective and a related recommendation  from this public report. This version includes information on the other two  objectives: (1) what has been reported about ANDSF capabilities and  capability gaps and (2) the extent to which DOD has information about  the ANDSF\u2019s ability to operate and maintain U.S.-purchased equipment.  Although the information provided in this report is more limited, the report  uses the same methodology for the two objectives as the sensitive report.", "To identify what has been reported about ANDSF capabilities and  capability gaps, we reviewed North Atlantic Treaty Organization (NATO)  and DOD documents and reports, such as DOD\u2019s semiannual Section  1225 reports to Congress, produced after the start of the NATO-led  Resolute Support mission on January 1, 2015. To determine what steps  DOD and NATO have taken to try to address gaps, we reviewed reports  the Center for Naval Analyses produced for DOD, as well as DOD and  NATO documents and reports produced after January 1, 2015, and  reports from GAO, the Special Inspector General for Afghanistan  Reconstruction (SIGAR), and the DOD Inspector General. We also  interviewed Center for Naval Analyses representatives and DOD officials  in the United States and Afghanistan, including DOD officials at the  Combined Security Transition Command\u2013Afghanistan (CSTC-A) and in  the Office of the Undersecretary of Defense for Policy (OSD-P) who  helped create the DOD reporting we reviewed.", "To determine the extent to which DOD has information about the  ANDSF\u2019s ability to operate and maintain U.S.-purchased equipment, we  reviewed DOD documents and reports and interviewed DOD officials in  the United States and Afghanistan, including DOD officials who advise the ANDSF. We also reviewed federal internal control standards to  determine what responsibilities agencies have specifically related to  information collection. To provide illustrative examples of information  DOD has about the ANDSF\u2019s ability to operate and maintain U.S.- purchased equipment and what that information indicates about the  ANDSF\u2019s abilities and challenges, we interviewed and analyzed written  responses from DOD officials, including DOD officials who provide  procurement and lifecycle management for some ANDSF aircraft and  vehicles, about three equipment types\u2014MD-530 helicopters, Mobile  Strike Force Vehicles (MSFV), and radios. We selected these three  equipment types from a list that we developed, for an August 2017 report,  of key ANDSF equipment the United States purchased from fiscal years  2003 through 2016. We made our selections after reviewing DOD  documentation and interviewing DOD officials regarding a number of  considerations, such as (1) how critical the equipment is to the ANDSF\u2019s  ability to achieve its mission; (2) which ANDSF component uses the  equipment (i.e., Afghan National Police, Afghan National Army, or both);  (3) whether DOD intends to continue procuring the equipment for the  ANDSF; and (4) whether the equipment had been in use at least 5 years.", "We collected detailed information about the ANDSF\u2019s ability to operate  and maintain MD-530 helicopters, MSFVs, and radios, as well as other  key statistics DOD provided about the equipment, such as inventory,  average lifespan, average cost, role, and training. This information was  based mainly on DOD responses collected from January 2018 to  February 2018 as well as DOD documents and reports produced after  January 1, 2015. The total amount of MD-530s and radios authorized for  procurement was based on DOD data that we collected for our August  2017 report on key ANDSF equipment the United States purchased in  fiscal years 2003 through 2016, which we supplemented with additional  data DOD provided on U.S.-purchased equipment from October 1, 2016,  through December, 31, 2017.", "The performance audit upon which this report is based was conducted  from August 2016 to September 2018 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate, evidence  to provide a reasonable basis for our findings and conclusions based on  our audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with DOD from September 2018 to  October 2018 to prepare this public version of the original sensitive report  for public release. This public version was also prepared in accordance  with those standards.", "Manufacturer: MD Helicopters,  Inc.", "U.S. Program Management  Office: U.S. Army, Non-Standard  Rotary Wing Aircraft Project  Management Office  Program Advising: Train Advise  Assist Command\u2013Air (TAAC-Air)", "The United States originally procured 6 unarmed MD-530s for the AAF for  rotary wing training in 2011. In 2014, the United States purchased 12 armed  MD-530s and began retrofitting the 5 remaining trainer helicopters with  armament for operational missions to address a close air attack gap. MD- 530s were chosen to fill the gap over other aircraft, in part because they  could be delivered relatively quickly as the AAF awaited A-29 light attack  aircraft that were experiencing procurement delays, according to Department  of Defense (DOD) officials. The United States procured additional MD-530s  in 2015, 2016, and 2017 because of the aircraft\u2019s positive impact on the  battlefield, according to DOD officials (see fig. 3).", "Key Statistics   Variants: All can be armed with  .50-cal machine gun pods and/or  2.75 inch rocket pods.", "Total Authorized for  Procurement: 60 as of December  31, 2017  Inventory: 25 as of January 2018  (30 are scheduled for delivery;  attrition of 5 due to crashes and  enemy fire)", "Average Lifespan: Absent  mishaps, and with good  maintenance, there is no defined  lifespan limit for MD-530s,  according to DOD officials.", "National Army and Afghan National Police, depending on the mission, in  all but one region of Afghanistan, which is supported by other aircraft.", "MD-530s are typically tasked two at a time for missions, according to  DOD officials.", "An MD-530 crew consists of a pilot and co-pilot, according to DOD.", "Average cost: $6.3 million per  aircraft, including all electronic  devices, weapons management  systems, and weapons (excluding  ordnance), according to DOD  officials. o  Division of labor is based on the individual crew members'  capabilities, with one pilot handling navigation and communication  while the other identifies targets and operates the weapon systems.", "Army pilot advisors at Kandahar Air Field, according to DOD officials.  o  MD-530 pilot training takes about 3 years (see fig. 4)."], "subsections": [{"section_title": "GAO Comments", "paragraphs": ["1. The GAO report number cited in DOD\u2019s letter refers to a draft of the  sensitive version of this report, which we issued on September 20, 2018.  Prior to issuing that version, we changed its report number to GAO-18- 662SU to reflect its sensitive nature. That version of this report included  two recommendations. The second recommendation has been omitted  from DOD\u2019s letter in this public version because it was related to  information that DOD deemed to be sensitive."], "subsections": []}]}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Joyee Dasgupta (Assistant  Director), Kara Marshall, Katherine Forsyth, and Bridgette Savino made  key contributions to this report. The team also benefitted from the expert  advice and assistance of David Dayton, Neil Doherty, Justin Fisher,  Ashley Alley, Cary Russell, Marie Mak, James Reynolds, Sally  Williamson, Ji Byun, and J. Kristopher Keener."], "subsections": []}]}], "fastfact": ["The United States has invested about $84 billion since 2002 to help create long-term security in Afghanistan\u2014including providing and maintaining equipment for the Afghan defense and security forces.", "We reviewed the capacity of these forces to operate and sustain U.S.-purchased weapon systems and equipment. We found that DOD lacks reliable information on how well most Afghan forces operate and maintain this equipment because it has little direct contact with the front-line units that make up about three-quarters of the Afghan forces.", "We recommended DOD develop options to collect more reliable information about this equipment."]}
{"id": "GAO-19-173", "url": "https://www.gao.gov/products/GAO-19-173", "title": "Weapon System Sustainment: DOD Needs to Better Capture and Report Software Sustainment Costs", "published_date": "2019-02-25T00:00:00", "released_date": "2019-02-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Software is integral to the operation and functionality of DOD equipment, platforms, and weapon systems, including tactical and combat vehicles, aircraft, ships, submarines, and strategic missiles. DOD estimates that software sustainment funding will total at least $15 billion over the next 5 fiscal years. DOD carries out software sustainment at various locations, where DOD uses its maintenance capabilities to maintain, overhaul, and repair its military weapon systems.", "GAO was asked to review several issues relating to the sustainment of operational system software for DOD weapon systems. This report examines, among other things, the extent to which (1) DOD has policies and organizations in place to manage the sustainment of operational system software for weapon systems; and (2) DOD and the military departments track costs to sustain weapon system software. GAO reviewed DOD policies and procedures and interviewed cognizant officials from select DOD software centers, among others, who perform weapon system software sustainment activities."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has policies and organizations to manage the sustainment of operational system software. DOD policy defines software sustainment and software maintenance activities synonymously, to comprise any activities or actions that change the software baseline, as well as modifications or upgrades that add capability or functionality. One example of such an action is the Air Force's modifying the security software on the B-52 bomber to better protect against attempted system penetration. The figure below defines the four categories of software sustainment actions.", "DOD policies on life-cycle management of weapon systems address software sustainment, and several DOD organizations\u2014including DOD software centers\u2014play key roles in overseeing and managing software sustainment. DOD policy includes software maintenance as part of core logistics, and it requires the military departments to report biennially to Congress on their estimated workloads to sustain core logistics capabilities, including estimated costs of these workloads. However, while the Army and Air Force categorize and report software sustainment as part of core logistics, the Navy does not. Without the Navy's categorizing and reporting its software sustainment costs, DOD and Congress are not fully informed of the magnitude and cost of core software sustainment capability requirements. This impedes DOD's efforts to plan for a ready and controlled source of technical competence, and to budget resources in peacetime while preserving necessary surge capabilities.", "DOD's ability to track weapon system software sustainment costs is impeded by limitations in its collection of software cost data. First, GAO found that the Office of Cost Assessment and Program Evaluation's (CAPE) Cost and Software Data Reporting system did not collect weapon system cost data from DOD software centers. Recognizing this, CAPE directed in January 2017 that cost and software data efforts on major acquisition programs should begin to be collected from government organizations, including DOD software centers. However, CAPE acknowledges that it lacks an implementation plan to execute and monitor the requirement for these centers to submit cost and software data. Second, GAO also found that the military departments' operating and support cost systems have incomplete software sustainment cost data. DOD policy requires the military departments to collect and maintain actual operating and support costs, including software sustainment costs. Without CAPE's taking steps to prioritize obtaining complete information on operating and support costs for software sustainment, CAPE is challenged in its ability to accurately compile total program costs or provide reliable life-cycle cost estimates to DOD and Congress."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that (1) the Navy categorize and report its software sustainment costs in accordance with DOD policy; and (2) CAPE improve the collection of weapon system software cost data. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Software is integral to the operation and functionality of Department of  Defense (DOD) equipment, platforms, and weapon systems. It has  become essential to the capabilities and operations of a vast range of  military systems, including tactical and combat vehicles, aircraft, ships,  submarines, and strategic missiles. Many weapon systems cannot  operate if the software fails to function as required. For instance, errors  among thousands to millions of lines of code can result in a mission- critical failure. To keep software on weapon systems functioning properly,  DOD maintains and upgrades it throughout the systems\u2019 life-cycles. DOD  defines software maintenance and software sustainment synonymously,  to comprise any activities or actions that change the software baseline of  a weapon system, as well as modifications or upgrades that add  capability or functionality. This includes requirements development,  architecture and design, and integration and testing. Typically, the  modification and upgrade activities are performed by teams of  government workers, contractor workers, or both. DOD\u2019s Future Years  Defense Program estimates that software sustainment funding will reach  at least $15 billion in total over the next 5 fiscal years.", "The DOD Office of Inspector General identified, for fiscal year 2018,  several major management challenges. One such challenge is that the  Defense Acquisition System often focuses on near-term costs, schedule, and performance trade-offs to the detriment of long-term costs, even  though more than 70 percent of the life-cycle costs of a weapon system  are incurred in the system\u2019s operating and support phase. However,  long-term forecasting of sustainment costs can be difficult.", "Our prior work on software sustainment, which dates back nearly four  decades, has shown persistent challenges related to the management,  cost reporting, and technical data rights of software, among other issues.  More recently, our work on the F-35 Joint Strike Fighter program has  identified challenges with software development, long-term sustainment  funding, and technical data rights. For example, in 2014 we found that  delays in developmental flight testing of the F-35\u2019s critical software could  hinder delivery of the warfighting capabilities the military services expect,  and that these delays were due largely to delays in software delivery,  limited capability in the software when delivered, and the need to fix  problems and retest multiple software versions. As we recommended,  DOD conducted an assessment of the specific capabilities that can be  delivered and of those that will likely not be delivered to each of the  services by their established initial operational capability dates.", "You asked us to review several issues relating to the sustainment of  operational system software for DOD weapon systems. This report  examines the extent to which (1) DOD has policies and organizations in  place to manage the sustainment of operational system software for  weapon systems; (2) DOD and the military departments track costs to  sustain weapon system software; and (3) DOD has addressed challenges  securing necessary data rights to sustain weapon system software. Our  scope included software sustainment of operational weapon systems.", "For objective one, we reviewed DOD policy and organizations in place to  manage the sustainment of operational system software. This included  DOD Instruction 5000.02, Operation of the Defense Acquisition System,  which establishes acquisition and life-cycle sustainment policies; and  DOD depot maintenance policy, which outlines requirements for DOD  materiel maintenance, core requirements, and core sustaining  workloads. We also interviewed officials from the Office of the Secretary  of Defense (OSD) and the military departments regarding the  department\u2019s guidance and the processes used to collect the data for  DOD\u2019s Biennial Core Report. As in our previous reviews of DOD\u2019s  biennial core reports, we did not assess the reliability of the underlying  data provided by the military services for the 2018 DOD Biennial Core  Report. However, we determined that the data were sufficiently reliable  for the purpose of determining whether the military services had reported  costs of workloads in 2012\u20142018.", "We conducted interviews using a semi-structured questionnaire with  officials at 11 of 20 DOD depot-level software sustainment activities, also  known as DOD software centers, to gain an understanding of how they  sustain weapon system software. Although this sample is not  generalizable to the population of DOD depot-level software centers, the  use of a random sample of software centers helped mitigate any potential  selection bias, and the interviews provided valuable information on those sites selected. The officials we interviewed at DOD software centers  included a variety of engineers and others who perform software  sustainment activities for weapon system software, including software on  air and sea platforms, targeting system software, and communications  systems, among others. We interviewed these officials to gain an  understanding of policies and procedures they follow to guide their  software sustainment activities, how they are organized, and the activities  they undertake to sustain the software.", "For objective two, we reviewed DOD policy and military department  guidance regarding software sustainment cost-reporting requirements,  including DOD Manual 5000.04, Cost and Software Data Reporting  (CSDR) Manual, and applicable financial management regulations. We  reviewed the Office of Cost Assessment and Program Evaluation (CAPE)  reports to Congress for fiscal years 2016 and 2017 to learn about  initiatives that CAPE is taking to improve software cost data reporting. We  interviewed officials at select DOD software centers, including officials  responsible for weapon system software on several DOD weapon  systems, to gain an understanding of how they track cost data. We also  interviewed officials from the Office of the Secretary of Defense (OSD),  including officials from CAPE, and officials from the three cost analysis  agencies responsible for collecting operating and support costs for the  military departments\u2019 Visibility and Management of Operating and Support  Costs (VAMOSC) data collection systems.", "For objective three, we reviewed statutory requirements relating to DOD  intellectual property and technical data rights to sustain software. We  also reviewed the Defense Federal Acquisition Regulation Supplement  (DFARS) pertaining to technical data rights. We reviewed DOD policy  and guidance, including the Defense Acquisition Guidebook. We interviewed officials from OSD, including officials from the Office of  General Counsel, military department headquarters, and DOD software  centers to gain an understanding of the necessary technical rights to  sustain weapon system software, the reasons that technical data rights  are needed, and challenges faced by the department. We analyzed select  weapon systems for which DOD had complete data rights, as well as  weapon systems for which DOD had partial or incomplete data rights, and  the actions DOD took for sustainment, such as public-private  partnerships. Finally, we reviewed statutory provisions in the fiscal years  2016 and 2018 National Defense Authorization Acts, which directed the  Secretary of Defense to commission studies related to DOD intellectual  property and establish a cadre of intellectual property experts, and we  interviewed OSD officials to understand DOD\u2019s status on the provisions.  Further details on our objectives, scope, and methodology are presented  in appendix I.", "We conducted this performance audit from June 2017 to February 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of Software Sustainment Activities", "paragraphs": ["DOD defines software maintenance and software sustainment  synonymously, to comprise any activities or actions that change the  software baseline, as well as modifications or upgrades that add  capability or functionality. For example, software sustainment activities  involve the correction of software errors after the software is released and  adaptations to enable interfacing with changing environments. The four  categories of software sustainment actions are defined in figure 1 below.", "A software sustainment activity can be categorized in multiple areas. For  example, an Army command is modifying software to incorporate  Windows 10. This action may be described as corrective in that it  addresses errors in previous versions of Windows; perfective in that it  upgrades the software to support new capabilities and functionality  provided by Windows 10; adaptive in that it can accommodate changes to  firmware and hardware environments; and preventive in that it improves  reliability.", "Sustaining software is normally different from sustaining hardware. For  example, when hardware breaks, technicians can remove the broken  part\u2014such as tread on a tracked vehicle\u2014 and install a working part. In  contrast, sustaining software typically requires writing, testing, and  deploying lines of code. Software provides critical functionality to nearly  every hardware system that DOD uses: surface (for example, mobile  network systems); air (for example, secure communications arrays in  aircraft); sea (for example, submarine guidance systems); missile (for  example, targeting systems); ordnance (for example, Common Remotely  Operated Weapon Station); and space (for example, positioning  software), as shown in figure 2.", "Further, a weapon system may comprise numerous software systems,  each supporting different components of the system. Hundreds, or even  thousands, of software systems can be embedded in a single weapon  system. Interoperability and integration within the weapon system as a  whole constitute key software considerations for the overall weapon  system\u2019s sustainability. For example, the military departments include  system-of-systems and family-of-systems considerations. These  considerations are defined as a set or arrangement of systems that  results when independent systems are integrated within a larger system  that delivers unique capabilities. Missions are performed by a system-of- systems arrangement of the platforms and systems that deliver the  mission capability."], "subsections": []}, {"section_title": "Weapon System Software and the Acquisition Life- Cycle", "paragraphs": ["Decisions affecting the software on a weapon system are made  throughout the acquisition life-cycle. The life-cycle is outlined in DOD  Instruction 5000.02, Operation of the Defense Acquisition System. This  instruction includes four basic and two hybrid models that serve as  examples of defense program structures. The hybrid models combine  models, such as a weapon system development that includes significant  software development. The instruction also includes phases and  milestones to oversee and manage acquisition programs, including major  weapon systems. It outlines considerations affecting software  sustainment for each milestone, including, for example, the following:", "Milestone A: The understanding of the technical, cost, and schedule  risks of acquiring the materiel solution; the determination of core  requirements; and the development of an intellectual property  strategy, to include technical data and computer software  deliverables. For example, for incrementally deployed software- intensive programs, the preliminary scope of limited deployment is  determined for evaluation prior to a full deployment decision for each  capability increment.", "Milestone B: A standard series of design reviews performed prior to  converging on a final design for production. For example, for a hybrid  acquisition program such as the combination of a major weapon  system\u2019s basic structural hardware development with a simultaneous  software-intensive development, criteria establishing maturity for the  development of software functional capability are to be identified.", "Milestone C: The point at which a program or increment of capability  is reviewed for entrance into the production and deployment phase or  for limited deployment. For example, a general criterion applied during  review would be to have a mature software capability consistent with  the software development schedule.", "Figure 3 depicts the milestones and decision points that inform a typical  acquisition program.", "Decisions affecting the software of a weapon system are made  throughout the acquisition life- cycle and involve stakeholders across a  number of domains. For example, DOD officials are involved in software  development, architecture and design, engineering, coding, integration  and testing, cost estimation and collection, and intellectual property. Many  decisions affecting software sustainment, such as software data rights  decisions, typically occur in one of the phases prior to operations and  support. Decisions made in the early phases may have long-term effects  on a weapon system\u2019s sustainability, especially for systems that endure  beyond their originally intended design life. Software sustainment  decisions are often revisited during the operations and support phase, as  hardware breaks or needs to be replaced, a new capability or requirement  is added, or a modification is made due to feedback received after a  weapon system is fielded."], "subsections": []}, {"section_title": "Software Sustainment as Part of Depot Maintenance, Core Requirements, and Core Sustaining Workloads", "paragraphs": ["DOD conducts software sustainment at a variety of depot-level  maintenance locations. DOD and military policy refer to these locations  variously as DOD depot-level software sustainment activities, Software  Engineering Centers, Software Support Activities, and Life-Cycle  Software Engineering Centers. For purposes of this report, we will refer to  these facilities as DOD software centers.", "Section 2460 of title 10 of the United States Code defines depot-level  maintenance and repair. This term includes all aspects of software  maintenance classified by DOD as of July 1, 1995, as depot-level  maintenance and repair\u2014regardless of the source of funds for the  maintenance or repair, or of the location at which the maintenance or  repair is performed. DOD maintains many weapon systems (such as  aircraft and ships) and equipment (such as radar) at the depot level  because the systems are too complex to maintain exclusively at the unit,  or organizational, level.", "Section 2464 of title10 of the United States Code requires DOD to  maintain a core depot-level maintenance and repair capability that is  government-owned and -operated. Maintaining this capability provides a  ready and controlled source of technical competence and resources to  enable effective and timely response to mobilizations, contingencies, or  other emergencies. Additionally, DOD must assign these government- owned and -operated facilities (the depots) sufficient workload to ensure  cost efficiency and technical competence during peacetime, while  preserving the surge capacity and reconstitution capabilities necessary to  fully support the strategic and contingency plans prepared by the  Chairman of the Joint Chiefs of Staff."], "subsections": []}, {"section_title": "Data Rights in DOD", "paragraphs": ["The term \u201cdata rights\u201d in the DOD context typically refers to the license  rights that the department acquires in two types of deliverables: technical  data and computer software. These rights are addressed in law, in the  Defense Federal Acquisition Regulation Supplement (DFARS), and in  DOD guidance. These data rights are defined as follows:", "Technical data: recorded information, regardless of the form or  method of recording, of a scientific or technical nature (including  computer software documentation).", "Computer software: computer programs, source code, source code  listings, object code listings, design details, algorithms, processes,  flow charts, and related material that would enable the software to be  reproduced, recreated, or recompiled.", "Computer software documentation: owner\u2019s manuals, user\u2019s manuals,  installation instructions, operating instructions, and other similar items,  regardless of how this documentation is stored, that will explain the  capabilities of the computer software or provide instructions for using  the software."], "subsections": []}]}, {"section_title": "DOD Has Policies and Organizations within Weapon System Management and Depot Maintenance to Manage Operational System Software Sustainment", "paragraphs": ["DOD has policies and organizations in place within weapon system  management and depot maintenance to manage the sustainment of  operational system software. We found that DOD has policies for  managing the life-cycle of weapon systems, including sustainment; and  that DOD policy on depot maintenance and cost also considers weapon  system software issues. Several organizations, including the Under  Secretary of Defense for Acquisition and Sustainment and DOD software  centers, play key roles in overseeing and managing software  sustainment. Software sustainment activities are conducted at numerous  facilities, including military department software centers, weapon system  program management offices, government laboratories or software  integration laboratories, and contractor facilities. Additionally, while DOD  has defined software sustainment and software maintenance activities  synonymously, and it defines these functions as part of depot  maintenance, we determined that the Navy categorizes and reports  software sustainment differently."], "subsections": [{"section_title": "DOD Has Policies for Life- Cycle Management of Major Weapon Systems That Include Considerations for Software Sustainment", "paragraphs": ["DOD has published a directive and an instruction to guide the military  departments in life-cycle management of major weapon systems,  including considerations relating to software and weapon system  sustainability. First, DOD\u2019s acquisition publications provide DOD-wide  policy and assign responsibilities to OSD and the military departments for  executing weapon system development, production, and sustainment. For  example, weapon system software considerations, including cost and  access to technical data (for example, product specifications) and  computer software (for example, source code), are to be included in  required documentation, such as the Life-Cycle Sustainment Plan and the  Systems Engineering Plan. Regulatory and reporting requirements differ depending on a system\u2019s cost and acquisition category. These policies  are in accordance with statute directing the Secretary of Defense to issue  and maintain comprehensive guidance on life-cycle management.", "Second, DOD includes weapon system software considerations in its  instruction regarding depot maintenance core capabilities. DOD-wide  policy assigns responsibilities to OSD and the military departments for the  performance of DOD core depot-level maintenance, including software.  DOD policy states that maintenance tasks are performed to restore safety  and reliability when deterioration has occurred. These tasks help to  ensure military readiness, including mobilization and surge capabilities, to  support national defense strategic and contingency requirements.  Additionally, DOD policy states that, for inherently governmental and core  capability requirements, maintenance programs are to use organic\u2014or  DOD personnel, rather than contractors\u2014in accordance with the law.  These DOD policies accord with the statute directing the Secretary of  Defense to maintain a core depot-level maintenance and repair capability  to ensure technical competence in peacetime while preserving the surge  capacity necessary to fully support strategic and contingency needs.", "Third, DOD includes weapon system software considerations in its cost  policy and manuals. These policies assign responsibilities for estimation  of costs and collection of costs (including operations and support costs).  They also prescribe cost data reporting and software resource data  reporting requirements."], "subsections": []}, {"section_title": "Several DOD Organizations Play Roles in Weapon System Software Sustainment Policy", "paragraphs": ["Several DOD organizations establish policies and procedures for weapon  system software sustainment. First, the Under Secretary of Defense for  Research and Engineering and the Under Secretary of Defense for  Acquisition and Sustainment play key roles in the establishment and  maintenance of policy and procedures for software sustainment. For  example:", "Research and Engineering: This office establishes policy and  oversees research, system engineering, and developmental test  processes, especially during formative stages of programs. It also  supports the Joint Federated Assurance Center, a cross-DOD working  group with a mission to develop, maintain, and offer software and  hardware vulnerability detection, analysis, and remediation  capabilities.", "Acquisition and Sustainment: This office establishes policy and  manages acquisition and sustainment of major weapon systems. In  April 2018 the Under Secretary appointed the first special assistant for  software acquisition to advise and assist in addressing software  challenges. According to officials, the special assistant will, among  other responsibilities, oversee the development of software  development policies and standards across DOD practices, and will  advise leadership on best practices in software sustainment and data  rights issues.", "Second, the Deputy Assistant Secretary of Defense for Materiel  Readiness, under the Assistant Secretary of Defense (Sustainment),  establishes policy for and manages DOD depot-level maintenance,  including software sustainment. Third, the Office of Cost Assessment and  Program Evaluation analyzes resource allocation and cost estimation,  and provides independent analytic advice on, among other things, the  cost-effectiveness of defense systems. Figure 4 highlights select  organizations that establish and maintain software sustainment policy and  procedures."], "subsections": []}, {"section_title": "Software Sustainment Activities Are Conducted at DOD Software Centers or Contractor Facilities", "paragraphs": ["Software sustainment is conducted either at DOD software centers\u2014 which include military department software centers, weapon system  program management offices, government laboratories, and software  integration laboratories\u2014or at contractor facilities. The specifics of how  the software sustainment is conducted vary by weapon system, in  accordance with what the program manager negotiates with the DOD  software center or contractor. At DOD software centers, software is  developed, tested, and distributed by government staff, contractor staff, or  both to maintain operational capability, correct faults, improve  performance, and adapt the software to environmental changes. Activities  range from small fixes for software errors to large releases that provide  weapon systems with new capabilities or address cybersecurity  vulnerabilities.", "The DOD software centers sustain a range of different systems. For  example,", "U.S. Army Communications and Electronic Command\u2019s Software  Engineering Center sustains software for Army communications  systems; and the U. S. Army Aviation and Missile Research  Development and Engineering Center sustains software for missiles,  space, and aviation;", "The Oklahoma City Air Logistics Complex\u2019s 76th Software  Maintenance Group at Tinker Air Force Base provides DOD with  capabilities in operational flight programs, mission planning systems,  space systems, ground-based radar, weapons support, mission  support, jet engine test, training and simulation systems, and  diagnostics and repair; and", "Space and Naval Warfare Systems Center Pacific supports and  maintains Naval systems in the areas of command and control,  communications, computers, and intelligence, surveillance, and  reconnaissance, as well as cyber and space.", "This work is necessary to maintain and upgrade weapon system software  and to meet immediate military operational needs. During our review,  officials at DOD software centers provided additional examples of  software sustainment activities they conduct on a wide variety of weapon  systems. Appendix II provides these additional examples."], "subsections": []}, {"section_title": "DOD Includes Software Sustainment as Part of Depot Maintenance and the Core Logistics Capabilities Determination Process, but Navy\u2019s Approach Differs", "paragraphs": ["DOD has defined software sustainment and software maintenance  activities synonymously, and it defines these functions as part of depot  maintenance and the core logistics process. The Departments of the  Army and the Air Force categorize and report software sustainment as  part of depot maintenance and the core logistics process. Specifically, the  Army and the Air Force have policies that categorize and report software  sustainment as part of their core logistics requirements, in accordance  with DOD instruction.", "Contrary to DOD policy, the Department of the Navy does not categorize  and report software sustainment as part of depot maintenance  Specifically, Navy officials said that the Navy views software sustainment  as an engineering function, not a depot maintenance function. They said  that Navy policy reflects the Navy\u2019s view of software sustainment as a  continuous engineering process that occurs throughout a weapon  system\u2019s life-cycle, rather than a discrete set of activities categorized as  depot maintenance.", "These officials stated that while the Navy believes software sustainment  to be critical to maintaining its weapon systems, it also believes that  managing software sustainment as part of depot maintenance is not the  most effective approach for the Navy. In particular, Navy officials  expressed several concerns about how reporting and categorizing  software sustainment as part of depot maintenance could affect their  activities. For example, Navy officials noted that this shift would require  software engineering to be reported as depot maintenance, which in turn  would require the Navy to carry out a greater portion of the work at Navy  depots using DOD\u2019s workforce. Navy officials stated that, in their opinion,  the Navy does not have the capacity to conduct this level of effort with the  current DOD workforce within the Navy depot structure, and that the  Navy\u2019s ability to develop adequate capacity in its DOD software  engineering workforce in the future is uncertain. They also stated that  shifting this capacity away from private industry to the DOD software  engineering workforce could create instability in the management of  current and future Navy programs, and would be inconsistent with the  Navy\u2019s efforts to broaden private-sector software engineering capability  and capacity.", "We also found that the Department of the Navy does not categorize and  report software sustainment as part of its core logistics requirements, in  accordance with DOD policy. DOD Instruction 4151.20, Depot  Maintenance Core Capabilities Determination Process, assigns  responsibilities and prescribes procedures to identify required core  capabilities for depot maintenance and the associated workloads needed  to sustain those capabilities. It is DOD policy that the core capability  requirements determination process underpins the establishment and  retention of a broad set of public-sector depot maintenance capabilities  necessary for DOD, and that the required core capabilities and depot  maintenance workloads necessary to sustain those capabilities will be  calculated by military services and then aggregated to determine the  overall DOD core requirements. As such, DOD requires the military  services to use a computational methodology to identify their essential  core capability requirements and their planned workload to support this  core maintenance capability.", "The Navy\u2019s differing approach to categorizing and reporting software  sustainment has created challenges for DOD-wide reporting on core  logistics capabilities. DOD is required by law to submit a Biennial Core  Report to Congress that identifies core logistics capabilities\u2014and DOD  has included software sustainment\u2014at depots, and the workload required  to maintain those capabilities. The Army and the Air Force included  direct labor hours and estimated sustainment costs for DOD depot-level  software sustainment in the 2018 DOD Biennial Core Report. However,  while the Navy conducted software sustainment activities, it did not  consider these activities to be part of depot maintenance or a core  logistics capability, as previously discussed. As a result, the Navy  reported no direct labor hours or estimated cost of sustaining its software  workload for inclusion in the 2018 DOD Biennial Core Report, as shown  in table 1. OSD accepted the Navy\u2019s core report submission for the 2018  DOD Biennial Core Report.", "The Department of the Navy\u2019s position that software sustainment is not  part of depot maintenance is contrary to DOD Instruction 4151.20, which  specifically includes software sustainment as part of depot maintenance.  Without the Department of the Navy\u2019s categorizing and reporting of its  software sustainment costs, in accordance with DOD policy on the Depot  Maintenance Core Capabilities Determination Process, DOD and Congress are not fully informed of the magnitude and cost of core  software sustainment capability requirements for the Navy. Accordingly,  DOD is impeded in its efforts to plan for a ready and controlled source of  technical competence, and to budget resources in peacetime while  preserving the surge capabilities necessary to fully support strategic and  contingency needs."], "subsections": []}]}, {"section_title": "Limitations in DOD\u2019s and the Military Departments\u2019 Data Reporting Impede DOD\u2019s Tracking of Weapon System Software Sustainment Costs", "paragraphs": ["DOD\u2019s ability to track weapon system software sustainment costs is  impeded by limitations in the collection of software data by both the Office  of Cost Assessment and Program Evaluation and the military  departments. CAPE oversees the primary cost data collection systems:  the Cost and Software Data Reporting system and the military  departments\u2019 Visibility and Management of Operating and Support Costs  system. Further, CAPE has limitations in its cost and software data  reporting system for data collected from DOD software centers. We also  found that the military departments collect incomplete data on software  sustainment costs in their VAMOSC systems."], "subsections": [{"section_title": "CAPE Has Limitations in Its Cost and Software Data Reporting System", "paragraphs": ["CAPE collects software sustainment cost data from contractors on certain  major weapon systems through its CSDR system. According to CAPE\u2019s  CSDR manual, this system serves as the primary repository of contractor  costs for use in most DOD resource analysis efforts, including cost  database development, applied cost-estimating, cost research, program  reviews, analysis of alternatives, and life-cycle cost estimates. Data from  the two principal components of the CSDR system\u2013contractor cost data  reporting and software resources data reporting systems\u2014can be used in  managing software sustainment costs. Data in the CSDR system may  also be used to prepare acquisition and life-cycle cost estimates for  weapon system milestone reviews, as well as to estimate and project  software sustainment costs.", "We identified limitations, however, in CAPE\u2019s CSDR system. First, the  system has historically not collected information from contractors for weapon system acquisition programs whose spending levels did not  reach the major defense acquisition program threshold. Although  collecting this information was not a requirement in the past, in 2016  Congress directed DOD to begin to collect additional information  necessary to facilitate cost estimation and comparison across acquisition  programs, including costs from programs with eventual total expenditures  greater than $100 million. In February 2018, as part of its overall efforts to  make data collection more robust, CAPE issued a memo stating that the  Army, Navy, and Air Force proposed pilot programs to collect contractor  cost data from 26 weapon system programs whose spending levels were  below the major defense acquisition program threshold. CAPE plans to  use the results of these pilot programs to inform future efforts to improve  information-gathering on, and visibility into, the actual expenditures for  lower-dollar programs. Additionally, CAPE plans to update its cost- collection policies and manual, if necessary, upon completion of the pilot  programs. Because the department is in the midst of these pilot programs  and has outlined next steps to be taken upon their completion, we are not  making a recommendation about this matter at this time.", "Second, CAPE\u2019s CSDR system does not collect any weapon system cost  or software data from DOD software centers. Prior to 2017, CAPE  required only contractors\u2014and not DOD software centers\u2014supporting  major defense acquisition programs to report software sustainment costs  into the CSDR system. However, in January 2017 CAPE recognized that  the lack of cost and software data from government-executed elements of  acquisition and sustainment programs was impeding accurate compilation  of total program costs. Accordingly, it issued a memorandum to the  military departments directing that cost and software data efforts on major  defense acquisition programs should also be collected and submitted into  the CSDR system by government-performed efforts, which include DOD  software centers. Also, the Standards for Internal Control in the Federal  Government states that management should use quality information to  achieve an entity\u2019s objectives, and that management should obtain data  from reliable internal and external sources in a timely manner based on  the identified information requirements for effective monitoring.", "According to a CAPE official, as of September 2018, CAPE had not  received any inputs into the CSDR system for DOD-performed software  sustainment efforts. CAPE officials told us that compliance with this  requirement in the memorandum has been very low, and they attributed  this to the absence of an implementation plan. The official said that CAPE  is currently in the early stages of evaluating cost data systems\u2014that is,  CSDR and the military departments\u2019 VAMOSC systems\u2014to determine  which is the more effective for use in collecting and submitting cost and  software data from DOD software centers. The official acknowledged that  after completing this evaluation of the systems, CAPE will develop an  implementation plan. However, CAPE is still in the early stages of  completing its evaluation. Having a robust implementation plan with time  frames for key milestones will be important to executing and monitoring  CAPE\u2019s actions to improve the reporting of software sustainment costs.  Without cost and software data from the DOD software centers, CAPE is  challenged in its ability to accurately compile total program costs for  program managers, cost estimators, and Congress, among other  information recipients."], "subsections": []}, {"section_title": "Military Departments Collect Incomplete Software Sustainment Costs in Operating and Support Cost Systems", "paragraphs": ["According to the CAPE cost estimating guide, the software  sustainment element excludes the costs of new development or major redesigns that  provide new capabilities. However, if the costs of new development or major redesigns  that provide new capabilities cannot be isolated, these costs will be considered as part of  software sustainment and should be so noted in the estimate documentation. defines cost elements that cover the range of weapon system operating  and support costs, including software sustainment. CAPE\u2019s cost guide  defines the software sustainment cost element as the labor, material, and  overhead costs incurred after deployment to maintain, modify, and  integrate software.", "According to the CAPE cost estimating guide, the software sustainment element  excludes the costs of new development or major redesigns that provide new capabilities.  However, if the costs of new development or major redesigns that provide new capabilities  cannot be isolated, these costs will be considered as part of software sustainment and  should be so noted in the estimate documentation. major commands. Therefore, in order to include software sustainment  costs for all shipboard systems in the VAMOSC system, Navy officials  must manually collect these cost data. This official explained that  since the Navy collects these costs manually, officials focus their  efforts on the most expensive and most populous shipboard systems.  According to the official, they intend to address the Navy VAMOSC  system\u2019s incomplete software sustainment data issue by expanding  their manual data collection efforts to include additional Navy  systems.", "According to DOD policy, CAPE\u2019s executive oversight responsibilities  include annually reviewing the services\u2019 VAMOSC systems to address  data accessibility, completeness, timeliness, accuracy, and compliance  with CAPE guidance. CAPE formed a VAMOSC task force in  partnership with the service cost-analysis agencies and the Product  Support Division in the office of the Assistant Secretary of Defense for  Sustainment. The task force is aware of gaps in the military departments\u2019  reporting of software sustainment costs within their VAMOSC systems,  particularly within the Army and the Navy, and it has included data  completeness in the scope of its efforts. However, closing data gaps is  not one of the specific purposes of the task force; these purposes include  (1) discussing integration of operating and support cost collection across  the department and (2) clearly defining the technical differences across  the military services\u2019 VAMOSC systems.", "The task force is concerned with multiple cost-reporting issues. We  recognize that the task force can enable DOD to improve the  completeness of its software sustainment cost reporting. Further,  systematic and institutionalized cost data collection by each military  department is important to support credible cost estimates of current and  future programs. However, without CAPE taking steps to prioritize  obtaining complete information on operating and support costs for  software sustainment, it cannot provide reliable life-cycle cost estimates  to DOD acquisition or maintenance officials\u2014or Congress\u2014 to assist with  current and future years funding decisions."], "subsections": []}]}, {"section_title": "DOD Has Begun Addressing Challenges with Data Rights for Weapon Systems\u2019 Software Sustainment but Has Not Yet Reported to Congress on Required Studies", "paragraphs": [], "subsections": [{"section_title": "DOD Makes Decisions about Securing Data Rights throughout Weapon Systems\u2019 Life-Cycles", "paragraphs": ["DOD continuously makes decisions about securing data rights, both early  and throughout the life-cycle of a weapon system (see sidebar).", "DOD may obtain data rights, including access to technical data and  computer software related to weapon systems, for a variety of reasons.  For example, as we have previously reported, data rights may be  obtained to help control costs and maintain flexibility in future acquisition  and sustainment of systems and subsystems, including maintenance and  upgrade of weapon system software. DOD officials we spoke with  emphasized that there is no one-size-fits-all approach. Further, obtaining  data rights for software sustainment constitutes only one of many  competing priorities that must be considered along with cost, schedule,  and performance in the acquisition of weapon systems. technical data or computer software, to be delivered under a contract.  DOD officials told us that this was due to cost and proprietary reasons\u2014 that is, the contractor retains ownership of the intellectual property, such  as the source code. DOD strives to balance the cost of purchasing the  rights against the extent of data rights it expects it will need to maintain  and support the system for years into the future. For example, DOD  obtains data rights for the following reasons:", "To support its ability to evaluate weapon system design in order to  sustain weapon system software.", "Computer software: computer programs,  source code, source code listings, object  code listings, design details, algorithms,  processes, flow charts, and related  material that would enable the software to  be reproduced, recreated, or recompiled. owner's manuals, user's manuals,  installation instructions, operating  instructions, and other similar items,  regardless of how this documentation is  stored, that will explain the capabilities of  the computer software or provide  instructions for using the software. upgrades and sustainment activities to achieve cost savings. Re- competing requires complete technical data packages that enable the  manufacture of data equipment from specification.", "During the operating and support phase of a weapon system, DOD may  need to reconsider its previous decisions about the extent of data rights it  previously acquired. DOD officials we spoke with emphasized that there  are situations in which the data rights needed may not be known until  years into sustainment. A senior-level DOD official told us that it would be  useful if data rights could have a pre-negotiated price and be an option as  part of the initial contract. Such an option would give the government the  right, but not the obligation, to purchase the data rights at the pre- negotiated price if needed, in the future."], "subsections": []}, {"section_title": "DOD Faces Challenges with Data Rights and Has Initiated Steps to Mitigate Them", "paragraphs": ["DOD has faced challenges in securing the necessary data rights to  sustain weapon system software. Specifically, having either partial or  incomplete data, or unclear data rights, or both can impede the  government\u2019s ability to support the weapon system as intended. For  example, our recent work on the F-35 Joint Strike Fighter Program found  that DOD has not defined all of the technical data it needs from the prime  contractor, and at what cost, to enable competition of future sustainment  contracts.", "Officials at DOD software centers told us that they take steps to mitigate  challenges posed by having either partial or incomplete data, or unclear  data rights, or both for decades-old weapon systems and new  acquisitions. For decades-old weapon systems, officials at some DOD  software centers stated that they use public-private partnerships to bridge  gaps for systems that lack access to the necessary data rights. For  example, an Air Force official at Robins Air Force Base told us that the C- 5 software sustainment workload has been successful due to a public- private partnership involving the C-5 System Program Office, the 402nd  Software Maintenance Group, and the contractor. As part of this  partnership, a C-5 software integrated laboratory was established at  Robins Air Force Base for DOD personnel to perform software  sustainment activities, including deficiency report investigations and  testing. In doing so, the 402nd Software Maintenance Group supports  $8.4 million in annual C-5 software sustainment requirements.", "Officials at DOD software centers further explained that they have the  expertise to optimize software that is transferred from a contractor to a  DOD software center or to reverse-engineer software for weapon  systems, if needed. In some cases, for example, a contractor may decide  that it is no longer profitable or advantageous to continue performing the  software sustainment; the activities can then be transferred to a DOD  software center. Air Force officials at the 402nd Software Maintenance  Group stated that on many occasions they have worked to take over  software from a contractor without any transition period. In 2013 this DOD  software center assumed sustainment responsibility from a contractor  without any transition period for a radar system on the F-15 aircraft in  order to maintain and upgrade its software. After assuming sustainment  responsibility, according to an Air Force official, this DOD software center  corrected latent defects and added new capabilities to adapt the radar to  a changing threat environment. According to the official, this occurred  because the contractor shifted focus to newer radar systems. Further, the  contractor priced the support for the older radar system above what the  Air Combat Command had budgeted for the updates.", "Officials at some DOD software centers told us that if they have the  source code but do not have the computer software documentation\u2014 such as manuals or instructions\u2014they may need to reverse-engineer the  software. For example, engineers at U.S. Army Research, Development  and Engineering Command, Armament Research, Development, and  Engineering Center (ARDEC) reverse-engineered a key software  function, as shown in figure 5 below.", "For newer acquisitions, DOD has increased the consideration it affords to  the potential needs for access to and delivery of data. For example, Air  Force officials said that because of past issues with data rights on legacy  systems, they had launched an initiative to ensure that program offices  use standardized contract clauses (for example, DFARS software data  rights) and contract delivery requirements (for example, models,  drawings, associated lists, and specifications) for data rights. To illustrate  this, an Air Force official told us that the HH60W Combat Rescue  Helicopter program committed early in the life-cycle to securing the  necessary data rights for a DOD software center in the 402nd Software  Maintenance Group to perform the software sustainment activities. The  official told us that the Statement of Work requests that the contractor  provide the DOD software center with the source code and full technical  data package, to include a complete software-supporting documentation  package."], "subsections": []}, {"section_title": "DOD Has Begun Establishing Intellectual Property Policy and Experts but Has Not Yet Reported to Congress on Required Studies on Data Rights", "paragraphs": ["Provisions in the fiscal years 2016 and 2018 National Defense  Authorization acts (NDAA) directed the Secretary of Defense to  commission studies related to DOD intellectual property, establish an  intellectual property policy, and establish a cadre of intellectual property  experts. In response, DOD is in the early stages of developing intellectual  property policy and establishing a cadre of intellectual property experts.  Also, DOD has commissioned studies to review its access to intellectual  property for DOD weapon systems, including necessary data rights.  However, the department has missed some required reporting time  frames, and it has not yet reported to congressional defense committees  on the studies\u2019 findings and recommendations."], "subsections": [{"section_title": "Congress Directed DOD to Establish Intellectual Property Policy and Identify a Cadre of Intellectual Property Experts", "paragraphs": ["In the fiscal year 2018 NDAA, Congress directed the Secretary of  Defense, through the Under Secretary of Defense for Acquisition and  Sustainment, to (1) develop policy on the acquisition or licensing of  intellectual property; and (2) establish a cadre of intellectual property  experts to help support the acquisition workforce on intellectual property  matters, including acquiring or licensing intellectual property. The law  did not include a time frame for completion. The department is in the early  stages of addressing these statutory provisions.", "According to the law, the policy is intended to enable DOD-wide  coordination and consistency in strategies for acquiring or licensing  intellectual property; to help ensure that program managers are aware of  DOD\u2019s rights and consider and use best practices early in the acquisition  process; and to encourage customized intellectual property strategies  based on the unique characteristics for each system. The cadre of  experts is intended to ensure a consistent, strategic, and knowledgeable  approach to acquiring or licensing intellectual property by providing expert  advice, assistance, and resources to the acquisition workforce on  intellectual property matters.", "While the department is in the early stages of addressing these statutory  provisions, senior-level DOD officials have acknowledged a delay in these  efforts, primarily due to the department\u2019s recent reorganization. DOD  officials stated that the details concerning organizational structure, roles,  responsibilities, and realignment of resources had to be finalized in order  for the newly formed organizations to implement these provisions.  Regarding the intellectual property policy, a senior-level DOD official told  us that the Office of Strategy and Design, within the Office of the  Secretary of Defense, will facilitate the collaboration of stakeholders to  assist in developing the intellectual policy, which the Assistant Secretary  of Defense (Acquisition) will then issue and oversee. Senior-level DOD  officials spoke with us regarding the complexity of developing this  intellectual property policy, as it spans the weapon system life-cycle,  including research, development, acquisition, and operating and support  considerations.", "Regarding the intellectual property cadre, a senior-level DOD official told  us that the Assistant Secretary of Defense (Acquisition) may house the  cadre. As of August 2018 the department had not yet specified details on  the potential size or scope of the intellectual property cadre, nor a time  frame to guide implementation. Although not required by law,  development of a robust implementation plan with time frames for key  milestones could help DOD to execute and monitor its actions."], "subsections": []}, {"section_title": "DOD Established a Government-Industry Panel to Review Technical Data Rights, but the Panel Has Missed Deadlines for Reporting to Congress", "paragraphs": ["In the fiscal year 2016 NDAA Congress directed DOD to establish a  Government-Industry Advisory Panel to review technical data rights, and  to submit its final report and recommendations to the Secretary of  Defense not later than September 30, 2016. The panel, comprising  members from both the public and private sectors, was to review defense  regulations on technical data and proprietary restrictions to ensure,  among other things, that DOD does not pay more than once for the same  work, and that contractors are appropriately recompensed for innovation  and invention, among several other considerations. The law also directs  that the Secretary of Defense submit comments or recommendations to  congressional defense committees not later than 60 days after receiving  the report. DOD established the panel, as legislatively required.", "As of November 2018 the panel had submitted its report to DOD but not  to Congress. Panel members acknowledged that the panel is late in  reporting to the congressional defense committees, and they attributed  the lateness to the complexity of the task. Panel members told us that  obtaining consensus between DOD and industry has been difficult, in part  because of competing interests. For example, panel members discussed  balancing DOD\u2019s needed ability to upgrade and support weapon  systems\u2014which is difficult to forecast 30 to 40 years into the future\u2014with  industry\u2019s need for a fair return on its intellectual property investments. In  November 2018 the panel submitted the report to the Under Secretary of  Defense for Acquisition and Sustainment. The report includes 19  recommendations for legislative, regulatory, and policy changes that,  according to the panel chairman, recognize and seek to balance the equities of both government and industry. As of November 21, 2018, the  panel had not yet transmitted the report to Congress, but the panel  Chairman stated that it planned to do so before the end of the month."], "subsections": []}, {"section_title": "DOD Is Late in Reporting to Congress on a 2017 Study on Access to Intellectual Property for Weapon System Sustainment", "paragraphs": ["In the fiscal year 2016 NDAA, Congress directed DOD to contract with an  independent entity to review DOD regulations, practices, and sustainment  requirements related to government access to and use of intellectual  property rights of private-sector firms. The law also directs the Secretary  of Defense to submit a report to the congressional defense committees  on the findings of the independent entity, along with a description of any  actions the Secretary proposed in order to revise and clarify laws, or  actions the Secretary may take to revise or clarify regulations, related to  intellectual property rights.", "In response, DOD contracted with the Institute for Defense Analyses to  review the intellectual property for weapon system sustainment. In May  2017 the Institute released its report on access to intellectual property for  weapon system sustainment. The report made six recommendations,  including that DOD establish or expand existing organizational  capabilities within the DOD components (with OSD support) to provide  expertise in the acquisition of intellectual property data and rights to  program managers throughout their programs\u2019 life-cycles, as well as to  other staff involved in weapon system acquisition.", "However, DOD has not yet submitted its report to the congressional  defense committees on the study\u2019s findings and recommendations,  though it was required to do so by March 1, 2016. OSD officials  acknowledged that they are late in reporting to congressional defense  committees on the study\u2019s findings and recommendations. They attributed  the delay to their intent of awaiting the findings and recommendations on  technical data rights, if any, of the Government-Industry Advisory Panel,  as discussed above. DOD informed the congressional defense  committees twice\u2014most recently in January 2018\u2014that the department  would consider the recommendations of the Institute for Defense  Analyses and those of the Panel collectively, and would provide its  recommendations in a single report after receiving the Panel\u2019s report. In this January 2018 update, DOD noted that the Panel expected to  complete its report by March 2018. However, the Panel did not complete  its report\u2014for which DOD was waiting before responding to the Institute\u2019s  study\u2014until November 2018. DOD\u2019s report to Congress on any actions it  might take in response to the study\u2019s findings and recommendations  could provide insight into whether laws or regulations related to  intellectual property rights need to be revised or clarified."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Software is essential to the capabilities and operations of a vast range of  military systems, including tactical and combat vehicles, aircraft, ships,  submarines, and strategic missiles. DOD has policies and organizations  within weapon system management and depot maintenance to manage  operational system software sustainment. DOD has defined software  sustainment and software maintenance activities synonymously, and the  department includes software maintenance as part of depot maintenance  core capabilities. However, the Department of the Navy does not  categorize or report software sustainment as part of depot maintenance.  Without the Department of the Navy\u2019s categorizing and reporting of its  software sustainment costs, in accordance with DOD policy on the Depot  Maintenance Core Capabilities Determination Process, DOD and  Congress are not fully informed of the magnitude and cost of core  software sustainment capability requirements. As such, DOD is impeded  in its efforts to plan for a ready and controlled source of technical  competence and to budget resources in peacetime while preserving the  surge capabilities necessary to fully support strategic and contingency  needs.", "Limitations exist in DOD\u2019s cost and software data reporting system with  regard to its obtaining cost data from DOD software centers, as well as in  the military departments\u2019 operating and support cost systems. These  limitations impede DOD\u2019s tracking of weapon system software  sustainment costs. Without cost and software data from the DOD  software centers as well as complete information on the military  departments\u2019 operating and support costs for software sustainment,  CAPE is challenged in its ability to accurately compile total program costs  for program managers, cost estimators, and Congress, among other  information recipients.", "Lastly, while DOD makes decisions about securing data rights both early  and throughout the life-cycle of a weapon system, the department faces  challenges in balancing the cost of purchasing the rights against the  extent of data rights it expects it will need over the life of the system. DOD  has begun taking actions to address these challenges. For example, DOD  has commissioned several studies, at congressional direction, to examine  DOD\u2019s access to and use of intellectual property, including technical data  rights and proprietary restrictions. However, Congress has yet to receive  two of those studies. Reporting on the findings and recommendations, as  well as on any actions DOD may take in response to both studies, would  provide insight and would highlight timely issues with technical data rights  to keep Congress and DOD informed of government and industry  concerns and enable them to use that knowledge in their decision making  on weapon systems that may be in operation for decades to come."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making five recommendations to the Department of Defense\u2014  one to the Secretary of the Navy and four to the Secretary of Defense.", "We recommend that the Secretary of the Navy categorize and report the  Navy\u2019s software sustainment costs, in accordance with DOD policy on the  Depot Maintenance Core Capabilities Determination Process.", "We recommend that the Secretary of Defense ensure that the Director for  Cost Assessment and Program Evaluation complete its evaluation and  select the most effective system to obtain cost and software data from  DOD software centers, and develop an implementation plan that includes  time frames for key milestones to execute and monitor the centers\u2019  submission of required data.", "We recommend that the Secretary of Defense ensure that the Director for  Cost Assessment and Program Evaluation takes steps to prioritize the  respective military departments\u2019 obtaining and reporting of complete  operating and support costs for software sustainment through its  VAMOSC systems.", "We recommend that the Secretary of Defense develop an implementation  plan with time frames for key milestones for establishing a cadre of  intellectual property experts.", "We recommend that the Secretary of Defense submit a report, as  required by law, to Congress about the study on access to intellectual  property for weapon system sustainment conducted by the Institute for  Defense Analyses, along with a description of any actions that the  Secretary proposes, or may take, to revise or clarify regulations related to  intellectual property rights."], "subsections": []}, {"section_title": "Agency Comments and Our Response", "paragraphs": ["We provided a draft of this report to the Department of Defense for review  and comment. DOD provided written comments, which are reprinted in  appendix III. In its comments, DOD concurred with our recommendations  and stated it has actions underway or plans to take actions in response to  all five of our recommendations.", "We are sending copies of this report to the appropriate congressional  committees and the Acting Secretary of Defense. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9627 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the extent to which (1) DOD has policies and  organizations in place to manage the sustainment of operational system  software for weapon systems; (2) DOD and the military departments track  costs to sustain weapon system software; and (3) DOD has addressed  challenges securing necessary data rights to sustain weapon system  software. Our scope included software sustainment of operational  weapon systems.", "For objective one, we reviewed DOD policies and organizations in place  to manage the sustainment of operational system software for weapon  systems. This included DOD Directive 5000.01 and DOD Instruction  5000.02, which establish acquisition program policies; and DOD Directive  4151.18 and DOD Instruction 4151.20, which outline requirements for  DOD materiel maintenance and DOD programs\u2019 core capabilities. We  reviewed statutory requirements, including 10 United States Code \u00a7 2337,  which requires the Secretary of Defense to issue and maintain  comprehensive guidance on life-cycle management and the development  and implementation of product support strategies for major weapon  systems. We compared the processes used by DOD and the military  departments against those outlined in DOD policy and statute, and  against software sustainment activities performed at several DOD  software centers. We identified the roles and responsibilities for  conducting software sustainment activities among personnel at each level  of DOD bureaucracy. We also interviewed officials from the Office of the  Secretary of Defense (OSD) and the military departments regarding the  department\u2019s guidance and the processes used to collect the data for  DOD\u2019s Biennial Core Report. As in our previous reviews of DOD\u2019s  biennial core reports, we did not assess the reliability of the underlying  data provided by the military services for the 2018 DOD Biennial Core  Report. However, we determined that the data were sufficiently reliable  for the purpose of determining whether the military services had reported  costs of workloads in 2012\u20142018.", "We interviewed officials from the Office of the Secretary of Defense  (OSD), including within the Office of the Under Secretary of Defense for  Research and Engineering and the Office of the Under Secretary of  Defense for Acquisition and Sustainment. Using a semi-structured  questionnaire, we also interviewed officials from each of the military  department headquarters\u2014U.S. Army G4, Air Force Acquisition office,  and the Assistant Secretary of the Navy for Research, Development, and  Acquisition\u2014to understand policies and organizations in place to manage  the sustainment of operational system software for major weapon  systems. We also interviewed industry officials, such as from the Center  for Strategic and Budgetary Assessments and the Software Engineering  Institute at Carnegie Mellon University. We conducted interviews using a  semi-structured questionnaire with officials at select DOD depot-level  software sustainment activities, also referred to as DOD software centers  for the purposes of this report. We used DOD\u2019s Fiscal Year 2016  Maintenance Fact Book to select 11 of 20 DOD depot-level software  sustainment activities based on several criteria, including (1) military  department, (2) weapon system type, (3) geographical location, and (4)  random selection. Although this sample is not generalizable to the  population of DOD depot-level software centers, the use of a random  sample of software centers helped mitigate any potential selection bias,  and the interviews provided valuable information on those sites selected.  The officials we interviewed at DOD software centers included a variety of  engineers and others who perform software sustainment activities for  weapon system software on several DOD weapon systems, including air  and sea platforms, targeting systems, and communications systems,  among others. We interviewed these officials to gain an understanding of  policies and procedures they follow to guide their software sustainment  activities, how they are organized, and the activities they undertake to  sustain the software.", "For objective two, we reviewed DOD policy and military department  guidance regarding software sustainment cost reporting requirements,  including Department of Defense Manual 5000.04, Cost and Software  Data Reporting Manual, and applicable financial management  regulations. We reviewed the Office of Cost Assessment and Program  Evaluation (CAPE) Reports to Congress for Fiscal Years 2016 and 2017  to learn about steps that CAPE is taking to address challenges. We  interviewed officials at the DOD software centers responsible for weapon  system software on several DOD weapon systems to gain an  understanding of how they track cost data. We also interviewed officials  from OSD, including officials from CAPE, and officials from the three cost  analysis agencies responsible for collecting operating and support costs  for the military departments\u2019 Visibility and Management of Operating and  Support Costs (VAMOSC) data collection systems. These agencies  include Office of the Assistant Secretary of the Army for Cost and  Economics, the Air Force Cost Analysis Agency, and the Naval Center for  Cost Analysis.", "For objective three, we reviewed statutes governing DOD intellectual  property, including technical data rights, computer software, and  computer software documentation. These statutes included, for example,  10 U.S.C. \u00a72320, \u201cRights in Technical Data,\u201d and 10 U.S.C. \u00a72321,  \u201cValidation of Proprietary Data Restrictions.\u201d Both of these statutes are  implemented, in part, by the Federal Acquisition Regulation and the  Defense Federal Acquisition Regulation Supplement (DFARS), which we  also reviewed. Specifically, we reviewed DFARS Subpart 227.71, \u201cRights  in Technical Data,\u201d and DFARS Subpart 227.72, \u201cRights in Computer  Software and Computer Software Documentation.\u201d Both include sections  that address DOD definitions of technical data; computer software; and  computer software documentation, policy, acquisition, licensure, and  delivery rights, among other items.", "We also reviewed DOD policy and guidance, including DOD 5010.12-M,  Procedures for the Acquisition and Management of Technical Data. We  reviewed the Defense Acquisition Guidebook, which addresses the  acquisition and maintenance of technical data rights to sustain and  upgrade software on major weapon systems. We also reviewed guidance put forth on intellectual property strategies, including a checklist  arranged by contract phase for key intellectual property management  activities and considerations.", "We interviewed officials from OSD, including from the Office of General  Counsel and the Office of Strategic Design, as well as officials from the  military department headquarters, to gain an understanding of the  necessary technical rights to sustain weapon system software, the  reasons that technical data rights are needed, and challenges faced by  the department. We interviewed officials at the DOD software centers  covering a variety of DOD weapon systems to gain an understanding of  what technical data rights they need for their respective weapon systems,  and the ways in which they manage issues they may encounter in which  contractors own the technical data. We analyzed select weapon systems  for which DOD had complete data and rights, as well as weapon systems  for which DOD had partial or incomplete data rights, and the actions DOD  took for sustainment, such as public-private partnerships. We also  interviewed members of the Government-Industry Panel examining  technical data rights and proprietary data restrictions to gain an  understanding of necessary data rights for sustaining weapon systems  coupled with proprietary concerns from industry. Finally, we reviewed  statutory provisions in the fiscal years 2016 and 2018 National Defense  Authorization acts, which directed the Secretary of Defense to  commission studies related to DOD intellectual property, and we  interviewed officials to understand DOD\u2019s status on the provisions.", "Table 2 lists the offices that we visited or contacted during our review."], "subsections": []}, {"section_title": "Appendix II: Select Software Sustainment Activities", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact listed above, Sally Newman (Assistant Director),  Laura Czohara (Analyst-in-Charge), Steven Bagley, Steven Boyles,  Vincent Buquicchio, Amie Lesser, Janine Prybyla, Andrew Stavisky, and  Cheryl Weissman made key contributions to this report."], "subsections": []}]}, {"section_title": "Appendix V: Related GAO Products", "paragraphs": ["GAO- F-35 Joint Strike Fighter: Development is Nearly Complete, but  Deficiencies Found in Testing Need to Be Resolved, GAO-18-321  (Washington, D.C.: June 5, 2018).", "GAO- F-35 Aircraft Sustainment: DOD Needs to Address Challenges  Affecting Readiness and Cost Transparency, GAO-18-75 (Washington,  D.C.: Oct. 26, 2017).", "GAO, Military Acquisitions: DOD Is Taking Steps to Address Challenges  Faced by Certain Companies, GAO-17-644 (Washington, D.C.: July  2017).", "GAO- F-35 Sustainment: DOD Needs a Plan to Address Risks Related to  Its Central Logistics System, GAO-16-439, (Washington, D.C., Apr. 14,  2016).", "GAO- F-35 Joint Strike Fighter: Preliminary Observations on Program  Progress, GAO-16-489T (Washington, D.C.: Mar. 23, 2016).", "GAO, Defense Contracting: Early Attention in the Acquisition Process  Needed to Enhance Competition, GAO-14-395 (Washington, D.C.: May 5,  2014).", "GAO- F-35 Joint Strike Fighter: Problems Completing Software Testing  May Hinder Delivery of Expected Warfighting Capabilities, GAO-14-322  (Washington, D.C.: Mar. 24, 2014).", "GAO- F-35 Joint Strike Fighter: Program Has Improved in Some Areas,  but Affordability Challenges and Other Risks Remain, GAO-13-500T  (Washington, D.C.: Apr. 17, 2013).", "GAO, Defense Acquisition: DOD Should Clarify Requirements for  Assessing and Documenting Technical-Data Needs, GAO-11-469  (Washington, D.C.: May 11, 2011).", "GAO, Federal Contracting: Opportunities Exist to Increase Competition  and Assess Reasons When Only One Offer Is Received, GAO-10-833  (Washington, D.C.: July 26, 2010).", "GAO, Weapons Acquisition: DOD Should Strengthen Policies for  Assessing Technical Data Needs to Support Weapon Systems,  GAO-06-839 (Washington, D.C.: July 14, 2006).", "GAO, Defense Management: Opportunities to Enhance the  Implementation of Performance-Based Logistics, GAO-04-715  (Washington, D.C.: Aug. 16, 2004).", "GAO, Defense Logistics: Opportunities to Improve the Army\u2019s and the  Navy\u2019s Decision-making Process for Weapons Systems Support,  GAO-02-306 (Washington, D.C.: Feb. 28, 2002).", "GAO, Defense Logistics: Air Force Lacks Data to Assess Contractor  Logistics Support Approaches, GAO-01-618 (Washington, D.C.: Sept. 7,  2001).", "GAO, Test and Evaluation: DOD Has Been Slow in Improving Testing of  Software Intensive Systems, GAO/ NSIAD-93-198 (Washington, D.C.:  September 1993).", "GAO, Mission Critical Systems, Defense Attempting to Address Major  Software Challenges, GAO/IMTEC-93-13 (Washington, D.C.: December  1992).", "GAO, Risk and Control of the Software Maintenance Process  (Washington, D.C.: January 1987).", "GAO, Federal Agencies\u2019 Maintenance of Computer Programs: Expensive  and Undermanaged, AFMD-81-25 (Washington, D.C., Feb. 26, 1981)."], "subsections": []}], "fastfact": ["Like anyone who owns a computer or smartphone, the Department of Defense has to continually update the software that keeps its weapon systems running smoothly. Sustaining that software for systems including aircraft, ships, submarines, and missiles, is essential for national defense.", "The cost of sustaining DOD's weapon system software is estimated to be at least $15 billion over the next 5 years, but DOD may not know the full costs. Some of DOD's systems have incomplete cost data, which could make it harder to ensure that DOD has the necessary resources available.", "We made 5 recommendations to help DOD address cost and data challenges."]}
{"id": "GAO-19-19", "url": "https://www.gao.gov/products/GAO-19-19", "title": "Dam Safety: FERC Should Analyze Portfolio-Wide Risks", "published_date": "2018-10-05T00:00:00", "released_date": "2018-11-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In February 2017, components of California's Oroville Dam failed, leading to the evacuation of nearly 200,000 nearby residents. FERC is the federal regulator of the Oroville Dam and over 2,500 other dams associated with nonfederal hydropower projects nationwide. FERC issues and renews licenses\u2014which can last up to 50 years\u2014to dam operators and promotes safe dam operation by conducting safety inspections and reviewing technical engineering studies, among other actions.", "GAO was asked to review FERC's approach to overseeing dam safety. This report examines: (1) how FERC collects information from its dam safety inspections and the extent of its analysis, and (2) how FERC evaluates engineering studies of dam performance to analyze safety, among other objectives. GAO analyzed documentation on a non-generalizable sample of 42 dams associated with projects relicensed from fiscal years 2014 through 2017, selected based on geography and hazard classifications, among other factors. GAO also reviewed FERC regulations and documents; and interviewed FERC staff associated with the selected projects and technical consultants, selected based on the frequency and timing of their reviews."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Energy Regulatory Commission's (FERC) staff generally followed established guidance in collecting safety information from dam inspections for the dams GAO reviewed, but FERC has not used this information to analyze dam safety portfolio-wide. For these 42 dams, GAO found that FERC staff generally followed guidance in collecting safety information during inspections of individual dams and key structures associated with those dams. (See figure.) However, FERC lacks standard procedures that specify how and where staff should record safety deficiencies identified. As a result, FERC staff use multiple systems to record inspection findings, thereby creating information that cannot be easily analyzed. Further, while FERC officials said inspections help oversee individual dam's safety, FERC has not analyzed this information to identify any safety risks across its portfolio. GAO's prior work has highlighted the importance of evaluating risks across a portfolio. FERC officials stated that they have not conducted portfolio-wide analyses because officials prioritize the individual dam inspections and response to urgent dam safety incidents. However, following the Oroville incident, a FERC-led initiative to examine dam structures comparable to those at Oroville identified 27 dam spillways with varying degrees of safety concerns, on which FERC officials stated they are working with dam licensees to address. A similar and proactive portfolio-wide approach, based on analysis of common inspection deficiencies across the portfolio of dams under FERC's authority, could help FERC identify safety risks prior to a safety incident.", "Guidelines recognize that each dam is unique and allow for flexibility and exemptions in its use. FERC staff use the studies to inform other components of their safety approach, including the analysis of dam failure scenarios and their review of safety to determine whether to renew a license."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FERC: (1) develop standard procedures for recording information collected as part of its inspections, and (2) use inspection information to assess safety risks across FERC's portfolio of dams. FERC agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Hydroelectric power projects, also known as hydropower projects, exist in  nearly every state and on most major river systems in the United States.  While the configuration of a hydropower project may vary, many of these  projects use one or more dams to impound vast quantities of water to  convert the potential energy of water into electricity. Under the Federal  Power Act, the Federal Energy Regulatory Commission (FERC) regulates  nonfederal hydropower projects, and their associated dams, which may  be owned by public utilities or private entities. As part of its  responsibilities, FERC issues licenses to construct and operate  nonfederal hydropower projects. Once FERC issues a license, it seeks to  ensure licensee compliance with dam safety regulations by performing  various oversight actions. These include periodic inspections and  reviews of licensee-submitted engineering studies, which inform FERC\u2019s  evaluation of the dam\u2019s ability to perform while minimizing safety risks to  the public. In addition, shortly before a license expires, FERC is to  evaluate an applicant\u2019s relicensing proposal to determine if the licensee  can safely manage and operate the project under a new license, which  has a term of up to 50 years.", "The February 2017 failure of key components of the Oroville Dam, part of  a FERC-licensed hydropower project in California, highlighted the risks associated with hydropower projects, and raised questions about FERC\u2019s  oversight of dam safety. Though rare, when dams and other structures  comprising hydropower projects fail, water can be released quickly, and  its release may result in fatalities, as well as economic and environmental  damage. In light of these concerns, when the components of the Oroville  Dam failed, local emergency management officials issued an evacuation  order for nearly 200,000 residents downstream of the dam. At the time of  the incident, FERC was reviewing the Oroville Dam project\u2019s relicensing  application. In January 2018, an independent review team investigating  the cause of the Oroville Dam incident raised questions about the  thoroughness of FERC\u2019s oversight of the project, among other factors that  may have contributed to the incident.", "You asked us to examine topics related to FERC\u2019s oversight of dam  safety. This report assesses: (1) how FERC collects information from its  dam safety inspections and the extent to which FERC analyzes it; (2) how  FERC evaluates engineering studies of dam performance to analyze  safety, and (3) the extent to which FERC reviews dam safety information  during relicensing and the information FERC considers. This report also  includes information on FERC actions to ensure licensees\u2019 compliance  with license requirements related to dam safety (app. I) and selected  models and data sets used to develop and evaluate engineering studies  of dam performance (app. II).", "For each of the objectives, we reviewed laws, regulations, FERC  guidance, templates, and other documentation pertaining to FERC\u2019s  evaluation of dam safety. In addition, we reviewed an independent  forensic team\u2019s assessment of the causes of the Oroville Dam incident,  including the report\u2019s analysis of FERC\u2019s approach to ensuring safety at  the project, to understand any limitations of FERC\u2019s approach identified  by the report. We also reviewed dam safety documentation, including  dam performance studies, FERC memorandums, the most recent  inspection report, and other information, from a non-probability sample of  14 projects encompassing 42 dams relicensed from fiscal years 2014  through 2017. We selected these projects and dams to include ones that  were geographically dispersed, had varying potential risk associated with  their potential failure, and had differences in the length of their relicensing  process. We developed a data collection instrument to collect information  from the dam safety documentation and analyzed data from the sample to  evaluate the extent to which FERC followed its dam safety oversight  guidance across the selected projects. Following our review of the  information from the dam safety documentation, we conducted semi- structured interviews with FERC engineer staff associated with each of  the 14 projects and 42 dams to obtain information about FERC\u2019s  inspections, review of engineering studies, and analysis of safety during  the relicensing of these projects. Our interviews with these FERC staff  provided insight into FERC\u2019s dam safety oversight approach and are not  generalizable to all projects. We also interviewed FERC officials  responsible for dam safety about dam safety practices.", "In addition, to review how FERC collects information from its dam safety  inspections and the extent to which FERC analyzes it, we also reviewed  inspection data from FERC\u2019s information management systems for fiscal  years 2014 through 2017. To assess the reliability of these data, we  reviewed guidance and interviewed FERC officials. We determined that  the data were sufficiently reliable for our purposes. We compared FERC\u2019s  approach to collecting, recording, and using safety information to federal  internal control standards for the design of information systems and  related control activities. To determine how FERC evaluates engineering  studies of dam performance to analyze dam safety, we reviewed FERC  policies and guidance. Further, we interviewed six independent  consultants having experience inspecting and analyzing FERC-regulated  dams to understand how engineering studies are developed. We selected  consultants who had recently submitted an inspection report to FERC  (between December 2017 and February 2018) based on the geographic  location of the project they reviewed and experience conducting these  inspections and the number of inspection reports submitted to FERC over  this time period. Our interviews with these consultants provided insight  into FERC\u2019s approach to conducting and reviewing studies and are not  generalizable to all projects or consultants. To evaluate the extent to  which FERC reviews dam safety information during relicensing and the  information it considers, we reviewed templates developed by FERC to  assess safety during relicensing and analyzed the extent to which staff  followed guidance in these templates for the 14 projects and 42 dams in  our sample.", "To review actions to ensure licensees\u2019 compliance with license  requirements related to dam safety, we reviewed FERC\u2019s guidance  related to compliance and enforcement and interviewed FERC officials  responsible for implementation of the guidance. To review information on  models and datasets used to develop and evaluate engineering studies of  dam performance, we reviewed dam safety documentation associated  with the projects in our sample (described previously), reviewed FERC  documentation, and interviewed FERC officials. Additional information on  our scope and methodology can be found in appendix III.", "We conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["According to the National Inventory of Dams, as of January 2016 there  are approximately 90,500 dams in the United States and about 2.5  percent of these (approximately 2,100 dams) are associated with  hydropower projects. Hydropower projects are owned and operated by  both non-federal entities\u2014such as private utility companies,  municipalities, and state government agencies\u2014or federal government  agencies\u2014primarily the U.S. Army Corps of Engineers (the Corps) and  the Bureau of Reclamation. Collectively, these dams associated with  hydropower projects account for about 8 percent of the total electric  generating capacity in the United States. Hydropower projects generally  consist of one or more dams and other key components associated with  hydroelectric power generation and water storage, and are uniquely  designed to accommodate watersheds, geology, and other natural  conditions present at the time of construction. These components  include both those that allow operators to adjust reservoir water levels,  such as spillways and gates, as well as those that produce and distribute  electricity, such as transmission lines and powerhouses, among others.  (See fig. 1.)", "The Federal Power Act provides for FERC\u2019s regulatory jurisdiction over a  portfolio of about 1,000 non-federal hydropower projects comprising over  2,500 dams. While FERC does not construct, own, or operate dams, it  licenses and provides oversight of non-federal hydropower projects to  promote their safe operation. Licensees are responsible for the safety and  liability of dams, pursuant to the Federal Power Act, and for their  continuous upkeep and repair using sound and prudent engineering  practices. FERC officials in each of the agency\u2019s five regional offices work  directly with licensees to help ensure these projects comply with licenses  and meet federal guidelines for dam safety. In addition, stakeholder  groups such as the Association of State Dam Safety Officials can assist  licensees in staying current on federal and state dam laws and  regulations, dam operations and maintenance practices, and emergency  action planning, among other things.", "FERC\u2019s regulations, supplemented by its Operating Manual and  Engineering Guidelines, establish a framework for its dam safety  oversight approach. FERC\u2019s Operating Manual provides guidelines for the  FERC staff performing inspections that are aimed at ensuring that  structures are safe, are being properly maintained, and are being  operated safely. FERC\u2019s Engineering Guidelines provides FERC staff and  licensees with procedures and criteria for the review and analysis of  license applications, project modification proposals, technical studies, and  dam designs. For example, one chapter presents guidelines for FERC  staff to use to determine the appropriateness and level of geotechnical  investigations and studies for dams. The Engineering Guidelines states  that every dam is unique and that safety analysis of each dam require  that engineers apply technical judgement based on their professional  experience.", "As part of FERC\u2019s safety oversight approach, it assigns a hazard  classification to each dam in accordance with federal guidelines that  consider the potential human or economic consequences of the dam\u2019s  failure. The hazard classification does not indicate the structural integrity  of the dam itself, but rather the probable effects if a failure should occur.  Depending on the hazard classification, the extent of and the frequency of  safety oversight activities can vary.", "Low hazard dams are those where failure \u2014an uncontrolled release  of water from a water-retaining structure\u2014would result in no probable  loss of human life but could cause low economic and/or environmental  losses.", "Significant hazard dams are those dams where failure would result in  no probable loss of human life, but could cause economic loss,  environmental damage, or other losses.", "High hazard dams are those dams where failure would probably  cause loss of human life.", "FERC has designed a multi-layered oversight approach that involves both  independent and coordinated actions with dam owners and independent  consultants. Key elements of this approach include ensuring licensees  have a safety program in place, conducting regular safety inspections,  reviewing technical analyses, and analyzing safety as a part of project  relicensing. (See fig. 2.)", "Licensee\u2019s dam safety program. According to FERC guidance,  licensees have the most important role in ensuring dam safety  through continuous visual surveillance and ongoing monitoring to  evaluate the health of the structure. Beyond this expectation for  continuous oversight, FERC requires licensees of high and significant  hazard dams to have an Owner\u2019s Dam Safety Program.", "FERC dam safety inspection. The dam safety inspection, also called  operation inspection, is a regularly-scheduled inspection conducted by  a FERC regional office project engineer primarily addressing dam and  public safety. FERC\u2019s Operating Manual establishes the frequency  that a FERC engineer conducts dam safety inspections.", "Independent consultant inspection and potential failure mode  analysis. FERC requires licensees to hire a FERC-approved  independent consulting engineer to inspect and evaluate high hazard  dams and certain types of dams above a certain height or size and  submit a report detailing the findings. Additionally, FERC requires  the licensee of a high or significant hazard dam to conduct a potential  failure mode analysis. A potential failure mode analysis is an  exercise to identify and assess all potential failure modes under  normal operating water levels and under extreme conditions caused  by floods, earthquakes, and other events.", "FERC relicensing of projects. FERC issues hydropower licenses for  the construction of new hydropower projects, and reissues licenses  for existing projects when licenses expire. Licensees may submit  applications for a new license for the continued operation of existing  projects as part of a process known as relicensing. During relicensing,  in addition to the power and development purposes for which FERC  issues licenses, FERC must evaluate safety, environmental,  recreational, cultural, and resource development among other factors  when evaluating projects, according to its guidance.", "In addition, FERC requires licensees to conduct various engineering  studies related to dam performance in accordance with FERC safety  requirements. Required engineering studies focus on dam performance  as affected by hydrology, seismicity, and dam stability. Licensees may  also produce engineering studies, such as a focused spillway  assessment, for their own operations or at the request of FERC."], "subsections": []}, {"section_title": "FERC Staff Collect Safety Information during Inspections of Individual Dams, but FERC Has Not Analyzed Dam Safety across Its Entire Portfolio", "paragraphs": [], "subsections": [{"section_title": "FERC Staff Generally Followed Guidance to Collect Information during Safety Inspections of Individual Dams That We Reviewed but Have Inconsistently Recorded Such Information Information Collection", "paragraphs": ["We found, based on our analysis of the 42 dam safety inspections we  reviewed, that FERC staff generally conducted and collected information  from these inspections consistent with guidance in its Operating Manual.  According to FERC\u2019s Operating Manual, staff\u2019s approach to conducting  these inspections and collecting information is to include preparing for the  inspection by reviewing documents, conducting a field inspection of the  dam and associated project components, and discussing inspection  findings with licensees and with FERC supervisors.", "Preparation for inspection: We found that FERC staff generally met  document review requirements in preparation for safety inspections of  the 42 dams we reviewed. (See table 1.) According to the Operating  Manual, FERC staff are to review safety-related information contained  in documents such as potential failure mode analyses and hazard  potential classifications. For example, we found that staff documented  their review of the most recent independent consultant inspection  report and potential failure mode analysis for each of the 16 high  hazard dams we reviewed. FERC staff told us that they generally  used checklists when preparing for these inspections. For example,  some of the staff told us they tailor the checklist included in the  Operating Manual, based on the dam\u2019s type, characteristics, and  hazard classification. Additionally, for each of the dams in our sample,  staff stated that they prepared for the inspection by reviewing prior  inspection reports and recommendations.", "Field inspection: We found that FERC staff generally met  requirements for reviewing project components and documenting their  findings from field inspections of the 42 dams we reviewed. (See table  2.) According to the Operating Manual, FERC staff are to conduct  visual inspections of the dam, typically alongside the licensee, to  assess the dam and project components by observing their condition  and identifying any safety deficiency or maintenance requirement.  Also during the inspection, FERC staff are to compare current  conditions of the dam and project components to those described in  prior inspection reports, and as applicable, collect information on the  licensee\u2019s progress towards resolving deficiencies and maintenance  issues that can affect safety. To assess safety, FERC staff we  interviewed stated that they primarily rely on their engineering  judgment.", "Inspection findings: According to our interviews with FERC staff from  selected projects, we found that staff generally followed FERC  guidance in discussing inspection findings with licensees and  supervisors prior to preparing inspection reports to document their  findings. According to the Operating Manual, following the dam safety  inspection, FERC staff are to discuss the inspection with the licensee,  giving direction on how to address any findings. Additionally, upon  returning to the office, staff are to discuss inspection findings with their  supervisors who may suggest additional actions. FERC staff are  then to develop a dam safety inspection report that documents  observations and conclusions from their pre-inspection preparation  and their field inspection and identifies follow-up actions for the  licensee. We found that FERC staff prepared inspection reports to  document findings from the 42 dam safety inspections we reviewed.  In response to inspection findings, FERC requires licensees to submit  a plan and schedule to remediate any deficiency, actions that FERC  staff then reviews, approves, and monitors until the licensees have  addressed the deficiency."], "subsections": [{"section_title": "Information Recording", "paragraphs": ["While we found that FERC staff conducted inspections and collected  inspection findings consistently in the files we reviewed, FERC\u2019s  approach to recording information varies across its regions, thus limiting  the usefulness of the information. FERC\u2019s approach to recording  inspection information relies on multiple systems to record inspection  information and affords broad discretion to its staff on how to characterize  findings, such as whether to track inspection findings as maintenance  issues or as safety deficiencies.", "As related to systems for recording inspection information, FERC staff  use the Data and Management System (DAMS), the Office of Energy  Projects-IT (OEP-IT) system, as well as spreadsheets. In particular,  according to FERC staff:", "Four out of FERC\u2019s five regional offices use DAMS\u2014which is primarily  a workload tracking tool\u2014to track plans and schedules associated  with safety investigations and modifications as well as inspection  follow-up items. FERC staff stated that since the inspection  information in DAMS is recorded as narrative text in a data field  instead of as discrete categories, sorting or analysis of the information  is difficult.", "One regional office uses OEP-IT to track safety deficiencies while the  system is more widely used across FERC to track licensees\u2019  compliance with the terms and conditions of their licenses.", "Three out of FERC\u2019s five regional offices also use spreadsheets and  other tools that are not integrated with DAMS or OEP-IT to track  inspection information and licensee progress toward resolving safety  deficiencies.", "FERC staff said that use of these different systems to record deficiencies  identified during inspections limits their ability to analyze safety  information. For example, according to FERC officials, OEP-IT was not  designed to track safety deficiency information and is not compatible with  DAMS for use in tracking information on a national level. Furthermore,  because spreadsheets and other tools are specific to the regional office in  which they are used, FERC staff does not use the information they  contain for agency-wide analysis.", "Concerning decisions on how to characterize inspection findings, FERC  staff relies on professional judgment, informed by their experience and  the Engineering Guidelines, to determine whether to track inspection  findings as a safety deficiency or as a maintenance item, according to  FERC officials. With input from their supervisors, FERC staff also  determines what information to record and how to track the status of the  inspection finding. For example, staff assigned to a dam at a FERC- licensed project in New Hampshire observed concrete deterioration on  several parts of the dam and its spillway and asked the licensee to  monitor all concrete surfaces, making repairs as necessary. According to  staff we interviewed, regional staff and supervisors decided not to identify  this as a deficiency to be tracked in DAMS because concrete  deterioration is normal and to be expected in consideration of the area\u2019s  harsh winter weather. In contrast, staff assigned to a dam at a FERC- licensed project in Minnesota observed concrete deterioration on several  parts of the project, including the piers and the powerhouse walls, and  entered the safety item in DAMS as requiring repair by the licensee.  FERC officials stated they are comfortable with the use of professional  judgement to classify and address inspection findings because it is  important to allow for consideration of the characteristics unique to each  situation and how they affect safety.", "FERC\u2019s approach to recording inspection information is inconsistent  because FERC has not provided standard language and procedures  about how staff should record and track deficiencies including which  system to use. Federal standards for internal control state that agencies  should design an entity\u2019s information system and related control activities  to achieve objectives and control risks. In practice, this means that an  agency would design control activities\u2014such as policies and  procedures\u2014over the information technology infrastructure to support the  completeness, accuracy, and validity of information processing by  information technology. FERC officials acknowledged that there are  inconsistent approaches in where and how staff record safety deficiency  information, approaches that limit the information\u2019s usefulness as an input  to its oversight. While the agency has not developed guidance, officials  stated that FERC plans to take steps to improve the consistency of  recorded information by replacing the OEP-IT system with a new system,  tentatively scheduled for September 2018, that will have a specific  function to track dam safety requirements. However, this new system will  not replace the functions of DAMS, which FERC will continue to use to  store inspection information. The two will exist as parallel systems with  the eventual goal of the two systems\u2019 sharing information. By developing  standard language and procedures to standardize the recording of  information collected during inspections, FERC officials could help ensure  that the information shared across these systems is comparable, steps  that would allow FERC to identify the extent of and characteristics  associated with common safety deficiencies across its entire portfolio of  regulated dams. Moreover, with a consistent approach to recording  information from individual dam safety inspections, FERC will be  positioned to proactively identify comparable safety deficiencies across its  portfolio and to tailor its inspections towards evaluating them."], "subsections": []}]}, {"section_title": "FERC Has Not Used Inspection Information to Fully Assess Safety Risks across Its Regulated Portfolio of Dams", "paragraphs": ["While FERC uses inspection information to monitor a licensee\u2019s efforts to  address a safety deficiency for an individual dam, FERC has not analyzed  information collected from its dam safety inspections to evaluate safety  risks across the entire regulated portfolio of dams. For example, FERC  has not reviewed inspection information to identify common deficiencies  among certain types of dams. Federal standards for internal control state  that agencies should identify, analyze, and respond to risks related to  their objectives. These standards note that one method for management  to identify risks is the consideration of deficiencies identified through  audits and other assessments. Dam safety inspections are an example of  such an assessment. As part of such an approach, the agency analyzes  risks to estimate their significance, which provides a basis for responding  to the risk through specific actions. Furthermore, in our previous work on  federal facilities, we have identified that an advanced use of risk  management involving the ability to gauge risk across a portfolio of  facilities could allow stakeholders to comprehensively identify and  prioritize risks at a national level and direct resources toward alleviating  them.", "FERC officials stated that they have not conducted a portfolio-wide  analysis in part due to the inconsistency of recorded inspection data and  because such an evaluation has not been a priority compared to  inspecting individual dams. According to officials, the FERC headquarters  office collects and reviews information semi-annually from each of its five  regional offices on the progress of outstanding dam investigations and  modifications in those regions. FERC\u2019s review is designed to monitor  the status of investigations on each individual dam but does not analyze  risks across the portfolio of dams at the regional or national level. For  example, officials from the New York Regional Office stated they do not  perform trend analysis across the regional portfolio of dams under their  authority, but they compile year-to-year data for each separate dam to  show any progression or changes from previous data collected from  individual dams.", "A portfolio-wide analysis could help FERC proactively identify safety risks  and prioritize them at a national level. FERC officials stated that a  proactive analysis of its portfolio could be useful to determining how to  focus its inspections to alleviate safety risks, but it was not an action that  FERC had taken to date. The benefits of a proactive analysis, for  example, could be similar to those FERC derived from the analysis it  conducted in reaction to the Oroville Dam incident. To conduct this  analysis, FERC required 184 project licensees, identified by FERC  regional offices as having spillways similar to the failed spillway at the  Oroville Dam, to assess the spillways\u2019 safety and capacity. According to  FERC officials, these assessments identified 27 dam spillways with  varying degrees of safety concerns. They stated that FERC\u2019s spillway  assessment initiative was a success because they were able to target a  specific subgroup of dams within the portfolio and identify these safety  concerns at 27 dam spillways. FERC officials stated that they are working  with the dam licensees to address these safety concerns. A similar and  proactive approach based on analysis of common deficiencies across the  portfolio of dams under FERC\u2019s authority could also help to identify any  safety risks that may not have been targeted during the inspections of  individual dams and prior to a safety incident."], "subsections": []}]}, {"section_title": "FERC Applies Agency Guidance and Uses Professional Judgment to Analyze Engineering Studies of Dam Performance and Evaluate Safety", "paragraphs": [], "subsections": [{"section_title": "Licensees and Their Consultants Develop the Engineering Studies Used to Assess Dam Performance", "paragraphs": ["As directed by FERC, licensees and their consultants develop and  review, or update, various engineering studies related to dam  performance to help ensure their dams meet FERC requirements and  remain safe. FERC regulations and guidelines describe the types and  frequency of studies and analyses required based on dams\u2019 hazard  classifications. For all high hazard and some significant hazard dams,  existing studies are to be reviewed by each licensee\u2019s consultants every 5  years, as part of the independent consultant inspection and  accompanying potential failure mode analysis. According to FERC  officials, for those significant hazard dams that do not require an  independent consultant inspection and for low hazard dams, FERC\u2019s  regulations and guidelines do not require any studies, but in practice  FERC directs many licensees to conduct them. FERC also may request  engineering studies in response to dam safety incidents at other projects,  or engage a board of consultants to oversee the completion of a study.  For example, as previously noted, following the Oroville Dam incident in  2017, FERC requested a special assessment of all dams with spillways  similar to the failed spillway at the Oroville Dam.", "To develop these studies, all six of the consultants we interviewed stated  that they follow guidelines provided by FERC and other dam safety  agencies. Specifically, they stated that they use FERC\u2019s Engineering  Guidelines, which provide engineering principles to guide the  development and review of engineering studies. In recognition of the  unique characteristics of each dam, including its construction, geography,  and applicable loading conditions, the Guidelines provides consultants  with flexibility to apply engineering judgment, and as a result, the  approach that licensees and their consultants use and the focus of their  reviews of engineering studies may vary across regions or projects. For  example, one independent consultant we interviewed noted that  seismicity studies are not highlighted during the independent consultant  inspections for projects in the Upper Midwest in comparison to projects in  other areas of the country because the region is not seismically active,  but that inspections do look closely at ice loads during the winter months.", "To create these studies, we found that licensees and their consultants  generally use data from other federal agencies and rely on available  modeling tools developed by federal agencies and the private sector to  evaluate dam performance. For example, many of the engineering  studies we reviewed rely on data from the National Weather Service and  the National Oceanic and Atmospheric Administration to estimate  precipitation patterns and the U.S. Geological Survey to estimate seismic  activity. In addition, licensees and their consultants use modeling tools  and simulations, such as those developed by the Corps to estimate  hydrology, to develop engineering studies.", "FERC staff noted that the engineering studies developed by licensees  and their consultants generally focus on the analysis of extreme events,  such as earthquakes and floods. In reference to extreme events, FERC  staff said that both actual past events and likely future events are  considered in determining their magnitude. FERC staff noted the probable  maximum flood\u2014the flood that would be expected to result from the most  extreme combination of reasonably possible meteorological and  hydrological conditions\u2014as an example of a dam design criterion that is  based on application of analysis of extreme events. In describing the  efficacy of probable maximum flood calculations, FERC officials stated  that they had not observed a flood that exceeded the probable maximum  flood calculated for any dam and noted that their Engineering Guidelines  provides a conservative approach to estimating the probable maximum  flood and other extreme events. FERC officials stated that requiring a  conservative approach to estimating extreme events helps to mitigate the  substantial uncertainty associated with these events, including in  consideration of emerging data estimating the effects of climate change  on extreme weather events.", "Once developed, engineering studies we reviewed often remained in  effect for a number of years, until FERC or the licensee and its consultant  determined an update was required. For example, we found that the  hydrology studies were 20 years or older for 17 of the 42 dams in our  review, including for 9 of the 16 high hazard dams in our sample. FERC\u2019s  Engineering Guidelines states that studies should be updated as  appropriate. For example, FERC\u2019s Engineering Guidelines on hydrology  studies state that previously accepted flood studies are not required to be  reevaluated unless it is determined that a re-analysis is warranted. The  Guidelines notes that FERC or the consultant may consider reanalyzing  the study for several reasons, including if they identify (1) significant  errors in the original study; (2) new data that may significantly alter  previous study results; or (3) significant changes in the conditions of the  drainage basin. FERC staff and consultants we interviewed stated that  age alone is not a primary criterion to update or replace studies and that  studies should be updated as needed depending on several factors  including age, new or additional data, and professional judgment.", "Consultants we interviewed identified some limitations that can affect their  ability to develop engineering studies for a dam. For example, they noted  that some dams may lack original design information, used prior to  construction of the dam, which includes the assumptions and calculations  used to determine the type and size of dam, the amount of water storage  capacity, and information on the pre-construction site geology and  earthquake potential. FERC officials estimated that for a large percentage  of the dams they relicense, the original information is no longer available.  For example, according to the report from the independent forensic team  investigating the Oroville Dam incident and as previously noted, some  design drawings and construction records for the dam\u2019s spillway could not  be located and some other documents that were available were not  included in the most recent independent consultant inspection report  submitted to FERC. To overcome the lack of original design information,  FERC told us that licensees and their consultants may use teams of  experts, advanced data collection techniques, and other modern  methods, where feasible, to assess the dam\u2019s ability to perform given  current environmental conditions. In cases where design or other  engineering information is incomplete, consultants stated that they  generally recommend the licensee conduct additional studies based on  the risk presented by the missing information but also noted that the  financial resources of a licensee may affect its willingness and ability to  conduct additional studies. However, FERC officials stated that FERC  staff are ultimately responsible for making decisions on whether additional  engineering studies are needed to evaluate a dam\u2019s performance."], "subsections": []}, {"section_title": "FERC\u2019s Staff Reviews of Engineering Studies of Dam Performance Are Based on Its Engineering Guidance, and Professional Judgment Informs Aspects of Its Safety Oversight Approach", "paragraphs": ["FERC has established policies and procedures that use formal guidance,  and permit the use of professional judgment, to evaluate and review  engineering studies of dam performance submitted by licensees and their  consultants. FERC officials in both the headquarters and regional  offices emphasized that their role as the regulator is to review and  validate engineering studies developed by the licensee and their  consultants. FERC generally does not develop engineering studies as  officials noted that dam safety, including the development of engineering  studies, is primarily the licensee\u2019s responsibility.", "To carry out their responsibility to ensure public safety, FERC staff stated  they use procedures and criteria in the FERC Engineering Guidelines to  review engineering studies and apply professional judgment to leverage  their specialized knowledge, skills, and abilities to support their  determinations of dam safety. FERC\u2019s Engineering Guidelines provides a  framework for the review of engineering studies, though the Guidelines  recognizes that each dam is unique and allows for flexibility and  exemptions in their use. Moreover, the Guidelines notes that analysis of  data is useful when evaluating a dam\u2019s performance, but should not be  used as a substitute for judgment based on experience and common  sense.", "Because FERC\u2019s Engineering Guidelines allows for the application of  professional judgment, the methods used to review these studies vary  depending on the staff, the region, and individual dam characteristics. For  example, FERC staff said that when they review consultants\u2019  assumptions, methods, calculations and conclusions, in some cases they  may decide to conduct a sensitivity analysis if\u2014based on the staff\u2019s  judgment\u2014they need to take additional steps to validate or confirm  factors of safety for the project. FERC officials also stated that staff may conduct their own independent analyses, as appropriate, such as  evaluating a major structural change to the dam or validating submitted  studies. For example, as part of its 2016 review of the Union Valley Dam  in California, FERC staff validated the submitted hydrology study by  independently calculating key inputs, such as precipitation rates and peak  floods, to evaluate the dam\u2019s performance and verify the spillway\u2019s  reported capacity.", "In addition, FERC has established various controls to help ensure the  quality of its review, including using a risk-based review process,  assigning multiple staff to review the studies, and rotating staff  responsibilities over time. We have previously found in our reporting on  other regulatory agencies that practices such as rotating staff in key  decision-making roles, and including at least two supervisory staff when  conducting oversight reviews help reduce threats to independence and  regulatory capture.", "Risk-based review process. FERC\u2019s review approach is risk-based, as  the frequency of staff\u2019s review of these studies is based on the hazard  classification of the dam as well as professional judgment. FERC  relies on three primary engineering studies (hydrology, seismicity, and  stability), and others as appropriate, which form the basis for  determining if a dam is safe. In addition, FERC requires licensees to  hire a FERC-approved independent consulting engineer at least every  5 years to inspect and evaluate high hazard and other applicable  dams and submit a report detailing the findings as part of the  independent consultant inspection process. In general, for the dams  we reviewed, we found that FERC staff reviewed engineering studies  for dams subject to independent consultant inspections (which are  typically high or significant hazard dams) more frequently than those  engineering studies associated with dams for which FERC does not  require an independent consultant inspection (typically low hazard  dams). For example, we found FERC staff had reviewed the most  recent hydrology studies for all 22 high and significant hazard dams in  our sample subject to independent consultant inspections within the  last 6 years and documented their analysis. According to FERC  officials, for dams not subject to an independent consultant inspection,  FERC staff review engineering studies on an as needed basis,  depending on whether the underlying assumptions and information  from the previous studies are still relevant. For example, for the 20  dams in our study not subject to an independent consultant  inspection, we found that most (15) of these studies were reviewed by  FERC within the past 10 years, usually during the project\u2019s  relicensing.", "Multiple levels of supervisory review. As part of FERC\u2019s quality control  and internal oversight process, multiple FERC staff are to review the  studies produced by the licensee and its consultant, with the number  of successive reviews proportional to the complexity or importance of  the study, according to FERC officials. FERC\u2019s Operating Manual  establishes the general procedure for the review of engineering  studies. To begin the review process, the staff assigned to a dam is to  review the engineering study and prepares an internal memo on its  findings; that memo is then to be reviewed for accuracy and  completeness by both a regional office Branch Chief, and the  Regional Engineer. If necessary, Washington, D.C., headquarters  office staff are to review and approve the final memo. Upon  completion of review, FERC staff are to provide a letter to the licensee  indicating any particular areas where additional information is needed  or where more studies are needed to evaluate the dam\u2019s  performance. According to FERC officials, each level of review adds  successive quality control steps performed by experienced staff. We  have previously found in reporting on other regulatory agencies that  additional levels of review increases transparency and accountability  and diminishes the risk of regulatory capture.", "Rotation of FERC staff responsibilities. As part of an internal quality  control program to help minimize the risk of missing important safety- related items, FERC officials told us they rotate staff assignments and responsibilities approximately every 3 to 4 years. According to FERC  officials, this practice decreases the chance that a deficiency would be  missed over time due to differences in areas of engineering expertise  between or among staff. We have previously found in our reporting on  other regulatory agencies that strategies such as more frequently  rotating staff in key roles can help reduce the risk to supervisory  independence and regulatory capture.", "Some FERC regional offices have developed practices to further enhance  their review of these studies. For example, the New York Regional Office  established a subject matter expert team that helps review dams with  unusually complex hydrology issues. This team was created, in part,  because FERC staff noted that some of the hydrology studies conducted  in the 1990s and 2000s were not as thorough as they would have wanted,  and warranted a re-examination. Currently, the New York Regional Office  is reviewing the hydrology analysis associated with 12 dam break studies  to determine if the hydrology data used in developing these studies were  as rigorously developed and validated. According to the FERC staff in  this office, utilizing a team of subject matter experts has reduced Regional  Office review time and improved the hydrology studies\u2019 accuracy. FERC  staff in the New York Regional Office also told us that they are working  with other regional offices on setting up similar technical teams. For  example, FERC staff in the New York Regional Office have been working  with the Portland Regional Office to set up a similar team.", "FERC procedures require the use of engineering studies at key points  over the dam\u2019s licensing period to inform components of its safety  oversight approach, including during the potential failure mode analyses  of individual dams as well as during relicensing.", "Potential failure mode analysis. The potential failure mode analysis is  to occur during the recurring independent consultant inspection and is  conducted by the licensee\u2019s independent consultant along with other  key dam safety stakeholders. As previously explained, the analysis  incorporates the engineering studies and identifies events that could  cause a dam to potentially fail. During the potential failure mode  analysis, FERC, the licensee, the consultant, and other key dam  safety stakeholders are to refer to the engineering studies to establish  environmental conditions that inform dam failure scenarios, the risks  associated with these failures, and their consequences for an  individual dam. Further, according to a FERC white paper on risk  analysis, FERC is beginning to use information related to potential  failure modes as inputs to an analysis tool that quantifies risks at each  dam. With this information, FERC expects to make relative risk  estimates of dams within its inventory and establish priorities for  further study or remediation of risks at individual dams, according to  the white paper.", "Relicensing. During relicensing, FERC staff are to review the  engineering studies as well as information such as historical  hydrological data and extreme weather events, which also inform their  safety evaluation of the licensee\u2019s application. FERC officials also  stated that as a result of their relicensing review, they might alter the  articles of the new license before it is issued should their reviews  indicate that environmental conditions affecting the dam\u2019s safety have  changed."], "subsections": []}]}, {"section_title": "FERC Summarizes Information from Required Sources to Evaluate Dam Safety during Relicensing", "paragraphs": ["We found that FERC generally met its requirement to evaluate dam  safety during the relicensing process for the 42 dams we reviewed.  During the relicensing process, we found that for the dams we reviewed,  FERC staff review safety information such as the past reports,  inspections, and studies conducted by FERC, the licensee, and  independent consultants and determine whether or not a dam owner  operated and maintained its dam safely. According to FERC staff, the  safety review for relicensing is generally a summary of prior safety and  inspection information, rather than an analysis of new safety information,  unless the licensee proposes a change to the operation or structure.", "FERC\u2019s review during relicensing for the high hazard and significant  hazard dams we reviewed was generally consistent with its guidance and  safety memo template, though the extent of its review of low hazard dams  varied. (See fig. 3.) For example, for the 22 high and significant hazard  dams we reviewed, the safety relicensing memos followed the template  and nearly all included summaries of hydrology studies, stability analyses,  prior FERC inspections, and applicable independent consultant reports.  For the 20 low hazard dams, FERC staff noted that some requirements in  the template are not applicable or have been exempted and therefore  were not reviewed during relicensing. While low hazard dams were  more inconsistently reviewed during relicensing, FERC staff also noted  that there has been a recent emphasis to more closely review, replace, or  conduct engineering studies, such as the stability study, for low hazard  dams during relicensing. Moreover, FERC staff told us that the safety  risks associated with these dams are minimal, as the failure of a low  hazard dam, by definition, does not pose a threat to human life or  economic activity.", "According to FERC staff, if a licensee proposed altering the dam or its  operations in any way as part of its application for a new license, FERC  staff would review the proposed change and may recommend adding  articles to the new license prior to its issuance to ensure dam safety.  FERC officials noted that, as part of their review, any structural or  operational changes proposed by the licensee during relicensing are  reviewed by FERC. These officials also noted that FERC generally  recommends modifications to the licensees\u2019 proposed changes prior to  their approval and inclusion in the new license. However, FERC officials  noted that, in some cases, additional information is needed prior to  approving the structural or operational change to ensure there are no  risks posed by the changes. In those instances, FERC may recommend  that articles be added to the new license, that require the licensee to  conduct additional engineering studies of the issue and submit them to  FERC for review and approval. For example, during the relicensing of the  Otter Creek project in Vermont in 2014, the licensee proposed changes to  the project\u2019s operation resulting from construction. As a result, FERC\u2019s  staff recommended adding a number of articles to the license, including  that the licensee conduct studies to evaluate the effect of the change on  safety and to ensure safety during construction.", "During relicensing, third parties\u2014such as environmental organizations,  nearby residents and communities, and other federal agencies, such as  the U.S. Fish and Wildlife Service\u2014may provide input on various topics  related to the project, including safety. However, FERC officials said that  very few third parties file studies or comments related to dam safety  during relicensing. FERC\u2019s template and guidance do not specifically  require the consideration of such analyses as part of its safety review,  and we did not identify any safety studies submitted by third parties for  dams or reviewed by FERC in our sample. According to FERC officials,  when stakeholders submit comments during relicensing, the comments  tend to focus on environmental aspects of the project, such as adding  passages for fish migration. Further, FERC is not required under the  Federal Power Act to respond to any comments, including those related  to dam safety, from third parties, according to FERC officials. However,  according to FERC officials, courts have held that the Administrative  Procedure Act precludes an agency from arbitrarily and capriciously  ignoring issues raised in comments. Furthermore, these officials stated  that if a court determines that FERC did not sufficiently address issues  raised during the relicensing process, its orders are subject to being  reversed and remanded by applicable United States courts of appeals.  Moreover, FERC officials noted that the information needed to develop  third party safety studies, such as the dam design drawings and  engineering studies, are property of the licensee, rather than FERC. In addition, this information may not be readily available to third parties or  the public if FERC designates it as critical energy infrastructure  information, which would preclude its release to the general public.", "FERC staff we interviewed stated that there have been no instances  where the Commission denied a new license to a licensee as a result of  its safety review during relicensing. FERC staff stated that given the  frequency of other inspections, including the FERC staff inspections, and  independent consultant inspections, it is unlikely staff would find a  previously unknown major safety issue during relicensing. FERC staff told  us that rather than deny a license for safety deficiencies, FERC will keep  a dam owner under the terms of a FERC license to better ensure the  licensee remedies existing safety deficiencies. Specifically, FERC staff  noted that under a license, FERC can ensure dam safety by (1) closely  monitoring the deficiency\u2019s remediation progress through its inspection  program, (2) adding license terms in the new license tailored to the  specific safety deficiency, and (3), as necessary, pursuing compliance  and enforcement actions, such as civil penalties or stop work orders, to  enforce the terms and conditions of the license. For example, prior to  and during the relicensing of a FERC-licensed project in Wisconsin in  2014, FERC\u2019s review identified that the spillway capacity was inadequate.  While the project was relicensed in 2017 without changes to the spillway,  FERC officials stated that they have been overseeing the plans and  studies of the remediation of the spillway through their ongoing inspection  program. However, if an imminent safety threat is identified during the  relicensing review, FERC officials stated that they will order that the  licensee take actions to remedy the issue immediately. Moreover, FERC  officials noted that, if necessary, a license can be revoked for failure to  comply with the terms of its license."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["FERC designed a multi-layered safety approach\u2014which uses  inspections, studies, and other assessments of individual dams\u2014to  reduce exposure to safety risks. However, as the spillway failure at the  Oroville Dam project in 2017 demonstrated, it is not possible to eliminate  all uncertainties and risks. As part of a continuing effort to ensure dam  safety at licensed projects, FERC could complement its approach to  evaluating the safety of individual dams by enhancing its capability to  assess and identify the risks across its portfolio of licensed dams.  Specifically, while FERC has collected and stored a substantial amount of  information from its individual dam safety inspections, FERC\u2019s approach  to recording this information is inconsistent due to a lack of standard  language and procedures. By clarifying its approach to the recording of  information collected during inspections, FERC officials could help ensure  that the information recorded is comparable when shared across its  regions. Moreover, the absence of standard language and procedures to  consistently record inspection information impedes a broader, portfolio- wide analysis of the extent of and characteristics associated with common  safety deficiencies identified during FERC inspections. While FERC has  not yet conducted such an analysis, a proactive assessment of common  safety inspection deficiencies across FERC\u2019s portfolio of licensed dams\u2014 similar to its identification of dam spillways with safety concerns following  the Oroville Dam incident\u2014could help FERC and its licensees identify  safety risks prior to a safety incident and to develop approaches to  mitigate those risks."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to FERC:", "FERC should provide standard language and procedures to its staff  on how to record information collected during inspections, including  how and where to record information about safety deficiencies, in  order to facilitate analysis of safety deficiencies across FERC\u2019s  portfolio of regulated dams. (Recommendation 1)", "FERC should use information from its inspections to assess safety  risks across its portfolio of regulated dams to identify and prioritize  safety risks at a national level. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FERC for review and comment. In its  comments on the draft report, FERC said it generally agreed with the  draft report\u2019s findings and found the recommendations to be constructive.  FERC said that it would direct staff to develop appropriate next steps to  implement GAO\u2019s recommendations. These comments are reproduced in  appendix IV. In addition, FERC provided technical comments, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Chairman of FERC  and other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at 202-512-2834 or vonaha@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Summary of the Federal Energy Regulatory Commission\u2019s Actions to Help Ensure Licensee Compliance with Requirements Related to Dam Safety", "paragraphs": ["FERC seeks to ensure licensees\u2019 compliance with FERC regulations and  license requirements, including remediating safety deficiencies, by using  a mix of preventative strategies to help identify situations before they  become problems and reactive strategies such as issuing penalties. As  part of its efforts, FERC published a compliance handbook in 2015 that  provides an overall guide to compliance and enforcement of a variety of  license requirements, including dam safety. The handbook includes  instructions for implementing FERC rules, regulations, policies, and  programs designed to ensure effective compliance with license  conditions, which include dam safety, to protect and enhance beneficial  public uses of waterways. FERC developed a range of enforcement  actions, that include holding workshops to encourage compliance and  issuing guidance, that increase in severity depending on the non- compliance issue. (See fig. 4.) More broadly, FERC\u2019s guidance directs  officials to determine enforcement actions and time frames for those  actions on a case-by-case basis, depending on the characteristics of the  specific compliance issue.", "According to FERC officials, many of these safety compliance  discussions are handled informally. In addition, their compliance  approach emphasizes activities that assist, rather than force, licensees to  achieve compliance, according to its guidance. These activities include  facilitating open lines of communication with licensees, participating in  technical workshops, and publishing brochures and guidance documents,  among other efforts. Also, according to these officials, FERC works with  licensees to provide guidance and warnings of possible non-compliance  matters, in order to avoid usage of any enforcement tools, if possible.  According to FERC officials, any safety issues that endanger the public  will result in immediate penalty or removal of the dam from power  generation, but this action is not lightly taken. Additionally, the length of  time between when a safety deficiency is identified and is resolved varies  substantially depending on the specific project. As stated earlier in this  report, FERC works with licensees to determine a plan and schedule for  investigating safety issues and making any needed modifications.  However, FERC officials stated that the majority of safety compliance  issues are resolved within a month.", "However, FERC officials stated that if a licensee repeatedly does not take  steps to address a compliance issue, FERC will explore enforcement  actions through a formal process. According to officials, FERC\u2019s  enforcement options are based on authorities provided under the Federal  Power Act and such options are flexible because of the variation in  hazards, consequences, and dams. According to FERC officials, to  ensure compliance with safety regulations, if a settlement cannot be  reached, FERC may, among other things, issue an order to show cause,  issue civil penalties in the form of fines to licensees, impose stop work or  cease power generation orders, revoke licenses, and seek injunctions in  federal court. Nevertheless, FERC officials stated that there is no  specific requirement for how quickly the compliance issues or deficiencies  should be resolved and that some issues can take years to resolve. For  example, in 2004, the current licensee of a hydroelectric project operating  in Edenville, Michigan, acquired the project, which was found by FERC to  be in a state of non-compliance at that time. FERC staff made numerous  attempts to work with the licensee to resolve the compliance issues.  However, they were unable to resolve these issues and as a result issued  a cease generation order in 2017, followed in 2018 by a license  revocation order. In practice, FERC\u2019s use of these enforcement tools to  resolve safety issues has been fairly limited, particularly in comparison to  other license compliance issues, according to FERC officials. Since 2013,  FERC has issued one civil penalty for a safety-related hydropower  violation and has issued compliance orders on eight other projects for  safety-related reasons, including orders to cease generation on three  projects."], "subsections": []}, {"section_title": "Appendix II: Information on Selected Models and Data Sets Used to Develop and Evaluate Dam Performance Studies", "paragraphs": ["For the 14 projects and 42 dams we reviewed, FERC licensees and their  consultants used a variety of tools to develop engineering studies of dam  performance (see table 3). These tools included programs and modeling  tools developed by government agencies, such as the U.S. Army Corps  of Engineers (the Corps), as well as commercially available modeling  tools. FERC officials stated that they also used a number of the same  tools used by its licensees and consultants.", "Similarly, for the 14 projects and 42 dams we reviewed, FERC licensees  and their consultants used a variety of datasets to develop engineering  studies of dam performance (see table 4). These datasets included data  maintained and updated by various government agencies, including the  United States Geological Survey and National Oceanic and Atmospheric  Administration. FERC officials stated that they also used a number of the  same datasets used by its licensees and consultants."], "subsections": []}, {"section_title": "Appendix III: Objectives, Scope, and Methodology", "paragraphs": ["This report assesses: (1) how FERC collects information from its dam  safety inspections and the extent to which FERC analyzes it; (2) how  FERC evaluates engineering studies of dam performance to analyze  safety, and (3) the extent to which FERC reviews dam safety information  during relicensing and the information FERC considers. This report also  includes information on FERC actions to ensure licensee compliance with  license requirements related to dam safety (app. I) and selected models  and data sets used to develop and evaluate engineering studies of dam  performance (app. II).", "For each of the objectives, we reviewed laws, regulations, FERC  guidance, templates, and other documentation pertaining to FERC\u2019s  evaluation of dam safety. In addition, we reviewed an independent  forensic team\u2019s assessment of the causes of the Oroville Dam incident,  including the report\u2019s analysis of FERC\u2019s approach to ensuring safety at  the project, to understand any limitations of FERC\u2019s approach identified  by the report. We also reviewed dam safety documentation, including  dam performance studies, FERC memorandums, the most recent  completed inspection report, and other information, from a non-probability  sample of 14 projects encompassing 42 dams relicensed from fiscal  years 2014 through 2017. (See table 5.) We selected these projects and  dams to include ones that were geographically dispersed, had varying  potential risks associated with their potential failure, and had differences  in the length of their relicensing process. We developed a data collection  instrument to collect information from the dam safety documentation and  analyzed data from the sample to evaluate the extent to which FERC  followed its dam safety guidance across the selected projects. To  develop the data collection instrument, we reviewed and incorporated  FERC oversight requirements from its regulations, guidance, and  templates. We conducted three pre-tests of the instrument, and revised  the instrument after each pre-test. To ensure consistency and accuracy in  the collection of this information, for each dam in the sample, one analyst  conducted an initial review of the dam safety documentation; a second  analyst reviewed the information independently; and the two analysts  reconciled any differences. Following our review of the information from  the dam safety documentation, we conducted semi-structured interviews  with FERC engineering staff associated with each of the 14 projects and  42 dams to obtain information about FERC\u2019s inspections, review of dam  performance studies, and analysis of safety during the relicensing of  these projects. Our interviews with these FERC staff provided insight into  FERC\u2019s dam safety oversight approach and are not generalizable to all  projects. We also interviewed FERC officials responsible for dam safety  about dam safety practices.", "In addition, to review how FERC collects information from its dam safety  inspections and the extent to which FERC analyzes it, we also reviewed  inspection data from FERC\u2019s information management systems from  fiscal years 2014 through 2017. To assess the reliability of these data, we  reviewed guidance and interviewed FERC officials. We determined that  the data were sufficiently reliable for our purposes. We compared FERC\u2019s  approach to collecting, recording and using safety information to federal  internal control standards for the design of information systems and  related control activities. We also reviewed our prior work on portfolio- level risk management.", "To evaluate how FERC evaluates engineering studies of dam  performance to analyze dam safety, we reviewed FERC policies and  guidance. We interviewed six independent consultants having experience  inspecting and analyzing FERC-regulated dams to understand how  engineering studies of dam performance are developed. We selected  consultants who had submitted an inspection report to FERC recently  (between December 2017 and February 2018) based on the geographic  location of the project they reviewed and experience conducting these  inspections, and the number of reports submitted to FERC over this time  period. (See table 6.) Our interviews with these consultants provided  insight into FERC\u2019s approach to conducting and reviewing studies and  are not generalizable to all projects or consultants.", "To evaluate the extent to which FERC reviews dam safety information  during relicensing and the information it considers, we reviewed  templates developed by FERC to assess safety during the relicensing  and analyzed the extent to which staff followed guidance in these  templates for the 14 projects and 42 dams in our sample. We also  interviewed stakeholders, including the National Hydropower Association  and Friends of the River to obtain general perspectives on FERC\u2019s  relicensing approach. Our interviews with these stakeholders provided  insight into FERC\u2019s approach to relicensing, and these views are not  generalizable across all stakeholders.", "To review actions to ensure licensee compliance with license  requirements related to dam safety, we reviewed FERC\u2019s guidance  related to compliance and enforcement and interviewed FERC officials  responsible for implementation of the guidance. To review information on  models and datasets used to develop and evaluate engineering studies of  dam performance, we reviewed dam safety documentation associated  with the projects in our sample (described previously), reviewed FERC  documentation, and interviewed FERC officials.", "We conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Federal Energy Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Andrew Von Ah, (202) 512-2834 or vonaha@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mike Armes (Assistant Director);  Matt Voit (Analyst-in-Charge); David Blanding; Brian Chung; Geoff  Hamilton; Vondalee Hunt; Rich Johnson; Jon Melhus; Monique Nasrallah;  Madhav Panwar; Malika Rice; Sandra Sokol; and Michelle Weathers  made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Federal Energy Regulatory Commission oversees over 2,500 dams used for hydropower. The near failure of a FERC-licensed dam in California in 2017 highlights the safety risks of dams. What does FERC do to ensure safety?", "FERC engineers inspect dams and review engineering studies as key safety steps. This helps FERC understand the risks at individual dams. However, a lack of standard language and procedures for recording inspection results limits FERC's ability to identify comparable safety risks at other dams.", "We recommended that FERC develop standard language and procedures for inspection information and assess safety risks portfolio-wide."]}
{"id": "GAO-18-457", "url": "https://www.gao.gov/products/GAO-18-457", "title": "Conflict Minerals: Company Reports on Mineral Sources in 2017 Are Similar to Prior Years and New Data on Sexual Violence Are Available", "published_date": "2018-06-28T00:00:00", "released_date": "2018-06-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Over the past decade, the United States and the international community have sought to improve security in the DRC. In the eastern DRC, armed groups have committed severe human rights abuses, including sexual violence, and reportedly profit from the exploitation of \u201cconflict minerals\u201d\u2014 in particular, tin, tungsten, tantalum, and gold, according to the United Nations. Congress included a provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that, among other things, required the SEC to promulgate regulations regarding the use of conflict minerals from the DRC and adjoining countries. The SEC adopted these regulations in 2012. The act also included a provision for GAO to annually assess the SEC regulations' effectiveness in promoting peace and security and report on the rate of sexual violence in the DRC and adjoining countries.", "In this report, GAO provides information about (1) companies' conflict minerals disclosures filed with the SEC in 2017 compared with disclosures filed in the prior 2 years and (2) the rate of sexual violence in the eastern DRC and adjoining countries published in 2017 and early 2018. GAO analyzed a generalizable random sample of SEC filings and interviewed relevant officials. GAO reviewed U.S., United Nations, and international organizations' reports; interviewed DRC officials, and other stakeholders; and conducted fieldwork in New York at the United Nations headquarters.", "GAO is not making any recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's review of companies' conflict minerals disclosures filed with the U.S. Securities and Exchange Commission (SEC) in 2017 found that, in general, they were similar to disclosures filed in the prior 2 years. In 2017, 1,165 companies filed conflict minerals disclosures\u2014about the same as in 2016 and 2015. Percentages of companies reporting country-of-origin inquiries in 2017 were also similar to the percentages from those 2 prior years. As a result of the inquiries they conducted, an estimated 53 percent of companies reported in 2017 whether the conflict minerals in their products came from the Democratic Republic of the Congo (DRC) and adjoining countries\u2014similar to the estimated 49 percent in 2016 and 2015 but significantly higher than the estimate of 30 percent in 2014 (see figure). In their 2017 disclosure reports, many companies described actions they took to improve data collection processes, and most companies indicated some challenges in determining the country of origin.", "Similar to the prior 2 years, almost all companies required to conduct due diligence, as a result of their country-of-origin inquiries, reported doing so. After conducting due diligence to determine the source and chain of custody of any conflict minerals used, an estimated 37 percent of these companies reported in 2017 that they were able to determine that their conflict minerals came from covered countries or from scrap or recycled sources, compared with 39 and 23 percent in 2016 and 2015, respectively. Four companies in GAO's sample declared their products \u201cDRC conflict-free,\u201d and of those, three included the required Independent Private Sector Audit report (IPSA), and one did not. In 2017, 16 companies filed an IPSA; 19 did so in 2016.", "GAO found information on the rate of sexual violence in the 2017 Uganda and Burundi Demographic and Health Surveys. For Uganda, 22 percent of women and 9 percent of men reported they had experienced sexual violence at least once in their lifetime. For Burundi, 23 percent of women and 6 percent of men reported they had experienced sexual violence at least once in their lifetime. The most recent information on the rate of sexual violence for eastern DRC and Rwanda is from 2016 and is discussed in our previous GAO reports."]}], "report": [{"section_title": "Letter", "paragraphs": ["The exploitation of the mining and trade of \u201cconflict minerals\u201d\u2014in  particular, tin, tungsten, tantalum, and gold from the eastern region of the  Democratic Republic of the Congo (DRC)\u2014has contributed to the  displacement of people and severe human rights abuses. The 2010  Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act) addresses, among other things, trade in conflict minerals.  Section 1502 of the act required several U.S. agencies, including the U.S.  Securities and Exchange Commission (SEC), to take certain actions to  implement the act\u2019s conflict minerals provisions. The act required the  SEC to promulgate disclosure and reporting regulations regarding the use  of conflict minerals from the DRC and adjoining countries (in this report  also collectively referred to as \u201ccovered countries\u201d) by April 2011. The  SEC adopted a conflict minerals disclosure rule (hereafter, SEC  disclosure rule) in August 2012 and published it in the Federal Register in  September 2012.", "The SEC disclosure rule requires companies to file a specialized  disclosure report known as the Form SD if they manufacture, or contract  to have manufactured, products that contain conflict minerals necessary  to the functionality or the production of those products and, as applicable,  to file a conflict minerals report. The Form SD provides general  instructions to companies for filing the conflict minerals disclosure and  specifies the information that each Form SD and conflict minerals report  must include. In addition, the Dodd-Frank Act included a provision for  GAO to report, beginning in 2012 and annually thereafter, on the  effectiveness of the SEC disclosure rule in promoting peace and security  in the DRC and adjoining countries and to report annually, beginning in  2011, on the rate of sexual violence in war-torn areas of the DRC and  adjoining countries, among other things.", "In this report, we (1) examine conflict minerals disclosures filed with the  SEC in 2017 compared with such disclosures filed in each of the prior 2  years and (2) provide information on the rate of sexual violence in the  eastern DRC and adjoining countries published in 2017 and early 2018.", "To examine disclosures that companies filed with the SEC in 2017 in  response to the SEC disclosure rule, we downloaded disclosure reports  (Form SDs) and conflict minerals reports from the SEC\u2019s publicly  available Electronic Data Gathering, Analysis, and Retrieval (EDGAR)  database. We randomly sampled 100 Form SDs from a population of  1,165 to create estimates generalizable to the population of all companies  that filed in response to the SEC disclosure rule. All estimates based on  our sample have a margin of error of plus or minus 10 percentage points  at the 95-percent confidence level, unless otherwise noted. We  determined that the EDGAR database was sufficiently reliable for  identifying the universe of Form SD filings. As described in that report, to  review the completeness and accuracy of the EDGAR database, we  reviewed relevant documentation, interviewed knowledgeable SEC and  GAO officials, and reviewed prior GAO reports on internal controls related  to the SEC\u2019s financial systems. We reviewed the Dodd-Frank Act and the  requirements of the SEC disclosure rule to develop a questionnaire that  guided our data collection and analysis of the Form SD filings. We also  interviewed company representatives attending an industry conference in  Santa Clara, California, to obtain additional perspectives on meeting  disclosure requirements. In addition, we met with representatives of a  range of stakeholders, including nongovernmental organizations, service  providers, international organizations, and the private sector, in  Washington, D.C., and Santa Clara, California. To identify information  published since our last report about sexual violence in the eastern DRC  and adjoining countries, we conducted Internet literature searches to  identify academic articles published in 2017 and early 2018, and we  interviewed and obtained key documents from researchers and  representatives of U.S. agencies and several United Nations agencies.", "We conducted this performance audit from September 2017 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of Conflict in the DRC and the Region", "paragraphs": ["The DRC is a vast, mineral-rich nation with an estimated population of  about 83 million people and an area that is roughly one-quarter the size of  the United States, according to the United Nations. Figure 1 shows the  DRC\u2019s provinces and adjoining countries.", "Since gaining its independence from Belgium in 1960, the DRC has  undergone political upheaval and armed conflict. From 1998 to 2003, the  DRC and eight other African countries were involved in what has become  known as \u201cAfrica\u2019s World War,\u201d which resulted in a death toll of an  estimated 5 million people in the DRC, according to the U.S. Department  of State (State). The eastern DRC has continued to be plagued by  violence, often perpetrated against civilians by illegal armed groups and  some members of the Congolese national military. Notably, in 2012, an  illegal armed group occupied the city of Goma and other cities in the  eastern DRC and clashed with the Congolese national army. During this  time, the United Nations reported numerous cases of sexual violence  against civilians, including women and children, which were perpetrated  by armed groups and some members of the Congolese national military.  In 2017, the United Nations reported that serious violations of human  rights remain widespread in the DRC, including continued acts of sexual  violence by government security forces as well as nonstate armed  groups."], "subsections": []}, {"section_title": "Uses of Conflict Minerals", "paragraphs": ["Various industries, particularly manufacturing industries, use the four  conflict minerals specifically named in the Dodd-Frank Act\u2014tin, tungsten,  tantalum, and gold\u2014in a wide variety of products. For example, tin is  used to solder metal pieces and is also found in food packaging, steel  coatings on automobile parts, and some plastics. Tungsten is used in  automobile manufacturing, drill bits and cutting tools, and other industrial  manufacturing tools and is the primary component of filaments in  incandescent light bulbs. Most tantalum is used to manufacture  capacitors that enable energy storage in electronic products such as cell  phones and computers or to produce alloy additives used in turbines in jet  engines. Gold is held as bullion by central bank reserves and used in  making jewelry and also in the electronics industry, for example, to  manufacture cell phones and laptops."], "subsections": []}, {"section_title": "SEC Conflict Minerals Disclosure Rule", "paragraphs": ["In August 2012, SEC adopted its conflict minerals disclosure rule in  response to Section 1502(b) of the Dodd-Frank Act. The act required that  SEC promulgate disclosure and reporting regulations regarding the use of  conflict minerals originating from the DRC and covered countries. In the  summary section of the adopting release for the rule, SEC noted that to  accomplish the goal of helping to end the human rights abuses in the  DRC caused by the conflict, Congress chose to use the Dodd-Frank Act\u2019s  disclosure requirements to bring greater public awareness of the sources  of companies\u2019 conflict minerals and to promote the exercise of due  diligence on conflict mineral supply chains.", "The SEC disclosure rule addresses the four conflict minerals named in  the Dodd-Frank Act from the DRC and covered countries. The rule  outlines a process for companies to follow, as applicable, to comply with  the rule (see app. II). The process broadly requires a company to  1.  determine whether it manufactures, or contracts to be manufactured,  products with \u201cnecessary\u201d conflict minerals;  2.  conduct a reasonable country-of-origin inquiry (RCOI) concerning the  origin of those conflict minerals; and  3.  exercise due diligence, if appropriate, to determine the source and  chain of custody of those conflict minerals, adhering to a nationally or  internationally recognized due diligence framework, if such a  framework is available for these necessary conflict minerals.", "If companies choose to disclose that their products are \u201cDRC conflict  free,\u201d the SEC disclosure rule requires companies to obtain an  independent private-sector audit (IPSA)."], "subsections": []}]}, {"section_title": "Conflict Minerals Disclosures Filed in 2017 Were Similar to Those Filed in Prior Years, and SEC Updated Guidance on Enforcement of Due Diligence Requirements", "paragraphs": ["Our review of companies\u2019 conflict minerals disclosures filed with the SEC  in 2017 found that, in general, they were similar to disclosures filed in the  prior 2 years. In 2017, a similar number of companies filed conflict  minerals disclosures as in 2015 and 2016. Based on our review of a  generalizable sample, we found that almost all companies that filed  conflict minerals disclosures in 2017 reported performing inquiries about  their conflict minerals\u2019 country of origin, similar to the results we  previously reported for 2016 and 2015. In their 2017 disclosure reports,  many companies described actions they took to improve data collection  processes, and most companies indicated challenges in determining the  country of origin. Our review of company filings found that almost all  companies required to conduct due diligence, as a result of their country- of-origin inquires, reported performing it. SEC issued revised guidance in  April 2017, indicating that the SEC\u2019s Division of Corporation Finance  would not recommend enforcement action if companies did not report on  specified due diligence disclosure requirements."], "subsections": [{"section_title": "About as Many Companies Filed Conflict Minerals Disclosures in 2017 as in Each of the Prior 2 Years", "paragraphs": ["In 2017, 1,165 companies filed conflict minerals disclosures\u2014almost as  many companies as filed in 2016 and 2015 (1,230 and 1,281  respectively). Our analysis of a generalizable sample of filings found that  an estimated 90 percent of the companies that filed in 2017 were  domestic and an estimated 10 percent were foreign companies, similar to  the domestic-to-foreign ratio we found in 2016 and 2015. While not all  companies reported the minerals used, of those that disclosed this  information, an estimated 69 percent reported using tin, 54 percent  reported using tantalum, 59 percent reported using tungsten, and 63  percent reported using gold, figures that are similar to the percentages  reported in 2016."], "subsections": []}, {"section_title": "Percentages of Companies Reporting Minerals\u2019 Country-of-Origin in 2017 Were Similar to Prior 2 Years", "paragraphs": ["Our analysis of a generalizable sample of 2017 filings found that, as in  2016 and 2015, almost all companies that filed conflict minerals  disclosures indicated that they performed country-of-origin inquiries.  Specifically, an estimated 100 percent of the companies reported that  they performed such an inquiry, similar to the percentages that we  estimated reported doing so in 2016 and 2015. As a result of the inquiries  they conducted, an estimated 53 percent of companies reported in 2017  whether the conflict minerals in their products came from covered  countries\u2014similar to the estimate of 49 percent in 2016 and in 2015 but  significantly higher than the estimate of 30 percent in 2014 (see fig. 2)."], "subsections": []}, {"section_title": "Some Companies Reported Improvements in Supply Chain Data Collection Efforts, but Challenges Remain", "paragraphs": ["In the filings we reviewed, many companies indicated they had taken  actions to improve their data collection processes, such as gathering  missing information about their supply chains and working with suppliers  to encourage conflict-free sourcing. In interviews, representatives of  selected companies that filed conflict minerals disclosures in 2017 and  other industry participants noted that (1) awareness among suppliers  about the use of conflict minerals had continued to increase and (2) the  process for collecting data on supply chains had become more routine  and standardized. However, as in prior years, our review of filings found  that most companies reported challenges in determining the country of  origin of conflict minerals, in part due to lack of access to suppliers and  complex supply chains involving many suppliers and processing  facilities."], "subsections": []}, {"section_title": "Almost All Companies Required to Conduct Due Diligence Reported Performing It", "paragraphs": ["Our review of company filings found that almost all companies that were  required, as a result of their country-of-origin inquires, to conduct due  diligence on the source and chain of custody of the conflict minerals in  their products reported doing so. In 2017, an estimated 96 percent  reported conducting due diligence, compared with 96 and 97 percent in  2016 and 2015 respectively. An estimated 87 percent of companies in  2017 reported using a due diligence framework prescribed by the  Organization for Economic Co-operation and Development (OECD)  guidance for conducting due diligence on the source and chain of custody  of the conflict minerals in their products. That result is comparable to an  estimated 92 percent that we reported in 2016 and an estimated 95  percent that we reported in 2015. The remaining 13 percent of the  companies that reported conducting due diligence in 2017 did not specify  a framework for their due diligence activities.", "After conducting due diligence, an estimated 37 percent of the companies  reported in 2017 that they were able to determine that their conflict  minerals came from covered countries or from scrap or recycled sources,  compared with an estimated 39 and 23 percent in 2016 and 2015,  respectively. An estimated 47 percent of the companies in 2017 reported  that they could not definitively confirm the source of the conflict minerals  in their products, compared with an estimated 55 and 67 percent in 2016  and 2015, respectively. However, as in previous years, almost all of the  companies that reported conducting due diligence in 2017 reported that  they could not determine whether the conflict minerals financed or  benefited armed groups. Four companies in our sample reported  determining that the minerals in their products did not finance or benefit  armed groups in covered countries, and declared some products \u201cDRC- conflict free.\u201d Three of these companies included the required  independent private-sector audit (IPSA) report, and one company did not  include an IPSA report. Overall, a total of 16 companies filed an IPSA  report in 2017, compared with 19 in 2016."], "subsections": []}, {"section_title": "SEC\u2019s Division of Corporation Finance Issued Updated Guidance Indicating It Would Not Recommend Enforcement Action on Due Diligence Disclosure Requirements", "paragraphs": ["In April 2017, the SEC\u2019s Division of Corporation Finance issued revised  guidance indicating that it would not recommend enforcement action to  the Commission if companies did not report on specified due diligence  disclosure requirements. The SEC disclosure rule requires companies,  if applicable, to report on their due diligence in a conflict minerals report  (see app. II for additional detail on the disclosure requirements). SEC\u2019s  Division of Corporation Finance staff told us that they received inquiries  from a small number of companies about the filing process for 2017. In  response to these inquiries, these staff noted that they advised  companies that the companies had the flexibility to determine whether or  not to report on their due diligence and to report their country-of-origin  inquiry findings in either the Form SD or in a conflict minerals report.  However, the Division of Corporation Finance staff also told us that,  regardless of the division\u2019s revised guidance, the SEC could still initiate  enforcement action if companies do not report on their due diligence, as  required by the SEC disclosure rule. In our sample, three companies cited  the updated guidance and other statements issued by the SEC in their  filings as a rationale for not reporting on due diligence activities. In  interviews, representatives of some companies and other industry  participants told us that even though the revised guidance and other  statements made by the SEC raised some uncertainty about the filing  process, generally, companies plan to continue to report similar conflict  minerals disclosure information."], "subsections": []}]}, {"section_title": "New Survey Data Are Available on the Rate of Sexual Violence in Burundi and Uganda", "paragraphs": ["We identified two new population-based surveys since our last report  related to sexual violence in Burundi and Uganda published in 2018; the  most recent information for eastern DRC and Rwanda is from 2016. We  also identified some new case-file data on sexual violence in the DRC;  however, as we reported previously, case-file data on sexual violence are  not suitable for estimating an overall rate of sexual violence."], "subsections": [{"section_title": "Results of Two New Demographic and Health Surveys Conducted in Uganda and Burundi Were Published in 2018", "paragraphs": ["We identified two new population-based surveys related to sexual  violence that were conducted in Uganda and Burundi in 2016 and 2017,  respectively, and whose results were published in 2018. The Uganda  Demographic and Health Survey was conducted from June to December  2016 by the Uganda Bureau of Statistics with technical assistance from  ICF International. The survey estimated that 12.7 percent of women  nationwide, ages 15-49, reported they had experienced sexual violence in  the 12-month period preceding the survey, while 21.9 percent reported  they had experienced sexual violence at some point in their lifetime. In  addition, 4 percent of men nationwide, ages 15-49, reported they had  experienced sexual violence in the 12-month period preceding the survey,  while 8.3 percent reported they had experienced sexual violence at some  point in their lifetime.", "The Burundi Demographic and Health Survey was conducted from  October of 2016 to March of 2017 by the Burundi Institute of Statistics  and Economic Studies with technical assistance from ICF International.  The survey estimated that 12.7 percent of women nationwide, ages 15- 49, reported they had experienced sexual violence in the 12-month period  preceding the survey, while 23.1 percent reported they had experienced  sexual violence at some point in their lifetime. In addition, 1.9 percent of  men nationwide, ages 15-49, reported they had experienced sexual  violence in the 12-month period preceding the survey, while 6.1 percent  reported they had experienced sexual violence at some point in their  lifetime. The most recent information on the rate of sexual violence for  eastern DRC and Rwanda is from 2016 and is discussed in our previous  reports.", "Figure 3 shows the publication dates for the population-based surveys  with data on rates of sexual violence in the eastern DRC, Rwanda,  Uganda, and Burundi that have been published since 2007."], "subsections": []}, {"section_title": "Some Additional Case-File Information about Sexual Violence Has Become Available", "paragraphs": ["State and United Nations entities have provided additional case-file  information about instances of sexual violence in the DRC and adjoining  countries.  State\u2019s annual country reports on human rights practices  provided the following case-file data pertaining to sexual violence in the  DRC and Burundi:", "DRC. In 2017, the UN documented 267 adult victims and 171 child  victims, including two boys, of sexual violence in conflict. This  violence was perpetrated by illegal armed groups as well as state  security forces and civilians and was concentrated in North Kivu  Province and in the Kasai region, according to State.", "Burundi. One government organization\u2014Humara Center\u2014 responsible for investigating cases of sexual violence and rape  received 197 cases of sexual and gender-based violence through  early December 2017, according to State. Observers stated many  women were reluctant to report rape, in part due to fear of reprisal,  according to State.", "In addition, UN entities reported the following case-file data about sexual  violence in the DRC:", "DRC. In 2017, the United Nations Organization Stabilization Mission  in the DRC verified 195 cases of conflict-related sexual violence, with  illegal armed groups responsible for 80 percent of the cases and DRC  security forces responsible for the remaining 20 percent. United  Nations officials we interviewed raised concerns about a resurgence  of sexual violence in certain regions in the DRC due to a variety of  factors, including political instability arising from the government\u2019s  postponement of the presidential election originally scheduled to take  place in November 2016."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the SEC, State, and the U.S. Agency  for International Development for comment. SEC provided technical  comments, which we incorporated as appropriate. State and USAID did  not provide comments.", "We are sending copies of this report to appropriate congressional  committees and to the Chairman of the Securities and Exchange  Commission, the Secretary of State, and the Administrator of the U.S.  Agency for International Development. The report is also 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) 512-8612 or gianopoulosk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we provide information about (1) companies\u2019 disclosures  filed with the U.S. Securities and Exchange Commission (SEC) in 2017  compared with disclosures filed in the prior 2 years and (2) the rate of  sexual violence in the eastern Democratic Republic of the Congo and  neighboring countries published in 2017 and early 2018.", "To examine the fourth annual company disclosures filed with the SEC in  2017 in response to the SEC disclosure rule, we downloaded the  specialized disclosure reports (Form SD) and conflict minerals reports  (CMR) from SEC\u2019s publically available Electronic Data Gathering,  Analysis, and Retrieval (EDGAR) database in September 2017. We  downloaded 1,165 filings identified as Form SDs and the CMRs included  in EDGAR. To review the completeness and accuracy of the EDGAR  database, we reviewed relevant documentation, interviewed  knowledgeable SEC officials, and reviewed prior GAO reports on internal  controls related to SEC\u2019s financial systems. We determined that the  EDGAR database was sufficiently reliable for identifying the universe of  SD filings.", "We reviewed the conflict minerals section of the Dodd-Frank Wall Street  Reform and Consumer Protection Act (Dodd-Frank Act) and the  requirements of the SEC disclosure rule to develop a data collection  instrument (DCI) that guided our analysis of Form SDs and CMRs that  contain the information disclosed by the filing companies. Our DCI was  not a compliance review of the Form SDs and CMRs. The questions were  written in both yes-no and multiple-choice formats. An analyst reviewed  the Form SDs and CMRs and recorded responses to the DCI for all of the  companies in the sample. A second analyst also reviewed the Form SDs  and CMRs and verified the responses recorded by the first analyst.  Analysts met to discuss and resolve any discrepancies.", "We randomly sampled 100 Form SDs from a population of 1,165 to  create estimates generalizable to the population of all companies that  filed. All estimates based on our sample have a margin of error of plus or  minus 10 percentage points or less at the 95-percent confidence level.  Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample\u2019s results as a 95-percent confidence interval. This is the interval  that would contain the actual population value for 95 percent of the  samples we could have drawn. We also attended an industry conference  on conflict minerals and spoke with company representatives to provide  additional perspective.", "To address our second objective, we identified and assessed any  information on sexual violence in the eastern DRC and the three adjoining  countries\u2014Rwanda, Uganda, and Burundi\u2014that had been published or  otherwise had become available in 2017 and early 2018. We discussed  the collection of sexual violence\u2013related data in the DRC and adjoining  countries, including population-based survey data and case-file data,  during interviews with U.S. Department of State and U.S. Agency for  International Development officials and with representatives of  nongovernmental organizations and researchers whom we interviewed  for our prior review of sexual violence rates in the eastern DRC and  adjoining countries. We also interviewed officials from the United Nations  Population Fund and the United Nations Special Representative of the  Secretary-General in New York on Sexual Violence in Conflict. In  addition, we conducted Internet searches to identify new academic  articles containing any additional information on sexual violence  published in 2017 and early 2018.", "We conducted this performance audit from September 2017 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: U.S. Securities and Exchange Commission (SEC) Summary of the Conflict Minerals Disclosure Rule", "paragraphs": ["The U.S. Securities and Exchange Commission (SEC) conflict minerals  disclosure rule requires certain companies to file a specialized disclosure  report, known as the Form SD, if the company manufactures, or contracts  to have manufactured, a product or products containing conflict minerals  that are necessary to the functionality or the production of those  products. The rule also requires each company, as applicable, to provide  a description of the measures the company took to exercise due diligence  in determining the source and chain of custody of the conflict minerals,  the facilities used to process them, their country of origin, and the efforts  made to determine the mine or location of origin with the greatest  possible specificity. Form SD provides general instructions for filing  conflict minerals disclosures and specifies the information that companies  must provide. Companies were required to file under the rule for the first  time by June 2, 2014, and annually thereafter on May 31. Figure 4 shows  the SEC\u2019s flowchart summarizing the conflict minerals disclosure rule."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Godwin Agbara (Assistant  Director), Farahnaaz Khakoo-Mausel (Analyst-in-Charge), Diana  Blumenfeld, Andrew Kurtzman, Justin Fisher, Grace Lui, David Dayton,  Christopher Keblitis, and Michael McAtee made key contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Conflict Minerals: Information on Artisanal Mined Gold and Efforts to  Encourage Responsible Sourcing in the Democratic Republic of the  Congo. GAO-17-733. Washington, D.C.: August 23, 2017.", "SEC Conflict Minerals Rule: 2017 Review of Company Disclosures in  Response to the U.S. Securities and Exchange Commission Rule.  GAO-17-517R. Washington, D.C.: April 26, 2017.", "Conflict Minerals: Insights from Company Disclosures and Agency  Actions. GAO-17-544T. Washington, D.C.: April 5, 2017.", "SEC Conflict Minerals Rule: Companies Face Continuing Challenges in  Determining Whether Their Conflict Minerals Benefit Armed Groups.  GAO-16-805. Washington, D.C.: August 25, 2016.", "SEC Conflict Minerals Rule: Insights from Companies\u2019 Initial Disclosures  and State and USAID Actions in the Democratic Republic of the Congo  Region. GAO-16-200T. Washington, D.C.: November 17, 2015.", "SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies  Were Unable to Determine the Source of Their Conflict Minerals.  GAO-15-561. Washington, D.C.: August 18, 2015.", "Conflict Minerals: Stakeholder Options for Responsible Sourcing Are  Expanding, but More Information on Smelters Is Needed. GAO-14-575.  Washington, D.C.: June 26, 2014.", "SEC Conflict Minerals Rule: Information on Responsible Sourcing and  Companies Affected. GAO-13-689. Washington D.C.: July 18, 2013.", "Conflict Minerals Disclosure Rule: SEC\u2019s Actions and Stakeholder- Developed Initiatives. GAO-12-763. Washington, D.C.: July 16, 2012.", "The Democratic Republic of Congo: Information on the Rate of Sexual  Violence in War-Torn Eastern DRC and Adjoining Countries.  GAO-11-702. Washington, D.C.: July 13, 2011.", "The Democratic Republic of the Congo: U.S. Agencies Should Take  Further Actions to Contribute to the Effective Regulation and Control of  the Minerals Trade in Eastern Democratic Republic of the Congo.  GAO-10-1030. Washington, D.C.: September 30, 2010."], "subsections": []}], "fastfact": ["Armed groups in the Democratic Republic of the Congo have committed severe human rights abuses, including sexual violence, and reportedly profit from mining and trade in tungsten, gold and other \"conflict minerals\" found in the region.", "In 2012, the Securities and Exchange Commission began requiring companies whose products may contain these minerals (from the DRC and neighboring countries) to report on their sources.", "We found in 2017 that nearly all the companies required to report this information did so and that most reported difficulty determining the country of origin. We also identified 2 new surveys on sexual violence in the area."]}
{"id": "GAO-18-147", "url": "https://www.gao.gov/products/GAO-18-147", "title": "Bureau of Prisons: Better Planning and Evaluation Could Help Ensure Effective Use of Retention Incentives", "published_date": "2017-12-07T00:00:00", "released_date": "2018-01-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["BOP is the largest employer within DOJ and is responsible for the care and custody of an inmate population of about 186,000. BOP has faced challenges retaining staff at correctional facilities, although it has used retention incentives, along with other human capital flexibilities. GAO was asked to review BOP's use of retention incentives.", "This report addresses: (1) how BOP used its authority to pay retention incentives; (2) internal controls BOP has in place for the use of retention incentives; and (3) the extent to which BOP plans for and evaluates the use of retention incentives. GAO obtained employee-level retention incentive expenditure data from DOJ's Justice Management Division for fiscal years 2012 through 2016. GAO also reviewed agency documentation, such as policy statements and 40 randomly selected retention incentive application packet case files from fiscal years 2014 through 2016. GAO also interviewed officials from BOP's Central Office and four correctional facilities that use retention incentives, selected to reflect variation in the number and types of employees receiving retention incentives, BOP regions, and BOP institution security levels."]}, {"section_title": "What GAO Found", "paragraphs": ["From fiscal years 2012 to 2016, the Department of Justice's (DOJ) Federal Bureau of Prisons' (BOP) total retention incentive expenditures generally increased from $10.7 to $14.0 million and the number of employees receiving retention incentives increased from 2,024 to 2,460. During those five years, BOP spent more than 97 percent of its total retention incentive expenditures on employees at four BOP institutions in California and for medical professionals nationwide. Further, total retention incentive expenditures for medical professionals increased by an average of 21 percent per year (see figure). According to BOP officials, BOP uses retention incentives, for example, to supplement BOP's medical professionals' salaries which are generally lower than private sector salaries.", "BOP has a variety of internal controls in place throughout the retention incentive process that help ensure retention incentive applications and approvals meet requirements. For example, each application goes through multiple levels of review to verify its accuracy and completeness.", "BOP takes steps to determine workforce needs and how to fill those needs, but has not strategically planned for and evaluated its use of retention incentives. According to BOP, planning for human capital needs is conducted at institutions during quarterly meetings, but discussions about these incentives respond to short-term staffing situations rather than proactively addressing future staffing needs. Including human capital goals and strategies in BOP's human capital plan would create a roadmap so the agency could move from being reactive to its current workforce needs to being strategic in trying to achieve its long-term workforce goals. Additionally BOP has not evaluated the effectiveness of its use of retention incentives in retaining staff. As a result, BOP does not know whether retention incentives have contributed to employees' retention in relation to other incentives used by BOP. Consistent with key principles for strategic human capital planning, planning for and evaluating the use of retention incentives could help BOP better determine if these incentives are an efficient and effective means by which to retain staff."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that BOP (1) include human capital goals and how retention incentives will be used to achieve these goals in its human capital plan; and (2) evaluate the use of retention incentives. BOP concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Federal Bureau of Prisons (BOP) is the largest employer within the  Department of Justice (DOJ). Its staff are responsible for managing the  care and custody of an inmate population of about 186,000, but BOP has  faced challenges retaining staff at some of its correctional facilities. With a  fiscal year 2017 budget of more than $7 billion\u2014a quarter of DOJ\u2019s  budget\u2014and about 40,000 employees, BOP uses retention incentives,  along with other human capital flexibilities, to help retain its staff.", "Over the last decade, we, along with the Office of Personnel Management  (OPM), DOJ, and DOJ\u2019s Office of the Inspector General (OIG), have  reported on the challenges BOP encounters when trying to retain or hire  staff critical to the care of prisoners, such as medical professionals.  These reviews showed, in part, that BOP faced challenges in retaining  employees at federal institutions primarily because the private sector  offered higher pay and more desirable work conditions, which was  especially attractive to BOP personnel who were assigned to remote  locations. These reviews found that, as a result of these challenges,  BOP had agency-wide staffing shortages, including mission-critical skills  gaps that could have a significant impact on BOP\u2019s mission. For example,  as of June 2017, only 82 percent of BOP\u2019s authorized medical positions  were filled.", "According to BOP officials and OPM, BOP uses retention incentives to  better attract, hire, and retain top talent to work at remote locations and in  undesirable working conditions and to help address staffing challenges at  some institutions. You asked us to review BOP\u2019s use of retention  incentives. For this report, we provide information regarding (1) how BOP  has used its authority to pay retention incentives; (2) what internal  controls BOP has in place for the use of retention incentives; and (3) the  extent to which BOP plans for and evaluates the use of retention  incentives.", "To determine how BOP used its authority to pay retention incentives, we  obtained employee-level retention incentive expenditure data from DOJ\u2019s  Justice Management Division (JMD) for fiscal years 2012 through 2016.  We analyzed data from this period in order to capture the most recent  trends in BOP\u2019s retention incentive expenditures and report on the most  current data available. We aggregated and analyzed the employee-level  data by institution, occupation, and employee grade level. We reviewed  BOP, DOJ, and OPM manuals to identify the system codes used to track  retention incentives expenditures related to specific institutions and BOP  regions and to identify the names for each occupational series code in the  datasets. We also obtained aggregated retention incentive expenditure  data from U.S. Department of Health and Human Services\u2019 (HHS) Public  Health Service (PHS) on the total amount of funds BOP reimbursed  PHS. These funds were used to reimburse for retention incentives  awarded to PHS staff who were assigned to BOP for fiscal years 2012  through 2016. Additionally, we interviewed BOP Human Resource  Management headquarters officials to obtain information on the primary  purposes for BOP\u2019s use of retention incentives and their views on  identified retention incentive expenditures trends. We also interviewed  PHS officials to better understand how BOP and PHS manage costs,  including retention incentive expenditures, for PHS staff assigned to BOP.  To assess the reliability of both BOP employee-level data and PHS  aggregated data, we examined the data and related controls, and we  interviewed relevant BOP and PHS officials. We determined these data  are sufficiently reliable for the purposes of this report.", "To describe the internal controls that BOP has in place related to  retention incentives, we reviewed documentation regarding BOP  requirements and guidance for the use of retention incentives. We also  interviewed officials from BOP\u2019s Central Office who are responsible for  the administration, management, and oversight of BOP\u2019s human capital  management systems, including retention incentives. Additionally, we  interviewed the warden and human capital officers at 4 of the 122 BOP  institutions to obtain illustrative examples regarding the internal controls in  place at these institutions for ensuring the proper disbursement of  retention incentives. Specifically, we interviewed BOP officials at Federal  Correctional Complex Pollock in Pollock, LA; Federal Correctional  Complex Butner in Butner, NC; United States Penitentiary Atwater in  Atwater, CA and Federal Correctional Institution Phoenix, in Phoenix, AZ.  These institutions were selected to ensure variation in the number and  types of employees receiving retention incentives, BOP region, and  security-level. Although the information we obtained from the interviews  with officials at these four institutions cannot be generalized to other BOP  institutions, these interviews provided important insights and perspectives  about the use of retention incentives at BOP institutions. We also  reviewed a non-generalizable random sample of 40 retention incentive  application packet case files for fiscal years 2014 through 2016 to provide  examples of the internal control activities that BOP institutions have in  place to monitor the application, approval, and funds disbursement  processes of BOP\u2019s retention incentive program.", "To determine the extent to which BOP plans for and evaluates the use of  retention incentives, we interviewed BOP officials regarding their  experiences with retention incentives, how they use retention incentives  to strategically manage their workforce needs, how the agency evaluates  the effectiveness of retention incentives, and how retention incentives  contribute to BOP\u2019s broader human capital goals. We then compared  BOP efforts to our prior work on strategic human capital planning,  specifically in terms of planning for and evaluating the use of human  capital flexibilities. Additionally, we interviewed the warden and human  capital officers at the four BOP institutions mentioned above to obtain  illustrative examples of how workforce planning occurs at these  institutions. We also reviewed the DOJ OIG\u2019s relevant work and our prior  reports to better understand the challenges that BOP faces in retaining  medical professionals and other staff.", "We conducted this performance audit from August 2016 through  December 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "BOP\u2019s Organization and Workforce", "paragraphs": ["Justice Management Division (JMD)  JMD provides the Federal Bureau of Prisons  senior management with guidance as it  relates to Department of Justice (DOJ) policy  for all matters pertaining to organization,  management, and administration, including  the use of human capital flexibilities such as  retention incentives.", "BOP is responsible for incarcerating all federal offenders sentenced to  prison. To carry out its mission, BOP, under the oversight of DOJ\u2019s JMD,  manages the human resource operations of its institutions, including the  use of retention incentives. BOP administers, monitors, and oversees  retention incentives through its Central Office, regional offices, and  institutions.", "Central Office. The Central Office serves as BOP\u2019s headquarters and  provides oversight of BOP operations and program areas. Within the  Central Office is BOP\u2019s Human Resource Management Division (HRMD)  which is responsible for developing, implementing and administering  human resource policies and programs, including the use of retention  incentives that meet OPM and DOJ requirements. In addition, the  Central Office\u2019s Program Review Division (PRD) is responsible for  assessing BOP programs, including human resources, to ensure that they  are managed and operated effectively.", "Regional offices. BOP has six regional offices that cover the Mid- Atlantic, North Central, Northeast, South Central, Southeast, and Western  regions of the United States. These offices, each led by a regional  director, oversee the operations of the 122 federal institutions within their  respective geographic regions of the country. According to BOP officials,  regional office staff also provide local level oversight of institutions\u2019  human capital programs, such as retention incentives, among other  things.", "Institutions. BOP institutions are managed by a warden and other  officials, including an executive assistant and associate warden who  generally provide overall direction and, in part, administer the institution\u2019s  human capital policies, including policies on retention incentives.  Correctional services staff represent the largest segment of each  institution\u2019s workforce and are responsible for the correctional treatment,  custody, and supervision of inmates. Non-correctional services staff  include, among others, those employees assigned to non-correctional  services management, facility operations, and the health services unit.  Workers in health services and psychology services are responsible for  providing inmates with medical, dental, and mental health services and  include, for example, dentists, pharmacists, physicians, nurses,  psychologists, and drug treatment specialists."], "subsections": []}, {"section_title": "Federal Laws and Regulations Related to Retention Incentives", "paragraphs": ["The Federal Employees Pay Comparability Act of 1990 first authorized  OPM to allow federal agencies to give incentives, including retention  incentives, to employees. The Federal Workforce Flexibility Act of 2004  provided federal agencies increased flexibilities regarding these  incentives. For example, individual retention incentives that were  capped at 25 percent of an employee\u2019s basic pay rate could be increased  up to 50 percent in cases of critical agency need with OPM\u2019s approval.  Generally, under OPM regulations, an agency is authorized to pay a  retention incentive to employees. This happens when the agency  determines that the unusually high or unique qualifications of the  employee or a special need of the agency for the employee\u2019s services  makes it essential to retain the employee and that the employee would be  likely to leave federal service in the absence of an incentive. In addition,  OPM requires agencies to develop plans for using retention incentives  outlining, in part, the required documentation for justifying the retention  incentive and any criteria for determining the amount of incentive and the  length of the service period. Generally, agencies must require that  employees sign a written service agreement that outlines the terms of the  service such as the employee\u2019s agreement to remain a certain length of  time with the agency. Additionally, according to OPM regulations, to  qualify for a retention incentive, each employee must have a performance  rating of at least \u201cfully successful\u201d or an agency\u2019s equivalent performance  rating."], "subsections": []}, {"section_title": "BOP\u2019s Retention Incentive Program", "paragraphs": ["BOP funds the majority of its retention incentives through its Salaries and  Expenses appropriation account which represented almost 93 percent of  BOP\u2019s budget in FY 2016. According to BOP officials, BOP\u2019s Central  Office allocates funding from the Salaries and Expenses account to the  regional offices. These regional offices then determine how to allocate  their budget among various salary and expense activities, including  retention incentives. HRMD delegates retention incentive determinations  to each institution. In accordance with OPM requirements and BOP\u2019s  October 2016 Program Statement on Compensation, the wardens make  retention incentive requests based on documented evidence that the  employee possesses unusually high or unique qualifications or meets a  special need of the agency and has a performance rating of at least  \u201csuccessful or its equivalent.\u201d These incentives are calculated as a  percentage of the employee\u2019s basic pay and are disbursed in installments  to the employee each pay period."], "subsections": []}, {"section_title": "Other Compensation- Based Human Capital Flexibilities", "paragraphs": ["In addition to retention incentives, BOP has authority to provide other  compensation-based human capital flexibilities to employees, in certain  circumstances. The following summarizes some of the compensation- based human capital flexibilities that BOP uses in addition to retention  incentives, to retain and recruit staff:", "Recruitment and relocation incentives. BOP pays recruitment  incentives to new hires and relocation incentives to current employees  who elect to move to a different geographic area, when a position is  likely to be difficult to fill in the absence of an incentive.", "Student loan repayments. Using this authority, BOP may repay  federally-insured student loans to attract job candidates or retain  current employees.", "Special salary rates. With OPM approval, BOP may establish higher  rates of pay for an occupation or group of occupations nationwide or  in a local area when it finds the government\u2019s recruitment or retention  efforts are, or would likely become, significantly handicapped without  those higher rates.", "Physicians and dental comparability allowances. Comparability  allowances may be paid to certain eligible physicians or dental  professionals who enter into service agreements. These allowances  are paid only to categories of physicians and dentists for which the  agency is experiencing recruitment and retention problems and are  fixed at the minimum amounts necessary to deal with such problems."], "subsections": []}]}, {"section_title": "BOP Increased Its Use of Retention Incentives and Used Them Primarily to Retain Staff in California and for Medical Professionals Nationwide", "paragraphs": [], "subsections": [{"section_title": "BOP\u2019s Total Retention Incentive Expenditures and the Number of Employees Receiving Retention Incentives Generally Increased from Fiscal Year 2012 through Fiscal Year 2016", "paragraphs": ["BOP retention incentive expenditures generally increased from $10.7  million in fiscal year 2012 to $14.0 million in fiscal year 2016.  Additionally, as illustrated in table 1, the number of employees who  received retention incentives increased each year from 2,024 employees  in fiscal year 2012 to 2,460 employees in fiscal year 2016.", "In general, BOP employees who received retention incentives received  the incentive for more than one year. For example, from fiscal year 2012  through fiscal year 2016, a total of 3,382 BOP employees received  retention incentive payments. Of those, 82 percent (2,766 of 3,382)  received retention incentive payments for at least 2 years and 39 percent  received retention incentives all 5 years, as shown in figure 1."], "subsections": []}, {"section_title": "BOP Used Retention Incentives Primarily at Four California Institutions and for Medical Professionals Nationwide", "paragraphs": ["From fiscal years 2012 through 2016, BOP spent more than 97 percent of  its total retention incentive expenditures on employees at four California  institutions and for medical professionals nationwide. BOP\u2019s total  retention incentive expenditures for the four California institutions and  medical professionals nationwide in fiscal year 2016 are provided in figure  2.", "Four California Institutions. The California institutions\u2014United States  Penitentiary (USP) Atwater, Federal Correctional Institution (FCI)  Herlong, FCI Mendota, and Federal Correctional Complex (FCC)  Victorville\u2014constituted the largest portion of BOP\u2019s total retention  incentive expenditures, and the level of their expenditures remained  relatively steady from fiscal year 2012 through 2016. BOP provides group  retention incentives for staff at the General Schedule (GS) grades level  12 and below and those in the Federal Wage System at three  institutions\u2014USP Atwater, FCI Herlong, and FCC Victorville. BOP also  provides individual retention incentives to its employees at GS grades  level 12 and below and in the Federal Wage System at FCI Mendota. As  shown in figure 3, our analysis of BOP data found that from fiscal years  2012 through 2016, these four California institutions had the largest  percentage of retention incentive expenditures across institutions as well  as the largest percentage of employees who received retention  incentives.", "Additionally, the four California institutions\u2019 retention incentive  expenditures remained relatively steady\u2014around $8.1 to $8.2 million  during the 5-year period\u2014even though the overall number of employees  who received the incentives generally increased. BOP officials told us that  these California institutions\u2019 retention incentive expenditures remained  relatively steady in spite of an overall increase in the number of  employees receiving incentives, in part, because in fiscal year 2013 BOP  reduced the retention incentive rate\u2014the percentage of an employee\u2019s  basic pay that determines the employee\u2019s retention incentive\u2014 by 3  percent at the four California institutions.", "BOP officials reported using retention incentives primarily at these four  institutions to supplement correctional officers\u2019 salaries and compensate  for the gap between BOP\u2019s and other institutions\u2019 salaries. Specifically,  officials told us that these four California institutions were consistently  understaffed as a result of their lower salaries in comparison to salaries  offered at California state and local prisons and at other BOP institutions  in California metropolitan areas. The Department of Labor\u2019s Bureau of  Labor Statistics reports that the average salary for correctional officers in  California in 2016 was $70,020. For the same year, the annual average  salary for BOP correctional officers at these four institutions was $50,859.  To bring these four California institutions\u2019 salaries in line with those  offered by state, local, and other BOP institutions in California  metropolitan areas, BOP officials told us that they first use recruitment  incentives to attract and hire staff and then provide retention incentives to  employees with a performance rating of at least \u201csuccessful.\u201d", "Medical Professionals. From fiscal years 2012 through 2016, BOP  retention incentive expenditures for medical professionals increased by  an average of approximately 21 percent per year. Our analysis showed  that most recently\u2014for fiscal years 2015 and 2016\u2014BOP retention  incentive expenditures for medical professionals accounted for the largest  portion of BOP\u2019s total retention incentive expenditures across the various  occupation groups and was primarily responsible for the overall increase  in BOP\u2019s total retention incentive expenditures from fiscal year 2012  through fiscal year 2016. For example, in fiscal year 2016, BOP spent  approximately 42 percent of total retention incentives expenditures for  medical professionals ($5.8 million), 27 percent on correctional officers  ($3.8 million), and the remaining 31 percent on employees in other  occupations. In total, BOP retention incentive expenditures for medical  professionals increased from approximately $2.7 million in fiscal year  2012 to $5.8 million in fiscal year 2016, as shown in figure 4. The  increase accounted for 92 percent of BOP\u2019s total increase in retention  incentive expenditures during the five-year period. In comparison, BOP\u2019s  retention incentive expenditures for correctional officers and all other  occupations remained relatively steady from fiscal year 2012 through  fiscal year 2016, increasing by an average of approximately 1 percent per  year.", "According to our analysis, the increase in retention incentive expenditures  for medical professionals during the five years is partially explained by the  increase in the number of institutions providing retention incentives to  medical professionals. Specifically, from fiscal years 2012 through 2016,  the number of institutions providing retention incentives to medical  professionals increased from 53 institutions with 341 employees in  medical occupations receiving retention incentives to 84 institutions  providing retention incentives to a total of 646 employees in medical  occupations.", "According to BOP officials, BOP primarily uses retention incentives for  medical professionals in an effort to retain these employees by  supplementing BOP salaries which are generally lower than salaries  offered to medical professionals in the private sector. Officials told us that  BOP has designated medical professional positions as hard-to-fill and,  therefore, BOP retaining these professionals in a correctional setting  requires the use of a variety of incentives, including retention incentives,  in order to increase pay."], "subsections": []}]}, {"section_title": "BOP Has a Variety of Internal Controls in Place throughout the Retention Incentive Process", "paragraphs": [], "subsections": [{"section_title": "BOP\u2019s Internal Controls Are Intended to Ensure That Retention Incentive Applications and Approvals Meet Requirements", "paragraphs": ["BOP has a number of internal controls in place to ensure that retention  incentive applications meet BOP and other requirements. BOP officials  told us that these controls are part of a multilayered application and  review process that begins at the institution and culminates at BOP\u2019s  Central Office. Our review of a random sample of 40 application packet  case files for retention incentives awarded from fiscal year 2014 through  fiscal year 2016 found that they all generally incorporated the internal  controls described by officials. The key controls in this process include:  Application review at the institution and regional levels.  According to BOP officials, the retention incentive application  process begins with an institution\u2019s human resources office,  whose staff complete a retention incentive application on behalf of  an employee. The institution\u2019s human resources office verifies that  the information in the application justifies a retention incentive and  that funds are available to pay the incentive. Although it is not  required, BOP officials said that they use a retention incentive  application checklist to help institutions ensure that retention  incentive applications are complete. The institution\u2019s human  resources office then submits the completed application packet,  which includes supporting documentation, to the warden for  review. Next, the application packet is forwarded to the respective  BOP regional director who also reviews it for accuracy and  completeness. The regional director then adds an approval  statement and forwards the packet to the Central Office for final  review and approval. Of the 40 randomly selected application  packet case files that we reviewed, 36 included a retention  incentive checklist used by the institutions and all contained  information to justify the retention incentive as well as a statement  of the regional director\u2019s approval.", "Central Office\u2019s final application approval. BOP policy requires  that all retention incentive applications undergo two levels of  review in BOP\u2019s Central Office: first by the Human Resource  Management Division\u2019s (HRMD) Staffing and Employee Relations  Section (SERS) and next by HRMD\u2019s Personnel Director, for final  review and approval. According to BOP officials, during the review  process there is ongoing communication between the various  entities to ensure that applications are complete and accurate; for  example, if SERS finds an error in the application or requests  additional information, SERS returns the application to the  regional or institutional level for correction and re-review. All of the  40 BOP application packet case files that we reviewed included  approvals by HRMD\u2019s Personnel Director or an authorized official,  as required by BOP policy.", "Annual review and re-certification to continue retention  incentives. According to BOP policy, on an annual basis,  institutions\u2019 human resources offices are required to review  employees\u2019 retention incentives to determine whether the  incentive is still warranted. Payment of a retention incentive may  be recertified and continued as long as the conditions giving rise  to the original determination to pay the incentive still exist and  funds are available. For each retention incentive, an institution\u2019s  human resources office must determine whether to continue,  adjust, or terminate the incentive within one year of the initial or  most recent approval. If the human resources office decides to  continue the retention incentive, the institution\u2019s warden must  again submit a retention incentive application. Applications to  continue the retention incentive proceed through the same review  and approval process as initial applications. Of the 40 application  files that we reviewed, 29 were continuations and 8 were initial  requests for a retention incentive."], "subsections": []}, {"section_title": "BOP Institutions Use Internal Controls to Help Monitor the Expiration, Continuation, or Termination of Retention Incentives", "paragraphs": ["According to BOP officials, after the initial approval of a retention  incentive, an institution\u2019s human resources office has primary  responsibility for the monitoring of retention incentive payments.  According to officials, institutions use a variety of internal controls to  monitor the expiration, continuation, or termination of retention incentives,  for example:  Monitoring expiration dates. BOP officials stated that  institutions\u2019 human resources offices monitor retention incentives  in order to identify incentives that are approaching their expiration  date and need to be terminated or renewed. For example,  according to BOP officials from USP Atwater, FCC Butner and FCI  Phoenix, staff from their institutions\u2019 human resources offices may  generate a retention incentive activity report and cross reference  this report with their locally generated tracking sheets. This  process helps identify retention incentives approaching their  expiration dates so that the human resources offices can submit a  request for continuation before the incentive expires.", "Using automated reminders to prompt file review. BOP  officials stated that institutions use automated reminders to alert  human resources staff to check the records of retention incentive  recipients for human resources-related events such as promotions  or relocations that could affect the continuation of a retention  incentive.", "Following a checklist of steps for relocation processes. BOP  officials told us that in April 2016 they instituted a checklist that  outlines steps that an institution\u2019s human resources staff must  take when employees relocate to a different institution. Based on  our review of this checklist, one step on the sheet prompts human  resources staff to review the employee\u2019s retention incentive.  According to BOP policy, when an employee receiving a retention  incentive transfers to another location, the human resources office  where the employee was receiving the retention incentive is  responsible for submitting a request to terminate the incentive.  The termination must be effective the last day of the pay period  that the employee occupies the position.", "Submitting forgiveness waivers. BOP officials told us that  institutions submit forgiveness waivers if a request to continue a  retention incentive is not submitted and approved prior to the  retention incentive expiring. BOP officials said that a forgiveness  waiver is considered an acknowledgement of an administrative  error and is a late submission of a retention incentive renewal that  was still warranted. The waiver is not a request to forgive an  overpayment since the employee was still considered to be  eligible for the retention incentive. Of the 40 retention incentive  applications that we reviewed, 5 applications included forgiveness  waivers to excuse the tardiness of the filing and request  continuations of the retention incentive."], "subsections": []}, {"section_title": "BOP and DOJ Conduct Periodic Reviews of Retention Incentive Controls", "paragraphs": ["According to BOP officials, BOP conducts periodic audits and reviews of  its human capital activities and related internal controls, to ensure that  retention incentives are being used appropriately. The following offices  conduct various audits and reviews involving BOP\u2019s retention incentives:  BOP\u2019s Program Review Division (PRD) audits regional and  institutional human resources functions. PRD audits BOP\u2019s  regional and institutional human resources offices to ensure that  they are in compliance with BOP policies and procedures.  According to BOP officials, as part of the audit process, PRD  audits retention incentives to ensure that they have the proper  approvals and are justified. PRD audits each institution\u2019s human  resources office at least every three years. During these audits,  PRD generates retention incentive activity reports (the same  reports that institutions run when monitoring for expiration dates),  to check the accuracy of retention incentive programs under  review. Following each audit, PRD issues a final report with  findings to the institution and to the staff operating the program  area under audit. Institutions respond to the report with corrective  actions that the institution will take to address the findings. When  the institution has resolved all corrective actions from the audit,  the audit is closed. Additionally, each quarter, PRD provides  HRMD with a report that summarizes its quarterly audit findings.  According to BOP officials, HRMD uses these reports to identify  any agency-wide trends that need to be addressed.", "Our review of BOP data showed that between fiscal years 2012  and 2016, PRD conducted nearly 200 audits. For example, in the  fourth quarter of fiscal year 2016, PRD audited five institutions\u2019  and regional offices\u2019 human resource management functions.  During these audits, PRD identified nine deficiencies, one of which  pertained to retention incentives. Specifically, it found that one  audited institution did not terminate an employee\u2019s retention  incentive after the employee had relocated to another institution.  To correct the deficiency, the institution cancelled the retention  incentive which discontinued future disbursements. According to  BOP officials, a bill was generated to recoup the overpayment  from the employee.", "BOP institutions conduct annual operation reviews of internal  functions, such as human resources. BOP officials told us that  each institution conducts annual operational reviews of various  internal functions, such as human resources. According to BOP\u2019s  Program Review Guidelines for Human Resource Servicing  Offices, during these reviews, institutions are required to review  supporting documentation for staff currently receiving an incentive  to determine if the incentives are still warranted. If the initial  request for the retention incentive was made over the preceding  12 months, institutions are also required to ensure that it was  approved. According to BOP officials, the results of these reviews  are reported to PRD through the Central Office.", "DOJ\u2019s Justice Management Division (JMD) audits BOP\u2019s  human resources programs. According to BOP officials, JMD  conducts audits of component-level human resources programs to  determine whether BOP\u2019s systems are compliant with DOJ policy  and aligned with DOJ\u2019s Human Capital Strategic Plan. JMD\u2019s most  recent audit of BOP\u2019s human resources programs that included a  review of BOP\u2019s retention incentives occurred in September 2010  at BOP\u2019s Human Resource Service Center in Grand Prairie,  Texas. JMD found that in some cases BOP granted retention  incentives prior to the signing of service agreements. JMD also  found that BOP lacked documentation to authorize a group  retention incentive for employees at its Victorville, California  institution. BOP\u2019s written response to the findings stated that JMD  incorrectly applied the service agreement requirement, as service  agreements were not warranted in the specific case that it  identified. Additionally, BOP stated that the documents JMD  identified as missing from the case files in question were kept in  separate files and not required to be part of the retention incentive  application. JMD agreed with BOP\u2019s responses and in January  2013, JMD closed out the audit\u2019s findings noting that these  responses satisfied all required corrective actions."], "subsections": []}]}, {"section_title": "BOP Conducts Limited Planning and Evaluation of the Effectiveness of Retention Incentives", "paragraphs": [], "subsections": [{"section_title": "BOP\u2019s Planning for the Use of Retention Incentives is Limited", "paragraphs": ["While BOP takes a number of steps to determine current workforce needs  and how to fill those needs, BOP does not strategically plan for how  retention incentives can be used to meet long-term human capital goals.  BOP officials stated that planning for human capital needs is conducted at  institutions during quarterly workforce utilization meetings or manpower  salary meetings. During these meetings, executive staff at the institution  discuss the current state of the institution\u2019s workforce. According to the  BOP officials, while considering attrition, hiring, and turnover rates, the  executive staff decide strategies they will employ to attract and retain  employees for their current needs.", "While officials we spoke with at four institutions have discussed retention  incentives at their workforce utilization meetings, details about the content  of these discussions ranged. According to these officials and our review  of meeting minutes from the four institutions, discussions about retention  incentives respond to each institution\u2019s short-term staffing situation rather  than address future staffing needs based on an overall strategic human  capital plan. For example:", "USP Atwater officials told us that they review the current turnover  rate, budget, projected vacancies, and use of retention incentives at  annual budget development meetings. Meeting minutes reflected the  following on retention incentives: \u201cretention \u2026  still  necessary to retain staff and hard-to-fill positions.\u201d", "FCC Butner is a medical facility that offers retention incentives to all  medical officers (all types of doctors) and nurses (practitioners,  registered, etc.) at the institution. According to Butner officials, during  workforce utilization meetings, Butner officials discuss recruitment and  staffing trends for the institution and plans for how to address any  staffing challenges. Meeting minutes we reviewed did not indicate  specific discussions about the use of retention incentives.", "FCC Pollock executive staff discuss current institutional salary  expenditures and projections and the status of vacant positions at  workforce utilization meetings. While meeting minutes we reviewed  indicated discussions about projected expenditures for incentive  awards, the minutes did not differentiate between retention incentive  awards, and other incentive awards such as recruitment or relocation  incentive awards.", "FCI Phoenix officials stated that in their workforce utilization  meetings, executive staff discuss salary projections and vacancy  statuses. Meeting minutes we reviewed did not indicate specific  discussions about the use of retention incentives.", "BOP decisions about retention incentives are currently not tied to any  strategic human capital plan for how to use human capital flexibilities\u2014 such as retention incentives\u2014to address their ongoing challenge of  retaining staff in hard-to-fill positions. According to officials, retention  incentives are awarded on an as-needed basis, determined by an  institution\u2019s warden, if funds are available.", "According to key principles for effective strategic human capital planning,  such planning is an important component of an agency\u2019s effort to develop  long-term strategies for acquiring, developing, and retaining staff needed  for an agency to achieve its goals. Specifically, senior leaders should be  involved in developing, communicating, and implementing strategic  human capital plans. Within an agency\u2019s strategic human capital plan, the  human capital policies, practices, and programs\u2014for example, an  agency\u2019s retention incentive program\u2014should clearly link to the human  capital and program goals of the organization. By not having a strategic  human capital plan that clearly establishes strategies that will be used to  achieve specific human capital goals, BOP cannot ensure that its  institutions are strategically managing their workforces in a manner that  meets the agency\u2019s human capital needs.", "In August 2017, BOP officials told us that they began drafting a strategic  human capital operating plan that will include strategic objectives, action  plans, performance objectives and measures, and evaluation/reporting  requirements. Officials stated that the plan will also include planning  regarding the use of human capital flexibilities, such as retention  incentives. BOP officials told us that they anticipate that the strategic  human capital operating plan will be a supplement to their workforce  utilization meetings and that an agency-wide plan will provide a set of  strategies for all institutions to consider. However, BOP could not provide  documentation of the project beginning or whether it would include a  strategic approach specific to retention incentives. Including retention  incentives in BOP\u2019s strategic human capital operating plan would create a  roadmap for the agency and the institutions to use to move from being  reactive in their current workforce needs\u2014for example, awarding  retention incentives on an ad hoc basis when funds are available\u2014to  being strategic in how retention incentives are used and to ensure that  these and other flexibilities help the agency achieve its long-term  workforce goals."], "subsections": []}, {"section_title": "BOP Does Not Evaluate the Effectiveness of Retention Incentives", "paragraphs": ["From fiscal year 2012 through fiscal year 2016, BOP spent more than $59  million on retention incentives but has not established any measures to  evaluate their effectiveness. According to officials, BOP has not evaluated  the effectiveness of its use of retention incentives because BOP officials  consider a retention incentive successful if an employee does not leave  the agency. However, BOP also uses other human capital flexibilities  along with retention incentives to help retain staff. For example, BOP  uses physician and dental comparability allowances\u2014additional pay to a  physician or dentist who enters into an agreement for a specified period  of service\u2014to help retain these medical personnel. According to officials,  it would otherwise be difficult to compete with private sector salaries  without the use of all available incentives. However, BOP has not studied  whether or how retention incentives have contributed to employees\u2019  retention in relation to other incentives such as physician and dental  comparability allowances.", "According to our work on strategic human capital management and  OPM\u2019s guidance, it is crucial for organizations to evaluate the success of  their human capital strategies, such as the use of retention incentives.  In measuring the performance of these strategies and their contribution to  key programmatic results, agencies can make adjustments, if  necessary. For example, agencies can use evaluation results to make  targeted investments in certain human capital strategies\u2014such as the  use of retention incentives\u2014creating a cycle of strategic workforce  management, where evaluation informs planning, planning dictates  strategies, and strategies are evaluated for effectiveness. While BOP  uses retention incentives to address critical skills gaps\u2014such as with  medical professionals\u2014evaluating the effectiveness of retention  incentives would help BOP determine whether and how retention  incentives, as well as other human capital flexibilities, contribute to an  employee\u2019s continued employment at BOP or if adjustments to BOP  retention strategies must be made for improved results.", "BOP officials agreed that evaluating the effectiveness of retention  incentives would help them be more strategic about their human capital  needs and spending on incentives. By including and implementing such  an evaluation in its upcoming strategic human capital operating plan,  BOP could better determine if it is making maximum use of its funds to  retain the necessary qualified personnel or if changes must be made to  most effectively retain its staff."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As the largest employer within DOJ with some staff working in remote  locations and undesirable conditions, BOP relies on a number of available  flexibilities, including retention incentives, to help retain its employees.  However, BOP currently lacks a strategic approach for using and  evaluating retention incentives to address human capital goals. Given  BOP\u2019s ongoing staffing challenges, for example, retaining staff in hard-to- fill medical positions, developing a plan that includes a thoughtful  blueprint for using retention incentives could help BOP better anticipate  and address staffing needs. Moreover, evaluating its use of retention  incentives could help BOP determine whether these incentives are  effective or whether adjustments are needed to better retain its  employees. By using evaluation results to inform planning, and planning  to inform how retention incentives are used, BOP would be better  positioned to achieve its long-term human capital goals and address its  critical staffing needs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to BOP:  1.  The Director of BOP should include in the forthcoming strategic  human capital operating plan, 1) human capital goals and 2)  strategies on how human capital flexibilities\u2014including retention  incentives\u2014will be used to meet these goals. (Recommendation 1)  2.  The Director of BOP should evaluate the effectiveness of BOP\u2019s use  of retention incentives to help determine whether the incentives have  helped BOP achieve its human capital goals or if adjustments in  retention incentives are needed. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We requested comments on a draft of this report from DOJ. In an email  received November 15, 2017, the DOJ liaison stated that DOJ concurred  with our recommendations. The Department did not provide official written  comments to include in our report, but did provide written technical  comments, which we incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the Attorney  General and the Director of BOP. 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) 512-9627 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how BOP has used its authority to pay retention  incentives; (2) what internal controls are in place for the use of retention  incentives; and (3) the extent to which BOP plans for and evaluates the  use of retention incentives.", "To determine how BOP has used its authority to pay retention incentives,  we reviewed BOP\u2019s July 2012 report on its use of recruitment, relocation,  and retention (3R) incentives. We then obtained underlying retention  incentive expenditure data from DOJ\u2019s Justice Management Division  because it serves as the focal point for performance and financial  information for all Department of Justice components and employees,  including BOP. In particular, we obtained employee-level retention  incentive payroll data for fiscal years 2012 through 2016. We selected this  time period because it includes the most recent five complete fiscal years  for which data were available and because we believe five years is  sufficient time to identify trends in BOP\u2019s retention incentive expenditures.  We analyzed and aggregated the employee-level data by institution,  occupation, and employee grade level. To identify trends, we compared  per fiscal year expenditures across the various categories of occupations  and locations across the five years. Additionally, we categorized  institutions by BOP region, institutions that use group retention incentives,  and institutions that use individual retention incentives. We also  categorized occupations as medical professionals, correctional officers,  and all other occupations and compared aggregate retention incentive  expenditures for the different groups. Using information from BOP\u2019s  website and testimonial evidence from BOP officials on its health care  system, for the purposes of this report, we defined medical professionals  as BOP employees in occupations that provide medical, dental, and  mental health care services and who do not solely provide these services  in an administrative function. For the purposes of our analyses, medical  professionals are dentists, dental assistants and hygienists, diagnostic  radiological technologists, health aid and technicians, medical doctors  (including psychiatrists), medical technologists, nurses, pharmacists,  pharmacy technicians, physician assistants, and practical nurses and  psychologists. To assess the employee-level retention incentive payroll  data\u2019s reliability, we obtained and analyzed documentation on systems\u2019  capabilities and data control, interviewed data users and managers  responsible for maintaining data, conducted checks for completeness and  logical consistency, and compared the employee-level data to aggregated  institution-level retention incentive expenditure data from BOP\u2019s Financial  Management Information System. We found the employee-level data to  be sufficiently reliable for the purpose of this report.", "Additionally for this objective, we reviewed documents such as the DOJ\u2019s  Financial Management Information System Sub-Object Classification  Code Guide and the Office of Personnel Management (OPM) Handbook  of Occupational Groups and Families to respectively identify the system  codes used to track retention incentives expenditures and to identify the  names for each occupational series code in the datasets. We also  interviewed BOP Human Resource Management headquarters officials to  obtain information on the primary purposes for BOP\u2019s use of retention  incentives and their views on identified retention incentive expenditures  trends. We also interviewed U.S. Department of Health and Human  Services\u2019 (HHS) Public Health Service (PHS) officials to better  understand how BOP and PHS manage costs, including retention  incentive expenditures, for PHS staff assigned to BOP. BOP partners with  PHS to acquire medical staff to provide medical care for BOP\u2019s inmate  population. BOP reimburses PHS for the costs of compensation and  benefits\u2014including retention incentive payments, if applicable\u2014for PHS  staff assigned to BOP. PHS has final approval authority for retention  incentives paid to PHS staff assigned to BOP facilities. Furthermore, we  obtained aggregated retention incentive expenditure data from PHS on  the total amount of funds BOP reimbursed PHS for fiscal years 2012  through 2016. For the reliability of PHS\u2019s data, we reviewed the system\u2019s  data fields to check that the appropriate fields were used to provide data  and interviewed data users and managers to discuss how expenditures  are recorded and maintained. We found the PHS data to be sufficiently  reliable for the purpose of this report.", "To identify and describe the internal controls that BOP has in place  related to retention incentives, we obtained and analyzed documentation  regarding BOP requirements and guidance for the use of retention  incentives. We also interviewed officials from BOP\u2019s Central Office who  are responsible for the administration, management, and oversight of  BOP\u2019s human capital management systems, including retention  incentives. We focused on the management and administrative controls  used by BOP to review, approve, re-certify, and monitor retention  incentives. Additionally, we interviewed the warden and human capital  officers at 4 of the 122 institutions to obtain illustrative examples  regarding the internal controls in place at these institutions to ensure the  proper disbursement of retention incentives. We interviewed BOP officials  at Federal Correctional Complex Pollock in Pollock, LA; Federal  Correctional Complex Butner in Butner, NC; United States Penitentiary,  Atwater in Atwater, CA and Federal Correctional Institution Phoenix, in  Phoenix, AZ. These institutions were selected to ensure variation in the  number and types of employees receiving retention incentives, BOP  region, and security-level. Although the information we obtained from the  interviews with officials at these four institutions cannot be generalized to  other BOP institutions, these interviews provided important insights and  perspectives about the use of retention incentives at BOP institutions. We  also reviewed a non-generalizable random sample of 40 retention  incentive application packet case files to determine the extent to which  these files contained documentation on the internal control activities in  place to monitor the application, approval, and funds disbursement  processes of BOP\u2019s retention incentive program. To identify our sample,  we used employee-level expenditure data to randomly select 40  application files from the universe of BOP employees who received  retention incentives from fiscal years 2014 through 2016. Each  application file was reviewed by two GAO analysts who each assessed  the extent to which each application contained the appropriate  justification, approval signatures, and other documentation such as an  application checklist and whether the application was an initial or  continuation application.", "To determine the extent to which BOP plans for and evaluates the use of  retention incentives, we interviewed BOP officials regarding their  experiences with retention incentives, how they use retention incentives  to strategically manage their workforce needs, how the agency evaluates  the effectiveness of retention incentives, and how retention incentives  contribute to BOP\u2019s broader human capital goals. We then compared  these efforts to our work on strategic human capital planning, specifically  in terms of planning for and evaluating the use of human capital  flexibilities. Additionally, we interviewed the warden and human capital  officers at four BOP institutions mentioned above to obtain illustrative  examples of how workforce planning occurs at these institutions. We also  reviewed the DOJ\u2019s Office of Inspector General Report 16-02 \u201cReview of  the Federal Bureau of Prisons\u2019 Medical Staffing Challenges\u201d (March  2016) and our past work to better understand the challenges that BOP  faces in retaining medical professionals and other staff."], "subsections": []}, {"section_title": "Appendix II: Bureau of Prisons\u2019 Use of Retention Incentives by Occupations in Fiscal Year 2016", "paragraphs": ["Table 2 provides the Bureau of Prisons\u2019 (BOP) fiscal year 2016 retention  incentive expenditures by various occupations and groups of occupations,  such as medical professionals, correctional officers, and other  occupations. A range of occupations are reflected in the table primarily as  a result of four California institutions\u2014United States Penitentiary (USP)  Atwater, Federal Correctional Institution (FCI) Herlong, FCI Mendota, and  Federal Correctional Complex Victorville\u2014providing retention incentives  to all employees at General Schedule grades level 12 and below and  those in the Federal Wage System."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Dawn Locke (Assistant Director)  and Meghan Squires (Analyst-in-Charge) managed the work. Also, David  Alexander, Renee Caputo, Willie Commons III, Jamarla Edwards, Robert  Goldenkoff, Chelsa Gurkin, Eric Hauswirth, Janice Latimer, Lerone Reid,  Rachel Stoiko, and Adam Vogt made significant contributions to this  report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-25", "url": "https://www.gao.gov/products/GAO-18-25", "title": "Preventing Drug Abuse: Low Participation by Pharmacies and Other Entities as Voluntary Collectors of Unused Prescription Drugs", "published_date": "2017-10-12T00:00:00", "released_date": "2017-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2015, 3.8 million Americans reported misusing prescription drugs within the last month, and deaths from prescription opioids have more than quadrupled since 1999. About half of the people who reported misusing prescription drugs in 2015 received them from a friend or relative.", "One way to help prevent this kind of diversion and potential misuse is by providing secure and convenient ways to dispose of unused, unneeded, or expired prescription medications. The Secure and Responsible Drug Disposal Act of 2010 authorizes pharmacies and other entities already authorized by DEA to handle controlled substances to also collect unused prescription drugs for disposal. In 2014, DEA finalized regulations for the implementation of the Act, establishing a voluntary process for eligible entities to become authorized collectors of unused prescription drugs using disposal bins.", "GAO was asked to review participation among authorized collectors that maintain disposal bins. In this report GAO describes (1) participation rates among entities eligible to collect unused prescription drugs and (2) factors that affect participation. GAO analyzed the most currently available DEA data from April 2017 on entities eligible to participate and those participating as authorized collectors. GAO also conducted interviews with DEA officials and a nongeneralizable sample of 11 stakeholder organizations selected to illustrate different types of authorized collectors and long-term care facilities. GAO is not making any recommendations. DEA provided technical comments, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that about 3 percent of pharmacies and other entities eligible to collect unused prescription drugs for disposal have volunteered to do so. The Drug Enforcement Administration (DEA) authorizes these entities to dispose of unused drugs to help reduce their potential misuse. Analysis of DEA data shows that as of April 2017, 2,233 of the 89,550 (2.49 percent) eligible entities\u2014that is, certain entities already authorized by DEA to handle controlled substances\u2014had registered with DEA to use disposal bins to collect unused prescription drugs. Most\u2014about 81 percent\u2014of the authorized collectors were pharmacies, followed by hospitals or clinics. GAO also found that participation rates varied by state, though in 44 states less than 5 percent of the state's pharmacies and other eligible entities had registered to become authorized collectors.", "Stakeholders cited several factors that may explain why relatively few pharmacies and other eligible entities have registered with DEA as authorized collectors of unused drugs. Most notably, stakeholders representing authorized collectors told GAO that because participation is voluntary, the cost associated with maintaining a disposal bin\u2014which includes purchasing and installing the bin according to DEA requirements and paying for the destruction of its contents\u2014is an important factor to weigh against potential benefits. DEA noted that availability of disposal by law enforcement agencies also contributes to low participation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The misuse of prescription drugs is widespread and contributes to  overdoses and deaths. Federal data show that in 2015, 3.8 million  Americans reported misusing prescription drugs within a 1-month period  and that prescription drug misuse was the second most common type of  illicit drug use, after marijuana use. The misuse of prescription drugs has  also contributed to the nation\u2019s opioid epidemic and the overdoses  associated with it, as 91 people in the United States die each day, on  average, from an opioid overdose, including overdoses involving  prescription opioids and heroin. Furthermore, the number of deaths  resulting from prescription opioids has more than quadrupled since 1999.", "About half of the people who reported misusing prescription drugs in 2015  received them from a friend or relative. One way to help prevent this type  of diversion of prescription drugs from their intended users and the  resulting potential for abuse is by providing secure and convenient  disposal mechanisms for unused, unneeded, or expired prescription  medications. Under the Secure and Responsible Drug Disposal Act of  2010 (\u201cDisposal Act\u201d), the Drug Enforcement Administration (DEA) may  authorize eligible retail pharmacies and other entities\u2014which are certain  entities already authorized by the DEA to handle controlled substances\u2014 to also collect unused prescription drugs from the public. In September  2014, DEA finalized regulations for the implementation of the Disposal  Act, providing pharmacies and other eligible entities the option to register  with DEA to become authorized collectors of unused controlled  prescription drugs using collection receptacles, which are bins used to  collect drugs meant for disposal. The regulation establishes  requirements participating entities must meet, such as installing the  disposal bin securely to a permanent structure and making the bin  inaccessible to the public when an employee is not present.", "You requested that we review DEA\u2019s requirements for authorized  collectors of prescription drugs and participation rates. In this report, we  describe  1.  participation rates of eligible pharmacies and other entities as DEA- authorized collectors of unused prescription drugs, and  2.  factors that affect voluntary participation as authorized collectors of  unused prescription drugs.", "To describe the rates of eligible pharmacies and other entities that  participate as DEA-authorized collectors of unused prescription drugs  using disposal bins, we analyzed DEA data as of April 20, 2017, the most  current data available at the time of our analysis. We determined the  number and percentage of eligible entities participating as authorized  collectors nationwide, by state, and by type of entity. We also determined the number of eligible and participating authorized collectors in rural and  urban areas, using DEA\u2019s data and Rural-Urban Commuting Area codes.  Finally, we analyzed DEA\u2019s data and data from the U.S. Census Bureau\u2019s  American Community Survey 5-year population estimates for 2011  through 2015 to estimate the number of individuals and the percentage of  the U.S. population living within varying distances of a DEA authorized  collector\u2019s disposal bin. For all data used in these analyses, we  interviewed knowledgeable officials and reviewed related documentation  and, based on these steps, determined that the data were sufficiently  reliable for our purposes. Our review is limited to DEA-authorized  collectors that use disposal bins to collect unused prescription drugs from  the public. Other methods of drug disposal by eligible entities and all  methods of disposal by law enforcement agencies, which do not require  DEA authorization to dispose of controlled substances, are outside the  scope of our work.", "To describe the factors that affect voluntary participation as authorized  collectors of prescription drugs, we interviewed DEA officials. In addition,  we conducted interviews with 11 stakeholder organizations\u20148 selected  because they represent different types of authorized collectors, such as  pharmacies and reverse distributors, and 3 selected because they  represent long-term care facilities. Our findings cannot be generalized  beyond the stakeholder organizations we interviewed.", "We conducted this performance audit from November 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The DEA, within the Department of Justice, is responsible for ensuring  the availability of controlled substances for legitimate uses while  preventing their diversion through its administration and enforcement of  the Controlled Substances Act and its implementing regulations. Under  the Controlled Substances Act, all persons or entities that manufacture,  distribute, or dispense controlled substances are required to register with  DEA, unless specifically exempted. DEA regulates these entities to limit  diversion and prevent abuse. For example, DEA regulates  pharmaceutical companies that manufacture controlled substances,  health care providers who prescribe them to patients, and pharmacies  that dispense them.", "In October 2010, the Disposal Act amended the Controlled Substances  Act to allow the public to deliver unused controlled substances to an entity  authorized by DEA to dispose of the substances. DEA was given  responsibility for promulgating the implementing regulations, and the  Disposal Act stipulated that the regulations should prevent diversion of  controlled substances while also taking into consideration public health  and safety, ease and cost of implementation, and participation by various  communities. In addition to disposal bins, DEA\u2019s regulations describe two  other options for the public to transfer controlled substances for the  purpose of disposal: mail-back programs and take-back events. Law  enforcement agencies may use all three methods of drug disposal without  the need for authorization by DEA. The Disposal Act stipulates that the  regulations cannot require an entity to participate in or establish any of  the disposal options."], "subsections": [{"section_title": "Requirements for Authorized Collectors of Unused Prescription Drugs", "paragraphs": ["To participate as authorized collectors of unused prescription drugs,  eligible entities\u2014retail pharmacies, hospitals/clinics with an on-site  pharmacy, narcotic treatment programs, reverse distributors, distributors,  and drug manufacturers that are already authorized by DEA to handle  controlled substances\u2014must modify their DEA registration. According to  DEA officials, such modification is free and simple to do. Eligible retail  pharmacies or hospitals/clinics that become authorized collectors are able  to install and maintain disposal bins in long-term care facilities in addition  to their own location. DEA\u2019s website contains a public search feature to  identify authorized collectors located near a specific zip code or  address.", "Authorized collectors must install, manage, and maintain the disposal  bins following DEA regulations. For example, under DEA\u2019s regulations for  maintaining the disposal bins,  the disposal bin must be securely fastened to a permanent structure,  securely locked, substantially constructed with a permanent outer  container and removable inner liner, and have a small opening that  allows contents to be added but not removed;  the bin must also prominently display a sign indicating which types of  substances are acceptable; users must dispose the unused prescriptions into the collection  receptacle themselves without handing them to staff at the  pharmacy;  the disposal bin must typically be located in an area where an  employee is present and near where controlled substances are  stored, and the bin must be made inaccessible to the public when an  employee is not present;  the inner liner of the disposal bin must meet certain requirements,  including being waterproof, tamper-evident, tear-resistant, opaque,  and having the size and identification number clearly labeled; and  the installation and removal of inner liners must be performed under  the supervision of at least two employees of the authorized collector.", "DEA regulations also require that all controlled substances collected in  the disposal bin\u2019s inner liners must be destroyed in compliance with  applicable federal, state, and local laws and rendered non-retrievable.  According to DEA regulations, non-retrievable means that the physical  and chemical conditions of the controlled substance must be permanently  altered, thereby rendering the controlled substance unavailable and  unusable for all practical purposes. Authorized collectors are permitted to  destroy the inner liner on their premises if they have the capacity to do so.  If not, the inner liners can be transported to a separate location to be  destroyed. Typically, in this case, an authorized collector contracts with a  reverse distributor to periodically remove, transport, and destroy the inner  liners. DEA regulations require that two reverse distributor employees  transport the inner liners directly to the disposal location without any  unnecessary stops or stops of an extended duration. Authorized  collectors must document certain information, including inner liner  identification numbers and the dates that each liner is installed, removed,  and transferred for destruction. The authorized collectors must maintain  these records for 2 years. Figure 1 summarizes the steps involved in the  collection of unused prescription drugs."], "subsections": []}]}, {"section_title": "About 3 Percent of Eligible Pharmacies and Other Entities Voluntarily Participate as DEA-Authorized Collectors of Unused Prescription Drugs", "paragraphs": ["About 3 percent of pharmacies and other eligible entities have voluntarily  chosen to become DEA-authorized collectors of unused prescription  drugs, according to DEA data. As of April 2017, 2,233 of the 89,550 (2.49  percent) of eligible entities\u2014which are already authorized by DEA to  handle controlled substances\u2014had registered to use disposal bins to  collect unused prescription drugs. Most of the authorized collectors\u2014 about 81 percent\u2014were pharmacies, followed by hospitals or clinics.  (See table 1). Narcotic treatment programs, reverse distributors, and  distributors made up approximately 1 percent of the authorized collectors.", "We also found that participation rates varied by state, though in most  states relatively few of the eligible entities had registered with DEA to  become authorized collectors of unused prescription drugs. In 44 states,  less than 5 percent of the eligible entities had registered. (See figure 2  and appendix I for more information on the participation rates of  authorized collectors in each state). As of April 2017, Connecticut,  Missouri, and Maine had the lowest participation rates, with 0.11, 0.22,  and 0.70 percent, respectively. In contrast, North Dakota had the  highest participation rate, with 32.0 percent of its pharmacies and other  eligible entities registered to be authorized collectors. The state with next  highest participation rate was Alaska, with 8.96 percent. In North Dakota,  the state\u2019s Board of Pharmacy provides funding for authorized collectors  to purchase and maintain the disposal bins. According to a board official,  the board decided to fund these activities to increase participation rates  and plans to continue its funding indefinitely using revenue generated  from prescription drug licensing fees it collects.", "In addition, our analysis shows that about 82 percent of all authorized  collectors were located in urban areas as of April 2017. However, when  comparing the entities registered to be authorized collectors with the total  number of eligible entities, we found that a larger percentage of the  eligible entities in rural areas became authorized collectors compared  with those in urban areas (see table 2).", "The data we obtained on the number of eligible and participating  authorized collectors and their locations are the only available DEA data  on the use of disposal bins to collect unused prescription drugs.  According to DEA officials, the agency does not collect any other  information on the use of disposal bins, such as the extent to which the  bins are used, or the amount and types of prescription drugs deposited  into the bins. For example, to minimize the risk of diversion, DEA  regulations do not allow authorized collectors to open and inspect the  inner liners of the disposal bins, so information on their contents cannot  be collected. According to DEA officials, the agency is not responsible  for collecting information on the amount and types of prescription drugs  destroyed through the disposal bins. DEA officials told us that the agency  views its responsibility solely as giving pharmacies and other eligible  entities the opportunity to become authorized collectors.", "Though we do not have information on the extent to which individuals use  DEA\u2019s prescription drug disposal bins, we were able to estimate that as of  April 2017, about half of the country\u2019s population lived less than 5 miles  away from a pharmacy or other DEA-authorized entity offering a  prescription disposal bin. In 21 states, at least 50 percent of the state\u2019s  population lived within 5 miles of a prescription disposal bin. (See   figure 3).", "While close to half of the nation\u2019s population lived less than 5 miles from a  disposal bin as of April 2017, the availability of nearby disposal bins  varied significantly for people depending on whether they lived in an  urban or a rural area. Specifically, about 52 percent of the population in  urban areas lived less than 5 miles away from a disposal bin, compared  to about 13 percent of the population in rural areas. Furthermore, about  44 percent of the population in rural areas lived even further away\u2014more  than 30 miles away from a disposal bin. An exception to this is North  Dakota, where about 86 percent of its urban population and about 64  percent of its rural population lived within 5 miles of a disposal bin."], "subsections": []}, {"section_title": "Stakeholders Cited Cost and Other Factors as Affecting Decision to Become DEA-Authorized Collectors of Unused Prescription Drugs", "paragraphs": ["According to officials from the 11 stakeholder organizations we  interviewed\u2014which represent authorized collectors and long-term care  facilities\u2014several factors may explain why relatively few pharmacies and  other eligible entities have chosen to become authorized collectors of  unused prescription drugs. These factors include the associated costs of  participating, uncertainty over proper implementation, and participation in  other, similar efforts for disposing of unused prescription drugs.", "Costs: Stakeholders said that the costs associated with purchasing,  installing, and managing the disposal bins is a factor that explains the  relatively low rate of participation. One stakeholder told us that many  eligible entities may decide that the benefit of participating does not  outweigh the costs associated with doing so. Specifically, stakeholders  told us that the major costs associated with participating include  the one-time cost of purchasing and installing a disposal bin;  the ongoing costs to train personnel to manage the bins; and  the cost of contracting with a reverse distributor to periodically dispose  of the bin\u2019s inner liner and contents.", "Stakeholders gave varying examples of the specific costs associated with  these investments. For example, one stakeholder estimated the yearly  costs of maintaining a disposal bin ranged from $500 to $600 per  location; another stakeholder said that the cost is thousands of dollars per  location per year, but did not provide a specific estimate. These  stakeholders added that costs can increase if the disposal bins fill more  quickly and need to be emptied more often than expected.", "For their part, officials from the reverse distributor stakeholders we  interviewed cited incinerating hazardous waste, the availability of  incinerators, and the cost of personnel as factors that increase the cost of  their services for authorized collectors. One reverse distributor  stakeholder told us that there are not many incinerators available,  requiring them to travel long distances to incinerate collected waste. The  other reverse distributor stakeholder added that DEA\u2019s requirement that a  second employee be present during the transportation and disposal  increases the cost of their services.", "While some stakeholders speculated that costs are a reason for low  participation, a few stakeholders told us that the benefits are worth the  costs. In fact, two stakeholders we spoke with told us that the benefit to  the communities was so important that they decided to provide funding to  retail pharmacies, alleviating an individual pharmacy\u2019s concern about the  cost of installing and maintaining the disposal bins. We found that as of  April 2017, over a quarter of the 2,233 authorized collectors using  disposal bins received external funding to pay for the costs associated  with installing and maintaining the disposal bins. In addition, stakeholders  told us that some localities have enacted laws known as extended  producer responsibility ordinances, which require that pharmaceutical  manufacturers pay for certain costs associated with drug disposal. When  asked about the costs associated with operating disposal bins, DEA  officials told us that addressing cost issues with eligible participants falls  outside of their responsibilities.", "Uncertainty: Stakeholders also told us that uncertainty regarding how to  comply with aspects of DEA\u2019s regulations for prescription drug disposal  bins affected their decisions to participate. One stakeholder added that  many eligible entities decide not to participate because uncertainties over  participation requirements could result in inadvertent non-compliance with  DEA\u2019s regulations.", "As an example of their uncertainty over some of the requirements  governing the disposal bins, officials from both of the reverse distributor  stakeholders we interviewed cited DEA\u2019s non-retrievable standard for  destruction of the inner liners of the bins. DEA requires that the method of  destruction be sufficient to render all controlled substances non- retrievable, meaning that the physical and chemical conditions of the  controlled substances must be permanently altered and unusable in order  to prevent diversion for illicit purposes. Both reverse distributor  stakeholders told us that they are uncertain about whether certain  disposal methods meet this standard, and they said that the agency has  not provided further guidance on how reverse distributors can meet this  requirement. DEA officials told us that the agency responds to questions  about whether a specific method of destruction meets the non-retrievable  standard by telling the registrant to test the remnants after destruction, to  see if any components of the controlled substance are still present. In its  summary of the regulations implementing the Disposal Act, DEA stated  that in order to allow for the development of various methods of  destruction, the agency did not require a specific method of destruction as  long as the desired result is achieved. However, DEA officials stated  that to their knowledge, incineration is the only method known to meet the  non-retrievable standard to date, but the officials hoped other methods  will be developed in the future.", "When asked about the guidance they provide to authorized collectors of  unused prescription drugs or those eligible to become authorized  collectors, DEA officials told us that they post frequently-asked questions  on their website, routinely answer questions from participants and others,  and give training presentations at conferences that include information on  the disposal bins. In our prior work, we found problems with DEA\u2019s  communication and guidance to stakeholders. In 2015, we recommended  that DEA identify and implement cost-effective means for communicating  regularly with pharmacies and other entities authorized to handle  controlled substances. DEA agreed with the recommendation, and  officials told us that, starting in August 2017, these entities can subscribe  to DEA\u2019s website to receive notifications when it is updated with new  guidance.", "Stakeholders also noted that some DEA requirements related to disposal  bins may conflict with other state and federal requirements governing the  transportation and disposal of hazardous waste, which includes some  controlled substances. For example, the two reverse distributor  stakeholders told us that some incinerator permits issued by states  require that hazardous waste be examined before incineration; however,  DEA requirements do not allow the contents of the liners to be examined,  even at the time of incineration. To address the incinerator permit  requirements, one reverse distributor told us that they use the  Environmental Protection Agency\u2019s hazardous waste household  exemption, which treats the liners as household waste and thereby allows  incinerator facilities to destroy the liners without examining the contents or  violating their state permit. In addition, some stakeholders raised  concerns that DEA\u2019s regulations may conflict with other federal  regulations. For instance, one stakeholder noted that they recently  learned that transporting the disposal bin\u2019s inner liners could violate  Department of Transportation regulations. DEA officials told us that they  were aware of this, explaining that the conflict was between DEA\u2019s  requirement that controlled substances be transported in liners and the  Department of Transportation\u2019s requirement that this type of waste be  transported in sturdy containers. According to DEA officials, this conflict  has been resolved by the Department of Transportation allowing reverse  distributors to place the liners inside sturdy containers kept on trucks.", "Participation in or Availability of Similar Efforts: Stakeholders said  that some pharmacies and other eligible entities were already  participating in other, similar efforts that allow for the safe disposal of  controlled substances, and therefore they did not want to invest additional  resources into participating as authorized collectors using disposal bins.  For example, the Centers for Medicare & Medicaid Services has an  established process that long-term care facilities use to dispose of their  unused controlled substances. As a result, all of the long-term care  stakeholders told us that long-term care facilities may choose not to  partner with pharmacies interested in placing disposal bins within their  facilities because it adds significant cost and effort without any additional  benefit. Furthermore, pharmacy stakeholders noted that because of the  availability of other prescription drug collection efforts in their  communities, they did not think that maintaining a disposal bin at their  locations was needed. For example, two of the stakeholders explained  that local law enforcement precincts already had a similar type of disposal  bin in place to collect unused prescription drugs. DEA officials told us  that they were aware of other options for the public and entities such as  long-term care facilities that are not registered as authorized collectors to  dispose of controlled substances. The officials also indicated that the  availability of disposal options at law enforcement agencies contributes to  the low participation rates among pharmacies as authorized collectors of  unused prescription drugs."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Justice for  comment. DEA, part of the Department of Justice, provided technical  comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Attorney General of  the United States and the Administrator of DEA. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Entities Eligible to Register with DEA to Become Authorized Collectors and Participating Collectors, by State, April 2017", "paragraphs": [], "subsections": [{"section_title": "Number of authorized collectors 19", "paragraphs": [], "subsections": []}, {"section_title": "Number of authorized collectors 75", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Elizabeth H. Curda (Director), Will  Simerl (Assistant Director), Kathryn Richter (Analyst-In-Charge), Nick  Bartine, Giselle Hicks, Jessica Lin, and Emily Wilson made key  contributions to this report. Also contributing were Muriel Brown and  Krister Friday."], "subsections": []}]}], "fastfact": ["In 2015, 3.8 million Americans reported misusing prescriptions in the prior month, and deaths from prescription opioids have quadrupled since 1999. Most people get these drugs from friends or relatives, so providing secure and convenient ways for people to dispose of their unused drugs could help.", "A 2010 federal law authorized pharmacies and other entities to voluntarily maintain a prescription drug disposal bin for the public. We found that 3% of entities eligible to collect drugs in this way volunteered to do so. Stakeholders reported that this is partly due to the cost of purchasing a bin and paying for the destruction of collected drugs."]}
{"id": "GAO-18-651T", "url": "https://www.gao.gov/products/GAO-18-651T", "title": "DNA Evidence: Preliminary Observations on DOJ's DNA Capacity Enhancement and Backlog Reduction Grant Program", "published_date": "2018-07-18T00:00:00", "released_date": "2018-07-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Many state and local crime labs have backlogs of requests for DNA analysis of crime scene evidence, as reported by grantees participating in DOJ's CEBR grant program. These backlogs can include sexual assault kits. Since 2011, DOJ's Office of Justice Programs\u2014the primary grant-making arm of DOJ\u2014has awarded nearly $500 million to states and local jurisdictions through the CEBR grant program to help reduce DNA evidence awaiting analysis at crime labs. There have been concerns that these backlogs of unanalyzed evidence have enabled serial offenders to reoffend or have delayed justice.", "This statement is based on preliminary observations and analyses from GAO's ongoing review of (1) the level of crime scene DNA evidence backlogs among CEBR grantees and the factors that contribute to such backlogs; (2) the extent to which DOJ has clearly defined goals for CEBR; and (3) the extent to which OJP has controls for CEBR related to federal conflicts of interest and lobbying requirements. To develop these preliminary findings, GAO reviewed CEBR grantee data from 2011-2016 (the latest data available) and studies relevant to the DNA backlog, visited selected labs, and interviewed DOJ officials, among others."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's preliminary analysis found that, among the Department of Justice's (DOJ) DNA Capacity Enhancement and Backlog Reduction Program (CEBR) grantees (state and local entities with forensic crime labs), the reported aggregated backlog of crime scene DNA analysis requests has increased by 77 percent from 2011-2016. The growth in this reported aggregate backlog is the result of labs receiving more requests than they were able to complete, although they were receiving and completing more requests, as shown in the figure below.", "GAO's preliminary analysis also found that the National Institute of Justice (NIJ)\u2014the component within DOJ's Office of Justice Programs (OJP) that is responsible for administering CEBR grants\u2014has not defined CEBR program-wide goals in clear, specific, and measurable terms. Additionally, GAO's ongoing work identified statements in NIJ and CEBR program documentation that communicated program-wide goals, but the documentation did not consistently identify the same goals or cite the same number of goals. GAO continues to evaluate CEBR program goals and is in the process of evaluating related CEBR performance measures as part of its ongoing work.", "GAO's preliminary analysis found that OJP has some controls to implement federal requirements associated with conflicts of interest and lobbying that apply to both OJP CEBR grant administrators as well as recipients of CEBR grant funding, but OJP has not fully established all appropriate controls related to lobbying."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this testimony but will consider them, as appropriate, as it finalizes its work."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss preliminary observations from  our ongoing work on backlogs of DNA evidence. In the criminal justice  context, DNA analysis may be used to develop investigative leads, link an  offender or victim to a crime scene, or confirm or disprove an account of a  crime. Many state and local crime labs have backlogs of requests for  DNA analysis of crime scene evidence, as reported by grantees  participating in the Department of Justice\u2019s (DOJ) DNA Capacity  Enhancement and Backlog Reduction grant program (CEBR). These  backlogs can include sexual assault kits (SAKs). There have been  concerns that these backlogs of unanalyzed evidence have enabled serial  offenders to reoffend or have delayed justice. In addition, questions have  been raised about potential improper connections among those who profit  from DNA testing and those who advocate for CEBR funding, such as  private companies providing financial assistance to CEBR funding  advocates.", "Since 2011, DOJ has awarded nearly $500 million to states and local  jurisdictions through CEBR to help reduce DNA evidence awaiting  analysis at crime labs. CEBR funds can be used to process DNA  evidence collected from crime scenes or offenders.", "My statement today is based on preliminary observations and analyses  from our ongoing review for Senator Grassley of DNA evidence backlogs  and the CEBR grant program. Specifically, I will address the following  topics: (1) the level of crime scene DNA evidence backlogs among CEBR  grantees and the factors that contribute to such backlogs; (2) the extent  to which DOJ has clearly defined goals for CEBR; and (3) the extent to  which DOJ\u2019s Office of Justice Programs (OJP)\u2014the primary grant-making  arm of DOJ\u2014has controls for CEBR related to federal conflicts of interest  and lobbying requirements.", "As part of our ongoing work, we reviewed CEBR grantee data and studies  relevant to the DNA backlog, we visited selected labs, and we interviewed  DOJ officials, among others. To assess the backlog of DNA evidence  among CEBR grantees, we collected yearly baseline performance data  from CEBR grantees from 2011 through 2016. We selected 2011 to  coincide with the year in which two grant programs were combined into  what is now known as the CEBR grant program, and 2016 was the latest  year for which grantee data were available. To assess the extent to which  DOJ-compiled CEBR baseline data are reliable, we completed a number  of data reliability steps, including discussing data entry issues with  grantees and running logic tests on the data. Despite some limitations  found with regards to validating and reporting requirements, after  completing these steps, we determined that CEBR data were sufficiently  reliable for the purposes of illustrating year-over-year aggregate trends  among CEBR grantees.", "Additionally, to identify factors that contribute to backlogs of unanalyzed  DNA evidence at laboratories, we reviewed relevant studies and  discussed factors with DNA evidence stakeholders, including DOJ  officials, CEBR grantees, forensic crime laboratory directors, and relevant  academics and practitioners. We summarized information from these  sources to identify common factors, and we included illustrative examples  of the types of factors we have identified to date in our statement. To  assess the extent to which DOJ has clearly defined goals for CEBR, we  are reviewing OJP CEBR documentation, including the most recent  CEBR grant solicitation and CEBR program performance reports. We  also discussed program goals with OJP officials. Finally, to assess the  extent to which OJP has controls associated with federal conflicts of  interest and lobbying requirements, we identified federal statutes and  regulations governing conflicts of interest and lobbying. We are reviewing  OJP documentation and statements from OJP officials to determine the  extent to which OJP has controls in place consistent with those  requirements.", "This work is being conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DNA Analysis of Crime Scene Evidence", "paragraphs": ["Analysis of DNA evidence from crime scenes can help law enforcement  link offenders or victims to crime scenes. After crimes occur, law  enforcement submits physical evidence from crime scenes, victims, and  suspects (hereafter referred to as \u201ccrime scene evidence\u201d) to labs for  analysis. Labs then perform \u201cDNA analysis,\u201d which, as used in this  statement, refers to (1) biology screening (locating, screening, identifying,  and characterizing blood and other biological stains and substances);  and/or (2) DNA testing (identifying and comparing DNA profiles in  biological samples). In order to compare the victim\u2019s or offender\u2019s DNA  profile to the recovered crime scene DNA, the lab will need to have  known biological samples available. Thus, samples are generally  collected from victims and may also be collected from others\u2014such as  suspects, crime scene personnel, first responders, and consensual  sexual partners (in cases of sexual assault)."], "subsections": []}, {"section_title": "Matching DNA Profiles in the FBI\u2019s Combined DNA Index System", "paragraphs": ["Matching DNA profiles from unknown potential offenders to existing DNA  profiles can help law enforcement develop investigative leads. If a case  has no suspects to compare the DNA evidence to, the DNA profile of the  unknown potential offender can be entered in the Federal Bureau of  Investigation\u2019s (FBI) Combined DNA Index System (CODIS), where it can  be compared to existing DNA profiles at the local, state, or national level.  Labs can then compare unknown potential offender profiles to other  profiles already in CODIS, including:  1.  Profiles generated from evidence taken from other crime scenes and  connected to other unknown potential offenders.  2.  Profiles generated from samples taken from known convicted  offenders, arrestees, and others as required by law (hereafter  \u201coffender samples\u201d). According to DOJ, the federal government, all 50  states, the District of Columbia, and Puerto Rico have laws requiring  the collection of DNA samples from individuals convicted of certain  crimes; in addition, the federal government, over half of the states,  and the District of Columbia have laws authorizing the collection of  DNA from individuals arrested for certain crimes.", "When an unknown potential offender\u2019s profile matches another profile  within CODIS, a \u201chit\u201d or investigative lead may be developed and shared  with law enforcement, as shown in figure 1 below.", "Only federal, state, or local government labs that meet the FBI\u2019s Quality  Assurance Standards can participate in CODIS. As of January 1, 2018  there were 201 labs that participated in CODIS in the U.S. Of these, 143  performed just forensic casework DNA analysis, 4 performed just offender  sample DNA analysis, and 54 performed both. According to the FBI, as of  May 2018, the national level of CODIS contained over 16 million profiles  generated from offender samples and over 850,000 profiles generated  from crime scene evidence. Also, the FBI reported that as of May 2018,  CODIS had produced over 422,000 hits that aided more than 406,000  investigations."], "subsections": []}, {"section_title": "DOJ\u2019s Capacity Enhancement and Backlog Reduction Grant Program", "paragraphs": ["The CEBR grant program is administered by the National Institute of  Justice (NIJ), a component within OJP. NIJ, the research arm of DOJ, is  responsible for evaluating programs and policies that respond to crime,  and providing and administering awards for DNA analysis and forensic  activities, among other criminal justice activities. The CEBR grant  program is funded by an appropriation \u201cfor a DNA analysis and capacity  enhancement program and for other local, State, and Federal forensic  activities.\u201d The broad appropriations language enables NIJ to allocate  funding for a variety of forensic programs at funding levels established by  the agency; however, congressional reports accompanying the  appropriation have directed that OJP make funding for DNA analysis and  capacity enhancement a priority. CEBR awards can be used to enhance  capacity and reduce backlogs at government labs that analyze crime  scene DNA evidence and/or process offender DNA samples. NIJ defines  a \u201cbacklogged\u201d request for analysis of crime scene evidence as a request  that has not been completed within 30 days of receipt in the laboratory.", "CEBR is a formula grant program that dates back to 2004. Grant  awards are made non-competitively to states and units of local  government based on a formula set by DOJ that allocates certain  amounts to each state. This formula takes into account each state\u2019s  population and associated crime, and guarantees a minimum amount for  eligible applicants from each state. CEBR has broad participation from  states and local jurisdictions. For instance, in 2017 OJP awarded $61  million in CEBR grants to 131 grantees in 49 states, the District of  Columbia, and Puerto Rico."], "subsections": []}]}, {"section_title": "Preliminary Analysis of CEBR Data Show that the Backlog of Requests for Crime Scene DNA Analysis Is Increasing and Stakeholders Attribute This to Various Factors", "paragraphs": ["Our preliminary analysis of CEBR grant program data show that the  backlog of requests for crime scene DNA analysis has increased by 77  percent from 2011 through 2016, and that demand for such DNA analysis  has outpaced laboratory capacity. In our review, we identified numerous  factors that have contributed to an increased demand for DNA analysis  beyond laboratories\u2019 capacities, including scientific advancements in DNA  analysis technology and state laws requiring testing of certain DNA  evidence."], "subsections": [{"section_title": "Preliminary Analysis of CEBR Data Show an Increasing Backlog for Crime Scene DNA Analysis at Laboratories among CEBR Grantees, though Backlogs Vary Among Individual Labs", "paragraphs": ["We found that, among CEBR grantees, the reported aggregated backlog  of requests for crime scene DNA analysis has increased by 77 percent  from 2011 through 2016. As part of the grant application process, NIJ  requires applicants for CEBR grants to provide data from all labs in their  jurisdiction, even if certain labs will not be using CEBR funds. NIJ does  this to assist in understanding nationwide trends in DNA analysis  backlogs. The reported growth in the aggregate backlog among CEBR  grantees is the result of labs receiving more requests than they were able  to complete over time, as shown in the figure below.", "Although reported aggregate trends show an increase in the backlog  among CEBR grantees, the data also reveal that this increase is not  uniform across all labs. For example, among the 118 grantees for which  we had data from 2011 through 2016, 30 grantees (25 percent) reported  an overall decrease in the backlog. In addition, data from CEBR grantees  show differences in the average time it takes to process requests  (turnaround time) among grantees. Stakeholders also stated, and NIJ has  reported, that labs generally have shorter average turnaround times for  requests associated with violent crimes than for requests associated with  non-violent crimes\u2014because labs generally prioritize requests associated  with violent crimes. For our ongoing review, we continue to analyze  CEBR data and data from other sources pertaining to this issue."], "subsections": []}, {"section_title": "Various Factors, Such as Scientific Advancements, Have Increased Demand for DNA Analysis Beyond Laboratories\u2019 Capacities", "paragraphs": ["Based on a review of a selection of studies and discussions with DNA  evidence stakeholders, we identified the following factors that are  reported to have contributed to an increased demand for crime scene  DNA analysis beyond laboratories\u2019 capacities. As a result, these factors  are believed to have helped contribute to increased backlogs:  Recent scientific advancements have increased the quality of  DNA analysis by allowing lab analysts to obtain DNA profiles from  smaller amounts of biological evidence. This has increased the  amount of evidence that is eligible to be analyzed and, as a result,  has increased the demand for DNA testing.", "One DNA evidence stakeholder was able to produce preliminary  data demonstrating that, as a general trend, labs that decreased  their turnaround time saw corresponding increases in requests  from law enforcement. Other DNA stakeholders, including NIJ,  made similar observations.", "Increased awareness among law enforcement and the public  Increased awareness among law enforcement officers of the value  of DNA analysis in solving current and older cases has led to law  enforcement agencies submitting more DNA evidence to labs for  analysis. Further, NIJ and other stakeholder officials we  interviewed stated that the volume of DNA profiles in CODIS has  increased significantly over recent years. This, in turn, increased  the usefulness of DNA evidence in testing suspect DNA profiles  against a well-populated database of existing offenders. This  usefulness has increased awareness among law enforcement  personnel of CODIS, which contributes to increased demand for  DNA analysis, thereby contributing to the backlog. Additionally,  when deciding whether to submit DNA evidence for analysis, law  enforcement and prosecutors may consider jurors\u2019 expectations  that DNA analysis is presented.", "Recent legislation requiring Sexual Assault Kit (SAK) analysis  State legislation requiring SAK analysis has caused an increase in  demand for DNA analysis. As of July 2018, we identified at least  25 states that have enacted laws requiring law enforcement to  submit for testing SAKs that come into law enforcement  possession. Eleven of these states also required the submission  for testing of previously untested SAKs. Twenty-one of these laws  were passed in 2014 or later.", "In addition to the factors that have contributed to increased demand,  resource challenges and constraints on lab capacity are reported to have  helped contribute to crime scene evidence backlogs. State and local labs  generally receive appropriations from state or local governments and are  subject to local funding priorities. Federal grants can help, but even  combined federal and jurisdictional funding may not increase lab capacity  enough to keep up with increases in demand. Additionally, these labs  report facing lengthy hiring and training processes for forensic analysts,  and often lose staff to private or federal labs which may offer higher pay,  further limiting lab capacity for completing analysis."], "subsections": []}]}, {"section_title": "Preliminary Results Show that DOJ Has Not Clearly Defined and Documented CEBR Grant Program Goals", "paragraphs": ["DOJ\u2019s NIJ has not defined CEBR program-wide goals in clear, specific,  and measurable terms. We identified statements in NIJ and CEBR  program documentation that communicated program-wide goals, but the  documentation did not consistently identify the same goals or cite the  same number of goals. For example, a stated goal of improving the  quality of DNA testing was included in only 2 of 4 NIJ documents we  reviewed. In addition, NIJ officials verbally clarified that the CEBR  program has two goals, (1) to increase laboratory capacity for DNA  analysis, and (2) to reduce backlogs of DNA evidence awaiting analysis.  These differences can be seen across goal statements outlined in various  NIJ sources as shown in table 1 below.", "NIJ officials acknowledged that they do not have documentation that  further defines the goals of the program in clear, specific, and measurable  terms. These goals are specified as increasing laboratory capacity for  DNA analysis and reducing backlogs of DNA evidence awaiting analysis.  Officials provided an explanation as to what the goals mean. Specifically,  officials stated that:  Increasing lab capacity refers to increasing samples analyzed,  reducing processing times, and increasing the number of DNA profiles  uploaded into CODIS\u2014all while either maintaining or increasing the  quality of DNA analysis at labs.", "Reducing backlogs refers to reducing the number of backlogged  requests awaiting analysis by more than the number of requests that  become backlogged during the same timeframe. Officials stated that  although they believe the goal of reducing the crime scene evidence  backlog is unachievable in the foreseeable future, they have kept it as  a program goal because each year it is included in the appropriation  language that supports the program.", "However, these clarifications and definitions are not available in CEBR  documentation, which is an indication that NIJ may not be using clear,  specific, and measurable goals to guide program development or assess  progress.", "We continue to evaluate CEBR program goals and we are in the process  of evaluating related CEBR performance measures as part of our ongoing  work."], "subsections": []}, {"section_title": "Preliminary Analysis Shows that OJP Has Established Controls for Conflicts of Interest Related to CEBR Grants, but Has Not Fully Established Controls Related to Lobbying", "paragraphs": ["Our preliminary results show that OJP has controls to implement federal  requirements associated with conflicts of interest and some controls  related to lobbying that apply to both OJP CEBR grant administrators as  well as recipients of grant funding; however, OJP has not fully established  all appropriate controls related to lobbying."], "subsections": [{"section_title": "OJP Has Established Controls for Conflicts of Interest Related to CEBR Grants", "paragraphs": ["We found that OJP has established controls to implement federal conflicts  of interest requirements that apply to OJP employees administering  CEBR grants and CEBR grantees. For example, federal law prohibits  government employees from participating personally and substantially in  particular government matters, such as the administration of federal  grants, which could affect their financial interests. We found that OJP  has established an agency-wide ethics program and uses tools such as  the DOJ Ethics Handbook and annual financial disclosure reports, among  others, to help employees and their supervisors to determine whether  they have potential conflicts of interest. See table 2 below for a list of the  federal conflicts of interest requirements we identified, as well as our  preliminary assessment of related OJP controls to ensure that the  requirements are met."], "subsections": []}, {"section_title": "OJP Has Some Controls for Lobbying as They Apply to Recipients of CEBR Grant Funds, but Has Not Fully Established All Appropriate Controls", "paragraphs": ["We found that OJP has established some controls related to lobbying but  has not fully established controls needed to meet applicable  requirements. Specifically, federal law sets forth several requirements  related to lobbying \u201ccertification\u201d and \u201cdisclosure.\u201d Lobbying certification  refers to agreeing not to use appropriated funds to lobby, and lobbying  disclosure refers to disclosing lobbying activities with respect to the  covered federal action paid for with nonappropriated funds. Federal  regulation requires recipients of all federal awards over $100,000 to file  certification documents and disclosure forms (if applicable) with the next  tier above, and to forward those same forms from the tier below if they  issue subawards for $100,000 or more. In the case of CEBR grants,  tiers include OJP, grantees, subgrantees, contractors under grantees and  subgrantees, and subcontractors. Subawards include subgrants,  contracts under grants or subgrants, and subcontracts.", "We found that OJP had established controls to obtain lobbying  certification documents and disclosure forms from grantees, but had not  fully established controls to ensure grantees obtain these documents from  tiers below them, see table 3 below.", "OJP has established mechanisms to ensure it obtains lobbying  certification documents and disclosure forms from grantees. Specifically,  according to OJP, it requires that grant applicants electronically agree to  the certification document during the application process; if applicants do  not agree to it, they cannot move on in the process. OJP also requires  that applicants submit the lobbying disclosure form as part of the grant  application process. Upon submission, a grant manager reviews the form  for completeness and content and checks a box in an application review  checklist.", "However, OJP has only partially established a mechanism to ensure that,  for subawards over $100,000 (1) CEBR grantees obtain certification  documents and disclosure forms, as applicable, from tiers below them,  and (2) disclosure forms are forwarded from tier to tier until received by  OJP. Specifically, OJP requires grant applicants to agree to the  certification document set forth in regulation. This certification  document, in turn, lists certification and disclosure requirements, and  states that, \u201cThe undersigned shall require that the language of this  certification be included in the award documents for all subawards at all  tiers (including subgrants, contracts under grants and cooperative  agreements, and subcontracts) and that all subrecipients shall certify and  disclose accordingly.\u201d However, the certification document does not state  in clear terms what the specific requirements of the regulation are or how  they are to be carried out.", "OJP attorneys responsible for overseeing their implementation were not  aware of specific requirements in the regulation. For example, they were  not aware that disclosure forms were required to be forwarded from tier to  tier until received by OJP. Additionally, 3 of 4 CEBR grantees we spoke  with were not aware of one or more of these requirements.", "Lastly, we found that OJP does not provide guidance to grantees to  ensure they understand the requirements nor does OJP follow-up with  grantees to ensure they are implementing them. The statute requires that  federal agencies \u201ctake such actions as are necessary to ensure that the   are vigorously implemented and enforced in   agency.\u201d As part of our ongoing work, we will continue to monitor and  assess OJP\u2019s compliance with statute and regulations related to grantee,  subgrantee, and contractor lobbying disclosure requirements and make  recommendations, as appropriate.", "Chairman Grassley, Ranking Member Feinstein, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgements", "paragraphs": ["If you or your staff members have any questions about this testimony,  please contact Gretta L. Goodwin, Director, Homeland Security and  Justice at (202) 512-8777 or GoodwinG@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this testimony included  Dawn Locke (Assistant Director), Adrian Pavia (Analyst-in-Charge),  Stephanie Heiken, Jeff Jensen, Chuck Bausell, Daniel Bibeault, Pamela  Davidson, Eric Hauswirth, Benjamin Licht, Samuel Portnow, Christine  San, Rebecca Shea, Janet Temko-Blinder, and Khristi Wilkins.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Many state and local crime labs across the country have backlogs of requests for DNA analysis of crime scene evidence.", "Since 2011, the Department of Justice has awarded nearly $500 million to states and localities through a grant program to help reduce DNA evidence backlogs.", "This testimony covers preliminary observations and analyses from our ongoing review of the program. For example, we found that backlogs are growing as several factors increase demand for DNA analysis. Also, labs may not have the resources to keep up with demand."]}
{"id": "GAO-18-576T", "url": "https://www.gao.gov/products/GAO-18-576T", "title": "NASA Major Projects: Portfolio Is at Risk for Continued Cost Growth and Schedule Delays", "published_date": "2018-06-14T00:00:00", "released_date": "2018-06-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GAO designated NASA's acquisition management as a high-risk area in 1990 after a history of persistent cost growth and schedule slippage in many of NASA's major projects. In more recent years, GAO found that NASA had taken some steps to improve its management, and, in May 2017, GAO found that projects were continuing a generally positive trend of limiting cost and schedule growth. But at the same time, GAO noted that many of these projects, including some of the most expensive ones, were approaching the phase in their life cycles when cost and schedule growth is most likely.", "This statement summarizes GAO's 2018 findings from its 10th annual snapshot of how well NASA is planning and executing its major acquisition projects, and describes (1) the cost and schedule performance of NASA's portfolio of major projects and (2) the extent to which NASA faces risks for further cost increases and schedule delays. To conduct its review for the 2018 report, GAO-18-280SP , GAO analyzed cost, schedule, and other data for NASA's 26 major projects, each with a life-cycle cost of over $250 million; reviewed monthly project status reports; and interviewed NASA officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The cost and schedule performance of the National Aeronautics and Space Administration's (NASA) portfolio of major projects has deteriorated, but the extent of cost performance deterioration is unknown. NASA expects cost growth for the Orion crew capsule\u2014one of the largest projects in the portfolio\u2014but does not have a current cost estimate. In addition, the average launch delay for the portfolio was 12 months, the highest delay GAO has reported in its 10 years of assessing major NASA projects (see figure below).", "The deterioration in portfolio performance was the result of 9 of the 17 projects in development experiencing cost or schedule growth.", "Four projects encountered technical issues that were compounded by risky program management decisions. For example, the Space Launch System and Exploration Ground Systems programs are large-scale, technically complex human spaceflight programs, and NASA managed them to aggressive schedules and with insufficient levels of cost and schedule reserves. This made it more difficult for the programs to operate within their committed baseline cost and schedule estimates.", "Two projects ran into technical challenges that resulted in delays in the integration and test phase. For example, in December 2017, GAO found that the James Webb Space Telescope project encountered delays primarily due to the integration of the various spacecraft elements taking longer than expected, as well as the need to resolve technical issues during testing. GAO has previously found that integration and testing is when projects are most at risk of incurring cost and schedule growth.", "Three projects experienced cost growth or schedule delays due to factors outside of the projects' control, such as delays related to their launch vehicles.", "NASA continues to face increased risk of cost and schedule growth in future years due to new, large and complex projects that will enter the portfolio and expensive projects remaining in the portfolio longer than expected."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any new recommendations in this statement. GAO has made recommendations in prior reports to strengthen NASA's acquisition management of its major projects. NASA generally agreed with these recommendations, but has not fully addressed some of them. GAO continues to believe they should be fully addressed."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for inviting me to discuss the cost and schedule performance  of the National Aeronautics and Space Administration\u2019s (NASA) portfolio  of major acquisition projects. NASA\u2019s major projects are the key enablers  for the agency to achieve its vision and its mission. They include NASA\u2019s  Space Launch System (SLS) and Orion Multi-Purpose Crew Vehicle  (Orion), which are the centerpieces of NASA\u2019s human exploration plans;  Mars 2020 and Europa Clipper, which will further our understanding of the  habitability of other planets; and the Ice, Cloud, and Land Elevation  Satellite-2 (ICESat-2), which will provide better data on changes in the  Earth. In its fiscal year 2019 budget request, NASA requested $19.9  billion, which included about $4.5 billion for its deep space exploration  programs and research and about $6 billion for science programs and  research. As these projects are complex and specialized, and often push  the state of the art in space technology, NASA manages a portfolio that  will always have inherent technical, design, and integration risks.", "We have been assessing the cost and schedule performance of NASA\u2019s  major projects\u2014those that have a life-cycle cost over $250 million\u2014 annually for 10 years. Over this time, we have seen NASA make progress  in reducing acquisition risks, such as by improving cost and schedule  estimating tools, and establishing design metrics and tracking projects  against the metrics. But our most recent assessment in May 2018 found  that the cost and schedule performance of the portfolio deteriorated after  several years of following a generally positive trend of limiting cost and  schedule growth.", "My statement today is based primarily upon our May 2018 report.  Specifically, I will discuss (1) the cost and schedule performance of  NASA\u2019s portfolio of major projects and (2) the extent to which NASA faces  risks for continued cost increases and schedule delays. To conduct this  work, we collected cost and schedule information from NASA\u2019s major  projects using a data collection instrument, analyzed projects\u2019 monthly  status reports, interviewed NASA project and headquarters officials, and  reviewed project documentation. At the time of our review, there were 26  major projects in total, but the information available depended on where a  project was in its life cycle. For the 17 projects that were in the  implementation phase, we compared current cost and schedule estimates  to their original cost and schedule baselines. We reviewed historical data  on cost and schedule performance for major projects from our prior  reports and compared them to the performance of NASA\u2019s current  portfolio of major projects. More detailed information on our objectives,  scope, and methodology for that work can be found in our May 2018  report. In addition, we requested and received an update from NASA in  early June 2018 on whether the agency had completed a new life-cycle  cost estimate for the Orion program. We also updated the actual launch  date for the Gravity Recovery and Climate Experiment Follow-On  (GRACE-FO) project and updated information on the launch date for the  Ionospheric Connection Explorer (ICON) project.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "NASA Acquisition Life Cycle for Space Flight Projects", "paragraphs": ["The life cycle for NASA space flight projects consists of two phases\u2014 formulation, which takes a project from concept to preliminary design, and  implementation, which includes building, launching, and operating the  system, among other activities. NASA further divides formulation and  implementation into phases, phase A through phase F. Major projects  must get approval from senior NASA officials at key decision points  before they can enter each new phase. Formulation culminates in a  review at key decision point C, known as project confirmation, where cost  and schedule baselines are established and documented in a decision  memorandum. Figure 1 depicts NASA\u2019s life cycle for space flight projects.", "At the time of our review in May 2018, NASA had a portfolio of 26 major  projects (see table 1). See appendix I for a brief description of each  project."], "subsections": []}, {"section_title": "NASA Acquisition Management as a High- Risk Area", "paragraphs": ["NASA acquisition management is an area that we monitor on our high- risk list. Our high-risk series is a biennial report that keeps focused  attention on government operations with greater vulnerabilities to fraud,  waste, abuse, and mismanagement or that are in need of transformation  to address economy, efficiency, or effectiveness challenges. In 1990, we  first designated the area as high risk because there was little emphasis  on end results, product performance, and cost control; the acquisition  process itself was cumbersome and time-consuming; and NASA found  itself procuring expensive hardware that did not work properly. For  example, in April 1990, NASA deployed the $1.5 billion Hubble Space  Telescope and soon after, the agency discovered that the primary mirror  had been manufactured in the wrong shape, severely degrading some of  the telescope\u2019s scientific capabilities.", "Subsequently, we and other organizations, including the National  Academy of Sciences and NASA\u2019s Office of the Inspector General, found  that NASA\u2019s cost estimates were overly optimistic. Our reviews also  found that NASA continued to experience significant cost and schedule  growth due, in part, to not having a disciplined cost estimating process.", "In 1992, we reviewed the cost and schedule performance of 29 NASA  programs and found that 25 of those programs experienced cost  growth that ranged from 14 to 426 percent above their initial  estimates. Further, the median estimate change for all programs was  an increase of 77 percent. General reasons that NASA provided for  the cost growth included insufficient definition studies, program and  funding instability, overly optimistic assumptions by program officials,  and unrealistic contractor estimates. The more specific reasons for  the cost growth we found included program redesigns, technical  complexities, budget constraints, and incomplete cost estimates.", "In 2004, we reviewed the cost and schedule performance of 27 NASA  programs and found that 17 of the programs experienced cost  growth. Cost growth for 10 of the 17 programs was over 25 percent.", "We found that considerable change in NASA\u2019s program cost  estimates\u2014both increases and decreases\u2014indicated that NASA  lacked a clear understanding of how much its programs cost and how  long they will take to achieve their objectives. Further, we found that  NASA\u2019s basic cost-estimating processes\u2014an important tool for  managing programs\u2014lacked the discipline needed to ensure that  program estimates are reasonable.", "In more recent years we have found that NASA\u2019s leadership was focused  on improving acquisition outcomes and had taken some steps to improve  its management.", "In 2006, NASA established a management review process to enable  NASA\u2019s senior management to more effectively monitor a project\u2019s  performance, including cost, schedule, and cross-cutting technical  and nontechnical issues.", "In 2009, NASA began requiring that NASA major programs and  projects develop a joint cost and schedule confidence level (JCL) prior  to project confirmation in order to ensure that cost and schedule  estimates were realistic and projects thoroughly planned for  anticipated risks. The JCL is a point-in-time estimate that, among  other things, includes all cost and schedule elements, incorporates  and quantifies known risks, assesses the impacts of cost and  schedule to date, and addresses available annual resources. NASA  policy generally requires that projects be baselined and budgeted at  the 70 percent confidence level.", "In 2012, the agency established metrics to more consistently measure  a project\u2019s design progress and, in 2014, we found that most major  projects in the portfolio were tracking and reporting those metrics. In  addition, experts with whom we met confirmed that NASA\u2019s metrics  are valid measures to assess design maturity in space systems.", "Since 2015, we have observed a positive trend of higher numbers of  projects maturing technologies prior to preliminary design review.  Demonstrating that technologies will work as intended in a relevant  environment serves as a fundamental element of a sound business  case, and projects falling short of this standard often experience  subsequent technical problems. Our best practices work has shown  that maturing technologies prior to preliminary design review can  minimize risks for projects entering development, which lowers the  risk of subsequent cost growth and schedule delays.", "We believe that many of these steps NASA has taken contributed to the  largely positive trend of cost and schedule performance for NASA\u2019s  portfolio of major projects between 2013 and 2017. In our May 2017  assessment of major projects, we found that out of 16 projects in  development, 5 experienced cost growth and 4 experienced schedule  delays over their development cost and schedule baselines. Both of  these measures were at or near the lowest levels we have reported since  we began our annual assessments in 2009.", "However, we also found in our February 2017 high risk update that NASA  needed to do more with respect to anticipating and mitigating risks\u2014 especially with regard to large programs, estimating and forecasting costs  for its largest projects, and implementing management tools. We  highlighted several actions that would be critical to improving NASA\u2019s  acquisition outcomes, including the following:", "Ensuring that NASA conducted adequate and ongoing assessments  of risks for larger programs because the impacts of any potential  miscalculations will be felt across NASA\u2019s portfolio.", "Ensuring that NASA understood long-term human exploration  program costs. While the three major human exploration programs\u2014 Orion, SLS, and the Exploration Ground Systems (EGS)\u2014have been  baselined, none of the three programs has a baseline that covers  activities beyond the second planned flight. Long-term estimates,  which could be revised as potential mission paths are narrowed and  selected, would provide decision makers with a more informed  understanding of costs and schedules associated with potential  agency development paths.", "Ensuring that program offices regularly and consistently updated their  JCL across the portfolio. As a project reaches the later stages of  development, especially integration and testing, its risk posture may  change. An updated project JCL would provide both project and  agency management with data on relevant risks that can guide project  decisions.", "Ensuring that NASA continued its efforts to build capacity in areas  such as cost and schedule estimating and measuring contractor  performance.", "Further, in our 2016 and 2017 assessments of major projects, we found  that while the cost and schedule performance of NASA\u2019s portfolio was  improving, a number of large, complex projects were in or would soon be  entering the integration and test phase\u2014the phase in development that  often reveals unforeseen challenges that can lead to cost and schedule  growth. In May 2017, projects in this phase included all three human  spaceflight programs and the James Webb Space Telescope (JWST).  Subsequently, we found that these programs experienced delays during  this phase of development. For example, in December 2017, NASA  announced a 13- to 19-month delay for the first integrated mission of  Orion, SLS, and EGS. This mission is referred to as Exploration Mission 1  (EM-1) and will not have crew. In addition, in December 2017, we found  that the JWST project continued to make progress towards launch, but  the program was encountering technical challenges that required both  time and money to fix and may lead to additional delays. Subsequently,  the JWST project delayed its launch readiness date by at least 19 months  from October 2018 to May 2020."], "subsections": []}]}, {"section_title": "Portfolio Cost and Schedule Deteriorated but Extent of Cost Growth Is Unknown", "paragraphs": ["The cost and schedule performance of NASA\u2019s portfolio of major projects  deteriorated between May 2017 and May 2018, but the extent of cost  growth is unknown. NASA lacks a current cost estimate for its Orion crew  capsule\u2014one of the largest programs in the portfolio\u2014but expects the  program will exceed its cost baseline when NASA updates the program\u2019s  life-cycle cost estimate. Because the Orion program accounts for about  22 percent of all development costs, even a small percentage of cost  growth for the Orion program could significantly affect portfolio cost  performance. The known negative cost and schedule performance is  largely driven by the cost and schedule growth of four projects\u2014SLS,  EGS, Space Network Ground Segment Sustainment (SGSS) and Mars  2020\u2014that experienced technical problems compounded by  programmatic challenges. Together, these projects experienced $638  million in cost growth and 59 months in aggregate schedule delays. Two  projects\u2014JWST and ICESat-2\u2014experienced schedule delays due to  technical challenges identified during integration and test. Another 3  projects\u2014NASA Indian Space Research Organisation Synthetic Aperture  Radar (NISAR), ICON, and GRACE-FO\u2014experienced cost growth or  delays largely due to factors outside of the projects\u2019 control, such as  launch vehicle delays."], "subsections": [{"section_title": "Portfolio Average Launch Delays Increased, but NASA Lacks a Current Orion Program Cost Estimate to Determine Extent of Cost Growth", "paragraphs": ["The average launch delay increased from 7 months in our May 2017  report to 12 months in our May 2018 report\u2014the highest schedule delay  we have reported to date. We were not able to determine the extent of  portfolio cost growth this year because NASA does not have a current  cost estimate for the Orion program\u2014one of the largest programs in its  portfolio\u2014and officials expect the cost to increase. As of June 2017, the  Orion program\u2019s development cost was about $6.6 billion; based on that  estimate, it accounts for 22 percent of the portfolio\u2019s estimated $30.1  billion of development costs. As a result, a small percentage of cost  growth for the Orion program could significantly affect cost performance.  Even without including Orion cost growth, the overall development cost  growth for the portfolio of 17 development projects increased to 18.8  percent, up from 15.6 percent in 2017 (see figure 2).", "Senior-level NASA officials told us they expect that the Human  Exploration and Operations Mission Directorate and the Orion program  will complete an updated life-cycle cost estimate in June 2018. This would  be approximately 10 months after the program raised to senior-level  officials\u2019 attention that the program expects cost growth over its cost  baseline during an August 2017 briefing concerning potential cost  increases related to the launch delay for EM-1. In early June 2018,  NASA officials said that they had not yet completed the updated life-cycle  cost estimate.", "In our May 2018 report, we found that 7 of 17 NASA major projects had  stayed within cost and schedule estimates since our 2017 annual  assessment of major projects, but 9 projects experienced cost growth or  schedule delays and cost growth is expected for the Orion program.  Table 2 provides data on the cost and schedule performance between our  May 2017 and 2018 reports for the 17 major projects in development that  have cost and schedule baselines.", "The deteriorating cost and schedule performance of the portfolio in 2018  is the result of  four projects\u2014SLS, EGS, SGSS, and Mars 2020\u2014addressing  technical challenges that were compounded by risky programmatic  decisions;  two projects\u2014JWST and ICESat-2\u2014experiencing delays due to  technical challenges identified during integration and test; and  three projects\u2014NISAR, ICON, and GRACE-FO\u2014experiencing cost  growth or delays largely due to factors outside of the projects\u2019 control.", "We elaborate on these three scenarios below.", "Technical challenges compounded by risky programmatic  decisions. Together, SLS, EGS, SGSS, and Mars 2020 experienced  $638 million in cost growth and 59 months in aggregate schedule delays  due to technical problems that were compounded by programmatic  challenges since our May 2017 report. The SLS and EGS programs  experienced cost growth and schedule delays associated with EM-1, their  first combined mission along with the Orion program. We have found for  several years that the human spaceflight programs\u2014Orion, SLS, and  EGS\u2014are making progress maturing designs and building hardware, but  also are experiencing some significant engineering and manufacturing  challenges. For example, the SLS program ran into numerous challenges  completing the welding of its core stage element in 2017. The program  stopped welding on the core stage for months to identify and resolve low  weld strength in the liquid oxygen and liquid hydrogen tanks due to low  weld strength measurements found in the liquid oxygen tanks caused by  a program and contractor decision to change the weld tool configuration  during fabrication. The EGS program also experienced technical  challenges, including with the design and installation of the ground  support equipment and the 10 umbilicals that connect SLS and Orion to  the Mobile Launcher\u2014which supports the assembly, testing, and  servicing of SLS and provides the platform on which SLS and Orion will  launch.", "Finally, although the Orion program has not yet reported cost growth, it  also experienced technical challenges. These challenges included  software and hardware delays, and at least 14 months of delays with the  European Service Module\u2014which provides air, water, power, and  propulsion to Orion during in-space flight\u2014since the element\u2019s critical  design review in June 2016. In April 2017, we found that, according to  program officials, the delays with the service module were largely due to  NASA, the European Space Agency, and the European Space Agency  contractor underestimating the time and effort necessary to address  design issues for the first production service module and the availability of  parts from suppliers and subcontractors. NASA expects the Orion  program to experience cost growth over its cost baseline to the second  combined mission, Exploration Mission 2 (EM-2). However, the extent of  the growth is unknown because, as noted above, NASA is currently  revising the program\u2019s life-cycle cost estimate.", "Technical challenges such as these are not unusual for large-scale  programs, especially human exploration programs that are inherently  complex and difficult. However, we have found that NASA has made  programmatic decisions\u2014including establishing low cost and schedule  reserves, managing to aggressive schedules, and not following best  practices for earned value management or creating reliable cost and  schedule baselines\u2014that have compounded the technical challenges  (see table 3). As a result, the three human spaceflight programs have  been at risk of cost and schedule growth since NASA approved their  baselines.", "In December 2017, NASA announced the new internal launch readiness  date for EM-1 is now December 2019, and has allocated 6 months of  schedule reserve available to extend the date to June 2020 for possible  manufacturing and production schedule risks. This represents a delay of  13-19 months for EM-1. It is too soon to know if NASA has addressed the  programmatic challenges identified above. We will continue to follow up  through future reviews.", "Similarly, the SGSS project experienced new cost growth of $59.5 million  and delayed its completion by 21 months. Project officials attributed the  cost growth and delays to the contractor\u2019s incomplete understanding of its  requirements, which led to poor contractor plans and late design  changes. But project management has been a challenge as well. The  project has historically struggled to manage contractor performance and  has faced both contractor and project staffing shortfalls, as we found in  our prior reports starting in 2013. For example, NASA managers noted  concerns with contractor plans and staffing estimates in 2013 during  project confirmation. In March 2015, we found that the project was being  rebaselined due to the contractor\u2019s poor cost and schedule performance  and in order to conform with limitations that NASA placed on the funding  available to the contractor in fiscal years 2014 and 2015. The contractor  was also operating with a limited number of staff at that time. In May  2017, we found that the project continued to experience contractor  performance problems and had experienced cost growth and schedule  delays over the 2015 rebaseline even as the project decreased its scope.  In addition, the project experienced staff shortfalls in key areas, such as  systems engineering and business management.", "The Mars 2020 project experienced $12.9 million in development cost  growth, but no schedule delays. The cost growth was primarily due to  technical challenges on a technology demonstration instrument and  higher than anticipated integration costs for an entry, descent, and  landing instrument. Both instruments are funded by the Human  Exploration and Operations and Space Technology Mission Directorates.  NASA officials attributed the cost growth of the technology demonstration  instrument\u2014which is designed to convert carbon dioxide to oxygen\u2014to the complexity of the technology development for the effort. At the  project\u2019s preliminary design review in February 2016, a critical technology  for the technology demonstration instrument did not meet the  recommended level of maturity, which we have found can increase risk  for systems entering product development. The project had matured the  technology to this recommended level by its critical design review in  February 2017. However, as a result of the focus on maturing this  particular technology, other components of the instrument fell behind the  planned schedule. Project costs for Mars 2020 also increased for an  entry, descent, and landing instrument, due, in part, to cost increases for  integration and to add additional staff to the instrument team to maintain  schedule.", "Finally, the Radiation Budget Instrument project would have likely  exceeded its cost baseline if NASA had not decided to cancel the project  in January 2018. According to NASA\u2019s cancellation memorandum, the  project was canceled because of continued cost growth, technical issues,  and poor contractor performance. In 2017, we found that the project was  working to an aggressive schedule, and the prime contractor continued to  experience cost overruns even after NASA added a deputy project  manager and increased site visits and meetings with the contractor.  Subsequently, the project\u2014which was developing an instrument to be  hosted on a National Oceanic and Atmospheric Administration satellite\u2014 determined that it would not be able to meet its delivery date for  integration with the satellite without requiring additional funding in excess  of the project\u2019s cost baseline if other technical issues arose. In its  cancellation memorandum, NASA stated continuing to fund the project  from within the Earth Science Division budget would slow other important  activities.", "Technical challenges identified during integration and test. The  JWST and ICESat-2 projects experienced technical challenges during  integration and test that delayed their schedules. Both projects were  previously rebaselined before entering system-level integration and  testing, and the current schedule delays are beyond the new schedules  that NASA set for the projects in 2011 for JWST and in 2014 for ICESat- 2.", "The JWST project delayed its launch readiness date by at least 19  months from October 2018 to May 2020. NASA announced two  delays for the project since our portfolio-wide review in May 2017.  First, as we found in February 2018, the project delayed its launch  readiness date by up to 8 months primarily due to the integration of  the various spacecraft elements taking longer than expected.  Specifically, execution of spacecraft integration and test tasks, due to  complexity of work and cautious handling given the sensitivity of flight  hardware, was slower than planned. In addition, before the delay, the  project used all of its schedule reserves to its prior launch readiness  date. This was the result of various contractor workmanship errors,  particularly with respect to the spacecraft propulsion systems, as well  as the resolution of various technical issues, including a test anomaly  on the telescope and sunshield hardware challenges. Second, in  March 2018, NASA announced that it had delayed the project\u2019s  launch readiness date by an additional 11 months to approximately  May 2020 and planned to establish an external independent review  board to analyze the project\u2019s organizational and technical issues to  inform a more specific launch time frame.", "The announcement also stated that after a new launch date is  established, NASA would provide a new cost estimate that may  exceed the $8 billion congressional cost cap that was established in  2011. NASA plans to finalize the project\u2019s cost and schedule estimate  by the end of June 2018. Because the additional delays were  announced while a draft of our May 2018 report was with NASA for  comment, we plan to follow up on the reasons for the additional  delays and the results of the analysis in a future review.", "In our prior assessments of JWST, we have made recommendations  with regard to improving cost and schedule estimating, updating risk  assessments, and strengthening management oversight. NASA has  generally agreed and taken steps to implement a number of our  recommendations. For example, in December 2015, we  recommended that the JWST project require contractors to identify,  explain, and document anomalies in contractor-delivered monthly  earned value management reports. NASA concurred with this  recommendation and, in February 2016, directed the contractors to  implement the actions stated in the recommendation. However, NASA  did not implement some recommendations, which if implemented,  may have provided insight into the challenges it now faces. For  example, in December 2012, we recommended the JWST project  update its JCL. Although NASA concurred with this  recommendation, it did not take steps to implement it. An updated  JCL may have portended the current schedule delays, which could  have been proactively addressed by the project.", "The ICESat-2 project delayed its launch readiness date by 4 months  from June to October 2018 due to technical issues with its only  instrument, the Advanced Topographic Laser Altimeter System. A key  part in the instrument\u2019s lasers failed during instrument environmental  testing, which delayed the project\u2019s system integration review\u2014the  start of system-level integration and test. The manufacturer  determined the primary cause of the anomaly was a flaw in the design  of the mount that ensures a component of the optical module remains  in a specific, precise position. The spare flight laser encountered the  same problem during earlier testing, which indicated a systemic  problem. The project redesigned and repaired the lasers and is  proceeding through integration and test.", "External factors. External factors\u2014including responding to requests for  additional data collection and delays due to launch-vehicle related  issues\u2014contributed to cost increases or schedule delays for the NISAR,  ICON, and GRACE-FO projects.", "The NISAR project experienced cost growth as the result of an  increase in the scope of data collection in response to additional data  needs being identified by an interagency working group. The  additional data include soil moisture and natural hazard data that  would be of value for other federal agencies and the science  community. NASA officials said the additional funding for development  would be used to upgrade the ground stations so that they can  receive the additional data at a higher downlink data rate and volume.", "The ICON project missed its committed launch readiness date  because of an accident involving its launch vehicle. In January 2017,  two of the Pegasus launch vehicle\u2019s three stages were involved in a  transport accident. The stages were subsequently returned to the  launch vehicle contractor facility for inspection and testing, and no  damage was found. The project had been on track to launch early.  Subsequently, in September 2017, an anomaly found in testing of the  launch vehicle bolt cutter assemblies resulted in additional delays.  NASA had planned to launch ICON in mid-June 2018, but recently  announced a delay after off-nominal data was observed from the  rocket during transit to the launch site. NASA announced a new  launch date would be determined at a later date.", "The GRACE-FO project delayed its launch readiness date from  February to May 2018 due to issues with its planned launch vehicle  and launch site. The launch vehicle is the responsibility of NASA\u2019s  partner on the project\u2014German Research Centre for Geosciences  (GFZ). GRACE-FO had planned to launch at a Russian launch site. In  February 2016, GFZ reported that it was notified by the Russian  Federal Space Agency that the Dnepr launch vehicle was no longer  available for GRACE-FO. GFZ, in June 2016, arranged to launch the  two GRACE-FO spacecraft, along with commercial satellites, on a  SpaceX Falcon 9. On May 22, 2018, GRACE-FO launched from  Vandenberg Air Force Base in California.", "In addition, the Commercial Crew Program also experienced delays,  which are not included above because the program does not have a  schedule baseline. Since the award of the current Commercial Crew  contracts in September 2014, the program, Boeing, SpaceX, and multiple  independent review bodies have all identified the contractors\u2019 delivery  schedules as aggressive. In February 2017, we found that Boeing and  SpaceX had determined that neither could meet their original 2017 dates  for NASA to certify their systems for human spaceflight. In January  2018, we found that both contractors had notified NASA that final  certification dates have slipped again and are now in the first quarter of  calendar year 2019. The Commercial Crew Program\u2019s schedule  analysis indicates that certification may be further delayed to December  2019 for SpaceX and February 2020 for Boeing."], "subsections": []}]}, {"section_title": "NASA Is Likely to Encounter Additional Cost Growth and Schedule Delays", "paragraphs": ["The composition of the portfolio in the coming years is expected to  include large and complex projects, putting NASA at risk of continued  cost increases and schedule delays. Specifically, NASA plans to have  complex projects enter the development portfolio in the next few years as  it holds confirmation reviews and set cost and schedule baselines. This  includes the Europa Clipper project and potentially the Wide-Field  Infrared Survey Telescope (WFIRST) project. In February 2018, the  President\u2019s 2019 Budget Request proposed canceling the WFIRST  project due to the project\u2019s significant costs and higher priorities in the  agency. However, the project may continue if funding is received.  Together, preliminary estimates indicate that these two projects could  cost as much as $7.8 billion. In addition, NASA expects to begin other  large, complex projects like the Lunar Orbital Platform-Gateway\u2014 currently being discussed as a space station or outpost in lunar orbit\u2014 and a Europa Lander project in the coming years. A December 2017  space policy directive also instructed NASA to return astronauts to the  moon for long-term exploration and to pursue human exploration of Mars  and the broader solar system.", "To its credit, NASA recently took steps to put a process in place to control  the costs of two projects while in formulation, which may prove useful if  properly executed.", "The Europa Clipper project implemented a process whereby cost  growth threats would be offset by descoping instruments in whole or  in part. For example, if an instrument exceeds its development cost by  20 percent, the project would propose a descope option to NASA that  brings instrument cost below that threshold. NASA had not descoped  any instruments as of our May 2018 report.", "The WFIRST project is responding to findings from an independent  review that was conducted to ensure the mission\u2019s scope and  required resources are well understood and executable. The review  found that the mission scope is understood, but not aligned with the  resources provided and concluded that the mission is not executable  without adjustments and/or additional resources. For example, the  study team found that NASA\u2019s current forecasted funding profile for  the WFIRST project would require the project to slow down activities  starting in fiscal year 2020, which would result in an increase in  development cost and schedule. NASA agreed with the study team\u2019s  results and directed the project to reduce the cost and complexity of  the design in order to maintain costs within the $3.2 billion preliminary  cost target.", "But even with these efforts, NASA\u2019s cost and schedule performance may  be further tested in upcoming years as some expensive, complex projects  linger in the portfolio longer than expected.", "As previously discussed, the Orion program expects cost growth and  faces other schedule and technical risks as it moves through the  integration and test phase for EM-1 into at least 2019 and then  through 2023 for EM-2. As of August 2017, NASA officials expected  that new hardware and addressing development challenges would be  the factors contributing to increased cost for the program. For  example, there was a cost impact when the program moved from a  single-piece, or monolithic, heatshield design to one that employs  blocks in order to improve its structural strength. Program officials  said they are also assessing schedule delays for EM-2, and noted that  the EM-2 launch date depends on the outcome of the EM-1 launch  date.", "The SLS and EGS programs continue to face cost, schedule, and  technical risks as they move through the integration and test phase  into at least 2019. For example, SLS will have to complete a \u201cgreen  run\u201d test which requires multiple first-time efforts. Specifically, the test  is the culmination of the development effort and includes the core  stage integration with its four main engines, fully fueling with  cryogenic hydrogen and oxygen, and then firing all four engines for  about 500 seconds. NASA currently has no schedule reserve to its  target December 2019 launch readiness date for two key areas in the  core stage schedule. First, there is no reserve between the end of  core stage production and the delivery of the core stage to the test  facility. Second, there is no reserve between the end of the testing  and delivery to Kennedy Space Center for final integration and testing  prior to launch.", "As previously discussed, the JWST project is at risk of exceeding its  congressional cost cap, and faces schedule risks as it completes its  remaining integration and test work. These activities have taken  considerably longer than planned due to a variety of challenges,  including reach and access limitations on the flight hardware.  Additionally, the project faces significant work ahead. For example,  the project must complete integration of spacecraft element hardware  and conduct deployment and environmental tests of the integrated  sunshield and spacecraft. Further, it must integrate the telescope  element with the spacecraft element to form the JWST observatory,  and complete another set of challenging environmental tests on the  full integrated observatory. At the same time, the project will need to  mitigate dozens of remaining hardware and software risks to  acceptable levels and address the project\u2019s many potential single  point failures to the extent possible.", "The SGSS project expects to experience additional cost growth  through the final acceptance review because the full scope of the  effort has not been included in the cost. NASA only approved its new  cost estimate through the initial operational readiness review,  currently planned for September 2019. A project official said NASA  headquarters asked the project to determine if there are ways to  reduce the cost between the operational readiness review and the  final acceptance review. NASA plans to conduct an independent  review of the project in mid-2018 to inform a decision on whether to  continue the project past the operational readiness review. If NASA  decides to continue the project past this review, additional cost growth  is expected for SGSS when NASA revisits project costs through future  budget cycles.", "In closing, NASA continues to make improvements to the acquisition  management of its portfolio of major projects. However, the deterioration  of the cost and schedule performance of NASA\u2019s portfolio this year and  the likelihood of additional cost growth and schedule delays demonstrate  the need for NASA to continue to take actions to further reduce  acquisition risk as we and others have recommended. Continuing to  improve cost and schedule estimating tools and practices\u2014such as by  providing projects with sufficient cost and schedule reserves to address  risks and unforeseen technical challenges and ensuring that program  offices regularly and consistently update their JCLs across the portfolio\u2014 could help to better position NASA for improved outcomes. We look  forward to continuing to work with NASA and this subcommittee in  addressing these issues.", "Chairman Babin, Ranking Member Bera, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Cristina T. Chaplain, Director, Contracting and National Security  Acquisitions at (202) 512-4841 or chaplainc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this statement include Molly Traci, Assistant Director; Laura Greifner;  Erin Kennedy; Miranda Riemer; Roxanna T. Sun; and Alyssa Weir."], "subsections": []}]}, {"section_title": "Appendix I: Descriptions of National Aeronautics and Space Administration Major Projects Reviewed in GAO\u2019s 2018 Assessment", "paragraphs": ["Appendix I: Descriptions of National   Aeronautics and Space Administration Major  Projects Reviewed in GAO\u2019s 2018 Assessment Project description  The Commercial Crew Program facilitates and oversees the development of safe, reliable,  and cost-effective crew transportation systems by commercial companies to carry NASA  astronauts to and from the International Space Station. The program is a multi-phase effort  that started in 2010. During the current phase, the program is working with two contractors\u2014 Boeing and SpaceX\u2014that will design, develop, test, and operate the crew transportation  systems. Once NASA determines the systems meet its standards for human spaceflight\u2014a  process called certification\u2014the companies will fly up to six crewed missions to the space  station.", "The DART project plans to travel to the near-Earth asteroid Didymos, a binary system, and  impact the smaller of the two bodies. NASA will assess the deflection result of the impact for  potential future use on other potentially hazardous near-Earth objects. The project responds  to near-Earth object guidance by the Office of Science and Technology Policy to better  understand our impact mitigation posture, and to recommendations by the National Research  Council Committee to conduct a test of a kinetic impactor. The DART mission is part of the  Asteroid Impact and Deflection Assessment, which is an international collaboration with the  European Space Agency.", "The Europa Clipper mission aims to investigate whether the Jupiter moon could harbor  conditions suitable for life. The project plans to launch a spacecraft in the 2020s, place it in  orbit around Jupiter, and conduct a series of investigatory flybys of Europa. The mission\u2019s  planned objectives include characterizing Europa\u2019s ice shell and any subsurface water,  analyzing the composition and chemistry of its surface and ionosphere, understanding the  formation of its surface features, and surveying sites for a potential landed mission.", "The EGS program is modernizing and upgrading infrastructure at the Kennedy Space Center  and developing software needed to integrate, process, and launch the Space Launch System  (SLS) and Orion Multi-Purpose Crew Vehicle (Orion). The EGS program consists of several  major construction and facilities projects including the Mobile Launcher, Crawler Transporter,  Vehicle Assembly Building, and launch pad, all of which need to be complete before the first  uncrewed exploration mission using the SLS and Orion vehicles.", "The GRACE-FO mission will continue and expand upon the 2002 GRACE mission, which  ended science operations in October 2017. The system, which consists of two spacecraft  working together to obtain scientific measurements, will provide high-resolution models of  Earth\u2019s gravity field and insight into water movement on and beneath the Earth\u2019s surface for  up to 5 years. These models will provide rates of ground water depletion and polar ice melt  and enable improved planning for droughts and floods. GRACE-FO is a collaborative effort  with the German Research Centre for Geosciences.", "The ICESat-2 mission is a follow-on mission to ICESat that will measure changes in polar  ice-sheet mass and elevation. The measurements will provide researchers a better  understanding of the mechanisms that drive polar ice changes and their effect on global sea  level. ICESat-2\u2019s upgraded laser instrument will allow the satellite to make more frequent  measurements and provide better elevation estimates over certain types of terrain than  ICESat.", "InSight is a Mars lander with two primary objectives. It is intended to further understanding of  the formation and evolution of terrestrial planets by determining Mars\u2019s size, its composition,  and the physical state of the core; the thickness of the crust; and the composition and  structure of the mantle, as well as the thermal state of the interior. It will also determine the  present level of tectonic activity and the meteorite impact rate on Mars. InSight is based on  the Phoenix lander design. Phoenix successfully landed on Mars in 2008.", "Project description  The ICON observatory will orbit Earth to explore its ionosphere\u2014the boundary region  between Earth and space where ionized plasma and neutral gas collide and react. Its four  instruments will make direct measurements and use remote sensing to further researchers\u2019  understanding of Earth\u2019s upper atmosphere, the Earth-Sun connection, and the ways in  which Earth weather drives space weather.", "JWST is a large, infrared-optimized space telescope designed to help understand the origin  and destiny of the universe, the creation and evolution of the first stars and galaxies, and the  formation of stars and planetary systems. It will also help further the search for Earth-like  planets. JWST will have a large primary mirror composed of 18 smaller mirrors and a  sunshield the size of a tennis court. Both the mirror and sunshield are folded for launch and  open once JWST is in space. JWST will reside in an orbit about 1 million miles from the  Earth.", "Landsat 9 is the next satellite in the Landsat series Program, which provides a continuous  space-based record of land surface observations to study, predict, and understand the  consequences of land surface dynamics, such as deforestation. The program is a  collaborative, joint mission between NASA and the U.S. Geological Survey. The Landsat data  archive constitutes the longest continuous moderate-resolution record of the global land  surface as viewed from space and is used by many fields, such as agriculture, mapping,  forestry, and geology.", "LCRD is a technology demonstration mission with the goal of advancing optical  communication technology for use in deep space and near-Earth systems. LCRD will  demonstrate bidirectional laser communications between a satellite and ground stations,  develop operational procedures, and transfer the technology to industry for future use on  commercial and government satellites. NASA anticipates using the technology as a next  generation Earth relay as well as to support near-Earth and deep space science, such as the  International Space Station and human spaceflight missions. The project is a mission partner  and will be a payload on a U.S. Air Force Space Test Program satellite.", "Low Boom Flight Demonstrator (LBFD)  LBFD is a flight demonstration project planned to demonstrate that noise from supersonic  flight\u2014sonic boom\u2014can be reduced to acceptable levels, allowing for eventual commercial  use of overland supersonic flight paths. Plans include multiple flights beyond fiscal year 2022  to gather community responses to the flights and to create a database to support  development of international noise rules for supersonic flight.", "Lucy will be the first mission to investigate the Trojans, which are a population of never- explored asteroids orbiting in tandem with Jupiter. The project aims to understand the  formation and evolution of planetary systems by conducting flybys of these remnants of giant  planet formation. The Lucy spacecraft will first encounter a main belt asteroid\u2014located  between the orbits of Mars and Jupiter\u2014and then will travel to the outer solar system where  the spacecraft will encounter six Trojans over an 11-year mission. The mission\u2019s planned  measurements include asteroid surface color and composition, interior composition, and  surface geology.", "Mars 2020 is part of the Mars Exploration Program, which seeks to further understand  whether Mars was, is, or can be a habitable planet. Its rover and science instruments will  explore Mars and conduct geological assessments, search for signs of ancient life, determine  potential environmental habitability, and prepare soil and rock samples for potential future  return to Earth. The rover will include a technology demonstration instrument designed to  convert carbon dioxide into oxygen. Mars 2020 is based heavily on the Mars Science  Laboratory, or Curiosity, which landed on Mars in 2012 and remains in operation.", "Project description  NISAR is a joint project between NASA and Indian Space Research Organisation (ISRO) that  will study the solid Earth, ice masses, and ecosystems. It aims to address questions related  to global environmental change, Earth\u2019s carbon cycle, and natural hazards, such as  earthquakes and volcanoes. The project will include the first dual frequency synthetic  aperture radar instrument, which will use advanced radar imaging to construct large-scale  data sets of the Earth\u2019s movements. NISAR represents the first major aerospace science  partnership between NASA and ISRO.", "Orion is being developed to transport and support astronauts beyond low-Earth orbit,  including traveling to Mars or an asteroid. The Orion program is continuing to advance  development of the human safety features, designs, and systems started under the  Constellation program, which was canceled in 2010. Orion is planned to launch atop NASA\u2019s  Space Launch System. The current design of Orion consists of a crew module, service  module, and launch abort system.", "PSP will be the first NASA mission to visit a star. Using the gravity of Venus, the spacecraft  will orbit the Sun 24 times and gather information to increase knowledge about the solar  wind, including its origin, acceleration, and how it is heated. PSP instruments will observe the  generation and flow of solar winds from very close range and sample and take  measurements of the Sun\u2019s outer atmosphere, where solar particles are energized. To  achieve its mission, parts of the spacecraft must be able to withstand temperatures  exceeding 2,500 degrees Fahrenheit and endure blasts of extreme radiation. The project was  formerly named Solar Probe Plus, or SPP, and was renamed in May 2017.", "PACE is a polar-orbiting mission that will use advanced global remote sensing instruments to  improve scientists\u2019 understanding of ocean biology, biogeochemistry, ecology, aerosols, and  cloud properties. PACE will extend climate-related observations begun under earlier NASA  missions, which will enable researchers to study long-term trends on Earth\u2019s oceans and  atmosphere, and ocean-atmosphere interactions. PACE will also enable assessments of air  and coastal water quality, such as the locations of harmful algae blooms.", "Psyche will be the first mission to visit a metal asteroid and aims to understand a previously  unexplored component of the early building blocks of planets: iron cores. The project plans to  orbit the Psyche asteroid to determine if it is a planetary core, characterize its topography,  assess the elemental composition, and determine the relative ages of its surface regions.", "RBI is a scanning radiometer that NASA planned to launch on the National Oceanic and  Atmospheric Administration\u2019s (NOAA) Joint Polar Satellite System 2. RBI\u2019s planned mission  was to support global climate monitoring by continuing measurements of the Earth\u2019s reflected  sunlight and emitted thermal radiation made by NASA and NOAA satellites over the past 30  years. This data was intended to represent one of two key sets of measurements needed to  determine whether the Earth is warming or cooling.", "The Restore-L project will demonstrate the capability to refuel on-orbit satellites for eventual  use by commercial entities. Specifically, Restore-L plans to autonomously rendezvous with,  inspect, capture, refuel, adjust the orbit of, safely release, and depart from the U.S.  Geological Survey\u2019s Landsat 7 satellite.  Landsat 7 can extend operations if successfully  refueled, but it is planned for retirement if the technology demonstration is unsuccessful.", "SLS is intended to be NASA\u2019s first human-rated heavy-lift launch vehicle since the Saturn V  was developed for the Apollo program. SLS is planned to launch NASA\u2019s Orion spacecraft  and other systems on missions between the Earth and Moon and to enable deep space  missions, including Mars. NASA is designing SLS to provide an initial lift capacity of 70 metric  tons to low-Earth orbit, and be evolvable to 130 metric tons, enabling deep space missions.  The 70-metric-ton capability will include a core stage, powered by four RS-25 engines, and  two five-segment boosters. The 130-metric-ton capability will use a new upper stage and  evolved boosters.", "Project description  The SGSS project plans to develop and deliver a new ground system for one Space Network  site. The Space Network provides essential communications and tracking services to NASA  and non-NASA missions. Existing systems, based on 1980s technology, are increasingly  obsolete and unsustainable. The new ground system will include updated systems, software,  and equipment that will allow the Space Network to continue to provide critical  communications services for the next several decades. The Space Network is managed by  the Space Communication and Navigation program.", "The SWOT mission will use its wide-swath radar altimetry technology to take repeated high- resolution measurements of the world\u2019s oceans and freshwater bodies to develop a global  survey. This survey will make it possible to estimate water discharge into rivers more  accurately, and help improve flood prediction. It will also provide global measurements of  ocean surface topography and variations in ocean currents, which will help improve weather  and climate predictions. SWOT is a joint project between NASA and the French Space  Agency\u2014the Centre National d\u2019Etudes Spatiales.", "TESS will use four identical, wide field-of-view cameras to conduct the first extensive survey  of the sky from space for transiting exoplanets\u2014or planets in other solar systems. The  mission\u2019s goal is to discover these exoplanets during transit, the time when the planet\u2019s orbit  carries it in front of its star as viewed from Earth. The project plans to discover rocky and  potentially habitable Earth-sized and super-Earth planets orbiting nearby bright stars for  further evaluation through ground- and space-based observations by other missions, such as  JWST.", "WFIRST is an observatory designed to perform wide-field imaging and survey of the near- infrared sky to answer questions about the structure and evolution of the universe, and  expand our knowledge of planets beyond our solar system. The project will use a telescope  that was originally built and qualified by another federal agency. The project plans to launch  WFIRST in the mid-2020s to an orbit about 1 million miles from the Earth. The project is also  planning a guest observer program, in which the project may provide observation time to  academic and other institutions.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["This testimony highlights our 10th annual Quick Look report on the status of NASA's major projects. Many of them experienced significant cost and schedule growth in the past year.", "NASA is likely to keep seeing cost and schedule growth because complex new projects are starting up, and other expensive projects are taking longer to launch than expected.", "The full extent of cost growth was unknown because NASA didn't have a cost estimate for the Orion crew vehicle, one of its most expensive projects.", "The average launch delay was 12 months in this review\u2014the most we've ever reported."]}
{"id": "GAO-18-361", "url": "https://www.gao.gov/products/GAO-18-361", "title": "Defense Health Care: TRICARE Surveys Indicate Nonenrolled Beneficiaries' Access to Care Has Generally Improved", "published_date": "2018-03-29T00:00:00", "released_date": "2018-03-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD provides health care, including mental health care, to eligible beneficiaries through TRICARE. Beneficiaries who use TRICARE Prime, a managed care option, must enroll to receive care. Prior to Jan. 1, 2018, beneficiaries did not need to enroll for TRICARE Standard, a fee-for-service option, or TRICARE Extra, a preferred provider organization option (referred to as nonenrolled beneficiaries). Although the TRICARE Standard and Extra options were terminated effective Jan. 1, 2018, the new TRICARE Select option has similar benefits for obtaining care from network and nonnetwork providers.", "The National Defense Authorization Act (NDAA) for Fiscal Year 2008 directed DOD to conduct surveys of nonenrolled beneficiaries and civilian providers about access to care under the TRICARE Standard and Extra options. It also directed GAO to review the surveys' results. Additionally, the NDAA for Fiscal Year 2017 included a provision for GAO to review access to care under TRICARE Extra. This report addresses both provisions.", "GAO analyzed DOD's surveys to determine (1) nonenrolled beneficiaries' access to care, (2) nonenrolled beneficiaries' ratings of TRICARE, (3) civilian providers' awareness and acceptance of TRICARE, and (4) nonenrolled beneficiaries' access by individual geographic area. GAO interviewed agency officials, analyzed the 2012-2015 surveys, and compared them to DOD's 2008-2011 surveys and to surveys of Medicare and Medicaid beneficiaries. In commenting on a draft of this report, DOD concurred with GAO's findings."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) most recent surveys of TRICARE beneficiaries and civilian health care providers show that access to care has generally improved for nonenrolled beneficiaries who used the TRICARE Standard and Extra options. Specifically, GAO found the following:", "Nonenrolled beneficiaries reported improved access to care in the most recent 4-year survey (2012-2015), compared to the prior survey (2008-2011). For example, a lower percentage of nonenrolled beneficiaries reported that they experienced problems finding a civilian provider in the most recent survey (29 percent) than those in the prior survey (31 percent). In addition, a higher percentage of nonenrolled beneficiaries (90 percent) reported that they were usually or always able to obtain a non-urgent appointment as soon as they thought they needed compared to the prior survey (87 percent).", "The percentage of nonenrolled beneficiaries who reported positive experience ratings of TRICARE ranged from 71 to 83 percent over five categories, including ratings of primary, specialty, and mental health care providers. These ratings were generally higher than the prior survey. When compared to other federal health plans, nonenrolled TRICARE beneficiaries' positive experience ratings of primary and specialty care providers were lower than those of Medicare fee-for service beneficiaries, but higher than those of Medicaid beneficiaries.", "The percentage of civilian providers who were aware of TRICARE increased from 82 percent in the prior survey to 84 percent. However, the percentage who accepted new TRICARE patients decreased from 58 percent to 55 percent. According to GAO's analysis of survey data, this overall decrease was mainly attributable to a decrease in mental health care providers' acceptance rates, as the acceptance rates for primary and specialty care providers remained unchanged. Network providers reported both higher awareness and acceptance of TRICARE than providers not in the network (referred to as nonnetwork providers). The biggest gap in both awareness and acceptance between network and nonnetwork providers was for mental health care providers:", "About 96 percent of network mental health care providers reported awareness of TRICARE compared to 72 percent of nonnetwork mental health care providers.", "About 79 percent of network mental health care providers reported accepting new TRICARE patients compared to 30 percent of nonnetwork mental health care providers.", "GAO's analysis of both the beneficiary and provider surveys identified locations in New York, Washington, Texas, and Washington, D.C. where access to providers may be particularly problematic. Specifically, in these locations, beneficiaries reported more problems finding providers who accepted TRICARE and providers reported lower acceptance of TRICARE, compared to national averages."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2016, the Department of Defense (DOD) offered health care  services, including mental health care, to more than 9 million eligible  beneficiaries in the United States and abroad through TRICARE, DOD\u2019s  regionally structured health care program. Under TRICARE,  beneficiaries may obtain care either from military hospitals and clinics,  referred to collectively as military treatment facilities, or from civilian  providers. However, since TRICARE\u2019s inception in 1995, beneficiaries in  some locations\u2014particularly those who did not enroll in TRICARE\u2019s  managed care option\u2014have raised concerns about difficulties finding  civilian providers who will accept them as patients.", "The number and type of civilian providers available to serve TRICARE  beneficiaries can vary depending on a beneficiary\u2019s location and choice of  coverage\u2014which prior to January 1, 2018, consisted of TRICARE\u2019s three  basic plans: Prime, Extra, and Standard. Beneficiaries who used  TRICARE Prime, a managed care option, had to enroll and could obtain  care through military treatment facilities or TRICARE\u2019s network of civilian  providers. DOD uses contractors, called managed care support  contractors, to develop networks of civilian providers (network providers)  to ensure adequate access to care for all TRICARE beneficiaries in  geographic areas called Prime Service Areas (PSA). Although some  network providers may be located outside of PSAs, contractors are not  required to develop networks in these areas (which we refer to as non- PSAs).", "Beneficiaries did not need to enroll to receive care under TRICARE  Standard, a fee-for-service option, or TRICARE Extra, a preferred  provider organization option. These beneficiaries\u2014referred to as  nonenrolled beneficiaries\u2014could choose to receive care either through  TRICARE Standard when they saw nonnetwork civilian providers or  through TRICARE Extra when they saw network civilian providers. The  National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017)  terminated both the TRICARE Standard and Extra options and  established a self-managed preferred provider option called TRICARE  Select beginning January 1, 2018.", "In response to nonenrolled beneficiaries\u2019 concerns about access to care,  the National Defense Authorization Act for Fiscal Year 2008 (NDAA 2008)  directed DOD to conduct a multi-year survey (2008-2011) of nonenrolled  beneficiaries and a multi-year survey (2008-2011) of civilian providers to  determine the adequacy of access to health care providers, including  mental health care providers, for nonenrolled beneficiaries. The National  Defense Authorization Act for Fiscal Year 2012 (NDAA 2012) directed  DOD to continue both of these surveys for an additional 4-year period  (2012-2015).", "The NDAA 2008 also included a recurring provision for us to review a  series of issues related to the adequacy of access to care for nonenrolled  TRICARE beneficiaries, including information gleaned from the  beneficiary and civilian provider surveys, and to report on these issues on  a biannual basis. We have issued a series of reports in response to this  provision, including two reports that focused on DOD\u2019s beneficiary and  civilian provider surveys. In addition, the NDAA 2017 directed us to  conduct a review of the network of civilian providers that provide care to  nonenrolled beneficiaries under the TRICARE Extra option.", "This report addresses provisions in both the NDAA 2008, as amended,  and the NDAA 2017 for us to report on the adequacy of access to care for  nonenrolled TRICARE beneficiaries. Specifically, it describes  1.  what the results of the most recent 4-year beneficiary survey indicate  about access to care for nonenrolled beneficiaries;  2.  what the results of the most recent 4-year beneficiary survey indicate  about nonenrolled beneficiaries\u2019 ratings of their experience with  TRICARE;  3.  what the results of the most recent 4-year civilian provider survey  indicate about civilian providers\u2019 awareness and acceptance of  TRICARE; and  4.  what the collective results of the most recent 4-year beneficiary and  civilian provider surveys indicate about access to care for nonenrolled  beneficiaries by geographic area.", "To determine what the results of the most recent 4-year beneficiary  survey indicate about access to care for nonenrolled beneficiaries, we  obtained and analyzed survey data from DOD\u2019s TRICARE Standard  Surveys of Beneficiaries for 2012-2015. Specifically, we analyzed these  data to determine whether nonenrolled beneficiaries were able to obtain  an appointment as soon as they wanted, how quickly they were able to  get an appointment to see a provider, and if they had a problem finding a  provider that would accept TRICARE. We compared these data across  location types, provider types, and providers\u2019 network status, where  applicable. We also compared these results to DOD\u2019s 2008-2011 survey  results to identify any changes in beneficiaries\u2019 access over time.", "To determine what the results of the most recent 4-year beneficiary  survey indicate about nonenrolled beneficiaries\u2019 ratings of their  experience with TRICARE, we obtained and analyzed the 2012-2015  nonenrolled beneficiary survey data that indicated beneficiaries\u2019 ratings of  certain aspects of their TRICARE experiences, such as their ratings of  health care, health plan, and primary, specialty, and mental health care  providers. We compared these data by providers\u2019 network status, where  applicable. We also obtained and analyzed data from the Department of  Health and Human Services\u2019 (HHS) Consumer Assessment of Healthcare  Providers and Systems (CAHPS) surveys for the 2013-2015 time period  to compare nonenrolled TRICARE beneficiaries\u2019 ratings to those of  Medicare fee-for-service and Medicaid beneficiaries. Additionally, we  compared the results of DOD\u2019s 2012-2015 beneficiary surveys to DOD\u2019s  2008-2011 survey results to identify any changes in beneficiaries\u2019 ratings  of experiences over time.", "To determine what the results of the most recent 4-year civilian provider  surveys indicate about civilian providers\u2019 awareness and acceptance of  TRICARE, we obtained and analyzed survey data from DOD\u2019s TRICARE  Standard Surveys of Providers for 2012-2015. We compared these data  by location type, provider type, and providers\u2019 network status, where  applicable. We compared these results to the results from DOD\u2019s 2008- 2011 surveys to identify any changes in provider awareness and  acceptance over time.", "To determine what the collective results of the most recent 4-year  beneficiary and civilian provider surveys indicate about access to care for  nonenrolled beneficiaries, we compared the results of our analyses of the  2012-2015 beneficiary and provider survey data by specific geographic  regions, where possible, in order to identify locations with high  percentages of nonenrolled beneficiaries who experienced problems  finding civilian providers and low percentages of civilian providers who  were accepting new TRICARE patients. We conducted this analysis by  individual location type and provider type.", "For each objective, we assessed the reliability of the data from the  surveys\uf8e7including DOD\u2019s 2012-2015 nonenrolled beneficiary and civilian  provider surveys and HHS\u2019s CAHPS survey\uf8e7by speaking with  knowledgeable officials and reviewing relevant documentation. DOD  calculated the response rates for its 2012-2015 nonenrolled beneficiary  surveys and civilian provider surveys to be about 25 percent and 39  percent, respectively. We verified that the surveys\u2019 results were  representative of the areas surveyed by reviewing DOD\u2019s nonresponse  analyses for these surveys and by interviewing DOD officials. We  determined that all data used in this report were sufficiently reliable for  our purposes. However, our analyses have some limitations. In our  collective analyses of DOD\u2019s beneficiary and provider surveys, we were  not able to compare survey results among all of the individual geographic  locations due to low numbers of respondents in some areas. Specifically,  we excluded individual locations that had less than 30 respondents to the  beneficiary survey or less than 50 respondents to the provider survey,  depending on the survey questions we analyzed. Due to the low numbers  of respondents who indicated that they needed mental health care, we  were unable to identify specific geographic locations in which nonenrolled  beneficiaries experienced problems finding mental health providers.", "We conducted this performance audit from March 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Composition of TRICARE\u2019s Nonenrolled Beneficiary Population", "paragraphs": ["In fiscal year 2016, DOD identified about 2.2 million nonenrolled  TRICARE beneficiaries who fell into four categories: (1) retired  servicemembers and their dependents, (2) inactive guard/reserve  servicemembers and their dependents, (3) dependents of active duty, or  of guard/reserve on active duty status, and (4) other beneficiaries, such  as dependent survivors of deceased servicemembers. Retired  servicemembers and their dependents made up the majority of  nonenrolled beneficiaries at the end of fiscal year 2016 (approximately 60  percent). (See fig. 1.)"], "subsections": []}, {"section_title": "TRICARE\u2019s Benefit Options", "paragraphs": ["Prior to January 1, 2018, TRICARE provided benefits through three basic  options for its non-Medicare-eligible beneficiary population\u2014TRICARE  Prime, Standard, and Extra. These options varied by enrollment  requirements, choices in civilian and military treatment facility providers,  and the amount beneficiaries must contribute toward the cost of their  care. (See table 1.)", "The NDAA 2017 made specific changes to the TRICARE program that  became effective on January 1, 2018. These changes included  terminating the TRICARE Standard and Extra options, establishing a new  option called TRICARE Select, and ensuring that 85 percent of TRICARE  Select beneficiaries are covered by the network of civilian providers.", "TRICARE Select has similar benefits to TRICARE Standard and Extra for  obtaining care from nonnetwork and network providers, but unlike these  options, TRICARE Select requires enrollment."], "subsections": []}, {"section_title": "TRICARE Networks and Locations", "paragraphs": ["Under TRICARE, DOD uses managed care support contractors to  develop networks of civilian providers to serve all TRICARE beneficiaries  in PSAs, which are typically within an approximate 40-mile radius of a  military outpatient or inpatient treatment facility or Base Realignment and  Closure sites. Although some network providers may be located in non- PSAs, contractors are not required to develop networks in these areas.  Previously, contractors had the option of developing additional PSAs (and  civilian provider networks) in areas that were not located near military  treatment facilities or Base Realignment and Closure sites. However, on  October 1, 2013, DOD eliminated these additional PSAs, referred to in  the survey analyses as \u201cformer PSAs,\u201d and as a result, the managed care  support contractors were no longer required to develop and maintain  networks of civilian providers in these areas.", "In fiscal year 2016, approximately 65 percent of the 2.2 million  nonenrolled beneficiaries that were eligible for TRICARE Standard and  Extra (1.47 million) lived in PSAs. Of the remaining nonenrolled  beneficiaries (775,000), about 19 percent lived in former PSAs and about  16 percent lived in non-PSAs. (See fig. 2.) Nonenrolled beneficiaries who  live in former PSAs and non-PSAs may still have access to network  providers, even though contractors are not required to develop networks  in these areas. About 57 percent of these beneficiaries (445,000) filed at  least one TRICARE claim with a network civilian provider during fiscal  year 2016."], "subsections": []}, {"section_title": "DOD\u2019s Implementation of Mandated Beneficiary and Civilian Provider Survey Requirements", "paragraphs": ["The NDAA 2008 directed DOD to survey nonenrolled beneficiaries and  civilian providers in at least 20 PSAs in each of four fiscal years, 2008  through 2011, as well as 20 non-PSAs. To do this, DOD divided the  country into 80 distinct PSAs and 80 distinct non-PSAs and surveyed 20  PSAs and 20 non-PSAs each year. At the end of the 4-year period, each  year\u2019s survey results were combined and weighted to develop estimates  of access to health care, including mental health care, at the service area,  state, and national levels. Additionally, the NDAA 2008 required DOD to  consult with representatives of TRICARE beneficiaries and providers of  health care, including mental health care, to identify locations where  nonenrolled beneficiaries have experienced significant access-to-care  problems and to survey both beneficiaries and health care providers,  including mental health care providers, in these areas. Based on these  consultations, DOD designated certain Hospital Service Areas (HSA) to  include in its beneficiary and provider surveys.", "DOD used a similar methodology for determining its locations in the 2012- 2015 surveys. However, as a result of DOD\u2019s changes to PSAs on  October 1, 2013, 28 of the 80 non-PSAs surveyed were former PSAs.  DOD also surveyed both nonenrolled beneficiaries and civilian providers  in a total of 30 HSAs. As a result, DOD collectively surveyed 190  geographic locations over the 4-year period. Furthermore, we previously  reported that DOD\u2019s implementation of its 2008-2011 nonenrolled  beneficiary and civilian provider surveys generally addressed the  requirements outlined in the NDAA 2008. DOD made several minor  revisions to the methodologies of the 2012-2015 surveys, but we  determined that none of those changes altered DOD\u2019s compliance with  the NDAA 2008, as amended."], "subsections": []}]}, {"section_title": "Nonenrolled TRICARE Beneficiaries Reported Generally Experiencing Fewer Problems Accessing Care, and More Reported Obtaining Care when Desired", "paragraphs": [], "subsections": [{"section_title": "Nonenrolled TRICARE Beneficiaries Reported Generally Experiencing Fewer Problems Accessing Care than in the Prior Survey", "paragraphs": ["Nonenrolled beneficiary survey results over time. Nationwide, a lower  percentage of nonenrolled beneficiaries reported that they experienced  problems finding any type of provider in the 2012-2015 survey (29  percent) when compared to the prior 2008-2011 survey (31 percent).  Specifically, fewer nonenrolled beneficiaries reported that they  experienced problems finding a primary care provider than in the prior  survey (22 percent in 2012-2015 compared to 25 percent in 2008-2011).  However, there was no significant statistical difference over time in the  percentage of beneficiaries who reported experiencing problems finding a  specialty care or mental health care provider. (See fig. 3.)", "Nonenrolled beneficiary survey results by type of location.  Nonenrolled beneficiaries in non-PSAs reported experiencing fewer  problems finding primary and specialty providers than those in PSAs,  which is similar to what we reported for the prior survey. For example,  about 20 percent of beneficiaries in non-PSAs reported that they had  problems finding specialty care providers compared to 24 percent in  PSAs. Regarding beneficiaries in former PSAs, the only statistically  significant difference among the three provider types was for problems  finding a primary care provider. Specifically, fewer (about 19 percent)  nonenrolled beneficiaries in non-PSAs reported experiencing problems  finding a primary care provider to accept TRICARE, compared to 24  percent in former PSAs. (See fig. 4.) DOD officials told us that they were  unsure of the exact reasons for the difference between PSAs and non- PSAs. However, they explained that PSAs are often located in more  populated areas, where TRICARE beneficiaries may not make up a large  market share for local civilian providers, who may have a wide array of  patients with other health plans.", "Nonenrolled beneficiary survey results by network status.  Nonenrolled beneficiaries with network providers reported experiencing  fewer problems finding civilian providers, compared to nonenrolled  beneficiaries with nonnetwork providers. For example, 20 percent of the  nonenrolled beneficiaries who used a network civilian primary care  provider reported that they had a problem finding a primary care provider  that would accept TRICARE compared with the 44 percent of nonenrolled  beneficiaries who used a nonnetwork civilian primary care provider.  (See fig. 5.)", "In addition, when compared with the results of the last survey (2008- 2011), the percentages of nonenrolled beneficiaries who reported that  they experienced problems finding a specialty care or mental health care  provider increased in the most recent survey (2012-2015) for  beneficiaries who used nonnetwork providers, but there were no changes  over time if their specialty care or mental health care providers were in  the network. (See fig. 6.)"], "subsections": []}, {"section_title": "More Nonenrolled TRICARE Beneficiaries Reported Obtaining Appointments as Soon as Desired", "paragraphs": ["Compared to the prior survey, a higher percentage of nonenrolled  beneficiaries reported that they were able to obtain appointments as soon  as they desired. Specifically, the percentage of nonenrolled beneficiaries  who made non-urgent appointments for health care and reported that  they were able to usually or always obtain an appointment as soon as  they thought they needed increased from 87 percent in the 2008-2011  survey to 90 percent in the 2012-2015 survey. However, the most  commonly reported length of time they waited between making an  appointment and actually seeing a provider did not change from the 2008- 2011 surveys\u2014most respondents in both surveys reported they were able  to get appointments within 3 days (about 54 percent for both years\u2019  surveys).", "The 2012-2015 survey also asked specific questions about how easy it  was to get an appointment with specialty care providers and mental  health care providers:", "Of those nonenrolled beneficiaries who tried to make an appointment  with a civilian specialty care provider, 84 percent reported it was  \u201cusually easy,\u201d or \u201calways easy,\u201d to get appointments. These results  also varied by network status, as a higher percentage of those who  used a network specialty care provider reported that they found it  \u201cusually easy\u201d or \u201calways easy\u201d to get appointments (85 percent)  compared to those that used a nonnetwork specialty care provider (74  percent).", "Of those nonenrolled beneficiaries that received treatment or  counseling from a civilian mental health care provider, 73 percent  reported that when they needed treatment or counseling right away,  they usually or always saw someone as soon as they wanted. We  found that this result did not change since the prior survey, nor did we  find any statistically significant differences between beneficiaries\u2019  responses for seeing a network versus a nonnetwork mental health  provider."], "subsections": []}]}, {"section_title": "Nonenrolled Beneficiaries\u2019 Positive Ratings of TRICARE Have Generally Increased over Time and Vary Compared to Other Federal Health Plans", "paragraphs": ["Ratings of TRICARE over time. Nonenrolled beneficiaries\u2019 positive  ratings of TRICARE have generally increased since the previous survey.  Specifically, over time, nonenrolled beneficiaries\u2019 positive ratings of five  different categories related to TRICARE have either increased (primary  care rating, specialty care rating, and health plan rating) or remained the  same (mental health care rating and health care rating). (See fig. 7.)  Furthermore, nonenrolled beneficiaries\u2019 positive ratings of their mental  health care providers were lower than their ratings for their primary and  specialty care providers. We also found that there were no significant  differences at the 95 percent confidence level for nonenrolled  beneficiaries\u2019 ratings of primary care, specialty care, or mental health care  providers based on their network status.", "Ratings of TRICARE compared to other federal health plans. When  we compared these results to those of the 2013-2015 CAHPS surveys,  we found that nonenrolled TRICARE beneficiaries\u2019 positive experience  ratings for primary care providers and specialty care providers were lower  than those of Medicare fee-for-service beneficiaries and higher than those  of Medicaid beneficiaries, which is similar to what we found for the  previous survey. We also found that TRICARE beneficiaries\u2019 positive  experience ratings for their health care were higher than that of both  Medicare fee-for-service beneficiaries and Medicaid beneficiaries, but  TRICARE beneficiaries\u2019 positive experience ratings for their health plan  were lower than both of these groups. (See fig.8.)"], "subsections": []}, {"section_title": "Civilian Providers\u2019 Reported Awareness of TRICARE Has Generally Increased over Time, While Mental Health Providers\u2019 Acceptance of New TRICARE Patients Has Decreased", "paragraphs": [], "subsections": [{"section_title": "Civilian Providers\u2019 Awareness of TRICARE Has Generally Increased over Time, with Network Providers Reporting Higher Awareness than Nonnetwork Providers", "paragraphs": ["Provider awareness over time, by provider type and by location  type. Nationwide, a higher percentage of civilian providers reported that  they were aware of TRICARE in the 2012-2015 civilian provider survey  (84 percent) than those from the 2008-2011 civilian provider survey (82  percent). Specifically, since the previous survey, we found that  awareness increased for specialty care providers (from 92 to 94 percent)  and mental health care providers (from 68 to 74 percent).", "In addition, when we analyzed these results by location type, we found  that civilian providers in both PSAs and non-PSAs reported higher  awareness of TRICARE since the previous survey (from 79 to 82 percent  in PSAs and from 87 to 89 percent in non-PSAs). Awareness among civilian providers in locations now designated as former PSAs remained  statistically unchanged at the 95 percent confidence level (89 percent in  2012-2015). However, despite some increases in awareness, civilian  providers in PSAs reported lower awareness than those in non-PSAs and  former PSAs in the 2012-2015 surveys.", "Provider awareness by network status. Providers within the TRICARE  network reported higher awareness of TRICARE than nonnetwork  providers, regardless of individual provider type. (See fig. 9.) Among  individual provider types, the biggest difference in awareness between  network and nonnetwork providers was for mental health care providers,  with 96 percent of network mental health care providers reporting  awareness of TRICARE compared with 72 percent of nonnetwork mental  health care providers."], "subsections": []}, {"section_title": "Civilian Mental Health Care Providers\u2019 Acceptance of New TRICARE Patients Has Decreased; Network Providers Reported Higher Acceptance than Nonnetwork Providers", "paragraphs": ["Provider acceptance over time, by provider type and location type.  Nationwide, we found an overall decrease reported in civilian providers\u2019  acceptance of new TRICARE patients in the 2012-2015 civilian provider  survey (55 percent) compared to the 2008-2011 civilian provider survey  (58 percent).  However, when we analyzed acceptance by provider  type, we found that the overall decrease was mainly attributable to a  decrease in mental health care providers\u2019 acceptance rates, as primary  and specialty care providers\u2019 acceptance rates remained unchanged.  Specifically, mental health care providers\u2019 TRICARE acceptance rate  decreased from 39 to 36 percent. However, this low acceptance rate  may not be an issue unique to TRICARE, as we have previously reported  that there is a nationwide shortage of mental health professionals.", "In addition, when we analyzed results for all civilian providers by location  type, we found that civilian providers in PSAs and non-PSAs reported  lower acceptance rates of new TRICARE patients since the previous  survey (from 55 to 53 percent in PSAs, and from 66 to 62 percent in non- PSAs). Acceptance among civilian providers in locations now  designated as former PSAs remained statistically unchanged at the 95  percent confidence level (60 percent in 2012-2015). Similar to our  findings on providers\u2019 awareness, we found that civilian providers in PSAs  reported lower acceptance rates than those in non-PSAs and former  PSAs. miscellaneous, and", "A Department of Defense official told us that  some examples of \u201cmiscellaneous\u201d are \u201cin a  private practice\u201d, and \u201cnot a preferred  provider.\u201d", "Provider acceptance by network status. When we analyzed civilian  providers\u2019 acceptance of new TRICARE patients by providers\u2019 network  status, we found that network providers reported higher acceptance of  new TRICARE patients than nonnetwork providers, regardless of provider  type. (See fig. 10.) Among individual provider types, the biggest  difference in acceptance between network and nonnetwork providers was  for mental health care providers with 79 percent of network mental health  care providers reporting acceptance of new TRICARE patients compared  with 30 percent of nonnetwork mental health care providers. Of those  mental health care providers that were not accepting new TRICARE  patients, one of the top reasons reported by those not in the network was  a lack of awareness of TRICARE. Due to the relatively small number of  network mental health providers who provided reasons for not accepting  new TRICARE patients, it was not possible to identify one primary  reason; however, some of the reasons they cited include reimbursement,  not accepting new patients, and specialty was not covered."], "subsections": []}]}, {"section_title": "DOD\u2019s Surveys of Nonenrolled Beneficiaries and Civilian Providers Collectively Indicate That Specific Geographic Locations May Have Access Problems", "paragraphs": ["Our analysis of the 2012-2015 nonenrolled beneficiary and civilian  provider surveys indicated that beneficiaries may have difficulty accessing  a primary care provider, a specialty care provider, or both in 6 out of the  190 specific geographic locations that were surveyed. For the 6 locations  we identified, beneficiaries reported higher levels of problems finding  providers, and providers reported lower rates of accepting TRICARE  patients.", "Primary care. We identified two locations where access to primary  care providers may be particularly problematic. (See table 2.) In these  two locations, the percent of beneficiaries who reported that they had  problems finding a primary care provider was at or above the 2012- 2015 beneficiary survey\u2019s national average of 22 percent, and also  where the percent of primary care providers who reported that they  were accepting new TRICARE patients was at or below the 2012- 2015 civilian provider survey\u2019s national average of 68 percent.", "Specialty care. We identified five locations where access to specialty  care providers may be particularly problematic. (See table 2.) In these  five locations, the percent of beneficiaries who reported that they had  problems finding a specialty care provider was at or above the 2012- 2015 beneficiary surveys\u2019 national average of 23 percent, and also  where the percent of specialty care providers who reported that they  were accepting new TRICARE patients was at or below the 2012- 2015 civilian provider surveys\u2019 national average of 78 percent.", "When we compared this analysis to our analysis of the 2008-2011  beneficiary and provider surveys, the \u201cDallas/Fort Worth, Texas\u201d HSA  was identified in both results. Using data from the prior survey, our  analysis identified it as being potentially problematic for primary care, but  using data from the more recent survey, we identified specialty care  access as being potentially problematic. DOD officials told us that their  past analysis of beneficiaries\u2019 complaints in this location centered on  appointment wait times exceeding beneficiaries\u2019 preferences and on drive  times to providers\u2019 offices. Officials explained that although there was a  wide range of network specialty care providers in this location, TRICARE  beneficiaries were a very small percentage of the overall population.  Furthermore, this location is home to a number of large corporations that  have health care plans that reimburse providers more than TRICARE.  DOD officials added that due to these factors, providers in this location do  not give preference to TRICARE beneficiaries, and drive times in this  location are often long due to the traffic patterns and overall congestion of  a large urban area."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["In reviewing a draft of this report, DOD concurred with our overall  findings. DOD\u2019s written response is reprinted in appendix I.", "We are sending copies of this report to the Secretary of Defense and  appropriate congressional committees. The report is also available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff has any questions regarding this report, please contact  Debra A. Draper at (202) 512-7114 or draperd@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": ["Debra A. Draper at (202) 512-7114 or draperd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contacts named above, Bonnie Anderson, Assistant  Director; Jeff Mayhew, Analyst-in-Charge; Amy Andresen; and Jennie  Apter made key contributions to this report. Also contributing were Zhi  Boon, Jacquelyn Hamilton, Vikki Porter, and Eric Wedum."], "subsections": []}]}], "fastfact": ["The Department of Defense offers health coverage to military servicemembers and retirees through TRICARE. Some beneficiaries\u2014particularly those not enrolled in TRICARE\u2019s managed care option\u2014have raised concerns about finding doctors who accept their health coverage.", "We reviewed DOD's most recent survey of TRICARE beneficiaries who were not enrolled in the managed care option and found that their access to care improved since the last survey. Specifically, these beneficiaries reported that it was easier to find doctors who accept TRICARE and get timely appointments with them."]}
{"id": "GAO-18-24", "url": "https://www.gao.gov/products/GAO-18-24", "title": "Internet Firearm Sales: ATF Enforcement Efforts and Outcomes of GAO Covert Testing", "published_date": "2017-11-21T00:00:00", "released_date": "2017-12-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The current federal legal framework governing buying and selling of firearms does not specifically address the use of the Internet to facilitate these transactions. Additionally, private transactions involving the most-common types of firearms between individuals who are not licensed to commercially sell weapons and who are residents of the same state, including transactions facilitated by the Internet, are generally not subject to federal background-check requirements.", "Congressional requesters asked that GAO assess the extent to which ATF is enforcing existing laws and investigate whether online private sellers sell firearms to people who are not allowed or eligible to possess a firearm. This report describes (1) techniques ATF uses to investigate and enforce generally applicable firearm laws in instances where the firearm or firearm-component transaction is facilitated by the Internet and (2) results of GAO's undercover attempts to buy firearms on the Dark Web and Surface Web.", "GAO analyzed documents and interviewed officials to identify actions ATF has taken to prohibit illegal firearm transactions. GAO also attempted to purchase firearms from Dark Web and Surface Web marketplaces. The results of the testing are illustrative and nongeneralizable."]}, {"section_title": "What GAO Found", "paragraphs": ["The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is responsible for investigating criminal and regulatory violations of firearms statutes and regulations that govern firearms transactions, including sales that are facilitated by the Internet. Two components of the Internet may be used to facilitate Internet firearm sales: the Surface Web and the Dark Web. The Surface Web is searchable with standard web search engines. The Dark Web contains content that has been intentionally concealed and requires specific computer software to gain access. ATF created the Internet Investigations Center (Center) to investigate buyers and sellers who use the Internet to facilitate illegal firearms transactions. The Center uses several tools to provide investigative support to ATF, which has resulted in the arrests of individuals using the Internet to facilitate illegal firearm purchases. ATF officials with the Center also noted that investigations might involve both the Surface Web and the Dark Web. For example, to identify an anonymous user on the Dark Web, the Center works to establish a user's \u201cdigital footprint\u201d on the Surface Web.", "In 2016, the Center also issued a report about Internet firearm transactions. This and other ATF reports highlighted the following about Internet-facilitated firearm transactions:", "The relative anonymity of the Internet makes it an ideal means for prohibited individuals to obtain illegal firearms.", "The more anonymity employed by a firearms purchaser, the greater the likelihood that the transaction violates federal law.", "Firearm transactions that occur on the Dark Web are more likely to be completed in person or via the mail or common carrier, versus through a Federal Firearm Licensee.", "GAO agents attempted to purchase firearms from Dark Web and Surface Web marketplaces. Agents made seven attempts to purchase firearms on the Dark Web. In these attempts, agents did not disclose any information about whether they were prohibited from possessing a firearm. Of these seven attempts, two on a Dark Web marketplace were successful. Specifically, GAO agents purchased and received an AR-15 rifle and an Uzi that the seller said was modified so that it would fire automatically. GAO provided referral letters to applicable law-enforcement agencies for these purchases to inform any ongoing investigations.", "Tests performed on the Surface Web demonstrated that private sellers GAO contacted on gun forums and other classified ads were unwilling to sell a firearm to an individual who appeared to be prohibited from possessing a firearm. Of the 72 attempts agents made to purchase firearms on the Surface Web, 56 sellers refused to complete a transaction: 29 sellers stated they would not ship a firearm and 27 refused after the disclosure of the undercover identities' stated prohibited status. Furthermore, in 5 of these 72 attempts, the accounts GAO set up were frozen by the websites, which prevented the agents from using the forums and attempting to make a purchase."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report. ATF provided technical comments, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Mass public shootings in the United States, such as those in Las Vegas,  Nevada; Newtown, Connecticut; and Orlando, Florida, have sparked  debate about existing firearms laws designed to reduce firearm violence.  Such debate has included questions about how prohibited individuals,  such as convicted felons, may have access to firearms. In 2016, the  Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)\u2014part of the  Department of Justice (DOJ)\u2014reported a steady increase in Internet- based criminal enforcement cases within ATF since 2011. According to  the ATF FY 2010 \u2013 FY 2016 strategic plan, the privacy of the Internet  makes it an ideal means for gang members, violent criminals, terrorists,  and juveniles to traffic and obtain illegal firearms. Further, the 2016  report noted that the more anonymity employed by a firearms purchaser,  the greater the likelihood that the transaction violates federal law.", "The current federal legal framework of statutes and regulations governing  the buying and selling of firearms does not specifically address the use of  the Internet to facilitate these transactions. Federally regulated  transactions include those in which the seller is engaged in the business  of dealing in firearms and is required to conduct a background check on a prospective nonlicensed buyer. Conversely, private transactions for the  most common types of firearms between nonlicensed individuals who are  residents of the same state, including transactions facilitated by the  Internet, are generally not subject to federal background-check  requirements.", "You asked us to assess the extent to which ATF is enforcing existing gun  laws as they apply to firearms transactions facilitated by the Internet and  investigate whether online private sellers sell firearms to prohibited  individuals. This report describes (1) techniques ATF uses to investigate  and enforce generally applicable firearm laws in instances where the  firearm or firearm-component transaction is facilitated by the Internet and  (2) results from our covert attempts to buy firearms on the Surface Web  and Dark Web.", "To describe the investigative and enforcement techniques ATF has  implemented to detect prohibited firearm or firearm-component  transactions facilitated by the Internet, we reviewed relevant ATF  documentation, such as planning and policy documents. We also  reviewed and analyzed relevant statutes and regulations to understand  the legal framework in which ATF performs its enforcement duties.  Further, we examined applicable DOJ and ATF documentation to identify  examples of closed adjudicated cases. We performed additional research  using public court records to augment these reports in order to describe  enforcement actions ATF has taken on prohibited firearms transactions  facilitated by the Internet. Additionally, we interviewed ATF officials,  including those with its Internet Investigations Center (Center), to  understand enforcement actions ATF takes to respond to firearm crimes  facilitated by the Internet. We also observed ATF regulatory officials  perform a compliance inspection of a Federal Firearm Licensee (FFL) that  engages in online commerce of dealing firearms to understand how the  FFL inspection process works and learn how legitimate FFL transactions  are facilitated by the Internet.", "To attempt to use the Internet to facilitate test firearm purchases, our  agents performed covert tests on the Dark Web and Surface Web. Agents  covertly accessed a Dark Web marketplace and attempted to purchase  firearms or firearm components from nonlicensed private sellers. For our  Dark Web testing, we examined the feasibility of obtaining different types  of firearms. We made seven attempts to complete firearm transactions on  the Dark Web, and we concluded testing when the transactions were  successfully completed. For these covert tests, we did not disclose any  information about our presumed prohibited status. On the Surface Web,  using a variety of scenarios designed to make the seller believe that the  transaction would be illegal, agents accessed gun forums and other  classified advertisements and made 72 attempts to purchase firearms or  firearm components from private nonlicensed sellers. The results of our  testing are for illustrative purposes only and are not generalizable. We  also reviewed DOJ and ATF published reports, as well as adjudicated  criminal cases, to understand how prohibited individuals may use the  Internet to purchase firearms or firearm components. Additionally, we met  with third-party groups with knowledge of the firearms industry, including  state law-enforcement agencies, a purveyor of a commercial website that  hosts online firearm classified advertisements, a gun-control advocacy  group, a firearm-industry organization, and an academic research center  to learn about online firearm marketplaces, criminal pathways to illegally  purchase or sell firearms, and enforcement responses. See appendix I for  more information on our scope and methodology.", "We conducted this performance audit from July 2015 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work in accordance with the standards prescribed by the  Council of the Inspectors General on Integrity and Efficiency."], "subsections": [{"section_title": "Background", "paragraphs": ["ATF is one of several DOJ law-enforcement components, including the  Federal Bureau of Investigation (FBI) and the Drug Enforcement  Administration (DEA), responsible for fighting violent crime. ATF is the  lead agency charged with enforcing federal firearms laws and regulating  the firearms industry. ATF is also responsible for investigating criminals  and criminal organizations that use firearms, arson, or explosives in  violent criminal activity.", "ATF investigates and combats violent crime related to firearm trafficking,  criminal possession and use of firearms, and the diversion of firearms  from legal commerce. This work includes law-enforcement operations and  intelligence gathering and analysis. For example, special agents  investigate reports of prohibited individuals acquiring or attempting to  acquire firearms from private sellers in order to avoid background checks  that would otherwise be required if purchasing through an FFL. According  to ATF officials, intelligence analysts may help agents by gathering  information from the public social-media profiles of individuals under  investigation. In addition, ATF investigates reports of individuals engaging  in the business of dealing firearms without a license, thereby  circumventing background-check, record-keeping, and other  requirements."], "subsections": [{"section_title": "Statutes and Regulations", "paragraphs": ["The National Firearms Act of 1934 (NFA) and the Gun Control Act of  1968 (GCA) are the primary federal laws that regulate the manufacture,  sale, distribution, and possession of firearms. There are no laws that  specifically regulate firearms transactions facilitated by the Internet.  Rather, firearms transactions facilitated by the Internet are subject to the  same legal requirements and regulations as traditional firearms sales."], "subsections": [{"section_title": "National Firearms Act of 1934, as Amended", "paragraphs": ["The NFA defines the specific types of firearms and components subject to  the provisions of the act based on the firearm\u2019s function, design,  configuration, or dimensions. For example, the NFA applies to machine  guns, short-barreled rifles, short-barreled shotguns, and silencers. The  NFA requires these firearms and components to be registered with ATF.  The lawful transfer of firearms and components subject to the NFA  generally requires ATF approval, a process that involves the submission  of application forms, fingerprints, and photographs to ATF, as well as  payment of a transfer tax. Transfers outside of this ATF-approval process  are generally illegal."], "subsections": []}, {"section_title": "Gun Control Act of 1968, as Amended", "paragraphs": ["The GCA, the main federal statute applicable to firearms such as  handguns, shotguns, and rifles, requires all persons engaged in the  business of manufacturing, importing, or dealing in firearms to become an  FFL through ATF. The GCA defines a person \u201cengaged in the business\u201d  as a dealer of firearms as someone who \u201cdevotes time, attention, and  labor to dealing in firearms as a regular course of trade or business with  the principal objective of livelihood and profit through the repetitive  purchase and resale of firearms.\u201d The definition excludes individuals  who make \u201coccasional\u201d sales or purchases to enhance a personal  collection or for a hobby or who sell all or part of a personal collection of  firearms. The GCA requires that FFLs maintain records of all their gun  sales. These records are used, among other purposes, to trace a firearm  recovered by law-enforcement officials from its first sale by the  manufacturer or importer through the distribution chain to the first retail  purchaser, in order to provide law-enforcement agencies with  investigative leads.", "As amended by the Brady Handgun Violence Prevention Act, the GCA  generally requires FFLs to contact the FBI\u2019s National Instant Criminal  Background Check System (NICS) prior to transferring a firearm to a  nonlicensed individual. During a NICS background check, the buyer  provides the FFL with appropriate identification, such as a valid driver\u2019s  license. The FFL submits descriptive data, including the buyer\u2019s name  and date of birth, to NICS, which searches three national databases  containing criminal history and other relevant records to determine  whether federal or state law prohibits the person from receiving or  possessing a firearm. The transfer may proceed if NICS informs the FFL  that it has no information indicating that the transfer would be in violation  of law, or if 3 business days have elapsed without notification that the  transfer would violate the law. The GCA prohibits individuals from  knowingly making a false statement intended to deceive FFLs with  respect to any fact material to the lawfulness of the sale, such as a  person claiming that he or she is the actual buyer of a firearm and not  acquiring the firearm on behalf of another person, when in fact he or she  is purchasing the firearm with the intent to transfer it to a prohibited  person. This type of transaction is often referred to as a \u201cstraw purchase.\u201d", "In addition, the GCA establishes the categories of persons generally  prohibited from shipping, transporting, receiving, or possessing firearms  and ammunition. Specifically, persons are prohibited from shipping,  transporting, receiving, or possessing a firearm if they (1) have been  convicted of a felony; (2) are a fugitive from justice; (3) are an unlawful  user of or addicted to any controlled substance; (4) have been committed  to a mental institution or judged to be mentally defective; (5) are aliens  illegally or unlawfully in the United States, or certain other aliens admitted  under a nonimmigrant visa; (6) have been dishonorably discharged from  the military; (7) have renounced their U.S. citizenship; (8) are under a  qualifying domestic violence restraining order; or (9) have been convicted  of a misdemeanor crime of domestic violence. In addition, federal law  prohibits persons under felony indictment from shipping, transporting, or  receiving a firearm.", "Individuals who are not engaged in the business of dealing in firearms  may not legally sell firearms to other unlicensed individuals under certain  circumstances. For example, a transaction between unlicensed  individuals would be illegal if the seller knows or has reasonable cause to  believe that the buyer is legally prohibited from possessing firearms or is  a resident of a different state than the seller. If the seller is not aware of  these circumstances, the seller may transfer the firearm to the buyer  without any record-keeping or background-check requirements.", "Nonprohibited, nonlicensed individuals may legally purchase firearms  through an FFL or through individual private sales with residents of the  same state. Regardless of whether an FFL is involved in an Internet- facilitated firearm purchase, if a seller knows or has a reasonable cause  to believe that the prospective recipient is prohibited from possessing  firearms, the seller must not transfer the firearm. See figure 1.", "As outlined in figure 1, the Internet can facilitate legal purchases either  through FFLs or through nonlicensed private sellers. For purchases  through an FFL, an individual orders a firearm online, and generally  completes the transaction process in person. The FFL submits the  required paperwork to ATF. A background check is processed directly by  NICS or through a state government that checks NICS. Unless denied by  the background check, the transaction is completed. If the individual is  purchasing the firearm from an FFL in another state, the original FFL will  transfer the firearm to an FFL in the state the buyer resides in to complete  the transaction. If both the buyer and seller are residents of the same  state, transfers between private nonlicensed parties facilitated by the  Internet without the involvement of an FFL may be lawful. The firearm  may be transferred in person between the buyer and the seller, or, if the  firearm is a shotgun or rifle, it may be mailed intrastate between the  individuals. The seller has no record-keeping obligations, and no NICS  background check is performed on the buyer. However, a nonlicensed  individual is usually prohibited from directly transferring a firearm to a  person who the transferor knows or had reasonable cause to believe is  residing in another state. In addition, it is usually illegal for any  nonlicensed individual to transport into or receive in the state where he  resides any firearm purchased or otherwise obtained outside that state.  Therefore, interstate transactions between two nonlicensed individuals  are likely to be illegal unless an FFL becomes a party to the transaction.  For a legal transaction between residents of different states, the seller  must send the firearm to an FFL in the buyer\u2019s state. The FFL submits  the paperwork, a background check is processed, and, unless denied by  the background check, the FFL transfers the firearm to the buyer."], "subsections": []}]}, {"section_title": "Internet Firearm Marketplaces", "paragraphs": ["Potential gun buyers can view firearm advertisements and make  purchases from the following categories of websites: major retailers,  online retailers, online auctions and marketplaces, online classified  listings, online forums and social media networks, and Dark Web  websites. According to ATF reports, major retailers and online retailers  meet the definition of firearm dealers and therefore must be FFLs in order  to operate. To see how purchases may be facilitated by various Internet  marketplaces, see figure 2."], "subsections": []}, {"section_title": "Prior Reporting on Internet Firearms Sales", "paragraphs": ["GAO, DOJ, and the Congressional Research Service (CRS), as well as a  gun-control advocacy group, have reported on the issue of Internet  firearm sales since the early 2000s. In 2001 we reported the results of our  undercover inquiries to private individuals who advertised firearms online.  We attempted to purchase firearms from two of these individuals. Both  individuals were willing to complete the transactions in person, though we  did not complete the sales.", "Also in 2001, as part of a larger report on reducing gun violence, DOJ  identified issues related to firearms sales facilitated by the Internet.  Among the issues outlined in the report was the possibility prohibited  individuals may use the Internet to acquire firearms. The report also  stated that the Internet may facilitate illegal sales by individuals selling  firearms commercially without a license. The report stated that  enforcement mechanisms must be established to prevent prohibited  individuals from obtaining firearms through the Internet and to make sure  that both FFLs and nonlicensed sellers follow existing law when  conducting sales through the Internet. The report noted that ATF was  working to establish a unit to identify and respond to criminal violations  involving the Internet and other new computer technology and worked  with other federal law-enforcement agencies to establish enforcement  mechanisms to prevent prohibited individuals from obtaining firearms  through the Internet and to make sure both FFLs and nonlicensed sellers  follow existing law when conducting sales through the Internet.", "In 2012, CRS reported on Internet firearm and ammunition sales. The  report outlined the extent to which federal law regulates the sale of  firearms via the Internet, which is not treated as legally distinct from sales  not facilitated by the Internet. CRS noted that this situation has raised  concerns about the possibility of increased violation of federal firearm  laws and about challenges that law-enforcement agencies may face when  attempting to investigate violations of these laws.", "Additionally, a prior report by an advocacy group explored how the  Internet may facilitate firearm sales to prohibited individuals. However,  the report described how prohibited individuals may use the Internet to  find firearms for sale and then to conduct face-to-face transactions. The  report did not demonstrate how prohibited individuals may have firearms  mailed directly to them, thus circumventing the FFL purchase process, or  otherwise break the law. Representatives from the investigative  organization that performed this work stated that they did not break the  law when performing their testing."], "subsections": []}]}, {"section_title": "ATF Takes Various Actions to Enforce Firearm Regulations Related to Prohibited Firearm Transactions Facilitated by the Internet", "paragraphs": [], "subsections": [{"section_title": "ATF Does Not Distinguish between In-Person Sales and Sales Facilitated by the Internet when Enforcing Firearms Statutes and Regulations", "paragraphs": ["As we noted above, there are no specific statutes or regulations  pertaining to Internet firearms transactions. Hence, ATF does not  distinguish between private firearms transactions taking place in person  versus those that use the Internet to facilitate the sale. Licensed and  nonlicensed sellers use the Internet to facilitate firearm sales in a variety  of ways. Major retailers with a federal firearms license enable customers  to browse available firearms on their websites but require transactions to  be made in person at the store. Online retailers with a federal firearms  license advertise firearms online and transfer the firearm to the purchaser  through either a storefront that qualifies as an FFL or another FFL in the  buyer\u2019s state. Online auction and marketplace websites, online  classifieds, and online forums also facilitate sales between buyers and  both licensed and nonlicensed sellers. Depending on the website,  potential buyers can search for firearms nationwide or narrowed down to  city or zip code. According to ATF, searching capabilities can affect  whether transactions among nonlicensed individuals are more likely to  occur in person or through an FFL as well as the potential for illegal  activity to occur.", "A private sale between two nonlicensed individuals would have an  unlawful component if, for example, (1) the seller knows or has  reasonable cause to believe that the buyer is legally prohibited from  possessing firearms or is a resident of a different state; (2) the seller is  engaged in the business of dealing in firearms without a license; or (3) the  item is an NFA-restricted weapon. ATF officials who oversee Internet- related investigations said that it is not possible to monitor private  firearms transactions coordinated over the Internet as they take place.  Federal law does not require the seller in a private firearm transaction to  conduct a background check or otherwise process paperwork through  ATF."], "subsections": []}, {"section_title": "ATF Developed an Internet Investigations Center to Help Identify Individuals Unlawfully Transferring Firearms Using the Internet", "paragraphs": ["According to ATF officials, in 2012 the agency created a national center  for Internet-related investigations, now known as the Internet  Investigations Center (Center). ATF officials noted that, as an example  of its activities, field agents who perform work involving the Internet will  coordinate with the Center to ensure they have the necessary training to  operate online in an undercover capacity. The Center has access to a  variety of tools to facilitate Internet investigations. Much of the Center\u2019s  software that is used to analyze online content for investigations is free  and open source. For example, according to ATF officials, using free  open-source software allows analysts to glean information from public  websites without violating users\u2019 privacy rights.", "ATF officials stated that the Center investigates buyers and sellers who  use the Internet to facilitate illegal firearms transactions. The officials with  the Center noted that these investigations are generally reactive, meaning  that the Center initiates them after receiving a tip or a request from a field  agent. For example, in November 2014 the Center received a tip from a  person who was selling firearms on an online firearms marketplace and  was suspicious of a prospective buyer attempting to obtain a pistol  without involving an FFL. The Center identified the prospective buyer and  engaged in an undercover operation in which the individual agreed to  provide the undercover agent with components designed to turn pistols  and rifles into fully automatic firearms in exchange for a pistol and cash.  The undercover agent and the buyer met in person and completed the  transaction. ATF agents arrested the buyer at the scene, and he was later  sentenced to 33 months in prison.", "ATF officials said the agency frequently receives tips about nonlicensed  sellers engaging in the business of firearms. For example, ATF  investigated a nonlicensed seller who posted more than 280 firearms for  sale on multiple online firearms marketplaces; purchased at least 54  firearms; and sold at least 51 firearms at a profit. The seller, who was also  found to have made straw purchases for other buyers, was sentenced in  August 2010 to 2 years in prison. For additional examples of ATF  enforcement actions involving sales facilitated by the Internet, please see  appendix II.", "According to ATF officials, the Center also performs investigative work on  the Dark Web, which requires knowledge of the Internet and investigative  techniques. For example, ATF analysts must understand virtual currency,  such as Bitcoin values. They must also know what sellers are charging for  their products, because prices on the Dark Web \u201cskyrocket\u201d due to the  criminal nature of the merchandise. In addition, the analysts learn  common terms associated with firearm culture, in order to communicate  with users engaged in criminal activity.", "ATF officials with the Center also noted that investigations might involve  both the Surface Web and the Dark Web. For example, to identify an  anonymous user on the Dark Web, the Center works to establish the  user\u2019s \u201cdigital footprint\u201d on the Surface Web. In some cases, users might  conduct illegal activity on the Dark Web but might then go to the Surface  Web, such as a social-networking website with chat forums on a wide  variety of topics, and discuss their illegal activity. From there, analysts  can link the user to other social-media accounts, where the user may post  a photo showing a street sign or other characteristics to help investigators  narrow the user\u2019s location. The ATF officials with the Center noted that  posts on some websites contain meta-data, which includes geo-coding  that helps the analysts identify where posts originated.", "ATF issued the Firearms and Internet Transactions Intelligence  Assessment Report in April 2016 to provide information and analysis in  the area of online firearm sales, including both legal and illegal  transactions. The report highlighted several key findings about how  firearm transactions are facilitated by the Internet. Specifically, the ATF  analysis of the online marketplaces for firearms demonstrated the ease  with which individuals can choose to circumvent the generally applicable  law in this arena. Within the report, ATF detailed a market analysis of  firearms transactions, including Surface Web and Dark Web  marketplaces. Firearms transactions that occur on the Dark Web are  more likely to be conducted in person or via the mail or common carrier,  versus through an FFL. Additionally, the report noted that it appears that  the price of a firearm increases as the transaction becomes more covert  or when parties attempt to subvert laws and regulations. According to  ATF staff, they plan to update the report when there is a significant shift in  Internet gun trafficking. The ATF officials with the Center said they have  not determined the frequency with which updated reports will be issued  but they do not plan to update it annually."], "subsections": []}, {"section_title": "ATF Enforces Firearms Laws through Regulatory Inspections of Licensed Firearms Dealers to Detect Prohibited Firearms", "paragraphs": ["To enforce the NFA, GCA, and related firearms regulations, ATF carries  out a variety of regulatory activities. For example, ATF monitors the  firearms industry from manufacture and importation through retail sale.  Specifically, ATF Industry Operations Investigators determine whether  FFL applicants are qualified to engage in firearms commerce through  routine inspections and regulatory oversight. Industry Operations  Investigators also routinely inspect FFLs to ensure continued compliance  with statutes and regulations. ATF officials stated that investigators  conduct compliance inspections of FFLs\u2014who must renew their licenses  every 3 years. ATF conducts these inspections at least once during the 3- year licensing period. Additionally, ATF officials stated that as part of  each inspection, officers will review all sales transactions an FFL has  made in the last 12 months and analyze the data for aberrant patterns.  Based on a review of DOJ Office of Inspector General documentation and  our own observations during an FFL inspection, we determined that,  during these inspections, ATF performs an inventory of the FFL\u2019s firearms and checks it against the  FFL\u2019s inventory to ensure that firearm transactions reconcile with the  firearm inventory;  reviews the FFL\u2019s records of background checks for purchases  processed through NICS;  checks the prior year\u2019s Firearms Transaction Record forms, which  document acquisition and disposition information that ATF uses to  trace firearms involved in crimes; and  reviews sales records to ensure that the FFL has recorded  appropriate tax information.", "While ATF investigators routinely monitor firearms transactions of FFLs,  the agency does not monitor private firearms transactions among  nonlicensed individuals. As noted above, private sales among  nonlicensed individuals who are residents of the same state are not  subject to record-keeping or background-check requirements, so ATF  does not have a means by which to monitor these sales as they take  place."], "subsections": []}, {"section_title": "ATF Law-Enforcement Operations Investigate Firearm-Related Crimes, Including Those Facilitated by the Internet", "paragraphs": ["One aspect of the enforcement work undertaken by ATF agents is to  investigate reports of individuals engaging in the business of dealing in  firearms without a license. According to agency officials with the ATF  Violent Crime Intelligence Unit, as part of these investigations, agents  gather information about a suspect\u2019s firearm transactions. On the basis of  the activity detected, agents will determine whether the extent of the sales  history is significant enough to warrant further action.", "In fiscal years 2014\u20132016, ATF made 322 arrests for engaging in the  business of dealing in firearms without a license. These figures represent  all arrests, as ATF does not identify or track whether transactions were  facilitated by the Internet. During the same time, ATF also made 53  arrests for charges related to the unlawful interstate transfer of firearms,  204 arrests for charges related to the sale of firearms to a prohibited  person, and 12,586 arrests for charges related to the possession of a  firearm by a prohibited person. These arrests may include but are not  limited to Internet-related investigations. According to documentation  provided by ATF, 89 percent of the defendants in these arrests received a  conviction. See table 1."], "subsections": []}]}, {"section_title": "Agents Purchased Two Firearms on the Dark Web, but Covert Attempts to Illegally Purchase Firearms on the Surface Web Were Unsuccessful Agents Successfully Purchased Two Firearms on the Dark Web", "paragraphs": ["Our agents successfully purchased two firearms from sellers we located  on a Dark Web marketplace as a result of seven total attempts. ATF  officials stated that the Dark Web is completely anonymous and is  designed to facilitate criminal activity online. Further, an ATF report states  that most used firearms are sold via the online auctions, online  marketplaces, and on the Dark Web as compared to the Surface Web. In  the seven attempts, our agents did not disclose any information indicating  they were prohibited from possessing a firearm. In the five attempts  where we did not ultimately purchase a firearm, the prospective seller  stopped responding to our inquiries, stated the firearm was no longer for  sale, refused to use an escrow account for payment, or experienced  technical problems using the Dark Web marketplace. The first weapon  that we purchased was an AR-15 rifle, which is a semiautomatic firearm.  The serial number on the firearm was obliterated. The Dark Web seller  shipped the dismantled weapon directly to the undercover address  provided by our agent. It is unlawful for any person to possess or ship in  interstate commerce a firearm which has had the importer\u2019s or  manufacturer\u2019s serial number removed, obliterated, or altered, if the  individual had such knowledge about the serial number. Additionally,  because the firearm was shipped across state lines, the seller may not  have been a resident of the same state as our agent. We did not confirm  whether the seller notified the shipping company that the package  contained a firearm. Any of these circumstances\u2014removing a serial  number, selling to a resident of a different state, or failing to properly  notify the shipping company that the shipment contained a firearm\u2014if  proven, would likely violate federal law. A photo of the weapon can be  seen in figure 3.", "The second weapon we purchased was an Uzi, which is an Israeli-made  semiautomatic firearm, and was advertised as a fully automatic firearm.  See photo in figure 4.", "If the firearm meets the NFA\u2019s definition of a machine gun, the seller\u2019s  prior possession of the Uzi, and the shipment to our agent, likely violated  federal law. Generally, only machine guns that were lawfully possessed  prior to May 19, 1986, may continue to be possessed and transferred,  with ATF approval, if they are registered in accordance with the NFA.", "We are referring information regarding our two Dark Web purchases to  applicable law-enforcement agencies to inform any ongoing investigations  for any further action they deem appropriate."], "subsections": [{"section_title": "All of Our Attempts to Illegally Purchase Firearms from Private Sellers on the Surface Web Were Unsuccessful", "paragraphs": ["Our covert testing involving GAO agents attempting to purchase firearms  illegally on the Surface Web were unsuccessful. Specifically, private  sellers on Surface Web gun forums and in classified ads were unwilling to  sell a firearm to our agents that self-identified as being prohibited from  possessing a firearm. In our 72 attempts to purchase firearms from  private sellers on the Surface Web, 56 sellers refused to complete a  transaction once we revealed that either the shipping address was across  state lines or that we were prohibited by law from owning firearms. The  scenarios we applied to the purchases were derived from provisions in  the GCA. The five scenarios disclosed status information that would  disqualify our agents from purchasing a firearm. For example, in one  scenario we stated that we were a convicted felon; in another scenario,  we informed the seller that we had a dishonorable discharge from the  military. In these 56 attempts, 29 sellers refused because they would  not ship a firearm and 27 refused after we presented the scenario.  Furthermore, in five of these attempts, the accounts we set up on several  forums were frozen by the websites, which prevented us from using them  after we disclosed our prohibited status or requested interstate shipment  and attempted to make a purchase.", "In the 11 remaining attempts, we encountered private sellers that  appeared to have scammed us, or attempted to scam us, after we  disclosed our prohibited status or asked to avoid using an FFL. In two of  these instances, we made a payment and never received the firearm or a  refund. In the remaining nine attempted scams, our agents determined  that the seller may not be legitimate and therefore did not complete the  purchase. For example, in one attempt, the agent conducted investigative  research on the seller and found evidence suggesting that the seller may  be involved in online fraud. As a result, the agent did not follow through  with the purchase attempt. ATF does not have jurisdiction over fraud  cases so, when it encounters such circumstances, the agency may refer  the case to the Joint Support and Operations Center or to local or state  law-enforcement agencies or may encourage the victim to file a police  report. The results of our attempts on the Surface Web are summarized in  figure 5."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to ATF and DOJ on October 31, 2017,  for review and comment.  ATF provided technical comments, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Deputy Director of  ATF and other interested parties. In addition, the report will be available  at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Seto Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov, or Wayne  McElrath at (202) 512-2905 or mcelrathw@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Methods for Performing GAO Covert Testing", "paragraphs": [], "subsections": [{"section_title": "Scope", "paragraphs": ["For our covert attempts to buy firearms on the Internet, we performed  tests on both the Dark Web and the Surface Web to compare and  contrast how transactions are completed. For the tests, our agents  employed undercover identities and accessed online marketplaces where  firearms were advertised for sale. In both Dark Web and Surface Web  testing, the agents contacted sellers that posted ads online, and  attempted to complete firearm purchases. For our testing, we did not  proactively attempt to purchase firearms from Federal Firearm Licensees  (FFL), focusing our efforts on private sellers. We counted an attempt as  successful if we received a firearm. We counted an attempt as a failure if  we contacted the seller and expressed interest in purchasing the  advertised firearm and the seller refused to complete the purchase, or if  the seller failed to respond after initial contact was made. In some  instances on the Surface Web, after we contacted a seller and described  our prohibited status, we were \u201cbanned,\u201d or prohibited from accessing the  gun forum or classified ad website. Additionally, in two instances, our  agents were apparently \u201cscammed\u201d in that we remitted payment for a  firearm we did not receive, or our agents otherwise identified indicators  that the firearm would not be shipped. The results of our testing are for  illustrative purposes only and are not generalizable.", "Prior to beginning our testing, to understand how prohibited individuals  may use the Internet to purchase firearms or firearm components, we  reviewed Department of Justice (DOJ) and Bureau of Alcohol, Tobacco,  Firearms and Explosives (ATF) published reports, including adjudicated  criminal cases. We also met with third-party groups with knowledge of the  firearms industry, including state law-enforcement agencies, a purveyor of   commercial website that host online firearm classified advertisements, a  gun-control advocacy group, a firearm-industry organization, and an  academic research center, to learn about online firearm marketplaces,  criminal pathways to illegally purchase or sell firearms, and enforcement  responses.", "Additionally, we reviewed reports by a gun-control advocacy group to  understand how prior similar work in this area was performed. We learned  through our review and our subsequent interviews with individuals who  performed this work that no federal laws were broken when this testing  was conducted. Accordingly, to demonstrate how the Internet may  facilitate illegal firearm transactions, we decided our agents would  complete the firearm purchases."], "subsections": []}, {"section_title": "Methodology for Dark Web Covert Testing", "paragraphs": ["Agents also accessed firearm advertisements on a Dark Web  marketplace and attempted to purchase firearms or firearm components  from nonlicensed private sellers. Agents focused on one Dark Web  marketplace for this stage of testing. Our agents performed a preliminary  test to assess the feasibility of purchasing a firearm on the Dark Web.  This attempt was successful, so our agents proceeded with additional  planned attempts to purchase additional firearms on the Dark Web.  Testing ended once a firearm was successfully purchased and received  by our agents, with a total of seven attempts completed. For these covert  tests, we did not disclose any information about our presumed prohibited  status. We also focused our efforts on purchasing a firearm that appeared  to be restricted by the National Firearms Act of 1934 (NFA)."], "subsections": []}, {"section_title": "Methodology for Surface Web Covert Testing", "paragraphs": ["To perform Surface Web testing, our agents accessed public gun forums  and other classified ads where private nonlicensed sellers listed firearms  for sale. These forums and classified ads were identified from our  meetings with ATF and third-party entities, and a review of available  documentation. We considered the following factors when selecting  online classified websites: hosted nationwide or regional ads, quantity of ads,  variety of firearms available, and accessibility of website.", "Recently posted ads on these sites were selected if they fell within a  designated price range, and were for transactions between private  nonlicensed individuals.", "The purpose of our Surface Web purchase attempts was to determine  whether private sellers would knowingly sell a firearm to an individual  prohibited from possessing one, as outlined by the Gun Control Act of  1968 (GCA). Our agents used one of five scenarios based on a provision  of the GCA when attempting to purchase a firearm. The scenarios  involved overtly explaining why our agent was prohibited from possessing  a firearm. The scenarios based on the GCA covered the following: a felon avoiding a background check, an individual with a domestic-violence background or a restraining  order against him or her, an individual who unlawfully uses controlled substances (or is an an individual who was dishonorably discharged from the military, and an individual who has renounced his or her citizenship or is otherwise  an unlawful alien.", "Before we began testing, we determined that we would run each scenario  iteratively until we successfully completed a purchase, we exhausted the  number of applicable ads, or we capped out our predetermined cap of 15  purchase attempts, with a total of 75 attempts to be made in total.  However, due to investigative decisions, we only employed 72 attempts.", "We conducted this performance audit from July 2015 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work in accordance with the standards prescribed by the  Council of the Inspectors General on Integrity and Efficiency."], "subsections": []}]}, {"section_title": "Appendix II: Examples of Illegal Firearms Sales Facilitated by the Internet", "paragraphs": ["As noted above, the Bureau of Alcohol, Tobacco, Firearms and  Explosives (ATF) does not track statistics on firearm enforcement actions  that involve illegal transactions facilitated by the Internet. However, ATF  officials provided several examples of closed, adjudicated cases where  the agency took enforcement action against individuals who were using  the Internet to facilitate illegal transactions. The following summaries  provide examples of the type of investigative and enforcement work ATF  agents perform:", "One individual was indicted in February 2015 for being a felon in  possession of firearms and for possessing a machine gun. In  November 2014, ATF\u2019s Internet Investigation Center (the Center)  received a tip from the ATF Tip Line; a legitimate seller was  suspicious of a buyer who was attempting to obtain a firearm without  involving a Federal Firearm Licensee (FFL) and suggested the seller  could obliterate the serial numbers. The Center identified the  prospective buyer as a convicted felon. The individual agreed to  provide the undercover agent with a Glock auto sear\u2014which, when  attached to a firearm makes it a fully automatic weapon\u2014and firearm  components that could be used to transform an M-16 style rifle into a  machine gun. In exchange, the undercover agent would provide the  individual with a Glock pistol and $300 cash. The individual and an  undercover agent completed the transaction and the individual was  immediately arrested. The individual\u2019s criminal history included a  recent prior felony gun-possession conviction. The individual pleaded  guilty to being a felon in possession of a firearm and to the illegal  transfer or possession of a machine gun, and was sentenced to 33  months imprisonment and 36 months of supervised release.", "In 2009, one individual was indicted on six counts of federal criminal  violations, including one count for engaging in the business of  firearms without a license. According to the indictment, from  approximately January 1, 2005, to May 8, 2008, while serving as an  FBI agent, the individual purchased multiple firearms from various  sources including private sellers, local stores, and sellers he dealt with  over the Internet. He posted at least 280 firearms for sale on a  legitimate firearm website, some of which were multiple listings of the  same item in the event that interested bidders did not meet his target  price. During this period, he purchased at least 54 firearms and sold  at least 51 firearms. He profited from all the sales, collecting more  than $118,000 in gross receipts. The individual was also indicted on  four counts of causing a firearms dealer to maintain false records,  which related to his purchasing firearms for third parties (straw  purchases). In addition, the individual was indicted on one count of  providing ATF with a false document listing the firearms he bought  and sold; agents recovered a more-extensive and more-descriptive  list. The individual was found guilty on all counts in April 2010, and  was sentenced in August 2010 to 2 years in federal prison.", "According to an affidavit from an ATF Special Agent, an individual  offered silencers, pistols, and rifles for sale on the Dark Web, as well  as nationwide shipping. The ATF Center \u201cproactively targeted\u201d the  individual\u2019s vendor name \u201cthrough various methods of analysis,\u201d  identified numerous Internet forum and social-media profiles  associated with the individual, and ultimately discovered his true  identity. The Center referred \u201can investigative lead\u201d and the  corresponding evidence and analysis to the respective ATF Field  Division. According to the affidavit, the Special Agent conducted a  controlled purchase through one of the Dark Web marketplaces,  reviewed U.S. Postal Service security video and observed the  individual mail the firearm, and executed arrest and search warrants.  The individual pled guilty to one count of causing a firearm silencer to  be delivered by the U.S. Postal Service without proper notification,  and was sentenced to 6 months in federal prison and 3 years of  supervised release.", "In October 2013, an individual was indicted for illegal exportation,  shipment, and delivery of firearms and firearm components that were  sold on a Dark Web site. The man shipped a handgun concealed in a  video game system to a buyer in Sydney, Australia. Australian  Federal Police intercepted the package and alerted ATF, which began  an investigation. During the investigation, the individual shipped a  9 mm pistol with an obliterated serial number to the United Kingdom,  various assault-rifle parts to Australia, and a .22-caliber pistol with an  obliterated serial number and a weapon magazine to Sweden. Each  firearm was disassembled and concealed in a broken electronic  device. The individual pleaded guilty and was sentenced to 2 years  imprisonment and 2 years of supervised release.", "In February 2015, an individual was indicted for dealing in firearms  without a license and selling firearms to residents of other states. The  individual sold firearms via two Dark Web sites and shipped them to  buyers in the United States and internationally. In an attempt to hide  his identity, the man placed false return-address labels on the  packages, used aliases to send the packages, and packed the  firearms so that they appeared to be computer hard drives. The  individuals agreed to sell handguns to undercover ATF agents posing  as gun buyers and then shipped the guns from Alabama to Nebraska  and New Jersey. The individual was found guilty and sentenced in  November 2015 to 51 months in prison and 36 months supervised  release."], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Dave Bruno (Assistant Director),  Dean Campbell, Julia DiPonio, Robert Graves, and Kristen Timko made  key contributions to this report. Other contributors include Marcus Corbin,  Colin Fallon, Maria McMullen, James Murphy, Anna Maria Ortiz, Julie  Spetz, and Helina Wong."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-482", "url": "https://www.gao.gov/products/GAO-18-482", "title": "Job Corps: DOL Could Enhance Safety and Security at Centers with Consistent Monitoring and Comprehensive Planning", "published_date": "2018-06-15T00:00:00", "released_date": "2018-07-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Deficiencies identified in multiple DOL Inspector General audits since 2009 and two student deaths in 2015 have raised concerns regarding the safety and security of Job Corps students. GAO was asked to review safety and security of students in the Job Corps program. GAO's June 2017 testimony summarized preliminary observations. This report further examines (1) the number and types of reported safety and security incidents involving Job Corps students; (2) student perceptions of their safety at Job Corps centers; and (3) the extent to which ETA has taken steps to address safety and security at Job Corps centers.", "GAO analyzed ETA's reported incident data for Job Corps centers from July 1, 2016, through June 30, 2017. GAO also analyzed ETA's student survey data from the same period, reviewed relevant documentation, and interviewed ETA officials at its national office and all six regions. GAO also visited two Job Corps centers that had different operators and at least 100 recent incidents. These two centers are not generalizable to all centers."]}, {"section_title": "What GAO Found", "paragraphs": ["Job Corps centers reported 13,673 safety and security incidents involving students from July 2016 to June 2017, according to GAO's analysis of the Department of Labor's (DOL) Employment and Training Administration's (ETA) data. Most reported incidents occurred onsite and involved recently enrolled male students under age 20. During that time, the program served about 79,000 students at 125 Job Corps centers, according to ETA officials. ETA's Office of Job Corps administers the program, which is the nation's largest residential, educational, and career and technical training program for low-income youth generally between the ages of 16 and 24. Drug-related incidents and assaults accounted for 48 percent of all reported incidents (see fig.).", "Students generally felt safe at Job Corps centers, yet fewer felt safe in some situations, based on GAO's analysis of ETA's September 2016 and March 2017 Job Corps student satisfaction surveys. At least 70 percent of students reported that they felt safe on half of the 12 safety-related questions in the 49 question survey about their experiences in the Job Corps program; but fewer students reported feeling safe when asked if they were made to feel unimportant or if they heard students threaten each other. ETA plans to administer a new survey nationally by January 2019 that focuses solely on safety and security issues.", "ETA has initiated several actions to improve safety and security at Job Corps centers, but insufficient guidance for its monitoring staff and absence of a comprehensive plan for safety and security may put the success of these actions at risk. Among its actions, ETA adopted a new risk-based monitoring strategy to identify emerging problems at the centers. Officials GAO spoke with in five of ETA's regional offices said that the new strategy has improved monitoring, but that more guidance on how to interpret and apply safety and security policies is needed to promote consistency across centers. Also, ETA lacks a comprehensive plan linking its new efforts to an overall safety and security framework. ETA officials told GAO that limited staff capacity and lack of expertise have hindered their efforts in developing such a plan. Without a comprehensive plan, ETA runs the risk that its new efforts will not be successful."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to DOL, including that ETA develop additional monitoring guidance and a comprehensive plan for safety and security. DOL agreed with GAO's three recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Job Corps is the nation\u2019s largest residential, educational, and career and  technical training program for low-income youth generally between the  ages of 16 and 24. The Job Corps program is administered by the Office  of Job Corps in the Department of Labor\u2019s (DOL) Employment and  Training Administration (ETA).The program enrolls approximately 50,000  new students each year at 123 Job Corps centers nationwide and for  fiscal year 2017 was appropriated about $1.7 billion.", "For almost a decade, concerns have been raised regarding the safety  and security of Job Corps students. For example, DOL Office of Inspector  General (OIG) audits in 2009, 2010, 2015, and 2017 found that the Office  of Job Corps did not properly address serious incidents related to student  safety and security because of deficiencies in its oversight of program  disciplinary policies. As a result, the DOL OIG included providing a safe  learning environment at Job Corps centers among the department\u2019s top  management challenges in November 2017. Additional concerns were  raised regarding the safety and security of students following the deaths  of two students at two separate Job Corps centers in 2015.", "For a June 2017 hearing, you asked us to provide preliminary  observations on the safety and security of students in the Job Corps  program. Our preliminary results found that Job Corps centers reported  49,836 safety and security incidents of various types that occurred both  onsite and offsite between January 1, 2007, and June 30, 2016. During  this time period, approximately 539,000 students were enrolled in the  program, according to ETA officials. Beginning July 1, 2016, ETA  implemented policy changes that impacted the categorization and number  of reportable incidents. As such, incident data after July 1, 2016\u2014the  focus of this report\u2014are not comparable with the earlier incident data  presented in our June 2017 testimony. In addition, we reported in our  testimony that from March 2007 through March 2017, students generally  reported feeling safe at their Job Corps center, but reported feeling less  safe in certain situations such as when they witnessed physical fights and  heard threats between students.", "This report examines (1) what is known about the number and types of  reported incidents involving the safety and security of Job Corps students  in program year 2016; (2) what is known about student perceptions of  safety and security at Job Corps centers, and what steps, if any, is ETA  taking to improve the survey used to collect this information; and (3) the  extent to which ETA has taken steps to address safety and security at  Job Corps centers.", "To address our first objective, we analyzed ETA\u2019s incident data for  program year 2016, the most recent year for which Job Corps data were  available. ETA captures these data in its Significant Incident Reporting  System (SIRS). We assessed the reliability of SIRS data by reviewing  relevant agency documentation about the data and the system that  produced them and interviewing knowledgeable ETA and DOL OIG  officials. We determined that the data were sufficiently reliable to report  the minimum number of incidents that occurred in program year 2016. It  is likely that the actual number of incidents was greater than the number reported in SIRS because the information is reported by Job Corps  centers, and the DOL OIG previously found instances of underreporting  by a non-generalizable sample of center operators. While ETA has  recently taken steps to improve center reporting of significant incidents,  according to DOL OIG officials, it is too early to determine if these steps  have resolved the OIG\u2019s concerns regarding center underreporting. The  incident categories and definitions in this report are taken directly from  ETA documents and represent how ETA categorizes these incidents. We  did not assess these categories and definitions.", "To address our second objective, we analyzed ETA\u2019s national student  satisfaction survey data for program year 2016, the most recent year for  which data were available. The surveys were administered to students in  September 2016 and March 2017, and each had a response rate of about  90 percent. The semi-annual survey on various aspects of the Job Corps  program included 12 questions about students\u2019 perceptions of safety at  their center. We assessed the reliability of the data by reviewing relevant  agency documentation about the data and the system that produced them  and interviewing knowledgeable ETA officials, among other steps. We  determined that the student survey data were sufficiently reliable for our  purposes.", "To address our third objective, we reviewed documentation on ETA\u2019s  recent actions to improve center safety and Job Corps policies for  monitoring center operators. We also used criteria to assess whether  ETA\u2019s documentation of its recent and planned actions constituted a  comprehensive plan. These criteria included leading practices for  comprehensive planning and Standards for Internal Control in the Federal  Government. We selected these criteria because they included a  process for developing a comprehensive plan and specify the content of  such plans, which we determined to be most relevant, given our initial  understanding that ETA was early in its planning process.", "To address all three objectives, we reviewed agency policies and  procedures and interviewed ETA national and regional officials. We also  conducted site visits to two Job Corps centers to interview center staff  and students about various safety and security issues. The two selected  centers were within geographical proximity to Washington, D.C., operated  by different contractors, and had over 100 reported incidents of various  types in program year 2016. While these two site visits are not  generalizable to all Job Corps centers, they provide examples of student  and staff experiences with safety and security. Additional details on our  methodology can be found in appendix I.", "We conducted this performance audit from April 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Job Corps Eligibility Criteria and Program Services", "paragraphs": ["To be eligible for the Job Corps program, an individual must generally be  16 to 24 years old at the time of enrollment; be low income; and have  an additional barrier to education and employment, such as being  homeless, a high school dropout, or in foster care. See table 1 for  characteristics of students served by Job Corps during program year  2016.", "Once enrolled in the program, youth are assigned to a specific Job Corps  center, usually one located nearest their home and which offers a job  training program of interest. The vast majority of students live at Job  Corps centers in a residential setting, while the remaining students  commute daily from their homes to their respective centers. This  residential structure is unique among federal youth programs and enables  Job Corps to provide a comprehensive array of services, including  housing, meals, clothing, academic instruction, and job training. In  program year 2016, about 16,000 students received a high school  equivalency and about 28,000 students completed a career technical  training program, according to ETA officials."], "subsections": []}, {"section_title": "Job Corps Structure and Operations", "paragraphs": ["ETA administers Job Corps\u2019 123 centers through its national Office of Job  Corps under the leadership of a national director and a field network of six  regional offices located in Atlanta, Boston, Chicago, Dallas, Philadelphia,  and San Francisco (see fig. 1). Job Corps is operated primarily through  contracts, which according to ETA officials, is unique among ETA\u2019s  employment and training programs (other such programs are generally  operated through grants to states). Among the 123 centers, 98 are  operated under contracts with large and small businesses, nonprofit  organizations, and Native American tribes. The remaining 25 centers  (called Civilian Conservation Centers) are operated by the U.S.  Department of Agriculture\u2019s (USDA) Forest Service through an  interagency agreement with DOL. Job Corps center contractors and the  USDA Forest Service employ center staff who provide program services  to students. The President\u2019s fiscal year 2019 budget seeks to end  USDA\u2019s role in the program, thereby unifying responsibility under DOL.  The Administration reported that it was proposing this action because  workforce development is not a core mission of USDA, and the 25  centers it operates are overrepresented in the lowest performing cohort of  centers. According to ETA officials, the Office of Job Corps has oversight  and monitoring responsibility to ensure that center operators follow Job  Corps\u2019 Policy and Requirements Handbook, including the safety and  security provisions. Job Corps regional office staff are largely responsible  for these duties."], "subsections": []}, {"section_title": "Requirements for Job Corps Centers Related to Incident Reporting", "paragraphs": ["Job Corps\u2019 Policy and Requirements Handbook requires centers to report  certain significant incidents to the national Office of Job Corps and to  regional offices using SIRS. Centers are required to report numerous  categories of incidents, including assaults, alcohol and drug-related  incidents, and serious illnesses and injuries (see appendix II for  definitions of these categories of incidents). Within the Policy and  Requirements Handbook, ETA establishes student standards of conduct  that specify actions centers must take in response to certain incidents.  In some cases, the incident categories in SIRS are related to the specific  infractions defined in the Policy and Requirements Handbook, which are  classified according to their level of severity. Level I infractions are the  most serious, and includes infractions such as arrest for a felony or  violent misdemeanor or possession of a weapon, and are required to be  reported in SIRS. Level II includes infractions such as possession of a  potentially dangerous item like a box cutter, or arrest for a non-violent  misdemeanor. The majority of these infractions are required to be  reported in SIRS. Minor infractions\u2014the lowest level\u2014include failure to  follow center rules, and are not required to be reported in SIRS.", "Centers must report incidents involving both Job Corps students and  staff, and incidents that occur onsite at centers as well as those that occur  at offsite locations. According to ETA officials, the agency and its center  operators must take steps to protect the safety and security of Job Corps  students when students are under Job Corps supervision. Students are  under Job Corps supervision when they are onsite at Job Corps centers  and when they are offsite and engaged in center-sponsored activities,  such as work-based learning or community service. According to ETA  officials, the agency and its contractors are not responsible for protecting  the safety and security of Job Corps students when students are offsite  and not under Job Corps supervision, such as when students are at home  on leave. However, when offsite safety and security incidents of any type  occur, Job Corps center operators are responsible for enforcing the  student conduct policy. For example, if a student is arrested for a felony  offsite while not under Job Corps supervision, the arrest may result in a  Level I infraction and dismissal from the program."], "subsections": []}, {"section_title": "Job Corps Student Satisfaction Survey", "paragraphs": ["Since 2002, ETA used its student satisfaction survey to periodically obtain  views from enrolled Job Corps students on various aspects of the  program, including career development services, interactions between  students and staff, access to alcohol and drugs, and overall satisfaction  with the program. The survey of 49 questions has remained the same  over time and included 12 questions on students\u2019 perceptions of safety  and security at centers.", "ETA used the responses to the 12 safety-related survey questions to  calculate a center safety rating, which represented the percentage of Job  Corps students who reported feeling safe at each center, as well as a  national safety rating, which represented the percentage of Job Corps  students who reported feeling safe nationwide. ETA officials said they  used these ratings to assess students\u2019 perceptions of safety at individual  centers and nationwide, to monitor and evaluate center operators, and to  determine whether ETA needed to take action to better address students\u2019  safety and security concerns. In 2018, ETA will pilot a stand-alone survey  for safety related topics and remove the safety questions from the student  satisfaction survey."], "subsections": []}]}, {"section_title": "Job Corps Centers Reported Nearly 14,000 Incidents of Various Types during Program Year 2016, Which Mainly Occurred Onsite and Involved Recently Enrolled Males under Age 20", "paragraphs": [], "subsections": [{"section_title": "Almost Half of the Reported Onsite and Offsite Incidents Involved Drugs or Assaults", "paragraphs": ["Our analysis of ETA\u2019s data from the Significant Incident Reporting System  (SIRS) showed that Job Corps centers reported 13,673 safety and  security incidents involving students, including those that occurred both  onsite and offsite, in program year 2016. During this time period (July 1,  2016, through June 30, 2017), approximately 79,000 students were  served by the program, according to ETA officials. Drug-related  incidents (29 percent) and assaults (19 percent) accounted for 48 percent  of all reported incidents involving students. The remaining 52 percent of  reported incidents involving students included breaches of security and  safety (12 percent), alcohol-related incidents (6 percent), serious illness  and injury (6 percent), theft or damage to property (5 percent), danger to  self or others (5 percent), and all other types of incidents (18 percent)  (see fig. 2). According to ETA officials, about half of the 3,926 drug- related incidents are due to positive drug test results among students that  are administered drug tests about 40 days after entering the program.", "We found that about 20 percent of reported onsite and offsite incidents in  program year 2016 were of a violent nature, which we define as  homicides, sexual assaults, and assaults. There were two reported  homicide incidents in program year 2016 and both occurred while  students were offsite and not under Job Corps supervision. Also,  centers reported 177 sexual assaults and 2,593 assaults involving  students during program year 2016. For each reported sexual assault and  assault, SIRS provides an additional description of the incident (see table  2).", "In our June 2017 testimony, we stated that 49,836 onsite and offsite  safety and security incidents of various types were reported by Job Corps  centers between January 1, 2007, and June 30, 2016, based on our  preliminary analysis of ETA\u2019s SIRS data. We cannot compare our  analysis of safety and security incidents in our June 2017 testimony to the  analysis contained in this report for program year 2016 due to a policy  change by ETA beginning July 1, 2016, which affected the categorization  and number of reportable incidents. Specifically, ETA changed the way  some incidents are defined, and required that some incidents be reported  in SIRS that previously had no such requirement. Anecdotally, officials  from one ETA regional office and two Job Corps centers that we visited  said that the number of reported incidents has increased since July 1,  2016, due to these changes. In its December 2017 report, the DOL OIG  compared the number of safety and security incidents reported to the OIG  for the same 8-month periods in 2016 and 2017 and found an increase of  134 percent. According to the DOL OIG, this increase is likely due to  more accurate incident reporting as a result of the recent policy change.  In addition, the DOL OIG said an actual increase in incidents is also  possible."], "subsections": []}, {"section_title": "Most Reported Incidents Occurred Onsite, but Arrests and Deaths Most Frequently Occurred Offsite While Students Were Not Under Job Corps Supervision", "paragraphs": ["Our analysis of SIRS data found that in program year 2016, 90 percent of  the 13,673 reported safety and security incidents involving students  occurred onsite at Job Corps centers, and 10 percent occurred at offsite  locations (see fig. 3). For example, 99 percent of drug-related incidents,  96 percent of assault incidents, and 84 percent of alcohol-related  incidents occurred onsite. While most reported incidents occurred onsite,  our analysis showed that the majority of reported arrests, deaths, and  motor vehicle accidents occurred offsite. For example, of the 21 student  deaths,18 occurred at offsite locations and 3 occurred onsite. In our  June 2017 testimony, we reported that from January 1, 2007, through  June 30, 2016, 76 percent of the reported safety and security incidents  occurred onsite at Job Corps centers, and 24 percent occurred at offsite  locations based on our preliminary analysis of ETA\u2019s SIRS data.  However, as previously noted, that analysis is not comparable to the  analysis in this report for program year 2016 due to ETA\u2019s July 1, 2016,  policy change that impacted the categorization and number of reportable  incidents.", "We analyzed the 1,406 incidents of 13,673 total reported incidents that  were reported to have taken place offsite in program year 2016 to  determine if the students involved were on duty (i.e., under Job Corps  supervision) or off duty (i.e., not under Job Corps supervision). We  found that for offsite incidents, similar percentages of student victims and  perpetrators were on duty and off duty. Specifically, we found that 50  percent of student victims were on duty, 44 percent were off duty, and we  were unable to determine the duty status of 6 percent. For student  perpetrators, we found that 45 percent of students were on duty, 45  percent were off duty, and we were unable to determine the duty status of  10 percent. Some types of reported incidents occurred more frequently  when students were offsite and off duty. For example, of the reported  arrest incidents that occurred offsite, 76 percent of student perpetrators  were off duty. Of the reported death-related incidents that occurred  offsite, student duty status was reported as off duty for 16 of 18 incidents.", "We were unable to determine the duty status for all students involved in  offsite incidents due to inconsistencies in ETA\u2019s data. Of the 1,406 offsite  incidents reported in SIRS, there were 178 instances in which a student\u2019s  duty status location conflicted with the incident location. For example, the  student\u2019s duty status was listed as onsite and on duty, but the incident  location was listed as offsite. We asked ETA officials why these  inconsistencies existed and they were unable to explain all instances in  which these inconsistencies occurred. ETA officials did state, however,  that these inconsistences can sometimes occur when centers enter  information in SIRS based on the student\u2019s duty status at the time the  incident report is completed instead of the student\u2019s duty status at the  time the incident occurred. Due to this data limitation, we were unable to  determine if the 178 students involved in those incidents were on duty or  off duty."], "subsections": []}, {"section_title": "Student Victims and Perpetrators Most Often Were Recently Enrolled Males under Age 20, Reflective of the Job Corps Population", "paragraphs": ["We analyzed SIRS data to determine the characteristics of students  involved in reported safety and security incidents and found that about  17,000 students were reported as victims or perpetrators of all onsite and  offsite incidents in program year 2016. The total number of students  reported as victims or perpetrators is 22 percent of the students served in  program year 2016. The number of student victims and perpetrators  varied across incident types (see fig. 4).", "In program year 2016, we found that about 5,000 students (6 percent of  students served) were reported as victims of various types of onsite and  offsite incidents. We separately examined the gender, age, and  enrollment time of reported student victims and found that for all reported  incidents the majority of student victims were male, under age 20, and  enrolled in Job Corps for less than 4 months (see fig. 5). These  characteristics are somewhat similar to the overall Job Corps student  population, which is primarily male and under age 20, as previously  noted. For example, 65 percent of reported assault victims and 73  percent of reported theft victims were male. However, the number of  female victims exceeded the number of male victims within some  reported incident categories, such as sexual assault, inappropriate sexual  behavior, and missing persons. Students under age 20 were victims of 67  percent of reported assault incidents and 63 percent of danger to self or  others incidents. According to ETA officials, 18 percent of students served  in program year 2016 were enrolled for less than 4 months; however,  across all reported incidents 56 percent of student victims were enrolled  for less than 4 months. For example, about 60 percent of student victims  of reported assault and danger to self or other incidents were enrolled in  Job Corps for less than 4 months.", "Our analysis of SIRS data shows that about 13,000 students (17 percent  of students served) were reported as perpetrators of various types of  onsite and offsite incidents in program year 2016. The most commonly  reported incidents\u2014drug-related and assaults\u2014also had the highest  numbers of student perpetrators. We found that 6 percent and 5 percent  of students served in program year 2016 were perpetrators of reported  drug-related and assault incidents, respectively. Similar to our analysis of  student victims, we separately examined student characteristics and  found that the majority of reported student perpetrators of all reported  incidents were male, under age 20, and enrolled in Job Corps for less  than 4 months (see fig. 6)."], "subsections": []}]}, {"section_title": "Students Generally Reported Feeling Safe; ETA Plans to Create a New, Expanded Survey", "paragraphs": [], "subsections": [{"section_title": "Most Students Reported Feeling Safe, but Fewer Reported Feeling Safe on Selected Questions", "paragraphs": ["Our analysis of ETA\u2019s student satisfaction survey data from program year  2016 showed that while students generally reported feeling safe at Job  Corps centers, a smaller proportion reported feeling safe in certain  situations. ETA considers students to feel safe if they provide certain  responses to each of the 12 safety-related survey questions, some of  which are phrased as statements. For example, if a student provided a  response of \u201cmostly false\u201d or \u201cvery false\u201d to the statement \u201cI thought about  leaving Job Corps because of a personal safety concern,\u201d that student  would be counted as feeling safe on that survey question. On 6 of the 12  safety-related survey questions in program year 2016, at least 70 percent  of responding students indicated that they felt safe (see table 3). For  example, 74 percent of students responded that they did not ever or in  the last month carry a weapon, and 83 percent of students responded  that it was very or mostly true that a student would be terminated from  Job Corps for having a weapon at the center. These are responses that  ETA considered to indicate feeling safe. At the two centers we visited,  students that we interviewed said that they felt safe onsite at their center.  For example, students at one center said that they felt safe because  absolutely no weapons, fighting, or drugs were allowed at the center.", "A smaller number of students reported feeling safe on questions that  dealt with hearing threats or hearing things from other students that made  them feel unimportant. For example, 36 percent of students reported they  had not ever or in the last month heard a student threaten another  student at the center, which is considered safe according to ETA policy.  Meanwhile, 49 percent reported that they had heard a student threaten  another student at least once in the last month, and ETA considered  these responses to indicate that students felt unsafe. Another 15  percent chose \u201cdon\u2019t know / does not apply.\u201d On another question, 53  percent of students reported that other students had not ever or in the last  month said things that made them feel like they were not important, which  ETA considered as feeling safe. Yet 30 percent reported that others made  them feel unimportant at least once in the last month\u2014which ETA  considered as feeling unsafe\u2014and 17 percent chose \u201cdon\u2019t know / does  not apply.\u201d", "In response to a question about the student conduct policy, 35 percent of  students indicated that the policy was not applied equally to all students.  At the two centers we visited, students that we interviewed had varying  views on applying the student conduct policy. Students from one center  said that staff have applied the policy in a fair way. Yet at another center,  students told us that they have occasionally perceived that staff have not  applied the student conduct policy fairly. They mentioned that they were  aware of favoritism in a few recent incidents when staff applied the  policy\u2019s disciplinary consequences for certain students but not others. For  example, they said that a student they perceived as the perpetrator  remained in Job Corps while a student they perceived as innocent was  dismissed.", "Our June 2017 testimony contained similar observations about students\u2019  perceptions of their safety, with students generally reporting that they felt  safe at their Job Corps centers. For example, most students reported  feeling safe because a student found with a weapon at the center would  be terminated. In that testimony, we also noted that students reported  feeling less safe on such questions as hearing threats or applying the  student conduct policy.", "In addition to the 12 safety-related questions, we examined data on the 2  questions about access to alcohol or drugs, and found that almost two- thirds of survey respondents said that it was mostly or very false that they  could access alcohol or drugs at their Job Corps center. Although a  large number of reported incidents in program year 2016 involved drugs  or alcohol, less than 15 percent of survey respondents said that it was  mostly or very true that they could access alcohol or drugs at their Job  Corps center."], "subsections": []}, {"section_title": "National Measures of Safety and Security Have Been Developed", "paragraphs": ["Based on students\u2019 responses to the 12 safety-related questions, ETA  determined that 88 percent of students indicated that they felt safe in  program year 2016. ETA calculated its national measure of safety\u2014 referred to as a safety rating\u2014to summarize and track students\u2019  perceptions of their safety and to determine the need for additional action,  as noted previously. Similarly, it calculated a safety measure for each  center.", "However, we calculated a national measure differently and found that an  average of 73 percent of students reported feeling safe in program year  2016. Our national measure reflected the average of how safe each  student felt on the 12 safety-related survey questions. We estimated  that one key difference accounted for about 11 of the 15 percentage  points between our and ETA\u2019s measure. (See table 7 in appendix I.)  Specifically, we calculated our measure based on a numeric average for  each student without rounding. For example, if a student answered all 12  safety questions with 6 responses that he felt safe and another 6 that he  felt unsafe, we counted this student as half safe (0.5). Meanwhile, ETA  rounded the average to either safe or unsafe, so that ETA counted a  student with 6 safe responses and 6 unsafe responses as feeling safe.", "In addition to differences in calculations, we developed our own national  measure of safety because it is important to assess and track students\u2019  perceptions for the program as a whole, as ETA has noted. Also, a  national measure facilitates analysis of groups of students, such as male  or female students or younger or older students, as described below.", "We examined whether our national measure differed by age, gender, time  in program, center size, or operator type and found statistically significant  and meaningful differences in our national measure by students\u2019 length of  time in the program. In particular, an average of 78 percent of students in  the program for less than 4 months responded that they felt safe,  compared to an average of 71 percent for students in the program for at  least 4 months. According to ETA officials, differences in responses  based on length of time in the program may relate to new students being  less aware about life at the center because they begin the program with  other newly arrived students for up to 2 months. For example, ETA  officials said that new students may live in a dormitory specifically for new  students. Thus, they are not yet fully integrated into the larger student  body. Although differences were also statistically significant between age  groups, center size, and operator type, such differences were not  meaningful in a practical manner (i.e., around 3 percentage points or  less). Differences in our national measure by gender were not statistically  significant.", "When we analyzed the survey\u2019s separate question about overall  satisfaction with Job Corps, we found that students who reported they  were satisfied with the Job Corps program responded that they felt safer  than students who were not satisfied. In program year 2016, about two- thirds of students said it was very or mostly true that they would  recommend Job Corps to a friend, which ETA uses to gauge overall  satisfaction with the program. Of the 65 percent of students who would  recommend Job Corps to a friend, 79 percent said they felt safe. Of the  11 percent of students who would not recommend Job Corps to a friend,  52 percent felt safe."], "subsections": []}, {"section_title": "ETA\u2019s New Web-based Survey Is Designed to Be More Timely and Detailed", "paragraphs": ["ETA officials said that the agency is creating a new expanded safety  survey to improve upon the prior survey. With Job Corps\u2019 heightened  attention to safety and security, the new survey\u2014the Student Safety  Assessment\u2014is focused solely on safety and security issues and is  designed to provide more timely and more detailed information.", "More timely information. ETA plans to administer the new safety  survey monthly to a random sample of students rather than twice per  year to all enrolled students. Also, it will be web-based, rather than the  current paper-based survey. As a result, ETA officials said that they  will receive more timely information from students because it will take  less time to administer the survey and analyze the responses.", "More detailed information. The number of questions about center  safety will increase from 12 to about 50\u2014pending finalization of the  survey\u2014which is about the same number of questions on the current  student satisfaction survey. For example, the new questions will ask  about sexual assaults and harassment or the types of drugs bought or  used at the center, which were not topics covered by the prior survey.", "ETA continues to work with its contractor with survey expertise to  develop, test, and administer the new survey in 2018, according to ETA  officials. To develop the new survey, ETA and its contractor have  considered, incorporated, and revised questions from other existing  surveys. For example, they have drawn from safety surveys of teenage  students and postsecondary students. ETA plans to continue developing  and refining the survey and its administration in 2018, including  conducting monthly pilots from January to June 2018, assessing  response rates, and developing a new way to calculate national and  center-level safety measures. Additionally, ETA officials said that, in  2018, they will seek to obtain comments and approval on the survey from  the Office of Management and Budget. ETA officials told us that they plan  to administer the new survey nationally by January 2019. As ETA refines  and administers this new survey, officials told us they plan to develop a  new way to measure student safety based on the more detailed survey."], "subsections": []}]}, {"section_title": "ETA Initiated Multiple Actions to Improve Center Safety and Security, but the New Monitoring Strategy Was Implemented Inconsistently and ETA Lacks a Comprehensive Plan", "paragraphs": [], "subsections": [{"section_title": "ETA Initiated Multiple Actions to Improve Center Safety and Security", "paragraphs": ["In 2014, ETA launched multiple actions to improve safety and security at  Job Corps centers in response to DOL OIG recommendations (see table  4). For example, in 2015 the DOL OIG found ETA\u2019s oversight of Job  Corps centers ineffective, in part, because ETA\u2019s student conduct policy  excluded some violent offenses. As a result, ETA revised its student  conduct policy by elevating several infractions previously classified as  Level II to Level I (the most severe) and by adding several new categories  of reportable incidents. Under the revised student conduct policy, assault,  a Level I infraction, now includes fighting, which was previously a Level II  infraction. In addition, the DOL OIG found that ETA did not monitor  centers regularly enough to ensure center consistency in administering  Job Corps disciplinary policies. In response, ETA implemented a risk- based monitoring strategy that identifies potential safety and security  issues before they occur.", "Staff from five ETA regional offices and at one Job Corps center we  visited said that ETA\u2019s actions overall helped to improve center safety and  security. For example, staff from five regional offices said that the  changes to the student conduct policy that were implemented in July  2016 clearly describe the penalties for infractions and eliminate grey  areas that previously allowed center staff to use their professional  judgement. Staff from four regional offices also said these changes  resulted in tradeoffs that reduced center staff discretion in imposing  penalties. In addition, at one center we visited, the Director of Safety and  Security told us he updated the center\u2019s security-related standard  operating procedures in response to ETA\u2019s guidance. ETA\u2019s guidance  was part of the 2017 updates to the Policy and Requirements Handbook  in response to DOL OIG concerns about reporting potentially serious  criminal misconduct to law enforcement."], "subsections": []}, {"section_title": "ETA Officials Reported That Some New Actions Improved Center Monitoring, but That Actions Were Inconsistently Implemented and May Create Reporting Overlaps", "paragraphs": ["ETA national officials said that the new risk-based monitoring strategy  has improved center monitoring because it has allowed them to more  effectively direct resources to areas of greatest need. Officials in five ETA  regional offices agreed that the new strategy improved their ability to  monitor centers. The new monitoring strategy shifted the focus from  addressing problems after they have occurred to a data-driven strategy  that tracks center performance and identifies emerging problems. This  strategy provides ETA and center operators an opportunity to address  problems before they occur, according to ETA national officials. For  example, the new monitoring strategy features new tools, including the  Risk Management Dashboard. The dashboard is a summary analysis tool  that conducts trend analysis using center data and allows regional staff to  engage in targeted interventions at centers with potential safety and  security concerns. In addition, under the new monitoring strategy, instead  of only conducting scheduled monitoring visits to a center at set times,  regional staff conduct unannounced visits based on data indicating a  decline in center performance or other triggers. See appendix VI for  additional information on the new monitoring strategy.", "Although the new risk-based monitoring strategy has improved center  monitoring, it is not consistently implemented across regional offices,  according to ETA national officials. They told us that similar problems  identified at centers may be treated with different levels of focus or  intensity from one region to another. In addition, national and regional  officials told us that regional office staff have relied on professional  judgment to determine the appropriate response to centers that may be at  risk of noncompliance with safety and security policies, which could lead  to inconsistencies. For example, when problems are identified at centers,  the type of assessment to conduct is left to regional office staff discretion.  As a result, staff in one region may decide that the most comprehensive  assessment, the Regional Office Center Assessment, is needed, while  another region\u2019s staff would select a targeted assessment, which is more  limited in scope. ETA national officials said that although each  determination could be justified based on resource constraints and  competing priorities, they would like to increase implementation  consistency in this area.", "To address regional inconsistencies, ETA national and regional office  staff said that guidance in the form of standard operating procedures  (SOP) would be helpful. These procedures would promote consistency in  how policies are interpreted and applied and would help ensure that  centers are held to the same standards, according to ETA national  officials. For example, SOPs could specify which type of assessment to  conduct in response to specific problems identified at centers. Internal  control standards state that managers should document in policies each  unit\u2019s responsibility for an operational process.", "Regional office staff said that they previously had a helpful tool, the  Program Assessment Guide, that linked policies in the Policy and  Requirements Handbook to the monitoring assessment process.  Regional office staff said they used the Program Assessment Guide to  prepare for center monitoring visits and it was a helpful training tool for  new staff. Our review of ETA documentation found that the Program  Assessment Guide included specific questions to ask center staff about  how they meet safety and security requirements and suggested where to  look for information to determine center compliance with policies.  However, the Program Assessment Guide, which has not been updated  since 2013, does not include recent changes to the Policy and  Requirements Handbook, such as the updated student conduct policy.  ETA national officials told us that limited staffing has made it difficult to  update the Program Assessment Guide as frequently as changes are  made to the Policy and Requirements Handbook.", "In February 2018, ETA national officials told us they plan to issue a  variety of SOPs related to monitoring center safety and security issues  (see table 5). ETA officials initially said these SOPs would be completed  in August or November 2018 and later revised its plans with a goal of  completing all SOPs by August 2018. However, in August 2017, ETA  officials had told the DOL OIG that these SOPs would be completed in  the March to July 2018 timeframe. ETA officials said that a staffing  shortage in the Office of Job Corps\u2019 Division of Regional Operations and  Program Integrity delayed development of the SOPs. This Division\u2014 established in 2015 to coordinate regional operations and strengthen  communications and quality assurance\u2014includes eight staff positions;  however, as of January 2018, the Division has two staff members on  board. ETA officials said that they have not yet received departmental  approval to fill the six vacant positions in the Division.", "Given this uncertainty, it is questionable whether ETA\u2019s revised  timeframes will be met. Without SOPs or other relevant guidance, ETA  cannot ensure that monitoring for center safety and security will be  carried out uniformly across the program. As a result, centers may be  held to different standards, and the program may not achieve its center  safety and security goals.", "In addition to inconsistencies in monitoring and a lack of sufficient  guidance, staff in all six regional offices told us that components of ETA\u2019s  risk-based monitoring strategy created reporting overlaps. As part of the  new monitoring strategy, regional staff have additional reports that they  complete\u2014such as the Risk Management Dashboard Action report and  Corrective Action Tracker\u2014about potential safety and security problems  or actual violations found at centers. Some regional staff said the desk  monitoring report includes similar information to the Risk Management  Dashboard and Corrective Action Tracker reports, which regional offices  submit to the ETA national office. Staff in one regional office said that  they enter the same information about the status of center safety and  security violations multiple times on the Corrective Action Tracker  because the time between reporting periods is too short to allow for  meaningful action to be taken. Staff from four regional offices said  completing duplicative reports reduces time that could be used to conduct  additional center monitoring, such as onsite visits, or to perform other key  duties.", "ETA national officials disagreed that overlap exists among monitoring  reports. They said that although reports may appear to overlap, the  reports are complementary and not duplicative, and are used at different  points in the monitoring process (see fig. 7 for an overview of ETA\u2019s  monitoring process). For example, ETA national staff told us that desk  monitoring reports are primarily used by regional staff at the beginning of  the monitoring process to identify potential problems and are not  substantially reviewed by the national office. ETA national officials also  said that the Risk Management Dashboard report is used at the beginning  of the monitoring process to identify problems, whereas the Corrective  Action Tracker is used later in the process after violations have been  identified and corrective actions have been planned to bring the center  back into compliance. In addition, ETA national officials also noted that  regional staff are not asked to complete all reports every month. For  example, regional staff complete a Risk Management Dashboard Action  report only for those centers with potential safety and security concerns.", "We compared the information included in five monitoring reports\u2014the  Center Culture and Safety Assessment, Corrective Action Tracker, Desk  Audit, Regional Office Center Assessment, and Risk Management  Dashboard Action report\u2014and found opportunities for streamlining. For  example, we found that the Center Culture and Safety Assessment,  Corrective Action Tracker, and Regional Office Center Assessment, all  include a narrative description of the violations identified by regional staff  categorized according to the corresponding requirement in the Policy and  Requirements Handbook. In addition, ETA regional office staff said the  Corrective Action Tracker, a Microsoft Excel spreadsheet, is cumbersome  to use and within the spreadsheet they attach and submit additional  documentation. ETA national officials agreed that streamlining or  automating monitoring tools would be helpful for its regional staff, along  with additional training to help staff understand the different reports and  how to write the required narratives. ETA national officials also told us  that they did not systematically review existing reports before creating  additional ones for the new risk-based monitoring process. Officials said  they have lacked the resources to make some improvements that could  reduce the time regional office staff spend on reporting.", "Standards for internal control state that managers should identify the  organizational level at which the information is needed, the degree of  specificity needed, and state that managers should review information  needs as an on-going process. Streamlining or automating reporting  requirements can help centralize documentation relevant to monitoring  center safety and security, possibly eliminate seemingly duplicative  reporting requirements, and help regional staff manage their workloads."], "subsections": []}, {"section_title": "ETA Lacks a Comprehensive Plan to Link Its Various Efforts to Improve Center Safety and Security", "paragraphs": ["While ETA initiated multiple actions to address various safety and security  issues, the agency does not have a comprehensive plan to improve  center safety and security. A comprehensive plan describes the  organization\u2019s long-term goals, its strategy and timelines for achieving  those goals, and the measures that will be used to assess its  performance in relationship to its goals. It can also guide decision-making  to achieve desired outcomes, including the priority with which to  implement these efforts. ETA officials told us that although they do not  have a single document that reflects a formal comprehensive plan, they  have employed a comprehensive approach to improve center safety and  security. However, in prior work, GAO established the importance of  comprehensive planning to ensure agencies effectively execute their  missions and are accountable for results.", "GAO has also identified leading practices that help ensure organizations  achieve their objectives. These leading practices include developing  goals, strategies to achieve goals, plans to assess progress toward goals,  and leadership and stakeholder involvement in plan development (see  table 6).", "ETA officials agreed that a comprehensive plan is needed, but told us that  limited staff capacity and lack of expertise have hindered their ability to  produce a comprehensive plan. In particular, the Division of Regional  Operations and Program Integrity would have a role in developing the  agency\u2019s comprehensive plan. As previously mentioned, ETA officials told  us that they did not have approval to fill the six vacant positions in the  Division. With only two of the eight positions filled, ETA officials said that  they prioritized correcting the deficiencies identified by the DOL OIG and  responding to immediate safety and security concerns. ETA officials told  us they plan to produce a comprehensive plan when they have secured  the staff to do so. However, at this time, ETA does not have a specific  timeframe for producing such a plan.", "When the agency begins developing a comprehensive plan, it could  consider using the leading practices outlined above and drawing on the  expertise of the government-wide Performance Improvement Council. In  the absence of a comprehensive plan for safety and security, ETA risks  the success of its new initiatives because they are not linked in an overall  framework that demonstrates how they are aligned or contribute to goals  for improving center safety and security."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["It is important that Job Corps students be provided with a safe and secure  learning environment. For the last several years, however, numerous  incidents have threatened the safety and security of students. ETA has  taken steps to improve center safety and security, but its efforts could be  strengthened by ensuring regional office staff responsible for monitoring  Job Corps centers are better supported with additional guidance and  streamlined reporting requirements. Without providing regional staff with  this additional support, the full potential of the new monitoring strategy  may not be realized. While ETA has implemented several actions to  address safety and security concerns, it does not have a comprehensive  plan to guide all of its efforts. Without a comprehensive plan, ETA will not  be able to assess its overall effectiveness in addressing center safety and  security."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to ETA:  The Assistant Secretary of ETA should ensure the Office of Job Corps  expeditiously develops additional guidance, such as SOPs or updates to  the Program Assessment Guide, to ensure regional offices consistently  implement the risk-based monitoring strategy. (Recommendation 1)", "The Assistant Secretary of ETA should ensure the Office of Job Corps  streamlines the monitoring reports completed by regional office staff. This  streamlining could include automating monitoring tools, consolidating  monitoring reports, or taking other appropriate action. (Recommendation  2)", "The Assistant Secretary of ETA should ensure the Office of Job Corps  commits to a deadline for developing a comprehensive plan for Job Corps  center safety and security that aligns with leading planning practices,  such as including a mission statement with goals, timelines, and  performance measures. This could also include developing the planning  expertise within the Office of Job Corps, leveraging planning experts  within other agencies in DOL, or seeking out external experts, such as the  government-wide Performance Improvement Council. (Recommendation  3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOL for review and comment. We  received written comments from DOL, which are reprinted in appendix  VII. DOL concurred with our three recommendations. The department  stated that it will move forward to develop standard operating procedures  for its risk-based monitoring strategy, review and streamline existing  monitoring reports, and provide additional training for its regional office  staff. The department also plans to develop a formal written  comprehensive plan for Job Corps safety and security. DOL also provided  technical comments that we have incorporated in the report as  appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of Labor. 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) 512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: Additional Information about Our Methodology", "paragraphs": ["The objectives of this review were to examine (1) what is known about the  number and types of reported incidents involving the safety and security  of Job Corps students in program year 2016; (2) what is known about  student perceptions of safety and security at Job Corps centers, and what  steps, if any, is the Employment and Training Administration (ETA) taking  to improve the survey used to collect this information; and (3) the extent  to which ETA has taken steps to address safety and security at Job Corps  centers.", "To address all three objectives, we reviewed agency policies and  procedures, such as the Job Corps Policy and Requirements Handbook  and guidance issued to center operators and ETA staff. In addition, we  interviewed ETA officials, including Office of Job Corps national staff,  Office of Job Corps regional directors, and staff in all six regional offices.  We also conducted site visits at the Woodstock Job Corps Center in  Woodstock, Maryland, and the Potomac Job Corps Center in  Washington, D.C. We selected these two centers because they were  within geographical proximity to Washington, D.C., operated by different  contractors, and had over 100 reported safety and security incidents each  in program year 2016. At each center, we interviewed the Center Director,  Head of Safety and Security, a group of staff members, and a group of  students. The staff and students we spoke with were selected by the  centers. While these two site visits are not generalizable to all Job Corps  centers, they provide examples of student and staff experiences with  safety and security."], "subsections": [{"section_title": "Analysis of Safety and Security Incidents at Job Corps Centers", "paragraphs": ["To determine the number and types of safety and security incidents  reported by Job Corps centers, we analyzed ETA\u2019s incident data for  program year 2016 (July 1, 2016 to June 30, 2017). This was the most  recent year of Job Corps data available at the time of our review. ETA  captures these data in its Significant Incident Reporting System (SIRS).  Centers must report incidents involving both Job Corps students and  staff, and incidents that occur at onsite and offsite locations. ETA has 20  categories of incidents in SIRS. See appendix II for incident category  definitions. The incident categories and definitions in this report are taken  directly from ETA documents and represent how ETA categorizes these  incidents. We did not assess these categories and definitions.", "In this report, we present information on reported safety and security  incidents in program year 2016 involving at least one student victim or  perpetrator. There were 13,673 reported incidents involving students;  additional incidents are reported in SIRS that did not involve students.", "When these additional incidents are included, a total of 14,704 safety and  security incidents were reported in program year 2016. See appendix III  for further information on the total number of incidents reported.", "To calculate the number and types of reported incidents, we analyzed the  primary incident type that was assigned to each incident reported in  SIRS. To provide additional information on reported assaults and sexual  assaults, we also analyzed the secondary incident type that was assigned  to each reported assault and sexual assault in SIRS. To calculate the  total number and types of reported deaths, we analyzed both primary  incident types and secondary incident types. In SIRS, deaths can be  reported under three different primary incident types (\u201cdeath\u201d, \u201cassault\u201d,  and \u201cdanger to self or others\u201d). When an incident is assigned to any of  these primary incident types, it may also be assigned a secondary  incident type of \u201chomicide,\u201d among other secondary incident types.", "In addition, we analyzed the duty status for student victims and  perpetrators of offsite incidents. In SIRS, students are described as being  either (1) on duty, which means that they are onsite at a center or in a Job  Corps supervised offsite activity; or (2) off duty, which means they are  offsite and not under Job Corps supervision. For the 1,406 offsite  incidents, we were unable to determine student duty status in 178  instances due to inconsistencies in ETA\u2019s data.", "This report focuses on reported safety and security incidents in program  year 2016, which was from July 1, 2016, to June 30, 2017. On July 1,  2016, ETA implemented policy changes that impacted the categorization  and number of reportable safety and security incidents. Accordingly,  incident data after July 1, 2016, are not comparable with earlier incident  data, including incident data we reported in a June 2017 testimony.", "We assessed the reliability of SIRS data by reviewing relevant agency  documentation about the data and the system that produced them and  interviewing ETA and Department of Labor Office of Inspector General  (DOL OIG) officials knowledgeable about the data. We determined the  data were sufficiently reliable to report the minimum number of incidents  that occurred in program year 2016. It is likely that the actual number of  incidents was greater than the number reported in SIRS because the  information is reported by Job Corps centers and the DOL OIG previously  found instances of underreporting by a non-generalizable sample of  center operators. In its March 2017 report, DOL OIG found that 12 of 125  Job Corps centers did not report 34 percent of significant incidents in  SIRS from January 1, 2014, through June 30, 2015. ETA has recently  taken steps to improve center reporting of significant incidents, such as  revising the student conduct policy to more clearly define behavior  infractions and conducting system-wide training to ensure uniform  understanding and enforcement of student conduct policies. However,  DOL OIG officials told us in January 2018 that it is too early to determine  if these steps have resolved the DOL OIG\u2019s concerns regarding center  underreporting."], "subsections": []}, {"section_title": "Analysis of Student Perceptions of Safety", "paragraphs": [], "subsections": [{"section_title": "Survey Response Rate and Reliability", "paragraphs": ["To examine what is known about student perceptions of their safety and  security at Job Corps centers, we analyzed students\u2019 responses to the  student satisfaction survey administered during program year 2016:  September 2016 and March 2017. We analyzed responses from both of  these surveys in program year 2016, which was the most recent year for  which data were available. ETA provided centers with the standardized  paper-based survey to administer to students in-person on designated  weeks. The survey of 49 close-ended questions contained 12 questions  that ETA used to assess students\u2019 safety. In addition to questions on  student safety, the survey includes questions on other topics, including  student demographics, overall satisfaction with Job Corps, and access to  drugs and alcohol on center.", "According to data from ETA, the response rate for each survey was  approximately 90 percent of all enrolled students. ETA calculated the  response rate by dividing the number of students who responded to the  survey by the number of enrolled students during the week of survey  administration. Students responded anonymously to the survey.", "Because about 90 percent of students provided responses and about 10  percent did not, we analyzed the potential for non-response biases based  on several student characteristics. If the responses of those who did not  respond would have differed from the responses of those who did on  relevant safety questions, the results calculated solely from those who  responded may be biased from excluding parts of the population with  different characteristics or views. We compared age, time in program,  race, and gender\u2014key characteristics available for the population of  enrollees and respondents\u2014to determine areas for potential bias.", "We determined that the potential for non-response biases existed for  particular groups of students: younger students and those enrolled in the  program for at least 6 months. For race, the potential for non-response  bias was unclear. We found no potential bias for gender. Specifically, we  found the following:", "Age. Younger students were under-represented, and older students  were over-represented among survey respondents. Thus, to the  extent that non-responding younger students would have answered  safety questions differently than responding younger students, the  potential for bias existed in the survey results we analyzed. When we  asked ETA officials about such a potential bias, they responded that  they did not have evidence or documentation suggesting that age is a  predictor of students\u2019 level of perceived safety in the program.", "Length of time in the program. Students in the program less than 6  months were over-represented among survey respondents, and  students enrolled in the program over 6 months were under- represented in the survey. To the extent that non-responding students  would have answered safety questions differently based on length of  time enrolled, the potential for bias existed in the survey results we  analyzed. When we asked ETA officials about such a potential bias,  they noted that new students may be less aware about life at the  center because they begin the program with other newly arrived  students for up to 2 months. Thus, they are not yet fully integrated into  the larger student body. Otherwise, they did not have evidence or  documentation suggesting that length of time in the program  correlates with students\u2019 level of perceived safety.", "Race. It is unclear whether the distribution of race for respondents  differs from that in the population. Specifically, ignoring item non- response, about 7 percent of respondents selected \u201cOther,\u201d and if  those respondents were Black/African American, the distributions  between the respondents and sample would be similar since this  would result in the respondent race percentage being close to 50  percent, like the population of enrollees. If respondents who selected  \u201cOther\u201d were actually distributed across the race categories, this  would result in a difference between the respondent and population  race/ethnicity characteristics, and to the extent that students\u2019  responses to safety questions differ by race, this could result in a  potential bias of respondent survey results we analyzed. We analyzed  race for purposes of potential non-response bias, and not as part of  statistical tests of survey results described below.", "Gender. We found no potential non-response bias for gender because  the distribution of gender for respondents was similar to that in the  population of students enrolled in the program.", "In addition to our non-response bias analysis, we assessed the reliability  of the survey data by reviewing relevant agency documentation about the  data and the system that produced them, testing data electronically, and  interviewing ETA officials knowledgeable about the data. We determined  that the student survey data were sufficiently reliable for our purposes."], "subsections": []}, {"section_title": "Calculations of Safety for Individual Survey Questions and for National Measures", "paragraphs": ["For the 12 safety-related survey questions, Job Corps policy specified  responses that the agency counted as safe or unsafe, which we followed.  As noted previously, ETA considers students to feel safe if they provided  certain responses to each of the 12 safety-related survey questions,  some of which are phrased as statements. For example, if a student  provided a response of \u201cmostly false\u201d or \u201cvery false\u201d to the statement \u201cI  thought about leaving Job Corps because of a personal safety concern,\u201d  that student would be counted as feeling safe on that survey question  (see table 3). The percentages that we calculated are not comparable to  prior publications, including ETA reports, because, for example, ETA  revised (i.e., recoded) students\u2019 responses in certain circumstances, as  explained below in table 7. Meanwhile, we used the original responses  that students provided and did not revise them. Also, ETA excluded  responses of \u201cdon\u2019t know / does not apply\u201d from its percentages. As a  result, our percentages are not comparable with those reported by ETA.", "We also calculated national measures of safety for the program and for  particular demographic groups of students (e.g., male, female). Our  calculation was similar to ETA\u2019s national safety rating in certain respects.  For example, as ETA did, we determined how safe each individual  student felt as the unit of analysis. Therefore, the national measures of  GAO and ETA may not equal the average of the 12 questions because,  for example, not all students answered every safety question.", "However, in other respects, we produced our national measure differently  than ETA. Table 7 explains the three ways that our calculation differed  from ETA\u2019s.", "Although the student safety surveys were an attempt to survey a census  of the population of participants, we treated the survey as a sample in  certain respects due to the non-response of about 10 percent of students  as well as the ongoing nature of the regularly repeated survey. Therefore,  we considered these data as a random sample from a theoretical  population of students in this program and used statistical tests to assess  any differences.", "Treating the data as a statistical sample, we carried out statistical tests of  differences in safety measures for student characteristics (e.g., age,  gender, length of time in the program). Because of the large sample size,  smaller differences may be detected as statistically significant. This is  because statistical significance is a function of the magnitude of the true  difference (statistical tests are more likely to detect differences when the  true values are very different) as well as the sample size (larger samples  can detect statistical significance of smaller magnitudes, when compared  to smaller sample sizes, when all else is equal). However, we used  statistical significance in conjunction with whether the detected  differences are meaningful or important, in a practical sense. In particular,  we used a series of f-tests to statistically test, at the alpha = 0.05 level, for  difference in average safety measure, across categories of age, gender,  time in program, center size, and operator type."], "subsections": []}]}]}, {"section_title": "Appendix II: Categories of Incidents in the Significant Incident Reporting System (SIRS)", "paragraphs": ["Appendix II: Categories of Incidents in the  Significant Incident Reporting System (SIRS)"], "subsections": []}, {"section_title": "Appendix III: All Significant Incidents Reported by Job Corps Centers in Program Year 2016", "paragraphs": ["Our analysis of the Employment and Training Administration\u2019s (ETA)  Significant Incident Reporting System (SIRS) data showed that there  were 14,704 reported safety and security incidents at Job Corps centers  in program year 2016, which include incidents involving students, staff,  and non-Job Corps individuals. See table 9."], "subsections": []}, {"section_title": "Appendix IV: Reported Safety and Security Incidents Involving Students by Job Corps Center, Program Year 2016", "paragraphs": ["Job Corps centers reported 13,673 safety and security incidents involving  students, including those that occurred both onsite and offsite, in program  year 2016. See table 10 for information on each Job Corps center,  including the number of incidents involving students reported in program  year 2016."], "subsections": []}, {"section_title": "Appendix V: GAO Safety Measure for Job Corps Centers, March 2017", "paragraphs": ["We calculated safety measures for each Job Corps center, based on  student responses to the safety-related questions on the student  satisfaction survey (see table 11). We used the methodology described in  appendix I to calculate safety measures for the centers. Results in table  11 are from the March 2017 survey, the most recent for program year  2016. The percentages in this table are not comparable and should not  be analyzed with the numbers of reported incidents at each center  because they are distinct measures that cover different periods of time."], "subsections": []}, {"section_title": "Appendix VI: ETA\u2019s Monitoring of Job Corps Centers", "paragraphs": ["The Employment and Training Administration\u2019s (ETA) risk-based  monitoring strategy is designed to identify emerging problems that place a  Job Corps center at-risk for safety and security problems. The strategy is  largely implemented by regional office staff, which work with the Office of  Job Corps\u2019 newly formed Division of Regional Operations and Program  Integrity and use a variety of tools to assess, track, and report on center  performance (see table 12)."], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mary Crenshaw (Assistant  Director), Andrea Dawson (Analyst-in-Charge), Sandra Baxter, and  Matthew Saradjian made key contributions to this report. Additional  assistance was provided by Alex Galuten, Gretta Goodwin, Benjamin  Licht, Grant Mallie, Mimi Nguyen, Nhi Nguyen, Monica Savoy, Almeta  Spencer, Manuel Valverde, Kathleen van Gelder, and Sonya Vartivarian."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-403", "url": "https://www.gao.gov/products/GAO-18-403", "title": "Collegiate Aviation Schools: Stakeholders' Views on Challenges for Initial Pilot Training Programs", "published_date": "2018-05-15T00:00:00", "released_date": "2018-05-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Collegiate aviation schools are one pathway for initial civilian pilot training in the United States and are a key source of airline pilots. Over the past 5 years, aviation stakeholders have voiced concerns that there is an insufficient supply of qualified airline pilots, citing increased airline pilot retirements, among other factors.", "The explanatory statement accompanying the Consolidated Appropriations Act of 2017 included a provision for GAO to review aspects of collegiate aviation schools' operations. This report examines: (1) what is known about schools with professional pilot degree programs and (2) challenges that affect schools' ability to produce professional pilots and schools' responses to these challenges.", "GAO reviewed relevant statutes, regulations, and documents from the FAA, Veterans Affairs, and Education; analyzed FAA's data on flight schools, airports, and pilots; and analyzed Education's degree completion data for the 2015\u20132016 academic year, the most recent data available. GAO also interviewed representatives from: 18 schools, selected based on factors including program type and location; 6 airports selected based on type and location; and 11 additional aviation stakeholders representing schools, airlines, pilots, airports, and flight instructors, selected to reflect a range of perspectives about initial pilot training. The results of the interviews are not generalizable to all aviation schools and stakeholders. GAO is not making recommendations in this report. On a draft of the report, DOT provided technical clarifications, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identified 147 collegiate aviation schools that offered professional pilot degree programs in academic year 2015\u20132016. All pilot students must pass the same knowledge and flight tests to obtain pilot certificates from the Federal Aviation Administration (FAA), but schools' programs vary. For example, 101 of these schools operated relatively more formalized, FAA-certificated degree programs. The other 46 schools operated under a model that provides flexibility and meets FAA requirements but that does not require FAA certification to conduct such training. Total annual pilot-student enrollment and graduation numbers are not known. According to FAA officials, FAA does not require schools to submit enrollment data and does not verify enrollment data that many certificated schools voluntarily submit. Regarding graduation data, schools must classify and report completed degrees by program type to the Department of Education (Education) using that agency's classification system. Education's data indicated a total of 1,356 professional pilot degrees in academic year 2015\u20132016. Because pilot-student graduates can be classified under a number of aviation-related programs in Education's system, the number of pilot-student graduates could be higher.", "Flight instructor retention, which has been influenced by the current high demand for airline pilots, and the high cost of pilot training are key challenges that affect schools' ability to produce pilots, according to aviation stakeholders GAO interviewed.", "Flight instructor retention : Nearly all (16 of 18) selected school representatives cited difficulty recruiting and retaining flight instructors as a great or moderate challenge for schools' ability to train pilots. According to most school representatives (15) and other selected stakeholders, instructors who aspire to be airline pilots are rapidly accruing the flight hours necessary to qualify and are obtaining employment as soon as they are eligible. In addition, regional airlines have recently increased hiring, generating high turnover among flight instructors, who are traditionally their main source of new pilots.", "High cost of training : Nearly all (16) selected schools' representatives identified the cost of a professional pilot degree program as a great or moderate challenge to recruiting and retaining pilot students. High education costs are not unique to these programs. Nonetheless, in addition to tuition, flight training fees alone often exceed $50,000, well above the cap for federal financial aid available to eligible students.", "Schools and regional airlines have taken a range of actions to address these challenges. For example, eight selected school representatives reported increasing flight instructors' compensation and benefits. In addition, some regional airlines' cadet programs provide mentorship and incentives such as bonus pay or tuition reimbursement to select students while they are still in school. The Department of Transportation (DOT) has also launched an initiative to assess the level of interest among veterans in becoming pilots and to examine strategies for employing military veterans as pilots."]}], "report": [{"section_title": "Letter", "paragraphs": ["The aviation system is an important part of the United States\u2019 economy  and the airline industry is a key provider of domestic and international  mobility for passengers and cargo. Over the past 5 years, aviation  stakeholders have voiced concerns that there is an insufficient supply of  available and qualified pilots to support current and future demand from  U.S. regional and mainline airlines. Many have cited the increased rate  of airline pilot retirements and first officer airline pilot qualification  requirements,  among other factors contributing to the current tight labor  market for professional pilots.", "We have previously reported on issues related to pilot supply and  demand. In 2014, we found that, among other things, the number of pilot  certificate holders\u2014those individuals who have completed pilot training  and passed Federal Aviation Administration\u2019s (FAA) pilot certification  requirements \u2014decreased about 1 percent from 2000 through 2012,  while the growth rate for pilots\u2019 employment decreased by 12 percent in  that period. In addition, available evidence suggested that by 2012 fewer  students were entering and completing pilot training programs since 2001  and that regional airlines reported difficulties finding sufficient numbers of  qualified airline pilots. Recently, some regional airlines, which are  particularly reliant on newly trained pilots, have been reducing flights and  eliminating routes to some markets, reportedly due to lack of qualified  pilots.", "Collegiate aviation schools with professional pilot degree programs are a  key source of new commercial pilots. These programs have been  generally perceived by aviation industry stakeholders as providing a high  level of civil aviation pilot training because they are designed to produce  professional pilots for airlines. In addition, airlines generally prefer to hire  pilots with college degrees, reportedly because they perform better in an  airline\u2019s training program when hired.", "The explanatory statement accompanying the Consolidated  Appropriations Act of 2017 included a provision for us to review certain  aspects of collegiate aviation schools\u2019 operations. This report addresses: what is known about collegiate aviation schools with professional pilot  degree programs in terms of location, types of training programs  available, and enrollment, and challenges that affect collegiate aviation schools\u2019 ability to produce  professional pilots and schools\u2019 response to these challenges.", "To determine what is known about collegiate aviation schools we  analyzed several sets of data. Specifically, to identify schools that  operated pilot programs for fixed wing aircraft in academic year 2015\u2013 2016 and the airports at which they operated, we obtained and reviewed  FAA\u2019s data on pilot schools that had received certification from FAA to  operate, as of August 19, 2016. We also obtained and reviewed school  information from two industry associations and school websites. These  data were the most applicable given the academic year we reviewed. To  determine what is known about the types of programs available at these  schools, we analyzed the Department of Education\u2019s (Education) data on  institution type, college-wide tuition and fees, and graduations in  academic year 2014\u20132015 (the most recent year available). To determine  what is known about enrollment at collegiate aviation schools, we  analyzed enrollment and certificated flight instructor data voluntarily  reported to FAA by some schools between October 2015 and October  2017. We also analyzed FAA\u2019s pilot data to identify, for a number of  categories, the number of new pilot certificates FAA issued from 2012  through 2016 and the total number of pilot certificate holders for those  years. We reviewed documents and interviewed Education and FAA  agency officials, as well as representatives of industry associations and  an accreditation entity to determine that these data were the most  complete sources available. While these data were limited, we  determined that they were sufficiently reliable for the purposes of our  reporting objectives.", "To determine challenges that affect collegiate aviation schools\u2019 ability to  produce professional pilots, we reviewed federal laws and regulations  pertaining to pilot requirements and FAA\u2019s oversight of collegiate aviation  schools\u2019 pilot programs and interviewed FAA officials. We reviewed  documents and interviewed a non-generalizable sample of 18 collegiate  aviation schools about their pilot programs and key challenges that affect  their ability to produce professional pilots. We selected these schools to  represent a mix in terms of geographic location, institution type, program  type, and estimated enrollment where that information was available.  While the sample allowed us to learn about challenges that affect these  schools\u2019 ability to produce professional pilots, it was designed to provide  anecdotal information, not findings that would be representative of all  collegiate aviation schools. We also reviewed documents from additional  stakeholders and interviewed them, including representatives of 6  selected airports where collegiate aviation schools operate and 11  industry organizations representing collegiate and non-collegiate pilot  schools, airports, flight instructors, pilots, regional airlines, and mainline  airlines. In addition, we reviewed documents and interviewed Education  and Department of Veterans Affairs (VA) officials about regulations and  policies related to pilot programs\u2019 eligibility for federal student financial aid  and the use of veterans\u2019 education benefits. Further details about our  scope and methodology can be found in appendix I.", "We conducted this performance audit from September 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Civil aviation in the United States can be generally divided into two broad  categories\u2014general aviation and commercial aviation. All civilian pilot  students undergo their initial pilot training in the general aviation sector,  which comprises all aviation activities other than military and commercial  airlines. Once hired in the commercial aviation sector for businesses that  carry passengers or cargo for hire or compensation, pilots may receive  additional, employer-specific training.", "FAA is responsible for regulating the safety of civil aviation in the United  States, including the administration of pilot certification (licensing) and  conducting safety oversight of pilot training. Regulations for initial pilot  training and certification are found in two parts of the Federal Aviation  Regulations\u2014pilot training requirements  and requirements for obtaining  a pilot school certificate.", "Pilot training requirements: These regulations prescribe the minimum  training, knowledge, and experience requirements for acquiring a  private, commercial, or airline transport pilot certificate, and for  becoming a certificated flight instructor (CFI). Individual  flight  instructors can provide pilot training to individuals under these  regulations and the training is not subject to direct FAA oversight  beyond the initial flight instructor certification and subsequent  renewal.", "Requirements for obtaining a pilot school certificate: These  regulations prescribe requirements pilot schools must meet to obtain  an FAA certificate and the general operating rules applicable to a  school\u2019s holding a certificate. FAA-certificated schools are required to  meet prescribed standards with respect to training equipment,  facilities, student records, personnel, and curriculum. Schools\u2019 pilot  program curriculum can vary in content, but FAA provides core  training guidelines that schools must follow to receive a certificate. To  ensure safety, FAA requires its inspectors to conduct on-site  inspections of each FAA-certificated school at least once a year,  focusing on pilot school operations and training aircrafts\u2019  airworthiness.", "Schools that provide initial pilot training generally fall into three  categories: (1) collegiate aviation schools, (2) non-collegiate vocational  pilot schools, and (3) non-collegiate, instructor-based pilot schools.  Collegiate aviation schools that provide initial pilot training typically offer a  2- or 4- year undergraduate degree in an aviation-based major along with  the pilot certificates and ratings necessary to become a commercial pilot.  All pilot schools must comply with FAA\u2019s pilot training requirements, but  some may elect to become FAA-certificated as well. Instructor-based  schools offer flexible training environments where the training sequence  can be altered to meet specific students\u2019 needs and time commitments.  Upon completion of the training, the students can obtain pilot certificates  for which they were trained, as long as they pass FAA\u2019s tests. FAA-certificated vocational schools do not allow flexible training environments  as the training sequence outlined in the curriculum cannot be altered.  FAA requires annual inspections of these schools, unlike flight instructor- based schools.", "As we have previously reported, it takes years of training to meet FAA\u2019s  certification and aeronautical experience qualifications to become an  airline pilot. Once cleared by a medical examination, an individual  may  obtain a medical certificate and a student pilot certificate from FAA. Pilot  students may then begin training, acquiring the knowledge and flight  training to obtain a private pilot certificate, instrument rating, commercial  pilot certificate, and multi-engine rating (see fig. 1).", "To be eligible for hire as either a captain or first officer for an airline,  individuals must also obtain an airline transport pilot (ATP) certificate in  addition to the other certificates and ratings. In July 2013, FAA began  requiring all first officers to have an ATP certificate, which requires 1,500  hours of flight experience. Pilots with fewer than 1,500 hours can obtain  a \u201crestricted-privileges\u201d ATP certificate (R-ATP), under which specific  academic training courses can count toward the required hours of total  flight time. FAA made this change for airline first officers following the  2009 Colgan Air Inc. crash in New York,   and subsequent legislation  that required FAA to modify, among other things, first officer  qualifications. In our 2014 report, FAA and industry stakeholders  estimated that it could take an additional 1 to 2 years for pilots coming out  of school to meet the 1,500 hour requirement.", "Consistent with airline representatives\u2019 views from our prior report,  regional airline association representatives have recently cited the revised  first officer training requirements and several other factors as contributing  to a tight pilot labor market. By increasing the minimum number of  required flight hours for a first officer, entry into the airline pilot profession  may take longer, which may decrease the pool of eligible pilots that  mainline and regional airlines can hire as a first officer. In addition, as we  previously reported, the civil aviation industry has been a historically  volatile industry because demand for air travel is sensitive to economic  conditions, as well as political, international, and even health-related  events. After several years of industry contraction during the 2007-2009  economic recession, demand for air travel has increased since 2012, and  FAA projects continued future growth. In addition, since 2014, pilot retirements have been increasing, further tightening the labor market,  according to one study. That study forecasts between 2,000 and 3,000  annual mandatory age retirements from the mainline airlines between  2018 and 2021. According to the Bureau of Labor Statistics, most of the  newly hired pilots in the next 10 years will be replacing retiring pilots."], "subsections": []}, {"section_title": "While Some Information on Collegiate Aviation Schools\u2019 Pilot Degree Programs Is Available, Enrollment and Graduation Data are Limited", "paragraphs": [], "subsections": [{"section_title": "Collegiate Aviation Schools Are Located across the Country and Offer Different Types of Pilot Degree Programs", "paragraphs": ["We identified 147 U.S. colleges and universities that offered at least one  professional pilot degree program in academic year 2015-2016. These  collegiate aviation schools are located throughout the country, as shown  in figure 2. They may offer pilot programs within different academic  departments, such as aviation or business. Within a department, pilot  programs may be offered as a stand-alone program, as an integral part of  a larger major, such as flight education or aviation management, or as a  specialty or track within a major.", "Professional pilot degree programs at collegiate aviation schools may  vary in several ways:", "School type: About three-quarters of collegiate aviation schools are  public (110 out of 145), while the remainder are either private non- profits or private for-profits, according to Education\u2019s data (see fig.  3).", "Program degree length: A majority of collegiate aviation schools offer  4-year degree programs, as shown in figure 3. Program degree length  may affect how long it takes pilot students to meet FAA\u2019s  requirements and their career options once they complete training.  For example, pilot students in 2-year degree programs may complete  the program and acquire a commercial pilot certificate and ratings in  less time than the 4-year degree program, which may save the  students time and money. However, according to associations  representing pilot training providers and pilots, mainline airlines prefer  pilots with a 4-year degree. In addition, representatives from one  mainline airline told us that the airline requires a 4-year degree for  employment as a pilot. Regardless of which school and degree  program a pilot student graduates from, all pilot students must pass  the same knowledge and flight tests to obtain pilot certificates and  are, by FAA\u2019s standards, eligible for the same career opportunities.", "FAA Regulations and academic curriculum: Forty-six collegiate  aviation schools we identified operate their pilot programs solely  under FAA\u2019s pilot training requirements. The remaining 101 collegiate  aviation schools\u2019 pilot programs are certificated by FAA under FAA\u2019s  pilot school requirements. As previously discussed, FAA-certificated  schools must meet prescribed standards, have structured programs,  and FAA must approve their pilot program\u2019s curriculum. In addition,  each pilot program\u2019s academic curriculum may differ, though all must  meet FAA\u2019s pilot training requirements and, if the school is  certificated, FAA\u2019s pilot school requirements.", "R-ATP authorization: Only FAA-certificated collegiate aviation schools  may apply to FAA for authority to certify eligible graduates for an R- ATP certificate with a reduced number of flight hours. Since FAA  promulgated the new first officer qualification rule and established the  R-ATP certificate in 2013, FAA has issued R-ATP authorizations to  more schools each year. As of August 22, 2017, 86 collegiate aviation  schools hold R-ATP authorizations. In addition, the number of R-ATP  certificates FAA has issued to eligible graduates each year has  steadily increased, from 37 in 2013 to 2,190 in 2016. The number of  R-ATP certificates issued in 2016 represented about 18 percent of all  ATP certificates. The reduced flight-hour eligibility may save students  time and money on their path to becoming a professional pilot,  depending on how they gain flight experience, which may motivate  more students to consider attending collegiate aviation schools that  are authorized for R-ATP certificates, compared to other training  alternatives.", "Aviation Accreditation Board International accreditation: Schools\u2019  professional pilot programs may choose to pursue program  accreditation in addition to the school\u2019s institutional accreditation.  Thirty-two collegiate aviation schools we identified have pilot  programs accredited by the Aviation Accreditation Board International  and an additional 4 schools have pilot programs that are candidates  for accreditation, as of December 27, 2017.", "The collegiate aviation schools we identified require that students  complete training that includes both classroom (ground) and flight  training. Ground school aims to provide students with the required  aeronautical knowledge and cognitive skills necessary to perform the  tasks required to become a pilot. Flight training focuses on teaching how  to manipulate the controls of and safely operate an airplane. Most schools  (89 of 147) conduct their own flight training using university-owned or \u2013 leased aircraft and university employed CFIs (in-house flight training).  The number of CFIs employed by collegiate aviation schools varies and is  one of the primary determinants of a school\u2019s enrollment capacity. The  remaining 58 schools contract out their flight training to one or more pilot  schools or allow students to complete their flight training at a pilot school  of the student\u2019s choosing.", "Schools that provide in-house flight training operate at a relatively small  number of all domestic airports, which vary greatly in size as measured  by annual passenger enplanements (see fig. 4). Approximately 69  percent of these schools operate at non-primary airports\u2014those with  fewer than 10,000 passenger enplanements a year. Flight training may  comprise a large proportion of an airport\u2019s activity, particularly at smaller  airports, according to representatives from seven schools and two airport  authorities. The remaining 28 percent of the schools that provide in-house  flight training operate at primary airports with over 10,000 passenger  enplanements a year. There are advantages to operating at small and  large airports. Representatives from three schools and five stakeholders  representing flight training providers, airports, and pilots told us that  operating out of smaller airports may be advantageous because they are  less crowded, a condition that can save waiting time for take-offs and  allows students to practice certain maneuvers that may be more difficult  to perform at larger airports. Conversely, according to representatives  from two schools, two pilot training provider associations, and one airport,  operating at larger airports can be advantageous because students can  learn to fly in the controlled environment that airline pilots will eventually  fly in."], "subsections": []}, {"section_title": "Pilot Student Enrollment and Graduation Data Are Limited", "paragraphs": ["For several reasons, there are no comprehensive data on pilot student  enrollment at collegiate aviation schools. First, because non-certificated  schools are not subject to periodic FAA inspections, FAA does not collect  any enrollment data for these schools. Second, enrollment data are  available for only some FAA-certificated schools because reporting that  data is optional for those schools during FAA\u2019s certification and inspection  process. In addition, FAA does not verify the data to determine their  accuracy. As previously noted, FAA is responsible for regulating the  safety of civil aviation in the United States. As such, according to FAA  officials, FAA requires data collection when such a requirement serves a  safety purpose, such as data required for pilot school certification and  FAA oversight. FAA officials told us that other data on collegiate aviation  schools, such as enrollment numbers, do not serve FAA\u2019s primary safety  purpose.", "The size of collegiate aviation schools appears to vary greatly. Although  voluntary, almost all FAA-certificated collegiate aviation schools  submitted enrollment data to FAA. According to FAA\u2019s data provided to us  on October 5, 2017, 92 FAA-certificated schools had reported average  yearly enrollment data for their pilot programs. Reported enrollment at  these FAA-certificated collegiate aviation schools varied greatly\u2014from 5  professional pilot students to 850. Despite this wide range, most (66) of  these schools reported that they enrolled 100 students or less in their pilot  programs. A majority (15 of 18) of representatives from selected  collegiate aviation schools noted an increase in enrollment over the past  5 years.", "Additionally,  the data on graduations from professional pilot programs are  not comprehensive. Education requires schools, including collegiate  aviation schools, to report how many students they graduate annually.  School officials classify and report completed degrees by program type to  Education using the agency\u2019s classification system. One of Education\u2019s  program codes\u2014for \u201cAirline/Commercial/Professional Pilot and Flight  Crew\u201d\u2014appears to best capture graduates from professional pilot  programs. Education\u2019s data for professional pilot degrees awarded by  collegiate aviation schools under this code totaled 1,356 in academic year  2015\u20132016. However, of the 147 collegiate aviation schools we identified  for academic year 2015\u20132016, 72 reported pilot student graduates using  the code. This might be because collegiate aviation schools may report  their pilot student graduates under other program codes, such as  \u201cAeronautics/Aviation/Aerospace  Science and Technology, General\u201d and  \u201cAviation/Airway  Management and Operations.\u201d According to an  Education official, while the agency expects schools to provide precise  reporting of graduations from each degree program, he said it is possible  that some school officials may not perceive their programs consistently  with Education\u2019s program classifications, despite specific definitions for  each program category. Because pilot student graduates could be  reported under a number of aviation-related program codes in  Education\u2019s system, the number of professional pilot graduates could be  higher.", "According to Education\u2019s data, the number of professional pilot degrees  awarded by collegiate aviation schools under the  Airline/Commercial/Professional Pilot and Flight Crew code fluctuated  from year to year between academic year 2010\u20132011 and 2015\u20132016.  Almost half of the representatives from our selected collegiate aviation  schools (8 of 18) noted increased pilot student graduations over the past  5 years. The number of these graduations could continue to increase in  the next few years since, according to representatives from seven  schools, student enrollment generally responds to industry need and the  perception of a more stable career pathway. According to one of these  representatives, graduations increase with a lag relative to the increased  industry demand and student enrollment, given the time it takes to  complete the degree program. Given the observations from school  representatives of increasing enrollment, graduations may continue to  increase as well."], "subsections": []}]}, {"section_title": "Flight Instructor Turnover, Cost of Training, and Other Factors Affect Collegiate Aviation Schools\u2019 Ability to Produce Pilots", "paragraphs": [], "subsections": [{"section_title": "Retaining Flight Instructors Is a Key Challenge for Collegiate Aviation Schools\u2019 Ability to Produce Pilots", "paragraphs": ["Selected school and other aviation industry representatives we spoke  with generally agreed that retaining and recruiting flight instructors is one  of the key challenges facing collegiate aviation schools.  Representatives from nearly all (16 of 18) of the schools identified  recruiting and retaining flight instructors as a great or moderate challenge  and a majority stated that it was their greatest challenge affecting their  ability to produce pilots (see app. I for a summary of the responses.).  According to representatives from 3 aviation industry stakeholders, in the  current environment some schools are unable to recruit and retain  enough flight instructors to train all the pilots that they otherwise have the  resources to accommodate in their pilot programs. To illustrate,  representatives from 2 schools reported an inability to accept some  qualified students because they did not have sufficient flight instructors.", "Meanwhile, representatives from 4 other schools said they have been  able to hire enough new instructors to keep up with flight instructor  attrition. In addition to presenting a management challenge, instructor  turnover may hinder training effectiveness. For example, one pilot  association representative told us that the quality of instruction tends to  be lower when students are routinely subject to new instructors since  there is little instructional continuity.", "Representatives of 6 of the collegiate aviation schools we interviewed  said they recognize that instructor turnover is unavoidable because most  pilots do not pursue flight instruction as a long-term career. Regardless,  the rate of turnover in recent years has increased, according to selected  school and other aviation industry representatives. As previously  discussed, school representatives told us that most pilots use flight  instruction as a stepping stone to accrue the required flight time to  become an airline pilot, which commands a higher salary and greater  prestige than flight instructor positions. Flight instructors generally seek  employment with an airline as soon as they are eligible, according to most  school representatives (15 of 18) and other stakeholders we spoke with.  According to two aviation industry stakeholder representatives, the career  progression of civilian-trained pilots from flight instructor to commercial  airline pilot has typically worked in this way. However, stakeholders have  stated that in recent years, airline industry growth, increasing pilot  retirements, and other factors previously discussed have caused  commercial airlines to accelerate pilot recruitment, ultimately causing  pilots to move through the instructor ranks more quickly.", "Regional airlines now hire qualified pilots as soon as they accrue the  minimum hours required by FAA, according to representatives from one  airline pilots association. According to one study, in the mid-2000s most  of the larger regional airlines set minimum flight-hour requirements for  first officer applicants of 800 to 1,000 hours, which were well above the FAA requirements at the time. Furthermore, applicants needed an even  higher number of hours to be competitive for those positions prior to that  time\u2014between 1,500 and 2,000 hours, according to representatives of a  pilots\u2019 association.", "Recruiting and retaining flight instructors with more advanced  qualifications, such as instructors qualified to train other pilots to be flight  instructors and chief instructors, can be a particular challenge for  collegiate aviation schools:", "Flight instructors qualified to train flight instructors: FAA requires flight  instructors to have a minimum 2 years of instructor experience before  they may train other pilots to obtain their CFI certificate.  Representatives from almost half (8 of 18) of collegiate aviation  schools reported challenges with retaining flight instructors long  enough for them to meet that requirement. According to some school  representatives, flight instructors typically accrue the minimum hours  required to qualify for their ATP or R-ATP within 2 years or soon  afterward. The resulting attrition of experienced flight instructors can  therefore hamper schools\u2019 ability to train enough pilots to become  flight instructors, an ability that is crucial for turning out the next  generation of instructors and pilot students.", "Chief Instructors: FAA requires certificated schools to have a chief  instructor who meets minimum regulatory qualifications, such as at  least 2,000 hours of flight time as \u201cpilot-in\u2013command.\u201d  Representatives from two schools told us that because of high  instructor turnover, few instructors meet these qualifications and the  schools find it challenging to recruit qualified chief instructors.", "Four school representatives and two other aviation stakeholders we  interviewed noted that the revised first officer requirements have helped  collegiate aviation schools retain flight instructors. As previously  discussed, these revised requirements increased the minimum number of  flight hours a pilot must have to become a first officer, so instructors  continue to instruct longer than they might have otherwise. The school  representatives noted that while they are still experiencing high flight  instructor turnover the situation would be more challenging without the  new requirements. In addition, representatives from two large collegiate  aviation schools stated that when there is a high demand for pilots, they  would not be able to recruit and retain any flight instructors in the absence  of FAA\u2019s first officer requirements.", "As shown in table 1, several of the collegiate aviation schools we  interviewed have taken some actions to address the challenge of  recruiting and retaining flight instructors.", "At least 6 regional airlines offer cadet programs, which may provide  additional incentives for graduates to remain at their alma mater as flight  instructors until they meet FAA\u2019s first officer qualification requirements,  according to school representatives we spoke to. These programs may include incentives such as bonus pay for a number of flight hours, health  benefits, or tuition reimbursement. Students who sign onto the cadet  programs typically accept a provisional employment offer and are  expected to work for the airline upon obtaining the number of hours  necessary for the ATP certificate and completing an airline\u2019s new hire  training. Representatives from two schools said that few students  participated in these programs, attributing lower participation to students  who may not want to commit to one airline.", "In addition to actions that schools can take to retain flight instructors,  school representatives suggested additional actions that would require  cooperation from airlines. Representatives from one state university told  us that the school negotiated an agreement with one airline to initially hire  its graduates as part-time pilots, allowing the pilots to continue to work  part-time as flight instructors. The school is attempting to go one step  further by negotiating agreements whereby airlines will not hire its  instructors until the school is ready to relinquish them. According to the  school\u2019s representatives, two regional airlines have recognized that  keeping instructors at the school longer could be to their benefit,  increasing the school\u2019s capacity to produce more pilots that the airlines  will then hire. Another school representative suggested that airlines might  consider loaning out their pilots to instruct for schools, but a  representative from an airline association said that airlines do not have  extra personnel to spare. Representatives of a pilot school said they are  working with airlines to change the seniority system so that pilots can get  their seniority number while they are instructors, which could reduce the  strong incentive to become an airline pilot as quickly as possible.", "School representatives and a stakeholder described additional actions  that could be taken to address this issue, including encouraging students  to obtain their CFI, encouraging retired airline pilots to instruct, and  raising the profile of the flight instructor profession as a possible career  path. Collegiate aviation schools may require their students to obtain a  CFI to graduate. Those schools that do not require a CFI may produce  fewer graduates who are qualified to instruct. A representative from one  school told us that it is now encouraging students to obtain their CFI as a  way to increase the number of potential flight instructors. Representatives  from three industry associations said the FAA should consider changing  its requirement for instructors to have 2 years instructing experience  before they may train other pilots to obtain their CFIs. In addition, in 2017  the FAA Aviation Rulemaking Advisory Committee issued a report  recommending that FAA permit completion of an FAA-approved  standardized course at FAA-certificated schools as an alternative to the  2-year experience requirement. According to FAA officials, the agency  is drafting a proposed regulatory change to allow appropriately qualified  flight instructors who have met proficiency requirements to train other  pilots to obtain a CFI."], "subsections": []}, {"section_title": "The Cost of Flight Training Is a Challenge for Some Colleges in Recruiting and Retaining Students", "paragraphs": ["There was general agreement among the majority of school  representatives we interviewed that in the last 5 years more students  have shown interest in the pilot profession by applying for and enrolling in  pilot programs at collegiate aviation schools. Representatives from eight  schools and one aviation industry stakeholder noted that students may be  interested in becoming pilots because there appears to be more pilot  career opportunities and a greater likelihood of a secure and lucrative  career path. Some airlines have created career path programs that  document the requirements to move along the career path from pilot  school to a particular regional airline and on to a particular mainline  airline. According to an association representing pilots, they have done so  to encourage more students to enter the pilot profession. Nonetheless,  representatives from nearly all schools we interviewed identified the cost  of a professional pilot degree program as a great (10 schools) or a  moderate (6 schools) challenge to recruiting and retaining students.", "While high education costs are not unique to pilot programs, these  programs can be particularly expensive, and therefore unaffordable to  many students. As previously reported, professional pilot students incur  flight training \u201clab fees\u201d in addition to general college tuition and fees, that together often exceeds $100,000. Schools\u2019 tuition and fees can vary  significantly. Factors affecting cost include whether the school is public,  private non-profit, or private for-profit, whether the school offers a 2-year  or 4-year program, and the student\u2019s resident status. According to  Education\u2019s data, annual in-state tuition at public collegiate aviation  schools we identified ranges from approximately $1,100 to $13,000.  However, annual out-of-state tuition at a public 4-year program can cost  as much as approximately $28,800. Private school tuition can cost more.  For example, one 4-year private for-profit collegiate aviation school lists  estimated annual undergraduate tuition of nearly $36,000, not including  room and board or flight training costs.", "Flight training costs also vary considerably. According to the University  Aviation Association\u2019s 2016 directory of collegiate aviation schools, a  majority of pilot programs (27 of 45) have total approximate flight training  costs of more than $50,000, with an upper cost of about $81,000. Flight  training costs may vary, depending on the school requirements, student  interest, and aptitude. Pilot program curriculum may differ and some  students may choose to take additional classes. Each additional  certificate and rating adds to the total cost of the training. Also, the time  required for students to complete their certificates and ratings varies.  Compounding the issue of cost is that the maximum federal financial aid  available to eligible students is well below the full cost of a collegiate flight  education, a factor that is also not unique to collegiate aviation students.  For academic years 2017\u20132018 and 2018\u20132019, the maximum federal  Pell Grant award is currently $5,920, and annual federal loan limits range  from $5,500 up to $12,500 depending on the student\u2019s year in school,  dependency status, and other factors. Most students need to either use  family resources or take out private loans to pay for the total cost of a pilot  program, according to representatives from four schools. Not all students  have the means to do so, as private lenders may require a co-signer with  good credit and a minimum income level. Also, representatives from two  schools said that some students who initially secure private loans for flight  training are unable or unwilling to secure loans needed later on to  complete this training, causing them to leave the pilot program. This  financing challenge may pose a significant barrier for lower income  students to enter the pilot profession.", "There are lower cost alternatives to collegiate aviation schools, though  they are not entirely equivalent. Students may obtain a flight education  and achieve the same FAA certificates and ratings from a non-collegiate  pilot school and incur flight training expenses without the added cost of  college tuition. As previously discussed, a pilot with non-collegiate flight  training could be eligible for the same employment opportunities with  regional airlines, but according to five stakeholders, airlines prefer or have  typically hired pilots with a 4-year degree. Military  service is another lower  cost alternative for flight training, as service members are compensated  for their time while they are training. However, one school representative  noted that service members may enlist in the military with the intention of  pursuing flight training, but they are not guaranteed to receive a flight  assignment.", "Representatives from two stakeholders told us it is not possible to  significantly reduce the cost of flight training because it is inherently  expensive, and four school representatives said that costs are  increasing. One approach to controlling costs for students is to make it  easier for them to transfer from public 2-year pilot programs to 4-year  programs, since public 2-year programs are typically less expensive. A  representative from a state university told us that he is developing a  degree completion program for professional pilot students from U.S. 2- year colleges. This program would enable students to complete their  bachelor\u2019s degree online with the university after they have obtained an  associate\u2019s degree in flight. Similarly, a community college has transfer  agreements with several 4-year universities, and most of its students aim  to obtain a 4-year college degree. We previously found that when  colleges provide their students with information on transfer agreements  they help students save on tuition costs by enabling students to predict which credits will transfer and reducing the likelihood that they will need to  repeat coursework. Two schools have opened satellite campuses for  their flight programs, and two other schools are considering that option,  both to expand their capacity and to provide options for students to  receive flight training while living closer to home, according to school  representatives.", "Other actions schools have taken focus on ensuring that students are  able to pay for the program and offering assistance with costs where  possible. Representatives of three schools told us that they are raising  money for departmental scholarships, and a representative of one school  said the school raises awareness about outside scholarships that may be  available to its students. A representative from a community college  said that there are scholarships available for women and minorities.  According to one industry representative, there are not enough women  and minorities in aviation, which will negatively affect the supply of future  pilots. One state university offers in-state tuition for flight students who  are residents of nearby states, with the aim of both reducing some  students\u2019 costs and increasing enrollment at the school. Representatives  of four schools told us that they emphasize communication with potential  students about costs before they enroll to improve pilot student retention.  In addition, one school we spoke with requires students to pay their flight  training fees for each certification upfront in one lump sum to ensure that  students will be able to complete the training.", "Initiatives to assist students with funding and reduce costs of flight  training have been in place for a long time with limited impact, according  to one flight training provider association. Other aviation stakeholders  noted that regional and mainline airlines could have a greater effect than  previous efforts by working together. For example, airlines could provide  scholarships and subsidize students\u2019 flight training while students are still  in school. The airlines could also work together as an industry to provide  scholarships to students. However, as one aviation association noted,  airlines are reluctant to provide scholarships to students who are likely to  fly for a competitor. Representatives from two stakeholders suggested that increases to limits on federal student loans could provide additional  resources to help students pay for flight training costs. To some extent  and even if additional actions are taken to help defray some of the  educational costs, some students may not be able to afford the cost of  collegiate aviation schools."], "subsections": []}, {"section_title": "A Variety of Other Factors May Present Challenges for Some Collegiate Aviation Schools", "paragraphs": ["Some selected school representatives also cited other challenges, though  these challenges were cited by fewer representatives, and most of the  representatives characterized these challenges as moderate or slight.", "Purchasing and maintaining aircraft. Representatives from 13 schools  said that purchasing or maintaining aircraft, or obtaining the requisite  purchase approvals can be challenging. New single-engine training  aircraft could cost more than $300,000, while a new multi-engine  aircraft can cost around $750,000. Purchasing older, used equipment  is one possible way to defray aircraft costs, but older equipment  requires more time offline for maintenance. Representatives from  two schools stated that aircraft used for training requires extensive  scheduled and unscheduled maintenance, which can interfere with  their ability to train students.", "Airport infrastructure and airspace constraints. When asked about  challenges related to airport infrastructure, representatives of six  schools identified challenges related to space constraints. Issues  included insufficient space to store and maintain aircraft, insufficient  classroom and office space, and crowded airspace that cannot  accommodate the desired flight operations to train the number of pilot  students they could with their existing resources. Few representatives  identified infrastructure availability at the airport as a great (1 school)  or moderate (3 schools) challenge, while 6 representatives reported  that infrastructure posed only a slight challenge and 7 said it was not  a challenge at all.", "VA education benefit program administration\u2014publication of specific  training hours and costs. Representatives from eight schools and two  stakeholders expressed some concern about new enforcement of VA  education benefit rules from the Post 9/11 GI Bill, as amended by the  Post-9/11 Veterans Educational Assistance Improvements Act of  2010. VA issued two policy advisories in 2015 to notify collegiate  aviation schools about statutory education benefit policies and bring  them into compliance. One policy advisory notified schools that they  must publish the specific number of training hours, as well as the  specific cost of training, for each flight course, effectively setting a  maximum number of training hours and fixed fees for each course  taken as part of a standard degree program. According to VA,  before the agency issued the policy advisories there was great public  and congressional outcry about individual pilot students receiving  hundreds of thousands of dollars from VA for their education. VA  issued the policy advisories to specify what pilot training activities are  appropriate uses of VA money, and under what circumstances. VA  funds cannot be used to pay for pilot training to proficiency because  that would entail an unlimited amount of funds to be available for an  individual\u2019s flight training.", "Representatives from five selected schools reported that this rule  made it difficult to provide efficient and effective flight training for all  pilot students. Depending on the program structure, students who  cannot finish the course in the set number of hours must either pay  out of pocket for additional training or accept a failing grade and take  the course again. VA education benefits pay for eligible beneficiaries  to repeat the course if needed. In contrast, FAA imposes a minimum  but not a maximum number of hours per certificate, because the  training goal is to achieve a certain level of proficiency for each  certificate. One school representative stated that the school allowed  its VA education benefit eligibility  to lapse because it allowed them the  freedom to train students to proficiency without maximum training  hours; however, veterans can no longer use their benefits to enroll in  that program.", "VA education benefit eligibility for contracted flight instruction.", "Representatives of two out of the five schools we interviewed that  contract out flight training and one stakeholder reported a challenge  concerning a rule described in the second VA policy advisory; the rule  places restrictions on collegiate aviation schools that contract out  flight training to a non-collegiate school. Previously, veterans  received benefits for flight training conducted at non-collegiate pilot  schools through the institution of higher learning that contracted out  the flight training. However, in its policy advisory VA stated that this  practice was not consistent with the rules of the education benefit  program because there are different rules for non-collegiate pilot  schools; VA benefits cannot be used to pay for training toward private  pilot certification at non-collegiate pilot schools. In addition, federal  law states that the VA cannot approve the enrollment of an eligible  veteran in a course if it involves contracted training that is either  otherwise barred from being approved or has not obtained approval  on its own.", "As a result, to remain eligible for VA education benefits, a collegiate  aviation school cannot include private pilot certification training  provided by a non-collegiate pilot school in its degree program since  such training is statutorily barred from approval at the contracted non- collegiate pilot school. Therefore, all students enrolled in such  programs must have already earned their private pilot certificate  before matriculating in the program, whether they use veterans\u2019  education benefits or not. According to VA, it issued its policy advisory  to clarify the statutory limitations of education benefits under the GI  Bill relating to private pilot certificate courses. Representatives from  two schools said that they are currently not eligible for VA education  benefits as a result of this rule, which representatives of one school  said has affected the school\u2019s enrollment of veterans. Furthermore,  industry stakeholders have expressed concern about greater limits on  VA education benefits for flight training based on possible future  legislative action. Meanwhile, the U.S. Department of Transportation  has announced a new \u201cForces to Flyers Initiative\u201d  with two objectives:  (1) to assess the level of interest among veterans in becoming pilots  and (2) to help veterans who are not former military pilots to receive  the training they need to become commercial pilots. Though  representatives from five schools identified this issue as a great  challenge, overall its impact is limited because not all schools have  students using veterans\u2019 benefits for their pilot programs, and a small  percentage of students overall use veterans\u2019 benefits to pay for their  education."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the DOT, Education, and VA for  comment. DOT provided technical comments, which we incorporated as  appropriate.  Education and VA declined to provide formal or technical  comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Transportation, the  Secretary of the Department of Veterans Affairs, the Secretary of the  Department of Education, 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 202-512-2834 or vonaha@gao.gov.  Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["For our review we addressed (1) what is known about collegiate aviation  schools with professional pilot degree programs in terms of location,  types of training programs available, and enrollment; and (2) challenges  that affect collegiate aviation schools\u2019 ability to produce professional pilots  and schools\u2019 response to these challenges.", "To address both objectives, we reviewed a range of reports from GAO,  Federal Aviation Administration (FAA), Congressional Research Service,  and Bureau of Labor Statistics: these reports included general  background information on a variety of related issues on pilot training,  issues such as pilot certification and training issues in the United States;  FAA regulatory training requirements for different levels of pilot  certification; types and requirements of pilot training schools; current  supply and demand, and forecasts for commercial airline pilots; and  airport infrastructure financing. Furthermore, we reviewed the Federal  Aviation Regulations related to training and certification for pilots under  Part 61 and Part 141. We also reviewed provisions of the Airline Safety  and Federal Aviation  Administration Extension Act of 2010 (Pub. L. No.  111-216) related to \u201cFlight Crewmember Screening and Qualifications\u201d  and \u201cAirline Transport Pilot Certification.\u201d", "To determine what is known about collegiate aviation schools we  analyzed several sets of data and interviewed representatives from  collegiate aviation schools and other aviation stakeholders. To identify  colleges and universities with professional pilot degree programs for fixed  wing aircraft in academic year 2015\u20132016, we compared FAA\u2019s data on  FAA-certificated pilot schools as of August 19, 2016; the Aircraft Owner  and Pilot Association\u2019s list of colleges and universities with aviation  programs as of September 19, 2016; and the University Aviation  Association\u2019s 2016 directory of collegiate aviation schools. These data  were the most applicable given the academic year reviewed. We verified  schools on all three lists by checking school websites, typically the  program\u2019s webpage or course catalog detailing degree program  requirements. For schools that were included on only one or two of the  lists, two staff members independently reviewed school information and  categorized the school as inside or outside of our scope. Disagreements  between coders were reviewed by a third staff member and resolved  through discussion. In a few cases where website information was  unclear, the staff member contacted school officials to verify that they  offered a professional pilot degree program. To determine the airport and  airport types at which schools with professional pilot degree programs  operated their flight training, we reviewed information from FAA\u2019s National  Plan of Integrated Airport Systems, the Aircraft Owner and Pilot  Association, and school websites. We also selected and interviewed  representatives of six airports of varying types (e.g., medium-hub, small- hub, and non-hub) and in different geographic areas of the country, all of  whom had collegiate aviation school tenants. Because we selected the  airports as part of a nonprobability  sample, our findings cannot be  generalized to all airports with collegiate aviation school tenants.", "To determine what is known about the institution type, college-wide tuition  and fees, and graduations at these schools, we analyzed data from  Education\u2019s Integrated Postsecondary Education Data System (IPEDS).  Of the 147 collegiate aviation schools with professional pilot degree  programs that we identified, 146 of them have an IPEDS identification  number. According to Education officials, schools with an IPEDS  identification number are likely to participate in Title IV financial aid, be  accredited, and consequently be monitored by Education through several  mechanisms including IPEDS, federal student aid compliance, and  accreditation. With respect the institution type, the categories of schools  included in our analysis included degree-granting institutions of the  following types: public, private non-profit, and private for profit with either  4-year baccalaureate or 2-year associates degrees. With respect to  tuition and fees, we reviewed both in-state and out-of-state costs schools  reported to Education. Data were not available for academic year 2014\u20132015 for two collegiate aviation schools we identified. In a few instances  schools offered lower-cost tuition and fees to local students (in-district).  For purposes of comparison, we did not include these costs in our report,  since not all schools offer in-district discounts. With respect to the  graduations data, we analyzed graduations data in academic year 2015\u2013 2016 in 10 aviation-related categories within Education\u2019s Classification of  Instructional Programs (CIP) for schools we identified as having  professional pilot degree programs. We determined that IPEDS data  were sufficiently reliable for the purposes of our reporting objectives  based on prior testing of the data from these systems and interviews with  knowledgeable officials at Education\u2019s National Center for Education  Statistics.", "To determine what is known about enrollment at collegiate aviation  schools, we analyzed enrollment and flight instructor data voluntarily  reported to FAA by some schools between October 2015 and October  2017. Through interviews with FAA officials, we have determined these  data were the most complete sources available and, while limited, were  sufficiently reliable for the purpose of illustrating the variety in the size of  professional pilot degree program enrollment. We also obtained and  analyzed FAA\u2019s pilot certificate and instrument rating data to identify, for a  number of categories, the number of new pilot certificates FAA issued  from 2012 through 2016 and the total number of pilot certificate holders  for those years. One limitation associated with the database in which  FAA stores certificate-holder information is that the agency does not have  an active process in place to discover and deactivate deceased pilots.  This lack may lead to an over count in the number of active pilot  certificates. However, airline transport pilot certificate holders must  regularly renew their medical certificates to remain active. We found that  the data were sufficiently reliable for the purposes of reporting the number  of \u201crestricted privileges\u201d airline transport pilot certificates FAA has issued  since 2013.", "To determine challenges that affect collegiate aviation schools\u2019 ability to  produce professional pilots, we reviewed documents, interviewed, and  administered a standardized question set to a non-generalizable sample  of 18 collegiate aviation schools about their pilot programs and key  challenges that affect their ability to produce professional pilots. To select  our non-generalizable sample of schools, we used information from FAA,  the Aircraft Owner and Pilot Association, school websites, and initial  interviews with aviation stakeholders. Based on the schools\u2019 geographic  location, we selected schools in each of FAA\u2019s nine airport regions. In  order to provide a variety of perspectives in our selection, we included  schools of each institution type (public, private non-profit, and private for- profit), of each program type (2-year and 4-year), some that were FAA- certificated and some that contracted out flight training. While the sample  allowed us to learn about challenges that affect these schools\u2019 ability to  produce professional pilots, it was designed to provide anecdotal  information, not findings that would be representative of all collegiate  aviation schools with professional pilot degree programs in the United  States. Our initial selection included 20 schools, of which 19 responded to  our request for interview. Of these 19, 18 schools responded to our  question set, and representatives of one additional school provided us  with general information about their program.", "In our question set, we asked schools to rate 10 factors that we identified  in preliminary interviews as potentially affecting schools\u2019 ability to recruit,  retain, and train professional pilot students\u2014thereby affecting their ability  to produce pilots. Schools rated each factor as a great challenge, a  moderate challenge, a slight challenge, or not a challenge to the ability to  recruit, retain, and train professional pilot students. After our interviews  with officials from the selected schools, we analyzed and aggregated  responses to these questions, and identified two factors that schools most  frequently cited as the most challenging to their ability to produce pilots.  In addition, 3 other factors were cited by multiple schools as a great or  moderate challenge. Schools generally cited the remaining 5 factors as a  slight or moderate challenge.", "To describe stakeholders\u2019 views of factors that affect collegiate aviation  schools\u2019 ability to produce pilots and actions that have been or could be  taken to address these factors, we reviewed and summarized schools\u2019  comments. We also reviewed documents and interviewed FAA officials,  representatives of airports and industry organizations representing  collegiate and non-collegiate pilot schools, airports, flight instructors,  pilots, regional airlines, and mainline airlines, selected to reflect a range  of perspectives about initial pilot training. (See table 4.) In addition, we  reviewed documents and interviewed Education and Department of  Veterans Affairs officials about regulations and policies related to pilot  programs\u2019 eligibility  for federal student financial aid and the use of  veterans\u2019 education benefits.", "We conducted this performance audit from September 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Gerald Dillingham, Ph.D.  (Director); Vashun Cole (Assistant Director); Jaclyn Mullen (Analyst-in- Charge); Amy Abramowitz; Danielle Ellingston; Dave Hooper; Delwen  Jones; Serena Lo; John Mingus; Natasha Oliver; Malika Rice; Michelle St.  Pierre; and Elizabeth Wood made key contributions to this report."], "subsections": []}]}], "fastfact": ["To address concerns about the airline pilot supply, we looked at one pathway for aspiring pilots: colleges and universities offering professional pilot degree programs. We identified 147 such schools.", "Nearly all of the school representatives we interviewed said that recruiting and retaining flight instructors and students was a challenge. They said that they often lost instructors to airline employment and cited student program costs as a disincentive, with training fees often exceeding $50,000 on top of tuition.", "Schools have raised instructor pay and airlines have offered tuition reimbursement, among other steps to address these challenges."]}
{"id": "GAO-18-63", "url": "https://www.gao.gov/products/GAO-18-63", "title": "VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns", "published_date": "2017-11-15T00:00:00", "released_date": "2017-11-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Nearly 40,000 providers hold privileges in VHA's 170 VAMCs. VAMCs must identify and review any concerns that arise about the clinical care their providers deliver. Depending on the findings from the review, VAMC officials may take an adverse privileging action against a provider that either limits the care a provider is allowed to deliver at the VAMC or prevents the provider from delivering care altogether.", "GAO was asked to review VHA processes for reviewing concerns about providers' clinical care. This report examines, among other things, selected VAMCs' (1) reviews of providers' clinical care after concerns are raised and VHA's oversight of these reviews, and (2) VAMCs' reporting of providers to the NPDB and SLBs and VHA's oversight of reporting. GAO visited a non-generalizable selection of five VAMCs selected for the complexity of services offered and variation in location. GAO reviewed VHA policies and files from the five selected VAMCs, and interviewed VHA, VISN, and VAMC officials. GAO also evaluated VHA's practices using federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["Department of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers\u2014physicians and dentists who are approved to independently perform specific services\u2014after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges.", "GAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that", "selected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and", "none of these nine providers had been reported to SLBs.", "GAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including for VA to direct VHA to require VAMCs to document reviews of providers' clinical care after concerns are raised, develop timeliness requirements for these reviews, and ensure proper VISN oversight of such reviews as well as timely VAMC reporting of providers to the NPDB and SLBs. VA concurred with GAO's recommendations and described steps it will take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs\u2019 (VA) Veterans Health Administration  (VHA) operates one of the largest health care systems in the nation, and  nearly 40,000 providers hold privileges at its 170 VA medical centers  (VAMC). As in all health care delivery settings, VAMCs are responsible  for ensuring that their providers deliver safe care to patients. If a concern  about a provider\u2019s clinical care arises at any point, it is the VAMC\u2019s  responsibility to review the provider\u2019s clinical care. Depending on the  nature of the concern and the findings from their review, VAMC  leadership officials may take adverse privileging actions against providers  that either limit the care they are allowed to deliver at the facility or  prevent the providers from delivering care altogether. VAMC officials are  also required to report the providers they take adverse privileging actions  against to the National Practitioner Data Bank (NPDB), which is used by  other VAMCs, non-VA hospitals, and other health care entities to obtain  information on providers with a history of substandard care and  misconduct. VAMC officials are also required to report providers to state licensing boards (SLB) when there are serious concerns about a  provider\u2019s clinical practice. The SLB can then investigate and determine if  the provider\u2019s license to practice medicine should be suspended,  restricted, or revoked.", "Congress and VA have taken recent steps to make the adverse  privileging action process more efficient and more transparent. For  example, the Department of Veterans Affairs Accountability and  Whistleblower Protection Act of 2017 shortens the appeals process  timeframe when a VAMC proposes taking an adverse privileging action.  While these actions may shorten the time period for reviewing and  rendering a decision on taking an adverse privileging action, questions  remain about the extent to which VAMC leadership officials review  providers\u2019 clinical care after concerns are raised and, when appropriate,  take adverse privileging actions against these providers and report them  to the NPDB or SLBs. For example, there have been recent whistleblower  complaints from VAMC providers to the U.S. Office of Special Counsel  alleging that VAMC leadership officials have not adequately reviewed and  addressed issues regarding providers\u2019 clinical care after concerns have  been raised. According to the whistleblowers, specific providers have  delivered care in a manner that is unsafe and inconsistent with industry  standards of care, such as performing unnecessary procedures on  veterans, without adequate reviews and actions taken by VAMC  leadership.", "Questions have also been raised about the extent to which VHA gives  performance pay\u2014a component of VA provider compensation\u2014to  providers who have had an adverse privileging action taken against them.  Performance pay is an annual lump sum payment given to providers  based on the extent to which the provider achieves specific goals in a  given fiscal year. In July 2013, we reported that providers who were the  subject of adverse actions, including adverse privileging actions, received  performance pay for the same year the actions were taken.", "You asked us to review the processes VHA has in place to review  providers\u2019 clinical care after concerns arise and the extent to which  providers receive performance pay when concerns are confirmed. In this  report, we examine  1.  VAMCs\u2019 reviews of providers\u2019 clinical care after concerns are raised  and VHA\u2019s oversight of these reviews;  2.  VAMCs\u2019 reporting of providers to the NPDB and SLBs and VHA\u2019s  oversight of these processes; and  3.  the extent to which VAMCs give performance pay to providers who  have had an adverse privileging action taken against them.", "To examine VAMCs\u2019 reviews of providers\u2019 clinical care after concerns are  raised, we reviewed VHA policies and guidance and interviewed relevant  VHA officials to obtain an understanding of VHA processes for these  reviews. In addition, we identified providers whose clinical care required  a review after concerns were raised at a non-generalizable selection of  five VAMCs from October 2013 through the time we completed our site  visits in March 2017. For these selected providers, we reviewed VAMC  documentation of their reviews. We selected the five VAMCs based on  the complexity of services offered and their geographic distribution. We  identified providers at each VAMC by reviewing documentation of each  VAMC\u2019s credentialing committee meetings from fiscal year 2014 through  fiscal year 2016. During our visits, we interviewed VAMC officials, including chiefs of staff, clinical supervisors known as service chiefs, and  other officials involved in these reviews. We asked the officials to clarify  information about the documentation we received and confirm the  completeness of the list of providers we identified. Based on the  documentation and interviews, we determined the type of reviews the  selected VAMCs conducted and the extent to which the VAMCs took  adverse privileging actions against any of the identified providers. We  assessed the extent to which the selected VAMCs adhered to VHA policy  requirements for clinical care reviews and we compared these VHA  policies and the selected VAMCs\u2019 reviews to federal internal control  standards related to monitoring and documentation. To review VHA\u2019s  oversight of VAMCs\u2019 clinical care reviews and adverse privileging actions,  we reviewed VHA policy for oversight responsibilities and requirements.  We also interviewed relevant VHA officials, as well as officials in VA\u2019s  Veterans Integrated Service Networks (VISN) responsible for each of the  five selected VAMCs, about their oversight activities. We also compared  VHA\u2019s policy and the selected VISNs\u2019 oversight activities with federal  internal control standards related to monitoring.", "To examine VAMCs\u2019 reporting of providers to the NPDB and SLBs, we  reviewed VHA\u2019s related policies and evaluated the extent to which the  selected VAMCs adhered to these policies. Specifically, we evaluated  the extent to which providers whose clinical care required a review or  resulted in the VAMC taking adverse privileging actions against them  from October 2013 through the time we completed our site visits in March  2017 were reported to the NPDB and the SLBs when appropriate. Our review of NPDB reporting is limited to NPDB adverse action reports,  which are reports of the adverse privileging actions VAMCs took against  providers and any providers who resigned or retired while under  investigation for a clinical care concern. Our review does not include VHA  reporting of providers for paid medical malpractice settlements or  judgements (tort claims). We reviewed VAMC documentation related to  its reporting of specific providers and interviewed VAMC officials,  including both clinical and administrative officials involved in these  reporting processes. To examine VHA\u2019s oversight of VAMC reporting, we  reviewed VHA policies for overseeing NPDB and SLB reporting and  interviewed relevant VHA officials as well as officials in the VISNs  responsible for each of the five selected VAMCs about VISN oversight  activities. We also compared VHA\u2019s policy for oversight responsibilities  and the selected VISNs\u2019 oversight activities with federal internal control  standards related to monitoring.", "To determine the extent to which VAMCs give performance pay to  providers who have had an adverse privileging action taken against them,  we reviewed documentation of performance pay given to providers we  identified with adverse privileging actions at the five selected VAMCs.  Specifically, for each of the providers with an adverse privileging action  who were eligible for performance pay, we reviewed documentation of  performance pay for the fiscal year in which the action was taken and for  the fiscal year prior to the action. Our performance pay analysis does not  include contract providers, because only employed providers are eligible  to receive performance pay. We also reviewed VA policy on  performance pay and interviewed relevant VHA officials, as well as VAMC  officials, about performance pay.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Identifying Concerns about Providers\u2019 Clinical Care", "paragraphs": ["As part of the credentialing and privileging process, VAMC officials are  responsible for monitoring each provider\u2019s performance on an ongoing  basis and identifying any concerns about clinical care that may warrant  further review. VAMCs can identify concerns about providers\u2019 clinical care  in a variety of ways, including the following:", "Ongoing monitoring. VHA requires VAMCs to conduct and  document ongoing monitoring of each provider\u2019s performance at least  twice a year through an ongoing professional practice evaluation.  During this evaluation, a provider\u2019s performance is evaluated against  benchmarks established by VAMC leadership that define acceptable  performance, such as documenting patient visits appropriately and  achieving specific patient outcomes.", "Peer review triggers. VHA has a separate process, called peer  review, that VAMCs may use to review adverse events. While  information collected as part of peer review is protected for quality  improvement purposes and may not be used to take action against a  provider, VAMCs can identify concerns about a provider\u2019s clinical care  based on a trend of certain peer review outcomes over a specified  period of time, referred to as triggers. VHA requires VAMCs to  establish peer review triggers. An example of a peer review trigger is  when a provider has two or more episodes of patient care within a 12- month period for which a peer determined that most experienced,  competent providers would have managed the episodes differently.", "Complaints or incident reports. Concerns about a provider\u2019s clinical  care can also be identified through complaints and incident reports.  These can come from any individual with a concern, including  patients, providers, or VAMC leadership.", "Tort claims. Filed or settled tort claims or malpractice claims can  raise a concern about a provider not identified through ongoing  monitoring or peer review."], "subsections": []}, {"section_title": "Reviewing Concerns about Providers\u2019 Clinical Care and Taking Adverse Privileging Actions", "paragraphs": ["Once a concern about a provider\u2019s clinical care is identified, VHA policy  and guidance establish processes for VAMC officials to use to review the  concern and determine whether an action should be taken against the  provider\u2019s clinical privileges. VHA policy states that if allowing a provider  under review to continue delivering patient care could result in imminent  danger to veterans, VAMC officials should remove the provider from  delivering patient care through a summary suspension of privileges.  VAMC officials have flexibility to determine the most appropriate process  to use to review a provider\u2019s clinical care depending on the specific  concerns and the situation. These processes include the following:", "Focused professional practice evaluation (FPPE) for cause. This  is a prospective review of the provider\u2019s care over a specified period  of time, during which the provider has the opportunity to demonstrate  improvement in the specific area of concern. Failure to improve could  result in further review or action.", "Retrospective review. This is a review of the provider\u2019s delivery of  patient care focused on a specific period of time in the past, a specific  area of practice, or both, based on an identified concern.", "Comprehensive review. This is a more extensive retrospective  review, generally performed by a panel of experts to ensure fairness  and objectivity. In addition to reviewing the provider\u2019s past patient  care, these reviews may also include interviews with the provider,  patients, and staff. These reviews generally result in conclusions  about whether care delivered by the provider met the standard of care  and may include recommendations about the provider\u2019s privileges.", "Once a review is completed, VAMC leadership officials and the VAMC  credentialing committee make decisions about next steps, which could  include the following: do nothing, if the review did not substantiate the concerns;  conduct further review (such as an FPPE for cause to allow the  provider an opportunity for improvement or a comprehensive review if  more information is needed); or  take an adverse privileging action, including limiting one or more  privileges (such as prescribing medication or performing a certain  procedure) or revoking all of the provider\u2019s privileges.", "If the VAMC\u2019s credentialing committee recommends an adverse  privileging action, it is the VAMC director\u2019s responsibility to weigh all  available information, including recommendations, and take an action.  After a permanent provider is notified of the director\u2019s decision, the  provider can appeal the decision to the Disciplinary Appeals Board as  part of their due process rights. The adverse privileging action is  considered final once the Disciplinary Appeals Board reaches a decision  and the Deputy Under Secretary for Health executes the Board\u2019s  decision. If a permanent provider does not make use of the offered due  process procedures within 7 days, the provider waives his or her right to  due process and the adverse privileging action is considered final."], "subsections": []}, {"section_title": "Reporting Providers to the NPDB and SLBs", "paragraphs": ["VHA policy requires VAMCs to alert certain entities if there are serious  concerns with regard to a provider\u2019s clinical performance. VHA policy  assigns reporting responsibility and authority to the VAMC director, who  generally delegates the task of reporting to other VAMC officials. VHA  makes this information available to other health care entities through two  distinct reporting processes:  NPDB. Under VHA policy, VAMC directors must report to the NPDB any  adverse privileging action the facility takes that 1) affects the clinical  privileges of a provider for a period longer than 30 days and 2) is related  to professional incompetence or professional misconduct. VHA policy  requires VAMCs to submit these NPDB adverse action reports within 15  calendar days of the date the adverse privileging action is made final\u2014 that is, when all applicable internal due process procedures have been  completed and the VAMC director has signed off on the action. VAMC  directors are also required to report to the NPDB providers who resign or  retire while under investigation or in return for the VAMC not conducting  such an investigation or proceeding. To avoid any errors in the facts of  the report, the VAMC director must notify any provider who is about to be  reported to the NPDB and give the provider an opportunity to discuss the  content of the report before it is submitted.", "SLBs. VHA policy requires VAMC directors to report providers\u2014both  current and former employees\u2014when there are serious concerns about  the providers\u2019 clinical care to any SLB where the providers hold an active  medical license. Specifically, VHA policy requires VAMCs to report  providers who so substantially failed to meet generally accepted  standards of clinical practice as to raise reasonable concern for the safety  of patients. According to VHA policy and guidance, the SLB reporting  process should be initiated as soon as it appears that a provider\u2019s  behavior or clinical practice fails to meet accepted standards. VAMC  officials are directed not to wait to report to SLBs until adverse privileging  actions are taken because an SLB conducts its own investigation of the  provider to determine whether licensure action is warranted. This  reporting process comprises five stages as established in VHA policy,  and VHA policy states that the process should be completed in around  100 days (see figure 1)."], "subsections": []}, {"section_title": "Performance Pay", "paragraphs": ["Performance pay\u2014a component of VA provider compensation\u2014is an  annual lump sum payment based on the extent to which an individual  provider achieves specific goals. The goals may vary for providers across  VA, at the same VAMC, or within a particular specialty. VA policy  establishes minimum performance pay eligibility criteria, including being  employed by VA from July 1 through September 30 of the fiscal year  being reviewed."], "subsections": []}]}, {"section_title": "Selected VAMCs\u2019 Reviews of Providers\u2019 Clinical Care Are Not Always Documented or Timely, and VHA Does Not Adequately Oversee These Reviews", "paragraphs": ["Documentation frequently lacking. We found that the five selected  VAMCs collectively required reviews of 148 providers\u2019 clinical care after  concerns were raised from October 2013 through March 2017, but VAMC  officials were unable to provide documentation that almost half of these  reviews were conducted. We found that all five VAMCs lacked at least  some documentation of the reviews they told us they conducted, and in  some cases the required reviews were not conducted at all. We also  found VHA does not adequately oversee these reviews, as discussed  later in this report.", "FPPEs for cause. FPPEs for cause accounted for most of the  missing documentation of clinical care reviews, despite VHA policy  requiring VAMCs to document FPPEs for cause in the providers\u2019 files.  Specifically, of the 112 providers for whom the selected VAMCs  required FPPEs for cause from October 2013 through March 2017,  the VAMCs were unable to provide documentation of the FPPEs for  nearly a quarter (26) of the providers. Additionally, VAMC officials  confirmed that FPPEs for cause that were required for another 21  providers were never conducted.", "Other reviews. The selected VAMCs were also unable to provide  documentation of some retrospective reviews. Specifically, of the 27  providers for whom the selected VAMCs conducted a retrospective  review, 8 were missing documentation. While VHA guidance  recommends that VAMCs document these reviews, VHA policy does  not require that VAMCs document retrospective or comprehensive  reviews. VHA officials told us that they expected VAMCs to document  these types of reviews so that the information could be used to  support adverse privileging actions, if necessary. Without clearly  stated documentation requirements in VHA policy, VAMC officials  inconsistently document their results, preventing VAMC directors and  VISNs from properly evaluating the effectiveness of its retrospective  and comprehensive reviews, which are used to, among other things,  ensure patient safety. Additionally, we found that key officials from two  VAMCs were not aware of the VHA guidance and that 5 of the 8  missing retrospective reviews were from these two VAMCs.", "We also found that one VAMC was missing documentation of clinical  care reviews for 12 providers who met the VAMC\u2019s peer review  trigger. In the absence of this documentation, we were unable to  identify the type of reviews that were missing for these 12 providers.", "The selected VAMCs\u2019 failure to document reviews of providers\u2019 clinical  care after concerns were raised is inconsistent with federal internal  control standards for monitoring and documentation, which state that  management should conduct and document separate evaluations, when  necessary. In the absence of VAMC documentation of such separate  evaluations of providers, VAMC leadership officials lack key information  needed to make decisions about whether providers\u2019 privileges are  appropriate, and they also lack reasonable assurance that appropriate  reviews are conducted.", "Reviews not always timely. We found that the five selected VAMCs\u2019  reviews of providers\u2019 clinical care were not always conducted in a timely  manner after concerns were raised. Specifically, of the 148 providers, the  VAMCs\u2019 initiation of reviews of 16 providers\u2019 clinical care was delayed by  more than 3 months, and in some cases for multiple years, after the  concern was raised. At one VAMC, service chiefs were not instructed to  conduct reviews of 14 providers until 4 to 13 months after these providers  met the VAMC\u2019s peer review trigger. Before the service chiefs were  notified of the concerns, 3 of these providers had at least one additional  concerning episode of care\u2014that peer reviewers judged would have been  handled differently by most experienced providers\u2014identified through the  peer review process. As pointed out in VHA guidance, earlier  intervention could prevent additional patients from receiving substandard  care. Officials from another VAMC did not conduct retrospective reviews  on 2 providers until we requested documentation of the reviews,  approximately 3 and a half years after the credentialing committee had  initially requested a review.", "While VHA officials told us that clinical care reviews should be conducted  as expeditiously as reasonably possible, VHA policy does not specify a  timeliness requirement. Allowing more time to elapse before a clinical  care review is initiated weakens the intended purpose behind clinical care  reviews and further increases risk to patient safety. Federal internal  control standards for monitoring state that management should evaluate  issues and remediate identified deficiencies in a timely manner. A  clinical care concern could represent a potential deficiency in providing  medical care, and as a result, VHA increases its risk further without  establishing a policy that sets timeframes for conducting clinical care  reviews.", "VHA oversight is inadequate. We also found that VHA does not  adequately oversee VAMC reviews of providers\u2019 clinical care after  concerns have been raised, including ensuring that these reviews are  completed and documented in a timely manner. Under VHA policy, VISNs  are responsible for overseeing the credentialing and privileging processes  at their respective VAMCs. While reviews of providers\u2019 clinical care after  concerns are raised are a component of credentialing and privileging, we  found that the VISNs with responsibility for overseeing the selected  VAMCs through routine audits do not include these reviews in their  audits. While the standardized tool VHA requires the VISNs to use for  these audits instructs the VISNs to identify and review providers who  were on an FPPE for cause, none of the VISN officials we spoke with  described any routine oversight of FPPEs or any other reviews of  identified clinical care concerns. This may be in part because some  VISN officials are not using VHA\u2019s standardized audit tool as required.  Officials from one VISN said they had developed their own audit tool and  officials from another VISN said that they were not conducting the audits  due to multiple instances of turnover in a key position at the VISN.  Further, VHA\u2019s standardized audit tool does not direct the VISN to  oversee any other types of reviews of clinical care concerns, such as  retrospective or comprehensive reviews. The tool also does not require  VISN officials to look at documentation of the FPPEs for cause; instead, it  calls for reviewing credentialing committee meeting minutes. Without  reviewing documentation, VISN officials would be unable to identify the  incomplete documentation that we identified in our review. Both VHA and  VISN officials described instances of assisting VAMC officials with  reviews of providers\u2019 clinical care after concerns had been raised, but  VHA and VISN officials told us that their involvement in these reviews is  typically consultative and not routine. (For example, the VISN may assist  by identifying providers outside of the VAMC to conduct the review.) As a  result, VHA and the VISNs are not conducting routine oversight to ensure  that VAMC reviews of providers\u2019 clinical care after concerns are raised  are conducted appropriately, including adequately ensuring that the  reviews are completed and documented in a timely manner, in  accordance with VHA policy.", "The lack of routine VHA oversight, through the VISNs, of VAMC reviews  of providers\u2019 clinical care after concerns are raised is inconsistent with  federal internal control standards for monitoring, which state that  management should establish and operate monitoring activities. In the  absence of routine monitoring of VAMCs\u2019 evaluations of providers after  concerns have been raised, VHA lacks reasonable assurance that  VAMCs adequately review all identified concerns about providers\u2019 clinical  care and take appropriate privileging actions to ensure that VA is  providing safe, high quality care for veterans."], "subsections": []}, {"section_title": "Selected VAMCs Did Not Always Report Providers to the NPDB and SLBs in Accordance with VHA Policy, and VHA Does Not Adequately Oversee This Reporting", "paragraphs": ["NPDB and SLB reporting not completed. We found that the five  selected VAMCs did not report the majority of providers who should have  been reported to the NPDB or SLBs in accordance with VHA policy. Our  analysis shows that from October 2013 through March 2017, of the 148  providers whose clinical care required a review, the VAMCs took adverse  privileging actions against 5 providers, and another 4 providers resigned  or retired while under review but before an adverse privileging action  could be taken. However, at the time of our review, we found that the five  selected VAMCs had only reported 1 of these 9 providers to the NPDB  and none of these providers to the SLBs. Furthermore, the 1 provider  who was reported to the NPDB for an adverse privileging action was  reported 136 days after all internal VA appeals were complete, far beyond  the 15 day reporting requirement.", "In addition to these nine providers, one of the selected VAMCs terminated  the services of four contract providers based on deficiencies in the  providers\u2019 clinical performance, effectively revoking their clinical  privileges. For example, the VAMC documented that one contractor\u2019s  services were terminated for cause related to patient abuse after only 2  weeks of work at the VAMC. A VAMC leadership official told us there was  no further documentation of whether reporting was considered or whether  any comprehensive review was conducted, despite the fact that the  VAMC credentialing committee recommended both. While VHA policy  identifies the requirements, steps, and limited fair hearing process for  reporting contract providers, these required steps were not followed, and  none of these providers were reported to the NPDB or SLB.", "As a result of our audit work, in August 2017, one of the VAMCs reported  to the NPDB three of the providers who resigned or retired while under  investigation but before an adverse privileging action could be taken.", "These reports were completed between 11 months and over 3 and a half  years after the providers resigned or retired. VAMC officials could not  confirm that they sent the required copies of the NPDB reports to the  appropriate SLBs.", "The five selected VAMCs did report two providers to their respective  SLBs for reasons other than adverse privileging actions. In accordance  with VHA policy, these SLB reports were made after VAMC officials  determined that the providers\u2019 behavior or clinical practice so substantially  failed to meet generally accepted standards of clinical practice as to raise  reasonable concern for the safety of patients\u2014the standard for SLB  reporting. One of these providers could not have an adverse privileging  action taken against them because VAMC officials unintentionally allowed  the provider\u2019s privileges to expire during a comprehensive review of the  provider\u2019s care. The other provider reported to the SLBs was considered  for an adverse privileging action, but VAMC officials suspended the  provider instead. The provider demonstrated improvement after the  suspension.", "SLB reporting not always timely. While two of the selected VAMCs had  each reported a provider, we found that in these cases the SLB reporting  process took significantly longer than the 100 day timeframe suggested in  VHA policy. Specifically, it took over 500 days for each of the two  completed reports to pass initial and comprehensive review at the VAMC,  receive concurrence from the VISN, and be submitted to the SLB. For  example, one of the two providers self-reported to the SLB the concerning  episode of care at the VAMC. However, before the VAMC submitted its  SLB report 328 days later, the SLB had completed its investigation of the  provider\u2019s self-report and put in place an agreement that placed  restrictions and requirements on the provider\u2019s medical license.  Subsequently, the provider successfully met the requirements of the  agreement and had all restrictions on the license removed. Officials at  two VAMCs told us the SLB reporting is more tedious or cumbersome  than the NPDB reporting process, making it difficult to complete in a  timely manner. One VAMC official commented that while completing the  process in less than a year seems reasonable, the typical timeframe for  submitting a SLB report is at least 2 years.", "At the five selected VAMCs, we found that providers were not reported to  the NPDB and relevant SLBs as required because officials were generally  not familiar with or misinterpreted related VHA policies. VHA officials  commented that adverse privileging actions and clinical care concerns  rising to the level of reporting are infrequent, with officials at two VISNs  estimating that only a few occur across the facilities within their network  each year. Staff at three VAMCs commented that there has been turnover  in positions that have been delegated tasks related to reporting and one  VAMC official told us that turnover in these positions is a barrier to timely  reporting. For example, at one facility, we found that officials failed to report six providers to  the NPDB because the officials were unaware that they had been  delegated responsibility for NPDB reporting.", "Officials at two of the selected VAMCs told us that VHA cannot report  contract providers to the NPDB. This assertion is inconsistent with  VHA policy.", "Officials at two of the selected VAMCs were waiting to start the SLB  reporting process for providers until after all appeals had been  exhausted. This approach is inconsistent with VHA policy, which  states that the process should start within 7 days of when the  reporting standard is met. For example, for one provider who was  reported, VAMC officials unnecessarily waited 7 months for the  completion of the appeals process before they resumed the reporting  process, which ultimately took 547 days.", "Officials at one VAMC did not report a provider to the NPDB or SLB  following an adverse privileging action because the SLB had found  out about the issue independently. This is inconsistent with VHA  policy for NPDB and SLB reporting, and the SLBs in other states  where the provider held a license were not alerted of concerns about  the provider\u2019s clinical practice.", "VHA oversight is inadequate. We also found that VHA and the VISNs  do not adequately oversee NPDB and SLB reporting and they cannot  ensure that VAMCs are reporting providers when required to do so by  VHA policy. While the VISNs are responsible for overseeing the  credentialing and privileging at their respective VAMCs under VHA policy,  VHA policy does not require the VISNs to oversee whether VAMCs are  reporting providers to the NPDB or SLB when warranted. As a result,  VISN officials were unaware of situations in which VAMC directors failed  to report providers to the NPDB, as evidenced by our review. In the case  of reporting processes for SLBs, VISN officials told us that they review the  evidence files to ensure, among other things, that the files are in  compliance with privacy laws. However, officials told us that the VISNs do  not oversee the reporting process to ensure that VAMC directors are  reporting all providers to the SLB who should be reported. Additionally,  VHA officials told us that they are not aware of the number of cases that  have been initiated for SLB reporting.", "Further, by failing to report providers as required, VHA facilitates  providers who provide substandard care obtaining privileges at another  VAMC or a hospital outside of VA\u2019s health care system without an  indication on their record that an adverse privileging action was taken  against them or that they resigned or retired while under investigation. For  example, we found that  two of the four contract providers whose privileges were revoked and  were not reported to the NPDB or SLBs by one VAMC continue to be  able to provide care to veterans outside of that VAMC. Specifically,  one provider whose services were terminated related to patient abuse  subsequently held privileges at another VAMC, while the other  provider belongs to a network of providers that provides care for  veterans in the community.", "Seven of the 12 providers who were not reported to the NPDB or  SLBs after their privileges were revoked\u2014through adverse privileging  actions or the termination of services on a contract\u2014or who resigned  or retired while under investigation have current Medicare enrollment  records, indicating that they are likely practicing outside of VA and  may still be receiving federal dollars by billing for services provided to  Medicare beneficiaries.", "We also identified one case where a VAMC director did not report a  provider to the NPDB or SLB after an agreement was reached that the  provider would resign, though the VAMC credentialing committee  recommended the provider\u2019s privileges be revoked. We found that the  provider\u2019s privileges were also revoked from a non-VA hospital in the  same city for the same reason 2 years later. The director\u2019s decision  not to report the provider as required left patients in that community  vulnerable to adverse outcomes because problems with the provider\u2019s  performance were not disclosed. There was no documentation of the  reasons why the VAMC director did not report the provider to the  NPDB or SLBs.", "This lack of routine oversight from VHA through the VISNs of VAMCs\u2019  reporting of providers to the NPDB and SLBs is inconsistent with federal  internal control standards for monitoring. The standards state that  management should establish and operate monitoring activities to monitor  the internal control system and appropriately remediate deficiencies on a  timely basis. Without routine monitoring of the reporting process, VHA  lacks reasonable assurance that all providers who should be reported to  the NPDB and SLBs are reported."], "subsections": []}, {"section_title": "At Selected VAMCs, Providers with Adverse Privileging Actions Were Ineligible for Performance Pay the Year the Actions Were Taken", "paragraphs": ["None of the five providers who had an adverse privileging action taken  against them in the period we reviewed received performance pay for the  fiscal year the action was taken because they were ineligible, per VA  policy. This is because VA policy requires providers to be employed  through the end of the fiscal year to be eligible for performance pay, and  none of the five providers we reviewed were still employed by the VAMCs  at the end of the fiscal year in which the actions were taken.", "All five of the adverse privileging actions resulted from concerns about the  providers\u2019 clinical care in previous fiscal years. Among the five providers,  two providers received performance pay in the fiscal year before their  privileges were revoked, and three providers did not. For example, one  provider\u2019s privileges were revoked in 2015 due to concerns raised in 2014  regarding the provider\u2019s failure to complete necessary documentation of  patient care in a timely manner. This provider did not receive credit for the  performance pay goal directly related to timely completion of  documentation, and ultimately the provider received half of the maximum  amount of performance pay for fiscal year 2014. In the case of another  provider who did not receive any performance pay for the fiscal year  before the adverse privileging action was taken, VAMC officials noted that  the provider had been removed from practice for a portion of the fiscal  year while they were reviewing the clinical care concern and thus was  unable to meet performance pay goals."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["VHA is responsible for ensuring that providers at its VAMCs deliver safe  care to veterans and that concerns that may arise about providers\u2019 clinical  care are reviewed and addressed at VHA\u2019s 170 VAMCs. However, our  work shows that at our five selected VAMCs, reviews of concerns about  providers\u2019 clinical care were not always documented or conducted in a  timely manner and VAMCs had not reported the majority of providers they  should have reported to the NPDB or SLBs. This is concerning for several  reasons. First, without documentation of the reviews of these concerns  about providers\u2019 clinical care, VAMC leadership officials may not have the  information they need to make decisions about whether a provider\u2019s  privileges at the VAMC are appropriate. Second, if VAMCs do not  document that they have reviewed provider\u2019s clinical care after concerns  have been raised, VHA lacks reasonable assurance that the VAMCs are  adequately addressing such concerns or that VAMCs are limiting or  revoking providers\u2019 privileges when necessary. Third, if these reviews are  not conducted in a timely manner and providers continue to deliver  potentially substandard care, VHA may be increasing the risk that  veterans will receive unsafe care at VAMCs. Finally, VAMCs\u2019 failure to  report providers to the NPDB and SLBs, as required under VHA policy,  makes it possible for providers to obtain privileges at other VAMCs or  non-VA health care entities without disclosing the problems with their past  performance. In effect, this can help shield the providers from  professional accountability outside of VA\u2019s health care system.", "Further, VHA\u2019s inadequate oversight of these processes calls into  question the extent to which VAMCs are held accountable for ensuring  that veterans receive safe, high quality care. As our review shows, the  VISNs responsible for overseeing the five selected VAMCs do not  routinely oversee VAMC reviews of providers\u2019 clinical care after concerns  are raised to ensure that these reviews are completed in accordance with  VHA policies; nor do the VISNs oversee the VAMCs to ensure that all  providers that should be reported are reported to the NPDB and SLBs.  Until VHA strengthens its oversight of these processes, veterans may be  at increased risk of receiving unsafe care through the VA health care  system."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to VA:  The Under Secretary for Health should specify in VHA policy that reviews  of providers\u2019 clinical care after concerns have been raised should be  documented, including retrospective and comprehensive reviews.  (Recommendation 1)", "The Under Secretary for Health should specify in VHA policy a timeliness  requirement for initiating reviews of providers\u2019 clinical care after a concern  has been raised. (Recommendation 2)", "The Under Secretary for Health should require VISN officials to oversee  VAMC reviews of providers\u2019 clinical care after concerns have been raised,  including retrospective and comprehensive reviews, and ensure that  VISN officials are conducting such oversight with the required  standardized audit tool. This oversight should include reviewing  documentation in order to ensure that these reviews are documented  appropriately and conducted in a timely manner. (Recommendation 3)", "The Under Secretary for Health should require VISN officials to establish  a process for overseeing VAMCs to ensure that they are reporting  providers to the NPDB and SLBs, and are reporting in a timely manner.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for comment. In its written  comments, which are reproduced in Appendix I, VA agreed with our  conclusions and concurred with our recommendations. In its comments,  VA stated that VHA plans to revise existing policy to require  documentation of reviews of providers\u2019 clinical care after concerns have  been raised and to establish expected timeframes for completing such  reviews. VA estimates that it will complete these actions by September  2018. VA also stated that VHA will update the standardized audit tool  used by the VISNs so that it directs them to oversee reviews of providers\u2019  clinical care after concerns have been raised and to ensure timely  reporting to the NPDB and SLBs. According to VA, the revised tool will  also facilitate aggregate reporting by VISNs to identify trends and issues.  VA estimates that it will complete these actions by October 2018.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Veterans Affairs, and the  Under Secretary for Health. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@gao.gov or Randall B.  Williamson at (202) 512-7114 or williamsonr@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs can be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia A. Mann (Assistant  Director), Kaitlin M. McConnell (Analyst-in-Charge), and Summar C.  Corley made major contributions to this report. Also contributing were  Krister Friday, Jacquelyn Hamilton, Vikki Porter, and Brienne Tierney."], "subsections": []}]}], "fastfact": ["The Department of Veterans Affairs requires its medical centers to review a doctor\u2019s care if quality or safety concerns arise. If VA medical center officials decide a doctor should no longer provide care to veterans, they are required to inform hospitals and other health care entities by reporting to a national database and to the states where the doctor is licensed.", "However, at the 5 VA medical centers we reviewed, we found that these reviews were not always timely. We also found that VA officials did not report 8 of the 9 doctors who should have been reported.", "We recommended VA improve oversight of clinical care reviews and reporting."]}
{"id": "GAO-19-81", "url": "https://www.gao.gov/products/GAO-19-81", "title": "Tax Administration: Opportunities Exist to Improve IRS's Management of International Tax Dispute Resolution", "published_date": "2019-03-13T00:00:00", "released_date": "2019-04-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["With increasing globalization, multinational corporations can take advantage of differences in countries' corporate tax systems to reduce their overall tax liabilities. However, globalization can also lead to disputes about the correct tax liability for U.S. MNCs in different countries. GAO was asked to review how the United States administers the process for resolving international tax disputes when a U.S. MNC disagrees with a tax determination of another country.", "This report (1) describes IRS's dispute resolution process, (2) assesses the information IRS provides to taxpayers about the process, and (3) assesses the extent to which IRS evaluates its management of dispute resolutions cases. GAO reviewed IRS guidance on the MAP process, interviewed IRS officials and compared IRS actions to federal standards for internal control and GAO's criteria for a good tax system. GAO analyzed MAP data for cases closed from 2013 to 2017 as well as a stratified random sample of MAP case files."]}, {"section_title": "What GAO Found", "paragraphs": ["A U.S. multinational corporation (MNC) operating in a foreign country is subject to taxes in that country as well as in the United States. The U.S. MNC's tax return may be audited by the United States or the other country. Such audits can result in an adjustment to the U.S. MNC's taxable income that may result in income being subject to tax in both countries. If the U.S. MNC disagrees with the adjustment, it can ask the United States Competent Authority (USCA) within the Internal Revenue Service (IRS) to help resolve the dispute through the mutual agreement procedure (MAP). Generally, disputes are resolved by one country withdrawing some or all of the adjustment and the other country providing other relief to the MNC to address double taxation of income. The following figure provides an overview of the dispute resolution process.", "Dispute resolution assistance is available to U.S.MNCs that need it and USCA provides comprehensive technical information on its website on how to request assistance. However, because USCA's website does not provide an overview or plain language guidance on the MAP process U.S. MNCs may not have clear information on how to navigate the process.", "USCA has taken a number of steps to ensure efficient management of MAP cases including assigning staff with requisite background and skills to cases according to their complexity and organizing staff into teams that specialize by countries. However, GAO identified a number of weaknesses that impact USCA's management of MAP cases. These include the following", "key data are not tracked and existing data are not used to assess the effective allocation of resources for the program,", "few controls have been established to monitor and ensure the reliability of the data in the case management database, and", "lack of trend analyses on dispute case characteristics that could help inform management decision making and the more efficient operation of the program."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making a total of eight recommendations, including that IRS improve the clarity of information on the dispute resolution process, track and use dispute resolution case data, ensure the quality of case data, and analyze trends in dispute case characteristics. IRS agreed with GAO's recommendations and said it will provide detailed corrective action plans."]}], "report": [{"section_title": "Letter", "paragraphs": ["As countries have become more globally interconnected, multinational  corporations (MNC) are relying more on tax planning strategies that take  advantage of differences among countries\u2019 corporate tax systems to  reduce their overall tax liabilities. These strategies have led to concerns  about the erosion of countries\u2019 corporate tax bases through the shifting of  profits from one jurisdiction to another. In addition, globalization can  complicate tax administration by resulting in disputes about the correct  tax liability in different countries. U.S. MNC activity can result in audits  conducted by the countries in which they are operating where U.S. MNCs  disagree with the adjustment made to their taxable income.", "In 2015, the Organisation for Economic Co-operation and Development  (OECD) released a report with 15 action items addressing a variety of  issues related to tax base erosion and profit shifting. In 2017, we reported  on two of these actions: (1) revisions of the transfer pricing guidelines and  new transfer pricing documentation; and (2) country-by-country  reporting. The OECD report also included an action item addressing  ways to improve mechanisms for resolving international tax disputes.", "These disputed adjustments can potentially lead to double taxation of a  U.S. MNC\u2019s income. These disputes can be resolved through the mutual  agreement procedure (MAP). MAP is administered through the Advance  Pricing and Mutual Agreement Program (APMA) in the office of the U.S.  Competent Authority (USCA) within the Internal Revenue Service (IRS).  The designated USCA is the Deputy Commissioner of the Large Business  and International Division of IRS.", "You asked us to review how the United States is administering the  process for resolving international tax disputes. In this report, we (1)  describe the MAP dispute resolution process for U.S. MNCs, (2) assess  the information IRS provides to taxpayers about the MAP process, and  (3) assess to what extent IRS evaluates management of dispute  resolution cases.", "To describe the dispute resolution process, we reviewed documents and  interviewed officials in IRS\u2019s USCA, the office responsible for  administering the MAP process. To assess the information IRS provides  taxpayers, we reviewed USCA guidance on how the process works and  interviewed USCA officials on how they communicate with taxpayers. To  assess how IRS evaluates its administration of dispute resolution cases,  we compared USCA\u2019s processes with standards for internal controls and  characteristics of a good tax system: efficiency, equity, and  administrability. Specifically, we interviewed USCA officials on their  process for ensuring efficient management. We also reviewed MAP case  data, including analyzing both the full inventory management database of  tracked dispute cases as well as a generalizable random sample of  dispute resolution case files. For more information on our methodology,  see appendix I.", "We conducted this performance audit from April 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["U.S. taxpayers who earn income abroad may be subject to U.S. taxes on  that income. Firms incorporated in the United States can earn income  from their own foreign activities or through their ownership of foreign  subsidiaries. In such cases, income is subject to tax in both the country  where it was earned and in the United States. In this report, we focus on  U.S. corporations with operations in foreign countries.", "Countries have generally adopted one of two alternative approaches to  taxing corporations\u2019 foreign income. Prior to the enactment of Public Law  115-97\u2014commonly referred to by the President and many administrative  documents as the Tax Cuts and Jobs Act of 2017 (TCJA)\u2014the U.S.  government taxed U.S. corporations largely on a worldwide basis,  meaning that the United States taxed both the domestic and foreign  earned income of corporations. Most other countries, including most  OECD member countries, use a largely territorial approach that taxes  income earned within their borders, and exempts certain foreign-earned  income of their resident corporations from taxation.", "However, under both a worldwide and a territorial system, income earned  by foreign entities from operations within a country is taxed by that  country. As such, the corporation or its subsidiary must file a tax return in  that country, and the country\u2019s tax authority can audit the tax return and  adjust taxable income and taxes due.", "Countries have adopted measures to limit the potential for double  taxation, which occurs when two or more countries levy taxes on the  same income due to differences in the tax jurisdictions and tax systems.  To avoid double taxation, countries\u2014including the United States\u2014that tax  on a worldwide basis provide a credit for foreign taxes paid that reduces  the MNC\u2019s domestic tax liability. In addition, countries maintain tax  treaties with each other that cover a wide range of tax issues but have  two primary purposes: (1) avoiding double taxation, and (2) preventing tax  evasion.", "Despite these efforts to limit disputes, a U.S. MNC may disagree with an  adjustment made to its taxable income. In such cases, an MNC can go  directly to the country\u2019s tax authority to try to resolve the dispute.  According to tax experts we spoke with, if, however, a U.S. MNC views  this process as unlikely to be successful or if it was unsuccessful and  believes the adjustment would result in double taxation, the corporation  can ask USCA for assistance in resolving the dispute.", "In the United States, the designated USCA is the commissioner of the  Large Business and International Division of the IRS. The USCA office is  made up of two groups: the Advance Pricing and Mutual Agreement  Program (APMA) and the Treaty Assistance and Interpretation Team.  According to USCA officials, most disputes involving U.S. MNCs\u2014the  focus of this report\u2014are resolved through APMA.", "TJCA significantly changed the way in which the United States taxes  MNC\u2019s income but some experts have pointed out that the law is unlikely  to end profit shifting. The Congressional Budget Office estimated in April  2018 that TCJA would reduce profit shifting by about $65 billion per year  out of an estimated $300 billion of profit shifting per year prior to the act.  For U.S. corporations earning income directly through foreign  subsidiaries, the act moved the United States from a system that  generally taxed worldwide income and provided a credit for taxes paid  abroad to a system that generally does not tax foreign-sourced income.  However, the new \u2018territorial\u2019 system created by the act included a  number of provisions designed to protect the United States\u2019 corporate tax  base by taxing some foreign income. It included (1) a lower worldwide tax  on global intangible low-taxed income, and (2) a corresponding tax on  intangible income earned abroad based on assets in the United States  (foreign-derived intangible income). The act also added a corporate tax  base erosion and antiabuse tax. It is not clear how these provisions will  affect corporations\u2019 allocation of profits and business activity."], "subsections": []}, {"section_title": "MAP Has Multiple Stages and Potential Resolution Paths", "paragraphs": ["The process of resolving a dispute through MAP usually begins when a  U.S. MNC requests assistance from USCA to resolve disputes over an  adjustment in either its foreign-filed or its U.S. tax return. According to  IRS, the number of active MAP cases, as of October 2017, was 686 and  covered $26 billion of income subject to potential double taxation. It  should be noted that a single U.S. taxpayer can be involved in multiple  MAP cases because disputes are resolved bi-laterally. For example, if a  U.S. MNC had a dispute involving the allocation of overhead costs across multiple subsidiaries in different countries, then there would be separate  dispute cases for each country involved. According to IRS data, the  number of MAP cases filed each year has been growing, more than  doubling in 5 years from 100 in 2010 to 286 in 2014.", "As noted earlier, when a U.S. MNC disputes a foreign tax authority\u2019s  adjustment to a tax return, the U.S. MNC can try to resolve the issue  through the appeals process within the taxing jurisdiction. However,  according to tax experts we spoke with, if the U.S. MNC is unsuccessful  or if the U.S. MNC believes the local appeal will be less successful than  the MAP process, it can request assistance from USCA.", "Once a taxpayer has requested assistance through MAP, USCA conducts  an initial review to determine if it will accept the request. For example,  USCA analysts would ensure that the request involves potential double  taxation and that the foreign country was a treaty partner.", "If USCA accepts the MAP request for assistance, it reviews the technical  facts of the dispute and prepares its position prior to negotiating on a  resolution with the foreign competent authority. When IRS, rather than the  foreign tax authority, initiates the adjustment, USCA will discuss the facts  of the case with the IRS examiner who proposed the adjustment, but  determines on its own how much of the adjustment is justified. In the case  of foreign-initiated adjustments, USCA will contact the foreign competent  authority while developing its position to provide updates and obtain any  needed information. According to USCA officials, based on its review, the  USCA determines whether it considers the adjustment valid and the  amount of the adjustment that should be withdrawn by the initiating tax  authority, and what amount of relief USCA may provide. USCA can also  unilaterally decide to fully withdraw the IRS adjustment or provide full  correlative relief for a foreign-initiated adjustment that USCA considers  valid.", "USCA resolves disputes brought to it by MNCs according to MAP  specified in the tax treaties. Under the treaties, international tax disputes  that may result in double taxation can be resolved in the following five  ways:", "The country that initiated the adjustment to taxable income can fully  withdraw the adjustment, leaving the taxpayer\u2019s reportable taxable  income unchanged.", "USCA can provide correlative relief to the MNC. This relief usually  takes the form of a corresponding adjustment, which relieves double  taxation caused by the other country\u2019s adjustment.", "USCA and the foreign country can agree to a combination of  withdrawing some of the adjustment to taxable income and providing  relief for the remaining adjustment to provide full relief of double  taxation to the taxpayer.", "USCA and the foreign country can agree on some combination of  withdrawal and relief that results in partial relief to the taxpayer.", "No relief from adjustment.", "Figure 1 provides an overview of the basic process of a MAP request for  assistance. Appendix III provides illustrative examples of dispute  resolution cases and resolutions.", "Once USCA has determined its position, it begins negotiating with the  foreign competent authority to resolve the dispute. These cases can take  several years to resolve with some taking much longer than the average,  particularly if there is a fundamental disagreement. For example, USCA\u2019s  APMA inventory data from 2013 to 2017 indicate the average processing  time was around 2 years, but cases ranged from as little as a few months  to 5 years to resolve, with a few cases taking even longer. In addition, the  inventory data show that disputes are generally over taxable income from  prior years. For example, a MAP case resolved in 2017 could have been  filed in 2008 for a dispute over 2005 taxable income. However, cases  may be shorter when the tax treaties include provisions for binding  arbitration. The United States has treaties with four counties that include  provisions for binding arbitration. If the two countries are unable to  resolve the dispute within 2 years, the taxpayer can request that the case  go to arbitration for a decision.", "Throughout the entire process, the taxpayer has a right to withdraw the  request and accept the tax authority\u2019s adjustment which may entail  double taxation. According to tax experts that we interviewed, if the  adjustment is small, a taxpayer may prefer to accept the double taxation  rather than incur the cost of going through the MAP process. These costs  can include direct costs of retaining tax advisors as well as the indirect  costs of listing the amount of funds that are in dispute on their financial  statement as an unresolved tax issue. The taxpayer can also refuse the  negotiated or arbitrated resolution and appeal the case to the IRS office  of appeals or foreign tax authority."], "subsections": [{"section_title": "Available Information about MAP is Limited and Highly Technical USCA Provides Information Needed for Requesting MAP Assistance, but the Information has Limited Accessibility", "paragraphs": ["USCA provides information about the MAP process through an IRS web  page on competent authority assistance. The webpage includes contact  information for USCA offices and a link to a document that describes the  process for requesting assistance. The document is in the form of a  Revenue Procedure\u2014an official statement of a procedure based on the  Internal Revenue Code, related statutes, tax treaties, and regulations.  Our analysis of the information on the website found a number of issues  that limit its accessibility:", "The website does not include an overview or high-level description of  the MAP process.", "The website lacked elements such as frequently asked questions or  fact sheets that IRS has developed for similar processes that help  promote understanding of complex tax issues.", "The website does not explain in clear language what constitutes a tax  dispute eligible for the MAP resolution process. Other IRS websites  provide more detailed information for other issues relevant to U.S.  MNCs. For example, the IRS website for country-by-country reporting  provides a detailed page explaining the new reporting guidance with  multiple links for additional guidance.", "In addition, USCA\u2019s guidance for requesting MAP assistance is an 87- page revenue procedure. While this document is complete, it is highly  technical and may not be easily understood by taxpayers seeking  relief from double taxation.", "IRS requires information for taxpayers to be clear and accessible. IRS\u2019s  Taxpayer Bill of Rights states that taxpayers have the right to clear  explanations of tax laws and IRS procedures. In addition, the federal  internal control standards, the Plain Writing Act of 2010, and Office of  Management and Budget plain writing guidance state that agencies  should, for example, communicate the necessary quality information  externally. Moreover, accessibility is consistent with the criteria we have  previously identified for a good tax system. IRS\u2019s Strategic Plan for  Fiscal Years 2018-2022 notes that the agency faces a business  environment that is becoming more global, dynamic, and digital, further  underscoring the importance of taxpayers having accessible, plain  language guidance on MAP.", "The Organisation for Economic Co-operation and Development (OECD)  also assessed the accessibility of USCA\u2019s guidance and found that it met  OECD\u2019s minimum standards. As part of its base erosion and profit-shifting  project, the OECD has been reviewing countries\u2019 administrations of the  mutual agreement processes. In its review of the United States\u2019 process,  the OECD concluded that while U.S. MAP guidance is comprehensive  and available, and fully met the OECD\u2019s minimum standards, some  further clarity could be provided.", "The OECD review offered examples of how other countries provide  taxpayers with overview information they can use before accessing more  detailed technical guidance. For example, Canada publishes an annual  MAP Program Report on its website that includes background information  on its process, as well as general information on the steps in the process  and high-level information on timeframes. Singapore\u2019s MAP web page  includes basic information on the MAP process, an example of a case  that would be suitable for MAP, and a link for users to provide feedback  on the usefulness of the information.", "USCA officials said that they have not improved the information provided  on their website because they believe the current guidance to be  sufficient. However, USCA officials told us that they are engaged in some  efforts that may improve the information they provide to taxpayers. USCA  officials stated that USCA is close to finalizing a \u201cpractice unit\u201d explaining  the competent authority process. According to USCA officials, this unit  uses plain language to walk taxpayers step by step through MAP and the  competent authority process. The unit also highlights the roles and  responsibilities of all the stakeholders in the process, including the  taxpayers. USCA officials said they intend to make the practice unit  available on USCA\u2019s public website and the United States\u2019 OECD MAP  Profile.", "APMA officials also said they expect that the additional information on the  requirements of MAP and Revenue Procedure 2015-40 will be useful to  those unfamiliar with the processes. USCA officials did not provide a date  for when this practice unit would be completed.", "Providing taxpayers with a clear overview and accessible guidance on the  MAP process would help ensure that taxpayers who might benefit from  entering the MAP process are aware of the process, know how to  navigate it, and understand the general time frames for relief. Providing  information that helps facilitate this process could help reduce taxpayer  burden."], "subsections": []}, {"section_title": "USCA Does Not Document Contacts with Taxpayers", "paragraphs": ["USCA may contact taxpayers about their cases for various reasons.  Officials in the APMA office stated that they send acknowledgement  letters when the MAP request is accepted, and routinely gather additional  information from taxpayers to fully develop a MAP case. They said that an  analyst generally will communicate with a taxpayer before and after  APMA has substantive discussions with its foreign counterparts regarding  the taxpayer\u2019s case. While officials stated they provide regular contact,  they do not have a process to systematically record or track these  contacts, other than in the case file.", "Regular contact with taxpayers may help make the process more  transparent and help ensure that they are informed about their cases.", "One of the criteria we have previously identified for a good tax system is  transparency. A transparent tax system reduces uncertainty for  taxpayers, allowing them to better plan their decisions about employment  and investment.", "According to IRS officials, APMA provides general guidance on when a  taxpayer should be notified of developments in the case or its status.  APMA officials stated that contact will vary depending on the facts and  circumstances of the case such as its complexity and frequency of  communications with the foreign competent authority. However, the  guidance is focused on taxpayer expectations and does not address any  requirements of officials to track or record contacts.", "Contacts with taxpayers could affect perceptions of the transparency and  fairness of the MAP process. Tracking and recording contact with  taxpayers would help provide APMA with assurance that taxpayers are  being kept aware of the status of their MAP case in a timely manner.  Monitoring such information would help APMA to evaluate the  transparency and fairness of its MAP administration. It would also help  assure APMA there is consistency in contacting taxpayers."], "subsections": []}]}, {"section_title": "USCA Does Not Track Key Data nor Use Existing Data to Assess Management of MAP Cases USCA Does Not Track Hours Worked or Key Milestones for MAP Cases", "paragraphs": ["APMA maintains an inventory database that tracks some information on  MAP cases. These data include how many months it took to resolve the  case, the analyst assigned to the case, and whether an economist was  assigned. According to APMA officials, each MAP case is assigned an  analyst and, for complex cases, an economist. APMA groups analysts  into teams that work on MAP cases from different geographic regions.  Three teams consist of economists that are assigned to cases managed  by other teams. APMA data on how staff are deployed are shown in table  1.", "While these data provide some information on workload, they do not  provide information on how many hours or staff days are associated with  a particular case. This information would be useful to know because it  could provide insight about the resources needed for different cases  based on differences in complexity and other factors. Standards for  internal control state that management should establish and operate  monitoring activities that can be used to evaluate results and ensure that  objectives are met with minimum wasted resources. However, according  to APMA officials, their tracking system is not set up to track hours or staff  days spent on each case.", "Instead, according to APMA officials, their staffing process accounts for  differences in complexity in other ways. Officials explained that when  APMA receives a MAP request, it ranks the request according to  complexity using a scale that runs from 1 to 5. The more complex cases,  those ranked 3 or higher, are assigned an economist which can increase  the cost of working the more complex cases."], "subsections": [{"section_title": "APMA Does Not Have Controls to Ensure the Quality of its Case Data", "paragraphs": ["In our review of a generalizable sample of MAP case files we found a  number of inconsistencies between the amount of adjustment recorded in  APMA\u2019s inventory database, the amount recorded in the original MAP  request, and the amount recorded in the resolution letter provided to  taxpayers and the foreign competent authority. We also found  inconsistencies between the request letter and the resolution letter  amounts. On the basis of our sample, we estimate that about 30 percent  of the entries in the inventory database had these types of discrepancies.", "The cause of some of these discrepancies was relatively easy to identify  and correct, such as transcription errors, which could have been detected  if APMA had a more robust inventory management system in place. Other  inconsistencies in the data were more difficult to resolve. According to  IRS officials, some discrepancies could be explained by changes in  exchange rates over time. However other inconsistencies could be not be  as easily explained.", "These inconsistencies exist because APMA does not have controls in  place to systematically and routinely evaluate the quality of the data in its  inventory of cases. As a result, the accuracy of program measures that  USCA might develop based on these data may be uncertain.", "Having controls in place to ensure the accuracy of data in the inventory  database would also help APMA meet OECD\u2019s minimum standards. The  OECD has called for countries to provide MAP case statistics by country  and published these statistics for the first time in 2018. According to  APMA officials, APMA is currently working on implementing an upgraded  inventory management system that should help APMA meet this goal.  Development and full implementation of this project has been underway  for 4 years."], "subsections": []}, {"section_title": "APMA Does Not Analyze Currently Available Data to Inform Its Operations and Management Decisions", "paragraphs": ["APMA\u2019s inventory data-base includes data on both pending and resolved  MAP cases that can help management monitor program operations and  potentially identify areas to improve the management of MAP cases.  However, APMA does not systematically analyze data to identify areas for  improvement. For example, analysis of trends and comparisons of certain  case characteristics\u2014such as the country initiating the adjustment, the  elapsed time on the case, whether an economist was assigned to the  case, and the negotiated outcome\u2014can help to identify how these  characteristics may be related. According to APMA officials they do not  undertake this kind of data analysis because they use the data as needed  to manage current resources and to achieve their primary goal of  satisfying the OECD\u2019s minimum standards. These minimum standards  include such goals as countries ensuring that adequate resources are  provided to the MAP function and ensuring that both competent  authorities should be made aware of MAP requests and given an  opportunity to share their views on whether the request should be  accepted.", "According to federal internal control standards, management should  design information systems to provide information to meet the entity\u2019s  objectives and respond to risks. Information and analysis that helps  APMA understand changes in international environment and complexity  of U.S. MNCs would better enable it to identify future resource needs by  evaluating trends in case characteristics.", "In the absence of quantifiable analysis conducted by APMA, we used  information from its existing inventory data to illustrate the types of  analysis that may be possible. For example, figure 2 shows that the  volume of cases can vary greatly by country over time. The figure shows  that the number of cases resulting from an adjustment by IRS ranged  from a low of 22 in 2015 to high of 85 in 2017. Conducting similar analysis  of trends in volume may help APMA better plan for allocating its limited  resources to different teams in anticipation of increased case volume. In  addition, because APMA allocates staff across teams that focus on  particular countries, tracking trends in case load by country could help  USCA prepare to anticipate spikes in cases and allocate resources more  effectively across country teams. By conducting regular trend analyses,  APMA could also identify areas for further analysis to determine what  may be driving variations in case load by country.", "Similarly, figure 3 shows our analysis of the average time to resolve a  case. Average case time ranged between 15 and 40 months, with the  average case time exceeding the OECD-recommended 24-month period  for a number of countries and years. By conducting similar analysis of the  trends and differences in processing time across MAP cases, APMA  would be better able to identify areas meriting additional review for ways  to improve timeliness.", "We also used inventory data to analyze outcomes in terms of the  determinations reached through MAP negotiations. One analysis included  an examination of the share of cases in which the United States provided  some relief to the taxpayer. As can be seen in figure 4, most foreign  cases in most years resulted in relief being shared between the two  countries involved in a dispute. As shown in figure 4, in 2017,  approximately two-thirds of all foreign cases were resolved with both  countries providing some relief compared to less than 10 percent of U.S.  cases.", "However, as shown in figure 5, USCA in most years fully withdrew a large  percentage of adjustments made by IRS. In 2017, 74 percent of IRS  adjustments were withdrawn. The data show that U.S.-initiated cases  were more often resolved entirely by the United States than with the  foreign country providing some of the relief.", "However, these data on case resolutions need to be interpreted with  caution. For example, as pointed out by IRS officials, a measure like the  percent withdrawn may be misinterpreted if it concerns a small number of  large MNCs with operations in many countries, and the adjustments are  small unless this information is provided as context. Nonetheless, the  case resolution data can be useful for guiding further analysis by helping  to identify areas that would merit further analysis of the reasons for  withdrawing cases or the reasons IRS examiners are making adjustments  that are not upheld by USCA. Analyzing trends in outcomes would help to  ensure that APMA is not missing opportunities to protect the U.S.  corporate tax base and that IRS examiners are cognizant of tax treaty  treatment of foreign source income of U.S. MNCs. Additional examples of  MAP case data analysis are provided in appendix IV.", "While APMA must work all MAP cases, developing quality data on MAP  cases would help to ensure effective management of the program.  Analyzing trends in case data could help identify and manage evolving  demands and priorities\u2014such as the challenges present in a changing  global tax environment. According to federal internal control standards, as  a part of management controls, management should design information  systems to obtain and process information to meet operational needs.", "Because APMA cannot alter its workload, it is all the more important to  effectively manage staff and time. Reliable information systems are  essential for effective management. Without assessing APMAs\u2019 current  and past performance, APMA may be less able to identify areas for  improvement. Conducting analysis and improving the quality of data could  help inform APMA\u2019s allocation of resources and inform other parts of the  agency concerning international tax issues. For example, IRS exams may  be better able to judge the appropriateness of its tax adjustments when it  is informed about how USCA has viewed similar adjustments governed  by tax treaties."], "subsections": []}, {"section_title": "APMA Does Not Record the Disputed Tax Issues in Its Inventory Database, Which Limits the Usefulness of Data", "paragraphs": ["The APMA inventory database contains select characteristics of resolved  cases, such as the time it took to resolve the case and the country that  initiated the adjustment in dispute. However, it does not contain  information on the tax issue that was in dispute. Without tracking the tax  issue in dispute, APMA is unable to analyze trends in tax issues which  could be used to determine if there are systemic issues that could be  solved through means such as changes in IRS regulations, treaty, or  statute.", "USCA officials told us that there are additional costs to tracking tax issues  and that defining the type of tax issue involved in complex international  tax cases could be difficult. However, IRS tracks issues in other similar  areas. For example, IRS\u2019s Office of Appeals, which handles a wide range  of tax controversies covering both international and domestic issues,  tracks the tax issue in dispute.", "Furthermore, APMA includes categories of tax transactions in its annual  statutory reports. The categories are used in Advanced Pricing  Agreements (APA) to distinguish between a U.S. entity and non-U.S.  entity, and to determine whether a transaction covered by an agreement  involved the sale of tangible property, use of intangible property or the  provision of services. APAs are agreements between IRS and MNCs on  how transactions among related entities of the MNC should be priced.  APAs can prevent potential disputes by having agreement on the  transaction prior to filing a tax return with IRS. These categories or  alternative categories that APMA has already developed could be added  to the inventory database to provide additional information on the tax  issue in dispute.", "To illustrate how the additional information on tax issues can help inform  management decisions, we categorized the tax issues in our sample of  MAP cases using APA categories. As shown in figures 6 and 7, we  compared the estimated percentage of certain tax issues in all MAP  cases between 2015 and 2017 with those in APA cases in 2014. We also  compared tax issues with other characteristics of the MAP cases. As  figure 6 shows, an estimated 37 percent of MAP cases involved disputes  over a tax adjustment related to services provided by a non-US entity  such as a foreign corporation. Figure 6 also shows that disputes  concerning the provision of services (both U.S. and non-U.S.) are  estimated to account for 61 percent of cases, which far exceeded  disputes over the use of intangible property, at 17 percent or the sale of  tangible property at 15 percent. Conducting similar reviews of this type  of information could help APMA better match its resources in terms of  experience with different types of tax issues.", "We also compared tax issues identified in MAP cases with the  transactions covered in APAs. The results illustrate how tracking tax  issues could be useful for improving the administration of both programs.  For example, as shown in figure 7, 23 percent of APA transactions  covered sales of tangible property into the United States in 2014. Our  categorization of MAP cases reported in figure 6 shows sales of tangible  property into the United States as a disputed issue in only an estimated 8  percent of those cases. This difference in relative frequencies may  suggest a connection between the programs, as tax practitioners have  suggested increasing the use of APAs as a way of reducing international  tax disputes. However, some of the differences in percentages between  figure 6 and 7 could arise from differences in years covered and in  categorization of tax issues.", "We also categorized the information to illustrate how tracking tax issues  and other characteristics, such as location and the outcomes of the  dispute resolution process could help with administration. For example,  as shown in table 2, the tax issue with the largest estimated share of  foreign MAP cases (67 percent) involved the provision of services. U.S.  MAP cases, in contrast, were spread more evenly across tax issues, with  no single tax category having an estimated share greater than 50 percent.  Conducting a similar review of this type of information could help APMA  match its resource allocations in terms of staff experience with different  types of tax issues within its country-focused teams.", "Additionally, table 3 shows when we tracked outcomes of the dispute  resolution process, we found that an estimated 69 percent of cases  resolved by a combination of withdrawal and correlative relief involved the  provision of services. For other outcomes, this tax issue of provision of  services is estimated to occur 49 percent of the time. Further research  on how outcomes and tax issues may be related could also inform how  APMA trains and assigns staff.", "Other analyses could examine the tax issue and whether an economist  was assigned or the average processing time. These statistics may help  identify insights into complex cases. Undertaking similar reviews across  tax issues may help identify areas for increased scrutiny to ensure  effective administration.", "Federal internal controls standards state that as part of an effective  internal control system, management should establish activities to monitor  program performance. Reliable information on program operations  requires the collection of quality data. Collecting key characteristics and  conducting relevant analyses would help ensure effective internal control  and could help improve USCA\u2019s management of MAP cases."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In a world with a growing number of international transactions, the United  States needs an efficient and effective dispute resolution process to  ensure that it is protecting the U.S. taxpayer and the U.S. corporate tax  base. The MAP processes adopted by countries\u2014including the United  States\u2014in their tax treaties are in place to prevent double taxation and  ensure the accurate application of treaty provisions.", "USCA plays a key role in resolving disputes over double taxation but the  agency has weaknesses in its processes that hamper its efforts. First,  USCA has not provided clear guidance to taxpayers on how the MAP  process works. As a result, taxpayers may be unaware of the process  and not fully understand what to expect when they undergo it.  Furthermore, USCA does not record when and for what reason there is  contact between the taxpayer and USCA, therefore making it difficult for  USCA to ensure that taxpayers are informed about the progress of their  case.", "Second, USCA does not track the hours that analysts spend on cases  and the milestones of cases. As a result, USCA does not have a full  understanding of the efficiency of the MAP process, including ways to  improve it. It also does not have processes to ensure the quality of the  data it collects, therefore cannot ensure accurate performance  measurement. While APMA aims to meet the minimum standards of the  OECD, it does not analyze the data to identify areas for improvement.", "Analyses of USCA\u2019s data could more fully inform its management  decisions. A number of potential analyses are available of how cases are  resolved. By forgoing these types of analyses, USCA may be unaware of  certain trends, possible explanations for them, or any need to adjust  guidance or resources to address these issues.", "Finally, many of APMA\u2019s tasks depend on factors beyond its control (for  example, the volume of taxpayer requests), but management of the  processes could benefit from the collection and analysis of well-defined  measures and quality data."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following eight recommendations to the IRS.", "The Commissioner of Internal Revenue should direct USCA to provide an  overview of the MAP process that is more accessible and transparent  than the Revenue Procedure. (Recommendation 1)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA staff record and track contact with taxpayers.  (Recommendation 2)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA staff record and track the hours they spend on MAP cases.  (Recommendation 3)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA identify and record the dates of key milestones throughout  MAP case resolutions. (Recommendation 4)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA puts procedures in place to review the quality of inventory  data. (Recommendation 5)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA records the dollar amounts of MAP case outcomes in its  database. (Recommendation 6)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA analyzes trends in case characteristics as part of routine  program management activities. (Recommendation 7)", "The Commissioner of Internal Revenue should direct USCA to ensure  that APMA identify and record categories of the tax issue relevant in the  dispute. (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Commissioner of Internal  Revenue for review and comment. In its written comments, reprinted in  appendix II, IRS agreed with our eight recommendations and will provide  detailed corrective action plans in its 60-day letter response to Congress.  IRS also provided technical comments, which we incorporated where  appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  Treasury, the Commissioner of Internal Revenue, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or mctiguej@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives Scope and Methodology", "paragraphs": ["As noted earlier, to assess the extent to which the Internal Revenue  Service (IRS) evaluates management of dispute resolution cases, we  interview IRS officials. Having determined that the Advanced Pricing  Mutual Agreement Program (APMA) does not conduct analysis of mutual  agreement procedure (MAP) case data, we used information from its  existing inventory data to illustrate the types of analysis that may be  possible. The inventory database APMA provided us contained all MAP  cases that were closed from 2013 to 2017, as well as the current stock of  open MAP cases. Because of a change in the method of recording the  outcome variable between 2013 and 2014, we restricted our analysis of  outcomes to 2014 to 2017.", "The inventory database did not include a variable for the tax issue in  dispute. To illustrate the type of analysis that could be conducted if the  tax issue were recorded we collected a sample of MAP case files. To  estimate features such as tax issue and outcome for the inventory  database, we selected a generalizable random sample of 84 cases that  was proportionally allocated across four strata described in table 4. The  strata included wither the initiating country was U.S. or Non-U.S. and  whether an Economist was involved. This sample was selected from the  population frame that consists of all files from APMA 2013-2017 Resolved  and 2017 Pending inventory for cases resolved in years 2015 to 2017.  Overall, this sample was designed to produce 95 percent confidence  intervals for percentage estimates that are within approximately +/- 10  percentage points. The sample is not designed to provide estimates for  other reporting groups at the same level of precision, and all margins of  error are reported along with estimates.", "To create a tax issue variable, we reviewed the summary of competent  authority issues required by Rev.Proc. 2015-40 to be included in the MAP  request letter. We then allocated the tax issue described in the narrative  to APMA\u2019s advanced pricing agreement transaction categories. Some  case files included multiple tax issues, but these cases accounted for less  than 18 percent of the sample. The illustrations provided rely on the first  tax issue noted in the narrative. Table 5 provides the estimates and  margins of error for the categories."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Illustrative Examples of Dispute Resolutions", "paragraphs": ["The following tables illustrate how a resolution can be reached in different  types of disputes. Table 6 provides a hypothetical example of U.S.- initiated adjustment to a transfer price and a resolution that provides full  relief from double taxation through a combination of partial withdrawal  and correlative relief. In this example, the U.S. multinational corporation  (MNC) parent sells a product to its subsidiary incorporated in a foreign  country for $1,000. The U.S. parent is taxed on the income of $1,000 from  the sale and the subsidiary is able to deduct that payment.", "The U.S. tax authority audits the parent\u2019s return and determines that the  price the parent sold the product for was too low and adjusts to price up  from $1,000 to $2,000, resulting in an increase in taxable income. The  U.S. MNC parent disputes the adjustment and requests assistance from  the U.S. Competent Authority (USCA). The new adjusted transfer price  results in $1,000 that is subject to double taxation because the foreign  subsidiary has not deducted the additional $1,000 as the price paid to the  U.S. parent, while the U.S. tax authority is now considering that income  taxable.", "USCA negotiates with the foreign competent authority and the two parties  agree on a revised transfer price of $1,600. The negotiated resolution  results in USCA agreeing to withdraw $400 of the original adjusted  amount of the transfer price. In turn, the foreign competent authority  agrees to correlative relief in the form of an increased deduction of $600  of the additional price that the foreign subsidiary will pay the U.S. parent.  The taxpayer receives full relief from double taxation since the total of the  withdrawal and the correlative relief erases the $1,000 of double-taxed  income that resulted from the increased adjustment.", "Alternatively, foreign tax authorities can make adjustments that affect a  U.S. taxpayer. Table 7 provides a hypothetical example of a foreign  initiated adjustment to a cost-sharing arrangement, and a resolution that  provides full relief from double taxation, again, through a combination of  partial withdrawal and correlative relief.", "In this scenario, the U.S. parent and its foreign subsidiary agree to share  the costs of developing a product that will yield income of $10,000. As  part of the agreement, the subsidiary will receive 10 percent of the  income yield while the parent will receive 90 percent.", "The foreign tax authority audits the subsidiary\u2019s tax return and determines  that the amount of income assigned to the subsidiary is too low. It then  adjusts the percentage to 50 percent, increasing the income allocated to  the subsidiary from $1,000 to $5,000. This adjustment results in a  potential $4,000 of income that is now subject to double taxation. The  subsidiary decides that resolving this dispute locally is unlikely and  through the U.S. parent requests assistance from USCA.", "USCA and the foreign competent authority negotiate a new allocation of  35 percent resulting in new income allocated to the subsidiary of $3,500.  This resolution results in a combination of withdrawal and correlative  relief. The competent authority agrees to withdraw $1,500 of the  adjustment as income to the subsidiary, and the U.S. competent authority  agrees to reduce the amount taxable to the parent by $2,500. The  taxpayer receives full relief from double taxation since the total of the  withdrawal and the correlative relief erases the $4,000 of double-taxed  income that resulted from the increased adjustment."], "subsections": []}, {"section_title": "Appendix IV: Examples of Analysis that Advanced Pricing and Mutual Agreement Program Could Do with Current Available Data", "paragraphs": ["All mutual agreement procedure (MAP) cases are not the same in terms  of complexity. One possible indicator of complexity is whether an  economist was assigned to a case. United States Competent Authority  (USCA) ranks the cases in order of complexity and assigns economists to  the more complex cases. Our analysis of Advanced Pricing and Mutual  Agreement Program (APMA) data in figure 8 shows how the use of  economists varies by source of MAP cases. For most years, APMA  assigned economists to a higher percentage of cases that involved U.S.  than Canadian initiated adjustments. For most years, the share of  economists assigned to foreign initiated cases was similar to U.S. initiated  cases. However, in 2015 and 2016 the share of U.S. cases receiving an  economist was more than double that of all foreign initiated cases. For  most years, an economist was assigned to less than a quarter of foreign  and U.S. MAP cases.", "We also analyzed USCA inventory data to compare the percentage of  cases that were assigned an economist and the average time it took to  resolve cases. As figure 9 shows, the average time a case was in  processing tends to decrease when the percentage of cases that are  assigned an economist increases. This relationship suggests that  assigning economists to a case may reduce the time it takes to resolve it  despite the greater complexity of the case. However, there may be many  other factors that could influence processing time. APMA officials noted  that many these factors include the readiness of the foreign competent  authority to discuss the case in a timely fashion. Further analysis would  be necessary to isolate the effects of specific resource allocation changes  on process efficiency."], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Kevin Daly (Assistant Director),  Jennifer G. Stratton (Analyst-in-Charge), Bertha Dong, Dawn Bidne,  Michael Bechetti, Sonya Vartivarian, Ed Nannenhorn, David Dornisch,  and A.J. Stephens made significant contributions to this report."], "subsections": []}]}], "fastfact": ["U.S. firms that earn income from foreign activities or foreign subsidiaries are subject to taxes at home and abroad. Double taxation may occur when two or more countries with different tax approaches levy taxes on the same income.", "The IRS' U.S. Competent Authority (USCA) helps U.S. multinationals resolve disputes over double taxation with foreign authorities and the IRS. However, taxpayers may have a hard time understanding the process. USCA's website, for example, provides highly technical guidance and lacks clear explanations.", "We made 8 recommendations, including that USCA provide better procedure guidance."]}
{"id": "GAO-18-128", "url": "https://www.gao.gov/products/GAO-18-128", "title": "European Reassurance Initiative: DOD Needs to Prioritize Posture Initiatives and Plan for and Report their Future Cost", "published_date": "2017-12-08T00:00:00", "released_date": "2017-12-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In response to Russia's annexation of Crimea in March 2014, the President announced the ERI, to reassure allies in Europe of U.S. commitment to their security. This initiative has been funded using OCO appropriations, which Congress provides in addition to DOD's base budget appropriations.", "The Joint Explanatory Statement accompanying the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, included a provision for GAO to review matters related to ERI. In this report, we (1) describe changes in ERI's objectives, funding under ERI, and DOD's posture in Europe since 2014 and (2) evaluate the extent to which DOD's planning processes for posture initiatives funded under ERI prioritize those initiatives, estimate their long-term costs, and communicate their estimated costs to Congress. GAO analyzed DOD strategy documentation, budget and cost analysis guidance, budget justification materials, and cost and obligations data. GAO also interviewed knowledgeable officials within the Office of the Secretary of Defense, U.S. European Command, the military services, and the State Department."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2014, the Department of Defense (DOD) has expanded the European Reassurance Initiative's (ERI) objectives, increased its funding, and planned enhancements to European posture. DOD expanded ERI's objectives from the short-term reassurance of allies and partners to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. With respect to funding, DOD will have requested approximately $4.5 billion for ERI's posture enhancements through the end of fiscal year 2017 (about $3.2 billion for fiscal year 2017 alone), and in July 2016 EUCOM identified funding needs for future posture initiatives. The expansion of ERI's objectives has contributed to DOD's enhancing its posture in Europe. Specifically, DOD has increased the size and duration of Army combat unit deployments, planned to preposition Army equipment in Eastern Europe, added new enduring locations (e.g., locations that DOD expects to access and use to support U.S. security interests for the foreseeable future), improved infrastructure, and negotiated new agreements with European nations. As of April 2017, DOD was considering further force enhancements under ERI as part of the department's ERI budget request. DOD also was reviewing whether new enduring locations to support ERI were needed and was considering other improvements to existing infrastructure.", "DOD's process for planning ERI has not established priorities among posture initiatives funded under ERI relative to those in its base budget, nor estimated long-term sustainment costs for some posture initiatives funded under ERI, nor communicated future costs to Congress. ERI is being planned using a separate process from DOD's established processes and is funded from DOD's overseas contingency operations (OCO) appropriations. GAO found several weaknesses:", "Lack of prioritization : DOD establishes priorities among ERI posture initiatives but has not evaluated them against base budget initiatives using its posture management process. As a result, DOD lacks an understanding of the relative importance of ERI initiatives and may be investing in projects that it will not continue should OCO funding become unavailable.", "Lack of sustainment costs : EUCOM and the military services have not fully estimated the long-term costs to sustain equipment and construction funded under ERI. Based on DOD's approach for calculating rough order sustainment costs, GAO determined that these costs could be substantial. DOD officials said that GAO correctly applied DOD's approach for estimating sustainment costs, but noted that actual costs may be lower, because the military services may not fully fund sustainment. In the absence of comprehensive estimates, DOD has been limited in its ability to assess affordability and plan for future costs.", "Not communicating future costs : DOD limits Congress's visibility into the resources needed to implement ERI and achieve its objectives because it does not include future costs in its ERI budget request.", "This is a public version of a classified report issued in August 2017. Information on specific posture planning, guidance, and budget estimates that DOD deemed to be classified have been omitted from this report."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD prioritize ERI posture initiatives against initiatives in its base budget, develop cost estimates for sustaining initiatives, and communicate future costs to Congress. DOD partially concurred with GAO's recommendations. GAO continues to believe that these recommendations are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["In response to Russia\u2019s annexation of Crimea in March 2014, President  Obama announced the European Reassurance Initiative (ERI), an effort  intended to reassure allies and partners of U.S. commitment to their  security. From fiscal year 2015 through fiscal year 2017, the Department  of Defense (DOD) identified $5.2 billion in funding for ERI as part of its  overseas contingency operation (OCO) budget requests. Most of this  funding would be used to enhance posture\u2014forces, footprint (locations  and infrastructure), and host nation agreements\u2014in Europe by funding  increases in military presence, improving infrastructure, and  prepositioning equipment. In July 2016, U.S. European Command  (EUCOM) submitted to DOD a prioritized list of requirements and funding  estimates for additional posture initiatives, which DOD was considering  for its budget submission at the time of our review.", "DOD has requested and used OCO-designated appropriations for ERI  initiatives. Congress provides OCO-designated appropriations to DOD in  addition to appropriations for DOD\u2019s base budget, generally to fund  ongoing military operations. DOD officials said that DOD has requested  OCO funds for ERI out of concerns about funding efforts to respond to  Russian aggression without reallocating resources from other priorities in  its base budget.", "Since 2007, we have reported on issues associated with funding from the  OCO budget, including the level of transparency, accuracy, and reliability  of DOD\u2019s OCO budget requests and efforts to transition enduring costs  from the OCO budget to the base budget. In January 2017, we reported  that DOD had developed an initial estimate of costs being funded by the  OCO budget that are likely to endure beyond current operations, such as  ERI, but it had not finalized or reported its estimate outside of the  department. We recommended that DOD develop a complete and  reliable estimate of DOD\u2019s enduring OCO costs\u2014which would include  those for ERI\u2014and report those costs in concert with the department\u2019s  future budget requests. DOD generally concurred with our  recommendations but said that until there is relief from statutory  budgetary caps established in legislation, it will continue to need OCO  funding. As of May 2017, the department has not implemented our  recommendations.", "Given the evolving security environment in Europe and the growth of the  funding request for ERI, the Joint Explanatory Statement accompanying  the Continuing Appropriations and Military Construction, Veterans Affairs,  and Related Agencies Appropriations Act, 2017, included a provision for  us to examine matters related to ERI. In this report, we (1) describe  changes in ERI\u2019s objectives, funding under ERI, and DOD\u2019s posture in  Europe since 2014 and (2) evaluate the extent to which DOD\u2019s planning  processes for posture initiatives funded under ERI prioritize those  initiatives, estimate their long-term costs, and communicate their  projected costs to Congress. This is a public version of a classified report  that we issued in August 2017. DOD deemed some of the information in  our August 2017 report to be classified; classified information must be  protected from loss, compromise, or inadvertent disclosure. Therefore this  report omits classified information about specific posture planning,  guidance, and budget estimates. Although the information provided in this  report is more limited, the report addresses the same objectives as the  classified report and uses the same methodology.", "For objective one, we analyzed White House, DOD, and EUCOM  documentation. To determine how ERI\u2019s objectives changed from  calendar year 2014 through 2017 we reviewed White House and EUCOM  fact sheets, DOD budget submissions, and EUCOM documentation.  Additionally, we identified changes in DOD\u2019s priorities in Europe by  reviewing the National Defense Strategy and guidance issued by the  Office of the Secretary of Defense as well as other documentation to  determine how ERI\u2019s expanded objectives supported the U.S. strategy  toward Russia. We also reviewed DOD and EUCOM posture planning  documentation to determine how DOD plans to change European posture  in support of ERI\u2019s objectives.", "For objective two, we compared DOD\u2019s planning process to criteria from  its posture planning guidance and budget development guidance as well  as relevant best practices pertaining to cost estimation, accounting  standards, and internal controls. We reviewed DOD\u2019s ERI budget  justification materials for fiscal years 2015 through 2017, slides presented  to the Deputy\u2019s Management Action Group in December 2015 and  October 2016, and other documentation to assess the extent to which  DOD prioritized its posture initiatives. We assessed whether DOD  estimated and planned for the sustainment of these initiatives by  reviewing EUCOM and military service documentation and cost data  related to ERI major military construction and prepositioned equipment.  We did not assess the military services\u2019 cost estimation methodologies,  because our objective was to determine whether future costs had been  considered as part of DOD\u2019s planning processes. We calculated the  potential sustainment costs for major military construction by using DOD\u2019s  rough order-of-magnitude estimation approach for such costs. We  assessed whether DOD has communicated its resource requirements to  Congress for posture initiatives funded under ERI by reviewing DOD\u2019s  budget justification submissions for fiscal years 2015 through 2017. We  also summarized the funding under ERI that has been programmed or  obligated for minor construction and repair projects by collecting cost data  for these projects in fiscal years 2015 through 2017 from U.S. Army  Europe and U.S. Air Force Europe.", "In conducting our work, we spoke to officials from the Office of the  Secretary of Defense, the Joint Staff, Department of the Army,  Department of the Air Force, Department of the Navy, United States  Marine Corps, EUCOM and its service component commands, and the  State Department.", "We conducted this performance audit from June 2016 through December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Global defense posture is an enabler of U.S. defense activities and  military operations overseas and is a central means of defining and  communicating U.S. strategic interests to allies, partners, and  adversaries. It is driven by a hierarchy of national-level and DOD-specific  guidance, which includes the National Defense Strategy and the National  Military Strategy. Under DOD Instruction 3000.12, global defense posture  includes three elements:", "Forces: forward stationed or rotationally deployed forces, U.S.  military capabilities, equipment, and units (assigned or allocated).", "Footprint: networks of U.S. foreign and overseas locations,  infrastructure, facilities, land, and prepositioned equipment.", "Agreements: treaties and access, transit, support, and status- protection agreements and arrangements with allies and partners that  set the terms regarding the U.S. military\u2019s presence within the territory  of the host country.", "EUCOM is one of six geographic combatant commands and is  responsible for missions in all of Europe, large portions of Asia, parts of  the Middle East, and the Arctic and Atlantic Oceans (see figure 1).  EUCOM evaluates the adequacy of posture in Europe to support relevant  plans and achieve military objectives. EUCOM shares responsibility with  the Chairman of the Joint Chiefs of Staff and the Office of the Secretary of  Defense for U.S. military relations with allies and partners in Europe and  the North Atlantic Treaty Organization (NATO).", "The number of U.S. military sites located in EUCOM\u2019s area of  responsibility and the number of military personnel assigned to Europe  have decreased substantially since the end of the Cold War, and two  heavy combat brigades had been deactivated by the end of fiscal year  2014. As of May 2016, EUCOM supported one airborne infantry brigade  and one Stryker brigade, as well as approximately 62,000 military  personnel across approximately 250 sites.", "Since 2009, we have reported on issues related to DOD\u2019s efforts to  estimate and report on the total cost of its global defense posture. In  2009, we identified weaknesses in DOD\u2019s approach for adjusting its  global defense posture and recommended, among other things, that DOD  issue guidance for estimating total costs for global defense posture and  modify its annual report to Congress to include the total cost to complete  each planned posture initiative. In February 2011, we reported that  EUCOM lacked comprehensive cost data in a key posture planning  document and that therefore decision makers lacked critical information  that they needed to make fully informed posture decisions. We  recommended that the Chairman of the Joint Chiefs of Staff revise the  Joint Staff\u2019s posture planning guidance to include direction on how the  combatant commands should analyze costs and benefits when  considering changes to posture and to require that posture plans include  comprehensive cost estimates. DOD agreed with the recommendations in  both reports and subsequently took steps to implement them.", "In June 2012, we reported that DOD did not fully understand the cost  implications of two posture initiatives in Europe\u2014including its decision to  return two heavy brigades from Europe to the United States\u2014and that  key posture planning documents did not completely and consistently  include cost data. We recommended that DOD fully estimate the cost  implications of these two initiatives, clarify components\u2019 roles and  responsibilities for estimating costs, and develop a standard reporting  format for cost data. DOD generally agreed with our recommendations  and has taken steps to implement two of them.", "Following the President\u2019s June 2014 announcement of ERI, EUCOM  identified five lines of effort that it would pursue under ERI, as described  in table 1.", "Three of ERI\u2019s lines of effort are expected to enhance DOD\u2019s posture in  Europe. For example, DOD is using ERI to increase the forces present in  Europe by rotating an armored brigade combat team and elements of a  combat aviation brigade to Europe every nine months. DOD also plans  to enhance its footprint in Europe by using ERI funding to make  infrastructure improvements and establish locations for prepositioned  equipment. Finally, in order to implement ERI\u2019s lines of effort and support  U.S. activities, DOD is partnering with the State Department to negotiate  host nation agreements that, among other things, establish protections for  U.S. military personnel and provide DOD the authority to improve host  nation installations and infrastructure. DOD is also supporting additional  exercises and training to improve interoperability with partner countries  while providing them with the capability and capacity to defend  themselves, but these efforts are not expected to affect DOD\u2019s long-term  posture in Europe."], "subsections": []}, {"section_title": "DOD Has Expanded ERI\u2019s Objectives and Funding, Contributing to Enhancements in Its Posture in Europe", "paragraphs": ["Since 2014, DOD has expanded ERI\u2019s objectives, increased its funding,  and planned enhancements to posture in Europe. In fiscal years 2015  and 2016, ERI\u2019s objective was to provide short-term reassurance to allies,  and the initiative had little funding for long-term enhancements to posture.  DOD focused its efforts on bolstering the security and capacity of NATO  allies and partners by funding training, conducting exercises, and  temporarily rotating Army and Air Force units to Eastern Europe. In fiscal  year 2017, DOD expanded ERI\u2019s objectives to include deterring Russian  aggression in the long term and developing the capacity to field a credible  combined force should deterrence fail.", "Recognizing that ERI\u2019s expanded objectives would require DOD to alter  its posture in Europe, DOD has requested increased ERI funding. DOD  will have requested approximately $4.5 billion in ERI funding for posture  enhancements through the end of fiscal year 2017; about $3.2 billion of  this was requested for use in fiscal years 2017. During the time of our  review, EUCOM had identified a need for additional funding over the next  several years for additional posture enhancements in Europe. Specific  details about EUCOM\u2019s future posture plans and funding requirements  were omitted because they are classified.", "DOD has requested increased funding to support planned enhancements  to all three posture elements\u2014forces, footprint, and agreements\u2014in  Europe:", "Force deployments to Eastern Europe: In fiscal years 2015 and  2016, the Army deployed armored brigade combat teams to Eastern  Europe to provide short-term reassurance to allies and partners,  which DOD officials said included Estonia, Latvia, Lithuania, and  Poland, among other countries. These short-duration deployments  were intermittent and focused on demonstrating U.S. commitment to  allies and partners. Additionally, the Air Force deployed air units on 4- month rotations to help protect allies\u2019 and partners\u2019 air space. In the  fiscal year 2017 budget justification materials provided to Congress,  as ERI\u2019s objectives expanded, DOD requested funding to retain Air  Force fighter units in Europe. It also began deploying a rotational  armored brigade combat team so that one such brigade would be  present in Europe at all times (see figure 2). The first deployment, in  January 2017, included approximately 4,000 personnel, 90 Abrams  tanks, 90 Bradley Infantry fighting vehicles, and 112 supporting  vehicles. Additionally, DOD began procuring and prepositioning  equipment for two planned armored brigades in Europe, one of which  will include modernized tanks, as an additional deterrent. According to  Army officials, these force enhancements in Europe give the Army the  ability to quickly deploy a substantial ground force in the event of a  conflict. As of April 2017, DOD was still evaluating force  enhancements in Europe as part of its fiscal year 2018 budget  submission. Specific details were omitted because they are classified.", "New locations and improvements to infrastructure: Since ERI was  announced in 2014, DOD has established new enduring locations in  Europe. An enduring location is designated by DOD and is a  geographic site that DOD expects to access and use to support U.S.  security interests for the foreseeable future. During our review, DOD  had not yet determined whether additional enduring locations would  be needed to support ERI.", "In addition to establishing new enduring locations, DOD plans to improve  installations and infrastructure. From fiscal years 2015 through 2017,  DOD requested funding in its budget justification submissions to  Congress for major military construction projects in nine European  countries and to improve support infrastructure\u2014such as roads,  railheads, and airbasing\u2014at these locations. Major military construction  projects are those projects specified in National Defense Authorization  Acts. During the time of our review, DOD was considering addition  improvements to existing infrastructure, specific details of which are  classified. According to DOD and State Department officials, DOD is also  working with U.S. allies and partners to determine what infrastructure  improvements to roads, railroads, and bridges need to occur outside  enduring locations to allow rapid response to a conflict.", "New host nation agreements: Since ERI was announced, DOD and  the State Department have completed host nation agreements with  six European nations in support of ERI efforts:", "Romania, Bulgaria, and Poland, implementing previous  agreements, in order to facilitate U.S. construction on installations  and areas in the host country (June and July 2015 and June  2016).", "Estonia, Latvia, and Lithuania, providing an overarching  framework for protections for U.S. personnel and U.S. access to  installations in host nations (January 2017)."], "subsections": []}, {"section_title": "DOD Does Not Prioritize Posture Initiatives Funded Under ERI against Those in Its Base Budget, Estimate Their Sustainment Costs, or Communicate Future Costs to Congress", "paragraphs": ["DOD is using a separate process instead of its established posture  planning process to plan for ERI\u2019s posture initiatives because of the  emergent nature of ERI requirements and their having been funded  through the OCO budget. DOD has established global defense posture  management and base budget development processes that plan for  posture initiatives and collectively support the department\u2019s efforts to  establish priorities, evaluate resource requirements, and develop strategy  and policy. As a result of its not using its established processes, DOD is  not prioritizing posture initiatives funded under ERI against posture  initiatives funded through its base budget, estimating these initiatives\u2019  long-term sustainment costs, or communicating their future costs to  Congress."], "subsections": [{"section_title": "DOD is Not Using Its Established Processes to Plan for and Fund ERI Posture Initiatives", "paragraphs": ["DOD is planning ERI posture initiatives outside of its established  processes and is funding these enduring initiatives\u2014including rotational  deployments and infrastructure projects\u2014out of its OCO budget. We have  previously identified risks associated with DOD\u2019s practice of completing  construction projects outside of its established processes. For example, in  September 2016 we reported that DOD had not issued implementing  guidance to establish a formal process for reevaluating ongoing  contingency construction projects when missions change and that as a  result DOD risked completing unnecessary construction projects. We  also found that DOD lacked visibility into the amount of funding it was  spending on operations and maintenance-funded construction projects in  U.S. Central Command and that this increased financial risk and  duplication risk for the department.", "Like U.S. Central Command, EUCOM is using DOD\u2019s OCO budget to  fund construction projects and is planning those projects outside of its  established processes. Based on our analysis, DOD plans to spend  approximately $503 million from fiscal year 2015 through the end of fiscal  year 2017 on ERI-related construction projects\u2014about $279 million for  major military construction projects and $224 million for minor military  construction and facilities maintenance and repair projects (hereafter,  minor construction and repair), as shown in table 2.", "DOD has established global defense posture management and base  budget development processes that plan for posture initiatives and  collectively support the department\u2019s efforts to establish priorities,  evaluate resource requirements, and develop strategy and policy.  According to DOD Instruction 3000.12, DOD\u2019s global defense posture  processes apply to DOD forces, footprint, and agreements that support  joint and combined global operations and plans in foreign countries.  According to the instruction, DOD\u2019s components use these processes to  address planning for global defense posture, resource requirements, and  policy development, among other things. Further, it states that these  processes are overseen by an executive council that provides   recommendations, inputs, and expertise on global defense posture to key  national strategy products. DOD\u2019s Planning, Programming, Budgeting,  and Execution Process serves as the annual resource allocation process  for DOD and is intended to enable DOD to align resources to prioritized  capabilities; balance necessary warfighting capabilities with risk,  affordability, and effectiveness; and provide mechanisms for making and  implementing fiscally sound decisions in support of the national security  strategy and the national defense strategy.", "DOD is using a separate and evolving process to plan ERI\u2019s posture  initiatives\u2014rather than following its established processes\u2014because ERI  is being funded through DOD\u2019s OCO budget. According to officials from  the Office of the Secretary of Defense, Cost Assessment and Program  Evaluation, the department has recognized that the short-term planning  process used to develop DOD\u2019s OCO budget can create problems when  it is used to plan for enduring initiatives. As a result, DOD has developed  a separate process to plan for ERI.", "As part of the fiscal year 2018 planning process, EUCOM provided a  prioritized list of potential requirements and an estimate of its annual  costs by appropriation account to the Director for Cost Assessment and  Program Evaluation. According to officials from the Office of the Secretary  of Defense, Cost Assessment and Program Evaluation, DOD completed  its review and provided recommendations to DOD\u2019s senior leaders for  approval in October 2016 and final decisions were made within DOD in  April 2017. The specific criteria by which DOD assessed EUCOM\u2019s  potential requirements are classified.", "DOD is requesting funds for ERI\u2019s posture initiatives as part of its OCO  budget, which is generally intended to be short-term funding for ongoing  contingency operations. In February 2009, the Office of Management and  Budget, in collaboration with DOD, issued criteria to assist in determining  whether funding properly belonged in DOD\u2019s base budget or in its OCO  budget. These criteria were updated in September 2010 and currently  indicate that funding requests should be for specific geographic areas  where combat or direct combat support operations occur (such as Iraq  and Afghanistan). Further, budget items must meet other criteria. For  example, OCO funding requests may be for constructing facilities and  infrastructure in the theater of operations in direct support of combat  operations. In these cases, the level of construction should be the  minimum needed to meet operational requirements, and construction  completed at enduring locations must be tied to surge operations or major  changes in operational requirements.", "In January 2017, we reported that DOD did not apply the OCO criteria to  ERI prior to deciding to budget for its requirements using its OCO budget.  We recommended that DOD, in consultation with the Office of  Management and Budget, reevaluate and revise the criteria for  determining what can be included in OCO budget requests. DOD  concurred with our recommendation and noted that it plans to propose  revised OCO criteria. As of May 2017, the department has not  implemented our recommendation."], "subsections": []}, {"section_title": "DOD Does Not Prioritize ERI Initiatives against Those in Its Base Budget, Estimate Long-Term Sustainment Costs, or Communicate Future Costs to Congress", "paragraphs": ["DOD\u2019s planning for ERI\u2019s posture initiatives does not establish priorities  for ERI initiatives relative to those in the base budget, estimate long-term  sustainment costs for some posture initiatives funded under ERI, or  communicate future ERI costs to Congress."], "subsections": [{"section_title": "DOD Does Not Review and Prioritize Posture Initiatives Funded Under ERI Relative to Those in Its Base Budget", "paragraphs": ["When planning ERI\u2019s posture initiatives, DOD establishes priorities  among ERI\u2019s initiatives but does not review posture initiatives funded  under ERI relative to those funded in the military services\u2019 base budgets.  DOD\u2019s posture management process is intended to establish priorities  among global posture elements and is overseen by a Global Posture  Executive Council. According to DOD Instruction 3000.12, the Executive  Council is responsible for reviewing, prioritizing, and endorsing across the  combatant commands key posture elements such as military construction  projects and international agreements. The Executive Council\u2019s  endorsements inform the military services\u2019 budget deliberations.", "For the fiscal year 2017 ERI budget, EUCOM requested funding for  several posture initiatives, including the continuous, rotational deployment  of an armored brigade combat team and the establishment of  prepositioned equipment in Europe. Officials representing the Under  Secretary of Defense for Policy and the Director, Cost Assessment and  Program Evaluation said that as part of its planning process for ERI the  Deputy\u2019s Management Action Group evaluated and prioritized posture  initiatives funded under ERI. However, DOD could not provide  documentation that it had established priorities relative to posture  initiatives funded through the base budget. Further, the Global Posture  Executive Council did not review or prioritize posture initiatives funded   under ERI relative to posture initiatives funded through DOD\u2019s base  budget. Similarly, as DOD prepared the fiscal year 2018 ERI budget  request, the Global Posture Executive Council did not prioritize EUCOM\u2019s  proposed ERI posture initiatives relative to initiatives funded through  DOD\u2019s base budget. More detailed information about these proposals,  and their potential funding requirements, are classified.", "According to officials from the Office of the Under Secretary of Defense  for Policy and the Joint Staff, DOD did not prioritize posture initiatives  funded under ERI against base-budget funded posture initiatives,  because ERI is funded through DOD\u2019s OCO budget\u2014which does not  directly affect the services\u2019 base budgets. However, because it does not  prioritize ERI initiatives against other initiatives funded through the base  budget, DOD lacks an understanding of the relative importance of  initiatives funded under ERI and may begin investing in projects that it  would not support in the absence of funding from DOD\u2019s OCO budget.  For example, Army officials noted that if funding were to become  unavailable in DOD\u2019s OCO budget, the Army is unsure how initiatives  funded under ERI would rank in importance relative to other posture  initiatives funded in its base budget. Consequently, the Army would be  forced to make critical\u2014and potentially costly\u2014decisions quickly and  without a clear idea of which posture initiatives were most important to the  department."], "subsections": []}, {"section_title": "DOD Does Not Estimate Long- Term Sustainment Costs for Some Posture Initiatives Funded Under ERI", "paragraphs": ["In planning for posture initiatives funded under ERI, EUCOM and the  military services have not fully estimated the long-term sustainment costs  of ERI\u2019s posture initiatives to establish prepositioned equipment and  construct new facilities. DOD\u2019s global defense posture guidance indicates  that, when evaluating potential changes to posture, the combatant  commands should work with the military services to estimate the full cost  of planned posture initiatives, including sustainment costs. DOD\u2019s  guidance on economic analysis also notes the importance of  understanding both the size and timing of costs. Finally, our prior work  has demonstrated that comprehensive cost estimates of current and  future resource requirements are critical to making funding decisions and  assessing program affordability.", "DOD leadership emphasized throughout the fiscal year 2018 budget  review process that the services would need to fund ERI posture   sustainment costs through their respective base budgets, but DOD did  not direct the services and EUCOM to estimate these costs as they would  have under their established processes. Officials from the Office of the  Secretary of Defense, Cost Assessment and Program Evaluation said  that DOD leadership emphasized that the military services would need to  fund all future sustainment costs for ERI projects from their base budgets.", "Based on DOD\u2019s approach for calculating rough order sustainment costs,  we determined that ERI sustainment costs for prepositioned equipment  and construction could be substantial. Army and Air Force officials said  that they were working to identify and incorporate these costs into future  base budget submissions. DOD officials said that we correctly applied  DOD\u2019s approach for estimating sustainment costs, but noted that actual  costs may be lower than the estimated costs, because the military services may not fully fund sustainment. Additionally, officials said that  EUCOM is trying to negotiate burden sharing agreements with host  nations; however, it is unclear whether these negotiations will be  successful or how any resulting agreements would affect DOD\u2019s future  costs.", "Without comprehensive estimates of the sustainment costs for the  prepositioned equipment and major military construction projects in  Europe, DOD decision makers have been limited in their ability to  evaluate the affordability of these initiatives. Further, in the absence of  these estimates, the services have been limited in their ability to plan for  costs in future budgets, because they have an incomplete understanding  of the magnitude of those costs and of when they are likely to be incurred."], "subsections": []}, {"section_title": "DOD Does Not Communicate to Congress the Future Costs of Enduring ERI Activities Funded through OCO", "paragraphs": ["The funding plan that DOD submits to Congress for ERI does not contain  information about ERI\u2019s future costs. This is in contrast to the way DOD  submits its funding plan for its base budget, where DOD provides  Congress with cost projections over a 5-year period, by appropriation,  leaving Congress with a better understanding of how and when to  allocate resources. In reviewing the fiscal year 2018 ERI request, the  Director for Cost Assessment and Program Evaluation assessed future  costs associated with posture initiatives funded under ERI. We previously  reported that DOD was not developing enduring requirements funded  through its OCO budget as part of its budget and programming process.  Officials from the Office of the Under Secretary of Defense (Comptroller)  and the Office of the Secretary of Defense, Cost Assessment and  Program Evaluation told us that DOD has not been required to provide  estimates for future OCO costs for ERI to Congress previously. An official  from the Office of the Under Secretary of Defense (Comptroller) told us  that DOD does not plan to provide these future costs to Congress along  with its fiscal year 2018 ERI budget submission.", "Additionally, in preparing its posture requirements, EUCOM did not  identify assumptions regarding host nation and NATO burden sharing.  For example, officials from the Office of the Under Secretary of Defense  for Policy said that DOD has submitted a request to the NATO Security  Investment Programm\u00e9 for $200 million in funding to build a facility in  Poland to store Army equipment. Officials told us that, as a result, this  construction project was identified as a lesser priority in EUCOM\u2019s fiscal  year 2018 request for funding. A senior Army officer told us that  completion of a facility in Poland was critical to its plans in Europe.  Officials from the U.S. Mission to NATO told us that as of July 2016  NATO had approved funding to complete preliminary architectural and  engineering design for this project. Officials expect additional funding will  be made available in July 2017 to complete final design and site  preparation and the full cost of the project will be approved in early 2019.  However, these officials noted that additional funding beyond what has  been approved by NATO may be required to meet U.S.-specific  requirements. Similarly, EUCOM officials said that they are working to  identify opportunities to defray future costs through host nation   contributions, but it is unclear how much funding\u2014if any\u2014host nations  will provide moving forward.", "Congress has expressed interest in knowing the future costs of enduring  activities being funded through DOD\u2019s OCO budget. The Senate  Appropriations Committee\u2019s report accompanying a bill for DOD\u2019s fiscal  year 2015 appropriations stated that the committee does not have an  understanding of enduring activities funded by the OCO budget. The  committee further noted that there is a potential for risk in continuing to  fund non-contingency-related activities through the OCO budget. Both  GAO\u2019s and other federal standards emphasize that agencies should  provide complete and reliable information on the costs of programs  externally, so that decision makers can make informed decisions when  allocating resources.", "DOD has not provided Congress projections of future costs for posture  initiatives funded under ERI because it is reviewing those requirements  outside of its budget and programming processes, and DOD officials said  that the department is not required to provide this information. As a result,  DOD is limiting congressional visibility into the resources needed to  achieve ERI\u2019s objectives. If DOD does not provide Congress with  projections of the future costs of posture initiatives funded under ERI and  information on its assumptions pertaining to host nation support and  burden sharing, it will continue to impede congressional visibility into the  resources that are needed to fully implement these initiatives."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Russia\u2019s annexation of Crimea and the subsequent threat of further  aggression led DOD to establish and later expand ERI\u2019s objectives and  enhance posture in Europe to support a new U.S. strategy toward Russia.  DOD has requested funding for these enhancements using its OCO  budget; however, the processes DOD uses to develop its OCO budget  were not designed to plan for and fund long-term, enduring initiatives  such as ERI. By following a separate planning process when funding ERI  with OCO, DOD is taking on risk by not reviewing and prioritizing ERI  posture plans against other posture initiatives, estimating the costs for  sustaining ERI initiatives, and providing Congress with estimates of ERI\u2019s  future costs. DOD risks making decisions that lack a strategic vision in  comparison to other DOD priorities and may fund initiatives that cannot  be sustained over the long term. Furthermore, Congress is likely to face  challenges in assessing DOD\u2019s estimated costs for ERI and the  affordability of initiatives funded under ERI over the long term."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To better ensure that DOD can target resources to its most critical  initiatives and establish priorities across its base budget and overseas  contingency operations budget, we recommend that the Secretary of  Defense prioritize posture initiatives under ERI relative to those funded in  its base budget as part of its established posture-planning processes.  (Recommendation 1)", "To better enable decision makers to evaluate the full long-term costs of  posture initiatives under ERI, we recommend that the Secretary of  Defense direct EUCOM and the military services to develop estimates for  the sustainment costs of prepositioned equipment and other infrastructure  projects under ERI and ensure that the services plan for these long-term  costs in future budgets. (Recommendation 2)", "To support congressional decision making, we recommend that the  Secretary of Defense provide to Congress, along with the department\u2019s  annual budget submission, estimates of the future costs for posture  initiatives funded under ERI and other enduring costs that include  assumptions such as those pertaining to the level of host nation support  and burden sharing. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the classified report to DOD for review and  comment. DOD partially concurred with all three of our recommendations,  and we have reproduced DOD\u2019s comments on the classified report in  appendix II. DOD also provided technical comments, which we  incorporated as appropriate.", "DOD partially concurred with our first recommendation to use its  established posture-planning processes to prioritize ERI\u2019s posture  initiatives relative to those funded in DOD\u2019s base budget. In its comments,  DOD stated that it will continue to prioritize the negotiation of international  agreements supporting ERI through the Global Posture Executive  Council, and that an on-going Strategic Review will inform ERI and guide  both EUCOM and the services in their program planning efforts. These  are positive steps. DOD also stated it will adjudicate its ERI-funded force  requirements through its global force management process, adding that it  will continue to resource OCO funds for ERI requirements until there is a  sufficient increase in DOD\u2019s base budget to do so. However, we continue  to believe, as noted in our report, that DOD could improve its planning for  posture initiatives funded under ERI, whether or not they are funded  through OCO, by using DOD\u2019s established posture planning processes.  Although DOD\u2019s global force management process directly affects  overseas military posture in the near term, this process is not designed to  evaluate long-term posture priorities. If DOD does not prioritize the forces  and infrastructure projects funded under ERI against those funded using  the military services\u2019 base budgets, it will continue to lack an  understanding of the relative importance of the posture initiatives funded  under ERI. Without such an understanding, DOD increases the risk that  the services will need to make critical and potentially costly decisions  without a clear idea of which posture initiatives are most critical to the  department.", "DOD partially concurred with our second recommendation that EUCOM  and the military services develop estimates for future sustainment costs  and plan for these costs in future budgets. In its comments, DOD stated  that its components will continue to estimate the sustainment costs for  prepositioned stocks and other infrastructure projects during DOD\u2019s  annual program and budget review process. DOD also commented that  without additional topline base budget funding, some portion of the  associated sustainment costs will need to be financed with OCO funds.  However, as we noted in our report, neither the Army nor the Air Force  has fully estimated these potentially significant future costs, nor had either  service incorporated them into their future budgets. Using OCO funds  would mark a departure from DOD leadership\u2019s emphasis that the  services would need to fund ERI posture sustainment costs through their  respective base budgets. Additionally, not developing robust estimates for  sustaining these initiatives could increase long-term fiscal risk for the  department if DOD shifts more ERI-associated enduring costs into its  OCO budget. In the absence of robust cost estimates and deliberate  planning to address those costs in future budgets, DOD will continue to  be limited in its ability to evaluate the affordability of posture initiatives  funded under ERI, and the military services may not plan adequate  funding to sustain posture investments in Europe.", "DOD partially concurred with our third recommendation, to provide  Congress with estimates of the future costs for posture initiatives funded  under ERI and information on any underlying assumptions, such as those  pertaining to the level of host nation support and burden sharing. In its  comments, DOD stated that it does not currently prepare a formal 5-year  Future Years Defense Program for OCO-related costs. Moreover, DOD  commented that it factors in host nation support and burden sharing when  preparing budget estimates for Congress. However, DOD does not state  whether it will begin to provide Congress future estimates and any  underlying assumptions with its budget submission. It is critical that DOD  increase congressional visibility into ERI\u2019s future costs and its underlying  assumptions to facilitate congressional oversight and reasonably ensure  that initiatives can be sustained over the long-term.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Commander, U.S.  European Command. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (404) 679-1816 or pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found   on the last page of this report. GAO staff who made major contributions to  this report are listed in Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Unspecified Minor Military Construction and Facilities Maintenance and Repair Projects Funded under the European Reassurance Initiative in Fiscal Years 2015 through 2017", "paragraphs": ["The Army and Air Force identified approximately $224 million in  unspecified minor military construction and facilities maintenance and  repair projects (hereafter, minor construction and repair) that were  programmed or obligated for the European Reassurance Initiative (ERI) in  fiscal years 2015 through 2017. This includes $157 million for minor  construction and repair projects identified by the Army and nearly $67  million for minor construction and repair projects identified by the Air  Force. According to U.S. European Command officials, Navy and Marine  Corps construction projects funded under ERI were either major military  construction or exercise-related construction projects. The tables below  do not include Navy and Marine Corps exercise-related construction  projects. Using the data provided by the military services, we compiled  the programmed and obligated funding for these minor construction and  repair projects by fiscal year, country, location, and project name in tables  3 and 4. The information in these tables was provided by U.S. Army  Europe and U.S. Air Force Europe in response to our request for a list of  minor military construction and repair projects. The data provided did not  identify the appropriations used for each project. Accordingly, we have  not conducted a review to examine whether funds were appropriately  used for a given project."], "subsections": []}, {"section_title": "Appendix II: DOD Comments", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kevin O\u2019Neill, Assistant Director;  Alex Winograd, Analyst-in-Charge; Scott Bruckner, Adrianne Cline, Martin  De Alteriis, Joanne Landesman, Jennifer Leotta, Carol Petersen, Michael  Shaughnessy, and Jena Sinkfield all made key contributions to this  report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-446", "url": "https://www.gao.gov/products/GAO-18-446", "title": "Reverse Auctions: Additional Guidance Could Help Increase Benefits and Reduce Fees", "published_date": "2018-07-18T00:00:00", "released_date": "2018-07-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Reverse auctions are intended to result in enhanced competition, lower prices, and reduced acquisition costs. GAO has previously found that agencies did not maximize these benefits.", "GAO was asked to review federal agencies' use of reverse auctions. This report examines (1) the use of reverse auctions and the extent to which selected agencies achieved benefits, such as competition; and (2) the extent to which selected agencies had insight into reverse auction fees.", "GAO collected and analyzed data on federal agencies' use of reverse auctions from fiscal years 2013 to 2017. For five of the largest users of reverse auctions\u2014the Departments of the Army, Homeland Security, Interior, Navy, and State\u2014GAO reviewed documentation for 40 auctions that resulted in contract awards in fiscal year 2016 (the most recent data available when the review began), and that were selected to obtain a mix of dollar values and levels of competition, among other factors. GAO also interviewed contracting officials and analyzed agency guidance."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal agencies' use of reverse auctions\u2014a process where vendors bid against each other with lower prices to win government contracts\u2014declined between fiscal years 2013 and 2017, from about 34,000 to 19,000 auctions valued at about $1.9 billion and $1.5 billion, respectively. In fiscal year 2016, the year GAO studied in detail, nearly three-quarters of auctions at the agencies GAO reviewed resulted in iterative bidding\u2014when there are multiple bidders and at least one bidder submits more than one bid during the auction (see figure).", "Contracting officers said reverse auctions reduce administrative burden, especially during peak contracting times. Reverse auctions data indicate that selected agencies may have saved more than $100 million in 2016.", "The five agencies GAO reviewed indirectly paid about $13 million in fees to reverse auction providers through awardees in 2016. However, 28 of the 30 contracting officials GAO interviewed did not fully understand how fees were set. Further, in 2016, agencies GAO reviewed indirectly paid approximately $3 million in fees for reverse auctions for which a fee-free alternative was likely available. None of the guidance GAO reviewed provided sufficient information for contracting officers to assess the appropriateness of these fees (see table). Without better information, contracting officials may be offsetting potential savings by paying more in fees than necessary for the level of services required."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making a total of 21 recommendations to the five agencies in GAO's review, including that agencies inform contracting officials about fees to better compare available provider options. Defense, State, and Interior concurred with this recommendation. DHS did not, stating that contracting officials should obtain this knowledge during market research. GAO believes managing this information centrally could eliminate confusion and minimize duplicate efforts."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies bought at least $1.5 billion of goods and services in  fiscal year 2017 using reverse auctions\u2014a process where vendors are  encouraged to revise their prices downward during the bidding process  until the auction closes. Reverse auctions are intended to leverage  enhanced competition, enable agencies to obtain lower prices, and  reduce acquisition costs. We have previously found that agencies had not  maximized these intended benefits. Specifically, in December 2013, we  found that over one-third of fiscal year 2012 reverse auctions we  reviewed had no iterative bidding\u2014a hallmark of reverse auctions when  there are multiple bidders and at least one bidder submits more than one  bid during the auction. In addition, almost half of the reverse auctions  were used to obtain items from existing contract vehicles that in some  cases resulted in agencies paying two fees\u2014one to the agency that  manages the contract vehicle and one to the reverse auction provider for  use of its services.", "You asked us to review federal agencies\u2019 use of reverse auctions. This  report examines (1) federal agencies\u2019 use of reverse auctions between  2013 and 2017, (2) the extent to which selected agencies achieved  benefits through reverse auctions, and (3) the extent to which selected  agencies had insight into reverse auction fees.", "To answer our objectives, we collected data on federal agencies\u2019 use of  reverse auctions from eight providers that operate reverse auction  platforms. We identified these providers by reviewing our past work in this  area, reviewing federal procurement solicitation and award information,  conducting interviews with agency officials, and conducting internet  searches about federal use of reverse auctions. We also used these  data to identify and select six of the largest users of reverse auctions, by  number of auctions and dollar value, to include in our review\u2014the  Departments of the Army, Homeland Security (DHS), the Interior, the  Navy, State, and Veterans Affairs (VA).", "To examine federal agencies\u2019 use of reverse auctions between 2013 and  2017, we collected data on reverse auction use from the eight reverse  auction providers, which include both government agencies and private  companies, to identify the number and dollar value of awarded reverse  auctions. We present the dollar value from fiscal years 2013 through  2017 in constant fiscal year 2017 dollars using the Congressional Budget  Office\u2019s June 2017 Gross Domestic Product price index projection\u2014the  most recent projection available at the time of our analysis. For this  analysis, we excluded data from two of the eight providers we identified,  Procurex and the Army Computer Hardware Enterprise Software and  Solutions (CHESS) Information Technology (IT) e-mart reverse auction  platform. In 2017, according to data we obtained from Procurex, the  Defense Logistics Agency\u2019s (DLA) total auction activity was worth roughly  $1 billion, and according to data from Army CHESS, the total auction  activity through its platform was worth about $91 million. However, we  cannot determine what portion of these auctions resulted in contract  awards. These providers do not track which reverse auctions actually  result in contract awards, and the agencies using these providers\u2019  platforms (primarily DLA and Army) do not require this information for  their own reporting and oversight purposes. Since we did not include  auctions that did not result in contract awards in our analysis, for  purposes of this report, all references to reverse auction use exclude  auctions conducted with these providers. For those providers that do  track which reverse auctions result in contract awards, about half of  auctions conducted in 2016 did not result in contract awards. We have  included information on auctions conducted by DLA and using Army  CHESS IT e-mart in appendix I. Of the six providers with awarded auction  data, FedBid accounted for almost all auctions and the vast majority of  dollars agencies awarded using reverse auctions from 2013 through  2017.", "In addition to data from 2013 through 2017, for five of the six selected  agencies, we collected and analyzed more detailed data, such as  information on the types of goods and services purchased and the type of  contracting vehicle used, on auctions conducted and awarded in fiscal  year 2016\u2014the most recent year of detailed data available at the time we  began our review. Our analysis of fiscal year 2016 auctions included  almost 15,000 auctions with a total awarded value of approximately  $910 million. We did not include VA in our detailed analysis of  2016 auctions because the agency conducted few auctions in that year.  We assessed the reliability of the reverse auction provider data by  comparing it with information contained in selected contract files and by  reviewing it for issues such as missing data elements, duplicates, and  outliers, among other steps, and determined they were sufficiently reliable  for the purposes of reporting on federal agencies\u2019 use of reverse auctions.", "To identify the extent to which selected agencies achieved the benefits of  reverse auctions, we analyzed the 2016 data we collected to identify  factors related to competition and savings. To obtain a more in-depth  understanding of the benefits achieved by selected agencies, we selected  and reviewed a nongeneralizable selection of 40 auctions awarded from  2016 reverse auctions across the five agencies. The 40 auctions included  12 Army auctions, 7 DHS auctions, 5 Interior auctions, 10 Navy auctions,  and 6 State auctions, and roughly reflect each agency\u2019s relative use of  reverse auctions. These contracts were chosen to obtain variety across a  number of characteristics, such as dollar value, goods and services being  purchased, and reverse auction platforms used. The 40 auctions selected  generally reflect the extent to which auctions were conducted using  various reverse auction platforms, with FedBid, as the largest provider,  accounting for the majority of auctions. Therefore, of the 40 auctions,  33 were FedBid auctions, 4 were General Service Administration (GSA)  Reverse Auctions, 2 were Army CHESS IT e-mart auctions, and 1 was  conducted using Compusearch. For each of the selected case studies,  we reviewed contract documentation related to the reverse auction, such  as documentation of market research, pre-auction cost estimates (e.g.  independent government cost estimates), price negotiation memoranda,  and contract award documents. In addition, to obtain contracting officials\u2019  perspectives on the benefits of reverse auctions, we interviewed the  contracting officials involved with 35 of these 40 auctions. The remaining  five knowledgeable officials were no longer with the agencies or were not  available for interviews. We did not compare reverse auctions to  alternative acquisition methods to compare the relative costs and  benefits.", "To identify the extent to which selected agencies had insight into reverse  auction fees, we analyzed data on indirect fees paid to reverse auction  providers in 2016 for the five agencies selected for our review. We also  analyzed contract documentation from the 40 selected auctions to identify  the extent to which fee information was available to the contracting  officials, and interviewed contracting officials to develop an understanding  of their knowledge of the fees related to the auctions. The 40 selected  auctions included 33 that incurred an indirect fee, 2 for which the provider  waived the fee, and 5 for which no fee applied. We interviewed the  contracting officials involved with 30 of the auctions that incurred a fee  and 5 of the auctions for which the fee was waived or no fee applied. To  develop an understanding of the fee arrangements and the selected  agencies\u2019 oversight of reverse auctions and their fees, we reviewed  contracts between the selected agencies and reverse auction providers  as well as other arrangements, including provider terms of service.", "We also used a variety of investigative tools and techniques to determine  if government officials or commercial and government providers have  engaged in potential fraud, waste, abuse, and mismanagement  associated with reverse auction use. While the steps we took did not  uncover any fraud, waste, abuse, or systemic mismanagement, we  cannot definitively state that there is no fraud, waste, abuse, or  mismanagement in federal use of reverse auctions.", "To assist in answering all of the objectives, we reviewed policies and  guidance related to reverse auctions from the Office of Federal  Procurement Policy (OFPP) and at the selected agencies and relevant  components of those agencies, and we reviewed GAO\u2019s Standards for  Internal Control in the Federal Government. We compared agencies\u2019  practices to these standards. We also interviewed procurement policy  officials from the selected agencies and representatives from reverse  auction providers. For more information on our scope and methodology,  see appendix III.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from April 2017 to March 2018 in accordance with  investigative standards prescribed by the Council of the Inspectors  General on Integrity and Efficiency."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "How Reverse Auctions Work", "paragraphs": ["In a traditional auction, the intent is for multiple buyers to bid against one  another by submitting bids to purchase a good or service that is for sale.  Generally speaking, the bidder offering the highest price receives the item  for sale and the seller benefits from receiving more money due to  competition. In contrast, reverse auctions are intended to encourage  multiple vendors to compete against one another to win a contract from  the government by lowering the price for which the vendor is willing to sell  a particular good or service. The buyer\u2014typically a contracting official\u2014then evaluates the technical proposals and bids, and selects a winning  vendor\u2014generally the bidder who submitted the lowest price bid with an  acceptable proposal\u2014to meet the government\u2019s need. Figure 1 compares  these two types of auctions.", "Reverse auctions can be opened to any vendor on the open market or  can be limited to vendors that hold contracts on existing contract vehicles,  such as indefinite-delivery vehicles under which the government has  already determined that a specific group of vendors is qualified to sell  specific goods or services. Existing vehicles provide a simplified way to  procure commercial products and services. Agencies can use reverse  auctions as a tool to further promote competition and lower prices, among  other potential benefits. Agencies can use reverse auctions to order from  various existing contract vehicles, including:", "The Army\u2019s CHESS program. CHESS is the Army\u2019s primary source  for commercial information technology hardware, software, and  services.", "DHS\u2019s First Source II. First Source II is a 100 percent small business  contract vehicle, specifically designed as a preferred source to  acquire commercially available information technology commodities,  solutions, and value-added vendor services to support DHS  programs.", "GSA\u2019s Federal Supply Schedules program. The Federal Supply  Schedules provide federal agencies a simplified method of purchasing  commercial products and services off of multiple schedules, from  numerous vendors, at prices associated with volume discount buying.", "National Aeronautics and Space Administration\u2019s Solutions for  Enterprise-Wide Procurement (SEWP). SEWP allows federal  agencies government-wide to purchase from over 140 vendors and  offers a wide range of commercial advanced technology products and  product-based services.", "Reverse auction providers can be private companies or offices within  federal agencies, and the providers may provide reverse auction services  across the government or to specific agencies. Since we last reported on  this issue in December 2013, two federal agencies developed platforms  to facilitate reverse auctions through existing contract vehicles, by  adapting existing electronic platforms. In July 2013, GSA\u2019s Federal  Acquisition Service launched its platform, GSA Reverse Auctions, which  was built off its e-Buy tool and initially offered reverse auctions for a  limited number of GSA and VA Federal Supply Schedule contracts,  expanding to additional schedule contracts and agency-specific multiple  award contracts over the following 2 years. In November 2015,  GSA Reverse Auctions expanded further to offer open market auctions. In  January 2016, Army\u2019s CHESS program launched a capability using its IT  e-mart to run reverse auctions on certain CHESS contracts. Similarly to  when the private sector builds a platform, new government capabilities  have costs associated with development and ongoing maintenance.  According to GSA officials, development of the reverse auction capability  cost approximately $2 million, and operations and maintenance costs are  expected to total about $650,000 over the next 3 fiscal years. According  to CHESS officials, its capability was developed at no additional financial  cost under the fixed-price contract for the IT e-mart, although there were  opportunity costs because other lower priority actions were delayed.  Table 1 includes information about the reverse auction providers we  identified in our review.", "Reverse auction providers offer differing levels of service, ranging from  simply providing a web-based reverse auction platform to a full-service  model. Full-service providers may offer services such as creating draft  auctions, soliciting vendors to participate, helping create a marketplace of  vendors, and encouraging vendor participation for low-bid-count auctions.  Agency buyers can select which additional services, if any, to use. FedBid  is an example of a full-service provider, whereas Army CHESS provides a  self-service web-based reverse auction platform, the IT e-mart.", "While the government pays some reverse auction providers directly, other  reverse auction providers, including FedBid and GSA, collect reverse  auction fees through an indirect payment process. Generally, in the  indirect payment process, the reverse auction provider adds a fee onto  the winning vendor\u2019s bid. Then, the agency pays the winning vendor this  total amount. In turn, the reverse auction provider collects the fee from  the winning vendor (see figure 2)."], "subsections": []}, {"section_title": "Prior GAO Work", "paragraphs": ["In December 2013, we reviewed the use of reverse auctions at four  agencies\u2014Army, DHS, Interior, and VA\u2014and found that these agencies  steadily increased their use of reverse auctions (in number and dollar  value) from fiscal years 2008 to 2012. For auctions in 2012 across the  four agencies, we found:", "Agencies awarded about 95 percent of reverse auctions for  $150,000 or less.", "Information technology goods and services were among the top  categories purchased.", "Products made up about 90 percent of total dollar value of awarded  reverse auctions.", "47 percent of reverse auctions were for orders from existing contracts.", "80 percent of reverse auction dollars and about 86 percent of reverse  auctions were awarded to small businesses.", "In addition, we found that the four agencies in our review did not  maximize the potential benefits of reverse auctions\u2014competition and  savings. We found that over one-third of reverse auctions in 2012 had no  iterative bidding and that it was unclear whether savings calculated for  reverse auctions were accurate because cost estimates developed before  the auction may have been set too low or too high. In addition, we found  that almost half of the reverse auctions were used to obtain items from  existing contracts.", "We further noted that there was a lack of comprehensive  government-wide guidance and that the Federal Acquisition Regulation  (FAR) did not specifically address reverse auctions, resulting in confusion  about their use. We recommended the Director of the Office of  Management and Budget (OMB) take steps to amend the FAR to address  agencies\u2019 use of reverse auctions and issue government-wide guidance  to maximize competition and savings when using reverse auctions.  OMB\u2019s OFPP subsequently issued guidance in June 2015 on reverse  auctions, and the proposed FAR changes are currently being reviewed  prior to being published for public comment."], "subsections": []}, {"section_title": "Government-wide Regulations and Guidance", "paragraphs": ["Prior to 1997, the FAR prohibited agencies from using auctioning  techniques. In 1997, the FAR was revised to eliminate these prohibitions  as part of an overall effort to make the source selection process more  innovative, simplify the acquisition process, and facilitate a best value  acquisition approach.", "In June 2015, OFPP issued guidance to federal agencies on the effective  use of reverse auctions. This memorandum reviewed the benefits of reverse auctions, offered a set of reminders to help contracting offices  maximize the value of this tool, and asked agencies to work with OFPP in  identifying and collecting data that can be used to evaluate and improve  results. Specifically, the memorandum noted that some of the benefits of  reverse auctions are price reductions, enhanced competition, and  significant small business participation. In addition, the memorandum  noted that reverse auctions are not a \u201cone size fits all\u201d solution and are  likely to be most effective in the following circumstances: are steady and relatively simple and might otherwise be acquired  using either a sealed bid or achieving best value through \u201clow  price technically acceptable\u201d source selection criteria; and  result in fixed price agreements.", "Typically, these circumstances exist in acquisitions for commercial items  and simple services that often fall under the simplified acquisition  threshold.", "The memorandum reminds agencies that, as with any procurement,  market research must be conducted to understand the marketplace and  to determine if it is reasonable to assume that the potential benefits of a  reverse auction can be achieved. It also notes that agencies should  regularly evaluate their experiences with reverse auctions and the  effectiveness of existing practices and policies as part of procurement  management reviews so that refinements can be made as necessary.  The issues addressed in the OFPP memorandum have not yet been  incorporated into the FAR. While the FAR does not specifically address  reverse auctions, several provisions facilitate agencies\u2019 use of them, such  as allowing the use of innovative strategies and electronic commerce."], "subsections": []}]}, {"section_title": "Federal Agencies\u2019 Use of Reverse Auctions Decreased between Fiscal Years 2013 and 2017", "paragraphs": ["We found the value of awarded reverse auctions decreased  approximately 22 percent across the government between 2013 and  2017, from about $1.9 billion to about $1.5 billion. Although the number  of auctions consistently decreased each year from 2013 to 2017, the  dollar value of auctions increased after 2015, indicating that some  individual reverse auctions have been for larger dollar values in the past  couple of years (see figure 3).", "During this same period, the overall trend in federal contract obligations  initially decreased from 2013 through 2015 and then increased overall  through 2017\u2014from about $490 billion in 2013 to $508 billion in 2017.  Hence, since 2013, contracts awarded through reverse auctions have  consistently represented less than 0.5 percent of federal contract  spending. In addition, almost all auctions and the vast majority of the  dollars agencies awarded between 2013 and 2017 resulted from the use  of the FedBid reverse auction platform.", "We also found that the dollar value of awarded reverse auctions varied  from 2013 to 2017 across the six agencies we reviewed, with total  reverse auction value greater in 2017 than in 2013 for half of the agencies  (DHS, Navy, and State) (see figure 4).", "Our analysis indicates that agencies\u2019 and components\u2019 policies may  influence the use of reverse auctions. Specifically, two agencies that  experienced substantial reductions in their use of reverse auctions  changed their policies so that contracting officers would no longer be  required to use reverse auctions. For example, Interior\u2019s August 2015  policy rescinded a previous requirement to first consider using reverse  auctions for commercial items using simplified procedures above the  micro-purchase threshold and below the simplified acquisition threshold.  The revised policy encouraged contracting officials to use procurement  tools as appropriate, allowing for the use of reverse auctions at  contracting officials\u2019 discretion. VA\u2019s Veterans Healthcare  Administration\u2014formerly one of the largest users of reverse auctions\u2014 revised its procurement manual in February 2014 to suspend the use of  any reverse auction platform to conduct new reverse auctions. The  Veterans Healthcare Administration amended its procurement manual  again in October 2015 to lift the suspension of GSA Reverse Auctions,  but kept in effect the suspension of all other reverse auctions platforms.  VA and Veterans Healthcare Administration officials stated that they  revised their policies following investigations about the use of reverse  auctions at the Veterans Healthcare Administration by the VA Office of  Inspector General.", "Other agencies and components we reviewed have policies that  encourage the use of reverse auctions. For example:", "State\u2019s May 2015 policy memorandum established a requirement that  contracting officials first consider using reverse auctions conducted  through FedBid for all noncomplex commodities.", "DHS\u2019s Customs and Border Protection\u2019s August 2014 standard  operating procedure required that reverse auctions conducted through  FedBid be given priority consideration when acquiring non-complex  commodities.", "A Naval Supply Systems Command\u2019s November 2014 policy letter  required use of reverse auctions for commercial off-the-shelf supply  items valued from $25,000 to the simplified acquisition threshold.", "The Army\u2019s Mission Installation Contracting Command Desk Book has  generally required use of reverse auctions for all acquisitions above  the micro-purchase threshold for commercial supplies in certain  categories.", "Overall, of the almost 15,000 reverse auctions conducted and awarded in  2016 by the five agencies for which we reviewed detailed data, we found  that about 94 percent were for contracts valued below $150,000.  However, we found that nearly two-thirds of the dollar value of awarded  reverse auctions was for purchases above $150,000 (see figure 5).", "Further, we found that reverse auctions valued at more than $1 million in  2016 accounted for less than 1 percent of the number of auctions and  32 percent of the dollar value. Most (about 80 percent) of these higher- dollar-value auctions were for information technology-related products  and services, while the remainder included hand tools, cabling  equipment, radios, uniforms, air rifles, and vehicle trailers.", "Our analysis also found that the selected agencies generally used  reverse auctions with fixed-price contracts, commercial items, products,  and to promote small business participation\u2014a few of the effective uses  outlined in the June 2015 OFPP memorandum. For example, in terms of  award value, 87 percent was for products and 13 percent for services. In  addition, 60 percent of auction award value was for information  technology-related purchases. Further, 83 percent of auction value was  for awards made to small businesses."], "subsections": []}, {"section_title": "Agencies Obtained Benefits of Enhanced Competition and Reduced Administrative Burden, but Savings Estimates Should be Viewed with Caution", "paragraphs": ["The agencies we reviewed obtained iterative bidding, indicating enhanced  competition between multiple vendors, in nearly three-quarters of reverse  auctions, and contracting officials cited reduced administrative burden as  another key benefit, but determining the actual amount of savings is  challenging due to data issues. Overall, in fiscal year 2016, the agencies  we reviewed achieved iterative bidding for 75 percent of reverse auctions.  However, in 20 percent of auctions only one bidder participated. Auctions  representing nearly half of the value of State\u2019s reverse auction awards  had only one bidder, driven by large dollar value procurements, in part  due to State\u2019s requirement to use reverse auctions for all non-complex  commodities without regard to expectations for competition. Contracting  officials we spoke to cited reduced administrative burden, particularly at  the end of the fiscal year, as a key factor in the decision to use reverse  auctions. Based on data from reverse auction providers, reverse auctions  that took place in 2016 resulted in contract awards that were an estimated  $100 million below the government\u2019s pre-auction estimate, though the  extent to which this figure represents actual savings is difficult to  determine."], "subsections": [{"section_title": "Three-Quarters of 2016 Auctions Resulted in Enhanced Competition through Iterative Bidding, But Competition Results Varied by Agency and Other Factors", "paragraphs": [], "subsections": [{"section_title": "Reverse Auctions Generally Resulted in Iterative Bidding", "paragraphs": ["We found the agencies we reviewed achieved iterative bidding on  75 percent of auctions in fiscal year 2016, accounting for 68 percent of  dollars spent. However, in 20 percent of the auctions, only one bidder  participated (see figure 6). OFPP\u2019s June 2015 guidance states that  reverse auctions are likely to be most effective in highly competitive  marketplaces.", "We found that auctions with iterative bidding resulted in award prices that  were, on average, about 12 percent lower than pre-auction cost  estimates, which generally reflect the government\u2019s independent cost  estimate. In contrast, this difference was about 6 percent among those  auctions without iterative bidding. Of the 40 auctions we selected for  in-depth review, we reviewed 29 auctions with iterative bidding. Review of  the bid history for some of these auctions demonstrated the potential  benefits of iterative bidding. For example:", "State awarded an approximately $4.3 million contract for night vision  goggles following an open market reverse auction that got 110 bids  from 16 vendors. The winning vendor bid 17 times and lowered its  price by roughly 30 percent over the course of the auction, not  including the reverse auction provider\u2019s indirect fee.", "DHS\u2019s Customs and Border Protection awarded an approximately  $268,000 contract, including an option period, for tires following an  open market reverse auction that got 35 bids from 13 vendors. The  winning vendor bid three times and lowered its bid by roughly  25 percent over the course of the auction, not including the reverse  auction provider\u2019s indirect fee.", "Army National Guard Bureau awarded an approximately  $14,000 contract for ice climbing equipment following an open market  reverse auction that got 20 bids from 7 vendors. The winning vendor  bid six times and lowered its price by roughly 10 percent over the  course of the auction, not including the reverse auction provider\u2019s  indirect fee."], "subsections": []}, {"section_title": "About One-Fifth of Reverse Auctions Had Only One Bidder", "paragraphs": ["Although three-quarters of 2016 auctions achieved iterative bidding for  the agencies we reviewed, we found that in 20 percent of the awarded  reverse auctions only one bidder participated, representing 27 percent of  the dollars awarded. This percentage is higher than the percent of  obligations on all 2016 competitive procurements for which there was only  one offer received across the government (14 percent). However, this  varied by agency. Four of the five agencies we reviewed had higher  proportions of only one bidder participating on reverse auctions, by dollar  value, than for their competitive procurements in general, particularly at  State. The other agency, Interior, had a lower proportion of only one  bidder participating in reverse auctions. Table 2 describes differences in  competition for selected agencies in 2016.", "Our analysis indicates that requiring the use of reverse auctions through  agency or component-level guidance may contribute to agencies  obligating more money through reverse auctions that attract only one  bidder. Specifically, State\u2019s percentage of dollar value for auctions with  one-bidder\u2014almost 40 percent\u2014was substantially higher than other  agencies in our review and more than twice State\u2019s percentage of dollars  obligated on competitive procurements in general when only one offer  was received. This was driven by the results of reverse auctions for larger  dollar value contracts. In 2016, State awarded more auctions valued over  $1 million than any of the other agencies we reviewed. Of 36 State  auctions valued at more than $1 million, 13 had only one bidder\u2014 accounting for 27 percent of the total dollar value of State\u2019s reverse  auctions in 2016. State\u2019s May 2015 guidance requires contracting officials  to first consider using FedBid\u2019s reverse auction platform for the  acquisition of non-complex commodities, but does not mention  competition or its benefits. While the policy allows contracting officers to  seek waivers in certain circumstances, none of the potential exceptions  listed in the policy include the expectation of a lack of robust competition.  Some State contracting officials we spoke to said that the requirement  encourages the use of reverse auctions even if there is not a reasonable  expectation of competition.", "We reviewed four State auctions valued at more than $1 million where  there was only one bidder. Contracting officials responsible for three of  the four auctions cited the guidance as a reason they used a reverse  auction. For example, State awarded a $12 million contract for brand  name computer and storage infrastructure equipment following a 2-day  reverse auction at the end of the fiscal year open to National Aeronautics  and Space Administration SEWP vendors. The contracting official  responsible for this auction told us that market research indicated that two  SEWP vendors could meet their needs, but only one vendor had  responded to inquiries during market research. However, she said that  she used a reverse auction because State policy required it for contracts  of this type.", "In the fourth instance, State officials acknowledged that other factors,  including poor acquisition planning that resulted in tight timeframes, led  them to use a reverse auction as a \u201ccrisis management tool\u201d. State  awarded a $19 million contract, including option periods, for construction  support services in Afghanistan following a 17-hour reverse auction  among Federal Supply Schedule vendors, although only one vendor had  responded to market research inquiries. Officials said that they had  sought to combine this contract with another set of services for which the  same vendor was the only identified source likely to respond, but  coordinating with the customers took too long, and they ultimately ran out  of time before the predecessor contract was set to expire and services  would stop. Under tight timeframes that risked the program losing critical  services, contracting officials said they used a reverse auction because it  allowed them to make a contract award quickly while still opening the  requirement to multiple vendors, even though there was little chance of  multiple vendors bidding.", "OFPP\u2019s June 2015 reverse auctions guidance states that market  research\u2014the process used to collect and analyze data about the  capabilities in the market to satisfy agency needs\u2014must be conducted to  understand the marketplace and to determine if it is reasonable to  assume that the potential benefits of reverse actions can be achieved.  State\u2019s requirement to first consider using FedBid\u2019s reverse auction  platform for all non-complex supplies, even with exceptions, may  contribute to State using and paying for reverse auctions when a different  approach could garner more competition and potentially a better price."], "subsections": []}, {"section_title": "Competition Rates Were Lower When Agencies Used Existing Contract Vehicles", "paragraphs": ["For the almost 15,000 auctions the five selected agencies conducted in  2016, nearly $590 million\u2014about 65 percent\u2014of total awarded reverse  auction value was for orders on existing contract vehicles. We found  that, in comparison to open market auctions, reverse auctions using  existing contract vehicles had 1) higher rates of only one bidder  participating, and 2) were less likely to have iterative bidding (see  table 3).", "The 40 auctions we reviewed in-depth included 24 auctions that used  existing contract vehicles, including 5 in which only one bidder  participated\u20144 awarded by State and 1 by DHS\u2019s Customs and Border  Protection. However, our review of these examples did not identify clear  reasons why auctions on existing contract vehicles have lower  competition rates overall than open market auctions. Agency procurement  officials told us that they are aware of variations in the competition  obtained for particular existing vehicles more generally than when reverse  auctions are used, and suggested that it would be useful to examine the  competition dynamics for reverse auctions vehicle by vehicle.", "None of the agency guidance we reviewed comprehensively addressed  how to use reverse auctions effectively when ordering from existing  contract vehicles. Further, none of the five agencies we reviewed have  collected data on or assessed why the number of reverse auctions with  only one bidder on existing contract vehicles was significantly higher than  reverse auctions using open markets. OFPP\u2019s June 2015 reverse  auctions guidance states that agencies should be evaluating their  experiences with reverse auctions and the effectiveness of existing  practices and policies so that refinements can be made as necessary.  Standards for internal control require management to periodically review  policies and procedures for continued relevance and effectiveness in  achieving the entity\u2019s objectives. Without understanding what factors  indicate that conducting reverse auctions using existing contract vehicles  is appropriate and providing this information to contracting officials so that  they can consider it when developing their acquisition strategies,  agencies may be using and paying for reverse auctions when another  approach might yield better competition and pricing."], "subsections": []}]}, {"section_title": "Decreased Workload and Ease of Use Are Key Reasons Officials Use Reverse Auctions", "paragraphs": ["Similar to what we found in December 2013, of the 35 contracting officials  we interviewed, 29 cited ease of use and reduced administrative burden  as key reasons why they chose to use reverse auctions, particularly at the  end of the fiscal year. Officials noted that certain reverse auction  providers, such as FedBid, offer acquisition support services in addition to  the reverse auction platform itself that can decrease the workload for  contracting officials. In particular, contracting officials noted the following  as ways that reverse auctions assisted them in performing their  responsibilities:", "The reverse auction provider performed functions such as  building complex auctions and following up with vendors to  encourage participation. In some instances, such as at State or  Customs and Border Protection, FedBid provides support personnel  on-site at agencies. Contracting officials told us that this is helpful  because they are able to obtain in-person support for troubleshooting  and time-sensitive purchases. Officials said that they used these  additional services for 7 of the 29 FedBid auctions about which we  interviewed contracting officials.", "Reverse auction platforms produced auction documentation that  decreased the administrative burden of producing a contract file.  For example, Army officials responsible for a $14,000 award for ice  climbing equipment explained that the summary document produced  by the FedBid platform includes much of the competition information,  such as auction participants and bids, needed for the contract file.", "The reverse auction platforms enabled contracting officials to  replicate past auctions for similar items, then update  auction-specific information. For example, a DHS Immigration and  Customs Enforcement contracting official responsible for a  $38,000 award for detention uniforms said that he makes frequent  purchases of the same items, so the ability to clone past auctions and  update the quantities, pre-auction cost estimates, clauses, and  sources (open market or existing contracts) saves a lot of time. He  said that with other procurement methods he must re-enter  procurement information each time.", "Reverse auctions enabled them to work on multiple  procurements simultaneously, rather than sending emails or  making phone calls to individual vendors to obtain quotes. For  example, a DHS Customs and Border Protection contracting official  responsible for two auctions we reviewed said that reverse auctions  allow him to work on multiple contract awards at a time at the end of  the fiscal year.", "Data we collected from reverse auction providers found that contracting  officials make greater use of reverse auctions at the end of the fiscal year.  While the agencies we reviewed made a disproportionate number of new  awards in the last fiscal quarter of 2016\u201442 percent\u2014reverse auctions  were used even more heavily, with agencies conducting 53 percent of  reverse auctions in the last quarter (see figure 7)."], "subsections": []}, {"section_title": "Reverse Auctions Data Indicate $100 million in Savings in 2016, but Savings Estimates Should be Viewed with Caution", "paragraphs": ["Based on fiscal year 2016 data from reverse auction providers, Army,  Navy, DHS, Interior, and State awarded contracts with values that totaled  more than $100 million less than the agencies\u2019 pre-auction cost  estimates, after including any reverse auction provider fees (see table 4).", "The agencies we reviewed generally rely on reverse auction providers to  report savings estimates to them. FedBid\u2014the largest provider used by  our selected agencies\u2014and GSA Reverse Auctions generally calculate  savings as the difference between the pre-auction cost estimate\u2014 represented by the auction\u2019s \u201ctarget price\u201d set by buyer\u2014and the award  price, which is the winning vendor\u2019s bid plus the reverse auction  provider\u2019s fee. In some cases, however, FedBid will modify this approach  to account for potential shortcomings in the quality of pre-auction cost  estimates. FedBid does this in two different scenarios.", "First, to correct for situations when using the agency target price  results in abnormally high savings\u2014generally defined by FedBid as  savings more than 50 percent above the target price\u2014instead FedBid  uses a target price based on an average of bids received during the  auction. FedBid representatives explained that these adjustments  help avoid overstating savings caused by outlier target prices.", "Second, to correct for situations when the agency target price was  lower than the winning bid, and would result in a calculated savings of  less than $0, instead FedBid uses a target price equal to the winning  bid, so that calculated savings equal $0. FedBid representatives  explained that, in their opinion, a contracting official would not  proceed with an award if the winning bid was higher than the target  price unless the contracting official believed that the pre-auction  estimate was invalid.", "Overall, we found that in 4 of the 33 FedBid auctions we reviewed, the  awarded reverse auction prices were collectively $900,000 higher than  the pre-auction cost estimates (which were used as the target prices).  Prior to reporting savings to the agencies, FedBid adjusted the target  prices to match the award values and reported that these auctions  resulted in no savings. FedBid representatives said that they have  provided details about this data normalization process to the contracting  officers responsible for their agency contracts.", "We identified other approaches to calculating savings resulting from  reverse auctions. For example, in December 2016, the Army negotiated a  new contract with FedBid that established a different method for  calculating savings in an attempt to isolate the savings due to the specific  effects of reverse auctions. The Army calculates savings as the difference  between the \u201cinitial leading bid\u201d\u2014the second bid usually\u2014and the winning  bid. GSA Reverse Auctions and Army CHESS have also calculated  savings through different methods, including as the difference between  the highest bid and the lowest bid, as well as between the winning  vendor\u2019s initial and lowest bids.", "Contracting officials acknowledged several challenges in using the  pre-auction cost estimate as a baseline from which to calculate savings.  For example:", "Contracting officials at Interior\u2019s US Geological Services stated that it  is critical to ensure that the pre-auction cost estimates they set in the  reverse auction system are based on good market research, and that  the target price is set at the lowest price they can obtain outside of a  reverse auction. They noted that before conducting a reverse auction  for water filters, these officials lowered the pre-auction cost estimate  by about $450,000 from the program office\u2019s initial cost estimate, to  reflect a lower price identified in subsequent market research. During  the reverse auction, Interior obtained five bids from four vendors,  resulting in an award valued at $1.4 million, including option periods.  The auction\u2019s savings were then calculated to be $670,000.", "In another auction resulting in a $430,000 contract awarded by the  Army for laptops, the contracting official noted that the pre-auction  cost estimate was developed by the customer based on historic  pricing. In turn, the price obtained through the reverse auction  reflected a calculated savings of $67,000 or about 13 percent from the  pre-auction estimate. However, the contracting official said that this  method is not a reliable way to calculate savings as his customers  typically use a high estimate to make sure they do not have to request  additional funds. The contracting officer also noted that, in his  experience, using historical pricing for technology products can be  problematic since pricing changes very quickly as new technology is  developed and old products become obsolete.", "We reported in December 2013 that it was unclear whether comparing  auction award prices to the pre-auction cost estimate produced an  accurate estimate of savings, as it depended on the quality of the  pre-auction cost estimate, which is generally informed by market  research. In our current review, contracting officials reiterated this  perspective. Federal regulations provide flexibility in terms of the extent to  which market research should be conducted, and how that research  should be conducted, including for low dollar procurements. Because  the FAR has not yet been amended to address any specific requirements  for reverse auctions as we recommended in our previous report, we are  not making additional recommendations on this issue."], "subsections": []}]}, {"section_title": "Agency Guidance and Contracting Approaches Lack Sufficient Information to Ensure Good Business Decisions and Appropriate Contract Oversight", "paragraphs": ["For reverse auctions conducted in 2016, the five agencies we reviewed  indirectly paid more than $13 million in fees. Similar to our findings from  our December 2013 review, we found that agency contracting officials we  interviewed generally did not have a complete and accurate  understanding of reverse auction fee structures. This hinders their ability  to make informed decisions about when to use reverse auctions or which  reverse auction platform to use for a specific procurement, potentially  leading to paying more fees than necessary for reverse auctions for the  level of service required. Our analysis of agency- and component-level  guidance found that none of the agency-level guidance we reviewed fully  informed contracting officials about the availability of reverse auction  providers and platforms and any applicable reverse auction fee  structures, nor did the guidance ensure that contracting officials would  compare the options available to them when considering whether to use  reverse auctions. In addition, agencies that used the services of FedBid,  the largest reverse auction provider, did not always draft sufficiently  detailed fee arrangements to ensure that the agencies were  knowledgeable about and could conduct oversight of FedBid\u2019s indirect  fees."], "subsections": [{"section_title": "Selected Agencies Paid over $13 Million for Reverse Auctions Conducted in 2016", "paragraphs": ["The five agencies we reviewed indirectly paid about $13.4 million in fees  to reverse auction providers in 2016. As discussed previously, generally,  in the indirect payment process, the reverse auction provider adds a fee  onto the winning vendor\u2019s bid. Then, the agency pays the winning vendor  this total amount. In turn, the reverse auction provider collects the fee  from the winning vendor.", "Agencies we reviewed primarily conducted reverse auctions using three  reverse auction providers\u2019 platforms in 2016. The agencies paid indirect  fees to two of these reverse auction providers in 2016\u2014FedBid and  GSA\u2014while the third provider, Army CHESS, did not charge a fee for its  services. Indirect fees paid to FedBid and GSA generally varied from 0 to  3 percent of the value of the transaction, though both FedBid and GSA  cap certain fees and will waive fees in certain circumstances. For  example, GSA does not charge an indirect reverse auction fee for Federal  Supply Schedule orders or agency contracts based on Federal Supply  Schedule contracts. See table 5 for additional details on typical fee  structures of reverse auction providers used by the agencies we  reviewed."], "subsections": []}, {"section_title": "Agency Guidance Does Not Provide Sufficient Information to Contracting Officials on Reverse Auction Fees to Help Ensure Good Business Decisions", "paragraphs": ["We found that none of the guidance we reviewed from the five agencies  included the information needed to help ensure that contracting officials  understand reverse auction indirect fees and their roles in assessing  those fees. OFPP\u2019s June 2015 guidance states that contracting officers  should consider the amount of fees paid when evaluating whether the  price of a product or service in a reverse auction is fair and reasonable,  including any additional fees for use of another agency\u2019s existing contract.  This expectation is further established in agency guidance at the Army,  DHS, and Interior. Our review found, however, that contracting officers  generally did not understand how fees would be applied or the amount  they would actually pay to use a reverse auction. This finding is  consistent with our observation from our December 2013 report that  agency officials were uncertain about how reverse auction fees were  paid. Understanding reverse auctions\u2019 costs is essential to making  informed business decisions about when to use reverse auctions or which  reverse auction platform to use for a particular procurement. Without such  understanding, the risk increases that agencies may be paying more in  fees than necessary for the level of service required.", "Agency officials we interviewed generally did not have an accurate  understanding of reverse auction indirect fee structures. For example,  acquisition policy officials at State told us that their contract with FedBid  has no cost to the agency because the fees are paid from the companies  that win the auctions and it is up to the companies whether or not to  include the fee in their final price to the government. As discussed above,  however, FedBid automatically adds fees on to all vendor bids. An official  who was involved in developing policy related to reverse auction use at  Interior told us that agency officials were not fully aware of the fee  structure used by FedBid when they initially contracted for the company\u2019s  reverse auction services in October 2010. The official added that in  hindsight, the fee structure is something that should have been more  closely considered.", "Additionally, while the contracting officials we interviewed for the  30 auctions we reviewed that incurred an indirect reverse auction fee  were generally aware that they were paying a fee, officials responsible for  28 of these 30 auctions were uncertain about one or more elements of  the reverse auction fee structure. For example:", "Lack of understanding of fee amount charged: Contracting officials  who conducted 18 of the 29 FedBid auctions in our review were not  aware of the fee charged for the reverse auction. All but three of these  officials told us that they generally do not see the fee amount because  it is included in the vendors\u2019 bids and is not broken out separately, so  they evaluate the price inclusive of the fee. In response, FedBid  representatives told us that since March 2014 they have offered  functionality in the FedBid system that displays the fee separately.  However, FedBid only turns this functionality on at the request of  agency officials, which had not occurred at the time of our review. We  found that procurement officials at all five of the agencies we reviewed  were unaware that this feature was available. According to FedBid  representatives, they have since notified the contracting officers  responsible for their agency contracts about this feature.", "Confusion about circumstances for fee waivers or reductions:  Although FedBid will waive or reduce its fee when the fee causes the  auction to be above the pre-auction cost estimate or an established  contract price, contracting officials responsible for 22 of the 29 FedBid  reverse auctions did not accurately understand how this would work  when we asked about it. For instance, some contracting officials at  State and Customs and Border Protection told us in error that FedBid  would waive its fee if there was only one bidder in an auction.  Additionally, contracting officials for two auctions told us that they  thought the fees associated with their auctions had been waived and  expressed surprise when they learned the fee amount. For one  auction, a State contracting officer told us that if she had been aware  of the amount of the potential fee for an auction for construction  services for which only one bid was received, she may have  considered other alternatives for awarding the contract.", "Uncertainty about how fee caps are applied: While FedBid generally  caps its reverse auction fees at $10,000 per transaction, officials we  interviewed that were responsible for 20 of 29 FedBid auctions told us  they were not aware of this or did not know the dollar threshold for the  fee cap.", "Additionally, while increased competition is typically cited as a benefit of  reverse auctions, we found that about 18 percent of fees paid to reverse  auction providers in 2016\u2014approximately $2.5 million\u2014were for auctions  in which there was only one bidder participating (see table 6 for detail by  agency).", "Further, we found that agencies in our review indirectly paid  approximately $3.3 million in fees for reverse auctions conducted in 2016  even when an alternative no-fee reverse auction platform was likely  available. The availability of an alternative platform does not necessarily  mean that the no-fee platform is the most appropriate option, because  different platforms provide different levels of service. We did not  determine whether particular platforms were more appropriate or resulted  in lower overall prices to the government. However, we found that  agencies paid these fees to FedBid to conduct reverse auctions for orders  on Federal Supply Schedule contracts or Army CHESS contracts when  they might have used GSA Reverse Auctions or the Army CHESS IT  e-mart without paying a fee. Our 40 case studies included 10 auctions for  orders off GSA\u2019s Federal Supply Schedules or Army CHESS contracts  that used FedBid rather than using GSA Reverse Auctions or the Army  CHESS IT e-mart. For five auctions at Army and State, contracting  officials told us they were required or strongly encouraged by agency or  component policy to use FedBid. For the other five auctions, contracting  officials told us that they preferred FedBid because it was easier to use or  they were more familiar with it than GSA Reverse Auctions. Without  considering which provider best meets its needs in these cases, the  agencies may have paid more in fees than necessary for the required  level of service.", "We found that none of the agency guidance we reviewed was sufficient to  ensure that contracting officials understood reverse auction fees and their  roles in assessing those fees. A clear understanding is necessary to  make informed decisions about when to use reverse auctions or which  reverse auction platform to use for a particular procurement (see table 7).", "We found that agency guidance we reviewed at two of the five  agencies\u2014Navy and State\u2014did not address the role of contracting  officials in understanding and assessing reverse auction fees.  Specifically:", "Navy does not have agency-wide guidance that addresses the  circumstances and processes for using reverse auctions. At the  component level, the Naval Supply Systems Command\u2019s November  2014 guidance states that contracting officials may use any available  government or commercial reverse auction platform for reverse  auctions, unless ordering off GSA\u2019s Federal Supply Schedule or other  contract vehicle posted at GSA\u2019s eBuy site, but the guidance does not  provide information about how contracting officers should consider  reverse auction fees in deciding which platform to use.", "State\u2019s guidance on reverse auctions does not address the role of  contracting officers in considering reverse auction fees. As noted  previously, State\u2019s May 2015 policy memorandum requires that  contracting officers first consider using FedBid for acquisition of all  non-complex commodities unless a waiver is obtained.", "Guidance we reviewed at the other three agencies\u2014Army, Interior, and  DHS\u2014did address the role of contracting officials in understanding and  assessing reverse auction fees, although the level of detail varied among  the three agencies. Specifically:", "A June 2015 policy alert from the Army stated that contracting officials  are required to be aware of reverse auction fees and consider them in  evaluating whether the price of the product or service being acquired  is fair and reasonable.", "Similarly, Interior\u2019s August 2015 guidance states that contracting  officers need to evaluate the estimated amount of reverse auction  fees that will be paid when assessing whether prices are fair or  reasonable.", "DHS\u2019s May 2017 guidance states that contracting officers need to  understand the fees charged by a provider, and determine and  document that the fee structure represents a fair and reasonable cost  and offers the best value to the government.", "None of the agency-wide guidance we reviewed at the five agencies  detailed the fee structure of each reverse auction platform used by the  respective agency. As a result, contracting officials\u2019 ability to understand  and assess the fees\u2014an existing requirement in OFPP guidance and at  the Army, Interior, and DHS\u2014is hindered. Neither State nor Interior had  guidance that detailed the specific fee structures of reverse auction  providers used by contracting officials at those agencies. While one Army  command developed guidance on FedBid\u2019s fee structure, the Army has  not provided any agency-wide guidance on FedBid or GSA Reverse  Auctions fee structures, even though the Army awarded reverse auctions  valued at approximately $326 million using these two providers in 2016.  Similarly, while the Navy\u2019s May 2017 memorandum of understanding for  using GSA Reverse Auctions informs contracting officials of GSA  Reverse Auctions\u2019 fee structure, the Navy does not have guidance that  details FedBid\u2019s fee structure. In 2016, the Navy conducted more than  10 times as many auctions using FedBid\u2019s platform as it did using GSA\u2019s  platform.", "Additionally, we found that none of the agencies had agency-wide  guidance that required contracting officials to consider whether no-fee  reverse auction alternatives, such as GSA Reverse Auctions for Federal  Supply Schedule orders and the Army\u2019s CHESS IT e-mart for Army  CHESS orders, would meet their needs. State, DHS, and Interior  guidance does not address this issue at all. Similarly, while neither the  Army nor Navy have agency-wide guidance that does so, each agency  has component or command-level guidance that addresses this issue to a  limited extent. For example, Naval Supply Systems Command guidance  issued in November 2014 requires that contracting officials use GSA  Reverse Auctions for products or services off the Federal Supply  Schedule. More recently, according to Army officials, as of July 2017, the  Army\u2019s CHESS program began recommending that reverse auctions for  orders off Army CHESS contracts be conducted using the Army CHESS  IT e-mart.", "Standards for internal control in the federal government require agencies  to develop policies that address operational processes and the  responsibilities of individuals for carrying out those processes. Our  review found that, while certain agencies or agency components had  guidance that provided some information about reverse auction fees,  none of the agency-level guidance we reviewed fully addresses  contracting officials\u2019 role in understanding and assessing reverse auction  fees, details fee structures for reverse auction platforms used by the  agency, or requires that contracting officers compare the options for  reverse auction providers that are available to them, particularly regarding  no-fee alternatives. Without such guidance, contracting officers are at risk  of paying more in fees than necessary for the level of service they  require."], "subsections": []}, {"section_title": "Agencies\u2019 Contracting Approaches Do Not Provide Sufficient Information on Reverse Auction Fees to Facilitate Oversight and Adherence to Internal Control Standards", "paragraphs": ["We found that while nearly all reverse auction fees were paid to FedBid  since FedBid was by far the largest reverse auction provider used by the  selected agencies, agencies\u2019 approaches to contracting with FedBid did  not result in sufficiently detailed fee arrangements to ensure that the  agencies were knowledgeable about the fees they were paying and could  conduct oversight of whether FedBid was applying indirect fees as  expected. For the five agencies we reviewed that conducted reverse  auctions using FedBid in 2016, two did not have documented agency- level fee arrangements with FedBid, while the other three had contracts  that did not fully address at least one element of FedBid\u2019s fees, as shown  in table 8.", "Three of the five agencies we reviewed that used FedBid\u2014Army, Navy,  and State\u2014had agency-wide contracts in place with FedBid, but we found  that these contracts did not always document key aspects of the fee  terms with FedBid. Specifically:", "Lack of clarification on how the fee cap applies to contracts with  option years: FedBid representatives stated that their standard  practice is that the fee cap will apply separately to each option year  awarded. The Navy\u2019s January 2018 contract with FedBid is consistent  with this practice and explains how the fee cap will apply to contracts\u2019  option years. In contrast, Army\u2019s and State\u2019s December 2016  contracts with FedBid do not specify how the fee cap would apply to  option years. Contracting officials who were responsible for managing  the FedBid contract at the Army told us they believed that the fee cap  was a total of $10,000 per contract awarded, including for the base  and all option years.", "Lack of detail on calculation of fee cap: Navy and State\u2019s contracts  with FedBid did not include full details on how the fee cap would be  applied. As discussed above, FedBid generally caps its fee at  $10,000. However, due to the way FedBid calculates fees, if the  lowest bid is not selected, the fee on the selected bid may be over  $10,000. We found that 19 reverse auctions in 2016 resulted in  FedBid fees over $10,000. Neither the Navy\u2019s January 2018 contract  nor State\u2019s December 2016 contract explains that the fee may be  above $10,000.", "According to agency officials, DHS and Interior did not have agency-wide  contracts with FedBid for reverse auctions conducted in 2016. While three  DHS components had their own contracts with FedBid that were active in  2016, four additional components plus DHS headquarters used FedBid in  2016 without either an agency- or component-level contract in place. At  Interior, the contract with FedBid expired in September 2015 and was not  renewed, although contracting officials at Interior components continued  to conduct reverse auctions on FedBid. Contracting officials at these  agencies used FedBid\u2019s services by agreeing to its standard terms and  conditions each time they accessed the FedBid platform. FedBid  representatives told us they consider the terms of use to be the contract  between FedBid and the government when there is no agency- or  component-level contract in place, and that this is similar to how  commercial e-commerce marketplaces operate with federal agencies for  micro-purchases. FedBid\u2019s standard terms and conditions, however, do  not provide detailed information on fees, such as the precise fee  percentage charged or the amount of the fee cap. FedBid representatives  told us that they typically charge federal agencies a 3 percent fee, but that  fee details are not included in the standard terms and conditions because  commercial and government customers may pay different fees. At DHS  and Interior, when there are not agency- or component-level contracts in  place and contracting officials use FedBid by agreeing to the standard  terms and conditions, there is a risk that they may agree to fees or other  terms that have not been reviewed and approved by agency acquisition  and legal offices.", "Lastly, we found that only two of the agencies we reviewed\u2014the Army  (since December 2016) and the Navy (since May 2012)\u2014required and  received regular monthly reporting from FedBid on reverse auction fees  paid indirectly by the agency. Both agencies also have contractual  requirements for FedBid to provide this information annually, in addition to  the monthly reporting. Army officials told us that requiring additional data  in their December 2016 contract with FedBid was a result of lessons  learned from their September 2012 contract, and was intended, in part, to  improve oversight of fees paid. Army and Navy officials provided  examples of FedBid reverse auction fee reports, and described how they  used this information to oversee their contracts with FedBid. The Army  and Navy also both requested and received monthly reports from GSA  Reverse Auctions that included detailed information on fees.", "In contrast, DHS, Interior, and State did not require or receive regular  reporting on fees from FedBid or GSA Reverse Auctions. As previously  discussed, according to officials, DHS and Interior do not have agency- wide contracts with FedBid and, therefore, do not have a mechanism in  place to require agency-wide reporting. Interior officials told us they do  not receive any reports on fees paid from FedBid. For the two DHS  components we reviewed, Immigration and Customs Enforcement  officials told us that they received ad hoc reporting on fees paid to FedBid  and provided us with a sample report that included fee data. While  Customs and Border Protection\u2019s contract with FedBid requires reporting  on costs incurred by the government, officials told us that they do not  receive any reporting on fees. State neither requires nor receives  reporting on fees from FedBid. State and Customs and Border Protection  officials told us that they do not receive such reporting since fees are paid  by winning vendors and therefore there is no direct cost to the  government to use FedBid. We found, however, that these agencies  indirectly paid almost $4.2 million in fees to FedBid in 2016.", "Standards for internal control require agencies to appropriately document  transactions and significant events to assist with oversight and help  ensure that agency objectives are being achieved effectively and  efficiently. Without a documented contract or arrangement in place  between agencies or components and FedBid that provides a clear and  common understanding of payment terms and fee structure, agencies  lack sufficient information to conduct contract oversight to determine  whether FedBid is applying its indirect fees as the agencies expect.", "Further, internal control standards emphasize timely and reliable  information and data so that agencies can effectively monitor their  operations. Without requiring reporting on reverse auction fees, agencies  may not have sufficient information to understand and oversee their use of reverse auction platforms and conduct contract oversight to ensure that  the fees they are being charged are appropriate."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The landscape of reverse auctions has changed slightly since our last  review in December 2013. There are more reverse auction providers,  including government providers, in the marketplace, with the vast majority  of auctions conducted through FedBid. The use of reverse auctions,  however, continues to constitute a relatively small percentage of federal  contract spending. For the most part, agencies are using reverse auctions  to acquire low-cost, commercial products and benefitting from the ease of  use and reduced administrative burden that reverse auctions can provide.  Agencies are also achieving more robust competition in the form of  iterative bidding on nearly three-quarters of reverse auctions. Despite this  level of competition, however, precisely quantifying the amount of savings  is inherently difficult. Given that the vast majority of auctions are small  dollar procurements which are, by design, intended to be simpler and to  pose less administrative burden on the acquisition workforce, it may be  counterproductive to expend more time and resources to produce a better  estimate of savings. Nevertheless, there is room for improvement in the  guidance agencies provide to their contracting personnel to ensure the  appropriate use of reverse auctions, increase benefits, and reduce costs.  Agencies could benefit from paying more attention to  rates of one-vendor participation, provider fee structures, and  contracts with reverse auction providers.", "Across the agencies in our review, often only one bidder participates, in  particular when agencies conduct a reverse auction using existing  contract vehicles rather than opening the auction to all potential vendors.  At State, its requirement for contacting officers to use reverse auctions for  all non-complex acquisitions may result in reverse auction use in  situations where it is not warranted; that is, without the type of highly  competitive marketplace that can result in savings.", "Our work also identified a need for agencies to provide contracting  officers better information on the fee structures so that they can make  informed decisions as to whether to use a reverse auction and which  reverse auction platform to use. Further, agencies are not requiring data  on or analyzing the fees they are paying. The indirect nature of provider  fees\u2014combined with fee arrangements that are missing important details  or are nonexistent and a lack of visibility into those fees\u2014puts agencies  at risk of paying more than necessary for the level of service needed.  These issues are not new: we raised similar concerns in our report more  than 4 years ago. Taken together, these issues put the government at risk  of failing to maximize the benefits that the effective use of reverse auction  can provide, and worse, put agencies at risk of paying millions of dollars  more in fees than necessary for the level of service needed."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making a total of 21 recommendations, including 3 to Army, 4 to  Navy, 4 to DHS, 4 to Interior, and 6 to State.", "We are making the following seven recommendations to heads of  agencies within the Department of Defense:", "The Secretary of the Army should: assess why reverse auctions that  are conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies. (Recommendation 1)", "The Secretary of the Army should: document and provide information  to contracting officials that describes available reverse auction  providers and platforms, and any associated fee structures; and  provide guidance, as appropriate, to contracting officials to ensure  that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 2)", "The Secretary of the Army should clarify with FedBid how fees apply  when contract option years are exercised. (Recommendation 3)", "The Secretary of the Navy should: assess why reverse auctions that  are conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies.(Recommendation 4)", "The Secretary of the Navy should review the agency\u2019s current  guidance to assess whether it adequately addresses contracting  officer responsibilities to consider the cost of any fees associated with  reverse auction options they may be considering when developing  their acquisition strategies, and revise its guidance as appropriate.  (Recommendation 5)", "The Secretary of the Navy should: document and provide information  to contracting officials that describes available reverse auction  providers and platforms, and any associated fee structures; and  provide guidance, as appropriate, to contracting officials to ensure  that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 6)", "The Secretary of the Navy should clarify with FedBid how FedBid\u2019s  fee cap will be calculated. (Recommendation 7)", "We are making the following four recommendations to DHS:", "The Secretary of the Homeland Security should: assess why reverse  auctions that are conducted using existing contract vehicles have only  one bidder at higher rates than reverse auctions conducted on the  open market; determine what factors indicate that conducting reverse  auctions is appropriate when using existing contract vehicles; and  provide this information to contracting officials so that they can  consider it when developing their acquisition  strategies.(Recommendation 8)", "The Secretary of Homeland Security should: document and provide  information to contracting officials that describes available reverse  auction providers and platforms, and any associated fee structures;  and provide guidance, as appropriate, to contracting officials to  ensure that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 9)", "The Secretary of Homeland Security should determine if it would be  advantageous for the agency to enter into contracts with third-party  reverse auction providers. (Recommendation 10)", "The Secretary of Homeland Security should obtain timely information  on how much the agency is paying for reverse auction services.  (Recommendation 11)", "We are making the following four recommendations to Interior:", "The Secretary of the Interior should: assess why reverse auctions that  are conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies.(Recommendation 12)", "The Secretary of the Interior should: document and provide  information to contracting officials that describes available reverse  auction providers and platforms, and any associated fee structures;  and provide guidance, as appropriate, to contracting officials to  ensure that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 13)", "The Secretary of the Interior should determine if it would be  advantageous for the agency to enter into contracts with third-party  reverse auction providers. (Recommendation 14)", "The Secretary of the Interior should obtain timely information on how  much the agency is paying for reverse auction services.  (Recommendation 15)", "We are making the following six recommendations to State:", "The Secretary of State should review the agency\u2019s current guidance  to assess whether it leads contracting officials to use reverse auctions  in situations where there is not a highly competitive marketplace, and  revise its guidance as appropriate. (Recommendation 16)", "The Secretary of State should: assess why reverse auctions that are  conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies. (Recommendation 17)", "The Secretary of State should review the agency\u2019s current guidance  to assess whether it adequately addresses contracting officer  responsibilities to consider the cost of any fees associated with  reverse auction options they may be considering when developing  their acquisition strategies, and revise its guidance as appropriate.  (Recommendation 18)", "The Secretary of State should: document and provide information to  contracting officials that describes available reverse auction providers  and platforms, and any associated fee structures; and provide  guidance, as appropriate, to contracting officials to ensure that they  compare the options that are available to them when considering  whether to use reverse auctions. (Recommendation 19)", "The Secretary of State should clarify with FedBid how FedBid\u2019s fee  cap will be calculated and how fees apply when contract option years  are exercised. (Recommendation 20)", "The Secretary of State should obtain timely information on how much  the agency is paying for reverse auction services. (Recommendation  21)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD, DHS, Interior, State, the  Department of Housing and Urban Development, GSA, VA, and OMB.  Collectively, the agencies concurred with 18 of the 21 recommendations  we made, and did not concur with three.", "In its written response, reproduced in appendix IV, DOD concurred with  our seven recommendations\u2014three to the Army and four to the Navy\u2014 and stated that the department expected to complete actions to address  the recommendations by the end of calendar year 2018.", "In its written response, reproduced in appendix V, DHS concurred with  two recommendations and did not concur with two recommendations.  DHS concurred with our recommendation that it assess why reverse  auctions conducted using existing vehicles have higher one bidder rates  and provide information to contracting officials about factors that indicate  conducting reverse auctions using existing vehicles is appropriate.  However, DHS did not believe that it needed to conduct an assessment  specific to reverse auctions. The department stated that the factors that  contribute to one bidder participating in other procurements\u2014such as  inadequate market research and poorly defined requirements\u2014would  similarly affect reverse auctions. Nevertheless, DHS stated that the Office  of the Chief Procurement Officer will communicate to its contracting  officials that when market research for a planned reverse auction buy on  an existing contract vehicle demonstrates that only one bid is expected, a  reverse auction must not be used to conduct the procurement. DHS  expects to complete actions in response to this recommendation by the  end of November 2018.", "DHS also concurred with our recommendation that it determine if it would  be advantageous for the agency to enter into contracts with third party  reverse auction providers. DHS stated that an assessment should be  done periodically to determine if there is a need to have a department- wide reverse auction provider. In that regard, DHS stated that an  assessment was conducted in 2016 to evaluate providers and platforms  and, based on this evaluation, DHS made the decision to continue to  provide contracting offices the flexibility to choose their own reverse  auction provider. DHS stated that it believes its past actions address our  recommendation. However, the intent of our recommendation is not to  suggest that DHS consider whether to mandate a certain provider be  used agency-wide. Rather, we are recommending that DHS assess  whether agency-level contracts with reverse auction providers\u2014be it one  or several different providers\u2014are desirable to protect against the risk  that individual contracting officials may be agreeing to fees or other terms  that have not been reviewed and approved by agency acquisition and  legal offices. It is unclear whether DHS\u2019s 2016 assessment considered  these issues.", "DHS did not concur with our recommendation that it provide information  to contracting officials regarding available reverse auction providers and  fee structures and, as appropriate, provide guidance to contracting  officials to ensure they compare available options for reverse auctions. In  its response, DHS stated that there is limited value in centrally collecting  and updating this information, and that it is the contracting officer\u2019s  responsibility, as a part of market research, to be knowledgeable about  reverse auction providers and fee structures. DHS stated that its May  2017 reverse auctions policy requires contracting officers to understand  the fees that will be charged and determine and document that the fee  structure represents a fair and reasonable cost and offers best value to  the government. DHS stated that the Office of the Chief Procurement  Officer will issue an alert reminding contracting professionals of these  responsibilities by the end of November 2018. Given the pervasive  confusion we found among contracting officials about the fee structures of  reverse auction providers, we continue to believe that DHS should  document and provide information to contracting officials, which could  help eliminate confusion and minimize the duplication of individual  reverse auction users repeatedly collecting the same information.", "DHS also did not concur with our recommendation that it obtain timely  information on how much the agency is paying for reverse auction  services, stating that aggregating fee data at the department level would  require systems changes or manual collection that would not inform DHS  as to whether reverse auctions were used correctly or if the fee was too  high. In this case, however, our work found that reverse auction providers  have this data available upon request. As such, in lieu of making changes  to systems or attempting to have contracting officers manually collect this  information, we believe DHS could obtain this information from its reverse  auction provider and use this information to help DHS understand what it  pays for reverse auction services. This approach would also better inform  the department in its periodic assessments of contractual relationships  with reverse auction providers.", "In its written response, reproduced in appendix VI, State concurred with  all six recommendations, and described actions the Office of Acquisitions  Management intends to take to address them, including reviewing current  guidance and revising it as appropriate; increasing contracting officer  awareness through training and policy guidance; and engaging with its  primary reverse auction provider to obtain a better understanding of the  fee structure and timely reporting of fees. State did not provide  information as to when it expected these actions to be completed.", "In its written response, reproduced in appendix VII, Interior concurred with  three recommendations and did not concur with one recommendation.  Interior concurred with our recommendation that it assess why reverse  auctions conducted using existing vehicles have higher one bidder rates  and provide information to contracting officials about factors that indicate  conducting reverse auctions using existing vehicles is appropriate. The  department stated that it will implement policy regarding the use of  reverse auctions with existing contract vehicles. Interior also concurred  with our recommendation that it provide information to contracting officials  regarding available reverse auction providers and fee structures and, as  appropriate, provide guidance to contracting officials to ensure they  compare available options for reverse auctions. The department stated it  would review and update guidance to provide contracting officials with  current and relevant information on available reverse auction providers,  platforms, and associated fee structures. Interior also concurred with our  recommendation that it obtain timely information on how much the agency  is paying for reverse auction services. Interior did not provide information  as to when it expected the above actions to be completed.", "Interior did not concur with our recommendation to determine if it would  be advantageous for the agency to enter into contracts with third-party  reverse auction providers, stating that it would be more efficient to provide  guidance to contracting officials so that they can make the best business  decision. Interior officials told us verbally that they have already  considered whether or not to enter into contracts with reverse auction  providers and determined that it is not to the department\u2019s advantage to  do so. Interior officials told us they would provide us information about the  factors considered in making this decision, but we did not receive this  information prior to issuing this report.", "In its written response, reproduced in appendix VIII, VA provided  information about its use of reverse auctions for energy purchases  through GSA and its energy reverse auction provider, EnerNOC. The  Department of Housing and Urban Development, GSA, and OMB  informed us that they had no comments on this report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of Homeland  Security, the Secretary of Housing and Urban Development, the  Administrator of General Services, the Secretary of the Interior, the  Secretary of State, the Secretary of Veterans Affairs, and the  Administrator of Federal Procurement Policy. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Defense Logistics Agency and Army Computer Hardware Enterprise Software and Solutions Reverse Auctions", "paragraphs": [], "subsections": [{"section_title": "Defense Logistics Agency\u2019s Use of Reverse Auctions", "paragraphs": ["The Defense Logistics Agency\u2019s (DLA) use of reverse auctions declined  over 80 percent from fiscal years 2013 to 2017 from about $7 billion to  about $1 billion in constant fiscal year 2017 dollars, according to data we  obtained from DLA\u2019s provider Procurex for all auctions conducted (that  may or may not have resulted in an award). According to DLA officials,  the agency\u2019s declining use is largely due to a policy revision that no  longer requires, but rather allows contracting officers to consider using  reverse auctions for all procurements over $150,000. DLA pays a flat fee  to its reverse auction provider for use of the reverse auction platform. This  payment mechanism is different from the fee arrangements in contracts  between agencies and many other reverse auction providers, for which  providers calculate fees on a per-transaction basis. In addition, DLA  generally uses a reverse auction as a price negotiation tool among a  group of selected vendors that the agency determined to be technically  acceptable based on vendors\u2019 initial responses to a solicitation. Because  of these differences, DLA does not have a need to track the reverse  auctions awarded for its reporting and oversight purposes."], "subsections": []}, {"section_title": "Army Computer Hardware Enterprise Software and Solutions (CHESS) Information Technology (IT) e-mart Reverse Auction", "paragraphs": ["The Army Computer Hardware Enterprise Software and Solutions  (CHESS) Information Technology (IT) e-mart program introduced its  reverse auction capability in January 2016. It offers fee-free reverse  auctions for a number of the CHESS contracts. According to Army  officials, in July 2017, the CHESS program began recommending use of  its reverse auction capability rather than other reverse auction platforms.  According to data provided by the CHESS program office for all auctions  conducted (that may or may not have resulted in an award), use of  reverse auctions increased over 225 percent between fiscal years 2016  and 2017 from about $28 million to about $91 million in constant fiscal  year 2017 dollars. The CHESS IT e-mart does not track which auctions  result in awards. According to officials, users capture award information in  the agency\u2019s contract writing system. While CHESS officials told us they  are interested in that kind of information, CHESS does not charge a fee  and does not have a need to track the reverse auctions awarded for its  oversight purposes."], "subsections": []}]}, {"section_title": "Appendix II: Agency Policies and Guidance Reviewed", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) federal agencies\u2019 use of reverse auctions  between 2013 and 2017, (2) the extent to which selected agencies  achieved benefits through reverse auctions, and (3) the extent to which  selected agencies have insight into reverse auction fees.", "For all objectives, we reviewed policies and guidance related to reverse  auctions from Office of Federal Procurement Policy (OFPP) and at  selected agencies and relevant components of those agencies we  reviewed, as well as the Standards for Internal Control in the Federal  Government and relevant work by agency Inspectors General. We also  interviewed procurement policy officials from the selected agencies and  representatives from reverse auction providers.", "To examine federal agencies\u2019 use of reverse auctions between 2013 and  2017, we collected data from reverse auction providers we identified by  reviewing our past work in this area, reviewing federal procurement  solicitation and award information, conducting interviews with agency  officials, and conducting internet searches about federal use of reverse  auctions. Through these efforts, we identified eight reverse auction  providers that offered reverse auction services either government-wide or  to specific agencies (see table 10 below).", "While it is possible that our efforts did not identify all reverse auction  providers that federal agencies use, we are reasonably confident we have  included the largest reverse auction providers used by the selected  agencies in our review. In addition to the identification efforts described  above, for the selected agencies in our review, we asked component  officials to identify reverse auction providers with which the agency has a  contractual relationship and which reverse auction platforms the agency\u2019s  contracting officials use. We also asked numerous individual contracting  officers about the various platforms the individual has used. No additional  providers or platforms were identified as part of those efforts.", "We collected fiscal year 2013 through 2017 data on reverse auctions use  from these reverse auction providers and analyzed it to identify the  number of reverse auctions conducted annually across the government  and the dollar value of those reverse auctions. For our analysis of the  number and dollar value of the auctions, we analyzed auctions that  resulted in a contract award between the agency and a vendor in a  particular year, according to provider data. We describe these as  awarded reverse auctions. The dollar value of an awarded auction is  based on the dollar amount of the bid selected for award; however, the  dollar amount of the bid selected for award is not necessarily equivalent  to the amount ultimately obligated on the resulting contract. We present  the dollar value of agencies\u2019 awarded auctions from 2013 through 2017 in  constant fiscal year 2017 dollars using the Congressional Budget Office\u2019s  June 2017 Gross Domestic Product price index projection\u2014the most  recent projection available at the time of our analysis. We generally  collected data from reverse auction providers because information about  reverse auction use is not available in the Federal Procurement Data  System-Next Generation, a government-wide source of contract data. In  addition, the selected agencies we reviewed do not separately track use  of reverse auctions. We collected data from the Department of Housing  and Urban Development directly because the agency tracks its reverse  auction use, including which auctions it awards. Two of the providers we  identified, Procurex and the Army CHESS IT e-mart reverse auction  platform, do not track the reverse auctions that agencies award to  vendors. The agencies using these providers, Defense Logistics Agency  and the Department of the Army, do not require this information for their  own reporting and oversight purposes or for paying for the reverse  auction services.", "For purposes of this report, all references to reverse auction use exclude  auctions conducted with these providers. Therefore, our analysis includes  only the value and number of known, awarded auctions between  2013 through 2017. As a result, we underestimate total federal reverse  auction use. Using available data for the Department of the Army, we  estimate our analysis includes over 95 percent of the value and  99 percent of Army auctions. For the Defense Logistics Agency, Procurex  reported that over the five-year period the agency conducted  approximately 7,100 auctions valued at about $19 billion. While we  cannot say with certainty the number and value of awarded auctions, we  can assume the agency awarded fewer auctions than it conducted. Based  on information from other providers for which we have data on the number of auctions conducted and awarded, agencies using these  providers awarded about 45 percent of the auctions conducted between  2013 and 2017. Of the six providers with awarded auction data, FedBid  accounted for almost all auctions and the vast majority of dollars agencies  awarded using reverse auctions from 2013 through 2017.", "We also used this data to identify six of the largest users of reverse  auctions for that period\u2014Departments of the Army, Homeland Security  (DHS), the Interior, the Navy, State, and Veterans Affairs (VA)\u2014by  number of auctions and dollar value. In determining the largest users of  reverse auctions, we excluded energy-related auctions from our analysis.  Energy-related auctions represented a sizable portion\u201410 percent\u2014of  reverse auction value, but less than 1 percent of auctions. We determined  that conducting a detailed review of energy-related auctions was not likely  to provide insight for other procurements because the unique  characteristics of energy markets make it difficult to compare to reverse  auctions for other goods and services that were included in our review.", "For five of the six selected agencies (Army, Navy, DHS, Interior, and  State), we collected additional data on auctions awarded in fiscal year  2016\u2014the most recent year of detailed data available at the time that we  began our review. We limited our analysis to auctions for which we  identified a start, end, and contract award date in 2016, according to  provider data. Our analysis of fiscal year 2016 auctions included almost  15,000 auctions with a total awarded value of approximately $910 million.  We excluded reverse auctions for which the data indicated that they were  awarded in 2016 but for which the auction dates indicated that the  auctions were conducted in a prior year. At least some of these auctions  represent options exercised on earlier auctions, rather than new auctions,  and we wanted to ensure we could compare auction activity to policies  and procedures in place for a specific period. Our analysis of awarded  auctions excluded auctions identified as cancelled or with an auction  start, end, or award date outside of 2016. The sixth agency (VA)  conducted less than a dozen new auctions in 2016, and so we excluded  them from our analysis of 2016 data, as well as our analysis of the  benefits and fees associated with reverse auctions.", "We analyzed agencies\u2019 use of reverse auctions, including but not limited  to  the number and dollar value of the awarded auctions,  types of products and services purchased,  level of competition achieved (number of participating vendors and  bids received),  savings from government pre-auction estimates, and  fees associated with the auctions.", "For our analysis of the number and dollar value of the awarded auctions,  we included auctions that resulted in a contract award between the  agency and a vendor, according to provider data. Actual award  obligations may differ. For example, an agency may adjust the  procurement (such as increasing or decreasing the number of items  purchased) between the auction and the final award, which may not be  reflected in the data we used. In addition, the number of awarded  auctions may differ. While we took steps to exclude awarded auctions for  which agencies had cancelled the resulting contracts, if the provider data  did not identify an auction as cancelled we may have included it in our  analysis. For the analysis of products and services, we examined  auctions conducted and awarded in 2016 by two of the three reverse  auction providers, both of which had product and service code data  available for awarded reverse auctions. These two providers accounted  for almost all contracts awarded via reverse auctions that year. Provider  data included an overall product and service code for the auction. The  auction may include goods and services outside that particular code. For  our purposes, we used the code provided to categorize the auction as a  product or service and the type of purchase. The third provider, GSA  Reverse Auction, does not capture similar product and service code data.", "Using other data GSA Reverse Auction provided, we were able to  estimate that about 20 percent of dollars awarded using GSA\u2019s Reverse  Auctions platform included information technology products and services.", "For our analysis of contract vehicles, we used provider data on whether  the buyer selected to conduct the auction on the open marketplace or  limit the auction to vendors qualified to bid on existing contract vehicles.  For example, buyers may have conducted auctions on the open market,  which is available to any vendor selling the good or service that is  registered to bid via the reverse auction provider or conducted auctions  that were limited to vendors with specific agency or government-wide  contracts. For our analysis of competition, we included all vendors and  associated bids submitted in provider data. During our interviews with  contracting officials, we learned that in some auctions officials determined  particular vendors were not technically acceptable following an auction.  This information is not available in provider data and, as a result, our  analysis includes vendors that contracting officials determined were not  technically acceptable.", "We also obtained contract-related information from the Federal  Procurement Data System-Next Generation for awarded auctions with  available contract or order numbers to identify if agencies used  commercial acquisition procedures and firm-fixed-price contracts in  accordance with the effective practices outlined in the June 2015 OFPP  memorandum. Government auditing standards require that we assess the  reliability of data we use in our products. As part of our assessment, we  reviewed the reverse auction data collected for obvious issues, such as  missing data elements, duplicates, and outliers. We also tested the  relationships between variables. In addition, we interviewed agency and  reverse auction provider officials to understand the data and collected  information on the systems used to collect and store the data, as well as  how those data are used. Further, we compared the data for a  non-generalizable sample of 40 auctions to contract files. We assessed  the reliability of the data used in this report and determined they were  sufficiently reliable for describing the known number and value of  awarded reverse auctions by federal agencies from 2013 through 2017  and identifying salient characteristics of selected agencies\u2019 awarded  auctions in 2016, including the number of participating vendors and bids,  type of good or service purchased, and indirect fees associated with the  auction.", "To identify the extent to which selected agencies achieved the benefits of  reverse auctions, we analyzed the 2016 data we collected on reverse  auction use at our five selected agencies to identify factors related to  competition (e.g., the number of participating vendors in auctions and the  number of bids received, and the frequency of iterative bidding, defined  as when there are multiple bidders and at least one bidder submits more  than one bid during the auction) and savings (e.g., savings as calculated  by the reverse auction providers). This analysis excludes auctions  conducted using the Army CHESS IT e-mart because it does not track  which auctions result in awards. However, the analysis still includes at  least 93 percent of reverse auction award value and 98 percent of the  awarded auctions in 2016. To obtain a more in-depth understanding of  the benefits achieved by selected agencies, we selected and reviewed a  nongeneralizable selection of 40 contracts awarded from 2016 reverse  auctions across the five agencies. These contracts were chosen to  obtain variety across the following characteristics: buying agency and  component; contract vehicle (open market or orders on existing contracts  such as Federal Supply Schedules or agency indefinite-delivery /  indefinite-quantity contracts); dollar value; fees charged by the reverse  auction providers; and goods and services being purchased (see table  11).", "At DHS, we selected case studies from two components, Customs and  Border Protection and Immigration and Customs Enforcement. Customs  and Border Protection had an active contract with FedBid in 2016 and  Immigration and Customs Enforcement did not, so we selected these two  components in order to understand the difference in how components  with and without an active contract used FedBid.", "For each of the selected case studies, we reviewed contract  documentation related to the reverse auction, such documentation of  market research, pre-auction cost estimates (e.g. independent cost  estimates), price negotiation memoranda, and contract award documents.  In addition, to obtain contracting officials\u2019 perspectives on the benefits of  reverse auctions, we interviewed the contracting officials involved with  35 of these 40 auctions: for the remaining 5, knowledgeable officials were  not available to interview. We conducted our interviews using a semi- structured interview process in which we asked contracting officials a  standard set of questions about their experiences conducting reverse  auctions. We did not compare reverse auctions to alternative acquisition  methods to compare the relative costs and benefits.", "To identify the extent to which selected agencies had insight into reverse  auction fees, we analyzed provider data on fees paid indirectly to FedBid  and GSA Reverse Auctions in 2016 for the five agencies selected for our  review. Fees paid to these two reverse auction providers were paid  indirectly by the agencies through the winning vendor. Our analysis  included the total amount of fees paid by each agency in 2016 to each  reverse auction provider and the amount of fees paid by each agency in  2016 for auctions with only one bidder.", "We also analyzed agency guidance to determine the extent of information  provided to contracting officials on reverse auction fees. Specifically, we  assessed whether agency guidance identified roles and responsibilities of  contracting officials in understanding and assessing reverse auction fees  and provided sufficient information to help ensure contracting officers  understood how reverse auction fees are applied. Further, we interviewed  contracting officials for 35 of our 40 selected auctions to develop an  understanding of the officials\u2019 knowledge of the fees related to the  auctions they conducted. As noted above, officials for the other 5 auctions  were not available to interview. The 40 selected auctions included 33 that  incurred an indirect fee, 2 for which the provider waived the fee, and 5 for  which no fee applied. We interviewed the contracting officials involved  with 30 of the auctions that incurred a fee and 5 of the auctions for which  the fee was waived or no fee applied. To determine whether contracting  officials we interviewed had a complete and accurate understanding of  reverse auction fee structures, we analyzed their responses to questions  about reverse auction fee structures and the fee paid for the reverse  auction we reviewed in detail, and compared their responses to fee  structures documented in agency contracts and reverse auction provider  terms and conditions.", "Lastly, to determine whether agencies had sufficient insight into reverse  auction fees to conduct appropriate oversight, we analyzed contracts  between the selected agencies and FedBid as well as other fee  arrangements, including provider terms of service and GSA\u2019s Federal  Supply Schedule contract with FedBid. Our analysis included both  contracts that were in place in fiscal year 2016 in order to understand the  terms and conditions that covered the reverse auctions we reviewed in  detail, as well as contracts agencies awarded subsequent to fiscal year  2016 so that we could understand whether and how agencies fee  arrangements with reverse auction providers had changed. We analyzed  the contracts and other fee arrangements to determine the extent to  which they explained details of how the fees were applied, such as what  fee percentage would be charged, how the fees would apply to contract  option years, and how fee caps were applied.", "We also used a variety of investigative tools and techniques to determine  if reverse auction procurement officials and commercial and government  providers have engaged in potential fraud, waste, abuse, and  mismanagement associated with reverse auction use. We reviewed fraud  alerts to learn about potential complaints, coordinated with agency  inspector general offices regarding work related to reverse auctions,  inquired about contracting officials\u2019 awareness of fraud incidents among  the 35 case studies for which we interviewed contracting officials, and  conducted a limited review for obvious financial relationships among  agency officials responsible for drafting reverse auction policy and  commercial reverse auction providers. While steps we took did not  uncover any obvious fraud, waste, abuse, or systemic mismanagement,  we cannot definitively state that there is no fraud, waste, abuse, or  mismanagement in federal use of reverse auctions.", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from April 2017 to March 2018 in accordance with  investigative standards prescribed by the Council of the Inspectors  General on Integrity and Efficiency."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Janet McKelvey (Assistant  Director), Luqman Abdullah, Cory Ahonen, Peter Anderson, Leslie  Ashton, Matthew Crosby, Alexandra Dew Silva, Lorraine Ettaro, April H.  Gamble, Anne McDonough, Miranda Riemer, Robin Wilson, and Helina  Wong made key contributions to this report."], "subsections": []}]}], "fastfact": ["To buy goods or services, the government sometimes uses \"reverse auctions\" where vendors bid against each other with lower prices to win a contract.", "We found reverse auctions often led to a vendor bidding more than once with a lower price, and may have saved the government up to $100 million in 2016. They also were easy to use.", "However, most contracting officers we interviewed did not fully understand the fees they paid to use reverse auctions. Agencies we reviewed indirectly paid $3 million in fees when a free alternative was likely available.", "We made 21 recommendations, including that agencies inform contracting officials about fees."]}
{"id": "GAO-18-214", "url": "https://www.gao.gov/products/GAO-18-214", "title": "Nuclear Security: CBP Needs to Take Action to Ensure Imported Radiological Material Is Properly Licensed", "published_date": "2018-01-10T00:00:00", "released_date": "2018-01-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Thousands of shipments containing radiological material enter the United States each year through airports across the country. Radiological material is used in various medical and industrial applications, and possession requires a license from the Nuclear Regulatory Commission (NRC) or one of the 37 states to which NRC has relinquished licensing authority. Failure to verify the licenses could allow terrorists to acquire radiological material for a dirty bomb, which uses explosives to disperse the material.", "GAO was asked to review CBP policies and procedures related to license verification. This report examines, among other things, (1) the extent to which CBP follows its policies and procedures, and (2) the effectiveness of these policies and procedures. GAO reviewed relevant policies and procedures, analyzed CBP data related to radiological material shipments and license verification, interviewed CBP and NRC officials, and selected four airports to visit based on expected traffic of radiological shipments."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. Customs and Border Protection (CBP) agency officials at U.S. airports have not verified the legitimacy of all licenses for imported radiological materials as required by CBP's policy. The policy requires CBP officials, when alerted, to verify licenses by calling experts in a centralized CBP office. CBP officials at two of four airports GAO visited said they were calling as required. However, CBP officials at the other two airports did not verify many licenses from January 1, 2015, through September 30, 2016, and headquarters officials were unaware of non-compliance with CBP policy. Also, GAO found that during this time frame nationwide, CBP officials were alerted to verify licenses for a significant number of shipments of licensable radiological material for all U.S. airports, but they did not make all the required calls\u2014leaving numerous shipments potentially unverified over this 21-month period. This situation occurred because CBP does not have a monitoring system to ensure that officials make license verification calls as required. Until CBP develops a monitoring system for license verification, it will not have reasonable assurance that it can identify activities inconsistent with its policy and take corrective action.", "CBP procedures cannot effectively implement the agency's policy that its officials verify all radiological material shipments imported into the United States. The procedures are not effective for this policy in part because they rely on automated alerts that are based on some but not all relevant information that could indicate potentially dangerous radiological material. Consequently, CBP's current system and procedures cannot ensure that all such materials will be identified. Under federal internal control standards, agencies are to design control activities to achieve objectives and respond to risks. However, CBP does not have the information it needs to develop a robust system or revise its procedures because it has not conducted a comprehensive assessment of the information not included in its automated alert system. In particular, CBP has not assessed relevant information not currently included in the automated alert or how to create a more risk-based approach that distinguishes between higher- and lower-risk quantities of radiological materials. Without such an assessment, CBP may be unable to develop a system or procedures that best support its policy for verifying imported radiological materials.", "This is a public version of a sensitive report GAO issued in September 2017. Information CBP deemed sensitive has been omitted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CBP develop a monitoring system to help ensure that CBP officials comply with the agency's license verification policy, conduct an assessment to determine relevant information that is not included in the automated alerts, and develop a system that allows it to identify shipments of greatest risk. CBP concurred with GAO's three recommendations and outlined actions to implement those recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Tens of thousands of shipments containing potentially dangerous  radiological material enter the United States each year through airports  spread across the country. Radiological material is commonly used in  thousands of locations throughout the United States and many other  countries for medical, industrial, and research purposes, such as treating  cancer, sterilizing food and medical instruments, and detecting flaws in  metal welds. In the hands of terrorists, radiological material could be used  to construct a \u201cdirty bomb\u201d\u2014a type of radiological dispersal device that  uses conventional explosives to disperse radiological material. Depending  on the type, form, amount, and concentration of radiological material  used, a dirty bomb could expose nearby individuals to the material and  potentially increase their long-term risk of cancer. In addition, the  evacuation and cleanup after a dirty bomb explosion could result in  serious economic costs, as individuals with homes and businesses in the  vicinity may not be able to, or may choose not to, return for an extended  period until the investigation and remediation activities are complete.  Recent terrorist activity in the United States, Europe, and the Middle East  continues to remind us about the potential use of radiological material in a  malicious act, such as a dirty bomb, and the need to control radiological  material.", "The Department of Homeland Security\u2019s U.S. Customs and Border  Protection (CBP) and the Nuclear Regulatory Commission (NRC) work to  ensure that only licensed radiological material enters the United States.  NRC authorizes the possession of radiological materials through licenses,  which can be issued by NRC or one of 37 Agreement States with  licensing authority. CBP monitors ports of entry to help ensure that only  properly licensed shipments of radiological material are permitted to enter  the United States. CBP is also part of the global nuclear detection  architecture\u2014a framework that includes numerous other federal agencies  that work domestically and internationally to detect, analyze, and report  on radiological materials that are out of regulatory control. Within this  framework, CBP deploys technology at and between ports of entry\u2014 which include border crossings, seaports, and airports\u2014that can detect  the presence of radiological material hidden in cargo or vehicles. In  addition, CBP personnel take steps to ensure that radiological material  imported into the United States is properly licensed.", "We have previously reported on vulnerabilities in CBP and NRC policies  and procedures to prevent unauthorized individuals from obtaining  radiological material. In March 2006, we were able to transport unlicensed  radiological material across the U.S. border using a fake license. In  response to that report, CBP developed a policy to verify the legitimacy of  licenses. In June 2008, we reported that many CBP field staff were not  aware of, or properly using CBP systems to verify licenses. We  recommended, among other things, that CBP communicate verification  guidance to ports of entry. CBP concurred with the recommendation. In  response, CBP sent a memorandum to all ports of entry requiring that  they incorporate new guidance into their operating procedures and  ensure that the guidance be a part of their on-the-job training. In 2016, we  again reviewed the rigor of NRC\u2019s radiological materials licensing  program. For that review, we obtained a genuine license to possess  radiological material by establishing fictitious companies, and we later  altered that license in order to procure additional quantities of radiological  material. Using both the genuine and altered licenses, we secured  commitments from radiological material distributors to sell us a dangerous  quantity of radiological material considered attractive for use in a dirty  bomb. In response to that report, NRC is considering making  enhancements to its pre-licensing process. In 2016, we also found that  CBP faces limitations in the air cargo radiological screening  environment. In 2017, we found weaknesses in NRC\u2019s and the  Department of Transportation\u2019s processes for ensuring compliance with  ground transportation security requirements for dangerous radiological  shipments. That report recommended, among other things, that NRC  should collect information on the number of shipments and mode of  transport for shipments of radiological material. NRC disagreed with the  recommendation.", "You asked us to review how CBP ensures that only properly licensed  radiological material is imported into the United States. Specifically, this  report (1) describes CBP\u2019s policies and procedures for ensuring that  imported radiological material is properly licensed, (2) examines the  extent to which CBP follows its policies and procedures, and (3)  evaluates the effectiveness of these policies and procedures. This report  is a public version of a sensitive report that we issued in September  2017. CBP deemed some of the information in our September report to  be sensitive, which must be protected from public disclosure. Therefore,  this report omits sensitive information about the extent of CBP\u2019s  verification of licenses and its procedures for doing so. Although the  information provided in this report is more limited, the report addresses  the same objectives as the sensitive report and uses the same  methodology, which we have described in less detail to omit references to  sensitive information.", "To describe CBP\u2019s policies and procedures for ensuring that imported  radiological material is properly licensed, we reviewed regulations,  policies, and procedures related to the verification of licenses for imports  of radiological material into the United States. We also interviewed  agency officials at CBP and NRC to obtain their views on the policies and  procedures related to license verifications.", "To examine the extent to which CBP is following these policies and  procedures, we conducted telephone and in-person interviews with CBP  officials in headquarters, experts at CBP\u2019s Laboratories and Scientific  Services Directorate\u2014Teleforensic Center, and officials and private- sector company personnel at airports where radiological material is  frequently imported into the United States. We selected four airports to  visit based on a high or low frequency of contacts made with the  Teleforensic Center to verify licenses and on expected traffic of  radiological materials shipments for a 21-month time frame from January  1, 2015, through September 30, 2016. We received data in October 2016  that included calls made from January 2015 through the last full month  prior to the data request (September 2016). We believe this 21-month  time frame provided a sufficient amount of time to examine trends within  the program. The information we obtained at airports is not generalizable  to all airports but provides examples of how airports are following CBP  policies and procedures. Finally, we gathered data from CBP on the  number of shipments of radiological material at ports of entry and  compared it with data on the number of calls to the Teleforensic Center to  verify licenses. We discussed the reliability of these data with  knowledgeable CBP officials and questioned them about the system\u2019s  controls to verify the accuracy and completeness of the data. We also  analyzed these data for missing information and obvious outliers. We  found the data sufficiently reliable for our reporting purposes.", "To evaluate the effectiveness of CBP\u2019s policies and procedures for  ensuring that imported radiological material is properly licensed, we  identified relevant internal control standards and compared them to CBP\u2019s  system of internal controls procedures for verifying licenses for  radiological material imported into the United States. We also spoke to  CBP officials about the data systems and automated rule they have in  place to notify CBP officials that a shipment requires license verification.  In discussions with the officials, we discussed the history of the data systems and which information indicating a shipment contains licensable  radiological material is included in the automated rule. We also obtained  data from January 1, 2015, through September 30, 2016, on licensable  radiological material imports. The 21-month time frame for these data  matched the data we received showing calls to the Teleforensic Center to  verify licenses, and it provided a consistent time frame for comparison.  These data included the port of entry, company receiving the shipment,  and mode of transport (i.e. air, ground, or sea), among other things. We  analyzed these data to determine how many shipments with radiological  material were not checked to verify that their license was legitimate. We  discussed the reliability of these data with knowledgeable CBP and NRC  officials, and we found the data sufficiently reliable for counting the  number of shipments of radiological material.", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Radiological material is used throughout the world for medical and  industrial purposes. Possession of this material within the United States  requires a license from NRC or from one of the 37 Agreement States to  which NRC has relinquished regulatory responsibility. NRC and  Agreement States issue two types of licenses authorizing the possession  and use of radiological materials: specific licenses and general licenses.  Specific licenses are issued for devices that typically contain larger  quantities of radiological material, such as medical equipment used to  treat cancer, cameras used for industrial radiography, and moisture and  density gauges used in construction. Devices approved for use under a  general license, by contrast, such as luminous exit signs, normally  contain relatively small quantities of radiological material. Such devices  are designed with inherent safety features, are widely available  commercially, and do not require NRC or Agreement State approval to  possess. Not all radiological material requires an NRC license for  possession. For example, there is naturally occurring radioactive material  in ceramics, fertilizers, and granite tile that does not require a license.  This report focuses on radiological material that requires specific licenses  for possession and use.", "Beyond requiring specific licenses for possession of radiological material,  NRC may also require a general or specific license to import such  material. Generally, NRC will issue an import license when the recipient  of the material is authorized to receive and possess the material being  imported.", "When issuing licenses for the possession of radiological material, NRC  and Agreement States take steps to ensure companies are legitimate.  Specifically, NRC and Agreement State officials are to conduct pre- licensing visits with all unknown applicants, using detailed screening  criteria. According to NRC, the purpose of the site visit is to have a face- to-face meeting with the applicant to determine whether there is a basis  for confidence that the applicant will use the radiological materials sought  as represented in the application when the applicant receives the license.  NRC has established a 14-point checklist to guide pre-licensing site visits  and has developed a list of questions and activities related to each  applicant\u2019s business operations, facility, radiation safety operations, and  personnel qualifications, to scrutinize the applicant and provide a basis for  confidence that the applicant will use the radiological material as specified  in the license.", "In 2003, the International Atomic Energy Agency published a system\u2014 which NRC adopted in 2004\u2014that ranks quantities of individual  radionuclides into one of five categories on the basis of their potential to  harm human health. Under this system, a given radionuclide is  considered dangerous when gathered in sufficient quantity and in close  enough proximity to people to cause direct human health effects. A  category 1 quantity, if not safely managed or securely protected, is likely  to cause permanent injury to a person who handles or is otherwise in  contact with it for more than a few minutes. Being close to this amount of  unshielded material for a period of a few minutes to an hour will probably be fatal. A category 2 quantity, if not safely managed or securely  protected, can cause permanent injury to a person who handles or is  otherwise in contact with it for a short time (minutes to hours). Being close  to this amount of unshielded radioactive material for a period of hours to  days can be fatal. A category 3 quantity, if not safely managed or  securely protected, can cause permanent injury to a person who handles  or is otherwise in contact with it for some hours. Being close to this  amount of unshielded radioactive material for a period of days to weeks  can be fatal. Category 4 and 5 quantities are unlikely to cause permanent  injury.", "In addition to categorizing radionuclides on the basis of their potential to  harm human health, NRC has identified 16 radionuclides that are  sufficiently attractive for use in a dirty bomb or for other malicious  purposes. These 16 radionuclides of concern, shown in table 1, warrant  enhanced security and protection measures\u2014such as cameras, alarms,  and other physical security measures\u2014under NRC regulations.", "Radiological material is imported into the United States by both express  consignment couriers arriving by air and air cargo carriers. Express  consignment couriers, such as FedEx, move cargo for the public under  express commercial services and provide door-to-door delivery. Air cargo  carriers transport radiological material in cargo containers on commercial  airlines. We have previously reported on the disparity in portal monitor  deployment between the express consignment and air cargo  environments. There are dozens of portal monitors in U.S. airports  servicing express couriers, but few servicing air cargo carriers.  According to CBP officials, handheld monitors are used to scan  radioactive material at airports where portal monitors are not available.", "The CBP mission includes the border enforcement of the customs,  immigration, and agriculture laws and regulations of the United States  and enforcement on behalf of numerous federal agencies. The mission  includes enforcement of the laws relating to the importation and  exportation of merchandise into and out of the United States. In addition,  the agency\u2019s mission includes denying entry to terrorists and their  weapons and criminals and their contraband. CBP\u2019s Office of Field  Operations is responsible for passenger and cargo processing activities  related to border security, trade, immigration, and agricultural inspection  at the nation\u2019s air, sea, and land ports of entry. Prior to importing goods  into the United States, information is submitted to CBP declaring the  contents of shipments. This information includes, among other things, a  description of goods, the name of the recipient, the port of entry, and a  tariff code that classifies goods.", "CBP uses various data systems to track shipments into the United States  and identify shipments for license verification. According to CBP, the  Automated Commercial Environment is the primary system for processing  shipments entering the United States, and it enables the government to  make determinations about whether to admit goods into the country. The  data stored in the Automated Commercial Environment are also used to  ensure proper duty is collected for imported goods. CBP officials also  view Automated Commercial Environment data in CBP\u2019s Automated  Targeting System, which is a decision support tool that analyzes  shipment data to assess risk and identify potential violations. The  Automated Targeting System includes automated alerts, which notify  CBP officials when they need to take additional actions before shipments  can be released. Information about NRC and Agreement State licenses  for radiological material is included in NRC\u2019s Web-Based Licensing  System, which includes information about NRC and Agreement State  licenses for category 1 and 2 quantities of radiological material. In  addition, the Web-Based Licensing System includes up-to-date  information on all NRC and six Agreement States\u2019 specific licenses,  including licenses that authorize possession of radiological material below  the category 2 threshold. However, licenses for quantities of material  below the category 2 threshold issued by 31 Agreement States are not  kept in the system. The CBP data systems used to identify shipments for  license verification are listed in table 2."], "subsections": []}, {"section_title": "CBP\u2019s Policies and Procedures Require License Verification for Imported Radiological Material", "paragraphs": ["CBP has implemented a policy and procedures requiring CBP officials at  airports to contact experts within a centralized CBP office to verify  licenses for radiological material being shipped into the United States.  Specifically, CBP issued its \u201cRadiation Detection Standard Operating  Procedures Directive\u201d policy in March 2014, outlining when CBP officials  at ports of entry are required to contact internal experts at CBP\u2019s  Teleforensic Center who possess the technical expertise to verify that  NRC and Agreement State licenses for radiological materials are  legitimate. The function of the Teleforensic Center is to provide field  CBP officials with assistance in resolving scientific and technological  questions, including detection, isolation, and control of potential threats  that may result from the presence of chemical, biological, radiological, or  nuclear materials. The Teleforensic Center is staffed with scientists with  expertise in a range of scientific disciplines, including chemistry, biology,  explosives, radiological science, and nuclear science. The Teleforensic  Center has established a hotline to receive requests for license  verification, among other things, and the experts are available 24 hours a  day, 7 days a week.", "CBP\u2019s 2014 policy requires CBP personnel to verify the legitimacy of  NRC and Agreement State licenses for all commercial imports of  industrial and medical radionuclides that require a license from NRC or  one of the 37 Agreement States. To implement this policy, CBP has  established procedures for private-sector entities and CBP. These  procedures, which apply equally to all quantities and types of licensable  radiological material, can be broken down into three parts: submission of  paperwork, identification of material, and verification of the license by  experts in the Teleforensic Center, as outlined in figure 1.", "Once the shipment information is entered into the Automated Commercial  Environment, CBP data systems identify which shipments of radiological  material require license verification. Specifically, CBP\u2019s Automated  Targeting System uses certain information to identify shipments requiring  license verification. Details about this information are omitted from this  report because they were deemed to be sensitive by CBP. Once  shipments are flagged as containing licensable radiological material, an  alert is sent to CBP officials at the airport informing them that the material  requires a license from NRC or an Agreement State. The alert outlines  the steps the officials need to take to verify that the license is legitimate.  Among other things, the alert explicitly states the phone number for  contacting the Teleforensic Center and includes instructions for handling  the material. According to CBP procedures, CBP officials are not allowed  to release the shipment until they receive approval from the Teleforensic  Center.", "Officials at the Teleforensic Center primarily use NRC\u2019s Web-Based  Licensing database to verify the legitimacy of licenses granted by NRC.  However, as we\u2019ve previously reported, licenses for some radiological  material that are granted by Agreement States are not kept in that  database, requiring the center\u2019s experts to also call specific points of  contacts at Agreement States to verify these licenses. CBP officials told  us that Agreement State offices typically are not open 24 hours a day, 7  days a week, occasionally requiring CBP to hold shipments until an  official can be reached. In addition to consulting the Web-Based  Licensing database and contacting Agreement State officials to verify  licenses, experts at the Teleforensic Center can also request additional  information from CBP officials at the airports. After the experts verify that  a license is legitimate, they give approval to the CBP officials at the  airport to release the shipment. CBP officials at the airport then document  the release. CBP officials at the four airports we visited and experts at the  Teleforensic Center told us that it typically takes 30 to 90 minutes to verify  a license, but it can take longer if the experts have to consult with an  Agreement State. If a license cannot be verified, the shipment is returned  to the sender or, in the case of an illegal shipment, seized and referred to  proper law enforcement officials, as outlined in the policy."], "subsections": []}, {"section_title": "CBP Has Not Verified All Licenses as Required by Its Policy and Procedures", "paragraphs": ["CBP has not verified all licenses for radiological materials as required in  its policy and procedures. During the 21-month period we reviewed, CBP  personnel at airports across the country did not verify the legitimacy of a  significant number of shipments CBP considered as containing potentially  dangerous radiological material. CBP officials at two of the four airports  we visited may not have verified the legitimacy of licenses for many of the  shipments of radiological material imported during the 21-month period,  which was not consistent with CBP policy. After we brought this issue to  CBP\u2019s attention, it issued additional guidance. However, this guidance  was not clear and caused confusion at the two airports we visited where  actions continued to be taken that were not consistent with CBP policy."], "subsections": [{"section_title": "CBP Is Not Consistently Implementing Its Procedures, Potentially Leaving Many Shipments of Radiological Material Unverified", "paragraphs": ["CBP officials did not verify the legitimacy of licenses for many of the  shipments of radiological material imported from January 1, 2015, to  September 30, 2016. We found that during this time frame, CBP officials  stationed at airports nationwide did not make the required calls to verify  licenses for a significant number of shipments of radiological material  identified by CBP as requiring license verification\u2014leaving many licenses  unverified over this 21-month period. These shipments came through  airports across the United States and, according to CBP officials we  interviewed, arrived by both express courier and air cargo companies.", "At two of the four airports we visited, we observed that CBP officials were  taking actions that were consistent with CBP policy. Specifically, we noted  the following:", "At one airport, officials responsible for reviewing shipments of  imported radiological material told us that they call the Teleforensic  Center whenever they receive an alert from CBP\u2019s data system,  consistent with CBP policy. In addition, the officials said that they  send any requested information to the Teleforensic Center and wait  for approval from the center before releasing shipments.", "At another airport, officials responsible for reviewing shipments of  imported radiological material told us that they also call the  Teleforensic Center whenever they receive an alert and only release  shipments upon receiving approval.", "However, at the remaining two airports we visited, officials responsible for  reviewing shipments of imported radiological material took actions that  were not consistent with CBP policy to verify the legitimacy of radiological  shipments entering the country. As a result, officials at these airports had  not verified hundreds of licenses as required under CBP\u2019s policy because  the officials misunderstood what they were required to do. In discussions  with these officials, some described taking actions that were not  consistent with the license verification requirements. Details about the  extent of verification are omitted from this report because the information  was deemed to be sensitive by CBP.", "At one airport, CBP officials told us they typically verify licenses on- site without calling the Teleforensic Center. This airport had more than  100 shipments of licensable radiological material during the 21-month  period for which CBP provided data, but officials only made a few  calls to the Teleforensic Center to verify licenses during this time,  leaving many shipments of material unverified. Instead of calling the  Teleforensic Center as required, the CBP officials said that they  reviewed the shipment paperwork and looked for anomalies. CBP  officials said that they undertake this paperwork review regardless of  the risk of the radiological material in the shipment. For example, they  said they would use this approach to verify licenses for category 1  materials, which NRC and the International Atomic Energy Agency  classify as likely to cause permanent injury to a person who comes  into contact with them. The officials told us that they call the  Teleforensic Center only when there is something wrong with the  shipment. Officials at CBP headquarters told us that this procedure  does not comply with their verification policy and would not be  effective.", "At the second airport, CBP officials we interviewed told us that license  verification was conducted by private-sector express couriers  overseas, negating the need for officials at the port of entry to call the  Teleforensic Center. The CBP officials at the airport believed that a  Memorandum of Understanding (MOU) between CBP and private  companies delegates responsibility to express couriers to scan  material with radiation detection equipment. These CBP airport  officials said that express couriers also verify licenses as part of this  process. However, the MOU between CBP and express couriers does  not address the verification of licenses for radiological shipments.  CBP headquarters officials we interviewed told us that the airport\u2019s  practice does not comply with the agency\u2019s verification policy and  confirmed that the Teleforensic Center is the only entity that can verify  licenses. The headquarters officials also reiterated to us that license  verification is not conducted by overseas private-sector companies.  Officials we interviewed from an express courier that ships  radiological material also told us that they do not verify licenses. This  airport made few calls to the Teleforensic Center to verify licenses  during the 21-month period, according to the data provided to us by  CBP."], "subsections": []}, {"section_title": "CBP Issued Additional Guidance, but This Guidance Did Not Initially Improve Compliance", "paragraphs": ["In February 2017, we briefed CBP headquarters officials on our findings  from the site visits to the four airports. We included in our briefing a  summary of findings from our site visits and information on the number of  calls made by CBP officials to verify licenses. At this meeting, CBP  headquarters officials indicated that they would look into why calls were  not made. Subsequently, in March 2017, in response to this briefing, CBP  headquarters issued additional guidance to remind all field officials of  CBP\u2019s license verification policy. The guidance states that CBP officials  must contact the Teleforensic Center to verify the license for all  shipments of licensable radiological material. In addition, the guidance  states that shipments may not be released from the airport until experts at  the Teleforensic Center have completed verification of the license. The  guidance was issued in the form of a \u201cmuster\u201d\u2014a type of memorandum  addressed to all CBP field offices to emphasize CBP policy. Once such a  memorandum is issued, CBP relies on local officials to interpret and pass  along this information to those working directly with the shipments.  According to CBP officials, the guidance was communicated to managers  and then the managers communicated this information to front-line staff  through weekly meetings and informal discussions.", "However, the muster was not successful in correcting previous  misconceptions at the two airports we visited where officials\u2019 actions were  not consistent with CBP policy and the muster did not fully resolve their  noncompliance with CBP policy. In part this was because, according to  officials, they found the muster confusing. In April and May 2017, several  weeks after CBP issued the muster, we contacted officials at the four  airports we previously visited. Based on interviews with CBP officials at  the two airports where actions were not consistent with CBP policy before  the muster, we determined that they were continuing to take actions that  were not consistent with CBP policy after they received the muster. For  example, CBP officials at one of the two airports said they were  continuing to conduct license verification without the assistance of the  Teleforensic Center. Officials at this airport told us that they believed their  actions were consistent with the policy, even though they had not altered  their actions in response to the muster. Similarly, at the other airport  where actions were not consistent with the CBP policy before the muster,  officials told us again that license verification can be conducted overseas  by express couriers, citing the MOU allowing express couriers to scan  material with radiation detection equipment. When we discussed the  content of the muster with CBP officials in headquarters in June 2017,  they acknowledged the muster was confusing and stated it needed to be  further clarified. Subsequent to our June 2017 meeting with CBP officials,  they provided additional data that suggested an increase in calls to the  Teleforensic Center. In July 2017, CBP officials told us they planned to  issue additional clarifications. Subsequently, in November 2017, CBP  issued an additional muster emphasizing its policy to call the Teleforensic  Center for all shipments of licensable radiological material.", "CBP headquarters officials told us that they were unaware, until we  informed them, that selected airports were not calling the Teleforensic  Center to verify licenses and that licenses were not being verified for  some imported radiological material. This is because CBP does not have  a mechanism, such as a monitoring system, to ensure that all required  license verifications are occurring. Such a system could also conduct  checks to ensure CBP officials are following agency policy. The challenge  to creating such a system is that CBP houses the data necessary to  create it in separate systems that do not communicate with each other,  and these systems are currently run by different offices with differing  missions within CBP. Federal standards for internal control state that  management should establish and operate monitoring activities to monitor  the internal control system and evaluate the results. Until CBP develops  a monitoring system to help ensure that CBP officials comply with the  license verification policy, the agency will not have reasonable assurance  that it can identify activities that are inconsistent with its policy and take  corrective action as necessary."], "subsections": []}]}, {"section_title": "CBP Policies and Procedures Are Not Effective at Ensuring Only Properly Licensed Radiological Material Is Imported", "paragraphs": ["CBP policies and procedures are not effective at ensuring that only  properly licensed radiological material is imported into the United States.  Specifically, CBP\u2019s procedures for identifying licensable radiological  material do not ensure that all shipments of radiological material are  identified and verified, resulting in the exclusion of a significant number of  shipments that possibly contained radioactive material during the 21- month period we reviewed. Moreover, CBP\u2019s current policy and  procedures treat all radiological shipments with the same level of scrutiny  and do not target resources based on the risk of the material. Details  about these issues are omitted from this report because the information  was deemed to be sensitive by CBP."], "subsections": [{"section_title": "CBP\u2019s Procedures Do Not Ensure That All Shipments of Radiological Material Are Identified and Verified", "paragraphs": ["CBP procedures for identifying licensable radiological material do not  effectively implement its policy to verify the license for all shipments of  licensable radiological material. We identified the following issues that  result in limitations in CBP\u2019s procedures.", "Specifically, the data system that CBP uses to implement its procedures  does not sufficiently identify all shipments of potentially dangerous  radiological materials. To implement its procedures, the agency chose to  use an existing data system designed to process all types of imports into  the United States. This system uses general customs information to  identify the contents of shipments. Consequently, of the 44,152  shipments that could contain licensable radiological material, the system  alerted CBP officials that they were required to verify relatively few  licenses from January 1, 2015, to September 30, 2016.", "In addition, CBP\u2019s license verification procedures do not currently target  the higher-risk radiological materials. CBP\u2019s method for identifying the  contents of shipments does not include information that describes the  quantity of radiological material. Specifically, categories 1, 2, and 3  quantities of radiological material can cause permanent injury or death to  a person in contact with them for some period of time. As a result,  according to a senior CBP official, it is safer to assume all shipments of  radiological material are dangerous until proven otherwise.", "Federal standards for internal control recommend that agencies design  control activities to achieve objectives and respond to risks. Until CBP  develops a robust system that can identify all shipments of radiological  material that pose risk, it will not have reasonable assurance that it has  the appropriate policies and procedures necessary to verify licenses for  these shipments. Furthermore, as we reported in December 2016, an  essential element of enterprise risk management is to examine risks  considering both the likelihood of the risk and the impact of the risk on the  mission, in order to help prioritize risk response. Although CBP officials  recognize that their current system and procedures have limitations and  do not allow them to fully implement the agency policy to verify all  shipments of radiological material that enter the United States, we found  that they have not developed a system nor revised their procedures to  address the issues we identified. Of particular concern is that CBP has not conducted a comprehensive assessment of (1) the information not  currently included in the automated alert to determine what additional  information would indicate shipments that may contain dangerous  material or (2) how to create a more risk-based approach that  distinguishes between higher- and lower-risk categories of radiological  materials. Until it conducts such an assessment, CBP will not know how  to adjust its current procedures to ensure that it is identifying all  shipments of potentially dangerous radiological material and targeting its  limited resources to those that pose the greatest risk."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["CBP has implemented a policy and procedures intended to ensure that  the tens of thousands of shipments of potentially dangerous radiological  material imported through U.S. airports each year are properly licensed.  However, CBP\u2019s procedures do not effectively implement CBP\u2019s policy of  ensuring that only properly licensed radiological material gains entry to  the United States. This is because CBP does not have a monitoring  system to help ensure that CBP officials at airports nationwide are  complying with the license verification policy. Until CBP develops such a  system, the agency will not have reasonable assurance that it can identify  activities that are inconsistent with its policy and take corrective action as  necessary.", "In addition, CBP\u2019s procedures for identifying licensable radiological  material do not ensure that all shipments of radiological material are  identified and verified. This is the result of CBP\u2019s automated alert, which  currently does not include all relevant information needed to identify such  shipments. Additionally, CBP procedures do not distinguish between  high-risk categories of radiological materials and lower-risk categories;  therefore CBP cannot target its limited resources to the shipments that  pose the greatest risk. CBP has not conducted a comprehensive  assessment of the information not currently included in the automated  alert and does not know which shipments pose the greatest risk. A  comprehensive assessment could help CBP gain a better understanding  of information not currently included in the automated alert, and it could  better position the agency to make appropriate changes to its existing  system and procedures, as well as target its limited resources toward the  quantities of material that pose the greatest risk."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to CBP:", "The Commissioner of CBP should develop a monitoring system to  help ensure that CBP officials comply with license verification policies  and procedures. (Recommendation 1)", "The Commissioner of CBP should conduct a comprehensive  assessment of information not included in the automated alert to  determine what information is needed to identify licensable  radiological material. (Recommendation 2)", "The Commissioner of CBP should develop a system that better  identifies shipments of radiological material that pose the greatest risk  and revise CBP\u2019s policies and procedures as necessary to verify  licenses for these shipments. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the Department of Homeland  Security (DHS) and NRC for review and comment. DHS provided written  comments, reproduced in appendix I, in which it concurred with our three  recommendations. DHS stated that it will take the following actions,  among others, to address our recommendations: (1) include a monitoring  process in an updated version of its policy addressing license verification,  (2) conduct a comprehensive assessment of information not included in  the automated alert to determine what information is associated with  dangerous material, and (3) develop an intelligence-driven process that  identifies shipments of radiological materials that pose the greatest threat.  In addition, DHS and NRC provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Chairman of the  U.S. Nuclear Regulatory Commission, 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 concerning this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page   of this report. GAO staff who made significant contributions to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Ned Woodward, Assistant  Director; Jeffrey Barron; Richard Burkard; Kendall Childers; Cindy Gilbert;  Cynthia Norris; Danny Royer; Jerry Sandau; Travis Schwartz; and Kiki  Theodoropoulos made key contributions to this report."], "subsections": []}]}], "fastfact": ["Tens of thousands of shipments containing radiological material\u2014which terrorists could use to make a dirty bomb\u2014enter the U.S. each year through airports across the country. The Nuclear Regulatory Commission and some states issue licenses for import and possession of the material, and U.S. Customs and Border Protection is responsible for verifying shipments entering the country are authorized or licensed.", "However, we found that CBP failed to verify licenses for some shipments and that its processes do not ensure that all shipments are identified. We recommended that CBP develop systems to improve shipment verification and identification."]}
{"id": "GAO-19-41", "url": "https://www.gao.gov/products/GAO-19-41", "title": "Mental Health: Leading Practices for State Programs to Certify Peer Support Specialists", "published_date": "2018-11-13T00:00:00", "released_date": "2018-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["As the peer support workforce has grown, there has been increased attention to standardizing the competencies of peer support specialists through certification.", "The 21st Century Cures Act included a provision for GAO to conduct a study to identify best practices related to training and certification in peer support programs in selected states that receive funding from SAMHSA. This report, among other things, describes leading practices for certifying peer support specialists identified by program officials in selected states.", "GAO interviewed state program officials in six selected states and reviewed online, publicly available information about their peer support programs. GAO selected the states in part based on the state's certification program being well-established (at least 2 years old), use of SAMHSA funding for peer support, and stakeholder recommendations. The six selected states\u2014Florida, Georgia, Michigan, Oregon, Pennsylvania, and Texas--are among the 41 states and the District of Columbia that, as of July 2016, had programs to certify peer support specialists. In addition to the state program officials, GAO interviewed SAMHSA officials and 10 stakeholders familiar with peer support specialist certification, including mental health researchers and officials from training organizations, among others.", "GAO provided a draft of this report to HHS for review and comment. The Department did not have any comments."]}, {"section_title": "What GAO Found", "paragraphs": ["According to officials from the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS), shortages in the behavioral health workforce are a key reason that individuals with mental illnesses do not receive needed treatment. In recent years, there has been an increased focus on using peer support specialists\u2014individuals who use their own experience recovering from mental illness to support others\u2014to help address these shortages. Program officials GAO interviewed in selected states generally cited six leading practices for certifying that peer support specialists have a basic set of competencies and have demonstrated the ability to support others."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal data and academic research show an unmet need for behavioral  health services\u2014that is, for services that address mental health or  substance use issues. Specifically, based on its annual survey of  behavioral health issues, the Substance Abuse and Mental Health  Services Administration (SAMHSA) within the Department of Health and  Human Services (HHS) estimated that 10.4 million adults in 2016 had a  serious mental illness; however, only 6.7 million adults received treatment  for these issues in the past year. Serious mental illnesses\u2014including  schizophrenia and bipolar disorders\u2014substantially interfere with a  person\u2019s major life activities such as maintaining interpersonal  relationships and employment. Further, a recent study covering the period  2008-2014 found that more than 50 percent of adults with co-occurring  mental health and substance use disorders (such as alcohol and opioid  use disorders) received neither mental health care nor substance use  treatment in the prior year.", "According to SAMHSA, workforce shortages are a key driver of the unmet  need for behavioral health services; 55 percent of counties in the United  States do not have any practicing behavioral health workers. In light of these issues, SAMHSA officials and other experts have called for using  peer support specialists to help address shortages in the behavioral  health workforce. Peer support specialists are individuals who use their  own personal, lived experience recovering from mental illnesses to  support others in their recovery.", "In recent years, states have increased their focus on recovery as part of  mental health services, and this has included utilizing peer support  specialists. A nationwide study found that 41 states and the District of  Columbia had established programs to train and certify these workers,  and two other states were in the process of developing such a program  as of July 2016. As the peer support specialist workforce continues to  grow, there has been increased attention to standardizing the profession  through certification.", "The 21st Century Cures Act included a provision for us to conduct a study  of peer support specialist programs in states that receive funding from  SAMHSA and identify best practices in these states related to training  and credential requirements for peer support specialist programs. This  report describes  (1) programs for certifying peer support specialists in selected  states and  (2) leading practices for certifying peer support specialists  identified by program officials in selected states.", "To describe programs for certifying peer support specialists in selected  states, we selected six states to illustrate aspects of, and variations in, the  certification programs that states have developed for peer support  specialists. The results from our sample cannot be generalized to other  state peer support specialist programs. We selected our sample states  using five criteria, specifically (1) recommendations from SAMHSA  officials, researchers in the field of peer support, and national-level mental  health organizations on states with well-established programs; (2)  SAMHSA data that indicated that a state had reported using SAMHSA\u2019s  Community Mental Health Services Block Grant for peer support  generally; (3) the age of the state\u2019s certification program was at least 2  years old; (4) geographic diversity across the United States; and (5) the  prevalence of serious mental illness among adults in the state. Using  these criteria, we selected the following six states for our sample: Florida,  Georgia, Michigan, Oregon, Pennsylvania, and Texas.", "We then reviewed information from the selected states describing  certification requirements for their peer support specialist programs,  including policy manuals and guidelines for becoming a peer support  specialist, training materials, and information on certification renewal.  Additionally, to understand general training practices to inform our  discussions with state program officials, we reviewed our previous reports  on assessing training and development efforts and key principles for  effective workforce planning. We similarly reviewed the National  Commission for Certifying Agencies\u2019 Standards for the Accreditation of  Certification Programs to provide similar guidance. Finally, we  interviewed individuals with responsibilities related to the peer support  specialist programs in the selected states, including state program  officials and staff from independent certification boards and consumer  advocacy groups. (See app. I for a complete list of those we  interviewed.) During these discussions we obtained information on,  among other things, the respective state\u2019s program\u2019s screening, training,  and certification requirements.", "To describe leading practices for certifying peer support specialists  identified by program officials in the six selected states, we interviewed  SAMHSA officials about information related to the training and  certification of these specialists, including information on core  competencies that apply to them that SAMHSA identified beginning in  2015. We collected information from the six selected states on their  certification practices through a questionnaire we developed and follow- up interviews with state officials. This included asking their opinions on  what they considered to be leading practices in the areas of screening,  training, and certification requirements for a state peer support specialist  program. We then analyzed information obtained from our interviews with  officials from the selected states to determine which leading practices  they consistently identified for certifying peer support specialists. For the  purposes of this report, we included a practice as a leading practice if it  was identified by state officials from the majority (at least four) of the  selected states. We then examined information from the six selected  states to determine whether they were currently applying the identified  leading practices, even if a particular state had not identified the practice  as a leading practice during the interview.", "We also interviewed 10 stakeholders about leading practices. (See app. I  for a complete list of those we interviewed.) To select the stakeholders,  we utilized information from our preliminary research on the topic of peer  support certification and requested recommendations from researchers  and SAMHSA officials. We ensured that the provided recommendations  represented researchers or academic institutions, training or consulting  organizations, associations, and advocacy organizations, interviewing at  least one stakeholder from each area to obtain a mix of perspectives. We  also included some stakeholders that were currently or formerly under  contract with the Department of Veterans Affairs\u2014the largest employer of  peer support specialists in the United States\u2014to provide training for its  peer support specialists. To confirm the applicability of the leading  practices identified by the six states, we shared them with the  stakeholders we interviewed. We also examined the extent to which the  identified leading practices aligned with those identified by the Defense  Centers of Excellence for Psychological Health and Traumatic Brain  Injury (now the Psychological Health Center of Excellence), within the  Defense Health Agency of the Department of Defense.", "We conducted this performance audit from November 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["SAMHSA defines a peer provider as \u201ca person who uses his or her lived  experience of recovery from mental illness and/or addiction, plus skills  learned in formal training, to deliver services in behavioral health settings  to promote mind-body recovery and resilience.\u201d Generally, peer providers  are known as \u201cpeer support specialists\u201d in mental health settings. Peer  support specialists are distinguished from traditional mental health service  providers by their lived experience recovering from mental illness. People  with serious mental illness generally receive longer term and more  intensive treatment\u2014either in a primary care or specialty setting\u2014and  peer support specialists may play a key role in the recovery process for  these individuals.", "Peer support specialists work in a variety of settings, including clinical  settings such as hospital emergency rooms, independent peer-run  organizations, and on support teams in housing agencies that help  eligible low-income families and persons with disabilities find rental  housing. They can also deliver a varied set of services, including sharing  of experience, goal-setting, developing coping and problem solving  strategies to help individuals self-manage their mental illnesses, and  linking individuals to desired resources like transportation or volunteer  opportunities. Importantly, the services provided by peer support  specialists complement, but do not replace, clinical services."], "subsections": [{"section_title": "Peer Support Specialist Certification", "paragraphs": ["Like other behavioral health specialties, the requirements for certifying  peer support specialists vary by state, and certification bodies range from  state government entities to independent non-profit organizations. The  development of state-level peer support specialist certification programs  was largely driven by another HHS agency, the Centers for Medicare &  Medicaid Services, which in 2007 recognized peer support services as an  evidence-based mental health model of care and established minimum  requirements for states seeking federal Medicaid reimbursement for peer  support services. One of these requirements is that peer support  specialists complete a training and certification program as defined by the  state. Another requirement is that peer support specialists receive  supervision from a \u201ccompetent mental health professional,\u201d which may be  provided through direct oversight or periodic care consultation. The state  defines the amount, scope, and duration of the supervision as well as  who is considered a competent mental health professional.", "States have used the flexibility allowed by the Centers for Medicare &  Medicaid Services to create their own programs to certify peer support  specialists. Some of these state peer support specialist programs are  assessment-based certificate programs\u2014programs that provide training  and then evaluate whether applicants achieved the learning objectives of  that training through an examination in order to receive certification. Other  programs are professional certification programs\u2014programs that evaluate  applicants against predetermined standards of knowledge, skills, or  competencies. In professional certification programs, the certifying body  is independent from, and is not responsible for, the training process."], "subsections": []}, {"section_title": "SAMHSA and Peer Support Specialists", "paragraphs": ["SAMHSA supports the peer support specialist field through training,  technical assistance, and grant funding. For example:", "From 2009 to 2014, SAMHSA partnered with stakeholders, such as  the National Association for State Mental Health Program Directors, to  gather nationally-recognized experts and stakeholders from across  the United States for an annual meeting. These meetings, known as  the \u201cPillars of Peer Support,\u201d aimed to identify and create consensus  around factors that facilitate the use of peer support services in state  mental health systems of care.", "In 2015, SAMHSA developed core competencies defining the critical  knowledge, skills, and abilities needed by anyone who provides peer  support services through a technical assistance project. According  to officials, the core competencies were developed in response to  inconsistencies in the training and certification of peer support  specialists that emerged as states began to develop their programs.  SAMHSA\u2019s core competencies reflected the five foundational  principles of peer support identified by consumers and other  stakeholders: services should be (1) recovery oriented; (2) person- centered; (3) voluntary; (4) relationship-focused; and (5) trauma  informed. In addition to developing the core competencies, the  project provides trainings and offers technical assistance to states,  counties, providers, and other stakeholders."], "subsections": []}, {"section_title": "Funding for Peer Support Specialist Programs", "paragraphs": ["Although Medicaid provides the largest share of funding for state mental  health agencies, followed by state funds, SAMHSA also provides grant  funding that states can use for both the service and administrative  components of their peer support specialist programs. For example,  SAMHSA\u2019s Center for Mental Health Services funds peer support  programs through its administration of the Community Mental Health  Services Block Grant, which provides flexible funding to the states to  support services and related support activities for individuals with serious  mental illness. While the Community Mental Health Services Block Grant  accounted for less than 1 percent of total revenues received by state  mental health agencies in fiscal year 2015, the flexibility of the funds  allows them to be expended to pay for services that Medicaid and other  health insurance will not pay for, such as training and developing  standards. In fiscal year 2018, 40 states and the District of Columbia  reported using the funds from the Community Mental Health Services  Block Grant for peer support.", "SAMHSA also provides discretionary grants directly to domestic nonprofit  organizations that aim to expand the capacity of peer support providers.  These discretionary grants, including the Statewide Consumer Network  Program grants, have helped establish recovery-oriented, consumer- driven services at the state level. SAMHSA also provides block and  discretionary grants focused on substance use through its Center for  Substance Abuse Treatment and Center for Substance Abuse  Prevention, both of which have been used for peer recovery coaches.", "While most states use SAMHSA grants and state general funds to  develop and sustain their peer support programs, as of 2016, 41 states  and the District of Columbia were receiving federal Medicaid  reimbursement for the services provided by peer support specialists.  Georgia was the first state to receive federal Medicaid payment for peer  support services in 1999, and additional state Medicaid programs began  to provide coverage of peer support after the Center for Medicare &  Medicaid Services issued guidance in 2007 on the requirements for  federal payment for such services. In addition to meeting the minimum  requirements for peer support services\u2014including training and  certification, supervision, and care coordination\u2014states that bill for peer  support services under the Medicaid program must comply with all  Medicaid regulations and policies."], "subsections": []}]}, {"section_title": "Selected State Programs Generally Use Similar Processes for Certifying Peer Support Specialists, with Some Variation in Program Requirements", "paragraphs": ["Programs in all six states that we reviewed generally use the same  process for screening, training, and ultimately certifying peer support  specialists. See figure 1 for an illustrated example of this process.", "Although the six states\u2019 programs generally use the same process for  certifying peer support specialists, as of May 2018 the programs varied in  the specific requirements applicants must meet for each of the three  stages of certification: screening, training, and certifying. See appendix  II for detailed information on state program requirements."], "subsections": [{"section_title": "Screening Requirements", "paragraphs": ["To determine applicants\u2019 eligibility for peer support specialist certification,  all six state programs we reviewed have screening requirements  applicants must meet when applying for certification. These screening  requirements include requirements related to education, lived experience  with mental illness, prior work or volunteer experience, and letters of  recommendation. The extent to which each screening requirement was  used by each state varied, and the specifics of each requirement also  varied across the six programs we reviewed (see fig. 2).", "Education. Five of the six states that we reviewed required a high school  diploma or equivalent. Officials from four of these states indicated that  this level of education was necessary given the skills needed by peer  support specialists, such as reading comprehension and communication  skills. In contrast, Oregon officials told us that they did not require a high  school diploma or equivalent; however, the officials noted that most of  their peer support specialists have at least a high school education.", "Mental health experience. While all six state programs we reviewed  required applicants to have lived experience in recovery from mental  illness, the programs implemented this requirement in different ways.  Some required a mental health diagnosis, while others required a  minimum length of recovery time or required applicants to have received  services for a mental illness. Texas officials said they did not have a  specified length of recovery requirement due to the difficulty of pinpointing  the specific time a person began his or her recovery; rather, Texas  required applicants to self-identify as having experience living in recovery.", "Prior work or volunteer experience. Three of the six state programs  required applicants to have prior relevant work or volunteer experience,  although the amount of experience required varies. For example, to start  the certification process, applicants in Michigan must be currently working  in a peer support specialist role and have been in that position for at least  10 hours a week for the past 3 months. In contrast, Georgia officials told  us that they found this requirement to be a barrier for some individuals  who have not been able to work; therefore, Georgia did not have this  requirement.", "Letters of recommendation. Three of the six states required letters of  recommendation as another way to assess applicants\u2019 readiness to  become peer support specialists. State officials stressed that the letter  should be a personal, work, or volunteer reference, rather than a clinical  reference."], "subsections": []}, {"section_title": "Training Requirements", "paragraphs": ["To ensure the competence of the peer support specialist workforce, all six  state programs we reviewed required applicants to complete an initial  training, which we refer to as \u201ccore training.\u201d The core training is the initial  training provided to applicants seeking to become certified peer support  specialists and, while the curricula may vary by state or training vendor,  its purpose is to convey the skills and competencies that peer support  specialists need to enter the workforce. Topics covered during the training  typically include ethics, recovery, sharing the recovery story, and  communication skills. (See app. III for an example of a peer support  specialist core training schedule.) While all six states require applicants to  attend core training, the length, cost, and curricula of these trainings  varied across the states, as figure 3 shows.", "Length of training. All six programs required at least 40 hours of in- person core training, with Georgia and Pennsylvania requiring more than  70 hours. The six states required at least a week of core training to allow  sufficient time to cover a core curriculum of general peer-related  information, such as the meaning and role of peer support services, and  at times including role play, in an effort to develop the interpersonal skills  needed for an effective peer leadership.", "Cost of training. All states but Florida charged applicants fees to attend  training. Training fees varied by state, ranging from $85 in Georgia to  $1,400 in Pennsylvania. These fees varied because what they covered  also varied. For example, state program officials from Michigan told us  that, among other things, the $600 fee covers the price of lodging for the  core training, consultant fees, materials, and college credit hours that can  be earned by attending the training and the graduation ceremony. In  contrast, state program officials from Georgia told us that the $85 they  charge covered the cost of producing the course manual and that all other  costs are covered by the state.", "Training curriculum. Four of the six state programs had their own  approved core training curriculum to be used for applicants, while the  remaining two programs in Oregon and Pennsylvania allowed applicants  to select from approved training vendors\u2014each of which had its own  training curricula."], "subsections": []}, {"section_title": "Certification Requirements", "paragraphs": ["To complete the certification process, all state programs we reviewed  assessed applicants\u2019 knowledge of the concepts taught in the core  training through an examination. The applicants also had to sign and  abide by a code of ethics. However, as of May 2018, the state programs  varied as to who administered the certification examination, the type of  code of ethics applicants were required to sign, the frequency with which  certifications had to be renewed, and the continuing education  requirements certified peer support specialists had to meet. (See fig. 4.)", "Examination. Four of the states we reviewed administered a single,  statewide exam that applicants must pass before becoming certified,  while in the remaining two states applicants had to pass an exam  administered by the approved training vendor. The exams included  multiple choice or essay questions. One training vendor responsible for  conducting training in at least two states told us that the vendor included  an oral evaluation component as part of the exam, in light of the  communication and interpersonal skills needed for the peer role.  Similarly, a state program official from Pennsylvania told us that  observational assessments are also used to determine an applicant\u2019s  skills and knowledge.", "Code of ethics. Like other health professions, peer support specialists  typically must agree to abide by a code of ethics. All six states we  reviewed required peer support specialists to sign a code of ethics before  becoming certified. Of the six states, the codes of ethics in Pennsylvania,  Georgia, Michigan, and Texas were unique to peer support specialists,  while Florida and Oregon used codes of ethics that also applied to other  workforces, such as substance use disorder professionals and community  health workers. Relatedly, five of the six states also had formal processes  in place to investigate and take action in the event that a peer violated the  code of ethics by, for example, disclosing confidential information. These  actions range from reprimand to revocation of certification.", "Certification renewal. Three of the six states we reviewed required peer  support specialists, once certified, to renew their certifications every 1 to 3  years, while the remaining three states awarded lifetime certifications.", "Continuing education. Five of the six states required certified peer  support specialists to meet annual continuing education requirements,  which ranged from approximately 10 hours per year to 36 hours every 2  years. According to some state program officials, requiring continuing  education ensures continued competence in the field of peer support or  provides specialized training, such as training for working with specific  populations (such as veterans) or incorporating additional approaches or  skill sets (such as training about the Wellness Recovery Action Plan)."], "subsections": []}]}, {"section_title": "State Officials Generally Cited Six Leading Practices for Certifying Peer Support Specialists", "paragraphs": ["Officials from peer support specialist programs in selected states  generally cited six leading practices for certifying peer support specialists.  The 10 stakeholders\u2014representing the perspectives of researchers,  training or consulting organizations, associations, and advocacy  organizations\u2014we spoke with generally agreed that the six identified  leading practices should be incorporated into programs that certify peer  support specialists because the practices can lead to stronger quality of  services for individuals with serious mental illnesses.", "Leading practice one: Systematic screening of applicants. Program  officials in five of the six selected states cited the importance of  systematic or detailed screening of applicants to become peer support  specialists as a leading practice. All six state programs assessed  applicants through a variety of approaches, including (1) using screening  questions about the applicants\u2019 understanding of the peer role, (2)  conducting telephone interviews with applicants, (3) reviewing  applications with a standardized tool or scoring rubric, and (4) having  multiple people review applications for objectivity. Eight of the 10  stakeholders we interviewed confirmed that this was a leading practice,  though some cautioned that these requirements should not unnecessarily  exclude individuals with unique backgrounds or little work history. The  Defense Centers of Excellence for Psychological Health and Traumatic  Brain Injury, which in 2011 explored how to most effectively apply peer  support in the military environment as part of its ongoing mission, has  similarly identified systematic screening with defined selection criteria as  a best practice for peer support programs.", "While work or volunteer experience can be used as a screening  requirement for applicants and was required by three of the states we  reviewed, four of the stakeholders we interviewed commented that  meeting these requirements can be challenging for individuals with a  history of mental illness who may have been previously unable to enter  the workforce. Research has shown that the stigma associated with  mental illness is a significant barrier to work for individuals with mental  illness and has shaped employer decisions about hiring or keeping a  person with mental illness in the workplace. These workplace barriers,  along with others, such as access to mental health treatment, contribute  to the relatively low workforce participation of adults with serious mental  illnesses. One stakeholder commented that peer support programs have  a responsibility not to contribute to barriers in the workplace for  individuals with mental illnesses.", "Our review shows that some of the peer support specialist programs in  the six selected states are taking steps to address these barriers. For  example, Florida recently changed its requirements and now provisionally  certifies peer support specialists who meet all the certification  requirements except for the requirement to have 500 hours of work or  volunteer experience. After receiving the provisional certification, peer  support specialists have 1 year to complete the work or volunteer hours  necessary to upgrade to the full certification.", "Leading practice two: Conducting core training in-person. Program  officials from five of the six selected states cited core training that is  conducted in-person, as opposed to online, as a leading practice. Three  program officials told us that core training should be done in-person to  foster relationship building and experiential learning to develop the  interpersonal skills a certified peer support specialist needs. All six state  programs had in-person core training, regardless of whether the training  was run by the state program itself or through approved vendors. For  example, Michigan hosts its core trainings at a retreat center where  participants are encouraged to stay for the week. Michigan program  officials told us that this creates a place for training participants from  across the state to network, discuss how their agencies work and the  types of issues they face as peer support specialists, and share best  practices. SAMHSA\u2019s core competencies identify the importance of using  active listening skills, understanding when to share experiences and  when to listen, and using their own recovery story to inspire hope.", "All 10 stakeholders we interviewed confirmed that providing in-person  training was a leading practice, though 3 commented that some of the  knowledge segments could be done online. Five stakeholders we  interviewed told us that observing the skills of peer support specialists  during training or incorporating observation as part of the certification  exam is important. One stakeholder explained that while written tests are  a good measure of basic knowledge, the tests cannot fully assess the  skills and competencies needed for certification. While 2 stakeholders  cited the increased costs of delivering and grading exams with an  observational component as the reasons many states use written exams  only, 1 stakeholder noted that including an observational component is a  more accurate assessment of whether or not people have developed  needed skills. Another stakeholder commented that using a written test  alone may allow individuals who are good test takers to become certified,  even if they lack the interpersonal skills needed to be a peer support  specialist.", "Leading practice three: Incorporating physical health and wellness  into training or continuing education. Program officials from five of the  six selected states cited the importance of emphasizing to peer support  specialists that they should help others manage their physical health\u2014in  addition to their mental health\u2014during core training or continuing  education as a leading practice. All six of the selected states incorporated  managing physical health conditions into their core training or continuing  education. (See text box.) In these trainings, peer support specialists  learn how to help others with access to needed care and prevention  services, set personal health goals to promote recovery and a wellness  lifestyle, and adopt healthy habits to prevent disease or lessen the impact  of existing chronic health conditions. The need for physical health- related training was identified after a 2006 report found that individuals  with serious mental illnesses were dying 25 years earlier than the general  population, largely due to treatable medical conditions caused by  modifiable risk factors, such as smoking and poor nutrition or obesity.  SAMHSA identified educating peers about health, wellness, recovery, and  recovery supports as a core competency.", "All 10 stakeholders we interviewed confirmed that emphasizing the  importance of physical health was a leading practice, though 2  stakeholders commented that incorporating physical health and wellness  into trainings should only be done as continuing education.", "Example of Leading Practice Three: Georgia Peer Support Whole Health and  Wellness Georgia determined it was important to incorporate physical health and wellness into  training for peer support specialists and was the first state to have related services\u2014 which it calls Peer Support Whole Health and Wellness\u2014provided by certified peer  support specialists covered by Medicaid. These peer support specialists\u2014who complete  additional training and are certified in Whole Health Action Management\u2014receive  medical technical support from registered nurses and are trained to work in both primary  care and behavioral health settings. Georgia created the service using a SAMHSA- funded Transformation Transfer Initiative grant, which was designed to give states the  opportunity to increase their efforts to make their state behavioral health delivery systems  more consumer driven, among other things.", "The SAMHSA-Health Resources and Services Administration Center for Integrated  Health Solutions adapted Georgia\u2019s training, along with a training developed by New  Jersey, to publish a Whole Health Action Management Peer Support Training Participant  Guide in 2015. This adapted 2-day training aims to teach peers to use a person-centered  planning process to create a whole health goal and how to engage in peer support,  including Whole Health Action Management peer support groups, to meet that goal.", "Leading practice four: Preparing organizations to effectively use  peers. Program officials from four of the six selected states cited efforts  to ready provider organizations\u2014such as hospitals or drop-in centers\u2014to  employ certified peer support specialists as a leading practice. State  program officials told us that organizational readiness includes making  sure staff understand the role of peer support specialists and can provide  appropriate supervision. (See text box.) Five of the selected states have  developed guidance or training for supervisors of peer support  specialists. Nine of the 10 stakeholders we interviewed confirmed that  this was a leading practice. SAMHSA identified using supervision  effectively and engaging in problem-solving strategies with a supervisor  as a core competency for this workforce.", "Example of Leading Practice Four: Michigan Peer Liaisons  In order to help provider organizations understand the role of peer support specialists,  Michigan created an informal peer liaison role at all 46 of the local Community Mental  Health Services Programs tasked with coordinating mental health services. State officials  told us that these peer liaisons have telephone calls and in-person meetings to provide  informal feedback on technical assistance needs and share information on how certified  peer support specialists are doing in their roles and responsibilities. According to state  officials, peer liaisons have helped prepare mental health agencies to work with peer  support specialists and have helped the state identify what new trainings should be  developed to better help peer support specialists succeed in the workplace.", "Many of the stakeholders we interviewed highlighted the importance of  having individuals in an organization who understand the peer support  role. Eight of the stakeholders we interviewed told us that supervisors  need to understand or be trained in the peer support role and skillset, with  three stakeholders commenting that supervisors need to be specifically  aware of the difference between peer support specialists and clinical  providers. For example, to achieve this the training and certifying  organization in Texas runs a twelve month program that helps provider  organizations effectively implement peer support services. The program,  which is designed as a learning community, focuses on changing  organizational culture, defining and clarifying the peer support specialist  role, and supervising these staff, among other things. Relatedly, three  stakeholders told us that there should be more than one peer support  specialist at each organization. One stakeholder noted that having  multiple peer support specialists at an agency provides built in support  and understanding of the peer role, which is important given that peer  support specialists typically have the lowest level of power in an organization. Another stakeholder noted that putting a single peer support  specialist in an organization can be isolating.", "Leading practice five: Continuing education requirements specific to  peer support. Program officials from five of the six selected states  considered it a leading practice to require, after certification, peer support  specialists to take continuing education that is specific to the peer support  role. This is to ensure that peers maintain their competency and are  aware of new developments in the field. Five of the six selected states  required certified peer support specialists to maintain their competence  through continuing education, and all five of these states had a  requirement that the continuing education be specific to the peer support  role. (See text box.) All 10 stakeholders we interviewed confirmed that  this was a leading practice. The Defense Centers of Excellence for  Psychological Health and Traumatic Brain Injury similarly identified as a  best practice enabling continued learning through structured training.  SAMHSA identified seeking opportunities to increase knowledge and  skills of peer support as a core competency for peer support specialists.", "Example of Leading Practice Five: Pennsylvania Continuing Education  Requirement As an added step to ensure that the peer support specialist workforce is competent,  Pennsylvania places some of the burden on provider agencies for ensuring that certified  peer support specialists meet continuing education requirements. The state requires its  licensed provider agencies to develop a staff training plan to ensure that each certified  peer specialist receives the continuing education they need. Pennsylvania also requires  these agencies to provide opportunities for certified peer specialists to network with other  certified peer specialists both within and outside the agency. The state monitors  compliance with these requirements through annual inspections. State officials told us  that this requirement serves as a safety net and assures them that certified peer support  specialists are up to date in their training.", "Leading practice six: Engaging peers in the leadership and  development of certification programs. Program officials from four of  the six selected states cited having certified peer support specialists lead  or participate in the certification process of applicants as a leading  practice. State program officials told us that peers should lead in a variety  of ways, including helping screen applicants, developing curricula,  providing training, and serving as mentors or supervisors to other certified  peer support specialists. For example, Michigan concurrently runs its  continuing education courses and core training in the same location so  that experienced peer support specialists can mentor new peers. Officials  from all six selected states told us that certified peer support specialists in  their states participate in some part of the certification process. (See text  box.) The Defense Centers of Excellence for Psychological Health and  Traumatic Brain Injury similarly identified as a best practice leveraging the  unique experiences and benefits peer support specialists offer as peers  throughout a peer support specialist program, including in positions of  leadership. All 10 stakeholders we interviewed confirmed that this was a  leading practice.", "Example of Leading Practice Six: Oregon Traditional Health Worker Commission  Through service on a statewide commission, peer support specialists in Oregon have a  leadership role in developing the education and training requirements for certified peer  support specialists and others. The Oregon Health Authority\u2019s Traditional Health Worker  Commission promotes the role, engagement, and utilization of traditional health  workers\u2014health workers who are certified by the state\u2014in Oregon\u2019s health care delivery  system. The commission includes member representatives of each type of traditional  health worker, including peer support specialists. In addition to developing the education  and training requirements for peer support specialists and other types of traditional health  workers, the commission developed the scope of practice to be used by provider  organizations that employ peer support specialists. On an ongoing basis, the commission  advises the Oregon Health Authority about the traditional health worker program and  ensures that the program is responsive to consumer and community health needs.  Oregon state officials consider having this advisory body with representation from the  peer community to be a best practice, commenting that the commission provides the  hands-on knowledge that the state can then implement through policy and rules."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for review and comment. The  Department did not have any comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Health and Human  Services, the Secretary of the Department of Defense, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff should have any questions about this report, please  contact me at (202) 512-7114 or DeniganMacauleyM@gao.gov. Contact  points for our Office of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: List of Organizations and Individuals Interviewed", "paragraphs": [], "subsections": [{"section_title": "State peer support specialist programs", "paragraphs": [], "subsections": []}, {"section_title": "Stakeholders", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Summary of Peer Support Specialist Program Screening, Training, and Certification Requirements in Selected States", "paragraphs": ["Recovery experience   Must have lived  experience with a  mental illness or  substance use disorder  and have been in  recovery for a minimum  of 2 years.  Must have been in  recovery for at least 1  year between diagnosis  of mental illness or  substance use disorder  and application for  training program.", "Must have been  diagnosed with a mental  illness and been in  recovery for a minimum  of 1 year.", "Must currently be or  formerly have been  receiving services for  mental illness or  substance use disorder.", "Must currently be or  formerly have been  receiving services for a  mental illness.", "Minimum of 12  months of work or  volunteer  experience within  the last 3 years   Not required  2 (type unspecified)", "Must self-identify as  being in recovery from a  mental health challenge.", "For the purposes of this report, we use the term \u201cpeer support specialist\u201d to describe individuals who  use their own lived experience recovering from mental illnesses to support others in their recovery;  however, each state may have different titles in place for the certified role achieved through their peer  support specialist programs."], "subsections": []}, {"section_title": "Appendix III: Example of a Peer Support Specialist Core Training", "paragraphs": ["The training schedule below, developed by the Appalachian Consulting  Group, illustrates the content areas that may be included in core training  curriculum for peer support specialists seeking certification. The  Appalachian Consulting Group\u2019s curriculum was used in the first  Medicaid-billable peer support specialist program in Georgia in 1999, and  since then the curriculum has been used to train peer support specialists  in 25 states. This training schedule is an example of the types of content  that could be included in such training, and is not an endorsement of a  particular training curriculum."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tom Conahan (Assistant  Director), Summar Corley (Analyst-in-Charge), JoAnn Martinez (Analyst- in-Charge), Kaitlin Asaly, Muriel Brown, Krister Friday, and Emily Wilson  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Federal and academic studies have reported that millions of American adults with serious mental illnesses, such as schizophrenia and bipolar disorders, go untreated each year. This is driven, in part, by a national shortage of behavioral health care professionals.", "In recent years, states have increased use of peer support specialists\u2014people who use their own experience recovering from mental illnesses to support others.", "We looked at how 6 states certify that the specialists have basic competencies and the ability to support others. We found 6 leading practices, including training specialists in person and requiring continuing education."]}
{"id": "GAO-19-210", "url": "https://www.gao.gov/products/GAO-19-210", "title": "Homeland Security: Research & Development Coordination Has Improved, but Additional Actions Needed to Track and Evaluate Projects", "published_date": "2019-03-21T00:00:00", "released_date": "2019-03-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Conducting R&D on technologies is vital to enhancing the security of the nation. The Homeland Security Act of 2002, as amended, designates S&T as responsible for coordinating all R&D activities of DHS. Questions have been raised about S&T's ability to demonstrate the impact of its R&D investments. Since DHS began operations in 2003, GAO has made recommendations to help improve DHS's efforts to coordinate and oversee R&D.", "GAO was asked to review DHS's R&D efforts. This report examines (1) how much DHS has obligated for R&D and what types of R&D DHS conducts, (2) to what extent S&T coordinates R&D across DHS, and (3) how, if at all, DHS identifies and tracks R&D efforts.", "GAO reviewed documentation from DHS related to the conduct, coordination, tracking, and evaluation of R&D projects. GAO interviewed DHS officials with responsibilities related to, among other things, R&D financial reporting, performance evaluation, and the IPT process, including officials from the 10 DHS components that participate in the IPTs. GAO also reviewed DHS R&D budget and obligation data from fiscal years 2010 through 2017."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) obligated more than $10 billion for research and development (R&D) from fiscal years 2010 through 2017. Seven DHS components have budget authority to conduct R&D, and the Science and Technology Directorate (S&T) obligated nearly 80 percent of all DHS R&D funds during this time period. These components conduct a wide range of R&D, from cybersecurity to border security projects. S&T generally leads or funds R&D projects by providing technology and knowledge products to support four homeland security mission areas:", "Disaster resilience . Improving community resilience to natural disasters through technology and tools;", "Critical incidents . Improving response technological capabilities;", "Border security . Improving the nation's ability to detect, interdict and prosecute illegal activity across air, land and sea.", "Cybersecurity . Developing technologies and tools to secure systems and critical infrastructures against cyberattacks.", "S&T strengthened its R&D coordination efforts across DHS, but some challenges remain. In 2015, DHS established an R&D coordination mechanism, to be led by S&T, and in 2017 issued R&D coordination-related guidance. Specifically, to improve coordination, DHS established an Integrated Product Team (IPT) process to serve as the key R&D coordination mechanism within DHS. All ten DHS components that GAO interviewed stated that the IPT process improved visibility into DHS R&D efforts. However, the component that obligated approximately 17 percent of DHS R&D funds in 2017, or $176 million, did not participate in the IPT process in 2018, as required. Nonparticipation poses a risk to R&D coordination efforts across DHS, including R&D project information not being shared among components. Furthermore, ensuring that all required components participate in the IPT process would help S&T maintain visibility of R&D projects in order to fulfill its statutory role of coordinating R&D, and mitigate the risk of potential duplication of effort.", "S&T, in its coordination role for DHS, uses disparate information sources to identify and track R&D project information and faces challenges to track progress and other information for ongoing R&D projects. For example, R&D project information is stored in multiple information sources leading to difficulty in integrating complete R&D project information and resulting in reporting that is not comprehensive. By developing a mechanism to address these challenges, S&T can further improve its efforts to report and analyze R&D project information, and have improved visibility on R&D efforts across DHS. GAO also identified challenges in collecting information related to R&D performance. Among other things, DHS is not well positioned to integrate the results and share lessons learned because limited R&D customer feedback information is collected and analyzed. Of the seven DHS components with R&D budget authority, two reported having formal customer feedback mechanisms. As a result, DHS is unable to more fully understand its customers' perceptions and experience which would allow DHS to better assess the performance of its R&D efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, with which DHS concurred, including that DHS: 1) ensure all components participate in the IPT process, 2) develop a mechanism that aligns R&D project tracking sources, and 3) collect feedback from R&D customers."]}], "report": [{"section_title": "Letter", "paragraphs": ["Conducting research and development (R&D) on technologies for  detecting, preventing, and mitigating terrorist and natural threats is vital to  enhancing the security of the nation. Since it began operations in 2003,  the Department of Homeland Security (DHS) has obligated billions of  dollars researching and developing technologies used to support a wide  range of missions, including securing the border, detecting nuclear  devices, and screening airline passengers and baggage for explosives,  among others. Within DHS, the Science and Technology directorate  (S&T) is responsible for coordinating and integrating R&D activities  across the department while DHS components may also conduct R&D to  support their respective missions.", "Since 2003, questions have been raised regarding S&T\u2019s ability to  oversee and coordinate R&D activities across the department as well as  to demonstrate the value of these investments over time. In 2012, we  found that DHS efforts to coordinate R&D across the department were  fragmented and overlapping, which increased the risk of unnecessary  duplication. We also reported that DHS did not know how much all of its  components invested in R&D, making it difficult to oversee these efforts  across the department. We recommended, among other things, that the  Secretary of Homeland Security develop and implement policies to  include elements such as a definition of R&D that provides reasonable  assurance that reliable accounting and reporting of R&D resources and  activities are achieved. In response to our recommendation, DHS issued  a memorandum in April 2014 that included a definition for R&D.  Furthermore, DHS implemented a common appropriations structure to  accurately identify the resources it is expending on R&D projects.", "You asked us to evaluate DHS\u2019s efforts to coordinate and monitor R&D  activities across the department. This report addresses the following  questions: (1) how much has DHS obligated for R&D from fiscal years  2010 through 2017 and what types of R&D does DHS conduct; (2) to  what extent does S&T coordinate R&D across DHS; and (3) how, if at all,  does DHS track and identify R&D efforts and assess R&D performance  department-wide.", "To determine how much DHS has obligated for R&D, we analyzed federal  budget data to identify R&D-related obligations for fiscal years 2010  through 2017. We selected this time frame to analyze multiple years of  obligation trend data, and 2017 was the most recent year of available  data at the time of our review. To identify the R&D obligations data, we  searched the Office of Management and Budget\u2019s (OMB) MAX database  for DHS accounts with the term \u201cresearch\u201d in the account title and  extracted total obligations for those accounts from the database for fiscal  years 2010 through 2017. We assessed the reliability of the data by  reviewing OMB guidance and procedures that govern OMB MAX data  inputs. We determined that the data were sufficiently reliable for reporting  general trends. However, because we previously found that some DHS  R&D-related obligation data were not properly identified, and because  R&D-related obligations could potentially be reported in other accounts  that may not contain the term \u201cresearch,\u201d we report the data as a  minimum of the amount that DHS could have obligated for fiscal years  2010 through 2017. We also interviewed DHS officials, including those from the DHS Office of the Chief Financial Officer (OCFO) and the S&T  Finance and Budget Division to obtain and corroborate information about  R&D-related obligations, budget and expenditure tracking tools and  reports. To identify what types of R&D DHS conducts, we reviewed DHS  documents including congressional budget justifications and fact sheets.  To learn more about the types of R&D activities that DHS components  conduct, we also interviewed officials from each of the 10 components  that are involved in the Integrated Product Teams (IPT), which is DHS\u2019s  primary R&D coordination mechanism. Based on IPT charter documents  and S&T IPT guidance, we identified the components that are to  participate in the IPT process. These components were: the Countering  Weapons of Mass Destruction (CWMD) Office, the Federal Emergency  Management Agency, the Cybersecurity and Infrastructure Security  Agency, the U.S. Secret Service, the Office of Intelligence and Analysis,  the Transportation Security Administration (TSA), the U.S. Citizenship  and Immigration Services, the U.S. Coast Guard, the U.S. Customs and  Border Protection (CBP) and the U.S. Immigration and Customs  Enforcement.", "To determine the extent to which S&T coordinates R&D across DHS, we  analyzed DHS guidance documents, such as management directives,  instructions, and memoranda, which assign R&D-related roles and  responsibilities and govern certain R&D coordination practices. The  guidance documents included a memorandum establishing the IPT  process and how the IPT process should coordinate R&D efforts across  DHS. We also interviewed DHS officials with roles and responsibilities  related to R&D to obtain their perspectives on R&D coordination and the  relevant guidance documents, including officials who manage IPT  operations. To further understand the IPT process, we conducted  interviews with officials from the 10 DHS components that participate in  the IPT process to obtain their perspectives on the benefits and  challenges of the process. Furthermore, we analyzed IPT-related  documentation including charter documents, IPT meeting agendas and  minutes, and IPT guidance documents to determine how the process  facilitates R&D coordination efforts. We also interviewed DHS officials  responsible for department-wide requirements identification.", "To examine the extent to which DHS tracks and identifies R&D efforts, we  interviewed S&T officials to determine what tracking mechanisms are  used. We also reviewed existing lists of DHS R&D projects, such as  DHS\u2019s Report of Coordinated R&D, DHS\u2019s responses to congressional  inquiries regarding R&D project lists, outputs from electronic tracking  systems, such as S&T\u2019s Project Tracker Database, and R&D projects  listed in congressional budget justification documents, among other  things. We also interviewed S&T officials involved in developing the R&D  project information sources to determine how the lists are compiled, how  information is entered into the sources, and what the benefits and  challenges are for each source of R&D project information that we  identified. In addition, we interviewed officials from DHS\u2019s OCFO and  reviewed departmental financial management policies to learn about how  the recently-implemented common appropriations structure has affected  the transparency of R&D efforts across DHS.", "To determine the extent to which DHS components with R&D budget  authority collected and reported performance information to assess their  R&D efforts, we reviewed applicable laws governing performance  reporting in the federal government, including the Government  Performance and Results Act of 1993 (GPRA), as updated and expanded  by the GPRA Modernization Act of 2010 (GPRAMA), and guidance for  implementing these laws. We also reviewed leading practices, identified  in our prior work, used by organizations related to R&D performance  indicators. In addition, we reviewed leading practices for project,  program and portfolio management and reviewed DHS documents  related to its processes for collecting and reporting its performance  information. The documents reviewed included policies and guidance  regarding how these processes are to operate, the information to be  collected, as well as documents used to communicate performance  information, including DHS\u2019s Annual Performance Report, as well as  DHS\u2019s congressional budget justification documents. To illustrate how  DHS uses one method to track R&D progress, we analyzed selected  milestones in the congressional budget justification documents for 7 of  DHS\u2019s approximately 132 reported R&D projects. To conduct our  analysis, we identified two milestones each from the selection of seven  R&D projects that S&T officials consider to be high priority. We selected  the two milestones from the most recent year for each project; if there  were more than two milestones, we randomly selected two. The  milestones, selected from the fiscal year 2018 budget documents, were  assessed against DHS guidance that its components are to utilize to  develop the milestones. Two analysts independently reviewed the  milestones and resolved any disagreements in their assessments. To  further understand the information used to assess R&D performance, we  interviewed officials from the seven IPT-participating DHS components  with R&D budget authority to learn how they collect and report  performance information. We also examined guidance to components for  collecting and reporting performance information, such as performance  goals and milestones, and customer feedback mechanisms.", "We also interviewed officials from various DHS offices that are involved in  managing, collecting or using R&D performance information from across  the department. Specifically, we interviewed officials from DHS\u2019s Office of  Program Analysis and Evaluation, Office of Policy, and OCFO. DHS\u2019s  Office of Program Analysis and Evaluation coordinates performance  management across DHS components. DHS\u2019s Office of Policy develops  strategies, operational plans, and leads the development of operational  and resource allocation guidance for the department, among other things.  Further, we reviewed performance information and documents related to  DHS\u2019s process for assessing and reporting its annual performance goals.  This included performance information reported in DHS\u2019s Annual  Performance Report for fiscal years 2016 through 2018 and in  congressional budget justification documents for fiscal year 2018 for the  DHS components that conduct R&D. To conduct our analysis, we  compared performance information in the DHS annual performance  report and congressional budget justification documents to GPRA  requirements and OMB guidelines for agency performance information.", "We conducted this performance audit from October 2017 through January  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DHS R&D Roles and Responsibilities", "paragraphs": ["The Homeland Security Act of 2002, as amended, designates the Under  Secretary for Science and Technology as responsible for coordinating all  R&D activities of DHS. The Act also provides that nothing in it precludes  other department components from carrying out R&D activities as long as  the activities are coordinated through S&T. As of September 2018,  seven DHS components have budget authority to conduct R&D  activities\u2014S&T, the Coast Guard, the CWMD, the Secret Service, the  Cybersecurity and Infrastructure Security Agency, TSA, and the Office of  the Chief Information Officer within the Office of the Undersecretary for  Management. Figure 1 provides an organizational overview of DHS  components and offices that are involved in the R&D process as of  December 2018.", "S&T reorganized its structure in September 2018 and currently has three  technical divisions responsible for managing R&D programs related to  improving border, immigration, and maritime security; supporting first  responders; and countering physical and cybersecurity threats among  others, as shown in figure 2.", "Most of S&T\u2019s R&D portfolio consists of applied and developmental R&D,  which can be transitioned to use within 3 years, as opposed to longer- term basic research. In addition to conducting projects for its DHS  customers, S&T conducts research for other federal agencies and first  responders. S&T is also responsible for conducting basic and applied  research, and collaborates with other government agencies, academia,  the private sector, and others."], "subsections": []}, {"section_title": "Overview of Past R&D Management Challenges", "paragraphs": ["Questions have been raised about S&T\u2019s ability to demonstrate the  impact of its investments\u2014in terms of value, tangible products, and  advances toward the homeland security mission. Accordingly, for  example, House appropriations committee report language has directed  S&T to demonstrate how its R&D efforts are timely, with results relatively  well defined and to make investment decisions based on clear and  sensible priorities. In 2016, Congress passed the National Defense  Authorization Act of 2017 (NDAA) which requires DHS to report annually  to Congress on the department\u2019s R&D projects including details such as  the project name, the component carrying out the project, associated  funding levels, and expected objectives and milestones for each project,  among other items.", "Since DHS began operations in 2003, we have made multiple  recommendations designed to improve DHS efforts to manage and  oversee R&D efforts, as described later in this report. In September 2012,  we reported that DHS did not have a department-wide policy defining  R&D or guidance directing its components how to report R&D activities.  As a result, DHS did not know its total annual investment in R&D, which  limited the department\u2019s ability to oversee components\u2019 R&D efforts and  align them with agency-wide R&D goals and priorities. We also reported  that DHS\u2019s R&D efforts were fragmented and overlapping, which  increased the risk of unnecessary duplication. We recommended that  DHS develop policies and guidance for defining, reporting and  coordinating R&D activities across the department, and that DHS  establish a mechanism to track R&D projects. As of August 2017, DHS  had implemented these recommendations by, among other things,  issuing guidance defining research and development activities and  establishing Integrated Product Teams (IPT) as a primary mechanism for  coordinating R&D. These actions and others are described in more detail  later in this report.", "Figure 3 provides a summary of key events related to S&T since its  inception."], "subsections": []}, {"section_title": "Past DHS Accounting Challenges", "paragraphs": ["After the consolidation in 2002 of 22 agencies into a single department,  DHS had, until recently, different appropriation structures and budget  management practices based on agencies\u2019 funding structures prior to  DHS consolidation. In 2018, we found that, with over 70 different  appropriations and over 100 formal program, project, or activity accounts,  DHS operated for over a decade with significant budget disparities and  inconsistencies across its components. The lack of uniformity hindered  visibility, inhibited comparisons between programs, and complicated  spending decisions, including for R&D-related programs. For example, in  2012 we reported that S&T, the Domestic Nuclear Detection Office, and  Coast Guard were the only three DHS components with budget authority  to conduct R&D. However, in 2012, we identified an additional $255  million in R&D obligations by other DHS components at that time. Further,  we found in 2012 that the Domestic Nuclear Detection Office did not  report certain R&D budget data to OMB, and R&D budget accounts  included a mix of R&D and non-R&D spending, which further complicated  DHS\u2019s ability to identify its total investment in R&D activities."], "subsections": []}, {"section_title": "Role of the Integrated Product Teams in R&D", "paragraphs": ["Within DHS, IPTs \u2013 established in 2015 \u2013 are to identify and prioritize  technological capability gaps, and identify current or future R&D efforts or  other solutions to close the gap, among other things. Specifically, the  IPT process consists of three activities: 1) Identifying R&D activities in  progress, funded, planned, or recently completed; 2) Prioritizing  technological capability gaps and corresponding R&D efforts to address  those gaps; and 3) Validating and reporting the gaps.", "The DHS IPT effort is led by S&T, but the individual IPTs are composed  of senior-level officials from across DHS. IPT members prioritize R&D  gaps based on departmentwide needs and requirements, and align  current and planned R&D efforts to the identified gaps. In prioritizing and  evaluating the capability gaps, four pre-defined criteria and rating scales  are used and are discussed below:", "Strategic alignment: assesses the R&D gaps alignment with DHS- level and component-level strategic priorities.", "Impact: assesses if addressing the R&D gap would result in  enhanced risk or threat reduction capability, among other things.", "Feasibility: assesses the feasibility of addressing the R&D gap, given  its technical complexity. Considerations include feasibility related to  technology, time, and transition.", "R&D needs: assesses whether the R&D gap would provide a critical  R&D solution in an otherwise unaddressed area.", "The IPT\u2019s role in coordinating R&D is discussed later in this report."], "subsections": []}, {"section_title": "Overview of DHS\u2019s Processes for Assessing R&D Performance", "paragraphs": ["GPRA, as updated and expanded by GPRAMA, requires agencies to  establish annual performance goals with target levels of performance  against which to measure progress towards those goals. In addition,  GPRA requires executive agencies to prepare an Annual Performance  Report on program performance for the previous fiscal year. DHS has  developed goals and targets to assess and communicate R&D  performance. As shown in figure 4, DHS\u2019s performance assessment  process also includes identifying performance gaps and implementing  corrective actions to address unmet performance goals.", "DHS uses strategic and management performance goals and measures  to assess and communicate on the performance of its R&D efforts. In  addition, DHS uses milestones to track and communicate progress of its  R&D project activities.", "Milestones: A milestone is a scheduled event signifying the  completion of a major deliverable or a phase of work. Milestones can  help agencies demonstrate that they have clear and fully developed  strategies and are tracking progress to accomplish their goals.  Milestones are often used as the basis of an alternative form of  performance goal. Milestones related to DHS R&D efforts are  reported to Congress and publicly available through the DHS  congressional budget justification.", "Strategic Goals: A type of performance goal used to reflect  achievement of missions that are publicly reported in the DHS Annual  Performance Report. As part of DHS\u2019s Annual Performance Report,  these goals are subject to GPRA and GPRAMA requirements.", "Management Goals: A type of performance goal used to gauge  program results and tie to resource requests that are reported to  Congress and publicly available through the DHS congressional  budget justification along with the strategic goals.", "As we previously reported in 1997, experts in research measurement  have tried for years to develop indicators that would provide a measure of  the results of R&D. However, the very nature of the innovative process  makes measuring the performance of science-related projects difficult.  For example, a wide range of factors determine if and when a particular  R&D project will result in commercial or other benefits. It can also take  many years for a research project to achieve results."], "subsections": []}]}, {"section_title": "DHS Has Obligated More Than $1 Billion per Fiscal Year from 2010 through 2017 for Conducting R&D That Aligns with Department Mission Areas across Seven DHS Components", "paragraphs": [], "subsections": [{"section_title": "R&D Funding Amounts", "paragraphs": ["DHS is required to report department-wide R&D-related funding to OMB  on an annual basis. DHS uses several mechanisms to report the R&D- related funding, including budget authority (the legal authorization to  obligate funds), obligations (binding agreements to make a payment for  services), and outlays (payments to liquidate obligations representing  amount expended). Further, OMB requires agencies to submit data on  R&D programs as part of their annual budget submissions on investments  for basic research, applied research, development, R&D facilities  construction, and major equipment for R&D using OMB\u2019s definition of  R&D.", "Based on our analysis of OMB\u2019s federal obligations data, we identified  R&D-related obligations data for DHS components for fiscal years 2010  through 2017. Figure 5 depicts the R&D related obligations that were  reported for fiscal years 2010 through 2017, which, on average, were  about $1.3 billion annually or more than $10 billion overall for that time frame. Additionally, S&T obligated nearly 80 percent of all DHS R&D  funds for that time period."], "subsections": []}, {"section_title": "Types of R&D Activities that S&T Conducts", "paragraphs": ["S&T may conduct or fund R&D activities on its own or jointly with other  entities. In addition to S&T, six other DHS components currently have  budget authority to conduct R&D\u2014the Coast Guard, CWMD, TSA, Secret  Service, Cybersecurity and Infrastructure Security Agency, and the  Undersecretary for Management. In August 2018, S&T reported that there  were at least 132 ongoing R&D projects across the Department. Some  R&D projects aim to produce a specific prototype or piece of technology  for an end user, while others might be for developing IT systems,  conducting specific training, or providing written reports, or knowledge  products.", "According to S&T officials, S&T generally leads or funds R&D projects by  providing technology and knowledge products for four homeland security  areas:", "Disaster resilience. Improving community resilience to natural  disasters through technology and tools that support planning,  decision-making and mitigation efforts;", "Critical incidents. Improving technological capabilities during all  stages of critical incident response;", "Border security. Improving the nation\u2019s ability to detect, interdict and  prosecute illegal activity across air, land and sea.", "Cybersecurity. Developing technologies, tools and techniques to  defend, mitigate, and secure current and future systems, networks  and critical infrastructures against cyberattacks.", "Figure 6 illustrates the types of R&D projects that are either led or funded  by S&T for each category. For more in-depth examples and descriptions  of S&T projects, please see appendix I.", "In its efforts to determine how to best support the DHS components and  first responders, S&T seeks first to identify the end user\u2019s needs by  discussing operational challenges with components and first responders;  then develop prototypes or leverage existing technologies to find  solutions; and finally to test and evaluate potential solutions to ensure that  they meet the end user\u2019s needs and ultimately deploy solutions to the  field.", "The other six DHS components with R&D budget authority typically lead  and fund R&D projects tailored to support their specific operational  requirements and respective missions. Examples of R&D projects  conducted by DHS components other than S&T are listed below in table  1."], "subsections": []}]}, {"section_title": "S&T Implemented R&D Coordination Mechanism and Directives to Strengthen Collaboration Across DHS, but Challenges Remain in Ensuring Participation", "paragraphs": [], "subsections": [{"section_title": "DHS Established a Process to Coordinate R&D Efforts", "paragraphs": ["DHS established its IPT process in August 2015 as the central  mechanism to coordinate R&D efforts across the department, in  accordance with recommendations we made in 2012. The IPT process  works to identify DHS technological capability gaps and coordinate R&D  to close the gaps across DHS mission areas.", "The IPTs consist of senior representatives from operational components.  As of October 2018, IPTs are organized according to the department\u2019s  identified missions and include the following sub-IPTs, as shown in table  2.", "Each IPT has an establishing charter document, which formally identifies  the IPT component members and responsibilities and lists the  corresponding sub-IPTs. IPTs and sub-IPTs are to meet multiple times  throughout the year to support the process of identifying and prioritizing  R&D capability gaps and R&D efforts. For example, the charter for the  \u201cSecure Borders\u201d IPT states that they anticipate meeting at least 2 or 3  times per year, or more frequently to support the annual program  planning and budgeting process.", "Overall, components reported that the IPT process enhanced  collaboration and improved visibility into R&D efforts across DHS.  Officials from all 10 of the DHS components we interviewed reported the  IPT process has been helpful in various ways, including identifying  capability gaps, prioritizing and closing the gaps, and providing  transparency and insight into other components\u2019 R&D efforts. For  example, CBP officials reported that, through the IPT process, they were  able to identify R&D projects that the Coast Guard had been pursuing  related to maritime security. The R&D projects that Coast Guard was  pursuing were also of interest to CBP, and therefore CBP worked through  the IPT process to prevent duplicative work and combine some of those  efforts. In another example, TSA officials reported that they collaborated  with the Secret Service to test explosive screening technologies, and that  the IPT process facilitated their ability to collaborate and share  information about the screening technologies.", "In addition to enhancing collaboration, component officials provided their  perspectives on how the IPT process prioritizes technology capability  gaps that components have identified. For example, TSA officials  reported that the gap identification and prioritization process works well,  but that funding R&D activities to close the gaps is more challenging  because it is influenced heavily by competing budget priorities, emerging  threats, and other DHS senior leadership priorities. TSA officials further  reported that departmental resource constraints limit the number of  identified capability gaps that can be addressed. However, officials from  CBP reported that several R&D projects were successfully implemented  after CBP had worked with S&T to identify a capability gap and transition  a solution to close the gap, such as certain upgrades needed on CBP  trucks. S&T officials stated that they have also taken steps to integrate  with the department\u2019s Joint Requirements Council and utilize component  requirement executives who work with component agencies to provide a  basis for requirements and aid the components with the means to track  the progress and disposition of each capability gap on a regular basis."], "subsections": []}, {"section_title": "DHS Issued R&D Coordination Directives but Faces Challenges in Ensuring IPT Participation", "paragraphs": ["In 2012, we found that, among other things, DHS had not developed a  policy defining who was responsible for coordinating R&D within the  department and what processes should be used to coordinate it. As a  result, components did not consistently coordinate with S&T on what R&D  was planned or underway, leading to increased risk of unnecessary  duplication of R&D efforts. We recommended that DHS develop and  implement policies and guidance for overseeing R&D that included,  among other things, a description of the department\u2019s process and roles  and responsibilities for overseeing and coordinating R&D investments.  DHS concurred with our recommendation, and, in response, the  Secretary for Homeland Security delegated the authority to coordinate  and integrate the department\u2019s R&D, testing, evaluation efforts to the  Under Secretary for Science and Technology in 2014. In 2015 and  2016, DHS issued two guidance documents regarding the establishment  and progress of the IPT process. These documents specified how DHS,  through the IPT process, is to implement processes and mechanisms to  coordinate department-wide R&D efforts. Additionally, in January 2017,  DHS issued an R&D directive and associated instruction to formalize  R&D reporting and coordination among components, as shown in figure  7.", "The 2017 directive and associated instruction identify the roles and  responsibilities, including IPT participation requirements, for key entities  involved in R&D across DHS. However, the directive and instruction do  not specifically address steps to be taken if components do not adhere to  the requirements. For example, the January 2017 DHS instruction states  that \u201cto effectively coordinate DHS R&D activities, DHS components are  required to follow the DHS IPT process.\u201d However, officials from CWMD  stated that they do not participate in the S&T-led IPT sessions because  they have their own internal process for identifying and prioritizing  capability gaps. S&T officials stated that CWMD\u2019s predecessor  organization, the Domestic Nuclear Detection Office, participated in the  IPT process until DHS initiated a reorganization of its weapons of mass  destruction programs (resulting in the current CWMD).", "Current non-participation by CWMD, which has the second-largest R&D  budget within DHS and obligated approximately 17 percent of DHS R&D  funds, or $176 million in fiscal year 2017, poses risk of R&D project  information not being shared among components. In August 2018, we  reported that DHS\u2019s chemical defense programs and activities were  fragmented and not well coordinated across the department, including  R&D activities. We recommended that CWMD develop a strategy and  implementation plan to help DHS integrate and coordinate its chemical  defense programs and activities, among other things. Additionally, in its  2014-2018 Strategic Plan, DHS states that, to anticipate key threats, DHS  should, among other things, prioritize R&D activities related to chemical,  biological, radiological, and nuclear terrorism. Given these factors,  CWMD\u2019s participation in the IPT process is important to ensure that all  R&D efforts are fully coordinated thereby mitigating the risk of potential  duplication of other DHS R&D efforts.", "S&T officials recognize that some components might not be complying  fully with the departmental directives and associated guidance documents  which require participating in the IPT process \u2013 the key R&D coordination  mechanism within DHS. S&T officials stated that, despite these  challenges, they have strong collaborative relationships with the  components, and the existing collaboration mechanisms, such as the IPT  process, continue to mature and facilitate R&D-related information  sharing. However, DHS guidance documents require that components  participate in the IPT process. By ensuring that all required components  participate in the IPT process, DHS can help S&T maintain visibility of  R&D projects in order to fulfill its statutory role of coordinating R&D."], "subsections": []}]}, {"section_title": "S&T Has Taken Steps to Identify and Track DHS\u2019s R&D Project Information, But Efforts Are Disjointed or Do Not Align with DHS Guidance", "paragraphs": ["Since 2012, S&T has taken steps to identify and track information related  to ongoing R&D projects across DHS, and in 2017, DHS developed a  common appropriations structure that standardized R&D budgeting  processes across the department. However, S&T\u2019s efforts to identify and  track R&D project information have limitations and can result in  information that is not comprehensive. We also identified challenges in  collecting information related to the achievement of R&D milestones."], "subsections": [{"section_title": "DHS Developed the Common Appropriations Structure to Better Streamline and Standardize the Budgeting Process across Components", "paragraphs": ["In 2017, DHS developed a common appropriations structure that allowed  it to calculate and monitor its expenses, including R&D expenses, across  the department. Officials from DHS\u2019s OCFO reported that, prior to the  new structure, some components categorized their R&D expenses as  other types of expenses, such as \u201csalaries and expenses.\u201d These  categorizations made it difficult to account for R&D expenses outside of  an individual component\u2019s budget management division. Furthermore,  OCFO officials reported that components previously utilized inconsistent  R&D definitions, which often led to discrepancies in how components  would report R&D activities.", "In our April 2018 report, we found that DHS had operated for over a  decade with significant budget disparities and inconsistencies across its  components. We found that the lack of uniformity hindered visibility,  inhibited comparisons between programs, and complicated spending  decisions. According to DHS OCFO officials, the introduction of the  common appropriations structure, among other things, has helped  improve transparency within DHS and among the components so that  R&D can be more readily identified and tracked. DHS is also able to  compare R&D funding amounts throughout DHS more easily than in  previous years. In addition, of the seven components that have their own  R&D funding to report, five indicated that the new structure has improved  the department\u2019s ability to identify and report R&D activities."], "subsections": []}, {"section_title": "S&T\u2019s Efforts to Maintain an Inventory of R&D Projects across DHS Have Resulted in Reporting That Is Not Comprehensive", "paragraphs": ["We identified multiple sources of component R&D project information,  each posing its own challenges or limitations. As described below, these  challenges and limitations include difficulty in collecting and integrating  R&D project information, and reporting that is not comprehensive.", "DHS\u2019s response to the National Defense Authorization Act of 2017:  The NDAA, passed in December 2016, required DHS to provide a list of  ongoing R&D projects and accompanying milestone information by  January 2017, and annually thereafter, to specified congressional  committees. In December 2017, DHS officials reported that they had not  yet submitted the report, and anticipated that the response to the NDAA  requirement would be completed by January 2018. In August 2018, DHS  submitted its response to the committee, then 19 months late. S&T  officials stated that the reporting delays were due to challenges in  collecting and integrating the data. S&T officials also reported that it used  the components\u2019 congressional budget justification documents as a  starting point to identify R&D projects to include in its report in response  to the NDAA requirement. However, additional details about the R&D  projects had to be collected via a \u201cdata call\u201d process from the  components. S&T officials told us that it was a challenge to have  components report information about their R&D projects consistently and  systematically. Furthermore, S&T officials identified terminology-related  challenges in their R&D data call efforts, including making distinctions  between R&D projects, efforts, and activities. S&T officials also reported  that, in its current format, they would not be able to easily identify how  many projects were added to the NDAA list across years, or if a given  R&D project experienced a large increase or decrease in funding.", "Annual Reports of Coordinated R&D: In response to a 2015 request  from the Secretary of Homeland Security that the IPTs identify R&D work  being performed across DHS, S&T issued a \u201cReport of Coordinated R&D\u201d  in 2016 and 2017. The content for the reports was developed through a  \u201cdata call\u201d process, and the reports identified R&D activities and projects  across DHS. The reports \u2013 for 2016 and 2017 \u2013 contain tables of R&D  project names and the component leading the project, among other  things. However, during the course of our review, S&T officials reported  that these annual reports should not be considered authoritative lists of  R&D projects due to inconsistencies in the project information that  components reported which led to the reports not being comprehensive.  For example, when we asked about some significant variations in the  number of projects between 2016 and 2017, S&T officials told us that one  DHS component responded to the data call with a list of R&D activities  that included a \u201cwish list\u201d of R&D for their component, and not actual  ongoing R&D activities. DHS officials acknowledged that they do not have  a mechanism to ensure the comprehensiveness of information reported  by the components through the data call process. In addition, two  components did not respond to S&T\u2019s request for R&D project information  for the 2017 Annual Report of Coordinated R&D.", "Congressional Budget Justifications: In May 2018, in the absence of a  single, comprehensive list of R&D projects across DHS prior to the  issuance of its report in response to the NDAA, S&T officials referred us  to the R&D projects listed within the seven individual congressional  budget justifications for the components that currently have budget  authority to conduct R&D. Furthermore, as discussed earlier, S&T officials  used the congressional budget justifications as their starting point in  developing their response to the NDAA. However, S&T officials stated  that there may be differences between the projects listed in the NDAA  response and the projects listed in the congressional budget justifications.  For example, S&T stated that the report in response to the NDAA  includes all \u201congoing\u201d projects, regardless of the fiscal year in which they  received funds; while the congressional budget justifications include R&D  projects for which funding was requested for the given fiscal year. In other  words, S&T officials clarified, they included all R&D projects in their  response to the NDAA that had project activity, regardless of whether  funding was requested in a particular congressional budget justification.", "S&T\u2019s Project Tracker Database and the S&T Analytical Tracking  System: A 2014 House Appropriations Committee report noted that the  committee had repeatedly raised questions about S&T\u2019s prioritization of  R&D projects and that, without the ability to easily review and compare  detailed information on all S&T projects and activities, the Under  Secretary for S&T could not effectively carry out S&T\u2019s responsibilities.  Accordingly, the Committee directed S&T to develop a method or system  for tracking all S&T-funded R&D projects. A November 2016 DHS  Directive reiterates this requirement, specifying that the list of projects  should be updated on at least a quarterly basis throughout the duration of  an R&D project. S&T officials told us that, in response to the committee  report, they developed the Project Tracker Database, which was in use at  the time of our review, but was transitioned to a new system, the S&T  Analytical Tracking System, in September 2018. Neither the S&T  Analytical Tracking System nor its predecessor system, the Project  Tracker Database, is intended to comprehensively collect information on  R&D projects across the department, only for R&D projects managed  within S&T. Given the recent implementation of the S&T Analytical  Tracking System, it is too soon to tell whether it will improve and  streamline S&T\u2019s efforts to collect and analyze R&D-related information  within the directorate.", "In addition, S&T officials stated that none of the above R&D information  sources are suited to long-term trend analysis or data aggregation of  department-wide R&D project information, and that these sources are  disparate across DHS. S&T officials also acknowledged that better  aligning R&D project information sources is an important aspect of  improving how the department collects information DHS-wide.", "Standards for Internal Control in the Federal Government call for  agencies to maintain quality information that is, among other things,  current, accurate, accessible, and provided on a timely basis.  Furthermore, the standards call for an agency\u2019s management team to  process relevant data from reliable sources and utilize it to make informed  decisions. The disparate R&D project information sources that S&T  maintains, such as DHS\u2019s response to the National Defense Authorization  Act of 2017 and the Annual Reports of Coordinated R&D discussed  above, and the manual data-call process it takes to update the sources  limits departmental access to current and reliable R&D project information. For example, an internal DHS web-based portal with pre- defined fields could provide component officials with a means for  reporting information more consistently and comprehensively. Without  complete and readily accessible R&D information, DHS may not have the  information it needs to make informed decisions about R&D investments,  such as which projects are to be prioritized. By developing a mechanism  to address challenges and limitations related to the collection, integration,  and comprehensiveness of R&D data across the department, S&T can  improve its visibility on R&D efforts across DHS in accordance with its  role as DHS\u2019s coordinator of R&D efforts."], "subsections": []}, {"section_title": "DHS Has Not Effectively Developed Some R&D Performance Management Information, Posing Challenges to Assess and Report on the Progress of R&D Projects", "paragraphs": ["DHS components have processes in place to collect certain indicators of  R&D performance, but we found that these processes have limitations.  The methods used to assess and report performance and progress of  DHS R&D efforts we identified include:", "Milestone information \u2013 used to assess and communicate progress to  Congress and agency decision makers on individual R&D projects", "Strategic and Management Performance Goals \u2013 milestone and other  information is aggregated to provide summary information on R&D  performance by mission area", "Customer feedback \u2013 information gathered by component officials on  R&D customer perspectives on the utility of ongoing or completed  projects  Below is our analysis of the three methods."], "subsections": [{"section_title": "Milestones", "paragraphs": ["Milestones are often used as the basis of an alternative form of  performance goal. Performance goals specified in alternative form must  be described in a way that makes it possible to discern if progress is  being made toward the goal. Milestones related to DHS R&D efforts are  reported to Congress and publicly available through the DHS  congressional budget justification. A milestone is a scheduled event  signifying the completion of a major deliverable or a phase of work, and  can be described in a way that makes it possible to discern if progress is  being made toward a goal. Milestones can also help agencies  demonstrate that they have clear and fully developed strategies and are  tracking progress to accomplish their goals. In our analysis of 14  milestones for seven S&T high-priority R&D projects identified in fiscal  year 2018 DHS budget justification documents, we found that 3 of the 14  milestones fully adhered to DHS guidance for milestone descriptions.  DHS budget development guidance suggests DHS components, which  develop milestones for inclusion in congressional budget justification  documents, utilize leading practices provided in the guidance. The  leading practices state that successful milestones contain the following  characteristics:  1.  Specific - provide a clear understanding of expected results;  2.  Measurable - the result can be reported in quantitative or qualitative  3.  Results-Oriented/Relevant - milestone clearly links to results-oriented  activities such as strategy, budget, and/or program/project plans;  4.  Time-Bound - milestone specifies a beginning and end date for  As shown in table 3, we identified that more than half of the milestones (8  of 14) were not specific and 10 of 14 were not results-oriented. Eleven of  14 milestones we analyzed were measurable and time-bound. While our  analysis is not generalizable to all fiscal year 2018 R&D milestones, it  illustrates areas where the selected milestones do not fully incorporate  the DHS guidance.", "Below is more detail on our assessment of the Specific and Results- Oriented guidance.", "Specific. Of the 14 milestones we reviewed, eight did not contain specific  information that would allow reviewers to have a clear understanding of  the result expected in connection with the milestone. For example, one  milestone for a cyber-related R&D project states that \u201ctestbeds and pilots  would be conducted with at least one department or agency.\u201d However,  the milestone is not specific enough to ascertain what types of testbeds or  pilots are being assessed and how the testbed effort would link to a  possible end result.", "Results-Oriented and Relevant. Ten of the 14 milestones that we  reviewed did not clearly link the milestone back to results-oriented  activities, such as strategy, budget, or project/program plans. For  example, one milestone for a first responder program stated the following:  \u201cTransition, commercialize, or make available through open source  platforms at least three technologies (e.g., Analyses, models, technology  prototypes and/or knowledge prototypes).\u201d It is unclear which  technologies would be transitioned or how these technologies would be  transitioned and made available.", "According to DHS OCFO officials, DHS congressional budget  justifications, which include milestones, serve to provide explanation and  detail for why DHS believes Congress should support the department\u2019s  R&D projects. DHS components are instructed by DHS\u2019s budget office to  routinely submit their congressional budget justifications for internal DHS  review, which is a process and mechanism that results in the supporting  justifications for R&D funding requests. DHS OCFO officials also stated  that they are not aware of a singular reason for why milestones do not  consistently incorporate DHS\u2019s guidance and stated that they have also  identified instances in which milestones do not align with the guidance. As  our analysis indicates, S&T\u2019s milestones could better incorporate  milestone criteria included in DHS\u2019s budget preparation guidance. Without  milestone information that more closely aligns with DHS guidance,  Congress and DHS decision-makers may not be able to fully assess  whether R&D projects are meeting specific goals within assigned time  frames or identify what adjustments, if any, may be needed to facilitate  the achievement of project goals and the R&D mission overall."], "subsections": []}, {"section_title": "Strategic and Management Performance Goals", "paragraphs": ["DHS has developed 12 performance goals to assess and report on its  R&D efforts, DHS is required to identify department-wide goals in its  strategic plan and annual performance report. For fiscal years 2016  through 2018, DHS\u2019s Annual Performance Report included two strategic  performance goals related to S&T\u2019s R&D efforts. DHS\u2019s congressional  budget justification includes the two strategic performance goals as well  as 10 related management performance goals. For a detailed listing of  the 12 performance goals, see table 4.", "Seven of the 10 management performance goals were for S&T R&D  efforts and the remaining three were for Domestic Nuclear Detection  Office\u2019s R&D efforts, which cover the components that account for 96  percent of DHS\u2019 fiscal year 2017 R&D obligations. DHS has  performance goals for mission programs that produce operational results  that link directly to the DHS Strategic Plan, according to officials from the  OCFO\u2019s Program Analysis and Evaluation division. DHS also uses  milestones to track the progress of the other components\u2019 R&D efforts."], "subsections": []}, {"section_title": "R&D Customer Feedback", "paragraphs": ["DHS components that conduct R&D use various methods to collect and  analyze customer feedback to assess their R&D efforts, as shown in table  5. However, DHS is not well positioned to integrate the results because  limited customer feedback information is collected and analyzed.", "Six DHS components that have R&D-related responsibilities evaluate  customers\u2019 needs and improve customer satisfaction by listening to  customers\u2019 feedback about the quality of deliverables they receive\u2014both  good and bad\u2014 and making changes necessary to enhance that  deliverable. Specifically, officials from S&T, the Coast Guard, CWMD,  TSA, the Cybersecurity and Infrastructure Security Agency, and the  Secret Service stated they have varying methods in place for gathering  customer feedback regarding the progress and the results of R&D  activities and deliverables. Below is a summary of these components\u2019  efforts to consider customer feedback.", "S&T. S&T\u2019s project management guide outlines a process for  ensuring customer requirements are being adequately met using a  customer survey that can be modified and provided to the customer to  complete at each major milestone. In addition, proceedings (e.g.,  minutes) from regularly scheduled meetings with customer and end  user groups may be used to gather information regarding value and  operational impact in lieu of a survey. The S&T survey asks  customers to rate their overall satisfaction with S&T products and  services, along with specific aspects of support, such as providing  products in time to meet needs and effectively keeping customers  informed. However, out of the 97 R&D activities that S&T reported in  fiscal year 2017 and the 110 activities in fiscal year 2016, S&T  collected one customer survey form.", "Coast Guard. The Coast Guard also has a process in place for  surveying and interviewing its customers following the completion of  an R&D project and officials reported using this information for future  R&D planning. The Coast Guard\u2019s survey instrument seeks feedback  on: customer satisfaction, timeliness, utility, and communications,  among other things. The customer service survey is distributed for  feedback on deliverables. At least 6 months after an R&D project is  completed, Coast Guard also conducts an in-person interview with  project sponsors to collect project transition performance success and  feedback information. The surveys that Coast Guard uses to obtain  feedback elicit a relatively low number of responses from customers,  significantly limiting their usefulness in soliciting feedback data.  Specifically, the response rates for fiscal years 2013-2017 were 16%,  17%, 27%, 13%, and 17%, respectively. Experts on customer  satisfaction measurement have stated that although survey response  rates are never 100 percent, an organization should strive to get its  rate as close as possible to that number. They suggest that ideally,  organizations can obtain response rates of over 70 percent.", "CWMD. CWMD does not have a formal mechanism, such as standard  processes and procedures, for collecting and analyzing customer  feedback. However, CWMD officials stated that certain informal  mechanisms are used to collect customer feedback. For example,  CWMD officials reported that the CWMD Office of Policy, Plans,  Analysis, and Requirements Directorate communicate with customers  and gather customer needs and requirements. In addition, as part of  these informal mechanisms, internal and external reviews feedback  may be obtained from eventual end users of the R&D technology such  as operators from CBP, the U.S. Coast Guard, and the TSA,  according to CWMD officials.", "Cybersecurity and Infrastructure Security Agency. The directorate  does not have a formal mechanism for collecting and analyzing  customer feedback. However, periodic control gates are used to  gather customer feedback, according to directorate officials. The input  received during these reviews is used to make corrective actions and  manage R&D efforts as necessary. For example, according to  directorate officials, they conduct a comprehensive review of R&D  coordination efforts annually to determine what was effective and  what can be improved.", "TSA. TSA does not have a formal mechanism for collecting and  analyzing customer feedback. However, according to TSA officials,  informal feedback may be obtained through review of the weekly  reports and meetings regarding recent developments and project  milestones. In addition, feedback may be obtained during quarterly  program management reviews, third party project development, and  certification testing.", "Secret Service. The Secret Service does not have a formal  mechanism for collecting and analyzing customer feedback. However,  according to Secret Service officials, informal feedback may be  obtained in conjunction with other related internal review activities,  including program management reviews.", "To formalize and improve customer feedback processes for R&D efforts,  the National Academy of Sciences has stated that feedback from both  R&D failures and successes may be communicated to stakeholders and  used to modify future investments. Research on leading practices in the  area of customer satisfaction suggests that multiple approaches are  needed to effectively listen to customers about their perceptions of quality  service and needs. The research also points to a need for centrally  integrating all customer feedback so that managers can achieve a better  understanding of customers\u2019 perceptions and needs. Also, we have  previously reported that leading organizations combine quantitative and  qualitative listening tools to obtain customer feedback and then centrally  integrate the data in one location. Such approaches include the  following:", "Customer satisfaction surveys. We previously reported that most  major organizations use tools such as surveys to periodically capture  customers\u2019 overall perceptions about their organization and to  measure satisfaction with specific transactions soon after they  occur. These surveys can be administered through the mail, by  telephone, in person, or electronically.", "Benchmark surveys. Benchmark surveys gather perceptions of  performance from the entire market. These surveys usually gather  customer perceptions of performance about top competitors in an  industry. This allows the company to examine its customer-perceived  strengths and weaknesses in the overall marketplace. While  continuous improvement may be a result of this listening tool, the real  value, according to the research in this area, comes from  breakthrough thinking to gain a sustainable advantage.", "Focus groups. Organizations use focus groups to get better  information from customers than survey results provide. In these  groups, customers are probed about why they answered survey  questions the way they did.", "Customer interviews. Conducting interviews with customers can  provide a way to get very detailed information about their specific  needs and problems. Like focus groups, this tool is used by leading  customer service organizations to probe survey respondents as to  why they answered survey questions a certain way.", "The National Academy of Sciences have stated that evaluating the  relevance and impact of R&D is a key stage of the R&D process and that  measuring the impact of R&D activities requires looking to the end users  and stakeholders for an evaluation of the impact of a research program,  such as through polling or systematic outreach. In addition, Standards  for Internal Control in the Federal Government calls for entities to  determine an oversight structure to fulfill responsibilities that are set forth  by feedback from key stakeholders, among other things. As a result of the  limited customer feedback information that is collected and analyzed,  DHS is unable to more fully understand its customers\u2019 perceptions and  experience to allow it to assess the benefits and performance of its R&D  efforts. Moving forward, standard processes and procedures for collecting  and analyzing R&D customer feedback would help in assessing R&D  efforts."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Since 2010, DHS has obligated more than $10 billion dollars on R&D to  develop technologies to support DHS\u2019s efforts to prevent, mitigate, and  recover from terrorist and natural threats. S&T officials indicated that they  have strong collaborative relationships with components; however, it is  important that required components fully participate in the IPT process in  order for S&T to maintain visibility of R&D projects and successfully fulfill  its statutory role of coordinating R&D and to help reduce the risk of  potential duplication of R&D efforts across the department. Furthermore,  S&T faces challenges and limitations related to the collection, integration,  and comprehensiveness of information on R&D projects. Without a  mechanism that aligns information sources and results in comprehensive  and accurate data, among other things, DHS may not have the  information it needs to make informed decisions about R&D investments.  S&T also does not fully leverage existing guidance when developing  milestones for R&D efforts. Without milestone information that more fully  aligns with DHS criteria, Congress and DHS decision-makers may not  have a full understanding of R&D progress and challenges. Finally,  standard processes and procedures for collecting and analyzing R&D  customer feedback would help to assess its R&D efforts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the Deputy  Secretary of the Department of Homeland Security:  The Deputy Secretary of the Department of Homeland Security should  ensure that all components adhere to IPT participation requirements, in  accordance with the DHS directives. (Recommendation 1)", "The Deputy Secretary of the Department of Homeland Security should  develop a mechanism that aligns processes and information sources for  collecting R&D project data from DHS components to ensure that the  information can be collected, integrated and result in a comprehensive  accounting of R&D projects DHS-wide. (Recommendation 2)", "The Deputy Secretary of the Department of Homeland Security should  direct OCFO program officials to ensure that S&T take steps to more fully  incorporate leading practices, such as those included in DHS\u2019s budget  preparation guidance, into R&D milestones. (Recommendation 3)", "The Deputy Secretary of the Department of Homeland Security should  develop standard processes and procedures for collecting and analyzing  customer feedback, applicable to components conducting R&D, for  improving the usefulness of existing customer feedback mechanisms to  assess R&D efforts and for implementing such mechanisms where  absent. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS  provided written comments which are reproduced in appendix II. In its  comments, DHS concurred with our recommendations and described  actions planned to address them. S&T, OCFO, CBP, the Cybersecurity  and Infrastructure Security Agency, and CWMD also provided technical  comments, which we incorporated as appropriate.", "With regard to our first recommendation, that the Deputy Secretary of the  Department of Homeland Security should ensure that all components  adhere to IPT participation requirements, in accordance with DHS  directives, DHS stated that S&T\u2019s Office of Science & Engineering will  revise the relevant DHS directive to require participation in the IPT  process by all components. DHS estimated that this effort would be  completed by December 31, 2019. This action, if fully implemented,  should address the intent of the recommendation.", "With regard to our second recommendation, that the Deputy Secretary of  the Department of Homeland Security should develop a mechanism for  collecting R&D project data in order to complete a comprehensive  accounting of R&D projects DHS-wide, DHS stated that S&T\u2019s Office of  Science & Engineering will revise the relevant DHS directive to include  requirements for data collection on all R&D projects across DHS to  ensure alignment of the appropriate data elements and existing guidance.  DHS estimated that this effort would be completed by December 31,  2019. This action, if fully implemented, should address the intent of the  recommendation.", "With regard to our third recommendation, that the Deputy Secretary of the  Department of Homeland Security should direct OCFO program officials  to ensure that S&T take steps to more fully incorporate leading practices,  such as those included in DHS\u2019s budget preparation guidance, into R&D  milestones, DHS stated that the OCFO will continue to work with S&T to  incorporate the leading practices and that the OCFO will validate all S&T  annual budget submissions and provide S&T feedback, as appropriate.  DHS estimated that this effort would be completed by April 30, 2020. This  action, if fully implemented, should address the intent of the  recommendation.", "With regard to our fourth recommendation, that the Deputy Secretary of  the Department of Homeland Security should standardize processes for  collecting and analyzing customer feedback to aid in assessing R&D  efforts, DHS stated that S&T\u2019s Office of Science & Engineering will revise  the relevant DHS directive to incorporate customer feedback procedures  into the IPT process for the recipients of R&D programs. DHS estimated  that this effort would be completed by December 31, 2019. This action, if  fully implemented, should address the intent of the recommendation.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact William Russell at (202) 512-8777 or russellw@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Key contributors to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Overview of the Science and Technology Directorate\u2019s Research and Development Projects", "paragraphs": ["The following appendix provides a general overview of the Department of  Homeland Security\u2019s (DHS) Science and Technology Directorate (S&T)  research and development (R&D) projects and programs that support the  following homeland security mission areas: (1) border security; (2)  disaster resilience; (3) critical incidents, and (4) cybersecurity. The  examples provided below are illustrative and therefore not intended to  provide a comprehensive list of DHS R&D programs or projects.", "S&T and the U.S. Coast Guard conducted drone demonstrations and  tests at two sites in Mississippi to test unmanned aerial systems  before they are deployed to the field.", "The Technical Assessment of Counter Unmanned Aerial Systems  Technologies in Cities is designed to help public safety and industry  officials identify potential methods for countering nefarious uses of  small unmanned aerial systems.", "The Wall System Design Support Tool Independent Verification and  Validation seeks to strengthen the U.S. Border Patrol\u2019s decision  analysis model used to identify the areas of the border where a wall  would be most beneficial.", "The Border Research in Instrumented Construction Project is  designed to identify cameras, sensors and other technology that can  be applied on or near a smart wall via ground, surface/air, subsurface  and water to enhance border security and agent safety.", "The Apex Border Situational Awareness program aims to help U.S.", "Customs and Border Protection access more data sources, develop  decision support tools and share information with partner law  enforcement agencies to improve situational awareness.", "The Integrated Maritime Domain Enterprise is a platform that seeks to  bridge disparate data systems to make it easier for DHS components  to share information and collaborate.", "The Adaptive Sensor Analytics Project aims to provide automated  data analytics to process satellite imagery, identify patterns of  nefarious activity and alert DHS officials.", "Ground-Based Technologies Program seeks to improve the ability to  detect illegal activity at the border through stronger situational  awareness, automated detection and alerts, target classification and  tools to promote agent safety", "Air-Based Technologies Program is designed to identify, test and  evaluate unmanned and manned aircraft platforms and sensors for  law enforcement, search and rescue, and disaster response in both  land and maritime environments.", "The Expert Tracker training program aims to help U.S. Border Patrol  agents improve their ability to track movement in rough terrain along  the nation\u2019s borders.", "Port of Entry Based Technology Program seeks to improve illicit cargo  detection and legitimate cargo throughput by upgrading legacy  scanning systems and linking them to new analysis and information  sharing tools that may make the most of personnel resources.", "The Port of Entry People Screening Program aims to identify,  evaluate and implement combinations of process and technology  improvements that facilitate the movement of people through the  nation\u2019s air, land and sea ports of entry.", "Autopsy is an open-source digital forensics platform that seeks to help  law enforcement determine how electronic devices were used in a  crime and recover evidence.", "Voice Forensics aims to help identify individuals who make hoax  rescue calls to the U.S. Coast Guard, which may make it easier to find  and prosecute suspects.", "Child Exploitation Image Analytics seeks to reduce the amount of time  it takes to identify and rescue children from exploitation, as well as  identify perpetrators, through automated face recognition algorithms  and forensic tools.", "The Tunnel Detection and Surveillance Program is designed to help  border officials detect and locate clandestine tunnels, as well as  gather forensic data to support investigation and prosecution of drug  smuggling activities.", "The Port of Entry Forensics and Investigations Program aims to help  combat transnational crime and investigate child exploitation and  human trafficking through open source data and forensic analysis of  material collected from suspicious packages and cargo.", "DHS S&T seeks to help improve community resilience to natural disasters  through technology and tools that support planning, decision making and  mitigation efforts.", "The Canada-U.S. Enhanced Resiliency Experiment series aims to use  real-world exercises to demonstrate that seamless communication is  possible between responders on either side of the northern border  during a large-scale emergency.", "DHS S&T and the Central United States Earthquake Consortium are  developing a suite of decision support tools designed to help  emergency managers analyze data used when planning, managing,  coordinating and communicating during natural disasters", "The Mutual Aid Resource Planner is a prototype application designed  to help jurisdictions develop more accurate resource plans by  incorporating custom data on geospatial hazards, risk assessments  and potential mutual aid partners.", "The National Mutual Aid Technology Exercise seeks to test existing  mutual aid systems to improve users\u2019 ability to exchange information  between systems in real time and develop technical guidance for  future use.", "The Coastal Resilience Center of Excellence aims to conduct targeted  research and education to address key challenges facing coastal  communities in the United States, including storm surge modeling,  pre-disaster planning, communicating risk and more.", "The Flood Apex Program is designed to help identify and develop  technology that can reduce flood-related fatalities and property loss,  increase community resilience and improve flood preparation,  response and recovery.", "The Internet of Things Low Cost Flood Inundation Sensors project  seeks to develop and test sensor technology that can provide real- time updates on rising water levels.", "The Kentucky Dam Safety project aims to create technology and  processes to better monitor dams and alert communities of potential  danger, reducing loss of life and property.", "The Advanced CIRCulation modeling tool seeks to accurately predict  coastal flooding threats to help emergency managers better  coordinate evacuation and response.", "The Hurricane Evacuation -eXtended platform is a decision support  tool for emergency managers designed to organize and stage  resources for hurricane response.", "The Simulation-Based Decision Support System for Water  Infrastructural Safety Lite\u2122 tool is designed to quickly model the  effects of potential dam breaks, helping officials develop accurate  emergency response plans and anticipate evacuation needs.", "The Tunnel Plug is an inflatable device that aims to seal off subway  tunnels to prevent water from flowing into the system, minimizing  damage to critical transportation systems.", "The Linking the Oil and Gas Industry to Improve Cybersecurity project  seeks to facilitate cooperative research, development, testing and  evaluation procedures to improve cybersecurity in petroleum industry  digital control systems", "The Homeowner Flood Insurance Roundtable aims to help reduce  future uninsured flood losses by identifying decision support and  research and development needs.", "The Automated National Structures Inventory project is seeking to  build a comprehensive list of private and commercial property at risk  for flood damage, which may help promote proper insurance and  more effective flood protection efforts.", "The Smart Cities IoT innovation project is designed to help first  responders improve their situational awareness through advances in  autonomous drone navigation, intelligent building sensors and body- worn interoperability platforms.", "The Wireless Emergency Alerts Research, Development, Testing and  Evaluation program aims to inform changes to the Federal  Communications Commission\u2019s alerting system, including increased  character length and adding URLs, pictures, videos and geo-targeting  capabilities.", "The System Assessment and Validation for Emergency Responders  program seeks to evaluate available responder technology on  affordability, usability, and other criteria to help agencies understand  which equipment will best fit their needs.", "The Urban Operational Experimentation program is designed to let  responders test new technologies in real-world settings, and may help  provide developers with direct feedback on how their products can  better meet operational needs.", "The Enhanced Dynamic Geo-Social Environment training platform is a  free virtual tool that aims to allow responders to practice responding to  an active shooter incident, whether within a single agency or with  multiple jurisdictions and disciplines.", "The Surface Transportation Explosives Threat Detection program is  aiming to develop screening technology that can identify potential  threats on people and in their bags without physically interacting with  them.", "The Explosives Detection Canine program is designed to help  detection canine teams identify new explosive compounds through  non-hazardous training aids and increase their proficiency through  realistic self-assessment and training events across the country.", "The Datacasting project aims to help responders send encrypted  video, data files, and other critical information through existing public  broadcast television signals, which helps prevent other  communication channels from being overwhelmed.", "The Next-Generation Incident Command System, a web-based  platform, seeks to allow responders to share data and request  assistance in real-time, and also allows officials to observe and make  critical decisions during evolving situations to better support  preparation, response, and recovery.", "The Android Team Awareness Kit, a free app, is designed to help  responders visually track team members and assets in real time  during an incident, as well as share encrypted data across  jurisdictions, disciplines, and components.", "The Assistant for Understanding Data through Reasoning, Extraction  and Synthesis platform aims to help responders overcome information  overload by providing actionable insight based on up-to-the-minute  sensor data.", "The First Responder Electronic Jamming Exercise seeks to identify  mitigation tactics against intentional or accidental communications  jamming, which responders were able to practice implementing in  realistic scenarios.", "The Telephony Denial of Service program is designed to help improve  911 emergency call centers\u2019 ability to defend against attacks through  cyber security technologies that can analyze incoming calls and may  help determine potential threats in real time.", "The Finding Individuals for Disaster and Emergency Response is  designed to detect human heartbeats under up to 30 feet of rubble,  which may help responders more effectively target rescue efforts.", "The Rapid DNA technology can complete a DNA test within 90  minutes or less from the field, which seeks to help officials identify  victims and inform family members in a timely manner.", "The Forensic Video Exploitation and Analysis tool aims to help  responders quickly analyze video to identify potential suspects by  allowing users to tag a person to a left-behind item and reconstruct  that individual\u2019s path across multiple camera views.", "The Cyber Risk Economics program seeks to fund applied R&D,  knowledge products by gathering stakeholders across government,  industry and academia to discuss cyber risk economics capability  gaps and needs. Through these stakeholder discussions, along with  scholarly cybersecurity economics research literature reviews and  authoritative U.S. federal government documents, DHS S&T  developed the newly released Cyber Risk Economics Capability Gaps  Research Strategy which aims to consider business, legal, technical  and behavior factors impacting cyber risk."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["William Russell, (202) 512-8777 or russellw@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Ben Atwater (Assistant Director),  Melissa Hargy (Analyst-in-Charge), Nanette Barton and Gary M.  Malavenda made key contributions to this report. In addition, key support  was provided by Chris P. Currie, Dominick Dale, Michele Fejfar, Richard  Hung, Benjamin Licht, John Mingus, Janet Temko-Blinder, and Sarah  Veale."], "subsections": []}]}], "fastfact": ["The Department of Homeland Security\u2019s Science and Technology Directorate is required to coordinate research and development (R&D) across the department, which helps to prevent duplicative efforts.", "We found that the department's R&D project information is stored in various disparate sources (e.g., reports, data systems, etc.)\u2014which makes it difficult to identify and track. By developing a method to align these sources, the directorate can better compile and analyze R&D project information.", "We recommended that it do so."]}
{"id": "GAO-18-97", "url": "https://www.gao.gov/products/GAO-18-97", "title": "Railroad Safety: Quiet Zone Analyses and Inspections Could Be Improved", "published_date": "2017-10-31T00:00:00", "released_date": "2017-10-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Accidents at grade crossings are a major source of fatalities in the railroad industry. FRA\u2014the federal agency responsible for providing regulatory oversight of grade-crossing safety\u2014\u2013issued regulations on the use of train horns in 2005. Railroads generally support sounding the horn, whereas, communities often support quiet zones to reduce noise.", "Congress included a provision in statute for GAO to examine FRA's train horn regulations, including those on quiet zones. Among other things, this report: (1) describes benefits and costs of quiet zones, and (2) examines how FRA evaluates the effectiveness of its train horn regulations. GAO analyzed FRA's documentation on quiet zones, including FRA's train horn regulations and 2011 and 2013 studies on quiet zone safety; reviewed literature; and interviewed FRA program officials in headquarters, Grade Crossing Managers in FRA's 8 regions, and a nongeneralizable sample of another 32 stakeholders from 6 states, railroads, public authorities, and private industry consulting firms. State and public authorities were selected based on the number of quiet zones, geographic diversity, and FRA's recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the benefits of quiet zones\u2014\u2013i.e., highway-rail at-grade crossings (grade crossings) where train horns are not sounded\u2014have not been quantified and that the costs to establish quiet zones vary. The Federal Railroad Administration's (FRA) train horn regulations allow public authorities (e.g., cities or towns) the opportunity to establish quiet zones if they install safety measures that reduce risks associated with the absence of the train horn (see fig.). While GAO did not identify any research that has quantified the benefits of quiet zones, most stakeholders GAO interviewed said that these quiet zones provide benefits to communities, such as reducing noise or increasing economic development. According to FRA guidance, the factors that affect the costs to establish quiet zones can vary based on the number of grade crossings and types of safety measures used. Public authorities, which typically incur the costs and receive the benefits of quiet zones, must therefore decide whether the benefits of quiet zones exceed the costs.", "To evaluate the effectiveness of its train horn regulations, FRA has analyzed data on grade crossings in quiet zones and is transitioning to a formal process for inspecting quiet zones.", "Analyses: FRA's analyses showed grade crossings in quiet zones were generally as safe as they were when train horns were sounded. However, these analyses did not control for changes to grade crossings' characteristics over time\u2014\u2013e.g., train speeds or frequency. Such changes may decrease the analyses' reliability. A revised methodology that accounts for these changes could provide FRA with better information on the long-term effects of the train horn regulations, including the safety of quiet zones.", "Inspections: Recognizing the need for additional oversight, FRA has taken steps to formalize its process for inspecting quiet zones. FRA has primarily relied on public authorities to oversee quiet zones and ensure compliance with the train horn regulations, in addition to informal inspections by FRA's Grade Crossing Managers. In September 2017, FRA began conducting formal inspections of quiet zones using Grade Crossing Inspectors. However, FRA has not developed guidance for how inspections are to be conducted, including how frequently inspections are to be performed or what should be examined. Without guidance, FRA cannot ensure that inspections are being conducted consistently across FRA's eight regions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FRA: (1) revise its methodology for analyzing the safety of quiet zones, and (2) develop guidance on conducting quiet zone inspections. The Department of Transportation partially concurred with the first recommendation, saying it would consider it, and fully concurred with the second. GAO continues to believe changes to the methodology are needed, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Accidents where railroad tracks cross roads (termed \u201cgrade crossings\u201d)  are a major source of fatalities in the U.S. railroad industry. According to  data from the Federal Railroad Administration (FRA)\u2014the federal agency  that oversees rail safety, including the safety of grade crossings\u2014in 2016  there were more than 2,000 accidents at grade crossings, resulting in 264  fatalities, or about 36 percent of all railroad fatalities.", "To prevent accidents at grade crossings, railroads have historically  sounded their horns to warn motorists of oncoming trains. However,  according to FRA, since the 1970s, many cities, counties, and towns  around the nation enacted whistle bans (i.e., local ordinances which  prohibit or restrict the use of train horns or whistles at grade crossings).  The whistle bans were allowed due in part to community complaints about  the negative effects of the train horn noise on resident\u2019s quality of life.  While whistle bans may have reduced noise, in 1990 FRA conducted an  analysis on Florida\u2019s whistle bans that showed that they led to a 195  percent increase in accidents at grade crossings during nighttime hours.", "Partially as a result of FRA\u2019s analysis and the spike in accidents  associated with selected whistle bans, in 1994 FRA was required in  statute to issue train horn regulations governing the sounding of train  horns at all public grade crossings. The statute also provided FRA  authority to make exceptions. In August 2006, FRA issued its final rule on  the use of locomotive horns at highway-rail-grade crossings. The rule  provided states and public authorities with an opportunity to establish  \u201cquiet zones,\u201d where train horns are not routinely sounded as trains  approach grade crossings. However, certain conditions must be met to  mitigate the increased risks resulting from the absence of the train horn.  While grade-crossing accidents have remained relatively constant in  recent years, federal and private-sector railroad officials remain  concerned about grade crossings\u2019 safety, including whether grade  crossings in quiet zones are as safe as grade crossings where the train  horn is sounded. These concerns are often in conflict with public  authorities who want to establish quiet zones to reduce noise.", "The Fixing America\u2019s Surface Transportation Act included a provision for  GAO to review FRA\u2019s final rule. This report discusses: (1) what is known  about the benefits and costs of quiet zones; (2) what challenges, if any,  public authorities and others encounter in establishing quiet zones; and  (3) how, if at all, FRA is evaluating the effectiveness of federal train horn  regulations.", "The scope of this work focused primarily on new quiet zones\u2014that is,  quiet zones that were established after FRA issued the train horn  regulations in August 2006. For each of our objectives, we reviewed  pertinent FRA regulations and documents; conducted a literature review  of academic material on quiet zones; interviewed FRA program officials  in headquarters and conducted in-depth interviews with a  nongeneralizable sample of 40 stakeholders\u2014including officials from 8  freight railroads, 5 private industry consulting firms with experience  helping public authorities establish quiet zones, 6 state agencies, 13  public authorities that established quiet zones within these 6 states, and  Grade Crossing Managers (GCM) in each of FRA\u2019s 8 regions. We  selected the states based on a number of factors including the number of  quiet zones established since federal regulations were issued, the  number of grade crossings within quiet zones, and geographic diversity.  We selected the public authorities for interviews based on factors similar  to the state selections, such as the number of new quiet zones, the  number of grade crossings in new quiet zones, geographic diversity, and  recommendations from FRA\u2019s GCMs and FRA\u2019s program officials. We  asked each of these stakeholder groups a similar set of questions to  gather the individual\u2019s views on each of our objectives; these views  cannot be generalized to others. With respect to the freight railroads, we  selected the seven largest freight railroads, in addition to the railroad  involved with the Florida whistle ban. The private industry consultants  were selected based on recommendations from FRA and other  stakeholders we interviewed.", "We also conducted additional work related to each of the objectives:", "To describe what is known about the benefits and costs of quiet  zones, we reviewed FRA\u2019s Regulatory Evaluation and Regulatory  Flexibility Assessment (RFIA), which evaluated the economic impacts  of federal train horn regulations, and a user guide prepared by FRA  on how to establish quiet zones.", "To identify what challenges public authorities and other stakeholders  encounter in establishing quiet zones, we conducted a content  analysis of interviews with stakeholders identified above. We also  reviewed FRA\u2019s Notice of Safety Inquiry\u2014the agency\u2019s retrospective  review of the final rule\u2014issued in March 2016.", "To determine how FRA is evaluating the effectiveness of FRA\u2019s train  horn regulations in quiet zones, we reviewed FRA\u2019s safety studies,  published in 2011 and 2013, that compared the safety of grade  crossings before and after the establishment of the quiet zone to  determine whether safety was impacted. To assess the reliability of  FRA\u2019s studies, we drew on established guidelines for assessing  research, our reports on evaluating research programs, and our  internal expertise in research design. We also compared FRA\u2019s  approach to federal internal controls related to information and  communication. In addition, we reviewed FRA policies and  procedures to determine its\u2019 oversight approach and then compared  this approach to federal internal control standards that would be  applicable to the control environment.", "Finally, in order to obtain information about quiet zones, we reviewed  FRA\u2019s data on quiet zones established from 2005 through 2017. To  assess the reliability of these data, we examined FRA reports, analyzed  the data to identify any outliers, and interviewed FRA program officials  about how the data were collected and used. We determined that the  data were sufficiently reliable for our purposes. See appendix I for more  information on our scope and methodology and appendix III for a list of  organizations we contacted.", "We conducted this performance audit from July 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The United States railroad system consists of a vast network of  operations that includes more than 780 railroads operating across  220,000 miles of track\u2014including about 212,000 grade crossings. Both  freight and passenger railroads operate across the system. The freight  railroad industry is dominated by the seven largest railroads, referred to  as class I railroads, whereas passenger rail service includes Amtrak and  29 commuter railroads.", "FRA is responsible for providing regulatory oversight of the safety of both  freight and passenger railroads. To accomplish this oversight, FRA issues  and enforces numerous safety regulations, including requirements  governing track, signal and train control systems, grade crossing warning  systems, and railroad-operating practices. FRA monitors railroads\u2019  compliance with federal safety regulations through routine and special  emphasis inspections on railroads\u2019 systems. FRA\u2019s inspectors generally  specialize in one of five areas. These inspection areas are called  disciplines and include: (1) operating practices, (2) track, (3) hazardous  materials, (4) signal and train control, and (5) motive power and  equipment.", "FRA also has specific responsibilities related to the safety of grade  crossings, including issuing regulations regarding the use of train horns at  grade crossings. FRA issued regulations in August 2006, after FRA\u2019s  analysis illustrated the dangers of whistle bans. Federal regulations  require that train horns be sounded in advance of all public grade  crossings. However, the regulations also provide an opportunity for  public authorities to reduce the effects of noise associated with the train  horn by establishing quiet zones. While railroads are directed to cease  the routine sounding of the train horn at-grade crossings within quiet  zones, the final rule states that train horns may still be sounded in  emergency situations and to comply with other federal regulations and  railroad operating rules.", "As of June 2017, there were 570 new quiet zones located across 42  states (see fig. 1).", "Train engineers are generally required to sound the horns at least 15 seconds, and no  more than 20 seconds, in advance of all grade crossings. Train horns must be sounded in  a standardized pattern of 2 long, 1 short and 1 long blast, with the volume ranging from 96  decibels to 110 decibels.", "Each pedestrian crossing or private crossing to an active commercial or industrial site  must be reviewed by a diagnostic team and equipped or treated in accordance with its  recommendations. The public authority must invite the state agency responsible for grade  crossings\u2019 safety and all affected railroads to participate in the diagnostic review. FRA is  not required to participate in diagnostic reviews.  The Notice of Intent provides railroads and state agencies with an opportunity to provide  comments and recommendations on the quiet zone. A complete and accurate U.S.", "Department of Transportation Grade Crossing Inventory Form must be on file with FRA for  all crossings within the quiet zone to reflect the current conditions at each crossing.  A Notice of Quiet Zone Establishment must be issued to FRA, applicable railroads, and  relevant state agencies indicating a quiet zone is being established at least 21 days prior  to the establishment date.", "Throughout the process public authorities may work with a number of  stakeholders who have roles and responsibilities related to grade  crossings. These include:", "FRA: In addition to issuing rules and regulations governing train horns  and quiet zones, FRA has staff\u2014in headquarters and in FRA\u2019s eight  regional offices\u2014that review public authority applications for use of  ASMs, issue guidance on implementing federal regulations, answer  questions from the public, and provide technical assistance related to  the establishment of quiet zones. For example, FRA\u2019s 19 regional  GCMs serve as subject matter experts on the train horn regulations  and respond to questions from public authorities, while FRA program  officials approve ASMs and conduct required annual reviews of quiet  zones established relative to the Nationwide Significant Risk  Threshold to ensure they equal or fall below this risk index.", "Railroads: Railroads work with public authorities to: (1) identify  appropriate safety measures at grade crossings; (2) participate in  diagnostic review meetings when the quiet zone includes public,  private, or pedestrian grade crossings; (3) receive and comment on  public authority\u2019s quiet zone notifications (e.g., the Notice of Intent and  Notice of Quiet Zone Establishment); (4) install safety measures on  railroad property; and (5) direct train crews not to sound horns in  established quiet zones.", "State departments of transportation and rail regulatory agencies:  These agencies receive and comment on Notices of Intent, public  authority applications, and Notices of Quiet Zone Establishment;  review, and in some cases approve grade crossing modifications; and  participate in diagnostic reviews.", "Private industry consultants: In some cases, public authorities hire  consultants to provide subject matter expertise on establishing quiet  zones. Consultants may perform such tasks as determining the  feasibility of a quiet zone; arranging diagnostic reviews; assessing  quiet zone risks; and identifying appropriate safety measures.", "According to FRA officials, federal funding is available to reduce the risks  of accidents at grade crossings, but funding specific to quiet zones is  limited and no dedicated source exists. The primary source of federal  funding to improve grade crossings\u2019 safety is the Federal Highway  Administration\u2019s (FHWA) Railway-Highway Crossings (Section 130)  Program, which received a set-aside of $230 million for fiscal year 2017  from amounts authorized for the Highway Safety Improvement Program.  While the funds are not specific to quiet zones, Section 130 funds may be  used to upgrade crossing infrastructure, an upgrade that may result in a  public authority\u2019s being more easily able to establish a quiet zone.  However, according to FRA program officials, the program is competitive  and funding must be used for safety projects. They said projects are  selected on a safety priority basis, and quiet zones are generally  considered a quality of life issue, not a safety improvement. Hence, it is  unlikely that many public authorities will obtain these funds to establish  quiet zones. Further, the officials said that while other federal funding is  available for which grade crossing improvements may be an eligible  expense, none is dedicated to quiet zones.", "According to FRA officials, limited federal funding is available because  quiet zones are not a national issue. They produce highly localized  quality-of-life benefits and little or no improvement in the level of safety at  grade crossings, but rather the safety measures are installed to  compensate for silencing the sound of a train horn at grade crossings.  As a result, public authorities seeking to establish quiet zones generally  fund the installation of SSMs and ASMs. Given limited funding, public  authorities determine whether the benefits of establishing a quiet zone  outweigh the costs to establish them."], "subsections": []}, {"section_title": "Benefits of Quiet Zones Have Not Been Quantified, and Costs Depend on Many Factors", "paragraphs": [], "subsections": [{"section_title": "While Benefits of Quiet Zones Have Not Been Quantified, Selected Stakeholders Highlighted Benefits for Communities", "paragraphs": ["Benefits derived from establishing quiet zones and reducing noise from  the train horn have not been quantified in research we reviewed or by the  public authorities (i.e., communities) that we interviewed. Specifically, our  review of literature did not identify any studies that had quantified the  benefits resulting from public authorities establishing quiet zones at grade  crossings where the horn was previously sounded. Further, FRA has not  quantified benefits associated with quiet zones, but did note in its RFIA  that quiet zones would likely result in localized quality-of-life benefits from  silencing of the horn at locations where it had previously been sounded.  Finally, none of the public authorities we interviewed have conducted any  analysis that has quantified benefits associated with quiet zones or were  aware of any studies that quantified these benefits.", "While the benefits of quiet zones have not been quantified, the majority of  stakeholders whom we interviewed stated that quiet zones do provide  benefits for communities. The most commonly cited benefit (35 of 40  stakeholders) was the reduction in noise due to the absence of routine  sounding of the train horn. Stakeholders told us this noise reduction led to  improvements in quality of life from, for example, the ability to sleep better  at night, as well as a reduction in residents\u2019 noise complaints. To a lesser  extent, stakeholders also cited economic development and safety as  benefits for communities. Almost half of the stakeholders (19 of 40) we  interviewed told us that areas with new quiet zones saw an increase in  economic development from such things as new businesses or residential  developments. Similarly, almost half of the stakeholders (17 of 40) said  that quiet zones increased safety along rail lines, given the addition of  new safety measures at the grade crossings.", "While the benefits associated with quiet zones have not been measured,  more generally, researchers have analyzed the effect of transportation  noise on property values and health to understand the effects.", "Property values: Our review identified two studies that analyzed the  effect of freight train noise on property values in selected communities  and found mixed results. In one study, the authors looked at the effect  of a freight rail line on home prices and concluded that, while for  smaller homes results suggest a negative and statistically significant  effect on sale prices, results for medium and larger units were  mixed. In the second study, the author examined the effect of a  railroad\u2019s decision to ignore whistle bans and found that proximity to  rail lines and crossings had a negative and statistically significant  effect on residential property values in some communities, with the  effect varying depending on distance to the rail line. The author  concluded that the crossing effects were largely temporary, because  over time, buyers less sensitive to noise would likely move into the  area, reducing or eliminating any long-term effect of the railroad\u2019s  decision. However, both of these studies have limitations, are based  on data almost two decades old, and the results might not be  representative of the economic effects associated with quiet zones.", "Health effects: In 2002, FRA summarized available academic  literature on the undesirable effects of noise\u2014primarily focusing on  transportation noise associated with aircraft, highways, and  railroads. According to the research, transportation noise can cause  undesirable psychological health effects, such as annoyance, and  physiological health effects, such as hearing impairments and sleep  disturbance on individuals."], "subsections": []}, {"section_title": "Costs to Establish Quiet Zones Depend on Many Factors", "paragraphs": ["Total costs to establish quiet zones depend on many factors and vary  widely. Prior to issuing regulations, in the RFIA, FRA identified the types  of costs associated with establishing quiet zones that can be incurred by  public authorities, states, railroads, and FRA. These factors included such  things as upgrading signals at grade crossings; purchasing, installing, and  maintaining safety measures like flashing lights and gates; developing,  reviewing, and evaluating quiet zones; and designing public education  and awareness efforts. The actual cost that public authorities incur to  establish quite zones will vary and depend on these and other factors.  Both FRA program officials and FRA guidance has stated that, in general,  the factors that affect the costs include such things as the number of  grade crossings in a quiet zone, the geography of the area in which the  quiet zone is established, and the types of safety measures a public  authority decides to install. For example, some grade crossings may  require upgrades to constant-warning-time devices or installation of  complex and costly SSMs (e.g., four-quadrant gates), whereas other  grade crossings may require fewer upgrades or less complex safety  measures (e.g., traffic channelization devices). In 2013, FRA published  guidance for public authorities in which it estimated that the capital costs  public authorities may incur to establish quiet zones may range from  about $30,000 to more than $1 million per grade crossing, depending on  the types of safety improvements and existing infrastructure at grade  crossings. The RFIA stated that, because grade crossings may differ  significantly, public authorities must analyze the characteristics of each  and the safety measures needed to accurately estimate costs to establish  quiet zones.", "Public authorities we interviewed confirmed that the costs to establish  quiet zones do vary and depend on many factors. All 13 public authorities  we interviewed often said that in establishing quiet zones they incurred  costs for identifying safety measures for grade crossings, purchasing and  installing these safety measures, and maintaining quiet zones, among  other things. According to the public authorities we spoke with in our  review, the cost to establish quiet zones ranged from about $14,000 to  several million dollars. However, this range also reflects different levels  of quiet zone activity; for example, one public authority established a quiet  zone at a single grade crossing, while another established a quiet zone  that encompassed 60 grade crossings.", "In addition, railroads, states, and FRA may incur costs as part of  establishing quiet zones. For example, officials from seven of the eight  railroads we interviewed stated that they incur costs for such things as (1)  participating in diagnostic reviews, (2) commenting on Notice of Intents  and Notice of Quiet Zone Establishments; and (3) notifying and training  crews not to sound horns in quiet zones. States may also incur costs.  Two states included in our review\u2014California and Colorado\u2014have public  utility commissions that told us they are required to review and approve  any modifications to grade crossings in their states, including those  associated with quiet zones. Finally, FRA incurs costs related to quiet  zones. This cost includes reviewing quiet zone applications, participating  in diagnostic reviews when invited, and the time GCMs or other FRA staff  spends providing technical assistance to public authorities and others on  establishing quiet zones.", "While public authorities are generally responsible for paying the costs to  establish quiet zones, about half of the public authorities we interviewed  (10 of 13) said they obtained funding from outside sources to help pay for  the zones, for example:", "Federal funds: Six of the public authorities we interviewed reported  receiving federal funds to help establish their quiet zones. In  particular, one public authority that we interviewed reported receiving  a $3.3 million Transportation Investment Generating Economic  Recovery grant to establish a quiet zone. Alternatively, public  authorities in the remaining five communities were eligible for grade  crossing safety improvement efforts that were designated by the state  through FHWA or other programs.", "State or railroad funds: For three of the public authorities we  interviewed, quiet zones were established in conjunction with larger  state department of transportation highway or railroad projects and  these entities paid a portion of the costs.", "Grade crossing incentive funds: Four of the public authorities we  interviewed received grade-crossing incentive funds from railroads or  state departments of transportation to close grade crossings that were  part of a quiet zone.", "Private funds: In two communities, private investors provided  financial assistance to public authorities for a quiet zone. For  example, a private developer paid for a quiet zone in order to facilitate  the building of residential developments."], "subsections": []}]}, {"section_title": "Selected Public Authorities and Other Stakeholders Reported Several Challenges in Establishing Quiet Zones and Suggested Potential Improvements", "paragraphs": ["Public authorities and other stakeholders that we spoke with reported  several types of challenges with establishing quiet zones. These  stakeholders noted three primary challenges, which included the cost to  establish quiet zones, obtaining stakeholder cooperation, and the process  to establish quiet zones. As aforementioned, public authorities generally  incur costs to establish quiet zones, so cost plays a major role in a public  authority\u2019s decision of whether to pursue a quiet zone or not. The most  commonly cited challenge was cost (29 of 40 stakeholders). In some  cases, officials whom we interviewed reported that costs were the main  reason that public authorities delayed or discontinued the process to  establish a quiet zone.", "In addition to cost, stakeholders cited two other primary challenges to  establishing quiet zones\u2014obtaining cooperation among quiet zone  participants and the process for establishing quiet zones\u2014and suggested  a variety of improvements related to bolstering the process.", "Cooperation among quiet zone participants (18 of 40): Although  stakeholders we spoke with cited a number of cooperation issues,  including difficulties in getting private grade crossing owners to  participate and lack of state cooperation, over half (10 of 18) cited  cooperation between public authorities and railroads as a challenge.  Such cooperation is important since both must typically work together  to establish quiet zones. However, there are natural tensions between  public authorities and railroads with respect to establishing quiet  zones. As discussed earlier, stakeholders we spoke with supported  quiet zones believing they not only maintain safety, but improve  quality of life. On the other hand, all eight railroads told us that the  train horn is the most effective safety measure.", "The process for establishing quiet zones (16 of 40): In general, the  stakeholders we spoke with cited a variety of process related  challenges, including that the train horn regulations are difficult to  understand, FRA waivers are difficult to obtain, and that the quiet  zone process could be better explained by FRA. In particular, over  half of the stakeholders whom said that process was a challenge (10  of 16) explained that the quiet zone process was either difficult to  understand or navigate or that the requirements to establish a quiet  zone were confusing. For example, one public authority told us that  rules for establishing a quiet zone can be difficult to interpret and that  this difficulty could impact public authorities\u2019 establishment of quiet  zones. Four of the 16 stakeholders also told us the process was time  consuming and, in some instances, can take years to complete. FRA  program officials said the turnaround time for FRA reviews depends  on the quality of materials provided. They said it generally takes 90 to  120 days for FRA to complete its review, but it can take longer if there  is missing information or other problems with a public authority\u2019s  application, as is often the case.", "Stakeholders we spoke to suggested three types of process-related  improvements: administrative changes to improve the efficiency of the  process, improvements to FRA\u2019s role in the quiet zone process, and  improvements to FRA guidance that public authorities use to establish  quiet zones.", "Administrative improvements: Twenty-five of the 40 stakeholders that  we interviewed identified one or more types of administrative process  improvements to improve the efficiency of the process for establishing  quiet zones or better facilitate their establishment. These suggested  improvements included:", "Making the quiet zone process more user-friendly (11 of 40  stakeholders that offered suggestions related to the quiet zone  process): Stakeholders we interviewed identified various  improvements that could streamline some administrative requirements  of the quiet zone process. These steps include standardizing or  automating the quiet zone process, developing sample Notices of  Intent or Notices of Quiet Zone Establishment that public authorities  could use to input information, and making quiet zone materials  available electronically. For example, GCMs in one FRA region told  us that by standardizing the paperwork all regions would receive the  same documents, a step that would make review easier. In addition,  these officials said public authorities often forget to include key  information in the Notice of Intent and with a standard form this may  not occur.", "Requiring diagnostic reviews for all quiet zones (7 of 40): As  discussed earlier, when there are private grade crossings that allow  public access to active commercial or industrial sites or pedestrian  grade crossings in a quiet zone, a diagnostic review is required. The  regulations require public authorities to provide state agencies and  affected railroads, among others, the opportunity to participate in  diagnostic reviews. According to FRA program officials, FRA is not  required to participate in diagnostic reviews. Diagnostic reviews  evaluate conditions at proposed quiet-zone crossings and a  diagnostic review team makes recommendations about measures that  are needed to protect safety at these crossings. Seven stakeholders  we interviewed suggested that diagnostic reviews should be required  for all quiet zones, not just instances when there are private or  pedestrian crossings. For example, one GCM told us conducting a  review for all grade crossings provides a better idea of what safety  measures are needed and is a prudent action to protect public  safety.", "FRA\u2019s Role in the Process: About half of the stakeholders we spoke  with (21 of 40) suggested improvements related to FRA and its role in the  quiet zone process:  Increase FRA oversight and inspection of quiet zones (11 of 40): In  general, these stakeholders believe FRA should be more involved  with inspections and oversight of quiet zones, particularly between  when a Notice of Quiet Zone Establishment is issued and when a  quiet zone is established. Most of the railroad stakeholders we spoke  with (6 of 8) believe there is a need for increased FRA involvement  with quiet zones\u2019 oversight. Among the railroad concerns were that  without additional FRA oversight, quiet zones may not achieve  compliance with the train horn regulations, and that public authorities  may not actually install the safety measures identified in the Notice of  Quiet Zone Establishment. A GCM in one FRA region told us that  officials discovered noncompliant safety measures and missing signs  after quiet zones had been established in this region, and that safety  measures that were supposed to be installed were not. We discuss  quiet zone oversight issues later in this report.", "Expedite FRA\u2019s review of quiet zone applications (10 of 40): As  discussed earlier, FRA plays a role in the quiet zone process, in part,  by reviewing quiet zone applications when ASMs are used. The 10  stakeholders felt that FRA should expedite its review process. For  example, a GCM in one FRA region suggested FRA shorten the  review time by developing a list of frequently used ASMs and their  safety effectiveness ratings and posting them online, a process that  would save FRA time when reviewing ASMs.", "Guidance about the process: Finally, stakeholders we spoke with  suggested guidance on the quiet zone process could be improved (17 of  40).", "In particular, 13 of the 17 stakeholders whom offered suggestions  about guidance said that FRA\u2019s quiet zone guidance should be clearer  or that training about the quiet zone process is needed. As previously  discussed, some stakeholders told us the quiet zone process is  difficult to understand or navigate, or that FRA could better explain the  process. In particular, two public authorities suggested some form of  step-by-step guide is needed to better describe the process, and  GCMs in three FRA regions also suggested classes or other types of  education were needed to better help public authorities understand  the quiet zone process. According to FRA program officials, FRA\u2019s  quiet zone guidance consists of its user guide and a document on  how to create a quiet zone. The train horn regulations also specifies  how public authorities are to establish quiet zones and includes steps  to follow under the public authority designation or public authority  application processes.", "Moving forward, FRA is in the process of conducting a retrospective  regulatory review and deciding what, if any, changes may be needed. In  March 2016, FRA issued a Notice of Safety Inquiry, which, according to  FRA, is a retrospective review of the train horn regulations. The Notice of  Safety Inquiry solicited comments about many aspects of the train horn  regulations, including whether FRA can decrease the barriers public  authorities encounter when establishing a quiet zone. Among other  things, the inquiry seeks comments about whether there should be an  online process for submitting notices and other required quiet zone  paperwork, whether diagnostic reviews should be required for all quiet  zones, and if the regulations should be amended to include common  ASMs in the list of approved SSMs. The Inquiry is also looking at other  aspects of the quiet zone process and guidance. As of July 2017, FRA  was still in the process of reviewing comments received in response to  the notice. FRA program officials did not indicate what, if any, changes  may result from this inquiry, but said any changes that are made would be  handled through a rulemaking. However, FRA program officials noted that  a rulemaking would not be necessary for the agency to provide public  authorities with additional tools to aid in the development of a quiet zone,  such as guidance."], "subsections": []}, {"section_title": "FRA Has Conducted Analyses of Safety in Quiet Zones and Is Formalizing Quiet Zone Inspections, but Limitations Exist", "paragraphs": [], "subsections": [{"section_title": "FRA\u2019s Analyses Generally Indicate That Grade Crossings in Quiet Zones Are As Safe As The Same Grade Crossings When the Train Horn Was Sounded, but Methodology Has Limitations", "paragraphs": ["One way FRA evaluates the effectiveness of its train horn regulations is  through conducting analyses of data on the safety of grade crossings in  quiet zones. Those analyses show that grade crossings in quiet zones  are generally as safe as the same grade crossings when the train horn  was sounded. Specifically, FRA conducted analyses in 2011 and 2013 to  assess whether there was a statistically significant difference in the  number of accidents before and after implementation of quiet zones.  The results showed that there was generally no statistically significant  difference in the number of accidents that occurred before and after quiet  zones were established. To conduct the analyses, FRA grouped quiet  zones by the number of years of available data since establishment of the  quiet zone, using an equal number of months before and after  establishment. FRA\u2019s analyses in 2011 and 2013 included 359 and 203  quiet zones, respectively.", "While FRA\u2019s analyses of quiet zones generally showed that grade  crossings in quiet zones were as safe as the same grade crossings when  the train horn was sounded, in 2013 FRA identified one exception that  FRA program officials reported resolving in a subsequent analysis.  Specifically, while FRA\u2019s 2011 analysis did not show any differences in  safety after establishment of the quiet zones, in 2013 FRA concluded that  for quiet zones established from May 2010 through April 2011, there was  a statistically significant increase in the number of accidents that occurred  after the establishment of the quiet zones. Specifically, FRA found that  accidents doubled from 11 accidents before establishment of the quiet  zones to 22 accidents following the establishment of the quiet zone. After  that finding, FRA program officials conducted a preliminary analysis for  2017 and reported that the results did not show a statistically significant  increase in accidents for any period of quiet zones, including those  established from 2010 through 2011. In addition to looking at quiet  zones by establishment year, FRA\u2019s 2013 analysis also grouped quiet  zones by how they were established, such as with safety measures at all  crossings or against FRA\u2019s risk indexes. Results from this analysis did not  show an increase in accidents by any establishment method analyzed.  As a result, FRA program officials told us that they believe the result in  2013 for quiet zones established from 2010 through 2011 was likely an  anomaly and that those quiet zones are as safe as other crossings.", "Before-and-after analysis is a methodologically acceptable practice, but  the reliability of the results decrease over time because unlike other types  of analyses, they do not control for factors that may change over time. In  particular, FRA\u2019s analyses assume that the number of accidents  experienced before the quiet zone is established is a good estimate of the  number of accidents that would be expected in the future had the quiet  zone not been established. However, FRA\u2019s before-and-after analyses  have limitations because, unlike other methodologies, they do not take  into account changes to characteristics of grade crossings over time. For  example, a multivariate method can control for changes to characteristics  at grade crossings that may impact safety. These characteristics can  include changes to train or vehicle traffic, train or vehicle speeds, time of  day when train activity occurs, number of highway lanes, the number of  tracks in use, or other changes to surrounding roads or infrastructure at a  crossing. For example, if train or vehicle traffic increased over time, it is  possible that the number of incidents would increase, while the risk of an  accident would stay the same. Specifically, closing a grade crossing near  a quiet zone or increases in traffic from new businesses around a quiet  zone could increase traffic after the establishment of a quiet zone;  however, these changes would not be factored into FRA\u2019s current  methodology for conducting safety analyses. This inherent limitation is  exacerbated over time, because the assumption that there would be no  changes to relevant characteristics of the grade crossings is less likely to  be the case as more time passes.", "FRA also conducts annual reviews of selected quiet zones to ensure their  safety, and FRA program officials told us that this review further validates  its before-and-after analyses. As mentioned previously, FRA conducts  annual reviews of quiet zones established against the Nationwide  Significant Risk Threshold because the measure is variable and subject  to change over time. According to FRA program officials, about 11  percent of all quiet zones are established against the Nationwide  Significant Risk Threshold and are thus included in this annual review. To  ensure that established quiet zones fall at or below the Nationwide  Significant Risk Threshold, FRA is required to recalculate this measure on  an annual basis and notify a public authority if the Quiet Zone Risk Index  no longer falls at or below the threshold. By doing so, FRA program  officials told us that they are further validating that the grade crossings in  quiet zones are as safe as other grade crossings. While this annual  review may provide FRA with additional support that grade crossings in  quiet zones are as safe as others, it does not address the underlying  limitations of a before-and-after analysis.", "While the reliability of a before-and-after analysis may decrease over  time, FRA has no plans to revise its methodology. In fact, as mentioned  previously, FRA program officials told us that preliminary results for their  2017 safety study mirror results from 2011, showing that there was no  statistically significant difference in accidents before and after the  establishment of quiet zones. According to FRA program officials, the  agency is not required to conduct this analysis, but moving forward,  program officials plan to conduct the same analysis on a biennial basis to  internally validate that grade crossings in quiet zones are as safe as  others.", "By continuing to rely on the current methodology, FRA\u2019s future analyses  may continue to provide the agency with information that does not  account for changes in characteristics of grade crossings over time. The  Standards for Internal Control in the Federal Government states that  management should use quality information to make informed decisions.  This requirement can be satisfied by, for example, obtaining relevant data  from reliable sources, obtaining that information on a timely basis, and  processing that data into quality information that accurately represents  what it purports to represent. Furthermore, a previous FRA study that the  agency relied on in developing the final rule has reported that changes in  grade crossings\u2019 characteristics can affect the results of analyses used to  predict accidents at grade crossings. As a result, FRA\u2019s Rail-Highway  Crossing Resource Allocation Procedures recommended that analyses  used to predict accidents at grade crossings only include accident data  for the most recent 5 years because older accident history information  may be misleading due to changes that occur in grade crossings\u2019  characteristics over time. While FRA\u2019s recommendation was not  developed to analyze the safety of grade crossings in quiet zones, the  agency\u2019s recommendation that accident data older than 5 years may be  misleading because of changes that occur to grade crossings\u2019  characteristics over time is relevant to those analyses. Nevertheless, FRA  program officials told us that they have no plans to revise the  methodology because it effectively compares the safety of grade  crossings in quiet zones to other grade crossings. By continuing to use  the same methodology, the agency may be missing an opportunity to fully  understand the safety of grade crossings in quiet zones."], "subsections": []}, {"section_title": "FRA Has Taken Steps to Formalize Quiet Zone Inspections, but Lacks Formal Guidance", "paragraphs": ["In addition to conducting studies, FRA also oversees quiet zones by  inspecting them to ensure their safety and compliance with train horn  regulations. According to FRA program officials, FRA is not required to  inspect quiet zones; rather, public authorities, in conjunction with the  railroads, are responsible for maintaining quiet zones and ensuring  compliance with train horn regulations. Until recently, FRA has utilized  its GCMs to, among other things, informally inspect quiet zones and work  with public authorities to resolve issues affecting the safety of quiet  zones\u2014issues such as foliage covering signage, maintenance issues  with safety devices, or outdated pavement markings. In fact, GCMs in  all eight regions told us that they informally inspect quiet zones.  According to FRA program officials, the agency has recently identified the  need for \u201cmore eyes on the ground\u201d to more systematically address  maintenance issues within quiet zones and to ensure compliance with  train horn regulations. As a result, FRA is transitioning its informal  inspection program for quiet zones to a more formal inspection process.", "As of August 2017, FRA had not terminated any quiet zones because of violations or  fined any entities for quiet zone violations.", "August 2017 that they planned to hire 24 new Inspectors. As of August  2017, FRA had also developed the Inspector training curriculum, and  began training three Inspectors. FRA program officials expressed  uncertainty over when the remaining 21 Inspectors will be hired because  of uncertainty regarding FRA\u2019s hiring and training priorities, among other  things. In September 2017, FRA program officials told us that one of the  newly hired Inspectors had completed the training and had begun  inspecting quiet zones.", "While FRA has started conducting formal quiet-zone inspections, we  found that FRA has not developed guidance on how the inspections  should be conducted, including guidance on how frequently these  inspections should be conducted and what should be examined. As a  result, such guidance is not included as part of the training curriculum  developed for Inspectors. According to FRA program officials, this  guidance has not been developed because program officials are still  finalizing the inspection program. Although no guidance has been  developed, FRA program officials told us that they are considering  inspecting all new quiet zones between when the public authority submits  a Notice of Quiet Zone Establishment and when the quiet zone is  established. Additionally, FRA program officials told us that existing quiet  zones would be inspected based on mission requirements, risk, and the  availability of resources, but ideally every 3 years. With respect to how  the quiet zones are to be inspected, FRA program officials said they plan  to develop guidance for Inspectors that is akin to the other FRA safety  disciplines. FRA program officials told us that they are working toward  establishing an Audit Division, which would be responsible for developing  this guidance. However, as of August 2017, FRA program officials had  not provided a timeline for when this division or guidance would be  completed.", "The absence of guidance on inspections is inconsistent with internal  control standards. Specifically, the Standards for Internal Control in the  Federal Government states that management should implement control  activities through its policies that document each unit\u2019s responsibility, or  further delineates day-to-day procedures. These procedures may also  include the timing of when a control activity occurs and state that  management should communicate these policies to its staff. Without this  type of guidance, FRA cannot have reasonable assurance that  inspections are being conducted consistently across FRA\u2019s eight regions  and as FRA intends."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Grade crossing collisions are one of the leading causes of fatalities in the  railroad industry, and ensuring safety in these areas, including those  within quiet zones, is a vital part of FRA\u2019s mission. While public  authorities are primarily responsible for safety in quiet zones, FRA can  help ensure that grade crossings in quiet zones are as safe as others.  However, the methodology FRA uses to assess the safety of quiet zones  has limitations because it does not account for changes to grade  crossings\u2019 characteristics over time. By continuing to rely on this  methodology, FRA may be missing an opportunity to ensure that  established quiet zones are providing the same level of safety as when  train horns were sounded.", "In addition to its safety studies, FRA is also taking steps to formalize its  process for conducting physical inspections of quiet zones. While FRA  has started hiring and training a few Inspectors, it lacks guidance on how  and when quiet zone inspections are to be performed. Without this  guidance, FRA cannot ensure that quiet zones will be inspected  consistently across FRA\u2019s eight regions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to FRA:  The Administrator of FRA should revise the methodology for the analysis  of safety in quiet zones to take into account relevant changes over time\u2014 including changes in train and automotive traffic, or in the physical  characteristics of the grade crossing. (Recommendation 1)", "The Administrator of FRA should develop guidance for Inspectors on the  nature and frequency of quiet zone inspections. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Transportation for  review and comment. The department provided a written response (see  app. II), as well as technical comments that we incorporated as  appropriate. The department concurred with the second recommendation  regarding developing guidance for quiet zone inspectors and partially  concurred with the first recommendation regarding revising the  methodology for analyzing the safety of quiet zones. The department said  it would consider our recommendation to revise its methodology as it  explores options for updating its methodology.", "We are encouraged that FRA is willing to consider revising its  methodology for analyzing the safety of grade crossings in quiet zones.   However, we continue to believe that our recommendation is valid and  that to fully understand quiet zone safety FRA needs to revise its  methodology to account for relevant characteristics of quiet\u2014zone grade  crossings. As we state in the report, the reliability of FRA\u2019s current  methodology will likely decrease over time because it does not control for  relevant changes to grade crossings in quiet zones including changes to  vehicle or train traffic or speeds. These and other factors are critical  determinants of grade-crossing safety. Further, developing a  methodology that incorporates characteristics that affect safety at grade  crossings in quiet zones may also provide FRA insight into the safety of  grade crossings more generally. Since grade-crossing accidents are a  major source of fatalities and, according to the department, are expected  to increase as train- and highway-traffic increases, it will become  increasingly important to have reliable information about grade-crossing  safety, both in quiet zones and across grade crossings more generally.", "We will send copies of this report to appropriate congressional  committees, the Secretary of Transportation, and the Administrator of the  Federal Railroad Administration. In addition, we will make copies  available to others upon request, and the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@gao.gov. Contact points for our Office  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Fixing America\u2019s Surface Transportation Act included provisions for  GAO to review the effectiveness of the Federal Railroad Administration\u2019s  (FRA) final rule governing the use of train horns at highway-rail   grade  crossings. The objectives of this report were to determine: (1) what is  known about the benefits and costs of quiet zones, (2) what challenges,  if any, public authorities and others encounter in establishing quiet zones,  and (3) how, if at all, FRA is evaluating the effectiveness of federal train  horn regulations. The scope of this report was limited to new quiet  zones\u2014that is, quiet zones that were established since FRA published  the final rule in August 2006. Federal regulations govern the use of train  horns at public-highway-rail-grade crossings (grade crossings) and  provide public authorities\u2014typically a city, town, or county\u2014with the  opportunity to create quiet zones where train horns are not sounded. We  focused on new quiet zones to better understand the benefits, costs,  challenges, and safety impacts associated with the regulations.", "To obtain information about quiet zones, we reviewed FRA\u2019s data on  quiet zones established from 2005 through 2017. To assess the reliability  of these data, we examined FRA\u2019s reports, analyzed the data to identify  any outliers, and interviewed FRA officials about how the data were  collected and used. We determined that the data were sufficiently reliable  for our purposes.", "For each of our objectives, we reviewed pertinent law and FRA  regulations and documents; interviewed FRA program officials in  headquarters; and conducted in-depth interviews with a nongeneralizable  sample of 40 stakeholders. This sample included stakeholders from 8  freight railroads, 5 private industry consulting firms with experience  helping public authorities establish quiet zones, 6 state agencies, 13  public authorities within these six states, and FRA Grade Crossing  Managers (GCMs) in each of FRA\u2019s 8 regions. The railroads selected  included all seven class I railroads, plus the Florida East Coast Railway.  The latter was selected due to its previous experience with whistle bans,  and it was located in a state where we conducted interviews. The private  industry consultants were selected based on several factors, including (1)  experience with assisting public authorities in establishing quiet zones, (2)  recommendations from FRA and other stakeholders we interviewed, and  (3) geographic dispersion.", "We selected six states as part of a nongeneralizable sample for  interviews. These states included California, Colorado, Florida, Illinois,  Maryland, and Texas. The states were selected based on a variety of  factors, including the number of new quiet zones and the number of grade  crossings in new quiet zones. Five of the six states accounted for about  48 percent of new quiet zones (California, Colorado, Florida, Illinois, and  Texas). We also conducted interviews in Maryland before we conducted  other interviews to test our interview protocol. Maryland was selected for  this purpose to, among other things, minimize resources. Within these  states, we conducted interviews with 13 judgmentally selected public  authorities (see table 1). The public authorities were also selected based  on factors such as the number of new quiet zones and recommendations  from FRA and other stakeholders we interviewed.", "For all our objectives we also conducted a literature review of pertinent  studies in scholarly/peer-reviewed journals, conference papers, non-profit  or think tank publications, and trade publications or industry articles to  identify research on quiet zones. We restricted our review to results  published between January 1, 1996, and October 17, 2016, and our  search yielded 99 results. Of these 99 results, we reviewed each abstract  or full article if available, to determine whether it was relevant to any of  our objectives. Our analysis identified 10 results pertaining to safety, 11  results related to benefits and costs, and 1 result related to challenges.  With respect to the articles related to costs and benefits, we also looked  at citations within the studies we reviewed to identity whether any of these  were relevant to our objective on costs and benefits of quiet zones. Using  this approach we identified one additional study. Each abstract was  reviewed by two analysts to determine whether it seemed relevant.  Where disagreement existed with respect to whether the abstract was  relevant, we included the abstract in our request for the complete study.  We then developed criteria/requirements for each objective and reviewed  each study against our criteria/requirements. Namely, we were only  interested in studies that quantified the benefits or costs of quiet zones or  that used data or analytics to measure safety at grade crossings in quiet  zones or compared safety at-grade crossings in quiet zones to grade  crossings where train horns sound. Further, each study was reviewed by  an analyst and a statistician or economist to determine its relevance.", "With respect to our objective on the effectiveness of the train horn  regulations, we determined that none of the studies met our underlying  criteria. Specifically, none of the studies measured the safety at grade  crossings in quiet zones or compared the results to grade crossings  where the train horn sounded. Conversely, with respect to our objective  on the costs and benefits of quiet zones, we determined that six studies  were relevant. To assess the reliability and methodological soundness of  the studies we determined were relevant, we compared the studies with  general guidelines based on standards for assessing research and  analysis from the literature, past GAO reports on evaluating research  programs, and our internal expertise in research design. These guidelines  include, for example, examining a study based on: (1) the extent to which  it was well designed and the methodology supports the objectives; (2)  whether the assumptions were reasonable and explicitly stated; (3)  whether the study used the best available data; and (4) whether the  conclusions and recommendations were balanced and supported by data  analysis.", "To determine what is known about the benefits and costs of quiet zones,  we reviewed the literature search discussed above and analyzed any  studies obtained using the methodology described above. We also  reviewed FRA\u2019s Regulatory Evaluation and Regulatory Flexibility  Assessment for Use of Locomotive Horns at Highway-Rail Grade  Crossings Final Rule (RFIA). The RFIA was issued before the final rule  and analyzed the potential economic effects of requiring the train horn to  be sounded at all public grade crossings, of eliminating whistle bans, and  of providing conditions under which the train horn can be silenced at- grade crossings. To review the RFIA, we compared it to selected  principles from Office of Management and Budget\u2019s (OMB) guidance for  developing regulatory analyses. These principles included whether the  analysis considered alternatives; whether the analysis estimated the  incremental effect of the rule compared to a business-as-usual baseline;  and whether the analysis analyzed uncertainty. In evaluating the RFIA, an  analyst and economist independently reviewed the analyses and  subsequently came to consensus about each element\u2019s adherence to  OBM guidance. We also reviewed FRA\u2019s September 2013 user guide for  quiet zones. This guide provides a high-level overview of the quiet zone  process, including an estimated cost range to establish quiet zones. We  discussed the cost range with FRA, including the source of the  information and its reliability. Since FRA program officials told us it was  an \u201corder of magnitude\u201d estimate and not meant to represent actual costs  to establish quiet zones, we did not determine the reliability of the  information. As a result, the cost range information is used for illustrative  purposes only, and we included a disclaimer about its reliability. Finally,  we interviewed FRA GCMs in all eight of FRA\u2019s regional offices, states,  public authorities, railroads, and private industry consultants about the  benefits and costs of establishing quiet zones. Some of these  stakeholders provided information about costs to establish quiet zones,  but this was anecdotal, and we did not attempt to verify its completeness  or accuracy.", "To determine the challenges encountered by public authorities and other  stakeholders in establishing quiet zones and improvements stakeholders  suggested to the quiet zone process, we interviewed FRA GCMs, states,  public authorities, railroads, and private industry consultants. We asked  these stakeholders to identify the primary challenges in establishing quiet  zones and for suggested improvements to the quiet zone process. We  then analyzed the information obtained to identify common themes of  challenges or suggested improvements. Based on this analysis, an initial  list of categories for each challenge and improvement was then  developed along with their definitions. The definitions identified specific  types of comments to be included in each challenge or improvement  category. After reviewing the initial list for overlaps and duplication, as  well as to keep the list manageable, a final consolidated list was  developed that consisted of eight types of challenges and seven types of  improvements (see table 2). Using this list, an analyst then reviewed each  interview and judgmentally assigned the information into one of the  categories. A second analyst then independently reviewed these  assignments using the consolidated list of categories and definitions. Any  differences were then reconciled by the two analysts.", "To further enhance our understanding of quiet zone challenges and  improvements, we reviewed guidance issued by FRA about quiet zones  and the train horn rule. This included FRA\u2019s How to Create a Quiet Zone  document (posted to the FRA website in September 2012) and FRA\u2019s  user guide about quiet zones published in September 2013.  Additionally, we reviewed FRA\u2019s regulations governing train horns and  quiet zones. We also interviewed FRA program officials about the quiet  zone process, application processing, various aspects of the train horn  rule, and obtained information from FRA about quiet zone guidance.", "To determine how FRA is evaluating the effectiveness of the federal train  horn regulations, we reviewed FRA\u2019s analysis of the safety of quiet zones  at highway-rail-grade crossings completed in 2011 and 2013, which  compared the safety of grade crossings in quiet zones to the safety of  grade crossings where the train horn is sounded. We also discussed with  FRA program officials the methodologies used to prepare these studies,  and concerns with the data, conclusions, and plans to conduct future  analyses. To assess the reliability and methodological soundness of the  studies, we used the same approach as above. Both analyses were  reviewed by a statistician and economist to corroborate the review. In  addition to developing criteria for reviewing the analyses, we also  reviewed guidance by FRA and others regarding analyzing incident data  at grade crossings and about the limitations of a paired t-test\u2014FRA\u2019s  methodology for comparing the grade crossings.", "To assess the extent to which FRA\u2019s methodology generally reflects  internal control principles, we reviewed it against practices for presenting  accurate information and communicating with internal and external  stakeholders outlined in the Standards for Internal Control in the Federal  Government. We also conducted data reliability assessments with  respect to the underlying data FRA used in its analyses. FRA\u2019s analyses  used data that originated from two distinct FRA databases: ccmMercury  (CCM) and the Safety Data Analysis website. CCM is a correspondence  management system which includes all data on quiet zones\u2014such as the  establishment date and grade crossings included, among others. This  information is contained in the Notice of Quiet Zone Establishment that  the public authority establishing the quiet zone is required to provide to  FRA. Alternatively, the Safety Data Analysis website contains two  datasets: the Grade Crossing Inventory System (GCIS) and the Railroad  Accident/Incident Reporting System (RAIRS). The GCIS contains  information on every crossing in the nation and was used to identify the  characteristics of the individual crossings within the quiet zone, whereas  the RAIRS contains details about each crossing collision incident that has  occurred. To assess the reliability of the data used in our review, we  examined FRA reports, reviewed prior GAO data reliability material, and  interviewed FRA stakeholders about how the data were collected, stored,  and used. We determined that the data were sufficiently reliable for the  purposes of our objectives.", "Finally, to understand how FRA conducts oversight of quiet zones, we  interviewed FRA program officials about oversight of quiet zones,  guidance to staff and public authorities, and any planned changes for how  the agency conducts oversight of quiet zones. We also interviewed GCMs  in each of FRA\u2019s eight regions to understand how they carry out oversight  of quiet zones and to learn about the extent to which differences exist  across regions. We also reviewed prior GAO reports that summarized  FRA\u2019s oversight approach to the rail industry, including its more traditional  inspection disciplines. We also asked stakeholders included in our  sample of FRA GCMs, states, public authorities, railroads, and private  industry consultants about the challenges of establishing quiet zones and  potential improvements to the quiet zone process. We then assessed  FRA\u2019s oversight approach using the Standards for Internal Control in the  Federal Government.", "We conducted this performance audit from July 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: List of Organizations Contacted by GAO", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Susan Zimmerman (Assistant  Director), Krister Friday, Sarah Gilliland, Timothy Guinane, Richard  Jorgenson, SaraAnn Moessbauer, Malika Rice, Amy Rosewarne, Melissa  Swearingen, Larry Thomas, and Crystal Wesco made significant  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-175", "url": "https://www.gao.gov/products/GAO-19-175", "title": "Federal Law Enforcement: Purchases and Inventory Controls of Firearms, Ammunition, and Tactical Equipment", "published_date": "2018-12-13T00:00:00", "released_date": "2018-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal law enforcement agencies purchase firearms, ammunition, and tactical equipment, such as riot shields, to support their missions. GAO was asked to review these purchases for federal law enforcement agencies, and inventory controls at HHS, EPA, and IRS specifically.", "This report examines, among other objectives (1) firearms, ammunition, and selected tactical equipment spending by federal agencies with 250 or more FLEOs from fiscal years 2010 through 2017; (2) the extent to which select agencies accurately reported purchases of firearms and ammunition in publicly-available data; and (3) inventory controls in place at HHS, EPA, and IRS.", "GAO obtained available data on purchases from 20 agencies and from USASpending.gov, and reviewed inventory information and controls within HHS, EPA, and IRS. GAO also conducted site visits to HHS, EPA, and IRS offices to observe inventory controls, selected based on data discrepancies or reports of loss or theft, among other factors.", "This is a public version of a sensitive report that GAO issued in October 2018. Information that HHS, IRS, and the Transportation Security Administration deemed sensitive has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["The 20 federal law enforcement agencies in GAO's review reported spending at least $38.8 million on firearms, $325.9 million on ammunition, and $1.14 billion on tactical equipment\u2014at least $1.5 billion in total\u2014from fiscal years 2010 through 2017, based on data agencies provided to GAO.", "The internal agency data on firearms and ammunition purchases for the Bureau of Indian Affairs, U.S. Forest Service, and U.S. Immigration and Customs Enforcement (ICE) did not always match data that were publicly available on USASpending.gov\u2014a government source for federal contract data. In particular, the dollar value of firearms purchases by ICE in USASpending.gov was approximately 8 times greater than the value of the purchases reported by ICE to GAO. Some differences result from other agencies using ICE contracts to make firearms and ammunition purchases, and ICE not properly identifying the funding agency for those purchases in the system that supplies data to USASpending.gov. Because ICE does not accurately report the agency that funded these purchases, the public does not have accurate information on how much ICE\u2014and the agencies that make purchases using ICE contracts\u2014have spent on firearms and ammunition. This decreases accountability and transparency of federal purchases, which is in conflict with the intended purpose of this system.", "Department of Health and Human Services (HHS), the Environmental Protection Agency (EPA), and the Internal Revenue Service (IRS) have inventory controls for tracking, verifying, and securing federal law enforcement officers' (FLEOs) firearms. GAO observed these agencies' law enforcement components and found them to be generally following their inventory and security policies at selected locations. In instances where agencies were not in compliance with their policies, the agencies made corrections during the course of GAO's review. Each component has a process whereby at least once yearly officials review the firearms inventory to ensure that firearms match with records in the office's inventory system. The figure below illustrates a general process that all components GAO reviewed follow to verify their firearms inventory. Ammunition and tactical equipment inventory controls varied because agencies generally did not consider these items to be as sensitive as firearms. Examples of these controls include security for, and limited access to, equipment that might be vulnerable to risk of loss or unauthorized use, such as silencers or pyrotechnics."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Director of ICE update ICE's contracting process to provide the name of the agency funding the purchase of firearms and ammunition to improve the accuracy of publicly available data. ICE concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal law enforcement officers (FLEO) play a key role in maintaining  the safety and security of federal property, employees, and the general  public. In 2012, the Bureau of Justice Statistics reported that the federal  government employed approximately 120,000 FLEOs in non-military  agencies with authority to make arrests and carry firearms in the United  States\u2014the vast majority of which were law enforcement agents within  the Department of Homeland Security (DHS) and Department of Justice  (DOJ). In addition, federal agencies such as the U.S. Department of  Health and Human Services (HHS), the Environmental Protection Agency  (EPA), and the Internal Revenue Service (IRS) also have law  enforcement responsibilities that support their core missions. These  responsibilities include investigating potential violations of federal public  health, environmental, and tax laws.", "Within the federal government, FLEOs have a number of different  functions to fulfill their law enforcement missions and roles, including  providing police response, conducting criminal investigations, and  providing building or personnel security. To help FLEOs carry out these  responsibilities, agencies purchase firearms, ammunition, and tactical  equipment. At these federal agencies, FLEOs are authorized to carry  firearms, and are required to train in their use and pass certain firearms  qualification standards. To help ensure officers\u2019 maintain the firearms  proficiency of their firearms-carrying workforce, these agencies purchase  ammunition for training, qualifications, and operations.", "Agencies may also purchase tactical equipment to support and augment  FLEO operations, such as counterdrug, counterterrorism, and border- security activities. The types of tactical equipment used for these  operations can include tactical vehicles to conduct drug raids; night vision  gear and thermal imaging devices to surveil marijuana cultivation on  public lands; helicopters to patrol coastlines; tactical and armored  vehicles to patrol the border for illegal activities; and aerial capabilities to  enhance border surveillance.", "Agencies that purchase firearms, ammunition, and tactical equipment  must report those purchases publicly on a searchable website\u2014 USASpending.gov. Because the law enforcement missions of these  agencies require them to purchase and manage firearms, ammunition,  and tactical equipment, effective purchasing and oversight\u2014including  inventory and safeguarding controls\u2014of these sensitive assets is  important. We have previously reported on federal agency firearms  inventory controls and on DHS ammunition purchasing and inventories. In  those reports, we also noted that it is incumbent upon agencies to ensure  the effective and efficient management of these items as stewards of  taxpayer resources.", "You asked us to review issues related to firearms, ammunition, and  tactical equipment purchases by federal agencies, as well as inventory  controls at HHS, EPA, and IRS specifically. This report examines the  following questions:  1.  What do available data show about spending on firearms,  ammunition, and selected tactical equipment made by federal  agencies with 250 or more federal law enforcement officers from fiscal  years 2010 through 2017?  2.  To what extent have selected agencies accurately reported purchases  of firearms and ammunition in publicly-available data on  USASpending.gov?  3.  What types and quantities of firearms, ammunition, and selected  tactical equipment do HHS, EPA, and IRS have documented to be in  their inventory systems, as of November 2017?  4.  What inventory controls and procedures are in place at HHS, EPA,  and IRS, and to what extent do these agencies follow these  procedures at selected locations?", "This report is the public version of a sensitive report that we issued in  October 2018. HHS, IRS and the Transportation Security Administration  (TSA) deemed some of the information in our October report to be  sensitive, which must be protected from public disclosure. Therefore, this  report omits sensitive information about the number of FLEOs at the TSA,  an illustration of how HHS\u2019s National Institutes of Health Police secures  its firearms, and the number and types of some firearms, ammunition,  and tactical equipment in NIH\u2019s and IRS\u2019s inventory. Although the  information provided in this report is more limited, the report addresses  the same objectives as the sensitive report and uses the same  methodology.", "To address our first question, we selected the 20 agencies from the  departments named in the Chief Financial Officers Act that employed 250  or more FLEOs at any point from fiscal years 2010 through 2017. We  also excluded military and intelligence agencies from our review, such as  all Department of Defense (DOD) branches and the U.S. Coast Guard,  which is part of DHS. Table 1 shows the agencies in our scope for our  first question.", "For the first question, we analyzed the amount 20 federal agencies  reported spending on firearms, ammunition, and tactical equipment and  refer to these internal agency records as spending data. Specifically, we  provided the 20 agencies a data collection instrument and requested that  they report, among other things, the agency\u2019s purchase method; award  date; number of firearms, ammunition, or tactical equipment purchased;  type of firearm, ammunition, or tactical equipment purchased; the amount  spent for these items; and whether the amount spent is an estimate for  the firearms, ammunition, and tactical equipment purchased for FLEOs  from their internal record-keeping systems from fiscal years 2010 through  2017. We analyzed the data agencies reported as \u201camount spent,\u201d and  we use the terms \u201cspending\u201d and \u201cspent\u201d to refer to these data. To identify  tactical equipment for inclusion in our review, we selected 18 categories  of items that appeared on two or more lists of destructive, militaristic, and  specialized equipment. We use the term \u201ctactical equipment\u201d to refer to  these 18 selected categories of tactical equipment.", "To assess the reliability of the spending data, we conducted tests for  missing data and obvious errors, reviewed relevant documentation, and  followed up with agency officials as needed. We interviewed  knowledgeable agency officials about their spending records and data  reporting practices. We found the data sufficiently reliable for the purpose  of reporting the minimum thresholds of total amounts agencies spent and  the number of firearms and rounds of ammunition they bought. However,  we found the data were not reliable for reporting the number of tactical  equipment items purchased or for conducting further comparative  analysis.", "To address our second question, we selected three agencies\u2014the  Bureau of Indian Affairs (BIA), the U.S. Forest Service, and U.S.  Immigration and Customs Enforcement (ICE)\u2014to assess the extent to  which their purchases of firearms and ammunition were accurately  reflected in publicly-available data. We selected these three agencies  based on the total dollar value of obligations reported in  USASpending.gov: one small agency (BIA), one medium agency (Forest  Service), and one large agency (ICE). We requested that these  agencies provide to us internal purchase data for firearms and  ammunition that included, among other things, the amount obligated for  these items, a unique transaction identifier (called the Procurement  Instrument Identifier), and the product or service code for firearms and  ammunition purchases from fiscal years 2010 through 2017. We  compared the amounts these three agencies obligated for firearms and  ammunition purchases, as they reported to us, with the obligation data  that are publicly available on USASpending.gov for those three agencies,  using the Procurement Instrument Identifier to match records across the  two sets of data. We obtained publicly-available data from  USASpending.gov, which included obligations data from the Federal  Procurement Data System-Next Generation (FPDS-NG), using product or  service codes that identify contracts for firearms or ammunition  purchases. We did not include equipment purchases because the  publicly-available data lack product or service codes that would allow us  to reliably identify those records. We reviewed a portion of these data and  interviewed agency officials about differences we found between the  publicly-available and agency-provided data. Results of our analyses of  these three agencies\u2019 data are not generalizable.", "To address our third and fourth questions, we reviewed inventory  information and controls for the case study federal law enforcement  components within HHS, EPA, and IRS. Specifically, we obtained and  analyzed inventory data, annual inventory reports, and other available  documentation provided by these case study agencies and their  components that employ FLEOs regarding their inventory of firearms,  ammunition, and tactical equipment as of November 2017. Accordingly,  we can draw conclusions only about the selected components in these  agencies. To assess the reliability of the inventory data, we reviewed  components\u2019 documentation related to purchases and data management,  especially policies to ensure that items are properly entered and removed  from the system.", "To examine these components\u2019 firearms, ammunition, and tactical  equipment inventory controls, we reviewed their policies describing  storage protocols and inventory control procedures, and we interviewed  components\u2019 officials to better understand these policies and procedures  in practice. We reviewed internal and external audit and inspection  reports related to the controls over firearms, ammunition, and tactical  equipment at these components to identify any reported deficiencies and  actions taken or planned to address those deficiencies. We also  compared these policies with applicable Standards for Internal Control in  the Federal Government and key areas that we have identified as  important for effective inventory management. We also conducted site  visits to 12 components\u2019 offices selected based on a variety of factors,  including the number of agencies with component offices in each city we  visited, data discrepancies at field offices, and reports of loss or theft at  these offices. During these site visits, we observed officials demonstrating  inventory inspection, inventory data entry, and access and other security  controls. In addition, we interviewed officials responsible for maintaining  and inventorying firearms, ammunition, and tactical equipment. The  observations and information we obtained from the offices visited cannot  be generalized to other locations for these components, but provide  insights about the components\u2019 firearms, ammunition, and tactical  equipment controls. For more information on our scope and methodology,  see appendix I.", "We conducted this performance audit from June 2017 through October  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. We subsequently worked  with the agencies addressed in this report from October 2018 to  December 2018 to prepare this public version of the original sensitive  report for release. This public version was also prepared in accordance  with these standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Missions, Roles, and Responsibilities of Federal Agencies in Our Review", "paragraphs": ["Federal agencies carry out a variety of missions, including protecting and  defending government buildings, public lands, and natural resources, as  well as federal employees, elected officials, and visitors to federal sites.  Agencies with FLEOs are also charged with investigating civil and  criminal violations of federal laws. Inspectors General, which may also  have FLEOs, are independent and objective units within agencies that are  charged with combatting waste, fraud, and abuse within the programs  and operations of their agencies. Table 2 lists the agencies within our  review (20 agencies included in our review of spending data and 5  agency components included in our review of inventory controls) and  describes their law enforcement missions. For more information about the  data each agency provided, see appendix II."], "subsections": []}, {"section_title": "Types of Firearms, Ammunition, and Selected Tactical Equipment", "paragraphs": ["For the purposes of our review, a firearm is any weapon that is designed  to expel a projectile by the action of an explosive or that may be readily  converted to do so. Some firearms are single-shot, while others may be  semi-automatic (requires a separate pull of the trigger to fire each  cartridge) or fully automatic (can shoot automatically more than one shot,  without manual reloading, by a single function of the trigger).  Ammunition includes its component parts, such as cartridge cases,  primers, bullets, or propellant powder designed to be used in a firearm.  Ammunition can be used in multiple types of firearms, based on the size.  For example, 9mm caliber ammunition used in pistols can also be used in  certain types of fully automatic firearms. See figure 1 below for more  information about the types of firearms FLEOs may use.", "In addition to firearms and ammunition, federal agencies may also have a  variety of tactical equipment available to their officers to support their law  enforcement roles. For example, officers engaged in counterdrug  activities may use armored vehicles for drug raids in rural areas or night- vision equipment to maintain surveillance of drug activities. Officers that  work in counterterrorism and border security may use helicopters or other  aircraft, as well as armored or tactical vehicles, to patrol or surveil  locations. See figure 2 for examples of selected tactical equipment in our  review."], "subsections": []}, {"section_title": "Purchase Data Reported in FPDS-NG and USASpending.gov", "paragraphs": ["Federal Procurement Data System-Next Generation (FPDS-NG) is a  comprehensive web-based tool for agencies to publicly report contract  transactions, including firearms, ammunition, and tactical equipment  purchases. The public can download FPDS-NG data on contract actions  from the USASpending.gov website, and this data set enables users to  examine spending in multiple categories across government agencies.  The contracting officer, who awards a contract or order against an  existing contract, has responsibility for accurately recording the individual  contract action information in FPDS-NG. Agencies are responsible for  developing a process for recording contract actions and monitoring  results to ensure their timely and accurate reporting in FPDS-NG, and  must submit certifications about the accuracy of contract reporting to the  General Services Administration.", "The Federal Acquisition Regulation (FAR) and the FPDS-NG Government  User\u2019s Manual require that each transaction record include the name of  the funding agency\u2014the agency that provided the obligated funds for the  transaction. The FPDS-NG Government User\u2019s Manual also requires a  product or service code (PSC) that reflects the product or service  procured. If more than one PSC applies, the PSC that represents the  predominance of the dollars obligated should be selected. Generally,  the FAR requires that agencies report contract actions with a total  estimated value greater than $3,500 to FPDS-NG. Generally, contract  actions that do not meet the $3,500 threshold may also be reported, but  the FAR does not require agencies to do so."], "subsections": []}]}, {"section_title": "Available Data Show that Selected Agencies Reported Spending at Least $1.5 Billion on Firearms, Ammunition, and Tactical Equipment from Fiscal Years 2010 through 2017", "paragraphs": ["The 20 federal agencies in our review reported data from their internal  record-keeping systems on the amount they spent on firearms,  ammunition, and selected tactical equipment. These agencies reported  spending at least $38.8 million on firearms, $325.9 million on ammunition,  and $1.14 billion on tactical equipment\u2014at least $1.5 billion in total\u2014from  fiscal years 2010 through 2017. For detailed information about the data  each agency provided, see appendix II."], "subsections": [{"section_title": "Firearms Spending", "paragraphs": ["The 20 agencies in our review reported spending a total of at least $38.8  million on firearms for their FLEOs from fiscal years 2010 through 2017,  based on available spending data they provided from their internal record- keeping systems. The amount each agency reported spending on  firearms over the 8-year period ranged from $106,000, in the case of the  Social Security Administration\u2019s Office of the Inspector General (SSA  OIG) to $4 million at U.S. Customs and Border Protection (CBP). Of the  20 agencies in our review, 18 agencies also reported the number of  firearms they bought. These agencies reported buying a total of at least  44,551 firearms during this time. The quantity of firearms each of these  18 agencies reported buying over the 8-year period ranged from at least  311 at SSA OIG to at least 8,500 at the Bureau of Alcohol, Tobacco,  Firearms, and Explosives (ATF).", "Agencies buy a variety of firearms in support of their law enforcement  missions. From fiscal years 2010 through 2017, agencies reported buying  pistols, rifles and shotguns, and three of the agencies\u2014NPPD, ICE, and  U.S. Secret Service\u2014also reported buying revolvers. Seventeen  agencies reported buying semi-automatic firearms, while eight agencies  reported buying fully automatic firearms and ten agencies reported buying  single-shot firearms. See figure 3 for more information about the types  of firearms that agencies reported buying over the 8-year period.", "Agency officials told us there were several reasons why they buy  firearms, such as to update their entire firearms inventory, to replace  malfunctioning firearms, or to test new models of firearms. Agencies  typically do not update their firearms inventory often because firearms  can last many years when properly serviced and maintained. This is  reflected in agencies\u2019 spending data, which generally show periodic larger  orders of firearms and more frequent smaller orders. For example, ATF  reported buying several thousand pistols in both fiscal years 2012 and  2017, and fewer than 1,000 pistols and rifles in total in the intervening  years. Similarly, BIA reported buying several hundred firearms in 2010,  2012, and 2014, and fewer than 200 in total in the remaining 5 years of  our review. When firearms near the end of their useful life, agencies can  choose to retire or replace them. Additionally, agencies frequently  reported buying three or fewer firearms at a time, and officials from one  agency we spoke with said that they may buy a single firearm at a time in  order to test out new models for future consideration."], "subsections": []}, {"section_title": "Ammunition Spending", "paragraphs": ["The 20 agencies in our review reported spending a total of at least $325.9  million on ammunition for their FLEOs from fiscal years 2010 through  2017, based on available spending data from agencies\u2019 internal record- keeping systems. The amount each agency reported spending on  ammunition over the 8-year period ranged from $309,000 (SSA OIG) to  $128 million (CBP). Of the 20 agencies in our review, 16 agencies also  reported the number of rounds of ammunition they bought. The 16  agencies reported buying a total of at least 767 million rounds of  ammunition during this time. The number of rounds of ammunition each  of these agencies reported buying over the 8-year period ranged from at  least 846,000 rounds (SSA OIG) to at least 429 million rounds (CBP).  These agencies most frequently reported buying handgun ammunition,  and .40 caliber was the most frequently reported caliber. See figure 4 for  more information about the types of ammunition that agencies reported  buying over the 8-year period.", "Agency officials we spoke with said the quantity of ammunition they buy  annually varies within each agency based on factors such as ammunition  usage in previous years, the number of officers qualifying to use a firearm  each year, the skill level of officers, the type of training conducted, and  their budget each fiscal year. Specifically, agencies require officers to  pass certain firearms qualifications standards in order to maintain their  proficiency\u2014typically quarterly for pistols, and biannually for rifles and  shotguns. Officers must qualify on each firearm they are authorized to  carry, and some agencies may have additional training requirements  throughout the year. For example, HHS Office of Inspector General (OIG)  officials said that, in addition to quarterly qualifications, officers also  complete eight additional training modules each year that cover topics  that include responding to multiple assailants, use of cover, and reactive  shooting techniques. HHS OIG officials noted that they may add  additional training if needed, and officials take this into account when  determining the type and amount of ammunition they order each year."], "subsections": []}, {"section_title": "Tactical Equipment Spending", "paragraphs": ["Of the 20 agencies in our review, 17 provided spending data for their  tactical equipment. The 17 agencies reported spending a total of at least  $1.14 billion on tactical equipment for their FLEOs from fiscal years 2010  through 2017, based on available spending data from agencies\u2019 internal  record-keeping systems. The amount each agency reported spending on  tactical equipment over the 8-year period ranged from $10,000 (SSA  OIG) to $609 million (CBP). We cannot report the total quantities of  tactical equipment agencies bought because agencies reported quantity  data using different units of measurement. For example, when we  requested data on the number of camouflage uniforms agencies bought,  agencies used \u201c1\u201d to refer to a variety of clothing, such as a single pair of  pants or a full set of uniforms.", "A few agencies accounted for a significant portion of the total reported  spending on tactical equipment. Specifically, four agencies\u2014CBP, U.S.  Marshals Service, Federal Bureau of Investigation (FBI), and Drug  Enforcement Administration\u2014reported spending at least $755 million in  the manned aircraft category, or 66 percent of all reported tactical  equipment spending for all agencies. See figure 5 for the types of tactical  equipment agencies reported in spending data.", "The 17 agencies that reported buying tactical equipment most frequently  reported buying aiming devices, such as sights and scopes, and  specialized image enhancement devices, such as thermal cameras or  night-vision goggles. Few agencies reported buying tactical and  weaponized vehicles, aircrafts, and vessels. See figure 6 for more  information about the types of equipment reported in each agency\u2019s  spending data."], "subsections": []}]}, {"section_title": "BIA and Forest Service Publicly- Available Data Differed Somewhat from their Internal Data, While ICE\u2019s Data Differed Substantially", "paragraphs": ["For the three agencies we reviewed\u2014BIA, Forest Service, and ICE\u2014 publicly-available purchase data from USASpending.gov on firearms and  ammunition did not consistently match the internal agency data we  reviewed. Table 3 shows the total dollar value of the firearms and  ammunition obligations that each agency reported to us, alongside the  dollar value of the obligations in the publicly-available data.", "Differences between the agency-reported values and the values shown in  the publicly-available data ranged from less than 1 percent to  approximately 700 percent of the values reported by the agencies. Of the  three agencies that we reviewed, ICE had the largest discrepancies  between the agency-reported and publicly-available values. ICE reported  to us $2,539,585 in firearms obligations and $47,965,399 in ammunition  obligations for fiscal years 2010 through 2017; however, the publicly- available data for ICE for the same time period shows $19,728,786 in  firearms obligations\u2014about eight times greater than what ICE reported to  us\u2014and $146,198,549 in ammunition obligations\u2014about three times the  amount that ICE reported to us.", "According to our analysis, some of the difference between the ICE- provided and publicly-available obligations in USASpending.gov results  from other DHS agencies using ICE contracts to make firearms and  ammunition purchases, and ICE not properly identifying the funding  agency for those purchases in the Federal Procurement Data System- Next Generation (FPDS-NG), the database from which USASpending.gov  draws contracting data. In these cases, agency officials told us that  under a process known as \u201cstrategic sourcing,\u201d ICE performs the  procurement functions and is reimbursed by the purchasing agency.  The Federal Acquisition Regulation (FAR) requires that the agency that  \u201cprovided the predominant amount of funding for the contract action\u201d be  recorded in FPDS-NG. The FPDS-NG Government User\u2019s Manual also  specifies that users record the agency that \u201cprovided the obligated  funds\u201d\u2014that is, the agency that purchased the item or service.", "However, when ICE records the transaction data in FPDS-NG, ICE lists  itself as the funding agency for firearms and ammunition transactions. For  example, in the publicly-available records, a fiscal year 2013 purchase of  pistols from the manufacturer totaling $847,960 in obligations shows ICE  as the funding agency, but the transaction description states: \u201cto  purchase pistols for FPS .\u201d As a result, ICE  appears to be the funding agency for more firearm and ammunition  transactions in the publicly-available data than in the data ICE reported to  us.", "ICE officials explained that their contracting officers manually enter ICE  as the funding agency in FPDS-NG. They interpret the FPDS-NG  Government User\u2019s Manual guidance to allow designation of ICE as the  funding agency, since payment for the purchase is made from an ICE  account even when those funds are reimbursed by the agency that  actually receives the purchased product. However, the FPDS-NG  Government User\u2019s Manual specifically requires the identification of the  funding agency and distinguishes between the agency that makes the  payment and the agency that ultimately provides the funds for the  purchase. FPDS-NG guidance also clarifies that when one agency buys  on behalf of another, the agency that is requiring the purchase should be  recorded as the funding agency, not the payment office.", "Because ICE recorded other agencies\u2019 purchases as its own in the  publicly-available data, it significantly inflated the apparent dollar value of  its firearms and ammunition purchases. As a result of ICE not accurately  recording the correct funding agency information in FPDS-NG, the public  does not have accurate information on the value of firearms and  ammunition purchases made by ICE, and the agencies that make purchases using ICE contracting services. As we have previously  reported, data need to be presented in a way that meets the needs of the  end users\u2014both policy makers and the public\u2014if USASpending.gov is to  fulfill its purpose of increasing accountability and transparency in federal  spending. Improving the accuracy of the reported funding agency can  better help the public understand and use federal data, and increase  accountability and transparency of these sensitive purchases.", "Data on obligations for the publicly-available purchase records had  smaller discrepancies when compared with purchases of firearms and  ammunition reported to us by the BIA and Forest Service. The BIA\u2019s  ammunition obligations in the agency- and publicly-reported data sets  closely matched, with a discrepancy of less than 1 percent overall from  fiscal years 2010 through 2017. The Forest Service\u2019s firearms obligation  amounts in the agency- and publicly-reported data sets also closely  matched, with a discrepancy of less than 1 percent overall from fiscal  years 2010 through 2017. However, the dollar value of the Forest  Service\u2019s ammunition obligations recorded in the publicly-available data  was approximately 25 percent greater than the value of the ammunition  purchases in the data that they provided to us. Forest Service officials  explained that the publicly-reported data includes ammunition purchased  for non-law enforcement purposes\u2014such as protecting Forest Service  employees from wildlife attacks, controlling invasive species, or  euthanizing injured animals\u2014and those purchases were excluded from  the data that they provided to us because the scope of this review  focuses on purchases for FLEOs.", "The type and amount of information recorded in the publicly-available  data also contribute to discrepancies between agency-provided and publicly-available purchase records. As a result, the publicly-available  data may comply with the data reporting requirements enumerated in the  FAR and in the FPDS-NG Government User\u2019s Manual and still differ from  the agency-provided data. Differences between publicly-available data  and agency purchase records include:", "The product or service code (PSC) selected in the publicly-available  data may not reflect all of the items in a purchase. According to the  FPDS-NG Government User\u2019s Manual, the PSC selected for a  purchase should reflect the items that constitute \u201cthe predominance of  the dollars obligated,\u201d and only one PSC may be associated with a  purchase. Therefore, when a purchase is assigned a firearms or  ammunition PSC, but the purchase includes non-firearms or non- ammunition items as well, the total obligated amount of the purchase  will be associated only with the selected PSC in the publicly-available  data. This may result in over- or under-reporting the value of the  obligations for firearms or ammunition purchases. For example, in  fiscal year 2014, BIA purchased 103 shotguns, 220 tactical lights, and  other equipment in a single transaction. The total value of the  obligation was $145,970, of which the shotguns constituted 50.4  percent of the purchase ($73,549). Consistent with FPDS-NG  guidance, the entire purchase was categorized as \u201cGuns, through  30mm\u201d in the publicly-available data, even though almost half of the  purchase was for non-firearms items, thereby over-reporting the  obligated value of the firearms purchased\u2014in this case, effectively  doubling the apparent obligated value of the firearms purchased while  omitting the obligated value of the non-firearms items that were part of  the purchase. Conversely, a purchase categorized as \u201cOptical  Sighting and Ranging Equipment\u201d obligated for $2,971 included a line  item for $500 of ammunition. BIA included the $500 ammunition  purchase in the data provided to us, but that amount was included  under the equipment PSC in the publicly-available data in keeping  with FPDS-NG guidance. This excluded the purchase from the  publicly-available data that we reviewed and under-reported the  obligated value of ammunition purchases by BIA.", "The available PSCs in the publicly-available data do not distinguish  between firearm parts and fully functional firearms. Several purchases  associated with firearms PSCs included descriptive information  indicating that the purchase was for firearms parts. ICE officials also  confirmed that an order described as firearm \u201cparts\u201d could include fully  functional firearms. The officials noted that whether a particular  purchase included fully functional firearms, firearms parts, or both  cannot be determined without the statement of work, and the  statement of work is not part of the publicly-available data. By  including purchases of both fully functional firearms and firearm parts  in the same category, publicly-available data may inflate the obligated  value of functional firearms purchases.", "Firearms and ammunition purchases may not be assigned a related  PSC in the publicly-available data. In cases where agencies assigned  a non-firearms or ammunition PSC to a firearms or ammunition  purchase, those purchases were excluded from the publicly-reported  data that we analyzed. For example, a Forest Service purchase of  rifles and sights which obligated $50,799 was assigned a PSC for  \u201cAssemblies Interchangeable Between Weapons In Two or More  Classes\u201d in the public data, rather than a firearms- or ammunition- specific PSC. Another Forest Service purchase for rifles which  obligated $23,457 was assigned a PSC for \u201cR&D-Defense System:  Weapons (Basic Research).\u201d", "Agencies are not required to report purchases of $3,500 or less to  FPDS-NG. Because purchases of $3,500 or less generally are not  required to be reported to FPDS-NG, these purchases may be  reported inconsistently or not at all in the publicly-available data.  Ammunition is often purchased by the selected agencies in small  quantities and may cost $3,500 or less. For example, Forest Service  officials noted that such small ammunition purchases may be made  using a purchase card, and their internal data included at least 130  such purchases.", "In addition, the publicly-available data do not include a field for agencies  to report quantity information associated with purchases. Therefore, the  number of firearms or rounds of ammunition that an agency purchased  are not available in the publicly-available purchase data."], "subsections": []}, {"section_title": "HHS, EPA, and IRS Reported Varying Levels of Inventories of Firearms, Corresponding Ammunition and Limited Tactical Equipment", "paragraphs": ["HHS, EPA, and IRS law enforcement components, our case studies, in  total reported inventories of five types of firearms\u2014all with corresponding  types of ammunition\u2014and nine types of tactical equipment. According  to officials in all components, their inventories of these items can be  attributed to a variety of factors, including the missions and  responsibilities of their FLEOs, the number of FLEOs, and the office\u2019s  schedule for disposing of and acquiring inventory. Table 4 summarizes  the types and quantities of firearms, ammunition, and tactical equipment  reported at case study components as of November 2017. For  additional information on case study components, see appendix II.", "Firearms. The numbers and types of firearms the components in our  review reported having in their inventories varied. As of November 2017,  all components reported inventories of pistols and shotguns, five  components reported rifles, and three reported fully automatic firearms.  Officials noted that they make decisions about what to have in their  inventories based on factors such as their number of FLEOs and mission  needs. All components issued pistols to FLEOs to carry, in accordance  with their statutory authority. Officials stated that these firearms are to be  carried on duty so FLEOs are prepared for potentially dangerous  circumstances, such as serving warrants on armed individuals. Similarly,  qualified FLEOs in all components can temporarily carry rifles or shotguns  in anticipation of, or in response to, high-risk situations, such as active  shooter threats or arrests of suspects who are believed to be dangerous.", "We found that components had more pistols per FLEO than shotguns or  rifles per FLEO, which reflects components\u2019 preferences to issue pistols  to officers as their duty weapons. For example, six components reported  having roughly a 2 to1 or 3 to 1 pistol-to-officer ratio, while EPA OIG  agents had a 5 to1 ratio. Case study components generally reported  having more pistols than FLEOs because every FLEO is assigned at least  one pistol. On the other hand, six components reported having about 1  shotgun or fewer per every two FLEOs. However, EPA Office of  Enforcement and Compliance Assurance (OECA) had a 1.4 to 1 shotgun- to-FLEO ratio. According to EPA OECA officials, their shotgun-to-agent  ratio is higher than other agencies because of two factors: 1) EPA OECA  historically had more agents, which made their shotgun-to-agent ratios  lower than when they acquired the shotguns in use today, and 2) EPA  OECA sends additional unassigned shotguns to natural disaster response  locations to pre-position them for EPA OECA agent use. Components in  the Food and Drug Administration (FDA) and IRS reported keeping a  relatively smaller number of shotguns, which they said they only deploy  for high-risk investigations. Among the five components with rifles, rifle-to- FLEO ratios ranged widely\u2014from less than 1 to 10 to 6 to 10 \u2014due to  differences in the number of FLEOs and mission needs. For example,  officials with IRS Police, which had four rifles for nine officers, stated that  they only use the rifles for continuity of operations drills and annual  qualifications.", "Ammunition. As of November 2017, case study components reported  inventories of ammunition ranging from 14,706, in the case of the IRS  Police, to approximately 5 million rounds held by IRS CI. (See table 4  for all components\u2019 inventories of ammunition.) Each law enforcement  agency independently decides how much ammunition to allocate to its  firearm-carrying personnel for training and qualification. Component  officials noted that ammunition inventories constantly fluctuate throughout  the year, based on factors such as the amount used for qualification and  training purposes, and the timing of ammunition shipments. Officials from all components stated that their ammunition inventories can quickly  change by thousands of rounds depending on training and qualification  timing. For example, according to NIH officials, between November 2017  and February 2018, officers used 5,110 rounds of rifle ammunition during  training, and subsequently NIH acquired 14,400 rounds of rifle  ammunition. To help ensure they have sufficient ammunition on hand to  support the training and operational needs of their FLEOs, components  may maintain inventories of ammunition to last for several months. The  length of time between ordering and receiving ammunition orders can be  lengthy, sometimes up to 1 year, according to officials. Therefore,  components order ammunition in large quantities to ensure there is  enough available for training and qualification purposes.", "Tactical Equipment. Six case study components reported inventories of  9 of the 18 types of tactical equipment reviewed. Breaching equipment  and aiming devices were the most frequently reported kinds of tactical  equipment at these six components: four components reported breaching  equipment and four reported aiming devices in inventories. Three  components reported other equipment. EPA OIG reported inventories of  silencers and tactical lighting; however, in February 2018 EPA OIG  officials told us they began to transfer their silencers to another federal  agency because officials decided that they were no longer necessary to  meet their mission. Among the agencies in our review, NIH reported  having pyrotechnics and large-caliber launchers. NIH officials said these  items were necessary for assisting other law enforcement agencies in the  event that extreme circumstances, such as a terrorist attack or riot,  occurred in the area."], "subsections": []}, {"section_title": "Case Study Components\u2019 Inventory Controls Vary and Selected Offices Generally Followed Their Own Procedures", "paragraphs": ["HHS, IRS, and EPA case study components have inventory controls in  place for firearms, ammunition, and tactical equipment. Components  generally followed their procedures at selected locations to track and  secure FLEOs\u2019 firearms. In addition, all 12 case study components\u2019  offices that we visited were in compliance with their ammunition and  tactical equipment inventory controls. All components had some controls  governing ammunition and equipment, though the specific controls varied  by component."], "subsections": [{"section_title": "Case Study Components Have Controls to Track and Secure Firearms", "paragraphs": ["HHS, IRS, and EPA case study components have controls in place for  tracking, verifying, and securing FLEOs\u2019 firearms. Through our  observations, we found these components are generally following their  inventory and security procedures at selected locations. According to  Standards for Internal Control in the Federal Government, agencies  should design control activities to respond to risks related to vulnerable  assets. To ensure these controls operate effectively, management can  take steps such as periodically counting and comparing such assets to  control records, and establishing physical control to secure and safeguard  vulnerable assets. Other examples of these controls include security for  and limited access to assets, such as equipment that might be vulnerable  to risk of loss or unauthorized use. In addition, we have identified areas  that have been consistently recognized as important for effective  inventory management that align with these controls. These areas  include recording and tracking firearms inventory data and maintaining,  controlling, and accounting for firearms inventories, among other things.", "Firearms Tracking. At each of these components, firearms are  considered sensitive items and are tracked in electronic data systems or  using paper records. At HHS OIG, there is a separate firearms tracking  system, and other components track firearms in their overall property  management system. A barcode or serial number is used to track the  firearm through the life-cycle of the weapon\u2014which includes initial  assignment, changes in assignment (to a different agent or to storage),  and weapon disposal. According to each component\u2019s policy, every  firearm has a bar code or serial number associated with it, and each  firearm is assigned to an agent or placed in storage. When an agency  receives a firearm, the serial number or bar code is entered into the  agency\u2019s firearms inventory system and upon assignment to an agent  updated with the agent\u2019s name. Typically, firearms in storage are  assigned to the primary firearms instructor or the firearms coordinator in  the inventory system to ensure accountability. At all case study  components the primary firearms instructors and firearms coordinators  are the persons responsible for managing the firearms inventory of an  office and ensuring firearms are properly tracked\u2014these are considered  ancillary duties for these individuals, in addition to their regular  responsibilities as FLEOs. We observed demonstrations or  documentation of these tracking records at each office we visited and  found them to be generally in accordance with office policies.", "Firearms Verification. Each component has a process whereby at least  once a year officials conduct a firearms inventory to ensure that issued  and stored firearms match with records in the office\u2019s inventory tracking  system. Figure 7 describes a general process that all components we  reviewed follow to verify their firearms inventory. Five components we  examined require this annual firearms inventory process to be conducted  in person and entail the visual inspection of the serial number and  condition of the firearm. However, FDA and EPA OECA FLEOs are  permitted to send an email containing their firearm serial number, a photo  of the firearm, or both to the official conducting the inventory to virtually  verify they are in possession of their firearm. Officials stated that this  saved them the expense of FLEOs in remote locations traveling for  annual inventory checks.", "In addition to regularly verifying inventories of their firearms, five case  study components conduct periodic checks to verify the accuracy of  firearm inventory data. During these checks, headquarters or other  inspection officials review data recorded about inventories, storage  controls, and proper maintenance of weapons. For example, IRS CI and  HHS OIG conduct regular internal reviews of firearms inventories and  records that they use to identify data errors and make recommendations  to improve data quality. We found that recent checks at the case study  components have rarely identified issues related to recorded firearms  data, and the majority of the identified issues were related to minor data  errors, such as incorrectly recorded assignments of guns to FLEOs,  locations of guns, and serial numbers. For example, in May 2017 EPA  OECA\u2019s check of one area office found two firearms listed as being in  storage were actually in service. All components with these administrative  errors corrected them as they became aware of them, according to the  audit reports and agency officials.", "However, during our review of EPA OIG inventory control practices for  firearms, we found that EPA OIG headquarters did not have a  management review process in place for firearms inventory, which  contributed to examples of inaccurate firearms inventory data.  Specifically, we found 6 out of the 12 EPA OIG offices reported  inventories with at least one firearm that did not match the location and  individual to which it was assigned. For example, we found that the  Special Agent in Charge at one EPA OIG\u2019s field office verified that 10  firearms were physically in the office when actually they had been  shipped to headquarters 11 months prior to the inventory date. According  to EPA OIG officials, the errors we found were largely due to EPA OIG  headquarters not updating records when agents transferred firearms from  one office to another. As a result of our review, headquarters is  implementing practices to improve future data quality. Specifically, EPA  OIG officials said they reconciled their inventory data and had field offices  with inaccurate inventories prepare memos to reflect their actual  inventories. EPA OIG also updated firearms procedures to include  headquarters increased oversight of firearms audits and inspections. In  practice, EPA OIG officials stated that this will entail an annual reconciling  of inventory memos sent by field offices with inventory data records  maintained at EPA OIG headquarters. Thus, EPA OIG can more reliably  track the location and agents responsible for firearms, ensuring proper  weapons control procedures and accountability.", "Firearms Storage. All case study components had policies in place that  required secure storage of firearms. All seven components\u2019 policies  specify that this must include a locked container, such as a file cabinet or  desk safe for issued firearms or a firearm vault or safe for unissued  firearms. In all 12 of the components\u2019 offices we visited, we observed  unissued firearms stored in a designated room that was kept locked with  limited access. Specifically, we observed firearms storage rooms secured  by keycard access, alarms, cameras, and other security devices. At all of  the components\u2019 offices we visited, only FLEOs with a need to enter the  rooms had authorization to do so. For example, only FLEOs in  management roles and firearms instructors had access to the firearms  storage room at the IRS CI and HHS OIG offices we visited, according to  officials at each.", "In the secure firearms storage rooms at all of the locations we visited, we  observed firearms that were further protected by cabinets, cages, safes,  vaults, or combinations of these devices. We also observed some  instances of firearms being stored securely in safes outside of the  designated firearms storage room. For example, two EPA OIG and OECA  offices we visited had spare shotguns and related equipment in biometric  safes in offices to be used in response to active shooter threats. Qualified  FLEOs in these two offices can use their fingerprints to open the safes  and respond to such threats.", "Based on our observations, the offices we visited for the six components  were in compliance with their firearms storage policies. However, we  found the IRS Police office in Martinsburg to be out of compliance with  policy that limits access to stored firearms to the armorer and chief of  security and its policy that restricts storage in locked cabinets to five  firearms. Based on our finding, IRS Police officials said they will update  their policy to reflect its current practice of allowing all IRS Police officers  access to stored firearms to respond to active shooter threats and  acquired an additional safe to store firearms in June 2018. For each of  the components we examined in our review, there were no instances of  firearms being lost or stolen from any office, according to component data  and officials."], "subsections": []}, {"section_title": "Case Study Components Vary in Their Controls Over Ammunition and Tactical Equipment", "paragraphs": ["All 12 offices for case study components that we visited were in  compliance with their ammunition and tactical equipment inventory  controls and procedures. All components had policies to treat ammunition  and equipment as items with some level of control, though the specific  controls varied by component.", "Ammunition. At the components\u2019 offices we visited, we observed various  methods for tracking ammunition inventories, such as electronic logs,  physical logs, or visual inspection. In general, case study components\u2019  policies require ammunition tracking through an ammunition log updated  as ammunition is used, a regular inventory, or both. Components track  ammunition to ensure they have enough on hand for training and  qualifications, according to component officials. Some components,  such as EPA OIG, maintain tight controls over their ammunition use by  tracking ammunition use by lot number and the number of bullets used by  each gun in physical logs. EPA OIG officials stated that they used this  level of precision for three reasons: to track how many bullets are fired  through each firearm for maintenance purposes, to quickly identify  ammunition in inventory that may be affected by recalls, and to have a  high degree of accountability. HHS OIG tracks ammunition using an  electronic log, which they said they update whenever ammunition is  removed for training and qualifications. IRS CI currently limits access to  ammunition and entrusts use of force coordinators with independently  managing their ammunition inventory to meet the training needs of their  area of responsibility. One IRS CI use of force coordinator said that she  relies on her experience and judgment to keep track of ammunition use at  her field office without formally recording it. IRS CI is the only component  in our review that does not have a documented policy to track ammunition  or conduct a regular inventory; however, IRS CI officials indicated they  are in the process of establishing a nationwide policy to track ammunition  and conduct a regular ammunition inventory. Officials at two case study  component offices said they provide their FLEOs extra boxes of  ammunition to use for practice at a firing range outside of work hours. In  general, four of the seven case study components did not track the real- time amount of ammunition they had on hand; rather, component officials  said they had a general sense of the amount of ammunition in order to  know if they had enough for training and qualifications, and when they  would need to reorder ammunition.", "All case study components\u2019 policies require secure storage of  ammunition. In all 12 of the components\u2019 offices we visited, we observed  that ammunition was stored in their firearms storage rooms, and all  offices took the additional step of securing the ammunition further in  locked safes. For example, IRS CI requires ammunition storage in a  security cabinet or a security room, preferably separately from firearms.  Both of the IRS CI offices that we observed stored ammunition separately  from firearms and with limited access. In the offices for two components,  NIH and HHS OIG, we observed ammunition secured in a separate room  from the firearms.", "Tactical equipment. Case study components do not control the tactical  equipment in their inventory in the same ways that they control firearms  and ammunition. Case study components that possessed aiming,  breaching, and tactical lighting equipment did not have policies guiding  their storage because they do not generally consider them to be as  dangerous as a firearm or valuable enough to be tracked. However,  components that possessed silencers, large-caliber launchers,  pyrotechnics, or other items did have policies to control these items.  Specifically, IRS CI policy requires the electronic tracking and inventory of  night-vision equipment, optical equipment, and vehicles. NIH policy  directs that large-caliber gas launchers be stored in the armory and  pyrotechnics be stored in their bunker with ammunition. IRS CI, NIH, and  EPA OIG all tracked this equipment during their annual inventory  verification. Case study components did not report any instances of loss  or theft of the tactical equipment in their inventories.", "Storage of tactical equipment varied and corresponded with case study  components\u2019 use of items. For example, we observed silencers and  aiming devices stored on or near firearms at EPA OIG and NIH because  they are accessories that attach to firearms. We observed breaching  equipment to be stored either in the firearms storage room, vehicles, or  elsewhere in the offices we visited. For example, at EPA OIG\u2019s  headquarters office, breaching equipment was stored in the firearms  room because officials stated that they were only likely to use breaching  equipment as part of a planned operation. However, officials at the FDA  and NIH offices we visited said that their breaching equipment was stored  in vehicles so it could be more readily accessible if they needed to use it."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Accurate reporting of firearms and ammunition is critical for accountability  and transparency of these sensitive purchases. While reporting such  purchases with precision is difficult, the execution of this responsibility  impacts the public\u2019s access to information about which agencies  purchase what types of firearms and ammunition, and the amount that  they spent on those purchases. However, ICE did not properly identify the  funding agency in FPDS-NG for purchases where other DHS agencies  used ICE contracts to procure firearms and ammunition. This inflated its  publicly-available data to show a significantly higher obligated dollar value  of purchases than it actually purchased. Because ICE does not accurately  report the agency that funded the purchase to FPDS-NG, the public does  not have accurate information on how much ICE and the agencies that  make purchases using ICE procurement services have obligated for  firearms and ammunition. Data need to be presented in a way that meets  the needs of the end users\u2014both policymakers and the public\u2014if  USASpending.gov is to fulfill its purpose of increasing accountability and  transparency in federal spending. Improving the accuracy of the reported  funding agency can better help the public understand and use federal  purchase data, and increase accountability and transparency for these  sensitive purchases."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["To improve the accuracy of publicly-available purchase information, the  Director of ICE should update ICE\u2019s contracting process to include the  name of the appropriate funding agency in data entered into FPDS-NG  for firearms and ammunition purchases. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of the sensitive product to DHS, DOI, DOJ, EPA,  HHS, SSA OIG, Treasury, USDA, and VA for review and comment.  Agencies provided technical comments, which we incorporated as  appropriate. DHS also provided written comments on the sensitive report,  which are reproduced in full in appendix III. In its written comments, DHS  concurred with our recommendation and described the actions ICE plans  to take in response.", "We are sending copies of this report to interested congressional  committees, the Secretaries of the Department of the Interior, the  Department of Homeland Security, the Department of Agriculture, the  Department of Justice, the U.S. Department of Veterans Affairs, the  Social Security Administration, the Department of the Treasury, the  Environmental Protection Agency, and the U.S. Department of Health and  Human Services. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report provides additional information on our objectives, scope, and  methodology. Specifically, our objectives were to examine the following  questions:  1.  What do available data show about spending on firearms,  ammunition, and selected tactical equipment made by federal  agencies with 250 or more federal law enforcement officers from fiscal  years 2010 through 2017?  2.  To what extent have selected agencies accurately reported purchases  of firearms and ammunition in publicly-available data on  USASpending.gov?  3.  What types and quantities of firearms, ammunition, and selected  tactical equipment do the Department of Health and Human Services  (HHS), Environmental Protection Agency (EPA), and Internal  Revenue Service (IRS) have documented to be in their inventory  systems, as of November 2017?  4.  What inventory controls and procedures are in place at HHS, EPA,  and IRS, and to what extent do these agencies follow these  procedures at selected locations?", "This report is the public version of a sensitive report that we issued in  October 2018. HHS, IRS and the Transportation Security Administration  (TSA) deemed some of the information in our October report to be  sensitive, which must be protected from public disclosure. Therefore, this  report omits sensitive information about the number of FLEOs at the TSA,  an illustration of how HHS\u2019s National Institutes of Health Police secures  its firearms, and the number and types of some firearms, ammunition,  and tactical equipment in NIH\u2019s and IRS\u2019s inventory. Although the  information provided in this report is more limited, the report addresses  the same objectives as the sensitive report and uses the same  methodology.", "To address our first question, we obtained available spending data on  firearms, ammunition, and certain tactical equipment from 20 agencies  from the departments named in the Chief Financial Officers Act that  employed 250 or more federal law enforcement officers (FLEOs) at any  point from fiscal years 2010 through 2017. Specifically, we identified  applicable agencies by reviewing Office of Personnel Management  employment data and contacting agency officials to verify the  employment of 250 or more FLEOs during the timeframe we reviewed.  We excluded military branches from our review, such as all Department of  Defense (DOD) branches and the U.S. Coast Guard, which is part of the  Department of Homeland Security (DHS). Table 5 shows the 20  agencies, within eight departments, included in our scope for this  question.", "Because there was no definitive list of what is considered tactical  equipment, we developed a list of equipment to include in our review. To  do so, we reviewed the National Firearms Act List, the Law Enforcement  Equipment Working Group Recommendations, the DOD\u2019s list of  Controlled Property, and the Special Weapons and Tactics Gear used by  the New York, Los Angeles and Houston police departments. We then  selected and categorized the tactical equipment that appeared in two or  more of these lists to include in our review. The 18 categories of tactical  equipment we created were: (1) silencers, (2) explosive devices, (3)  large-caliber weapons (>.50 caliber, excluding shotguns), (4) armored  vehicles, (5) weaponized aircraft, vessels, or vehicles, (6) camouflage  uniforms, (7) manned aircraft, (8) unmanned aerial vehicles, (9) tactical  vehicles, (10) command and control vehicles, (11) pyrotechnics and  specialized munitions, (12) breaching apparatus, (13) riot batons, (14) riot  helmets, (15) riot shields, (16) tactical lighting (excludes basic flashlights),  (17) specialized image enhancement devices (such as thermal imaging  devices and night vision gear), and (18) aiming devices (such as scopes  and tripods). To more closely describe the types of equipment frequently  reported in the large-caliber weapons and breaching apparatus  categories, we refer to them in the report as large-caliber launchers and  breaching equipment, respectively.", "To collect data from the 20 agencies within the scope of our review for  this objective, we developed a data collection instrument that requested  spending data of firearms, ammunition, and selected tactical equipment  from agencies\u2019 internal record-keeping systems from fiscal years 2010  through 2017. For this objective, we requested the types of information  that agencies reported using the data collection instrument: the date of  each purchase; descriptive information on what was bought, including the  caliber or gauge of firearms and ammunition; the quantity of items bought;  the amount spent and whether those amounts were estimates; the type of  record-keeping system used by the agency and any limitations associated  with it or challenges compiling the information we requested; descriptions  of changes or updates to the system that may have affected the data; and  the contracting office(s) that were responsible for buying these items for  the agency. We asked agencies not to include data on any items they  received without spending funds, so agencies may have received more  firearms, ammunition, or equipment in their inventories than what they  reported in their spending data. For example, agencies may have  received these items through interagency transfers, which may have no  cost to receiving agencies.", "For the first objective, we analyzed the data agencies reported in the  \u201camount spent\u201d column, and we use the terms \u201cspending\u201d and \u201cspent\u201d to  refer to these data. In cases where agencies only reported the amount  they obligated for a purchase on the data collection instrument, we  confirmed with agencies that those amounts reflected the amount they  spent on the purchase and that we could use those amounts in our  analysis. We pre-tested the instrument with Veterans Health  Administration and U.S. Immigration and Customs Enforcement (ICE),  whose officials provided feedback on the feasibility of providing the  requested data. Based on the feedback we received from the pre-test, we  revised and finalized the instrument and requested that the 20 agencies  provide spending data on firearms, ammunition, and tactical equipment  from fiscal years 2010 through 2017 from their internal record-keeping  systems.", "To assess the reliability of the spending data, we conducted tests for  missing data and obvious errors, reviewed relevant documentation,  interviewed agency officials about their spending records and data  reporting practices, and followed up with agency officials as needed. We  re-categorized agency data that appeared to be miscoded. For example,  we received data on specialized munitions and large-caliber launchers  that agencies categorized as ammunition and firearms, respectively.  Based on the descriptive data that agencies had provided, we re- categorized those items. We also adjusted the data to ensure consistency  in their format, such as consistent entry of dates and use of categories of  tactical equipment. Agencies in our review submitted a range of detail  about their firearms when reporting their data, and we could not  determine to what extent firearms were fully automatic. Some firearms  have selector switches that allow the user to switch between semiautomatic and fully-automatic capabilities, while others are limited to  shooting three-round bursts with each pull of the trigger. As such, we  reported all firearms that are capable of firing multiple rounds with the  single pull of the trigger as fully-automatic firearms. We also combined  ammunition intended for use in machine guns with rifle ammunition  because machine guns shoot rifle-caliber ammunition, and we did not  have confidence that every agency accurately distinguished which rifle- caliber ammunition was intended for use in machine guns and what was  reserved for rifles.", "We found the data sufficiently reliable for the purpose of reporting the  minimum thresholds of total amounts agencies spent and the numbers of  firearms and rounds of ammunition they purchased during fiscal years  2010 through 2017. However, we found the data were not reliable for  reporting the number of tactical equipment items purchased or reporting  further comparative analysis. Agency officials reported various challenges  in compiling the data we requested and we identified some data  limitations, as described in table 6.", "To address our second question, we selected three agencies\u2014the  Bureau of Indian Affairs (BIA), the U.S. Forest Service, and the U.S.  Immigration and Customs Enforcement (ICE)\u2014to assess the extent to  which their purchases of firearms and ammunition were accurately  reflected in publicly-available data. We requested that agencies report  internal purchase data for firearms and ammunition that included, among  other things, the amount obligated for these items, a unique transaction  identifier (called the Procurement Instrument Identifier), and the product  or service code for firearms and ammunition purchases from fiscal years  2010 through 2017. We compared the amounts these three agencies  obligated for firearms and ammunition purchases, as reported to us in  their data collection instruments, with the obligation data that are publicly- available data on USASpending.gov for those three agencies. We  obtained publicly-available data from USASpending.gov, which includes  purchase data from the Federal Procurement Data System-Next  Generation (FPDS-NG), using product or service codes (PSC) that identify contracts for firearms or ammunition purchases. We also  reviewed our related work and Inspector General reports on the quality of  USASpending.gov data. We obtained records for purchases made in  fiscal years 2010 through 2017. We did not include equipment purchases  because the publicly-available data lack product or service codes that  would allow us to reliably identify those records.", "To select the three agencies for inclusion in this analysis, we started with  the 20 agencies with at least 250 FLEOs in our scope. From those, we  selected agencies that provided us with records of their firearms and  ammunition purchases and that USASpending.gov listed as the funding  agency for one or more firearms or ammunition purchase (12 agencies).  From those, we selected three agencies based on the total dollar value of  purchases reported in USASpending: one small (BIA), one medium  (Forest Service), and one large (ICE), based on natural breaks in dollar  values and not selecting multiple agencies from the same department.", "We then compared obligations data provided to us by each of the three  agencies against obligations in the publicly-available purchase records  using the Procurement Instrument Identifier to match records across  agency-provided and publicly-available purchase data. We additionally  corroborated these obligations by comparing fields related to the date of  purchase, purchase value, and vendor. We reviewed a portion of  purchase records to compare and interviewed agency officials about  differences in the publicly-available and agency-provided data.", "For firearms, we included the following PSCs:", "1005 - Guns, through 30mm", "1010 - Guns, over 30mm up to 75mm", "1015 - Guns, 75mm through 125mm", "1020 - Guns, over 125mm through 150mm", "1025 - Guns, over 150mm through 200mm", "1030 - Guns, over 200mm through 300mm", "1035 - Guns, over 300mm  We excluded several weapons PSCs from our analysis that described  weapons other than firearms, such as 1040 \u2013 Chemical Weapons and  Equipment. Any excluded PSC, particularly 1095 \u2013 Miscellaneous  Weapons, may have been used as the PSC to categorize a purchase that  included firearms and those purchases would be excluded from the  publicly-available records that we examined.", "Similarly, for ammunition, we included records associated with the  following PSCs:", "1305 \u2013 Ammunition, through 30mm", "1310 \u2013 Ammunition, over 30mm up to 75mm", "1315 \u2013 Ammunition, 75mm through 125mm", "1320 \u2013 Ammunition, over 125mm  Like firearms, we excluded records that were associated with non- firearms ammunition, such as 1336 \u2013 Guided Missile Warheads and  Explosive Components. Any excluded PSC, particularly 1395 -  Miscellaneous Ammunition, may have been used as the PSC to  categorize a purchase that included firearms ammunition and those  purchases would be excluded from the publicly-available records that we  examined.", "To address our third and fourth questions, we reviewed inventory  information and controls for case study federal law enforcement  components within U.S. Department of Health and Human Services  (HHS), Environmental Protection Agency (EPA), and Internal Revenue  Service (IRS). These components are as follows: EPA Office of Inspector  General (OIG), Office of Enforcement and Compliance Assurance  (OECA); Food and Drug Administration (FDA), National Institutes of  Health (NIH), HHS OIG, and IRS. Within IRS, two offices employ FLEOs:  Criminal Investigation (CI) and Police Officer Section (Police).  Accordingly, we can draw conclusions only about these components.", "We obtained and analyzed inventory data and other available  documentation provided by these components regarding their current  inventory as of November 2017 of firearms, ammunition, and tactical  equipment. This included firearms in storage as well as those in FLEO  possession. To assess the reliability of the inventory data, we reviewed  components\u2019 documentation related to data management, especially  policies to ensure that items are properly entered and removed from the  system. In addition, we reviewed components\u2019 recent purchases to verify  that purchases were inventoried and reviewed their purchase data for any  limitations that may affect their quality. We reviewed components\u2019  acquisitions through DOD\u2019s excess property program, known as the Law  Enforcement Support Office (LESO) or 1033 program, to ensure these  items were inventoried. We did not conduct physical inventories during  site visits, and therefore did not actually count components\u2019 physical  inventories.", "To examine these components\u2019 firearms, ammunition, and tactical  equipment inventory controls, we reviewed their policies describing  storage protocols and inventory control procedures, and we interviewed  components\u2019 officials to better understand these policies and procedures  in practice. We also compared these policies with applicable Standards  for Internal Control in the Federal Government and key areas that we  have identified as important for effective inventory management. We  reviewed internal and external inspection and Inspector General reports  related to the controls over firearms, ammunition, and tactical equipment  at these components to identify any reported deficiencies and actions  taken or planned to address those deficiencies.", "We also conducted site visits to components\u2019 offices selected based on a  variety of factors, including the number of agencies with component  offices in each city we visited, data discrepancies at field offices, and  reports of loss or theft at these offices. The IRS Police facility we visited in  Martinsburg, West Virginia is the only location for this component. In all,  we visited 12 offices. During site visits, we observed officials  demonstrating inventory inspection, inventory data entry, and access and  other security controls. In addition, we interviewed officials responsible for  maintaining and inventorying firearms, ammunition, and certain tactical  equipment. The observations and information we obtained from the  offices visited cannot be generalized to other locations for these  components, but provide insights about the components\u2019 controls for  firearms, ammunition, and tactical equipment.", "We conducted this performance audit from June 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We subsequently worked with  the agencies addressed in this report from October 2018 to December  2018 to prepare this public version of the original sensitive report for  release. This public version was also prepared in accordance with these  standards."], "subsections": []}, {"section_title": "Appendix II: Spending on Firearms, Ammunition, and Tactical Equipment by Agency", "paragraphs": ["This appendix summarizes agency-provided spending data for the 20  agencies with 250 or more federal law enforcement officers and the 5  additional agency components that were included in our review. This  appendix also identifies the challenges that agency officials identified in  collecting the requested data and the limitations we identified while  analyzing their data. To compile this information, we asked the agencies  to provide data on their spending on firearms, ammunition, and selected  tactical equipment from fiscal years 2010 through 2017. We reviewed the  spending data provided by agencies to assess their accuracy and  completeness, and followed up with agency officials as needed. Some  agencies reported limited access to spending records because of their  storage format or physical location, and we asked agencies to report the  data that were accessible to them within the timeframe of this review. We  found the data sufficiently reliable for the purpose of reporting the  minimum thresholds of total amounts agencies spent and the numbers of  firearms and rounds of ammunition they bought during the 8-year period  in our scope. However, we found that data were not reliable for reporting  the number of tactical equipment items purchased or for comparing the  data across and within agencies. For more information on the  methodology we used to collect these data and the challenges agencies  faced compiling these data, see appendix I.", "Officials also provided information about the missions of their agencies or  components, and the roles and responsibilities of their law enforcement  officers. We included inventory data as of November 2017 for the agency  components that were included in our review of inventory controls."], "subsections": [{"section_title": "U.S. Forest Service", "paragraphs": ["Protects the public, employees, natural  resources, and property under the jurisdiction of  the Forest Service by enforcing the applicable  laws and regulations that affect the National  Forest System.", "Officers are responsible for conducting  enforcement and investigations of criminal and  civil offenses that affect the management of the  National Forest System.  Officers engage in  public safety patrol operations, investigations of  significant criminal offenses, community policing  programs, natural disaster response, and law  enforcement services at large group events,  among other things.", "Agency stores purchase records for six years,  which limited access to older data. Ammunition  purchases and record-keeping are mostly  decentralized among field offices, and officials  could not provide the level of detail requested for  all purchases. Upgrades to the record-keeping  system may have compromised data from  previous systems."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)", "No known limitations."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Health and Human Services", "paragraphs": [], "subsections": []}]}]}, {"section_title": "Food and Drug Administration (FDA)", "paragraphs": ["FDA\u2019s Office of Criminal Investigations protects  public health and furthers the FDA\u2019s mission by  investigating suspected criminal violations of the  Federal Food, Drug, and Cosmetic Act and other  related laws.", "No known challenges.", "Officers conduct investigations related to criminal  violations of the Food Drug and Cosmetic Act,  which include conducting search and seizure  warrants, transporting prisoners following arrest,  conducting undercover operations, and other  hazardous duties as necessary."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": []}, {"section_title": "Inventory as of November 2017", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Health and Human Services", "paragraphs": [], "subsections": []}]}]}, {"section_title": "National Institutes of Health (NIH)", "paragraphs": ["Protects our country\u2019s scientific research and  the NIH research community, ensures that the  mission of NIH is not impeded by personal  attacks, loss of assets, criminal activity or acts of  terrorism.", "Officers with the Division of Police are  responsible for protecting property, employees  and visitors; screening visitors entering NIH  facilities; monitoring onsite equipment, cameras  and alarms; operating the visitor badging system  on and off campus; safeguarding selected  buildings; patrolling areas of the NIH; providing  traffic enforcement; conducting intelligence  gathering and reporting; providing dignitary  protection; and preparing warrants and arresting  suspects.", "No known challenges."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "Type by year", "paragraphs": ["No known limitations."], "subsections": []}]}, {"section_title": "Inventory as of November 2017", "paragraphs": ["NIH determined inventory information to be sensitive.", "U.S. Department of Health and Human Services (HHS)"], "subsections": []}]}, {"section_title": "Office of Inspector General (OIG)", "paragraphs": ["No known challenges.", "Special agents conduct criminal investigations  related to fraud, waste, and abuse within HHS\u2019  hundreds of programs, which can involve  surveillance, undercover operations, search  warrants, and arrest warrants."], "subsections": [{"section_title": "U.S. Customs and Border Protection (CBP)", "paragraphs": ["Safeguards America\u2019s borders, protects the  public from dangerous people and materials, and  enables legitimate trade and travel.", "Officers are responsible for preventing terrorists  and weapons from entering the country, enforcing  laws at ports of entry, and preventing the illegal  trafficking of people, narcotics and contraband.", "Record-keeping system was implemented in  2016. Prior records required manual review.  Records of purchases made at local field offices  may be unavailable."], "subsections": [{"section_title": "U.S. Immigration and Customs Enforcement (ICE)", "paragraphs": ["Enforces federal laws governing border control,  customs, trade and immigration to promote  homeland security and public safety. responsible for conducting investigations to  protect critical infrastructure industries that are  vulnerable to sabotage, attack or exploitation.", "Some purchases are decentralized among field  offices. Hard copy records required manual  review and were difficult to access. Older  records stored at field offices may not have been  available."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["No known limitations."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in millions)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Homeland Security", "paragraphs": [], "subsections": []}]}, {"section_title": "National Protection and Programs Directorate (NPPD)", "paragraphs": ["NPPD\u2019s Federal Protective Service prevents,  protects, responds to and recovers from  terrorism, criminal acts, and other hazards  threatening the U.S. Government\u2019s workforce,  critical infrastructure, services, and the people  who receive these services.", "No known challenges.", "Officers with the Federal Protective Service  are responsible for enforcing all federal laws  and regulations on and off federal property;  investigating, mitigating, and defeating threats to  federal facilities and the people who work within  or visit those facilities; and providing integrated  security, law enforcement, and protective  intelligence capabilities to ensure the Federal  Government functions securely."], "subsections": []}, {"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": ["No known limitations."], "subsections": [{"section_title": "U.S. Department of Homeland Security", "paragraphs": [], "subsections": []}]}]}]}, {"section_title": "Transportation Security Administration (TSA)", "paragraphs": ["TSA\u2019s Federal Air Marshal Service (FAMS)  detects, deters and defeats criminal and terrorist  activities that target our nation\u2019s transportation  systems. TSA\u2019s Office of Inspection (OOI)  ensures the integrity, efficiency, and  effectiveness of TSA\u2019s workforce, operations,  and programs through objective audits, covert  testing, inspections, and criminal investigations.", "No known challenges.", "Officers with FAMS are deployed on U.S. aircraft  worldwide to protect airline passengers and  crew against the risk of criminal and terrorist  violence, and perform investigative work to  proactively fight terrorism. Officers with OOI  investigate allegations of misconduct by TSA  employees and contractors, conduct inspections  of TSA operations, and evaluate effectiveness  of security systems through covert testing and  audits."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["No known limitations."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in millions)"], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Homeland Security", "paragraphs": [], "subsections": []}]}]}]}, {"section_title": "U.S. Secret Service (USSS)", "paragraphs": ["Ensures the safety and security of the President,  the Vice President, their families, the White  House, the Vice President\u2019s Residence,  national and visiting world leaders, former U.S.  Presidents and events of national significance;  and protects the integrity of our currency and  investigates crimes against our national financial  system committed by criminals around the world  and in cyberspace.", "Officers are responsible for executing security  operations that prevent, deter, and mitigate  identified threats and vulnerabilities; and  conducting investigations to identify, locate and  apprehend individuals and criminal organizations  targeting the nation\u2019s critical financial  infrastructure and payment systems.", "Record-keeping system changed in 2015 and  older records may be incomplete. Officials  were unable to provide records of equipment  purchases because purchasing is decentralized  among field offices and records required manual  review; they provided current inventory records  of the equipment instead."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)", "Officials reported that some  cost data were estimated  based on available information The percentages do not total  100 because of rounding."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in millions)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of the Interior", "paragraphs": [], "subsections": []}]}]}, {"section_title": "Bureau of Indian Affairs (BIA)", "paragraphs": ["BIA\u2019s Office of Justice Services upholds tribal  sovereignty and customs while supporting tribal  justice systems, and corroboratively ensures the  safety of Indian communities by protecting life  and property, enforcing laws, and maintaining  justice and order.", "Officers are responsible for patrolling designated  Indian reservations, providing local law  enforcement, responding to calls for emergency  response, investigating crimes, transporting  prisoners to and from tribal court appearances,  gathering and analyzing criminal intelligence,  and collaborating with state and federal task  forces.", "The current financial management system was  implemented in 2013, and records from the  previous system may be incomplete."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)", "No known limitations."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in thousands)", "Because of incomplete data from  the  agency, we determined the data  are not  reliable for reporting in this  category."], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of the Interior", "paragraphs": [], "subsections": []}]}]}, {"section_title": "U.S. Fish and Wildlife Service (FWS)", "paragraphs": [], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in thousands)", "Because of incomplete data from  the  agency, we determined the data  are not  reliable for reporting in this  category."], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of the Interior", "paragraphs": [], "subsections": []}]}]}, {"section_title": "National Park Service (NPS)", "paragraphs": ["events within the NPS; and providing protection  for dignitaries and visiting foreign heads of state.", "NPS\u2019 Visitor and Resource Protection  Directorate\u2014under which fall the Law  Enforcement, Security, and Emergency Services  and U.S. Park Police\u2014protects the safety and  health of NPS visitors, partners, and staff, as well  as our natural and cultural resources.", "Financial management system implemented in  2013, and older records did not retain the cost  data fields. Some records kept as paper copies  and were decentralized among field offices."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in thousands)"], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": []}, {"section_title": "U.S. Department of Justice Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)", "paragraphs": [], "subsections": [{"section_title": "Mission", "paragraphs": ["Protects the public from crimes involving  firearms, explosives, arson, and the diversion of  alcohol and tobacco products; regulates lawful  commerce in firearms and explosives; and  provides worldwide support to law enforcement,  public safety, and industry partners.", "Officers are responsible for reducing violent  crime by targeting firearms traffickers, violent  criminal organizations, armed violent offenders,  and career criminals; investigating and arresting  individuals and organizations that illegally supply  firearms to prohibited individuals; and deterring  the diversion of firearms from lawful commerce  into the illegal market with enforcement  strategies and technology.", "Retention policy is 6 fiscal years, so older  records may have been unavailable. There may  be errors associated with manual data entry."], "subsections": []}]}, {"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands) firearms in 2017. At the time  of our review, the funds were  obligated but not yet spent."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in thousands)", "No known limitations."], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": ["No known limitations."], "subsections": [{"section_title": "U.S. Department of Justice", "paragraphs": [], "subsections": []}]}]}, {"section_title": "Federal Bureau of Investigation (FBI)", "paragraphs": [], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["No quantity or type data reported."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Firearm of intended use for all years No quantity or firearm of intended use data  reported."], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Justice", "paragraphs": [], "subsections": []}]}]}, {"section_title": "Federal Bureau of Prisons (BOP)", "paragraphs": ["Protects society by confining offenders in prisons  and community-based facilities and provides  work and other self-improvement opportunities  to assist offenders in becoming law-abiding  citizens.", "Officers are responsible for ensuring the security  of federal prisons, providing inmates with  needed programs and services, and modeling  mainstream values. Officers help protect public  safety and provide security and safety to the  staff and inmates in prison facilities. All non- custody staff are trained to assume the duties of  Correctional Officers.", "Officials reported limited data\u2014most records  prior to 2016 were stored in file cabinets at  prison facilities or in warehouses and would have  required significant time and resources to review.  Purchasing is decentralized across prison  facilities, which limited the availability of data,  and inconsistent data entry procedures among  officials may limit the reliability of data."], "subsections": [{"section_title": "Drug Enforcement Administration (DEA)", "paragraphs": ["illicit drug trafficking; coordination with law  enforcement officials on drug enforcement efforts  and to reduce availability of illicit drugs.", "Firearms purchases were embedded in contracts  and required manual review."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in millions)"], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Justice", "paragraphs": [], "subsections": []}]}]}]}, {"section_title": "U.S. Marshals Service (USMS)", "paragraphs": ["Officers provide for the security of federal courts  and execute and enforce federal court orders,  apprehend fugitives and non-compliant sex  offenders. Officers also transport federal prisoners  from arrest to incarceration, manage and disposes  of assets subject to forfeiture, and provide protection  for government witnesses and their families.", "The record-keeping system changed in 2012,  and there may be gaps in the data from 2013  and 2014 while the agency transitioned to the  new system."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Firearm of intended use for all years No quantity data provided."], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of the Treasury", "paragraphs": [], "subsections": []}]}]}, {"section_title": "The Internal Revenue Service (IRS)", "paragraphs": ["IRS\u2019 Criminal Investigation serves the American  public by investigating potential criminal  violations of the Internal Revenue Code and  related financial crimes in compliance with the  law.", "Officers enforce tax laws and support tax  administration to ensure compliance with the law  and combat fraud. Investigations focus on tax  fraud, abusive tax schemes, identity theft, public  corruption, virtual currency, cyber-crimes, and  narcotics-related financial crimes.", "Some requested data were not retained in the  system. Agency could not provide equipment  purchase data. Ammunition, equipment, and  purchases $3,500 or less are decentralized  among field offices."], "subsections": [{"section_title": "The Internal Revenue Service (IRS) Police", "paragraphs": ["IRS\u2019 Police Force at the Enterprise Computing  Center in Martinsburg, West Virginia provides  protection for the people, property and processes  of this location, which houses 10 of IRS\u2019 19  critical tax processing functions.", "No known challenges.", "Officers patrol the facility and have authority to  serve warrants and make arrests."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": ["No reported firearms purchases between fiscal years 2010 through 2017.", "Dollars (in thousands)", "No known limitations."], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": []}, {"section_title": "Inventory as of November 2017", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of the Treasury", "paragraphs": [], "subsections": []}]}, {"section_title": "The Treasury Inspector General for Tax Administration (TIGTA)", "paragraphs": ["Provides independent oversight of Internal  Revenue Service (IRS) activities and addresses  threats arising from lapses in IRS employee  integrity, violence directed against the IRS, and  external attempts to corruptly interfere with  federal tax administration.", "Officers are responsible for conducting  investigations that protect the integrity of  the IRS; detecting and preventing fraud  and other misconduct within IRS programs;  investigating allegations of criminal violations and  administrative misconduct by IRS employees; and  protecting IRS against external attempts to corrupt  or threaten its employees.", "After fiscal year 2016, record-keeping system no  longer tracked purchases under $3,000."], "subsections": []}, {"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)", "No known limitations."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in thousands)"], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": ["No known limitations."], "subsections": [{"section_title": "U.S. Department of the Treasury", "paragraphs": [], "subsections": []}]}]}]}, {"section_title": "The U.S. Mint", "paragraphs": ["No known challenges.", "Officers with the Mint Police protect life and  property, prevent, detect, and investigate criminal  acts, collect and preserve evidence, make  arrests, and enforce federal and local laws."], "subsections": [{"section_title": "Office of Enforcement and Compliance Assurance (OECA)", "paragraphs": ["EPA\u2019s criminal enforcement program focuses on  criminal conduct that threatens people\u2019s health  and the environment; enforces the nations\u2019 laws  by investigating cases, collecting evidence,  conducting forensic analyses; and provides legal  guidance to assist with prosecutions.", "No known challenges.", "Agents enforce the nation\u2019s laws by investigating  cases, collecting evidence, conducting forensic  analyses and providing legal guidance to assist  with prosecutions."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": ["No reported firearms purchases from fiscal years 2010 through 2017.", "Dollars (in thousands)"], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": []}, {"section_title": "Inventory as of November 2017", "paragraphs": [], "subsections": [{"section_title": "U.S. Environmental Protection Agency (EPA)", "paragraphs": [], "subsections": []}]}]}]}, {"section_title": "Office of Inspector General (OIG)", "paragraphs": ["Helps the agency protect the environment in  a more efficient and cost effective manner by  performing audits, evaluations, and investigations  of EPA and its contractors; promoting economy  and efficiency; and preventing and detecting  fraud, waste, and abuse.", "Law enforcement agents conduct criminal  investigations of financial fraud involving EPA  programs or funds; employee misconduct;  intrusion into EPA computers; threats against  EPA employees, contractors, facilities and  assets; assaults on EPA employees or  contractors and other acts of violence in  EPA facilities; impersonating EPA officials;  counterfeiting or misuse of insignia, logos or  credentials; and theft of property or funds within  EPA facilities.", "No known challenges."], "subsections": [{"section_title": "Office of the Inspector General (OIG)", "paragraphs": ["OIG\u2019s Office of Investigations conducts and  coordinates investigative activity related to fraud,  waste, abuse, and mismanagement in SSA  programs and operations.", "No known challenges.", "Officers with the Office of Investigations  investigate wrongdoing by applicants,  beneficiaries, contractors and third parties,  and employees; conduct joint investigations  with other law enforcement agencies; share  responsibility for investigating threats or violence  against SSA employees and facilities; and assist  in the investigation of terrorism cases and other  cases involving national security."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Values by year", "paragraphs": ["Dollars (in thousands)", "No known limitations."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": ["Dollars (in thousands)", "No known limitations."], "subsections": []}, {"section_title": "Tactical equipment spending data", "paragraphs": ["No known limitations."], "subsections": [{"section_title": "Department of Veterans Affairs (VA)", "paragraphs": [], "subsections": []}]}]}, {"section_title": "Veterans Health Administration (VHA)", "paragraphs": ["Protects veterans by enforcing federal law at VA  medical facilities (and some National Cemetery  and Benefits locations) and by serving as initial  response forces to active threat incidents.", "Officers protect veterans, visitors, and staff on  department facilities and grounds; investigate  serious incidents on VA controlled property; and  provide personal protection to the Secretary and  Deputy Secretary of the VA.", "Purchasing and record-keeping are decentralized  among facilities, and there is no agency-wide  system for recording purchases. Purchase card  records were not easily accessible or identifiable."], "subsections": [{"section_title": "Firearms spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)", "We identified missing data for  some cost and date fields", "Officials reported some cost  data were estimated based on  available information The percentages do not total  100 because of rounding."], "subsections": []}]}, {"section_title": "Ammunition spending data", "paragraphs": [], "subsections": [{"section_title": "Minimum values by year", "paragraphs": ["Dollars (in thousands)"], "subsections": []}]}, {"section_title": "Tactical equipment spending data", "paragraphs": [], "subsections": [{"section_title": "Type by year", "paragraphs": [], "subsections": []}]}]}]}]}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the above contact, Adam Hoffman (Assistant Director) and  Michelle Serfass (Analyst-in-Charge) managed this assignment.  Christoph Hoashi-Erhardt, Allison Gunn, and Kelsey Burdick made  significant contributions to this report. David Alexander, David Blanding  Jr., Willie Commons III, Eric D. Hauswirth, Julia Kennon, Susan Hsu,  Diana Maurer, Wayne McElrath, and Kevin Reeves also contributed."], "subsections": []}]}], "fastfact": ["Are federal law enforcement agencies accurately reporting how much they spend on firearms, ammunition, and tactical equipment?", "We found that federal agencies\u2019 internal data on these purchases did not always match data that were publicly available on USASpending.gov. For example, ICE told us that it spent 8 times more on firearms than the amount we calculated using data from the website. This was partly because other agencies used ICE contracts to buy firearms, but weren\u2019t properly identified in ICE's website data.", "We recommended that ICE update its contracting process to include the names of these agencies."]}
{"id": "GAO-18-36", "url": "https://www.gao.gov/products/GAO-18-36", "title": "Improper Payments: Most Selected Agencies Improved Procedures to Help Ensure Risk Assessments of All Programs and Activities", "published_date": "2017-11-16T00:00:00", "released_date": "2017-11-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Reported improper payment estimates totaled over $1.2 trillion government-wide from fiscal years 2003 through 2016. Agencies are statutorily required to perform improper payment risk assessments to identify programs and activities that may be susceptible to significant improper payments and are required to report an improper payment estimate for ones that are susceptible to significant improper payments.", "GAO was asked to review federal agencies' improper payment risk assessments. This report examines the extent to which (1) the 24 CFO Act agencies followed OMB guidance for reporting on improper payment risk assessments and (2) selected CFO Act agencies properly designed control activities to include all of their programs and activities in an improper payment risk assessment at least once every 3 years, as statutorily required. GAO analyzed the 24 CFO Act agencies' AFRs and PARs and reviewed the procedures at 9 selected agencies. GAO selected 9 agencies that did not report improper payment estimates in fiscal year 2015, except for those estimates that were mandated to be reported pursuant to the Disaster Relief Appropriations Act, 2013. For this review, GAO did not evaluate the quality of improper payment risk assessments completed."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's review of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies' fiscal years 2014 through 2016 agency financial reports (AFR) and performance and accountability reports (PAR) found that these agencies generally adhered to the Office of Management and Budget's (OMB) improper payment risk assessment reporting directives. However, GAO found instances of nonadherence, including the following:", "There were two instances of nonadherence to OMB's directive for agencies to report the basis for how they grouped programs and activities, both of which occurred in fiscal year 2014. All agencies that completed risk assessments adhered to this directive for fiscal years 2015 and 2016.", "The Improper Payments Information Act of 2002, as amended, identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider when conducting risk assessments. For fiscal years 2015 and 2016 reporting, OMB directed agencies to report the risk factors considered in their risk assessments. However, GAO found six agencies that did not report one or more of the nine risk factors in their AFRs or PARs.", "OMB's revised guidance for fiscal year 2017 no longer directs agencies to report on their risk assessments. OMB staff stated that their primary motivation for removing such reporting was to reduce the administrative burden. After GAO notified OMB of the importance of certain data, OMB staff plan to direct agencies to provide additional data, including a listing of risk assessed programs and activities, on www.paymentaccuracy.gov for reporting beginning in fiscal year 2017. OMB staff also plan to revise the guidance for fiscal year 2018 for agencies to report the other risk assessment information in their AFRs or PARs.", "GAO also found that three of the nine selected agencies (the Departments of Energy and Justice and the U.S. Agency for International Development) that it reviewed had designed and documented control activities to help ensure that all programs and activities were assessed every 3 years. For the remaining six agencies, GAO found that the agencies did not properly design control activities for this purpose. Specifically, GAO found the following:", "Three agencies\u2014the Department of Commerce, the National Science Foundation, and the Nuclear Regulatory Commission\u2014did not have documented procedures for conducting risk assessments during fiscal years 2014 through 2016 but subsequently documented them.", "Three agencies\u2014the Departments of the Interior (Interior) and State (State) and the National Aeronautics and Space Administration (NASA)\u2014documented procedures for conducting risk assessments but did not include all programs and activities in their risk assessments. Interior later drafted revisions to its procedures and State updated its procedures to include them.", "Without properly designed and documented control activities, there is a risk that an agency may not identify all programs and activities that require a risk assessment, which could result in the agency failing to develop and report improper payment estimates for programs and activities that should have been identified as susceptible to significant improper payments."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that NASA revise its procedures to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years. NASA concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["As the steward of taxpayer dollars, the federal government is accountable  for how it spends hundreds of billions of taxpayer dollars annually.  However, improper payments\u2014payments that should not have been  made or were made in incorrect amounts\u2014remain a significant and  pervasive government-wide issue. Specifically, from fiscal years 2003  through 2016, improper payments have been estimated to total over   $1.2 trillion government-wide. The most recent government-wide  improper payment estimate reported for fiscal year 2016 was  $144.3 billion, an increase of approximately $7.6 billion from the  $136.7 billion estimate reported for fiscal year 2015. It is important to  note that these estimates themselves may not be accurate, reliable, or  complete, as we have reported that the federal government is unable to  determine the full extent of improper payments and to reasonably assure  that actions are taken to reduce them. In addition, certain inspectors  general (IG) have reported issues with agencies\u2019 reported improper  payment estimates because agencies used inappropriate sampling  methods and inadequate estimation methodologies to calculate and  report these estimates.", "The Improper Payments Information Act of 2002 (IPIA), as amended by  the Improper Payments Elimination and Recovery Act of 2010 (IPERA)  and the Improper Payments Elimination and Recovery Improvement Act  of 2012 (IPERIA), requires, among other things, that each federal agency  review all programs and activities that the agency head administers and  identify those that may be susceptible to significant improper payments\u2014 a process commonly referred to as an improper payment risk  assessment. Specifically, IPIA, as amended, (hereafter referred to as  IPIA) requires agencies to conduct improper payment risk assessments  for all federal programs and activities in fiscal year 2011 and at least once  every 3 years thereafter. Office of Management and Budget (OMB)  guidance provides that programs that have been determined to be  susceptible to significant improper payments and that are already  reporting an estimate\u2014or in the process of establishing an estimate\u2014do  not have to perform additional risk assessments. IPIA defines significant  improper payments as gross annual improper payments\u2014the total  amount of payments that should not have been made or that were made  in an incorrect amount\u2014that may have exceeded (1) both 1.5 percent of  program outlays and $10 million of all program or activity payments made  during the fiscal year reported or (2) $100 million (regardless of the  improper payment percentage of total program outlays).", "You requested that we review federal agencies\u2019 improper payment risk  assessments. This report examines the extent to which (1) the 24  agencies subject to the Chief Financial Officers Act of 1990 (CFO Act)  followed OMB guidance for reporting on improper payment risk  assessments and (2) selected CFO Act agencies designed control  activities to include all of their programs and activities in an improper  payment risk assessment at least once during a 3-year period, as required by IPIA. At the time of our review, the most recent 3-year period  was fiscal years 2014 through 2016.", "To address our first objective, we reviewed the improper payment risk  assessment requirements in IPIA, as well as reviewed the related  guidance in OMB Circular A-136, Financial Reporting Requirements,  including the OMB directives for agencies\u2019 risk assessment reporting, and  OMB M-15-02. To determine if the agencies adhered to OMB reporting  directives, we analyzed the agency financial reports (AFR) or the  performance and accountability reports (PAR) of the 24 CFO Act  agencies for fiscal years 2014 through 2016. Our review focused on  whether the agencies reported the risk assessment information in their  AFRs or PARs but did not include an evaluation of the quality of these  agencies\u2019 improper payment risk assessments. For agencies that did not  adhere to the reporting directives, we interviewed appropriate agency  officials to determine the reason(s) they did not.", "To address our second objective, we reviewed IPIA, the related OMB  guidance, and relevant internal control standards to determine the  relevant control activities needed to help ensure that agencies conduct  improper payment risk assessments for all programs and activities at  least once every 3 years. Although the control activities are relevant for  all of the 24 CFO Act agencies, we selected those agencies that have not  identified any programs or activities that were susceptible to significant  improper payments. Specifically, we focused on those 9 agencies that did  not report improper payment estimates in fiscal year 2015, except for  those estimates that were mandated to be reported pursuant to the  Disaster Relief Appropriations Act, 2013. These 9 agencies were the  Departments of Commerce, Energy, the Interior, Justice, and State; the  National Aeronautics and Space Administration; the National Science  Foundation; the Nuclear Regulatory Commission; and the U.S. Agency  for International Development. Specifically, for these 9 agencies  (hereafter referred to as selected agencies), we reviewed the agencies\u2019  procedures for conducting improper payment risk assessments and  interviewed agency officials to determine whether the agencies properly  designed and documented control activities to review all programs and  activities at least once every 3 years. Appendix I provides further details  on our scope and methodology.", "While our second objective focused on certain key control activities  related to the selected agencies\u2019 inclusion of programs and activities in  their improper payment risk assessments at least once during fiscal years  2014 through 2016, we did not evaluate all control activities and other  components of internal control. If we had done so, additional deficiencies  may or may not have been identified that could impair the effectiveness of  the control activities evaluated as part of this audit. Appendix II provides  additional details on standards for internal control in the federal  government.", "We conducted this performance audit from June 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["IPIA requires agencies to conduct a risk assessment for all programs and  activities at least once every 3 years, and OMB guidance implementing  IPIA also directs agencies to report on the assessment in either the  agencies\u2019 AFRs or PARs. Each agency must institute a systematic  method of performing the improper payment risk assessment, which may  take the form of either a quantitative analysis based on a statistical  sample or qualitative evaluation (e.g., a risk assessment questionnaire).", "IPIA identifies seven risk factors and OMB guidance includes two  additional risk factors that agencies are to consider when conducting  improper payment risk assessments. According to OMB M-15-02,  agencies\u2019 risk assessments (either quantitative or qualitative) should  consider all of the following nine risk factors that are likely to contribute to  significant improper payments:  1.  whether the program or activity reviewed is new to the agency;  2.  the complexity of the program or activity reviewed, particularly with  respect to determining correct payment amounts;  3.  the volume of payments made annually;  4.  whether payments or payment eligibility decisions are made outside of  the agency, for example, by a state or local government or a regional  federal office;  5.  recent major changes in program funding, authorities, practices, or  6.  the level, experience, and quality of training for personnel responsible  for making program eligibility determinations or certifying that  payments are accurate;  7.  inherent risks of improper payments because of the nature of agency  8.  significant deficiencies in the agency\u2019s audit reports, including but not  limited to the agency IG or GAO audit findings or other relevant  management findings that might hinder accurate payment  certification; and  9.  results from prior improper payment work.", "OMB guidance describes these nine risk factors as the minimum factors  that agencies should consider and notes that additional risk factors, such  as those specific to the program or activity being assessed, should also  be considered, as appropriate.", "If an agency\u2019s improper payment risk assessment finds that a program is  susceptible to significant improper payments, the agency is required by  IPIA to estimate the annual amount of improper payments for the  program, publish corrective action plans, set reduction targets, and  annually report on the results of addressing these requirements for that  program. IPIA states that each agency is required to publish the improper  payment information in an annual report in the form and content required  by OMB\u2014typically an AFR or a PAR\u2014for the most recent fiscal year, and  post that report on the agency\u2019s website.", "OMB Circular A-136 and OMB M-15-02 provide guidance for agencies on  preparing their AFRs or PARs, including the reporting of improper  payment information. Specifically, this OMB guidance directs agencies to  disclose the following in their AFRs or PARs: (1) the basis for grouping  programs and activities for improper payment risk assessments; (2) the  risk factors considered during their risk assessment; and (3) a listing of all  programs that were assessed for a given year, regardless of whether a  program or activity was deemed susceptible to significant improper  payments. Given that OMB guidance is updated periodically, some  reporting directives may differ for each fiscal year. As shown in table 1,  the directive to disclose the basis for grouping programs and activities  was applicable for all 3 years included in the scope of our review (i.e.,  fiscal years 2014 through 2016). However, the directives to disclose all  the risk factors considered and include a listing of all programs and  activities assessed were only applicable for fiscal years 2015 and 2016."], "subsections": []}, {"section_title": "CFO Act Agencies Generally Adhered to Improper Payment Reporting Directives for Risk Assessments", "paragraphs": ["During fiscal years 2014 through 2016, the 24 CFO Act agencies,  excluding the Department of Defense (DOD), reported in their AFRs or  PARs that that they completed at least one risk assessment on at least  one program or activity in one or more of those years. For the agencies  that reported that they completed an improper payment risk assessment,  we found that most generally adhered to the reporting directives that were  applicable for fiscal years 2014 through 2016. For example, for fiscal year  2014, 21 of the 24 CFO Act agencies reported completing a risk  assessment, and for those 21 agencies, we found that 19 agencies  adhered to OMB guidance for reporting the basis of groupings of  programs and activities and 2 did not. (See fig. 1.) For fiscal years 2015  and 2016, all 18 CFO Act agencies that reported completing a risk  assessment adhered to OMB guidance for this directive. Appendix III  provides additional details regarding the agencies\u2019 reporting of completing  an improper payment risk assessment each year and adherence to the  OMB improper payment risk assessment reporting directives. Further  details on each of these reporting directives are provided below.", "Reporting the basis for grouping programs and activities. During the  3-year period from fiscal years 2014 through 2016, we found two  instances where the agencies\u2014the Departments of Commerce  (Commerce) and Energy (Energy)\u2014did not adhere to the reporting  directive for agencies to report the basis of grouping programs and  activities. Although these two agencies did not adhere to this reporting  directive in fiscal year 2014, Commerce adhered to this directive in fiscal  year 2015 and fiscal year 2016. Energy adhered to this directive in fiscal  year 2015, and this reporting directive was not applicable for fiscal year  2016 because Energy did not report completing any risk assessments  that year. All other applicable agencies were in full adherence to this  OMB directive in fiscal years 2015 and 2016.", "Reporting a listing of all programs and activities assessed during  the agencies\u2019 improper payment risk assessments. During fiscal  years 2015 through 2016, the applicable CFO Act agencies, except for  the U.S. Agency for International Development (USAID), adhered to the  reporting directive for listing all programs and activities assessed during  the agencies\u2019 improper payment risk assessments. USAID did not adhere  to this reporting directive in fiscal year 2015; however, in fiscal year 2016,  USAID did list all programs and activities. USAID officials provided us an  OMB e-mail indicating, among other things, that USAID could be on a 3- year cycle of performing risk assessments starting in fiscal year 2015.  Notwithstanding that e-mail, USAID continued to perform improper  payment risk assessments annually, according to USAID officials, to  maintain audit readiness and expertise. These officials further stated that  this OMB e-mail served as support for not adhering to the OMB directive  for reporting risk assessments. However, we did not find upon our review  that the e-mail explicitly provided such support.", "Reporting the risk factors considered during the agencies\u2019 risk  assessments. As directed by OMB guidance, agencies are to report the  risk factors considered during improper payment risk assessments in their  AFRs or PARs. Given that IPIA identifies seven risk factors that agencies  are to consider and OMB guidance includes two additional risk factors,  agencies are directed by OMB to consider a minimum of nine risk factors.  Therefore, the AFRs and PARs adhering to OMB guidance are to include  a discussion regarding the agencies\u2019 consideration of these nine factors  as well as any other factors considered. In our analysis, we found that six  agencies failed to adhere to OMB reporting directives either in fiscal year  2015, fiscal year 2016, or both. Specifically, we found the following:", "The Office of Personnel Management (OPM) did not adhere to the  improper payment risk assessment reporting directives in fiscal year  2015. However, OPM subsequently corrected the reporting issue in  fiscal year 2016.", "Three agencies\u2014USAID, the U.S. Department of Agriculture (USDA),  and the Social Security Administration (SSA)\u2014did not adhere to the  improper payment risk assessment reporting directives in fiscal years  2015 and 2016. In their fiscal years 2015 and 2016 AFRs, USAID did  not report its consideration of any of the nine risk factors, USDA  reported that it considered four of the nine risk factors, and SSA  reported that it considered six of the nine risk factors.", "Two agencies, the Department of Education (Education) and the  Department of Labor (Labor), did not adhere to the improper payment  risk assessment reporting directive in fiscal year 2016. In their fiscal  year 2016 AFRs, neither Education nor Labor provided a detailed  description of all the risk factors that were considered in their risk  assessments. Education stated that its risk assessment analysis  \u201cincluded a quantitative review of questioned costs from Single Audit  findings versus total program expenditures, as well as a qualitative  review of other risk factors including changes in legislation or  regulations and history of audit findings.\u201d Labor did not list the risk  factors considered in its improper payment risk assessments but  instead provided a hyperlink to IPIA.", "As noted above, officials from USAID stated that an OMB e-mail served  as support for not adhering to the OMB directive for reporting risk  assessments, including the risk factors. However, we found upon our  review that the e-mail did not explicitly provide such support.", "Officials from USDA, Labor, and SSA, three of the five agencies that did  not adhere to the reporting directive in fiscal year 2016, informed us that  they considered the nine risk factors but were not aware that they had to  specifically list the nine risk factors in their AFRs or PARs. In addition,  Labor officials stated that they included a link to IPIA instead of  mentioning the nine risk factors to help simplify the reporting. However,  OMB Circular A-136 specifically directs the agencies to include a  description of the risk factors considered in their improper payment risk  assessments in their AFRs or PARs. Although Labor officials stated that  they considered all nine risk factors, Labor\u2019s link to IPIA only includes  seven required risk factors and not the two additional risk factors that are  referenced in OMB guidance. After we brought these concerns to their  attention, officials from these three agencies indicated that they plan to  report the risk factors considered, as directed by OMB, which should  include consideration of all nine risk factors. By adhering to the OMB  directive for reporting risk factors, the agencies will improve the  transparency of the risk assessments reported in their AFRs or PARs.", "An Education official stated that the department did not consider all nine  risk factors for its non-Federal Student Aid programs during fiscal year  2016 because Education\u2019s analysis was quantitative in nature.  However, OMB guidance states that all nine risk factors must be  considered in both qualitative and quantitative improper payment risk  assessments. In May 2017, the Inspector General for Education  recommended that Education ensure that improper payment risk  assessments conform with IPIA and OMB guidance when determining  whether programs may be susceptible to significant improper payments and identify all programs that may be susceptible to significant improper  payments. In response to the recommendation in the Office of Inspector  General (OIG) audit report, Education stated that it will align its improper  payment risk assessments with the nine risk factors beginning in fiscal  year 2017.", "A revised version of OMB Circular A-136 that was issued in August 2017  no longer directs agencies to report improper payment risk assessment  information in the agencies\u2019 fiscal year 2017 AFRs and PARs.  Specifically, agencies will no longer have to report in their AFRs or PARs  for a given year (1) the basis for grouping programs and activities for  improper payment risk assessments, (2) a listing of all programs and  activities assessed during their risk assessments, and (3) the risk factors  considered during their risk assessments. OMB staff stated that their  primary motivation for eliminating the risk assessment reporting directives  from OMB guidance was to reduce the administrative burden on  agencies. Although OMB guidance will not direct agencies to report the  three items noted above, agencies are still required to complete the risk  assessments, as required by IPIA and directed in OMB guidance. Further,  OMB staff stated that they rely on each agency\u2019s OIG to review the  quality of each agency\u2019s risk assessment, which should include assessing  the three items noted above; therefore, these reporting directives are not  necessary.", "While we recognize the importance of reducing administrative burden, we  also have previously reported on the importance of risk assessments for  managing improper payments. We believe that the requirement for  agencies to publicly report the improper payment risk assessment  information has helped hold agencies accountable and provided  additional transparency to the agencies\u2019 improper payment processes, as  well as assisted Congress and others in their oversight of government- wide improper payments. However, if OMB is going to rely on each  agency\u2019s OIG to ensure quality risk assessments, it is important that these reviews are performed consistently throughout the federal  government. In our May 2017 report, we found that OIGs inconsistently  reported agencies\u2019 compliance with the IPERA criterion for conducting  program-specific risk assessments. For example, certain OIGs reported  agencies as noncompliant when agencies did not consider all nine risk  factors, as outlined in IPIA, OMB guidance, or both, during program- specific risk assessments, whereas other OIGs reported agencies as  compliant with this IPERA criterion, despite also finding issues with the  agencies\u2019 consideration of the nine risk factors. To help ensure that  government-wide compliance under IPERA is consistently determined  and reported, we recommended in May 2017 that the Director of OMB  coordinate with the Council of the Inspectors General on Integrity and  Efficiency (CIGIE) to develop and issue guidance, either jointly or  independently, to specify what procedures should be conducted as part of  the OIGs\u2019 IPERA compliance determinations. OMB did not provide any  comments on our recommendation, and as of August 2017, OMB had not  yet issued such guidance. CIGIE stated that it would coordinate with OMB  as needed and provide feedback on any draft OMB guidance.", "Subsequent to the issuance in August 2017 of a revised version of OMB  Circular A-136 and after we notified OMB of our views on the importance  of certain data, OMB staff stated that they plan to direct agencies to  report additional risk assessment data. Specifically, in September 2017,  OMB staff told us that they plan to direct agencies to provide a listing of  all programs and activities assessed during their risk assessments on  www.paymentaccuracy.gov for fiscal year 2017 reporting, and that they  plan to continue to direct agencies to report this listing for subsequent  fiscal years. In addition, although the basis for grouping programs and  activities for improper payment risk assessments and the risk factors  considered during the risk assessments will not be required to be  reported in fiscal year 2017 AFRs and PARs, OMB staff stated that they  plan to revise the guidance for fiscal year 2018 so that agencies report  such information in their AFRs and PARs."], "subsections": []}, {"section_title": "Six Selected CFO Act Agencies Did Not Have Properly Designed Control Activities That Included All Programs and Activities in Their Improper Payment Risk Assessments", "paragraphs": ["We found that three of the nine selected CFO Act agencies that we  reviewed, Energy, the Department of Justice, and USAID, had  documented procedures for performing the required improper payment  risk assessments and these procedures included the design of control  activities necessary to help ensure that all programs and activities were  assessed at least once every 3 years. However, the remaining six  agencies did not properly design control activities for this purpose.  Specifically, three of these six selected agencies did not have  documented procedures for performing the required improper payment  risk assessments. The remaining three agencies improperly excluded  specific programs and activities from the improper payment risk  assessment process. Appendix IV provides more detail on our analysis of  these selected agencies\u2019 procedures for performing improper payment  risk assessments.", "We did not evaluate whether all control activities related to conducting  improper payment risk assessments were properly designed or evaluate  other internal control components, such as the control environment. If we  had done so, additional deficiencies may or may not have been identified  that could impair the overall effectiveness of the control activities  evaluated as part of this audit."], "subsections": [{"section_title": "Three Selected CFO Act Agencies Did Not Have Documented Procedures for Conducting Their Improper Payment Risk Assessments but Have Now Documented Them", "paragraphs": ["Three of the nine selected CFO Act agencies\u2014Commerce, the National  Science Foundation (NSF), and the Nuclear Regulatory Commission  (NRC)\u2014did not have documented procedures for conducting improper  payment risk assessments for fiscal years 2014 through 2016. Although  two of these three agencies (Commerce and NSF) had developed  processes to help ensure that all programs and activities were assessed  for susceptibility to significant improper payments at least once every 3  years, these processes were not documented in written procedures. By  the end of our review, the three agencies subsequently established  documented procedures during fiscal year 2017. We reviewed the  procedures for Commerce, NRC, and NSF and found that they included  control activities designed to help ensure that all programs and activities  are included in the agencies\u2019 improper payment risk assessments at least  once every 3 years, as required by IPIA."], "subsections": []}, {"section_title": "Three Selected CFO Act Agencies Did Not Properly Design Control Activities to Help Ensure That All Programs and Activities Were Assessed", "paragraphs": ["Although the Departments of the Interior and State and the National  Aeronautics and Space Administration (NASA) had documented  procedures for conducting improper payment risk assessments, we  found that these agencies did not have properly designed control  activities to help ensure that all programs and activities were assessed for  susceptibility to improper payments. These three agencies specifically  excluded certain programs and activities from the improper payment risk  assessment process, as follows.", "Department of the Interior (Interior). In our review of Interior\u2019s  design of control activities, we found that Interior did not include  payments made by the department for certain programs. When asked  why the programs associated with these payments were not  assessed, Interior officials told us that the list that the department  used to ensure that all programs and activities for which the  department made payments were properly assessed excluded those  payments from Interior\u2019s program population. Subsequent to our  inquiry, Interior officials told us that Interior will update its procedures  to ensure that they capture all programs in Interior\u2019s assessments. In  addition, Interior officials provided us a draft of Interior\u2019s updated  procedures, and we found that these draft procedures included control  activities designed to help ensure that all programs and activities are  included in the department\u2019s improper payment risk assessments at  least once every 3 years, as required by IPIA.", "Department of State (State). In our review of State\u2019s design of  control activities, we found that State excluded certain programs and  activities from the improper payment risk assessment based on  threshold limitations on outlay data. Specifically, State only included  programs and activities in the improper payment risk assessments if  the outlays were greater than (1) $100 million or (2) $85 million and a  50 percent increase from the prior year. Programs and activities that  fell below these thresholds were not assessed for susceptibility to  significant improper payments. State officials told us that they  believed the $100 million threshold limitation was reasonable because  State predicted that it was improbable one of its programs would have  an improper payment estimate of at least 10 percent in order to meet  the IPIA threshold of $10 million. According to State officials, State\u2019s  justification for its assessment threshold was based on many factors,  including sampling of expenditures, past external audits, and internal  OMB Circular A-123 reviews. However, IPIA requires that improper  payment risk assessments be performed for each program and  activity that the agency head administers. In commenting on our draft  report, State officials informed us that State had updated its  documented procedures to lower the assessment threshold to the   $10 million threshold identified in IPIA. State officials provided us a  copy of the updated procedures, and we found that the procedures  included control activities designed to help ensure that all programs  and activities are included in the department\u2019s improper payment risk  assessments at least once every 3 years, as required by IPIA.", "NASA. In our review of NASA\u2019s design of control activities, we found  that NASA has documented procedures for conducting improper  payment risk assessments; however, the procedures used for  improper payment risk assessments conducted for fiscal years 2014  through 2016 were outdated. Specifically, the documented  procedures, dated 2012, did not account for changes to IPIA in 2013  or updates to OMB\u2019s guidance issued in fiscal year 2014. In June  2017, NASA subsequently updated its procedures for improper  payment risk assessments to properly address OMB\u2019s current  improper payments guidance. The updated procedures also included  a description of key control activities designed to help ensure that all  NASA programs and activities, other than OIG activities, have  undergone an improper payment risk assessment.", "According to NASA officials, NASA\u2019s improper payment risk assessment  process specifically excluded OIG activities because its OIG receives its  own appropriation, and therefore, OIG activities are not considered part of  NASA\u2019s programs or activities for improper payment risk assessments. In  addition, NASA officials stated that NASA OIG activities are excluded  from the improper payment risk assessments because of concerns  regarding NASA OIG\u2019s independence as NASA OIG conducts the  agency\u2019s annual IPERA compliance audit. NASA could not provide us  with any guidance or documentation that specifically addresses the  exclusion of OIG activities.", "The NASA OIG is part of NASA, and IPIA requires that improper payment  risk assessments be performed for each program and activity that the  agency head administers. To the extent that the potential threat to OIG  independence prevents NASA from conducting a risk assessment of  payments made by the OIG\u2019s programs and activities, the NASA  Administrator may transfer this responsibility to the OIG. By not making  an assessment, NASA has not determined whether OIG programs and  activities are susceptible to significant improper payments.", "Standards for Internal Control in the Federal Government states that  management should develop control activities to achieve objectives and  respond to risks and implement control activities through policies. When  an agency does not have properly designed policies and procedures to  help ensure that all programs and activities are assessed for susceptibility  to significant improper payments at least once every 3 years, there is an  increased risk that the agency may not always identify all risk-susceptible  programs and activities, resulting in incomplete improper payment  estimates."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Performing improper payment risk assessments and reporting on such  assessments are key to identifying programs and activities that may be  susceptible to significant improper payments. Agencies\u2019 nonadherence to  the OMB guidance to report on the results of their risk assessments may  result in Congress not having the information necessary to monitor and  take prompt action to address problematic programs. Most of the nine  selected agencies did not properly design control activities to include all  programs and activities in their improper payment risk assessments at  least once every 3 years during fiscal year 2014 through fiscal year 2016,  the time period of our review. Subsequent to fiscal year 2016, with the  exception of NASA, which did not include its OIG\u2019s activities, the federal  agencies that were identified as lacking properly designed control  activities drafted or updated their procedures to help ensure that all  programs and activities were assessed for susceptibility to significant  improper payments. Without proper control activities, NASA may not be  identifying all programs and activities that should be included in its  improper payment risk assessments. If a program or activity is not  assessed for risk, then an agency could be at risk of noncompliance with  IPIA or nonadherence to OMB guidance as the risk assessment process  is a crucial step in determining programs and activities that are  susceptible to significant improper payments and thus subject to  additional reporting and monitoring requirements."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to NASA:  The Administrator of NASA should take steps to revise the agency\u2019s  procedures for conducting improper payment risk assessments to include  the activities of its OIG in its risk assessment process to help ensure that  all programs and activities are assessed for susceptibility to significant  improper payments at least once every 3 years as required by IPIA.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the 24 CFO Act agencies and OMB  for comment. We received written comments from 4 agencies\u2014NASA,  State, SSA, and USAID, which are reproduced in appendixes V through  VIII. We also received technical comments from Energy, OMB, State, and  USAID, which we incorporated in the report as appropriate. All of the  other agencies notified us that they had no comments.", "The following discusses the written comments we received from the four  agencies noted above.", "In its comments, NASA concurred with our recommendation and  stated that the agency will revise its procedures for conducting  improper payment risk assessments to include OIG programs and  activities by September 2018.", "In the draft report provided to State for comment, we had  recommended that State reevaluate the agency\u2019s use of dollar  thresholds for excluding programs and activities from its risk  assessment process and revise its procedures for conducting  improper payment risk assessments to help ensure that all programs  and activities are assessed for susceptibility to significant improper  payments at least once every 3 years as required by IPIA. In its  comments, State questioned the practicality of our proposed  recommendation; however, State stated that it updated its procedures  to lower the assessment threshold to the minimum dollar threshold of  $10 million. We noted that this threshold aligns with the IPIA threshold  of $10 million. We reviewed State\u2019s updated procedures and  confirmed that State had revised its dollar threshold for conducting  risk assessments, which effectively addressed our preliminary  findings. Therefore, we have removed the recommendation from our  report.", "In its comments, SSA stated that it believed that its risk assessment  reporting fully complied with OMB guidance. SSA stated that it  considered the nine required risk factors but only reported on the risk  factors that were applicable to the agency. However, given that SSA  reported that it considered six risk factors and did not indicate in its  AFRs that the other factors were not applicable to SSA, we continue  to believe that SSA did not report, as directed by OMB guidance, on  all the risk factors considered in its improper payment risk  assessments for fiscal years 2015 and 2016.", "In its comments, USAID stated that our draft report was inaccurate in  stating that USAID did not adhere to OMB reporting directives. USAID  stated that an e-mail from OMB provided USAID relief from improper  payment reporting. However, OMB\u2019s e-mail did not explicitly provide  USAID a waiver from the OMB risk assessment reporting directives.   Moreover, USAID reported in its AFRs for fiscal years 2014 through  2016 that it conducted annual risk assessments for the time period  covered in this audit. As stated in appendix III, USAID did properly  report the basis for grouping programs and activities for fiscal years  2014 through 2016, and the agency also properly reported a listing of  all programs and activities that were assessed for fiscal year 2016.  Accordingly, we believe that USAID also should have followed all  OMB risk assessment reporting directives for the time period covered  for our audit, and we believe that our report accurately characterizes  this issue.", "We are sending copies of this report to the appropriate congressional  committees, the heads of the 24 CFO Act agencies, the Director of the  Office of Management and Budget, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the extent to which (1) the 24 agencies subject to  the Chief Financial Officers Act of 1990 (CFO Act) followed Office of  Management and Budget (OMB) guidance for reporting on improper  payment risk assessments in their agency financial reports (AFR) or  performance and accountability reports (PAR) for fiscal years 2014  through 2016 and (2) selected CFO Act agencies have designed control  activities to include all of their programs and activities in an improper  payment risk assessment at least once during a 3-year period, as  required by the Improper Payments Information Act of 2002 (IPIA), as  amended by the Improper Payments Elimination and Recovery Act of  2010 and the Improper Payments Elimination and Recovery Improvement  Act of 2012. At the time of our review, the latest 3-year period was fiscal  years 2014 through 2016.", "To address our first objective, we reviewed improper payment risk  assessment requirements in IPIA, as amended, and the related guidance  in OMB Circular A-136, Financial Reporting Requirements, including the  OMB directives for agencies\u2019 risk assessment reporting, and OMB  Circular A-123, Appendix C, Requirements for Effective Estimation and  Remediation of Improper Payments (OMB M-15-02). We analyzed these  statutes and guidance to identify key criteria that agencies must meet for  reporting on improper payment risk assessments. IPIA, as amended,  identifies seven risk factors and OMB guidance includes two additional  risk factors that agencies are to consider in their improper payment risk  assessment to determine susceptibility to significant improper payments.  Additionally, for fiscal years 2014 through 2016, OMB M-15-02 directed  agencies that conducted improper payment risk assessments to disclose  in their AFRs or PARs the basis for grouping programs and activities for  improper payment risk assessments. For fiscal years 2015 and 2016,  OMB Circular A-136 directed agencies to report (1) a listing of programs  and activities that were assessed for susceptibility to significant improper  payments in a given year, regardless of whether a program or activity was  deemed risk-susceptible, and (2) the risk factors considered during their  improper payment risk assessments. We analyzed the AFRs or PARs of  the 24 CFO Act agencies for fiscal years 2014 through 2016 to determine  whether each agency met the key OMB reporting criteria described  above. For our review, we focused on whether the agencies reported the  risk assessment information in their AFRs or PARs and did not evaluate  the quality of improper payment risk assessments completed.", "For any agencies that did not meet the reporting directives outlined in  OMB guidance for their improper payment risk assessments, we  interviewed appropriate agency officials to determine why those agencies  did not meet these key criteria. For fiscal year 2017, a revised version of  OMB Circular A-136 that was issued in August 2017 no longer directs  agencies to report improper payment risk assessment information in the  agencies\u2019 fiscal year 2017 AFRs and PARs. Subsequent to the issuance  in August 2017 of a revised version of OMB Circular A-136 and after we  notified OMB of our views on the importance of certain data, OMB staff  stated that they plan to direct agencies to report additional risk  assessment data. Specifically, in September 2017, OMB staff told us that  they plan to direct agencies to provide a listing of all programs and  activities assessed during their risk assessments on  www.paymentaccuracy.gov for fiscal year 2017 reporting, and that they  plan to continue to direct agencies to report this listing for subsequent  fiscal years. In addition, although the basis for grouping programs and  activities for improper payment risk assessments and the risk factors  considered during the risk assessments will not be required to be  reported in fiscal year 2017 AFRs and PARs, OMB staff stated that they  plan to revise the guidance for fiscal year 2018 so that agencies report  such information in their AFRs and PARs.", "To address our second objective, we reviewed IPIA, as amended; the  related OMB guidance; and relevant internal control standards to  determine the relevant control activities needed to help ensure that  agencies conduct improper payment risk assessments for all programs  and activities at least once every 3 years. For this objective, we selected  nine CFO Act agencies that did not report improper payment estimates  for any programs or activities in fiscal year 2015 or 2016 except those  estimates that were required to be reported pursuant to the Disaster  Relief Appropriations Act, 2013. These nine agencies were the  Departments of Commerce, Energy, the Interior, Justice, and State; the  National Aeronautics and Space Administration; the National Science  Foundation; the Nuclear Regulatory Commission; and the U.S. Agency  for International Development. We reviewed these agencies\u2019 procedures  for conducting improper payment risk assessments and interviewed  agency officials to determine whether the agencies designed and  documented control activities to include all programs and activities in an  improper payment risk assessment at least once every 3 years. To verify  each agency\u2019s assertions that all programs and activities are reviewed at  least once every 3 years, we compared the line item for gross outlays  contained in each agency\u2019s Statement of Budgetary Resources for the  relevant period to outlay data provided by each agency for each program  and activity covered by improper payment risk assessments for fiscal  years 2014 through 2016. When we identified differences between the  two data sources, we interviewed agency officials to understand the  cause for the differences and obtained any supporting documentation to  ensure that all significant programs and activities were properly assessed.", "While our second objective focused on certain significant control activities  related to the selected agencies\u2019 inclusion of programs and activities in  their improper payment risk assessments at least once during fiscal years  2014 through 2016, we did not evaluate all control activities and other  components of internal control. If we had done so, additional deficiencies  may or may not have been identified that could impair the effectiveness of  the control activities evaluated as part of this audit.", "We conducted this performance audit from June 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Standards for Internal Control in the Federal Government", "paragraphs": ["Standards for Internal Control in the Federal Government provides the  overall framework for establishing and maintaining internal control.  Internal control should be designed, implemented, and operating  effectively to provide reasonable assurance that the operations, reporting,  and compliance objectives of an entity will be achieved. The five  components of internal control are as follows:", "Control environment - The foundation for an internal control system. It  provides the discipline and structure to help an entity achieve its  objectives.", "Risk assessment - Assesses the risks facing the entity as it seeks to  achieve its objectives. This assessment provides the basis for  developing appropriate risk responses.", "Control activities - The actions management establishes through  policies and procedures to achieve objectives and respond to risks in  the internal control system, which includes the entity\u2019s information  system.", "Information and communication - The quality information management  and personnel communicate and use to support the internal control  system.", "Monitoring - Activities management establishes and operates to  assess the quality of performance over time and promptly resolve the  findings of audits and other reviews.", "An effective internal control system has each of the five components of  internal control effectively designed, implemented, and operating and the  five components operating together in an integrated manner. In this audit,  we focused on certain significant control activities related to the selected  agencies\u2019 inclusion of programs and activities in their improper payment  risk assessments at least once during fiscal years 2014 through 2016."], "subsections": []}, {"section_title": "Appendix III: Agency Adherence to Office of Management and Budget Reporting Directives for Risk Assessments", "paragraphs": ["As noted in our report, the Improper Payments Information Act of 2002,  as amended by the Improper Payments Elimination and Recovery Act of  2010 and the Improper Payments Elimination and Recovery Improvement  Act of 2012, requires agencies to conduct improper payment risk  assessments for all federal programs and activities in fiscal year 2011  and at least once every 3 years thereafter. During fiscal years 2014  through 2016, the 24 agencies subject to the Chief Financial Officers Act  of 1990 (CFO Act), excluding the Department of Defense, reported in  their agency financial reports (AFR) or performance and accountability  reports (PAR) that they completed at least one risk assessment on at  least one program or activity in one or more of those years. For each  agency that reported completing an improper payment risk assessment in  a given year, we evaluated whether the agency adhered to certain Office  of Management and Budget (OMB) reporting directives. It is important to  note that our audit scope did not include evaluating whether the agencies  completed the required risk assessment for all programs and activities.", "We evaluated the 24 CFO Act agencies\u2019 fiscal years 2014 through 2016  AFRs and PARs to determine if agencies adhered to OMB guidance for  reporting on improper payment risk assessments. Table 2 summarizes  agencies\u2019 adherence to the OMB guidance to report a basis for grouping  programs and activities in the AFRs or PARs for fiscal years 2014 through  2016.", "Table 3 summarizes agencies\u2019 adherence to the OMB directive to list all  of the programs and activities that were assessed for susceptibility to  significant improper payments and describe the risk factors considered  during their assessments for fiscal years 2015 and 2016. There was no  directive to report this information for fiscal year 2014."], "subsections": []}, {"section_title": "Appendix IV: Summary of Agencies\u2019 Procedures for Performing Improper Payment Risk Assessments", "paragraphs": ["Table 4 summarizes our analysis of the selected agencies\u2019 procedures for  performing improper payment risk assessments to help ensure that all  programs and activities were properly reviewed once every 3 years."], "subsections": []}, {"section_title": "Appendix V: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Matt Valenta (Assistant Director),  Michelle Philpott (Assistant Director), Laura Bednar (Auditor-in-Charge),  Stephanie Adams, Youssef Amrani, Francine DelVecchio, and Kailey  Schoenholtz made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-595", "url": "https://www.gao.gov/products/GAO-18-595", "title": "Real Property: GSA Is Taking Steps to Improve Collection and Reporting of Repair and Alteration Projects' Information", "published_date": "2018-07-23T00:00:00", "released_date": "2018-07-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year, GSA spends hundreds of millions of dollars on R&A projects to address the repair, renovation, or modernization needs of the more than 1,600 federally owned buildings under the agency's custody and control\u2014the average building's age is 47 years old. In fiscal year 2018, Congress appropriated $666 million in obligational authority from the Federal Buildings Fund for GSA's R&A program. Collecting information is fundamental to monitoring progress and assessing projects' performance.", "GAO was asked to review issues about GSA's collection of information needed to manage its R&A projects. This report examines how GSA (1) collects information on individual R&A projects and (2) assesses the performance of R&A projects.", "GAO reviewed documentation on the systems that GSA uses to support its management of the R&A program, as well as internal GSA reports on regional offices' use of the system that tracks projects' status. GAO also interviewed officials from GSA's central office and four regional offices to understand the types of information collected on R&A projects and how the information is input in GSA's systems. To identify the regional officials to be interviewed, GAO selected a non-generalizable sample of four capital R&A projects and eight small R&A projects, active between October 2013 and August 2017, based on a preliminary analysis of GSA data.", "GSA had no comments on the report."]}, {"section_title": "What GAO Found", "paragraphs": ["The General Services Administration (GSA) requires its regional offices to collect information on their repair and alteration (R&A) projects electronically and is working to improve the completeness and timeliness of this collection. Since 2011, GSA has required its regional offices to input and update information on both capital projects (those costing more than $3.095 million as of fiscal year 2018) and small projects (those costing less than $3.095 million). Officials from the four regions GAO interviewed said they find this system to be useful for forecasting how a capital project will progress. Regarding small projects' information, GSA has taken steps to improve regional offices' collection by, for example, conducting monthly checks to ensure that all small projects have been created in the system, assessing the number of projects that have missing information, and introducing a simplified way that GSA's regions can enter information in the system. GSA officials reported that, moving forward, they are continuing to emphasize the importance of collecting complete and timely information, which is needed to assess the performance of all R&A projects.", "GSA uses schedule- and budget-focused measures to assess the individual, the regional, and the national performance of capital and small R&A projects and is working to create a consistent understanding of performance. GSA's measures rely on information input by regional officials. For example, during the construction phase, GSA uses two \u201cproject delivery\u201d measures, which compare a project's estimated schedule and budget with actual outcomes. GSA produces regional and national reports detailing projects' performance relative to these measures. However, not all regional officials GAO spoke with view these reports as useful because they are not specific to the officials' information needs. As a result, some regions have created their own reports, contributing to an inconsistent understanding of R&A projects' performance across the agency. GSA has conducted outreach to its regions and has begun to introduce new \u201cdashboard\u201d reports that present a consolidated view of R&A projects' information. Moving forward, GSA's ability to assess R&A projects' performance will continue to rely on regional officials' complete and timely input of information for both capital and small projects."]}], "report": [{"section_title": "Letter", "paragraphs": ["The General Services Administration (GSA) spends hundreds of millions  of dollars each year on repairs and alterations to the approximately 1,600  federally owned buildings under its custody and control. Repairs and  alterations not only are important to keep buildings operating efficiently  but also are increasingly important as buildings age and require  renovation or modernization. In fiscal year 2017, GSA reported that the  average age of its buildings was 47 years old and that the backlog of  deferred maintenance for these buildings exceeded $1.4 billion. We have  previously reported that deferring maintenance and repair can reduce the  overall life of federal facilities, lead to higher costs in the long term, and  pose risks to safety and agencies\u2019 missions.", "As the needs of the aging federal inventory exceed available resources, it  is important that the repair and alteration (R&A) projects that GSA funds  to address these needs are completed efficiently and cost-effectively.  Collecting information on these R&A projects is fundamental to monitoring  their progress and assessing their performance; our prior work has shown  the extent of information collected on these projects can be limited. You  asked us to review issues related to GSA\u2019s collection of information  needed to manage its R&A projects. This report discusses how GSA (1)  collects information on R&A projects and (2) assesses the performance of  R&A projects.", "To determine how GSA collects information on individual R&A projects,  we reviewed documentation on the project information systems that GSA  uses to manage its capital projects\u2014those with total construction costs  that exceeded $3.095 million\u2014and small projects\u2014those with total  construction costs exceeding $25,000 and less than or equal to $3.095  million. We also interviewed officials from GSA\u2019s central office about the  project information systems and regional officials\u2019 use of these systems.  In addition, we reviewed GSA project reports from 2015 to 2017 from the  system used to track small projects\u2019 status to assess the extent to which  GSA\u2019s 11 regional offices may have varied in inputting complete and  timely R&A project information. We reviewed the information in these  reports to identify potential trends in regions\u2019 complete and timely entry of  R&A project information and interviewed GSA officials about the sources  of information used to generate the reports and steps they take to ensure  its accuracy.", "We also obtained data from GSA for all active R&A projects from October  2013 to August 2017. These years represent the period after GSA  officials said they began tracking small projects in the system used to  track status information and the most recent year for which data were  available. We analyzed the data for completeness and interviewed GSA  officials about how the data were generated and found them to be  sufficiently reliable for the purposes of selecting projects to further our  understanding of how GSA collects information on its R&A projects.  Specifically, we used this data to select 12 R&A projects, including four  capital projects and eight small projects, to understand the types of  information collected on these projects. We also discussed the selected  projects with officials from the four regions\u2014including project team  members who worked on these projects\u2014to understand the specific  project detail, budget, and schedule information being tracked and how  the information was input in the project information systems. Furthermore,  we visited two of the four selected regions based on their proximity to our  field office locations.", "To select these 12 projects, we first identified those regions that had  capital projects categorized as \u201csubstantially completed\u201d during this time  period as few capital projects are completed in a given year; seven  regions were identified using this criterion. We then narrowed our  selection to four regions that had varying degrees of performance based  on our initial review of GSA reports containing regional schedule and  budget targets. Specifically, to ensure that we were not selecting four  comparable regions, we selected two regions that GSA reported had  surpassed schedule and budget performance targets and two regions that  had not. Each of these four regions had one substantially completed  capital R&A project in the time frame, and we selected two small R&A  projects from each region\u2014those with the highest and lowest estimated  costs when their respective construction contracts were awarded. The  information obtained from the review of 12 selected projects and  interviews of regional officials is not generalizable to all R&A projects and  regions, but provides insight into how information is input by regional  officials, how it is used by GSA\u2019s central office and selected regional  officials, and any issues affecting its completeness or timeliness.", "To determine how GSA assesses the performance of R&A projects, we  reviewed internal guidance and guidelines on the agency\u2019s project-level  performance measures, performance goals, and performance reporting  related to R&A projects. In addition, we reviewed performance reports  produced by GSA from its project information systems to understand  regional R&A projects\u2019 performance relative to GSA\u2019s performance  measures. We also reviewed documentation on GSA plans to develop  new performance reporting on capital and small projects, including R&A  projects, and outreach plans to understand regional officials\u2019 reporting  needs. Finally, we interviewed officials from GSA\u2019s central office\u2014as well  as officials from four selected regions, described above\u2014to discuss the  use and usefulness of these project performance reports.", "We conducted this performance audit from May 2017 through July 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["GSA spends hundreds of millions of dollars each year on needed repairs  to the more than 1,600 federally owned buildings under its custody and  control, which are occupied by a wide variety of federal tenant agencies.  The agency\u2019s R&A program provides repairs and alterations for buildings  to ensure that they will protect both the government\u2019s investment and the  health and safety of buildings\u2019 occupants, support the transfer of federal  agencies from leased space, and be cost-effective.", "GSA prioritizes capital and small R&A projects for selection differently.  GSA gives priority to repairs to prevent deterioration and damage to  buildings, their support systems, and operating equipment. GSA\u2019s central  office uses criteria based on agency-wide strategic goals to rank and  prioritize projects for funding. According to GSA\u2019s Fiscal Year 2019  Congressional Justification, the agency prioritizes R&A capital projects  relative to a set of six criteria, each of which consider factors such as  space consolidation, customer priorities, project urgency, facility  conditions, historic status, and code compliance. For small R&A projects, GSA\u2019s central office reviews those with estimated costs exceeding  $250,000 and develops an \u201capproved\u201d list of projects for its regions using  criteria similar to those used to prioritize capital projects. GSA\u2019s small  R&A projects primarily focus on building repairs and equipment and other  replacement issues.", "The Federal Buildings Fund (FBF), established by the Public Buildings  Act Amendments of 1972 and administered by GSA, is the primary  source of funds for all operating and capital costs associated with federal  space\u2014including repairs and alterations. GSA collects rent from tenant  agencies, deposits it into FBF, and is appropriated obligational authority  by Congress to fund real property acquisition, repairs and alterations,  operation, maintenance, and disposal. As shown in figure 1, the amount  of funding appropriated in obligational authority for R&A projects has  steadily decreased since fiscal year 2014\u2014and has been below the  amount GSA requested each fiscal year. According to GSA officials, this  decline in funding has contributed to the agency\u2019s backlog of deferred  maintenance. In fiscal year 2018, GSA requested more than $1.4 billion  for R&A activities; $666 million in obligational authority was appropriated  from the FBF to perform major and minor repairs and alterations. GSA  has requested $909.7 million for R&A activities for fiscal year 2019.", "GSA\u2019s Public Buildings Service manages R&A projects through its central  office in Washington, D.C., and 11 regional offices. GSA\u2019s central office  establishes programming, design, and construction standards and  guidance, and provides technical backup, as needed. GSA officials in  both the central and regional offices are involved in assessing the needs  of federal facilities and guiding R&A project development and execution.  Once a project is authorized and funded, GSA\u2019s regional offices oversee  the design and construction phases of the project, from the procurement  of design through the management of construction until project closeout.", "Further details of GSA\u2019s R&A project design and construction delivery  process are shown in figure 2."], "subsections": []}, {"section_title": "GSA Collects Information on R&A Projects Electronically and Is Taking Steps to Improve the Collection of Small Project Information", "paragraphs": [], "subsections": [{"section_title": "Regional GSA Offices Collect Information on Capital and Small R&A Projects Electronically", "paragraphs": ["In order to track projects, GSA has developed numerous systems that  regional officials are required to use to collect information electronically  on R&A projects. Each of these systems is used to collect different types  of information, such as information on potential projects or funding details.  These systems are used throughout the phases of GSA\u2019s project design  and construction delivery process, starting at the point that a potential  project is first identified, and each system serves various management  purposes, as noted in table 1.", "While GSA uses all of these systems to collect information on R&A  projects, ePM/ePMXpress is the system used to track a project\u2019s progress  because it supports and facilitates the tracking of project status and  related performance reporting. GSA regional officials initially create  records of capital projects in ePM early in the planning process\u2014about 2  years before funding is requested from Congress\u2014and for small projects  in ePMXpress soon after they are authorized for initial funding. Once a  project is entered into ePM/ePMXpress, GSA project team members  (which include the project manager, other regional GSA staff, and may  include external contractors) populate and update key types of project  information at specific points in the project\u2019s design and construction  delivery process.", "GSA\u2019s central office first introduced ePM as a pilot project in 2009 and, to  establish consistency in the information collected, issued minimum  requirement guidelines for the project information to be input in the  system in 2011. These guidelines require project team members to  enter specific information on both capital and small projects into ePM.  GSA introduced ePMXpress in late 2012, and it provides regional officials  with a simplified interface to input and track small project information. This  simplification is reflected in the types and amounts of information GSA  requires project teams to collect in ePM compared to ePMXpress:", "For capital projects in ePM, there are 42 modules such as project  details, funding, contracts, and schedule data.", "For small projects in ePMXpress, there are 7 modules\u2014program  information, project details, project team details, schedule, funding,  project manager financials, and file manager information.", "Within these modules, project team members are required to input  specific baseline and actual milestone dates in ePM/ePMXpress for  both small and capital projects, including when a project\u2019s design is  complete, when construction is authorized to begin, and when  construction is substantially complete. Capital projects require 57  milestones, compared with up to 16 milestones for small projects.", "See appendix II for additional information on the specific types of  information that regional GSA officials are required to collect on their  capital and small R&A projects.", "GSA guidelines also encourage project team members to collect and  record additional R&A project information in ePM/ePMXpress\u2014beyond  what is required for capital and small projects\u2014as a best practice.  Officials from GSA\u2019s central office said storing additional information in  this system encourages collaboration across both project teams and  regions, promotes a project management culture that results in more  efficiency, and allows GSA to more efficiently prepare reports for its  customers. Officials from three of the four regional offices we contacted  provided examples of project team members in their region inputting more  information on their R&A projects than required by GSA\u2019s central office.", "For example, officials in one region said they have required their project  team members to collect additional information on their projects that allow  the region to monitor staff workload, forecast the number of future small  projects that may be needed, and ensure that officials have sufficient  resources available to oversee their region\u2019s projects."], "subsections": []}, {"section_title": "GSA Is Continuing Efforts to Improve Its Collection of Small R&A Project Information", "paragraphs": ["According to GSA officials, they have seen improvements in the collection  of capital R&A project information since first requiring regional offices to  use ePM. Officials from GSA\u2019s central office said that since ePM was first  introduced in 2009, they have worked with regional officials to adjust the  types of information that project team members must input to improve the  completeness, timeliness, and usefulness of project information collected.  As a result, GSA officials reported that project team members are now (1)  consistently creating capital R&A projects in ePM and (2) regularly  updating information on these projects in a complete and timely manner,  throughout the agency\u2019s project design and construction delivery process.  Officials from GSA\u2019s central office said they verify that the projects have  been entered into ePM when regional officials request them for inclusion  in GSA\u2019s budget, a process that occurs during a project\u2019s early planning  stages. These officials added that once a capital project is funded,  project team members are required to actively manage its details in ePM,  providing regular updates through various reporting tools. Furthermore,  they stated that, as few new capital projects are funded each year, each  capital project is highly visible and subject to a degree of scrutiny that  leads to the identification and correction of any errors in ePM. In  addition, according to GSA officials, missing project information would be  captured in regional performance reports. For these reasons, GSA  officials said they do not develop reports on the creation of capital  projects in ePM or the timeliness of updates made to these projects.", "Project team members we interviewed said that having information on  capital R&A projects in ePM is useful in a number of ways. For example,  project team members from all four regions we interviewed said they find  the \u201cearned value\u201d tool in ePM to be useful for project management. This  tool uses schedule and budget information to forecast how a capital  project is expected to progress and analyzes progress as new information  is added. In addition, officials from two regions stated that ePM is a good  tool for storing project documents for internal agency use, and officials  from one of the regions said ePM offers a useful means to securely  transmit capital project documents to both internal and external  stakeholders.", "GSA also reported improvements in the completeness and timeliness of  updates to small projects\u2019 information in ePMXpress in recent years. GSA  conducts monthly checks to assess the number of small projects in  ePMXpress with information that is either missing or out of date and  issues reports to its regions summarizing the results of these checks. In  May 2015, GSA issued an internal memorandum that reiterated its  existing requirement that all small R&A projects be created in ePMXpress  and updated in a complete and timely manner. In October 2016, GSA\u2019s  reports showed that, of all small R&A projects in ePMXpress, on average,  5 percent had schedule data errors and 7 percent had budget data  errors. These rates varied across GSA\u2019s regional offices, from 0 to 11  percent for schedule errors and 1 to 16 percent for budget errors. To  reduce the rate of budget data errors, in 2017 GSA began using some  contract award information available in EASi or FMIS to assess small  projects\u2019 performance, instead of relying on information input in  ePMXpress. GSA\u2019s central office officials said that they found the  information in these systems to be more up to date. After GSA  implemented this action, its September 2017 report showed that less than  one percent of small R&A projects had errors in their schedule or budget  data. Specifically, nine of GSA\u2019s 11 regions had no small R&A projects  with schedule errors, and 10 regions had no budget errors.", "GSA has reported that the rate at which project team members initially  create all of their small R&A projects in ePMXpress has also improved in  recent years. Each month, officials from GSA\u2019s central office take steps to  verify that funded projects have been created in ePMXpress by manually  reconciling information between ePMXpress and IRIS. GSA\u2019s stated  goal is to have 100 percent of small projects created in ePMXpress, and  its guidelines require project team members to create all small projects in  ePMXpress within 30 days of being approved for funding. We found that  recent GSA reports on this reconciliation showed that the overall  percentage of small projects having been created in the system has  improved. At the beginning of fiscal years 2016, 2017, and 2018,  nationwide compliance trended from 81 percent to 95 percent to 92  percent, respectively. In addition, the lowest percentage of small projects  created in ePMXpress in any one individual region at the start of fiscal  year 2016\u201461 percent\u2014had improved to 88 percent by the outset of  fiscal year 2017 and was 85 percent at the beginning of fiscal year 2018.  At that time, the percentage of small projects created in ePMXpress  ranged, by region, between 85 and 100 percent. GSA officials said they  expect to find some small projects to be missing in ePMXpress because,  in some cases, not enough time will have elapsed between the date of  funding and the date of the reconciliation. GSA officials explained that  they are continuing to take steps to emphasize the importance of having  complete and timely information on all small R&A projects in ePMXpress  to its regional offices. For example, to support the expectation that all  small projects are created in ePMXpress, one official from GSA\u2019s central  office said monthly meetings are held with regional officials to discuss  expectations for the completeness and quality of the project information.", "Regional officials, including project team members, told us that  ePMXpress is not useful to their work on small R&A projects, a situation  that has limited the extent to which the officials use this tool, an outcome  that can affect the completeness and timeliness of small project  information. Specifically, officials from one region said that they view  ePMXpress solely as a tracking tool for GSA\u2019s central office, not as a  project management tool. In addition, some regional officials said they do  not find ePMXpress to be effective as a project management tool  because ePMXpress does not allow them to collect information on useful  project details, such as why schedules or cost estimates change during a  project or why certain events happened. Project team members from  three regions said that they continue to maintain offline \u201ccuff records\u201d\u2014 which allow them to customize their notes on why things happened during  a project\u2014because they are easier to access and update. Similarly,  officials from all four regions we interviewed noted that the process of  manually creating and updating all of their small projects in ePMXpress\u2014 of which there are hundreds each year\u2014is time consuming. Furthermore,  small R&A projects can often be started and completed in a short period  of time, and can be completed before a project team is required to create  a record in ePMXpress (within 30 days of a project\u2019s approval). For this  reason, officials from one region said that it is not useful to use  ePMXpress for these projects. Officials in another region also reported  that one of the functions that makes ePM useful for managing capital  projects\u2014that it can securely transmit documents outside of GSA\u2014is not  useful for small projects because they do not require as much interaction  with external parties.", "GSA has begun considering replacement systems for ePM/ePMXpress  that GSA officials suggested could include the automated creation of  projects upon project approval. As of March 2018, GSA had developed a  statement of work to begin pursuing a replacement for ePM/ePMXpress.  According to officials from the Office of GSA\u2019s Chief Information Officer,  the overall goals of a replacement include ensuring that it is easier for  project team members to use than the current system. However, the  capabilities of any such system are not currently known, nor are the ways  in which a different system would affect the challenges reported by  regional officials.", "In the meantime, GSA is continuing to emphasize the importance of using  ePMXpress to create and capture information for all small R&A projects to  its regional offices, as the agency is using the information to support both  ongoing and new efforts. For example, creating and updating project  information in a timely manner improves GSA\u2019s ability to assess R&A  projects\u2019 performance at the individual, regional, and national levels, as  discussed later in this report. In fiscal year 2018, GSA plans to use  project information input in ePM/ePMXpress to support its efforts to  improve communication with tenant agencies, and GSA guidelines state it  will be important that project team members use ePMXpress throughout  all project phases for their small projects and ensure that the required  information is up to date. In addition, the overall amount of information  that project team members are required to input will increase moving  forward because GSA is now requiring staff to create additional small  projects in ePMXpress in a shorter period of time. In March 2018, GSA  both reduced the time that project teams have to create small projects in  ePM/ePMXpress from 30 to 15 days and also began requiring that  additional, non-R&A small projects be created in the system. GSA has  estimated this will result in approximately 1,100 additional projects being  created in ePMXpress each year."], "subsections": []}]}, {"section_title": "GSA Uses Schedule and Budget Measures to Assess the Performance of R&A Projects and Is Taking Steps to Improve Reporting", "paragraphs": [], "subsections": [{"section_title": "GSA Uses Schedule- and Budget-Related Performance Measures to Assess R&A Projects", "paragraphs": ["GSA\u2019s central office assesses the performance of capital and small R&A  projects across its regional offices by focusing primarily on schedule and  budget-related measures. According to internal GSA guidelines on  performance measures, measuring projects\u2019 schedule and budget  performance allows GSA to continuously improve the project delivery and  accountability of its work in order to demonstrate good stewardship of its  stakeholders\u2019 limited funding.", "GSA assesses the performance of R&A projects using a few key  measures. First, GSA uses a \u201ctimely award\u201d measure. According to  internal GSA guidelines on performance measures, the \u201ctimely award\u201d  measure reflects the effectiveness of early planning by assessing the  timeliness of the obligation of funds for construction contracts following a  project\u2019s initial authorization. This measure is based on schedule  information that project team members input in ePM/ePMXpress and, as  mentioned earlier, budget information from the FMIS and EASi systems to  compare planned obligations, projected contract award amounts, and  planned contract award dates to actual results. Specifically, GSA officials  stated that a project\u2019s performance relative to the timely award measure  is determined based on the percentage of awards that are made within  set timeframes. This measure varies slightly between capital and small  projects; for example, a capital project is viewed as successful if 90  percent of its planned obligation dollars are awarded within 30 days of its  planned \u201cbaseline\u201d award dates set at a project\u2019s outset, and partially  successful if this awarding occurs within 45 days. Conversely, a small  project is deemed successful if 85 percent of its planned obligation dollars  are awarded within 30 days of its baseline award dates or within 10  percent of its estimated construction costs. If 80 percent of these funds  are awarded within 45 days or 20 percent of estimated construction costs,  a small project is considered partially successful with respect to this  measure.", "GSA also has two \u201cproject delivery\u201d measures. Once construction begins,  GSA uses information from ePM/ePMXpress, EASi, and FMIS to assess  whether projects are delivered \u201con-schedule\u201d and \u201con-budget\u201d by  comparing the alignment of a project\u2019s (1) estimated baseline schedule  and budget to its (2) actual schedule and budget. As shown in figure 3,  GSA\u2019s project-delivery measures focus on the time between the start of  construction and substantial completion, which is the date on which a  project is suitable for occupancy. GSA\u2019s project delivery targets are to  have 85 percent of R&A projects be completed within 10 percent of their  baseline schedules, and 85 percent of them to have total costs within 10  percent of their baseline budgets. GSA reported that it uses these  measures to understand how capital R&A projects contribute to its  agency-wide strategic objective to establish GSA as a more effective  provider of real estate services for all agencies. According to GSA  officials, tracking the rate at which capital projects\u2014including capital R&A  projects\u2014are completed on time and within budget helps regional officials  manage project expectations with their customers.", "GSA reported that most of its R&A projects met the agency\u2019s overall  timely-award and project-delivery performance targets in fiscal year 2017.  For the timely award measure, GSA reported that in fiscal year 2017, 93  percent of capital projects had their planned obligation dollars awarded  within 30 days of their baseline award dates and that 87 percent of small  projects had awards made within 45 days of their baseline dates. For  the project delivery measure, GSA reported that 99 percent of all capital  projects completed on-schedule and 99 percent were on-budget in fiscal  year 2017. In that same year, GSA reported that 88 percent of small  R&A projects were on-schedule and 86 percent were on-budget. GSA  arrived at these results by rolling up information on individual projects\u2019  performance. Officials from GSA\u2019s central office said that capital projects  are typically completed on-schedule and on-budget at a higher rate than  small projects because capital projects have a more comprehensive  planning process and are often reviewed by third parties, and they said  that this process tends to result in more accurate baseline estimates.  These officials also said that, while GSA has assessed the performance  of its capital projects for 14 years and its regional officials have grown  familiar with measurement of these projects, the agency only began  assessing small projects\u2019 performance in the past 3 years and regional  officials are still growing accustomed to the idea of measurement on  projects with lesser costs.", "GSA officials are able to adjust the baseline schedule milestones and  cost estimates against which the agency assesses performance when  circumstances requiring additional time or funding arise during a project\u2019s  construction phase. According to an internal GSA document detailing  requirements related to performance measures and reporting for capital  projects, it is more difficult to change baseline milestones for a capital  project than to adjust the dates for a small project because once a capital  project\u2019s baselines are input in ePM, they can only be altered through an  adjudication process involving GSA\u2019s central office. As described by  officials in one GSA region, this process focuses on determining whether  the reasons provided to support a request are strong enough to justify a  baseline change. If such a change is approved by the central office,  actual performance will then be compared against adjusted baseline  milestone dates or cost estimates. GSA officials stated that, although  there is no such adjudication process for small projects, any changes to  schedule or budget baselines must be approved by regional management  or, in some cases, officials from the central office depending on the  context of the change.", "The brief nature of some small R&A projects may affect the entry of their  information and the interpretation of the reported performance. For  example, we found that all eight of the small projects we reviewed had  either missing baseline dates or baseline and actual milestone dates that  matched exactly in the system. When asked why this may occur, officials  from one region explained that small R&A projects with short durations  can sometimes be completed before a project team is required to create  the project\u2019s record in ePMXpress. This can result in either missing data  or baseline and completion dates simply being entered in a single  session. Officials from GSA\u2019s central office said that they rely on  regional officials to input accurate information throughout the course of a  project, as baselines are set and actual milestones are either met or  exceeded."], "subsections": []}, {"section_title": "GSA Reports on R&A Projects\u2019 Performance at Regional and National Levels and Is Introducing New Reporting Intended to Create a Consistent Understanding of Performance", "paragraphs": ["GSA\u2019s central office produces regional and national reports and provides  them to their regional offices to facilitate internal discussion on R&A  projects\u2019 performance. Specifically, GSA shares the reports containing  regional and overall results of its timely award measure, project delivery  measures, and the previously discussed reconciliation measure to  encourage conversations among senior GSA leadership and regional  management. For example, one report compares projects\u2019 actual  progress with baseline milestones using the project delivery measures to  assess the accuracy of teams\u2019 planning. GSA also shares R&A project  delivery measure results with the Office of Management and Budget  when compiling its annual performance reports.", "Regional officials varied in the extent to which they viewed R&A  performance reports as useful, and some regions have developed their  own approaches to understanding projects\u2019 performance. For example,  officials in all four GSA regions we interviewed said that some reports  distributed by the central office are not specific to their information needs.  Officials from one of these regions described one report as having little  value because it is difficult to understand what message the report is  intended to convey. Officials from another region said they do not find a  particular report to be useful because\u2014in addition to the timely award  measure that GSA emphasizes in working to understand R&A project  performance\u2014it also includes less prominent milestones in identifying  whether a project is on schedule. These officials said that while their  region focuses on significant milestones like a project\u2019s contract award  date (\u201ctimely award\u201d measure) to assess progress, the report often flags  projects as being behind schedule based on less critical interim  milestones that can be done concurrently with other tasks, such as  submitting a document for legal review. When regional officials have not  found the reports shared by GSA\u2019s central office to be useful, some said  they rely on varying sources of information to understand performance.  For example, officials from one region we interviewed said they use raw  data, made available by the central office, to create reports that they feel  offer a more complete picture of performance in their region and highlight  projects that may be at risk. Similarly, officials from another region said  they create custom consolidated reports to discuss projects and obtain an  overall impression of the information available, track and assign  workloads, and assess any relevant trends emerging across projects.", "Officials from GSA\u2019s central office said they are aware that some regions  have not found R&A performance reports to be useful. These officials 1)  acknowledged that the extent of information and features that  ePM/ePMXpress offers is less than some regions have told them they  need to manage their projects and 2) said updating these reports only  once or twice per month is not often enough for some regions. The  officials added that some regions\u2019 opting to rely on other sources of  information has contributed to an inconsistent understanding of R&A  projects\u2019 performance across the agency. GSA has been conducting  outreach to its regional offices to better understand what information  regions find useful to understanding their projects\u2019 performance. GSA\u2019s  plan for this outreach states that one of its aims is to ensure that regions  clearly understand the purpose, outcome, and value of new reports being  developed. According to this plan, GSA intends to assess the  effectiveness of its outreach by gathering feedback from regional officials  and reviewing analytics on usage of the reports developed.", "As outreach to regions continues, GSA has begun to introduce what  officials describe as \u201cself-service dashboard\u201d reports to present a  consolidated view of R&A project information, with the intent of promoting  a consistent understanding of performance across the agency. According  to GSA\u2019s outreach plan for one of the forthcoming dashboards, GSA  intends for these new reports to improve the transparency and timeliness  of information on R&A projects, increase accountability, help identify  information gaps and redundancies, and expand knowledge sharing  across the agency. Even with these dashboards, GSA officials  acknowledge that some regional offices may also continue to rely on  other sources of information but added that the near real-time nature and  ability to filter information offered by the dashboards will allow regional  officials to do more with the information that their project teams input on  their projects than in the past.", "Specifically, GSA recently introduced a Capital Program Information  Dashboard, which is an interactive, online presentation of information on  all capital projects\u2014including R&A projects\u2014that is updated as often as  daily, in some cases, using information from ePM, IRIS, FMIS, and other  sources. The overall Capital Program Information Dashboard consists of  a series of dashboards that present project information in a number of  ways. For example, the National Summary Dashboard is comprised of  three sections:", "Program Measures Performance: This section provides a national and  regional view of schedule and budget performance for capital projects,  using the 85 percent fiscal year 2018 target as a reference line to  show how each region is performing.", "Program Award Performance: This section provides a national and  regional view of capital projects\u2019 performance with regard to GSA\u2019s  timely award measure, displaying comparisons of actual contract  award dates and original baseline dates.", "Program Summary: This section provides a national and regional view  of capital projects, both by dollars appropriated and by the number of  projects, for categories including: active projects, projects declared  substantially complete within the current fiscal year, and overall  combined totals. This section displays these values at a regional level  in chart form and by state in an interactive map.", "At the same time that GSA introduced regional and national-focused  dashboard reports on capital projects, it also introduced (1) a Project  Details Dashboard for capital projects that provides project-level  information by region and state and (2) a Project Award Performance  Dashboard that provides capital project-level information for planned  awards; this dashboard can be filtered by fiscal year, program, vendor,  project name, and contract type or number. Both of these dashboards  have multiple sections; for example, the Project Award Performance  Dashboard includes sections that focus on performance relative to the  project delivery and timely award measures, highlight capital projects that  may require adjustments to their schedule or budget baselines, and detail  reasons for requested changes to baselines.", "In April 2018, GSA also launched a draft version of a dashboard for small  projects that it expects to give regional officials direct access to up-to-date  information on their small R&A projects. Similar to the Capital Project  Information Dashboard, the Small Project Dashboard will integrate  information from systems including ePMXpress, IRIS, EASi, and FMIS.  GSA\u2019s plan for implementation states that this dashboard will present  regional officials with a consolidated view of program and project  information that includes status updates on timely-award and project- delivery measures. GSA expects that this dashboard, which is to be  finalized before the end of fiscal year 2018, will offer \u201cnear real-time  access\u201d to small project information and reports to facilitate program  management and data-driven decision-making. Finally, GSA officials said  the agency is also planning to introduce a dashboard that will provide its  customer agencies with up-to-date information in 2018. GSA expects this  report to remove the delay between the inputting of project information  and its accessibility to all parties involved, making the information more  transparent both internally and externally.", "GSA\u2019s ability to assess and understand the performance of R&A projects  will continue to rely on project team members\u2019 entry of information as it  finalizes its set of dashboard reports. GSA documentation on the  introduction of the Small Projects Dashboard states that because  ePM/ePMXpress will continue to serve as a key source of schedule  information, regional officials\u2019 regular input of R&A project information will  be needed to make the dashboards meaningful. This documentation  also suggests that regional officials consider entering additional project  information, beyond what is required, so it will be available to them in the  dashboards. Officials from GSA\u2019s central office acknowledge that their  ongoing outreach to the regional offices emphasizes the importance of  complete and timely information\u2014as discussed earlier\u2014to the agency\u2019s  ability to comprehensively understand R&A projects\u2019 performance."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to GSA for comment. An official in  GSA\u2019s Audit Management Division told us in an email that the agency had  no comments on the draft report.", "We will send copies of this report to appropriate congressional  committees and the Administrator of the General Services Administration.  In addition, we will make copies available to others upon request, and the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at 202-512-2834 or rectanusl@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to discuss how GSA (1) collects information on repair  and alteration (R&A) projects and (2) assesses the performance of R&A  projects. The scope of the work focused on R&A projects from two R&A  program funding streams: \u201ccapital\u201d R&A projects (those with costs greater  than $3.095 million) and \u201csmall\u201d R&A projects (those with costs less than  or equal to $3.095 million and greater than $25,000); we did not include  projects related to new building construction projects or reimbursable  work authorization projects, which are those performed by GSA but  funded by other federal agencies to improve or renovate federal facilities.  We collected information on systems supporting GSA\u2019s management of  its R&A projects, including its Electronic Project Management  (ePM/ePMXpress) system, Pegasys, Financial Management Information  System (FMIS), Inventory Reporting Information System (IRIS), and  Enterprise Acquisition Solution integrated (EASi) system. Despite some  discussions of the accounting systems involved with R&A projects, this  review did not involve a financial audit of the R&A program. We also  reviewed our prior work and reports from the GSA\u2019s Office of Inspector  General to obtain background information and identify any existing audit  findings on the R&A program that might be relevant for our objectives.", "To determine how GSA collects information on individual R&A projects,  we reviewed documentation related to the R&A program, both provided to  us by GSA and found on the agency\u2019s web site. In addition, we reviewed  GSA reports of the rates at which regional officials have created and  updated information on their small projects in a timely and complete  manner in ePMXpress. By reviewing reports generated by GSA\u2019s central  office\u2014which are (1) based on their manual reconciliation of information  between ePMXpress and IRIS and (2) based on the GSA identified errors  in on-budget and on-schedule data in ePMXpress, EASi, and FMIS\u2014we  were able to assess the variance between regions in the extent to which  project team members created their small R&A projects in ePMXpress\u2014 and subsequently updated this information as projects move forward\u2014 between 2015 and 2017. We reviewed the information in these reports to  identify potential trends in regions\u2019 complete and timely entry of R&A  project information and interviewed GSA officials about the sources of  information used to generate the reports and steps officials take to ensure  its accuracy. However, we did not independently verify the accuracy of  the data contained in these reports.", "We also selected 12 R&A projects using GSA\u2019s central office data from  October 2013 through August 2017 to understand how information is  input into the systems by regional officials, how it is used by officials from  GSA\u2019s central office and selected regional offices, and whether there are  any issues affecting the information\u2019s completeness or timeliness. We  selected the 2013 to 2017 time frame because this time period represents  the period after GSA officials said that they began tracking small projects  in the system used to collect information on project status, and the period  represents the most recent data available at the time of our selection. For  our project selection, we obtained data from GSA central office for all  R&A projects that existed but not were closed out as of the beginning of  fiscal year 2014 or had been added since the beginning of fiscal year  2014. We reviewed documentation on the collection of the data and  analyzed the data for missing information and found the data to be  sufficiently reliable for the purpose of selecting projects to understand  how R&A project information is input by regional officials and how it is  used across GSA.", "To arrive at these 12 projects, we selected projects from regions that had  one or more capital R&A projects categorized as having been  substantially completed between October 2013 and August 2017, as most  regions undertake few capital projects in a given year. We initially  identified seven GSA regions that had substantially completed at least  one capital project during this timeframe and narrowed this number to  four regions\u2014GSA regions 5, 6, 7 and 9\u2014which had varying degrees of  performance based on our initial review of GSA reports containing  schedule and budget metrics. Specifically, to ensure that we were not  selecting four comparable regions, we selected two regions that  surpassed GSA performance targets and two regions that did not surpass  their performance targets. In addition, we gave preference to regions in  proximity to our field offices\u2019 locations to minimize costs associated with  site visits. Within each of the four selected regions, we identified the sole  capital R&A project that was substantially completed between October  2013 and August 2017, for a total of four capital projects. We then  selected two small projects\u2014those with the highest and lowest  \u201cEstimated Cost of Construction at Award\u201d and had been active between  October 2013 and August 2017\u2014for a total of eight small projects (see  table 2 for list of selected projects).", "We conducted interviews with regional officials from these four regions\u2014 visiting two of the four regions that were located near our field offices.  During those interviews, we discussed data entry processes and posed  questions both specific to the region\u2019s selected projects and the R&A  program more broadly. During interviews with both GSA\u2019s central and  regional offices, we asked officials to explain how the IRIS,  ePM/ePMXpress, EASi, and any other systems are used throughout the  planning and execution of R&A projects. Specifically, we reviewed and  discussed processes related to project information collection in general  with regional officials and specific project detail, budget, and schedule  information with the project team members who input information on the  selected capital and small projects into these systems; for example, we  raised questions about instances in which baseline and actual dates  matched for some projects. Information on the projects we selected is not  generalizable to all R&A projects, and the views of the regional officials  interviewed are not generalizable to all of GSA\u2019s regional offices.", "To determine how GSA assesses the performance of its R&A projects,  we requested and reviewed documentation from GSA on the extent to  which the agency evaluates the performance of its R&A projects and  inquired about the project information systems used to produce related  performance reports. In addition to the documents provided by GSA, we  used publicly available annual reports and budget justifications detailing  GSA\u2019s overall goals and mission and the ways in which GSA has stated  that the R&A program supports these aims. After an initial review of  documents provided by GSA, we identified and requested specific internal  guidance and guidelines, information on the criteria used to select  individual R&A projects for funding, and reports related to both capital and  small projects\u2019 performance. We used information contained in some of  these reports to identify the performance metrics GSA has established for  assessing R&A projects\u2019 performance and to assess overall regional  performance relative to these metrics, as reported by GSA. We did not  independently verify the accuracy of the on-schedule and on-budget  figures reported by GSA, a methodological consideration that was beyond  the scope of this review; our focus was on how GSA assesses the  performance of R&A projects\u2014not on the results of their assessments.  We also interviewed officials from GSA\u2019s central office and the four  regional offices to discuss the agency\u2019s assessment of R&A projects\u2019  performance and the performance reports provided to regional officials.  Furthermore, we reviewed information about GSA\u2019s plans to introduce  new \u201cdashboard\u201d reports and outreach that officials from GSA\u2019s central  office had conducted to understand regional officials\u2019 reporting needs.  Finally, we interviewed these central-office officials and officials from the  selected regional offices described above to discuss the use and  usefulness of the performance reports.", "We conducted this performance audit from May 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: General Services Administration\u2019s Capital and Small Project Data-Entry Requirements for ePM and ePMXpress", "paragraphs": ["The tables below show the details and differences in the General  Services Administration\u2019s (GSA) data entry requirements for capital  projects in ePM and small projects in ePMXpress. Although some of the  ePM modules may not be applicable for every project, there are  mandatory fields and functions in each that drive GSA\u2019s metrics,  measures, and standardized reports. Table 3 identifies the elements  required, by GSA\u2019s fiscal year 2018 measures, for capital projects and  indicates whether each is used in a key performance indicator.", "Table 4 identifies the small-project data entry requirements for  ePMXpress, as required for fiscal year 2018 measures, and whether they  are used in a key performance indicator.", "Table 5 contains a list of standard project milestones that must be  maintained by GSA project managers in the ePM and ePMXpress  schedule modules, as identified in table 3 for capital projects and table 4  for small projects."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgements", "paragraphs": ["In addition to the contact named above, Nancy Lueke, Assistant Director;  Chad Williams, Analyst-in-Charge; Terence Lam; Les Locke; Cynthia  Nelson; Josh Ormond; Amy Rosewarne; Kelly Rubin; James Sweetman,  Jr.; and Crystal Wesco made key contributions to this report."], "subsections": []}]}], "fastfact": ["The General Services Administration (GSA) spends millions yearly to maintain approximately 1,600 federally owned buildings. Without repair and alteration projects, building safety may decline and operating costs may increase.", "GSA collects information from its regional offices to monitor progress and assess the performance of building projects. Timely and complete information used to create reports is essential for GSA to have an understanding of regional and national performance. Some regional offices said that GSA\u2019s reports don't meet their needs to manage the projects.", "GSA is introducing new dashboard reports to help address this issue."]}
{"id": "GAO-18-42", "url": "https://www.gao.gov/products/GAO-18-42", "title": "Information Technology: Agencies Need to Involve Chief Information Officers in Reviewing Billions of Dollars in Acquisitions", "published_date": "2018-01-10T00:00:00", "released_date": "2018-01-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government invested more than $90 billion on IT in fiscal year 2016. However, prior IT expenditures have produced failed projects. Recognizing the severity of issues, in December 2014 Congress enacted IT acquisition reform legislation (referred to as the Federal Information Technology Acquisition Reform Act, or FITARA). Among other things, OMB's FITARA implementation guidance requires covered agencies' chief acquisition officers to identify IT contracts for the CIOs to review and approve.", "GAO's objectives were to determine the extent to which (1) federal agencies identify IT contracts and how much is invested in them, and (2) federal agency CIOs are reviewing and approving IT acquisitions. To do so, GAO reviewed data on IT contracts from fiscal year 2016 at 22 agencies and compared agency actions to law and OMB guidance."]}, {"section_title": "What GAO Found", "paragraphs": ["Most of the 22 selected agencies did not identify all of their information technology (IT) contracts. The selected agencies identified 78,249 IT-related contracts, to which they obligated $14.7 billion in fiscal year 2016. However, GAO identified 31,493 additional contracts with $4.5 billion obligated, raising the total amount obligated to IT contracts in fiscal year 2016 to at least $19.2 billion (see figure).The percentage of additional IT contract obligations GAO identified varied among the selected agencies. For example, the Department of State did not identify 1 percent of its IT contract obligations. Conversely, 8 agencies did not identify over 40 percent of their IT-related contract obligations.", "Many of the selected agencies that did not identify these IT acquisitions did not follow Office of Management and Budget's (OMB) guidance. Specifically, 14 of the 22 agencies did not involve the acquisition office in their process to identify IT acquisitions for Chief Information Officer (CIO) review, as required by OMB. In addition, 7 agencies did not establish guidance to aid officials in recognizing IT. Until agencies involve the acquisitions office in their IT identification processes and establish supporting guidance, they cannot ensure that they will identify all IT acquisitions. Without proper identification of IT acquisitions, agencies and CIOs cannot effectively provide oversight of these acquisitions.", "In addition to not identifying all IT contracts, 14 of the 22 selected agencies did not fully satisfy OMB's requirement that the CIO review and approve IT acquisition plans or strategies. Further, only 11 of 96 randomly selected IT contracts at 10 agencies that GAO evaluated were CIO-reviewed and approved as required by OMB's guidance. The 85 IT contracts not reviewed had a total possible value of approximately $23.8 billion. Until agencies ensure that CIOs review and approve IT acquisitions, CIOs will continue to have limited visibility and input into their agencies' planned IT expenditures and will not be able to use the increased authority that FITARA's contract approval provision is intended to provide. Further, agencies will likely miss an opportunity to strengthen CIOs' authority and the oversight of IT acquisitions. As a result, agencies may award IT contracts that are duplicative, wasteful, or poorly conceived."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 39 recommendations, including that agencies ensure that acquisition offices are involved in identifying IT and issue related guidance; and to ensure IT acquisitions are reviewed according to OMB guidance. OMB and 20 agencies generally agreed with or did not comment on the recommendations. One agency agreed with one recommendation, but disagreed with another. GAO believes this recommendation is warranted. One agency disagreed with two recommendations. GAO subsequently removed one of these, but believes the other recommendation is warranted, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Information systems are critical to the health, economy, and security of  the nation. To support these systems, the federal government invested  more than $90 billion in information technology (IT) in fiscal year 2016.  However, prior IT expenditures have too often produced failed projects\u2014 that is, projects with multimillion dollar cost overruns and schedule delays  measured in years, and with questionable mission-related achievements.", "Recognizing the severity of issues related to the government-wide  management of IT, in December 2014, Congress enacted IT acquisition  reform legislation (commonly referred to as the Federal Information  Technology Acquisition Reform Act, or FITARA) as part of the Carl Levin  and Howard P. \u2018Buck\u2019 McKeon National Defense Authorization Act for  Fiscal Year 2015. FITARA holds promise for improving agencies\u2019  acquisitions of IT and enabling Congress to monitor agencies\u2019 progress,  as well as for holding agencies accountable for reducing duplication and  achieving cost savings. In addition, with the enactment of FITARA, the  federal government has an opportunity to strengthen the authority of chief  information officers (CIO) to provide needed direction and oversight of  agencies\u2019 IT acquisitions, among other areas.", "We recently testified that, while agencies have made progress in  implementing the law, its further implementation is critical to improving IT  management. We have also noted that continued congressional  oversight of agencies\u2019 implementation of FITARA is essential to help  ensure that these efforts succeed.", "Among other things, FITARA requires CIOs of major civilian agencies to  review and approve IT contracts. With this in mind, you asked us to  review whether CIOs are approving IT contracts as required by this law.  Our objectives were to determine the extent to which (1) federal agencies  identify IT contracts and how much is invested in them, and (2) federal  agency CIOs are reviewing and approving IT acquisitions.", "Our review included the Office of Management and Budget (OMB) and 22  of the 24 agencies covered by the Chief Financial Officers Act. We did  not include the Department of Defense because it is excluded from the  provision in FITARA requiring CIO approval of IT contracts. We also did  not include the Department of Homeland Security because we recently  issued a report on the department\u2019s implementation of FITARA.", "To determine the extent to which federal agencies identify IT contracts  and how much is invested in them, we requested that each of the 22  agencies provide us a list of their IT contract obligations for fiscal year  2016. Separately, we identified IT-related contracts from each of these  agencies using fiscal year 2016 data reported on USAspending.gov. We then compared these resulting lists of IT-related contracts to the agency- provided lists of contracts to determine which contracts the agencies had  not identified. We also reviewed other agency documentation, such as IT  acquisition policies and processes, as well as acquisition plans and  strategies. In addition, we interviewed the agencies\u2019 acquisition officials  and officials from the Office of the CIO to determine their processes for  identifying IT contracts.", "To determine the extent to which federal agency CIOs are reviewing and  approving IT acquisitions, we randomly selected 10 contracts at 10  agencies (100 total contracts) to review in depth. For each of the 100  selected contracts, we asked the associated agency to confirm that the  contract was IT-related and requested evidence of the CIO\u2019s or CIO  designee\u2019s review and approval. We compared the resulting  documentation to FITARA and OMB guidance to determine whether the  IT acquisitions had been appropriately reviewed and approved.", "We also reviewed agency documentation on IT acquisition processes and  procedures and compared it to the requirements in FITARA and OMB  guidance. Further, we interviewed the agencies\u2019 officials, including  officials in the Office of the CIO, to clarify their respective processes and  policies.", "We found the data from USAspending.gov and contract data provided by  the agencies to be sufficiently reliable for the purposes of our reporting  objectives and used the data as evidence to support our findings,  conclusions, and recommendations. For the USAspending.gov data, we  reviewed publicly available documentation related to the database, such  as the USAspending.gov data dictionary. For both the USAspending.gov  and agency-provided contract data, we tested the datasets to look for  duplicate records and missing data in key fields. We also interviewed  agency officials to corroborate the data. A full description of our  objectives, scope, and methodology can be found in appendix I.", "We conducted this performance audit from July 2016 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["While IT investments have the potential to improve lives and  organizations, federally funded IT projects can\u2014and, too often, have\u2014 become risky, costly, and unproductive mistakes. We have previously  reported that the federal government has spent billions of dollars on failed  or troubled IT investments, such as  the Office of Personnel Management\u2019s (OPM) Retirement Systems  Modernization program, which was canceled in February 2011, after  spending approximately $231 million on the agency\u2019s third attempt to  automate the processing of federal employee retirement claims;  the United States Coast Guard\u2019s effort, initiated in 2010, to replace its  aging electronic health records system, but which was discontinued in  October 2015 after spending nearly $67 million. As a result, the Coast  Guard currently has a manual, paper-based health records  management process;  the tri-agency National Polar-orbiting Operational Environmental  Satellite System, which was halted in February 2010 by the White  House\u2019s Office of Science and Technology Policy after the program  spent 16 years and almost $5 billion;  the Department of Veterans Affairs\u2019 (VA) Scheduling Replacement  Project, which was terminated in September 2009 after spending an  estimated $127 million over 9 years;  the Farm Service Agency\u2019s Modernize and Innovate the Delivery of  Agricultural Systems program, which was halted in July 2014 after  spending $423 million to modernize IT systems over 10 years; and  the Department of Health and Human Services\u2019 (HHS) Healthcare.gov  website and its supporting systems, which were to facilitate the  establishment of a health insurance marketplace by January 2014, but  which encountered significant cost increases, schedule slips, and  delayed functionality.", "These failed or troubled projects often suffered from a lack of disciplined  and effective management, such as project planning, requirements  definition, and program oversight and governance. In many instances,  agencies had not consistently applied best practices that are critical to  successfully acquiring IT investments.", "To help address these ongoing challenges, in February 2015, we added  improving the management of IT acquisitions and operations to our list of  high-risk areas for the federal government. This area highlighted several  critical IT initiatives in need of additional congressional oversight,  including (1) reviews of troubled projects; (2) efforts to increase the use of  incremental development; (3) efforts to provide transparency relative to  the cost, schedule, and risk levels for major IT investments; (4) reviews  of agencies\u2019 operational investments; (5) data center consolidation; and  (6) efforts to streamline agencies\u2019 portfolios of IT investments. We noted  that implementation of these initiatives had been inconsistent and more  work remained to demonstrate progress in achieving IT acquisitions and  operations outcomes.", "In our February 2015 high-risk report, we also identified actions that OMB  and federal agencies needed to take to make progress in this area. These  included implementing FITARA and at least 80 percent of our  recommendations related to the management of IT acquisitions and  operations within 4 years. Specifically, between fiscal years 2010 and  2015, we made 803 recommendations to OMB and federal agencies to  address shortcomings in IT acquisitions and operations, including many  to improve the implementation of the previously mentioned six critical IT  initiatives and other government-wide, cross-cutting efforts.", "In February 2017, we issued an update to our high-risk series and  reported that, while progress had been made in improving the  management of IT acquisitions and operations, significant work still  remained to be completed. For example, as of May 2017, OMB and  federal agencies had fully implemented 380 (or about 47 percent) of the  803 recommendations. Nevertheless, in fiscal year 2016, we made 202  new recommendations, thus further reinforcing the need for OMB and  agencies to address the shortcomings in IT acquisitions and operations.  Also, beyond addressing our prior recommendations, our 2017 high-risk  update noted the importance of OMB and federal agencies continuing to  expeditiously implement the requirements of FITARA."], "subsections": [{"section_title": "Agencies Are to Follow Federal Requirements for Acquisitions", "paragraphs": ["The Federal Acquisition Regulation (FAR) is the primary regulation for  use by federal executive agencies in their acquisition of supplies and  services with appropriated funds. The FAR requires agencies to perform  planning for all acquisitions. Acquisition planning begins when an agency  need is identified and includes developing requirements and creating  written acquisition plans. A detailed acquisition plan must address all of  the technical, business, management, and other significant  considerations that will control the acquisition. It should include, among  other things, a statement of need, cost, a plan of action, and milestones.  The FAR is less specific on the requirements for an acquisition strategy,  but it states that acquisition planning should include developing the  overall strategy for managing the acquisition.", "Once a contract is awarded, the awarding agency must enter certain  information into the Federal Procurement Data System-Next Generation,  the federal government\u2019s database that captures information on contract  awards and obligations and is the primary database that serves as the  source of other contracting data systems, such as USAspending.gov.  The system captures information on contract awards and obligations,  including, the vendor, and amount obligated. Further, agencies must  select a product and service code that represents the predominant  product or service being purchased. Product and service codes are used  to describe and identify products, services, and research and  development spending within the system.", "In an effort to eliminate redundancies and increase efficiencies in federal  acquisition, in September 2015, the Category Management Leadership  Council and OMB developed a government-wide category structure to  support category management implementation across the federal  government. The Council and OMB reviewed the product and service  codes and grouped them into 19 individual spend categories, including IT.  See appendix II for a list of the 79 IT-related product and service codes."], "subsections": []}, {"section_title": "Federal Law Establishes Agency IT Management Responsibilities", "paragraphs": ["Over the last three decades, Congress has enacted several laws to help  federal agencies improve the management of IT investments. For  example, the Clinger-Cohen Act of 1996 requires agency heads to  appoint CIOs and specifies many of their responsibilities with regard to IT  management. Among other things, CIOs are responsible for  implementing and enforcing applicable government-wide and agency IT  management principles, standards, and guidelines; assuming  responsibility and accountability for IT investments; and monitoring the  performance of IT programs and advising the agency head whether to  continue, modify, or terminate such programs. The Clinger-Cohen Act,  as amended, also defines IT as: any equipment or interconnected system  or subsystem of equipment, used in the automatic acquisition, storage,  analysis, evaluation, manipulation, management, movement, control,  display, switching, interchange, transmission, or reception of data or  information by the agency or a contractor under a contract with the  agency.", "As previously mentioned, recognizing the severity of issues related to the  government-wide management of IT, Congress enacted FITARA in December 2014. The law includes provisions related to seven areas at  covered agencies:", "Agency CIO authority enhancements. CIOs at agencies are  required to (1) approve the IT budget requests of their respective  agencies, (2) certify that OMB\u2019s incremental development guidance is  being adequately implemented for IT investments, (3) approve the  appointment of other agency employees with the title of CIO, and (4)  review and approve contracts for IT. With regard to the review of IT  contracts, FITARA requires that agency CIOs review and approve IT  contracts prior to award, unless that contract is associated with a non- major investment. When the contract is associated with a non-major  investment, the CIO are allowed to delegate the review and approval  duties to an official that reports directly to the CIO. Alternatively, the  law states that an agency may use its governance processes to  approve any IT contract, as long as the agency CIO is a full  participant in the governance processes.", "Federal data center consolidation initiative. Agencies are required  to provide OMB with a data center inventory, a strategy for  consolidating and optimizing the data centers (to include planned cost  savings), and quarterly updates on progress made. The law also  requires OMB to develop a goal for how much is to be saved through  this initiative, and provide annual reports on cost savings achieved.", "Enhanced transparency and improved risk management. OMB  and agencies are to make detailed information on federal IT  investments publicly available, and agency CIOs are to categorize  their investments by level of risk. In addition, in the case of major IT  investments rated as high risk for 4 consecutive quarters, the law  requires that the agency CIO and the investment\u2019s program manager  conduct a review aimed at identifying and addressing the causes of  the risk.", "Portfolio review. Agencies are to annually review IT investment  portfolios in order to, among other things, increase efficiency and  effectiveness and identify potential waste and duplication. In  establishing the process associated with such portfolio reviews, the  law requires OMB to develop standardized performance metrics, to  include cost savings, and to submit quarterly reports to Congress on  cost savings.", "Expansion of training and use of IT acquisition cadres. Agencies  are to update their acquisition human capital plans to address  supporting the timely and effective acquisition of IT. In doing so, the  law calls for agencies to consider, among other things, establishing IT  acquisition cadres or developing agreements with other agencies that  have such cadres.", "Government-wide software purchasing program. The General  Services Administration (GSA) is to develop a strategic sourcing  initiative to enhance government-wide acquisition and management of  software. In doing so, the law requires that, to the maximum extent  practicable, GSA should allow for the purchase of a software license  agreement that is available for use by all executive branch agencies  as a single user.", "Maximizing the benefit of the federal strategic sourcing initiative.  FITARA requires that OMB issue regulations for federal agencies that  do not use the federal strategic sourcing initiative to purchase  services and supplies that are offered by this initiative. The  regulations are to include a requirement for agencies to analyze the  comparative value between what is to be purchased and what the  strategic sourcing initiative offers."], "subsections": []}, {"section_title": "OMB Established Guidance for Agencies to Implement FITARA", "paragraphs": ["In June 2015, OMB released guidance describing how agencies are to  implement FITARA. The guidance emphasizes the need for CIOs to  have full accountability for IT acquisition and management decisions, and  gives agencies considerable flexibility in making those decisions. Among  other things, the guidance is intended to: assist agencies in aligning their IT resources with agency missions,  goals, and requirements; establish government-wide IT management controls that will meet the  law\u2019s requirements, while providing agencies with flexibility to adapt to  agency processes and mission requirements;  clarify the CIO\u2019s role and strengthen the relationship between  department CIOs and bureau or component CIOs; and  strengthen CIO accountability for IT cost, schedule, performance, and  security.", "With regard to CIOs\u2019 review and approval of IT contracts, OMB\u2019s  guidance expands upon FITARA in a number of ways. Specifically,  according to the guidance:", "CIOs may review and approve IT acquisition strategies and plans,  rather than individual IT contracts;", "CIOs can designate other agency officials to act as their  representatives, but the CIOs must retain accountability;", "Chief Acquisition Officers (CAO) are responsible for ensuring that all  IT contract actions are consistent with CIO-approved acquisition  strategies and plans; and", "CAOs are to indicate to the CIOs when planned acquisition strategies  and acquisition plans include IT."], "subsections": []}]}, {"section_title": "Agencies Identified $14.7 Billion in IT Obligations, but Did Not Identify an Additional $4.5 Billion", "paragraphs": ["OMB\u2019s FITARA implementation guidance requires agencies\u2019 CAOs to  indicate to CIOs when planned acquisition strategies and acquisition  plans include IT. Given the Category Management Leadership Council  and OMB\u2019s categorization of IT product and service codes, CAOs should  be identifying the obligations that have IT-related codes.", "The 22 selected agencies identified 78,249 IT-related contracts, to which  they obligated approximately $14.7 billion in fiscal year 2016. Of that  amount, approximately $14 billion was categorized as IT-related,  consistent with the Category Management Leadership Council and  OMB\u2019s product and service codes, and approximately $626 million was  categorized under other, non-IT codes.", "The $626 million in obligations with non-IT codes could contain  embedded IT or be associated with IT programs. For example, the  agencies reported IT-related acquisitions categorized under such non-IT  codes as IT/telecommunications training, data analysis, and research and  development. Three agencies accounted for most of these non-IT  obligations: the Department of Veterans Affairs (VA) accounted for $220  million, the Environmental Protection Agency (EPA) accounted for $156  million, and the Department of Labor (Labor) accounted for $105 million.", "However, in addition to the obligations that agencies reported to us, we  identified 31,493 additional contracts at 21 agencies with IT-related  product and service codes. The associated agencies obligated  approximately $4.5 billion to these contracts, raising the total amount  obligated to IT contracts in fiscal year 2016 to at least approximately  $19.2 billion. Figure 1 reflects the obligations agencies reported to us  relative to the obligations we identified.", "The percentage of additional IT contract obligations that we identified  varied among the selected agencies. For instance, the Department of  State (State) did not identify 1 percent of its IT contract obligations.  Conversely, eight agencies\u2014the Departments of the Interior (Interior),  Transportation (Transportation), and the Treasury (Treasury), as well as  the National Science Foundation (NSF), the U.S. Agency for International  Development (USAID), HHS, GSA, and OPM did not identify over 40 percent of their IT contract obligations. Figure 2 reflects the contract  obligations that the selected agencies reported to us (both with IT-related  codes and those with non-IT codes) relative to the obligations we  identified. For additional information about the IT obligations identified by  these agencies, see appendix III.", "Agencies offered various reasons for why they had not identified the  approximately $4.5 billion in IT obligations. For example, officials from  OPM and NSF stated that their agencies only identified new IT contracts  and did not include contract modifications in their identified IT obligations,  making their submissions much smaller. NSF also noted that it only  identified IT contracts over $150,000. In addition, GSA and Transportation  officials stated that at least one of the Category Management Leadership  Council\u2019s IT product and service codes should not be considered IT. For  instance, an official in GSA\u2019s Vendor Management Office stated that  contracts using a product and service code for miscellaneous  maintenance, repair, and rebuilding should not be categorized as IT.  Likewise, Transportation officials provided examples of contracts that the  agency did not consider being IT-related, even though they were  categorized under IT product and service codes for program review or  development services. In addition, Transportation and USAID officials  stated that they did not use the complete list of IT product and service  codes in their identification efforts. A Treasury official in the Office of the  CIO stated that the department focused on codes that were the most  important.", "We agree that the Council\u2019s IT product and service codes could include  contracts that are not IT. Further, as previously discussed, IT is included  in product and service codes that the Council did not identify as IT.  Nonetheless, the Council has provided a valuable service in developing  specific categories from which agencies can select in identifying IT. To  the extent that agencies have concerns about specific categories, they  could raise them to the Council.", "In addition, the majority of the selected agencies that did not identify the  $4.5 billion in IT obligations also did not follow OMB\u2019s guidance to have  the CAO identify all IT acquisitions for CIO review and approval. As those  tasked with monitoring their respective agencies\u2019 acquisition activities, the  offices of the CAOs are in a unique position to identify prospective IT  acquisitions to the CIOs. Of the 21 selected agencies that did not identify  the approximately $4.5 billion in IT obligations, 8 involved the acquisition  offices in the identification of their IT acquisitions. For example, OPM\u2019s  process followed OMB\u2019s guidance by directly involving its senior  procurement executive in the identification of the acquisitions.", "Conversely, the other 14 agencies did not follow OMB\u2019s guidance to have  a process in which the acquisition offices identified, or helped to identify,  IT acquisitions for CIO review. Among these agencies, for example, EPA  officials indicated that program office officials are responsible for  identifying IT requirements and obtaining the appropriate approvals.  EPA\u2019s process does not require acquisition office participation. Instead,  the program office officials work with IT officials to determine if the  contract is IT-related and subject to the IT acquisition approval policy.", "In addition, 7 agencies reported that they rely on the requesting program  offices to self-identify whether their acquisitions are IT-related. Table 1  summarizes the officials responsible for the identification of IT  acquisitions at the selected agencies.", "We have previously reported on the importance of developing and issuing  policies or supporting guidance in order to successfully implement  processes and achieve related objectives. In recognition of the  importance of establishing guidance to assist agency officials in  identifying IT, 14 of the 22 selected agencies issued such guidance.", "However, 7 agencies did not. Specifically, the Departments of Agriculture  (USDA), Energy (Energy), Justice (Justice), Labor, and Transportation;  the National Aeronautics and Space Administration (NASA); and the  Social Security Administration (SSA) did not establish guidance regarding  the identification of IT-related acquisitions. For instance, officials in  Justice\u2019s Office of the CIO stated that the agency does not follow a  prescribed process to determine which acquisitions are IT-related and  does not use guidance or checklists to aid with the identification. One  other agency, Interior, had established draft guidance to assist officials  when identifying IT; however, the agency did not identify a schedule for  finalizing the draft guidance.", "Until agencies involve the acquisition office in their IT identification  processes, and establish and effectively implement supporting guidance,  they will likely not be able to ensure that all IT acquisitions are identified.", "As a result, agencies risk not having appropriate oversight of IT worth  billions of dollars."], "subsections": []}, {"section_title": "Most Agency CIOs Are Not Reviewing and Approving IT Acquisitions in Accordance with OMB\u2019s Requirements", "paragraphs": ["FITARA and OMB\u2019s associated implementation guidance require major  civilian agency CIOs to review and approve acquisitions of IT either  directly, or through the agency\u2019s governance processes. In particular,  OMB\u2019s guidance states that agencies shall not approve any acquisition  plan or strategy that includes IT without the agency CIO\u2019s review and  approval.", "OMB\u2019s guidance also allows the CIO to delegate these responsibilities to  other agency officials to act as the CIO\u2019s representative; however, staff  in OMB\u2019s Office of the Federal CIO noted that these assignments need to  be approved by OMB. Alternatively, FITARA and OMB\u2019s guidance allow  agencies to use IT governance processes to conduct these reviews and  approvals as long as the CIO is a full participant in the process.", "Most of the processes at the 22 selected agencies do not fully satisfy  OMB\u2019s requirements that the CIO review and approve IT acquisition plans  or strategies (or that the CIO participate in a governance process that  reviews and approves IT acquisition plans and strategies). Specifically,  8 agencies\u2019 processes fully satisfy OMB\u2019s requirements, while 14 of the  agencies\u2019 processes do not fully satisfy the requirements. Of these, 8  agencies partially satisfy the requirements and 6 do not satisfy the  requirements. For example,", "NSF fully satisfies OMB\u2019s requirement by requiring that the CIO  review and approve each IT acquisition plan. Similarly, SBA requires  the CIO to review and approve each IT acquisition plan over the  FAR\u2019s simplified acquisition threshold.", "HUD partially satisfies OMB\u2019s requirements in that its process only  requires the office of the CIO to review a subset of IT acquisitions  (those over $500,000). In addition, the HUD CIO has delegated the  approval authority to the Deputy CIO and others within the Office of  the CIO, but this delegation has not been approved by OMB.", "VA does not yet have a process in place that satisfies OMB\u2019s  requirements, but officials in VA\u2019s Office of Information and  Technology stated that they are currently developing processes and  procedures necessary to implement FITARA accountability and  responsibilities for IT acquisitions. While the agency did not submit a  documented time frame for its plans, VA officials stated that they  would like to implement the new process by the second quarter of  fiscal year 2018.", "Table 2 summarizes the extent to which the selected agencies\u2019 processes  satisfy OMB\u2019s requirements for the CIO to review and approve IT  acquisition plans. Appendix IV provides additional details about the  agencies\u2019 processes that are used to review and approve IT acquisitions.", "Of 96 randomly selected IT contracts at 10 agencies, only 11 acquisitions  associated with these contracts had been reviewed and approved as  required by OMB. The acquisitions associated with 85 contracts, with a  total possible value of approximately $23.8 billion, did not receive the  appropriate level of review. Further, despite having CIO review and  approval processes in place that fully or partially satisfied OMB\u2019s  requirements, four agencies (the Department of Commerce (Commerce),  HHS, Justice, and SSA) did not consistently ensure that the CIO or a  designee reviewed and approved the acquisition plan or strategy.", "Table 3 summarizes the number and total possible value of IT contracts  that we reviewed for consistency with OMB\u2019s requirements. Appendix V  provides more details on the selected IT acquisitions and the CIO  approval of them.", "Four key factors contributed to the acquisitions associated with the 85  contracts not being reviewed and approved by the CIOs in accordance  with OMB\u2019s requirements:", "Non-compliant processes. As previously mentioned, agencies\u2019  processes at 7 of the 10 agencies did not fully satisfy OMB\u2019s  requirements that the CIO review and approve IT acquisition plans  and strategies. Four agencies reported that they were following their  own agency processes which we determined do not fully align with  requirements. For example, NASA officials responsible for information  regarding one of the selected contracts stated that the CIO only  provides technical guidance and concurrence on the acquisition plan  and does not approve the acquisition plan. This is not consistent with  OMB\u2019s requirement that the CIO or designee review and approve IT  acquisition plans.", "In addition, for 16 contracts, the respective agencies stated that there  were no acquisition plans associated with the particular acquisitions.  For example, a director in USDA\u2019s Forest Service\u2019s acquisition office  issued waivers for 2 acquisitions, making them exempt from needing  acquisition plans. Thus, the CIO did not review and approve  acquisition plans for those contracts. As noted earlier, OMB\u2019s  guidance states that if there is not an acquisition plan or strategy, the  contract action itself should be reviewed and approved. However, in  all 16 cases, the associated agencies\u2019 CIOs did not undertake such  reviews.", "Improper delegation. We identified 16 instances where agencies  allowed CIOs to delegate their review to levels lower than agency  policy or OMB allows. For example, Treasury\u2019s CIO delegated  contract approval to the component CIOs\u2014one of whom further  delegated this approval based on monetary thresholds to a variety of  other officials. According to the component\u2019s policy, one of the  selected acquisitions, worth over $22 million, should have been  approved by the component\u2019s Deputy CIOs, Associate CIOs, or  Deputy Associate CIOs. However, this particular acquisition was  approved by an IT Project Manager. Further, two agencies allowed  their CIOs to delegate IT acquisition approvals to other officials,  without having these assignments approved by OMB. For example,  three of NASA\u2019s selected acquisitions were reviewed and approved by  the component CIOs; however, NASA had not had these assignments  approved by OMB.", "Approval of other documentation. In 26 instances, CIOs or  designees reviewed and approved acquisition documentation other  than the required acquisition plan or strategy. For example, CIOs or  designees reviewed and approved documents such as a requisition, a  procurement request, or a business case analysis. While the CIOs or  designees reviewed and approved some form of acquisition  documentation prior to the award of these acquisitions, these forms of  documentation did not have all the elements typically associated with  an acquisition plan. As a result, the CIO (or designee) may not have  been adequately equipped to make an informed decision about the  acquisition.", "Undocumented approvals. We identified 2 instances where the  agency reported that the CIO or designee approved the IT acquisition,  but did not document the approval. For example, regarding one  contract, Commerce officials stated that one of the agency\u2019s selected  acquisitions was reviewed and approved by its component CIO for the  Bureau of Economic Analysis. However, the agency could not provide  evidence to show the CIO\u2019s approval beyond an e-mail after the  contract was signed stating that the CIO was aware of and had  approved that particular acquisition.", "Until agencies fully satisfy FITARA and OMB\u2019s requirements by ensuring  that CIOs, or their appropriate designees, review and approve IT  acquisitions, CIOs risk continuing to have limited visibility and input into  their agencies\u2019 planned IT expenditures and not being able to use the  increased authority that FITARA\u2019s contract approval provision is intended  to provide. In addition, agencies are missing an opportunity to strengthen  CIOs\u2019 authority and to provide needed direction and oversight of their IT  acquisitions. As a result, agencies may award IT contracts that are  duplicative, wasteful, or poorly conceived."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Given the history of failures and amount of money at stake, it is  imperative that agencies properly oversee IT acquisitions. While the 22  selected agencies reported $14.7 billion in IT obligations, 21 agencies did  not identify $4.5 billion as IT. Further, because the selected agencies did  not always identify their IT acquisitions, it is likely that agencies have  additional unidentified IT spending. Among other reasons, this shortfall  existed because many agencies did not ensure that their acquisition  offices were involved in the identification process, or provide clear  guidance for ensuring that IT was properly identified. Without proper  identification of IT acquisitions, agencies and CIOs cannot effectively  provide oversight of them.", "In addition, many of the selected agencies covered by FITARA did not  ensure the appropriate CIO review and approval of IT acquisitions that  were identified. The CIOs\u2019 review and approval presents an opportunity  for CIOs to increase visibility into agency IT and recognize opportunities  for improvement. However, the review and approval processes at 14 of  the selected agencies were not in full compliance with OMB  requirements, and only 11 of 96 randomly selected IT acquisitions were  appropriately reviewed and approved by the CIO. As a result, agencies  awarded IT contracts with a total possible value of $23.8 billion without  the required CIO review and approval. Consequently, CIOs had limited  visibility and insight into their agencies\u2019 IT, thereby increasing the risk of  entering into contracts that were duplicative, wasteful, or poorly  conceived."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 39 recommendations to federal agencies.", "We are making the following 3 recommendations to USDA:", "The Secretary of Agriculture should ensure that the office of the CAO  is involved in the process to identify IT acquisitions.  (Recommendation 1)", "The Secretary of Agriculture should direct the CAO and CIO to issue  specific guidance to ensure IT-related acquisitions are properly  identified. (Recommendation 2)", "The Secretary of Agriculture should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 3)", "We are making the following 2 recommendations to Commerce:", "The Secretary of Commerce should ensure that the office of the CAO  is involved in the process to identify IT acquisitions.  (Recommendation 4)", "The Secretary of Commerce should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 5)", "We are making the following 2 recommendations to Education:", "The Secretary of Education should ensure that the office of the CAO  is involved in the process to identify IT acquisitions.  (Recommendation 6)", "The Secretary of Education should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 7)", "We are making the following 2 recommendations to Energy:", "The Secretary of Energy should direct the CAO and CIO to issue  specific guidance to ensure IT-related acquisitions are properly  identified. (Recommendation 8)", "The Secretary of Energy should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 9)", "We are making the following recommendation to HHS:", "The Secretary of HHS should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 10)", "We are making the following 2 recommendations to the Department of  Housing and Urban Development:", "The Secretary of Housing and Urban Development should ensure that  the office of the CAO is involved in the process to identify IT  acquisitions. (Recommendation 11)", "The Secretary of Housing and Urban Development should ensure that  IT acquisition plans or strategies are reviewed and approved  according to OMB\u2019s guidance. (Recommendation 12)", "We are making the following 3 recommendations to Interior:", "The Secretary of the Interior should ensure that the office of the CAO  is involved in the process to identify IT acquisitions.  (Recommendation 13)", "The Secretary of Interior should direct the CAO and CIO to finalize  and issue guidance on identifying IT acquisitions in order to ensure  the CIO review and approval of those acquisitions. (Recommendation  14)", "The Secretary of the Interior should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 15)", "We are making the following 2 recommendations to Justice:", "The Attorney General should direct the senior procurement executive  and CIO to issue specific guidance to ensure IT-related acquisitions  are properly identified. (Recommendation 16)", "The Attorney General should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 17)", "We are making the following 3 recommendations to Labor:", "The Secretary of Labor should ensure that the office of the CAO is  involved in the process to identify IT acquisitions. (Recommendation  18)", "The Secretary of Labor should direct the CAO and CIO to issue  specific guidance to ensure IT-related acquisitions are properly  identified. (Recommendation 19)", "The Secretary of Labor should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 20)", "We are making the following 2 recommendations to State:", "The Secretary of State should ensure that the office of the CAO is  involved in the process to identify IT acquisitions. (Recommendation  21)", "The Secretary of State should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 22)", "We are making the following recommendation to Treasury:", "The Secretary of the Treasury should ensure that IT acquisition plans  or strategies are reviewed and approved according to OMB\u2019s  guidance. (Recommendation 23)", "We are making the following 3 recommendations to Transportation:", "The Secretary of Transportation should ensure that the office of the  CAO is involved in the process to identify IT acquisitions.  (Recommendation 24)", "The Secretary of Transportation should direct the CAO and CIO to  issue specific guidance to ensure IT-related acquisitions are properly  identified. (Recommendation 25)", "The Secretary of Transportation should ensure that IT acquisition  plans or strategies are reviewed and approved according to OMB\u2019s  guidance. (Recommendation 26)", "We are making the following 2 recommendations to VA:", "The Secretary of VA should ensure that the office of the CAO is  involved in the process to identify IT acquisitions. (Recommendation  27)", "The Secretary of VA should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 28)", "We are making the following recommendation to EPA:", "The Administrator of EPA should ensure that the office of the CAO is  involved in the process to identify IT acquisitions. (Recommendation  29)", "We are making the following 3 recommendations to NASA:", "The Administrator of NASA should ensure that the office of the CAO is  involved in the process to identify IT acquisitions. (Recommendation  30)", "The Administrator of NASA should direct the CAO and CIO to issue  specific guidance to ensure IT-related acquisitions are properly  identified. (Recommendation 31)", "The Administrator of NASA should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 32)", "We are making the following recommendation to NRC:", "The Chairman of NRC should ensure that the office of the senior  procurement executive is involved in the process to identify IT  acquisitions. (Recommendation 33)", "We are making the following recommendation to OPM:", "The Director of OPM should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 34)", "We are making the following recommendation to SBA:", "The Administrator of SBA should ensure that the office of the senior  procurement executive is involved in the process to identify IT  acquisitions. (Recommendation 35)", "We are making the following 3 recommendations to SSA:", "The Commissioner of SSA should ensure that the office of the senior  procurement executive is involved in the process to identify IT  acquisitions. (Recommendation 36)", "The Commissioner of SSA should direct the senior procurement  executive and CIO to issue specific guidance to ensure IT-related  acquisitions are properly identified. (Recommendation 37)", "The Commissioner of SSA should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 38)", "We are making the following recommendation to USAID:", "The Administrator of USAID should ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  (Recommendation 39)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OMB and the other 22 agencies  included in our review. Among the comments received, 16 agencies  (Energy, GSA, HHS, HUD, Interior, Justice, Labor, NASA, OPM, SBA,  SSA, State, Transportation, USAID, USDA, and VA) agreed with our  recommendations; 2 agencies (EPA and OMB) did not agree or disagree  with our recommendations; 1 agency (Education) partially agreed with our  recommendations; 1 agency (NRC) disagreed with our recommendations;  and 2 agencies (Treasury and NSF) had no comments on the  recommendations. One other agency (Commerce) did not provide  comments on the report.", "The agencies\u2019 comments that we received, and our evaluations of them,  are summarized as follows:  In comments provided via e-mail on December 8, 2017, an OMB GAO  liaison did not agree or disagree with our findings. The official stated  that improved coordination and collaboration between CIOs, CAOs,  and senior procurement executives is critical, but represents a  significant cultural shift for most agencies. The official added that  OMB\u2019s Office of Federal Procurement Policy and Office of the Federal  CIO are working closely with agency CAOs and CIOs through the CIO  Council and CAO Council to discuss practices that agencies have  found helpful in achieving this cultural change.", "In comments provided via e-mail on November 18, 2017, a Senior  Advisor from USDA\u2019s Office of the CIO stated that the department  concurred with the findings in our report and had no additional  comments.", "In written comments, Education concurred with one of our  recommendations, which called for the department to ensure that the  office of the CAO is involved in the process to identify IT acquisitions.  However, Education did not concur with a second recommendation to  ensure that IT acquisition plans or strategies are reviewed and  approved according to OMB\u2019s guidance. The department stated that  the CIO reviews and approves IT acquisition strategies and plans as  part of his review and approval of IT investments. Specifically, the  department stated that its Departmental Directive OCIO: 3-108,  \u201cInformation Technology Investment Management\u201d establishes a  process for Office of the CIO review of IT acquisitions. Further, the  department stated that its Statement of Work Review Process adds  increased rigor to the CIO\u2019s review and approval by requiring all  acquisitions with IT elements to be submitted for Office of the CIO  review. Finally, the department stated that the Federal Student Aid  Investment Review Board charter documents the agency CIO as a  voting member. The department added the CIO is required to vote on  Federal Student Aid IT investments greater than $10 million. For  Federal Student Aid investments less than $10 million, the CIO is  provided the same level of insight as any other Investment Review  Board member, but has delegated the required vote to the Federal  Student Aid CIO.", "The IT Investment Management Directive, together with the  department\u2019s associated Lifecycle Management Framework  (referenced in the directive), indicates that the office of the CIO is to  review IT acquisition plans. However, the department\u2019s Statement of  Work Review Process does not require the review and approval of  acquisition plans. Instead, the process states that the office of the CIO  may review IT acquisition plans or strategies as one of several  possible documents, including statements of work or cost estimates.", "We also reviewed the Federal Student Aid Investment Review Board  charter and updated our report to reflect the department CIO\u2019s  involvement on the Federal Student Aid\u2019s Investment Review Board.  Based on this collective information, we updated our assessment of  Education\u2019s IT acquisition policy to reflect that the department had  partially met OMB\u2019s requirements. Nevertheless, the CIO\u2019s review of  the department\u2019s acquisition plans and strategies should be required,  rather than optional. Thus, we believe that our recommendation to  ensure that IT acquisition plans or strategies are reviewed and  approved according to OMB\u2019s guidance is still warranted. Education\u2019s  comments are reprinted in appendix VI.", "In written comments, Energy concurred with our two  recommendations directed to the department and stated that it has  activities underway to revise the department\u2019s acquisition policy.", "Energy added that it planned to address the recommendations by  December 31, 2017. Energy\u2019s comments are reprinted in appendix  VII.", "In comments provided via e-mail on December 7, 2017, a  Management Analyst in HHS\u2019s Office of the CIO stated that the  department agreed with the recommendation and had no comments  on the report.", "In written comments, HUD stated that it concurred with our two  recommendations to the department. HUD\u2019s comments are reprinted  in appendix VIII.", "In written comments, Interior stated that it concurred with our three  recommendations to the department. Interior\u2019s comments are  reprinted in appendix IX.", "In comments provided via e-mail on November 27, 2017, a Program  Analyst from Justice\u2019s Internal Review and Evaluation Office stated  that the department concurred with our two recommendations. The  department also provided technical comments, which we have  incorporated in the report, as appropriate.", "In written comments, Labor concurred with our three  recommendations that we directed to the department. These  recommendations called for the department to (1) ensure that the  office of the CAO is involved in the process to identify IT acquisitions,  (2) issue specific guidance to ensure IT-related acquisitions are  properly identified, and (3) ensure that IT acquisition plans or  strategies are reviewed and approved according to OMB\u2019s guidance.  Labor detailed actions recently taken to implement each of the  recommendations and submitted documentation to support its  assertions. For example, the department submitted its Acquisition  Plan Preparation Guide and related acquisition plan templates to  show that it had issued guidance on identifying IT and required the  CIO review and approval of IT acquisition plans. Implementation of  these steps should help ensure appropriate oversight of IT  acquisitions. Labor\u2019s comments are reprinted in appendix X.", "In written comments, State agreed with both of our recommendations.  In particular, regarding our recommendation to ensure that the office  of the CAO is involved in the process to identify IT acquisitions, the  department stated that senior State officials, including the CAO and  CIO, will develop a plan to ensure that the CAO monitors acquisition  activities and ensures acquisition decisions are consistent with all  applicable laws, such as FITARA.", "Further, regarding the recommendation to ensure that the  department\u2019s IT acquisition plans or strategies are reviewed and  approved according to OMB\u2019s guidance, State referenced its capital  planning and investment control guide that describes how a group  under the direction of the CIO reviews acquisition strategies during  the IT portfolio selection process. However, while the guide states that  the CIO is to approve the finalized IT portfolio, the guide does not  state that the CIO is to review the individual acquisition strategy  documents. As a result, our recommendation is still warranted. State\u2019s  comments are reprinted in appendix XI.", "In comments provided via e-mail on December 7, 2017, an Audit  Liaison from Treasury\u2019s Office of the CIO stated that the department  had no comments on the report. The department did not say whether  it agreed or disagreed with the recommendation, but noted that it had  planned corrective actions to work with Treasury stakeholders, to  include the Chief Procurement Executive, Bureau CIOs, and  Acquisition officials; and OMB officials to develop acquisition plans  and strategies according to OMB\u2019s FITARA guidance for IT  acquisition.", "In comments provided via e-mail on November 27, 2017, the Director  of Audit Relations and Program Improvement within the Department  of Transportation stated that the department concurred with the  findings and recommendations.", "In written comments, VA concurred with our two recommendations to  the department and stated that it is taking steps to address the  recommendations. Specifically, regarding the recommendation to  ensure that the office of the CAO is involved in the process to identify  IT acquisitions, the department stated that it had addressed this  concern by implementing an updated version of the Acquisition and  Management of VA IT Resources directive in November 2017. In its  discussion of this directive, the department stated that the CIO, in  conjunction with the CAO, collaborates on all IT actions to ensure  FITARA compliance.", "While the directive clarifies the scope of VA\u2019s IT resources subject to  the oversight authority of the CIO, the directive does not indicate that  the office of the CAO is also involved in this process. It will be  important for VA to consider this recommendation as it continues to  implement FITARA requirements.", "Further, regarding the recommendation to ensure that IT acquisition  plans or strategies are reviewed and approved according to OMB\u2019s  guidance, the department stated that its Office of Strategic Sourcing is  currently developing processes and procedures necessary to  implement FITARA accountability and responsibilities for IT  acquisitions. The department also stated that the new acquisition  review process is scheduled to be implemented in the second quarter  of fiscal year 2018. VA\u2019s comments are reprinted in appendix XII.", "In written comments, EPA stated it did not take exception to the  report\u2019s findings, conclusions, and recommendations. Regarding the  recommendation to ensure that the office of the CAO is involved in the  process to identify IT acquisitions, the agency stated that the policy  which implements interim guidance from the CIO to comply with  FITARA requirements is being updated. The agency added that future  policy revisions are to include the requirement that the CAO or a  designee will address this recommendation. EPA\u2019s comments are  reprinted in appendix XIII.", "In comments provided via e-mail on November 17, 2017, a program  analyst in GSA\u2019s GAO/Office of Inspector General Audit Management  Division stated that the agency concurred with the report and had no  additional comments.", "In written comments, NASA concurred with the three  recommendations to the agency and stated that it believes it has  already addressed them. Specifically, regarding the recommendation  to ensure that the Office of the CAO is involved in the process to  identify IT acquisitions, NASA asserted that its CAO is already  adequately involved. However, NASA did not provide evidence that it  fulfills this requirement. For instance, none of the processes  mentioned in NASA\u2019s comments support the assertion that the  acquisition office is involved in the identification of individual  acquisitions as IT. Further, the discussion of a form used to identify IT  acquisitions (NASA Form 1707) confirmed our original conclusion that  the officials identifying IT acquisitions are not in the acquisition office.", "In addition, NASA concurred with our recommendation to issue  specific guidance to ensure IT-related acquisitions are properly  identified, and stated that the agency currently has several policies  that provide such guidance. However, the policies named by the  agency (NASA Policy Directive 1000.5B, NASA Interim Directive  1000.110, NASA FAR Supplement 1804.7301, and NASA FAR  Supplement 1807.71) do not contain guidance on how the identifying  officials should determine whether an acquisition is IT-related. For  example, our review of NASA Form 1707 (required by NASA FAR  Supplement 1804.7301) showed that, while this form has instructions  on how to fill out its IT section, it does not contain guidance on how to  properly identify an acquisition as IT-related. In addition, NASA did not  provide an official policy on the role of the Center Functional Review  Team in the identification process.", "Further, NASA concurred with our recommendation to ensure that its  IT acquisition plans or strategies are reviewed and approved  according to OMB guidance and stated that, on September 27, 2017,  the CIO had issued a memo delegating the authority to review and  approve all IT acquisitions to the Center CIOs. However, as previously  mentioned, these delegations of authority need to be approved by  OMB, and NASA\u2019s delegation of IT acquisition authority had not been  approved by OMB, as required. In addition, NASA has not  demonstrated that the CIO\u2019s review and approval is occurring, as  none of the 9 acquisitions we randomly selected were reviewed and  approved by the CIO. NASA also stated that the CIO and Assistant  Administrator for Procurement review acquisition plans as part of their  participation in Acquisition Strategy Meetings. However, as we  mention in the report, not all IT contracts have acquisition strategy  meetings. NASA\u2019s comments are reprinted in appendix XIV.", "In written comments, NRC did not concur with our recommendations  and stated that our draft report did not accurately reflect the agency\u2019s  process for reviewing and approving IT acquisitions. With regard to  our recommendation to ensure that the office of the senior  procurement officer is involved in the process to identify IT  acquisitions, the agency provided technical comments which stated  that acquisition office officials review acquisitions to ensure that IT is  properly identified. However, the agency did not provide supporting  documentary evidence to support this assertion. Lacking evidence  from the agency that would enable us to verify the implementation of  the process described in its comments, we maintain that our  recommendation is warranted.", "In addition, our draft of this report included a recommendation for  NRC to ensure that IT acquisition plans or strategies are reviewed  and approved according to OMB\u2019s guidance. NRC disagreed with this  recommendation and stated in its technical comments that the agency  does not require the development of acquisition plans for acquisitions  under $1 million. Thus, the NRC CIO does not review acquisition  plans under that threshold. The agency also stated that it has a  process for approving contract actions under the $1 million threshold.", "According to OMB guidance, in the absence of acquisition plans or  strategies, CIOs may approve the corresponding contract actions.", "Since NRC has a process for approving contract actions under the $1  million threshold, we revised the report to reflect that NRC has  processes in place for the review and approval of acquisition plans in  a manner consistent with OMB guidance and removed the associated  recommendation. NRC\u2019s comments are reprinted in appendix XV and  its technical comments have been incorporated in the report, as  appropriate.", "In comments provided via e-mail on November 21, 2017, an NSF  liaison stated that the agency had no comments.", "In written comments, OPM concurred with our recommendation and  stated that the agency will review and update its policies and  processes as needed, so that they are aligned with OMB\u2019s guidance.  OPM\u2019s comments are reprinted in appendix XVI.", "In written comments, SBA agreed with our recommendation to ensure  that the office of the CAO is involved in the process to identify IT  acquisitions. SBA noted that it is not required to have a CAO, but  agreed with having its acquisition workforce involved in IT  acquisitions. Based on the agency\u2019s comments, we modified the  associated recommendation to refer to the agency\u2019s senior  procurement executive rather than the CAO. SBA stated that it has  already begun to implement the recommendation for fiscal year 2018.  SBA\u2019s comments are reprinted in appendix XVII.", "In written comments, SSA agreed with the three recommendations  that we had directed to the agency, stated that it had taken steps to  address the recommendations, and submitted supporting  documentation. In particular, SSA agreed with the recommendation to  ensure that the office of the CAO is involved in the process to identify  IT acquisitions and, in response, provided documentation that is to  detail the involvement of its Chief Financial Officer (who is the  agency\u2019s senior procurement executive) in identifying and approving  IT acquisitions. Implementation of these steps should help ensure  appropriate oversight of IT acquisitions.", "Regarding our recommendation to issue specific guidance to ensure  IT-related acquisitions are properly identified, SSA agreed with the  recommendation and stated that, according to its IT Acquisition  Approval Policy, the Chief Financial Officer notifies the CIO of IT  acquisitions by submitting acquisition plans to the CIO for approval.  However, while SSA\u2019s policy does support this method of CIO  notification, it does not provide guidance to assist in identifying IT.", "Further, SSA agreed with our recommendation to ensure that IT  acquisition plans or strategies are reviewed and approved according  to OMB\u2019s guidance and provided its September 2017 policy for  acquisition plan approval. After reviewing this policy and SSA\u2019s 2017  capital planning and investment control process, we updated our  report to show that SSA\u2019s processes satisfy OMB\u2019s requirements.  While SSA has made progress in implementing OMB\u2019s FITARA  requirements, the agency needs to demonstrate that the CIO\u2019s review  and approval are occurring, as 3 of the 10 acquisitions we randomly  selected were not reviewed and approved as required by OMB\u2019s  guidance. It will be important for SSA to consider this  recommendation as it continues to implement FITARA requirements.   SSA\u2019s comments are reprinted in appendix XVIII. The agency also  provided technical comments, which we have incorporated in the  report as appropriate.", "In written comments, USAID agreed with our recommendation and  stated that the CIO and CAO are working together to (1) ensure all IT- related acquisition plans and strategies are reviewed and approved by  the CIO and (2) further communicate this requirement to the  acquisition planning stakeholders. USAID\u2019s comments are reprinted in  appendix XIX. The agency also provided technical comments, which  we have incorporated in the report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of the Departments of Agriculture,  Commerce, Education, Energy, Health and Human Services, Housing  and Urban Development, Labor, State, the Interior, the Treasury,  Transportation, and Veterans Affairs; the U.S. Attorney General of the  Department of Justice; the Administrators of the Environmental Protection  Agency, General Services Administration, National Aeronautics and  Space Administration, Small Business Administration, and the U.S.  Agency for International Development; the Commissioner of the Social  Security Administration; the Directors of the National Science Foundation  and the Office of Personnel Management; and the Chairman of the  Nuclear Regulatory Commission. 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) 512-9286 or at pownerd@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 XX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine the extent to which (1) federal agencies  identify information technology (IT) contracts and how much is invested in  them, and (2) federal agency Chief Information Officers (CIO) are  reviewing and approving IT acquisitions.", "For both objectives, our review included the Office of Management and  Budget (OMB) and 22 agencies of the 24 agencies covered by the Chief  Financial Officer Act. We did not include the Department of Defense  because it is excluded from the relevant provision in the Federal  Information Technology Acquisition Reform Act (FITARA) requiring CIO  approval of IT contracts. Further, we did not include the Department of  Homeland Security because we recently issued a report that reviewed the  department\u2019s implementation of FITARA, including the CIO\u2019s approval of  IT contracts. For specific information on the CIOs\u2019 review of individual IT  contracts, we focused on 10 agencies covered by FITARA that obligated  the most money to IT contracts in fiscal year 2016 (except the  Departments of Defense and Homeland Security).", "To determine the extent to which federal agencies identify IT contracts  and how much is invested in them, we requested that each of the 22  selected agencies submit a list of their IT contract obligations for fiscal  year 2016. We also requested the associated contract identification  number, obligation amount, and product and service code.", "In order to determine if the agencies gave us a full accounting of their IT  obligations, we used the Category Management Leadership Council\u2019s  categorizations of federal government spending by product and service  codes. In particular, we used the Council\u2019s list of 79 IT-related codes,  which is listed in appendix II, to identify fiscal year 2016 IT-related  contract obligations on USAspending.gov. For each funding agency, we  downloaded all contracts associated with the IT-related codes, such as  purchase orders, blanket purchase agreements, and government-wide  acquisition contracts. By comparing the resulting list of IT-related  contracts on USAspending.gov data to those provided by the agencies,  we were able to determine which IT-related contract obligations the  agencies had not identified. In doing so, we gave the agency credit for  identifying the entire IT contract if an agency identified any portion of the  contract (e.g., a contract modification). Consequently, the total of  obligations that agencies did not identify is likely higher than the totals we  were able to report.", "To assess the reliability of the USAspending.gov data, we reviewed  publicly available documentation related to the database, such as the  USAspending.gov data dictionary. We also reviewed the results of our  previous reports on USAspending.gov that had identified deficiencies in  the accuracy and reliability of the reported data. For both the  USAspending.gov and agency-supplied contract data, we tested the  datasets to look for duplicate records and missing data in key fields. We  also interviewed agency officials to corroborate the data. We found the  contract data from USAspending.gov, while sometimes incomplete, were  sufficient for our purpose of identifying IT contracts and demonstrating the  amount of obligations toward IT contracts. In addition, we found the  contract data provided by the agencies to be sufficiently reliable for the  purposes of our reporting objectives. We used these data as evidence to  support our findings, conclusions, and recommendations.", "We also compared the product and service codes in the lists of IT  contracts provided by the agencies to the list of IT product and service  codes developed by the Category Management Leadership Council.  From this comparison, we determined which agency-submitted  obligations were associated with IT-related product and service codes  and which obligations were associated with non-IT codes.", "To determine the cause for any discrepancies between the agency- provided list of obligations and those found on USAspending.gov, we  asked each agency to describe and provide evidence of the Chief  Acquisition Officer\u2019s (CAO) involvement in the process for identifying IT  acquisitions for CIO review. We also collected both testimonial evidence  and documentation that described the identification process for potential  IT acquisitions. We analyzed these data from each agency to determine the involvement of the CAO and officials within the CAO\u2019s acquisition  office. We also determined the involvement of officials positioned outside  of the acquisition office, such as officials from the office requesting the IT  acquisition or from the Office of the CIO. As a result, we were able to  establish which officials were responsible for identifying acquisitions for IT  review at each agency. We also reviewed the submitted evidence to  determine whether the agencies provided guidance that clearly described  or defined IT to the identifying officials.", "To determine the extent to which federal agency CIOs are reviewing and  approving IT acquisitions, we first compiled a composite list of IT-related  contracts from fiscal year 2016 for each of the 10 selected agencies by  combining:  contracts associated with IT-related product and service codes from  USAspending.gov,  contracts associated with IT vendors from USAspending.gov,  contracts linked with major IT investments as listed on OMB\u2019s IT  Dashboard, and  contracts provided by agencies in response to our earlier request for a  list of IT contracts.", "We then randomly selected 10 IT contracts from each of the 10 agencies  on which to perform additional analysis (100 total contracts). For each of  the 100 selected contracts, we asked the associated agency to confirm  that the contract was, in fact, IT-related and requested evidence of CIO or  CIO designee review and approval of the contract\u2019s associated  acquisition. We compared the resulting documentation to FITARA and  OMB guidance to determine the extent to which the IT acquisitions had  been reviewed and approved. In order to receive full credit, agencies had  to provide evidence that the CIO had reviewed and approved the  acquisition plans or strategies for those IT acquisitions associated with  major IT investments. For IT acquisitions associated with non-major IT  investments, agencies had to provide evidence that the CIO, or a  designee that reports directly to the CIO, reviewed and approved the  acquisition plan or strategy. If agencies could not associate the IT  acquisition with a particular IT investment, we looked for evidence that the  CIO reviewed and approved the acquisition plan or strategy, since  FITARA does not state that the review and approval of these IT  acquisitions can be delegated.", "To determine whether agencies had processes in place to ensure the  review and approval of IT acquisitions, we reviewed agency  documentation on IT acquisition processes and procedures and  compared it to the requirements in FITARA and OMB guidance. We  also interviewed agency officials to clarify their respective processes and  policies. In order to receive full credit, agencies had to provide evidence  that they had a process in place that required the agency CIO to review  and approve IT acquisition plans or strategies with the exception of those  associated with non-major IT investments. Agencies received partial or no  credit if their processes had one or more of the following shortfalls: approval was not documented, delegated IT acquisition review and approval without OMB approval of did not provide the CIOs or their delegates oversight of all IT  involved the review of other documentation instead of the required  acquisition plans or strategies, or did not provide department CIO oversight over IT acquisitions at the  component level.", "We conducted this performance audit from July 2016 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: IT-Related Product and Service Codes", "paragraphs": ["In September 2015, the Category Management Leadership Council and  the Office of Management and Budget (OMB) identified a total of 79  information technology (IT)-related product and service codes, of which  43 are for IT services and 36 are for IT products. Table 4 provides details  on the IT-related services and product codes."], "subsections": []}, {"section_title": "Appendix III: Estimated Total Fiscal Year 2016 IT Obligations by Agency", "paragraphs": ["The 22 selected agencies identified approximately $14.7 billion in  obligations for information technology (IT)-related contracts in fiscal year  2016. Of that amount, approximately $14 billion was categorized as IT- related per the Category Management Leadership Council\u2019s product and  service codes, and approximately $626 million was categorized under  other, non-IT codes. In addition to the obligations that agencies reported  to us, we identified an additional $4.5 billion in obligations for contracts  with IT-related product and service codes, raising the total amount  obligated to IT contracts in fiscal year 2016 to at least approximately  $19.2 billion. Table 5 provides details on each selected agency\u2019s  obligations for IT-related contracts in fiscal year 2016."], "subsections": []}, {"section_title": "Appendix IV: Agency Acquisition Processes Used to Review and Approve IT Acquisitions", "paragraphs": ["The Federal Information Technology Acquisition Reform Act (FITARA)  and the Office of Management and Budget\u2019s (OMB) associated  implementation guidance require major civilian agency chief information  officers (CIO) to review and approve acquisitions of information  technology (IT) either directly, or as full participants in the agency\u2019s  governance processes. In particular, OMB\u2019s guidance states that  agencies shall not approve an acquisition plan or strategy that includes IT  without the agency CIO\u2019s review and approval. OMB\u2019s guidance also  allows the CIO to delegate these responsibilities to other agency officials  to act as the CIO\u2019s representative; however, staff in OMB\u2019s Office of the  Federal CIO noted that these assignments need to be approved by  OMB. Alternatively, FITARA and OMB\u2019s guidance allows agencies to use  IT governance processes to conduct these reviews and approvals, as  long as the CIO is a full participant in the process. Table 6 provides  details on the selected agencies\u2019 acquisition processes and the degree to  which the processes comply with OMB\u2019s requirements."], "subsections": []}, {"section_title": "Appendix V: Details on Selected IT Acquisitions", "paragraphs": ["Of 96 randomly selected information technology (IT) contracts at 10  agencies, 9 acquisitions associated with these contracts had been  reviewed and approved as required by the Office of Management and  Budget (OMB). The acquisitions associated with the remaining 87  contracts did not receive the appropriate levels of Chief Information  Officer (CIO) review and approval in accordance with OMB  requirements. Table 7 provides details on the selected IT acquisitions  and the CIO review and approval of them."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comment from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIV: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XV: Comments from the Nuclear Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVI: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVII: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVIII: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIX: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["David A. Powner, (202) 512-9286 or pownerd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kevin Walsh (Assistant Director),  Jessica Waselkow (Analyst in Charge), Chris Businsky, Rebecca Eyler,  Angel Ip, Tarunkant Mithani, David Plocher, Meredith Raymond, and  Adam Vodraska made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-33", "url": "https://www.gao.gov/products/GAO-19-33", "title": "Federal Personal Property: GSA and VA Have Opportunities to Improve the Exchange Sale Process", "published_date": "2018-11-16T00:00:00", "released_date": "2018-11-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to the U.S. Treasury, the government owns about $1.3 trillion in \u201cpersonal property\u201d such as computers, furniture, and vehicles. Federal law authorizes agencies to exchange or sell personal property and retain the allowances or proceeds for replacing similar needed property. These are called \u201cexchange/sale\u201d transactions. GSA is responsible for issuing exchange/sale regulations and guiding agencies on the use of the authority.", "GAO was asked to review agencies' use of the exchange/sale authority. This report (1) describes what is known about personal property exchange/sale transactions from fiscal year 2013 through fiscal year 2017 and (2) examines selected agencies' experiences using the exchange/sale authority and monitoring such activities. GAO analyzed multi-year data compiled by GSA OGP and found the data to be sufficiently reliable. GAO selected three agencies\u2014GSA, the Army, and VA\u2014based on the type, quantity, and value of personal property exchanged and sold; reviewed agencies' personal property policies; examined agencies' monitoring of exchange/sale activities; and interviewed their officials about personal property management."]}, {"section_title": "What GAO Found", "paragraphs": ["According to data compiled by the General Services Administration's Office of Government-wide Policy (GSA OGP), 27 agencies executed exchange/sale transactions, governed by statute and GSA regulations, to exchange (trade-in) or sell personal property from fiscal year 2013 through fiscal year 2017. The 27 agencies reported transactions totaling about $3.1 billion. Vehicle sales accounted for $2.6 billion (about 84 percent) of that total.", "GAO found that GSA officials who procure vehicles for federal agencies and Army officials who purchase helicopters appeared to understand the exchange/sale process and used it frequently. However, Department of Veterans Affairs (VA) officials expressed confusion about key aspects of the authority. For example, officials were unclear about how to sell property; this lack of clarity led to missed opportunities to use sale proceeds for replacing property. GSA OGP officials who guide agencies on the use of the authority acknowledged that the exchange/sale regulations can be confusing but GSA's plan to amend them is at least 2 years away. Because GSA does not plan to address this confusion in the near term through other means such as bulletins or outreach, agencies' misunderstanding of the authority could lead to additional missed opportunities to be effective stewards of government funds.", "Regarding monitoring of exchange and sale activities, GAO found that the Army monitored activities consistent with its policy. However, GSA and VA performed limited monitoring because:", "GSA had not clarified its responsibilities or defined the scope of its authority for monitoring internal GSA exchanges and sales, and", "VA did not have a detailed policy for monitoring and had not communicated information about monitoring to pertinent employees.", "Until GSA clarifies its responsibilities and the scope of its authority and VA revises its policy with pertinent details and communicates this information to staff members, neither agency will be positioned to sufficiently monitor exchange/sale activities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that GSA OGP address agency confusion about the exchange/sale authority and that GSA clarify its responsibilities and the scope of its authority. GAO is also recommending VA revise its policy to address monitoring and communicate the revision to staff. Both agencies agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government owns and manages more than a trillion dollars of  \u201cpersonal property\u201d\u2014government property other than real property\u2014 ranging from vehicles and aircraft to specialized medical equipment and  scientific devices. In fiscal year 2017, federal agencies reported  approximately $1.3 trillion in personal property assets. Over time,  agencies\u2019 personal property may no longer adequately perform the task  for which it was used. Federal law authorizes agencies to exchange  (trade-in) or sell such property still needed to meet their missions and  apply the exchange allowance or sale proceeds in whole or in partial  payment to acquire similar replacement property. Such transactions are  known as personal property \u201cexchange/sale\u201d transactions. These  transactions facilitate the replacement of property by allowing agencies to  offset the cost of new property, resulting in savings to taxpayers. Without  this authority, agencies may have to charge the full purchase price of new  property to their appropriations, while depositing the proceeds from the  disposition of their worn property in the U.S. Treasury.", "Because exchange/sale transactions provide agencies with an  opportunity to save costs, it is important that agencies using the authority  establish policies, processes, and procedures with effective controls to  help ensure they meet applicable requirements and are good stewards of  government resources. The General Services Administration (GSA) has  issued regulations that describe the terms, conditions, and reporting  requirements for using such exchanges or sales, but agencies are to  carry out the authority and adhere to legal requirements after assessing  their own needs and making decisions about whether to use the authority.", "You asked us to review agencies\u2019 use of the personal property  exchange/sale authority. This report: describes what is known about personal property exchange/sale  transactions, as reported by federal agencies from fiscal years 2013  through 2017 and examines selected agencies\u2019 experiences using the personal property  exchange/sale authority and monitoring such activities.", "To address both objectives, we reviewed applicable federal statutes and  regulations pertaining to personal property management and the  exchange/sale authority; our prior work; and reports by federal agencies\u2019  offices of inspectors general on personal property management issues.  To describe what is known about personal property exchange/sale  transactions, we analyzed annual exchange/sale summary data, as  reported to GSA\u2019s Office of Government-wide Policy (GSA OGP) by  federal agencies from fiscal year 2013 through fiscal year 2017. These  data\u2014which are the only federal government-wide data available on  exchange/sale transactions\u2014identify the agency involved in the  transactions, the transaction method, and the type and value of the  property. To assess the reliability of these data, we reviewed GSA\u2019s  electronic template provided to federal agencies for reporting data and  the user guide and other materials related to GSA\u2019s personal property  reporting tool. We interviewed GSA officials about the process for  collecting, submitting, reconciling, verifying, and compiling annual  government-wide, exchange/sale summary reports. To assess the  reliability of selected agencies\u2019 data, we interviewed officials from these  agencies (see below) about the exchange/sale data they reported to GSA  and reconciled documentation on transactions with data reported to GSA  to identify any discrepancies. We determined that the data were  sufficiently reliable to describe the agencies that use the authority and the  general types of property they acquire, but determined that data from the  Department of Veterans Affairs (VA) were unreliable.", "To examine selected agencies\u2019 experiences using the personal property  exchange/sale authority and monitoring such activities, we selected three  agencies\u2014GSA, Army, and VA\u2014based on various characteristics, such  as type, quantity, and value of personal property reported as exchanged  and sold in GSA\u2019s summary data.", "GSA: We selected GSA because it reported a high-value of  exchange/sale transactions. Within GSA, two offices have key roles in  the internal use of the exchange/sale authority. First, the Office of  Fleet Management (GSA Fleet) uses the authority to manage the  government-wide motor-pool program that acquires vehicles and then  leases them to other federal agencies. Second, the Office of  Administrative Services (GSA OAS) is the office responsible for  performing personal-property management functions, such as  developing policy and procedures, internal to the agency.", "Army: We selected the Army within the Department of Defense (DOD)  because it reported a relatively low-number of high-value items, such  as aircraft. In particular, the Army Program Executive Office for  Aviation (Army Aviation) accounted for the majority of high-value  aviation-related exchange/sale transactions within DOD. Beyond the  three selected agencies, we heard from other agencies when we  attended a joint GSA-DOD presentation focused on aviation that  brought together GSA, Army, Navy, and Air Force officials to discuss  their experiences using the exchange/sale authority.", "VA: We selected VA because it reported a high-number of low-value  items sold or exchanged. For in-depth interviews, we selected three  medical centers (Long Beach, California; Cincinnati, Ohio; and  Portland, Oregon) that reported using the authority for the acquisition  of medical equipment and the three Veterans Integrated Service  Networks (Regional Offices) responsible for monitoring these medical  centers.", "We also reviewed applicable federal internal control standards, agencies\u2019  personal property policies and programs to understand agencies\u2019 use of  the authority and monitoring of exchange/sale activities, and conducted  interviews with selected offices within these agencies to understand their  experiences in using the authority. Information we obtained from these  three agencies is not generalizable to all federal agencies but provides  illustrative examples in how agencies have used this authority. See  appendix I for more details on our scope and methodology.", "We conducted this performance audit from August 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Personal property refers to a wide variety of property that may include  commonly used items such as computers, office equipment and furniture,  and vehicles, as well as more specialized property specific to agencies  such as medical equipment for VA and medical helicopters for the Army.  See figure 1.", "The personal property exchange/sale authority allows agencies to  replenish property that is not excess or surplus and that is still needed to  meet the agency\u2019s continuing mission. Agencies must meet several  requirements, including:", "The property exchanged or sold is similar to the property acquired.", "Agencies can meet the similarity requirement in one of several ways.  First, the property acquired is identical to the property replaced.  Second, the acquired property and the replaced property fall within a  single federal supply group of property. Third, both the acquired and  the replaced property constitute parts or containers for similar parts.  Fourth, the acquired and the replaced property are designed or  constructed for the same purpose. For instance, ambulances and  station wagons adapted for use as ambulances would be considered  similar.", "The property exchanged or sold was not acquired for the principal  purpose of later exchanging or selling it using the authority. For  example, an agency cannot purchase a costly piece of equipment for  the sole reason that it will deliver a higher value when sold using the  authority.", "Proceeds from the sale can only be put toward the purchase of  replacement property and cannot be spent on services. In other  words, an agency can use proceeds from the sale of a vehicle to  purchase a new vehicle, but it cannot use proceeds to hire a  mechanic to repair an existing vehicle.", "In addition, GSA regulations, except as otherwise authorized by law,  require that proceeds from sales be available during the same fiscal year  the property was sold or the following fiscal year for replacement  property. For an item sold in fiscal year 2018, an agency has the rest of  fiscal year 2018 as well as fiscal year 2019 to purchase a replacement  item. If agencies do not spend these funds by the end of fiscal year 2019,  monies are to be deposited in the U.S. Treasury. Finally, agencies are  prohibited from using the authority to replace certain types of property  (i.e., hand tools and clothing). However, agencies may request a waiver from GSA to sell these prohibited items or to extend the time frame to  purchase replacement property.", "Agencies may choose between two transaction methods to replace  property\u2014the exchange (trade-in) or sale method, but must determine  which method provides the greater return to the government, including  administrative and overhead expenses. A typical exchange occurs when  the original manufacturer delivers a replacement item to the agency and  removes the item being replaced. The manufacturer applies a trade-in  credit (an allowance) for the purchase of a replacement item. If the sale  method is used, the agency receives the sale proceeds for the sale of the  non-excess items (needed to meet mission requirements) and applies  those proceeds to the purchase of the replacement personal property.  See figure 2.", "In conducting a sale, agencies are to follow a process similar to the  disposal process for excess property. When an agency disposes of  excess property, it makes the item available to other federal agencies and  state agencies by posting it in GSAXcess\u2014GSA\u2019s website for reporting,  searching, and selecting excess property. The disposal process generally  consists of four sequential stages in which personal property may be  transferred to another agency or eligible recipient, donated, sold, or  abandoned or destroyed.", "Similarly, agencies may use GSAXcess to facilitate the replacement of  property under the exchange/sale authority. However, unlike the disposal  process for excess property that may be offered at no cost, if another  federal agency or state agency needs the property, the agency is to pay  no more than the fair market value for the item or a negotiated fixed price,  respectively. Otherwise, the property may be listed for sale to the general  public at approved sales centers, such as GSA AuctionsSM, or through  other approved methods, such as live auctions or Internet sales. After the  sale closes, the agency receives the proceeds to apply toward the  purchase of a similar item.", "Agencies are required to submit a summary report to GSA at the end of  each fiscal year on the type, the quantity, the exchange allowances or  sale proceeds, and the original acquisition cost of items for both  exchange and sale transactions. Agencies that made no transactions  during a fiscal year must submit a report stating that they made no  transactions. Ultimately, agencies decide whether to use the  exchange/sale authority to replace property in their inventory. In  managing property, federal law requires agencies to maintain adequate  inventory controls and accountability systems as well as assess the  extent to which the agency\u2019s mission depends on the property."], "subsections": []}, {"section_title": "A Few Agencies Carried Out Most Transactions, Which Involved Selling Billions of Dollars in Property", "paragraphs": [], "subsections": [{"section_title": "GSA Reported About 60 Percent of Proceeds across the Federal Government", "paragraphs": ["According to GSA\u2019s annual summary data, 27 agencies reported using  the exchange/sale authority and received a total of about $3.1 billion in  exchange allowances or sale proceeds from fiscal year 2013 through  fiscal year 2017. While many agencies used the authority, a few  agencies, particularly GSA, together accounted for about 90 percent of all  allowances and proceeds. Specifically, 5 of 27 agencies reported nearly  all exchange allowances and sale proceeds. GSA accounted for about  $1.9 billion of about $3.1 billion (or about 60 percent) of reported  allowances and proceeds across the federal government. Four other  agencies\u2014the Departments of Homeland Security, Agriculture, Defense,  and the Interior\u2014accounted for about $934 million (or about 30 percent)  of the total. The other 22 agencies using the authority reported about  $332 million (or about 11 percent) in exchange allowances or sales  proceeds over the 5-year period. See figure 3. Finally, agencies  reported using the sale method more than the exchange method. Sales  by agencies accounted for about $2.9 billion (or about 91 percent), while  use of the exchange method accounted for about $275 million (or about 9  percent) of total transactions reported, primarily due to GSA\u2019s and DOD\u2019s  reporting more use of the sale method over the exchange method.", "While some agencies reported hundreds of millions of dollars in exchange  allowances and sale proceeds, the data show that 10 federal agencies\u2014 including the Department of Labor, Office of Personnel Management, and  the Social Security Administration\u2014reported relatively few transactions,  which totaled less than $100,000 in exchange allowances and sales  proceeds.", "GSA OGP officials consider the agency-reported data to provide a  representative picture of the overall exchange/sale transactions occurring  across the federal government. GSA OGP officials rely on the agencies to  ensure the accuracy and completeness of the exchange/sale information.  According to GSA OGP officials, because GSA does not have authority to  compel the agencies to report or address quality issues, it does not look  at record level data from the agency to determine the data\u2019s accuracy and  does not have a way of verifying if exchange data are accurate and  complete. Nonetheless, GSA officials said they take steps to ensure the  data are reliable and complete. For example, GSA OGP officials said they  review the data for any obvious inaccuracies and follow up with the  reporting agency to correct the inaccuracy. In addition, according to GSA  OGP officials, they report the sales portion of most agencies\u2019  exchange/sale transactions for any sales that were conducted by GSA  and ask agencies to verify the data before finalizing it in the summary  report."], "subsections": []}, {"section_title": "Agencies Reported Selling High-Value Items, Primarily Vehicles", "paragraphs": ["While agencies exchanged and sold a wide variety of items, GSA\u2019s  annual summary data show that high-value items, primarily vehicles,  accounted for the vast majority of allowances and proceeds from fiscal  year 2013 through fiscal year 2017. Specifically, vehicle sales across the  federal government accounted for about $2.6 billion of $3.1 billion (or  about 84 percent) in total proceeds, of which GSA\u2019s Fleet program  accounted for about 71 percent of that total. According to GSA Fleet  program officials, the authority allows GSA to continuously update its fleet  of over 214,000 vehicles while keeping lease payments low for its 75  customer agencies. The program sells an average of about 36,000  vehicles each year, bringing in about $370 million in sales proceeds  annually. In fiscal year 2017, the program received almost $300 million in  proceeds from vehicle sales and spent about $776 million acquiring new  vehicles. Three agencies\u2014the Departments of Agriculture, Homeland  Security, and the Interior\u2014each reported over $100 million in proceeds  from vehicle sales.", "In addition to vehicles, agencies reported exchanging and selling other  types of high-value items. For example, DOD reported using the authority  to sell or exchange helicopters. According to the Army Aviation Program  Executive Office, the Army continues to divest and plans to replace up to  800 Black Hawk helicopters from 2014 to 2025, each having an average  value of about $1.5 million. See figure 4. DOD reported about $150  million in exchange allowances and sale proceeds by using the authority  to replenish aircraft, and as of January 2018 Army Aviation had  purchased five Black Hawk helicopters. Other DOD agencies\u2014the  Naval Air Systems Command and the Air Force Life Cycle Management  Center\u2014are using the authority for exchanging aircraft engines and parts  containing rare earth metals under a reclamation and propulsion material  exchange program.", "In addition to high-value items, agencies reported selling a wide variety of  other items, including missiles, office equipment, lumber, and packing  supplies. One of our selected agencies, VA, predominately used the  authority to exchange medical equipment. See figure 4. However, we did  not find data for VA to be sufficiently reliable to report separately. Based  on our interviews with VA medical centers we found that reported data did  not reflect actual exchange/sale transactions, which we discuss later in  this report. However, we have included VA data in the reported $332  million for \u201cOther federal agencies\u201d in figure 3."], "subsections": []}]}, {"section_title": "Selected Agencies Expressed Confusion About How to Use the Authority or Monitor Exchange/Sale Activities", "paragraphs": [], "subsections": [{"section_title": "VA Did Not Understand How to Use the Exchange/Sale Authority", "paragraphs": ["GSA regulations for the personal property exchange/sale authority set  forth several conditions for using the authority, including that the property  exchanged or sold is not excess or surplus and that agencies report  information on their exchange/sale transactions to GSA on an annual  basis. Federal internal control standards state that management should  externally communicate the necessary quality information to achieve the  entity\u2019s objectives.", "However, the agencies in our review had different levels of understanding  about the authority, which affected their experiences for how they used  the authority and outcomes. For example, VA officials said they  misunderstood key aspects of the exchange/sale authority, resulting in  inefficiencies and data inaccuracies, as described below:", "Process for selling property: Officials from all three selected VA  medical centers said they did not understand the sequence of events  in selling property using the sale method, a situation that led to VA\u2019s  using a potentially less economical method to acquire new equipment.  For example, officials at two selected VA medical centers told us that  they believed that they had to sell their medical equipment prior to  acquiring replacement equipment. Officials at one medical center said  this sequence of events makes it difficult to use the sales method of  the exchange/sale authority because VA medical centers must have  medical equipment, such as x-ray machines, readily available and  fully operational for veterans at all times. However, GSA OGP officials  stated that replacement property can be purchased prior to the sale of  property. In addition, officials at a VA medical center reported they  had limited storage, making it difficult to buy replacement equipment  and store it until VA can sell the equipment. As a result, a VA medical  center official stated that they instead used the exchange method  because it provided a seamless replacement of equipment to prevent  any break in availability of medical equipment. While the exchange  method is a viable approach, in this case, the sales method could  have delivered a higher monetary return. In addition, by using the sale  method, VA could potentially have replaced equipment more  efficiently than replacing the full cost of the item with the agency\u2019s  appropriation. A VA headquarters official was also unclear about how  to use the proceeds from sales. This official was unclear whether the  sales proceeds could be used from any type of medical equipment in  a particular supply category, such as a scalpel, toward the  replacement of another item in that same classification, such as a  wheelchair, or whether the items had to be identical or serve a similar  purpose.", "Data Reporting: Officials at two selected VA medical centers did not  clearly understand the annual summary data reporting process. These  officials stated that they found GSA\u2019s reporting template confusing  because it provides minimal direction to the user and does not clearly  define some data-reporting elements. The template includes a space  for reporting \u201cexchanged/sold;\u201d however, officials at one medical  center were unaware that \u201csold\u201d referred specifically to exchange/sale  transactions only and not to other transactions referred to as sales,  such as surplus property sales; according to medical center officials,  this medical center reported about 1,000 misclassified sales in GSA\u2019s  annual summary data.", "Exchange/sale versus disposal: According to VA officials, they or  others involved in personal property management did not fully  understand the distinction between the process for acquiring  replacement property under the exchange/sale authority and the  process for declaring property as excess. Officials within all three  selected VA medical centers misunderstood the difference between  the two processes, possibly because both processes use GSAXcess  to sell property under the exchange/sale authority or to report property  as excess for disposal. As a result, one VA medical center mistakenly  reported excess disposals as exchange/sale in the GSA OGP annual  summary data. In addition, two facilities disposed of some still needed  property instead of conducting sales under the exchange/sale  authority. A VA headquarters official acknowledged that property  managers in charge of implementing the exchange/sale authority at  medical centers may be confusing these two processes or may be  unaware that the exchange/sale authority exists.", "Similarly, officials from the Air Force and Navy said they or others  involved in personal property management did not always understand the  difference between these two processes. An Air Force official stated  that DOD\u2019s policies do not clearly distinguish the exchange/sale process  from the disposal process and do not consistently define terms, such as  \u201cexcess\u201d and \u201cnon-excess\u201d property, that align with GSA\u2019s regulations. In  retrospect, Air Force officials stated that they disposed of property that  could have been replaced through the exchange/sale authority.  Generally, disposal results in (a) sales proceeds being returned to the  U.S. Treasury rather than retained by the agency and (b) services  possibly having to use their appropriation for replacement property, rather  than working directly with the vendor to obtain a replacement at a  reduced cost. We have previously reported on DOD\u2019s disposing of $855  million in excess items for which they will likely have a continuing need.", "Conversely, based on our interviews and review of their policies, records,  and transaction data, two program offices within the Army and GSA\u2014 Army Aviation and GSA Fleet\u2014appeared to understand how to use the  exchange/sale process. We found that these offices may have a greater  level of understanding for a few key reasons:", "Narrow scope: Both programs are designed around replacing one  type of item\u2014helicopters for helicopters or vehicles for vehicles.  When items are not so directly interchangeable, determining whether  or not an item sold and replaced or exchanged are \u201csimilar\u201d can be  challenging. Because the Army Aviation and the GSA Fleet  programs focus on one type of item, the determination of what  constitutes similar property under the GSA regulation is not a  challenge.", "Established programs with frequent sales: The Army Aviation and  the GSA Fleet programs have sold hundreds of aircraft and tens of  thousands of vehicles over the past several years. They have  invested resources into developing an exchange/sale process.  Conversely, programs that may sell or exchange an item or two a  year\u2014even very expensive items, such as medical equipment\u2014may  not have the same opportunities to develop processes and guidance  through repeated sales or exchanges.", "High-value items: Similarly, both the Army Aviation and the GSA  Fleet programs sell high-value items. Thus, investing resources in an  exchange/sale process makes sense, as programs benefit from the  sales and have a process to guide and track these high-value items.  For an agency like VA, which disposes of some low-value items, there  may not be the same motivation to develop a standard process. GSA  OGP officials emphasized that high-value items, such as helicopters  and vehicles, are best suited for using the exchange/sale authority."], "subsections": []}, {"section_title": "GSA Has Not Clarified Aspects of Using Exchange/Sale Authority for Agencies", "paragraphs": ["GSA OGP officials stated that they recognize some agencies, such as  VA, may experience confusion using the authority, that the regulations  are misunderstood by agencies, and that aspects of the authority need to  be clarified. According to these officials, GSA attempted to amend the  regulations in 2015 to address key areas of confusion, including:  restricting the definition of similar to ensure that items replaced are  clearly similar. GSA wanted to change the federal supply category  criteria to make agencies replace items at the more specific four digit  level rather than the broader two digit level. As an illustration, this  change would help clarify the confusion VA reported about whether a  scalpel and a wheel chair qualify as similar items.  clarifying the process for selling property; specifically, clarifying that  agencies can purchase replacement property prior to the sale of  property that no longer adequately performs its task.", "However, GSA OGP officials stated that they did not complete the  rulemaking process in order to give the incoming administration an  opportunity to review and approve any revisions.", "Since the change in administration, GSA officials said they have been  focused on evaluating the continued need and relevance of all of their  regulations as part of the administration\u2019s plan to conduct regulatory  reviews. Nonetheless, GSA OGP officials said they plan to address  these areas of confusion by amending the regulations. Specifically, they  plan to clarify the definition of similar property and the difference between  excess and non-excess property, among other changes. However,  officials estimate the rulemaking will likely not be finalized for at least 2  years. As a result, the extent to which the rulemaking process will result in  clarifying language is unknown.", "Although GSA anticipates initiating a rulemaking to amend regulations,  which could make the definition of \u201csimilar\u201d more restrictive, GSA OGP  officials told us that clarifying the issues agencies found confusing would  not necessarily require a rulemaking. They highlighted other actions they  are taking to promote the use of the authority, inform agencies of the  requirements, and train agencies on using the authority. For example,  they conduct outreach by making presentations at national conferences  (i.e., FedFleet), meet with representatives from the National Property  Management Association, and hold small group discussions with  program managers specializing in certain high-value items, such as  aircraft. GSA\u2019s presentations aim to educate agencies on what the  authority is, the conditions and requirements of the authority, and when to  use the authority. According to GSA OGP officials, as a result of their  outreach, they have seen immense growth in exchange/sale transactions  among the aviation community.", "GSA has also issued bulletins to help dispel misunderstandings related to  using the exchange/sale authority. For example, GSA issued a bulletin  in 2010 to federal agencies to remind them to submit annual reports on  exchange/sale transactions. This bulletin contained information on the  reporting requirements, frequently asked questions, and points of contact  for agencies to reach out to with additional questions. In summer 2018,  GSA OGP officials drafted a new bulletin to further address financial  aspects of the exchange/sale authority and expect to issue it in December  2018. This bulletin details why agencies should use the authority and  directs agencies to develop policies for using the authority and to consult  with the Chief Financial Officer of the agency to obtain more information.  According to these officials, an additional bulletin would take 3 to 4  months to develop and issue.", "However, neither GSA\u2019s outreach nor its draft bulletin addresses existing  confusion regarding the sales process or data reporting, or distinguishes  the exchange/sale process from the disposal process. For example,  GSA\u2019s outreach, such as the FedFleet presentation, generally describes  the authority and discusses provisions of using the authority but does not  address issues agency officials told us they found confusing. The  presentation tells agencies that they can sell property under the authority  but does not go into the mechanics of how to sell property. By making  presentations like these to address areas agencies found confusing, GSA  would have an opportunity to help clarify these issues and encourage  agencies to use the authority more.", "Moreover, GSA OGP officials told us that they believe that a lack of  knowledge of the authority is a reason why some agencies do not use it  more. As we reported earlier, 10 of the 27 federal agencies that reported  transactions had few exchange/sale transactions over the past 5 years.  According to a VA official, if VA medical centers better understood how to  use the authority, they could see a significant increase in use throughout  the agency. Furthermore, if GSA provided clearer information on using  the authority, the 10 agencies that we found that used the authority  infrequently may increase their use.", "Additionally, GSA\u2019s draft bulletin on financial issues does not address the  logistical issues agencies found confusing, such as how to sell property  using the exchange/sale authority. The bulletin addresses accounting  procedures agencies should follow when conducting transactions but  does not describe how agencies are to conduct these transactions. Until GSA takes action to address confusion, agencies may continue to  misunderstand and not use the exchange/sale authority. If agencies  continue to misunderstand aspects of the exchange/sale authority, they  may not take full advantage of the authority, thereby missing opportunities  to be more effective stewards of government property and replenish  property more efficiently."], "subsections": []}, {"section_title": "GSA and VA Did Not Monitor Exchange/Sale Activities", "paragraphs": ["Agencies are responsible for managing their own personal property,  including monitoring their exchange/sale activities. Federal internal  control standards call on managers to establish and operate monitoring  activities to monitor the internal control system and evaluate the results.  Monitoring involves regular management and supervisory activities,  comparisons, reconciliations, and other routine actions.", "We found that the Army monitored its exchange/sale activities, as  outlined in its policies. The Army\u2019s policy delegated responsibility to the  Army\u2019s Deputy Chief of Staff (Logistics) to monitor and approve Army  programs seeking to use the authority. Our review of Army\u2019s policy  found that multiple Army offices monitor financial, logistical, legal, and  procurement functional areas as they reviewed and communicated on the  eligibility of exchange/sale transactions. The policy also allows program  and inventory managers to use the authority for high-value items, requires  contracting officers and attorneys to review the transactions, and uses a  management checklist for transactions. Consistent with policy, the Army\u2019s  Deputy Chief of Staff, in conjunction with offices within DOD, reviewed  and approved requests from Army Aviation to use the exchange/sale  authority to sell Black Hawk helicopters and apply proceeds to  replacement helicopters. The Army official said that the office continues to  monitor exchange/sale transactions in collaboration with the Army  Aviation program to manage the exchange and sale of their personal  property that includes Black Hawk helicopters.", "Unlike the Army, GSA OAS did not monitor its internal exchange/sale  activities. In 2009, GSA\u2019s internal policy established a position  responsible for ensuring compliance with government-wide, personal  property requirements. However, GSA officials stated that the position  was never staffed and later subsumed into GSA OAS when the office was  established in 2011 to manage personal property, including  exchange/sale activities, within the agency. Since that time, GSA OAS  officials said that they have not monitored these activities because senior  management did not prioritize personal property, including exchange/sale  transactions. For example, management did not clarify GSA OAS\u2019s  responsibilities nor did it define the scope of its authority for monitoring  exchange/sale activities. As a result, GSA OAS officials said they have  not been involved with any exchange/sale activities within the agency,  and besides GSA Fleet, they do not know the extent to which other  internal offices are using (or should be using) the authority.", "According to GSA OAS officials, they have recently focused on an effort  to rebuild an internal personal-property management program that will  take several years to develop given the current staff of two. As part of this  effort, GSA OAS revised the policy for internal personal property  management in 2018 and is drafting a standard operating procedure that  is expected to provide additional clarification for monitoring and  conducting exchange/sale activities within GSA. According to GSA  officials:  the 2018 policy provides relevant updates and more details that  distinguish between (a) the exchange/sale authority for the exchange  and sale of non-excess, non-surplus personal property and (b) the  disposal authority with a focus on the disposal of excess personal  property.  the draft standard operating procedure is to provide procedures for all  internal GSA offices to follow when using the authority. This standard  operating procedure establishes a position to, among other things,  help internal offices conduct and report exchange/sale transactions.  GSA OAS officials referred to this procedure as a work-in-progress  and were uncertain when it would be finalized.", "However, GSA OAS officials said that they do not know whether this  policy revision will allow them to monitor exchange/sale activities for two  reasons. First, GSA OAS is unclear about the scope of its authority, such  as whether the GSA Fleet program falls under its exchange/sale purview.  GSA Fleet program officials said that they are not opposed to having GSA  OAS monitor their program in the future. Second, this procedure will not  be formally approved or coordinated throughout GSA, a situation that  means there may not be consensus among all GSA offices as to GSA  OAS\u2019s responsibilities and scope of authority. As a result, the revision of  the policy and completion of the procedure may not be enough to ensure  compliance with exchange/sale requirements. In the absence of clear  responsibilities and scope of its authority, GSA OAS may not be able to  monitor exchange/sale activities or provide clear information and direction  to other offices within GSA.", "Similar to GSA, VA conducted limited monitoring of its exchange/sale  activities. VA policy states that the Deputy Assistant Secretary for  Acquisition and Logistics has the departmental-wide responsibility for  personal property inventory management, utilization, and disposition as  well as to monitor VA logistics programs and policies. Within VA\u2019s  Veterans Health Administration (VHA), the Office of Procurement and  Logistics assigns logistics officers at VHA Regional Offices with  monitoring responsibilities of medical centers to ensure compliance with  VA and VHA policies. However, we found that the three VHA Regional  Offices conducted limited monitoring of 23 medical centers under their  purview. According to the officials we contacted, they conducted a  cursory review of end-of-year data from medical centers before the data  were submitted through VHA to GSA for the annual summary report.", "According to officials at one Regional Office, they did not focus on  monitoring exchange/sale transactions beyond a cursory review to  see that property fell within the medical or laboratory equipment  supply categories. As previously mentioned, we found that reported  data did not reflect actual exchange/sale transactions. Specifically, we  found that none of the sale transactions reported in 2016 as  exchange/sale transactions by a selected medical center in this region  was correct. Instead, these transactions were sales of surplus  property.", "According to officials at another Regional Office, they have no reason  to review exchange/sale transactions in a more robust manner  because end-of-year reporting presented no problems in the past that  would warrant a more standardized approach. However, for the one  selected medical center in this region, we found several errors in  reporting end-of-year data from 2013 through 2017. Specifically, we  found that nearly all reported exchanges were actually sales of  surplus property, a reported exchange in 2017 was actually a transfer  to another medical center, and despite reporting no transactions in  2016, we identified an exchange valued at $500,000.", "According to officials from a third Regional Office, they monitored  various aspects of VA\u2019s personal property program\u2014inventories and  disposals, but not exchange/sale transactions. During our review, we  found that one selected medical center under their purview reported  about 1,000 sale transactions to GSA, but none was correct. Instead  of sales of needed (non-excess, non-surplus) property, they were  actually sales of surplus property. Regional officials are aware of this  error and have added four new questions about exchange/sale  transactions to the checklist used for their annual quality-control  reviews. They said they do not know whether other Regional Offices  perform similar reviews.", "An official in VA\u2019s Office of Acquisition and Logistics acknowledged that  these findings are likely not uncommon because the office has not  developed or communicated the management activities necessary for  Regional Offices to consistently monitor medical centers\u2019 exchange/sale  transactions. The lack of communication on monitoring procedures was  corroborated by two Regional Offices. An official with the Office of  Acquisition and Logistics explained that the office promulgates policy and  that VHA\u2019s Office of Procurement and Logistics helps ensure policy is  followed, but the absence of monitoring stems, in part, from these two  offices\u2019 not collaborating or communicating the activities Regional Offices  are to conduct. VHA Regional Offices monitor medical centers through  annual quality-control reviews, but the reviews did not have an  exchange/sale component. Furthermore, VA internally reviews a small  sample of the VHA\u2019s annual quality-control reviews each year. From a  Regional Office perspective, officials told us they prioritized other  activities, such as monitoring inventories or disposal of equipment, over  exchange/sale activities. The VA office has also not communicated with  VA medical centers on how to effectively use the authority to support their  medical equipment replacement needs or the benefits associated with the  authority. For example, the VA office has not provided specific guidance  beyond issuing personal property policies for how to conduct and monitor  exchange/sale transactions.", "VA officials are taking steps to improve communication to those involved  in exchange/sale transactions throughout the agency\u2014those monitoring  transactions and those initiating transactions. For example, officials within  the Office of Acquisition and Logistics stated that they plan to clarify the  use of the exchange/sale authority within the agency\u2019s policies for  personal property disposal. This clarification will be in the form of a  notice (an incremental policy change) or as part of a planned rewrite of  personal property policies. However, it is uncertain whether the  information will have a level of detail to be useful for medical centers to  understand the requirements for using the exchange/sale authority or will  delineate how the exchange/sale process differs from the disposal  process. Adding to this is the uncertainty about the time frame for  finalizing and communicating such information to medical centers.  Furthermore, VA officials said the policy changes alone will not be  sufficient and assistance from VHA will be necessary to ensure Regional  Offices understand their monitoring roles and responsibilities. A VHA  official acknowledged the need to work with Regional Offices to augment  the annual quality-control review checklists with an exchange/sale  component, but it is unclear if and when such an update will take place. Until VA and VHA work together to develop a detailed policy for  monitoring and establish time frames with milestones for communicating  information, they cannot be assured that 172 medical centers and 18  Regional Offices understand the exchange/sale authority, how to use it,  and how to monitor end-of-year reporting data."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["By using the exchange/sale authority, agencies have an opportunity to be  good stewards of government property by efficiently replacing needed  property, including high-value items, that serves critical and continuing  requirements to meet agency missions. However, unfamiliarity with the  exchange/sale authority and confusion surrounding the authority may  lead to decisions that may not be in the government\u2019s best interest.  Although GSA OGP officials acknowledge the need to amend the  regulations to address areas that require rulemaking, delay in taking  action to address areas of confusion that currently exist but do not require  rulemaking will continue to lead to misinterpretation or misunderstanding  about the authority. Moreover, until GSA specifies GSA OAS\u2019s  responsibilities and defines the scope of its authority, it will continue a  long-term pattern of not monitoring GSA\u2019s exchange/sale activities.  Finally, until VA develops and communicates the necessary information to  help Regional Offices and medical centers with their exchange/sale  responsibilities, it will not have an assurance that all VA medical centers  are reporting transactions accurately or effectively using the  exchange/sale authority."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to GSA and one  recommendation to VA.", "The GSA\u2019s Associate Administrator for the Office of Government-wide  Policy should take action to address specific areas of federal agency  confusion with the exchange/sale authority, areas such as the process  for selling property, reporting data, and distinguishing the  exchange/sale process from the disposal process. Such actions could  include issuing bulletins or conducting expanded outreach and, as  necessary, issuing regulations. (Recommendation 1)", "The Administrator of General Services should take steps to improve  agency-wide monitoring of exchange/sale activities within GSA by  specifying the Office of Administrative Services\u2019 responsibilities and  by defining the scope of its authority. (Recommendation 2)", "The VA\u2019s Deputy Assistant Secretary of Acquisition and Logistics, in  collaboration with VHA\u2019s Office of Procurement and Logistics, should  revise VA\u2019s policy to include details on the exchange/sale authority,  particularly those related to monitoring by Regional Offices and use of  the authority for medical centers, and establish time frames with  milestones for communicating such information. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to GSA, DOD, and VA for comment. All  three agencies agreed with the findings. GSA and VA also agreed with  the recommendations for their agencies. DOD provided a technical  comment to the report in an email; we incorporated the technical  suggestion.", "GSA agreed with our recommendations and stated that it has already  begun to increase understanding and appropriate use of the  exchange/sale authority within GSA and across the federal government.  GSA is finalizing a plan to address the recommendations. GSA\u2019s written  response is reprinted in appendix II.", "VA agreed with our recommendation to revise its policy to include details  on the exchange/sale authority. VA stated that the Office of Acquisition  and Logistics, in conjunction with the VHA Procurement and Logistics  Office, has produced two draft memorandums to amend policy related to  the exchange/sale authority as well as the utilization and disposal of  personal property. The agency plans to promulgate the new policy by  December 2018. VA\u2019s written response is reprinted in appendix III.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of General Services, the Secretary of  Defense, and the Secretary of Veterans Affairs. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) describe what is known about personal  property exchange/sale transactions, as reported by federal agencies  from fiscal years 2013 through 2017, and (2) examine selected agencies\u2019  experiences using the personal property exchange/sale authority and  monitoring such activities. To address both objectives, we reviewed  applicable federal statutes and regulations pertaining to personal property  management and the exchange/sale authority, our prior work, and  reports by federal agencies\u2019 offices of inspectors general on personal  property management issues. To understand General Services  Administration\u2019s (GSA) role and responsibilities for personal property  management in support of exchange/sale activities across the federal  government, we reviewed GSA\u2019s personal property management  structure, policies, bulletins, briefings, and training materials.", "To describe what is known about the personal property exchange/sale  transactions, we analyzed annual exchange/sale summary data, as  reported to GSA\u2019s Office of Government-wide Policy (GSA OGP) from  federal agencies from fiscal year 2013 through fiscal year 2017. These  data identify the agency involved in the transactions, the transaction  method, and the type and value of the property. These data are the only  federal government-wide data available on exchange/sale transactions.  Accordingly, we analyzed these summary data to characterize  transactions over a 5-year time frame, by agency, by type of transaction  (exchange or sale), by type of personal property using personal property  categories, and by amount of exchange allowances and sale proceeds.", "We assessed the reliability of these data from a government-wide  perspective and for selected agencies.", "From a government-wide perspective, we reviewed GSA\u2019s electronic  template provided to federal agencies for reporting data, viewed a  training video used to help agencies report data to GSA, and reviewed  the users\u2019 guide and other materials related to GSA\u2019s personal  property reporting tool. In addition, we interviewed GSA OGP officials  regarding their data processes\u2014such as data collection, submission,  reconciliation, verification, and compilation of annual exchange/sale  summary reports\u2014to understand the steps GSA OGP takes to  determine the accuracy, consistency, and completeness of data. We  did not independently verify all the exchange and sales data that was  provided to us because of the large quantity of detailed data  associated with each agency and because some of the data were not  within the scope of our selected agencies and personal property  categories. However, we determined that GSA\u2019s government-wide  summary data was sufficiently reliable for our purposes of describing  the agencies that use the authority, the general types of property they  acquire, and the relative order of magnitude of exchange allowances  and sales proceeds. For sales conducted through GSA sales centers,  GSA reports summary information on behalf of most agencies. GSA  officials told us all exchange transactions are self-reported by  agencies. GSA does not ensure the accuracy of this information  beyond a review for obvious errors. However, because sales account  for about 91 percent of the dollar value of all transactions, we believe  that the total value of transactions across the federal government is  sufficiently reliable for our purposes of describing exchange/sale  activity.", "To assess the reliability of GSA and other selected agencies\u2019  summary data, we compared annual exchange/sale summary data  collected by GSA OGP with detailed GSAAuctionsSM sales data  associated with the exchange/sale authority collected by GSA\u2019s Office  of Personal Property Management. We looked to see if aggregated  sales totals matched, identified similarities and gaps, and observed  individual agency and government-wide trends for using the  exchange/sale authority. We found data reported by GSA\u2019s Office of  Fleet Management (GSA Fleet) and the Army\u2019s Program Executive  Office for Aviation (Army Aviation) to be reliable. However, we found  reliability issues with data reported by the Department of Veterans  Affairs (VA). As a result of our interviews with selected facilities, we  found that some reported sale and exchange data from VA did not  represent actual exchange/sale transactions. Accordingly, we  determined that VA data were not reliable to analyze independently.  We did include these data in the total for the federal government given  that they accounted for about 1 percent of that total.", "To examine selected agencies\u2019 experiences using the exchange/sale  authority and monitoring such activities, we selected three agencies\u2014 GSA, the Department of the Army within the Department of Defense  (DOD), and the VA\u2014based on various characteristics, such as the values  of the agencies\u2019 exchange allowances and sale proceeds; the quantity of  items exchanged and sold; and selected three different types of personal  property categories\u2014vehicles, aircraft, and medical equipment\u2014for which  the exchange/sale authority was used over the 5-year time period.", "GSA: We selected GSA because it reported a high-value of  exchange/sale transactions. Within GSA, two offices have key roles in  the internal use of the exchange/sale authority. First, through GSA  Fleet, GSA manages the government-wide motor-pool program (the  largest user of the exchange/sale authority) that acquires vehicles and  then leases them to other federal agencies. Second, GSA\u2019s Office of  Administrative Services (GSA OAS) is the office responsible for  performing personal-property management functions, such as  developing policy and procedures, internal to the agency.", "Army: We selected the Army because it reported a relatively low- number of high-value items. In particular, Army Aviation accounted for  the majority of high-value aviation-related exchange/sale transactions  within DOD. During the course of our review, we also attended a joint  GSA-DOD presentation focused on major end items that brought  together GSA, Army, Navy, and Air Force officials to discuss their  experiences using the exchange/sale authority.", "VA: We selected VA because it reported a high-number of low-value  items sold or exchanged. For in-depth interviews, we selected three  medical centers (Long Beach, California; Cincinnati, Ohio; and  Portland, Oregon) that reported using the authority for the acquisition  of medical equipment and the three Veterans Integrated Service  Networks (Regional Offices) responsible for monitoring these medical  centers. See table 1 below.", "At all of these agencies, we reviewed exchange/sale transactions to  understand agencies\u2019 experiences in using the authority, personal  property policies and program, financial documents applicable to  exchange/sales, and applicable Standards for Internal Control in the  Federal Government and GSA\u2019s regulations. We also reviewed relevant  sections of Principles of Federal Appropriations Law to understand  decisions on using the exchange/sale authority for acquiring personal  property. In addition, we examined agencies\u2019 monitoring of  exchange/sale transactions in the context of internal control standards.", "We interviewed officials from each of our selected agencies responsible  for using exchange/sale authority and implementing processes to manage  and monitor personal property. We interviewed GSA Fleet officials and  visited Army Aviation officials in Huntsville, Alabama. During these  interviews, GSA and Army Aviation officials walked through materials and  explained their exchange/sale processes by using actual sample  transactional information. We examined personal property documentation  associated with personal property that had been either been exchanged  or sold.", "For VA, we selected 3 of 172 VA medical centers to understand how  these medical centers implemented their personal property  exchange/sale processes and procedures. We selected one site based  on its high number of exchange/sale transactions of medical equipment  and its close geographic proximity to one of our field offices. The other  two sites were chosen based on a high and low number of exchange/sale  transactions of medical equipment. At the VA locations, we interviewed  medical center officials responsible for supply chain management as well  as Regional Office officials responsible for oversight of those selected  medical centers and the exchange/sale management activities. During  these interviews, we discussed selected agency officials\u2019 understanding  and use of the exchange/sale authority, reviewed data and  documentation, addressed what officials did to implement processes for  their exchange/sale programs, identified challenges, and took  photographs at one location of selected personal property that was  exchanged or sold. Information we obtained from the three selected  agencies is not generalizable to all federal agencies but provides  illustrative examples in how agencies have used the authority.", "We conducted this performance audit from August 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on the audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the General Services Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, the following individuals made  important contributions to this report: Nancy Lueke (Assistant Director);  Steve Martinez (Analyst-in-Charge); Aisha Cabrer; SaraAnn Moessbauer;  Malika Rice; Amy Rosewarne; Jerry Sandau; Travis Schwartz; and  Crystal Wesco."], "subsections": []}]}], "fastfact": ["The federal government owns $1 trillion in personal property, such as furniture and vehicles. Agencies can sell these items and use the proceeds to buy similar items. The General Services Administration makes the rules for these federal agency transactions, buys and sells vehicles for other agencies to use, and carries out its own transactions.", "We found that GSA officials who buy vehicles and Army officials who buy helicopters did this often and understood the rules. VA officials, however, did not. We recommended that GSA clarify the rules for selling property so that agencies have opportunities to be better stewards of personal property."]}
{"id": "GAO-18-175", "url": "https://www.gao.gov/products/GAO-18-175", "title": "Cybersecurity Workforce: Urgent Need for DHS to Take Actions to Identify Its Position and Critical Skill Requirements", "published_date": "2018-02-06T00:00:00", "released_date": "2018-02-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DHS is the lead agency tasked with protecting the nation's critical infrastructure from cyber threats. The Homeland Security Cybersecurity Workforce Assessment Act of 2014 required DHS to identify, categorize, and assign employment codes to all of the department's cybersecurity workforce positions. These codes define work roles and tasks for cybersecurity specialty areas such as program management and system administration. Further, the act required DHS to identify and report its cybersecurity workforce critical needs.", "The act included a provision for GAO to analyze and monitor DHS's implementation of the requirements. GAO's objectives were to assess the extent to which DHS has (1) identified, categorized, and assigned employment codes to its cybersecurity positions and (2) identified its cybersecurity workforce areas of critical need. GAO analyzed DHS and OPM workforce documentation and administered a data collection instrument to six major DHS components. GAO also interviewed relevant DHS and OPM officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) has taken actions to identify, categorize, and assign employment codes to its cybersecurity positions, as required by the Homeland Security Cybersecurity Workforce Assessment Act of 2014 ; however, its actions have not been timely and complete. For example, DHS did not establish timely and complete procedures to identify, categorize, and code its cybersecurity position vacancies and responsibilities. Further, DHS has not yet completed its efforts to identify all of the department's cybersecurity positions and accurately assign codes to all filled and vacant cybersecurity positions. In August 2017, DHS reported to the Congress that it had coded 95 percent of the department's identified cybersecurity positions. However, GAO's analysis determined that the department had, at that time, coded approximately 79 percent of the positions. DHS's 95 percent estimate was overstated primarily because it excluded vacant positions, even though the act required DHS to report these positions.", "In addition, although DHS has taken steps to identify its workforce capability gaps, it has not identified or reported to the Congress on its department-wide cybersecurity critical needs that align with specialty areas. The department also has not reported annually its cybersecurity critical needs to the Office of Personnel Management (OPM), as required, and has not developed plans with clearly defined time frames for doing so. (See table).", "Without ensuring that its procedures are complete and that its progress in identifying and assigning codes to its positions is accurately reported, DHS will not be positioned to effectively examine its cybersecurity workforce, identify its critical skill gaps, or improve its workforce planning. Further, until DHS establishes plans and time frames for reporting on its critical needs, the department may not be able to ensure that it has the necessary cybersecurity personnel to help protect the department's and the nation's federal networks and critical infrastructure from cyber threats. The commitment of DHS's leadership to addressing these matters is essential to helping the department fulfill the act's requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DHS take six actions, including ensuring that its cybersecurity workforce procedures identify position vacancies and responsibilities; reported workforce data are complete and accurate; and plans for reporting on critical needs are developed. DHS concurred with our six recommendations and described actions the department plans to take to address them. OPM did not have any comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security\u2019s (DHS\u2019s) mission is to safeguard  the American people and the homeland. It also serves a critical role in  securing the nation\u2019s cyberspace. As such, in addition to being  responsible for protecting the confidentiality, integrity, and availability of  its own computer systems and information, it is also the lead federal  department for coordinating with partners in the public and private sectors  to protect the computer networks of federal civilian agencies and the  nation\u2019s critical infrastructure from threats.", "Having an effective cybersecurity workforce is essential to helping ensure  the security of the department\u2019s information and systems. However,  achieving a resilient, well-trained, and dedicated cybersecurity workforce  to help protect our information and infrastructure has been a long- standing challenge for the federal government. Since 1997, we have  designated federal information security as a governmentwide high-risk  area and, in 2003, expanded this area to include computerized systems  supporting the nation\u2019s critical infrastructure. In 2003, we designated  Implementing and Transforming DHS as a high-risk area, and in 2013, we  renamed that area to Strengthening DHS Management Functions, which  included information technology and human capital.", "In December 2014, Congress passed the Homeland Security  Cybersecurity Workforce Assessment Act of 2014 (HSCWAA). This law  requires DHS to identify all cybersecurity workforce positions within the  department, determine the cybersecurity work category and specialty  area of such positions, and assign the corresponding data element  employment code to each cybersecurity position. After completing these  activities, DHS was to identify its cybersecurity work categories and  specialty areas of critical need within a year of identifying and assigning  employment codes, and report these needs annually to the Office of  Personnel Management (OPM).", "HSCWAA also contained a provision for GAO to analyze and monitor the  status of DHS\u2019s efforts to address the act\u2019s requirements. For this report,  our specific objectives were to determine the extent to which DHS has (1)  identified, categorized, and assigned employment codes to its  cybersecurity positions and (2) identified its cybersecurity workforce areas  of critical need.", "To address the first objective, we reviewed the provisions of HSCWAA to  identify the specific implementation activities DHS was to perform for its  cybersecurity workforce and the time frames by which it was to complete  the activities. In addition, we reviewed Standards for Internal Control in  the Federal Government and then compared the cybersecurity workforce  internal controls and project management processes that DHS  implemented to address the act to the selected standard.", "We examined department-level procedures and guidance disseminated to  DHS\u2019s components for their use in identifying cybersecurity positions and  assigning employment codes, and compared the procedures and  guidance to HSCWAA requirements and leading practices. We also  analyzed department-level cybersecurity workforce data from the DHS  Office of Chief Human Capital Officer (OCHCO), the Department of  Agriculture\u2019s National Finance Center, dashboard reports, and DHS  progress reports to OPM and Congress, to identify the status of the  department\u2019s efforts in fulfilling mandated requirements to identify,  categorize, and code cybersecurity positions. We found the data  sufficiently reliable for the purposes of reporting DHS\u2019s cybersecurity  workforce identification and coding progress. However, the National  Finance Center data are limited in that only filled federal civilian positions  were reported in the National Finance Center system. Vacancies,  contractors, and military were not included in those data. Additionally,  DHS reported data may be estimated by components, data may not cover  the breadth of components, and data may be measured at different  intervals.", "Further, we chose a nonprobability sample of DHS components and  examined their procedures for identifying cybersecurity positions and  applying employment codes to the positions. The results of our  assessments of these six components are not generalizable to all DHS  components.", "To identify the components, we considered their reported number of  cybersecurity personnel and their cybersecurity functions. To select the  components, we segmented the 15 DHS components into 3 groups,  based on their reported total number of cybersecurity personnel in DHS.  We classified these groups as \u201chigh,\u201d \u201cmedium,\u201d and \u201clow.\u201d From each  group, we selected the two DHS components with the highest number of  cybersecurity functions, as reported by DHS. This resulted in the  selection of six components:", "U.S. Customs and Border Protection (CBP),", "Departmental Management and Operations (DMO),", "National Protection and Programs Directorate (NPPD),", "U.S. Secret Service (USSS),", "Science and Technology Directorate (S&T), and", "U.S. Citizenship and Immigration Services (USCIS).", "We then collected and reviewed the cybersecurity coding progress  reports from the six selected DHS components. We also administered a  questionnaire and data collection instrument (DCI) to officials  representing each of the six selected components to collect information  and obtain their views on the status of the components\u2019 efforts to identify  and code cybersecurity positions. We administered the questionnaire and  DCI from July through September 2017.", "All six components responded to the questionnaire and DCI, although not  all six components answered every question. We reviewed the responses  and clarified and validated them, as necessary, through interviews with,  or additional written responses received from the six component officials  that oversaw cybersecurity workforce activities. Again, the results of our  assessments of these six components are not generalizable.", "To address the second objective, we analyzed documentation discussing  DHS\u2019s planned actions for identifying its cybersecurity workforce areas of  critical need, including its data calls to components and progress reports  to OPM and Congress. We also examined cybersecurity workforce data  and documentation from OCHCO and the six selected components and  compared the documentation to the act\u2019s requirements, DHS-wide and  component-specific workforce planning processes, the National Initiative  for Cybersecurity Education (NICE) National Cybersecurity Workforce  Framework categories and specialty areas, and Standards for Internal  Control in the Federal Government. We found the data sufficiently  reliable for the purposes of reporting DHS\u2019s identification of cybersecurity  workforce areas of critical need. However, the data are limited in that  DHS reported data may be estimated by components, and component  responses may be from a particular program or office and not cover the  breadth of the program.", "For both objectives, we supplemented the information and knowledge  obtained from our analyses by conducting interviews with relevant  officials from DHS OCHCO and the six selected components regarding  the status of the department\u2019s efforts to implement the provisions of  HSCWAA. Additional details on our objectives, scope, and methodology  are provided in appendix I.", "We conducted this performance audit from March 2017 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies and our nation\u2019s critical infrastructures\u2014such as  energy, transportation systems, communications, and financial services\u2014 are dependent on computerized (cyber) information systems and  electronic data to carry out operations and to process, maintain, and  report essential information. The information systems and networks that  support federal operations are highly complex and dynamic,  technologically diverse, and often geographically dispersed. This  complexity increases the difficulty in identifying, managing, and protecting  the myriad of operating systems, applications, and devices comprising the  systems and networks.", "Cybersecurity professionals can help to prevent or mitigate the  vulnerabilities that could allow malicious individuals and groups access to  federal information technology (IT) systems. The ability to secure federal  systems depends on the knowledge, skills, and abilities of the federal and  contractor workforce that designs, develops, implements, secures,  maintains, and uses these systems. This includes federal and contractor  employees who use the systems in the course of their work, as well as  the designers, developers, programmers, and administrators of the  programs and systems.", "However, the Office of Management and Budget has noted that the  federal government and private industry face a persistent shortage of  cybersecurity and IT talent to implement and oversee information security  protections to combat cyber threats. This shortage of cybersecurity  professionals makes securing the nation\u2019s networks more challenging and  may leave federal IT systems vulnerable to malicious attacks. Having  experienced and qualified cybersecurity professionals is important for  DHS to help mitigate vulnerabilities in its own and other agencies\u2019  computer systems as a result of cyber threats."], "subsections": [{"section_title": "Federal Initiative and Guidance Are Intended to Improve Cybersecurity Workforces", "paragraphs": ["In recent years, the federal government has taken various steps aimed at  improving the cybersecurity workforce. These include establishing a  national initiative to promote cybersecurity training and skills and  developing guidance to address cybersecurity workforce challenges.", "The National Initiative for Cybersecurity Education (NICE): This  initiative, which began in March 2010, is a partnership among  government, academia, and the private sector. It is coordinated by the  National Institute of Standards and Technology (NIST) to help  improve cybersecurity education. According to NICE, its mission  includes promoting cybersecurity education, training, and workforce  development, and coordinating with government, academic, and  industry partners to build on existing successful programs and  facilitate change and innovation. The initiative\u2019s goal is to increase the  number of skilled cybersecurity professionals in order to boost  national IT security.", "National Cybersecurity Workforce Framework: In April 2013, NICE  published the National Cybersecurity Workforce Framework, which is  intended to provide a consistent way to define and describe  cybersecurity work at any public or private organization, including  federal agencies. The initial framework defined 31 cybersecurity- related specialty areas that were organized into 7 categories. In  August 2017, the framework was revised to include 33 cybersecurity- related specialty areas. The 7 categories are: securely provision,  operate and maintain, protect and defend, investigate, collect and  operate, analyze, and oversee and govern. For example, in the  oversee and govern category, a specialty area is cybersecurity  management, which covers the management of personnel,  infrastructure, policy, and security awareness. Further, in the protect  and defend category, the vulnerability assessment and management  specialty area covers conducting assessments of threats and  vulnerabilities and recommending appropriate mitigation  countermeasures in order to protect information systems from threats.", "In August 2017, NIST also revised the framework to define work roles  within each specialty area and describe cybersecurity tasks for each  work role. The revision also described the knowledge, skills, and  abilities that a person should have in order to perform each work  role. The revised framework is intended to enable agencies to  examine specific IT and cybersecurity-related work roles and identify  personnel skills gaps.", "OPM Guidance for Assigning Employment Codes to  Cybersecurity Positions: OPM sets data standards for federal job  classifications, including cybersecurity positions. The data standards,  issued by OPM in November 2014 created a 2-digit employment code  for each work category and specialty area defined in the initial 2013  NICE cybersecurity workforce framework. Federal agencies use the  codes to identify cybersecurity positions in personnel systems, such  as the National Finance Center\u2019s personnel and payroll system.  According to OPM, assigning codes to federal cybersecurity positions  is intended to lay the groundwork for a consistent governmentwide  count of the federal cybersecurity workforce. Use of these codes is  intended to enable OPM and federal agencies to more effectively  identify the cybersecurity workforce; determine baseline capabilities;  examine hiring trends; identify skill gaps; and recruit, hire, train,  develop, and retain an effective cybersecurity workforce. (See  appendix II for a description of the specialty areas defined in the NICE  Cybersecurity Workforce Framework and their corresponding OPM  codes).", "In January 2017, OPM issued new guidance to agencies for assigning  employment codes to cyber-related positions. This guidance created a  unique 3-digit employment code for each cybersecurity work role  identified in a draft version of the 2017 NICE cybersecurity workforce  framework. To enhance the recruiting and hiring of workers with  needed skills, agencies are to use the new 3-digit employment codes  to identify critical needs, and provide training and development  opportunities for cybersecurity personnel. In October 2017, NIST  issued guidance, which reflected the finalized 2017 NICE framework  and included a crosswalk of the 2-digit employment codes to the 3- digit employment codes."], "subsections": []}, {"section_title": "DHS\u2019s Cybersecurity Workforce Performs a Wide Range of Critical Missions", "paragraphs": ["DHS is the third largest department in the federal government, employing  approximately 240,000 people and with an annual budget of about $60  billion\u2014$6.4 billion of which was spent on IT in fiscal year 2017. The  department leads the federal government\u2019s efforts to secure our nation\u2019s  public and private critical infrastructure information systems. For example,  DHS collects and shares information related to cyber threats and  cybersecurity risks and incidents with other federal partners to enable  real-time actions to address these risks and incidents.", "DHS is made up of 15 components: 7 front-line, or operational,  components, and 8 support components. The operational components  lead the department\u2019s front-line activities to protect the nation, while the  support components are to provide the resources, analysis, equipment,  services, and other support to ensure that the operational components  have the tools and resources to accomplish the department\u2019s mission.  The 15 operational and support components, including the 6 that we  reviewed, are identified in figure 1.", "The components perform a diverse range of cybersecurity functions.  These functions include combating cybercrime; responding to cyber  incidents; sharing cyber-related information, including threats and best  practices; providing cybersecurity training and education; and securing  both privately owned critical infrastructure and non-military federal  networks. The missions and cybersecurity functions for the six  components selected for our review are described in table 1."], "subsections": []}, {"section_title": "Federal Laws Require DHS to Assess Its Cybersecurity Workforce", "paragraphs": ["HSCWAA required DHS to perform several workforce assessment-related  activities. Specifically, the department was to:  1.  Establish procedures for identifying and categorizing cybersecurity  positions and assigning codes to those positions. This was to be done  within 90 days of the law\u2019s enactment.  2.  Identify all positions with cybersecurity functions and determine the  work category and specialty areas of each position. DHS was required  to identify all cybersecurity positions\u2014both filled and vacant\u2014within  the department. In addition, it was to determine the cybersecurity work  category and specialty areas for each such position. Work categories  and specialty areas are defined in the NICE Cybersecurity Workforce  Framework.  3.  Assign codes to all filled and vacant cybersecurity positions. The  department was to assign the appropriate 2-digit employment code,  as set forth in OPM\u2019s Guide to Data Standards, to each position  based on the position\u2019s primary cybersecurity work category and  specialty areas.", "In addition, after completing the aforementioned activities, the department  was to:  4.  Identify the cybersecurity work categories and specialty areas of  critical need in the department\u2019s cybersecurity workforce and report to  Congress.  5.  Submit to OPM an annual report through 2021 that describes the work  categories and specialty areas of critical need and substantiates the  critical need designations.", "The act required DHS to complete the majority of the activities by specific  due dates between March 2015 and September 2016 (see table 2).", "Beyond HSCWAA, the Federal Cybersecurity Workforce Assessment Act  of 2015 was enacted in December 2015. It assigned specific workforce  planning-related activities to all federal agencies, including DHS.  Specifically, the law requires all federal agencies to identify all positions  that perform information technology, cybersecurity, or other cyber-related  functions and assign the appropriate employment code to each position.  Similar to HSCWAA, the federal act also requires all federal agencies,  including DHS, to identify and report to OPM on its cybersecurity work  roles of critical need; each agency also is to submit a progress report on  identifying cyber-related work roles of critical need to Congress.  According to OPM officials within Employee Services, which oversees the  federal cybersecurity workforce activities and implementation, agencies  are not expected to continue coding to the 2-digit data standard and,  instead, are to adopt the 3-digit data standard and complete coding the 3- digit standard by April 2018."], "subsections": []}]}, {"section_title": "DHS Has Not Fully Identified Cybersecurity Positions or Assigned Employment Codes in a Complete and Reliable Manner", "paragraphs": ["As defined in OPM\u2019s guidance and required by HSCWAA, DHS has  begun activities related to identifying, categorizing, and assigning the  appropriate employment codes to its cybersecurity positions. However,  DHS has not completed all of these activities, as required. Specifically,  the department did not develop timely and complete procedures or review  its components\u2019 procedures. In addition, it did not completely and reliably  identify and assign employment codes because its processes were  manual, undocumented, and resource-intensive.", "As indicated in table 3, the department did not complete any of the  activities associated with establishing procedures and identifying and  assigning employment codes to positions by the statutorily defined due  dates, and two of these efforts are still ongoing."], "subsections": [{"section_title": "DHS Did Not Ensure Cybersecurity Workforce Procedures Were Timely, Complete, or Reviewed", "paragraphs": ["HSCWAA required DHS to establish procedures to identify and assign the  appropriate employment code to all of the department\u2019s filled and vacant  positions with cybersecurity functions, in accordance with OPM\u2019s Guide to  Data Standards by March 2015. In addition, DHS\u2019s April 2016  Cybersecurity Workforce Coding guidance stated that components should  ensure procedures are in place to monitor and to update the employment  codes as positions change over time. Further, Standards for Internal  Control in the Federal Government recommends that management assign  responsibility and delegate authority to key roles and that each  component develop individual procedures to implement objectives. The  standard also recommends that management periodically review such  procedures to see that they are developed, relevant, and effective.", "Toward this end, OCHCO has developed procedures and recommended  implementation steps for coding positions with cybersecurity functions for  the department\u2019s components. The procedures include criteria to be used  in identifying cybersecurity positions. For example, the procedures state  that any position that performs cybersecurity work at least 25 percent of  the time should be identified as a cybersecurity position. The procedures  also include information on how components are to select the appropriate  data element codes.", "Nevertheless, although OCHCO developed procedures for identifying  positions and assigning codes, the procedures were not timely.  Specifically, DHS did not include in its procedures information on  identifying positions and assigning codes to address the act\u2019s  requirements until April 2016\u201413 months after the due date.", "In addition, the procedures were not complete in that they did not include  information related to identifying and coding vacant positions, as the act  required. For example, while the National Finance Center system, which  is DHS\u2019s system of record for employment codes assigned to  cybersecurity employees, was modified to capture the codes for filled  positions, the system was not modified to capture data on vacant  positions. (For an explanation of National Finance Center\u2019s system and  how DHS relates to it, see footnote 12.) In addition, the department\u2019s  procedures did not address how to identify or code vacant positions, or  where such information should be reported in a standardized manner  across the department.", "Moreover, the departmental procedures did not identify the individual  within each DHS component who was responsible for leading and  overseeing the identification and coding of the component\u2019s cybersecurity  positions. For example, the procedures did not identify a responsible  individual for leading the effort to identify and code CBP\u2019s cybersecurity  positions. Because there was no identified individual responsible for the  entirety of the CBP cybersecurity workforce identification efforts, CBP  officials told us they were unable to comment on, or provide a status  update on, where they were on the cybersecurity coding process.", "Further, although components were able to supplement the departmental  procedures by developing their own component-specific procedures for  identifying and coding their cybersecurity positions, DHS did not review  selected components\u2019 procedures for consistency with departmental  guidance. The department could not provide documentation that OCHCO  had verified or reviewed component-developed procedures. OCHCO  officials acknowledged that they had not reviewed the components\u2019  procedures and had not developed a process for conducting such  reviews.", "OCHCO officials identified several factors that they said limited their  ability to develop timely and complete procedures for identifying and  coding cybersecurity positions, and to review the supplemental  procedures developed by the components. For example, they stated that:", "DHS did not complete its update of the procedures for identifying  cybersecurity positions and assigning codes until April 2016 because  the department could not decide whether or not certain positions  within the department should be considered cybersecurity positions; each component had the best understanding of their human capital  systems and processes, so the development of tailored procedures  was best left up to each component; each of the six selected DHS components recorded and tracked  vacant positions differently; therefore, the department\u2019s human capital  office could not issue department-wide guidance on vacant positions;  the cybersecurity specialty areas for vacant positions were not known  until a position description was developed or verified and a hiring  action was imminent; and", "DHS did not assign responsibilities for, or review, components\u2019  procedures because, as noted previously, the department believed  that its components had the best understanding of their specific  human capital systems; thus, what the components included in their  own procedures was best left up to them.", "OCHCO officials said that they plan to work with their internal  accountability team to review component-developed procedures, but they  had not established a time frame for doing so. Without assurance that  procedures are timely, complete, and reviewed, DHS cannot be certain  that components are effectively prepared to identify and code all positions  with cybersecurity functions, as required by the act."], "subsections": []}, {"section_title": "DHS Has Not Yet Completed Required Identification Activities", "paragraphs": ["HSCWAA required DHS to identify all cybersecurity positions, including  vacant positions, by September 2015 in order to meet the act\u2019s other  deadlines. Further, the act called for the department to use OPM\u2019s Guide  to Data Standards to categorize the identified positions and determine the  work category or specialty area of each position.", "As of December 2016, the department reported that it had identified  10,725 cybersecurity positions, including 6,734 federal civilian positions,  584 military positions, and 3,407 contractor positions. However, as of  November 2017, the department had not completed identifying all of its  cybersecurity positions or determining the work categories or specialty  areas of the positions. For example, three of the six DHS components we  reviewed had not identified their vacant cybersecurity positions. OCHCO  officials stated that components varied in reporting their identified vacant  positions because the department did not have a system to track  vacancies.", "DHS also reported that it most commonly determined that the work  category or specialty area of its cybersecurity positions were in the  \u201cprotect and defend,\u201d \u201csecurely provision,\u201d and \u201coversight and  development\u201d work categories, and in the \u201csecurity program  management\u201d and \u201cvulnerability assessment and management\u201d specialty  areas of the NICE framework. DHS reported at least 12 of 15 DHS  components as having cybersecurity positions in these categories and  specialty areas. However, DHS could not provide data to show the actual  numbers of positions in each of these categories and specialty areas.  According to OCHCO officials, the department was still in the process of  identifying positions for the 2-digit codes and would continue this effort  until the 3-digit codes were available in the National Finance Center  personnel and payroll system in December 2017. At that time, OCHCO  officials stated that the department intends to start developing procedures  for identifying and coding positions using the 3-digit codes."], "subsections": []}, {"section_title": "DHS Has Not Completely and Accurately Assigned Employment Codes", "paragraphs": ["In addition to identifying all of its positions with cybersecurity functions  and determining the work categories and specialty areas of each position  consistent with the NICE framework, HSCWAA required DHS to assign  positions codes to all such identified positions by September 2015.  According to the Office of Management and Budget, having complete  data consistent with the framework will help agencies to effectively  examine the cybersecurity workforce; identify skill gaps; and improve  workforce planning. Further, Standards for Internal Control in the  Federal Government states that agencies should obtain relevant data  from reliable sources that are accurate.", "DHS has not completely and accurately assigned employment codes to  its cybersecurity workforce. As of August 2017\u201423 months after the due  date\u2014the department had not completed the process of assigning the 2- digit employment codes to all of its identified cybersecurity positions. For example, five of the six components we selected for review had not  completed the coding of their cyber positions.", "In addition, DHS did not completely or accurately assign codes to all filled  and vacant cybersecurity positions as required by the act. In August  2017, OPM provided a progress report to Congress containing DHS data  that stated that 95 percent of DHS-identified cybersecurity positions had  been coded. However, our analysis determined that the department had  assigned cybersecurity position codes to approximately 79 percent, rather  than the reported 95 percent, of identified federal civilian cybersecurity  positions. See figure 2 below. DHS could not demonstrate that it had  assigned codes to 95 percent of its positions, as reported, since its coding  progress data never indicated such a percentage.", "The percentage of coded positions reported for DHS was overstated  because it was not based on complete information. Specifically, the  percentage reflected information on the progress of filled federal civilian  cybersecurity positions, but excluded vacant positions, even though the  act required DHS to report these positions. Among the six components  that we selected for our review, five of them had not yet completed the  coding of their positions.", "Figure 2 shows the results of our analysis of DHS\u2019s progress in coding its  cybersecurity positions, which considered both filled and vacant federal  civilian cybersecurity positions, in comparison to what the department  identified, which considered incomplete data\u2014using only filled positions.", "In addition to being incomplete, DHS\u2019s results were not accurate.  Specifically, OCHCO developed a bi-monthly dashboard to monitor and  report coding progress; however, the office did not have assurance that  its data were accurate. OCHCO officials stated they did not verify the  components\u2019 data for accuracy. For example, while no more than 100  percent of identified positions should be coded, OCHCO reported 122.7  percent of positions as being coded for the Office of the Chief Information  Officer. Such anomalies were due to DHS components reporting the total  number of identified cybersecurity positions on a semi-annual basis, while  OCHCO determined positions coded on a bi-monthly basis using data  from the National Finance Center personnel and payroll system. Yet,  OCHCO analyzed and reported these numbers together, even though  they were representative of different time periods. This produced  unreliable results that were not representative of actual progress.", "Table 4 provides examples of components\u2019 coding progress, as reflected  in DHS\u2019s August 29, 2017 dashboard report, which showed one  component that had more cybersecurity positions coded than were  identified.", "OCHCO officials reported several factors related to their processes and  systems that had limited their ability to collect and use data that were  complete and accurate. Specifically, the officials stated that OCHCO did  not have documented processes to collect and verify data from the  components. The officials also stated that the components did not report  vacancies consistently, and that the department does not have a system  to track the vacancies. The officials further stated that the cybersecurity  workforce amounts frequently changed, and that they could not review  workforce data for reliability, as such a review was a resource-intensive  activity.", "However, if DHS does not assure that processes are in place to obtain  and use data that are complete, including vacant positions, and accurate,  then the department cannot be assured that it will have an accurate  understanding of its internal coding progress. Without the ability to code  its cybersecurity positions in a complete and accurate manner, DHS will  not be able to effectively examine the cybersecurity workforce; identify  skill gaps; and improve workforce planning."], "subsections": []}]}, {"section_title": "DHS Has Not Identified or Reported Its Department-wide Cybersecurity Workforce Areas of Critical Need", "paragraphs": ["While DHS has identified workforce capacity and capability gaps, it has  not identified or reported to Congress its department-wide cybersecurity  critical needs that align with the NICE framework. Additionally, the  department has not reported its critical needs to OPM or developed plans  and time frames for completing priority actions for reporting critical needs  annually to OPM. Further, as indicated in table 5, the department did  address any required activities by the statutorily defined due dates."], "subsections": [{"section_title": "DHS Has Not Identified Critical Needs in Alignment with the NICE Framework or Provided Guidance to Components", "paragraphs": ["HSCWAA required DHS to identify its cybersecurity work categories and  specialty areas of critical need in alignment with the NICE framework and  to report this information to the appropriate congressional committees by  June 2016. In addition, according to a DHS directive, the DHS Chief  Human Capital Officer is responsible for providing guidance to the  department\u2019s components on human resources standards, such as  identifying workforce needs. According to GAO\u2019s leading practices on  strategic workforce planning, developing and providing guidance could  help agencies identify their critical needs in order to effectively recruit,  hire, train, and retain cybersecurity personnel.", "Although required to do so by June 2016, DHS has not yet identified its  cybersecurity work categories and specialty areas of critical need in  alignment with the NICE framework. The department identified workforce  skills gaps and included this information in a report that it submitted to  congressional committees in March 2017. However, the department did  not align the workforce skills gaps report to the NICE framework\u2019s work  categories and specialty areas as required by HSCWAA. (The  categories and specialty areas are described in appendix II.)", "Specifically, although the framework required that critical needs be align  with a specific specialty area, DHS did not align the skills gaps to a  particular specialty area in the NICE framework. For example, DHS  identified a skill gap called development operations, which is related to 12  different specialty areas in the NICE framework. This skill gap also  overlaps with other DHS skill gaps and creates the potential for double- counting critical needs. Furthermore, although three selected components  reported in our questionnaires that they were able to identify their critical  needs that aligned to the framework, they did not report this information to  OCHCO.", "According to OCHCO officials, DHS has not identified department-wide  cybersecurity critical needs that align with the framework partly because  OPM had not provided DHS with guidance for identifying cybersecurity  critical needs. According to OPM officials, however, they provided oral  guidance to DHS on using the 2-digit codes for identifying its critical  needs during four meetings in 2016 and 2017. The OPM officials also  stated that they had plans to develop governmentwide guidance for using  the 3-digit codes to identify cybersecurity critical needs by March 2018 to  fulfil the requirements of the Federal Cybersecurity Workforce  Assessment Act of 2015. According to OPM, agencies such as DHS are  required to identify critical needs for the 3-digit codes by April 2019. DHS  OCHCO officials said that DHS plans to transition to identifying cyber- related work roles of critical need once they have completed the 3-digit  coding efforts under the 2015 federal act mentioned previously.", "Further, DHS has not developed and provided guidance to help its  component-level agencies to identify their critical needs that align to the  NICE framework. Specifically, DHS did not include guidance in its  procedures that instructed components on how to report on their critical  needs or to align to the NICE framework work categories and specialty  areas. Two selected components\u2019 officials told us they required  guidance from OCHCO on how best to identify critical needs.", "According to OCHCO officials, they did not provide components guidance  on critical needs that align with the NICE framework because the  components were in the best position to determine their critical needs.  Further, OCHCO officials stated that the components do not generally  view critical skills gaps in terms of the categories or specialty areas as  defined in the NICE framework, but instead, describe their skills gaps  using position titles that are familiar to them. For example, one selected  component identified security engineering as a skills gap familiar to them.  However, according to OCHCO officials, this gap may align to five  different specialty areas in the NICE framework\u2019s securely provision work  category. As mentioned previously, the framework required that critical  needs be align with a specific specialty area.", "In September 2017, OCHCO developed a draft document that crosswalks  identified department-wide cybersecurity skills gaps to one or more  specialty areas in the NICE framework. However, the document does not  adequately help components identify their critical needs by aligning their  gaps with the NICE framework. Half of the DHS skills gaps overlap with  two or more work categories, but the National Finance Center payroll  system allows components to enter only one code per position. Further,  the document does not provide additional decision rules to help  components determine a critical need in cases in which a skills gap is  mapped to multiple work categories.", "Without providing relevant guidance to help components identify their  critical needs, DHS and the components are hindered from effectively  identifying and prioritizing workforce efforts to recruit, hire, train, develop,  and retain cybersecurity personnel across the department."], "subsections": []}, {"section_title": "DHS Did Not Report Critical Needs Annually to OPM or Develop Plans and Time Frames for Completing Priority Actions", "paragraphs": ["HSCWAA required that, annually from September 2016 through  September 2021, DHS, in consultation with OPM, submit a report to OPM  that describes and substantiates critical need designations. In addition,  Standards for Internal Control in the Federal Government states that  management should develop plans to achieve objectives. Developing  plans to report critical needs is a control activity that could help capture  and sequence all of the activities that DHS must complete in order to  report critical needs. This involves clearly defining what is to be achieved,  who is to achieve it, how it will be achieved, and the time frames for  achievement.", "DHS did not report cybersecurity critical needs to OPM in September  2016 or September 2017 as required. Instead, the department first  reported its cybersecurity coding progress and skills gaps in the March  2017 report that it sent to OPM and Congress addressing several of the  HSCWAA requirements. The report did not describe or substantiate  critical need designations because DHS has not yet identified them.  OCHCO officials stated that the department plans to submit another  report to OPM; however, they did not indicate whether critical needs will  be included in the report, and did not have a time frame for when they  plan to submit the report to OPM.", "Additionally, DHS has not developed plans or time frames to complete  priority actions that OCHCO officials said must be completed before it can  report its cybersecurity critical needs to OPM. DHS\u2019s Comprehensive  Cybersecurity Workforce Update reported two priority actions to identify,  describe, and substantiate cybersecurity critical needs\u2014developing a  DHS cybersecurity workforce strategy and completing its initial  cybersecurity workforce research\u2014by the end of fiscal year 2017.  However, DHS did not complete the priority actions by the end of fiscal  year 2017, as planned.", "As of September 2017, the department was still in the process of  finalizing the DHS cybersecurity workforce strategy and had not yet  completed the initial cybersecurity workforce research. OCHCO officials  said that the strategy is to be influenced by ongoing efforts to finalize the  DHS comprehensive cybersecurity mission strategy, provide DHS reports  required by the May 2017 cybersecurity-related presidential executive  order, and finalize and implement the new cybersecurity-focused  personnel system. According to OCHCO officials, the department plans  to conduct additional interviews and focus groups in fiscal year 2018.", "According to DHS OCHCO officials, the department did not develop plans  or schedules with time frames to report cybersecurity critical needs.  These officials stated that the report that the department submitted to  Congress in March 2017 had contained plans and schedules. However, it  did not capture and sequence all of the activities that DHS officials said  must be completed in order to report critical needs. For example, the  report did not include a schedule for completing the cybersecurity  workforce strategy or conducting additional interviews and focus groups  to complete the initial cybersecurity workforce research.", "Until DHS develops plans and schedules with time frames for reporting its  cybersecurity critical needs, the department may not have important  insight into its needs for ensuring that it has the workforce necessary to  carry out its critical role of helping to secure the nation\u2019s cyberspace.  Further, OPM may be hindered from using DHS\u2019s reports to understand  critical needs consistently on a governmentwide basis."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DHS has begun the required workforce assessment activities to identify,  categorize, and assign codes to its cybersecurity positions. However, the  department did not complete the activities by their statutorily defined due  dates and efforts are still ongoing. Specifically, the department did not  develop timely and complete procedures or review its components\u2019  procedures. In addition, DHS\u2019s efforts to identify, categorize, and code  cybersecurity positions were incomplete and unreliable. Without the ability  to identify, categorize, and code its cybersecurity positions in a complete  and accurate manner, DHS will not be able to effectively examine the  cybersecurity workforce, identify skill gaps, and improve workforce  planning.", "DHS has identified critical gaps in its cybersecurity workforce, but these  gaps did not align with the NICE framework work categories and specialty  areas of critical need, as required by the act. Specifically, DHS has not  developed guidance to help its component agencies and offices identify  their cybersecurity critical needs. Moreover, DHS lacks plans with defined  time frames for completing its required annual reporting to OPM. Until the  department addresses these issues, it may continue to miss reporting  deadlines and be hindered from effectively identifying and prioritizing  critical workforce efforts to recruit, hire, train, develop, and retain  cybersecurity personnel across its multiple components. In addition, DHS  may not have cybersecurity personnel with the required skills to better  protect federal networks and national critical infrastructure from threats.", "The commitment of DHS\u2019s leadership is essential to successfully  addressing these issues and the associated management weaknesses.  By taking urgent and diligent action now, DHS will be better positioned to  fulfill the requirements of HSCWAA and to identify and code its filled and  vacant cybersecurity positions accurately when it transitions to using the  revised NICE framework."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to DHS:  The Secretary of Homeland Security should develop procedures on how  to identify and code vacant cybersecurity positions. (Recommendation 1)", "The Secretary of Homeland Security should identify the individual in each  component who is responsible for leading that component\u2019s efforts in  identifying and coding cybersecurity positions. (Recommendation 2)", "The Secretary of Homeland Security should establish and implement a  process to periodically review each component\u2019s procedures for  identifying component cybersecurity positions and maintaining accurate  coding. (Recommendation 3)", "The Secretary of Homeland Security should ensure OCHCO collects  complete and accurate data from its components on all filled and vacant  cybersecurity positions when it conducts its cybersecurity identification  and coding efforts. (Recommendation 4)", "The Secretary of Homeland Security should develop guidance to assist  DHS components in identifying their cybersecurity work categories and  specialty areas of critical need that align to the NICE framework.  (Recommendation 5)", "The Secretary of Homeland Security should develop plans with time  frames to identify priority actions to report on specialty areas of critical  need. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We received written comments on a draft of this report from DHS. In the  comments (reprinted in appendix III), the department concurred with our  six recommendations and provided estimated completion dates for  implementing each of them.", "With regard to recommendations 1 and 2, DHS stated that, by February  28, 2018, it plans to finalize and disseminate an updated version of its  cybersecurity position identification and coding guidance to address  vacant positions, as well as issue a memorandum requiring its  components to designate a lead for reporting progress to OCHCO.  Further, by April 30, 2018, the department said it plans to address  recommendation 3 by disseminating a memorandum that includes a  process for periodically reviewing component procedures and instructions  for components to report related data and documents.", "DHS also stated that, by June 29, 2018, it plans to issue memorandums  to its components that provide instructions, guidance, and plans to  address recommendations 4 through 6. The department added that it  intends to (1) periodically review compliance and cybersecurity workforce  data concerns with component leads to ensure data accuracy; (2)  disseminate a reporting schedule for identifying cybersecurity critical  needs; and (3) develop and disseminate a project plan with milestones,  due dates, and responsibilities for reviewing progress and reporting on  workforce planning actions in fiscal years 2018 and 2019.", "The aforementioned actions, if implemented effectively, should help DHS  address the intent of our recommendations. In addition, we received  technical comments from the department, which we have incorporated, as  appropriate.", "We also provided a draft of this report for OPM\u2019s review and comments.  In response, an OPM program analyst stated, via email, that the agency  had no edits, comments, or revisions to the draft report.", "We are sending copies of this report to appropriate congressional  committees, the Secretary of Homeland Security, and the Director of the  Office of Personnel Management. 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  Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov, or  Chris Currie 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 IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to identify the extent to which DHS has:  1.  identified, categorized and assigned employment codes to  2.  identified its cybersecurity workforce areas of critical need.", "To address both objectives, we examined Department of Homeland  Security (DHS) Office of Chief Human Capital Officer (OCHCO) and  component cybersecurity workforce data and documentation and  interviewed OCHCO and component officials. In addition, we reviewed  Standards for Internal Control in the Federal Government and Key  Principles for Effective Strategic Workforce Planning, and then compared  the cybersecurity workforce internal controls and project management  processes that DHS implemented to address the act to the selected  standard.", "We also administered a questionnaire and data collection instrument  (DCI) to a nonprobability sample of 6 of 15 DHS components. To select  the 6 components we used OPM\u2019s Enterprise Human Resources  Integration-Statistical Data Mart data on DHS civilian positions. We  segmented the 15 components into 3 groups, based on their reported  total number of cybersecurity personnel in DHS\u2014high, medium, and low.  From each group, we selected 2 DHS components with the highest  number of cybersecurity functions, as reported by DHS. Where  components or offices in the same tier have equivalent cybersecurity  functions, we selected the DHS component or office with the highest  share of cybersecurity employees. This approach resulted in the selection  of the following DHS components:", "U.S. Customs and Border Protection,", "Departmental Management and Operations,", "National Protection and Programs Directorate,", "U.S. Secret Service,", "Science & Technology Directorate, and", "U.S. Citizenship and Immigration Services.", "The results of this analysis are not generalizable to all DHS components.", "In both the questionnaire and DCI, we asked questions related to the  status of DHS\u2019s identification, categorization and assignment of  employment codes to cybersecurity positions, and identification of its  cybersecurity workforce areas of critical need. To minimize errors that  might occur from respondents interpreting our questions differently from  our intended purpose, we performed a preliminary review of the  questionnaire and DCI with OCHCO officials.", "The selection of OCHCO officials for preliminary review was based on  OCHCO\u2019s oversight role in the implementation of the Homeland Security  Cybersecurity Workforce Assessment Act of 2014 (HSCWAA). During this  review, we interviewed the officials to ensure that the questions were  applicable, clear, unambiguous, and easy to understand. We then revised  our questionnaire and DCI based on the feedback provided during the  preliminary review. All respondents completed the final questionnaire and  DCI, although not all survey respondents answered every question. We  then reviewed the responses and interviewed relevant component  officials in order to get clarification and validation of their responses.", "We determined that the data obtained from the questionnaire and DCI are  sufficiently reliable for the purpose of reporting DHS\u2019 progress in  assigning cybersecurity codes. However, these data have the following  limitations: component responses may be from a particular program or  office and not cover the breadth of the program, and component reported  data may be estimated or unavailable.", "To address our first objective, we reviewed and analyzed DHS\u2019s  department-level cybersecurity workforce procedures and  communications and organizational documents for identifying  cybersecurity positions and assigning work-position codes in accordance  with the act. Further, we examined department-level data from the  Department of Agriculture\u2019s National Finance Center, DHS dashboard  reports, and DHS progress reports to the Office of Personnel  Management (OPM) and Congress. To assess the reliability of OCHCO  and component cybersecurity workforce data, we compared them with  data from OPM\u2019s Enterprise Human Resources Integration-Statistical  Data Mart data on DHS civilian positions and against the National  Finance Center personnel and payroll system data on the cybersecurity  coding of DHS civilian positions as appropriate. In addition, we reviewed  and analyzed component-level cybersecurity workforce procedures, as  well as cybersecurity workforce data and documentation, including data  calls to selected component-level offices in DHS. We evaluated these  documents against the act\u2019s requirements and Standards for Internal  Control in the Federal Government to ensure that DHS\u2019s processes  addressed leading practices.", "To address our second objective, we reviewed and analyzed DHS\u2019s  planned actions for identifying its cybersecurity workforce areas of critical  need, including data calls to components, and DHS progress reports to  OPM and Congress. We also examined OCHCO and component  cybersecurity workforce data and department-level workforce planning  documentation to evaluate the status of the department\u2019s efforts to  identify its cybersecurity workforce areas of critical need. We compared  these documents against the act\u2019s requirements, DHS-wide and  component-specific workforce planning processes, the National Initiative  for Cybersecurity Education (NICE) framework categories and specialty  areas, and Standards for Internal Control in the Federal Government to  ensure DHS met its requirements.", "To assess the reliability of OPM\u2019s Enterprise Human Resources  Integration-Statistical Data Mart data on DHS civilian positions, we  reviewed the data for obvious errors as well as compared OPM\u2019s written  responses to our data reliability questionnaire regarding the generation  and use of the data. We determined that the data were sufficiently reliable  for the purpose of helping inform our selection of a nonprobability sample  of 6 DHS components as described above.", "To assess the reliability of National Finance Center personnel and payroll  system data on the cybersecurity coding of DHS civilian positions, we  examined the data for outliers and obvious errors and compared those  data to data and documentation from DHS components. In addition, we  interviewed and observed DHS officials generate and use the National  Finance Center data. We determined that the data were sufficiently  reliable for the purposes of reporting DHS cybersecurity workforce coding  progress. The data are limited in that only filled federal civilian positions  were reported in the National Finance Center system. Vacancies,  contractors, and military were not included in those data.", "To assess the reliability of DHS\u2019s OCHCO and component human capital  systems data on the DHS civilian cybersecurity workforce, we reviewed  the data for outliers and obvious errors, and compared them against data  from the National Finance Center personnel and payroll system. We also  interviewed officials from OCHCO and selected DHS components  regarding the generation and use of the data. We determined that the  data were sufficiently reliable for the purpose of reporting DHS\u2019 progress  in assigning cybersecurity codes. However, the data have the following  limitations: component responses may be from a particular program or  office and not cover the breadth of the program, data may be estimated  by components, and data may be measured at different intervals\u2014for  example, total cybersecurity workforce may be measured at a different  point in time than cybersecurity workforce positions coded.", "For both objectives, we supplemented the information and knowledge  obtained from our assessments by holding discussions with relevant DHS  OCHCO and the six components\u2019 officials to evaluate the status of the  department\u2019s efforts to implement the act.", "We conducted this performance audit from March 2017 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: National Initiative for Cybersecurity Education (NICE) Cybersecurity Workforce Framework Categories and Specialty Areas", "paragraphs": ["Appendix II: National Initiative for  Cybersecurity Education (NICE) Cybersecurity  Workforce Framework Categories and  Specialty Areas Oversees, evaluates, and supports the documentation, validation,  assessment, and authorization processes necessary to assure that existing  and new information technology (IT) systems meet the organization\u2019s  cybersecurity and risk requirements. Ensures appropriate treatment of risk,  compliance, and assurance from internal and external perspectives.", "Develops and writes/codes new (or modifies existing) computer applications,  software, or specialized utility programs following software assurance best  practices.", "Works on the development phases of the systems development life cycle.", "Consults with customers to gather and evaluate functional requirements and  translates these requirements into technical solutions. Provides guidance to  customers about applicability of information systems to meet business needs.", "Develops system concepts and works on the capabilities phases of the  systems development life cycle; translates technology and environmental  conditions (e.g., law and regulation) into system and security designs and  processes.", "Conducts technology assessment and integration processes; provides and  supports a prototype capability and/or evaluates its utility.", "Develops and conducts tests of systems to evaluate compliance with  specifications and requirements by applying principles and methods for cost- effective planning, evaluating, verifying, and validating of technical, functional,  and performance characteristics (including interoperability) of systems or  elements of systems incorporating IT.", "Addresses problems; installs, configures, troubleshoots, and provides  maintenance and training in response to customer requirements or inquiries  (e.g., tiered-level customer support).", "Develops and administers databases and/or data management systems that  allow for the storage, query, and utilization of data.", "Manages and administers processes and tools that enable the organization to  identify, document, and access intellectual capital and information content.", "Installs, configures, tests, operates, maintains, and manages networks and  their firewalls, including hardware (e.g., hubs, bridges, switches, multiplexers,  routers, cables, proxy servers, and protective distributor systems) and  software that permit the sharing and transmission of all spectrum  transmissions of information to support the security of information and  information systems.", "Installs, configures, troubleshoots, and maintains server configurations  (hardware and software) to ensure their confidentiality, integrity, and  availability. Also, manages accounts, firewalls, and patches. Responsible for  access control, passwords, and account creation and administration."], "subsections": [{"section_title": "NICE Specialty Area Systems Analysis", "paragraphs": ["NICE Specialty Area definition  Conducts the integration/testing, operations, and maintenance of systems  security.", "Conducts training of personnel within pertinent subject domain. Develops,  plans, coordinates, delivers and/or evaluates training courses, methods, and  techniques as appropriate.", "Applies knowledge of data, information, processes, organizational interactions,  skills, and analytical expertise, as well as systems, networks, and information  exchange capabilities to manage acquisition programs. Executes duties  governing hardware, software, and information system acquisition programs  and other program management policies. Provides direct support for  acquisitions that use information technology (IT) (including National Security  Systems), applying IT-related laws and policies, and provides IT-related  guidance throughout the total acquisition life cycle.", "Provides legally sound advice and recommendations to leadership and staff on  a variety of relevant topics within the pertinent subject domain. Advocates  legal and policy changes, and makes a case on behalf of client via a wide  range of written and oral work products, including legal briefs and proceedings.", "Oversees the cybersecurity program of an information system or network;  including managing information security implications within the organization,  specific program, or other area of responsibility, to include strategic,  personnel, infrastructure, requirements, policy enforcement, emergency  planning, security awareness, and other resources.", "Develops policies and plans and/or advocates for changes in policy that  supports organizational cyberspace initiatives or required  changes/enhancements.", "Supervises, manages, and/or leads work and workers performing  cybersecurity work.", "Uses defensive measures and information collected from a variety of sources  to identify, analyze, and report events that occur or might occur within the  network in order to protect information, information systems, and networks  from threats.", "Tests, implements, deploys, maintains, reviews, and administers the  infrastructure hardware and software that are required to effectively manage  the computer network defense service provider network and resources.  Monitors network to actively remediate unauthorized activities.", "Responds to crises or urgent situations within the pertinent domain to mitigate  immediate and potential threats. Uses mitigation, preparedness, and response  and recovery approaches, as needed, to maximize survival of life, preservation  of property, and information security. Investigates and analyzes all relevant  response activities.", "Conducts assessments of threats and vulnerabilities; determines deviations  from acceptable configurations, enterprise or local policy; assesses the level of  risk; and develops and/or recommends appropriate mitigation  countermeasures in operational and nonoperational situations."], "subsections": []}, {"section_title": "NICE Specialty Area Analyze category All-Source Analysis", "paragraphs": ["Analyzes threat information from multiple sources, disciplines, and agencies  across the intelligence community. Synthesizes and places intelligence  information in context; draws insights about the possible implications.", "Analyzes collected information to identify vulnerabilities and potential for  exploitation.", "Applies current knowledge of one or more regions, countries, non-state  entities, and/or technologies.", "Identifies and assesses the capabilities and activities of cybersecurity criminals  or foreign intelligence entities; produces findings to help initialize or support  law enforcement and counterintelligence investigations or activities.", "Applies language, cultural, and technical expertise to support information  collection, analysis, and other cybersecurity activities."], "subsections": []}, {"section_title": "Collect and Operate category Collection Operations", "paragraphs": ["Executes collection using appropriate strategies and within the priorities  established through the collection management process.", "Performs activities to gather evidence on criminal or foreign intelligence  entities in order to mitigate possible or real-time threats, protect against  espionage or insider threats, foreign sabotage, international terrorist activities,  or to support other intelligence activities.", "Performs in-depth joint targeting and cybersecurity planning process. Gathers  information and develops detailed Operational Plans and Orders supporting  requirements. Conducts strategic and operational-level planning across the full  range of operations for integrated information and cyberspace operations."], "subsections": []}, {"section_title": "Investigate category Digital Forensics", "paragraphs": ["Collects, processes, preserves, analyzes, and presents computer-related  evidence in support of network vulnerability mitigation, and/or criminal, fraud,  counterintelligence or law enforcement investigations.", "Applies tactics, techniques, and procedures for a full range of investigative  tools and processes to include, but not limited to, interview and interrogation  techniques, surveillance, counter surveillance, and surveillance detection, and  appropriately balances the benefits of prosecution versus intelligence  gathering.", "OPM guidance states that individuals primarily engaged in project or program management for  cybersecurity projects or tasks should be coded with the Cybersecurity Program/Project Management  value (80)."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts above, Ben Atwater (assistant director), Tammi  Kalugdan (assistant director), David Hong (analyst-in-charge), Christy  Abuyan, Alexander Anderegg, David Blanding, Jr., Chris Businsky,  Wayne Emilien, Jr., David Plocher, Luis E. Rodriguez, and Priscilla Smith  made significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-105", "url": "https://www.gao.gov/products/GAO-18-105", "title": "Central States Pension Fund: Department of Labor Activities under the Consent Decree and Federal Law", "published_date": "2018-06-04T00:00:00", "released_date": "2018-06-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Multiemployer plans are collectively bargained pension agreements often between labor unions and two or more employers. CSPF is one of the nation's largest multiemployer defined benefit pension plans, covering about 385,000 participants. Since 1982, the plan has operated under a court-enforceable consent decree which, among other things, requires that the plan's assets be managed by independent parties. Within 7 years, CSPF estimates that the plan's financial condition will require severe benefit cuts. GAO was asked to review the events and factors that led to the plan's critical financial status and the oversight DOL provides under the consent decree and under other federal laws.", "GAO reviewed (1) what is known about the factors that contributed to CSPF's critical financial condition, (2) DOL's role in the administration of the 1982 CSPF consent decree and what actions the agency has taken under that role, and (3) what actions, if any, DOL has taken to oversee CSPF, beyond those required under the consent decree. GAO reviewed the consent decree and its amendments, relevant federal laws and regulations, agency guidance on plan management, and DOL protocols for investigating plans; interviewed CSPF representatives, International Brotherhood of Teamsters officials and members, federal officials, and industry stakeholders; and reviewed correspondence between DOL and CSPF and documents related to DOL investigations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Central States, Southeast and Southwest Areas Pension Fund (CSPF) was established in 1955 to provide pension benefits to trucking industry workers and is one of the largest multiemployer plans. According to its regulatory filings, CSPF had less than half the estimated funds needed to cover plan liabilities in 1982 at the time it entered into a court-enforceable consent decree that provides for oversight of certain plan activities. Since then, CSPF has made some progress toward achieving its targeted level of funding; however, CSPF has never been more than 75 percent funded and its funding level has weakened since 2002, as shown in the figure below.", "Stakeholders GAO interviewed identified numerous factors that contributed to CSPF's financial condition. For example, stakeholders stated that changes within the trucking industry, as well as a decline in union membership, contributed to CSPF's inability to maintain a healthy contribution base. CSPF's active participants made up about 69 percent of all participants in 1982, but accounted for only 16 percent in 2016. The most dramatic change in active participants occurred in 2007 when the United Parcel Service, Inc. (UPS) withdrew from the plan. At that time, UPS accounted for about 30 percent of the plan's active participants (i.e. workers). In addition, the market declines of 2001 to 2002 and 2008 had a significant negative impact on the plan's long-term investment performance. Stakeholders noted that, while each individual factor contributed to CSPF's critical financial condition, the interrelated nature of the factors also had a cumulative effect on the plan's financial condition.", "The 1982 consent decree between the U.S. Department of Labor (DOL) and CSPF came about as a result of an investigation of alleged breaches of fiduciary duty and mismanagement of plan assets, and is intended to prevent their reoccurrence. In addition to reiterating the requirement that the plan comply with the Employee Retirement Income Security Act of 1974 (ERISA)\u2014the primary law governing the treatment of private-sector pensions in the United States\u2014the consent decree further outlines requirements for the plan to help ensure fiduciary controls and plan management, including seeking court approvals for the appointment of new trustees and changes to the plan's investment policy. The consent decree also delineates roles for DOL and other stakeholders. For example, it allows DOL to object to or comment on certain proposed plan actions, but does not require the agency to do so. GAO's review of plan documents found that the agency provided oversight and technical assistance in the areas specifically identified for its involvement under the consent decree, such as vetting proposed trustees prior to the court's approval.", "DOL is primarily responsible for enforcing the reporting, disclosure, and fiduciary provisions of ERISA for all tax-qualified pension plans, including CSPF. ERISA sets forth a \u201cprudent man standard of care\u201d in the execution of fiduciary duties that, according to DOL, focuses on the process for making proper fiduciary decisions. Plan fiduciaries are responsible for selecting and monitoring investment managers, but are generally not liable for the individual investment decisions of those managers. To enforce ERISA, DOL conducts examinations and investigations. Since the consent decree was established, DOL officials reported that the agency has completed two investigations of CSPF. The two investigations\u2014completed in 1998 and 2004\u2014were closed without adverse findings against the plan. Beyond the agencies' oversight role, DOL collaborated with CSPF and others on steps intended to improve the plan's financial position, including contributing to discussions on proposed legislation and working with CSPF on its application to reduce benefits under the Multiemployer Pension Reform Act of 2014. The application was not approved by the U.S. Department of the Treasury."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Established in 1955 to provide pension benefits to trucking industry  workers, the Central States, Southeast and Southwest Areas Pension  Fund (CSPF) is one of the nation\u2019s largest multiemployer pension plans,  with $15.3 billion in assets at the end of 2016. About 1,400 employers are  obligated to contribute to CSPF, and the plan covers almost 385,000  participants. Since 1982, the plan has operated under a court- enforceable consent decree which, among other things, requires it to  obtain approval from the U.S. District Court for the Northern District of  Illinois, Eastern Division, for certain plan activities and allows for U.S.  Department of Labor (DOL) input prior to the court\u2019s approval. Currently,  CSPF is projected to become insolvent within 7 years and is classified as  a \u201ccritical and declining\u201d plan under the Employee Retirement Income  Security Act of 1974 (ERISA), as amended by subsequent laws, including  the Multiemployer Pension Reform Act of 2014 (MPRA). In addition to  causing financial hardship for hundreds of thousands of CSPF retirees  who are at risk of severe benefit cuts, CSPF\u2019s projected insolvency is also  likely to coincide with the projected insolvency of the multiemployer  insurance program managed by the Pension Benefit Guaranty  Corporation (PBGC). The insolvency of PBGC\u2019s multiemployer program  would significantly impact the level of PBGC-guaranteed benefits to current and future beneficiaries in all multiemployer plans receiving PBGC  assistance. In light of these issues, you asked us to review the events  and factors that led to CSPF\u2019s critical financial condition, how it compares  to similar plans, and the oversight DOL provides under the consent  decree and under ERISA.", "In this report, we reviewed (1) what is known about the factors that  contributed to CSPF\u2019s critical financial condition; (2) DOL\u2019s role in the  administration of the 1982 CSPF consent decree and what actions DOL  has taken under that role; and (3) what actions, if any, DOL has taken to  oversee CSPF, beyond those required under the consent decree.", "To answer these questions, we used several methodologies. For all  objectives, we reviewed CSPF and DOL documentation and available  literature; reviewed relevant federal laws and regulations; and interviewed  CSPF officials, federal officials, and other knowledgeable industry  stakeholders. To describe the major factors that led to CSPF\u2019s critical  financial condition, we conducted 23 semi-structured interviews with  federal agency officials and other stakeholders knowledgeable about  unions, participants and retirees, the trucking industry, collective  bargaining agreements, and multiemployer pension plans. We also  interviewed three stakeholders with actuarial expertise to specifically  understand actuarial standards and procedures. In our semi-structured  interviews we asked about key factors affecting the plan and the broader  regulatory and financial environment in which multiemployer plans  operate. We selected knowledgeable stakeholders based on a review of  literature and prior GAO work, and recommendations from other  stakeholders. Additionally, we selected stakeholders whose expertise  coincided with the scope of our objectives and who would be able to  provide a broad range of perspectives. We also collected actuarial,  financial, and other data on current and historical measures of plan  assets, liabilities, investment performance, and other factors, and  performed our own analyses of this data. The data and documentation  collected was generally from the plan or agencies that oversee pensions.  We determined the information to be generally reliable for the purposes of  our objectives.", "To describe DOL\u2019s oversight role under the consent decree and under  federal laws and regulations, we reviewed the consent decree and its  amendments, relevant federal laws and regulations, multiemployer plan  management guidance available to plans on DOL\u2019s website, and DOL\u2019s  protocols for investigating and overseeing pension plans. We also  reviewed correspondence between CSPF and DOL since 1982, when the  consent decree was put into place. Correspondence was provided by  CSPF in response to our request for documentation of DOL oversight,  and to our follow-up requests for additional documentation related to  specific time periods and topics, such as investigations and steps taken to  vet trustee candidates. DOL also provided documentation throughout the  course of our engagement, including documentation it provided between  September and October 2017 that it had not previously identified as being  relevant to our review. We completed an on-site file review at DOL in  September 2017, and DOL sent us additional electronic documentation in  September and October 2017. Overall, we reviewed extensive  documentation from DOL\u2014spanning over 10,000 pages of paper-based  and electronic files\u2014and spent substantial time cataloging and  categorizing it. However, DOL officials reported that certain  documentation related to CSPF was no longer available because it had  only been retained for the time specified in the records retention policy of  the relevant office, and that many individuals at DOL and the plan who  were involved in establishing the consent decree in 1982 and ensuring  compliance in the intervening years were no longer available. However,  we believe the information provided by CSPF and DOL was sufficient to  determine the nature of DOL\u2019s oversight.", "We conducted this performance audit from March 2016 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CSPF is a defined benefit multiemployer pension plan. Multiemployer  plans are often created and maintained through collective bargaining  agreements between labor unions and two or more employers, so that  workers who move from job to job and employer to employer within an  industry can continue to accrue pension benefits within the same plan  over the course of their careers. Multiemployer plans are typically found in  industries with many small employers such as trucking, building and  construction, and retail food sales. In 2017, there were about 1,400  defined benefit multiemployer plans nationwide covering more than 10  million participants."], "subsections": [{"section_title": "Multiemployer Plan Administration, Funding, and Benefits", "paragraphs": [], "subsections": [{"section_title": "Administration", "paragraphs": ["Most multiemployer plans are jointly administered and governed by a  board of trustees selected by labor and management. The labor union  typically determines how the trustees representing labor are chosen and  the contributing employers or an employer association typically  determines how the trustees representing management are chosen. The  trustees set the overall plan policy, direct plan activities, and set benefit  levels (see fig. 1).", "Multiemployer plans are \u201cprefunded,\u201d or funded in advance, primarily by  employer contributions. The employer contribution is generally  negotiated through a collective bargaining agreement, and is often based  on a dollar amount per hour worked by each employee covered by the  agreement. Employer contributions are pooled in a trust fund for  investment purposes, to pay benefits to retirees and their beneficiaries,  and for administrative expenses. Multiemployer plan trustees typically  decide how the trust fund should be invested to meet the plan\u2019s  objectives, but the trustees can use investment managers to determine  how the trust fund should be invested.", "A plan\u2019s funded percentage is its ratio of plan assets to plan liabilities.  Because the amount needed to pay pension benefits for many years into  the future cannot be known with certainty due to a variety of economic  and demographic factors, including the potential volatility of asset values,  estimates of a plan\u2019s funded percentage may vary from year to year.  Defined benefit pension plans use a \u201cdiscount rate\u201d to convert projected  future benefits into their \u201cpresent value.\u201d The discount rate is the interest  rate used to determine the current value of estimated future benefit  payments and is an integral part of estimating a plan\u2019s liabilities. The  higher the discount rate, the lower the plan\u2019s estimate of its liability.  Multiemployer plans use an \u201cassumed-return approach\u201d that bases the  discount rate on a long-term assumed average rate of return on the  pension plan\u2019s assets. Under this approach, the discount rate depends on  the allocation of plan assets. For example, a reallocation of plan assets  into more stocks and fewer bonds typically increases the discount rate,  which reduces the estimated value of plan liabilities, and therefore,  reduces the minimum amount of funding required.", "Looking at the entire \u201cmultiemployer system\u201d\u2014the aggregation of  multiemployer plans governed by ERISA and insured by PBGC\u2014shows  that while the system was significantly underfunded around 2001 and  2009, its funded position has improved since 2009. Specifically,  analyses published by the Center for Retirement Research at Boston  College and the Society of Actuaries used plan regulatory filings to  calculate the funded status for the system and determined that it was  approaching 80 percent funded by 2014 after falling during the 2008  market downturn. However, some observers have noted that while  many plans are making progress toward their minimum targets, a subset  of plans face serious financial difficulties."], "subsections": []}, {"section_title": "Benefits", "paragraphs": ["Multiemployer retirement benefits are generally determined by the board  of trustees. The bargaining parties negotiate a contribution rate and the  trustees adopt or amend the plan\u2019s benefit formulas and provisions.  Decisions to increase benefits or change the plan are also typically made  by the board of trustees. Benefit amounts are generally based on a worker\u2019s years of service and either a flat dollar amount or the worker\u2019s  wage or salary history, subject to further adjustment based on the age of  retirement."], "subsections": []}]}, {"section_title": "The Central States, Southeast and Southwest Areas Pension Fund (CSPF)", "paragraphs": ["CSPF was established in 1955 to provide pension benefits to  International Brotherhood of Teamsters union members (Teamsters) in  the trucking industry and it is one of the largest multiemployer plans. In  the late 1970s, CSPF was the subject of investigations by the IRS within  the U.S. Department of the Treasury (Treasury), and by DOL and the  U.S. Department of Justice (DOJ). The DOL investigation ultimately  resulted in the establishment of a federal court-enforceable consent  decree in 1982 that remains in force today. CSPF held more than $4.3  billion in Net Assets at the end of 1982 after the consent decree was  established. The plan\u2019s Net Assets peaked at nearly $26.8 billion at the  end of 2007 and declined to about $15.3 billion at the end of 2016 (see  fig. 2). As of 2016, CSPF reported that it had about 1,400 contributing  employers and almost 385,000 participants.", "The number of active CSPF participants has declined over time. In 2016,  16 percent of about 385,000 participants were active, i.e., still working in  covered employment that resulted in employer contributions to the plan.  In comparison, CSPF reported in 1982 that 69 percent of more than  466,000 participants were active participants. Since the 1980s, CSPF\u2019s  ratio of active to nonworking participants has declined more dramatically  than the average for multiemployer plans. By 2015, only three of the  plan\u2019s 50 largest employers from 1980 still paid into the plan, and for each  full-time active employee there were over five nonworking participants,  mainly retirees. As a result, benefit payments to CSPF retirees have  exceeded employer contributions in every year since 1984. Thus, CSPF  has generally drawn down its investment assets. In 2016, CSPF withdrew  over $2 billion from investment assets (see fig. 3.).", "CSPF has historically had fewer plan assets than were needed to fully  fund the accrued liability\u2014the difference referred to as unfunded liability.  In 1982, we reported that CSPF was \u201cthinly funded\u201d\u2014as the January 1,  1980, actuarial valuation report showed the plan\u2019s unfunded liability was  about $6 billion\u2014and suggested that IRS should closely monitor CSPF\u2019s  financial status. In 2015, the plan\u2019s actuary certified that the plan was in  \u201ccritical and declining\u201d status. The plan has been operating under an  ERISA-required rehabilitation plan since March 25, 2008, which is  expected to last indefinitely. As of January 1, 2017, the plan was funded  to about 38 percent of its accrued liability. In September 2015, CSPF  filed an application with Treasury seeking approval to reduce benefits  pursuant to provisions in the Multiemployer Pension Reform Act of 2014  (MPRA), which is fully discussed later in this section. The application was  denied in May 2016 based, in part, on Treasury\u2019s determination that the  plan\u2019s proposed benefit suspensions were not reasonably estimated to  allow the plan to remain solvent. In 2017, CSPF announced it would no  longer be able to avoid the projected insolvency. (See app. I for a  timeline of key events affecting CSPF.)"], "subsections": []}, {"section_title": "The Consent Decree", "paragraphs": ["As previously mentioned, CSPF was the subject of investigations in the  1970s by IRS, DOL, and DOJ. DOL\u2019s investigation focused on  numerous loan and investment practices alleged to constitute fiduciary  breaches under ERISA, such as loans made to companies on the verge  of bankruptcy, additional loans made to borrowers who had histories of  delinquency, loans to borrowers to pay interest on outstanding loans that  the fund recorded as interest income, and lack of controls over rental  income. As a result of its investigation, DOL filed suit against the former  trustees of CSPF and, in September 1982, the parties entered into a  consent decree, which remains in force today. The consent decree  provides measures intended to ensure that the plan complies with the  requirements of ERISA, including providing for oversight by the court and  DOL, and prescribes roles for multiple parties in its administration. For  example, certain plan activities must be submitted to DOL for comment  and to the court for approval, including new trustee approvals and some  investment manager appointments. According to DOL, to prevent  criminal influence from regaining a foothold of control over plan assets,  the consent decree generally requires court-approved independent asset  managers\u2014called \u201cnamed fiduciaries\u201d\u2014to manage CSPF\u2019s investments.  CSPF\u2019s trustees are generally prohibited from managing assets; however,  they remain responsible for selecting, subject to court approval, and  overseeing named fiduciaries and monitoring plan performance. To focus  attention on compliance with ERISA fiduciary responsibility provisions, the  consent decree provides for a court-appointed independent special  counsel with authority to observe plan activities and oversee and report  on the plan. (See app. II for additional detail on the key provisions of the  consent decree.)"], "subsections": []}, {"section_title": "Legal Framework", "paragraphs": [], "subsections": [{"section_title": "Employee Retirement Income Security Act of 1974", "paragraphs": ["In 1974, Congress passed ERISA to protect the interests of participants  and beneficiaries of private sector employee benefit plans. Among other  things, ERISA requires plans to meet certain requirements and minimum  standards. DOL, IRS, and PBGC are generally responsible for  administering ERISA and related regulations.", "DOL has primary responsibility for administering and enforcing the  fiduciary responsibility provisions under Part 4 of Title I of ERISA, which  include the requirement that plan fiduciaries act prudently and in the sole  interest of participants and beneficiaries.", "Treasury, specifically the IRS, is charged with determining whether a  private sector pension plan qualifies for preferential tax treatment under  the Internal Revenue Code. Additionally, the IRS is generally  responsible for enforcing ERISA\u2019s minimum funding requirements, among other things. ERISA generally requires that multiemployer plans meet  minimum funding standards, which specify a funding target that must be  met over a specified period of time. The funding target for such plans is  measured based on assumptions as to future investment returns, rates of  mortality, retirement ages, and other economic and demographic  assumptions. Under the standards, a plan must collect a minimum level of  contributions each year to show progress toward meeting its target, or the  plan employers may be assessed excise taxes and owe the plan for  missed contributions plus interest. Minimum contribution levels may vary  from year to year due to a variety of economic and demographic factors,  such as addressing differences between assumed investment returns and  the plan\u2019s actual investment returns.", "To protect retirees\u2019 pension benefits in the event that plan sponsors are  unable to pay plan benefits, PBGC was created by ERISA. PBGC is  financed through mandatory insurance premiums paid by plans and plan  sponsors, with premium rates set by law. PBGC operates two distinct  insurance programs: one for multiemployer plans and another for single- employer plans. Each program has separate insurance funds and  different benefit guarantee rules.", "The events that trigger PBGC intervention differ between multiemployer  and single-employer plans. For multiemployer plans, the triggering event  is plan insolvency, the point at which a plan begins to run out of money  while not having sufficient assets to pay the full benefits that were  originally promised when due. PBGC does not take over operations of an  insolvent multiemployer plan; rather, it provides loan assistance to pay  administrative expenses and benefits up to the PBGC-guaranteed level.  According to PBGC, only once in its history has a financial assistance  loan from the multiemployer pension insurance program been repaid. In  2017, PBGC provided financial assistance to 72 insolvent multiemployer  plans for an aggregate amount of $141 million. For single-employer plans  the triggering event is termination of an underfunded plan\u2014generally,  when the employer goes out of business or enters bankruptcy. When this  happens, PBGC takes over the plan\u2019s assets, administration, and  payment of plan benefits (up to the statutory limit).", "The PBGC-guaranteed benefit amounts for multiemployer plans and the  premiums assessed by PBGC to cover those benefit guarantees are  significantly lower than those for single-employer plans. Each insured  multiemployer plan pays flat-rate insurance premiums to PBGC based on  the number of participants covered. The annual premium rate for plan  years beginning in January 2017 was $28 per participant and it is  adjusted annually based on the national average wage index. (See app.  I for the PBGC premium rates that have been in effect since the consent  decree was established in 1982.) When plans receive financial  assistance, participants face a reduction in benefits. For example, using  2013 data, PBGC estimated 21 percent of more than 59,000 selected  participants in insolvent multiemployer plans then receiving financial  assistance from PBGC faced a benefit reduction. The proportion of  participants facing reductions due to the statutory guarantee limits is  expected to increase. About 51 percent of almost 20,000 selected  participants in plans that PBGC believed would require future assistance  were projected to face a benefit reduction.", "Since 2013, the deficit in PBGC\u2019s multiemployer program has increased  by nearly 700 percent, from a deficit of $8.3 billion at the end of fiscal year  2013 to $65.1 billion at the end of fiscal year 2017. PBGC estimated that  at of the end of 2016, the present value of net new claims by  multiemployer plans over the next 10 years would be about $24 billion, or  approximately 20 percent higher than its 2015 projections. The program  is projected to become insolvent within approximately 8 years. If that  happens, participants who rely on PBGC guarantees will receive only a  very small fraction of current statutory guarantees. According to PBGC,  most participants would receive less than $2,000 a year and in many  cases, much less.", "We have identified PBGC\u2019s insurance programs as high-risk. This  designation was made in part because multiemployer plans that are  currently insolvent, or likely to become insolvent in the near future,  represent a significant financial threat to the agency\u2019s insurance program.  We designated the single employer program as high-risk in July 2003,  and added the multiemployer program in January 2009. Both insurance  programs remain on our high-risk list."], "subsections": []}, {"section_title": "Key Amendments to ERISA Affecting Multiemployer Plans", "paragraphs": ["Multiemployer Pension Plan Amendments Act of 1980  Among other things, the Multiemployer Pension Plan Amendments Act of  1980 (MPPAA) made employers liable for a share of unfunded plan  benefits when they withdraw from a plan, unless otherwise relieved of  their liability, and strengthened certain funding requirements. An  employer that chooses to withdraw from a multiemployer plan may be  required to continue to contribute if the plan does not have sufficient  assets to cover the plan\u2019s current and known future liabilities at the time  the employer withdraws; however, these payments may not fully cover  the withdrawing employer\u2019s portion of the plan\u2019s liabilities. In such  cases, the employers remaining in the plan may effectively assume the  remaining liability.", "The Pension Protection Act of 2006  The Pension Protection Act of 2006 (PPA) was intended to improve the  funding of seriously underfunded multiemployer plans, among other  things. It included provisions that require plans in poor financial health to  take action to improve their financial condition over the long term and  established two categories of troubled plans: (1) \u201cendangered status\u201d or  \u201cyellow zone\u201d plans (this category also includes a sub-category of  \u201cseriously endangered\u201d), and (2) more seriously troubled \u201ccritical status\u201d  or \u201cred zone\u201d plans. PPA further required plans in the endangered and critical zones to develop written plans to improve their financial condition,  such as by revising benefit structures, increasing contributions, or both,  within a prescribed time frame. Multiemployer plans in yellow or red  zone status must document their remediation strategies in a written plan,  notify plan participants, and report annually on whether scheduled  progress has been made. Since the 2008 market decline, the number of  participants in endangered and critical plans has generally been  decreasing (see fig. 4).", "The Multiemployer Pension Reform Act of 2014  In response to the funding crisis facing PBGC and multiemployer pension  plans, the Multiemployer Pension Reform Act of 2014 (MPRA) made  changes to the multiemployer system that were intended to improve its  financial condition. Key changes included:", "Creation of critical and declining status. MPRA created a new  category, \u201ccritical and declining,\u201d for plans in critical status projected to  become insolvent during the current plan year or within any of the 14  succeeding plan years, or in certain circumstances, within any of the  19 succeeding plan years. In 2017, PBGC reported that more than  100 multiemployer plans (more than 7 percent of plans) representing  approximately 1 million participants (about 10 percent of participants)  have been determined to be \u201ccritical and declining.\u201d", "Permitted reduction of accrued benefits. MPRA permits plans to  reduce participants\u2019 and beneficiaries\u2019 accrued retirement benefits if  the plan can demonstrate such action is necessary to remain solvent.  Plans apply to Treasury for the authority to reduce benefits. Treasury,  in consultation with PBGC and DOL, reviews the applications and  determines whether the proposed changes would enable the plan to  remain solvent.", "Increased PBGC premiums. MPRA also increased the PBGC premiums for multiemployer plans from $12 to $26 (per participant per plan year) in 2015 and from $26 to $28 in plan year 2017. The annual premium in subsequent years is indexed to changes in the national average wage index.", "Creation of new framework of rules for partition. Partition allows a multiemployer plan to split into two plans\u2014the original and a successor. Partitions are intended to relieve stress on the original plan by transferring the benefits of some participants to a successor plan funded by PBGC and to help retain participant benefits in the plans at levels higher than the PBGC-guaranteed levels."], "subsections": []}]}]}, {"section_title": "CSPF\u2019s Critical Financial Condition Is a Result of Factors That Reflect Challenges Experienced by the Multiemployer System", "paragraphs": [], "subsections": [{"section_title": "CSPF Has Been Underfunded Since the Consent Decree Was Established", "paragraphs": ["At the time the consent decree was established in 1982, CSPF had less  than half the estimated funds needed to cover plan liabilities (and to pay  associated benefits over the lifetime of participants) and it has not  attained 100 percent of its estimated funding need since then, according  to regulatory filings. CSPF\u2019s 1982 Form 5500 we reviewed shows that the  plan was less than 40 percent funded prior to the consent decree  becoming effective. Over the next two decades, the plan generally made  progress toward achieving its targeted level of funding but was never  more than 75 percent funded, and funding has generally deteriorated  since its 2002 filing (see fig. 5). Overall, the plan\u2019s unfunded liability  increased by approximately $11.2 billion (in inflation-adjusted dollars)  between January 1983 and January 2016. As a consequence,  participant benefits were never fully secured by plan assets over this  period, as measured by ERISA\u2019s minimum funding standards, and the  plan consistently needed to collect contributions in excess of those  needed to fund new benefit accruals to try to make up for its underfunded  status."], "subsections": []}, {"section_title": "Stakeholders Described Multiple Factors That Contributed to CSPF\u2019s Critical Financial Condition, Many of Which Have Been Experienced by Other Multiemployer Plans", "paragraphs": ["CSPF officials and other stakeholders identified several factors that  contributed to CSPF\u2019s critical financial condition and reflect the  challenges faced by many multiemployer plans. For example, like CSPF,  many multiemployer plans have experienced financial difficulties due to a  combination of investment losses and insufficient employer contributions.  In addition to being underfunded prior to the consent decree going into  effect, stakeholders identified other specific factors that contributed to  CSPF\u2019s critical financial condition, such as trends within the national  trucking industry and its workforce, funding challenges and common  investment practices of multiemployer plans, and the impact of market  downturns on long-term investment performance. Stakeholders also  described the effects of the 2007 withdrawal of a key employer, United  Parcel Service (UPS), on CSPF\u2019s critical financial condition."], "subsections": [{"section_title": "Key Industry Specific Workforce Trends", "paragraphs": ["Stakeholders we interviewed said changes to the workforce, such as  declining union membership rates and changes resulting from industry  deregulation, affected CSPF and some other multiemployer plans by  reducing the number of workers able to participate in their plans. While  the multiemployer structure distributes bankruptcy risk across many  employers, for any particular multiemployer plan employers are often  concentrated in the same industry, making the plans vulnerable to  industry-specific trends and risks. For example, stakeholders noted the  impact that the Motor Carrier Act of 1980 had on the trucking industry.  Specifically, deregulation of the trucking industry reduced government  oversight and regulation over interstate trucking shipping rates. The  trucking industry became increasingly dominated by nonunion trucking  companies resulting in the bankruptcy of many unionized trucking  companies, according to stakeholders. New trucking companies typically  did not join multiemployer plans because their labor force was not  unionized and this, coupled with the bankruptcy of many contributing  employers, contributed to a decrease in active participant populations for  many plans serving the industry. As the total number of active participants  in a plan declines, the resources from which to collect employer  contributions declines proportionally. Stakeholders also said these  changes were unforeseeable. Limitations on a plan\u2019s ability to increase  contributions mean that a plan has less capacity to recover from an  underfunded position or to make up for investment returns that fall short  of expectations.", "A decline in the number of active workers can also accelerate plan  \u201cmaturity,\u201d as measured by the ratio of nonworking to working  participants. Plan maturity has implications for a plan\u2019s investment  practices and the time frame over which the plan must be funded.  According to PBGC\u2019s data for the multiemployer plans it insures, there  were approximately three active participants for every nonworking  participant in 1980 (3:1); by 2014, the ratio was approximately one active  worker for every two nonworking participants (1:2). Figure 6 shows the  change in the percentages of active and nonworking participants for the  multiemployer plans that PBGC insures.", "CSPF saw an even more dramatic change in its active to nonworking  participant ratio from 1982 through 2015. In 1982, there were more than  two active workers for every nonworking participant (2:1) and by 2016  that ratio had fallen to approximately one active worker for every five  nonworking participants (1:5) (see fig. 7). Because CSPF\u2019s contributing  employers were largely trucking companies, stakeholders said this made  the fund especially vulnerable to industry-wide shocks. Like the industry  as a whole, CSPF was unable to attract new employers to replace exiting  employers, in part because of the lack of new unionized employers.", "CSPF officials said that changes to the trucking industry and its workforce  also led to other challenges for the plan. For example, contributions to the  plan declined with the shrinking number of active workers. CSPF officials  told us they could not significantly increase the contribution rate paid by  remaining employers because of the financial hardship it would cause,  and as a result, the plan\u2019s ability to recover from its underfunded position  was limited. CSPF officials said that this increased the plan\u2019s reliance on  investment returns to try to close the gap between its assets and  liabilities."], "subsections": []}, {"section_title": "Funding Challenges and Investment Practices", "paragraphs": ["Stakeholders we interviewed cited challenges inherent in multiemployer  plans\u2019 funding and investment practices, and described how the  challenges may have contributed to the critical financial condition of some  plans, including CSPF.", "Stakeholders said that CSPF and many other multiemployer plans have  been challenged by employer withdrawals. An employer withdrawal  reduces the plan\u2019s number of active worker participants, thereby reducing  its contribution base and accelerating plan maturity. A withdrawing  employer generally must pay a share of any unfunded benefits.  Stakeholders identified several ways in which the withdrawal liability  framework could result in a withdrawing employer underpaying its share  of an unfunded liability. We have previously reported on the challenges  associated with withdrawal liability, including: withdrawal liability assessments are often paid over time, and  payment amounts are based on prior contribution rates rather than the  employer\u2019s actual withdrawal liability assessment; withdrawal liability payments are subject to a 20-year cap, regardless  of whether an employer\u2019s share of unfunded benefits has been fully  paid within this 20-year timeframe; plans often did not collect some or all of the scheduled withdrawal  liability payments because employers went bankrupt before  completing their scheduled payments; and  fears of withdrawal liability exposure increasing over time could be an  incentive for participating employers to leave a plan and a disincentive  for new employers to join a plan.", "Stakeholders we interviewed also added that the calculation used to  determine withdrawal liability may use an investment return assumption  that inherently transfers risk to the plan.", "When exiting employers do not pay their share of unfunded benefits, any  remaining and future employers participating in the plan may effectively  assume the unpaid share as a part of their own potential withdrawal  liability as well as responsibility for the exiting employer\u2019s \u201corphaned\u201d  participants. Participating employers may negotiate a withdrawal if they  perceive a risk that the value of their potential withdrawal liability might  grow significantly over time.", "In its MPRA application, CSPF cited employer withdrawals and  bankruptcies as a significant challenge for the plan. CSPF reported that  after deregulation, the number of contributing employers dropped by over  70 percent. While some of the drop could be due to the consolidation of  trucking companies after deregulation, CSPF officials cited several cases  in which employers went bankrupt or withdrew from the plan, which  reduced the plan\u2019s contribution base and accelerated its maturity.  Additionally, when employers went bankrupt, they often did not pay their  full withdrawal liability. For example, CSPF said two of its major  contributing employers left the plan between 2001 and 2003, and left  $290 million of more than $403 million in withdrawal liability unpaid after  they went bankrupt.", "Stakeholders identified funding timeframes as a factor that contributed to  the challenges facing many multiemployer plans, including CSPF.  ERISA\u2019s minimum funding standards have historically allowed  multiemployer plans to amortize, or spread out the period of time for  funding certain events, such as investment shortfalls and benefit  improvements. For example, CSPF began a 40-year amortization of  approximately $6.1 billion in underfunding on January 1, 1981, giving the  plan until the end of 2021 to fully fund that amount. Longer amortization  periods increase the risk of plan underfunding due to the number and  magnitude of changes in the plan\u2019s environment that may occur, such as  a general decline in participants or deregulation of an industry. The  Pension Protection Act of 2006 shortened amortization periods for single- employer plans to 7 years and the amortization periods for multiemployer  plans to 15 years. Shorter amortization periods provide greater benefit  security to plan participants by reducing an unfunded liability more  rapidly. In addition, shorter amortization periods can be better aligned  with the projected timing of benefit payments for a mature plan. However,  shorter periods can be a source of hardship for plans with financially  troubled contributing employers because they may require higher  contributions. According to CSPF officials, CSPF requested and received  an additional 10-year amortization extension from the IRS in 2005 after  relating that contribution requirements could force participating employers  into bankruptcy. One CSPF representative said an amortization extension  can also help avoid subjecting the plan\u2019s employers to IRS excise taxes  for failing to make required minimum contributions.", "Stakeholders we interviewed said that certain common investment  practices may have played a role in the critical financial condition of  CSPF and other mature and declining plans. In general, multiemployer  plans invest in portfolios that are expected, on average, to produce higher  returns than a low-risk portfolio, such as one composed entirely of U.S.  Treasury securities. Stakeholders also stated that these investment  practices may have been too risky because returns can be more volatile,  and the higher expected returns might not be achieved. In addition, the  Congressional Budget Office has reported that if \u201cplans had been  required to fund their benefit liabilities\u2014at the time those liabilities were  accrued\u2014with safer investments, such as bonds, the underfunding of  multiemployer plans would have been far less significant and would pose  less risk to PBGC and beneficiaries.\u201d", "Stakeholders also told us that for mature plans like CSPF, these  investment practices can pose further challenges. Mature plans, with  fewer active employees, have less ability to recoup losses through  increased contributions and have less time to recoup losses through  investment returns before benefits must be paid. Market corrections, such  as those that occurred in 2001 through 2002 and in 2008, can be  particularly challenging to mature plans and their participants, especially if  a mature plan is also significantly underfunded. Mature plans could  mitigate these risks by investing more conservatively, however, the  resulting lower expected returns from more conservative investing  necessitates higher funding targets and contribution rates, which could be  a hardship for employers in an industry with struggling employers.  Alternatively, a plan that invests more conservatively may provide lower  promised benefits to accommodate the level of contributions it can collect.  Lower investment returns from a more conservative investment policy  would cost employers more in contributions and could potentially result in  employers leaving the plan. Further, investing in a conservative portfolio  would be relatively unique among multiemployer plans, and stakeholders  said plan managers may feel they are acting in a prudent fashion by  investing similarly to their peers. Underfunded plans like CSPF may not  see conservative investment as an option if they cannot raise the  contributions necessary to fully fund their vested benefits. Officials from  CSPF told us that, because they lacked the ability to significantly increase  revenue or decrease accrued benefits, the named fiduciaries sought  incrementally higher investment returns to meet funding thresholds  required by the amortization extension they received in 2005.", "On the other hand, there are challenges associated with risk-bearing  investments. In our prior work, we reported that multiemployer plans  generally develop an assumed average rate of investment return and use  that assumption to determine funding targets, required contributions, and  the potential cost of benefit improvements. Experts we interviewed for  that report told us that using a portfolio\u2019s expected return to value the cost  of benefits increases the risk that insufficient assets could be on hand  when needed. They also told us that using the portfolio\u2019s expected return  to calculate liabilities could incentivize plans to invest in riskier assets and  to negotiate higher benefit levels because the higher returns expected  from riskier portfolios can result in lower reported liabilities.", "Plan Terms Set through Collective Bargaining  Stakeholders we interviewed said that plan terms, such as contribution  rates, which are set through the collective bargaining process, can create  an additional challenge for multiemployer plans. Employers in  multiemployer plans generally are not required to contribute beyond what  they have agreed to in collective bargaining, and these required employer  contributions generally do not change during the term of a collective  bargaining agreement. CSPF officials said that up until the early 2000s,  plan officials did not request modifications to collective bargaining  agreements, such as reallocating contribution dollars, to respond to  adverse investment returns."], "subsections": []}, {"section_title": "Investment Performance and Market Downturns", "paragraphs": ["Stakeholders highlighted the effects of market downturns on  multiemployer plan assets as another contributing factor to CSPF\u2019s critical  financial condition and that of other multiemployer plans. Failure to  achieve assumed returns has the effect of increasing unfunded liabilities.  For the multiemployer system in aggregate, the average annual return on  plan assets over the 2002 to 2014 period was about 6.1 percent, well  short of typical assumed returns of 7.0 or 7.5 percent in 2002.", "Many multiemployer plans were especially impacted by the 2008 market  downturn. PBGC estimated that from 2007 to 2009, the value of all  multiemployer plan assets fell by approximately 24 percent, or $103  billion, after accounting for contributions to and payments from the  plans. Although asset values recovered to some extent after 2009,  some plans continued to be significantly underfunded, and stakeholders  said this could be due to the contribution base not being sufficient to help  recover from investment shortfalls.", "CSPF\u2019s investment performance since 2000 has reflected performance  similar to other multiemployer plans and the plan went from 73 percent  funded in 2000 to about 38 percent funded in 2017. While the plan used  an assumed rate of return of 7.5 to 8.0 percent per year between 2000  and 2014, our analysis of the plan\u2019s regulatory filings shows that the  plan\u2019s weighted-average investment return over this period was about 4.9  percent per year. CSPF officials said the 2008 downturn significantly  reduced CSPF\u2019s assets and it was unable to sufficiently recoup those  losses when the market rebounded in 2009. Plan assets declined from  $26.8 billion at the beginning of 2008 to $17.4 billion at the beginning of  2009, with $7.5 billion of the decline attributable to investment losses.  Despite reporting a 26 percent return on assets during 2009, CSPF had  only $19.5 billion in assets at the end of 2009 because benefits and  expenses exceeded the contributions it collected and because it had  fewer assets generating returns for the plan. By the end of 2009, CSPF\u2019s  funding target was $35.9 billion but the fund had less than $20 billion that  could be used to generate investment returns.  If CSPF\u2019s portfolio had  returned 7.5 percent per year over the 2000-2014 period, instead of the  approximately 4.9 percent we calculated, we estimate that the portfolio  value would have exceeded $32.0 billion at the end of 2014, or 91  percent of its Actuarial Accrued Liability."], "subsections": []}, {"section_title": "Effect of UPS Withdrawal", "paragraphs": ["In addition to the factors mentioned that affected many multiemployer  plans, stakeholders we interviewed also noted the unique effect of the  UPS withdrawal on CSPF. In 2007, UPS negotiated with the International  Brotherhood of Teamsters for a withdrawal from CSPF and paid a  withdrawal liability payment of $6.1 billion. This payment was invested  just prior to the 2008 market downturn. Moreover, the loss of UPS,  CSPF\u2019s largest contributing employer, reduced the plan\u2019s ability to collect  needed contributions if the plan became more underfunded. A UPS  official said that, following the market decline of 2001-2002, the company  considered whether it should withdraw from all multiemployer plans  because it did not want to be the sole contributing employer in any plan.  According to this official, UPS considered the large number of UPS  employees in CSPF and the plan\u2019s demographics\u2014such as an older  population and fewer employers\u2014in its decision to withdraw. CSPF  officials said they did not want UPS to withdraw because its annual  contributions accounted for about one-third of all contributions to the plan.  CSPF officials also told us that, prior to the UPS withdrawal, they had  expected the population of active UPS workers in the plan to grow over  time.", "UPS\u2019 withdrawal of 30 percent of CSPF\u2019s active workers, in combination  with the significant market downturn just after UPS withdrew, reflected the  loss of working members and investment challenges on a large scale.  Additionally, stakeholders noted that although each of the factors that  contributed to CSPF\u2019s critical financial condition individually is important,  their interrelated nature also had a cumulative effect on the plan. Industry  deregulation, declines in collective bargaining, and the plan\u2019s significantly  underfunded financial condition all impaired CSPF\u2019s ability to maintain a  population of active workers sufficient to supply its need for contributions  when investment shortfalls developed. Given historical rules for plan  funding and industry stresses, CSPF was unable to capture adequate  funding from participating employers either before or after they withdrew  from the plan. The plan\u2019s financial condition was further impaired when  long-term investment performance fell short of expectations. For an  underfunded, mature plan such as CSPF, the cumulative effect of these  factors was described by some stakeholders as too much for CSPF to  overcome."], "subsections": []}]}]}, {"section_title": "DOL Has Provided Oversight in Its Role As Described in the Consent Decree", "paragraphs": [], "subsections": [{"section_title": "Roles and Responsibilities Identified in the Consent Decree", "paragraphs": ["The consent decree describes roles and responsibilities for several  parties, including CSPF, its trustees, and DOL. Generally, it reiterates the  requirement that CSPF must comply with ERISA, and gives DOL the  authority to provide input on certain actions proposed by the plan.  Additionally, the consent decree requires CSPF to employ a named  fiduciary to administer and manage the plan\u2019s investment assets, set  investment policy, and select and supervise investment managers to  create separation of plan trustees and staff from the management of plan  investments. The plan must seek court approval for certain actions,  such as the appointment of new trustees and named fiduciaries, and DOL  can raise objections to these proposed actions. The named fiduciary must  also seek court approval for proposed changes to the investment policy.  (Appendix II provides a more comprehensive description of roles and  other key provisions of the consent decree and its amendments.) The  consent decree also provides for a court-appointed independent special  counsel to assist the court in overseeing the plan, attend meetings of the  board of trustees, and submit quarterly reports on plan activities to the  court (see table 1).", "Although certain stakeholders have stated that the consent decree has  achieved its purpose, DOL and CSPF agree that it still provides valuable  protections, and the consent decree remains in place. The intent of the  consent decree was to address alleged breaches of fiduciary duties under  ERISA, including plan officials\u2019 roles in the mismanagement of assets that  were identified during DOL\u2019s investigation of the plan in the 1970s. The  former Assistant Secretary for the Employee Benefits Security  Administration (EBSA) stated that the consent decree was primarily  focused on preventing corrupt conduct and the influence of organized  crime found during investigations prior to the consent decree\u2019s  establishment. Stakeholders agreed the consent decree accomplished  its objectives by requiring the plan to seek court approval for certain  activities. In 2004, the presiding judge noted in a memorandum opinion  and order that the \u201cprofessional management guidelines\u201d that arose from  the consent decree had worked well. In 2002, discussions arose  between CSPF and DOL as to whether the consent decree should be  dissolved. In 2011, the independent special counsel wrote in a letter to  the court that he believed the plan was well-run and the role of the  independent special counsel was no longer necessary. However, DOL  officials stated that the provisions of the consent decree have created a  strong incentive for ERISA compliance and have had a positive impact on  the administration of the plan and the selection of trustees. Similarly,  CSPF officials stated they had not requested the consent decree be  dissolved because its requirements have provided valuable protection  from stakeholder influence."], "subsections": []}, {"section_title": "DOL Conducted a Number of Oversight Activities under the Consent Decree", "paragraphs": ["In accordance with the requirements of the consent decree, DOL may  provide input on and oversight to certain plan activities. For example,  DOL may comment on or object to proposedboard of trustee candidates  and proposed named fiduciaries prior to court approval. CSPF must  provide notice to the court and DOL within specific time frames when  seeking court approval for such actions. The consent decree requires  CSPF to submit trustee and named fiduciary candidates to the court and  DOL 60 days before filing their request for court approval (see fig. 8). In  addition, the consent decree states that CSPF must notify DOL of new  trustee candidates, selected by union or employer processes, 60 days  prior to the proposed effective date of the candidate\u2019s term and DOL may  object to, or comment on, the approval of trustee candidates within 30  days.", "Although the consent decree does not require DOL to take any specific  actions in determining whether it will comment on or object to a trustee  candidate, DOL officials reported that with the assistance of other  agencies they have taken the following steps to review trustee  candidates:", "Requesting trustee candidate information. DOL requests that CSPF  provide information on prospective trustee candidates;", "Providing questionnaires to trustee candidates via CSPF. Responses  to questionnaires are reviewed by DOL\u2019s Offices of Labor- Management Standards and Inspector General, the Department of  Justice, the Federal Bureau of Investigation, and the Office of the  Chief Investigator at the Teamster\u2019s Independent Review Board (IRB);", "Compiling additional information. DOL searches internal and external  databases for information regarding the trustee candidates;", "Assessing the information. DOL reviews any findings identified by the  attorney assigned to CSPF in DOL\u2019s Office of the Solicitor, officials in  DOL\u2019s Plan Benefits Security Division, and EBSA management staff.  A recommendation regarding whether to file an objection is discussed  and, if filing an objection is being considered, it is first discussed with  the plan; and", "Filing objections. If any identified issues cannot be resolved, DOL files  an objection with the court.", "Documents submitted to the court by DOL also indicated the agency has  sought input on trustee candidates from PBGC, IRS, and the National  Labor Relations Board. Several trustees we interviewed confirmed that  DOL\u2019s process to vet them included background checks. Our review of  correspondence and other documentation found DOL routinely took such  steps to vet trustee candidates. CSPF and DOL provided documents  associated with the appointment and approval process of the 21 trustees  appointed to the board since 1982 and one additional trustee candidate  who was not presented to the court for approval because DOL identified  issues during the vetting process. Vetting trustees took from  approximately 1 to 5 months for the cases we reviewed. Our review of  documentation also found that DOL provided input and collaborated with  CSPF in two cases where approved trustees were asked to resign post- approval.", "The length of time for the process to vet trustee candidates (in advance of  submitting them to the court) varied, but, in the cases we reviewed, took  as long as 5 months. Correspondence showed various factors contributed  to in the duration of DOL\u2019s vetting process prior to submitting candidates  to the court for approval, including DOL officials\u2019 workload and vacation  schedules, scheduling, and additional time spent clarifying any issues  identified during the vetting process.", "In 2009, the vetting processes used by CSPF and DOL identified  concerns with a trustee candidate before the candidate was presented  to the court. During the 4-month vetting process, the candidate was  found to be involved in two ongoing court cases in his role as a  fiduciary for two other pension plans. Although the nominating  employer association did not consider his involvement in the suit to be  a problem, they eventually withdrew the nomination and proposed  another candidate.", "In 2012, DOL\u2019s review of a candidate to fill a vacancy left by a trustee  who died during his term in office was completed in approximately 1  month.", "In 2015, DOL\u2019s vetting process for a trustee candidate identified and  resolved a concern before the candidate was presented to the court.  DOL reported that they made inquiries to agencies and the  Teamsters\u2019 Independent Review Board (IRB) about the candidate  during the vetting process, and the IRB did not report any issues with  the trustee candidate at the time of DOL\u2019s inquiry. More than 7  months after the candidate was approved, DOL received a report from  the IRB that alleged lapses in financial controls and expense payment  practices and procedures at a Teamsters\u2019 local union office when the  then-trustee had served as president. The trustee resigned from  CSPF\u2019s board 7 weeks later, but continued to serve as a trustee for  an additional 5 months until a replacement was vetted by DOL and  presented to the court for approval.", "In 2007 and 2009, CSPF kept DOL apprised of trustees who resigned  and were replaced because employers were leaving the plan.", "The consent decree does not discuss court or DOL involvement in  resolving issues with trustees already serving on the board, but in  1996, DOL assisted the CSPF board of trustees when they learned  that one of their trustees, who had been on the board of CSPF for  about 11 years, was accused of fiduciary misconduct in carrying out  his duties for another pension plan. To assist the nominating board  and the plan\u2019s board of trustees in determining the proper course of  action, CSPF consulted with DOL and the court before filing a motion  with the court to appoint a special counsel to investigate, and to  authorize expenditures for the investigations. Following the special  counsel\u2019s report, the nominating board recommended that trustee be  removed, and the trustee chose to resign.", "Documents we reviewed also indicated DOL provided input to CSPF and  the court on proposed amendments to the consent decree. For example,  DOL assisted in writing a proposed amendment that would allow for the  addition of a second named fiduciary and for named fiduciaries to act as  investment managers for the plan. In addition, in 2007, a named  fiduciary requested that CSPF assume responsibility for determining the  plan\u2019s asset allocation and indemnify it for any losses it might incur in  fulfilling its role. In response to the request, CSPF considered several  approaches to insulating the named fiduciary from fiduciary risk, and  whether they would be inconsistent with the consent decree; however,  CSPF decided against requesting the consent decree be dissolved.  CSPF officials consulted with DOL regarding the approaches they  considered, including one that would allow for flexibility in the allocation of  investment assets within prescribed bands. CSPF waited to file its motion  to amend the consent decree until DOL had an opportunity to evaluate  the proposals. CSPF decided not to proceed with the proposed  amendments, and instead worked with the named fiduciary to make  changes to the investment policy to reduce risk for the named fiduciary.  In our review of documents provided by CSPF, we also found that DOL  regularly reviewed the quarterly reports from the independent special  counsel, which included topics of discussion at the meetings of the board  of trustees, a quarterly financial report, and other recent events of  significance to the plan.", "Our review of communication between CSPF and DOL showed the plan  also provided updates and allowed for DOL\u2019s input on other actions. For  example, CSPF responded to DOL inquiries about changes in the number  of participants and the plan\u2019s funded status in 2011 and 2014,  respectively. In 2009, CSPF also provided details about a possible  arrangement to allow a contributing employer that was at risk of  bankruptcy to defer its contribution payments instead of suspending its  participation in the plan. CSPF received input from DOL on the  employer\u2019s request to use real estate as collateral in place of cash  contributions to the plan."], "subsections": []}]}, {"section_title": "DOL Conducted Investigations of CSPF in Accordance with Its Role under ERISA", "paragraphs": [], "subsections": [{"section_title": "DOL Has Primary Responsibility for Enforcing ERISA\u2019s Fiduciary Provisions", "paragraphs": ["Separate from its role under the consent decree, DOL has a primary  oversight role over plans under ERISA, which it carries out through  investigations and other activities. DOL is responsible for enforcing the  reporting, disclosure, and fiduciary responsibility provisions of ERISA.  Additionally, ERISA grants DOL investigative authority. Title I of ERISA  establishes responsibilities for fiduciaries, such as persons who are  responsible for the administration and management of employee benefit  plans, to ensure that they act solely in the interest of plan participants and  beneficiaries, and gives DOL authority to examine and investigate plans  to ensure they comply with the provisions.", "ERISA sets forth a \u201cprudent man\u201d standard of care that requires fiduciary  duties to be executed \u201c\u2026with the care, skill, prudence, and  diligence\u2026that a prudent man acting in a like capacity and familiar with  such matters would use\u2026\u201d. According to a DOL compliance guide,  prudence focuses on the process for making fiduciary decisions, and the  guide states that a fiduciary lacking needed expertise is encouraged to  hire others with professional knowledge to carry out fiduciary function,  including investing fund assets. The guide further notes that, if a plan  appoints an investment manager that is a bank, insurance company, or  registered investment advisor, the plan is responsible for selecting and  monitoring the manager, but is not liable for the individual investments of  that manager. Further, in testimony, the former Assistant Secretary for  EBSA stated that plan fiduciaries are not liable for plan losses merely  because an investment lost money, but rather would be in instances  where they acted imprudently in selecting and monitoring investments.  Beyond the requirements of ERISA, the consent decree requires that  CSPF hire a named fiduciary with exclusive responsibility and authority to  manage and control the assets allocated to them. The consent decree  also requires the independent special counsel to provide quarterly reports  to the court and DOL. The quarterly reports include topics of discussion at  the meetings of the board of trustees, a quarterly financial report, and  other recent events of significance to the plan.", "Although stakeholders identified major factors contributing to the plan\u2019s  critical financial condition those factors are not the focus of DOL\u2019s role  under ERISA. DOL has provided assistance to the plan in identifying and  assessing solutions to its financial condition. For example, in 2010,  CSPF\u2019s executive director worked directly with the assistant secretary of  Labor as the plan prepared a partition application for PBGC  consideration. According to CSPF officials, the plan chose not to submit  the application because it did not believe the application would be  approved. In 2015, CSPF had discussion with the assistant secretary  about MPRA before CSPF ultimately submitted its application to Treasury  to reduce pension benefits under MPRA.", "CSPF-provided documents show it also collaborated with DOL in  developing strategies to improve the broader multiemployer plan system.  For example, DOL contacted CSPF\u2019s executive director to participate in a  meeting as a \u201cthought leader\u201d on PBGC investment policy. The plan also  worked with the assistant secretary and DOL and other government  officials on legislative proposals, including modifications to statutes  concerning partitioning and how partitions are funded through PBGC. In  2010, the assistant secretary testified regarding changes to the partition  process proposed by CSPF and others, stating DOL would continue to  work with CSPF on the proposal.", "IRS and PBGC also have roles under ERISA related to key factors that  stakeholders identified as contributing to CSPF\u2019s critical financial  condition. IRS is responsible for enforcing certain ERISA requirements,  including minimum participation, vesting and benefit accrual which are  generally requirements to qualify for favorable tax treatment and minimum  funding standards. Plans certify their PPA funding (or zone) status to IRS  annually. PBGC, in addition to collecting premiums and providing financial  assistance to insolvent multiemployer plans to pay participants a  statutorily guaranteed benefit for the rest of their retirement lifetimes,  provides technical assistance to multiemployer plan professionals,  monitors plans, and administers certain tools to help preserve plans, such  as assisting with plan mergers, reviewing methods for alternative  withdrawal liabilities, and providing possible relief through plan partitions."], "subsections": []}, {"section_title": "Two Completed DOL Investigations Resulted in No Action Against CSPF", "paragraphs": ["DOL has completed at least two investigations of the plan since the  consent decree was established; neither of which resulted in adverse  findings or action against CSPF. DOL carries out its ERISA enforcement  through a wide range of activities, including civil and criminal  investigations and the agency\u2019s enforcement priorities are set annually at  the national level. DOL officials stated that to meet those priorities, the  national and regional offices of DOL develop enforcement projects to  focus enforcement activities on specific plan activities. Investigations  based on enforcement projects or triggered by participant complaints are  conducted by regional offices\u2014DOL officials also stated that the Chicago  Regional Office is primarily responsible for oversight of CSPF at the  regional level. National and regional projects may be broadly applicable  or may focus on specific types of plans. Since 2012, there have been  seven national projects and five regional projects (two of the regional  projects are currently underway). Currently, there is a Chicago Regional  Office project focused on multiemployer plans.", "DOL officials noted that field offices generally exercise broad discretion in  determining when investigations will be opened and what entities or  people will be investigated. During investigations, the field offices gather  information and evaluate compliance with ERISA\u2019s civil and criminal  provisions. Potential issues for investigation are identified through  participant complaints, targeting based on computer-generated results of  Form 5500 review and analysis, media, and referrals from federal, state,  and local government, advocacy groups and service providers. For the  period between 2007 and 2016, DOL opened an average of nearly 2,600  civil and criminal pension cases annually; about 5 percent of the cases  were investigations of multiemployer plans. ERISA\u2019s fiduciary  responsibility provisions are intended to ensure that plan fiduciaries act  solely in the interest of plan participants. Accordingly, if investigators  review the selection of investments, they generally focus on the  fiduciaries\u2019 duty of prudence in the selection and monitoring of  investments, rather than the ultimate performance of the asset."], "subsections": [{"section_title": "Investigation 1 from DOL\u2019s Case Management System: Opened June 1996, Closed November 1998", "paragraphs": ["The investigation was opened based on a referral from DOL\u2019s Office  of the Solicitor, the entity that coordinates DOL oversight of CSPF  under the consent decree.", "The investigation centered on alleged breaches of fiduciary  responsibility by the plan trustees in private litigation. The parties  settled for a withdrawal liability of one-fifth of the alleged amount owed  and did not pursue a malpractice claim against attorneys who  represented CSPF in the litigation.", "DOL\u2019s Chicago Regional Office concluded that CSPF trustees were  not in violation of ERISA. DOL\u2019s Office of Enforcement concurred.", "The investigation was closed without action."], "subsections": []}, {"section_title": "Investigation 2 from DOL\u2019s Case Management System: Opened June 2001, Closed September 2004", "paragraphs": ["The investigation was opened based on a complaint from a former  employee of the named fiduciary who alleged he was fired when he  brought possible misconduct to the attention of the named fiduciary.", "DOL\u2019s investigation was centered on alleged securities violations by  the named fiduciary.", "DOL\u2019s Chicago Regional Office concluded that no violations occurred.", "Because of incomplete documentation from DOL and because agency  officials could not provide further information, we were unable to  determine why the investigation was closed.", "CSPF provided documents that indicated it had also been subject to  earlier DOL investigations. For example, CSPF provided a June 1989  letter from DOL indicating the agency had investigated whether CSPF  met its fiduciary duties through adequate procedures for monitoring legal  services provided to the plan. In the letter, the DOL investigator noted that  CSPF had written procedures for monitoring services and addressing  disputes and that the plan provided reports showing activities surrounding  the monitoring of legal fees. DOL concluded, based on available  information, that CSPF had implemented monitoring procedures and DOL  would take no further action. DOL did not provide further information  about the letter or investigation."], "subsections": []}]}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the report to the U.S. Department of Labor, U.S.  Department of the Treasury, and the Pension Benefit Guaranty  Corporation for review and comment. We received technical comments  from the U.S. Department of Labor and the Pension Benefit Guaranty  Corporation, which we incorporated as appropriate. The U.S. Department  of the Treasury provided no comments.", "We will send copies to the appropriate congressional committees, the  Secretary of Labor, the Secretary of the Treasury, Director of the Pension  Benefit Guaranty Corporation, and other interested parties. This report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Selected Events Affecting the Central States, Southeast and Southwest Areas Pension Fund", "paragraphs": ["Below is a list of selected events that have affected the Central States,  Southeast and Southwest Areas Pension Fund (CSPF) as identified  through a review of relevant documentation and interviews with  stakeholders and agency officials. It is not intended to be an exhaustive  list of the events that have impacted CSPF, nor is it intended to include  comprehensive descriptions of each event."], "subsections": []}, {"section_title": "Appendix II: Key Provisions of the Central States, Southeast and Southwest Areas Pension Fund\u2019s Consent Decree", "paragraphs": [], "subsections": [{"section_title": "Brief History and Current Status of Consent Decree", "paragraphs": ["On September 22, 1982, the Department of Labor (DOL) entered into a  court-enforceable consent decree with the Central States Southeast and  Southwest Areas Pension Fund (CSPF) to help ensure the plan\u2019s assets  were managed for the sole benefit of the plan\u2019s participants and  beneficiaries as required by the Employee Retirement Income Security  Act of 1974 (ERISA). The consent decree has been amended several  times and currently remains in effect, as amended, under the jurisdiction  of the Federal Court for the Northern District of Illinois, Eastern Division.  Below is a description of the key parties to and their primary  responsibilities under the consent decree."], "subsections": []}, {"section_title": "Key Parties and Their Primary Roles under Consent Decree", "paragraphs": ["The consent decree defines roles and responsibilities for its parties,  including the court, the court-appointed independent special counsel,  DOL, the plan and its Board of Trustees, and the independent asset  manager, which is called the named fiduciary."], "subsections": [{"section_title": "Court", "paragraphs": ["The primary role of the court is to oversee and enforce the consent  decree. Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days\u2019  notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent  good cause shown by DOL why the consent decree should continue  in effect."], "subsections": []}, {"section_title": "Independent Special Counsel", "paragraphs": ["The court-appointed independent special counsel is intended to serve the  court by assisting in identifying and resolving issues that arise in  connection with the plan\u2019s compliance with the consent decree and Part 4  of Title I of ERISA, and to report on the plan to the court. Specifically, the  independent special counsel: has full authority to examine the plan\u2019s activities and oversee and  report on the plan\u2019s performance of the undertakings of the consent  decree; may, with court approval, employ attorneys, accountants,  investigators, and others reasonably necessary and appropriate to aid  him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and  information of whatever type or description in the possession,  custody, or control of the plan; may attend meetings of the plan, including meetings of the board of  trustees and any meetings at which plan-related matters are  discussed or considered;  can petition the court to compel the plan to cooperate with the  independent special counsel in the performance of his duties and  responsibilities; may consult with DOL, the Internal Revenue Service, and other  agencies, as appropriate, but must provide access to DOL upon its  request to any documents prepared by the independent special  counsel within the exercise of his power;  is required to file quarterly reports, as well as any other reports the  independent special counsel deems necessary or appropriate, with  the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may  later determine are appropriate; and  cannot be discharged or terminated during the duration of the consent  decree except for leave of court, and upon the termination, discharge,  death, incapacity, or resignation of an independent special counsel,  the court will appoint a successor."], "subsections": []}, {"section_title": "Department of Labor", "paragraphs": ["Under the consent decree, DOL has an oversight role and may object to  certain proposed plan changes. Specifically, DOL: may request and review certain reports provided by the plan and any  documents prepared by the independent special counsel in the  exercise of his authority; may object to the appointment of proposed trustees, named  fiduciaries, investment managers of the passively-managed accounts,  and asset custodians;  receives notice of proposed changes to the plan\u2019s investment policy  statements from the plan; and may object to the dissolution of the consent decree."], "subsections": []}, {"section_title": "CSPF (including Board of Trustees and Internal Audit Staff)", "paragraphs": ["The plan must operate in full compliance with the consent decree, with  ERISA, and with any conditions contained in determination letters it  receives from the Internal Revenue Service. Specifically, CSPF, its  board of trustees, and its internal audit staff must meet certain  requirements.  is required to use an independent asset manager known as the  named fiduciary; must rebid the named fiduciary role at least once within every 6 years,  with the option to extend the appointment for one calendar year; may remove a named fiduciary without cause shown on 6 months\u2019  written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the  performance of his duties and responsibilities and with DOL in its  continuing investigation and enforcement responsibilities under  ERISA;  is required to recommend to the court three replacement candidates,  agreeable to DOL, to replace an outgoing independent special  counsel; and  is required to maintain a qualified internal audit staff to monitor its  affairs.  is required to appoint, subject to court approval, the investment  managers of the passively-managed accounts;  is prohibited from authorizing any future acquisitions, investments, or  dispositions of plan assets on a direct or indirect basis unless  specifically allowed by the consent decree; and  is required to comply with ERISA fiduciary duties, such as monitoring  the performance of the assets of the plan, under Part 4 of Title I of  ERISA.  is required to review benefit administration, administrative  expenditures, and the allocation of plan receipts to investments and  administration; and  is required to prepare monthly reports setting forth any findings and  recommendations, in cooperation with the executive director of the  plan, and make copies available to the independent special counsel  and, upon request, to DOL and the court."], "subsections": []}, {"section_title": "Named Fiduciaries", "paragraphs": ["The independent asset managers, known as named fiduciaries, are  appointed by the plan\u2019s trustees, subject to court approval, and have  exclusive responsibility and authority to manage and control all assets of  the plan allocated to them. Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees,  and implement investment policy statements for the assets they  manage, giving appropriate regards to CSPF\u2019s actuarial  requirements."], "subsections": []}]}]}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Charles A. Jeszeck, (202) 512-7215 or jeszeckc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above David Lehrer (Assistant  Director), Margaret J. Weber, (Analyst-in-Charge), Laurel Beedon,  Charles J. Ford, Jessica Moscovitch, Layla Moughari, Joseph Silvestri,  Anjali Tekchandani, Frank Todisco, and Adam Wendel made key  contributions to this report. Also contributing to this report were Susan  Aschoff, Deborah K. Bland, David M. Chrisinger, Helen Desaulniers, Ted  Leslie, Sheila McCoy, Mimi Nguyen, and Walter Vance."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Central States Pension Fund: Investment Policy Decisions and  Challenges Facing the Plan. GAO-18-106. Washington, D.C.: June 4,  2018.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Pension Plan Valuation: Views on Using Multiple Measures to Offer a  More Complete Financial Picture. GAO-14-264. Washington, D.C.:  September 30, 2014.", "Private Pensions: Clarity of Required Reports and Disclosures Could Be  Improved. GAO-14-92. Washington, D.C.: November 21, 2013.", "Private Pensions: Timely Action Needed to Address Impending  Multiemployer Plan Insolvencies. GAO-13-240. Washington, D.C.: March  28, 2013.", "Private Pensions: Multiemployer Plans and PBGC Face Urgent  Challenges. GAO-13-428T. Washington, D.C.: March 5, 2013.", "Pension Benefit Guaranty Corporation: Redesigned Premium Structure  Could Better Align Rates with Risk from Plan Sponsors. GAO-13-58.  Washington, D.C.: November 7, 2012.", "Private Pensions: Changes Needed to Better Protect Multiemployer  Pension Benefits. GAO-11-79. Washington, D.C.: October 18, 2010.", "Private Pensions: Long-standing Challenges Remain for Multiemployer  Pension Plans. GAO-10-708T. Washington, D.C.: May 27, 2010.", "The Department of Labor\u2019s Oversight of The Management of the  Teamsters\u2019 Central States Pension and Health and Welfare Funds.  GAO/HRD-85-73. Washington, D.C.: July 18, 1985.", "Investigation to Reform Teamsters\u2019 Central States Pension Fund Found  Inadequate. GAO/HRD-82-13. Washington, D.C.: April 28, 1982."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-648", "url": "https://www.gao.gov/products/GAO-18-648", "title": "Veterans First Program: VA Needs to Address Implementation Challenges and Strengthen Oversight of Subcontracting Limitations", "published_date": "2018-09-24T00:00:00", "released_date": "2018-10-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA spends billions every year to procure goods and services and is required to give preference to veteran-owned small businesses when awarding contracts\u2014a program known as Veterans First. In turn, those firms must comply with limitations on the use of subcontracting. A 2006 statute established Veterans First, and a 2016 Supreme Court decision clarified conflicting interpretations, resulting in changes to how VA must now implement the program.", "GAO was asked to review VA's implementation of Veterans First since the Supreme Court decision. Among other things, this report assesses the extent to which (1) changes occurred in procurement obligations to veteran-owned small businesses from fiscal years 2014 through 2017; (2) VA has encountered any challenges in implementing Veterans First policies; and (3) VA has mechanisms to oversee contractor compliance with subcontracting limitations.", "GAO analyzed VA regulations, policies, and contracting data; conducted three site visits; and reviewed a non-generalizable sample, selected based on factors such as high dollar value, of 35 contracts and orders, 29 of which VA awarded under Veterans First."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the percentage of Department of Veterans Affairs (VA) obligations set aside for veteran-owned small businesses under its Veterans First program was higher in 2017\u2014the first full year following the 2016 Supreme Court decision\u2014than in previous years. In its decision, the court clarified that VA contract competitions must be restricted to these businesses if they meet two criteria: (1) the contracting officer reasonably expects that at least two such businesses will submit offers, and (2) the award can be made at a fair and reasonable price and best value to the government. This has become known as the \u201cVA Rule of Two.\u201d VA created a new policy for implementing Veterans First following the 2016 decision. The percentage of obligations set aside for veteran-owned small businesses increased from fiscal years 2014 to 2017 (see figure).", "Contracting officers face challenges implementing aspects of Veterans First, some of which VA has addressed through policy and optional training. However, 12 of the 30 contracting officers GAO interviewed cited difficulty in assessing the second criterion of the VA Rule of Two when making a set-aside decision. Eight of them stated that they sometimes lacked confidence in their fair and reasonable price determinations. VA's training, however, does not fully address these more challenging aspects of implementing the Veterans First policy. More targeted training would provide VA with greater assurance that its contracting officers have the knowledge and skills necessary to implement the policy. Additionally, assessing whether training on this policy should be mandatory would allow VA to determine if it would be beneficial for all contracting officers.", "GAO found that VA conducts limited oversight of contractor compliance with limitations on subcontracting and has few mechanisms for ensuring compliance. For example, GAO found that the required clause for ensuring that veteran-owned small business contractors perform the required portion of work was either missing entirely or an outdated version was used in 11 of the 29 set-aside contract actions GAO reviewed. Without better oversight, VA is limited in its ability to detect violations and ensure that the goal of Veterans First\u2014to promote opportunities for veteran-owned small businesses\u2014is not undermined."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that VA provide more targeted training for contracting officers, assess whether training should be mandatory, ensure required clauses are included in contracts, and improve oversight of compliance with subcontracting limitations. VA agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) spent $26.2 billion in fiscal year  2017 to procure a wide range of goods and services\u2014including  construction, information technology, medical supplies, and many  others\u2014to meet veterans\u2019 needs. In 2006, in order to increase  opportunities for veterans to do business with VA, Congress directed the  department to apply a preference to Veteran-Owned Small Businesses  (VOSB) and Service-Disabled Veteran-Owned Small Businesses  (SDVOSB) before awarding competitive contracts. VA created what it  calls its Veterans First Contracting Program (referred to in this report as  Veterans First) to implement the statute.", "In June 2016, the Supreme Court\u2019s decision in Kingdomware  Technologies, Inc. v. United States clarified conflicting interpretations of  the requirement for the preference, concluding that VA must restrict  competition to veteran-owned small businesses if the contracting officer  reasonably expects that at least two such businesses will submit offers  and the award can be made at a fair and reasonable price that offers best  value to the United States. VA\u2019s prior practice had been to consider this  preference mandatory only until it met its annual goals for contracting with  veteran-owned small businesses. Prior VA practice was also not to apply  it to orders placed against the Federal Supply Schedules (FSS). The  Court held that VA must apply the preference\u2014often referred to as a \u201cset- aside\u201d\u2014before contracting under competitive procedures, regardless of  whether VA has met goals, and to orders placed against FSS. In  response, VA made a number of changes to the policies and regulations  implementing its Veterans First program to ensure appropriate application  across all of the department\u2019s contracts. Firms that receive contracts  through this preference must also comply with a number of requirements,  which generally includes the Small Business Administration\u2019s (SBA)  Limitations on Subcontracting requirement. The purpose of the  subcontracting limitations is to ensure that firms that receive awards on a  set-aside basis perform a material portion of the contract themselves,  rather than subcontracting a majority of the work to firms that would have  been ineligible for the award.", "You requested that we examine changes to how VA implements the  Veterans First program as a result of the Supreme Court\u2019s decision. This  report assesses: (1) how VA procurement obligations to veteran-owned  small businesses changed in the period from fiscal years 2014 through  2017; (2) what actions VA has taken to update Veterans First policies and  regulations and provide training following the Supreme Court\u2019s decision;  (3) what challenges, if any, VA is encountering in applying Veterans First  policies; and (4) the extent to which VA has mechanisms in place to  monitor compliance with subcontracting limitations by veteran-owned  small businesses, and the effectiveness of such mechanisms.", "To assess how VA procurement obligations to veteran-owned small  businesses changed in the period from fiscal years 2014 through 2017,  we obtained data from VA\u2019s Electronic Contract Management System  (eCMS) on all contracts from fiscal years 2014 through 2017, chosen to  provide data before and after the Supreme Court decision. We analyzed  these data to determine changes in the use of set-asides for SDVOSB  and VOSB firms relative to overall VA contracting obligations during this  period, to identify patterns across VA contracting organizations, and to  determine the number of individual SDVOSB and VOSB firms that  received awards for set-aside contracts from fiscal years 2014 through  2017. We analyzed VA\u2019s Office of Small and Disadvantaged Business  Utilization\u2019s (OSDBU) Vendor Information Pages (VIP) database to  determine the change in the total number of businesses that were  certified during this same period. To assess the reliability of the data, we  reviewed documentation and interviewed officials responsible for  maintaining eCMS data to gather information on processes, accuracy,  and completeness of the data; we chose to exclude actions reported in  Express Reports\u2014summaries of multiple orders placed on existing  contracts\u2014from our analysis because they were only consistently  reported in eCMS starting in 2017. We determined that the eCMS and  VIP data were sufficiently reliable for the purposes of this reporting  objective.", "To assess what actions VA has taken to update Veterans First policies  and regulations following the Supreme Court\u2019s decision, we analyzed  policies, regulations, guidance, and training materials related to the  program, and compared these to what VA had in place prior to the  decision. We met with leadership at VA\u2019s national contracting  organizations to discuss the implementation of the Veterans First policy  within their organizations, and interviewed senior officials in VA\u2019s Office of  Acquisition and Logistics, OSDBU, Office of General Counsel, and  Veterans Health Administration\u2019s (VHA) Procurement and Logistics Office  regarding the program.", "To assess what challenges, if any, VA is encountering in applying the  Veterans First policy, we gathered documentation from six contracting  organizations across the VA. We conducted site visits at a non- generalizable selection of three VHA regional offices, known as Veterans  Integrated Service Networks (VISN). We focused our site visits on VHA  because it is the largest contracting organization in the Department. We  selected these VISNs primarily based on changes in total contract  obligations to SDVOSBs and VOSBs from fiscal year 2015 to fiscal year  2017\u2014the first full fiscal years before and after the Supreme Court  decision\u2014selecting two with among the largest percentage changes, and  one with the lowest. At the selected VISNs, we interviewed leadership at  their respective Network Contracting Offices, and selected a non- generalizable sample of 35 total contracts and orders\u201429 of which were  set aside for SDVOSBs or VOSBs\u2014selected based on high dollar value,  and for procurements of construction, services, or supplies. For each of  the selected contracts and orders, we reviewed the contract files and  interviewed both the contracting officer and the customer\u2014in most cases  the contracting officer\u2019s representative. We held roundtable discussions of  Veterans First implementation, training, and other matters with 8 to 11  contracting officers at each location, randomly selected from the  construction, services, and supply teams. We also interviewed leaders at  three VA national contracting organizations\u2014the National Acquisition  Center, the Technology Acquisition Center, and the Strategic Acquisition  Center.", "To assess the extent to which VA has mechanisms in place to monitor  compliance with subcontracting limitations, we analyzed VA and SBA  policies and regulations. To assess the effectiveness of VA\u2019s  mechanisms, we evaluated the extent to which VA applied these  mechanisms in the 29 selected contracts set aside for SDVOSBs and  VOSBs. We reviewed the internal policies of VA\u2019s Subcontracting  Compliance Review Program and analyzed the program\u2019s audit results.  We interviewed senior VA procurement officials responsible for  developing and/or implementing these mechanisms. We also reviewed  our prior work and SBA and VA Inspector General reports on VA and  other agencies\u2019 compliance with subcontracting limitations. See  appendix I for a more detailed scope and methodology.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "VA Contracting Organizational Structure", "paragraphs": ["VA serves veterans of the U.S. armed forces and provides health,  pension, burial, and other benefits. The department\u2019s three operational  administrations\u2014VHA, Veterans Benefits Administration, and National  Cemetery Administration\u2014operate largely independently from one  another. Each has its own contracting organization, though all three  administrations also work with national contracting offices under the  Office of Acquisition, Logistics, and Construction for certain types of  purchases, such as medical equipment and information technology. VHA,  which provides medical care to about 9 million veterans at 172 medical  centers, is by far the largest of the three administrations and, as such, is  the primary focus of our review. These VHA medical centers are  organized into 18 VISNs, organizations that manage medical centers and  associated clinics across a given geographic area. Each VISN is served  by a corresponding Network Contracting Office, which awards contracts  for goods and services needed by the VISN. VA\u2019s Office of Procurement  Policy and Warrant Management (referred to in this report as the Office of  Procurement Policy), within the Office of Acquisition and Logistics, is  responsible for all procurement policy matters at the VA. Figure 1 shows  the organizational structure of the procurement function at VA."], "subsections": []}, {"section_title": "Preferences for Veteran- Owned Small Businesses in Awards of VA Contracts", "paragraphs": ["The 2006 Veterans Benefits, Health Care, and Information Technology  Act established a requirement that VA contract competitions must be  restricted to SDVOSBs and VOSBs if: 1) the contracting officer  reasonably expects that at least two such businesses will submit offers,  and 2) the award can be made at a fair and reasonable price that offers  the best value to the government. (In this report, we refer to these two  elements of the law as criteria.) This determination is known as the \u201cVA  Rule of Two.\u201d The statute also establishes an order of priority for the  contracting preferences, with the highest preference for SDVOSBs,  followed by VOSBs. (In this report, we refer to these businesses  collectively as SD/VOSBs.)", "There are a number of socio-economic programs implemented in the  Federal Acquisition Regulation (FAR) that provide contracting  preferences or special contracting authorities for specific groups. These  include contracting preferences for small businesses overall as well as  more targeted preferences such as SBA\u2019s 8(a) Business Development  Program, which assists disadvantaged small businesses. Unlike these  other socioeconomic preference programs that generally apply to  agencies across the federal government, the 2006 statute created a  preference for SD/VOSBs that applies only to VA.", "In June 2016, the Supreme Court decision in Kingdomware Technologies,  Inc. v. United States found that the manner in which VA had been  applying the preference for SD/VOSBs was not consistent with the 2006  statute. This case arose because VA was not applying the statute\u2019s  preference in competitions for orders under the FSS, which VA uses to  order medical supplies, among other things. The Supreme Court ruled  that VA\u2019s FSS orders are subject to the 2006 statute, and that the VA  Rule of Two must be applied because the statute mandates its use before  contracting under competitive procedures.", "Previously, VA considered FSS a mandatory source of supplies and  services that must be used when possible, but did not require that  contracting officers apply the Rule of Two when placing FSS orders. An  example of a mandatory source used across the federal government is  the AbilityOne procurement list. AbilityOne is a program to employ the  blind and people with severe disabilities to provide supplies and services  to federal customers. Federal agencies that need the specific products  and services on AbilityOne\u2019s procurement list are generally required to  purchase them through the program.", "Contracting officers, who are authorized to commit the government to  contracts, are ultimately responsible for awarding and administering  contracts, including ensuring compliance with the VA Rule of Two. Within  the VA contracting organizations we reviewed, the contracting officer  typically designates a representative of the customer office\u2014the  organization that has requested the purchase of a good or service for its  use\u2014as the contracting officer\u2019s representative. This individual assists  with tasks that support the work of the contracting officer, such as market  research, developing independent government cost estimates, and  monitoring contractor performance."], "subsections": []}, {"section_title": "Verification of SD/VOSBs", "paragraphs": ["The 2006 statute also required VA to maintain a database of verified  SD/VOSBs, and required that only firms appearing in the database may  qualify for VA awards set aside for SD/VOSBs. VA\u2019s Office of Small and  Disadvantaged Business Utilization (OSDBU) maintains this database  through its Center for Verification and Evaluation, which assesses  whether small businesses meet the criteria for being veteran-owned and  controlled by verifying self-certifications provided by the SD/VOSBs. A  separate federal agency, SBA, is responsible for setting size standards  (by revenue and employees) for what constitutes a small business; the  threshold varies by industry. Certified SD/VOSBs\u2014which VA has verified  as owned and controlled by veterans\u2014are listed in VA\u2019s Vendor  Information Pages (VIP). This is an online database accessible to VA\u2019s  contracting workforce and the public that includes basic information about  each firm. Firms listed in this database select numerical codes based on  the North American Industry Classification System to identify the types of  goods and services they seek to provide to the VA; firms can do business  under a variety of these codes."], "subsections": []}, {"section_title": "Subcontracting Limitations", "paragraphs": ["While SD/VOSBs that receive awards through set-asides may  subcontract with firms that do not have small business status, the  SD/VOSBs generally must perform a certain percentage of the work on a  contract themselves. The SBA establishes regulations that govern these  subcontracting limitations, which were most recently revised in May  2016. These regulations place limits on the percentage of the overall  contract value that firms in particular socio-economic categories, including  SD/VOSBs, may pay to subcontractors that do not belong to the same  category.", "The purpose of the subcontracting limitations is to ensure that firms that  receive awards on a set-aside basis perform a material portion of the  contract themselves, rather than subcontracting a majority of the work to  firms that would have been ineligible for the award. Under SBA\u2019s revised  regulations, subcontracted work performed by \u201csimilarly situated\u201d  entities\u2014those in the same socio-economic category as the firm awarded  the set-aside contract\u2014does not count against the subcontracting  limitation. Table 1 lists the maximum percentage a firm that is awarded a  set-aside contract may subcontract to firms that are not in the same  socio-economic category under SBA\u2019s 2016 Subcontracting Limitations  regulations.", "If a firm violates the subcontracting limitations, SBA\u2019s subcontracting  limitation regulation would allow the government to impose a penalty of  $500,000 or, if it is greater, the dollar amount spent on subcontracted  work in excess of the permitted level. Contracting officers are  responsible for ensuring compliance with the terms of the contract, and,  as discussed in more detail below, the terms of a contract may include a  requirement to comply with SBA\u2019s limitations on subcontracting  regulation. In addition, we have reported that contracting officers were not  clear who was responsible for the monitoring, and uncertain about how to  conduct the monitoring. The VA\u2019s Inspector General and SBA  compliance reviews have reported similar findings."], "subsections": []}]}, {"section_title": "Obligations to and Number of SD/VOSBs Receiving Awards Were Higher Following the Supreme Court Decision Obligations and Awards to SD/VOSBs Increased Since the Supreme Court Decision", "paragraphs": ["VA\u2019s set-asides to SD/VOSBs increased following the 2016 Supreme  Court decision, particularly among non-construction contract actions. The  change in percentage of obligations made under set-aside contracts  varied across VA contracting organizations, in part because of differences  in the types of goods and services they bought. The number of  SD/VOSBs certified by VA also increased, as did the number of those  firms that received contract awards.", "VA obligations and awards for SD/VOSB set-asides increased in fiscal  years 2016 and 2017, particularly fiscal year 2017, which was the first full  fiscal year following the 2016 Supreme Court decision. VA obligations  for SD/VOSB set-asides have increased as a percentage of total VA  obligations over this period, while the percentage of obligations through  other set-aside types\u2014mostly non-veteran-owned small business set- asides\u2014remained almost steady. VA obligated about $3.9 billion through  SD/VOSB set-asides in fiscal year 2017, and VA\u2019s overall obligations also  increased. Figure 2 depicts this information.", "The number of individual awards\u2014new contracts and orders\u2014made by  VA through SD/VOSB set-asides has also increased as a percentage of  total VA awards from fiscal years 2014 through 2017, particularly in fiscal  year 2017 following the Supreme Court decision, as shown in figure 3."], "subsections": [{"section_title": "SD/VOSB Non- Construction Set Asides Increased", "paragraphs": ["VA has consistently set aside a much greater percentage of construction  contracts and orders for SD/VOSBs than for other types of goods and  services, according to our analysis of VA eCMS data from fiscal years  2014 through 2017. Construction accounted for about 51 percent of  obligations under SD/VOSB set-asides, despite construction representing  only about 15 percent of VA\u2019s overall contract obligations during this  period. VA contracting officials we spoke with stated that the market for  firms performing construction services generally has a greater percentage  of capable SD/VOSBs than the market for firms providing non- construction goods and services. VA contracting officers working on  construction contracts told us that they experienced little effect from the  policy changes related to the 2016 Supreme Court decision because they  had already been setting aside most construction contract actions for  SD/VOSBs. Nonetheless, there was an increase in the percentage of total  obligations for construction set-asides to SD/VOSBs in fiscal year 2017,  while total obligations for construction contracts declined. Figure 4 shows  total and set-aside obligations for construction and non-construction  contract actions in fiscal years 2014 through 2017.", "As depicted in figure 4, obligations for non-construction SD/VOSB set- asides increased in fiscal year 2017 both in total dollars and as a  percentage of total obligations. Among obligations for non-construction  SD/VOSB set-asides, the top five categories of goods and services by  obligations across fiscal years 2014 through 2017 included:  1.  Automatic data processing and telecommunications.  2.  Information technology equipment, software, supplies, and support  equipment.  3.  Medical/dental equipment and supplies.  4.  Professional services.  5.  Housekeeping services."], "subsections": []}, {"section_title": "Obligations for SD/VOSB Set-Asides Varied across VA Contracting Organizations", "paragraphs": ["The percentage of obligations for SD/VOSB set-asides varied across VA  contracting organizations. Among the contracting offices for VHA\u2019s 18  VISNs\u2014which together accounted for about 47 percent of total  obligations\u2014the percentage for SD/VOSB set-asides ranged from  approximately 17 percent to 40 percent in fiscal year 2017, as shown in  figure 5.", "Total obligations and SD/VOSB set-aside obligations also varied across  VA\u2019s three national contracting offices\u2014the National Acquisition Center,  Strategic Acquisition Center, and Technology Acquisition Center\u2014in part  because of differences in the types of goods and services they procure.  The Technology Acquisition Center had a larger increase in SD/VOSB  set-aside obligations than other contracting organizations in fiscal year  2017. This increase is consistent with our finding that IT-related  categories were among the types of goods and services that had the  highest increase in SD/VOSB obligations following the Supreme Court  decision. The National Acquisition Center consistently had the lowest  volume and percentage of obligations for SD/VOSB set-asides; officials  noted that its areas of focus in pharmaceuticals and high tech medical  equipment are markets that have little participation from small businesses  and SD/VOSBs. Figure 6 shows obligations on set-aside and non-set- aside contracts and orders in these three national contracting offices over  fiscal years 2014 through 2017."], "subsections": []}, {"section_title": "The Number of Veteran- Owned Small Businesses Receiving Set-Aside Awards Has Increased Since the Supreme Court Decision", "paragraphs": ["Data from VA\u2019s OSDBU shows consistent increases over the last several  years in the number of certified firms listed in its VIP database, with a  noticeable spike following the Supreme Court decision. While the number  of certified SD/VOSBs in VIP increased annually from fiscal years 2014  through 2017, the largest increase\u2014from 8,925 to 11,926 firms\u2014 occurred in the last year of this time frame.", "The number of SD/VOSBs that received set-aside contracts or orders  also increased over fiscal years 2015 through 2017. The largest year-to- year increase during this period was in the last year of this time frame,  when the number increased from 1,174 to 1,663, as shown in figure 7."], "subsections": []}]}, {"section_title": "VA Updated Policy for the Veterans First Program and Provided Training to Contracting Officers to Address Confusion", "paragraphs": [], "subsections": [{"section_title": "VA Updated Veterans First Program Policy", "paragraphs": ["In response to the Supreme Court\u2019s 2016 decision in the case of  Kingdomware Technologies, Inc. v. United States, VA released a July  2016 policy for the Veterans First program, a revision to its 2007 policy.  To develop this revised policy, officials from VA\u2019s Office of Procurement  Policy said they created an integrated project team that consisted of  representatives from VA procurement leadership, the Office of General  Counsel, OSDBU, and others. VA\u2019s Office of Procurement Policy also  subsequently issued a \u201cclass deviation\u201d to the VA Acquisition Regulation  to implement changes VA viewed as necessary for consistency with the  Supreme Court\u2019s decision. VA\u2019s Deputy Senior Procurement Executive  issues class deviations when necessary to allow VA\u2019s contracting  organizations to deviate from the FAR or VA Acquisition Regulation.  According to VA officials, these deviations effectively replace existing  policy. The Office of Procurement Policy also issued guidance to provide  clarifications on certain issues. Among the guidance VA issued was a  decision tree that summarized how to apply the VA Rule of Two under the  new 2016 Veterans First policy. Figure 8 presents our analysis of VA\u2019s  process.", "VA\u2019s Office of Acquisition and Logistics had issued an Information Letter  in June 2007 that established procedures for the Veterans First program,  to comply with the 2006 federal statute that directed VA to prioritize  SD/VOSBs in their contracting decisions. While the basic principle of the  VA Rule of Two was the same across the 2007 and 2016 policies, the  2007 policy did not provide contracting officers as many details for  applying the VA Rule of Two. In contrast, the 2016 policy provides more  detail on how contracting officers must implement set-asides for  SD/VOSBs across different types of procurements and various steps in  the contracting process, including market research and use of existing  contract vehicles\u2014such as FSS and agency-wide indefinite delivery  contracts. These changes had implications for how VA contracting  officers make contracting decisions and document their work. Table 2  summarizes key differences in emphasis between the 2007 and 2016  policies and the work that contracting officers must perform."], "subsections": []}, {"section_title": "VA Provided Training on Updated Veterans First Program Policy", "paragraphs": ["VA has conducted training for its workforce on the 2016 Veterans First  policy and subsequent updates and guidance. VA\u2019s Office of Procurement  Policy collaborated with the VA Acquisition Academy to provide several  installments of online training to contracting officers. The academy offered  initial training to contracting officers in July 2016, just after the policy was  issued. Supplemental training was offered to supervisors in December  2016. In March 2018, the academy offered follow-up training for all  contracting officers to provide further clarification on the Veterans First  policy. These trainings focused on specific areas of frequent questions  that the Office of Procurement Policy received from contracting officers,  including market research, fair and reasonable price determinations, and  limitations on subcontracting, among other things. These trainings were  highly encouraged but not mandatory. Figure 9 details the training  provided to contracting officers."], "subsections": []}, {"section_title": "VA Took Steps to Clarify Certain Aspects of Veterans First Policy to Help Address Contracting Officer Confusion and Concerns", "paragraphs": ["VA\u2019s Office of Procurement Policy addressed some aspects of the 2016  Veterans First policy that had caused confusion and concerns among  contracting officers by providing additional guidance and policy.  Contracting officers we met with told us of their initial uncertainty about  whether they could use existing contract vehicles and whether they must  apply the VA Rule of Two before using these vehicles under the Veterans  First policy. In response to such concerns, the Office of Procurement  Policy gathered frequently asked questions, and created guidance by  posting answers on its website as another mechanism for providing  clarification to contracting officers.", "VA also issued new policy and guidance to address contracting officers\u2019  concerns about the additional work and delays associated with cases  where they set-aside a solicitation for SD/VOSBs but did not receive any  offers. Specifically, 28 of the contracting officers we interviewed  individually and in roundtable discussions told us they sometimes had to  cancel SD/VOSB solicitations for this reason and then reopen  procurements without the SD/VOSB set-aside, resulting in delays in the  contract award process. Other contracting officials we spoke with told us  that since the implementation of the 2016 Veterans First policy, individual  contract actions take longer to award on average due to the need to re- solicit in cases where they set aside solicitations for SD/VOSBs but do  not receive acceptable offers, as well as due to expectations for  increased documentation of the rationale for issuing a solicitation without  an SD/VOSB set-aside restriction. For instance, a contracting officer at  one of the VISN contracting offices we visited stated that a majority of his  contract actions have involved multiple rounds of solicitations, which has  increased his workload and procurement lead times.", "In response to such concerns, VA\u2019s Office of Procurement Policy  provided informal guidance in early 2017, followed by policy in February  2018 that contracting officers could use \u201ctiered\u201d or \u201ccascading\u201d  solicitations. Under VA\u2019s current policy, VA issues a solicitation that  requests offers from multiple types of firms, or \u201ctiers,\u201d including  SD/VOSBs, other small business types, and, potentially, large  businesses. The solicitation establishes an order of preference among the  different tiers. The contracting officer separates the offers based on the  firms\u2019 size or socioeconomic status, and then evaluates them in the order  of preference established by the solicitation. If the award cannot be made  at the first tier, the evaluation moves to the succeeding tier or tiers until an  award can be made."], "subsections": []}]}, {"section_title": "Contracting Officers Face Several Challenges in Applying Aspects of the Veterans First Policy", "paragraphs": ["Applying the 2016 Veterans First policy has presented challenges for  contracting officers. First, the VA system that contracting officers are  required to use for the initial step of market research was not designed for  this purpose, and contracting officers we interviewed expressed  dissatisfaction with it. Second, contracting officers we spoke with  expressed confusion about conducting market research and applying the  VA Rule of Two criteria\u2014determining whether there is a reasonable  expectation that two or more SD/VOSBs will submit offers and that award  can be made at a fair and reasonable price that offers best value to the  government. Further, contracting officers also expressed confusion on  how to determine whether the prices offered by SD/VOSBs in response to  a set-aside solicitation are fair and reasonable. Finally, continuing  workload issues, real and perceived pressure to set aside contracts, and  training not reaching all VA contracting officers are other factors that  continue to contribute to the challenges."], "subsections": [{"section_title": "Contracting Officers Cited Barriers in Using VA\u2019s Vendor Information Pages System to Conduct Market Research", "paragraphs": ["VA\u2019s 2016 Veterans First policy requires contracting officers to use VIP as  the first step in market research to identify SD/VOSBs capable of  performing the work. While the use of VIP and documentation of its use  had been required by the VA Acquisition Regulation since 2009,  presenting it as the first step for all market research was a key change in  how contracting officers use this system. Forty-one out of 60 contracting  officers we interviewed individually and in roundtable discussions  expressed dissatisfaction with VIP as the starting point for market  research, citing difficulty in using it and lack of usefulness to conduct  market research. Specifically, several of these contracting officers stated  that while VIP can be used to determine whether firms are certified as  SD/VOSBs, it does not contain much information to help them determine  whether these SD/VOSBs will be capable of performing the contract.  They also stated, and OSDBU officials confirmed, that each SD/VOSB  self-selects the codes that indicate the types of goods and services it can  provide, and many list a large number. As a result, a search can return  hundreds of results. Twenty-six contracting officers we interviewed\u2014 either individually or in roundtable discussions\u2014stated that they have had  instances where they issued an SD/VOSB set-aside solicitation based on  a VIP search returning a high number of SD/VOSB contractors that  provide the desired goods or services, but no SD/VOSBs submitted  offers. Many of these contracting officers stated that, because they feel  they cannot rely on the VIP results, they have taken subsequent steps  such as using public \u201csources sought\u201d notices to gauge interest from  SD/VOSBs. While this step requires additional time, they said they found  it to be a better source of information for making a VA Rule of Two  decision.", "VA OSDBU officials stated that they would like to provide contracting  officers with enhanced utility for conducting and documenting market  research. They acknowledged that VIP is not designed to be used as a  market research tool and that the challenges contracting officers noted  were not surprising. The director of OSDBU stated that VA is planning to  make some improvements to its VIP database to provide better  information on SD/VOSB capability, but, according to these officials,  these improvements are not yet available for use.", "The 2016 Veterans First policy requires contracting officers to document  their VIP searches in the contract file, but this requirement is being  implemented inconsistently. Specifically, 29 of the 35 contract files we  reviewed did not contain such documentation. The cognizant contracting  officers for most of these contracts told us they conducted the VIP  searches; some stated they forgot to print and attach the results to the  contract file, while others stated they had difficulty printing the results.  According to VA\u2019s Veterans First policy, documenting the results of the  VIP search is required to establish the contracting officer\u2019s basis for the  VA Rule of Two decision, regardless of whether the contract is set aside  or not. Documenting this information in the case files, as required,  provides VA with assurance that contracting officers have performed this  search to support their overall market research efforts."], "subsections": []}, {"section_title": "Contracting Officers Face Challenges in Determining Whether to Set Aside for SD/VOSBs Under VA Rule of Two", "paragraphs": ["There are a large number of certified SD/VOSBs offering various goods  and services\u2014about 12,000 as of fiscal year 2017, according to VIP data  provided by the OSDBU. A number of contracting officers we met with  stated that this can result in VIP searches that return a lengthy list of  SD/VOSBs. As a result, the decision of whether to set aside a solicitation  is often based on the second criterion of the VA Rule of Two\u2014whether  there is a reasonable expectation that the award can be made at a price  that is fair and reasonable and offers the best value to VA. To meet this  criterion, the contracting officer combines research and professional  judgment to make a decision whether to set aside or not, according to VA  officials.", "While these VA Rule of Two criteria have not changed since 2007,  contracting officers told us that their perception of the rule\u2019s application  has changed following the Supreme Court decision and VA\u2019s 2016  Veterans First policy. Several contracting officers we met with stated that  sometimes, when they identified that there were two or more SD/VOSBs  that they expected to submit offers, they set aside a solicitation without  providing full consideration of this second criterion. These contracting  officers told us it is difficult in some cases to make a prospective  determination that they can reasonably expect to be able to make an  award at a fair and reasonable price without any actual offers in-hand.  Contracting officers told us that prior to the Supreme Court decision their  understanding was that they had the option to set aside contract actions  for SD/VOSBs when they expected that the price would be fair and  reasonable. They stated that after the decision, management relayed an  expectation that contracting officers must set aside contract actions to  SD/VOSBs unless they can prove that they cannot reasonably expect to  make an award at a fair and reasonable price.", "Contracting officers also told us of instances where they identified  multiple SD/VOSBs likely to submit proposals, but, based on their market  research, it was unlikely that an award could be made at a fair and  reasonable price that offered best value to VA. Many of these contracting  officers stated that, despite those findings, they focused only on the  number of SD/VOSBs, in part because they felt pressure to do so from  local or headquarters\u2019 management, OSDBU, or feared protests from  SD/VOSBs, which would delay the award.", "In two specific areas of contracting we found examples of differing  approaches to addressing the challenges faced by contracting officers  when applying the VA Rule of Two criteria. Prior to the Supreme Court  decision, there was little use of SD/VOSB set-asides in real property  leasing or for high-tech medical equipment, according to officials from  contracting offices responsible for these procurements. After the decision,  there was uncertainty about whether and how to apply the Veterans First  policy to these areas of contracting. As illustrated in the examples below,  real property officials continue to face challenges applying the VA Rule of  Two to leasing, whereas high-tech medical equipment contracting officials  addressed this challenge by preparing a business case and used it to  apply the VA Rule of Two consistently across their contracts:", "Officials in VA\u2019s headquarters Construction and Facilities  Management office\u2014responsible for planning, designing, and  constructing VA facilities\u2014told us that prior to the Supreme Court  decision they did not apply the VA Rule of Two to its real property  leases. These officials stated that they have found the Rule of Two to  be difficult to apply. According to the officials, VHA facilities have  requirements for specific size, space, and location, and there are few  SD/VOSBs in this industry, so it is rare that an SD/VOSB can meet  these requirements. These officials further told us that, since the  Supreme Court decision, they have often set aside lease solicitations  for SD/VOSBs as long as there were two firms available despite  uncertainty that these firms could compete for the work at a fair and  reasonable price at best value to the VA.", "According to these VA officials, based on guidance they received from  OGC and others, they felt compelled to conduct the procurements as  SD/VOSB set-asides even when they were unsure that the second  criterion of the VA Rule of Two would be met. These officials stated  they are often unable to make awards to those firms\u2014either because  their proposals were not acceptable, or the SD/VOSBs did not submit  proposals at all. They expressed concern that the Veterans First  program is being applied to leasing when, from their perspective, it is  impractical to do so. They stated that these challenges in applying  VA\u2019s Rule of Two criteria have added an average of 3 to 6 months to  the process of awarding a new lease, resulting in delays in developing  new facilities. Similarly, officials responsible for awarding leases at  one VISN contracting office we visited told us they set aside a  solicitation to an SDVOSB even though only one SDVOSB responded  to a sources sought notice. This action was taken, according to the  contracting officials, because they were concerned that their decision  would be challenged by OSDBU if they did not set it aside. They  stated they had been without a broker\u2014a firm that helps to negotiate  leases\u2014for more than a year due to challenges in applying the VA  Rule of Two, making it difficult for them to move forward with any new  leases.", "In both cases, VA officials stated that they decided to solicit on an  SD/VOSB set-aside basis even though they lacked confidence that  there was a reasonable expectation that two or more SD/VOSBs  would submit offers and that award could be made at a fair and  reasonable price that offered the best value to the government. Also,  in both cases, VA had to reissue solicitations without the SD/VOSB  set-aside restriction, which lengthened the time that VA procurement  staff were required to spend on the acquisition and delayed the  fulfillment of VA\u2019s leasing requirements.", "In contrast, another VA contracting organization determined that  SD/VOSB set-asides were not feasible because there was no  reasonable expectation that two or more SD/VOSBs would submit  offers and that award could be made at a fair and reasonable price.", "The National Acquisition Center\u2019s program to procure high-tech  medical equipment\u2014such as magnetic resonance imaging and X-ray  machines\u2014historically had little participation from SD/VOSBs.  Following the release of the 2016 Veterans First policy, contracting  officials responsible for the program halted all non-emergency  purchases for over a year while they conducted an analysis of how to  apply the VA Rule of Two to purchases of high-tech medical  equipment. These officials analyzed the marketplace and concluded  that no SD/VOSBs manufacture such equipment, and that purchasing  this equipment from SD/VOSB resellers would greatly increase costs  and not present the best value to VA.", "The results of this analysis were summarized in an internal report that  was used as documentation to support the contracting officers\u2019  decision not to set-aside high-tech medical equipment purchases for  SD/VOSBs. As a result, they continued to meet medical centers\u2019  equipment needs through existing purchasing arrangements. The  contracting officers told us they also periodically revisit their analysis  to identify any opportunities to set aside specific solicitations for  SD/VOSBs."], "subsections": []}, {"section_title": "Determining Whether the Price Offered by an SD/VOSB Is Fair and Reasonable Poses Challenges for Contracting Officers", "paragraphs": ["Contracting officers must determine whether the price proposed by an  SD/VOSB is fair and reasonable and offers the best value to VA before  awarding the contract. The 2016 Veterans First policy did not change this  requirement, and contracting officers are generally required to make this  determination for every contract award. However, we found that many of  the contracting officers we interviewed were uncertain how to balance the  Veterans First preference with the determination of fair and reasonable  price when lower prices were available on the open market. Twelve of the  30 contracting officers we interviewed for selected contract actions stated  that it is difficult to assess whether the SD/VOSB\u2019s offered price is fair  and reasonable, and 8 stated that, in some cases, they lacked confidence  in their determinations that prices were fair and reasonable. In many of  these cases, contracting officers told us that they determined that a  higher price was fair and reasonable in order to effectuate the Veterans  First preference. For instance, a branch chief we interviewed provided  five examples of purchases under $16,000 where, in recent, separate  procurements, non-SD/VOSB small businesses had proposed prices for  the same or substantially similar items that were about $400 to $3,000  less than those proposed by SD/VOSBs. These procurements were  conducted as SD/VOSB set-asides, and awards were made to  SD/VOSBs on the basis of the Veterans First preference.", "The FAR establishes that adequate price competition normally  establishes a fair and reasonable price, and it provides methods for  determining fair and reasonable pricing, such as comparing proposed  prices to each other, previous prices paid for the same or similar items,  published prices, or the independent government cost estimate.  However, a few of these contracting officers told us that some of these  comparison methods may not be reliable for offers received under  SD/VOSB set-asides. They stated that they lacked the confidence that  using these methods consistently provided robust and well-documented  support for their decision to not award to an SD/VOSB. For example, they  stated that in some instances, the independent government cost estimate  is outdated, and the customer responsible for preparing it conducts  limited market research. This issue is not unique to VA; in 2017, we  reported on shortcomings in the usefulness and documentation of  independent government cost estimates across several agencies.", "VA Procurement Policy officials emphasized that contracting officers must  apply professional judgment and that no across-the-board standard  exists\u2014a higher price compared to non-SD/VOSBs might be  appropriately found reasonable in some cases but not others, depending  on many variables, including the degree of difference between the prices  and the size and complexity of the requirement. However, in response to  requests for clarification from contracting officers, VA officials provided  conflicting informal guidance. For example, a contracting officer stated  that, during a webinar training on the implementation of the Veterans First  policy in late 2016, VHA\u2019s Acting Chief Procurement and Logistics Officer  said that, as a general rule, he would be hesitant to pay 5 percent more  than any recent prices identified in contracting officers\u2019 market research  for the same or similar supplies or services from non-SD/VOSBs, a view  he repeated when we interviewed him in spring of 2018.", "In contrast, the Executive Director for the Office of Acquisition and  Logistics said he would not advocate paying any amount above recent  prices identified in contracting officers\u2019 market research for the same or  similar goods or services from non-SD/VOSBs for any requirement. He  stated that the Veterans First statute and policy did not authorize higher  prices for goods and services from SD/VOSBs. According to a contracting  officer we met with, he shared this view in a training session at a VA  conference in March 2017, as well as when meeting with us in spring of  2018. A consistent message from senior management would provide VA  greater assurance that its contracting officers have confidence when  making fair and reasonable price determinations in set-aside acquisitions.", "In one of VA\u2019s national contracting offices, the Strategic Acquisition  Center, the Director told us that contracting officers were confused about  how to implement the Veterans First policy in their work, particularly in  making VA Rule of Two decisions and fair and reasonable price  determinations. In order to address confusion and provide guidance to  contracting officers, the Director stated that he provided a series of case  studies to contracting officers that demonstrated effective application of  these aspects of the Veterans First policy. Separately, other senior VA  procurement officials stated that contracting office managers have a  responsibility to address confusion and serve as a source of information  for their contracting workforce."], "subsections": []}, {"section_title": "Contracting Officers Faced Challenges in Implementing Veterans First Policy, in Part, Due to Training Shortfalls, Pressures, and Workload Issues", "paragraphs": ["The judgments that VA contracting officers are asked to make\u2014in  conducting market research, making VA Rule of Two decisions, and  determining whether proposed prices are fair and reasonable\u2014can in  some cases be inherently complex, and there are additional challenges  that VA has faced in implementing Veterans First. There are several  factors that contribute to these challenges."], "subsections": [{"section_title": "Training Did Not Reach All Contracting Officers, and Did Not Fully Address the More Challenging Components of the Veterans First Policy", "paragraphs": ["While VA provided training concurrently with the issuance of its 2016  Veterans First policy, the training did not reach all staff. According to VA  Acquisition Academy officials, 81 percent of all VA contracting officers  completed the initial training on the 2016 Veterans First policy in the  summer of 2016. We reviewed academy training records for the 60  contracting officers we interviewed, and these records show that 14 of  them did not take the initial training in 2016. In addition, only 52 percent  of VA contacting officers completed the follow-up training on the Veterans  First policy in the spring of 2018. According to the academy, the feedback  provided by those that attended these training sessions was favorable,  with ratings of 4.59 out of 5 and 4.75 out of 5, respectively.", "In communicating about the training to contracting officers, VA sent an  announcement to all contracting officers, describing the training as  \u201cstrongly encouraged\u201d but not mandatory. According to VA Acquisition  Academy and Office of Acquisition and Logistics officials, this is because  neither of these organizations has the authority to designate training as  mandatory\u2014only VA\u2019s Office of Human Resources and Administration  has the ability to do so.", "GAO\u2019s Standards for Internal Control in the Federal Government states  that management should design control activities to achieve objectives  and respond to risks. In doing so, management should ensure that  training is aimed at developing and retaining employee knowledge, skills,  and abilities to meet changing organizational needs\u2014such as those that  occurred after the 2016 Supreme Court decision. Based on our review of  the training, it does not fully address the more challenging aspects of  implementing the Veterans First policy, such as making fair and  reasonable price determinations when acquisitions have been set aside.  Establishing more targeted training on the Veterans First policy and  providing this training to all contracting officers would provide the VA with  greater assurance that contracting officers have the knowledge and skills  necessary to implement the more challenging components of this policy.  Further, without establishing the importance of training on the Veterans  First policy by assessing whether to make its attendance mandatory,  management is not fully communicating its importance, and contracting  officers may lack the tools needed to implement this policy."], "subsections": []}, {"section_title": "Contracting Officers Perceive Pressure to Apply Veterans First Preferences", "paragraphs": ["As previously stated, contracting officers told us they were not always  confident in applying the Veterans First policy, in part because of  pressure\u2014real or perceived\u2014from others. Contracting officers cited  perceived negative scrutiny from leadership, OSDBU, Office of General  Counsel reviewers, or potential protests from SD/VOSBs as reasons for  their reluctance to not set aside requirements for SD/VOSBs, or to deem  prices proposed by SD/VOSBs not fair and reasonable. Contracting  officers explained that objections raised from any of these parties would  add time to the procurement process, and a decision to cancel a set- aside because the prices were found not fair and reasonable would  require yet more time to start the solicitation process again. Some  contracting officers stated that they could not risk delays in awarding  contracts by pursuing an approach other than setting aside for  SD/VOSBs. We noted that training slides from a 2016 conference for VA  contracting officials included a statement that, \u201ccontracting officers may  not know if they have properly applied the VA Rule of Two standard until  a court rules on the facts of a given case.\u201d VA\u2019s Acting Chief Acquisition  Officer stated that he is aware of these perceived pressures and stated  that some of these pressures are long-standing. He stated that VA had an  initial effort to communicate the Veterans First policy immediately after  the 2016 Supreme Court decision, but he acknowledged that contracting  officers\u2019 confusion remains, especially regarding fair and reasonable price  determinations. VHA contracting officers also noted that because their  customers are hospitals, there is an inherent need to avoid delays in the  procurement process to prevent an adverse effect on patient care. The  effect of these pressures was exacerbated by a concern we noted among  contracting officers of whether their management would fully support a  decision not to set-aside a contract."], "subsections": []}, {"section_title": "VA Faces Continuing Workload Issues", "paragraphs": ["The struggles that contracting officers are facing in making VA Rule of  Two and fair and reasonable price determinations, as discussed above,  are exacerbated by continuing workload stresses they have faced for  years. In September 2016, we reported that managing workload is a  challenge for VA\u2019s contracting officers. For example, one medical center  official stated that his local contracting office had at times turned away  some purchase requests because it could not staff them. In November  2017, we also reported on contracting inefficiencies that affected  contracting officers\u2019 ability to provide goods and services in a timely  manner and at best value to medical centers. Results from a recent  survey of VA staff also illustrate existing workload stress within VA  contracting. Specifically, in the Office of Personnel Management\u2019s  Federal Employee Viewpoint Survey, federal employees are asked if they  believe their workload is reasonable; according to VA\u2019s analysis of this  data in 2017, 54.2 percent of the contracting officers at VA who  responded said their workload was not reasonable."], "subsections": []}]}]}, {"section_title": "VA Conducts Limited Oversight of Compliance with Subcontracting Limitations", "paragraphs": ["In many cases, clauses that require compliance with and enable  monitoring of subcontracting limitations are not included in VA contracts  and orders with SD/VOSBs. Contracting officers are generally aware of  subcontracting limitations, but they told us they do not have sufficient time  or knowledge to conduct oversight. VA conducts some audits of  compliance through a separate program. While the scale of that effort has  been limited, these audits have identified a number of violations. VA,  however, has not shared subcontracting limitation compliance risks or  practices to improve monitoring efforts."], "subsections": [{"section_title": "Contract Clauses Are VA\u2019s Primary Preventive Monitoring Mechanism, but Many Contracts We Reviewed Lacked Them", "paragraphs": ["VA contracting officers are required to include two different clauses when  issuing solicitations for SD/VOSB set-asides:", "One clause requires contractors to comply with SBA\u2019s subcontracting  limitations regulation.", "Another enables the VA to obtain access to the SD/VOSB prime  contractor\u2019s records to monitor compliance with subcontracting  limitations."], "subsections": [{"section_title": "SD/VOSB Set-Aside Clause Establishing Subcontracting Limitations Missing from Some Contract Actions", "paragraphs": ["Under the first clause, an SD/VOSB must comply with the SBA regulation  that limits the percentage of the amount paid by the government under  the contract that may be subcontracted to firms that are not in the same  socio-economic category\u2014that is, firms that are not also SD/VOSBs. This  is known as the subcontracting limitations requirement. For example,  under a services contract set aside for SD/VOSB contractors, an  SD/VOSB prime contractor may only subcontract to non-SD/VOSBs a  maximum of 50 percent of the amount paid by the government under the  contract.", "The purpose of the subcontracting limitations requirement is to ensure  that the SD/VOSBs that are awarded set-aside contracts do not  subcontract the work beyond prescribed levels, and ensure that the goal  of Veterans First\u2014to promote opportunities for veteran-owned small  businesses\u2014is not undermined. In July 2016, VA updated its standard  SDVOSB and VOSB set-aside clauses to refer to SBA\u2019s revised  subcontracting limitations regulation. For example, the SD/VOSB clause  defines the criteria that firms contracting with VA must meet to be eligible  for SD/VOSB set-asides and requires SD/VOSBs to agree to comply with  SBA\u2019s subcontracting limitations regulation in the performance of set- aside contracts. VA\u2019s acquisition regulations require contracting officers to  include the clause in all SD/VOSB set-aside contracts.", "We selected 35 VHA contracts and orders for review, 29 of which were  set-aside to SD/VOSBs, to determine whether they contained the July  2016 (current) version of the SD/VOSB set-aside clause. All of our  selected contract actions occurred after the 2016 Veterans First policy  was issued, and after VA adopted SBA\u2019s 2016 update of its  subcontracting limitation regulation, which made the prior clause  obsolete. We found that 11 of the 29 contract actions did not contain the  current version of the clause\u2014it was either missing entirely or an  outdated version of the clause was used (see figure 10).", "The contracts and orders that contained the outdated version of the  clause did not reference the significantly changed version of the SBA  limitations on subcontracting regulation that is currently in effect, and  therefore did not reference the version of the regulation that includes the  penalty provision establishing that contractors that do not comply with  subcontracting limitations may be subject to a $500,000 fine.  Contracting officials told us the contracting officers likely forgot to include  the clause or included an outdated version of the clause by mistake.  Without including the mandatory clause in the contract actions as  required, VA lacks assurance that SD/VOSBs are aware of  subcontracting limitations."], "subsections": []}, {"section_title": "Monitoring Clause Missing from Most Contract Actions", "paragraphs": ["For the second clause, establishing VA\u2019s right to access information from  SD/VOSBs to monitor their compliance with the subcontracting limitations  requirement, we found that 22 of the 29 contracts and orders we reviewed  did not contain this clause. VA contracting officials told us the clause was  not included in the contract in some cases because the contracting  officers were unaware of the requirement, which was established in a  June 2011 Information Letter policy memorandum. The policy  memorandum directed contracting officers to include the clause in  solicitations, which the Division Chief at one VISN contracting office  identified as the reason it was not included in the contracts. However, the  clause would not be in effect if not contained in the contract, and a VA  procurement policy official confirmed that the intent was for this clause to  be included in both solicitations and contracts. Without this clause, VA  could face challenges in attempting to obtain information needed from the  SD/VOSBs to determine their compliance with subcontracting limitations.  Omission of this clause also poses a risk to VA by hindering its ability to  detect violations, enforce the subcontracting limitations requirement, and  ensure that the goal of Veterans First\u2014to promote opportunities for  veteran-owned small businesses\u2014is not undermined.", "In June 2018, the VA rescinded the 2011 policy memorandum and issued  a class deviation to the VA Acquisition Regulation. The class deviation  revised the second clause\u2014limitations on subcontracting monitoring and  compliance\u2014and required the clause to be included in solicitations and  contracts. This is an important step to communicate that this clause is  required in the contract. However, as noted above, the first clause\u2014VA\u2019s  notice of set-aside clause that requires compliance with SBA\u2019s limitations  on subcontracting regulation\u2014is already required by a previous class  deviation and was missing from 8 of 29 contracts we reviewed. Given  this, it is uncertain whether this VA Acquisition Regulation update alone  will ensure that the monitoring clause is included in all contracts."], "subsections": []}]}, {"section_title": "VA Contracting Officers Conduct Limited Oversight to Assess Contractor Compliance with Subcontracting Limitations", "paragraphs": ["VA contracting officers conduct little oversight to ensure that SD/VOSBs  comply with SBA\u2019s subcontracting limitations regulations. According to the  FAR, contracting officers are responsible for ensuring that the contractor  complies with the terms of the contract, and, as discussed above, the  terms of the contract may include subcontracting limitations. For the 29  SD/VOSB set-aside contracts and orders we reviewed, we found little  evidence that contracting officers were monitoring compliance with SBA\u2019s  regulatory limitations on subcontracting requirements, which includes  ensuring the VA clause that requires compliance with the subcontracting  limitation is in the contract. Contracting officers we spoke with were  aware of these responsibilities but cited several barriers to executing  them, including high workload, a focus on awarding over administering  contracts, and uncertainty of what steps to take. Senior VA procurement  officials stated that monitoring the subcontracting limitations requirement  has not been a high priority and that contracting officers have competing  priorities and, thus, limited time available to conduct this monitoring.", "The VA\u2019s limited oversight of subcontracting limitations has been a long- standing problem. In September 2016, SBA conducted a surveillance  review of one of VA\u2019s VISN contracting offices. In its review of 29 contract  files, SBA found no evidence that the subcontracting limitations  requirement was being monitored by contracting officers and  recommended that VA take measures to ensure it conducts active  monitoring. In July 2017, SBA followed up to determine what steps the  VISN contracting office had taken to implement its recommendation to  improve monitoring of the subcontracting limitations requirement. The  SBA concluded that the VISN contracting office needed to take additional  steps in order to close the recommendation.", "Some of the VA contracting officers we met with told us they rely on  contracting officers\u2019 representatives (COR) to monitor compliance with the  subcontracting limitations and identify possible violations. CORs are  generally at the location where the goods are being delivered or the  services are performed to observe whether the SD/VOSB contractor is  accomplishing the required work as specified in the contract. VA  procurement officials told us that monitoring subcontracting limitations is  the responsibility of contracting officers."], "subsections": []}, {"section_title": "VA\u2019s Program to Assist Contracting Officers in Reviewing Subcontracting Limitations Is Limited in Scope", "paragraphs": ["In June 2011, VA\u2019s Office of Acquisition and Logistics established the  Subcontracting Compliance Review Program (SCRP) within the Risk  Management and Compliance Service (RMCS) to assist contracting  officers in conducting subcontracting limitations reviews. RMCS conducts  its own reviews of compliance with subcontracting limitations, but the  scale is limited. Specifically, RMCS conducted reviews of 95 SD/VOSB  and other set-aside contracts out of thousands that were awarded since  2011, and the office is in the process of reviewing another 24 contract  actions. The office selects a sample of contract actions awarded each  fiscal year to review and may review other contract actions if contracting  officers or other VA officials contact it with referrals of instances that  warrant a review. RMCS officials told us they have received very few  referrals to date. Many of the contracting officers we met with were  unaware that SCRP existed, or that they could refer potential  subcontracting limitations violations to it for review. However, VA\u2019s  manual describing the SCRP is housed on a portal accessible to  contracting officers, and, in March 2018, VA\u2019s Acquisition Academy  training included information on the SCRP.", "RMCS\u2019s subcontracting limitations reviews have identified a number of  instances of non-compliance. Specifically, since 2011, the office has  identified 25 instances of non-compliance with subcontracting limitations  among the 95 reviews it has completed, or 26 percent of selected  contract actions. For example, one review found that a VOSB contractor  responsible for providing project management services paid more than  the allowable percentage (50 percent) of the contract\u2019s value to non- VOSB firms. In another example, the review found an SDVOSB  contractor responsible for providing courier services paid more than 88  percent of the contract\u2019s value to non-SDVOSB firms at about the halfway  point in the contract\u2019s period of performance. If VA\u2019s mechanisms for  monitoring and enforcing subcontracting limitations are not robust, the  department exposes itself to increased risk of not detecting  noncompliance.", "RMCS\u2019s SCRP manual states that the evidence RMCS collects is to be  provided to the contracting officer so that he or she can make a  determination about whether the contractor is in compliance. The manual  also outlines the various remedies available to contracting officers if an  SD/VOSB is suspected of being or is found to be in noncompliance with  the subcontracting limitations. A RMCS official told us that remedial  actions taken with respect to noncompliant contractors are determined on  a case-by-case basis and that contractors are generally provided an  opportunity to correct the deficiency, if the contractor submits a viable  plan. In several of the cases where the RMCS office identified non- compliance, contracting officers requested that SD/VOSBs develop a plan  for becoming compliant with the subcontracting limitations requirement.  For example, one plan specified additional oversight steps that the VOSB  would take to ensure compliance with the subcontracting limitations, such  as having the project manager provide a compliance plan to senior  management for any instance of subcontracting with a non-VOSB that  was anticipated to exceed a significant percentage of the total value of  the contract award.", "RMCS officials said they had anticipated receiving additional resources to  conduct the planned reviews when the SCRP was initially created but  have yet to receive them. Officials stated they currently rely on three  support contractor staff to conduct the reviews but are exploring the  possibility of hiring additional staff to increase the number of reviews they  can complete each year. In addition, the Acting Director also told us that  the office has created a database that will ultimately allow contracting  officers and CORs to identify contracts with which they have  subcontracting limitations concerns. They have only implemented some  of the database\u2019s capabilities due to resource limitations. RMCS\u2019s Acting  Director stated she would like to grow the office and establish  mechanisms to better facilitate communication between contracting  officers and RMCS. She noted, however, that the lack of a permanent  Director for RMCS, as well as competing funding priorities have made it  difficult to establish these mechanisms. The Acting Director said she is  the office\u2019s sixth one in the past 2 and 1/2 years, and each person in this  role has had other duties in addition to the position."], "subsections": []}, {"section_title": "VA Has Not Communicated Subcontracting Limitation Risks or Useful Monitoring Practices to Stakeholders", "paragraphs": ["Because VA has few mechanisms for monitoring subcontracting  limitations and RMCS reviews are limited in scope, VA may not be able to  detect the risk of fraud for the Veterans First program. Proactive fraud  risk management is meant to facilitate a program\u2019s mission and strategic  goals by ensuring that taxpayer dollars and government services serve  their intended purposes. To help agencies better address fraud, GAO\u2019s  2015 report, A Framework for Managing Fraud Risks in Federal Programs  (Fraud Risk Framework), includes a comprehensive set of leading  practices that serve as a guide when developing or enhancing efforts to  combat fraud in a strategic, risk-based manner. These practices include:  Identifying and assessing risks.", "Collaborating and communicating with stakeholders\u2014in this case,  contracting officials\u2014 to share information on fraud risks.", "Applying lessons learned to improve the design and  implementation of control mechanisms and communicating those  changes to stakeholders.", "The Fraud Reduction and Data Analytics Act of 2015, and Office of  Management and Budget guidance implementing its provisions, affirm  that agencies should adhere to the leading practices identified in the  Fraud Risk Framework.", "In our review of VA\u2019s mechanisms for monitoring subcontracting  limitations, we found that VA\u2019s Office of Acquisition and Logistics as well  as the RMCS perform some identification and assessment of risks, but  that this assessment is not comprehensive. In addition, VA is not  collaborating with and communicating these risks to stakeholders, as  called for in GAO\u2019s Fraud Risk Framework. By conducting a  comprehensive assessment of fraud risk, VA would be better positioned  to detect potential fraud related to subcontracting limitations for the  Veterans First program."], "subsections": [{"section_title": "VA Has Taken Some Steps to Identify and Assess Risks, but Has Not Communicated These Risks to Stakeholders", "paragraphs": ["RMCS officials told us they were unable to comprehensively identify and  assess the risks related to subcontracting limitations due to limited staff  and resources. Nonetheless, they told us that they have identified certain  situations\u2014based on the reviews they have conducted to date and  discussions with contracting officers\u2014that may pose a higher risk of non- compliance with subcontracting limitations. These situations include:  contracts for certain types of services, such as grounds maintenance,  van transportation, and specialty trade construction; where a SD/VOSB has multiple contracts across several VISNs for  the same services; and where a SD/VOSB does not have a business presence in the same  geographical area where the services are being performed.", "They said these were higher risk situations because the SD/VOSBs have  had difficulty completing the required work on their own, or the lack of a  local business presence increases the likelihood that the SD/VOSB might  rely on a local, non-SD/VOSB contractor to do more than the permissible  portion of the work. According to RMCS officials, they have not shared  information on subcontracting limitation risks with stakeholders, such as  contracting officers and their management, but they agreed this could be  a helpful step. By sharing information on higher risk situations, contracting  officers would have a better understanding of when to refer cases to  RMCS.", "Our prior work on subcontracting limitations, in the context of SBA\u2019s 8(a)  program, also identified situations presenting an increased risk that  subcontracting limitations may be exceeded. These situations included  instances when the 8(a) prime contractor proposed subcontractors that  were the agency\u2019s incumbent contractor or that had more experience in  meeting the agency\u2019s current requirement than the small business. It also  included situations where the subcontractor, rather than the prime  contractor, submitted documents to or corresponded directly with  government officials. These situations highlight the importance of  monitoring the extent of subcontracting. SBA has also identified risk  factors to consider prior to contract award, such as the incumbent  contractor working as a subcontractor or if the prime contractor lacks  relevant experience and must rely upon its more experienced  subcontractor to win the contract.", "In our review, contracting officers cited several contracts where  subcontracting risk factors were present. In one case we reviewed, the  contracting officer reported that a large business was the prime contractor  on a previous water treatment services contract. After the 2016 Supreme  Court decision, the contract was re-competed on a SDVOSB set-aside  basis; a SDVOSB won the award and the incumbent contractor served as  a subcontractor. According to the contracting officer, he suspected that  the subcontractor was performing more than 50 percent of the work  based on the SDVOSB\u2019s limited capacity, but he said he did not have the  authority to request information on payments from the SDVOSB prime  contractor to the subcontractor. We found that neither the set-aside  clause that limits subcontracting nor the monitoring clause were included  in this contract, limiting the contracting officer\u2019s ability to ensure the  SDVOSB was meeting the appropriate subcontracting limitation  requirement. The COR told us that the subcontractor performed most of  the water treatment services work\u2014the primary requirement under the  contract\u2014while the SDVOSB prime contractor sent invoices and  conducted oversight."], "subsections": []}, {"section_title": "VA Has Identified Some Useful Monitoring Practices, but Has Not Communicated Them to Stakeholders", "paragraphs": ["RMCS officials told us they have identified some helpful practices that  could improve compliance with subcontracting limitations. They said they  have encouraged some contracting officers to require SD/VOSBs to  explain in their proposals how they planned to comply with the  subcontracting limitations requirement and said that some contracting  officers have also used a worksheet to collect data on the work the  SD/VOSB planned to complete themselves versus subcontract.", "Other VA contracting officials we met with also told us about additional  practices they had implemented to facilitate monitoring of compliance with  subcontracting limitations. These practices included the following:  require the SD/VOSB contractors to submit quarterly reports during  contract performance that indicate the percentage of the work  completed by the SD/VOSB contractor and any subcontractors; hold pre-award discussions between the contracting officer and the  SD/VOSB about the need to comply with subcontracting limitations;  and  convene post-award conferences between the contracting officer and  COR to discuss whether the SD/VOSB is in compliance or not.", "Standards for Internal Control in the Federal Government state that  management should internally communicate the necessary quality  information to achieve the entity\u2019s objectives. Although RMCS provides  information to contracting officers and their management through the  SCRP manual and related training, RMCS officials told us that they have  not included these monitoring practices among the information they have  shared. Having this information could improve contracting officers\u2019 ability  to ensure compliance with subcontracting limitations."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The basic premise of the Veterans First Contracting Program has not  changed in the 12 years since its implementation began. However, the  2016 Supreme Court decision prompted VA to refocus and refine its  policy, and implementing the refined policy and the associated VA Rule of  Two across the entire enterprise of VA contracting has been challenging  due to inherent complexities, perceived and real pressures to award  contracts to SD/VOSBs, and inconsistent and sometimes conflicting  management guidance. This environment created mixed messages and  lessened some contracting officers\u2019 confidence about how to  appropriately apply the VA Rule of Two criteria, particularly in making a  determination that there is a reasonable expectation that award could be  made at fair and reasonable prices.", "Most of the contracting officers for the selected contracts we reviewed  expressed dissatisfaction with VIP as the starting point for market  research, citing difficulty in using it. While documentation of the VIP  search results is required by the Veterans First policy, over three-quarters  of the contract files we reviewed lacked such documentation. Such  documentation, combined with support for overall market research efforts,  provides VA with assurance that contracting officers have performed this  search as part of the basis for their Rule of Two decision. These  contracting officers also had some difficulty applying the VA Rule of Two,  particularly in the more challenging component, determining whether they  can reasonably expect prices offered by SD/VOSBs to be fair and  reasonable\u2014issues that could be mitigated by establishing more targeted  training that would provide the VA with greater assurance that its  contracting officers have the knowledge and skills necessary to  implement this policy. Further, assessing whether training on the  Veterans First policy should be designated as mandatory would provide  VA with information necessary to determine if such training would be  beneficial for all contracting officers.", "Monitoring of subcontracting limitations is an important oversight tool to  ensure effective implementation of VA\u2019s Veterans First program. Without  ensuring that required contract clauses regarding subcontracting  limitations are included in all SD/VOSB set-aside contracts, VA lacks  assurance that SD/VOSBs are aware of subcontracting limitations.  Additionally, VA\u2019s Subcontracting Compliance Review Program has found  subcontracting limitation violations and has identified some risk factors  and practices for monitoring compliance with subcontracting limitations.  Conducting a comprehensive assessment of fraud risk, using GAO\u2019s  Fraud Risk Framework, would help better position VA to detect potential  fraud related to subcontracting limitations for the Veterans First program.  Further, VA has not communicated identified risk factors and monitoring  practices to stakeholders as called for in GAO\u2019s Framework."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to VA.", "The Secretary of Veterans Affairs should ensure that VA\u2019s Director of the  Office of Acquisition and Logistics, in consultation with OSDBU, takes  measures to ensure that VA contracting staff adhere to the requirements  for documenting the required Vendor Information Pages searches in  contract files. (Recommendation 1)", "The Secretary of Veterans Affairs should ensure that the Director of VA\u2019s  Office of Acquisition and Logistics directs the VA Acquisition Academy to  provide more targeted training for the more challenging components of  implementing the Veterans First policy, such as making fair and  reasonable price determinations. (Recommendation 2)", "The Secretary of Veterans Affairs should, in consultation with VA\u2019s Office  of Human Resources and Administration, and the Director of VA\u2019s Office  of Acquisition and Logistics, assess whether training on the Veterans First  policy should be designated as mandatory and take appropriate action  based on the assessment results. (Recommendation 3)", "The Secretary of Veterans Affairs should ensure that the Director of the  Office of Acquisition and Logistics establishes a mechanism to ensure  that mandatory clauses relating to subcontracting limitations are  consistently incorporated in all contracts that are set aside for SD/VOSBs.  (Recommendation 4)", "The Secretary of Veterans Affairs should ensure that the Director of the  Office of Acquisition and Logistics conducts a fraud risk assessment for  the Veterans First program. (Recommendation 5)", "The Secretary of Veterans Affairs should ensure that the Director of the  Office of Acquisition and Logistics directs the Risk Management and  Compliance Service to share, through guidance, training, or other  methods, subcontracting limitation risks and monitoring practices with  contracting officers and their management. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  and the Small Business Administration for review and comment. VA  provided written comments on the draft report. In its comments, which are  reprinted in appendix II, VA concurred with all of our 6 recommendations.  SBA provided technical comments, which were incorporated as  appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Veterans Affairs, the  Administrator of the Small Business Administration, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by email at oakleys@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["You requested that we examine changes to how the Department of  Veterans Affairs (VA) implements the Veterans First program as a result  of the Supreme Court\u2019s decision. In June 2016, the Supreme Court\u2019s  decision in Kingdomware Technologies, Inc. v. United States clarified  conflicting interpretations of the requirement for the preference,  concluding that VA must restrict competition to veteran-owned small  businesses if the contracting officer reasonably expects that at least two  such businesses will submit offers and the award can be made at a fair  and reasonable price that offers best value to the United States. This  report assesses: (1) how VA procurement obligations to veteran-owned  small businesses changed in the period from fiscal years 2014 through  2017; (2) what actions VA has taken to update Veterans First policies and  regulations and provide training following the Supreme Court\u2019s decision;  (3) what challenges, if any, VA is encountering in applying Veterans First  policies; and (4) the extent to which VA has mechanisms in place to  monitor compliance with subcontracting limitations by veteran-owned  small businesses, and the effectiveness of such mechanisms.", "To assess how VA procurement obligations to veteran-owned small  businesses changed in the period from fiscal years 2014 through 2017,  we obtained data from VA\u2019s Electronic Contract Management System  (eCMS) on all contracts from fiscal years 2014 through 2017, chosen to  provide data before and after the Supreme Court decision. We chose to  exclude orders reported in Express Reports\u2014summaries of multiple  orders placed on existing contracts\u2014from our analysis. These actions  were only consistently reported in eCMS starting in 2017; because they  represent billions of dollars of obligations with relatively little set-asides to  service-disabled veteran-owned small businesses and veteran-owned  small businesses (SD/VOSB), including them would have distorted year- to-year comparisons of percentages set aside for SD/VOSBs. We  analyzed these eCMS data to determine changes in the use of set-asides  for SD/VOSBs relative to overall VA contracting obligations during this  period. We used this analysis to determine the extent to which VA set- aside contract obligations to SD/VOSBs in the period after the  Kingdomware decision compared to the period before the decision. We  adjusted obligations for inflation to fiscal year 2017 dollars using the fiscal  year gross domestic product price index. We also analyzed the data to  identify patterns of set-asides as a percentage of obligations among  different contracting activities and across VA contracting organizations.  To determine the extent to which new businesses are obtaining SD/VOSB  certification, we obtained Vendor Information Pages (VIP) data from VA\u2019s  Office of Small and Disadvantaged Business Utilization (OSDBU) for  fiscal years 2014 through 2017. We used these data to identify the  change in the total number of certified SD/VOSBs in VIP during this  period. We also analyzed VA\u2019s eCMS data to determine the number of  unique, individual SD/VOSBs that received awards for set-asides during  the same period. With these data from VIP and eCMS, we compared the  number of certified SD/VOSBs to the number of businesses awarded set- asides for each year during this period. To assess reliability of these data,  we also reviewed available eCMS documentation and interviewed officials  responsible for maintaining eCMS data to gather information on  processes, accuracy, and completeness of these data. We determined  that these eCMS and VIP data were sufficiently reliable for the purpose of  describing changes in VA\u2019s use of SD/VOSB set-asides over this period.", "To assess what actions VA has taken to update Veterans First policies  and regulations and provide training following the Supreme Court\u2019s  decision, we analyzed policies, regulations, guidance, and training  materials related to the program, and compared these to what VA had in  place prior to the decision. We obtained and analyzed the program\u2019s  initial Information Letter, policy memorandum, and revisions to VA\u2019s  Acquisition Regulations, which detailed the Department\u2019s intention to  comply with federal statute. We also obtained and reviewed additional  program documentation, including briefings, presentations, and training  provided to contracting officers. We met with leadership at VA\u2019s national  contracting organizations to discuss implementation of the Veterans First  policy within their organizations, and interviewed senior officials in VA\u2019s  Office of Acquisition and Logistics\u2014including Office of Procurement  Policy and VA Acquisition Academy\u2014OSDBU, Office of General Counsel,  and the Veterans Health Administration\u2019s (VHA) Procurement and  Logistics Office to discuss policies, guidance and training regarding the  Veterans First program.", "To assess what challenges, if any, VA is encountering in applying the  Veterans First policy, we gathered documentation from six contracting  organizations across the VA. We conducted reviews of eCMS data to  determine VA\u2019s use of set-asides and the increase in the use of set- asides for all VA contracting organizations. Based on our analysis of  these data, we determined that VHA had the greatest use of set-asides in  fiscal year 2017. As such, we conducted site visits at a non-generalizable  selection of three VHA regional offices, known as Veterans Integrated  Service Networks (VISN).", "The three VISNs we selected are as follows:", "VISN 8: St. Petersburg, Florida", "Network Contracting Office 8", "Orlando, Florida VA Medical Center", "Tampa, Florida VA Medical Center", "VISN 12: Westchester, Illinois", "Network Contracting Office 12", "Hines, Illinois VA Medical Center", "Milwaukee, Wisconsin VA Medical Center", "VISN 16: Ridgeland, Mississippi", "Network Contracting Office 16  Jackson, Mississippi VA Medical Center", "New Orleans, Louisiana VA Medical Center  We focused our site visits on VHA, because it is the largest contracting  organization in the Department. We selected these VISNs primarily based  on changes in total contract obligations to SDVOSBs and VOSBs from  fiscal year 2015 to fiscal year 2017\u2014the first full fiscal years before and  after the Supreme Court decision\u2014selecting two with among the largest  percentage changes, and one with the lowest. The first site visit to VISN 8  was chosen because it had a high change in the percent of obligations on  SD/VOSB set-asides from fiscal years 2015 through 2017 and high total  obligations in fiscal year 2017. After completing the first site visit, we  decided to exclude obligations for construction-related contracts, as our  analysis of VA\u2019s eCMS data found that construction had not been affected  much by the 2016 Veterans First policy because the majority of  construction contracts have always been\u2014and continue to be\u2014awarded  to SD/VOSBs. The second site visit to VISN 12 was chosen because it  had a low change in the percent of non-construction obligations on  SD/VOSB set-asides from fiscal years 2015 through 2017 with high total  non-construction obligations in fiscal year 2017. The final site visit to  VISN 16 was chosen because it had a high change in the percent of non- construction obligations on SD/VOSB set-asides from fiscal years 2015 to  2017 with high total non-construction obligations in fiscal year 2017. At  each selected VISN, we interviewed the VISN Deputy Network Director.  We also obtained documentation from and interviewed leadership at the  National Acquisition Center, Strategic Acquisition Center, and the  Technology Acquisition Center.", "At the selected VISNs, we interviewed leadership at their respective  Network Contracting Offices, and selected a non-generalizable sample of  35 total contracts and orders\u201429 of which were set aside for SDVOSBs  or VOSBs\u2014selected based on high dollar value, and for procurements of  construction, services, or supplies. For each of the selected contracts and  orders, we reviewed the contract files and interviewed both the  contracting officer and the customer\u2014in most cases the contracting  officer\u2019s representative. We also held roundtable discussions of Veterans  First implementation, training, and other matters with 8 to 11 contracting  officers at each location, randomly selected from the construction,  services, and supply teams.", "We selected a non-generalizable sample of 12 contract actions from  VISN 8, 11 contract actions from VISN 12, and 12 contract actions from  VISN 16. The selection was based primarily on:  contracts and orders that were set-aside to SD/VOSBs; product and service codes for services and supplies; and awards with a total value above $1 million as well as those between  $150,000 and $1 million.", "We obtained and reviewed the contract files for each of the selected  contract actions, which are also stored in eCMS, including signed awards,  solicitations, market research reports, fair and reasonable price  determinations, independent government cost estimates, statements of  work, and other documents. We visited each of the Network Contracting  Offices and interviewed the contracting officer for each of the selected  contract actions and discussed the set-aside determination and their  experiences with the Veterans First policy; because some were  responsible for more than one, we interviewed 30 contracting officers for  the 35 selected contracts and orders. We interviewed leadership at each  location, and held 5 roundtable discussions with contracting officers from  various product lines\u2014supplies, services, construction, and leasing\u2014 whose contracts were not included in our non-generalizable sample. We  also interviewed the customer\u2014in most cases the contracting officer\u2019s  representative or subject matter expert\u2014for each of the selected contract  actions. Finally, we met with leadership at VA\u2019s national contracting  organizations\u2014including the National Acquisition Center, Strategic  Acquisition Center, Technology Acquisition Center, and Construction and  Facilities Management\u2014to discuss the implementation of the 2016  Veterans First policy within their organizations.", "To assess the extent to which VA has mechanisms in place to monitor  compliance with subcontracting limitations by veteran-owned small  businesses and the effectiveness of such mechanisms, we analyzed VA  and Small Business Administration (SBA) acquisition policies and  regulations to identify the monitoring mechanisms in place to ensure  compliance with subcontracting limitations. To assess the effectiveness of  VA\u2019s mechanisms, we leveraged our reviews of files for the 29 selected  contracts that were set aside, and we assessed whether the required set- aside and monitoring clauses were included. In cases where we selected  an order, we reviewed the overarching indefinite delivery contract if it was  awarded by VA. We also assessed the extent to which the files reflected  evidence of monitoring. We reviewed VA\u2019s Information Letter that  established the Risk Management and Compliance Service\u2019s  Subcontracting Compliance Review Program and the program\u2019s manual  for conducting subcontracting limitations compliance audits and analyzed  the audit results. We also assessed the extent to which these  mechanisms met GAO internal control and fraud framework criteria. We  interviewed senior VA procurement officials responsible for developing  and/or implementing these mechanisms and providing training to  contracting officers and contracting officers\u2019 representatives. We also  reviewed our prior work and SBA and VA Inspector General reports on  VA and other agencies\u2019 compliance with subcontracting limitations.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Lisa Gardner, Assistant  Director; Pete Anderson; Matthew T. Crosby; Susan Ditto; Jeff Hartnett;  Alexandra Jeszeck; Teague Lyons; Lorraine Ettaro; Suellen Foth; Ashley  Rawson; Eric Schwab; Roxanna Sun; and Alyssa Weir made key  contributions to this report."], "subsections": []}]}], "fastfact": ["VA is required to give preference to veteran-owned small businesses when awarding contracts, which it does using the Veterans First program. VA changed some aspects of this program following a 2016 Supreme Court decision.", "We found that VA increased obligations and awards set aside for veteran-owned small businesses following the Supreme Court decision. We also found that contracting officers faced challenges implementing some aspects of the Veterans First program.", "We made six recommendations, including that VA provide more training for contracting officers on implementing this program."]}
{"id": "GAO-18-429", "url": "https://www.gao.gov/products/GAO-18-429", "title": "Rental Housing Assistance: Actions Needed to Improve Oversight of Criminal History Policies and Implementation of the Fugitive Felon Initiative", "published_date": "2018-08-09T00:00:00", "released_date": "2018-09-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HUD has encouraged PHAs to balance resident safety with the housing needs of persons with criminal records when administering its rental assistance programs. PHAs are responsible for screening program applicants. The HUD OIG and the FBI implement the Fugitive Felon Initiative to identify and apprehend wanted persons receiving rental assistance.", "GAO was asked to review HUD's criminal history policies and the Fugitive Felon Initiative. This report examines (1) federal requirements for PHAs' criminal history policies, (2) HUD guidance and monitoring of these requirements, and (3) implementation of the Fugitive Felon Initiative. GAO reviewed federal statutes and regulations and interviewed officials from HUD, the HUD OIG, and the FBI; analyzed Fugitive Felon Initiative data from 2013 through 2017; and interviewed staff at a nongeneralizable sample of 10 PHAs (selected based on size and other factors)."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal requirements for public housing agencies. Federal statutes and Department of Housing and Urban Development (HUD) regulations require public housing agencies (PHA) to conduct criminal history checks on individuals applying for rental assistance under HUD's public housing and Housing Choice Voucher programs and deny assistance for six types of offenses. Mandatory denials include convictions for producing methamphetamine on the premises of federally-assisted housing and lifetime sex offender registrants. Otherwise, PHAs generally have discretion in establishing their criminal history policies and may deny assistance for other offenses or factor in mitigating circumstances.", "HUD monitoring of public housing agencies. From 2011 through 2016, HUD issued new guidance to PHAs on criminal history policies, but these changes are not reflected in HUD's program guidebooks for PHAs. These guidebooks serve as key reference tools, but have not been updated in over 15 years. Updating them would help HUD more accurately communicate its criminal history policies. While HUD officials said their current efforts to update the guidebooks will reflect recent criminal history policy notices, documentation provided by the agency on these updates did not specifically address criminal history guidance. In addition, HUD's compliance reviews of high-risk PHAs do not address some criminal history policy requirements, such as the prohibition on using arrest records as the basis for determining eligibility. Further, these reviews are largely limited to examining PHAs' written policies and do not cover how PHAs implement those policies. More comprehensive compliance reviews would improve HUD's ability to identify areas of noncompliance with criminal history policy requirements.", "Fugitive Felon Initiative. From fiscal years 2013 through 2017, the HUD Office of Inspector General (OIG) and the Federal Bureau of Investigation (FBI) shared data through the Fugitive Felon Initiative, which led to the apprehension of more than 1,200 wanted persons who may have lived in HUD-assisted housing. However, GAO found that the HUD OIG had not defined its regional office responsibilities under the initiative and that four of the seven HUD OIG regions did not participate from 2012 through 2016. The HUD OIG revised its procedures for the initiative in April 2018 to include regional office responsibilities, such as coordinating with law enforcement agencies. According to HUD OIG officials, regional offices are now required to coordinate with law enforcement agencies on a priority list of investigative leads, which include warrants for violent felonies, sexual assault, and narcotics distribution. However, the HUD OIG does not plan to assess regional office implementation of several requirements. Collecting and assessing more comprehensive information on regional office activities would help the HUD OIG determine the extent to which regions are undertaking required activities. In addition, the HUD OIG and the FBI have not consistently shared information on the initiative's results\u2014such as apprehension statistics and program savings\u2014which could help evaluate the effectiveness of the initiative. Further, the HUD OIG's and the FBI's current activities to implement the initiative differ in some areas from the agreed-upon responsibilities listed in their 2012 memorandum of understanding. Updating the memorandum to reflect current responsibilities under the initiative could help improve collaboration between the agencies and improve implementation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that HUD update PHA guidebooks and improve monitoring procedures; that the HUD OIG assess more comprehensive information on the implementation of the Fugitive Felon Initiative; and that the HUD OIG and the FBI consistently share information on the initiative's results and update their memorandum of understanding to reflect current responsibilities. HUD and the FBI generally agreed. The HUD OIG did not agree with two of our recommendations. GAO maintains the recommendations, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Balancing the safety of residents receiving rental assistance with the  housing needs of persons with a criminal history is a challenging  undertaking that has received increased attention in recent years. Over 3  million households receive rental assistance through the Department of  Housing and Urban Development\u2019s (HUD) public housing and Housing  Choice Voucher (HCV) programs. In the 1990s, HUD encouraged public  housing agencies (PHA)\u2014local entities responsible for administering  these programs on HUD\u2019s behalf\u2014to develop and enforce strict screening  and eviction policies as part of their antidrug and anticrime initiatives.  However, within the last decade, HUD has encouraged PHAs to move  away from strict policies that deny housing assistance to anyone who has  engaged in criminal activity. For example, in 2011, the Secretary of HUD  issued a letter encouraging PHAs to consider providing \u201csecond chances\u201d  for formerly incarcerated individuals and to implement policies that  balance resident safety with the housing needs of persons with criminal  history records.", "In addition, HUD\u2019s Office of Inspector General (OIG) works with the  Federal Bureau of Investigation (FBI) and other law enforcement  agencies to implement the Fugitive Felon Initiative. Under this initiative,  these agencies share information in an effort to locate and apprehend  fugitive felons and investigate the fraudulent receipt of HUD benefits. In  recent years, some members of Congress have raised questions about  the presence of fugitive felons in public housing and the effectiveness of  the Fugitive Felon Initiative.", "GAO was asked to review HUD\u2019s criminal history policies and the Fugitive  Felon Initiative. This report examines (1) the statutory and regulatory  requirements for PHAs\u2019 criminal history policies for public housing and  HCV programs; (2) the extent to which HUD provides guidance and  monitors PHA implementation of criminal history policy requirements for  public housing and HCV programs; and (3) the HUD OIG\u2019s  implementation of the Fugitive Felon Initiative, in coordination with the  FBI.", "To describe the federal statutory and regulatory requirements (federal  requirements) for PHAs\u2019 criminal history policies, we reviewed federal  statutes and HUD regulations for the public housing and HCV programs  on providing housing assistance to persons with criminal history records  and arrest warrants, including fugitive felons. In addition, to obtain  information about the implementation of federal requirements, we  interviewed officials from HUD headquarters and five HUD field offices  and 10 PHAs in four selected metropolitan areas: Chicago, Dallas/Ft.  Worth, New York City, and Philadelphia. In selecting these areas, we  considered, among other things, the sizes of the PHAs (measured by the  number of units), geographic location, and the proximity of HUD field  offices and HUD OIG regional offices to each other. We selected two or  three PHAs to visit in each of the four areas, resulting in a  nongeneralizable sample of 10 PHAs. We selected these PHAs based on  factors that included their size, presence of both public housing and HCV  programs, and geographic location (for example, urban or nonurban  location). We selected HUD field offices by determining which field office  oversees each of the selected PHAs.", "To determine the extent to which HUD provides guidance and monitors  PHA implementation of criminal history policy requirements, we reviewed  HUD guidance (letters, notices, and program guidebooks) for the public  housing and HCV programs. We interviewed officials from the 10 selected  PHAs for their perspectives on HUD\u2019s guidance. We also reviewed HUD\u2019s  procedures for monitoring PHAs, specifically those that review PHA  compliance with federal requirements on providing housing assistance to  persons with criminal history records. We interviewed officials from HUD  headquarters and our sample of five HUD field offices about the agency\u2019s  efforts to monitor and oversee PHAs\u2019 implementation of criminal history  policy requirements. We assessed HUD\u2019s guidance and compliance  procedures in relation to federal statutes, HUD regulations concerning  criminal history policies, and internal control standards.", "To determine the extent to which the HUD OIG, in coordination with law  enforcement agencies, implements and monitors the Fugitive Felon  Initiative, we reviewed agreements between the HUD OIG and the FBI  and between the HUD OIG and the U.S. Marshals Service (USMS). We  reviewed HUD OIG\u2019s Standard Operating Procedure for the Fugitive  Felon Initiative and interviewed officials from the FBI, HUD OIG, and  USMS headquarters to obtain information on the processes these  agencies follow as part of the initiative. We also interviewed officials from  all seven HUD OIG Office of Investigation regional offices and relevant  USMS Fugitive Task Forces in our four selected metro areas (see above).  We assessed the HUD OIG\u2019s and the FBI\u2019s activities in relation to their  interagency agreement, OIG\u2019s Standard Operating Procedure (SOP) for  the Fugitive Felon Initiative, and federal internal control standards. In  addition, we collected and analyzed data on the results of HUD OIG\u2019s  2017 efforts to cross-reference HUD tenant data and the FBI\u2019s Wanted  Persons File (sent to the HUD OIG in September 2016) to identify  potential investigative leads into the possible location of fugitive felons.  Specifically, we summarized the types of offenses related to the potential  investigative leads by grouping similar offenses together and identified  the top 10 most frequently occurring offenses.", "To assess the reliability of the HUD OIG data we interviewed  knowledgeable agency officials, conducted electronic testing for missing  data and obvious errors, observed HUD OIG\u2019s process for cross- referencing HUD tenant data and the FBI\u2019s Wanted Persons File, and  reviewed system documentation for the relevant data systems. We  determined these data to be reliable for our purposes of reporting on the  number of potential investigative leads, including by type of offense and  associated HUD rental assistance program. We also reviewed FBI data  on the results of law enforcement agencies (as reported to the FBI from  fiscal years 2013 through 2017) in apprehending fugitive felons based on  potential investigative leads produced by the initiative. To assess the  reliability of the FBI data we interviewed knowledgeable agency officials  and reviewed documentation for the related FBI data system. We  determined these data to be reliable for our purposes of describing the  number of apprehensions resulting from the potential investigative leads  identified as part of the Fugitive Felon Initiative. Further details on our  scope and methodology appear in appendix I.", "We conducted this performance audit from January 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Public Housing and Housing Choice Voucher Programs", "paragraphs": ["HUD administers its public housing and HCV programs\u2014which serve  eligible low- and very-low income households, the elderly, and persons  with disabilities\u2014through local PHAs. PHAs are typically municipal,  county, or state agencies created under state law to develop and manage  public housing units for low-income families. PHAs that participate in the  programs contract with HUD to provide housing in exchange for federal  grants and subsidies. In total, there were 3,825 PHAs as of December  2017, according to HUD data. PHAs may administer both public housing  and HCV programs.", "HUD\u2019s public housing program provides low-rent housing units to over 1  million eligible households. According to HUD, the majority of PHAs  (approximately 3,300 of the 3,825 PHAs) across the country take part in  its public housing program. These PHAs own and manage public housing  properties, which can include high-rise and low-rise buildings, scattered  single family properties, or be part of mixed-income housing  developments. Some PHAs manage public housing programs with less  than 100 units and others manage programs with more than 30,000 units.  For the public housing program, PHAs handle admissions, calculate  rents, and enforce leases, among other duties. Under the terms of their  contracts with HUD, PHAs agree to administer their properties according  to federal statute and HUD regulations, and in exchange they receive  funding from HUD. These statutes and regulations provide PHAs with  more discretion in developing certain policies, such as parts of the  admissions process, and less discretion in developing other policies, such  as the income determination process. PHAs are required to develop plans  that describe their policies through a process that allows for\u2014and  responds to\u2014community feedback.", "Approximately 2,200 PHAs across the country are responsible for  managing the day-to-day operations of the HCV program, including  determining the eligibility of households, approving applications, and  distributing vouchers. The HCV program subsidizes housing costs for  approximately 2.2 million households in the private rental market as of  March 2018, according to HUD officials. In the HCV program, participants  are able to find their own housing within the PHA\u2019s jurisdiction, including  most single-family homes, townhouses, and apartments. If the household  moves out of the unit, it can move with continued assistance to another  private rental unit. PHAs are required to state their admissions policies  within their administrative plans and make these plans publically  available.", "HUD\u2019s Office of Public and Indian Housing (PIH) is responsible for  implementing HUD\u2019s public housing and HCV programs, among others.  Forty-five PIH field offices across the country are charged with overseeing  PHAs\u2019 compliance with HUD rules. Within PIH, the Office of the Deputy  Assistant Secretary for Public Housing and Voucher Programs develops  national policy, allocates funding, and provides program direction for  public housing and HCV programs. The Office of the Deputy Assistant  Secretary for Field Operations oversees the field offices. Figure 1 shows  the organizational chart for selected HUD divisions with responsibilities  related to public housing and HCV programs."], "subsections": []}, {"section_title": "Fugitive Felon Initiative", "paragraphs": ["HUD OIG operates independently within HUD and reports to the Office of  the Secretary. The OIG conducts audits, evaluations, and investigations  to detect and prevent fraud, waste, and abuse; and promotes effective  and efficient government operations. The HUD OIG Office of  Investigations conducts work through a headquarters office and seven  regional offices. The Office of Investigations initiates investigations about  possible violations of laws or regulations in the administration of HUD  programs and activities, or misconduct on the part of HUD employees or  recipients of HUD funds.", "The HUD OIG Office of Investigations began the Fugitive Felon Initiative  in fiscal year 2003, in response to a request from USMS and one of our  prior recommendations. The Initiative began as a data-sharing effort  between HUD OIG and USMS to identify fugitives that may be living in  HUD-assisted housing. According to HUD OIG officials, the data-sharing  responsibilities were transferred from USMS to the FBI in 2004. This  initiative has been governed by three memoranda of understanding  (MOU). Specifically, a 2002 MOU between HUD OIG and USMS facilitated sharing USMS a 2004 MOU between HUD OIG and the FBI established a process to  share a larger set of warrant data from federal, state, and local law  enforcement agencies; and a 2012 MOU between HUD OIG and the FBI clarified the purposes of  the Fugitive Felon Initiative and the roles of HUD OIG and the FBI.", "For the purposes of this report, we refer to the Fugitive Felon Initiative as  the data-sharing effort between HUD OIG and the FBI to locate and  apprehend fugitives. The term \u201cFugitive Felon Initiative,\u201d however, is HUD  OIG\u2019s name for the program. The FBI participates in the data-sharing  efforts with HUD OIG through the FBI\u2019s Fugitive Identification Notice  Delivery project. This project leverages FBI data-sharing with a small  number of federal agencies, including HUD, to identify the possible  location of fugitives.", "The Fugitive Felon Initiative is a law enforcement initiative, and it  operates separately from PHA processes for conducting criminal history  screenings to determine eligibility for housing assistance. Consistent with  the 2002 and 2004 MOUs, the 2012 MOU states that the primary purpose  of the Fugitive Felon Initiative is to apprehend fugitives and the secondary  purpose is for HUD OIG to investigate, identify, and refer for prosecution  the fraudulent receipt of HUD benefits. The Fugitive Felon Initiative  includes HUD programs administered by PHAs\u2014including public housing  and HCV\u2014as well as additional HUD programs not administered by  PHAs.", "Through the Fugitive Felon Initiative, the HUD OIG leverages FBI and  HUD data to identify potential investigative leads into the possible location  of fugitives. The FBI shares with the HUD OIG nationwide data on felony  and misdemeanor warrants from the FBI\u2019s Wanted Persons File. The  Wanted Persons File is included in the FBI\u2019s National Crime Information  Center (NCIC) database. The HUD OIG also accesses data from HUD\u2019s  Public and Indian Housing Information Center (PIC) system and Tenant  Rental Assistance Certification System (TRACS). These systems  maintain data on tenants who receive housing assistance. The HUD OIG  then cross-references the FBI and HUD data to identify potential  investigative leads based on possible matches between these data  sources.", "As shown in figure 2, after the FBI receives a list of potential investigative  leads from the HUD OIG, the FBI is to verify that warrants associated with  the leads remain active because some warrants may have been resolved  during the period of time the HUD OIG cross-referenced the FBI and HUD  data. For example, a warrant may no longer be active if the individual  associated with the warrant was already arrested or if the case involving  the warrant was dismissed. For warrants that remain active, the FBI  disseminates these investigative leads by sending \u201clead letters\u201d to the federal, state, or local law enforcement agencies that entered the warrant  into NCIC. These lead letters provide information, such as a possible  address for an individual with the outstanding warrant. HUD OIG also  disseminates potential investigative leads to its regional offices.", "HUD OIG regions may assist law enforcement in apprehending a fugitive  or make referrals to PHAs to take administrative action against a tenant.  This referral informs the PHA that one of its tenants may be a fugitive or  has been apprehended. To ensure law enforcement agencies have  sufficient time to apprehend wanted persons, the 2012 MOU states that  HUD OIG regions must wait 60 days after law enforcement agencies  have received the investigative leads before making referrals to PHAs.  PHAs then have discretion about whether to take administrative action  against the tenant to terminate assistance."], "subsections": []}]}, {"section_title": "Federal Statutes and HUD Regulations Include Requirements for PHAs\u2019 Criminal History Policies but Some Also Provide Discretion", "paragraphs": [], "subsections": [{"section_title": "Federal Statutes and HUD Regulations Require PHAs to Conduct Criminal Background Checks and Mandate Denial of Housing Assistance for Certain Offenses", "paragraphs": ["PHAs must follow federal statutes and HUD regulations (federal  requirements) in determining eligibility for public housing and HCV  assistance for persons with criminal history records. These requirements  include the following:  Conducting criminal background checks for program applicants. PHAs  are required to conduct criminal background checks on all applicants to  the public housing and HCV programs. PHAs must conduct these checks  in the state where the housing is located and also check for criminal  history records in other states where the applicant and members of the  applicant\u2019s household are known to have resided. When recertifying  tenants, PHAs are not required to conduct criminal background checks.  According to HUD officials, there are barriers to conducting background  checks when recertifying tenants such as limited staff resources and cost  constraints.", "Obtaining sufficient evidence of criminal activity. In November 2015,  HUD\u2019s Office of Public and Indian Housing issued a notice on the use of  arrest records and other issues related to denying and terminating  housing assistance for individuals who have engaged in criminal  activity. The notice stated that the fact that an individual was arrested is  not sufficient evidence that the individual engaged in criminal activity and  informed PHAs that arrest records could not be used as the basis for  denying admissions, terminating assistance, or evicting tenants. In a  Frequently Asked Questions document pertaining to the notice, HUD  advised PHAs to review their plans and revise their policies, as needed,  to comply with the Notice. PHAs may use other forms of evidence such  as conviction records, police records, or witness statements to determine  whether the individual engaged in disqualifying criminal activity. The  notice also reminded PHAs that their policies and procedures for  screening applicants and eviction or termination of assistance must  comply with the Fair Housing Act and the Civil Rights Act, and that  inconsistent application of standards or decisions based on partial or  inaccurate information (such as arrest record information) may result in  liability under these laws.", "Establishing a process that allows applicants and tenants to dispute  adverse information. PHAs must provide applicants and tenants with  notification and the opportunity to dispute the accuracy and relevance of a  criminal record before denying admission or terminating assistance on the  basis of such a record.", "Denying or terminating assistance for certain types of criminal-related  offenses. HUD regulations mandate that PHAs deny admission to the  public housing and HCV programs for six types of offenses, two of which  require lifetime bans on admissions. Specifically, PHAs must permanently  ban admissions for individuals convicted of producing methamphetamine  on the premises of federally assisted housing and individuals subject to a lifetime registration requirement under a state sex offender program. For  the other four mandatory denials\u2014which are related to illegal drug use,  drug-related crime, and alcohol abuse\u2014PHAs have some discretion to  determine whether the offense applies to an applicant or household  member or to consider mitigating circumstances. While six offenses  require denial of admissions, only one of these offenses\u2014the offense  related to methamphetamine production\u2014also mandates termination of  assistance, as shown in table 1.", "In addition, federal statute and HUD regulations require that PHAs include  certain offenses that are grounds for denial or termination in their policies,  but give PHAs discretion on when and how to act on them. For example,  PHAs can, but are not required to, terminate assistance for \u201cfugitive  felons.\u201d Table 1 provides a summary of criminal history-related  restrictions for the public housing and HCV programs."], "subsections": []}, {"section_title": "PHAs Generally Have Discretion in Establishing Their Criminal History Policies", "paragraphs": ["PHAs generally have discretion in establishing their specific criminal  history policies, apart from the specific federal requirements discussed  above. Below are examples of how policies vary among the 10 PHAs we  reviewed.", "PHAs Have Discretion by Design   In the 1990s, Congress enacted legislation to  deregulate federal housing assistance  programs, which gave public housing  agencies broader discretion in establishing  their own policies for tenant selection, income  and rent, and administrative operations for the  public housing and Housing Choice Voucher  programs. This included discretion on policies  for screening applicants, denying admissions,  and terminating assistance.", "Denials and terminations. PHAs may choose to deny or terminate  assistance for additional offenses that are not specifically listed in federal  requirements. All of the PHAs we reviewed had established policies to  deny admissions or terminate tenancy for additional offenses. For  example, in addition to the mandatory denials, one PHA had a written  policy to deny admission to public housing to applicants or household  members convicted of arson or child molestation and persons who  committed homicide, armed robbery, trafficking, or domestic violence in  the past 3 years. Another PHA would deny housing assistance if an  applicant, tenant, household member, or guest had ever committed  homicide, kidnapping, rape or sexual assault, indecency with a child, or  arson. According to selected PHA\u2019s written policies, other offenses for  which PHAs may deny admission or terminate tenancy include selling,  producing, or manufacturing illegal substances; violent behavior; property  destruction; and fraud, bribery, or other crimes in connection with a  federally-assisted housing program.", "Lookback periods. PHAs can establish periods of time before the  admission decision during which an applicant must not have engaged in  certain types of criminal activity, such as drug-related or violent crimes,  known as lookback periods. Based on our interviews with selected PHAs,  lookback periods generally ranged from 2 years to 7 years but were  sometimes longer for offenses such as homicide or assault. For example,  one PHA had a policy to deny housing assistance to individuals who have  committed manslaughter, robbery, illegal possession of a firearm or  deadly weapon, assault, or physical violence to persons or property within  a 5-year period. Another PHA had a 5-year lookback period for felony  convictions for burglary; a 10-year lookback period for felony convictions  for assault, kidnapping, abduction, forcible sex, or arson; and a 20-year  lookback period for convictions for first degree murder, according to its  screening criteria for the public housing and HCV programs. Some PHAs  began the lookback period on the date of the conviction, and others on  the date the offense occurred.", "Representatives of three PHAs we interviewed said that they had revised  their policies in the past 5 years to reduce their lookback periods. For  example, from 2013 through 2016, one PHA reduced its lookback period  for all offenses first from 10 years to 7 years, and then finally to 3 years.  The officials said their neighborhood had a high incarceration rate and  they wanted to give second chances to ex-offenders. Officials from  another PHA said that in 2016, they changed their lookback period from  10 years to 5 years at the suggestion of their new deputy director.", "Use of arrest records. According to HUD\u2019s 2015 guidance, PHAs cannot  rely on arrest records to determine eligibility for housing assistance.  However, they may still review arrest records and may make an adverse  housing decision based on the conduct underlying an arrest if the conduct  indicates that the individual is not suitable for tenancy and the PHA has  sufficient evidence (in addition to the arrest record) that the individual  engaged in the conduct. Officials from 9 of the 10 PHAs said that they  did not rely on arrest records to determine eligibility for assistance.  Officials from the remaining PHA told us they have used arrest records as  the basis for denying assistance for certain offenses and believed they  complied with HUD\u2019s notice on the use of arrest records by providing the  applicant or tenant the right to appeal the denial or termination.", "Of the 9 PHAs that did not rely on arrest records for determining eligibility  for assistance, officials at 5 PHAs indicated that they obtained and  reviewed information on arrest records, but that they did not take action to  deny assistance or terminate tenancy based on an arrest record. Officials  at 1 PHA stated that they only took action based on conviction records  and officials at another PHA stated they do not use arrest records at all in  making eligibility determinations. For cases where an applicant has  charges pending, officials at 2 PHAs said that they may wait for the case  to be closed prior to making an eligibility determination.", "Consideration of mitigating circumstances and other factors. PHAs  sometimes consider mitigating circumstances for applicants or tenants  who may otherwise be denied housing assistance. Officials from PHAs  we interviewed took different approaches to allowing mitigating  circumstances and other factors. For example, officials from one PHA  said that it always considered mitigating circumstances and requested  such information as part of the application process. Officials at another  PHA said that after a denial letter is sent, applicants can provide evidence  of mitigating circumstances during the appeals process. Another PHA\u2019s  officials said that in making eligibility decisions, they considered the  severity of the crime and whether the individual completed rehabilitation.  As allowed by federal requirements, some PHAs included in their policies  factors to consider when determining whether or not to deny or terminate  housing assistance. For example, one PHA\u2019s policy stated that in  making such determinations it considers several factors such as the  seriousness of the case and the effects that denying assistance may have  on other household members or the community. Officials from another  PHA said that they allowed public housing residents to preserve their  tenancy on the condition that the offending household member is  permanently excluded from the public housing unit.", "Selected PHAs\u2019 Coordination with Local  Law Enforcement   Officials we interviewed at 10 public housing  agencies (PHA) said they coordinated with  local law enforcement as part of their efforts to  address criminal activity in public housing.  Two PHAs have their own police departments.   Three PHAs said that local police officers  patrol their public housing properties and  inform the PHA if there are any issues related  to criminal activity. Officials at one of the  larger PHAs we interviewed said that staff  check arrest reports every night to see if any  crimes were committed by their tenants.  Officials at another PHA said that they had  off-duty police officers regularly patrol their  public housing properties and had security  cameras on their properties that are  monitored by local police.", "Timing and Frequency of Background Checks. In addition to federal  requirements to conduct criminal background checks at time of  application, PHAs may also choose to conduct such checks as part of an  annual recertification process for persons already receiving rental  assistance. Officials from 3 of the 10 PHAs we interviewed said that they  conducted background checks on tenants during the recertification  process. In addition, officials from 3 other PHAs said that they may  conduct background checks if issues arise during a person\u2019s tenancy or  at any time. Officials from the other 4 PHAs we interviewed did not  provide additional details on conducting tenant background checks.", "Methods Used to Obtain Criminal History Information. Federal statute and  HUD regulations authorize PHAs to obtain criminal history information  from law enforcement agencies. HUD has also recognized that PHAs  may obtain this information through other means. HUD officials at one  regional office estimated that most of the PHAs under their purview use  private companies to obtain criminal history information. Of the 10 PHAs  we interviewed, 6 said that they hired private screening companies to  provide the PHA with a criminal history report for an applicant or tenant.", "Criminal History Records and Data Quality  Challenges  The completeness and accuracy of criminal  history information is a known and persistent  challenge for state and federal agencies and  private companies that compile and sell this  information to entities such as employers and  public housing agencies.    In its 2015 notice on the use of arrest records,  the Department of Housing and Urban  Development (HUD) affirmed its commitment  to the goal of ensuring that individuals are not  denied access to HUD-subsidized housing on  the basis of inaccurate, incomplete, or  otherwise unreliable evidence of criminal  conduct.  In addition, the Federal Interagency  Reentry Council, of which HUD is a  participating agency, reported that it plans to  take steps to address widespread  inaccuracies in criminal records, and that it  would work with consumer reporting agencies  to develop best practices for improving the  accuracy of criminal records.", "Officials from one of the selected PHAs we interviewed said that the  housing authority\u2019s police department conducted the criminal background  check and determined whether to approve or deny the applicant based on  the results, consulting with the PHA if needed. Officials at two PHAs said  a local law enforcement agency or state agency did the initial criminal  background check to determine if the applicant has a criminal record, and  if so, a private screening company may obtain the individual\u2019s detailed  criminal record. Another PHA said that their staff used state databases to  conduct criminal background checks."], "subsections": []}]}, {"section_title": "HUD Has Not Yet Updated Its Guidebooks for PHAs with Newer Criminal History Policy Guidance, and Its Compliance Reviews Do Not Address Some Requirements", "paragraphs": [], "subsections": [{"section_title": "HUD Has Not Yet Updated Its Guidebooks to Reflect New Criminal History Policy Guidance", "paragraphs": ["As of mid-May 2018, HUD officials stated that they were in the process of  updating HUD\u2019s HCV Program Guidebook and Public Housing  Occupancy Guidebook (guidebooks), including updating sections of these  guidebooks with new criminal history policies. However, the  documentation HUD provided on these updates did not specifically  address criminal history policies. The guidebooks serve as key reference  documents and are designed to advise PHAs on the administration of the  HCV and public housing programs, but have not been revised since 2001  and 2003, respectively. From 2011 through 2016, HUD issued notices  and other documents that urged PHAs to move away from policies that  deny admissions or tenancy to anyone who has engaged in criminal  activity, and instead to seek policies that strike a balance between  resident safety and the reentry needs of formerly incarcerated individuals  and others with criminal history records.", "In 2011, the Secretary of HUD issued a letter to PHAs encouraging  them to allow ex-offenders to rejoin their families in the public housing  or HCV programs when appropriate. The letter reminded PHAs that  they have broad discretion to set admission and termination policies  for the public housing and HCV programs, aside from the federal  requirements. The letter also reminded PHAs that they have  discretion to consider other factors such as evidence of rehabilitation  or participation in social service programs when screening applicants  for suitability.", "HUD issued a notice in 2012 recommending that PHAs terminate the  tenancy of persons living in federally assisted housing who were  erroneously admitted while subject to a state lifetime sex offender  registration requirement or who commit sex offenses while living in  federally assisted housing. HUD recommended that PHAs ask at the  time of annual recertification whether any member of the household is  subject to a state lifetime sex offender registration program in any  state. If the PHA finds that a member of the household engages in  criminal activity, including sex offenses, while living in HUD-assisted  housing, the PHA should pursue termination of tenancy, according to  the notice.", "As previously discussed, HUD issued a notice on criminal history  policies and the use of arrest records in 2015, stating that the fact that  an individual was arrested is not sufficient evidence that the individual  engaged in criminal activity. In addition, the notice stated that HUD  does not require the adoption of \u201cone strike\u201d policies (for example,  policies that deny admissions or tenancy to anyone who has engaged  in criminal activity), and that in most cases PHAs have discretion to  determine whether to deny admission or terminate assistance to  applicants or households with criminal history records.", "In 2016, the HUD Office of General Counsel issued a document  indicating that policies that exclude individuals based on arrests do  not satisfy the Fair Housing Act\u2019s burden of proof. The document  further stated that housing providers should consider factors such as  the type of crime and the length of time since conviction when making  housing decisions based on criminal history records.", "As of mid-May 2018, HCV and public housing guidebooks were outdated  because they did not reflect the letters and notices cited above. HUD has  not updated the guidebooks in more than 15 years because they do not  frequently update these documents. For example, according to HUD\u2019s  website, the 2003 Public Housing Occupancy Guidebook is the first  update in over 20 years. We reported previously that HUD had struggled  to maintain up-to-date and complete policies and procedures across its  management functions. In March 2018, HUD officials told us they had  begun the process of updating their HCV and public housing guidebooks,  noting that PHAs have requested such an update. HUD officials said the  eligibility chapters of the updated guidebooks will reflect the notices that  HUD has provided to PHAs in recent years on criminal history policies.  However, we requested documentation on HUD\u2019s planned updates and  the information we received did not clearly indicate that the new criminal  history guidance would be incorporated into the guidebooks.", "Federal internal control standards state that management should  communicate the necessary quality information to achieve the entity\u2019s  objectives. This can include ensuring appropriate means of  communicating with external parties. Effective communications can take  many forms, including guidance. By updating its HCV and public housing  guidebooks to reflect newer criminal history guidance, HUD can ensure  that these guidebooks serve as consolidated and up-to-date references  for PHAs that accurately communicate HUD\u2019s current guidance on  criminal history policies."], "subsections": []}, {"section_title": "HUD\u2019s Reviews for Some High-Risk PHAs Do Not Comprehensively Address Criminal History Policies", "paragraphs": ["HUD reviews the criminal history policies for the small number of PHAs it  designates as high risk or very-high risk, but these reviews do not  address all related federal requirements or their implementation. Using its  National Risk Assessment, HUD designates each PHA on a quarterly  basis as low, moderate, high, or very-high risk. The assessment uses  quantitative and qualitative data sources to identify, mitigate, prevent, and  anticipate potential risk in five categories: financial, physical, governance,  management risks, and risks to the HCV program. This assessment does  not include specific metrics related to PHAs\u2019 criminal history policies,  according to HUD officials. HUD uses the results to direct field staff  resources towards higher-risk PHAs, such as providing these PHAs with  technical assistance or conducting compliance reviews.", "HUD Field Staff May Have Cause to Review  PHAs\u2019 Criminal History Policies for  Various Reasons    Outside of the Department of Housing and  Urban Development\u2019s (HUD) Compliance  Monitoring Checklist, HUD field staff may  have cause to review a PHA\u2019s criminal history  policies for other reasons. Those reasons  include complaints from applicants who were  denied assistance for criminal history reasons  or low occupancy rates, which could indicate  that people do not want to live in particular  public housing complexes for safety reasons,  or that a PHA\u2019s screening policies may be too  stringent. HUD may also review a PHA\u2019s  criminal history policies through the annual  plan submission process. According to HUD  officials, about one-third of PHAs are required  to submit annual plans, which describe PHAs\u2019  policies governing resident or tenant eligibility,  and selection and admission, among other  policies.", "Although HUD does not routinely monitor PHAs\u2019 compliance with federal  requirements on criminal history policies, it does evaluate some aspects  of compliance for those high-risk and very-high-risk PHAs that receive a  compliance review. To conduct these compliance reviews, field staff use  HUD\u2019s Compliance Monitoring Checklist (checklist). The checklist, which  was first piloted in 2016 among six PHAs, contains six questions field  staff must cover that directly relate to PHAs\u2019 criminal history policies.  These include questions on the PHA\u2019s policies for denying applicants for  drug-related criminal activity and checking states\u2019 sex offender registry  lists. In 2017, HUD expanded the use of the checklist to 74 high-risk and  very-high-risk PHAs. For 2018 reviews, HUD officials stated that each of  HUD\u2019s 45 field offices will be required to use the checklist for at least one  high-risk PHA in their portfolio, meaning the checklist will be applied to at  least 45 PHAs out of 626 PHAs designated as high risk and very-high risk  (out of a total of 3,825 PHAs as of December 2017), according to HUD  officials. HUD field offices can choose to use the checklist at more than  one PHA, according to HUD officials. Prior to this checklist, HUD officials  said HUD field staff collected information on PHAs\u2019 criminal history  policies through HUD\u2019s Rental Integrity Monitoring reviews by which HUD  field office staff collect and analyze PHA income and rent information,  identify income and rent errors, and assess PHA policies and procedures  in both the public housing and HCV programs. However, HUD no longer  required these reviews after 2006, though field staff may still conduct  them, according to HUD officials.", "As shown in table 2, the checklist generally directs field staff to obtain a  copy of a PHA\u2019s written policies related to criminal history. For two of the  six questions, field staff are also directed to review supporting materials  and interview PHA staff, but for the other four questions, no additional  information must be obtained. According to HUD officials, field staff who  conduct the reviews are experienced and know to obtain additional  information even if it is not listed in the checklist guidance. Officials stated  that the checklist was not intended to be a step-by-step guide.", "HUD\u2019s checklist does not include items to assess PHAs\u2019 compliance with  additional aspects of PHAs\u2019 criminal history policies. As shown in table 2,  the checklist includes specific items related to federal requirements on  drug-related criminal activity, sex offenders, and convictions for  methamphetamine production for which PHAs are required to deny  admissions for public housing and HCV programs. The checklist,  however, does not cover the requirement related to the abuse of alcohol.", "In addition, HUD\u2019s checklist also does not address the requirement that  PHAs may not use arrest records as the basis for denying or terminating  assistance. Officials from 8 of the 10 PHAs we interviewed stated that  they were already implementing policies or changed their policies to  follow HUD\u2019s notice on arrest records. However, we found that 1 of the 2  remaining PHAs we interviewed had not yet updated its written policies,  though officials at this PHA said they did not base any decisions on arrest  records in practice. The other PHA\u2019s policies state that a record of  arrest(s) will not be used as the basis for the denial or proof that the  applicant engaged in disqualifying criminal activity, but officials from this  PHA said that they did use arrest records as the basis for denying  assistance to persons. Specifically, PHA officials stated that they based  assistance decisions on records of arrest for drug-related or violent  activity if the arrest had not been dismissed, had not reached disposition,  and occurred within the last 5 years. Officials from this PHA said that they  comply with HUD\u2019s 2015 notice by providing the applicant the right to  appeal a denial or termination (officials said that appeals by applicants  are rare).", "HUD\u2019s checklist instructions direct Office of Public and Indian Housing  (PIH) field staff to note regulatory violations that they observe when  conducting compliance reviews using the checklist. However, officials in  HUD headquarters stated that they could not provide information on any  regulatory violations related to PHAs\u2019 criminal history policies specifically  because they have aggregate results from the 2017 checklist reviews,  which do not specify the type of compliance issues identified by field staff.  As a result, violations related to criminal history policies would be  included under the general categories of PHA\u2019s Admissions and  Continued Occupancy Policies (for public housing) or Administrative  Plans (for HCV). In addition, none of the HUD staff we interviewed from  July through December 2017 from five of HUD\u2019s field offices discussed  any instances of noncompliance specifically related to PHAs\u2019 criminal  history policies. Field staff we interviewed identified a range of potential  actions they might take if they found that a PHA\u2019s criminal history policies  did not meet HUD\u2019s requirements. These actions could include providing  technical assistance to the PHA, requiring the PHA to make corrective  actions within a specified time frame, or requiring the PHA to rescreen  applicants.", "HUD is required by law to assess the performance of PHAs in all major  areas of management operations, including implementing effective  screening and eviction policies and other anticrime strategies. In  addition, federal internal control standards indicate that management  should design control activities to achieve objectives and respond to  risks. However, HUD\u2019s checklist does not address PHAs\u2019 criminal  history policies in a comprehensive manner. For example, it generally  does not require field staff to go beyond reviewing written policies and  obtaining additional information on how the policies are being  implemented. In addition, field staff are not required to address some  federal requirements, such as PHAs\u2019 use of arrest records. According to  agency officials, HUD issued the arrest record notice in response to  information indicating that PHAs were basing denial decisions on whether  an individual had been arrested, which is not sufficient evidence of  criminal activity. In our interviews of 10 selected PHAs, as discussed  above, officials from one PHA described practices that were not in line  with its written policy on the use of arrest records. Specifically, the  officials stated that they make housing assistance decisions based on  arrest records though their policies state they will not. Another PHA had  not updated its written policy to reflect its practice of not basing decisions  on arrest records. HUD officials stated that, due to resource issues, they  developed the checklist to address high-risk areas, but that they planned  to review the checklist again after the guidebooks are updated. By  reviewing the checklist to determine what additional criminal history policy  requirements should be included and revising the checklist instructions to  direct staff to obtain information on PHAs\u2019 implementation of criminal  history policy requirements, HUD could improve its ability to identify areas  of noncompliance. Noncompliance, according to HUD\u2019s public housing  guidebook, could lead to admission of ineligible families or unlawful  discrimination."], "subsections": []}]}, {"section_title": "The Fugitive Felon Initiative Has Led to Apprehensions, but Its Implementation and Program Oversight Have Been Inconsistent", "paragraphs": [], "subsections": [{"section_title": "The HUD OIG Identified and Shared Potential Leads on Locations of Fugitives with the FBI", "paragraphs": ["Through the Fugitive Felon Initiative, the HUD OIG and the FBI have  shared information that has produced thousands of potential investigative  leads on the location of fugitives who may live in HUD-assisted housing.  From May through June 2017, the HUD OIG identified approximately  18,000 potential investigative leads using FBI warrant data from  September 2016, according to HUD OIG officials and FBI data. The  HUD OIG identified these leads by cross-referencing the approximately  2.4 million felony and misdemeanor warrants in the FBI\u2019s Wanted  Persons File with the approximately 10.6 million records in HUD\u2019s PIC  and TRACS data systems. Cross-referencing involves identifying  corresponding records within the FBI and HUD data that show the same  or similar names, the same date of birth, and the same sex. A HUD OIG  official stated that this process is designed to be overly inclusive to  minimize the risk of missing a potential investigative lead. In addition,  because the Fugitive Felon Initiative uses data from HUD tenant files,  fugitives who live in HUD-assisted housing but are not listed on the rental  agreement would not be identified through this process, according to  HUD OIG officials.", "As part of its activities under the Fugitive Felon Initiative, after cross- referencing the FBI and HUD data, the HUD OIG distributed potential  investigative leads to HUD OIG regional offices and the FBI. According  to HUD OIG officials, the list of potential investigative leads they sent to  HUD OIG regional offices only included extraditable warrants for felony  offenses. The FBI did not verify these potential investigative leads to  determine if the warrants remained active. The list of potential  investigative leads the HUD OIG sent to its regional offices differed from  the list of leads the FBI distributed to law enforcement agencies.  Specifically, the investigative leads the FBI distributed to law enforcement  agencies contained only extraditable warrants for both felony and  misdemeanor offenses that the FBI verified remained active, according to  FBI officials.", "According to our analysis of HUD OIG data, many of the potential  investigative leads the HUD OIG sent to its regional offices involved  nonviolent offenses, though a small percentage included crimes such as  assault or homicide. Specifically, from May through June 2017, the HUD  OIG sent 4,814 potential investigative leads (about 27 percent of the  approximately 18,000 potential investigative leads) to its regional offices.  As shown in table 3, about one-third of these leads were for failure to  appear in court or probation violations\u2014the two most frequently occurring  offenses.", "According to FBI officials, once they electronically receive the list of  potential investigative leads from the HUD OIG, their system  automatically removes potential leads when either (1) the warrant  associated with the lead is no longer active or (2) the warrant associated  with the lead is not extraditable. A warrant would no longer be active if an  arrest or other warrant resolution occurred between the time the FBI sent  the Wanted Persons File to the HUD OIG and the time the HUD OIG  returned the list of potential investigative leads to the FBI. An investigative  lead would not be extraditable if the fugitive\u2019s address fell outside of the  geographic extradition area. According to HUD OIG officials, the HUD  OIG sent the FBI approximately 18,000 potential investigative leads in  2017. FBI data show that the warrants associated with 9,415 of these  leads remained active once the FBI received the leads. Of the potential  leads with active warrants, FBI data show that 4,957 of the warrants were  extraditable and active. According to FBI officials, they sent lead letters\u2014 which notify law enforcement agencies of the possible location of a  fugitive who may be receiving HUD assistance\u2014for the leads associated  with the extraditable warrants that remained active to the relevant law  enforcement agency. Lead letters include information from HUD tenant  data and the associated warrant, such as name, date of birth, Social  Security number, warrant number, date of the lead, and a possible  address for the individual."], "subsections": []}, {"section_title": "The FBI\u2019s Investigative Lead Letters Facilitated Apprehensions", "paragraphs": ["The FBI\u2019s investigative lead letters have led to over 1,200 fugitive  apprehensions from fiscal years 2013 through 2017 as a result of the  Fugitive Felon Initiative. FBI data show that the FBI sent lead letters to  law enforcement agencies for active, extraditable warrants each time the  FBI received a list of potential investigative leads from the HUD OIG from  fiscal years 2013 through 2017. From fiscal years 2013 through 2017, the  FBI sent approximately 45,100 lead letters to law enforcement agencies  for extraditable warrants that remained active (out of approximately  66,000 total potential investigative leads FBI data show it received from  the HUD OIG during this time period, which included extraditable and  nonextraditable active warrants).", "Law enforcement agencies provide information to the FBI on the  disposition of most warrants associated with lead letters. According to FBI  officials, when the FBI provides a lead letter to law enforcement agencies,  it includes an optional questionnaire on the disposition of the warrant.  Law enforcement agencies return the questionnaire about 75 percent of  the time, according to FBI data. Data from these questionnaires show that  law enforcement agencies reported 1,260 fugitive apprehensions that  were facilitated by information from the Fugitive Felon Initiative from fiscal  years 2013 through 2017. Lead letters do not always result in  apprehensions. For example, law enforcement agencies may have  resolved the outstanding warrant through a separate investigation, been  unable to locate the subject of the warrant, or decided to not extradite a  subject located in another state, according to FBI data. There may also  be additional apprehensions that occurred without the FBI\u2019s knowledge if  the law enforcement agency apprehended an individual but did not return  the disposition questionnaire to the FBI.", "From fiscal years 2013 through 2016, law enforcement agencies reported  numbers of apprehensions resulting from the Fugitive Felon Initiative  ranging from 254 to 339 each year (see table 4). However, in fiscal year  2017, law enforcement agencies reported a substantial decrease in  apprehensions to 77. FBI officials stated that this decrease was a direct  result of the decrease in the frequency and speed with which the HUD  OIG cross-referenced HUD and FBI data and provided potential leads to  the FBI. Specifically, the HUD OIG did not cross-reference data for over a  year during fiscal years 2016 and 2017, and the HUD OIG did not return  the results to the FBI for 10 months after receiving warrant data from the  FBI in September 2016, which resulted in many warrants no longer being  active, according to FBI officials. HUD OIG officials stated that the lag in  returning potential investigative leads to the FBI in July 2017 was due to  staff turnover. HUD OIG officials stated they are developing a process so  that staff turnover will not prevent the HUD OIG from cross-referencing  the data in the future.", "Of the 77 apprehensions in fiscal year 2017 based on the HUD OIG\u2019s  potential investigative leads, our analyses showed that many were for  nonviolent offenses. Specifically, about 57 percent were for failure to  appear in court or probation violations. The next most frequent offenses  included larceny, fraud, dangerous drugs, harassing communication,  parole violation, and contempt of court. These offenses made up  approximately 25 percent of all apprehensions."], "subsections": []}, {"section_title": "The HUD OIG Has Revised Its SOP to Address Inconsistent Regional Office Participation in the Fugitive Felon Initiative", "paragraphs": ["Participation in the Fugitive Felon Initiative among the HUD OIG\u2019s  regional offices was inconsistent and declined from fiscal years 2012  through 2016. In April 2018, the HUD OIG revised its Standard Operating  Procedure (SOP) for the Fugitive Felon Initiative to define regional office  responsibilities, improve consistency among regional offices\u2019 participation,  and leverage the FBI\u2019s efforts."], "subsections": [{"section_title": "Inconsistent Participation", "paragraphs": ["The inconsistent participation of HUD OIG regional offices in the Fugitive  Felon Initiative resulted from changes in HUD OIG investigative priorities,  inconsistent data-sharing from HUD OIG headquarters, and resource  constraints:  Change in agency priorities. According to HUD OIG officials, beginning  in 2012, the HUD Inspector General prioritized investigations that would  have significant financial effects, such as fraud committed by PHA  employees. Subsequently, four of the seven HUD OIG regional offices did  not participate in the Fugitive Felon Initiative from 2012 through 2016,  according to regional officials, while the other three regional offices  participated by following-up on at least some of the potential investigative  leads.", "In addition, most HUD OIG regional offices stopped participating in USMS  fugitive task forces after 2012. Specifically, officials in six of the seven  regional offices said that before 2012, they coordinated with or  participated in USMS task forces to investigate potential leads they  received from HUD OIG headquarters. An agent in one regional office  who participated as a member on the USMS Regional Fugitive Task  Force said that he gathered additional information on fugitives from law  enforcement and assisted in the apprehension of fugitives. According to  officials in that region, they stopped participating in the task force in 2012.  Similarly, officials in four other regional offices that coordinated with or  participated in USMS fugitive task forces either did not receive the data  from HUD OIG headquarters after 2012 or stated that they discontinued  their formal involvement in the USMS task forces around 2012. Officials in  the sixth regional office stated that they continue to interact with the  USMS fugitive task force. Officials in the seventh regional office reported  not working with USMS on fugitive apprehensions. Officials we  interviewed from three USMS fugitive task forces confirmed their prior  interaction with three HUD OIG regions. According to HUD OIG and  USMS officials, the three HUD OIG regional offices stopped working with  the USMS fugitive task forces in 2005, 2012, and 2015, respectively. For  example, officials from one task force stated that a HUD OIG agent was  detailed to the task force until 2015 and provided them with related HUD  information to locate potential fugitives.", "Inconsistent data-sharing. HUD OIG headquarters did not consistently  share potential investigative leads with all regional offices after 2012,  which affected their participation in the Fugitive Felon Initiative. HUD OIG  headquarters did not track when it shared potential investigative leads  with its regional offices, but our interviews indicate that regional offices  did not consistently receive leads from HUD OIG headquarters. Officials  from three regional offices stated that they continued to receive data on  the potential leads from headquarters from 2012 through 2016, one  received data on the potential leads from 2012 through 2014, one  received the data upon request from 2012 through 2015, and two did not  receive the data after 2012. Of the three regional offices that received the  potential leads from 2012 through 2016, officials from two offices stated  that they conducted further investigations or coordinated with law  enforcement to pursue apprehensions of fugitives on at least some of the  potential leads.", "Resource constraints. Resource constraints limited HUD OIG regional  office participation in the Fugitive Felon Initiative, according to officials  from six of the seven regional offices. Officials from two of these regions  stated that their staff levels have been reduced in recent years, limiting  the resources available to address the hundreds of potential investigative  leads from HUD OIG headquarters. They noted that following up on  each lead was time-consuming, requiring agents to reenter warrant  information into NCIC, identify the law enforcement agency point of  contact, and call the agency to provide the potential location of the  wanted person. Officials from four regions that continued to receive the  potential investigative leads after 2012 stated that they investigated a  subset of leads, such as leads for violent offenses. Officials from another  region that continued to receive the leads after 2012 stated they did not  follow up on any of the leads they received due to work constraints."], "subsections": []}, {"section_title": "Revised Standard Operating Procedure", "paragraphs": ["In April 2018, the HUD OIG revised its SOP and added guidance for  regional office participation in the Fugitive Felon Initiative. The prior  version of the SOP (issued in 2016) did not specifically define regional  activities. The 2018 SOP states that regional offices will be responsible  for verifying that the warrant associated with the potential investigative  lead is still active and coordinating with the law enforcement agency that  originally entered the warrant into NCIC. In addition, regional offices will  generally be required to conduct additional research by querying criminal  databases, referring leads to PHAs for administrative action, and  recording their efforts in the HUD OIG case management system.", "The 2018 SOP states that based on resource and staffing levels, HUD  OIG regions may limit their participation in the Fugitive Felon Initiative to  only \u201cpriority\u201d leads. According to HUD OIG headquarters officials,  regional offices are to follow up on priority leads by undertaking activities  listed in the 2018 SOP such as coordinating with law enforcement  agencies and referring leads to PHAs for administrative action. The  Prioritized Fugitive Felon List is defined as leads associated with warrants  for violent felonies, sexual assault, and narcotics distribution, as well as  other offenses that may affect the health and safety of housing residents,  children, national security, or law enforcement. The 2018 SOP also  details a new process in which HUD OIG headquarters will provide  regional offices with (1) the priority list of leads and (2) the nonpriority list  of leads, which includes all leads associated with extraditable felony  warrants not included in the priority list.", "The 2018 SOP also states that the HUD OIG will cross-reference FBI and  HUD data twice each year and return the list of potential investigative  leads to the FBI before sending it to HUD OIG regional offices. As a new  step under the 2018 SOP, the FBI will verify whether each warrant on the  list is active before sending the list back to the HUD OIG, which according  to HUD OIG officials, is intended to reduce the number of leads with  inactive warrants provided to regional offices.", "Because the HUD OIG only recently issued the new SOP, it is too early to  assess its effectiveness in enhancing regional office participation in the  Fugitive Felon Initiative."], "subsections": []}]}, {"section_title": "The HUD OIG Has Reporting Requirements for the Fugitive Felon Initiative, but Does Not Plan to Collect or Assess Data on Some Key Aspects of Regional Implementation", "paragraphs": ["The 2018 SOP includes some added requirements for HUD OIG  headquarters to track and report some statistics related to its regional  offices\u2019 activities, but the HUD OIG does not plan to collect or assess data  on some activities listed in the 2018 SOP that HUD OIG officials stated  regional offices are required to undertake for the Prioritized Fugitive Felon  List. Under the 2018 SOP, HUD OIG headquarters will be responsible  for tracking and reporting statistics on the number of referrals, evictions,  PHA actions, and positive matches. However, the 2018 SOP does not  require the HUD OIG to track the extent to which its regional offices  undertake all the activities that HUD OIG officials stated regions are  required to undertake, such as contacting and coordinating with relevant  law enforcement agencies for the leads on the Prioritized Fugitive Felon  List.", "The HUD OIG\u2019s 2018 SOP states that the development and use of the  SOP is integral to a successful quality control system and that it provides  pertinent information needed to perform a required task properly by  facilitating consistency. Federal internal control standards state that  management should establish activities to monitor the internal control  system and evaluate results. HUD OIG headquarters officials stated that  they do not plan to collect or assess information on the extent to which  regional offices are implementing the new SOP because collecting such  information would be resource intensive. However, we believe the HUD  OIG could obtain more comprehensive information on its regional offices\u2019  activities using current resources. For example, the 2018 SOP states that  HUD OIG regions are to create a subject profile in the case management  system on all confirmed hits. This indicates that the regions will track their  efforts to implement the new SOP. As a result, HUD OIG headquarters  could collect and assess this information on the extent to which regions  are implementing the new SOP through periodic data calls to its regional  offices. Collecting and assessing more comprehensive information would  better enable the HUD OIG to (1) determine the extent to which HUD OIG  regions are undertaking activities listed in the 2018 SOP, including  activities agency officials stated regions are required to undertake for the  leads on the \u201cPrioritized Fugitive Felon List\u201d and (2) identify any areas for  improvement. Such assessments of regional office efforts would also  inform HUD OIG headquarters of whether the new SOP is being  implemented as intended and consistently, which is particularly important  given the regions\u2019 inconsistent participation in the initiative in the past."], "subsections": []}, {"section_title": "The HUD OIG and the FBI Have Not Consistently Shared Results of the Initiative", "paragraphs": ["The HUD OIG and the FBI have not consistently shared information on  the results of the Fugitive Felon Initiative or agreed on the type of  information that would be the most useful to share. The 2012 MOU for the  initiative states that (1) the FBI is to provide apprehension and other  fugitive felon statistics to the HUD OIG monthly and (2) the HUD OIG is to  provide apprehension information and estimated program savings to the  FBI every 30 days.", "FBI Apprehension Data. Prior to 2012, the FBI shared aggregate data  on apprehensions that resulted from its lead letter process with the HUD  OIG, but stopped doing this at the request of the HUD OIG, according to  FBI officials. During our review and at the request of the HUD OIG, the  FBI resumed sharing information on apprehensions with the HUD OIG in  November 2017. However, rather than providing aggregate apprehension  statistics, the FBI provided individual disposition letters to the HUD OIG  on a weekly basis. While the disposition letters contain information on  apprehensions, HUD OIG officials stated that aggregate statistics would  better assist them in judging the effectiveness of the initiative.", "HUD OIG Apprehension Data. HUD OIG headquarters has not tracked  the numbers of apprehensions of wanted persons under the initiative and  therefore has not shared this information with the FBI. HUD OIG officials  stated that it is not feasible for them to collect and share this information  with the FBI every month. The HUD OIG\u2019s April 2018 SOP also states  that the HUD OIG will no longer share information on apprehensions with  the FBI. As of April 2018, FBI officials said that they were not aware of  any changes to the HUD OIG\u2019s responsibilities for sharing apprehension  information under the 2012 MOU.", "HUD OIG Program Savings Data. FBI data show that HUD OIG  headquarters has not shared program savings data with the FBI since  2012. HUD OIG headquarters officials stated that they do not currently  have a method for estimating program savings under the Fugitive Felon  Initiative although they have calculated program savings in the past. FBI  data show that the HUD OIG provided an estimate of program savings in  2012. The HUD OIG and the FBI have not agreed on whether sharing  information on program savings would be useful in implementing the  initiative. The 2012 MOU also does not specify for what purpose the HUD  OIG should share information on program savings with the FBI. FBI  officials stated, however, that if they received data on apprehensions and  program savings in the future, they would use this information to report to  FBI management to show the ongoing results from the initiative as well as  benefits for law enforcement.", "In our prior work, we found that collaborating agencies should develop  mechanisms to monitor, evaluate, and report results. Reporting on these  activities can help the agencies identify areas for improvement such as  policy and operational effectiveness. In the 2012 MOU, the HUD OIG  and the FBI documented the information they would share on results;  however, they have not consistently shared this information, according to  HUD OIG and FBI officials. In addition, in its 2018 SOP, the HUD OIG  stated that it would no longer collect or share data on apprehensions or  program savings with the FBI, but this change is not reflected in the  current MOU. By agreeing on what information on results would be useful  to share, and consistently sharing this information, the HUD OIG and the  FBI could enhance their ability to identify areas for improvement and  evaluate the effectiveness of the initiative."], "subsections": []}, {"section_title": "The HUD OIG and the FBI Have Not Updated Their 2012 MOU to Reflect Program Changes", "paragraphs": ["In addition to not consistently sharing information on results, we found  several other areas where the 2012 MOU between the HUD OIG and the  FBI does not align with current processes for implementing the Fugitive  Felon Initiative. The MOU also does not reflect changes made by HUD  OIG\u2019s April 2018 SOP, and the HUD OIG generally had not discussed  these changes with the FBI.", "Prosecution for Fraud. According to HUD OIG officials, the HUD OIG  generally does not pursue tenant fraud cases as part of the Fugitive Felon  Initiative, although the MOU lists this as one of the purposes of the  initiative. Specifically, the MOU states that in addition to apprehending  fugitive felons, the secondary purpose of the initiative is to investigate,  identify, and refer for prosecution individuals who fraudulently receive  HUD benefits. However, according to HUD OIG headquarters and  officials from one regional office, the HUD OIG generally does not pursue  federal tenant fraud cases because these cases typically do not meet the  dollar threshold for federal prosecution.", "New Data-Sharing Process. The HUD OIG\u2019s 2018 SOP includes a new  procedure in which the FBI will return verified investigative leads to the  HUD OIG, but the MOU does not include this new responsibility for the  FBI. As discussed earlier, the FBI will now be responsible for verifying  whether each warrant on the list of potential investigative leads is active  and then sending a list of investigative leads with active warrants to the  HUD OIG for distribution to its regional offices. According to FBI officials,  they have discussed this added step with the HUD OIG and are currently  developing the capability to implement it.", "HUD OIG Referrals to PHAs. The MOU states that HUD OIG regional  offices should not refer cases to PHAs for administrative action for 60  days after the FBI sends the lead letter to law enforcement. However, the  MOU does not specify how HUD OIG regional offices will be notified  about when the 60-day period begins. In addition, officials from HUD OIG  regional offices had differing understandings of when this 60-day period  begins, and officials from one region stated that they had only recently  become aware that there was a 60-day waiting period. Further, the  current MOU does not reflect new language in the HUD OIG\u2019s 2018 SOP  that allows HUD OIG regional offices to make referrals to PHAs if the  subject of the warrant is on the Prioritized Fugitive Felon List and is  apprehended before the 60-day period expires.", "HUD OIG Interaction with Law Enforcement. The HUD OIG and the  FBI have not updated the 2012 MOU to reflect that, under the 2018 SOP,  HUD OIG regional offices are now generally tasked with proactively  contacting and coordinating with law enforcement. Further, according to  HUD OIG officials, regional offices are required to proactively contact and  coordinate with law enforcement for persons on the Prioritized Fugitive  Felon list. However, the MOU only states that the HUD OIG will  encourage law enforcement agencies to contact the HUD OIG\u2019s regional  Special Agents in Charge for assistance with fugitive apprehension  activities.", "Our prior work has found that agencies that articulate their agreements in  formal documents can strengthen their commitment to working  collaboratively, and written agreements are most effective when they are  regularly updated. The HUD OIG and the FBI articulated their  agreement for the Fugitive Felon Initiative in the 2012 MOU, but the MOU  has not been updated to reflect either of the agencies\u2019 current  implementation of the initiative or the HUD OIG\u2019s updated April 2018  SOP, according to HUD OIG and FBI officials. As discussed previously,  the HUD OIG\u2019s April 2018 SOP includes program changes that affect the  activities listed in the 2012 MOU, but according to HUD OIG officials, they  have only raised some tentative changes with the FBI. According to FBI  officials, as of April 2018 HUD OIG officials mentioned that they are  interested in updating the MOU, but the HUD OIG has not discussed any  specific changes with the FBI and has not made a formal request to  update the MOU. HUD OIG officials stated that they are waiting to  process the findings of this GAO report before finalizing program changes  with the FBI. Jointly agreeing to any changes in HUD OIG and FBI  responsibilities under the Fugitive Felon Initiative and updating the MOU  to reflect these changes could improve collaboration between the HUD  OIG and the FBI and improve implementation of the initiative."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Criminal history policies for federally assisted housing and the Fugitive  Felon Initiative help ensure the safety of residents receiving rental  assistance. In the past decade, HUD issued notices and other documents  urging PHAs to strike a balance between resident safety and the reentry  needs of individuals with criminal history records. By completing its  planned updates of program guidebooks to reflect this guidance, HUD  could help ensure that PHA staff know and follow HUD\u2019s current guidance  on criminal history policies. In addition, HUD could improve its ability to  identify and address potential noncompliance by determining what  additional criminal history requirements to include in its compliance  reviews and obtaining additional information on how PHAs are  implementing their policies as part of these reviews.", "Through the Fugitive Felon Initiative, the HUD OIG and the FBI undertook  efforts that led to over 1,200 apprehensions of wanted persons in the past  5 years. During the course of our review, the HUD OIG updated its  procedures for the initiative in an effort to better define regional office  responsibilities and improve the consistency of their participation, as well  as to leverage the FBI\u2019s efforts. However, collecting and assessing more  comprehensive information on the extent to which regional offices are  implementing these new procedures would better enable the HUD OIG to  determine the extent to which its regional offices are fulfilling their  responsibilities and identify areas for improvement. In addition, by  consistently sharing useful information on the results of the initiative, the  HUD OIG and the FBI would have better information with which to  evaluate the overall effectiveness of the initiative. Finally, the HUD OIG  and the FBI could improve their collaboration by agreeing to changes in  HUD OIG and FBI responsibilities under the initiative and updating the  MOU to reflect these changes."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of seven recommendations: two to HUD\u2019s Office of  Public and Indian Housing, three to HUD\u2019s Office of the Inspector General  Office of Investigation, and two to the FBI. Specifically:", "The HUD Assistant Secretary for the Office of Public and Indian  Housing should complete its updates of the HCV Program Guidebook  and Public Housing Occupancy Guidebook to reflect current guidance  on criminal history policies for its public housing and HCV programs.  (Recommendation 1)", "The HUD Assistant Secretary for the Office of Public and Indian  Housing should review HUD\u2019s Compliance Monitoring Checklist to  determine if questions should be added to address additional federal  criminal history requirements and revise checklist instructions to direct  HUD staff to obtain information on PHAs\u2019 implementation of these  requirements during compliance reviews. (Recommendation 2)", "The HUD Assistant Inspector General for the Office of Investigation  should collect and assess more comprehensive information on  regional efforts to implement the activities listed in the 2018 SOP.  (Recommendation 3)", "The HUD Assistant Inspector General for the Office of Investigation  should, in collaboration with the FBI, determine what information on  fugitive apprehensions and any estimated program savings that occur  as the result of the Fugitive Felon Initiative would be most useful and  consistently share such information with the FBI. (Recommendation 4)", "The HUD Assistant Inspector General for the Office of Investigation  should, in collaboration with the FBI, update the Fugitive Felon  Initiative MOU to reflect the agencies\u2019 current activities and  responsibilities. (Recommendation 5)", "The Director of the FBI should, in collaboration with the HUD OIG,  determine what information on fugitive apprehensions that occur as  the result of the Fugitive Felon Initiative would be most useful and  consistently share such information with the HUD OIG.  (Recommendation 6)", "The Director of the FBI should, in collaboration with the HUD OIG,  update the Fugitive Felon Initiative MOU to reflect the agencies\u2019  current activities and responsibilities. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HUD, the HUD OIG, and DOJ  (including the FBI and USMS) for review and comment. HUD provided  comments in an email and the HUD OIG provided comments, the latter of  which are reproduced in appendix II. The FBI provided technical  comments, which we incorporated as appropriate. USMS informed us that  they did not have any comments.", "In an email received from a HUD PIH audit liaison on July 16, 2018, HUD  stated that they agreed with our recommendation to reflect current  guidance on criminal history policies in HUD\u2019s updated public housing  and HCV program guidebooks (Recommendation 1) and expect to  publish the relevant updated chapters in December 2018. In response to  our recommendation to review questions in HUD\u2019s Compliance  Monitoring Checklist and include instructions for obtaining information on  the implementation of the requirements (Recommendation 2), agency  officials stated that they reviewed the current checklist questions and  determined that no additional questions or revisions are needed at this  time. However, the officials did not provide supporting documentation on  how they determined that the existing questions were sufficient. They also  did not address the part of our recommendation related to HUD revising  its checklist instructions to direct staff to obtain information on PHAs\u2019  implementation of criminal history policy requirements. We believe these  actions are needed to fully address our recommendation.", "In its written comments, the HUD OIG disagreed with our  recommendation that it collect and assess more comprehensive  information on regional office efforts to implement activities listed in the  2018 SOP (Recommendation 3). The HUD OIG stated that it is not  feasible to capture information on regional offices\u2019 activities without  diverting resources from its primary mission, and that it would be  burdensome to create additional mechanisms to monitor participation.   We disagree. According to the 2018 SOP, the HUD OIG will be  responsible for collecting and reporting statistics for some regional office  activities, such as the number of referrals. As discussed in this report, we  believe the HUD OIG could obtain more comprehensive information on  additional required regional activities using existing resources, such as  through periodic data calls to regions. Such assessments of regional  office activities are particularly important given that regional offices had  not consistently participated in the Fugitive Felon Initiative in the past.  Accordingly, we believe our recommendation is still warranted.", "The HUD OIG also disagreed with our recommendation to determine  what information on results of the Fugitive Felon Initiative would be the  most useful to share in collaboration with the FBI (Recommendation 4).  The HUD OIG stated that its ability to determine apprehensions and  program savings is limited. However, the current MOU between the HUD  OIG and the FBI states that the HUD OIG is to share this information with  the FBI. In addition, in May 2018, HUD OIG officials stated that HUD OIG  plans to track statistics on apprehensions that occur with HUD OIG  involvement and eventually share these statistics with the FBI. The intent  of our recommendation is for the HUD OIG and the FBI to collaborate to  determine what information on results should be shared and then share  such information consistently. We believe our recommendation provides  sufficient flexibility for the HUD OIG and the FBI to determine what  information on results would be feasible to collect, and maintain that such  collaboration could better position the HUD OIG and the FBI to enhance  their ability to identify any areas for improvement and evaluate the  effectiveness of the initiative. The HUD OIG agreed with our  recommendation to update the Fugitive Felon Initiative MOU to reflect the  agencies\u2019 current activities and responsibilities (Recommendation 5).", "In an email received on July 9, 2018, an FBI management and program  analyst stated that the FBI agreed with our recommendation to determine  what information on apprehensions resulting from the Fugitive Felon  Initiative would be most useful to share and consistently share this  information with the HUD OIG (Recommendation 6). The FBI also agreed  with our recommendation to update the Fugitive Felon Initiative MOU to  reflect the agencies\u2019 current activities and responsibilities  (Recommendation 7).", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  Department of Housing and Urban Development, the Inspector General of  the Department of Housing and Urban Development, the Attorney  General of the United States, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact Daniel Garcia-Diaz at (202) 512-8678 or garciadiazd@gao.gov, or  Gretta Goodwin at (202) 512-8777 or goodwing@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. Key contributors to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the statutory and regulatory requirements for  public housing agencies\u2019 (PHA) criminal history policies for public housing  and Housing Choice Voucher (HCV) programs; (2) the extent to which the  Department of Housing and Urban Development (HUD) provides  guidance and monitors PHA implementation of criminal history policy  requirements for public housing and HCV programs; and (3) the  implementation of the Fugitive Felon Initiative by the HUD Office of  Inspector General (OIG), in coordination with the Federal Bureau of  Investigation (FBI).", "To describe the statutory and regulatory requirements (federal  requirements) for PHAs\u2019 criminal history policies, we reviewed federal  statutes and HUD regulations for the public housing and HCV programs  on providing housing assistance to persons with criminal history records  and arrest warrants, including fugitive felons. We focused on the public  housing and HCV programs because PHAs screen applicants and  determine eligibility for these programs, whereas property owners are  primarily responsible for these functions for other HUD rental assistance  programs. In addition, the HCV program is the U.S. government\u2019s largest  rental assistance program. In addition, we interviewed officials from HUD  headquarters as well as officials in five HUD field offices and 10 PHAs in  four selected metropolitan areas: Chicago, Dallas/Ft. Worth, New York  City, and Philadelphia. We used a cluster sampling technique to select  the four metropolitan areas. In selecting these areas, we considered  geographic location and proximity of HUD field offices and HUD OIG  regional offices to each other, whether there were options to visit a variety  of differently sized PHAs that had different characteristics (such as ones  that managed both the public housing and HCV programs or had a law  enforcement department), and participation of HUD OIG regional offices  in the Fugitive Felon Initiative. In each of the four selected metropolitan  areas, we selected two to three PHAs to visit, for a total nongeneralizable  sample of 10 PHAs (see table 5). In selecting PHAs, we considered PHA  size (as measured by the number of public housing and HCV units),  whether the PHA implemented both public housing and HCV programs,  distance in miles between a PHA and the HUD and HUD OIG metro area  offices, and whether a PHA was in an urban or nonurban location and  had a law enforcement department.", "We selected five HUD field offices by determining which field office  oversees each of the selected PHAs. We interviewed officials from the 10  selected PHAs and reviewed their criminal history policies to better  understand the federal requirements and how PHAs implemented them  for the public housing and HCV programs. We did not conduct a  compliance audit of the selected PHAs. We also interviewed officials from  three housing associations (selected based on their expertise with the  public housing and HCV programs) about federal requirements and  PHAs\u2019 implementation of the requirements. In addition, we interviewed a  nonprofit organization that wrote a report on HUD\u2019s criminal records  policies and two private companies that conducted criminal background  screening for PHAs to better understand criminal screening processes.", "To determine the extent to which HUD provides guidance and monitors  PHA implementation of criminal history policy requirements, we reviewed  HUD letters and notices for the public housing and HCV programs. We  also reviewed HUD\u2019s 2001 HCV Program Guidebook and 2003 Public  Housing Occupancy Guidebook. We interviewed officials from the 10  selected PHAs for their perspectives on HUD\u2019s guidance. We also  reviewed HUD\u2019s monitoring procedures for PHAs. Specifically, we  reviewed documentation related to HUD\u2019s National Risk Assessment as  well as HUD\u2019s Compliance Monitoring Checklist for reviewing PHA  compliance with federal requirements, including requirements on  providing housing assistance to persons with criminal history records.  We interviewed officials from HUD headquarters and our sample of five  HUD field offices about the agency\u2019s efforts to monitor and oversee  PHAs\u2019 implementation of criminal history policy requirements (same  selected regional offices discussed above). We assessed HUD\u2019s  guidance and compliance procedures in relation to federal requirements  for criminal history policies in relation to federal statutes, HUD regulations  concerning criminal history policies, and internal control standards.", "To determine the extent to which the HUD OIG, in coordination with law  enforcement agencies, implements and monitors the Fugitive Felon  Initiative, we reviewed memorandum of understanding (MOU)  agreements between the HUD OIG and the FBI and between the HUD  OIG and the U.S. Marshals Service (USMS) on their efforts to share and  analyze data on HUD tenants and wanted persons and coordinate any  apprehension efforts. We reviewed HUD OIG\u2019s Standard Operating  Procedure for the Fugitive Felon Initiative and interviewed officials from  the FBI, HUD OIG, and USMS headquarters to obtain information on the  processes these agencies follow as part of the initiative. We also  interviewed officials from all seven HUD OIG Office of Investigation  regional offices and relevant USMS Fugitive Task Forces in our four  selected metropolitan areas to obtain information on their involvement  with and perspectives on the Fugitive Felon Initiative. We worked with  USMS Headquarters to identify the relevant fugitive task force that would  have jurisdiction over the geographic area covered by a HUD OIG  regional office. We assessed the HUD OIG\u2019s and the FBI\u2019s activities in  relation to their current MOU, OIG\u2019s Standard Operating Procedure for  the Fugitive Felon Initiative, and federal internal control standards. We  collected and analyzed data on the HUD OIG\u2019s Fugitive Felon Initiative.  Specifically, we analyzed the results of the HUD OIG\u2019s 2017 efforts to  cross-reference HUD tenant data and the FBI\u2019s Wanted Persons File  (from September 2016) to identify potential investigative leads into the  possible location of fugitive felons. We summarized the types of offenses  related to these potential investigative leads by grouping similar offenses  together and identified the top 10 most frequently occurring offenses.  Table 6 lists the subcategories of assault, burglary, fraud, forgery,  larceny, and robbery. There were no subcategories associated with the  other 4 offenses in the top 10 most frequently occurring (failure to appear,  probation violation, parole violation, and dangerous drugs).", "To assess the reliability of the HUD OIG data, we interviewed  knowledgeable agency officials, conducted electronic testing for missing  data and obvious errors, observed the HUD OIG\u2019s process for cross- referencing HUD tenant data and the FBI\u2019s Wanted Persons File, and  reviewed system documentation for the data systems the HUD OIG uses  to cross-reference the data. We determined these data to be reliable for  our purposes of describing the number of potential investigative leads  produced by the initiative, the types of offenses associated with the  potential investigative leads, and the HUD rental assistance programs in  which identified fugitive felons participated. We also reviewed FBI data on  the results of law enforcement agencies (as reported to the FBI from  fiscal years 2013 through 2017) in apprehending fugitive felons based on  potential investigative leads produced by the initiative. To assess the  reliability of the FBI data, we interviewed knowledgeable agency officials  and reviewed documentation for the data system the FBI uses to store  and retrieve these data. We determined these data to be reliable for our  purposes of describing the number of apprehensions that result from the  potential investigative leads identified as part of the Fugitive Felon  Initiative.", "We conducted this performance audit from January 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Allison Abrams (Assistant  Director), Eric Erdman (Assistant Director), Charlene J. Lindsay (Analyst  in Charge), Charlene Calhoon, Mara McMillen, David Ballard, Rudy  Chatlos, Willie (Billy) Commons III, Marc Molino, Tovah Rom, and Tyler  Spunaugle made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Housing and Urban Development and the FBI play roles in ensuring resident safety in federally-assisted housing. For example, HUD is responsible for monitoring local public housing agencies' compliance with requirements for screening applicants.", "Also, HUD's Office of Inspector General works with the FBI to identify and apprehend fugitives who may be living in federally-assisted housing. But these efforts have not been consistent.", "We made 7 recommendations to enhance HUD's oversight of local public housing agencies and improve collaboration between HUD's Office of Inspector General and the FBI."]}
{"id": "GAO-18-135", "url": "https://www.gao.gov/products/GAO-18-135", "title": "Transitioning Veterans: Coast Guard Needs to Improve Data Quality and Monitoring of Its Transition Assistance Program", "published_date": "2018-04-19T00:00:00", "released_date": "2018-04-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Thousands of Coast Guard servicemembers have left the military and transitioned into civilian life, and some of these new veterans may face significant challenges, such as finding and maintaining employment. To help them prepare, federal law mandated that DHS provide separating Coast Guard servicemembers with counseling, employment assistance, and information on veterans' benefits through TAP. GAO was asked to examine TAP implementation.", "This review analyzes (1) the reliability of TAP data on participation levels for Coast Guard servicemembers and the factors that affect participation, and (2) the Coast Guard's performance measures and monitoring efforts related to TAP. GAO interviewed Coast Guard headquarters staff; surveyed 12 Coast Guard installations that conduct TAP (100 percent response rate); collected and reviewed participation data for reliability; and interviewed TAP managers from three installations selected for size and location, and 25 Coast Guard servicemembers at one location. (For a companion report on TAP implementation for separating and retiring servicemembers in other military services, see GAO-18-23 .)"]}, {"section_title": "What GAO Found", "paragraphs": ["The United States Coast Guard (Coast Guard), which is overseen by the Department of Homeland Security (DHS), lacks complete or reliable data on participation in the Transition Assistance Program (TAP), designed to assist servicemembers returning to civilian life. According to senior Coast Guard officials, a major reason why data are not reliable is the lack of an up-to-date Commandant Instruction that specifies when to record TAP participation data. Consequently, the data are updated on an ad-hoc basis and may not be timely or complete, according to officials. Federal internal control standards call for management to use quality information to achieve the entity's objectives. Until the Coast Guard issues an up-to-date Commandant Instruction that establishes policies and procedures to improve the reliability and completeness of TAP data, it will lack quality information to gauge the extent to which it is meeting TAP participation requirements in the VOW to Hire Heroes Act of 2011.", "According to GAO's survey of Coast Guard installations, various factors affected participation, such as servicemembers serving at geographically remote locations or separating from the Coast Guard rapidly. TAP officials and Coast Guard servicemembers GAO interviewed said commanders and direct supervisors sometimes pulled servicemembers out of TAP class or postponed participation because of mission priorities. TAP managers also said they rely on delivering TAP online because many Coast Guard servicemembers are stationed remotely.", "The Coast Guard cannot effectively measure performance to ensure key TAP requirements are met because it lacks reliable data and does not monitor compliance with several TAP requirements. Further, the Coast Guard has not established a formal performance goal against which it can measure progress, although federal internal control standards stipulate that management should consider external requirements\u2014such as the laws with which the entity is required to comply\u2014to clearly define objectives in specific and measurable terms. Establishing a goal could help the Coast Guard define expected performance. In addition, the Coast Guard does not monitor TAP requirements regarding the timeliness of servicemembers' TAP participation or their access to additional 2-day classes. Consequently, it cannot know whether servicemembers are starting TAP early enough to complete the program or those who elected to attend additional 2-day classes were able to do so before separation or retirement, as required by the Act. Finally, the Coast Guard lacks an up-to-date Commandant Instruction that establishes the roles and responsibilities of Coast Guard staff in implementing TAP. Federal internal control standards stipulate that management should assign responsibility and delegate authority to key roles throughout the entity. Issuing an up-to-date Commandant Instruction that defines roles and responsibilities would clarify who is ultimately responsible for ensuring Coast Guard servicemembers attend TAP, thereby facilitating accountability."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that the Coast Guard issue a new Commandant Instruction establishing data collection policies, set TAP performance goals, monitor timeliness and access, and define roles and responsibilities. DHS agreed with all of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Over the past several years, thousands of Coast Guard servicemembers  have left the military with more soon to follow. Some of these new  veterans may face significant challenges as they transition to civilian life,  such as finding and maintaining employment. To help them, one section  of the VOW to Hire Heroes Act of 2011 (VOW Act) generally mandates  the Department of Homeland Security (DHS) to assure that all separating  Coast Guard servicemembers participate in the Transition Assistance  Program (TAP) to receive counseling, employment assistance, and  information on federal veteran benefits, among other supports. TAP is  designed to help all servicemembers, including those from the Coast  Guard, successfully prepare for civilian life.", "Concurrently with the VOW Act, the prior administration initiated a  redesign of TAP which, among other changes, created a standardized  curriculum sometimes referred to as Transition GPS (Goals, Plans,  Success). The redesign was led by an interagency task force, which  included DHS. The task force developed an extended, core curriculum  for TAP that covered employment, veterans\u2019 benefits, and financial  planning, among other topics. The redesigned TAP also included  additional 2-day classes for Coast Guard servicemembers interested in  pursuing higher education, career technical training, or entrepreneurship.", "In 2014, GAO issued an initial report on TAP implementation. You asked  us to conduct a follow-up review of TAP. We developed two reports  based on our audit work\u2014a previously issued report that focuses on the  Department of Defense\u2019s (DOD) TAP implementation, and this report  that focuses on the Coast Guard\u2019s implementation of TAP. This report  examines:  1.  What is known about the reliability of Transition Assistance Program  data on participation levels and the factors that affect Coast Guard  servicemembers\u2019 participation?  2.  To what extent does the Coast Guard measure TAP performance and  monitor key areas of Transition Assistance Program implementation?", "To address these questions, we surveyed 12 Coast Guard installations  with on-site TAP managers and achieved a 100 percent response rate.  We reviewed Coast Guard data on TAP participation for fiscal years 2012  to 2017 and interviewed Coast Guard officials in headquarters  responsible for overseeing TAP implementation for the Coast Guard. We  interviewed 3 of the Coast Guard\u2019s 13 TAP managers\u2014one in person and  two by phone\u2014selected for diversity in location of the regions they  oversee. We visited one Coast Guard installation where, in addition to  interviewing the on-site TAP manager, we interviewed additional TAP  staff as well as 25 Coast Guard servicemembers (including both officers  and enlisted personnel) who had participated in the program.", "We assessed the reliability of the Coast Guard\u2019s TAP participation data  and, based on interviews with agency officials knowledgeable about the  data, determined these data were not sufficiently reliable due to  limitations with the Coast Guard\u2019s data collection system, which does not  have sufficient controls to ensure data are complete and accurate. We  discuss the issues with data reliability in our report. We also reviewed  relevant federal laws, regulations, policies, documents, and publications.  Information in this report is current as of the date GAO received formal  agency comments from DHS. For more information on our methodology,  see appendix I.", "We conducted this performance audit from February 2016 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Coast Guard Organizational Structure for TAP", "paragraphs": ["Coast Guard staffing for the TAP program reflects the organizational  structure of its Health, Safety, and Work-Life Directorate, which oversees  TAP policy. The Coast Guard\u2019s TAP managers are assigned to 13  installations where Health, Safety, and Work-Life offices are located.  One or two TAP managers are assigned to each of the Coast Guard\u2019s  nine districts, which often span multiple states and territories, and these  TAP managers oversee operations both for the installation where they  work and for units stationed throughout the region (see fig. 1). For  example, the TAP manager assigned to Coast Guard Base Cleveland  oversees TAP implementation both for that installation and for Coast  Guard units serving in Coast Guard District 9\u2014a region that  encompasses portions of eight states and the Great Lakes area. The  program manager in Coast Guard Headquarters manages Coast Guard\u2019s  Transition Assistance Program. The Coast Guard protects and defends  over 100,000 miles of U.S. coastline and inland waterways, and  consequently, TAP-eligible Coast Guard servicemembers sometimes  work in small, widely dispersed units assigned to remote locations,  including on Coast Guard vessels. One aspect of the Coast Guard\u2019s  mission\u2014a first responder for maritime search and rescue in United  States waters\u2014can require Coast Guard servicemembers to respond to  emergency situations at a moment\u2019s notice."], "subsections": []}, {"section_title": "TAP Process and Timing", "paragraphs": ["The Coast Guard, which is overseen by DHS, not DOD, generally  oversees TAP implementation for its servicemembers. Federal law  requires DOD and DHS to require eligible servicemembers under their  respective command to participate in TAP, with some exceptions. In  response to this statutory requirement, DOD has promulgated regulations  and developed issuances which require that servicemembers complete  the component parts of the TAP program, and that commanding officers  ensure that servicemembers under their command complete these parts,  with some exceptions. In contrast, according to Coast Guard officials,  Coast Guard has not promulgated any regulations to implement TAP.  Further, Coast Guard issued its most recent Commandant Instruction in  2003, approximately 8 years prior to TAP redesign in 2011. However,  Coast Guard issued policy guidance in 2014 that made some limited  updates to the Commandant Instruction. Coast Guard officials also said  the Coast Guard plans to issue a new TAP Commandant Instruction in  May 2018.", "Under the redesigned TAP, Coast Guard servicemembers\u2014like their  DOD counterparts\u2014begin TAP by attending pre-separation or transition  counseling where they are briefed on TAP requirements and available  transition resources. Pre-separation or transition counseling can be  delivered by TAP managers, uniformed career counselors, or online (see  fig. 2). Coast Guard servicemembers are able to participate in TAP  either through the Coast Guard or at a DOD installation, if space is  available.", "During or at the end of pre-separation or transition counseling,  participants register for and attend TAP courses. The core curriculum  includes three required courses\u2014the Department of Labor (DOL)  Employment Workshop, unless exempt, and Department of Veterans  Affairs (VA) Benefits Briefings I and II\u2014and other courses that focus on  aspects such as translating military skills and experiences into  credentialing for civilian jobs and preparing a financial plan. Participants  may also elect to attend additional 2-day classes either at a Coast Guard  or DOD installation or online through the Joint Knowledge Online  platform, according to agency officials. These additional 2-day classes  include Accessing Higher Education, Career Technical Training, and  Entrepreneurship. Federal law requires the Coast Guard to permit  servicemembers who elect to take these additional 2-day classes to  receive them.", "Federal law establishes a time frame within which servicemembers with  anticipated separation or retirement dates should begin the program.  According to federal law, retirees with anticipated separation dates are  expected to begin TAP as soon as possible during the 24-month period  preceding that date, but not later than 90 days before separation.  Similarly, servicemembers with anticipated separation dates who are not  retiring are expected to begin as soon as possible during the 12-month  period preceding that date, but not later than 90 days before separation.  Servicemembers who learn that they will separate or retire from the  military fewer than 90 days before their anticipated separation or  retirement date are expected to begin TAP as soon as possible within  their remaining period of service."], "subsections": []}, {"section_title": "Interagency Collaboration", "paragraphs": ["As we previously reported, officials from multiple federal agencies  collaborate to deliver and assess TAP. The TAP interagency  governance structure includes senior officials from DOD, VA, DOL, DHS,  the Department of Education, the U.S. Office of Personnel Management,  and the Small Business Administration (SBA), who participate in TAP  Senior Steering Group meetings at least every month and TAP Executive  Council meetings each quarter. Further, officials tasked to particular  interagency working groups focus on specific elements of TAP (e.g.,  curriculum or performance measures), meet more frequently (typically at  least once a month), and generally communicate weekly, according to  agency officials. The TAP program manager for the Coast Guard told us  that he participates in several of the working groups.", "One such working group is the performance management working group  that oversees the interagency TAP evaluation plan, which includes  monitoring performance measures related to TAP requirements,  indicators of post-program outcomes, and formal evaluations sponsored  by interagency partners. While DOD tracks TAP-specific performance  measures, other interagency partners track indicators of how well  veterans fare after leaving military service. For example, DOD tracks  performance measures prior to servicemembers\u2019 separation, such as TAP  participation and credential attainment rates, while other agencies track  post-separation indicators, such as unemployment rates among veterans  ages 18 to 24. The performance management working group also  reviews the formal evaluation efforts led by individual agencies and  provides feedback to help shape their efforts in accordance with the TAP  Evaluation Plan."], "subsections": []}]}, {"section_title": "Coast Guard Lacks Reliable Data and Cites Several Factors that Affect Participation Coast Guard Lacks Reliable Data on Servicemembers\u2019 Participation in TAP", "paragraphs": ["The Coast Guard does not have complete or reliable data on participation  levels in TAP. According to Coast Guard officials, a major reason why  the data are not reliable is that the Coast Guard lacks an up-to-date  Commandant Instruction that specifies when to record TAP participation  data. Consequently, the data are updated on an ad-hoc basis,  according to agency officials, and may not be timely or complete. For  example, one TAP manager said she updates the list of TAP participants  for her installation only once every few months because of her other  duties. According to federal internal control standards, management  should use quality information\u2014including current and timely information\u2014 to achieve the entity\u2019s objectives and to communicate quality information  to external parties. Given the lack of timely and complete data, we  determined the Coast Guard\u2019s TAP data were not sufficiently reliable for an analysis of participation in TAP classes. Because it lacks policies and  procedures governing reliable data collection, including when data should  be entered and by whom, the Coast Guard cannot determine to what  extent its servicemembers attend TAP, although federal law mandates  that DHS ensure all TAP-eligible servicemembers participate in the  program.", "In addition, the data collection system currently used to track TAP  participation is not sufficient to ensure reliable data. For example,  according to Coast Guard staff, TAP staff enter TAP participation data  into a shared spreadsheet that all TAP managers can edit. Specifically,  staff record the names of servicemembers they identify as TAP-eligible  and whether these individuals completed required portions of TAP. Coast  Guard officials said they are in the process of adopting a new data  system, in October 2018, to more reliably track TAP participation and that  they expect to fully adopt this system\u2013DOD\u2019s TAP-IT Enterprise  System\u2014after a new Commandant Instruction is finalized, in May 2018.  In November 2016, DOD launched the new system to collect TAP-related  data for servicemembers in the Army, Navy, Air Force, and Marine  Corps. In addition to standardizing data collection and improving data  completeness and accuracy, the TAP-IT Enterprise System is expected to  track information related to the time frames of servicemembers\u2019  participation. According to a senior DOD official, the military services will  not be able to use the system to generate unit-level or installation-level  reports until October 2018."], "subsections": [{"section_title": "Serving at a Remote Installation and Rapid Separations Hindered TAP Participation, As Did Limited Staff Capacity and Competing Priorities", "paragraphs": ["According to our survey, the most common factor affecting TAP  participation, cited at 11 of the 12 Coast Guard installations we surveyed,  pertained to servicemembers assigned to geographically remote  locations. The next three most commonly cited factors\u2013each cited by 7 of  the 12 installations surveyed\u2014relate to the timing of TAP participation:  rapid separation from the military, not being sufficiently aware of the need  to attend TAP, and starting the transition process too late to attend. (See  fig. 3.) Headquarters-based TAP officials identified additional factors that  may affect servicemember participation, such as separating from the  Coast Guard Reserves or retiring with no plans to work after leaving the  military. However, the Coast Guard lacks participation data to verify  whether participation rates for these groups are in fact lower than for  other Coast Guard servicemembers.", "Coast Guard installations we surveyed did not indicate that unit  commanders or direct supervisors affected participation in TAP\u2019s required  courses or additional 2-day classes. However, Coast Guard  servicemembers and TAP officials we spoke with said unit commanders  or direct supervisors sometimes prevented participation. All three TAP  managers we spoke with (of 12 nationwide) told us that while  commanders generally allowed servicemembers to register for TAP  courses, they occasionally required them to return to their duties before  completing the courses. We observed this during a TAP class at a Coast  Guard installation we visited when a servicemember\u2019s commander  ordered her to return to the unit during TAP training and she missed a  briefing she wanted to attend. Two of three TAP managers we  interviewed also said commanders sometimes required servicemembers  under their command to wait to take TAP classes until close to their  separation date because of mission priorities.", "Two of three TAP managers interviewed said that commanders in the  Coast Guard face unique challenges in ensuring TAP participation. They  said commanders in all branches of the military must balance competing  demands, including their primary mission and the training needs of the  personnel they oversee. They said it can be particularly difficult for Coast  Guard commanders to juggle these priorities because Coast Guard  servicemembers are sometimes assigned to very small units or called to  return to duty for emergency situations during scheduled TAP classes.  One TAP manager said that a commander in a remote location had  collaborated with her to provide a classroom-based TAP class for  transitioning Coast Guard servicemembers within the commander\u2019s unit,  but rescue efforts occurred during the class which resulted in most of  those servicemembers returning to their vessel to respond to the  emergency. In addition, all three TAP managers we spoke with said there  are limited resources for holding TAP in a classroom setting.  Consequently, classroom-based TAP may not be offered frequently in  remote locations, making rescheduling difficult. One TAP manager said  that her installation typically offers three or four TAP classes a year and  because classes are so infrequent, servicemembers are encouraged to  start TAP as soon as possible prior to separation.", "Coast Guard staff we interviewed said that juggling competing priorities  affected the Coast Guard\u2019s ability to implement TAP. Both the frontline  and headquarters staff who oversee TAP implementation said they  oversee at least three other programs in addition to TAP at their  installation and throughout their regions, including the Coast Guard\u2019s  relocation and spousal employment programs."], "subsections": []}, {"section_title": "Coast Guard Relies on Online Delivery of TAP for Several Categories of Servicemembers", "paragraphs": ["The Coast Guard relies on online delivery of TAP information and classes  for servicemembers who are rapidly separating and assigned to remote  and geographically dispersed units, according to our survey results and  several Coast Guard staff we interviewed. For example, all 12  installations we surveyed cited servicemembers facing rapid separations  as a reason for accessing TAP training online, and 11 cited  servicemembers being remotely stationed as a reason. Coast Guard staff  also said online TAP was used for servicemembers interested in  attending additional 2-day classes.", "The three TAP managers we interviewed also identified several reasons  why installations had to rely on online TAP classes. For example, one  manager corroborated our survey results, saying that many Coast Guard  servicemembers worked in small units assigned to remote and  geographically dispersed locations, making it difficult to convene a  sufficient number of transitioning Coast Guard servicemembers to meet  minimum class size requirements. In addition, all three managers said  they used the online version of TAP for remotely stationed Coast Guard  servicemembers because the Coast Guard lacked the resources for them  to attend classes in person. Although they preferred that  servicemembers participate in live, classroom-based TAP classes, all of  the managers acknowledged that the online version of TAP played an  integral role in ensuring that more servicemembers could participate in  the program. However, two of them noted that while classroom delivery of  TAP classes provided an interactive learning environment that allowed  participants to ask questions and learn from their peers, online  participants generally clicked quickly through the slides and had difficulty  understanding the information being presented. Two managers told us  that they regularly used the online version to deliver parts of the TAP  curriculum. For example, one TAP manager said she required  participants to complete the crosswalk of military and civilian occupations  class online before attending required classes in person. Two managers  noted that additional 2-day classes were available online, and one noted  that some servicemembers attended these classes in a classroom setting  either on a Coast Guard base or a DOD installation. Finally, all three TAP  managers said that many participants in online TAP classes would benefit  from participating in a real-time virtual version of TAP led by live  facilitators. Two managers told us that having a remote facilitator  delivering TAP in real time would give participants more opportunity to  ask questions and better understand and absorb class content."], "subsections": []}, {"section_title": "Feedback About TAP Was Generally Positive", "paragraphs": ["Despite these challenges, TAP managers and separating Coast Guard  servicemembers we interviewed provided generally positive feedback  about the TAP program. All of the 25 Coast Guard servicemembers we   spoke with said that the information they received during the courses was  useful and they liked the instructors. One Coast Guard servicemember  praised the classroom courses for being interactive, and several Coast  Guard servicemembers said they wanted the opportunity to retake TAP  before or shortly after they separated from the Coast Guard. However,  many said the volume of information presented in a short period of time  could be overwhelming and was like \u201ctrying to drink from a firehose.\u201d"], "subsections": []}]}, {"section_title": "Coast Guard Cannot Effectively Measure Performance or Monitor Implementation to Ensure Key TAP Requirements Are Met", "paragraphs": [], "subsections": [{"section_title": "Coast Guard Has Not Set a Formal Performance Goal for TAP Participation and Cannot Effectively Measure Program Performance Because it Lacks Reliable Data", "paragraphs": ["The Coast Guard has not set a formal performance goal for TAP  participation, according to a Coast Guard official, and as previously  discussed, does not have complete, reliable data. Without reliable  information, the Coast Guard cannot effectively monitor TAP  implementation or measure program performance. DHS is mandated to  ensure that all TAP- eligible servicemembers of the Coast Guard  participate in TAP before leaving military service. However, without  effective monitoring of program participation, the Coast Guard cannot  know to what extent its servicemembers receive the required training they  need to prepare for civilian life. According to federal internal control  standards, management should consider external requirements\u2014such as  the laws with which the entity is required to comply\u2014to clearly define  objectives in specific and measurable terms. In addition, establishing  goals can help agencies define expected performance and articulate  results. A Coast Guard official said the Coast Guard\u2019s long-term goal is  for full compliance with TAP requirements, but in the interim, the Coast  Guard uses DOD\u2019s 85 percent VOW compliance goal as an informal  benchmark against which to gauge the Coast Guard\u2019s TAP  performance. However, the Coast Guard has not communicated a  specific, measurable goal to TAP staff implementing the program, or to  Coast Guard commanders who oversee separating and retiring Coast  Guard servicemembers, according to a Coast Guard official. Establishing  and communicating a formal goal could help the Coast Guard define  expected performance. The official also told us that, like DOD, the Coast  Guard tracks the elements of TAP mandated under the VOW Act\u2014 transition or pre-separation counseling, VA Benefits I and II, and the DOL  Employment Workshop."], "subsections": []}, {"section_title": "Coast Guard Does Not Monitor Compliance with Additional TAP Requirements", "paragraphs": ["The Coast Guard does not monitor the (1) timeliness of participation in  TAP, and (2) access to additional 2-day classes. A Coast Guard official  said the Coast Guard does not currently monitor TAP beyond tracking  whether separating servicemembers participate in the required courses,  and currently lacks the capacity to undertake additional monitoring efforts.  However, he said additional monitoring would be possible once the Coast  Guard completed the move to the DOD TAP-IT Enterprise data system."], "subsections": [{"section_title": "Timeliness of TAP Participation", "paragraphs": ["According to a Coast Guard official, the Coast Guard does not currently  monitor the timeliness of TAP participation although federal law  prescribes time frames for servicemembers to begin TAP participation.  Generally, separating servicemembers who are not retiring are to begin  TAP participation no later than 90 days before their separation date.  Without a systematic method for monitoring timeliness, the Coast Guard  cannot know whether its servicemembers begin the program on time or  account for the timeliness of TAP participation. As a result, the Coast  Guard cannot know whether its servicemembers are starting TAP early  enough to complete the training they need to adequately prepare for their  transition to civilian life."], "subsections": []}, {"section_title": "Access to Additional 2-Day Classes", "paragraphs": ["The Coast Guard does not track which of its servicemembers participate  in the additional 2-day classes, according to a Coast Guard official we  interviewed, even though federal law requires that DHS ensure those who  elect to participate are able to receive the training. By not tracking which Coast Guard servicemembers participate in 2-day classes or requiring  transition staff to document when servicemembers ask to attend, the  Coast Guard cannot determine the extent to which servicemembers who  wished to attend these courses were able to do so, as required by law."], "subsections": []}]}, {"section_title": "Roles and Responsibilities Are Not Clearly Defined", "paragraphs": ["Coast Guard commanders and TAP managers do not have clearly  defined roles and responsibilities in implementing TAP because of the  lack of an up-to-date Commandant Instruction, according to TAP staff we  interviewed. As previously discussed, the Coast Guard\u2019s last  Commandant Instruction on TAP was issued in 2003, approximately 8  years prior to TAP\u2019s redesign. According to federal internal control  standards, to achieve the entity\u2019s objectives, management should assign  responsibility and delegate authority to key roles throughout the entity.  Without an up-to-date Commandant Instruction, TAP managers and  commanders may be unclear on who is ultimately responsible for  ensuring servicemembers attend TAP. Moreover, two TAP managers also  told us that an up-to-date Commandant Instruction might lead some  commanders to place higher priority on ensuring TAP participation. Coast  Guard officials said the Coast Guard was in the process of revising the  TAP Commandant Instruction and anticipated issuing the new instruction  in May 2018."], "subsections": []}, {"section_title": "Coast Guard Does Not Share Participation or Performance Data with Commanders or TAP Interagency Partners, Limiting Monitoring and Evaluation", "paragraphs": ["The Coast Guard lacks the ability to share data with commanders, limiting  its ability to monitor TAP participation and ensure servicemembers attend  the program. According to a Coast Guard official, the Coast Guard\u2019s  current data collection system also cannot generate installation or unit- level participation rates to share with commanders who oversee  transitioning and retiring servicemembers. Federal internal control  standards state that management should share quality information  throughout an organization to enable personnel to perform key roles, and  we have previously reported that by regularly sharing useful performance  information with leaders at multiple levels of an organization, agencies  can help leaders make informed decisions. Without this information,  individual unit commanders or the commanders\u2019 supervisors cannot  determine whether Coast Guard servicemembers under their command  completed TAP or identify whether there is a need for corrective actions  to ensure they do so.", "As we mention earlier in this report, the Coast Guard plans to adopt  DOD\u2019s TAP-IT Enterprise System, which according to officials, could help  the Coast Guard ensure eligible servicemembers participate in the  program. According to a Coast Guard official, once the system is fully  implemented by the Coast Guard, commanders will be required to verify  and document whether Coast Guard servicemembers under their  command completed TAP, potentially making commanders more vested  in the process. We previously reported that a senior DOD official said that  the TAP-IT Enterprise System may be able to generate unit- and  installation-level reports for the four DOD-led military services by October  2018, and a Coast Guard official said he would work with DOD to identify  whether this capability could also extend to the Coast Guard. Once data  reliability improves, sharing installation and unit-level TAP performance  information with Coast Guard commanders could support monitoring  efforts.", "The performance measures tracked by the TAP interagency working  group do not reflect TAP implementation broadly across all five military  services, according to a Coast Guard official we interviewed. The Coast  Guard does not currently share TAP data it collects with DOD or other  members of the interagency performance working group. While the  benefits of interagency data sharing cannot be realized without the Coast  Guard first improving the quality and completeness of its TAP data, we  have identified leading practices for interagency collaboration, including  that members of interagency working groups identify and share relevant  agency performance data. Moreover, federal internal control standards  call for management to communicate quality information to external  parties. Because the Coast Guard does not share TAP data, the  performance measures tracked by the interagency group do not reflect  Coast Guard servicemembers\u2019 experiences and thus do not provide a  complete picture of TAP implementation across the five military services.  More specifically for the Coast Guard, without such data sharing, future  TAP evaluations may not be able to assess the effectiveness of TAP  delivery, hindering the Coast Guard\u2019s ability to make program  adjustments to better prepare its servicemembers to successfully  transition to life after military service. Coast Guard officials said migrating  to DOD\u2019s TAP-IT Enterprise System will facilitate information sharing with  interagency partners and that improving data completeness and reliability  is a top priority for 2018."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given the sacrifices servicemembers have made to serve their country, it  is imperative they are afforded every chance to adequately prepare for  civilian life before leaving military service. In order to make a successful  transition, servicemembers need to be well-positioned to get a job or  make an informed decision about whether to pursue additional education  or start a small business. As such, the Transition Assistance Program  (TAP) serves a critically important function\u2014to give servicemembers the  tools and information they need to successfully transition to life outside  the military. Federal law requires that the Coast Guard ensure all eligible  servicemembers participate in the program, but thousands of Coast  Guard servicemembers may have transitioned without the support  provided by TAP. Reliably tracking participation has proven to be a  challenge for the Coast Guard, in part because it lacks a current  Commandant Instruction that defines the roles and responsibilities of staff  responsible for implementing TAP and ensuring complete and reliable  data are collected. In preparing to issue an updated Commandant  Instruction, the Coast Guard has taken a positive step toward addressing  the limitations of its current TAP data, and will be better positioned to  ensure compliance with VOW Act requirements using reliable data.", "In addition to collecting reliable data, the Coast Guard could further  demonstrate its commitment to meeting TAP requirements by  establishing formal performance goals that measure the extent to which  Coast Guard servicemembers participate in TAP. By establishing interim  performance goals, the agency would be able to show its progress  towards achieving full compliance. Moreover, communicating  performance goals to unit and installation commanders could enhance  accountability and might spur progress toward meeting federal program  requirements.", "By expanding its monitoring efforts beyond tracking participation in TAP\u2019s  required classes, the Coast Guard could enhance its ability to ensure  other TAP requirements are met and that its servicemembers are able to  access additional transition resources. Monitoring the timeliness of  participation would help ensure Coast Guard servicemembers have  adequate time to complete TAP before leaving the military. Further, by  monitoring requests to participate in additional 2-day classes and 2-day  class attendance, the Coast Guard would be in a better position to identify  whether servicemembers who wish to attend the classes are able to do  so, to determine whether more classes are needed, and to communicate  this information to the interagency partners responsible for delivering  these classes.", "Commanders can also play a key role in bolstering TAP participation.  Having an up-to-date written Commandant Instruction that explicitly  describes commanders\u2019 roles and responsibilities could enhance  commanders\u2019 ability to ensure TAP\u2019s proper implementation and  compliance with VOW Act requirements. Moreover, once data quality  improves, providing commanders a mechanism to readily determine  whether servicemembers under their command have completed TAP  could help them monitor the program to ensure that all TAP-eligible  servicemembers receive the resources they need to successfully  transition to civilian life.", "Finally, once more reliable data on Coast Guard servicemember  participation are available, sharing this information with interagency  partners could improve TAP implementation on a broader scale. Sharing  reliable data, such as participation figures for the Coast Guard, would  give TAP interagency partners a more complete picture of implementation  across all five military services. Sharing such information would also  enhance the interagency group\u2019s ability to evaluate how well TAP serves  the entire population of servicemembers. Improving the reliability of the  Coast Guard\u2019s TAP data will be essential for the benefits of data sharing  to be realized."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To ensure that all eligible Coast Guard servicemembers are provided the  opportunity to complete the Transition Assistance Program (TAP), we  recommend the Commandant of the Coast Guard take the following  seven actions:  Issue an updated Commandant Instruction that establishes policies  and procedures to improve the reliability and completeness of TAP  data by including when and by whom data should be recorded and  updated. (Recommendation 1)", "Establish a formal performance goal with a measurable target for  participation rates in VOW Act-mandated portions of TAP.  (Recommendation 2)", "Monitor the extent to which Coast Guard servicemembers participate  in TAP within prescribed time frames. (Recommendation 3)", "Monitor the extent to which Coast Guard servicemembers who elect  to participate in additional 2-day classes are afforded the opportunity  to attend. (Recommendation 4)", "Issue an updated Commandant Instruction that defines the roles and  responsibilities of the personnel who administer the program and  ensure servicemembers\u2019 participation. (Recommendation 5)", "Once reliable data are available by installation or unit, enable unit  commanders and the higher-level commanders to whom they report  to access TAP performance information specifically for the units they  oversee so that they can monitor compliance with all TAP  requirements. (Recommendation 6)", "Once reliable data are available, share TAP information with DOD and  other interagency partners, such as data on participation in required  TAP courses and additional 2-day classes. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Homeland  Security, Defense, Education, Labor, and Veterans Affairs, the Office of  Personnel Management, and the Small Business Administration for their  review and comment. The formal written response of the Department of  Homeland Security (DHS) is reproduced in appendix II. In addition, DHS  provided technical comments from Coast Guard officials that we  incorporated into the report as appropriate. The other agencies did not  provide any comments.", "In its written comments, DHS agreed with all seven of our  recommendations.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": [], "subsections": [{"section_title": "Overview", "paragraphs": ["This report examines (1) what is known about the reliability of Transition  Assistance Program (TAP) data on participation levels and the factors  that affect Coast Guard servicemembers\u2019 participation, and (2) the extent  to which the Coast Guard measures TAP performance and monitors key  areas of TAP implementation. To address these questions, we surveyed  Coast Guard installations with full-time TAP operations; reviewed Coast  Guard data on TAP participation for fiscal years 2012 to 2017; visited one  Coast Guard installation and interviewed TAP managers from two  additional Coast Guard installations selected for diversity in location,  among other reasons; and interviewed Coast Guard officials responsible  for overseeing TAP implementation for the Coast Guard. We also  reviewed relevant federal laws, regulations, policies, documents, and  publications. Information in this report is current as of the date GAO  received formal agency comments from DHS."], "subsections": []}, {"section_title": "Survey", "paragraphs": ["Our survey of Coast Guard installations with full-time TAP operations  asked about how TAP was being implemented. The survey included  questions about the accessibility of TAP components, challenges Coast  Guard servicemembers faced in attending the components, and the level  of commander support for participation. Our survey targeted front-line  TAP managers, who could draw on the expertise of TAP course  facilitators, transition counselors, career counselors, and other key TAP  staff as necessary.", "After drafting the survey questions, we pretested them with a TAP  manager to ensure (1) the questions were clear and unambiguous, (2)  terminology was used correctly, (3) the survey did not place an undue  burden on agency officials, (4) the information could feasibly be obtained,  and (5) the survey was comprehensive and unbiased. We revised the  content and format of the survey based on the feedback we received.", "We initially sent the survey to TAP managers at all 13 Coast Guard  installations at which TAP staff were located. We removed one installation  when we later found that the TAP manager position was vacant and  revised the total to 12 Coast Guard installations. The survey was  accessible online from October 31, 2016, through January 18, 2017,  through a secure server that recipients were able to access using unique  usernames and passwords. We sent an email announcement to TAP staff  at all 13 Coast Guard installations at which TAP staff are located on  October 24, 2016. We sent a second email on October 31, 2016 to notify  participants the survey was available online, and provided their unique  passwords and usernames. We sent two follow-up e-mails (November 14,  2016 and November 28, 2016) to those who had not responded. Finally,  we contacted all remaining nonrespondents by telephone starting  December 5, 2016. The survey was available online until we reached a  100 percent response rate."], "subsections": []}, {"section_title": "Interviews with Coast Guard Installation TAP Staff and Servicemembers", "paragraphs": ["To increase our understanding into how TAP was being implemented at  installations and supplement our survey findings, we visited one Coast  Guard installation and interviewed TAP managers from two additional  installations. We selected the installations based on several factors,  including the size of the installation, proximity to Department of Defense  (DOD) installations, and diverse locations in the United States. (See table  1.) At Coast Guard Base Elizabeth City in North Carolina, the installation  we visited, we interviewed the TAP manager, uniformed career  counselors, and senior installation leadership. During our interviews with  TAP managers at all three installations, we asked about the extent to  which Coast Guard servicemembers participate in TAP\u2019s required and  additional 2-day classes, including whether the servicemembers attended  classes online or in a classroom setting, challenges to ensuring Coast  Guard servicemembers participate in TAP, and the extent to which they  monitor Coast Guard servicemembers\u2019 participation in TAP. At Coast  Guard Base Elizabeth City, we also interviewed 25 Coast Guard  servicemembers (both officers and enlisted personnel) to get their  perspective on how well TAP worked and any challenges they had  participating. To help guide the interviews with the Coast Guard  servicemembers, we asked them to complete a short questionnaire that  asked about their experiences with the TAP program."], "subsections": []}, {"section_title": "Interviews with Agency Personnel", "paragraphs": ["We also interviewed TAP staff at Coast Guard headquarters to learn  about TAP policy, monitoring efforts, and performance measures for the  service overall. For example, we asked what policies and procedures  guide installations\u2019 TAP implementation; what performance measures the  Coast Guard uses to monitor TAP; how performance results are reported  and shared with different levels of Coast Guard leadership; and to what  extent the Coast Guard uses results from TAP participant satisfaction  assessments. We also asked whether the Coast Guard plans to shift to  DOD\u2019s new TAP-IT Enterprise System and how using the new system  could affect its monitoring efforts in the future. In evaluating the Coast  Guard\u2019s performance measures, we focused on measures related to  servicemembers\u2019 transition experiences before leaving the military. We  did not gather information on post-program evaluations and outcomes  because they were determined to be outside the scope of this review."], "subsections": []}, {"section_title": "Data Reliability Assessment", "paragraphs": ["We reviewed DHS data on TAP participation for fiscal years 2012 to  2017. To assess the reliability of the Coast Guard\u2019s TAP participation  data, we interviewed agency officials knowledgeable about the data. We  determined these data were not sufficiently reliable due to limitations with  the Coast Guard\u2019s data collection system. Specifically, the system lacks  adequate controls to ensure TAP data are complete and accurate.", "We conducted this performance audit from February 2016 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Meeta Engle (Assistant Director),  Amy MacDonald (Analyst-in-Charge), James Bennett, Holly Dye, David  Forgosh, Ying Long, Jonathan McMurray, Jean McSween, Andrew  Sherrill, Benjamin Sinoff, and Timothy Young, made significant  contributions to this report.", "Also contributing to this report were Susan Aschoff, Jessie Battle,  Ramona Burton, Melinda Cordero, Elizabeth Curda, Dawn Hoff, Ben  Licht, Serena Lo, Sheila McCoy, Almeta Spencer, Christopher Schmitt,  James Whitcomb, and Jill Yost."], "subsections": []}]}, {"section_title": "Appendix IV: Related Products", "paragraphs": ["Transitioning Veterans: DOD Needs to Improve Performance Reporting  and Monitoring for the Transition Assistance Program, GAO-18-23.  Washington, D.C.: November, 8, 2017.", "Transitioning Veterans: Improvements Needed in DOD\u2019s Performance  Reporting and Monitoring of the Transition Assistance Program,  GAO-18-225T. Washington, D.C.: November 8, 2017.", "Department of Defense: Transition Assistance Program (TAP) for Military  Personnel, GAO-16-302R. Washington, D.C.: December 17, 2015.", "Veterans\u2019 Employment: Need for Further Workshops Should Be  Considered before Making Decisions on Their Future, GAO-15-518.  Washington, D.C.: July 16, 2015.", "Military and Veteran Support: DOD and VA Programs That Address the  Effects of Combat and Transition to Civilian Life, GAO-15-24.  Washington, D.C.: November 7, 2014.", "Veterans Affairs: Better Understanding Needed to Enhance Services to  Veterans Readjusting to Civilian Life, GAO-14-676. Washington, D.C.:  September 10, 2014.", "Transitioning Veterans: Improved Oversight Needed to Enhance  Implementation of Transition Assistance Program, GAO-14-144.  Washington, D.C.: March 5, 2014.", "Military and Veterans\u2019 Benefits: Enhanced Services Could Improve  Transition Assistance for Reserves and National Guard, GAO-05-544.  Washington, D.C.: May 20, 2005.", "Military and Veterans\u2019 Benefits: Observations on the Transition  Assistance Program, GAO-02-914T (July 18, 2002)."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-550", "url": "https://www.gao.gov/products/GAO-18-550", "title": "DHS Acquisitions: Additional Practices Could Help Components Better Develop Operational Requirements", "published_date": "2018-08-08T00:00:00", "released_date": "2018-08-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GAO has previously found that DHS's components had acquisition programs that did not meet requirements and that those requirements were, in some cases, poorly defined. Poorly defined requirements increase the risk that acquisitions will not meet the needs of users in the field\u2014for example, border patrol agents or emergency responders.", "GAO was asked to examine DHS components' practices for developing requirements. This report addresses the policies, organizations, and workforce that selected DHS components use to develop requirements for their acquisition programs.", "GAO selected seven DHS components with significant acquisition programs and a non-generalizable sample of programs\u2014based on cost, component, and acquisition phase\u2014as case studies. GAO analyzed policies and program documentation; and interviewed DHS and component officials, as well as end users of DHS programs. GAO compared components' practices to industry best practices and federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO has identified several best practices to ensure that operational requirements for acquisitions are well-defined and found some Department of Homeland Security's (DHS) components met them while others did not. These practices include a formal policy for developing requirements, an independent requirements organization, and an understanding of workforce needs and training. The table below shows GAO's assessment of seven of DHS's components against these practices.", "Establishing a formal policy to guide the process is critical to developing well-defined requirements. However, only the Coast Guard has an approved policy for requirements development among the seven components reviewed. Without well-defined requirements, components are at risk of acquiring capabilities that will not meet mission needs. DHS officials told GAO that components have generally prioritized obtaining funding and starting programs over developing requirements.", "Three components have a requirements development organization, separating requirements from acquisition in addressing capability gaps. Officials from components without such organizations told GAO that they have fewer major acquisitions and rely on DHS to assist in requirements development. DHS policy and best practices, however, maintain the importance of this separation regardless of the number of major acquisitions to guard against possible bias by acquisition officials toward a specific materiel solution.", "Two components have assessed requirements development workforce needs, but both need to be updated; and one component has provided requirements development training and certification. Other component officials told GAO that they lack the resources necessary to take these steps. Best practices indicate that without an appropriately sized and trained workforce, components remain at risk of acquiring capabilities that fail to meet end user needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 25 recommendations, including to individual components to establish policies and independent organizations for requirements development, assess workforce needs, and establish training and certifications. DHS concurred with all the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security (DHS) invests billions of dollars  each year in major acquisition programs to assist in executing its many  critical missions. In November 2014, in response to a GAO  recommendation, the department reestablished the Joint Requirements  Council (JRC) that the department had dissolved in 2006, to review  requirements submitted by DHS\u2019s component agencies (e.g., the  Transportation Security Administration). The purpose of the council is to  validate and prioritize operational requirements\u2014those capabilities that  are necessary to conduct DHS\u2019s mission\u2014for all major acquisitions and  to ensure that objective, analytical rigor supports these requirements. We  subsequently found that several programs did not meet their key  performance parameters\u2014the most important requirements a capability  must meet\u2014after initial approval by DHS and deployed capabilities prior  to meeting all of their key performance parameters, leaving their true  capabilities in doubt. One reason programs did not achieve their  specified key performance parameters was that programs poorly defined  them. Poorly defined key performance parameters can increase the risk  that end users\u2014such as border patrol agents or first responders in a  disaster\u2014receive capabilities that do not meet their missions.", "You asked us to examine DHS\u2019s components\u2019 requirements development  practices. This report discusses (1) how often selected programs  changed requirements; and assesses the extent to which the selected  components have (2) developed policies for requirements development,  (3) established independent requirements organizations, and (4) taken  steps to assess and train a requirements workforce. Our focus for this  report was on the DHS components, as they are responsible for  developing the requirements to meet end user needs.", "To conduct our work, we reviewed the DHS Master Acquisition Oversight  List as of April 2017 and selected seven DHS components with Level 1  and Level 2 major acquisition programs and covered a broad range of  missions. The seven components we selected are as follows:", "Customs and Border Protection", "Federal Emergency Management Agency", "National Protection and Programs Directorate", "U.S. Citizenship and Immigration Services  From these seven components, we selected 14 major acquisition  programs with DHS-approved key performance parameters to serve as  case studies for our review. We selected this non-generalizable sample of  programs based on different factors, such as the acquisition phase and  component to have a mix of the types of programs that we reviewed. We  also reviewed two programs that do not have DHS-approved key  performance parameters to understand how requirements are determined  before DHS validation.", "We focused on the presence of policies for requirements development,  independent requirements organizations, and requirements-specific  workforce and training in components as our past work on major  acquisitions has shown that these are the fundamental building blocks  required to develop well-informed operational requirements. This  selection was also informed by our standards for internal controls. To  inform each of our objectives, we interviewed officials at various levels  throughout DHS to understand both their relationship to and role in  components\u2019 requirements development, including: (1) department-level,  (2) component-level, (3) program-level, and (4) program end users.  These discussions informed our understanding of the extent to which the  components have implemented requirements development policies,  organizations, and assessments and training for their components. In  addition, we furthered our understanding through reviewing component-  and program-level documentation such as guidance manuals, mission  needs statements, and operational requirements documents.", "To determine the extent to which the selected programs changed  requirements, we examined key performance parameters after DHS  approval when key performance parameters should be stable. To  determine the extent to which DHS components developed requirements  development policies, as well as determine the extent to which those  components established independent organizations, we reviewed  component documentation pertaining to requirements development, such  as instruction manuals, mission statements, and capability analyses. To  determine assessment, training, and certification standards for DHS\u2019s  requirements development workforce, we spoke with JRC and U.S. Coast  Guard officials regarding the training and certification programs they have  in place and reviewed available documentation.", "We assessed the components\u2019 requirements development practices  against GAO\u2019s standards for internal control and additional supporting  criteria as stated in the findings. The standards identify key principles to  help entities achieve their objectives, such as delivering capabilities to  end users.", "See appendix I for a detailed description of our objectives, scope, and  methodology. Appendix I also includes a detailed description of the major  acquisition programs we reviewed.", "We conducted this performance audit from May 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["To help manage its multi-billion dollar acquisition investments across its  components, DHS has established policies and organizations for  requirements validation, acquisition management, and budgeting. The  department uses these to monitor and guide delivery of the acquisition  programs the components require to close critical capability needs,  enabling DHS to execute its missions and achieve its goals."], "subsections": [{"section_title": "DHS and Its Components", "paragraphs": ["DHS has 14 components, which, as a part of their operational missions,  are responsible for assessing capability needs, developing the  requirements to fill these needs, and creating acquisition programs to  meet these requirements. The number and cost of acquisition programs  vary by component. DHS generally defines a capability as the means to  accomplish a mission or objective that may be achieved through materiel  and non-materiel solutions. Once the component has a JRC-validated  capability gap, and identifies and documents the need for a materiel  solution, it develops the operational requirements. Requirements can be  unique to an individual component, or they can be joint requirements that  apply to more than one component. Within the components, program  management offices are responsible for planning and executing individual  programs within cost, schedule, and performance parameters, and  preparing required acquisition documents."], "subsections": []}, {"section_title": "Tracing Mission Needs to Program Requirements", "paragraphs": ["The DHS requirements process generally starts with the identification of  mission needs and broad capability gaps from which components develop  a program\u2019s operational requirements, key performance parameters, and  more definitive technical requirements. Figure 1 depicts this traceability  from mission needs to technical requirements.", "Operational requirements are what the end users need to fill capability  gaps and conduct the mission. Operational requirements, in part, define  the purpose for the acquisition program and set boundaries for user  needs. Subject matter experts, such as system engineers, support  development of operational requirements to ensure that they are clearly  developed. Well-defined operational requirements trace to one or more of  the identified capability gaps.", "After components define operational requirements, they identify some as  key performance parameters that denote the most important and non- negotiable requirements that the program has to meet to fulfill its  fundamental purpose. According to DHS policy, failure to meet any key  performance parameter results in a re-evaluation of a program that may  lead to requirements changes or program cancellation. See figure 2  below for an overview of the requirements process.", "According to DHS policy on managing acquisition programs, components  further decompose operational requirements into technical requirements,  such as design or material specifications. For example, an operational requirement may be the ability to detect explosives at the airport. The  technical requirement may then be the ability to detect metal or explosive  material within certain parameters."], "subsections": [{"section_title": "DHS\u2019s Joint Requirements Council and Other Offices", "paragraphs": ["Through the JRC, DHS provides oversight of operational requirements for  the acquisition programs developed by its components. The JRC consists  of a chair and 14 members, called principals, who are senior executives  or officers that represent key DHS headquarters offices and seven of the  department\u2019s operational components. JRC principals represent the views  of both their components and DHS, and validate and prioritize capability  needs and operational requirements. Among other responsibilities, the  JRC is to provide requirements-related advice and validate key  acquisition documentation to prioritize requirements and inform DHS  investment decisions for all Level 1 and Level 2 major acquisitions, as  well as for programs that are joint interest, regardless of level.", "Separate from the JRC, DHS\u2019s Office of Program Accountability and Risk  Management, which reports directly to the Under Secretary for  Management, oversees major acquisitions and guides acquisition policy.  DHS also has a separate office for budget management and a planning,  programming, budgeting, and execution process to allocate resources,  such as funding, to acquisition programs. In addition, the Science and  Technology Directorate conducts systems engineering reviews and  technology assessments of the technical solutions for major acquisition  programs. The Directorate also provides department-level guidance on  requirements development in its Systems Engineering Life Cycle  Guidebook."], "subsections": []}, {"section_title": "DHS\u2019s Joint Requirements Process", "paragraphs": ["Multiple DHS directives and manuals establish the framework for the  department\u2019s Joint Requirements Integration and Management System  (JRIMS)\u2014a process by which the department reviews and validates  capability gaps\u2014and requirements to mitigate those gaps. DHS further  clarified its directives in April 2016 through DHS Instruction Manual 107- 01-001-01, Department of Homeland Security Manual for the Operation of  the Joint Requirements Integration and Management System. The JRC  also instituted a series of training courses that provide an overview of  JRIMS and its core concepts. JRC validation of requirements confirms the  requirements are traceable, feasible, and cost-informed.", "In addition to validation by the JRC, DHS\u2019s Under Secretary for  Management approves the operational requirements that the components  developed and reviews them at a series of predetermined acquisition  decision events. Figure 3 depicts the acquisition life cycle established in  DHS acquisition policy. DHS initially established its acquisition process in  policy in November 2008.", "An important aspect of acquisition decision event 2A, which begins the  \u201cObtain\u201d phase and system development, is the decision authority\u2019s  review and approval of key acquisition documents that establish the cost,  schedule, and requirements baselines for a program. The operational  requirements document and acquisition program baseline are key  acquisition documents requiring this approval and include a program\u2019s  key performance parameters. DHS also revisits these baselines at subsequent acquisition decision events in order to determine whether the  requirements remain achievable."], "subsections": []}]}, {"section_title": "Prior GAO Work on DHS Requirements Development", "paragraphs": ["We have previously reported on the importance of stable requirements  and the costs of changing them.", "In March 2016, we found that changes to key performance  parameters have been common and are likely to continue for several  reasons. While some changes may have a valid reason, such as a  response to emerging threats, we found that one of the most common  reasons programs changed key performance parameters was that the  originally approved key performance parameters had been poorly  defined. Key performance parameter changes on several programs  were associated with schedule slips and cost growth. DHS leadership  acknowledged that the department has had difficulty defining key  performance parameters, and said that the Office of Program  Accountability and Risk Management has improved its ability to help  programs define key performance parameters. We recommended,  among other things, that DHS should require the components to  submit program funding certification memos to aid affordability  discussions. DHS concurred and implemented our recommendation.", "In October 2016, we found that the JRC\u2019s structure and management  approach\u2014informed by assessments of requirements processes,  guidance, and lessons learned from DHS components\u2014are generally  consistent with key practices for mergers and organizational  transformations. However, we recommended that DHS\u2019s Office of the  Chief Information Officer have a more formal and consistent role than  that of a non-voting advisor to the JRC, since 24 of 36 major  acquisitions were information technology programs, and we previously  identified poor requirements definition as a factor in failed information  technology programs. DHS concurred with our recommendation and  implemented it in November 2016.", "In April 2017, we found that DHS\u2019s acquisition policy was not  consistent with acquisition best practices in terms of when to enter the  \u201cObtain\u201d phase depicted in figure 3. Specifically, best practices call for  ensuring that a program\u2019s needs are matched with available  resources\u2014such as technical and engineering knowledge, time, and  funding\u2014prior to starting product development. We recommended,  among other things, that DHS require that major acquisition programs\u2019  technical requirements be well-defined and conduct key technical  reviews prior to approving programs to initiate product development,  in accordance with acquisition best practices. DHS concurred with our  recommendation, but has not yet implemented it."], "subsections": []}]}, {"section_title": "Over Half of the Selected Programs Changed Requirements", "paragraphs": ["Our analysis found that 9 of 14 programs from the seven components that  we reviewed changed key performance parameters for various reasons  after program approval and entry into the \u201cObtain\u201d phase. DHS had  initially approved most programs\u2019 key performance parameters before  DHS reestablished the JRC in November 2014. Whether these  programs changed DHS-approved key performance parameters is shown  in table 1.", "We found that the causes of these changes varied, but included  requirements did not accurately describe end user needs, were not  achievable given available technologies, or that programs pursued  greater capability than originally intended. Further details on the nine  programs that changed their requirements are in table 2.", "To mitigate these types of requirements changes, we identified several  principles that are critical as the first steps to successful implementation  of programs and the remainder of this report presents examples of when  the principles have been implemented and when they have not."], "subsections": []}, {"section_title": "One of the Seven Selected Components Has a Policy for Requirements Development", "paragraphs": ["Among the seven DHS components we reviewed, each of which is  responsible for managing major acquisition programs, only the U.S. Coast  Guard has a formalized policy in place for developing requirements. Of  the other six components, some are developing such policies and others  rely on JRIMS guidance. In the absence of component-level policies,  some sub-organizations and programs within the components have  developed their own requirements policies."], "subsections": [{"section_title": "U.S. Coast Guard Has an Approved Requirements Policy, While the Other Six DHS Components in Our Review Do Not", "paragraphs": ["The U.S. Coast Guard, which has a long history of managing large  acquisition programs, established a requirements policy to assess needs  and fill capability gaps in 2009 and updated it in 2017. The most recent  version of this requirements policy, the Coast Guard Operational  Requirements Generation Manual, aligns its policies with DHS\u2019s  acquisition and requirements policies. The manual contains guidance on  requirements development and the analytic efforts used to develop the  requirements documents. The manual also describes the personnel that  are to be included in requirements development and provides guidance  on drafting the necessary documentation, and includes templates to do  so. As part of the process, requirements development personnel work  with end users to generate requirements, which the U.S. Coast Guard  reviews and approves before going to the DHS JRC for validation.", "The status of developing a requirements policy across the other six  components is as follows:  Immigration and Customs Enforcement, National Protection and  Programs Directorate, Transportation Security Administration, and  U.S. Citizenship and Immigration Services officials told us that they  are currently developing or considering developing policies. These  components have not yet set time frames for approving these policies.", "A Federal Emergency Management Agency official stated that they  are planning to develop a formal requirements policy but are waiting  for the JRC to clarify JRIMS policy on information technology program  reviews and decision authorities before doing so. However, such  clarification does not prevent them from drafting an interim policy.", "Customs and Border Protection has a draft requirements development  policy but did not provide a definitive timeline for completion.", "Although Customs and Border Protection does not yet have a finalized  policy, the following sub-component operational organizations have  documented their requirements policies. For example:", "Border Patrol finalized a requirements management process policy on  June 12, 2018 that defined roles and responsibilities throughout the  process. The requirements policy was preceded by an October, 18,  2016 policy on the process for identifying capability gaps. GAO  previously reported on the Border Patrol\u2019s policy in February 2017 and  recommended clarifying the roles and responsibilities of the parties  involved.", "The Office of Technology Innovation and Acquisition developed a  draft requirements handbook in 2011 that provided guidance for the  execution of activities within each stage of development, including  defining operational requirements.", "The Passenger Systems Program Office also documented its  requirements management policy in 2010 that outlined requirements  development at a high level.", "While these sub-components have taken the key step of documenting  their policies, without a single component policy, Customs and Border  Protection may not be efficiently and effectively meeting its mission."], "subsections": []}, {"section_title": "Without Requirements Policies, Components Risk Failing to Meet Mission Needs", "paragraphs": ["In the absence of component-level policies, we found that components  are less likely to establish the base of knowledge needed for  requirements development. Further, we found this contributes to an  inability to properly mitigate capability gaps and meet mission and end  user needs.", "Outcomes for a number of our case study programs illustrate the potential  benefits of having component-level requirements development policies in  place.", "National Flood Insurance Program PIVOT (not an acronym):  Federal Emergency Management Agency officials told us that the  current attempt is the third effort to modernize its information  technology systems after two failed attempts. Program officials said  that one of the previous program attempts failed to meet capability  gaps and end user needs because of a lack of clear policies for  developing requirements. The officials said that failure is less likely as  the program currently uses lessons learned from the previous  attempts. In addition, the JRC is encouraging the component to adopt  rigorous standards for developing requirements. However, without a  policy to capture these lessons learned, programs within the Federal  Emergency Management Agency are at risk for losing the knowledge.", "National Security Cutter: The U.S. Coast Guard began requirements  development for the National Security Cutter in the late 1990s, before  it had established a documented requirements development policy in  2009. We found in 2010 that the lack of overarching, formalized policy  resulted in requirements that were vague, not testable, not prioritized,  and not supportable or defendable. In 2014, the National Security  Cutter completed initial operational testing but did not fully  demonstrate 7 of its 19 key performance parameters, including those  related to unmanned aircraft and cutter-boat deployment in rough  seas. To meet the cutter-boat deployment parameter, U.S. Coast  Guard officials said that the program had to overcome differing  interpretations of the parameter between the U.S. Coast Guard and its  independent test officials. One key practice for requirements  development is assigning roles and responsibilities, such as when and  in what capacity test officials should be involved in requirements  development, to avoid just such an outcome and the resulting effect  on cost and schedule. U.S. Coast Guard officials stated that end  users of the National Security Cutter have since demonstrated its key  performance parameters during U.S. Coast Guard operations.", "Electronic Baggage Screening Program: Without a finalized  requirements development policy, the Transportation Security  Administration\u2019s program developed requirements that focused on  how the system functioned as opposed to the capability that it would  provide. Program officials said that neither the Transportation Security  Administration nor the program office had a documented policy for  requirements development when the program began in 2004. In this  environment, the program adopted an informal approach to develop  operational requirements by collecting end user input. However,  officials noted that end users listed technical requirements rather than  broader operational requirements. Officials told us that the program  \u201cbacked into\u201d operational requirements using these technical  requirements, resulting in a system more focused on function and less  on capability. Without a focus on the capability, the program risked not  meeting the capability gap and end user need.", "We also found an example of where a component\u2019s policy was beneficial  to a program developing requirements:", "Offshore Patrol Cutter: The U.S. Coast Guard has matured its  requirements development policies since the National Security Cutter  program as described above. For the Offshore Patrol Cutter, the U.S.  Coast Guard has six DHS-approved key performance parameters,  such as operating range and duration. The U.S. Coast Guard plans to  use engineering reviews and developmental and operational tests  throughout the acquisition to refine and demonstrate requirements.  For example, to refine the requirements and ensure end user input,  the U.S. Coast Guard had an early operational assessment of the  cutter\u2019s key performance parameters and associated lower level  technical requirements. According to officials, specific policies guided  the assessment to, in part, ensure that the program refined key  performance parameters before progressing through the remaining  acquisition phases.", "DHS\u2019s JRIMS directive and manual are not designed to provide the level  of specificity for component-level requirements development. JRIMS  encourages components to elicit end user needs and translate them into  requirements. It also authorizes the components to develop their own  policies consistent with the intent of and required capability  documentation in the JRIMS manual and DHS Instruction Manual.", "Federal standards for internal control and key practices for requirements  development, such as those in Carnegie Mellon University\u2019s Capability  Maturity Model Integration for Development, state that organizations  should establish responsibility and authority by having documentation that  communicates the \u201cwho, what, when, where, and why\u201d of achieving their  missions. A policy also provides a means to retain organizational  knowledge and mitigate the risk of having that knowledge limited to a few  personnel. Such a policy should include a documented process for  developing and managing requirements which can help reduce the risk of  developing a system that does not meet end user needs, cannot be  adequately tested, and does not perform or function as intended. We  depict four key practices for requirements management in figure 4.", "DHS officials indicated to us that one factor which contributes to a  component\u2019s lack of finalized requirements policies is the prioritization of  starting an acquisition over developing requirements. This situation  reflects what we have found over many years at the Department of  Defense. Undesirable program outcomes share a common origin;  decisions are made to move forward with programs before the knowledge  needed to reduce risk and support those decisions is sufficient. There are  strong incentives within the acquisition culture to overpromise  performance while understating cost and schedule. A key enabler of  successful programs is firm, feasible requirements that are clearly  defined, affordable, and clearly informed. Once programs begin,  requirements should not change without assessing their potential  disruption to the program.", "Of note, DHS established its formal acquisition process in 2008, and did  not have a similar emphasis on requirements development until 2016,  when the JRIMS process was set forth. DHS requirements officials said  that the renewed emphasis on requirements development at DHS  requires a significant culture change among the components, pushing the  components away from previous practices that undervalued well-defined  requirements. They said that the components generally completed the  necessary requirements documents to comply with department guidance  and formats rather than to ensure that the components identified the  needed capabilities and generated the correct requirements.", "DHS officials said that in the past, some program offices would contract  out the capability assessment and requirements development, have them  approved by DHS, but not use the resulting documentation to guide the  acquisition. Two component requirements officials told us that their  components\u2019 previous acquisition and requirements processes focused  on obtaining funding before developing requirements.", "Most components indicated that they are planning on drafting a  requirements development policy. However, without specific timeframes  for completing their efforts, there is a risk that management attention will  not be sustained and planned actions will not be implemented. Without  component-level requirements policies that are aligned with the JRC and  JRIMS standards, DHS is missing an opportunity to help ensure that  components\u2019 programs are set-up from the beginning to meet end user  needs and close capability gaps."], "subsections": []}]}, {"section_title": "Utilization of an Independent Requirements Organization Inconsistent Across Selected Components", "paragraphs": ["Three of the seven DHS components in our review have established  requirements development organizations, such as offices or directorates  independent of the acquisition function. Among the reasons cited by  these components\u2019 officials was recognition of the importance of the  operational requirements development function for addressing capability  gaps. Those that do not have separate requirements organizations cited,  among other things, the smaller size of their components. However,  according to key principles, independent lines of authority should develop  operational requirements and manage acquisitions separately, regardless  of size."], "subsections": [{"section_title": "Three Components Have Independent Requirements Development Organizations but Remaining Four Components Do Not", "paragraphs": ["Three of the seven DHS components in our review have established  independent requirements development organizations that are separate  from acquisition offices, as shown in table 3.", "The three components that established requirements organizations did so  at various times.", "In 2009, the U.S. Coast Guard formally placed responsibility for its  requirements development policy in its capabilities directorate under  the Assistant Commandant for Capability, who reports to the Deputy  Commandant for Operations, one level below the Vice Commandant  of the Coast Guard. The capabilities directorate, which is separate  from the acquisitions directorate, provides oversight and management  of its requirements development process. This directorate provides  expertise as well as an independent quality review of the  requirements documents generated for approval.", "Customs and Border Protection officials noted that they created a  requirements organization in 2010 in the Office of Technology  Innovation and Acquisition. In 2016, through an organizational  realignment, Customs and Border Protection separated the  requirements organization and established the Planning, Analysis,  and Requirements Evaluation Directorate. The officials stated that due  to concerns about independence from the acquisitions office,  Customs and Border Protection placed this Directorate in the  Operations Support office.", "The Transportation Security Administration established the Office of  Requirements and Capabilities Analysis in 2017, in part, because  officials told us they recognized that prior requirements development  efforts were not being done the right way. This new office, which is  separate from the Office of Acquisition Management, reports directly  to the Executive Assistant Administrator of Operations Support.", "The remaining four components that we reviewed did not have separate,  independent requirements development organizations. Officials from  Immigration and Customs Enforcement, National Protection and  Programs Directorate, and U.S. Citizenship and Immigration Services  noted that they are planning on developing such organizations but have  not provided specific time frames for doing so. An official from the  National Protection and Programs Directorate told us that although an  independent office has not been established, he serves as an  independent requirements official, separate from acquisitions. Among the  reasons cited by components\u2019 officials for not having a requirements  organization at the time of our review was a primary focus on the  acquisition function, associated funding issues, and reliance on the JRC  to help refine their requirements.", "Officials also noted the smaller size of their respective components and  the fewer number of major acquisitions as reasons for not having an  independent requirements organization. Regardless of size, components  need to ensure that requirements development is independent of  acquisitions in order to guard against possible bias by acquisition officials  toward a specific materiel solution."], "subsections": []}, {"section_title": "A Separate, Independent Requirements Organization Is Critical to Addressing Capability Gaps", "paragraphs": ["According to federal standards for internal controls, independent lines of  authority should develop requirements and manage acquisitions  separately. These standards state that management should design  control activities to achieve objectives and respond to risks. In addition,  authorities should segregate incompatible duties to prevent risks such as  management override. For example, if requirements developers were  part of the acquisition function, management could tailor operational  requirements to satisfy preferred acquisition outcomes, increasing the risk  that capability gaps will not be addressed. The absence of an  independent requirements organization hampers the components\u2019 ability  to remove biases and identify crosscutting opportunities and investments.  See figure 5 for a notional example of organizations with separate  functions.", "In accordance with these standards, DHS, at the department level, has  separate requirements, acquisitions, and resourcing organizations\u2014each  with its own governance structure. In addition, U.S. Coast Guard policy  notes that requirements development, when separated from acquisition  organizations, results in an operational requirements document that  conveys the user\u2019s true needs. The policy goes on to state that the  requirements development organization informs the acquisition process  by ensuring requirements are traceable to strategic objectives and  recommended courses of action to address capability gaps are cost  informed and assessed for feasibility. According to GAO\u2019s best practices,  while these organizations should be separate, there should be consistent  collaboration and feedback throughout the process.", "We found examples of programs in our review that would have benefited  from an independent organization at the component level.", "Immigration and Customs Enforcement, TECS Modernization  (not an acronym): The acquisition program office set the  requirements without an understanding of the capability gaps it was  trying to close. Without a requirements development office to guide  development, program officials stated that they generated  approximately 25,000 requirements, which consisted of both technical  and operational requirements to address the capability gaps that they  were unable to prioritize. The program revised its operational  requirements a few times and went through a replanning initiative that  included a full review of all the requirements to ensure completeness  and accuracy to determine the program\u2019s operational requirements.  Immigration and Customs Enforcement officials stated that they  recognize the importance of requirements development and are in the  process of establishing a requirements organization.", "U.S. Citizenship and Immigration Services, Transformation: The  program began requirements development in 2006 in the absence of  an independent organization for requirements development and has  subsequently generated three operational requirements documents  over a six-year period. Our review showed that the key performance  parameters from the oldest document to the most recent one changed  significantly. For example, the operational requirements document  from 2009 had a key performance parameter called \u201caccount  hardening,\u201d which involved gathering identity and biometric evidence.  The document from 2015 did not contain this parameter. In April 2015,  nine years after starting requirements development, DHS leadership  finalized a revised set of operational requirements after the program  struggled again to meet its previous requirements.", "We also found an example of where a component\u2019s requirements  organization was beneficial to a program developing requirements:", "Customs and Border Protection, Cross Border Tunnel Threat:  This program is analyzing alternative capabilities as it moves toward  the JRC\u2019s validation of its requirements. To aid in developing the  operational requirements, Border Patrol, a sub-component of  Customs and Border Protection, has its own Operational  Requirements Management Division. In addition, Customs and Border  Protection officials noted that its Planning, Analysis, and  Requirements Evaluation Directorate is coordinating, guiding, and  providing oversight to ensure the operational requirements address  the capability gaps. In doing so, these requirements organizations  facilitate input from subject matter experts on tunnel threats and from  end user agents who have to mitigate these threats."], "subsections": []}]}, {"section_title": "Majority of Selected Components Have Not Assessed Workforce Needs or Established Training for Requirements Development", "paragraphs": ["We found that two components have assessed requirements workforce  needs, and one has provided requirements specific training. Components  gave different reasons why they have not yet taken one or more of these  steps, including a lack of resources."], "subsections": [{"section_title": "Two Components Have Assessed Requirements Workforce Needs, and One Has Provided Requirements Specific Training", "paragraphs": ["Two of the seven components we reviewed, Federal Emergency  Management Agency and Customs and Border Protection, performed  assessments of workforce needs for requirements development. The  Federal Emergency Management Agency assessed its requirements  workforce needs in 2016 and found, among other things, that it does not  have the capacity to identify and analyze capability gaps or accurately  trace operational requirements to capability needs. As a result of the  assessment, the agency requested additional requirements personnel in  the fiscal year 2019\u20132023 budget cycle.", "Customs and Border Protection requirements officials stated that they last  conducted an assessment in 2013. They stated that the assessment  identified the appropriate number and types of personnel necessary to  conduct requirements development through an analysis of historical  requirements workloads. In addition, Customs and Border Protection  officials said that they are currently performing an assessment as part of  their Acquisition Management Performance Improvement initiative. The  initiative assesses training needs and availability and is due at the end of  fiscal year 2018.", "Requirements officials from Immigration and Customs Enforcement,  National Protection and Programs Directorate, Transportation Security  Administration, and U.S. Citizenship and Immigration Services told us that  they have not assessed their requirements workforce needs and have no  plans to do so. U.S. Coast Guard requirements officials told us that  although they have not conducted a formal assessment of their workforce  needs, they informally assess those needs and would like to increase the  personnel who have requirements training across the organization.", "Although the U.S. Coast Guard has not conducted an assessment of its  workforce needs, it is the only component that has an established  requirements training process. Requirements officials told us that the U.S.  Coast Guard initially established training and training-related certification  standards in 2007 to emulate similar changes taking place at the  Department of Defense and address previous U.S. Coast Guard  acquisition challenges. Specifically, the U.S. Coast Guard requirements  development organization assigns end users for a two to three year  rotation and provides them training and certification on requirements  development. The requirements development certification program is two  levels and requires both classroom-based training and on-the-job  experience. The U.S. Coast Guard assigns those who complete a higher  level of certification to develop requirements for more complex and costly  programs. This helps to ensure that requirements personnel can give  timely, relevant end user input but also differentiate between operational  and technical requirements. U.S. Coast Guard requirements officials told  us that the training and certification standardizes the proficiency of the  requirements workforce across the component. In addition, Customs and  Border Protection officials told us that they are in the process of training  their personnel on operational requirements development as part of a  larger training program implemented through their Acquisition  Management Performance Improvement effort.", "Components provided multiple reasons why they have not assessed their  requirements workforce development needs or implemented a  requirements training program. Specifically:", "Federal Emergency Management Agency is waiting on resources to  build a requirements organization and provide component-specific  training.", "Immigration and Customs Enforcement officials stated that they are  standing up a requirements development organization and have  requested additional personnel. However, they have not done a  comprehensive assessment of their workforce needs nor established  additional training as a result of resource constraints.", "National Protection and Programs Directorate requirements officials  told us that they do not currently have plans to assess the sufficiency  of requirements development personnel and do not have component- specific requirements training.", "Transportation Security Administration has recently established a  requirements development organization but has not yet assessed its  workforce needs or established component-specific training.", "U.S. Citizenship and Immigration Services requirements officials told  us that they have not assessed their workforce and training needs, as  they are more focused on processes supporting information  technology programs rather than requirements overall."], "subsections": []}, {"section_title": "Acquisition Programs Benefit from an Adequately Staffed and Trained Requirements Workforce", "paragraphs": ["Assessment and training\u2014according to GAO\u2019s internal controls,  workforce development key principles, and DHS\u2019s workforce guidance\u2014 are two key steps in workforce planning to ensure that the right numbers  of people with the right skills are available at the right time. Specifically,  an assessment should include an understanding of the goals and  objectives of the component, the workforce needed to achieve the goals,  and the capacity and capabilities needed to support workforce strategies.  With a better understanding of the needs and current capabilities of the  workforce, management can develop specific strategies to better educate  the workforce and standardize skill levels. Organizations can then  develop specific training to develop the workforce and fill areas of  identified need with involvement of management and employees.  Organizations can use a variety of instruction approaches for training\u2014for  example, classroom based learning; distance learning; or structured on- the-job training. When warranted, organizations should consider blending  learning methods (such as web-based and instructor-led) within the same  training effort to leverage resources in the most efficient way possible.  See figure 6 for a notional workforce planning process that matches  workforce needs with the goals of the organization.", "The JRC approved a DHS-wide Requirements Specialization as a part of  the Technology Manager Certification on June 21, 2018. In addition, JRC  officials stated that they are expanding requirements development  training and determining course content for the certification. We have  previously found the importance of having the appropriate workforce as a  factor in meeting an agency\u2019s mission. Until the components assess  their needs and take appropriate action, acquisition programs may  continue to be at risk of not meeting end user needs, as they will not have  a trained workforce to develop requirements.", "Selected case study acquisition programs further illustrate the effect of a  trained requirements development workforce.", "Customs and Border Protection and Immigration and Customs  Enforcement, TECS Modernization (not an acronym) programs:  These programs illustrate the effect that knowledgeable requirements  officials can have. Customs and Border Protection\u2019s TECS program  had an engineer with requirements development experience.  According to this official, TECS Modernization traced all program  requirements from the operational to the technical level in a matrix to  ensure that they were valid and understood. A trained workforce,  however, is one principle among many needed to provide a program  with a sound start. In this case, a trained requirements official took the  critical step of tracing the requirements to the gap, but his involvement  cannot address the requirements and program executing issues that  may arise throughout the life of a program. In fact, TECS  Modernization later experienced changes to requirements and  schedule.", "In contrast, Immigration and Customs Enforcement\u2019s TECS  Modernization program officials told us that the program initially  utilized contractors for requirements development. Rather than  develop operational requirements to close the capability gap,  development started with thousands of technical requirements. The  program could not trace these requirements back to the capability  gap, and could not implement the proposed solution. Immigration and  Customs Enforcement re-started the program by bringing in trained  requirements development personnel who worked with the end users  to determine the appropriate operational requirements. Current  Immigration and Customs Enforcement officials acknowledged the  problems of the past but indicated that with the operational  requirements now in place, they have a greater likelihood of success.", "Transportation Security Administration, Electronic Baggage  Screening and Passenger Screening Programs: End users of the  screening units at an airport told us they are not aware of anyone,  such as a requirements development official, with whom they can  communicate emerging threats or problems with the screening units.  They also said that some of the key performance parameters, such as  the number of bags processed per hour, are not based on current  data. In their experience, the volume of travelers and bags has  increased significantly. Without a trained requirements development  official with whom end users can provide input, the program risks not  meeting end user needs.", "U.S. Coast Guard, Offshore Patrol Cutter: Requirements officials  told us that they continue to mature their requirements workforce to  ensure the appropriate requirements for programs. The U.S. Coast  Guard\u2019s requirements workforce, as stated previously, utilizes an end  user with requirements training as a subject matter expert on  requirements development. These end users with requirements  training work together with end users currently using the assets to  ensure that requirements are well-defined. For this program, the U.S.  Coast Guard recently held an assessment of the draft requirements  for the cutter that solicited input from users across the organization.  The trained requirements personnel facilitated the assessment and  gathered the input to refine the requirements. While it is too early to  determine how this acquisition program will perform against baselines,  this initial focus on requirements is positive.", "As most components recognize the need for requirements development,  it is important that they assess their needs for a workforce and align those  needs with training to develop a workforce that can help ensure that  requirements match end user needs. DHS is taking steps to standardize  training and certification across its requirements workforce to ensure that  the workforce across all levels implements requirements development in  accordance with JRIMS. However, DHS remains at risk until such training  and certification are fully implemented throughout DHS and its  components."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While DHS now has the JRIMS in place, which authorizes the  components to create their own internal requirements development  organizations, the components lag in creating the means to develop  requirements and close identified capability gaps. While DHS  components generally are working toward developing their own  requirements policies, they have not yet established timeframes for  completing this effort. Without specific timeframes, there is the risk that  management attention will be lost. Further, some components do not  have in place independent requirements development organizations,  separate from their acquisition functions. The overlap in these  responsibilities does not comport with best practices and engenders a risk  that acquisition officials may override requirements developers to procure  a preferred solution as opposed to the one needed by the end user.", "Further, most of the components in our review have not taken steps to  assess their requirements workforces and provide training. Compounding  this problem is a lack of training and certification standards for  requirements personnel at the agency level. Rather, components have  prioritized obtaining funding and starting acquisition programs over  requirements development. Not giving requirements development  adequate priority is likely to contribute to poorly defined requirements and  delays in achieving\u2014or failure to achieve\u2014the capabilities necessary to  perform components\u2019 missions.", "DHS, at a department level, has recognized the importance of having a  requirements policy, an independent requirements organization, and a  trained workforce by establishing JRIMS, the JRC, and associated  training. While the components vary in acquisition activity, it is incumbent  on them to recognize the importance of these critical elements. Past  acquisitions have demonstrated the need to do so."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 25 recommendations to the Secretary of DHS.  Specifically, that the Secretary of DHS ensures that:  The Commissioner of Customs and Border Protection through the  Executive Assistant Commissioner for Operations Support finalizes and  promulgates the Customs and Border Protection\u2019s draft policy for  requirements development. (Recommendation 1)", "The Commissioner of Customs and Border Protection through the  Executive Assistant Commissioner for Operations Support updates the  2013 workforce assessment to account for the independent requirements  organization\u2019s current workforce needs. (Recommendation 2)", "The Commissioner of Customs and Border Protection through the  Executive Assistant Commissioner for Operations Support establishes  component specific training for requirements development.  (Recommendation 3)", "The Administrator of the Federal Emergency Management Agency  establishes a policy for requirements development. (Recommendation 4)", "The Administrator of the Federal Emergency Management Agency  establishes an independent requirements development organization  within the Federal Emergency Management Agency. (Recommendation  5)", "The Administrator of the Federal Emergency Management Agency  updates the 2016 workforce assessment to account for an independent  requirements organization\u2019s workforce needs. (Recommendation 6)", "The Administrator of the Federal Emergency Management Agency  establishes component specific training for requirements development.  (Recommendation 7)", "The Director of Immigration and Customs Enforcement establishes a  policy for requirements development. (Recommendation 8)", "The Director of Immigration and Customs Enforcement establishes the  planned independent requirements development organization within  Immigration and Customs Enforcement. (Recommendation 9)", "The Director of Immigration and Customs Enforcement conducts a  workforce assessment to account for an independent requirements  organization\u2019s workforce needs. (Recommendation 10)", "The Director of Immigration and Customs Enforcement establishes  component specific training for requirements development.  (Recommendation 11)", "The Under Secretary of Homeland Security for the National Protection  and Programs Directorate finalizes and promulgates the National  Protection and Programs Directorate\u2019s draft policy for requirements  development. (Recommendation 12)", "The Under Secretary of Homeland Security for the National Protection  and Programs Directorate establishes the planned independent  requirements development organization within the National Protection  and Programs Directorate. (Recommendation 13)", "The Under Secretary of Homeland Security for the National Protection  and Programs Directorate conducts a workforce assessment to account  for an independent requirements organization\u2019s workforce needs.  (Recommendation 14)", "The Under Secretary of Homeland Security for the National Protection  and Programs Directorate establishes component specific training for  requirements development. (Recommendation 15)", "The Administrator of the Transportation Security Administration through  the Executive Assistant Administrator of Operations Support finalizes and  promulgates the Transportation Security Administration\u2019s draft policy for  requirements development. (Recommendation 16)", "The Administrator of the Transportation Security Administration through  the Executive Assistant Administrator of Operations Support conducts a  workforce assessment to account for an independent requirements  organization\u2019s workforce needs. (Recommendation 17)", "The Administrator of the Transportation Security Administration through  the Executive Assistant Administrator of Operations Support establishes  component specific training for requirements development.  (Recommendation 18)", "The Commandant of the U.S. Coast Guard through the Assistant  Commandant for Capability conducts a workforce assessment of the U.S.  Coast Guard\u2019s capabilities directorate. (Recommendation 19)", "The Director of the U.S. Citizenship and Immigration Services finalizes  and promulgates the U.S. Citizenship and Immigration Services\u2019s draft  policy for requirements development. (Recommendation 20)", "The Director of the U.S. Citizenship and Immigration Services establishes  the planned independent requirements development organization within  U.S. Citizenship and Immigration Services. (Recommendation 21)", "The Director of the U.S. Citizenship and Immigration Services conducts a  workforce assessment to account for an independent requirements  organization\u2019s workforce needs. (Recommendation 22)", "The Director of the U.S. Citizenship and Immigration Services establishes  component specific training for requirements development.  (Recommendation 23)", "The JRC collaborate with components on their requirements development  policies and, in partnership with the Under Secretary for Management,  provide oversight to promote consistency across the components.  (Recommendation 24)", "In addition, the Secretary of DHS should ensure that training for  requirements development is consistent by establishing training and  certification standards for DHS and the components\u2019 requirements  development workforces. (Recommendation 25)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DHS.", "DHS provided written comments, which are reproduced in appendix II. In  its comments, DHS concurred with all 25 of our recommendations and  identified actions it plans to take to address them. DHS also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report discusses (1) how often selected Department of Homeland  Security (DHS) programs changed requirements; and assesses the  extent to which the selected components have (2) developed policies for  requirements development, (3) established independent requirements  organizations, and (4) taken steps to assess and train a requirements  workforce. Our focus for this report was on the DHS components, as they  are responsible for developing the requirements to meet end user needs.", "To conduct our work, we reviewed the DHS Master Acquisition Oversight  List as of April 2017 and selected seven DHS components with Level 1  and Level 2 major acquisition programs and cover a broad range of  missions. The seven components are as follows:", "Customs and Border Protection", "Federal Emergency Management Agency", "National Protection and Programs Directorate", "U.S. Citizenship and Immigration Services  From these seven components, we selected 14 major acquisition  programs with DHS-approved key performance parameters to serve as  case studies for our review. We selected a non-generalizable sample of  programs based on different factors, including their acquisition phase,  component, acquisition level, and whether they were information  technology (IT) or non-IT. We selected the programs on these factors to  reflect the broad spectrum of DHS components\u2019 operations. In addition,  we coordinated our program selection with the DHS Office of Inspector  General due to its ongoing audit on the implementation of Joint  Requirements Council (JRC) policies in DHS acquisition programs. See  table 4 below for a description of the programs.", "We also reviewed two programs that did not have DHS-approved key  performance parameters at the time of our review to understand how  requirements are determined before DHS validation. The two programs  were Customs and Border Protection\u2019s Cross Border Tunnel Threat and  Biometric Entry-Exit Program.", "To determine the extent to which the selected programs changed  operational requirements, we examined key performance parameters,  which the programs document in requirements and acquisitions  documents, before and after DHS approval when key performance  parameters should be stable. Such program documents include the  operational requirements documents and acquisition program baselines.  In certain cases, programs had multiple iterations of these documents.  We then compared the extent to which key performance parameters  changed between documents. We selected operational requirements  documents and acquisition program baselines because these are the key  requirements documents validated by DHS management in order for  programs to begin development.", "We focused on the presence of policies for requirements development,  independent requirements organizations, and requirements specific  workforce and training in components as our past work on major  acquisitions has shown that these are the fundamental building blocks  required to develop well-informed operational requirements. This  selection was also informed by our standards for internal controls.", "To determine the extent to which DHS components\u2019 requirements  development policies exist, as well as determine the extent to which those  components established independent organizations, we reviewed  component documentation pertaining to requirements development, such  as instruction manuals, mission statements, and capability analyses. We  also reviewed DHS documentation such as the Joint Requirements  Integration and Management System Instruction Manual and the  Acquisition Management Instruction to determine the requirements  development guidance provided to the components. We also reviewed  program-level documents such as mission need statements and  operational requirements documents to determine the capability gaps that  respective programs were intended to mitigate, and the programs\u2019 key  performance parameters.", "To help determine assessment, training, and certification standards for  DHS\u2019s requirements development workforce, we spoke with officials from  Defense Acquisition University regarding comparable standards that  apply to the Department of Defense\u2019s requirements workforce. We also  reviewed training standards materials provided by these officials. In  addition, we spoke with JRC and U.S. Coast Guard officials regarding  their requirements development training and certification standards and  reviewed available documentation.", "To inform each of our objectives, we interviewed officials at various levels  throughout DHS to understand their relationship to requirements  development. We interviewed JRC officials to determine their interaction  with components for requirements development, policies, training, and  organizational standards. We also interviewed component-level officials  to understand the extent to which they have implemented requirements  development policies, organizations, and training for their components.  We then interviewed both program officials and program end users to  understand their roles in requirements development, the extent to which  their feedback is incorporated into the requirements development  process, and then the extent to which they receive requirements  development training. In addition, we furthered this understanding through  reviewing component- and program-level documentation including  guidance manuals, mission needs statements, and operational  requirements documents.", "We assessed the components\u2019 requirements development practices  against GAO\u2019s standards for internal control and additional supporting  criteria. The standards identify key principles to help entities achieve their  objectives, such as delivering capabilities to end users. Specifically,  management should establish structure, responsibility, and authority  including developing an organizational structure and documentation. In  addition, management should have a commitment to competence by  developing individuals, such as through training.", "We conducted this performance audit from May 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Marie A. Mak, (202) 512-4841, or makm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, J. Kristopher Keener, Assistant  Director; James Kim; Stephen V. Marchesani; Cody Knudsen; Claire  McGillem; Pete Anderson; Roxanna Sun; and Sylvia Schatz made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Homeland Security invests billions of dollars each year in major acquisition programs to assist in executing its many critical missions. We\u2019ve previously found that DHS agencies had acquisition programs that did not meet requirements. Sometimes operational requirements were poorly defined, increasing the risk of not meeting the needs of end users in the field, such as emergency responders.", "We looked at seven DHS agencies and found that some meet GAO-identified best practices for defining operational requirements and others do not.", "We made 25 recommendations to DHS to improve its agencies\u2019 methods for developing requirements."]}
{"id": "GAO-19-121", "url": "https://www.gao.gov/product/GAO-19-121", "title": "Veterans Affairs: Additional Actions Needed to Increase Veterans' Burial Access", "published_date": "2019-09-30T00:00:00", "released_date": "2019-09-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The VA is responsible for ensuring that veterans have reasonable access to burial options in a national or state veterans' cemetery. In fiscal year 2018 VA estimated that about 92 percent of veterans had reasonable access to burial options, which was an increase from 90 percent in fiscal year 2014 but short of its goal of 96 percent by the end of fiscal year 2017.", "The House Appropriations Committee has expressed concerns that there are geographic pockets where veterans remain unserved by burial options. House Report 115-188 accompanying a bill for the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018, includes a provision for GAO to examine veterans' access to burial options.", "This report (1) describes VA's plan for increasing reasonable access to burial options for veterans and (2) assesses VA's progress in implementing its plan and any challenges experienced. GAO reviewed applicable VA and NCA documents, compared NCA's cost-estimating practices with GAO's cost-estimating 12 steps, and met with cognizant officials regarding NCA's efforts to provide reasonable access to burial options."]}, {"section_title": "What GAO Found", "paragraphs": ["Within the Department of Veterans Affairs (VA), the National Cemetery Administration (NCA) has a plan to establish 18 new national cemeteries to increase reasonable access to burial options for veterans. NCA defines reasonable access as a national or state veterans' cemetery being located within 75 miles of veterans' homes. Key parts of NCA's plan include establishing 13 urban and rural initiative national cemeteries and awarding grant funds to state applicants for establishing new state veterans' cemeteries.", "NCA has made limited progress in implementing its plan to increase burial access and is years behind its original schedule for opening new cemeteries. For example, NCA has opened only two of its planned urban and rural initiative sites and is behind its original schedule for the other 11 (see fig. below). The primary factor delaying NCA's completion of these cemeteries has been challenges in acquiring suitable land.", "NCA has also been challenged in producing accurate estimates of construction costs for most of its rural initiative sites. Cost estimates have increased more than 200 percent (from about $7 million to $24 million) for these sites, and NCA's guidance for developing cost estimates for the cemeteries does not fully incorporate the 12 steps identified in cost-estimating leading practices\u2014such as conducting a risk and uncertainty analysis or a sensitivity analysis. As a result, NCA is not well positioned to provide reliable and valid cost estimates to better inform decisions to enhance veterans' cemetery access."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that NCA fully adopt cost-estimating leading practices into its procedures to assist in improving its cost estimates for establishing cemeteries. NCA concurred with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 1973 the Department of Veterans Affairs (VA) National Cemetery  Administration (NCA) has been responsible for the interment of deceased  servicemembers and veterans. As part of these responsibilities, NCA  ensures that veterans have reasonable access to a burial option in a  national, state, or tribal government veterans\u2019 cemetery. NCA defines  reasonable access as a national or state veterans\u2019 cemetery being  located within 75 miles of veterans\u2019 homes. As of September 2019, NCA  maintains approximately 3.8 million gravesites at 137 national cemeteries  and 33 soldiers\u2019 lots and monument sites, located across 40 states and  Puerto Rico. NCA estimated that more than 2.1 million veterans\u2014 approximately 10 percent of the veterans in the United States\u2014did not  have reasonable access to burial options at the end of fiscal year 2013.", "The Consolidated and Further Continuing Appropriations Act, 2013,  required that VA submit to Congress a strategy to serve the burial needs  of veterans residing in rural areas. This act also included a provision for  us to review VA\u2019s strategy and determine whether it included specific  elements related to providing veterans residing in rural areas with access  to veterans\u2019 cemeteries. VA submitted a strategy in response to the Act\u2019s  requirement, we reviewed the strategy and, in September 2014, we  reported that the strategy included only four of the eight required  elements. We made a recommendation that VA develop and implement  a plan to fully meet the reporting requirements, including the estimated  number and location of unserved veterans and a national map of  cemeteries. VA subsequently implemented this recommendation.", "In June 2017, the House Appropriations Committee expressed concern  that there were geographic pockets in the country where veterans remain  unserved, and that VA had failed to meet its goal of ensuring that  veterans have reasonable access to burial options. House Report 115- 188, to accompany a bill for the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018, included a provision for  us to examine and provide a report on rural veterans\u2019 access to national  cemeteries. This report (1) describes VA\u2019s plan for increasing reasonable  access to burial options for veterans and (2) assesses VA\u2019s progress in  implementing its plan and any challenges experienced.", "For objective one, we reviewed applicable VA and NCA documents  covering fiscal years 2011-2024, such as strategic plans, annual budget  proposals, and press releases on new veterans\u2019 cemeteries, to identify  VA and NCA plans for expanding reasonable access to burial options for  veterans. In addition, we reviewed NCA\u2019s 5-year strategic and long-range  plans and its plans of actions and milestones, as well as VA annual  performance plans. Further, we interviewed knowledgeable NCA officials  to discuss the agency\u2019s strategy for increasing burial access, and whether  NCA has a plan to continually reexamine burial options and implement  necessary changes.", "For objective two, we determined the implementation status of VA\u2019s and  NCA\u2019s plans and evaluated whether timelines and goals had been met.  Specifically, we compared historical information on construction and  project timeline changes from fiscal years 2011-2020 with the information  outlined in NCA\u2019s timeline and goals. We interviewed knowledgeable  NCA officials to gather information on the project timelines and status of  NCA\u2019s urban and rural initiative sites, as well as any challenges  confronted in the implementation of the plans. We also gathered and  reviewed project summary and cost-estimate information on NCA\u2019s urban  and rural initiatives from fiscal years 2011-2020. We conducted an in- depth assessment of the cost-estimating policies and practices NCA uses  to calculate estimated costs for its urban and rural initiatives and other  cemetery construction projects. Specifically, we assessed VA\u2019s 2011  Manual for Preparation of Cost Estimates and Related Documents for VA  Facilities (Manual); VA\u2019s 2011 Architect/Engineer (A/E) Submission  Requirements for National Cemetery Projects Program Guide PG 18-15  Volume D (Guide); and NCA\u2019s Construction Program Conceptual  Estimate Worksheet (Worksheet), and we compared them with the 12- step cost-estimating process established in GAO\u2019s Cost Estimating and  Assessment Guide: Best Practices for Developing and Managing Capital  Program Costs (Cost Guide). Because NCA\u2019s Worksheet along with  VA\u2019s Manual and Guide collectively guide NCA\u2019s cemetery project cost  estimating, we refer to these three documents collectively as \u201cNCA\u2019s cost- estimating guidance\u201d throughout the report.", "In addition, we reviewed NCA\u2019s methodology for determining the  percentage of the veteran population served by a veterans\u2019 cemetery in  order to understand the basis for its estimate. We compared the number  of unserved veterans by using estimated veteran population data from  NCA as well as data from the U.S. Census Bureau. We estimated the  percentage of veterans served by multiplying the percentage of the area  of each census tract in the United States that falls within the service area  of an open veterans\u2019 cemetery by the estimated number of veterans in  the tract, which we derived from the American Community Survey 5-year  estimates for 2013-2017. We totaled these estimates at the county,  state, and national levels to calculate the estimated percentage of  veterans served in the United States. We determined the numbers of  unserved veterans in the actual and planned service areas of the  initiatives by using both NCA\u2019s county-level population data and census  tract data from 2013-2017 to compare the data from the two sources and  to assess whether access to burial options have been or will be expanded  or increased from the urban initiatives and increased from the rural  initiatives. The estimates of veterans within the service area of an open  cemetery that we derived from American Community Survey 5-year data  are statistical estimates that have sampling error associated with them.  We followed the Census Bureau technical guidance for estimating the standard error of census tract population totals from American  Community Survey 5-year data. We express our confidence in the  precision of our estimate as 90 percent confidence intervals. These are  the intervals that would contain the actual population value for 90 percent  of the American Community Survey samples that the Census Bureau  could have drawn. Estimates of total veterans derived from American  Community Survey data are rounded to the nearest 100 unless otherwise  noted.", "We conducted this performance audit from April 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of the National Cemetery Administration", "paragraphs": ["The National Cemeteries Act of 1973 created the modern veterans\u2019  cemetery system. NCA, within VA, manages a majority of veterans\u2019  cemeteries in the United States. In that role NCA maintains existing  national cemeteries and builds new national cemeteries for the nation\u2019s  veterans and their family members. Since 1978 NCA has also provided  funding through VA\u2019s Veterans Cemetery Grants Program (Grants  Program) to help establish, expand, or improve state and tribal veterans\u2019  cemeteries. States and tribal governments seeking funding from the  Grants Program must apply to the VA. Any cemetery established,  expanded, or improved through funding from VA\u2019s Grants Program must  be maintained and operated in accordance with NCA\u2019s operational  standards. Veterans from all 50 states, the District of Columbia, Puerto  Rico, and some U.S. territories are served by national, state, or tribal  cemeteries.", "In addition, over time NCA has changed its policies and procedures to  better fulfill its mission to serve and honor veterans and their family  members. For example, in 2011 NCA lowered its policy threshold for  establishing new national cemeteries from an area having at least  170,000 veterans who are unserved by burial options to an area having  80,000 unserved veterans. NCA established this revised policy  threshold in recognition that many highly populated areas still lacked  reasonable access to a burial option, and based on data and analysis  provided by an independent review of VA\u2019s burial benefits program in  2008. This revised minimum veteran population threshold was chosen  based on data showing that state veterans\u2019 cemeteries funded through  VA\u2019s Grants Program were located in areas that typically served a  maximum of 80,000 veterans within a 75-mile service area. According to  VA documentation, moving to this lower threshold has enabled the  agency to establish new national cemeteries in areas where states may  not have been willing to place them because of the size and cost of  operating a larger state veterans\u2019 cemetery."], "subsections": []}, {"section_title": "NCA\u2019s Various Burial Options", "paragraphs": ["NCA offers a variety of facilities to meet the burial needs of veterans,  including various cemetery configurations that either provide burial  options to eligible veterans or improve their access to burial options, as  shown in table 1."], "subsections": []}, {"section_title": "NCA\u2019s Methodology for Determining Access to Burial Options", "paragraphs": ["NCA uses county-level population data to determine whether veterans  currently have reasonable access to burial options and uses county-level  population projections to support decisions about future cemetery  locations. NCA makes its decisions regarding whether a veteran is served  or unserved based on the county in which the veteran resided, without  reference to the location of the veteran\u2019s actual residence. NCA\u2019s  methodology uses a veteran\u2019s county of residence as a proxy for being  within 75 miles of a veterans\u2019 cemetery."], "subsections": []}]}, {"section_title": "NCA Plans to Establish Eighteen New National Cemeteries and Use Its Grants Program for the Creation of State Veterans\u2019 Cemeteries to Increase Access to Burial Options", "paragraphs": ["NCA\u2019s plan entails establishing 18 new national cemeteries\u2014comprised  of five traditional national cemeteries and 13 urban and rural initiative  national cemeteries\u2014and awarding funds for new state veterans\u2019  cemeteries. In 2014, we reported that NCA estimated approximately 90  percent of the veteran population had reasonable access to burial  options, and that it expected to reach its strategic goal of providing  reasonable access to 96 percent of veterans by the end of fiscal year  2017. Since 2014, NCA has revised its strategic goal to provide  reasonable access to 95 percent of the veteran population, and NCA\u2019s  current long-range plan to achieve this goal covers fiscal years 2018- 2022.", "NCA\u2019s 2014 plan to increase veterans\u2019 access to burial options included  building 18 new national cemeteries as follows:", "Five traditional national cemeteries, to be located in Western New  York; Central East Florida; Southern Colorado; Tallahassee, Florida;  and Omaha, Nebraska. Taken together, according to NCA, these  cemeteries are intended to provide a burial option to an additional  550,000 veterans and their families.", "Five urban initiative cemeteries, to be located in Los Angeles,  California; the San Francisco Bay Area, California; Chicago, Illinois;  Indianapolis, Indiana; and New York, New York. Taken together,  according to NCA, the urban initiative is intended to expand burial  options for approximately 2.4 million additional veterans in certain  urban areas. NCA announced this initiative in 2011 with the purpose  of expanding burial options in urban areas through building  columbaria-only (facilities for cremated remains) national cemeteries  close to the urban core.", "Eight rural initiative cemeteries, to be located in Idaho, Maine,  Montana, Nevada, North Dakota, Utah, Wisconsin, and Wyoming.  Taken together, according to NCA, the intent of the rural initiative is to  increase the burial options for approximately 106,000 additional  veterans in certain rural areas. NCA announced this initiative in 2012  with the purpose of increasing access by establishing new national  cemeteries for states with no open national cemetery and a population  of 25,000 or fewer veterans.", "In addition, since 1978, NCA has used the Grants Program to help  increase veterans\u2019 cemetery access. The Grants Program was  established to complement national cemeteries by assisting state,  territory, and tribal government applicants to establish, expand, or  improve veterans\u2019 cemeteries in order to provide gravesites for veterans  in those areas where NCA cannot fully satisfy their burial needs. As noted  earlier, states and tribal governments seeking grant funding must apply to  the VA. States, funded by the Grants Program, often build in areas with  veteran populations that are too small to qualify for a national cemetery.  NCA prioritizes pending grant applications by giving the highest priority to  cemetery construction projects in geographic locations with the greatest  projected number of veterans who will benefit from the project, as  determined by NCA based on county-level population projections. In  2018, NCA provided funding for a total of 15 grants for the expansion,  improvement, or establishment of state and tribal government veterans\u2019  cemeteries. This includes the establishment of two new state and tribal  government veterans\u2019 cemeteries. In 2019, NCA expects to provide  funding for 17 state and tribal government veterans\u2019 cemetery projects,  three of which would be for new cemeteries."], "subsections": []}, {"section_title": "NCA Has Made Limited Progress in Implementing Its Plan for Increasing Burial Access and Faces Continuing Challenges", "paragraphs": ["While NCA has made some progress in implementing its plan to increase  burial access for veterans, that progress has been limited, as it is years  behind its original schedule for opening new cemeteries. In its efforts,  NCA has experienced three key challenges: (1) acquiring suitable land for  new national cemeteries, (2) estimating the costs associated with  establishing new national cemeteries, and (3) using all available data to  inform how its Grants Program targets unserved veteran populations."], "subsections": [{"section_title": "NCA Has Opened Six New Cemeteries since 2014 but Is Years Behind Its Original Schedule", "paragraphs": ["In 2014, NCA planned to open 18 new sites by the end of fiscal year 2017  to better serve the burial needs of the veteran population. As of  September 2019, NCA has opened four new traditional national  cemeteries\u2014Tallahassee National Cemetery in Tallahassee, Florida;  Cape Canaveral National Cemetery in Mims, Florida; Omaha National  Cemetery in Omaha, Nebraska; and Pikes Peak National Cemetery in  Colorado Springs, Colorado. NCA also opened two of its eight planned  rural initiative cemeteries\u2014Yellowstone National Cemetery in Laurel,  Montana, and Fargo National Cemetery in Harwood, North Dakota. As a  result, according to NCA, by the end of fiscal year 2018 the percentage of  veterans with reasonable access had increased from 90 percent to about  92 percent. As previously discussed, NCA\u2019s goal is to provide 95 percent  of veterans with reasonable access to burial options.", "As we reported in 2014, NCA had initially planned to open all of its 13  urban and rural initiative sites by the end of fiscal year 2017. As shown  in figure 1, NCA had originally estimated completing all five of its urban  initiative sites by the end of fiscal year 2015. However, the completion  dates for all of these sites have slipped multiple times. In July 2019, NCA  officials stated that the planned completion dates for the urban initiative  sites were as follows: October 2019 for Los Angeles, sometime in 2020  for New York and Indianapolis, September 2021 for Chicago, and  sometime in 2027 for San Francisco.", "As shown in figure 2, NCA has opened two of its rural initiative sites, in  Laurel, Montana, and Fargo, North Dakota. However, the completion  dates for the other six rural initiative sites have slipped multiple times. In  September 2019, NCA officials stated that the planned completion dates  for the rural initiative sites were currently Fall 2019 for Twin Falls, Idaho,  Machias, Maine, and Rhinelander, Wisconsin; sometime in 2020 for  Cheyenne, Wyoming; and Summer 2021 for Cedar City, Utah. NCA did  not provide a specific estimated completion date for the site in Elko,  Nevada, affirming that it would be completed \u201cin a future year.\u201d", "When we asked NCA officials why the rural and urban initiative sites were  currently projected to take years longer to complete than originally  planned, they replied that they might have overstated their 2014  expectations for having all initiative sites completed by the end of fiscal  year 2017. NCA officials also stated that it takes at least 12 months for  the land acquisition phase of cemetery construction projects; 9 to 12  months for the design phase; and 12 to 15 months\u2014sometimes up to  30\u2014for the construction phase. According to NCA officials, as of  September 2019, five of the 11 initiative sites had reached the  construction phase, and one of the sites no longer had an estimated  completion date. There were still some outstanding or unresolved issues  that had complicated NCA\u2019s ability to estimate a completion date for the  site in Elko, Nevada. See figure 3 for a timeline of each of NCA\u2019s urban  and rural initiative sites as of September 2019."], "subsections": []}, {"section_title": "NCA Has Faced Challenges in Implementing Its Efforts to Increase Access to Burial Options for Veterans", "paragraphs": ["In executing its plans to increase access to burial options for veterans,  NCA has experienced three key challenges: (1) acquiring suitable land for  new national cemeteries; (2) estimating the costs associated with  establishing new national cemeteries; and (3) using all available data to  inform how its Grants Program targets unserved veteran populations."], "subsections": [{"section_title": "Challenges in Acquiring Land Have Led to Delays in Implementing NCA\u2019s Plan", "paragraphs": ["The primary factor that has led NCA to adjust its timelines for completing  these cemeteries concerns challenges in acquiring suitable land. Such  challenges include difficulty in finding viable land for development, legal  issues related to the acquisitions process, and resistance from the local  community, among others. Four examples are described below, including  two instances in which, as of July 2019, NCA had not yet acquired  suitable land, which may further delay the opening of those specific urban  and rural sites.", "Chicago, Illinois. NCA officials stated that they are on their fifth  attempt to acquire land for the urban initiative site in Chicago, Illinois.  In addition, they said that the environmental assessment process for  the Chicago site is currently underway, and that a site viability  decision will not occur until the environmental assessment process is  completed later in 2019. According to NCA documentation we  reviewed, NCA initiated the land acquisition process for the Chicago  site in June 2011 and planned to complete the process by July 2018.  If the fifth attempt to acquire land is not successful, then NCA will  attempt\u2014for the sixth time\u2014to acquire land. According to NCA  officials, this would result in an additional 12 to 18 months to identify  and evaluate new property for potential acquisition, likely further  delaying the opening of this site. See figure 4 for more details on  NCA\u2019s attempts to acquire land for the urban initiative site in Chicago.", "Elko, Nevada. NCA officials stated that they have identified a top- rated site for the rural initiative site in Elko, Nevada, on land currently  owned by the Bureau of Land Management. However, according to  NCA officials, Congress would need to enact legislation transferring  this land from the Bureau of Land Management to VA before NCA  could begin construction. As of June 2019, Congress had not done  so. According to NCA officials, VA has opened dialogue with local  officials about drafting a utility agreement for the city to construct  infrastructure needed to supply water to the site. Implementation of a  utility agreement would be dependent upon whether future legislation  may potentially be introduced and subsequently passed authorizing  the Bureau of Land Management to permanently transfer property to  VA for national cemetery use. Also, according to NCA officials, once  legislation has passed to allow the transfer of land from the Bureau of  Land Management to VA, they estimate it will take 12 to 18 months for  the land transfer to be completed.", "Indianapolis, Indiana. In a written response, NCA officials stated that  construction for the urban initiative site in Indianapolis, Indiana, has  been delayed by about a year due to a public protest of NCA\u2019s  acquisition of the site because of environmental concerns, which  resulted in a land transfer with the previous landowner in January  2019. In addition, NCA had to conduct a partial project re-design for  the exchanged property. According to NCA\u2019s May 2018 plan of  actions and milestones, it had expected to have acquired the land for  the Indianapolis site by August 2018 and to have completed  construction in December 2019. However, officials told us in  September 2018 that, due to the delays in acquiring the land, NCA  had revised its planned construction completion date to August 2020.", "Los Angeles, California. According to officials, NCA is partnering with  the Veterans Health Administration, which transferred property for the  proposed columbarium at the Los Angeles, California, urban initiative  site. Officials stated that this project was delayed initially due to the  need to remove existing encumbrances on the land (for example,  leases with tenants), among other things. In July 2019, officials stated  that the project is scheduled for completion in October 2019.", "According to NCA officials, unforeseen site conditions can also contribute  to delays in cemetery construction projects. During the design phase, soil  and geotechnical samples are taken but do not cover the entire site. After  excavation begins, issues such as rock formations or hazardous waste  not identified during the geotechnical investigation may create challenges  to developing land for cemetery use. For example, in July 2019 NCA officials stated that the urban initiative site in San Francisco had  encountered major geotechnical and soil issues, causing the project  completion to slip to 2027. Also, according to NCA\u2019s 2017 annual status  report to Congress on new national cemeteries, the cemetery  construction contract for a new cemetery construction project in Western  New York could not begin solicitation until additional parcels of land had  been acquired. Those parcels of land have a gas well and a gas pipeline  that must be relocated. According to NCA officials, as of September 2019,  six of the 11 urban and rural initiative sites had not yet begun to be  excavated, and any issues that arise during the excavation process at  these sites could pose further scheduling delays.", "NCA\u2019s Cost Estimates for Most of Its Rural Initiative Sites Have  Increased Significantly  We found that NCA\u2019s cost estimates for seven rural initiative sites have  increased significantly above what NCA officials had initially estimated.  In its strategy, NCA had estimated that the construction cost estimate for  each of the seven rural initiative sites would be approximately $1 million  (totaling approximately $7 million). However, NCA officials told us in  August 2018 that the construction cost estimates for these sites had  increased to more than $3 million each (totaling almost $24 million). This  amounts to a cost increase of more than 200 percent. Further, the  information they provided was not always consistent. For example, in July  2018 NCA officials provided us the average land acquisition and  construction costs for the urban and rural initiatives. According to the  document they provided, the average construction cost for each urban  initiative cemetery is $7.5 million. However, in August 2018 NCA stated in  a written response that the construction cost estimates for each of the  urban initiatives ranged from approximately $9 million to more than $22  million, reflecting an average cost of $13.6 million.", "NCA\u2019s cost-estimating guidance used to prepare construction cost  estimates does not fully incorporate the 12 steps identified in our Cost  Guide that should result in reliable and valid estimates that management  can use to make informed decisions, as shown in table 2. Appendix I  provides a detailed summary of our assessment of NCA\u2019s cost-estimating  guidance.", "Specifically, NCA\u2019s cost-estimating guidance fully met one step,  substantially met four steps, partially met four steps, minimally met two  steps, and did not meet one step. For example:", "NCA\u2019s cost-estimating guidance fully met the step of \u201cobtaining the  data\u201d in that it requires a market survey that explores all factors that  will affect the bid cost and collects valid and useful historical data to  develop a sound cost estimate.", "NCA\u2019s cost-estimating guidance substantially met the step of  \u201cupdating the estimate\u201d in that it requires cost estimates to be  regularly updated. For instance, it requires an updated cost-estimating  report at each stage of the design of the construction project.", "NCA\u2019s cost-estimating guidance minimally met the step of \u201cconducting  a risk and uncertainty analysis\u201d in that, while it mentions the inclusion  of a risk analysis, it does not describe what a risk analysis is and how  it relates to cost. Additionally, none of the guidance we reviewed  contains any discussion of risk management.", "NCA\u2019s cost-estimating guidance did not meet the step of \u201cconducting  a sensitivity analysis.\u201d According to our Cost Guide, a sensitivity  analysis should be included in all cost estimates because it examines  the effects of changing assumptions and ground rules. Because  uncertainty cannot be avoided, it is necessary to identify the cost  elements that represent the most risk, and cost estimators should if  possible quantify the risk.", "NCA uses multiple guidance documents on cost estimation and requires  that managers and contractors use all of these documents in  implementing their projects. Specifically, NCA uses VA\u2019s 2011 Manual for  Preparation of Cost Estimates and Related Documents for VA Facilities  (Manual); VA\u2019s 2011 Architect/Engineer (A/E) Submission Requirements  for National Cemetery Projects Program Guide PG 18-15 Volume D  (Guide); and NCA\u2019s Construction Program Conceptual Estimate  Worksheet. We refer to these documents collectively as \u201cNCA\u2019s cost- estimating guidance.\u201d", "We previously reported on VA\u2019s management of minor construction  projects and made several recommendations, including that the Veterans  Health Administration revise its cost-estimating guidance to incorporate  the 12 steps presented in the Cost Guide, to help VA have greater  assurance that its cost estimates for minor construction projects are  reliable. VA concurred and stated that it would ensure that the Veterans  Health Administration update its cost-estimating guidance by  incorporating the 12 steps outlined in the Cost Guide, as applicable. As  of August 2019, VA had not taken any action to implement this  recommendation. The guidance document it plans to update, the VA  Manual, is also used by NCA. Further, NCA uses additional guidance documents to develop cost estimates for its cemetery construction  projects\u2014including the urban and rural initiatives\u2014that do not fully  incorporate the 12 steps presented in the Cost Guide. Without NCA\u2019s  revising its cost-estimating guidance to more fully reflect the 12 steps in  the Cost Guide, including \u201cconducting a risk and uncertainty analysis,\u201d  NCA will not be well-positioned to provide reliable cost estimates to VA  and enable it to make informed decisions regarding the management of  cemetery construction projects."], "subsections": []}, {"section_title": "NCA\u2019s Grants Program Does Not Use All Available Data for Targeting Unserved Veteran Population Sites", "paragraphs": ["As noted earlier, the Grants Program is part of NCA\u2019s plan to increase  veterans\u2019 reasonable access to burial options. According to NCA officials,  their plan to meet their strategic goal of 95 percent of veterans being  served by burial options relies, in part, on the state and tribal government  efforts funded by the Grants Program. The Grants Program, in turn, relies  on states and tribal governments applying for funding to build new  cemeteries or expand existing cemeteries. An NCA official told us that  NCA does not have the authority to formally request that a state seek  grant funding to expand access in an unserved area. However, according  to VA officials, the Grants Program has had informal discussions with  states that it believes have larger concentrations of unserved veterans, in  order to encourage grant applications to provide increased burial access  for unserved veteran populations.", "When reviewing grant applications, NCA considers a number of factors,  including how the grant would enhance access for unserved veterans.  NCA officials stated that they use the VA\u2019s county-level population data to  identify veteran population areas unserved by national, state, or tribal  government veterans\u2019 cemeteries. This analysis also allows NCA to  project where additional state and tribal government veterans\u2019 cemeteries  may be most needed. Specifically, NCA has ranked what it identified as  the 40 largest currently unserved veteran population areas. NCA  performs this ranking at the county level, not the more precise census  tract level, although as we have previously reported it has the technical  ability to use census tract data.", "In September 2014, we reported that NCA was using population data at  the county level to identify veterans not served by burial options, and that  using population data at the census tract level would enhance NCA\u2019s  management of the national cemetery program. Specifically, we  recommended that NCA use its existing capabilities to estimate the  served and unserved veteran populations using census tract data. This  would have allowed them to make better-informed decisions concerning  where to locate new national cemeteries, as well as identify which state  and tribal government cemetery grant applications would provide  reasonable burial access to the greatest number of veterans. However,  VA did not concur with that recommendation. In its comments on our draft  report, VA agreed that census tract data may yield more precise  information than county-level population data, but it disagreed with our  conclusion that the use of census tract data would have helped VA to  make better-informed decisions regarding the location of burial options.", "For this review, we performed an analysis using census tract data to  examine the 40 prospective sites that NCA has identified as the currently  largest unserved areas, using current veteran population data. Our  analysis yielded estimates for veterans in the service areas for these  prospective sites that differed substantially in some instances from the  numbers used by NCA (see figure 5). For example, NCA ranked Erie,  Pennsylvania, as 4th on its list of prospective sites, based on its estimate  that an additional 45,154 veterans could be served by a cemetery at this  location. However, using census tract data we estimate that only about  10,000 veterans could be served there, resulting in a lower priority for  Erie, Pennsylvania, on this list of prospective sites. Similarly, the county- based methodology used by NCA ranked Decatur, Alabama, as 25th on  the list of prospective sites, while our methodology based upon nearby  census tracts placed it 2nd on the list by estimated number of veterans in  the service area. Thus, even though it could serve many additional  veterans, Decatur, Alabama, would not be ranked highly on the list for  funding using NCA\u2019s methodology.", "By using the more precise census tract data to help inform its grant- making decisions, NCA could enhance its ability to implement its plan to  provide burial options to unserved veterans. Comparing estimates of  unserved veterans based on current census tract data with such  estimates based on current county-level data can be a useful supplement  to NCA\u2019s current reliance on long-term projected county-level population  data. Comparing census tract data with county-level data could also  identify areas where the county-level projections might be overridden or  require additional scrutiny. This could position NCA to better identify  those areas of the country that will have the most significant unserved  veteran populations. Additionally, this could help NCA refine its current  plans or develop new ones, as it deems appropriate. We therefore  continue to maintain the validity of our 2014 recommendation for VA to  use census tract data to estimate the served and unserved veteran  populations to help inform its plans for providing reasonable access to  burial options."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["By NCA\u2019s estimates, more than 2.1 million veterans\u2014about 10 percent of  the veterans in the United States\u2014did not have reasonable access to  burial options at the end of fiscal year 2013. According to NCA, its plan  had helped increase the percentage served by burial options to about 92  percent of the veteran population by the end of fiscal year 2018.  However, completion of some of the urban and rural sites that are part of  NCA\u2019s plan is currently estimated to take 5 years or longer than planned  at significantly higher cost, in part because construction cost estimates for  the remaining sites may be unreliable. Without NCA\u2019s revising its cost- estimating guidance to more fully reflect the 12 steps in the Cost Guide,  including \u201cconducting a risk and uncertainty analysis,\u201d NCA will not be  well-positioned to provide reliable cost estimates to VA and enable it to  make informed decisions regarding the funding and oversight of NCA\u2019s  ongoing minor construction projects to enhance veterans\u2019 burial options."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Veterans Affairs should ensure that the Under Secretary  for Memorial Affairs update its cost-estimating procedures for cemetery  construction projects to fully incorporate the 12 steps identified in the  GAO Cost Estimating and Assessment Guide: Best Practices for  Developing and Managing Capital Program Costs."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for review and comment. In  written comments, VA concurred with our recommendation. VA also  provided technical comments, which we incorporated as appropriate.  VA\u2019s comments are printed in their entirety in appendix II.", "In its technical comments, VA disagreed with our finding that NCA had  made limited progress implementing its plan for increasing burial access  for veterans and stated that NCA had instead made significant progress.  As we note in this report, in 2014, NCA planned to open 18 new sites by  the end of fiscal year 2017 to better serve the burial needs of the veteran  population. However, as of September 2019, only six of the planned sites  were open, with NCA years behind its original schedule. For this reason,  we characterized the progress as \u201climited.\u201d While the progress has been  limited, it is important to note that the opening of the six sites has  increased accessibility of burial options to veterans.", "VA also stated that it continues to disagree with our 2014  recommendation that VA use census tract data to estimate the current  served and unserved veteran populations to inform its plans for providing  reasonable access to burial options. In its written response, VA stated  that we recommended NCA use census tract rather than county-level  data. However, that is not what we recommended. As we stated in this  report, comparing estimates of unserved veterans based on current  census tract data with estimates based on current county-level data  would provide a useful supplement to NCA\u2019s current reliance on long-term  projected county-level population data. Specifically, NCA would be better  positioned to identify those areas of the country that will have the most  significant unserved veteran populations and refine its current plans or  develop new ones, as it deems appropriate.", "We are sending copies of this report to interested congressional  committees and the Secretary of Veterans Affairs. In addition, the report  is available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9627 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff members who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: GAO Assessment of the National Cemetery Administration\u2019s (NCA) Guidance for Developing Cemetery Construction Cost Estimates", "paragraphs": ["We compared NCA\u2019s cost-estimating guidance with the 12 steps  identified in the GAO Cost Estimating and Assessment Guide: Best  Practices for Developing and Managing Capital Program Costs (Cost  Guide). We found that NCA\u2019s cost-estimating guidance on preparing cost  estimates for cemetery construction projects\u2014specifically Department of  Veterans Affairs\u2019 (VA) Manual for Preparation of Cost Estimates &  Related Documents for VA Facilities (Manual), VA\u2019s Architect/Engineer  Submission Requirements for National Cemetery Projects, Program  Guide 18-15 Volume D (Guide), and NCA\u2019s Construction Program  Conceptual Estimate Worksheet (Worksheet)\u2014does not fully incorporate  these 12 steps, as shown in table 3. The guidance incorporates some of  the 12 steps to some degree, but not others, raising the possibility of  unreliable cost estimates for NCA\u2019s urban and rural initiatives.  Specifically, NCA\u2019s guidance on preparing cost estimates:  fully or substantially met five of the 12 steps, partially met four of the 12 steps, and minimally met or did not meet three of the 12 steps."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Diana Maurer, (202) 512-9627 or maurerd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Brian Lepore, Director (Retired);  Maria Storts, Assistant Director; Pamela Nicole Harris, Analyst-in-Charge;  Brian Bothwell, Jennifer Echard, Alexandra Gonzalez, Jason Lee, Amie  Lesser, Serena Lo, John Mingus, Brenda Mittelbuscher, Maria Staunton,  Frank Todisco, Cheryl Weissman, and John Wren made significant  contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Veterans Affairs is responsible for ensuring that veterans have reasonable access to burial options in a national or state veterans\u2019 cemetery. It defines reasonable access as a cemetery within 75 miles of veterans\u2019 homes. It estimated that about 92% of veterans had reasonable access in fiscal year 2018.", "VA\u2019s National Cemetery Administration has a plan to establish 18 new national cemeteries to increase access. However, it is years behind schedule for opening new cemeteries and its cost estimates for some sites have more than doubled.", "We recommended the National Cemetery Administration adopt better cost-estimating practices."]}
{"id": "GAO-18-379", "url": "https://www.gao.gov/products/GAO-18-379", "title": "Emergency Communications: Increased Regional Collaboration Could Enhance Capabilities", "published_date": "2018-04-26T00:00:00", "released_date": "2018-05-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["During emergencies, reliable communications are critical. Disasters, such as 2017's hurricanes, continue to test the nation's emergency communications capabilities. As disasters can cross jurisdictional boundaries, collaboration within and across regions is very important.", "GAO was asked to review implementation of the Post-Katrina Act's provisions related to disaster preparedness, response, and recovery. This report examines: (1) challenges related to emergency communications that selected stakeholders have experienced; (2) their views on DHS's emergency communications assistance; and (3) the regional working groups established by the Post-Katrina Act and their effect on emergency communications capabilities. GAO reviewed DHS's reports and grant data for fiscal years 2011\u20132016 and conducted case studies of three cities\u2014Houston, Los Angeles, and Boston\u2014selected based on the number of declared disasters, DHS grant funding, and geographic diversity. GAO interviewed DHS officials; leaders of all 10 regional working groups and other stakeholders, including public safety officials in the case study cities; and others chosen for their expertise."]}, {"section_title": "What GAO Found", "paragraphs": ["Selected first responders and public safety officials identified various challenges related to emergency communications. These challenges include attaining the interoperability of communication systems, obtaining funding, ensuring ongoing training, and increasing the emphasis on communications during emergency response exercises. For example, some stakeholders told GAO about challenges related to equipment that is not interoperable, and others said first responders need training after investments are made in new interoperable communications equipment.", "To help address these challenges and as required by the Post-Katrina Emergency Management Reform Act of 2006 (Post-Katrina Act), the Department of Homeland Security (DHS) has provided technical assistance, such as training, and Federal Emergency Management Agency (FEMA) grants. It has also established regional emergency communications coordination working groups, which bring together stakeholders from different levels of government and the private sector within FEMA's 10 regions.", "While emergency communications challenges persist, stakeholders told GAO that DHS's technical assistance generally meets their needs and that FEMA grants have helped them enhance emergency communications capabilities. In particular, stakeholders found training for specific communications positions was useful. Houston-area officials said this training was critical in preparing first responders for Hurricane Harvey. Some stakeholders told GAO that FEMA grants helped them address needs that would otherwise go unfunded, including interoperable communications networks and equipment.", "GAO found that the regional working groups have enhanced emergency communications capabilities through building relationships and sharing information. Within the respective regions, group members have:", "assisted each other during disasters and emergencies,", "developed technical solutions to enhance interoperability, and", "addressed policy concerns, such as the use of interoperable radio channels during emergencies.", "However, most regional group leaders told GAO that more collaboration across the groups was needed. GAO's prior work has also found that including all relevant participants can enhance collaborative efforts. Further, DHS's strategic plan for emergency communications established a vision of collaboration among stakeholders across the nation. While FEMA has encouraged collaboration among regional working-group leaders, cross-regional efforts have been limited and do not involve all group members. Developing and implementing an appropriate ongoing mechanism for collaboration could enhance emergency communications capabilities, such as by helping group members address common challenges. Without ways for all members of these groups to collaborate across regions, members may be missing opportunities to share information and leverage the knowledge and experiences of their counterparts throughout the nation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FEMA should work with regional working-group members to reach consensus and implement an ongoing mechanism, such as a national-level working group, to encourage nationwide collaboration across regions. DHS concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["For first responders in emergency situations, reliable communications are  critical for a rapid and sufficient response. Hurricane Katrina exposed  gaps in how federal, state, and local entities responded to the  catastrophic storm, gaps that include revealing that the equipment the  first responders used for emergency communications were often not  operable and interoperable. Congress passed the Post-Katrina  Emergency Management Reform Act of 2006 (Post-Katrina Act) to  improve the federal government\u2019s preparation for and response to natural  and manmade disasters. Among the more than 300 reforms in the Post- Katrina Act, two of the provisions relate to emergency communications  during disaster response and recovery. These provisions required  that the Department of Homeland Security (DHS) provide assistance  to support the rapid establishment of interoperable emergency  communications in urban areas and other areas deemed to be  consistently at a high level of risk from disasters; and  the establishment of regional emergency communications  coordination working groups (RECCWG) in each of the 10 Federal  Emergency Management Agency (FEMA) regions.", "While DHS has provided assistance in the form of technical assistance  and funding and Congress has established the RECCWGs (commonly  pronounced rec-wigs), natural disasters such as hurricanes Harvey, Irma,  and Maria in 2017 continued to test the nation\u2019s emergency  communications capabilities. These types of events can cross  jurisdictional borders, highlighting the critical need for collaboration of first  responders and public safety officials both within and across regions.", "You asked us to evaluate how the implementation of the Post-Katrina  Act\u2019s provisions has affected disaster preparedness, response, and  recovery in general. In this report, we examined:  the challenges selected stakeholders have experienced related to  emergency communications;  the emergency communications assistance\u2014technical assistance and  funding\u2014provided by DHS and selected stakeholders\u2019 views on these  efforts; and  the RECCWGs established by the Post-Katrina Act and their effect on  emergency communications capabilities.", "To address these objectives, we reviewed RECCWG annual reports from  2011 to 2016, the most recent years available. We also reviewed relevant  reports and documentation from DHS\u2014such as reports on national  preparedness and on specific emergency incidents and technical  assistance offerings\u2014as well as other documents we identified through a  literature search. We analyzed FEMA data on preparedness grant funding  from fiscal years 2011 to 2016. After reviewing relevant documentation  and discussing the data with FEMA staff, we determined that the data  were sufficiently reliable to describe the approximate total amounts of  funding for each grant program that had been provided to support  emergency communications.", "In addition, we interviewed DHS officials from FEMA and the Office of  Emergency Communications (OEC). We selected 41 emergency  communications stakeholders and through interviews or written  responses, obtained their perspectives on the general topics covered in  our review\u2014challenges relating to emergency communications, DHS  technical assistance and grants, and the RECCWGs. These stakeholders  included 20 RECCWG leaders (representing all 10 FEMA regions)  representatives of 2 public safety associations and 2 tribal emergency-  management organizations; and 17 other public safety officials and first  responders with knowledge of emergency communications. We selected  these individuals based on their involvement with the RECCWGs, as part  of our case studies (described below), or because of their emergency  communications experience. We conducted case studies of emergency  communications in Houston, Boston, and Los Angeles. We selected  these urban areas to include variation in geographic location, in the types  of declared disasters and emergencies experienced from 2011 to 2016,  and in the amounts of DHS grant funding for emergency communications  received from fiscal years 2011 to 2016. For each case study we  reviewed documents about emergency communications in that urban  area, such as reports about emergency events or articles identified in our  literature search, and interviewed multiple stakeholders, including the  relevant statewide interoperability coordinator and FEMA regional  emergency communications coordinator, a city or county emergency  manager, at least one first responder with knowledge of emergency  communications, and other selected public safety officials. While the  results from our case studies and interviews are not generalizable, they  provide illustrative examples of challenges related to emergency  communications, views on DHS-provided technical assistance and  funding, and how the RECCWGs have enhanced emergency  communications capabilities. We compared the collaborative efforts of the  RECCWGs\u2019 and FEMA\u2019s efforts to facilitate such collaboration with the  National Emergency Communications Plan, as well as practices for  enhancing interagency collaboration that we identified in prior work and  federal standards for internal control.", "We conducted this performance audit from December 2016 to April 2018  in accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Effective communications are vital to first responders\u2019 ability to respond to  emergencies and ensure the safety of both their personnel and the public.  In particular, first responders use communications systems to gather  information, coordinate a response, and request additional resources and  assistance from neighboring jurisdictions and the federal government.", "First responders use different communications systems, such as land  mobile radio (LMR) and commercial wireless services.", "LMR: These systems are the primary means for first responders to  gather and share information while conducting their daily operations  and to coordinate their emergency response efforts. LMR systems are  intended to provide secure, reliable voice communications in a variety  of environments, scenarios, and emergencies. Across the nation,  there are thousands of separate LMR systems. They operate by  transmitting voice communications through radio waves at specific  frequencies and channels within the radio frequency portion of the  electromagnetic spectrum.", "Commercial wireless services: For data transmissions (such as  location information, images, and video) public safety entities often  pay for commercial wireless services. Some jurisdictions also use  commercial wireless services for voice communications.", "These systems must work together, or be interoperable, to ensure  effective communication. Emergency communications interoperability  refers to the ability of first responders and public safety officials to use  their radios and other equipment to communicate with each other across  agencies and jurisdictions when needed and as authorized, as shown in  our hypothetical example of response to a fire in figure 1.", "First responders may use designated radio frequencies\u2014known as  interoperability channels\u2014to help communicate among different  jurisdictions. Certain interoperability channels have been designated for  federal agencies to communicate with non-federal agencies, and others  have been designated for use at the state and local levels.", "OEC, created within DHS in 2007, has taken a number of steps aimed at  supporting and promoting the ability of public safety officials to  communicate in emergencies and work toward operable and  interoperable emergency communications nationwide. OEC develops  policy and guidance supporting emergency communications across all  levels of government and various types of technologies. OEC also  provides technical assistance\u2014including training, tools, and online and  on-site assistance for federal, state, local, and tribal first responders. Also  as required by the Post-Katrina Act, OEC developed the National  Emergency Communications Plan in 2008 and worked with federal, state,  local, and tribal jurisdictions to update it in 2014 to reflect an evolving  communications environment. The long-term vision of the plan\u2014which  OEC views as the nation\u2019s current strategic plan for emergency  communications\u2014is to enable the nation\u2019s emergency response  community to communicate and share information across levels of  government, jurisdictions, disciplines, and organizations for all threats and  hazards, as needed and when authorized.", "FEMA is responsible for coordinating government-wide disaster response  efforts, including on-the-ground emergency communications support and  some technical assistance. Additionally, FEMA provides a range of grant  assistance to state, local, tribal, and territorial entities, including  preparedness grants that can be used for emergency communications.  FEMA provides assistance to the RECCWGs, which report to their  respective FEMA regional administrator. A chair and co-chair serve as the  leaders for each RECCWG and provide direction in determining activities  and priorities. These groups are comprised of federal, state, and local  officials, and coordinate with private sector stakeholders. For example,  members include representatives from local fire departments, state and  local police departments, tribal officials, telecommunications companies,  and federal agencies. Figure 2 shows the member states and territories  that compose each group.", "The Post-Katrina Act established the RECCWGs and requires each  group:  to assess local emergency communications systems to meet goals of  the National Emergency Communications Plan,  to ensure a coordination process for multijurisdictional and multi- agency emergency communications networks through the expanded  use of mutual aid agreements for emergency-management and  public-safety communications, and  to coordinate support services and networks designed to address  immediate needs in responding to disasters, acts of terrorism and  other manmade disasters.", "According to FEMA officials, these groups are run by their members and  determine their own activities. FEMA plays a role in facilitating the groups  and provides some administrative support. Each group reports annually  on the status of the region\u2019s operable and interoperable emergency- communications initiatives. In these reports, the groups describe how  they fulfill their responsibilities and identify areas for improvement. FEMA  compiles the reports into a RECCWG annual report with an executive  summary and distributes it to the heads of OEC, the Federal  Communications Commission, and the National Telecommunications and  Information Administration, as well as to the groups themselves, which  may further distribute the final report as they see fit."], "subsections": []}, {"section_title": "Selected Stakeholders Cited Ongoing Interoperability, Funding, and Training Challenges", "paragraphs": ["We identified several prevalent challenges to emergency communications  based on our analysis of RECCWG annual reports, case studies, and  interviews with emergency communications stakeholders. These  challenges included achieving the interoperability of communication  systems, obtaining funding, ensuring ongoing training, and increasing the  emphasis on communications during emergency response exercises. As  discussed in more detail later, DHS technical assistance and grant  programs as well as coordination efforts of the RECCWGs have focused  on addressing these ongoing challenges."], "subsections": [{"section_title": "Interoperability Challenges", "paragraphs": ["We identified ongoing technical and non-technical challenges in achieving  interoperability of emergency communications systems. In the 2016  RECCWG annual report, most of these groups (7 of 10) cited  interoperability as a challenge to emergency communications in their  regions. We have reported over the years that interoperability issues  can affect mission operation and put first responders and the public at risk  when responding officials cannot communicate with one another."], "subsections": [{"section_title": "Technical Challenges", "paragraphs": ["Interoperability challenges can exist due to technical issues such as  equipment\u2019s incompatibility. As mentioned previously, first responders  primarily rely on LMR to communicate and coordinate during  emergencies. Although LMR systems have similar components, such as  handheld portable radios and mobile radios mounted in vehicles, systems  that operate on different radio frequency bands are not always  interoperable, making it difficult for different jurisdictions to communicate  with each other without technical solutions such as multi-band radios and  interoperable gateways. Within Los Angeles County, local stakeholders  told us that many jurisdictions use LMR systems that operate on different  radio frequency bands across the area\u2019s 88 cities and 56 law enforcement  agencies. When an emergency involves first responders from a variety of  jurisdictions, communication among them can be challenging. For  example, one stakeholder told us about an incident in September 2015  where a carjacking turned into a car chase through multiple jurisdictions  before the suspect barricaded himself with hostages in a restaurant. The  restaurant was surrounded by multiple law enforcement entities and none  of them could immediately communicate with each other since their LMR  systems operated on different radio frequency bands. According to this  stakeholder, this interoperability challenge was dangerous because the  officers could not share information such as a description of the  suspect.", "Interoperability challenges can also exist because of a reliance on  commercial wireless providers for voice and data emergency  communications. In such cases, if the commercial network is overloaded  or damaged, first responders could be unable to communicate within their  own agency. This situation could also result in interoperability challenges  when an agency\u2019s first responders cannot communicate with other  jurisdictions. According to a 2017 OEC report, reliance on commercial providers for first responders\u2019 voice and data access can be problematic  for a variety of reasons\u2014including that they must share these networks  with the public. According to the report, recent events around the country  have demonstrated that regional and city commercial networks are  sometimes overwhelmed and compromised by both routine events and  large gatherings of people. For instance, the report stated that during the  2017 Mardi Gras celebrations in New Orleans, first responders\u2019 wireless  voice and data connections were impaired while responding to an  accident along the parade route, possibly because of the spike in cellular  usage by the public. Additionally, two stakeholders from the same  region told us that a state in their region does not have a statewide LMR  system and relies on commercial wireless service for emergency  communications; such reliance could cause interoperability challenges in  the event of an emergency.", "The First Responder Network Authority (FirstNet) is working to establish a  nationwide dedicated network for public safety use that is intended to  foster greater interoperability, support important data transmissions, and  meet public safety officials\u2019 reliability needs. FirstNet is working with five  jurisdictions designated as \u201cearly builder projects\u201d of the public-safety  broadband network that are deploying local and regional public-safety  broadband networks similar to what FirstNet must do on a national  scale."], "subsections": []}, {"section_title": "Non-Technical Challenges", "paragraphs": ["Interoperability challenges can also result from non-technical or human  factors such as a lack of coordination or not properly using interoperability  channels. Additionally, as we reported in 2016, 23 states\u2019 responses to  our survey indicated that they have experienced interoperability difficulties  when communicating or attempting to communicate with federal partners  during disasters. For example, following Hurricane Harvey, stakeholders  with the City of Houston and Harris County reported interoperability  challenges when they were unable to communicate with members of  FEMA\u2019s Urban Search & Rescue teams deployed to the area. However,  according to stakeholders we interviewed, they were initially unaware  these teams were operating in the area because the teams did not share  information\u2014including the LMR channels on which they were operating\u2014 with local first responders. According to a stakeholder from the State of  Texas this was a communications coordination challenge. Stakeholders  from the City of Houston, Harris County, and the State of Texas told us  that having this information would have been useful to help coordinate  emergency response. FEMA officials told us that they were aware of this  issue, which they noted was an isolated incident, and have emphasized  to these teams the importance of sharing this information in the future.", "We also found that at least one stakeholder in each of our case study  locations identified challenges due to first responders not using  interoperable LMR channels properly. Additionally, a report about the  response to the Boston Marathon bombings stated that first responders  underutilized dedicated channels or had difficulty accessing them, a  situation that limited coordination. Two stakeholders in Boston told us  that officials in the city develop a comprehensive communications plan for  major events to help allow all levels of government to better  communicate, but one of these stakeholders said there is a continued  need for training on using interoperability channels. As discussed later,  DHS offers technical assistance and grants to improve interoperability."], "subsections": []}]}, {"section_title": "Challenges with Training and Exercises", "paragraphs": ["Based on RECCWG annual reports, our case studies, and interviews with  stakeholders, we identified: (1) an ongoing need for training and (2) the  lack of a communications component in emergency response exercises  as both challenges to emergency communications. Stakeholders in each  of our three case study locations told us there is an ongoing need for  training and practice in using emergency communications equipment.  Additionally, this issue was raised in a recent RECCWG annual report  and a report about the response to the 2013 Boston Marathon bombing.  Stakeholders in two of our case study locations, Los Angeles and Boston,  told us that first responders continue to need training after investments  are made in new interoperable communications equipment, posing an  ongoing need for training. In addition, stakeholders from all three of our  case study locations told us that first responders need training on the  proper use of interoperability channels. For example, this gap in training  was the case during the response to the Boston Marathon bombing when  responders used their everyday channels rather than interoperable  channels. If all responders are not operating on the same channels, there  is the possibility of missing critical information. Additionally, with staff  turnover and position changes, four stakeholders told us there is a  constant need to educate first responders and other personnel. For  example, officials from one department told us that emergency  communications training is always a challenge with their approximately  10,000 personnel. Other stakeholders also told us that public safety  officials must know how to properly use new technologies and that  evolving technology requires additional training. OEC officials said that  their training and technical assistance has evolved to address new and  emerging technologies such as broadband. For example, OEC\u2019s current  technical assistance catalog contains new or revised offerings on topics  related to Next Generation 911 such as the technical and procedural  challenges associated with integrating digital communications into these  911 systems. OEC officials told us they work with various emergency  communications stakeholders, such as state and local agencies, to stay  informed about training needs.", "Exercises\u2014which can be planned and carried out at the federal, state, or  local level\u2014are important in preparing for emergencies because they can  expose challenges, which can then be addressed before an actual  emergency, according to stakeholders we interviewed. According to OEC  officials, these exercises are intended to simulate large-scale disasters or  emergencies and bring participants (including first responders, state and  federal officials, hospital personnel, etc.) together to test equipment and actual response procedures. According to DHS\u2019s Interoperability  Continuum, implementing effective exercise programs to practice  communications interoperability is essential for ensuring that the  technology works and that first responders are able to effectively  communicate. One stakeholder in Houston told us that planned events  prior to Hurricane Harvey revealed that many first responders in the area  were not comfortable using interoperability channels because they did not  typically operate on these channels or did not need to use radios for their  daily work. After planned events (such as the 2017 Super Bowl), they  gained experience and familiarity, and were able to use these  interoperability channels without incident during the response to  Hurricane Harvey, according to this stakeholder.", "According to RECCWG annual reports in 2015 and 2016, major  emergency-response exercises often do not include a large  communications component, which can limit the preparedness of state  and local public safety officials. Additionally, the 2016 RECCWG annual  report states that in a large-scale disaster, compromised or insufficient  communications can have dramatic effects on response efforts. All 10  RECCWGs agreed on the need to test communications during  emergency response exercises, and two of these groups cited this need  as a specific priority for the upcoming year. FEMA officials told us they  are working to build scenarios into exercises that will also help to test  communications. Three stakeholders told us that during large-scale  events, there is still too often an assumption that emergency  communications systems will remain operational in the event of an  emergency. The stakeholders said exercises are more beneficial and  realistic when communications personnel are included in exercise  planning and the exercises include a communications component. OEC  officials told us that communications are frequently either omitted from or  only notionally included in exercises and assessments, and because of  this situation, OEC offers training on planning exercises. As discussed  later, DHS offers technical assistance to help address the above  challenges related to training and exercises."], "subsections": []}, {"section_title": "Funding Challenges", "paragraphs": ["Based on RECCWG annual reports and interviews with emergency  communication stakeholders we identified challenges in obtaining funding  for acquiring and maintaining interoperable equipment and systems, as  well as for travel and training. For example, a recent RECCWG annual  report noted that determining funding sources to address interoperability  needs was a challenge. This report raised concerns that two federal  grant programs that jurisdictions previously used to address  interoperability needs are no longer funded. Stakeholders told us that  DHS grant programs have been important for emergency  communications projects in their regions. They also noted that within a  jurisdiction many projects compete for a limited amount of funding. For  example, one stakeholder explained that even after his jurisdiction used a  DHS grant to purchase a new LMR system, the jurisdiction must continue  to seek funding to upgrade and maintain the system. Further, one recent  RECCWG annual report identified funding limitations as causing many  states and agencies to make trade-offs among capabilities essential for  operable and interoperable communications\u2014such as deciding whether  to upgrade equipment or systems. As existing communications systems  and equipment continue to age or become obsolete, these trade-offs put  the agencies at an increasing risk of not being able to effectively  exchange communications during an event response, according to this  recent RECCWG annual report.", "Additionally, leaders from all 10 RECCWGs also told us funding was  currently a challenge to emergency communications in their region. For  example, half (10 of 20) of these group cited limited funding to upgrade or  replace equipment as a challenge in their region. According to a leader in  one region that identified funding as a major challenge, many entities  within the region need funding for this purpose. They noted that efforts to  find alternative funding sources have not been successful and that as  emergency communications technology evolves it will grow increasingly  difficult for first responders to keep pace with the changes. Likewise,  representatives from one public safety association told us that  maintaining interoperable communications is a challenge due to the  expense of new radios and software. As a result, they noted that  jurisdictions, particularly those in less populated areas, might decide to  purchase less costly equipment that is not interoperable. Such purchases  can result in emergency communications challenges. The leader of one  RECCWG told us that due to consistent budget shortfalls over the past  several years, one state in the region has deferred maintenance of  communications infrastructure. This deferral is expected to create more  expensive problems in the future.", "Leaders from 5 of the 10 RECCWGs told us they have also experienced  funding challenges related to travel or training. For example, one regional  group leader told us that funding is a challenge because funding shortfalls  prevent personnel from attending courses that would increase their  knowledge of equipment and new technologies. Another regional group  leader told us that funding is a challenge in that travel money is very  limited. Given the large geographic area covered by this RECCWG, it is  expensive for group members to travel to meetings, inhibiting participation  and information sharing at RECCWG meetings."], "subsections": []}]}, {"section_title": "Stakeholders Indicated DHS\u2019s Technical Assistance and Grants Have Enhanced Emergency Communications in Their Regions", "paragraphs": [], "subsections": [{"section_title": "Technical Assistance", "paragraphs": ["Technical assistance, including guidance and training, is one of OEC\u2019s  main responsibilities, and while FEMA does provide certain technical  assistance, it is not the agency\u2019s primary responsibility. These OEC and  FEMA efforts are intended help address emergency communications  challenges, including those discussed above.", "OEC offers various types of technical assistance, such as workshops  and assessments to help participants strengthen their  communications plans and governance structures, as well as a  seminar to help participants incorporate communications into  emergency response exercises. According to OEC officials, they have  delivered more than 2,000 technical-assistance-training courses and  workshops since OEC was created in 2007. In addition, OEC has  developed other resources, such as a toolkit for managing emergency  communications at planned events such as the Super Bowl.  According to OEC officials, they have a technical assistance budget of  approximately $9 million per year, and OEC delivers this assistance at  no cost to the requesting state or territory. OEC also has 11 subject  matter experts located across the country who help jurisdictions with  their communications programs and resources. These individuals  seek to build partnerships across different levels of government and  the private sector and are involved with their respective RECCWGs.", "FEMA offers training related to emergency communications, such as  various courses on emergency management topics. FEMA also has  10 regional emergency communications coordinators who are  responsible for providing assistance on an as-needed basis to their  respective regions and coordinating FEMA\u2019s tactical communications  support during a disaster or emergency. These coordinators also  support the RECCWGs.", "OEC and FEMA jointly provide training to first responders and other  public safety officials to prepare them to act as communications unit  leaders.  OEC also provides training for other specialized  communications support roles. The communications unit is part of a  standardized organizational emergency response structure called the  Incident Command System. When a disaster or emergency occurs,  the communications unit is responsible for managing the operational  and technical aspects of communications. For example, one of the  unit leader\u2019s tasks includes developing a plan to coordinate the radio  frequencies used by first responders, to help ensure interoperability.  The unit may also include a communications technician who provides  the technical skills to implement the required equipment and systems.  OEC trained more than 8,000 individuals between 2007 and August  2017 to serve in communications unit positions, according to OEC  information.", "While stakeholders continue to face a range of emergency  communications challenges, they are generally satisfied with DHS\u2019s  technical assistance to help address them. Specifically, nearly all the  stakeholders we contacted (36 of 41) were generally satisfied with  technical assistance from OEC, FEMA, or both. In addition, in 2016 we  reported that all states had received OEC technical assistance and that  almost all were satisfied with the support they received from OEC.", "When asked about the general topic of DHS technical assistance, more  than half (25 of 41) of stakeholders we interviewed said that training for  communications unit positions was useful in advancing emergency  communications capabilities in their jurisdictions. OEC and FEMA also  employ a \u201ctrain-the-trainer\u201d approach for the communications unit-leader  course. Houston-area stakeholders told us that over 1,000 local  personnel across the state had received communications unit training and  that the area now has a large number of local trainers. Five stakeholders  we interviewed for our Houston case study praised this training and said it  was critical in preparing communications personnel to respond to  Hurricane Harvey. Specifically, one stakeholder who served as a  communications unit leader during Hurricane Harvey told us that this  training prepared him to develop an effective interoperable radio  communications plan for the storm. This individual also said that first  responders who came to assist from outside the region often brought their  own communications unit leaders with them, and because this training is  consistent nationwide, the outside groups knew how the response effort  would be organized and whom to call about which radio frequencies to  use. However, a stakeholder from the Los Angeles area told us that while  having the communications unit train itself was useful, it was insufficient  without opportunities to practice the skills in real-life situations, a  challenge that other stakeholders also noted in a recent RECCWG annual  report. Based on feedback from state and local personnel, OEC is  assisting states with establishing policies and procedures for their  communications unit resources, including a process to demonstrate skills  required for these specialized positions.", "While stakeholders are generally satisfied with technical assistance,  many (19 of 41) stakeholders said their jurisdictions would still benefit  from additional technical assistance, aligning with a challenge we  identified earlier regarding the need for training. Four stakeholders told us  that OEC adapted technical assistance offerings to the needs of their  jurisdictions. OEC officials told us that they customize technical  assistance as needed\u2014for example, when providing communications- planning support to a local jurisdiction, OEC will collect local agencies\u2019  policies and facilitate a discussion with stakeholders to determine the best  overall approach. A stakeholder in Texas said that OEC\u2019s technical  assistance\u2014including communications-focused exercises and support  with developing a statewide interoperability plan\u2014had helped to advance  capabilities in the state. Another stakeholder told us that FEMA\u2019s training  has been critical in helping tribal nations build emergency-management  programs, including providing an introduction to emergency  communications. When asked about their experiences with technical  assistance, six stakeholders specifically told us they had benefited from  OEC\u2019s support with communications planning or coordination for special  events, such as the Super Bowl. Each state or territory can request up to  five offerings per year from OEC\u2019s technical assistance catalog, and OEC  officials told us that, given their available resources, they can generally  fulfill about 60\u201370 percent of requests each year."], "subsections": []}, {"section_title": "Grant Funding", "paragraphs": ["DHS administers several grant programs to help address emergency  communications challenges. Three programs provided the majority of  DHS\u2019s grant funding aimed at improving emergency communications from fiscal year 2011 to 2016, based on our analysis of data from FEMA\u2019s  Grants Reporting Tool. FEMA administers these three grant programs,  which are intended to support a wide range of emergency response  capabilities, one of which is operational communications.", "Urban Area Security Initiative: Assists high-threat, high-density urban  areas in efforts to build and sustain the capabilities necessary to  prevent, protect against, mitigate, respond to, and recover from acts  of terrorism. This assistance can include building, sustaining, and  enhancing emergency preparedness activities, including emergency  communications interoperability.", "State Homeland Security Program: Assists state, local, tribal, and  territorial preparedness activities that address high-priority  preparedness gaps across all emergency preparedness capabilities\u2014 including communications to prevent, protect against, respond to, and  recover from acts of terrorism and other catastrophic events.", "Emergency Management Performance Grant: Assists state, local,  tribal, and territorial emergency-management agencies in preparing  for \u201call hazards,\u201d and can be used to support all capabilities, including  communications. Each state and territory and the District of Columbia  receive a base amount of funding, and the program requires  recipients to commit matching funds.", "According to FEMA\u2019s data, which is reported by recipients, between fiscal  years 2011 and 2016 more than $700 million in grants were provided to  support emergency communications, as described in table 1.", "According to FEMA officials, these funding amounts are approximate  totals because the recipient-reported data have certain limitations. For  example, the information may be incomplete if the recipient does not  submit required biannual reports. In addition, FEMA officials told us that  recipients identify which core capability the funding was used to support,  but the data might not capture all aspects of a project because only one  core capability may be selected at a time. FEMA officials told us that  FEMA tracks funds obligated and dispersed at the overall grant level and  uses the recipient-reported data to have a general understanding of how  funding supports emergency communications and other capabilities.  According to FEMA officials, recipient-reported data is sufficient for that  general purpose. We have a substantial body of work related to DHS\u2019s  grant program management and in 2013 recommended that FEMA  make improvements in collecting and validating performance data for  certain grant programs.  FEMA implemented these improvements in  2017. FEMA officials told us they have also initiated a multi-year effort to  improve the oversight and monitoring of grants and support data analytics  for improved efficiencies\u2014called the Grant Management Modernization  program\u2014which is scheduled to be operational in 2020. Given these  ongoing actions, we did not assess FEMA\u2019s grants management efforts  as part of this review.", "Some state and local stakeholders told us that DHS grants (outlined in  table 1 above) have allowed them to build and enhance communications  capabilities that their jurisdictions would otherwise lack funding to  address. These grants have been used to, among other things, build  interoperable communications networks and purchase equipment, for  example:", "Urban Area Security Initiative grant funds were used to enhance a  regional radio system in the Houston area. According to stakeholders,  the system helped the region respond to Hurricane Harvey because it  enhanced interoperability in the Houston area, so that first responders  from multiple counties and agencies were all using the same system  to communicate. Urban Area Security Initiative grant funds have also  been used to help build the LMR component of an interoperable  communications network in Los Angeles County.", "Urban Area Security Initiative and State Homeland Security Program  grants funds were used to build a large radio cache in Massachusetts,  with over 400 multi-band radios that can be quickly deployed into the  field to support both emergency and planned events across multiple  jurisdictions. One stakeholder told us that these radios are requested  on a regular, often weekly, basis.", "Emergency Management Performance grants have been used to  establish and enhance state and local emergency operations centers  across the country. These centers are activated during disasters and  emergencies and provide a single location for leaders to coordinate  the response effort, including the coordination of communications."], "subsections": []}]}, {"section_title": "RECCWGs Have Enhanced Capabilities in Several Ways, but Collaboration across Regions Is Limited", "paragraphs": ["As part of the Post-Katrina Act, Congress established the RECCWGs to  help address emergency communications issues, such as a lack of  equipment interoperability. We found the RECCWGs have enhanced  emergency communications capabilities through relationship building and  information sharing\u2014with demonstrated benefits. Although these groups  have had successes, they still face challenges, such as ensuring  continuous and broad participation and increasing the national visibility of  the groups. Further, collaboration across these groups is limited. Without  ways to collaborate across the regions, RECCWG members may be  missing opportunities to share best practices and leverage the experience  of their counterparts nationwide."], "subsections": [{"section_title": "RECCWGs Facilitate Relationship Building and Information Sharing, with Demonstrated Benefits", "paragraphs": [], "subsections": [{"section_title": "Relationship Building", "paragraphs": ["The RECCWGs bring together communications stakeholders from  different levels of government and the private sector, and all of these  groups have identified relationship building as a major benefit, according  to our analysis of RECCWG annual reports and interviews with these  groups\u2019 leaders. Members expand their professional networks and build  relationships within their regions when they gather for in-person meetings  and participate in regular conference calls. For example, a leader of one  RECCWG told us that through these interactions, members learn about  each other\u2019s areas of expertise and also make connections in the region.  A leader of another RECCWG told us that his members were more willing  to call on each other for assistance because of the strong working  relationships they had developed in the group. The relationships  established in these groups have facilitated cooperation and resulted in  more effective emergency response efforts, as described below."], "subsections": []}, {"section_title": "Information Sharing", "paragraphs": ["All of the RECCWGs share best practices and lessons learned, according  to the groups\u2019 annual reports and the leaders of these groups. Information  sharing takes a variety of forms, including discussing lessons learned  after disasters or other major events, sharing experiences with new  technologies, and presenting information from federal and private industry  partners. For example, the Region X group reported in 2016 that  members shared lessons learned after declared disasters in several  states. Further, according to the 2016 RECCWG annual report, in Region  VII, members from Nebraska shared their experiences with expanding  their statewide LMR system. This expansion helped members in Iowa  construct their own system in a more timely and cost-effective way.  RECCWG members share information about communications resources  within their regions; that information can be deployed when a disaster or  emergency occurs. For example, nearly all of these groups (9 of 10)  groups have or are working to compile information about communications  assets, such as equipment and personnel. Information sharing about  communications resources has been used to facilitate response efforts,  as described below. The groups have helped promote awareness of  developments in federal programs, such as the public safety broadband  network, according to the 2016 RECCWG annual report. The groups also  provide a forum for FEMA to understand the regions\u2019 capabilities, needs,  and vulnerabilities. According to FEMA officials, they use this information  to develop regional plans that help FEMA assist the regions more  effectively during a disaster."], "subsections": []}, {"section_title": "Demonstrated Benefits", "paragraphs": ["In several instances, RECCWG members have reported assisting each  other during disasters and emergencies, drawing on the relationships and  information sharing fostered by the groups. For example, a member of the  Region I group, which includes New England, told us that prior to his  group\u2019s formation, emergency communications stakeholders from  different levels of government in that region did not meet. However,  because of the relationships that regional group helped to build, these  stakeholders now meet regularly to develop communications plans for  large planned events and have collaborated to provide communications  support in responding to the Boston Marathon bombing in 2013,  Hurricane Sandy in 2012, and other events both within and outside of the  region. According to a leader of the Region X group, relationships  developed in the group were also helpful in responding to wildfires in  Washington State in 2014 and 2015. In addition, after Hurricane Matthew  and a major flood in 2016, Region IV group members drew on  relationships developed in the RECCWG to coordinate support from other  states in the region to assist South Carolina, according to a leader of that  group. As discussed earlier, nearly all of these groups (9 of 10) have or  are working to share information about resources that can be deployed  during a disaster. At least three regions have consulted these resource  compilations during recent disasters. For example, according to the 2016  RECCWG annual report, this information was used during Hurricanes  Hermine and Matthew in 2016, severe storms and flooding in Minnesota  and Wisconsin in 2016, and severe winter storms in New England in  2015.", "Several RECCWGs have or are working to develop technical solutions to  enhance interoperability within or bordering their regions, according to the  groups\u2019 annual reports, the leaders of these groups, and FEMA officials.  For example, the group in Region V connected disparate statewide radio  systems in Illinois, Indiana, Ohio, and Michigan, so that responders would  be able to communicate in the event of a regional disaster or emergency.", "The Region VIII group, which includes the border states of Montana and  North Dakota, is working to develop solutions to enhance interoperability  among states in the region and with Canada. After the Deepwater  Horizon oil spill in 2010, the Region IV group, which includes the  southeastern states along the Gulf of Mexico, developed a  communications network that is still in place and could be used for other  events affecting the Gulf Coast. In 2011 this network was modified to  connect to Arkansas and Louisiana\u2019s statewide communications  networks, and was successfully tested during a multi-state hurricane  evacuation exercise. The Region IV group is also working to identify  technology to directly connect emergency operations centers in the  southeastern states to coordinate assistance and evacuations when other  communications methods fail, according to the 2016 RECCWG annual  report.", "RECCWGs have addressed or are working to address several policy  concerns based on joint positions developed within their groups,  according to the groups\u2019 annual reports, interviews with RECCWG  leaders, and FEMA officials. For example, RECCWG efforts led to  changes in the National Telecommunications and Information  Administration manual allowing for state and local use of federal  interoperability channels, according to FEMA officials. In addition, the  Region I group raised concerns regarding an interoperability challenge  with Department of Defense (DOD) first responders, resulting in a  nationwide rule change for DOD\u2019s land mobile radios used for domestic  response activities. After a corporate jet crashed at Hanscom Air Force  Base in Massachusetts in 2014, local first responders could not  communicate with the Hanscom Fire Department because the base\u2019s  radio programming policies did not permit the use of interoperable radio  channels. The RECCWG subsequently collaborated with DOD and other  federal agencies on an initiative to program DOD radios with national  interoperability channels. In addition, during a Region VI group meeting,  members learned that multiple states were experiencing a common  problem with the use of national interoperability channels. They found that  in multiple areas, local entities were using these channels for day-to-day  operations, meaning they could not be reliably used during disaster and  emergency situations because first responders experienced interference  on these interoperability channels. In February 2017, the Region VI group  raised its concerns to the Federal Communications Commission, which  had licensed these channels to local entities for use on a secondary  basis, and the group continues to work on addressing this issue. FEMA  officials told us that the participation and involvement of federal agencies  in the RECCWGs has been critical in addressing policy changes."], "subsections": []}]}, {"section_title": "RECCWGs Face Other Ongoing Challenges", "paragraphs": ["Although the RECCWGs have cited several achievements, they have  ongoing challenges, such as ensuring broad, continuous participation and  establishing national visibility for the groups, according to their annual  reports and interviews with group leaders and other selected group  members. Various factors can make participation in these groups difficult.  Participation is on a volunteer basis, in addition to members\u2019 regular work  responsibilities, and some groups cover large geographic areas. Leaders  or members from four RECCWGs told us their groups have had turnover  in membership, such as when individuals move to other positions or  retire. FEMA officials told us that this turnover is a challenge shared  across the RECCWGs. In the 2016 RECCWG annual report, many of  these groups reported progress in broadening and diversifying their  membership. For example, 7 of 10 groups added state and local 911  representatives to their membership, and nearly all saw an increase in  participation from cellular providers. However, four of the groups identified  challenges with tribal participation in 2016, and all 10 groups reported that  they have continued outreach to tribal nations in their respective regions.  A representative from a tribal emergency-management organization told  us that time and resource demands can affect the level of engagement  from tribal members, because emergency response personnel for tribal  nations often have many other primary responsibilities.", "The activity level and achievements also vary across the 10 RECCWGs,  according to our analysis of the groups\u2019 reports, as well as interviews with  group leaders, selected group members, FEMA officials, and other  stakeholders. As noted earlier, each group determines its own activities.  Stakeholders we interviewed told us that some regions have very active  groups with many achievements, while other RECCWGs meet less  frequently and have had fewer achievements. For example, stakeholders  from Region I told us that they meet on a monthly basis and collaborate  frequently outside of formal meetings. On the other hand, a leader from  another region said that his group has not been very active in recent  years. According to the 2016 RECCWG annual report, that group did not  have any formal meetings in 2016, and instead stakeholders worked  together through other coordination groups in the members\u2019 states and  territories. We also found that the emergency communications  stakeholders\u2019 awareness of the activities of the RECCWGs can vary. For  example, two stakeholders told us they are interested in regional  collaboration but were not aware that these groups existed. In addition,  four other stakeholders we interviewed knew about the groups in their  respective regions, but they told us the groups\u2019 activities were limited or  they were not aware of what the group had done.", "The RECCWGs have identified other issue areas they are working to  address. For example, almost all of these groups (9 of 10) are working to  improve the information that states, private sector partners, and others  share about communications resources that can be deployed during  disasters or emergencies, according to the 2016 RECCWG annual report.  In addition, a member of one RECCWG told us it can be challenging to  address policy concerns when federal agencies they contact are not  aware of the groups or their purpose. This stakeholder said that it was  important to increase the national visibility of the groups in order to  improve their effectiveness. Increasing national collaboration, as  discussed below, could be one way to address this concern."], "subsections": []}, {"section_title": "Collaboration across RECCWGs Has Been Limited", "paragraphs": ["OEC\u2019s National Emergency Communications Plan\u2014which OEC views as  the nation\u2019s strategic plan for this area\u2014established a vision of enabling  the nation\u2019s emergency response community to communicate and share  information across all levels of government, disciplines, and jurisdictions.  This plan has prioritized enhancing coordination among stakeholders,  processes, and planning activities across the emergency response  community. In addition, our previous work has found that collaboration  can be used to address a range of purposes, including information  sharing and communication.  In this work, we identified key  considerations for implementing interagency collaborative mechanisms,  such as ensuring that all relevant participants have been included.  Federal internal control standards also speak broadly to the importance of  communicating to achieve an entity\u2019s objectives.", "FEMA has taken some steps to encourage collaboration among  RECCWG leaders, but broader collaboration across regions remains  limited. RECCWGs have periodically shared information with their  counterparts in other regions, but according to our analysis of the groups\u2019  annual reports and interviews with group leaders, these exchanges  primarily involve one region working with another on an ad-hoc basis. For  example, according to one group member in Region VI, members of other  RECCWGs reached out to him to learn more about communications  successes and challenges during Hurricane Harvey. FEMA has taken  some steps to encourage information sharing and collaboration among  the RECCWGs. Specifically, FEMA encouraged the establishment of a  monthly conference call for RECCWG co-chairs in 2015, and its Disaster  Emergency Communications division distributes a biweekly newsletter to  RECCWG members, according to FEMA officials. However, there is not  an ongoing mechanism for communication across all of the regions so  that the full membership can effectively share information with each other  and collaborate. While the co-chair conference calls are intended to  enhance collaboration across the regions, the meetings do not involve the  broader membership of the groups.", "Most RECCWG leaders (15 of 20), as well as 9 other stakeholders, told  us that more collaboration across the groups was needed. For example,  four stakeholders explained to us that if a RECCWG in another part of the  country has identified best practices it would be useful to share the  information more broadly. Three other stakeholders who said their groups  were less active told us it would still be helpful to receive information  about what other groups are doing to enhance emergency  communications. Stakeholders suggested several possible methods,  such as an in-person conference or a national-level working group that  functions using virtual or other means.", "FEMA officials have considered ways to enhance collaboration but they  face certain limitations. Specifically, FEMA officials told us they had  considered an in-person national conference, but FEMA\u2019s budget for the  groups was limited and a national conference would be too resource- intensive. FEMA officials also explained that they facilitate the groups, but  the groups are run by their members. According to FEMA officials, they  have tried some ways to enhance collaboration across the RECCWGs,  such as by encouraging the groups to extend meeting invitations to other  regions and use online portals for collaboration. Developing and  implementing an appropriate ongoing mechanism for collaboration may  be a worthwhile investment because it could further enhance the  RECCWGs\u2019 efforts to improve emergency communications. Reaching a  consensus with RECCWG members may help FEMA determine options  that are both useful for the membership and feasible, given FEMA\u2019s  resource constraints. In the role as a facilitator for RECCWGs FEMA is  well positioned to lead this effort.", "Without ways for all members of the RECCWGs, not just the groups\u2019  leaders, to collaborate across regions, members may be missing  opportunities to share best practices and leverage the knowledge and  experience of their counterparts throughout the nation. For example,  lessons learned from Hurricane Harvey and other natural disasters in  2017\u2014such as how first responders used interoperability channels  effectively\u2014may not be shared across all of the regions without additional  methods for collaboration. Further, several of these groups are working to  address similar challenges and priorities, as discussed above. For  example, nearly all of the groups want to improve the way information  about emergency communications resources is shared in their regions, so  that these resources can be better leveraged during disasters and  emergencies. Some of the RECCWGs have explored ways to better  leverage these resources, but in the absence of methods to exchange  information more broadly, RECCWGs may not be able to easily share  what has been successful for their regions."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["When disasters strike or emergencies arise, they can span multiple  jurisdictions, making coordination and collaboration critically important for  effective emergency response. The RECCWGs established by the Post- Katrina Act have enhanced emergency communications within their  regions. While the relationship building and information sharing within  these groups have contributed to benefits at the regional level, nationwide  collaboration among the groups has been more limited. Such  collaboration could help the groups address common challenges by  providing a way to improve the sharing of best practices and lessons  learned and to allow members to leverage the knowledge and experience  of their counterparts to improve emergency communications capabilities  in their regions and nationwide. Therefore, it could benefit FEMA to work  with these groups to reach consensus on and to implement a mechanism  for accomplishing cross-regional collaboration. A concerted effort  focusing on these groups\u2019 collaboration needs, while also considering  FEMA\u2019s resource constraints, could help FEMA and regional stakeholders  determine an appropriate mechanism for collaboration moving forward."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Administrator of FEMA should work with RECCWG members to  reach consensus on and implement an ongoing mechanism to encourage  nationwide collaboration across these groups, considering the costs of  one or more suitable methods, such as a national-level working group  that uses virtual or other means of coordination, as appropriate.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS  provided written comments, which are reprinted in appendix I. In written  comments, DHS concurred with our recommendation and provided an  attachment describing the actions it would take to implement the  recommendation. DHS noted that FEMA is committed to increased  collaboration among RECCWGs to coordinate multi-state efforts and  measure progress on and improving survivability, sustainability, and  interoperability of communication at the regional level and nationwide.  Separately FEMA provided technical comments that we incorporated as  appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of  Homeland Security and appropriate congressional committees. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or members of your staff have any questions about this report,  please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may   be found on the last page of this report. Major contributors to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, David Sausville (Assistant  Director); Aaron Kaminsky (Analyst in Charge); Melissa Bodeau; Josh  Ormond; Kate Perl; Cheryl Peterson; and Kelly Rubin made key  contributions to this report."], "subsections": []}]}], "fastfact": ["During emergencies, first responders need to be able to communicate with each other\u2014even across jurisdictions. After Hurricane Katrina, Congress passed a law to help first responders do just that. The law created working groups to improve regional collaboration. Each group has members from different levels of government, as well as from the private sector.", "We found that these groups have generally worked well at the regional level\u2014members shared information and assisted each other during emergencies. However, we recommended that FEMA encourage nationwide collaboration among the groups."]}
{"id": "GAO-18-544", "url": "https://www.gao.gov/products/GAO-18-544", "title": "Tax Fraud and Noncompliance: IRS Could Further Leverage the Return Review Program to Strengthen Tax Enforcement", "published_date": "2018-07-24T00:00:00", "released_date": "2018-08-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Tax noncompliance, including refund fraud, threatens the integrity of the tax system and costs the federal government hundreds of billions of dollars annually. RRP is IRS's primary pre-refund system for detecting and preventing the issuance of invalid refunds. IRS reported that between January 2015 and November 2017 RRP prevented the issuance of more than $6.51 billion in invalid refunds.", "GAO was asked to examine RRP's capabilities. This report (1) describes how RRP detects and selects suspicious returns and prevents invalid refunds; (2) assesses how IRS monitors and adapts RRP; and (3) examines what else, if anything, IRS can do to strengthen RRP and use it to address other enforcement issues.", "GAO reviewed IRS plans for RRP and documents on its performance. GAO compared IRS's efforts to federal internal control standards, GAO's Fraud Risk Framework and IRS's strategic plan. GAO interviewed IRS officials who work on and use RRP."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service's (IRS) Return Review Program (RRP) detects and selects potentially fraudulent returns to prevent the issuance of invalid refunds. According to IRS, RRP uses advanced analytic techniques and various data sources, including prior-year tax returns, to assign multiple scores to individual returns based on characteristics of identity theft and other refund fraud.", "GAO found that IRS routinely monitors RRP's performance and adapts RRP to improve detection and address evolving fraud threats. Each year IRS updates RRP's detection tools to improve accuracy for the next filing season.", "IRS has plans to continue developing RRP to further prevent invalid refunds, including using RRP to analyze and detect fraudulent business returns. However, GAO identified other opportunities for IRS to improve RRP's fraud detection and to use RRP for other enforcement activities:", "RRP's ability to accurately detect and select suspicious returns could benefit from having information on Forms W-2, Wage and Tax Statements (W-2) available for analysis more frequently. As of April 2018, IRS officials said they were drafting but had not yet approved a work request to load W-2s into RRP daily instead of weekly for the 2019 filing season.", "IRS could collect more information electronically from paper filers. One approach IRS evaluated in 2012 is to digitize some paper returns using barcoding technology, but it has not updated that analysis or expanded it to consider other digitizing technologies. IRS requested that Congress require that returns prepared electronically but filed on paper include a scannable code printed on the return, but Congress had not done so as of May 2018.", "IRS could apply RRP's capabilities to improve other tax enforcement activities, such as audit selection or underreporting detection. Individuals' underreporting of tax liabilities accounts for hundreds of billions in lost tax revenue. Until IRS evaluates the costs and benefits of expanding RRP to analyze returns not claiming refunds, IRS will not have the information needed to make decisions that could help streamline processes for detecting and treating additional types of noncompliance and fraud."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO suggests Congress consider legislation to require that returns prepared electronically but filed on paper include a scannable code. GAO is also making five recommendations to IRS, including that IRS take action to make incoming W-2s available to RRP more frequently, update and expand a 2012 analysis of the costs and benefits of digitizing returns filed on paper, evaluate the costs and benefits of expanding RRP to analyze returns not claiming refunds, and take any appropriate action based on those evaluations. IRS agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Internal Revenue Service (IRS) faces an ongoing challenge to detect  and prevent noncompliance with tax laws. Noncompliance and fraud  threaten the integrity of the tax system, costing the federal government  billions of dollars annually. Every year taxpayers willfully or unintentionally  fail to pay hundreds of billions of dollars owed in taxes. This  noncompliance includes individuals who make inadvertent mistakes and  fraudsters who intentionally seek to evade taxes and obtain invalid  refunds.", "IRS\u2019s enforcement of tax laws has been on our High-Risk List since the  list was first established in 1990.", "In 2015 we added IRS\u2019s efforts to address identity theft (IDT) tax refund  fraud to the high-risk area.", "IDT tax refund fraud occurs when a fraudster seeking a tax refund files a  fraudulent tax return using a legitimate taxpayer\u2019s identifying information.  Detecting fraudulent tax returns has become increasingly difficult for IRS  as fraudsters gain access to more personal and financial information,  which they use to file returns that appear legitimate. IRS estimated that at  least $12.2 billion in IDT tax refund fraud was attempted during 2016.  IRS estimated that it prevented at least $10.6 billion (86 percent) of that  amount but paid at least $1.7 billion in invalid refunds.", "One of IRS\u2019s preventive tools is the Return Review Program (RRP), a  pre-refund system that screens individual returns claiming refunds using  characteristics predictive of IDT and other refund fraud. IRS began  developing RRP in 2009 to replace the Electronic Fraud Detection  System, which IRS built in the 1990s (see appendix I for more  information).", "Given the importance of RRP for preventing billions of dollars in invalid  refund payments, you asked us to examine RRP\u2019s capabilities. This  report (1) describes how RRP detects and selects suspicious returns to  prevent invalid refunds; (2) assesses how IRS monitors and adapts RRP;  and (3) examines what else, if anything, IRS can do to strengthen RRP  and use it to address other enforcement issues.", "To describe how RRP detects and selects suspicious returns to prevent  invalid refunds, we reviewed IRS documents and procedures related to  RRP development and capabilities. We reviewed IRS documents  analyzing RRP\u2019s performance detecting and selecting fraudulent returns  during the filing season. We reviewed IRS\u2019s replacement plans for its  legacy fraud detection system and release plans outlining requirements  and capabilities for RRP. We reviewed reports from the Treasury  Inspector General for Tax Administration (TIGTA) on IRS\u2019s development  of RRP and RRP\u2019s capabilities. We interviewed IRS officials involved in  the development and operation of RRP, including officials from IRS\u2019s  Information Technology (IT) organization and Wage and Investment and  Criminal Investigation divisions.", "To assess IRS\u2019s efforts to monitor and adapt RRP, we reviewed IRS  documents outlining IRS\u2019s process for updating RRP, reports analyzing  RRP performance for the 2017 and 2018 filing seasons, and IRS reports  describing changes or adjustments to RRP. We reviewed TIGTA reports  and IRS documents outlining IRS\u2019s process for evaluating and updating  RRP. We interviewed IRS officials overseeing and evaluating RRP\u2019s  performance to determine how officials use the reports and analysis to  manage RRP. We compared IRS\u2019s efforts to the Standards for Internal  Control in the Federal Government that directs officials to establish and  operate ongoing monitoring activities to determine the effectiveness of  systems such as RRP and take corrective action as appropriate. We also  assessed IRS\u2019s monitoring and evaluation of RRP against leading  practices to combat fraud in a strategic, risk-based manner as identified in  the Framework for Managing Fraud Risks in Federal Programs (the Fraud  Risk Framework).", "To evaluate what else, if anything, IRS can do to strengthen RRP  detection and use it to address other tax enforcement issues, we  reviewed IRS documentation describing RRP\u2019s current state and planned  development and our prior work evaluating IRS\u2019s development of RRP  and other major IT investments. We also reviewed our prior work and  recommendations related to IRS\u2019s tax enforcement activities. We  interviewed IRS officials involved in developing and managing RRP to  discuss planned development and uses of RRP. We also interviewed  officials from the Small Business and Self-Employed division responsible  for enforcement activities, such as auditing individual tax returns to detect  misreporting, and officials from the Office of Research, Applied Analytics,  and Statistics who conduct IRS\u2019s research on noncompliance and IRS\u2019s  enforcement strategies. We compared IRS\u2019s efforts to goals and  objectives identified in its Strategic Plan: FY2018-2022, such as  encouraging compliance through tax administration and enforcement and  increasing operational efficiency and effectiveness. We also compared  IRS\u2019s actions to the federal standards for internal control and the Fraud  Risk Framework, which direct management to evaluate the costs and  benefits of using systems to inform resource allocation decisions and  achieve agency objectives.", "We conducted this performance audit from June 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Noncompliance, including fraud, does not have a single source, but  occurs across different types of taxes and taxpayers. It includes  unintentional errors as well as intentional evasion, such as intentionally  underreporting income, intentionally over-reporting expenses, and  engaging in abusive tax shelters or frivolous tax schemes. IRS uses many  approaches to address noncompliance, from sending notices to taxpayers  to conducting complex audits. Many of these approaches can be  burdensome to IRS and to taxpayers since they may occur years after  taxpayers file their return.", "We have long highlighted the importance of strong preventive controls for  detecting fraud because preventing payment of invalid refunds is easier  and more cost-effective than trying to recover revenue through the pay- and-chase model of audits. IRS uses pre-refund compliance checks to  confirm taxpayers\u2019 identities, quickly and efficiently correct some clerical  and mathematical errors, and detect possible fraud and noncompliance.  As shown in figure 1, RRP analyzes individual tax returns claiming  refunds and identifies characteristics predictive of IDT and other refund  fraud before IRS issues refunds for those returns.", "IRS reported that between January 2015 and November 2017, RRP  prevented the issuance of more than $6.51 billion in invalid refunds. As of  March 30, 2018, IRS reports spending about $419 million developing and  operating RRP. For fiscal year 2019, IRS requested $106 million to  operate and further develop RRP."], "subsections": [{"section_title": "IRS Management of RRP", "paragraphs": ["According to IRS, RRP supports data, analytical, and case processing  activities conducted by employees working in revenue protection,  accounts management, taxpayer communications, and criminal  prosecution. IRS employees from across these areas coordinate to  oversee the development and operation of the system (see fig. 2).", "Four IRS divisions work with IRS\u2019s Information Technology (IT)  organization and Office of Research, Applied Analytics, and Statistics  (RAAS) to develop, maintain, and operate RRP. The Wage and  Investment (W&I) division leads the management of RRP with IRS\u2019s IT  offices. W&I\u2019s audit programs cover mainly refundable credits claimed on  individual income tax returns and the division develops policy and  guidance for RRP and other pre-refund programs that detect suspicious  returns. Coordinating with other IRS divisions, W&I and IT update RRP  as needed to reflect any new business rules or changes to existing  business rules, for example. The Large Business and International  division provides RRP with business requirements specific to large  corporations. The Criminal Investigation division reviews and analyzes  tax returns throughout the filing season to identify fraudulent patterns and  trends to incorporate into RRP. The Small Business and Self-Employed  division audits individual and business tax returns to detect  misreporting. RAAS leads development of some of RRP\u2019s predictive  models and IDT filters."], "subsections": []}]}, {"section_title": "The Return Review Program Aims to Detect, Select, and Prevent Invalid Refunds More Accurately and Efficiently", "paragraphs": ["As IRS\u2019s primary pre-refund system for detecting IDT and other refund  fraud, RRP performs three major activities (see fig. 3)."], "subsections": [{"section_title": "Detection: RRP Uses Multiple Data Sources and Predictive Models, Among Other Techniques, to Detect Suspicious Returns", "paragraphs": ["According to IRS, RRP uses advanced analytic techniques and evaluates  data from various sources to assign multiple scores to individual returns  claiming refunds. The scores are based on characteristics of IDT and  other refund fraud known to IRS. Higher fraud scores indicate the return\u2019s  greater potential for refund fraud. IRS officials told us that RRP\u2019s design  helps IRS identify increasingly sophisticated tax fraud. RRP\u2019s analytic  techniques include the following:", "Predictive models. IRS develops many different models that help  detect emerging fraud, outliers, and taxpayer behavior inconsistencies  in returns claiming refunds. These models also mine data and help  IRS seek out patterns predictive of IDT and other refund fraud. For  example, a model may use a combination of existing variables from  the 1040 individual tax return, such as tax credits claimed and  income.", "Business rules. RRP contains over 1,000 rules (a \u201cyes\u201d or \u201cno\u201d  outcome) developed by IRS to flag returns for evidence of anomalous  behavior. For example, RRP uses a business rule to distinguish  between returns for which it has received an associated Form W-2,  Wage and Tax Statement (W-2), from those which it has not.", "Clustering. RRP uses a tool that reveals patterns and relationships in  masses of data allowing RRP to identify clusters of returns that share  traits predictive of schemes and refund fraud. For example, IRS could  use clustering to identify groups of returns that share the same  geographic location, among other traits. According to IRS, this  technique was developed to automate certain aspects of Criminal  Investigation\u2019s identification of fraud schemes.", "A number of systems connect to RRP and provide additional taxpayer  data or third-party information for RRP to analyze. RRP contains  taxpayers\u2019 prior three years\u2019 filing history and third parties\u2014employers,  banks, and others\u2014file information returns to report wages, interest, and  other payment information to taxpayers and IRS. For example, the  Social Security Administration sends W-2s to IRS. The W-2 information is  loaded regularly into RRP, along with other information returns, to  validate wage and income information reported on individual returns  claiming refunds\u2014a process IRS calls systemic verification."], "subsections": []}, {"section_title": "Selection: RRP Filters Select Suspicious Returns for Further Action or Review", "paragraphs": ["RRP has filters that combine results from the analytic techniques to  automatically make a selection decision and then a treatment decision  before the return can move to the next processing step and a refund can  be issued. Returns not selected by RRP continue through the pipeline  process.", "Selection decision. Returns with fraud scores above thresholds\u2014 and meeting other criteria set by IRS management\u2014will automatically  be selected by RRP filters for further action or review. According to  IRS, the agency\u2019s capacity to review selected returns is part of the  automated selection decision, as are other criteria that weigh the cost  and risk to IRS. IRS reports that for the 2017 filing season, RRP  selected 857,438 returns as potential IDT refund fraud and 219,210  returns as potential other refund fraud. This is less than 1 percent of  almost 158 million individual returns filed that year.", "Treatment decision. RRP automatically assigns selected returns to  the appropriate treatment based on the characteristics of IDT or other  refund fraud RRP detected. Examples of treatments include the  following:  Identity theft refund fraud. Returns selected by an IDT filter are  automatically assigned for treatment in the Taxpayer Protection  Program. IRS notifies taxpayers that they must authenticate their  identity before IRS will process the return or issue a refund.  Taxpayers can verify their identity by calling an IRS telephone  center, visiting a Taxpayer Assistance Center, or in some cases,  authenticating online or via mail. If the taxpayer does not  respond to the letter or fails to authenticate, the return is  confirmed to be IDT refund fraud.", "Other refund fraud. If a return is selected by one of RRP\u2019s non- identity theft filters, RRP automatically assigns the return, based  on the characteristics of fraud identified, to the Integrity and  Verification Operations (IVO) function within W&I\u2019s Return Integrity  and Compliance Services office for further action or review. For  example, RRP may select a return as potential refund fraud  because it is missing verification of income for a refundable tax  credit, such as the Earned Income Tax Credit. IVO tax  examiners may then, for example, contact employers to confirm  the income and withholding amounts reported on the return.", "Frivolous returns. RRP selects returns that contain certain  unsupportable arguments to avoid paying taxes or reduce tax  liability. If IRS determines these returns to be frivolous, the  taxpayer may be subject to penalty. RRP assigns potentially  frivolous returns to IVO for review and to notify the taxpayer.", "Non-workload returns. RRP\u2019s non-workload filters select returns  that, according to IRS, score just below the thresholds for RRP\u2019s  other filters described above. IRS officials told us that RRP loops  these returns for additional scoring and detection."], "subsections": []}, {"section_title": "Prevention: RRP Freezes Selected Returns and Improves Detection and Enforcement Efforts Across IRS", "paragraphs": ["RRP supports IRS\u2019s efforts to prevent issuing invalid refunds in the  following ways:", "Freezing refunds. RRP connects directly to IRS\u2019s systems for  processing individual tax returns and issues transaction codes directly  to the Individual Master File depending on the type of refund fraud  RRP detected. IRS reports that for the 2017 filing season, RRP  prevented IRS from issuing about $4.4 billion in invalid refunds. Of  that amount, $3.3 billion was attributed to IDT refund fraud and $1.1  billion to other refund fraud.", "When RRP selects a return as potential IDT refund fraud, RRP will  simultaneously assign the return for treatment and issue a transaction  code telling IRS\u2019s processing systems to freeze the refund until the  case is resolved. As a result, IRS can protect the refund until the  review is complete or a legitimate taxpayer has authenticated his or  her identity, at which point IRS will release the return.", "If RRP\u2019s non-identity theft filters select the return because of  characteristics predictive of other refund fraud, RRP issues a  transaction code to freeze the return for 14 days while IVO examiners  have the opportunity to screen the return. After 14 days, the return  automatically resumes processing and the refund may be released.  Accordingly, IRS officials told us that RRP prioritizes IDT treatment  and if a return is selected by both IDT and other refund fraud filters,  RRP will automatically assign the return to the Taxpayer Protection  Program and freeze the refund.", "IRS officials told us that when RRP\u2019s non-workload filters select a  return, RRP will issue a transaction code that delays the payment of  the refund associated with the return for 1 week. According to IRS  officials, this delay provides IRS an opportunity to manually review  returns that contain suspicious characteristics.", "Incorporating treatment results. IRS integrates the results from  each return review into its analytic techniques to improve RRP\u2019s  detection ability and accuracy on an ongoing basis. For the 2018 filing  season, IRS officials told us they were able to add functionality that  uses real-time case feedback data to automatically improve the  accuracy of some of RRP\u2019s IDT fraud filters. IRS officials can also  change RRP\u2019s selection criteria or filters during the filing season  based on emerging fraud or workload concerns.", "Detailed data and analysis. With RRP, all available taxpayer  information is linked together and available for analysis and queries  by IRS employees for post-refund enforcement activities, such as  criminal investigations. RRP creates and distributes a report with the  results of RRP\u2019s clustering analysis to analysts in Criminal  Investigation. IRS employees are also able to search RRP and  analyze data relevant to their specific enforcement activities. Criminal  Investigation officials told us they use RRP reports to identify  suspicious returns that were not selected by RRP and flag them for  further post-refund review."], "subsections": []}]}, {"section_title": "IRS Routinely Monitors RRP\u2019s Performance and Adapts RRP to Improve Detection and Address Evolving Fraud Threats", "paragraphs": ["As the primary system for detecting IDT and other refund fraud and  preventing IRS from paying invalid refunds, RRP is an integral part of  IRS\u2019s ability to process returns during the filing season. Therefore,  monitoring and evaluation activities that rely on quality information to  identify, analyze, and respond to changes\u2014such as emerging fraud  trends\u2014are critical to ensure that RRP is operating effectively. Federal  standards for internal control and the Fraud Risk Framework highlight the  importance of monitoring and incorporating feedback on an ongoing basis  so the system remains aligned with changing objectives, environments,  laws, resources, and risks. Consistent with these practices, IRS follows  an industry-standard process to conduct a range of monitoring and  evaluation activities for RRP throughout the year (see fig. 4)."], "subsections": [{"section_title": "IRS Evaluates and Updates RRP Each Year", "paragraphs": ["According to IRS officials, each year beginning in February, IRS  evaluates and updates RRP to improve detection and accuracy for the  next filing season. A leading practice in the Fraud Risk Framework is for  managers to use the results of monitoring, evaluations, and investigations  to improve fraud prevention, detection, and response. A more accurate  RRP helps IRS use its resources more effectively. For example, if RRP  automatically detects fraudulent returns previously identified by manual  processes or post-refund enforcement activities, IRS can redirect those  enforcement resources to identifying new and emerging fraud schemes.  Further, as RRP selects fewer legitimate returns as suspicious, IRS  employees are able to devote more of their time to identifying fraudulent  returns.", "IRS officials stated that to improve RRP\u2019s accuracy, IRS incorporates  information about all refund fraud and noncompliance detected by other  enforcement activities into RRP\u2019s detection tools. IRS also uses  information from its research efforts and external entities, as described  below.", "Other enforcement activities. These activities include the Fraud  Referral and Evaluation program, where, according to IRS, analysts  manually review select tax returns that scored just below RRP\u2019s  selection thresholds. Another enforcement activity is the Dependent  Database, a pre-refund screening system that identifies potential  noncompliance related to the dependency and residency of children.  IRS staff told us they evaluate refund fraud detected by the  Dependent Database and Fraud Referral and Evaluation program that  RRP missed and update RRP\u2019s analytic techniques for the next year.  Third, investigators in Criminal Investigation told us that they work  with other IRS offices to incorporate new and emerging refund fraud  patterns, such as those identified as a result of external data  breaches, into RRP\u2019s detection tools. To ensure that the updates are  operating effectively, IRS staff track the percentage of invalid returns  that RRP automatically selected that were previously detected by  other IRS processes.", "IRS research. IRS officials stated that the agency uses information  from a number of research efforts to inform updates or adaptations to  RRP. For example, for the 2018 filing season, IRS changed RRP\u2019s  filters and selection criteria to automatically select returns that IRS  held manually in 2017. IRS officials told us they made these changes  after researching taxpayer behavior in noncompliant claims of the  Earned Income Tax Credit and Additional Child Tax Credit during the  2017 filing season.", "Third-party information. IRS collaborates with external entities to  strengthen IRS\u2019s defenses against paying invalid refunds. IRS officials  told us they use information from their collaborative efforts to update  RRP\u2019s detection tools for the upcoming filing season. These efforts  include the External Leads Program, where participating financial  institutions provide leads to IRS regarding deposits of suspicious  refunds, and the Opt-In Program, a voluntary program where  participating financial institutions flag and reject refunds issued by IRS  via direct deposit if they find that certain characteristics do not match.  IRS reported that in 2017, banks recovered 144,000 refunds with a  value of $204 million. IRS has also used information from the Security  Summit to improve RRP\u2019s detection of IDT refund fraud. The Security  Summit is a partnership between IRS, the tax preparation industry,  and state departments of revenue to improve information sharing  around IDT refund fraud. For the 2017 filing season, IRS  incorporated a number of data elements into RRP\u2019s detection tools  that were identified by the Security Summit.", "IRS also incorporates legislative changes into RRP for the upcoming filing  season. IRS officials told us in March 2018 that they are working to  determine all the updates and changes they need to make to RRP\u2019s  analytic techniques for the 2019 filing season to ensure that RRP will  make appropriate selections in accordance with Pub. L. No. 115-97, \u201cAn  act to provide for reconciliation pursuant to titles II and V of the concurrent  resolution on the budget for fiscal year 2018.\u201d"], "subsections": []}, {"section_title": "Prior to the Filing Season, IRS Tests RRP and Establishes Selection Criteria", "paragraphs": ["Between September and December each year, IRS tests RRP to ensure  that the system\u2019s updated detection tools meet objectives to increase  detection and accuracy for the upcoming filing season. A key factor is  setting RRP\u2019s thresholds used to trigger if a return will be selected by  RRP. For a given set of rules and criteria, as a threshold is lowered, the  number of returns that RRP selects as suspicious will increase, including  both fraudulent and legitimate returns. During this testing period, IRS  officials determine appropriate threshold settings for RRP given IRS\u2019s  fraud detection objectives and IRS resources available to review selected  returns. IRS management uses this process to inform its risk tolerance  and fraud risk profile. According to the Fraud Risk Framework, effective  managers of fraud risks use the program\u2019s fraud risk profile to help decide  how to allocate resources.", "IRS officials told us they test RRP\u2019s analytic techniques and filters by  running a random sample of prior-year returns through numerous  iterations using different settings. This testing produces various  outcomes. According to documents we reviewed and IRS officials, IRS  management evaluates the outcomes using the following measures:", "Selection volume: the number of returns that RRP selects as  potentially fraudulent and requiring further action or review by IRS  analysts and examiners to confirm the return as fraudulent or  legitimate. IRS uses this measure to gauge the workload resulting  from certain combinations of settings in RRP.", "Accuracy: the percent of selected returns confirmed to be legitimate  (the false detection rate). IRS uses this measure to evaluate the effect  RRP\u2019s settings may have on legitimate taxpayers whose refund may  be delayed because their return was inaccurately selected.", "Revenue protected: the value of refunds associated with returns  selected by RRP that IRS confirmed to be fraudulent. This measure  can provide an estimate of RRP\u2019s return on investment based on  different combinations of settings in RRP."], "subsections": []}, {"section_title": "During the Filing Season IRS Monitors and Adapts RRP", "paragraphs": ["After IRS updates RRP and establishes selection criteria, RRP is ready to  operate during the filing season. To ensure that RRP is performing as  expected, IRS managers collect and analyze performance reports, meet  weekly during the filing season, and adapt RRP to address emerging  fraud or make other adjustments. We reviewed the various reports  produced by RRP and IRS staff and determined that the information is  reliable, relevant, and timely, as required by federal standards for internal  control. IRS officials told us that daily reports highlighting RRP\u2019s  selections are helpful, especially during the first weeks of the filing  season, to ensure that systems are operating effectively.", "Consistent with federal standards for internal control and the Fraud Risk  Framework, we found that RRP is designed to be flexible and adaptive,  and IRS can adjust RRP during the filing season to respond to emerging  threats or other concerns. IRS officials told us they made several  adjustments to RRP during the 2017 filing season:  IRS adjusted the selection thresholds for one of RRP\u2019s IDT filters after  observing that the number of selections was exceeding projections,  resulting in more selections than IRS officials expected and possibly a  higher rate of legitimate returns being incorrectly selected. According  to IRS officials, adjusting selection thresholds takes approximately 24  hours. To respond to an external data breach, for example, IRS  officials told us they might lower RRP\u2019s selection thresholds so that  RRP selects more returns for review.", "IRS reported that it disabled a rule that it determined was incorrectly  selecting legitimate tax returns. IRS officials told us they could  address selection errors or respond to new or emerging fraud patterns  by modifying RRP\u2019s analytic techniques, such as its business rules  and models. According to IRS officials, these types of changes require  approval of the business rules governance board and take, on  average, 10 business days.", "According to IRS documents we reviewed, early in the 2017 filing  season, IRS discovered that RRP did not issue appropriate  transaction codes to the Individual Master File to freeze about 11,000  returns selected as potential IDT refund fraud. As a result, some of  these returns posted and refunds may have been issued incorrectly.  IRS told us they fixed this error within 3 days of identifying it."], "subsections": []}]}, {"section_title": "As IRS Continues to Develop the Return Review Program, Additional Opportunities Exist to Improve Enforcement", "paragraphs": [], "subsections": [{"section_title": "IRS Plans to Expand RRP Capabilities to Further Prevent Invalid Refunds", "paragraphs": ["IRS plans to continue developing RRP to expand its capabilities to detect  refund fraud on business and partnership returns, as well as on individual  returns that improperly claim nonrefundable tax credits. According to IRS,  continued development of RRP will automate previously manual  processes, eliminate duplicative efforts, and achieve greater efficiency.", "Business returns and partnership returns. IRS officials told us in  January 2018 that they are currently working to develop rules,  models, and filters in RRP to detect noncompliance and fraud in  business and partnership returns. According to IRS, identity thieves  have long used stolen business information to create and file fake W- 2s along with fraudulent individual tax returns. However, identity  thieves are now using this information to file fraudulent business  returns. In May 2018, IRS reported a sharp increase in the number of  fraudulent business and partnership returns in recent years.", "Nonrefundable tax credits. IRS plans to develop models and rules in  RRP to detect refund fraud on individual returns that improperly claim  nonrefundable tax credits. A nonrefundable tax credit is limited to the  taxpayer\u2019s tax liability, which means the credit can be used to offset  tax liability, but any excess of the credit over the tax liability is not  refunded to the taxpayer. Examples of nonrefundable credits include  the Child Tax Credit, Foreign Tax Credit, and Mortgage Interest  Credit. According to IRS officials, IRS currently relies on a number of  systems, including the Dependent Database, to screen returns for  noncompliance associated with tax credits.", "IRS\u2019s management of other major investments will affect the agency\u2019s  ability to realize the full potential of RRP\u2019s current and planned  capabilities because RRP interfaces with numerous legacy systems. For  example, RRP obtains taxpayer information from the Individual Master  File, which IRS has been working to replace with a modern database, the  Customer Account Data Engine 2 (CADE 2). According to IRS, CADE 2  will provide RRP with additional taxpayer history data and more frequent  data updates, improving RRP\u2019s detection capabilities. However, as we  reported in June 2018, IRS delivered only 46 percent of planned scope  for CADE 2 during the time period we reviewed and paused a number of  CADE 2 projects. As of June 2018, a completion date is uncertain.", "RRP\u2019s effectiveness is limited by the system\u2019s dependence on a legacy  case management system. In 2015, IRS approved plans to implement an  enterprise-wide case management system to consolidate and replace  over 60 legacy systems IRS currently uses. IRS reports a number of  limitations with the current systems, including redundancies between  systems and limited visibility between programs. However, IRS  encountered challenges with the investment, and in 2017 IRS paused  development activities. As of June 2018, IRS is working to acquire  another product to serve as the platform for IRS\u2019s enterprise-wide case  management system.", "Our prior work has identified actions that Congress could take that would  improve IRS\u2019s ability to administer the tax system and enforce tax laws.  These actions could also improve IRS\u2019s ability to further leverage RRP\u2019s  capabilities. For example, in August 2014 we suggested that Congress  provide the Secretary of the Treasury with the regulatory authority to  lower the threshold for requiring employers to electronically file W-2s from  250 returns annually to between 5 to 10 returns, as appropriate. Under  current law, employers who file 250 or more W-2s annually are required  to file W-2s electronically, while those who file fewer may opt to file on  paper. Without this change, some employers\u2019 paper W-2s are unavailable to RRP for matching before IRS issues refunds due to the  additional time the Social Security Administration needs to process paper  forms. Lowering the threshold would help IRS use RRP to verify returns  before issuing refunds. This proposed change has been included in H.R.  5444. As of June 2018, H.R. 5444 passed the House and was being  considered by the Senate Finance Committee.", "We have also suggested that Congress grant IRS broader math error  authority, with appropriate safeguards against misuse of that authority, to  correct taxpayer errors during tax return processing. IRS officials told us  that this type of corrective authority would allow IRS to develop more  efficient treatments for returns selected by RRP with obvious errors.  Although the Consolidated Appropriations Act, 2016 gave IRS additional  math error authority, it is limited to certain circumstances. Giving IRS  broader math error authority or correctible error authority with appropriate  controls would enable IRS to correct obvious noncompliance, would be  less intrusive and burdensome to taxpayers than audits, and would  potentially help taxpayers who underclaim tax benefits to which they are  entitled. As of June 2018, Congress had not provided Treasury with such  authority."], "subsections": []}, {"section_title": "IRS Has Not Fully Considered Opportunities to Improve Data Available to RRP", "paragraphs": ["IRS has additional opportunities to improve data available to RRP to  enhance RRP\u2019s detection and accuracy. As described above, RRP\u2019s  analytic techniques depend on taxpayer data and information from  numerous IRS systems and external entities. RRP\u2019s access to useful and  timely information enables IRS to more fully utilize RRP\u2019s analytic  techniques to detect suspicious returns, leading to more accurate  selection and treatment decisions. Given RRP\u2019s importance to IRS\u2019s  mission, it is critical that IRS considers and addresses risks that could  affect the accuracy and effectiveness of RRP\u2019s detection and selection  activities.", "According to the Office of Management and Budget, risks include not only  threats but also opportunities that could affect an agency\u2019s ability to  achieve its mission. IRS and Congress have previously considered  opportunities and taken steps to enhance some data made available to  RRP. For example:  IRS expanded RRP\u2019s use of relevant data from electronically filed  returns and information returns. For example, as mentioned  previously, IRS incorporated a number of data elements identified  through the Security Summit into RRP. In 2016 and 2017, IRS used  these data elements to develop additional business rules and models  specific to electronically filed returns. IRS also expanded RRP analytic  techniques to incorporate data from Forms 1099-MISC, which  taxpayers may use to report non-employee compensation.", "Consistent with our prior reporting, in 2015 Congress enacted  legislation to help IRS prevent invalid refunds associated with IDT and  other refund fraud. This change allows IRS more time to use RRP to  match wage information to tax returns and to identify any  inconsistencies before issuing refunds. Since 2017, employers have  been required to submit W-2s to the Social Security Administration by  January 31, about 1 to 2 months earlier than in prior years. The act  also required IRS to hold refunds for all taxpayers claiming the Earned  Income Tax Credit or the Additional Child Tax Credit. In 2018 we  made recommendations that IRS fully assess the benefits and costs  of using existing authority to hold additional taxpayer refunds as well  as extending the date for releasing those refunds until it can verify  wage information. IRS outlined a number of actions it plans to take to  address these recommendations. Taking these actions could prevent  IRS from issuing millions of dollars in invalid refunds annually.", "IRS officials told us that they are taking steps to enhance RRP\u2019s  ability to detect fraudulent returns filed using prisoners\u2019 Social Security  numbers. To do this, IRS is working to load updated prisoner data into  RRP more frequently and developing additional business rules. The  Treasury Inspector General for Tax Administration (TIGTA) has  reported that refund fraud associated with prisoner Social Security  numbers is a significant problem for tax administration, accounting for  IRS\u2019s issuance of potentially fraudulent refunds worth tens of millions  of dollars in 2015.", "Based on our prior work, we found that there may be additional  opportunities for IRS to enhance RRP by improving data made available  to it:", "Making W-2 information available more frequently. In January  2018, we reported that IRS\u2019s ability to verify information on tax returns  early in the filing season was affected by limitations with its IT  systems. IRS receives and maintains information return data,  including W-2 and 1099-MISC forms, through the Information Return  Master File (IRMF) system. IRMF then makes the data available to  RRP for systemic verification, the automated process that uses W-2s  to verify that taxpayers accurately reported their income and other  information on their tax returns. IRS receives the W-2 data from the  Social Security Administration daily\u2014up to 25 million W-2s per day\u2014 but only loads the data into IRMF and RRP weekly. According to IRS,  to add new information returns to IRMF, IRS staff need to reload all  existing information at the same time. As employers and financial  institutions send more documents to IRS during the filing season,  reloading IRMF can take 3 days or more because updates take more  time as IRMF\u2019s file increases in size, ultimately containing billions of  information returns.", "IRS officials told us that having W-2s available for analysis sooner  would benefit RRP detection and selection of fraudulent returns. In  addition, matching W-2 information can also provide sufficient  assurance of a valid return, even if characteristics of the return might  otherwise raise suspicion. According to our analysis of RRP data for  the 2017 filing season, matching available W-2s resulted in RRP  excluding 367,027 electronically filed returns that RRP otherwise  would have selected as suspicious. Having W-2 information loaded  more frequently and available for RRP\u2019s systemic verification helps  IRS improve its use of limited enforcement resources by more  accurately identifying fraudulent returns and excluding legitimate  returns.", "As of April 2018, IRS officials had drafted but not yet approved a work  request to send IRMF data to RRP daily between January and March  during the 2019 filing season. In preparing the draft request, IRS  officials told us they are assessing how frequently the agency can  efficiently load data into IRMF as the filing season progresses.  Federal standards for internal control require federal managers to  analyze and address risks to agency objectives. As noted  previously, risks include not only threats but also opportunities.  Leading practices in fraud risk management further state that  managers should take into account external risks that can impact the  effectiveness of fraud prevention efforts. Until IRS makes incoming  employer W-2s available to RRP more frequently, IRS will not address  an opportunity to expand the use of RRP\u2019s systemic verification  process to more accurately detect and select invalid refund returns for  additional action.", "Making more information available electronically from returns  filed on paper. RRP\u2019s analytic techniques could be strengthened if  the program had electronic access to additional information from filers  of paper returns. While about 90 percent of individual taxpayers file  their returns electronically, over 19 million taxpayers filed on paper in  2017. To control costs, IRS transcribes a limited amount of  information provided by paper filers into its computer databases. This  practice limits the amount of information readily available for  enforcement and other tax administration activities that rely on  digitized information. We also reported that according to IRS officials,  digitizing and posting more comprehensive information provided by  paper filers could facilitate enforcement efforts, expedite contacts for  faster resolution, reduce handling costs, and increase compliance  revenue.", "In October 2011 we found that IRS considered a number of options to  make more information from paper returns available electronically,  including increasing manual transcription, optical character  recognition technology, and barcoding technology. An optical  character recognition system would read text directly from all paper  returns using optical scanners and recognition software and convert  the text to digital data. A 2-D bar code is a black and white grid that  encodes tax return data allowing IRS to scan the bar code to digitize  and import the data into IRS\u2019s systems, such as RRP. We  recommended in 2011 that IRS determine whether and to what extent  the benefits of barcoding would outweigh the costs. In response to  our recommendations, in 2012 IRS updated an earlier evaluation of  implementing barcoding technology for paper returns. The agency  estimated that implementing and using barcoding technology over a  10-year period from fiscal years 2015 to 2025 would yield about $109  million in benefits, compared to about $13 million in costs\u2014a  substantial return on investment. IRS estimated benefits based on  anticipated reductions in staff hours dedicated to the coding, editing,  transcription, and error resolution functions of paper return  processing.", "However, because of statutory limitations, a legislative change is  necessary to require individuals, estates, and trusts to print their  federal income tax returns with a scannable bar code. In each of its  congressional justifications for fiscal years 2012 to 2016, IRS  requested that Congress require returns prepared electronically but  filed on paper include a scannable code printed on the return. The  National Taxpayer Advocate made a similar legislative proposal in  2017. As of June 2018, Congress had not taken action on the  proposal.", "In addition to barcoding, there are other technologies IRS could use to  digitize more information from paper returns to further improve tax  administration and enforcement activities. However, as of June 2018,  IRS had not taken any additional steps to further evaluate the costs  and benefits of digitizing individual return information, taking into  consideration new technology or additional benefits associated with  RRP\u2019s enhanced enforcement capabilities.", "IRS\u2019s strategic plan identifies expanding the agency\u2019s use of digitized  information as a key activity toward its goal to increase the efficiency  and effectiveness of IRS operations. Updating and expanding its  2012 analysis of the costs and benefits of digitizing returns to consider  any new technology or additional benefit to RRP would provide IRS  managers and Congress with valuable information to implement the  most cost-effective options for making additional, digitized information  available for enforcing and administering taxes. This information could  help IRS make progress toward its mission by improving RRP\u2019s  detection and selection of suspicious returns. In addition, greater  efficiency in the paper return transcription process could free  additional resources for enforcement and administration activities."], "subsections": []}, {"section_title": "IRS Has Not Fully Considered Opportunities to Use RRP to Improve Other Tax Enforcement Activities", "paragraphs": ["IRS has not yet evaluated the costs and benefits of expanding RRP to  improve other tax enforcement activities, such as compliance checks or  audits, for returns not claiming refunds. All individual returns (Forms  1040) are loaded into RRP as part of return processing. However, RRP is  used to prevent IRS from paying invalid refunds as part of IRS\u2019s pre- refund enforcement activities and, therefore, according to IRS officials,  RRP has been limited to detecting and selecting individual returns  claiming refunds. Currently, IRS does not use RRP to support other  enforcement activities that detect misreporting or noncompliance on  individual tax returns not claiming refunds, which also contribute to the tax  gap\u2014the difference between taxes owed and what are paid on time.", "Underreporting of income represents the majority of the tax gap, with the  average annual underreporting of individual income tax on both refund  and non-refund returns for tax years 2008 to 2010 estimated by IRS to be  about $264 billion or 57 percent of the total gross tax gap of $458 billion.", "Given the large amount of revenue lost each year due to underreporting,  it is important that IRS consider opportunities to improve its enforcement  efforts and promote compliance. IRS\u2019s enforcement of tax laws helps fund  the U.S. government by collecting revenue from noncompliant taxpayers  and, perhaps more importantly, promoting voluntary compliance by giving  taxpayers confidence that others are paying their fair share.", "According to IRS officials, RRP has benefited IRS\u2019s pre-refund  enforcement activities by enhancing detection of IDT and other refund  fraud, providing more cost-effective treatment, and enhancing data  analytics for improved enforcement. Based on this review of RRP\u2019s  capabilities and our prior work on tax enforcement and administration, we  identified a number of activities and processes that could be improved  and enhanced if IRS expanded RRP to analyze returns not claiming  refunds, in addition to returns with refunds. For example:", "Enhanced detection and selection of potential noncompliance.", "IRS reported that RRP significantly enhanced its detection of IDT and  other refund fraud over prior systems. In January 2018 we  recommended\u2014and IRS outlined planned actions\u2014that IRS assess  the benefits and costs of additional uses and applications of W-2 data  for pre-refund compliance checks, such as underreporting,  employment fraud, and other noncompliance. Underreporting occurs  when a taxpayer underreports income or claims unwarranted  deductions or tax credits. As previously noted, underreporting  accounts for the largest portion of the tax gap. To detect  underreporting by individuals, after the filing season and after refunds  have been issued, IRS uses its Automated Underreporter (AUR)  program to electronically match income information reported to IRS by  third parties, such as banks and employers, against information that  taxpayers report on their tax returns. During our review, we found that  this process of matching income information is similar to RRP\u2019s pre- refund systemic verification process that occurs during return  processing, but only applies to returns claiming refunds. IRS should  consider expanding RRP\u2019s capabilities to use RRP as a platform to  perform AUR matching on all individual returns during return  processing and post-processing, as more information returns are  available for matching. In May 2018, IRS officials told us that, in  response to our January 2018 recommendation, IRS is assessing the  possibility of using RRP to perform some AUR checks. However, until  IRS expands RRP to analyze returns not claiming refunds, these  compliance checks will not cover all potential underreporting.", "During this review of RRP, we also found that IRS could implement  predictive models of noncompliance in RRP to select returns for  audits. Audits are an important enforcement tool for IRS to identify  noncompliance in reporting tax obligations and to enhance voluntary  reporting compliance. IRS\u2019s Small Business and Self-Employed  (SB/SE) division conducts audits of individual taxpayers after the  return has been processed. SB/SE staff review the returns identified  for potential audit by various processes. One of these audit selection  processes is a computer algorithm\u2014discriminant function (DIF)\u2014that  uses models to score all individual returns (with and without refunds)  for their likelihood of noncompliance, an indicator of their audit  potential. The DIF models are developed from a unique data set and  include variables IRS has found to be effective in predicting the  likelihood that a return would have a significant tax change if  audited. The additional information available in RRP, such as  taxpayer history, has the potential to improve the DIF models and  therefore the DIF scoring. IRS officials told us that they plan to  examine opportunities to use RRP for some SB/SE audit selection  processes, such as incorporating DIF scoring into RRP. However, as  of April 2018 IRS had not taken any action.", "More efficient and effective treatment of potentially noncompliant  returns. IRS reported that RRP automated and streamlined many of  IRS\u2019s selection and treatment processes for preventing the issuance  of invalid refunds. Using RRP to improve IRS\u2019s detection and  selection of potentially noncompliant returns during return processing  could lead IRS to consider treatment options, such as soft notices,  that engage taxpayers earlier, to help IRS and taxpayers resolve  issues more quickly. A soft notice does not always require a response  from the taxpayer; instead, it provides information about a potential  error and asks taxpayers to review their records. Consequently, soft  notices can be more efficient than other treatments, such as  telephone calls or in-person interactions. This treatment option is  consistent with IRS\u2019s strategic objective to reduce the time between  filing and resolution of compliance issues. One strategy IRS highlights  to achieve this objective is to review and refine IRS\u2019s risk-based  systems, like RRP, to detect potential issues early.", "Currently, IRS\u2019s enforcement activities, including SB/SE audits and  AUR, occur after the return has been processed and the filing season  ends. For example, AUR begins matching information returns to  individual tax returns in July after the filing season has ended, and  according to TIGTA, routinely identifies more than 20 million individual  tax returns with discrepancies each year. In 2013 we reported that  IRS took on average, over 1 year\u20142 years in some cases\u2014to notify  taxpayers about discrepancies. These delays are a challenge for  IRS and the taxpayer. For example, when additional tax is owed, as  time passes taxpayers may be less likely, or less able, to pay the  original debt owed and any associated penalties that may have  accrued since the time of filing. Taxpayers may also be less likely to  have the relevant tax records needed to respond to IRS questions.  Notifying taxpayers earlier of a potential error could help bring them  into compliance more effectively than other enforcement options.", "We found that IRS could also expand RRP\u2019s capabilities to use RRP  to identify and generate soft notices for taxpayers that do not pay  taxes owed at the time of return processing. IRS does not contact  electronic filers with an unpaid tax balance until mid-May, weeks after  the April payment deadline. This treatment option could help IRS  collect taxes owed and also help taxpayers by making them aware of  payment options earlier and allowing them to avoid interest and  penalties. IRS officials agreed that it is more likely to recover any debt  owed if the taxpayer is notified earlier.", "Enhanced data analytics for improved enforcement. Just as IRS is  using RRP data and reporting capabilities to better target resources  for enforcement activities associated with refund returns, we found  that IRS could increase its access to useful data if it expanded RRP to  analyze returns not claiming refunds. For example, using RRP\u2019s  enhanced data analytics, including access to multiple data sources,  IRS could better identify characteristics of other types of  noncompliance to improve detection and enforcement. This approach  is consistent with IRS\u2019s strategic goal to advance data analytics to  inform decision making and improve operational outcomes. Officials  from IRS\u2019s Office of Research, Applied Analytics, and Statistics told  us that RRP is a valuable data source for research on IDT and other  refund fraud. However, until IRS expands RRP to analyze and score  individual returns not claiming refunds, IRS will be limited in its ability  to use RRP\u2019s data analytics to help IRS address other types of  noncompliance and fraud.", "Evaluating the costs and benefits of expanding RRP to analyze individual  returns not claiming refunds to support other tax enforcement activities is  consistent with the goals and objectives outlined in IRS\u2019s Strategic Plan to  encourage compliance through tax administration and enforcement and  increase operational efficiency and effectiveness. IRS has identified and  implemented opportunities to expand RRP to better detect IDT and other  refund fraud in individual and business returns. However, until IRS  evaluates the costs and benefits of expanding RRP to support other  enforcement activities, IRS may be missing opportunities to realize  operational efficiencies by streamlining the detection and treatment of  other types of noncompliance and fraud. Additionally, IRS may be missing  an opportunity to promote voluntary compliance with tax laws and make  progress toward closing the estimated $458 billion average annual gross  tax gap."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Noncompliance, including tax fraud, has been a long-standing challenge  for IRS. More recently, IDT refund fraud has emerged as a costly and  evolving threat to taxpayers and the tax system. As part of IRS\u2019s effort to  strategically address these challenges, RRP provides opportunities for  IRS to operate more efficiently, increase taxpayer compliance, and  combat refund fraud. IRS has plans to continue developing and  enhancing RRP, including analyzing business returns for fraud. However,  IRS has not fully examined opportunities to improve the availability of  information that RRP\u2019s analytic tools rely on.", "These opportunities include examining the costs and benefits of making  more information from paper returns available electronically and making  W-2 information available to RRP for income verification more frequently.  Until IRS conducts such analyses, the agency will be missing  opportunities to improve RRP\u2019s detection and accuracy and prevent  paying invalid refunds. These evaluations can also inform Congress\u2019s  decisions on requiring scannable codes on some printed tax returns, as  well as issues we highlighted in our previous work, including lowering the  e-file threshold for employers filing W-2s and expanding IRS\u2019s correctible  error authority. Congressional action on these issues would help IRS  better leverage RRP\u2019s capabilities.", "Further, RRP has the potential to improve tax enforcement in other areas  such as underreporting and audit selection if IRS can successfully expand  RRP\u2019s detection and selection capabilities to analyze individual tax  returns, including those not claiming refunds, for fraud and  noncompliance. Earlier detection of anomalies and notification can  increase compliance and collection rates."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider legislation to require that returns prepared  electronically but filed on paper include a scannable code printed on the  return. (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to IRS.", "The Commissioner of Internal Revenue should increase the frequency at  which incoming W-2 information is made available to RRP.  (Recommendation 1)", "The Commissioner of Internal Revenue should update and expand a  2012 analysis of the costs and benefits of digitizing returns filed on paper  to consider any new technology or additional benefits associated with  RRP\u2019s enhanced enforcement capabilities. (Recommendation 2)", "Based on the assessment in recommendation 2, the Commissioner of  Internal Revenue should implement the most cost-effective method to  digitize information provided by taxpayers who file returns on paper.  (Recommendation 3)", "The Commissioner of Internal Revenue should evaluate the costs and  benefits of expanding RRP to analyze individual returns not claiming  refunds to support other enforcement activities. (Recommendation 4)", "Based on the assessment in recommendation 4, the Commissioner of  Internal Revenue should expand RRP to support identified activities.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Commissioner of Internal  Revenue for review and comment. In its written comments, which are  summarized below and reprinted in appendix II, IRS agreed with our five  recommendations stating that it is taking action to address them and will  provide a more detailed corrective action plan.", "IRS agreed with our recommendations aimed at improving information  available to RRP to enhance detection of fraudulent returns. IRS stated  that it is evaluating the frequency at which W-2 data is made available to  RRP and options for digitizing returns filed on paper. IRS further noted  that it is evaluating other associated information provided to RRP for  detection. As stated earlier, efforts to improve RRP\u2019s detection and  accuracy will protect additional federal revenue.", "IRS agreed with our recommendations to evaluate options for expanding  RRP to improve tax enforcement and compliance. IRS stated that its  objective is to make RRP the primary detection system for pre- and post- refund processing across the agency.", "IRS stated that to expand RRP to analyze returns not claiming refunds, a  legislative change requiring all information returns to be filed electronically  will be necessary to achieve maximum benefit from RRP. In this report,  we highlight legislative issues from our prior work, including lowering the  e-file threshold for employers filing W-2s and expanding IRS\u2019s correctible  error authority, to help IRS better leverage RRP\u2019s capabilities. However,  we are confident that even under current conditions, IRS could use RRP  to further improve compliance and its enforcement efforts. For example,  with the current electronic filing requirements, RRP could help IRS detect  and resolve individual underreporting earlier in the process.", "IRS stated its intention to collaborate with GAO and other organizations to  determine appropriate actions after assessing the results of its analyses.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Commissioner of Internal  Revenue, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512- 9110 or mctiguej@gao.gov. Contact points for our  offices of Congressional Relations and Public Affairs are on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Return Review Program Investment Summary", "paragraphs": ["The Return Review Program (RRP) is one of the Internal Revenue  Service\u2019s (IRS) major information technology investments. IRS began  developing RRP in 2009 to improve its ability to detect fraudulent returns.  In October 2016, RRP replaced IRS\u2019s legacy system, the Electronic  Fraud Detection System (EFDS) as IRS\u2019s primary fraud detection system.  IRS originally planned for RRP to be operating by 2014 because IRS had  determined that by 2015 EFDS would not be reliable. However, in 2014,  IRS paused RRP\u2019s development to reconsider RRP\u2019s capabilities within  IRS\u2019s strategic fraud detection goals. The year-long pause delayed EFDS  replacement and retirement until 2016. RRP operated as IRS\u2019s primary  system for detecting identity theft and other refund fraud beginning with  the 2017 filing season. Figure 5 is a timeline of IRS\u2019s development of  RRP."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Neil Pinney (Assistant Director),  Margaret M. Adams (Analyst-in-Charge), Michael Bechetti, Mark Canter,  Pamela Davidson, Robert Gebhart, James A. Howard, Jesse T. Jordan,  Paul Middleton, Sabine Paul, J. Daniel Paulk, and Bradley Roach, made  significant contributions to this report."], "subsections": []}]}], "fastfact": ["The Return Review Program is one of IRS's key systems for detecting tax fraud and preventing bad refunds\u2014preventing about $4.4 billion in bad refunds during the 2017 filing season.", "IRS monitors the program's performance and adjusts it to address new threats, but we found ways to improve and expand use of the program.", "For example, we recommended ways to increase the amount of data available to the program, including loading W-2 data into it more frequently and digitizing paper returns. We also recommended using the program for other tax enforcement activities such as selecting returns for audits or checking them for underreported income."]}
{"id": "GAO-18-21", "url": "https://www.gao.gov/products/GAO-18-21", "title": "Tobacco Trade: Duty-Free Cigarettes Sold in Unlimited Quantities on the U.S.-Mexico Border Pose Customs Challenges", "published_date": "2017-10-11T00:00:00", "released_date": "2017-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since the 1970s, U.S. agencies have recognized that high-volume cigarette sales at duty-free stores near the U.S.\u2013Mexico land border, although lawful, could be related to illicit activity. In 1988, U.S. law limited the quantity of duty-free tobacco products an individual can purchase at stores located in airports, restricting the sale of tobacco products to quantities consistent with personal use. This requirement, however, does not apply to land border duty-free stores.", "GAO was asked to review information on sales of cigarettes at duty-free stores along the southwest border. CBP identified 88 such stores and warehouses. This report describes (1) requirements that govern the lawful sale and export of cigarettes from duty-free stores on the southwest border and schemes for illicit trade in such cigarettes, (2) U.S. agency observations about these exports and efforts to counter illicit trade, (3) the extent to which selected cigarette transaction data submitted by duty-free stores indicate compliance issues. GAO analyzed Census data on these exports; reviewed CBP, ICE, and Department of the Treasury documents; and interviewed agency officials in Washington, D.C., and in several ports along the southwest border, including Laredo, Texas, and the San Diego, California, area."]}, {"section_title": "What GAO Found", "paragraphs": ["Duty-free stores at the southwest border may sell tax-exempt cigarettes in any quantity to passengers departing the United States for Mexico; agencies have identified schemes associated with duty-free cigarette sales used to evade U.S. and Mexican taxes. U.S. Customs and Border Protection (CBP), an agency within the Department of Homeland Security (DHS), regulates duty-free stores. U.S. regulations require the stores to have procedures to provide reasonable assurance of export of cigarettes and the exporter to report export information on transactions valued at over $2,500. U.S. Census Bureau (Census) data show that about 18,500 such transactions involving cigarettes occurred from 2010 to 2015. According to information from U.S. and Mexican officials, the Mexican government limits the amount of duty-free cigarettes that can be brought into Mexico (see figure). U.S. agencies identified three schemes to evade U.S. and Mexican cigarette-related tax and other laws: (1) diversion from a duty-free store into U.S. commerce; (2) smuggling into Mexico through U.S. ports; and (3) smuggling back into the United States after export to Mexico.", "U.S. agency officials said that some smuggling of duty-free cigarettes across the southwest border has links to organized crime, supplies the illicit tobacco market in Mexico, and poses oversight and enforcement challenges. U.S. Immigration and Customs Enforcement (ICE) officials said they have identified links between the smuggling of large quantities of duty-free cigarettes and transnational criminal organizations that use the smuggled cigarettes to launder money and generate revenue. Inexpensive cigarettes made in the United States are part of the trade in duty-free cigarettes along the southwest border, including brands that a Mexican official stated are prohibited for sale in Mexico. U.S. officials reported that their efforts to counter the illicit trade in duty-free cigarettes face challenges, primarily due to the ability to buy unlimited quantities of duty-free cigarettes at the land border.", "According to CBP, in many cases, duty-free stores on the southwest border are filing noncompliant information that they are required to report on cigarette exports valued at more than $2,500. For example, officials had compliance concerns with filings in which stores identify themselves, and not the purchaser, as the exporter. CBP and Census have met with representatives of one of the largest operators of duty-free stores on the southwest border to clarify regulatory requirements. However, CBP officials said that this duty-free store operator continues to make incorrect filings. CBP has not issued guidance to all operators to clarify the correct procedure. Without accurate export data, agencies may lack the information they need to enhance their enforcement and intelligence efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["CBP should take steps to strengthen compliance with export reporting requirements for duty-free cigarette sales on the southwest border, such as issuing guidance to all duty-free store operators. DHS agreed and noted CBP plans to address the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since the 1970s, U.S. agencies have recognized that high-volume  tobacco sales at duty-free stores near the southwest U.S. border,  although lawful, could be related to illicit activity. The U.S. government  permits sales of tobacco products at duty-free stores near U.S. points of  exit. According to our analysis of agency data and our communications  with U.S. agency officials, cigarettes are the primary tobacco export from  duty-free stores on the southwest border. According to federal and state  government officials, increases in cigarette taxes in Mexico in 2010 and in  border states such as California in April 2017 have elevated the risk of  cross-border cigarette smuggling from all sources, including duty-free  stores. In a 2014 committee report, the House of Representatives  Committee on Appropriations noted its understanding that nearly one in  four packs of cigarettes consumed in Texas is smuggled in from Mexico.", "You asked us to review issues related to sales of cigarettes at duty-free  stores along the southwest border of the United States. We examined (1)  requirements that govern the lawful sale and export of cigarettes from  duty-free stores on the southwest border and schemes for illicit trade in  such cigarettes that agencies identified, (2) U.S. agency observations  about these duty-free cigarette exports and efforts to counter illicit trade,  and (3) the extent to which selected cigarette transaction data submitted  by duty-free stores indicate compliance issues with reporting  requirements.", "To address the objectives, we reviewed relevant federal laws, regulations,  and agency documents. We also interviewed officials from the  Department of Commerce\u2019s (Commerce) U.S. Census Bureau (Census);  the Department of Homeland Security\u2019s (DHS) U.S. Customs and Border  Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE);  the Department of Justice\u2019s (DOJ) Bureau of Alcohol, Tobacco, Firearms,  and Explosives (ATF); the Department of the Treasury\u2019s (Treasury)  Alcohol and Tobacco Tax and Trade Bureau (TTB); and tax-collecting  officials from the California state government\u2019s Board of Equalization. In  addition, we conducted fieldwork at the ports in Laredo, Texas; and the  San Diego, California, area, including the ports of Otay Mesa and San  Ysidro; we also interviewed cognizant officials in Los Angeles, California.", "To describe how duty-free cigarettes are sold and exported and how duty- free stores report data, we analyzed Automated Export System (AES)  data from Census for 2010 through 2015 on recorded transactions at the  88 duty-free stores CBP identified as being adjacent to the U.S.-Mexico  border, also referred to as the southwest border, spanning Texas, New  Mexico, Arizona, and California (see fig. 1). We determined that data  were sufficiently reliable to review filing practices with respect to duty-free  cigarette transactions. We determined that value and quantity data for  those transactions were not reliable for the purposes of this report due to  unexplained variations in the calculated prices; we based our assessment  on a review of related documentation and on interviews with Census  officials about the agency\u2019s procedures to ensure the quality of the data  and interviews with CBP officials to discuss relevant aspects of how  transaction data might be entered in AES. See appendix I for more details  on our scope and methodology and appendix II for our assessment of  AES data reliability.", "We conducted this performance audit from November 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Duty-Free Stores in the United States", "paragraphs": ["19 U.S.C. \u00a7 1555(b)(8)(D). portion was then being smuggled back into the United States without  payment of U.S. taxes.", "Congress legislated on duty-free stores through the Omnibus Foreign  Trade and Competitiveness Act of 1988, which required duty-free stores  located in airports to restrict the sale of duty-free merchandise to any one  individual to \u201cpersonal use quantities,\u201d which is defined as \u201cquantities only  suitable for uses other than resale.\u201d10 During consideration of the  legislative language that was enacted in 1988, a senator introduced an  amendment to permit duty-free stores located along the border to  continue to sell goods in wholesale quantities. In introducing the  amendment, the senator observed that a large part of the sales by the  border stores along the U.S.-Mexico border were in wholesale quantities  and that restricting the stores\u2019 ability to sell in such quantities would  adversely affect the stores\u2019 business and the regional economy.  Congress adopted the law with the amendment and applied the concept  of \u201cpersonal use quantities\u201d only to airport duty-free stores.12 This  requirement does not apply to land border stores."], "subsections": []}, {"section_title": "Agencies with Roles Related to Duty-Free Cigarette Exports", "paragraphs": ["Pub. L. No. 100-418, \u00a7 1908(b), 102 Stat. 1107, 1315 (codified as amended at 19  U.S.C. \u00a7 1555(b)). The act does not identify any quantity amount with respect to personal  use but defines personal use quantities as quantities that are only suitable for uses other  than resale and includes reasonable quantities for household or family consumption as  well as for gifts to others.", "Discussion of this topic occurred as part of congressional consideration of Senate Bill  1420, the Omnibus Trade and Competitiveness Act of 1987. One senator highlighted the  potential for economic harm to communities adjacent to the U.S.-Mexico border if the  provision precluding duty-free sales in wholesale quantities were applied to land border  stores. Congress passed the Omnibus Foreign Trade and Competitiveness Act of 1987,  but the President vetoed the bill, and a vote to override the veto failed in the Senate. (See  H.R. 3, 100th Cong. (1987). S. 1420 was incorporated into H.R. 3.) The provision limiting  the concept of \u201cpersonal-use quantities\u201d to airports was in the Omnibus Foreign Trade and  Competitiveness Act of 1988, which Congress passed and the President signed. Pub. L.  No. 100-418, \u00a7 1908(b), 102 Stat. 1107, 1316.", "At Commerce, Census is responsible for collecting, compiling, and  publishing export trade statistics. AES is the primary instrument for  collecting export trade data. Census takes steps to ensure  compliance by AES filers, including duty-free store operators, through  training and follow-up on unusual transactions, according to Census  officials.", "At DHS, CBP and ICE are the components with roles related to duty- free cigarette exports.", "CBP is responsible for oversight of duty-free stores, including the  requirements for establishment of stores and ensuring stores\u2019  compliance with various requirements for operations and lawful  sales. Duty-free stores are regulated as a type of bonded  warehouse. CBP port directors ensure that duty-free stores  establish operating procedures. According to CBP officials, the  agency is also responsible for enforcing the Foreign Trade  Regulations, including consideration of enforcement action when  an AES filer submits incorrect information regarding a shipment of  merchandise being exported.  Such enforcement action may  include the issuance of penalties or the seizure of the  merchandise intended for export.", "ICE enforces U.S. laws related to tobacco smuggling for cases in  which it has investigative jurisdiction, including related offenses  such as money laundering. According to agency officials, ICE also  coordinates with CBP on enforcement efforts, such as seizures of  merchandise due to violations of U.S. laws or customs  regulations.", "At DOJ, ATF investigates trafficking in cigarettes that have illegally  entered U.S. commerce and enforces federal antitobacco smuggling  laws under Title 18 of the U.S. Code, particularly the Prevent All  Cigarette Trafficking Act and Contraband Cigarette Trafficking Act  (CCTA).17 As we previously reported, by enforcing the CCTA, ATF  seeks to reduce illegal cigarette trafficking, divest criminal and terrorist  organizations of money derived from this activity, and significantly  reduce tax revenue losses to the affected states.", "At Treasury, TTB is responsible for administering and enforcing the  federal tax laws relating to tobacco products. Federal law requires that  every person, prior to commencing business as a manufacturer or  importer of tobacco products or establishing a TTB-regulated export  warehouse for the storage of nontax-paid tobacco products pending  export, obtain a permit from TTB. According to TTB officials, among  the regulations that TTB enforces are those governing the export of  tax-exempt tobacco products, under which only tobacco product  manufacturers and export warehouse proprietors may remove  tobacco products for export without payment of tax. TTB officials  also stated that a manufacturer of tobacco products or an export  warehouse proprietor is relieved of the liability for tax on tobacco  products upon providing evidence satisfactory to TTB of exportation or  proper delivery, including delivery to a customs bonded warehouse  operating as a duty-free facility. TTB may audit TTB permit holders to  confirm such deliveries or exports.", "See Prevent All Cigarette Trafficking Act of 2009, Pub. L. No. 111-154, 124 Stat. 1087  (2010) and Contraband Cigarette Trafficking Act, Pub. L. No. 95-575, 92 Stat. 2463 (1978)  (codified as amended at 18 U.S.C. \u00a7\u00a7 2341-2346). The Contraband Cigarette Trafficking  Act makes it unlawful (a felony) for any person to ship, transport, receive, possess, sell,  distribute, or purchase contraband cigarettes. Contraband cigarettes are cigarettes in a  quantity of more than 10,000 sticks (currently, 50 cartons) that bear no evidence of  applicable state or local cigarette tax payment in the state or locality in which the  cigarettes are found, if such state or local government requires a stamp or other indicia to  be placed on the packages or other containers of cigarettes to evidence payment of  cigarette taxes and which are in the possession of any person other than specified  persons, including permit holders under the Internal Revenue Code, common carriers  transporting cigarettes with proper bills of lading, or individuals licensed by the state where  the cigarettes are found."], "subsections": []}]}, {"section_title": "Purchasers and Exporters of Duty- Free Cigarettes at the Southwest Border Are Subject to U.S. and Mexican Requirements; Agencies Identified Schemes and Practices That Facilitate Illicit Trade", "paragraphs": ["Duty-free stores may sell tax-exempt cigarettes in any quantity to  passengers departing the United States for Mexico at a port on the land  border; agencies have identified schemes and practices associated with  duty-free sales that are used to evade U.S. and Mexican taxes. U.S.  regulations require duty-free stores to have procedures to provide  reasonable assurance that duty-free merchandise sold will be exported  and requires the exporter to report information on the export of  commercial cargo, which CBP considers to be transactions valued at  more than $2,500. Census data indicate that about 18,500 such  transactions occurred from 2010 through 2015 at duty-free stores on the  southwest border. According to information from CBP and a Mexican  customs official, Mexican requirements dictate that, depending on place  of residence, some adult travelers to Mexico can bring in one carton of  cigarettes tax-exempt, and some residents can bring in an additional  three cartons if they pay taxes on them. Bringing in any quantity above  four cartons would require an individual to register as an importer with the  Mexican government, according to the same Mexican official. U.S.  agencies identified three schemes used to evade cigarette-related taxes  and other legal requirements in the United States and Mexico:  (1) diverting cigarettes from the store directly into U.S. commerce; (2)  smuggling duty-free cigarettes into Mexico through U.S. ports of entry by  concealing them, while potentially also bribing Mexican customs officials  to evade payment of Mexican taxes; and (3) smuggling duty-free  cigarettes back into the United States after first smuggling them into  Mexico."], "subsections": [{"section_title": "U.S. Regulations Require Duty-Free Stores on the Southwest Border to Provide Reasonable Assurance of Export of Cigarettes and Report Transactions Over $2,500", "paragraphs": [], "subsections": [{"section_title": "Duty-Free Stores Sell Tax- Exempt Cigarettes to Passengers Departing the United States", "paragraphs": ["Cigarettes manufactured in the United States and labeled for export may  be shipped, without payment of federal or state tax, to duty-free stores for  export and consumption beyond the jurisdiction of U.S. internal revenue  laws. In addition to U.S.\u2013manufactured cigarettes, duty-free stores can  sell cigarettes imported from overseas. Duty-free cigarettes, which are  cigarettes labeled for export, are considered to be in violation of U.S. law  if sold for domestic consumption in the United States.24 According to CBP  officials, in the duty-free retail environment, the individual purchasing the  merchandise is the exporter.", "Cigarettes sold at duty-free stores are generally distributed to duty-free  retail outlets from warehouses maintained by the duty-free operator.  Figure 2 outlines potential steps in the lawful export of duty-free  cigarettes, according to U.S. and Mexican agency officials.", "Tobacco products manufactured in the United States and labeled for exportation may  not be sold or held for sale for domestic consumption in the United States unless such  articles are removed from their export packaging and repackaged by the original  manufacturer into new packaging that does not contain an export label. 26 U.S.C. \u00a7  5754(a)(1)(C).", "TTB regulates export warehouses."], "subsections": []}, {"section_title": "Duty-Free Stores at the Southwest Border Must Provide Reasonable Assurance of Export of Cigarettes to Mexico", "paragraphs": ["CBP requires duty-free stores to have procedures designed to provide  reasonable assurance that duty-free merchandise is exported.25 For duty- free stores along the southwest border, such procedures are designed to  ensure export by pedestrians and passengers in vehicles crossing into  Mexico. The four operating procedures for duty-free stores that we  reviewed require that they assure that individuals and their merchandise  depart the United States for Mexico under escort or observation.", "Figure 3 shows the procedures at a duty-free store in Laredo, Texas, that  is located at the border. This duty-free store sells cigarettes from a drive- through window; at the time of purchase, a store employee puts a  numbered red cone on the roof of the vehicle. A private security guard  employed by the duty-free store removes the red cone at the border  crossing to verify that the vehicle exits the United States. In other ports,  duty-free stores may be located farther from the U.S. border crossing,  and the procedures designed to assure export of duty-free goods could  entail having a store employee in a van or other vehicle escort purchasers  to the crossing. According to the procedures of one duty-free store we  visited, refusal by a pedestrian customer to cross into Mexico should  typically result in that customer returning to the store and being given a  refund for the duty-free goods purchased, and if the customer refuses to  return to the store for a refund and does not cross into Mexico, that  individual is not allowed to purchase in the facility again. In the case of a  customer in a vehicle, the store should notify CBP, and that customer  should not be allowed to purchase in that facility again.", "U.S. laws and a customs regulation stipulate that duty-free stores shall establish  procedures to provide reasonable assurance that duty-free merchandise sold by the store  is exported. 19 U.S.C. \u00a7 1555 and 19 C.F.R. \u00a7 19.36. Customs regulations further specify  conditions for delivery of such items at land border locations, meaning an exit point from  which individuals depart to a contiguous country by vehicle or on foot by bridge, tunnel,  highway, walkway, or by ferry across a boundary lake or river. 19 C.F.R. \u00a7 19.39."], "subsections": []}, {"section_title": "Duty-Free Cigarette Transactions Valued at More Than $2,500 Are Subject to Reporting; Operators of Duty- Free Stores Reported About 18,500 Such Transactions in 2010\u20132015", "paragraphs": ["For every duty-free store transaction in which the value of the goods is  more than $2,500, the Foreign Trade Regulations generally require that  the U.S. principal party in interest (USPPI) or its agent file electronic  export information through AES. (In this report, we use \u201cexporter\u201d to refer  to the USPPI.) According to CBP officials, this requirement extends to  purchases of duty-free cigarettes. The export information includes 28  mandatory data elements such as the value, quantity, name of exporter,  name of the person receiving the shipment, and method of transportation.  AES data from Census showed a total of 18,504 such transactions from  2010 through 2015 from duty-free stores on the southwest border, with  almost 70 percent exported from Texas (see fig. 4 and table 1). The  number of duty-free cigarette transactions valued at over $2,500 peaked  in 2012 at 4,685 and declined to a level about 45 percent lower in 2014  and 2015. According to CBP officials in Laredo and the San Diego area,  while it is not possible to determine the exact cause, duty-free stores may  have reported greater numbers of these transactions in 2012 due to an  increase in enforcement actions at those ports that encouraged greater  compliance with export data filing requirements. These officials said  stores may have reported fewer transactions valued at over $2,500 in  subsequent years due to CBP\u2019s continued enforcement actions. CBP  officials said that they have no way of systematically knowing the full  scale of exports that occur through transactions valued at under $2,500.  Those transactions are not captured in data that are required to be  reported to the U.S. government."], "subsections": []}]}, {"section_title": "Mexican Customs Regulations Limit the Amount of Cigarettes Individuals Crossing the Southwest Border May Bring with Them", "paragraphs": ["According to information provided by officials from CBP and the Mexican  customs agency, Mexican residents above the age of 18 are allowed to  bring up to four cartons of cigarettes into Mexico, depending on where  they live. Specifically, officials from CBP and the Mexican customs  agency provided the following details:", "The Mexican customs agency allows each adult who is a resident of  the interior of Mexico (not living in towns adjacent to the border)  crossing from the United States to bring up to four cartons of  cigarettes into Mexico; the first would be exempt from Mexican taxes,  and the remaining three would be taxed at a 573-percent rate.", "Mexican border-zone residents, defined as those who live in towns  along the U.S.-Mexico border such as Ciudad Juarez and Tijuana, are  subject to different rules and are not permitted to bring cigarettes into  Mexico.", "A Mexican customs official said that bringing in any quantity of cigarettes  above these amounts would require an individual to register as an  importer with the Mexican government, including both the customs  agency and health ministry, and obtain a health authorization in advance  of the importation. This official also said that commercial cigarettes are  charged a 67-percent import duty, a 16-percent value-added tax, and  other special duties or taxes that may be applicable."], "subsections": []}, {"section_title": "U.S. Agencies Identified Three Schemes and Related Purchasing Practices by Which Duty- Free Cigarette Traffickers Evade Taxes in the United States and Mexico", "paragraphs": ["For purposes of this report, we use \u201cdivert\u201d and \u201cdiversion\u201d to refer to the unlawful  introduction of duty-free cigarettes into U.S. commerce using a scheme that does not  involve the crossing of the southwest border. We use \u201csmuggle\u201d and \u201csmuggling\u201d to refer  to the surreptitious exporting or importing of duty-free cigarettes that involves the crossing  of an international border."], "subsections": [{"section_title": "Diverting Duty-Free Cigarettes Directly into the United States", "paragraphs": ["In this scheme, cigarettes are purchased from a land border duty-free  store and diverted into the United States without paying applicable taxes.  According to ICE officials, individuals diverting cigarettes use methods  that include bribery of a duty-free store official to allow a vehicle to stay in  the United States without informing CBP instead of observing its crossing  into Mexico. CBP and ICE officials also reported instances of individuals  loading cigarettes into a car after the duty-free store had closed. CBP  officers in the San Diego area also identified the following deceptive  practices in the course of a 2010 operation, some of which were carried  out with the complicity of store employees who took actions such as escorting vehicles using unapproved exit routes, allowing purchasers of large quantities to leave the store unescorted, assisting purchasers in their efforts to conceal goods in the door  panels and engine compartments of their vehicles.", "In April 2013, ICE received information of a pending large purchase of  cigarettes from a duty-free store in Nogales, Arizona. ICE agents were  surveilling the store when they observed an individual loading cigarettes  into a van and leaving without an escort from the store. The van did a U- turn just before reaching the crossing into Mexico. ICE seized 840 cartons  of cigarettes purchased from a duty-free store after pursuing the van in  which the purchaser drove north away from the border into the United  States instead of traveling across the border into Mexico."], "subsections": []}, {"section_title": "Smuggling Duty-Free Cigarettes into Mexico across the Land Border, Contrary to That Country\u2019s Laws", "paragraphs": ["In this scheme, according to CBP and ICE officials, individuals legally  purchase cigarettes from duty-free stores in the United States and  smuggle them into Mexico through U.S. ports of entry by concealing  these goods in their vehicles or on their person. The individuals may  attempt to bribe Mexican customs officials to evade payment of Mexican  taxes, according to CBP and ICE officials.", "CBP and ICE officials reported that they observed individuals in the  parking lots of duty-free stores near the port of San Diego loading  cigarettes into concealed compartments in personal vehicles to smuggle  them into Mexico. An ICE officer in California told us that smugglers had  posted Internet advertisements online to recruit runners to move  cigarettes across the border from the United States. ICE officials provided  data that they obtained from the government of Mexico on cigarette  seizures its officials conducted from 2012 through 2015 at numerous  locations along the border, including entry points in Mexico directly  opposite El Paso, Texas, and San Diego, California, as well as in other  parts of Mexico. The data indicate that the Mexican government seized  1.2 million cartons of cigarettes in 2012; the number of cartons seized  steadily decreased to about 320,000 cartons in 2015. At least one of the  brands among those seized is associated with the operator of multiple  duty-free stores on the southwest border. (See fig. 6 for photographs of  duty-free cigarettes concealed in vehicles and discovered by Mexican  customs officials.)", "CBP officials in Laredo told us that they had conducted joint operations  with Mexican officials at the passenger crossings but that counter  surveillance by smugglers often limited their effectiveness. Typically, a  short time after initiating an operation, they would observe that smugglers  had ceased activities temporarily and that every vehicle CBP officers  examined contained only one or two cartons of cigarettes, an amount  that, according the CBP officials, complies with Mexican import  restrictions."], "subsections": []}, {"section_title": "Smuggling Duty-Free Cigarettes Back into the United States after First Smuggling Them into Mexico", "paragraphs": ["In this scheme, duty-free cigarettes that are smuggled into Mexico are  brought back across the border and introduced into U.S. commerce  without declaring the goods to CBP upon reentry, thus avoiding relevant  U.S. taxes. Smugglers might bring these goods back into the United  States in small amounts, to avoid detection, and take them to rented  storage facilities along the border, according to CBP officials at the port of  San Diego. The smuggled cigarettes are bundled into larger quantities  and subsequently transported for sale at locations in the interior of the  United States. During our fieldwork at the port of San Ysidro, CBP  officials identified warehouses where such cigarettes had been stored in  the past."], "subsections": []}, {"section_title": "Traffickers Can Facilitate Diversion and Smuggling by Avoiding the $2,500 Threshold for Reporting Transactions or by Moving to Another Port", "paragraphs": ["According to agency officials, traffickers engaged in diversion and  smuggling schemes minimize their visibility to the U.S. government by  dividing a large purchase of duty-free cigarettes into smaller ones to avoid  the AES reporting threshold of $2,500. Such structured transactions can  be carried out by individual buyers or by multiple individuals making  purchases on behalf of the holder of an account at a duty-free store. As  part of a 2012 enforcement operation, CBP officials reviewed receipts for  cigarette sales from three duty-free stores in San Ysidro and identified six  people who made multiple purchases during the same day at one of the  stores. One of these six individuals made 14 consecutive purchases of  cigarettes valued at $200 and then a final purchase of $100 for a total of  $2,900 which, as a single transaction, would have exceeded the $2,500  threshold for reporting such exports. In addition, CBP officials in Laredo  described a 2010 scenario in which U.S. citizens moved $100,000 worth  of tobacco products into Mexico over the course of a month by making  repeated crossings on foot with under $2,500 in merchandise each time  so that no reporting was required. Further, CBP officials at the port of San  Diego said that following a series of CBP operations related to duty-free  stores from 2010 through 2012, they reviewed the stores\u2019 sales records  and noticed a decrease in high-value sales. An ICE official said, however,  that cigarette smuggling operations may have moved eastward in  response to CBP operations in California. In addition, according to these  CBP officials, a 2010 operation discovered multiple store operators  maintaining two sets of accounts to link cash outlays upfront for multiple  purchases."], "subsections": []}]}]}, {"section_title": "Smuggling of Duty- Free Cigarettes across the Southwest Border Is Reportedly Linked to Organized Crime and Supplies the Illicit Tobacco Market in Mexico; U.S. Efforts to Counter This Illicit Activity Face Challenges", "paragraphs": ["U.S. agency officials said that some smuggling of duty-free cigarettes  across the southwest border has links to organized crime, supplies the  illicit tobacco market in Mexico, and poses oversight challenges. ICE  officials told us that transnational criminal organizations use smuggled,  duty-free cigarettes to launder money and generate revenue.  Furthermore, a Mexican customs official noted that relatively inexpensive  cigarettes manufactured in the United States, which cannot legally be  sold in the United States or in Mexico, are routinely sold for export from  duty-free stores on the southwest border; such cigarettes are then  smuggled across to supply Mexico\u2019s illicit tobacco market. One brand of  such cigarettes has been cited in recent studies as a significant part of  the illicit tobacco trade in Mexico. U.S. officials reported that their efforts  to counter the illicit movement of duty-free cigarettes face challenges  related to the purchaser\u2019s ability to buy duty-free cigarettes in unlimited  quantities and to use passenger, not commercial, crossings from the  United States into Mexico. According to U.S. officials, while U.S.  agencies do not have the authority to seize exports that violate Mexico\u2019s  laws related to these cigarettes, U.S. officials reported working with  Mexican officials on activities to enforce the customs laws and regulations  of both countries."], "subsections": [{"section_title": "Criminal Organizations Reportedly Use Duty-Free Cigarettes to Launder Money and Generate Revenue", "paragraphs": ["The term \u201cblack market\u201d refers to trade in goods or commodities in violation of laws and  regulations. method of generating funds. In addition to U.S.\u2013 manufactured  cigarettes, foreign cigarettes are also smuggled into Mexico.", "According to ICE officials, transnational criminal organizations launder  money by depositing illicit funds into client accounts at duty-free stores  along the southwest border. They then make withdrawals from these  accounts, just as they would from a bank account, to purchase duty-free  tobacco and alcohol.37 According to ICE officials, transnational criminal  organizations purchase in quantities such that some duty-free stores give  them substantial discounts on the stores\u2019 in-house cigarette brands.  Subsequently, these goods are smuggled either by concealment or  bribery of Mexican customs officials, according to ICE officials. According  to an official from the Mexican customs agency, some drug cartels add  their own product identification codes onto packs of cigarettes from duty- free stores for sale in areas that they control."], "subsections": []}, {"section_title": "Certain Duty-Free Cigarettes from the United States Comprise a Large Share of the Illicit Mexican Market", "paragraphs": ["ICE defines trade-based money laundering as the use of trade to legitimize, conceal,  transfer, and convert large quantities of illicit cash into less conspicuous assets. ICE  officials in San Diego explained that, in Southern California, criminals use other  commodities more frequently than cigarettes for trade-based money laundering.", "According to a public health warning issued by a federal commission of the Mexico  health secretariat, this particular brand of U.S.-made cigarettes for duty-free sale is among  those cigarettes \u201cwhich can be counterfeit, adulterated, and even made with unknown  ingredients, increasing the possibility that they contain potentially toxic non-tobacco  chemicals.\u201d the illicitly trafficked cigarettes that the Mexican government confiscated  at various locations in the country from 2012 through 2015. In addition, in  2013, the Mexican customs agency executed a number of seizures of this  brand of duty-free cigarettes that were undeclared at ports of entry on the  U.S.-Mexico border (see fig. 7).This brand of cigarettes has been cited in  recent studies as a significant part of the illicit tobacco trade in Mexico.", "ICE officials provided a November 2015 report issued by the National  Cyber-Forensics & Training Alliance, a public-private partnership,  which stated that this U.S.-made brand of cigarettes was recognized  as the largest illegal brand being sold in Mexico. The report also  stated that this brand of cigarettes was being diverted into Mexico  through various duty-free stores in Laredo, Texas, and San Diego,  California.39", "Another study reported that, as of June 2014, 64 percent of the inflow  of tobacco into Mexico from the United States consisted of this brand  of cigarettes manufactured and trademarked in the United States and  sold at duty-free stores on the southwest border. The study also  noted that this brand of cigarettes accounted for about 13 percent of  the overall illicit cigarette market in Mexico.", "National Cyber-Forensics & Training Alliance (NCFTA), Southern Border Illicit Tobacco  Activity (Pittsburgh, Penn.: November 2015). The NCFTA is funded by private sector  entities, including tobacco firms. ICE has a partnership agreement with the NCFTA and  assigns agents there through the National Intellectual Property Rights Coordination Center  that it leads.", "Mexico and that they did not have an obligation to know since the  company is not the exporter of the cigarettes."], "subsections": []}, {"section_title": "U.S. Officials\u2019 Efforts to Counter Illicit Trade in Duty-Free Cigarettes Face Challenges", "paragraphs": [], "subsections": [{"section_title": "Agencies Cite the Ability to Buy Unlimited Quantities of Duty- Free Cigarettes at the U.S. Land Border as a Factor That Facilitates Smuggling", "paragraphs": ["CBP and ICE officials in Laredo said that the ability to buy unlimited  quantities of duty-free cigarettes at the land border facilitates large  shipments of these goods to be clandestinely smuggled into Mexico. CBP  officials acknowledge that duty-free stores on the southwest border are  functioning as wholesale suppliers of cigarettes. During congressional  consideration of duty-free store legislation, a senator raised the issue of  the potential for economic harm to communities adjacent to the U.S.- Mexican border if a provision precluding duty-free sales in wholesale  quantities were applied to land border stores. Congress later enacted  the Omnibus Foreign Trade and Competitiveness Act of 1988, which  required duty-free stores located in airports to restrict the sale of duty-free  merchandise to any one individual to \u201cpersonal use quantities,\u201d a  requirement that does not apply to land border stores. According to CBP  officers in San Diego, duty-free store representatives told them in 2010  that the stores at the port of San Ysidro were some of the most profitable  in the country and that merchandise sold in wholesale quantities was an  important part of their business."], "subsections": []}, {"section_title": "Use of Passenger Crossings to Export Large Quantities of Duty-Free Cigarettes Creates Oversight Challenges; CBP Officials Said They Are Reviewing Proposed Options at One Port", "paragraphs": ["U.S. officials said that the ability to use passenger crossings to export  wholesale quantities of duty-free cigarettes enables these goods to enter  Mexico with less scrutiny and oversight than if they were processed  through a commercial crossing. U.S. ports on the land border may have  multiple crossings, some designated for passenger traffic and others for  commercial traffic. CBP officials said that duty-free cigarettes are treated  as noncommercial goods that exit via passenger crossings and, therefore,  are not subject to the same requirements and potential for CBP oversight  as commercial exports. Requirements for commercial cargo leaving the  United States include submission of electronic information to CBP in  advance of departure. CBP and ICE officials in Laredo noted that CBP  does not define what constitutes a commercial export, enabling the use of  passenger crossings by purchasers of \u201ccommercial-type\u201d quantities.45  CBP officials in Laredo and San Diego said that individuals purchasing  large quantities of duty-free cigarettes would likely be less able to evade  Mexican taxes if the goods were to exit from a commercial crossing.", "Officials said that CBP-enforced regulations also do not provide a definition for what  would constitute a commercial quantity and that the agency has not adopted its own  definition or guidelines in part because commercial transactions can have different  quantities and varying price points. CBP officials said that they view commercial exports to  be merchandise for business resale or for profit, rather than for individual use, such as for  personal or household consumption.", "In the San Diego area, which has one of the highest concentrations of  duty-free stores among ports on the southwest border and has multiple  crossings into Mexico, CBP took steps to try and address the challenge  of large quantities of duty-free cigarettes moving through passenger  crossings. In 2010, CBP in San Diego prepared a draft notice for  members of the area trade community, including duty-free stores,  announcing that the Port Director had decided more controls were  necessary to ensure the export of duty-free merchandise purchased for  resale. The draft notice identified four scenarios that would meet the  definition of a commercial purchase and identified appropriate exit  procedures for any commercial purchases to include exit from a  commercial (or cargo) export facility, instead of from the passenger  crossing. In July 2017, CBP officials indicated that no change in exit  procedures for duty-free tobacco products had taken place; previously,  they had stated that CBP had not issued the notice because it was still  undergoing review. Officials at CBP headquarters in Washington, D.C.,  informed us that the agency was planning to engage with port officials in  San Diego to plan appropriate next steps in assessing the type of  crossing through which duty-free cigarettes should be exiting."], "subsections": []}, {"section_title": "U.S. Agency Officials Report That They Are Not Authorized to Seize Exports That Violate Mexico\u2019s Laws but Have Taken Steps to Work with Mexico on Enforcement", "paragraphs": ["CBP officials said the agency does not have the authority to seize goods  that are being smuggled into Mexico contrary to that country\u2019s laws.  Officials at CBP headquarters said that enforcing Mexican laws is not the  responsibility of U.S. agencies, but officials at two different ports of entry  also described efforts to work with Mexican counterparts on activities  related to enforcing customs laws and regulations of both countries. In  addition, CBP in Laredo instructed duty-free store operators to discourage  customers from concealing duty-free items by including procedures about  this in their employee manuals. We reviewed the procedures manual for  one of these operators and found that it directed employees to inform  customers that they were not allowed to hide or conceal duty-free items.", "CBP and ICE officials told us they are able to take some actions in  concert with their Mexican counterparts related to coordination and  information sharing at both the border and headquarters levels.  Specifically, CBP officials in Laredo told us that they conduct joint  enforcement operations with Mexican officials to inspect passenger  vehicles as they exit the United States and enter Mexico. ICE and CBP  officials in Laredo also said that the issue of cigarette smuggling has been  raised at bilateral security cooperation meetings that are routinely held  with Mexican customs and law enforcement counterparts. Additionally,  according to officials there, ICE\u2019s National Intellectual Property Rights  Coordination Center, under terms of the U.S.-Mexico Customs Mutual  Assistance Agreement, has obtained information from the Mexican  customs agency on that country\u2019s seizures of cigarettes nationwide to  advance related investigations in the United States. An ICE official said  that the agency has also worked concurrently with its counterparts in  Mexico to advance an investigation related to the smuggling of cigarettes  from U.S. bonded warehouses that were destined for duty-free stores but  were being smuggled directly into Mexico and possibly diverted back into  the United States. According to the ICE official, ICE has continued to  keep Mexico abreast of developments through its attach\u00e9 in Mexico City."], "subsections": []}]}]}, {"section_title": "Selected Export Data Reported by Duty- Free Stores Show Irregularities, Which CBP Has Taken Some Steps to Address", "paragraphs": [], "subsections": [{"section_title": "Multiple Duty-Free Stores Are Filing Some Noncompliant Information on Cigarette Exports", "paragraphs": ["According to CBP, in many cases duty-free stores on the southwest  border are filing some noncompliant information that they are required to  report on cigarette exports valued at more than $2,500. Our analysis of  export data from Census also showed that many transactions include  some noncompliant information. Specifically, we identified the following  three compliance issues:", "According to CBP, in most instances, the duty-free store should  identify the purchaser of the cigarettes as the exporter, and  subsequently, report the purchaser\u2019s name and also provide a unique  numerical identifier for the purchaser such as a passport or border  crossing card number. In our analysis of reported data for 18,504  transactions involving cigarettes at duty-free stores on the southwest  border from 2010 through 2015, we found that 99 percent of these  transactions indicate that the duty-free store operator sold the  merchandise to an individual purchaser but identified itself as the  exporter through use of its Internal Revenue Service employer  identification number (EIN). According to CBP officials, these  transactions pose potential compliance concerns.", "Duty-free stores on the southwest border owned by one operator  commonly used the operator\u2019s postdeparture filing privilege for  cigarette transactions while also reporting them as routed export  transactions. However, the Foreign Trade Regulations specify that  postdeparture filings cannot be made for routed export transactions.  This duty-free store operator incorrectly used its postdeparture filing  privilege and marked transactions as routed exports in 16,384 of the  16,387 transactions it reported during 2010 through 2015.", "In response to our inquiries, CBP reviewed AES filings for this duty- free store operator and found additional compliance concerns related  to filings showing Otay Mesa, California, as the port of exit.  Specifically, according to CBP, the duty-free store operator was filing  information indicating that the cigarettes were leaving the country  through the port of Otay Mesa, although CBP officials had previously  observed the sales leaving through the port of San Ysidro, California."], "subsections": []}, {"section_title": "CBP Has Provided Information to One Duty- Free Store Operator Reporting Inaccurate Data on Cigarette Transactions but Has Not Taken Steps to Finalize Any Guidance", "paragraphs": ["CBP has acted to address its compliance concerns with one duty-free  store operator, but other possible actions remain, including the issuance  of final instructions and guidance to all operators on the border and the  public. According to CBP, one of the ways it fosters adherence to rules  and regulations in the trade community is through \u201cinformed compliance,\u201d  the idea that, in order to maximize voluntary compliance with trade laws  and regulations, the trade community needs to be clearly and completely  informed of its legal obligations. We have previously found that  information programs are a key part of CBP\u2019s informed compliance  strategy at both headquarters and the ports. For example, CBP issues  directives, handbooks, and a series of \u201cinformed compliance publications\u201d  that provide guidance on various trade-related matters.", "In 2012, CBP informed the duty-free store operator with the largest  number of AES transactions we reviewed that its transactions incorrectly  identified its stores as the exporter when in fact the purchaser was the  exporter. Regulations state that knowingly failing to file or knowingly  submitting false or misleading export information through AES is a  violation subject to penalties. CBP is authorized to enforce the Foreign  Trade Regulations, which include regulations on reporting through AES.  With regard to the compliance issue that CBP raised in 2012, CBP did not  take action until after April 2014, when a CBP assessment of export  transactions found that the problem with the operator\u2019s cigarette export  filings continued. In August 2014, CBP issued a penalty to the duty-free  store operator, and the operator requested that CBP give it time to arrive  at an agreement with the agency and remove the penalty, noting that a  change to current practices might have adverse consequences on its  business and further emphasizing that its practices had been widely  known for years. According to CBP officials, due to the operator\u2019s  confusion over correct procedure, the penalty was canceled, and officials  decided to take steps to ensure proper filing of AES through informed  compliance.", "In October 2015, CBP provided the operator with interim instructions on  how to comply with its requirements under the Foreign Trade  Regulations. Those instructions included scenarios illustrating both  compliant and noncompliant export data filings for transactions involving  cigarettes. CBP officials also told us that a planned meeting with the  duty-free store operator to finalize instructions never took place and that  CBP never provided final instructions to that operator.", "According to CBP officials, this duty-free store operator continues to  identify itself as the exporter and to use its postdeparture filing privilege.  CBP officials said that duty-free stores assert that they are working to be  compliant, but it is challenging for them in part because the cigarette  purchasers are often unaware of their role and do not have accounts  established to file the electronic export data. Additionally, one CBP official  said that purchasers may be reluctant to provide a verifiable numeric  identifier, such as a passport number or border crossing card, if they are  involved in smuggling operations. Furthermore, CBP and ICE officials  said that employees working at land border duty-free stores may not be  fully trained and aware of proper filing procedures.", "In response to our inquiries, Census re-sent the 2015 interim instructions  to the duty-free store operator in March 2017, after confirming that the  operator was still using its postdeparture privilege when it should not.  CBP officials indicated in July 2017 that they plan to conduct outreach to  duty-free stores on the southwest border and provide guidance to the  ports there to ensure proper data submission and appropriate use of  postdeparture filing. CBP headquarters officials informed us that they had  recently held initial discussions on this topic with agency officials in  Laredo, but they had not issued any further information to the duty-free  store operators and to the public; they said further discussions were  planned. CBP officials did not identify instances of providing similar  information to, or having discussions with, the other duty-free store  operators.", "The Foreign Trade Regulations state that the filer of export information in  AES is responsible for transmitting accurate data as known at the time of  filing. An ICE official said that properly completed export data with  purchasers\u2019 verifiable identification numbers would allow ICE to  corroborate that information against other databases, such as the  Automated Targeting System (ATS), during an investigation. ATS  compares traveler, cargo, and conveyance information against law  enforcement, intelligence, and other enforcement data to assess risk. In  addition, ICE sought data from Mexico, such as names and dates of birth  of individuals arrested in connection with cigarette seizures in that  country, to keep that information on file in the event the individuals were  associated with cases in the United States. Agency officials said that  verifiable identification information, such as the type that is collected in  AES filings, would further help ICE corroborate and identify individuals  participating in the illicit trade of duty-free cigarettes. CBP officials said  that accurate data on the identity of the exporter would benefit law  enforcement and intelligence operations. Without accurate data, including  correct and complete information on the exporter, agencies may lack the  information they need to enhance their enforcement and intelligence  efforts related to the illicit trade of duty-free cigarettes on the southwest  border."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Unlike duty-free stores at U.S. airports, duty-free stores associated with  U.S. land borders may sell tax-exempt cigarettes in any quantity. Since  Congress legislatively adopted this policy in 1988, changes on both the  U.S. and Mexican sides of the southwest border have affected this trade.  Agencies have cited a number of schemes used by individuals to divert  these products into Mexico and into U.S. commerce, despite efforts by  CBP to enforce relevant regulations and procedures. Agencies have  noted that, as smuggling has become potentially more lucrative, an  existing linkage may grow stronger between cigarette smuggling and  organized crime on the southwest border, where they believe that criminal  organizations have created distribution networks to illicitly move  cigarettes in both countries. CBP officials also state that the agency does  not have the authority to seize goods that are being smuggled into Mexico  contrary to that country\u2019s laws.", "CBP has made efforts to utilize available data collected on transactions  valued at over $2,500 to evaluate duty-free store compliance with  regulations. However, despite various outreach and enforcement efforts,  agency officials said that inaccurate filings by one large operator\u2014 comprising nearly 89 percent of the transactions we reviewed\u2014continue,  and other store operators are still potentially out of compliance. Until  steps are taken to ensure that duty-free store operators and exporters  fully comply with reporting requirements, U.S. agencies will lack the  accurate, complete information that can help them conduct their  enforcement and intelligence efforts."], "subsections": []}, {"section_title": "Recommendation for Agency Action", "paragraphs": ["The Commissioner of the U.S. Customs and Border Protection should  take steps to strengthen compliance with export reporting requirements  related to duty-free cigarette sales on the southwest border, such as  issuing guidance to all duty-free store operators. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to Commerce, DHS, DOJ, and  Treasury for comment. DHS provided substantive comments that are  reproduced in appendix III. Commerce and DHS also provided technical  comments, which we incorporated as appropriate. DOJ and the Treasury  provided no comments.", "In its comments on our draft report, DHS concurred with our  recommendation. DHS stated that CBP\u2019s Office of Field Operations will  issue guidance and engage field personnel to strengthen compliance with  export requirements. In addition, DHS stated that ports would be  instructed to provide guidance to all duty-free store operators on correct  filing procedures for electronic export information (EEI), including use of  the correct port of export and identifying the party responsible for filing the  EEI. DHS gave an estimated completion date for these actions of October  31, 2017.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Commerce, the  Secretary of Homeland Security, the Attorney General, the Secretary of  the Treasury, and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) requirements that govern the lawful sale and  export of cigarettes from duty-free stores on the southwest border and  schemes for illicit trade in such cigarettes that agencies identified, (2)  U.S. agency observations about these duty-free cigarette exports and  efforts to counter illicit trade, and (3) the extent to which selected cigarette  transaction data submitted by duty-free stores indicate compliance issues  with reporting requirements.", "To obtain background information on duty-free stores, we reviewed  documents related to the legislative history of duty-free stores, including  those from the Congressional Record and U.S. laws and customs  regulations. To describe relevant agency roles related to duty-free  cigarette exports, we reviewed documents from the agencies and utilized  information from interviews with their officials.", "To address the first two objectives, we collected and analyzed information  through several methods. We reviewed relevant federal laws and  regulations. We also interviewed officials from the Department of  Commerce\u2019s U.S. Census Bureau (Census); the Department of  Homeland Security\u2019s U.S. Customs and Border Protection (CBP) and  U.S. Immigration and Customs Enforcement (ICE); the Department of  Justice\u2019s Bureau of Alcohol, Tobacco, Firearms, and Explosives; the  Department of the Treasury\u2019s Alcohol and Tobacco Tax and Trade  Bureau; and tax-collection officials from the state of California. We also  interviewed representatives from private sector tobacco and duty-free  firms. We conducted field work in California in the areas around San  Diego, including Otay Mesa and San Ysidro, and Los Angeles. We  selected these locations based on the presence of duty-free stores or  reports of cigarettes being diverted from duty-free stores into the United  States, supplemented by insights from agency officials. We also used  information gathered from field work in Laredo, Texas, that we conducted  under a related review. We spoke with U.S. agency officials in Nogales,  Arizona, and in the Washington, D.C., area. Lastly, we spoke with and  obtained data from an official from the Mexican customs agency, the Tax  and Customs Administration Service.", "To describe how cigarettes are sold and exported from duty-free stores  on the southwest border, we also reviewed relevant U.S. laws and  customs regulations and collected information from U.S. and Mexican  officials on allowances and requirements for duty-free cigarettes imported  into Mexico. In addition, to describe the views that agency officials have  expressed with regard to cigarette exports from duty-free stores on the  southwest border, we reviewed CBP documents that described operating  procedures at the ports of Laredo, Texas, and San Diego, California; a  draft port information notice from the port of San Diego; and reports from  the private sector and a public-private partnership, the National Cyber- Forensics & Training Alliance, on the illicit tobacco market in Mexico. We  also analyzed data on seizures from the Mexican Tax and Customs  Administration Service and information from interviews with officials from  CBP, ICE, and the Mexican government.", "We also analyzed Automated Export System (AES) data from Census for  2010 through 2015 on recorded transactions at the duty-free stores CBP  identified as being adjacent to the U.S.-Mexico border, also referred to as  the southwest border, spanning Texas, New Mexico, Arizona, and  California. We determined that value and quantity data for those  transactions were not reliable for the purposes of this report; we based  our assessment on a review of related documentation and on interviews  with Census officials about the agency\u2019s procedures to ensure the quality  of the data and with CBP officials to discuss relevant aspects of how  transaction data might be entered in AES. According to Census officials, it  is not possible to identify from AES whether or not an export came from a  duty-free store, as such information is not required when filers submit  electronic export information. We used an alternative method to identify  the AES data associated with transactions at duty-free stores on the  southwest border: We obtained the employer identification numbers (EIN)  for those duty-free stores from CBP, which identified 88 duty-free stores  on the southwest border that in some cases used the same EIN because  some stores owned by the same proprietor used the same EIN. We  obtained 54 EINs covering the 88 border stores. In one instance, a single  EIN applied to 7 duty-free stores.", "Census provided us with the export transactions recorded in AES that  corresponded to the 54 EINs provided by CBP. Census protects the  confidential data contained in export transaction records it receives from  firms but may disclose the data to other government agencies if the  agency determines it is in the national interest to do so. For each  transaction record, we requested the data for 24 of the 28 mandatory  fields in AES for which exporters must provide information. In addition,  we asked Census to filter the information by several fields to include  country of destination (Mexico) and the Harmonized Tariff Schedule  codes associated with cigarettes. Census identified 19,101 transaction  records in response to our request. After removing those records that fell  outside of our parameters (e.g., entries from 2009 and entries for which  the value was $2,500 or less), 18,504 export transaction records  remained. To identify the schemes related to the illicit trade in duty-free  cigarettes, we reviewed court documentation from criminal cases at the  state and federal levels. We also reviewed Federal Register notices for  historical references to cases of smuggling in addition to interviewing  officials from the U.S. and Mexican governments.", "To evaluate the extent to which duty-free cigarette export data presented  potential compliance issues with reporting requirements, we reviewed  such data from AES and compared select data elements to reporting  requirements as stated in the Foreign Trade Regulations.  We also  reviewed summaries of events that CBP provided relating to a specific  penalty issued by the port of Laredo to a duty-free store operator for  failure to comply with AES reporting requirements. We examined a  document Census provided to us that was submitted to that agency and  CBP from the operator\u2019s lawyers as well as the interim document  provided to that operator by CBP and Census. We also analyzed a subset  of our data concurrently with agency officials to evaluate the compliance  of the specific transaction records we received from Census with a  requirement in the Foreign Trade Regulations. Additionally, we reviewed  documents from the Commercial Customs Operations Advisory  Committee to contextualize one of the largest duty-free store operator\u2019s  use of its postdeparture filing privilege.", "We conducted this performance audit from November 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Assessment of Duty-Free Cigarette Export Data Reliability", "paragraphs": [], "subsections": [{"section_title": "Background", "paragraphs": ["We analyzed U.S. Census Bureau (Census) transaction-level data from  the Automated Export System (AES) on sales of duty-free cigarettes  purchased at stores located on the U.S. southwest border from 2010  through 2015. Census collects electronic export information in AES to  report trade statistics, including the export of duty-free cigarettes. Stores  that are principal parties to a sale of duty-free cigarettes for export  generally self-report the transaction through AES. Some duty-free  operators integrate point-of-sales systems to AES for automatic entry,  and some enter the data manually or into software programs that are  approved by Census, according to U.S. Customs and Border Protection  (CBP) officials. Self-reported data captured in AES include transaction- related variables such as date of export, port of export, value, quantity,  weight, method of transportation, and ultimate consignee. Census then  uses the AES data to compile and publish export trade statistics.", "CBP and Census share responsibility for monitoring compliance with  trade law, including the data reporting requirements that duty-free stores  must meet. According to CBP officials, CBP officers regularly review  duty-free store operators\u2019 inventory control and recordkeeping systems  during unannounced spot checks and compliance assessments.  However, according to these officials, CBP\u2019s compliance reviews of  inventory control systems do not generally include an examination of how  store operators report data in AES. AES is built to include automated  electronic checks of stores\u2019 AES submissions as the data are entered;  these data-entry validation checks produce alerts when required  information is invalid or missing. Census also sometimes sends staff to  meet with companies that have a high rate of submission errors, such as  reporting shipments late.", "If they identify problems with the accuracy of the information that store  operators are filing in AES, CBP and Census can take appropriate steps  to enforce compliance with the law. CBP is responsible for the  enforcement of the Foreign Trade Regulations. When data are  incorrectly entered in AES, CBP can take enforcement action, including  issuing penalties or seizing merchandise, according to CBP officials.  Census can also respond to noncompliant reporting of electronic export  information by operators by revoking special privileges granted to some,  such as permission to file export information after a shipment has been  exported, among other actions. In compiling and analyzing AES data,  Census makes corrections to some data that appear erroneous, but CBP  officials said that Census does not flag or report the data corrections it  makes to CBP. Census officials stated that, while they reach out to some  filers to suggest corrective action, the scale of the trade data program and  the number of transactions processed every month precludes  comprehensive outreach."], "subsections": []}, {"section_title": "Duty-Free Cigarette Data Collected through AES Are Not Reliable for Analysis of Value and Quantity of Exports or Associated Trends", "paragraphs": [], "subsections": [{"section_title": "Evaluating Unprocessed, Transaction-Level AES Data on Duty-Free Cigarettes", "paragraphs": ["Our testing found that the unprocessed transaction-level AES data on  duty-free cigarettes for 2010 through 2015 are not reliable for use in  describing the value and quantity of duty-free cigarettes, and associated  trends, exported from the southwest border. For that time period, we  received data on 18,504 transactions of duty-free cigarettes that had a  reported value of $2,500 or above, in keeping with AES reporting  requirements. To examine the data on value and quantity, we evaluated  the reasonableness of the ratio of these variables, the unit price (value  divided by quantity), and the consistency and stability of reported prices.  We found that many of these transactions\u2019 reported unit prices are far  below reasonable price levels. For example, 2.3 percent of transactions in  these unprocessed data are associated with a unit price of under $4.42  per 1,000 cigarette sticks\u2014the cost of tobacco on commodity markets as  of calendar year 2015, which excludes necessary costs of cigarettes such  as paper costs and manufacturing costs. However, these transactions  with extremely low unit prices account for more than 98 percent of the  quantity of trade in duty-free cigarettes as reported in the AES data we  obtained. Moreover, 39 percent of the reported transactions (accounting  for more than 99.6 percent of the total reported quantity sold) were  associated with unit prices lower than what we conservatively estimate to  be the price at which duty-free stores could procure cigarettes from  manufacturers, as discussed in the section below. We also found high  levels of reported price variation in the data, with reported median unit  sales prices frequently doubling or halving from year to year, even within  the same port location."], "subsections": []}, {"section_title": "Evaluating Census\u2019s Data- Processing Methodology and Assumptions", "paragraphs": ["Census is responsible for collecting, compiling, and publishing AES trade  data for duty-free cigarettes, and Census officials said that they clean and  correct (process) these data by changing value entries to equal a \u201cprice  adjustment factor\u201d when the unit price of transactions falls outside of an  expected range, as explained below. For cigarette exports as of February  2017, including those transactions exempt from taxes and duties, these  officials said that this range includes a minimum of $11 per 1,000  cigarette sticks, a price adjustment factor of $40 per 1,000 sticks, and a  maximum of $75 per 1,000 sticks. According to these officials, Census  sets its price range and adjustment factor by examining the data and  identifying outlier levels based on judgment. Census officials stated that  they updated this expected price range in February 2017. Census officials  stated that price adjustment factors are not updated on a fixed schedule  and do not automatically adjust for inflation. Instead, Census may choose  to update factors when it believes there have been significant changes in  an industry\u2019s trade patterns. According to these officials, prior to February  2017, the price range for cigarettes was last updated in 2007. From 2007  through January 2017, the price adjustment factor for cigarettes was  $11.46\u2014about one-fourth of its current value\u2014with a minimum of $8.87  and a maximum of $27.39.", "Census\u2019s current price range for cigarettes is not appropriate for cleaning  data to analyze trends in duty-free cigarette exports because it may  significantly underestimate a reasonable expected price range for  cigarettes. Approximately 39 percent of the observations in the  unprocessed, duty-free cigarette data are associated with sales prices  below Census\u2019s minimum price or above Census\u2019s maximum price. We  estimated minimum and maximum expected prices for cigarettes that are  substantially greater than Census\u2019s current price adjustment factor range  for cigarettes.", "To estimate a minimum expected price for cigarettes, we examined  commodity prices, production costs, and revenue data from a large,  publicly traded cigarette manufacturer. We found that the  manufacturing cost of cigarettes exceeded Census\u2019s estimated  minimum sales price by 30 percent, $14.26 per 1,000 cigarette sticks  instead of $11. Thus, even if the manufacturer sold its cigarettes  directly to a duty-free store, and neither the manufacturer nor the  duty-free store made a profit, we would still expect a price greater  than Census\u2019s lower bound.", "This expected minimum retail price increases significantly if we  account for cigarette manufacturers\u2019 revenue. Using revenue data  from the public accounting statements of the same manufacturer, and  again conservatively assuming direct sales to a duty-free store that  itself sells for no profit, we would expect to see a price of $43.65 per  1,000 cigarette sticks, which is nearly 300 percent greater than  Census\u2019s lower bound of $11 per 1,000 cigarette sticks and about 9  percent larger than Census\u2019s current price adjustment factor of $40  per 1,000 sticks.", "To estimate a maximum expected price for cigarettes, we examined  the price of a premium cigarette brand listed for sale on a duty-free  store\u2019s website. We found that this price was 163 percent higher than  the upper bound in Census\u2019s price range, $197.50 per 1,000 cigarette  sticks instead of $75 per 1,000 sticks.", "For any observed prices in trade data outside of this expected range for a  given tariff code, Census officials said that they attempt to correct these  observations by adjusting the reported quantity such that the reported  price is equal to the price adjustment factor\u2014$40 per 1,000 cigarette  sticks. For example, if a reported sale is $80 per 1,000 cigarette sticks,  Census will adjust the reported quantity to 2,000 sticks while leaving the  reported value unchanged, so the reported price (value divided by  quantity) becomes $40 for each unit of 1,000 sticks. Census officials  stated that this data cleaning process is sufficient for their use in  producing aggregated trade statistics because of the volume of  transactions they must review and the ease with which Census analysts  can apply this method to clean trade data.", "Census\u2019s process of correcting missing or outlying data (unreliable data)  with its price adjustment factor is not appropriate for our use because it  would significantly alter the relationships among subgroups within our  data, distorting trends that we otherwise would intend to analyze. For  example, in a hypothetical dataset where the average sales price is $40  per 1,000 cigarette sticks across exports from the United States,  Census\u2019s replacement of missing and outlying data using a price  adjustment factor of $40 would not change this overall average. But if one  state in the data has an average sales price lower than the national  average, reflecting lower costs of doing business, any missing or outlying  data replaced with the same price adjustment factor as other higher  costing states would increase the state\u2019s reported average sales price.  The distinction between high-price states and low-price states would thus  become less clear.", "Moreover, we cannot determine the appropriateness of Census\u2019s decision  to preserve reported value and adjust reported quantity when processing  data to manage the relationship between value, quantity, and price. This  is because we cannot determine whether the unprocessed value or the  unprocessed quantity data are reliable. Applying our minimum expected  price for cigarettes, discussed above, excludes many transactions in the  unprocessed data, indicating problems with value, quantity, or both.  Census officials stated that they believe the value data are more reliable  than the quantity data and so change the reported quantity data when  processing the data, though they also stated that this is a general  assumption without specific insight as to whether or why this method may  be valid for cigarettes. While CBP officials stated that high-level postaudit  checks can be used to ensure that a store\u2019s AES system is working  properly, they said that these checks are rare, and the inventory control  system compliance review does not otherwise provide assurance that  data self-reported into AES are reliable. CBP officials stated that they  were not confident about which transaction data in AES were more  reliable: value or quantity. Because neither agency\u2019s control process  provides strong assurance that either the value or the quantity data are  reliable for our use, we cannot appropriately use value, quantity, or price  as a benchmark to correct the other variables."], "subsections": []}, {"section_title": "Evaluating Alternative Data-Processing Techniques", "paragraphs": ["Alternative methods for determining appropriate replacement values for  outlying data, referred to as imputation, would not make the duty-free  cigarette data reliable for our intended use. For example, stochastic  regression imputation replaces a missing or excluded variable value  within an observation by drawing randomly from within the error  distribution of a best-fit model. Correctly specifying such a model allows  data processing to occur while preserving the dataset\u2019s overall average  values, correlations, and variation. However, identifying the observations  that require correction remains a challenge. As discussed above, we can  estimate the approximate manufacturer\u2019s sales price for cigarettes. In the  absence of additional proprietary data, we are unable to determine a price  range that accounts for retail store costs and profit. Without this  information, and given that the duty-free cigarette data include significant  and questionable variation of reported prices even within our estimated  price band, it is not possible to identify which observations require  correction or deletion with appropriate levels of confidence. Lacking a  clear basis for finding either the value data or quantity data reliable, we  also cannot appropriately determine how to manage the relationship  between value and quantity if we were to impute replacement price levels  for these observations."], "subsections": []}]}]}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Emil Friberg (Assistant Director),  Farhanaz Kermalli (Analyst-in-Charge), Giff Howland, David Dayton, Neil  Doherty, Andrew Kurtzman, and Grace Lui made key contributions to this  report. Pedro Almoguera, Ming Chen, Jill Lacey, and Mary Moutsos  provided technical assistance."], "subsections": []}]}], "fastfact": ["Unlike airport duty-free shops, U.S. duty-free stores on the border with Mexico can sell you an unlimited quantity of tax-free cigarettes. Sometimes criminals buy thousands of dollars' worth of these cigarettes to sell illegally (as shown below), which can generate revenue for organized crime.", "This report examines the illicit trade in cigarettes on the southwest border and some challenges U.S. Customs and Border Protection and other agencies face in countering it. We recommended that CBP take steps to strengthen compliance with export reporting requirements for duty-free cigarette sales."]}
{"id": "GAO-17-809T", "url": "https://www.gao.gov/products/GAO-17-809T", "title": "Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Affecting the Fleet", "published_date": "2017-09-19T00:00:00", "released_date": "2017-09-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since January 2017, the Navy has suffered four significant mishaps at sea that resulted in serious damage to its ships and the loss of 17 sailors. Three of these incidents involved ships homeported in Japan. In response to these incidents, the Chief of Naval Operations ordered an operational pause for all fleets worldwide, and the Vice Chief of Naval Operations directed a comprehensive review of surface fleet operations, stating that these tragic incidents are not limited occurrences but part of a disturbing trend in mishaps involving U.S. ships.", "This statement provides information on the effects of homeporting ships overseas, reducing crew size on ships, and not completing maintenance on time on the readiness of the Navy and summarizes GAO recommendations to address the Navy's maintenance, training, and other challenges.", "In preparing this statement, GAO relied on work it has published since 2015 related to the readiness of ships homeported overseas, sailor training and workload issues, maintenance challenges, and other issues. GAO updated this information, as appropriate, based on Navy data."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's prior work shows that the Navy has increased deployment lengths, shortened training periods, and reduced or deferred maintenance to meet high operational demands, which has resulted in declining ship conditions and a worsening trend in overall readiness. The Navy has stated that high demand for presence has put pressure on a fleet that is stretched thin across the globe. Some of the concerns that GAO has highlighted include:", "Degraded readiness of ships homeported overseas: Since 2006, the Navy has doubled the number of ships based overseas. Overseas basing provides additional forward presence and rapid crisis response, but GAO found in May 2015 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan. As a result, the crews of these ships did not have all of their needed training and certifications. Based on updated data, GAO found that, as of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews based in Japan\u2014including certifications for seamanship\u2014had expired. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since GAO's May 2015 report. The Navy has made plans to revise operational schedules to provide dedicated training time for overseas-based ships, but this schedule has not yet been implemented.", "Crew size reductions contribute to sailor overwork and safety risks: GAO found in May 2017 that reductions to crew sizes the Navy made in the early 2000s were not analytically supported and may now be creating safety risks. The Navy has reversed some of those changes but continues to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload\u2014both of which have contributed to some sailors working over 100 hours a week.", "Inability to complete maintenance on time: Navy recovery from persistently low readiness levels is premised on adherence to maintenance schedules. However, in May 2016, GAO found that the Navy was having difficulty completing maintenance on time. Based on updated data, GAO found that, in fiscal years 2011 through 2016, maintenance overruns on 107 of 169 surface ships (63 percent) resulted in 6,603 lost operational days (i.e., the ships were not available for training and operations).", "Looking to the future, the Navy wants to grow its fleet by as much as 30 percent but continues to face challenges with manning, training, and maintaining its existing fleet. These readiness problems need to be addressed and will require the Navy to implement GAO's recommendations\u2014particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, managing investments to modernize and improve the efficiency of the naval shipyards, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made 14 recommendations in prior work cited in this statement. The Department of Defense generally concurred with all of them but has implemented only 1. Continued attention is needed to ensure that these recommendations are addressed, such as the Navy assessing the risks associated with overseas basing and reassessing sailor workload and factors used in its manpower requirements process."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss issues related  to Navy readiness in the wake of four significant mishaps at sea thus far  in 2017. The most recent of these occurred in August when an Arleigh  Burke class destroyer\u2014the USS John S. McCain (DDG 56)\u2014collided with  an oil tanker while underway near Singapore. This collision resulted in  serious damage to the ship, the loss of 10 sailors, and injury to five more.  It was the second collision involving the loss of life for Navy ships  underway in the last three months and the fourth significant at sea mishap  in the past year. In response to these incidents, the Chief of Naval  Operations ordered an operational pause for all fleets worldwide, and the  Vice Chief of Naval Operations directed a comprehensive review of  surface fleet operations, stating that these tragic incidents are not limited  occurrences but part of a disturbing trend of mishaps involving U.S.  warships.", "While we await the Navy\u2019s official findings on this matter, you asked us to  testify today on findings from our recent Navy readiness reviews. Before  we begin, however, it is important to set the context for the challenges the  Navy faces. In June 2017, we issued a report highlighting five key mission  challenges facing the Department of Defense (DOD). In that report, we  noted that the United States faces an extremely challenging national  security environment at the same time that it is grappling with addressing  an unsustainable fiscal situation in which DOD accounts for  approximately half of the federal government\u2019s discretionary spending.  Within this environment, DOD is working to both rebuild the readiness of  its forces and modernize to meet future threats while facing constrained  budgets. Each of the military services today are generally smaller and  less combat ready than they have been in many years, and each military  service has been forced to cut critical needs in areas such as training,  maintenance, and modernization due to budgetary constraints. Put  simply, our work has shown that readiness challenges persist across a  number of areas including, but not limited to, the Navy.", "This statement provides information on Navy readiness, including the  effects of homeporting ships overseas, reducing crew size on ships, and  not completing maintenance on time, and summarizes GAO  recommendations to address the Navy\u2019s challenges. We provided a  similar statement on September 7, 2017 before two subcommittees of the  House Armed Services Committee.  This statement is updated to include  recently-issued work on Navy shipyards and is based on our body of work  issued between 2015 and 2017 examining the readiness of ships  homeported overseas, sailor training and workload issues, maintenance  challenges, and other readiness issues. To perform our prior work, we  analyzed Navy readiness, training, and maintenance data, and  interviewed cognizant Navy officials involved in fleet operations. The  reports cited throughout this statement contain more details on the scope  of the work and the methodology used to carry it out. This statement also  includes updates to information as of August 2017, as appropriate, based  on Navy documentation and discussions with Navy officials.", "The work on which this testimony is based was conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Since January 2017, the Navy has suffered four significant mishaps at  sea that have resulted in serious damage to Navy ships and the loss of  17 sailors (see figure 1). Three of the four at sea mishaps that have  occurred\u2014two collisions and one grounding\u2014have involved ships  homeported overseas in Yokosuka, Japan. Appendix II provides a  summary of major mishaps for Navy ships at sea in fiscal years 2009  through 2017.", "The Navy currently has 277 ships, a 17 percent reduction from the 333  ships it had in 1998. Over the past two decades, as the number of Navy  ships has decreased, the number of ships deployed overseas has  remained roughly constant at about 100 ships; consequently, each ship is  being deployed more to maintain the same level of presence. We  reported in September 2016 that the Navy, along with the other military  services, had been reporting persistently low readiness levels. The Navy  attributes these, in part, to the increased deployment lengths needed to  meet the continuing high demand for its aircraft carriers, cruisers,  destroyers, and amphibious ships. For example, the deployment lengths  for carrier strike groups had increased from an average of 6.4 months  during the period of 2008 through 2011 to a less sustainable 9 months for  three carrier strike groups that were deployed in 2015. In 2016, the Navy  extended the deployments of the Harry S Truman and Theodore  Roosevelt Carrier Strike Groups to 8 and 8.5 months, respectively. In  addition, the Navy has had to shorten, eliminate, or defer training and  maintenance periods to support these high deployment rates. These  decisions have resulted in declining ship conditions across the fleet and  have increased the amount of time required for the shipyards to complete  maintenance on these ships. Lengthened maintenance periods, in turn,  compress the time that ships are available for training and operations."], "subsections": []}, {"section_title": "Ships Homeported Overseas Provide Increased Forward Presence but Train Less, Defer More Maintenance, Degrade Faster, and Cost More to Operate", "paragraphs": ["As we previously reported, to help meet the operational demands using  its existing inventory of ships, the Navy has assigned more of its surface  combatants and amphibious ships to overseas homeports. Since 2006,  the Navy has doubled the percentage of the fleet assigned to overseas  homeports. In 2006, 20 ships were homeported overseas (7 percent of  the fleet); today, 40 ships are homeported overseas (14 percent of the  fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will  be homeported in Yokosuka, Japan in 2018 (see figure 2).", "According to the Navy, homeporting ships overseas is an efficient method  for providing forward presence and rapid crisis response. Our prior work  confirms that having ships homeported overseas provides additional  presence, but it comes at a cost. For example, we found in May 2015 that  homeporting ships overseas results in higher operations and support  costs than homeporting ships in the United States. In addition, the  operational schedules the Navy uses for overseas-homeported ships limit  dedicated training and maintenance periods, resulting in difficulty keeping  crews fully trained and ships maintained. In fact, the primary reason that  Navy ships homeported overseas provide more deployed time than ships  homeported in the United States is that the Navy reduces their training  and maintenance periods in order to maximize their operational  availability. Ships homeported overseas do not operate within the  traditional fleet response plan cycles that apply to U.S.-based ships.  Since the ships are in permanent deployment status during their time  homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational  schedules (see figure 3). Navy officials told us that because the Navy  expects these ships to be operationally available for the maximum  amount of time, their intermediate and depot-level maintenance are  executed through more frequent, shorter maintenance periods or deferred  until after they return to a U.S. homeport\u2014generally after 7 to 10 years  overseas.", "In May 2015, we also found that high operational tempo for ships  homeported overseas limits the time for crew training when compared  with training time for ships homeported in the United States. Navy officials  told us that U.S.-based crews are completely qualified and certified prior  to deploying from their U.S. homeports, with few exceptions. In contrast,  the high operational tempo of ships homeported overseas had resulted in  what Navy personnel called a \u201ctrain on the margins\u201d approach, a  shorthand way to say there was no dedicated training time set aside for  the ships so crews trained while underway or in the limited time between  underway periods. We found that, at the time of our 2015 review, there  were no dedicated training periods built into the operational schedules of  the cruisers, destroyers, and amphibious ships homeported in Yokosuka  and Sasebo, Japan. As a result, these crews did not have all of their  needed training and certifications. We recommended that the Navy  develop and implement a sustainable operational schedule for all ships  homeported overseas. DOD concurred with this recommendation and  reported in 2015 that it had developed revised operational schedules for  all ships homeported overseas. However, when we contacted DOD to  obtain updated information in August 2017, U.S. Pacific Fleet officials  stated that the revised operational schedules for the cruisers and  destroyers homeported in Japan were still under review and had not been  employed. As of June 2017, 37 percent of the warfare certifications for  cruiser and destroyer crews homeported in Japan had expired, and over  two-thirds of the expired certifications\u2014including mobility-seamanship  and air warfare\u2014had been expired for 5 months or more. This represents  more than a fivefold increase in the percentage of expired warfare  certifications for these ships since our May 2015 report. The Navy\u2019s  Surface Force Readiness Manual states that the high operational tempo  and frequent tasking of ships homeported overseas requires that these  ships always be prepared to execute complex operations and notes that  this demand for continuous readiness also means that ships homeported  overseas should maintain maximum training, material condition, and  manning readiness.", "With respect to the material condition of the ships, we found in May 2015  that casualty reports\u2014incidents of degraded or out-of-service equipment\u2014nearly doubled over the 2009 through 2014 time frame, and  the condition of overseas-homeported ships decreased even faster than  that of U.S.-based ships (see figure 4). The Navy uses casualty reports to  provide information on the material condition of ships in order to  determine current readiness. For example, casualty report data provide  information on equipment or systems that are degraded or out of service,  the lack of which will affect a ship\u2019s ability to support required mission  areas. In 2015, Navy officials acknowledged an increasing number of  casualty reports on Navy ships and a worsening trend in material ship  condition. They stated that equipment casualties require unscheduled  maintenance and have a negative effect on fleet operations, because  there is an associated capability or capacity loss.", "In our May 2015 report, we recommended that the Navy develop a  comprehensive assessment of the long-term costs and risks to its fleet  associated with the Navy\u2019s increasing reliance on overseas homeporting  to meet presence requirements; make any necessary adjustments to its  overseas presence based on this assessment; and reassess these risks  when making future overseas homeporting decisions. DOD concurred  with this recommendation, but, as of August 2017, it has not conducted  an assessment, even though it has continued to increase the number of  ships homeported overseas."], "subsections": []}, {"section_title": "Size and Composition of Ship Crews May Contribute to Sailor Overwork and Create Readiness and Safety Risks", "paragraphs": ["In the early 2000s, the Navy made several changes to its process for  determining the size and composition of ship crews that may contribute to  sailor overwork and create readiness and safety risks. These changes  were intended to drive down crew sizes in order to save on personnel  costs. However, as we reported in May 2017, these changes were not  substantiated with analysis and may be creating readiness and safety  risks. With fewer sailors operating and maintaining surface ships, the  material condition of the ships declined, and we found that this decline  ultimately contributed to an increase in operating and support costs that  outweighed any savings on personnel (see figure 5). The Navy eventually  reassessed and reversed some of the changes it had made during this  period\u2014known as \u201coptimal manning\u201d\u2014but it continued to use a workweek  standard that does not reflect the actual time sailors spend working and  does not account for in-port workload\u2014both of which may be leading to  sailors being overworked. Additionally, we found that heavy workload  does not end after ships return to port. Crews typically operate with fewer  sailors while in port, so those crew members remaining must cover the  workload of multiple sailors, causing additional strain and potential  overwork.", "In 2014, the Navy conducted a study of the standard workweek and  identified significant issues that could negatively affect a crew\u2019s  capabilities to accomplish tasks and maintain the material readiness of  ships, as well as crew safety issues that might result if crews slept less to  accommodate workload that was not accounted for. The Navy study  found that sailors were on duty 108 hours a week, exceeding their weekly  on-duty allocation of 81 hours. This on-duty time included 90 hours of  productive work\u201420 hours per week more than the 70 hours that are  allotted in the standard workweek. This, in turn, reduced the time  available for rest and resulted in sailors spending less time sleeping than  was allotted, a situation that the study noted could encourage a poor  safety culture. Moving forward, the Navy will likely face manning  challenges, especially given its current difficulty in filling authorized  positions, as it seeks to increase the size of its fleet by as much as 30  percent over its current size. Navy officials stated that even with  manpower requirements that accurately capture all workload, the Navy  will be challenged to fund these positions and fill them with adequately  trained sailors at current personnel levels. Figure 6 shows the Navy\u2019s  projected end strength and fleet size.", "In our May 2017 report, we found that the Navy\u2019s guidance does not  require that the factors it uses to calculate manpower requirements be  reassessed periodically or when conditions change, to ensure that these  factors remain valid and that crews are appropriately sized. We made  several recommendations to address this issue, including that the Navy  should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its  manpower requirements process, and (4) update its ship manpower  requirements. DOD concurred with our recommendations, stating that it is  committed to ensuring that the Navy\u2019s manpower requirements are  current and analytically based and will meet the needs of the existing and  future surface fleet. As of August 2017, DOD had not yet taken any  actions to implement these recommendations. We believe that, until the  Navy makes the needed changes, its ships may not have the right  number and skill mix of sailors to maintain readiness and prevent  overworking its sailors."], "subsections": []}, {"section_title": "The Navy\u2019s Inability to Complete Ship Maintenance on Time Hampers Its Efforts to Rebuild Readiness", "paragraphs": ["To address its persistently low readiness levels, the Navy began  implementing a revised operational schedule in November 2014, which it  referred to as the optimized fleet response plan. This plan seeks to  maximize the employability of the existing fleet while preserving adequate  time for maintenance and training, providing continuity in ship leadership  and carrier strike group assignments, and restoring operational and  personnel tempos to acceptable levels. The Navy\u2019s implementation of the  optimized fleet response plan\u2014and readiness recovery more broadly\u2014is  premised on adherence to deployment, training, and maintenance  schedules.", "However, in May 2016, we found that the Navy was having difficulty in  implementing its new schedule as intended. Both the public and private  shipyards were having difficulty completing maintenance on time, owing  primarily to the poor condition of the ships after more than a decade of  heavy use, deferred maintenance, and the Navy\u2019s inability to accurately  predict how much maintenance they would need. We reported that in  2011 through 2014 only 28 percent of scheduled maintenance for surface  combatants was completed on time and just 11 percent was completed  on time for aircraft carriers. We updated these data as of August 2017 to  include maintenance availabilities completed through the end of fiscal  year 2016 and found continued difficulty completing maintenance on time  for key portions of the Navy fleet (see figure 7):", "Aircraft Carriers (CVNs): In fiscal years 2011 through 2016,  maintenance overruns on 18 of 21 (86 percent) aircraft carriers  resulted in a total of 1,103 lost operational days\u2014days that ships were  not available for operations\u2014the equivalent of losing the use of 0.5  aircraft carriers each year.", "Surface Combatants (DDGs and CGs): In fiscal years 2011 through  2016, maintenance overruns on 107 of 169 (63 percent) surface  combatants resulted in a total of 6,603 lost operational days\u2014the  equivalent of losing the use of 3.0 surface combatants each year.", "Submarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011  through 2016, maintenance overruns on 39 of 47 (83 percent)  submarines resulted in a total of 6,220 lost operational days\u2014the  equivalent of losing the use of 2.8 submarines each year.", "Navy officials are aware of the challenges faced by both the public and  private shipyards and have taken steps to address the risks these pose to  maintenance schedules, including hiring additional shipyard workers and  improving their maintenance planning processes. However, Navy officials  have told us that it will take time for these changes to bring about a  positive effect. For example, as of May 2016, data on the public  shipyards\u2019 workforce showed that 32 percent of all employees had fewer  than 5 years of experience. According to Navy officials, this workforce  inexperience negatively affects the productivity of the shipyards, and it will  take several years for them to attain full productivity.", "Just last week, we issued another report, prepared in response to  direction from this committee, examining the ability of the Navy\u2019s public  shipyards to support the Navy\u2019s readiness needs. We found that  capacity limitations as well as the poor condition of the shipyards\u2019 facilities  and equipment contributed to the maintenance delays we discussed  earlier and were hindering the shipyards\u2019 ability to support the Navy.  Specifically, we found that the shipyards will be unable to support 73\u2014or  about one-third\u2014of 218 maintenance periods planned over the next 23  years. In addition, this estimate did not factor in planned increases to the  fleet. We made three recommendations, with which the Navy agreed to  take steps to improve its management of capital investment in the  shipyards. However, we noted that at current average funding levels it  would take at least 19 years and a Navy-estimated $4.86 billion to clear  the backlog of restoration and modernization projects at the shipyards.  Furthermore, this estimate does not include the $9 billion that the Navy  estimates it will need for capacity and capability upgrades over the next  12 years to support maintenance operations for the current fleet."], "subsections": []}, {"section_title": "Navy Readiness Rebuilding is Part of a Broader DOD Effort", "paragraphs": ["In September 2016, we found that although DOD has stated that  readiness rebuilding is a priority, implementation and oversight of  department-wide readiness rebuilding efforts did not fully include key  elements of sound planning, and the lack of these elements puts the  overall rebuilding efforts at risk. The Navy states that its overall goal for  readiness recovery is to reach a predictable and sustainable level of  global presence and surge capacity from year to year. The Navy identified  carrier strike groups and amphibious ready groups as key force elements  in its plan for readiness recovery and had set 2020 for reaching a  predictable and sustainable level of global presence and surge capacity  by implementing the optimized fleet response plan. However, we found in  2016 that the Navy faced significant challenges, such as delays in  completing maintenance and emerging demands, in achieving its  readiness recovery goals for carrier strike groups and amphibious ready  groups, and projections show that the Navy will not meet its time frames  for achieving readiness recovery.", "As a result, we recommended that DOD and the services establish  comprehensive readiness goals, strategies for implementing them, and  associated metrics that can be used to evaluate whether readiness  recovery efforts are achieving intended outcomes. DOD generally  concurred with our recommendations and, in November 2016, issued  limited guidance to the military services on rebuilding readiness; it has  also started to design a framework to guide the military services in  achieving readiness recovery but has not yet implemented our  recommendations. The Navy has since extended its time frame for  readiness recovery to at least 2021, but it still has not developed specific  benchmarks or interim goals for tracking and reporting on readiness  recovery. Navy officials cited several challenges to rebuilding readiness,  chief among them the continued high demand for its forces, the  unpredictability of funding, and the current difficulty with beginning and  completing ship maintenance on time.", "In January 2017, the President directed the Secretary of Defense to  conduct a readiness review and identify actions that can be implemented  in fiscal year 2017 to improve readiness. DOD and Navy officials told us  that, as part of this readiness review, the Navy prioritized immediate  readiness gaps and shortfalls. These officials added that this review  would guide the Navy\u2019s investment decisions in future budget cycles, with  the intention to rebuild readiness and prepare the force for future  conflicts. However, high demand for naval presence will continue to put  pressure on a fleet that is already stretched thin across the globe.  Looking to the future, the Navy has plans to grow its fleet by as much as  30 percent, but it has not yet shown the ability to adequately man,  maintain, and operate the current fleet. These readiness problems need  to be addressed and will require the Navy to implement our  recommendations\u2014particularly in the areas of assessing the risks  associated with overseas basing, reassessing sailor workload and the  factors used to size ship crews, managing investments in its shipyards,  and applying sound planning and sustained management attention to its  readiness rebuilding efforts. In addition, continued congressional  oversight will be needed to ensure that the Navy demonstrates progress  in addressing its maintenance, training, and other challenges.", "Chairmen McCain, Ranking Member Reed, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgements", "paragraphs": ["If you or your staff have questions about this testimony, please contact  John Pendleton, Director, Defense Capabilities and Management at (202)  512-3489 or pendletonj@gao.gov.", "Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Suzanne Wren, Assistant  Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne  Landesman, Amie Lesser, Felicia Lopez, Tobin McMurdie, Shari Nikoo,  Cody Raysinger, Michael Silver, Grant Sutton, and Chris Watson."], "subsections": []}]}, {"section_title": "Appendix I: Implementation Status of Prior GAO Recommendations Cited in this Testimony", "paragraphs": ["Over the past three years, we issued several reports related to Navy  readiness cited in this statement. Table 1 summarizes the status of  recommendations made in these reports, which contained a total of 14  recommendations. The Department of Defense generally concurred with  all of these recommendations but has implemented only one of them to  date. For each of the reports, the specific recommendations and their  implementation status are summarized in tables 2 through 5."], "subsections": []}, {"section_title": "Appendix II: Summary of Major Mishaps for Navy Ships at Sea for Fiscal Years 2009 Through 2017, as of August 2017", "paragraphs": ["The Navy defines a class A mishap as one that results in $2 million or  more in damages to government or other property, or a mishap that  resulted in a fatality or permanent total disability. We analyzed data  compiled by the Naval Safety Center for fiscal years 2009 through 2017  to provide a summary of major Navy mishaps at sea (see table 6)."], "subsections": []}, {"section_title": "Appendix III: Related GAO Products", "paragraphs": ["Report numbers with a C or RC suffix are Classified. Classified reports  are available to personnel with the proper clearances and need to know,  upon request.", "Naval Shipyards: Actions Needed to Improve Poor Conditions that Affect  Operation. GAO-17-548. Washington, D.C.: September 12, 2017.", "Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-798T.  Washington, D.C.: September 7, 2017.", "Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C.  Washington, D.C.: June 13, 2017. (SECRET)", "Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 7, 2016.", "Navy and Marine Corps: Services Face Challenges to Rebuilding  Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016.  (SECRET//NOFORN)", "Military Readiness: Progress and Challenges in Implementing the Navy\u2019s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.", "Navy Force Structure: Sustainable Plan and Comprehensive Assessment  Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas  Homeports. GAO-15-329. Washington, D.C.: May 29, 2015.", "Military Readiness: Navy Needs to Assess Risks to Its Strategy to  Improve Ship Readiness. GAO-12-887. Washington, D.C.: September 21,  2012.", "Force Structure: Improved Cost Information and Analysis Needed to  Guide Overseas Military Posture Decisions. GAO-12-711. Washington,  D.C.: June 6, 2012.", "Military Readiness: Navy Needs to Reassess Its Metrics and  Assumptions for Ship Crewing Requirements and Training. GAO-10-592.  Washington, D.C.: June 9, 2010.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-5", "url": "https://www.gao.gov/products/GAO-19-5", "title": "Department of Energy: Performance Evaluations Could Better Assess Management and Operating Contractor Costs", "published_date": "2019-02-26T00:00:00", "released_date": "2019-02-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal years 2006 through 2016, the federal government spent almost $193 billion on DOE's M&O contracts\u2014a form of contract that traces its origins to the Manhattan Project. Six DOE offices use M&O contracts to manage and operate federally owned sites that perform work to fulfill DOE's diverse missions, such as conducting scientific research and maintaining nuclear weapons.", "GAO was asked to review DOE's performance management of its M&O contracts. This report examines, among other things, (1) how DOE offices evaluated M&O contractor performance in fiscal years 2006 through 2016; (2) the extent to which DOE's fiscal year 2016 M&O contractor PERs provide information on contractors' technical, administrative, and cost performance; and (3) the results of DOE's M&O contractor performance evaluations for fiscal years 2006 through 2016.", "GAO reviewed performance evaluation documents for 21 of the 22 DOE M&O contracts; analyzed DOE policies, procedures, and guidelines, and federal regulations; analyzed technical, administrative, and cost aspects of M&O contracts' 2016 PERs; and interviewed DOE officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In fiscal years 2006 through 2016, six offices within the Department of Energy (DOE) generally used one of three different approaches to evaluate management and operating (M&O) contractor performance. Although these approaches varied in the performance criteria and methodologies used for determining contractor ratings and incentives, all the offices annually set expectations for contractors and assessed performance.", "In analyzing DOE's fiscal year 2016 Performance Evaluation Reports (PER), GAO found that these reports provided less information on M&O contractors' cost performance than on contractors' technical and administrative performance. The cost information provided in the PERs often was not detailed, did not indicate the significance of the performance being described, and applied only to specific activities. Further, the information is of limited use for acquisition decision-making, such as deciding whether to extend the length of a contract, because it does not permit an overall assessment of cost performance. A key reason PERs did not include more cost performance information is that the DOE offices' policies do not require specific assessments of cost performance or discuss how to ensure cost information is useful for future acquisition decision-making. By updating policies to require inclusion of quality cost performance information in PERs, DOE offices could better assess M&O contractors' costs, improve acquisition decision-making, and ensure performance evaluations fully address required elements.", "Based on GAO's review of DOE M&O contractor performance evaluations from fiscal years 2006 through 2016, DOE generally provided high performance ratings and more than 90 percent of available performance incentives (see figure). Ratings for some areas of contractor performance, as well as ratings for contractor performance at specific DOE sites, varied from this trend. For example, three times during this period contractors received 50 percent or less of available award and incentive fees due to a major accident and safety and security issues."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations to DOE, including to each of the six DOE offices to update their policies requiring that PERs include quality information to enable an overall assessment of M&O contractor cost performance. In commenting on a draft of this report, DOE generally agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal years 2006 through 2016, the federal government spent almost  $193 billion on Department of Energy (DOE) management and operating  (M&O) contracts\u2014a form of contract that traces its origins to the  Manhattan Project during World War II. DOE relies extensively on M&O  contracts to manage and operate many of its government-owned,  contractor-operated sites. DOE\u2019s diverse missions are carried out at  these sites, including developing, maintaining, and securing the nation\u2019s  nuclear weapons capability and conducting basic energy and science  research and development. According to DOE\u2019s Fiscal Year 2017 Agency  Financial Report, DOE spends approximately 90 percent of its annual  budget on contracts. As we and the DOE Inspector General have  previously found, DOE and its contractors face several management  challenges involving large future costs, including nuclear weapon  modernization, environmental liabilities, and aging and degraded  infrastructure. Because of DOE\u2019s reliance on M&O contracts, contract  management is critical to the agency\u2019s ability to successfully and cost- effectively meet these challenges.", "DOE manages and oversees its M&O contractors through a variety of  means, including a performance evaluation process that evaluates  contractor performance, reports on those evaluations, and rewards or  penalizes contractors. Contractor performance evaluation reports cover a  wide range of activities due to the significant size and scope of M&O  contracts. These reports help form the basis of a contractor\u2019s  performance record, which DOE and other agencies consider in awarding  future contracts. Further, when an M&O contract has reached the end of  its contract term, the Federal Acquisition Regulation (FAR) and DOE  policy require DOE to consider the contractor\u2019s technical, administrative,  and cost performance before deciding whether to extend the contract or  open it up for competitive bids.", "DOE\u2019s history of inadequate management and oversight of its contractors  has led us, since 1990, to designate aspects of the department\u2019s contract  management as a high-risk area vulnerable to fraud, waste, abuse, and  mismanagement. In January 2009, to recognize progress made at  DOE\u2019s Office of Science, we narrowed the focus of the department\u2019s high- risk designation to two DOE offices: the National Nuclear Security  Administration (NNSA) and the Office of Environmental Management  (EM). In February 2013, we further narrowed the focus of DOE\u2019s high- risk designation to major projects and contracts (i.e., those with values of  at least $750 million) within these two DOE offices, to acknowledge  progress made in managing smaller-value efforts.", "Our recent reports and those from the DOE Inspector General, as well as  from commissions, task forces, and other outside groups, have  highlighted ongoing challenges with DOE\u2019s contracting and contract  management. For example, the Congressional Advisory Panel on  Governance of the Nuclear Security Enterprise (also known as the  Augustine-Mies Panel) and the Commission to Review the Effectiveness  of the National Energy Laboratories (CRENEL) recommended various  measures for reforming DOE\u2019s M&O contractor management and  oversight, including DOE\u2019s use of performance incentives. DOE also  recognizes that it has faced long-standing challenges in managing its  contracts, as outlined in a recent memo from the Deputy Secretary calling  for comprehensive reforms to improve acquisition management.", "You asked us to review DOE\u2019s performance management of its M&O  contracts. This report examines (1) how DOE offices evaluated M&O  contractor performance in fiscal years 2006 through 2016 and the extent  to which these offices have documented their evaluation approaches; (2)  the extent to which DOE\u2019s fiscal year 2016 M&O contractor performance  evaluation reports provide information on contractors\u2019 technical,  administrative, and cost performance; and (3) the results of DOE\u2019s M&O  contractor performance evaluations for fiscal years 2006 through 2016.", "For all three objectives, we reviewed performance evaluation  documentation\u2014such as performance evaluation plans, performance  evaluation reports, and fee determination\u2014for 21 of the 22 DOE M&O  contracts in place as of fiscal year 2016, the most recently completed  contract year at the time we initiated our review. We also reviewed  documentation for the remaining contract\u2014the Bettis and Knolls Atomic  Power Laboratories\u2019 M&O contract\u2014but excluded it from our analysis  because the contract did not have award fee and annual performance  evaluation reports comparable to the other DOE M&O contracts. We did  not examine performance evaluations or incentives provided outside the  main M&O contract performance evaluation reports for contracts that had  separate contract line items for certain projects with separate  performance evaluations. We also interviewed DOE officials to gain a further understanding of the department\u2019s performance evaluation  processes and results.", "To examine how DOE offices have evaluated M&O contractor  performance and the extent to which these offices have policies and  procedures to guide these processes, we reviewed DOE\u2019s policies and  procedures for performance evaluations, as well as policies and  procedures from each of the six DOE offices with M&O contracts. We  also reviewed annual performance evaluation plans and performance  evaluation reports from fiscal years 2006 through 2016. We selected  this period to provide 10 years of data on M&O contractors, and fiscal  year 2016 was the latest year for which data were available when we  began our engagement.", "To evaluate the extent to which performance evaluation reports provided  information on each of the performance areas outlined in the FAR\u2014 technical, administrative, and cost\u2014we performed content analysis of 22  DOE fiscal year 2016 performance evaluation reports for M&O  contractors. We examined the quality of the cost performance  information contained in the DOE fiscal year 2016 performance  evaluation reports by comparing the information contained in those  reports to the definition DOE provided for \u201cquality\u201d in its Information  Quality Guidelines. These guidelines apply to information DOE makes  available publicly, which includes many performance evaluation reports.", "To examine the results of DOE\u2019s M&O contractor performance  evaluations for fiscal years 2006 through 2016, we analyzed performance  ratings and incentives awarded in performance evaluation reports, fee  determination letters, and other performance evaluation documents. To  compare performance ratings and incentives provided to contractors at  M&O sites, we analyzed and provided information by \u201ccontract rating  sites\u201d rather than individual contractors or physical sites, because the  individual contractors and how certain sites align with the contracts  changed over time. Accordingly, we analyzed 24 distinct contract rating  sites covered by 21 M&O contracts in place as of fiscal year 2016. There  are three more contract rating sites than the number of contracts in 2016;  two were because two individual contracts were consolidated into one  contract during the period we covered\u2014we analyzed the two individual  contracts from prior to 2014 separately from the current consolidated  contract\u2014and the third was because two DOE offices separately  evaluated the performance of a single contractor that performed activities  for each of those offices.", "To analyze and summarize performance ratings and incentives awarded,  we used rating, award fee, and incentive fee information from 239  performance evaluations at the 24 contract rating sites. We did not  include fee ratings from years in which award or incentive fees were not  available. We also did not include information from the EM portion of the  Savannah River Site contract for fiscal years 2006 through 2009, since  award fees covered multiple years that did not align with individual fiscal  years. Appendix I provides additional information on our scope and  methodology.", "We conducted this performance audit from October 2016 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes DOE\u2019s M&O contracts, incentives in those  contracts, general requirements for DOE\u2019s M&O contractor performance  evaluation processes, and contracting and performance challenges  involving DOE\u2019s M&O contracts that have been identified by previous  reporting."], "subsections": [{"section_title": "DOE Uses M&O Contracts", "paragraphs": ["Since the Manhattan Project produced the first atomic bomb during World  War II, DOE and its predecessor agencies have depended on the  expertise of private firms, universities, and others with the scientific,  manufacturing, and engineering expertise needed to carry out research  and development work and manage and operate the government-owned,  contractor-operated facilities where the bulk of the department\u2019s mission  activities are carried out. DOE relies on contracts in general, and M&O  contracts in particular, to do this work. According to DOE\u2019s Fiscal Year  2017 Agency Financial Report, the department spends approximately 90  percent of its annual budget on contracts, and in fiscal year 2016 DOE  managed contracts valued at more than $24 billion. Of that amount, DOE  spent approximately 80 percent on its M&O contracts.", "The work is closely related to the  agency\u2019s mission and is of a long-term or  continuing nature, and there is a need to  ensure its continuity and for protection  covering the orderly transition of  personnel and work in the event of a  change in contractors. and sites that are contaminated from decades of nuclear weapons  production and nuclear energy research.", "The Office of Fossil Energy (FE) manages the nation\u2019s Strategic  Petroleum Reserve, which is an emergency stockpile of oil stored in  underground salt caverns in Texas and Louisiana.", "NNSA, a separately organized agency within DOE, is responsible for  maintaining and enhancing the safety, reliability, and performance of  the nation\u2019s nuclear weapons stockpile, promoting international  nuclear safety and nonproliferation, and supporting U.S. leadership in  science and technology, among other things.", "The Office of Nuclear Energy\u2019s (NE) primary mission is to advance  nuclear power as a resource capable of making major contributions in  meeting the nation\u2019s clean energy supply and energy security needs.", "The Office of Science (SC) supports scientific research for energy and  the physical sciences both by supporting (1) such research, and (2)  the development, construction, and operation of scientific user  facilities.", "These DOE offices use M&O contracts to carry out their research and  development, nuclear weapons production, and other missions. For  example, for research and development, DOE is the nation\u2019s single  largest funding source for basic physical sciences research, supporting  research in energy sciences, advanced scientific computing, physics, and  other fields. For weapons production, NNSA uses production sites to  maintain, evaluate, repair, and dismantle both the nuclear and non- nuclear components for nuclear weapons; manufacture weapons  components; and process tritium, a key isotope used to enhance the  power of nuclear weapons. DOE also uses M&O contracts for sites  dedicated to other types of missions, including nuclear waste disposal  and an emergency stockpile of oil. Figure 1 and appendix II provide  additional information on DOE\u2019s M&O contracts.", "In August 2016, we identified three key attributes associated with DOE\u2019s  M&O contracts. First, M&O contracts have a limited competitive  environment\u2014we found that about half of DOE\u2019s fiscal year 2015 M&O  contract spending was on contracts awarded noncompetitively or that  received a single offer at the time they were competed. In addition, M&O  contracts include longer terms than other federal contracts, so they are  competed less frequently. Second, DOE M&O contracts have broad  scopes of work that cover nearly all aspects of work at a site. In particular,  though mission activities of M&O contractors can be highly technical,  mission support activities generally accounted for about 25 to 50 percent  of contractors\u2019 total costs in fiscal year 2015, and encompassed such  things as managing infrastructure, facilities, and grounds; security; and  the internal audit function. Third, M&O contracts and DOE management  practices contribute to a closer relationship between contractors and the  government. For example, M&O contractors are generally more  integrated with DOE in how they are paid and in their accounting systems  than other types of contractors. With regard to payment, rather than  traditional bill payment methods including invoices, payment approval and  authorization, and disbursement of funds, M&O contractors can draw  funds directly from federal accounts through \u201cletter of credit financing.\u201d", "With regard to accounting systems, as we reported in August 2016, DOE  requires M&O contractors to follow DOE\u2019s Accounting Handbook and  integrate their costs and liabilities in DOE\u2019s accounts each month. DOE  officials said that this provides visibility into contractor accounts and  allows DOE to monitor the appropriateness of the contractors\u2019 withdrawal  of funds in near real time. According to DOE officials, this integration  carries over into how the value of contracts are determined\u2014rather than  establishing the cost of the contract at the time of contract award, the  value of the M&O contract is determined by the amount annually  obligated on the contract by DOE, consistent with DOE\u2019s annual  congressional appropriations."], "subsections": []}, {"section_title": "Incentives in M&O Contracts", "paragraphs": ["Cost-reimbursement type contracts allow the agency to contract for work  when circumstances do not allow the agency to sufficiently define its  requirements or estimate its costs to allow for a fixed-price contract.  Under a fixed-price contract, a contractor accepts responsibility for  completing a specified amount of work for a fixed price. In contrast, under  cost-reimbursement contracts, the government reimburses a contractor  for allowable costs incurred, to the extent prescribed by the contract. The  government may also pay a fee that is either fixed at the outset of the  contract or adjustable based on performance criteria set out in the  contract.", "In September 2009, we reported that cost-reimbursement contracts are  considered high risk for the government because of the potential for cost  escalation and because the government pays a contractor\u2019s costs of  performance regardless of whether the work is completed. As such,  cost-reimbursement contracts are suitable only when (1) circumstances  do not allow the agency to define its requirements sufficiently to allow for  a fixed-price type contract; or (2) uncertainties involved in contract  performance do not permit costs to be estimated with sufficient accuracy  to use any type of fixed-price contract. One major reason for the inability  to accurately estimate costs is the lack of knowledge of the work needed  to meet the requirements of the contract, such as with research contracts,  which necessarily involve substantial uncertainties. The DOE Acquisition  Regulation (DEAR) states that cost-plus-award-fee (cost reimbursement)  contracts are generally the appropriate contract type for M&O contracts  and that the agency can choose among a number of different contract  types for its M&O contracts.", "Under the FAR, cost-reimbursement contracts may include specific  incentives, such as arrangements intended to improve contractor efforts  and discourage inefficiency and waste. Table 1 provides definitions of  incentives commonly included in DOE\u2019s M&O contracts.", "Generally, according to DOE officials, award fees and incentive fees are  intended to motivate M&O contractor performance on an annual basis, as  outlined in annual performance evaluation plans. All DOE M&O contracts  GAO analyzed also include \u201cconditional payment of fee\u201d clauses that  permit the agency to reduce an otherwise earned fee if it determines that  the contractor\u2019s performance did not meet minimum requirements, such  as those related to safety, health, or the environment. Under the award  term incentive, contractors can earn one additional year of performance  under the contract for each year they exceed certain thresholds in their  annual performance evaluations. (See apps. III through VIII for additional  information on the incentives included in each M&O contract, by DOE  office.)", "In addition, other elements of contract administration or oversight, while  not formally incentives, can influence contractor performance. For  example, option periods\u2014which are established in the contract\u2014enable  the government to unilaterally extend the performance period and  performance of services. According to DOE officials, other potentially  important influences on contractor behavior include public reputation and  the ability to compete for follow-on DOE or other government contracts."], "subsections": []}, {"section_title": "Performance Evaluation and Award Fee Requirements", "paragraphs": ["The FAR, DEAR, DOE\u2019s Acquisition Guide, and DOE policies provide  requirements and guidance for DOE\u2019s annual performance evaluations of  contractor performance. Under the FAR, all contracts providing for award  fees must be supported by an award fee plan that establishes procedures  for evaluating award fees and an Award Fee Board to conduct award fee  evaluations. A Fee Determining Official makes the final determination  regarding the amount of award fee the contractor earns during the  evaluation period. Additionally, the FAR generally calls for entities that  administer contracts providing award fees to use a set of ratings from  Excellent to Unsatisfactory, which include performance descriptions and  associated available award fee percentages (see Table 2 below). Award  fee ratings are associated with a range of percentages of the total  available award fee that DOE offices may award to a contractor based on  the contractor\u2019s assessed performance.", "DOE offices develop two primary documents to guide and report  assessments of contractors\u2019 performance for each fiscal year: a  Performance Evaluation and Measurement Plan (PEMP) and a  Performance Evaluation Report (PER). The PEMP is to be developed at  the beginning of each fiscal year\u2014which is the beginning of the  evaluation period\u2014and is to establish expectations for contractor  performance and describe how the responsible DOE office will evaluate  and measure performance against those expectations. The PEMP  provides the blueprint for what performance is expected of contractors,  how contractors\u2019 performance will be evaluated, and how the evaluations  will be used to determine award fees, award terms, and any other  incentives. The PER is to be developed at the end of each evaluation  period\u2014which typically is the end of the fiscal year\u2014and is the  responsible DOE office\u2019s evaluation of contractor performance, in which  DOE documents the performance rating and, in some cases, the fees and  other incentives that will be awarded to the contractor. Figure 2 shows the  general steps of DOE\u2019s performance evaluation of contractors.", "Further, under the FAR and DOE policy, the department is to consider  technical, administrative, and cost performance during acquisition  planning. The FAR provides that, for M&O contracts, replacement of an  incumbent contractor is largely based on an expectation of meaningful  improvement in performance or cost; thus, an agency or department  should consider three categories of performance\u2014technical,  administrative, and cost\u2014when deciding whether to extend or compete a  contract at the end of the contract\u2019s term. According to DOE officials,  the annual performance evaluation process and the related PER are  important sources of information for making these decisions. Thus, the  PER should include relevant information on an M&O contractor\u2019s  technical, administrative, and cost performance. For DOE, the M&O  contract PER is also important because DOE uses information from the  PER to update a contractor\u2019s past performance information in the  Contractor Performance Assessment Reporting System (CPARS), which  DOE and other agencies use to understand a contractor\u2019s performance  history and to inform their evaluations of future contract proposals."], "subsections": []}, {"section_title": "Contracting and Performance Challenges Involving DOE\u2019s M&O Contracts", "paragraphs": ["A number of commissions, task forces, and other outside groups have  identified challenges involving DOE\u2019s M&O contracts. For example, two  independent commissions\u2014the Augustine-Mies Panel and CRENEL\u2014 have reported on related contract management challenges. The 2014  Augustine-Mies report focused on NNSA and made numerous  recommendations for comprehensive reforms, including addressing  dysfunctional government-M&O contractor relationships, improving  oversight of M&O contractors, and reforming award fee and performance  incentive structures. CRENEL, taking a broader view of all 17 national  laboratories across DOE, in 2015 found a similar erosion of trust between  DOE and some of its M&O contractors while noting that some  laboratories, in particular those under SC, had better, more effective  relationships. The CRENEL report recommended reforms to the  management and oversight of M&O contractors and performance  incentive structures. In addition to challenges, CRENEL also noted that  SC\u2019s annual performance evaluation and planning processes were robust  and suggested that they be adapted by other DOE offices.", "NNSA\u2019s and EM\u2019s contract management remains on our High-Risk List  for government operations vulnerable to fraud, waste, abuse, and  mismanagement. In addition, since 2005 we have identified a variety of  project and program outcomes associated with deficiencies in DOE\u2019s  management and oversight of its M&O contractors. We have also  identified improvements needed in core processes and functions DOE  relies on to oversee its M&O contractors and assess their performance.  These reports include the following examples:", "Since 2005, during various reviews, we found that cost accounting  practices used by NNSA\u2019s M&O contractors have varied, making it  difficult for NNSA to compare costs across its sites or accurately  identify the total costs across its nuclear security enterprise and to  obtain reliable cost data. In January 2017, we reported on the  importance of reliable enterprise-wide cost information to effective  management and oversight and found that the plan NNSA submitted  to Congress in 2016 to improve and integrate its financial  management, as required by Congress in 2013, did not provide a  useful road map for guiding NNSA\u2019s efforts. We recommended that  NNSA develop a plan for producing cost information that fully  incorporates leading planning practices. NNSA agreed, and we are  monitoring implementation of the recommendation.", "In October 2014, we reported on actions taken to address challenges  with the Uranium Processing Facility under construction at the NNSA  Production Office Sites (specifically at the Y-12 National Security  Complex), which is managed by the M&O contractor at that site. A  challenge with this facility was that in July 2012 the M&O contractor  concluded that required equipment would not fit into the facility as  designed and that addressing this issue would cost an additional $540  million. NNSA\u2019s analysis of the factors that contributed to this issue  identified several causes, including project oversight deficiencies\u2014 specifically, failure to ensure that requests and directives from NNSA  to the contractor were implemented.", "In May 2015, we reported on NNSA\u2019s use of contractor assurance  systems to conduct oversight and evaluate the performance of M&O  contractors. Contractor assurance systems are designed and used  by M&O contractors to oversee their own performance and to self- identify and correct potential problems. We found that NNSA had not  fully established policies or guidance for using information from these  systems to conduct oversight of M&O contractors and that NNSA  therefore did not have standards for ensuring that contractors are  overseen consistently. We recommended that NNSA establish  policies and guidance for using information from contractor assurance  systems for the oversight of M&O contractors; NNSA concurred with  the recommendations and has taken some steps to establish policies  and guidance, though it has not yet fully addressed our  recommendations.", "In March 2017, we reported that DOE needed quality data to manage  its risk of fraud and recommended that DOE require contractors to  maintain sufficiently detailed transaction-level cost data that are  reconcilable with amounts charged to the government. DOE did not  concur with the recommendation and has not taken steps to  implement it. Because DOE does not require its contractors to  maintain sufficiently detailed transaction-level cost data that are  reconcilable with amounts charged to DOE, it is not well positioned to  employ data analytics as a fraud detection tool. As a result, DOE is  missing an opportunity to develop, refine, and improve its data  analytics and better meet requirements of the Fraud Reduction and  Data Analytics Act."], "subsections": []}]}, {"section_title": "DOE Offices Use Different Approaches to Evaluate Contractor Performance, and all but NNSA Have Documented Their Approaches", "paragraphs": ["In fiscal years 2006 through 2016, the six DOE offices generally used one  of three different approaches to evaluate M&O contractor performance.  All but one of these offices have documented their approaches in policies  and procedures; NNSA has a broad policy but does not have procedures  for implementing it, in particular for collecting and using performance  information. In the absence of documented procedures, NNSA may not  consistently collect and use performance information in evaluating  contractor performance."], "subsections": [{"section_title": "DOE Offices Use Three Approaches That Differ in Their Criteria and Methodologies for Ratings and Incentives", "paragraphs": ["According to DOE officials, DOE does not have a department-wide  performance evaluation process and offices developed their approaches  to performance evaluation based on their varying missions and  performance evaluation priorities.", "We identified the following three general approaches:", "The Science and Energy Lab approach (used by SC, EERE, and  NE) uses broad, office-wide performance criteria and a detailed  process and web-based tool to collect performance information and  determine ratings and incentives.", "The NNSA approach also uses broad, office-wide performance  criteria, but ratings and incentives are determined through a series of  management meetings.", "The Site Specific approach (used by FE and EM) uses more  detailed performance criteria specific to each contract and makes  rating and incentive determinations in ways that vary based on the  individual criteria.", "These approaches generally differ in their (1) performance criteria, (2)  methodologies used to determine contractor ratings, and (3)  methodologies used to determine incentives. Appendixes III through VIII  provide additional information on each office\u2019s performance evaluation  approach."], "subsections": [{"section_title": "Performance Criteria", "paragraphs": ["Based on our review of DOE documents, the three approaches all use a  combination of what PEMPs describe as subjective and objective  performance criteria. The Science and Energy Lab and NNSA  approaches use primarily subjective criteria, and the Site Specific  approach uses primarily objective criteria. Subjective criteria are generally  qualitative statements that describe desired contractor performance,  according to DOE officials. For example, a subjective criterion that SC  used during fiscal year 2016 was for contractors to \u201cprovide effective and  efficient strategic planning and stewardship of scientific capabilities and  program vision.\u201d In contrast, DOE officials explained that objective criteria  generally describe performance that may be measured on a \u201cpass/fail\u201d or quantitative basis. For example, FE used objective criteria such as  developing a strategic plan by a specific date or ensuring that all phases  of construction were mechanically complete regarding the conversion of a  tank.", "Performance criteria under the Science and Energy Lab and NNSA  approaches share a similar structure of three tiers of criteria: goals,  objectives, and notable outcomes (called key outcomes under NNSA\u2019s  approach). The criteria are also mostly subjective and broad enough to be  consistent across all the contracts of the responsible DOE office. Based  on our review of DOE documents and information, SC and EERE have  used the Science and Energy Lab approach since fiscal year 2006 and  NE since fiscal year 2007. NNSA used the NNSA approach in fiscal  years 2013 through 2016.", "Under the Science and Energy Lab and NNSA approaches, goals are  general overarching statements of the desired outcomes for each major  performance area under the contract and constitute the highest  performance criteria used to evaluate contractor performance. Based on  documentation describing these approaches, goals are to be composed  of at least two objectives, which are statements of desired results for an  organization or activity and that discuss specific actions the contractor will  undertake to accomplish a goal. Each office uses its respective goals and  objectives consistently for each of its M&O contracts (EERE and NE each  have only one site) and generally cover the same functional areas across  the offices, though some NNSA goals focus specifically on NNSA\u2019s  nuclear weapons and national security missions. For complete lists of  goals and objectives used by the offices using the Science and Energy  Lab and NNSA approaches, see appendixes III, VI, VII, and VIII.", "The third tier performance criteria used to evaluate contractor  performance is the notable outcome, which, according to agency  documents, is intended to focus the contractor on specific items that  officials identified as the most important initiatives or highest risk issues  the contractor must address. According to DOE documents, notable  outcomes differ from goals and objectives in that they (1) are usually  objective, (2) are specific to each contractor, and (3) change from year to  year. However, not all goals and objectives have associated notable  outcomes. Figure 3 provides an example of the relationship between a  goal and its related objectives and notable outcomes for SC\u2019s  Brookhaven National Laboratory contractor for fiscal year 2016.", "Our review of agency documents found that the Site Specific approach  consists primarily of objective performance criteria that are specific to  each contract, as well as a few broader, objective criteria. This is in  contrast to the other two DOE approaches to performance evaluation,  which primarily rely on broad, subjective criteria and a few objective  criteria. Based on our discussions with agency officials, both EM and FE  have generally used this Site Specific approach since fiscal year 2006.  For both offices, objective performance criteria are defined based on  quantifiable metrics (e.g., a contractor\u2019s demonstrated waste processing  rate) and milestones (e.g., whether a contractor completed a task on or  before a scheduled date). For example, one of FE\u2019s fiscal year 2016  objective performance criteria for the Strategic Petroleum Reserve M&O  contract is whether facilities and systems functioned at a level adequate  to meet program requirements based on average scores from its  Maintenance Performance Appraisal Rating tool. Further, our review of  agency documents showed that the Site Specific approach uses  subjective performance criteria for aspects of performance that may be  difficult to capture objectively\u2014such as determining how effectively  measures a contractor has taken have prevented harm to workers, the  general public, and the environment. (See apps. IV and V for examples of  the objective and subjective criteria EM and FE use.)", "Prior to fiscal year 2013, NNSA also used the Site Specific approach, and  it had specific, objective performance criteria that varied by contract.  Based on our review of agency documents, NNSA\u2019s performance criteria  were generally divided into four performance areas: (1) mission, (2)  operations, (3) business, and (4) multi-site. According to NNSA officials,  as a result of \u201clessons learned\u201d efforts, NNSA updated this approach to its  current one to provide more succinct, structured, and consistent reporting  by ensuring that all NNSA M&O contractors have identical goals and  objectives."], "subsections": []}, {"section_title": "Methodologies Used to Determine Contractor Ratings", "paragraphs": ["Based on our review of DOE documents, rating methodologies vary  across the three approaches\u2014the Science and Energy Lab approach  uses a detailed, formulaic methodology; the NNSA approach determines  ratings at a series of management meetings; and in the Site Specific  approach, ratings depend primarily on whether the contractor  accomplishes specific tasks.", "Based on our review of agency documents, under the Science and  Energy Lab approach, stakeholders\u2014including officials from  headquarters, field offices, and internal and external customers\u2014 generally evaluate contractor performance against the criteria for each  objective and notable outcome (\u201clab customers\u201d evaluate objectives under  science and technology goals only). Their evaluations, in the form of  narratives and numerical scores, are entered into a web-based  information collection tool that aggregates the scores using a series of  calculations and weights to generate ratings that are then approved by  the Fee Determining Official for the responsible DOE office. For  example, for SC, once individual stakeholders enter objectives\u2019 scores  into the Laboratory Rating Tool, those scores are then weighted and  added together through a predetermined formula to provide an overall  rating of contractor performance for each goal. Under this approach, the  Laboratory Rating Tool aggregates the objective scores into numerical  goal ratings and corresponding letter grades from 4.3 (A+) to 0 (F) for the  contractor. Notable outcomes are rated on a \u201cpass/fail\u201d basis, meaning  that the contractor either met or did not meet them. Receiving a passing  rating for the notable outcome is required for the contractor to earn a B+  or better for the notable outcome\u2019s associated objective. Thus, although  notable outcomes are not given their own numerical score or letter grade,  they can have a significant effect on a contractor\u2019s objective ratings and,  ultimately, goal ratings. (See apps. III, VII, and VIII for examples of the  weighting and calculations involved in aggregating ratings for EERE, NE,  and SC M&O contractors.)", "Based on our review of agency information, the methodology for the  NNSA approach to determine contractor ratings entails officials holding a  series of meetings to review various internally developed periodic reports  and other inputs (e.g., contractor self-assessments and inspection  reports). The participants in these meetings include field office managers,  program managers, and NNSA executive leadership who collaboratively  review contractor performance and determine ratings. According to NNSA  officials, at these meetings NNSA collaboratively reviews all M&O  contracts across the NNSA complex, thereby allowing officials to weigh  and compare performance. The Fee Determining Official determines the  final performance ratings for each M&O contractor using rating categories  from the FAR: Excellent, Very Good, Good, Satisfactory, and  Unsatisfactory. NNSA does not use numerical calculations to score and  weigh individual objectives or goals. Instead, NNSA officials use  professional judgment to determine overall goal ratings.", "Based on our review of agency information, under the Site Specific  approach, field office officials rate contractor performance against  objective performance criteria quantitatively or pass/fail and rate  subjective performance criteria using FAR award fee categories. That is,  they evaluate performance against objective performance criteria as  completed or not completed\u2014for example, whether the contractor  packaged 10 waste drums during the fiscal year. For the subjective  performance criteria, officials assign ratings using the FAR rating  categories in a similar manner to the NNSA approach."], "subsections": []}, {"section_title": "Methodologies Used to Determine Incentives", "paragraphs": ["Based on our review of DOE documents, the three performance  evaluation approaches also use different methodologies for determining  award and incentive fees, and two offices use similar methods to  determine whether the contractor receives award term. Based on our  review of agency documents, under the Science and Energy Lab  approach, once ratings are determined, several additional detailed  calculations determine how much of the available award fee is provided to  the contractor. Precisely how ratings are weighted to determine fee differs  by DOE office, but generally performance in technical areas is more  important in determining the amount of fee the contractor earns. For  example, SC determines award fees based on the contractor\u2019s final  science and technology area rating and adjusts that fee if the final  management and operations area rating is 3.0 (grade B) or below. (See  app. VIII for additional information on SC\u2019s fee determination, app. III for  EERE, and app. VII for NE.)", "Based on our review of agency information, under the NNSA approach,  officials assign goals specific portions of the available award fee for each  contract at the beginning of the fiscal year. At the end of the fiscal year,  officials determine ratings and fees at the same time in the collaborative  meeting with NNSA leadership. For example, for the Los Alamos National  Laboratory contractor in fiscal year 2016, the nuclear weapons goal was  30 percent of fee, and the operations and infrastructure goal was 35  percent. As discussed earlier, the Fee Determining Official makes the  final determination on the ratings and also determines how much fee to  provide the contractor within the range defined by the FAR rating  (Excellent, Very Good, Good, Satisfactory, Unsatisfactory). In fiscal year  2016, NNSA awarded the Los Alamos National Laboratory M&O  contractor an \u201cExcellent\u201d rating for the nuclear weapons goal, which is  associated with the contractor earning from 91 to 100 percent of the  available fee for that goal. To determine the overall award fee for the  contract, NNSA adds up the award fees for all of its goals. (See app. VI  for an example of a NNSA fee determination letter.)", "Our review of DOE documents showed that the Site Specific approach  has a different process for determining incentive and award fees,  depending on whether the fee is tied to objective or subjective  performance criteria. According to agency officials and documents, the  Site Specific approach generally provides more money toward incentive  fees tied to objective criteria than to award fees tied to subjective  criteria\u2014about 60 to 75 percent of available fee money goes to incentive  fees. Incentive fees tied to objective performance criteria are awarded  based on completion of the specific tasks or quantitative targets defined  by the performance criteria. For example, one of the objective  performance criteria for EM\u2019s Waste Isolation Pilot Plant (WIPP) M&O  contractor in fiscal year 2016 was to develop a maintenance and  engineering program, called the Material Condition and Aging  Management Program, and complete certain program activities. EM set  a maximum incentive fee of $500,000 in the PEMP to be awarded upon  completion of the activities.", "In regard to award fees that are tied to subjective performance criteria  under the Site Specific approach, offices using this approach take a  similar method to the NNSA approach, in that they determine ratings and  fees simultaneously. Specific portions of an available award fee are  assigned to subjective performance criteria at the beginning of the fiscal  year and documented in the PEMP, and officials then determine the  percentage of fee to award and corresponding ratings from the FAR  award fee categories for each subjective performance criterion. The final  decision on the percentage of the available fee awarded for subjective  performance criteria is made by the Fee Determining Official, who is  generally an on-site official. The overall fee awarded is the sum of the  individual objective incentive fees and subjective award fees. (See apps.  IV and V for examples of how fee is assigned to specific criteria under the  Site Specific Approach.)", "With regard to award term, for the SC and NNSA contracts that had  award term as an incentive, the contracts defined the conditions for  receiving it, and those conditions generally included meeting certain  rating thresholds, based on our review of documents from those offices.  For SC, the contractor (1) was to earn at least a 3.5 (A-) science &  technology area rating and a 3.1(B+) management & operations area  rating, and (2) have no individual goal ratings below 3.1(B+) for science &  technology area goals and 2.5 (B-) for management & operations area  goals. The contracting officer is to prepare and submit a standardized  document along with an annual contractor performance evaluation  presentation for review through program officials, and the Director of the  Office of Science is to make the final award term determination. For  NNSA contracts, the contractor generally must (1) earn a rating of \u201cVery  Good\u201d or better in four of the six goals and receive no rating of  \u201cSatisfactory\u201d or lower in any goal, and (2) meet any additional  requirements as specified in the contract."], "subsections": []}]}, {"section_title": "All DOE Offices but NNSA Have Clearly Documented Approaches, Which May Lead NNSA to Inconsistently Collect and Use Performance Information in Contractor Evaluations", "paragraphs": ["All of DOE\u2019s offices have documented policies outlining their performance  evaluation approaches, and all but NNSA have documented how  information is to be collected and used to make rating determinations.  SC, EERE, NE, FE, and EM have included in their documented policies  and performance evaluation plans detailed procedures for collecting  information on contractors\u2019 performance that outline, among other things,  how officials are to gather input from internal and external stakeholders  and how the officials are to use that information in making rating  determinations. For example, under SC\u2019s Laboratory Performance  Appraisal Process and PEMP Preparation Guidance (SC\u2019s Appraisal  Guidance), stakeholders are to provide evaluations using SC\u2019s web- based information collection tool, the Laboratory Rating Tool, to provide  scores and narratives on contractor performance. As a result, SC\u2019s  contractor performance evaluation approach clearly traces where  performance information comes from and how the information is used in  determining contractors\u2019 final ratings.", "Similarly, EM and FE document how officials are to collect information  and use it in PEMPs or other performance evaluation plans. For example,  EM\u2019s PEMP for the WIPP M&O contract provides step-by-step  procedures for how field office officials are to assess contractor  performance against each performance criterion. These procedures guide  the flow of information from contractor to field office officials, who are to  check and validate the information and provide rating and fee  recommendations to the on-site Fee Determining Official. Similarly, field  office officials at EM\u2019s Savannah River Site and FE\u2019s Strategic Petroleum  Reserve also have detailed procedures for assessing and distributing  information regarding performance. Such detailed written procedures can  provide better assurance to agencies that officials are consistently  gathering and using performance evaluation information and that one can  trace the ultimate performance rating in the PER to the underlying  performance information.", "In contrast to the detailed documented policies of other DOE offices,  during the period of our review NNSA\u2019s documented policy did not always  match its performance evaluation approach, and the policy did not contain  procedures for how officials should collect and use information so that  one can trace the performance rating to the underlying performance  information. As noted above, NNSA changed from using the Site Specific  performance evaluation approach that focused on objective performance  criteria to the agency\u2019s current approach in fiscal year 2013. However,  NNSA did not update its policy to reflect this change until December  2016. Thus, in fiscal years 2013 through 2016, NNSA was using a  policy intended to evaluate site-specific objective performance criteria and  incentive fees rather than the broad, office-wide subjective performance  criteria that NNSA was using during those 4 fiscal years.", "NNSA brought its policy into alignment with its performance evaluation  approach in December 2016 by issuing its Corporate Performance  Evaluation Process for Management and Operating Contractors policy  (NAP-4C). NAP-4C provides a general framework under which NNSA  officials provide input into the contractor performance evaluation process;  the policy also provides a general schedule for implementing the  performance evaluation approach, as well as general references to  information collection.", "However, NAP-4C does not include detailed procedures for how  performance information should be collected and used, and according to  NNSA officials, individual NNSA offices and officials determine how they  collect and distribute information. This means information may be  collected inconsistently across the agency, depending on individual  offices\u2019 preferences. For example, NAP-4C states that officials should  \u201cleverag information from contractor assurance systems . . . to monitor  performance\u201d but does not discuss how and when officials should use this  information to ensure performance information is traceable to rating  determinations.", "In May 2015, we reported on the importance of tracing performance  information from contractor assurance systems to performance  evaluations. We reported that a senior NNSA official told us NNSA  could not track the extent to which information from contractor assurance  systems was used in evaluating contractor performance because it could  be difficult to identify the sources of information used in performance  evaluations. We recommended that NNSA revise policy, guidance, and  procedures on performance evaluation to fully address how and under  what circumstances those responsible for evaluating M&O contractors\u2019  performance should use information from contractor assurance systems  for this purpose. NNSA concurred with our recommendation and issued  revised policy for contractor oversight but has not yet developed guidance  or procedures for how to use information from contractor assurance  systems in its performance evaluation process. We continue to follow up  on this recommendation.", "In addition to NAP-4C, NNSA\u2019s Fee Determining Official issued  implementation guidance for the fiscal year 2016 performance evaluation  cycle. This implementation guidance directs relevant NNSA officials to  follow a series of templates for interim reports to the contractor and  provides the format of the final PER and specific dates for those reports.", "The guidance does not include procedures as to how officials throughout  NNSA are to collect or use information to create the content for those  templates. For example, the guidance\u2019s Interim Feedback Report  schedule states that the \u201cprogram/functional offices provide input to field  offices.\u201d There is no discussion of how the program/functional office is to  provide such input, what types of input are important, or how the input is  to be used. Similarly, NNSA\u2019s PEMPs also do not discuss how officials  should collect or use performance information.", "In the absence of documented, detailed procedures, NNSA may not  consistently collect and use performance information from program  managers and field office officials for contracts in a given fiscal year and  may therefore inconsistently apply NNSA\u2019s evaluation process. For  example, we identified two instances in which the NNSA Fee Determining  Official made handwritten changes to proposed award fee amounts  during fiscal year 2012 without documenting in the PER the basis for the  changes, such as by identifying the performance information that would  support the handwritten changes to create traceability between the award  fee amounts and its supporting performance documentation. These  changes awarded (1) Los Alamos National Laboratory\u2019s contractor a year  of award term, even though the contractor had not met the established  rating threshold for award term, and (2) Lawrence Livermore National  Laboratory\u2019s contractor a higher award fee that also qualified the  contractor for award term it otherwise would not have received. With  these changes, these contractors received award terms and fees in a  manner inconsistent with how award terms and fees were assessed for  other M&O contractors. According to NNSA officials, this type of action  would not happen currently because the agency\u2019s approach is rooted in a  policy (NAP-4C) and implementation guide that is supported by a more  collaborative decision-making process. However, even under the new  policy, because NNSA does not have clearly documented procedures  specifying how officials are to collect or use performance information,  NNSA leadership cannot have assurance that there is clear traceability  between the contractor evaluation and its underlying support.", "Federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks, such  as by clearly documenting internal control in management directives,  administrative policies, or operating manuals. NNSA has a documented  policy, but this policy does not clearly specify how to collect and use  contractor performance information to evaluate contractor performance.  NNSA officials stated that in their opinion their policy was still effective  and robust without detailed procedures for its implementation. However,  without developing and documenting clear procedures for implementing  NAP-4C that specify the process for collecting contractor performance  information and how officials are to ensure this information can be traced  to rating determinations, NNSA leadership does not have reasonable  assurance that the agency is consistently evaluating contractor  performance and that it is using relevant performance information as  intended."], "subsections": []}]}, {"section_title": "Evaluation Reports Could Better Assess M&O Contractors\u2019 Cost Performance", "paragraphs": [], "subsections": [{"section_title": "DOE\u2019s Fiscal Year 2016 M&O Contractor Performance Evaluation Reports Provided Less Information on Contractors\u2019 Cost Performance than on Other Types of Performance", "paragraphs": ["We found that DOE offices\u2019 fiscal year 2016 PERs provided less  information on M&O contractors\u2019 cost performance\u2014evaluations of the  contractor\u2019s spending, budgeting, strategic sourcing, and costs, including  the contractor\u2019s cost-effectiveness\u2014and provided more information  regarding technical and administrative areas of performance. Specifically,  the PERs were 67 pages long on average and contained about 1 page of  cost performance-related information overall. In contrast, information on  contractors\u2019 technical and administrative performance included in-depth  descriptions of contractors\u2019 scientific discoveries and production progress  that spanned numerous pages. Figure 4 provides typical examples of the  type of technical, administrative, and cost performance descriptions that  we found in our review of fiscal year 2016 M&O contract PERs.", "In addition, in our review of the number of performance descriptions in  DOE\u2019s 2016 PERs, we found about 24 percent (179 of 737) of the performance descriptions in the  PERs provided information on cost performance; about 71 percent (524 of 737) provided information on administrative  performance (evaluations of contractor\u2019s performance on mission  support activities, such as information technology, human resources,  legal activities, environmental safety and health, property  management, risk management, and leadership activities); and about 53 percent (390 of 737) provided information on technical  performance (evaluation of contractor\u2019s performance on mission- related activities such as research and development, production,  storage, clean-up, and construction)."], "subsections": []}, {"section_title": "Cost Performance Information Included in DOE\u2019s Performance Evaluation Reports is of Limited Use for Acquisition Decision-Making", "paragraphs": ["In addition to providing less information on M&O contractors\u2019 cost  performance than on other areas of performance, the cost information  contained in DOE offices\u2019 PERs is of limited use for acquisition decision- making. DOE\u2019s Information Quality Guidelines define quality, in part, as  information that is useful to DOE and the public. We examined whether  the PERs included such useful information that would permit an overall  assessment of contractor cost performance. FAR and DOE policy call for  such an overall assessment, which therefore is useful to DOE for  acquisition decision-making and to the public generally.", "Our analysis showed that the information on contractors\u2019 cost  performance in the PERs did not permit such an assessment of  contractor cost performance for two primary reasons. First, the  information consisted of statements that lacked detail, such as \u201cwithin  budget,\u201d and did not address the significance of the performance  described. For example, cost performance-related statements such as  \u201cover/under budget\u201d and \u201ccost savings/cost overrun\u201d did not commonly  provide information on the amount saved or lost, making it difficult to  identify the significance of what was reported. Information on cost  effectiveness was also rare\u2014cost-effectiveness information was included  in about 11 percent of the instances in which cost performance was  discussed (48 of 441 instances). Second, cost performance information  commonly applied to specific activities under the contract, such as  construction activities, rather than to achievement of overall operating  efficiencies. When cost performance information is limited to specific  activities, it is not possible to assess a contractor\u2019s overall cost  performance based on information in the PER.", "We identified one reason and DOE officials identified three additional  reasons why more cost performance information was not provided in  DOE\u2019s fiscal year 2016 PERs. We believe all of these contribute to why  the cost performance information that was included was often not useful  for acquisition decision-making:", "DOE offices\u2019 policies and PEMPs did not specifically require  PERs to include cost performance information and did not  discuss how to ensure that cost information is useful for  acquisition decision-making. Based on our review, DOE offices\u2019  policies did not specifically require that PERs include cost  performance information, nor did they discuss information quality. In  addition, DOE offices\u2019 PEMPs\u2014which serve as a general blueprint for  the type of performance information that offices should include in the  corresponding PER\u2014generally did not include specific cost  performance criteria or explicitly call for evaluations of contractors\u2019  cost performance. In contrast, DOE offices\u2019 fiscal year 2016 PEMPs  commonly included explicit technical and administrative performance  criteria such as: \u201cprovide S&T  results with  meaningful impact on the field\u201d (technical) and \u201cprovide an efficient  and effective worker health and safety program\u201d (administrative).  There were three exceptions in which PEMPs included specific cost  performance criteria: EM\u2019s WIPP M&O contract, NE\u2019s Idaho National  Laboratory, and FE\u2019s Strategic Petroleum Reserve M&O contract.", "Although SC does not have explicit cost performance goals or  objectives, according to SC officials, cost performance is listed as a  factor to consider in SC\u2019s PEMPs\u2019 descriptions of how to evaluate  certain performance criteria. However, SC officials told us that PER  performance descriptions may not include cost information for these  criteria unless there were notable cost overruns or the contractor was  doing an exceptionally good job in these areas. SC officials stated this  is, in part, to keep PERs shorter and streamlined. However, when  PERs are silent on cost performance, there is no formal documented  record of M&O contractor cost performance.", "M&O contract missions made it difficult for DOE to assess  contractor cost performance, resulting in less cost performance  information in PERs. According to DOE officials, it is difficult to  assess the costs of the scientific and research missions covered by  many M&O contracts. For example, according to DOE officials, it is  difficult to develop cost estimates for research activities because it is  not always certain when scientific breakthroughs will occur or how  long they will take. DOE uses cost-reimbursement contracts for its  M&O contracts, in part because it is not possible to know with  certainty and in advance how much research and development efforts  will cost or what level of effort will be required.", "While we agree that assessing cost performance for scientific and  research activities may be difficult, M&O contractors also carry out a  variety of other activities for which costs may be more readily  assessed. For example, a sizeable portion of the costs under M&O  contracts are for administrative or mission support and other business  operations activities, such as personnel, business processes, human  resources, procurement, and security. In our previous work, we found  that such administrative and support activities accounted for about 25  to 50 percent of M&O contractor costs in fiscal year 2015.Similarly,  SC\u2019s fiscal year 2016 annual laboratory plans identify areas, such as  infrastructure and information systems, as the major cost drivers for  that year. We have found that other agencies assess cost  performance for contractors performing such administrative  activities. DOE officials we interviewed agreed that measuring cost  performance in these areas would be more feasible than measuring it  for its scientific and research missions.", "The M&O contract type made it difficult to some degree for DOE  to assess contractor cost performance. According to DOE officials,  certain aspects of how DOE implements cost-reimbursement M&O  contracts create challenges to evaluating cost performance. Some  officials described these challenges as the result of \u201cthe budget-based  nature\u201d of M&O contracts. Specifically, according to DOE officials,  M&O contract budgets (the amount contractors are allowed to spend)  are not set up front in the original contract. Rather, according to DOE  officials, M&O contract budgets are commonly determined by the  amount DOE obligates to the contract on an annual basis, based  mostly on annual congressional appropriations to the relevant DOE  programs. Further, these officials noted, because much of DOE\u2019s  appropriated funds are available until expended rather than expiring at  the end of the fiscal year for which they were appropriated, M&O  contractors may be able to carry over those funds to spend in future  fiscal years. According to DOE officials, DOE reviews M&O  contractor estimates when developing its budget request, including  determining how much work is required by its contractors to execute  the program scope outlined in the budget request. Agency officials  also noted that, with regard to cost reimbursement contracts, the  federal government is legally required to reimburse contractors for all  allowable costs up to the approved budget amount.", "We have previously reported that cost-reimbursement contracts carry  a high risk for the federal government, resulting in the potential for  cost escalation, as some expenditures may be allowable under the  contract but may not be cost effective. We recognize that M&O  contracts are unique in many ways. Nevertheless, the manner in  which DOE allocates funds to the contract, and the requirement to  reimburse contractors for allowable costs do not, by themselves,  affect DOE\u2019s ability to assess contractor cost performance.", "Some cost performance evaluation conducted outside of the  annual performance evaluation process is not included in PERs.  DOE officials told us they perform some activities related to contractor  cost performance outside the performance evaluation process for  M&O contracts, though information on these activities is not always  included in PERs. For example, according to DOE officials, some  M&O contractors participate in group purchasing efforts, where  contractors coordinate purchases to drive up competition and drive  down costs. Also, DOE offices generally monitor M&O contractor  indirect costs to ensure they do not escalate without reason. In  particular, SC\u2019s M&O contractors include a \u201cCost of Doing Business\u201d  section in their annual laboratory plans, in which SC contractors report  on indirect costs. According to SC officials, SC also uses its reviews  of the Cost of Doing Business sections as opportunities to discuss  options to reduce operational costs. SC officials stated that an internal  process in which SC\u2019s laboratories compete and are awarded work, in  part, also serves to control costs. According to DOE officials, efforts  such as group purchasing and indirect cost monitoring and reporting  are not commonly included in PERs because the agency considers its  existing performance criteria to be sufficiently broad to assess  contractor performance.", "Though these efforts may be important to address contractor costs  and information from the efforts could inform assessments of cost  performance, they do not, on their own, represent DOE office\u2019s  evaluation of contractor\u2019s cost performance. In addition, PERs are  important records of DOE offices\u2019 evaluations of contractor  performance because, according to agency officials, DOE uses the  PERs to inform acquisition decisions and help form the basis for a  contractor\u2019s performance record.", "We and the DOE Inspector General have identified how important it is for  DOE to obtain quality cost information and use it to evaluate cost  performance. For example, for more than a decade, we have reported  that some DOE offices have experienced challenges obtaining quality  information that could enable the offices to make better-informed  decisions about programs\u2019, and therefore DOE\u2019s, budgetary needs.  Furthermore, we reported in July 2012 that NNSA based much of its  congressional budget request on contractor-generated budget proposals,  which the agency often did not thoroughly evaluate. More recently,  according to a 2017 DOE Inspector General report, challenges in  evaluating cost performance have contributed to NNSA\u2019s and its M&O  contractors\u2019 difficulty in demonstrating the anticipated cost savings for the  NNSA Production Office Sites contract. DOE created this contract by  consolidating the contracts for the Y-12 National Security Complex and  the Pantex Plant into a single contract for the explicit purpose of saving  costs.", "While collecting quality information on, measuring, and reporting on cost  performance for M&O contracts may be challenging, this information is  important for two reasons. First, the FAR, DOE policy, and CPARS  highlight the importance of information on contractor\u2019s cost performance  for acquisition decision-making. As we previously noted, the FAR and  DOE policy provide that decisions to extend or compete an M&O contract  be based on an expectation of meaningful improvement in performance  or cost, including consideration of a contractor\u2019s technical, administrative,  and cost performance. In addition, according to DOE officials, they largely  copy information from PERs into the federal government database on  contractors\u2019 past performance, CPARS, which agencies use to inform  their awarding of contracts. CPARS has several performance criteria that  agencies are required to complete, one of which is \u201ccost control.\u201d This is  challenging to address, according to DOE officials, because PERs do not  typically include an explicit evaluation of cost performance even though,  also according to DOE officials, PERs are the primary source of  information entered into CPARs.", "Second, as we reported in 2009, there are inherent risks to the  government from cost-reimbursement contracts such as DOE\u2019s M&O  contracts, particularly with cost escalation because the government is  required to pay the contractor\u2019s allowable costs regardless of whether the  contractor completes the work. Because of these risks, we found that  these types of contracts involve significantly more government oversight  than do fixed-price contracts. This is, in part, because the agency needs  to monitor contractor costs to provide a reasonable assurance that  efficient methods and effective cost controls are used.", "As we previously noted, FAR, DOE guidance and policy, and CPARS  highlight the importance of quality information on contractor\u2019s cost  performance. In addition, federal standards for internal control state that  management should design control activities to achieve objectives and  respond to risks, such as by clearly documenting internal control in  management directives, administrative policies, or operating manuals.", "DOE offices have policies on contractor performance evaluation, but  these do not specifically require that PERs include quality cost  performance information that can be used to make an overall assessment  of cost performance. By updating policies to require inclusion of quality  cost performance information in PERs to enable an overall assessment of  a contractor\u2019s cost performance, DOE offices could strengthen their  oversight of M&O contractor costs. For example, DOE offices could better  inform acquisition decisions such as whether to extend or compete a  contract, complete CPARS with greater ease, inform incentives for  contractor performance, and uncover opportunities for federal cost  savings. This is particularly important given that these cost- reimbursement type contracts carry risks of cost escalation."], "subsections": []}]}, {"section_title": "DOE Generally Awarded M&O Contractors High Ratings and Most Available Performance Incentives, Except in Cases of Significant Safety or Security Incidents", "paragraphs": ["In reviewing DOE\u2019s M&O contractor performance evaluations for fiscal  years 2006 through 2016, we found the results of the evaluations to  generally include high performance ratings and most available  performance incentives, including a median of 94 percent of available  award and incentive fees. During this time frame, administrative  performance sometimes had lower ratings\u2014though these were balanced  out in overall ratings by strong performance elsewhere\u2014and some safety  issues and accidents resulted in additional fee reductions outside the  performance evaluation process. In fiscal years 2006 through 2016, three  contractors received 50 percent or less of available award fee due to two  significant incidents\u2014a safety and security issue and a major accident."], "subsections": [{"section_title": "M&O Contractors Generally Received High Ratings in Fiscal Years 2006 through 2016 and more than 90 Percent of Available Performance Incentives", "paragraphs": ["For the 239 annual M&O contractor evaluations from the 24 DOE contract  rating sites we reviewed, in fiscal years 2006 through 2016, DOE offices  provided award and incentive fees equivalent to the FAR rating  categories of Excellent or Very Good 94 percent of the time. Contractors  at more than half of the 24 contract rating sites (17 of 24) received  award and incentive fee percentages consistent with only Excellent or  Very Good ratings for all fiscal years from 2006 through 2016. As  discussed above, while the precise approaches for determining ratings  and fees vary by DOE office, ratings and fees are directly linked in all  three approaches: Fee is either determined through a formula based on  ratings, or DOE offices determine ratings and fees at the same time.  Differences between rating methodologies across offices and changes in  performance evaluation approaches over time mean directly comparing  ratings requires some caution; however, even acknowledging those  differences, there is a clear trend of a high percentage of award and  incentive fees awarded and high equivalent performance ratings across  sites and years.", "From fiscal years 2006 through 2016, DOE also provided its M&O  contractors with a median of 94 percent of their available award and  incentive fees. See Table 3 for the results by FAR award fee rating  category for each contract rating site for this period, and Table 4 for an  analysis of average and median percentages of fees awarded by site.  The amount of fee available, fee as a share of total contract spending,  and the use of other incentives have varied across sites, yet performance  results have been generally similar. Appendixes III through VIII provide  additional details by DOE office.", "Contract rating site by DOE office  Office of Energy Efficiency and Renewable Energy  Savannah River Site\u2013Environmental Management  Waste Isolation Pilot Plant  Office of Fossil Energy   Strategic Petroleum Reserve Office  Office of Nuclear Energy  National Nuclear Security Administration  Kansas City National Security Campus  Lawrence Livermore National Laboratory  Los Alamos National Laboratory  Nevada National Security Site   NNSA Production Office Sites  Pantex Plant  Y-12 National Security Complex  Sandia National Laboratories  Savannah River Site\u2013National Nuclear Security  Administration  Thomas Jefferson National Accelerator Facility  94  in annual performance evaluation plans. Fixed fees are set at the inception of the contract and do not  vary for performance.", "Of further note from our analysis of the extent to which contractors earned  fees in fiscal years 2006 through 2016:", "Contractors for the 24 M&O contract rating sites that included award  fees earned approximately $4.3 billion in total fees over this time.  About three-quarters ($3.4 billion) of the $4.3 billion in fees were  award fees and incentive fees, and the remaining amount was fixed  fees.", "NNSA\u2019s M&O contracts represent 68 percent of the fees paid and 55  percent of the total M&O contract spending over this period.", "As discussed above, DOE offices provided a median of 90 to 95  percent of available annual award fee to 18 of 24 M&O contract rating  sites. However, six rating sites, all conducting work for NNSA, had  median award fee percentages below 90 percent. Several NNSA sites  had fixed fees in addition to award fees. When including those fixed  fees, the percentage of total fee awarded rises, with median fee  percentages rising above 90 percent for three of the sites.", "Contract rating sites rarely received less than 75 percent of available  award fee.", "In addition to awarding contractors high percentages of available fees,  DOE offices generally awarded M&O contractors most of the available  award term incentives. Several DOE and contractor officials we  interviewed noted that award term is perhaps the most valuable incentive  from a contractor perspective because an extra year of work on the  contract represents much more revenue for them than fees. SC and  NNSA\u2014the two offices with contracts that had award term\u2014awarded 92  percent of award term years available, or 76 out of 83 possible award  term years. Specifically, SC included award term in seven contracts and  awarded M&O contractors with 95 percent of potential award term years,  and NNSA included award term in four contracts and awarded contractors  with 83 percent of potential award term years (see Table 5 below). Three  of the unearned award term years are attributable to the contractor at Los  Alamos National Laboratory, which also had a fourth award term year that  NNSA revoked retroactively. According to NNSA officials, upon not  earning an award term for the fourth time, Los Alamos\u2019s contractor\u2014in  accordance with the terms of the contract\u2014had all of its award terms  revoked, and NNSA decided to recompete the contract."], "subsections": []}, {"section_title": "Administrative Performance Sometimes Had Lower Ratings, with Some Issues Resulting in Fee Reductions Outside of the Performance Evaluation Process", "paragraphs": ["Within the pattern of high overall performance ratings, ratings for  administrative performance have generally been lower than ratings for  technical performance, and some administrative performance issues\u2014 particularly safety issues and accidents\u2014resulted in fee reductions  outside the performance evaluation process, as noted in table 6 below.  For example, since fiscal year 2013, when NNSA adopted common  performance goals across its contract rating sites, about 83 percent of  possible goal ratings (134 of 162) had been rated Very Good or better. Of  the 28 goal ratings below Very Good, 22 (79 percent) were in  administrative goals. In many cases, incidents that led to lower ratings  involved site operations issues, such as in safety and security. Similarly,  the contractors at the 10 SC contract rating sites and one NE contract  rating site also showed generally higher technical performance ratings  with 9 of 11 contract rating sites having higher average technical area  scores than administrative area scores (the two other contract rating sites  had average technical area scores that were about equal to the average  administrative scores).", "From our review of DOE documents and discussions with officials, one  factor that may be an important influence in the difference between  technical and administrative scores at SC and NE rating sites is that the  Science and Energy Lab performance evaluation approach does not  incentivize administrative performance above a B+. As discussed above,  contractors generally receive additional award fee for higher ratings, but  under the Science and Energy Lab approach, in the administrative area,  all scores of B+ and above lead to the same amount of award fee.  Therefore, a contractor whose only difference was an administrative  score of B+ versus A+ would receive the same amount of award fee.  According to DOE officials, this structure is meant to encourage  contractors to reinvest cost savings into technical performance rather  than improving administrative systems that already meet expectations.", "Relatively low performance in certain areas can be balanced out in overall  ratings by strong performance ratings elsewhere. Of nine occasions since  fiscal year 2013 that an NNSA contractor received at least one  Satisfactory goal rating (below 50 percent), the overall rating for the  contractor remained Good or Very Good, and contractors were provided  the majority of their fees in all but one case (the contractor for Los Alamos  National Laboratory in fiscal year 2014, which we discuss further below).  For example, following the break-in of trespassers and related security  lapses at Y-12 in 2012, NNSA provided the M&O contractor with  Satisfactory ratings in operations in fiscal years 2012 and 2013. However,  Very Good and Excellent ratings in other areas meant NNSA provided an  overall rating of Good to the contractor in those years, and the contractor  received more than 50 percent of available award fees. For SC, in the five  occasions since fiscal year 2006 in which a contractor received at least  one goal rating of C (2.0) or below, overall area scores remained As and  Bs and fees above 75 percent, except for one instance. On that occasion,  Princeton Plasma Physics Laboratory in 2016 received multiple goal  ratings of C, which led to a technical score of C+ and a fee of 68 percent.  This 2016 rating for Princeton Plasma Physics Laboratory is also the only  case from fiscal years 2006 through 2016 of a Satisfactory-level goal  rating in a technical area goal, as the others were all in the administrative  areas of site operations or leadership.", "The extent to which a single area of performance affects overall ratings is  influenced by the broad scope of activities under an M&O contract, the  broad types of performance required under the contract, and the weights  used to determine overall ratings and incentives. According to DOE  officials, one way the Science and Energy Lab approach addresses these  factors is to include all the ratings provided by each stakeholder and for  each objective in the PER. In this way, while a C from one stakeholder or  objective may be weighted out overall, the grade and the feedback  associated with it are still provided to the M&O contractor and clearly  visible to readers of the reports.", "Another way that DOE offices have addressed individual performance  deficiencies that may get balanced out in overall ratings is through  additional fee reductions. Most offices have reduced fees outside the  performance evaluation process to address specific performance  deficiencies\u2014generally administrative concerns, such as safety issues.  In particular, all offices except EERE have reduced fees that would have  been provided from performance evaluation results, relying on contract  clauses that allow for fee reductions. Such clauses allow DOE offices to  unilaterally reduce fees for the evaluation period if, for example, the  contractor fails to meet performance requirements of the contract relating  to environment, safety, and health. For example, NE used such clauses  in 7 of the 11 years we reviewed to reduce the fee provided to the Idaho  National Laboratory M&O contractor. FE has also frequently used fee  reductions to address issues outside its predominantly objective  performance criteria. SC, NNSA, and EM have also occasionally used  additional fee reductions outside the performance evaluation process. For  all offices, fee reductions generally resulted from administrative  performance issues\u2014safety issues and accidents\u2014rather than technical  performance. These fee reductions ranged from $10,000 to $35 million,  and while the fee received by the contractor was lowered, the original  ratings were not revised. In most cases, these reductions were for 10  percent or less of award and incentive fees provided and less than $1  million dollars; however, they represented large portions of contractors\u2019  fees in a few cases. See Table 6 below for a list of fee reductions."], "subsections": []}, {"section_title": "From Fiscal Years 2006 through 2016, Three Contractors Received 50 Percent or Less of Available Award and Incentive Fees Due to Significant Safety and Security Incidents", "paragraphs": ["Three times in fiscal years 2006 through 2016, M&O contractors received  50 percent or less of available award and incentive fees due to a safety  and security issue at the Lawrence Livermore National Laboratory (LLNL)  in fiscal year 2008 and a major accident involving the WIPP in Carlsbad,  New Mexico, and the Los Alamos National Laboratory (LANL) in fiscal  year 2014.", "LLNL, 2008. LLNL\u2019s M&O contractor received 50 percent of the available  award and incentive fees\u2014$15,795,584 out of $31,879,519\u2014due to  weaknesses in environmental management, security, and  management/performance improvement that resulted in Satisfactory  ratings in those respective areas and an overall Satisfactory rating in  operations. In particular, an April 2008 inspection and force-on-force  exercise conducted by DOE\u2019s Office of Health, Safety, and Security found  significant weaknesses in protective force and classified matter protection  and control programs that led to an Unsatisfactory rating in security. The  performance evaluation also reported issues with contractor assurance  system progress, staffing, and \u201cunacceptable\u201d losses of key personnel.  LLNL\u2019s contractor received overall ratings of Outstanding in mission and  Good in institutional management. In addition, the contractor received  $21,862,651 in fixed fees, for a total fee award of $37,658,235.", "WIPP, 2014. WIPP\u2019s contractor received 6.9 percent\u2014$561,266 out of  $8,192,895\u2014of the fees available under its contract in fiscal year 2014  due to two unrelated accidents, a truck fire and a waste drum explosion,  that resulted in the suspension of waste disposal at the site\u2014the nation\u2019s  only facility for disposal of transuranic waste. The 6.9 percent of fees  awarded represented an additional reduction of fees from the amounts  the contractor earned for meeting a portion of its objective criteria targets  and receiving Satisfactory ratings in all four subjective criteria. WIPP did  not resume waste disposal operations until 2017.", "LANL, 2014. LANL\u2019s contractor received none of the available award fee,  and no DOE fixed fee, in fiscal year 2014 due to its improper oversight  and packaging of the waste drum that exploded at WIPP. Of $63,406,380  in available fee, LANL\u2019s contractor received about $6.3 million in fixed fee  associated with work completed under contract with other federal  agencies that, according to NNSA officials, could not be revoked. Similar  to WIPP\u2019s contractor, this represented an additional reduction of fees  from the amounts that would have resulted from an overall Satisfactory  rating (including an Unsatisfactory for operations and infrastructure;  Satisfactory for science, technology and engineering; Satisfactory for  leadership; and Very Good for the two mission goals). In addition to losing  fee and award term, the waste portion of the LANL contract was  withdrawn from the M&O contract and contracted out separately by EM.", "In all three cases, in the year following the 50 percent or less in award  and incentive fees, performance ratings returned to at least Good levels  and contractors received at least three-quarters of available award and  incentive fees. With regard to the WIPP accident involved in two of the  three cases, efforts to recover from the waste drum incident and return to  full operations have cost hundreds of millions to date and are estimated to  cost more than $600 million in total, all of which will be costs to the  taxpayer. The combined unearned and reduced fee for both contractors  amounted to $64,788,464, or about 10 percent of total estimated costs to  the government. In addition to fee reductions, NNSA officials stated that  the WIPP accident played a significant role in NNSA\u2019s decision to not  exercise the last 7 years of possible award term on the LANL contract  and thus recompete the contract in 2018. According to NNSA, those 7  years translate into approximately $17 billion in work and up to $500  million in fee the LANL contractor could have earned. Also, with regard to  additional actions EM took after the accidents at WIPP, according to DOE  officials, EM modified the contract terms from having a single 5-year  option period to five 1-year option periods."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While there are differences in how DOE\u2019s offices approach performance  evaluation of M&O contractors, all of the offices use the annual  performance evaluations of the contractors and the associated rating and  fee determinations to evaluate the extent to which contractors are  operating sites as intended and accomplishing mission work, and to  justify incentives such as fee and additional contract term. These annual  performance evaluations also provide valuable information for contract  management and acquisition decisions, such as whether to renew or  compete expiring M&O contracts. DOE also recognizes the importance of  improving performance evaluation and oversight of contractors.", "All of DOE\u2019s offices except NNSA have clearly documented procedures  on how to collect and use information to make rating determinations.", "NNSA provides a general framework for its performance evaluations in its  NAP-4C policy but leaves how to collect, distribute, and document  information to the discretion of individual offices and officials. In the past,  NNSA officials have made changes to incentives awarded without  underlying performance documentation to support the change. Without  developing and documenting clear procedures for implementing NAP-4C  that specify the process for collecting contractor performance information  and how officials are to ensure this information can be traced to rating  determinations, NNSA leadership does not have reasonable assurance  that it is consistently evaluating contractor performance and that it is  using relevant performance information as intended.", "The cost performance information included in DOE offices\u2019 fiscal year  2016 PERs is of limited use for acquisition decision-making in that this  information does not permit making an overall assessment of M&O  contractors\u2019 cost performance. DOE offices have not required specific  assessment of cost performance in their performance evaluation policies,  nor discussed how to ensure that cost information is useful for acquisition  decision-making. However, the PERs are important sources of  information for contract management\u2014particularly for acquisition  decisions and oversight of spending on cost-reimbursement contracts.  DOE officials identified challenges in evaluating M&O contractors\u2019 cost  performance and ways this evaluation may occur outside of the annual  performance evaluation process. These challenges contribute to why  there is less cost performance-related information in PERs than for other  types of performance. While collecting, measuring, and reporting quality  cost performance information may be challenging, such information is  important for fully assessing contractor performance and managing the  inherent risks of cost-reimbursement contracts. By updating their policies  to require quality cost performance information in PERs to enable an  overall assessment of M&O contractor cost performance, the six DOE  offices with M&O contracts could strengthen their oversight of costs for  contracts worth about $20 billion a year and use this information to  improve acquisition decision-making."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making seven recommendations to DOE offices:  The Administrator for the National Nuclear Security Administration should  develop and document clear procedures for implementing NAP-4C,  specifying the process for collecting contractor performance information  and describing how officials are to ensure this information can be traced  to rating determinations. (Recommendation 1)", "The Assistant Secretary for the Office of Energy Efficiency and  Renewable Energy should update its policy to require that Performance  Evaluation Reports include quality information on cost performance to  enable an overall assessment of Management and Operating contractor  cost performance. (Recommendation 2)", "The Assistant Secretary for the Office of Environmental Management  should update its policy to require that Performance Evaluation Reports  include quality information on cost performance to enable an overall  assessment of Management and Operating contractor cost performance.  (Recommendation 3)", "The Assistant Secretary for the Office of Fossil Energy should update its  policy to require that Performance Evaluation Reports include quality  information on cost performance to enable an overall assessment of  Management and Operating contractor cost performance.  (Recommendation 4)", "The Administrator for the National Nuclear Security Administration should  update its policy to require that Performance Evaluation Reports include  quality information on cost performance to enable an overall assessment  of Management and Operating contractor cost performance.  (Recommendation 5)", "The Assistant Secretary for the Office of Nuclear Energy should update  its policy to require that Performance Evaluation Reports include quality  information on cost performance to enable an overall assessment of  Management and Operating contractor cost performance.  (Recommendation 6)", "The Director of the Office of Science should update its policy to require  that Performance Evaluation Reports include quality information on cost  performance to enable an overall assessment of Management and  Operating contractor cost performance. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOE for comment. DOE provided us  with written comments, as well as technical comments, which we  incorporated as appropriate. In its written comments, reproduced in  appendix IX, DOE agreed with four of our seven recommendations and  partially agreed with the others.", "DOE partially agreed with our recommendations that three DOE offices\u2014 EERE, NE, and SC\u2014update their policies to require that PERs include  quality information on cost performance to enable an overall assessment  of M&O contractor cost performance. In its written comments, DOE said  that the three offices have concerns that (1) our report gives the  impression that DOE does not review cost performance of their respective  national laboratories in an adequate manner, and (2) by focusing on the  annual PERs, our report does not capture the cost performance reviews  conducted in day-to-day contract oversight, the annual laboratory  planning process, and contract extend/compete decisions. In its  comments, DOE stated that since EERE, NE, and SC conduct cost  performance reviews in normal operations and at the year-end annual  evaluation process, adequate information is available to assess whether  the contractor cost performance is acceptable to the department.", "In the report, we note that DOE conducts some cost performance  evaluation activities outside of the annual performance evaluation  process, although we did not assess these efforts. While there may be  adequate information available, DOE does not commonly document this  information or assessments from such activities in the PERs. We continue  to believe that the PERs are important sources of information for contract  management\u2014particularly for acquisition decisions and oversight of  spending on cost-reimbursement contracts\u2014and that action is needed to  improve these formal records of contractor performance. By not including  quality information on overall cost performance and assessments in  PERs, DOE offices are missing a valuable opportunity to better document  contractors\u2019 cost performance, improve acquisition decision-making, and  strengthen oversight of billions of dollars in contracting. We continue to  believe that it is important for EERE, NE, and SC to implement the  recommendations and that by doing so, these offices would have better  assurance that M&O performance evaluations fully address required  elements.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or bawdena@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report reviews the Department of Energy\u2019s (DOE) performance  management of its management and operating (M&O) contracts.  Specifically, it examines (1) how DOE offices evaluated M&O contractor  performance in fiscal years 2006 through 2016 and the extent to which  these offices have documented their evaluation approaches; (2) the  extent to which DOE\u2019s fiscal year 2016 M&O contractor performance  evaluation reports provide information on contractors\u2019 technical,  administrative, and cost performance; and (3) the results of DOE\u2019s M&O  contractor performance evaluations from fiscal years 2006 through 2016.", "For all three objectives, we reviewed performance evaluation  documentation\u2014performance evaluation plans, performance evaluation  reports (PERs), fee determinations, award term determinations, and  option term determinations\u2014for 21 of the 22 DOE M&O contracts in place  as of fiscal year 2016, the most recently completed contract year at the  time we initiated our review. We also reviewed documentation for Bettis  and Knolls Atomic Power Laboratories\u2019 M&O contract but excluded it from  our analysis because the contract does not have annual reviews and  ratings comparable to the other DOE M&O contracts. The Bettis and  Knolls contract does not have an award fee and thus NNSA\u2019s Office of  Naval Reactors\u2014the office responsible for overseeing the M&O  contract\u2014does not produce annual PERs similar to those of the other  offices. In addition, we did not include in our scope the DOE contract for  the cleanup of the West Valley Demonstration Project in upstate New  York because it was not an M&O contract in fiscal year 2016; according  to DOE officials, it switched from being an M&O to a non-M&O contract in  fiscal year 2007.", "In addition, we also interviewed DOE officials to gain a further  understanding of the department\u2019s performance evaluation processes and  results, including officials at DOE headquarters and at several field offices  that are responsible for providing day-to-day oversight of the activities of  M&O contractors. To provide additional perspective, we interviewed  officials at the Department of Defense, the National Aeronautics and  Space Administration, and the Department of Homeland Security, which  we selected because they also manage government-owned, contractor- operated laboratories and sponsor work at DOE laboratories, sometimes  contributing views incorporated into DOE performance evaluations.", "To examine how DOE offices have evaluated M&O contractor  performance, we reviewed DOE\u2019s and DOE offices\u2019 policies and  procedures for performance evaluations, as well as annual performance  evaluation and measurement plans and PERs from fiscal years 2006  through 2016. We also compared each office\u2019s policies and procedures  for conducting performance evaluations against federal standards for  internal control, as well as the Federal Acquisition Regulation (FAR),  DOE\u2019s Acquisition Guide, and the Department of Energy Acquisition  Regulations. In addition, to examine the extent to which these offices  have documented their evaluation approaches, we discussed the  evaluation approaches and processes with DOE officials and compared  those approaches with documented policies and procedures.", "To evaluate the extent to which PERs provided information on each of the  performance areas outlined in the FAR\u2014technical, administrative, and  cost\u2014we performed a content analysis of 22 DOE fiscal year 2016 PERs  for M&O contractors. We developed operationalized definitions of each  of the three areas with input from DOE\u2019s offices. Broadly, the  operationalized definition of technical performance included mission- related activities, the operationalized definition of administrative  performance included mission support activities, and the operationalized  definition of cost performance included spending-related activities.  Mission-related activities included, for example, research and  development, production, storage, clean-up, and construction. Mission  support activities included, for example, information technology, human  resources, legal activities, environmental safety and health, property  management, risk assessment, and leadership activities. Cost-related  activities included, for example, spending, budgeting, strategic sourcing,  and costs, including the contractor\u2019s cost-effectiveness. In identifying  information related to cost performance, we considered all evaluative  statements related to cost, including broad terms such as saving, cost,  spending, and budget. Then we categorized performance descriptions  under these three performance areas and counted the number of  performance descriptions that included information in the M&O contracts\u2019  PERs related to each of the areas. A performance description could be  categorized as related to one, two, or all three areas. Two analysts  independently reviewed each PER and then met to agree on the  categorizations. When differences arose, we included a third analyst to  arrive at a consensus.", "For the vast majority of M&O contracts, we analyzed the performance  descriptions at the level of objectives\u2014where most performance  descriptions were found\u2014and included notable outcomes described  under those objectives. In a few instances, we used other comparable  units of analysis, such as goals, for some National Nuclear Security  Administration (NNSA) M&O contracts (in which performance information  was provided by goals, not objectives) and criteria for Office of  Environmental Management (EM) and Office of Fossil Energy (FE) (in  which performance information was provided under numerous subjective  and objective criteria). Based on our analysis, we reported the total  number of performance descriptions for each area, as well as the  percentage of performance descriptions that contained information  related to each area. Because performance criteria descriptions could  contain information related to more than one area, the percentages total  more than 100 percent.", "To determine the extent of cost performance-related information in DOE\u2019s  fiscal year 2016 PERs for its M&O contracts, we performed a content  analysis. From our analysis, we reported the total number of pages the  cost performance-related information represented, compared with the  average number of total report pages. To determine the number of pages,  we counted the number of pages of each PER.", "In addition, to evaluate the quality of cost performance-related  information, we reviewed DOE Information Quality Guidelines, which  apply to information DOE offices make available to the public. We then  performed a content analysis of DOE fiscal year 2016 PERs based on the  definition of quality in the guidelines, which includes that information  generated for DOE and the public be useful. We further analyzed and  categorized the types of cost performance-related information. Types of  cost information included, for example, within budget, over budget, cost  savings, cost overrun, and cost effectiveness. We defined cost  effectiveness as good value for money spent.", "To examine the results of DOE\u2019s M&O contractor performance  evaluations from fiscal years 2006 through 2016, we analyzed  performance ratings and incentives awarded in PERs, fee determination  letters, and other performance evaluation documents. Throughout the  report, we analyzed and provided information by \u201ccontract rating sites\u201d  rather than individual contractors or physical sites, because the individual  contractors and how certain sites align with the contracts have changed  over time. We analyzed 24 distinct contract rating sites covered by 21  M&O contracts in place as of fiscal year 2016. There are three more  contract rating sites than the number of contracts in 2016: two additional  contract rating sites because two individual contracts were consolidated  into one contract during the period we covered\u2014we analyzed the two  individual contracts from prior to 2014 separately from the current  consolidated contract\u2014and one additional contract rating site because  two DOE offices separately evaluated the performance of a single  contractor that performed activities for each of those offices.", "To summarize the results of DOE\u2019s annual contract performance  evaluations, we analyzed overall annual percentages of available award  and incentive fees provided at each contract rating site and presented the  corresponding FAR rating categories. We reviewed performance  evaluation ratings from 239 performance evaluations at the 24 contract  ratings sites. We also did not include ratings from the EM portion of the  Savannah River Site contract for fiscal years 2006 through 2008 because,  according to EM officials and award fee documents, it had multi-year  award fee targets that did not align with individual fiscal years.", "We conducted this performance audit from October 2016 through  February 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."], "subsections": []}, {"section_title": "Appendix II: Additional Information on the Department of Energy\u2019s Management and Operating Contracts", "paragraphs": ["Table 7 provides additional information on the Department of Energy\u2019s 22  management and operating contracts, contractors, contract award and  end year, and total spending through these contracts. Table 8 presents  the spending data adjusted for inflation."], "subsections": []}, {"section_title": "Appendix III: Additional Information on the Office of Energy Efficiency and Renewable Energy\u2019s Performance Evaluations", "paragraphs": ["The Office of Energy Efficiency and Renewable Energy (EERE) focuses  on aiding the development and implementation of renewable energy  technologies and improving energy efficiency across various sectors.  EERE administers its management and operating (M&O) contract at the  National Renewable Energy Laboratory (NREL), in Golden, Colorado. As  we describe in our report, EERE follows a Science and Energy Lab  approach to evaluate its M&O contractor\u2019s performance that uses broad,  office-wide performance criteria, which are mostly subjective. Table 9  provides the full list of the goals and objectives EERE used to evaluate its  M&O contractor performance in fiscal year 2016. For the most part, these  performance criteria remained unchanged from fiscal year 2006 through  fiscal year 2016.", "As we describe in our report, EERE uses detailed methodologies to  determine ratings and incentives. To illustrate the detailed formulas and  calculations involved, Figure 5 provides an example of how ratings and  fees are calculated.", "Table 11 shows the rating scores the contractors earned for Mission and  Operations goals.", "Figure 6 shows the annual total fee (both award fee and fixed fee) EERE  provided to its M&O contractors for fiscal years 2006 through 2016.", "Table 12 provides the percentage of available award and incentive fees  provided to the M&O contractors for fiscal years 2006 through 2016 by  contract rating site."], "subsections": []}, {"section_title": "Appendix IV: Additional Information on the Office of Environmental Management\u2019s Performance Evaluations", "paragraphs": ["The Department of Energy\u2019s Office of Environmental Management (EM)  is responsible for decontaminating and decommissioning facilities and  sites that are contaminated from decades of nuclear weapons production  and nuclear energy research. EM has two management & operating  (M&O) contract sites:  the Savannah River Site (SRS) in Aiken, South Carolina; and  the Water Isolation Pilot Plant (WIPP) in Carlsbad, New Mexico.", "As we describe in our report, EM follows a Site Specific approach to  evaluate its M&O contractors that uses detailed performance criteria  specific to each contract. Under this approach, most performance criteria  we reviewed are objective criteria, and a few are broader, subjective  criteria. Tables 13 through 16 provide examples of some of the specific  criteria EM used at each site. We provide examples rather than a full list  because each site has numerous individual metrics, which are often quite  technical. Specifically, Tables 13 and 14 provide examples of EM\u2019s  objective performance criteria, which are defined based on quantifiable  metrics (e.g., a contractor\u2019s demonstrated waste processing rate) and  milestones (e.g., whether a contractor completed a task on or before a  scheduled date). Table 13 includes 3 of the 6 objective performance  criteria EM used to evaluate the SRS contractor\u2019s performance during  fiscal year 2016. Table 14 contains examples of 3 of the 9 objective  criteria EM used to evaluate the WIPP contractor in fiscal year 2016.", "Tables 15 and 16 provide examples of EM\u2019s subjective criteria, which are  used for aspects of performance that may be difficult to capture  objectively. Table 15 provides examples of 3 of the 12 subjective criteria  for evaluating the SRS M&O contractor\u2019s performance during fiscal year  2016, while Table 16 contains the fiscal year 2016 subjective criteria for  evaluating the WIPP M&O contractor\u2019s performance.", "The following tables and figure provide details on the incentives available  to and earned by EM\u2019s M&O contractors from fiscal year 2006 through  fiscal year 2016. Table 17 shows the performance incentives that EM  included in its M&O contracts. We use the term \u201ccontract rating sites\u201d  rather than individual contractors or physical sites, because the individual  contractors and how certain sites align with the contracts may have  changed over time.", "Figure 7 shows the annual total fee (both award fee and fixed fee)  provided to EM M&O contractors for fiscal years 2006 through 2016.  Because EM and National Nuclear Security Administration activities at the  Savannah River Site are rated separately, only the EM portion of fees is  represented below.", "Table 18 provides the percentage of available award and incentive fees  EM\u2019s M&O contractors earned for fiscal years 2006 through 2016."], "subsections": []}, {"section_title": "Appendix V: Additional Information on the Office of Fossil Energy\u2019s Performance Evaluations", "paragraphs": ["The Department of Energy\u2019s Office of Fossil Energy (FE) manages the  nation\u2019s Strategic Petroleum Reserve (SPR), which consists of salt  caverns storing crude oil in Texas and Louisiana. As we describe in our  report, FE follows a Site Specific approach to evaluate its M&O  contractors that uses detailed performance criteria specific to each  contract. Under this approach, most performance criteria we reviewed are  objective criteria, and a few are broader, subjective criteria. Table 19  provides examples of FE\u2019s objective performance criteria, which are  defined based on quantifiable metrics (e.g., the contractor\u2019s demonstrated  oil drawdown rate) and performance targets (e.g., whether a contractor  completed a task on or before a scheduled date). Table 19 includes 4 of  the 11 objective performance criteria FE used to evaluate the Strategic  Petroleum Reserve Office (SPRO) contractor\u2019s performance during fiscal  year 2016. We provide examples rather than a full list because there were  numerous individual metrics, which are often quite technical.", "Table 20 contains the full list of FE\u2019s subjective performance criteria\u2014 which FE uses for aspects of performance that may be difficult to capture  objectively\u2014for evaluating the SPRO M&O contractor\u2019s performance  during fiscal year 2016.", "Table 21 shows the performance incentives that FE included in its M&O  contract.", "Figure 8 shows the annual total fee (both award fee and fixed fee) FE  provided to its M&O contractors for fiscal years 2006 through 2016.", "Table 22 provides the percentage of available award and incentive fees  provided to M&O contractors for fiscal years 2006 through 2016."], "subsections": []}, {"section_title": "Appendix VI: Additional Information on the National Nuclear Security Administration\u2019s Performance Evaluations", "paragraphs": ["The National Nuclear Security Administration (NNSA), a separately  organized agency within DOE, is responsible for maintaining and  enhancing the safety, reliability, and performance of the nation\u2019s nuclear  weapons stockpile, promoting international nuclear safety and  nonproliferation, and supporting U.S. leadership in science and  technology. NNSA administers management and operating (M&O)  contracts at eight national laboratories, plants, and sites:", "Bettis and Knolls Atomic Power Laboratory in West Mifflin,  Pennsylvania, and Niskayuna and West Milton, New York", "Kansas City National Security Campus in Kansas City, Missouri", "Lawrence Livermore National Laboratory in Livermore, California", "Los Alamos National Laboratory in Los Alamos, New Mexico", "Nevada National Security Site near Las Vegas, Nevada", "NNSA Production Office Sites", "Pantex Plant in Amarillo, Texas", "Y-12 National Security Complex in Oak Ridge, Tennessee", "Sandia National Laboratories in Albuquerque, New Mexico", "Savannah River Site in Aiken, South Carolina  As we describe in our report, NNSA follows an approach to evaluate its  M&O contractors that uses broad, office-wide performance criteria that  are mostly subjective. Table 23 provides the full list of the goals and  objectives NNSA used to evaluate its M&O contractors\u2019 performance in  fiscal year 2016. While there have been some language amendments,  overall, goals and objectives have remained the same from fiscal year  2013 through fiscal year 2016.", "As we describe in our report, under the NNSA approach, goals are  assigned specific portions of the available award fee for each contract at  the beginning of the fiscal year\u2014and at the end of the fiscal year, officials  determine ratings and fees at the same time in a collaborative meeting  with NNSA leadership. Figure 9 provides an example of award fee  amounts assigned to individual goals.", "Table 24 shows the performance incentives that NNSA included in its  M&O contracts. We use the term \u201ccontract rating sites\u201d rather than  individual contractors or physical sites, because the individual contractors  and how certain sites align with the contracts have changed over time.", "Specifically, NNSA consolidated its Y-12 National Security Complex and  Pantex Plant contracts into the National Production Office Sites contract  in fiscal year 2014, and NNSA and the Office of Environmental  Management separately evaluated their respective activities carried out  by the Savannah River Site contractor.", "Table 25 provides annual performance ratings by goal for fiscal years  2013 through 2016 for each NNSA contract rating site.", "Figure 10 shows the annual total fee (both award fee and fixed fee)  provided to NNSA M&O contractors for fiscal years 2006 through 2016 by  contract rating site.", "Table 26 provides the percentage of available award and incentive fees  provided to M&O contractors for fiscal years 2006 through 2016 by  contract rating site."], "subsections": []}, {"section_title": "Appendix VII: Additional Information on the Office of Nuclear Energy\u2019s Performance Evaluations", "paragraphs": ["The Office of Nuclear Energy\u2019s (NE) primary mission is to advance  nuclear power as a resource capable of making major contributions in  meeting U.S. energy supply, environmental, and energy security needs.  NE administers its management and operating (M&O) contract at the  Idaho National Laboratory (INL), in Idaho Falls, Idaho. As we describe in  our report, NE follows a Science and Energy Lab approach to evaluate its  M&O contractor that uses broad, office-wide performance criteria that are  mostly subjective. Table 27 provides the full list of the goals and  objectives NE used to evaluate its M&O contractor performance in fiscal  year 2016. For the most part, these performance criteria have remained  unchanged from fiscal year 2007 through fiscal year 2016.", "As discussed above, NE uses detailed methodologies to determine  ratings and incentives. To illustrate the detailed formulas and calculations  involved, Figure 11 provides an excerpt from a fee determination letter as  an example of how ratings and fees are calculated.", "Table 28 shows the performance incentives that NE included in its M&O  contract.", "Table 29 shows the rating scores the contractor earned for Mission and  Operations goals.", "Figure 12 shows the annual total fee (both award fee and fixed fee)  provided to NE\u2019s M&O contractor for fiscal years 2006 through 2016.", "Table 30 provides the percentage of available award and incentive fees  provided to M&O contractor for fiscal years 2006 through 2016."], "subsections": []}, {"section_title": "Appendix VIII: Additional Information on the Office of Science\u2019s Performance Evaluations", "paragraphs": ["The Office of Science (SC) supports scientific research for energy and the  physical sciences both by directly supporting such research, for example,  through grants to and cooperative agreements with universities, and by  supporting the development, construction, and operation of scientific user  facilities. SC administers management and operating (M&O) contracts at  10 national laboratory sites:", "Ames Laboratory in Ames, Iowa", "Argonne National Laboratory in Argonne, Illinois", "Brookhaven National Laboratory in Upton, New York", "Fermi National Accelerator Laboratory in Batavia, Illinois", "Lawrence Berkeley National Laboratory in Berkeley, California", "Oak Ridge National Laboratory, in Oak Ridge, Tennessee", "Pacific Northwest National Laboratory in Richland, Washington", "Princeton Plasma Physics Laboratory in Princeton, New Jersey", "SLAC National Accelerator Laboratory in Stanford, California", "Thomas Jefferson National Accelerator Facility in Newport News,  As we describe in our report, SC follows a Science and Energy Lab  approach to evaluate its M&O contractors that uses broad, office-wide  performance criteria that are mostly subjective. Table 31 provides the full  list of the goals and objectives SC used to evaluate its M&O contractors\u2019  performance in fiscal year 2016. Generally, these performance criteria  remained mostly unchanged from fiscal year 2006 through fiscal year  2016.", "As discussed above, SC uses detailed methodologies to determine  ratings and incentives. To illustrate the detailed formulas and calculations  involved, Figure 13 provides excerpts from a performance evaluation  report as an example of how ratings and fees are calculated.", "The following tables and figure provide details on the incentives available  to and earned by SC\u2019s M&O contractors from fiscal year 2006 through  2016. Table 32 shows the performance incentives that SC included in its  M&O contracts. We use the term \u201ccontract rating sites\u201d rather than  individual contractors or physical sites, because the individual contractors  and how certain sites align with the contracts may have changed over  time.", "Table 33 shows the rating scores the contractor earned for the Science  and Technology goals and Maintenance and Operations goals, by  contract rating site.", "Figure 14 shows the annual total fee (both award fee and fixed fee) SC  M&O contractors earned for fiscal years 2006 through 2016 by contract  rating site.", "Table 34 provides the percentage of available award and incentive fees  SC\u2019s M&O contractors earned for fiscal years 2006 through 2016 by  contract rating site.", "Under the award term incentive, some SC M&O contractors are able to  earn one additional year of performance under the contract for each year  they exceed certain thresholds in their annual performance evaluations.  Table 36 shows award term results for fiscal years 2006 through 2016 by  contract rating site."], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements:", "paragraphs": ["In addition to the contact named above, Quindi Franco (Assistant  Director), Ryan Gottschall (Analyst in Charge), Danny Baez, and Diantha  Garms made key contributions to this report. Also contributing to this  report were John Delicath, Brenna Derritt, Cindy Gilbert, Timothy  Guinane, Rich Johnson, Danny Royer, Kiki Theodoropoulos, and Tatiana  Winger."], "subsections": []}]}], "fastfact": ["The Department of Energy depends on the expertise of firms, universities, and others to do much of its work, including managing and operating nuclear weapons labs. In 10 years, it spent about $193 billion on management and operating contracts.", "DOE generally gave these contractors high ratings and awarded over 90% of available performance incentives. However, we found DOE could do a better job reporting on how well contractors spend these federal funds.", "We made 7 recommendations, including that DOE report more useful information on cost performance.", "DOE remains on our High Risk List for inadequate contractor management and oversight."]}
{"id": "GAO-19-56", "url": "https://www.gao.gov/products/GAO-19-56", "title": "Supplemental Nutrition Assistance Program: More Complete and Accurate Information Needed on Employment and Training Programs", "published_date": "2018-11-20T00:00:00", "released_date": "2018-12-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SNAP is the nation's largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $64 billion in benefits. To maintain eligibility for benefits, certain SNAP recipients must comply with the program's work requirements, which may include participating in a state's SNAP E&T program if required by the state.", "This report examines (1) what is known about SNAP E&T program participants and outcomes over time and (2) the extent to which state SNAP E&T programs have partnered with other programs offering similar services. GAO reviewed relevant federal laws, regulations, and guidance; analyzed USDA data on SNAP recipients, work registrants, and SNAP E&T participants from fiscal years 2008 through 2016, the most recent data available; reviewed states' fiscal year 2017 SNAP E&T plans and outcome reports; and interviewed USDA officials and state officials in five states selected, in part, to reflect a range of SNAP E&T program characteristics."]}, {"section_title": "What GAO Found", "paragraphs": ["The Supplemental Nutrition Assistance Program's (SNAP) Employment and Training (E&T) programs, which are overseen by the U.S. Department of Agriculture (USDA) and administered by states, have served a small percentage of SNAP recipients over time, and information on participant characteristics and outcomes is limited. In an average month of fiscal year 2016, SNAP E&T served about 0.5 percent of the 43.5 million SNAP recipients. Further, since 2008, the percentage of SNAP recipients served by SNAP E&T has declined. Participation in SNAP E&T may be low, in part, because most SNAP recipients were exempt from work requirements, according to USDA data. In addition, SNAP recipients may participate in other activities to comply with work requirements. Although data on the number of recipients served in SNAP E&T are generally reliable, USDA lacks reliable data on participant characteristics and outcomes because of imprecise instructions on data collection forms and staff confusion at the state level. USDA has taken some steps to address these issues, but data reliability issues persist. As a result, USDA's ability to assess whether agency goals are being met through the SNAP E&T program is limited, as is the department's ability to monitor states' implementation of work requirements and ensure program integrity.", "In fiscal year 2018, most state SNAP agencies partnered with workforce development system entities, such as community colleges and workforce agencies, to provide services to SNAP E&T participants, according to USDA data. Regional and state officials reported that state SNAP agencies often have used these partnerships to leverage non-federal funding sources and provide additional capacity and expertise to help expand SNAP E&T services. However, 3 states operated their own SNAP E&T programs without partnering with any other program, and a total of 20 states lacked partnerships with workforce agencies, according to USDA data for fiscal year 2018. Federal regulations require that SNAP E&T services be delivered through the state's workforce development system unless the services are not available locally through this system. USDA and state officials described challenges to forming effective partnerships with workforce agencies, including perceived disincentives to serving SNAP recipients. However, states that are not fully leveraging resources available through the workforce development system may miss opportunities to provide a wider variety of services to SNAP E&T participants and serve a greater number of SNAP recipients through SNAP E&T."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that USDA take additional steps to address SNAP E&T data reliability issues and to help states leverage available workforce development system resources. USDA officials generally agreed with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Supplemental Nutrition Assistance Program (SNAP) is the largest  federally funded nutrition assistance program in the United States. In  fiscal year 2017, the program provided approximately $64 billion in  benefits to about 42 million individuals in more than 20 million  households. SNAP is overseen by the U.S. Department of Agriculture\u2019s  (USDA) Food and Nutrition Service (FNS) and administered by the states.  To be eligible for benefits, certain SNAP recipients must comply with the  program\u2019s work requirements, including registering for work and  participating in certain work programs if required by the state agency.  For example, a state SNAP agency may assign a SNAP recipient to  participate in a state-administered SNAP Employment and Training (E&T)  program as a condition of SNAP eligibility. Federal requirements for such  programs were first enacted in 1985, and these programs are intended to  help individuals in SNAP households acquire skills, training, employment,  or experience that will increase their ability to obtain regular employment.  As such, FNS considers increasing participation in state SNAP E&T  programs a strategy for helping SNAP recipients achieve self-sufficiency.  State agencies have flexibility in designing SNAP E&T programs and may  partner with local entities, such as nonprofit community-based social  service providers and community colleges, to leverage existing services.", "In recent years, the Congress and FNS have made changes to federal  requirements for state SNAP E&T programs. For example, the  Agricultural Act of 2014 required that states report additional data on  SNAP E&T participant characteristics and outcomes. You asked us to  review several aspects of SNAP E&T.", "This report examines (1) what is known about SNAP E&T program  participants and outcomes over time and (2) the extent to which state  SNAP E&T programs have partnered with other programs offering similar  services.", "To address our first objective, we analyzed data on SNAP E&T  participation from three FNS data sources, as well as data on participant  outcomes from one of these sources. First, we analyzed aggregate data  on SNAP E&T participants collected from state SNAP agencies for fiscal  years 2008 through 2016, the most recent data available. Second, for the  same time period, we analyzed Quality Control data on individual SNAP  recipients, work registrants, and SNAP E&T participants. Finally, we also  reviewed and analyzed aggregate outcome and participation data from  state SNAP agencies\u2019 fiscal year 2017 outcome and participant  characteristics reports. To assess the reliability of these data, we  interviewed FNS and state officials, performed data testing, and reviewed  relevant documentation. We determined these data to be sufficiently  reliable to identify the number of average monthly SNAP E&T  participants, work registrants, and SNAP recipients, and to assess  change in the size of these groups over time.", "To address our second objective, we reviewed all fiscal year 2017 SNAP  E&T state plans and analyzed data from FNS on state SNAP agency  partnerships for fiscal year 2018. To assess the reliability of these data,  we interviewed FNS and state officials and reviewed relevant  documentation. We determined these data to be sufficiently reliable for  the purposes of this report.", "To address both objectives, we reviewed relevant federal laws and  regulations, as well as guidance and research from FNS, the USDA  Office of the Inspector General, and our prior work on SNAP E&T  programs. We interviewed relevant FNS officials from each of the seven FNS regions. We also conducted interviews with SNAP state agency  officials in five states, selected based on several criteria to ensure our  sample included state SNAP E&T programs with different service delivery  approaches and other program characteristics, as well as geographic  diversity. We visited those states (four of the five) in which services are  provided through partnerships with local providers and interviewed  selected local program staff with knowledge of SNAP E&T program  operations, participant characteristics, and coordination with the state  SNAP agency. For additional contextual information on SNAP E&T  program trends, we also conducted background interviews with state  officials from seven other state SNAP E&T programs, as well as  representatives from national organizations with knowledge of the SNAP  E&T program. Information collected from state and local SNAP E&T  officials during our site visits and interviews cannot be generalized to all  SNAP E&T officials nationwide. For additional information on the report\u2019s  scope and methodology, see appendix I.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "SNAP Work Requirements", "paragraphs": ["All SNAP recipients ages 16 through 59, unless exempted by law or  regulation, must comply with general work requirements. (See fig. 1.)  These requirements generally include registering for work, reporting to an  employer if referred by a state agency, accepting an offer of a suitable  job, not voluntarily quitting a job or reducing work hours below 30 hours a  week, or participating in a SNAP E&T program or a workfare program\u2014in  which recipients perform work on behalf of the state\u2014if assigned by the  state agency. SNAP recipients are exempt from complying with these  work requirements if they meet certain criteria, such as being responsible for caring for a dependent child under age 6 or an incapacitated person.  In addition, per federal law, those who are employed for 30 or more hours  per week are exempt from the work requirements. SNAP recipients who  are subject to the work requirements\u2014known as work registrants\u2014may  lose their eligibility for benefits if they fail to comply with the requirements  without good cause.", "In addition to meeting the general work requirements, able-bodied adults  without dependents (ABAWDs) must work or participate in a work  program 20 hours or more per week, or participate in workfare, which is  performing work to earn the value of their SNAP benefits. Participation  in SNAP E&T, which is a type of work program, is one way for ABAWDs  to meet the 20-hour-per-week ABAWD work requirement, but other work  programs are acceptable as well. Unless ABAWDs meet these work  requirements or are determined to be exempt, they are limited to 3  months of SNAP benefits in a 36-month period. (See fig. 2.)", "At the request of states, FNS may waive the ABAWD time limit for  ABAWDs located in certain areas of a state or an entire state when  certain circumstances are met. For example, a waiver may be granted if  the area has an unemployment rate of over 10 percent or the number of  jobs available is insufficient to provide employment for these individuals. If  the time limit is waived, ABAWDs are not required to meet the ABAWD  work requirement in order to receive SNAP for more than 3 months in a  36-month period, but they must still comply with the general work  requirements."], "subsections": []}, {"section_title": "SNAP Employment and Training Programs", "paragraphs": ["Federal requirements for state SNAP E&T programs were first enacted in  1985 and provide state SNAP agencies with flexibility in designing their  SNAP E&T programs, including whom to serve and what services to offer.  The state can require some or all SNAP work registrants to participate in  the SNAP E&T program as a condition of eligibility, an approach  commonly referred to as a mandatory program. In mandatory programs,  individuals can be sanctioned if they fail to participate in an assigned  SNAP E&T activity. State SNAP agencies also may elect to exempt  categories and individuals from participating in SNAP E&T, such as those  living in rural areas or experiencing homelessness. In addition, states  may exempt all work registrants from participation in SNAP E&T and only  serve volunteers, an approach commonly referred to as a voluntary  program. States also determine which types of services to provide  participants through their SNAP E&T programs, although they must  provide at least one from a federally determined list. This list includes job  search programs, job search training programs, workfare, programs  designed to improve employability through work experience or training,  education programs to improve basic skills and employability, job  retention services, and programs to improve self-sufficiency through self- employment.", "There are three types of federal funding streams for state SNAP E&T  programs: 100 percent funds\u2014formula grants for program administration,  including planning, implementing, and operating a SNAP E&T program;  50 percent federal reimbursement funds; and ABAWD pledge funds\u2014 grants to states that pledge to serve all of their at-risk ABAWDs. While  the federal allocation for 100 percent funds has generally been capped at  $90 million over the last decade, some states do not obligate or expend  their full allocation, and as a result, the following year FNS reallocates  these funds to other states that request additional funds, according to  FNS officials. Total federal expenditures on SNAP E&T programs  increased from about $282 million in fiscal year 2007 to about $337  million in fiscal year 2016, according to FNS data (see fig. 3). Federal 50  percent reimbursement funds, which are generally not capped, constitute  the largest portion of federal expenditures on SNAP E&T and were  responsible for the majority of the increase in total federal SNAP E&T  expenditures over the last decade. These funds are used for program  administrative costs for operating SNAP E&T programs, as well as SNAP  E&T participant expenses, such as transportation and dependent care  costs."], "subsections": []}, {"section_title": "Program Support and Oversight", "paragraphs": ["In 2014, FNS created the Office of Employment and Training to provide  support and oversight for the SNAP E&T program. Specifically, FNS  expanded its headquarters staff dedicated to SNAP E&T from one to six  full-time employees, and added a dedicated SNAP E&T official in each  FNS regional office to provide technical assistance to states. FNS has  also developed resources, such as a SNAP E&T Operations Handbook,  intended to help states implement and expand their SNAP E&T programs.", "To inform its program support and oversight, FNS collects information on  SNAP recipients and work registrants, as well as SNAP E&T program  participants, services, and expenditures. More specifically, FNS  periodically collects data from states on the total number of work  registrants, ABAWDs, SNAP E&T participants, and participants in each  type of SNAP E&T service. FNS also collects data from states on a  sample of all households participating in SNAP each month as part of the  Quality Control process. The Quality Control data include characteristics  of SNAP recipients, including whether they are work registrants, for  example. In addition, as a result of requirements in the Agricultural Act of  2014, FNS began collecting annual SNAP E&T outcome and participant  characteristics data from states in January 2018. Furthermore, FNS  collects quarterly information from states on SNAP E&T expenditures.", "States are also required to submit an annual SNAP E&T plan to FNS,  including information on the services they plan to offer during the year  and their projected budget and program participation numbers. Guidance  on plan requirements is provided in an FNS handbook for states. FNS  national and regional officials review the plans to ensure compliance with  requirements, and plans must be approved by regional officials before  SNAP E&T funding is allocated to a state."], "subsections": []}]}, {"section_title": "State SNAP E&T Programs Have Served a Small Percentage of Recipients over Time and Little Is Known about Participants and Outcomes", "paragraphs": ["State SNAP E&T programs have served a small and decreasing  percentage of overall SNAP recipients over time, and although these data  are generally reliable, FNS data on SNAP E&T program participant  characteristics and outcomes are not reliable. State SNAP E&T programs  have served a small percentage of SNAP recipients over the last decade  potentially due in part to certain policy changes during that time, such as  the increasing number of states moving from mandatory to voluntary  SNAP E&T programs. The number of SNAP recipients served by SNAP  E&T programs has also potentially been low because a limited number of  those referred to state programs go on to participate in services. FNS\u2019s  lack of reliable SNAP E&T data, as well as the agency\u2019s lack of a plan for  using newly reported participant characteristics and outcome data to  assess program performance, constrain FNS\u2019s ability to understand the  extent to which agency goals are being met."], "subsections": [{"section_title": "State SNAP E&T Programs Have Served a Small and Decreasing Percentage of SNAP Recipients over the Last Decade, Due to Various Factors", "paragraphs": ["According to FNS data, among the approximately 43.5 million total SNAP  recipients, only a small percentage\u20140.5 percent, or about 200,000\u2014were  served by state SNAP E&T programs in an average month of fiscal year  2016, due to several factors. (See fig. 4.) First, according to FNS data,  most SNAP recipients are exempt from work requirements for various  reasons, under federal law and regulation. For example, according to  FNS data, almost two-thirds of SNAP recipients were children, elderly, or  adults with a disability in an average month of fiscal year 2016, and these  groups generally are exempt from work requirements. As a result of  federal exemptions, in an average month of fiscal year 2016, about 14  percent of SNAP recipients, or about 6.1 million individuals, were work  registrants who were subject to work requirements, according to FNS  data. Further, state SNAP agencies may elect to exempt individuals for  whom participation is judged to be impractical or not cost effective.  Moreover, SNAP work registrants may participate in other activities to  comply with work requirements, such as other federal- and state-funded  E&T programs.", "In recent years, the number and percentage of SNAP recipients and work  registrants participating in SNAP E&T programs has decreased,  according to FNS data. From fiscal years 2008 through 2016, the average  monthly number of SNAP E&T participants decreased from about  256,000 to about 207,000, or by 19 percent, according to state data on  SNAP E&T participants that were reported to FNS. (See fig. 5.) However,  the data also show that over the same time period, the average monthly  number of SNAP recipients increased from about 27.8 million to about  43.5 million, and work registrants increased from about 3.2 million to  about 6.1 million. As a result, the percentage of total SNAP recipients  participating in SNAP E&T programs decreased from about 0.9 percent to  about 0.5 percent, and the percentage of work registrants participating in  these programs decreased from approximately 8.1 percent to  approximately 3.4 percent.", "The decline in SNAP E&T participation in recent years may have been  influenced by certain policy changes, including states\u2019 widespread use of  waivers for ABAWDs. According to FNS data, from fiscal years 2008  through 2012, the number of states with statewide waivers due to  economic conditions increased from 7 to 46 states, potentially enabling  ABAWDS in these states to continue receiving SNAP benefits without  meeting ABAWD work requirements. As a result, these waivers  potentially reduced the number of ABAWDs nationwide who may  otherwise have participated in SNAP E&T programs in order to continue  receiving SNAP benefits. Further, according to FNS data, from fiscal  years 2011 through 2015, the majority of states continued to operate  under statewide waivers of the ABAWD time limit.", "According to FNS data, states have also increasingly moved from  mandatory to voluntary SNAP E&T programs in recent years, another  policy change that may have influenced SNAP E&T participation. In  fiscal year 2010, 36 states operated mandatory programs; however, by  fiscal year 2017, 19 states operated mandatory programs. (See fig. 6.)  When states move to a voluntary program, they generally experience a  decline in SNAP E&T participation, according to FNS officials and our  analysis of FNS data. Specifically, of the 21 states that changed from a  mandatory to a voluntary program from fiscal year 2010 through fiscal  year 2016, 13 experienced a decrease in SNAP E&T participation in the  year following the change\u2014ranging from a 21 percent decrease to a 93  percent decrease. This trend was generally inconsistent with the trend  in work registrants, as 9 of the 13 states that changed from a mandatory  to a voluntary program and experienced a decrease in SNAP E&T  participation also experienced an increase in their total number of SNAP  work registrants during the same time period. Furthermore, voluntary  programs are generally smaller overall than mandatory programs,  according to our analysis of FNS data. In fiscal year 2016, for example,  the 31 states operating voluntary programs together served less than half  of the total number of SNAP E&T participants served by the 22 states  operating mandatory programs, although these two groups of states had  similar numbers of new work registrants.", "FNS officials told us that there are various reasons states may move to  voluntary programs. For example, FNS officials said that many states  have reported to them that offering employer-driven, skills-based,  intensive employment and training services, such as vocational training or  work experience, through voluntary programs yields more engaged  participants with stronger outcomes. FNS officials stated that they have  been actively encouraging states to offer these types of services because  they believe these types of services are more effective in moving SNAP  recipients, who may be more likely to have barriers to employment,  toward self-sufficiency. However, they noted that SNAP E&T funding may  not be sufficient to provide these types of services in mandatory programs  that require participation by SNAP recipients and thus have higher  participation. In addition, FNS officials told us that voluntary programs are  less administratively burdensome than mandatory programs, as they  allow states to focus on serving motivated participants rather than  sanctioning non-compliant individuals.", "In addition, participation rates are low for SNAP recipients referred to the  SNAP E&T program, according to FNS officials, state program officials,  and available data, regardless of whether the state operates a mandatory  or voluntary program. FNS officials said that engaging SNAP recipients  who are referred to the program is a challenge across all states\u2014a point  confirmed by the states we selected and available data. Among the 11  states that reported data to FNS on SNAP E&T participation by those  referred to the program, which included states operating mandatory and  voluntary programs, the percentage of SNAP recipients who were sent a  referral letter but did not participate in any activity ranged from 35 to 98  percent in fiscal year 2017. For 8 of these states, about 70 percent or  more of SNAP recipients who were sent a referral letter did not participate  in any activity.", "FNS officials, state officials, and SNAP E&T service providers in our  selected states indicated that participation by SNAP recipients referred to  SNAP E&T may be low for various reasons. For example, FNS officials  told us that some recipients face barriers to participation, such as a lack  of transportation, childcare, or treatment for mental health issues, yet they  have not been exempted by the state. For example, SNAP E&T providers  and state officials in our selected states noted that SNAP recipients in  rural areas, in particular, experience challenges participating in the E&T  program due to a lack of transportation to E&T services, as well as the  limited range of available services and employment opportunities. State  officials and providers in all five of the states we selected also noted that  SNAP recipients with mental health needs or substance abuse issues  usually require additional services to participate in the SNAP E&T  program, such as intensive case management or treatment. Lack of  awareness of E&T services may also affect participation, as three SNAP  E&T providers we spoke with said that SNAP recipients can be transient,  and as a result, may not receive referral letters provided by mail. Further,  some SNAP recipients may decide not to participate, despite the potential  loss of SNAP benefits, or others face certain barriers to employment that  may deter them from participating. For example, formerly incarcerated  SNAP recipients may be discouraged from participating in SNAP E&T  due to past struggles finding employers willing to hire those with a  criminal background.", "Low participation rates are common across other employment and  training programs serving similar populations, and although FNS has not  researched how to address this issue in SNAP E&T, other agencies have  assessed ways to improve participation in these programs. For example,  in our past work, we found that states faced challenges with low  participation in employment and training activities by Temporary  Assistance for Needy Families cash assistance recipients. Recognizing  that states would benefit from strategies on how to increase engagement  in such activities, the U.S. Department of Health and Human Services  contracted for research on behavioral interventions that affect attendance  rates for employment and training services. Researchers found that  strategies such as sending text messages to participants\u2014in addition to  letters in the mail\u2014could increase the likelihood that they would attend  program activities, particularly when communications encouraged  recipients to make a detailed plan to participate. FNS officials stated that  they are aware of research on strategies to address low participation in  E&T programs; however, they noted that they have not researched  causes of low participation in the SNAP E&T program. FNS officials  added that they believe states could take steps to make enrolling and  participating in SNAP E&T activities less burdensome for SNAP  recipients.", "Further, FNS officials acknowledged that states could potentially benefit  from technical assistance on increasing the rates at which referred SNAP  recipients participate in SNAP E&T activities, but the agency\u2019s SNAP E&T  technical assistance resources have generally not focused on this issue.  In a recent policy brief, FNS indicated that collecting data on SNAP E&T  participation can help state agencies and providers determine where  attrition is occurring and point towards processes or services that need  improvement. However, the brief did not provide strategies for improving  processes or services to reduce attrition, and FNS officials acknowledged  that they generally have not focused their resources on getting recipients  to initially engage with service providers. Rather, FNS has focused its  technical assistance resources on an approach intended to improve  participation among those recipients who engage with the SNAP E&T  program. Specifically, according to FNS officials, the agency\u2019s resources  have focused on encouraging SNAP E&T providers to offer more  intensive services, including skills-based training, as these services may  be better able to address SNAP recipients\u2019 barriers to employment.  Officials noted that they believe these types of services may be more  responsive to SNAP recipients\u2019 needs, which could increase participation  in E&T.", "Assisting state efforts to increase the level of participation for SNAP  recipients who are referred to the E&T program could help FNS achieve  agency goals, as well as help SNAP recipients move toward self- sufficiency. Specifically, USDA\u2019s fiscal year 2018 strategic plan includes  increased participation in SNAP E&T as a strategy for supporting SNAP  recipients in achieving self-sufficiency. Similarly, in a 2016 letter to  states, FNS noted that expanding SNAP recipients\u2019 access to  employment and training services is critical to helping them transition off  the SNAP program by becoming economically self-sufficient. If states  continue to struggle with low participation in SNAP E&T, and FNS does  not expand its technical assistance to include a broader array of  strategies to increase participation, both FNS\u2019s ability to meet its strategic  goals, and the program\u2019s ability to help recipients achieve self-sufficiency,  will be hindered."], "subsections": []}, {"section_title": "Information on SNAP E&T Participant Characteristics and Outcomes Is Not Reliable", "paragraphs": ["Although data on the number of overall participants in SNAP E&T  programs in an average month from one FNS dataset are generally  reliable, data on SNAP E&T program participant characteristics and  outcomes are not reliable, according to our analysis of state data on  SNAP E&T programs reported to FNS and our discussions with FNS and  state officials. Specifically, in our review of the three FNS datasets that  include state-reported information on SNAP E&T, we found several  issues that affect the reliability of these data. According to our analysis,  these data reliability issues include widely varying counts of SNAP E&T  participants, ABAWDs, and work registrants across the datasets;  missing or incomplete data on work registrants, ABAWDs, SNAP E&T  participant characteristics and outcomes, and SNAP E&T services within  the datasets; and inconsistencies within and between quarterly and  annual reports of SNAP E&T participants in one of the datasets. For  example, according to FNS officials, some states inaccurately reported  participation in a single SNAP E&T service that exceeded the state\u2019s total  number of SNAP E&T participants.", "FNS has taken steps to address some of the SNAP E&T data limitations,  including providing additional training and guidance to states. For  example, FNS provided training to states in July 2014 and September  2018 on how to accurately report SNAP E&T participant information  through one of the state-reported datasets on SNAP E&T. In addition, in  response to state questions regarding how to collect new outcome  measures on SNAP E&T required by the Agricultural Act of 2014, FNS  issued two memoranda in 2016 and 2017 providing additional policy  clarifications. Recently, in 2018, FNS issued two memoranda providing  clarifications on work requirements for ABAWDs and on SNAP E&T, in  part to improve the reliability of data collected.", "Even with these efforts, our analysis suggests that FNS continues to lack  reliable data on SNAP E&T programs for at least two reasons: imprecise  instructions on data collection forms and staff confusion at the state level.", "Imprecise instructions on data collection forms. According to our  analysis, state-reported data on SNAP E&T participants and  characteristics are not reliable due to imprecise instructions on the  respective data collection forms. For example, the form used by states  to collect information on SNAP recipients nationwide asks states to  indicate if recipients are work registrants, and if so, participate in  employment and training programs. Although FNS officials told us that  this was intended to capture SNAP E&T participants alone, the form  does not specify this. As a result, FNS officials explained that they  believe states are incorrectly reporting SNAP recipients participating  in any E&T program. Without a reliable link to SNAP E&T  participation, FNS is unable to use this source, which provides  detailed information on SNAP recipients\u2019 demographic, educational,  and economic characteristics, to analyze SNAP E&T participant  characteristics. Similarly, in the case of another state-reported data  source, we found that the form used to collect data on the types of  SNAP E&T services participants receive does not list or define  required services. According to FNS officials, states report widely  varying SNAP E&T services within the same categories.", "Staff confusion at the state level. According to FNS officials, there  has been widespread confusion among states regarding the need to  track ABAWDs when waivers are in place. Consequently, some states  were not tracking ABAWD participation or properly documenting  SNAP recipients\u2019 ABAWD status in recent years, according to FNS  officials and some of the state SNAP agency officials we spoke with.  FNS noted the importance of accurately tracking ABAWDs following  the expiration of the waivers and reinstatement of the time limit in a  March 2015 memorandum to regional directors. Further, FNS officials  told us that states should have continued to track ABAWDs even if the  state was under a statewide ABAWD waiver. FNS noted in its 2015  memorandum that states that failed to accurately track ABAWDs  risked potential overpayments, as ABAWDs who fail to meet work  requirements are ineligible for benefits. Further, although we found  generally reliable SNAP E&T participation data in one FNS dataset,  staff confusion has also likely affected these participation data. FNS  officials told us that some states may mistakenly include those  referred into SNAP E&T programs who did not participate in a  program activity in their count of SNAP E&T participants. Finally, in  the case of SNAP E&T data on outcomes, FNS regional officials told  us that state-level staff were confused by the two different definitions  for completion of a SNAP E&T activity used by FNS\u2014an issue which  may have affected the reliability of the outcome data.", "FNS has acknowledged that it is important to have reliable data on the  SNAP E&T program for program oversight. Recently, in August and  September 2018, FNS presented information to states at a national  conference and in a webinar regarding the interactions of the different  state-reported SNAP E&T data sources, and the importance of these data  for funding and planning purposes. In a July 17, 2009 memorandum, FNS  also stated that it is important that the agency collect reliable data on  SNAP E&T to satisfy the increasing demands of Congress, advocacy  groups, and the public for an accurate picture of the types of activities  provided and participation patterns in those activities. This is generally  consistent with federal internal control standards and our previous work  on SNAP E&T. Federal internal control standards state that agencies  should maintain quality data in order to produce and share quality  information with stakeholders to help achieve agency goals. Further, in  our 2003 report on SNAP E&T, we found that no nationwide data existed  on whether SNAP E&T programs helped participants obtain employment,  and we recommended that FNS collect nationwide data on program  participants and require states to collect outcome measures.", "However, at present, the lack of reliable state-reported data on SNAP  E&T participant characteristics and outcomes hinders FNS\u2019 ability to  effectively oversee and monitor the SNAP E&T program. Without such  information, states, FNS, and the Congress are unable to fully assess  whether agency goals are being met through the SNAP E&T program.  Further, the lack of reliable state-reported data on work registrants and  ABAWDs affects FNS\u2019s ability to monitor states\u2019 implementation of  program rules, including work requirements, and ensure program  integrity. In addition, as data on work registrants and ABAWDs are used  to allocate federal funds to states for SNAP E&T, unreliable estimates of  these groups have funding implications.", "FNS\u2019s ability to understand the extent to which agency goals are being  met is further hampered because FNS has not yet determined how it will  use newly reported data to assess the performance of state SNAP E&T  programs. As a result of provisions in the Agricultural Act of 2014, FNS  required states to report new data on SNAP E&T participants\u2019 outcomes,  such as the median quarterly earnings of certain program participants,  and participant characteristics, such as the percentage of participants  who have received a high school diploma. In addition, the Act requires  that FNS assess the effectiveness of states\u2019 performance. In the  preamble to the relevant interim final rule, FNS described at a high level  how it intends to use the data, including identifying which program  activities are most successful at moving individuals into employment.  However, FNS officials told us that they were not yet certain how they will  use the data to make such determinations. In addition, regional officials  we spoke with stated that the current data might not allow FNS to answer  questions about whether the program is achieving its goals.", "Similarly, state SNAP E&T officials we spoke with during our review did  not know how the recently collected data related to program performance.  Specifically, state officials in all five states we selected indicated that they  were not certain how FNS will use these data to assess states\u2019  performance. Officials in three states also said that a lack of clarity about  how these data relate to program goals has led to confusion.", "FNS officials told us that they have not determined how they will use the  newly reported data or whether the current data are sufficient, in part,  because the agency has instead focused its resources on assisting the  states in submitting the data to meet the new reporting requirements.  According to FNS regional and national officials, states required extensive  technical assistance to obtain the requisite data and calculate the  reporting measures. For example, one regional official said that his office  had been providing the states technical assistance for a year and a half to  prepare them for the new reporting requirements. States we spoke with  also indicated that the data were time-consuming and challenging to  obtain. For example, many states struggled to obtain data sharing  agreements with workforce agencies for the required employment data.  According to FNS officials, after receiving the first round of reports in  January 2018, FNS officials continued to provide technical assistance to  states to improve the quality of the data, and FNS required states to  submit revised reports in May. However, as of August 2018, one state  and one territory had not submitted the required reports to FNS,  according to FNS officials.", "In the absence of FNS taking steps to determine how it will use the newly  reported data to assess state effectiveness, questions about whether  SNAP E&T programs meet their goals will remain unanswered. Further,  states may continue to be challenged to report these data, and without  information from FNS on how state performance will be assessed, states  may lack clarity on how collecting these data will help contribute to  program goals. As of October 2018, FNS officials said that they are  exploring ways to improve their ability to collect and analyze all of the  program data necessary to do a comprehensive assessment of state  SNAP E&T. Our prior work has emphasized the importance of  establishing how performance data relates to program goals. In addition, federal internal control standards state that management should  determine whether performance measures for the defined objectives are  appropriate for evaluating the agency\u2019s performance in achieving those  objectives. Federal internal control standards also state that  management should communicate necessary quality information to  relevant internal and external parties to help the agency achieve its  objectives."], "subsections": []}]}, {"section_title": "States Have Increasingly Partnered with Various E&T Providers, but Some States Have Not Leveraged Available Workforce Development System Resources", "paragraphs": [], "subsections": [{"section_title": "States Have Increasingly Partnered with Other Entities to Provide SNAP E&T Services", "paragraphs": ["In recent years, state SNAP agencies have increasingly partnered with  other state and local organizations, such as nonprofit community-based  social service providers, community colleges, and workforce agencies, to  provide services to SNAP E&T participants, according to FNS officials  and states we selected for our review. In fiscal year 2018, 50 state SNAP  agencies partnered with at least one other organization to deliver SNAP  E&T services, with the majority partnering with more than one, according  to an analysis by FNS (see fig. 7). In that year, 36 states partnered with  community-based social service providers, 33 states had partnerships with workforce agencies, and 24 states partnered with community  colleges.", "FNS officials in all seven regions said that states have increasingly used  an approach FNS refers to as third party partnerships in recent years to  leverage outside funding to serve SNAP E&T participants. In this model,  according to FNS officials, third party organizations use non-federal  funding to provide allowable E&T services and supports to SNAP  recipients, and state SNAP agencies are then eligible for a federal  reimbursement of 50 percent of these expenditures. FNS has promoted  this third party partnership model through various technical assistance  resources provided to states, including an operations handbook and  webinars, and has added a dedicated position for a SNAP E&T official in  each regional office, in part, to help develop these partnerships. Federal  50 percent reimbursement funds expended increased from nearly $182  million to more than $223 million, or by 23 percent, from fiscal year 2007  to fiscal year 2016.", "According to FNS national officials as well as officials in some FNS  regions and states, partnerships play a critical role in SNAP E&T  programs because state SNAP agencies may lack the capacity,  resources, and expertise to provide the type of intensive employment and  training services FNS considers most likely to lead to self-sufficiency for  SNAP recipients. For example, two of our selected states reported that  they have partnered with community colleges to train participants for local  in-demand occupations, including information technology, healthcare, and  welding. According to officials in one FNS regional office, community- based social service providers and community colleges may have staff  with expertise in workforce development, which SNAP agencies may not  have, and this enables SNAP agencies to expand their programs and  services without the expense of growing their own staff. According to  officials in some FNS regions and some of our selected states, partnering  with workforce agencies has enabled some states to provide training to  participants using Workforce Innovation and Opportunity Act (WIOA)  funds and supportive services using SNAP E&T funds, maximizing their  ability to address participants\u2019 needs. Officials in one of the states we  visited also said that partnering with the workforce agency allows them to  ensure basic E&T services, such as job search assistance, are available  to SNAP recipients across all counties in their state. (See fig. 8.)", "FNS officials also said that these partnerships better position states to  improve their program outcomes by tapping into providers currently  serving communities that include SNAP recipients. For example, one of  our selected states partnered with nonprofit community-based social  service providers experienced in working with homeless and previously  incarcerated populations. Officials in this state said that the providers  tailor E&T services based on their knowledge of these populations\u2019  unique barriers to employment. Further, officials in three of our five  selected states said that some of the community-based social service  organizations they partner with provide SNAP E&T participants with  additional supportive services, including transitional housing, clothing,  financial advising, and mental and physical health services, to address a  broader set of barriers to employment."], "subsections": []}, {"section_title": "Some States Do Not Leverage Workforce Development System Resources for SNAP E&T, and FNS Has Not Assessed State Efforts to Utilize these Resources", "paragraphs": ["Although states are increasingly partnering with external entities to  provide SNAP E&T services, according to FNS data for fiscal year 2018,  20 state SNAP agencies have not partnered with workforce agencies for  SNAP E&T. According to FNS officials, the nationwide network of more  than 2,500 American Job Centers, which are operated by state and local  workforce agencies, can help to fill service gaps in areas lacking  community based organizations or community colleges. However,  despite the broad availability of E&T services such as job search  assistance through American Job Centers, 12 state SNAP agencies  directly provided job search or job search training for their SNAP E&T  programs, according to their fiscal year 2017 state SNAP E&T plans.", "In addition, some states have not yet fully leveraged resources from the  broader workforce development system, which includes workforce  agencies, community-based organizations, and community colleges, to  provide SNAP E&T services. For example, FNS data for fiscal year 2018  show that three states\u2019 SNAP agencies operated their own SNAP E&T  programs in fiscal year 2018 and did not involve existing workforce  development system entities in the provision of these services. According  to their fiscal year 2017 state plans, these states each offered one or two  types of SNAP E&T services, and the services they offered\u2014primarily job  search and job search training\u2014are considered less intensive by FNS  officials. In contrast, states with workforce development system  partnerships offered a broader range of services, as well as more  intensive services, such as vocational education. For example, all 36  state SNAP agencies that offered vocational education did so through  workforce development system partnerships. As previously noted, FNS  officials have said that intensive services are likely more effective in  moving SNAP E&T participants, who may be more likely to have barriers  to employment, toward self-sufficiency.", "Overlap and a lack of coordination in federally-funded E&T programs is a  long-standing concern, and relatedly, state SNAP agencies are required  to make use of workforce development system resources for SNAP E&T,  when possible. In our prior work, we found that SNAP E&T was 1 of 47  federally funded E&T programs, nearly all of which overlapped with at  least one other program by providing similar services to similar  populations. We noted that overlap among federal E&T programs raises  questions about the efficient use of resources, and we highlighted the  value of coordination between these programs to ensure efficient and  effective use of resources. Consistent with our findings, federal  regulations require that each component of a state agency\u2019s SNAP E&T  program be delivered through its statewide workforce development  system, unless the component is not available locally through such a  system.", "FNS national and regional officials, as well as state officials, described  challenges states face in forming effective workforce development system  partnerships. FNS officials said that challenges are often caused by  differences in workforce agency and SNAP E&T program target  populations and service delivery approaches. According to FNS, SNAP  E&T participants often have more barriers to employment, such as low  literacy and limited work experience, than the broader population served  by workforce agencies. Because those with employment barriers could  adversely impact the workforce agencies\u2019 employment and earnings  performance, which could jeopardize agencies\u2019 workforce program  funding, workforce agency staff are sometimes reluctant to serve SNAP  E&T participants, according to FNS national and regional officials in three  of the seven regions, as well as officials in one of our selected states.  For example, officials in one region said that workforce agency staff had  stopped serving SNAP E&T participants in the past when they realized  the participants needed more supportive services or time in workforce  programs to meet employment goals.", "Recognizing these challenges, in recent years, USDA has urged state  SNAP agencies to collaborate with workforce agencies and others to  improve coordination of E&T services. For example, in March 2016,  USDA and the Department of Labor issued a joint letter encouraging state  SNAP agencies and state and local workforce agencies to work together  to develop shared strategies to better connect SNAP recipients with E&T  opportunities through American Job Centers. FNS has also provided  states with technical assistance materials on SNAP E&T and WIOA  partnerships, which describe respective program requirements and how  SNAP E&T and WIOA-funded workforce programs can complement one  another.", "However, FNS has not ensured that all states take steps to identify  potential workforce development system partners. Federal internal control  standards state that agencies should collect complete and reliable  information to ensure effective monitoring. FNS officials told us that they  do not independently assess the availability of states\u2019 workforce  development system partners but instead rely on states to document this  information in their state SNAP E&T plans, a key tool used by FNS for  program monitoring. However, we found that 24 states did not provide  information in their fiscal year 2017 SNAP E&T plans that would allow  FNS to verify whether these states had assessed available workforce  development system providers. For example, the states\u2019 plans did not  describe existing workforce development services in the state, despite  FNS guidance that directs states to describe the statewide workforce  development system and identify the E&T services that will be delivered  through this system in their plans.", "States that are not fully leveraging resources available through the  workforce development system may miss opportunities to provide a wider  variety of services to SNAP E&T participants and serve a greater number  of SNAP recipients through SNAP E&T programs. If state SNAP agencies  do not assess workforce development system resources available in their  state, they may lack awareness of potential partners and the resources  they offer, potentially leading to an inefficient use of resources. In  addition, without complete and reliable information on states\u2019 available  workforce development system resources, FNS is not able to ensure that  states are complying with the requirement to deliver SNAP E&T services  through their state workforce development systems."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FNS has made strides in recent years to provide additional support and  oversight of states\u2019 SNAP E&T programs, yet the agency lacks complete  and accurate information on these programs, which may limit the  effectiveness of its efforts. For example, SNAP E&T programs have  served a small percentage of SNAP recipients over time, and while FNS  recognizes that states lack information on strategies for increasing  participation among those referred to the SNAP E&T program, it has not  provided technical assistance in this area. As a result, FNS may miss  opportunities to help more SNAP recipients receive program services  intended to increase their self-sufficiency, a USDA strategic goal. FNS\u2019s  ability to assess whether the program is assisting the department in  meeting this goal is also hindered because FNS lacks reliable data on  SNAP E&T participant characteristics and outcomes. Without reliable  data on SNAP recipients subject to work requirements and participation in  SNAP E&T, the agency\u2019s ability to monitor states\u2019 implementation of  program rules to ensure recipients are not receiving benefits for which  they are ineligible is also limited. Further, because FNS has not yet  determined how it will use the newly required outcome and participant  characteristics data to assess state SNAP E&T programs, questions  about program performance remain unanswered. In addition, without  information from FNS on how state performance will be assessed, states  will continue to lack clarity on how reporting these data will help contribute  to program goals. Finally, because partnerships can be a crucial source  of additional capacity, resources, and expertise for SNAP E&T programs,  states that are not fully leveraging available workforce development  system resources may miss opportunities to serve a greater number of  SNAP recipients through SNAP E&T and provide a wider variety of  services to SNAP E&T participants. In addition, states may provide  overlapping or duplicative services and use resources inefficiently,  because FNS has not ensured that all states take steps to identify  potential workforce development system partners."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to FNS:  The Administrator of FNS should identify and disseminate strategies to  states and service providers for increasing the participation of SNAP  recipients referred to the SNAP E&T program. (Recommendation 1)", "The Administrator of FNS should take additional steps to address data  reliability issues in the state-reported data on SNAP E&T participant  characteristics and outcomes, including steps to address imprecise  instructions on data collection forms and staff confusion at the state level.  (Recommendation 2)", "The Administrator of FNS should determine and communicate to states  how the agency will use newly reported outcome and participant  characteristics data to assess the effectiveness of state SNAP E&T  programs. (Recommendation 3)", "The Administrator of FNS should take additional steps to assist states in  leveraging available workforce development system resources. Such  steps should include ensuring that state SNAP E&T plans provide the  agency with sufficient information to verify that states have assessed  available workforce development system providers. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to USDA for review and comment. On  November 5, 2018, the Deputy Associate Administrator for SNAP and  FNS officials from SNAP\u2019s Office of Employment and Training provided  us with the agency\u2019s oral comments. FNS officials told us that they  generally agreed with the recommendations in the report. They noted that  they have been implementing strategies to help states improve their  SNAP E&T programs, including expanding the reach of the programs and  improving the reliability of state reported data. FNS officials stated that  the agency plans to build on these current efforts to address the  recommendations. We acknowledge the agency\u2019s ongoing efforts in our  report but continue to believe that additional action is necessary to  address our recommendations. FNS also provided technical comments,  which we incorporated into the report as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  USDA, congressional committees, and other interested parties. In  addition, this report will be available at no charge on the GAO website at  https://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page   of this report. GAO staff who made key contributions to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This appendix discusses in detail our methodology for addressing our two  research objectives examining (1) what is known about Supplemental  Nutrition Assistance Program (SNAP) employment and training (E&T)  program participants and outcomes over time and (2) the extent to which  state SNAP E&T programs have partnered with other programs offering  similar services. We scoped our review of state SNAP E&T programs to  include the 50 states, the District of Columbia, Guam, and the Virgin  Islands.", "In addition to the methods we discuss below, to address both our  research objectives, we reviewed relevant federal laws, regulations, and  guidance; interviewed United States Department of Agriculture (USDA)  Food and Nutrition Service (FNS) officials in its headquarters and seven  regional offices; and reviewed relevant research from FNS and the USDA  Office of Inspector General, as well as our prior work on SNAP E&T  programs. Further, we interviewed representatives of a range of  nationwide organizations knowledgeable about SNAP E&T and state  officials from seven state SNAP E&T programs: Idaho, Louisiana, New  York, Pennsylvania, Tennessee, Washington, and the District of  Columbia. We also analyzed SNAP E&T expenditures using form FNS- 778 data for fiscal years 2007 through 2016, the most recent data  available. The form FNS-778\u2014Federal Financial Report\u2014is a form used  by FNS to collect quarterly expenditure data for state SNAP E&T  programs. To assess the reliability of these data, we interviewed FNS and  state officials, performed data testing, and reviewed relevant  documentation. We determined these data to be sufficiently reliable for  the purposes of our report. We excluded from our review the SNAP E&T  pilot programs that were authorized by the Agricultural Act of 2014  because these are being evaluated separately by FNS.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "SNAP E&T Program Data", "paragraphs": ["To address our first objective, we analyzed data on SNAP E&T  participation from three FNS data sources. First, we analyzed aggregate  data on SNAP E&T participants collected from state SNAP agencies for  fiscal years 2008 through 2016, the most recent data available. Second,  for the same time period, we analyzed Quality Control data on individual  SNAP recipients, work registrants, and SNAP E&T participants. Finally,  we reviewed and analyzed aggregate participation data from state SNAP  agencies\u2019 fiscal year 2017 outcome and participant characteristics  reports."], "subsections": []}, {"section_title": "Form FNS-583 Data", "paragraphs": ["We analyzed the average monthly number of SNAP recipients  participating in SNAP E&T using the form FNS-583 data. The form FNS- 583\u2014U.S. Department of Agriculture Food and Nutrition Service SNAP  Employment and Training (E&T) Program Activity Report\u2014is used by  FNS to collect quarterly and annual participation data for state SNAP E&T  programs. To assess the reliability of these data, we interviewed FNS and  state officials, performed data testing, and reviewed relevant  documentation. Data testing included checks for missing data elements,  duplicative data, and values outside a designated range. We determined  the data were sufficiently reliable to identify the number of average  monthly SNAP E&T participants and to assess change over time.", "To further examine what is known about participation in SNAP E&T, we  also assessed form FNS-583 data on work registrants and able-bodied  adults without dependents (ABAWDs) participating in SNAP E&T for fiscal  years 2008 through 2016. To assess the reliability of these data, we  interviewed FNS and state officials, performed data testing, and reviewed  relevant documentation. We determined these data to be unreliable for  the purposes of our report. As described above, for example, FNS  officials learned in recent years that there was widespread confusion  among states regarding the need to track ABAWDs when waivers were in  place. Consequently, some states were not tracking ABAWD participation  or properly documenting SNAP recipients\u2019 ABAWD status."], "subsections": []}, {"section_title": "FNS Quality Control Data", "paragraphs": ["We analyzed SNAP Quality Control data on individual SNAP recipients,  work registrants, and SNAP E&T participants. The SNAP Quality Control  database contains detailed demographic, economic, and SNAP eligibility  information for a nationally representative sample of SNAP households.  We estimated the number of SNAP recipients and work registrants for  fiscal years 2008 and 2016 using the public use Quality Control dataset  and calculated confidence intervals to determine if the change over time  was statistically significant (see table 1). To assess the reliability of these  data, we interviewed officials from FNS and the contractor responsible for  maintaining the Quality Control dataset, as well as state officials;  reviewed relevant technical documentation; and conducted data testing.  For example, we compared the estimates we produced for fiscal years  2008 and 2016 to the publicly reported estimates in the annual  Characteristics of Supplemental Nutrition Assistance Program  Households reports for those years. We determined that the data, and the  corresponding estimates in these reports, were sufficiently reliable for our  purposes. As a result, for fiscal years 2009 through 2015, we relied on the  estimates of SNAP recipients and work registrants published in the  reports.", "We also analyzed SNAP Quality Control data on SNAP E&T participants  for fiscal year 2016. To assess the reliability of these data, we interviewed  officials from FNS and the contractor responsible for maintaining the Quality Control dataset, as well as state officials; reviewed relevant  technical documentation; and conducted data testing. For example, we  compared the estimate of SNAP E&T participants from the SNAP Quality  Control dataset to the number of SNAP E&T participants reported by  states on the FNS-583, which we had determined was reliable. From our  review, we determined the Quality Control SNAP E&T participation data  to be unreliable for the purposes of our report. As described above, for  example, the form used by states to collect information on SNAP  recipients nationwide asks states to indicate if recipients participate in  employment and training programs. Although FNS officials told us that  this was intended to capture SNAP E&T participants alone, the form does  not specify this, and FNS officials said that some states are incorrectly  reporting SNAP recipients participating in any E&T program.", "To determine the percentage of SNAP recipients and work registrants  that participate in SNAP E&T, we used the data that we had determined  were reliable. Specifically, we used the Quality Control data on SNAP  recipients and work registrants, as well as the form FNS-583 data on  SNAP E&T participants, for fiscal years 2008 through 2016."], "subsections": []}, {"section_title": "SNAP E&T Outcome and Participant Characteristics Data", "paragraphs": ["We also reviewed and analyzed fiscal year 2017 outcome and participant  characteristics data reported by state SNAP agencies in the SNAP E&T  Annual Report Federal Fiscal Year 2017. These data include information  on SNAP E&T participants\u2019 outcomes, such as the median quarterly  earnings of program participants, and participant characteristics, such as  the percentage of participants who have received a high school diploma.  Certain outcome data were only collected by FNS for two quarters of  fiscal year 2017, whereas participant characteristics data were collected  for the entire year. We received copies of these data reports from FNS as  states submitted their initial reports to FNS in early 2018. Subsequent to  FNS\u2019 review of these initial reports and their efforts to help states improve  the accuracy and consistency of their reporting, FNS provided us with  updated versions of the reports for many of the states. We used the  reports to describe rates at which SNAP recipients referred to the SNAP  E&T program participated in services\u2014data that were reported by 11  states. We did not validate the accuracy of these data."], "subsections": []}, {"section_title": "State SNAP E&T Plans and FNS Program Characteristics Data", "paragraphs": ["To address our second objective on the extent to which state SNAP E&T  programs have partnered with other programs offering similar services,  we reviewed fiscal year 2017 SNAP E&T state plans for all 53 state  SNAP agencies. Specifically, we reviewed the plans to determine which  services states planned to offer through partnerships with other programs  in that year and the extent to which states documented their use of  available workforce development system resources. To supplement our  review of the plans, we also analyzed fiscal year 2018 summary data  from FNS on the number of state SNAP agencies that partnered with  community-based organizations, workforce agencies, and community  colleges, as well as the number with state SNAP agency-operated SNAP  E&T programs. We also analyzed fiscal year 2010 and 2017 summary  data from FNS on mandatory and voluntary programs to determine how  the number of state SNAP agencies with each program type changed  over time. To assess the reliability of the FNS summary data, we  interviewed FNS and state officials and reviewed relevant documentation.  We determined these data to be sufficiently reliable for the purposes of  this report."], "subsections": []}, {"section_title": "State Interviews and Site Visits", "paragraphs": ["To help inform both of our objectives and gather additional information  about state SNAP E&T programs, we selected five states: Delaware,  Oregon, Kansas, Texas, and Virginia. We selected these states based on  several criteria to ensure our sample included state SNAP E&T programs  with different service delivery approaches and other program  characteristics, as well as geographic diversity. Specifically, we  considered state SNAP E&T participation and expenditures, including  utilization of federal 50 percent reimbursement funds. In addition, we  considered whether the state operated a mandatory or voluntary SNAP  E&T program, a county- or state-administered program, and opted to be  an ABAWD pledge state. We also considered whether the state submitted  its SNAP E&T plan as part of a Workforce Innovation and Opportunity Act  Combined State Plan.", "Using semi-structured questions, we interviewed officials from the state  agencies responsible for administering SNAP in the five selected states.  We gathered information on SNAP E&T administration at the state level,  including information on partnerships; program participation and  expenditures; data collection efforts, including those related to assessing  program outcomes; and any challenges to administering the program, as  well as efforts to address such challenges.", "We conducted site visits to our selected states in which services are  provided through partnerships with local providers\u2014Delaware, Oregon,  Texas, and Virginia\u2014and interviewed selected local program staff with  knowledge of SNAP E&T program operations, participant characteristics,  and coordination with the state SNAP agency who provide SNAP E&T  services in both urban and rural areas. We conducted these visits in  February and March 2018. During each site visit, we used semi- structured questions to gather information on the goals and mission of the  providers\u2019 organizations, types of services provided to SNAP E&T  participants, needs and characteristics of SNAP E&T participants and  how these might differ from those of other clientele, sources of funding  used to provide services to SNAP E&T participants, and efforts to  coordinate with the state SNAP agency. The local program staff we  interviewed included representatives of workforce agencies, non-profit  community-based organizations, a for-profit company, and community  colleges. Information collected from state and local SNAP E&T officials  during our site visits cannot be generalized to all SNAP E&T officials  nationwide."], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rachel Frisk (Assistant Director),  Kristen Jones (Analyst-in-Charge), Morgan Jones, and Kelly Snow made  key contributions to this report. Also contributing to this report were Alex  Galuten, Mimi Nguyen, Sam Portnow, Julia Robertson, Monica Savoy,  Almeta Spencer, Jeff Tessin, Kathleen van Gelder, Nicholas Weeks, and  Jessica L. Yutzy."], "subsections": []}]}], "fastfact": ["To be eligible for benefits, some Supplemental Nutrition Assistance Program (SNAP) recipients must comply with work requirements, which may include participating in a state\u2019s SNAP Employment and Training program. These programs are intended to help recipients become self-sufficient.", "We found that only a small number of SNAP recipients participated in these programs\u2014less than 1% per month on average in 2016. However, USDA has limited data on these programs, so it can\u2019t monitor whether recipients are still eligible to receive benefits, or are achieving self-sufficiency.", "We recommended that USDA collect better data on these programs."]}
{"id": "GAO-18-103", "url": "https://www.gao.gov/products/GAO-18-103", "title": "Medicaid: CMS Should Take Additional Steps to Improve Assessments of Individuals' Needs for Home- and Community-Based Services", "published_date": "2017-12-14T00:00:00", "released_date": "2018-01-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["With approval from CMS, the federal agency responsible for overseeing state Medicaid programs, states can provide long-term care services and supports for disabled and aged individuals under one or more types of HCBS programs. State and federal Medicaid HCBS spending was about $87 billion in 2015. Effective needs assessments help states ensure appropriate access to, and manage utilization of, services and therefore costs. States' processes vary, and challenges include the potential for assessors to have conflicts of interest leading to over- or under-estimating of beneficiaries' needs for HCBS.", "GAO was asked to examine states' needs assessment processes for provision of long-term services and supports. This report addresses (1) how selected states assess needs for HCBS, and (2) steps CMS has taken to improve coordination and effectiveness of needs assessments, among other objectives. GAO studied six states that varied in terms of assessment tools in use, participation in federal initiatives, HCBS delivery systems, and geographic location; reviewed federal requirements and documents; and interviewed CMS officials and stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["The six selected states that GAO reviewed used multiple approaches to assess individuals' needs for Medicaid home- and community-based services (HCBS). Each state may have multiple HCBS programs authorized under different sections of the Social Security Act. These programs serve beneficiaries who generally need assistance with daily activities, such as bathing or dressing. States establish needs assessment processes to collect data on functional needs, health status, and other areas that they use to determine individuals' eligibility for HCBS and to plan services, such as the amount of services needed. The selected states varied in the extent to which they used different assessments across HCBS programs and used multiple types of entities\u2014such as state or government agencies, contractors, or providers\u2014to conduct them.", "The Centers for Medicare & Medicaid Services (CMS) has taken steps to improve needs assessments but concerns about conflict of interest remain in regard to HCBS providers and managed care plans. HCBS providers may have a financial interest in the outcome of needs assessments, which could lead to overstating needs and overprovision of services. CMS has addressed risks associated with HCBS provider conflicts, such as by requiring states to establish standards for conducting certain needs assessments, but these requirements do not cover all types of HCBS programs. For example, specific conflict of interest requirements are generally not in place for needs assessments that are used to inform HCBS eligibility determinations. In addition, requirements for states to establish standards to address HCBS providers' potential for conflict of interest in conducting needs assessments that are used for service planning do not apply across all programs.", "Similarly, managed care plans may have a financial interest in the outcome of HCBS assessments used for both determining eligibility and service amounts. Managed care plans could have an incentive to enroll beneficiaries with few needs, as plans typically receive a fixed payment per enrollee. For example, a plan in one state admitted in a settlement with the federal government to enrolling 1,740 individuals, from 2011 through 2013, whose needs did not qualify them. In 2013, CMS issued guidance that managed care plans may not be involved in assessments used to determine eligibility for HCBS, but CMS has not consistently required states to prevent this involvement. Among three states GAO reviewed with managed care HCBS programs, CMS required one to stop allowing plans to conduct such assessments but allowed plan involvement in two states. The absence of conflict-of-interest requirements across all types of HCBS programs and states is not consistent with federal internal control standards, which require agencies to respond to risks to program objectives."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS ensure that all Medicaid HCBS programs have requirements for states to address both service providers' and managed care plans' potential for conflicts of interest in conducting assessments. HHS concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicaid, a federal-state health financing program for low-income and  medically needy individuals, is the nation\u2019s primary payer of long-term  services and supports for children and adults with disabilities and aged  individuals. In recent years, the majority of Medicaid spending on long- term services and supports has been for home- and community-based  services (HCBS)\u2014that is, services that are provided to beneficiaries in  their homes or in other settings that are integrated into their communities  rather than in institutional settings such as nursing homes. In fiscal year  2015, federal and state Medicaid spending for HCBS was estimated at  $87 billion, or 55 percent of total Medicaid spending on long-term services  and supports. HCBS can enable beneficiaries who are limited in their  ability to care for themselves to remain in their homes, maintain their  independence, and participate in community life to the fullest extent  possible. In administering their Medicaid programs, states have  considerable flexibility to establish multiple HCBS programs authorized  under different provisions of federal law, which offer states different  options for serving beneficiaries. For example, some types of Medicaid  HCBS program authorities limit services only to beneficiaries who need a  level of care typically provided in an institutional setting.", "To receive Medicaid HCBS, beneficiaries generally must meet functional  eligibility criteria\u2014which are typically based on factors such as physical  and cognitive abilities indicative of a specified level of need for services\u2014 as well as financial eligibility criteria. States establish HCBS needs  assessment processes that they use to determine whether individuals are  functionally eligible for Medicaid HCBS and to develop service plans that  specify the scope and amount of services beneficiaries may receive  based on their needs. These processes must be consistent with  applicable federal requirements, which may vary across HCBS programs.  HCBS needs assessments directly affect the efficiency of and access to  the Medicaid program, given their key role in informing both states\u2019  determination of functional eligibility for HCBS and the development of  service plans that reflect the amount of services to be provided. These  assessments are conducted using questionnaires or interview guides  referred to as assessment tools, and individual states may use different  assessment tools. A state may also use different assessment tools for  different HCBS programs within the state or for different purposes such  as establishing functional eligibility or developing service plans. The  Medicaid and CHIP Payment and Access Commission (MACPAC) found  at least 124 distinct HCBS needs assessment tools in use nationwide in  2015.", "Given the variation in needs assessment tools across and within states,  stakeholders have noted potential benefits of moving toward more  uniform HCBS needs assessments\u2014either by assessing all individuals  with the same assessment tool, or by assessing individuals in specific  populations or HCBS programs with distinct tools that gather similar  information on a core set of topics for all individuals. For example, the U.S. Senate Commission on Long Term Care recommended the  development and implementation of a single needs assessment tool that  could be used across states, programs, and care settings. In addition,  MACPAC noted potential benefits of moving to a uniform needs  assessment tool, but also challenges such as differing and changing  program needs across states and recent state investments in a variety of  different tools. The Centers for Medicare & Medicaid Services (CMS), an  agency within the Department of Health and Human Services (HHS), is  responsible for federal oversight of Medicaid. Recent CMS initiatives  related to HCBS needs assessments were intended to help states collect  uniform information across HCBS assessment tools and improve the  effectiveness of needs assessments by addressing potential conflicts of  interest, which may occur when entities with financial incentives that are  tied to the outcomes of needs assessments conduct such assessments.", "Given the critical role that needs assessments play in determining  Medicaid beneficiaries\u2019 access to long term services and supports and  states\u2019 broad flexibility to structure needs assessments, you asked that  we provide information related to the use of needs assessments across  states.", "In this report, we:  1.  describe the needs assessment processes that selected state  Medicaid programs used to determine functional eligibility for HCBS  and to plan the provision of services, such as the amount of services  to provide;  2.  describe steps selected states have taken to improve needs  assessment processes for HCBS; and  3.  evaluate steps CMS has taken to improve the coordination and  effectiveness of needs assessment processes for HCBS.", "To describe states\u2019 HCBS needs assessment processes and the steps  states have taken to improve these processes, we conducted case  studies of six states. We selected states that varied in the number of  assessment tools in use, types of HCBS delivery systems, participation in  key CMS programs related to needs assessments, and geographic  location. The six selected states were: Connecticut, Kentucky, Minnesota,  New York, North Carolina, and Washington. For each state, we  interviewed state officials involved in Medicaid HCBS programs and  interviewed or collected information from state advocacy organizations,  such as organizations representing beneficiaries that receive HCBS. We  reviewed documents related to states\u2019 HCBS programs such as CMS  program approvals and policy manuals, as well as documents related to  the tools states use to assess beneficiaries\u2019 needs, such as  questionnaires. To supplement the state case studies, we also reviewed  relevant publications, such as MACPAC\u2019s inventory of the assessment  tools that states used, and conducted interviews with representatives  from national organizations involved in Medicaid HCBS issues. The scope  of this review was to describe states\u2019 needs assessment processes for  determining HCBS functional eligibility and developing service plans with  respect to the amount of services to provide. While we reviewed HCBS  needs assessment tools, it was not within the scope of our review to  evaluate the benefits or limitations of specific assessment tools or  questions, or to assess state compliance with federal requirements  governing HCBS programs.", "To evaluate steps CMS has taken to improve the coordination and  effectiveness of Medicaid HCBS needs assessment processes, we  reviewed and analyzed relevant federal statutes and regulations,  guidance, and program materials issued by CMS and its contractors. We  compared CMS\u2019s regulations and guidance across Medicaid HCBS  program authorities. We also reviewed evaluations and documentation of  key CMS programs related to HCBS needs assessments, and  interviewed CMS officials responsible for overseeing state Medicaid  HCBS programs and key CMS programs related to HCBS needs  assessments. We also reviewed CMS\u2019s HCBS program approvals in our  selected states and information gathered from our case studies in the  states. In addition, we reviewed the relevant standards for internal control  in the federal government.", "We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Medicaid is jointly financed by the federal government and the states.  States administer their Medicaid programs within broad federal rules and  according to a state plan approved for each state by CMS. CMS issues  program requirements in the form of regulations and guidance, approves  changes to states\u2019 Medicaid programs, provides technical assistance to  states, and conducts other oversight activities. States are responsible for  establishing state policies and procedures in accordance with federal  requirements. Each state must designate a single state agency to  administer its Medicaid program. That agency can delegate programs or  functions\u2014such as enrollment in HCBS programs\u2014to other state and  local agencies, but is responsible for their supervision. States may  provide certain types of HCBS under their state plans. In addition, states  may seek permission from CMS to provide HCBS under waivers of  traditional Medicaid requirements; for example, in order to provide  services to a targeted population or to a limited number of beneficiaries.  Both state plans and waivers are developed and proposed by states and  must be approved by CMS in order for states to receive federal matching  funds for medical expenditures."], "subsections": [{"section_title": "Types of Medicaid HCBS Programs and Delivery Systems", "paragraphs": ["Medicaid HCBS cover a wide range of services and supports to help  individuals remain in their homes or live in a community setting, such as  personal assistance with daily activities, assistive devices, and case  management services to coordinate services and supports that may be  provided from multiple sources. With approval from CMS, states can  provide Medicaid HCBS under one or more types of programs authorized  under different sections of the Social Security Act, including several state  plan and waiver authorities. (See table 1.) States can have multiple HCBS  programs operating under different authorities, and these authorities have  distinct features such as different functional eligibility criteria. For  example, some types of Medicaid HCBS programs only serve  beneficiaries who are functionally eligible for an institutional level of care;  that is, beneficiaries must have needs that rise to the level of care usually  provided in a nursing facility, hospital, or other institution.", "Under some types of HCBS programs, states can tailor their programs to  the needs of specific beneficiary populations they choose to target.  Common populations that states target with their HCBS programs  include: older adults and people with physical disabilities, people with intellectual or developmental disabilities, people with addictions or mental illness, and other populations with specific conditions such as traumatic brain  injury or Alzheimer\u2019s disease.", "States use different delivery systems to provide Medicaid HCBS, and  these may vary across distinct HCBS programs within a state.  Historically, states have predominantly provided HCBS using fee-for- service delivery systems in which states pay providers for HCBS  rendered to beneficiaries and billed to the state. Alternatively, under  managed care long-term services and supports delivery systems, states  contract with managed care plans to provide HCBS to beneficiaries and  typically reimburse the plans through capitation payments, which are  periodic payments for each beneficiary enrolled under the contract.  Managed care plans may contract with HCBS providers to provide  services to beneficiaries or may provide services directly. A state may use  a combination of fee-for-service and managed care delivery systems  within or among its HCBS programs. Estimated expenditures on HCBS  provided under managed care have grown from $8 billion in fiscal year  2012 to $19 billion in fiscal year 2015."], "subsections": []}, {"section_title": "Assessments of Individuals\u2019 Needs for Medicaid HCBS", "paragraphs": ["Individuals require HCBS because they are limited in their ability to care  for themselves due to physical, developmental, or intellectual disabilities,  or to chronic conditions. These services can assist beneficiaries with  activities of daily living\u2014basic, personal, everyday activities such as  bathing, dressing, and eating\u2014or with instrumental activities of daily  living, which are other activities that allow individuals to live independently  in the community, such as meal preparation or managing finances. States  generally assess a beneficiary\u2019s needs for HCBS based on designated  assessment tools\u2014or sets of questions\u2014that assessors use to collect  information from sources such as beneficiaries, caregivers, and health  records. Examples of this information include the following:", "Functional support needs: The need for assistance with activities of  daily living or instrumental activities of daily living.", "Clinical care needs or medical health concerns: Information on an  individual\u2019s health history, active diagnoses, medications, and clinical  services (e.g., wound care or dialysis).", "Cognitive and behavioral support needs: The loss of memory function,  behaviors that pose risks, or adaptive and maladaptive behaviors.", "Beneficiaries\u2019 strengths, preferences, and goals.", "The needs assessment processes may vary across states and distinct  HCBS programs within a state, but typically involves the following key  steps:", "States direct potentially eligible individuals to entities that conduct  Medicaid HCBS needs assessments.", "An assessor conducts a needs assessment, generally in a face-to- face setting, using a designated assessment tool to collect information  based on methods such as interviews with beneficiaries and  caregivers, observation, and review of other sources of information  needed to determine functional eligibility for services. Additional  information relevant for service planning purposes may be included in  this needs assessment, or collected in additional assessments that  may occur after an individual is determined eligible for HCBS.", "Needs assessment results are used to inform determinations of  whether an individual meets particular HCBS programs\u2019 functional  eligibility requirements.", "Needs assessment results for eligible individuals inform the  development of a service plan. The service plan includes the type and  amount of services to be provided to the beneficiary within state- specified limits. States may use distinct needs assessments for  service planning to collect more detailed information or may use the  same assessment that was used to determine functional eligibility.  (See fig. 1.)", "CMS\u2019s goals for HCBS and other Medicaid long-term services and  supports include achieving a sustainable and efficient system that  provides appropriate services to beneficiaries. Effective needs  assessments can help beneficiaries to receive appropriate services to  help them live independently and help states manage utilization of  services, and therefore costs. An effective assessment process would  facilitate efficient use of services and beneficiaries\u2019 access to available  services appropriate to their needs by accurately and consistently  estimating beneficiaries\u2019 needs. Assessment processes that overestimate  needs, underestimate needs, or both, may result in HCBS programs that  offer more services than needed or deny eligible beneficiaries access to  needed services. (See fig. 2.)", "There are varied reasons why HCBS needs assessments may not  accurately and consistently estimate beneficiaries\u2019 needs. HCBS needs  assessments cover complex subject matter and may require assessors to  make observations and judgments about beneficiaries\u2019 needs. For  example, needs assessments typically address numerous and varied  tasks necessary for a beneficiary to live independently, which can be  difficult to measure and subject to interpretation\u2014such as a beneficiary\u2019s  ability to manage finances. Furthermore, CMS has stated that assessors\u2019  conflicts of interest can influence decisions even without individual  assessors realizing this. Conflicts of interest can arise when an assessor  has an incentive for a beneficiary to either over- or under-utilize HCBS, or  an incentive to put the needs of assessors ahead of program goals, such  as promoting certain HCBS when others may be more beneficial or cost  effective. As examples to further illustrate these points, incentives that  could result in over- or under-utilization of HCBS include the following,  respectively. On one hand, an assessor may be a provider of the services  for which the beneficiary may be eligible or a managed care plan that  covers these services, and thus have an incentive to find that individuals  need the services or coverage they offer. Conversely, a managed care  plan may have incentives to reduce enrollees\u2019 service utilization in order  to reduce costs below the capitation payments that the plan receives to  provide care to its enrollees and thus to maximize its profits, which could  influence needs assessments used for service planning."], "subsections": []}]}, {"section_title": "Selected States Used Multiple Tools and Entities to Conduct Needs Assessments across Distinct HCBS Programs", "paragraphs": [], "subsections": [{"section_title": "Selected States Varied in the Extent to Which Needs Assessment Tools Were Tailored to Distinct HCBS Programs and Assessment Purposes", "paragraphs": ["Each of the six selected states we reviewed used varied needs  assessment tools across their distinct Medicaid HCBS programs, for  which both functional eligibility criteria and amount of services available to  beneficiaries can differ widely. The selected states varied in the extent  to which their needs assessment tools were either tailored to a single  Medicaid HCBS program or used across multiple, though not necessarily  all, HCBS programs in the state. The selected states also varied in the  extent to which the same or different needs assessment tools were used  for different purposes, such as determining functional eligibility and  developing a service plan:", "Connecticut. State officials reported that the state was in the process  of piloting a uniform needs assessment tool that it planned to use for  all but one of the Medicaid HCBS programs in the state. This needs  assessment tool was used both to determine functional eligibility and  to develop beneficiary service plans.", "Kentucky. State officials reported that the state had implemented a  new needs assessment tool for one Medicaid HCBS Waiver program  while continuing to use previous tools for other Medicaid HCBS  Waiver programs. The same assessment was used for determining  functional eligibility and for developing the service plan. In selecting  and adapting the new tool, officials said that they considered the  assessment needs of the other Medicaid HCBS waiver programs,  because they would ultimately like to use only one assessment tool  across all HCBS Waiver programs.", "Minnesota. State officials reported that the state had designed a  uniform needs assessment tool for use across all HCBS programs in  the state and had implemented it for most programs. The uniform  assessment tool was used to determine functional eligibility for all  HCBS programs in the state for which it was implemented and was  also used to inform the development of service plans.", "New York. State officials reported that the state had implemented a  set of needs assessment tools, referred to as a uniform assessment  system, for use across multiple HCBS programs. The same uniform  assessment system was used to both determine functional eligibility  and to inform development of beneficiary service plans.", "North Carolina. At the time of our review, officials described  generally using different assessment tools for the separate HCBS  programs in the state. State officials reported that the state had  developed a new needs assessment tool for one Medicaid HCBS  Waiver program, and that they planned to expand use of this tool to  another program in the future. The state used different needs  assessments to determine functional eligibility and for service  planning in its HCBS Waiver programs.", "Washington. State officials reported that a uniform assessment  system was used across HCBS programs in the state. The system  was composed of multiple needs assessment components. One  version of the assessment was used for HCBS programs serving  individuals with intellectual and developmental disabilities, and a  different version was used for all other programs. For all HCBS  programs, the same needs assessment system was used to  determine functional eligibility and to develop the service plan."], "subsections": []}, {"section_title": "Selected States Used Different Types of Entities to Conduct Needs Assessments, Including State Agencies, Local Public Agencies, Contractors, HCBS Providers, and Managed Care Plans", "paragraphs": ["All six states we studied reported using more than one type of entity to  conduct needs assessments for HCBS programs. For example, New York  used five different types of entities, North Carolina used four different  types of entities, and the remaining four states used two or three types of  entities to conduct needs assessments. State agencies, local public  agencies, and independent contractors were used by four states to  conduct needs assessments for at least one HCBS program. All states  but one, Washington, used HCBS providers or managed care plans to  conduct needs assessments (see table 2).", "The types of entities that conduct needs assessments in the selected  states varied across distinct HCBS programs, or for distinct needs  assessment purposes within a single HCBS program. States may use  multiple types of entities to conduct needs assessments because of  differences in how particular HCBS programs were delivered. For  example, the entities used in Minnesota varied by delivery system\u2014the  state reported that it used local public agencies to conduct needs  assessments for all Medicaid HCBS programs other than its managed  care HCBS program, for which managed care plans conducted needs  assessments. In other states, different entities conducted needs  assessments within the same HCBS programs depending on the purpose  of the assessment. For example, because managed care plans may have  a financial interest in eligibility determinations, New York began by July  2015 to use an independent contractor exclusively to conduct needs  assessments to determine functional eligibility for HCBS for new enrollees  in its managed care HCBS program. Once individuals were determined  eligible for managed care HCBS, the managed care plans conducted the  same assessment a second time in order to develop beneficiary service  plans."], "subsections": []}, {"section_title": "Selected States Varied in Whether Formulas Were Used to Inform Functional Eligibility Determinations and Service Planning Decisions", "paragraphs": ["The six selected states also varied in whether they used formulas based  on information collected using Medicaid HCBS needs assessment tools to  inform key functional eligibility and service planning decisions. States  may use such formulas as a means of meeting goals of consistent  treatment of individuals based on needs. In making functional eligibility  determinations, five of the six selected states\u2014Connecticut, Minnesota,  New York, North Carolina, and Washington\u2014reported using a formula to  compare the results of completed needs assessments to eligibility criteria  for at least one of the HCBS programs in the state. For example, for  specific HCBS programs, the assessment tool may compile results of  certain assessment questions into a score that indicates whether or not  the beneficiary is considered to have a need for an institutional level of  care, which is required in order to be functionally eligible for some types  of HCBS programs. For service planning purposes, four states\u2014 Connecticut, Minnesota, North Carolina, and Washington\u2014reported that  in at least one of these states\u2019 distinct HCBS programs, the assessment  tools included formulas. These formulas specified a particular amount of  services or guided a potential range of service amounts for beneficiaries  based on the results of particular assessment questions. (See table 3.)", "Professional judgment may also be used in conjunction with formulas. For  example, when formulas are used to specify particular service levels  based on the needs assessment results, they may specify a number of  service hours or service budget. In either case, other factors may also be  considered in some circumstances. State officials in one state described  the use of formulas to allocate services as an initial step prior to the  detailed person-centered service planning process. For example, in  Minnesota a state formula specifies a certain number of hours of personal  care services partly based on the level of need for assistance with  activities of daily living such as eating, bathing, and toileting. However,  the beneficiary and the entity responsible for the service planning process  determine the specific services to prioritize within the overall number of  hours available, and they may decide to use the authorized hours toward  covered services that were not necessarily part of the formula, such as  instrumental activities of daily living. In contrast, in states or HCBS  programs that did not utilize formulas to specify or guide a particular  amount of services based on assessment results, the amount of services  may be determined\u2014within the scope of service limits applicable to the  particular HCBS program\u2014by the entity responsible for working with the  beneficiary on the service planning process."], "subsections": []}]}, {"section_title": "Selected States Took Steps to Unify Needs Assessment Processes and Increase Consistency", "paragraphs": [], "subsections": [{"section_title": "Selected States Made Efforts to Make Needs Assessment Processes More Uniform across Distinct HCBS Programs and Noted Benefits and Challenges", "paragraphs": ["The six selected states reported taking steps to unify needs assessment  processes across Medicaid HCBS programs as a means of meeting goals  such as improving the efficiency and effectiveness of assessments.  Specifically, states reported taking steps to implement assessment tools  for use across multiple Medicaid HCBS programs in the state. Four  states\u2014Connecticut, New York, Minnesota, and Washington\u2014had  adopted or were piloting needs assessment tools that were used across  multiple state Medicaid HCBS programs (though not necessarily all such  programs in the state) rather than completing separate needs  assessments for each separate program. In addition, Kentucky and North  Carolina had recently implemented new tools for specific Medicaid HCBS  programs that would be considered for use in additional HCBS programs  in the future.", "Important benefits to beneficiaries and HCBS programs have resulted  from efforts to coordinate needs assessment processes by using a  uniform assessment across distinct HCBS programs, according to state  officials and advocates. For example:", "State officials and advocates described that using a uniform  assessment tool to determine functional eligibility for multiple state  HCBS programs resulted in benefits and efficiencies for beneficiaries.  Officials and advocates in Minnesota said that the uniform  assessment process allowed beneficiaries to connect with the  program best suited to their needs, even if they may not have  otherwise been aware of it when initially seeking assistance. For  example, officials said that families of children with autism may apply  for personal care services, but may benefit more from being  connected to another HCBS program that is available and designed to  support the children\u2019s specific needs. Similarly, officials in Connecticut  said that uniform assessment across HCBS programs allows  beneficiaries to access the services that are most appropriate without  multiple assessments. For example, if an individual applies for a  particular HCBS program but a separate program would be more  appropriate, a second assessment is not necessary.", "Connecticut, Washington, and New York officials described how  uniform assessment tools allowed consistent information to be shared  with care providers or when beneficiaries transitioned between care  settings. This, in turn, could allow care providers to better manage  beneficiary care.", "State officials reported uniform assessment tools can result in better  informed program management and policy decisions because they  allow for the ability to collect consistent information across HCBS  programs. For example, officials from Connecticut and Washington  described how comparable assessment information could inform  equitable policies for allocating services. Washington officials  described using information about the extent of beneficiary needs to  inform decisions about how many program staff were needed.  Kentucky officials described how a more uniform assessment process  helped them become aware of when beneficiaries were receiving  services from multiple different non-Medicaid HCBS programs that  were state-funded.", "States and advocates also reported challenges, including inefficiencies, to  using uniform assessments under certain circumstances, such as when  states have different criteria for functional eligibility across their different  HCBS programs, or when different beneficiary populations have different  assessment needs. For example:", "Minnesota officials reported that beneficiaries may need to address  multiple versions of similar eligibility-related questions in its uniform  assessment tool. This was due to the decision to incorporate each  HCBS program\u2019s previously separate functional eligibility questions  into its tool to avoid changes in the information they used to determine  eligibility.", "Beneficiary advocates in three states expressed concerns with the  use of assessments designed for a particular population on a different  population, such as using assessments designed for adults to assess  the needs of children. Officials from Kentucky also noted concerns  about using assessments across distinct populations as part of the  reason the state was not using a single assessment tool.", "State officials and advocates also reported that uniform assessments  resulted in lengthier assessment question sets that take longer to  complete for both the assessor and the beneficiary."], "subsections": []}, {"section_title": "Selected States Reported Efforts to Increase Consistency in How Needs Assessments Were Conducted and Used, but Balancing Consistency with Flexibility Was a Concern", "paragraphs": ["Selected states reported making efforts to improve their assessment  processes to increase consistency in how assessors conduct HCBS  needs assessments. These efforts included using structured questions  and emphasizing training to ensure individual assessors approached the  assessment questions consistently and according to policy, and  addressing potential conflicts of interest by using independent assessors  rather than HCBS providers and managed care plans to conduct certain  needs assessments. States\u2019 improvement efforts included the following:", "Structured questions. Officials from five states described that  structured approaches to assessment questions could improve the  consistency of the assessment results, which are used to make  functional eligibility and service planning decisions. Examples of  structured questions that state officials described included questions  that limited responses to a specific time period\u2014such as the past 7  days\u2014when assessing needs, and questions that used a standard  scale for responses.", "Assessor training. Officials from four states reported focusing on  assessor training to improve consistency. For example, North  Carolina officials reported that determinations of need for personal  care services were improved after training. In the training, assessors  were taught to comply with a state policy to ask that beneficiaries  demonstrate need for assistance with activities of daily living, such as  mobility, rather than solely asking them questions about their needs.", "Independent needs assessments. Officials from three of the  selected states\u2014New York, North Carolina, and Kentucky\u2014reported  that needs assessments were improved by removing entities that had  a financial interest in assessment results from conducting certain  assessments. For example, Kentucky officials reported that using  independent assessors rather than HCBS providers enhanced  consistency because HCBS providers may skew beneficiaries\u2019  assessment results to generate demand for their services. They noted  that providers had resisted their removal from the process.", "Three of the six selected states reported that using a formula to  summarize assessment results increased the consistency with which  functional eligibility determinations or decisions about the amount of  services to provide were made based on each individual\u2019s assessment  results. For example, officials from Washington reported that after  implementing a formula to generate an overall classification of need, the  amount of service hours authorized for beneficiaries was distributed more  equitably and evenly across a continuum from minimum to maximum,  rather than beneficiaries mainly always receiving the maximum number of  hours allowed under program limits. This could allow for limited resources  to be allocated more consistently across beneficiaries with similar levels  of need. Officials from Connecticut similarly reported that during testing of  a formula that was planned for use to specify the amount of service to  provide, they had identified beneficiaries receiving more services than  would be indicated by the formula based on their assessed needs.", "While officials reported that these efforts enhanced consistency of  eligibility determinations and service authorization decisions, state  officials and advocates also acknowledged challenges related to  balancing consistency with flexibility in arriving at decisions\u2014particularly  with respect to the use of formulas for service allocation. The different  approaches of relying on a formula or relying on the judgement of  individual entities each presented its own challenges:  In two states where there was a formula to specify or guide the  amount of services to provide, advocates raised concerns that the  indicated amount did not adequately address needs for some  individuals. For example, advocates noted that the results of a lengthy  and nuanced assessment tool were ultimately reduced to a single  score in order to inform a particular budget for services. While this  score might reflect the average needs of beneficiaries with similar  assessment results, it did not adequately convey individualized needs  of some beneficiaries, according to the advocates.", "On the other hand, there were concerns that relying on entities\u2019  judgment resulted in inconsistency across beneficiaries. Advocates in  three states raised concerns about inconsistent decisions across  managed care plans or geographic areas, or over time, when  determinations of functional eligibility or amount of services to provide  were not based on state-determined formulas.", "In one state, state officials and advocates noted that these concerns  were addressed by using formulas to allocate services but allowing  beneficiaries to use an alternative assessment process in certain  circumstances or receive \u201cexceptions\u201d to the amount of service  authorized by the state\u2019s formula based on individual circumstances.", "Beneficiary advocates also emphasized that the amount of services that  are authorized for beneficiaries may reflect the scope of available  services rather than the needs of an individual beneficiary. To the extent  that a given HCBS program has limited resources for providing services,  assessment results may be used to allocate resources within those  limitations rather than to estimate the amount of services that would fully  meet needs. For example, an assessment formula in Washington is  designed to specify service amounts based on beneficiaries\u2019 identified  levels of need and the amounts that are available for particular levels of  need may increase or decrease based on the state budget. State officials  in Connecticut also said that because funding can vary for different HCBS  programs within a single state, moving to a consistent formula for  analyzing assessment results may shed light on the extent that  beneficiaries with similar levels of need receive different levels of services  depending on available program resources."], "subsections": []}]}, {"section_title": "CMS Has Taken Steps to Make HCBS Needs Assessment Processes More Effective, Uniform, and Free from Conflict of Interest, but Some Concerns Remain Unaddressed", "paragraphs": [], "subsections": [{"section_title": "Two CMS Programs Have Sought to Make Assessment Processes More Effective and Uniform within and across States", "paragraphs": ["CMS has implemented two key programs that facilitate state efforts to  make their HCBS needs assessment processes more uniform, among  other goals. One of these is called Testing Experience and Functional  Tools (TEFT) and is designed, in part, to test the effectiveness of a set of  specific questions that states can use to conduct needs assessments.  CMS designed the TEFT assessment questions for use across multiple  HCBS beneficiary populations, including beneficiaries (1) of advanced  age, or with (2) intellectual or developmental disabilities, (3) physical  disabilities, (4) serious mental illnesses, or (5) traumatic brain injuries.  The assessment questions being tested are limited to needs that may be  relevant among these populations and do not assess needs that may  apply to only certain populations; for example, questions to assess  cognitive status that may apply to those with intellectual or developmental  disabilities or other conditions but that do not apply to those with physical  disabilities only. CMS announced TEFT in 2012 and six states received  grants to test needs assessment questions for their effectiveness, which  includes their validity (defined as accuracy in measuring individuals\u2019  functional abilities) and reliability (defined as the consistency of results  across assessors). Three of these six states were among those we  selected for this review: Connecticut, Kentucky, and Minnesota. Officials  in these states told us that they had not completed field testing the TEFT  questions, and officials in two of these states (Connecticut and  Minnesota) said they would consider the option of using TEFT questions  in their assessments in the future. CMS officials told us that CMS plans to  make the assessment questions they determine to be valid and reliable  available to all states in the spring of 2018.", "Another key program that CMS has implemented is the Balancing  Incentive Program, which was authorized by the Patient Protection and  Affordable Care Act in 2010, to provide incentives for eligible states to  rebalance their long-term services and supports systems towards more  home- and community-based care. Among other things, this program  required participating states to collect information on specific topics  related to beneficiaries\u2019 needs, but allowed states to choose the needs  assessment questions. Under this program, states could use different  assessment tools to gather information for HCBS programs serving  different populations as long as the states used tools that collected  information on 26 key topics that spanned five broad areas, or domains.  The five domains were (1) activities of daily living, (2) instrumental  activities of daily living, (3) medical conditions/diagnoses, (4) cognitive  functioning, memory, and learning, and (5) behavior concerns (e.g.,  injurious, uncooperative, or destructive behavior). The requirement to  collect information from these five domains for each beneficiary  population was designed to promote consistency in determining  beneficiaries\u2019 needs across HCBS programs, while allowing states to  tailor their assessment processes to specific beneficiary populations,  according to CMS officials. For example, New York reported collecting  information on the required topics using a suite of six assessment tools  that varied to reflect differences in beneficiaries\u2019 age, population, and  other factors.", "The Balancing Incentive Program ended in 2015, although some states  were provided extensions to carry out planned activities. Of 20  participating states evaluated, 18 successfully carried out the requirement  to incorporate the 26 key topics in their needs assessments, according to  a program evaluation prepared for the HHS Assistant Secretary for  Planning and Evaluation. In addition, CMS has provided information and  lessons learned from the Balancing Incentive Program to all states via its  website and, according to CMS officials, has done several related  presentations. While CMS does not have plans to conduct additional  evaluations of assessment tools used by participating states, CMS  officials told us that there would be some value to doing so and they may  consider it in the future."], "subsections": []}, {"section_title": "CMS Has Taken Steps to Improve Effectiveness by Addressing the Potential for Conflicts of Interest, but These Steps Do Not Address All Types of Programs or Conflicts", "paragraphs": ["CMS has sought to improve HCBS needs assessments by addressing  concerns about the potential for conflicts of interest that HCBS providers  and managed care plans may have in conducting assessments. As  previously noted, HCBS providers may have a financial interest in  providing services that could potentially lead to over-utilization of  services, while managed care plans may have a financial interest in  increasing enrollments and reducing enrollees\u2019 service utilization."], "subsections": [{"section_title": "Addressing HCBS Providers\u2019 Potential for Conflicts of Interest", "paragraphs": ["CMS has taken steps to address conflicts of interest that may occur when  HCBS providers conduct needs assessments, but gaps remain. The  Balancing Incentive Program, which ended in 2015, required the 21  participating states to either separate HCBS provision from needs  assessment processes or to take steps to mitigate the potential for  conflicts of interest that occur when HCBS providers conduct  assessments. In addition, CMS implemented regulations requiring all  states to establish standards for conducting needs assessments that  address certain potential conflicts for particular types of HCBS programs.  The specific requirements may differ by program and whether the  assessment is used to determine functional eligibility or develop service  plans:", "For example, for State Plan HCBS\u2014a relatively small program that  accounted for less than 1 percent of estimated Medicaid HCBS  expenditures in fiscal year 2015\u2014states are required to establish  conflict-of-interest standards that address both (1) evaluation of  eligibility, and (2) needs assessments used to develop service plans.  These standards must prohibit HCBS providers from conducting  eligibility evaluations and needs assessments for this program, with  certain exceptions in which the potential for conflict of interest must be  mitigated.", "Under the HCBS Waiver, Community First Choice, and Self-Directed  Personal Assistant Services programs\u2014which collectively accounted  for 60 percent of estimated expenditures for Medicaid HCBS in fiscal  year 2015\u2014states are required to establish standards that generally  prohibit HCBS providers from conducting assessments of need used  to develop service plans, but this requirement does not apply to  assessments that states may use to determine functional eligibility.", "In addition, for State Plan Personal Care Services programs and other  HCBS authorized under Section 1905(a) of the Social Security Act\u2014 which collectively accounted for 29 percent of estimated Medicaid  HCBS expenditures in fiscal year 2015\u2014regulations do not  specifically limit HCBS providers from conducting assessments that  states may use to determine eligibility or develop service plans.", "As a result of these differences in requirements across HCBS authorities,  there are gaps in federal conflict-of-interest requirements applicable to  entities that may conduct needs assessments. For example, several  types of HCBS programs have specific requirements for states to  establish standards to address potential conflicts of interest when HCBS  providers conduct needs assessments that are used for service planning,  but there are no equivalent requirements for State Plan Personal Care  Services programs. (See table 4). In addition, HCBS providers may  conduct certain needs assessments that inform HCBS functional eligibility  determinations, but specific conflict of interest requirements are generally  not in place for such assessments. With respect to gaps in requirements  specific to needs assessments that are used to inform functional eligibility  determinations, CMS officials suggested that state agencies\u2019  responsibility for making final eligibility determinations addresses conflict- of-interest concerns. Specifically, officials noted that CMS regulations  require state agencies to determine eligibility, and that, in doing so, states  may consider needs assessments conducted by assessor entities as well  as information from other sources. However, states may vary in the  extent to which they consider information from other sources. In addition,  it is unclear how the requirement that the state maintain responsibility for  eligibility determinations addresses potential conflicts of interest when an  HCBS provider conducts a needs assessment upon which a  determination of eligibility for HCBS may be based.", "Gaps in requirements to address the potential for conflicts of interest  when HCBS needs assessments are conducted by HCBS providers are  not consistent with federal internal control standards, which require  federal agencies to identify, analyze, and respond to risks related to  achieving defined objectives. While CMS has a goal of achieving an  effective long-term services and supports system that provides  appropriate services to beneficiaries, because the agency does not  require states to address the potential for HCBS providers\u2019 conflicts of  interest in conducting needs assessments under all HCBS authorities,  there is a risk that some states may rely on HCBS providers to conduct  assessments without addressing HCBS providers\u2019 financial incentives,  which can lead to over-utilization of HCBS. Examples among our case  study states include:", "North Carolina: A program integrity review conducted by CMS in  North Carolina found that the state\u2019s transition to the use of an  independent entity to conduct needs assessments for the State Plan  Personal Care Services Program\u2014rather than relying on HCBS  providers to assess beneficiary needs\u2014was followed by a reduction in  both the number of beneficiaries using the program and a 30 percent  reduction in average monthly expenditures. This suggests the  program may have been over-utilized before the independent entity  was used to conduct needs assessments. CMS highlighted this use of  an independent entity as a practice that merits consideration from  other states.", "Kentucky: State officials told us that when they transitioned to the  use of independent assessors they also identified apparent instances  of over-utilization that were occurring before they implemented  independent assessments and other program changes. For example,  officials said that when testing a new assessment tool using  independent assessors, they identified individuals who had a low level  of needs, and who did not appear to require an institutional level of  care, as required for program eligibility, but who had been assessed  at that level in the past."], "subsections": []}, {"section_title": "Addressing Managed Care Plans\u2019 Potential for Conflicts of Interest", "paragraphs": ["Conflict-of-interest concerns also exist for states with managed care  HCBS programs where managed care plans conduct assessments.  CMS has taken separate steps to address these concerns, including  issuing guidance and new regulatory requirements.", "CMS issued guidance in May 2013 that addressed best practices and  CMS\u2019s expectations of new and existing managed long-term services and  supports programs, which include managed care HCBS.  The guidance  stated that managed care plans may not be involved in any HCBS  functional eligibility determinations or needs assessment processes prior  to a beneficiary\u2019s enrollment in the plan. CMS officials told us that  allowing managed care plans to assess individuals before enrollment  without proper oversight by the state may provide an opportunity for plans  to selectively enroll individuals who require less HCBS. Despite this risk,  we found that CMS does not always take steps to ensure that states have  procedures in place to guard against this practice prior to approving their  programs. CMS officials told us that they evaluate state programs  individually and may not apply all of the detailed concepts in its guidance  when developing state-specific requirements for managed care HCBS  programs. CMS\u2019s application of the guidance in the three states selected  for this review varied across types of HCBS programs. Examples from  1115 Demonstration and HCBS Waiver programs for our case study  states include the following:", "1115 Demonstration programs: Of the six states we selected for this  review, one\u2014New York\u2014operated a managed care HCBS program  authorized by an 1115 demonstration. Prior to July 2015, New York  used managed care plans to assess and determine individuals\u2019  functional eligibility for certain HCBS programs. One managed care  plan admitted to enrolling 1,740 individuals in managed care HCBS  whose needs did not qualify them for the program from January 2011  to September 2013, and it resolved allegations that it had submitted  false claims for Medicaid HCBS in a $35 million settlement with the  U.S. Department of Justice. In 2013, CMS amended the terms and  conditions of New York\u2019s demonstration to require the state to use an  independent assessor entity to both conduct needs assessments and  determine eligibility for managed care HCBS, and New York has  contracted with an independent assessor to carry out these functions.  While this requirement applied specifically to New York, it does not  necessarily apply to other states, as CMS\u2019s terms and conditions for  1115 demonstrations can vary across states. According to CMS, an  additional 11 states had managed care HCBS programs approved  under 1115 demonstrations as of July 2017. However, CMS officials  told us that they did not have information on whether or not these 11  states were using managed care plans to conduct needs  assessments for the purpose of determining individuals\u2019 functional  eligibility.", "HCBS Waiver programs: Two of our six selected states\u2014Minnesota  and North Carolina\u2014used managed care plans to deliver services for  HCBS Waiver programs. In these states, CMS approved HCBS  Waiver applications that proposed to use managed care plans to  conduct or evaluate needs assessments used to determine functional  eligibility for the programs, contrary to CMS\u2019s May 2013 guidance.  CMS officials said that when states allow managed care plans to be  involved in these assessments, CMS would expect states to provide  oversight as part of their quality improvement strategies required  under HCBS Waivers. However, CMS does not require states to  provide assurances or evidence of oversight directly related to  managed care plans\u2019 potential for conflicts of interest when plans are  involved in needs assessments that states use to determine functional  eligibility.", "CMS officials told us that states that do allow managed care plans to  conduct assessments used to determine eligibility for HCBS should be  aware of the potential for conflicts of interest in order to provide adequate  oversight. CMS officials also told us that they engage in a conversation  with states related to oversight of the assessment process when CMS  learns of such states. However, CMS does not collect complete  information on which states use managed care plans for needs  assessments prior to enrollment, and states may not implement  precautions absent a specific CMS requirement to address the potential  for these conflicts of interest. The absence of requirements for states to address acknowledged risks is not consistent with federal internal control  standards that require federal agencies to identify, analyze, and respond  to risks related to achieving defined objectives.", "Developing Service Plans and Determining the Amount of HCBS to  Provide  Separate concerns pertain to managed care plans\u2019 involvement in HCBS  needs assessments for service planning purposes that are conducted by  plans after enrollment. Advocates in two of the three selected states with  managed care HCBS programs, New York and North Carolina, expressed  concerns about managed care plans\u2019 incentives to reduce their costs by  reducing enrollees\u2019 HCBS service levels, leading to reduced access to  needed HCBS. For example, advocates in New York highlighted the  growth in fair hearings that enrollees initiated to dispute reductions in  HCBS they receive, which can result from inaccurate needs  assessments. In May 2016, in the preamble to a final rule that amended  managed care regulations, CMS responded to concerns from  commenters about managed care plans\u2019 involvement in the needs  assessments used to develop service plans by stating that managed care  plans\u2019 HCBS needs assessments of enrollees are a critical component of  the plans\u2019 efforts to manage enrollees\u2019 care. CMS also noted that existing  appeals processes, which are similar to fair hearings, provide adequate  safeguards to address instances when enrollees believe their needs  assessments do not reflect their true needs. However, according to  CMS, beneficiaries enrolled in managed long-term services and supports  are among the most vulnerable and often require enhanced protections to  assure their health and welfare.", "To implement additional beneficiary protections, the May 2016 managed  care regulations require states with managed care HCBS programs to  implement a beneficiary support system. A beneficiary support system  generally provides individuals with education and assistance related to  appeals, grievances, and fair hearings, and assists states with the  identification and resolution of systemic issues through review and  oversight of program data. These regulations also require states to report  annually on the activities and performance of these systems in order to  drive continual improvements. CMS stated that reporting requirements of  this nature would help the agency address fragmented program  information about state managed care programs and help improve  oversight efforts. However, as of September 2017, CMS had not issued  guidance to states on the content and form of this reporting, and under  the regulations, states are not required to submit reports until CMS issues  such guidance. CMS officials told us they were unsure whether they  would issue this guidance, and thus it is unclear whether and when the  reporting requirement will take effect.", "We previously made a recommendation to CMS that pertains to this  issue. Specifically, in a report published in August 2017, we identified  similar concerns with the lack of requirements for state managed long- term services and supports programs to report information that CMS  needs to adequately oversee states\u2019 programs for ensuring beneficiary  access to services. We found that existing state reporting did not always  include key elements necessary for CMS to monitor certain key aspects  of beneficiaries\u2019 access and quality of care, including data related to  appeals and grievances. We recommended that CMS improve its  oversight of managed long-term services and supports by taking steps to  identify and obtain key information needed to oversee states\u2019 efforts to  monitor beneficiary access to quality services. HHS concurred with this  recommendation and stated that the agency will take this  recommendation into account as part of an ongoing review of the 2016  managed care regulations. This action could help to address the  concerns discussed above regarding managed care plans\u2019 potential for  conflicts of interest in conducting needs assessments for service planning  purposes."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["HCBS needs assessments can directly affect whether individuals are  eligible to receive HCBS and the amount of services they receive. Given  the growth in spending for Medicaid HCBS and the potential vulnerability  of individuals seeking HCBS, it is critical that needs assessments are  effective in ensuring that beneficiaries receive the help they need to live  independently while at the same time reducing the risk of over-utilization  of HCBS. CMS plays an important role in ensuring that states  appropriately assess the needs of those seeking HCBS, including  addressing the potential for entities that conduct needs assessments to  have conflicts of interest. Conflicts of interest can result in inaccurate  assessments, potentially leading to provision of unnecessary services or  restricting other beneficiaries\u2019 access to needed services. CMS has  required states to take actions to avoid or mitigate the potential for  conflicts of interest for some HCBS programs, and states that have taken  steps to protect against conflicts of interest in HCBS programs have  reported improvements; however, we found gaps in federal requirements  for such safeguards. These gaps in requirements are inconsistent with  federal control standards that require federal agencies to identify,  analyze, and respond to risks related to achieving defined objectives.  CMS could improve the efficiency and effectiveness of Medicaid HCBS  programs by taking additional steps to consistently require all types of  states\u2019 programs to avoid or mitigate the potential for conflicts of interest  in conducting needs assessments, as appropriate."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Administrator of CMS should ensure that all types of Medicaid HCBS  programs have requirements for states to avoid or mitigate potential  conflicts of interest on the part of entities that conduct needs  assessments that are used to determine eligibility for HCBS and to  develop HCBS plans of service. These requirements should address both  service providers and managed care plans conducting such  assessments. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for review and comment, and  HHS provided written comments, which are reprinted in appendix I. HHS  also provided technical comments, which we incorporated as appropriate.  HHS concurred with our recommendation to ensure that all types of  Medicaid HCBS programs have requirements for states to avoid or  mitigate potential conflicts of interest on the part of entities that conduct  needs assessments. HHS stated that it has a regulatory structure in place  to protect against potential conflicts of interest on the part of entities  responsible for determining eligibility for HCBS and developing service  plans. As described in our report, however, there are gaps in required  conflict of interest standards applicable to entities that conduct needs  assessments that inform HCBS eligibility determinations. Further, the  conflict of interest requirements related to service plans do not apply to all  programs, such as State Plan Personal Care Services programs.  Developing additional requirements in response to such gaps would  further improve efficiency and effectiveness.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or iritanik@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tim Bushfield (Assistant  Director), Emily Beller Holland, Anne Hopewell, Laurie Pachter, Chris  Piccione, Vikki Porter, Russell Voth, and Jennifer Whitworth made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Medicaid spent $87 billion in FY2015 for long term care services provided in homes and community settings. To receive these services, individuals\u2019 needs must first be assessed\u2014by a government agency, independent contractor, care provider, or others.", "However, a conflict of interest can exist if the assessor has a financial interest in the outcome. For example, one state took steps to address conflicts after a managed care plan admitted enrolling 1,740 individuals whose needs did not qualify them.", "We recommended that the federal Centers for Medicare & Medicaid Services expand requirements for states to address potential conflicts of interest."]}
{"id": "GAO-19-62", "url": "https://www.gao.gov/products/GAO-19-62", "title": "Central America: USAID Assists Migrants Returning to their Home Countries, but Effectiveness of Reintegration Efforts Remains to Be Determined", "published_date": "2018-11-08T00:00:00", "released_date": "2018-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2014, instability driven by insecurity, lack of economic opportunity, and weak governance led to a rapid increase of unaccompanied alien children (UAC) from El Salvador, Guatemala, and Honduras arriving at the U.S. border. In fiscal year 2017, the Department of Homeland Security reported (DHS) apprehending more than 200,000 nationals from these countries and removed nearly 75,000 nationals, including UAC, of these countries from the United States and returned them to their home countries. Current estimates also indicate nearly 350,000 individuals may need to be reintegrated to El Salvador and Honduras over the next few years when their Temporary Protected Status in the United States expires.", "GAO was asked to review U.S. efforts to support the reintegration of Central American migrants. This report describes (1) USAID efforts to assist reception and reintegration of migrants from El Salvador, Guatemala, and Honduras into their home countries since fiscal year 2014; and (2) what is known about the effectiveness of these efforts. GAO reviewed agency program documents and funding data; interviewed officials from U.S. government agencies, IOM, and host governments and beneficiaries; and conducted site visits in these countries.", "GAO is not making any recommendations in this report. USAID and IAF provided formal comments, which are reproduced in this report, and all agencies provided technical comments, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Since fiscal year 2014, the U.S. Agency for International Development (USAID) has provided approximately $27 million to the International Organization for Migration (IOM)\u2014an intergovernmental organization focusing on migration\u2014for assistance to migrants returning to El Salvador, Guatemala, and Honduras. Assistance to migrants includes short-term reception services, such as food and transportation, renovating reception centers, and collecting data on returning migrants that are used to support their reintegration. Assistance also includes long-term reintegration efforts, such as counseling services and employment assistance to make it easier for migrants to readjust to and stay in their home countries. These various efforts are in different stages of development.", "While reception services for migrants have improved, USAID has not yet assessed the effectiveness of reintegration efforts. USAID monitored and assessed reception services through site visits, meetings, and reports from IOM. IOM's early efforts improved the three host governments' capacity to provide reception services to returning migrants. For example, since fiscal year 2014, IOM renovated the seven reception centers and shelters being used in El Salvador, Guatemala, and Honduras. Further, with IOM's assistance, the host governments have improved their capacity to collect data about returning migrants. According to USAID and IOM, host governments are using these data to design policies and develop programs to provide reintegration assistance. While USAID has not yet assessed the effectiveness of reintegration efforts, many of these programs are just beginning. USAID expects to sign a new agreement by the end of December 2018 that would involve, among other things, monitoring and evaluating reintegration efforts in the three countries."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2014, instability in the Northern Triangle of Central America, driven by  insecurity, lack of economic opportunity, and weak governance, led to a  rapid increase of unaccompanied alien children (UAC) from El Salvador,  Guatemala, and Honduras arriving at the U.S. border. In response, the  U.S. government funded activities in these countries that, among other  things, created information campaigns about the dangers of the journey  and targeted criminal organizations involved in human smuggling.  Individuals from these three countries, however, have continued to  migrate to the United States, and, when apprehended and removed from  the United States, will ultimately need to be reintegrated into their home  countries. The Department of Homeland Security (DHS) reported  apprehending more than 200,000 migrants from El Salvador, Guatemala,  and Honduras in fiscal year 2017. In addition, nearly 75,000 nationals  from these countries, including UAC, were removed from the United  States by DHS and returned to their countries in fiscal year 2017. In  2018, the Administration made the decision to terminate Temporary  Protected Status (TPS) for nationals of El Salvador and Honduras,  effective September 9, 2019, and January 5, 2020, respectively. The  decision has the potential to raise the number of nationals these countries  may need to reintegrate in the next few years by nearly 350,000 adults,  including approximately 262,500 Salvadorans and 86,000 Hondurans.  Many of these adults also have children who are U.S. citizens and may  return with them, according to DHS.", "The U.S. government, primarily through the U.S. Agency for International  Development (USAID), the Department of State (State), and the Inter- American Foundation (IAF), has provided assistance to help address the  needs of returning migrants since 2014, including receiving them upon  arrival and reintegrating them in their home countries. The U.S.  government provides additional assistance to these countries through the U.S. Strategy for Central America, including the Central America Regional  Security Initiative. These programs focus on the drivers of migration  including violence and the lack of economic opportunity. While  reintegration efforts do not have dedicated funding, Central America  Regional Security Initiative and Development Assistance funds support  these programs.", "We were asked to review a number of issues related to U.S. efforts to  assist the reintegration of Central American migrants. This report  describes (1) USAID efforts to assist the reception and reintegration of  migrants from El Salvador, Guatemala, and Honduras back into their  home countries since fiscal year 2014; and (2) what is known about the  effectiveness of these efforts. In addition, we reviewed how U.S. agencies  have coordinated efforts to assist the reintegration of returning migrants  (see appendix II).", "To address the objectives for this review, we reviewed agency program  documents and funding data, and interviewed officials from U.S.  government agencies including USAID, State, and IAF; host  governments; and the International Organization for Migration (IOM). We  conducted site visits in March 2018 in El Salvador, Guatemala, and  Honduras. To determine what is known about the effectiveness of  reintegration efforts from fiscal years 2014 through 2017, the most recent  available information at the time of our review, we reviewed agency  evaluation policies and progress reports and evaluations. We interviewed  U.S. officials in Washington, D.C. We also interviewed U.S. government,  host government, and nongovernment officials in El Salvador, Guatemala,  and Honduras, where we also visited U.S. agency-assisted projects. For  more information on our scope and methodology, see appendix I.", "We conducted this performance audit from November 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The rapid increase of UAC apprehended by DHS in 2014 led to USAID\u2019s  assistance for reception and reintegration efforts in Central America\u2019s  Northern Triangle. USAID\u2019s efforts, carried out by its implementing  partner IOM, have focused on children and family units, as they are  considered the most vulnerable migrant populations. According to DHS,  the number of UAC from any country who were apprehended at the U.S.- Mexico border rose from nearly 28,000 in fiscal year 2012 to more than  42,000 in fiscal year 2013, and to more than 73,000 in fiscal year 2014.  Prior to fiscal year 2012, the majority of UAC apprehended at the border  were Mexican nationals. However, nearly three-fourths of UAC  apprehended in fiscal year 2014 were nationals from El Salvador,  Guatemala, and Honduras. In fiscal year 2014, approximately 122,000  nationals (both children and adults) from the Northern Triangle countries  were removed from the United States and returned to their home  countries, according to DHS. That number decreased to approximately  75,000 in fiscal year 2017. For the number of nationals from El Salvador,  Guatemala, and Honduras removed by DHS\u2019s U.S. Immigration and  Customs Enforcement (ICE) from fiscal years 2014 through 2017, see  figure 1.", "In addition to migrants returned from the United States, the Northern  Triangle countries also receive migrants returned from Mexico. In 2016  and 2017, the number of returnees from Mexico to these three countries  was greater than those returning from the United States, according to  information from countries\u2019 migration directorates. In 2017, however, the  number of returning migrants from the United States and Mexico  decreased in all three countries, as figure 2 shows.", "We have previously reported that the causes of migration from El  Salvador, Guatemala, and Honduras to the United States are multiple and  include:  the lack of economic and job opportunities, gang-related violence and other insecurity issues, high poverty rates and poor living conditions,  the desire for family reunification, and perceptions of U.S. immigration policy.", "A number of U.S. agencies provide assistance to these countries to  address some of these socioeconomic issues, such as violence and  poverty. For example, USAID, State, and DHS have programs providing  assistance in areas such as economic development, rule of law, citizen  security, law enforcement, education, and community development  funded through the U.S. Strategy for Central America, including the  Central America Regional Security Initiative. To support efforts to prevent  migration, such as targeting human smuggling organizations and  developing public information campaigns, the U.S. embassies in El  Salvador, Guatemala, and Honduras coordinate through interagency  working groups. For more information on these coordination activities,  see appendix II."], "subsections": []}, {"section_title": "USAID Provides Funding for Assistance to Reintegrate Migrants Returning to El Salvador, Guatemala, and Honduras", "paragraphs": ["USAID has provided funding for short- and long-term assistance to  migrants returning to El Salvador, Guatemala, and Honduras, including  assisting returning migrants upon arrival at points of entry and  reintegrating them into their home countries. USAID provided  approximately $27 million to IOM through three program contribution  agreements to conduct these efforts. These efforts are in various stages  of development in all three countries. Host governments face challenges  in their efforts to reintegrate migrants, including limited resources and a  lack of employment opportunities."], "subsections": [{"section_title": "USAID Provides Funding for Short and Long-Term Assistance for Returning Migrants", "paragraphs": ["USAID has provided funding for short- and long-term assistance to  migrants returning to El Salvador, Guatemala, and Honduras, whether  they are returning from the United States or Mexico. Short-term efforts  assist returning migrants arriving at reception centers in their home  countries. These efforts involve processing migrants upon arrival at the  points of entry and generally providing post-arrival assistance, such as  food, transportation, hygiene and school kits, and clothes within the first  two days after returning (see fig. 3). Long-term efforts focus on  reintegrating migrants into their home countries. Reintegration seeks to  restore migrants into society and to reestablish economic, psychological,  and social ties.", "USAID has assisted migrants returning to their home countries since  2014 through three program contribution agreements, implemented by  IOM.  1.  Reception/ In-Processing and Repatriation Assistance to Returning  Families and Unaccompanied Children in the Northern Triangle of  Central America Agreement (also known as Post-Arrival and  Reception Assistance or PARA), (July 2014\u2013April 2016). This  agreement between USAID and IOM\u2014established in response to a  rapid increase of UAC from El Salvador, Guatemala, and Honduras  arriving at the U.S. border in 2014\u2014intended to, among other things,  achieve the overall objective of contributing to the \u201cdignified, holistic,  and sustainable\u201d return of children and families in the Northern  Triangle. According to the program description, IOM viewed  infrastructure improvements as a key component of the program. For  example, IOM included the renovation of reception centers and  shelters among the activities that might be carried out to meet one of  the program goals, which related to supporting the countries\u2019  capacities to process and assist returnees at points of entry and  migrant shelters. Other goals included efforts to address topics such  as providing capacity building to key government agencies, non- governmental organizations, and other partners offering assistance to  returning migrants, and improving migration data collection and  information sharing among governments, donors, humanitarian  agencies, and civil society.  2.  Northern Triangle Migration Information Initiative Agreement (NTMI),  (September 2015\u2013March 2018). This second agreement between  USAID and IOM focused on improving the quality, reliability, and  uniformity of migration information. According to the program  description, the program would address the need for improved  migration information to contribute to the development of more  strategic public policies among institutional counterparts involved in  the reception, assistance, and reintegration of returning migrants. The  program\u2019s goal was to strengthen the governments\u2019 capacity to  manage, collect, and analyze migration information to support  humanitarian action and protect vulnerable populations in the  Northern Triangle countries. This effort also involved taking steps to  develop and strengthen data systems to register returning migrants\u2019  information.  3.  Return and Reintegration in the Northern Triangle Agreement, (June  2016\u2013June 2019). This third agreement between USAID and IOM was  intended to continue to promote and ensure more humane and  dignified assistance to and sustainable reintegration of migrants upon  return to communities of origin by strengthening the capacities of key  stakeholders to assist, care for, and protect returning UAC and  migrant families in the Northern Triangle countries. According to the  agreement, the program would address things such as expanding the  range of government-supported opportunities for returning migrants  while providing high-quality services during the reintegration process  at the local level."], "subsections": []}, {"section_title": "USAID Provided Approximately $27 Million for Assistance to Returning Migrants, in Fiscal Years 2014 through 2016", "paragraphs": ["USAID provided approximately $27 million for assistance to IOM through  the three program contribution agreements. Once the program  contribution agreement is signed and the funds are disbursed to IOM,  USAID considers the funds expended for its purposes. As of April 2018,  IOM has expended all the funds for the first two agreements, $7.6 million  and $2.5 million respectively, and $7.1 million of $16.8 million, or 42  percent, of the funds for the third.", "For all three agreements, from fiscal year 2014 through April 2018, IOM  expended about $9.1 million in El Salvador, about $5.4 million in  Honduras, and about $2.7 million in Guatemala, according to IOM. (See  figure 4.)", "Asociaci\u00f3n de Retornados Guatemaltecos  (ARG)   The civil society organization Asociaci\u00f3n de  Retornados Guatemaltecos (ARG) begins its  work with returning migrants from the United  States at the Guatemalan Air Force Base  Reception Center. Members of ARG are  returned migrants themselves who started the  association in 2013 because they understood  the experiences of returning migrants and  wanted to help people in similar situations by  providing a support network. According to an  ARG volunteer and our observations, at the  reception center, an ARG volunteer greets  every returning migrant as they come through  the door. After migration authorities process  the returning migrants and provide them a  snack, an ARG volunteer helps them make a  domestic or international telephone call to  their family members. Once the migrants have  received any belongings and exchanged  money, ARG volunteers offer them clothing,  help with various tasks\u2014such as receiving  money through wire transfers or registering  them for a new identity card\u2014and, if  necessary, purchase bus tickets for them to  return to their communities of origin. ARG  volunteers stay until all the returning migrants  are served, and, if the migrants are fearful of  returning to their communities, accompany  them to the Casa del Migrante, a shelter that  provides protection assistance. The  volunteers told us that they maintain a  database to track the returned migrants, later  call the returned migrants to make sure they  arrived safely in their communities, and offer  them assistance in getting certified in skills  they may have acquired abroad, such as  construction work or speaking English. ARG  also connects returned migrants with  vocational or training opportunities and  potential scholarships. $49,740 to expand a network of migrant returnees to facilitate  reintegration and provide information on locally available resources to  returnees, such as credit access, government-training programs, market  information, and contracting opportunities. The grantee also developed a  working group to discuss with government officials and the private sector  the health issues returnees face. Even though the grant has ended, the  lnstituto Salvadore\u00f1o del Migrante\u2019s efforts continue with funds from other  donors, according to IAF."], "subsections": []}, {"section_title": "Efforts to Assist Returning Migrants are in Various Stages of Development in the Three Countries", "paragraphs": ["Efforts to assist reception, migrant-related data collection, and  reintegration are in various stages of development in all three countries.  IOM, with U.S. assistance, has renovated seven reception centers and  shelters in El Salvador, Guatemala, and Honduras and improved the  collection of migration data to understand the characteristics of the  population returning to their countries to inform decisions about allocating  resources needed for reintegration. However, in all three countries the  use of migration information varies and reintegration efforts are just  beginning."], "subsections": [{"section_title": "Reception Centers and Post- Arrival Assistance", "paragraphs": ["El Salvador has one reception center for returning migrants; Guatemala  has three reception centers and two shelters; and Honduras has three  reception centers. See figure 5 for the locations of these reception  centers and shelters as well as points of entry.", "We observed that at the reception centers in the three countries, returning  migrants go through a similar reception process. The process may differ  slightly depending on the country and whether the returning person is an  adult, part of a family unit, or UAC. See figure 6.", "IOM has assisted in the renovation of the countries\u2019 reception centers and  shelters and provided post-arrival assistance to returning migrants.  Country-specific information on these facilities follows.", "El Salvador has one IOM-supported reception center, called Direcci\u00f3n de  Atenci\u00f3n al Migrante (DAMI), Directorate of Assistance to Migrants, but  informally known as La Chacra. IOM completed its efforts to renovate the  center in February 2016, and increased its capacity to receive up to 200  returning migrants at a time. The center serves adults, UAC, and family  units returned by chartered bus from Mexico or on chartered flights from  the United States. Post-arrival assistance is provided at the center. See  figures 7 and 8.", "Guatemala has three reception centers and two shelters for returning  migrants. IOM renovated the two shelters in 2015 and one of the  reception centers in 2017. IOM also provided information technology  equipment for one reception center and plans to renovate another  reception center in 2018. See figure 9.", "The three reception centers include:", "Sala de Recepci\u00f3n de Ni\u00f1as, Ni\u00f1os y Adolescentes Migrantes no  Acompa\u00f1ados y Unidades Familiares (Reception Center for  Unaccompanied Migrant Children and Family Units), La Aurora  International Airport, Guatemala City. This center, which opened in  May 2017, serves UAC and family units returning by commercial  flights from Mexico or the United States. The center provides post- arrival assistance, and has areas for immigration processing,  psychological and social assistance, and breast-feeding. It also has a  medical clinic and a play area for children. See figure 10.", "Centro de Recepci\u00f3n de Retornados de la Fuerza A\u00e9rea  Guatemalteca (Reception Center for Returnees at Guatemalan Air  Force Base), Guatemala City. This reception center serves adults,  UAC, and families returning by chartered flights from the United  States, and provides post-arrival assistance to them. See figure 11.  Adults traveling without children are processed separately from  families. In July 2015, IOM opened a small remodeled area of the  center that receives returning migrant families and provides post- arrival assistance.", "Centro de Recepci\u00f3n de Retornados en Tec\u00fan Um\u00e1n (Reception  Center for Returnees at Tec\u00fan Um\u00e1n), Tec\u00fan Um\u00e1n. This reception  center, on the border with Mexico, serves adults, UAC, and family  units returning by chartered bus from Mexico. IOM has supported the  center mainly by providing IT equipment in October 2016 to process  returning migrants. The children go through immigration processing at  Tec\u00fan Um\u00e1n and are then moved to Casa Nuestras Ra\u00edces  Quetzaltenango by bus, accompanied by a government social worker  to ensure the protection of UAC until a parent or guardian picks them  up.", "The two shelters include:", "Casa Nuestras Ra\u00edces Guatemala (Our Roots Shelter, Guatemala),  Guatemala City. This shelter serves UAC returning by chartered  flights from Mexico and commercial or chartered flights from the  United States who have been processed at either La Aurora or Fuerza  A\u00e9rea Guatemalteca. IOM renovated this shelter in August 2015 and  supports post-arrival assistance for returning migrants and their  relatives who come to take them home. See figure 12.", "Casa Nuestras Ra\u00edces Quetzaltenango (Our Roots Shelter,  Quetzaltenango), Quetzaltenango. This shelter serves UAC returning  by chartered bus from Mexico. UAC are processed first at Tec\u00fan  Um\u00e1n and then transported to Quetzaltenango. Similar to the shelter  in Guatemala City, IOM renovated this shelter in August 2015 and  provides post-arrival assistance.", "Honduras has three reception centers. IOM renovated two of the  reception centers and upgraded the third. See figure 13.", "Centro de Atenci\u00f3n al Migrante Retornado SPS (SPS Assistance  Center for Returned Migrants), San Pedro Sula. This reception center  serves adults returning by chartered flights from the United States.  IOM completed renovating and equipping this center in February  2016. It provides post-arrival assistance to returning migrants.", "Centro de Atenci\u00f3n para Ni\u00f1ez y Familias Migrantes Bel\u00e9n (Bel\u00e9n  Assistance Center for Children and Families), San Pedro Sula. This  center serves UAC and family units returning by chartered bus from  Mexico or commercial flights from Mexico or the United States. IOM  completed renovating and equipping the center in February 2016.  Post-arrival, psychological, and medical assistance is also provided at  Bel\u00e9n.", "Centro de Atenci\u00f3n al Migrante Retornado Omoa (Omoa Assistance  Center for Returned Migrants), Omoa. This center serves adults who  are returned by chartered bus from Mexico. IOM provided hygiene,  sanitation, and water upgrades to the center, and, according to IOM,  plans to make electrical improvements and construct a sports field,  sidewalks, and parking area; some of these efforts were started in  September 2018."], "subsections": []}, {"section_title": "Migration Data Collection", "paragraphs": ["IOM began assisting the countries in September 2015 with the collection  and use of migration data with funding from USAID through its NTMI  agreement. Since September 2015, all three host governments collect  and digitize migration data. The governments use the data to  understand the characteristics of the population returning to their  countries so they can make decisions about allocating resources needed  for reintegration, according to IOM.", "To facilitate the collection of relevant information, IOM helped each  government in the three countries develop its own form to gather the  information needed by the various ministries involved in reception and  reintegration efforts. According to IOM, this uniform questionnaire has  promoted data sharing among institutions, reduced interviewing times,  and helped ensure that returning migrants are not required to provide the  same information multiple times. In addition to counting the number of  returned migrants and recording where they are returning from, each  country now collects detailed information about each migrant. For  example, the Honduran government collects information on an  individual\u2019s reason for migrating, labor skills, place of birth, and education  level.", "Through the NTMI agreement, IOM also provided government agencies  in all three countries with information technology equipment, software,  and training to collect and analyze relevant information about returning  migrants. For example, IOM developed the Honduran government\u2019s data  repository and official website for the agency responsible for the  registration and publication of data on returning migrants. In Guatemala,  IOM is helping the migration directorate implement a system to use  fingerprints to identify returning migrants who had migrated previously  and returned, providing information on recidivism. IOM has also trained  personnel involved with migrant programs in all three countries on how to  use and analyze this information."], "subsections": []}, {"section_title": "Reintegration Efforts", "paragraphs": ["El Salvador, Guatemala, and Honduras are at different stages in  establishing reintegration efforts, and each government has different  priorities, according to IOM. While some reintegration efforts began  earlier, IOM\u2019s main reintegration efforts began under the third contribution  agreement with USAID in 2016, focusing on expanding the range of  government-supported opportunities for returning migrants while  providing high-quality services during the reintegration process at the  local level. Reintegration efforts in all three countries seek to support  returnees with resources in their home communities, including  psychological and social services, vocational and employment training,  employment opportunities, and upgrades to public spaces. Civil society  organizations support some of these reintegration efforts. USAID, through  its agreements with IOM, assists these reintegration efforts in a context in  which the three host countries experience challenges, such as limited  resources and employment opportunities, which affect implementation.", "Reintegration Efforts in El Salvador  El Salvador is furthest along in establishing reintegration efforts, at both  the national and municipal levels. These efforts focus on the entire  spectrum of returnees\u2014children, adolescents, and adults\u2014by providing  education, psychological, and social assistance to children and families,  and reintegration information to adults. At the national level, IOM has  been working since November 2015 with the government of El Salvador\u2019s  Assistance Centers for Returned Migrant Children and Adolescents and  its information centers that support reintegration services for adults, called  Ventanillas de Atenci\u00f3n al Migrante, Migrant Assistance Windows  (commonly known as Ventanillas).", "The Assistance Centers for Returned Migrant Children and Adolescents  are located in four municipalities, all of which have high numbers of  returning migrants, including children and adolescents. These centers  provide returning migrant children and families with social services and  case management to facilitate their economic and social reintegration.  These services include psychological and social assistance and crisis  intervention; legal assistance, including safety and protection; health  services, including nutrition and immunizations; educational support to  ensure children and adolescents are incorporated into the formal  education system; and referral services.", "The Ventanillas are information centers supporting reintegration in the  five municipalities with the highest number of returning migrants. Each  center has one person who is responsible for providing assistance to  returned migrants such as employment assistance, school enrollment,  training opportunities, and lines of credit. IOM equipped the centers with  office furniture and such items as storage cabinets, water coolers, air  conditioners, and telephones.", "At the municipal level, IOM is also assisting other government initiatives  in four communities that have high numbers of returned migrants and  which the government has prioritized under its Plan El Salvador Seguro  (Safe El Salvador Plan). Specifically, IOM is working with municipal  governments and community organizations to:  improve public spaces with small scale infrastructure projects;  raise awareness and knowledge of migration and reintegration at the  community level among local governments, communities, and  community leaders; and provide psychological and social assistance.", "The infrastructure projects are meant to create safe, public spaces to  build social cohesion within communities. For example, in two areas in  Zacatecoluca that we visited, IOM supported an effort to rebuild a sports  complex, which included basketball and soccer fields, and a playground  and community center. In Usulut\u00e1n, IOM supported the renovation of the  municipal gym (see fig. 14). In January 2018, IOM also began providing  technical assistance to the Zacatecoluca municipal government to help it  obtain feedback from the community on services needed and working  with local service providers to facilitate assistance to beneficiaries, among  other things.", "Guatemala also has government reintegration efforts at both the national  and municipal levels. The current reintegration activity underway is the  municipal level Centro de Formaci\u00f3n Qu\u00e9date (Stay Here Vocational  Training Center), supported by IOM. Implemented by the Secretariat for  Social Welfare, this technical and vocational center provides certified  vocational courses and alternative education opportunities for youth,  including returned UAC and host community adolescents. While the  Secretariat for Social Welfare began operations at the center in 2015,  IOM\u2019s support started in July 2018. In addition, Guatemala\u2019s President  and First Lady launched a national strategy in March 2017 that aims to  prevent migration and to care for returning Guatemalan migrants and their  families. The strategy\u2019s goal is to consolidate all government agencies\u2019  activities and create a comprehensive system for returning migrants,  including children.", "Honduras, with support from IOM, has focused at the national level on  improving and maintaining its reception centers, and at the municipal  level on opening reintegration assistance centers. In addition, the  Honduran First Lady has concentrated on UAC and their needs, such as  prioritizing secure reunification. Honduras\u2019 effort to link returned migrants,  specifically families and UAC, with government services in the  municipalities are focused on reintegration assistance centers. There are  nine centers, with plans to open seven more by the end of 2018. The  Bel\u00e9n Assistance Center, discussed earlier in this report, refers returning  migrants to the reintegration assistance centers, according to a center  official. The reintegration assistance centers then obtain information from  the returning migrants about assistance they are seeking and send it to  one of 12 government agencies, such as the Ministries of Development  and Social Inclusion, Education or Health, and the Women\u2019s National  Institute.", "In addition to assisting government-sponsored reintegration efforts, IOM  supports civil society organizations in Honduras that provide reintegration  services. In Honduras, we visited three civil society organizations whose  programs work directly with returned UAC.", "Casa Alianza. Casa Alianza provides reintegration support including  psychological and social assistance, child protection services, and  children\u2019s rights advocacy for returnees as well as internally displaced  persons. The organization worked in the Bel\u00e9n Assistance Center  from 2014 to 2017 with returning UAC, according to Casa Alianza  officials.", "Mennonite Committee for Social Action. This organization\u2019s Support  for Returned Migrants Program began in 2014 and has various  components including: (1) vocational training, (2) psychological  assistance, (3) complementary workshops on life skills, and (4)  humanitarian assistance. The program focuses on youth between  ages 15 and 25 returning to the San Pedro Sula area.", "Collaboration and Effort Association. This program in Tegucigalpa  focuses on providing returned children a safe place to live, teaching  them responsibility and cooperation, and supporting their education.  Many of the adolescents are returned UAC, and all beneficiaries must  themselves help run the association\u2019s programs.", "Host Government Challenges Affect Reintegration Efforts  USAID, through its agreements with IOM, is providing assistance to host  countries where various challenges affect reintegration efforts. Some of  these challenges affecting host countries, such as limited employment  opportunities and resource constraints, are long-standing in nature.", "Limited resources: With limited resources dedicated to reintegration  efforts, the centers can connect few returning migrants with the  appropriate government services. For example, at a Ventanilla we  visited in El Salvador, just one official\u2014who has no vehicle\u2014is  responsible for providing services to all returning migrants in an area  roughly one-fifth the country\u2019s overall size and containing roughly one- fifth of its returning migrants. Similarly, at the Honduran reintegration  assistance center we visited, there was only one staff member and no  psychologist. As of July 2018, the Honduran government had opened  9 of the 16 planned reintegration assistance centers; it plans to open  the remaining ones by the end of 2018.", "Few training and employment opportunities: There are limited training  and employment opportunities for returning migrants. One of the  primary reasons cited for migration is the lack of employment  opportunities in the countries. Additionally, the employment  opportunities that are available may not fit the migrants\u2019 skills. For  example, only migrants with sufficient English skills can be placed in  call centers. At the same time, the training programs being offered at  a particular time may not interest the migrant. Further, the few  opportunities available may not be offered in the locations where  migrants can readily access them. Finally, an official from a  multilateral organization working in the region raised the concern that  many of the training opportunities offer similar skills, such as training  to be a barber, beautician, or mechanic, and the market can support  only so many people in these professions.", "Need for individualized services: Each returning migrant has a  different set of needs, skills, and interests, but providing customized  assistance takes time and resources. Staff at reintegration assistance  centers we visited told us that they try to match a migrant with the  services or opportunities they need. For example, a returning migrant  may be a single mother with good English skills and referred to  services and opportunities based on that profile. Additionally,  according to U.S. and Honduran government officials, large-scale  reintegration efforts encounter the challenge of reintegrating migrants  with different and individualized profiles.", "Voluntary nature of seeking and finding assistance: Receiving  reintegration assistance and services depends in part on the initiative  and desire of the returning migrant. Returning migrants must seek  assistance to receive reintegration services, and so must be aware of  and connect with the reintegration assistance centers. In El Salvador,  only about 7 percent of returning migrants requested help from the  reintegration assistance centers in 2017; of those who requested  assistance, however, 91 percent received it, according to El  Salvador\u2019s Ministry of Foreign Affairs. In both El Salvador and  Honduras, the reintegration assistance offered by the government is  publicized at the reception centers where migrants are processed  upon their return. However, in El Salvador, a government official told  us that migrants may not have the patience to wait to receive  information after traveling and going through the reception process.", "Termination of TPS May Increase the Need  for Reception and Reintegration Services  in El Salvador and Honduras  With the Secretary of Homeland Security\u2019s  decisions to terminate TPS in the United  States for nationals of El Salvador and  Honduras, as of September 9, 2019, and  January 5, 2020, respectively, both countries  face the possibility of a significant influx of  returnees\u2014as many as 262,500 Salvadorans  and 86,000 Hondurans, along with their U.S.  citizen children. Reintegration efforts may also  be complicated by the different backgrounds  and needs of returning migrants who  benefited from TPS. According to State  officials, returning migrants who had TPS are  likely to be older with more skills and  education than those who left the country  more recently. Successful strategies to  reintegrate former TPS beneficiaries will be  different than those that are currently in place.  TPS beneficiaries may also have children who  are U.S. citizens with different needs than  UAC.  During our country visits in March 2018, State  officials indicated that official planning for the  return of former TPS beneficiaries was either  just beginning, as in El Salvador, or had not  begun, as in Honduras because an official  decision on the termination of TPS for  Hondurans had not yet occurred. U.S.  officials, though, were meeting with their  counterparts to discuss the challenges of  reintegrating TPS beneficiaries. In both El  Salvador and Honduras, U.S. officials have  encouraged the government to address the  challenges of reintegrating former TPS  beneficiaries. For example, in February 2018,  USAID\u2019s mission in El Salvador convened a  one-day conference on current efforts to  prevent migration and to plan for the return of  migrants with TPS. At the same time, U.S.  government officials also stated that some or  most TPS beneficiaries might choose to stay  in the United States without lawful status,  attempt to adjust their status, or move to a  third country rather than return to their home  countries.", "Leadership turn-over and guidance: Elections in the three countries,  and the subsequent turnover of government officials, also affect  implementation, according to IOM. Furthermore, in Guatemala  leadership turn-over in key agencies has affected what the  government can achieve in terms of reintegration of returning  migrants, according to IOM officials. Both the Secretariat of Social  Welfare and the Directorate of Migration have had various leaders  over the past few years. The government of Guatemala has not yet  determined which institution is responsible for reintegration activities  and a national plan has not yet been developed, which complicates  reintegration efforts, according to IOM."], "subsections": []}]}]}, {"section_title": "USAID Assessed Reception and Data Collection Efforts, Which Were Improved, but Effectiveness of Reintegration Efforts Remains to be Determined", "paragraphs": ["USAID assessed the effectiveness of its reception and migrant-related  data collection efforts through site visits, meetings with IOM, and report  reviews. This assistance has improved the capacity of the governments of  El Salvador, Guatemala, and Honduras to provide reception services to  returning migrants and to collect and utilize migration information. USAID  has not yet assessed the effectiveness of reintegration efforts conducted  to date, but plans to sign an agreement by the end of December 2018 for  a new reintegration program which will include a monitoring and  evaluation component."], "subsections": [{"section_title": "USAID Assessed the Effectiveness of its Reception and Data Collection Efforts through Program Monitoring and Report Reviews", "paragraphs": ["Beginning in October 2014, after signing the first agreement IOM, USAID  monitored program implementation and assessed the effectiveness of  IOM\u2019s efforts to assist returning migrants and improve migration  information through site visits, regular meetings with IOM, and review of  IOM reports. USAID and IOM officials noted that USAID\u2019s periodic site  visits to IOM projects and frequent communications between the two  parties helped USAID track progress and results, and make needed  adjustments in a timely manner. In a memorandum approving the third program, USAID\u2019s mission in Honduras stated that IOM \u201cresponded  quickly and satisfactorily to any concerns.\u201d IOM, in consultation with  USAID, adapted activities as needed for each country, such as by  rebidding a contract to renovate a reception center in Guatemala City in  response to corruption allegations. During our site visit in March 2018, we  observed USAID officials\u2019 familiarity with specific details related to IOM\u2019s  activities and the close working relationship between USAID and IOM  staff.", "In addition, USAID regularly reviewed the activity and progress reports  provided by IOM, which included weekly, monthly, and quarterly reports.  According to USAID officials, these activity and progress reports served  as the basis for conversations with IOM about program progress and  assessment. The reports included information such as an overview of  achievements, activity updates by country, and challenges and actions  taken. For example, the reports detailed information such as the number  of returning migrants provided with post-arrival assistance, including food  or hygiene kits, as well as progress on larger projects such as  constructing small-scale, community-based infrastructure or renovating  reception centers. IOM also explained challenges encountered and plans  for overcoming them, such as building strong relationships with new key  government personnel when there was turnover in Guatemala and  Honduras. IOM also provided information to USAID through periodic, two- page information sheets that summarized its activities in a certain  geographical area, such as a municipality in El Salvador, or with a certain  program, such as NTMI in Honduras.", "As part of the agreements with USAID, IOM agreed to conduct mid-term  and final evaluations of the three programs. IOM produced written mid- term and final evaluations for the first program (PARA) based on reviews  of documents, field visits, and interviews with government counterparts  and USAID, among others. The final evaluation highlighted the program\u2019s  achievements, challenges, effective practices, lessons learned, and  recommendations. For example, it noted IOM\u2019s strong working  relationship with USAID and host government agencies, as well as the  need to conduct high-quality assessments in each country during  program design. Instead of a written mid-term evaluation for the second  program (NTMI), IOM held an internal workshop, which a USAID  representative attended. According to IOM officials, IOM plans to present  USAID with a mid-term evaluation for the Return and Reintegration  program and a final evaluation for the NTMI program, although both have  been delayed due to staffing issues.", "USAID also assessed IOM\u2019s programs during internal USAID meetings.  For example, according to USAID officials, when USAID considered  IOM\u2019s requests for no-cost extensions for the PARA and NTMI  agreements, USAID assessed the progress and challenges of the  activities implemented as part of the agreements and whether they were  fulfilling their goals. USAID also discussed the effectiveness of IOM\u2019s  programs at a strategic level during portfolio reviews and program  performance reports, according to USAID officials. USAID officials told us  that because the first program with IOM was productive and had good  results, USAID also funded the second and third programs through  program contribution agreements. In the memorandum approving the  third program, USAID\u2019s mission in Honduras stated that \u201cIOM has been a  very effective partner in the first Program Contribution\u201d and noted that  IOM collaborated with USAID, the host governments, and other donors to  design the follow-on program focused on reintegration efforts. The  memo also stated that IOM has \u201csound management systems and  controls, and has long been an effective partner\u201d of the U.S. government."], "subsections": []}, {"section_title": "U.S. Assistance Has Helped Improve Reception Centers and Data Collection", "paragraphs": [], "subsections": [{"section_title": "Reception Center Improvements", "paragraphs": ["With U.S. assistance, IOM improved the capacity of the Northern Triangle  governments to provide reception services to returning migrants and to  collect migration information. With U.S. assistance, IOM renovated the  region\u2019s seven reception centers and shelters currently in use and  provided post-arrival assistance such as hygiene kits and medical  services. The final evaluation for IOM\u2019s first program indicated that IOM  designed the renovations in consultation with the host government  agencies to meet their needs and to provide a welcoming space for  returning migrants. During our site visit in March 2018, we visited five  reception centers and one shelter in the three countries, including the  Bel\u00e9n Assistance Center in Honduras, which we had visited in March  2015, prior to its renovation. The Bel\u00e9n Assistance Center renovations  were extensive, including the dining areas, kitchen, bathrooms,  dormitories, play spaces, clinics, and counseling areas as well as a  conference room used for facilitating meetings and workshops among  government entities and partners. We observed the improved facilities as  well as the processing of returning migrants (see fig. 15).", "Likewise, IOM extensively renovated the Casa Nuestras Ra\u00edces Shelters  in Guatemala City and Quetzaltenango, Guatemala, including the kitchen,  bathrooms, dormitories, play spaces, clinics, and counseling areas.", "In addition to improving infrastructure, IOM provided the governments  with post-arrival assistance such as hygiene kits, clothing, meals, buses,  and medical, psychological, and social support for returning migrants. For  example, from 2014 through 2017 in all three countries, IOM reported that  it supplied in total: nearly 60,000 hygiene kits, nearly 34,000 items of clothing, and more than 75,000 meals to returning migrants.", "In fiscal year 2017, IOM provided post-arrival assistance to over 29,000  returning migrants, according to IOM. Additionally, IOM provided the host  governments with 12 buses to transport returning migrants from the  airport to the reception center and from the reception center to the bus  station to return to their communities. U.S. and host government officials  in the three countries noted that, with USAID and IOM\u2019s assistance, the  reception of returnees has improved. For example, IOM expanded and  renovated the DAMI Reception Center in San Salvador, adding separate  areas for the various ministries involved so that returning migrants can  receive specialized services such as a medical examination,  psychological and social assistance, and the beginning of job placement  assistance. The center also provides integrated child protection and  social services. During our site visits to the reception centers and shelter  in Guatemala City and San Pedro Sula in March 2018, we observed staff  distributing food to returning migrants upon their arrival.", "Through technical assistance and other support, IOM also helped build  the capacity of host government institutions as it relates to the reception  process and their ability to provide better reception services. For  example, IOM worked with government agencies to develop protocols  and procedures for receiving returned migrants and trained reception staff  on issues such as human rights. At the reception centers in all three  countries, multiple government agencies are now working together to  assist returning migrants, according to IOM."], "subsections": []}, {"section_title": "Migration-Related Data Improvements", "paragraphs": ["With IOM\u2019s support, the governments of the Northern Triangle have  improved their capacity to collect data about returning migrants.  According to USAID, the technical assistance and support provided by  IOM through the NTMI agreement strengthened the governments\u2019  capacity to collect, manage, analyze, and share migration information.  Prior to these USAID-assisted efforts, data on returning migrants was  limited in all three countries and the information produced was not readily  available for use by other government agencies, according to USAID.  Since 2015, with IOM equipment and training, all three countries have  moved toward uniform, more detailed data collection systems. In  Honduras, for instance, technical assistance from IOM enabled the  creation of a single data repository, which provides migration data for all  agencies to use.", "IOM has trained staff of the countries\u2019 migration directorates to use the  registration systems for returning migrants and has trained personnel of  other government agencies on how to analyze and use the data produced  by the migration directorates. Each government now knows the number of  migrants returning to the country\u2014information that was not available  previously. (See fig. 2 earlier in this report.) In addition, the governments  now have such information as:  the causes of migration reported by returnees;  the location from which the migrants are returning; and  the location to which they are returning.", "For example, in El Salvador, approximately 27 percent of children and  adolescent migrants returning in 2017 said they left because of violence,  approximately 27 percent left to reunify with families, and approximately  43 percent left for economic reasons, according to IOM\u2019s analysis of  information from El Salvador\u2019s Directorate of Migration. Additionally,  according to USAID officials, IOM trained the staff at El Salvador\u2019s  General Directorate of Statistics and Census and the agency is now  conducting its own surveys of migrants.", "According to USAID and IOM officials, the Northern Triangle governments  are using the expanded information about returning migrants to make  informed decisions, design public policies, and develop programs to  provide reintegration assistance. Prior to USAID and IOM entering into  the NTMI agreement, no official statistics were available that allowed for  evidence-based decisions or public policy design. Now, during the  registration process in Honduras, for instance, returning migrants are  asked what trade they would like to learn, which can inform host  government planning. With information about the reasons migrants left  the country, governments can also refer migrants to existing programs or  create programs to address those issues, such as developing training and  employment opportunities. According to IOM and USAID officials,  examples of how governments use this information include the  following.", "In El Salvador, multiple government institutions use returning migrant  information to design specific programs for this population and  redirect programming if necessary. The Ministry of Labor, for instance,  uses this information to design entrepreneurship programs. Relevant  migration information is also shared with committees of the Alliance  for Prosperity Plan.", "In Honduras, returning migrant information is used by government  institutions for planning, budgeting, and monitoring reception,  assistance, and reintegration activities. For instance, the First Lady of  Honduras\u2019 Task Force for Child Migrants bases its strategy for the  reception centers on returning migrant data.", "Detailed information on returning migrants in these countries has also  been useful for U.S. government officials and has informed USAID\u2019s  strategy and programming. According to a USAID official in Guatemala,  the new information has been integral to USAID\u2019s ability to evaluate  migration issues in a more informed manner. For example, USAID  officials in Guatemala told us that much of their programming is based in  the Western Highlands because they now have data showing most  migrants come from this area of the country. In addition, USAID\u2019s mission  in El Salvador convened a conference in February 2018 to discuss the  termination of Temporary Protected Status for Salvadorans and used  information gathered by El Salvador\u2019s Directorate of Migration about  reasons for migration and returnees\u2019 profiles to discuss possible  reintegration strategies for this population."], "subsections": []}]}, {"section_title": "USAID Has Not Yet Assessed the Effectiveness of its Reintegration Efforts", "paragraphs": ["USAID has not assessed the effectiveness of reintegration efforts  conducted to date. Reintegration is a long-term process and many of the  reintegration assistance programs are just beginning. Specifically, El  Salvador began opening five information centers supporting reintegration  in November 2015, Honduras opened nine reintegration assistance  centers in 2017 and early 2018, and Guatemala\u2019s one center began  assisting returned adolescents in July 2018. Given the number of  returning migrants and the nascent reintegration services, relatively few  have benefited from services offered by these centers. For example, in El  Salvador, only about 1,700 of nearly 26,500 returning migrants were  connected with government reintegration services through the centers in  2017.", "In addition, determining the effectiveness of reintegration efforts is  challenging because of the difficulties of tracking migrants once they  return to their communities and of accounting for the various external  factors that influence an individual\u2019s decision to migrate again. USAID,  IOM, and host government officials cited the challenges of tracking and  following up with returned migrants once they leave the reception centers.  Although the countries are beginning to offer reintegration assistance,  through the information and municipal assistance centers in El Salvador  and Honduras, there are currently no systems in place to track migrants  when they return to their communities. U.S. government officials also  noted there are multiple external factors that may influence an individual\u2019s  decision to migrate again, some of which cannot be addressed through  reintegration assistance programs. For example, the desire to reunify with  family may affect an individual\u2019s decision, as well as the country\u2019s  economic conditions and levels of violence and insecurity.", "Although USAID has not yet assessed the effectiveness of reintegration  efforts, it plans to monitor and evaluate efforts. As part of the third  program, IOM plans to evaluate each country\u2019s reintegration assistance  projects. In addition, by the end of December 2018, USAID expects to  sign a 3-year agreement with a Public International Organization (PIO) for  a new program which will, among other things, continue assisting the host  governments\u2019 efforts to reintegrate returning migrants. According to the  USAID memorandum describing the new program, it will be underpinned  by a monitoring and evaluation plan, and is expected to result in, among  other things, a strengthened focus on monitoring and evaluation systems  to track reintegration at the community level. Additionally, according to the  memorandum, the new program will use a cost-type agreement which is  structured such that the PIO will be reimbursed or advanced funds for  costs of goods and services to achieve the agreement purpose."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We are not making any recommendations in this report. We provided a  draft of this report to DHS, IAF, State, and USAID. All the agencies  provided technical comments, which we incorporated as appropriate.  USAID and IAF provided written comments which we have reprinted in  appendices III and IV.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report\u2019s date. At that time, we will send copies to the appropriate  congressional committees and the Administrator of the U.S. Agency for  International Development, the President of the Inter-American  Foundation, and the Secretaries of Homeland Security and State. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made major contributions to this report are listed in  appendix V.", "If you or your staff has any questions about this report, please contact me  at (202) 512-7141 or groverj@gao.gov."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the U.S. Agency for International Development\u2019s  (USAID) efforts to assist the reception and reintegration of migrants from  El Salvador, Guatemala, and Honduras into their home countries since  fiscal year 2014; and (2) what is known about the effectiveness of these  efforts. In addition, we reviewed how U.S. agencies have coordinated  efforts to assist the reintegration of returning migrants.", "To examine USAID\u2019s efforts to assist the reception and reintegration of  returning migrants from fiscal year 2014 through fiscal year 2017 in El  Salvador, Guatemala, and Honduras, we reviewed USAID\u2019s three  program contribution agreements with the International Organization for  Migration (IOM). We also reviewed grant agreements for Inter-American  Foundation (IAF) projects in El Salvador and Guatemala. In addition, we  obtained data from USAID, the Department of State (State), and IAF on  agency funding to El Salvador, Guatemala, and Honduras from fiscal  years 2014 through 2017. We assessed the reliability of USAID  expenditures by reviewing expenditure data from USAID\u2019s Phoenix  system for the three contribution agreements. We determined these data  to be sufficiently reliable for reporting the amount of funding U.S.  agencies expended on reintegration programs. We also reviewed IOM  expenditure data from fiscal year 2014 through April 2018. We  determined these data were sufficiently reliable to illustrate the general  scale of IOM\u2019s expenditures. Additionally, we reviewed IOM program  reporting documents detailing the status of the projects, including weekly,  biweekly, and monthly progress reports and project presentations related  to renovations, information management, and reintegration efforts.", "During our March 2018 site visit, we interviewed USAID, State, IAF, and  IOM officials in all three countries regarding the status of the projects  being implemented under the contribution agreements or grants, and we  met with host government officials to discuss these projects. We  interviewed representatives from nongovernmental organizations in the  three countries to learn about how their work supports reintegration. We  conducted five site visits to reception centers, one in El Salvador, two in  Guatemala, and two in Honduras, where we observed the reception  process, and we visited one shelter in Guatemala City, Guatemala. We  selected the locations to visit based on the location of the majority of  reception centers and shelters in the countries. In Honduras, we met with  unaccompanied children (UAC) at three centers operated by different  nongovernmental organizations with IOM support, where we discussed  their reasons for making the journey to the U.S, and how the programs  were assisting their reintegration. Spanish-speaking GAO staff primarily  conducted the interviews and GAO contracted for interpreters with State  to help facilitate the interviews, when necessary. We also interviewed  USAID, State, and IAF officials in the  United States who are responsible  for these programs.", "To determine the number of migrants returned to El Salvador, Guatemala,  and Honduras, we reviewed and tabulated IOM data from calendar year  2015 to 2017. We did not review 2014 data because IOM\u2019s effort had not  yet begun. To determine the number of people removed from the United  States, we reviewed and tabulated Department of Homeland Security  (DHS) data from fiscal years 2014 through 2017. We assessed the  reliability of IOM migration data on the number of returnees, and DHS  data on people removed, by reviewing documents and interviewing  knowledgeable agency officials and host government officials about how  the data were produced, selected, and checked for accuracy. We  determined the IOM data to be sufficiently reliable to provide background  information on the number of migrants returning to the three countries.  We determined the DHS data was sufficiently reliable for reporting on  number of removals of migrants from the United States to El Salvador,  Guatemala, and Honduras from fiscal years 2014 through 2017. The data  for the number of Temporary Protected Status (TPS) beneficiaries is from  DHS reporting in the Federal Register, which is sufficiently reliable for  reporting the approximate number of TPS beneficiaries.", "To examine how USAID assessed the effectiveness of its assistance for  reintegration efforts in El Salvador, Guatemala, and Honduras, from fiscal  years 2014 through 2017, we reviewed IOM\u2019s contribution agreements,  USAID\u2019s evaluation policies for the agreements, country strategy  documents for each country, and regional planning documents. We also  interviewed USAID officials. To gather migration related information and  requirements, we reviewed the U.S. Strategy for Central America, the  associated quarterly reporting cables, and State\u2019s Justification  Memoranda for releasing foreign assistance to Central America. During  our March 2018 site visit, we also interviewed USAID and IOM officials at  overseas locations regarding their evaluation requirements and policy and  how they monitored and evaluated the projects. We reviewed IOM\u2019s  reported progress towards achieving its goals by reviewing its mid-term  and final evaluation reports for the first contribution agreement, and other  reporting documentation containing progress updates for the other two  contribution agreements.", "During our site visit to El Salvador, we visited renovation projects that  IOM supported, including two playgrounds, a municipal gymnasium, and  a community center in Zacatecoluca and Usulut\u00e1n. In addition, we visited  several reintegration initiatives, including an Assistance Center for  Returned Migrant Children and Adolescents and, one municipal  information center supporting reintegration center, both in El Salvador,  and one municipal reintegration assistance center in Honduras. We  selected reception and reintegration initiatives to visit based on proximity  to San Salvador and San Pedro Sula. We also met with U.S. embassy  officials, including the U.S. Ambassador to Guatemala and acting chiefs  of mission in El Salvador and Honduras, to obtain their views on U.S.  assistance for returning migrants and to understand what efforts were  underway to address the impact of termination of Temporary Protected  Status for El Salvadoran and Honduran beneficiaries. We also  interviewed IOM officials in El Salvador on the host nation\u2019s ability to  reintegrate Temporary Protected Status beneficiaries, and reviewed  documents regarding El Salvador and Honduras by DHS and State on  this topic.", "To examine interagency coordination, we obtained information on how  USAID, State, DHS, and IAF headquarters offices with responsibility for  overseeing assistance for reception and reintegration activities and  country team operations in El Salvador, Guatemala, and Honduras have  been coordinating with each other and with host country partners. During  our March 2018 site visit, we interviewed USAID and IOM representatives  at overseas locations to discuss their coordination efforts. We also  interviewed USAID, State, and DHS officials in the United States who are  responsible for these programs to obtain their views on interagency  coordination. In addition, we obtained related information from IAF  officials on coordination by email.", "We conducted this performance audit from November 2017 to November  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: U.S. Agencies Coordinate on Reception and Reintegration Efforts for Migrants Returning to El Salvador, Guatemala, and Honduras", "paragraphs": [], "subsections": [{"section_title": "Interagency Coordination on Reception and Reintegration Efforts Takes Place in All Three Countries", "paragraphs": ["Interagency coordination on reception and reintegration efforts takes  place at U.S. embassies among the U.S. Agency for International  Development (USAID), Department of State (State), Department of  Homeland Security (DHS), and others, in El Salvador, Guatemala, and  Honduras. These efforts occur on a formal basis as part of interagency  working groups focused on migration at the U.S. embassies in El  Salvador and Honduras and on an ad hoc basis in Guatemala, where no  formal migration working group exists. Additionally, the Inter-American  Foundation (IAF) coordinates its reintegration efforts with USAID\u2019s  missions in El Salvador and Guatemala, where it funds such projects.", "The migration working group at the U.S. embassy in El Salvador,  according to group officials, coordinates the efforts of the various U.S.  agencies working on migration issues, in support of the U.S. embassy\u2019s  overall goal of curbing illegal migration to the United States. Members of  the working group come from USAID; State, including various sections  such as Political, Consular, and Public Affairs; DHS components,  including U.S. Customs and Border Protection and U.S. Immigration and  Customs Enforcement; and others as appropriate. According to these  officials, the working group\u2019s purpose is to have all the agencies at the  U.S. embassy support and work together on migration-related issues,  share information, and avoid duplication of effort. These officials told us  the working group also responds to issues raised by State headquarters.  For example, State officials in Washington asked the working group to  assess the potential impact of former beneficiaries of Temporary  Protected Status in the United States returning to El Salvador.", "The migration working group at the U.S. embassy in Honduras initially  focused on addressing the rapid increase of unaccompanied children  (UAC) from El Salvador, Guatemala, and Honduras arriving at the U.S.  border in 2014, according to group officials. Members of the working  group include individuals from USAID, State, DHS, and others as  appropriate. In September 2017, the working group, according to these  officials, shifted its focus to reintegration, as well as issues related to  internally displaced persons. Officials told us that the working group has  spun off other working groups, including one to address the issue of  beneficiaries with Temporary Protected Status returning to Honduras.", "The U.S. embassy in Guatemala had no formal inter-agency migration  working group, in March 2018 when we visited, but it had several others,  including a law enforcement working group that meets once a week.  According to the working group, the Ambassador meets with them if any  sensitive issues regarding migration arise. In addition, it has an economic  and political working group focused on the ports and trade that regularly  discusses what is occurring at the ports of entry. Among these working  groups, migration is discussed at the U.S. embassy as needed, according  to embassy officials we spoke with who participate in these groups.  Members of the working groups include individuals from USAID, State,  DHS, and others as appropriate.", "IAF also coordinates its reintegration efforts with all three U.S.  embassies, to ensure that (1) its projects are aligned with U.S. foreign  policy objectives and (2) its grantees are appropriate. State provides  feedback on IAF proposed grants and the relevant U.S. embassies  provide their approval. According to IAF officials, for each fiscal year  since 2016 IAF has presented a detailed proposal to USAID\u2019s Latin  American and Caribbean Bureau, outlining its programing and funding  objectives, and monitoring and evaluation plan in the Northern Triangle  countries. The proposals are intended to facilitate USAID\u2019s transfer of  funds to IAF, ensuring that community-led projects are included in the  efforts it supports to advance the U.S. Strategy for Central America."], "subsections": []}, {"section_title": "USAID Coordinates with Foreign Partners Mainly through the International Organization for Migration", "paragraphs": ["USAID coordinates its assistance for reception and reintegration efforts  with foreign partners, including host governments and international  organizations, through the International Organization for Migration (IOM),  which is the primary implementing partner for these efforts. USAID  officials told us, however, they engage with both the host government and  other national and multilateral organizations when it identifies a  constructive opportunity.", "Specifically, USAID\u2019s three program contribution agreements with IOM  addressed the benefits of partnerships and coordination with counterparts  in government, civil society, multilateral organizations, and the private  sector. Additionally, IOM noted it would engage with various stakeholders  to coordinate responses and avoid duplication. For example, according to  IOM, in 2014, it had already met with various private sector counterparts,  such as Americares, and the civil society organizations Glasswing  International and World Vision, to identify potential activities to build upon  USAID-funded assistance before the initiation of the first program  contribution agreement.", "IOM also coordinated with various civil society, multilateral, and private  sector organizations in the three countries in its implementation of the  program contribution agreements. For example, in Guatemala, IOM  officials stated that their coordination with the United Nations Population  Fund enabled IOM to provide computer hardware, while the United  Nations provided computer software to the Ministry of Foreign Relations  to register UAC, thus avoiding duplication. IOM also coordinated with civil  society organizations such as:", "Fundaci\u00f3n Cristosal, in El Salvador, which is working to implement a  new registration system of victims of internal displacement.", "Fundaci\u00f3n Avina, in Guatemala, which assists returnees with social  and labor reintegration.", "Scalibrini Missionary Sisters, in Honduras, which operates the  reception center at San Pedro Sula and provides returnees bus tickets  back to their communities of origin, if needed and also phone calls to  reach their family members upon their arrival.", "During our site visit to Honduras in March 2018, we attended a roundtable  meeting with representatives from the International Committee of the Red  Cross, the Norwegian Refugee Council, and the United Nations High  Commissioner of Refugees, where these representatives discussed  coordination and efforts to avoid duplication at reception centers. For  example, officials at the meeting stated that during the post-election  protests in Honduras in late 2017 and early 2018, returning children and  families could not access the Centro de Atenci\u00f3n para Ni\u00f1ez y Familias  Migrantes Bel\u00e9n (Bel\u00e9n Assistance Center for Children and Families) to  be processed by IOM, so they were processed by the Honduran Red  Cross at the Centro de Atenci\u00f3n al Migrante Omoa (Omoa Assistance  Center for Migrants). The organizations worked together and consistently  communicated to ensure that there were no gaps in coverage for the  returning UAC and families, according to officials at the meeting.", "USAID officials told us that IOM programs helped strengthen the  relationship between the U.S. government and the host country  governments. The host government agency must formally request IOM\u2019s  assistance before IOM will provide support, and IOM officials said this  letter of request is important to ensure institutional support for and  cooperation with IOM\u2019s programs. Additionally, IOM, USAID, and the host  government agencies worked together to improve reception and  reintegration services for returning migrants. For example, in Honduras in  March 2018, USAID, IOM, the Ministry of Foreign Affairs, and the  National Center for Social Sector Information met to discuss what  additional information they would like to obtain about returning migrants  and how to analyze the data.", "The program contribution agreements also called for the establishment of  coordination committees to facilitate coordination and consultation among  its members. According to the agreements, the committees were to share  information as needed to provide assistance, evaluate the effectiveness  of the assistance, and otherwise share relevant information. The  committee meetings, according to IOM officials, were held regionally  among representatives of IOM and the USAID missions under the first  program contribution agreement, Repatriation Assistance to Returning  Families and Unaccompanied Children in the Northern Triangle of Central  America, when the efforts were beginning and there was a sense of  urgency due the rapid influx of UAC at the U.S. border from El Salvador,  Guatemala, and Honduras. When the third program contribution  agreement, Return and Reintegration in the Northern Triangle, began in  2016, the meetings between IOM and USAID were held bilaterally in each  country.", "The coordination committee played an important role during the beginning  of the first program contribution agreement because, according to USAID  officials, it facilitated interaction with the host governments, helped with  coordination, and established working relationships between USAID and IOM. Once the program and relationships were established by the time of  the third contribution agreement, coordination had evolved, according to  USAID officials. IOM officials said that although committee meetings  occur on an ad hoc basis under the third program contribution agreement,  coordination is stronger. For example, USAID and IOM coordinate closely  on strategic decisions, such as IOM\u2019s decision to rebid the contract to  renovate and expand the reception center at the Guatemalan Air Force  Base, after allegations of corruption arose surrounding the initial  contractor.", "Finally, USAID interacts in various ways with IOM, outside of the formal  terms of the contribution agreements. According to IOM and USAID  officials,", "USAID and IOM engage in regular discussions about the programs\u2019  progress and implementation challenges, to help IOM make decisions  and redefine plans of action if necessary.", "USAID is involved in IOM\u2019s strategic decisions, and IOM regularly  consults USAID for feedback and recommendations regarding  programming.", "USAID and IOM participated in forums such as conferences and a  workshop where lessons learned and best practices were discussed."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Inter- American Foundation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Judith Williams (Assistant  Director), Joe Carney (Assistant Director), Julie Hirshen (Analyst-in- Charge), Kathryn Bassion, Neil Doherty, Daniela Rudstein, Aldo Salerno,  Michael Silver, and K. Nicole Willems made key contributions to this  report."], "subsections": []}]}], "fastfact": ["In fiscal year 2017, the Department of Homeland Security returned nearly 75,000 migrants to El Salvador, Guatemala, and Honduras.", "We examined U.S. efforts to help migrants reintegrate into their home countries\u2014such as by helping them reestablish psychological, social and economic ties.", "Since 2014, USAID has provided about $27 million to assist returnees. This assistance has included providing food, transportation, school supplies, and help finding work. It has not yet assessed the effectiveness of these efforts, but has plans to do so."]}
{"id": "GAO-18-527", "url": "https://www.gao.gov/products/GAO-18-527", "title": "District of Columbia: Improved Reporting Could Enhance Management of the Tuition Assistance Grant Program", "published_date": "2018-09-06T00:00:00", "released_date": "2018-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress funds DCTAG through an annual appropriation, which was $40 million in fiscal year 2018. DCTAG provides D.C. residents up to $10,000 per year to attend college.", "The Consolidated Appropriations Act, 2017, included a provision for GAO to review DCTAG. This report examines, among other things, the characteristics of DCTAG recipients and steps taken by the program to support recipients, as well as the extent to which OSSE reports DCTAG's performance to internal and external stakeholders.", "GAO assessed the most recent data available on DCTAG, covering academic years 2007\u20132016, as well as data on college graduation, tuition, and fees from the Department of Education's Integrated Postsecondary Education Data System for academic years 2007\u20132016, and data on enrollment in high schools and median household income in D.C. from the U.S. Census Bureau's American Community Survey for 2007\u20132016; interviewed representatives of DCTAG and the entities it partners with to support recipients; and reviewed relevant laws, the applicability of standards for internal control, and guidance on performance management."]}, {"section_title": "What GAO Found", "paragraphs": ["The federally funded District of Columbia Tuition Assistance Grant (DCTAG) program was created in 1999 to give college-bound District of Columbia (D.C.) residents greater choices among institutions of higher education. Since its creation, the DCTAG program has awarded over $440 million to more than 26,000 residents to defray costs charged to out-of-state residents at some of the nation's public colleges and universities. While the program serves students from families with a wide range of household incomes, about half the students receiving a DCTAG award in academic years 2007\u20132016 came from the three D.C. wards with the lowest household incomes, as the figure below illustrates. DCTAG coordinates with public and private partners in the community to help students prepare for college, complete financial aid applications, and stay on track to graduate college.", "Although the Office of the State Superintendent of Education (OSSE), which manages DCTAG on behalf of the Mayor of the District of Columbia, issues various annual reports, these reports do not relate program performance to the program's four goals. One of these goals is to help D.C. students make smarter college choices. OSSE officials stated that they regularly communicate information about DCTAG data and activities internally and externally. However, these efforts do not provide the context necessary for program managers, Congress, or the public to understand the program's goals, nor determine whether DCTAG is making progress toward meeting them. Standards for internal control state that program managers should communicate information that internal and external stakeholders need to help the program achieve its objectives. Absent an annual report relating performance to goals, DCTAG's stakeholders will be limited in their ability to assess the program's performance or identify opportunities to improve it."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends OSSE issue annual reports relating DCTAG's performance to program goals. In response to the recommendation, the Mayor stated that OSSE will expand annual reporting to include direct linkages and combine data points to better illustrate the program's performance."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal law created the federally funded District of Columbia Tuition  Assistance Grant (DCTAG) program in 1999 to give college-bound  District of Columbia (D.C.) residents more choices among colleges and  universities. Since its creation, DCTAG has awarded over $440 million to  more than 26,000 college-bound D.C. residents. The grants can help  defray some costs associated with recipients\u2019 postsecondary education.  For example, D.C. residents who attend public colleges and universities  in other states may pay higher \u201cout-of-state\u201d tuition.  States generally  provide financial support to their state university systems and can require  public institutions to offer residents lower, \u201cin-state\u201d tuition. In contrast to  these state university systems, which can include dozens of institutions  serving hundreds of thousands of students, D.C. has a single public  university. In fiscal year 2018, Congress appropriated $40 million to fund  DCTAG. While Congress funds DCTAG through annual appropriations,  the Mayor of the District of Columbia manages the program through the  Office of the State Superintendent of Education (OSSE).", "The Consolidated Appropriations Act, 2017, includes a provision for GAO  to provide information about the performance of the DCTAG program.  Specifically, the provision sought information on trends in eligibility,  enrollment, performance, and outcomes, and asked for information on  steps taken to provide support to current participants. In addition, the  provision sought information on scholarship programs offered by other  municipalities in the United States, including a comparison of participant  requirements, outcomes, and funding sources.", "In this report, we reviewed DCTAG and other selected state and local  scholarship programs to:  1. Describe trends in the eligible population, enrollment, and college graduation rates for DCTAG.", "2.", "Identify steps taken under the program to support recipients and address any challenges they may face staying on track to graduate. 3. Assess the extent to which DCTAG\u2019s performance is reported to program managers, Congress, and the public. 4. Describe other state and local scholarship programs with regard to participant eligibility, funding sources, steps to support recipients, and program outcomes.", "To describe trends in DCTAG, we reviewed the most recent program data  available, including data on enrollment in DCTAG for academic years  2007\u20132016 and 6-year graduation rates for recipients in academic years  2012\u22122015. To assess the reliability of program data, we interviewed  OSSE officials about the processes used to produce these data and  reviewed the programming codes used to extract them from OSSE\u2019s data  system. We did not independently verify recipients\u2019 eligibility for DCTAG.  We also used American Community Survey (ACS) data to produce  estimates of D.C. household income and enrollment in D.C. high schools  for calendar years 2007\u22122016. To assess the reliability of these  estimates, we reviewed technical documentation for ACS. Because ACS  is based on samples and therefore subject to sampling error, we present  these estimates with their associated 95 percent confidence intervals.  Lastly, to provide context for trends in DCTAG, we reviewed data on  average tuition and required fees at 4-year public institutions for  academic years 2007\u20132016 and average 6-year graduation rates for  certain nationwide groups of students in academic years 2012\u20132016 from  the Integrated Postsecondary Education Data System (IPEDS). To  assess their reliability, we reviewed technical documentation on IPEDS.  We determined that data from these three sources were sufficiently  reliable for our purposes.", "To identify steps taken to support recipients, we reviewed documents  from OSSE describing support services offered to students either directly  by DCTAG or by other entities within OSSE. For example, we reviewed  documents describing services provided by OSSE\u2019s Office of College and  Career Readiness, which promotes college access and graduation for  D.C. students. Additionally, we interviewed officials from OSSE and the  stakeholders they partner with, including public and private school  officials and representatives of college access providers, which generally  are organizations that seek to expand access to higher education. These  organizations included the D.C. College Access Program, a privately  funded scholarship program, and the federally funded D.C. Educational  Opportunity Center, which provides D.C. residents information, guidance,  and counseling on opportunities to pursue education beyond high school.", "We also reviewed program documents for these partners to determine  how DCTAG works through its partners to offer support services that can  help recipients and potential applicants prepare for college, apply for  financial aid, and stay on track to graduate college.", "To assess the extent to which DCTAG\u2019s performance is reported, we  interviewed OSSE officials and reviewed program documents and  relevant federal laws. We used standards for internal control and  information on performance management as criteria against which to  assess these efforts. We also coordinated with the D.C. Office of the  Inspector General to understand key management practices and  requirements for D.C. government agencies. We did not assess the  program\u2019s compliance with legal reporting requirements.", "To describe other state and local scholarship programs, we reviewed a  non-generalizable sample of three programs that target students in two  municipalities and one state: the Boston Tuition-Free Community College  Plan, Boston, Massachusetts; the Kalamazoo Promise, Kalamazoo,  Michigan; and the Washington State Opportunity Scholarship,  Washington. We selected programs to reflect diversity in program design  and geography. We reviewed key program documents and interviewed  managers of each program. We did not conduct an independent review of  relevant state and local laws, regulations, and municipal orders; however,  we coordinated with state and local audit offices as appropriate.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["When DCTAG was created, there was no income eligibility requirement.  However, in 2007, federal law limited eligibility to students from families  with annual taxable incomes less than $1,000,000. In 2015, federal law  further limited eligibility to students from families with annual taxable  incomes less than $750,000; the law provided that this limit was to be  subsequently adjusted for inflation as measured by the percentage  increase, if any, in the Consumer Price Index for All Urban Consumers.  For example, in academic year 2018, eligibility was limited to students  from families with annual taxable incomes less than $762,000 (see  textbox for selected eligibility requirements).", "Complete the Free Application for Federal", "Generally begin a course of study within 3  years of graduating high school or  obtaining a General Equivalency Diploma. institution\u2019s requirements for Satisfactory  Academic Progress.", "Universities (HBCU) nationwide and other participating private nonprofit  institutions in the D.C. metropolitan area."], "subsections": []}, {"section_title": "Populations Eligible for and Enrolled in DCTAG Remained Relatively Stable as Amounts Awarded Increased and Recipients Graduated at Higher Rates than Selected National Comparison Groups", "paragraphs": ["We identified the following trends in eligibility for and enrollment in  DCTAG and graduation rates for recipients:", "DCTAG\u2019s potentially eligible population. ACS data for calendar  years 2007\u22122016 indicate that the population of high school students  with incomes within DCTAG\u2019s eligibility requirements has remained  relatively stable. Over this time frame, about 25,000 students in D.C.  were enrolled in high school each year, and about 90 percent of D.C.  households had annual incomes less than $200,000. Additional  households with annual incomes of $200,000 and above were also  likely eligible for DCTAG based on income.", "Enrollment in DCTAG. DCTAG program data indicate that the  number of DCTAG recipients remained relatively stable over the last  decade. DCTAG provided awards to an average of about 4,750  recipients annually over academic years 2007\u22122016 (see fig. 1).  While enrollment in DCTAG peaked in academic year 2012, the  number of DCTAG recipients in academic year 2016, the last year in  our period of review, was similar to the number of recipients in  academic year 2007, the first year in our period of review.", "Enrollment in DCTAG by type of high school attended. DCTAG  program data indicate the majority of recipients over academic years  2007\u20132016 graduated from D.C.\u2019s public high school system\u2014both  traditional public schools and public charter schools. D.C.\u2019s traditional  public schools include six selective schools, or magnet schools, that  limit admission to students that meet certain criteria or eligibility  requirements. For example, in academic year 2016, more than 70  percent of DCTAG recipients graduated from D.C.\u2019s public high school  system (see fig. 2). Many DCTAG recipients have also graduated  from private schools or schools outside D.C., were home schooled, or  attained their General Equivalency Diploma. For academic years  2007\u22122016, between about 30 and 40 percent of DCTAG recipients  came from high schools or programs outside the D.C. public school  system.", "Enrollment in DCTAG by taxable household income. Although in  2007 federal law limited eligibility for DCTAG to students from families  with annual taxable incomes less than $1,000,000, DCTAG  enrollment data show the program made awards to students from  families with a wide range of household taxable incomes in academic  years 2009\u22122016. At the same time, enrollment data indicate the  program\u2019s particular support for students from middle and lower  income families. Nearly 60 percent of recipients over this time frame  came from families with annual household taxable incomes of  $50,000 or less (see fig. 3).", "Enrollment in DCTAG by Ward. DCTAG program data indicate that  for academic years 2007\u22122016, about 50 percent of recipients came  from the three D.C. wards with the lowest median household incomes,  according to American Community Survey estimates (see fig. 4).", "Enrollment in DCTAG by attendance at 4-year and 2-year  institutions. DCTAG program data show that for academic years  2007\u22122016, about 90 percent of DCTAG recipients attended 4-year  institutions (see fig. 5). To counter the downward trend in enrollment  at 2-year institutions that began in academic year 2013, OSSE  officials told us they made programmatic changes to DCTAG for  academic year 2018. Specifically, OSSE officials told us they  determined out-of-state-tuition at 2-year public institutions attended by  DCTAG recipients exceeded in-state tuition by an average of $4,500  per year. However, the maximum annual award for recipients  attending these institutions was only $2,500. For academic year 2018,  OSSE officials said they increased the maximum annual award to  attend 2-year public institutions to $10,000 to close this gap.", "Enrollment in DCTAG by amount awarded. For academic years  2007\u22122016, the percentage of recipients receiving DCTAG\u2019s  maximum annual awards increased from 40 percent to 62 percent  (see fig. 6). OSSE officials linked an increase in the percentage of  recipients receiving maximum awards to rising tuition at colleges and  universities over this period. We analyzed data from IPEDS on  average tuition and required fees at 4-year public institutions and our  analysis confirmed that the average gap between out-of-state and in- state tuition exceeded DCTAG\u2019s $10,000 maximum annual award  starting in academic year 2015.", "DCTAG graduation rates. College graduation rates are an important  measure of performance for DCTAG. OSSE officials told us they  maintain a program goal of helping recipients choose schools from  which they are likely to graduate. For academic years 2012\u22122015, 6- year college graduation rates for DCTAG recipients were lower than  those for students nationwide. However, OSSE officials reported  that rates for recipients compare favorably to rates for national and  regional groups of students with characteristics similar to those of  DCTAG recipients. Our analysis confirmed that in academic year  2015, about 72 percent of DCTAG recipients were African-American  and the DCTAG graduation rate was about 10 percentage points  higher than for African-Americans nationwide. Similarly, in academic  year 2015, nearly 40 percent of DCTAG recipients attended  Historically Black Colleges and Universities (HBCU) and the DCTAG  graduation rate was about 15 percentage points higher than for the  nationwide population of students at these schools (see fig. 7).  Additionally, OSSE officials estimated that more than 65 percent of  DCTAG recipients were eligible for Pell Grants in academic year  2016. The National Center for Education Statistics recently started  reporting graduation rates for Pell Grant recipients, beginning with the  cohort of recipients that should have graduated by academic year  2016. Although not directly aligned, the academic year 2016  graduation rate for Pell Grant recipients nationwide was 48 percent\u2014 similar to the academic year 2015 graduation rate for DCTAG  recipients."], "subsections": []}, {"section_title": "DCTAG and Its Partners Help Recipients Prepare for College, Complete Applications for Financial Aid, and Stay on Track to Graduate", "paragraphs": ["DCTAG partners with other entities to offer support services intended to  help D.C. students prepare for college, apply for financial aid, and stay on  track to graduate college. These partners include other entities within  OSSE, as well as partners in the broader community such as public and  private high school officials and college access providers. DCTAG  provides some support services directly to students, such as individual  counseling on how to complete a DCTAG application (see fig. 8). An  OSSE official told us that DCTAG counselors instruct applicants and  renewing recipients on tasks such as how to obtain required supporting  documents to verify their residency in D.C. Additionally, to keep recipients  on track to graduate, DCTAG emails recipients a quarterly newsletter with  reminders to reapply for DCTAG and federal student aid so that they do  not disrupt their studies by losing financial assistance. OSSE officials also  said that DCTAG expands the reach of its support services by partnering  with other entities within OSSE and in the community. For example,  DCTAG works with OSSE\u2019s Office of College and Career Readiness,  whose mission is to increase D.C. public school students\u2019 access to  college. Through this collaboration, DCTAG helps eligible students  prepare for higher education, such as through assistance to public  schools to offer college entrance exams at no cost to students. Similarly,  by partnering with college access providers, DCTAG supplements the  support services it offers to help students stay on track to graduate. For  example, DCTAG partners with the D.C. College Access Program, a  privately funded scholarship program that offers support services for D.C.  students in college. One of their services includes using scholarship  recipients to mentor incoming D.C. students."], "subsections": []}, {"section_title": "OSSE\u2019s Reporting to Key Stakeholders on DCTAG Does Not Include Program Performance Information", "paragraphs": ["We found that although OSSE communicates DCTAG\u2019s program data  and activities to internal stakeholders, Congress, and the public in various  formats, these reporting methods do not include the program\u2019s four goals  (see textbox), relate performance information to these program goals, or  describe progress toward achieving them (see table 1). For example,  OSSE\u2019s 2017 annual report to Congress on DCTAG did not include  DCTAG\u2019s four program goals, nor did OSSE relate information about the  performance of the program to those goals. Instead, the 2017 annual  report was comprised of descriptive statistics that were presented without  explanation or sufficient context to allow readers to understand the  significance of what was being reported. Specifically, this information was  unrelated\u2014quantitatively or qualitatively\u2014to DCTAG\u2019s program goals of  ensuring D.C. residents are aware of and apply to DCTAG, or of helping  DCTAG students make smarter college choices, which OSSE officials  told us includes helping students select schools where they are more  likely to graduate. As a result, it is unclear how to interpret the information  presented in these reports and whether reported results indicate positive  or negative program performance.", "Federal standards for internal control state that program managers should  communicate necessary quality information so both internal and external  parties can help the program achieve its objectives. We have previously  reported that annual reports are essential for managers of federal  programs to communicate to decision makers the progress an agency  has made toward achieving its goals during a given year and, in cases  where goals are not met, identify opportunities for improvement or  whether goals need to be adjusted. In addition, our prior work found that  managers of these programs can increase the value of their reports to  congressional decision makers and the public by relating annual  performance information to the agency\u2019s strategic goals and mission.  Furthermore, we reported that performance measurement does not  require establishing a causal link between program activities and program  outcomes, but rather emphasizes that the nature of performance  measurement is the ongoing monitoring and reporting of program  accomplishments, particularly toward pre-established goals.", "OSSE officials agreed on the importance of developing an annual report  relating performance to program goals for the DCTAG program and  concurred with our finding that they had not communicated DCTAG\u2019s  performance information, such as progress toward program goals, in a  single annual report. They explained that developing performance  measures is challenging. For example, they said DCTAG recipients have  access to multiple support programs, which creates difficulties in  establishing causal links between a program and the desired outcome.  OSSE officials also stated that many DCTAG initiatives are new and, as a  result, complete data on those initiatives are not yet available. Although  we recognize that developing an annual report could be challenging, our  prior work has found performance measurement guidelines would not  require program managers to establish causal links as part of ongoing  performance monitoring and reporting of progress toward program goals.  Unless DCTAG\u2019s stakeholders have access to an annual report that  relates performance information to the program\u2019s goals, they may be  limited in their ability to judge the significance of what is being reported,  determine whether the agency is making progress toward achieving its  goals, or make informed program management and funding decisions."], "subsections": []}, {"section_title": "The Design of Selected Scholarship Programs Reflects Unique State and Local Needs", "paragraphs": ["Each of the three other selected scholarship programs we reviewed was  created to meet unique state or local needs.", "Boston Tuition-Free Community College Plan. Created to make  college more affordable for the city\u2019s low-income students.", "Kalamazoo Promise. Created to promote the economic and social  well-being of the community by expanding college access with full- tuition scholarships.", "Washington State Opportunity Scholarship. Created to address  shortfalls in the state\u2019s Science, Technology, Engineering, and  Mathematics (STEM) and health care workforce and increase  educational opportunities for low-income and middle-income students.", "Because each program was designed to address a unique state or local  need, they differ with regard to eligibility, funding, recipient supports, and  outcome measures. (For additional information on these three programs  see appendix I.)", "Eligibility. Each of the three selected scholarship programs  established eligibility criteria, such as income requirements, residency  requirements, and grade point average (GPA) requirements among  others, that reflect program objectives. For example, to ensure that  the Boston program serves the intended low-income population, the  program requires students to be eligible for Pell grants to receive  funding.", "Funding. While the selected scholarship programs have dedicated  funding streams, their funding sources reflect the origins of each  program. For example, Boston\u2019s program was initiated by the city\u2019s  mayor and is funded through a public charitable trust from fees for  large-scale commercial building projects while the Kalamazoo  promise was initiated by a group of anonymous donors who have  funded the program in perpetuity, according to program officials.  Alternately, the Washington program was initiated through  cooperation between the state government and private sector  companies and is funded by private donations that are matched by  state funds up to an annual maximum of $50 million.", "Recipient supports. Each of the selected scholarship programs have  developed supports such as coaching and peer mentoring to help  recipients transition to college and stay on track to graduate. For  example, the Kalamazoo Promise partners with and provides funding  to two local colleges to create counseling, coaching, or peer  mentoring services for scholarship recipients, according to program  managers.", "Outcome measures. The selected scholarship programs have  developed outcome measures to better understand the programs\u2019  impact, such as whether students stay on track to graduate or find  employment post-graduation. For example, program managers with  the Washington program said they initiated a post-graduation survey  in 2015 to better understand the employment status of graduates in  STEM and health care fields, their job location, and annual salary."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Steady enrollment in DCTAG provides an encouraging signal that the  program may be meeting the purpose set forth in federal law to expand  access to higher education opportunities for D.C. students. However,  without annual reports that relate DCTAG\u2019s performance information to  the program\u2019s goals, it is difficult to assess the impact of the program and  its support services. The information OSSE currently makes available  about DCTAG does not provide the context needed for the program\u2019s  internal stakeholders, Congress, or the public to determine whether the  program is meeting its goals or if any changes may be necessary."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["OSSE should issue an annual report on DCTAG that relates information  about the program\u2019s performance to the program\u2019s goals.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Mayor of the District of Columbia  for review and comment. Comments from the Mayor are reproduced in  appendix II. In response to our recommendation, the Mayor stated that  OSSE plans to expand DCTAG\u2019s current annual reports to Congress with  direct links to DCTAG\u2019s annual strategic performance goals and the  reports will combine data points to illustrate the program\u2019s performance.  The Mayor also raised a concern about the title of the draft report, stating  that it implied OSSE is not meeting legislative requirements. We have  modified the title and text of the report to avoid this implication.", "We are sending copies of this report to the appropriate congressional  committees, the District of Columbia Office of the State Superintendent of  Education, and other interested parties. In addition, this report is available  at no charge on the GAO website at http://www.gao.gov."], "subsections": []}]}, {"section_title": "Appendix I: Other State and Local Scholarship Programs", "paragraphs": ["Based on interviews with officials of three selected state and local  scholarship programs and a review of program documents, we present a  selection of information to provide additional context on these programs.  They include the Boston Tuition-Free Community College Plan, the  Kalamazoo Promise, and the Washington State Opportunity Scholarship.  The following tables include information on these scholarship programs\u2019  eligibility requirements, funding sources, recipient supports, and annual  reports and performance measures. Table 2 presents a selection of  eligibility requirements for the Boston Tuition-Free Community College  Plan, the Kalamazoo Promise, and the Washington State Opportunity  Scholarship.", "Table 3 presents a summary of the three selected scholarship programs\u2019  funding sources, as well as how students may use those funds.", "Table 4 presents a summary of the supports developed by the three  selected scholarship programs to support students, keep them on track to  graduate from college, and help them begin their careers.", "Table 5 presents a summary of the annual reports and selected  performance measures developed by the three selected scholarship  programs."], "subsections": []}, {"section_title": "Appendix II: Comments from the Mayor of the District of Columbia", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Melissa Emrey-Arras, (617) 788-0534 or emreyarrasm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Bill J. Keller (Assistant Director),  Tom Moscovitch (Analyst-in-Charge), and Michael C. Duane made  significant contributions. Also contributing to this report were James  Bennett, Deborah K. Bland, Sheila R. McCoy, Benjamin A. Sinoff, Rachel  R. Stoiko, and Kate van Gelder."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-72", "url": "https://www.gao.gov/products/GAO-18-72", "title": "Federal Facility Security: Selected Agencies Should Improve Methods for Assessing and Monitoring Risk", "published_date": "2017-10-26T00:00:00", "released_date": "2017-10-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Protecting federal employees and facilities from security threats is of critical importance. Most federal agencies are generally responsible for their facilities and have physical security programs to do so.", "GAO was asked to examine how federal agencies assess facilities' security risks. This report examines: (1) how selected agencies' assessment methodologies align with the ISC's risk management standard for identifying necessary countermeasures and (2) what management challenges, if any, selected agencies reported facing in conducting physical security assessments and monitoring the results.", "GAO selected four agencies\u2014CBP, FAA, ARS, and the Forest Service\u2014based on their large number of facilities and compared each agency's assessment methodology to the ISC Standard; analyzed facility assessment schedules and results from 2010 through 2016; and interviewed security officials. GAO also visited 13 facilities from these four agencies, selected based on geographical dispersion and their high risk level."]}, {"section_title": "What GAO Found", "paragraphs": ["None of the four agencies GAO reviewed\u2014U.S. Customs and Border Protection (CBP), the Federal Aviation Administration (FAA), the Agricultural Research Service (ARS), and the Forest Service\u2014used security assessment methodologies that fully aligned with the Interagency Security Committee's Risk Management Process for Federal Facilities standard (the ISC Standard). This standard requires that methodologies used to identify necessary facility countermeasures\u2014such as fences and closed-circuit televisions\u2014must:", "1. Consider all of the undesirable events (i.e., arson and vandalism) identified by the ISC Standard as possible risks to facilities.", "2. Assess three factors\u2014threats, vulnerabilities, and consequences\u2014for each of these events and use these three factors to measure risk.", "All four agencies used methodologies that included some ISC requirements when conducting assessments. CBP and FAA assessed vulnerabilities but not threats and consequences. ARS and the Forest Service assessed threats, vulnerabilities, and consequences, but did not use these factors to measure risk. In addition, the agencies considered many, but not all 33 undesirable events related to physical security as possible risks to their facilities. Agencies are taking steps to improve their methodologies. For example, ARS and the Forest Service now use a methodology that measures risk and plan to incorporate the methodology into policy. Although CBP and FAA have updated their methodologies, their policies do not require methodologies that fully align with the ISC standard. As a result, these agencies miss the opportunity for a more informed assessment of the risk to their facilities.", "All four agencies reported facing management challenges in conducting physical security assessments or monitoring assessment results. Specifically, CBP, ARS, and the Forest Service have not met the ISC's required time frame of every 3 years for conducting assessments. For example, security specialists have not conducted required reassessments of two ARS and one Forest Service higher-level facilities. While these three agencies have plans to address backlogs, CBP's plan does not balance conducting risk assessments with other competing security priorities, such as updating its policy manual, and ARS and the Forest Service lack a means to monitor completion of future assessments. Furthermore, CBP, ARS, and the Forest Service did not have the data or information systems to monitor assessment schedules or the status of countermeasures at facilities, and their policies did not specify such data requirements. For example, ARS and the Forest Service do not collect and analyze security-related data, such as countermeasures' implementation. FAA does not routinely monitor the performance of its physical security program. Without improved monitoring, agencies are not well equipped to prioritize their highest security needs, may leave facilities' vulnerabilities unaddressed, and may not take corrective actions to meet physical security program objectives. This is a public version of a sensitive report that GAO issued in August 2017. Information that the agencies under review deemed sensitive has been omitted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends: (1) that CBP and FAA update policies to require the use of methodologies fully aligned with the ISC Standard; (2) that CBP revise its plan to eliminate the assessments backlog; and (3) that all four agencies improve monitoring of their physical security programs. All four agencies agreed with the respective recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Several incidents\u2014such as armed citizens taking over a federal wildlife  refuge in Oregon for about 40 days in 2016; the active shooter incident at  the Washington Navy Yard in Washington, D.C., in 2013 that resulted in  several deaths; and the fatal shooting at the Anderson Federal Building in  Long Beach, California, in 2012\u2014demonstrate that government facilities  and their employees continue to be targets of potential harm. In light of  these incidents and other emergent threats, it is important that agencies  use risk-based methodologies to assess the physical security needs of  the approximately 113,000 executive-branch, non-military federal  buildings. Security assessments of facilities can uncover vulnerabilities  and threats and recommend protective measures\u2014called  countermeasures\u2014such as fences, access control systems, and closed- circuit television systems to mitigate those threats.", "At least 30 federal agencies are responsible for protecting about 45  percent of civilian federal facilities and their occupants from potential  threats. To help federal agencies protect and assess risks to their  facilities, the Interagency Security Committee (ISC), an organization  chaired by the Department of Homeland Security (DHS), developed  physical security standards for non-military federal facilities in the United  States.", "One particular standard, called The Risk Management Process for  Federal Facilities, defines the criteria and process executive agencies  and departments must follow when assessing risks to their facilities.  However, our past work found that some federal agencies used this  standard to varying degrees leaving agencies\u2019 facilities, workforce, and  visitors exposed to risk. You asked us to examine how federal agencies  with protective responsibilities use risk management to protect their  facilities with countermeasures that meet their security needs. This report  examines (1) how selected agencies\u2019 assessment methodologies align  with the ISC risk management standard to identify necessary  countermeasures, and (2) what management challenges, if any, selected  agencies reported facing in conducting physical security assessments  and monitoring the results.", "This product is a public version of a sensitive report that we issued in  August 2017. DHS deemed some of the information in our August report  to be sensitive, including information about facility locations, risk  assessment results, and undesirable events not assessed for federal  facilities physical security. Therefore, this report omits that information  which must be protected from public disclosure. Although the information  provided in this report is more limited, the report addresses the same  objectives as the sensitive report and uses the same methodology.", "To address the objectives, we selected four agencies with responsibility  for assessing their own facilities\u2014DHS\u2019s U.S. Customs and Border  Protection (CBP); the Department of Transportation\u2019s Federal Aviation  Administration (FAA); and the United States Department of Agriculture\u2019s  (USDA) Agricultural Research Service (ARS) and Forest Service. To  determine how these agencies\u2019 assessment methodologies align with The  Risk Management Process for Federal Facilities (the ISC Standard), we  compared facility security policies and procedures from the departments  and agencies to the criteria and process in the ISC Standard. In addition,  we selected 13 facilities within these 4 agencies for site visits based on  geographical dispersion and high levels of risk. For each of the selected  facilities, we reviewed assessment reports, toured the facilities, and  identified the status of recommended countermeasures. We interviewed  officials from the ISC, 3 departments, 4 agencies, and the 13 facilities to  understand security standards, policies, and procedures; agency-specific  assessment processes; management challenges; and guidance for  prioritizing physical security needs. We did not independently determine  what constitutes a management challenge, but relied on these facility  managers and agency security staff to identify their concerns as defined  in their own policies and procedures. We reviewed Standards for Internal  Control in the Federal Government (Standards for Internal Control)  regarding risk management criteria and the use of quality information for  our evaluation of the agencies\u2019 abilities to monitor their physical security  program. The results of our review of the selected agencies are not  generalizable to all the ISC member agencies but provide illustrative  examples of risk assessments and how the facilities addressed needed  countermeasures. See appendix I for more details on our scope and  methodology and appendix II for a list of the 13 selected facilities visited.", "The performance audit upon which this report is based was conducted  from June 2016 to August 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DHS, DOT, and USDA from August 2017 to  October 2017 to prepare this version of the sensitive report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": [{"section_title": "Background", "paragraphs": ["Risk management, as applied to security of federal facilities, entails a  continuous process of applying a series of mitigating actions\u2014assessing  risk through the evaluation of threats, vulnerabilities, and consequences;  responding to risks with appropriate countermeasures; and monitoring  risks using quality information (see fig. 1).", "In 1995, Executive Order 12977 established the ISC after the bombing of  the Oklahoma City Alfred P. Murrah Federal Building in April 1995. The  ISC\u2019s mandate is to enhance the quality and effectiveness of security in  and protection of federal facilities in the United States occupied by federal  employees for nonmilitary activities. The order directs the ISC to  develop and evaluate security standards for federal facilities, develop a  strategy to ensure executive agencies and departments comply with such  standards, and oversee the implementation of appropriate security  measures in federal facilities. The ISC has released a body of standards,  including the ISC Standard, designed to apply to the physical security  efforts of all federal, non-military agencies. The ISC Standard prescribes  a process for agencies to follow in developing their risk assessment  methodologies (see fig. 2).", "Most federal departments and agencies are generally responsible for  protecting their own facilities and have physical security programs in  place to do so. The ISC Standard requires executive departments and  agencies to follow the risk-management process when conducting risk  assessments for each of their facilities. That process begins with  determining the facility security level, ranging from level I (lowest risk) for  facilities generally having 100 or fewer employees to level V (highest risk)  for the most critical facilities and generally having greater than 750  employees. The security level designation determines the facility\u2019s baseline countermeasures. For each facility, departments and agencies  are required to (a) consider all of the \u201cundesirable events\u201d that could pose  a risk to their facilities\u2014 such as active shooters, vandalism, and  explosions\u2014and (b) assess three factors of risk (threats, vulnerabilities,  and consequences) to specific undesirable events. Subsequently,  agencies are to combine all three factors to yield a measurable level of  risk for each undesirable event (see app. III). Based on the results of  these assessments, agencies should customize (either increase or  decrease) the countermeasures to adequately reflect the assessed level  of risk.", "In addition, as part of planning for physical security resources within an  agency\u2019s budget process, the ISC has identified the need to balance  allocations for countermeasures with other operational needs and with  competing priorities. The ISC Best Practices have some similarities with  leading practices in capital decision-making. For example, both state that  the allocation of resources should be integrated into the agency\u2019s  mission, objectives, goals, and budget process. However, beyond the ISC  Best Practices, the Office of Management and Budget and we have  developed more comprehensive leading practices in capital decision- making that provide agencies with guidance for prioritizing budget  decisions such as for countermeasure projects. The Office of  Management and Budget and our guidance also emphasize evaluating a  full range of alternatives, informed by agency asset inventories that  contain condition information, to bridge any identified performance gap.  Furthermore, the guidance calls for a comprehensive decision-making  framework to review, rank, and select from among competing project  proposals. Such a framework should include the appropriate levels of  management review, and selections should be based on the use of  established criteria.", "The following describes the mission and physical security program  characteristics for the agencies in our review:", "CBP, the nation\u2019s largest law enforcement agency, has responsibility  for securing the country\u2019s borders. It also has responsibility for  conducting security assessments at about 1,200 facilities, including  approximately 215 federally owned and agency-controlled higher-level  facilities (facility security levels III and IV). These facilities include  border patrol stations with holding cells for people detained at the  border, office buildings, and canine-training centers. CBP conducts  these assessments.", "FAA\u2019s mission is to provide a safe and efficient aerospace system for  the country. According to agency data, FAA has 55 federally owned  and agency-controlled higher-level facilities\u2014including critical air  traffic control towers. According to FAA officials, FAA specialists  conduct security assessments.", "ARS conducts research related to agriculture and disseminates  information to ensure high-quality safe food and to sustain a  competitive agricultural economy. According to agency data, ARS has  security responsibility for four domestic federally owned and agency- controlled higher-level facilities\u2014including laboratories for research to  improve food and crop quality, office buildings, and warehouses. ARS  security personnel have responsibility for conducting security  assessments.", "The Forest Service sustains the health, diversity, and productivity of  the nation\u2019s forests and grasslands. According to agency officials, the  Forest Service has one federally owned and agency-controlled higher- level facility\u2014a regional headquarters office building. The Forest  Service\u2019s security officials have responsibility for conducting security  assessments, but at the time of our review, USDA security officials  conducted the assessment at Forest Service\u2019s one higher-level  facility."], "subsections": []}, {"section_title": "Selected Agencies\u2019 Assessment Methodologies Do Not Fully Align with the ISC\u2019s Risk Management Standard", "paragraphs": ["None of the four selected agencies\u2019 security assessment methodologies  fully aligned with the ISC Standard. The ISC gives agencies some  flexibility to design their own security-assessment methodologies for  identifying necessary countermeasures as long as the chosen  methodology adheres to fundamental principles of a sound risk- management methodology. Specifically, methodologies must:  consider all of the undesirable events identified in the ISC Standard  as possible risks to federal facilities, and assess three factors of risk (threats, vulnerabilities, and  consequences) for each of the events.", "Furthermore, the ISC Standard requires executive departments and  agencies to document decisions that deviate from the ISC Standard.  Agencies\u2019 policies and methodologies reference the ISC Standard.  However, none of the agencies\u2019 methodologies considered all of the  undesirable events during assessments although they used some type of  risk assessment methodology. In addition, the agencies did not always  adhere to these principles of risk management (see table 1).", "At the time of our review, CBP\u2019s methodology did not fully align with the  ISC Standard because it did not consider all of the 33 undesirable events  nor assess threat and consequence. CBP security specialists assessed  vulnerabilities at building entrances and exits, in interior rooms, and  around the perimeter using a yes/no checklist during the assessment  process. However, assessment reports showed that specialists did not  assess the threats and consequences of undesirable events at each  facility. According to security officials, the gap occurred because they  designed the checklist to meet requirements in the 2009 CBP Security  Policy and Procedures Handbook, which predates the first edition of the  ISC Standard issued in 2010. CBP officials told us that as of January  2017, they began using an improved methodology to assess the threats,  vulnerabilities, and consequences for 30 of 33 undesirable events\u2014 omitting three now identified in the November 2016 revision to the ISC  Standard. However, CBP has not yet updated its handbook to align with  the ISC Standard, even though it started this effort over 3 years ago in  December 2013. CBP officials did not provide a draft of its updated  handbook, but they provided a plan with milestone dates for issuing the  handbook by September 2018. CBP officials also told us that updates to  the handbook may have to wait due to competing priorities, including  efforts to address the backlog of assessments (which we discuss later in  this report). Delays in updating the handbook mean that CBP\u2019s policy will  continue to not align with the ISC Standard. Furthermore, although CBP  security officials told us that all of the agency\u2019s security specialists have  been trained to use the improved assessment methodology, without  documentation of the methodology in agency policy, there may be greater  risk of its inconsistent application. Standards for Internal Control  emphasize the importance of agencies developing and documenting  policies to ensure agency-wide objectives are met. Documentation serves  to retain institutional knowledge over time when questions about previous  decisions arise. Without an updated policy handbook that requires a  methodology that assesses all undesirable events consistent with the ISC  Standard, CBP cannot reasonably ensure that its facilities will have levels  of protection commensurate to their risk.", "FAA\u2019s methodology does not fully align with the ISC Standard because it  does not consider all of the 33 undesirable events nor does it assess all  three factors of risk. FAA security specialists assess vulnerabilities to the  site perimeter, entryways, and interior rooms using a yes/no checklist, but  the checklist does not assess the consequences from each of the  undesirable events at each facility. With respect to threat, FAA applies the  ISC\u2019s baseline threat\u2014a general federal facilities threat level that relates  directly to a set of baseline countermeasures\u2014across all its higher-level  facilities because FAA policy states that there is no agency-specific threat  that exceeds the current baseline threat. According to FAA officials, the  baseline threat standardizes the security needs across their facilities  rather than addressing the security needs of individual facilities from  specific threats. When necessary, FAA policy allows specialists to modify  countermeasures based on an evaluation of conditions at the facility.", "FAA realized that this approach was no longer appropriate given the  agency-wide goal to make risk-based decisions, a review of the  assessment process after a 2014 Chicago fire incident that destroyed  critical FAA equipment, and an awareness of ISC initiatives to assess  compliance. To address the resulting methodological gaps, FAA hired a  contractor to design, develop, test, and validate an improved risk- assessment methodology. Subsequently, FAA improved its methodology  in January 2017 to assess the threats, vulnerabilities, and consequences  for 30 of the 33 undesirable events identified in the November 2016  revision to the ISC Standard \u2014and tested the methodology at lower-  and higher-level facilities. This revised methodology addresses the need  to assess individual facility needs rather than using a standardized  baseline approach. In April 2017, FAA officials told us of their plan for  implementing this methodology and provided tentative milestone dates to  conduct further testing, training, and analysis before deciding to use the  improved methodology, which they expect to complete by January 2018.  However, their plan lacks the necessary information to ensure successful  implementation, such as detail on how many facilities they will test and  how they will use the results of testing, training, and analysis to  implement the improved methodology within the identified 9-month time  frame. Furthermore, the improved methodology does not address  undesirable events for which ISC issued countermeasures in May 2017.  Without a detailed implementation plan to assess the methodology\u2019s  impact on its security program, FAA cannot reasonably ensure that its  facilities have the proper countermeasures. With ongoing changes to its  security program, FAA has an opportunity to fully align its improved  methodology with the ISC Standard by including all 33 undesirable events  and to update its policy requiring the use of such a methodology.", "Unlike CBP and FAA\u2014which developed their own methodologies  separate from their parent departments (Department of Homeland  Security (DHS) and Department of Transportation (DOT), respectively)\u2014 ARS and the Forest Service follow an assessment methodology  developed by USDA. USDA\u2019s methodology does not fully align with the  ISC Standard because it does not consider all of the 33 undesirable  events for which ISC issued countermeasures in May 2017. Security  specialists from USDA headquarters typically assess ARS\u2019s and the  Forest Service\u2019s higher-level facilities using a risk-based methodology  that considers the 31 undesirable events listed in the previous version of  the ISC Standard dated August 2013. However, until recently, USDA did  not assign ratings to each of the three risk factors\u2014threat, vulnerability,  and consequence\u2014and then combine these ratings to yield a measurable  level of risk for each undesirable event. USDA security officials said that  they have revised the assessment-reporting format to include this risk  calculation and trained their specialists to measure risk in this way. USDA  officials provided us with a new assessment template that addresses all  33 undesirable events and includes measuring risk. Additionally, USDA  officials said that they are revising their outdated physical security manual  and expect to complete it by April 2018. With a revised manual and  application of the new assessment template, USDA should be better  positioned to assess risk at its facilities.", "When agencies do not use methodologies that fully align with the ISC  Standard, they could face deleterious effects, ranging from facilities  having inappropriate levels of protection to agencies having an inability to  make informed resource allocation decisions for their physical security  needs. Specifically, the ISC Standard states that facilities may face the  effect of either having (1) less protection than needed resulting in  inadequate security or (2) more protection than needed resulting in an  unnecessary use of resources. The ISC Standard also states that these  effects can be negated by determining the proper protection according to  a risk assessment. Identified excess resources in one risk area then can  be reallocated to underserved areas, thus ensuring the most cost- effective security program is implemented. As an illustration of such  potential effects, we found that two agencies assessing two higher-level  facilities came to two different conclusions in terms of their need for X-ray  machines to screen for guns, knives, and other prohibitive items in federal  facilities. Specifically, one agency based its decision on a policy that does  not deviate from the ISC\u2019s baseline set of countermeasures, and the other  agency based its decision on professional judgement that deviated from  the ISC\u2019s baseline set of countermeasures. Neither agency based its  decision on a risk assessment nor documented its decision\u2014both ISC  requirements, specifically:", "Without conducting a risk assessment, FAA recently expanded a  policy requirement calling for all higher-level facilities to have X-ray  machines and magnetometers. This new requirement poses a  potentially sizeable investment for the agency with an estimated cost  of X-ray machines of about $24,000 and magnetometers of about  $4,000 each. FAA may need such equipment at all its higher-level  facilities. However, the ISC Standard requires that agencies conduct  risk assessments first to justify their needs. Without conducting risk  assessments, FAA managers could unnecessarily use resources by  installing such equipment in all higher-level air traffic facilities when  there may be higher priority needs", "A USDA security specialist decided, despite an ISC baseline  requirement that higher\u2013level facilities have X-ray machines, not to  recommend an X-ray machine at a higher-level Forest Service facility.  The specialist reasoned that unlike other federal buildings with  numerous unknown visitors, this facility receives mostly known  individuals and a limited number of visitors. The ISC Standard allows  for professional judgement; however, the ISC requires that agencies  document deviations from the baseline set of countermeasures.  Reducing the facility\u2019s level of protection without documenting an  assessment of risk could result in no record of the basis of the  decision for current and future facility managers and security officials  to review or use as justification in the case of a question of  compliance.", "In another case, we found that one higher-level facility did not have  access control for employees or visitors nor did it have armed guard  patrols. The facility manager told us that intelligence and a history  without incidents gave leadership reason to believe that these measures  were not needed and that therefore the agency did not require and would  not fund such protective measures for this facility\u2014in effect, accepting the  risks to the facility. Security officials said they also had the same  understanding and did not document the matter in the assessment report  even though agency policy and the ISC Standard require written  documentation when officials deviate from the baseline requirement.", "Without security assessments that fully align with the ISC Standard and  provide measureable levels of risk, agencies do not have the information  they need to determine priorities and make informed resource allocation  decisions. For example, they may not be able to assess whether to  acquire or forego costly physical-security countermeasures\u2014such as, X- ray machines, access control systems, and closed-circuit television  systems\u2014for facilities. Additionally, after determining the need to acquire  a countermeasure, agencies must fund the countermeasure. As  previously discussed, leading practices in capital decision-making include  a comprehensive framework to review, rank, and select from competing  project proposals for funding. In conducting risk assessments that do  not fully align with the ISC Standard (i.e., not assessing threats,  vulnerabilities, and consequences and measuring risks), agencies miss  the opportunity for more informed funding decisions. Three of the four  agencies (CBP, ARS, and the Forest Service) currently prioritize funding  for operational needs over physical security needs (see table 2) when  agencies\u2019 priorities might be different if they based their decisions on an  aligned risk assessment."], "subsections": []}, {"section_title": "Selected Agencies Reported Facing Challenges in Conducting Security Assessments and Monitoring Results", "paragraphs": [], "subsections": [{"section_title": "Agencies Have Not Conducted Timely Security Assessments", "paragraphs": ["Standards for Internal Control state that agencies should use quality  information on an ongoing basis as a means to monitor program activities  and take corrective action, as necessary. The ISC requires that agencies  assess higher-level facilities at least once every 3 years\u2014an interval  requirement to identify and address evolving risks. We found that three of  the four agencies (CBP, ARS, and the Forest Service) did not meet this  requirement. Officials reported various challenges including (1)  assessments competing with other security activities, (2) an insufficient  number of qualified staff to conduct assessments when compared to the  number of facilities, or (3) not knowing of the required assessment  schedule.", "An \u201cinformation system\u201d is the people, processes, data, and technology that  management organizes to obtain, communicate, or dispose of information. that had not been reassessed since 2010. CBP security officials attributed  the backlog to (1) having too few security specialists assigned to assess  about 1,200 facilities and (2) the specialists working on competing  priorities, such as revising the security handbook, conducting technical  inspections, and reviewing new construction designs and renovation  projects. According to CBP security officials, they have developed a plan  to eliminate the backlog by the end of fiscal year 2018 by prioritizing the  completion of assessments. While we found the plan comprehensive, the  schedule did not seem feasible. For example, the plan assumes that one  specialist can complete six assessments in 3 consecutive days and that  another specialist can complete three assessments in 1 day. In contrast,  security officials told us specialists take about 20 work hours (or 2\u00bd days)  to conduct an on-site assessment of one facility. CBP officials said that  they believe they can meet the time frames of the plan because they have  set aside other priorities and have a thorough understanding of the scope  of work involved at the facilities. They added that it will not be easy to  meet the timeline, but they can accomplish it with a motivated and  committed workforce, adequate financial resources, and absent activities  that would otherwise require shifting of resources. We question the  feasibility of setting aside important priorities, such as updating the policy  manual and reviewing physical security elements in new construction  designs, as well as the workload assumptions for completing the  assessments. Further, these other priorities are also key to securing  facilities. Without balancing assessments with competing priorities, CBP\u2019s  time frames for completing the assessments by the end of fiscal year  2018 may not be feasible and may also result in the agency\u2019s not  addressing other important physical security responsibilities.", "Since the ISC issued its standard in 2010, ARS and the Forest Service  have assessed their higher-level facilities at least once. However, these  agencies have not reassessed all of their higher-level facilities within the  3-year interval requirement. Specifically, security specialists have not  conducted required reassessments of two ARS and one Forest Service  higher-level facilities. The ARS headquarters official explained that the  agency had not reassessed the two facilities due to competing priorities  and insufficient internal resources. During the course of our review, ARS  headquarters officials said they began assessing one of the two ARS  facilities in May 2017 and will begin assessing the second facility in  October 2017. The Forest Service official explained that the agency  missed its security reassessment of the regional office because the  facility staff had not requested one. During our visit, facility staff  responsible for security told us that they were not aware of the ISC\u2019s 3- year interval requirement. Facility staff requested a reassessment, and  security officials told us that they expected to complete it by mid-June  2017. Completing this one-time assessment may address the facility\u2019s  security needs temporarily. However, ARS and the Forest Service have  not implemented a long-term schedule with key milestones and lack a  means to monitor completion of assessments of higher-level facilities at  least once every 3 years. Consequently, these agencies cannot  reasonably ensure that they have full knowledge of the risks to their  facilities.", "FAA data from 2010 through 2016 show that FAA has assessed its 55  higher-level facilities at least once every 3 years. FAA policy requires  that specialists schedule assessments of higher-level facilities every 12\u2013 18 months depending on whether the facility has met FAA physical  security standards."], "subsections": []}, {"section_title": "Data Limitations Affect Agencies\u2019 Ability to Fully Monitor Security Activities", "paragraphs": ["The ISC Standard states that to make appropriate resource decisions,  agencies need information, such as what is being accomplished, what  needs management attention, and what is performing at expected levels.  We found that agencies\u2019 methods of collecting and storing security  information had limitations that affected agency and facility officials\u2019  oversight of the physical security of their facilities (see table 3).", "Without having long-term, agency-wide information to monitor whether  assessments are conducted on schedule, ARS and the Forest Service  may not meet the ISC Standard, resulting in not adequately protecting  their facilities and employees.", "The ISC Standard also states that agencies should measure their security  program\u2019s capabilities and effectiveness to demonstrate the need to fund  facility security and to make appropriate decisions for allocating  resources. However, the agencies in our review were unable to  demonstrate appropriate oversight of their physical security programs  because:", "CBP\u2019s handbook does not include requirements for data collection  and analysis for monitoring physical-security program activities.  Facility managers and security officials do not enter assessment  results, such as the countermeasures recommended for facilities, in  the real property database. Consequently, they do not have  comprehensive data to manage their security program, assess overall  performance, and take any necessary corrective actions. A CBP  official told us that a comprehensive database would allow CBP to set  priorities for addressing countermeasures. Without including data  collection and analysis requirements in its updated handbook, CBP  may be unable to monitor the performance of its physical security  program.", "FAA\u2019s policy does not require ongoing monitoring of physical security  information, such as the status of recommended countermeasures or  assessment schedules. As a result, FAA officials do not proactively  use physical security information to assess the overall performance of  its physical security program and take corrective actions before an  incident occurs. Without a policy requiring ongoing monitoring of  information\u2014an internal control activity, FAA may be unable to assess  the overall performance of its security program and take necessary  corrective actions.", "USDA has a decentralized security program and places the  responsibility on agencies to create their physical security programs.  Security officials from ARS and the Forest Service told us that USDA  does not have a policy for collecting and managing agency-wide  information; however, they said that USDA is drafting a new  departmental regulation and manual that will specify (1) the roles and  responsibilities of agency and facility managers and (2) electronic- data-reporting requirements for monitoring the performance of the  physical security program. USDA officials provided a draft of USDA\u2019s  regulation and manual for our review. The draft regulation did not  mention data reporting and monitoring, while the draft manual only  contained a table of contents that included a section entitled \u201cFacility  Tracking Database.\u201d USDA officials expect to issue new policies  sometime between October 2017 and April 2018. In the absence of  new departmental regulation and manual, USDA and Forest Service  officials told us that they have begun to develop a Forest Service  system for storing electronic copies of agency-wide assessments and  that they plan to expand the use of this system to track site specific  assessment dates and status of recommended countermeasures.  Forest Service officials provided milestone dates and described the  capabilities for a future information system, which they expect to  complete in September 2017. However, we could not determine  whether the manual will have information system requirements to  monitor agencies\u2019 physical security program, an internal control  activity. Without USDA\u2019s including data collection and analysis  requirements in its manual, its agencies may not be able to monitor  the performance of their physical security programs."], "subsections": []}, {"section_title": "Selected Agencies Vary in Addressing Recommended Corrective Actions", "paragraphs": ["Without agencies having information to monitor security activities, they  were unable to provide us information on the status of countermeasures  across their entire portfolio. In order to better understand the status of  countermeasures implemented and facilities\u2019 experiences when  implementing countermeasures, we determined the status of  countermeasures at 13 facilities we visited.", "As previously noted, risk management, as it pertains to physical security,  involves agency officials monitoring their physical security programs.  During our visits to 13 selected facilities, we found the four agencies  differed in the number of countermeasures that they had not  implemented. Facility officials provided us with some information on why  countermeasures had not been implemented, specifically:", "CBP had a significant number of recommended countermeasures  from 2010 through 2016 that remained open at the eight selected  CBP facilities. CBP facility officials gave reasons why recommended  countermeasures had not been implemented. At one facility, officials  did not know about the recommended countermeasures from its last  2010 assessment because the individuals previously knowledgeable  about the assessments left the organization without communicating  the results. By taking action to improve facility security, they  implemented some needed countermeasures. However, at the time of  our review, a large number of the recommendations remained open.  At another facility, officials told us that they too had not known (for the  same reason mentioned above) of their 2010 assessment, which  contained recommended countermeasures. However, these officials  told us that they submitted a funding request a few weeks before our  visit to address all except one of the open countermeasures.  In  other cases, facilities have not implemented needed countermeasures  due to resource constraints or physical site limitations.", "FAA had a large number of recommended countermeasures from  2010 through 2016 that remained open at the time of our review for  the two FAA facilities visited. In this case, the most recent security  assessment, completed in late 2016, resulted in one facility\u2019s having  little time to implement countermeasures by the time we conducted  our analysis.", "While ARS had closed almost all recommended countermeasures at  two facilities at the time of our review, one Forest Service facility had  not yet implemented a recommendation (to secure its entrance doors)  that was identified in a 2013 security assessment (see bottom center  photo, fig. 3). This countermeasure remained open because facility  officials said they continued to explore alternatives to address the  recommendation.", "Figure 3 shows examples of countermeasures not fully implemented at  selected facilities we visited.", "During our site visits and discussions with facility staff, we found that  physical site limitations or other priorities can make it difficult for facility  managers to implement countermeasures. For example, a  countermeasure might involve correcting a clear zone violation\u2014that is,  moving an object (such as a brick wall) a certain distance away from the  facility\u2019s perimeter fence to prevent a potential intruder from using the  object to climb over the fence. However, when the object near the fence  is a building and the property outside of the fence is not federally owned  (see bottom right photo, fig. 3), it may not be cost effective to correct the  clear zone violation. In this situation, the agency bears the responsibility  for exploring ways to address the vulnerability. In following the ISC  Standard, as previously noted, managers are required to justify and  document why they could not implement recommended  countermeasures\u2014what the ISC calls risk acceptance."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Selected agencies carry a great responsibility for protecting facilities that  support border protection activities, provide safe and efficient air traffic  around the country, and protect the quality of the nation\u2019s food supply.  With this responsibility comes the need to appropriately assess risk to  ensure the security of these agencies\u2019 facilities. However, 7 years after  the ISC issued its initial risk-management process standard, each of four  selected agencies continued to use assessment methodologies that did  not fully align with this standard. During our review, agencies improved  their methodologies to better align with the ISC Standard, but the  agencies had not yet incorporated the methodologies into their policies  and procedures. Without updated policies and procedures requiring a  methodology that adheres to the ISC Standard (including all 33  undesirable events now identified in the November 2016 revision to the  ISC Standard), agencies may not collect the information needed to  assess risk and determine priorities for improved security. This situation  could hamper the agencies\u2019 ability to make informed resource allocation  decisions or to recommend countermeasures commensurate to the needs  at specific facilities. To address challenges in conducting timely  assessments, agencies that had a backlog developed plans to address  them, but the assumptions used in CBP\u2019s plans and time frames did not  appear to fully reflect the agency\u2019s competing priorities and actual  experience. Additionally, ARS and Forest Service have not implemented  a long-term assessment schedule with key milestones to ensure that  higher-level facilities are reassessed at least once every 3 years. Further,  in cases where the agencies may have had risk assessment information,  CBP, ARS, and the Forest Service lack the means to collect, store, and  analyze this information in order to monitor the status of a facility\u2019s  security. Without these key aspects of a comprehensive security  program\u2014a methodology that meets the standard, policies, and  procedures that incorporate that methodology; the ability to complete  assessments on time; and information to perform monitoring\u2014agencies  remain vulnerable to substantial security risks."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To improve agencies\u2019 physical security programs\u2019 alignment with the ISC  Risk Management Process for Federal Facilities and Standards for  Internal Control in the Federal Government for information and  monitoring, we recommend that the   Commissioner of U.S. Customs and Border Protection take the following  three actions: with regard to the updated Security Policy and Procedures Handbook,  the ISC\u2019s Risk Management Process for Federal Facilities  requirement to assess all undesirable events, consider all three  factors of risk, and document deviations from the standard, and data collection and analysis requirements for monitoring the  performance of CBP\u2019s physical security program.  revise the assumptions used in the plan to address the backlog to  balance assessments with competing priorities, such as updating the  policy manual and reviewing new construction design, to develop a  feasible time frame for completing the assessment backlog.", "Secretary of Transportation direct the FAA Administrator to take the  following three actions: develop a plan that provides sufficient details on the activities needed  and time frames within the date when FAA will implement an  improved methodology; update FAA\u2019s policy to require the use of a methodology that fully  aligns with the ISC\u2019s Risk Management Process for Federal Facilities  for assessing all undesirable events, considering all three factors of  risk, and documenting all deviations from the standard  countermeasures; and update FAA\u2019s policy to include ongoing monitoring of physical security  information.", "Secretary of Agriculture take the following two actions:  include data collection and analysis requirements for monitoring the  performance of agencies\u2019 physical security programs, in the  department\u2019s revised physical-security manual, and direct the Administrator of the Agricultural Research Service and the  Chief of the Forest Service to  implement and monitor a long-term assessment schedule with key  milestones to ensure that higher-level facilities are reassessed at  least once every 3 years."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Homeland  Security, Transportation, and Agriculture for review and comment. All  three departments agreed with the findings and recommendations for  their respective agencies. DHS agreed with our recommendations and  provided actions and timeframes for completion. With regard to our  recommendation to update the Security Policy and Procedures  Handbook, DHS stated that CBP is updating the handbook to include: (1)  a discussion and diagram of the ISC risk management process and its  application within CBP\u2019s assessment processes; (2) specific guidance for  conducting risk assessments in accordance with the ISC\u2019s Risk  Management Process for Federal Facilities; and (3) a requirement and  guidance for data collection and analysis in support of a robust physical  security program. With regard to our recommendation to revise the  assumptions used in the plan to address the assessment backlog, DHS  stated that CBP has reevaluated current priorities and believes the  current plan to eliminate the risk assessment backlog by the end of fiscal  year 2018 is achievable. DHS also provided technical comments, which  we incorporated as appropriate. DHS\u2019s official written response is  reprinted in appendix IV.", "DOT also agreed with our recommendations and by e-mail requested that  we publish the response to the sensitive version of this report. DOT  stated that FAA continues to refine its policy and develop processes that  address the ISC threats, vulnerabilities, and consequences. Further, DOT  stated that FAA would either validate that current mitigation strategies  address those risks or apply additional appropriate countermeasures.  DOT stated that it will provide a detailed response to each  recommendation within 60 days from the date of this report. DOT\u2019s official  written response is reprinted in appendix V.", "USDA agreed with our recommendations and provided the agency-wide  actions for completion. USDA provided a plan to ensure compliance with  the ISC\u2019s Risk Management Process for Federal Facilities by  development of a standard physical-security assessment process and by  initiation of a compliance program to track assessments and monitor the  installation of countermeasures. In an e-mail, USDA provided milestone  dates and planned completion by January 2019. USDA\u2019s official written  response is reprinted in appendix VI.", "If you or your staff has any questions about this report, please contact me  at (202) 512-2834 or RectanusL@gao.gov. GAO staff who made key  contributions to this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines: (1) how selected agencies\u2019 assessment  methodologies align with the Interagency Security Committee\u2019s (ISC) risk  management standard for identifying necessary countermeasures and (2)  what management challenges, if any, selected agencies reported facing  in conducting physical security assessments and monitoring the results.", "To determine how selected agencies\u2019 assessment methodologies align  with ISC standards for identifying the necessary countermeasures, we  identified federal executive branch departments and agencies reported by  the Department of Homeland Security (DHS) to have received  delegations of authority to protect their own buildings. We reviewed the  Federal Real Property Council\u2019s data on the Federal Real Property Profile  to identify federally owned and agency-controlled buildings. We  determined that these data were sufficiently reliable for the purpose of our  reporting objectives based upon our recent report that reviewed these  data fields. We selected four agencies based upon their large quantity of  reported federally owned and agency-controlled buildings: DHS, U.S.  Customs and Border Protection (CBP); Department of Transportation  (DOT), Federal Aviation Administration (FAA); United States Department  of Agriculture (USDA), Agricultural Research Service (ARS) and USDA\u2019s  United States Forest Service (Forest Service). This methodology  purposely does not include federal buildings protected by FPS and under  the control of the General Services Administration as well as other  agencies that we reported on in our previous work. We obtained and  reviewed one particular ISC standard, The Risk Management Process for  Federal Facilities (the ISC Standard) and its related appendices for  assessing physical security and providing recommended  countermeasures at federal facilities. We obtained and analyzed the  selected departments\u2019 and agencies\u2019 facility-security policies and  procedures for a risk assessment methodology. According to the ISC  Standard, agencies\u2019 risk assessment methodologies must:  consider all of the undesirable events identified in the ISC Standard  as possible risks to federal facilities as listed in appendix III; assess the threat, consequences, and vulnerability to specific produce similar or identical results when applied by various security provide sufficient justification for deviations from the ISC-defined  security baseline.", "We limited the scope of this review to the first two standards above  because agencies\u2019 adherence to these standards could be objectively  verified by reviewing and analyzing agency documentation and  interviewing agency officials, and their adherence to the two additional  standards could not be verified in this manner. We did not conduct risk  assessments with independent security professionals to evaluate: 1) the  results from prior agency evaluations and 2) the sufficiency of  justifications for deviations from the ISC-defined security baseline, as  both evaluations were outside of the scope of the engagement.  Therefore, for the purposes of this report, risk assessment policies,  procedures and resulting methodology that align with ISC standards are  those that consider all of the undesirable events and assess the threats,  consequences, and vulnerabilities to specific undesirable events. We  reviewed and analyzed information to answer the following five questions:  1.   Do the policies and procedures mention the ISC standards?  2.  Do the policies and procedures consider all of the undesirable  events?  3.  Do the policies and procedures assess the threat of specific  undesirable events?  4.  Do the policies and procedures assess the consequences of specific  undesirable events?  5.  Do the policies and procedures assess the vulnerability to specific  undesirable events?", "We answered each of these questions as either a \u201cYes\u201d or \u201cNo\u201d for our  selected agencies. The \u201cNo\u201d answer to questions 3, 4, and 5 includes the  following two possibilities: (a) the agency\u2019s threat, consequence, or  vulnerability ratings are not tied to specific undesirable events, or (b) the  agency does not have a framework or formalized steps within which it  collects and analyzes threat-, consequence-, or vulnerability-related  information. If the answer to each of the five questions was \u201cYes,\u201d then  the agency\u2019s overall risk assessment methodology aligns with ISC risk  assessment standards for the purposes of this report. If the answer to one  or more of the five questions was \u201cNo\u201d, then the agency\u2019s methodology  does not to align with ISC standards for the purposes of this report.", "We interviewed security officials at ISC; three departments (DHS, DOT,  and USDA); and four agencies (CBP, FAA, ARS, and the Forest Service).  We obtained and analyzed agency guidance on prioritizing physical  security needs and interviewed agencies\u2019 facility maintenance and budget  officials. We reviewed the ISC\u2019s best practices for planning for physical  security resources within an agency budget process. Additionally, we  reviewed the Office of Management and Budget\u2019s and our leading  practices in capital decision-making that provide agencies with guidance  for prioritizing budget decisions such as \u201ccountermeasure projects.\u201d We  also reviewed Standards for Internal Control in the Federal Government  because internal controls play a significant role in helping agencies  achieve their mission-related responsibilities. Our findings from our  review of the selected agencies are not generalizable to all ISC member  agencies, but provide insight into and illustrative examples about selected  agencies\u2019 facility risk-assessment methodologies.", "To determine what management challenges selected agencies reported  facing in conducting physical security assessments and monitoring  results, we interviewed agencies\u2019 security, maintenance, and budget  officials. We requested agency security officials to provide portfolio- wide  data on facility security assessments for our review in order to select sites  to visit and analyze data for dates of assessments and the status of  findings. We assessed the reliability of this data through interviews with  knowledgeable agency staff and a review for completeness and any  unexpected values. We compiled information from physical security  assessments when no portfolio-wide agency data were available. We  determined that these data were sufficient for the purpose of our reporting  objectives and selected geographically dispersed sites with buildings with  higher reported security levels per the ISC Standard, as these higher  security levels have greater requirements and therefore the potential for  greater resource needs. See appendix II for the 13 sites we selected. For  these selected sites, we interviewed agency staff concerning the  assessment process, site-specific findings, recommendations, justification  for deviations from ISC\u2019s baseline standards, and management  challenges faced in addressing physical security needs. We observed  and photographed the status of the findings from the site physical security  assessments. We did not independently determine what constitutes a  management challenge or a physical security finding. Rather, we relied  on these stakeholders to determine these physical security concerns as  defined in their own standards and guidance. The information from our  selected sites is illustrative and cannot be generalized to sites agency- wide.", "The performance audit upon which this report is based was conducted  from June 2016 to August 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DHS, DOT and USDA from August 2017 to  October 2017 to prepare this version of the original report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": []}, {"section_title": "Appendix II: Selected Facilities GAO Visited", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: The Interagency Security Committee\u2019s Undesirable Events", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Transportation", "paragraphs": ["Error! No text of specified style in document."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Agriculture", "paragraphs": ["Error! No text of specified style in document."], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": ["Appendix VII: GAO Contact and Staff  Acknowledgments Error! No text of specified style in document."], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Amelia Shachoy (Assistant  Director), Steve Martinez (Analyst-in-Charge), Jennifer Clayborne,  George Depaoli, Geoffrey Hamilton, Joshua Ormond, Alison Snyder,  Amelia Michelle Weathers, and Elizabeth Wood made key contributions  to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-671", "url": "https://www.gao.gov/products/GAO-18-671", "title": "Veterans Choice Program: Further Improvements Needed to Help Ensure Timely Payments to Community Providers", "published_date": "2018-09-28T00:00:00", "released_date": "2018-09-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Questions have been raised about the lack of timeliness of TPAs' payments to community providers under the Choice Program and how this may affect the willingness of providers to participate in the program as well as in the forthcoming Veterans Community Care Program. You asked GAO to review issues related to the timeliness of TPAs' payments to community providers under the Choice Program.", "This report examines, among other things, (1) the length of time TPAs have taken to pay community providers' claims and factors affecting timeliness of payments, and (2) actions taken by VA and the TPAs to reduce the length of time TPAs take to pay community providers for Choice Program claims.", "GAO reviewed TPA data on the length of time taken to pay community provider claims from November 2014 through June 2018, the most recent data available at the time of GAO's review. GAO also reviewed documentation, such as the contracts between VA and its TPAs, and interviewed VA and TPA officials. In addition, GAO interviewed a non-generalizable sample of 15 community providers, selected based on their large Choice Program claims volume, to learn about their experiences with payment timeliness."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs' (VA) Veterans Choice Program (Choice Program) was created in 2014 to address problems with veterans' timely access to care at VA medical facilities. The Choice Program allows eligible veterans to obtain health care services from providers not directly employed by VA (community providers), who are then reimbursed for their services through one of the program's two third-party administrators (TPA). GAO's analysis of TPA data available for November 2014 through June 2018 shows that the length of time the TPAs took to pay community providers' clean claims each month varied widely\u2014from 7 days to 68 days. VA and its TPAs identified several key factors affecting timeliness of payments to community providers under the Choice Program, including VA's untimely payments to TPAs, which in turn extended the length of time TPAs took to pay community providers' claims; and inadequate provider education on filing claims.", "VA has taken actions to address key factors that have contributed to the length of time TPAs have taken to pay community providers. For example, VA updated its payment system and related processes to pay TPAs more quickly. According to VA data, as of July 2018, VA was paying at least 90 percent of the TPAs' invoices within 7 days. In addition, VA and the TPAs have taken steps to improve provider education to help providers resolve claims processing issues. However, 9 of the 15 providers GAO interviewed said they continue to experience lengthy telephone hold times. According to VA and TPA officials, steps have been taken to improve the customer service offered to community providers. However, VA officials do not collect data on or monitor TPA compliance with customer service requirements\u2014such as calls being answered within 30 seconds or less\u2014for provider calls because they said they are not enforcing the requirements and are allowing TPAs to prioritize calls from veterans. Without collecting data and monitoring compliance, VA does not have information on challenges providers may face when contacting TPAs to resolve payment issues."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, including that VA should collect data on and monitor compliance with its requirements pertaining to customer service for community providers. VA concurred with GAO's recommendations and described steps it will take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Veterans Access, Choice, and Accountability Act of 2014 created the  Veterans Choice Program (Choice Program) to address problems with  veterans\u2019 timely access to care at Department of Veterans Affairs (VA)  medical facilities. Under the Choice Program, when eligible veterans  face long wait times, lengthy travel distances, or other challenges  accessing care at VA medical facilities, they may obtain health care  services from community providers\u2014that is, providers who are not  directly employed by VA. The program is primarily administered by two  contractors, known as third-party administrators (TPA)\u2014TriWest  Healthcare Alliance (TriWest) and Health Net Federal Services (Health  Net)\u2014which are responsible for, among other things, establishing  nationwide networks of community providers, scheduling appointments  for veterans, and paying community providers for their services.", "Since its implementation, the Choice Program has faced challenges and  drawn scrutiny. External reviews, media reports, and congressional  hearings held over the course of the Choice Program\u2019s implementation  and operation have highlighted several programmatic weaknesses. These  weaknesses have included insufficient community provider networks,  significant delays in scheduling appointments, and a lack of timely  payments by the TPAs to community providers.  Media reports suggest  that the untimely payments to community providers have created financial  hardship for some and a reluctance to continue participating in the Choice  Program. This has raised concerns that a reduction in participating  community providers will increase wait times for veterans and result in  longer travel distances, especially in rural areas. Due to these and other  concerns, we concluded that VA health care is a high-risk area and added  it to our High Risk List in 2015.", "Congress recently passed legislation to help address some of the  challenges faced by the Choice Program and VA\u2019s other community care  programs. Specifically, the VA MISSION  Act of 2018, signed into law in  June 2018, requires VA to consolidate the Choice Program and its other  VA community care programs into one community care program\u2014the  Veterans Community Care Program\u2014in addition to authorizing VA to  utilize a TPA for claims processing and requiring VA to reimburse  community providers in a timely manner.  Currently, VA is in the process  of evaluating proposals for the Veterans Community Care Program.  Under the current request for proposals (RFP) there will be an up to 1- year implementation period, and the new program is expected to begin  serving veterans in fiscal year 2019. The Choice Program is expected to  continue until that time and will statutorily sunset after June 6, 2019.", "You asked us to review issues related to the timeliness of TPAs\u2019  payments to community providers under the Choice Program. In this  report, we examine  1. the length of time TPAs have taken to pay community providers\u2019  claims under the Choice Program, VA\u2019s efforts to monitor these time  frames, and factors that affected timeliness of payments, and  2.  actions taken by VA and the TPAs to reduce the length of time TPAs  take to pay community providers for Choice Program claims.", "To examine the length of time TPAs have taken to pay community  providers\u2019 claims under the Choice Program, factors affecting timeliness  of payments, and VA\u2019s efforts to monitor these time frames, we reviewed  TPA data on the length of time it took TPAs to pay claims and the number  and percentage of claims rejected or denied over the course of the  Choice Program, from November 2014 through June 2018, the most  recent data available at the time of our review.  To assess the reliability of  these data, we collected information from TPA officials regarding the  reliability of the data and reviewed the data for obvious errors and missing  values. We discussed and worked with TPA officials to resolve any  identified data issues. On the basis of these steps, we determined the  claim payment data were sufficiently reliable for the purposes of our  reporting objectives. However, data limitations prohibited us from  assessing the extent to which the two TPAs rejected or denied claims.  We also reviewed VA and TPA documentation, such as the contracts  between VA and its TPAs, contract modifications, and VA\u2019s RFP for its  new contracts for the Veterans Community Care Program. We  interviewed VA contracting officials and officials from the Office of  Community Care (the office within VA\u2019s Veterans Health Administration  responsible for implementing and overseeing the Choice Program) as  well as TPA officials about VA\u2019s efforts to monitor TPA data on payment  time frames, as well as claim rejections and denials, and factors that  contributed to the length of time VA\u2019s TPAs have taken to pay providers.  In addition, between April and June 2018, we interviewed a non- generalizable sample of 15 providers\u2014including 7 that either currently  participate or previously participated in the TriWest community provider  network and 10 that either currently participate or previously participated  in the Health Net community provider network\u2014to identify any additional  factors affecting payment time frames. We selected the providers with  the largest Choice Program claims volume from July 2017 through  December 2017, based on the most recent TPA data available at the time  we selected these providers.", "To examine the actions taken by VA and the TPAs to reduce the length of  time TPAs take to pay community providers for Choice Program claims,  we reviewed VA and TPA documentation, such as contract modifications  and policy documents. We also interviewed VA contracting officials and  Office of Community Care officials as well as TPA officials. In addition, we  interviewed the 15 selected providers to determine how claim payment  timeliness issues have affected them. We assessed the actions taken by  VA and the TPAs to address the factors that contributed to the length of  time taken to pay providers against federal standards for internal control  for performing monitoring activities.", "We conducted this performance audit from February 2018 through  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform our  work 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The Veterans Access, Choice, and Accountability Act of 2014 provided up  to $10 billion in funding for veterans to obtain health care services from  community providers through the Choice Program when veterans faced  long wait times, lengthy travel distances, or other challenges accessing  care at VA medical facilities. The temporary authority and funding for  the Choice Program was separate from other previously existing  programs through which VA has the option to purchase care from  community providers. Legislation enacted in August and December of  2017 and June 2018 provided an additional $9.4 billion for the Veterans  Choice Fund. Authority of the Choice Program will sunset on June 6,  2019."], "subsections": [{"section_title": "Responsibilities of the Choice Program TPAs", "paragraphs": ["In October 2014, VA modified its existing contracts with two TPAs that  were administering another VA community care program\u2014the Patient- Centered Community Care program\u2014to add certain administrative  responsibilities associated with the Choice Program. For the Choice  Program, each of the two TPAs\u2014Health Net and TriWest\u2014are  responsible for managing networks of community providers who deliver  care in a specific multi-state region. (See fig. 1.) Specifically, the TPAs  are responsible for establishing networks of community providers,  scheduling appointments with community providers for eligible veterans,  and paying community providers for their services. Health Net\u2019s contract  for administering the Choice Program will end on September 30, 2018,  whereas TriWest will continue to administer the Choice Program until the  program ends, which is expected to occur in fiscal year 2019."], "subsections": []}, {"section_title": "Choice Program Claim Processing and Payment", "paragraphs": ["VA\u2019s TPAs process claims they receive from community providers for the  care they deliver to veterans and pay providers for approved claims.  Figure 2 provides an overview of the steps the TPAs follow for processing  claims and paying community providers.", "VA\u2019s contracts with the TPAs do not include a payment timeliness  requirement applicable to the payments TPAs make to community  providers. Instead, a contract modification effective in March 2016  established a non-enforceable \u201cgoal\u201d of processing\u2014approving, rejecting  or denying\u2014and, if approved, paying clean claims within 30 days of  receipt.", "To be reimbursed for its payments to providers, the TPAs in turn submit  electronic invoices\u2014or requests for payment\u2014to VA. TPAs generate an  invoice for every claim they receive from community providers and pay.  VA reviews the TPAs\u2019 invoices and either approves or rejects them.  Invoices may be rejected, for example, if care provided was not  authorized. Approved invoices are paid, whereas rejected invoices are  returned to the TPAs. The federal Prompt Payment Act requires VA to  pay its TPAs within 30 days of receipt of invoices that it approves."], "subsections": []}, {"section_title": "VA\u2019s Planned Consolidated Community Care Program", "paragraphs": ["The VA MISSION  Act of 2018, among other things, requires VA to  consolidate its community care programs once the Choice Program  sunsets 1 year after the passage of the Act, authorizes VA to utilize a  TPA for claims processing, and requires VA to reimburse community  providers in a timely manner. Specifically, the act requires VA (or its  TPAs) to pay community providers within 30 days of receipt for clean  claims submitted electronically and within 45 days of receipt for clean  claims submitted on paper.", "In December 2016, prior to enactment of the VA MISSION  Act of 2018,  VA issued an RFP for contractors to help administer the Veterans  Community Care Program. The Veterans Community Care Program will  be similar to the current Choice Program in certain respects. For  example, VA is planning to award community care network contracts to  TPAs, which would establish regional networks of community providers  and process and pay those providers\u2019 claims. However, unlike under the  Choice Program, under the Veterans Community Care Program, VA is  planning to have medical facilities\u2014not the TPAs\u2014generally be  responsible for scheduling veterans\u2019 appointments with community  providers."], "subsections": []}]}, {"section_title": "The Length of Time Taken by TPAs to Pay Claims from Community Providers Has Varied Widely, and VA\u2019s Monitoring of This Timeliness Has Been Limited", "paragraphs": [], "subsections": [{"section_title": "The Time TPAs Have Taken to Pay Claims Has Varied Widely, and Available Data Do Not Account for Payment Delays Due To Rejected or Denied Claims", "paragraphs": ["From November 2014 through June 2018, VA\u2019s TPAs paid a total of  about 16 million clean claims\u2014which are claims that contain all required  data elements\u2014under the Choice Program, of which TriWest paid about  9.6 million claims and Health Net paid about 6.4 million. Data on the  median number of days VA\u2019s TPAs have taken to pay clean claims each  month show wide variation over the course of the Choice Program\u2014from  7 days to 68 days. As discussed previously, in March 2016, VA  established a non-enforceable goal for its TPAs to process and, if  approved, pay clean claims within 30 days of receipt each month. Most  recently, from January through June 2018, the median number of days  taken to pay clean claims ranged from 26 to 28 days for TriWest, while it  ranged from 28 to 44 days for Health Net. (See fig. 3.)", "In addition to the 16 million clean claims the TPAs paid from November  2014 through June 2018, during this time period they also paid  approximately 650,000 claims (or 4 percent of all paid claims) that were  classified as non-clean claims when first received after obtaining the  required information. Non-clean claims are claims that are missing  required information, which the TPA must obtain before the claim is paid.  From November 2014 through June 2018, TriWest paid around 641,000  non-clean claims (or 6 percent of all paid claims) while Health Net paid  about 9,600 non-clean claims (or less than 1 percent of all paid claims).  Data on the median number of days VA\u2019s TPAs have taken to pay non- clean claims each month also show wide variation over the course of the  Choice Program\u2014from 9 days to 73 days. (See fig. 4.)", "The data on the time TPAs have taken to pay approved clean and non- clean claims do not fully account for the length of time taken to pay  providers whose claims are initially rejected or denied, as, according to  the TPAs, providers are generally required to submit a new claim when  the original claim is rejected or denied. Thus, providers that submit  claims that are rejected or denied may experience a longer wait for  payment for those claims or may not be paid at all. In some cases,  providers\u2019 claims may be rejected or denied multiple times after  resubmission."], "subsections": []}, {"section_title": "Stakeholders Identified Three Key Factors Affecting the Timeliness of Claim Payments to Community Providers under the Choice Program", "paragraphs": ["VA and its TPAs identified three key factors affecting the timeliness of  claim payments to community providers under the Choice Program: (1)  VA\u2019s untimely payments of TPA invoices; (2) Choice Program contractual  requirements related to provider reimbursement; and (3) inadequate  provider education on filing Choice Program claims, as discussed below.", "VA\u2019s untimely payments of TPA invoices. According to VA and TPA  officials, VA made untimely invoice payments to its TPAs\u2014that is,  payments made more than 30 days from the date VA received the TPAs\u2019  invoices\u2014which resulted in the TPAs at times having insufficient funds  available to pay community providers under the Choice Program.  A VA  Office of Inspector General (OIG) report estimated that from November  2014 through September 2016, 50 percent of VA\u2019s payments to its TPAs  during this time frame were untimely.  VA officials stated that VA\u2019s  untimely payments to the TPAs resulted from limitations in its fee-basis  claims system, which VA used at the beginning of the Choice Program to  process all TPA invoices. In addition, the VA OIG found that VA  underestimated the number of staff necessary to process Choice  Program invoices in a timely manner.", "Choice Program reimbursement requirements. According to VA and  TPA officials, three Choice Program requirements, some of which were  more stringent than similar requirements in other federal health care  programs, led to claim denials, which, in turn, contributed to the length of  time TPAs have taken to pay community providers when the providers did  not meet these requirements:  1.  Medical documentation requirement. Prior to a March 2016  contract modification, VA required providers to submit relevant  medical documentation with their claims as a condition of payment  from the TPAs. According to TriWest officials, those Choice  Program claims that did not include medical documentation were  classified by TriWest as non-clean claims and placed in pending  status until the documentation was received. When community  providers did not provide the supporting medical documentation after  a certain period of time, TriWest typically denied their claims.  According to Health Net officials, Choice Program claims that did not  include medical documentation were denied by Health Net.  2.  Timely filing requirement. VA requires providers to file Choice  Program claims within 180 business days from the end of an episode  of care. TPAs deny claims that are not filed within the required time  frame.  3.  Authorization requirement. VA requires authorizations for  community providers to serve veterans under the Choice Program  and receive reimbursement for their services; however, if community  providers deliver care after an authorization period or include services  that are not authorized, the TPAs typically deny their claims.  According to TPA data, denials related to authorizations are among  the most common reasons the TPAs deny community provider claims.", "Inadequate provider education on filing Choice Program claims.  According to VA and TPA officials as well as providers we interviewed,  issues related to inadequate provider education may have contributed to  the length of time it has taken the TPAs to pay community providers  under the Choice Program. These issues have included providers  submitting claims with errors, submitting claims to the wrong payer, or  otherwise failing to meet Choice Program requirements. For example,  some VA community care programs require the claims to be sent to one  of VA\u2019s claims processing locations, while the Choice Program requires  claims to be sent to TriWest or Health Net. Claims sent to the wrong  entity are rejected or denied and have to be resubmitted to the correct  payer. Ten of the 15 providers we interviewed stated that that they lacked  education and/or training on the claims filing process when they first  began participating in the Choice Program, including knowing where to  file claims and the documentation needed to file claims that would be  processed successfully. Four of these 10 providers stated that they  learned how to submit claims through trial and error."], "subsections": []}, {"section_title": "VA\u2019s Monitoring of Claim Payment Timeliness Has Been Limited under the Choice Program, but VA Plans to Strengthen Monitoring under the Veterans Community Care Program", "paragraphs": ["At the infancy of the Choice Program, November 2014 through March  2016, VA was unable to monitor the timeliness of its TPAs\u2019 payments to  community providers because it did not require the TPAs to provide data  on the length of time taken to pay these claims. Effective in March 2016,  VA modified its TPA contracts and subsequently began monitoring TPA  payment timeliness, requiring TPAs to report information on claims  processing and payment timeliness as well as information on claim  rejections and denials. However, because VA had not established a  payment timeliness requirement, VA officials said that VA had limited  ability to penalize TPAs or compel them to take corrective actions to  address untimely claim payments to community providers. Instead, the  March 2016 contract modification established a non-enforceable goal for  the TPAs to process and pay clean claims within 30 days of receipt. As of  July 2018, according to VA officials, VA did not have a contractual  requirement it could use to help ensure that community providers  received timely payments in the Choice Program.", "Officials from VA\u2019s Office of Community Care told us that VA\u2019s experience  with payment timeliness in the Choice Program informed VA\u2019s RFP for  new contracts for the Veterans Community Care Program, which includes  provisions that strengthen VA\u2019s ability to monitor its future TPAs. For  example, in addition to requiring future TPAs to submit weekly reports on  claim payment timeliness as well as claim rejections and denials, VA\u2019s  RFP includes claim payment timeliness standards that are similar to  those in the Department of Defense\u2019s TRICARE program.  Specifically,  according to the RFP, TPAs in the Veterans Community Care Program  will be required to process and pay, if approved, 98 percent of clean claims within 30  return claims, other than clean claims, to the provider with a clear  explanation of deficiencies within 30 days of original receipt, and process resubmitted claims within 30 days of resubmission receipt.", "The RFP also identifies monitoring techniques that VA may employ to  assess compliance with these requirements, including periodic  inspections and audits. VA officials told us that VA will develop a plan for  monitoring the TPAs\u2019 performance on these requirements once the  contracts are awarded."], "subsections": []}]}, {"section_title": "VA Has Addressed Some but Not All of the Key Factors Affecting the Timeliness of Claim Payments to Community Providers under the Choice Program", "paragraphs": ["We found that VA has made system and process changes that improved  its ability to pay TPA invoices in a timely manner. However, while VA has  modified two Choice Program requirements that contributed to provider  claim payment delays, it has not fully addressed delays associated with  authorizations for care. Furthermore, while VA and its TPAs have taken  steps to educate community providers in order to help prevent claims  processing issues, 9 of the 15 providers we interviewed reported poor  customer service when attempting to resolve these issues."], "subsections": [{"section_title": "VA Has Changed Its System and Processes for Paying TPA Invoices in order to Improve Its Ability to Pay TPAs in a Timely Manner", "paragraphs": ["VA has taken steps to reduce untimely payments to its TPAs, which  contributed to delayed TPA payments to providers, by implementing a  new system and updating its processes for paying TPA invoices so that it  can pay these invoices more quickly. Specifically, VA has made the  following changes:  In March 2016, VA negotiated a contract modification with both TPAs  that facilitated the processing of certain TPA invoices outside of the  fee basis claims system from March 2016 through July 2016.   According to VA officials, due to the increasing volume of invoices that  the TPAs were expecting to submit to VA during this time period,  without this process change, VA would have experienced a high  volume of TPA invoices entering its fee basis claims system, which  could have exacerbated payment timeliness issues.", "In February through April 2017, VA transitioned all TPA invoice  payments from its fee basis claims system to an expedited payment  process under a new system called Plexis Claims Manager.  VA  officials told us that instead of re-adjudicating community provider  claims as part of its review of TPA invoices, Plexis Claims Manager  performed up front checks in order to pay invoices more quickly, and  any differences in billed and paid amounts were addressed after  payments were issued to the TPAs.", "In January 2018, VA transitioned to a newer version of the Plexis  Claims Manager that enabled VA to once again re-adjudicate  community provider claims as part of processing TPA invoices, but in  a timelier manner compared with the fee basis claims system.  According to VA officials, this is due to the automation of claims  processing under Plexis Claims Manager, which significantly reduced  the need for manual claims processing by VA staff that occurred  under the fee basis claims system. Based on VA data, as of July  2018, VA is paying 92 percent of TriWest\u2019s submitted invoices within 7  days, with payments being made in an average of 4 days, and 90  percent of Health Net\u2019s invoices within 7 days, with payments being  made in an average of 4 days under the newer version of Plexis  Claims Manager.", "In addition to steps taken to address untimely payments to the TPAs  under the current Choice Program contracts, VA has taken steps to help  assure payment timeliness in the forthcoming Veterans Community Care  Program. Specifically, the RFP includes a requirement for VA to  reimburse TPAs within 14 days of receiving an invoice. VA officials stated  that to achieve this metric, they are implementing a new payment system  that will replace Plexis Claims Manager and will no longer re-adjudicate  TPA invoices prior to payment."], "subsections": []}, {"section_title": "VA Has Modified Two Choice Program Requirements That Contributed to Provider Payment Delays, but Has Not Fully Addressed Delays Associated with Authorizations for Care", "paragraphs": ["VA has issued a contract modification and waivers for two Choice  Program contract requirements that contributed to provider payment  delays\u2014(1) the medical documentation requirement and (2) the timely  filing requirement. However, while VA issued a contract modification to  amend the requirements for obtaining authorizations for Choice Program  care, provider payment delays associated with requesting these  authorizations may persist, because VA is not ensuring that VA medical  centers review and approve these requests within required time frames.", "Elimination of medical documentation requirement. Effective  beginning March 2016, VA issued a contract modification that eliminated  the requirement that community providers must submit medical  documentation as a condition of receiving payment for their claims. Data  from one TPA showed a reduction in non-clean claims following the  implementation of this contract modification. For example, starting in  April 2016, after this modification was executed, almost 100 percent of claims submitted to TriWest were classified as clean claims, as opposed  to 49 percent of claims submitted in March 2016. However, when the  modification first went into effect in March 2016, TriWest and Health Net  officials stated that they processed a large amount of claims from  community providers that had previously been pended or denied because  they lacked medical documentation and, in turn, submitted a large  number of invoices to VA for reimbursement. As previously discussed, to  help address the increased number of TPA invoices, VA issued lump-sum  payments to the TPAs during this time period.", "Modification of timely filing requirement. In February and May 2018,  VA issued waivers that gave TPAs the authority to allow providers to  resubmit rejected or denied claims more than 180 days after the end of  the episode of care if the original claims were submitted timely\u2014that is,  within 180 days of the end of the episode of care. VA officials stated that  the waivers were intended to reduce the number of rejected and denied  claims by giving community providers the ability to resubmit previously  rejected or denied claims for which the date of service occurred more  than 180 days ago. VA\u2019s waivers were implemented as follows:  In February 2018, VA issued a waiver that allowed community  providers to resubmit certain claims rejected or denied for specific  reasons when the provider or TPA could verify that the provider made  an effort to submit the claim prior to the claims submission deadline.", "In May 2018, VA issued a second waiver that removed the 180 day  timeliness requirement for all Choice Program claims. The waiver also  provided instructions to the TPAs on informing providers that they  may resubmit claims rejected or denied for specific reasons and how  the TPAs are to process the resubmitted claims.", "In regards to the first waiver, TPA officials stated that the processing of  those resubmitted claims adversely affected the timeliness of the TPAs\u2019  payments to community providers because the waiver resulted in a large  influx of older claims. As the second waiver was in the process of being  implemented by the two TPAs at the time we conducted our work, we  were unable to determine if the second waiver affected the TPAs\u2019  provider payment timeliness.", "Changes to authorization of care requirement. VA issued a contract  modification in January 2017 to expand the time period for which  authorizations for community providers to provide care to veterans under  the Choice Program are valid.  In addition, in May 2017, VA expanded  the scope of the services covered by authorizations, allowing them to  encompass an overall course of treatment, rather than a specific service  or set of services. According to VA officials, the changes VA made  related to the authorization of care requirement were also intended to  reduce the need for secondary authorization requests (SAR). Community  providers request SARs when veterans need health care services that  exceed the period or scope of the original authorizations. Community  providers are required to submit SARs to their TPA, which, in turn,  submits the SARs to the authorizing VA medical facility for review and  approval. Both Health Net and TriWest officials told us that since VA  changed the time frame and scope of authorizations, the number of SARs  has decreased.", "Despite efforts to decrease the number of SARs, payment delays or claim  denials are likely to continue if SARs are needed. We found that VA is not  ensuring that VA medical facilities are reviewing and approving SARs  within required time frames. VA policy states that VA medical facilities are  to review and make SAR approval decisions within 5 business days of  receipt. However, officials from one of the TPAs and 7 of the 15  providers we interviewed stated that VA medical facilities are not  reviewing and approving SARs in a timely manner. According to TriWest  officials, as of May 2018, VA medical facilities in their regions were taking  an average of 11 days to review and make approval decisions on SARs,  with four facilities taking over 30 days for this process.", "According to an official from VA\u2019s Office of Community Care, VA does not  currently collect reliable national data to track the extent of nonadherence  to the VA policy to review and make SAR approval decisions within 5  business days. The official told us that instead, VA relies on employees  assigned to each Veterans Integrated Service Network to monitor data on  VA medical facilities\u2019 timeliness in making these SAR approval  decisions. If a VA medical facility is found not to be in adherence with  the SAR policy, the official told us that staff assigned to the Veterans  Integrated Service Network attempt to identify the reasons for  nonadherence, and perform certain corrective actions, including providing  education to the facility. Despite these actions, the official told us that  there are still VA medical facilities not in adherence with VA\u2019s SAR  approval policy.", "According to a VA official, VA is in the process of piloting software for  managing authorizations that will allow VA to better track SAR approval  time frames across VA medical facilities in the future. However, even after  this planned software is implemented, if VA does not use the data to  monitor and assess SAR approval decision time frames VA will be unable  to ensure that all VA medical facilities are adhering to the policy.  Standards for internal control in the Federal Government state that  management should establish and operate monitoring activities to  evaluate whether a specific function or process is operating effectively  and take corrective actions as necessary. Furthermore, monitoring such  data will allow VA to identify and take actions as needed to address any  identified challenges VA medical facilities are encountering in meeting the  required approval decision time frames. Without monitoring data to  ensure that all VA medical facilities are adhering to the SAR approval  time frames as outlined in VA policy, community providers may delay care  until the SARs are approved or provide care without SAR approval. This  in turn increases the likelihood that the community providers\u2019 claims will  be denied. Further, continued nonadherence to VA\u2019s SAR policy raises  concerns about VA\u2019s ability to ensure timely approval of SARs when VA  medical facilities assume more responsibilities for ensuring veterans\u2019  access to care under the forthcoming Veterans Community Care  Program."], "subsections": []}, {"section_title": "TPAs Have Taken Steps to Improve Provider Education to Help Providers Resolve Claims Processing Issues, but Many Providers Still Report Poor Customer Service", "paragraphs": ["We found that VA and its TPAs have taken steps to educate community  providers in order to help prevent claims processing issues that have  contributed to the length of time TPAs have taken to pay these providers.  Despite these efforts, 9 of the 15 providers we interviewed reported poor  customer service when attempting to resolve claims payment issues.", "While VA\u2019s contracts with the TPAs do not include requirements for  educating and training providers on the Choice Program, both TPAs have  taken steps to educate community providers on how to successfully  submit claims under the Choice Program. Specifically, TriWest and  Health Net officials told us that they have taken various steps to educate  community providers on submitting claims correctly, including sending  monthly newsletters, emails, and faxes to communicate changes to the  Choice Program; updating their websites with claims processing  information; and holding meetings with some providers monthly or  quarterly to resolve claims processing issues. Officials from both TPAs  also told us that they provided one-on-one training to some providers on  the claims submission process to help reduce errors when submitting  claims. In addition, VA\u2019s RFP for the Veterans Community Care Program  contracts includes requirements to provide an annual training program  curriculum and an initial on-boarding and ongoing outreach and education  program for community providers, which includes training on the claims  submission and payment processes and TPA points of contact.", "VA and the TPAs have also made efforts to help providers resolve claims  processing issues and outstanding payments. For example,", "VA launched its \u201ctop 20 provider initiative\u201d in January 2018 to work  directly with community providers with high dollar amounts of unpaid  claims and resolve ongoing claims payment issues. This initiative  included creating rapid response teams to work with community  providers to settle unpaid claim balances within 90 days and working  with both TPAs to increase the number of clean claims paid in less  than 30 days. In addition, VA has developed webinars on VA\u2019s  community care programs and\u2014in conjunction with trade  organizations and health care systems\u2014has delivered provider  education on filing claims properly.", "TriWest officials stated that it has educated the customer service staff  at its claims processing sub-contractor, who field community provider  calls regarding claims processing issues, to help ensure that the staff  are familiar with Choice Program changes and can effectively assist  community providers and resolve claims processing issues. Internal  TriWest data show that providers\u2019 average wait time to speak to a  customer service representative about claims processing issues  decreased from as high as 18 minutes in 2016 to as low as 2.5  minutes in 2018.", "Health Net officials were unable to provide data, but stated that since  the fourth quarter of 2017, Health Net has decreased the time it takes  for a community provider to speak with a customer service  representative by adding additional staff and extending the hours in  which providers can call with questions. In addition, Health Net  officials stated that they have required customer service staff to  undergo additional training related to resolving claims processing  issues.", "Despite these efforts, 7 of the 10 providers that participate in the Health  Net network and 2 of the 7 providers that participate in the TriWest  network we interviewed between April and June 2018 told us that when  they contact the TPAs\u2019 customer service staff to address claim processing  questions, such as how to resolve claim rejections or denials, they  experience lengthy hold times, sometimes exceeding one hour. In  addition, 7 of the 15 providers we spoke with told us they typically reach  employees who are unable to answer their questions. According to these  providers, this experience frustrated them, as they often did not  understand why a claim had been denied or rejected, and they required  assistance correcting the claim so it could be resubmitted. One  community provider stated that their common practice to resolve  questions or concerns was to call customer service enough times until  they received the same answer twice from a TPA representative. In  addition, 5 of the 10 Health Net providers we interviewed stated that they  have significant outstanding claim balances owed to them. One of these  providers\u2014who reported over $3 million in outstanding claims\u2014stressed  the importance of being able to effectively resolve claims issues with TPA  customer service staff, as the administrative burden of following up on  outstanding claim balances takes time away from caring for patients.", "The issues concerning customer service wait times and TPA staff inability  to resolve some claims processing issues reported by community  providers appear to be inconsistent with VA contractual requirements.", "VA\u2019s current Choice Program contracts require the TPAs to establish a  customer call center to respond to calls from veterans and non-VA  providers. The contract requires specified levels of service for telephone  inquiries at the call center. For example, VA requires TPA representatives  to answer customer service calls within an average speed of 30 seconds  or less and requires 85 percent of all inquiries to be fully and completely  answered during the initial telephone call. However, VA officials explained  that VA does not enforce the contractual requirement for responding to  calls from community providers. Furthermore, according to these officials,  VA allows the TPAs to prioritize calls from veterans. Officials from VA\u2019s  Office of General Counsel, Procurement Law Group, confirmed that this  requirement does apply to the TPAs\u2019 handling of calls from community  providers. Because VA does not enforce the customer service  requirement for providers, VA has not collected data on or monitored the  TPAs\u2019 compliance with these requirements for providers\u2019 calls.", "As previously stated, standards for internal control in the Federal  Government state that management should establish and operate  monitoring activities to evaluate whether a specific function or process is  operating effectively and take corrective actions as necessary. Without  collecting data and monitoring customer service requirements for provider  calls, VA does not have information on the extent to which community  providers face challenges when contacting the TPAs about claims  payment issues that could contribute to the amount of time it takes to  successfully file claims and receive reimbursement for services under the  Choice Program. This, in turn, poses a risk to the Choice Program to the  extent that community providers who face these challenges decide not to  serve veterans under the Choice Program.", "Looking forward, VA has included customer service requirements in its  RFP for the Veterans Community Care Program contracts, and VA  officials have told us that these requirements are applicable to provider  calls. For example, the RFP includes a requirement for its future TPAs to  establish and maintain call centers to address inquiries from community  providers and has established customer service performance metrics to  monitor call center performance.  Monitoring data on provider calls under  the contracts will be important as Veterans Community Care Program  TPAs will continue to be responsible for building provider networks,  processing claims, and resolving claims processing issues."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Choice Program relies on community providers to deliver care to  eligible veterans when VA is unable to provide timely and accessible care  at its own facilities. Although VA has taken steps to improve the  timeliness of TPA claim payments to providers, VA is not collecting data  or monitoring compliance with two Choice Program requirements, and  this could adversely affect the timeliness with which community providers  are paid under the Choice Program. First, VA does not have complete  data allowing it to effectively monitor adherence with its policy for VA  medical facilities to review SARs within 5 days of receipt, which impacts  its ability to meet the requirement. To the extent that VA medical facilities  delay these reviews and approvals, community providers may have to  delay care or deliver care that is not authorized, which in turn increases  the likelihood that the providers\u2019 claims will be denied and the providers  will not be paid. Second, VA requires the TPAs to establish a customer  call center to respond to calls from veterans and non-VA providers.  However, VA does not enforce the contractual requirement for responding  to calls from community providers and allows the TPAs to prioritize calls  from veterans. Consequently, VA is not collecting data, monitoring, or  enforcing compliance with its contractual requirements for the TPAs to  provide timely customer service to providers. As a result, VA does not  have information on the extent to which community providers face  challenges when contacting the TPAs about claims payment issues,  which could contribute to the amount of time it takes to receive  reimbursement for services.", "To the extent that these issues make community providers less willing to  continue participating in the Choice Program and the forthcoming  Veterans Community Care Program, they pose a risk to VA\u2019s ability to  successfully implement these programs and ensure veterans\u2019 timely  access to care."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to VA:  Once VA\u2019s new software for managing authorizations has been fully  implemented, the Undersecretary for Health should monitor data on SAR  approval decision time frames to ensure VA medical facilities are in  adherence with VA policy, assess the reasons for nonadherence with the  policy, and take corrective actions as necessary. (Recommendation 1)", "The Undersecretary for Health should collect data and monitor  compliance with the Choice Program contractual requirements pertaining  to customer service for community providers, and take corrective actions  as necessary. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for review and comment. In its  written comments, reproduced in appendix I, VA concurred with our two  recommendations and said it is taking steps to address them. For  example, VA plans to implement software in spring 2019 that will  automate the SAR process and allow for streamlined reporting and  monitoring of SAR timeliness to ensure ongoing compliance. Additionally,  VA has included provider customer service performance requirements  and metrics in its Veterans Community Care Program RFP, and will  require future contractors to provide a monthly report to VA on their call  center operations and will implement quarterly provider satisfaction  surveys.", "We are sending copies of this report to the Secretary of Veterans Affairs,  the Under Secretary for Health, appropriate congressional committees,  and other interested parties. This report is also available at no charge on  the GAO Web site at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs are on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia A. Mann (Assistant  Director), Michael Zose (Analyst-in-Charge), and Kate Tussey made  major contributions to this report. Also contributing were Krister Friday,  Jacquelyn Hamilton, and Vikki Porter."], "subsections": []}]}], "fastfact": ["The VA's Veterans Choice Program allows veterans to get health care from providers not directly employed by VA (community providers), such as when facing long wait times at VA facilities.", "VA uses contractors to pay providers for their services to veterans. But contractor payment times have varied, sometimes causing delays in providers' payments. The result: providers may not want to continue participating in the Choice Program, which may decrease veterans' access to health care.", "A Veterans Community Care Program to replace the Choice Program is to begin in 2019. We recommended that VA take steps to correct provider payment issues."]}
{"id": "GAO-18-563T", "url": "https://www.gao.gov/products/GAO-18-563T", "title": "Aviation Security: TSA Uses Data to Monitor Airport Operations and Respond to Increases in Passenger Wait Times and Throughput", "published_date": "2018-05-17T00:00:00", "released_date": "2018-05-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TSA employs about 43,000 Transportation Security Officers (TSO) who screen over 2 million passengers and their property each day at airports in the United States. TSA allocates TSOs to airports using both a computer-based staffing model and information from airports intended to provide each airport with the optimum number of TSOs. In the spring of 2016, long screening checkpoint lines at certain U.S. airports raised questions about TSA's process for allocating TSOs to airports. This testimony addresses (1) how TSA monitors wait times and throughput, and (2) tools TSA uses to respond to increases in passenger wait times. This testimony is based on a report GAO issued in February, 2018: GAO, Aviation Security: TSA Uses Current Assumptions and Airport-Specific Data for Its Staffing Process and Monitors Passenger Wait Times Using Daily Operations Data . GAO-18-236 , Washington, D.C.: February 1, 2018. For that report, among other things, GAO analyzed TSA documentation and passenger wait time and throughput data."]}, {"section_title": "What GAO Found", "paragraphs": ["In February 2018, GAO reported that the Transportation Security Administration (TSA) uses data to monitor passenger wait times and throughput, the number of passengers that are screened at each airport checkpoint, on a daily basis and responds to increases. For example, TSA's Airport Operations Center (AOC) monitors daily wait times and passenger throughput from 28 airports that TSA officials say represent the majority of passenger throughput nationwide or are operationally significant. Furthermore, TSA officials at airports are required to report to the AOC when an event occurs--such as equipment malfunctions--that affects airport screening operations and results in wait times that are greater than 30 minutes in standard screening lanes. For its February 2018 report, GAO analyzed wait time data for the AOC-monitored airports for the period of January 2015 through May 2017 and found that TSA's reported wait times met its standard of less than 30 minutes in standard screening 99 percent of the time. Within that time frame, two airports accounted for the longest wait times in the spring of 2016. TSA officials also identified several tools, such as passenger screening canines, that they reported using to respond to increases in passenger wait times at these airports."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the Transportation Security  Administration\u2019s (TSA) efforts to monitor passenger wait times and the  number of passengers that are screened at each airport checkpoint,  known as throughput, at airports throughout the United States. As you  know, the Department of Homeland Security\u2019s TSA is responsible for  protecting the nation\u2019s transportation systems while also ensuring the free  movement of people and commerce. TSA employs about 43,000  Transportation Security Officers (TSOs) who screen over 2 million  passengers and their accessible and checked baggage each day at  nearly 440 airports across the United States. In the spring of 2016,  unusually long screening checkpoint lines at certain major U.S. airports  raised questions about TSA\u2019s process for allocating TSOs to airports and  managing passenger wait times.", "My testimony today addresses (1) how TSA collects and monitors  passenger wait time and throughput data and (2) tools TSA uses to  respond to increases in passenger wait times. This statement is based on  selected findings from our February 2018 report on staffing allocation and  managing wait times. To perform the work from our previous report, we  analyzed TSA documentation, reports, and data on wait times and  passenger throughput from January 2015 through May 2017 for 28  airports that, according to TSA headquarters officials, represent the  majority of passenger throughput nationwide or are operationally  significant. We also interviewed headquarters officials responsible for  overseeing TSA\u2019s collection and use of wait time and throughput data as  well as Federal Security Directors (FSD) and their designees at eight  selected airports to determine the tools they use to respond to increases  in passenger wait times and throughput.  Further detail on the scope and  methodology for the previously issued report is available within the  published product. The work upon which this testimony is based was  conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "TSA Processes for Allocating TSOs across Airports", "paragraphs": ["TSA allocates TSOs to airports using its Resource Allocation Plan, which  is intended to provide each airport with the optimum number of TSOs  needed to screen passengers for threats to aviation security, such as  prohibited and other potentially dangerous items. To implement  passenger screening and pursue efficient operations, in addition to relying  on TSOs, TSA works with officials from airlines and airports, as well as  officials from associations that represent airlines and airports. At airports,  FSDs and their designees work with individual airport operators and  airlines to, among other things, adjust TSA resources (i.e., TSOs and  screening assets such as metal detectors) in response to increases in  passenger throughput at each checkpoint, and monitor passenger wait  times at checkpoints.", "At TSA headquarters, the Office of Security Operations (OSO) has  primary responsibility for operation of the Resource Allocation Plan and  allocation of TSOs across airports. To allocate staff to the nearly 440  TSA-regulated airports in the United States, OSO is to use a combination  of computer-based modeling and line-item adjustments based on airport- specific information. First, the agency is to work with a contractor to  evaluate the assumptions\u2014such as rates of expedited screening\u2014used  by the computer-based staffing allocation model to determine the optimal  number of TSOs at each airport based on airport size and configuration,  flight schedules, and the time it takes to perform checkpoint and baggage  screening tasks. Second, after the model has determined how many  TSOs are required for each airport, headquarters-level staff are to make  line item adjustments to account for factors such as differences in staff  availability and training needs that affect each airport.", "In 2007, we reviewed the Resource Allocation Plan (referred to as the  Staffing Allocation Model at that time) and recommended, among other  things, that TSA establish a mechanism to ensure periodic assessment of  the assumptions, such as passenger and checked baggage screening  rates, underlying the plan. TSA agreed with the recommendation, and in  December 2007 developed and implemented a plan to periodically  assess the plan\u2019s assumptions."], "subsections": []}, {"section_title": "TSA Processes for Collecting Wait Time and Throughput Data at Airports", "paragraphs": ["At each airport, TSA is to collect throughput data on the number of  passengers screened under both expedited and standard screening and  monitor passenger wait times at screening checkpoints. TSA airport  officials are to submit passenger throughput and wait time data on a daily  basis to OSO\u2019s Performance Management Division at TSA headquarters,  which compiles the data through the Performance Measurement  Information System, TSA\u2019s web-based data collection system. TSA  required FSDs and their designees to collect actual wait times from 2002  through 2007 and beginning again in July 2014. From 2008 through June  2014, TSA required that FSDs collect data on wait time ranges, such as  between 20 to 29 minutes or greater than 30 minutes."], "subsections": []}, {"section_title": "TSA Information Sharing Efforts with Stakeholders", "paragraphs": ["In February 2018, we reported that TSA headquarters officials have taken  steps intended to improve information sharing with stakeholders\u2014officials  from airlines and airports, as well as officials from associations that  represent airlines and airports\u2014about staffing and related screening  procedures at airports. For example, we reported that TSA holds daily  conference calls with stakeholders at selected airports intended to ensure  timely communication and to help identify and address challenges in  airport operations such as increases in passenger wait times.  Additionally, we reported that TSA conducted a series of presentations  and meetings to discuss the Resource Allocation Plan, security  enhancements at airports, and airport screening processes, among other  things."], "subsections": []}]}, {"section_title": "TSA Uses Passenger Wait Time and Throughput Data to Monitor Airport Operations on a Daily Basis", "paragraphs": ["In February 2018, we reported that TSA collects passenger wait time and  throughput data and uses those data to monitor daily operations at  airports. TSA\u2019s Operations Directive (directive), Reporting Customer  Throughput and Wait Times, provides instructions for collecting and  reporting wait time and passenger throughput data for TSA screening  lanes. Regarding wait time data, according to the directive, FSDs or their  designees at all Category X, I, and II airports must measure wait times  every operational hour in all TSA expedited and standard screening  lanes. The directive requires wait times to be measured in actual time,  using a verifiable system such as wait time cards, closed circuit television  monitoring, or another confirmable method. The directive indicates that  wait times should be measured from the end of the line in which  passengers are waiting to the walk through metal detector or advanced  imaging technology units.", "According to TSA officials at that time, at the beginning of each hour, wait  time cards are handed to passengers at the end of the checkpoint line  and are collected when a passenger reaches the metal detector or  imaging unit. Closed circuit television is monitored from a location other  than the checkpoint, such as at the airport\u2019s coordination center.  According to TSA headquarters officials, TSA does not require FSDs or  their designees to collect wait times from a statistical sample of  passengers throughout the hour, but rather requires that one wait time is  collected for every operational hour in all screening lanes. If more than  one wait time is collected during the hour, the directive indicates that the  maximum wait time should be reported. TSA officials at airports we visited  for our February 2018 report stated that TSOs return completed wait time  cards to supervisors, who then enter the information into a shared  spreadsheet and eventually into the Performance Measurement  Information System. Each hour\u2019s reported wait time is then applied to all  of a lane\u2019s throughput for that given hour. FSDs or their designees at  Category III and IV airports may estimate wait times initially, but the  directive requires them to measure actual wait times when wait times are  estimated at 10 minutes or greater.", "The directive also requires FSDs or their designees to collect passenger  throughput data directly from the walkthrough metal detectors and  advanced imaging technology units. According to TSA headquarters  officials, the machines have sensors that collect the number of  passengers who pass through each hour, and TSOs retrieve the data  directly from the units. All airports regardless of category are required to  enter their wait time and throughput data daily into the information system  no later than 3:30 AM Eastern Time of the next calendar day so that the  data can be included in the morning\u2019s Daily Leadership Report (discussed  in more detail below).", "To monitor operations for all airports, TSA compiles a daily report utilizing  a variety of data points from the information system, including wait time  and throughput data. The Office of Security Operations\u2019 Performance  Management Division disseminates the Daily Leadership Report to TSA  officials, including regional directors and FSDs and their designees every  morning detailing the previous day\u2019s wait times and throughput figures,  among other data points. The Performance Management Division  includes a quality assurance addendum with each Daily Leadership  Report, indicating missing or incorrect data, to include wait time and  throughput data, and TSA has procedures in place intended to ensure  officials at the airports correct the data in the Performance Measurement  Information System within 2 weeks.", "In addition to the Daily Leadership Report, we reported that TSA utilizes  wait time and throughput data to monitor airport operations at 28 airports  in near real time. In May 2016, TSA established the Airport Operations  Center partly in response to the long screening checkpoint lines in the  spring of 2016 at certain airports. The center conducts near real time  monitoring of the operations of 28 airports that, according to TSA  headquarters officials, represent the majority of passenger throughput  nationwide or are operationally significant. TSA requires the 28 airports monitored by the center to enter passenger wait time data and throughput  data hourly (whereas the remaining airports are only required to submit  data once daily, by 3:30 AM Eastern Time, as described above) so that  officials can monitor the operations in near real time. In addition, TSA  officials at airports are required to report to the center when an event  occurs\u2014such as equipment malfunctions, weather-related events, or  unusually high passenger throughput\u2014that affects airport screening  operations and results in wait times that are greater than TSA\u2019s standards  of 30 minutes in standard screening lanes or greater than 15 minutes in  expedited screening lanes.", "If an airport is undergoing a period of prolonged wait times, we found that  officials at the Airport Operations Center reported coordinating with the  Regional Director and the FSD to assist in deploying resources. For  example, over the course of the summer of 2016, after certain airports  experienced long wait times in the spring of 2016 as confirmed by our  analysis, the center assisted in deploying additional passenger screening  canines and TSOs to those airports that experienced longer wait times.  The center disseminates a morning and evening situational report to TSA  airport-level officials and airport stakeholders summarizing nationwide  wait times, highlighting wait times at the top airports and any hot spots  (unexpected passenger volume or other operational challenges) that may  have occurred since the most recent report was issued. In addition to the  near real-time monitoring of 28 airports, the center also monitors  operations at all other airports and disseminates information to airports  and stakeholders as needed.", "For our February 2018 report, to determine the extent to which TSA  exceeded its wait time standards, we analyzed wait time data for the 28  airports monitored by the Airport Operations Center for the period of  January 2015 through May 2017 for both standard and expedited  screening. Our analysis showed that TSA met its wait time standard of  less than 30 minutes in standard screening at the 28 airports 99.3 percent  of the time for the period of January 2015 through May 2017. For  expedited screening for the same time period at the same airports, we  found that 100 percent of the time passengers were reported to have  waited 19 minutes or less.", "Additionally, our analysis confirmed that the percentage of passengers in  standard screening who waited over 30 minutes increased in 2016 during  the months of March, April, and May as compared to 2015 at all 28  airports. Our analysis also confirmed that reported wait times increased in  the spring of 2016 at selected airports, as mentioned in the news media.  For example, in May 2016, approximately 22 percent of passengers at  Chicago O\u2019Hare International airport and 26 percent of passengers at  Chicago Midway International airport waited over 30 minutes in standard  screening as opposed to zero percent for both airports in May 2015,  which accounted for the longest wait times in the spring of 2016. These  two airports were part of the 28 airports for which we analyzed wait time  data for the period of January 2015 through May 2017."], "subsections": []}, {"section_title": "TSA Airport Officials Reported Using a Variety of Tools to Respond to Increases in Passenger Wait Times and Throughput", "paragraphs": ["In February 2018, we reported that FSDs and their staff at the airports we  visited identified a variety of tools that they utilize to respond to increases  in passenger wait times and/or throughput.", "TSOs from the National Deployment Force \u2014teams of additional  TSOs\u2014are available for deployment to airports to support screening  operations during major events and seasonal increases in  passengers. For example, TSA officials at one airport we visited  received National Deployment Force officers during busy holiday  seasons and officials at another airport received officers during the  increase in wait times in the spring and summer of 2016.", "TSA officials at selected airports used passenger screening canines  to expedite the screening process and support screening operations  during increased passenger throughput and wait time periods. For  example, TSA officials at one airport we visited emphasized the  importance of passenger screening canines as a useful tool to  minimize wait times and meet passenger screening demands at times  when throughput is high. Officials at another airport we visited relied  on these canines in busy terminals during peak periods. According to  officials at two of the airports we visited, the use of passenger  screening canines helped them to reduce wait times due to increased  passenger volumes in the spring and summer of 2016.", "TSA officials at selected airports also utilize part-time TSOs and  overtime hours to accommodate increases in passenger throughput  and wait times. For example, according to officials at all eight of the  airports we visited, they used overtime during peak travel times, such  as holiday travel seasons, and officials usually planned the use of  overtime in advance. Additionally, TSA officials at four of the airports  we visited told us they used part-time TSOs to help manage peak  throughput times throughout the day.", "According to TSA officials at two of the airports we visited, they  moved TSOs between checkpoints to accommodate increases in  passenger throughput at certain checkpoints and to expedite  screening operations. For example, TSA officials at one airport we  visited have a team of TSOs that terminal managers can request on  short notice. Officials at the other airport estimated that they move  TSOs between terminals about 40 times per day.", "Chairman Katko, Ranking Member Watson Coleman and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact William Russell at  (202) 512-8777 or russellw@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  include Ellen Wolfe (Assistant Director), Joel Aldape, Brendan  Kretzschmar, and Natalie Swabb. Key contributors for the previous report  that this testimony is based on are listed in the product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-53", "url": "https://www.gao.gov/products/GAO-19-53", "title": "Defense Health Care: DOD Should Demonstrate How Its Plan to Transfer the Administration of Military Treatment Facilities Will Improve Efficiency", "published_date": "2018-10-30T00:00:00", "released_date": "2018-10-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2017, DOD provided health care to 9.4 million beneficiaries, including servicemembers, retirees, and their families at a cost of $43 billion. For more than a decade, partially in response to congressional mandates, DOD has worked to address inefficiencies in the Military Health System to control costs.", "To further achieve efficiencies, the NDAA for Fiscal Year 2017 required DOD to develop an implementation plan that addressed four elements related to transferring the administration of the MTFs to the DHA. DOD issued the plan in June 2018.", "The NDAA also included a provision for GAO to review the plan. GAO determined whether (1) DOD's plan included the statutory elements related to the transfer of administration of the MTFs to the DHA and (2) additional information would be useful to demonstrate that the plan will reduce or better manage duplication and improve efficiencies. GAO assessed DOD's plan against the required elements and, where appropriate, considered the extent to which the plan provided detailed information related to key change management practices identified in past GAO work."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) June 2018 plan addressed the four statutory elements for the transfer of the administration of the military treatment facilities (MTFs) from the military departments to the Defense Health Agency (DHA). Specifically, the plan provided information on (1) how the DHA will take administrative responsibility of the MTFs; (2) efforts to eliminate duplicative activities; (3) efforts to maximize efficiencies in the DHA's activities; and (4) reductions of headquarters-level military, civilian, and contractor personnel. DOD dedicated most of the plan to describing the governance structure of the proposed administrative framework and to describing the timeline for a phased transfer of the approximately 457 MTFs to the DHA by October 1, 2021. Initially, DOD was to transfer responsibility for the administration of the MTFs to the DHA by October 1, 2018. However, Congress in the National Defense Authorization Act (NDAA) for Fiscal Year 2019 amended the law to allow, among other things, DOD to complete the transfer by September 30, 2021.", "DOD has taken key steps in its June 2018 plan to improve the effectiveness and efficiency of the administration of MTFs. However, DOD's plan has two weaknesses that could be mitigated with additional information. Specifically,", "DOD excluded 16 operational readiness and installation-specific medical functions from consideration for transfer to the DHA. DOD did not define or analyze the potential effect of excluding these functions, which include dental care, substance abuse, and occupational health. Senior officials from the DHA and the Assistant Secretary of Defense for Health Affairs acknowledged that transferring the dental care function, for example, from the military departments to the DHA could potentially reduce duplicative activities.", "DOD's plans to achieve the stated goal of reducing headquarters-level personnel, including contractor personnel, by 10 percent are unclear. In its June 2018 plan, DOD states that the DHA will experience personnel growth during each phase of the transition, but that it expects to reduce headquarters-level personnel by 10 percent by 2021. However, the plan does not provide specific details about how DOD will achieve the established goal of reducing headquarters-level personnel by 10 percent while the DHA experiences personnel growth. Further, the plan does not address whether and how contractor personnel factor into the reduction. This lack of clarity exists because DOD has not validated headquarters-level personnel requirements or conducted a comprehensive review to identify the least costly mix of military, civilian, and contractor personnel to meet the validated requirements.", "Until DOD takes action to resolve these two weaknesses, DOD will likely not be well positioned to reduce or better manage duplication and improve efficiencies, including reducing headquarters-level personnel across the Military Health System. Furthermore, Congress will lack important information to determine the extent to which the transfer of the administration of the MTFs to the DHA is being planned and implemented effectively and efficiently."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD define and analyze the 16 operational readiness and installation-specific medical functions for duplication, validate headquarters-level personnel requirements, and identify the least costly mix of personnel. DOD concurred with all three recommendations and noted actions it was taking to address each one."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the Department of Defense\u2019s (DOD) Military Health  System provided health care to 9.4 million beneficiaries including  servicemembers, retirees, and their family members at a cost of $43  billion. For more than a decade, DOD has worked to address  congressional concerns about governance-related inefficiencies in the  Military Health System, in part by responding to a number of  congressional mandates. For example, in September 2013, DOD  established the Defense Health Agency (DHA) to create a more  integrated Military Health System and achieve cost savings at  headquarters-level organizations by, among other things, streamlining the  administrative support for the military departments\u2019 respective medical  programs. The DHA also assumed the administrative responsibility for  managing military treatment facilities (MTFs) in the National Capital  Region\u2014specifically, the Walter Reed National Military Medical Center  and the Fort Belvoir Community Hospital. According to National Capital  Region Medical Directorate information, the DHA exercises authority,  direction, and control over approximately 6 MTFs in the National Capital  Region. MTFs, which include military hospitals, ambulatory care clinics,  and dental clinics, are part of the direct care system. According to DOD,  these MTFs total approximately 679. The direct care system represents  health care facilities and medical support organizations owned by DOD  and managed by the military departments\u2019 respective Surgeons General.", "Section 702 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 amended Chapter 55 of title 10, United States Code, to include  a new section entitled \u201c1073c Administration of Defense Health Agency  and military medical treatment facilities,\u201d which describes how the DHA  will take administrative responsibility of the MTFs. According to that  section, the Director of the DHA shall be responsible for the  administration of each MTF, including with respect to budgetary matters;  information technology; and health care administration and management,  among other things.", "Section 702 of the NDAA for Fiscal Year 2017 required that the Secretary  of Defense develop a plan that includes four elements, such as how the  Secretary will carry out subsection (a) of section 1073c of title 10 of the  United States Code and efforts to eliminate duplicative activities, among  others. DOD provided three interim reports to Congress in response to  section 702. The first two interim reports, dated March 31, 2017, and  June 30, 2017, were DOD\u2019s preliminary draft of the plan. In these  reports, DOD discussed its intent to use the \u201ccomponent model\u201d as the  administrative framework. Under the component model, the Director of  the DHA would administer each MTF through military department-led  intermediary component commands and military department-led MTFs.  Congress, in the Conference report accompanying the NDAA for Fiscal  Year 2018 that was issued in November 2017, raised concern about the  component model. The third interim report, which DOD provided to  Congress March 30, 2018, did not include the component model as  DOD\u2019s administrative framework, but provided details on a new proposed  framework to transition MTF administration and management to the  DHA. According to the third interim report, DOD decided after deeper  analysis and discussions with Congress that the component model did  not adequately satisfy the requirements of subsection (a) of section  1073c. DOD submitted its final plan (hereinafter referred to as the plan) to  Congress on June 28, 2018. Figure 1 provides a timeline of DOD\u2019s  efforts in response to section 702.", "Section 702 also includes a provision for us to review the plan by  September 1, 2018. In this report, we determined whether (1) DOD\u2019s  plan included the statutory elements related to the transfer of the  administration of the MTFs to the DHA and (2) additional information  would be useful to demonstrate that the plan will reduce or better manage  duplication and improve efficiencies.", "For objective one, we determined whether DOD\u2019s plan included the four  elements set forth in the statute. Two analysts independently conducted  this assessment and reconciled any differences to reach a consensus on  the overall assessment. For objective two, where appropriate, we also  considered the extent to which the plan provided detailed information  related to key change management practices identified in our prior work,  which could help ensure that DOD effectively and efficiently achieves its  goals. We also reviewed key planning documents identified by DOD in  developing the plan and other relevant documents, such as the Under  Secretary of Defense for Personnel and Readiness memorandums  related to section 702 and concepts of operations from the Assistant  Secretary of Defense for Health Affairs; the DHA; and the Army, the  Navy, and the Air Force departments.", "For both objectives, we corroborated our understanding of the plan by  conducting interviews with officials from the Office of the Under Secretary  of Defense for Personnel and Readiness; the Office of the Assistant  Secretary of Defense for Health Affairs; the DHA; the Health Care  Management Reform Team (one of the reform teams created in 2017 by  the DOD to address improved mission effectiveness and efficiencies in  DOD); the Office of Cost Assessment and Program Evaluation; the Army  Medical Command, Office of the Surgeon General and the Office of the  Assistant Secretary of the Army Manpower and Reserve Affairs; the Navy  Bureau of Medicine and Surgery; the Air Force Medical Service; and the  Joint Staff Surgeon.", "We conducted this performance audit from March 2018 to October 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of Military Health System Reforms", "paragraphs": ["For over a decade, Congress and DOD have led a series of efforts to  address the governance structure of the Military Health System, including  recommending and implementing significant organizational realignments.  DOD undertook a significant organizational realignment effort in June  2011, creating an internal task force to review the governance of the  Military Health System and subsequently identified as priorities cost  containment, greater integration, and increased unity of effort. In March  2012, DOD submitted a report to Congress that, among other things,  proposed creating the DHA to achieve cost savings at headquarters- and  administrative-level organizations, TRICARE, the headquarters of military  departments\u2019 medical commands and agencies, and other management  organizations within the Military Health System that do not directly provide  health care services. DOD established the DHA in September 2013 to  provide administrative support for the military departments\u2019 respective  medical programs by adopting common clinical and business processes,  combining common shared services, and coordinating the work of the  military departments\u2019 respective MTFs and care purchased from the  private sector. The DHA also assumed the administrative responsibility  for managing the MTFs in the National Capital Region.", "The NDAA for Fiscal Year 2013 required that DOD create a detailed plan  for carrying out its health care system reform to include the goals of the  reform and performance measures to achieve them; the personnel levels  required for the DHA and the National Capital Region Medical  Directorate; and specific information on the shared services, among other  things. In 2015, we reported on DOD\u2019s establishment of the DHA and  made five recommendations, and DOD concurred or partially concurred with all of these recommendations. DOD has implemented two of the  five recommendations by completing some baseline personnel  assessments of the DHA workforce and reporting the number and cost of  administrative headquarters personnel within the Military Health System  in DOD\u2019s fiscal year 2018 Defense Health Program budget estimates. Of  the three open recommendations, two relate directly to assessing  personnel requirements within the DHA. As of January 2018, these  recommendations have not been fully addressed and remain open  because DOD has not established processes and procedures to create  an overall personnel management process for the DHA.", "In December 2016, Congress expanded the role of the DHA by directing  the transfer of responsibility for the administration of each MTF from the  military departments to the DHA. Pursuant to section 1073c(a) of title  10, United States Code, the Director of the DHA shall be responsible for  the administration of each MTF, including with respect to budgetary  matters, information technology, health care administration and  management, administrative policy and procedure, military medical  construction, and any other matters the Secretary of Defense determines  appropriate. Section 702 of the NDAA for Fiscal Year 2017 required that  the Secretary of Defense develop a plan to implement section 1073c of  title 10, United States Code, that includes the following four elements:  A.  how the Secretary will carry out subsection (a) of section 1073c of title  10 of the United States Code;  B.  efforts to eliminate duplicative activities carried out by the elements of  the DHA and military departments;  C.  efforts to maximize efficiencies in the activities carried out by the  DHA; and  D.  how the Secretary will implement section 1073c in a manner that  reduces the number of members of the armed forces, civilian  employees who are full-time equivalent employees, and contractors  relating to the headquarters activities of the Military Health System, as  of the date of the enactment of the act.", "Section 702 of the NDAA for Fiscal Year 2017 also included a provision  for us to review DOD\u2019s interim and final reports on the implementation  plan. In our review of DOD\u2019s plan in September 2017, we noted that  DOD had selected the component model\u2014in which the Director of the  DHA would administer each MTF through military department-led  intermediary component commands and military department-led MTFs\u2014 as the administrative model DOD would use to meet the requirements  specified in section 702. Congress, in the Conference report  accompanying the NDAA for Fiscal Year 2018 that was issued in  November 2017, raised concern about DOD\u2019s lack of progress on the  development of the plan and about the component model. Specifically,  Congress noted that the component model was an attempt to maintain  current stove-piped organizational constructs that risk continued  inefficiencies in the Military Health System command and governance  structure. In the third interim report, DOD found that the component  model would not be adequate to satisfy statutory requirements and  subsequently changed from the component model to a new administrative  framework."], "subsections": []}, {"section_title": "Amendments from the NDAA for Fiscal Year 2019", "paragraphs": ["The NDAA for Fiscal Year 2019 amended section 1073c of title 10, United  States Code. The NDAA for Fiscal Year 2019, among other things,  provided additional authorities to the Director of the DHA, such as the  authority to determine total workforce requirements at each MTF and  established within the DHA two subordinate organizations\u2014one for  research and development, and one for public health. Additionally, the  NDAA for Fiscal Year 2019 extended the date for the transfer of the  administration of the MTFs to the DHA from the original deadline of  October 1, 2018, to September 30, 2021. Section 1073c of title 10, United  States Code, including these amendments, is reproduced in appendix I."], "subsections": []}, {"section_title": "Roles and Responsibilities of Key DOD Entities in the Military Health System", "paragraphs": ["Currently, the Under Secretary of Defense for Personnel and Readiness,  the Assistant Secretary of Defense for Health Affairs, the DHA, and the  military departments have various responsibilities for the oversight and  management of the Military Health System:", "The Under Secretary of Defense for Personnel and Readiness is the  principal staff assistant and advisor to the Secretary and Deputy  Secretary of Defense for health affairs and, in that capacity, develops  policies, plans, and programs for health and medical affairs.", "The Assistant Secretary of Defense for Health Affairs has the primary  responsibility for the Military Health System and serves as the  principal advisor to the Under Secretary of Defense for Personnel and  Readiness for all DOD health policies, programs, and activities. The  Assistant Secretary of Defense for Health Affairs also has the  authority to develop policies; conduct analyses; issue guidance;  provide advice and make recommendations to the Secretary of  Defense, the Under Secretary of Defense for Personnel and  Readiness, and others; and provide oversight to the DOD  components on matters pertaining to the Military Health System.  Further, the Assistant Secretary of Defense for Health Affairs  prepares and submits a DOD Unified Medical Program budget to  provide resources for the Military Health System.", "The Director of the DHA, in addition to carrying out the responsibilities  outlined above, manages the execution of policy developed by the  Assistant Secretary of Defense for Health Affairs.", "The Secretaries of the military departments coordinate with the  Assistant Secretary of Defense for Health Affairs to develop certain  Military Health System policies, standards, and procedures and  provide military personnel and other authorized resources to support  the activities of the DHA, among other things. The Surgeon General of  each military department serves as the principal advisor to the  Secretary of the military department concerned on all health and  medical matters of the military department."], "subsections": []}]}, {"section_title": "DOD Addressed the Statutory Elements for the Transfer of the Administration of the MTFs to the DHA", "paragraphs": ["DOD addressed each of the four statutory elements in its June 2018 plan.  DOD dedicated most of the plan to describing the governance structure of  DOD\u2019s new administrative framework and to describing the schedule for  the phased transfer of the administration of approximately 457 MTFs to  the DHA by October 1, 2021. DOD\u2019s plan provided less detail on  addressing efforts to eliminate duplicative activities; maximizing  efficiency; and reducing the number of headquarters-level military,  civilian, and contractor personnel. The following provides a summary of  what DOD\u2019s plan included for each of the four elements in the statute:  Information on efforts to transfer the administration of the MTFs  to the DHA. In its plan, DOD described the transfer of the MTFs to  the DHA, including budgetary matters, information technology, health  care administration and management, administrative policy and  procedure, military medical construction, and all other MTF  operations. DOD dedicated most of the plan to describing the (1) new  governance structure of the proposed administrative framework model  and (2) timeline for the phased transfer of the administration of the  457 MTFs from the military departments\u2019 respective medical  commands to the DHA. For example, DOD states that Military Health  System governance will shift its focus from consensus-driven bodies  that address both policy and management issues to a smaller,  streamlined set of oversight councils that focus on high-level, Military  Health System-wide policy and budgetary matters. According to the  plan, the Assistant Secretary of Defense for Health Affairs will resolve  matters that involve both the military departments and the DHA. DOD  also stated that the DHA plans to establish six intermediate  management organizations (two for each region) to assist with the  administration and management of the MTFs, which are broken out as  follows: an East Region, a West Region, and outside the United  States. Further, DOD stated that the DHA had established an  Assistant Director position for Health Care Administration, as well as  four Deputy Assistant Director positions for Information Operations,  Financial Operations, Health Care Operations, and Medical Affairs.", "Regarding the timeline for the phased transfer, beginning no later than  October 1, 2018, DOD will transfer 5 of its approximately 679 MTFs  to the DHA for the first phase of the transition. MTFs transferring to  the DHA for the first phase include the Womack Army Medical Center,  Fort Bragg; the Naval Hospital Jacksonville; Force 81st Medical  Group, Keesler Air Force Base; 4th Medical Group, Seymour Johnson  Air Force Base; and 628th Medical Group, Joint Base Charleston. In  the second phase of the transition, which will begin no later than  October 1, 2019, DOD will transfer 244 MTFs from the East Region to  the DHA. The third phase will begin no later than October 1, 2020,  and will include 134 MTFs from the West Region. The fourth phase  will include 79 MTFs outside the United States and begin no later than  October 1, 2021. DOD also provided DHA organizational charts for  each of the four phases.", "Information on efforts to eliminate duplicative activities carried  out by the DHA and the military departments. In its plan, DOD  noted that it is undertaking an analysis of the functions that will be  performed at DHA headquarters and at the military departments\u2019  respective medical department headquarters. In the plan, DOD  provided three figures listing the functions, functional responsibilities,  and functional requirements that will be carried out by the DHA, the  DHA intermediate management organizations, and the military  departments\u2019 medical department headquarters. Specifically, the  functions listed included those functions that should be with the DHA  intermediate management organizations, such as Emergency  Planning and Preparation, and those functions that should be with the  military departments\u2019 medical department intermediate commands or  headquarters, such as Quality and Safety for Healthcare in the  Operational Setting. The three figures primarily focused on functions  to be performed during the first phase of the transition.", "Information on efforts to maximize efficiencies in the activities  carried out by the DHA. In its plan, DOD included information  about its three principle efforts currently underway to address  efficiencies. Specifically, DOD describes its broader efforts to  streamline clinical and business processes across the Military Health  System and links some of these broader initiatives to section 702.  According to the plan, efforts such as the use of centralized contract  support functions and common purchasing, among others, are made  possible because of the transfer of the administration of the MTFs to  the DHA. Specific to the transfer of MTFs to the DHA as required by  section 1073c of title 10 of the United States Code, DOD\u2019s plan stated  that the DHA is developing, publishing, and implementing procedural  instructions to help administer and manage the MTFs. The plan also  states that each MTF transferring to the DHA will establish a  performance plan\u2014referred to as a quadruple aim performance  plan\u2014to monitor performance. According to the plan, Military Health  System leadership adopted the quadruple aim performance plan to  monitor MTF performance, which they believe will improve  performance and contribute to better outcomes and increased  efficiencies. The plan states that the performance of all MTFs in the  Military Health System will be monitored using the Military Health  System quadruple aim performance plan measures beginning  October 1, 2018.", "Information on reducing headquarters-level military, civilian, and  contractor personnel within the Military Health System. In its  plan, DOD noted that it has already programmed a 25-percent  reduction in personnel positions aligned to medical headquarters  across the enterprise. Specific to the transfer of MTFs to the DHA as  required by section 1073c of title 10 of the United States Code, DOD  states that the DHA will experience personnel growth during each  subsequent phase of the transition in order to undertake its new  responsibilities. Additionally, the plan states that DOD expects at least  a 10-percent reduction (approximately 695 positions from the current  baseline) in headquarters military and civilian personnel by the end of  the transition. However, the plan does not provide specific details  about how it will achieve the 10-percent reduction while the DHA  experiences personnel growth during each phase. The plan includes a  figure depicting military and civilian full-time equivalent positions for  the current baseline of the DHA and the military departments\u2019  respective medical department headquarters and intermediate  commands. Contractors are also mentioned in the plan at a high level,  but without specific data. Additionally, DOD continues to take steps to  evaluate personnel requirements. Specifically, according to two June  2018 Under Secretary of Defense for Personnel and Readiness  memorandums, DOD is conducting a review and validation of  headquarters-level personnel requirements, which we discuss in more  depth later in this report."], "subsections": []}, {"section_title": "Additional Information Would Be Useful to Demonstrate How the Plan Will Reduce or Better Manage Duplication and Improve Efficiencies", "paragraphs": ["DOD\u2019s June 2018 plan takes steps toward reducing duplication and  improving effectiveness and efficiency, as previously discussed.  However, the plan has two weaknesses that could be mitigated with  additional information from DOD. Specifically, DOD cannot be reasonably  assured that its plan will reduce or better manage duplication and improve  efficiency since (1) certain functions are excluded from the transfer to the  DHA and (2) it is unclear, based on the information in the plan and  supporting planning documents, how implementation of the plan will result  in the achievement of the stated goal of reducing headquarters-level  personnel, including contractor personnel, by 10 percent."], "subsections": [{"section_title": "DOD Excluded Certain Functions from the Planned Transfer to the DHA That Could Reduce or Better Manage Duplication", "paragraphs": ["As part of its approach for addressing the requirements of section 702 of  the NDAA for Fiscal Year 2017, DOD excluded 16 medical functions from  the transfer to the DHA. In a February 2018 Under Secretary of Defense  for Personnel and Readiness memorandum, these functions were  identified as being related to operational readiness and installation- specific missions. That memorandum and another memorandum from  the Under Secretary of Defense for Personnel Readiness dated May  2018 listed 16 functions that DOD identified as operational readiness and  installation-specific medical functions and that would therefore be  excluded from the planned transfer to the DHA (see table 1).", "DOD cannot be reasonably assured that its plans are reducing or better  managing duplication because DOD has not defined the functions or  analyzed the potential for the 16 functions to be transferred to the DHA.  These functions are not defined in the February or May 2018  memorandums or DOD\u2019s plan. The two memorandums list only the  functions and state that they are separate from MTF health care delivery  services and MTF business operations. One of the memorandums  explains that these functions are tied to organizing, training, and  equipping personnel for operational readiness missions. These memorandums also do not explain the rationale used to determine that  the 16 functions were different from the other MTF health care functions  DOD plans to transfer to the DHA. Further, DOD did not provide any  analysis or documentation regarding the decision to exclude these 16  functions in the supporting documentation that we reviewed, such as in  the concepts of operations for the Assistant Secretary of Defense for  Health Affairs, the DHA, the Army, the Navy, and the Air Force. According  to senior-level officials from the Assistant Secretary of Defense for Health  Affairs and the DHA, there was no formal analysis or documentation to  support the decision.", "With respect to the exclusion of the transfer of the dental care function to  the DHA, Assistant Secretary of Defense for Health Affairs and DHA  senior-level officials stated that dental clinics serve only servicemembers,  not retirees or family member beneficiaries. Therefore, dental care was  considered to be an operational readiness function rather than a health  care delivery function, according to these same officials. However, this  statement is not completely in line with DOD information regarding  overseas dental care and family member beneficiaries. According to DOD  information regarding dental care overseas, family members of active- duty servicemembers can receive dental care from military dental clinics.  As such, in some instances the delivery of dental care is not solely for  ensuring the readiness of servicemembers. Further, senior-level officials  from the Assistant Secretary of Defense for Health Affairs and the DHA  acknowledged that transferring the dental care function from the military  departments to the DHA could potentially reduce duplicative activities and  result in more efficiencies. According to a senior-level DHA official,  splitting health care and dental care results in two separate health care  delivery organizations.", "Across the Military Health System there are approximately 247 (200 in the  United States) dental clinics, which represent about a third of DOD\u2019s  facilities within the direct care system when including dental clinics,  military hospitals, and ambulatory care clinics (i.e., approximately 679  facilities in total). Moreover, senior-level officials from the Assistant Secretary of Defense for Health Affairs and the DHA stated that by  transferring a function from the military departments to the DHA, DOD  reduces the number of managers of a function from four (i.e., at the Army,  the Navy, the Air Force, and the DHA) to only one at the DHA.", "In our prior work, we have reported that agencies can act to improve the  efficiency of their programs by maximizing the level of services provided  for a given level of resources, as well as improving programs\u2019  effectiveness in achieving their objectives. In particular, we have  highlighted the need for agencies to define their mission, functions,  activities, services, and processes when identifying fragmentation,  overlap, and duplication among programs. Agencies should also assess  how, if at all, the fragmented, overlapping, or duplicative functions are  related and how they are being coordinated between agencies.  Understanding this relationship will help inform decisions about whether  and how to increase efficiency or reduce or better manage fragmentation,  overlap, or duplication. Also, agencies should assess whether potential  effects in areas such as program implementation, outcomes, and costs  are positive or negative. Identifying the positive and negative effects of  fragmentation, overlap, or duplication will help agencies determine  whether or not actions to reduce or better manage the fragmentation,  overlap, or duplication are economical and efficient.", "However, DOD has not fully determined whether opportunities exist to  achieve additional savings due to the lack of analysis, including clear  definitions, of the 16 functions that were excluded by DOD. According to  senior-level officials from the Assistant Secretary of Defense for Health  Affairs and the DHA, there are potential savings by transferring the 16  functions to the DHA, but these have not been adequately analyzed.  Without defining and analyzing the 16 functions, DOD cannot assure  decisionmakers that it has fully considered all opportunities for reducing  or better managing duplication in its plan to transfer the administration of  the MTFs to the DHA."], "subsections": []}, {"section_title": "DOD Has Not Demonstrated That Its Plan Will Lead to Reductions in Headquarters Personnel", "paragraphs": ["As previously discussed, DOD\u2019s plan identifies the functions that will  transfer to the DHA. However, DOD\u2019s plan and supporting documents do  not provide details on how DOD established the 10-percent reduction of  headquarters-level military, civilian, and contractor personnel by 2021,  when the administration of the 457 MTFs is to have been transferred to  DHA. The plan also states that DHA personnel will grow during each  subsequent phase of the transition. Further, information in other related  supporting documentation indicates that headquarters-level personnel will  increase rather than decrease to achieve the 10-percent reduction goal.  Lastly, DOD did not include information in the plan or in its supporting  documents concerning contractor personnel reductions.", "Officials from the Army, the Navy, the Air Force, the DHA, and the Office  of Cost Assessment and Program Evaluation could not identify for us  what office within DOD established the 10-percent reduction goal. Our  review of key planning documents\u2014the concepts of operations for the  Assistant Secretary of Defense for Health Affairs, the DHA, the Army, the  Navy, and the Air Force\u2014found that these documents also did not  provide details for the 10-percent reduction of headquarters personnel.  Specifically, although these documents included some information  regarding personnel reductions, they did not include specific details  concerning the 10-percent reduction of headquarters personnel.", "DOD states in the plan that the DHA will experience incremental growth in  staffing during each phase of the transition in order to undertake its new  responsibilities, but does not explain how it will achieve its 10-percent  reduction goal given the projected growth. Further, DOD does not provide  any data in the plan about how much the DHA will grow during each  phase. Senior-level officials from the offices of the Assistant Secretary of  Defense for Health Affairs and the DHA stated that there were no explicit  restrictions in section 702 of the NDAA for Fiscal Year 2017 that would  prohibit the DHA from increasing its number of personnel. However,  section 702 does require that the Secretary implement section 1073c in a  manner that reduces the number of members of the armed forces; civilian  employees who are full-time equivalent employees; and contractors  relating to the headquarters activities of the military health system, which  includes the DHA.", "Further, the projected growth described in DOD\u2019s plan is also consistent  with a June 2018 DHA pre-decisional draft briefing concerning full-time  equivalent positions based on current information provided by the military  departments, which describes a transfer of personnel to the DHA from the  military departments rather than a reduction in personnel. According to  the briefing, full-time equivalents to support future DHA headquarters and  intermediate management organizations would not lead to any reductions  in personnel. On the contrary, the briefing states that full-time equivalents  for military and civilian personnel would increase by 38 percent at the  DHA and result in additional costs. A senior-level DHA official confirmed  that the information in the briefing relates to a transfer of personnel from  the military headquarters to the DHA for health care delivery, not a  reduction in personnel that would result in no cost savings. The briefing  also states that information related to current and future state full-time  equivalent positions is misleading because contractor data, as well as  other relevant personnel data, are not included.", "Regarding contractor data, DOD did not include any detailed information  related to the reduction of contractor personnel in the plan. Specifically,  information concerning contractor personnel reductions was not included  in the figure or other parts of the section concerning headquarters-level  personnel reductions. Overall, contractors are referenced only five times  in the entire plan:", "Three of the references are simply repeating the language from the  statutory requirement.", "Another reference reiterates that the DHA will assume management  responsibilities for civilian and contractor personnel performing health  care delivery functions and operations.", "The last reference from the section of the plan related to personnel  reductions states that DOD is planning for headquarters personnel  reductions, to include military, civilian, and contractor personnel.", "In reviewing the concepts of operations for the Assistant Secretary of  Defense for Health Affairs, the DHA, the Army, the Navy, and the Air  Force for details on contractor personnel, we found that most of these  documents did not provide details regarding contractors. Four out of five  of the aforementioned concepts of operations did not include information  concerning contractors in the context of personnel reductions. Although  the Assistant Secretary of Defense for Health Affairs\u2019 concept of  operations does include information about contractors in the context of  personnel reductions, the information does not provide further details  about DOD\u2019s plans for this effort.", "According to DOD Directive 1100.4, Guidance for Manpower  Management, it is DOD policy that personnel requirements are driven by  workload and shall be established at the minimum levels necessary to  accomplish mission and performance objectives. This directive states  that personnel is a resource and that changes in personnel shall be  preceded by changes to the programs, missions, and functions that  require personnel resources. Additionally, the directive states that  assigned missions shall be accomplished using the least costly mix of  personnel (military, civilian, and contract) consistent with military  requirements, among other considerations. The directive also states that  military (active and reserve) and civilian manpower resources shall be  programmed in accordance with validated personnel requirements,  among others. Moreover, key change management practices concerning  workforce reductions state that before implementing workforce reduction  strategies, it is critical that agencies carefully consider how to strategically  downsize the workforce and maintain the staff resources to carry out its  mission. These same key change management practices also define  \u201cefficiency\u201d as maintaining federal government services or outcomes  using fewer resources (such as time and money) or improving or  increasing the quality or quantity of services or outcomes while  maintaining (or reducing) resources.", "However, DOD\u2019s ability to develop an analytically-based goal for  personnel reductions associated with the transfer of administration to  DHA, a plan to achieve that goal given that it is projecting growth in  personnel, and how contractors factor into its plan has been limited for  two reasons. First, DOD has not validated headquarters-level personnel  requirements. Second, DOD has not conducted a comprehensive  review\u2014a review that, per DOD\u2019s own guidance, would involve  establishing at minimum levels the requirements necessary to accomplish  mission and performance objectives and reflect the consideration of the  least costly mix of personnel (i.e., military, civilian and contract) consistent  with military requirements, among other considerations, to meet the  validated requirements.", "Senior-level officials from the offices of the Assistant Secretary of  Defense for Health Affairs and the DHA stated that information regarding  contractor personnel reductions was not included in the plan because  DOD probably did not have these data. These same officials said that it is  difficult to obtain contractor personnel data. As we previously noted,  DOD has faced challenges with understanding DHA headquarters  personnel requirements and composition. In 2015, we reported on DOD\u2019s  establishment of the DHA and on how, among other things, DOD could  not determine DHA\u2019s effect on Military Health System administrative and  headquarters personnel levels. We found that the DHA had not  completed the personnel requirements assessment process or developed  a baseline estimate of personnel in the Military Health System before the  DHA was created. As discussed previously, we made five  recommendations, with which DOD concurred or partially concurred. As  of January 2018, DOD had not taken action to fully address three of these  recommendations. Of the three recommendations that had not been fully  addressed, two relate directly to DHA personnel requirements.  Specifically, we recommended the following:", "To provide decision makers with appropriate and more complete  information on the continuing implementation, management, and  oversight of the DHA, the Secretary of Defense should direct the  Assistant Secretary of Defense for Health Affairs to develop a  comprehensive requirements assessment process that accounts for  needed future skills through the consideration of potential  organizational changes and helps ensure appropriate consideration of  workforce composition through the determination of the final status of  military personnel within the DHA.", "To provide decision makers with appropriate and more complete  information on the continuing implementation, management, and  oversight of the DHA, the Secretary of Defense should direct the  Assistant Secretary of Defense (Health Affairs) to develop a plan for  reassessing and revalidating personnel requirements as the missions  and needs of the DHA evolve over time.", "Since the recommendations concerning DHA personnel requirements  have not been fully addressed and DHA is in the middle of a significant  organizational change, it would be timely for DOD to validate  headquarters-level personnel requirements and conduct a comprehensive  review to determine the appropriate mix of personnel. This validation and  comprehensive review should occur prior to transferring authority,  direction, and control of the MTFs to the DHA for the third phase, which,  as previously noted, is scheduled to begin no later than October 1, 2020.", "In June 2018, DOD directed a review and validation of headquarters-level  personnel requirements. The Under Secretary of Defense for Personnel  and Readiness issued two memorandums concerning the review of  headquarters-level personnel requirements. The June 7, 2018,  memorandum directs the establishment of cross-service manpower  teams to conduct a baseline review of DHA headquarters\u2019 current and  future personnel requirements. Similarly, the June 15, 2018,  memorandum directs the establishment of a working group to determine  the appropriate manning of all above MTF-level medical activities in the  military departments. This memorandum also requires the working group  to review and validate the results of the cross-services manpower teams\u2019  assessment of DHA headquarters activities, among other requirements.", "Officials with the Office of the Under Secretary of Defense for Personnel  and Readiness involved in these efforts said that the goal of the current review is to identify the DHA\u2019s current and future baseline personnel  requirements. However, according to these same officials, the review will  not (1) validate personnel requirements because of time constraints, (2)  identify potential personnel reductions, or (3) consider workforce  composition. These officials also clarified that a comprehensive personnel  requirements study would take a considerable amount of time and would  generate more technical estimates of the work being performed. They  said such a study would review major functions and subfunctions, as well  as get down to the task level and analyze work processes, which would  allow for making process improvement suggestions.", "In September 2018, the Office of the Under Secretary of Defense for  Personnel and Readiness issued the report on DHA\u2019s personnel  requirements. The report stated that DHA personnel requirements  would increase to support an expanded mission and included several  recommendations one of which was to conduct a military essentiality  review of DHA positions and functions. According to officials with the  Office of the Under Secretary of Defense for Personnel and Readiness,  each military department provided headquarters personnel data, which  will be reviewed as part of the upcoming Program Budget Review cycle.", "Until DOD validates headquarters-level personnel requirements and  conducts a comprehensive review that considers the least costly mix of  personnel, DOD may not be able to achieve its goal of reducing  headquarters-level personnel by 10 percent while maintaining the efficient  and effective provision of healthcare services. Furthermore, Congress will  lack important information to determine the extent to which the transfer of  the administration of the MTFs to the DHA is being planned and  implemented effectively and efficiently."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Congress required DOD to provide a plan to transfer the administration of  the MTFs from the military departments to the DHA. DOD provided a final  implementation plan, which made significant changes to the  administrative approach described in two of DOD\u2019s initial interim plans. In  its final plan, DOD addressed all of the elements of the statute. However,  the plan did not provide details to demonstrate how DOD will reduce  duplicative activities or headquarters-level personnel. Without defining  and analyzing the 16 functions currently excluded from transfer to the  DHA, validating headquarters-level personnel requirements, and  conducting a comprehensive review to determine, per DOD guidance, the  least costly mix of personnel, DOD and congressional decisionmakers are  not positioned to know how, whether, and to what extent undertaking this  significant reform effort will improve effectiveness and efficiency in the  administration of the MTFs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the DOD:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Health Affairs, in coordination with Director of the DHA and  the Surgeons General of the military departments, define and analyze   the 16 operational readiness and installation-specific medical functions  currently excluded from transfer to the DHA to determine whether  opportunities exist to reduce or better manage duplicative functions   and improve efficiencies in the administration of the MTFs.  (Recommendation 1)", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Health Affairs, in coordination with DHA Assistant Director for  Health Care Administration and the Secretaries of the military  departments, validate headquarters-level personnel requirements to  determine that they are established at the minimum levels necessary\u2014 per DOD guidance\u2014to accomplish missions and achieve objectives  before transferring authority, direction, and control of the MTFs to the  DHA for the third phase. (Recommendation 2)", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Health Affairs, in coordination with DHA Assistant Director for  Health Care Administration and the Secretaries of the military  departments, conduct a comprehensive review to identify the least costly  mix\u2014per DOD guidance\u2014of military, civilian, and contractors needed to  meet validated requirements\u2014that is, to perform the functions identified  at the DHA headquarters and intermediate management organizations  and at the military departments\u2019 headquarters and intermediate  commands. Additionally, this comprehensive review should be completed  before transferring authority, direction, and control of the MTFs to the  DHA for the third phase. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["In written comments reproduced in appendix II, DOD concurred with all  three recommendations and noted the actions it was taking to address  each recommendation.", "In response to our third recommendation, DOD noted that it has  completed an extensive review of manpower requirements for the  management structure of the DHA. The September 2018 report by the  Office of the Under Secretary of Defense for Personnel and Readiness is  a first step toward addressing our recommendation. The report provided  initial information concerning DHA\u2019s personnel requirements. As we noted  in our report, however, DOD needs to identify the least costly mix\u2014per  DOD guidance\u2014of military, civilian, and contractors once it has validated  requirements for DHA.", "As an additional comment, DOD noted that since our draft report was  provided for comment it has refined the estimated projected growth in full- time equivalents for military and civilian personnel at the DHA from 38  percent to 14 percent. In its comments, DOD stated that it continues to  believe that it will achieve a 10 percent reduction. However, as we stated  in this report, DOD has not demonstrated the extent to which its plan to  transfer the MTFs to the DHA will lead to reductions in headquarters-level  personnel.", "We are sending copies of this report to the appropriate congressional  committees. We are also sending copies to the Secretary of Defense; the  Under Secretary of Defense for Personnel and Readiness; the Assistant  Secretary of Defense for Health Affairs; the Director, Cost Assessment  and Program Evaluation; the Director, Defense Health Agency; the  Surgeon General of the Army; the Surgeon General of the Navy; and the  Surgeon General of the Air Force.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-3604 or farrellb@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 members who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Section 1073c of Title 10, United States Code", "paragraphs": ["The National Defense Authorization Act (NDAA) for Fiscal Year 2017  amended Chapter 55 of title 10, United States Code to include a new  section: \u00a7 1073c Administration of Defense Health Agency and military  medical treatment facilities. Section 1073c of title 10, United States Code,  as amended by Pub. L. No. 115-91, \u00a7\u00a7 713, 1081 (2017), and Pub. L. No.  115-232, \u00a7 711 (2018) reads as follows:  \u00a7 1073c. Administration of Defense Health Agency and military  medical treatment facilities  (a) Administration of military medical treatment facilities.  (1)  In accordance with paragraph (4), by not later than  September 30, 2021,  the  Director  of  the  Defense  Health  Agency  shall  be  responsible  for  the administration of each  military medical treatment facility, including with respect to--  (A) budgetary matters;  (B) information technology;  (C) health care administration and management;  (D) administrative policy and procedure;  (E) military medical construction; and  (F) any other matters the Secretary of Defense determines  appropriate.  (2)  In addition to  the responsibilities set forth in paragraph (1),  the Director of the Defense Health Agency shall, commencing  when the Director begins to exercise responsibilities under  that paragraph, have the authority\u2014  (A) to direct, control, and serve as the primary rater of the  performance of commanders or directors of military  medical treatment facilities;  (B) to direct and control any intermediary organizations  between the Defense Health Agency and military medical  treatment facilities;  (C) to determine the scope of medical care provided at each  military medical treatment facility to meet the military  personnel readiness requirements of the senior military  operational commander of the military installation;  (D) to determine total workforce requirements at each military  (E) to direct joint manning at military medical treatment  facilities and intermediary organizations;  (F) to address personnel staffing shortages at military medical  (G)  to select among service nominations for commanders or  directors of military medical treatment facilities.  (3) The military commander or director of each military medical  treatment facility shall be responsible for--  (A) ensuring the readiness of the members of the armed  forces and civilian employees at such facility; and  (B) furnishing the health care and medical treatment provided  at such facility.   (4)  The Secretary of Defense shall establish a timeline to ensure  that each Secretary of a military department transitions the  administration of military medical treatment facilities from  such Secretary to the Director of the Defense Health Agency  pursuant to paragraph (1) by the date specified in such  paragraph.  (5)  The  Secretary  of  Defense  shall  establish  within  the  Defense  Health  Agency  a  professional  staff  to provide  policy, oversight, and direction to carry out paragraphs (1)  and (2). The Secretary shall carry out this  paragraph by  appointing the positions specified in subsections (b) and (c). (b) DHA Assistant Director.  (1)  There  is  in  the  Defense  Health  Agency  an  Assistant  Director  for  Health  Care  Administration.  The  Assistant  Director shall--  (A) be a career appointee within the Department; and  (B) report directly to the Director of the Defense Health  Agency.  (2) The Assistant Director shall be appointed from among  individuals who have equivalent education and  experience  as a chief executive officer leading a large, civilian health  care system.  (3) The Assistant Director shall be responsible for the following:  (A) Establishing priorities for health care administration and  management.  (B) Establishing policies, procedures, and direction for the  provision of direct care at military medical treatment  facilities.  (C) Establishing priorities for budgeting matters with  respect to the provision of direct care at military  medical treatment facilities.  (D) Establishing policies,  procedures,  and  direction  for  clinic  management  and  operations at military medical  treatment facilities.  (E)  Establishing  priorities  and  between  the  military  medical  treatment  facilities. (c) DHA Deputy Assistant Directors.  (1) (A) There is in the Defense Health Agency a Deputy Assistant  Director for Information Operations.  (B) The Deputy Assistant Director for Information  Operations shall be responsible for policies,  management,  and  execution  of  information technology  operations  at  and  between  the  military  medical treatment facilities.  (2)  (A) There is in the Defense Health Agency a Deputy  Assistant Director for Financial Operations.  (B) The Deputy Assistant Director for Financial Operations  shall be responsible for the policy, procedures,  and  direction  of  budgeting  matters  and  financial  management  with  respect  to  the  provision of direct care across the  military health system.  (3)  (A) There is in the Defense Health Agency a Deputy  Assistant Director for Health Care Operations.  (B)  The  Deputy  Assistant  Director  for  Health  Care  Operations  shall  be  responsible  for  the  policy,  procedures, and direction of health care administration in  the military medical treatment facilities.  (4)  (A) There is in the Defense Health Agency a Deputy  Assistant Director for Medical Affairs.  (B) The Deputy Assistant Director for Medical Affairs shall  be responsible for policy, procedures, and  direction  of  clinical  quality  and  process  improvement,  patient  safety,  infection  control,  graduate  medical education, clinical  integration, utilization review, risk management, patient  experience, and civilian physician recruiting.  (5)  Each Deputy Assistant Director appointed under  paragraphs (1) through (4) shall report directly to the  Assistant Director for Health Care Administration.  (d) Certain responsibilities of DHA Director.  (1) In addition to the other duties of the Director of the Defense  Health Agency, the Director shall coordinate  with the Joint  Staff Surgeon to ensure that the Director most effectively  carries out the responsibilities of the Defense Health  Agency as a combat support agency under section 193 of  this title.  (2) The responsibilities of the Director shall include the following:  (A) Ensuring  that  the  Defense  Health  Agency  meets  the  the the  commanders  of  operational  needs  of  combatant commands.  (B)  Coordinating  with the military departments to ensure  that the staffing at the military medical treatment  facilities supports readiness requirements for members  of the armed forces and health care personnel.  (C) Ensuring  that  the  Defense  Health  Agency  meets  the  military  medical  readiness  requirements  of  the  senior  military  operational  commanders  of  the  military  installations.  (e) ADDITIONAL DHA ORGANIZATIONS.\u2014Not later than  September 30, 2022, the Secretary of Defense shall, acting  though the Director of the Defense Health Agency, establish  within the Defense Health Agency the following:  (1)  A subordinate organization, to be called the Defense Health  (A) led,  at  the  election  of  the  Director,  by  a  director  or  commander (to be called the Director or Commander of  Defense Health Agency Research and Development);  (B) comprised of the Army Medical Research and Materiel  Command and such other medical research  organizations and activities of the armed forces as the  Secretary considers appropriate; and  (C) responsible for coordinating funding for Defense Health  Program Research, Development, Test, and Evaluation,  the Congressionally Directed Medical Research  Program, and related Department of Defense medical  research.  (2)  A subordinate organization, to be called the Defense Health  (A) led, at the election of the Director, by a director or  commander (to be called the Director or Commander of  Defense Health Agency Public Health); and  (B) comprised of the Army Public Health Command, the  Navy\u2013Marine Corps Public Health Command, Air Force  public health programs, and any other related defense  health activities that the Secretary considers appropriate,  including overseas laboratories focused on preventive  medicine, environmental health, and similar matters. (f)  Definitions.  In this section:  (1) The term \"career appointee\" has the meaning given that  term in section 3132(a)(4) of title 5.  (2) The term \"Defense Health Agency\" means the Defense  Agency established pursuant to Department of  Defense  Directive 5136.13, or such successor Defense Agency."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Lori Atkinson, Assistant Director;  Alexandra Gonzalez; Rebecca Guerrero; Mae Jones; Mary Jo LaCasse;  Kirsten Leikem; Steven Putansu; and Sarah Veale made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-163", "url": "https://www.gao.gov/products/GAO-18-163", "title": "Federal Student Loans: Actions Needed to Improve Oversight of Schools' Default Rates", "published_date": "2018-04-26T00:00:00", "released_date": "2018-04-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["As of September 2017, $149 billion of nearly $1.4 trillion in outstanding federal student loan debt was in default. GAO was asked to examine schools' strategies to prevent students from defaulting and Education's oversight of these efforts.", "This report examines (1) how schools work with borrowers to manage default rates and how these strategies affect borrowers and schools' accountability for defaults; and (2) the extent to which Education oversees the strategies schools and their default management consultants use to manage schools' default rates. GAO analyzed Education data on student loans that entered repayment from fiscal years 2009\u20132013, the most recent data at the time of this analysis; reviewed documentation from Education and a nongeneralizable sample of nine default management consultants selected based on the number of schools served (about 1,300 schools as of March 2017); reviewed relevant federal laws and regulations; and interviewed Education officials."]}, {"section_title": "What GAO Found", "paragraphs": ["According to federal law, schools may lose their ability to participate in federal student aid programs if a significant percentage of their borrowers default on their student loans within the first 3 years of repayment. To manage these 3-year default rates, some schools hired consultants that encouraged borrowers with past-due payments to put their loans in forbearance, an option that allows borrowers to temporarily postpone payments. While forbearance can help borrowers avoid default in the short-term, it increases their costs over time and reduces the usefulness of the 3-year default rate as a tool to hold schools accountable. At five of the nine selected default management consultants (that served about 800 of 1,300 schools), GAO identified examples when forbearance was encouraged over other potentially more beneficial options for helping borrowers avoid default, such as repayment plans that base monthly payments on income. Based on a review of consultants' communications, GAO found four of these consultants provided inaccurate or incomplete information to borrowers about their repayment options in some instances. A typical borrower with $30,000 in loans who spends the first 3 years of repayment in forbearance would pay an additional $6,742 in interest, a 17 percent increase. GAO's analysis of Department of Education (Education) data found that 68 percent of borrowers who began repaying their loans in 2013 had loans in forbearance for some portion of the first 3 years, including 20 percent that had loans in forbearance for 18 months or more (see figure). Borrowers in long-term forbearance defaulted more often in the fourth year of repayment, when schools are not accountable for defaults, suggesting it may have delayed\u2014not prevented\u2014default. Statutory changes to strengthen schools' accountability for defaults could help further protect borrowers and taxpayers.", "Education's ability to oversee the strategies that schools and their consultants use to manage their default rates is limited. Education's strategic plan calls for protecting borrowers from unfair and deceptive practices; however, Education states it does not have explicit statutory authority to require that the information schools or their consultants provide to borrowers after they leave school regarding loan repayment and postponement be accurate and complete. As a result, schools and consultants may not always provide accurate and complete information to borrowers. Further, Education does not report the number of schools sanctioned for high default rates, which limits transparency about the 3-year default rate's usefulness for Congress and the public."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider strengthening schools' accountability for student loan defaults and requiring that the information schools and consultants provide to borrowers about loan repayment and postponement options be accurate and complete. GAO recommends that Education increase transparency of reporting on default rate sanctions. Education agreed with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Over 42 million borrowers held nearly $1.4 trillion in federal student loans  as of September 2017 through programs authorized under Title IV of the  Higher Education Act of 1965, as amended. Of that amount, loans  valued at $149 billion, or about 11 percent of the total, were in default,  posing a financial risk to the federal government and taxpayers. The  Department of Education (Education) can rescind a school\u2019s eligibility to  participate in federal student aid programs if a certain percentage of their  student loan borrowers default on their loans within a certain time period.  Education calculates a cohort default rate (CDR)\u2014the percentage of  borrowers who enter repayment in a given fiscal year who then default  within a 3-year period\u2014for each school to hold them accountable for high  default rates.", "The CDR, however, may have limitations as an oversight tool. News  reports indicate that some schools and the consultants they hire to  provide default management services may use strategies to prevent  borrowers from defaulting during the CDR period that are not in  borrowers\u2019 best interests. Specifically, these sources reported that  schools and their consultants may counsel past-due borrowers to  postpone their monthly payments by putting their loans in forbearance  when other repayment options may be more favorable for some  borrowers. Student loan experts have raised concerns that this strategy  may harm borrowers and undermine the effectiveness of the CDR to hold  schools accountable. You asked us to review this issue.", "For this report, we examined (1) how schools work with borrowers to  manage schools\u2019 cohort default rates, and how these strategies affect  borrowers and schools\u2019 accountability for defaults, and (2) the extent to  which Education oversees the strategies schools and their default  management consultants use to manage schools\u2019 cohort default rates  and informs the public about its efforts to hold schools accountable.", "To determine how schools work with borrowers to manage their CDRs,  we examined the practices of selected companies that schools contract  with for this purpose. Specifically, we selected a nongeneralizable sample  of nine default management consultants that served over 1,300 schools.  These schools accounted for over 1.5 million borrowers in the 2013 CDR  cohort. We reviewed documentation from these default management  consultants on the schools they work with and the strategies they use to  reduce borrower defaults. We interviewed management officials and  employees responsible for contacting and working with borrowers at four  of these companies. We also analyzed school-level data from  Education\u2019s National Student Loan Data System (NSLDS), Education\u2019s  central database for federal student aid information, for the five most  recent CDR cohorts for which data are available, from cohort years 2009  to 2013, to analyze trends in loan postponement, repayment, and  default. For the same CDR periods, we analyzed 3-year repayment rate  data from Education\u2019s College Scorecard and CDRs from Education\u2019s  CDR Database. We also compared the effect postponement of student  loans has on the CDR by calculating an alternative metric. We assessed  the reliability of the data we obtained from Education by reviewing  documentation and testing the data we used in this report. We  determined the data to be sufficiently reliable for the purposes of this  report. We also interviewed representatives from higher education  associations, the Consumer Financial Protection Bureau, a state attorney  general\u2019s office, and consumer advocates. We reviewed relevant  provisions in the Higher Education Act of 1965, as amended. In addition,  we assessed the CDR against government standards for internal control  for identifying and responding to risks and goals and objectives in the  Office of Federal Student Aid\u2019s Fiscal Year 2015-2019 Strategic Plan.", "To determine the extent to which Education oversees the strategies  schools and their default management consultants use to manage  schools\u2019 CDRs and informs the public about its efforts to hold schools  accountable, we reviewed relevant federal laws and regulations and  Education\u2019s internal guidance and documentation on calculating,  assessing, and overseeing CDRs. We interviewed Education officials  responsible for oversight of student financial aid, including the CDR and  default prevention. We assessed Education\u2019s oversight activities against  goals and objectives in the Office of Federal Student Aid\u2019s Fiscal Year  2015-2019 Strategic Plan, government standards for internal control for  communicating with stakeholders, and Office of Management and Budget  guidelines for disseminating public information. More details on our scope  and methodology are included in appendix I.", "We conducted this performance audit from May 2016 to April 2018, in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Direct Loan Program", "paragraphs": ["Education administers federal student financial aid programs, including  the William D. Ford Federal Direct Loan (Direct Loan) program, through  the Office of Federal Student Aid. Education issues several types of  loans under the Direct Loan program, including subsidized and  unsubsidized loans. Prospective borrowers apply and are approved for  loans through Education, which then disburses the loan through the  borrowers\u2019 school. Upon disbursement of funds, Education assigns each  loan to a contracted loan servicer responsible for communicating  information to borrowers while they are in school and when they enter  repayment. Borrowers receive additional information about their loans  and related rights and responsibilities through their loan\u2019s promissory  note, Education\u2019s website, and mandatory entrance and exit counseling  provided by their school. When borrowers enter repayment, generally 6  months after leaving school, they make payments directly to the assigned  servicer."], "subsections": []}, {"section_title": "Federal Student Loan Repayment and Postponement Options", "paragraphs": ["Education offers a variety of repayment plan options that can help Direct  Loan borrowers avoid delinquency and default, including Standard,  Graduated, Extended, and Income-Driven. Income-Driven Repayment  plans can ease repayment by setting loan payment amounts as a  percentage of a borrower\u2019s income and extending the repayment period  up to 25 years. Unlike Standard, Graduated, and Extended repayment  plans, Income-Driven Repayment plans offer loan forgiveness at the end  of the repayment term and monthly payments may be as low as $0 for  some borrowers. Extending the repayment period may also result in  some borrowers paying more interest over the life of the loan than they  would under 10-year Standard repayment. In addition to making monthly  payments more manageable and offering the potential for loan  forgiveness, Income-Driven Repayment plans may also reduce the risk of  default. For example, in 2015, we reported that borrowers in two such  plans had substantially lower default rates than borrowers in the Standard  repayment plan.", "Eligible borrowers may also temporarily postpone loan payments through  deferment or forbearance. Several different types of deferment are  currently available to borrowers, each with their own eligibility criteria.  Under deferment, the interest generally does not accrue on subsidized  loans, but it continues to accrue on unsubsidized loans. Eligible  borrowers can also postpone or reduce loan payments through either a  general or mandatory forbearance; however, interest on the loan  continues to accrue in each type (see table 1). Most borrowers choose  general forbearance, which, unlike most types of mandatory forbearance  and deferment, can be issued over the phone with no supporting  documentation. As of September 2017, $69.9 billion in outstanding  Direct Loans was in general forbearance compared to $6.3 billion in  mandatory forbearance, according to Education data."], "subsections": []}, {"section_title": "Cohort Default Rate Calculation", "paragraphs": ["Education computes CDRs each year for all schools that enroll students  who receive funds through the Direct Loan program. To compute a  school\u2019s CDR, Education divides the number of student loan borrowers in  a CDR cohort\u2014those entering repayment in the same fiscal year\u2014who  have defaulted on their loans in the initial 3 years of repayment by the  total number of a school\u2019s student loan borrowers in that CDR cohort (see  fig. 1). The CDR does not hold schools accountable for borrowers who  default after the 3-year period. Borrowers in deferment and forbearance  are considered to be \u201cin repayment\u201d and current on their loans for the  purpose of calculating a school\u2019s CDR, even though borrowers in these  loan statuses are not expected to make any monthly payments.", "For the 2014 CDR cohort, the national 3-year CDR was 11.5 percent,  meaning 11.5 percent of borrowers who first entered repayment in fiscal  year 2014 had defaulted on one or more loans by the end of fiscal year  2016. The national CDR has changed over time, peaking at 22.4 percent  for the 1990 CDR cohort and declining to a historic low of 4.5 percent for  the 2003 CDR cohort (see fig. 2). Beginning with the 2009 CDR cohort,  Education switched from a 2-year measurement to a 3-year measurement  as required by the Higher Education Opportunity Act.", "According to Education officials, there are several possible explanations  for the general decrease in the national CDR from the 1990 cohort to the  2003 cohort. They include: 1) Education\u2019s efforts to provide schools with  default prevention training; 2) the loss of eligibility to participate in federal  student aid programs and subsequent closure of many schools with  chronically high CDRs in the early 1990s; 3) enactment of legislation in  1998 that increased the length of time a loan can go unpaid before being  considered in default, which decreased the likelihood that a borrower  would default within the CDR period; and 4) an increase in borrowers  consolidating their loans while in school, an option that was eliminated in  2006."], "subsections": []}, {"section_title": "Use of the Cohort Default Rate to Hold Schools Accountable", "paragraphs": ["Schools with high CDRs may lose eligibility to participate in federal  student aid programs. Specifically, Education generally excludes schools  from participation in the Direct Loan program if their CDR is above 40  percent for a single year and from participation in the Direct Loan and  Federal Pell Grant programs if their CDRs are 30 percent or greater for 3  consecutive years. Schools potentially subject to these sanctions can  pursue an appeal. The CDR is the only borrower outcome measure  used to determine eligibility for participation in federal student aid  programs for all schools.", "Schools with high CDRs that do not cross these thresholds may also be  subject to additional oversight. For example, schools are certified for up to  6 years to maintain eligibility to participate in federal student aid, but  schools with high CDRs may only be granted certification for 2 years,  according to Education policy. Education policy also prioritizes selection  of schools with high CDRs for program review. Further, schools whose  CDRs are equal to or exceed 30 percent for any cohort are required to  create a Default Prevention Taskforce that develops and submits a  default prevention plan to Education to reduce defaults, among other  things."], "subsections": []}, {"section_title": "Consequences of Student Loan Defaults", "paragraphs": ["When borrowers do not make payments on their federal student loans,  and the loans are in default, the federal government and taxpayers are  left with the costs. Borrowers also face severe financial burdens when  their federal student loans go into default. For example, upon default the  entire unpaid balance of the loan and any accrued interest is immediately  due. The amount owed may increase due to late fees, additional interest,  and costs associated with the collection process, including court costs,  collection fees, and attorney\u2019s fees. The federal government also has  tools to collect on defaulted student loans. For example, under the  Treasury Offset Program, the federal government can withhold certain  federal or state payments to borrowers, including federal or state income  tax refunds and some Social Security benefits, to collect on defaulted  student loans. The federal government can generally also garnish up to  15 percent of a defaulted borrower\u2019s disposable pay and apply those  funds toward the defaulted loan. There is no limit on how long the  government can attempt to collect on defaulted student loans, and  student loans are more difficult to eliminate in bankruptcy proceedings  than other types of consumer debt."], "subsections": []}, {"section_title": "Default Management Consultants", "paragraphs": ["Some schools hire default management consultants to help them reduce  their CDRs. Education classifies default management consultants as  \u201cthird-party servicers\u201d and generally has the authority to oversee the  services they provide to schools and their students. Schools are  required to notify Education when they enter into, modify, or terminate a  contract with a third-party servicer. Based on concerns that a significant  number of schools had not reported information on the third-party  servicers they use as required, Education issued guidance to remind  schools of the requirement in January 2015. In addition, Education  requires third-party servicers to submit information about the services  they provide to schools. As of June 2017, Education reported that it had  information on 187 third-party servicers, including 48 that reported  providing default management services. Schools must ensure that their  third-party servicers, including default management consultants, comply  with relevant federal regulations and program requirements. Education  also requires third-party servicers to submit an annual compliance audit  report that covers the administration of the federal student aid related  services they perform to determine compliance with applicable statutes,  regulations, and policies."], "subsections": []}]}, {"section_title": "Some Schools\u2019 Consultants Encourage Borrowers to Postpone Loan Payments, Which Can Lower Cohort Default Rates and Increase Borrowers\u2019 Loan Costs Some Schools\u2019 Consultants Encourage Borrowers to Postpone Loan Payments When Better Borrower Options May be Available", "paragraphs": ["To help manage their default rates, some schools hired default  management consultants that encouraged borrowers with past-due  student loans to postpone loan payments through forbearance, even  when better borrower options may be available. The nine default  management consultants we selected, which served over 1,300 schools,  used various methods to contact borrowers and attempted to connect  them with their loan servicer for assistance (see fig. 3). Seven of the nine  participated in three-way conference calls with the borrower and the loan  servicer. Further, one consultant visited past-due borrowers at their home  to provide in-person loan counseling and connect them to their loan  servicer.", "Income-Driven Repayment Plans May Be  Better Options for Some Struggling  Borrowers   According to Education, postponing payments  through forbearance may be appropriate for  some borrowers who face temporary  hardships. On the other hand, Income-Driven  Repayment plans may be a better option for  borrowers who are having difficulty repaying  their loans for an extended period of time.  These plans base monthly payments on  income and family size, and payments may be  as low as $0 for those who qualify. Income- Driven Repayment plans also feature the  potential for forgiveness of remaining loan  balances after 20 or 25 years of repayment.   Interest generally continues to accrue on  loans in both forbearance and Income-Driven  Repayment. Under forbearance, accumulated  interest that is not paid during the forbearance  period will generally be added to the loan  balance, resulting in higher monthly payments  when forbearance ends. In contrast, the  federal government does not charge the  unpaid interest for up to 3 years for some  borrowers repaying their loans on Income- Driven Repayment plans, and struggling  borrowers on these plans are not generally  expected to make higher monthly payments  until their financial situation improves.  In addition, GAO\u2019s past work found that  borrowers in Income-Driven Repayment had  substantially lower rates of default than those  in Standard repayment.   GAO previously found that it is difficult for  Education to estimate which borrowers have  incomes low enough to benefit from or be  eligible for Income-Driven Repayment plans  because only borrowers who apply for these  plans are required to submit income  information to Education.", "Four consultants sent borrowers who were past due on their loans  unsolicited emails and letters that included only a forbearance  application and instructed borrowers to return the application to them  instead of their loan servicer. Representatives of one consultant said  that this practice was to ensure that borrowers completed the forms  accurately. According to Education, the application provides an  opportunity for borrowers to learn about other repayment and  postponement options and the potential costs of forbearance. The  application includes a statement informing borrowers about the option  to request a deferment or Income-Driven Repayment plan and  examples of the additional costs borrowers may incur as a result of  interest that continues to accrue during forbearance. While this is  correct, the application does not include details about these options;  instead, it directs borrowers to Education\u2019s website for more  information. Borrowers who only receive a forbearance application  may inaccurately assume that forbearance is their only or preferred  option. Moreover, borrowers may miss the opportunity to learn about  other, potentially more favorable repayment and postponement  options from Education\u2019s loan servicers, who are responsible for  counseling borrowers and approving forbearance requests.", "One consultant included an inaccurate statement in letters it sent to  borrowers who were past due on their loans. This consultant sent  past-due borrowers forbearance applications with letters that  inaccurately stated that the federal government can take away  Supplemental Nutrition Assistance Program and Supplemental  Security Income benefits when borrowers default on a federal student  loan. Inaccurate information about the consequences of default  could cause a borrower who depends on these benefits to feel undue  pressure to choose forbearance, even when eligible for more  favorable repayment and postponement options. Further, this  consultant\u2019s script for its representatives to use when calling  borrowers who are past due on their loans referred exclusively to  postponing loan payments. The script instructed representatives to tell  borrowers \u201cI am now going to conference you in with your loan  servicer and they will process your forbearance over the phone.\u201d  Borrowers who hear such statements may feel undue pressure to  choose forbearance. The script also instructed representatives to tell  the loan servicer that the borrower they were about to speak with was  requesting a forbearance. Further, representatives from this  consultant were also instructed to tell borrowers to \u201cstick to their guns\u201d  on the option they have selected before connecting the borrower with  their loan servicer on a three-way call.", "One consultant previously offered borrowers gift cards as an incentive  to put their loans in forbearance. Education has also previously  identified the use of gift cards to steer borrowers toward forbearance  over other available options. An internal review that Education  conducted in 2012 and 2013 found that a chain of schools used gift  cards to promote forbearance for purposes of lowering its CDR.  According to Education\u2019s findings, a borrower who had attended one  of the schools stated that she was current in her payments but was  offered a $25 gift card to apply for forbearance. Multiple borrowers  included in Education\u2019s review expressed the view that they were  pressured or forced to apply for forbearance and were not made  aware of other options, such as deferment or Income-Driven  Repayment plans. Indeed, offering gift cards may steer borrowers  toward forbearance over other available options. While the consultant  that offered gift cards to borrowers to lower schools\u2019 CDRs has  discontinued this practice, and the school Education reviewed has  since closed, these practices may have affected reported CDRs and  could be used by other consultants and schools.", "Schools have a financial interest in preventing borrowers from defaulting  within the first 3 years of repayment to ensure that their CDRs remain low  enough to meet Education\u2019s requirements for participating in federal  student aid programs. Consultants also have a financial interest in  preventing borrowers from defaulting during the 3-year CDR period. Eight  of the nine consultants we selected did not have any school clients that  paid them to contact borrowers who were past due on their loans outside  the 3-year CDR period. In addition, four of the nine selected consultants  were paid by their client schools based on the number of past-due  borrowers they brought current on their loans during the CDR period, and  representatives\u2019 salaries or incentives at two of these consultants were  calculated based on this as well.", "Some consultants have an incentive to encourage forbearance in  particular as a strategy to prevent borrowers from defaulting within the 3- year CDR period in an effort to lower their client schools\u2019 CDRs. This is  because forbearance applications can be processed more quickly than  other repayment or postponement options. Loan servicers can grant  general forbearance based on a request from borrowers over the phone  because there are no documentation requirements, whereas borrowers  seeking deferment or an Income-Driven Repayment plan generally must  submit a written application. According to Education officials, loan  servicers are required to process Income-Driven Repayment plan  applications within 15 business days. One consultant sent borrowers a  letter that stated it could process a verbal forbearance in 5 minutes. The  president of one school that contracted with a consultant that is paid  based on the number of borrowers brought current told us that he did not  care whether the consultant encouraged the use of forbearance as long  as borrowers did not default within the 3-year CDR period and the  consultant followed federal regulations. According to Education data,  nearly 90 percent of the school\u2019s borrowers were in forbearance during  the 2013 CDR period. Consultant payment structures, as well as the  difference in processing requirements between forbearance, deferment,  and Income-Driven Repayment plans may create incentives for  consultants to encourage forbearance over other repayment and  postponement options."], "subsections": [{"section_title": "Postponing Loan Payments Can Increase Borrowers\u2019 Loan Costs and Reduce the Usefulness of the Cohort Default Rate to Hold Schools Accountable", "paragraphs": ["While forbearance can be a useful tool for helping borrowers avoid  defaulting on their loans in the short term, it increases their costs over  time and reduces the usefulness of the CDR to hold schools accountable.  To understand the potential financial impact of forbearance during the first  3 years of repayment (the CDR period), we calculated the cost for a  borrower with $30,000 in loan debt over 10 years in the Standard  repayment plan with varying lengths of time in forbearance (see fig. 4).", "A borrower on the 10-year Standard repayment plan who did not spend  any time in forbearance would pay $39,427 over the life of the loan.  Spending all 3 years of the CDR period in forbearance would cost that  borrower an additional $6,742, a 17 percent increase over spending no  time in forbearance. One borrower we spoke with who took out $34,700 in  loans and opted for forbearance accrued about $10,000 in interest in just  over 3 years, an amount that the borrower said she would be paying off  \u201cfor the rest of my days.\u201d Further, the unpaid interest that accrues while a  borrower\u2019s loans are in forbearance may result in higher future monthly  payments when the forbearance period ends. Borrowers who cannot  make these higher monthly payments may eventually default. If schools\u2019  consultants continue to encourage forbearance over other options that  may be more beneficial, such as Income-Driven Repayment plans, some  borrowers will continue to be at risk of incurring additional costs without  any long-term benefits.", "Education officials and student loan experts we spoke with said that  forbearance is intended to be a short-term option for borrowers facing  financial difficulties lasting a few months to a year, such as unexpected  medical expenses. Longer periods of forbearance, while not typically  advantageous to borrowers, can be an effective strategy for schools to  manage their CDRs. Specifically, spending 18 months or more\u2014at least  half of the CDR period\u2014in forbearance reduces the potential for  borrowers to default within the 3-year period (see fig. 5). This is because  forbearance keeps borrowers current on their loans, and borrowers would  not go into default until they had made no payments for an additional 360  days after the forbearance period ended. Indeed, according to our  analysis of Education\u2019s data for the 2013 CDR period, only 1.7 percent of  borrowers who were in forbearance for 18 months or more defaulted  within the 3-year CDR period, compared to 8.7 percent of borrowers who  were in forbearance up to 18 months during this period, and 20.3 percent  of borrowers who were not in forbearance during this period. Borrowers  who default outside the 3-year CDR period will not negatively affect a  school\u2019s CDR. In an online presentation, representatives from one  consultant highlighted that forbearance can be a tool for reducing a  school\u2019s CDR and stated that borrowers who postponed payments  defaulted less often during the CDR period than other past-due borrowers  based on a case study they conducted.", "According to our analysis of Education\u2019s data, the percentage of  borrowers whose loans were in forbearance for 18 months or more during  the 3-year CDR period increased each year during the 5 cohorts we  reviewed, doubling from 10 percent in the 2009 CDR cohort to 20 percent  in the 2013 CDR cohort. During the same time period, the percentage of  borrowers whose loans were in forbearance for any amount of time  increased from 39 percent to 68 percent (see fig. 6). Further, borrowers  in forbearance for 18 months or more defaulted in the year after the 3- year CDR period more often than they did during the CDR period.  Specifically, 9.4 percent of these borrowers in the 2013 CDR period  defaulted in the year following the CDR period, while only 1.7 percent  defaulted in the first 3 years of repayment, suggesting that long-term  forbearance may have delayed, not prevented, default for these  borrowers. Reducing the number of borrowers in long-term forbearance  and directing them toward other repayment or postponement options  could help reduce the number of borrowers that later default and save the  government money. For example, Education estimates that it will not  recover a certain percentage of defaulted Direct Loan dollars even if  repayment resumes. Specifically, for Direct Loans issued in fiscal year  2018, Education estimates that it will not recover over 20 percent of  defaulted loans. These unrecovered defaulted loan amounts total an  estimated $4 billion, according to our analysis of Education\u2019s budget  data. In addition to cost savings to the government, borrowers who  avoid default would not have to face severe consequences, such as  damaged credit ratings that may make it difficult to obtain credit,  employment, or housing.", "In addition, the percentage of borrowers who made progress in paying  down their loans during each CDR cohort\u2014the repayment rate\u2014 decreased from 66 percent for the 2009 cohort to 46 percent for the 2013  cohort (see sidebar).", "We analyzed these data for a subset of schools with the largest CDR  decreases from the 2009 to 2013 cohorts and found that as these  schools\u2019 CDRs improved, other borrower outcomes worsened (see app. II  for more information about these schools). Specifically, for this subset of  schools, the percentage of borrowers in long-term forbearance doubled,  and the percentage of borrowers who made progress in paying down their  loans during the CDR period decreased by half, suggesting that these  schools may be encouraging forbearance as a default management  strategy (see fig. 7).", "Education has acknowledged that when schools encourage borrowers to  postpone loan repayment until the 3-year CDR period ends, it can have a  distorting effect on the CDR. Borrowers who have postponed their  payments through forbearance or deferment are considered to be \u201cin  repayment\u201d for the purpose of calculating the CDR, even though they are  not expected to make any payments on their loans while in these  statuses. As a result, an increased use of forbearance, particularly long- term forbearance, could result in lower CDRs, and therefore fewer  schools being sanctioned due to high CDRs. In July 1999, we reported  that the CDR understates the actual number of borrowers who default.  We suggested that Congress may wish to consider amending the Higher  Education Act of 1965 to exclude borrowers with loans in deferment or  forbearance at the end of the CDR period from schools\u2019 CDR calculation  and include these borrowers in a future CDR cohort after they have  resumed making payments on their loans. Education\u2019s Office of  Inspector General made a recommendation to the agency to support  similar amendments to the law in December 2003.", "For this report, we examined the impact that removing borrowers in long- term forbearance from the CDR calculation would have on schools\u2019  reported CDRs. For the 2013 cohort, 35 schools from our population  had CDRs of 30 percent or higher. When we excluded from our  population borrowers who spent 18 months or more in forbearance and  did not default within the 2013 CDR period, we found 265 additional  schools that would potentially have had a CDR of 30 percent or higher  (see app. II for more information about these schools). Schools with  CDRs at this level for 3 consecutive years may lose eligibility to offer their  students Direct Loans and Pell Grants. Further, 21 of the 265 schools  would potentially have had a CDR greater than 40 percent, making them  potentially subject to immediately losing eligibility to offer Direct Loans. Of  the 265 schools that would have potentially been subject to sanctions  based on our alternative calculation, 261 received a combined $2.7 billion  in Direct Loans and Pell Grants in academic year 2016-2017.", "The CDR is a key tool for holding schools accountable for borrower  outcomes and protecting borrowers and the federal government from the  costs associated with default. The substantial growth in the percentage of  borrowers spending at least half of the CDR period in forbearance  reduces the CDR\u2019s usefulness to hold schools accountable. This presents  risks to the federal government and taxpayers, who are responsible for  the costs associated with high rates of default, and to borrowers who may  benefit from other repayment or postponement options. Since the way the  CDR is calculated is specified in federal law, any changes to its  calculation would require legislation to be enacted amending the law.  Strengthening the usefulness of the CDR in holding schools accountable,  such as by revising the CDR calculation or using other accountability  measures to complement or replace the CDR, could help further protect  both borrowers and the billions of dollars of federal student aid funds the  government distributes each year."], "subsections": []}]}, {"section_title": "Actions Needed to Improve Education\u2019s Oversight of Default Management Strategies and Public Reporting of CDR Sanctions Requirements Needed to Oversee How Schools and their Consultants Communicate Loan Options to Borrowers in Repayment", "paragraphs": ["Education\u2019s ability to oversee the strategies that schools and their  consultants use to manage CDRs is limited because there are no  requirements governing the interactions that schools and their consultants  have with borrowers once they leave school. Education requires that  schools provide certain information to borrowers about their student loans  when they begin and finish school but does not oversee schools\u2019 or their  consultants\u2019 communications with borrowers after they leave school.  According to Education, the Higher Education Act does not contain  explicit provisions that would allow it to impose requirements governing  communications that schools and their consultants may have with  borrowers who have left school.", "As noted earlier, we found that some default management consultants, in  seeking to help schools lower their CDRs, provided borrowers inaccurate  or incomplete information or offered gift cards to encourage forbearance  over other repayment or postponement options that may be more  beneficial to the borrower. According to Education officials, borrowers are  protected from such practices because loan servicers are required to  inform borrowers of all available repayment options upon processing a  forbearance. Education officials also said that performance-based  contracts provide loan servicers an incentive to keep borrowers in  repayment. However, a Consumer Financial Protection Bureau report  found that borrowers may not be informed about the availability of other  repayment plans and instead may be encouraged by their loan servicers  to postpone payments through forbearance, which may not be in  borrowers\u2019 best interests. Further, some consultant practices we  identified, such as instructing borrowers to return the forbearance  application to the consultant and remaining on three-way calls with the  loan servicer and the borrower, may undermine the role of the loan  servicer. Education officials also said that borrowers should be aware of  their repayment options because schools are required to inform  borrowers of these options through exit counseling when they leave  school. However, in 2015 we found gaps in borrowers\u2019 awareness of  repayment options. Education\u2019s Office of Federal Student Aid has a  strategic goal to help protect borrowers and families from unfair,  deceptive, or fraudulent practices in the student loan marketplace.  Without clear requirements regarding the information that schools and  their consultants provide to borrowers after leaving school, Education  cannot effectively oversee schools\u2019 default management strategies.  Further, without such requirements, Education cannot ensure that schools  and consultants are providing borrowers with the information they need to  make informed decisions to manage their loan costs and avoid future  default."], "subsections": [{"section_title": "Education\u2019s Public Reporting of Cohort Default Rate Sanctions Lacks Transparency", "paragraphs": ["The limited information Education reports annually to the public about  schools that face sanctions for high CDRs overstates the extent to which  schools are held accountable for their default rates. Specifically,  Education does not report the number of schools that successfully  appealed CDR sanctions or the number of schools ultimately  sanctioned. For example, with the release of the 2013 CDRs in 2016,  Education publicly reported that 10 schools were subject to sanctions, but  did not publicly report that 9 schools appealed their sanctions and 8 were  successful in their appeals and were thereby not sanctioned (see fig. 8).", "Office of Management and Budget guidelines call for federal agencies to  ensure and maximize the usefulness of information they disseminate to  the public. Federal internal control standards call for effective  communication with external stakeholders. The number of schools  subject to sanction has declined over time\u2014from a high of 1,028 schools  in fiscal year 1994 to 10 schools in fiscal year 2017 (see app. III). In  addition, unpublished sanction data reveal that a small fraction of  borrowers who defaulted on student loans attended schools that have  been sanctioned. For example, two schools were ultimately sanctioned in  2016 and accounted for 67 of the nearly 590,000 borrowers whose  defaulted loans were included in schools\u2019 2013 CDRs. By reporting only  the number of schools subject to sanction and not those actually  sanctioned, Education\u2019s data make it difficult for Congress and the public  to assess the CDR\u2019s usefulness in holding schools accountable."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Preventing student loan defaults is an important goal, given the serious  financial risks default poses to borrowers, taxpayers, and the federal  government. The CDR, which is specified in federal law, is intended to  hold schools accountable when significant numbers of their borrowers  default on their student loans during the first 3 years of repayment.  However, the metric in its current form creates incentives for schools that  may result in unintended consequences for some borrowers. Schools  have an interest in preventing their students from defaulting during the  CDR period to ensure that they can continue to participate in federal  student aid programs, and some schools contract with private consultants  to work with borrowers who have fallen behind on their loan payments.  Although some of these consultants have recently changed their  communications to borrowers, others continue to provide inaccurate or  incomplete information to encourage past-due borrowers to choose  forbearance over other repayment options. While postponing payments  through forbearance may help struggling borrowers avoid default in the  near term, it increases borrowers\u2019 ultimate repayment costs and does not  necessarily put borrowers on a path to repaying their loans. Moreover,  including borrowers who spend 18 months or more in forbearance in the  CDR calculation reduces the CDR\u2019s ability to hold schools accountable  for high default rates since long periods of forbearance appear to delay\u2014not prevent\u2014default for some borrowers. Absent a statutory change,  schools and their consultants seeking to keep CDRs below allowable  thresholds will continue to have an incentive to promote forbearance over  other solutions that could be more beneficial to borrowers and less costly  to the federal government and its taxpayers.", "Education plays an important role in overseeing schools and their default  management consultants to ensure that they are held accountable and  student loan borrowers are protected. However, because Education  asserts that it lacks explicit statutory authority to establish requirements  regarding the information that schools and consultants provide to  borrowers after they leave school, Education does not hold them  accountable for providing accurate and complete information about  repayment and postponement options. In addition, public information on  CDR sanctions is important for assessing the usefulness of the CDR to  hold schools accountable. Yet, Education\u2019s practice of reporting the  number of schools potentially subject to sanction without reporting the  number of schools ultimately sanctioned following the appeals process  limits transparency about the CDR\u2019s usefulness for Congress and the  public."], "subsections": []}, {"section_title": "Matters for Congressional Consideration", "paragraphs": ["We are making the following two matters for congressional consideration:   Congress should consider strengthening schools\u2019 accountability for  student loan defaults, for example, by 1) revising the cohort default rate  (CDR) calculation to account for the effect of borrowers spending long  periods of time in forbearance during the 3-year CDR period, 2)  specifying additional accountability measures to complement the CDR, for  example, a repayment rate, or 3) replacing the CDR with a different  accountability measure. (Matter 1)", "Congress should consider requiring that schools and default management  consultants that choose to contact borrowers about their federal student  loan repayment and postponement options after they leave school  present them with accurate and complete information. (Matter 2)"], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Chief Operating Officer of the Office of Federal Student Aid should  increase the transparency of the data Education publicly reports on  school sanctions by adding information on the number of schools that are  annually sanctioned and the frequency and success rate of appeals.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to the Department of Education for  review and comment. Education\u2019s comments are reproduced in appendix  IV. We also provided relevant report sections to the Consumer Financial  Protection Bureau and the nine default management consultants for  technical comment. The Consumer Financial Protection Bureau provided  technical comments, which we incorporated as appropriate.", "Education agreed with our recommendation to increase transparency of  school sanction data. In its response, Education stated that it makes a  significant amount of CDR data publicly available on its website. For  example, Education posts CDRs and underlying data for each school for  which the rates are calculated and lists schools subject to sanctions as a  result of their CDRs. Education also stated that beginning with the release  of fiscal year 2015 CDRs, it would provide additional information on its  website indicating whether schools subject to sanctions have submitted  appeals and the disposition of such appeals. As we recommended in our  draft report, Education should also publicly report the number of schools  ultimately sanctioned each year.", "Our draft report included a recommendation for Education to seek  legislation to strengthen schools\u2019 accountability for student loan defaults.  Education disagreed with this recommendation, asserting that from a  separation of powers perspective, it has a responsibility to implement,  and not draft, statutes. Education stated that if GAO believes such  legislation is needed, it would be best addressed as a matter to  Congress. We agree that, as an executive agency, Education is  responsible for implementing laws as enacted. However, it is important to  note that the President has the \u201cundisputed authority\u201d to recommend  legislation to the Congress and the Office of Management and Budget  within the Executive Office of the President has outlined procedures for  executive branch agencies to submit proposed legislation. Indeed, in  making this recommendation, we intended that Education seek legislation  through any of the practices used by executive branch agencies in  communicating with Congress. In a recent example, both the President\u2019s  Budget Request and Education\u2019s Congressional Budget Justification for  Fiscal Year 2019 seek a change in the statutory allocation formula for the  Federal Work-Study program to focus funds on institutions enrolling high  numbers of Pell Grant recipients. Nevertheless, in light of Education\u2019s  disagreement with our draft recommendation, and the importance of  strengthening schools\u2019 accountability for student loan defaults, we have  converted the recommendation into a Matter for Congressional  Consideration.", "Our draft report also included a recommendation for Education to require  that schools and default management consultants that contact borrowers  about repayment and postponement options after they leave school  present accurate and complete information. Education agreed that  institutions should provide accurate and complete information about all  repayment options. It also stated that institutions should allow the  borrower\u2019s stated preference for any given repayment option to guide the  ultimate direction of the conversation, and that the information provided  should be free from financial incentive. However, Education asserted that  it \u201ccannot impose requirements on schools and their consultants without  further authority.\u201d Education clarified in a follow-up communication that  the Higher Education Act does not contain \u201cexplicit provisions\u201d under  which it could require schools (and their consultants) to include specific  content in the information that they choose to provide to borrowers after  the borrowers leave school, but did not address whether there was any  other authority under which it could take action in this area. Instead,  Education noted that it could provide information to schools and their  consultants on best practices in this area. We continue to believe that  schools and their consultants should be required to ensure that any  information they present to borrowers about repayment and  postponement options after they leave school is accurate and complete.  As we stated in our draft report, without clear requirements in this area, Education cannot ensure that schools and consultants provide borrowers  with the information they need to make informed decisions to manage  their loan costs and avoid future default. In light of this, and Education\u2019s  response to our draft recommendation, we have converted our  recommendation into a Matter for Congressional Consideration.", "In its comments, Education inaccurately asserted that our findings should  be viewed in light of a limited scope. As stated in the draft report, we  analyzed trends in forbearance, repayment, and default using national  data from Education for the five most recent CDR cohorts for a population  of over 4,000 schools. To determine how schools work with borrowers to  manage their CDRs, we reviewed the practices of a nongeneralizable  sample of nine default management consultants that served over 1,300  schools. These schools accounted for over 1.5 million borrowers in the  2013 CDR cohort. The five consultants that provided inaccurate or  incomplete information about forbearance or offered gift cards served  about 800 schools, which accounted for over 875,000 borrowers in the  2013 CDR cohort. For each of the consultants, as stated in our draft  report, we reviewed documentation including training materials, internal  policies and procedures, and examples of correspondence they send to  borrowers. Finally, Education inaccurately asserted that we based our  findings on a small sample of interviews with 11 borrowers and officials  from 3 schools and 4 consultants. We conducted these interviews to  better understand borrowers\u2019 loan experiences and the strategies that  schools and their consultants use to manage the CDR, and the illustrative  interview examples we include in our report do not form the basis of any  of our findings or recommendations.", "In addition, Education commented that the report did not consider the  extent to which borrowers enter Income-Driven Repayment plans during  the 3-year CDR period or the substantial growth in borrowers participating  in these plans over the past several years. Education suggested that such  data would be important to consider in determining whether there has  been an overreliance on forbearance in the past, and if so, whether any  problems in this area are being remedied by the availability of Income- Driven Repayment plans. We have incorporated additional information  regarding the increase in borrowers participating in Income-Driven  Repayment plans in response. As Education noted in its comments, our  draft report acknowledged that increased participation in these plans may  have been a factor in the observed increase in overall rates of  forbearance since it is common for loan servicers to place borrowers in  administrative forbearance while processing applications for Income- Driven Repayment plans. However, as explained in our draft report, since  administrative forbearance for this purpose should be for 60 days or less  it would not explain the twofold increase in the percentage of borrowers in  forbearance for 18 months or longer from CDR cohort years 2009 to  2013.", "Education also stated that while our report included an example of the  additional interest cost incurred by a borrower using forbearance, it did  not discuss the potential additional interest costs associated with other  repayment options, such as Income-Driven Repayment plans. Education  noted that these options could be more costly than forbearance in some  instances and all options have consequences for borrowers. We  acknowledged in our draft report that interest continues to accrue on  loans in Income-Driven Repayment and that the monthly payments of  some borrowers on these plans may not be high enough to pay down any  principal during the first 3 years of repayment. However, as stated in our  draft report, Income-Driven Repayment plans, unlike forbearance, offer  borrowers the potential for loan forgiveness after 20 or 25 years of  repayment. We have incorporated additional details about the potential  costs of these and other repayment plans based on Education\u2019s  comments. The potential consequences that Education highlighted in its  comments further illustrate the importance of ensuring that borrowers  receive accurate and complete information to help them make informed  decisions to manage their loan costs and avoid default.", "In response to our findings regarding communication practices of some  default management consultants, Education stated that the draft report  did not acknowledge that the forbearance application that selected  consultants send to borrowers provides an opportunity for borrowers to  learn about other repayment options and the potential costs of  forbearance. We have incorporated additional information regarding the  information included on the application. Although the form mentions  deferment and Income-Driven Repayment, it does not describe these  options; instead, it directs borrowers to Education\u2019s website for more  information. Therefore, we maintain that borrowers who only receive a  forbearance application may inaccurately assume that forbearance is the  only or preferred option.", "Further, Education commented that the draft report did not examine what  effect, if any, consultants may have had in encouraging borrowers to seek  consecutive forbearances since borrowers can remain in forbearance for  no longer than 12 months before they have to reapply. Education also  suggested that comparing the use of forbearance at schools that hired  consultants that encouraged borrowers to postpone payments with those  that did not would have provided a better understanding of the potential  impact of such practices. While these topics were beyond the scope of  our objectives for this report, Education may wish to explore them in  support of its goals to protect borrowers and mitigate risks in the federal  student aid programs.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Education, the Director of  the Consumer Financial Protection Bureau, and other interested parties.  In addition, the report will be available at no charge on GAO\u2019s website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This appendix discusses in detail our methodology for addressing (1) how  schools work with borrowers to manage schools\u2019 cohort default rates  (CDR), and how these strategies affect borrowers and schools\u2019  accountability for defaults; and (2) the extent to which the Department of  Education (Education) oversees the strategies schools and their default  management consultants use to manage schools\u2019 CDRs and informs the  public about its efforts to hold schools accountable.", "We conducted this performance audit from May 2016 to April 2018, in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Default Management Consultants \u2013 Interviews and Document Requests", "paragraphs": ["To determine how schools work with borrowers to manage their cohort  default rates, we examined the practices of companies that schools  contract with to help them lower their CDRs. Specifically, we selected a  nongeneralizable sample of 9 of the 48 default management consultants  on file with Education as of December 2016. To select the 9 consultants,  we obtained lists of client schools from Education and reviewed websites  for each of the 48 consultants to determine the services each company  offered. Some companies offered an array of services to schools, while  others focused exclusively on default management. We selected our  nongeneralizable sample of 9 consultants by prioritizing those with large  numbers of client schools, those with a specific focus on default  management, or those with unique default management practices based  on our review of their websites. These 9 companies served over 1,300  schools. These schools accounted for over 1.5 million borrowers in the  2013 CDR cohort.", "We reviewed documentation from the 9 consultants on the strategies they  use to reduce borrower defaults during the CDR period; their  organizational structure; products and services offered; current client  schools; internal training materials; contracts and agreements with  schools; methods of compensation for employees responsible for  outreach to student loan borrowers; internal policies and procedures; and  examples of correspondence (e.g., emails, letters, and repayment  applications) with borrowers. Based on the information received from  these consultants, we cannot determine how many borrowers were  contacted or received correspondence from these companies. However,  the consultants we spoke to generally indicated that the materials they  provided to us were used for all or most of their school clients.", "To learn more about the strategies schools and default management  consultants use to help schools manage their CDRs, we conducted  interviews with managers at 4 of the 9 consultants. We also interviewed  employees responsible for working with student loan borrowers to discuss  the procedures they use to contact or counsel borrowers on loan  repayment options. We selected these 4 consultants by prioritizing those  that provided default management services to large numbers of client  schools, or had unique default management practices based on website  reviews."], "subsections": []}, {"section_title": "Schools and Borrowers \u2013 Interviews and Document Requests", "paragraphs": ["To determine how schools work with borrowers to manage schools\u2019 CDRs  we selected a nongeneralizable sample of 12 schools for review based on  data from Education that suggested that they had successfully lowered  their CDRs from the 2009 through 2013 cohorts through forbearance.  This sample informed our selection of borrowers. We emailed borrowers  who attended these 12 schools and requested interviews with them, and  selected 3 of the 12 schools for interviews with school officials and  document requests.", "To select the 12 schools, we analyzed CDRs for the 2009-2013 cohorts  from Education\u2019s Cohort Default Rate Database; 3-year forbearance rates  for fiscal years 2009-2012 from Education\u2019s Annual Risk Assessment  data; and 3-year repayment rates for fiscal years 2009-2014 from  Education\u2019s College Scorecard data. We selected the 12 schools from  the population that had a CDR calculated for 2013. We excluded schools  whose 2013 CDR was calculated using a different formula that Education  uses for schools with fewer than 30 borrowers entering repayment in a  particular cohort. To be considered for selection, schools had to have  had CDRs of 25 percent or above for cohort years 2009-2013 and also be  in the following: 1) top 20 percent of year-to-year decreases in CDR; 2)  top 20 percent of year-to-year increases in 3-year forbearance rates; or 3)  top 20 percent of 3-year forbearances that resulted in default after the 3- year CDR period ended. This analysis resulted in a list of 312 schools,  which we randomized within strata based on combinations of institutional  control (public, nonprofit, and for-profit), maximum length of degree  programs offered (less than 4-year or 4-year and above), and school size  (fewer than 1,000 borrowers entering repayment in a given fiscal year and  1,000 or more borrowers entering repayment in a given fiscal year). We  removed schools that had fewer than 1,000 borrowers entering  repayment in a given fiscal year to mitigate the wide variations in  forbearance rates and CDRs that may occur at smaller schools. Finally,  we judgmentally selected a total of 12 schools from across the remaining  strata, choosing the schools from each stratum in the randomized order.  We conducted interviews with officials at 3 of these schools (public,  nonprofit, and for-profit) and reviewed documentation on the strategies  they use to reduce borrower defaults during the CDR period.", "To examine how default management strategies may affect borrowers,  we obtained record-level data from Education\u2019s National Student Loan  Data System (NSLDS) related to the 12 schools we focused on in our  review, including data on all loans that entered repayment from fiscal  years 2011-2014 and contact information for the borrowers that took out  these loans. We weighted the sample toward borrowers whose loans  were in deferment, forbearance, or were consolidated during the CDR  period or defaulted after the CDR period. We then randomly selected  about 6,500 of these borrowers and emailed them a request to discuss  their student loan repayment experience with us. We received replies from 49 borrowers and interviewed 11 of them that we thought may have  been contacted by their school or a default management consultant. We  generally selected borrowers for interviews in the order they replied to us.  We also prioritized borrowers whose email responses included student  loan experiences that were relevant to our objectives, such as receiving  communication from their school about student loan repayment and  postponement options. We were not able to interview borrowers who did  not provide phone numbers or who provided phone numbers but did not  respond to our calls."], "subsections": []}, {"section_title": "Data Analysis", "paragraphs": ["To determine how schools\u2019 default management strategies affect  borrowers and the CDR, we analyzed school-level data from Education  on borrowers with loans that were included in schools\u2019 official CDR  calculations for the 2009 through 2013 cohorts. We selected the 2009  cohort because it was the first cohort held accountable for the 3-year  CDR. The 2013 cohort was the most recent CDR available at the time of  our analysis. We identified the year borrowers entered repayment using  the same logic that Education does for calculating the CDR. A borrower  with multiple loans from the same school whose loans enter repayment  during the same cohort fiscal year was included in the formula only once  for that cohort fiscal year. We excluded schools whose CDR was  calculated using a different formula that Education uses for schools with  fewer than 30 borrowers entering repayment in a particular cohort.", "For the population of 4,138 schools that had a CDR calculated for 2013  and a subset of 364 schools that had CDR decreases of 10 or more  percentage points from the 2009 to 2013 cohorts, we analyzed  cohort default rates (cohorts 2009-2013);  the percentage of borrowers who were in forbearance for any length  of time during their first 3 years in repayment (cohorts 2009-2013);  the percentage of borrowers who were in forbearance for 18 or more  months during their first 3 years in repayment (cohorts 2009-2013);  the percentage of borrowers who paid down at least $1 of the  principal loan amount during the first 3 years of repayment (cohorts  2009-2013); and  the percentage of borrowers who were in forbearance for varying  lengths of time during their first 3 years in repayment and then  defaulted in the year following the CDR period (2013 cohort).", "We also calculated an alternative CDR for each of these 4,138 schools, in  which we excluded borrowers who spent 18 or more months in  forbearance during the 2013 cohort and did not default during the CDR  period from their school\u2019s CDR calculation. We analyzed how many  schools would have potentially exceeded the 30 percent and 40 percent  CDR thresholds for the 2013 cohort and calculated the total amount of  Direct Loans and Pell Grants that these schools received in academic  year 2016-2017. We did not estimate the number of schools that could  become ineligible to participate in federal loan programs under this  alternative methodology because such schools would be entitled to an  appeal and sanctionable thresholds may change with the advent of new  methodologies of calculating the CDR. Further, schools may change their  default management strategies in response to an alternative CDR. In  addition, we assessed the CDR against government standards for internal  control for identifying and responding to risks and goals and objectives in  the Office of Federal Student Aid\u2019s Fiscal Year 2015-2019 Strategic Plan.", "Additionally, we analyzed data from Education\u2019s Integrated  Postsecondary Education Data System on sector and program length for  these 4,138 schools, as well as for certain subsets of these schools (for  more information, see app. II).", "To assess the reliability of the data elements we analyzed for our study,  we (1) performed electronic testing of required data elements; (2)  reviewed existing information about the data and the systems that  produced them; and (3) interviewed agency officials knowledgeable about  the data. We determined that the data were sufficiently reliable for the  purposes of this report."], "subsections": []}, {"section_title": "Review of Education Documents and Relevant Federal Laws and Regulations", "paragraphs": ["To determine the extent to which Education oversees the strategies  schools and their default management consultants use to manage  schools\u2019 CDRs and informs the public about its efforts to hold schools  accountable, we reviewed relevant federal laws, regulations, guidance,  and internal documentation from Education on how it oversees schools  and default management consultants practices as they relate to the CDR  and how it implements and reports CDR sanctions. To better understand  how CDRs are used in Education\u2019s oversight of schools, we reviewed  relevant regulations and interviewed Education officials responsible for  administering program review, recertification for eligibility for federal  student aid, and oversight of the CDR including default prevention. We  assessed Education\u2019s oversight activities against goals and objectives in  the Office of Federal Student Aid\u2019s Fiscal Year 2015-2019 Strategic Plan,  government standards for internal control for communicating with  stakeholders, and Office of Management and Budget guidelines for  disseminating public information."], "subsections": []}, {"section_title": "Interviews with Experts and Consumer Advocates", "paragraphs": ["To help us understand how the default management strategies used by  schools and default management consultants affect borrowers and  reported CDRs, we interviewed individuals with expertise on federal  student loans. Specifically, we interviewed experts from federal agencies  including the Consumer Financial Protection Bureau and Education\u2019s  Office of Inspector General. We also interviewed experts from the  Association of Community College Trustees, the Career Education  Colleges and Universities, the Center for American Progress, The  Institute for College Access & Success, Harvard\u2019s Project on Predatory  Student Lending, the Illinois Attorney General Office, and Young  Invincibles."], "subsections": []}]}, {"section_title": "Appendix II: Sector and Program Length of Schools with Selected Characteristics", "paragraphs": ["Appendix II: Sector and Program Length of  Schools with Selected Characteristics Schools whose cohort default rates (CDR) were calculated using a different formula that Education  uses for schools with fewer than 30 borrowers entering repayment in a particular cohort were  excluded from this analysis.  Schools were included in this analysis if their CDR decreased by 10 percentage points or more from  the 2009 to 2013 CDR cohorts.  Foreign schools include schools that are eligible to participate in the Direct Loan program and are  located outside the United States."], "subsections": []}, {"section_title": "Appendix III: Number of Schools Subject to Department of Education Cohort Default Rate Sanctions, 1991-2017", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S. Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kris Nguyen and Debra Prescott  (Assistant Directors), Brian Schwartz (Analyst-in-Charge), Alex Galuten,  Raheem Hanifa, John Karikari, Kirsten Lauber, Jeffrey G. Miller, John  Mingus, Jeff Tessin, Khristi Wilkins, and Stephen Yoder made key  contributions to this report. Additional assistance was provided by Susan  Aschoff, Rachel Beers, James Bennett, Deborah Bland, Jason Bromberg,  Alicia Cackley, Marcia Carlsen, David Chrisinger, William Colvin, Sheila  McCoy, Arthur Merriam, Jessica Orr, Ellen Phelps Ranen, Phillip Reiff,  Barbara Steel-Lowney, and Christopher Zbrozek."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-34", "url": "https://www.gao.gov/products/GAO-19-34", "title": "Fraud Risk Management: OMB Should Improve Guidelines and Working-Group Efforts to Support Agencies' Implementation of the Fraud Reduction and Data Analytics Act", "published_date": "2018-12-04T00:00:00", "released_date": "2018-12-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Fraud poses a significant risk to the integrity of federal programs and erodes public trust in government. Implementing effective fraud risk management processes can help ensure that federal programs fulfill their intended purpose, spend their funding effectively, and safeguard assets.", "FRDAA requires agencies to establish internal controls to manage their fraud risks and to report implementation progress for the first 3 years after enactment. It also directs OMB to (1) develop guidelines for agencies to establish fraud risk management controls and (2) establish a working group to share best practices in fraud risk management and data analytics.", "GAO was asked to review agencies' and OMB's efforts to implement FRDAA. This report examines steps (1) agencies and (2) OMB have taken to implement FRDAA. GAO conducted a survey of the 72 agencies subject to the act, held a roundtable discussion with 14 selected agencies, reviewed 24 selected annual financial reports, examined OMB guidelines, and interviewed OMB staff."]}, {"section_title": "What GAO Found", "paragraphs": ["At varying stages, agencies have begun planning for and implementing fraud risk activities (like conducting an evaluation of fraud risks) required by the Fraud Reduction and Data Analytics Act of 2015 (FRDAA), according to GAO's survey of agencies subject to the act. Overall, most of the 72 surveyed agencies (85 percent) indicated that they have started planning how they will meet FRDAA requirements, and about 78 percent indicated that they have also started taking steps to implement the requirements.", "To assist agencies in implementing fraud risk management activities, the Office of Management and Budget (OMB) established FRDAA-related guidelines and a working group, as required by the act. However, agencies experienced challenges with OMB's guidelines and the working group, among other things, according to GAO's survey and roundtable discussion results (see figure below).", "Implementation guidelines. To meet FRDAA requirements, OMB updated Circular No. A-123 guidelines that govern executive agencies. However, this update included limited information on the methodologies agencies can use to assess, document, and report on internal controls required by FRDAA, according to GAO's review of the guidelines. Surveyed agencies had mixed perspectives on the usefulness of OMB's guidelines for implementing FRDAA controls. Similarly, agencies identified the lack of clear requirements and guidance as top challenges in GAO's roundtable discussion with 14 selected agencies.", "Reporting on implementation progress. Although not required by FRDAA, OMB updated annual financial report guidelines to include FRDAA requirements, but GAO found that the guidelines did not contain enough information to aid agencies in producing complete and detailed progress reports in 2017, the first year of reporting. Additional guidelines from OMB could help agencies produce more complete and detailed reports for 2019, the final year of required reporting. Without a longer reporting period, however, Congress may not have the useful information for continued oversight of agencies' progress.", "Working Group. OMB has taken steps to establish the working group, but GAO found the working group did not fully meet FRDAA requirements. As Chair, OMB did not (1) involve all agencies subject to the act in the working group or (2) hold the required number of meetings in 2017. Most surveyed agencies indicated a lack of involvement with and information from the working group as challenges in implementing FRDAA."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that OMB (1) enhance its guidelines for establishing controls, (2) enhance guidelines for reporting on agencies' progress, and (3) fully implement the working group. OMB did not concur with the need for the recommendations. GAO continues to believe the recommendations are valid, as discussed in the report. Additionally, Congress should consider extending agencies' reporting requirements."]}], "report": [{"section_title": "Letter", "paragraphs": ["Fraud poses a significant risk to the integrity of federal programs and  erodes public trust in government. It is a contributor to financial and  nonfinancial risks that waste taxpayer dollars, threaten national security,  or put consumers at risk. Fraud\u2014which involves obtaining something of  value through willful misrepresentation\u2014continues to add to the improper  payments made by the government. In fiscal year 2017, agencies  government-wide reported $8.8 billion in confirmed fraud, although the  deceptive nature of fraud makes it difficult to detect, prevent, and  measure in a reliable way. We have previously identified indicators of  financial and nonfinancial fraud in a wide range of programs including the  Federal Communications Commission\u2019s Lifeline program, the Department  of Energy\u2019s contractors, the Centers for Medicare & Medicaid Services\u2019  oversight of Medicare Part D, and the Bureau of Alcohol, Tobacco,  Firearms and Explosives\u2019 firearm applications. Managers of federal  programs have the primary responsibility for reducing these risks and  ensuring program integrity. In addition, the Office of Management and  Budget (OMB) plays a key role in issuing guidance to assist federal  managers with combating government-wide fraud, waste, and abuse.", "To aid agencies and OMB in their efforts to reduce fraud risks, in June  2016 Congress enacted the Fraud Reduction and Data Analytics Act of  2015 (FRDAA), which created requirements for agencies to establish  financial and administrative controls for managing fraud risks. These  requirements are aligned with leading practices outlined in GAO\u2019s A  Framework for Managing Fraud Risks in Federal Programs (Fraud Risk  Framework), issued July 2015. FRDAA also requires agencies to report  to Congress on the status of efforts to implement fraud controls, identify  fraud risks, and establish strategies to mitigate both financial and  nonfinancial fraud risks. In support of agencies\u2019 efforts to establish these  financial and administrative controls, FRDAA required the Director of the  OMB, in consultation with the Comptroller General, to issue guidelines  that incorporate leading practices from GAO\u2019s Fraud Risk Framework and  to form a working group to share practices, among other things. In  addition, as agencies take steps to implement FRDAA, they are doing so  in the context of other, related OMB guidance for enterprise risk  management (ERM) and memorandums directed at reducing burden and  the federal civilian workforce.", "You asked us to review agencies\u2019 and OMB\u2019s efforts to implement  FRDAA. Specifically, we examined: (1) federal agencies\u2019 progress and  challenges in implementing fraud risk management practices, including  those required by FRDAA, and (2) the extent to which OMB has taken  steps that complied with FRDAA requirements and that facilitated  agencies\u2019 implementation of the act.", "To determine federal agencies\u2019 progress and challenges in implementing  fraud risk management practices, we (1) sent information requests to 93  federal entities to determine whether their organization met the definition  of \u201cagency\u201d in 5 U.S.C. \u00a7 551(1)\u2014and were thus subject to FRDAA\u2014and  then surveyed the 72 agencies that responded affirmatively; (2) held a  roundtable discussion with 14 agencies, selected from those that  responded to our survey; and (3) conducted a content analysis of  information reported in the fiscal year 2017 annual financial reports for  the 24 Chief Financial Officers (CFO) Act agencies. We report  information gathered from agencies in aggregate and do not attribute  survey, annual financial report, or roundtable responses to individual  agencies. We used this approach to better ensure agencies\u2019 participation  and candor in their survey responses and roundtable discussion. For  additional details on our scope and methodology, including a list of  agencies determined to be subject to FRDAA, see appendix I.  1.  We surveyed the 72 agencies subject to FRDAA from January 2018  through March 2018 to determine the status of their fraud risk  management planning and implementation efforts; challenges they  face in managing fraud risks and implementing FRDAA; and the  extent to which they followed fraud risk management practices  outlined in FRDAA, GAO\u2019s Fraud Risk Framework, and the fraud  risk principle (Principle 8) of the Standards for Internal Control in the  Federal Government (Standards for Internal Control). All 72  agencies completed our survey, resulting in a 100 percent response  rate. Appendix II contains the survey questions with response  frequencies for each question.  2.  We held a roundtable discussion with 14 agencies\u2014selected  randomly within type and size categories described below\u2014to obtain  agency officials\u2019 perspectives on the strategies and activities they  used to establish fraud controls and related fraud risk management  activities and on the guidance and resources used to facilitate the  implementation of FRDAA, among other things. The selected  agencies represented a variety of organizational types and sizes,  such as executive-department agencies, independent agencies, CFO  Act agencies, and Small Agency Council members. The selected  agencies also varied in their FRDAA implementation status, based on  their responses to our survey. Through facilitated discussions, we  gathered information on the selected agencies\u2019 strategies and  practices. Roundtable participants also indicated their top challenges  while implementing FRDAA by ranking the challenges with votes, and  discussed potential solutions for those challenges. These results are  not generalizable to agencies beyond those that participated.  3.  We conducted a content analysis of fiscal year 2017 annual financial  reports for the 24 CFO Act agencies to assess the completeness and  level of detail these agencies provided about their progress with  FRDAA implementation. We selected these 24 agencies because,  among other things, these agencies met the definition of \u201cagency\u201d in 5  U.S.C. \u00a7 551(1) at the time of our selection and were therefore subject  to FRDAA, and were estimated to account for over 99 percent of the  government-wide improper payments in fiscal year 2015.  Specifically, we reviewed (1) the content and length of agencies\u2019  fraud-reporting reports and (2) the overall level of detail provided.  While the reporting requirements in FRDAA list three categories of  information, we broke out the unique requirements in each category  for our assessment into 11 reporting elements specified by FRDAA.  Each annual financial report was independently coded by one subject- matter expert familiar with fraud risk management and by a second  subject-matter expert familiar with each agency\u2019s efforts.", "We assessed each annual financial report\u2019s completeness by placing  it in one of four categories representing FRDAA\u2019s 11 reporting  elements: (1) fully complete when all 11 elements were present, (2)  mostly complete when 6 to 10 elements were present, (3) partially  complete when 1 to 5 elements were present and (4) not at all  complete, when no elements were present. We examined the extent  to which our independent reviews of the 24 CFO Act agencies\u2019 annual  financial reports were consistent between coders and found over 99  percent agreement on identification of reporting elements, reconciled  the 1 percent difference, and considered all coded material complete  when assessing the completeness and detail of the annual financial  reports.", "To determine the extent to which OMB has taken steps that complied with  FRDAA requirements and facilitated agencies\u2019 implementation of the act,  we (1) interviewed OMB staff and reviewed relevant memorandums,  circulars, and other documents related to FRDAA implementation and (2)  evaluated agencies\u2019 perspectives and experiences using OMB\u2019s  guidelines and other initiatives to implement the act.  1.  We reviewed relevant memorandums, circulars, and other OMB  documents such as Circular A-123 and compared these with the  requirements for OMB outlined in FRDAA. Additionally, we  interviewed staff from OMB\u2019s Office of Federal Financial Management  and Office of Personnel and Performance Management regarding  their development of guidelines, the FRDAA working group, and any  challenges they may have experienced implementing the act\u2019s  requirements.  2.  We obtained agencies\u2019 perspectives on and experiences with OMB\u2019s  guidelines and the FRDAA working group in order to assess the  usefulness of these actions for agencies\u2019 implementation efforts.  Collectively, we used information from our survey, annual financial- report reviews, and roundtable discussions, as described above, to  inform our assessment of the quality of OMB guidelines and other  efforts. We also interviewed officials from the CFO Council and  Council of the Inspectors General on Integrity and Efficiency to get a  broader opinion about the effectiveness of OMB and agency efforts to  implement FRDAA.", "We conducted this performance audit from August 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Fraud Risk Management", "paragraphs": ["Fraud and \u201cfraud risk\u201d are distinct concepts. Fraud\u2014obtaining something  of value through willful misrepresentation\u2014is a determination to be made  through the judicial or other adjudicative system, and that determination is  beyond management\u2019s professional responsibility. Fraud risk exists when  individuals have an opportunity to engage in fraudulent activity, have an  incentive or are under pressure to commit fraud, or are able to rationalize  committing fraud. Although the occurrence of fraud indicates there is a fraud risk, a fraud risk can exist even if actual fraud has not yet been  identified or occurred. When fraud risks can be identified and mitigated,  agencies may be able to improve fraud prevention, detection, and  response. Managers of federal programs maintain the primary  responsibility for enhancing program integrity and managing fraud risks.  Those who are effective at managing their fraud risks collect and analyze  data and identify fraud trends and use data and trends to improve fraud  risk management activities. Implementing effective fraud risk  management processes is important to help ensure that federal programs  fulfill their intended purpose, funds are spent effectively, and assets are  safeguarded.", "The Fraud Risk Framework provides a comprehensive set of leading  practices that serve as a guide for agency managers developing or  enhancing efforts to combat fraud in a strategic, risk-based manner. The  Fraud Risk Framework is also aligned with Principle 8 (\u201cAssess Fraud  Risk\u201d) of the Standards for Internal Control. It is designed to focus on  preventive activities, which generally offer the most cost-efficient use of  resources since they enable managers to avoid a costly and inefficient  \u201cpay-and-chase\u201d model of recovering funds from fraudulent transactions  after payments have been made. The leading practices in the Fraud Risk  Framework are organized into four components\u2014commit, assess, design  and implement, and evaluate and adapt\u2014as depicted in figure 1."], "subsections": []}, {"section_title": "FRDAA Requirements", "paragraphs": ["Legislation and guidance has increasingly focused on the need for  program managers to take a strategic approach to managing risks,  including fraud. FRDAA was enacted to improve federal agency controls  and procedures to assess and mitigate fraud risks, and to improve  agencies\u2019 development and use of data analytics for the purpose of  identifying, preventing, and responding to fraud. FRDAA requires  agencies to establish financial and administrative controls that incorporate  the Fraud Risk Framework\u2019s leading practices, including  1.  conducting an evaluation of fraud risks and using a risk-based  approach to design and implement financial and administrative control  activities to mitigate identified fraud risks;  2.  collecting and analyzing data from reporting mechanisms on detected  fraud to monitor fraud trends, and using that data and information to  continuously improve fraud-prevention controls; and  3.  using the results of monitoring, evaluation, audits, and investigations  to improve fraud prevention, detection, and response.", "Further, agencies are required to annually report to Congress on their  progress in implementing the act for each of the first 3 fiscal years after its  enactment.", "FRDAA required OMB, in consultation with the Comptroller General, to  establish guidelines for agencies that incorporate leading practices from  the Fraud Risk Framework as well as to establish a working group that  shares best practices in fraud risk management. In addition, the working  group is required to submit a plan to develop a federal interagency data  analytics library for fraud risk management. This working group was also  required to consult with the Offices of Inspector General and federal and  nonfederal experts on fraud risk assessments, financial controls, and  other relevant matters as well as to meet not fewer than four times per  year. See figure 2 for additional details on FRDAA\u2019s requirements and  implementation timeline."], "subsections": []}]}, {"section_title": "Agencies Have Taken Steps to Manage and Report on Fraud Risks as FRDAA Requires, but Have Identified Challenges", "paragraphs": [], "subsections": [{"section_title": "Agencies Indicated They Are Planning or Implementing Activities to Manage Fraud Risks", "paragraphs": ["Agencies\u2019 steps to manage fraud risks at the agency-wide level\u2014and in  response to FRDAA\u2014are at varying stages of planning and  implementation, according to our survey of agencies subject to the act. In  our survey, we asked the 72 agencies subject to FRDAA to characterize  (1) the overall status of their efforts to plan for and implement the act as  \u201cnot started,\u201d \u201cstarted but not mature,\u201d or \u201cmature\u201d and (2) whether they  regularly undertook specific fraud risk management activities prior to and  after FRDAA\u2019s enactment. With respect to overall status, most surveyed  agencies (85 percent) indicated that they have at least started planning  how they will meet FRDAA requirements (started or mature), and about  78 percent indicated that they have also started or are mature in their  efforts to implement the requirements. Fewer agencies, however,  characterized either their planning or implementation efforts as \u201cnot  started\u201d (about 15 and 22 percent, respectively). See figure 3 for agency  responses on their FRDAA planning and implementing efforts.", "While most agencies indicated they have taken planning and  implementation steps, agencies varied in the extent to which they  indicated undertaking specific fraud risk management activities required  by FRDAA at the agency-wide level, according to our survey results. We  asked agencies whether they were currently performing key fraud risk  management activities at the agency-wide level. The fraud risk  management activities identified in the survey were an abbreviated  version of the FRDAA requirements for agencies to establish financial  and administrative controls, which included (1) conducting an evaluation  of fraud risks and using a risk-based approach to design and implement  financial and administrative control activities to mitigate identified fraud  risks; (2) collecting and analyzing data from reporting mechanisms on  detected fraud to monitor fraud trends and using that data and information  to continuously improve fraud-prevention controls; and (3) using the  results of monitoring, evaluation, audits, and investigations to improve  fraud prevention, detection, and response. Most agencies (about 86  percent) indicated they use the results of monitoring, evaluation, audits,  and investigations to manage fraud risk. Fewer agencies (about 63  percent) indicated they collect fraud-related data for prevention. Agencies  also varied in the frequency with which they perform certain activities. For  example, of the agencies that indicated that they collect fraud-related  data for prevention, 44 percent indicated they do so regularly, while 18  percent indicated that they do so but not on a regular basis. See figure 4  for additional information on the frequency with which agencies indicated  they perform fraud risk management activities related to FRDAA  requirements for financial and administrative controls.", "The majority of agencies we surveyed indicated that they were engaged  in a variety of fraud risk management activities before FRDAA\u2019s  enactment, but a larger number indicated action in each of these activities  since the law was enacted. For example, 86 percent of agencies  indicated they used findings from monitoring, auditing, or evaluation of  fraud risk activities after the enactment of FRDAA, compared with 79  percent of agencies that indicated they used such findings before  FRDAA. See figure 5 for a comparison of the number of agencies  reporting that they undertook fraud risk management activities before and  after the enactment of FRDAA.", "To identify relationships among survey responses associated with  progress implementing elements of FRDAA and fraud risk management  practices, we considered direction and strength of correlations between  those questions. Agencies that indicated that they have started  implementing FRDAA (85 percent) also reported higher use of some key  fraud risk management activities, according to our analysis of the survey  data. For example, agencies that indicated their implementation efforts  were \u201cmature\u201d or \u201cstarted but not mature\u201d indicated at higher rates that  they conduct risk-based evaluations of fraud risks and collect fraud- related data for prevention since the enactment of FRDAA. As mentioned,  these activities are FRDAA requirements and are leading practices in the  Fraud Risk Framework. These agencies also indicated at higher rates  that they incorporated fraud risk activities into broader ERM, as directed  by OMB Circular A-123. Further, while most (89 percent) agencies  indicated having a designated entity for managing fraud risk, consistent  with one leading practice identified in the Fraud Risk Framework, fewer  (74 percent) have designated an entity specifically for FRDAA  implementation. Agencies that indicated they had a designated entity for  implementing FRDAA indicated that they were at a mature stage of  FRDAA implementation more often than agencies without such an entity."], "subsections": []}, {"section_title": "All CFO Act Agencies Reported on Their Progress Implementing FRDAA, but Reporting Varied in Completeness and Detail", "paragraphs": ["Each of the 24 CFO Act agencies reported on their progress  implementing FRDAA in their fiscal year 2017 annual financial reports to  Congress, as FRDAA requires, but the reporting varied in completeness  and detail. FRDAA specifies that, beginning in fiscal year 2017 and for the  following 2 fiscal years, agencies must include the following 11 elements  in their reports:", "Agencies must report their progress implementing the financial and  administrative controls required to be established by the agency,  which include (1) conducting an evaluation of fraud risks and using a  risk-based approach to design and implement financial and  administrative control activities to mitigate identified fraud risks; (2)  collecting and analyzing data from reporting mechanisms on detected  fraud to monitor fraud trends and using that data and information to  continuously improve fraud-prevention controls; (3) using the results  of monitoring, evaluation, audits, and investigations to improve fraud  prevention, detection, and response; (4) implementing the fraud risk  principle as described in the Standards for Internal Control; and (5)  implementing the OMB Circular A-123 section related to leading  practices for managing fraud risk.", "Agencies must report their progress identifying risks and  vulnerabilities to fraud. These include (6) payroll, (7) beneficiary  payments, (8) grants, (9) large contracts, and (10) purchase and  travel cards.", "Agencies must report their progress (11) establishing strategies,  procedures, and other steps to curb fraud.", "In August 2017, OMB updated its financial-reporting guidance in Circular  A-136, Financial Reporting Requirements, with a section on FRDAA  reporting requirements, including the reporting elements specified in the  act. While the reporting requirements in FRDAA and OMB\u2019s guidance  list three categories of information, as noted above, we broke out the  unique requirements in each category for our assessment. As a result,  our analysis of the completeness of agencies\u2019 annual financial reports is  based on whether they contain each of 11 specific reporting elements.  See appendix I (table 2) for additional information about these reporting  elements.", "The 24 CFO Act agencies each included fraud-reduction sections in their  annual financial reports as FRDAA requires but, at times, the  completeness and detail of reporting was limited because some reports  did not completely address all of the elements specified in the act. Four  agencies reported on all of the specified elements, 19 agencies reported  on more than half of the specified elements, and 1 agency reported on  fewer than half of the specified elements, according to our analysis. For  example, each of the 24 CFO Act agencies reported on their progress in  establishing financial and administrative fraud controls required by  FRDAA and OMB Circular A-123, but 7 agencies did not report on  progress in implementing the fraud risk principle in the Standards for  Internal Control. In addition, some agencies did not report on their  progress in identifying risks and vulnerabilities with respect to payroll,  beneficiary payments, and other elements specified in the act.  Specifically, 12 of the CFO Act agencies did not report on payroll, 11 did  not report on beneficiary payments, 5 did not report on grants, 9 did not  report on large contracts, and 7 did not report on purchase and travel  cards. See figure 6 for an analysis of the inclusion of required FRDAA  reporting elements in agency reports.", "Variation in reporting on progress in identifying specific risks and  vulnerabilities could result from some agencies\u2019 determinations about  their applicability to the agency. For example, some agencies that  participated in our roundtable discussion noted that grant risks are not  applicable to their agency because they do not have grant programs.  However, this would not explain some areas of risk that are applicable to  all agencies, but were not reported, such as payroll. As discussed later in  this report, variation in reporting on progress in identifying specific risks  and vulnerabilities may also be partly due to some agencies\u2019 uncertainty  about what information must be reported.", "The reports also varied in terms of detail provided about agencies\u2019 efforts,  including specific actions taken to implement elements of FRDAA. For  example, one agency reported that its efforts to comply with the fraud risk  principle in the Standards for Internal Control included implementing  enterprise risk management (ERM) and establishing a policy for having a  common risk assessment tool to ensure consistency across the agency  and to determine appropriate mitigation strategies for risks identified in all  programs. Conversely, another agency reported that it updated an annual  entity-level control assessment to comply with this principle, but the  agency did not describe how this update achieved compliance. Without  this detail in the report, it is not possible to determine the extent of the  agency\u2019s implementation progress, as we describe later in the report.", "Further, most (16 of the 24 CFO Act agencies) included details about  financial fraud risks but did not address nonfinancial fraud risks. For  example, one agency reported it had low fraud risk and, as such, did not  implement any new controls in response to FRDAA. As support, the  agency provided examples of identifying no or limited financial fraud risks,  and concluded that it did not have fraud risks to address. The agency did  not discuss nonfinancial fraud. However, a 2016 GAO report identified  this agency as having vulnerabilities to nonfinancial fraud that present  national security risks. In addition, a 2017 report recommended that two  agencies responsible for a program with national security\u2013related  responsibilities conduct joint fraud risk assessments to obtain  comprehensive information on inherent fraud risks that may affect  program integrity; provide reasonable assurance that their controls  mitigate those risks; and ensure that fraud-prevention efforts target the  areas of highest risk. However, one of these agencies did not mention  nonfinancial fraud in its report. Further, neither agency identified this  program in their report. As mentioned in the Fraud Risk Framework,  nonfinancial fraud, such as fraudulently obtained credentials, can  potentially facilitate other crimes related to national security such as  international terrorism and drug trafficking. In addition, a leading practice  of the Fraud Risk Framework is that managers consider nonfinancial  effects of fraud, such as those related to the program\u2019s reputation and  compliance with laws, regulations, or standards. As discussed later in this  report, these limitations in agency reporting may be partly due to limited  guidance provided by OMB to agencies regarding the level of detail and  type of information that should be included in the reports."], "subsections": []}, {"section_title": "Agencies Identified Challenges Undertaking Fraud Risk Management Activities", "paragraphs": ["Agencies identified challenges undertaking some fraud risk management  activities required by FRDAA, according to our analysis of survey and  roundtable responses. Top identified challenges were generally related to  staffing and resources, among other things. These challenges may affect  agencies\u2019 ability to implement leading practices from the Fraud Risk  Framework. Some roundtable participants also noted strategies for  mitigating some of these challenges. The factors agencies most  frequently indicated as great or moderate challenges in undertaking fraud  risk management activities include the following:", "Availability of resources. Agencies most frequently noted the  availability of resources, such as staffing and funding to conduct fraud  risk management activities, as a challenge to managing fraud risk.  About 75 percent of agencies indicated in their surveys that this was a  great or moderate challenge. Agencies that participated in our  roundtable discussion identified similar \u201cbandwidth\u201d concerns related  to staffing. For example, one agency noted the ability of staff to  manage multiple responsibilities\u2014such as conducting fraud risk  management activities in addition to daily program-related activities\u2014 as a top challenge, especially within smaller units of the agency.  Some agencies at the roundtable discussion told us that having the  authority to use program-integrity funding for fraud risk management  would help provide necessary resources to undertake fraud risk  management activities required by FRDAA. However, one agency  noted that this may not be a viable solution for all agencies, since not  all agencies may receive additional program-integrity funding to  conduct fraud risk management activities.", "Limited tools and techniques for data analytics. Most agencies  (about 68 percent) indicated that limitations in having and using tools  and techniques for data analytics were a great or moderate challenge,  according to our survey. Using data analytics to manage fraud risk is  a leading practice in the Fraud Risk Framework. While one agency at  our roundtable discussion told us that the agency does not have  software to assist staff in performing data analytics, other agencies  suggested leveraging free or existing resources to gain access to and  use data tools. For example, one agency representative described the  usefulness of the Department of the Treasury\u2019s Do Not Pay Business  Center. This agency representative noted that the Department of the  Treasury can proactively analyze agency data it has received and  share it with agencies. Another agency suggested that agencies ask  their shared service providers to provide data analytics, provide  insight, and benchmark against other agencies.", "Lack of available expertise. The availability of staff with expertise to  conduct fraud risk management activities also presents challenges for  agencies. Leading practices in the Fraud Risk Framework include  designating an antifraud entity that serves as the repository of  knowledge on fraud risks and controls and increasing managers\u2019 and  employees\u2019 awareness of potential fraud schemes through training  and education. About 56 percent of agencies we surveyed, however,  identified availability of staff expertise as a great or moderate  challenge. Agencies that identified this as a challenge also more  frequently indicated that they experience some other challenges  associated with FRDAA implementation, such as understanding  FRDAA requirements and implementation time frames; reporting on  implementation progress in the annual financial reports; and  sufficiency of other information or tools to aid in implementation.  During the roundtable discussion, some agencies also described  having a staffing gap where data-analytic skills were concerned. In  response to this challenge, one agency moved its centralized  antifraud unit to a newly created, more-experienced unit within the  agency to increase the antifraud unit\u2019s capacity to conduct data- analytics reviews.", "Access to data and information. A majority of agencies also  identified having access to data to look for fraud or fraud indicators as  a challenge. About 55 percent of agencies indicated that access to  data is a great or moderate challenge to their ability to implement  fraud risk activities. Agencies that participated in our roundtable  discussion also told us that access to data is a key challenge  associated with implementing FRDAA requirements. For example,  one agency stated that the Privacy Act presents a challenge to data  matching that may limit agencies\u2019 ability to share data with one  another, such as Social Security numbers involved in potentially  fraudulent activity that could cut across multiple agencies. This  challenge is not new. In our July 2013 report on using data analytics  for oversight and law enforcement and in our March 2017 report on  using data analytics to address fraud and improper payments, we  reported on similar perceived challenges from other agencies and  organizations regarding data sharing among agencies.", "Some agencies at the roundtable discussion also stated that they did  not receive information from their respective Office of Inspector  General that would help them manage fraud risks and implement  FRDAA. The Fraud Risk Framework highlights the role of the Office of  Inspector General in agencies\u2019 fraud risk management activities.  According to the framework, the Office of Inspector General itself  should not lead or facilitate fraud risk assessments, in order to  preserve its independence when reviewing the program\u2019s activities.  However, the framework notes that program managers and their  Office of Inspector General should collaborate and communicate to  help improve understanding of fraud risks and identify emerging fraud  risks, in order to proactively enhance fraud-prevention activities. While  one agency at the roundtable discussion identified the lack of  information from their Office of Inspector General limiting their ability  to address fraud risks, some agencies appear to be reaching out to  their respective Offices of Inspector General for this information. We  spoke with the Council of the Inspectors General on Integrity and  Efficiency, which comprises representatives of Offices of Inspector  General in the executive branch. During the Council of the Inspectors  General on Integrity and Efficiency meeting, representatives from  three agency Inspectors General told us that their agencies reached  out to them to discuss fraud, such as how an agency can use  databases to look for fraud. At least one representative expected to  coordinate with the representative\u2019s agency to strengthen internal  controls as the agency continues to implement FRDAA."], "subsections": []}]}, {"section_title": "OMB Established Guidelines and a Working Group as Required by FRDAA, but Limited Details and Coordination Hindered Agencies\u2019 Implementation of the Act", "paragraphs": ["OMB has taken steps to establish guidelines and a working group for  agencies, as required by FRDAA, but limited guidelines and working- group coordination hindered some agencies\u2019 implementation of the act.  Specifically, OMB issued guidelines for agencies to implement FRDAA\u2019s  requirement to establish controls and report on their progress and has  established a FRDAA working group, but agencies indicated the need for  additional guidance and involvement in working-group activities. Our  analysis of survey responses, roundtable discussion results, and  agencies\u2019 annual financial reports indicates that (1) agencies had mixed  perspectives on the usefulness of OMB\u2019s guidelines for agencies to  establish controls; (2) limited details in OMB\u2019s reporting guidelines  contributed to CFO Act agencies\u2019 incomplete and insufficiently detailed  annual financial reports; and (3) agencies had challenges implementing  FRDAA in part due to their lack of involvement in and lack of  communication from the working group. In addition to FRDAA, OMB has  issued guidance on other government-wide reform and burden-reduction  initiatives that could shape how agencies address FRDAA  implementation, such as reforms that may change the structure of  agencies and related programs or how agencies collect data used in  managing fraud risks. While it is still too early to determine the effect of  these broader initiatives on agencies\u2019 efforts to implement FRDAA, we  have previously reported that broader reform efforts can be leveraged by  OMB and agencies to address the high-risk areas and government-wide  challenges that present vulnerabilities to fraud, waste, abuse, and  mismanagement."], "subsections": [{"section_title": "OMB Updated Existing Guidelines to Meet FRDAA Requirements, but Agencies Have Mixed Perspectives on the Guidelines\u2019 Usefulness", "paragraphs": ["To comply with FRDAA, OMB updated existing guidelines for agencies to  establish financial and administrative controls to manage fraud risks, but  agencies indicated having challenges with the usefulness of these  guidelines, according to our survey and roundtable discussion results.  Specifically, OMB incorporated guidelines to meet FRDAA requirements  into its July 2016 update of Circular A-123, Management\u2019s Responsibility  for Enterprise Risk Management and Internal Control, within 90 days of  enactment, as required by the act. This particular update of Circular  A-123 introduced requirements for agencies to implement ERM and  integrate with existing internal control capabilities to improve mission  delivery, reduce costs, and focus corrective actions on key risks. The  update to Circular A-123 also included a discussion of the Fraud Risk  Framework and aligned internal control processes with the 2014 update  to the Standards for Internal Control\u2014such as the reference to the fraud  risk principle (Principle 8)\u2014which OMB staff stated provided agencies  with a broad context for why fraud risk management is expected of  agencies.", "According to OMB staff, including the reference to the Fraud Risk  Framework in the circular met the FRDAA requirement to issue guidelines  for agencies to establish financial and administrative controls to identify  and assess fraud risks. The guidelines have a section on \u201cManaging  Fraud Risks in Federal Programs\u201d that encourages agencies to develop  the same financial and administrative controls that are listed in FRDAA  requirements. This section also directs agencies to adhere to the leading  practices described in the Fraud Risk Framework as part of their efforts to  effectively design, implement, and operate an internal control system that  addresses fraud risks. However, based on our review of the guidance,  because FRDAA is never mentioned in the guidelines, there is a risk that  agencies may not be aware that the guidelines directly apply to  implementing FRDAA\u2019s requirement to establish financial and  administrative controls. In addition, OMB\u2019s guidelines provide limited  information related to steps that agencies should take to implement  FRDAA\u2019s requirement to establish financial and administrative controls,  according to our review of the guidelines.", "Agencies indicated having mixed views on the sufficiency of OMB\u2019s  guidelines. For example, 65 percent of the agencies surveyed indicated  that OMB\u2019s Circular A-123 guidelines were moderately or very useful.  However, 40 percent of the agencies surveyed also identified the  sufficiency of OMB\u2019s guidelines as a great or moderate challenge in  implementing the act. Among other things, these challenges included  agencies\u2019 uncertainty about how ERM and FRDAA requirements differ,  given that OMB included the guidelines for managing fraud risk as a  subsection of ERM requirements. These challenges contributed to  agencies\u2019 lack of clarity, among other things, on the actions they should  take to implement FRDAA, as described below.", "Challenges using OMB guidelines to implement FRDAA\u2019s  requirement to establish controls. Some agencies indicated that using  OMB guidelines for FRDAA implementation was a challenge, according to  our analysis of survey responses. Specifically, 40 percent of agencies  indicated the sufficiency of the guidelines was a great or moderate  challenge to their implementation efforts. CFO Act agencies reported  this challenge more often than non\u2013CFO Act agencies (61 and 30  percent, respectively).", "Selected Agency Officials\u2019 Perspectives on  Office of Management and Budget (OMB)  Fraud Reduction (FRDAA) and Data  Analytics Act of 2015 Guidelines  \u201cWhat does compliance mean specifically  when it comes to FRDAA?\u201d  \u201caving looked at other guidance that\u2019s  come out of OMB, particularly like the DATA  Act or even ERM [enterprise risk  management], there was lots of guidance. . . .  In this particular case I think it has not been  as robust\u201d", "Lack of guidance and unclear requirements were also identified as top  challenges in our roundtable discussion on implementation of FRDAA  required controls. For example, some roundtable participants stated that  clearer requirements, such as information on what activities would be  considered compliant with the act, would be helpful to better implement  FRDAA. In particular, two agencies identified grants and contracts as an  area where additional guidance on managing fraud risks would be helpful.", "In contrast, a theme of the roundtable discussion was that there were  trade-offs in having clarity on the objectives and having the flexibility to  tailor requirements to different programs. One roundtable participant said that agencies had different definitions of fraud and that it would be difficult  to create standardized tools that met every agency\u2019s needs. In order to  better understand what steps they should take to implement the controls  required by FRDAA, two roundtable participants sought out alternative  sources of information to determine whether they were complying with  Circular A-123, such as a previously issued GAO report on the Fraud  Risk Framework. Other roundtable participants described using non-OMB  guidance to implement FRDAA, such as the ERM playbook developed by  the CFO Council and Performance Improvement Council, and materials  developed by the Association of Certified Fraud Examiners. While relying  on other sources of information can be helpful, agencies that do not have  knowledge of or access to additional resources such as these may not  have sufficient information to effectively implement the act. This point is  underscored by the 40 percent of agencies that identified the sufficiency  of OMB\u2019s guidance as a great or moderate challenge to their  implementation of FRDAA.", "Selected Agency Officials\u2019 Perspectives on  Office of Management and Budget Fraud  Reduction and Data Analytics Act of 2015  (FRDAA) Guidelines  \u201cI would like some clarification on the intent of  , like what will it achieve that the  other  A-123 or ERM [enterprise risk  management] is not achieving?\u201d", "Uncertainty about the difference between ERM and FRDAA  requirements. Many agencies are leveraging existing ERM processes to  implement fraud risk activities, according to our survey results, but OMB  guidelines were unclear on the relationship between FRDAA and ERM  requirements, according to our review of the guidelines and roundtable  discussion responses. Under ERM, agencies are required to assess the  full spectrum of an organization\u2019s risks, and identify those that are  enterprise-level risks. For enterprise risks, agencies are expected to rate  those risks in terms of impact and build internal controls to monitor and  assess the risk developments at various time points and incorporate risk  awareness into the agencies\u2019 culture and operations. Our survey results  indicate that more agencies (56 percent) are currently incorporating fraud  risk activities into broader ERM compared with before FRDAA enactment  in June 2016 (34 percent). Additionally, some roundtable participants  stated that they leveraged their existing ERM process and teams to  implement FRDAA\u2019s control requirements. While Circular A-123 directs  agencies to assess fraud risks as part of a broader assessment of  enterprise risk, it does not provide information on how ERM and fraud risk  management requirements differ. For example, it does not clarify that  FRDAA encompasses a broad set of actions that agencies must take to  manage fraud risks, regardless of whether the fraud risk is identified as  an enterprise risk.", "Additionally, Circular A-123 does not specify how to implement the  strategies identified in the Fraud Risk Framework within the context of  ERM. According to the circular, managers should adhere to the leading  practices identified in the framework and are responsible for determining  the extent to which the leading practices are relevant to their program.  Managers are also responsible for tailoring the practices to align with the  program\u2019s operations. While the Fraud Risk Framework does state that  the leading practices can be tailored, it enumerates four components and  overarching concepts that are necessary for an effective risk  management approach. These four components of the framework\u2014 commit, assess, design and implement, and evaluate and adapt\u2014 collectively encompass the control activities for managing fraud risks and,  as outlined in the framework and Standards of Internal Control, should be  present in some form to be effective. Therefore, even if agency officials  identify fraud risks in a particular program that are not determined to be  enterprise-level risks, the officials are still responsible for designing and  implementing controls to address them and evaluating and adapting  improvements to these controls over time, in line with the Fraud Risk  Framework requirements. However, OMB staff informed us that if a fraud  risk does not rise to the level of an enterprise risk for an agency in the  ERM process, the agency may not go through all of the steps outlined in  the Fraud Risk Framework or required by FRDAA to assess and respond  to that risk. The Fraud Risk Framework acknowledges that agencies may  use initiatives like ERM efforts to assess their fraud risks, but it does not  eliminate the separate and independent fraud risk management  requirements of FRDAA.", "In response to our draft report, OMB staff stated that other parts of  Circular A-123 helped to fulfill their requirement to establish guidelines for  agencies to establish financial and administrative controls. According to  OMB, if agencies identify fraud risks that are not discussed in ERM, they  will still be addressed by the broader risk management requirements in  Circular A-123. These other sections of Circular A-123 existed prior to  FRDAA and therefore, were not developed in response to FRDAA\u2019s  requirement that OMB establish guidelines for agencies. However, our  review of Circular A-123 found that there are some references to  managing fraud risks that are in alignment with the spirit of the financial  and administrative controls identified in FRDAA. For example, other sections of Circular A-123 describe requirements for agencies to develop  a risk profile and state that agency risk profiles must include an  operational objective related to administrative and major program  operations, including financial and fraud objectives. Further, agencies  should identify the existing management process that will be used to  implement and monitor proposed actions to address the risks. However,  according to Circular A-123, these sections of the document define  management\u2019s responsibilities for ERM, which is focused on enterprise  level risks. Further, these sections of Circular A-123 do not encourage  agencies to incorporate the leading practices outlined in the Fraud Risk  Framework to manage their fraud risks, as required by FRDAA.", "According to OMB staff, if agencies identify fraud risks that are not  discussed in ERM, they will still be addressed by the broader risk  management requirements in Circular A-123. These other sections of  Circular A-123 existed prior to FRDAA and therefore were not developed  in response to OMB\u2019s requirement to provide guidance on FRDAA.  However, our review of Circular A-123 found that there are some  references to managing fraud risks that are in alignment with the spirit of  the financial and administrative controls identified in FRDAA. For  example, other sections of Circular A-123 describe requirements for  agencies to develop a risk profile and state that agency risk profiles must  include an operational objective related to administrative and major  program operations, including financial and fraud objectives. Further,  agencies should identify the existing management process that will be  used to implement and monitor proposed actions to address the risks.  However, according to Circular A-123, these sections of the document  define management\u2019s responsibilities for ERM, which is focused on  enterprise-level risks. Further, these sections of Circular A-123 do not  encourage agencies to incorporate the leading practices outlined in the  Fraud Risk Framework to manage their fraud risks, as required by  FRDAA.", "In addition, OMB staff stated that they believe that, along with Circular  A-123, the Standards for Internal Control and the Fraud Risk Framework  provide all the guidance that agencies need to implement and comply  with FRDAA. However, based on the results of our survey and  roundtable, we informed OMB that agencies reported experiencing  confusion about the similarities and differences between FRDAA and  other requirements, including ERM. According to OMB staff, Circular A- 123 and its focus on ERM is the appropriate place for the FRDAA  guidelines because fraud is one type of risk an agency might face.  However, OMB staff noted that it is the agencies\u2019 responsibility to  determine how to implement the act\u2019s requirements in a way that aligns  with the agency\u2019s mission, and accordingly does not have immediate  plans to update Circular A-123 to provide more-detailed guidelines for  agencies to implement the financial and administrative controls required  by FRDAA.", "The Standards for Internal Control state that management should  implement control activities through policies. Documentation of  responsibilities through policies and periodic review of control activities  contribute to the design, implementation, and operating effectiveness of  control activities. In addition, management should externally communicate  the necessary quality information to achieve the entity\u2019s objectives. These  standards are practices that can assist any entity that is providing  guidance to agencies with ensuring that intended objectives are  accomplished. To better understand the type and level of detail in  guidance that agency managers need to implement management  controls, OMB and other similar oversight bodies often seek input and  comments from agencies on draft guidance. In this case, OMB staff has  not provided evidence that it consulted with agencies on whether the  update to Circular A-123 met their needs in implementing FRDAA. While  OMB staff stated they held three solicitations for agency comments on a  draft update of Circular A-123 prior to FRDAA\u2019s enactment, they did not  obtain input from agencies on whether the updates provided the guidance  agencies needed to implement the controls in FRDAA\u2019s final enacted  requirements.", "Without input from agencies, OMB does not have the information it needs  to determine what additional guidance agencies need to effectively  implement the controls required by the act. In addition, without clarifying  that FRDAA\u2019s requirements must be addressed for all fraud risks\u2014 including those that agencies may have assessed and determined are not  enterprise-level risks\u2014agencies may not follow through on the additional  steps of designing, implementing, evaluating, and improving controls for  their remaining fraud risks. Lastly, without additional detailed guidelines  for implementing FRDAA\u2019s control requirements, agencies will continue to lack clarity on the actions they should take to effectively implement the  act."], "subsections": []}, {"section_title": "OMB\u2019s Guidelines on FRDAA Reporting Requirements Lack Information Needed for Agencies to Produce Complete and Detailed Reports", "paragraphs": ["OMB updated existing guidelines to include a section on FRDAA  reporting requirements, but did not include enough information to  effectively assist agencies in producing complete and detailed reports,  according to our analysis of annual financial reports and survey and  roundtable responses. FRDAA directs agencies to report to Congress  on the progress of FRDAA implementation in their annual financial reports  for each of the 3 fiscal years after enactment. Although FRDAA does not  require OMB to establish guidelines for agencies to comply with the act\u2019s  reporting obligations, OMB generally provides guidance to support  agencies\u2019 annual financial-reporting requirements in Circular A-136,  Financial Reporting Requirements, and accordingly updated this  guidance to include a section on FRDAA reporting requirements first in  August 2017 and again in July 2018. There were no significant changes  to the FRDAA section of Circular A-136 in the July 2018 update.", "Agencies are to include in their annual financial reports to Congress their  progress in: (1) implementing the financial and administrative fraud  controls as required by FRDAA, the fraud risk principle in the Standards  for Internal Control, and the OMB Circular A-123 section related to  leading practices for managing fraud risk; (2) identifying risks and  vulnerabilities to fraud, including with respect to payroll, beneficiary  payments, grants, large contracts, and purchase and travel cards; and (3)  establishing strategies, procedures, and other steps to curb fraud.  However, as previously discussed, our analysis of the 24 CFO Act  agencies\u2019 annual financial reports found that many reports issued in  2017\u2014the first year of reporting\u2014were incomplete and lacked detail.  Some agencies did not report on their progress in identifying risks and  vulnerabilities with respect to payroll, beneficiary payments, and other  elements specified in the act and did not address nonfinancial fraud risks.  In addition, according to our survey results, some agencies considered  reporting on implementation progress in the annual financial reports a  challenge. Specifically, 31 percent of agencies indicated that reporting  was a great or moderate challenge, see figure 7.", "Further, some of our roundtable participants indicated that they needed  more detailed guidance on what should be reported to comply with  FRDAA. In the absence of more-detailed guidance from OMB, some  agencies turned to each other for help. For example, some roundtable  participants indicated that they looked at other agencies\u2019 annual financial  reports to see what they were reporting. While relying on other agencies\u2019  reports can be helpful, agencies may be reviewing incomplete information  based on our review of the annual financial reports, and may not have  appropriate examples of how FRDAA information should be reported.", "OMB\u2019s guidance to agencies on FRDAA reporting did not include  information on the level of detail agencies should report. The FRDAA  section of Circular A-136 is a near-exact replication of the reporting  elements listed in FRDAA and specifies the period in which agencies are  to report on their progress implementing FRDAA. According to OMB  staff, they included the content of FRDAA verbatim in Circular A-136  because the reporting requirements are outlined in the act. However, the  act provides high-level information on what should be included in agency  reports, not operational guidance on how to address the reporting  requirements, which is typically outlined in executive guidance to  agencies. Further, OMB staff informed us that they instructed agencies to  provide a status update of fraud-reduction efforts undertaken in the final  quarter of fiscal year 2016 through fiscal year 2017, but did not provide  agencies with any specific guidance on how detailed that reporting should  be in their annual financial reports. The Standards for Internal Control  state that management should implement control activities through  policies and documentation and externally communicate the necessary  quality information to achieve the entity\u2019s objective. Until OMB provides  additional guidelines directing agencies to report more-complete and  more-detailed information related to their progress on both financial and  nonfinancial risks, some agencies may continue to report incomplete  information on their full range of fraud risks and activities they are  performing to manage these risks.", "On the basis of the limitations we identified in agencies\u2019 annual financial  reports, Congress and OMB do not have complete and detailed  information about agencies\u2019 progress implementing FRDAA\u2019s  requirements to establish fraud controls as intended by the act. For  example, as previously mentioned, 12 of the 24 CFO Act agencies did not  report on payroll fraud risks, which are applicable to all agencies, and 16  did not report on nonfinancial risks such as effect on reputation and  compliance with laws, regulations, or standards. The agency reporting  requirement was intended to help Congress monitor the progress made  by agencies in addressing and reducing fraud risk, including the success  or failures of the guidelines created by OMB as a result of the act.  Similar to reporting requirements for improper payments, agencies\u2019  reports on their progress implementing FRDAA serve as important  oversight tools that can be used to evaluate agency efforts to make  needed changes to their processes and policies. In the absence of  additional OMB guidelines that include more-complete and more-detailed  information for reporting on both financial and nonfinancial risks, some  agencies may continue to produce incomplete information on their full  range of fraud risks and fraud risk management activities. However, as  noted, OMB did not make changes to the FRDAA section in its July 2018  update of Circular A-136, which might have informed agencies\u2019 2018  reporting efforts.", "On the basis of FRDAA\u2019s requirements, Congress sought 3 years of  reporting on FRDAA implementation, and therefore agencies\u2019 obligation  to report on their progress expires after fiscal year 2019. Even if OMB  makes changes to its guidelines in 2019 to support more-complete and  more-detailed reporting, agencies would report only one time after that\u2014 in their 2019 annual financial reports, due in November 2019. We have  previously reported on the importance of reporting information that helps  facilitate proper stewardship of federal resources, congressional  oversight, transparency, and public accountability, among other things.  Without an extension of reporting requirements, Congress will not have  access to useful information through this reporting mechanism to support oversight and accountability of agencies\u2019 progress implementing the fraud  risk management practices required by FRDAA."], "subsections": []}, {"section_title": "OMB Established a Working Group, but Agencies Identified Involvement and Information Sharing as Challenges", "paragraphs": ["OMB established a working group of agencies as required by FRDAA, but  has not met all of the requirements for the working group, such as those  related to member composition, and meeting frequency. As a result of  these and other working-group limitations, agencies identified a lack of  involvement in and limited information sharing from the working as two of  the top challenges to implementing the act. As required, OMB established  a working group within 180 days of enactment to improve the sharing of  financial and administrative controls and other best practices for  detecting, preventing, and responding to fraud, including improper  payments, and the sharing and development of data-analytics techniques.  OMB also submitted to Congress\u2014but not within 270 days of  enactment\u2014a plan for the establishment and use of a federal interagency  library of data analytics and data sets to facilitate fraud risk management.  However, OMB did not initially include the CFO of each agency in earlier  working-group meetings, or, according to OMB, meet four times per year  in 2017 as required. The working group also did not effectively facilitate  the sharing of controls, best practices, and data-analytics techniques,  according to our survey results and roundtable discussion. OMB  encountered challenges that limited its ability to fulfill some of these  requirements, but did not take the necessary actions to implement others.", "Plan for data library. In May 2017, OMB submitted a letter to Congress  describing the working group\u2019s plan to use a phased approach to  establish a federal interagency library of data analytics and data sets, as  required by FRDAA. However, OMB did not do so within 270 days of  enactment, as required by FRDAA. According to OMB\u2019s letter, the  working group is taking a phased approach to develop the plan to  establish an interagency data library and took some steps, but identified  challenges in the process. When developing the plan, the working group  identified two challenges to developing the interagency data library: (1)  standardizing how agencies define fraud in their programs, and (2)  developing a fraud taxonomy to accurately compile fraud risks and  categories. According to the letter, to address these challenges, the  working group is creating a fraud-classification system that leverages the  existing Association of Certified Fraud Examiners fraud-classification  system. OMB\u2019s letter also states that the working group performed an  initial inventory of existing tools and materials that will be used to  populate the first phase of the library, which is currently located in the  OMB MAX Information System. According to the letter, the working  group is partnering with agencies to identify a permanent location for the  library as well as to develop future enhancements based on the needs of  agencies. OMB stated in the letter that it plans to provide Congress  additional information once the next phase of the library is implemented.", "Working-group composition. FRDAA requires the working group to  include the CFO of each agency. OMB, in its role as Chair, did not involve  all of the relevant agencies in the working group by inviting them to  participate or otherwise providing access and input into the working group  as required by FRDAA, according to agencies we surveyed and our  assessment of OMB documents. In addition to the statutory  requirement, we have previously reported that early outreach to  participants to identify shared interests is a key practice for enhancing  interagency collaboration. However, OMB\u2019s initial working-group efforts  in particular did not include some CFO Act agencies or most non\u2013CFO  Act agencies subject to FRDAA, representing missed opportunities to  share practices and collaborate on ways to advance federal efforts to  reduce fraud, waste, and abuse. While the May 2017 letter to Congress  states that the CFO from every agency was invited to participate in the  working group, OMB staff later noted that only the 24 CFO Act agencies and the Small Agency Council representative from the CFO Council were  invited to the working-group meetings. OMB staff indicated that they did  not independently reach out to non\u2013CFO Act agencies to invite them to  participate because they believed the Small Agency Council  representative was responsible for communicating this information to its  members. Nevertheless, FRDAA requires the working group to include  the CFO of each agency subject to the act, as well as other parties  determined to be appropriate by OMB.", "According to our survey results, about half of the agencies subject to  FRDAA were not at all familiar with the working group and about two- thirds did not have an entity responsible for participating in it. Non\u2013CFO  Act agencies indicated these responses more often than CFO Act  agencies. Specifically, 71 percent of non\u2013CFO Act agencies indicated  they were not at all familiar with the working group compared with 21  percent of CFO Act agencies. In addition, 90 percent of non\u2013CFO Act  agencies indicated they did not have a designated person or entity  participating in the working group, compared with 29 percent of CFO Act  agencies (see fig. 8).", "Similarly, two roundtable participants stated that they thought the working  group was geared towards the CFO Act agencies. Most of the CFO Act  agencies that participated in our discussion noted that they had been  involved in the FRDAA working group. In contrast, almost all of the non\u2013 CFO Act agencies that participated in our discussion stated that they  were not aware of the working group.", "Selected Non\u2013Chief Financial Officers  (CFO) Act Agency Officials\u2019 Perspectives  on Lack of Communication from and  Participation in the Working Group  \u201cThere\u2019s been nothing that I\u2019m aware  at   Small Agency Council level that\u2019s had  meetings or anything to give extra guidance  \u2026 and I think that would have been very  helpful. In most things in small agencies we  wait for things to trickle down from the larger  agencies if OMB [Office of Management and  Budget] doesn\u2019t give us guidance, and we just  haven\u2019t gotten any sort of feedback.\u201d", "It is also unclear how many and which CFO Act agencies attended the  working-group meetings. In particular, OMB and agencies provided  conflicting information about which agencies attended the working-group  meetings. For example, according to one CFO Act agency roundtable  participant, the representative was invited to the first meeting and not  invited to the next. The participant further stated that the agency recently  started to receive information from OMB. However, the information OMB  provided about this agency\u2019s involvement in working-group meetings  conflicted with this participant\u2019s description of the agency\u2019s attendance at  the first four meetings.", "Agencies identified the lack of involvement in the working group as one of  the top challenges to implementing FRDAA. Most CFO and non\u2013CFO Act  agencies indicated that their lack of involvement was a moderate or great  challenge to implementing FRDAA (see fig. 9). Agencies that indicated  having these challenges also more frequently reported challenges with  sharing best practices and data-analytics techniques about fraud with  other agencies, which was the purpose of the working group. The need  for this coordination underscores the importance of identifying shared  interests and developing collaborative solutions to help achieve  outcomes.", "OMB and the working group did consult with the Offices of Inspector  General on fraud risk matters, as required by FRDAA, by including them  in working-group meetings. In OMB\u2019s May 2017 letter to Congress, the  agency reported that the working group coordinated with the Council of  the Inspectors General on Integrity and Efficiency and other interagency  working groups to discuss and share best practices in mission-specific  areas. In addition, two agencies\u2019 Offices of Inspector General are listed as  having attended the first four working-group meetings. This coordination  between the working group and Inspectors General\u2014who often identify  and investigate instances of fraud in agencies\u2014is a positive step for the  working group. Inspectors General may be able to provide agencies with  information that can assist the agencies in analyzing data for potential  fraud, such as fraud indicators. In addition, we have previously reported  that if collaborative efforts, like the working group, do not consider the  input of all relevant stakeholders, important opportunities\u2019 for achieving  outcomes may be missed.", "Frequency of meetings. The working group did not meet the FRDAA  requirement to hold at least four meetings per year. OMB staff stated that  there have been eight working-group meetings to date\u2014one in 2016,  three in 2017, and four in 2018\u2014but these meetings do not meet the  FRDAA requirement to meet at least four times per year in 2017. As of  October 2018, OMB has shown improvements towards meeting this  particular FRDAA requirement in 2018. Specifically, the working group  has met at least four times in fiscal year and calendar year 2018, as of  October 2018.", "Vacant appointment positions at OMB and the agencies have slowed  efforts to establish the working group, according to OMB staff. FRDAA  requires the OMB Controller to serve as the chairperson of the working  group, but as of October 2018 the Senate has not made a confirmation  for this position. During the roundtable discussion, one participant shared  that there was a period when there was no OMB leadership and the  working group was largely silent for months. According to OMB staff, it  has also been difficult to establish agency membership of the working  group due to the lack of confirmed CFOs at some of the 24 CFO Act  agencies. As of September 2018, 7 of the 24 CFO Act agencies did not  have a CFO. However, OMB and the working group could have held the  required minimum number of meetings regardless of OMB and agency  vacancies, as evidenced by the seven meetings that were held in the  midst of these vacancies. Further, according to OMB staff, aside from the  first meeting led by the former Controller, all working-group meetings  have been led by the Deputy Controller and other OMB staff, while the  Controller position was vacant.", "Information sharing about controls, best practices, and data- analytics techniques. It is unclear whether OMB, as chair of the working  group, documented working-group meetings or any work products that  were developed to facilitate sharing information about financial and  administrative controls, best practices for fraud management, and data- analytics techniques. OMB staff stated that they do not have documented  minutes or notes from working-group meetings, but in August 2018 stated  that they uploaded work products to the FRDAA federal community site  on the MAX Information System website. However, apart from two  screenshots of the MAX website provided to us in February 2018, which  indicated that a fraud taxonomy was among the materials produced by  the working group, we were not able to obtain documentation of these  work products. We have previously reported that one key practice for  enhancing and sustaining agency collaboration is using plans and reports  to reinforce accountability for collaborative efforts. Without documented  discussions, plans, or reports for these collaborative meetings, OMB is  unable to share the lessons learned from the meetings with those who  cannot attend, and does not have a record of the plans and actions that  the working group has agreed to take. This documentation is also  important to maintaining the continuity of the working group\u2019s initiatives  when leadership changes occur within the agencies and OMB.", "With respect to the information that was shared at some of the initial  working-group meetings, roundtable participants stated that the topics  discussed were related to the interagency data library and the working- group plan required to be submitted to Congress, as OMB described in  the May 2017 letter. For example, some participants confirmed that the  first few meetings were spent discussing ways to establish a standard  definition of fraud, the implementation plan due to Congress, and the  difficulties agencies experience in sharing data. Our survey results  indicate that most agencies identified the sufficiency of information  coming from the working group as a great or moderate challenge in their  efforts to implement FRDAA (see fig. 10).", "Roundtable participants also identified data access and sharing, and  inter- and intra-agency communication and collaboration, as top  challenges for implementing FRDAA. We have previously reported that  collaborative mechanisms can be used for a range of purposes such as  information sharing. Without participation in appropriately recurring  working-group meetings and documentation to facilitate information  sharing, agencies will continue to miss opportunities to learn from each  other\u2019s experiences and share solutions for establishing financial and  administrative controls to prevent, detect, and respond to fraud risks in  their programs."], "subsections": []}, {"section_title": "FRDAA Implementation during Broader Reforms", "paragraphs": ["OMB has recently issued guidance on other government-wide reform and  burden-reduction initiatives that could shape how agencies address  FRDAA implementation, such as reforms that may change the structure  of agencies and related programs or how agencies collect data used in  managing fraud risks. These changes may present challenges and  opportunities in establishing the fraud risk management practices outlined  in the FRDAA. As examples of these recent reforms, in March 2017 the  President issued an executive order requiring a proposed plan to  reorganize executive branch agencies. In April 2017, OMB provided  guidance to federal agencies for developing their reform and workforce- reduction plans, as required by the President\u2019s executive order. Executive  Order 13781\u2014Comprehensive Plan for Reorganizing the Executive  Branch\u2014and other recent administration actions prompted OMB to issue  a memorandum (M-17-22), that required agencies to submit an agency  reform plan to OMB by September 2017. These reform plans were part  of the agencies\u2019 fiscal year 2019 budget submission to OMB that included  long-term workforce reductions. In addition, OMB issued a memorandum  (M-17-26) that required agencies to streamline reporting requirements\u2014 an initial effort at removing duplicative, outdated reporting requirements,  with the goal of making the federal government more efficient and  effective.", "In March 2018, OMB released the President\u2019s Management Agenda,  which provided updated information on the status of government  reorganization efforts and is connected with these reform efforts. The  President\u2019s Management Agenda also identified a set of cross-agency  priority goals, required under the GPRA [Government Performance and  Results Act] Modernization Act of 2010, to target those areas where  multiple agencies must collaborate to effect change and report progress  in a manner the public can easily track. One of these collaborative  efforts is focused on reducing the amount of dollars lost to taxpayers  through improper payments, including payments resulting from fraud. In  addition to the President\u2019s Management Agenda, OMB was required by  the March 2017 executive order to develop a comprehensive  government-wide reform plan, including, as appropriate,  recommendations for both legislative proposals and administrative  actions based on agency reform plans, OMB-coordinated crosscutting  proposals, and public input.", "In June 2018, OMB released the government-wide reform plan, which  consists of government-wide reorganization and reform proposals with  the goal of increasing focus on integrated mission, service, and  stewardship delivery. While it is too early to tell whether or how all of  these reforms will affect agencies\u2019 efforts to implement FRDAA, we have  previously reported that OMB and agencies can leverage these broader  reform efforts to address the high-risk areas and government-wide  challenges that present vulnerabilities to fraud, waste, abuse, and  mismanagement, or are in need of transformation. We surveyed the 72  agencies about whether their plans to implement reforms have had an  effect on their efforts to implement FRDAA. About 83 percent of the  agencies surveyed reported that they did not address aspects of their  fraud risk management in their agency reform plans. Further, OMB  reported to us that these plans are still evolving, and have not yet been  finalized. However, as we have previously reported, OMB and agencies  can consider whether (1) the agency has addressed ways to decrease  the risk of fraud, waste, and abuse of programs as part of its proposed  reforms and (2) the size of the workforce or resources dedicated to fraud  risk management activities may be affected by any of the organizational  reforms or efforts to reduce burden, and to make decisions with these  considerations in mind."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Fraud is one contributor to financial and nonfinancial risks that cost  taxpayers dollars, threaten national security, or put consumers at risk.  Therefore, agencies must take a more-rigorous preventive approach to  managing the risk of fraud in their programs. Compliance with FRDAA  provisions can support these efforts. We recognize that effective  implementation of the act will take time, and each program and agency  may evolve at a different pace. While a small number of agencies  reported being mature in their implementation of FRDAA activities, most  are in the process of developing key fraud risk activities, and others have  yet to start developing them. Wherever agencies fall on this spectrum, it is  important that they continue taking actions to enhance their ability to  prevent, detect, and respond to fraud risks in their programs and  operations.", "OMB plays an important role in supporting agencies\u2019 efforts to manage  fraud risks by providing clear guidelines and facilitating agencies\u2019  involvement with the working group. OMB has taken steps to assist  agencies, such as updating ERM guidelines and chairing working-group  meetings, but improvements to these efforts could better facilitate  agencies\u2019 abilities to implement the act. Specifically, agencies reported  the need for additional guidance and clarity on the actions they should  take to effectively establish the required controls and report their progress  on implementation of the act\u2019s requirements, uncertainty about the  difference between ERM and FRDAA requirements, and the need for  more involvement and information from the working group. With  enhanced guidelines from OMB and improvements to collaboration,  agencies would be better positioned to improve controls and procedures  to assess and mitigate fraud risks, as FRDAA intends.", "Promoting the oversight and accountability of agency fraud risk activities  through reporting is an important aspect of congressional oversight, as  agencies enhance their fraud risk management controls. However, the  progress reports submitted by agencies as part of their annual financial  reports were incomplete and lacked detailed information to effectively  inform Congress of agencies\u2019 implementation status. Further, agencies  are only required to report their progress in implementing the  requirements of FRDAA through fiscal year 2019. However, it is not clear  that more-complete information will be reported by then. Until OMB  provides additional guidelines directing agencies to report more-complete  and more-detailed information related to both financial and nonfinancial  risks, agencies may continue to produce incomplete information on their  fraud risk management activities. Requiring agencies to report on the  progress of their implementation efforts beyond 2019 could better position  Congress to ensure oversight and accountability."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration.", "Congress should consider extending the requirement in FRDAA for  agencies to report on their implementation of fraud controls, identification  of fraud risks, and strategies for mitigating them, beyond the current 2019  expiration. (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to OMB:", "The Director of OMB should enhance the guidelines for agencies  to establish the controls required by FRDAA, by clarifying the  difference between FRDAA and ERM requirements, and through  collaboration with agencies to determine what additional  information agencies need to implement the controls.  (Recommendation 1)", "The Director of OMB should enhance FRDAA reporting guidelines  by directing agencies to report complete and detailed information  on each of the reporting elements specified by FRDAA, which  should include information related to financial and nonfinancial  fraud. (Recommendation 2)", "The Director of OMB should ensure the working group\u2019s  composition meets FRDAA requirements by involving the CFO of  all agencies subject to the act by inviting them to participate or  otherwise providing access and input into the working group, and  ensure that mechanisms to share controls, best practices, and  data-analytics techniques are in place. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this report to OMB for review and comment. OMB  staff provided oral comments that disagreed with our three  recommendations, which we summarize below. OMB staff also provided  technical comments that we incorporated as appropriate.", "OMB disagreed with our first recommendation that it should enhance the  guidelines for agencies to establish the controls required by FRDAA by  clarifying the difference between FRDAA and ERM requirements, and  through collaboration with agencies to determine what additional  information agencies need to implement the controls. According to OMB  staff, Circular A-123 incorporates all of the guidance that agencies need  to implement FRDAA and, outside of the current guidance in Circular A- 123 which OMB staff stated incorporates both GAO\u2019s Standards for  Internal Control and GAO\u2019s Fraud Risk Framework, agencies are in the  best position to make decisions about how they should implement  FRDAA.  Further, OMB staff stated that they did not believe that our  survey of the 72 agencies and the roundtable with the 14 agencies  provided sufficient evidence that a change in their guidance is needed  because these responses are based on agencies\u2019 opinions.", "While Circular A-123 contains a section on Managing Fraud Risks in  Federal Programs, we identified important limitations to that section of  guidance in our report. In its comments on our report, OMB staff stated  that other parts of Circular A-123 provide guidance on FRDAA  requirements. These sections of Circular A-123 existed prior to FRDAA  and therefore, were not developed in response to FRDAA\u2019s requirement  that OMB establish guidelines for agencies. Our review of Circular A-123  found that there are some references to managing fraud risks that are in  alignment with the financial and administrative controls identified in  FRDAA, and therefore we incorporated that additional information into our  report. However, as we reported, agencies stated that they needed  additional guidance on how to effectively establish the controls required  by FRDAA. OMB was required by FRDAA to establish guidelines.  Specifically, lack of guidance and unclear requirements were identified as  top challenges during the roundtable discussion, and the sufficiency of  OMB\u2019s guidelines was a challenge for 40 percent of the agencies we  surveyed. OMB staff stated that they did not believe that our survey and  roundtable results are sufficient evidence to warrant a change in their  guidance because these responses are based on agencies\u2019 opinions.  However, because the purpose of OMB\u2019s guidance is to assist agencies  in implementing the administrative controls required by FRDAA, agencies\u2019  experiences and perspectives on the sufficiency of the guidance is an  essential part of assessing its effectiveness. Therefore, we reiterate the  positions expressed by many agencies that they do not have sufficient  guidance on implementing FRDAA requirements related to the  establishment of financial and administrative controls. As a result, our  recommendation on improving this guidance is still warranted.", "OMB also disagreed with our second recommendation that it should  enhance FRDAA reporting guidelines by directing agencies to report  complete and detailed information on each of the reporting elements  specified by FRDAA, which should include information related to financial  and nonfinancial fraud. According to OMB staff, Circular A-136 is  sufficient guidance because it includes the requirements stated in  FRDAA, and incorporating this guidance into Circular A-136 was not a  requirement of the act. Although not required by FRDAA, OMB\u2019s  guidance to agencies on FRDAA reporting is important because these  reports can be used to evaluate agency efforts to make changes to their  processes and policies. OMB Circular A-136 establishes reporting  guidance for executive branch entities required to submit agency financial  reports, among other things. Agencies were required to report on their  progress implementing FRDAA in these reports. However, FRDAA  provides high-level information on what should be included in agency  reports, not operational guidance on how to address the reporting  requirements, which is typically outlined in executive guidance to  agencies. Consequently, the initiative that OMB took to provide guidance  on FRDAA in Circular A-136 was an important step in the right direction.  However we found that the 24 CFO Act agencies\u2019 annual financial reports  for 2017 were incomplete and lacked details, which can be attributed in  part to the limited guidance provided by OMB. We found that 31 percent  of surveyed agencies indicated that reporting on FRDAA progress was a  great or moderate challenge. The agency reporting requirement was  intended to help Congress monitor the progress made by agencies in  addressing and reducing fraud risks, including the success and failures of  the guidelines created by OMB as a result of the act. Therefore, our  recommendation to improve OMB\u2019s reporting guidelines is still  appropriate.", "OMB also disagreed with our third recommendation that it should ensure  that the FRDAA working group\u2019s composition meets the act\u2019s  requirements by involving the CFO of all agencies subject to the act by  inviting them to participate or otherwise providing access and input into  the working group, and ensuring mechanisms to share controls, best  practices, and data-analytics techniques are in place. According to OMB  staff, they disagreed because they believe that OMB provided an  opportunity for all agencies to attend the working group meeting and they  have held four working group meetings in 2018. However, evidence  submitted by OMB throughout our review and agencies\u2019 responses to our  survey indicate that not all agencies had the opportunity to participate in  the working group. The working group was required to include the CFOs  of every agency subject to FRDAA, including those that are not subject to  the CFO Act. However, 71 percent of non\u2013CFO Act agencies were not at  all familiar with the working group, and ninety percent did not have a  designated person or entity that participated in the working group,  according to our survey. Moreover, 21 percent of CFO Act agencies,  which represent the largest federal agencies, were not at all familiar with  the working group, and 29 percent did not have a designated person or  entity that participated in it, according to our survey results, as of March  2018. To ensure that we obtained information from the right contacts  regarding agency participation, we surveyed the CFO or the CFO\u2019s  designee of each agency subject to FRDAA. During our audit, OMB  indicated that it did not have a list of CFO contacts for all agencies  subject to the act, and requested that we share our list of contacts. We  have agreed to do so consistent with our protocols, upon public release of  the report. Given our findings, our recommendation for OMB to ensure  that every agency is then given the opportunity to participate is still  warranted.", "Our survey results also indicated that most agencies identified the  sufficiency of information coming from the working group as a great or  moderate challenge in their efforts to implement FRDAA. Further, OMB  staff stated that they do not have documented minutes or notes from  working-group meetings. As we stated in our report, without documented  discussions, plans, or reports for these collaborative meetings, OMB is  unable to share the lessons learned from the meetings with those who  cannot attend, and does not have a record of the plans and actions that  the working group has agreed to take. This documentation is also  important to maintaining the continuity of the working group\u2019s initiatives  when leadership changes occur within the agencies and OMB. As we  previously noted, without participation in working-group meetings and  documentation to facilitate information sharing, agencies will continue to  miss opportunities to learn from each other\u2019s experiences and share  solutions for establishing financial and administrative controls to prevent,  detect, and respond to fraud risks in their programs. Therefore, we  believe that our recommendation on ensuring mechanisms are in place to  share controls, best practices, and data-analytics techniques is still  warranted. Finally, although OMB did not hold the required number of  meetings per year in 2017, it has done so for fiscal year and calendar  year 2018, as of November 2018. Therefore, we modified our  recommendation to reflect the new actions taken.", "We are sending copies of this report to appropriate congressional  committees and OMB. 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  Rebecca Shea at (202) 512-6722 or shear@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report reviews agencies\u2019 and the Office of Management and  Budget\u2019s (OMB) efforts to implement the Fraud Reduction and Data  Analytics Act of 2015 (FRDAA). Specifically, it examines (1) federal  agencies\u2019 progress and challenges in implementing fraud risk  management practices, including those required by FRDAA, and (2) the  extent to which OMB has taken steps that complied with FRDAA  requirements and that facilitated agencies\u2019 implementation of the act. To  address both of these objectives, we developed and implemented a  government-wide survey of agencies subject to the act, conducted a  roundtable discussion with selected agencies, reviewed the 24 Chief  Financial Officer (CFO) Act agencies\u2019 annual financial reports,  interviewed staff from OMB, the CFO Council and the Council of the  Inspectors General on Integrity and Efficiency, and reviewed relevant  OMB circulars and documents."], "subsections": [{"section_title": "Survey", "paragraphs": [], "subsections": [{"section_title": "Determination of Executive Branch Agencies Subject to FRDAA", "paragraphs": ["To determine which agencies were subject to FRDAA and subsequently  surveyed, we first sent information requests to 93 federal executive  branch entities to determine whether their organization met the definition  of \u201cagency\u201d in 5 U.S.C. \u00a7 551(1). FRDAA requires the CFO of each  agency to be a member of the FRDAA working group. Therefore we  identified each entity\u2019s CFO or equivalent using publicly available  websites. We sent an email to the 93 entities\u2019 CFO or equivalent and  GAO liaison, if present, to notify the agency that we planned to administer  a government-wide survey related to the act and requested that an official  from the entity\u2019s Office of the General Counsel confirm whether the entity  is an \u201cagency\u201d as defined in 5 U.S.C. \u00a7 551(1). If the CFO was not the  official who was most appropriate to answer our survey about activities  related to the act, we requested that the agency identify who should  receive our survey. Of these 93 entities, 72 indicated they met this  definition of agency, 20 reported that they did not, and 1 entity, the  Central Intelligence Agency, did not respond. See table 1 for a list of the  72 executive branch agencies that identified themselves as being subject  to the act."], "subsections": []}, {"section_title": "Survey Questionnaire Development", "paragraphs": ["To improve the response rate of agencies receiving our survey, while  mitigating respondent burden and reducing total survey error, we  developed the survey using a variety of quality-assurance techniques.  Survey error can arise from population coverage, measurement,  nonresponse, and processing errors associated with questionnaire  surveys. GAO survey specialists determined survey design parameters  and developed, tested, revised, and finalized the questionnaire, in  consultation with subject-matter experts on the engagement team. The  survey design parameters included population coverage, mode of  administration, respondent communication methods, and protection from  disclosure of identifiable information.", "To reduce measurement error, we pretested the questionnaire with  selected agency representatives using cognitive interviewing techniques,  such as nondirective probing of answers and asking respondents to think  aloud when formulating answers. This process allowed us to determine  whether questions were understood and answered as intended.  Specifically, pretests examined respondent issues related to  comprehension of the questions, ability to accurately respond to the  questions, perceptions of bias in the questions or scales, and  completeness of answer responses. For example, during pretesting we  probed respondents on whether our scales were appropriately balanced,  and whether individual questions were likely to be applicable to all  respondents. We conducted pretests over the phone with CFOs or other  FRDAA designated officials from three types of agencies for a total of six  agencies: two executive-department CFO Act agencies; two CFO Act  agencies that are not executive departments, and two non-CFO Act  agencies that are not executive departments. As a result of these  pretests, we made modifications to question wordings, scale categories,  and other response options to improve respondent comprehension,  reduce respondent burden, and mitigate risks of inaccurate or biased  responses.", "An additional survey specialist, who had not been involved in the  development of the questionnaire, also reviewed the questionnaire. We  then modified the questionnaire based on suggestions made by the  reviewer and subject-matter experts. The final version of the  questionnaire was copy edited for grammatical and editorial errors.", "The final questionnaire included questions designed to capture  information about FRDAA implementation government-wide and obtain a  high-level status update of agencies\u2019 implementation of the act including,  but not limited to, the steps agencies had taken since the enactment of  the act, fraud risk management activities, challenges they have  experienced implementing FRDAA, and their perspectives about OMB\u2019s  support of these efforts. It was composed of questions with  predetermined answer choices (closed-ended questions) and questions  without predetermined answer choices requiring written response (open- ended questions). See appendix II for survey questions and frequencies  of agencies\u2019 responses."], "subsections": []}, {"section_title": "Survey Administration", "paragraphs": ["To administer the survey, we emailed each agency a fillable PDF  questionnaire. We fielded the survey from January 18, 2018, through  March 27, 2018. To follow up with agencies that did not respond to the  initial notice, we emailed or called multiple times to encourage survey  participation or provide technical assistance, as appropriate. We received  usable questionnaire responses from all 72 agencies, for a response rate  of 100 percent. Because this survey was sent to all agencies that were  identified as being subject to FRDAA, there is no error as a result of  sampling, and results cover the entire population. However, the practical  difficulties of conducting any survey may also introduce other types of  errors, commonly referred to as nonsampling errors. For example,  difficulties in how a particular question is interpreted, in the sources of  information available to respondents, or in how the data were entered into  a database or analyzed can introduce unwanted variability into the survey  results. With this survey, we took a number of steps to minimize these  nonsampling errors. For example, our staff with subject-matter expertise  designed the questionnaire in collaboration with our survey specialists,  and all questions were cognitively pretested with knowledgeable  respondents. When the survey data were received from agencies and  analyzed, a second independent analyst on our staff verified the analysis  programs to ensure the accuracy of the code and the appropriateness of  the methods used for the computer-generated analysis. Since this was an  electronic survey, respondents entered their answers directly into the  questionnaire, thereby mitigating the need to have the data keyed into a  database, thus avoiding a source of data-entry error."], "subsections": []}]}, {"section_title": "Roundtable Discussion", "paragraphs": ["To collect information about agencies\u2019 experiences implementing FRDAA,  we also facilitated a roundtable discussion with selected agencies subject  to FRDAA that had completed the survey. The purpose of the roundtable  discussion was to obtain agency officials\u2019 perspectives on  the strategies and activities used to establish fraud controls and  related fraud risk management activities;  the guidance and resources used to facilitate the implementation of  FRDAA;  their challenges in implementing FRDAA; and potential solutions to improve implementation of the act, including any  additional guidance or resources that may be useful to implementing  the act.", "We randomly selected and invited a diverse group of agencies that are  subject to FRDAA. We planned for a group of agencies that were diverse  in terms of the following:  1.  agency type, such as whether the agency was a CFO Act agency, an  executive department or non\u2013executive department, and membership  in the Small Agency Council; and  2.  FRDAA implementation status as indicated by their responses to two  survey questions. These two survey questions were \u201coverall, what is  the status of your agency-wide efforts to implement FRDAA\u201d and \u201cas  of today, does your agency do the following to manage fraud risk at  the agency-wide level.\u201d We used the survey responses to divide  agencies into two groups, a more-mature implementation group and a  less-mature implementation group.", "We invited a total of 27 agencies to participate in our roundtable, an initial  group of 20 agencies and 7 backup agencies. Fourteen agencies  attended our roundtable: six executive-department CFO Act agencies;  two CFO Act agencies that are not executive departments; and six Small  Agency Council member agencies. Agency representatives included  agency officials with responsibility for antifraud activities, including either  the agency\u2019s CFO, Chief Risk Officer, or other staff responsible for fraud  risk management activities.", "The roundtable discussion was held March 26, 2018, and included three  sessions: an opening session, a breakout session, and a closing session.  In the opening session, all 14 of the roundtable participants were given an  overview of our researchable questions and the agenda for the day. Then  the agencies were split into two breakout groups based on their response  to our survey questions about the maturity of their implementation of  FRDAA. In the two breakout groups, roundtable participants discussed  the guidance and resources they used for implementation of the act, their  approaches used for implementation of the act, and the strategies and  challenges associated with implementation of the act. In each breakout  group, roundtable participants identified and voted on their top challenges  in implementing FRDAA. After the breakout session, GAO facilitators and  subject-matter experts on the engagement team then met to create a new  list of the top voted challenges of both groups as well as any crosscutting  challenges. Finally, in the closing session, all 14 agencies came back  together to recap the breakout discussions and have a broader  discussion about experiences of successful implementation and potential  solutions to improve implementation, including any additional guidance or  resources that may be useful to implementing the act. Roundtable  participants identified and voted on their top challenges to implementing  FRDAA. These results are not generalizable to agencies beyond the 14  that participated."], "subsections": []}, {"section_title": "Fiscal Year 2017 Annual Financial Reports", "paragraphs": ["To further assess steps that agencies have taken to implement fraud risk  management practices, as required by FRDAA, we also reviewed the  fiscal year 2017 annual financial reports for the 24 agencies subject to the  CFO Act. FRDAA required agencies to report to Congress on the status  of their efforts to implement financial and administrative controls that  incorporate leading practices from GAO\u2019s Fraud Risk Framework, identify  fraud risks, and establish strategies to mitigate fraud in these reports. We  selected these 24 agencies because they were known at the time of our  selection to be agencies that were subject to FRDAA, and are estimated  to account for over 99 percent of the government-wide improper  payments in fiscal year 2015. These agencies also are required to  submit their reports directly to GAO. We conducted a content analysis to  determine the completeness and quality of the information provided in  these reports related to these FRDAA requirements.", "Because content analysis relies on the judgment of coders to determine  whether qualitative data reflects particular categories, we took several  steps to ensure that this judgment remained objective, accurate, and  consistent. Prior to beginning the content analysis, we worked with  subject-matter and legal experts to develop a codebook and definitions  for the different kinds of information that FRDAA requires agencies to  report, as well as supplemental coding categories related to leading  practices in fraud risk management identified in our framework. In order to  test the clarity of these codes, we had four independent analysts pretest  the content analysis on two annual financial reports, and found high levels  of interrater reliability. Specifically, each of the categories had at least 95  percent agreement between coders. As a result to this pretest, minor  changes were made to the category definitions.", "We used two independent coders within GAO to ensure consistent  judgment of categories. For the content analysis, each of the 24 annual  financial reports was coded by two independent analysts, including one  subject-matter expert familiar with fraud risk management and another  familiar with each of the CFO Act agencies. Agreement among coders  exceeded 99 percent across all of the coding categories. On the basis of  this high level of agreement between coders, we are confident that our  content analysis represents an objective, accurate, and consistent  assignment of these coding categories. Because these coding categories  would be further reviewed in making our determinations about  completeness and detail, we decided to resolve any intercoder  disagreements by keeping all coded material for that review.", "To assess the completeness of agencies\u2019 reporting on FRDAA  implementation, we broke out the unique requirements in each of the  three broad categories outlined in FRDAA\u2019s reporting requirements. As a  result, our analysis included an assessment of 11 coding categories,  which are listed with their definitions in table 2 below. An element was  considered present if the corresponding code was applied one or more  times in the annual financial reports, and missing if the corresponding  code was applied zero times. Each annual financial report was then  categorized into one of four categories of completeness, based on these  assessments:  1.  Fully complete: agencies with reports that contained information on all  11 elements.  2.  Mostly complete: agencies with reports that contained information on  6\u201310 elements.  3.  Partially complete: agencies with reports that contained information on  1\u20135 elements.  4.  Not at all complete: agencies with reports that contained information  on 0 elements.", "In addition to assessing whether the annual financial report contained  these elements, as required by FRDAA, we also reviewed the content of  each of these coding categories, as well as additional categories related  to leading practices in fraud risk management. In order to demonstrate  the range of the quality and level of detail provided for each element, and  for the overall reporting on fraud risk management efforts, we reviewed  the specific coded excerpts in NVivo for each agency and summarized  the level of detail, length, and other observations specific to each  category.", "To address our second objective, determining the extent to which OMB  has taken steps that complied with FRDAA requirements and that  facilitated agencies\u2019 implementation of the act, we reviewed relevant  documents produced to support the implementation of FRDAA. We also  assessed the extent to which the guidelines were consistent with leading  practices from the Fraud Risk Framework and the Standards for Internal  Control in the Federal Government.", "To determine the extent to which OMB has taken steps that complied with  FRDAA requirements and facilitated agencies\u2019 implementation of the act,  we did the following:  1.  We interviewed staff from OMB\u2019s Office of Federal Financial  Management and Office of Personnel and Performance Management  regarding their development of guidelines, the working group, and any  challenges OMB may have experienced while implementing the act\u2019s  requirements, to determine the extent to which OMB\u2019s efforts to  facilitate agency implementation of the act were viewed as helpful by  agencies.  2.  We reviewed relevant memorandum, circulars, and other OMB  documents including Circular A-123, Management\u2019s Responsibility  for Enterprise Risk Management and Internal Control, and Circular  A-136, Financial Reporting Requirements, and compared these with  the requirements for OMB outlined in FRDAA.  3.  We evaluated agencies\u2019 perspectives and experiences using OMB\u2019s  guidelines and other initiatives to implement the act by assessing our  survey responses, annual financial-report analysis, and roundtable  discussion for responses related to OMB guidelines and other efforts,  and related strengths and challenges.  4.  We also interviewed officials from the CFO Council and Council of the  Inspectors General on Integrity and Efficiency to get a broader opinion  about the effectiveness of OMB and agency efforts to implement  FRDAA.", "We conducted this performance audit from August 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Results of GAO\u2019s Survey on Agencies\u2019 Implementation of the Fraud Reduction and Data Analytics Act of 2015", "paragraphs": ["To obtain information about the extent to which executive branch  agencies have taken steps required by the Fraud Reduction and Data  Analytics Act of 2015 (FRDAA), we identified 72 agencies subject to the  act and surveyed these agencies about their fraud risk management  practices and related challenges. We received responses from all 72  agencies, for a response rate of 100 percent. The questions we asked in  our survey and the percentage of agencies\u2019 responses are shown below.  Our survey was composed of questions with predetermined answer  choices (closed-ended questions) and questions without predetermined  answer choices requiring written response (open-ended questions). In  this appendix, we include all survey questions and results of responses to  the closed-ended questions; we do not provide information on responses  to open-ended questions.", "The tables below represent the percentage of agencies\u2019 responses to the  close-ended questions. The percentages we report are rounded to the  nearest whole number. For a more-detailed discussion of our survey  methodology, see appendix I.", "Survey question 13: What other information, if any, should GAO know  about your agency\u2019s efforts to implement FRDAA or manage fraud risks?  (open-ended response)", "Survey question 14: Do you have any additional explanations for your  answers or comments on any of the issues in this questionnaire?   (open-ended response)", "Survey question 15: Please enter the contact information for the primary  person who completed this survey. (open-ended response)"], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Latesha Love (Assistant  Director); Georgette Hagans (Analyst in Charge); Sarah Cantatore, Joy  Kim, Grant Mallie, James Murphy, Eve Nealon, Steven Putansu, Kristen  Timko, and Shana Wallace made key contributions to this report. Other  contributors include Marcus Corbin, Carrie Davidson, Colin Fallon,  Barbara Lewis, and Maria McMullen."], "subsections": []}]}], "fastfact": ["Fraud in federal programs can erode public trust in government. We reviewed what the Office of Management and Budget and agencies are doing to manage fraud risk.", "We found that OMB established a working group and held meetings to help agencies share fraud risk management practices. However, the group did not meet as often as required in 2017 and not all relevant agencies were involved.", "Most agencies we surveyed had started implementing required fraud risk management activities, but reported needing more involvement and information from the working group.", "We recommended 3 ways to improve compliance with fraud risk management requirements."]}
{"id": "GAO-18-119", "url": "https://www.gao.gov/products/GAO-18-119", "title": "Southwest Border Security: Border Patrol Is Deploying Surveillance Technologies but Needs to Improve Data Quality and Assess Effectiveness", "published_date": "2017-11-30T00:00:00", "released_date": "2017-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The southwest border has long been vulnerable to cross-border illegal activity. In fiscal year 2016, Border Patrol apprehended over 409,000 illegal entrants. Border Patrol has employed a variety of land-based surveillance technologies to assist in securing the border. GAO has reported regularly on CBP's progress and challenges deploying surveillance technologies.", "GAO was asked to review CBP's use of surveillance technology. This report examines (1) the deployment status of surveillance technology programs and the extent to which CBP has developed plans for future technology deployments and (2) what data are available on the contributions of deployed technologies to CBP's border security efforts and the extent to which CBP has assessed technology performance.", "GAO analyzed technology program documents; interviewed CBP and Border Patrol officials; and conducted site visits to Arizona and south Texas to observe the operation of various land-based technologies. We selected these locations because CBP has deployed or has plans to deploy a mix of technologies there, among other factors."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Border Patrol, within the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP), has made progress deploying surveillance technology along the southwest U.S. border under its 2011 Arizona Technology Plan (ATP) and 2014 Southwest Border Technology Plan. The ATP called for deployment of a mix of radars, sensors, and cameras in Arizona; the 2014 plan expanded these deployments to the rest of the southwest border. As of October 2017, Border Patrol had completed the planned deployment of select technologies to Arizona, Texas, California, and New Mexico. For example, in Arizona, Border Patrol deployed all planned Remote Video Surveillance Systems (RVSS) and Mobile Surveillance Capability (MSC) systems, and 15 of 53 planned Integrated Fixed Tower (IFT) systems. Border Patrol also deployed all planned MSC systems to Texas, California, and New Mexico and completed contract negotiations to deploy RVSS to Texas. These technology programs have experienced delays, but are currently on track against revised program schedules and cost baselines. To plan for future technology deployments, Border Patrol reports it will use its Requirements Management Process (RMP)\u2013\u2013a process designed to facilitate planning by, among other things, identifying capability gaps and collecting agents' feedback\u2013\u2013and other initiatives. Border Patrol is currently developing written guidance for the RMP to ensure station officials understand their roles and responsibilities in the process.", "Border Patrol agents collect and report data on asset assists, which are instances in which technologies or other assets (such as canine teams) contributed to an apprehension or seizure; however, Border Patrol has not provided sufficient guidance to ensure the accuracy and reliability of that data. For example, agents incorrectly attributed some apprehensions or seizures to certain technologies rather than others. Stations in the Rio Grande Valley sector recorded assists from IFTs in about 500 instances from June through December 2016; however, this sector does not have IFTs. Data integrity and quality checks are the responsibility of individual sectors, but Border Patrol has provided limited guidance on how to ensure data quality. Without sufficient guidance to ensure the quality of asset assist data, Border Patrol is limited in its ability to determine the mission benefits of its surveillance technologies and use information on benefits to inform resource allocation decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Border Patrol issue guidance to improve the quality and usability of its asset assist information. DHS concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The southwest border of the United States has long been vulnerable to  cross-border illegal activity. Within the Department of Homeland Security  (DHS), U.S. Customs and Border Protection\u2019s (CBP) U.S. Border Patrol  (Border Patrol) is the federal agency responsible for securing the national  borders between U.S. ports of entry. According to Border Patrol data,  total apprehensions of illegal entrants across the southwest border  increased from about 331,000 in fiscal year 2015 to about 409,000 in  fiscal year 2016.", "Border Patrol has employed a variety of land-based surveillance  technologies to assist in securing the border and apprehending  individuals attempting to cross the border illegally. In November 2005,  DHS launched the Secure Border Initiative, which was responsible for  developing a comprehensive border protection system based on tower- mounted radar and camera technologies, known as the Secure Border  Initiative Network (SBInet). By 2010, at a cost of about $1 billion, CBP  had deployed 15 SBInet tower systems along 53 miles of Arizona\u2019s 387- mile border with Mexico. However, in January 2011, in response to  internal and external assessments that identified concerns regarding the  performance, cost, and schedule for implementing the systems, the  Secretary of Homeland Security announced the cancellation of future  SBInet systems. That same month, CBP introduced the Arizona Border  Surveillance Technology Plan (ATP) for deploying technology along the  remainder of the Arizona border. The ATP was based on a mix of fixed  and mobile technology systems, including radars, sensors, and cameras  that could be tailored to the varying terrain and operating conditions along  the border to help provide security for the remainder of the Arizona  border. In June 2014, CBP developed a separate plan that incorporated  the ATP and extended land-based surveillance technology deployments  to the remainder of the southwest border\u2014the Southwest Border  Technology Plan.", "Over the years, we have reported on the progress DHS has made and  challenges it has faced in implementing its border security efforts. More  specifically, in November 2011 we reported on DHS\u2019s planning efforts  related to the ATP and found that CBP did not have the information  needed to fully support and implement the plan. Among other things, we  recommended that CBP ensure the underlying analyses of the plan were  documented in accordance with DHS guidance and internal control  standards, develop and apply key attributes for metrics to assess  program implementation, and conduct a post-implementation review and  operational assessment of SBInet. DHS concurred with these  recommendations and has taken action toward addressing some of them,  as we discuss later this in report. In March 2014, we reported on DHS\u2019s  progress in deploying land-based surveillance technologies under the  ATP and efforts to assess the contributions of those technologies to  border security. We found, among other things, that CBP\u2019s schedules and  life-cycle cost estimates reflected some, but not all, best practices, and  CBP had not developed an Integrated Master Schedule for the ATP. We  recommended that CBP apply scheduling best practices, and verify life- cycle cost estimates, among other things. DHS concurred with some, but  not all, of these recommendations, and has taken action toward  addressing some of them, as we discuss later in this report.", "You asked us to review the status of DHS\u2019s efforts to implement the  Southwest Border Technology Plan. This report addresses the following  two questions:  1.  What is the deployment status of the technology programs under the  Southwest Border Technology Plan, and to what extent has CBP  developed plans for future technology deployments?  2.  What data are available on the contributions of the deployed  technologies to CBP\u2019s border security efforts, and to what extent has  CBP assessed the technologies\u2019 performance?", "To determine the deployment status of the technology projects under the  Southwest Border Technology Plan and the extent to which CBP has  developed plans for future technology deployments, we analyzed DHS  and CBP documents and interviewed CBP officials regarding the  technology programs\u2019 costs and schedules. We focused on the plan\u2019s  three highest-cost technology programs\u2014the Integrated Fixed Tower  (IFT), Remote Video Surveillance System (RVSS), and Mobile  Surveillance Capability (MSC). As part of our work, we reviewed key  planning and funding documents, including acquisition decision memos  for these programs and relevant DHS acquisition management policies  and processes. We analyzed CBP\u2019s revised schedules and cost  estimates for these programs and compared them against the originally  planned baselines for the selected technologies. As discussed in this  report, we also identified technology deployment challenges that CBP  was experiencing in testing, procuring, deploying, and operating  technologies in the Southwest Border Technology Plan. We analyzed  relevant documents and interviewed program officials from the Border  Patrol\u2019s Program Management Office Directorate (PMOD) about the  causes of those challenges, the associated risk of program delays, and  their plans to manage those risks. Further, we interviewed CBP officials  and analyzed documents to determine the progress CBP and DHS have  made in implementing prior GAO recommendations to improve  management of surveillance technology programs.", "In addition, we conducted site visits to Arizona in November 2016 and  April 2017 and to south Texas in March 2017. During these site visits, we  observed border surveillance operations, interviewed Border Patrol  agents operating technologies, and discussed agents\u2019 experiences  utilizing the technologies. In Arizona, we visited five Border Patrol stations  within the Tucson sector\u2014Ajo, Brian A. Terry, Douglas, Nogales, and  Tucson stations. We also conducted telephone interviews with officials  from two additional stations within the Tucson sector\u2014Casa Grande and  Sonoita\u2014and from the Yuma sector. We selected the Tucson and Yuma  sectors because CBP has deployed a mix of technologies there and we  selected specific stations in order to observe a variety of those  technologies. To learn about CBP\u2019s planning for border surveillance  technologies along the south Texas border, we visited four Border Patrol  stations within the Rio Grande Valley sector\u2014McAllen, Rio Grande City,  Weslaco, and Harlingen stations. We selected the Rio Grande Valley  sector and stations within that sector because Border Patrol determined  that the capability gaps in these stations constituted a critical vulnerability  to border security, among other factors. While the information we  obtained from interviews with officials in these sectors cannot be  generalized to all Border Patrol sectors or stations within these sectors,  the interviews provided important insights on Border Patrol\u2019s process for  identifying border surveillance technology needs and Border Patrol\u2019s  current plans for technology deployments in each area of responsibility.  To assess Border Patrol\u2019s process for identifying what land-based  surveillance technologies it plans to deploy in the future, we reviewed  relevant documentation from the Border Patrol Operational Requirements  Management Division, which is responsible for executing Border Patrol\u2019s  Requirements Management Process (RMP) and deploying technologies  along the southwest border.", "To determine what data are available on the contributions of the deployed  land-based surveillance technologies to CBP\u2019s border security efforts and  the extent to which CBP assessed the technologies\u2019 performance, we  analyzed available data from DHS\u2019s Enforcement Integrated Database  (EID) on apprehensions, seizures, and other events and their  corresponding asset assists. Specifically, we analyzed data from fiscal  years 2015 through May 3, 2017 (the most current years for which data  were available) on asset assists in order to determine which assets have  contributed the most to Border Patrol\u2019s activities. We reviewed Border  Patrol\u2019s processes for ensuring the reliability and completeness of these  data and compared those processes to standards set forth in Standards  for Internal Control in the Federal Government. We report on the  reliability of those data later in this report. We also reviewed available  reports on technology testing and performance, including operational  assessments and post-implementation reviews. Additionally, we visited  Border Patrol stations within the Tucson sector, as discussed earlier, to  gather agent perspectives on the impacts technologies have had on  mission effectiveness, the extent to which agents\u2019 feedback during user  testing has been incorporated into the final deployed systems, and the extent to which technologies have met requirements once deployed. We  interviewed program officials from the Border Patrol\u2019s PMOD to determine  what actions have been taken, or were planned, in order to address  deficiencies identified in testing or raised by users for each technology.  We also interviewed Border Patrol headquarters officials with  responsibilities for collecting and using asset assist and other related  data, including officials from the Strategic Planning and Analysis  Directorate.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Border Patrol Organization", "paragraphs": ["Border Patrol has divided geographic responsibility for the southwest  border among nine sectors, as shown in figure 1.", "Each sector has a varying number of stations, which serve as bases of  operation for agents, and agents are responsible for patrolling within  defined geographic areas\u2014known as areas of responsibility. Border  Patrol uses a variety of land-based surveillance technologies under the  Southwest Border Technology Plan to assist its efforts to secure the  border by interdicting illicit cross-border activity and apprehending  individuals attempting to cross the border illegally. Border Patrol is  responsible for planning, acquiring, and deploying that technology along  the southwest border. Border Patrol\u2019s PMOD executes the acquisition and  procurement of Border Patrol systems, supplies, and services, including  current and planned technology deployments along the southwest border,  which was previously conducted by CBP\u2019s Office of Technology  Innovation and Acquisition. CBP has an Office of Acquisitions that  performs oversight."], "subsections": []}, {"section_title": "Southwest Border Technology Plan", "paragraphs": ["As noted above, the 2014 Southwest Border Technology Plan  incorporated the 2011 Arizona Technology Plan and included plans to  extend land-based surveillance technology deployments beyond Arizona  to the remainder of the southwest border, beginning with selected areas  in Texas and California. Border Patrol developed the Southwest Border  Technology Plan using a two-step process. First, the Homeland Security  Studies and Analysis Institute conducted an analysis of alternatives,  which analyzed five technology options in 13 representative areas along  the southwest border, identified the types of environmental conditions  under which a given technology option might be more effective or less  effective, and provided a general overview of the cost and effectiveness  tradeoffs between the technologies. For example, the analysis of  alternatives noted that IFTs are potentially effective if vegetation is  sufficiently sparse and terrain is flat or rolling, such as in the Ajo station  area of responsibility (see figure 2). However, according to Border Patrol  officials, the IFT\u2019s radar capabilities may not be suited for urban  environments, where illegal crossers and narcotics traffickers can blend in  with the legitimate traffic. In some of these locations, such as the Nogales  port of entry, Border Patrol has determined that the RVSS is more  effective.", "Second, Border Patrol developed a technology deployment plan that  identified the types and quantities of each technology needed for each  sector. To develop this plan, Border Patrol officials reviewed the results of  the analysis of alternatives and considered each sector\u2019s operational  conditions, including patterns of traffic, terrain, infrastructure, weather,  available resources, and challenges. For example, Border Patrol selected  MSC units for Arizona\u2019s Tucson and El Centro sectors, but not for Texas\u2019s  Rio Grande Valley sector because the radar was less effective in the  dense vegetation of south Texas, an example of which is shown in   figure 3.", "Figure 4 shows the border surveillance technology systems included in  the Southwest Border Technology Plan."], "subsections": []}, {"section_title": "DHS\u2019s Acquisition Life Cycle", "paragraphs": ["Border Patrol follows DHS\u2019s acquisition policy to acquire planned  technologies under the Southwest Border Technology Plan. DHS\u2019s overall  policy for acquisition management is outlined in Acquisition Management  Directive 102-01 and its associated Instructional Manual 102-01-001.  DHS\u2019s Under Secretary for Management (USM) is currently designated  as the department\u2019s Chief Acquisition Officer and, as such, is responsible  for managing the implementation of the department\u2019s acquisition policies  and acting as the acquisition decision authority for the department\u2019s  largest acquisition programs. Within DHS, the USM is supported by the  Office of Program Accountability and Risk Management (PARM), which is  responsible for overseeing the acquisition process and assessing the  status of acquisition programs through four phases of the acquisition life  cycle. These phases include a series of five Acquisition Decision Events  (ADE) that provide the acquisition decision authority an opportunity to  assess whether the program is ready to proceed through the acquisition  life cycle phases. Figure 5 depicts the four phases of the acquisition life  cycle and the associated ADEs.", "In addition, components and program offices have established program- level groups, such as Executive Steering Committees, to provide, among  other things, assistance and support during the acquisition process."], "subsections": []}, {"section_title": "Border Patrol\u2019s Requirements Management Process", "paragraphs": ["According to Border Patrol officials, in 2014, Border Patrol began  implementing a new process to identify future technology needs. The  Requirements Management Process (RMP), according to Border Patrol  officials, is a new process designed to facilitate planning in order to fund  and deploy operational capabilities, such as surveillance technology and  tactical infrastructure, for border security operations. According to Border  Patrol officials, Border Patrol will use information resulting from the RMP  to fulfill DHS acquisition policy requirements, including information  required for Acquisition Decision Events, as appropriate. Border Patrol is  working to develop guidance to align the RMP with the DHS acquisition  life cycle. The RMP consists of six steps as shown in figure 6.", "In the first step of the process, Border Patrol reviews strategic guidance  to identify mission priorities and goals and assesses the state of the  threat to be addressed. The second step, mission analysis, begins with  the Capability Gap Analysis Process, which is intended to identify each  station\u2019s capability gaps by determining the difference between a station\u2019s  existing capabilities and the capabilities required to perform its mission- essential tasks. The identified shortfall in required capability is a capability  gap. Under the RMP\u2019s third step\u2014planning\u2014Border Patrol officials  examine capability gaps in detail and determine courses of action\u2014that  is, solutions, which may include surveillance technologies, to close the  capability gaps. For example, potential solutions could include adjusting  the technologies or personnel deployed in a specific area or improving  maintenance and repair of access roads. The solutions are documented  in sector-specific Initial Requirements Documents. The fourth step\u2014 execution\u2014involves Border Patrol leadership executing courses of action.  Border Patrol officials stated that courses of action are options for Border  Patrol commanders and executives to select and implement. Certain  courses of action, including acquiring and deploying land-based  surveillance technology, may need to proceed through the DHS  acquisition life cycle as appropriate. Once implemented, these options are  expected to resolve identified capability gaps in operations, according to  Border Patrol officials. The fifth and sixth steps of the process\u2014 assessment and life-cycle management\u2014involve implementing and  monitoring solutions to determine their ability to resolve capability gaps,  and gathering sector feedback on how the solutions affect border security  operations."], "subsections": []}]}, {"section_title": "CBP Has Made Progress Deploying Technology along the Southwest Border, and Is Still Developing Guidance for Future Planning Processes", "paragraphs": [], "subsections": [{"section_title": "Border Patrol Has Completed Deployment of Select Surveillance Technology to Arizona, Texas, California, and New Mexico, and Has Further Deployment Activities Underway", "paragraphs": ["As of October 2017, Border Patrol had initiated or completed the planned  deployment of select technologies to sectors across areas in Arizona,  Texas, California, and New Mexico. In 2014, we reported that Border  Patrol had made progress deploying technologies and had completed  deployments for two technology programs in Arizona\u2014the Agent Portable  Surveillance System (APSS) and the Thermal Imaging Device (TID)  technologies. Since our 2014 report, Border Patrol has completed  deployments of several additional technology programs. Specifically,  according to Border Patrol officials, it has completed deployments of all  planned RVSS, MSC, and Unattended Ground Sensors (UGS), as well as  15 of 53 IFT systems to Arizona. Border Patrol has also completed  deployments of select technologies to Texas and California, including  deploying 32 MSC systems to Texas and California.", "Border Patrol also has efforts underway for completing deployments of  other technology programs, but some of those programs have not yet  begun deployment or are not yet under contract. For example, as of  October 2017, Border Patrol had not yet initiated deployments of RVSS to  Texas because, according to PMOD officials, the program had only  recently completed contract negotiations for procuring those systems.  According to PMOD officials responsible for the RVSS program, Border  Patrol has begun planning the designs of the command and control  centers and towers, as well as real estate needs for the Rio Grande  Valley sector. Additionally, Border Patrol initially awarded the contract to  procure and deploy MVSS units to Texas in 2014 but, because of bid and  size protests, did not award the contract until 2015, and the vendor that  was awarded the contract did not begin work until March 2016. The  deployment status of surveillance technologies is shown in table 1."], "subsections": []}, {"section_title": "Border Patrol\u2019s Technology Programs Have Experienced Delays, but Are on Track against Revised Schedules and Cost Baselines", "paragraphs": ["Border Patrol has revised schedules and cost estimates for its three  highest-cost programs\u2014IFT, RVSS, and MSC\u2014and as of October 2017,  is on track to meet those revised schedules and estimates; however, risks  remain in Border Patrol\u2019s deployment efforts. Border Patrol has  rebaselined (i.e., revised original schedule and cost goals) its three  highest-cost programs\u2014IFT, RVSS, and MSC\u2014due to schedule,  quantity, and cost estimating variances, among other changes to the  programs\u2019 original plans. According to our cost and schedule  assessment guides, while rebaselining can be beneficial for quickly  identifying new variances, reporting a program\u2019s performance based on a  rebaselined cost or schedule may not reflect the program\u2019s overall cost  and schedule performance or timeline."], "subsections": [{"section_title": "Deployment Schedules", "paragraphs": ["In March 2014, we reported that CBP had a deployment schedule for  each of the seven technology programs planned for deployment at the  time\u2013\u2013IFT, RVSS, MSC, APSS, MVSS, TID, and UGS\u2013\u2013and that four of  the programs would not meet their originally planned completion dates.  Specifically, we found that the three highest-cost programs (IFT, RVSS,  and MSC) had experienced delays relative to their baseline schedules as  of March 2013, which were current at the time of our review. We  recommended that CBP ensure that scheduling best practices are applied  to the IFT, RVSS, and MSC program schedules. DHS concurred with the  recommendation and stated that CBP planned to apply scheduling best  practices when revising the three programs\u2019 schedules. Based on our  assessment of the IFT, RVSS, and MSC programs\u2019 revised schedules  that CBP had completed as of January 2017, CBP did not apply all  scheduling best practices. However, the revised programs\u2019 schedules for  the IFT, RVSS, and MSC reflect substantial improvements in quality and  are consistent with the intent of our recommendation. In particular, CBP  has improved the quality of its products for analyzing and quantifying risk  to the programs\u2019 schedules. Continuing to apply scheduling best practices  in future updates will help better position CBP to identify and address any  potential delays in its programs\u2019 commitment dates.", "DHS approved Border Patrol\u2019s rebaseline of the IFT program in  December 2015, which extended the program\u2019s completion date to  2020\u2014five years beyond what Border Patrol had estimated in its original  baseline schedule. The RVSS and the MSC programs\u2019 completion dates  were also extended because the scopes of the programs had increased,  among other reasons. While Border Patrol\u2019s revisions to its schedules are  positive steps in helping the agency oversee its management of these  programs, the programs continue to be behind schedule relative to their  original planned baseline documents dated March and September 2012  for the IFT and RVSS programs, respectively, as shown in figure 7.", "In addition to revising program schedules, Border Patrol has revised the  life-cycle cost estimates for the three highest-cost programs to reflect  actual costs and include cost estimates for additional and ongoing work.  For example, the MSC cost estimate increased by $294.7 million\u2014from  $107.2 million to $401.9 million\u2014due to, among other reasons, the  program\u2019s expanded scope to Texas, California, and New Mexico. In  December 2015, estimated life-cycle costs for the IFT program decreased  from its original March 2012 baseline estimate by $211.5 million, in part  because of lower-than-expected contract costs. However, from March  2012 to December 2015, IFT\u2019s acquisition cost threshold increased by  more than $50 million\u2014from $288 million to $341 million\u2014when CBP  included the costs of contractor personnel supporting the program office,  the cost of replacing SBInet systems, and actual costs through fiscal year  2014, rather than estimates. According to Border Patrol officials, a CBP  policy change required them to include the contractor personnel support  costs in the rebaseline, which was previously not required in the original  cost baseline. Figure 8 shows original and revised cost estimates for the  IFT, RVSS, and MSC programs.", "In March 2014, we reported that the three highest-cost programs (IFT,  RVSS, and MSC) accounted for 97 percent of the Arizona Technology  Plan\u2019s estimated cost and that the life-cycle cost estimates for the two  highest-cost programs\u2014IFT and RVSS\u2014reflected some, but not all, best  practices for cost estimating. Reliable life-cycle cost estimates reflect  four characteristics\u2014they are (1) well-documented, (2) comprehensive,  (3) accurate, and (4) credible. Our analysis of CBP\u2019s estimates for the two  highest-cost programs at the time of our March 2014 review showed that  these estimates at least partially met three of these characteristics: well- documented, comprehensive, and accurate. In terms of being credible,  these estimates had not been verified with independent cost estimates in  accordance with best practices. We concluded that verifying life-cycle  cost estimates with independent estimates in accordance with cost- estimating best practices could help better ensure the reliability of the  cost estimates. We recommended that CBP verify the life-cycle cost  estimates for the IFT and RVSS programs with independent cost  estimates and reconcile any differences. DHS concurred with this  recommendation, but stated then that it did not believe there would be a  benefit from expending funds to obtain independent cost estimates and  that if the costs realized to date continued to hold, there may be no  requirement or value added in conducting full program updates with  independent cost estimates.", "As part of our updates on CBP\u2019s efforts to implement our 2014  recommendations, CBP officials told us that in fiscal year 2016, DHS\u2019s  Cost Analysis Division (CAD) would begin piloting its own independent  cost estimate capability with the RVSS program. According to CBP  officials, this pilot was an opportunity to assist DHS in developing its  independent cost estimate capability. CBP selected the RVSS program  for the pilot because the program was at a point in its planning and  execution process where it could benefit most from having an  independent cost estimate performed, as these technologies were being  deployed along the southwest border beyond Arizona. According to CBP  officials, CAD completed its independent cost estimate for the RVSS  program in August 2016. CBP officials also told us that the RVSS life- cycle cost estimate was finalized and reconciled in March 2017. CBP  reported that the component acquisition executive approved the  reconciliation estimate in September 2017. According to CBP officials,  CBP does not have plans to conduct an independent cost estimate and  verification for the IFT. We continue to believe that independently  verifying the life-cycle cost estimate for the IFT program and reconciling  any differences, consistent with best practices, could help CBP better  ensure the reliability of the estimate."], "subsections": []}, {"section_title": "Risks Affecting Schedule and Cost Goals", "paragraphs": ["While selected technology programs are on track to meet schedule and  cost goals, according to Border Patrol officials, some programs have  identified risks that may lead to schedule slips or cost growth in the future.  Specifically, Border Patrol has experienced delays in completing  deployments for planned technologies due to (1) land use and access- related issues; (2) technical issues; and (3) contracting challenges,  among other factors. For instance, the IFT program continues to  experience delays deploying IFTs to tribal lands in the Tucson sector in  Arizona. Border Patrol officials stated that the IFT program has not  received authorization from tribal land leaders to build an access road  and deploy IFT tower systems on the tribe\u2019s land. They also stated that  the historic preservation officer for the tribal lands would need to issue a  finding that the IFT would not have any negative impact on cultural  resources before Border Patrol could proceed with deployment. In  addition, RVSS program officials we met with noted that access to  privately owned land is an issue of concern in Texas that could potentially  delay RVSS deployment for the Rio Grande Valley sector. Border Patrol  has also encountered delays in the IFT program as a result of technical  issues identified during delivery of the IFT. For example, we previously  reported that testing completed in November 2015 on IFT systems in  Nogales had been delayed by 2 months in order for the contractor to  address issues related to IFT cameras and operator interfaces.  Additionally, Border Patrol has encountered schedule delays due to  contracting challenges, such as renegotiations with the contractor after  the contract was awarded. For example, according to Program officials,  the MVSS contractor proposed a technical change to the system to  address safety and maintenance concerns. Border Patrol agreed to the  change, which led to delays.", "We have previously reported that program delays can result in increased  costs and force agents to rely on legacy surveillance technologies.  According to Border Patrol officials, program managers and Border Patrol  are working to mitigate the risk of delays through quarterly executive  steering committee meetings of program managers and representatives  from other component and headquarters offices, such as DHS\u2019s PARM.  During these meetings, program managers discuss cost and schedule  risks and evaluate options for mitigating those risks. For example,  according to PARM officials, at one such meeting, officials reviewed the  RVSS program and determined that it met cost criteria to receive  additional DHS oversight. According to Border Patrol officials, Border  Patrol has also used quarterly executive steering committee meetings to  involve stakeholders and address potential risks as it moves forward with  full production in the IFT program. As Border Patrol proceeds with these  programs, it will be important to continue to find ways to mitigate the risk  of delays in order to meet its revised schedules."], "subsections": []}]}, {"section_title": "Border Patrol Is Developing Guidance to Help Sectors Identify and Plan for Future Technology Needs and Deployments", "paragraphs": ["Border Patrol\u2019s RMP and other initiatives are intended to help inform  future technology deployment decisions, but, as we reported in February  2017, additional actions are needed to ensure station officials understand  the process and their respective roles and responsibilities. Border Patrol  officials reported that the Southwest Border Technology Plan is the  baseline for identifying technology needs and planning technology  deployments, and that changes to the plan are needed as threats and  priorities evolve. To help address these changes and remain adaptive, in  2014, Border Patrol began implementing the RMP that, among other  things, is intended to identify capability gaps in border security operations  and identify solutions to those capability gaps.", "In February 2017 we found that Border Patrol had documented the RMP,  but had not developed written guidance on how officials were to use the  information and analyses resulting from the process when requesting  tactical infrastructure\u2014that is, fencing, gates, roads, bridges, lighting, and  drainage infrastructure\u2014for deployment purposes. For example, we  reported that sectors varied in their understanding of how to use results  from the Capability Gap Analysis Process when engaging in planning  processes or when making resource allocation decisions. We  recommended that Border Patrol develop and implement written guidance  for the steps within its requirements process for identifying, funding, and  deploying tactical infrastructure for border security operations, including  clarifying the roles and responsibilities of the parties involved in the RMP.", "In response to our recommendation, Border Patrol officials reported that  they are currently updating the RMP documentation, training, and  guidance to the field. Border Patrol officials expect to have an updated  Internal Operating Procedure and Manual for the RMP by the second  quarter of fiscal year 2018. According to CBP officials, actions taken in  response to our recommendation would apply to surveillance technology  as well\u2014not solely tactical infrastructure. By developing this written  guidance, Border Patrol intends to reduce the risk of relevant agency  officials not having the information needed to perform their appropriate  role in the process. We will continue to monitor the progress of Border  Patrol efforts related to the RMP to determine whether these actions meet  the intent of our recommendation to fully develop and implement written  guidance for the steps within the RMP. Until then, Border Patrol is less  likely to have reasonable assurance that it has the best available  information to inform future investments in surveillance technologies and  resource allocation decisions among surveillance technologies.", "In addition to the RMP, future surveillance technology deployments will be  affected by other ongoing DHS and CBP initiatives. Specifically, Border  Patrol officials in the Strategic Planning and Analysis Division reported  that the Domain Awareness: Land Surveillance initiative requirements  documents and Southwest Border Capability Roadmap will also be taken  into consideration throughout the RMP and will influence future  surveillance technology deployments. CBP\u2019s Domain Awareness: Land  Surveillance initiative is intended to depict current CBP land domain  awareness capabilities and inform future capabilities, which could help  Border Patrol identify solutions during various phases of the RMP. Border  Patrol officials stated that Border Patrol, with CBP\u2019s Air and Marine  Operations and U.S. Immigration and Customs Enforcement, is  developing mission needs statements, concepts of operations, and  capability operational requirements documents for (1) mobile, (2) fixed  and relocatable, and (3) agent-portable capabilities which will help inform  future technology deployments. Border Patrol also proposed a Southwest  Border Capabilities Roadmap in April 2017 to assist with identifying  solutions, such as surveillance technology, mobility and access, and  personnel. This roadmap is intended to inform a balanced, risk-based  investment strategy driven by capability gaps, geographic priorities,  terrain, and other environmental factors, and to consider the evolving  cross-border threat. The roadmap identifies specific requirements for  persistent surveillance assets, such as RVSS, and was used to support  CBP\u2019s fiscal year 2018 budget justification for RVSS deployments in the  Rio Grande Valley sector. To create this roadmap, Border Patrol officials  reported reaching out to stations within 40 miles of the border to discuss  their current gaps and how they would close them (either through physical  barriers, manpower, or technology). Because Border Patrol is still in the  planning phases for future technology deployments, it is too soon to tell  how these efforts will assist Border Patrol in structuring and planning  those deployments."], "subsections": []}]}, {"section_title": "CBP Is Taking Action to Better Link Performance Data to Planning Efforts, but Needs to Improve Data Quality", "paragraphs": [], "subsections": [{"section_title": "Border Patrol Has Made Progress Identifying Performance Metrics for Technologies", "paragraphs": ["Border Patrol has made progress identifying performance metrics for the  technologies under the Southwest Border Technology Plan, but additional  actions are needed to fully implement our prior recommendations in this  area. In November 2011, we found that CBP did not have the  information needed to fully support and implement the ATP and  recommended that CBP (1) determine the mission benefits to be derived  from implementation of the ATP and (2) develop and apply key attributes  for metrics to assess program implementation. We reported in 2014 that,  in response to our recommendations, CBP had identified mission benefits  expected from the implementation of the surveillance technologies under  the ATP, but had not fully developed key attributes for performance  metrics for the technologies. We recommended, among other things, that  CBP analyze available data on apprehensions and seizures and  technological assists, in combination with other relevant performance  metrics or indicators, to determine the contribution of surveillance  technologies to CBP\u2019s border security efforts. CBP officials stated that  they planned to develop objectives for each performance measure, at  which time the agency would begin using the data to evaluate the  contributions of specific technology assets. CBP also intended to  establish a tool by the end of fiscal year 2016 that explained the  qualitative and quantitative impacts of technology and tactical  infrastructure on situational awareness in specific areas of the border  environment.", "In September 2016, Border Patrol provided us a case study that  assessed technology assist data, along with other measures, to  determine the contributions of surveillance technologies to its mission. In  April 2017, we reported that this was a helpful step in developing and  applying performance metrics; however, the case study was limited to  one border location and the analysis was limited to select technologies.  In May 2017, Border Patrol officials demonstrated the agency\u2019s new  Tracking, Sign Cutting, and Modeling (TSM) system, which they said is  intended to connect between agents\u2019 actions (such as identification of a  subject with a camera) and results (such as an apprehension) and allow  for more comprehensive analysis of the contributions of surveillance  technologies to Border Patrol\u2019s mission. One official said that data from  the TSM will have the potential to provide decision makers with  performance indicators, such as changes in apprehensions or traffic  before and after technology deployments. However, the TSM is still early  in its use and officials confirmed that it is not yet used to support such  analytic efforts. The official stated that over time it would be used to  analyze performance on a systematic basis and provide information to  decision makers. We continue to believe that it is important for Border  Patrol to assess technologies\u2019 contributions to border security and will  continue to monitor the progress of the TSM and other Border Patrol  efforts to determine whether these actions sufficiently meet the intent of  our November 2011 recommendation to fully develop and apply  performance metrics for its border technologies. Until then, Border Patrol  is not well positioned to fully assess its progress in implementing the  Southwest Border Technology Plan and determine when mission benefits  have been fully realized."], "subsections": []}, {"section_title": "Border Patrol Measures Technologies\u2019 Assistance in Apprehensions and Seizures, but Data Are of Limited Quality and Usability", "paragraphs": ["Border Patrol agents collect and report data on asset assists, which are  instances in which technologies or other assets (such as canine teams,  bicycle patrols, or air support from CBP\u2019s Air and Marine Operations)  contributed to an apprehension or seizure; however, the agency does not  have sufficient controls to ensure the accuracy and reliability of that data.  In March 2014, we reported that CBP was not capturing complete asset  assist data on the contributions of its surveillance technologies to  apprehensions and seizures and that Border Patrol agents were not  consistently recording these data across locations. We recommended  that CBP require data on asset assists to be recorded and tracked within  the DHS Enforcement Integrated Database (EID), which contains data on  apprehensions and seizures. Since then, Border Patrol has taken actions  to better record asset assists and to expand the types of technologies that  can be tracked, consistent with our prior recommendation. Specifically, in  June 2014, Border Patrol issued guidance informing agents that the asset  assist data field within the e3 Portal to the EID had become a mandatory  data field. Additionally, when recording asset assists, agents initially  could only choose from \u201ccamera,\u201d \u201cmobile surveillance system,\u201d \u201cscope  truck,\u201d \u201cunattended ground sensor,\u201d or \u201cother\u201d when selecting  technologies. In May 2016, Border Patrol expanded the types of assets  available for agents to choose from to include MSC, IFT, and APSS,  among others.", "Border Patrol requirements for entering asset assist data into the e3  Portal and expansion of the types of assets listed have been positive  steps to help better position Border Patrol to assess the contributions of  surveillance technologies to border security efforts, as we recommended  in 2014. However, we have identified issues with the completeness and  reliability of the asset assist data. In particular, we analyzed data on asset  assists from October 1, 2014 through May 3, 2017 and our analysis  showed that agents incorrectly attributed some apprehensions and  seizures to certain technologies rather than others. For example, stations  in the Rio Grande Valley sector recorded assists from IFTs in nearly 500  instances from June through September 2016, which cannot be accurate,  since the sector does not have IFTs. When we brought this issue to the  attention of Border Patrol headquarters officials, they told us in December  2016 that they would discuss the matter with Rio Grande Valley sector  officials. However, data from December 2016 through May 3, 2017  indicated that agents in the Rio Grande Valley sector continued to record  asset assists from IFTs. Additionally, we found that one station in the  Tucson sector with SBInet towers was recording asset assists from the  SBInet towers as \u201cother,\u201d when Border Patrol headquarters officials told  us that SBInet towers should be recorded as \u201cIFT.\u201d Moreover, our  analysis showed that \u201cother\u201d (including \u201cother\u201d listed alongside additional  assets) made up nearly 16 and 23 percent, respectively, of asset assists  recorded in the Tucson and Rio Grande Valley sectors from October 1,  2016 through May 3, 2017. Border Patrol officials told us that \u201cother\u201d  should be any technology not otherwise listed, and could include  technologies or support that officials were interested in tracking locally.  Officials said the large number of \u201cother\u201d assets could also be a result of  agents not understanding their responsibilities or agents working to  complete the asset assist data entry as quickly as possible so they could  move on to other duties.", "According to Border Patrol officials, data integrity and quality checks are  the responsibility of the individual sectors, and each station has a  designated point of contact for data integrity and a system administrator  to oversee data quality. However, Border Patrol has not provided written  guidance to the sectors on how to oversee data integrity or conduct  quality checks of asset assist data, and Border Patrol\u2019s guidance on how  to enter asset assist data is limited. According to Border Patrol officials,  Border Patrol\u2019s asset assist guidance for sectors consists of two training  presentations. We reviewed the training slides for these presentations  and found they included photographs and general descriptions of some  technologies, along with two case examples for recording an asset assist.  However, the slides did not discuss how sectors should conduct data  integrity or quality checks. Furthermore, the slides did not address how  agents should record assists for SBInet towers. The slides also did not  explain why asset assist data are collected (other than that the Chief of  the Border Patrol requires it), what it could be used for, or why it was  important to ensure data were accurately recorded. Officials told us in  June 2017 that the asset assist data were only used to respond to data  requests from external agencies\u2014the data were not being used for  planning, budgeting, performance measurement, or other purposes.", "Standards for Internal Control in the Federal Government states that  management should obtain relevant data from reliable internal and  external sources in a timely manner based on the identified information  requirements. Reliable internal and external sources provide data that  are reasonably free from error and bias and faithfully represent what they  purport to represent. Management should evaluate both internal and  external sources of data for reliability. Additionally, management should  periodically review policies, procedures, and related control activities for  continued relevance and effectiveness in achieving the entity\u2019s objectives  or addressing related risks. If there is a significant change in the entity\u2019s  process (such as the addition of new asset assist fields), management  should review this process in a timely manner to determine that the  control activities are designed and implemented accordingly. Without  sufficient guidance for sectors on how to enter and review asset assist  information, Border Patrol does not have reliable data on asset assists  that could help monitor the contribution of surveillance technologies to  Border Patrol apprehensions and seizures and inform resource allocation  decisions."], "subsections": []}, {"section_title": "Border Patrol Reviews Agent Feedback Data on Technology Performance to Improve Current and Future Deployments", "paragraphs": ["Border Patrol has a variety of mechanisms for collecting agent feedback  on technology performance and for using that information to improve  current and future deployments. For example, officials from the Border  Patrol Program Management Office Directorate (PMOD) reported that  they conduct required technology performance evaluations at specified  intervals (e.g., a 6-month post-deployment review and an annual  operational analysis) to regularly collect and evaluate agent feedback,  and conduct monthly reviews of maintenance and repair requests.  Officials said that this feedback is consolidated, prioritized based on cost  effectiveness, and used to identify system upgrades (both for systems  that have been deployed and for future deployments).", "The PMOD also collects feedback as part of the annual process for  developing an operational analysis report. In the 2016 operational  analysis for the MSC program, the PMOD assessed Border Patrol agents\u2019  overall satisfaction with the MSC system, whether it enabled agents to  perform their functions more easily and efficiently, and whether it met  agents\u2019 needs. Agents identified several MSC benefits, including  performance improvements from the prior system (known as the Mobile  Surveillance System), radars that exceeded the performance of other  mobile systems\u2019 radars, and targets being detected at farther ranges than  the system specification. However, the analysis identified more  opportunities for improvement, including the need for improvements to the  MSC\u2019s camera, video analytics, tracking, graphical user interface,  engineering, and other changes.", "Border Patrol also reported using post-implementation reviews to collect  agent feedback and identify improvements. For technologies under the  ATP and Southwest Border Technology Plan, Border Patrol completed  post-implementation reviews for the MSC in July and October of 2014, for  the IFT in June 2016, and for the RVSS in October 2016. In August 2017,  Border Patrol reported expecting to conduct reviews for the remaining  technologies within 6 to 18 months of each technology reaching initial  operating capability. A post-implementation review\u2019s primary purpose is to  determine the impact of the system on stakeholders, quantitative and  qualitative performance of the system, and the ability of the system to  meet identified goals. For example, the MSC review from October 2014  reported that the system was generally an improvement over the older  Mobile Surveillance System; however, program risks included damage to trucks and sensors from Border Patrol agent operator error and the need  to improve or widen access roads given the larger footprint of the MSC  trucks (compared to the prior Mobile Surveillance System trucks). The  review concluded with six recommendations to improve future  assessments of the system and to plan for new sensor deployments. The  recommendations to the PMOD and Border Patrol acquisition office  included updating the life-cycle cost estimate to track manpower costs;  using a skills-based qualification standard for MSC operators; and  ensuring future Border Patrol surveillance systems include the ability to  extract actual performance, operational, and environmental data. In  August 2017, Border Patrol reported a range of actions underway to  address these recommendations, including (1) developing updates to the  MSC\u2019s support system to better capture all service requests and  maintenance work orders, (2) providing standardized training to each  MSC operator with refresher training available upon request, and (3)  updating key acquisition documents to reflect the increase in the number  of MSCs to a full operating capability of 90 units.", "In addition to required reports, PMOD officials reported gathering agent  feedback directly. For example, a PMOD official with responsibility for the  IFT program reported conducting feedback meetings with agents. The  meetings included both contractors and government personnel in order to  ensure a shared understanding of agent-identified issues. The PMOD  also reported conducting weekly, monthly, and real-time monitoring of  trouble-tickets\u2014that is, agent-generated reports of maintenance or other  technical issues. PMOD officials reviewed the issues identified and  prioritized them based on cost and the potential increases in capability.  For issues beyond contractual requirements, the PMOD vets the requests  and forwards them to senior Border Patrol leadership for approval and  funding."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since 2005, Border Patrol has spent more than one billion dollars  deploying technologies to the southwest border, but is not yet positioned  to fully quantify the impact these technologies have on its mission. We  continue to believe that developing and applying performance metrics for  its border technologies, in accordance with our prior recommendation,  would help Border Patrol more fully assess its progress in implementing  the Southwest Border Technology Plan and determine when mission  benefits have been realized. Border Patrol has taken some steps toward  tracking the performance of its surveillance technologies, including  requiring agents to record when technologies assist in an apprehension  or seizure. However, additional guidance to better ensure the quality of  these data (including agent training and managerial review), would help  Border Patrol determine the mission benefits of its surveillance  technologies, which in turn could be used to inform Border Patrol\u2019s  resource allocation decisions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["The Chief of the Border Patrol should issue guidance for sectors to  improve the quality and usability of its surveillance technology asset  assist information to help ensure it has reliable data so that Border Patrol  can be better positioned to measure the impact of these technologies on  its border security efforts and inform future investments.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS  provided written comments, which are summarized below and reproduced  in full in appendix I. DHS also provided technical comments, which we  incorporated as appropriate. DHS concurred with our recommendation  and described actions planned to address it. Specifically, DHS stated that  Border Patrol will revise its training presentation concerning asset assists  to include additional information on how sectors should conduct asset  assist data integrity checks, why the data are collected, how the data can  be used, and why Border Patrol needs to ensure asset assist data are  accurately recorded. Border Patrol also plans to prepare and release a  video concerning asset assists for all field office personnel. Border Patrol  plans to complete these actions by February 28, 2018.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jeanette Henriquez (Assistant  Director), Ashley Davis, Charlotte Gamble, Yvette Gutierrez, Eric  Hauswirth, Nancy Kawahara, Marycella Mierez, Sasan J. \u201cJon\u201d Najmi,  and Claire Peachey made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-224", "url": "https://www.gao.gov/products/GAO-19-224", "title": "UN Peacekeeping Operations: State Should Take Additional Steps to Work with the UN to Improve Effectiveness and Performance Information", "published_date": "2019-03-19T00:00:00", "released_date": "2019-03-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["As of December 2018, the UN had 14 ongoing peacekeeping operations with approximately 103,000 personnel. The United States is the single largest financial contributor to these operations, assessed by the UN to contribute an estimated $1.7 billion in fiscal year 2018, according to State. It is also a member of the Security Council, the UN body tasked with maintaining international peace and security.", "GAO was asked to review UN peacekeeping operations. In this report, GAO examines (1) the UN's process to establish and renew peacekeeping operations, including the tasks these operations perform; (2) State's assessment of the effectiveness of UN peacekeeping operations; (3) how the United States works within the UN to adjust peacekeeping mandates and associated resources; and (4) member states' concerns regarding the UN's performance information. To address these objectives, GAO analyzed UN and U.S. documents and interviewed UN and U.S. officials. GAO also interviewed officials at peacekeeping operations in the Democratic Republic of the Congo, Haiti, Kosovo, and Lebanon. GAO selected these operations because they represent those that perform a variety of tasks and are located in diverse regions."]}, {"section_title": "What GAO Found", "paragraphs": ["The United Nations (UN) Security Council establishes and renews peacekeeping operations by issuing resolutions, generally referred to as mandates, which can include a range of tasks, such as monitoring ceasefires and protecting civilians. Generally once or twice a year, the Security Council renews an operation's mandate and makes adjustments as needed.", "GAO's review of the Department of State's (State) assessments as of December 2018 and discussions with State officials found that UN peacekeeping operations generally do not fully meet U.S. principles for effective peacekeeping, which include host country consent and an exit strategy, among others. GAO's review of 11 operations found that all 11 met or partially met the principle of host country consent, while five included or partially included an exit strategy. State officials stated that they must continue to work with the UN to ensure peacekeeping operations meet principles of effectiveness, which they noted are key to success.", "The United States works with the UN Security Council and member states to adjust peacekeeping mandates, but it lacks sufficient information to determine if associated resources accurately reflect these adjustments. State officials noted that they do not have this information because UN peacekeeping budgets do not estimate costs by mandated task. UN peacekeeping guidance states that when the UN changes a peacekeeping mandate, it should make commensurate changes to that operation's resources. Without information on estimated costs by task, member states have difficulty determining that resources for UN peacekeeping operations accurately reflect mandate changes.", "The UN has taken steps to improve peacekeeping performance data, but member states have raised concerns about that information's quality, including its completeness and timeliness. Among other concerns, member states note that the UN does not have complete information to assess the performance of civilians, who comprised about 14 percent of peacekeeping personnel, as of December 2018. In March 2018 the UN began peacekeeping reforms, including those to improve performance data. However, according to State officials, these efforts are in the early stages and more work is needed. Without fully addressing member states' concerns about the quality of information, the UN is limited in its ability to improve the performance of peacekeeping operations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State take additional steps to ensure that the UN (1) peacekeeping operations meet principles of effectiveness, (2) provides information on the estimated costs of mandated tasks, and (3) addresses member states' concerns about the quality of performance information. State agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the United Nations (UN), UN peacekeeping is one of the  main tools employed by the organization to promote international peace  and security. Also, UN peacekeeping supports U.S. government  objectives by helping to sustain peace, protect civilians, and promote  conditions necessary for political resolution of conflicts. As of December  2018, the UN had led 14 peacekeeping operations worldwide with over  103,000 military, police, and civilian personnel and a budget of $7 billion  for the UN\u2019s 2018-2019 fiscal year. The United States is a member of the  UN Security Council and the single largest financial contributor to these  operations. According to the Department of State (State), in fiscal year  2018, total U.S. assessments for UN peacekeeping activities were $1.7  billion. In his fiscal year 2018 and 2019 proposed budgets, the President  of the United States cited a desire to reduce U.S. peacekeeping  contributions while advancing measures to improve performance of UN  peacekeeping operations. Further, the United States has highlighted  several principles for effective UN peacekeeping operations, including the  need for host country consent and a clear exit strategy; and the UN  Secretary-General regularly reports to member states on the performance  of such operations.", "In this context, you asked us to examine a number of issues related to UN  peacekeeping operations. In this report, we examine (1) the UN\u2019s process  to establish and renew peacekeeping operations, including the tasks  these operations perform; (2) State\u2019s assessment of the effectiveness of  UN peacekeeping operations; (3) how the United States works within the  UN to adjust peacekeeping mandates and associated resources, and (4)  UN member states\u2019 concerns regarding the UN\u2019s performance  information.", "To examine the UN\u2019s process to establish and renew peacekeeping  operations, including the tasks these operations perform, we first  reviewed various UN documents and websites to describe steps taken by  UN components. Next, to determine the tasks peacekeeping operations  perform, we analyzed the UN Security Council resolutions authorizing  each peacekeeping operation\u2014generally referred to as a mandate\u2014as of  December 2018. We described the types of mandated tasks performed  by peacekeeping operations using categories and definitions published in  UN Department of Peacekeeping Operations-Department of Field  Support\u2019s training documents. We also reviewed these mandates to  identify the date on which the authority for each operation expires and the  period of time reported until the next renewal decision.", "To examine State\u2019s assessment of the effectiveness of UN peacekeeping  operations, we reviewed State documents that include the department\u2019s  assessment of these operations against principles of effective  peacekeeping, which, according to State, establish critical conditions for  an operation to successfully implement its mandate. We analyzed these  documents to determine State\u2019s assessment of whether the  peacekeeping operations met the principles of effectiveness and  categorized State\u2019s results as: met, partially met, or did not meet. In  December 2018, we updated our categorization of State\u2019s assessments  based on our discussions with State/IO and officials at the U.S. Mission to  the UN (USUN). We discussed our methodology and results with officials  at State, who confirmed that our methodology and results were valid. We  also discussed with these officials additional steps the United States  could take to ensure that peacekeeping operations meet the principles for  effective peacekeeping. We did not independently verify State\u2019s  assessments, but we reviewed State\u2019s methodology and discussed it with  officials and found the information in State\u2019s reporting to be sufficiently  reliable for the purposes of this report.", "To examine how the United States works within the UN to adjust  peacekeeping mandates and associated resources, we spoke with State  officials to understand the different approaches the Security Council takes  to revise mandates and the types of information available to UN member  states to determine appropriate resource adjustments when mandates  change. We also compared the information the UN provides to member  states to make these adjustments to internationally-accepted and federal  standards for internal control, which state that policymakers should have  quality information to help them make decisions.", "To examine UN member states\u2019 concerns regarding the UN\u2019s  performance information, we interviewed officials from the USUN and  reviewed UN documents to understand member states\u2019 concerns regarding the quality of performance information available to them from  the UN. We compared member states\u2019 concerns and the Secretary- General\u2019s plans for implementing reforms for improving performance  information with internationally-accepted and federal standards for  internal controls, which state that organizations should use quality  information to better achieve their performance goals.", "To address all four objectives, we reviewed UN policies, Security Council  resolutions, General Assembly reports, Secretary-General\u2019s reports,  Security Council meeting transcripts, budget documents, and various UN  websites. We also interviewed UN officials from the Departments of  Peacekeeping Operations and Field Support and U.S. government  officials from State and the Department of Defense. Additionally, we  selected operations in four countries\u2014the Democratic Republic of the  Congo, Haiti, Kosovo, and Lebanon\u2014as case studies. We selected these  peacekeeping operations because, among other attributes, they  represent a mix of different types of UN peacekeeping operations located  in different regions of the world. We interviewed U.S., UN, and, when  possible, host government officials and representatives of civil society  organizations in these countries. While the findings from these  peacekeeping operations cannot be generalized, they provide illustrations  of the UN\u2019s peacekeeping activities. Appendix I provides more information  on our objectives, scope, and methodology.", "We conducted this performance audit from October 2017 to March 2019  in accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of Peacekeeping Operations", "paragraphs": ["In accordance with the UN Charter, peacekeeping operations aim to  maintain international peace and security, among other things. The UN  has deployed 71 peacekeeping operations since 1948. As of December  2018, the UN had 14 active peacekeeping operations worldwide (see fig.  1).", "We have previously reported that UN peacekeeping operations have  become more complex since 1998. Traditional UN peacekeeping  operations were primarily military in nature and limited to monitoring  cease-fire agreements and stabilizing situations on the ground while  political efforts were made to resolve conflicts. More recently, in response  to increasingly complex situations in which conflicts may be internal,  involve many parties, and include civilians as deliberate targets, several  UN peacekeeping operations deploy civilian and police personnel, in  addition to those from the military, and focus on peacebuilding activities."], "subsections": []}, {"section_title": "Key UN Components in Establishing UN Peacekeeping Operations", "paragraphs": ["There are three principal UN bodies active in peacekeeping:", "The General Assembly, which consists of 193 member states that  work through membership in one of six main committees and various  subsidiary components tasked with specific issue areas.", "The Security Council, which has 15 members, including 5 permanent  members with veto power: the United States, the United Kingdom,  France, Russia, and China. The remaining 10 members of the  Security Council are elected for 2-year terms to ensure geographical  representation.", "The Secretariat, which comprises the administrative component of the  UN and is led by the Secretary-General, who has responsibility for  managing multiple UN departments, offices, and activities.", "The United States holds positions in two of these three components\u2014the  General Assembly and the Security Council. See table 1 for more  information."], "subsections": []}, {"section_title": "The United States\u2019 Role in UN Peacekeeping", "paragraphs": ["State\u2019s Bureau of International Organization Affairs (State/IO) and the  USUN serve primary roles with regard to the UN. State/IO is the U.S.  government\u2019s primary interlocutor with the UN and other international  organizations, and is charged with advancing U.S. national interests  through multilateral engagement on a range of global issues, including  peace and security, nuclear nonproliferation, human rights, economic  development, climate change, and global health. The USUN serves as  the United States\u2019 delegation to the UN and is responsible for carrying out  U.S. participation in the organization. The USUN represents the United  States\u2019 political, legal, military, and public diplomacy interests at the UN.", "As part of its oversight of UN peacekeeping operations, State/IO conducts  annual monitoring trips to most UN peacekeeping operations and  documents the findings of these trips in Mission Monitoring and  Evaluation reports. These reports summarize State/IO\u2019s evaluation of  each peacekeeping operation\u2019s progress toward meeting its mandate and  identify challenges the operation faces in doing so. State/IO summarizes  the findings of these reports for the National Security Council in a U.S.  strategy and priorities memorandum that includes recommendations for  U.S. action, including how the United States should conduct negotiations  and vote on upcoming renewals of the mandates that authorize  peacekeeping operations. According to State, the National Security  Council conducts an interagency policy formulation process based on this  input.", "Other U.S. government entities also support UN peacekeeping  operations. For instance, State\u2019s Bureau of Political-Military Affairs and  Bureau of International Narcotics and Law Enforcement Affairs provide  capacity-building support for troops and police from troop- and police- contributing countries, respectively, serving in UN peacekeeping  operations. Additionally, the Department of Defense participates in UN  peacekeeping operations by providing UN forces with equipment,  personnel, and other support services."], "subsections": []}, {"section_title": "The United States\u2019 Principles of Effective Peacekeeping", "paragraphs": ["In April 2017, during a Security Council meeting on peacekeeping, the  U.S. Permanent Representative to the UN outlined five principles that the  United States believes are critical for effective peacekeeping. She  remarked that, while peacekeeping is the UN\u2019s most powerful tool to  promote international peace and security, there is room for improvement,  citing examples of operations that no longer need to exist or have limited  host country consent. To make peacekeeping operations more effective,  she emphasized that the UN should identify operations that lack the  underlying political conditions for a resolution to the conflict, noting that  numerous studies have concluded that such conditions are central to an  operation\u2019s success. To guide this process, she announced a set of five  principles to which peacekeeping operations should be held:  1.  Peacekeeping operations must support political solutions to conflict.  2.  Operations must have host country consent.  3.  Mandates must be realistic and achievable.  4.  There should be an exit strategy, which would articulate the Security  Council\u2019s agreement on what success looks like and how to achieve  it.  5.  The Security Council should be willing to adjust peacekeeping  mandates when situations improve or fail to improve.", "Since the Permanent Representative\u2019s announcement of these principles,  State/IO has included an assessment of each peacekeeping operation  against these principles in the U.S. strategy and priorities memoranda  that it prepares for the National Security Council. With regard to the fifth  principle, in these memoranda, State/IO assesses whether and how a  mandate itself should be changed, rather than assessing the Security  Council\u2019s willingness to change the mandate. Officials indicated that they  conduct their assessment in this manner in order to inform and establish  the U.S. negotiating position."], "subsections": []}]}, {"section_title": "The UN Security Council Establishes and Renews Peacekeeping Operations, Which Conduct a Range of Tasks Working with UN Member States, the UN Security Council Establishes and Renews Peacekeeping Operations", "paragraphs": [], "subsections": [{"section_title": "UN Peacekeeping Operations Are Mandated to Perform Tasks Such As Maintaining Ceasefires, Protecting Civilians, and Providing Electoral Assistance", "paragraphs": ["Security Council resolutions establishing UN peacekeeping operations  define mandates, or tasks, for each operation, and the peacekeeping  operations perform a variety of activities to fulfill these tasks. In some  cases, these activities are specifically mandated by a Security Council  resolution; in others, the peacekeeping operation engages in an activity  pursuant to a broad grant of authority to achieve a task. Each UN  peacekeeping operation performs a unique set of tasks. The mandates of  peacekeeping operations established prior to 1998 tend to include the  monitoring of cease-fire as a mandated task, while those established after  1998 also include tasks such as the protection of civilians, facilitation of  humanitarian assistance, and enforcement of economic sanctions or an  arms embargo. Comparatively, operations in the African region have  mandates that include the highest number of tasks. See appendix II for a  list of the mandated tasks of all 14 peacekeeping operations.", "The UN has defined 16 categories into which these activities can be  classified, including supervision or monitoring of ceasefire agreements,  the protection and promotion of human rights, and protecting civilians.  See table 3 for a list and description of these categories."], "subsections": []}]}, {"section_title": "State\u2019s Assessments Show that UN Peacekeeping Operations Generally Do Not Fully Meet U.S. Principles of Effective Peacekeeping and Face Challenges to Achieving Their Mandates", "paragraphs": ["Based on our review of State\u2019s most recent assessments and discussions  with State officials, we found that despite some military and political  successes of individual peacekeeping operations, UN peacekeeping  operations generally do not fully meet the U.S.-stated principles of  effective peacekeeping and face challenges to achieving their mandates.  For the 11 peacekeeping operations with mandates that renew on a  regular basis, State prepares strategy and priority memoranda for  appropriate committees of the National Security Council to inform the  mandate renewal process. We reviewed these memoranda and spoke  with State officials about their assessments of these operations against  four of the U.S. principles. Table 4 presents GAO\u2019s categorization of the  results of State\u2019s assessments.", "Supporting political solutions to conflict. Based on State\u2019s  assessment, we categorized 10 of the 11 peacekeeping operations as  having met (five) or partially met (five) the principle of supporting  political solutions to the conflict. For example, in Cyprus, State  assessed that the United Nations Peacekeeping Force in Cyprus  (UNFICYP) met this principle because its activities generally support a  political solution, despite the country\u2019s slow progress toward  negotiating a final settlement of conflict between the Greek Cypriot  and Turkish Cypriot communities. We categorized one peacekeeping  operation, the United Nations Mission for the Referendum in Western  Sahara, as not meeting this principle.", "Host country consent. Based on State\u2019s assessment, we  categorized all 11 peacekeeping operations as having met (four) or  partially met (seven) the principle of host country consent. For  example, State officials assessed that the government of the Central  African Republic cooperates fully with the UN Multidimensional  Integrated Stabilization Mission in the Central African Republic  (MINUSCA). With respect to other peacekeeping operations, officials  noted that a country\u2019s consent to host an operation differs from  cooperation with all aspects of a peacekeeping operation. For  example, State reported that while the government of the Democratic  Republic of the Congo has consented to the UN Organization  Stabilization Mission in the Democratic Republic of the Congo\u2019s  (MONUSCO) presence in the country, the government has, at times,  been hostile toward and actively taken steps to undermine the  mission.", "Realistic and achievable mandates. Based on State\u2019s assessment,  we categorized seven of the 11 peacekeeping operations as having  met (two) or partially met (five) the principle of having realistic and  achievable mandates. For example, we categorized the African  Union-United Nations Hybrid Operation in Darfur (UNAMID) as having  partially met this principle because State reports that it has been able  to carry out many of its mandated tasks; however, according to  State\u2019s assessments, government obstructions, a slow peace  process, and mission management inefficiencies prevent the full  implementation of UNAMID\u2019s mandate. We categorized the remaining  four peacekeeping operations as not meeting this principle.", "Exit strategies. Based on State\u2019s assessment, we categorized five of  the 11 peacekeeping operations as having met (two) or partially met  (three) the principle of having an exit strategy in their mandates. For  example, we categorized MINUSCA as having partially met the  principle because, according to State\u2019s assessment, the operation\u2019s  mandate has an exit strategy that will take several years to achieve  given the lack of host government capacity. We categorized the  remaining six peacekeeping operations as not meeting this principle.  For example, based on State\u2019s assessment, we categorized the UN  Mission in the Republic of South Sudan (UNMISS) as not meeting this  principle because the operation had not considered a near-term exit  strategy because of ongoing conflict and the political stalemate in  South Sudan.", "In addition to the four principles in the table, the fifth principle for effective  peacekeeping reads as the Security Council\u2019s willingness to change the  mandate. In its memoranda, State assessed the fifth principle by  examining whether the mandate was achieving its objective and, if not,  should be adjusted. Using this method, State assessments show that the  Security Council should adjust the mandates of nine of the 11  peacekeeping operations. For example, State assessed that the  UNFICYP (Cyprus) mandate should be adapted to address the stalled  political process.", "Although we found that State\u2019s assessments show most peacekeeping  operations are not fully meeting the U.S.-stated principles for effective  peacekeeping, State officials we interviewed noted the important role UN  peacekeeping operations play in maintaining stability in volatile conflicts  around the world. These officials noted the dangerous and hostile  environments in which peacekeeping operations are located, and, in  some cases, human atrocities these operations help prevent. Further,  U.S. and UN officials cited UN peacekeeping operations\u2019 strengths,  including international and local acceptance, access to global expertise,  and the ability to leverage assistance from multilateral donors and  development banks. Officials also cited strengths of individual operations,  such as the protection of civilians against atrocities in South Sudan, the  Democratic Republic of the Congo, and the Central African Republic,  assistance toward the peaceful conduct of elections in numerous  countries, police capacity building in Haiti, and support to peace  processes and agreements in numerous countries.", "According to State/IO and USUN officials, continual evaluation and  adjustment of the mandates of UN peacekeeping missions to better align  with the U.S. principles remains a key tenet of the Administration\u2019s UN  peacekeeping policy, but the U.S. government faces two key challenges  in this regard. First, some aspects of two of the five principles\u2014host  country consent and support for a political process\u2014may be outside of  the control of any international organization or bilateral partner. For  example, MONUSCO\u2019s (Democratic Republic of the Congo) mandate  includes the provision of elections assistance in support of the nation\u2019s  political process, but, according to State officials, the lack of host  government cooperation has relegated MONUSCO\u2019s efforts in this area to  technical assistance. Second, these officials explained that the Security  Council does not always adopt U.S. proposals to change mandates to  align with these principles, such as including an exit strategy. Changing  peacekeeping mandates requires nine affirmative votes and no vetoes  from permanent Council members, which, according to State and USUN  officials, can be difficult. For example, USUN officials stated that the UN  Interim Administration Mission in Kosovo (UNMIK) had fulfilled its  mandate, but Russia and China were not supporting a vote to close the  operation.", "Moreover, State officials noted that the assessment process using the  principles began in 2017 and the United States has had a limited number  of opportunities to negotiate changes to peacekeeping mandates  because renewals generally occur annually. State officials cited several  examples of notable progress, however, in improving the efficiency and  focus of UN peacekeeping operations. According to State officials,  through U.S. leadership, the Security Council reconfigured the operation  in Haiti to focus on police and the rule of law. Additionally, the Security  Council changed and downsized the operation in Darfur to reflect current  political and security realities. State officials also said that the UN Security  Council supported responsible drawdowns of peacekeeping operations,  most recently in Cote d\u2019Ivoire, while pushing peacekeepers in Lebanon to  use all of their mandated authorities to be more effective in carrying out  their tasks.", "According to State officials, adherence to these principles is not sufficient  to guarantee success. An operation could fully meet all the principles, but  still face challenges carrying out its mandate because of formidable  circumstances, such as insecure security environments or limited  government cooperation. However, State officials also noted that these  principles describe critical conditions for effective peacekeeping in that an  operation that does not meet these principles is unlikely to be able to fully  carry out its mandate. Moreover, given the importance of establishing the  necessary conditions for peacekeeping success, State/IO and USUN  officials acknowledged that State must continue to work with the Security  Council to ensure that peacekeeping operations meet the principles of  effectiveness, such as modifying mandates to include exit strategies. In  doing so, the UN and its member states could have greater assurance  that they have set up peacekeeping operations for success."], "subsections": []}, {"section_title": "The United States Has Worked with the UN to Adjust Peacekeeping Mandates, but Does Not Have Sufficient Information to Determine if UN Resource Decisions Accurately Reflect These Adjustments The United States Has Worked with Security Council Members to Adjust Peacekeeping Mandates", "paragraphs": ["When the U.S. agencies involved in peacekeeping agree that the UN  should change a peacekeeping operation\u2019s mandate, USUN officials told  us that the USUN works with other Security Council members to make  adjustments, such as adding or removing tasks from an operation\u2019s  mandate. While not all proposals are adopted by the Security Council,  State officials highlighted several types of mandate adjustments the  United States has pursued, including:", "Removal of tasks. State and USUN officials told us they strive to  remove tasks from peacekeeping mandates when those tasks have  been achieved or are no longer relevant or achievable. For example,  officials noted that the USUN successfully advocated that election  monitoring be removed from the list of mandated tasks for MINUSCA  because the elections had taken place in the previous year and,  therefore, the task was no longer relevant.", "Addition of language to prioritize tasks. State and USUN officials  told us that another strategy is to add language to a mandate to  designate priority tasks. Officials stated that, as a result of such  language in mandates for MINUSCA, MONUSCO, and MINUSMA,  management at these peacekeeping operations had shifted mission  resources to focus on priority tasks. For example, officials cited  MINUSCA\u2019s proposed budget, which increased resources for  protection of civilians\u2014a task designated as a priority by the Security  Council\u2014and reduced resources for Security Sector Reform, an area  of less relevance to the mission given the current situation in the  Central African Republic.", "Addition of language to clarify exit strategies. State and USUN  officials noted that adding language to clarify exit strategies aids an  operation\u2019s success. For example, for the MINUJUSTH (Haiti) 2017  mandate, USUN officials noted that the United States had advocated  successfully for the Security Council to include language calling for an  exit strategy with benchmarks to assist the UN in monitoring the  progress of the operation\u2019s transition to a non-peacekeeping mission  beginning in October 2019."], "subsections": [{"section_title": "USUN Does Not Have Sufficient Information from the UN on the Cost of Peacekeeping Operations to Determine Accurate Resource Allocation When Adjusting Mandates", "paragraphs": ["USUN officials told us that they do not have sufficient information to allow  them to determine accurate resource allocation to peacekeeping  operations when the Security Council makes a change to the mandate.  For example, USUN officials told us that as a result of the Security  Council\u2019s decision to reduce resources for specific tasks in MONUSCO\u2019s  2017 mandate\u2014such as Security Sector Reform and Disarmament,  Demobilization, and Reintegration activities, where little progress had  been achieved\u2014the United States had sought to reduce the MONUSCO  budget to reflect this change. However, the USUN did not have complete  information from the UN on all of the costs associated with this change,  including support costs, such as flight hours and fuel for transport  vehicles. In the absence of such information from the UN, USUN officials  estimated these costs and advocated for a reduction in MONUSCO\u2019s  budget based on their own estimates. USUN officials noted that without  input from the UN, they did not have sufficient information to determine  the accuracy of their estimates.", "USUN officials told us that these information gaps exist because UN  peacekeeping budgets do not include estimated costs by task. Rather,  UN peacekeeping budgets provide information on the operation\u2019s use of  financial resources for personnel and operational costs. Thus, according  to USUN officials, when the Security Council changes a peacekeeping  operation\u2019s mandate\u2014such as by adding or removing a task\u2014it is not  clear how to adjust the budget for that operation to accurately reflect the  change. UN headquarters officials told us that the UN does not prepare  peacekeeping budgets with estimated costs by task because it is  challenging to do so. However, senior officials with whom we spoke at  two peacekeeping operations said that, despite challenges, it is possible  to estimate costs by mandated task, which would provide additional  budget transparency for the UN. Further, USUN officials stated that  having UN estimates readily available to all member states would not only  improve the accuracy of decisions related to resource allocation, but also  improve the transparency of the budget negotiation process.", "UN guidance on peacekeeping states that when the UN changes an  existing peacekeeping mandate it should make commensurate changes  in the resources available to the operation. Further, internationally- accepted and federal standards for internal control note that organizations  should use quality information to make informed decisions to achieve  their objectives. Without information on estimated costs by task, USUN  and other UN member states have difficulty determining that resources  for UN peacekeeping operations accurately reflect changes to the  mandates of peacekeeping operations. With this information, the United  States and the international community can better ensure that resources  provided to peacekeeping operations support the tasks agreed upon by  UN member states."], "subsections": []}]}, {"section_title": "Member States Have Expressed Concerns Regarding the Quality of Peacekeeping Performance Information, Despite UN Reform Efforts in This Area", "paragraphs": [], "subsections": [{"section_title": "Member States Have Expressed Concerns about the Completeness and Timeliness of UN Peacekeeping Performance Data", "paragraphs": ["UN member states, including the United States, have expressed  concerns regarding the quality of information regarding UN peacekeeping  operations. Specifically, according to member states, information on  peacekeeping performance can be incomplete and is not always provided  on a timely basis, despite ongoing UN efforts to improve performance  information. UN Security Council resolutions and peacekeeping guidance  documents have stated the importance of having access to quality  performance information to make management decisions. For example,  UN Security Council resolutions note that data\u2014based on clear and well- defined benchmarks\u2014should be used to improve the performance of  peacekeeping operations. The UN\u2019s Special Committee on Peacekeeping  Operations has also called for a timely flow of information regarding how  well peacekeeping operations perform their mandated activities.  Additionally, internationally-accepted and federal standards for internal  control also highlight the importance of quality information in enhancing  the ability of organizations to achieve their performance goals. Quality  information includes information that is complete and provided on a timely  basis, among other attributes."], "subsections": [{"section_title": "Completeness", "paragraphs": ["UN member states have expressed concerns regarding the completeness  of peacekeeping performance information. For example, USUN officials  have noted concerns related to the completeness of performance  information about peacekeeping troops. USUN officials noted that while  the UN maintains some performance information on peacekeeping  operations, such as a database with information on troop capabilities and  readiness to deploy, it does not provide a complete picture of  peacekeeping performance. Specifically, USUN officials noted that they  would like better performance information about when peacekeeping units  are engaging well, failing to engage, or lack the training to perform the  tasks they have been asked to carry out. Also, the Security Council noted  concern in a September 2018 resolution sponsored by the United States  about the underperformance of some peacekeepers, such as inaction in  the face of imminent threats of physical violence against civilians and  conduct issues.", "Another concern relates to the completeness of performance information  about civilian peacekeeping staff. According to the UN, civilian  peacekeeping staff, who comprise about 14 percent of all peacekeeping  personnel, perform many of the mandated activities of peacekeeping  operations, including promoting and protecting human rights, helping  strengthen the rule of law, and fostering the political process. However,  according to USUN officials, the UN needs more complete information on  the performance of these staff. For example, as noted above, UN officials  told us that the UN had developed a database to collect performance  information on military personnel staffed to UN peacekeeping operations,  but did not have a similar way to track information on civilian personnel.  Additionally, the Security Council noted in a September 2018 resolution  that the UN must improve evaluation of all UN personnel supporting  peacekeeping operations, including civilians. Individual member states  have concurred, with some stating that better performance information is  needed in all sectors of UN peacekeeping and others noting the need for  comprehensive information on all peacekeeping personnel, including  civilian personnel.", "The Security Council has also noted concerns about underreporting of  information, which can affect data completeness. For example, in a  September 2018 resolution, the Security Council expressed concern  regarding the underreporting of sexual exploitation and abuse by some  UN peacekeepers and non-UN forces authorized under a Security  Council mandate, including military, civilian, and police personnel. The  UN has reported that instances of sexual exploitation and abuse by  peacekeepers undermine the credibility of peacekeeping operations by  breaking down the trust between an operation and the communities it  serves."], "subsections": []}, {"section_title": "Timeliness", "paragraphs": ["UN member states have also expressed concerns regarding the  timeliness of UN performance information on peacekeeping. For example,  USUN officials cited instances of conduct violations by UN troops in the  Central African Republic and the Democratic Republic of the Congo about  which the Security Council had not been informed for several months.  Ultimately, the Security Council learned of these incidents from media  reporting and had to seek additional information from the UN Secretariat.", "Additionally, the Security Council has expressed concern regarding the  timely reporting of performance information on police personnel assisting  peacekeeping operations. For instance, in Resolution 2382 adopted in  November 2017, the Security Council emphasized the need to improve  accountability and effectiveness in the performance of peacekeeping  operations, requesting that the UN Secretariat provide member states  timely and complete information regarding the training needs of police  personnel.", "Further, the UN\u2019s Special Committee on Peacekeeping Operations has  also called for a timely flow of information on a range of peacekeeping  performance issues, such as reports and evaluations of peacekeeping  operations, incidents involving the safety and security of peacekeepers,  and troop misconduct, such as sexual exploitation and abuse. For  example, in its March 2018 report, the committee stressed the need for timely information sharing about serious incidents involving the safety and  security of peacekeepers, noting that prompt reporting of such incidents  contributes to their prevention and positive resolution."], "subsections": []}]}, {"section_title": "UN Is in Early Stages of Reform Efforts to Improve Performance Information and the Extent to Which the Efforts Will Address Member States\u2019 Concerns Is Unclear", "paragraphs": ["USUN officials told us that they have concerns about the quality of  peacekeeping performance data because the UN does not have  comprehensive performance information about its peacekeeping  operations and officials are unsure whether new UN reforms in this area  will address their concerns. USUN officials described various UN sources  of performance information on peacekeeping operations, such as  strategic reviews conducted by the Secretary-General on the  performance of peacekeeping operations and a UN database containing  information on peacekeeping troops\u2019 readiness to deploy. However,  officials noted that this information is insufficient to help them assess the  overall performance of UN peacekeeping operations. For instance, USUN  officials noted that the information collected is not standardized across  UN peacekeeping operations or for all peacekeeping personnel. Without  better information, USUN officials said that they had challenges obtaining  a clear picture of the performance of UN peacekeeping operations.  According to USUN officials, a culture of performance in peacekeeping is  important to better deliver on peacekeeping mandates and improve the  safety and security of peacekeepers in the field.", "Acknowledging challenges related to peacekeeping, the UN Secretary- General announced a peacekeeping reform initiative known as Action for  Peacekeeping in March 2018. As part of this effort, the Secretary-General  invited member states to help develop a set of mutually agreed principles  and commitments to improve peacekeeping operations. The Secretary- General announced these shared commitments in August 2018 and, as of  September 2018, 151 member states and several regional organizations  had made political commitments to implement them. The declaration of  shared commitments includes a commitment to ensure the highest level  of peacekeeping performance and to hold all peacekeeping personnel  accountable for effective performance by, among other things, ensuring  that performance data are used to inform planning, evaluation,  deployment decisions and reporting.", "However, USUN officials told us in October 2018 that their concerns  about the quality of UN peacekeeping performance data still remained  because the UN is in the early stages of adopting these reforms. Further,  USUN officials stated that they have yet to see concrete plans of action  and as such, it is not clear to them that the reforms will address their  concerns to ensure that the UN provides complete and timely  peacekeeping performance information to its member states. For  instance, officials stated that in September 2018\u20146 months after the  Action for Peacekeeping agreements to improve the use of performance  data to manage peacekeeping operations\u2014the Security Council adopted  Resolution 2436, which noted continued concerns related to  completeness and timeliness of peacekeeping performance information  provided to the Council. Without fully addressing member states\u2019  concerns about the quality of information on the performance of  peacekeeping operations, the Security Council is limited in its ability to  identify problems and take corrective action to improve the performance  of peacekeeping operations. More complete and timely performance  information could enhance the Security Council\u2019s ability to effectively  manage peacekeeping operations."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Peacekeeping operations are a key instrument for implementing the UN\u2019s  central mission of maintaining international peace and security. As a  member state of the UN, a permanent member of the Security Council,  and the largest financial contributor to the UN peacekeeping budget, the  United States plays a significant role in both the management of  peacekeeping operations and encouraging reforms to improve  peacekeeping activities. According to State, the U.S.-stated principles for  effective peacekeeping are critical conditions for peacekeeping  operations to carry out their mandates. Given the importance of  establishing the necessary conditions for peacekeeping success, State/IO  and USUN officials acknowledged the imperative of continuing to work  with the Security Council to ensure that peacekeeping operations meet  U.S.-stated principles of effectiveness. In doing so, the UN and its  member states could have greater assurance that they have set up  peacekeeping operations for success. Without information on estimated  costs by task, USUN and other UN member states have difficulty  determining that resources for UN peacekeeping operations accurately  reflect changes to the mandates of peacekeeping operations. With this  information, the United States and the international community can better  ensure that resources provided to peacekeeping operations support the  tasks agreed upon by UN member states. Additionally, while the UN has  initiated reform efforts to strengthen peacekeeping, including better use of  performance information, UN member states have continued to express  concerns about the quality of this information and note that it is too soon  to tell whether reforms will address their concerns. Without fully  addressing member states\u2019 concerns about the quality of information on  the performance of peacekeeping operations, the Security Council is  limited in its ability to identify problems and take corrective action to  improve the performance of peacekeeping operations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to State:  The Secretary of State should continue to work with the Permanent  Representative to the United Nations to ensure that UN peacekeeping  operations fully meet principles of effective peacekeeping.  (Recommendation 1)", "The Secretary of State should work with the Permanent Representative to  the United Nations to ensure that the United Nations provides information  to member states on the estimated costs of mandated peacekeeping  tasks to provide better cost information when the Security Council adjusts  peacekeeping mandates. (Recommendation 2)", "The Secretary of State should continue to work with the Permanent  Representative to the United Nations to ensure that the United Nations  takes additional steps to address member states\u2019 concerns about  complete and timely information on the performance of United Nations  peacekeeping operations. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Defense and  State for review and comment. The Department of Defense told us that  they had no comments on the draft report. In its comments, reproduced in  appendix V, State concurred with our recommendations. State also  provided technical comments, which we incorporated as appropriate  throughout the report.", "We are sending copies of this report to congressional committees; the  Acting Secretary of the Department of Defense; and the Secretary of the  Department of State. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made significant contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we examine (1) the United Nations\u2019 (UN) process to  establish and renew peacekeeping operations, including the tasks these  operations perform; (2) the Department of State\u2019s (State) assessment of  the effectiveness of UN peacekeeping operations; (3) how the United  States works within the UN to adjust peacekeeping mandates and  associated resources; and (4) UN member states\u2019 concerns regarding the  UN\u2019s performance information.", "To examine the UN\u2019s process to establish and renew peacekeeping  operations and the tasks these operations perform, we reviewed UN  policy and guidance, as well as various UN websites accessed as of  November 2018, and interviewed State and UN officials to discuss UN  processes. To determine the tasks these operations perform, we  analyzed the most recent UN resolution authorizing the peacekeeping  operation passed by the Security Council as of December 31, 2018\u2014 generally referred to as a mandate\u2014for each of UN\u2019s 14 peacekeeping  operations, and categorized the tasks of each operation. We describe UN  categories of activities to achieve mandated tasks as listed in the  Department of Peacekeeping Operations-Department of Field Support\u2019s  Core Pre-deployment Training Materials for United Nations Peacekeeping  Operations, which lists and defines 16 categories. We also analyzed the  most recent mandate as of December 31, 2018 for the 14 UN  peacekeeping operations to identify the date on which the authority for  each operation expires and the period of time reported until the next  renewal decision.", "To examine State\u2019s assessment of the effectiveness of UN peacekeeping  operations, we analyzed State\u2019s Bureau of International Organization  Affairs\u2019 (State/IO) most recent Mission Monitoring and Evaluation reports  as of December 2018 and the accompanying U.S. strategy and priorities  memoranda outlining U.S. priorities for the operations\u2019 mandate renewal.  State bases its Mission Monitoring and Evaluation reports on annual field  visits to peacekeeping operations during which assessors interview U.S.  and UN officials to evaluate the operation\u2019s progress toward meeting its  mandate and identify factors that affect the operation\u2019s ability to do so.  Based on these reports, State\u2019s strategy and priorities memoranda  summarize U.S. observations on the peacekeeping operation and, among  other things, propose options for U.S. action within the Security Council.  Each of the 11 memoranda we reviewed also includes State\u2019s  assessment of the peacekeeping operation against the U.S.  government\u2019s stated principles of effective peacekeeping, which State  considers to be critical conditions for an operation to successfully  implement its mandate. These principles are whether a peacekeeping  operation (1) supports a political solution to conflict, (2) has host country  consent, (3) has a realistic and achievable mandate, and (4) has an exit  strategy; and (5) whether the Security Council is willing to adjust the  mandate if the situation in the country improves or fails to improve.", "We reviewed State\u2019s memoranda on the operations and considered the  following types of factors when determining whether to categorize State\u2019s  assessments as met, partially met, or not met:  Supporting political solutions: Mediation processes, peace  agreements, and support for democratic elections.", "Host country consent: Consent to the operation, and the  necessary freedom of action, both political and physical to carry  out its mandated tasks.", "Realistic and achievable mandates: Extent to which operation  tasks appeared feasible in light of current conditions and available  resources.", "Exit strategies: Strategic goals and targets, strategic planning,  and timetables for withdrawal.", "We categorized a principle as \u201cmet\u201d if State indicated that the operation  was generally succeeding in an area. We categorized a principle as \u201cnot  met\u201d if State indicated that the operation was generally not succeeding in  an area. We categorized a principle as \u201cpartially met\u201d if State indicated  that the operation had some areas of success, but was generally not  succeeding or restricted from success in some way. The fifth principle for  effective peacekeeping reads as the Security Council\u2019s willingness to  change the mandate. However, in its memoranda, State/IO assesses  whether and how a mandate should be changed, rather than assessing  the Security Council\u2019s willingness to change the mandate. For this  principle, we categorized State\u2019s results as either \u201cyes\u201d or \u201cno.\u201d We coded  the results as \u201cyes\u201d if State assessed that the Security Council should  adjust the mandate. We categorized the results as \u201cno\u201d if State assessed  that the Security Council did not need to adjust the mandate. The coding  was conducted by one GAO analyst and separately verified by two other  GAO analysts. In December 2018, we met with State/IO and USUN  officials to discuss their current assessment of each peacekeeping  operation. We updated our categorization of State\u2019s written assessments  to reflect the agency\u2019s most current assessment as appropriate.", "We discussed our methodology and results with officials from the U.S.  Mission to the UN (USUN), who confirmed that our methodology and  results were valid. We also discussed with these officials additional steps  the United States could take to ensure that peacekeeping operations fully  meet the principles for effective peacekeeping. We did not independently  verify State\u2019s assessment, but we reviewed State\u2019s methodology and  discussed it with officials and found the information in State\u2019s reporting to  be sufficiently reliable for the purposes of this report.", "To examine how the United States works within the UN to adjust  peacekeeping mandates and associated resources, we interviewed  USUN officials to understand the different approaches the Security  Council takes to revise mandates and to understand the types of  information available to UN member states to determine appropriate  resource adjustments when mandates change. We also interviewed a  senior official from the UN Department of Field Support\u2019s Field Budget  and Finance Division and reviewed UN budget and performance reports  to identify how the UN reports on peacekeeping budget information to  member states. In addition, we interviewed officials at two of the four  peacekeeping operations we selected for in-depth case studies, as  discussed below, to determine whether they were able to report on the  operation\u2019s budget by mandated task. To determine the extent to which  State has sufficient information to advocate for resources adjustments  when mandates change, we compared information currently provided by  the UN to internationally-accepted and federal standards for internal  control, which state that organizations should have quality information to  help them make decisions.", "To examine UN member states\u2019 concerns regarding the UN\u2019s  performance information, we interviewed officials from the USUN to  understand their concerns regarding performance information available to  them from the UN. Based on these interviews, we identified two main  issues of completeness and timeliness. To understand the extent to which  UN member states share these concerns, we analyzed the UN Special  Committee on Peacekeeping\u2019s 2016, 2017, and 2018 annual reports and  Security Council resolutions to confirm member states\u2019 concerns related  to completeness and timeliness of performance information. We did not  independently verify the veracity of these concerns, because we did not  have access to the UN\u2019s internal performance information. We also  reviewed UN documents on the Secretary-General\u2019s new reform efforts,  transcripts of meetings the Security Council held on peacekeeping in  2018, and Security Council resolutions to identify steps the UN is taking  to address these concerns. Further, we analyzed the extent to which the  UN could better address member state concerns regarding performance  information by comparing the Secretary-General\u2019s plans for implementing  the UN\u2019s new reform efforts with internationally-accepted and federal  standards for internal controls, which identify necessary elements of  performance information.", "To inform our analyses of all four objectives, we also selected UN  peacekeeping operations in four countries\u2014the Democratic Republic of  the Congo, Haiti, Kosovo, and Lebanon\u2014for in-depth case studies. We  selected these peacekeeping operations because they are the largest of  the three types the UN employs, and are located in the four geographic  regions in which UN peacekeeping operations are currently deployed\u2014 Africa, Europe, the Middle East, and the Western Hemisphere. While the  findings from these peacekeeping operations cannot be generalized, they  provide an illustrative mix of the UN\u2019s peacekeeping activities. To inform  our audit, we conducted a literature review using ProQuest language  searches, focusing on literature published between 2015 and 2018. In  total, we identified and reviewed 12 relevant publications that helped  inform our study of the four operations. We conducted fieldwork at  peacekeeping operations in Haiti, Kosovo, and Lebanon, and interviewed  U.S., UN, and host government officials, as well as representatives of  other donor countries and civil society. In lieu of fieldwork, we conducted  videoconferences with senior officials at the peacekeeping operation in  the Democratic Republic of the Congo.", "We conducted this performance audit from October 2017 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Mandated Tasks of United Nations Peacekeeping Operations", "paragraphs": ["We analyzed United Nations (UN) Security Council resolutions  authorizing the 14 UN peacekeeping operations, in effect as of December  31, 2018, and identified the mandated tasks of these operations. See  table 5 below for a complete list."], "subsections": []}, {"section_title": "Appendix III: Department of State\u2019s Assessment of Challenges United Nations Peacekeeping Operations Face", "paragraphs": ["To inform its oversight of United Nations (UN) peacekeeping operations,  the Department of State\u2019s Bureau of International Organizations Affairs  (State/IO) conducts annual monitoring trips to most UN peacekeeping  operations. State/IO evaluates peacekeeping operations\u2019 progress toward  meeting their mandates and identifies any challenges to their progress.  State/IO documents its findings in Mission Monitoring and Evaluation  reports and disseminates these reports for comment to various State  bureaus involved in international peacekeeping efforts and to relevant  offices in the Department of Defense. The findings of these assessments  are intended to inform the National Security Council and the U.S. Mission  to the United Nations in their decision-making.", "We analyzed the most recent Mission Monitoring and Evaluation reports  that State had conducted through June 30, 2018. In our analysis of  State\u2019s assessments, we found that the challenges State most frequently  identified for each UN peacekeeping operation were those associated  with host government cooperation, resources, and the security situation."], "subsections": [{"section_title": "Host Government Cooperation", "paragraphs": ["According to the UN, the UN does not deploy a peacekeeping operation  unless the organization has the consent of the involved parties, which  often include the governments of the countries in which conflicts occur.  While host governments generally have consented to the presence of UN  peacekeeping operations, State found instances in which the host  government did not cooperate fully or did not have a positive relationship  with the peacekeeping operation working in-country. For example, in  Darfur, State found that while the Sudanese government had  demonstrated some progress, it continued to restrict the African Union- United Nations Hybrid Operation in Darfur\u2019s (UNAMID) access and  movement in certain regions. Additionally, according to government  officials in Kosovo, the government of Kosovo does not engage with the  UN Interim Administration Mission in Kosovo (UNMIK) because it  considered the operation to have completed its mandate as a transitional  authority once Kosovo declared its independence and established a  functioning government. As a result, UNMIK works on community trust- building activities with local communities according to the vision and  strategic direction of the head of the peacekeeping operation."], "subsections": []}, {"section_title": "Resources", "paragraphs": ["State found that several operations faced financial, human, and material  resource constraints. For example, State assessed that the peacekeeping  operations in Mali; the Democratic Republic of the Congo; the Golan  Heights, Syria; and Haiti did not have enough funds to meet their needs.  State also found that troops in the peacekeeping operations in the Central  African Republic; the Democratic Republic of the Congo; and the Golan  Heights, Syria did not have enough troops with sufficient skillsets.  Further, State found that the operations in the Democratic Republic of the  Congo; Haiti; Mali; and Abyei, Sudan lacked adequate equipment.  Officials from the peacekeeping operation at the UN Interim Force in  Lebanon (UNIFIL) also told us they anticipated a budget shortfall of over  $2 million for the 2018-2019 peacekeeping fiscal year as a result of a  reduced budget and an increase in UN troop salaries.", "However, officials at the UN Organization Stabilization Mission in the  Democratic Republic of the Congo (MONUSCO) told us about ways in  which they were maximizing and readjusting existing resources in spite of  these challenges. They stated that MONUSCO\u2019s March 2018 mandate  renewal was intended to streamline the operation and was informed by  the UN\u2019s most recent strategic review of the operation. Senior  MONUSCO officials also told us that, as a result of the review, the  Security Council had reduced its work in the justice reform sector by 50  percent because it believed the operation would be able to engage more  meaningfully in this arena after the presidential election."], "subsections": []}, {"section_title": "Security Situation", "paragraphs": ["State identified several peacekeeping operations that worked in  environments in which there were ongoing ceasefire violations or  unstable security situations. State found that peacekeeping operations in  the Democratic Republic of the Congo; the Golan Heights, Syria; Western  Sahara; Cyprus; and Lebanon faced ongoing ceasefire violations. State  also found that the peacekeeping operations in Mali and the Central  African Republic worked in dangerous conditions and the operations in  Mali and the Democratic Republic of the Congo faced persistent attacks  on civilians. During our field work in Lebanon, UNIFIL officials  emphasized the importance and successes of the UNIFIL-facilitated  tripartite mechanism, which provides regular opportunities for soldiers  from the Lebanese Armed Forces and the Israeli Defense Force to help  prevent any event from escalating into a major event. According to U.S.  embassy officials, because of the prevalence of armed groups in eastern  Congo, the government\u2019s and international community\u2019s response to the  Ebola outbreak that started there in August 2018 was significantly more  complex and challenging than their response to the May 2018\u2013July 2018  outbreak in northwestern Congo, an area that does not have a significant  presence of armed groups."], "subsections": []}]}, {"section_title": "Appendix IV: Synopsis of Four United Nations Peacekeeping Operations and Key Challenges They Face", "paragraphs": ["We selected United Nations (UN) peacekeeping operations in four  countries\u2014the Democratic Republic of the Congo, Haiti, Kosovo, and  Lebanon\u2014for case studies. Below is a synopsis of each of these  peacekeeping operations and key challenges they face, according to U.S.  and UN officials.", "Key Facts About DRC  Population: Approximately 83.3  million people live in DRC. About  60 percent of the population is  under the age of 25, and about 40  percent is under the age of 15.  There are over 200 ethnic groups;  the majority is Bantu.", "Map of the Democratic Republic of the Congo (DRC)", "Government: DRC is a semi- presidential republic. The last  presidential election was held on  December 30, 2018.", "Economy: DRC\u2019s estimated gross  domestic product for 2017 was  $40.4 billion. Conflict and  corruption have contributed to the  poor economic performance of  DRC, despite its vast natural  resource wealth.", "Timeline of Key Events  1960: The Republic of the Congo is  granted independence from  Belgium.  1960-1964: The UN deploys the  United Nations Operation in the  Congo (ONUC) to ensure the  withdrawal of Belgian forces from  the Republic of the Congo, among  other things.  1998: \u201cAfrica\u2019s World War\u201d begins,  with seven countries fighting in  DRC.", "Current Status and Challenges  According to U.S. and United Nations (UN) officials, MONUSCO\u2019s most  important mandated tasks are the protection of civilians and support to  the government of DRC\u2019s elections. According to the Secretary-General,  the impact of intercommunal violence and attacks by armed groups  continue to persist in eastern and southern DRC and have led to the  displacement of thousands of people. Held after several delays, the  results of the December 30, 2018 national and provincial elections are  expected to result in the first democratic transition of power in the nation\u2019s  history. Despite varied disputes over preliminary results and reports of  sporadic violence, the UN reports that the elections were relatively  peaceful. However, according to the UN, pending the announcement of  the final results by the DRC Constitutional Court, the coming days will be  critical.", "1999: The Lusaka Ceasefire is  signed, ending the war. The UN  establishes a peacekeeping  operation in DRC\u2014United Nations  Organization Mission in the  Democratic Republic of the Congo  (MONUC).", "July 2010: The UN renames  MONUC MONUSCO and updates  the peacekeeping operation\u2019s  mandate.", "According to U.S. and UN officials, the biggest challenges MONUSCO  faces in carrying out its mandated tasks are the vast size of DRC and the  fact that the government of DRC will accept limited help from MONUSCO  in carrying out its elections. According to UN officials, MONUSCO is  having some success in addressing instability in eastern DRC. For  example, MONUSCO said it receives 300 to 400 calls per month alerting  it to attacks and that either MONUSCO or DRC forces respond to 90  percent of these calls. In addition, UN officials told us that the Security  Council provided MONUSCO with a budget to use for logistical support  for  elections assistance, so MONUSCO can readily help the DRC  government if and when it asks for assistance.", "Key Facts about Haiti  Population: Approximately 10.6  million people live in Haiti. More  than 50 percent of the population is  under the age of 24.", "Government: Haiti is a semi- presidential republic.", "Economy: Haiti\u2019s estimated gross  domestic product for 2017 was  $8.36 billion.  Haiti continues to rely  on international economic  assistance for fiscal sustainability,  with over 20 percent of its budget  coming from foreign aid. In 2010,  Haiti\u2019s unemployment rate was  estimated to be 40.6 percent, and  in 2012, 58.5 percent of its  population was estimated to be  living below the poverty line.", "Timeline of Key Events  1993: Following a military coup, the  UN establishes the first of a series  of three peacekeeping operations.  The last of these operations leaves  in 2000.  2004: The UN establishes the  United Nations Stabilization  Mission in Haiti (MINUSTAH) to  help restore and maintain order  after the collapse of the  government.  2017: The UN establishes  MINUJUSTH as a successor to  MINUSTAH, composed of police  and civilian personnel and focused  on institutional strengthening and  development.", "Current Status and Challenges  The United Nations (UN) established MINUJUSTH in 2017 to assist the  government of Haiti in strengthening rule-of-law institutions, further  support and develop the Haitian National Police, and engage in human  rights monitoring, reporting, and analysis. In the resolution establishing  MINUJUSTH, the Security Council called on the Secretary-General to  develop a 2-year exit strategy with clear benchmarks. The Secretary- General regularly reports on MINUJUSTH\u2019s progress toward reaching its  benchmarks. The Security Council resolution extending the MINUJUSTH  mandate to April 2019 calls on the Secretary-General to conduct a  strategic assessment of the operation by early 2019 and present  recommendations on the UN\u2019s future role in Haiti. To facilitate the  transition, the UN has created a joint UN Development Program and  MINUJUSTH rule-of-law program to continue its work in this area after  the peacekeeping operation ends.", "According to U.S. and UN officials, Haiti continues to struggle with weak  institutions and high levels of government corruption. Moreover,  according to MINUJUSTH officials, the process of transitioning from the  previous peacekeeping operation in Haiti to MINUJUSTH was challenging  because of the level of effort involved in liquidating assets, among other  things. These officials told us that similar issues will make the  MINUJUSTH transition to a non-peacekeeping UN presence equally  challenging.", "Key Facts about Kosovo  Population: Approximately 1.9  million people live in Kosovo. About  42 percent of the population is  under the age of 25. The primary  ethnic group is the Albanian  Kosovars, making up  approximately 93 percent of the  population. Other ethnic minorities  include Serbs and Bosnians.", "Government: Kosovo is a  parliamentary republic.", "Economy: Kosovo\u2019s estimated  gross domestic product in 2017  was an estimated $19.6 billion.  Kosovo's economy has achieved  some stability, but it is still highly  dependent on the international  community for financial and  technical assistance. Kosovo\u2019s  unemployment rate is 33 percent,  with a youth (under 26)  unemployment rate near 60  percent.", "Timeline of Key Events  1991: Kosovo's Albanians declare  independence from Serbia.  1998: Multi-year conflict results in  large numbers of casualties,  refugees, and displaced persons.", "Current Status and Challenges  The Security Council established UNMIK to provide an interim  administration for Kosovo, under which UNMIK had authority over the  territory and people of Kosovo, including all legislative and executive  powers and administration of the judiciary. Following the declaration of  independence by the Kosovo Assembly in June 2008, the tasks of the  operation have changed to focus primarily on the promotion of security,  stability, and respect for human rights in Kosovo, as well as reducing  tensions between Serbia and Kosovo.", "1999: A 3-month NATO military  operation against Serbia results in  the Serbs withdrawing their military  and police forces from Kosovo.  1999: UN Security Council  Resolution 1244 (1999) places  Kosovo under a transitional  administration pending a  determination of Kosovo's future  status.", "According to U.S. and United Nations (UN) officials, the greatest  challenge UNMIK faces in carrying out its mandate is that the Kosovo  government will not engage directly with UNMIK. According to U.S., UN,  and Kosovo government officials, the Kosovar government will not  engage with UNMIK because it views UNMIK\u2019s mandate as obsolete,  given Kosovo\u2019s independence. U.S. officials believe that UNMIK has  achieved its mandate and should be closed. However, these officials also  noted that Russia, as a permanent member of the Security Council with a  veto, prevents the affirmative decision necessary to close UNMIK.", "2008: The Kosovo Assembly  declares Kosovo\u2019s independence.", "U.S. and UN officials told us that UNMIK has found ways to indirectly  assist the Kosovo government, such as by providing funding for  government efforts in Kosovo through other UN agencies with which the  Kosovo government will engage. For instance, one UN official told us that  UNMIK had provided a ground-penetrating radar to the Office of the  United Nations High Commissioner for Human Rights to assist in efforts  to locate missing persons, which will help clarify the fate and  whereabouts of people unaccounted for after the conflict with Serbia.", "Key Facts about Lebanon  Population: Approximately 6.2  million people live in Lebanon. The  country is about 27 percent Sunni,  27 percent Shia, and 41 percent  Christian. Officially, there are  almost 1 million Syrian refugees in  Lebanon.", "Government: Lebanon is a  parliamentary republic, with a  unicameral legislature that elects  the president. Currently, 35 of 128  legislative seats are held by the  Shia Amal-Hezbollah coalition.   Lebanon's borders with Syria and  Israel remain unresolved.", "Economy: Lebanon\u2019s estimated  gross domestic product for 2017  was $52.7 billion, with a real  growth rate of 1.5 percent. The  growth rate is down from about 7  percent in 2010.", "Timeline of Key Events  1975-1990: Sectarian violence  leads to the Lebanese civil war.  1978: Israel sends troops into  Lebanon.", "March 1978: UNIFIL is established  to supervise the withdrawal of  Israeli forces from southern  Lebanon. Israeli forces withdraw in  2000.", "Current Status and Challenges  UNIFIL was created by the Security Council in March 1978 to supervise  the Israeli withdrawal from Lebanon, restore international peace and  security, and assist the government of Lebanon in restoring its authority.  In late 2006, following renewed conflict between Israel and Lebanon, the  Security Council enhanced UNIFIL\u2019s forces and added additional tasks to  its mandate to include monitoring the cessation of hostilities and  extending UNIFIL\u2019s assistance to help ensure humanitarian access to  civilian populations and the voluntary and safe return of displaced  persons. The United Nations (UN) reported in March 2018 that the  situation in UNIFIL\u2019s area of operations has remained generally calm, but  there has been no progress toward implementing a permanent ceasefire.", "Early 1980s: Israeli forces in  southern Lebanon start facing  opposition from a militant group  that would become Hezbollah,  backed by Iran.", "July-August 2006: Hezbollah  captures two Israeli soldiers,  sparking a 34-day war with Israel.  UN Security Council Resolution  1701 calls for a cease-fire between  the two sides and supplements  UNIFIL\u2019s mandate.", "According to U.S. and UN officials, one challenge UNIFIL faces in  carrying out its mandate is that Israel and Lebanon have not agreed on a  peaceful solution to their conflict. Officials noted that there is no  articulated exit strategy for the operation and that the Lebanese Armed  Forces lack the capacity to secure the southern border with Israel\u2014a  necessary condition for the successful exit of UNIFIL. However, U.S. and  UN officials agreed that UNIFIL plays a vital role by deterring further  hostilities in southern Lebanon and providing a neutral forum for meetings  between Israel and Lebanon."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Elizabeth Repko (Assistant  Director), Shirley Min (Analyst in Charge), Julia Jebo Grant, Sarah Amer,  Molly Miller, Debbie Chung, Martin de Alteriis, Neil Doherty, Mark  Dowling, Michael Rohrback, and Brandon Hunt made contributions to this  report."], "subsections": []}]}], "fastfact": ["As of December 2018, the UN had 14 ongoing peacekeeping operations involving about 103,000 personnel. The U.S. is the single largest financial contributor to these operations.", "Our review of Department of State assessments and discussions with State officials found that UN operations generally do not fully meet U.S. principles for effective peacekeeping, such as obtaining host country consent. State officials also said they need better financial and performance information on these operations.", "We recommended that State take additional steps to ensure more effective UN operations and improve UN reporting on finances and performance."]}
{"id": "GAO-18-534", "url": "https://www.gao.gov/products/GAO-18-534", "title": "Medicare Fee-For-Service: Information on the First Year of Nationwide Reduced Payment Rates for Durable Medical Equipment", "published_date": "2018-07-25T00:00:00", "released_date": "2018-08-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To achieve Medicare DME savings, Congress required CMS to implement a CBP in certain geographic areas for certain DME items. Beginning in 2011, CMS began implementing the CBP in several phases. The agency estimates that the CBP will save the Medicare program $19.7 billion between 2013 and 2022.The Patient Protection and Affordable Care Act required CMS to use CBP information to adjust fee-for-service payment rates for certain DME items in non-bid areas. On January 1, 2016, adjusted rates for 393 items went into effect in non-bid areas. CMS estimated these adjustments will save the Medicare program about $3.6 billion between fiscal years 2016 and 2020.", "GAO was asked to review the potential effects of reduced payment rates for DME in non-bid areas. In this report, GAO examines (1) payment rate reductions and any changes in the number of suppliers; (2) any changes in the utilization of rate-adjusted items; and (3) available evidence related to potential changes in beneficiaries' access to rate-adjusted items.", "GAO compared non-adjusted 2015 fee-for-service payment rates to adjusted 2016 and 2017 rates and reviewed Medicare claims data from 2010 through 2016. GAO also reviewed CMS's monitoring activities and interviewed CMS officials. In addition, GAO interviewed select beneficiary advocacy groups and DME industry trade organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS) implemented a competitive bidding program (CBP) for certain durable medical equipment (DME), such as wheelchairs and oxygen, in 2011 that is currently operating in 130 designated U.S. areas. On January 1, 2016, CMS used information from the CBP to start adjusting Medicare fee-for-service payment rates for certain DME throughout the country in areas that had previously not been subject to the CBP (known as non-bid areas). For the first year adjusted rates were in effect in non-bid areas, GAO found:", "Reductions in payment rates were generally significant but varied by category of DME item. The unweighted average reduction in payment rates for the five rate-adjusted DME items with the highest expenditures in 2016 within each DME category was 46 percent.", "Changes in the number of suppliers furnishing rate-adjusted items were generally consistent with the years before adjusted rates went into effect. GAO found that the number of suppliers furnishing rate-adjusted items in non-bid areas in 2016 decreased 8 percent compared to 2015.", "GAO's review of Medicare claims data found that beneficiary utilization of rate-adjusted items in non-bid areas in 2016 showed little change compared to 2015. GAO also found that CMS's activities to monitor beneficiary access, including changes in health outcomes, showed little change between 2015 and 2016.", "GAO interviewed several stakeholder groups that reported anecdotal examples of specific beneficiary access concerns they attributed to the rate adjustments, but stakeholders could not provide evidence to substantiate that the access issues were widespread. GAO's findings are consistent with CMS's monitoring results, which indicate that there were no widespread effects on beneficiary access in the year after the adjusted rates went into effect. However, some effects may take longer to appear, underscoring the importance of CMS's continued monitoring activities.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicare, a federal health insurance program administered by the  Centers for Medicare & Medicaid Services (CMS), within the Department  of Health and Human Services (HHS), spent about $6.4 billion in 2016 on  fee-for-service (FFS) payments for durable medical equipment (DME).  According to the 2018 Medicare Trustees Report, in 2017, 33.6 million, or  about 63 percent of the total 53.4 million Medicare enrollees, were  enrolled in the Medicare FFS Part B program that helps pay for DME  items, such as oxygen, wheelchairs, hospital beds, and walkers, if they  are medically necessary and prescribed by a physician. Medicare  beneficiaries typically obtain DME items from suppliers, who then submit  claims for payment to Medicare on behalf of beneficiaries.", "Historically, Medicare paid for DME items by using a fee schedule  generally based on what suppliers charged for the items and services  during the 1980s, and these amounts were updated annually. However,  both we and the HHS Office of Inspector General have reported that  Medicare and its beneficiaries sometimes paid higher than market rates  for various DME items, and there were long-standing concerns about the  high rates of improper payments related to DME. To achieve savings  and address improper payment concerns, Congress\u2014through the  Medicare Prescription Drug, Improvement, and Modernization Act of  2003\u2014 directed that CMS change the way it pays for DME and other  items in certain areas of the country by implementing a competitive  bidding program (CBP).", "The CBP has been implemented through several rounds, each operating  in specific CBP areas and for specific time frames. The first round began  in 2011 in nine of the largest metropolitan statistical areas, and the CBP  currently includes 130 areas. The CBP payment for a CBP-covered DME  item is based on winning bids submitted by competing suppliers within  each designated CBP area. As such, the same item can have a different  payment rate in different areas. We have previously found that CMS\u2019s  implementation of the CBP decreased expenditures for both Medicare  and beneficiaries residing in designated CBP areas as a result of lower  payment rates and decreased utilization. We also reported that CMS\u2019s  monitoring activities indicated that beneficiary access and satisfaction had  not been affected by the CBP.", "Beginning January 1, 2016, the Patient Protection and Affordable Care  Act required CMS to use payment information from the CBP to adjust  FFS payment rates (hereafter referred to as adjusted rates) in all non- rural and rural areas of the United States that are not included in the CBP  (hereafter referred to as non-bid areas). These adjustments reduced  payment rates for almost all affected DME items in non-bid areas. CMS  estimates that about half of DME items furnished to Medicare FFS Part B  program beneficiaries are furnished to beneficiaries residing in non-bid  areas, and the reduced rates after adjustment in non-bid areas will save  the Medicare program about $3.6 billion between fiscal years 2016  through 2020. CMS officials told us adjusted rates in non-bid areas have  also helped limit fraud by making DME a less lucrative target for fraud  and abuse, and may also have curbed unnecessary utilization of certain  DME. However, some stakeholder groups have raised concerns that  reduced payment rates in non-bid areas have disrupted beneficiary  access to needed DME items and such issues may be exacerbated in  rural areas because some suppliers have limited their service areas.", "You asked us to examine the potential effects of reduced payment rates  for DME in non-bid areas. In this report, for non-bid areas, we examine:  1.  DME payment rate reductions and any changes in the number of  suppliers after the rate adjustments went into effect;  2.  any changes in the utilization of rate-adjusted DME items after the  rate adjustments went into effect; and  3.  available evidence related to potential changes in Medicare  beneficiaries\u2019 access to rate-adjusted items after the rate adjustments  went into effect.", "To examine the extent to which FFS payment rates changed after  adjusted rates went into effect, we used FFS payment rate information on  CMS\u2019s website to compare 2015 non-adjusted payment rates with 2016  and 2017 adjusted rates. Specifically, we analyzed payment rates for  the five items with the largest percentage of 2016 total expenditures for all  rate-adjusted items furnished to beneficiaries in non-bid areas within each  of the 11 general DME product categories established by CMS. Based  on Medicare claims data, the resulting top 53 of the 393 rate-adjusted  items accounted for 80 percent of 2016 total expenditures for all rate- adjusted items. We analyzed payment rates by product category and by  individual item.", "To examine any changes in the number of suppliers in non-bid areas, we  used Medicare claims data and other CMS data to calculate percentage  changes in the number of suppliers furnishing any of the 393 rate- adjusted DME items to Medicare beneficiaries from 2010 through 2016.  We also reviewed changes in the number of suppliers furnishing items not  included in the CBP (non-adjusted items). We did this to evaluate the  effect reduced payment rates may have had on the number of suppliers in  the context of broader health industry developments and CMS antifraud  efforts that were not limited to rate-adjusted items, such as the  implementation of new safeguards to better screen Medicare suppliers.  (See Appendix I for information about CMS\u2019s CBP and antifraud initiatives.) In addition, we compared changes in the number of suppliers  in both non-rural and rural areas and by product category. We also spoke  with several DME suppliers as part of our outreach to four large DME  industry trade organizations whose members may provide rate-adjusted  items, CMS officials, and officials from the Small Business  Administration\u2019s National Ombudsman\u2019s Office for Regulatory  Enforcement Fairness to discuss their views on how the implementation  of adjusted rates may have affected the number of DME suppliers in non- bid areas.", "To examine the extent to which adjusted rates for items included in the  CBP may have affected utilization of those items, we used Medicare  claims data and other CMS data to report percentage changes in the  number of beneficiaries utilizing any of the 393 rate-adjusted items in  non-bid areas. Specifically, we examined changes in beneficiary  utilization of the 393 rate-adjusted items from 2010 through 2016 and  compared changes in utilization in non-rural versus rural areas and by  product category. We also examined changes in CBP areas and in  beneficiary utilization of non-adjusted items to determine how these  compared to non-bid areas and rate-adjusted items.", "To examine available evidence regarding the extent to which adjusted  rates for DME items potentially affected Medicare beneficiaries\u2019 access to  those items in non-bid areas, we reviewed: (1) data from CMS\u2019s 1-800- MEDICARE beneficiary help line; (2) CMS data on DME suppliers\u2019 rates  of assignment for rate-adjusted items\u2014i.e., whether suppliers accepted  the Medicare-approved amount in full or charged beneficiaries an  additional amount\u2014because CMS reported that a high rate of assignment  indicates that adjusted rates are sufficient; and (3) results from CMS\u2019s  health status monitoring tool that tracks real-time health outcomes for  beneficiaries residing in both CBP areas and non-bid areas. We also  conducted our own analysis for a particular set of beneficiaries using rate- adjusted oxygen items in both non-bid and CBP areas to determine if  certain health outcomes for that set of beneficiaries changed pre-and  post-implementation of adjusted rates. We selected rate-adjusted oxygen  items because most of these items are billed on a monthly basis, which  allowed us to more easily associate utilization with changes in health  outcomes. In addition, according to CMS officials, oxygen items are  generally used for the entirety of a beneficiary\u2019s life once prescribed.  Specifically, we reviewed trends for two health outcomes\u2014death and  hospital admissions\u2014by identifying a cohort of beneficiaries who began  using oxygen items in the first half of 2014 and tracking their utilization of  those items through the end of 2016.", "In addition, we interviewed CMS officials, CMS\u2019s competitive acquisition  ombudsman, and representatives from the State Health Insurance  Assistance Program. We also interviewed representatives from the  California Hospital Association, who monitor the effects of CBP and  payment changes on beneficiary access, and three beneficiary advocacy  groups representing Medicare beneficiaries who may have specific  conditions requiring DME items. We asked about their members\u2019  experiences in obtaining rate-adjusted items in non-bid areas and the  extent to which they reported widespread issues related to access and  choice of DME items. When we interviewed the four large DME industry  trade organizations, we asked them if they were aware of any effects on  beneficiaries such as access issues and whether such effects were  widespread.", "We assessed the reliability of the Medicare claims data we used for this  report by reviewing existing information about the data and the systems  that produced them, performing electronic data checks, and interviewing  CMS officials. To assess the reliability of the data we received from CMS  and its contractor, we reviewed relevant documentation, performed  electronic data checks, and interviewed CMS officials. On the basis of  these steps, we determined that these data were sufficiently reliable for  the purposes of our reporting objectives.", "We conducted this performance audit from April 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings based on our audit  objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DME Items Subject to Adjusted FFS Payment Rates", "paragraphs": ["CMS used payment information from the CBP to adjust payment rates for  393 Healthcare Common Procedure Coding System (HCPCS) codes  (generally referred to as \u201citems\u201d in this report) in non-bid areas. Most of  these items were included in at least one CBP round; however, some are  no longer included in current CBP rounds. For example, 81 items with  adjusted rates were not included in the CBP rounds that were in effect at  the end of calendar year 2016.", "CMS grouped the 393 items with adjusted rates into 11 general product  categories. See table 1 for these categories and the number of items in  each category."], "subsections": []}, {"section_title": "CMS\u2019s Methodologies for Adjusting FFS Payment Rates in Non-Bid Areas Using CBP Information", "paragraphs": ["CMS uses different methodologies to adjust FFS payment rates in non- bid areas. These adjustments are based on CBP payment information  depending on the number of CBP areas in which a particular item has  been competitively bid and the geographic area in which the adjusted rate  is applied. For example, for an item that is competitively bid in more than  10 CBP areas and is furnished to beneficiaries residing in non-rural areas  of the contiguous United States, CMS calculates a separate adjusted rate  for each of eight geographic regions. In each region, the item\u2019s average  regional adjusted rate reflects the unweighted average competitively bid  rate for all CBP areas located fully or partially within the region. To  address concerns regarding the possible effect of adjusted rates on  beneficiaries residing in rural areas, CMS may apply an additional  premium to the adjusted rates for items furnished to beneficiaries residing  in rural areas of the contiguous United States. Similarly, CMS may also  apply a premium in non-contiguous areas of the United States\u2014Alaska,  Hawaii, and the U.S. territories\u2014that applies to non-rural and rural areas  alike. See figure 1 for a map of CBP and non-bid areas as of 2016."], "subsections": []}, {"section_title": "Phase-In of Adjusted FFS Payment Rates", "paragraphs": ["According to CMS, it initially used a phased-in approach to adjust FFS  payment rates beginning in 2016; this allowed for a transition period in  which the agency could closely monitor health outcomes and access to  affected DME items prior to implementing fully adjusted rates. From  January 1 through June 30 of 2016, FFS payment rates were based on a  50/50 blend of non-adjusted and adjusted rates, and from July 1 through  December 31 of the same year, FFS payment rates were 100 percent  adjusted based on CBP information. However, the 21st Century Cures  Act required CMS to retroactively apply the 50/50 blended payment rates  to claims in the second half of 2016, delaying the fully adjusted payment  rates to January 1, 2017. Because the retroactively applied 50/50  blended rates were based on newly available information from the CBP  round 2 recompete that went into effect on July 1, 2016, the adjusted  rates for the second half of 2016 may have differed from the adjusted  rates for the first half of 2016. CMS contractors retroactively adjusted  claims for this period, which were processed during the second half of  calendar year 2017. Because this rate change became effective mid- December 2016, most decisions by suppliers and beneficiaries during the  second half of 2016 were made based on the 100 percent adjusted rates,  and the retroactive adjustments affected the total allowed charges, or  expenditures, that suppliers were reimbursed. The implementation of  adjusted rates may also affect other populations in addition to Medicare  suppliers and Medicare beneficiaries in non-bid areas, because some  private and other government insurers base their payment rates on  Medicare\u2019s fee schedule. For example, the federal government\u2019s  TRICARE military health program uses Medicare\u2019s fee schedule to help  determine how much it pays for DME items."], "subsections": []}, {"section_title": "DME Supplier Requirements", "paragraphs": ["CMS has established certain requirements that all DME suppliers must  meet in order to enroll in Medicare and maintain Medicare billing  privileges, which include accreditation and appropriate licensure.  Specifically, DME suppliers must meet Medicare enrollment and quality  standards. CMS also requires all DME suppliers and each of their  locations to be accredited by a CMS-approved accrediting organization.  In addition, DME suppliers must meet state licensure requirements in  order to furnish certain items or services. Finally, certain DME suppliers  are required to post a surety bond of at least $50,000 for each business  location.", "There are two key differences between supplier requirements in non-bid  areas versus CBP areas. First, only suppliers who are awarded a  contract\u2014referred to as contract suppliers\u2014can furnish certain DME  items at competitively determined prices to Medicare beneficiaries  residing in CBP areas, and they are contractually obligated to furnish  items in their contract upon request. According to CMS\u2019s competitive  acquisition ombudsman, contract suppliers in CBP areas may receive  more scrutiny than DME suppliers in non-bid areas because CMS can  take action to ensure the suppliers are meeting their contract  obligations.", "However, in non-bid areas, any Medicare-enrolled DME supplier can  furnish DME items. DME suppliers do not sign contracts in non-bid areas  and are not contractually obligated to furnish items upon request. Second,  contract suppliers in CBP areas must accept Medicare assignment,  meaning that they must accept the competitively determined Medicare  payment rate in full (and may not charge beneficiaries more than any  unmet deductible and 20 percent coinsurance), whereas suppliers in non- bid areas may choose not to accept assignment and there is no limit on  the amount they may charge a beneficiary."], "subsections": []}, {"section_title": "CMS\u2019s Monitoring Activities", "paragraphs": ["CMS has implemented several activities to monitor whether beneficiary  access has been affected by the implementation of adjusted rates in non- bid areas, as summarized below.", "Inquiries to 1-800-MEDICARE. Beneficiaries with DME questions\u2014 referred to by CMS as inquiries\u2014are directed to call CMS\u2019s 1-800- MEDICARE call line. Callers are assisted by customer service  representatives trained to answer questions and assist beneficiaries in  finding DME suppliers. One CMS official told us the agency tracks  DME-related inquiries to 1-800-MEDICARE but does not track  whether inquiries are received from beneficiaries in CBP areas versus  non-bid areas.", "Health Status Monitoring Tool. CMS analyzes Medicare claims data  to monitor real-time health outcomes, such as death, hospitalizations,  emergency room visits, and physician visits for beneficiaries in both  CBP and non-bid areas. CMS posts information on its website to  show historical and regional trends in health outcomes for specific  groups of beneficiaries.", "Monitoring Changes in the Number of Suppliers and Beneficiary  Utilization Rates. CMS officials told us they closely monitor changes  in the number of suppliers furnishing items subject to adjusted rates in  non-bid areas as well as changes in beneficiary utilization of rate- adjusted items.", "Monitoring Assignment Rates. CMS monitors the percentage of  claims suppliers have submitted as \u201cassigned\u201d in non-bid areas.  According to CMS, assignment rates are a good indicator of whether  FFS payment amounts are sufficient.", "While CMS conducted beneficiary satisfaction surveys before and after  the implementation of previous CBP rounds in order to measure changes  in beneficiary satisfaction in CBP areas, CMS officials reported they have  not conducted similar surveys of beneficiaries residing in non-bid areas."], "subsections": []}]}, {"section_title": "Payment Rate Reductions Were Generally Significant but Varied, and Number of Suppliers Continued a Trend of Annual Decreases", "paragraphs": [], "subsections": [{"section_title": "FFS Payment Rate Reductions Were Generally Significant but Varied By Product Category and DME Item", "paragraphs": ["The payment rate reductions for DME items in non-bid areas were  generally significant. The average unweighted percentage reduction  across the top product category items combined\u2014measured by  calculating the percentage change between the 2015 non-adjusted and  the 2017 fully adjusted rates\u2014was 46 percent. However, payment rate  reductions varied by DME product category and by individual item within  product categories. This is not unexpected given that the adjusted rates  for each item were based on competitively determined payment rates  from prior or current CBP rounds, and rate reductions for those payment  rates also varied widely by product category and item. Specifically,  average payment rate reductions by DME product category ranged from  18 percent to 74 percent with a midpoint of 47 percent. For example, the  average payment rate reduction for the top items in the oxygen product  category\u2014the category that accounted for the highest percentage of total  expenditures in 2016\u2014was 39 percent. The range of reductions among  individual items within product categories also varied. For example,  payment rate reductions for the top items in the enteral nutrients product  category ranged from 46 percent to 56 percent. In contrast, payment rate  reductions for the three items in the negative pressure wound therapy  (NPWT) product category ranged from 6 percent to 61 percent. (See table  2.)", "Table 3 shows 2015 non-adjusted and 2017 fully adjusted rates and the  percentage reduction in these rates for the rate-adjusted item in each  product category with the largest share of 2016 total expenditures. (See  Appendix II for detailed information on the 2015 non-adjusted payment  rates, 2016 transitional 50/50 blended adjusted rates, and 2017 fully  adjusted rates for items with the highest 2016 expenditures in each  product category.)"], "subsections": []}, {"section_title": "In 2016, Number of Suppliers Furnishing Rate- Adjusted Items in Non-Bid Areas Continued a Trend of Annual Decreases", "paragraphs": ["The number of suppliers furnishing any of the 393 rate-adjusted items to  beneficiaries in non-bid areas in 2016\u2014the first year that CMS adjusted  payment rates in non-bid areas\u2014decreased 8 percent compared to 2015.  This continued a trend of annual decreases in non-bid areas going back  to at least 2011\u2014the first year CMS began implementing the CBP in nine  areas. The largest percentage decrease in suppliers, 13 percent,  occurred in 2014 (the year after the CBP was expanded to an additional  100 areas), followed by 9 and 8 percent decreases in 2015 and 2016,  respectively. This information is based on our review of the number of  suppliers billing Medicare, so it is unclear as to how much the decreases  were attributable to suppliers closing their businesses, conducting  mergers or acquisitions, no longer accepting Medicare beneficiaries, or  other factors.", "Also, the number of suppliers furnishing non-adjusted items to  beneficiaries residing in non-bid areas decreased 4 percent in 2016  compared to 2015. Similar to trends found for rate-adjusted items, this continued a trend of annual decreases since at least 2011, although  these decreases were smaller. As was the case with rate-adjusted items,  the largest percentage decrease in the number of suppliers occurred in  2014 and then slowed in subsequent years. (See fig. 2.) Because 2016  was the most recent year of complete Medicare claims data available at  the time of our study, we could only review data for the first year that  adjusted rates were in effect in non-bid areas and could not determine if  these trends continued in 2017.", "Some DME industry trade organization representatives we interviewed  reported that suppliers face an additional challenge of having to travel  long distances when furnishing items to beneficiaries in rural areas, which  may result in suppliers limiting their service areas. However, there was  little difference between non-rural and rural non-bid areas in terms of  changes in the number of suppliers between 2015 and 2016. For  example, the number of suppliers furnishing rate-adjusted items to  beneficiaries residing in non-rural non-bid areas decreased 7 percent  between 2015 and 2016 compared with a decrease of 8 percent in rural  non-bid areas. (See fig. 3.)", "There was also little difference between non-rural and rural areas in terms  of changes in the number of suppliers who furnished non-adjusted items  to beneficiaries residing in non-bid areas. For example, between 2015  and 2016 the number of suppliers furnishing non-adjusted items to  beneficiaries in non-bid areas decreased 3 percent in non-rural areas and  4 percent in rural areas.", "We found that the number of suppliers furnishing rate-adjusted items in  non-bid areas decreased between 2015 and 2016 in all product  categories, though the extent of these decreases varied. For example, we  found that the number of suppliers furnishing items in the infusion pumps  product category decreased by 1 percent between 2015 and in 2016  while the number of suppliers furnishing general home equipment  decreased by 10 percent. Trends for 2010 through 2016 were generally  similar. The number of suppliers decreased in all product categories, and  the extent of decreases varied. Individual suppliers may furnish items  across multiple product categories. (See fig. 4.)"], "subsections": []}]}, {"section_title": "Beneficiary Utilization of Rate-Adjusted Items Held Steady in 2016 Following Three Years of Decreases", "paragraphs": ["The number of beneficiaries in non-bid areas receiving at least one rate- adjusted item in 2016\u2014the first year that CMS implemented adjusted  rates in non-bid areas\u2014showed little change compared to 2015,  decreasing by less than one-half of a percentage point. This stabilization  in beneficiary utilization occurred following three years of decreases in  non-bid areas with the largest decrease (4 percent) in 2014\u2014the year  following the CBP\u2019s expansion to an additional 100 areas. In comparison,  the number of beneficiaries in non-bid areas who received at least one  non-adjusted item increased 3 percent in 2016. (See fig. 5.) In general,  the annual trends in CBP areas paralleled those in non-bid areas.  Between 2015 and 2016, there was little change in the number of  beneficiaries in CBP areas who received at least one rate-adjusted item,  with a decrease of less than one-half a percentage point.", "In non-bid areas, there was little difference between non-rural and rural  areas in terms of changes in 2016 in the number of beneficiaries who  received rate-adjusted items, with decreases in both of less than one-half  a percentage point. There was also little difference in terms of the  changes in the number of beneficiaries in non-bid areas who received  non-adjusted items. The total decrease for the 2010 to 2016 period was  smaller in non-rural areas than rural areas. (See fig. 6.)", "We found that the number of beneficiaries in non-bid areas receiving at  least one rate-adjusted item decreased in 2016 for 9 of the 11 product  categories. Changes ranged from a 45 percent decrease for the TENS  product category to a 9 percent increase for the CPAP/RAD product  category. For the 2010 through 2016 period, most product categories  also had total net percentage decreases, and percentage changes varied  across product categories. (See fig. 7.) Individual product category  decreases were generally larger in CBP areas than in non-bid areas. For  example, between 2010 and 2016, the percentage change in the number  of beneficiaries who received oxygen product category items was -29  percent in CBP areas as compared to -19 percent in non-bid areas.  CPAP/RAD was the one product category for which the number of  beneficiaries receiving at least one item increased rather than decreased  in 2016 and between 2010 and 2016 in both non-bid and CBP areas. This  is consistent with what we have previously reported.", "We could only report on utilization for one year following adjustment of  rates because 2016 was the most recent year with complete data  available; as such utilization trends may differ in 2017 and subsequent  years."], "subsections": []}, {"section_title": "Available Evidence Indicates No Widespread Access Issues in the First Year of Reduced Durable Medical Equipment Payment Rates in Non-Bid Areas CMS\u2019s Health Status Monitoring Tool Indicates that Beneficiaries in Non- Bid Areas Have Not Experienced Changes in Health Outcomes", "paragraphs": ["CMS has reported that data from its health status monitoring tool indicate  the reduced payment rates have not resulted in changes in access to  DME items or health outcomes in non-bid areas in 2016 as compared to  2015. CMS uses the health status monitoring tool to analyze Medicare  claims data and track seven health outcomes\u2014deaths, hospitalizations,  emergency room visits, physician visits, admissions to skilled nursing  facilities, average number of days spent hospitalized in a month, and  average number of days in a skilled nursing facility in a month\u2014for  beneficiaries in both CBP and non-bid areas. The data for non-bid areas  are broken out by rural and non-rural areas across eight different regions  of the country and non-contiguous U.S. areas. CMS monitors these  health outcomes for three Medicare FFS beneficiary groups: 1) all  beneficiaries enrolled in FFS, 2) beneficiaries who are likely to use one of  the rate-adjusted items on the basis of related health conditions, and 3)  beneficiaries who have a claim for one of the rate-adjusted items. CMS\u2019s  tool considers historical and regional trends in health status to monitor  health outcomes in all CBP and non-bid areas. CMS officials told us that  staff meet bi-weekly to review monitoring tool trends as well as external  complaints or stakeholder feedback to identify and investigate potential  DME access issues. The officials told us these investigations have not  identified any adverse health outcomes as a result of the implementation  of adjusted rates.", "We previously conducted an analysis of CMS\u2019s methodologies and  scoring algorithm that focused on evaluating health outcome trends in  CBP areas and found them to be generally sound. CMS officials told us  they have not made significant revisions to the tool\u2019s underlying  methodologies but did create a separate workbook specially tailored to  the implementation of the adjusted rates in non-bid areas that includes  additional capabilities, such as review of assignment rates. In addition,  because CMS uses a 4-month window to evaluate health outcomes of all  beneficiaries that meet the criteria, for this report we also conducted our  own analysis of health outcomes over a longer period of time to  determine if our results for a particular set of beneficiaries were consistent  with CMS\u2019s shorter-term results. Specifically, we tracked a cohort of about  256,000 beneficiaries in both non-bid and CBP areas who began using  oxygen items in the first half of 2014 and followed their utilization through  the end of 2016 to determine if mortality and hospital admissions rates  remained consistent before and after the implementation of adjusted  rates. We found that the trends in mortality and hospital admissions rates  for this cohort were generally consistent with the cumulative trends  displayed in CMS\u2019s monitoring tool. We did not find a change in health  status between 2015 and 2016 related to the reduced payment rates."], "subsections": [{"section_title": "The Percentage of Medicare Enrolled Participating Suppliers and Rates of Assignment for Rate-Adjusted Items Did Not Change Following the Implementation of Adjusted Rates", "paragraphs": ["One way that CMS verifies that beneficiaries have access to needed  items and services is by reviewing the percentage of suppliers who enroll  as Medicare \u201cparticipating\u201d suppliers and the percentage of claims that  suppliers have submitted as assigned. Participating suppliers must accept  the FFS payment rate in full for all claims and cannot charge beneficiaries  an additional amount above the 20 percent copayment. DME suppliers  can also elect to be \u201cnon-participating\u201d suppliers meaning they can  choose to accept assignment on a claim-by-claim basis and there is no  limit on the amount that they can charge for a DME item. Non- participating suppliers in non-bid areas are not required to accept  assignment of Medicare claims. This means a non-participating supplier  can decide not to accept assignment for an item and can charge  beneficiaries an amount above the Medicare payment rate. CMS told us  the rate of participating suppliers in 2016 was unchanged from 2015 and  decreased by one percent in 2017, and the rates of assignment for rate- adjusted items remained very high (over 99 percent of all claims for rate- adjusted items in non-bid areas) in 2016 and 2017."], "subsections": []}, {"section_title": "Number of Inquiries to CMS and the State Health Insurance Assistance Program Did Not Increase Following the Implementation of Adjusted Rates", "paragraphs": ["CMS told us the nationwide number of inquiries to 1-800-MEDICARE  associated with access issues did not increase after the implementation  of adjusted rates. According to a CMS official, CMS uses the same  process for all DME calls received, regardless of whether the caller lives  in a CBP or non-bid area, so there is no way to distinguish DME-related  calls in CBP areas from non-bid areas. However, the CMS official said  there has been no evidence of systemic access issues in non-bid areas,  such as beneficiaries reporting they were not able to find suppliers to  furnish DME items with adjusted rates.", "We spoke with officials from three of CMS\u2019s regional offices, who also  reported there has not been an increase in the number of DME-related  inquiries since adjusted rates in non-bid areas went into effect. One of the  officials told us that her regional office is forwarded information about all  inquiries related to Medicare Parts A and B from the other CMS regional  offices. She also said the regional offices generally receive direct inquiries  from a variety of sources including beneficiaries, beneficiary advocates,  local partners, congressional district offices, and providers, and some are  also escalated by 1-800-MEDICARE customer service representatives.  According to that official, each year regional offices receive close to  40,000 inquiries nationwide regarding a wide range of DME issues, and  most are related to questions about coverage and documentation  requirements (such as what types of DME may require additional  documentation or face-to-face visits with physicians). In addition, the  official told us that regional offices capture detailed information about  each inquiry. This includes contact information for the individual  submitting the inquiry, the type of DME involved and whether it is included  in the CBP, and the regional office\u2019s response. Officials said they review  this information to specifically look for access issues or trends by product  category but have not identified any issues. One official said she had  heard anecdotal reports of beneficiaries contacting regional offices  claiming they had experienced access issues, but such reports did not  indicate these issues were widespread or sustained.", "We also interviewed representatives from the State Health Insurance  Assistance Program who reported there has not been an increase in  requests for assistance with DME-related issues since the adjusted rates  went into effect. The representatives told us State Health Insurance  Assistance Program counselors log all contacts, but the data do not  distinguish between non-bid and CBP areas. However, they said  counselors have received about 300 to 500 DME-related contacts each  quarter since 2015, and the number of requests for assistance with DME- related issues remained consistent before and after adjusted rates went  into effect. State Health Insurance Assistance Program representatives  said counselors attempt to resolve issues on their own, but can also  contact CMS\u2019s regional offices for assistance."], "subsections": []}, {"section_title": "Several Stakeholder Groups Reported Anecdotal Examples of Specific Beneficiary Access Concerns, But Did Not Have Evidence That Issues Were Widespread", "paragraphs": ["We interviewed representatives from one state hospital association, three  beneficiary advocacy groups, and four DME industry trade organizations  who provided anecdotal examples of varying degrees of beneficiary  access issues in non-bid areas. For example, representatives from the  state hospital association told us some hospital case managers in non-bid  areas have reported difficulty in locating suppliers to provide DME items  such as wheelchairs or walkers, but these issues are not widespread. A  representative from one beneficiary advocacy group told us her  organization does not receive many direct inquiries from Medicare  beneficiaries in regard to access issues to DME, but it has been  contacted by entities such as hospital discharge planners and pharmacies  regarding issues with delivery of DME items. For example, the  representative said some hospital discharge planners have reported that  DME suppliers are more resistant to delivering DME items, such as  wheelchairs and walkers, to the hospital when the beneficiary resides in a  non-bid area as opposed to a CBP area. However, the representative  said such reports are anecdotal and she does not think that issues  reported are widespread or have created significant hardship. She added  that her organization makes webinars available on a fairly regular basis,  and very few people signed up for the DME webinar, which was not the  case for webinars held for other topics.", "In contrast, a representative of another beneficiary advocacy group that  focuses on a condition in which beneficiaries would typically use oxygen  items with adjusted rates told us that without a real research instrument, it  is difficult to determine if the increase in complaints that her group began  receiving in 2016 from beneficiaries in non-bid areas is directly related to  the adjusted rates, but she said she believes they are because she had  not heard certain types of complaints before the adjusted rates went into  effect. For example, she said the beneficiary advocacy group has received complaints about reduced delivery services and reductions in  the number of portable oxygen tanks that DME suppliers are willing to  furnish in a single delivery and these complaints are more frequent from  beneficiaries who live in rural areas. The representative said given that  rural areas may have higher delivery costs, it is not surprising that some  suppliers may have decreased the number of deliveries, but she was  surprised to hear they have decreased the number of portable oxygen  tanks they are willing to provide. According to CMS, the agency  encourages individuals to report any supplier that delivers fewer tanks of  oxygen than a beneficiary needs to CMS, so this violation can be  immediately addressed.", "Representatives from four DME industry trade organizations that we  spoke with told us the implementation of adjusted rates has caused some  suppliers to change their business models and practices. Specifically,  individuals from all four DME industry trade organizations told us DME  companies have lowered costs by reducing their number of employees,  decreasing their service areas, or consolidating deliveries in specific  areas to only certain days. For example, several DME suppliers told us  that since the implementation of adjusted rates, they will only service  beneficiaries who reside within the city limits or within a certain number of  miles from their locations. Several DME suppliers told us the quality and  range of items provided by DME suppliers in non-bid areas has changed  since the adjusted rates went into effect. For example, several suppliers  reported they provide cheaper, lower quality items and that some  suppliers will no longer provide liquid oxygen to Medicare beneficiaries. In  addition, individuals from all four DME industry trade organizations also  told us there have been delays in hospital discharges as a result of not  being able to find a DME supplier to provide needed DME. In contrast,  CMS officials told us they investigated reported concerns about delayed  patient discharges because of difficulties in acquiring rate-adjusted items  and found there has not been a noticeable change in the average length  of hospital stay before and after the implementation of adjusted rates.  Specifically, CMS officials told us they measured: 1) average length of  hospital stay for beneficiaries who received new rate-adjusted items  shortly after their discharge, 2) whether beneficiaries were being  discharged prior to receiving new rate-adjusted items, and 3) average  length of stay for beneficiaries in individual access groups whether or not  they received rate-adjusted items after being discharged. According to  CMS, results of this analysis indicated no apparent changes in the  average length of hospital stay after adjusted rates were implemented.", "In addition to speaking with these representatives, we also reviewed  several publicly released studies that assessed the effect of the  implementation of adjusted rates on beneficiaries, DME suppliers, and  others. We found these studies did not provide persuasive evidence of  substantial effects, primarily because of methodological issues with how  the participants in the studies were recruited. Specifically, respondents  were recruited on social media platforms or through targeted email  notifications, raising concerns about selection bias.", "Although the number of DME suppliers and beneficiary utilization of DME  items have decreased throughout the past several years, available  evidence indicates there were not widespread beneficiary access issues  in 2016. According to CMS officials, the long-term decreases in utilization  do not necessarily indicate that beneficiaries did not receive needed  DME, and suggested instead that these decreases are the result of a  decline in unnecessary utilization. However, some stakeholders we  interviewed continued to express concerns that lower FFS payment rates  may have made it more difficult for some beneficiaries to receive needed  DME, and one DME trade organization told us some decreases in  utilization could be attributed to beneficiaries opting to pay for items  outright rather than going through Medicare. Because there is only limited  experience on changes in the number of DME suppliers and utilization of  DME based on the first year that adjusted rates have been in effect, some  effects may take longer to appear, and it is possible that trends could  differ in 2017 or subsequent years. This underscores the importance of  CMS\u2019s continued monitoring activities."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for comment. HHS provided  technical comments, which were incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services and appropriate congressional  committees. The report will also be available at no charge on our website  at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or clowers@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: The Centers for Medicare & Medicaid Services\u2019 Phase-In of the Competitive Bidding Program and Other Antifraud Initiatives, 2008 through 2019", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS) has implemented  several antifraud efforts that affect durable medical equipment (DME)  suppliers. Specifically, CMS began phasing in DME competitive bidding  program (CBP) rounds in 2008. (See fig. 8.) In addition to the CBP, CMS  has also implemented several other broader initiatives. (See fig. 9.)"], "subsections": []}, {"section_title": "Appendix II: Medicare Fee-for-Service (FFS) Payment Rates for Top Expenditure Items in Each Durable Medical Equipment (DME) Product Category, 2015 to 2017", "paragraphs": ["Table 4 includes the top five Healthcare Common Procedure Coding  System (HCPCS) codes for each product category based on the  percentage of 2016 total expenditures for items included in the  competitive bidding program (CBP) and subject to adjusted rates in non- bid areas. Combined, these items account for 80 percent of 2016 total  expenditures across all 393 rate-adjusted items."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["A. Nicole Clowers, (202) 512-7114 or clowersa@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kathleen M. King, Director;  Martin T. Gahart, Assistant Director; Michelle Paluga, Analyst-in-Charge;  Sam Amrhein; Todd Anderson; Barbara Hansen; and Emily Wilson made  key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Medicare: CMS\u2019s Round 2 Durable Medical Equipment and National Mail- order Diabetes Testing Supplies Competitive Bidding Programs.  GAO-16-570. Washington, D.C.: September 15, 2016.", "Medicare: Utilization and Expenditures for Complex Wheelchair  Accessories. GAO-16-640R. Washington, D.C.: June 1, 2016.", "Medicare: Bidding Results from CMS\u2019s Durable Medical Equipment  Competitive Bidding Program. GAO-15-63. Washington, D.C.: November  7, 2014.", "Medicare: Second Year Update for CMS\u2019s Durable Medical Equipment  Competitive Bidding Program Round 1 Rebid. GAO-14-156. Washington,  D.C.: March 7, 2014  Medicare: Review of the First Year of CMS\u2019s Durable Medical Equipment  Competitive Bidding Program\u2019s Round 1 Rebid. GAO-12-693.  Washington, D.C.: May 9, 2012.", "Medicare: The First Year of the Durable Medical Equipment Competitive  Bidding Program Round 1 Rebid. GAO-12-733T. Washington, D.C.: May  9, 2012.", "Medicare: Issues for Manufacturer-level Competitive Bidding for Durable  Medical Equipment. GAO-11-337R. Washington, D.C.: May 31, 2011.", "Medicare: CMS Has Addressed Some Implementation Problems from  Round 1 of the Durable Medical Equipment Competitive Bidding Program  for the Round 1 Rebid, GAO-10-1057T. Washington, D.C.: September 15,  2010.", "Medicare: CMS Working to Address Problems from Round 1 of the  Durable Medical Equipment Competitive Bidding Program. GAO-10-27.  Washington, D.C.: November 6, 2009.", "Medicare: Covert Testing Exposes Weaknesses in the Durable Medical  Equipment Supplier Screening Process. GAO-08-955. Washington, D.C.:  July 3, 2008.", "Medicare: Competitive Bidding for Medical Equipment and Supplies  Could Reduce Program Payments, but Adequate Oversight Is Critical.  GAO-08-767T. Washington, D.C.: May 6, 2008.", "Medicare: Improvements Needed to Address Improper Payments for  Medical Equipment and Supplies. GAO-07-59. Washington, D.C.:  January 31, 2007.", "Medicare Durable Medical Equipment: Class III Devices Do Not Warrant  a Distinct Annual Payment Update. GAO-06-62. Washington, D.C.: March  1, 2006.", "Medicare: More Effective Screening and Stronger Enrollment Standards  Needed for Medical Equipment Suppliers. GAO-05-656. Washington,  D.C.: September 22, 2005.", "Medicare: CMS\u2019s Program Safeguards Did Not Deter Growth in Spending  for Power Wheelchairs. GAO-05-43. Washington, D.C.: November 17,  2004.", "Medicare: Past Experience Can Guide Future Competitive Bidding for  Medical Equipment and Supplies. GAO-04-765. Washington, D.C.:  September 7, 2004."], "subsections": []}], "fastfact": ["Historically, Medicare used a standard set of rates to pay for certain durable medical equipment (i.e., walkers and oxygen) for its beneficiaries. Due to concerns that it was paying higher than market rates, Medicare began a competitive bidding program for some of these items in designated areas in 2011. In 2016, information from this program was used to reduce rates in the rest of the country.", "We found that the number of suppliers who sold these items decreased\u2014continuing a long-term trend\u2014but that available information indicates that beneficiaries were able to get needed items."]}
{"id": "GAO-19-60", "url": "https://www.gao.gov/products/GAO-19-60", "title": "U.S. Secret Service: Action Needed to Address Gaps in IT Workforce Planning and Management Practices", "published_date": "2018-11-15T00:00:00", "released_date": "2018-11-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Commonly known for protecting the President, the Secret Service also plays a leading role in investigating and preventing financial and electronic crimes. To accomplish its mission, the Secret Service relies heavily on the use of IT infrastructure and systems. In 2009, the component initiated the IITT investment\u2014a portfolio of programs and projects that are intended to, among other things, improve systems availability and security in support of the component's business operations.", "GAO was asked to review the Secret Service's oversight of its IT portfolio and workforce. This report discusses the extent to which the (1) CIO implemented selected IT oversight responsibilities, (2) Secret Service implemented leading IT workforce planning and management practices, and (3) Secret Service and DHS implemented selected performance monitoring practices for IITT. GAO assessed agency documentation against 14 selected component CIO responsibilities established in DHS policy; 15 selected leading workforce planning and management practices within 5 topic areas; and two selected leading industry project monitoring practices that, among other things, were, in GAO's professional judgment, of most significance to managing IITT."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Secret Service (Secret Service) Chief Information Officer (CIO) fully implemented 11 of 14 selected information technology (IT) oversight responsibilities, and partially implemented the remaining 3. The CIO partially implemented the responsibilities to establish a process that ensures the Secret Service reviews IT contracts; ensure that the component's IT policies align with the Department of Homeland Security's (DHS) policies; and set incremental targets to monitor program progress. Additional efforts to fully implement these 3 responsibilities will further position the CIO to effectively manage the IT portfolio.", "Of the 15 selected practices within the 5 workforce planning and management areas, the Secret Service fully implemented 3 practices, partly implemented 8, and did not implement 4 (see table). Within the strategic planning area, the component partly implemented the practice to, among other things, develop IT competency needs. While the Secret Service had defined general core competencies for its workforce, the Office of the CIO (OCIO) did not identify all of the technical competencies needed to support its functions. As a result, the office was limited in its ability to address any IT competency gaps that may exist. Also, while work remains to improve morale across the component, the Secret Service substantially implemented the employee morale practices for its IT staff.", "Secret Service officials said the gaps in implementing the workforce practices were due to, among other things, their focus on reorganizing the IT workforce within OCIO. Until the Secret Service fully implements these practices for its IT workforce, it may be limited in its ability to ensure the timely and effective acquisition and maintenance of the component's IT infrastructure and services.", "Of the two selected IT project monitoring practices, DHS and the Secret Service fully implemented the first practice to monitor the performance of the Information Integration and Technology Transformation (IITT) investment. In addition, for the second practice\u2014to monitor projects on incremental development metrics\u2014the Secret Service fully implemented the practice on one of IITT's projects and partially implemented it on another. In particular, OCIO did not fully measure post-deployment user satisfaction with the system on one project. OCIO plans to conduct a user satisfaction survey of the system by September 2018, which should inform the office on whether the system is meeting users' needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 13 recommendations, including that the Secret Service establish a process that ensures the CIO reviews all IT contracts, as appropriate; and identify the skills needed for its IT workforce. DHS concurred with all recommendations and provided estimated dates for implementing each of them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Commonly known for protecting the President, the United States Secret  Service (Secret Service), a component of the Department of Homeland  Security (DHS), also plays a leading role in investigating and preventing a  variety of financial and electronic crimes. For example, the Secret  Service\u2019s criminal investigation activities encompass financial and  electronic crimes, such as identity theft, counterfeiting, and computer- based attacks on the nation\u2019s financial, banking, and telecommunications  infrastructure. In addition, its protective intelligence efforts include  investigating threats against protected persons and facilities, such as the  President and the White House. The Secret Service is also responsible  for certain security activities, including presidential inaugurations and  national conventions.", "To accomplish its mission, the Secret Service relies heavily on the use of  information technology (IT) infrastructure and communications systems.  The component\u2019s Chief Information Officer (CIO) plays a key role in  effectively managing this infrastructure and systems. Among other things,  the CIO is responsible for IT strategic planning and the management and  governance of the IT programs and infrastructure. The CIO is also  responsible for managing the component\u2019s IT workforce, which officials  from the Office of the CIO (OCIO) define as the government employees  who provide direct and indirect support of the day-to-day operations of the  Secret Service\u2019s enterprise systems and services.", "However, the Secret Service has faced longstanding challenges in  managing its IT environment. For example, a National Security Agency  audit of the environment in 2008 identified network and system  vulnerabilities that needed immediate remediation to protect the Secret  Service\u2019s systems and electronic information.", "To address the challenges with its IT environment, the Secret Service  initiated the Information Integration and Technology Transformation (IITT)  investment in 2009. IITT is a portfolio of programs and projects that are  intended to, among other things, modernize and enhance the IT network  infrastructure; provide hardware and software to ensure reliable and  consistent voice, data, and radio coverage for Secret Service agents; and  provide counterintelligence and data mining capabilities to improve  officials\u2019 ability to perform the component\u2019s investigative mission.", "Yet, the Secret Service\u2019s implementation of the IITT investment has also  been problematic. For example, in 2011, DHS\u2019s Office of Inspector  General reported that, among other things, the component\u2019s schedule for  implementing IITT was not realistic. Also in that 2011 report, the  Inspector General stated that, while the Secret Service had implemented  an internal governance approach for IITT (including establishing  governance policies and procedures), it had not implemented a formal  department-level IT governance mechanism to provide integrated  feedback and direction for the investment.", "Given the importance of effective IT management for achieving the Secret  Service\u2019s mission, you asked us to review the role of the Secret Service  CIO in overseeing the component\u2019s IT portfolio and workforce. Our  specific objectives were to evaluate the extent to which: (1) the Secret  Service CIO has implemented selected IT oversight responsibilities, (2)  the Secret Service has implemented leading workforce planning and  management practices for its IT workforce, and (3) the Secret Service  and DHS have implemented selected performance and progress  monitoring practices for the IITT investment.", "To address the first objective, we analyzed DHS\u2019s policies and guidance  on IT management to identify the responsibilities that were to be  implemented by the component-level CIO related to overseeing the  Secret Service\u2019s IT portfolio, including existing systems, acquisitions, and  investments. From the list of 33 responsibilities that we identified, we  then excluded the responsibility that was associated with information  security, which is expected to be addressed as part of a separate,  subsequent GAO review. We also excluded those responsibilities that  were significantly large in scope (e.g., implement an enterprise  architecture) or that, in our professional judgment, lacked specificity (e.g.,  provide timely delivery of mission IT services). As a result, we excluded  from consideration for this review a total of 10 CIO responsibilities.", "For the 23 that remained, we then combined certain responsibilities that  overlapped with other related responsibilities. For example, we combined  related responsibilities on the component CIO\u2019s review of IT contracts. As  a result, we were left with 14 responsibilities that were relevant for our  review. We then validated with the acting DHS CIO that these were key  responsibilities for the department\u2019s component-level CIOs. Following this  validation, we elected to include all 14 of the responsibilities in our review.  Appendix I identifies the 14 selected component-level CIO  responsibilities.", "We then assessed relevant Secret Service documentation to determine  the extent to which the CIO had implemented the selected  responsibilities. For example, we assessed monthly program  management reports demonstrating the CIO\u2019s oversight of IT programs,  projects, and systems; systems engineering life cycle technical review  briefings; the Secret Service\u2019s enterprise governance policy; and meeting  minutes from the DHS boards and councils on which the CIO participated.  We also selected and analyzed two random, non-generalizable samples  of a total of 33 IT contracts that the Secret Service awarded between  October 1, 2016, and June 30, 2017, as well as the associated approval  documentation, to determine whether or not the CIO or the CIO\u2019s  delegate had approved each of the contracts.", "Further, we interviewed Secret Service officials, including the CIO and  Deputy CIO, regarding the CIO\u2019s implementation of the 14 selected  component-level responsibilities. We assessed the evidence against the  selected responsibilities to determine the extent to which the CIO had  implemented the responsibilities.", "To address the second objective, we first identified seven topic areas  associated with human capital management based on our review of IT  workforce planning and management guidance issued by the Office of  Personnel Management, the Chief Human Capital Officers Council, DHS,  the Secret Service, and us. Among these topic areas, we then selected  five areas that, in our professional judgment, were of particular  importance to successful workforce planning and management. These  areas are: (1) strategic planning, (2) recruitment and hiring, (3) training  and development, (4) employee morale, and (5) performance  management.", "We also reviewed these same sources and identified numerous leading  practices associated with the five topic areas. Among these leading  practices, we then selected three practices within each of the five areas,  for a total of 15 practices. The selected practices were foundational  practices that, in our professional judgment, were of particular importance  to successful workforce planning and management. Appendix I identifies  the five workforce areas and the 15 associated practices that we  selected.", "We then assessed the Secret Service\u2019s workforce planning  documentation against the 15 selected leading practices. For example,  we analyzed the staffing model that the Secret Service used to determine  the number of IT staff it needed, as well as recruitment plans and action  plans for improving employee morale. We also interviewed Secret Service  officials\u2014including the CIO, Deputy CIO, and workforce planning staff\u2014 about the component\u2019s efforts to implement the selected leading practices  for its IT workforce.", "Regarding our assessments of the Secret Service\u2019s implementation of the  15 selected leading workforce planning and management practices, we  assessed a practice as being fully implemented if component officials  provided supporting documentation that demonstrated all aspects of the  practice. We assessed a practice as not implemented if the officials did  not provide any supporting documentation for that practice, or if they  provided documentation that did not demonstrate any aspect of the  practice. We assessed a practice as being partly implemented if the  officials provided supporting documentation that demonstrated some, but  not all, aspects of the selected practice.", "In addition, related to our assessments of the Secret Service\u2019s  implementation of the five selected overall workforce areas, we assessed  each area as follows, based on the implementation of the three selected  practices within each area:", "Fully implemented: The Secret Service provided evidence that it had  fully implemented all three of the practices within the workforce area;", "Substantially implemented: The Secret Service provided evidence that  fully implemented two practices and partly implemented the  remaining one practice within the workforce area, or  fully implemented one practice and partly implemented the  remaining two practices within the workforce area;", "Partially implemented: The Secret Service provided evidence that it  had partly implemented each of the three practices within the  workforce area;", "Minimally implemented: The Secret Service provided evidence that it partly implemented two practices and not implemented the  remaining one practice within the workforce area, or partly implemented one practice and not implemented the  remaining two practices within the workforce area; or", "Not implemented: The Secret Service did not provide evidence that it  had implemented any of the three practices within the workforce area.", "To address the third objective, we reviewed leading project monitoring  practices and guidance from the Software Engineering Institute. We then  selected two practices that, in our professional judgment, were of most  significance to managing the IITT investment given the phase of the life  cycle that the investment was in and the agile development methodology  that the Secret Service was using for certain projects within IITT. The  two selected practices were:", "Monitor program performance and conduct reviews at predetermined  checkpoints or milestones by, among other things, comparing actual  cost, schedule, and performance data with estimates in the program  plan and identifying significant deviations from established targets or  thresholds for acceptable performance levels.", "Measure and monitor agile projects on velocity (i.e., number of story  points completed per sprint or release), development progression  (e.g., the number of features and user stories planned and  accepted), product quality (e.g., number of defects), and post- deployment user satisfaction.", "To determine the extent to which DHS and the Secret Service had  implemented the first selected practice, we analyzed relevant program  management and governance documentation for IITT\u2019s Enabling  Capabilities program, and Multi-Level Security, Uniformed Division  Resource Management System, and Events Management projects. For  example, we analyzed documentation such as DHS and Secret Service  program oversight reviews. We then assessed the documentation against  the selected practice.", "To determine the extent to which the Secret Service had implemented the  second selected practice related to measuring and monitoring agile  projects on agile metrics (i.e., velocity, development progression, product  quality, and post-deployment user satisfaction), we obtained and  analyzed agile-related documentation for the two projects that the Secret  Service was implementing using an agile methodology\u2014Uniformed  Division Resource Management System and Events Management.  Specifically, to determine the extent to which the Secret Service was  measuring and monitoring these two projects on metrics for velocity and  development progression, we obtained and analyzed documentation,  such as sprint burndown charts and monthly program status reports, and  compared it to the selected practice.", "In addition, the agile metrics for product quality and post-deployment user  satisfaction were only applicable to projects that had been deployed to  users. As such, these metrics were applicable to the Uniformed Division  Resource Management System (which the Secret Service had deployed  to users) and were not applicable to Events Management (which the  Secret Service had not yet deployed to users, as of early May 2018).", "We therefore obtained and analyzed documentation demonstrating that  Secret Service OCIO measured product defects for the Uniformed  Division Resource Management System. We also requested  documentation demonstrating that OCIO had measured and monitored  post-deployment user satisfaction for this project. See appendix I for a  more detailed discussion of our objectives, scope, and methodology.", "We conducted this performance audit from May 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Secret Service plays a critical role in protecting the President, Vice  President, their immediate families, and national leaders, among others.  In addition, the component is responsible for safeguarding the nation\u2019s  currency and financial payment systems. To accomplish its mission,  Secret Service officials reported that, as of June 2018, the component  had approximately 7,100 employees (including the Uniformed Division,  special agents, and administrative, professional, and technical staff).  These employees were assigned to the component\u2019s headquarters in  Washington, D.C., and 133 field offices located throughout the world  (including 115 domestic offices and 18 international offices).", "The Secret Service\u2019s employees are heavily dependent on the  component\u2019s IT infrastructure and communications systems to perform  their daily duties. According to data reported on the Office of  Management and Budget\u2019s IT Dashboard, the component planned to  spend approximately $104.8 million in fiscal year 2018 to modernize and  maintain its IT environment.", "To manage this IT environment, the Secret Service hired a full-time CIO  in November 2015. In addition, in an effort to improve its management  structure, the component consolidated all IT staff and assets under this  new CIO in March 2017. OCIO officials stated that these staff include the  government employees who provide direct and indirect support of the  day-to-day operations of the Secret Service\u2019s enterprise systems and  services.", "According to Secret Service officials, the component\u2019s IT workforce  included 190 staff, as of July 2018. These officials stated that 166 of  these employees were located in the component\u2019s headquarters in  Washington, D.C., and 24 were located in domestic field offices. The  officials also reported that these July 2018 staffing levels were below their  current approved staffing level of 220 staff (which included 44 positions in  domestic field offices).", "Secret Service IT staff also deploy to other locations, as necessary, to  provide support for certain security activities. For example, the Secret  Service reported that, in 2017, OCIO deployed over 79 staff to New York,  N.Y., to provide communications support during the United Nations  General Assembly."], "subsections": [{"section_title": "DHS IT Acquisition Policies and Guidance", "paragraphs": ["As a component of DHS, the Secret Service must follow the department\u2019s  policies and processes for managing acquisitions, including IT  acquisitions. DHS categorizes its acquisition programs according to three  levels that are determined by the life cycle costs of the programs. These  levels then determine the extent of required program and project  management and the acquisition decision authority (the individual  responsible for management and oversight of the acquisition). The  department also categorizes its acquisition programs as major or non- major based on expected cost. Table 1 describes the levels of DHS\u2019s  acquisition programs and their associated acquisition decision authorities.", "DHS\u2019s policies and processes for managing major acquisition programs  are primarily set forth in its Acquisition Management Directive 102-01 and  Acquisition Management Instruction 102-01-001. In particular, these  policies establish that a major acquisition program\u2019s decision authority is  to review the program at a series of predetermined acquisition decision  events to assess whether the program is ready to proceed through the  acquisition life cycle phases. Figure 1 depicts the acquisition life cycle  established in DHS acquisition management policy.", "DHS\u2019s Acquisition Management Directive and Instruction do not establish  an acquisition life cycle framework for the department\u2019s non-major  acquisition programs. Instead, according to the Instruction, Component  Acquisition Executives (i.e., the senior acquisition official within a  component that is responsible for implementation, management, and  oversight of the component\u2019s acquisition process) are required to  establish component-specific non-major acquisition policies and guidance  that support the \u201cspirit and intent\u201d of the department\u2019s acquisition policies.", "To that end, the Secret Service developed a policy that establishes an  acquisition life cycle framework for its non-major acquisition programs.  This acquisition framework for the component\u2019s non-major acquisition  programs is consistent with the acquisition framework that DHS  established for its major acquisition programs. In particular, the Secret  Service\u2019s framework includes the same phases and decision events as  DHS\u2019s framework (e.g., acquisition decision event 2A, the point at which  the acquisition decision authority determines whether a program may  proceed into the obtain phase).", "In addition, DHS\u2019s Systems Engineering Life Cycle Instruction and  Guidebook outline a framework of major systems engineering activities  and technical reviews that are to be conducted by all DHS programs and  projects, both major and non-major. This framework is intended to  ensure that appropriate systems engineering activities are planned and  implemented, and that a program\u2019s development effort is meeting the  business need.", "In particular, the systems engineering life cycle framework consists of  nine major activities (e.g., requirements definition, integration, and  testing) and a set of related technical reviews (e.g., preliminary design  review) and artifacts (e.g., requirements documents). DHS policy allows  programs to tailor these activities, technical reviews, and artifacts based  on the unique characteristics of the program (e.g., scope, complexity, and  risk). For example, a program may combine systems engineering  technical reviews and artifacts, or add additional reviews. This tailored  approach must be documented in a program\u2019s systems engineering life  cycle tailoring plan.", "The systems engineering technical reviews are intended to provide DHS  the opportunity to determine how well a program has completed the  necessary systems engineering activities. Each technical review includes  a minimum set of exit criteria that must be satisfied before a program may  move on to the next systems engineering activity. At the end of the  technical review, the program manager must develop a technical review  completion letter that documents the outcome of the review, including  stakeholder concurrence that the exit criteria were satisfied.", "Moreover, DHS\u2019s agile instruction, which was first issued in April 2016  and updated in April 2018, identifies agile as the preferred development  approach for the department\u2019s IT programs and projects. Agile is a type  of incremental (i.e., modular) development, which calls for the rapid  delivery of software in small, short increments rather than in the typically  long, sequential phases of a traditional waterfall approach. DHS\u2019s agile  instruction also states that component CIOs are to set modular (i.e.,  incremental) outcomes and target measures to monitor progress in  achieving agile implementation for IT programs and projects. To that end,  the department identified core metrics that its agile IT programs are to  use to monitor progress, including the number of story points completed  per release and the number of releases per quarter.", "Further, DHS policy and guidance have established an acquisition (i.e.,  contract) review process that is intended to enable the DHS CIO to review  and effectively guide the department\u2019s IT expenditures. According to the  department\u2019s IT acquisition review guidance, DHS components with a  CIO (which includes the Secret Service) are to submit to DHS OCIO for  review, IT acquisitions that (1) have total estimated procurement values of  $2.5 million or more; and (2) are funded by a level 1, 2, or 3 program with  a life cycle cost estimate of at least $50 million (i.e., a major investment,  as defined by DHS\u2019s capital planning and investment control guidance)."], "subsections": []}, {"section_title": "DHS Policies Outline Component-Level CIO Responsibilities", "paragraphs": ["DHS policies and guidance also establish numerous responsibilities for  the department\u2019s component-level CIOs that are aimed at ensuring proper  oversight and management of the components\u2019 IT investments. Among  other things, these component-level CIO responsibilities relate to topics  such as IT budgeting, portfolio management, and oversight of programs\u2019  systems engineering life cycles. Table 2 identifies 14 selected IT  oversight responsibilities for DHS\u2019s component CIOs."], "subsections": []}, {"section_title": "Overview of the Secret Service\u2019s IT Portfolio", "paragraphs": ["The Secret Service acquires IT infrastructure and services that are  intended to improve its ability to execute its investigation and protection  missions. According to data reported on the Office of Management and  Budget\u2019s IT Dashboard, the Secret Service planned to spend about  $104.8 million on IT in fiscal year 2018, which included approximately  $34.6 million for the development and modernization of its IT  infrastructure and services, and about $70.2 million for the operations and  maintenance of this infrastructure (including 21 existing IT systems). Also  according to data reported on the IT Dashboard, as of April 2018, the  Secret Service had one major IT investment (called the Information  Integration and Technology Transformation and discussed in more detail  later in this report), seven non-major IT investments, and one non- standard infrastructure investment. Figure 2 depicts the Secret Service\u2019s  planned IT spending for fiscal year 2018."], "subsections": []}, {"section_title": "The Secret Service Initiated the Information Integration and Technology Transformation Investment to Address IT Challenges", "paragraphs": ["The Secret Service has faced long-standing challenges in managing its IT  infrastructure. For example,", "A National Security Agency audit of the Secret Service\u2019s IT  environment in 2008 identified network and system vulnerabilities that  needed immediate remediation to protect the component\u2019s systems  and electronic information.", "The Secret Service determined in 2010 that it had IT capability gaps  associated with three key areas: network security, information sharing  and situational awareness, and operational communications. The  component reported that it required a significant IT modernization  effort with sustained investment of resources to replace dated and  restrictive network and communications capabilities.", "The Secret Service also reported in 2010 that it had 42 mission- support applications that were operating on a 1980\u2019s mainframe that  lacked multi-level security (i.e., the ability to view classified  information from two security levels, such as secret and top secret, at  the same time), was beyond its equipment life cycle, and was at risk  of failing.", "Further, in 2011, DHS\u2019s Office of Inspector General reported that the  Secret Service\u2019s existing infrastructure did not meet current  operational requirements. According to the Secret Service, this  dated infrastructure was unable to support newer technologies (e.g.,  Internet protocol), share common DHS enterprise services, or  migrate to the department\u2019s consolidated data centers.", "To address challenges with its IT environment, in 2009, the Secret  Service initiated the IITT investment, which is intended to modernize and  enhance the component\u2019s infrastructure, communications systems,  applications, and processes. In particular, IITT is a portfolio of programs  and projects that are meant to, among other things, improve systems  availability in support of the Secret Service\u2019s business operations,  increase interoperability with other government systems and networks,  enhance the component\u2019s system and network security, and enable  scalability to support growth.", "From 2010 to July 2018, according to OCIO officials, the Secret Service  spent approximately $392 million on IITT. In fiscal year 2018, the  component had planned to spend approximately $42.7 million on IITT  (i.e., about 40 percent of its total planned IT spending for the fiscal year),  according to data reported on the Office of Management and Budget\u2019s IT  Dashboard. In total, the planned life cycle cost estimate for IITT is at least  $811 million.", "As of June 2018, IITT was a major investment comprised of two programs  (one of which included three projects) and one standalone project (i.e., it  was not part of another program) that had capabilities that were in  planning or development and modernization. These programs and project  were the Enabling Capabilities program, Enterprise Resource  Management System program (which included three projects that were  each being implemented using an agile methodology: Uniformed  Division Resource Management System, Events Management, and  Enterprise-wide Scheduling), and the Multi-Level Security project.", "Table 3 describes the IITT programs and projects that had capabilities  that were in planning or development and modernization, as of June  2018. The table also includes the associated level, acquisition decision  authority, estimated life cycle costs, and planned or actual dates of  operational capability for each of the programs and projects. (Appendix II  also provides additional information on these programs and projects.)", "The Enabling Capabilities program within IITT is designated as a major  acquisition program. As such, its acquisition decision authority is the DHS  Under Secretary for Management, and both DHS and the Secret Service  provide oversight to this program. IITT\u2019s other program and project\u2014the  Enterprise Resource Management System program (which includes three  projects, as discussed earlier) and Multi-Level Security project\u2014are  designated non-major acquisition programs. In June 2011, DHS\u2019s Under  Secretary for Management delegated acquisition decision authority for  this non-major program and project to the Secret Service Component  Acquisition Executive. As such, oversight of the Enterprise Resource  Management System program (including its three projects) and the Multi- Level Security project is conducted primarily at the component level.", "The Secret Service also implemented other capabilities that are now in  operations and maintenance (i.e., the capabilities have been fielded and  are operational) as part of the IITT investment, such as a capability to  move data between systems in separate classification levels (e.g., top  secret and secret) and communications interoperability. Table 4 describes  IITT capabilities that are in operations and maintenance."], "subsections": []}, {"section_title": "DHS\u2019s Management of Human Capital Is a High- Risk Effort", "paragraphs": ["DHS, including the Secret Service, has faced long-standing challenges in  effectively managing its workforce. In January 2003, we designated the  implementation and transformation of DHS as high risk, including its  management of human capital, because it had to transform 22  agencies\u2014several with major management challenges\u2014into one  department. This represented an enormous and complex undertaking that  would require time to achieve in an effective and efficient manner. Since  that time, the department has made important progress in strengthening  and integrating its management functions.", "Nevertheless, we have continued to report that significant work remains  for DHS to improve these management functions. Among other things,  we previously reported that the department had lower average employee  morale than the average for the rest of the federal government. We also  reported that, in 2011, based on employee responses to the Office of  Personnel Management\u2019s Federal Employee Viewpoint Survey\u2014a tool  that measures employees\u2019 perceptions of whether and to what extent  conditions characterizing successful organizations are present in their  agency\u2014DHS was ranked 31st out of 33 large agencies on the  Partnership for Public Service\u2019s Best Places to Work in the Federal  Government rankings. The most recent results of these surveys in 2017  showed that DHS continues to maintain its low rankings.", "DHS\u2019s Office of Inspector General has reported on challenges that the  Secret Service has faced in managing its IT workforce. Specifically, in  October 2016, the Inspector General reported that  the Secret Service CIO did not have oversight of, or authority over, all  IT resources, including the workforce; in particular, almost all of the  component\u2019s IT employees were located in a division outside of  OCIO; and  the Secret Service had vacancies in key positions responsible for  managing IT, including not having a full-time CIO from December  2014 through November 2015.", "As previously discussed, the Secret Service has taken actions to address  these two issues with the management of its IT workforce. These actions  included hiring its full-time CIO in November 2015 and consolidating the  workforce and all IT assets under this CIO in March 2017."], "subsections": []}]}, {"section_title": "The Secret Service CIO Fully Implemented Most of the Required Responsibilities", "paragraphs": ["Of the 14 selected responsibilities established for component-level CIOs  in DHS\u2019s IT management policies, the Secret Service CIO had fully  implemented 11 responsibilities and had partially implemented 3  responsibilities. Table 5 summarizes the extent to which the Secret  Service CIO had implemented each of the 14 responsibilities.", "The Secret Service CIO fully implemented 11 of the 14 selected  component-level CIO responsibilities. Examples of the responsibilities  that the CIO fully implemented are as follows:", "Develop, implement, and maintain a detailed IT strategic plan.  Consistent with DHS\u2019s IT Integration and Management directive, in  January 2017, the Secret Service CIO developed an IT strategic plan  that outlined the CIO\u2019s strategic IT goals and objectives, as well as  tasks intended to meet the goals and objectives. The CIO maintained  this strategic plan, to include updating it in January 2018. The CIO  also took steps to implement the tasks identified within the strategic  plan, such as working to develop an IT training program. In particular,  as part of this effort to develop an IT training program, OCIO identified  recommended training for the office\u2019s various IT workforce groups  (discussed in more detail later in this report).", "Concur with each program\u2019s and/or project\u2019s systems  engineering life cycle tailoring plan. In accordance with DHS\u2019s  Systems Engineering Life Cycle instruction, the Secret Service CIO  concurred with the systems engineering life cycle tailoring plan for one  program and three projects included in the Secret Service\u2019s IITT  investment. Specifically, the CIO documented his approval via his  signature on the tailoring plans for IITT\u2019s Enabling Capabilities  program, and Multi-Level Security, Uniformed Division Resource  Management System, and Events Management projects.", "Participate on DHS\u2019s CIO Council, Enterprise Architecture Board,  or other councils/boards as appropriate, and appoint employees  to serve when necessary. As required by DHS\u2019s IT Integration and  Management directive, the Secret Service CIO participated on two  required DHS-level councils/boards, and appointed a delegate to  serve in his place, when necessary. Specifically, the Secret Service  CIO or the CIO\u2019s delegate\u2014the Deputy CIO\u2014attended bi-monthly  meetings of the DHS CIO Council. In addition, another Secret Service  CIO appointee\u2014the component\u2019s Chief Architect\u2014attended an ad  hoc meeting of the Enterprise Architecture Board in June 2017.", "In addition, the Secret Service CIO had partially implemented three  component-level CIO responsibilities, as follows.", "Manage the component IT investment portfolio, including  establishing a component-level IT acquisition review process  that enables component and DHS review of component  acquisitions (i.e., contracts) that contain IT. As directed in DHS\u2019s  Capital Planning and Investment Control directive and guidebook, the  Secret Service CIO took steps to manage the component\u2019s IT  investment portfolio, including reviewing certain contracts containing  IT. For example, among our random sample of 33 IT contracts that  the Secret Service awarded between October 1, 2016, and June 30,  2017, we found that the CIO or the CIO\u2019s delegate had reviewed 31 of  these contracts.", "However, the CIO had not established and documented a defined  process for reviewing contracts containing IT, which may have  contributed to why the CIO or the CIO\u2019s delegate did not review 2 of  the 33 contracts in our sample. OCIO officials were unable to explain  why neither of these officials reviewed the 2 contracts, which had a  combined planned total procurement value of approximately $1.75  million. In particular, one of the contracts, with a planned total  procurement value of about $1,122,934, was to provide credentialing  services for the 2017 Presidential Inauguration. The other contract,  with a planned total procurement value of about $629,337, was to  provide maintenance support for a logistics system. The OCIO  officials acknowledged that both contracts should have been  approved by one of these officials. Without establishing and  documenting an IT acquisition review process that ensures that the  CIO or the CIO\u2019s delegate reviews all contracts containing IT, as  appropriate, the CIO\u2019s ability to analyze the contracts to ensure that  they are a cost-effective use of resources and are aligned with the  component\u2019s missions and goals is limited.", "Ensure all component IT policies are in compliance and  alignment with DHS IT directives and instructions. As required by  DHS\u2019s IT Integration and Management directive, the Secret Service  CIO had ensured that certain component IT policies were in  compliance and alignment with DHS IT directives and instructions. For  example, in alignment with the department\u2019s IT Integration and  Management directive, the Secret Service\u2019s Investment Governance  for IT policy specifies that the component CIO (in conjunction with  each Secret Service Office) is responsible for developing the  component IT spend plan, as well as developing and maintaining an  IT strategic plan.", "However, the Secret Service\u2019s enterprise governance policy was not  in compliance with DHS\u2019s IT Integration and Management directive.  Specifically, while the department\u2019s policy states that the Secret  Service CIO is responsible for developing and reviewing the  component\u2019s IT budget formulation and execution, the Secret  Service\u2019s enterprise governance policy does not specify this as the  CIO\u2019s responsibility.", "According to OCIO officials, the Secret Service CIO participates in the  development and review of the IT budget formulation and execution  as a member of the Executive Resources Board (the Secret Service\u2019s  highest-level governing body, which has the final decision authority  and responsibility for enterprise governance), and the Secret Service  Deputy CIO is a voting member of the Enterprise Governance Council  (the Secret Service\u2019s second-level governance body and advisory  council to the Executive Resources Board). However, the Secret  Service\u2019s enterprise governance policy has not been updated to  reflect these roles. The Secret Service did not update its enterprise  governance policy to properly reflect the CIO\u2019s and Deputy CIO\u2019s  roles on the Executive Resources Board or Enterprise Governance  Council because OCIO officials were not aware that these roles were  not properly documented in the component\u2019s policy until we identified  this issue during our review.", "Further compounding the issue of the Secret Service\u2019s enterprise  governance policy not properly reflecting the CIO\u2019s and Deputy CIO\u2019s  roles and responsibilities on the component\u2019s governance boards is  that the Secret Service has not developed a charter for its Executive  Resources Board. We have previously reported that a best practice  for effective investment management is to define and document the  board\u2019s membership, roles, and responsibilities. One such way to do  so is via a charter.", "According to Secret Service officials, the component does not have a  charter for the board because, while the Secret Service has  established the board pursuant to law, there is little statutory guidance  on how the board must be formalized, including whether a charter is  required. The officials acknowledged that development of a board  charter is a best practice. They stated that, in response to our review,  the component has begun efforts to develop a charter for the  Executive Resources Board, but they did not know when it would be  completed.", "Until the Secret Service updates its enterprise governance policy to  specify (1) the CIO\u2019s current role and responsibilities on the Executive  Resources Board, to include developing and reviewing the IT budget  formulation and execution, and (2) the Deputy CIO\u2019s role and  responsibilities on the Enterprise Governance Council, the CIO\u2019s  ability to develop and review the component\u2019s IT budget may be  limited. Further, until the Secret Service develops a charter for its  Executive Resources Board that specifies the roles and  responsibilities of all board members, including the CIO, the Secret  Service will not be effectively positioned to ensure that all members  understand their roles and responsibilities on the board and will  perform them as expected.", "Set modular outcomes and target measures to monitor the  progress in achieving agile implementation for IT programs  and/or projects within their component. Consistent with DHS  policy, the Secret Service CIO has set modular outcomes and target  measures to monitor the progress of two IITT projects that the  component is implementing using an agile methodology\u2014Uniformed  Division Resource Management System and Events Management.  For example, the modular outcomes set for these projects included  measuring planned and actual burndown (i.e., the number of user  stories completed). In addition, the projects were to measure their  velocity (i.e., the rate of work completed) for each sprint (i.e., a set  period of time during which the development team is expected to  complete tasks related to developing a piece of working software).", "However, the modular outcomes and target measures did not include  product quality or post-deployment user satisfaction, although such  measures are leading practices for managing agile projects.  According to Secret Service OCIO officials, the component does not  mandate the specific metrics that its agile projects are to use; instead,  each project is to determine the metrics based on stakeholder  requirements and unique project characteristics. The officials further  stated that these metrics are to be documented in an acquisition  program baseline and program management plan; this baseline and  program management plan are then to be approved by the CIO. To its  credit, the component\u2019s one agile project that, as of May 2018, had  deployed its system to users\u2014the Uniformed Division Resource  Management System\u2014did measure product quality. OCIO officials  also stated that they regularly receive verbal, undocumented feedback  from users on the system and they plan to conduct a documented  user satisfaction survey on this system by September 2018.", "Nevertheless, without ensuring that product quality and post- deployment user satisfaction metrics are included in the modular  outcomes and target measures that the CIO sets for monitoring agile  projects, the Secret Service lacks assurance that the Events  Management project or other future agile projects will measure  product quality or post-deployment user satisfaction. Without  guidance specifying that agile projects track these metrics, the  projects may not do so and the CIO may be limited in his knowledge  of the progress being made on these projects."], "subsections": []}, {"section_title": "The Secret Service Did Not Fully Implement the Majority of the Selected Leading Planning and Management Practices for Its IT Workforce", "paragraphs": ["Workforce planning and management is essential for ensuring that  federal agencies have the talent, skill, and experience mix they need to  execute their missions and program goals. To help agencies effectively  conduct workforce planning and management, the Office of Personnel  Management, the Chief Human Capital Officers Council, DHS, the Secret  Service, and we have identified numerous leading practices related to five  workforce areas: strategic planning, recruitment and hiring, training and  development, employee morale, and performance management. Table  6 identifies the five workforce areas and 15 selected leading practices  associated with these areas (3 practices within each area).", "Of the five selected workforce planning and management areas, the  Secret Service had substantially implemented two of the areas and  minimally implemented three of the areas for its IT workforce. In addition,  of the 15 selected leading practices associated with these workforce  planning and management areas, the Secret Service had fully  implemented 3 practices, partly implemented 8 practices, and did not  implement any aspects of 4 practices. Table 7 summarizes the extent to  which the Secret Service had implemented for its IT workforce the five  selected workforce planning and management areas and 15 selected  leading practices associated with those areas, as of June 2018."], "subsections": [{"section_title": "The Secret Service Minimally Implemented Selected Leading IT Strategic Workforce Planning Practices", "paragraphs": ["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. We previously identified numerous leading  practices related to IT strategic workforce planning, including that an  organization should (1) establish and maintain a strategic workforce  planning process, including developing all competency and staffing  needs; (2) regularly assess competency and staffing needs, and analyze  the IT workforce to identify gaps in those areas; and (3) develop  strategies and plans to address gaps in competencies and staffing.", "The Secret Service minimally implemented the three selected leading  practices associated with the IT strategic workforce planning area.  Specifically, the component partly implemented two of the practices and  did not implement one practice. Table 8 lists these selected leading  practices and provides our assessment of the Secret Service\u2019s  implementation of the practices.", "Establish and maintain a strategic workforce planning process,  including developing all competency and staffing needs\u2014partly  implemented. The Secret Service took steps to establish a strategic  workforce planning process for its IT workforce. For example, the  Secret Service CIO developed and maintained a plan that identified  strategic workforce planning tasks, to include analyzing the staffing  requirements of the IT workforce. In addition, the Secret Service  defined general core competencies (e.g., communication and  customer service) for its workforce, including IT staff.", "However, OCIO did not identify all required knowledge and skills  needed to support this office\u2019s functions. In particular, while OCIO  identified certain technical competencies that its IT workforce needs,  such as cybersecurity, the office did not identify and document all of  the technical competencies that it needs. OCIO officials stated that  they did not identify and document the technical competencies that  the office needs because the Secret Service was focused on  reorganizing the IT workforce under a single, centralized reporting  chain within the CIO\u2019s office. Consequently, the officials stated that  they had not completed the work to identify all required IT knowledge  and skills necessary to support the office.", "Yet, the Secret Service completed the IT workforce reorganization  effort over a year ago, in March 2017 and, since then, OCIO has not  identified all of the required IT knowledge and skills that the office  needs. OCIO officials told us that they plan to identify all of the  technical competency needs for the IT workforce, but they were  unable to specify a time frame for when these needs would be fully  identified. Until OCIO identifies all of the required knowledge and skills  for the IT workforce, the office will be limited in its ability to identify  and address any competency gaps associated with this workforce.", "In addition, the Secret Service did not reliably determine the number  of IT staff that it needs in order to support OCIO\u2019s functions.  Specifically, in January 2017, an independent review of the staffing  model that the component used to identify its IT workforce staffing  needs found that the model was not based on any verifiable  underlying data. In late August 2018, Office of Human Resources  officials reported that they had hired a contractor in early August 2018  to update the staffing model to improve the quality of the data. These  officials expected the contractor to finish updating the model by  August 2019. The officials plan to use the updated model to identify  the Secret Service\u2019s IT workforce staffing needs for fiscal year 2021.  Updating the staffing model to incorporate verifiable workload data  should increase the likelihood that the Secret Service is able to  appropriately identify its staffing needs for its IT workforce.", "Regularly assess competency and staffing needs, and analyze  the IT workforce to identify gaps in those areas\u2014not  implemented. The Secret Service regularly assessed the  competency and staffing needs for 1 of the occupational series within  its IT workforce (i.e., the 2210 IT Specialist series). However, it did not  regularly assess the competency and staffing needs for the remaining  11 occupational series that are associated with the component\u2019s IT  workforce, nor identify any gaps that it had in those areas.", "OCIO officials stated that they had not assessed these needs or  identified competency or staffing gaps because, among other things,  the Secret Service was focused on reorganizing the IT workforce  under a single, centralized reporting chain within the CIO\u2019s office.  However, as previously mentioned, the component completed this  effort in March 2017, but OCIO did not subsequently assess its  competency and staffing needs, nor identify gaps in those areas.", "OCIO officials reported that they plan to assess the competencies of  the IT workforce to identify any gaps that may exist; however, they  were unable to identify a specific date by which they expect to have  the capacity to complete this assessment. Until OCIO regularly  analyzes the IT workforce to identify its competency needs and any  gaps it may have, OCIO will be limited in its ability to determine  whether its IT workforce has the necessary knowledge and skills to  meet its mission and goals.", "Further, Office of Human Resources officials reported that they plan to  update the staffing model that they use to identify their IT staffing  needs to include more reliable workload data. However, as discussed  earlier, the Secret Service had not yet developed that updated model  to determine its IT staffing needs. Office of Human Resources officials  reported that once they update the staffing model they plan to re- evaluate the Secret Service\u2019s IT staffing needs. The officials also  stated that, going forward, they plan to reassess these needs each  year as part of the annual budget cycle. Regular assessments of the  IT workforce\u2019s staffing needs should increase the likelihood that the  Secret Service is able to appropriately identify the number of IT staff it  needs to meet its mission and programmatic goals.", "Develop strategies and plans to address gaps in competencies  and staffing\u2014partly implemented. The Secret Service developed  recruiting and hiring strategies to address certain competency and  staffing needs (e.g., cybersecurity) for its IT workforce. These  strategies included, among other things, participating in DHS-wide  recruiting events and using special hiring authorities.", "However, because OCIO did not identify all of its IT competency and  staffing needs, and lacked a current analysis of its entire IT workforce,  the Secret Service could not provide assurance that the recruiting and  hiring strategies it developed were specifically targeted towards  addressing current OCIO competency and staffing gaps. For example,  without an analysis of the IT workforce\u2019s skills, OCIO did not know the  extent to which it had gaps in areas such as device management and  cloud computing. As a result, the Secret Service\u2019s recruiting  strategies may not have been targeted to address any gaps in those  areas. Until the Secret Service updates its recruiting and hiring  strategies and plans to address all IT competency and staffing gaps  identified (after OCIO completes its analysis of the entire IT workforce,  as discussed earlier), the Secret Service will be limited in its ability to  effectively recruit and hire staff to fill those gaps."], "subsections": []}, {"section_title": "The Secret Service Minimally Implemented Selected Leading Recruitment and Hiring Practices", "paragraphs": ["According to the Office of Personnel Management, the Chief Human  Capital Officers Council, and our prior work, once an agency has  determined the critical skills and competencies that it needs to achieve  programmatic goals, and identifies any competency or staffing gaps in its  current workforce, the agency should be positioned to build effective  recruiting and hiring programs. It is important that an agency has these  programs in place to ensure that it can effectively recruit and hire  employees with the appropriate skills to meet its various mission  requirements.", "The Office of Personnel Management, the Chief Human Capital Officers  Council, and we have also identified numerous leading practices  associated with effective recruitment and hiring programs. Among these  practices, an agency should (1) implement recruiting and hiring activities  to address skill and staffing gaps by using the strategies and plans  developed during the strategic workforce planning process; (2) establish  and track metrics to monitor the effectiveness of the recruitment program  and hiring process, including their effectiveness at addressing skill and  staffing gaps, and report to agency leadership on progress addressing  those gaps; and (3) adjust recruitment plans and hiring activities based on  recruitment and hiring effectiveness metrics.", "The Secret Service minimally implemented the selected three leading  practices associated with the recruitment and hiring workforce area.  Specifically, the component partly implemented one of the three practices  and did not implement the other two practices. Table 9 lists these  selected practices and provides our assessment of the Secret Service\u2019s  implementation of the practices.", "Implement recruiting and hiring activities to address skill and  staffing gaps by using the strategies and plans developed during  the strategic workforce planning process\u2014partly implemented.  OCIO officials implemented the activities identified in the Secret  Service\u2019s recruiting and hiring plans. For example, as identified in its  recruiting plan, OCIO participated in a February 2017 career fair to  recruit job applicants at a technology conference. In addition, in  August 2017, OCIO participated in a DHS-wide recruiting event.  Secret Service officials reported that, during this event, they  conducted four interviews for positions in OCIO.", "However, as previously discussed, OCIO did not identify all of its IT  competency and staffing needs, and lacked a current analysis of its  entire IT workforce. Without complete knowledge of its current IT  competency and staffing gaps, the Secret Service could not provide  assurance that the recruiting and hiring strategies that it had  implemented fully addressed these gaps.", "Establish and track metrics to monitor the effectiveness of the  recruitment program and hiring process, including their  effectiveness at addressing skill and staffing gaps, and report to  agency leadership on progress addressing those gaps\u2014not  implemented. The Secret Service had not established and tracked  metrics for monitoring the effectiveness of its recruitment and hiring  activities for the IT workforce. Officials in the Office of Human  Resources attributed this to staffing constraints and said their priority  was to address existing staffing gaps associated with the Secret  Service\u2019s law enforcement groups.", "In June 2018, Office of Human Resources officials stated that they  plan to implement metrics to monitor the effectiveness of the hiring  process for the IT workforce by October 2018. The officials also stated  that they were in the process of determining (1) the metrics that are to  be used to monitor the effectiveness of their workforce recruiting  efforts and (2) whether they need to acquire new technology to  support this effort. However, the officials did not know when they  would implement the metrics for assessing the effectiveness of the  recruitment activities and whether they would report the results to  leadership.", "Until the Office of Human Resources (1) develops and tracks metrics  to monitor the effectiveness of the Secret Service\u2019s recruitment  activities for the IT workforce, including their effectiveness at  addressing skill and staffing gaps; and (2) reports to component  leadership on those metrics, the Secret Service and the Office of  Human Resources will be limited in their ability to analyze the  recruitment program to determine whether the program is effectively  addressing IT skill and staffing gaps. Further, Secret Service  leadership will lack the information necessary to make effective  recruitment decisions.", "Adjust recruitment plans and hiring activities based on  recruitment and hiring effectiveness metrics\u2014not implemented.  While the Secret Service CIO stated in June 2018 that he planned to  adjust the office\u2019s recruiting and hiring strategies to focus on entry- level staff rather than mid-career employees, this planned adjustment  was not based on metrics that the Secret Service was tracking.  Instead, the CIO stated that he planned to make this change because  his office determined that previous mid-career applicants were often  unwilling or unable to wait for the Secret Service\u2019s lengthy, required  background investigation process to be completed.", "However, as previously mentioned, the Secret Service did not develop  and implement any metrics for assessing the effectiveness of the  recruitment and hiring activities for the IT workforce. As a result, the  Office of Human Resources and OCIO were not able to use such  metrics to inform adjustments to their recruiting and hiring plan and  activities, thus, reducing their ability to target potential candidates for  hiring.", "Until the Office of Human Resources and OCIO adjust their  recruitment and hiring plans and activities as necessary, after  establishing and tracking metrics for assessing the effectiveness of  these activities for the IT workforce, the Secret Service will be limited  in its ability to ensure that its recruiting plans and activities are  appropriately targeted to potential candidates. In addition, the  component will lack assurance that these plans and activities will  effectively address skill and staffing gaps within its IT workforce."], "subsections": []}, {"section_title": "The Secret Service Minimally Implemented Selected Leading Training and Development Practices", "paragraphs": ["An organization should invest in training and developing its employees to  help ensure that its workforce has the information, skills, and  competencies that it needs to work effectively. In addition, training and  development programs are an integral part of a learning environment that  can enhance an organization\u2019s ability to attract and retain employees with  the skills and competencies needed to achieve cost-effective and timely  results.", "DHS, the Secret Service, and we have previously identified numerous  leading training and development-related practices. Among those  practices, an organization should (1) establish a training and development  program to assist the agency in achieving its mission and goals; (2) use  tracking and other control mechanisms to ensure that employees receive  appropriate training and meet certification requirements, when applicable;  and (3) collect and assess performance data (including qualitative or  quantitative measures, as appropriate) to determine how the training  program contributes to improved performance and results.", "The Secret Service minimally implemented the selected three leading  practices associated with the training and development workforce area.  Specifically, the component partly implemented two of the three practices  and did not implement one practice. Table 10 lists these selected leading  practices and provides our assessment of the Secret Service\u2019s  implementation of the practices.", "Establish a training and development program to assist the  agency in achieving its mission and goals\u2014partly  implemented. OCIO was in the process of developing a training  program for its IT workforce. For example, OCIO developed a draft  training plan that identified recommended training for the office\u2019s  various IT workforce groups (e.g., voice communications employees).", "However, the office had not defined the required training for each IT  workforce group. In addition, OCIO officials had not yet determined  which activities they would implement as part of the training program  (e.g., soliciting employee feedback after training is completed and  evaluating the effectiveness of specific training courses), nor did they  implement those activities.", "OCIO officials stated that they had not yet fully implemented a training  program because their annual training budget for fiscal year 2018 was  not sufficient to implement such a program. However, resource  constrained programs especially benefit from identifying and  prioritizing training activities to inform training budget decisions. Until  OCIO (1) defines the required training for each IT workforce group, (2)  determines the activities that it will include in its IT workforce training  and development program based on its available training budget, and  (3) implements those activities, the office may be limited in its ability to  ensure that the IT workforce has the necessary knowledge and skills  for their respective positions.", "Use tracking and other control mechanisms to ensure that  employees receive appropriate training and meet certification  requirements, when applicable\u2014partly implemented. OCIO used  a training system to track that the managers for IITT\u2019s programs had  met certain certification requirements for their respective positions. In  addition, OCIO manually tracked the technical training that certain IT  staff took.", "However, as discussed earlier, OCIO did not define the required  training for each IT workforce group. As such, the office was unable to  ensure that IT staff received the appropriate training relevant to their  respective positions. Until it ensures that IT staff complete training  specific to their positions (after defining the training required for each  workforce group), OCIO will have limited assurance that the workforce  has the necessary knowledge and skills.", "Collect and assess performance data (including qualitative or  quantitative measures, as appropriate) to determine how the  training program contributes to improved performance and  results\u2014not implemented. As previously discussed, OCIO did not  fully implement a training program for the IT workforce; as such, the  office was unable to collect and assess performance data related to  such a program. OCIO officials stated that, once they fully implement  a training program, they intend to collect and assess data on how this  program contributes to improved performance. However, the officials  were unable to specify a time frame for when they would do so.", "Until OCIO collects and assesses performance data (including  qualitative or quantitative measures, as appropriate) to determine how  the IT training program contributes to improved performance and  results (once the training program is implemented), the office may be  limited in its knowledge of whether the training program is contributing  to improved performance and results."], "subsections": []}, {"section_title": "The Secret Service Substantially Implemented Selected Leading Practices for Improving the Morale of Its IT Workforce, but Did Not Demonstrate Sustained Improvement", "paragraphs": ["Employee morale is important to organizational performance and an  organization\u2019s ability to retain talent to perform its mission. We have  previously identified numerous leading practices for improving employee  morale. Among other things, we have found that an organization should  (1) determine root causes of employee morale problems by analyzing  employee survey results using techniques such as comparing  demographic groups, benchmarking against similar organizations, and  linking root cause findings to action plans; and develop and implement  action plans to improve employee morale; (2) establish and track metrics  of success for improving employee morale, and report to agency  leadership on progress improving morale; and (3) maintain leadership  support and commitment to ensure continued progress in improving  employee morale, and demonstrate sustained improvement in morale.", "With regard to its IT workforce, the Secret Service substantially  implemented the selected three practices associated with the employee  morale workforce area. Specifically, the component fully implemented two  of the selected practices and partly implemented one practice. Table 11  lists these selected practices and provides our assessment of the Secret  Service\u2019s implementation of the practices.", "Determine root causes of employee morale problems by  analyzing employee survey results using techniques such as  comparing demographic groups, benchmarking against similar  organizations, and linking root cause findings to action plans.  Develop and implement action plans to improve employee  morale\u2014fully implemented. The Secret Service used survey  analysis techniques to determine the root causes of its low employee  morale, on which we have previously reported. For example, the  component conducted a benchmarking exercise where it compared  the morale of the Secret Service\u2019s employees, including IT staff, to  data on the morale of employees at other agencies, including the U.S.  Capitol Police, U.S. Coast Guard, and the Drug Enforcement  Administration. As part of this exercise, the Secret Service also  compared its employee work-life offerings (e.g., on-site childcare and  telework program) to those available at other agencies.", "In addition, the Secret Service developed and implemented action  plans for improving employee morale. Among these action plans, for  example, the component implemented a student loan repayment  program and expanded its tuition assistance program\u2019s eligibility  requirements.", "Establish and track metrics of success for improving employee  morale, and report to agency leadership on progress improving  morale\u2014fully implemented. The Secret Service tracked metrics for  improving employee morale and reported the results to leadership.  For example, the component tracked metrics on the percentage of the  workforce, including IT staff, that participated in the student loan  repayment and tuition assistance programs. In addition, the Chief  Strategy Officer reported to the Chief Operating Officer the results  related to meeting those metrics.", "Maintain leadership support and commitment to ensure  continued progress in improving employee morale, and  demonstrate sustained improvement in morale\u2014partly  implemented. Secret Service leadership developed and implemented  initiatives that demonstrated their commitment to improving the  morale of the Secret Service\u2019s workforce. For example, since 2014,  the Secret Service had worked with a contractor to identify ways to  improve the morale of its entire workforce, including IT staff.", "However, as of June 2018, the Secret Service was unable to  demonstrate that it had sustained improvement in the morale of the  component\u2019s IT staff. In particular, the component was only able to  provide IT workforce-specific results from one employee morale  assessment that was conducted subsequent to the consolidation of  this workforce into OCIO in March 2017. These results were from an  assessment conducted by the component\u2019s Inspection Division in  December 2017 (the assessment found that the majority of the Secret  Service\u2019s IT employees rated their morale as \u201cvery good\u201d or  \u201cexcellent.\u201d)", "While the component also provided certain employee morale results  from the Office of Personnel Management\u2019s Federal Employee  Viewpoint Survey in 2017, these results were not specific to the IT  workforce. Instead, this workforce\u2019s results were combined with those  from staff in another Secret Service division. According to OCIO  officials, the results were combined because, at the time of the  survey, the IT workforce was administratively identified as being part  of that other division.", "OCIO officials stated that, going forward, they plan to continue to  assess the morale of the IT workforce on an annual basis as part of  the Federal Employee Viewpoint Survey. In addition, the officials  stated that OCIO-specific results may be available as part of the 2018  survey results, which the officials expect to receive by September  2018. By measuring employee satisfaction on an annual basis, the  Secret Service should have increased knowledge of whether its  initiatives that are aimed at improving employee morale are in fact  increasing employee satisfaction."], "subsections": []}, {"section_title": "The Secret Service Substantially Implemented Selected Performance Management Leading Practices, but Did Not Explicitly Align Expectations with Organizational Goals", "paragraphs": ["Agencies can use performance management systems as a tool to foster a  results-oriented organizational culture that links individual performance to  organizational goals. We have previously identified numerous leading  practices related to performance management that are intended to  enhance performance and ensure individual accountability. Among the  performance management practices, agencies should (1) establish a  performance management system that differentiates levels of staff  performance and defines competencies in order to provide a fuller  assessment of performance, (2) explicitly align individual performance  expectations with organizational goals to help individuals see the  connection between their daily activities and organizational goals, and (3)  periodically provide individuals with regular performance feedback.", "The Secret Service substantially implemented the selected three leading  practices associated with the performance management workforce area.  Specifically, the component fully implemented one of the three practices  and partly implemented the other two practices. Table 12 lists these  selected leading practices and provides our assessment of the Secret  Service\u2019s implementation of the practices.", "Establish a performance management system that differentiates  levels of staff performance and defines competencies in order to  provide a fuller assessment of performance\u2014partly  implemented. The Secret Service\u2019s performance management  process requires leadership to make meaningful distinctions between  levels of staff performance. In particular, the component\u2019s  performance plans for IT staff, which are developed by the Office of  Human Resources and tailored by OCIO, as necessary, specify the  criteria that leadership use to determine if an individual has met or  exceeded the expectations associated with each competency  identified in their respective performance plan. The performance plans  include pre-established, department-wide competencies that are set  by DHS, as well as occupational series-specific goals that may be  updated by the Secret Service.", "However, because OCIO did not fully define and document all of its  technical competency needs for the IT workforce, as discussed  earlier, the Secret Service\u2019s performance plans for IT staff did not  include performance expectations related to the full set of technical  competencies required for their respective positions. In addition,  because OCIO officials were unable to specify a time frame for when  they will identify all of the technical competency needs for the IT  workforce (as previously discussed), the officials were also unable to  specify a time frame for when they would update the IT workforce\u2019s  performance plans to include those relevant technical competencies.", "Until OCIO updates the performance plans for each occupational  series within the IT workforce to include the relevant technical  competencies, once identified, against which IT staff performance  should be assessed, the office will be limited in its ability to provide IT  staff with a complete assessment of their performance. In addition,  Secret Service management will have limited knowledge of the extent  to which IT staff are meeting all relevant technical competencies.", "Explicitly align individual performance expectations with  organizational goals to help individuals see the connection  between their daily activities and organizational goals\u2014partly  implemented. The Secret Service\u2019s performance plans for IT staff  identified certain goals that appeared to be related to organizational  goals and objectives. For example, the performance plan for the  Telecommunications Specialist occupational series (which is one of  the series included in OCIO\u2019s IT workforce) identified a goal for staff to  support the voice, wireless, radio, satellite, and video systems serving  the Secret Service\u2019s protective and investigative mission. This  performance plan goal appeared to be related to the component\u2019s  strategic goal on Advanced Technology, which included an objective  to create the infrastructure needed to fulfill mission responsibilities.", "However, the Secret Service was unable to provide documentation  that explicitly showed how individual employee performance links to  organizational goals, such as a mapping of the goals identified in  employee performance plans to organizational goals. Specifically,  while Office of Human Resources officials stated that each Secret  Service directorate is responsible for ensuring that employee goals  map to high-level organizational goals, OCIO officials stated that they  did not complete this mapping. The officials were unable to explain  why they did not align the goals in their employees\u2019 performance  plans to the component\u2019s high-level goals.", "According to the officials, the Secret Service is in the process of  implementing a new automated tool that will require each office to  explicitly align individual performance expectations to organizational  goals. The officials stated that OCIO plans to use this tool to create  employees\u2019 fiscal year 2019 performance plans. By explicitly  demonstrating how individual performance expectations align with  organizational goals, the Secret Service\u2019s IT staff should have a better  understanding of how their daily activities contribute towards  achieving the Secret Service\u2019s goals.", "Periodically provide individuals with regular performance  feedback\u2014fully implemented. Secret Service leadership periodically  provided their IT staff with performance feedback. Specifically, on an  annual basis, OCIO staff received feedback during a mid-year and  end-of-year performance feedback assessment. In our prior work, we  have stressed that candid and constructive feedback can help  individuals maximize their contribution and potential for understanding  and realizing the goals and objectives of an organization. Further, this  feedback is one of the strongest drivers of employee engagement."], "subsections": []}]}, {"section_title": "The Secret Service and DHS Implemented Selected Leading Monitoring Practices for the IITT Investment", "paragraphs": ["According to leading practices of the Software Engineering Institute,  effective program oversight includes monitoring program performance  and conducting reviews at predetermined checkpoints or milestones. This  is done by, among other things, comparing actual cost, schedule, and  performance data with estimates in the program plan and identifying  significant deviations from established targets or thresholds for  acceptable performance levels.", "In addition, the Software Engineering Institute previously identified  leading practices for effectively monitoring the performance of agile  projects. According to the Institute, agile development methods focus on  delivering usable, working software frequently; as such, it is important to  measure the value delivered during each iteration of these projects. To  that end, the Institute reported that agile projects should be measured on  velocity (i.e., number of story points completed per sprint or release),  development progression (e.g., the number of user stories planned and  accepted), product quality (e.g., number of defects), and post-deployment  user satisfaction.", "DHS and the Secret Service had fully implemented the selected leading  practice for monitoring the performance of one program and three  projects within the IITT investment, and conducting reviews of this  program and these projects at predetermined checkpoints. In addition,  with regard to the selected leading practice for monitoring agile projects,  the Secret Service had fully implemented this practice for one of its two  projects being implemented using agile and had partially implemented  this practice for the other project. Table 13 provides a summary of DHS\u2019s  and the Secret Service\u2019s implementation of these leading practices, as  relevant for one program and three projects within IITT.", "Monitor program performance and conduct reviews at  predetermined checkpoints or milestones. Consistent with leading  practices, DHS and the Secret Service monitored the performance of  IITT\u2019s program and projects by comparing actual cost, schedule, and  performance information against planned targets and conducting  reviews at predetermined checkpoints. For example, within the Secret  Service:", "The Enabling Capabilities program and Multi-Level Security  project monitored their contractors\u2019 costs spent to-date on a  monthly basis and compared them to the total contract amounts.", "OCIO used integrated master schedules to monitor the schedule  performance of the Enabling Capabilities program and Multi-Level  Security project.", "OCIO also monitored the cost, schedule, and performance of the  Uniformed Division Resource Management System and Events  Management projects during monthly status reviews.", "In addition, DHS and the Secret Service conducted acquisition  decision event reviews and systems engineering life cycle technical  reviews of IITT\u2019s program and projects at predetermined checkpoints  and, when applicable, identified deviations from established cost,  schedule, and performance targets. For example:", "Secret Service OCIO met with DHS\u2019s Office of Program  Accountability and Risk Management in February 2017, and with  DHS\u2019s Acting Under Secretary for Management in June 2017, to  discuss a schedule breach for the Enabling Capabilities program.  In particular, the Enabling Capabilities program informed DHS that  the program needed to change the planned date for acquisition  decision event 3 (the point at which a decision is made to fully  deploy the system) in order to conduct tests in an operational  environment prior to that decision event. This delay was due to the  Secret Service misunderstanding the tests that it was required to  conduct prior to that decision event. Specifically, the Enabling  Capabilities program had conducted tests on \u201cproduction  representative\u201d systems, but these tests were not sufficient to  meet the requirements for acquisition decision event 3.", "The project team for Multi-Level Security identified that certain  technical issues they had experienced would delay system  deployment and full operational capability (the point at which an  investment becomes fully operational). As such, in October 2017,  the project notified the Secret Service Component Acquisition  Executive of these expected delays. In particular, the web  browser that was intended to provide users on \u201cSensitive But  Unclassified\u201d workstations the ability to view information from  different security levels, experienced technical delays in meeting  personal identity verification requirements. The project team also  described for the executive how the schedule delay would affect  the project\u2019s performance metrics and funding, and subsequently  updated the project plan accordingly.", "Measure and monitor agile projects on, among other things,  velocity (i.e., number of story points completed per sprint or  release), development progression (e.g., the number of features  and user stories planned and accepted), product quality (e.g.,  number of defects), and post-deployment user satisfaction.  Secret Service OCIO measured its two agile projects\u2014Uniformed  Division Resource Management System and Events Management\u2014 using certain agile metrics. In particular, OCIO officials measured the  Uniformed Division Resource Management System and Events  Management projects using key metrics related to velocity and  development progression. For example, the officials measured  development progression for both projects on a daily basis. In  addition, OCIO officials monitored each project\u2019s progress against  these metrics during bi-weekly reviews that they conducted with each  project team.", "The OCIO officials also tracked product quality metrics for the  Uniformed Division Resource Management System. For example,  on a monthly basis, the officials tracked the number of helpdesk  tickets that had been resolved related to the system. In addition, on a  quarterly basis, they tracked the number of Uniformed Division  Resource Management System defects that (1) had been fixed and  (2) were in the backlog.", "However, while OCIO officials received certain post-deployment user  satisfaction information from end-users of the Uniformed Division  Resource Management System by, among other things, tracking the  number of helpdesk tickets related to the system and via daily verbal,  undocumented feedback from certain Uniformed Division officers,  OCIO officials had not fully measured and documented post- deployment user satisfaction with the system, such as via a survey of  employees who use the system. The officials stated that they had not  conducted and documented a survey because they were focused on  (1) addressing software performance issues that occurred after they  deployed the system to a limited number of users, and (2) continuing  system deployment to the remaining users after they addressed the  performance issues.", "OCIO officials stated that they plan to conduct such a documented  survey by the end of September 2018. The results of the user  satisfaction survey should provide OCIO with important information on  whether the Uniformed Division Resource Management System is  meeting users\u2019 needs."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The Secret Service\u2019s full implementation of 11 of 14 component-level CIO  responsibilities constitutes a significant effort to establish CIO oversight  for the component\u2019s IT portfolio. Additional efforts to fully implement the  remaining 3 responsibilities, including ensuring that all IT contracts are  reviewed, as appropriate; ensuring that the Secret Service\u2019s enterprise  governance policy appropriately specifies the CIO\u2019s role in developing  and reviewing the component\u2019s IT budget formulation and execution; and  ensuring agile projects measure product quality and post-deployment  user satisfaction, will further position the CIO to effectively manage the  Secret Service\u2019s IT portfolio.", "When effectively implemented, IT workforce planning and management  activities can facilitate the successful accomplishment of an agency\u2019s  mission. However, the Secret Service had not fully implemented all of the  15 selected practices for its IT workforce for any of the five areas\u2014 strategic planning, recruitment and hiring, training and development,  employee morale, and performance management. The Secret Service\u2019s  lack of (1) a strategic workforce planning process, including the  identification of all required knowledge and skills, assessment of  competency gaps, and targeted strategies to address specific gaps in  competencies and staffing; (2) targeted recruiting activities, including  metrics to monitor the effectiveness of the recruitment program and  adjustment of the recruitment program and hiring efforts based on  metrics; (3) a training program, including the identification of required  training for IT staff, ensuring that staff take required training, and  assessment of performance data regarding the training program; and (4)  a performance management system that includes all relevant technical  competencies, greatly limits its ability to ensure the timely and effective  acquisition and maintenance of the Secret Service\u2019s IT infrastructure and  services.", "On the other hand, by monitoring program performance and conducting  reviews at predetermined checkpoints for one program and three projects  associated with the IITT investment, in accordance with leading practices,  the Secret Service and DHS provided important oversight needed to  guide that program and those projects. Measuring projects on leading  agile metrics also provided the Secret Service CIO with important  information on project performance."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 13 recommendations to the Director of the  Secret Service:  The Director should ensure that the CIO establishes and documents an IT  acquisition review process that ensures the CIO or the CIO\u2019s delegate  reviews all contracts containing IT, as appropriate. (Recommendation 1)", "The Director should update the enterprise governance policy to specify  (1) the CIO\u2019s current role and responsibilities on the Executive Resources  Board, to include developing and reviewing the IT budget formulation and  execution; and (2) the Deputy CIO\u2019s role and responsibilities on the  Enterprise Governance Council. (Recommendation 2)", "The Director should ensure that the Secret Service develops a charter for  its Executive Resources Board that specifies the roles and responsibilities  of all board members, including the CIO. (Recommendation 3)", "The Director should ensure that the CIO includes product quality and  post-deployment user satisfaction metrics in the modular outcomes and  target measures that the CIO sets for monitoring agile projects.  (Recommendation 4)", "The Director should ensure that the CIO identifies all of the required  knowledge and skills for the IT workforce. (Recommendation 5)", "The Director should ensure that the CIO regularly analyzes the IT  workforce to identify its competency needs and any gaps it may have.  (Recommendation 6)", "The Director should ensure that, after OCIO completes an analysis of the  IT workforce to identify any competency and staffing gaps it may have,  the Secret Service updates its recruiting and hiring strategies and plans to  address those gaps, as necessary. (Recommendation 7)", "The Director should ensure that the Office of Human Resources (1)  develops and tracks metrics to monitor the effectiveness of the Secret  Service\u2019s recruitment activities for the IT workforce, including their  effectiveness at addressing skill and staffing gaps; and (2) reports to  component leadership on those metrics. (Recommendation 8)", "The Director should ensure that the Office of Human Resources and  OCIO adjust their recruitment and hiring plans and activities, as  necessary, after establishing and tracking metrics for assessing the  effectiveness of these activities for the IT workforce. (Recommendation 9)", "The Director should ensure that the CIO (1) defines the required training  for each IT workforce group, (2) determines the activities that OCIO will  include in its IT workforce training and development program based on its  available training budget, and (3) implements those activities.  (Recommendation 10)", "The Director should ensure that the CIO ensures that the IT workforce  completes training specific to their positions (after defining the training  required for each workforce group). (Recommendation 11)", "The Director should ensure that the CIO collects and assesses  performance data (including qualitative or quantitative measures, as  appropriate) to determine how the IT training program contributes to  improved performance and results (once the training program is  implemented). (Recommendation 12)", "The Director should ensure that the CIO updates the performance plans  for each occupational series within the IT workforce to include the  relevant technical competencies, once identified, against which IT staff  performance should be assessed. (Recommendation 13)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DHS provided written comments on a draft of this report, which are  reprinted in appendix III. In its comments, the department concurred with  all 13 of our recommendations and provided estimated completion dates  for implementing each of them.", "For example, with regard to recommendation 2, the department stated  that the Secret Service would update its enterprise governance policy and  related policies to outline the roles and responsibilities of the CIO and  Deputy CIO, among others, by March 31, 2019. In addition, for  recommendation 13, the department stated that the Secret Service OCIO  will include relevant technical competencies in performance plans, as  appropriate, in the next performance cycle that starts in July 2019. If  implemented effectively, these actions should address the weaknesses  we identified.", "The department also identified a number of other actions that it said had  been taken to address our recommendations. For example, in response  to recommendation 8, which calls for the Office of Human Resources to  (1) develop and track metrics to monitor the effectiveness of the Secret  Service\u2019s recruitment activities for the IT workforce and (2) report to  component leadership on those metrics, DHS stated that the Secret  Service\u2019s Office of Human Resources\u2019 Outreach Branch provides to the  department metrics on recruitment efforts toward designated priority  mission-critical occupations.", "However, for fiscal year 2017, only 1 of the 12 occupational series  associated with the Secret Service\u2019s IT workforce was designated as a  mission-critical occupation for the component (i.e., the 2210 IT Specialist  series). The 11 other occupational series were not designated as mission- critical occupations. In addition, for fiscal year 2018, none of these 12  occupational series were designated as mission-critical occupations. As  such, metrics on recruiting for these IT series may not have been  reported to DHS leadership.", "Moreover, while we requested documentation of the recruiting metrics for  the Secret Service\u2019s IT workforce and, during the course of our review,  had multiple subsequent discussions with the Secret Service regarding  such metrics, the component did not provide documentation that  demonstrated it had established recruiting metrics for its IT workforce.  Tracking such metrics and reporting the results to Secret Service  leadership, as we recommended, would provide management with  important information necessary to make effective recruitment decisions.", "Further, in response to recommendation 10, which among other things,  calls for the CIO to define the required training for each IT workforce  group, the department stated that the Secret Service OCIO recently  developed training requirements for each workforce group, which were  issued during our audit. However, while during our audit OCIO provided a  list of recommended training courses, the office did not identify them as  being required courses. Defining training that is required for each IT  workforce group, as we recommended, would inform OCIO of the  necessary training for each position and enable the office to prioritize this  training, to ensure that its staff have the needed knowledge and skills.", "In addition to the aforementioned comments, we received technical  comments from DHS and Secret Service officials, which we incorporated,  as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Director of the  Secret Service, and other interested parties. In addition, this report is  available at no charge on the GAO website at http://www.gao.gov.", "Should you or your staffs have any questions on information discussed in  this report, please contact me at (202) 512-4456 or HarrisCC@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to evaluate the extent to which: (1) the U.S. Secret  Service (Secret Service) Chief Information Officer (CIO) has  implemented selected information technology (IT) oversight  responsibilities, (2) the Secret Service has implemented leading  workforce planning and management practices for its IT workforce, and  (3) the Secret Service and the Department of Homeland Security (DHS)  have implemented selected performance and progress monitoring  practices for the Information Integration and Technology Transformation  (IITT) investment.", "To address the first objective, we analyzed DHS\u2019s policies and guidance  on IT management to identify the responsibilities that were to be  implemented by the component-level CIO related to overseeing the  Secret Service\u2019s IT portfolio, including existing systems, acquisitions, and  investments. From the list of 33 responsibilities that we identified, we  then excluded the responsibility that was associated with information  security, which is expected to be addressed as part of a separate,  subsequent GAO review. We also excluded those responsibilities that  were significantly large in scope (e.g., implement an enterprise  architecture) or that, in our professional judgment, lacked specificity (e.g.,  provide timely delivery of mission IT services). As a result, we excluded  from consideration for this review a total of 10 CIO responsibilities.", "For the 23 that remained, we then combined certain responsibilities that  overlapped with other related responsibilities. For example, we combined  related responsibilities on the component CIO\u2019s review of IT contracts. As  a result, we identified 14 responsibilities for review. We validated with the  acting DHS CIO that these responsibilities were key responsibilities for  the department\u2019s component-level CIOs. We then included all 14 of the  responsibilities in our review.", "The 14 selected component-level CIO responsibilities were:  1.  Develop and review the component IT budget formulation and  execution.  2.  Manage the component IT investment portfolio, including establishing  an IT acquisition review process that enables component and DHS  review of component acquisitions (i.e., contracts) that contain IT.  3.  Develop, implement, and maintain a detailed IT strategic plan.  4.  Ensure all component IT policies are in compliance and alignment  with DHS IT directives and instructions.  5.  Concur with each program\u2019s and/or project\u2019s systems engineering life  cycle tailoring plan.  6.  Support the Component Acquisition Executive to ensure processes  are established that enable systems engineering life cycle technical  reviews and that they are adhered to by programs and/or projects.  7.  Ensure that all systems engineering life cycle technical review exit  criteria are satisfied for each of the component\u2019s IT programs and/or  projects.  8.  Ensure the necessary systems engineering life cycle activities have  been satisfactorily completed as planned for each of the component\u2019s  IT programs and/or projects.  9.  Concur with the systems engineering life cycle technical review  completion letter for each of the component\u2019s IT programs and/or  projects.  10. Maintain oversight of their component\u2019s agile development approach  for IT by appointing the responsible personnel, identifying investments  for adoption, and reviewing artifacts.  11. With Component Acquisition Executives, evaluate and approve the  application of agile development for IT programs consistent with the  component\u2019s agile development approach.  12. Set modular outcomes and target measures to monitor the progress in  achieving agile implementation for IT programs and/or projects within  their component.  13. Participate on DHS\u2019s CIO Council, Enterprise Architecture Board, or  other councils/boards as appropriate, and appoint employees to serve  when necessary.  14. Meet the IT competency requirements established by the DHS CIO,  as required in the component CIO\u2019s performance plan.", "To determine the extent to which the Secret Service CIO has  implemented these responsibilities, we obtained and assessed relevant  component documentation and compared it to the responsibilities.  Specifically, we obtained and analyzed documentation including evidence  of the CIO\u2019s participation on the Secret Service governance board that  has final decision authority and responsibility for enterprise governance,  including the IT budget; monthly program management reports showing  the CIO\u2019s oversight of IT programs, projects, and systems; monthly status  reports on program spending; the Secret Service\u2019s IT strategic plan; the  Secret Service\u2019s enterprise governance policy; meeting minutes from the  DHS board and council on which the CIO participated (i.e., the CIO  Council and Enterprise Architecture Board); and documentation  demonstrating whether the CIO met the IT competency requirements.", "In addition, we obtained and analyzed relevant documentation related to  the CIO\u2019s oversight of the major IT investments on which the Secret  Service was spending development, modernization, and enhancement  funds during fiscal year 2017. As of July 2017, the component had one  investment\u2014IITT\u2014that met this criterion. IITT is a portfolio investment  that, as of July 2017, included two programs (one of which included three  projects) and one standalone project (i.e., it was not part of another  program) that had capabilities that were in planning or development and  modernization: the Enabling Capabilities program, Enterprise Resource  Management System program (which included three projects, called  Uniformed Division Resource Management System, Events Management,  and Enterprise-wide Scheduling), and Multi-Level Security project.", "In particular, we obtained and analyzed documentation related to the  CIO\u2019s oversight of the systems engineering life cycles for IITT\u2019s Enabling  Capabilities program and the Uniformed Division Resource Management  System, Events Management, and Multi-Level Security projects. This  documentation included acquisition program baselines, systems  engineering life cycle tailoring plans, and systems engineering life cycle  technical review briefings and completion letters. We then compared the  documentation against the five selected systems engineering life cycle  oversight responsibilities (responsibilities 5, 6, 7, 8, and 9).", "We also obtained and analyzed documentation related to the CIO\u2019s  oversight of two projects that the Secret Service was implementing using  an agile methodology\u2014Uniformed Division Resource Management  System and Events Management. Specifically, we obtained and  assessed documentation of (1) the CIO\u2019s approval for these projects to be  implemented using an agile methodology and (2) the agile development  metrics that the CIO established for each of these projects. We then  compared this documentation to the three agile development-related  component-level CIO responsibilities (responsibilities 10, 11, and 12).", "Further, to determine the extent to which the Secret Service CIO had  established an IT acquisition (i.e., contract) review process that enabled  component and DHS review of component contracts that contain IT  (which is part of responsibility 2), we first asked Secret Service officials to  provide us with a list of all new, unclassified IT contracts that the  component awarded between October 1, 2016, and June 30, 2017. The  Secret Service officials provided a list of 54 contracts. We validated that  these were contracts for IT or IT services by: (1) searching for them in the  Federal Procurement Data System \u2013 Next Generation; (2) identifying  their associated product or service codes, as reported in that system;  and (3) determining whether those codes were included in the universe of  79 IT product or service codes identified by the Category Management  Leadership Council.", "In validating the list of 54 contracts provided by the Secret Service, we  determined that 5 of the contracts were not associated with an IT product  or service code. As such, we removed those contracts from the list. In  addition, we found that three other items identified by the component  were not in the Federal Procurement Data System \u2013 Next Generation.  Secret Service officials subsequently confirmed that these three items  were not contracts. We therefore removed these three items from the list.  As such, the final list of validated contracts identified by the Secret  Service included 46 IT contracts.", "In addition, to identify any IT contracts that were not included in the list  provided by the Secret Service, we conducted a search of the Federal  Procurement Data System \u2013 Next Generation to identify all unclassified  contracts that (1) the component awarded between October 1, 2016, and  June 30, 2017; (2) were not a modification of a contract; and (3) were  associated with 1 of the 79 IT product or service codes identified by the  Category Management Leadership Council. Based on these criteria, we  identified 144 Secret Service IT contracts in the Federal Procurement  Data System \u2013 Next Generation (these 144 contracts included the 46  contracts previously identified by Secret Service officials). We then asked  Secret Service officials to validate the accuracy, completeness, and  reliability of these data, which they did.", "From each of these two lists of IT contracts (i.e., the list of 46 IT contracts  identified by the Secret Service and the list of 144 IT contracts that we  identified from the Federal Procurement Data System \u2013 Next Generation),  we then selected random, non-generalizable samples of contracts, as  described below.", "First, from the list of 46 IT contracts identified by Secret Service  officials, we removed 4 contracts that had total values of less than  $10,000. To ensure that we selected across all contract sizes, we  randomly selected 12 contracts from the remaining list of 42 contracts,  using the following cost ranges: $10,000 to $50,000 (4 contracts), more than $50,000 to less than $250,000 (4 contracts), and more than $250,000 (4 contracts).", "Second, from our list of 144 IT contracts that we identified from the  Federal Procurement Data System \u2013 Next Generation, we removed  the 46 contracts identified by Secret Service officials. We also  removed 12 contracts that had total values of less than $10,000. To  ensure that we selected across all contract sizes, we randomly  selected 21 contracts from the remaining list of 86 contracts, using the  following cost ranges: $10,000 to $50,000 (7 contracts), more than $50,000 to less than $250,000 (7 contracts), and more than $250,000 (7 contracts).", "In total, we selected 33 IT contracts for review. We separated the  contracts into the three cost ranges identified above in order to ensure  that contracts of different value levels had been selected. This enabled us  to determine the extent to which the CIO appropriately reviewed contracts  of all values.", "To determine the extent to which the CIO had established an IT contract  approval process that enabled the Secret Service and DHS, as  appropriate, to review IT contracts, we first asked Secret Service Office of  the CIO (OCIO) officials for documentation of their IT contract approval  process. These officials were unable to provide such documentation.  Instead, the officials stated that the Secret Service CIO or the CIO\u2019s  delegate approves all IT contracts prior to award. The officials also  provided documentation that identified four staff to whom the CIO had  delegated his approval authority. Further, the officials stated that, in  accordance with DHS\u2019s October 2016 IT acquisition review guidance,  they submitted to DHS OCIO for approval any IT contracts that met  DHS\u2019s thresholds for review, including those that (1) had total estimated  procurement values of $2.5 million or more, and (2) were associated with  a major investment.", "Based on the IT acquisition review process that Secret Service OCIO  officials described, we then obtained and analyzed each of the 33  selected IT contracts and associated approval documentation to  determine whether or not the Secret Service CIO or the CIO\u2019s delegate  had approved each of the contracts. In particular, we (1) reviewed the  name of the contract approver on the approval documentation, and (2)  compared the signature dates that were on the contracts to the signature  dates that were identified on the associated approval documentation.", "In addition, to determine whether or not the Secret Service CIO submitted  to DHS OCIO for approval the IT contracts that (1) had total estimated  procurement values of $2.5 million or more, and (2) were associated with  major investments, we first analyzed the 144 Secret Service IT contracts  that we had previously pulled from the Federal Procurement Data System  \u2013 Next Generation to determine which contracts met the $2.5 million  threshold. We identified 4 contracts that met this threshold. We then  requested that OCIO identify the levels (i.e., major or non-major) of the  investments associated with these contracts. According to OCIO officials,  3 of the 4 contracts were associated with non-major investments and 1  was not associated with an investment. As such, based on DHS\u2019s  October 2016 IT acquisition review guidance, none of these contracts  needed to be submitted to DHS OCIO for review.", "We also interviewed Secret Service officials, including the CIO and  Deputy CIO, regarding the CIO\u2019s implementation of the 14 selected  component-level responsibilities. We assessed the evidence against the  selected responsibilities to determine the extent to which the CIO had  implemented them.", "To address the second objective\u2014determining the extent to which the  Secret Service had implemented leading workforce planning and  management practices for its IT workforce\u2014we first identified seven  topic areas associated with human capital management based on the  following sources:", "The Office of Personnel Management\u2019s Human Capital Framework.", "Office of Personnel Management and the Chief Human Capital  Officers Council Subcommittee for Hiring and Succession Planning,  End-to-End Hiring Initiative.", "GAO, High-Risk Series: Progress on Many High-Risk Areas, While  Substantial Efforts Needed on Others.", "GAO, IT Workforce: Key Practices Help Ensure Strong Integrated  Program Teams; Selected Departments Need to Assess Skill Gaps.", "GAO, Department of Homeland Security: Taking Further Action to  Better Determine Causes of Morale Problems Would Assist in  Targeting Action Plans.", "GAO, Human Capital: A Guide for Assessing Strategic Training and  Development Efforts in the Federal Government.", "GAO, Results-Oriented Cultures: Creating a Clear Linkage between  Individual Performance and Organizational Success.", "DHS acquisition guidance.", "Secret Service acquisition guidance.", "Among these topic areas, we then selected five areas that, in our  professional judgment, were of particular importance to successful  workforce planning and management. They were also previously  identified as part of our high-risk and key issues work on human capital  management. These areas include: (1) strategic planning, (2) recruitment  and hiring, (3) training and development, (4) employee morale, and (5)  performance management.", "We also reviewed these same sources and identified numerous leading  practices associated with the five topic areas. Among these leading  practices, we then selected three leading practices within each of the five  areas (for a total of 15 selected practices). The selected practices were  foundational practices that, in our professional judgment, were of  particular importance to successful workforce planning and management.", "Table 14 identifies the five selected workforce areas and 15 selected  associated practices.", "To determine the extent to which the Secret Service had implemented the  selected leading workforce planning and management practices for its IT  workforce, we obtained and assessed documentation and compared it  against the 15 selected practices. In particular, we analyzed the Secret  Service\u2019s human capital strategic plan, human capital staffing plan, IT  strategic plan, documentation of the component\u2019s staffing model that it  used to determine the number of IT staff needed, an independent  verification and validation report on the component\u2019s staffing models,  documentation of the current number of IT staff, the Secret Service\u2019s  recruitment and outreach plans, documentation of DHS\u2019s hiring  authorities (which are applicable to the Secret Service), the Secret  Service\u2019s training strategic plan, IT workforce training plan, action plans  for improving employee morale, and templates used for measuring and  reporting employee performance.", "We also interviewed Secret Service officials\u2014including the CIO, Deputy  CIO, and workforce planning staff\u2014about the component\u2019s workforce- related policies and documentation. Further, we discussed with the  officials the Secret Service\u2019s efforts to implement the selected workforce  practices for its IT workforce.", "Regarding our assessments of the Secret Service\u2019s implementation of the  15 selected workforce planning and management practices, we assessed  a practice as being fully implemented if component officials provided  supporting documentation that demonstrated all aspects of the practice.  We assessed a practice as not implemented if the officials did not provide  any supporting documentation for that practice, or if the documentation  provided did not demonstrate any aspect of the practice. We assessed a  practice as being partly implemented if the officials provided supporting  documentation that demonstrated some, but not all, aspects of the  selected practice.", "In addition, related to our assessments of the Secret Service\u2019s  implementation of the five selected overall workforce areas, we assessed  each area as follows, based on the implementation of the three selected  practices within each area:", "Fully implemented: The Secret Service provided evidence that it had  fully implemented all three of the selected practices within the  workforce area;", "Substantially implemented: The Secret Service provided evidence that  it had either  fully implemented two selected practices and partly implemented  the remaining one selected practice within the workforce area, or  fully implemented one selected practice and partly implemented  the remaining two selected practices within the workforce area;", "Partially implemented: The Secret Service provided evidence that it  had partly implemented each of the three selected practices within the  workforce area;", "Minimally implemented: The Secret Service provided evidence that it partly implemented two selected practices and not implemented  the remaining one selected practice within the workforce area, or partly implemented one selected practice and not implemented  the remaining two selected practices within the workforce area; or", "Not implemented: The Secret Service did not provide evidence that it  had implemented any of the three selected practices within the  workforce area.", "To address the third objective\u2014determining the extent to which the  Secret Service and DHS have implemented selected performance and  progress monitoring practices for IITT\u2014we reviewed leading project  monitoring practices and guidance from the Software Engineering  Institute. First, we reviewed the practices within the Project Monitoring  and Control process area of the Institute\u2019s Capability Maturity Model  Integration\u00ae for Acquisition. Based on our review, we identified four  practices associated with monitoring program performance and progress.  In our professional judgment, all four of these practices were of  significance to managing the IITT investment given the phase of the life  cycle that the investment was in. As such, we elected to include all four of  these practices in our review, and combined them into one practice, as  follows:", "Monitor program performance and conduct reviews at predetermined  checkpoints or milestones by, among other things, comparing actual  cost, schedule, and performance data with estimates in the program  plan and identifying significant deviations from established targets or  thresholds for acceptable performance levels.", "Next, given the agile development methodology that the Secret Service  was using for certain projects within IITT, we reviewed the Software  Engineering Institute\u2019s technical note on the progress monitoring of agile  contractors. Based on our review, and in consultation with an internal  expert, we selected four agile metrics that the Institute identified as  important for successful agile implementations and that, in our  professional judgment, were of most significance to monitoring the  performance of IITT\u2019s agile projects. We then combined these four  metrics into one practice, as follows:", "Measure and monitor agile projects on velocity (i.e., number of story  points completed per sprint or release), development progression  (e.g., the number of features and user stories planned and accepted),  product quality (e.g., number of defects), and post-deployment user  satisfaction.", "To determine the extent to which DHS and the Secret Service had  implemented the first selected practice, we analyzed relevant program  management and governance documentation for IITT\u2019s Enabling  Capabilities program, and Multi-Level Security, Uniformed Division  Resource Management System, and Events Management projects. In  particular, we analyzed acquisition program baselines, DHS acquisition  decision event memorandums, artifacts from DHS and Secret Service  program oversight reviews, cost monitoring reports, program integrated  master schedules, and program status briefings, and compared this  documentation to the selected practice. We also interviewed Secret  Service OCIO officials regarding the Secret Service\u2019s and DHS\u2019s efforts to  monitor the IITT investment\u2019s performance and progress.", "To determine the extent to which the Secret Service had implemented the  second selected practice related to measuring and monitoring agile  projects on agile metrics (i.e., velocity, development progression, product  quality, and post-deployment user satisfaction), we obtained and  analyzed agile-related documentation for the two projects that the Secret  Service was implementing using an agile methodology\u2014Uniformed  Division Resource Management System and Events Management.  Specifically, to determine the extent to which the Secret Service was  measuring and monitoring these two projects on metrics for velocity and  development progression, we obtained and analyzed documentation,  such as sprint burndown charts and monthly program status reports, and  compared it to the selected practice.", "In addition, the agile metrics for product quality and post-deployment user  satisfaction were only applicable to projects that had been deployed to  users. As such, these metrics were applicable to the Uniformed Division  Resource Management System (which the Secret Service had deployed  to users) and were not applicable to Events Management (which the  Secret Service had not yet deployed to users, as of early May 2018).", "We therefore obtained and analyzed documentation demonstrating that  Secret Service OCIO measured product defects for the Uniformed  Division Resource Management System. We also requested  documentation demonstrating that OCIO had measured and monitored  post-deployment user satisfaction for this project, including via a survey.  OCIO officials stated that they had not conducted such a survey and were  unable to provide documentation demonstrating they had measured post- deployment user satisfaction for the Uniformed Division Resource  Management System.", "To assess the reliability of the cost, schedule, and agile-related data that  were in DHS and the Secret Service\u2019s program management and  governance documentation for the IITT investment, we (1) analyzed  related documentation and assessed the data against existing agency  records to identify consistency in the information, and (2) examined the  data for obvious outliers, incomplete, or unusual entries. We determined  that the data in these documents were sufficiently reliable for our  purpose, which was to evaluate the extent to which DHS and the Secret  Service had implemented processes for monitoring the IITT investment\u2019s  performance and progress.", "We conducted this performance audit from May 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Description of the U.S. Secret Service\u2019s Information Integration and Technology Transformation Investment\u2019s Programs and Projects", "paragraphs": ["As of June 2018, the Secret Service\u2019s Information Integration and  Technology Transformation (IITT) investment included two programs (one  of which included three projects) and one project that had capabilities that  were in planning or development and modernization, as described below:", "Enabling Capabilities. This program is intended to, among other  things, (1) modernize and enhance the Secret Service\u2019s information  technology (IT) network infrastructure, including increasing bandwidth  and improving the speed and reliability of the Secret Service\u2019s IT  system performance; (2) enhance cybersecurity to protect against  potential intrusions and viruses; and (3) provide counterintelligence  and data mining capabilities to improve officials\u2019 ability to perform the  Secret Service\u2019s investigative mission.", "Enterprise Resource Management System. This program comprises  three projects that are intended to provide: a system that will enable the Secret Service\u2019s Uniformed Division  to efficiently and effectively plan, provision, and schedule missions  (this project is referred to as Uniformed Division Resource  Management System), a system that will unify the logistical actions (e.g., assigning  personnel) surrounding special events that Secret Service agents  need to protect, such as the United Nations General Assembly  (this project is referred to as Events Management), and a capability for creating schedules for Secret Service agents and  administrative, professional, and technical staff, as well as the  ability to generate reports on information such as monthly hours  worked (this project is referred to as Enterprise-wide Scheduling).", "Multi-Level Security. This project is intended to enable authorized  Secret Service users to view two levels of classified information on a  single workstation. Previously, data at various security levels were  contained and used in multiple disparate systems. Multi-Level  Security is intended to streamline users\u2019 access to information at  different security levels in order to enable them to more quickly and  effectively perform their duties.", "Table 15 provides the planned life cycle cost and schedule estimates  (threshold values) for each IITT program and project that had capabilities  in planning or development and modernization, as of June 2018. In  addition, the table describes any changes in those cost and schedule  estimates, as well as the key reasons for any changes, as identified by  officials from the Secret Service\u2019s Office of the Chief Information Officer."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following staff made key  contributions to this report: Shannin O\u2019Neill (Assistant Director), Emily  Kuhn (Analyst-in-Charge), Quintin Dorsey, Rebecca Eyler, Javier Irizarry,  and Paige Teigen."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-656", "url": "https://www.gao.gov/products/GAO-18-656", "title": "Science and Technology: Considerations for Maintaining U.S. Competitiveness in Quantum Computing, Synthetic Biology, and Other Potentially Transformational Research Areas", "published_date": "2018-09-26T00:00:00", "released_date": "2018-09-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Scientific and technological innovation contributes to U.S. economic competitiveness and prosperity. Federal agencies support transformational technological advances\u2014those that result in new or significantly enhanced technologies\u2014by, for example, funding research (nearly $70 billion in obligations in fiscal year 2017).", "GAO was asked to examine support for research that could lead to transformational technological advances. This report (1) describes federal agencies' and nonfederal entities' support for such research in selected areas, (2) examines federal agencies' coordination on this research, and (3) describes experts' views on considerations for maintaining U.S. competitiveness through such advances. GAO selected quantum computing and synthetic biology as examples of research areas that could lead to transformational technological advances. GAO reviewed agency documents and interviewed federal officials, subject matter experts, and stakeholders. GAO also worked with the National Academies of Sciences, Engineering, and Medicine to convene a meeting to solicit views from 19 experts selected from government, academia, and industry, among others."]}, {"section_title": "What GAO Found", "paragraphs": ["Multiple federal and nonfederal entities support research for transformational technological advances in the areas of quantum computing\u2014the manipulation of bits of data using the behavior of individual atoms, molecules, or other quantum systems to potentially outperform supercomputers\u2014and synthetic biology\u2014the combination of biology and engineering to create or modify biological systems. GAO found that at least 6 agencies support quantum computing research; at least 10 agencies support synthetic biology research; and nonfederal entities, such as universities and businesses, support research in both areas.", "Agency officials said they coordinate on quantum computing and synthetic biology through efforts such as conferences and interagency groups, but GAO found that certain new efforts have not fully implemented selected leading collaboration practices. The quantum computing group, co-chaired by officials from 4 agencies, and the synthetic biology group, led by the National Science Foundation, have taken initial steps to implement some leading practices GAO identified that can enhance and sustain interagency collaboration. For example, both groups agreed to coordinate their research, and participating agencies documented agreement with the quantum computing group's purpose through a charter. However, the groups have not fully implemented other practices, such as agreeing on roles and responsibilities and identifying common outcomes, that could help ensure they effectively marshal agencies' efforts to maintain U.S. competitiveness in quantum computing and synthetic biology.", "Experts identified considerations for maintaining U.S. competitiveness through transformational technological advances. The considerations broadly address federal and nonfederal entities' roles in supporting such advances and include:", "developing a strategic approach using consortia or other mechanisms to bring together potential partners;", "fostering an environment in which information is shared among researchers while also considering the risks of information sharing;", "focusing on technology development and commercialization, for example, by providing support across multiple stages of technology innovation; and", "strengthening the science and technology workforce through training, recruiting, and retaining talent."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the agencies leading the interagency quantum computing and synthetic biology groups take steps to fully implement leading collaboration practices. The agencies agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal support for research and development can accelerate innovation,  drive technological advances, and promote U.S. competitiveness in the  global economy. For example, federally supported research led to the  introduction of global positioning systems and touchscreen technologies  that contributed to the development of smartphones, creating new  industries and significant economic growth. In fiscal year 2017, the  federal government obligated nearly $70 billion for research, according to  the National Science Foundation (NSF). While some research leads to  incremental changes in a scientific field, other research can yield  disruptive or transformational advances. These advances are  transformational because they result in new technologies or significantly  enhanced capabilities in existing technologies.", "The United States is considered a world leader in many science and  technology areas, but other countries, such as China, are also making  considerable investments in research. Increased competition from these  countries has led some experts and others to express concern that the  United States may be losing its competitive advantage. In January 2018,  NSF\u2019s National Science Board reported that the United States\u2019 overall  global share of research and development spending is declining relative  to other countries. Moreover, other reports indicate that the United  States is losing ground in certain technologies, such as intense ultrafast  lasers, which may have applications in manufacturing, medicine, and  national security.", "Since 2007, a series of laws has built on prior federal efforts to invest in  innovation through research and development and to improve the United  States\u2019 competitiveness. In 2007, the America Creating Opportunities to  Meaningfully Promote Excellence in Technology, Education, and Science  Act (COMPETES 2007) established the Advanced Research Projects  Agency-Energy (ARPA-E) in the Department of Energy (DOE) to  overcome long-term and high-risk technological barriers in the  development of energy technologies. It also, among other things,  authorized programs in the Department of Education and NSF to train  teachers in science, technology, engineering and math (STEM) fields. In  2011, the COMPETES Reauthorization Act of 2010 reauthorized parts of  COMPETES 2007, established several new programs, and authorized  additional funding for STEM education. In 2017, the American Innovation  and Competitiveness Act of 2017 reauthorized some parts of the  COMPETES acts. The three acts also provided direction to the Office of Science and Technology Policy (OSTP), whose responsibilities include  coordinating federal research programs, advising the President on  scientific and technological considerations with regard to federal budgets,  and advising the President of scientific and technological considerations  involved in areas of national concern.", "However, continued concerns related to the federal debt and federal  budget deficits are forcing difficult decisions about how much the federal  government should spend on research, as well as what types of research  it should fund. These concerns overlie a long-standing debate about the  federal government\u2019s role in supporting science and technology research  and which roles should be left to the private sector, academia, or other  nonfederal entities. We have reported that the government often funds  research at the early stages of technology development, whereas industry  typically supports the final stages of technology development. As a  result, U.S. innovators may find it difficult to obtain public funding or  private investment during the middle stages of innovation. We have also  reported that substantial amounts of funding or investment are needed to  support technology maturation through the middle stages of innovation  and that high costs can be a barrier to technology commercialization,  especially for small and medium-sized U.S. enterprises. Long-standing  disagreements among stakeholders about the appropriateness of the  federal government taking an active role in supporting technological  advances with ambiguous applications has led to the creation, and  sometimes the dissolution, of programs such as the Advanced  Technology Program and the Technology Innovation Program. These two  programs were established to help U.S. businesses and organizations  support, promote, and accelerate innovation through high-risk, high- reward research in areas of critical national need. Different perspectives  on the appropriate federal role may have also led to the proposals in the  President\u2019s Budget for fiscal years 2018 and 2019 to eliminate ARPA-E.", "You asked us to examine federal and nonfederal support for research that  could accelerate innovation and advance U.S. competitiveness. This  report (1) describes federal agencies\u2019 and nonfederal entities\u2019 support for  research for transformational technological advances in selected areas,  (2) examines federal agencies\u2019 coordination on this research, and (3)  provides experts\u2019 views on considerations for maintaining U.S.  competitiveness through transformational technological advances.", "To address these objectives, we selected quantum computing (a sub- area of quantum information science) and synthetic biology as examples  of areas of research that could lead to transformational technological  advances. We selected these two areas based on several factors,  including that they (1) represent enabling or platform technologies, (2) are  supported by a mix of federal agencies and nonfederal entities, and (3)  represent areas of congressional interest in which we have not recently  conducted work. For the purposes of our report, we defined quantum  computing as computing in which bits of data are manipulated by using  the behavior of atoms, molecules, or other quantum systems, with the  potential to carry out extremely complicated calculations for specific  problems that can outperform conventional supercomputers. We defined  synthetic biology as the intersection of biology and engineering that  focuses on the modification or creation of novel biological systems for  useful purposes.", "To describe federal agencies\u2019 and nonfederal entities\u2019 support for  research that could lead to transformational technological advances in  quantum computing or synthetic biology, we focused on federal and  nonfederal efforts in fiscal year 2016 through the second quarter of fiscal  year 2018. We reviewed agency documentation, relevant literature, and  our prior work related to federal research efforts. We also interviewed  officials from federal agencies that support quantum computing or  synthetic biology research, as well as subject matter experts in the areas  of quantum computing, synthetic biology, or federal research more  broadly from industry, academia, nonprofit organizations, and  professional associations. We included 10 agencies in our review:  Department of Commerce, Department of Defense (DOD), Environmental  Protection Agency (EPA), DOE, Department of Homeland Security  (DHS), Department of Health and Human Services (HHS), National  Aeronautics and Space Administration (NASA), NSF, Office of the  Director of National Intelligence (ODNI), and the U.S. Department of  Agriculture (USDA). We did not seek to develop comprehensive  information on federal agencies\u2019 and nonfederal entities\u2019 efforts to support  research in quantum computing and synthetic biology. As a result, federal  agencies and nonfederal entities could have efforts in these two areas  that we do not discuss in our report.", "To examine federal agencies\u2019 coordination on quantum computing and  synthetic biology research, we identified coordination efforts that took  place in fiscal year 2016 through the second quarter of fiscal year 2018  during our review of agency documentation and interviews with federal  officials, including OSTP officials. We then compared these efforts with  selected leading practices for enhancing and sustaining collaboration.  We selected six of the eight leading practices based on their relevance to  the operations of the interagency coordination efforts we identified. In  this report, and in our past work, we define collaboration as any joint  activity that is intended to produce more public value than could be  produced when organizations act alone.", "To provide experts\u2019 views on considerations for maintaining U.S.  competitiveness through transformational technological advances, we  convened a meeting of 19 experts in October 2017, with the assistance of  the National Academies of Sciences, Engineering, and Medicine. The  experts included current and former federal officials and subject matter  experts from industry, academia, nonprofit organizations, and  professional associations. About half of the experts were subject matter  experts in quantum computing or synthetic biology, while the other half  were experts with broader perspectives on the role of federal and  nonfederal entities in supporting research for transformational  technological advances. We worked with the National Academies to  select experts with a range of viewpoints. We used a transcript of the  meeting in analyzing information obtained from these experts. See  appendix I for more detailed information on the scope and methods of our  review and appendix II for a list of the experts who participated in the  meeting we convened.", "We conducted this performance audit from November 2016 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides information on translating research into new  products or services, the federal government\u2019s role in supporting  research, and OSTP\u2019s role in fostering collaboration among the various  entities. It also provides information on the areas of quantum computing  and synthetic biology."], "subsections": [{"section_title": "Translating Research into New Products or Services", "paragraphs": ["Technological innovation involves not only creating new ideas but also  translating those ideas into a new product or service. Innovation, and  the research driving it, is inherently risky because the likelihood that  research can be translated into a product or service and the ultimate  value of that product or service are unknown. Because of this risk and the  long time frames sometimes associated with technology development,  there can be a gap in funding and investment support that makes it  challenging to translate research into commercialized products or  services. While government and universities often support early-stage  research and industry tends to support later stages of development, there  may be a gap during the middle stages of innovation during which  innovators may have difficulty finding financial support, as illustrated in  figure 1 (see app. III for a printable version).", "The linear, or pipeline, model of innovation presents innovation as a  succession of outputs that transfer to the next level as inputs. The starting  point in the pipeline model is basic research. Knowledge created through  basic research transitions to the next stage of applied research then to  development and, finally, commercialization. Under this model, innovation  takes place in distinct and sequential phases.", "Critics of the pipeline model have noted that innovation is actually cyclical  because the development of knowledge involves feedback and interaction  at these different stages of the cycle. Alternative innovation models  include the following:", "Extended pipeline model. Under this model certain research and development organizations support the entire technology development process, from basic research to initial commercialization. Unlike the pipeline model, in which the government\u2019s support is disconnected from the rest of the innovation ecosystem, under the extended pipeline model the government\u2019s role is deeply connected to the rest of the system. Under this model, federal entities such as DOD support the evolution of technologies, including electronics, computing, and the internet, across all stages of innovation.", "Induced innovation model. Innovation that follows this model is more industry-led because the parties involved have a market niche that the research needs to meet. Research under this model is more likely to lead to incremental advances because it is conducted in response to market demand.", "Manufacturing-led model. Under this model, innovation is pursued with the main objective of manufacturing. This model describes innovations in production technologies, processes, and products that emerge from the manufacturing process. The production process is supplemented by applied research and development. It is typically industry-led but may have strong government support, particularly in countries such as Germany, Japan and China whose economies are organized around this model."], "subsections": []}, {"section_title": "Federal Role in Supporting Research", "paragraphs": ["While the different innovation models receive various levels of federal  support, examining the organization of federal agencies in support of  innovation is complex because of the decentralized nature of the federal  research system. More than 25 federal agencies support intramural or  extramural research, and these agencies may play different roles in  supporting research that may lead to potentially transformational  technologies. For example, NSF supports basic research that is in  keeping with its mission of promoting the progress of science; advancing  the national health, prosperity, and welfare; and securing the national  defense. DOD supports research in line with its mission to provide the  military forces needed to deter war and to protect the United States\u2019  security, while DOE supports research in line with its mission to ensure  America\u2019s security and prosperity by addressing its energy,  environmental, and nuclear challenges. Commerce\u2019s National Institute of  Standards and Technology (NIST) supports research in measurement  science, standards, and technology, in keeping with its mission to  promote innovation and industrial competitiveness. Other agencies\u2014such  as EPA, and HHS\u2019s Food and Drug Administration\u2014support research in  their capacity as regulatory agencies.", "Federal support for research is not only decentralized but also changes  over time. Factors such as international conflict, budgetary pressures,  and globalization may contribute to shifts in U.S. science and technology  policy. In times of war, federal support for research has increased in  part because of the view that America\u2019s military survival might depend on  science and technology leadership. Budgetary pressures also affect the  federal role in research when such pressures lead to reductions in federal  funding for research. Globalization and the associated integration of the  world economy may also affect federal science and technology policy.  While the United States invests far more resources in research and  development than any other country, its rank in research and  development intensity has slowly fallen in recent years.", "Researchers have said that, in addition to globalization, domestic  changes\u2014such as the structure of U.S. companies\u2014present new  challenges to commercializing new products and services. For example,  in the last few decades, the amount of research produced by industrial  laboratories has declined. Further, U.S. companies, particularly small and  midsized firms, devote fewer resources to train employees compared to  firms from the 1980s. In recognition of the need for a more skilled  workforce to enhance U.S. competitiveness, the federal government has  increasingly shifted attention to preparing students for careers in STEM  fields.", "The federal role also changes in response to differing policy views. One  policy perspective maintains that the federal role should be to support  innovation across the economy. This policy approach has underpinned  innovation and economic growth since at least the end of World War II.  As we reported previously, another perspective is that the federal role  should be to support individual sectors. Critics of the latter perspective  argue that the government should not \u201cpick winners and losers\u201d in  commercial contexts because it is unlikely that the government will have  sufficient information or foresight about an individual firm\u2019s or a particular  technology\u2019s growth potential to select it for special subsidy. This view  advocates allocating resources through market mechanisms because  such mechanisms are anticipated to result in U.S. investments that are  most efficient and best suited to the comparative advantages of the  United States. However, the federal government has supported  individual sectors from research and development through  implementation, most often because of the government\u2019s own needs in  areas deemed important for national security (e.g., aerospace and  defense). In addition, findings of economic market failures have justified  other interventions, such as for research, development, and  demonstrations in various sectors, including agriculture and energy, and  recently, advanced production technologies.", "The federal government has partnered with nonfederal entities to  translate research into commercialized products to foster economic  growth. For example, DOD, through programs such as the Defense  Advanced Research Projects Agency (DARPA), has partnered with  nonfederal entities to support both early-stage research and later-stage  production. Some of these partnerships have led to development of  transformational technologies. For example, in the 1970s DOD supported  development of a communications network to facilitate information  sharing, which is considered the foundation of the modern internet.", "DOD also funded research in the 1950s on speech recognition and  artificial intelligence that commercial companies leveraged in the 1990s  and 2000s to develop technologies such as the Speech Interpretation and  Recognition Interface, the iPhone assistant. NIST research, such as its  critical technical evaluations of speech recognition technologies dating  back to the 1980s, also contributed to the development of Speech  Interpretation and Recognition Interface, according to NIST officials.  Alongside DOE, HHS and NSF, DOD has funded research that led to  technologies used to make the first iPod and later the iPhone (see fig.  2). Many federal agencies also support other mechanisms, such as  Small Business Innovation Research and Small Business Technology  Transfer grants, to stimulate innovation by facilitating interactions among  the federal government, private sector, and nonprofit research institutions."], "subsections": []}, {"section_title": "Role of OSTP in Fostering Collaboration", "paragraphs": ["OSTP was established in 1976 to provide advice on the scientific,  engineering, and technological aspects of issues that require attention at  the highest levels of government. Advances in technology in areas such  as quantum computing and synthetic biology have become increasingly  interdisciplinary, and OSTP works with agencies across the decentralized  federal research system to coordinate activities to support these  advances. The National Science and Technology Council (NSTC) is a key  component of these efforts and is charged with coordinating science and  technology policy across the federal government. One of the NSTC\u2019s  primary objectives is to establish clear national goals for federal science  and technology investments. NSTC organizes its work under six  committees, such as the Committee on STEM Education, which is  responsible for coordinating federal programs and activities in support of  STEM education. In addition to pulling together federal entities, OSTP  also plays a role in pulling together nonfederal entities to help tackle  technological issues of importance to the nation. For example, the  National Strategic Computing Initiative, created in 2015, is a government  collaboration with industry and academia to sustain and enhance U.S.  leadership in high-performance computing."], "subsections": []}, {"section_title": "Quantum Computing", "paragraphs": ["Quantum computing has the potential to revolutionize computing by  introducing a fundamentally new approach to computing not available  with classical computers, which constitute most computers in use today.  Classical computers process two different states as 1s and 0s (binary  digits) to form \u201cbits\u201d of information that the computer manipulates. Bits  can exist in either a 1 or 0 state. These bits may be created using, for  example, specific voltage or current levels in a circuit, and there is a limit  as to how quickly transistors in classical computers can manipulate these  bits to conduct calculations or how many circuit components can be  included on a computer chip. While classical computers rely on bits,  quantum computers rely on quantum bits (\u201cqubits\u201d). Unlike bits, qubits  can be in combinations of both a 1 and a 0 at the same time due to  quantum superposition. Phenomena such as quantum superposition and  quantum entanglement (the ability of two particles to have correlated  information, even at a distance) make quantum computers more powerful  than even today\u2019s most advanced classical supercomputers for solving  some complex problems. This ability to exist in combinations of both  states simultaneously allows for the efficient implementation of certain  algorithms, resulting in the ability to solve certain types of problems  significantly faster than classical computers.", "To date, a universal quantum computer is not commercially available.  As of 2017, quantum computers contain at most 50 qubits and can  perform some small calculations more slowly than classical computers.  Among the challenges to building a quantum computer are developing  software and hardware. Quantum hardware allows the computer to  manipulate qubits by completely isolating quantum processors from  outside forces. Quantum computing hardware is at the laboratory  prototype stage and is progressing steadily, according to a 2016 federal  report. Hardware development efforts include the creation of logical  qubits, which use error correction techniques to actively mitigate errors,  thus stabilizing the quantum state of the qubit even in the presence of  external factors (i.e., noise). Quantum information is extremely fragile and  requires special techniques and equipment, such as extreme  refrigeration, to maintain the qubit. Other challenges include creating  qubits of high quality, packaging them together in a scalable form so they  can perform complex calculations in a controllable way, and limiting the  errors that can result from heat and electromagnetic radiation. Addressing  these challenges may require developing new materials. Stakeholders  still consider developing a universal quantum computer a long-term goal.  When available, these computers could provide new computational  methods and powerful new tools for researchers. Quantum computing  has the potential to support significant breakthroughs in medicine,  manufacturing, artificial intelligence, defense, and improved  cybersecurity. However, it may take a decade or more before such  technology is ready to be demonstrated at scale."], "subsections": []}, {"section_title": "Synthetic Biology", "paragraphs": ["Synthetic biology represents an intersection of biology and engineering  that focuses on the modification or creation of novel biological systems.  The current state of synthetic biology is mostly the result of research in  biology, engineering, computer science, and information technology  dating back to the mid-1900s. Synthetic biology has drawn increasing  attention as a potentially transformative platform technology. Whether  found in nature or synthesized in a test tube, the building blocks of  synthetic biology are assembled to create biological systems. Synthetic  biological systems can function in cell-free environments, such as cell  extracts, or may be placed into living cells, such as bacteria, which serve  as a \u201cchassis.\u201d In the short-term, synthetic biology is enhancing  understanding of how living organisms work through progress in the  ability to design and construct biological parts.", "Synthetic biology is already being applied in a variety of fields. Through  the creation of novel biological systems, synthetic biology offers potential  solutions to many current challenges, such as climate change, energy  needs, and global health. For example, synthetic biology may help  address global warming through the development of artificial leaf  technology, a synthetic version of the photosynthesis process. In the  energy sector, synthetic biology is being used to devise more efficient  methods of producing biofuels, and in the healthcare sector, synthetic  biology may lead to biosensors that can permanently reside in the body to  detect and treat abnormalities such as cancer. Synthetic biology has  already resulted in biosensors that can detect arsenic in drinking water.  Factors that may support growth in synthetic biology applications include  a decline in the cost of deoxyribonucleic acid (DNA) sequencing and  increases in genetically engineered crop development, expenditures in  research and development by biotechnology and pharmaceutical  companies, and demand for synthetic genes. On the other hand, bio- safety and bio-security concerns about the potential that synthetic biology  could be used for nefarious purposes may restrict the short-term growth  of synthetic biology."], "subsections": []}]}, {"section_title": "Multiple Federal Agencies and Nonfederal Entities Support Quantum Computing and Synthetic Biology Research for Transformational Technological Advances", "paragraphs": ["Multiple federal agencies and nonfederal entities support quantum  computing and synthetic biology research that could lead to  transformational technological advances in many areas of the U.S.  economy, including energy, medicine, and national security. We  identified 6 agencies that in fiscal year 2016 through the second quarter  of fiscal year 2018 supported quantum computing research to advance  foundational understanding of quantum computing or to develop related  hardware and software. We found that 4 of the 6 agencies reported a  combined total of at least $23.4 million in obligations to support quantum  computing research in fiscal year 2017. Similarly, we identified 10  agencies that, during the timeframe we reviewed, supported synthetic  biology research to advance foundational understanding of synthetic  biology or knowledge of how to apply it in bioengineering, national  security, and biofuels development. We found that 6 of the 10 agencies  reported a combined total of at least $211.2 million in obligations to  support synthetic biology research in fiscal year 2017. We also identified  a variety of nonfederal entities, such as universities and private  companies, that conduct research in quantum computing and synthetic  biology."], "subsections": [{"section_title": "Six Agencies Support Research in Quantum Computing", "paragraphs": ["In fiscal year 2017, 6 agencies\u2014DOD, DOE, ODNI, NASA, Commerce\u2019s  NIST, and NSF\u2014supported quantum computing research, and 4 of these  6 agencies reported a combined total of at least $23.4 million in  obligations toward those efforts. Agency officials, stakeholders, and  experts we interviewed told us they expect quantum computers could  lead to transformational advances in national security technologies or in  technology areas that rely heavily on simulation, such as machine  learning for defense capabilities, pharmaceuticals, and materials science  for advanced manufacturing. However, there is still uncertainty  surrounding the specific applications of quantum computing. Agency  officials, stakeholders, and experts told us that they anticipate that  quantum computing applications may include large number factoring,  optimization of certain tasks, and simulation of other quantum systems.  Accordingly, agencies\u2019 quantum computing efforts included research to  advance foundational understanding of quantum information science as  well as research to develop the hardware and software needed to build a  universal quantum computer."], "subsections": [{"section_title": "Foundational Understanding of Quantum Information Science", "paragraphs": ["Joint Quantum Institute (JQI)  The JQI is a research partnership between  the National Institute of Standards and  Technology and the University of Maryland,  with the support and participation of the  Laboratory for Physical Sciences. JQI was  created in 2006 to pursue theoretical and  experimental studies of quantum physics in  the context of information science and  technology. Among other objectives, JQI  conducts fundamental research on the  engineering and control of systems based on  quantum mechanics, which describes the  behavior of matter and energy at the smallest  physical scales. One attribute of quantum  physics is that certain properties of a particle,  such as its momentum and position, are not  fixed; instead these properties follow  probability distributions that describe the  likelihood a property may be a particular  value. Researchers have also discovered that  the quantum states of two separate objects,  like two atoms, can be entangled such that  the state of one object is correlated with the  other. This entanglement makes it possible to  move quantum information from one place to  another. The phenomena that occur at the  quantum scale have the potential to affect  disparate economic sectors and could lead to  improvements in computing and materials  science, among others. For example,  researchers at JQI have devised a new chip  that generates and steers single photons,  which could allow researchers to  systematically assemble pathways for single  photons and enable new types of optical  devices.  An illustration of a photonic chip created by  JQI researchers. and Revolutionary Computing program, NSF supports theoretical and  experimental research on quantum-based computing paradigms,  information, transmission, and manipulation. Also, the NSF Physics  Division\u2019s Physics Frontiers Centers program supports university- based centers and institutes in enabling transformational advances  through interdisciplinary research across different areas of focus. One  of the Physics Frontier Centers that NSF supports is located at the  JQI; this center supports research that focuses on studying the  controlling and monitoring of quantum phenomena to support  quantum engineering. A second Physics Frontier Center is at JILA.  Both the JQI and JILA represent partnerships between the NSF and  NIST.", "DOE\u2019s Office of Science supports foundational quantum computing research as part of its Advanced Scientific Computing Research program, which focuses on discovering, developing, and deploying computational and networking capabilities to analyze, model, simulate, and predict complex phenomena important to DOE and the advancement of science. The program\u2019s efforts include partnering with other Office of Science program offices to support research aimed at understanding how future computing technologies, including those based on quantum information science, could impact DOE\u2019s  mission.", "NASA\u2019s Quantum Artificial Intelligence Laboratory\u2014a collaborative effort with Google and the Universities Space Research Association\u2014 supports foundational research to maximize utilization of emerging quantum hardware. This work involves analytical and experimental research on the mechanisms underlying quantum computing, including, for example, researching quantum entanglement and measurement-based quantum computation. NASA also supports university-based quantum computing research through programs such as the Established Program to Stimulate Competitive Research (EPSCoR)."], "subsections": []}, {"section_title": "Hardware Development", "paragraphs": ["Lincoln Laboratory\u2019s Quantum Computing  Laboratory  The Massachusetts Institute of Technology\u2019s  Lincoln Laboratory is a federally funded  research and development center sponsored  by the Department of Defense that researches  and develops a broad array of advanced  technologies to meet critical national security  needs. In the area of quantum information  science, researchers with Lincoln Laboratory\u2019s  Quantum Computing Laboratory are exploring  the fundamentally different ways that  information can be stored and manipulated  through quantum physics. Specifically, Lincoln  Laboratory researchers are working to  develop and scale up two systems that could  comprise the quantum bits, or \u201cqubits\u201d of a  quantum computer. In one method, called  Josephson junction-based superconducting  circuits, Lincoln Laboratory researchers are  using cryogenic dilution refrigerators and  microwave test and measurement equipment  to control and measure superconducting  qubits at extremely cold temperatures. In  another method, researchers are using  cryogenically cooled vacuum systems to  house micro-fabricated chips that trap  individual strontium and calcium ions, which  are manipulated using lasers and other  electromagnetic fields. For both methods,  researchers are working to scale up systems  of qubits to a size large enough to address  real computational problems.  Laser light manipulation of trapped ion qubits  at Lincoln Laboratory. broader portfolios of research across the department. For example, as part of DOD\u2019s Applied Research for the Advancement of Science and Technology Priorities program, the Office of the Secretary of Defense administers the Quantum Science and Engineering Program\u2014a cross-cutting effort that has supported research related to technologies for controlling qubit entanglement, among other things. Additionally, DOD supports a research program on Quantum System Sciences at Lincoln Laboratory, a federally funded research and development center operated by the Massachusetts Institute of Technology (MIT). This research encompasses, among other topics, development of quantum-based computation technologies.", "DOE\u2019s quantum science research efforts, such as those supported by the Office of Science\u2019s Advanced Scientific Computing Research program, includes quantum computing hardware and architecture. After DOE issued its 2015 report on quantum computing for science, the agency held a February 2017 workshop to obtain information from stakeholders on the opportunities and challenges in establishing a quantum testbed to advance quantum computing hardware.Subsequently, DOE issued solicitations in 2017 and 2018 for proposals to support developing quantum testbeds. According to an April 2018 announcement for one of these solicitations, a testbed laboratory will host experimental quantum computing platforms that are not yet ready for commercialization, and will function as a collaborative facility to provide internal and external researchers with access to novel, early-stage quantum computing resources.", "NIST\u2019s quantum science research efforts include projects within its Physical Measurement Laboratory that are looking at a spectrum of potential quantum computing hardware approaches, such as superconducting circuits or ion trap-based quantum computing, that could provide viable approaches for processing and manipulating quantum information. By working across multiple approaches, NIST has been able to apply different quantum hardware platforms to  address computing and metrology problems, including creating one of  the most advanced ion trap-based quantum computing platforms.  Furthermore, NIST is using its advanced microfabrication facilities to  develop a broad array of components that will enable the scaling of  different quantum computing hardware platforms.", "ODNI, through the Intelligence Advanced Research Projects Activity\u2019s (IARPA) Logical Qubits Program, is supporting research to overcome the limitations of current multi-qubit systems, whereby qubits are impacted by other qubits, environmental factors, and other forces, which can generate errors in quantum computing operations. IARPA\u2019s Logical Qubits Program is sponsoring research teams to build qubit structures with reduced susceptibility to these types of problems and has developed a quantum system with between 10 and 20 qubits.", "NSF supports research related to quantum computing hardware as part of a broader portfolio of research under its Computing and Communication Foundations Division, which supports research that explores the foundations of computing and communications devices and their usage, including advancing hardware designs for computers and computational sciences, among other focus areas. For example, under the division\u2019s Expeditions in Computing program, which provides financial assistance awards of up to $10 million over 5 years, NSF provided an award for the Enabling Practical-Scale Quantum Computation project in 2018. This project is a multi-institution, university-based effort to build a 100-qubit computer."], "subsections": []}, {"section_title": "Software Development", "paragraphs": ["Agency officials, stakeholders, and experts said one area in which a  quantum computer could offer potential benefits over a classical computer  is solving optimization problems. However, using a quantum computer for  this or other applications requires developing software to, for example,  translate algorithms into the steps to manipulate qubits to perform  computing operations. Among the six agencies that support quantum  computing research, examples of agencies\u2019 efforts to support research to  develop software necessary to operate a quantum computer include the  following:", "DOD\u2019s Air Force Research Laboratory issued a multi-year funding opportunity announcement for research on Quantum Computing Sciences with a focus on quantum computing algorithmic implementation and problem solving. Among other potential research topics, the Air Force is seeking research proposals to develop new algorithms to help solve optimization and machine learning problems.", "NASA\u2019s Advanced Supercomputing Division provides funding for the Quantum Artificial Intelligence Laboratory. Through this effort, NASA hosts a 2,031-qubit D-Wave 2000 quantum device. NASA researchers are using this system to explore the potential for quantum computers to tackle optimization problems that are difficult or impossible for traditional supercomputers to handle and to explore the software algorithms that would be needed to do so."], "subsections": []}]}, {"section_title": "Ten Agencies Support Research in Synthetic Biology", "paragraphs": ["In fiscal year 2017, 10 agencies\u2014DOD, DHS, DOE, EPA, HHS, ODNI,  NASA, NIST, NSF, and USDA\u2014supported synthetic biology research,  and 6 of these agencies reported a combined total of at least $211.2  million in obligations toward those efforts. According to one agency official  and experts, although synthetic biology has advanced significantly,  foundational understanding is still needed in some key areas, including  measurement and tool development. Accordingly, synthetic biology  research that federal agencies supported included research to advance  foundational understanding of the science, and the application of  synthetic biology in specific areas, such as bioengineering, genome  editing, national security, and biofuels and bioproduct development."], "subsections": [{"section_title": "Foundational Understanding of Synthetic Biology", "paragraphs": ["Genome in a Bottle  The Genome in a Bottle consortium is one of  several ongoing collaborations among the  National Institute of Standards and  Technology, Stanford University, and other  partners in the Joint Initiative for Metrology in  Biology. The initiative focuses on  measurements and standards supporting the  newest developments in genomics and  synthetic biology. The Genome in a Bottle  consortium focuses on genome sequencing,  which involves determining the chemical  building blocks of deoxyribonucleic acid  (DNA) or ribonucleic acid (RNA) and can give  insights into the genes carried by an individual  and how and when they are activated. Since  the completion of the Human Genome Project  in 2003 that first sequenced the whole  genome of a human, scientists have worked  to make whole human genome sequencing  faster and less expensive. The consortium  aims to develop the tools needed to ensure  the accuracy of human genome sequencing.  These tools include reference materials,  standards, and data to enable the translation  of whole human genome sequencing to  clinical practice.  Illustration of a chromosome inside a bottle.", "NIST supports foundational synthetic biology research by developing measurement solutions, serving as a neutral ground for the discussion of underpinning measurements and other manufacturing needs, and leading and contributing to the development of standards. NIST measurement infrastructure includes the development of enabling tools, methods, and protocols; bioinformatics and modeling tools; and documentary standards and reference materials. NIST also leads several consortia to work with measurement stakeholders and partners to accelerate breakthroughs in genomics and synthetic biology. These include NIST\u2019s Genome in a Bottle consortium and the Joint Initiative for Metrology in Biology.", "DOE supports foundational research related to synthetic biology as part of a broader portfolio of research under the Biological and Environmental Research (BER) Genomic Science program, which seeks to understand how genomic information is translated to functional capabilities, enabling more confident redesign of microbes and plants for sustainable biofuel production, improved carbon storage, or contaminant bioremediation. Within BER, DOE funds the Joint Genome Institute to produce high-throughput sequencing, a fast method of determining the order of bases of genetic material, synthesis and analysis in support of BER\u2019s bioenergy and environmental missions. Research enabled through this user facility includes developing renewable and sustainable sources of biofuels from plant biomass and exploring the biological processes controlling greenhouse gas accumulation in the atmosphere.", "Within HHS, multiple NIH institutes and centers support foundational research involving synthetic biology techniques, including NIH Common Fund support for research to understand and combat antibiotic resistance and National Cancer Institute support for research into new cancer immunotherapy methods. Additionally, the National Institute of Biomedical Imaging and Bioengineering has provided grants to researchers studying or using a multitude of synthetic biology techniques for applications, such as improving stem cell quality for biomedicine.", "NSF funds an estimated $60 million a year in foundational synthetic biology research across several directorates. For example, in 2013, NSF awarded a 5-year, $10 million Expeditions in Computing grant for a multi-university effort led by the California Institute of Technology to  enable theoretical investigations in several synthetic biology-related  topic areas. In 2016, NSF awarded a second 5-year, $10 million  Expeditions in Computing grant for a multi-university effort led by  Boston University to support synthetic biology research."], "subsections": []}, {"section_title": "Bioengineering", "paragraphs": ["Gene Editing  The National Institutes of Health (NIH)  describes gene editing as a group of  technologies that give scientists the ability to  add, remove, or alter genetic material at  particular locations in the genome. One such  technology is known as CRISPR-Cas9, which  is short for clustered regularly interspaced  short palindromic repeats and CRISPR- associated protein 9. According to NIH, the  CRISPR-Cas9 system has generated  excitement in the scientific community  because it is faster, cheaper, more accurate,  and more efficient than other existing gene  editing methods. The system was adapted  from a naturally occurring gene editing system  that helps bacteria defend themselves against  viruses by targeting the deoxyribonucleic acid  (DNA) of the virus. In the lab, CRISPR-Cas9  allows researchers to cut out a specific  sequence of DNA from cells. Once  researchers cut out the targeted DNA  sequence, they can use other techniques to  add or delete genetic material. These genetic  changes can cause the edited cells to express  new physical traits, such as eye color, or  change their disease risk. Gene editing is  being applied to research on many diseases;  however, according to NIH, there are still  significant technical barriers to using gene  editing therapies to treat human diseases.  Further, the use of gene editing raises a  number of ethical concerns.  An illustration of a chromosome unravelling to  show the DNA that makes up individual  genes.", "Development programs are developing on-demand nutrients from  microbes engineered to produce targeted nutrients for human  consumption as well as examining how to manipulate certain types of  bacteria to produce lightweight construction tools and materials.", "EPA employs synthetic biology approaches through its Chemical Safety for Sustainability Research Program, which seeks to develop new prediction techniques, pioneer the use of innovative technologies for chemical toxicity testing, and design tools to advance the management of chemical risks. For example, researchers are developing virtual tissues by building complex computer models for biological development. According to an EPA publication, the models will help reduce dependence on animal study data and provide faster chemical risk assessments.", "NSF\u2019s Science and Technology Center Program\u2019s Center for Cellular Construction seeks to develop tools to predict, design, and test the impact on cellular function of changes to cells\u2019 internal organization. The center will also develop living \u201cbioreactors\u201d that will generate products of commercial value. NSF has funded research into bacterial immunity, which led to the development of clustered regularly interspaced short palindromic repeats (CRISPR)-Cas9\u2014a technology that allows researchers to precisely edit genes.", "Several NIH institutes and centers support research related to bioengineering. For example, NIH\u2019s Synthetic Biology for Engineering Applications Funding Opportunity Announcement solicits applications to support research to advance the understanding and application of synthetic biology for human health. In addition, NIH institutes and centers have supported research across various areas, including engineering synthetic receptor systems and genetic controller circuits, engineering microbes as therapeutic platforms, and developing enabling technologies for human-machine hybrid tissues."], "subsections": []}, {"section_title": "National Security", "paragraphs": ["Application of synthetic biology may support U.S. national security efforts  by aiding with monitoring for biological or conventional threats, and  strengthening the resilience of soldiers in combat. Among the 10  agencies that support synthetic biology research, officials from DOD,  ODNI, and DHS said their agencies support synthetic biology research  with potential national security applications. Examples of federal efforts in  this area include the following:", "DOD\u2019s Office of Naval Research funds research to extend the natural capabilities of living organisms such as microbes and plants to create systems that will provide new naval capabilities, according to the office\u2019s website. Office of Naval Research officials told us the office is funding ongoing research related to engineering gut microbes in order to enhance the resilience of service members to deployment stressors, among other things. In addition, DARPA\u2019s Safe Genes Project supports force protection and military health and readiness by protecting service members from accidental or intentional misuse of genome-editing technologies. For example, researchers are developing the genetic circuitry and genome-editing machinery for robust, spatial, temporal, and reversible control of genome-editing activity in living systems.", "ODNI supports synthetic biology research through efforts including IARPA\u2019s Functional Genomic and Computational Assessment of Threats program, which supports research to protect against critical threats related to pathogens and other biological threats. Researchers aim to develop better approaches and tools for characterization and analysis of biological threats based on gene function.", "DHS\u2019s Biological Threat Characterization program and its Biodefense Knowledge Center program support synthetic biology research to understand the risks associated with the technologies useful for synthetic biology and the harmful pathogens that may be created by those who wish to do harm."], "subsections": []}, {"section_title": "Biofuels and Bioproducts", "paragraphs": ["Synthetic biology is being used to develop cost-effective methods for  producing biofuels and bioproducts according to agency officials, experts,  and DOE\u2019s website. Among the 10 agencies that support synthetic  biology research, officials from DOE and USDA said their agencies  support synthetic biology research related to biofuels development  applications. Examples of federal efforts in this area include the following:", "DOE officials told us that the Office of Energy Efficiency and Renewable Energy\u2019s Bioenergy Technologies Office manages the Conversion Program and the Advanced Algal Systems Program, both of which employ synthetic biology techniques to accomplish office goals. Within the Conversion Program, DOE funds the Agile BioFoundry to help develop and transition synthetic biology tools from the laboratory to the biofuels and bioproducts industry. The program accomplishes this through targeted research and development partnerships with industry and academia, as well as by developing integrated synthetic biology tools designed to speed up biomanufacturing. In addition, the office funds the Advanced Algal Systems Program, which supports early-stage applied research to apply synthetic biology approaches to alternative fuels that use algae as their source, among other things. According to a DOE website, this industry has the capability of producing billions of gallons per year of renewable diesel, gasoline, and jet fuel.", "USDA, through the Agricultural Research Service, led a collaborative project between federal, industry, and academic researchers to produce a commercial rubber-based tire using the guayule plant, a small shrub native to the United States that has been considered a possible alternative source of natural rubber."], "subsections": []}]}, {"section_title": "Nonfederal Entities Support Research in Quantum Computing", "paragraphs": ["Nonfederal research to advance quantum computing includes efforts to  address existing hardware and software challenges. We identified a  variety of nonfederal entities, such as universities and private companies,  that have ongoing efforts aimed at building a quantum computer.  Stakeholders we spoke to told us that private companies have been  increasing their research in quantum computing."], "subsections": [{"section_title": "Hardware Development", "paragraphs": ["Academic and industry stakeholders we interviewed described various  efforts to develop the hardware needed for a quantum computer.  Examples of ongoing efforts include the following:", "Academic researchers at Purdue University partner with Microsoft at Station Q-Purdue to perform a variety of experiments and activities related to building a semiconductor-based quantum computer, including testing different hardware designs.", "Academic researchers from Yale\u2019s Quantum Institute are working to develop scalable superconducting devices.", "Researchers at IonQ are working to develop general-purpose quantum information processors using a trapped-ion approach to create a quantum computer that is scalable and that could support a broad array of applications across a variety of industries.", "A Google official told us that the company has been working for several years to build a quantum computer through the Quantum Artificial Intelligence Lab. In a March 2018 press release, Google announced its newest 72-qubit quantum computer, called Bristlecone."], "subsections": []}, {"section_title": "Software Development", "paragraphs": ["Academic and industry stakeholders we interviewed described ongoing  efforts related to software development. Examples of ongoing efforts  include the following:", "An official from Microsoft said the company is working to develop quantum algorithms and software to run on a quantum computer for a given set of problems. Researchers are also currently developing an operating system and various applications that could be run on a quantum device.", "An IBM official told us that, in 2016, the company launched the Quantum Experience, a quantum computing system with five superconducting qubits on the cloud, encouraging students and researchers worldwide to explore quantum computing. Over the past two years, the system\u2019s software has been expanded and upgraded for greater functionality and exploration of quantum algorithms to allow researchers around the world to use the system to write more than 80 research publications. MIT and many other universities now  use the Quantum Experience in their curricula."], "subsections": []}]}, {"section_title": "Nonfederal Entities Support Research in Synthetic Biology", "paragraphs": ["We identified a variety of nonfederal entities, such as universities and  private companies, that conduct research in synthetic biology to advance  foundational understanding and develop new products."], "subsections": [{"section_title": "Foundational Understanding of Synthetic Biology", "paragraphs": ["The iGEM Foundation  The International Genetically Engineered  Machine (iGEM) Foundation is an  independent, non-profit organization  dedicated to the advancement of synthetic  biology, education and competition, and the  development of an open community and  collaboration. The foundation does these by  fostering an open, cooperative community and  friendly competition. The main iGEM program  is the iGEM competition, which began in  January 2003 as an independent study  course at the Massachusetts Institute of  Technology in which students developed  biological devices to manipulate cells. This  course became a summer competition with 5  teams in 2004, grew to 13 teams in 2005, and  had expanded to 310 teams by 2017,  reaching more than 40 countries. The  competition was originally aimed at college  students but has expanded to include high  school students and others. The iGEM  competition gives students the opportunity to  push the boundaries of synthetic biology by  tackling everyday issues facing the world.  Multidisciplinary teams made up of primarily  university students work together to design,  build, test, and measure a system of their own  design using interchangeable biological parts  and standard molecular biology techniques.  Every year nearly 6,000 people dedicate their  summer to iGEM and then come together in  the fall to present their work and compete at  the annual Jamboree.  A picture of the iGEM logo.", "The International Genetically Engineered Machine (iGEM) Foundation hosts an annual worldwide synthetic biology competition in Boston, the iGEM Giant Jamboree. The competition attracts teams from around the world (primarily university students) to use standardized genetic parts to address real-world problems in fields including health, medicine, manufacturing, and bioenergy.", "At MIT\u2019s Synthetic Biology Center, researchers work with federal and industry partners to advance understanding of synthetic biology for genetic programming, DNA synthesis, and genome design. Researchers at the Synthetic Biology Center seek to create a programming language for living cells that is similar to languages used to program computers and robots."], "subsections": []}, {"section_title": "Development of New Products and Technologies", "paragraphs": ["DNA Storage  To facilitate storing an ever-increasing amount  of digital data, researchers from Microsoft, in  collaboration with the University of  Washington, are studying the use of synthetic  deoxyribonucleic acid (DNA) as a means of  storing data. According to a Microsoft  researcher, this technology uses a process by  which custom sequences of synthetic DNA  are produced or manufactured to store  information. The researcher described three  main advantages of storing data in DNA as  compared to the current means of storing  data, generally magnetic and optical media:  Density. DNA may allow for the storage of up  to 1 exabyte (one quintillion bytes) of data  per cubic millimeter. In comparison,  according to Microsoft, storing similarly  large volumes of data in optical discs  would occupy significant physical space.", "IBM researchers are developing biosensors that may be used for the early detection of cancer. They are also working on understanding and analyzing cardiac, neurological, and mental health conditions.", "Researchers from Microsoft said the company is conducting research related to data storage using synthetic DNA as the information preservation medium. This storage technology uses a process by which custom sequences of synthetic DNA are manufactured to store information.", "Ginkgo Bioworks officials said the company is focused on trying to de- risk supply chains and improve supply chain management through  synthetic biology approaches. To that end, the company designs  custom enzymes for a variety of customers including companies in a  wide range of industries such as food and fragrance companies. relevant storage mechanism, unlike other  means of storing digital data (e.g., floppy  discs), which becomes outdated as  technology advances.", "The Energy Biosciences Institute is a partnership among the  University of California, DOE\u2019s Lawrence Berkeley National Lab, and  the University of Illinois. Researchers at the Energy Biosciences  Institute carry out research in the areas of biofuels, carbon  sequestration, and sustainable chemicals productions, among other  things."], "subsections": []}]}]}, {"section_title": "Agencies Coordinate Research through a Range of Efforts, but Interagency Groups Have Not Fully Implemented Selected Leading Practices", "paragraphs": ["Agency officials we interviewed said they coordinate on quantum  computing and synthetic biology research through a range of efforts, but  we found that certain efforts are new and that agencies have not fully  implemented selected leading practices for collaboration in these efforts.  Agency officials told us they use means of coordination ranging from  attending ad hoc meetings, such as conferences or workshops, to  participating in ongoing interagency groups, such as interagency groups  on quantum information science (QIS) and synthetic biology. However,  we found that new interagency groups on QIS and synthetic biology have  not fully implemented leading practices that can enhance and sustain  collaborative efforts."], "subsections": [{"section_title": "Agencies Coordinate on Quantum Computing and Synthetic Biology Research Using Efforts That Range from Ad Hoc Meetings to Ongoing Interagency Groups", "paragraphs": ["Agency officials said that they coordinate on quantum computing and  synthetic biology research by attending ad hoc meetings, as well as  through ongoing efforts such as participating in interagency working  groups. The means of coordinating that officials most frequently cited  were participating in working groups or attending a conference or  workshop. Meetings such as these bring together representatives of  different agencies or departments to discuss common problems,  exchange information, or develop agreements on issues of mutual  interest, as we have reported in the past. Specifically:", "Officials from 4 of the 6 agencies that support quantum computing research said they attended a conference or workshop related to quantum computing at some point from October 2015 through March 2018. For example, NASA and DOE officials participated in a 2017 NASA workshop that brought together experts from NASA research centers, DOE national laboratories, academia, and industry to discuss quantum information science and computation.", "Officials from all 10 agencies that support synthetic biology research cited attendance at a conference, and officials from 7 of these 10 cited workshops as a way in which they coordinated on synthetic biology research from October 2015 through March 2018. For example, officials from DOD, DOE, NIST, and national laboratories attended a 4-day conference in June 2017 to discuss synthetic biology applications in genetic engineering.", "Officials from 7 of the 10 agencies that support synthetic biology research also said they coordinated research with other selected agencies through communities of practice or consortia that meet on an ad hoc basis. For example, NASA officials said they support synthetic biology work through the Space Technology Research Institute in Biomanufacturing, a University of California Berkeley-led consortium of universities.", "Officials we interviewed also said they coordinate with one another  through ongoing efforts, such as interagency groups. For example, on  June 21, 2018, NSTC established the Subcommittee on Quantum  Information Science (QIS Subcommittee) to coordinate quantum  computing research. According to its June 2018 charter, the QIS  Subcommittee\u2019s purpose is to establish and maintain a national agenda in  quantum information science and technology, expand U.S. economic and  national security, and coordinate federal quantum information science  and technology policy and programs. The functions of the QIS  Subcommittee include to  issue and update plan(s) that coordinate(s) federal policy to expand U.S. leadership in quantum information science and technology; enable stakeholders to invest effectively in quantum information science and technology and post-quantum application spaces through data gathering, analysis, consultation, planning, convening, and reporting; and provide a forum for research and development coordination and collaboration, including sharing expertise and best practices for program management and conducting joint workshops and program reviews.", "The QIS Subcommittee is led by co-chairs from NIST, DOE, NSF, and  OSTP and includes 9 additional agencies. The QIS Subcommittee met  for the first time as an official chartered group on June 28, 2018. The  OSTP official serving as a co-chair for the QIS Subcommittee said that  the group\u2019s first priority will likely be to develop a national approach to  QIS research and development.", "Officials from 5 of the 6 agencies that support quantum computing  research said that prior to the formation of the QIS Subcommittee, they  coordinated through the NSTC Interagency Working Group on Quantum  Information Science (QIS working group), which was formed in 2014. In  July 2016, the QIS working group produced a report, which the agency  officials serving as the group\u2019s co-chairs told us included its strategic plan  for federal QIS research. The July 2016 report identified QIS as a  priority for federal coordination and investment as a component of U.S.  scientific leadership, national security, and economic competitiveness.  The QIS Subcommittee co-chair from OSTP said that the shift from a  working group to a subcommittee is a significant elevation that  communicates the importance of QIS to the administration.", "Agencies also coordinated synthetic biology research through interagency  working groups. Officials from NSF and USDA told us that, in December  2017, they formed a new synthetic biology working group that had 7  member agencies as of February 2018. These officials said that the  participating agencies saw a need for continued communication and  information sharing, and the officials said the group\u2019s efforts will increase  coordination. Prior to the formation of this new group, 7 of the 10  agencies that support synthetic biology research participated in an NSTC  Synthetic Biology Working Group that NSF officials said existed from  2012 to 2013 and was co-chaired by DOD and DOE, according to a  2013 DOE report to Congress that the group produced. According to  some officials, the working group ended after it produced this report,  which described synthetic biology research and development needs at  the time and identified which federal agencies were planning synthetic  biology research. The report also discussed the need for communication  and coordination among federal agencies that support basic and applied  synthetic biology research to build synergies, consider new research and  development needs, and evaluate issues as they emerge. According to a  senior NSF official we interviewed who was helping lead efforts to  establish the new group, one of its first undertakings will be to update the  2013 report to provide a roadmap for agencies\u2019 synthetic biology  research. However, the official also stated that the participating agencies  were still considering the new group\u2019s activities."], "subsections": []}, {"section_title": "Agencies Are Coordinating on Quantum Computing and Synthetic Biology through New Interagency Groups, But Have Not Fully Implemented Leading Collaboration Practices", "paragraphs": ["By recently establishing the QIS Subcommittee and a synthetic biology  working group, NSTC and federal agencies, respectively, took steps to  further coordination on quantum computing and synthetic biology  research. However, the new subcommittee and working group have not  fully implemented leading practices for collaboration.", "We have reported that effective collaboration can help reduce or better  manage fragmentation, overlap, and duplication of federal programs. As  described above, a number of federal agencies support research related  to quantum computing and synthetic biology. In our April 2015 guide to  evaluating and managing fragmentation, overlap, and duplication, we  define fragmentation as those circumstances in which more than one  federal agency, or organization within an agency, is involved in the same  broad area of national need, and opportunities exist to improve service  delivery. This definition applies concerning federal agencies\u2019 quantum  computing and synthetic biology research, with more than one agency  involved in the same broad area of national need. However, as shown in  our description above of the agencies\u2019 support for research in these two  areas, agencies\u2019 activities sometimes differ in meaningful ways or  leverage the efforts of other agencies.", "We examined agencies\u2019 efforts to coordinate through interagency groups  by selecting six leading practices that we have previously identified can  enhance and sustain interagency collaboration:", "Define and articulate a common outcome. Effective collaboration requires agencies to define and articulate common outcomes or purposes they are seeking to achieve that are consistent with their  respective agencies\u2019 goals and missions.", "Establish mutually reinforcing or joint strategies. Having mutually reinforcing or joint strategies enables agencies to align activities, core processes, and resources to achieve a common outcome.", "Identify and address needs by leveraging resources. Agencies can sustain their collaborative efforts by identifying the human, information technology, physical, and financial resources necessary to achieve identified outcomes.", "Agree on roles and responsibilities. By defining and agreeing on roles and responsibilities, including leadership, collaborating agencies can better clarify who will do what, organize their joint and individual efforts, and facilitate decision making.", "Establish compatible policies, procedures, and other means to operate across agency boundaries. Agencies can facilitate collaboration by addressing the compatibility of standards, policies, procedures, and data systems that will be used in the collaborative effort.", "Develop mechanisms to monitor, evaluate, and report on results.", "Creating the means to monitor and evaluate collaborative efforts enables agencies to identify areas for improvement.", "We identified limitations in agencies\u2019 past efforts to coordinate quantum  computing and synthetic biology research. In the area of quantum  computing, the QIS working group\u2014which preceded the subcommittee\u2014 took steps to implement selected leading practices for collaboration, but  the group did not fully implement these practices. For example, the QIS  working group\u2019s July 2016 report broadly identified quantum computing  research needs but did not identify common outcomes for agencies\u2019  collaborative efforts to advance QIS, including quantum computing. The  three senior officials who served as co-chairs of the QIS working group  said they were not aware of any federal goals or outcomes for quantum  computing research, and DOE officials said that clarifying common goals  could help interagency collaboration on quantum computing research.  Officials from some agencies cited challenges with collaborating on joint  quantum computing projects\u2014for instance, because of variations among  agencies on time frames for providing financial assistance.", "OSTP officials described the establishment of the QIS Subcommittee as  an effort to further previous coordination conducted through the QIS  working group. While the QIS Subcommittee has taken initial steps to  implement certain leading practices for collaboration, it has not fully  implemented the relevant leading collaboration practices we identified.  For example, by developing a charter that identifies its high-level purpose  and functions and that identifies co-chairs for the group, the QIS  Subcommittee has taken initial steps to identify some agencies\u2019 roles and  to establish means for operating across agency boundaries. Moreover, by  having a charter signed by senior officials, the QIS Subcommittee has  taken steps to document agencies\u2019 agreement to collaborate, which is a  key feature of collaborative mechanisms we have identified in our prior  work. However, the working group has not defined roles and  responsibilities for agencies other than the co-chairs. OSTP officials said  that efforts to date have focused on ensuring that all relevant agencies  are included in the QIS Subcommittee; the officials also said that  agencies\u2019 roles and responsibilities for contributing to the subcommittee  will evolve. Table 1 provides additional information on the extent to  which the QIS Subcommittee has implemented leading practices for  collaboration.", "With regard to interagency coordination on synthetic biology research,  NSF and USDA officials noted that the new synthetic biology working  group hoped to, through continued communication and information  sharing, address limitations in agencies\u2019 coordination that existed prior to  its formation. Officials from NSF said the group was needed for  communication, information sharing and to leverage resources and DOD  officials agreed that the working group was needed. Additionally, one  DOD official and one expert said that limited interagency coordination had  resulted in lost opportunities to further develop the area of synthetic  biology. They also noted that having a national strategy for synthetic  biology would be beneficial. Other officials noted that, as in the area of  quantum computing, differences in funding timeframes across agencies  hinder their ability to coordinate their synthetic biology research. Some of  these officials also said such differences make it difficult to develop an  integrative roadmap for their research.", "Like the QIS Subcommittee, the new synthetic biology working group has  taken initial steps to implement some leading practices for interagency  collaboration but has not fully implemented the relevant leading  collaboration practices we have identified. For example, the group has  taken initial steps to identify member agencies\u2019 roles by having NSF serve  as the lead agency for the first 2 years. However, the group has not  identified other member agencies\u2019 roles and responsibilities. An NSF  official said the new working group had also considered developing a  document, such as a charter, to guide its efforts but, as of June 2018, it  had not yet decided whether to do so. Table 2 provides additional  information on the extent to which the Synthetic Biology Working Group  has implemented leading practices for collaboration.", "As we previously reported, interagency collaborative mechanisms can  take many different forms, such as working groups or subcommittees,  and the leading practices we identified that help enhance and sustain  interagency collaboration can be adapted to help address the specific  challenges agencies face. For example, incorporating the leading  practices into agencies\u2019 collaborative efforts can help address issues  associated with potential fragmentation, overlap, and duplication in  instances where multiple agencies have activities in a similar area. The  QIS Subcommittee and the synthetic biology working group are  mechanisms through which agencies can address limitations in past  interagency coordination on quantum computing and synthetic biology.  However, as of July 2018, the subcommittee and working group were still  new and have had limited time to fully implement the leading practices we  have identified. As the subcommittee and the working group move  forward, by taking steps to fully implement these leading practices,  member agencies could better marshal their collective efforts to support  research in the areas of quantum computing and synthetic biology and  help maintain U.S. competitiveness through transformational  technological advances."], "subsections": []}]}, {"section_title": "Experts Identified Key Considerations for Maintaining U.S. Competitiveness through Transformational Technological Advances", "paragraphs": ["Experts who participated in the meeting we convened with the assistance  of the National Academies identified four key considerations for  maintaining U.S. competitiveness through transformational technological  advances. These considerations extend beyond quantum computing and  synthetic biology, and more broadly address the role of federal and  nonfederal entities in supporting research for such advances. The key  considerations experts identified were (1) developing a strategic approach  for transformational technology, (2) fostering information sharing, (3)  focusing on technology development and commercialization, and (4)  strengthening the science and technology workforce."], "subsections": [{"section_title": "Developing a Strategic Approach for Transformational Technology", "paragraphs": ["Experts emphasized the importance of developing a strategic approach  for advancing potentially transformational technologies for maintaining  U.S. competitiveness. has a technological focus, such as additive manufacturing,  advanced flexible electronics, or regenerative medicine, and  includes members such as companies, nonprofit organizations,  academic institutions, and federal agencies.", "Semiconductor Manufacturing Technology consortium (SEMATECH). Experts described SEMATECH, a nonprofit consortium that supported research and development on advanced semiconductor manufacturing, as a successful, industry-led, public-private collaboration that helped government and industry stakeholders take a strategic approach to challenges facing the U.S. semiconductor industry in the late 1980s.However, Commerce\u2019s NIST officials noted that after federal support ended, SEMATECH began accepting memberships from companies from competitor countries, which led to a transfer of technology through the consortium\u2019s work outside the United States. are industry-led and industry provides at least half of the annual funding because industry can best design a research program to meet its needs; develop a comprehensive industry assessment and prepare an operating plan that identifies realistic objectives and milestones as a basis for receiving federal funds; include active participation by member companies\u2019 senior executives in establishing research priorities and overseeing technological progress; have a program to improve long-term working relationships between manufacturers and key suppliers, unless inappropriate for the industry\u2019s structure; emphasize research projects that improve an industry\u2019s overall efficiency and that have industrywide applications; consider ways to provide access for smaller industry members that might not have the resources to participate; and establish criteria for determining how or when government should end its funding.", "Grand challenges, strategies, and roadmaps. Experts described the importance of grand challenges, strategies, and roadmaps in supporting a strategic approach to developing transformational technologies. In particular, experts described how these mechanisms help stakeholders coalesce around technology goals and organize efforts toward reaching them. Examples experts noted included the following:", "Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative. Experts described the BRAIN Initiative, which was launched in 2013 to build neuroscience measurement tools, as a key example of a grand challenge. The BRAIN Initiative\u2014led by HHS (specifically NIH), NSF, and DARPA, with the participation of other federal agencies as well as foundations, universities, and industry\u2014seeks to deepen understanding of the human mind and to improve how brain disorders are treated, prevented, and cured.", "National Nanotechnology Initiative. Experts described the National Nanotechnology Initiative as a key example of a federal government strategic effort. The National Nanotechnology Initiative began in 2000 and is an interagency effort to bring together the nanotechnology-related activities of 28 federal agencies in an effort to enhance understanding and control of nanoscale material. The National Nanotechnology Initiative maintains a strategic plan describing the initiative\u2019s vision and goals and the strategies to achieve these goals. In discussing this initiative, experts described how it could enable federal agencies  to share information on their research and ensure that key  research areas are advanced in pursuit of a long-term national  nanotechnology strategy.", "Grand challenges may be articulated through strategy documents  and, according to experts, involve getting stakeholders to think about  potentially transformational technologies in a future-oriented way.  Roadmaps, according to experts, represent detailed plans to guide  progress toward a technology goal. Federal agencies, industry, or  others may lead roadmapping efforts, according to experts.  Additionally, one expert stated that roadmaps can help accelerate  technology development. Another expert noted that for some fields,  such as quantum computing and synthetic biology, a technology  development strategy is needed in addition to a research and  development strategy because the former outlines how a technology  would move forward beyond the research and development phase.", "Across both of these aspects of a strategic approach, experts  emphasized the importance of a sustained commitment of resources to  support technology development. One expert also emphasized the  importance of setting tough performance objectives without specifying  how innovators will solve a problem. Experts acknowledged that  developing shared national strategies is challenging in the United States,  in part because of the decentralized nature of research support across  multiple federal agencies. However, experts also cited as strengths of  the federal research system the ability of federal agencies to support  multiple approaches to developing transformational technologies in  accordance with their missions and the ability to evolve and try new  approaches.", "Experts identified several indicators of when developing a strategic  approach might be important to support U.S. competitiveness through  transformational technological advances in a particular area. Specifically:", "Convergence of advances across different technology areas.", "Experts described how transformational technologies often occur as a result of different technologies that have advanced incrementally over time. One expert noted the development of the Global Positioning System as an example of a technology that required the convergence of advances in computing power, satellite technology, geospatial imaging, and timekeeping. Because of the strength and role of the federal government in convening and fostering engagement among non-traditional collaborators on interdisciplinary issues, experts identified technology convergence as a potential indicator of the need to take a strategic approach.", "Progress from discovery to real-world application. Experts described how progress from discovery in an area of science to the appearance of niche applications for a technology can be an indicator of the need to take a strategic approach. According to one expert, one challenge in technology development is how to push the technology forward as quickly as possible to develop it into something useful. Experts explained that by taking a strategic approach that extends beyond early-stage research, the federal government can support the development of potentially transformational technologies.", "Existence of barriers to technology development. Experts identified several barriers to the development of transformational technologies that could indicate the need to take a strategic approach to developing a technology. Examples of barriers experts identified included high capital costs for research, prototyping, demonstration, or other aspects of a technology development life cycle; regulatory barriers; lack of consensus on standards; and technology measurement challenges, such as limitations in the availability of tools with which to measure products or processes. Experts described multiple ways in which the federal government can play an important  role in addressing such barriers through helping efforts to de-risk  technologies, establishing or revising regulations, supporting  standards development, and developing measurement tools.", "Increasing involvement across multiple stakeholders or competitors. Experts described aspects of how increasing involvement across multiple stakeholders in a particular technology area can indicate the need to take a strategic approach to developing a transformational technology. For example, when multiple federal agencies are working in a technology area or industrial participants increase involvement in a particular technology, experts said such involvement could signal that a strategic approach is needed to work across boundaries and engage the research community in a coordinated way. Similarly, according to one expert, increasing international competition in a technology area could serve as an indicator of the need for the federal government to exercise leadership through a strategic approach to organize domestic public and private efforts in order for the United States to remain competitive.", "Need for sustained, long-term investment in areas of national interest. Experts identified the need for sustained, long-term investment in areas of national interest as a potential indicator of the need for a strategic approach to transformational technologies. Experts described how the short-term cycles of many federal programs and disincentives for the private sector to sustain long-term investments can present challenges to developing transformational technologies, which one expert noted can take years or even decades to develop. Experts also cited a need for a strategic approach to advancing a technology when it has the potential to be transformational and presents enormous societal benefits.", "In the areas of quantum computing and synthetic biology, experts cited a  need to develop a strategic approach to maintain U.S. competitiveness.  Within the area of quantum computing, experts cited all of the indicators  identified above in stating that U.S. competiveness in quantum computing  could benefit from a national strategy. For example, experts described the  need to foster interdisciplinary engagement across the fields of physics,  engineering, and computer science to support convergence of advances  in these areas to further quantum computing technology. Experts also  indicated that real-world applications are beginning to become apparent  in the area of quantum computing. However, they noted that significant  barriers to development exist and discussed a need for sustained long- term investment in this area, which has significant implications for  national security, and according to one expert, economic  competitiveness. Moreover, experts expressed concern over the  significant and increasing international competition from China, the  European Union, and other countries. One expert noted that given the  security implications of quantum computing technology, the United States  needs to find a way to counter the significant investment that China is  making. Stakeholders and one agency official we interviewed cited similar  concerns, such as the European Union\u2019s plans to launch a flagship  initiative on quantum technology, which includes quantum computing;  therefore, the United States needs a national quantum computing  strategy, the experts said.", "Similarly, with regard to synthetic biology, experts cited several of the  indicators described above in stating that the United States could benefit  from a strategic approach to maintain competitiveness. For example,  experts discussed barriers to technology development, including a lack of  measurement tools and regulatory barriers. According to one expert,  before the 2017 update to the Coordinated Framework for the Regulation  of Biotechnology, the system was last updated in 1992. The expert said  that it was not yet clear if the updated framework would help advance  synthetic biology research. Experts also noted the need to engage across  multiple stakeholders in this area; in particular, one expert noted the need  for leadership to advance a dialogue about how synthetic biology could  help address issues of national concern. Experts described significant  foreign competition in synthetic biology. One expert said that there are  more than 40 countries that have a unified strategy for synthetic  biology. While one expert stated that NSF has initiated a synthetic  biology roadmapping effort, a few experts stated that the United States  does not have a similar unified synthetic biology strategy. One expert  said that in the absence of such a strategy, the United States faces  economic and physical security risks. Stakeholders we interviewed raised  similar concerns."], "subsections": []}, {"section_title": "Fostering Information Sharing", "paragraphs": ["Experts also suggested considering how to foster information sharing to  help maintain U.S. competitiveness through transformational  technological advances. Experts discussed the role the federal  government can play in bringing together stakeholders to discuss  emerging technologies and collaborate on pre-competitive research. For  example, according to one expert, in 2015, 2 years after the BRAIN  initiative was launched, the White House convened a meeting that  brought together industry partners, academic researchers, and  government scientists to share information and discuss research plans.  This expert highlighted the importance of communication among  representatives of organizations that would not normally work together,  and how these conversations about where they saw research going over  the next 5 years led to greater understanding and collaboration to support  the research under this initiative.", "Experts identified three key reasons for sharing information to facilitate  transformational technological advances in supporting U.S.  competitiveness:", "Convergence of different disciplines. Experts generally agreed that information sharing can facilitate an interdisciplinary approach to study a problem, which they said is important to the nation\u2019s ability to conduct research for transformational technological advances. The federal government\u2019s ability to convene groups, according to one expert, is particularly important for interdisciplinary areas of study because it can help bring stakeholders together to discuss how research could help address an area of national need. Another expert explained that agencies\u2019 research is increasingly interdisciplinary, which increases the importance of coordinating across agencies.Agency officials and stakeholders we interviewed also discussed the importance of sharing information across fields of study. One stakeholder said that without government funding for interdisciplinary efforts in quantum computing, it will be challenging to solve problems, such as creating some of the computer programming needed to operate a quantum computer, that need to be solved in order to make quantum computing viable.", "Overcoming barriers to innovation. Experts discussed how information sharing can facilitate the identification of barriers to innovation and help overcome them. For example, one expert noted the importance of information sharing in trying to address the challenges the U.S. semiconductor industry faced in the 1980s. The expert emphasized the recognition that individual companies could not address the barriers to innovation on their own and that they needed information sharing, such as cross-licensing of intellectual property and communication about roadmapping to overcome barriers that they faced. Another expert explained that information sharing across federal agencies led to the identification of the U.S.  biotechnology regulatory system as a significant barrier to innovation  and that, based on this, the Coordinated Framework for the  Regulation of Biotechnology was updated. This expert further said  that information sharing is the first step in coordination\u2014by sharing  information, agencies can determine where there might be  overlapping research efforts or gaps in ongoing research.", "Leveraging international research. Experts explained that bringing technologies to the United States that were developed elsewhere is not something that has been central to U.S. science and technology policy, but they stressed that the United States needs to consider how to take advantage of research that other countries are conducting and effectively utilize that information to maintain U.S. competitiveness. For example, one expert described the importance of the iGEM competition as an opportunity for information exchange among researchers from around the world who are working in synthetic biology-related fields. In describing this example, the expert noted that most bioengineers will not be U.S.-based and that, to remain competitive in synthetic biology, the United States needs to better understand discoveries being made by researchers from around the world.", "Experts said that while information sharing is important, there are  tradeoffs, particularly with regard to sharing and protecting pre- competitive intellectual property. The experts said that the benefits of  sharing pre-competitive intellectual property include the opportunity to  speed innovation by allowing multiple researchers to work with the  intellectual property concurrently and by preventing foreign competitors  from restricting use of the intellectual property through obtaining a patent.  Economically valuable knowledge can spread through publicly and freely  available records such as scientific publications and open source  software. Such knowledge can be used repeatedly, can quickly spread to  users outside the institutions where it was created, and can lead to the  creation of new products. For example, one expert stated that, as of   October 2017, a quantum computer we described earlier in this report  had been available over the Internet for public use for about a year and  had 50,000 users. Having a larger number of users working with this  resource could lead to more rapid discovery of ways in which a quantum  computer might be used than if it had not been shared. The expert said  that because this technology exists, it should be developed as quickly as  possible to determine what its first useful application will be and to find  the first problem that only a quantum computer can solve. Doing so, the  expert said, would create opportunities in which a U.S. company could  profit from the technology while also developing it. In addition, information  sharing was cited as instrumental to the success of the Human Genome  Project, according to NIH officials we interviewed, because the project  made the genome\u2019s sequencing available as a resource for researchers  to use.", "A deoxyribonucleic acid (DNA) strand around  the outline of a person.  The Human Genome Project, which formally  began in 1990, was a 13-year international  collaborative research project coordinated by  the Department of Energy and the National  Institutes of Health. The Human Genome  Project\u2019s goals were to (1) identify all the  genes in human DNA, (2) determine the  chemical base pair sequences of human  DNA, (3) store this information in databases,  (4) improve data analysis tools, (5) conduct technology transfer, and (6) address the ethical, legal, and social issues that may arise from the project. The full sequence of the human genome was completed and published in April 2003. Through its policy of open data release, the  Human Genome Project facilitated the  research of others. The Human Genome  Project also anticipated and promoted  commercializing genomic resources and  applications by establishing an infrastructure  and supporting private-sector technology  development. Consequently, the project led  to new tools to support biological research.  Further, the data and technologies generated  by the project and related research present a  broad array of commercial opportunities  across many areas of the economy. These  include more individualized diagnostics,  prognostics, drugs, and other therapies as  well as hardier, more nutritious, and healthier  crops and animals, among other applications.", "At the same time, experts said that while information sharing is important,  there are risks, such as foreign commercialization of U.S. intellectual  property. Experts noted that the world is increasingly competing with the  United States in research for transformational technological advances.  One expert cautioned that while information sharing is important for  transformational technologies, it must be done carefully so that other  companies do not exploit a technology or it is not leaked to a foreign  competitor. Similarly, one stakeholder said that while information sharing  is beneficial at the early stages of technology development, a balanced  approach to information sharing\u2014an approach that allows for trade  secrets and that guards some research results\u2014is needed once a  technology is no longer in the early stages of development.", "In light of these tradeoffs, experts emphasized the importance of ensuring  that intellectual property protections support U.S. competitiveness;  however, they also described challenges with how intellectual property is  managed in the United States. For example, experts said it can be  challenging to bring industry and academic researchers into partnerships  that support transformational technological advances. Experts explained  that some collaborators are willing to openly share their intellectual  property, while other experts noted that some collaborators may be less  inclined to do so because they view intellectual property as a profitable  commodity. Additionally, one expert cited differences between potential  industry and academic collaborators\u2019 knowledge of, and attention paid to,  developing technologies into commercial products as a potential barrier.  One expert said that foreign countries generally allow university- developed intellectual property to be owned and licensed by the inventors  or third-party companies (instead of the university). This can create a  foundation for a startup company or make it easier to get the interest of  companies who would like to acquire a university-based technology or  process. The expert noted that in one circumstance, this has given an  advantage to a foreign university in recruiting top researchers, helping it  to become a leader in quantum computing. However, another expert  stated that most major research universities have moved to a model of  developing partnerships with firms, especially startups, which has minimal  upfront licensing costs, and shared gains over time if the project is  successful\u2014according to that expert, such universities typically share  research intellectual property rights with faculty inventors."], "subsections": []}, {"section_title": "Focusing on Technology Development and Commercialization", "paragraphs": ["Focusing on technology development and commercialization is another  policy consideration that experts identified for maintaining U.S.  competitiveness through transformational technological advances.  According to experts, the United States\u2019 \u201cinnovation ecosystem\u201d\u2014the  network of public and private institutions within a country whose activities  and interactions initiate, develop, commercialize, and diffuse new  technology innovations\u2014has either lost or needs better mechanisms for  commercializing technologies to maintain U.S. competitiveness. To  address this issue, experts discussed how the federal government could  focus on technology development and commercialization by providing  support across multiple stages of innovation and support for the  development of tools to enhance innovation."], "subsections": [{"section_title": "Providing Longer-Term Assistance to Support Technology Development", "paragraphs": ["Experts discussed a need to improve technology development and  commercialization by providing support across multiple stages of  innovation. Experts described how sustained federal research  investments have led to key scientific discoveries, including, for example,  NIST and IARPA\u2019s decade-long support for quantum computing research  and NSF\u2019s investment in synthetic biology. However, while experts said  federal agencies\u2019 ability to support new discoveries is a strength, they  explained that the United States is losing the ability to commercialize  technologies that are invented here. For example, according to one  expert, while the technology might soon be available to build small (100  qubit) quantum computers, the United States does not have the  necessary enterprise in place to manufacture those systems. Experts  stated that it may take decades or more from the time research is funded  until it is commercialized. During this intervening period, significant  investment is needed to support the innovation cycle in terms of research  in the design, building, and testing of new product prototypes and  production processes.", "Experts described an increasing reliance, over time, on venture capital  funding to support investments in the innovation cycle. They said that  while this is generally working well in some areas such as software and  biotechnology, venture capital investors have become less willing to  support other technologies that require higher levels of capital investment,  longer-term returns, and greater risk. For example, one expert stated that  while the U.S. venture capital system spends $70 billion annually on  technology commercialization activities, in 2015, the expert estimated that  5 percent of venture capital funding went to hard technologies. Multiple  reports in recent years have documented the challenges associated with  how the innovation cycle is supported in the United States and its  implications for the domestic commercialization and production of new  technologies. For example, in a 2012 report, the National Research  Council stated that discoveries and inventions originating from research  conducted at U.S. universities, corporations, and national laboratories no  longer naturally led to products that are commercialized and  manufactured within the United States. According to this report,  manufacturing is important in developing new products because in many  high-technology industries, design cannot easily be separated from  manufacturing, and a lack of sustained investment in research and  infrastructure threatens to damage the U.S. innovation ecosystem,  economy, and security.", "To address this issue, experts discussed a need to provide longer-term  federal financial assistance to better support technology development  across multiple stages of innovation. Experts stated that federal agencies  often support research on short-term funding cycles (e.g., 3 years or less)  that may not be conducive to the long-term support sometimes needed to  effectively de-risk potentially transformational technologies. A 2017  National Academies report cited short-term funding as one factor that has  resulted in U.S. science losing its flexibility and nimbleness, elements that  feed new discovery. Additionally, experts said that federal agencies\u2019  support may not extend to the later stages of technology development but  providing longer-term support for research is an important part of the  federal government\u2019s role in advancing transformational technologies. For  example, one expert said that long-term federal support facilitates  creating a research infrastructure that can support a technology\u2019s  development.", "Experts cited several examples of how federal agencies\u2019 programs  provide different models for supporting technology development across  multiple stages of innovation.", "Advanced Technology Program. Experts cited NIST\u2019s Advanced Technology Program\u2014which COMPETES 2007 repealed\u2014as a success in terms of its efforts to support transformational research.Experts cited several aspects of the program in discussing its success, including its support for (1) research that accelerated the development of high-risk technologies with the potential for broad- based economic benefits to the nation; (2) information sharing across different sectors; (3) active project management and workshops that  taught awardees how to pitch their technology to venture capital  investors, according to one expert. One expert noted that the  program collaborated with NIH to develop diagnostic approaches that  advanced the genomic revolution.", "ARPA-E. Experts described ARPA-E\u2014which was modeled after DARPA\u2014as an important challenge-based federal effort to advance technologies in areas aligned with DOE\u2019s mission. Aspects of the ARPA-E model one expert cited as important to the program\u2019s ability to support transformational technological advances included, among others, support for higher-risk research and the autonomy that program directors have in seeking expert input and selecting research projects.", "Manufacturing USA Institutes. One expert described the Manufacturing USA institutes as an important federal effort to support emerging technologies across multiple stages of innovation. Another expert explained that in order to continue to capture the economic benefits of the innovation system, the United States needs to embed the knowledge for technology production locally within the country. The first expert said the Manufacturing USA institutes help increase the connectivity among different actors involved with specific technology areas and improve their ability to leverage advances in  those areas.", "Experts also discussed how other countries\u2019 long-term funding for  research efforts may help them support technology development. For  example, one expert discussed Germany\u2019s Fraunhofer Institutes, where  the government makes research investments over time frames of 5 or  even 20 years and rewards successful projects with funding increases  each year. In addition, one expert noted that other countries such as  the Netherlands and Singapore also provide long-term research funding,  allowing them to develop the broader research infrastructure necessary to  support technology development. In the area of quantum computing, one  expert stated that the Netherlands\u2019 investment has contributed to one of  the largest quantum computing-focused efforts in the world. According to  one expert, if U.S. researchers do not conduct the research necessary  over the long term to prove their research ideas, other countries will have  the opportunity to pick up where U.S. researchers leave off and  commercialize technologies based on this research."], "subsections": []}, {"section_title": "Supporting Development of Tools to Enhance Innovation", "paragraphs": ["Experts stated that tool development is critical to transformational  technological advances and discussed a need for federal government  support for tool development to maintain U.S. competitiveness. A tool is  something\u2014such as equipment used for a specific purpose, a modified  biological system, or a computer program\u2014that is used to perform a task  or that is needed to practice a profession. According to one expert, tools  are crucial supporting technologies that are necessary for the product  development process. According to recent reports, research in tools  development can lead to the introduction of new products, materials, or  the ability to produce materials at the commercial level.", "A bioprinted coronary artery.  3D bioprinting is a tool that scientists are  developing in the field of regenerative  medicine. 3D bioprinting uses 3D printing with  biological materials to create skin, bones,  arteries, and a variety of other tissues and  organs. For example, the Department of  Defense has conducted research into using  3D bioprinting to repair skin damaged by  burns\u2014injuries that account for 10 to 30  percent of battlefield casualties. To repair  burned skin, researchers have created scans  of burns that a computer then uses to have a  3D printer reconstruct the burned skin.  3D bioprinting has also been used to create  small blood vessel networks that contain living  cells that have joined with the blood vessel  networks in a mouse, allowing blood to  circulate through them. Such printed blood  vessels could be used to replace a damaged  heart muscle. In the future, such organs could  be grown using 3D bioprinting and the cells of  the person who needs the organ, and they  could be used in place of transplanted organs.  3D bioprinted tissues could also be used to  test the safety of new drugs. 3D bioprinting is  in the early stages of development.", "Experts explained that the United States is at risk of losing its ability to  develop tools, and they identified challenges to tool development,  including the following:", "Unclear needs and long time frames. According to experts, industry may be less likely to invest in tool development when tools do not support existing products, but, rather, are a part of solving technology challenges that are not clearly defined. In this context, experts explained that tool development can take a relatively long time, which may not be compatible with industry\u2019s short innovation time frames.", "Potentially high or unrecoverable costs. Developing tools is expensive, according to experts, and when creating a new tool, companies have to consider whether they will be able to recover their costs. One expert described a circumstance in which a modified laser was needed to support research on a quantum system. The expert explained that a laser manufacturing company would need to change its production line in order to make the modified laser, and it would be very expensive for the company to adjust its production line to make only the modified laser.", "Experts emphasized the important role federal agencies can play in  helping overcome these challenges to tool development. For example,  experts described the importance of federal support for developing  measurement tools to accelerate and improve the learning cycles around  designing, building, and testing technologies and products. Experts  specifically cited NIST\u2019s role in the development of measurement tools.  For example, through the NIST-on-a-Chip program NIST is developing  ultra-compact, inexpensive tools that will measure quantities such as  time, distance, current and voltage, and temperature and pressure and  that will allow measurement technologies to be deployed without requiring  traditional measurement services. In line with NIST\u2019s goals, the private  sector will manufacture and distribute these technologies. Experts also  noted the important role federal agencies play in providing access to  tools, such as technology testbed facilities to support de-risking  technologies through prototyping and other development activities."], "subsections": []}]}, {"section_title": "Strengthening the Science and Technology Workforce", "paragraphs": ["Experts identified strengthening the science and technology workforce as  a consideration for maintaining U.S. competitiveness through  transformational technological advances. According to experts, there is a  need for federal agencies to work with academia and industry to improve  connections between the training academia provides and what industry  needs, such as interdisciplinary training. Experts further discussed the  recruitment of researchers and the retention of research talent and a  technically trained workforce; according to experts, attracting researchers  has historically been a U.S. strength, but this ability may be at risk."], "subsections": [{"section_title": "Improving Connections between Academic Training and Industry Needs", "paragraphs": ["Experts identified the need to improve connections between academic  institutions and industry so that the training academia provides  corresponds to industry\u2019s needs, particularly for interdisciplinary research  fields. Without strengthening these connections, according to experts,  academia may not deliver the interdisciplinary training needed for some  research areas. Experts identified the systems engineering training  needed to build a quantum computer as one such area of interdisciplinary  training. For example, one expert said engineers are usually unfamiliar  with the quantum mechanics used in a quantum computer and this is  challenging since knowledge of both disciplines\u2014quantum mechanics  and engineering\u2014is necessary to develop the technology. Also, not many  quantum computing researchers are trained in the fields of computer  science or engineering, according to stakeholders and agency officials we  interviewed. A few experts said that because universities are not training  the researchers needed in some interdisciplinary areas, there are not  enough researchers in those areas available for industry to hire.", "Experts, other stakeholders and agency officials we interviewed, as well  as some recent reports, identified several factors that may contribute to a  disconnect between academic training and industry needs. For example,  experts explained that universities appear to operate on the assumption  that industry, not universities, must teach students the practical skills  needed to be productive members of an engineering team.  Additionally, according to a 2012 report by the National Research  Council, job markets and careers for doctoral scientists and engineers  have shifted since 1990 so that more than 50 percent of new doctorates  work outside of academia, but there are few incentives to motivate  graduate programs to align doctoral education with evolving employment  activities. According to one expert, graduate education is largely  supported by federally funded research awards to universities which tend  to support basic research, not applied research or development. This  expert further stated that as a result, graduate students are not taught  later stage applied work relevant to industry because that has not been  what federal research has historically funded. According to a different  2012 National Research Council report, cultural barriers often separate  industry from academia and are reinforced by organizational incentives\u2014 universities have traditionally emphasized the need to publish research,  not commercialize it. Further, one expert, a stakeholder, and an agency  official we interviewed said that universities generally were not hiring  faculty who focus on quantum computing as part of their computer  science and engineering departments. The expert attributed this to limited  funding available to support those research programs. According to this  expert, the financial assistance federal research programs provide can  send an important signal to universities that can lead to evolving  academic programs and hiring in interdisciplinary fields. A 2016 MIT  report made similar observations and said that many universities remain  siloed along departmental lines and need resources and structures that  allow for team teaching\u2014two people from different research areas co- teaching a course\u2014or research in which students from different  disciplines could be paired to answer a research question. However, in  synthetic biology, one expert noted that some universities have started  entirely new Departments of Bioengineering because aspects of synthetic  biology contribute to the development of an independent, distinctive, and  complementary type of engineering. This has resulted in the development  of a new curriculum that incorporates synthetic biology into the training  and development of bioengineers, according to this expert."], "subsections": []}, {"section_title": "Recruitment and Retention of Talent", "paragraphs": ["Experts discussed the importance of recruiting researchers and retaining  talent and a technically trained workforce. Experts stated that attracting  researchers to come and stay in the United States has historically been a  national strength. The Congressional Budget Office has reported that  foreign-born workers contribute disproportionately to innovation.  Further, according to this report, foreign-born researchers account for a  disproportionate number of the scientific researchers who yield many of  the big discoveries and conceptual breakthroughs that drive science.", "However, according to a few experts, and a National Research Council  report, the United States is increasingly competing with other countries to  recruit and retain talented researchers. Countries such as Canada,  China, and Singapore are attracting talented researchers to their  universities and research institutes by offering high salaries and the  opportunity to run well-funded programs, according to a National  Research Council report. For example, according to a few experts,  China started the Thousand Talents Program in 2008 to get talented  researchers to return to China. The Thousand Talents Program\u2019s goal  is to bring top talent trained overseas to China on a full- or part-time  basis. One expert gave the example of a university president resigning  from a U.S. university because he believed the possibilities for research  were greater in Asia. According to one expert, the nation\u2019s ability to recruit  and retain researchers may be at risk because the United States is not  working to retain and incentivize talent. According to that expert, this puts  the nation at risk of missing out on the next global transformational  technological advance.", "According to some experts, one challenge to retaining talent in the United  States is that limited job opportunities are available to young researchers  trained in certain areas. It is important to create conditions for young  researchers to find employment in research and development, according  to one expert, so that they can contribute to these areas. Creating the  right incentive structure for people to produce transformational  technologies in the United States is important, according to another  expert, because when technologies are produced in the United States,  the skills needed to produce them become embedded in that community.  We have previously reported that too much location of skilled  manufacturing jobs abroad can, in general, put the United States at a  disadvantage in terms of its ability to design new products, according to  participants in a 2013 forum on nanomanufacturing. Similarly, in a 2012  report, the National Research Council stated that manufacturing is  integral to new product development, and production lines are linked to  an iterative innovation chain that includes research and development,  product refinement, and full-scale production. In many high-technology  industries, design cannot be easily separated from manufacturing, and  talent availability is the most important factor for deciding where to place  a production facility. In some cases, according to this 2012 report,  companies are choosing to produce abroad because of concerns related  to the capacity of the U. S. supply chain, technical skills of U.S. workers,  and the investment climate for high-volume manufacturing. Also  according to this report, as a result of these factors, the United States is  finding it increasingly difficult to capture the economic value generated by  public and private investments in research and development."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Federal support for research in areas such as quantum computing and  synthetic biology can help promote U.S. competitiveness in the global  economy. For example, advances in quantum computing have the  potential to lead to transformational advances in national security  technologies or technology areas that rely heavily on simulation, such as  pharmaceuticals and materials science for advanced manufacturing.  Research in synthetic biology could help achieve significant advances in  health care, energy, and other sectors. When agencies collaborate on  their research efforts, they can produce more public value than when they  act alone. Moreover, collaboration through mechanisms such as  interagency groups can help address complex issues, such as those  remaining to be resolved in quantum computing and synthetic biology.  Collaboration can also mitigate challenges associated with fragmentation  of efforts across multiple agencies, as well as potential overlap and  duplication.", "NSTC and federal agencies have taken steps, building on earlier efforts,  to coordinate their activities in the areas of quantum computing and  synthetic biology. Specifically, both the new QIS Subcommittee and the  new synthetic biology working group have taken initial steps to implement  certain leading practices that can enhance and sustain collaborative  efforts. For example, both have taken steps toward agreeing on roles and  responsibilities. These steps could help address problems identified in  previous interagency coordination efforts. However, both the  subcommittee and working group are recently established and have had  limited time to fully implement the leading practices that we describe in  this report. As the subcommittee and working group move forward, by  taking steps to fully implement these leading practices for collaboration,  member agencies could better marshal their collective efforts to support  research in quantum computing and synthetic biology and help maintain  U.S. competitiveness through transformational technological advances."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations, including one to OSTP,  one to Commerce, one to DOE, and two to NSF.", "As the QIS Subcommittee moves forward, the Office of Science and Technology Policy co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 1)", "As the QIS Subcommittee moves forward, the Department of Commerce co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 2)", "As the QIS Subcommittee moves forward, the Department of Energy co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 3)", "As the QIS Subcommittee moves forward, the National Science Foundation co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 4)", "As the Interagency Working Group on Synthetic Biology moves forward, the Director of the National Science Foundation, in coordination with participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments, Third-Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this product to Commerce, DOD, EPA, DOE, DHS,  HHS, NASA, NSF, ODNI, OSTP and USDA for comment. Commerce,  DOE, NSF, and OSTP generally agreed with the recommendations  directed to them.", "Commerce, DOE, and NSF provided written comments that are  reproduced in appendixes IV, V, and VI, respectively. In expressing  concurrence with the recommendations directed to them, these agencies\u2019  written comments discussed aspects of the interagency groups\u2019 efforts we  examined in our report or the agencies\u2019 own efforts related to coordination  and collaboration.", "OSTP\u2019s General Counsel provided OSTP\u2019s comments by email. In its  comments, OSTP stated that it sees value in our recommendation and  will implement the recommendation as resources allow. However, OSTP  expressed concern about the impact that resource limitations could have  on its ability to implement the recommendation. We recognize that OSTP  faces certain resource limitations. However, we believe that implementing  our recommendation would allow leveraging of limited resources across  the agencies participating in a collaborative effort.", "In an email from an official with the Office of the Chief Financial Officer in  USDA\u2019s Agricultural Research Service, USDA provided general  comments on our findings and our recommendation pertaining to the  Interagency Working Group on Synthetic Biology. Specifically, USDA  concurred that federal support for research and development help drive  technological advances and promote U.S. competitiveness. USDA also  agreed that the leading practices we discuss in our report can enhance  and sustain interagency collaboration, and it expressed support for the  implementation of these practices in the Interagency Working Group on  Synthetic Biology, consistent with our recommendation.", "In addition, Commerce, DHS, DOE, EPA, HHS, NASA, and OSTP  provided technical comments, which we incorporated as appropriate.  Officials from DOD and ODNI stated via email that they had no comments  on the report.", "We also provided a draft of this report to a participant who served as  moderator in our October 2017 expert meeting on research for  transformational technological advances. We requested his views on  aspects of the report on which he has expertise and, in particular, the  characterization of statements made by experts at our meeting. He  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Agriculture, Commerce, Defense, Energy,  Health and Human Services, and Homeland Security; the Administrators  of the Environmental Protection Agency and the National Aeronautics and  Space Administration; the Directors of National Intelligence, the National  Science Foundation and the Office of Science and Technology Policy;  and other interested parties. In addition, this report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to (1) describe federal agencies\u2019 and  nonfederal entities\u2019 support for research for transformational technological  advances in selected areas, (2) examine federal agencies\u2019 coordination  on this research, and (3) provide experts\u2019 views on considerations for  maintaining U.S. competitiveness through transformational technological  advances.", "For the purposes of this report, we selected quantum computing (a sub- area of quantum information science) and synthetic biology (the  intersection of biology and engineering that focuses on the modification or  creation of novel biological systems) as examples of research for  transformational technological advances. We selected these two areas of  research because they: (1) represent enabling or platform technologies,  which could lead to other advances, (2) are supported by a mix of federal  agencies and nonfederal entities, and (3) represent areas of  congressional interest in which we have not recently conducted work.", "We conducted this performance audit from November 2016 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Support for Research", "paragraphs": ["To describe federal agencies\u2019 and nonfederal entities\u2019 support for  research for transformational technological advances in quantum  computing or synthetic biology we reviewed agency documentation,  relevant literature, and our prior work related to federal research efforts.  We focused on federal and nonfederal efforts in fiscal years 2016 through  the second quarter of fiscal year 2018. For example, we reviewed the  National Science and Technology Council\u2019s 2016 report on advancing  quantum information science which discusses the state of the research  area and federal involvement. We also interviewed officials from 10  agencies and departments that have ongoing work in either quantum  computing or synthetic biology, or in some instances, work in both  research areas. These agencies were the: Department of Commerce,  Department of Defense, Environmental Protection Agency, Department of  Energy, Department of Homeland Security, Department of Health and  Human Services, National Aeronautics and Space Administration,  National Science Foundation (NSF), Office of the Director of National  Intelligence, and U.S. Department of Agriculture. We initially selected  federal agencies on the basis of those that had total research and  development obligations of $500 million or greater in fiscal year 2016  according to NSF\u2019s Survey of Federal Funds for Research and  Development. Additionally, we included an agency which we learned,  through the course of our work, had significant ongoing work in both  research areas. We did not seek to develop comprehensive information  on federal agencies\u2019 efforts to support research in quantum computing  and synthetic biology. As a result, federal agencies could have ongoing  efforts in these two areas that we do not discuss in our report.", "To examine the funding federal agencies provide for quantum computing  and synthetic biology research, we requested data on obligations for  quantum computing and synthetic biology research for fiscal years 2016  through 2017, information on the type of research funded, and the names  of individual studies or projects. We requested funding data from all  agencies within our scope but some agencies did not provide such data.  We assessed the reliability of the data we obtained by checking for  obvious errors in accuracy and completeness and by comparing the data  with other sources of funding information, such as agency budget  documents, where possible. We determined that the data were sufficiently  reliable for reporting an approximate, minimum amount of federal financial  assistance obligated for quantum computing and synthetic biology  research.", "To examine the extent to which nonfederal entities have supported  research related to synthetic biology and quantum computing, we  interviewed stakeholders from 21 nonfederal entities with experience in  the areas of quantum computing, synthetic biology, or federal research  more broadly. To collect a range of viewpoints, we selected nonfederal  entities from industry, academia, nonprofit organizations, and professional  associations. The 21 nonfederal entities we interviewed included:  1. American Chemical Society 2. American Physical Society 3. Arizona State University 4. Georgia Institute of Technology 8.", "IBM 9.", "Institute of Electrical and Electronics Engineers 10. Information Technology and Innovation Foundation 12. Massachusetts Institute of Technology (MIT)13. Materials Research Society 15. National Venture Capital Association 17. Science and Technology Policy Institute 18. University of California 19. University of Colorado We also defined the people cited in this report in the following manner:  1. Experts: individuals who participated in our expert meeting. 2. Stakeholders: academic researchers, industry officials, and representatives of professional organizations who we interviewed. This group does not include agency officials. 3. Agency officials: federal officials we interviewed.", "We identified and selected these stakeholders through a literature review  and referrals. We conducted a literature review to learn about the current  state of each research area as well as to identify relevant stakeholders in  the areas of synthetic biology and quantum computing. We then  contacted the stakeholders for interviews and asked them for additional  references. We interviewed stakeholders both in person and over the  phone.", "We did not seek to develop comprehensive information on nonfederal  efforts to support research in quantum computing and synthetic biology.  As a result, we acknowledge that there are nonfederal entities that may  have ongoing efforts in these two areas that we do not discuss in our  report."], "subsections": []}, {"section_title": "Federal Agencies\u2019 Coordination on Research", "paragraphs": ["To examine federal agencies\u2019 coordination on quantum computing and  synthetic biology research, we identified coordination efforts in fiscal year  2016 through the second quarter of fiscal year 2018 through our review of  agency documentation and interviews with federal officials. Additionally,  we interviewed officials with the Office of Science and Technology Policy.  For ongoing interagency coordination efforts, we compared agencies\u2019  efforts with selected leading practices for enhancing and sustaining  collaboration. We selected six of the eight practices based on their  relevance to the operations of the interagency coordination efforts we  identified. In this report, and in our past work, we define collaboration  broadly as any joint activity that is intended to produce more public value  than could be produced when organizations act alone. Through  interviews and a data request, we asked agency officials to provide  information on their efforts to coordinate quantum computing and  synthetic biology research from fiscal year 2016 through the second  quarter of fiscal year 2018. For interagency groups related to quantum  computing and synthetic biology, we obtained information through June  2018."], "subsections": []}, {"section_title": "Experts\u2019 Views", "paragraphs": ["To provide experts\u2019 views on considerations for maintaining U.S.  competitiveness through transformational technological advances, we  convened a meeting of 19 experts on October 12 and 13, 2017, with the  assistance of the National Academies of Sciences, Engineering, and  Medicine. The experts included current and former federal officials, as  well as subject matter experts from industry, academia, nonprofit  organizations, and professional associations. About half of the experts  were subject matter experts in the areas of quantum computing or  synthetic biology, while the other half were experts with broader  perspectives on the role of federal and nonfederal entities in supporting  research for transformational technological advances. We worked with  the National Academies staff to select experts with a range of viewpoints.", "Prior to the meeting, we worked with National Academies staff to help  ensure balance and to assess potential conflicts of interest among the  experts. For example, we asked all participating experts to provide  information on (1) whether their immediate family had any investments or  assets that could be affected, in a direct and predictable way, by a  decision or action based on the information or opinions they would  provide to GAO; (2) whether they or their spouse received any income or  hold any organizational positions that could be affected, in a direct and  predictable way, by the information or opinions they would provide GAO;  and (3) whether there were any other circumstances, not addressed in  the two previous questions, that could be reasonably viewed by others as  affecting participants\u2019 point of view on the topics to be discussed. We  received signed responses from all participating experts. Three of the 19  experts reported potential conflicts. We evaluated their statements and  determined that they did not have any inappropriate biases when taken in  the context of the overall group of experts taking part in the meeting. As a  result of these efforts, we determined that the group of 19 experts,  overall, was balanced and had no inappropriate biases. However, the  views of these experts cannot be generalized to everyone with expertise  on research for transformational technological advances; they represent  only the views of the experts who participated in our meeting. We list the  experts who participated in our meeting in Appendix II.", "We divided the 2-day expert meeting into 8 sessions focused on a range  of topics, such as the role of federal and nonfederal entities in keeping the  United States competitive. Each session featured an opening  presentation by two selected experts, followed by open discussion among  all meeting participants. At the end of each session, one expert was  tasked with highlighting the key themes discussed during that session.  We then solicited feedback from the experts to determine whether there  were any additional comments they wanted to add to those themes. We  recorded and transcribed the meeting to ensure that we accurately  captured the experts\u2019 statements.", "We analyzed the information gathered from the experts by reviewing and  conducting a content analysis of the transcript and identifying  considerations for maintaining U.S. competitiveness based on  categorizing the experts\u2019 comments. For purposes of quantifying expert  remarks, we refer to a statement from an individual expert as being from  one expert, and unless there is significant disagreement in the transcript,  we refer to statements from two or more experts as being from experts. In  cases of significant disagreement in the transcript, we refer to statements  from two to three experts as being from a few experts, and statements  from four to six experts as being from some experts. Before publication  and consistent with our quality assurance framework, we provided the  experts with a draft of our report and asked them to provide their views on  whether our overall characterization of the meeting generally reflected the  considerations discussed during the meeting. Of the 18 experts who  responded to our request for review, 13 experts agreed that our overall  characterization generally reflected the key considerations identified  during the meeting, one partially agreed, and one differed with our  report\u2019s presentation of specific issues regarding synthetic biology. We  incorporated feedback experts provided on the draft, as appropriate.", "To corroborate statements made by the experts on particular topics, as  appropriate, we identified and analyzed studies and reports by agencies,  the National Academies, and others that were recommended to us by  experts. In addition, we compared the experts\u2019 statements to other  information provided by agency officials and stakeholders we interviewed."], "subsections": []}]}, {"section_title": "Appendix II: Participants in GAO\u2019s Meeting on Research for Transformational Technological Advances", "paragraphs": ["Appendix II: Participants in GAO\u2019s Meeting on  Research for Transformational Technological  Advances Affiliation  Ceres Nanosciences, Inc."], "subsections": []}, {"section_title": "Appendix III: Funding/Investment Gap in the Manufacturing-Innovation Process (Corresponds to fig. 1)", "paragraphs": ["Appendix III: Funding/Investment Gap in the  Manufacturing-Innovation Process  (Corresponds to fig. 1)", "Figure 3 shows the potential gap during the middle stages of innovation,  in which innovators may have difficulty finding financial support. The  figure includes a static display of the rollover information included in figure  1, which is interactive.", "Figure 3 Funding/Investment Gap in the Manufacturing-Innovation Process (Corresponds to fig. 1)"], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the National Science Foundation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following individuals made  contributions to this report: Christopher Murray (Assistant Director),  Angela Miles (Analyst-in-Charge), Justin Fisher, Scott Fletcher, Ashley  Grant, Charlotte E. Hinkle, Gwen Kirby, Patricia Moye, Cynthia Norris,  Emily Pinto, Tind Shepper Ryen, McKenna Storey, and Walter Vance."], "subsections": []}]}], "fastfact": ["Many federal agencies support research on quantum computing and synthetic biology. Experts we convened identified considerations, such as taking a strategic approach, that could help maintain U.S. competitiveness in these and other fields.", "We found that agencies have taken steps to collaborate on these activities, such as creating new interagency groups, but have not fully implemented key collaboration practices\u2014e.g., agreeing on roles and responsibilities. We recommended they implement these practices."]}
{"id": "GAO-18-375", "url": "https://www.gao.gov/products/GAO-18-375", "title": "VA Health Care: Actions Needed to Improve Oversight of Community-Based Outpatient Clinics", "published_date": "2018-04-12T00:00:00", "released_date": "2018-04-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2016, VHA's 733 CBOCs provided care to more than 3 million veterans at a cost of $5.3 billion. Although most of these clinics are VHA-owned and -operated, 101 are operated through contracts with non-VHA organizations. VHA policy states that CBOCs, whether VHA-operated or contracted, must provide one standard of care that is of high quality.", "GAO was asked to review VHA's use of contracts to carry out core functions. This report examines, among other issues, the extent to which VHA oversees CBOC operations.", "To conduct this work, GAO reviewed VHA's policies and CBOC Report. GAO also interviewed officials from VHA's central office and from a nongeneralizable sample of eight CBOCs and their four respective VAMCs and VISNs. The CBOCs were selected for variation in factors such as contract status and geographic area."]}, {"section_title": "What GAO Found", "paragraphs": ["Community-based outpatient clinics (CBOC) are an important part of the Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) health care delivery system. These clinics are geographically separate from VA medical centers (VAMC) and provide outpatient services, including primary care and mental health care. GAO found weaknesses in VHA's oversight of CBOCs:", "Incomplete policy implementation. VHA has not implemented certain CBOC oversight requirements as outlined in its policy. Specifically, VHA has not developed guidelines for monitoring the quality and comprehensiveness of care in CBOCs and officials said they have no plans to do so. Officials told GAO they believe the requirement was met as part of their regular oversight of Veterans Integrated Service Networks (VISN)\u2014regional networks responsible for oversight of VAMCs and CBOCs. However, VHA may miss CBOC performance problems that are not identifiable in VISN-level data. Further, although policy requires VHA central office officials to review CBOC performance as part of quarterly VISN performance reviews, officials said they do not specifically do so unless the VISN identifies a problem. Officials from three of the four VISNs in GAO's review said they largely delegate CBOC oversight to VAMCs, and do not separately review clinic performance unless a VAMC identifies a problem.", "An inaccurate and incomplete CBOC Report. VHA's CBOC Report is prepared by VHA central office and distributed to VISNs and VAMCs quarterly and at year-end. The CBOC Report could be useful to compare clinical quality of care between VHA-operated and contracted CBOCs, but it is inaccurate and incomplete. Specifically, VHA officials have used their judgment to classify certain sites as CBOCs in the report, rather than use the official classifications in policy. GAO found that 22 percent of sites were incorrectly classified as CBOCs when they were other types of sites, including VAMCs. As a result, the report is of limited usefulness to VHA as an oversight tool.", "Lack of guidance or training on the CBOC Report. VHA central office officials do not provide guidance or training specific to understanding the CBOC Report to assist VISNs and VAMCs in their oversight of CBOCs. GAO found that in several places in the report, shorthand text and acronyms were used, but not defined. In addition, several VISN and VAMC officials stated that guidance or training would be helpful.", "No requirement to use the CBOC Report. VHA officials told GAO that VAMCs and VISNs are expected to use the CBOC Report as an oversight tool, but GAO found that VHA lacks a requirement that they do so. Officials from three of the four VISNs and three of the four VAMCs in GAO's review were not using the report.", "These weaknesses potentially lead to inconsistent oversight and create a risk that VHA is not providing one standard of care that is of high quality to veterans across VHA-operated and contracted CBOCs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VHA (1) implement oversight requirements that align with existing policy; (2) establish a process to ensure the CBOC Report is accurate and complete; (3) provide guidance or training to VISNs and VAMCs on how to use the CBOC Report; and (4) require use of the CBOC Report as an oversight tool. VA concurred with all of GAO's recommendations and identified actions it is taking to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs\u2019 (VA) Veterans Health Administration  (VHA) operates one of the largest health care delivery systems in the  United States. In fiscal year 2016, VHA\u2019s health care system included 168  VA medical centers (VAMC) that offered inpatient, outpatient, and  residential services and 733 community-based outpatient clinics  (CBOC)\u2014stand-alone clinics that are geographically separate from  VAMCs and provide outpatient primary care, mental health care, and, in  some cases, specialty care services. In fiscal year 2016, these clinics  provided care to more than 3 million veterans at a cost of $5.3 billion,  which represented about half of the veterans treated by VHA and nearly  10 percent of total spending for their care. Although most CBOCs (632 of  the 733) are owned and operated by VHA, about 14 percent (101) are  operated by non-VHA health care organizations that contract with VHA to  provide services. According to VHA, as of the end of fiscal year 2016, 29  contractors held CBOC contracts, for which VHA spent nearly $312  million. It is VHA policy that all CBOCs provide one standard of care that  is of high quality, regardless of whether they are VHA-operated or  contracted.", "In May 2000, VHA published the last in a series of reports in response to  a 1998 request from the Under Secretary for Health to evaluate CBOC  performance. The evaluation found that VHA-operated and contracted  CBOCs performed equally on most performance measures, but  contracted clinics provided fewer primary care visits, had fewer patients  with mental health diagnoses, and did not have adequate cost data  available to compare their costs to those clinics operated by VHA. Since  that time, outpatient care use in VHA has grown substantially. In 2015, an  external assessment of VHA reported that between 2007 and 2014, VHA  outpatient visits increased 41 percent while inpatient bed days declined 9  percent. The 2015 assessment also reported that VHA\u2019s planning  models predicted inpatient bed days would decline by at least another 50  percent over the next 20 years.", "We and others have cited longstanding concerns about VHA\u2019s oversight  of its health care system. These concerns contributed to veterans\u2019 health  care being placed on GAO\u2019s High-Risk List beginning in 2015. You  asked us to conduct a management review of VHA that included, among  other issues, its use of contracts to carry out core functions. In this  report, we examine the extent to which:  1.  VHA-operated and contracted CBOCs vary in their provision of health  2.  VHA oversees CBOC operations, including ensuring the same quality  of care at both VHA-operated and contracted CBOCs.", "To determine the extent to which VHA-operated and contracted CBOCs  vary in their provision of health care services, we analyzed fiscal years  2014 through 2016 expenditure and encounter data (the three most  recent fiscal years of data available) for the 687 of 733 CBOCs that  provided care as of September 30, 2016, and for which these data were  available. We compared expenditures per encounter and the types of  services provided by VHA-operated clinics to those for contracted clinics.  We also spoke to officials from VHA\u2019s central office about the factors that  influence per-encounter expenditure variation across CBOCs. Given that  our 3-year analysis period was relatively short, we did not adjust the  values for inflation. We assessed the reliability of the encounter and  expenditure data by checking for missing values and obvious errors and  discussing them with VHA officials who were knowledgeable about the  data. We analyzed the data as reported by CBOCs in VHA\u2019s managerial  cost accounting system and we did not independently verify the accuracy  or completeness of the information, or the methodology used by VHA to  calculate total costs for VHA-operated clinics. After taking these steps,  we determined the data were sufficiently reliable for the purposes of this  reporting objective.", "In addition, we interviewed officials from eight selected CBOCs and from  the four VAMCs and the four Veterans Integrated Service Networks  (VISN) that oversee them. We also interviewed the four VHA contracting  officers associated with the contracted CBOCs. The eight selected  clinics are a nongeneralizable sample of four pairs of VHA-operated and  contracted CBOCs. (See table 1.) We selected these clinics from a list of  CBOCs that provided services as of March 10, 2017\u2014the most recently  available data at the time of our review\u2014using data from the VHA site  tracking (VAST) system, which lists all facilities and their characteristics.  We selected the clinics for variation in geographic diversity, parent VAMC  complexity level, clinic type (multi-specialty vs. primary care), and clinic  size. We also interviewed officials from the American Legion, a veterans  service organization, to obtain the perspective of veterans on the services  provided at CBOCs. The information from our interviews is not  generalizable to all CBOCs, VAMCs, VISNs, or contracting officers. We  assessed the reliability of the VAST system data on clinic characteristics  by reviewing relevant documentation and speaking to knowledgeable  agency officials. We also performed data reliability checks, such as  examining the data for missing values and obvious errors to test the internal consistency and reliability of the data. After taking these steps,  we determined the data were reliable for the purposes of selecting sites  and determining the complete list of CBOCs.", "To evaluate the extent to which VHA oversees CBOC operations,  including ensuring the same quality of care at both VHA-operated and  contracted CBOCs, we reviewed VHA policies, including Directive 1229  that establishes VHA and VISN oversight responsibilities for outpatient  sites of care, including CBOCs. We also reviewed and interviewed  officials about VHA\u2019s CBOC Report that documents clinical quality of care  measures for both VHA-operated and contracted clinics. In addition, we  analyzed the report from the first quarter of 2017\u2014the most recently  available report at the time of our review\u2014and compared CBOCs in the  report against sites in the VAST system as of January 3, 2017. We also  interviewed officials from VHA central office and our selected clinics  (including the contracting officers for our selected contracted clinics), as  well as officials from the selected clinics\u2019 VAMCs and VISNs. We  assessed the oversight activities performed by VHA\u2019s central office and  the VISNs in the context of the federal standards for internal control.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Over the last decade, VHA has increasingly provided care on an  outpatient basis, including primary care and mental health care services.  VHA Handbook 1006.02, VHA Site Classifications and Definitions,  defines classifications for outpatient sites of care including CBOCs.  VHA\u2019s Directive 1229, Planning and Operating Outpatient Sites of Care,  outlines the process for establishing new CBOCs."], "subsections": [{"section_title": "VHA\u2019s Outpatient Sites of Care", "paragraphs": ["VHA provides outpatient care through CBOCs, health care centers, and  other outpatient services sites, which are defined in VHA\u2019s site  classification policy:", "CBOCs are clinics that provide primary care and mental health care  services, and also may provide specialty care services such as  cardiology or neurology, in an outpatient setting. CBOCs can provide  a wide array of services, ranging from a small, mainly telehealth clinic  with one technician and a nurse, to a large clinic with several specialty  care services and providers. Each clinic is overseen by, and  separate from, its VAMC; each VAMC in turn is overseen by one of 18  VISNs.", "Health care centers are large multi-specialty outpatient clinics that  provide primary care, mental health care, and on-site surgical  services, in addition to other health care services.", "Other outpatient services sites provide nonclinical services, such as  social services, homelessness services, and support services. They  may also provide services that are clinical in nature through telehealth  or other arrangements. (See fig. 1.)"], "subsections": []}, {"section_title": "VHA\u2019s Process for Establishing New CBOCs", "paragraphs": ["To establish a new CBOC, VHA\u2019s policy states that the VAMC and VISN  must ensure that one is needed by first exhausting existing VHA  resources (such as changing clinic hours or staffing) and determining that  VHA community care programs cannot meet the identified demand. The  VAMC and VISN follow several steps to assess the need for a new clinic:", "Step 1\u2014The VAMC and VISN identify an underserved area using  VHA models that project changes in the veteran population and trends  in veterans\u2019 health care needs.", "Step 2\u2014The VAMC develops a detailed proposal for the new clinic\u2014 an Access Expansion Plan\u2014that includes information such as  whether the proposed clinic will be VHA-operated or contracted,  projected workload, scope of the services to be provided, and cost. It  also describes, as required by VHA policy, how the VAMC has  exhausted existing VHA resources before proposing a new clinic.", "Step 3\u2014The VISN reviews the expansion plan, and if approved  forwards it to an interdisciplinary panel at VHA\u2019s central office, which  reviews it. A list of approved clinics is then sent to the Under  Secretary for Health for endorsement.", "Step 4\u2014Endorsed clinics are included in the VISN\u2019s Strategic Capital  Investment Planning process submission for the fiscal year. Final  approval and funding for a new CBOC is dependent on Office of  Management and Budget approval of VA\u2019s budget submission and  VHA\u2019s final appropriations.", "In fiscal year 2015, VHA suspended the establishment of new CBOCs  beginning in fiscal year 2018 due to several factors, including budget constraints and an emphasis on the use of VHA community care  programs. However, VISNs can submit requests for exceptions to the  Deputy Under Secretary for Health for Operations and Management for  review. VHA officials told us 11 exceptions had been granted as of  February 2018."], "subsections": []}]}, {"section_title": "VHA-Operated CBOCs Provided Proportionally More Specialty Care and Had Higher Expenditures than Contracted CBOCs in Fiscal Years 2014 through 2016", "paragraphs": [], "subsections": [{"section_title": "VHA-Operated CBOCs Provided Proportionally More Specialty Care and Less Primary Care and Mental Health Care than Contracted CBOCs", "paragraphs": ["We found that VHA-operated CBOCs provided more specialty care and  less primary care and mental health care as a proportion of their total  provided services than contracted CBOCs in fiscal years 2014 through  2016. For example, in fiscal year 2016, specialty care (e.g., cardiology,  gastroenterology, physical therapy) comprised 13 percent of services  provided at VHA-operated clinics and 5 percent of services provided at  contracted clinics. In contrast, VHA-operated clinics provided  proportionally less primary care and mental health services (services  offered at all CBOCs) in fiscal year 2016\u2014these services comprised 66  percent of the services provided at VHA-operated clinics, but 84 percent  of the services provided at contracted clinics. (See fig. 2.)", "We found that VHA-operated CBOCs provided several specialty care  services that were not offered in contracted CBOCs. For example, dental  care services and gastrointestinal endoscopy were provided by multiple  VHA-operated clinics, but were not provided by any of the contracted  clinics in fiscal year 2016. In addition, we found that VHA-operated clinics  were generally larger and provided more complex services than  contracted clinics. For example, multi-specialty CBOCs (clinics that  provide two or more on-site specialty care services, and which may offer  procedures requiring local anesthesia or sedation) were more often VHA- operated than contracted. Of the 733 CBOCs in fiscal year 2016, 210  were classified by VHA as multi-specialty, and nearly all of these (206)  were VHA-operated.", "Officials from the four VAMCs and VISNs in our review told us decisions  about what types of services CBOCs provide are made on a case-by- case basis according to local needs. For example, officials from one  VAMC told us they decided to add physical therapy specialty care to one  of their VHA-operated clinics based on analysis indicating that veterans\u2019  need for this care in their community would increase. Also, officials said  they wanted to alleviate the travel burden for veterans who needed the  care, as the next closest VHA facility that offered this care was a 2.5-hour  drive away. Officials from another VAMC told us that they approached the  service needs at their clinics from a regional perspective, allowing for  veteran demand for services to be met across multiple clinics in the same  geographic area instead of relying on one clinic to meet the need. As a  result of this approach, VAMC officials were in the process of expanding  services at two of its clinics."], "subsections": []}, {"section_title": "VHA-Operated CBOCs Had Higher Expenditures than Contracted CBOCs", "paragraphs": ["From fiscal years 2014 through 2016, we found that VHA-operated  CBOCs had higher per-encounter expenditures than contracted  CBOCs\u2014a difference ranging from 3 to 5 percent per encounter. (See  table 2.)", "We also found that per-encounter expenditures for almost all service  types were higher on average for VHA-operated CBOCs than contracted  CBOCs in fiscal year 2016; the exception was mental health care  services, where VHA-operated clinics\u2019 per-encounter expenditures were 2  percent lower than for contracted clinics. The difference in per-encounter  expenditures was greatest for specialty care services. For example, VHA- operated clinics\u2019 per-encounter expenditures for specialty care services  were 46 percent higher than for contracted clinics. This is in contrast to  primary care, where VHA-operated clinics had 11 percent higher per- encounter expenditures, on average, compared to contracted clinics.  (See fig. 3.)", "Officials told us that several factors can influence per-encounter  expenditures, including (1) differences in provider compensation and  types of providers (physicians vs. physician assistants); (2) the number of  patients with complex health conditions that generally require longer visits  and more costly services (as opposed to patients with well-managed  conditions); and (3) geographic differences in the cost of providing care.  One of our selected contracted CBOCs had one of the highest per- encounter expenditures for fiscal year 2016 among all clinics. Officials  from this clinic\u2019s VAMC told us this was due to the contractor being able  to command a very high payment rate at the time of the contract award,  due to temporarily strong local economic conditions, as well as being the  only contractor in the area capable of providing the required services.  Officials said the VAMC is in the process of awarding a new contract for  this clinic.", "Although per-encounter expenditures were generally lower for contracted  CBOCs, officials from the VISNs and VAMCs in our review told us they  consider several factors in determining whether a new clinic will be VHA- operated or contracted. Such factors include the ability to directly monitor  performance and implement new standards of care, as well as the ability  to recruit and staff the clinic. For example, officials from two VAMCs in  our review told us that VHA-operated clinics can be easier to manage  because the VAMC has direct control of the clinic. Officials said this  makes it easier to implement changes to VHA standards of care without  the need to enter into contract modification negotiations. On the other  hand, officials from three of the four VISNs and three of the four VAMCs  in our review told us that contractors can be more flexible than VHA in  recruiting staff (such as the ability to offer higher salaries), making a  contracted clinic desirable for geographic areas where VHA has  challenges recruiting or retaining providers."], "subsections": []}]}, {"section_title": "VHA Has Not Fully Implemented Policy Requirements, and Inaccurate Information Limits Its Oversight of CBOC Quality of Care VHA Has Not Fully Implemented CBOC Oversight Policy Requirements", "paragraphs": ["We found that VHA has implemented certain oversight requirements, but  not others described in Directive 1229\u2014its policy that outlines VHA\u2019s  oversight responsibilities for outpatient sites of care, including CBOCs.  In terms of the oversight requirements that VHA implemented, we found it  has provided reports on patient satisfaction to VISNs and VAMCs on a  monthly basis. Specifically, VHA distributes the results of the VHA Survey  of Healthcare Experiences, a monthly survey of veterans\u2019 satisfaction with  the care they received through VHA health care facilities. In addition, VHA  implemented the requirement to make measures related to evaluating the  progress of outpatient sites of care, such as data on wait times, workload,  and costs, available on an internal VHA website. However, VHA has not  implemented other oversight requirements, which is inconsistent with  federal standards for internal control related to monitoring, which state  that management should establish and operate monitoring activities to  monitor the internal control system and evaluate the results.", "We found that VHA has not implemented the following requirements in  Directive 1229:", "VHA has not developed guidelines for monitoring the quality and  comprehensiveness of care in CBOCs. Officials from the three VHA  offices with responsibility for collaborating to develop guidelines for  monitoring the quality and comprehensiveness of care in CBOCs, as  required in the policy, told us that they are not currently developing  these guidelines and they have no plans to do so. First, officials from  the office of the Assistant Deputy Under Secretary for Health for  Policy and Planning told us they had not developed these guidelines  because they no longer believed it was their office\u2019s responsibility,  despite the fact that officials from the office had helped to develop the  recently issued policy. Second, officials from the office of the Deputy  Under Secretary for Health for Organizational Excellence told us that  their office was not responsible for addressing the broader issue of  monitoring clinics. Third, officials from the office of the Deputy Under  Secretary for Health for Operations and Management told us that  although they do not have formal guidelines in place, they believe  their office meets the Directive 1229 requirement as part of their  regular VISN oversight. Officials said they collect and review VISN- level performance data, such as patient satisfaction data, which can  be broken down to the level of the CBOC if there is a performance  problem. However, VHA may miss clinic performance problems that  are not identifiable in the VISN-level data. In addition, without  developing such guidelines, VHA has not established standardized  processes for how it monitors CBOCs, which can lead to inconsistent  oversight. This poses the risk that veterans may be subject to different  standards of care depending on the clinic visited.", "VISNs do not conduct continuous quality monitoring of CBOCs  to ensure that consistent, quality care is being delivered. We  found that three of the four VISNs in our review largely delegated  oversight of the CBOCs to the VAMCs, rather than conducting  continuous quality monitoring as required in the policy. Specifically,  officials from these VISNs said that they largely focus their oversight  on the VAMCs and do not separately review the performance of every  CBOC unless the VAMC informs them of a quality problem at a  particular clinic. Officials from the remaining VISN in our review said  they do conduct CBOC-specific oversight activities. Specifically, this  VISN had created a performance review survey tool that it sends to  each clinic on an annual basis, and the results are reviewed by a  workgroup made up of VISN staff. The workgroup examines trends  across the CBOCs, including a comparison of VHA-operated and  contracted performance. For example, one question in the tool asks  how an individual CBOC\u2019s performance compares with others  overseen by the VAMC. The delegation of oversight responsibility for  the CBOCs to the VAMCs without consistent VISN-level oversight  creates the potential for inconsistencies in oversight, which does not  align with VHA policy to provide one standard of care for all clinics.  Consequently, veterans may be subject to different standards of care  across clinics.", "The Deputy Under Secretary for Health for Operations and  Management has not reviewed CBOC performance with VISNs as  part of the quarterly VISN performance reviews. The Deputy Under  Secretary for Health for Operations and Management is responsible  for conducting reviews of VISN performance with each VISN director.  Specifically, the office of the Deputy Under Secretary for Health for  Operations and Management is required by VHA policy to review  CBOC-level performance data during quarterly VISN performance  reviews. However, officials from this office and two of the VISNs we  contacted told us they do not specifically do this unless the VISN  identifies a performance problem. Of the remaining two VISNs,  officials at one VISN reported only having mid-year and year-end  meetings with VHA central office at which they did not specifically  discuss the CBOCs, and officials from the other VISN said they did  not have any regular quarterly performance reviews with VHA central  office. This lack of consistent oversight poses the risk that VHA is not  providing one, high quality standard of care to veterans across  CBOCs."], "subsections": [{"section_title": "VHA\u2019s CBOC Report Lacks Accurate and Complete Information", "paragraphs": ["Directive 1229 requires VHA to provide reports to the VISNs and VAMCs  on CBOC quality of care on a quarterly and year-end basis. We found  that the CBOC Report, which is VHA\u2019s only report that allows for  comparing clinical quality of care data across VHA-operated and  contracted CBOCs, lacks accurate and complete information. These  gaps limit the CBOC Report\u2019s usefulness as a monitoring tool to  determine whether VHA-operated and contracted CBOCs are providing  the same standard of care. This is inconsistent with federal standards for  internal control for information and communication, which state that  management should use quality information to achieve the entity\u2019s  objectives.", "Specifically, VHA distributes the CBOC Report to VISNs and VAMCs on a  quarterly and year-end basis, which compiles CBOC quality of care  performance results based on the Healthcare Effectiveness Data and  Information Set (HEDIS)\u2014an industry standard set of quality measures.  VISNs and VAMCs have access to other types of CBOC performance  data, such as patient satisfaction data and wait time data, but these data  are not used to assess clinical quality of care and they cannot be used to  examine performance across all CBOCs or stratified by VHA-operated  versus contracted CBOCs. In contrast, the CBOC Report allows for the  comparison of clinical quality of care data across all CBOCs, which can  be stratified according to whether the clinic is VHA-operated or  contracted.", "However, we found the following issues with the CBOC Report:  Incorrect classification of CBOCs. We compared CBOCs from the  most recent CBOC Report at the time of our review (the first quarter of  fiscal year 2017) against sites in the VAST system as of January 3,  2017, which is VHA\u2019s listing of all VHA sites of care and their  characteristics. We found that 22 percent of sites were incorrectly  classified as CBOCs, based on the site classifications in VAST.  Several of these sites were much more complex, such as health care  centers and VAMCs. For example, a VAMC was included in the  report as a CBOC, but this VAMC has three specialized intensive care  units and serves as a regional referral center for intensive inpatient  surgery, including open heart surgery. In addition, we also identified  sites included in the report that provided less complex services than  those that are provided in CBOCs, such as other outpatient services  sites.", "VHA officials who produce the CBOC Report told us that, prior to the  establishment of the VAST site classifications in 2014, they used their  judgment to classify existing sites of care as CBOCs and they have  not updated their classifications since then. For sites established  since 2014, officials told us they use the VAST site classifications, but  may also use their judgment in certain situations. For example, if a  site\u2019s classification changed in VAST from a non-CBOC to a CBOC,  they would make a decision about whether to classify it as a CBOC in  the report by examining various aspects of the facility, such as the  services provided and encounters. This procedure differs from what is  documented in the methodology section of the CBOC Report, which  states that site classifications are based on VAST. Further, VHA  officials said they did not have a document available that outlined how  they make these decisions. Because the site classifications in the  CBOC Report are based, in part, on officials\u2019 judgment in addition to  the classifications in VAST, the report does not present accurate  information on CBOCs across VHA and is of limited usefulness to  VHA as a tool to ensure that VHA-operated and contracted CBOCs  are providing the same standard of care that is of high quality.", "Missing CBOCs. We found that 53 CBOCs (7 percent of all CBOCs)  were missing from the CBOC Report from the first quarter of fiscal  year 2017, rendering the data incomplete. VHA officials provided  examples of why a CBOC might not be included in the report. For  example, a newer CBOC might not be included because it did not  have quality of care data available at the time the report was  developed. However, we identified several other sites that were listed  in the report, despite unavailable data.", "Inaccurate summary calculations. Due to the incorrect site  classifications and missing CBOCs, the national- and VISN-level  summary calculations of performance in the CBOC Report were also  inaccurate. Specifically, the report includes national- and VISN-level  averages for each HEDIS measure, which VHA officials can use as  benchmarks for clinic performance. These averages were over- inclusive\u2014incorporating performance results from additional sites that  were not CBOCs, and under-inclusive\u2014omitting performance results  from CBOCs that were missing from the report. These inaccuracies  may lead VHA officials to draw incorrect conclusions about the quality  of care provided in CBOCs. For example, officials from one VAMC  told us that they use the national averages as benchmarks against  which they compare the performance of their CBOCs. Because this  VAMC requires CBOCs with lower-than-average HEDIS performance  results to develop a formal action plan to improve performance,  officials may not be identifying clinics that are in need of an action  plan due to the inaccuracy of the averages. In addition, VHA central  office officials who develop the CBOC Report said that the results  from recent reports have shown that VHA-operated and contracted  clinics in general provided the same standard of care, but this  conclusion may not be correct as it is based on unreliable data.", "No guidance or training for use of the CBOC Report. VHA central  office officials do not provide guidance or training specific to the  CBOC Report to assist VISNs and VAMCs in using it to oversee  CBOCs. This is inconsistent with federal standards for internal control  related to the control environment, which state that management  should, among other things, develop personnel to achieve the entity\u2019s  objectives. Such development may include training to enable  individuals to develop competencies appropriate for key roles. In our  review of the CBOC Report from the first quarter of fiscal year 2017,  we found that in several places in the report, shorthand text and  acronyms were used, but not defined. In addition, although there is a  methodology section, it is not clear that the measures described in the  report are HEDIS measures, for which VHA makes training available.  Several VAMC and VISN officials stated that guidance or training that  is specific to understanding the CBOC Report would be helpful. If  VISNs and VAMCs are not trained on how to use the report, they may  not know how to use it to oversee CBOCs and ensure they are  providing one standard of care that is of high quality.", "No requirement for VISNs or VAMCs to use the CBOC Report.", "VHA does not require that the CBOC Report be used as a tool to  oversee CBOCs. As a result, we found that the report was not widely  used. Specifically, an official from the office of the Deputy Under  Secretary for Health for Organizational Excellence\u2014which produces  the CBOC Report\u2014told us that the office\u2019s role is to compile the  reports and distribute them, but not to monitor performance. Officials  from the office of the Deputy Under Secretary for Health for  Operations and Management said that VISNs and VAMCs are  expected to use the report as part of their CBOC oversight; however,  we found there is no requirement that they do so. We found that  officials from three of the four VISNs and three of the four VAMCs in  our review were not regularly using the CBOC Report. Officials from  one of the four VAMCs and one of the four VISNs in our review were  using it as part of CBOC oversight activities at the time of our review.  Officials from another VISN said that they planned to start using the  CBOC Report after we made them aware of it during our interview. If  VISN and VAMC officials do not use the report as a part of their  oversight, they may be missing opportunities to compare VHA- operated and contracted CBOCs and ensure they are providing one  standard of care that is of high quality."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["CBOCs are an integral part of VHA\u2019s health care delivery system, and  VHA requires that such clinics, whether VHA-operated or contracted,  provide the same standard of care to veterans that is of high quality.  Although VHA has implemented certain policy requirements for CBOC  oversight, we found several weaknesses in its oversight that make it  difficult to determine whether it is ensuring this consistent standard of  care across the clinics.", "Specifically, VHA has not fully implemented oversight requirements that  align with its established policies, including a requirement to establish  guidelines for overseeing CBOC quality of care. The CBOC Report, as  VHA\u2019s only report comparing clinical quality of care across both VHA- operated and contracted clinics, could be an important part of those  guidelines. However, as it currently stands, the report is inaccurate and  incomplete and VISNs and VAMCs are not trained on or required to use  it; thus, it is of limited use to VHA, including the VISNs and VAMCs that  have responsibility for CBOC oversight. As a result, VHA lacks assurance  that both VHA-operated and contracted CBOCs are providing one  standard of care that is of high quality."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the VHA  Undersecretary for Health:  Implement oversight requirements that align with VHA\u2019s existing policy,  including developing guidelines for monitoring quality of care in CBOCs.  (Recommendation 1)", "Establish a process for regularly updating the CBOC Report to ensure it  contains an accurate and complete list of CBOCs that is consistent with  VHA\u2019s established site classifications. (Recommendation 2)", "Ensure that VISNs and VAMCs receive guidance or training on how to  use the CBOC Report. (Recommendation 3)", "Require the use of the CBOC Report as an oversight tool for ensuring  one standard of care that is of high quality across VHA-operated and  contracted CBOCs. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided VA with a draft of this report for its review and comment. VA  provided written comments, which are reprinted in appendix I. In its  written comments, VA concurred with all four of the report\u2019s  recommendations, and identified actions it is taking to implement them.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Veterans Affairs, the Under Secretary  for Health, and other interested parties. In addition, the report is available  at no charge on the GAO Web site at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at draperd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Debra A. Draper, (202) 512-7114 or draperd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Janina Austin, Assistant Director;  Malissa G. Winograd, Analyst-in-Charge; Jennie F. Apter; Zhi Boon; Keith  Haddock; and Sarah-Lynn McGrath made key contributions to this report.  Also contributing were Jacquelyn Hamilton and Vikki Porter."], "subsections": []}]}], "fastfact": ["Community-based outpatient clinics are an increasingly important part of the Department of Veterans Affairs\u2019 health care system, providing millions of veterans with services like primary and mental health care. Most of them are operated by VA, but others are operated by contractors.", "We found weaknesses in VA's oversight of community-based outpatient clinics, leading us to make four recommendations to help ensure veterans receive the same standard of care regardless of whether a clinic is operated by VA or by a contractor."]}
{"id": "GAO-18-67", "url": "https://www.gao.gov/products/GAO-18-67", "title": "Critical Infrastructure Protection: Electricity Suppliers Have Taken Actions to Address Electromagnetic Risks, and Additional Research Is Ongoing", "published_date": "2018-02-07T00:00:00", "released_date": "2018-02-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["A severe GMD or HEMP event could potentially have significant impacts\u2014 including power outages\u2014on the nation's electric grid, which could affect other sectors that depend on electricity, such as communications. In response, NERC created two regulatory standards requiring certain U.S. and Canadian suppliers to assess their vulnerability to GMD and take appropriate steps in response.", "GAO was asked to review electricity industry actions to prepare for and mitigate electromagnetic risks. This report examines, among other things, (1) to what extent U.S. and Canadian electricity suppliers have identified information about GMD and HEMP effects on the grid, (2) what steps selected U.S. and Canadian suppliers have taken to protect against GMD and HEMP, and (3) what opportunities exist for U.S. suppliers to recover costs for protecting against GMD and HEMP.", "GAO examined government and industry studies and interviewed federal and industry officials about potential GMD and HEMP effects on grid infrastructure; reviewed regulatory standards, monitoring processes, and NERC compliance audit data from April 2015 through August 2017; reviewed federal regulations and interviewed state regulators on cost recovery issues; and interviewed officials from a nongeneralizable sample of 13 U.S. and Canada electricity suppliers, selected based on factors such as GMD experience and preparation for GMD and HEMP events.", "GAO provided a draft of this report to five federal agencies and NERC. Technical comments provided were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. and Canadian electricity suppliers\u2014electricity generation and transmission owners and operators\u2014have identified information on the potential effects of a severe geomagnetic disturbance (GMD), resulting from a solar storm, but have identified less information about the potential effects of a high-altitude electromagnetic pulse (HEMP), resulting from the detonation of a nuclear device, on the electric grid. There is general agreement that more research is needed on both GMD and HEMP. Government and industry have publicly reported on the potential impacts of GMD on the grid. For example, one study identified two main risks: (1) potential voltage instability, causing power system collapse and blackouts; and (2) possible damage to key system components. However, these studies do not address the unique aspects of individual suppliers' networks. Recognizing this, 11 of the 13 selected suppliers GAO contacted said they had assessed their network vulnerability; of these 11, 6 expected GMD effects to be relatively small. In contrast, Department of Energy (DOE) and industry officials told GAO that information on HEMP effects is limited in that suppliers lack key information to fully understand HEMP effects on their networks. Historically, study of HEMP effects focused on impacts to military equipment rather than the commercial electric grid. Recently, DOE and industry began research to better understand HEMP effects. Of the 11 suppliers who responded to GAO about their HEMP efforts, 3 reported having studied the impact of HEMP on their networks and 2 of the 11 had integrated, or planned to integrate, HEMP-resistant features into new control centers.", "Of the 13 selected suppliers GAO contacted, 10 reported making technological and operational improvements to enhance overall network reliability that also provided some protection against GMD and HEMP risks. For example, suppliers reported making technological improvements such as replacement of some older transformers and unprotected control centers. As of May 2017, all 13 suppliers stated they had complied with a GMD regulatory standard issued by the North American Electric Reliability Corporation (NERC)\u2014the federally designated regulatory authority responsible for developing and enforcing reliability standards\u2013-to develop operating procedures to mitigate GMD effects. A second regulatory standard\u2014which is to be implemented in phases through 2022\u2014will generally require suppliers to further assess their vulnerability to GMD.", "Selected U.S. suppliers told GAO that costs they have incurred to protect against GMD and HEMP have been relatively small so far and they expect to recover those costs through customer rates. Suppliers could face future increased costs depending on corrective actions needed to comply with the second GMD regulatory standard. Federal and state regulators indicated that regulated U.S. suppliers' costs for protecting against GMD are generally recoverable through customer rates, but recovery is less certain for protection against HEMP because less is known about HEMP risks. Further, some suppliers could face challenges to cost recovery. Specifically, independent owners of power plants\u2014those that sell power in wholesale electricity markets and are not part of an integrated utility\u2014must recover reliability improvement costs through their sales of electricity and are not assured of cost recovery; federal regulators told GAO they are aware this could be a challenge for these independent owners."]}], "report": [{"section_title": "Letter", "paragraphs": ["The electric grid is crucial to our country\u2019s economy and wellbeing,  providing electricity to over 300 million people and representing more  than $1 trillion in assets, as well as supporting other critical  infrastructure. Consequently, the reliability of the grid\u2014its ability to meet  consumers\u2019 electricity demand at all times\u2014is essential to national safety  and security. As early as 1941, electric power industry researchers have  expressed concerns about the potential risks posed to grid reliability by  electromagnetic events. An electromagnetic event can result from a  naturally occurring, large-scale geomagnetic disturbance (GMD), caused  by severe solar weather, or from human-made sources, such as the high- altitude detonation of a nuclear device to create a high-altitude  electromagnetic pulse (HEMP). A major GMD or HEMP event could  have long-term, significant impacts on the nation\u2019s electric grid\u2014the  commercial electric power transmission and distribution system. Given  the interdependency among infrastructure sectors, a disruption to the  electric grid could also result in potential cascading impacts on fuel  distribution, transportation systems, food and water supplies, and  communications and equipment for emergency services, as well as other  communication systems that utilize the civilian electrical infrastructure.  More recently, however, some government and research organizations  have questioned the long-term level of impact electromagnetic events  could have on the electric grid and have recommended further research  and study be conducted on the effects of electromagnetic events.", "Most of the U.S. electric grid is owned and operated by the private sector,  with federal, state, local, and other governments playing significant  regulatory and other roles. The Department of Homeland Security (DHS)  has the lead role in coordinating the overall federal effort to promote the  security and resiliency of the nation\u2019s critical infrastructure, which includes  the electricity grid. The Department of Energy (DOE)\u2014as the sector- specific agency for the energy sector\u2014coordinates with DHS and is also  responsible for coordinating with other relevant federal agencies and for  collaborating with critical infrastructure owners and operators to prioritize  and coordinate federal resiliency efforts. In addition, the Federal Energy  Regulatory Commission (FERC), which regulates the interstate  transmission of electricity, among other things, is responsible for  reviewing and approving standards developed by the North American  Electric Reliability Corporation (NERC)\u2014the designated U.S. Electric  Reliability Organization (ERO)\u2014to provide for the reliable operation of the  bulk power system (the generation and transmission components of the  grid). The North America electric grid encompasses the United States,  parts of Mexico, and most provinces of Canada. Canada has experienced  the only extreme GMD event resulting in significant loss of power to the  North America grid. NERC\u2019s role in Canada is similar to its role in the  United States and reliability standards are mandatory and enforceable in  most Canadian provinces.", "The United States has taken steps to assess the risks posed by  electromagnetic events and identified steps to mitigate these risks. For  example, in April 2008 the Commission to Assess the Threat to the  United States from Electromagnetic Pulse Attack (EMP Commission)  issued a report that included over 90 recommendations addressing the  preparation for, and protection and recovery from, a possible EMP attack  against U.S. critical infrastructure. The majority of these  recommendations were made to DHS and DOE. In May 2013, FERC  directed NERC to develop reliability (regulatory) standards requiring  electricity suppliers to address the potential impact of GMD on the reliable  operation of the U.S. bulk power system. In June 2014, FERC approved  a standard, submitted by NERC, requiring that certain suppliers prepare  for the effects of GMD events by developing contingency operating plans,  procedures, and processes. FERC approved a second standard in September 2016, also submitted by NERC, requiring certain suppliers to  assess the vulnerability of their transmission systems to GMD events;  suppliers that do not meet certain performance requirements must  develop a plan to achieve the performance requirements. Also, in  December 2016, the National Defense Authorization Act for Fiscal Year  2017 was enacted, requiring DHS to, among other things, conduct an  intelligence-based review and comparison of the risks and consequences  of electromagnetic events to the nation\u2019s critical infrastructure and to use  that information to inform a recommended strategy for protecting and  preparing U.S. critical infrastructure against electromagnetic threats.", "In 2016, we reported that key federal agencies had taken various actions  to address electromagnetic risks to the electric grid\u2014such as establishing  industry standards and federal guidelines and completing related  research reports\u2014and that some of these actions aligned with  recommendations made in 2008 by the EMP Commission. We also  found that while DHS components had independently conducted some  efforts to assess electromagnetic risks, DHS had not fully leveraged  opportunities to collect key risk inputs\u2014threat, vulnerability, and  consequence information\u2014to inform comprehensive risk assessments of  electromagnetic events. Moreover, we found that DHS and DOE, in  conjunction with industry, had not established a coordinated approach to  identifying and implementing key risk management activities to address  EMP risk, such as identifying and prioritizing key research and  development efforts. We recommended, among other things, that DHS  identify internal roles to address electromagnetic risks and collect  additional risk inputs to further inform risk assessment efforts. We also  recommended that DHS and DOE engage with federal partners and  industry stakeholders to identify and implement key EMP research and  development priorities. DHS and DOE concurred with our  recommendations. As of October 2017, DHS had addressed our  recommendation regarding key EMP research and development priorities  by, among other things, working with key industry stakeholders to help  identify and implement EMP research and development efforts. DHS had  also taken steps to identify key roles and responsibilities within the  Department to address electromagnetic risks as well as work with federal  and industry partners to collect additional inputs on threats,  vulnerabilities, and consequences related to electromagnetic risks, which  we are in the process of reviewing to determine whether they address our  recommendations in these areas. DOE has also taken steps to work with  industry to develop a joint government-industry EMP strategy and  supporting DOE action plan to further address our recommendation  regarding the identification of key EMP research and development  priorities. Both DHS and DOE have reported taking some actions to  identify critical electrical infrastructure assets, but have yet to fully  address this recommendation. We will continue to review DHS and DOE\u2019s  actions to address our open recommendations.", "Given our previous work reviewing federal efforts to address  electromagnetic risks, you asked us to review actions taken by the  electricity industry to prepare for and mitigate impacts from  electromagnetic events. Our objectives were to examine (1) to what  extent U.S. and Canadian electricity suppliers have identified information  about the effects of GMD and HEMP events on the electric grid, (2) what  steps selected U.S. and Canadian electricity suppliers have taken to  protect against GMD and HEMP events and how NERC has monitored  these efforts, and (3) what opportunities exist for U.S. electricity suppliers  to recover costs for protecting against GMD and HEMP events.", "In conducting our work, we interviewed representatives from 13 of the  181 U.S. and Canadian electricity suppliers subject to NERC\u2019s 2014 GMD  reliability standard that conduct planning and generation, transmission,  and distribution operations. We selected these 13 electricity suppliers  based on various factors, including input from DOE, NERC, and industry  organization officials familiar with suppliers\u2019 activities to prepare for  electromagnetic events. Of these 13, we conducted site visits to 6  suppliers to better understand their experiences with past GMD events  and identify actions they have taken to prepare for and mitigate GMD and  HEMP events, among other things. During these visits we met with  officials and observed operations and facilities, such as control centers  hardened to mitigate effects from HEMP events, and equipment  potentially vulnerable to GMD, such as high-voltage transformers. We  included three Canadian electricity suppliers among the 13 suppliers we  interviewed due to their (1) experiences with past GMD events, (2)  research on the impacts of GMD, and (3) actions taken to prepare for and  mitigate GMD events. While we cannot generalize the information we  learned from these selected suppliers to all U.S. and Canadian suppliers,  they provided us with examples of what suppliers may know about the  potential impacts of electromagnetic events on the electric grid, as well as  steps suppliers may be taking to prepare for and mitigate such impacts.  The selected U.S. suppliers also identified opportunities available to them  for recovering costs for protecting against electromagnetic events.  Further, we interviewed representatives from six industry organizations  because of these organizations\u2019 specialized knowledge and experience  with electricity suppliers.", "To address the first objective, we reviewed U.S. and Canadian  government studies issued, or commissioned by, for example, DHS,  DOE, and NERC regarding, among other things, the vulnerability of  transmission and generation infrastructure and equipment to GMD and  HEMP events, possible measures to mitigate the effects of GMD and  HEMP, and areas requiring further research. We also reviewed relevant  studies from various industry organizations\u2014such as the Electric Power  Research Institute (EPRI)\u2014and interviewed knowledgeable officials from  these organizations and government agencies to clarify our  understanding of relevant research issues. We identified these studies  based on feedback from all entities listed above and through references  in reports and other documentation. While we did not compile a  comprehensive list of all studies of the effects of GMD and HEMP on the  U.S. and Canadian electric grid, industry experts indicated that we had  identified relevant studies published on this subject since 2010. We  assessed the methodologies used in the relevant reports and determined  them to be sufficiently rigorous to provide information about the potential  effects of GMD and HEMP events on the electric grid. To better  understand the effects of solar weather on the electric grid, how GMD is  measured, and mechanisms in place for notifying electricity suppliers of  potentially dangerous solar storms, we interviewed representatives from  the National Oceanic and Atmospheric Administration (NOAA) and other  federal agencies and reviewed relevant documentation on processes and  procedures. To identify the frequency and intensity of past GMD events,  we analyzed the available historical record of GMD occurrences from  1933 through 2016 calculated and maintained by GFZ German Research  Centre for Geosciences. NOAA officials confirmed that the GFZ German  Research Centre for Geosciences maintains the authoritative historical  record of these data. We assessed the reliability of these data by testing  for missing data, outliers, or obvious errors, and found the data to be  sufficiently reliable to report on the number and intensity of GMD events  occurring from 1933 through 2016. With respect to ongoing HEMP  research and planning efforts, we reviewed, for example, relevant U.S.  government strategies and plans and interviewed relevant officials,  including researchers from U.S. National Laboratories. In October 2017,  we also requested an interview with a representative from the EMP  Commission but did not receive a response to our requests.", "To address the second objective, we reviewed FERC orders and NERC  reliability standards that require certain suppliers to take steps to assess  and prepare for GMD impacts, and interviewed relevant officials regarding  the standards. We also obtained information from 13 U.S. and Canadian  electricity suppliers regarding steps they had taken to comply with NERC  reliability standards and actions to prepare for electromagnetic events. To  understand how NERC has monitored electricity suppliers\u2019 steps to  comply with NERC Reliability Standard EOP-010-1, we reviewed NERC  monitoring processes. NERC officials provided the number of compliance  audits conducted between April 2015\u2014when NERC, through Regional  Entities to which it has delegated enforcement authority, first began  reviewing suppliers for compliance with EOP-010-1\u2014and August 2017  that included the EOP-010-1 reliability standard. We contrasted the  number of compliance audits with the total number of suppliers potentially  subject to NERC\u2019s GMD reliability standard EOP-010-1. We assessed the  reliability of the data on the total number of suppliers subject to EOP-010- 1 by interviewing agency officials regarding data sources, system  controls, and any quality assurance steps performed by officials before  the data were provided; we found the data to be sufficiently reliable to  provide the number of suppliers subject to EOP-010-1 since it went into  effect. We also discussed with cognizant NERC officials the  organization\u2019s processes for collecting and reporting comprehensive data  on the status of their overall compliance monitoring efforts.", "To address the third objective, we reviewed FERC regulations and orders  related to cost recovery, such as suppliers\u2019 costs for spare transmission  equipment services. We also interviewed FERC officials and  representatives of two state regulators whose jurisdictions include  suppliers we interviewed, regarding procedures available to electricity  suppliers to recover costs for actions taken to prepare for and mitigate  electromagnetic effects. We asked these officials to discuss previous,  current, and potential future regulatory actions\u2014orders or rate cases they  have overseen\u2014involving recovery of costs for actions taken to protect  against GMD and HEMP events. Further, we interviewed DHS and DOE  officials to identify the extent to which financial incentives\u2014such as  preparedness grants\u2014are available to U.S. electricity suppliers to offset  the costs of preparation and mitigation efforts. We interviewed officials  from the 10 selected U.S. suppliers regarding the extent to which they  had recovered costs expended on preparedness and mitigation efforts  and what, if any, options they were considering to recover such costs in  the future. While the information provided by these selected electricity  suppliers is not generalizable to the U.S. electricity industry, it illustrates  examples of actions selected suppliers have taken to recover costs for  GMD and HEMP mitigation and preparedness efforts. Additional details  on our scope and methodology are contained in appendix I.", "We conducted this performance audit from May 2016 to February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Electricity Operation and Delivery in the United States and Canada", "paragraphs": ["The electricity operation and delivery system\u2014collectively referred to as  the grid\u2014in the United States and Canada includes four functions:  generation, transmission, distribution, and system operations (see fig. 1).  Electricity is generated at power plants by burning fossil fuels; through  nuclear fission; or by harnessing renewable sources such as wind, solar,  geothermal energy, or hydropower. Once wholesale electricity is  generated, it enters the bulk power system\u2014a network of high-voltage,  high-capacity transmission systems\u2014where it is transformed to a higher  voltage and flows through transmission lines, generally over long  distances, to areas where it is transformed to a lower voltage and sent  through the local distribution system for use by various customers.  Throughout this process, system operations are managed by a system  operator, such as a local utility.", "Below is additional information on the functions of the electric grid,  including equipment that may be vulnerable to GMD and HEMP.", "Electricity generation. Power plants generate electricity by  converting energy from other forms\u2014such as coal, natural gas, or  wind\u2014into electricity. While they produce electricity once operating  they are vulnerable when power outages occur because initially  starting a power plant after an outage typically requires an external  source of electricity to operate the control systems\u2014electronics that  are integral to their operations. Some power plants have the  capability to restore operations by employing a \u201cblack start,\u201d which is  the process of restoring a plant to operation without relying on off-site  sources of electricity, usually through using dedicated diesel  generators to provide the electricity needed. However, not all plants  have this capability and in the event of a power outage could therefore  be vulnerable to lengthy system disruptions.", "Electricity transmission. Power plants are generally geographically  distant from the areas where electricity is consumed. To move  electricity from where it is produced to where it is used, electricity is  sent over transmission lines; together, these lines form a network, or  grid. To transport energy over long distances with reduced power  losses, suppliers increase voltages\u2014the \u201cforce\u201d that makes electricity  flow through a conductor\u2014and utilize high-voltage transmission lines,  operating from 230 up to 765 kilovolts (kV) in North America.  According to the Quadrennial Energy Review, as of January 2017,  there were approximately 240,000 miles of high-voltage transmission  circuit lines in the contiguous United States. During a solar storm,  high-voltage transmission lines can act as \u201cantennae\u201d that allow GMD  to enter the electric system.", "Transformers. Transformers are critical to the efficient and effective  delivery of electricity to customers and, under certain circumstances,  can be vulnerable to the effects of GMD and HEMP. Transformers  facilitate the efficient transfer of electricity over long distances through  the transmission system by converting electricity to different voltages  along the delivery system\u2014either up or down, depending on the  design and function of the transformer (see sidebar). Figure 2  depicts a large power transformer. paired with equipment\u2014for example, a protective relay\u2014that is designed  to take them out of service temporarily when the effects of an  electromagnetic event reach the grid. If transformers were temporarily  taken out of service for preventative purposes, it could lead to an  interruption of electricity service to consumers. However, if  transformers\u2014especially those more vulnerable due to age, condition, or  design\u2014are not taken out of service during an electromagnetic event they  are at risk of being permanently damaged when additional electrical  current flows into them, causing excessive localized heating and damage  to internal components. (See fig. 3 for an example of transformer  windings that were damaged from localized heating associated with a  GMD event.) Transformers that become permanently damaged during an  electromagnetic event can also contribute to interruptions in service.  According to DOE, replacing a damaged transformer can be challenging  because they are custom-designed and interchangeability and availability  of spares is limited. If a usable spare transformer is not immediately  available, obtaining a replacement transformer is often a long and costly  process, usually involving long delivery lead times due to their size and  weight, limited inventory, a complex procurement and manufacturing  process, and other factors. According to DOE, in 2014 the average lead  time to obtain a large power transformer was between 5 and 16 months,  but could take more than 20 months in the event of supply disruptions or  delays in procuring raw materials or key parts; larger, more sophisticated  models are generally manufactured abroad. According to a transformer  manufacturer, depending on the function of the transformer, the voltage  rating, and the model, in 2017 the approximate price of a large power  transformer, weighing from 170 to 410 tons, ranged from approximately  $2 to $7.5 million in the United States.", "Distribution system. The final stage in the electric power system is  the distribution system, which carries electricity out of the  transmission system to industrial, commercial, residential, and other  consumers. The distribution system includes equipment that can be  damaged during electromagnetic events, but the extent of the risk is  limited because distribution lines are generally too short and of too  low voltage to pose a risk to distribution equipment.", "System operations: Operation of the electricity system is managed  by entities such as a local utility, which this report collectively refers to  as system operators. Because electric energy is not typically stored in  large quantities, system operators must constantly balance the  generation and consumption of electricity to maintain reliability. To do  this, system operators utilize a system of sensors and controls to  monitor power consumption and generation from a centralized  location. Operators use computerized systems to send signals to  power plants and other grid components to adjust their output to  match changes in consumption. Electromagnetic events can interrupt  or damage some of the equipment system operators use, which can  cause a disturbance in control systems (for example, such events can  cause relays to unintentionally operate, which can disable system  protection equipment). Because the electric power system  increasingly operates at or near reliability limits during peak demand  periods, a relatively modest disturbance to the system can potentially  pose a risk to system reliability.", "In the United States, the electrical infrastructure is primarily operated by  private industry, which owns approximately 85 percent of the nation\u2019s  critical electrical infrastructure. In contrast, Canada\u2019s electrical  infrastructure is primarily organized along provincial lines with large,  government-owned, integrated public utilities playing a leading role in the  generation, transmission, and distribution of electricity."], "subsections": []}, {"section_title": "Electromagnetic Events \u2013 GMD and HEMP", "paragraphs": ["Based on our review of relevant studies and interviews with cognizant  government and industry officials, there are differing opinions on the  potential impact electromagnetic events could have on the electric grid  and the risk of long-term, widespread damage. However, they generally  agree that more study on the effects of electromagnetic events is needed.  The following section describes (1) the nature and potential impact of  GMD, U.S. efforts to monitor it, and the frequency of past occurrences;  and (2) the nature and potential impact of HEMP events."], "subsections": [{"section_title": "GMD \u2013 Description, Potential Impact, Monitoring, and Historical Occurrences", "paragraphs": ["Naturally occurring solar weather events can create electromagnetic  impacts\u2014or GMD\u2014of sufficient intensity that can adversely affect the  electric power system. Solar weather events include, for example, large  coronal mass ejections (CME), which are energetic eruptions in the sun\u2019s  atmosphere that can cause the release of a large mass of charged  particles from the sun into space. When a large CME travels from the  Sun to the Earth it can interact with and create disturbances in the Earth\u2019s  geomagnetic field, referred to as a geomagnetic storm; the resulting  impact on Earth is commonly referred to as a geomagnetic disturbance,  or GMD. Figure 4 illustrates how solar weather can create a GMD.  Strong GMDs can create large geomagnetically induced current (GIC) on  the grid. The degree to which GMD and accompanying GIC affect the  electric power system depends on several factors, including the  magnitude of the GMD, design and geomagnetic latitude of the power  system, and geology of the local area, among other things. According to  NERC, the most likely consequence of a strong GMD and the  accompanying GIC is the loss of voltage stability, although GMD can also  damage components of the system, including high-voltage transformers.", "In the United States, the National Oceanic and Atmospheric  Administration\u2019s (NOAA) National Weather Service manages the Space  Weather Prediction Center (SWPC), which is responsible for monitoring  and providing services on space weather, including geomagnetic  storms. SWPC uses a variety of ground and space-based sensors, as  well as imaging systems, to monitor conditions on the Sun and to observe  and forecast geomagnetic activity around the world. SWPC uses this  information to issue Watches, Warnings, and Alerts for geomagnetic  storms through e-mail and website postings to those who are impacted by  space weather, such as owners and operators of the electric grid,  spacecraft operations, users of radio signals, and others. In addition,  SWPC provides immediate telephone notification and confirmation of imminent and ongoing geomagnetic storms to all NERC reliability  coordinators through a NERC hotline.", "To communicate the magnitude of geomagnetic storms (disturbances in  Earth\u2019s magnetic field) and to determine whether geomagnetic alerts and  warnings should be issued, SWPC relies on a real-time estimate of the  Planetary K-index (Kp-index), which ranges from Kp = 0, or quiet, to Kp =  9, or extreme storm intensity. (See appendix II for more information on  SWPC\u2019s notification system as well as their estimates of overall impact of  geomagnetic storms to the electric power system, by storm level.) Figure  5 shows the range of planetary geomagnetic activity, by solar cycle and  Kp level, from 1933 through 2017. As shown in this figure, recent  activity\u2014between 2007 and 2017, approximately equivalent to the  average length of a solar cycle\u2014exhibited the fewest occurrences of  GMD events (minor, moderate, strong, severe, and extreme) of any solar  cycle in nearly a century. -index) data show  the maximum fluctuations in the magnetic field observed from a network of selected  magnetometers\u2014instruments that measure relative change of a magnetic field at a  particular location\u2014relative to a quiet day."], "subsections": []}, {"section_title": "HEMP \u2013 Description and Potential Impact", "paragraphs": ["According to the 2008 EMP Commission, a nuclear EMP is the burst of  electromagnetic radiation that results from the detonation of a nuclear  device, which can disrupt or destroy electronic equipment. The threat  primarily focused on by the 2004 and 2008 EMP Commissions, and  specifically addressed in this report, is the high-altitude EMP (HEMP). A  HEMP event is caused by the detonation of a nuclear device above the  atmosphere, from about 40 to 400 kilometers (approximately 25 to 250  miles) above the Earth\u2019s surface. A HEMP attack does not cause direct  physical impacts at the Earth\u2019s surface, such as injury or damage directly  from heat, blast, or ionizing radiation, but instead creates an intense  electromagnetic pulse. The components of HEMP\u2014commonly identified  as E1, E2, and E3\u2014can disrupt or damage critical electrical  infrastructure, such as computers, electronics, and transformers. EMP  can also be produced using nonnuclear weapons, but these generally  have a short range and are not a focus of this report."], "subsections": []}]}, {"section_title": "Electricity System Regulation and Oversight", "paragraphs": ["Responsibility for regulating electricity is divided between states and the  federal government. Most electricity consumers are served by retail  markets that are regulated by the states, generally through state public  utility commissions or equivalent organizations. As the primary regulator  of retail markets, state commissions approve many aspects of utility  operations, such as the siting and construction of new power plants, as  well as approving the prices consumers pay and how those prices are  set. Prior to being sold to these retail consumers, such as households  and businesses, electricity is bought, sold, and traded in wholesale  electricity markets by companies that own power plants, as well as  utilities and other companies.", "Wholesale interstate electricity markets are regulated by FERC.  Historically, FERC-approved wholesale electricity rates based on utilities\u2019  costs of production plus a rate-of-return that it determined to be  reasonable. Beginning in the late 1990s, FERC took a series of  significant steps to restructure the wholesale electricity markets to  increase the role of competition\u2014market forces of supply and demand\u2014 in setting wholesale electricity prices, a process referred to as electricity  restructuring. Subsequently, FERC has provided authority for many  entities\u2014for example, independent owners of power plants\u2014to sell  electricity in wholesale markets at prices determined by supply and  demand. These entities can now compete with existing utilities and one  another to sell electricity in wholesale markets, but have no assurance  that their costs will be recovered. While electricity restructuring has  introduced a measure of market-based pricing to the generation of  electricity, transmission (and distribution, regulated by states) are still  subject to regulation on a cost-recovery basis. FERC has jurisdiction over  transmission rates on the federal level, and state regulators have  jurisdiction over the charges that utilities incorporate in customers\u2019 rates  in order to recover their transmission costs.", "As part of the restructuring process, FERC also encouraged the voluntary  creation of new entities called Regional Transmission Organizations  (RTO) and Independent System Operators (ISO) to manage regional  networks of electric transmission lines as grid operators\u2014functions that,  in these areas, had traditionally been carried out by local utilities. These  RTOs, in many cases, established and manage wholesale electricity  markets for electricity buyers and sellers to participate in. As grid  operators, RTOs are also responsible for managing transmission in their  regions, which includes establishing and implementing rules and pricing  related to transmission, among other things. As we reported in 2003, 24  states also introduced retail competition to electricity markets they  regulate and allow former utilities and new companies to compete to  serve customers; since then, the states where retail competition is  occurring have changed. In states with retail competition, in general,  electricity rates for generators other than the original utility are not  structured to guarantee recovery of generation-related costs.", "In addition to its role in regulating aspects of the electricity market, FERC  is also responsible for reviewing and approving standards to ensure the  reliability of the bulk power system. FERC designated NERC to develop  and enforce these reliability standards, subject to FERC review and  approval. These standards outline general requirements for planning and  operating the bulk power system to ensure reliability. (See appendix III for  information on NERC reliability standards requiring electricity suppliers to  address the potential impact of GMD on the reliable operation of the U.S.  electric grid.) NERC and its Regional Entities, along with FERC, can all  independently enforce reliability standards. Within the boundary of each  regional entity, there are one or more NERC-certified reliability  coordinators. Reliability coordinators are charged with the task of  continuously assessing the reliability of the transmission system. The  coordinator has the authority to direct stakeholders\u2014transmission  operators, generators, and others involved with the electric grid\u2019s  operations\u2014to take action to preserve the reliability and integrity of the  bulk power system."], "subsections": []}]}, {"section_title": "U. S. and Canadian Electricity Suppliers We Contacted Have Identified Information about GMD Effects, but Have Less Information about HEMP Effects", "paragraphs": [], "subsections": [{"section_title": "Electricity Suppliers Have General Information about GMD Effects and Some Selected Suppliers Have Taken Steps to Evaluate Their Networks", "paragraphs": ["U.S. and Canadian government and industry organizations have studied  and publicly reported on potential GMD effects on the electric grid. These  studies have covered the general threats to the nation\u2019s electric grid from  GMD but do not cover the unique aspects of individual suppliers\u2019  generation and transmission networks that could potentially make them  more or less vulnerable to GMD events. In addition, these studies  typically identified areas in which more research is needed regarding the  GMD threat and potential mitigation measures that would inform  suppliers\u2019 own assessments of the potential impact of GMD events on  their unique networks.", "These select studies we identified included those performed by NERC,  DOE, EPRI, and other private industry groups and generally examined  the areas of vulnerability for the grid with respect to GMD events,  potential impact on the grid from these events, possible mitigation  measures, and areas needing further research. While noting the need  for further research, some of these studies vary with regard to their  assessment of the likelihood of long-term, widespread damage to the grid  from these events. The following is a summary of some of these selected  studies performed since 2010 and grouped by the entities responsible for  performing them:", "NERC. In June 2010, NERC issued a report, based on a joint effort  with DOE, which included a plan to form a task force of government  and industry efforts to examine GMD. This resulted in the formation  of the NERC GMD Task Force consisting of government and industry  officials to examine the GMD threat to the nation\u2019s power grid. The  task force\u2019s work in evaluating the potential impact of GMD events  resulted in NERC\u2019s subsequent February 2012 report which outlined  its plans for working with industry on new reliability standards for  protecting the grid against GMD events. This report concluded,  among other things, that the failure of a large number of transformers  during a severe GMD event was unlikely, although certain older  transformers, along with generator step-up transformers, could be  particularly susceptible. As a result of this work, and as directed by  FERC, NERC developed the EOP-010-1 and TPL-007-1 GMD  reliability standards. Also, as a result of this work, NERC issued a  GMD Planning Guide for electricity suppliers, which assists the  suppliers in carrying out studies of their individual vulnerabilities to a  GMD event.", "DOE/National Labs. Since 2010, DOE has been engaged in a  number of efforts regarding GMD. For example, in 2011, DOE enlisted  the Pacific Northwest National Laboratory (PNNL) to study the  potential effect of GMD on long, high-voltage transmission lines and  associated mitigation measures that could potentially be employed.  Also, in April 2014, DOE reported on the results of its study of the  vulnerabilities of large power transformers to GMD and other threats  and the challenges facing the replacement of these transformers in  the wake of such events.", "EPRI. In conducting research for its private industry membership, the  Electric Power Research Institute engaged in a number of studies  from October 2010 to March 2014. These efforts began with an effort  to examine potential impacts from GMD through an assessment of  various risk factors. EPRI\u2019s later efforts involved the development of  approaches for modeling the impacts from GMD on the grid to allow  suppliers to better protect their networks from these events.", "Other private industry. Private entities conducted studies in January  2010 and November 2011 for Oak Ridge National Laboratory and  DHS, respectively, that examined prior GMD events and assessed the  potential future impact of these events on the grid along with areas of  vulnerability and potential mitigation measures. Other private studies  included those examining which regions of North America are most  vulnerable to GMD events in addition to the potential impact on the  insurance industry and society in general from these events.", "See appendix IV for additional details on these and other select studies  performed by government and industry regarding protection of the grid  from GMD events.", "These past research efforts have generally identified the degree to which  the electric power system is affected by a GMD event. The level of impact  from these events can depend on various factors including, among other  things, magnitude of the event, design and geomagnetic latitude of the  power system, and geology of the local area. Further, these studies  identified that GMD can have a broad range of impacts when it is  introduced to a power system, ranging from minor events such as radio interference and control malfunctions to wide-scale disruptions. NERC  has identified two predominant risks to the system: (1) potential voltage  instability in the transmission system caused by insufficient reactive  power support and (2) possible damage to system components.", "The first risk and, according to NERC, the most likely consequence of a  strong GMD event and accompanying GIC, is the insufficient reactive  power support, which can lead to voltage instability and power system  collapse. Reactive power support is necessary to stabilize the transfer of  electricity through the electric power system, from generation to  consumption. With regard to the second risk, several components of the  electric system are susceptible to damage from GMD and GIC, but  government and industry officials agree that the vulnerable components  with the greatest potential consequence in the event of loss are  transformers, which typically exist at substations throughout suppliers\u2019  transmission networks. High-voltage transmission lines act as  \u201cantennae,\u201d allowing GIC to enter the electric power system, disrupting  normal operations and, in some cases, damaging equipment.  Transformers, in turn, run the risk of overheating during a GMD event.  According to NERC, restoration times for these two risk scenarios are  significantly different. Restoration time from voltage collapse\u2014i.e., system  blackout\u2014would be a matter of hours to days, while the replacement of  transformers, as previously discussed, could take months or potentially  years. Therefore, the failure of large numbers of transformers, while less  likely, would have considerable impacts on portions of the electric power  system.", "While general information on the potential impact of GMD events on the  electric grid is available from the aforementioned government and  industry reports, individual suppliers must assess the potential impact on  their own, unique networks. For example, of the 13 selected suppliers we  spoke with, 11 reported performing analyses to evaluate the potential  impact of GMD on their specific generation systems or transmission  networks. The 11 suppliers that had performed these analyses did so in  advance of all suppliers being required to analyze the vulnerabilities of  their networks as part of their compliance with NERC\u2019s second-stage  GMD reliability standard TPL-007-1. The nature of the analyses the 11  suppliers engaged in required the use of modeling software to determine  the specific vulnerabilities of their networks which further allowed them to  design their own mitigation measures, if warranted, to address any  vulnerabilities identified and prevent equipment damage or power  outages. Suppliers we contacted noted that potential GMD mitigation  measures included installation of specific equipment to assist with  network stability and voltage regulation.", "As noted previously, past research efforts have indicated that GMD  events can have a variety of impacts ranging from minor malfunctions to  wide-scale disruptions. For example, 3 of the 11 suppliers we contacted  that had performed an analysis of their networks\u2019 potential vulnerabilities  had also reported prior impacts on their networks from a GMD event. Of  these three suppliers, two (including Hydro-Quebec) reported major  power interruption or equipment damage from the event. The remaining  supplier reported a brief power outage on one transmission line during the  same 1989 GMD event that caused a major power outage for Hydro- Quebec; however, this power outage did not result in any significant loss  of electricity to the supplier\u2019s customers. Outside of the 1989 event, this  same supplier reported minor power fluctuations and voltage drops from  smaller GMD events.", "Most suppliers we contacted that had assessed their networks\u2019  vulnerabilities to GMD expressed confidence in their ability to avoid major  damage or power interruptions from future GMD events. Specifically, 6 of  the 11 selected suppliers that had performed analyses of their networks\u2019  vulnerabilities to GMD reported that, going forward, they expected that  any effects from a future GMD event on their networks would likely be  minimal (i.e., no significant damage or power interruption). Six suppliers  also thought that procedures and technology currently in place afforded  better protection from these events than in the past. For example, one  northern U.S. supplier we contacted had, after acquiring new GMD  analysis software, studied its system and concluded that it could easily  withstand the GMD \u201cbenchmark event\u201d established by NERC in its TPL- 007-1 reliability standard and that its current technology and procedures  were adequate to deal with the threat. Also, another supplier studied its  system and is using the results to inform future decisions on transformer  purchases to obtain technology that is more resistant to GMD."], "subsections": []}, {"section_title": "Government and Industry Are Taking Steps to Better Understand Effects of HEMP on the Grid", "paragraphs": ["According to U.S. government and industry officials we spoke with,  completed research and available information on the vulnerability of the  grid to HEMP, along with its potential effects, is less extensive and lags  behind industry understanding of GMD. These officials noted that the  understanding of HEMP and how it can affect the electricity system is  general in nature and not specific to the commercial electric grid.  Specifically, the Department of Defense has developed information  regarding the potential effects of HEMP on military assets and facilities.  According to DOE, the most detailed HEMP testing has been performed  on military communication and weapons systems, not on the commercial  electric grid. In a number of studies since 2010, both government and  private industry have examined the HEMP threat to the grid while also  noting the need for further research to fully understand the specific  threats to components of the grid that would allow suppliers to protect  against these events. While noting the need for further research, some  of these studies vary with regard to their assessment of the likelihood of  long-term, widespread damage to the grid from HEMP. See appendix IV  for additional details on government and industry studies on the threat to  the grid from EMP events including HEMP.", "The government and private industry studies generally note the threat to  the grid presented by the E1, E2, and E3 pulse components of HEMP as  follows:", "E1. The E1 pulse is capable of destroying microelectronics (such as  computers), communication and control systems, and other electronic  equipment that can disrupt the grid and other critical sectors.  According to DOE, E1 can also generate very large and damaging  voltage surges in power lines. Figure 6 depicts the potential impact  from an E1 pulse, and shows the higher the altitude the greater the  potential radius of the impact from an E1 pulse.", "E2. The E2 pulse, similar to lightning, has an ability to impair or  destroy control features that are not protected from lightning.  However, the grid typically has protections in place to address the  lightning threat to major components.", "E3. The E3 pulse is similar to GMD and also creates similar disruptive  currents in transmission lines which can cause grid instability and  heating that damages transformers.", "Few electricity suppliers we contacted reported taking steps to examine  how HEMP could impact their systems. Specifically, 3 of 11 selected  suppliers who responded to our inquiry on this topic reported performing a  study of the potential impact of HEMP events on their network  infrastructure. Two of these three suppliers reported studying the  potential impact of HEMP events on their network in conjunction with  these suppliers\u2019 design of hardened control centers expected to be  resistant to HEMP and other hazards. One of the two suppliers that  designed control centers resistant to HEMP did so due to a concern over  being able to maintain power to certain critical customers for which the  loss of power would have national security implications. The other  supplier that had designed an HEMP-resistant control center did so as  part of an \u201call hazards\u201d approach to protecting its transmission  infrastructure. The third supplier that had studied the potential impact of  HEMP on its system did so as part of a combined study, required by its  state legislature, on the threats posed by both GMD and HEMP.  Specifically, this supplier examined the potential impact of the HEMP E3  pulse on its system which is similar to GMD, and, therefore, is expected  to involve similar mitigation measures. The supplier stated that the lack  of available modeling and analysis tools prevents them from fully  understanding the potential impact of all components of HEMP\u2014 particularly the E1 and E2 pulses.", "Four of the 8 suppliers we contacted who stated they had not studied the  potential impact of HEMP on their networks indicated a desire to see  EPRI complete its ongoing EMP research before engaging in studies of  their own networks. Further, all eight suppliers who stated they had not  performed any studies of the potential impact of HEMP on their networks  also noted a lack of key information on the nature and risk of the HEMP  threat that would allow them to complete studies of their networks and  develop corresponding mitigation measures. Six of the suppliers cited the  classified nature of much of the available information maintained by the  federal government on the EMP threat\u2014particularly HEMP\u2014as a  contributing factor to the industry\u2019s lack of needed information on the  threat. In addition, according to NERC officials, while they have  developed reliability standards directing suppliers to study the  vulnerabilities of their networks to GMD and establish procedures for  dealing with those events, it has yet to produce similar standards for EMP  or HEMP due to the lack of information available to industry on the EMP  threat and how it may impact the grid.", "According to DOE, more research is needed to fully investigate and  evaluate how an electric utility could protect itself from, or mitigate the  effects of, HEMP on its systems. DOE also noted that government and  industry have ongoing research efforts to better understand these  potential effects and develop possible mitigation measures. For example,  DOE has three ongoing research efforts related to HEMP. First, DOE is  collaborating with DHS to advance the understanding of HEMP effects on  the grid through research at the Los Alamos National Laboratory.  Second, DOE has funded efforts underway at the Idaho National  Laboratory focused on developing potential HEMP strategies, protections,  and mitigations for the electric grid\u2014including hardening of infrastructure,  blocking of currents, developing a strategy for stocking and prepositioning  of spare parts, as well as developing operational and emergency planning  tools. Finally, DOE has enlisted the Oak Ridge National Laboratory in  analyzing the vulnerability of the grid to a HEMP event, along with the  potential damage from such an event, and how it would impact on the  reliability and delivery of electric power. The analysis will examine  resilience options such as hardening some facilities, stockpiling some  parts, and contingency planning. In addition to these research projects,  DOE officials told us both Los Alamos National Laboratory and Lawrence  Livermore National Laboratory are working to produce unclassified  information on the characteristics of the electromagnetic signals  associated with HEMP that could be shared with electricity suppliers to  better inform their planning efforts.", "In addition to its ongoing research efforts, DOE and industry have taken  steps to enhance understanding of HEMP issues. In particular, DOE and  industry issued the Joint Electromagnetic Pulse Resilience Strategy (Joint  Strategy) in July 2016 to study HEMP and improve the sharing of  information on HEMP that would be useful to industry. According to  DOE, central to development of the Joint Strategy was an effort to  enhance shared government-industry understanding of the current status  of risks from, and preparedness for, HEMP events. DOE added that this  effort is important because what is currently known about HEMP effects  to the grid has been developed from computer models designed for other  purposes (e.g., understanding Department of Defense system effects), or  is classified and thus difficult to share with industry. Specifically, the Joint  Strategy includes five strategic goals to guide DOE and industry in  minimizing HEMP impacts and improving resilience of the grid to these  events. These strategic goals are (1) improving and sharing  understanding of HEMP: threat, effects, and impacts, (2) identifying  priority infrastructure, (3) testing and promoting mitigation and protection  approaches, (4) enhancing response and recovery capabilities relating to  a HEMP attack, and (5) sharing best practices across government and  industry both nationally and internationally.", "Following development of the Joint Strategy, both DOE and EPRI  (working with DOE, on industry\u2019s behalf) committed to developing  separate, but coordinated, action plans that would implement the five  strategic goals for studying HEMP and providing needed information to  industry. DOE\u2019s Electromagnetic Pulse Resilience Action Plan (DOE  Action Plan), issued in January 2017, delineates the steps that DOE will  take to address HEMP risks and emphasizes the federal government\u2019s  ability to clarify and communicate HEMP threats and impacts, reduce  HEMP vulnerabilities, and facilitate the energy sector\u2019s response and  recovery after HEMP events. DOE stated that its Action Plan also  considers the over 90 recommendations made in the 2008 EMP  Commission report and at least partially addresses 10 of the 15  recommendations directly related to the electric power system made by  the EMP Commission in their report. See appendix V for additional  detail on the DOE Action Plan, including its relationship to the EMP  Commission\u2019s work.", "As noted in the Joint Strategy, EPRI\u2019s industry action plan\u2014initiated in  April 2016\u2014is a complement to the DOE Action Plan and includes  research to be performed to (1) detail the potential impacts of HEMP on  the bulk power system, (2) examine potential industry actions to mitigate  HEMP risks, and (3) inform industry investment decisions regarding those  mitigation options. According to DOE and EPRI, the research that is  outlined in the industry action plan is ongoing and scheduled for  completion over a 3-year period with the first two reports being issued in  September 2016 and February 2017. EPRI officials added that this  research is intended to provide the electric industry with what it needs\u2014 specifically, an unclassified, science-based approach to HEMP with  regard to (1) threat characterization, (2) testing results, (3) modeling and  simulation, and (4) recommended strategies for mitigating the impacts of  HEMP including prudent and practical hardening and recovery options.  To meet these goals, EPRI, together with participating suppliers, have  undertaken this 3-year long research effort and expect to complete this  work in 2019. This research effort is comprised of the following tasks:", "HEMP threat characterization. For the first part of this task, EPRI is  identifying the state of knowledge of unclassified HEMP research for  all three components of the HEMP environment (i.e., the E1, E2 and  E3 pulse components of HEMP). This portion of EPRI\u2019s research was  achieved by the issuance of the aforementioned September 2016  report. The remaining two components of this task are ongoing and  include (1) identifying characteristics of the electromagnetic signals  associated with HEMP that can be used to assess the potential  impacts on bulk power system components, and (2) investigating the  physics of HEMP\u2019s transmission to, and impact on, power system  infrastructure.", "Electric infrastructure EMP vulnerability. This task involves  identifying the vulnerability of transmission systems and support  assets (e.g., protection and controls systems, communications,  transformers, etc.) exposed to the HEMP threat by performing  laboratory tests. EPRI will test various infrastructure components at  two EMP test labs by subjecting them to E1 pulses. According to  EPRI, initial results for this task are possible by the end of 2017.", "Electric infrastructure impacts. For this task, EPRI is assessing the  potential impacts of a HEMP attack on the bulk power system by  combining the system modeling-related efforts in the first task above  with the equipment testing results of the second task above. Under  this task, EPRI is also developing assessment techniques, models,  and tools for assessing the impacts of a HEMP attack. The  aforementioned February 2017 report assessing the potential effects  of the E3 pulse component of HEMP on U.S. bulk-power transformers  represents a portion of the work under this task. In this report, EPRI  found that a small number of geographically-dispersed transformers  (14 out of the tens of thousands included in EPRI\u2019s analysis) were  potentially at risk for thermal damage from the E3 pulse. EPRI  produced a companion report assessing the potential impacts of the  E3 pulse on the stability of the bulk-power system (i.e., the potential  for voltage collapse) in December 2017 to be followed by the results  of the first E1 pulse assessment at a later date.", "Mitigation, hardening, and recovery. Under this task, EPRI is  assessing various mitigation and hardening approaches that can be  employed to reduce the impacts of HEMP on bulk-power system  reliability\u2014including examinations of potential unintended  consequences of these approaches and cost effectiveness. As an  initial step, EPRI is developing interim guidance on hardening  substations based on military and international standards that is  scheduled to be completed by the third quarter of 2017.", "Risk-based decision support. For this task, EPRI is developing  methodologies and tools to support risk-informed decisions regarding  the implementation of HEMP hardening and mitigation measures.", "Trial implementation. Once hardening measures have been  identified, EPRI\u2019s supporting member utilities will have the opportunity  to evaluate implementation of these measures on aspects of their  networks. This task will develop a collection of leading industry  practices with regards to HEMP mitigation and hardening. EPRI is to  communicate the effectiveness of these measures including lessons  learned.", "Project member and stakeholder communication. Under this task,  EPRI will communicate the results of its research project to its  supporting members and stakeholders in order to share new learning  in a timely manner."], "subsections": []}]}, {"section_title": "U.S. and Canadian Electricity Suppliers Have Made Improvements to Provide Protection against GMD and HEMP Events, Including Some That NERC Requires and Monitors", "paragraphs": [], "subsections": [{"section_title": "Selected Suppliers Have Made Technology Improvements Primarily to Enhance Overall Network Reliability which Can Also Help Protect Against GMD and HEMP Events", "paragraphs": ["Overall, 10 of the 13 selected suppliers we contacted reported making  technological improvements to provide a range of system reliability  benefits, some of which can also provide collateral benefits for protecting  against GMD and HEMP events. These 10 suppliers purchased and  maintained their own transmission-related equipment, while the remaining  three suppliers were reliability coordinators who did not purchase or own  their equipment. Various examples of these technological improvements  for improved system reliability\u2014that had the added benefit of protecting  against GMD or HEMP events\u2014were reported by the suppliers we  contacted and include the following:", "Replacement of older transformers for various reasons,  including susceptibility to GMD. Overall, 7 of the 13 suppliers we  contacted noted that transformer replacement occurs for a variety of  reasons, including increased efficiency. However, seven of the ten  suppliers that purchased their own equipment added that, when they  acquire new transformers, they generally selected models that have  the added benefit of being more resilient to the effects of GIC during a  GMD event. These seven suppliers reported that their specifications  for the acquisition of new transformers specifically included qualities  to make them more resilient to GIC. The suppliers also told us they  are adhering to these specifications whenever they replace an older,  less resilient, transformer as part of ongoing system upgrades. One  supplier reported that they have undertaken a broad review of the  transformers used in their system and taken steps to systematically  reduce the number of unique units as part of a broader effort to make  their system more consistent. They told us they have worked, to the  extent possible, to standardize their transformer designs since  implementing a new transformer purchasing program in 2008 which  included upgrades such as more stringent specifications for protection  against GMD. This supplier told us these efforts would also make it  easier and less costly to maintain spares and to replace individual  transformers that could be damaged from GMD or HEMP events.", "Participation in spare transformer programs to facilitate timely  recovery of suppliers\u2019 networks after transformer failures,  including those caused by GMD and HEMP events. Of the 10  selected suppliers we contacted who purchased their own equipment,  6 reported having participated in at least one spare transformer  program. For example, five of these suppliers participated in the  Edison Electric Institute\u2019s (EEI) Spare Transformer Equipment  Program (STEP) which was intended as a coordinated approach to  developing a shared inventory of spare transformers and streamlining  the process of sharing transformers with affected companies. This  program requires participating utilities to maintain a specific number of  transformers up to 500 kV to be made available to other utilities in  case of a critical substation failure. According to program  documentation, any investor-owned, government-owned, or rural  electric company in the U.S. or Canada may participate in the EEI  STEP. The sixth supplier did not participate in an outside spare  transformer program such as EEI\u2019s, but, instead, maintained its own,  in-house program.", "Investment in series capacitors to enhance network efficiency.  Eight of the 10 selected suppliers we contacted, who purchased their  own equipment, stated that they had added series capacitors to their  networks. Seven of these eight suppliers told us they had acquired  series capacitors to enhance the efficiency of their networks and help  with network stability and voltage regulation. These suppliers stated  that these devices offer the added benefit of mitigating the impacts of  GMD and HEMP events because series capacitors block GIC,  therefore preventing GIC from affecting certain parts of the  transmission system. For example, one Canadian supplier, whose  customers were almost totally dependent on electricity for heat during  the winter, reported installing these technologies to improve overall  network reliability but recognized the benefits of the technology for  helping alleviate the threat of GMD events\u2014which, according to DOE,  is particularly acute at its far northern latitude.", "Installation of digital relays with enhanced functionality. Four of  the 10 suppliers we contacted who acquired their own equipment had  replaced, or were in the process of replacing, older electro- mechanical protective relays used in their grid control systems with  newer digital relays. Unlike electro-mechanical relays\u2014which can fail  to operate properly under certain conditions resulting from a GMD  event\u2014digital relays can be programmed to properly respond to these  conditions. FERC officials confirmed that digital relays may offer some  degree of protection during GMD events, but cautioned that they are  likely more susceptible than the older electro-mechanical relays to the  E1 pulse of HEMP events.", "Construction of hardened control centers to protect against a  variety of threats, including HEMP. Two of the 10 suppliers we  contacted that purchased their own equipment had built, or were  planning to build, control centers specifically designed to be resilient  to the effects of EMP and other threats. For example, one electricity  supplier\u2019s customers included critical national security agencies and  others in the Washington, D.C. area\u2014resulting in the supplier\u2019s desire  to protect against the HEMP threat. The second supplier was in the  process of designing its own hardened control center to guard against  both EMP and other threats posed by extreme weather events  occasionally occurring in its area of the country.", "In addition to technological improvements to provide a range of system  reliability benefits, some suppliers are considering investments in  technology specifically focused on blocking harmful GIC produced during  GMD events. This GMD mitigation technology is referred to as a \u201cGIC  blocking device\u201d and is still being tested. Since this technology is for the  sole purpose of blocking GIC produced during GMD events, its cost may  be directly attributed to GMD mitigation. One of our 13 selected  electricity suppliers had installed such a prototype device on its high- voltage transmission system as part of an ongoing field trial to assess its  performance and overall system impact in order to determine the  effectiveness of the device under different operating conditions. Four  selected suppliers expressed concern that GIC blocking devices can have  unintended consequences on the stability or reliability of their  transmission networks which could limit their overall benefits. Two of  these suppliers stated that, before considering the installation of these  blocking devices, they would perform analysis to determine their  effectiveness in suppressing GIC at the system level and the impact on  the functioning of their transmission system."], "subsections": []}, {"section_title": "Suppliers Have Developed Operating Procedures for the Initial GMD Reliability Standard and Recognize They May Need to Take Further Steps for the Next Standard", "paragraphs": ["NERC\u2019s initial reliability standard EOP-010-1 requires certain suppliers to  have GMD operating procedures to mitigate the potential effects of GMD  events on the reliable operation of the transmission networks for which  they are responsible. As of May 2017, the 13 suppliers we contacted  told us they were all subject to the requirements of the EOP-010-1  standard and had GMD operating procedures in place to comply with the  standard. Moreover, three of the 13 suppliers functioned as reliability  coordinators and told us that all of the suppliers they oversaw in their  territory also had operating procedures in place in accordance with EOP- 010-1. Officials with the reliability coordinators stated they reviewed their  suppliers\u2019 operating procedures to ensure they did not conflict with the  procedures of other electricity suppliers in the coordinators\u2019 geographic  areas of responsibility.", "In addition, NERC\u2019s Compliance Registry indicates that 188 electricity  suppliers in the United States and Canada are potentially subject to the  EOP-010-1 standard. NERC officials stated that, based on audit reports  reviewed from its Regional Entities that included EOP-010-1, suppliers  with transformers fitting the criteria specified in EOP-010-1 have  developed the operating procedures required by the standard. NERC  officials also stated that the EOP-010-1 standard requires electricity  suppliers\u2019 operating plans and procedures to mitigate the effects of GMD  events on the reliable operation of the grid\u2014as well as for the reliability  coordinators to coordinate these plans and procedures within their area of  responsibility. NERC officials stated that, as part of their compliance  review for the standard, the NERC regions will assess the  reasonableness of these plans and procedures. According to NERC, the  standard provides the suppliers the flexibility to develop the procedures  they think they need for their respective networks. NERC officials added  that the quality of the measures put in place to address vulnerabilities to  GMD would be further addressed under NERC\u2019s second-stage GMD  standard, TPL-007-1.", "NERC\u2019s initial GMD-related reliability standard, EOP-010-1, went into  effect in April 2015. NERC\u2019s next reliability standard, TPL-007-1,  includes requirements that will be phased in over a 5-year period from  July 2017 to January 2022. The TPL-007-1 standard lists a total of seven  requirements of which all but one are directed at planning coordinators  and transmission planners whose planning area includes certain high- voltage transformers. In general, these requirements detail further steps  suppliers must take to periodically model their networks and assess the  vulnerable points of their networks to GMD.", "Depending on the vulnerabilities suppliers identify in conducting future  assessments in accordance with TPL-007-1, suppliers will be required to  develop corrective action plans, starting in January 2022, to ensure their  generation or transmission networks meet certain performance  requirements during a GMD event (e.g., no cascading blackouts).  According to NERC, corrective actions in each plan may include (1)  operational procedures, (2) enhanced training, (3) installation of devices  (e.g., GIC blocking devices), (4) modification of devices (e.g., modifying  equipment for greater GIC resilience), (5) removing vulnerable devices  (e.g., old transformers), and (6) spare transformer programs. See  appendix III for additional detail on TPL-007-1\u2019s 7 requirements for certain  electricity suppliers along with implementation dates for each."], "subsections": []}, {"section_title": "NERC Has a Process to Verify Compliance with Reliability Standards, Including Those Related to GMD", "paragraphs": ["NERC has an established process to verify electricity suppliers\u2019  compliance with reliability standards, including EOP-010-1 and TPL-007- 1. Annually, NERC identifies and prioritizes risks based on the potential  impact to reliability across its eight North American regions and the  likelihood that such an impact might be realized. This process results in  an annual compilation of risk elements for the coming year that are  reflected in NERC\u2019s implementation plan for compliance monitoring of  reliability standards throughout its eight regions. In this implementation  plan, NERC obtains input from the regions on risks inherent in their  geographic areas of responsibility, and NERC links these areas of risk  with specific reliability standards. For example, since becoming effective  in 2015, NERC officials stated that the EOP-010-1 standard has been an  annual area of focus in the implementation plan under the \u201cextreme  physical events\u201d risk area.", "NERC\u2019s overarching implementation plan provides a template for the  regions to follow in developing their own regional implementation plans.  NERC\u2019s eight Regional Entities build on NERC\u2019s guidance on risks facing  all regions by assessing risks to the reliable operation of the bulk power  system in their specific geographic areas of responsibility and identifying  the reliability standards associated with those local areas of risk that they  will focus on in their compliance monitoring efforts for the upcoming year.  Further, according to NERC officials, each NERC Regional Entity  performs individual risk assessments for each of the electricity suppliers  in their areas of responsibility which further inform their approach to  compliance monitoring for each of these suppliers\u2014including which tools  to use when assessing compliance. According to NERC, these individual risk assessments, along with the overarching and region- specific risks, inform the regions compliance monitoring oversight plan for  each supplier. At the end of this planning process, NERC approves each  region\u2019s implementation and audit plans and submits the audit plans to  FERC.", "As of August 2017, NERC\u2019s regions had conducted 63 compliance audits  of suppliers that included the EOP-010-1 reliability standard out of the  total of 188 electricity suppliers potentially subject to the standard in the  United States and Canada. According to NERC officials, the EOP-010-1  reliability standard went into effect in April 2015, and, as noted previously,  NERC Regional Entities conduct compliance audits of individual  suppliers\u2014including those that must comply with EOP-010-1\u2014at least  once every 3 years. Therefore, due to this reason and the fact that  these audits are just one of several options for NERC to consider in  compliance monitoring, not every supplier subject to EOP-010-1 has been  the subject of a compliance audit that included that standard in its scope  as of the date of this report. NERC regions conducted these compliance  audits on both reliability coordinators and transmission operators  registered in the U.S. that were subject to EOP-010-1. As of September  2017, NERC had reported a total of two instances of non-compliance with  the EOP-010-1 standard since its inception in April 2015. Electricity  suppliers self-reported these two instances of non-compliance to NERC,  and they were not the result of a compliance audit. NERC concluded that  these incidents posed minimal risk to the reliability of the bulk power  system. The two suppliers engaged in mitigation activities (e.g., training of  personnel and modification of procedures) to address their non- compliance with the standard, which was verified by NERC\u2019s Regional  Entities. NERC concluded that no further action was needed in these two  cases."], "subsections": []}]}, {"section_title": "Selected Suppliers Reported that Costs for Protecting against GMD and HEMP Events Have Been Relatively Small to Date, and Most U.S. Suppliers Are Expected to Be Able to Recover Costs through Charges to Electricity Customers", "paragraphs": [], "subsections": [{"section_title": "Selected Suppliers Told Us Costs for Protecting against GMD and HEMP Events Have Been Relatively Small to Date, but Costs May Increase as Suppliers Comply with Future NERC Requirements", "paragraphs": ["Selected electricity suppliers told us the costs they have incurred to date  for protecting against GMD and HEMP events have been small relative to  their overall system costs. One supplier said that the costs they have  incurred are generally associated with projects that provide broader  system reliability or other benefits not specific to GMD or HEMP events.  Based on interviews with selected suppliers, there are several types of  projects that protect against GMD and HEMP events at different levels of  costs:", "Projects providing collateral GMD or HEMP protection at no  specific, incremental cost. As noted previously in this report,  selected suppliers have installed several types of equipment for the  purposes of transmission efficiency or benefits of general stability, and  this equipment also provides collateral protection against GMD or  HEMP events. This equipment has included series compensation  systems installed on transmission lines, replacement of older electro- mechanical protective relays used in the suppliers\u2019 grid control  systems with newer digital relays, and acquisition of spare  transformers or participation in shared spare transformer programs  which improves their ability to quickly restore transmission systems  from any cause, including GMD or HEMP events. Total project costs  may vary widely depending on the amount and type of equipment  suppliers choose to install, but according to suppliers we interviewed  and information from transformer manufacturers, costs for this  equipment can range from thousands of dollars per digital relay to  tens of millions of dollars for a series compensation system.", "Projects providing supplemental GMD or HEMP protection at  minimal added cost. As also noted previously in this report, some  suppliers we interviewed said they have added specifications for  improved protection against GMD or HEMP events as part of larger  equipment procurement or construction projects and that this  improved protection typically came at a relatively small increase in  total project price. For example, several suppliers told us that  transformers and other transmission equipment used to control  voltage levels can be made more resistant to GIC by using certain  designs or materials, and one supplier said this would increase  equipment costs by 2 to 3 percent or less. In addition, the two  suppliers we interviewed who have designed new control centers that  are to be hardened against a range of hazards\u2014including extreme  weather (earthquakes, tornadoes, hurricanes, lightning), physical  attacks, and HEMP events\u2014told us that adding HEMP protection to  the design of new control centers has increased total project costs  from about 5 to approximately 20 percent.", "Projects built primarily for GMD or HEMP protection. As also  noted previously in this report, one supplier has installed a prototype  GIC-blocking device, designed specifically to protect against GMD  events, as part of a pilot effort to test its operational impacts. The  costs of deploying these devices are expected to be better understood  after the pilot effort is completed, but based on its initial results, the  supplier expects that the total cost for a well-designed GIC-blocking  device would be at least $500,000, excluding installation and other  costs and one device could be required to protect each transformer.", "Suppliers we interviewed told us they have also developed plans or  procedures to mitigate for GMD. According to suppliers, in general these  plans emphasize reducing the (1) level of power provided by individual  power plants and (2) amount of power flowing over power lines to levels  below their operating limits. For example, the plan for one coordinator\u2014a  grid operator\u2014requires that they immediately take action to reduce the  transfer of power down to GMD Operating Plan-designated limits; if these  limits are approached or exceeded, selected power plants are directed to  reduce the levels of power provided and, if necessary, the grid operator  modifies the levels of power flowing through the system until designated  transfer limits are reached. According to suppliers, lowering these power  levels can reduce the temperatures of key equipment such as  transformers and provide for greater flexibility to operate the system  during an event. In some cases, such plans can require increased use of  power plants that are more costly to operate, potentially increasing overall  system costs. The costs of emergency operating procedures  implemented in response to electromagnetic events are likely to vary  considerably on a case-by-case basis, depending on such factors as the  level of demand and the generation resources available during the event.", "In terms of customer costs, U.S. suppliers we interviewed said that the  costs they have incurred for GMD or HEMP protection thus far would  represent a negligible increase in rates paid by customers. For example,  one supplier we interviewed serves about 4.5 million retail customers, and  officials from that supplier estimated the cost of hardening a planned  control center against HEMP to be at least $10 million. If this cost is fully  passed on to customers and paid for in a single year, we calculated that it  would amount to a total of about $2 for the average customer\u2019s electric bill  for that year.", "In the future, suppliers could face increased costs for protecting against  GMD, depending on the corrective actions needed to address  vulnerabilities, which suppliers are to identify in accordance with reliability  standard TPL-007-1. The standard does not require suppliers to complete  vulnerability assessments and develop corrective action plans until 2022,  and suppliers told us it is too early to know what types of corrective  actions may be required. However, the costs associated with some types  of potential actions could be high. In particular, examples of potential  corrective actions provided in the standard, such as installing new  equipment or modifying existing equipment for improved GIC resilience,  could be costly according to some suppliers we interviewed. For example,  high-voltage transformers can cost tens of millions of dollars each. If  suppliers identify multiple transformers that are vulnerable to thermal  impacts from GIC flows, replacing or modifying them would be costly.  Similarly, a supplier may need to install GIC-blocking devices throughout  their network to effectively protect against a GMD event because the  devices re-direct GIC flows elsewhere in the network. Therefore, a  blocking device strategy could be costly if suppliers determine that large  numbers of their transformers are vulnerable.", "Based on our prior review of federal efforts to enhance electric grid  resiliency and federal emergency management programs, and interviews  with agency and industry representatives, there are no sources of direct  federal funding specifically to reimburse suppliers for costs they incur for  protecting against GMD or HEMP events. DHS officials told us there  are two DHS grant programs that could be used to indirectly support  suppliers\u2019 efforts to prepare for GMD or HEMP events. However, DHS  directly awards these grants to state, local, or tribal governments, and  DHS officials told us that it is rare for these grant funds to be passed  through to private companies and they have no record of instances in  which electricity suppliers received funding for grid preparedness  efforts."], "subsections": []}, {"section_title": "Regulated U.S. Suppliers\u2019 Costs for Protecting against GMD are Generally Recoverable, but Cost Recovery is Less Certain for HEMP Events", "paragraphs": [], "subsections": [{"section_title": "Federal and State Regulators Have Made Specific Assurances about Recovering GMD-Related Costs", "paragraphs": ["At the federal level, in FERC\u2019s September 22, 2016, order approving  NERC\u2019s TPL-007-1 reliability standard, FERC stated that cost recovery  for prudent costs associated with or incurred to comply with the standard  would be available to suppliers for whom FERC approves rates. Two  suppliers we interviewed said that because FERC requires suppliers to  comply with the standard and has provided specific assurance that  prudent costs will be recoverable, they do not expect challenges  recovering such costs. According to FERC officials, FERC determines  whether suppliers\u2019 investments are prudent on a case-specific basis, in  part by considering whether the supplier acted reasonably given industry  norms. FERC officials also stated that for most transmission rates, it  does not conduct in-depth reviews of the reasonableness and prudence  of each cost item unless a stakeholder such as a ratepayer advocacy  group, large customer, or state public utility commission challenges the  suppliers\u2019 rate filing with FERC. FERC officials told us they were not  aware of any cases in which stakeholders challenged GMD-related costs.", "Some suppliers we interviewed said that the revisions to TPL-007-1 that  FERC required in Order 830\u2014particularly, revisions to the benchmark  GMD event suppliers must use in their vulnerability assessments\u2014could  result in added costs for suppliers. For instance, one supplier expressed  concern that they could have to begin work to assess vulnerabilities and  protect against the first version of the benchmark event, and that the  revised standard would require them to re-do such work using a new  benchmark event, at additional cost. In response to such concerns, FERC  stated that it could not yet determine what impacts the revisions might  have on the actions suppliers would have to take to comply, because  NERC had not yet developed or proposed the revisions. However,  FERC re-affirmed that cost recovery for prudent costs associated with or  incurred to comply with reliability standard TPL-007-1, and future  revisions to the standard, will be available to regulated suppliers.", "Representatives from the state regulators we interviewed said they allow  recovery of prudent generation or distribution costs for regulated utilities  for improvements needed to meet federally-required reliability standards,  such as NERC\u2019s GMD reliability standards. In addition, some of the  selected suppliers told us that they use federally-required reliability  standards to justify necessary investments when filing a rate case with  state regulators. As with FERC, state regulators we interviewed said they  determine the prudence and reasonableness of costs on a case-specific  basis."], "subsections": []}, {"section_title": "Suppliers\u2019 Ability to Recover Future HEMP-Related Costs is Uncertain Due to Limited Understanding of HEMP Risks and Mitigation Efforts", "paragraphs": ["To the extent suppliers and regulators determine that HEMP events pose  a risk to bulk power system reliability, FERC may allow recovery of  prudent costs for protecting against EMP events. However, according to  FERC officials, determining prudence for costs associated with new,  emerging areas such as HEMP mitigation could be challenging because  regulators and suppliers have limited understanding of HEMP risks. In  2004, FERC publicly assured suppliers that it will allow for recovery of  prudent costs necessary for ensuring the reliability of the bulk power  system. Specifically, FERC issued a policy statement assuring public  utilities that FERC will approve applications to recover prudently-incurred  costs necessary to ensure bulk power system reliability, including prudent  expenditures for compliance with good utility practices\u2014practices  engaged in or approved by a significant portion of the electricity industry  or that could be expected to accomplish the desired result at a  reasonable cost. Two suppliers we interviewed said that they expect  FERC would allow them to recover transmission costs they deemed  necessary for protecting against HEMP events. FERC officials told us that  they are not aware of any cases to date where suppliers have sought  recovery of transmission costs associated with HEMP protection through  FERC-approved rates, so they do not know what challenges they might  encounter in determining whether these costs are prudent. Also, unlike  GMD events, suppliers and electricity industry stakeholders told us there  are not yet tools for assessing suppliers\u2019 vulnerability to HEMP events,  standards for protecting against these events, or tools for assessing the  effectiveness of protective remedies.", "Suppliers and state regulators we met with said more information is  needed to understand HEMP risks and mitigation efforts in order to  determine to what extent costs would be recoverable. Electricity industry  stakeholders and suppliers told us that they are sensitive to the fact that  their costs are typically borne by customers, and more complete  knowledge of HEMP risks would allow them to invest responsibly in  HEMP protection from both a reliability and cost perspective. Similarly,  one state regulator we interviewed has not yet received any rate filings  from suppliers that include costs associated with HEMP protection.  However, one supplier said that their state regulators prioritize reliability,  and they expect the regulators would allow recovery of costs for HEMP  protection if suppliers determined such protection was needed. As with  FERC, state regulators said that when rate filings involve new  technologies or practices, there is more uncertainty regarding costs and  benefits and it can be more difficult for regulators to determine prudency.  For example, one state regulator told us that DHS is doing work to  understand risks associated with HEMP events, and what protections  such events may necessitate. The regulator said they would like to see  the results of this work before suppliers invest in mitigation equipment, so  there can be more certainty that the costs will be considered prudent."], "subsections": []}]}, {"section_title": "Independent Generators May Face Challenges Recovering Costs for Protecting Against GMD and EMP Events", "paragraphs": ["Independent generators\u2014generators that sell power in wholesale  electricity markets and are not part of an integrated utility\u2014do not have a  mechanism assuring cost recovery for reliability improvements, including  such as GMD and HEMP protection. FERC officials stated that these  generators sell electricity at prices determined by supply and demand in  markets that FERC has determined are sufficiently competitive or that  have adequate procedures in place to mitigate the effect of companies to  manipulate prices, such as could be the case for a company with a large  market share. As such, according to electricity industry and FERC  officials, independent generators do not have the assurances of cost  recovery that traditionally-regulated suppliers do. If they invest in  protecting their facilities from the potential effects of GMD and HEMP, the  prices independent generators obtain for selling electricity so as to be  competitive in the wholesale markets may be too low to allow them to fully  recover their costs. According to data from DOE\u2019s Energy Information  Administration, independent generators represented nearly 47 percent of  electric generation facilities and generated about 39 percent of utility- scale electricity in the U.S. in 2015.", "FERC officials said they recognize that independent generators could  face challenges recovering costs for step-up transformers\u2014generator  equipment which, if it is vulnerable to GMD, may need to be replaced or  modified in accordance with NERC standard TPL-007-1. Independent  generators must balance the need to recover costs associated with these  transformers with the need to offer prices for their electricity that are  competitive in wholesale markets. According to suppliers, until studies are  completed to identify how companies will comply with TPL-007-1 it is  unclear the extent of the risk to step-up transformers owned by  independent generators and the extent of the challenges of paying for  steps to mitigate those risks."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOE, DHS, NOAA, NRC, FERC, and  NERC for their review and comment. DOE, DHS, NRC, FERC, and  NERC provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the Secretaries of Commerce,  Energy, and Homeland Security, the Chairmen of the Federal Energy  Regulatory Commission and the Nuclear Regulatory Commission, and  the Chief Executive Officer of the North American Electric Reliability  Corporation. 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  Chris Currie at (404) 679-1875 or curriec@gao.gov or Frank Rusco at  (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["In conducting our work, we interviewed representatives from 13 of the  181 U.S. and Canadian electricity suppliers\u2014entities that own or operate  generation or transmission infrastructure\u2014subject to the North American  Electric Reliability Corporation\u2019s (NERC) 2014 geomagnetic disturbance  (GMD) reliability standard and which conduct planning and generation,  transmission, and distribution operations. We selected these 13  electricity suppliers based on input from the U.S. Department of Energy  (DOE), NERC, industry associations, and research institutions as to  which suppliers had taken steps to prepare for and mitigate impacts from  electromagnetic events. We also considered, among other things, the  following supplier preparedness and mitigation actions and  characteristics: (1) efforts or plans to install mitigation equipment or  technology; (2) efforts or plans to develop specific mitigation processes,  procedures, or other operational actions; (3) infrastructure, such as length  and voltage of transmission lines; (4) high-voltage equipment, including  transformers over 230 kilovolts (kV); (5) geomagnetic latitude; and (6)  experience with GMD-related service disruptions. We included 3  Canadian electricity suppliers among the 13 suppliers we interviewed due  to their (1) experiences with past geomagnetic disturbance (GMD) events,  (2) research on the impacts of GMD, and (3) actions taken to prepare for  and mitigate GMD events.", "We conducted site visits to 6 of the 13 suppliers to better understand their  experiences with past GMD events and identify actions they have taken  to prepare for and mitigate GMD and High-Altitude Electromagnetic Pulse  (HEMP) events, among other things. During these visits we met with  organization officials; observed operations and facilities, such as control  centers hardened to mitigate effects from HEMP events; and viewed  equipment potentially vulnerable to GMD, such as high-voltage  transformers. While we cannot generalize the information we learned  from these selected suppliers to all U.S. and Canadian suppliers, they  provided insight on what electricity suppliers may know regarding the  potential impacts of electromagnetic events on the electric grid, as well as  steps suppliers may be taking to prepare for and mitigate such impacts.  The selected U.S. suppliers also identified opportunities available to them  for recovering costs for protecting against electromagnetic events. Based  on input from DOE, NERC, supplier, and industry officials, and because  of these organizations\u2019 specialized knowledge and experience with the  electricity industry, we also interviewed representatives from six industry  organizations\u2014five industry associations and one industry research  organization\u2014two transformer manufacturers, one software modelling  company specializing in simulations of high-voltage power system  operations, and one designer of a prototype geomagnetically induced  current (GIC)-blocking device.", "To determine the extent to which U.S. and Canadian electricity suppliers  have identified information about the effects of GMD and HEMP on the  electric grid, we reviewed selected U.S. and Canadian government  studies issued\u2014or commissioned by\u2014DHS, DOE, U.S. National  Laboratories, Natural Resources Canada, the Federal Energy Regulatory  Commission (FERC), and NERC since 2010 regarding, among other  things, the vulnerability of transmission and generation infrastructure and  equipment to GMD and HEMP events, possible measures to mitigate the  effects of GMD and HEMP, and areas requiring further research. We  also reviewed relevant studies published since 2010 from the Electric  Power Research Institute (EPRI) and private contractors referred to us by  government, supplier, and industry representatives. We identified these  studies based on feedback from all entities listed above and through  references in reports and other documentation. While we did not compile  a comprehensive list of all studies of the effects of GMD and HEMP on  the U.S. and Canadian electric grid, industry experts indicated that we  had identified relevant studies published on this subject since 2010. We  also interviewed knowledgeable officials from these U.S. and Canada  government agencies, national laboratories, and industry organizations to  clarify our understanding of the issues addressed in these studies. We  assessed the methodologies used in the relevant reports and determined  them to be sufficiently rigorous to provide information about the potential  effects of GMD and HEMP events on the electric grid.", "To better understand the effects of solar weather on the electric grid, how  GMD is measured, and mechanisms in place for notifying electricity  suppliers of potentially dangerous solar storms, we interviewed  representatives from the National Oceanic and Atmospheric  Administration\u2019s (NOAA) National Weather Service, the U.S. Geological  Survey (USGS), and the National Aeronautics and Space Administration  (NASA). We also reviewed relevant documentation on processes and  procedures. -index) is a near real-time estimate of the official Planetary K-index  maintained by the GFZ German Research Centre for Geosciences. events occurring from 1933 through 2016. We also interviewed  Department of Homeland Security (DHS) officials regarding the  Department\u2019s efforts to address requirements in the National Defense  Authorization Act for Fiscal Year 2017.", "To obtain perspectives on efforts individual electricity suppliers have  taken to better understand the effects of GMD and HEMP, we interviewed  officials from 13 U.S. and Canadian suppliers regarding the extent to  which they had evaluated the impact of electromagnetic events on their  specific generation systems or transmission networks and what they had  learned from these evaluations. With respect to ongoing efforts to  research the effects of HEMP, we reviewed DOE and EPRI\u2019s Joint  Electromagnetic Pulse Resilience Strategy and the U.S. Department of  Energy Electromagnetic Pulse Resilience Action Plan and interviewed  relevant DOE and EPRI officials regarding these plans. Further, we  interviewed officials from various national laboratories regarding their  ongoing efforts to fully investigate and evaluate how an electric utility  could protect itself from, or mitigate the effects of, HEMP on its systems.  We also interviewed officials from the Nuclear Regulatory Commission  (NRC) regarding efforts to assess the ability of a nuclear power plant to  achieve safe shut down following a GMD or EMP event and the extent to  which plants are required to implement strategies or guidelines in the  event of a prolonged loss of offsite power, similar to what could be  caused by a GMD or EMP event. Finally, we reviewed the 2008  Commission to Assess the Threat to the United States from  Electromagnetic Pulse Attack (EMP Commission) report with  recommendations on preparing for and recovering from a possible EMP  attack. In October 2017, we also requested an interview with a  representative from the EMP Commission but did not receive a response  to our requests.", "To identify steps selected U.S. and Canadian electricity suppliers have  taken to protect against GMD and HEMP events and understand how  NERC has monitored these efforts, we reviewed FERC orders and NERC  reliability standards that require certain suppliers to take steps to assess  and prepare for GMD impacts. We interviewed FERC and NERC  officials to discuss these standards and reviewed public comments  submitted by stakeholders during the FERC rulemaking process. We also  interviewed officials from 13 U.S. and Canadian electricity suppliers to  identify steps they had taken to comply with NERC reliability standards as  well as any additional actions to prepare for and mitigate potential GMD  and HEMP effects, such as replacement of older equipment or investment  in spare transformer programs. Additionally, we reviewed relevant federal  guidance on preparing for GMD and HEMP events, such as DHS\u2019s  Electromagnetic Pulse protection guidelines and NERC\u2019s Geomagnetic  Disturbance Planning Guide.", "To identify the extent to which NERC has monitored electricity suppliers\u2019  steps to comply with NERC reliability standard EOP-010-1, we reviewed  NERC monitoring processes, including procedures for developing an  annual, nationwide implementation plan for conducting monitoring  activities. NERC officials provided the number of compliance audits  conducted between April 2015\u2014when NERC, through Regional Entities  to which it has delegated enforcement authority, first began reviewing  suppliers for compliance with EOP-010-1\u2014and August 2017 that included  the EOP-010-1 reliability standard. We contrasted the number of  compliance audits with the total number of suppliers potentially subject to  NERC\u2019s GMD reliability standard EOP-010-1. We assessed the reliability  of the data on the total number of suppliers subject to EOP-010-1 by  interviewing agency officials regarding data sources, system controls, and  any quality assurance steps performed by officials before the data were  provided; we found the data to be sufficiently reliable to provide the  number of suppliers subject to EOP-010-1 since it went into effect. We  also discussed with cognizant NERC officials the organization\u2019s  processes for collecting and reporting comprehensive data on the status  of their overall compliance monitoring efforts.", "To identify what opportunities exist for U.S. electricity suppliers to recover  costs for protecting against GMD and HEMP events, we reviewed FERC  regulations and orders related to cost recovery, such as suppliers\u2019 costs  for spare transmission equipment services. We also interviewed FERC  officials and representatives of selected state regulators whose  jurisdictions include suppliers we interviewed, regarding procedures  available to electricity suppliers to recover costs for actions taken to  prepare for and mitigate GMD and HEMP effects. We asked these  officials to discuss previous, current, and potential future regulatory  actions\u2014orders or rate cases they have overseen\u2014involving recovery of  costs for actions taken to protect against GMD and HEMP events.  Further, we interviewed cognizant DHS and DOE officials to identify the  extent to which financial incentives\u2014such as preparedness grants\u2014are  available to U.S. electricity suppliers to offset the costs of preparation and  mitigation efforts. As part of our review of actions taken by ten selected  U.S. electricity suppliers to prepare for and mitigate the impact of  electromagnetic events, we interviewed officials regarding the extent to  which they had recovered costs expended on preparedness and  mitigation efforts and what, if any, options they were considering to  recover such costs in the future. While the information provided by  these selected electricity suppliers is not generalizable to the U.S.  industry, it illustrates examples of actions selected suppliers have taken  to recover costs for GMD and HEMP mitigation and preparedness efforts.  In addition, we interviewed representatives from various trade  associations to identify challenges suppliers face in recovering costs for  mitigation and preparedness efforts.", "We conducted this performance audit from May 2016 to February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: National Oceanic and Atmospheric Administration (NOAA) Notifications for Geomagnetic Disturbances", "paragraphs": ["In the United States, the National Oceanic and Atmospheric  Administration\u2019s (NOAA) National Weather Service manages the Space  Weather Prediction Center (SWPC), which is responsible for monitoring  and providing services on space weather, including geomagnetic storms.  SWPC uses a variety of ground and space-based sensors, as well as  imaging systems, to view and estimate geomagnetic activity around the  world, and to issue Watches, Warnings, and Alerts for geomagnetic  storms through e-mail and website postings to those who are impacted by  space weather. Additionally, in the event of imminent geomagnetic  storms, SWPC issues immediate voice notification and confirmation to all  North American Electric Reliability Corporation (NERC) reliability  coordinators through a special hotline. is a  \u201crange index\u201d\u2014a measure of variation that saturates at K= 9\u2014Dst is an unbounded  measure of solar storm effects on the Earth\u2019s magnetic field. In this report, we use the K- index, the history of which spans three solar cycles more than the Dst-index. = 9 (extreme)\u2014to determine whether geomagnetic alerts and warnings  should be issued.", "SWPC\u2019s primary notifications include:", "Watches: Watch forecasts for impending geomagnetic storms\u2014 coronal mass ejections (CME)\u2014are issued when the highest  predicted Kp-index for a day is between K = 5 or higher and are  posted approximately 1 to 2 days before a storm reaches Earth.  According to SWPC, Watch forecasts are less reliable in predicting  storm intensity and timing than other types of forecasts, but are  considered useful for longer-range notification. Watch forecasts are  based primarily on space and ground-based solar observations as  well as modelling predictions.", "Warnings: Warnings of geomagnetic storms are issued when  estimated K-indices of K = 4 or higher are expected; they are  generally issued 20 to 40 minutes in advance and are based on real- time observations of the solar wind conditions affecting earth. SWPC  considers Warning notices as more reliable than Watch forecasts in  terms of measuring storm intensity and timing. -index to determine the G-scale level (G1 through G5), in  which \u201cK= 5\u201d corresponds to \u201cG1\u201d and \u201cK= 9\u201d corresponds to \u201cG5.\u201d A K of 0 to 4 is  below storm levels and is labeled as \u201cG0.\u201d For purposes of consistency, we use the K- index in this report.", "Alerts: Alerts are near real-time indications that a specific storm  threshold\u2014K = 4 or above\u2014is reached; they are based on SWPC\u2019s  minute-by-minute estimate of GMD activity. Alerts are derived from  ground-based magnetometer observations from eight locations  around the world.", "According to SWPC, Watches, Warnings, and Alerts are to be issued as  activity occurs and therefore can be issued very frequently during high- activity intervals and not at all during quiet periods. SWPC issues these  notifications when storm levels reach a specific estimated K level. Table  1 shows the estimated K-indices that trigger each SWPC notification  product as well as the estimated impacts to the electrical power system."], "subsections": []}, {"section_title": "Appendix III: North American Electric Reliability Corporation (NERC) Geomagnetic Disturbance (GMD) Reliability Standards", "paragraphs": ["In May 2013, the Federal Energy Regulatory Commission (FERC)  directed NERC to develop reliability standards requiring electricity  suppliers to address the potential impact of GMD on the reliable operation  of the U.S. bulk power system. In June 2014, FERC approved standard  EOP-010-1, submitted by NERC, requiring that certain suppliers prepare  for the effects of GMD events by developing contingency operating plans,  procedures, and processes. FERC approved a second standard\u2014TPL- 007-1\u2014in September 2016, also submitted by NERC, requiring certain  suppliers to assess the vulnerability of their transmission systems to GMD  events; suppliers that do not meet certain performance requirements  must develop a plan to achieve the performance requirements. Table 2  summarizes the specific requirements in NERC\u2019s stage 1\u2014EOP-010-1\u2014 and stage 2\u2014TPL-007-1\u2014standards, the electricity industry entities  responsible for them, and their effective dates for the requirements."], "subsections": []}, {"section_title": "Appendix IV: Select Government and Industry Studies on Electromagnetic Events", "paragraphs": ["An electromagnetic event can result from a naturally occurring, large- scale geomagnetic disturbance (GMD), caused by severe solar weather,  or from human-made sources, such as the high-altitude detonation of a  nuclear device to create a high-altitude electromagnetic pulse (HEMP).  Table 3 provides details on a select number of geomagnetic-related  studies performed since 2010 with respect to their objectives, findings,  and recommendations. These studies include details on (1) areas of  vulnerability for the grid with respect to GMD events, (2) potential impact  on the grid from these events, (3) possible mitigation measures, and (4)  areas needing further research. For example, as shown in the table, the  North American Electric Reliability Corporation\u2019s (NERC) and the  Department of Energy\u2019s (DOE) June 2010 report included a plan to form a  task force of government and industry efforts to examine GMD. This  resulted in the formation of the NERC GMD Task Force, consisting of  government, industry, and academic experts, to examine the GMD threat  to the nation\u2019s power grid. The task force\u2019s work in evaluating the  potential impact of GMD events resulted in NERC\u2019s subsequent February  2012 report (also shown in table 3) which outlines its plans for working  with industry on new reliability standards for GMD events, among other  things. As a result of this work, and as directed by the Federal Energy  Regulatory Commission (FERC), NERC developed the EOP-010-1 and  TPL-007-1 GMD reliability standards. Also as a result of this work, NERC  issued a GMD Planning Guide for electricity suppliers, which assists the  suppliers in carrying out studies to assess the effects of GMD on their  individual networks.", "Table 4 provides details on a select number of unclassified HEMP-related  studies performed since 2010 with respect to their objectives, findings,  and recommendations. These studies include details on (1) areas of  vulnerability for the grid with respect to HEMP events, (2) potential impact  on the grid from these events with respect to all three HEMP pulses (E1,  E2, and E3), (3) possible mitigation measures, and (4) areas needing  further research."], "subsections": []}, {"section_title": "Appendix V: Details on the U.S. Department of Energy\u2019s (DOE) Electromagnetic Pulse (EMP) Resilience Action Plan", "paragraphs": ["DOE\u2019s EMP Action Plan (DOE Action Plan), issued January 2017,  describes 19 actions to be taken by September 30, 2021, to enhance the  resilience of the electric power grid to high-altitude electromagnetic pulse  (HEMP) effects. DOE stated that its Action Plan considers the over 90  recommendations made in the 2008 Commission to Assess the Threat of  the United States from Electromagnetic Pulse (EMP) Attack (EMP  Commission) report and at least partially addresses 10 of the 15  recommendations directly related to the electric power system made by  the EMP Commission in their report. See table 5 for these 10 EMP  Commission recommendations from 2008 and corresponding  components of DOE\u2019s 2017 Action Plan.", "As of November 2017, based on our review of implementation dates for  specific actions in DOE\u2019s plan, the agency had yet to complete 15 of the  19 actions detailed in the Action Plan but had initiated efforts under the  plan to identify gaps in HEMP knowledge and coordinate government and  industry information sharing with the electricity sector and other critical  industry sectors. Future work DOE expects to address under the plan will  include (1) evaluating existing models used to estimate EMP impacts to  the grid, (2) the adequacy of backup power generation in the wake of an  EMP event, (3) establishing a national capability for conducting EMP  testing of existing grid components, (4) identifying and evaluating  mitigation and protection measures for various grid components, and (5)  assessing the feasibility of testing different hardening techniques for  substations for EMP scenarios. The DOE Action Plan includes  deliverables and due dates for the 19 action items detailed in the plan  which, according to DOE, are subject to the availability of necessary  funding. See table 6 for details on these deliverables, and associated  dates, for each action item."], "subsections": []}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individuals named above, Jon Ludwigson (Acting  Director), Ben Atwater (Assistant Director), and Barbara Guffy (Analyst-in- Charge) managed this assignment. Frederick K. Childers, Jonathan  Felbinger, Daniel Friess, Alexandra D. Gebhard, Michael Harmond, Eric  Hauswirth, Richard Hung, Miles Ingram, and Heidi Nielson made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Under some circumstances, a severe solar storm or high-altitude nuclear blast could damage the U.S. electric grid and potentially cause extensive outages.", "New standards require some electricity suppliers to assess their vulnerability to extreme solar storms. We reviewed industry actions to reduce risks from extreme solar storms and high-altitude nuclear blasts.", "Government and industry experts generally knew more about solar than nuclear risks, and agreed on a need for more research. All but 2 of the 13 electricity suppliers we contacted had assessed their systems' vulnerability to solar storms and most expected impacts to be relatively small."]}
{"id": "GAO-18-96", "url": "https://www.gao.gov/products/GAO-18-96", "title": "Federal Aviation Administration: Stakeholders' Perspectives on Potentially Moving the Office of Commercial Space Transportation", "published_date": "2017-10-05T00:00:00", "released_date": "2017-10-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Office of Commercial Space Transportation, which regulates and promotes the U.S. commercial space launch industry, was established in 1984 within the Office of the Secretary of Transportation and transferred to FAA in 1995. In 2015, GAO reported that the Office of Commercial Space Transportation faced challenges associated with the growth of the commercial space launch industry such as licensing more launches. To help meet these and other challenges such as updating regulations, some industry stakeholders and others suggested that the Office of Commercial Space Transportation should be moved back to the Office of the Secretary of Transportation.", "GAO was asked to review issues regarding transferring the Office of Commercial Space Transportation from FAA to the Office of the Secretary of Transportation. This report addresses: (1) selected stakeholders' and officials' perspectives on transferring the Office of Commercial Space Transportation from FAA to the Office of the Secretary of Transportation, (2) what steps would be required to make this transfer, and (3) key practices and considerations GAO has previously identified for organizational changes that could be instructive for such a transfer. GAO interviewed industry stakeholders and FAA and DOT officials, reviewed the steps taken during the office's 1995 transfer, and reviewed prior reports on key practices and questions to consider regarding organizational changes.", "GAO is making no recommendations in this report."]}, {"section_title": "What GAO Found", "paragraphs": ["Representatives from commercial space launch companies and spaceports GAO interviewed described advantages and disadvantages of moving the Office of Commercial Space Transportation to the Office of the Secretary of Transportation, but most of them favored moving the office. Conversely, most Federal Aviation Administration (FAA) officials GAO interviewed did not favor the idea. A senior official in the Office of Commercial Space Transportation said that there are advantages and disadvantages to moving the office and that whether such an action would be beneficial depends on the implementation details and the administration's preferences. Officials from the Office of the Secretary of Transportation said they currently do not have plans to move the office. Stakeholders' and officials' perspectives are based on what they perceive could occur as a result of a move, for example:", "Communication and coordination: Department of Transportation (DOT) officials said that a possible advantage of moving the office would be having a unified point of contact for the industry in communicating about commercial space launch issues, while FAA officials said that moving the office could make it more difficult for FAA offices to coordinate on commercial space activities.", "Regulations: Some stakeholders said that moving the office could help accelerate the pace of commercial space regulatory reform, but DOT officials said that moving the office would not necessarily do so.", "Resources: According to some stakeholders and a senior official in the Office of Commercial Space Transportation, moving the office out of FAA could give commercial space launch issues a higher profile and more resources because FAA is focused on aviation as opposed to commercial space. However, officials from the Office of the Secretary of Transportation said that it is uncertain whether the office would receive more resources if it were moved to the Secretary's office.", "The Secretary of Transportation could move all or part of the office through a delegation of responsibilities for commercial space, as was the case in the prior move in 1995. If the office were moved, other necessary steps would include addressing the differences in pay scales between FAA and the Office of the Secretary of Transportation, obtaining support services and office space, and establishing new coordination and communication processes and procedures.", "GAO's prior work has identified key practices and questions for consideration when evaluating proposals for or implementing organizational changes such as a consolidation or merger. These key practices include: (1) focusing on a key set of principles and priorities at the outset of the transformation, (2) setting implementation goals and a timeline to build momentum and show progress, and (3) establishing a communication plan. Questions to consider when evaluating consolidation proposals include (1) What are the goals of the consolidation? and (2) What will be the likely costs and benefits of the consolidation?"]}], "report": [{"section_title": "Letter", "paragraphs": ["The Office of Commercial Space Transportation, which regulates and  promotes the U.S. commercial space launch industry, was established in  1984 within the Office of the Secretary of Transportation and transferred  to the Federal Aviation Administration (FAA) in 1995. In 2015, we  reported that the Office of Commercial Space Transportation faced  challenges associated with the growth of the commercial space launch  industry, including licensing more launches as well as new types of  vehicles and technologies, licensing more and complex launch sites, and  responding to emerging business plans. To help meet these and other  challenges such as updating regulations, some industry stakeholders and  others have suggested that the Office of Commercial Space  Transportation should be moved back to the Office of the Secretary of  Transportation.", "You requested that we review issues regarding transferring the Office of  Commercial Space Transportation from FAA to the Office of the Secretary  of Transportation. This report addresses: (1) selected stakeholders\u2019 and  officials\u2019 perspectives on transferring the Office of Commercial Space  Transportation from FAA to the Office of the Secretary of Transportation,  (2) what steps would be required to make this transfer, and (3) key  practices and considerations we have identified for organizational  changes that could be instructive for such a transfer.", "To obtain selected stakeholders\u2019 perspectives on transferring the Office of  Commercial Space Transportation from FAA to the Office of the Secretary  of Transportation, we interviewed representatives from four selected  commercial space launch companies that have conducted launches and  other activities under a permit within the last 5 years in the United States  and that represent different sectors of the industry such as orbital  launches and space tourism. In addition to these companies and to  obtain the perspectives of companies that have different types of licenses  and are in different stages of the licensing process, we also interviewed  representatives from (1) a company that indicated it is working with FAA  on a launch license application, (2) a licensed spaceport, and (3) an  airport in the launch site licensing process. Furthermore, to obtain the  perspective of an industry association that represents a range of  commercial space companies\u2014including commercial spaceflight  developers, operators, and spaceports\u2014we interviewed a representative  from the Commercial Spaceflight Federation, an association representing  the commercial space industry. Within FAA, we interviewed officials in  offices that FAA identified as being involved in commercial space  transportation issues, including the Office of the Administrator, the Office  of Commercial Space Transportation, the Air Traffic Organization, and the  Office of Airports. We also received written answers to our questions from  FAA\u2019s Office of Aviation Safety. To obtain perspectives from the  Department of Transportation (DOT), we interviewed officials from the  Office of the Secretary of Transportation. In addition, we interviewed a  former DOT official who served in a senior position when the Office of  Commercial Space Transportation was transferred to FAA in 1995.  Because there is no formal plan to move the office, stakeholders\u2019  perspectives are based on what they perceive could occur as a result of a  move. Moreover, whether an effect of moving the office would be an  advantage or disadvantage may vary depending on a stakeholder\u2019s or  official\u2019s perspective and what would actually occur from a move.", "We also reviewed available documentation, including a 1992 report  prepared by the National Academy of Public Administration that included  organizational options for the Office of Commercial Space Transportation  and the FAA Air Traffic Organization\u2019s Roadmap for Integration of Space  Operations in the National Airspace System.", "To determine what would be required to move the Office of Commercial  Space Transportation from FAA back to the Office of the Secretary of  Transportation, we reviewed the steps taken regarding DOT\u2019s transfer of  the Office of Commercial Space Transportation from the Office of the  Secretary of Transportation to FAA in 1995. In addition, we reviewed the  legislative histories for the Commercial Space Act of 1984 and legislation  introduced in 1994 to require the transfer of the Office of Commercial  Space Transportation from DOT to FAA. We also interviewed current and  former officials from the Office of the Secretary of Transportation.", "To determine what we have previously identified as key practices for  successful transitions that might be instructive, we reviewed our prior  reports on key practices for mergers and organizational transformations  and questions to consider for consolidations. For this prior work, we  developed these key merger and transformation practices by convening a  forum to identify and discuss useful practices and lessons learned from  major private and public sector organizational mergers, acquisitions, and  transformations; interviewing knowledgeable officials; reviewing relevant  literature and agency documentation; and reviewing the status of high risk  issues. To identify key questions that federal agencies should consider  when evaluating whether to consolidate physical infrastructure or  management functions, we reviewed prior GAO work that identified and  reviewed relevant literature on public sector consolidations produced by  academic institutions, professional associations, think tanks, news  outlets, and various other organizations, and reviewed examples of  agency consolidations. This information complemented our review of  GAO\u2019s extensive body of work on government reform.", "We conducted this performance audit from May 2017 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In 1984, the Commercial Space Launch Act gave DOT the authority,  among other things, to license and monitor the safety of commercial  space launches and to promote the industry. Executive Order 12465  designated DOT as the lead federal agency for enabling private-sector  launch capability. The Office of Commercial Space Transportation and  its responsibilities, which were originally within the Office of the Secretary  of Transportation, were transferred to FAA in 1995.", "The U.S. commercial space launch industry has achieved several  milestones since 1984. For example, in recent years SpaceX, a  commercial space launch company, has successfully tested reusable  elements of expendable launch vehicles and landed them back on land  and on an off-shore landing vessel called a drone ship. In addition, the  industry is changing with the emergence of some suborbital launch  vehicles that are capable of being launched into space more than once  and can enable space tourism. For example, Blue Origin has  successfully launched and landed the vehicle it intends to use in the  future for space tourism. By adding an expendable upper stage,  suborbital vehicles can also be used to transport small satellites to orbit.  Furthermore, although licensed launches historically took place at federal  launch sites such as Cape Canaveral Air Force Station and the National  Aeronautics and Space Administration\u2019s Kennedy Space Center, launch  sites now can be private spaceports or FAA-licensed launch sites. One  launch site is co-located at an airport that has scheduled commercial  airline flights and other spaceports are used for general aviation. As of  August 2017, there were 10 licensed launch sites in the United States.", "The Office of Commercial Space Transportation works with other FAA  lines of business such as:  the Air Traffic Organization on integrating licensed launches and  permitted activities in the national airspace,  the Office of Airports regarding airports that seek to be or already are  licensed launch sites, and  the Office of Aviation Safety on launch vehicles that follow aircraft  rules and can be used for commercial space activities.", "In fiscal year 2017, the Office of Commercial Space Transportation had  104 full-time equivalent positions and an operations budget of $19.8  million\u2014an increase of 20 full-time equivalent positions and $2 million  over fiscal year 2016. FAA has a staff of over 40,000 people and a budget  of $16.4 billion in fiscal year 2017. According to the Office of Commercial  Space Transportation, its workload has increased significantly in recent  years, particularly regarding pre-application consultations for launch and  launch site licenses.", "The Office of the Secretary of Transportation has offices that are  responsible for policy, legal, and government affairs among other issues.", "In 1987, the House Appropriations Committee recommended that DOT  perform a comprehensive organization and management study of the  Office of Commercial Space Transportation with the objectives of  eliminating duplication of activities carried out by offices within the Office  of the Secretary and DOT modal administrations, and determining  potential areas for streamlining operations. In 1991, DOT asked the  National Academy of Public Administration to analyze and evaluate the  key organizational and management issues facing the Office of  Commercial Space Transportation which at that time was located in the  Office of the Secretary of Transportation. The report considered  organizational options for the office including establishing an independent  regulatory office, merging the office into an existing operating  administration such as FAA, transferring this office to bureau status in  DOT, or creating a new operating administration in DOT. According to the  report, three of the study\u2019s five panel members stated that they believed  that the office should be removed from the Office of the Secretary of  Transportation and established as an operating administration because  its mission was inconsistent with the broad and cross-cutting  organizations within the Secretary\u2019s Office that are focused on policy,  budget, and administrative issues."], "subsections": []}, {"section_title": "Stakeholders Cited Various Perspectives on Moving the Office of Commercial Space Transportation", "paragraphs": ["Representatives from the commercial space launch companies and  spaceports we spoke to described both potential advantages and  disadvantages of moving the office, but most of them favored moving the  office. On the other hand, most FAA officials we interviewed did not favor  the idea. A senior official in the Office of Commercial Space  Transportation said that there are advantages and disadvantages to  moving the office and that whether such an action would be beneficial  depended on the implementation details and the administration\u2019s  preferences. Officials from the Office of the Secretary of Transportation  said they currently do not have plans to move the office. Stakeholders  and officials provided perspectives on what they believe might result from  a move including discussions regarding communicating with the industry  and coordinating within FAA, program operations, updating regulations,  and obtaining resources for the office, and other issues."], "subsections": [{"section_title": "Stakeholder Perspectives on Advantages and Disadvantages of a Move", "paragraphs": [], "subsections": [{"section_title": "Communication and Coordination", "paragraphs": ["Officials in the Office of the Secretary of Transportation said a possible  advantage of moving all or part of the office would be having a unified  point of contact for communicating with the industry on commercial space  launch issues. Representatives from a commercial space launch  company also said that rather than working with various FAA offices, they  would like there to be a \u201cone-stop shop\u201d for commercial space launch  issues and a senior official in the Office of Commercial Space  Transportation indicated the office\u2019s original purpose was to fulfill that  role. Some company representatives further explained that although  they generally work with the Office of Commercial Space Transportation  on licensing issues and with the Air Traffic Organization on airspace  access, in some cases, the lines of responsibility between the two offices  are not clearly defined. Furthermore, a spaceport official said that in  addition to working with the Office of Commercial Space Transportation  he also needs to work with FAA\u2019s Office of Airports, which reviews the  effects of spaceports on airports, among other responsibilities.", "In discussing these issues with the senior official involved in the Air Traffic  Organization\u2019s emerging technologies integration efforts, the official said  that although there is overlap and a need for more communication  between the Office of Commercial Space Transportation and the Air  Traffic Organization, coordination between the two offices is improving.  He also said that later this year or early next year, FAA plans to start an  aviation rulemaking advisory committee that will help to determine  airspace access priorities for all national airspace users. Similarly, an  official from the Office of Airports said the office is developing standard  operating procedures and a memorandum of understanding with the  Office of Commercial Space Transportation to resolve issues. A  spaceport official who has been working on a launch site operator\u2019s  license application for several years confirmed that coordination among  various FAA offices on commercial space launch issues has significantly  improved during the last 6 months.", "Furthermore, several FAA senior officials said that moving the office could  make it more difficult for FAA offices to coordinate on commercial space  activities. For example, a senior official involved in the Air Traffic  Organization\u2019s emerging technologies integration efforts said that  although such a move may increase the visibility of the Office of  Commercial Space Transportation, it would not necessarily improve  airspace integration. In addition, written responses to our questions from  the Office of Aviation Safety indicated that their ability to interact with the  Office of Commercial Space Transportation at an internal agency level  may be less cumbersome than having to go through the additional  communication protocols at the level of the Office of the Secretary of  Transportation. Similarly, officials from the Office of Airports indicated that  coordinating airspace review is an inherently FAA function that uses the  experience and knowledge of subject matter experts located within the  FAA, and that moving the commercial space office to the Office of the  Secretary of Transportation could affect the efficiency of these reviews.  Officials from the Office of the Secretary of Transportation also said that  even if the commercial space transportation office were moved to their  office, they would still need to work with FAA on airspace access issues  and that they would not necessarily favor the industry regarding airspace  issues.", "Moreover, FAA officials we interviewed said they are working on  improving commercial space coordination through various working  groups, particularly through the Commercial Space Transportation  Executive Working Group that was formed earlier this year to coordinate  on commercial space issues. This group is chaired by the official directing  commercial space integration in the Office of Commercial Space  Transportation and is comprised of executives from across the agency,  including the Air Traffic Organization, the Office of Airports, and the Office  of Aviation Safety. According to the group\u2019s chairman, this group was  formed to formalize coordination on commercial space launch issues  across the agency because there was confusion among commercial  space stakeholders and across the agency, and commercial space  launch companies were hearing different things from different FAA lines  of business. The group\u2019s chairman said that the Executive Working Group  reports to FAA\u2019s New Entrants Board, a group formed to provide status  updates on activities and events as well as decide how to move forward  on specific initiatives associated with new entrants to the airspace such  as drones and commercial space launch vehicles and is comprised of the  principal leaders of FAA lines of business working on these issues. An  FAA senior official told us that he believes commercial space coordination  issues will be resolved as launches become more routine. In addition, the  Air Traffic Organization has formed an Emerging Technologies Integration  Office to focus on integrating commercial space operations and  unmanned aircraft system activities within the national airspace system. A  senior official in that office said that for decades, the Air Traffic  Organization was focused on airplanes and that any deviation in airplane  flow was viewed as an impediment, but that his office\u2019s goal is to shift the  understanding within the organization from an airplane-only focus to the  idea that several types of vehicles can use the national airspace system."], "subsections": []}, {"section_title": "Program Operations", "paragraphs": ["A representative from one commercial space launch company said that  an advantage of moving the Office of Commercial Space Transportation  and thereby making space transportation its own mode, is that it could  facilitate a more \u201clevel playing field\u201d for space activities operating in and  through the national airspace system. The representative noted that the  Air Traffic Organization is a much larger office than the Office of  Commercial Space Transportation and is focused on aviation safety  which is regulated differently than space activities. As a result, the  representative said that companies perceive an unequal playing field  between these two offices and the risk of negative effects if aviation  standards are imposed on space, including airspace closures during  launch and reentry. According to the representative, because of the Air  Traffic Organization\u2019s lack of familiarity with space launch operations and  the mechanics of placing a spacecraft into orbit or on a trajectory to  another celestial body, the office has suggested launch times be limited to  certain times of day and certain days of the month as dictated by the  amount of air traffic. The representative said that the Air Traffic  Organization\u2019s proposed approach is \u201cuntenable\u201d for commercial space  launches because launch times are dictated by orbital mechanics and  that the Air Traffic Organization has imposed airspace restrictions during  the holidays that have required launches to be rescheduled. A  representative from another commercial space launch company said that  an unequal playing field between these two offices results in the Office of  Commercial Space Transportation not having the practical authority  commensurate with its responsibility. According to this representative, the  impact of this mismatch results in confusion over authority and negatively  affects when commercial space companies are able to launch as well as  excessive time and volume of airspace closed during a launch. A  representative from a third company said that there are multiple variables  to consider about moving the office. The representative said that while  moving the Office of Commercial Space Transportation to the Office of  the Secretary of Transportation would provide it with much more visibility,  the office may still be at a disadvantage when it disagrees with larger  offices in the FAA. In addition, the representative said that most launch  companies would still have to work with FAA on air traffic control issues  as well as hybrid vehicles and experimental aircraft licenses. Moreover,  a representative from the Commercial Spaceflight Federation said that  although the association does not have a consensus position on moving  the Office of Commercial Space Transportation, its members are  concerned that the Air Traffic Organization is attempting to treat the  rapidly developing area of commercial space similarly to how it treats the  mature commercial aviation industry.", "In response to these comments, an Air Traffic Organization official told us  that the airspace is restricted to commercial space launches for about 15  days per year during the holidays because a launch can affect hundreds  of flights and that they prefer that launches occur when there are fewer effects on the national airspace system, for example, at night. However,  an official said that the Air Traffic Organization has only denied one  launch request over the last 5 years. An Air Traffic Organization official  also said that they do not regulate the commercial space launch industry  and focus on providing safe access to the airspace by all users of the  national airspace system. In addition, an official involved with commercial  space integration in the Office of Commercial Space Transportation and a  spaceport representative told us they expect that technology will allow for  more efficient use of the national airspace in the future by reducing the  amount of time that the airspace will need to be shut down for launches."], "subsections": []}, {"section_title": "Regulations", "paragraphs": ["Some stakeholders said that moving the Office of Commercial Space  Transportation could help accelerate the pace of updating regulations to  reflect new technology, which they said was proceeding too slowly. A  senior official in the Office of Commercial Space Transportation said that  instead of competing with other FAA offices for rulemaking approval  within the agency, moving the Office of Commercial Space Transportation  to the Office of the Secretary might give the commercial space office a  higher priority with regard to rulemaking. However, officials from the  Office of the Secretary of Transportation also said that the regulatory  rulemakings are not allocated by office but are set according to the  priorities of each administration, so moving the office would not  necessarily affect regulatory reform efforts."], "subsections": []}, {"section_title": "Resources", "paragraphs": ["According to some stakeholders and a senior official in the Office of  Commercial Space Transportation, moving the office out of FAA could  give commercial space launch issues a higher profile and more resources  because FAA is focused on aviation as opposed to commercial space.  One stakeholder also said moving the office out of FAA would make the  office a priority as an independent organization within DOT. Furthermore,  a senior official in the Office of Commercial Space Transportation said  that the office has reached the limits of what it can accomplish with  existing resources, policies, and authorities, and that moving the office  could enable industry growth. In addition, a company representative  said that the primary possible advantage of moving the office would be to  have an Assistant Secretary for Commercial Space Transportation who  would be in a leadership position to represent the growing industry  directly to the Secretary of Transportation. However, officials from the  Office of the Secretary of Transportation said that it is uncertain whether  the Office of Commercial Space Transportation would receive more  resources if it were moved to the Secretary\u2019s office. In addition, some  stakeholders said that if moved, the office would have to pay for support  services that are currently available within FAA, such as legal, regulatory,  human resources, and administrative support."], "subsections": []}]}, {"section_title": "Other Issues Noted by Stakeholders and Officials", "paragraphs": ["A commercial space launch company representative suggested that the  Office of Commercial Space Transportation\u2019s promotional responsibilities  should be separate from its regulatory responsibilities to avoid even the  appearance of a conflict of interest between regulating safety and  promoting a company interest, but did not suggest that its promotional  responsibilities had affected safety. In addition, a senior FAA official said  that it would make sense to move the Office of Commercial Space  Transportation\u2019s promotion duties out of FAA because of an inherent  conflict with the office being both a promoter and a regulator. Officials  from the Office of the Secretary said transferring the policy and promotion  aspects of the Office of Commercial Space Transportation\u2019s work to the  Secretary\u2019s office, but not the launch licensing responsibilities, is one of  various options regarding the office but that they have not advanced a  specific proposal. A senior official in the Office of Commercial Space  Transportation said there is no specific office within the Office of  Commercial Space Transportation that promotes the industry and that the  office\u2019s promotional functions are part of its overall responsibilities, so  moving only the promotional responsibilities would not be feasible.", "A former DOT official who served in a senior position when the Office of  Commercial Space Transportation was transferred to FAA in 1995 noted  that one reason the office was moved was because of the belief that the  Office of the Secretary of Transportation should not be involved in  programmatic activities that belong in the operating agencies. However,  in 2014, Congress moved a programmatic office, the Research and  Innovative Technology Administration (RITA), to the Office of the  Secretary of Transportation. This former DOT official also said that the  Office of Commercial Space Transportation would benefit from the  technological and engineering support available within FAA.", "Finally, representatives from commercial space launch companies and an  FAA official had different perspectives on whether the Office of  Commercial Space Transportation would or should be its own modal  agency within DOT or part of the Office of the Secretary of  Transportation. For example, a company representative who favored  moving the office said that commercial space could easily be considered  its own transportation mode and not as part of aviation. Another  company\u2019s representative expected that the Office of Commercial Space  Transportation, if it were moved out of FAA, would start out as its own  modal agency. A third stakeholder suggested that eventually space  transportation will become its own independent mode of transportation  such as air, sea, rail, and roads and that moving the Office of Commercial  Space Transportation out of the FAA is an inevitable first step in that  direction. A senior official from the Office of Commercial Space  Transportation said that moving the Office of Commercial Space  Transportation would be a step toward considering commercial space  transportation as a mode similar to rail or highway transportation."], "subsections": []}]}, {"section_title": "Steps Can Be Taken through DOT\u2019s Rulemaking Process to Move the Office of Commercial Space Transportation", "paragraphs": ["All or part of the Office of Commercial Space Transportation can be  transferred back to the Secretary\u2019s office through a rulemaking process  as was used in 1995 to amend the existing DOT delegation regulation.  This process, which does not require congressional approval, was used  when the Secretary of Transportation delegated the office\u2019s  responsibilities from DOT to FAA in 1995. FAA officials and the former  Deputy Secretary of Transportation said moving the Office of Commercial  Space Transportation from the Office of the Secretary of Transportation to  FAA in 1995 was a \u201cseamless\u201d process. FAA and DOT officials said the  following steps would need to be taken to move the office:", "Equivalent salaries would need to be determined for employees who  are transferring because FAA and DOT have different pay scales.", "Legal, human capital, and administrative support currently provided by  FAA would need to be obtained from DOT.", "New physical space for the office would likely need to be obtained, as  FAA and the Office of the Secretary of Transportation are in different  buildings.", "New processes and procedures for coordination and communication  would need to be established."], "subsections": []}, {"section_title": "Key Practices and Considerations for Organizational Changes", "paragraphs": ["Our prior work has identified key practices and questions for  consideration when evaluating proposals for or implementing  organizational changes such as a consolidation or merger. We have  previously found that implementing large-scale change management  initiatives, such as mergers and organizational transformations, are not  simple endeavors and require the concentrated efforts of both leadership  and employees to realize intended synergies and to accomplish new  organizational goals. We have found that mergers and transformations  that incorporate strategic human capital management approaches will  help to sustain agency efforts and improve the efficiency, effectiveness,  and accountability of the federal government. These key merger and  transformation practices include focusing on a key set of principles and  priorities at the outset of the transformation, setting implementation goals  and a timeline to build momentum and show progress, and establishing a  communication plan. Questions to consider when evaluating  consolidation proposals include (1) What are the goals of the  consolidation? and (2) What will be the likely costs and benefits of the  consolidation?", "Based on these key practices and considerations, DOT and FAA, for  example, would need to determine the purpose of moving the Office of  Commercial Space Transportation and the costs and benefits of such a  move. Furthermore, to ensure employee and management support, DOT  and FAA would need to obtain the buy-in of various FAA offices involved  in commercial space launch issues such as the Air Traffic Organization.  In addition, to assess the costs of the transformation, DOT and FAA  would need to determine the costs of any additional support that would be  needed by moving to the Office of the Secretary such as legal and  administrative support. Moreover, DOT could consider the risk of  unintended consequences of moving the office such as incurring  additional costs. In addition, a spaceport representative told us that he is  more concerned about the execution of moving the office than its  placement. The representative said that although conceptually moving the  office to the Office of the Secretary of Transportation could bring it more  visibility and resources, the move would be futile if it is executed poorly.  Therefore, if a decision were made to move the office, an implementation  plan would be needed, consistent with our key mergers and  transformation practices. Implementing a large-scale organizational  transformation requires the concentrated efforts of both leadership and  employees to accomplish new organizational goals. Agencies should  have an implementation plan that includes essential change-management practices such as active, engaged  leadership of executives at the highest possible levels; a dedicated implementation team that can be held accountable for a strategy for capturing best practices, measuring progress toward the  established goals of the consolidation, retaining key talent, and  assessing and mitigating risk, among others.", "Table 1 of appendix I lists the key practices and implementation steps  that we have previously identified for mergers and organizational  transformations. Table 2 of appendix I provides the key questions we  have identified for evaluating proposals to consolidate physical  infrastructure and management functions. Although moving the office  does not involve a consolidation, we believe that many of these questions  would apply to other organizational changes such as an office move."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOT for review and comment. DOT  provided technical comments via email which we incorporated as  appropriate.", "We are sending copies of this report to the Secretary of Transportation,  the Administrator of the Federal Aviation Administration, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have questions concerning this report, please contact  me at (202) 512-2834 or dillinghamg@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."], "subsections": []}]}, {"section_title": "Appendix I: Key Practices for Mergers and Organizational Transformations and Questions to Consider for Consolidations", "paragraphs": ["Appendix I: Key Practices for Mergers and  Organizational Transformations and Questions  to Consider for Consolidations Key Questions  What are the goals of the consolidation? What opportunities will be addressed through  the consolidation and what problems will be solved? What problems, if any, will be  created?", "What will be the likely costs and benefits of the consolidation? Are sufficiently reliable  data available to support a business-case analysis or cost-benefit analysis?", "How can the up-front costs associated with the consolidation be funded?", "Who are the consolidation stakeholders, and how will they be affected? How have the  stakeholders been involved in the decision, and how have their views been considered?  On balance, do stakeholders understand the rationale for consolidation?", "To what extent do plans show that change-management practices will be used to  implement the consolidation? (Please see table 1 for the key merger and transformation  practices.)"], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Cathy Colwell (Assistant  Director); Bob Homan (Analyst-in-Charge); Maureen Luna-Long; Dave  Hooper; SaraAnn Moessbauer; and Sarah Veale made key contributions  to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-179", "url": "https://www.gao.gov/products/GAO-18-179", "title": "Medicaid Assisted Living Services: Improved Federal Oversight of Beneficiary Health and Welfare is Needed", "published_date": "2018-01-05T00:00:00", "released_date": "2018-02-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The number of individuals receiving long term care services from Medicaid in community residential settings is expected to grow. These settings, which include assisted living facilities, provide a range of services that allow aged and disabled beneficiaries, who might otherwise require nursing home care, to remain in the community.", "State Medicaid programs and CMS, the federal agency responsible for overseeing the state programs, share responsibility for ensuring that beneficiaries' health and welfare is protected. GAO was asked to examine state and federal oversight of assisted living services in Medicaid. This report (1) describes state spending on and coverage of these services, (2) describes how state Medicaid agencies oversee the health and welfare of beneficiaries in these settings, and (3) examines the extent that CMS oversees state Medicaid agency monitoring of assisted living services.", "GAO surveyed all state Medicaid agencies and interviewed officials in a nongeneralizeable sample of three states with varied oversight processes for their assisted living programs. GAO reviewed regulations and guidance, and interviewed CMS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["State Medicaid agencies in 48 states that covered assisted living services reported spending more than $10 billion (federal and state) on assisted living services in 2014. These 48 states reported covering these services for more than 330,000 beneficiaries through more than 130 different programs. Most programs were operated under Medicaid waivers that allow states to target certain populations, limit enrollment, or restrict services to certain geographic areas.", "With respect to oversight of their largest assisted living programs, state Medicaid agencies reported varied approaches to overseeing beneficiary health and welfare, particularly in how they monitored critical incidents involving beneficiaries receiving assisted living services. State Medicaid agencies are required to protect beneficiary health and welfare and operate systems to monitor for critical incidents\u2014cases of potential or actual harm to beneficiaries such as abuse, neglect, or exploitation.", "Twenty-six state Medicaid agencies could not report to GAO the number of critical incidents that occurred in assisted living facilities, citing reasons including the inability to track incidents by provider type (9 states), lack of a system to collect critical incidents (9 states), and lack of a system that could identify Medicaid beneficiaries (5 states).", "State Medicaid agencies varied in what types of critical incidents they monitored. All states identified physical, emotional, or sexual abuse as a critical incident. A number of states did not identify other incidents that may indicate potential harm or neglect such as medication errors (7 states) and unexplained death (3 states).", "State Medicaid agencies varied in whether they made information on critical incidents and other key information available to the public. Thirty-four states made critical incident information available to the public by phone, website, or in person, while another 14 states did not have such information available at all.", "Oversight of state monitoring of assisted living services by the Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), is limited by gaps in state reporting. States are required to annually report to CMS information on deficiencies affecting beneficiary health and welfare for the most common program used to provide assisted living services. However, states have latitude in what they consider a deficiency. States also must describe their systems for monitoring critical incidents, but CMS does not require states to annually report data from their systems. Under federal internal control standards, agencies should have processes to identify information needed to achieve objectives and address risk. Without clear guidance on reportable deficiencies and no requirement to report critical incidents, CMS may be unaware of problems. For example, CMS found, after an in-depth review in one selected state seeking to renew its program, that the state lacked an effective system for assuring beneficiary health and welfare, including reporting insufficient information on the number of unexpected or suspicious beneficiary deaths. The state had not reported any deficiencies in annual reports submitted to CMS in 5 prior years."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommendations to CMS include clarifying state requirements for reporting program deficiencies and requiring annual reporting of critical incidents. HHS concurred with GAO's recommendations to clarify deficiency reporting and stated that it would consider annual reporting requirements for critical incidents after completing an ongoing review."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicaid, a federal-state program for low-income and medically needy  individuals, is the nation\u2019s primary payer of long-term care services for  older adults and people with disabilities. Medicaid spending on long-term  care is significant, representing about one quarter of Medicaid spending  annually and is expected to grow with an aging population. In recent  years, most states have expanded their Medicaid long-term care options  to include more home and community-based services (HCBS), which may  include services provided by assisted living facilities. Federal and state  Medicaid spending on HCBS exceeds the amount spent on nursing home  and other institutional care and, in 2015, totaled $87 billion.", "Assisted living facilities provide a residential alternative to nursing home  care for individuals who prefer to live independently but need assistance  to maintain their independence. They may provide residents with a variety  of services to assist with activities of daily living, such as bathing and  dressing. Medicaid beneficiaries receiving assisted living services  include older adults and individuals with physical, developmental, or  intellectual disabilities, some of whom can be particularly vulnerable to  abuse, neglect, and exploitation.", "The federal government and states both have responsibilities for the  health and welfare of beneficiaries receiving assisted living services and  other types of HCBS covered by Medicaid. Under broad federal  requirements, each state administers Medicaid under the oversight of the  Centers for Medicare & Medicaid Services (CMS), an agency within the  U.S. Department of Health and Human Services (HHS). States must  obtain CMS approval to establish HCBS programs including those that  cover assisted living services, and are then responsible for administering  their approved programs, establishing policies and procedures to monitor  the service providers, and safeguarding beneficiaries\u2019 health and welfare.  CMS has important oversight responsibilities to ensure states are  effectively administering and monitoring Medicaid HCBS programs,  including those that cover assisted living services. With approval from  CMS, states can provide Medicaid HCBS under one or more Medicaid  authorities, including several state plan and waiver authorities. States  most frequently provide assisted living services under the HCBS waiver  program, which allows states to target certain populations, limit  enrollment, or restrict services to certain geographic areas.", "The demand for assisted living services is expected to increase as a  result of the aging of the nation\u2019s population, increased life expectancy,  and increased opportunities to remain in the community for individuals  with disabilities and older adults\u2014those 65 and older, generally referred  to as aged individuals. Providing these services to individuals can be cost  saving for the Medicaid program because the cost of nursing home care  for an individual generally exceeds the cost of assisted living facility  services.", "Although the federal government has comprehensive information on  nursing homes providing Medicaid services, not much is known about  Medicaid beneficiaries in assisted living facilities. Current information on  the amount spent by Medicaid on assisted living services and number of  beneficiaries receiving services provided by assisted living facilities is not  available.", "In light of the expected increase in demand for assisted living services,  the vulnerability of some Medicaid beneficiaries receiving these services,  and limited information on the varied state programs under which they are  provided, you asked us for information on Medicaid coverage of assisted  living services and state and federal oversight of the health and welfare of  beneficiaries receiving these services. This report  1.  describes state Medicaid programs covering assisted living services,  including spending, beneficiaries served, and services covered;  2.  describes how state Medicaid agencies oversee the health and  welfare of beneficiaries receiving assisted living services in their  largest programs; and  3.  examines the extent to which CMS oversees state Medicaid agencies\u2019  monitoring of the health and welfare of beneficiaries receiving  assisted living services under HCBS waivers.", "To describe state Medicaid programs providing assisted living services,  we administered a survey to all states and the District of Columbia  (hereafter referred to as \u201cstates\u201d). As part of this survey we asked states  to report information for all of their programs that provided such services  in 2014. Information requested included Medicaid spending for such  services in 2014, enrollment, type of beneficiaries served, services  provided, and federal authority used to cover the different assisted living  programs. We conducted the survey from December 2016 through  March 2017, and received a response from all states. We did not  independently verify the information reported by the states in the survey,  but reviewed responses and followed up with state officials when reported  information appeared inconsistent or needed clarification. On that basis  we believe the data are reliable for the purposes of our reporting  objectives.", "To describe how state Medicaid agencies oversee the health and welfare  of beneficiaries receiving assisted living services, we relied on information  obtained from our survey of states. Because a state may have multiple  programs covering assisted living services within the state, and these  programs may be overseen in different ways, we focused our work on  examining states\u2019 oversight of their largest programs. In particular, we  asked each state to report 2014 information only for its largest HCBS  program in terms of number of aged beneficiaries receiving services  provided by assisted living facilities. These results cannot be generalized  to all HCBS program types within a state or nationally. Assessing whether  states\u2019 oversight activities were compliant with federal requirements was  not within the scope of this review.", "To examine the extent to which CMS oversees state Medicaid agencies\u2019  monitoring of the health and welfare of Medicaid beneficiaries receiving  assisted living services through HCBS waiver programs, we reviewed  relevant federal laws, regulations, and guidance; reviewed key  documents submitted by states to CMS regarding their HCBS waiver  programs; and interviewed CMS officials. We reviewed HCBS waiver  programs because they are the most common type of program states use  to cover assisted living services. To obtain more detailed information on  CMS oversight of state monitoring, we selected a nongeneralizable  sample of three states: Georgia, Nebraska, and Wisconsin. We selected  these states because they were overseen by three different CMS  Regional Offices and provided coverage for assisted living services to a  large number of Medicaid beneficiaries using different administrative  models. For these states, we reviewed documentation of CMS oversight  activities, interviewed state Medicaid officials and officials in CMS\u2019s  central office and the respective regional offices that have direct oversight  of the states\u2019 programs and review documentation submitted by the  states. We also obtained and reviewed other reports on Medicaid HCBS,  including federal oversight of these services. In addition, we compared  CMS\u2019s oversight process and activities to the relevant standards for  internal control in the federal government.", "We conducted this performance audit from March 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal and state Medicaid spending on long-term care continues to  increase; for example it increased from $146 billion in 2013 to $158 billion  in 2015. Individuals seeking long-term care generally need care that is,  by definition, longer term in nature and more costly than other types of  care. Spending on long-term care services provided in home and  community settings, including assisted living facilities, exceeds the  amount spent on institutional settings such as nursing homes. State  Medicaid programs may cover certain medical and non-medical services  that assisted living facilities provide; however, the Medicaid statute does  not provide for coverage of room and board charges of an assisted living  facility.", "In their federal-state partnership, both CMS and states play important  roles in the oversight of Medicaid. CMS is responsible for oversight of  state Medicaid programs. To conduct this oversight, CMS issues program  requirements in the form of regulations and guidance, approves changes  states make to their programs, provides technical assistance to states,  collects and reviews required information and data from states and, in  some cases, reviews individual state programs. States are responsible for  the day-to-day administration of their Medicaid programs, including  monitoring and oversight of the different HCBS programs through which  they cover assisted living services, within broad federal rules and  requirements. Each state is required to identify and designate a single  state agency to administer or supervise the administration of its Medicaid  program. The state Medicaid agency may partially or fully delegate the  administration and oversight of the state\u2019s HCBS programs to another  state agency or other entity, such as a state unit on aging, a mental  health department, or other state departments or agencies with  jurisdiction over a specific population or service. However, the state  Medicaid agency is ultimately accountable to the federal government for  compliance with the HCBS requirements.", "Under different authorizing provisions of federal law, states have  considerable flexibility to establish multiple HCBS programs including  those covering assisted living services. A state Medicaid program can  have multiple HCBS programs operating under different federal  authorities. CMS is responsible for ensuring that states meet the  requirements associated with their HCBS programs under these different  authorities.", "Key to states\u2019 monitoring of the health and welfare of Medicaid  beneficiaries is their tracking of, and response to, incidents that may  cause harm to a beneficiary\u2019s health or welfare, such as abuse, neglect,  or exploitation\u2014commonly referred to as critical incidents. Such  monitoring is required for most HCBS programs; however, we previously  found that requirements for states related to oversight of the health and  welfare of beneficiaries in different types of HCBS programs varied, and  recommended that CMS take steps to harmonize those requirements  across programs.", "The most common HCBS programs with the most stringent federal  requirements are HCBS waiver programs. These programs serve  beneficiaries who are eligible for an institutional level of care; that is,  beneficiaries must have needs that rise to the level of care usually  provided in a nursing facility, hospital, or other institution. CMS oversees  states\u2019 HCBS waiver programs specifically by reviewing and approving  applications and reviewing HCBS program reports that states submit.  HCBS waiver program applications include specific requirements  implementing various statutory and regulatory provisions. (See text box  below.) One requirement is that states have the necessary safeguards in  place to protect the health and welfare of beneficiaries receiving services  covered by HCBS waiver programs. For each of their HCBS waiver  programs, states must demonstrate to CMS that they are meeting various  requirements CMS has established regarding beneficiary health and  welfare.", "The Six Requirements States Must Demonstrate for Home-   and Community-Based Services Waiver Programs  1.  Administrative authority: The Medicaid agency retains ultimate  administrative authority and responsibility for the operation of the  waiver program by exercising oversight of the performance of  waiver functions by other state and local/regional non-state  agencies (if appropriate) and contracted entities.  2.  Level of care: The state demonstrates that it implements the  processes and instrument(s) specified in its approved waiver for  evaluating/re-evaluating an applicant\u2019s/waiver participant\u2019s level of  care consistent with care provided in a hospital, nursing facility, or  intermediate care facility.  3.  Qualified providers: The state demonstrates that it has designed  and implemented an adequate system for assuring that all waiver  services are provided by qualified providers.  4.  Service plan: The state demonstrates it has designed and  implemented an effective system for reviewing the adequacy of  service plans for the waiver participants.  5.  Health and welfare: The state demonstrates it has designed and  implemented an effective system for assuring waiver participant  health and welfare.  6.  Financial accountability: The state must demonstrate that it has  designed and implemented an adequate system for insuring  financial accountability of the waiver program.", "CMS also provides ongoing oversight of state HCBS programs through  annual reports that states must submit for each of their HCBS waiver  programs as well as renewal reports submitted about two years before an  HCBS waiver is scheduled to end. The state reports are intended to  provide CMS with information on the operation of state HCBS waiver  programs.", "In contrast to long-term care services provided in nursing facilities, less is  known at the federal level about the oversight and quality of care in  assisted living facilities. Generally, states establish their own licensing  and oversight requirements for assisted living facilities. As a result, the  requirements for assisted living facilities and the type and frequency of  oversight can vary across states.", "In contrast, nursing homes must meet a comprehensive set of federal  requirements in order to receive payment for long-term care services for  Medicaid and Medicare beneficiaries in addition to state requirements.  CMS contracts with state entities to regularly inspect nursing facilities and  investigate complaints to assess whether nursing homes meet these  federal quality requirements. Annually CMS publishes a comprehensive  report on nursing homes that serve Medicaid and Medicare beneficiaries,  including the extent that beneficiaries are at risk for harm, based on these  investigations and inspections. In addition, CMS publicly reports a  summary of each nursing home\u2019s quality data using a five-star quality  rating based on health inspection results, staffing data, and quality  measure data. The goal of this rating system is to help consumers make  meaningful distinctions among high- and low-performing nursing homes.", "This type of standardized framework for oversight, investigation and  inspections, and reporting on quality of care concerns does not exist for  assisted living facilities and other types of HCBS providers."], "subsections": []}, {"section_title": "States Reported Spending $10 Billion on More than 130 Programs Covering Assisted Living Services in 2014", "paragraphs": [], "subsections": [{"section_title": "Forty-Eight States Reported Spending $10 Billion on Assisted Living Services for More than 330,000 Medicaid Beneficiaries in 2014; Spending per Beneficiary Varied Widely by State", "paragraphs": ["Forty-eight state Medicaid agencies reported collectively spending about  $10 billion in state and federal Medicaid funds for assisted living services  in 2014, according to our survey. The other 3 states reported that they did  not pay for assisted living services. We estimate that this spending for  services provided by assisted living facilities represents 12.4 percent of  the $80.6 billion Medicaid spent on HCBS in all settings that year. More  than 330,000 Medicaid beneficiaries received assisted living services,  based on data reported to us by the 48 states.", "Nationally, the average spending per beneficiary on assisted living  services in the 48 states in 2014 was about $30,000; states provided  these HCBS services through fee-for-service and managed care delivery  models. Fee-for-service spending comprised 81 percent of total  spending on assisted living services and managed care spending was  about 19 percent of the total. The cost per beneficiary reported by  surveyed states also varied based on payment type; average per  beneficiary cost was $31,000 for fee-for-service and $27,000 for  managed care. About 21 percent of Medicaid assisted living enrollment  was for beneficiaries receiving these services under a managed care  delivery model. (See table 1.)", "Average per-beneficiary spending varied significantly across the states.  For example, for the nine states with the lowest spending per beneficiary,  average Medicaid spending ranged from about $1,700 to about $9,500  per beneficiary. In contrast, in the nine states with the highest per- beneficiary spending, the average spending ranged from about $43,000  to $108,000 per beneficiary. (See Figure 1.) For more information on each state\u2019s enrollment, total spending, and average per beneficiary  spending on assisted living services, see appendix I."], "subsections": []}, {"section_title": "Forty-Eight States Administered More than 130 Programs That Covered Assisted Living Services, Mainly under HCBS Waiver Authority", "paragraphs": ["The 48 states that reported covering assisted living services in 2014 said  they did so through 132 different programs. The majority of the states, 31  of the 48, reported administering more than one program that covered  assisted living services. As illustrated in table 2 below, of the different  types of HCBS programs under which states can provide coverage for  assisted living services, HCBS waivers were the most common type of  program they used. Specifically, 39 states and 69 percent of the  programs that provided assisted living services, were operated under the  HCBS waiver program. (See appendix II for additional details on each  state\u2019s number of programs by program type and total number of HCBS  programs that covered assisted living facility services in 2014.)"], "subsections": []}, {"section_title": "States Reported Offering Assisted Living Services to Certain Aged and Disabled Beneficiaries, and Most Reported Covering Common Services", "paragraphs": ["Almost all of the 48 states that covered assisted living services did so for  two groups of Medicaid beneficiaries eligible through their programs. In  45 of 48 states, aged beneficiaries received services provided by assisted  living facilities. Similarly, in 43 of 48 states, physically disabled  beneficiaries received services. (See Figure 2.)", "In 38 or more of the 48 states that covered assisted living services, six  types of services were provided. For example, 45 states covered  assistance with activities of daily living, such as bathing and dressing; 44  states covered medication administration; and 41 states covered  coordination of meals. (See Figure 3.)"], "subsections": []}]}, {"section_title": "State Approaches for Overseeing Health and Welfare of Beneficiaries in Assisted Living Services Varied, Including Monitoring Incidents of Beneficiary Harm", "paragraphs": [], "subsections": [{"section_title": "Oversight by State Medicaid Agencies Varied in the Functions Delegated to Other Agencies, the Information Used, and the Actions Taken to Correct Any Identified Problems", "paragraphs": ["State Medicaid agency approaches for oversight of assisted living  services varied widely in terms of who provided the oversight for their  largest programs, according to their responses to our survey. Thirteen  of the 48 state Medicaid agencies reported delegating administrative  responsibilities, including oversight of beneficiary health and welfare, to  other state or local agencies. State Medicaid agencies may delegate the  administration of programs to government or other agencies through a  written agreement; however, state Medicaid agencies retain the ultimate  oversight responsibility for those delegated functions. For example,  among the 13 states that delegated HCBS program administration, the  administering agencies were those that provided services to the aged,  disabled, or both of these populations, such as the states\u2019 Departments of  Aging. (See text box, below, for examples of states\u2019 delegation.)", "Examples of State Medicaid Agencies\u2019 Delegation of Authority   for Administration of Home- and Community-based Services\u2019  Programs Covering Assisted Living Services  Georgia\u2019s Elderly & Disabled Waiver Program was operated in 2014  by the Georgia Department of Human Services Division of Aging  Services, a separate agency of the state that was not a division/unit of  the Medicaid agency. The Georgia Medicaid Agency maintained a  formal interagency agreement with the Division of Aging Services which  describes by function the required deliverables to support compliance  and a schedule for delivery of reports.", "Nebraska\u2019s Waiver for Aged and Adults and Children with  Disabilities is operated by the state Medicaid agency Division of  Medicaid and Long Term Care. The majority of services are provided  by independent contractors in order to allow service delivery in the rural  and frontier areas of the state. The state Medicaid agency contracts  with the Area Agencies on Aging, Independent Living Centers, and  Early Development Network agencies to perform a variety of  operational and administrative functions including authorizing services  and monitoring the delivery of services.", "States also varied in the types of information they reported reviewing as  part of the oversight of assisted living services, and the extent to which  state Medicaid agencies review the information when another agency is  responsible for administration. For example, other entities outside the  state Medicaid agency\u2014such as the agency delegated to administer an  HCBS program, or a contractor that manages provider enrollment\u2014may  check to ensure a provider is allowed to deliver services to Medicaid  beneficiaries; in such cases, however, the state Medicaid agency might  not be aware of the results of such checks.", "As illustrated in table 3, in all 48 states the types of information generally  reviewed by either the state Medicaid agency, the agency delegated  administrative responsibilities, or other agencies were: critical incident  reports, the HHS Office of Inspector General\u2019s list of excluded providers,  patient service plans, and information on concerns about care received  directly from patients, relatives, caregivers or the assisted living facility  itself. In many cases, the state Medicaid agency did not review all  information sources reviewed by other agencies. For example, although  all critical incident reports were reviewed in the 48 states by either the  state Medicaid agency, the agency delegated administrative  responsibilities, or another agency; in 16 of those states, the state  Medicaid agency was not involved in those reviews, according to  responses to our survey. Instead, the critical incident reports were  reviewed by another entity designated responsible for the HCBS program  in the state or another state entity with regulatory responsibility over the  assisted living facility. Such reviews, including any critical incidents found,  may not have been communicated back to the state Medicaid agency,  according to responses to our survey.", "State Medicaid agencies also varied in reporting the extent to which they  were made aware or notified when enforcement actions were taken as a  result of concerns with beneficiary care identified by other entities.  Various oversight actions may be taken by the state Medicaid agency, the  agency delegated to administer an HCBS program, or a state regulatory  agency, such as a state agency responsible for licensing and inspecting  various types of HCBS providers. When delegated agencies or other  licensing agencies take corrective action, the state Medicaid agency may  not be aware unless notified by the agencies taking that action. For  example, in 23 states, the investigation of potential incidents related to  beneficiary health and welfare was delegated to another agency but in  only 6 of these states was the state Medicaid agency always notified of  such an investigation based on our survey. (See table 4 and text box  below.)", "Example of a Collaborative Approach to Monitoring and Ensuring  Quality Care Specifically for Assisted Living Facilities  In 2009, the Wisconsin Coalition for Collaborative Excellence in  Assisted Living was formed to redesign the way quality is ensured and  improved for individuals residing in assisted living communities. This  public/private coalition utilizes a collective impact model approach that  brings together the state, the industry, the consumer, and academia to  identify and implement agreed upon approaches designed to improve  the outcomes of individuals living in Wisconsin assisted living  communities. The core of the coalition is the implementation of an  association developed, department approved, comprehensive quality  assurance, quality improvement program."], "subsections": []}, {"section_title": "State Medicaid Agencies Varied in How They Monitored Incidents of Potential or Actual Harm to Medicaid Beneficiaries Receiving Assisted Living Services", "paragraphs": ["For their largest HCBS programs that covered assisted living services,  the 48 states varied in how they monitored \u201ccritical incidents\u201d that caused  actual or potential harm to Medicaid beneficiaries in assisted living  facilities. Specifically, the 48 states varied in their ability to report the  number of critical incidents; how they defined incidents, and the extent to  which they made information on such incidents readily available to the  public.", "These states varied in whether they could provide us the number of  critical incidents involving beneficiaries for their largest programs covering  assisted living services, and for those that could report, the number of  incidents they reported varied widely. In 26 of the 48 states the Medicaid  agencies were unable to report, for their largest program covering  assisted living services, the number of critical incidents that had occurred  in assisted living facilities in 2014. The remaining 22 states reported a  total of 22,921 critical incidents involving Medicaid beneficiaries in their  largest programs covering assisted living services. The number of  critical incidents reported in these states ranged from 1 to 8,900. For six  of these states the number of critical incidents reported was more than  1,000, (See text box, below, for examples of selected state processes  managing critical incidents.)", "Selected States\u2019 Processes for Managing Beneficiary Harm or  Potential Harm in Assisted Living Facilities", "Georgia: According to state officials in 2014 there was no  centralized or comprehensive system for capturing and tracking the  data on actual and potential violations. State officials acknowledged  the lack of a centralized system prevents the Division of Community  Health  from tracking the status of each problem.", "Nebraska: According to state officials, Nebraska\u2019s Adult Protective  Services operates an electronic system that coordinates across  state social service programs. When Adult Protective Services  initiates an investigation of reported harm to an assisted living  resident, the state Medicaid agency is automatically notified.", "Reasons state Medicaid agencies reported for being unable to provide us  with the number of critical incidents included limitations in the data or data  systems for tracking them. Nine states reported an inability to track  incidents by provider type, and thus distinguish critical incidents in  assisted living facilities from other providers of home and community  based services. States also cited lacking a system to collect critical  incidents (9 states), and that the system for reporting could not identify  whether a resident was a Medicaid beneficiary (5 states). Even in the 32  states where the state Medicaid agencies reported reviewing information  about critical incidents, 20 states were unable to provide the actual  number of critical incidents that occurred in assisted living facilities.", "State Medicaid agencies\u2019 definitions of critical incidents also varied. As  illustrated in Figure 4, all 48 states cited physical assault, emotional  abuse, and sexual assault or abuse as a critical incident in their largest  programs providing assisted living services in 2014. However, for other  types of incidents, several states did not identify the incident as critical, including discharge and eviction from the facility (not a critical incident in  24 states), medication errors (not a critical incident in 7 states), and  unauthorized use of seclusion, (not a critical incident in 6 states). For  other serious incidents, a relatively small number of states did not identify  the incident as critical, such as unexplained death (not a critical incident  in 3 states) and missing beneficiaries (not a critical incident in 2 states).  See appendix IV for a full list of the beneficiary-related incidents and the  number of states that identify each as critical.", "Although half of the 48 states that cover assisted living services did not  consider discharges or evictions to be critical incidents, according to state  responses to our survey, 42 states offered certain protections related to  involuntary discharge of Medicaid residents who live in assisted living  facilities. The majority of protections consisted of a lease agreement  requirement that applied to other housing contracts in the state, such as  providing residents with eviction notices. Other protections included an  appeals process (10 states) and a requirement for the facility to find an  alternative location for the resident (10 states).", "State Medicaid agencies also varied in whether they made information on  critical incidents and other key information readily available to the public.  (See table 5.) Beneficiaries seeking care in an assisted living facility may  want to know the number of critical incidents related to a particular facility.  Through our survey we found that states differed in the availability of  information related to health and welfare that was available to the public.  For example, 34 of the 48 states reported that they made critical incident  information available to the public by phone, website, or in person, and  the remaining 14 states did not have such information available at all.  Although all 48 states had information in some form on which assisted  facilities accepted Medicaid beneficiaries, 8 states could not provide this  information by phone and 22 states could not provide the information in  person."], "subsections": []}]}, {"section_title": "CMS Has Taken Steps to Improve Oversight of the Health and Welfare of Medicaid Beneficiaries in Assisted Living and Other Community Settings, but Gaps Remain", "paragraphs": ["In recent years, CMS has taken steps to improve oversight of beneficiary  health and welfare in HCBS programs by adding new HCBS waiver  application requirements for state monitoring of beneficiary health and  welfare. CMS requires state waiver applications to include specific  requirements that implement various statutory and regulatory provisions,  including a provision that states assure that they will safeguard the health  and welfare of Medicaid beneficiaries. In March 2014, CMS added  unexplained death to the events that states must be able to identify and  address on an ongoing basis, as part of their efforts to prevent instances  of abuse, neglect, and exploitation, and added four new requirements for  states to protect beneficiary health and welfare. (See table 6.) In its  guidance implementing the 2014 requirements, CMS noted that state  associations and state representatives\u2019 work groups had agreed that  \u201chealth and welfare is one of the most important assurances to track, and  requires more extensive tracking to benefit the individuals receiving  services, for instance by using data to prevent future incidents.\u201d As a  condition for approval of their HCBS waiver applications for each of the  requirements, states must identify and agree with CMS on the type of  information they will collect to provide as evidence that they will meet the  requirements. However, according to CMS officials, each state Medicaid  agency has wide discretion over the information it will collect and report to  demonstrate that it is meeting the health and welfare requirements and  protecting beneficiaries.", "Although CMS added the additional requirements in 2014 for  safeguarding beneficiary health and welfare, the agency generally did not  change requirements for how it oversees state monitoring efforts once  HCBS waivers are approved. We found a number of limitations in CMS\u2019s  oversight of approved HCBS waivers that undermine the agency\u2019s ability  to effectively monitor state oversight of HCBS waivers. These limitations  include: unclear guidance on what states should identify and report  annually related to any identified program deficiencies; lack of  requirements on states to regularly provide CMS information on critical  incidents; and CMS\u2019s inconsistent enforcement of the requirement that  states submit annual reports.", "Unclear guidance on what states should identify and report annually  related to any identified program deficiencies. Federal law requires  states to provide CMS with information annually on an HCBS waiver\u2019s  impact on (1) the type and amount, and cost of services provided and (2)  the health and welfare of Medicaid beneficiaries receiving waiver  services. CMS reporting requirements give states latitude to determine  what to report as health and welfare deficiencies found through state  monitoring of their HCBS programs.", "With respect to health and welfare, CMS\u2019s State Medicaid Manual directs  states when preparing their annual reports to \u201ccheck the appropriate  boxes regarding the impact of the waiver on the health and welfare\u201d of  beneficiaries and to describe relevant information. States are required to  provide a brief description of the state process for monitoring beneficiary  safeguards, use check boxes to indicate that beneficiary health and  welfare safeguards have been met, and identify whether deficiencies  were detected during the monitoring process. If states determine that  deficiencies were identified through monitoring, states are required to  \u201cprovide a summary of the significant areas where deficiencies were  detected\u201d and an explanation of the actions taken to address deficiencies  and ensure the deficiencies do not recur.", "CMS\u2019s written instructions for completing the HCBS annual report do not  provide further guidance regarding reporting of deficiencies. For example,  the reporting instructions do not describe or identify 1) what states are  supposed to report as deficiencies, 2) how they are to identify which  deficiencies are most significant, and 3) the extent to which states need to  explain the steps taken to ensure that deficiencies do not recur. The lack  of clarity is inconsistent with federal internal control standards, in  particular, the need for federal agencies to have processes that identify  information needed to achieve objectives and address risk. Without  clear instructions as to what states must report, states\u2019 annual reports  may not identify deficiencies with states\u2019 HCBS waiver programs that may  affect the health and welfare of beneficiaries.", "States may determine that issues or problems they identified through  monitoring do not represent reportable deficiencies and therefore may not  report those deficiencies to CMS, increasing the risk that problems are  not elevated to CMS\u2019s attention.", "In the case of one of the selected states we reviewed, no problems were  included on the annual reports submitted to CMS between 2011 and  2015. However, when CMS completed its review in the fourth year of the  state\u2019s waiver\u2014 for purpose of renewing the waiver\u2014it determined the  state was not assuring beneficiary health and welfare. CMS found that the  information the state submitted for purpose of renewal suggested a  \u201cpervasive failure\u201d by the state to assure the health and welfare of  beneficiaries receiving services, including assisted living services. In  particular, CMS noted the state provided insufficient information regarding  the number of unexpected or suspicious beneficiary deaths. CMS  concluded that the state failed to demonstrate that it has effective  systems and processes for ensuring the health and welfare of  beneficiaries.", "Lack of requirements on states to annually provide CMS information  on critical incidents. Despite the importance of state critical incident  management and reporting systems to protecting the health and welfare  of beneficiaries, CMS lacks written requirements that states provide  information needed for the agency oversight of state monitoring of critical  incidents. According to CMS, a critical element of effective state oversight  is the operation of data systems that support the identification of trends  and patterns in the occurrence of critical incidents to identify needed  improvements. Such a system is also consistent with federal internal  controls standards which specify, in particular, the need for federal  agencies to have processes that identify information needed to achieve  objectives and address risk.", "CMS requires states to operate a critical incident reporting system. On  their waiver applications states must check a box indicating they operate  a system and also describe their system\u2014including who must report and  when, and what must be reported. Despite this requirement for states to  have critical incident reporting systems, CMS does not require states to  report to CMS any data from these systems on critical incidents as part of  their required annual reports. Specifically, states are not required to  include, in their annual reports, the number of critical incidents reported or  substantiated that involve Medicaid beneficiaries. As a result, CMS does  not have a method to confirm what states describe about critical incident  management systems, which is a required component of states\u2019 waiver  applications or to assess the capabilities of states\u2019 systems. For example,  CMS cannot confirm whether the state systems can report incidents by  location or type of residential provider, such as assisted living facilities;  the type and severity of critical incidents that occurred; and the number of  incidents that involved Medicaid beneficiaries. Without annual critical  incident reporting, CMS may be at risk of (1) not having adequate  evidence that states are meeting CMS requirements to have an effective  critical incident management and reporting system and of (2) being  unaware of problems with states\u2019 abilities to identify, track, and address  critical incidents involving Medicaid beneficiaries.", "Our prior work has shown that the lack of explicit reporting requirements  on critical incidents not only impacts HCBS waiver programs but also  impacts other types of Medicaid long-term services programs as well.  Specifically,  In a November 2016 report, we found that CMS requirements for  states to report on their critical incident monitoring systems for the  HCBS waiver program were more stringent than those for other types  of HCBS programs, potentially leaving those other programs at even  greater risk. We recommended that CMS take steps to harmonize  requirements across different types of HCBS programs. HHS  concurred with the recommendation stating it would seek input from  states, stakeholders, and the public regarding harmonizing  requirements across programs.", "In an August 2017 report we found similar issues in critical incident  reporting requirements for other types of long term services programs,  particularly those used to provide HCBS and other long term services  under managed care. We found that CMS was not always requiring  states that contracted with managed care organizations to provide  long term services and supports to report to CMS sufficient  information on critical incidents and other key areas needed to  monitor beneficiary access and quality. We recommended that CMS  take steps to identify and obtain key information needed to better  oversee states\u2019 efforts to monitor beneficiary access to quality  services in their managed long-term services and supports programs.  HHS concurred with this recommendation and stated that the agency  would take this recommendation into account as part of an ongoing  review of its 2016 Medicaid managed care rule.", "We continue to believe that the implementation of our prior  recommendations is needed to help improve CMS oversight of states  monitoring of beneficiary safety.", "CMS\u2019s inconsistent enforcement of the requirement that states  submit annual reports. States must prepare and submit an annual  report for each HCBS waiver as a condition of waiver approval. According  to CMS guidance, the agency\u2019s review of the annual report is part of the  ongoing oversight of HCBS waiver programs and not submitting an  annual report jeopardizes the states renewal of HCBS waiver programs.  However, some states have not been timely in submitting the required  annual reports for their HCBS waivers. A review of 2013 HCBS annual  reports by a CMS contractor, published in 2016, found that annual reports  were missing for 29 HCBS waivers and multiple years\u2019 of annual reports  were missing for 8 waivers.", "In 2014, CMS adopted new strategies to ensure compliance with HCBS  waiver requirements, including the requirement that states submit annual  reports on a timely basis. These strategies include withholding federal  funding, placing a moratorium on enrollment in the waiver, or other  actions the agency determines necessary. CMS officials reported that  the agency had not used these new strategies with states that were  delinquent in submitting their annual reports. Officials said they were in  the process of reviewing how to implement these new strategies in the  case of one state; however, as of August 2017 officials had not finalized a  decision. CMS\u2019s ability to provide effective oversight of state programs  and protect beneficiary health and welfare is undermined by the lack of  enforcement and receipt of required annual waiver reports."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Effective state and federal oversight is necessary to ensure that the  health and welfare of Medicaid beneficiaries receiving assisted living  services are protected, especially given the particular vulnerability of  many of these beneficiaries to abuse, neglect, or exploitation. CMS has  taken steps to strengthen beneficiary health and welfare protections in  states\u2019 HCBS waiver programs, the most common type of program that  covers assisted living services and one that serves the most vulnerable  beneficiaries. In particular, CMS now has multiple requirements for states  to safeguard beneficiaries\u2019 health and welfare, including requirements to  operate an effective critical incident management and reporting system to  identify, investigate, and address incidents of beneficiary abuse, neglect,  exploitation, and unexplained death.", "However, CMS\u2019s ability to effectively monitor how well states are assuring  beneficiary health and welfare is limited by gaps in state reporting to  CMS. CMS has not provided clear guidance to states on what information  to include in annual reports on deficiencies they identify. As a result, CMS  lacks assurance that it is receiving consistent, complete, and relevant  information on deficiencies that is needed to oversee beneficiary health  and welfare. Lacking clear guidance on the reporting of deficiencies may  result in a delayed recognition of problems that may affect beneficiary  health and welfare. Further, for years, states have been required to check  a box attesting that they operate a critical incident management system,  but have not always been required to report information on incidents of  potential or actual harm to beneficiaries. Given the increasing prevalence  of assisted living facilities as a provider of services to Medicaid  beneficiaries, it is unclear why more than half of states responding to our  survey could not provide us information on the number of critical incidents  that occurred in these facilities in their states. Reporting data from their  critical incident systems, such as the number of incidents, the type and  severity of the incidents, or the location or type of facility in which the  incident occurred would provide evidence that an effective system is in  place, provide information on the extent beneficiaries are subject to actual  or potential harm, and allow for tracking trends over time.", "Finally, CMS has not ensured that all states submit annual reports on  their HCBS waiver programs as required. Without improvements to state  reporting, CMS cannot ensure states are meeting their commitments to  protect the health and welfare of Medicaid beneficiaries receiving assisted  living services, potentially jeopardizing their care."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to CMS:  The Administrator of CMS should provide guidance and clarify  requirements regarding the monitoring and reporting of deficiencies that  states using HCBS waivers are required to report on their annual reports.  (Recommendation 1)", "The Administrator of CMS should establish standard Medicaid reporting  requirements for all states to annually report key information on critical  incidents, considering, at a minimum, the type of critical incidents  involving Medicaid beneficiaries, and the type of residential facilities,  including assisted living facilities, where critical incidents occurred.  (Recommendation 2)", "The Administrator of CMS should ensure that all states submit annual  reports for HCBS waivers on time as required. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHS  provided written comments, which are reproduced in Appendix V. The  department also provided technical comments, which we incorporated as  appropriate. In its written comments, the department concurred with two  of our three recommendations, specifically, that CMS will clarify  requirements for state reporting of program deficiencies and ensure that  all states submit required annual reports on time. HHS did not explicitly  agree or disagree with our third recommendation to require all states to  report information on critical incidents to CMS annually. The department  noted it has established a workgroup to learn more about states\u2019 health  and welfare systems and that it will use the results of this workgroup to  determine which additional reporting requirements would be beneficial.  The workgroup\u2019s review will continue through calendar year 2018. In  technical comments, HHS indicated that after the workgroup\u2019s review is  complete it will consider annual reporting of critical incidents. We believe  establishing the workgroup is a positive first step towards improving  oversight and state reporting and encourage HHS to require annual  reporting on critical incidents when developing additional reporting  requirements.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, the Administrator of CMS, the Administrator of the  Administration for Community Living, appropriate congressional  committees, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7114 or at iritanik@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff that made key contributions to  this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: State Reported Enrollment and Spending on Assisted Living Services", "paragraphs": [], "subsections": [{"section_title": "State North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington Wisconsin Wyoming", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: State Reported Home- and Community-Based Services (HCBS) Programs Covering Assisted Living Services", "paragraphs": [], "subsections": [{"section_title": "State Ohio", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix III: Information Regarding Medicaid Beneficiaries\u2019 Access to Assisted Living Services", "paragraphs": ["Our survey of state Medicaid agencies regarding coverage, spending,  enrollment, and oversight of assisted living services in 2014, obtained  information on challenges for Medicaid beneficiaries to access assisted  living services in their states. States provided information related to  factors that create challenges for Medicaid beneficiaries\u2019 ability to access  and receive assisted living services and the extent states had policies to  help beneficiaries with the cost of room and board.", "A number of states in our survey cited common factors as creating the  greatest challenges to a beneficiary\u2019s ability to access assisted living  services, including  the number of assisted living facilities willing to accept Medicaid  beneficiaries (13 states or 27 percent of the 48 states) program enrollment caps (9 states or 19 percent of the 48 states) beneficiaries\u2019 inability to pay for assisted living facility room and board  (9 states or 19 percent of the 48 states), which Medicaid typically  does not cover  low rates the state Medicaid program paid assisted living facilities (8  states or 17 percent of the 48 states).", "A number of states reported that they had policies to assist Medicaid  beneficiaries with the costs of room and board charged by assisted living  facilities, which Medicaid does not typically cover. Two common policies,  cited by at least half of the states, were aimed at limiting how much  assisted living facilities could charge Medicaid beneficiaries for room and  board. For example, 30 of 48 states, limited the amount facilities could  charge for room and board to the amount of income certain beneficiaries  receive as Supplemental Security Income. The other commonly cited  policies focused on providing financial assistance to the beneficiaries to  defray the room and board costs. (See table 9.)"], "subsections": []}, {"section_title": "Appendix IV: Events That States Defined as Critical Incidents", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tim Bushfield and Christine  Brudevold (Assistant Directors), Jennie Apter, Shirin Hormozi, Anne  Hopewell, Kelsey Kreider, Perry Parsons, Vikki Porter, and Jennifer  Whitworth made key contributions to this report."], "subsections": []}]}], "fastfact": ["Older people and people with disabilities receiving Medicaid assisted living services\u2014over 330,000 in 2014\u2014can be vulnerable to abuse, neglect or exploitation. The Centers for Medicare & Medicaid Services oversees how states monitor such incidents, but its guidance has been unclear.", "More than half of the 48 states providing these services couldn\u2019t tell us the number or nature of critical incidents in assisted living facilities. In addition, states may not be monitoring things you might expect them to. For example, 3 states don\u2019t monitor unexpected or unexplained deaths.", "We recommended that CMS take steps to improve state reporting."]}
{"id": "GAO-18-220", "url": "https://www.gao.gov/products/GAO-18-220", "title": "Medicaid Demonstrations: Evaluations Yielded Limited Results, Underscoring Need for Changes to Federal Policies and Procedures", "published_date": "2018-01-19T00:00:00", "released_date": "2018-02-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Demonstrations\u2014which represented roughly a third of the more than $300 billion in federal Medicaid spending in 2015\u2014are a powerful tool to test new approaches to providing coverage and delivering Medicaid services that could reduce costs and improve beneficiaries' outcomes. Evaluations are essential to determining whether demonstrations are having their intended effects. States are required to evaluate their demonstrations and CMS can initiate its own federal evaluations of demonstrations.", "GAO was asked to examine evaluations of demonstrations, including how the results have been used to inform Medicaid policy. This report examines (1) state-led evaluations and (2) federal evaluations. GAO reviewed evaluation documentation for eight states with high demonstration expenditures that varied in the number of years their demonstrations had been in effect and by geography. GAO also reviewed documentation for the ongoing federal evaluations and interviewed state and federal Medicaid officials. GAO assessed evaluation practices against federal standards for internal control and leading evaluation guidelines."]}, {"section_title": "What GAO Found", "paragraphs": ["Under section 1115 of the Social Security Act, the Secretary of Health and Human Services (HHS) may approve Medicaid demonstrations to allow states to test new approaches to providing coverage and for delivering services that can transform large portions of states' programs. However, GAO found that selected states' evaluations of these demonstrations often had significant limitations that affected their usefulness in informing policy decisions. The limitations included gaps in reported evaluation results for important parts of the demonstrations. (See table.) These gaps resulted, in part, from HHS's Centers for Medicare & Medicaid Services (CMS) requiring final, comprehensive evaluation reports after the expiration of the demonstrations rather than at the end of each 3- to 5-year demonstration cycle. CMS has taken a number of steps since 2014 to improve the quality of state-led evaluations, and in October 2017, officials stated that the agency planned to require final reports at the end of each demonstration cycle for all demonstrations. However, the agency has not established written procedures for implementing such requirements, which could allow for gaps to continue. CMS also plans to allow states to conduct less rigorous evaluations for certain types of demonstrations but has not established criteria defining under what conditions limited evaluations would be allowed.", "Federal evaluations led by CMS have also been limited due to data challenges that have affected the progress and scope of the work. For example, delays obtaining data directly from states, among other things, led CMS to considerably reduce the scope of a large, multi-state evaluation, which was initiated in 2014 to examine the impact of state demonstrations in four policy areas deemed to be federal priorities. Though CMS has made progress in obtaining needed data, it is uncertain when results from the multi-state and other federal evaluations will be available to policymakers because CMS has no policy for making results public. By not making these results public in a timely manner, CMS is missing an opportunity to inform important federal and state policy discussions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS: (1) establish written procedures for requiring final evaluation reports at the end of each demonstration cycle, (2) issue criteria for when it will allow limited evaluations of demonstrations, and (3) establish a policy for publicly releasing findings from federal evaluations of demonstrations. HHS concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicaid section 1115 demonstrations, which allow states to test and  evaluate new approaches for delivering Medicaid services, have become  a significant feature of the Medicaid program, increasing both in number  and cost over the years and affecting millions of beneficiaries. In  November 2016, nearly three-quarters of states operated at least part of  their Medicaid program under section 1115 demonstrations, and, in fiscal  year 2015, federal demonstration expenditures amounted to $109 billion  or about one-third of Medicaid program expenditures that year.", "Under section 1115 of the Social Security Act, the Secretary of Health  and Human Services may waive certain federal Medicaid requirements  and approve new types of expenditures that would not otherwise be  eligible for federal Medicaid matching funds for experimental, pilot, or  demonstration projects that, in the Secretary\u2019s judgment, are likely to  promote Medicaid objectives. For example, the Centers for Medicare &  Medicaid Services (CMS), the agency within the Department of Health  and Human Services (HHS) that oversees the Medicaid program, has  approved states\u2019 proposals to extend Medicaid coverage under  demonstrations to populations or for services that would not otherwise be  covered under Medicaid. CMS has also allowed states to use Medicaid  funds to finance costs that would not otherwise be eligible for federal  funds, such as incentive payments to providers to improve access to and  quality of care.", "Because Medicaid section 1115 demonstrations (hereafter referred to as  demonstrations) are intended to test new approaches to providing  coverage and delivering Medicaid services, evaluations of the  demonstrations are essential to determining whether the new approaches  are having their intended effect. Evaluations are also critical to ensuring  that information on the effects of demonstrations, such as on beneficiary  access to care, quality of care, and costs of care is available to inform  federal and state policy decisions about new approaches to coverage and  care. Further, because demonstrations allow states to use Medicaid funds  for costs that would not otherwise be covered under the program,  evaluations serve as an important check of whether such funds are  achieving federal Medicaid objectives. CMS has long required states to  conduct evaluations of demonstrations. In addition, CMS has initiated its  own federal evaluations of selected Medicaid demonstrations.", "Given continued state interest in undertaking Medicaid section 1115  demonstrations and their budgetary significance and programmatic  scope, you asked us to examine evaluations of demonstrations, including  how the results have been used to inform Medicaid policy. This report  examines:  1.  state-led evaluations of demonstrations; and  2.  federal evaluations of demonstrations led by CMS.", "To examine state-led evaluations of demonstrations, we reviewed  documentation for demonstrations in eight states\u2014Arizona, Arkansas,  California, Indiana, Kansas, Maryland, Massachusetts, and New York.  We selected these states by first identifying the 15 states with the highest  average demonstration expenditures for fiscal years 2013 through 2015\u2014 the most current, complete years of data available at the time we began  our work. From those, we selected eight states to achieve variation with regard to (1) total spending on the demonstrations, including as a percent  of the state\u2019s total Medicaid spending, (2) the number of years the state\u2019s  most comprehensive demonstration had been in place, and (3)  geography. Together, demonstration spending in the eight states  accounted for about 47 percent of total demonstration spending for fiscal  year 2015. (See appendix I for more information on the characteristics of  the demonstrations in our selected states.)", "For each state-led demonstration, we reviewed the following (1)  evaluation requirements delineated in the contract negotiated between  CMS and the state\u2014referred to as the special terms and conditions  (STC), (2) evaluation design plans submitted by the state, and (3)  evaluation reports submitted by the state, including any stated limitations  or gaps in evaluation findings. For seven of our eight states\u2014those which  had completed more than one demonstration cycle\u2014we reviewed the  documentation for the most recently completed and current  demonstration cycles as of the time of our review. For Kansas, which  was in its first demonstration cycle at the time of our review, we reviewed  the evaluation documentation for this cycle. We also reviewed, when  available, documentation of CMS\u2019s review of design plans and reports.  We supplemented the documentation review by interviewing CMS  officials about the agency\u2019s policies and procedures for overseeing state- led evaluations, including recent and planned changes in the agency\u2019s  policies and procedures and the agency\u2019s use of evaluation findings in  decision making. We also interviewed state Medicaid officials (in five of  our eight selected states) to gain an understanding of the design and  implementation of their evaluations and their interactions with CMS during  the evaluation process. In evaluating this information, we compared  CMS\u2019s policies and procedures against standards for internal control in  the federal government, including those related to control activities and  communication, and the American Evaluation Association\u2019s  recommendations for evaluations of federal programs, which include  recommendations related to the scope, quality, and transparency of  evaluations.", "To examine federal evaluations of demonstrations led by CMS, we  reviewed documents in the contract files for the two contract task orders  (hereafter referred to as contracts) that CMS awarded in 2014 and 2015  to conduct the agency\u2019s ongoing federal evaluations of demonstrations.  The options for these contracts were exercised annually and work was  ongoing as of November 2017. The documentation we reviewed included  the contract scopes of work that define the purposes of the contract, the  timeframes for execution, and the expected products, or \u201cdeliverables;\u201d  monthly contractor progress reports; evaluation design documents; and  other contract deliverables, including any reports of findings submitted as  of October 2017. We reviewed the documents to assess the progress of  the evaluations, including identifying any challenges encountered. We  also interviewed CMS officials and one of CMS\u2019s contractors about the  progress and status of the federal evaluations and about the agency\u2019s  policies and procedures for conducting federal evaluations, including  policies for identifying demonstrations for federal evaluation and for  making evaluation results public. We compared CMS\u2019s policies and  procedures against the American Evaluation Association\u2019s  recommendations for evaluations of federal programs.", "We conducted this performance audit from November 2016 to January  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Medicaid Section 1115 Demonstrations", "paragraphs": ["Nearly three-quarters of states (37 as of November 2016) have CMS- approved Medicaid section 1115 demonstrations, which allow states to  test new approaches to coverage and to improve quality and access or  generate savings or efficiencies. CMS has approved demonstrations for a  wide variety of purposes. For example, under demonstrations, states  have extended coverage to populations or for services not otherwise  eligible for Medicaid, made payments to providers to incentivize delivery  system improvements, and, more recently, expanded Medicaid to certain  low-income adults by using Medicaid funds to purchase private health  insurance coverage. While state demonstrations vary in size and scope,  many are comprehensive in nature, affecting multiple aspects of states\u2019  Medicaid programs simultaneously. For example, Kansas\u2019s  demonstration, approved in 2012, significantly expands the use of  managed care to deliver physical, behavioral, and long-term care services  to almost all the state\u2019s Medicaid populations, care that for some  populations was previously provided on a fee-for-service basis. The  demonstration also established a funding pool of up to $344 million to  provide payments to hospitals to finance uncompensated care.", "Kansas\u2019s demonstration expenditures accounted for about 94 percent of  the state\u2019s total Medicaid expenditures in fiscal year 2015.", "In fiscal year 2015, federal spending under demonstrations represented a  third of all Medicaid spending nationwide. In 10 states, federal spending  on demonstrations represented 75 percent or more of all federal spending  on Medicaid. (See fig. 1.)", "Demonstrations are typically approved by CMS for an initial 5-year period  (referred to as a demonstration cycle), but some states have operated  portions of their Medicaid programs under a demonstration for decades.  This can be achieved through a series of renewals approved by CMS,  generally occurring every 3 to 5 years. What a state is testing and  implementing under its demonstration can change from one cycle to the  next. States often make changes to their demonstrations, either through  the renewal process or by requesting an amendment during the  demonstration cycle. These changes can be relatively small or can be  significant and can represent testing of a new approach for the state.  For example, at renewal a state could request approval to expand  coverage to a new population or add requirements that beneficiaries  share in the cost of care by paying a monthly premium."], "subsections": []}, {"section_title": "CMS Oversight of State- Led Evaluations", "paragraphs": ["CMS has long required states to conduct evaluations of section 1115  demonstrations. CMS oversees the evaluations and can influence them  at several key points during the demonstration process.", "Application review and approval: When a state applies for a  demonstration, CMS reviews the state\u2019s application, which describes  the goals and objectives of the demonstration and what the  demonstration will test, among other things. As part of the review  and approval process, CMS negotiates with the state on the STCs,  including evaluation requirements. These requirements might include,  for example, reporting timeframes and broad standards for the  evaluation, such as standards around the independence of the  evaluator and acceptable evaluation methods.", "Evaluation design phase: After a demonstration is approved, states  are required to submit an evaluation design to CMS for review and  approval. The evaluation design must discuss, among other things,  the hypotheses that will be tested, the data that will be used, and how  the effects of the demonstration will be isolated from other changes  occurring in the state. During review of the design, CMS can seek  adjustments such as requiring the state to address certain objectives  or using particular performance measures.", "Demonstration renewal: In the event that a state wishes to renew its  demonstration, it must generally submit an application to CMS at least  1 year before the demonstration is scheduled to expire. The  application must include, among other things, a report presenting the  evaluation\u2019s findings to date, referred to as an interim evaluation  report. CMS can use the information from the interim evaluation  report to negotiate changes in the STCs for the evaluation of the next  demonstration cycle. If CMS renews the demonstration, the evaluation  process starts over with the state submitting a new evaluation design  that reflects changes in what is being tested in the new cycle.", "Demonstration end: CMS requires states to submit a final evaluation  report for review and approval generally after the end of the  demonstration, at which time the agency can work with the state to,  for example, add clarity and disclose the limitations of the evaluation  before the final evaluation report is made public.", "Within the framework that CMS has established for state-led evaluations,  states design evaluations to the specifics of their demonstrations. As the  size and scope of demonstrations varies considerably across states, so,  too can evaluations vary in their breadth and complexity. State-led  evaluations may assess the effects of several different policies, each with  its own set of hypotheses\u2014predictions of the effects of the policy\u2014and  methods. For example, a state could evaluate the effects of moving to a  managed care delivery model for providing managed long-term services  and supports (referred to as MLTSS), implementing provider payment  pools aimed at delivery system reform, and expanding coverage to a new  population all within the same demonstration. Each of those three  elements would have its own hypotheses and methods and may have  varying timeframes for the number of years of experience needed to be  able to effectively measure the effects of what is being tested."], "subsections": []}, {"section_title": "Federal Evaluations", "paragraphs": ["CMS has the authority to initiate its own federal evaluations of section  1115 demonstrations, and states must fully cooperate with any such  evaluations. Between 2014 and 2016, CMS initiated three federal  evaluations that were ongoing as of November 2017. The first evaluation,  initiated in 2014, is a large, multi-state evaluation examining four broad  demonstration types in several states. (See table 1.) According to CMS,  it selected these demonstration types\u2014which together account for tens of  billions of dollars in federal and state Medicaid spending\u2014because they  included policies that the agency considered priority areas for evaluation.  CMS awarded a contract to an evaluation organization to implement the  5-year study. According to CMS, the estimated total cost of this  evaluation for the 5-year life of the contract is $8.3 million. The  evaluation was designed to produce three sets of results: a series of  reports providing contextual information about the demonstrations being  evaluated, referred to as rapid cycle reports; interim evaluation reports  featuring early results of more in-depth analysis; and final evaluation  reports.", "CMS contracted with another evaluation organization to conduct two  federal evaluations examining demonstrations in single states\u2014Indiana  and Montana\u2014over 4 years. As of September 2017, the estimated cost of  this contract, inclusive of all options, was $8.2 million. In total, spending  for Indiana\u2019s and Montana\u2019s demonstrations was about $2 billion in fiscal  year 2015, including $1.6 billion in federal spending.", "Indiana: CMS initiated this evaluation in 2015. CMS officials told us  they started this evaluation to better understand how policies in  Indiana\u2019s demonstration, many of which were unprecedented, were  affecting beneficiaries. These policies included, for example, charging  monthly contributions for most newly eligible adults with incomes from  0 to 138 percent of the federal poverty level; imposing a lock-out  period of 6 months for nonpayment of premiums for most people with  incomes above the federal poverty level; and charging co-payments  above statutory levels for non-urgent use of emergency room  services. The federal evaluation is aimed at estimating the effects of  Indiana\u2019s demonstration on health insurance coverage and access to  and use of care, and documenting beneficiary understanding of  enrollment, disenrollment, and copayment policies, among other  things.", "Montana: CMS initiated this evaluation in 2016. CMS officials told us  they started this evaluation to provide a point of comparison to  Indiana\u2019s demonstration, as Montana was implementing similar  policies to Indiana but with some variations. For example, under  Montana\u2019s demonstration, the state charges premiums to most newly  eligible adults with incomes between 51 and 138 percent of the  federal poverty level; and disenrolls beneficiaries with incomes above  the federal poverty level for nonpayment of premiums, with  reenrollment when overdue premiums are paid. Similar to the federal  evaluation of Indiana\u2019s demonstration, the evaluation of Montana\u2019s  demonstration is aimed at estimating the effects of the demonstration  on insurance coverage, access to and use of care, and documenting  beneficiary understanding of and experience with premiums,  copayments, enrollment, and disenrollment, among other things."], "subsections": []}]}, {"section_title": "Limitations in State- Led Evaluations Hindered Their Usefulness and May Not Be Fully Addressed by CMS Improvements", "paragraphs": ["State-led evaluations of demonstrations in selected states often had  significant methodological weaknesses and gaps in results that affected  their usefulness for federal decision-making. Though CMS has been  taking steps since 2014 to improve the quality of these evaluations, the  agency has not established written procedures to help implement some of  these improvements."], "subsections": [{"section_title": "State-Led Evaluations in Selected States Often Had Significant Limitations That Affected Their Usefulness in Informing Federal Decision-Making", "paragraphs": ["The state-led evaluations we reviewed in our selected states often had  methodological limitations that affected what could be concluded about  the demonstration\u2019s effects. CMS hired a contractor to review state  evaluation designs and reports, and that contractor identified a number of  methodological concerns with the evaluations in our selected states. For  example, CMS\u2019s contractor raised concerns about the comparison  groups, or lack thereof, used to isolate and measure the effects of the  demonstrations in the Arkansas, California, Indiana, and Maryland  evaluations. The contractor also raised concerns with the sufficiency of  sample sizes and survey response rates for beneficiary surveys in  Indiana. These surveys were key methods for assessing the effect of  demonstrations on access, beneficiary understanding, and perceptions on  affordability. Finally, the contractor raised concerns with the analysis of  the effects of the demonstration on cost in Arkansas, California, and  Maryland. Officials in several states told us that some of the  methodological limitations in their evaluations were difficult to control. For  example, officials in two states told us that isolating the effects of the  demonstration was difficult given other changes happening in the state\u2019s  health care system at the same time. Some state officials also noted that  state resources, including both funding and staff capacity, present  challenges in completing robust evaluations. program, with approved funding up to about $690 million. Under the  demonstration STCs, the state was required to evaluate whether the  seven hospitals participating in the DSRIP were able to show  improvements on certain outcome measures related to improving  quality of care, improving population health and access to care, and  reducing the per capita costs of health care. However, the evaluation  report, submitted by the state 5 years after approval of the DSRIP  program, provided only descriptive or summary information about the  number and types of projects implemented by the hospitals receiving  payments and did not provide any data to measure or conclusions on  the effects of those payments.", "Arkansas: Under its demonstration, the state was testing the effects  of using Medicaid funds to provide premium assistance for the more  than 200,000 beneficiaries newly eligible under PPACA to purchase  private insurance offered through the state\u2019s health insurance  exchange. The state\u2019s evaluation was designed to assess whether  beneficiaries would have equal or better access to care and equal or  better outcomes than they would have had in the Medicaid fee-for- service system. The evaluation was also aimed at examining  continuity of coverage for beneficiaries, as the expansion population  was anticipated to have frequent income fluctuations leading to  changes in eligibility and gaps in coverage. However, evaluation  results submitted over two and a half years into the demonstration\u2014 the only results submitted for the state\u2019s first cycle\u2014were limited to  data only from the first year of the demonstration and did not provide  data on continuity of coverage. Achieving continuity of coverage was  part of the state\u2019s rationale for using an alternative approach to  Medicaid expansion.", "Arizona: Among other things, Arizona\u2019s demonstration includes  MLTSS, including for the particularly complex populations of adults  who have intellectual and developmental disabilities and for children  with disabilities. As part of its evaluation, the state was assessing  whether the quality of and access to care, as well as quality of life,  would improve during the demonstration period for long-term care  beneficiaries enrolled in MLTSS. However, evaluation results  submitted in October 2016\u2014the only results submitted for the state\u2019s  most recently completed demonstration cycle\u2014lacked data on key  measures of access, such as hospital readmission rates, and on  quality of life, such as beneficiaries\u2019 satisfaction with their health plan,  provider, and case manager.", "A key contributor to the gaps in the information included in the state-led  evaluations we reviewed was that CMS historically had not required the  states to submit final, comprehensive evaluation results at the end of  each demonstration cycle. As a result, for our selected states, including  those discussed above, CMS had received only interim evaluation reports  that were generally based on more limited data from the early years of the  demonstration cycle and did not include all of the analyses planned.  Though CMS had required final evaluation reports in the demonstration  STCs, the due dates for those reports were tied to the expiration of the  demonstrations or, in one case, CMS did not enforce the specified due  date. Under such conditions, due dates for final evaluation reports were  effectively pushed out when the demonstrations were renewed.  Evaluation due dates could be pushed out for multiple cycles. CMS  officials acknowledged that the lack of data in the interim evaluation  reports from the more mature years of the demonstration affected the  conclusions that could be drawn from them.", "We found that due dates for final evaluation reports were pushed out  upon renewal in all seven of our states that had completed a  demonstration cycle, leading to a gap in evaluation reporting of up to 6 or  7 years for several states. In Maryland, for example, CMS approved the  demonstration to run from 2013 to 2016 with a final evaluation report due  120 days after the expiration of the demonstration. In 2016, CMS  extended the demonstration, pushing the deadline for the final evaluation  report to 18 months following the end of the new cycle, or June 2023. At  that time, it will be 7 years since the interim evaluation report was  submitted. See figure 2.", "The limitations in state-led evaluations\u2014including methodological  weaknesses and gaps in results\u2014have, in part, hindered CMS\u2019s use of  them to inform its policy decisions. CMS officials told us that, historically,  state-led evaluations have generally provided descriptive information but  lacked evidence on outcomes and impacts. As a result, officials noted  that they consider the data reported in the evaluations but, generally,  state-led evaluations have not been particularly informative to their policy  decisions. CMS officials told us that there have been cases where data,  but not the conclusions, from state-led evaluations have informed their  thinking on certain policy changes. For example, CMS officials said that  data reported in early evaluations of DSRIP programs helped them in  considering whether and how the agency should modify the basic policy  structure of these programs. State officials had mixed perspectives on  whether state-led evaluations influenced CMS decision-making around  renewing their demonstrations. Officials in one state told us that while  CMS reviewed their interim evaluation results, the results did not appear  to influence the negotiations around the demonstration renewal. In  contrast, officials from another state told us that discussion of interim  evaluation results and limitations was a significant part of negotiations in  2016 regarding whether CMS would be willing to reauthorize funding for  certain programs, including a new DSRIP investment and broader  delivery system reforms the state was trying to implement. Officials in  several states told us that there was value to state-led evaluations and in  the federal-state partnership in designing the evaluations."], "subsections": []}, {"section_title": "CMS Is Taking Steps to Improve the Quality of State-Led Evaluations, but Lacks Written Procedures to Ensure That All Evaluations Will Be Subject to New Requirements", "paragraphs": ["CMS has implemented several procedures since 2014 aimed at  improving the quality of state-led evaluations. CMS officials told us that  these changes were part of CMS placing increased focus on monitoring  and evaluation, which also resulted in CMS establishing a new office in  2015 that is responsible for these activities. One of the key changes CMS  began implementing in 2014 was to set more explicit requirements for  evaluations in the STCs, including requirements to improve the evaluation  methodologies. According to CMS officials, the agency realized that one  reason why state-led evaluations had generally lacked rigor and been of  limited usefulness was that CMS had not been setting clear expectations  for evaluations in the STCs. The officials said that CMS began  strengthening evaluation requirements starting in 2014 with  demonstrations implementing approaches in CMS\u2019s high priority policy  areas.", "In our review of the STCs for current demonstration cycles in our seven  selected states that had completed a demonstration cycle, all of which  were approved in 2014 or later, we found evidence of CMS\u2019s efforts.  Specifically, we found an increased focus on the use of independent  evaluators and more explicit expectations for rigor in the design and  conduct of evaluations:", "Consistent requirements for independent evaluators. The STCs  for the most recently approved cycle of demonstrations in all seven  states required the state to use an independent evaluator to conduct  the evaluation. In some cases, the STCs also required that the  evaluation design discuss the process to acquire the independent  evaluator, including describing the contractor\u2019s qualifications and how  the state will assure no conflict of interest. These requirements were  new in most states.", "More explicit expectations for rigor. In four of the seven states we  reviewed, the STCs for the most recently approved cycle of states\u2019  demonstrations included new, explicit language requiring state  evaluations to meet the prevailing standards of scientific and  academic rigor. These included standards for the evaluation design  and conduct as well as the interpretation and reporting of findings.  Some states\u2019 STCs further specified the characteristics of rigor that  CMS expected, including using the best available data, discussing the  generalizability of results, and using controls and adjustments for and  reporting the limitations of data and their effects on results. According  to CMS, in the past, states have not always discussed methodological  limitations in their evaluation reports.", "In addition to strengthening evaluation requirements, CMS has also taken  steps since 2014 to enhance its oversight during the design and early  stages of state-led evaluations, and, according to officials, some of these  steps are likely to improve the usefulness of evaluations. Specifically,  CMS has provided technical assistance to help states design their  evaluations, sometimes leveraging expertise from other parts of HHS,  including the HHS Office of the Assistant Secretary for Planning and  Evaluation and the Center for Medicare & Medicaid Innovation as well as  outside contractors. For example, officials stated that the agency assists  states in developing relevant and standardized measures and provides  assistance to help address states\u2019 data limitations. Officials said this has  resulted in more robust evaluation designs with increased potential to  isolate outcomes and impacts.", "CMS has also used contractors to help in its review of state evaluation  designs, including sampling designs, and evaluation reports. Since 2014,  one contractor has provided over 30 assessments of evaluation designs  and findings in at least 11 states. According to officials, this has increased  CMS\u2019s capacity to identify methodological weaknesses and negotiate  changes with states to improve the usefulness of evaluations. For  example, CMS\u2019s contractor reviewed four draft survey instruments that  Indiana planned to use in its evaluation, providing comments on the  sampling frames and the structure and organization of survey questions.  In response to the contractor\u2019s feedback, Indiana made changes to the  surveys to gather more reliable information and improve their readability.", "Finally, CMS has begun making changes to how it sets due dates for final  evaluation reports. CMS officials told us that in spring 2017, CMS began  requiring states to submit a comprehensive evaluation report for  demonstrations in its high priority policy areas for evaluation at the end of  each demonstration cycle, rather than after the expiration of the  demonstration. CMS\u2019s recent demonstration renewals in Florida and  Missouri\u2014approved in August and September of 2017, respectively\u2014 required a final, summative evaluation report at the end of the  demonstration cycle, consistent with the policy. In October 2017, CMS  officials stated that the agency was expanding this policy and was now  planning to require final reports at the end of each cycle for all  demonstrations, as they are approved or renewed. However, CMS had  not established written procedures for implementing this new policy.", "It is too soon to assess the effectiveness of CMS\u2019s recent efforts to  strengthen state-led evaluations. CMS has been implementing the  strategies on a rolling basis as states apply for demonstration renewals  and new demonstrations. If implemented and enforced consistently,  CMS\u2019s efforts to improve the quality of state-led evaluations have the  potential to result in more conclusive evaluations. Further, CMS\u2019s efforts  to improve the quality of state-led evaluations and its plan to require final  reports after each demonstration cycle are consistent with evaluation  guidance from the American Evaluation Association that recommends  that federal agencies conduct evaluations of public programs and policies  throughout the programs\u2019 life cycles, not just at their end, and that  agencies use evaluations to improve programs and assess their  effectiveness. Federal internal control standards also state that  management should implement control activities through policies.  However, CMS does not have written procedures for implementing its  planned policy, for example, for ensuring that the requirement is included  in the STCs for all demonstrations, despite unique negotiations with each  state, and that those requirements are consistently enforced. As a result,  some state-led evaluations could continue to produce only more limited,  interim findings that leave critical questions about the effects of the these  demonstrations on beneficiaries and costs unanswered.", "CMS oversight of state-led evaluations may see further changes, as CMS  officials told us that their oversight procedures are still evolving. For  example, CMS officials told us that as of October 2017 the agency plans  to begin to make distinctions in the level of evaluation required across  demonstrations. They said that they are considering, for example,  whether longstanding and largely unchanged components of a  demonstration, and approaches previously tested by a number of other  states without concern, require the same level of evaluation as testing a  new approach to Medicaid expansion. Officials said that they plan to  include language in demonstration STCs, as the agency did in the recent  renewals for Florida and Missouri, instructing the state to consider those  factors as the state designs its evaluation. Specifically, in the evaluation  design submitted for CMS approval, the state should include in the discussion of limitations whether the demonstration is long-standing,  noncomplex, has previously been rigorously evaluated and found to be  successful, or is also considered to be successful without issues or  concerns. CMS officials said that the expected level of rigor for the  evaluation could be balanced against such factors.", "The implications of limiting evaluation requirements for certain types of  demonstration approaches would depend on CMS\u2019s definitions of what is,  for example, noncomplex or has previously been rigorously evaluated. As  of October 2017, CMS had not established specific criteria for  determining when a demonstration component would require less  rigorous evaluation. Agency officials told us they were planning to  develop such criteria after concluding a pilot of alternative criteria and  expectations in certain demonstrations related to providing services for  family planning and former foster care children. They said that when  these pilots have concluded they will evaluate the results. It is unclear  how these narrowly scoped demonstrations\u2014scoped for a particular type  of service or population\u2014can be used to inform criteria for  comprehensive demonstrations that can affect a state\u2019s entire Medicaid  population and all services. Further, though CMS has begun indicating to  states, including those with comprehensive demonstrations, that the  agency may allow less rigorous evaluations for certain types of  demonstration approaches, CMS has not established timeframes for  issuing the criteria defining those conditions.", "Federal standards for internal control stress that management should  implement control activities through policy and should internally and  externally communicate necessary information to achieve the agency\u2019s  objectives. If CMS does not establish clear criteria for components of  demonstrations that require limited evaluation, characteristics such as  \u201clong-standing\u201d or \u201cnoncomplex\u201d could be broadly interpreted. This could  result in demonstrations that receive significant amounts of federal funds  and affect many beneficiaries not being thoroughly evaluated. Written  criteria could also reduce the potential for inconsistencies in the level of  evaluation required across demonstrations."], "subsections": []}]}, {"section_title": "Ongoing Federal Evaluations Led by CMS Have Been Limited by Data Challenges and It Is Uncertain When Results Will Be Available", "paragraphs": ["Data and other challenges have significantly limited the scope and  progress of CMS\u2019s large, multi-state evaluation and the agency\u2019s  evaluation of Indiana\u2019s demonstration. Further, CMS has not released  available evaluation results from the multi-state evaluation nor set  timeframes for making these and future federal evaluation findings public."], "subsections": [{"section_title": "Data Challenges Have Limited the Scope and Progress of Federal Evaluations", "paragraphs": ["CMS encountered numerous data challenges in its multi-state evaluation  that significantly reduced the scope of the analyses planned. These data  challenges included limitations in the quality of CMS data and delays  obtaining data directly from states. These limitations caused CMS to  narrow the evaluation\u2019s scope, often by reducing the number of state  demonstrations evaluated or limiting what was being examined. All four  demonstration types targeted in the multi-state evaluation\u2014which reflect  CMS\u2019s high priority policy areas\u2014were affected by these challenges. In  the most extreme case, data limitations reduced the scope of the MLTSS  evaluation to two states out of the more than 20 states operating such  programs. As a result, the evaluation findings will not be generalizable to  all MLTSS programs. (See table 2.) The data challenges were in addition  to other challenges that affected the evaluation. For example, there were  difficulties in trying to isolate demonstration effects in the context of  rapidly changing health systems, or recent demonstrations had not been  in operation long enough to allow CMS to appropriately assess longer- term effects.", "Many of the data challenges CMS encountered in the multi-state  evaluation reflect long-standing concerns with the lack of accurate,  complete, and timely Medicaid data. Specifically, we and others have  found that data states are required to submit to CMS have, at times, been  incomplete or have not been reported at all, particularly managed care  encounter data. Complicating the availability of these data is CMS\u2019s  ongoing transition to a new data system, the Transformed Medicaid  Statistical Information System (T-MSIS), which is CMS\u2019s primary effort to  improve Medicaid expenditure and utilization data. States\u2019 transitions to  T-MSIS, however, have introduced substantial delays in state data  submissions. For example, by 2015, a large number of states had  stopped submitting data through the legacy information system until they  established T-MSIS submissions, which meant CMS had to obtain data  directly from individual states for the multi-state evaluation. New data  challenges have also emerged as states under demonstrations have  enrolled newly eligible beneficiaries in health insurance exchange  coverage. Lack of accessible data on beneficiaries enrolled in plans  offered through the exchange resulted in the delays in obtaining data for  Arkansas for the multi-state evaluation. In the past, we have made  recommendations to CMS to take action to improve the data available for  Medicaid program oversight, including to T-MSIS.", "As with the multi-state evaluation, data challenges, particularly obtaining  needed data from the state, also proved to be a significant hurdle in  CMS\u2019s evaluation of Indiana\u2019s demonstration. CMS initiated its federal  evaluation of Indiana\u2019s demonstration in 2015 to understand how the  approaches being tested in Indiana\u2019s demonstration affected beneficiaries  (see sidebar). However, in 2016, Indiana raised concerns about sharing  enrollee data with CMS\u2019s evaluation contractors. Specifically, in a letter to  CMS, the state cited concerns about the controls that CMS had in place  to ensure that its contractors would protect enrollee information consistent  with state and federal privacy protections. Despite assurances by CMS,  CMS\u2019s contractor and the state were not able to execute a data use  agreement. This effectively halted the evaluation\u2019s progress. The data  use agreement was necessary for the contractor to access state  enrollment data that drove a number of planned evaluation activities,  including a key beneficiary survey. In October 2017, CMS officials told us  that they were continuing to work with the state and anticipated that a  data use agreement would be executed and the federal evaluation of  Indiana\u2019s demonstration would proceed. They did not have timeframes for  when the agreement would be reached.", "Despite the data challenges and delays, CMS\u2019s evaluations of Medicaid  demonstrations, as planned, are likely to provide new information on the  effects of demonstrations in different states to inform policy decisions.  The multi-state evaluation, for example, is expected to provide  information on whether living in a state that collects monthly contributions  from beneficiaries affects the likelihood of beneficiaries enrolling in  Medicaid and how per-beneficiary spending differs between premium  assistance demonstration states and states that have implemented more  traditional Medicaid expansions. CMS officials emphasized that federal  evaluations allow for cross-state evaluations that can be used to validate  the findings of related studies and also to identify which findings are  generalizable to other states and populations."], "subsections": []}, {"section_title": "CMS Has Not Released Rapid Cycle Reports and It Is Uncertain When Final Evaluation Results Will Be Available", "paragraphs": ["CMS has yet to make initial reports from the multi-state evaluation  publicly available, limiting the potential use of those findings by states and  other federal policymakers. As of October 2017, CMS\u2019s contractor had  produced 15 rapid cycle reports on states\u2019 progress in implementing  demonstrations in the high priority policy areas. These reports provide  information on states\u2019 implementation of their demonstrations and  variations in design and provide details that can help with the  interpretation of evaluation results, inform federal policymaking, and  provide lessons learned to states and other stakeholders. The reports  also describe policy and other challenges states encountered in  implementing their programs, which could be useful to other states  interested in replicating these models. (See table 3.)", "However, despite having received some of these reports from its  contractor in 2015, CMS had not released these findings as of October  2017. CMS officials said that the reports were still under agency review  and acknowledged that since some of the rapid cycle reports were almost  2 years old, CMS\u2019s contractor was reviewing and updating the information  in them. CMS officials noted that the rapid cycle reports had provided  useful information and had influenced ongoing work with states designing  related demonstrations. For example, according to officials, findings from  the rapid cycle reports played a part in how the agency structured the  latest DSRIP demonstrations. They also said that rapid cycle reports on  beneficiary engagement have shed light on the effectiveness of different  beneficiary education strategies, such as what approaches are more  successful in capturing beneficiaries\u2019 attention and what strategies are  easiest for states to implement. In October 2017, CMS officials stated that  they had recently decided to make the rapid cycle reports public, although  the agency\u2019s clearance process for the reports was still being decided  and the officials did not have timeframes for the reports\u2019 release.", "It is also uncertain when CMS will make interim and final evaluation  reports from the multi-state evaluation public. By September 2017, CMS\u2019s  contractor for the multi-state evaluation produced three interim evaluation  reports covering the four demonstration types. CMS officials regard  these as draft interim evaluation reports, and, as of October 2017, said  they were under agency review and would not be publicly released. CMS  expects the contractor to submit final interim evaluation reports, which are  anticipated to include some additional information beyond the draft  reports, by September 2018, about 1 year later than when the final interim  evaluation reports were originally due. CMS officials said that the  agency planned to release the final interim evaluation reports, although  there was no specific timetable for this. Timeframes for the completion  and release of final evaluation results are even more uncertain, both  because of the delays in the evaluation progress and because CMS has  no standard policy for timeframes for releasing evaluation results.", "It is also uncertain when evaluation results will be available and made  public for CMS\u2019s evaluations of the Indiana and Montana demonstrations.  Two years after the approval of the contract for the Indiana evaluation,  CMS\u2019s contractor has produced an evaluation design but no evaluation  findings. CMS had not posted the evaluation design on its website until  November 2017, according to officials, about 1 year after it was originally  submitted. As discussed above, the lack of findings is due to the  contractor and state not having negotiated a data use agreement. To the  extent that Indiana\u2019s evaluation moves forward and evaluation reports are  produced, CMS officials said the agency plans to release the final  evaluation report but did not indicate whether interim findings, available a  year earlier, would be released. With regard to the Montana evaluation,  CMS expects to receive the interim evaluation report by September 2018  and the final evaluation report by September 2019. How soon these  findings would be publicly available, however, is difficult to estimate, as  CMS officials told us the agency must review these before making them  publically available and does not have timeframes for this review.", "The lack of a standard policy for the public release of findings from  federal evaluations of Medicaid demonstrations is inconsistent with  recommendations of the American Evaluation Association. The  Association recommends that evaluation findings related to public  accountability be disseminated to the public, and that evaluation results  be made available in a timely manner and be easily accessible through  the internet. For state-led evaluations, CMS must post on its website, or  provide a link to the state\u2019s website, all evaluation materials, including  research and data collection, for the purposes of sharing findings with the  public within 30 days of receiving the materials. CMS has not established  a comparable policy for the release of findings from federal evaluations of  demonstrations. CMS officials stated that federal evaluations provide a  unique cross-state perspective that states typically do not have the  capacity to provide in their own state-led evaluations; however, if these  reports are not made public in a timely fashion, opportunities may be  missed to inform federal and state policymakers and other stakeholders  on the effects of Medicaid demonstrations."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Section 1115 demonstrations have long been an important tool for  providing states with the flexibility to test new approaches to providing  and financing Medicaid coverage. Given the potential effects on millions  of beneficiaries and significant federal investment in these  demonstrations\u2014over $100 billion in 2015\u2014it is critical that they be  evaluated. Evaluating Medicaid demonstrations is complex, both within a  single state and across states. These programs are dynamic, and there  are many factors affecting outcomes, making it challenging to isolate the  effects of policy changes implemented under a demonstration. Further,  persistent challenges with Medicaid data that we have highlighted over  the years add to the complexity of evaluating demonstrations. Despite  these challenges, targeted and well-designed evaluations offer the  potential to identify policies that improve outcomes for beneficiaries and  reduce costs to Medicaid. With the growing complexity of Medicaid  programs and limited resources, that information could prove key in  helping to sustain the program.", "CMS\u2019s approach to overseeing state-led evaluations in the past has  resulted in limited information about the effects of demonstrations, leaving  gaps in evidence about policies that might improve state Medicaid  programs. CMS\u2019s efforts since 2014 to improve the usefulness of  evaluations in informing state and federal Medicaid policy decisions have  promise. If CMS consistently sets and enforces clear expectations and  provides support for rigorous and timely state-led evaluations for all  demonstrations as planned, those evaluations could yield more useful  information within the next several years. However, CMS has not  established written procedures for requiring final, comprehensive  evaluation reports at the end of each cycle for all demonstrations, a key  step in improving the usefulness of state-led evaluations. Further, CMS is  planning to allow less rigorous evaluations for some demonstrations but  has not yet established specific criteria for doing so.", "Federal evaluations led by CMS also show promise. The evaluations  currently underway\u2014despite challenges that caused delays and reduced  scope\u2014are likely to provide a cross-state look at the effects of policies  that are of great interest to CMS, Congress, and other states. However,  CMS has not yet made potentially useful rapid cycle reports public and  has no established policy for making future evaluation reports public. By  not making the results of the federal evaluations public in a timely  manner, CMS is missing an opportunity to inform important policy  discussions happening at the state and federal levels."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to CMS:  The Administrator of CMS should establish written procedures for  implementing the agency\u2019s policy that requires all states to submit a  final evaluation report after the end of each demonstration cycle,  regardless of renewal status. (Recommendation 1)", "The Administrator of CMS should issue written criteria for when CMS  will allow limited evaluation of a demonstration or a portion of a  demonstration, including defining conditions, such as what it means  for a demonstration to be longstanding or noncomplex, as applicable.  (Recommendation 2)", "The Administrator of CMS should establish and implement a policy for  publicly releasing findings from federal evaluations of demonstrations,  including findings from rapid cycle, interim, and final reports; and this  policy should include standards for timely release. (Recommendation  3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHS  concurred with all three recommendations. Regarding our first  recommendation that CMS establish written procedures for implementing  its policy requiring states to submit final evaluation reports after the end of  each demonstration cycle, HHS said that it is in the process of developing  such written procedures. HHS said that it is currently making this a  requirement through the STCs for each demonstration as demonstrations  are approved or renewed. Regarding our second recommendation that  CMS issue written criteria for when the agency will allow states to limit  evaluations of their demonstrations, HHS said it is in the process of  testing such criteria, and that once it has experience with the criteria, it  will develop written guidance. Regarding our third recommendation that  CMS establish and implement a policy for publicly releasing findings from  federal evaluations of demonstrations, HHS said that CMS is in the  process of establishing such a policy. HHS added that CMS plans to have  all finalized federal rapid cycle reports and final interim evaluation reports  publicly available in the near future.", "HHS also provided technical comments, which we incorporated as  appropriate. HHS\u2019s comments are reproduced in appendix II.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services, appropriate congressional  committees, and other interested parties. The report will also be available  at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7114 or iritanik@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Characteristics of Selected States\u2019 1115 Demonstrations", "paragraphs": ["The Medicaid section 1115 demonstrations (referred to as  demonstrations) in our eight selected states varied in terms of the number  of years the demonstrations had been in effect and cost, among other  things. For example, three of the more mature demonstrations\u2014those in  Maryland, Massachusetts, and New York\u2014had been in place for two  decades. Demonstrations in Arkansas and Kansas represented more  recent approvals, both approved in 2013. (See table 4.) With regard to  cost, all of the selected states were among the top 15 states in terms of  amount of spending under demonstrations. Together, spending under  demonstrations in our selected states accounted for about 47 percent of  all spending under demonstrations in fiscal year 2015."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Susan Barnidge (Assistant  Director), Linda McIver (Analyst-in-Charge), John Lalomio, Hannah  Locke, and Corissa Kiyan-Fukumoto made key contributions to this  report. Also contributing were Laurie Pachter and Emily Wilson."], "subsections": []}]}], "fastfact": ["About one-third of Medicaid's spending goes toward demonstrations, which allow states to test new approaches to delivering Medicaid services. Do they save money? Improve care?", "The short answer is that states and the federal government don't fully know. We found that the federal government did not require complete and timely evaluations from the states, so conclusive results were not available. Moreover, the federal government wasn't making its evaluation results public\u2014missing opportunities to inform federal and state Medicaid policy discussions.", "We recommended ways for the Centers for Medicare & Medicaid Services to address these issues."]}
{"id": "GAO-18-288", "url": "https://www.gao.gov/products/GAO-18-288", "title": "Veterans Health Administration: Opportunities Exist for Improving Veterans' Access to Health Care Services in the Pacific Islands", "published_date": "2018-04-12T00:00:00", "released_date": "2018-04-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Veterans' access to timely health care at VA medical facilities has been a long-standing problem identified by GAO and VA's Office of Inspector General. The remote nature of the Pacific Islands creates some unique challenges for VAPIHCS, which may affect its ability to provide the approximately 50,000 veterans it serves in American Samoa, Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands with timely access to primary, mental health, and specialty care.", "House Report 114\u2013497 included a provision for GAO to review VHA's efforts to provide timely access to health care within VAPIHCS. Among other things, this report examines: the extent to which the VAPIHCS veterans received (1) timely primary and mental health care, and (2) timely specialty care; and (3) any challenges VAPIHCS faced in recruiting and retaining physicians, and strategies to resolve them. GAO reviewed relevant policy documents and a randomly selected, non-generalizable sample of 164 medical records, and interviewed VHA, VAPIHCS, and DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["For the sample of veterans' medical records that GAO reviewed, most veterans received primary and mental health care from the Department of Veterans Affairs (VA) Pacific Islands Health Care System (VAPIHCS) within timeliness goals set by VA's Veterans Health Administration (VHA). However, GAO also found that some of these veterans experienced delays related to the processing of their enrollment applications, contacting them to schedule appointments, and completing comprehensive mental health evaluations. These delays were similar to some GAO had identified in previous work pertaining to veterans' access to care nationwide.", "For the sample of veterans' medical records that GAO reviewed, VAPIHCS referred nearly all specialty care to non-VA providers within VHA's timeliness goal, but the time taken to provide care was variable and sometimes lengthy. Specifically, VAPIHCS sent specialty care referrals to", "the Veterans Choice Program (Choice Program)\u2014for veterans that GAO reviewed, the number of days to receive care from the Choice Program was, on average, 75 days.", "Department of Defense (DOD) military treatment facilities\u2014for veterans that GAO reviewed, the number of days to receive care from the two DOD facilities for which VAPIHCS has agreements was, on average, 37 days from one facility and 47 days from the other.", "GAO identified weaknesses in VAPIHCS' management of its referral process for sending veterans for specialty care services at one of the two military treatment facilities. GAO found VAPIHCS did not always manage referrals to the military treatment facility in a timely way and there was inconsistent guidance describing the roles and responsibilities of the VAPIHCS staff involved in the process. These weaknesses may have contributed to the amount of time it took for veterans to receive specialty care services.", "GAO also found that VAPIHCS faces challenges recruiting and retaining physicians. As of October 2017, 17 of approximately 100 VAPIHCS physician positions were vacant, as were several other types of health care providers. Some of the challenges VAPIHCS faced are unique to the Pacific Islands, such as the availability of only one local medical school from which to recruit, along with travel burdens and a high cost of living that may discourage physicians from relocating there. Other challenges were similar to those GAO has previously identified as faced by VA medical centers across the country, such as differences in interpretation of hiring and recruiting policies. VAPIHCS officials said they use several strategies to help recruit and retain physicians, including VHA strategies used by other VA medical centers such as financial incentives and an educational debt reduction program. Although they described limits to the success of some of these strategies, they have not evaluated their effectiveness. Without completing an evaluation of its strategies, VAPIHCS may not be optimizing its resources to improve its hiring efforts and may continue to struggle with physician shortages."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes four recommendations, including that VAPIHCS improve monitoring of referrals to one DOD facility and evaluate the effectiveness of physician recruitment and retention strategies. VA concurred with three recommendations and partially concurred with the fourth. GAO maintains that monitoring referrals to the DOD facility is needed, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Veterans Health Administration (VHA), within the Department of  Veterans Affairs (VA), operates one of the nation\u2019s largest health care  systems. In fiscal year 2016, VHA provided care to about 6.9 million  veterans and obligated about $65 billion for their care through 170 VA  medical centers (VAMC) and 1,082 clinics nationwide. The VA Pacific  Islands Health Care System (VAPIHCS) is part of Veterans Integrated  Service Network (VISN) 21 and includes 1 of VHA\u2019s 170 VAMCs\u2014the  Spark M. Matsunaga VAMC, located in Honolulu, Hawaii\u2014and 10 clinics  located across the Pacific Islands. VAPIHCS provides health care  services to approximately 50,000 veterans that reside in the Pacific  Islands of Hawaii, American Samoa, Guam, and the Commonwealth of  the Northern Mariana Islands. While some outpatient specialty care is  provided at the Spark M. Matsunaga VAMC and the 10 clinics, VAPIHCS  primarily provides outpatient primary and mental health care services.  Unlike most VAMCs, the Spark M. Matsunaga VAMC does not include an  inpatient hospital. For most inpatient and other specialty care, veterans  are referred to local military treatment facilities through joint venture and  sharing agreements with the Department of Defense (DOD) or to non-VA  providers in the community. In particular, VAPIHCS partners with Tripler  Army Medical Center (TAMC) through a joint venture in Hawaii and U.S.  Naval Hospital Guam (NHG) through a sharing agreement, and also  offers veterans access to non-VA providers in the community through the  Veterans Choice Program (Choice Program).", "In recent years, we and the VA Office of the Inspector General (OIG)  have expressed concerns about veterans\u2019 ability to access timely medical  care and VHA\u2019s oversight of its appointment scheduling practices. VHA  has timeliness goals outlined in policies that measure the amount of time  it should take to schedule appointments, and for veterans to receive  health care services. Additionally, we and the VA OIG have expressed  concerns about whether VHA is able to ensure that it has the appropriate  clinical workforce to meet the needs of veterans. The VA OIG also has  found that VAPIHCS faces unique challenges in providing patient care  given the geographic remoteness of the Pacific Islands, and identified  concerns including about lengthy wait times for primary care.", "House report 114-497, which accompanied the Military Construction,  Veterans Affairs, and Related Agencies Appropriations Bill, 2017,  included a provision for us to review the scheduling, staffing, outreach,  and access management practices at VAPIHCS. This report examines:  1.  the extent to which veterans in the Pacific Islands receive primary and  mental health care from VA providers within VHA\u2019s timeliness goals;  2.  the extent to which veterans in the Pacific Islands are referred to and  receive specialty care from non-VA providers within VHA\u2019s timeliness  goals;  3.  the challenges, if any, in the recruitment and retention of physicians in  the Pacific Islands, and the extent to which strategies are used to help  resolve any such challenges; and  4.  the challenges, if any, veterans in the Pacific Islands face in  accessing care, and the strategies used to improve veterans\u2019 timely  access to care.", "To examine all four objectives, we focused our review on services  provided to veterans in 3 of the 10 clinics\u2014located on the islands of  American Samoa, Guam and Maui\u2014because they provided the most  comparable types of primary and mental health care services across all  clinics. We interviewed VAPIHCS officials, DOD officials, and a local  representative of TriWest, the third-party administrator for the Choice  Program in VISN 21, the program through which most veterans in the  Pacific Islands receive non-VA care, and we conducted site visits to the  VA and DOD facilities in Guam and Honolulu in April 2017. We  interviewed VA and DOD officials, and the local TriWest representative  about policies and guidance for scheduling veterans for outpatient  primary, mental health, and specialty care; arranging for and providing  specialty care at a DOD military treatment facility or with a non-VA  provider in the community; physician recruitment and retention  challenges; and challenges veterans have with accessing health care  services in the Pacific Islands. In addition, we discussed access to care  challenges with community stakeholders, including with members from a  local advisory council that represents veterans on Guam.", "To examine the extent to which veterans accessed primary and mental  health care from VA providers, and specialty care services from non-VA  providers, within VHA\u2019s timeliness goals, we reviewed relevant VHA  policies for veteran enrollment application processing and appointment  scheduling within VA facilities, and for facilitation of health care services  referred outside a VA facility. We also examined VAPIHCS\u2019 joint venture  and sharing agreements with DOD and VA\u2019s Choice Program contract  with TriWest. In addition, we compared the processes VAPIHCS followed  to refer veterans to care outside a VA facility to appropriate federal  internal control standards. Additionally, we interviewed officials from  VHA\u2019s Office of Veteran Access to Care, Office of Mental Health  Services, and Office of Community Care to obtain information on VHA\u2019s  scheduling policies. To measure the timeliness of care provided by VA  and non-VA providers, we reviewed a sample of 164 medical records of  veterans enrolled at clinics on the islands of American Samoa, Guam,  and Maui. The results from our review cannot be generalized to all  veterans within VAPIHCS, or to other VAMCs, but provide insights into  the extent to which veterans were able to receive timely access to health  care services. Our sampling methodology for the 164 medical records  included requesting and obtaining lists of veterans from VHA, unless  otherwise noted, that satisfied the following criteria:  Initial primary care appointments. Those veterans who applied for  enrollment and were successfully enrolled in VHA health care  benefits; requested on their enrollment applications that VA contact  them to schedule medical appointments; and received their first  primary care appointment from Oct. 1, 2016, through Mar. 31, 2017.", "Initial mental health appointments. Those veterans that received  their first appointment with a mental health care provider from Oct. 1,  2016, through Mar. 31, 2017.", "Follow-up appointments. Those established veterans\u2014veterans  who were seen by a VA primary or mental health provider within the  last 2 years\u2014who saw a provider for a follow-up primary or mental  health care appointment in March 2017.", "Specialty care referrals. Those routine outpatient specialty care  referrals that were created from Oct. 1, 2016, through Mar. 31, 2017,  that VAPIHCS sent to either (1) DOD military treatment facilities  working in partnership with VAPIHCS: TAMC and NHG, or (2)  community providers through the Choice Program. The majority of  veterans enrolled in VAPIHCS received non-VA care in fiscal year  2016 through the Choice Program. From these lists, we selected a  random sample that included referrals for orthopedics\u2014a mission- critical physician specialty\u2014as well as the specialty care service most  frequently referred to TAMC, NHG, and the Choice Program from  each of the three selected clinics in fiscal year 2016. These referrals  resulted in a face-to-face consultation with a specialty care provider.  Additionally, we also reviewed a select sample of general surgery  referrals sent to NHG that were subsequently canceled by VAPIHCS;  we reviewed these referrals to further assess reasons for the  cancelations.", "See Table 1 for information on the number of medical records reviewed,  by type of appointment and health care service, number of records  sampled, and location of veteran.", "To identify any challenges in the recruitment and retention of physicians  in the Pacific Islands, and the extent to which strategies have been used  to help resolve such challenges, we reviewed key VHA documents  related to physician recruitment and retention and workforce and  succession planning; directives related to staffing and pay administration;  and guidance regarding the composition of primary care and mental  health providers within clinics. Additionally, we reviewed information on  the current physician staffing and vacancy levels for each clinic within  VAPIHCS. We assessed VAPIHCS\u2019 strategies to address challenges it  faces to recruit and retain physicians within the context of federal  standards for internal control. Finally, we interviewed VHA, VISN, and  VAPIHCS officials involved in physician recruitment and retention,  including from VHA\u2019s Office of Workforce Management and Consulting,  VISN 21\u2019s Office of Human Resources, and VAPIHCS\u2019 Office of Human  Resources.", "To identify any challenges veterans in the Pacific Islands face in  accessing care, and the strategies used to improve access, we reviewed  VHA\u2019s handbook and guidance related to its beneficiary travel program.  This program is intended to improve veterans\u2019 access to timely care by  reimbursing certain travel costs to medical appointments. Additionally, we  reviewed VAPIHCS materials used to inform veterans about their access  options. We also collected and assessed information on the number of  outreach efforts conducted by VAPIHCS to inform veterans about access  to care. We also interviewed officials from VAPIHCS and VHA\u2019s Office of  Rural Health and TriWest to obtain information about any access  challenges for veterans they have identified and strategies used to  address them.", "We conducted this performance audit from January 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VAPIHCS provides comprehensive health care to eligible veterans who  reside in Hawaii and the three U.S. territories in the Pacific\u2014 American  Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.  According to VAPIHCS officials, the geographic distances between the  Pacific Islands and the use of multiple sources of health care to provide  services to veterans in this region create complex care delivery and  coordination challenges for VAPIHCS."], "subsections": [{"section_title": "VAPIHCS and Primary and Mental Health Care Services", "paragraphs": ["VAPIHCS generally provides outpatient primary and mental health care  services to the veterans it serves. These services are provided through its  ambulatory care clinic, housed at the Spark M. Matsunaga VAMC in  Honolulu, Hawaii, on the island of Oahu, and 10 clinics located in other  communities across the Pacific Islands. These 10 clinics include", "7 in the state of Hawaii on the islands of Oahu (1 clinic); Hawaii (2  clinics); Maui (1 clinic); Lanai (1 clinic); Molokai (1 clinic); and Kauai (1  clinic);", "1 in the territory of American Samoa;", "1 in the territory of Guam; and", "1 in the Commonwealth of the Northern Mariana Islands on the island  of Saipan.", "VAPIHCS provides some outpatient specialty care services through the  ambulatory care clinic and through traveling VAPIHCS specialty care  providers. Table 2 shows the number of enrolled veterans and the  number of veterans that have used outpatient services in fiscal year 2017  at each VAPIHCS facility."], "subsections": []}, {"section_title": "VAPIHCS and Specialty Care and Inpatient Services", "paragraphs": ["According to VAPIHCS officials, VAPIHCS provides most specialty care  and inpatient services to veterans at military treatment facilities through  joint venture and sharing agreements with DOD or through non-VA  providers in the community. In fiscal year 2017, VAPIHCS sent 50,000  referrals outside of VA, mostly to DOD or through the Choice Program.", "Military treatment facilities. Two military treatment facilities located in  the Pacific Islands provide care for veterans through joint venture and  sharing agreements with VAPIHCS: TAMC and NHG. According to  VAPIHCS\u2019 data, VAPIHCS made more than 8,000 referrals to these  facilities in fiscal year 2017.", "VAPIHCS\u2019 joint venture with TAMC: VAPIHCS\u2019 joint venture  agreement with TAMC\u20141 of 10 joint venture agreements in place  between VA and DOD as of December 2017\u2014states that VAPIHCS  may refer veterans to TAMC providers for specialty care and inpatient  services and, in return, for VAPIHCS to provide services for DOD  beneficiaries, such as psychiatric and post-traumatic stress disorder  services.", "VAPIHCS\u2019 sharing agreement with NHG: VAPIHCS\u2019 sharing  agreement with NHG\u20141 of more than 200 active sharing agreements  in place between VA and DOD as of December 2017\u2014states that  VAPIHCS may refer patients from the Saipan and Guam clinics to  NHG for available specialty care, laboratory, emergency care, and  inpatient services. NHG is located within a mile of the Guam clinic.", "Choice Program. VAPIHCS may also refer veterans to a non-VA  provider in the community when veterans need care that is not offered by  VAPIHCS, or cannot obtain the needed care in a timely manner. In fiscal  year 2017, 61 percent of VAPIHCS referrals sent to community providers  were through the Choice Program. (See fig. 1 for the breakdown of the  number and percent of referrals sent to care outside of VAPIHCS in fiscal  year 2017.) Veterans may opt to obtain health care services from a  network of community providers through the Choice Program if they meet  certain criteria, including:  1.  the next available medical appointment with a VHA clinician is more  than 30 days from the veteran\u2019s preferred appointment date or the  date the veteran\u2019s physician determines he or she should be seen;  2.  the veteran lives more than 40 miles driving distance from the nearest  VHA facility with a full-time primary care physician;  3.  the veteran needs to travel by air, boat, or ferry to the VHA facility that  is closest to his or her home;  4.  the veteran faces an unusual or excessive burden in travelling to a  VHA facility based on geographic challenges, environmental factors,  or a medical condition;   5.  the veteran\u2019s specific health care needs, including the nature and  frequency of care needed, warrants participation in the program; or  6.  the veteran lives in a state or territory without a full-service VHA  medical facility.", "As the third-party administrator of the Choice Program for VAPIHCS,  TriWest is responsible for establishing networks of community providers,  scheduling appointments with community providers for eligible veterans,  and paying providers for their services. TriWest has contractual time  frames in which to accept and schedule the appointment, or return the  referral to VAPIHCS for further action."], "subsections": []}]}, {"section_title": "Most Veterans in Our Review Received Primary and Mental Health Care from VA Providers within VHA\u2019s Timeliness Goals, although Some Faced Delays", "paragraphs": [], "subsections": [{"section_title": "Veterans in Our Review Faced Some Enrollment Delays, but Once Contacted, Most Received Initial Primary Care from VA Providers within VHA\u2019s Timeliness Goal", "paragraphs": ["Our review of 30 medical records of newly enrolled veterans accessing  initial primary care services at the American Samoa, Guam, or Maui clinic  found some delays in processing of health care benefits enrollment  applications and contacting of veterans to schedule appointments. Once  contacted, however, most veterans in our sample received initial primary  care within VHA\u2019s timeliness goal. These enrollment delays may have  contributed to the time taken for veterans to see primary care providers,  consistent with findings from our prior work.", "Enrollment for VA Health Care Benefits   To receive VA health care benefits, a veteran  may submit an enrollment application by mail,  telephone, through VA\u2019s website, or by  applying in person at a VA health care facility.  Once a veteran submits an application, there  are three key steps for processing the  application: (1) intake of application, (2)  verification of eligibility, and (3) enrollment  determination. In fiscal year 2016, most  enrollment applications were processed by VA  medical center staff. According to Veterans  Health Administration policy, staff are required  to process applications within 5 business days  of receipt. applications within the timeliness goal set in VHA policy. For 27 of the  30 veterans in our sample, VHA staff recorded the date the application  was received, which enabled us to assess the timeliness of enrollment  processing for these veterans. We found that 22 of these 27 applications  were processed within VHA\u2019s required 5 business days, with an average  of 1 day for processing. (See table 3.) Five applications were not  processed within the 5-day requirement; for four of these veterans, it took  an average of 10 days to process the enrollment applications. For the fifth  veteran, it took 627 days for VHA to process the application, and for  which VAPIHCS staff could not explain the delay.", "New Enrollee Appointments   Veterans can request on their enrollment  applications that Department of Veterans  Affairs (VA) staff contact them to schedule an  initial outpatient appointment. After a  veteran\u2019s enrollment application has been  processed, VA staff are to initiate the  scheduling of appointment requests within 7  days. within 7 days of their eligibility determination as required by VHA policy.  We found that 15 of the 30 veterans in our review had contact initiated  within 7 days to schedule an appointment, with an average of 4 days.  (See table 4.) Fifteen veterans did not have contact initiated within the 7  day requirement; for 14 of these veterans, it took an average of 20 days  to initiate contact. For the 15th veteran, it took 183 days to initiate contact.  According to clinic staff, gaps in communication between clinic and  VAPIHCS staff responsible for veteran enrollment, as well as staffing  shortages, may have contributed to delays in contacting newly enrolled  veterans. Clinic staff reported differences in how they are notified that a  veteran\u2019s enrollment application has been processed and that  appointment scheduling should be initiated. In addition, staff from two  clinics said there were staffing vacancies for primary care appointment  schedulers in their clinics during the time of our medical record sample  selection (October 2016 through March 2017), which may have caused  delays in contacting veterans.", "Timeliness of initial primary care services. For the 30 newly enrolled  veterans\u2019 medical records we reviewed, we found that, once contacted,  27 veterans received initial primary care services within VHA\u2019s timeliness  goal of 30 days of their preferred appointment dates (the date a veteran  requests health care services), with an average wait time of 7 days.  (See table 4.) Three veterans did not receive initial primary care  appointments at the Guam clinic within the 30-day requirement, and  waited an average of 62 days. However, as we have previously reported,  VHA\u2019s timeliness goal monitors only a portion of the overall time it takes  newly enrolled veterans to access primary care, and does not account for  the time it takes to process enrollment applications, to notify clinic staff of  successful enrollments, or to contact veterans to schedule their  appointments. In our March 2016 report, we recommended that VA  monitor the full amount of time newly enrolled veterans wait to be seen by  primary care providers, starting with the date veterans request they be  contacted to schedule appointments. When accounting for the time to  process applications and contact veterans, we found 6 of the 30 veterans  in our review waited more than 90 days to see a provider while 9 waited  30 days or less."], "subsections": []}, {"section_title": "Most Veterans in Our Review Received Initial Mental Health Care from VA Providers within VHA\u2019s Timeliness Goal, but There Were Some Delays Completing Comprehensive Mental Health Evaluations", "paragraphs": ["Our review of a randomly selected sample of 30 medical records for  veterans who accessed mental health care services for the first time at  one of the selected three clinics found that most veterans received initial  mental health care within VHA\u2019s timeliness goal. Although most veterans  in our sample received timely initial services, our review found that those  veterans needing comprehensive mental health evaluations often  experienced delays receiving them.", "Mental Health Care Appointments   Veterans can either request mental health  care services, or be referred for these  services, such as by their primary care  providers. Once care is requested for non- emergent mental health care needs,  appointments are to be scheduled within 30  days of the referral\u2019s clinically indicated date,  or in the absence of a clinically indicated date,  the veteran\u2019s preferred date for their first  mental health care appointment. In addition to  scheduling the initial appointment, veterans  are to receive a comprehensive mental health  evaluation within 30 days of that initial  referral\u2019s clinically indicated date, or in the  absence of a clinically indicated date, the  veteran\u2019s preferred date for their first mental  health care appointment. This comprehensive  mental health evaluation occurs during a  mental health appointment, and includes a  diagnosis and a plan for treatment. While this  evaluation does not necessarily have to occur  during the first mental health care  appointment, it is expected to be completed  within the timeliness goals as noted.", "Timeliness of initial mental health care services. Our review found  that 21 of the 30 veterans in our sample who needed mental health care  received their initial mental health care appointments within VHA\u2019s  timeliness goal of 30 days of their documented clinically indicated dates  (the date an appointment is deemed clinically appropriate by the referring  provider), or in the absence of clinically indicated dates, their preferred  dates. (See table 5.) These 21 veterans were seen by a mental health  care provider within an average of 7 days of their clinically indicated date  or preferred date. Nine veterans did not receive initial mental health care  appointments within VHA\u2019s 30-day timeliness goal, and waited an  average of 46 days to receive care from a mental health provider.", "Timeliness of comprehensive mental health evaluations. Although 21  of 30 veterans in our sample received initial mental health care  appointments in a timely manner, our review found that most veterans  needing comprehensive mental health evaluations experienced delays  receiving them. Of the 30 veterans in our sample, 25 were identified as  needing a comprehensive mental health evaluation, and only 9 received  that evaluation within VHA\u2019s timeliness goal of 30 days of their clinically  indicated date, or in the absence of a clinically indicated date, the  veteran\u2019s preferred date. (See table 6.) These 9 veterans received their  evaluations within an average of 8 days. For the 16 veterans that did not  receive a comprehensive mental health evaluation within the 30-day  requirement, it took between 35 and 217 days (an average of 82 days) for  15 veterans to receive an evaluation from the initial referral\u2019s clinically  indicated date or veteran\u2019s preferred appointment date. The remaining  veteran had not completed an evaluation as of February 2018.", "The process by which veterans received comprehensive mental health  evaluations varied by clinic, and this sometimes resulted in the  evaluations being completed outside of VHA\u2019s timeliness goal:", "American Samoa clinic staff stated that they provide veterans with a  hard-copy comprehensive mental health evaluation at the veteran\u2019s  first appointment. The veteran is instructed to complete the form at  home, and return to the clinic at a later date to discuss with a  provider. Staff stated that allowing veterans to fill out the form on  their own saves time at the clinic, and allows veterans to be more  thorough in their answers. A staff member stated that the  comprehensive mental health evaluation is just one piece of the  diagnostic interview and that, presumably, the provider obtains  sufficient information from the veteran to develop a treatment plan and  initiate services for the veteran while waiting for the veteran to  complete the form.", "Guam clinic staff said that they generally complete the comprehensive  mental health evaluation during the veteran\u2019s first mental health care  appointment, but do sometimes need to schedule a second  appointment to complete the entire evaluation. Staff stated that the  first priority is to treat and address what is clinically indicated, so they  are sometimes delayed in completing all form requirements until a  later time.", "Maui clinic staff stated that they typically schedule the first  appointment with a veteran, and if it becomes clear that the veteran  needs to continue receiving mental health services, they will schedule  a comprehensive mental health evaluation at a future appointment."], "subsections": []}, {"section_title": "Most Veterans in Our Review Received Follow- Up Primary and Mental Health Care from VA Providers within VHA\u2019s Timeliness Goal", "paragraphs": ["Follow-Up Appointments   After a veteran is seen for an appointment at  a Department of Veterans Affairs (VA) facility,  the provider is to document in the veteran\u2019s  medical record a clinically appropriate specific  return date or interval (such as 2, 3, or 6  months), when the provider determines the  veteran should return for care. This is also  known as the clinically indicated date. The  follow-up appointment should then be  scheduled within 30 days of the clinically  indicated date.", "Our review of a randomly selected sample of medical records for 30  veterans in the Pacific Islands (15 veterans needing primary care and 15  veterans needing mental health care) who received follow-up  appointments found that most of these veterans received care within  VHA\u2019s timeliness goal. Specifically, we found that of the 30 veterans, 25  veterans received follow-up care within 30 days of the clinically indicated  date determined by each veteran\u2019s provider, in accordance with VHA  policy. (See table 7.) This included 10 veterans needing follow-up  primary care (who received care an average of 6 days within the  veteran\u2019s clinically indicated date), and all 15 veterans needing follow-up  mental health care (who received care an average of 3 days within the  veteran\u2019s clinically indicated date). The 5 veterans needing follow-up  primary care that were not seen within the required 30 days were seen  between 109 and 584 days (an average of 299 days) from their clinically  indicated dates. Explanations for the length of time it took for these 5  veterans to receive care varied; for example, Guam clinic staff told us that  one veteran\u2019s follow-up care was delayed due to clinical and scheduling  staffing shortages."], "subsections": []}]}, {"section_title": "VAPIHCS Referred Most Specialty Care to Non-VA Providers within VHA\u2019s Timeliness Goal, but Time Taken to Provide Care Was Variable and Sometimes Lengthy", "paragraphs": [], "subsections": [{"section_title": "VAPIHCS Met VHA\u2019s Timeliness Goal for Almost All Specialty Care Referrals in Our Sample Sent to Choice Program and DOD Providers", "paragraphs": ["We found that VAPIHCS referred 67 of 69 randomly selected specialty  care referrals in our sample to non-VA providers in the Choice Program or  through DOD within 7 days, in accordance with the timeliness goal set in  VHA policy. Specifically, VAPIHCS met this goal for 28 of 30 specialty  care referrals sent to Choice Program providers, and all 39 specialty care  referrals sent to DOD providers at two military treatment facilities.  VAPIHCS staff took an average of 2 days to review and send referrals to  VAPIHCS staff responsible for Choice Program referrals, and an average  of 1 day to review and send specialty care referrals to TAMC and NHG.  VAPIHCS staff responsible for Choice Program referrals also are  responsible for uploading the referrals into TriWest\u2019s portal, the Choice  Programs\u2019 third-party administrator within VAPIHCS. Although VHA  policy applies to referrals sent to in-house providers, a VHA official told us  that VHA expects VAMCs to manage non-VA referrals as they would  those referred in-house. A VAPIHCS official confirmed that it holds staff  to the 7-day requirement found in VHA policy."], "subsections": []}, {"section_title": "Time Taken for Veterans in Our Review to Receive Specialty Care from Choice Program and DOD Providers Was Variable and Sometimes Lengthy", "paragraphs": ["We found that once specialty care referrals in our review were sent to the  Choice Program or one of the two DOD military treatment facilities\u2014 TAMC and NHG\u2014the amount of time it took veterans to receive care  from these non-VA providers varied, and sometimes was lengthy.", "Time taken to receive care from a Choice Program provider. Once  VAPIHCS staff reviews and uploads each referral into TriWest\u2019s portal,  TriWest is required to meet VA\u2019s timeliness requirements for the Choice  Program, which specify the amount of time TriWest has to (1) contact the  veteran, (2) schedule the appointment, (3) and provide veterans with  care.", "We found that for all 30 referrals in our sample, TriWest first  attempted to contact the veteran within the 4 business days  required once TriWest received and accepted the referral from  VAPIHCS. However, we also found that TriWest did not follow the  requirements for mailing letters for 3 of the referrals when it was  unable to reach the veterans by phone. If TriWest is unable to reach a  veteran after calling a minimum of three times over 4 business days, a  letter is to be mailed to the veteran on the 7th business day after  receiving the referral notifying them that they have 10 business days  from the date of the letter to contact TriWest to schedule an  appointment. For these 3 referrals, TriWest mailed a letter, but did not  do so until one day later than the required 7th business day after  receiving and accepting the referral.", "We found that after reaching the veteran, TriWest staff scheduled  appointments for 17 of the 25 referrals within the 5 business  days required for scheduling an appointment after the veteran  opts in to the Choice Program. (See table 8.) We found varying  reasons that may have delayed the scheduling of an appointment. For  example, some records showed that TriWest staff did not begin to call  a provider until 4 or more days after they reached the veteran and  confirmed they wanted to utilize, or opt in to, the Choice Program to  receive care. In addition, some providers required time to review the  veteran\u2019s medical record before scheduling the appointment with  TriWest.", "We found that 20 of the 30 veterans referred to Choice Program  providers received care within VHA\u2019s 30-day timeliness goal that  VA used to evaluate TriWest\u2019s performance under its contract.  TriWest has an overall timeliness goal from VHA to provide veterans  care through Choice Program providers, although the way this was  calculated changed during our review due to changes in their practice  and modifications to the contract. The 20 veterans that received  care within the timeliness goal did so within an average of 14 days.  The 10 veterans that did not receive care within the 30-day timeliness  goal waited between 31 and 126 days (an average of 62 days).  Veteran preferences and specific provider tendencies sometimes led  to delays in scheduling, causing care to be completed outside VHA\u2019s  timeliness goal. For example, our review of TriWest records found that  two veterans in Guam noted that they preferred to stay on island for  their ophthalmology referrals, rather than flying to Honolulu, and the  non-VA Guam orthopedist sometimes took a week or more to review  a veteran\u2019s file before scheduling the appointment with TriWest.", "The 30-day timeliness goal that VA used to evaluate TriWest\u2019s  performance captured a portion of the overall amount of time that it took  for these veterans to receive care. We found that the number of days  from the referral\u2019s creation to the date that veterans received care from  Choice Program providers varied by clinic, and ranged from 19 to 239  days, with the average being 75 days. (See table 9.) This range and  average includes circumstances outside of TriWest\u2019s control; for example,  four veterans in our sample chose to reschedule their appointments  for a later date. One veteran from American Samoa was originally  scheduled for an appointment within 40 days of the referral\u2019s creation  date; however, the veteran chose to reschedule the appointment and,  in doing so, it took a total of 166 days for the veteran to be seen.  three other veterans experienced delays in care after VAPIHCS  initially sent their referrals to TAMC or NHG and later redirected the  referrals to the Choice Program. VAPIHCS referred one veteran from  Guam for specialty care at NHG. However, when VAPIHCS  discovered that NHG could not provide care to the veteran, the  veteran\u2019s referral was redirected to the Choice Program 88 days after  the referral creation date. This veteran encountered additional delays  because of the time it took the Choice Program provider to review  medical records before scheduling the appointment. As a result, it  took a total of 180 days for the veteran to be seen.", "Time taken to receive care from a DOD provider. After referring a  veteran to a DOD provider, VHA does not have any timeliness goals or  requirements in place related to the scheduling of appointments, or when  the veteran should receive care. Our review found wide ranges in the time  it took for the 39 veterans in our sample to receive care at TAMC and  NHG. (See table 10.)", "TAMC: It took up to 95 days for 29 veterans from the American  Samoa, Guam, and Maui clinics referred to TAMC to receive specialty  care, with an average of 37 days from the creation of the referral to  receiving care. These time frames include some veterans that  rescheduled their appointments for later dates. For example, one  veteran from Maui did not show up to the originally scheduled  appointment (which was scheduled for approximately a month after  the referral creation date), and the appointment was rescheduled for  two months later.", "NHG: It took up to 107 days for 10 veterans from the Guam clinic  referred to NHG to receive specialty care, with an average of 47 days  from the creation of the referral to receiving care."], "subsections": []}, {"section_title": "Weaknesses in VAPIHCS\u2019 Referral Process May Have Contributed to the Time Taken to Provide Care at One DOD Military Treatment Facility", "paragraphs": ["When reviewing VAPIHCS\u2019 referrals to NHG, we found weaknesses with  the VAPIHCS\u2019 referral process, including (1) incorrectly canceling  referrals, (2) inconsistent guidance describing roles and responsibilities,  and (3) untimely referral management. These weaknesses may have  contributed to the amount of time it took for veterans to receive care, or  resulted in the veteran not receiving care.", "Military Treatment Facility Referral  Process  After the Department of Veterans Affairs (VA)  Pacific Islands Health Care System  (VAPIHCS) staff review a referral and decide  care should be rendered at a military  treatment facility, there are two different  processes for sending the referral to Tripler  Army Medical Center (TAMC) or Naval  Hospital Guam (NHG). If it is determined that  a veteran needs care at TAMC, VAPIHCS  staff review and send the referral to TAMC\u2019s  VA Referral Center. There, TAMC staff enters  the referral information into DOD\u2019s electronic  medical record system and completes the  appointment scheduling process. If it is  determined that a veteran needs care at NHG,  VAPIHCS staff review and send the referral to  designated staff on Guam who have access to  enter the referral directly into NHG\u2019s electronic  medical record. After the designated staff on  Guam enter the referral into the system, NHG  staff are then responsible for scheduling the  veteran\u2019s appointment.", "Some referrals sent to NHG were incorrectly canceled by VAPIHCS  staff. Specifically, in addition to the 10 completed referrals we reviewed,  we also examined 5 referrals sent to NHG that were subsequently  canceled by VAPIHCS staff responsible for referral management, but with  no indication of appointments ever being scheduled. The reason for  cancelations recorded in the veterans\u2019 medical records was that the  referrals had been open for more than 90 days; however, this practice is  not in alignment with VHA policy. According to VHA policy confirmed by a  VHA official, canceling a referral is an action taken by the receiving  service to alert the sending provider that additional information is needed,  or to correct an obvious error in the referral; a referral should not be  canceled due to the length of time the referral has been open without care  being provided. VHA policy also states that canceled referrals older than  90 days are not to be resubmitted by the sending provider; instead, the  sending provider must reassess the patient\u2019s needs, as the clinical  circumstances may have changed, and create a new referral, as  necessary. Based on our review, it is unclear why VAPIHCS staff  responsible for referral management were not following VHA policy for  canceling referrals, whether it was because they did not understand the  policy or for other reasons. Federal internal control standards require  management to review processes in a timely manner to ensure that  control activities are appropriately designed and implemented. Because  our review found that in some cases VAPIHCS staff were not following  VHA\u2019s referral policy, it is important for VAPIHCS to determine why staff  are not adhering to the policy and take needed steps to ensure  compliance. Ultimately, in our review of the veterans\u2019 medical records, we  did not find documentation that these veterans received the  recommended care included in the canceled referrals. Additionally, we did  not find evidence that four of the five referrals had been updated and  resubmitted, or that any new referrals had been submitted in their place,  which may have delayed needed care; or that the five affected veterans  were contacted by VAPIHCS to understand why appointments had not  been scheduled.", "Inconsistent guidance exists describing the roles and  responsibilities of VAPIHCS staff involved in the NHG referral  process. We identified different VAPIHCS guidance that provided  inconsistent descriptions of the referral process with NHG. For example, a  VAPIHCS flowchart depicting the referral process states that, after  review, the referral is to be sent to a VAPIHCS staff member embedded  within NHG to enter the referral information into NHG\u2019s electronic medical  record. However, language in the referral itself states that, after review,  the referral is sent to Guam clinic staff to enter into NHG\u2019s record.  Federal internal control standards call for management to assign  responsibility and delegate authority to achieve an agency\u2019s objectives.", "A VAPIHCS official stated that the embedded member within NHG  entering in referrals in NHG\u2019s electronic medical record was an interim fix  and that there are plans in place for those responsibilities to be  transferred to NHG staff. Specifically, VAPIHCS and NHG officials  reported that NHG plans to hire two staff members to manage the referral  process, but as of December 2017, these 2 staff members had not yet  been hired due to budgetary constraints. Whether or not NHG hires  additional staff, it is important for VAPIHCS to clarify and document the  roles and responsibilities of their staff for sending, managing, and  monitoring referrals to NHG. Without such clarification, there is the risk for  confusion about responsibilities for entering referrals into NHG\u2019s  electronic medical record, which could potentially create delays in  appointment scheduling and veterans\u2019 receiving care.", "VAPIHCS did not always manage referrals to NHG in a timely way.  Our review found instances throughout the NHG referral process where  lack of timely referral management by VAPIHCS staff may have  contributed to delays in veterans receiving care. VHA policy states that  the referral process should include appropriate staff to manage referral  notification, disposition, scheduling and completion; and designate staff to  run referral reports, which must be reviewed at least weekly to resolve  issues. In addition, federal internal control standards state than an  organization should establish and operate monitoring activities to  determine appropriate corrective actions on a timely basis.", "One factor that contributed to the lack of timely referral management was  that VAPIHCS does not effectively monitor the referrals sent to NHG.", "First, VAPIHCS staff did not always monitor the availability of services  at NHG with the frequency necessary to ensure the timeliness of  referral management. NHG is to provide VAPIHCS with a list of  available outpatient services no less than quarterly so VAPIHCS can  determine if a referral for a specific service can be made to NHG; we  confirmed that NHG provided these lists quarterly during our review  time frame. However, VAPIHCS staff did not monitor whether services  remained available after sending referrals to NHG in a timely manner.  For example, one veteran in our review was originally referred to NHG  in late November 2016, but it was not until VAPIHCS staff followed up  on the referral in early February 2017 that they were informed that  NHG could not accommodate the veteran at that time and that they  instead should refer the veteran to a non-VA provider. This may have  contributed to delay in care for the veteran by more than 2 months.", "Second, VAPIHCS staff did not ensure that referrals were entered into  NHG\u2019s electronic medical record system in a timely manner to begin  the appointment scheduling process; under the process agreed to by  VAPIHCS and NHG, it is the responsibility of designated VAPIHCS  staff to enter referrals into the NHG electronic medical record system.  For example, VAPIHCS staff referred one veteran for care to NHG in  November 2016. However, it was not until December 2016\u2014one  month later\u2014that VAPIHCS staff checked on the status of the referral.  Finding no evidence of actions taken to schedule an appointment,  staff added a reminder for the embedded VAPIHCS staff member at  NHG to enter the referral into NHG\u2019s electronic medical record, to  restart the appointment scheduling process.", "Third, VAPIHCS staff did not always manage referrals to ensure the  timely disposition and scheduling of appointments. Among the five  canceled referrals that we reviewed, we found VAPIHCS staff noticed  appointments had not been scheduled only when they reviewed the  referrals months later. For example, of the five referrals VAPIHCS  sent to NHG, one referral, sent in mid-November 2016, was canceled in early  February 2017 after VAPIHCS staff found no evidence that an  appointment had or would be scheduled. another referral was sent in late November 2016. After VAPIHCS  staff reviewed the referral and found no evidence that an  appointment had or would be scheduled, they noted that the  referral was 101 days old and canceled it in late January 2017.", "VAPIHCS staff referred another veteran to NHG in mid-March  2017. After VAPIHCS staff reviewed the referral and found no  evidence that an appointment had or would be scheduled, they  noted that the referral was almost 4 months old and canceled it in  June 2017.", "VAPIHCS\u2019 lack of timely referral management was also due to poor  communication between VAPIHCS staff and NHG. Federal internal  control standards state that an organization should communicate with  external bodies to receive the necessary quality information required to  achieve the entity\u2019s objectives. A VAPIHCS official stated that VAPIHCS  staff do not have the same level of communication with NHG as they do  with TAMC, which has its own staff to schedule veteran appointments and  communicate that information back to VAPIHCS on a weekly basis,  including if they cannot schedule a veteran. Instead, the official stated  that VAPIHCS staff have to independently monitor the status of referrals  to NHG, or ask the embedded VAPIHCS staff member at NHG to  complete referral research for them. In addition, our review of the referral  notes for these veterans found no evidence of communication between  VAPIHCS staff and NHG staff regarding NHG\u2019s efforts to schedule  appointments for veterans before VAPIHCS staff canceled them.  Furthermore, we also found no evidence of communication regarding  outreach by NHG staff to VAPIHCS staff to discuss any scheduling  difficulties, such as being unable to contact a veteran.", "Because VAPIHCS relies on NHG to provide inpatient and specialty care  services for veterans from Guam and the Commonwealth of the Northern  Mariana Islands, it is essential that referrals sent to NHG are managed in  a timely manner, including verifying the availability of services and  ensuring referrals are entered into NHG\u2019s electronic medical record  system, as well as communicating with NHG about the status of veterans\u2019  appointments. Without a more robust referral management process,  VAPIHCS is unable to ensure that veterans receive needed care in a  timely manner, if they receive care at all."], "subsections": []}]}, {"section_title": "VAPIHCS Has Faced Physician Recruitment and Retention Challenges, but Has Not Evaluated the Strategies It Used to Help Resolve Them", "paragraphs": [], "subsections": [{"section_title": "VAPIHCS Has Faced Physician Recruitment and Retention Challenges, Including Those Unique to the Pacific Islands, and Others Common across VHA", "paragraphs": ["We found that VAPIHCS has faced physician recruitment and retention  challenges that are both unique to the Pacific Islands, such as the limited  number of local physicians from which to recruit, and challenges that are  common across VHA, such as the amount of time it takes to hire a new  physician. Having an adequate physician workforce is key to ensuring  veterans\u2019 timely access to health care. Overall, there were at least 17  physician vacancies out of approximately 100 positions across VAPIHCS  as of October 2017, as well as several more vacancies for other types of  health care providers, some of which have been unfilled for some time.  For example, Guam clinic staff told us that at one point between October  2016 and March 2017, the period of our medical record review, the clinic  had 1.8 primary care physician full-time equivalents even though it was  authorized for 4. VAPIHCS officials told us they are constantly trying to  recruit physicians for their facilities.", "Recruitment and Retention Challenges Unique to VAPIHCS. Through  our review of relevant literature and interviews with VAPIHCS officials, we  learned that physician recruitment is challenging for VAPIHCS in the  following ways, particularly because of its geographic remoteness:", "There is one local medical school and limited local providers  from which VAPIHCS recruits. The University of Hawaii\u2019s John A.  Burns School of Medicine is the only local medical school across  Hawaii, Guam, and American Samoa from which VAPIHCS recruits  physicians.", "The islands of American Samoa, Guam, and Hawaii all include  counties, facilities, or populations designated as Health  Professional Shortage Areas, which indicate health care provider  shortages in primary, dental, or mental health care. These  designations indicate a limited number of local physicians for  VAPIHCS to target in the event of a vacancy. A 2015 University of  Hawaii study further highlighted these shortages. It found that the  Hawaiian Islands had a deficit of more than 600 physicians, with a  projected shortage of between 800 and 1,500 physicians by 2020.  This requires VAPIHCS to focus its recruitment efforts on medical  schools and physicians located on the mainland United States.", "Travel options for VAPIHCS staff and their families are limited.", "Finding physicians that are willing to relocate to such remote locations  is difficult, according to VAPIHCS officials. In prior work, we found that  other VAMCs experienced challenges recruiting physicians who were  reluctant to practice in rural or geographically remote areas. This  challenge is likely more pronounced for VAPIHCS, given the location  of its clinics. Both American Samoa and Guam are thousands of miles  from the mainland United States and travel to and from these islands  requires significant time and money. For example, American Samoa  only has two direct commercial flights a week (on Mondays and  Fridays) and Guam has only a daily direct commercial flight to  Honolulu. While the Hawaiian Islands are more accessible to the  mainland, they are still geographically isolated relative to the rest of  the United States, and face some of the same travel challenges as  American Samoa and Guam.", "Residents face a high cost of living, limited community  resources, and trade-offs associated with island living. While  other regions of the country face similar challenges, they may be  more pronounced living on an island where alternatives are limited.  The cost of living in Hawaii is higher than the nationwide average, and  VAPIHCS officials told us that the real estate market in Hawaii is  extremely expensive. These officials also said that physician  candidates have raised concerns about the quality of the public school  system in some areas of the islands, which could add a potential  expense of sending their children to private schools and thus deter  them from accepting employment. Other concerns include, for  example, the lack of a veterinarian on American Samoa. According to  an official, VAPIHCS lost a candidate who had agreed to relocate to  the island until learning of the lack of veterinary services.", "Technical issues due to locations. One physician in American  Samoa told us that it can take almost 1.5 hours to access the web- based program VHA offers for voice-activated dictation of medical  notes, and thus, instead, he often uses services offline, although  doing so means he has to enter his notes into VA\u2019s medical record at  a later time. Guam clinic staff, including physicians, also face unique  challenges due to working across the International Date Line from the  Spark M. Matsunaga VAMC. Specifically, the Guam clinic information  technology system operates off of a server located in Honolulu that is  20 hours, or almost a day, behind Guam. Veterans being treated in  Guam are essentially being treated in the \u201cfuture\u201d according to VA\u2019s  server in Honolulu, as the date of a health care appointment in Guam  is always one day ahead of the server in Honolulu. For example, if a  Guam physician sees a patient on Monday at 3:00 pm, it is 7:00 pm  on Sunday in Honolulu. As a result, physicians must wait until the next  day to retroactively complete clinical notes. Officials also said that  physicians are frustrated working in a system that may require  multiple days to complete clinical notes, and that this issue has  impacted physician recruitment and retention. Guam clinic staff also  said that, due to the time change, they only have about 16 business  hours per week that the clinic is open that overlap with business hours  of VAPIHCS officials working in Honolulu, which limits the amount of  time physicians at the Guam clinic can consult with other VAPIHCS  physicians or administrators in Honolulu.", "Recruitment and Retention Challenges across VHA. VAPIHCS has  encountered some of the same physician recruitment and retention  challenges that we have previously found are common across VHA,  although some of these challenges may be compounded by the Pacific  Islands\u2019 geographic remoteness. For example:", "Differences in interpretation of recruiting and hiring policies may  have contributed to lengthy recruiting times. In prior work, we  found that differences in VAMC officials\u2019 understanding of some of  VHA\u2019s recruitment and hiring policies contributed to lengthy  recruitment and hiring processes. We also heard differences in  policy interpretations during our discussions with VAPIHCS officials  for this review. For example, some officials mentioned that a physician  vacancy must be posted to USAJobs; however, VHA\u2019s hiring  authorities allow facilities to hire physicians for positions without  regard to civil service requirements, such as requiring public notice of  the vacancy. Some VAPIHCS officials also mentioned having to wait  to post a position until after the predecessor had vacated it, while  another official correctly noted that the recruitment process to replace  a departing physician can begin before the position is vacated. Failure  to understand VHA\u2019s hiring authorities and use an expeditious hiring  process most suitable for a particular vacancy may contribute to the  length of the recruitment process.", "Lack of interoperable electronic medical record systems between  VA and DOD. We have reported for more than a decade that VA and  DOD lack interoperable electronic medical record systems that permit  the efficient electronic exchange of patient health information. VA  and DOD partly addressed the lack of interoperability by utilizing a  web-based Joint Legacy Viewer to facilitate information-sharing for VA  and DOD patients, including those at VAPIHCS, NHG, and TAMC.  The Joint Legacy Viewer provides VAPIHCS physicians with access  to clinical notes on a veteran being treated at a military treatment  facility. However, VAPIHCS and DOD officials told us that there are  challenges using the Joint Legacy Viewer, including the absence of  robust information found in electronic medical records, the need for  physicians to toggle between multiple applications to obtain a patient\u2019s  full history, slow networks, and reduced worker productivity as a result  of operating several different systems simultaneously. Retention of  physicians may be difficult in an environment where the administrative  burdens associated with information technology may take time away  from providing patient care."], "subsections": []}, {"section_title": "VAPIHCS Has Used, but Not Evaluated, VHA Strategies to Support Physician Recruitment and Retention", "paragraphs": ["Primary responsibility for physician  recruitment and retention rests with each  Veterans Affairs medical center (VAMC)  While each Veterans Integrated Service  Network has a Human Resources office  responsible for overseeing the VAMC-level  Human Resources offices within its network,  individual VAMCs are responsible for  managing their employee recruitment and  retention programs. The Veterans Health  Administration supports VAMCs in recruiting  and retaining providers by providing system- wide strategies for their use.", "VAPIHCS and VHA officials told us they have recruited and retained  physicians to the Pacific Islands by promoting attributes of its location and  by using VHA strategies, similar to other VAMCs nationwide. Locally,  officials told us they have advertised the Pacific Islands\u2019 weather and  scenery during their recruitment efforts. Officials also said they promoted  VAPIHCS\u2019 unique relationship with DOD through its joint venture with  TAMC in Honolulu as an incentive for moving to Hawaii. For example,  some VAPIHCS physicians working in Honolulu have the opportunity to  work alongside DOD physicians at TAMC\u2014including the ability to consult  face-to-face regarding care for a veteran referred to TAMC and provide  care to DOD beneficiaries in certain settings.", "VAPIHCS also used many of the VHA strategies used at VAMCs  nationwide to help with its physician recruitment and retention efforts.  VAPIHCS officials discussed the use of the following VHA strategies, and  noted limitations associated with some of them.", "Financial incentives. VAPIHCS officials reported that they  sometimes used recruitment and retention bonuses and relocation  allowances for physicians. For example, in fiscal year 2017,  VAPIHCS paid $217,257 in recruitment incentives to three specialty  care providers (for an average of $72,419 per physician). VAPIHCS  did not offer any other financial incentives that year.", "Education Debt Reduction Program. Through the Education Debt  Reduction Program, VHA reimburses qualifying education loan debt  for employees, including physicians, in hard-to-recruit positions. In  fiscal year 2017, three primary care physicians in VAPIHCS had  applications approved for this program. Each recipient was awarded,  on average, $17,000. VAPIHCS officials said the program was  generally considered a \u201cgreat recruiting tool,\u201d but that its success was  inconsistent given uncertainties regarding the amount of funding that  would be available to the facility in a given year. Funds for the  Education Debt Reduction Program, which are centrally managed by  VHA\u2019s Healthcare Retention and Recruitment Office, are based on the  availability of funds and demand each year. In instances where  centralized funding is not available, VAPIHCS and other VAMCs are  authorized to use local funds to support program offers, but VAPIHCS  officials said they have not used any local funds to support the  program in the last 5 years.", "National Recruitment Program. VHA\u2019s National Healthcare  Recruitment Service, a division of VHA\u2019s Workforce Management and  Consulting Office, operates the National Recruitment Program, which  provides direct physician recruitment services to VAMCs for hard-to- recruit positions by using private-sector recruiting techniques,  including representing VHA at medical conferences and screening  resumes. As part of VISN 21, VAPIHCS may also use the services of  the network\u2019s one dedicated recruiter responsible for serving the nine  facilities in the VISN. In the almost 6 years since this recruiter has  worked for VISN 21, he reported recruiting seven physicians and one  social worker for VAPIHCS, and is in the process of recruiting a  nephrologist. The recruiter observed that with recent leadership  changes, VAPIHCS officials have been more engaged with his office  and the recruiting assistance he can provide. VAPIHCS officials  shared these sentiments, echoing their interest in increasing utilization  of the VISN recruiter.", "Rural Health Training and Education Initiative. According to VHA  officials, VAPIHCS is one of five facilities to participate in VHA\u2019s Office  of Rural Health\u2019s Rural Health Training and Education Initiative to  enhance its physician recruitment efforts. This program works with  academic affiliates to help place physicians in rural areas and  enhance VAMCs\u2019 recruitment efforts and educate trainees about  working within a VA rural health environment. According to VAPIHCS  officials, 3 out of 16 physicians from this program who are eligible to  be hired have taken positions at its clinics, including positions in  Guam and Molokai.", "Enhanced Physician Recruiting and Onboarding Model. In 2015,  VHA issued its Enhanced Physician Recruiting and Onboarding Model  to standardize interpretation of its recruitment policy, strengthen  overall physician recruitment at VAMCs, and shorten hiring  processing time. VAMCs were not required to implement the model,  and in our prior work, we found that implementation has been limited  due to, for example, the lack of resources to implement the  recommendation for a dedicated VAMC-based physician recruiter.", "VAPIHCS officials we spoke with said they were unaware of the  Enhanced Physician Recruitment and Onboarding Model, but  reported that they use 20 of the 30 best practices listed under the  model, when asked about those practices. These best practices  include, for example, leveraging increased pay rates when recruiting  physicians, engaging with the VISN recruiter for hard-to-fill vacancies,  and identifying interview questions and an interview panel before  recruitment begins. VAPIHCS officials reported that they do not use  other best practices such as utilizing VA\u2019s human resources program  for tracking recruitment actions and having a dedicated physician  recruiter because they already have an alternate practice in place or a  practice does not match their needs, among other reasons. However,  officials told us they plan to examine whether there are opportunities  to leverage any of these remaining best practices.", "As noted, in a prior report we recommended that VHA should conduct a  comprehensive, system-wide evaluation of the physician recruitment and  retention strategies used by VAMCs to determine their overall  effectiveness, identify and implement improvements, ensure coordination  across VHA offices, and establish an ongoing monitoring process.  However, because VAMCs are primarily responsible for managing their  own employee recruitment and retention programs and given the unique  and ongoing challenges VAPIHCS has experienced with recruiting and  retaining physicians, it is also important for VAPIHCS to similarly evaluate  whether the strategies it uses are effective. An evaluation conducted by  VHA on system-wide recruitment and retention strategies would not  preclude the need for VAPIHCS to evaluate the strategies it uses; rather,  it would further help identify those specific strategies that are most  effective for recruiting and retaining physicians in the Pacific Islands.", "Federal standards for internal control related to monitoring calls for  agencies to perform monitoring activities, including completing  evaluations to monitor the design and effectiveness of the operations at a  specific time. Agencies are to then evaluate the results of these activities  and take corrective actions as needed. Ensuring veterans have timely  access to health care services is one of VA\u2019s objectives, which is  dependent upon having an adequate number of physicians to provide the  care. VAPIHCS officials told us that as of December 2017 they have not  conducted any type of evaluation of their current strategies for facilitating  physician recruitment and retention due to recent changes in leadership  positions. Without evaluating the strategies currently used to determine  their effectiveness, or determining if additional strategies offered by VHA  might be appropriate, VAPIHCS risks missing the opportunity to target its  efforts to those strategies that have the greatest potential to ameliorate  long-standing staffing shortages."], "subsections": []}]}, {"section_title": "Veterans Face a Number of Challenges Accessing Health Care in the Pacific Islands, and VAPIHCS Uses Several Strategies to Improve Access", "paragraphs": [], "subsections": [{"section_title": "Lack of Certain Specialties on the Pacific Islands and Significant Travel Are among Challenges Veterans Face Accessing Heath Care", "paragraphs": ["According to VAPIHCS officials, veterans face challenges accessing  health care services on the Pacific Islands due to the lack of certain  specialty care providers on many of the islands, the significant travel that  is required to obtain these services, and limitations associated with  telehealth services.", "Lack of certain specialty care providers. VAPIHCS officials told us that  several Pacific Islands lack certain specialty care services entirely or  significantly enough that there may be only one or a few of a certain  provider type available to serve all residents, including veterans. Overall,  VAPIHCS officials noted that the availability of different types of  physicians across the islands is constantly in flux, but said that notable  shortages are in gastroenterology, audiology, podiatry, rheumatology,  dermatology, and neurology. For example, according to VAPIHCS  officials,  there is only one dermatologist on Guam practicing at NHG, and there  is only one gastroenterologist in the community providing certain  services;", "Kauai has a shortage of oncologists;", "Maui has a shortage of cardiologists; and", "American Samoa has a shortage of almost all types of specialty care  providers because it only has one hospital\u2014the Lyndon B. Johnson  Tropical Medical Center\u2014to provide medical care to its approximate  55,000 residents. VAPIHCS officials said the hospital is lacking many  specialty services. According to VA, it does not authorize non-VA care  there because the hospital receives funding from other federal  agencies to provide medical services. Additionally, the hospital is not  accredited for safety and quality. TriWest officials reiterated that  there are virtually no specialty providers available on American  Samoa for them to contract with; as of July 2017, there was only one  Choice Program provider contracted on the island. As a result,  essentially all eligible veterans must travel to Hawaii for specialty care  services.", "Significant travel required of veterans. Because many of the islands  lack certain specialty providers, VAPIHCS officials said that veterans  often must fly elsewhere to obtain care. While travelling such distances  helps improve veterans\u2019 access to health care services, it also creates  challenges. For example, such travel requires time away from their  homes and families, which may be particularly difficult for veterans in poor  health. The time and distance required for travel can also be quite  significant\u2014for example, veterans from American Samoa, Guam, and the  Commonwealth of the Northern Mariana Islands must travel thousands of  miles by plane to receive services in Honolulu. A Guam veterans group  said that veterans were frustrated with having to fly 8 hours to Hawaii for  health care services. In instances where the necessary services are  beyond those available in Honolulu, veterans must fly to the mainland  United States for care\u2014a flight from Honolulu to California adds about 5  hours. The flight times are even longer for veterans travelling from  American Samoa, the Commonwealth of the Northern Mariana Islands,  and Guam. Figure 2 illustrates the locations of veterans enrolled in  VAPIHCS and the distances and flight times they may need to travel to  receive care.", "According to VAPIHCS data, most VAPIHCS veterans travelling for health  care services over the years have received care in Honolulu, although  some have had to travel to the mainland United States for subspecialty  care or highly specialized care such as organ transplants. Eligible  veterans are provided reimbursement for travel-related expenses under  VHA\u2019s Beneficiary Travel Program. In fiscal year 2017, VAPIHCS  provided beneficiary travel funds to 348 veterans from American Samoa  and 92 veterans from Guam to travel to Honolulu for care, for a total of  678 trips. During this same year, 15 veterans traveled to the mainland  United States for care. VAPIHCS reported that, overall, 830 VAPIHCS  veterans used beneficiary travel benefits to travel to Honolulu or the  mainland United States for care that year. This represents approximately  2 percent of the total number of veterans (51,213) who received some  type of care through VAPIHCS in fiscal year 2017. Veterans are  responsible for paying for travel if they are ineligible for travel benefits and  travel is required to receive care. The significant costs associated with  travel among the Pacific islands\u2014flights, lodging, meals\u2014could be cost  prohibitive for these veterans and, as a result, they may be unable to  access VA or non-VA health care services off island.", "Limitations with telehealth services. Veterans face challenges  accessing health care services due to limitations with telehealth services.  For example, VAPIHCS officials told us there are limitations with the  availability of internet services on the islands of Guam and American  Samoa. This could lead to disruptions\u2014or even cancellations\u2014of  veterans\u2019 telehealth appointments. For example, VAPIHCS officials  shared that damaged cables in the Pacific Ocean due to natural disasters  and equipment failure on the part of internet service providers on the  islands have led to disrupted and cancelled appointments for veterans. In  March 2018, VAPIHCS reported that it had increased bandwidth and  purchased new equipment to help support its telehealth efforts.  Additionally, the extent to which a veteran can receive telehealth in his or  her home versus the local clinic may depend upon the licensure of the  provider delivering care. If a veteran is receiving telehealth services while  he or she is physically located in a clinic, under federal law, the provider  is not required to be licensed in the state in which the facility is  located. When the patient is receiving telehealth services at home,  however, a state may require that the provider be licensed in the state in  which the patient is located. An official said that this is currently  hampering VAPIHCS\u2019 telehealth expansion efforts into the home."], "subsections": []}, {"section_title": "VAPIHCS Uses Several Strategies to Improve Veterans Access to Health Care, including the Use of Travelling Providers and Increased Use of Telehealth", "paragraphs": ["VAPIHCS has utilized a system of travelling VAPIHCS providers and is  working to improve its use of telehealth services to better ensure  veterans\u2019 timely access to care, among other strategies, according to  VAPIHCS officials.", "Use of travelling providers. VAPIHCS officials reported that travelling  providers enable VAPIHCS to better ensure access for veterans who are  not eligible for beneficiary travel, and reduce the travel burden on  veterans who are. Furthermore, they noted that it can be more cost  effective for VAPIHCS to send a travelling provider to an island on a set  schedule than it is to fly veterans to Honolulu for care. These providers  also help expand access by providing specialty care that is in short supply  or missing entirely in some communities. For example, a VAPIHCS  optometrist travels to American Samoa for one week each month,  according to officials, because there is no board-certified optometrist on  the island. In addition, the travelling providers offer veterans the  opportunity to receive specialty care from a VA provider.", "Officials said they adjust the travelling providers\u2019 schedules to reflect  changes in service availability in the local communities. Table 11  illustrates the types of VAPIHCS travelling providers and the frequency  with which they visit different clinics, as of December 2017.", "Increased use of telehealth services. Even though internet service on  the Pacific Islands is not always reliable as previously noted, VAPIHCS  has been increasing its use of telehealth services to improve veterans\u2019  access to health care services. In fiscal year 2017, VAPIHCS reported  that 3,046 VAPIHCS veterans utilized clinic-based telehealth services  compared to 1,299 veterans in fiscal year 2011, an increase of more than  134 percent.", "VAPIHCS launched two new telehealth hubs in June 2017:", "According to VA officials, VAPIHCS was 1 of 8 VAMCs selected to  establish a hub, or center for delivery of teleprimary care from the  VAMC to distant clinics within its system. According to VAPIHCS  officials, the teleprimary care hub in the Spark M. Matsunaga VAMC is  currently providing services to veterans at the Guam clinic and is  exploring opportunities to provide teleurgent care in partnership with  VAPIHCS\u2019 call center. Officials further noted this would allow  telehealth staff to provide veterans with \u201calmost instant access\u201d to  health care services and, if successful, help improve veterans\u2019 timely  access to care by increasing the number of appointments at the  clinics that could be dedicated to more complex concerns. VAPIHCS  officials also said that the teleprimary care hub would also be used for  long-term coverage for clinics with provider vacancies.", "Similarly, VAPIHCS was one of 11 VAMCs selected to establish a  telemental health hub. According to VAPIHCS officials, this hub is  currently serving veterans at the Oahu, Guam, and Molokai clinics  and one of the Hawaii clinics (Hilo), with plans to expand services to  the Kauai clinic in the future.", "Overall, officials said that feedback from veterans using these hubs has  been \u201coverwhelmingly positive,\u201d as veterans appreciate receiving care  from VAPIHCS providers, the privacy afforded by telehealth, and not  having to travel for their services. The number of telehealth users in  VAPIHCS is likely to continue increasing as a result of these new hubs.", "While feedback has been positive, VAPIHCS officials said they have  experienced some challenges with the launch of these hubs, including the  time and date difference between Guam and Honolulu where the staff for  both hubs are located. Staff from the hubs had to adjust their schedules  to support Guam\u2019s hours given that only 16 business hours per week  overlap between the two islands. Having sufficient space in the clinics for  telehealth services is another challenge. To address this, one official said  they are encouraging veterans to hold video visits with their providers  from their homes if clinical exams are not required during their  appointments.", "Improvements to clinical space. Because sufficient examination and  treatment space is lacking in many of its clinics, VAPIHCS is in the  process of building new or expanding existing clinics to increase the  number and type of services available to veterans. According to a  VAPIHCS official, as of August 2017, VAPIHCS has plans to replace six  of its existing clinics and open one new clinic. These new clinics are  expected to be open by fiscal year 2020. For example, the American  Samoa clinic will be expanded to include additional space for mental  health consultations and group meeting spaces, while the Guam clinic will  be expanded to include additional primary and mental health care clinic  space. This may help address a concern of the Guam veterans group we  spoke with in Guam, who said the clinic was too small and did not offer  sufficient patient privacy. According to VAPIHCS officials, VAPIHCS\u2019 new  clinic, expected to open in 2020, is to be located on the island of Oahu  and will be a multi-specialty outpatient clinic offering many different  services, including primary care, mental health, telemedicine, women\u2019s  care, dental care, a pain clinic, physical and occupational therapy,  prosthetic, laboratory and pathology, pharmacy, and imaging services.", "Improvements to the beneficiary travel process. VAPIHCS is in the  process of updating its process for arranging beneficiary travel, which  ultimately could improve veterans\u2019 access to care. Under the old process,  officials told us that much of the responsibility for coordinating veterans\u2019  travel fell on nursing and administrative staff, creating stress and reducing  the amount of time nurses could spend on providing patient care. As a  result, VAPIHCS decided to centralize its beneficiary travel process in the  Office of Beneficiary Travel in Honolulu. The goal, according to VAPIHCS  officials, is to remove the clinic staff from the process\u2014thereby increasing  the amount of time dedicated to their clinical duties\u2014and instead  encourage veterans to work directly with the staff in Honolulu to arrange  their travel. As of September 2017, VAPIHCS was still in the process of  implementing this new process. VAPIHCS also created a task force to  improve the process for arranging travel for American Samoa veterans  needing care off-island. As a result of their efforts, VAPIHCS officials  reported in December 2017 that they had managed to reduce the time  clinic staff in American Samoa dedicated each day to addressing travel  issues from an average of 408 minutes to 64 minutes.", "Communicating with veterans about VA and Non-VA services.  VAPIHCS uses a variety of mechanisms to communicate with veterans  about access to VA and non-VA health care services. Veterans are  introduced to these services through New Veteran Orientations that are  offered at some of the clinics. VAPIHCS also gives newly enrolled  veterans handbooks that are specific to the clinics where they enrolled.  VAPIHCS also communicates with veterans through town hall meetings,  health forums, its Facebook page, television and radio shows, and  community events. For example, staff from the American Samoa clinic  told us that they partner with a local television station to host a 30-minute  monthly segment to educate veterans about available VA services.  VAPIHCS officials reported they had planned to conduct approximately  170 outreach events, spanning 9 islands and targeting about 6,000  veterans, for fiscal year 2017. VAPIHCS officials told us that they try to  provide culturally appropriate communications with veterans of the  different Pacific Islands. For example, they said they are planning to  translate materials into Samoan for veterans from American Samoa. They  also recognize that many veterans prefer face-to-face interactions with  VA officials rather than receiving information electronically; for example,  the Hawaiian tradition known as \u201ctalk story\u201d focuses on informal  conversations and sharing information with friends in the community."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["VAPIHCS has generally provided primary and mental health care within  VHA\u2019s timeliness goals for most veterans reviewed, but there are  weaknesses in the referral process for specialty care services. Because  most specialty care services are provided to veterans outside of VA  through DOD providers or through non-VA providers in the community, it  is crucial that VAPIHCS improve its management of these referrals to  ensure adherence to VHA policy. Without improvements to adherence to  VHA policy in the referral process, inconsistent guidance on roles and  responsibilities, and lack of timeliness of referral management, these  weaknesses are likely to persist, and may add to the amount of time it  takes for some veterans to receive care, or may result in some veterans  not receiving care at all.", "In addition, maintaining an adequate clinical workforce to meet the health  care needs of veterans is necessary to ensuring veterans\u2019 timely access  to care. Doing so is particularly important for VAPIHCS given the unique  challenges it faces in recruiting and retaining physicians in the  geographically remote Pacific Islands. It is therefore critical that VAPIHCS  identify and use the most effective recruitment and retention strategies  offered by VHA. However, VAPIHCS has not evaluated the strategies that  it has used to determine if they are the most optimal or if other available  strategies would be more effective. Without completing such an  evaluation, VAPIHCS does not know if it is optimizing its resources to  improve its hiring efforts and ameliorate long-standing physician  shortages."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to VA:  1.  The Secretary of VA should ensure that VAPIHCS review its referral  process for referrals to DOD providers, including referral cancellation,  to determine why VHA policy is not being adhered to and make  changes as needed. (Recommendation 1)  2.  The Secretary of VA should ensure that VAPIHCS clarify guidance to  clearly define and document roles and responsibilities for VAPIHCS  staff involved in the referral process with NHG. (Recommendation 2)  3.  The Secretary of VA should ensure that VAPIHCS improves the  monitoring of referrals and communication with NHG to ensure the  timely management of referrals to NHG, including verifying the  availability of services for veterans; ensuring referrals are entered into  NHG\u2019s electronic medical record system; and obtaining information  about the status of scheduling appointments for veterans.  (Recommendation 3)  4.  The Secretary of VA should ensure that VAPIHCS evaluates the  effectiveness of strategies it currently uses to promote physician  recruitment and retention, including how the strategies could be  improved. The plan should also include an assessment of whether  additional strategies currently offered by VHA would be beneficial.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to VA and DOD for review and  comment. VA provided written comments, which are reproduced in  appendix I. In addition, both VA and DOD provided technical comments,  which we have incorporated as appropriate.", "In its written comments, VA concurred with three of our four  recommendations and provided information on its plans to address them.  VA partly concurred with our recommendation for VAPIHCS to improve  the monitoring of referrals and communication with NHG to ensure the  timely management of referrals to NHG. For this recommendation, VA  agreed that it should improve its monitoring of referrals by verifying the  availability of services at NHG for veterans and obtaining the status of  their appointments to be scheduled, and noted that VAPIHCS is  developing a standard operating procedure that includes, among other  things, monitoring referrals weekly to resolve issues.", "However, VA did not agree with ensuring referrals are entered into NHG\u2019s  electronic medical record system as part of its monitoring efforts and  stated that it does not have the authority to do so. During our review, we  found that designated VAPIHCS staff on Guam have access to, and are  responsible for entering referrals directly into, NHG\u2019s electronic medical  record. Only after VAPIHCS staff enter referrals directly into NHG\u2019s  electronic medical record did NHG staff assume responsibility for  scheduling veterans\u2019 appointments. We confirmed this practice through  interviews with VAPIHCS and DOD staff and through our review of a  sample of referrals sent to NHG, which showed that VAPIHCS staff had  entered the referrals. Furthermore, the sharing agreement between  VAPIHCS and NHG documented the arrangement for VAPIHCS staff to  be granted access to NHG\u2019s electronic medical record. As long as  VAPIHCS staff continue to be responsible for entering referrals into  NHG\u2019s electronic medical record system, we believe that it is also their  responsibility to monitor the status of these referrals, including ensuring  that referrals are entered correctly and timely. Because VAPIHCS relies  on NHG to provide inpatient and specialty care services for veterans from  Guam and the Commonwealth of the Northern Mariana Islands, it is  important for VAPIHCS to monitor the entire referral management  process to ensure that veterans receive needed care in a timely manner.", "We are sending copies of this report to the appropriate congressional  committees and the Secretaries of Veterans Affairs and Defense. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or at DraperD@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Department of Veterans Affairs Comments", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Ann Tynan, Assistant Director,  Kaitlin Coffey (Analyst in Charge), Kate Tussey, Jennie Apter, and Jackie  Hamilton made key contributions to this report. Also contributing were  Emily Binek, Muriel Brown, Natalie Hagy, Alexis MacDonald, and Brienne  Tierney."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Veterans Health Administration: Better Data and Evaluation Could Help  Improve Physician Staffing, Recruitment, and Retention Strategies,  GAO-18-124. Washington, D.C.: October 19, 2017.", "VA Health Care: Opportunities Exist for Improving Implementation and  Oversight of Enrollment Processes for Veterans, GAO-17-709.  Washington, D.C.: September 5, 2017.", "VA Health Care: Improvements Needed in Data and Monitoring of Clinical  Productivity and Efficiency, GAO-17-480. Washington, D.C.: May 24,  2017.", "Veterans Health Care: Preliminary Observations on Veterans\u2019 Access to  Choice Program Care, GAO-17-397T. Washington, D.C.: March 7, 2017.", "Veterans Health Administration: Management Attention Is Needed to  Address Systemic, Long-standing Human Capital Challenges,  GAO-17-30. Washington, D.C., December 23, 2016.", "Veterans Health Care: Improvements Needed in Operationalizing  Strategic Goals and Objectives, GAO-17-50. Washington, D.C.: October  21, 2016.", "Veterans Health Administration: Personnel Data Show Losses Increased  for Clinical Occupations from Fiscal Year 2011 through 2015, Driven by  Voluntary Resignations and Retirements, GAO-16-666R. Washington,  D.C.: July 29, 2016.", "VA Health Care: Actions Needed to Improve Newly Enrolled Veterans\u2019  Access to Primary Care, GAO-16-328. Washington, D.C.: March 18,  2016.", "VA Mental Health: Clearer Guidance on Access Policies and Wait-Time  Data Needed, GAO-16-24. Washington, D.C.: October 28, 2015.", "VA Primary Care: Improved Oversight Needed to Better Ensure Timely  Access and Efficient Delivery of Care. GAO-16-83. Washington, D.C.:  October 8, 2015.", "VA Health Care: Oversight Improvements Needed for Nurse Recruitment  and Retention Initiatives, GAO-15-794. Washington, D.C.: September 30,  2015.", "VA Health Care: Actions Needed to Ensure Adequate and Qualified  Nurse Staffing, GAO-15-61. Washington, D.C.: October 16, 2014.", "VA Health Care: Management and Oversight of Consult Process Need  Improvement to Help Ensure Veterans Receive Timely Outpatient  Specialty Care, GAO-14-808. Washington, D.C.: September 30, 2014.", "VA Health Care: Reliability of Reported Outpatient Medical Appointment  Wait Times and Scheduling Oversight Need Improvement, GAO-13-130.  Washington, D.C.: December 21, 2012.", "VA and DOD Health Care: Department-Level Actions Needed to Assess  Collaboration Performance, Address Barriers, and Identify Opportunities,  GAO-12-992. Washington, D.C.: September 28, 2012.", "Veterans\u2019 Health Care: Service Delivery for Veterans on Guam and the  Commonwealth of the Northern Mariana Islands, GAO/HEHS-99-14.  Washington, D.C.: November 4, 1998.", "Veterans\u2019 Benefits: Availability of Benefits in American Samoa,  GAO/HRD-93-16. Washington, D.C.: November 18, 1992."], "subsections": []}], "fastfact": ["VA medical facilities have struggled to provide timely care. For veterans who live in American Samoa, Guam, Hawaii, and the Northern Marianas, these areas' remoteness can add challenges, such as long flights to see specialists.", "We examined the timeliness of the primary, mental health, and specialty care provided by the VA Pacific Islands Health Care System.", "Most veterans in our review received timely primary and mental health care. We found some delays and weaknesses in the referral process to community providers, such as inconsistent guidance on staff roles and responsibilities.", "We recommended actions to improve the referral process."]}
{"id": "GAO-18-199", "url": "https://www.gao.gov/products/GAO-18-199", "title": "Food Safety: Federal Efforts to Manage the Risk of Arsenic in Rice", "published_date": "2018-03-16T00:00:00", "released_date": "2018-04-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Arsenic, an element in the earth's crust, can be harmful to human health and may be present in water and certain foods, such as rice. Rice may be more susceptible to arsenic contamination than other crops due to the flooded conditions in which it is typically grown. FDA and USDA work to address food safety risks. FDA's responsibilities for rice include regulatory and research programs; USDA's include research programs.", "GAO was asked to review issues related to arsenic and rice. GAO examined (1) what NRC and recent key scientific reviews have reported about the effects of ingestion of arsenic on human health, (2) the extent to which FDA and USDA have managed the risk to human health from arsenic in rice, and (3) the extent to which FDA has coordinated with USDA and other federal agencies on actions to manage the risk. GAO analyzed a 2013 NRC report on inorganic arsenic, 14 reviews of scientific studies on the human health effects of ingesting arsenic published from January 2015 to June 2017, and agency documents; interviewed agency officials; and compared good practices with actions FDA and USDA took to manage risk and that FDA took to coordinate."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Research Council (NRC) of the National Academy of Sciences, in 2013, and more recent key scientific reviews reported evidence of associations between long-term ingestion of arsenic and adverse human health effects, such as cardiovascular disease. Many of the studies NRC reviewed as part of its survey of the scientific literature examined the ingestion of arsenic in drinking water, but others looked at arsenic from all sources, including dietary sources such as rice. NRC stated that evidence suggests that food, particularly rice, may be a significant source of inorganic arsenic, the more toxic of the two forms of arsenic; however, consumption of rice and levels of arsenic in rice vary widely, making it difficult to estimate arsenic intake from rice. NRC identified stronger evidence for some health effects at higher levels of arsenic\u2014defined by NRC as 100 parts per billion or higher in drinking water\u2014than at lower levels, which are more common in the United States, and noted that research on the health effects of ingesting lower levels of arsenic is ongoing.", "The Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) have taken actions to manage the risk of arsenic in rice to human health, including assessing the type and prevalence of health effects that may result from long-term ingestion of arsenic in rice. FDA also has taken action to publicly communicate and report on the risk. In 2016, FDA issued a risk assessment about the human health effects from long-term ingestion of arsenic in rice and draft guidance recommending industry not exceed a level of 100 parts per billion of inorganic arsenic in infant rice cereal. FDA noted it issued this guidance because infants face a higher risk owing to their less-varied diets. However, FDA has not updated the risk assessment, which was informed by a review of scientific studies published before February 2015, or finalized the draft guidance. In prior work, GAO has found that sharing risk information and incorporating stakeholder feedback can help organizations identify and better manage risks, as well as increase transparency and accountability to Congress and taxpayers. FDA officials stated that they may update the risk assessment based on newly-available information and consider public comments before finalizing the draft guidance. However, FDA officials could not provide a specific timeline for either. By developing such a timeline, FDA could help clarify when it will take action and improve the transparency of its decisions.", "FDA coordinated with USDA and other federal agencies on actions to manage the risk of arsenic in rice to varying extents. For example, FDA and USDA coordinated on developing arsenic detection methods for rice to a limited extent, although both agencies have crosscutting strategic goals for developing detection methods for foodborne contaminants, including arsenic. GAO has noted in prior work that developing interagency mechanisms to coordinate crosscutting issues may reduce potentially duplicative efforts. FDA and USDA officials stated that they coordinated on an informal basis but have no mechanism for coordinating more formally. By developing a coordination mechanism, FDA and USDA could enhance their ability to use their resources efficiently and avoid potentially duplicative efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that FDA develop a timeline for updating its risk assessment and finalizing its draft guidance and that FDA and USDA develop a coordination mechanism for developing methods to detect foodborne contaminants, including arsenic. FDA and USDA generally agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Arsenic, an element in the earth\u2019s crust, is present in the environment,  including water, air, and soil, because of both natural occurrence and  human activity. It exists in two general forms, organic and inorganic.  Both can be harmful to human health, but inorganic arsenic is generally  considered to be the more toxic form. Inorganic arsenic has been  classified as carcinogenic to humans by the International Agency for  Research on Cancer. According to the Department of Health and Human  Services\u2019 (HHS) Agency for Toxic Substances and Disease Registry,  exposure to arsenic generally occurs through contaminated groundwater  and the ingestion of foods containing arsenic compounds. The Agency  for Toxic Substances and Disease Registry identified rice as a  predominant dietary source of arsenic. Partly because of the flooded  conditions under which rice is typically grown, rice may be more  susceptible to arsenic contamination than other crops. In 2009, the  European Food Safety Authority noted that exposure of infants to arsenic  in rice products is a concern because such products are often used in  foods for infants and because infants and young children have a higher  food intake relative to their body weight than adults.", "The safety and quality of the U.S. food supply, both domestic and  imported, are governed by a complex system stemming from at least 30  federal laws that are administered by 15 federal agencies. HHS\u2019s Food  and Drug Administration (FDA) and the U.S. Department of Agriculture  (USDA) are the principal agencies working to protect the food supply from  risks, such as contamination. FDA is responsible for ensuring the safety  of virtually all domestic and imported food products, with the exception of  meat and poultry, processed egg products, and catfish, which are the  responsibility of USDA\u2019s Food Safety and Inspection Service. Other  agencies within USDA also play a role in food safety. For example,  USDA\u2019s Agricultural Research Service (ARS) and National Institute of  Food and Agriculture (NIFA) sponsor food safety research. In addition,  the Environmental Protection Agency (EPA) has the statutory  responsibility for, among other things, ensuring that the pesticides used  on food crops do not endanger public health. EPA has been updating its  assessment of the health hazards of inorganic arsenic in the Integrated  Risk Information System\u2014an important source of toxicity information for  federal agencies. The National Research Council (NRC) of the National  Academy of Sciences has reviewed EPA\u2019s approach to updating its  toxicological assessment of inorganic arsenic and issued a report in 2013  that provided key guidance and a preliminary survey of the literature on  inorganic arsenic.", "For more than 4 decades, we have reported on the fragmented federal  food safety oversight system, which has caused inconsistent oversight,  ineffective coordination, and inefficient use of resources. In January 2007,  because of risks to the economy and to public health and safety, we  added transforming federal oversight of food safety to our list of areas at  high risk for fraud, waste, abuse, and mismanagement, or most in need of  transformation. In our February 2017 update to that list, we noted that  HHS, USDA, and the Office of Management and Budget (OMB) have  taken some positive steps to address fragmentation in the federal food  oversight system but that additional steps are needed. In January 2017,  to address ongoing fragmentation, we recommended that the Executive  Office of the President, in consultation with relevant federal agencies and  other stakeholders, develop a national strategy to improve the food safety  oversight system. In addition, we have found shortcomings with FDA\u2019s  oversight of seafood, dietary supplements, and other matters. In 2012,  we identified key issues to consider that could benefit interagency  collaborative mechanisms, which may help reduce potentially duplicative,  overlapping, and fragmented efforts.", "You asked us to review issues related to arsenic and rice. This report  examines (1) what NRC and recent key scientific reviews have reported  about the effects of ingestion of arsenic on human health, (2) the extent to  which FDA and USDA have managed the risk to human health from  arsenic in rice, and (3) the extent to which FDA has coordinated with  USDA and other federal agencies on actions to manage the risk.", "To determine what NRC and recent key scientific reviews have reported  about the effects of ingestion of arsenic on human health, we analyzed  NRC\u2019s 2013 report on inorganic arsenic and 14 reviews of the scientific  literature published from January 2015 through early June 2017 on the  human health effects of ingestion of arsenic. We identified the reviews by  conducting a literature search of research databases, such as PubMed  and Toxline, and selected English-language reviews that met certain  criteria, such as relying on human, rather than animal, studies. We  assessed the scientific and statistical credibility, reliability, and  methodological soundness of the reviews and excluded reviews for which  we could not clearly determine the methodology.", "To determine the extent to which FDA and USDA have managed the risk  to human health from arsenic in rice, we examined relevant provisions in  the Federal Food, Drug, and Cosmetic Act, as amended; the Federal  Agriculture Improvement and Reform Act of 1996; and other laws,  regulations, and policies. We also reviewed our prior work on enterprise  risk management and used the essential elements for managing risk that  it identified. We identified information on agency actions for managing  the risk from arsenic in rice by collecting documentation and interviewing  officials from FDA and USDA, and we reviewed the information in light of  the requirements, policies, and elements. We assessed FDA\u2019s and  USDA\u2019s reported actions to determine the extent to which each agency\u2019s  actions aligned with the essential elements for managing risk. In  assessing FDA\u2019s and USDA\u2019s actions against these essential elements,  we used the terms \u201cconsistent\u201d and \u201cpartially consistent\u201d to reflect the  extent to which each agency\u2019s actions aligned with an essential element.  We also interviewed 17 stakeholders, including university researchers,  representatives of a consumer organization, and representatives of the  rice industry, including rice mills and farms, to obtain their views on the  extent to which FDA\u2019s and USDA\u2019s actions managed this risk. We  identified stakeholders based on suggestions from agency officials and  other stakeholders; through our site visit to Arkansas\u2019 rice agricultural  research and production areas and rice mills; and the stakeholders\u2019  unique perspective or qualifications, such as membership in the NRC  Committee on Inorganic Arsenic. The views we obtained in these  interviews are not generalizable to all university researchers or consumer  or rice industry organizations but they provide illustrative examples of the  views of such stakeholders.", "To determine the extent to which FDA coordinated with USDA and other  federal agencies on actions to manage the risk from arsenic in rice, we  identified actions for which coordination would be expected. Specifically,  we identified actions for which the agencies shared similar goals in their  strategic plans or relevant expertise. For these actions, we examined  whether FDA developed interagency collaborative mechanisms. We had  previously reported that such mechanisms could facilitate coordination  between agencies. We also examined whether FDA considered a key  issue we had identified when implementing one of these mechanisms: to  clarify the roles and responsibilities of participating agencies. We selected  this key issue because it was relevant to the challenges FDA and the  other agencies faced. See appendix I for a detailed description of our  objectives, scope, and methodology.", "We conducted this performance audit from December 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Forms and Distribution of Arsenic", "paragraphs": ["Arsenic is a naturally occurring element that is widely distributed in the  earth\u2019s crust in two general forms\u2014organic and inorganic. It commonly  enters the body through ingestion of food or water. Most data reported for  arsenic in food describe the levels of total arsenic because analyses that  provide information about the forms of arsenic present are more difficult  to perform, and relatively few laboratories are able to perform these  analyses. Data on the levels of specific forms of arsenic, however, are  becoming increasingly important because, according to the Agency for  Toxic Substances and Disease Registry, the two forms have different  toxicities, with inorganic arsenic being considered the more toxic form.  Further, foods may have different proportions of organic and inorganic  arsenic as well as different levels of total arsenic. According to the  European Food Safety Authority, plants generally contain low levels of  both total and inorganic arsenic, but rice may contain significant levels of  total arsenic and inorganic arsenic. Levels of arsenic in groundwater, a  major source of drinking water in many parts of the world, may be high in  some areas; essentially all the arsenic in drinking water is inorganic  arsenic.", "The form and level of arsenic in rice may vary depending on the  geographic region where rice is grown, conditions under which rice is  grown, variety of the rice, and rice milling practices. In the United  States\u2014where, according to USDA, approximately 80 percent of the rice  consumed domestically is grown\u2014rice is primarily grown in six states:  Arkansas, California, Louisiana, Mississippi, Missouri, and Texas. In  2016, the latest year for which USDA data were available, about 47  percent of the rice grown in the United States was grown in Arkansas,  and about 21 percent was grown in California.", "The amount of arsenic rice absorbs varies by geographic region because  of differing levels of arsenic in the soil and other factors. Arsenic levels in  the soil vary both naturally and as a result of human activity. Natural  processes that contribute to arsenic levels in the soil may include bedrock  weathering, because arsenic is present in many rock-forming minerals.  Human activities that contribute to arsenic levels in the soil may include  the use of arsenic-based pesticides and animal drugs, the mining and  smelting of metal, and coal combustion. Figure 1 shows the results of a  2013 U.S. Geological Survey sampling of soils to measure the levels of  arsenic in the contiguous United States. In addition, the figure shows  the outlines of rice-growing counties based on 2016 data from USDA.", "Compared to other plants, rice absorbs more arsenic from the  environment, in part because of the physiology of rice. For example, rice  may readily absorb certain compounds of arsenic because, among other  reasons, these compounds are similar in size to compounds containing  silicon, an essential nutrient for rice. The conditions under which rice is  grown may also cause it to absorb more arsenic than other plants. For  instance, rice is often grown in flooded fields to control pests, grasses,  and diseases, among other reasons. However, flooded conditions may  promote the formation of arsenic compounds that may be easily absorbed  by the rice plant. Even under the same growing conditions, some varieties  of rice tend to have higher levels of arsenic in their grain, on average,  than others, owing to a need for longer growing periods, among other  factors. In addition, the concentrations of the two forms of arsenic may  vary within the rice grain. While organic arsenic may be distributed  throughout the rice grain, most of the inorganic arsenic is found in the  bran layer. As seen in figure 2, the process of milling rice removes the  bran layer; thus, levels of inorganic arsenic in white, or milled, rice may be  lower than those in brown, or whole grain, rice."], "subsections": []}, {"section_title": "Federal Agencies\u2019 Responsibilities for Rice", "paragraphs": ["A number of federal agencies are responsible for ensuring the safety and  quality of rice and for assessing the human health effects of ingestion of  arsenic in rice. Within HHS, FDA has overall responsibility for  implementing provisions of the Federal Food, Drug, and Cosmetic Act, as  amended. Specifically, FDA is responsible for determining whether food,  including rice, is deemed to be adulterated (i.e., whether it bears or  contains any poisonous or deleterious substance that may render it  injurious to health). Under its regulations, FDA may issue guidance to  establish a level of a contaminant that a food should not exceed. FDA  would consider case-by-case whether a food that contains the  contaminant is adulterated. For example, in 2013, FDA issued draft  guidance for arsenic in apple juice, on the basis of its risk assessment  that estimated the long-term cancer risk posed by inorganic arsenic.  According to FDA, its Center for Food Safety and Applied Nutrition is  responsible for regulatory and research programs that address the health  risks associated with foodborne contaminants and is aided in this role by  the Office of Regulatory Affairs, which is responsible for field-based  activities such as inspections, sampling, and testing of regulated  products. The Center for Food Safety and Applied Nutrition also conducts  industry outreach and educates consumers, among other things.", "Other agencies within HHS may also conduct research, collect data, and  provide information on the health effects of arsenic. For example, the  National Institutes of Health (NIH) sponsor research on the health effects  of ingestion of arsenic. The Centers for Disease Control and Prevention  (CDC) administer the National Health and Nutrition Examination Survey,  which, among other things, collects data about diet and exposure to  certain substances, such as arsenic. Under the Superfund Amendments  and Reauthorization Act of 1986, the Agency for Toxic Substances and  Disease Registry prepares toxicological profiles for certain hazardous  substances, including arsenic.", "Agencies within USDA conduct and sponsor research to advance food  safety and to help farmers market rice and manage the risk of growing it.  Within USDA, ARS and NIFA conduct and sponsor research, to, among  other things, maintain an adequate, nutritious, and safe supply of food to  meet human nutritional needs and requirements. NIFA also distributes  capacity grants that support research and extension programs at land- grant universities, which provide science-based information to farmers.  The Agricultural Marketing Act of 1946 authorizes the Federal Grain  Inspection Service (FGIS) to establish quality standards, including  standards for rice. FGIS also offers inspection services for rice farmers  and processors upon request. The Risk Management Agency manages  the Federal Crop Insurance Corporation, which offers crop insurance to  farmers for over 100 different crops, including rice. For the 2018 crop  year, the rice crop insurance provisions generally require that the rice be  flood-irrigated (i.e., intentionally covered with water at a uniform and  shallow depth throughout the growing season).", "Other agencies play a role in managing the risk of arsenic. EPA regulates  the presence of certain substances, such as arsenic, in drinking water  under the Safe Drinking Water Act and conducts toxicological  assessments. In 2001, EPA issued a rule limiting the level of arsenic in  drinking water to 10 parts per billion (ppb) to protect consumers from the  health effects of long-term exposure. Under its Integrated Risk  Information System program, EPA conducts assessments that provide  toxicity values\u2014such as for increased cancer risk due to lifetime ingestion  of a specified quantity of a substance. In accordance with congressional  direction, EPA submitted a plan for developing a draft assessment and  preliminary assessment materials for inorganic arsenic to NRC for review.  In 2013, NRC released an interim report, which provided guidance to EPA  and included a preliminary survey of the scientific literature. In addition,  in accordance with Executive Order 13272, the Small Business  Administration\u2019s Office of Advocacy helps agencies assess the potential  impacts of draft rules on small businesses\u2014which could include members of the rice industry\u2014small governmental jurisdictions, and small  organizations.", "Entities outside of the federal government have recently proposed or  established limits or guidance for arsenic in rice. For example, in 2017,  the Codex Alimentarius, an international standard-setting body, published  a code of practice that provides guidance for preventing and reducing  arsenic contamination in rice, as well as communicating the risk to  stakeholders. In 2014 and 2016, the Codex Alimentarius established a  standard for inorganic arsenic of 200 ppb for white rice and 350 ppb for  brown rice. In 2015, the European Commission issued a regulation  limiting inorganic arsenic in various rice-based foods, including limits of  200 ppb in white rice, 250 ppb in brown rice, and 100 ppb in rice destined  for food for infants and young children."], "subsections": []}, {"section_title": "Enterprise Risk Management", "paragraphs": ["Enterprise risk management allows agencies to assess threats and  opportunities that could affect the achievement of their goals. In a 2016  report, we updated our 2005 risk management framework to (1) reflect  changes to OMB\u2019s Circular A-123, which requires agencies to implement  enterprise risk management; (2) incorporate recent federal experience;  and (3) identify essential elements of federal enterprise risk  management. Beyond traditional internal controls, enterprise risk  management promotes risk management by considering its effect across the entire organization and how it may interact with other identified risks.  Additionally, it also addresses other topics such as setting strategy,  governance, communicating with stakeholders, and measuring  performance, and its principles apply at all levels of the organization and  across all functions\u2014such as those related to managing the risk of  arsenic in rice. The six essential elements of enterprise risk management  that we identified in December 2016 are as follows:", "Align risk management process with goals and objectives.", "Ensure the process maximizes the achievement of agency mission  and results.", "Identify risks. Assemble a comprehensive list of risks, both threats  and opportunities, that could affect the agency\u2019s ability to achieve its  goals and objectives.", "Assess risks. Examine risks, considering both the likelihood of the  risk and the impact of the risk to help prioritize risk response.", "Respond to the risks. Select risk treatment response (based on risk  appetite), including acceptance, avoidance, reduction, sharing, or  transfer.", "Monitor risks. Monitor how risks are changing and whether  responses are successful.", "Communicate and report on risks. Communicate risks with  stakeholders and report on the status of addressing the risks."], "subsections": []}]}, {"section_title": "NRC and Recent Key Scientific Reviews Reported Evidence of Associations between Ingestion of Arsenic and Adverse Human Health Effects", "paragraphs": ["NRC, in its 2013 report, and recent key scientific reviews reported  evidence of associations between long-term ingestion of arsenic and  adverse human health effects. NRC identified stronger evidence of  these associations at higher arsenic levels\u2014defined by NRC as 100 ppb  or higher in drinking water\u2014than at lower levels, which are more common  in the United States. NRC reported greater uncertainty regarding the  associations with some health effects at lower levels of arsenic and noted  that research on the health effects of ingestion of lower levels of arsenic  is ongoing. Many of the studies on which NRC based its conclusions were  focused on the ingestion of arsenic from drinking water, but other studies  were based on arsenic from all sources, including dietary sources such as  rice. Further, NRC reported that evidence from CDC dietary surveys  and related academic studies suggests that food, particularly rice, may be  a significant source of inorganic arsenic, especially when arsenic levels in  drinking water are lower; however, consumption of rice and levels of  arsenic in rice vary widely, making it difficult to estimate arsenic intake  from rice. NRC reported strong evidence of causal associations\u2014that is,  a potential cause and effect\u2014between the long-term ingestion of arsenic  from water or dietary sources, such as rice, and the following five health  effects:", "Skin diseases.", "Skin lesions. Skin lesions due to arsenic ingestion predispose a  person to some skin cancers and may indicate increased  susceptibility to other cancer and noncancer diseases. Skin  lesions have a well-established dose-response relationship with  arsenic in drinking water.", "Skin cancer. Arsenic is an established skin carcinogen, according  to NRC. NRC stated that almost all published studies found  evidence of an association between arsenic ingestion and  nonmelanoma skin cancers.", "Lung cancer. Arsenic from drinking water is an established lung  carcinogen in humans, according to NRC. NRC cited studies  conducted in Argentina, Chile, Japan, Taiwan, and the United States  that reported associations between high levels of arsenic ingestion  and lung cancer. NRC reviewed several studies that examined  ingestion of lower levels of arsenic, some of which found evidence of  an association, while others did not.", "Cardiovascular disease. NRC stated that many studies found a  causal association between the ingestion of arsenic and  cardiovascular disease and mortality. Studies suggest that the  ingestion of lower levels of arsenic in drinking water and possibly in  food is associated with cardiovascular disease, but additional  evidence is needed to fully understand the relationship.", "Bladder cancer. Arsenic is an established bladder carcinogen in  humans, according to NRC. NRC cited a 2012 assessment by the  International Agency for Research on Cancer that indicated higher  mortality from bladder cancer in populations that are exposed to high  levels of arsenic compared to those that are not based on studies in  Argentina, Chile, and Taiwan.", "NRC reported that there was moderate evidence of association between  the long-term ingestion of various levels of arsenic from water or dietary  sources such as rice, and adverse health effects, although some studies  found evidence of an association and others did not. Adverse health  effects include, for example, neurodevelopmental toxicity and pregnancy  outcomes related to infant illness, disease, or injury. NRC also reported  that there was limited evidence of an association between the long-term  ingestion of arsenic from water and dietary sources and adverse health  effects, such as liver and pancreatic cancer and renal disease.", "We analyzed 14 scientific reviews, published since NRC\u2019s 2013 report,  from January 2015 through early June 2017, that generally have  supported NRC\u2019s conclusions that long-term ingestion of arsenic is  associated with the above-mentioned health effects. Two reviews  reporting additional evidence related to cardiovascular disease suggested  that there may be a threshold\u2014an arsenic level below which there is no  significant occurrence of cardiovascular disease. However, one of these  reviews noted that the number of studies they examined was small,  among other limitations. Regarding lung cancer, another recent review  proposed a dose-response relationship, which NRC identified as a gap in  the understanding of this adverse health effect. However, this review  noted that the studies it included did not distinguish between the risk of  lung cancer in smokers and non-smokers, which NRC reported may be a key confounding factor. The review also cited other limitations, including  the small number of studies it used to model this relationship. See  appendix II for additional information about the reviews we identified."], "subsections": []}, {"section_title": "FDA and USDA Have Taken Actions to Manage the Risk to Human Health from Arsenic in Rice", "paragraphs": ["FDA and USDA have taken actions to manage the risk to human health  from arsenic in rice, including assessing the type and prevalence of  health effects that may result from long-term ingestion. These efforts were  generally consistent with the six essential elements for managing risk,  which we have found could help agencies assess threats that could affect  the achievement of their goals. Specifically, FDA has taken actions that  were consistent with five of the six essential elements, including: (1)  aligning risk management process with goals and objectives, (2)  identifying risks, (3) assessing risks, (4) responding to the risks, and (5)  monitoring risks. However, FDA has not fully taken action on the sixth  element of communicating and reporting on risks. FDA issued a risk  assessment in 2016 for public comment and a draft guidance limiting the  levels of arsenic in infant rice cereal, but it has not updated or finalized  these key documents. USDA has taken actions consistent with five of the  six essential elements but has not taken actions to monitor the risk  because of its more limited, nonregulatory role."], "subsections": [{"section_title": "Aligning Risk Management Process with Goals and Objectives", "paragraphs": ["FDA and USDA have aligned their actions to manage the risk to human  health from arsenic in rice to goals in their strategic plans. According to  FDA officials, FDA\u2019s actions align with three of the six goals identified in  the 2015\u20132018 research strategic plan for FDA\u2019s Center for Food Safety  and Applied Nutrition, including advancing diet and health research that  contributes to the development of science-based policies and  communication strategies. Regarding USDA\u2019s actions, ARS officials  stated that their research on arsenic in rice aligned with four goals in  ARS\u2019s fiscal year 2012\u20132017 strategic plan, such as protecting food from  pathogens, toxins, and chemical contamination during production,  processing, and preparation. NIFA officials stated that the research they  sponsored on arsenic in rice aligned with one of the sub-goals in NIFA\u2019s  fiscal year 2014\u20132018 strategic plan: to reduce the incidence of  foodborne illness and provide a safer food supply. FGIS officials  provided documentation showing that their actions aligned with one of the  goals in their fiscal year 2016\u20132020 strategic plan: provide the  environment for fair and competitive market practices between  agricultural producers and buyers. FDA\u2019s and USDA\u2019s actions were  consistent with the essential element of aligning risk management actions  to their strategic plans."], "subsections": []}, {"section_title": "Identifying Risks", "paragraphs": ["Total Diet Study   The Food and Drug Administration\u2019s (FDA)  Total Diet Study, which began testing for  arsenic in 1991, is an ongoing program that  monitors the levels of about 800 contaminants  and nutrients in the average U.S. diet. To  conduct the study, FDA buys, prepares, and  analyzes about 280 kinds of foods and  beverages from representative areas of the  country and estimates the average amounts  of contaminants and nutrients the entire U.S.  population, some subpopulations, and each  person consumes annually. The sampling  plan calls for purchasing each type of food  four times a year, each time in a different  region. Within each region, FDA purchases  each food product from three different stores  and combines them into a composite sample,  for a total of four estimates each year. FDA  makes results of the study, from 1991 through  2015, available to the public in electronic form  on its website.", "FDA and USDA have taken actions to identify the risk of arsenic in rice.  FDA has identified the risk of arsenic in rice through the Total Diet  Study\u2014an annual testing of contaminants and nutrients in food. As part of  conducting the Total Diet Study, FDA collects samples of certain foods,  including rice, and tests them for a variety of toxic chemicals, including  total arsenic. From 2014 through 2015, the most recent years for which  data are available, FDA tested six different categories of rice-based foods  for arsenic. FDA officials told us that they identified arsenic in rice as a  priority based, in part, on the results of the Total Diet Study, which  indicated that rice had higher levels of arsenic compared to other foods.  Some university researchers we interviewed stated that the Total Diet  Study would be more helpful if it measured inorganic arsenic or had a  more robust methodology. For example, one university researcher noted  that the number of samples in the Total Diet Study is not big enough to be  nationally representative. FDA officials told us that starting with the fiscal  year 2018 Total Diet Study, they plan to begin testing rice-based foods for  inorganic arsenic, increase the number of samples they collect, and make  other improvements to the sampling methodology.", "USDA officials have taken actions to identify the risk of arsenic in rice  through a variety of research programs. ARS officials told us that they  have conducted research on arsenic in rice under four national programs:  (1) plant genetic resources, genomics, and genetic improvement; (2)  water availability and watershed management; (3) human nutrition; and  (4) food safety. For example, ARS researchers are examining whether  changes in soil chemistry as a result of organic or conventional  management practices affect arsenic levels in rice. NIFA officials stated  that NIFA sponsors research on arsenic in rice through formula-based  grants to universities and through competitive grants, such as those  offered through the Agriculture and Food Research Initiative.", "To identify what research to undertake, ARS officials told us that they  typically meet with industry to identify its highest priorities. For example,  ARS officials from the Delta Water Management Research Unit in  Arkansas stated that they started researching arsenic in rice after  participating in a joint ARS-USA Rice Federation conference in 2012.  FGIS officials told us that contaminants such as arsenic may affect the  quality of a grain, such as rice, and hence its value. They stated that they  work closely with the grain industry to develop new standards and tests to  meet industry\u2019s needs."], "subsections": []}, {"section_title": "Assessing Risks", "paragraphs": ["FDA and USDA have taken actions to assess the risk of arsenic in rice. In  2012, FDA published its current method to detect inorganic arsenic in  rice. FDA officials told us that this method, though useful, is time- consuming and expensive, and the agency continues to develop other  methods to reduce cost and time. For example, in 2017, FDA developed  another method to detect inorganic arsenic in wine and rice that takes  less time than its current method. FDA officials told us they have an  ongoing research project on a field-deployable method based on a  commercially-available digital arsenic test kit for detecting arsenic in  drinking water called the Arsenator. In addition, FDA has been using laser  ablation, the process of removing a material from a solid using a laser  beam so that it can be measured, as a way to study arsenic distribution in  rice.", "From 2011 through 2014, FDA conducted targeted sampling of more than  1,400 rice-based foods\u2014including rice, rice beverages, cereals, and  snacks\u2014for inorganic arsenic. This targeted sampling and a literature  review of articles published before February 2015 informed a risk  assessment of arsenic in rice that FDA issued for public comment in April  2016. Specifically, the risk assessment used the results of the targeted  sampling to identify levels of inorganic arsenic in rice and examined  available scientific information to provide quantitative estimates of lung  and bladder cancer risk\u2014that is, the number of expected lung and  bladder cancer cases per million people that may be attributable to long- term ingestion of inorganic arsenic in rice and a qualitative assessment of  other adverse health effects. The risk assessment also analyzed  alternative approaches to reducing the risk of arsenic in rice, such as  instituting limits on the allowable level of arsenic in various rice-based  foods, limiting the amount and frequency of consumption of rice, and  cooking practices.", "FDA\u2019s actions have helped assess the risk of arsenic in rice, although  some stakeholders we interviewed have identified limitations to FDA\u2019s  actions. For example, one rice producer noted that because FDA\u2019s  current detection method is time-consuming and expensive, it is not  widely used\u2014companies only use it when tests for total arsenic reveal  that the levels exceed the limit for inorganic arsenic that their customers  request. Some stakeholders noted that the evidence FDA used to assess  the risk of the ingestion of low levels of arsenic, which may be more  relevant for rice consumption, is more uncertain.", "USDA agencies have also taken actions to assess the risk by conducting  research to develop faster and less expensive methods to detect  inorganic arsenic in rice. In 2016, ARS developed a method using hydride  generation, which uses an acid to convert the inorganic arsenic into a gas  that can be detected by an instrument. ARS officials stated that they have  conducted research on the hydride generation method for more than 5  years and were able to further refine the method with funding from the  Rice Foundation. Stakeholders from the rice industry and a university  researcher we interviewed noted that, while the hydride generation  method is faster and cheaper than FDA\u2019s current detection method, it is  too time-consuming and expensive for commercial purposes. For  example, rice mills could not keep pace with trucks lining up to unload  rice if they use the hydride generation method. However, ARS officials  stated that researchers may use it if they need to analyze thousands of  samples and are willing to trade off some accuracy for speed and cost. In  addition, FGIS conducted some of its own development work on the  Arsenator. Agency officials said that they began research on the  Arsenator to help provide a rapid and inexpensive method of detecting  inorganic arsenic at FGIS official testing locations that could include rice  mills but have suspended their efforts because representatives of the rice  industry have told them that these tests are not necessary."], "subsections": []}, {"section_title": "Responding to the Risks", "paragraphs": ["FDA and USDA have taken actions to respond to the risk of arsenic in  rice. In 2016, FDA issued draft guidance, which proposed an action level,  recommending that the rice industry not exceed a level of 100 ppb  inorganic arsenic in infant rice cereal, and FDA has conducted research  on cooking methods that may reduce arsenic. In its draft guidance, FDA  stated that it used its risk assessment, among other considerations, to  identify the level of inorganic arsenic in infant rice cereal. FDA further  noted that it selected 100 ppb because of the potential for human health  risks associated with inorganic arsenic and because such a level is  achievable with the use of current good manufacturing practices\u2014 specifically, selecting sources of rice or rice-derived ingredients with lower  inorganic arsenic levels. FDA officials told us that they focused on infant  rice cereal because infants are at a higher risk of experiencing some of  the health effects of ingesting inorganic arsenic, such as  neurodevelopmental effects, and because the diet of infants is less varied  than that of adults. FDA officials noted that the proposed guidance sets a  limit for infant rice cereal that is generally consistent with the limit set by  the European Commission and that other types of rice sold in the United  States also generally meet the Codex Alimentarius standards.", "University researchers and a group representing consumers we  interviewed stated that FDA\u2019s draft guidance is a good first step, but that  FDA should establish limits for arsenic in other rice products, such as rice  crackers and other foods that children eat. FDA officials noted that the  next most susceptible group would likely be toddlers and young children,  but because their diet is more diverse than that of infants, rice-based  foods make up a smaller portion of their diet. FDA requested public  comments on certain aspects of the draft guidance, such as its feasibility,  and noted that when it is finalized, it will represent FDA\u2019s current thinking  on this topic. The public comments were due to FDA in July 2016,  although FDA noted that the public may comment on its guidance at any  time. University researchers and stakeholders from the rice industry we  interviewed stated that FDA\u2019s draft guidance has become a de facto  industry standard for infant rice cereal. In 2016, FDA also published  research on the effect that cooking methods, such as cooking rice in  excess water, may have on reducing the level of arsenic in rice. FDA  officials told us that they provided advice to consumers on cooking  methods that could reduce arsenic in rice on the FDA website but said  FDA will not direct manufacturers to change the cooking instructions for  rice because the alternative methods may reduce the nutritional value of  the rice.", "Within USDA, ARS and NIFA have sponsored published and ongoing  research that can help respond to the risk, such as research on ways to  reduce the uptake of arsenic by rice through new rice varieties, water  management practices, and soil additives, as well as research on the  genetic mechanisms underlying the uptake and transport of arsenic in the  rice plant. For example, ARS has been conducting research on rice  varieties that can improve yield and grain quality, including lower levels of  arsenic, at the Dale Bumpers National Rice Research Center in Arkansas  for more than 30 years. In 2016, university and ARS researchers  published a study showing that growing rice using a water management  practice called alternate wetting and drying could decrease the levels of  arsenic. Under this practice of growing rice, shown in figure 3 below,  fields are periodically drained and re-flooded during the growing season.", "ARS officials stated that the alternate wetting and drying water  management practice has been adopted to a limited extent in Arkansas,  but pointed out that other benefits, such as reducing water use, may have  been more influential to its adoption than the lowering of arsenic levels.  They noted that there are a number of challenges that may preclude  widespread use, including inadequate water-pumping capacity and the  lack of crop insurance coverage for the practice. In addition, in 2015,  university researchers and an ARS researcher, with a grant from NIFA,  published a study on the effects of adding iron oxide to the soil on the  levels of arsenic in rice; they found that iron oxide resulted in significant  reduction of arsenic for the two varieties of rice that the study examined."], "subsections": []}, {"section_title": "Monitoring Risks", "paragraphs": ["FDA, which is responsible for ensuring the safety of rice and rice-based  foods, has taken actions to monitor the risk of arsenic in rice. USDA has  not done so, because of its more limited, nonregulatory role. FDA has a  compliance program designed to monitor over 1,400 products annually,  including foods that are most likely to contribute to the dietary intake of  toxic elements, among other contaminants. In fiscal years 2015 and  2016, FDA monitored the risk of arsenic by assessing the levels in rice  and rice-based foods under this compliance program, and FDA officials  told us that they plan to continue to do so in fiscal years 2017 and 2018.  FDA officials told us that they generally test the rice for total arsenic but  have recently analyzed some samples for inorganic arsenic based on  factors such as the level of total arsenic found. FDA considers whether to  conduct follow-up actions, including enforcement actions, on a case-by- case basis. As a result of its monitoring in 2016 and 2017 FDA  considered, but did not take, two enforcement actions for arsenic in infant  rice cereal. FDA officials stated that the inorganic arsenic level in one  case was close to the 100 ppb limit and within the margin of error of the  detection method, and in the second case, FDA determined during its  follow-up to the initial sample that the manufacturer destroyed the  remaining product.", "USDA agencies have not monitored arsenic in rice. The Food Safety and  Inspection Service is USDA\u2019s regulatory agency for food safety, but  officials have told us they have not taken actions in this area because rice  is not under the agency\u2019s jurisdiction. ARS maintains a food composition  database, but it does not monitor rice for contaminants such as arsenic  because, according to ARS officials, that is not the database\u2019s purpose.  FGIS officials stated that they do not have an arsenic testing program for  rice at this time. They told us that they considered establishing a testing  program for rice intended for export at the request of the rice industry.  However, FGIS officials stated that they suspended their efforts when  industry determined that it did not need a testing program."], "subsections": []}, {"section_title": "Communicating and Reporting on Risks", "paragraphs": ["FDA and USDA have taken actions to communicate and report on the risk  of arsenic in rice to the public. FDA has issued a risk assessment and  draft guidance on arsenic in infant rice cereal, but it has not updated or  finalized these documents. FDA\u2019s 2016 risk assessment report provides  information about the risk from long-term ingestion of arsenic in rice, and  its draft guidance on arsenic in infant rice cereal includes a link to an FDA  website with information for consumers, including pregnant women and  parents. FDA has requested comments and received 22 public  comments from 17 individuals and organizations on both documents. The  comments have addressed a range of issues, including the methodology  FDA used in its risk assessment; the 100 ppb limit and scope of the  agency\u2019s draft guidance; and the effectiveness of the agency\u2019s  communication to the public. However, FDA has not publicly issued  versions of the guidance or the risk assessment that address these  comments. In our prior work, we have found that sharing risk information  and incorporating feedback from internal and external stakeholders can  help organizations identify and better manage risks, as well as increase  transparency and accountability to Congress and taxpayers.", "In the risk assessment, FDA stated that it will provide an update after  considering public comments and any newly-available information. For  example, FDA officials told us that they plan to consider newly-available  information, such as any updates to EPA\u2019s Integrated Risk Information  System assessment for inorganic arsenic, and may update the risk  assessment as a result. With regard to public comments, FDA officials  told us that they do not intend to make any changes to the approach or  findings of the risk assessment and that they are still considering whether  to make changes to the draft guidance as a result of public comments.  FDA officials stated that they are still reviewing comments and that,  before publication, the guidance would have to undergo interagency  review. FDA officials also stated that the agency is not required to provide  a response to comments in the final guidance. Further, FDA officials  stated that the agency does not need to finalize the guidance in order to  sample foods for a contaminant or to take enforcement action when  contamination may pose a health hazard.", "Stakeholders we interviewed stated that updating the risk assessment  and finalizing the draft guidance would improve FDA\u2019s communication of  the risk. For example, some stakeholders we interviewed told us that the  information used in the risk assessment\u2014both regarding the health  effects of arsenic and the levels of arsenic in rice\u2014may need to be  updated to incorporate the results of more recent research. Further, two  stakeholders we interviewed\u2014one representing the rice industry and the  other representing consumers\u2014noted that it is not clear to them what  actions FDA can take based on the draft guidance. However, FDA  officials could not give us a timeline for when they plan to update the risk  assessment or finalize the guidance. By developing a timeline for  updating the risk assessment on arsenic in rice to incorporate any newly- available information, FDA could help clarify when it will take action.  Developing a timeline for finalizing the draft guidance on arsenic in infant  rice cereal could also help FDA improve the transparency of its  decisions\u2014such as by clarifying the effectiveness of the draft guidance.", "USDA has taken actions that can help communicate and report on the  risk of arsenic in rice. ARS officials told us that they have communicated  the results of their research on arsenic in rice in a number of ways, such  as through presentations at conferences and through outreach to farmers,  including in cooperation with extension programs at universities. For  example, USDA researchers demonstrated automated irrigation systems  that can be used for the alternate wetting and drying water management  practice. In 2017, ARS researchers contributed to the development of a  bulletin in conjunction with University of Arkansas researchers that  contains recommended practices about irrigation methods that can  reduce the levels of arsenic in rice. ARS officials told us that their  communication efforts could help increase farmers\u2019 interest and adoption  of methods they have researched. They also stated that they work with  extension programs because these programs have good access to  farmers."], "subsections": []}]}, {"section_title": "FDA Coordinated Several Risk Management Actions with USDA and Other Federal Agencies to Varying Extents", "paragraphs": ["FDA coordinated with USDA and other federal agencies on the actions to  manage the risk of arsenic in rice for which coordination would be  expected, to varying extents. FDA coordinated with USDA and several  other federal agencies, including CDC, EPA, and NIH, on the  development of the risk assessment and draft guidance on arsenic in  infant rice cereal, but USDA raised concerns about the extent of the  coordination. FDA and USDA coordinated to a limited extent to develop  faster and less expensive methods to detect arsenic in rice."], "subsections": [{"section_title": "FDA Coordinated Its Risk Assessment and Draft Guidance with Several Federal Agencies, but USDA Raised Concerns about the Extent of Coordination", "paragraphs": ["FDA coordinated with several federal agencies on the development of the  risk assessment and draft guidance on arsenic in infant rice cereal.  According to FDA officials, in developing the risk assessment, FDA  initially coordinated with EPA on two noncancer health effects\u2014adverse  pregnancy outcomes and developmental neurotoxicology effects in young  children\u2014to ensure consistency with the work EPA was doing to update  its Integrated Risk Information System assessment for arsenic. When  FDA completed the draft of the noncancer section of its risk assessment,  the agency provided it to EPA and NIH\u2019s National Institute of  Environmental Health Sciences for review. FDA incorporated comments  from EPA and NIH in the risk assessment document, which EPA, CDC,  and NIH subsequently reviewed. From December 2014 through June  2015, the risk assessment and draft guidance underwent HHS\u2019s  clearance process. Through this process, CDC and NIH, along with  HHS\u2019s Assistant Secretary for Legislation and its Office of the Assistant  Secretary for Planning and Evaluation, reviewed the documents, and FDA  revised the risk assessment and draft guidance to address their  comments. CDC, EPA, and NIH officials told us that they were generally  satisfied with FDA\u2019s coordination efforts and the extent to which FDA  addressed their comments. For example, CDC officials said that the  agency provided FDA several rounds of comments, and by the end of the  process, all of its comments had been considered.", "OMB also chose to review FDA\u2019s risk assessment and draft guidance on  arsenic in infant rice cereal through its interagency review process.  According to FDA officials, as part of this process, which occurred from  May 2015 through March 2016, FDA coordinated with EPA again, as well  as with OMB\u2019s Office of Information and Regulatory Affairs and the U.S.  Trade Representative within the Executive Office of the President, the  Small Business Administration\u2019s Office of Advocacy, and USDA. Officials  from the Small Business Administration\u2019s Office of Advocacy said that  they were generally satisfied with the review process and characterized  the outcome as typical in that some, but not all, of their suggested  changes were accepted.", "However, USDA officials raised concerns about FDA involving them too  late in the coordination process and about the extent to which FDA  addressed their comments. From May 2015 through July 2015, USDA  conducted its first review of these documents and provided FDA with  comments. USDA had offered to provide FDA with feedback on versions  of the risk assessment on several occasions earlier in the process, but  FDA did not accept USDA\u2019s offers, according to a USDA official. As  discussed below, FDA chose to engage USDA later in the process.", "In their comments, USDA officials expressed concerns regarding  uncertainties and data limitations in the risk assessment and draft  guidance on arsenic in infant rice cereal. USDA also raised questions  about whether sufficient data on the link to adverse health effects existed  to warrant the draft guidance. Furthermore, USDA stated that because  the documents focus solely on rice, instead of addressing risks to the diet  as a whole, FDA needs to share clear, consistent, and understandable  messages with the public to alleviate fear and misunderstanding related  to the risk posed by arsenic in rice. According to USDA officials, FDA did  not adequately address their comments in the revised documents,  including FDA\u2019s communication strategy. However, according to a senior  USDA official, in its response to USDA\u2019s comments, FDA maintained that,  overall, the comments it received from its external peer reviewers\u2014five  university researchers\u2014were supportive of the risk assessment and that  based on the peer review, FDA did not change its findings or conclusions.  According to this USDA official, FDA also noted that there are insufficient  data to accurately quantify the risk from arsenic in rice to pregnant  women or children but that it decided moving forward with the draft  guidance on arsenic in infant rice cereal would be prudent.", "FDA and USDA did not agree on USDA\u2019s role in developing the risk  assessment and the point at which they should begin coordinating on the  risk assessment. FDA officials told us that FDA generally considers  agencies\u2019 expertise in determining whether and when to include them in  the development of risk assessments and related documents. FDA did  not see USDA as having a role in developing the risk assessment; rather,  FDA officials told us that they reached out to USDA after the risk  assessment was drafted, when the agency began to consider how to  reduce the levels of arsenic in rice during the growing process and the  feasibility of industry meeting its draft guidance on arsenic in infant rice  cereal. The officials said that FDA met with USDA officials on numerous  occasions and invited them to attend additional meetings with various  stakeholders. However, according to a senior USDA official, USDA has  relevant scientific and technical expertise that should have played a role  in developing the risk assessment. According to this official, if FDA had  involved USDA earlier in the development process, FDA may have  addressed USDA\u2019s comments to a greater extent.", "We have shown in prior work that agencies can facilitate their  collaborative efforts by developing a mechanism for interagency  coordination, and a key issue to consider when developing such a  mechanism is whether participating agencies have clarified their roles and  responsibilities. FDA officials stated that they were not aware of the  existence of any mechanism for coordinating risk assessments of  contaminants in food, including arsenic in rice, which among other things,  could clarify the roles and responsibilities of participating agencies. FDA  officials told us that they followed a 2002 report listing guiding principles  when developing the risk assessment, but this report, which broadly  applies to all foodborne contaminants, did not specify the process FDA  should follow to coordinate its risk assessment. However, our review of  this 2002 report shows that it recommends that FDA encourage active  participation and communication with other agencies and stakeholders  and collaboration, when appropriate, as part of its risk assessment  development process. Although FDA did reach out to USDA, those  meetings were after the completion of the risk assessment. By developing  a mechanism for working with relevant agencies to identify their roles and  responsibilities for coordinating risk assessments of contaminants in food,  including arsenic in rice, FDA could have better assurance that it fully  utilizes the expertise of all participating federal agencies."], "subsections": []}, {"section_title": "FDA and USDA Coordinated on Developing Methods to Detect Arsenic in Rice to a Limited Extent", "paragraphs": ["FDA and USDA\u2019s FGIS and ARS coordinated on the development of  detection methods to a limited extent. Officials from FDA and FGIS told  us that they began to coordinate in March 2016, when they discovered, in  the course of ongoing coordination in another area, that they were each  working independently on developing a faster and less expensive  detection method using the Arsenator. According to FDA officials, FDA  became aware of FGIS\u2019s interest in developing methods to detect arsenic  in rice during a Codex Alimentarius meeting that researchers from both  agencies attended. Therefore, the avoidance of potentially duplicative  effort occurred as a result of an informal discussion that occurred during  this meeting. With regard to ARS, FDA officials told us that FDA did not  coordinate with ARS on the development of the hydride generation  method but that FDA used its own validated method to provide ARS with  actual arsenic concentrations of samples to help ARS test its method.  According to ARS officials, ARS did not coordinate with FDA or FGIS  when developing its method on hydride generation. According to an FDA  official, FDA did not coordinate the development of its current method to  detect inorganic arsenic in rice, the faster method for wine and rice, or the  laser ablation method with FGIS, ARS, or any other federal agency.", "We have shown in prior work that many of the meaningful results that the  federal government seeks to achieve, such as those related to protecting  food and agriculture, require the coordinated efforts of more than one  federal agency. ARS officials told us that from their perspective, there  was no reason to coordinate because ARS, FDA, and FGIS are trying to  meet different needs with their research. Further, ARS officials told us  that coordinating with FDA would blur the distinction between ARS\u2019s  scientific role and FDA\u2019s regulatory role and may imply that ARS has  regulatory responsibilities or expertise. However, all three agencies share  a crosscutting strategic interest in developing methods for detecting  foodborne contaminants, including arsenic in rice. The strategic plans for  ARS and FDA\u2019s Center for Food Safety and Applied Nutrition include  outcomes and strategies related to the development of detection methods  for chemical contaminants or residues. Further, FGIS\u2019s strategic plan  includes a strategy of developing innovative tests to measure grain  quality, and according to FGIS officials, they have considered testing  inorganic arsenic as part of measuring grain quality. According to FGIS  officials, once they began coordinating with FDA on the Arsenator, they  saw value in coordinating and did so for about 9 months before  suspending work on the detection method.", "We have noted in prior work that interagency mechanisms to coordinate  programs that address crosscutting issues may reduce potentially  duplicative efforts. However, neither FDA nor USDA has such a  mechanism to coordinate the development of methods to detect arsenic  in rice or other methods to detect contaminants in food. FDA officials told  us that the agency works with USDA research agencies on food safety in  an informal manner, and USDA officials told us that they are not aware of  any mechanism for coordination and that coordination with FDA generally  occurs at the secretarial level because it cuts across a number of USDA  agencies. Recently, we also found another example in which FDA and  USDA did not coordinate in developing detection methods for other  contaminants in foods. FDA and another USDA agency\u2014the Food Safety  and Inspection Service\u2014did not coordinate in developing detection  methods for drug residues in seafood. By developing a mechanism to  coordinate their crosscutting efforts to develop faster and less expensive  methods for detecting contaminants in food, including arsenic in rice, FDA  and USDA could enhance their ability to use their resources efficiently  and avoid engaging in unnecessary and potentially duplicative efforts."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["NRC and key recent scientific reviews have indicated that long-term  ingestion of arsenic may pose a significant risk to human health, and FDA  and USDA have taken various actions to manage the risk to human  health of arsenic in rice. Their actions are generally consistent with the  essential elements we have identified for managing risk, which can help  agencies assess threats that could affect the achievement of their goals.  For example, both agencies have conducted research on arsenic  detection methods, and FDA has issued for public comment a risk  assessment on the human health effects from the long-term ingestion of  arsenic in rice. In addition, according to FDA officials, because infants are  at a higher risk of experiencing some of the health effects of ingesting  arsenic, such as neurodevelopmental effects, and the diets of infants are  less varied than that of adults, FDA issued a draft guidance regarding  arsenic in infant rice cereal. However, FDA officials have not provided a  specific timeline for updating the risk assessment in response to newly- available information or for finalizing the draft guidance for infant rice  cereal in response to public comments. Both of these documents could  help communicate to the public the risk of arsenic in rice, and updating or  finalizing them could also help FDA demonstrate its commitment to  increasing transparency and accountability by addressing public  comments and clarifying its enforcement authority, among other things.", "FDA coordinated the development and review of these key documents  with several federal agencies, and these agencies were generally  satisfied with FDA\u2019s coordination efforts. However, USDA raised concerns  about being involved too late in the process and the extent to which its  comments were addressed. By developing a mechanism for working with  relevant agencies to identify their roles and responsibilities for  coordinating risk assessments of contaminants in food, including arsenic  in rice, FDA could better ensure that it fully utilizes their expertise.  Furthermore, FDA and USDA coordinated on the development of arsenic  detection methods to a limited extent. Developing a mechanism to  coordinate their crosscutting efforts to develop methods to detect  contaminants in food, including arsenic in rice, could help FDA and USDA  manage their resources and avoid engaging in unnecessary and  potentially duplicative efforts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations, including four to FDA  and one to USDA. Specifically:", "The Commissioner of FDA should develop a timeline for updating the  risk assessment on arsenic in rice. (Recommendation 1)", "The Commissioner of FDA should develop a timeline for finalizing the  draft guidance on arsenic in infant rice cereal. (Recommendation 2)", "The Commissioner of FDA should develop a mechanism for working  with relevant agencies to identify their roles and responsibilities for  coordinating risk assessments of contaminants in food, including  arsenic in rice. (Recommendation 3)", "The Commissioner of FDA should work with USDA to develop a  mechanism to coordinate the development of methods to detect  contaminants in food, including arsenic in rice. (Recommendation 4)", "The Secretary of Agriculture should work with FDA to develop a  mechanism to coordinate the development of methods to detect  contaminants in food, including arsenic in rice. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to EPA, HHS, OMB, and USDA for their  review and comment. HHS and USDA provided written comments, which  are summarized below and reproduced in appendix III and appendix IV,  respectively. In addition, EPA, HHS, and USDA provided technical  comments, which we incorporated as appropriate. OMB did not comment.", "In its comments, HHS generally agreed with our findings and three of the  four recommendations directed to it and partially agreed with the other  recommendation. Specifically, HHS partially agreed with our first  recommendation for FDA to develop a timeline for updating the risk  assessment on arsenic in rice, noting that the evolving nature of science  precludes it from committing to a specific timeline. We recognize that new  scientific studies continue to add to the understanding of the risk of  arsenic. However, we continue to believe that FDA should demonstrate  its commitment to increasing transparency and accountability by  developing a timeline to update the risk assessment, potentially in  conjunction with finalizing the draft guidance on arsenic in infant rice  cereal. Such an update may state that recent scientific studies or public  comments have not resulted in a change to FDA\u2019s assessment of the risk.", "HHS generally agreed with our findings about the actions it has taken to  manage the risk from arsenic in rice and the extent of its coordination with  USDA and other agencies. HHS noted that it anticipates developing a  final guidance establishing an action level of 100 ppb of inorganic arsenic  in infant rice cereal by the end of 2018, which will be consistent with our  recommendation. HHS also noted that it will consider ways to enhance  mechanisms\u2014such as the Interagency Risk Assessment Consortium\u2014to  collaborate and coordinate in the development of risk assessments with  agencies that have regulatory responsibility or specific expertise. Further,  HHS stated that FDA agrees that a mechanism for better coordinating  with USDA on the development of methods to detect contaminants in  foods would be worthwhile. FDA will consider whether and how existing  mechanisms, such as the lnteragency Residue Control Group and the  annual meeting with USDA's ARS and the Food Safety and Inspection  Service on food safety research, could be used to improve collaboration  with USDA on method development. HHS\u2019s plans to enhance or use  existing interagency mechanisms may be responsive to our  recommendations if they focus on enhancing coordination with other  agencies that have expertise or similar goals in the areas of risk  assessments and methods to detect foodborne contaminants.", "In its comments, USDA generally agreed with our findings and the one  recommendation we directed to it. Specifically, USDA generally agreed  with our findings about the extent to which FDA coordinated with USDA  on the development of methods to detect contaminants in food, including  arsenic in rice. It also generally agreed with our recommendation that  USDA work with FDA to develop a mechanism to do so and stated that  the USDA Office of the Chief Scientist will facilitate this effort. Further,  USDA noted that the Interagency Risk Assessment Consortium may be  an appropriate mechanism for addressing GAO\u2019s recommendations.  USDA\u2019s proposal has the potential to be responsive to our  recommendation if it focuses on enhancing coordination with FDA  regarding the development of detection methods for foodborne  contaminants.", "As agreed with your office, unless you publicly announce the contents  earlier, we plan no further distribution of this report until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Secretaries of Agriculture and Health and  Human Services; the Administrator of EPA; the Director of OMB; and  other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact me at (202) 512-3841 or morriss@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what the National Research Council (NRC) and  recent key scientific reviews have reported about the effects of ingestion  of arsenic on human health, (2) the extent to which the Food and Drug  Administration (FDA) and U.S. Department of Agriculture (USDA) have  managed the risk to human health from arsenic in rice, and (3) the extent  to which FDA has coordinated with USDA and other federal agencies on  actions to manage the risk. In this report, we use the term arsenic to refer  to either total arsenic or inorganic arsenic. We use the term rice to  encompass rice grain and products made with rice, such as infant rice  cereal.", "To determine what NRC and recent key scientific reviews have reported  about the effects of ingestion of arsenic on human health, we analyzed  NRC\u2019s 2013 report on inorganic arsenic and 14 reviews of the scientific  literature published from January 2015 through early June 2017 on the  human health effects of ingestion of arsenic. We conducted a literature  search of several research databases, such as PubMed and Toxline, to  identify reviews that (1) were focused on the effects of ingestion of  arsenic on human health; (2) were peer-reviewed; (3) relied on human,  rather than animal, studies; (4) provided conclusions or summary  statements related to more than one study, rather than just listing  individual study findings; (5) included an abstract; and (6) were written in  English. We assessed the scientific and statistical credibility, reliability,  and methodological soundness of the reviews. We also contacted some  of the authors for additional methodological information. Methodological  information included, for example, criteria for selecting the studies used in  the review; meta-analyses; or meta-regression approach. It also included  limitations that the authors cited for the studies they reviewed or for any  analyses they conducted. We excluded articles for which we could not  clearly determine the methodology. We also reviewed the authors\u2019  statements regarding conflicts of interest and determined that none of the  articles should be excluded for this reason. We did not examine the  references cited by these reviews as part of our analysis. We also did not  examine the studies cited by the NRC. The studies we reviewed are listed  in appendix II.", "To determine the extent to which FDA and USDA have managed the risk  to human health from arsenic in rice, we examined relevant provisions in  the Federal Food, Drug, and Cosmetic Act, as amended; the Federal  Agriculture Improvement and Reform Act of 1996; and other relevant  laws, regulations, and policies. We also used the essential elements for  managing risk as identified in our prior work on enterprise risk  management. These include: (1) align the risk management process with  goals and objectives, (2) identify risks, (3) assess risks, (4) respond to the  risks, (5) monitor the risks, and (6) communicate and report on the risks.  We identified information on agency actions for managing the risk from  arsenic in rice by collecting documentation and interviewing officials from  FDA and USDA and we reviewed the information in light of the  requirements, policies, and elements. We assessed FDA\u2019s and USDA\u2019s  reported actions to determine the extent to which each agency\u2019s actions  aligned with these elements. In assessing FDA\u2019s and USDA\u2019s actions  against these essential elements, we used the terms \u201cconsistent\u201d and  \u201cpartially consistent\u201d to reflect the extent to which each agency\u2019s actions  aligned with an essential element. A determination of \u201cconsistent\u201d meant  that the agency provided evidence that it had taken major actions in  alignment with that essential element. A determination of \u201cpartially  consistent\u201d meant that the agency provided evidence that it had taken  some actions in alignment with that essential element.", "We also interviewed 17 stakeholders to obtain their views on the extent to  which FDA\u2019s and USDA\u2019s actions managed the risk, including university  researchers (academics) specializing in relevant fields such as  epidemiology and soil chemistry, representatives of a consumer  organization, and representatives of the rice industry, including rice mills  and farms. We identified stakeholders based on suggestions from agency  officials and other stakeholders; through our site visit in Arkansas\u2019 rice  agricultural research and production areas and rice mills; and based on  the stakeholders\u2019 unique perspective or qualifications, such as  membership in the NRC Committee on Inorganic Arsenic. The views we  obtained from these interviews are not generalizable to all university  researchers or consumer or rice industry organizations but they provide  illustrative examples of the views of such stakeholders. Table 1 lists  information about the 17 stakeholders we interviewed.", "To determine the extent to which FDA has coordinated with USDA and  other federal agencies on actions to manage the risk to human health  from arsenic in rice, we identified relevant actions and examined whether  FDA developed interagency collaborative mechanisms, which we have  previously reported could help to facilitate coordination between  agencies. To identify actions for which the agencies shared similar goals  in their strategic plans or relevant expertise and for which FDA would be  expected to coordinate with USDA and other federal agencies, we  reviewed relevant provisions in the Federal Food, Drug, and Cosmetic  Act, as amended; the Federal Agriculture Improvement and Reform Act  of 1996; other relevant laws, regulations, and policies; the current  science and research strategic plan for FDA\u2019s Center for Food Science  and Applied Nutrition and current strategic plans for USDA\u2019s Agricultural  Research Service (ARS) and Federal Grain Inspection Service (FGIS);  and information about the agencies\u2019 missions from their websites. These  actions were the development of FDA\u2019s risk assessment and draft  guidance on arsenic in rice and FDA\u2019s and USDA\u2019s efforts to develop  detection methods for arsenic in rice. We interviewed FDA officials and  reviewed documentation they provided to identify the other federal  agencies and offices with which FDA coordinated the development and  review of its risk assessment and draft guidance on arsenic in infant rice  cereal and the development of methods for detecting arsenic in rice.  These agencies and offices included ARS, the Centers for Disease  Control and Prevention, the Environmental Protection Agency (EPA),  FGIS, National Institutes of Health\u2019s National Institute of Environmental  Health Sciences, the Department of Health and Human Services\u2019  Assistant Secretary for Legislation and Office of the Assistant Secretary  for Planning and Evaluation, Office of Management and Budget\u2019s (OMB)  Office of Information and Regulatory Affairs, the Small Business  Administration\u2019s Office of Advocacy, and the U.S. Trade Representative.", "To determine the extent to which FDA coordinated its risk assessment  and draft guidance on arsenic in rice with USDA and other federal  agencies, we obtained and reviewed FDA\u2019s framework for conducting risk  assessments; reviewed agencies\u2019 comments on these documents;  interviewed FDA officials regarding FDA\u2019s efforts to coordinate with other  agencies; and interviewed officials from the Centers for Disease Control  and Prevention; EPA; the National Institutes of Health; OMB; the Small  Business Administration\u2019s Office of Advocacy; and USDA regarding the  nature of their comments, their experiences coordinating with FDA, and  the extent to which FDA addressed their comments.", "To examine the extent to which FDA and USDA coordinated the  development of arsenic detection methods, we obtained and reviewed  documents, including those describing the detection methods that FDA,  ARS, and FGIS have developed or have under development, and we  interviewed officials from these agencies regarding their efforts to develop  these methods and coordinate their development efforts. We also  interviewed officials from these agencies to gather their views on the  effectiveness of these coordination efforts. We then examined whether  FDA had interagency collaborative mechanisms for the development of its  risk assessment and draft guidance, and its efforts with USDA to develop  arsenic detection methods. We also examined whether participating  agencies clarified their roles and responsibilities. Our prior work identified  this as a key issue for agencies to consider when implementing  coordination mechanisms. We selected this practice because it was  relevant to the challenges the agencies faced.", "We conducted this performance audit from December 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Recent Reviews of the Health Effects of Ingestion of Arsenic", "paragraphs": ["The following list identifies recent key reviews of the health effects of  ingestion of arsenic that we analyzed.", "Amadi, C.N., Z.N. Igweze, and O.E. Orisakwe. \u201cHeavy Metals in  Miscarriages and Stillbirths in Developing Nations.\u201d Middle East Fertility  Society Journal, vol. 22, no. 2 (2017): 91-100.", "Bardach, A.E., A. Ciapponi, N. Soto, M.R. Chaparro, M. Calderon, A.  Briatore, N. Cadoppi, R. Tassara, and M.I. Litter. \u201cEpidemiology of  Chronic Disease Related to Arsenic in Argentina: A Systematic Review.\u201d  The Science of the Total Environment, vol. 538, (2015): 802-16.", "Karagas, M.R., A. Gossai, B. Pierce, and H. Ahsan. \u201cDrinking Water  Arsenic Contamination, Skin Lesions, and Malignancies: A Systematic  Review of the Global Evidence.\u201d Current Environmental Health Reports,  vol. 2, no. 1 (2015): 52-68.", "Khanjani, N., A. Jafarnejad, and L. Tavakkoli. \u201cArsenic and Breast  Cancer: A Systematic Review of Epidemiologic Studies.\u201d Reviews on  Environmental Health (2017).", "Lamm, S.H., H. Ferdosi, E.K. Dissen, J. Li, and J. Ahn. \u201cA Systematic  Review and Meta-Regression Analysis of Lung Cancer Risk and  Inorganic Arsenic in Drinking Water.\u201d International Journal of  Environmental Research and Public Health, vol. 12, no. 12 (2015):  15498-15515.", "Mayer, J.E. and R.H. Goldman. \u201cArsenic and Skin Cancer in the USA:  The Current Evidence regarding Arsenic-Contaminated Drinking Water.\u201d  International Journal of Dermatology, vol. 55, no. 11 (2016): e585-e591.", "Milton, A.H., S. Hussain, S. Akter, M. Rahman, T.A. Mouly, and K.  Mitchell. \u201cA Review of the Effects of Chronic Arsenic Exposure on  Adverse Pregnancy Outcomes.\u201d International Journal of Environmental  Research and Public Health, vol. 14, no. 6 (2017).", "Phung, D., D. Connell, S. Rutherford, and C. Chu. \u201cCardiovascular Risk  from Water Arsenic Exposure in Vietnam: Application of Systematic  Review and Meta-Regression Analysis in Chemical Health Risk  Assessment.\u201d Chemosphere, vol. 177 (2017): 167-175.", "Quansah, R., F.A. Armah, D.K. Essumang, I. Luginaah, E. Clarke, K.  Marfoh, S.J. Cobbina, et al. \u201cAssociation of Arsenic with Adverse  Pregnancy Outcomes/Infant Mortality: A Systematic Review and Meta- Analysis.\u201d Environmental Health Perspectives, vol. 123, no. 5 (2015):  412-21.", "Robles-Osorio, M.L., E. Sabath-Silva, and E. Sabath. \u201cArsenic-Mediated  Nephrotoxicity.\u201d Renal Failure, vol. 37, no. 4 (2015): 542-7.", "Sidhu, M.S., K.P. Desai, H.N. Lynch, L.R. Rhomberg, B.D. Beck, and F.J.  Venditti. \u201cMechanisms of Action for Arsenic in Cardiovascular Toxicity and  Implications for Risk Assessment.\u201d Toxicology, vol. 331 (2015): 78-99.", "Sung, T., J. Huang, and H. Guo. \u201cAssociation between Arsenic Exposure  and Diabetes: A Meta-Analysis.\u201d BioMed Research International, (2015).", "Tsuji, J.S., M.R. Garry, V. Perez, and E.T. Chang. \u201cLow-Level Arsenic  Exposure and Developmental Neurotoxicity in Children: A Systematic  Review and Risk Assessment.\u201d Toxicology, vol. 337, (2015): 91-107.", "Von Stackelberg, K., E. Guzy, T. Chu, and B.C. Henn. \u201cExposure to  Mixtures of Metals and Neurodevelopmental Outcomes: A Review.\u201d Risk  Analysis, vol. 35, no. 6 (2015): 971-1016."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Anne K. Johnson (Assistant  Director), Ruth Solomon (Analyst in Charge), Kevin Bray, Stephen Cleary,  Ellen Fried, Juan Garay, Rebecca Parkhurst, Beverly Peterson, Anne  Rhodes-Kline, Sara Sullivan, Kiki Theodoropoulos, Sarah Veale, and  Khristi Wilkins made key contributions to this report."], "subsections": []}]}], "fastfact": ["The FDA warned in 2016 that infants face a higher health risk than adults from arsenic owing to their less-varied diets, and proposed guidance on arsenic levels in infant rice cereal.", "We reviewed recent scientific work and FDA and USDA actions to manage the risk of arsenic in rice. We found the agencies have researched methods to detect arsenic in rice and taken other actions, but that FDA could better communicate the risk to the public and coordinate with other agencies.", "We recommended that, among other things, FDA develop a timeline to finalize its guidance on infant rice cereal and work to better coordinate its actions."]}
{"id": "GAO-18-311", "url": "https://www.gao.gov/products/GAO-18-311", "title": "Comparative Effectiveness Research: Activities Funded by the Patient-Centered Outcomes Research Trust Fund", "published_date": "2018-03-23T00:00:00", "released_date": "2018-03-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2010, the Patient Protection and Affordable Care Act (PPACA) authorized the establishment of PCORI to carry out CER and improve its quality and relevance. PPACA also established new requirements for HHS to, among other things, disseminate findings from federally funded CER, including findings published by PCORI; and coordinate with relevant federal health programs to build data capacity for this research. To fund CER activities, PPACA established the Trust Fund from which PCORI and HHS are expected to receive an estimated $4.0 billion from fiscal years 2010 through 2019.", "PPACA included a provision for GAO to review PCORI's and HHS's use of the Trust Fund. This report examines (1) PCORI's use of the Trust Fund for CER activities, including the dissemination and use of research findings; and (2) HHS's use of the Trust Fund for these activities.", "GAO examined PCORI and HHS documents and data related to use of the Trust Fund, such as commitment, obligation, and expenditure data; PCORI's audited financial statements; and descriptions of CER activities. GAO also interviewed PCORI and HHS officials responsible for planning and carrying out CER activities and interviewed officials from stakeholder organizations representing potential users of CER, including public and private payer organizations, provider organizations, and patient organizations. PCORI and HHS provided technical comments, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Patient-Centered Outcomes Research Institute (PCORI) made about $2 billion in commitments for awards in fiscal years 2010 through 2017. PCORI is a federally funded, nonprofit corporation established to carry out and improve comparative clinical effectiveness research (CER), which evaluates and compares the health outcomes and the clinical effectiveness, risks, and benefits of two or more medical treatments, services, or items. PCORI provides funding through award commitments from the Patient Centered Outcomes Research Trust Fund (Trust Fund) and may pay these awards over multiple years. Of the $2 billion PCORI committed as of the end of fiscal year 2017, about $1.6 billion (or 79 percent of its commitments) is for research awards, and $325 million (or 16 percent) is for building the capacity to use existing health data for research. Through fiscal year 2017, commitments for dissemination and implementation awards\u2014intended to share CER findings with potential users of this research\u2014were limited because most PCORI-funded research was still underway. PCORI projects to commit an additional $721 million for awards in fiscal years 2018 through 2021. In addition to awards, PCORI spent $310 million on program and administrative support services in fiscal years 2010 through 2017 and projects to spend an additional $206 million for these services through fiscal year 2024.", "From fiscal years 2011 through 2017, the Department of Health and Human Services (HHS) obligated about $448 million from the Trust Fund. Of this amount, HHS obligated about $260 million (or 58 percent of all obligations) to the dissemination and implementation of CER findings. As most PCORI-funded CER had not yet been completed due to the time needed to conduct this research, HHS efforts focused instead on the dissemination and implementation of CER funded by other federal entities. Additionally, HHS obligated funds for efforts to train researchers on conducting CER, build data capacity, and on administrative activities. HHS projects to obligate an additional $120 million for these activities in fiscal years 2018 through 2020."]}], "report": [{"section_title": "Letter", "paragraphs": ["Clinical research is often conducted to evaluate the effectiveness of a  specific treatment for a disease or condition; however, research is less  often conducted to compare the relative effectiveness of two or more  available treatment options. Comparative clinical effectiveness research  (CER) evaluates and compares the health outcomes and the clinical  effectiveness, risks, and benefits of two or more medical treatments,  services, or items. For example, a recent CER study found that the life  expectancy of women over age 50 with breast cancer in one breast, but  who do not carry the breast cancer gene mutation, is similar whether they  have one or both breasts removed. Another recent study compared the  effectiveness and safety of treatments for childhood anxiety disorders and  found that a combination of medications and therapy is likely more  effective than either treatment alone. According to the National  Academies of Medicine, CER can help clinicians, patients, payers, and  others make informed decisions to improve health care.", "In 2010, the Patient Protection and Affordable Care Act (PPACA)  authorized the establishment of the Patient-Centered Outcomes  Research Institute (PCORI) as a federally funded, nonprofit corporation to  improve the quality and relevance of CER. In addition, PPACA established new requirements for the Department of Health and Human  Services (HHS) to, among other things, broadly disseminate findings from  federally funded CER, including findings published by PCORI; train  researchers on CER methodological approaches; and coordinate relevant  federal health programs to build data capacity for this research. To fund  PCORI\u2019s and HHS\u2019s CER activities, PPACA established the Patient- Centered Outcomes Research Trust Fund (Trust Fund) through which  PCORI and HHS expect to receive an estimated total of about $4 billion  from fiscal years 2010 through 2019.", "PPACA included a provision for us to report on the use of the Trust Fund  for CER activities. In this report, we examine:  1.  PCORI\u2019s use of the Trust Fund for CER activities, including the  dissemination and use of research findings, and  2.  HHS\u2019s use of the Trust Fund for these activities.", "To examine PCORI\u2019s and HHS\u2019s use of the Trust Fund for CER activities,  including the dissemination and use of research findings, we reviewed  PCORI award commitment and expenditure data and HHS data on  obligated funds. We also reviewed descriptions of PCORI\u2019s and HHS\u2019s  CER activities, relevant legislation, and previous GAO reports.  Furthermore, we conducted interviews with PCORI and HHS officials  responsible for planning and carrying out CER activities. Within HHS, we  interviewed officials from the Agency for Healthcare Research and Quality  (AHRQ), the Office of the Assistant Secretary for Planning and Evaluation  (ASPE), and the National Institutes of Health (NIH). We also interviewed  officials coordinating PCORI\u2019s PCORnet initiative, the National Patient- Centered Clinical Research Network, to build data capacity for research.  We reviewed funding from fiscal year 2010, the first year funding was  made available, through 2017, the most recent data available at the time  of our analysis. To the extent available, we also reviewed the amount of  funding projected beyond fiscal year 2017. Finally, to gather the views of  potential users of CER findings, including public and private payers,  providers, and patients, we interviewed officials from several large  organizations that broadly represent each group of potential users.", "To assess the reliability of PCORI commitment and expenditure data and  HHS obligation data, we collected information from PCORI and HHS  officials regarding the reliability of the data, including the accuracy of data  entry and the systems that contain the data. We also reviewed PCORI\u2019s  annual audited financial statements. On the basis of these steps, we  determined the data were sufficiently reliable for the purposes of our  reporting objectives.", "We conducted this performance audit from May 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform our work 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."], "subsections": [{"section_title": "Background", "paragraphs": ["In 2010 PPACA authorized the establishment of PCORI to improve CER  quality and relevance. PPACA also established requirements for HHS to,  among other things, disseminate findings from federally funded CER,  including findings published by PCORI, and coordinate with relevant  federal health programs to build data capacity for research. PPACA  established a Trust Fund to fund these CER activities by PCORI and HHS  through fiscal year 2019."], "subsections": [{"section_title": "PCORI Activities Required by PPACA", "paragraphs": ["PPACA authorized the establishment of PCORI as a federally funded,  nonprofit corporation aimed at advancing the quality and relevance of  evidence through research to help patients, clinicians, purchasers, and  policy-makers to make informed health care decisions. PCORI is  required to identify research priorities, establish a research project  agenda, fund research consistent with its research agenda, and  disseminate research findings, among other responsibilities. In 2015 we  reported that PCORI had conducted activities consistent with its  legislative requirements. For example, we reported that since its  inception in 2010, PCORI established and implemented priorities for  funding CER and related activities, developed plans to disseminate  funded research and track its utilization, and took steps to make its  research more centered on outcomes prioritized by patients. Further,  PCORI developed PCORnet as a distributed research network initiative  that enables electronic health-related data from multiple sources to be  available for research."], "subsections": []}, {"section_title": "HHS CER-related Activities Required by PPACA", "paragraphs": ["PPACA requires HHS to perform several requirements related to CER,  which it has implemented through AHRQ and ASPE. Specifically, AHRQ  is required to disseminate and support the incorporation of CER funded  by PCORI and other federal entities, as well as to foster capacity for  conducting CER by supporting training in the methods used to conduct  such research. ASPE, in turn, is required to build data capacity for  conducting CER. In 2015, we reported that AHRQ had taken some steps  to disseminate research findings, but had not taken other actions to help it  fully address its dissemination requirements. Furthermore, we reported  that ASPE coordinated among various agencies to fund projects intended  to build data capacity for research, but that its approach lacked key  elements\u2014such as defined objectives, milestones, and time frames\u2014that  are necessary to ensure effectiveness. In our 2015 report, we made five  recommendations to HHS to direct AHRQ and ASPE to address these  issues, as appropriate. HHS concurred with these recommendations and  specified actions it would take to address them. Four of the  recommendations have since been implemented."], "subsections": []}, {"section_title": "PPACA Funding for CER", "paragraphs": ["PPACA established the Trust Fund through which PCORI and HHS  receive funds for CER activities. The law provides that for fiscal years  2010 through 2019, the Trust Fund will receive appropriations from the  general fund of the Treasury, transfers from the Medicare trust funds, and  fees collected by the Department of the Treasury (Treasury) from private  insurance and self-insured health plans. Eighty percent of the amounts in  the Trust Fund must be made available to PCORI in fiscal years 2011  through 2019, and Treasury must transfer the remaining 20 percent to the  Secretary of HHS in each of those years. Under current law,  appropriations and transfers to the Trust Fund will end in fiscal year 2019.  The law also provides that no amounts shall be available for expenditure  from the Trust Fund after September 30, 2019, and specifies that any  amounts remaining in the Trust Fund after that time will be transferred to  the general fund of the Treasury. (See fig. 1 for an overview of transfers  to the Trust Fund and distribution of funds to PCORI and HHS).", "PPACA limits the use of CER in certain ways; for example, the law  prohibits PCORI from developing or using a dollars-per-quality adjusted  life-year to establish what type of health care is cost effective or  recommended, and prohibits the Secretary of HHS from using such  measures as a threshold to determine coverage, reimbursement, or  incentive programs under Medicare. HHS may use CER findings to help  inform Medicare coverage decisions, but PPACA does not allow Medicare  coverage to be denied solely on the basis of CER findings."], "subsections": []}]}, {"section_title": "PCORI Committed Funds Primarily to Research and Data Capacity Efforts; Awards for Dissemination and Implementation of Findings Were Limited as Most Research Was Still Underway", "paragraphs": ["In fiscal years 2010 through 2017, PCORI committed about $1.6 billion  (or 79 percent of its total award commitments of $2.0 billion) to awards for  conducting CER and $325 million (or 16 percent) to awards for building  data capacity for research. In addition, PCORI committed $93 million for  engagement and workforce awards to involve stakeholders in the  research process and expand the research workforce, and committed $12  million for awards to disseminate and implement its research findings.  Awards for the dissemination and implementation of its research findings  were limited as of the end of fiscal year 2017, as most of this research  was still underway. (See table 1 for PCORI\u2019s award commitments for  fiscal years 2010 through 2017.)", "By the end of fiscal year 2024, PCORI projects to spend a total of almost  $3.3 billion, which reflects its projected Trust Fund revenue through fiscal  year 2019 plus interest income. This total amount encompasses the  commitments PCORI has made for awards through fiscal year 2017, as  well as $514 million in projected additional research award commitments  to be made by the end of fiscal year 2019 and $207 million for other  award commitments to be made by the end of fiscal year 2021. In  addition to awards, the total includes PCORI\u2019s expenditures for program  and administrative support services in fiscal years 2010 through 2017, as  well as projected expenditures for these services through fiscal year  2024. (See fig. 2 for PCORI\u2019s actual and projected commitments and  expenditures and see app. I for an overview of PCORI\u2019s awards.)", "The following information provides details on PCORI\u2019s awards related to  research, building data capacity, engagement and workforce activities,  and the dissemination and implementation of its research findings."], "subsections": [{"section_title": "Research Awards", "paragraphs": ["PCORI committed $1.6 billion, or 79 percent of its total award  commitments, for research in fiscal years 2010 through 2017. In fiscal  years 2018 and 2019, PCORI projects to commit an additional $514  million for research awards. PCORI research awards have increasingly  focused on conditions that impose a substantial health or financial burden  on patients and the healthcare system. (See table 2 for information on the  health conditions that received the highest research award funding.)", "Similar to certain types of CER that may take many years, the entire  research award process for PCORI-funded CER may span multiple years  from the funding announcement to the dissemination of completed  research. Specifically, the process PCORI established can take as  many as 6 years, which includes requesting and reviewing proposals,  awarding contracts, recruiting participants or obtaining data, conducting  and reviewing research, and disseminating findings and typically involves  awards that span multiple years. For example, PCORI estimates that  the typical timeframe for announcing funding and selecting applications to  receive research awards can take 8 to 11 months as PCORI brings  scientists, patients, payers, and other stakeholders together to prioritize  proposals based on the impact of the condition, potential to improve  health, technical merit, patient-centeredness, and engagement. (See fig.  3.)", "Most of PCORI\u2019s research projects, awarded through fiscal year 2017,  were still underway. Only 53 of its 543 research projects had been  completed as of the end of fiscal year 2017\u2014in part because PCORI\u2019s  research award process typically takes 2 to 6.5 years to complete, and  because almost two-thirds of the funds committed for research projects  were awarded in fiscal years 2015 through 2017. While most PCORI- funded research is underway, a larger number of research studies are  projected to be completed by of the end of each year from 2018 to 2022,  with all of the remaining studies to be completed by 2024. (See fig. 4.)  PCORI officials told us that the institute attempts to manage its funds to  ensure that its research awards are funded and managed through  completion, including peer review and the distribution of research  findings, in recognition of the time needed to conduct this research as  well as the uncertainty regarding the total amount of funding available.", "Officials from all but one of the stakeholder organizations we  interviewed\u2014public and private payers, health care providers, and patient  advocacy organizations that represented potential users of CER\u2014 generally supported PCORI\u2019s research award priorities. Most of the  stakeholders we interviewed stressed the importance of research  conducted by unbiased organizations, such as the federally funded  research funded by PCORI and HHS. In addition, most stakeholders also  told us that PCORI\u2019s efforts to engage patients in the research process  have changed the way research is conducted for the better, such as  prioritizing research outcomes that are most meaningful to patients.  However, officials from an organization representing payers (and from an  individual health plan) told us that PCORI\u2019s priorities did not fully align  with their needs, such as their needs for CER on certain high-cost  conditions, medications or treatments."], "subsections": []}, {"section_title": "Building Data Capacity Awards", "paragraphs": ["PCORI committed the second largest portion of award funding\u2014$325  million through fiscal year 2017\u2014for awards to build data capacity for  research through the development of PCORnet. PCORI officials told us  that the institute supported the development of the PCORnet initiative in  order to use existing medical records and claims data and to transform  much of that data into a common data model to be used for clinical  research, until such time when such data will have been standardized in  electronic health records so that they can easily be used for research. As  of December 2017, PCORnet included 36 partner networks agreeing to  link their electronic claims and health data. PCORI officials told us that  this distributed data network already comprises a nationally  representative sample of approximately 128 million individuals whose  data can be used in randomized clinical trials, large observational studies,  and other research. In fiscal years 2018 and 2019, PCORI projects to  commit an additional $70 million for these awards to continue building this  data capacity.", "PCORnet research is managed through its Coordinating Center, which  oversees the translation of certain categories of the partner networks\u2019  data into the common data model and forges agreements with each of the  partners to share results of queries using their data with researchers.", "This research process generally starts when a researcher requests to  query data on a specific population, after which PCORnet may approve  the request and invite network partners to participate. Participating  network partners then run queries on their data following established  parameters and submit the results to a secure portal that the researcher  can access in order to analyze the results for research. (See fig. 5.)  PCORI officials told us that there were 32 research projects using  PCORnet that received funding through PCORI\u2019s research award process  as of the end of December 2017, as well as 45 research projects funded  by other parties, including federal agencies and private industry.", "Further, as part of its building data capacity awards, in fiscal year 2017  PCORI committed $25 million to the People-Centered Research  Foundation, a nonprofit foundation formed in March 2017 to support the  network partners and other entities conducting research using PCORnet.  This funding was provided to support this foundation\u2019s development of a  business plan, as well as its governance structure, to ensure the  continuity of the PCORnet network partnership efforts after PCORI  funding for PCORnet ends. PCORI has indicated it may provide additional  funding to the foundation, provided that the foundation and the networks  make progress toward self-sustainability.", "Officials from most stakeholder organizations we interviewed generally  agreed that PCORnet offers value by improving the data available to  conduct CER. Officials from two organizations told us that PCORnet has  made it possible to use network partners\u2019 aggregated data to make  conducting research more efficient than in the past."], "subsections": []}, {"section_title": "Engagement and Workforce Awards", "paragraphs": ["Through fiscal year 2017, PCORI also committed $93 million for  engagement and workforce awards. For example, PCORI committed a  total of $63 million for engagement awards, intended to involve a variety  of stakeholders in the research process and to improve the methodology  for carrying out CER. Engagement awards include \u201cEugene Washington  Engagement Awards\u201d that are intended to bring patients, caregivers,  clinicians, and other healthcare stakeholders into the research process  and to disseminate study results. In addition, \u201cPipeline to Proposal  Awards\u201d are intended to bring together stakeholders with strong interests  in a specific health issue to develop research proposals to address their  needs. Officials from the two patient advocacy organizations we  interviewed told us that PCORI\u2019s engagement awards have helped to  support patient involvement in the research process. For example, one  official noted that, while it has not been easy to find patients willing to  participate, these awards have been important to train and support  patients in the research process.", "PCORI also committed $30 million to workforce training awards for  clinicians and researchers. For example, one of PCORI\u2019s career  development programs, conducted in partnership with AHRQ, is designed  to train clinician and research scientists to conduct patient-centered  outcomes research and to actively engage stakeholders in efforts to  improve the quality and safety of care."], "subsections": []}, {"section_title": "Dissemination and Implementation Awards", "paragraphs": ["Dissemination and implementation awards for PCORI-funded research  findings thus far have been limited as most of the research was still  underway, but, according to PCORI officials, awards for this work will  substantially increase as research is completed. Specifically, through  fiscal year 2017, PCORI committed a total of $12 million for awards to  disseminate and implement PCORI-funded research by helping  researchers and other stakeholders to publicize findings and by  supporting patients and providers to utilize findings. PCORI projects to  commit an additional $91 million for these awards in fiscal years 2018  through 2021.", "Dissemination and implementation awards are intended to encourage  PCORI awardees that have completed research and their patient and  stakeholder partners to pursue strategic activities to disseminate and  implement their findings. For example, PCORI awarded about $0.4 million  to increase awareness and promote the use of research findings on using  technology to deliver virtual care home visits for those with Parkinson\u2019s  disease. According to PCORI, these funds will be used to train  neurologists and other health professionals to provide virtual care for  patients in their homes. In addition, as part of its efforts to summarize  research findings, PCORI also awarded funds to the American Institutes  for Research to establish a Translation Center that develops two  summaries of each of PCORI\u2019s research findings: a public abstract for  general audiences that is also translated into Spanish and a professional  abstract for clinicians.", "In addition to awards, PCORI has fostered the dissemination and  implementation of its research findings in other ways, including through its  website, publications, and roundtable briefings. For example, according to  PCORI, it posts research findings on its website within 90 days of  receiving final peer-reviewed research results so that patients and  providers have access to the information to make healthcare decisions. In  addition, according to PCORI, it pays journals\u2019 open access fees to allow  free public access to selected research and plans to support research  awardees to place accepted journal manuscripts in the PubMed Central  database. PCORI also facilitates roundtable briefings that bring together  clinicians, patients, and others with interests in recent findings in order to  build support for immediate use of the findings. PCORI also coordinates  its dissemination efforts with AHRQ.", "PCORI considers the implementation of its research methods and  findings to be an integral part of its dissemination efforts and a  culmination of its work and so has begun efforts to track implementation,  such as the number of its findings published in peer-reviewed journals,  and the use of its findings in clinical care. For example, PCORI officials  told us that that there were 891 publications in peer-reviewed journals  that resulted from studies fully or partially funded by PCORI through  October 2017. According to PCORI, two PCORI-funded studies on  prostate cancer, one study on oral versus intravenous antibiotics for  certain children, and one study on self-monitoring of blood glucose were  included in medical resource software that is used by nearly 90 percent of  academic medical centers in the United States.", "Most of the stakeholder officials we interviewed noted the importance of  disseminating research findings quickly and in ways that are readily  available and understandable to both experts and the general public to  raise awareness about the findings. While officials representing two  payers noted limitations to the usefulness of PCORI\u2019s research findings  because they do not take treatment costs into account, most stakeholder  officials noted the importance of the PCORI-funded research underway  and looked forward to utilizing the research findings once they become  available. In particular, officials representing provider and patient  advocacy organizations told us that they were interested in ensuring that  the most important research findings would be quickly implemented by  patients and clinicians."], "subsections": []}]}, {"section_title": "HHS Obligated Funds Primarily for the Dissemination and Implementation of Research", "paragraphs": ["Between fiscal years 2011 and 2017, HHS\u2019s AHRQ obligated about $260  million (or 58 percent of HHS\u2019s $448 million in total obligations) for the  dissemination and implementation of CER findings. According to AHRQ  officials, because most PCORI-funded research had not been completed  by the end of fiscal year 2017, these efforts were primarily focused on the  dissemination and implementation of research funded by other entities,  including NIH and the Centers for Disease Control and Prevention (CDC).  Additionally, AHRQ obligated $94 million for efforts to train researchers  on conducting CER, and ASPE obligated $85 million for efforts to build  data capacity. AHRQ and ASPE have obligated a total of $9 million for  administrative activities during those years. Table 3 provides an overview  of HHS\u2019s obligations in each fiscal year.", "AHRQ and ASPE plan to obligate an additional $120 million for  dissemination and implementation, training, building data capacity, and  administrative activities during fiscal years 2018 through 2020. They  expect to have $245 million available to fund ongoing and future CER  activities, based on expected transfers from the Trust Fund in fiscal years  2018 and 2019. (See fig. 6.)", "The following information provides details on HHS-funded projects related  to dissemination and implementation, training on conducting CER, and  building data capacity."], "subsections": [{"section_title": "Dissemination and Implementation", "paragraphs": ["During fiscal years 2011 through 2017, AHRQ obligated a total of $260  million for CER dissemination and implementation initiatives and plans to  obligate an additional $93 million for these initiatives in fiscal years 2018  through 2020. According to officials, AHRQ plans to fund additional  dissemination and implementation initiatives in fiscal years 2018 and  2019 but had not finalized those plans as of January 2018. (See app. II  for an overview of all of AHRQ\u2019s dissemination and implementation  initiatives.) AHRQ\u2019s dissemination and implementation initiatives  comprise efforts to synthesize CER findings, translate and communicate  research findings to potential users, and implement them:", "Synthesis of CER findings: According to AHRQ officials, AHRQ\u2019s  Evidence-Based Practice Centers developed 48 systematic reviews of  CER findings based on completed research. As of the end of fiscal  year 2017, 40 of these reviews had been published, while 8 were still  in progress. Officials told us that these systematic reviews have likely  not included PCORI-funded research, as most of that research had  not been completed by the end of fiscal year 2017.", "Translation and communication of CER findings: AHRQ funded  initiatives, which\u2014according to the agency\u2014are aimed at making  CER findings accessible and understandable to health care  professionals, patients, and others. For example, AHRQ developed a  \u201cLibrary of Patient-Centered Outcomes Research Resources\u201d website  with links to CER databases maintained by other entities including  NIH and PCORI. Another example is AHRQ\u2019s \u201cJohn M. Eisenberg  Center for Clinical Decisions and Communications Science,\u201d which  translates research findings into information that can be used by  consumers, health care providers, and policymakers.", "Implementation of CER findings: AHRQ funded four key initiatives to  implement CER findings. According to AHRQ officials, one of the four  initiatives includes PCORI-funded research, while the other three  have thus far focused on implementing existing CER funded by other  entities:", "The \u201cDissemination and Implementation Initiative\u201d was designed  to disseminate and implement government-funded CER findings\u2014 including PCORI-funded findings\u2014relevant to physicians,  healthcare providers, patients, and others. This initiative consists  of a multi-step approach for identifying several areas of CER each  year that\u2014according to AHRQ officials\u2014have the greatest  potential for impact and are feasible to implement. (See figure 7  for an overview of this process.) According to AHRQ officials, as  of December 2017, 37 findings have been nominated for  consideration under AHRQ\u2019s Dissemination and Implementation  Initiative, including 5 findings nominated by PCORI. According to  these officials, 1 of the findings PCORI has nominated is under  consideration for implementation. Two were rejected\u20141 because  of insufficient impact and the other because of challenges in  implementation feasibility. (Two are still under review.)", "The \u201cEvidence Now\u201d initiative disseminates CER evidence directly  to primary care practices and supports them in implementing  clinical and organizational evidence in practice through regional  cooperatives.", "The \u201cComparative Health System Performance Initiative\u201d  established three centers of excellence and a coordinating center  to identify, classify, track, and compare health systems. AHRQ\u2019s  goal is to understand the factors that affect health systems\u2019 use of  CER and to identify best practices in disseminating and using  CER.", "The \u201cClinical Decision Support (CDS) Initiative\u201d is designed to use  CDS to promote the timely incorporation of CER findings into  clinical practice.", "Some of AHRQ\u2019s dissemination and implementation initiatives\u2014such as  \u201cEvidence Now\u201d and \u201cCDS Initiative\u201d\u2014include an evaluation component,  as described in app. II. According to AHRQ officials, as of January 2018  results from these evaluations were not yet available."], "subsections": []}, {"section_title": "Training on Conducting CER", "paragraphs": ["Between fiscal years 2011 and 2017, AHRQ obligated a total of $94  million for awards supporting training in the methods used to conduct  CER. AHRQ plans to obligate an additional $14 million for training on  conducting CER by fiscal year 2020. AHRQ has funded eight categories  of awards for individual researchers or research institutions. For example,  AHRQ\u2019s \u201cInfrastructure Development Program in Patient-Centered  Outcomes Research\u201d award supports institutions in the development of  their capacity to conduct and implement CER. Its \u201cInstitutional Mentored  Career Development Award Program in Patient-Centered Outcomes  Research\u201d award supports the development of researchers in academic  and applied settings. (See app. III for an overview of these awards.)  Starting in fiscal year 2018, AHRQ plans to fund an additional training  award category in conjunction with PCORI. AHRQ developed a plan to  evaluate its training activities and, according to AHRQ officials, the  evaluation is expected to be funded in fiscal year 2018."], "subsections": []}, {"section_title": "Building Data Capacity", "paragraphs": ["Between fiscal years 2012 and 2017, ASPE obligated a total of $85  million for 30 projects designed to build data capacity for conducting CER  and plans to obligate an additional $6 million to existing projects and 1  new project through fiscal year 2019. Officials told us that ASPE plans to  fund additional projects to build data capacity in fiscal years 2018 and  2019, based on HHS leaders\u2019 priorities, but had not finalized those plans  as of January 2018. ASPE manages these projects, which are largely  carried out by other HHS agencies through interagency agreements and  are intended to develop and maintain a comprehensive, interoperable  data network to collect, link, and analyze data on outcomes and  effectiveness from multiple sources for CER. (See app. IV for an  overview of these activities.)", "In response to a recommendation in our 2015 report on HHS\u2019s CER  activities, ASPE implemented a monitoring system to track progress  toward its milestones and deliverables for these projects. ASPE also  contracted to evaluate its projects to build data capacity for CER. The  evaluation, completed in December 2017, found that ASPE made  progress managing these projects towards the core functionalities  outlined in its strategic framework. However, among other things, the  evaluation found that additional efforts are needed to explore how to  enhance data privacy and security, ensure data quality, and  operationalize related standards. According to ASPE officials, the  evaluation will inform the development and implementation of future  ASPE projects to build data capacity for conducting CER."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to PCORI and HHS for review and  comment. PCORI and HHS provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Executive Director of PCORI, the Secretary of Health  and Human Services, the Director of AHRQ, the Assistant Secretary for ASPE, and other interested parties. In addition, the report will be available  at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in app. V."], "subsections": []}]}, {"section_title": "Appendix I: Patient-Centered Outcomes Research Institute (PCORI) Award Commitments Made During Fiscal Years 2010 through 2017", "paragraphs": ["Appendix I: Patient-Centered Outcomes  Research Institute (PCORI) Award  Commitments Made During Fiscal Years 2010  through 2017 Award category description   These awards generally fund research studies in priority areas for conditions that impose a  substantial burden on patients and the healthcare system.  Information about individual research awards can be found at:  https://www.pcori.org/research-results?f%255B0%255D=field_project_type%3A298&f%5B0%5D=fiel d_project_type%3A298#search-results.", "These awards fund infrastructure projects to build data capacity through the development of  PCORnet and support for clinical and patient-powered data research networks.  Information about individual building data capacity awards can be found at:  https://www.pcori.org/research-results?f%5B0%5D=field_project_type%3A441#search-results.", "Engagement awards fund projects to improve the methodology for carrying out research by involving  patients, caregivers, clinicians, and other healthcare stakeholders into the research process.  Workforce training awards provide accredited continuing education opportunities, in coordination with  the Agency for Healthcare Research and Quality, for researchers and clinicians.  Information about individual engagement awards and workforce awards can be found at:  https://www.pcori.org/research-results?f%5B0%5D=field_project_type%3A299#search-results and  https://www.pcori.org/research-results/2017/k12-institutional-mentored-career-development-program.", "Dissemination and implementation awards are intended to help researchers and other stakeholders  to publicize findings, and support the utilization of findings for patients and providers.  Information about individual dissemination and implementation awards can be found at:  https://www.pcori.org/research-results?f%5B0%5D=field_project_type%3A308#search-results."], "subsections": []}, {"section_title": "Appendix II: Agency for Healthcare Research and Quality\u2019s (AHRQ) Dissemination and Implementation Initiatives, as of September 30, 2017", "paragraphs": ["Appendix II: Agency for Healthcare Research  and Quality\u2019s (AHRQ) Dissemination and  Implementation Initiatives, as of September 30,  2017 Description  Disseminates evidence to primary care practices and supports them in implementing clinical  and organizational evidence in practice through regional cooperatives. AHRQ awarded a  separate grant to establish an independent, external evaluation to study improvements in  the delivery of the ABCs.", "Develops three Centers of Excellence on \u201cComparative Health System Performance in  Accelerating PCOR Dissemination.\u201d According to AHRQ, the Centers of Excellence will  identify and classify characteristics of health care systems over 5 years. They will also  identify ways to assess the quality and cost of such systems, including their use of PCOR,  understand the characteristics of high performing systems, and identify what system  characteristics are associated with more rapid adoption and diffusion of PCOR- recommended practices throughout a system.", "Evaluates and synthesizes research findings to aid decision-making for patients, providers,  and payers, among others.", "Translates PCOR findings into tools, such as research summaries and decision aids,  designed to help patients and consumers, clinicians, and policymakers make informed and  evidence-based health care decisions.", "Expands an existing initiative or creates a new initiative that supports multi-site, multi-region,  multi-stakeholder dissemination and implementation of evidence.", "Develops and tests methods for translating and disseminating PCOR findings to hard-to- reach audiences, including patients with low health literacy, disadvantaged populations,  isolated clinicians and policy makers, and other decision makers who may not have had the  benefit of more traditional translation and dissemination efforts.", "Integrates PCOR into clinical practice using various methods shown to improve the uptake  of scientific evidence in clinical decision making. Grantees were asked to consider both  educational theory and the relevance of \u201cnew media\u201d as they designed their programs.", "Searches for emerging interventions, prioritizes those most likely to have a large impact in  the near future, and disseminates the information to the public. According to AHRQ, the  Horizon Scanning System screened more than 22,000 potential intervention leads and  tracked over 2,300 intervention topics.", "Provides targeted audiences\u2014such as providers and payers\u2014with an accessible tool for  obtaining objective, detailed information on evidence-based clinical practice guidelines to  further their dissemination, implementation, and use.", "Promotes collaboration, reduces redundancy, and improves transparency in patient  registries.", "Description  Created informational tools to support the dissemination and implementation of PCOR  findings, including best practices and new knowledge about the use of electronic health  record data for research and quality improvement.", "Promotes the timely incorporation of PCOR findings into clinical practice\u2014which  encompasses a variety of tools to enhance clinical decision-making.", "Collaborated with 176 national organizations to disseminate materials for the Effective  Health Care Program.", "Multi-media campaign to educate health care consumers about the value of reviewing  medical evidence when weighing treatment options.", "Educating the Educators  Conducted and disseminated research to develop a process for shared decision making that  includes exploring and comparing the benefits, harms, and risks of each option through  meaningful dialogue about what matters most to the patient.", "Collects patient-generated health data, integrates patient-generated health data with PCOR  evidence, and disseminates PCOR findings using mobile health technology.", "Identifies ways to reduce health care differences across diverse populations with a particular  focus on minority populations in under-resourced healthcare settings.", "Established five regional offices, responsible for developing and cultivating dissemination  partnerships within each region.", "This repository houses study data extracted from primary research publications during the  course of conducting systematic reviews. It is designed to increase the transparency of  comparative effectiveness reviews, improve the ability to update systematic reviews,  improve the quality of abstracted data, and enhance the efficiency and reduce the costs of  conducting reviews.", "Gathers input from patients on a complex topic related to the implementation of evidence- based health-care decision making.", "Increases the relevance of AHRQ systematic reviews for patients, clinicians, and  policymakers by examining and addressing challenging topic areas that may affect the  credibility and utility of the review for end users and that are areas of inconsistency or  variation among AHRQ systematic reviews.", "Conducted three projects to improve the development of registries, a major activity of  AHRQ\u2019s Effective Health Care Program.", "Description  Provides online continuing education materials that inform physicians and other health care  providers about PCOR from the Effective Health Care Program.", "Worked with health professional student associations to evaluate students\u2019 understanding of  the importance and clinical applicability of PCOR and shared decision-making to their  practice and evaluated students\u2019 educational needs and preferences related to integrating  PCOR findings into their training curricula.", "Created a decision-modeling methods center that reviewed the existing research and  guidance published on modeling methods with input from a multidisciplinary group of  experts.", "Provides for maintenance and updating of existing data resources to conduct future CER  through a grant competition. The grants fund three to four 1-year pilot projects aimed at  enabling a future, larger competition to enhance the data infrastructure and move the  resources to self-sustaining models.", "Disseminates CER findings published by the Patient-Centered Outcomes Research Institute  (PCORI) and other government entities to providers, patients, payers, and others. This  initiative consists of a seven-step approach for identifying research findings that have the  greatest potential for implementation.", "Provided an understanding of how AHRQ could effectively disseminate and promote PCOR  findings and tools in the development and maintenance of clinical decision support systems.  The project included a market analysis and an assessment of potential stakeholders and  audiences, including vendors of health information technology focused on clinical decision  support. Information gathered from this project directly informed the concept for the PCOR  clinical decision support initiative that was launched in 2016.", "Promoted PCOR through public service announcements nationwide.", "Created a new page on AHRQ\u2019s website that highlights the agency\u2019s own resources, as well  as directs researchers, health professionals, patients, caregivers, and families to additional  databases that collect information on CER. These databases provide summaries of findings  from a wide range of CER findings and research that is in progress.", "PCOR is a form of CER."], "subsections": []}, {"section_title": "Appendix III: Agency for Healthcare Research and Quality\u2019s (AHRQ) Training Awards, as of September 30, 2017", "paragraphs": ["Appendix III: Agency for Healthcare Research  and Quality\u2019s (AHRQ) Training Awards, as of  September 30, 2017 Description  Funds a 5-year, renewable effort to support the development of PCOR capacity among  institutions that have basic health services research capacity but need to develop capacity to  conduct and implement PCOR. The program would potentially include institutions located in  geographic areas that lack capacity, and institutions that serve predominantly minority  populations.", "Supports the development of researchers in academic and applied settings. The program  combines didactic and experiential opportunities, focusing on the generation, adoption, and  spread of new scientific evidence. The goal is to improve population-specific health  outcomes by developing and disseminating evidence-based information to patients,  clinicians, and other decision-makers, responding to their expressed needs, about which  interventions are most effective for which patients under specific circumstances.", "Provides basic, advanced, and experiential training on the methods to conduct PCOR,  particularly prospective observational research, registries, and clinical trials. The program  was open to researchers employed in both the public and private sectors, particularly those  who serve minorities, economically or medically disadvantaged populations.", "Facilitates the transition of postdoctoral candidates from mentored to independent research  positions, accelerating research independence for PCOR researchers.", "Provides support for intensive, research career development for individual investigators in  academic or applied settings, leading to research independence in the field of PCOR and  the generation and translation of new scientific evidence and analytic tools.", "Provides career development awards for established investigators to further develop their  research expertise in PCOR methodologies. This concept seeks to accelerate the  development of the research workforce capable of conducting PCOR.", "Provides 2-year fellowships for training in PCOR. A focus for these fellowships is recruitment  of trainees from diverse disciplines, including social and behavioral sciences, business, and  engineering. The expected output of these fellowships is trained PCOR researchers.", "Establishes an expert panel, comprised of 7 to 10 leaders in the fields of learning healthcare  system, health services research, and PCOR, to assess the current state of health services  research and PCOR training and recommend ways to improve core  competencies/curriculum to meet the needs of the health system. Develops a report  summarizing the panel\u2019s recommendations concerning current deficiencies and  recommendations regarding skills and competencies needed to meet the challenges.", "PCOR is a form of CER."], "subsections": []}, {"section_title": "Appendix IV: Office of the Assistant Secretary for Planning and Evaluation\u2019s (ASPE) Projects to Build Data Capacity, as of September 30, 2017", "paragraphs": ["Total  obligations  (dollars in  millions)", "Developed technical standards for how health care providers, researchers, and the  public health community access and extract data from electronic health records to  conduct Patient-Centered Outcomes Research (PCOR).", "Identified and developed the functional and technical specifications necessary to  enable electronic health record systems to retrieve, display, and fill a structured  form or template and store and submit the completed form to an external repository.", "Provided researchers with access to the Centers for Medicare & Medicaid Services\u2019  Chronic Conditions Warehouse, which contains Medicare and Medicaid beneficiary,  claims, and assessment data, and supported infrastructure enhancements to  conduct CER.", "Longitudinal follow-up of certain cancer patients to assess vital statistics, disease  recurrence, disease progression, and additional treatment types. Treatment data  submitted each year to the Centers for Disease Control and Prevention and  provided to researchers through the National Center for Health Statistics Research  Data Center.", "Included clinical encounters for all patients and all conditions seen at the  community health centers from 2006 to 2013 in the Community Health Applied  Research Network Registry data warehouse, a research network comprising  18 community health centers. A de-identified analytic file and associated data  codebook were developed to support the use of analytic files by researchers  outside of the network.  Established a process for investigators to access the data warehouse through  the development of a data access plan.", "Maintained the infrastructure for PCOR and for quality improvement in the  safety net.", "Developed common data elements and standards for CER .The results were the  initial entries into the National Institutes of Health\u2019s National Library of Medicine  common data element repository.", "Developed a conceptual framework and environmental scan; produced policy  documents ranging from patient-initiated data, through research data on care  processes, transitions and coordination, to researcher access to claims data; and  developed the \u2018HHS Strategic Roadmap for Building Data Capacity for Clinical  Comparative Effectiveness Research.\u2019   The overall CER Inventory project was to design and implement a system for the  categorization and cataloguing of CER activities through a web-based tool. Due to  the rapidly evolving technologies supporting web-based search engines, and the  improved methods for identification of more recent CER, the development of the  CER Inventory (as a web-based search engine using a retrospective algorithm) was  determined to have been superseded by existing search engine tools available.", "Description  Designed and conducted an independent evaluation of the ASPE portfolio to  systematically assess progress related to the strategic framework functionalities.", "Total  obligations  (dollars in  millions)", "Conducted CER analyses on the beta release of the Multi-Payer Claims Database  and evaluated beta testers\u2019 experiences requesting and using data from the MPCD  for research. Results of the beta test found that the project was successful in  achieving the key objectives of building a pilot database.", "Planned for development and implementation of the Centers for Medicare &  Medicaid Services\u2019 Blue Button\u2014a service that allows patients to access their own  health information in electronic form.", "Linkage of data on fact, cause, and manner of death from the National Death Index  to several federal population-based health data platforms in order to demonstrate  the feasibility of such linkage, enable PCOR on patterns and correlates of mortality  via the resulting linked data; and to facilitate collaboration between federal partners  regarding strengthening the infrastructure and methods for linking healthcare data  to mortality outcomes and using such linked data for PCOR.", "Improve the infrastructure to support timely and complete mortality data collection  through more timely delivery of state death records to the National Death Index  database and by linking National Death Index database records with nationally  collected hospital datasets to obtain a more complete picture of patient care.", "Identify the best patient attributes to address the challenge of linking patients\u2019 data  across research, clinical, and claims data sets in order to support the PCOR data  infrastructure that enables standardization and sharing of patient data across  organizations.", "Create a coordinated registry network for women\u2019s health technologies that will  collect patient reported outcomes and employ structured data capture from  electronic health records for data collection and exchange.", "Build data infrastructure for conducting PCOR using data from routine clinical  settings. The sources of these data may include, but are not limited to, insurance  billing claims, electronic health records, and patient registries. This project intends  to harmonize several existing common data models, potentially including PCORnet  and other networks.", "Develop technical tools for collecting and integrating patient-reported outcome  assessments into electronic health records or other health information technology  products.", "Create an interface that enables CMS beneficiaries to connect their  MyMedicare.gov data to applications and services they trust, including research  platforms related to research studies in which the beneficiary may be interested in  participating.", "Provide technical assistance to the Trust Fund awardees in informatics and assist  ASPE in setting up additional oversight processes and procedures to monitor  progress.", "Description  Develop a privacy and security data infrastructure blueprint, legal analysis, and  ethical framework to address legal and privacy and security related policy issues  that affect the use of data for various types of PCOR.", "Convene clinical topic-specific working groups to discuss the data definitions  currently in use and how these definitions can be harmonized to promote common  definitions for outcome measures across systems. These common definitions are to  be made publicly available to PCOR researchers and analysts.", "Develop a natural language processing service that will be accessible and publicly  available to researchers on the Public Health Community Platform \u2013 a cooperative  platform for sharing interoperable technologies to address public health priority  areas aimed at improving population health outcomes and health equity (e.g.,  tobacco use).", "Leverage the Sync for Science and Blue Button application programming interface  programs to enable Medicare beneficiaries to donate their medical claims data for  scientific research studies.", "Develop and test the capability to conduct timely and secure distributed regression  analysis in distributed data networks. Additionally, explore the feasibility of creating  virtual linkage capabilities to utilize data from multiple data sources and data for one  specific patient with information at different institutions.", "Create the infrastructure for collecting data from patients through a mobile device  application, allowing patient-generated data to be linked with a single data partner  that participates in the Food and Drug Administration\u2019s Sentinel distributed network.  The project will develop and pilot a mobile application to capture data from pregnant  women who volunteer to participate.", "Develop a policy framework for the use of patient-generated data in research and  care delivery that addresses data collection tools, data donation policies, regulatory  gaps, combining data with medical record data, and interoperability of data across  health information systems and devices.", "Create and implement a metadata standard data capture and querying system for  data quality and characteristics, data source and institutional characteristics, and  \u201cfitness for use.\u201d", "Cross-Network Directory Service  Create an interoperable service that allows data partners to participate in multiple  data research networks, query across the networks, and share analytic capabilities  and knowledge across networks. The project will be piloted across two existing  networks: Food and Drug Administration\u2019s Sentinel and PCORnet.", "Generate tools and data standards that could be deployed in other CER studies by  leveraging the infrastructure of an existing research study called the ADAPTABLE  trial (Aspirin Dosing: A Patient-Centric Trial Assessing Benefits and Long Term  Effectiveness). This trial is the first major randomized comparative effectiveness  trial to be conducted by PCORnet.", "Description  Create a flexible, extensible, and computable mechanism for rolling data into  clinically relevant equivalence groups that enable more efficient processing  aggregation of laboratory data and other data from diverse health information  technology systems. The primary focus of this work will be on laboratory tests.", "Total  obligations  (dollars in  millions)", "Create a single point data capture approach from the electronic health record to  electronic data capture systems using the Retrieve Form for Data Capture  standard. Stakeholders will be provided with a tool to seamlessly integrate  electronic health record and electronic data capture systems.", "In addition to the projects listed, ASPE plans to obligate $2.0 million for one new project starting in  fiscal year 2018."], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karin Wallestad, Assistant  Director; Michael Zose, Analyst-in-Charge; Kye Briesath; Laurie Pachter;  Vikki Porter, and Jennifer Whitworth made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Patient Protection and Affordable Care Act established a fund to support research comparing the effectiveness of available treatments. This research can help patients, doctors, and others make decisions to improve health care.", "We found that the Patient-Centered Outcomes Research Institute and Department of Health and Human Services expect to receive about $4 billion from the fund by the end of fiscal year 2019.", "The money has primarily funded research and helped facilitate getting findings to the patients, doctors, and others who can use them. Most of the funded research will be completed in the coming years."]}
{"id": "GAO-18-596T", "url": "https://www.gao.gov/products/GAO-18-596T", "title": "Waste Management: DOD Needs to Fully Assess the Health Risks of Burn Pits", "published_date": "2018-06-07T00:00:00", "released_date": "2018-06-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Burn pits help base commanders manage waste generated by U.S. forces overseas, but they also produce harmful emissions that military and other health professionals believe may result in chronic health effects for those exposed.", "This statement provides information on the extent to which DOD has assessed any health risks of burn pit use.", "This statement is based on a GAO report issued in September 2016 (GAO-16-781). The report was conducted in response to section 313 of the Carl Levin and Howard P. \u201cBuck\u201d McKeon National Defense Authorization Act for Fiscal Year 2015. Specifically, GAO assessed the methodology DOD used in conducting a review of the compliance of the military departments and combatant commands with DOD instructions governing the use of burn pits in contingency operations and the adequacy of a DOD report for the defense committees. GAO also obtained updates from DOD on actions taken to assess health risks from burn pits since September 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO reported in September 2016 that the effects from exposing individuals to burn pit emissions were not well understood, and the Department of Defense (DOD) had not fully assessed the health risks associated with the use of burn pits. Burn pits\u2014shallow excavations or surface features with berms used to conduct open-air burning\u2014were often chosen as a method of waste disposal during recent contingency operations in the U.S. Central Command (CENTCOM) area of responsibility, which extends from the Middle East to Central Asia and includes Iraq and Afghanistan. According to DOD Instruction 6055.01, DOD Safety and Occupational Health (SOH) Program , DOD should apply risk-management strategies to eliminate occupational injury or illness and loss of mission capability or resources. The instruction also requires all DOD components to establish procedures to ensure that risk-acceptance decisions were documented, archived, and reevaluated on a recurring basis. Furthermore, DOD Instruction 6055.05, Occupational and Environmental Health (OEH), requires that hazards be identified and risk evaluated as early as possible, including the consideration of exposure patterns, duration, and rates.", "While DOD has guidance that applies to burn pit emissions among other health hazards, DOD had not fully assessed the health risks of use of burn pits, according to DOD officials.", "According to DOD officials, DOD's ability to assess these risks was limited by a lack of adequate information on (1) the levels of exposure to burn pit emissions and (2) the health impacts these exposures had on individuals. With respect to information on exposure levels, DOD had not collected data from emissions or monitored exposures from burn pits as required by its own guidance. Given the potential use of burn pits near installations and during future contingency operations, establishing processes to monitor burn pit emissions for unacceptable exposures would better position DOD and combatant commanders to collect data that could help assess exposure to risks.", "GAO recommended that the Secretary of Defense (1) take steps to ensure CENTCOM and other geographic combatant commands, as appropriate, establish processes to consistently monitor burn pit emissions for unacceptable exposures; and (2) in coordination with the Secretary of Veterans Affairs, specifically examine the relationship between direct, individual, burn pit exposure and potential long-term health-related issues. DOD concurred with the first recommendation and partially concurred with the second. In a May 2018 status update regarding these recommendations, DOD outlined a series of steps it had implemented as well as steps that it intends to implement. The department believes these efforts will further enhance its ability to better monitor burn-pit emissions and examine the relationship between direct, individual, burn pit exposure and potential long-term health related issues. GAO believes the steps DOD is taking are appropriate."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made two recommendations focused on improving monitoring of burn pit emissions and examining any associated health effects related to burn pit exposure. DOD concurred with one recommendation and partially concurred with the other. GAO continues to believe the recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to submit this statement on our September 2016 report  covering the Department of Defense\u2019s use of burn pits. Since the  initiation of military operations in Afghanistan in 2001 and Iraq in 2003,  the Department of Defense (DOD) has employed several methods to  dispose of the waste that U.S. forces have generated in both countries. In  general, the methods employed have been left to the discretion of base  commanders and include the use of incinerators, landfills, and open-air  burn pits on or near military bases. According to DOD officials, when  making these decisions base commanders may take into consideration a  number of factors, including the local security situation, the number of  personnel on the installation, and the amount and type of waste  generated by those personnel. As one of the options available, burn pits  help base commanders manage waste, but they also produce smoke and  harmful emissions that military and other health professionals believe  may result in acute and chronic health effects for those exposed to the  emissions.", "My statement today focuses on the extent to which DOD has assessed  any health risks of burn pit use. This statement is based on our  September 2016 report. That work was conducted in response to section  313 of the Carl Levin and Howard P. \u201cBuck\u201d McKeon National Defense  Authorization Act for Fiscal Year 2015 (NDAA for Fiscal Year 2015).  Specifically, we assessed the methodology DOD used in conducting a  review of the compliance of the military departments and combatant  commands with DOD Instruction 4715.19, Use of Open-Air Burn Pits in  Contingency Operations, and the adequacy of the subsequent report  DOD sent to the defense committees containing the results of its review.", "To evaluate the extent to which DOD has assessed any health effects of  burn pit use, we reviewed relevant health assessments on the effects of  burn pits, including a 2011 report by the Institute of Medicine that was  contracted by the Department of Veterans Affairs, as well as prior related  reports by GAO and the Special Inspector General for Afghanistan  Reconstruction. We also interviewed officials from U.S. Central Command  (CENTCOM), U.S. Army Central Command, U.S. Air Force Central  Command, Department of Veterans Affairs, and Institute of Medicine to  discuss any effects of exposures to burn pit emissions, among other  things. Additionally, we obtained an update from DOD in May 2018 on  actions taken regarding our findings and recommendations from our  September 2016 report.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Burn pits\u2014shallow excavations or surface features with berms used to  conduct open-air burning\u2014were often chosen as a method of waste  disposal during recent contingency operations in the CENTCOM area of  responsibility, which extends from the Middle East to Central Asia and  includes Iraq and Afghanistan. In 2010, we reported that there were 251  active burns pits in Afghanistan and 22 in Iraq. However, in 2016, we  reported that the use of burn pits in the CENTCOM area of responsibility  had declined since that time. As of June 2016, DOD officials told us that  there were no military-operated burn pits in Afghanistan and only one in  Iraq. According to DOD officials, the decline in the number of burn pits  from 2010 to 2016 could be attributed to such factors as (1) using  contractors for waste disposal and (2) increased use of waste  management alternatives such as landfills and incinerators. However,  DOD officials acknowledged that burn pits were being used to dispose of  waste in other locations that are not military-operated. Specifically, these  officials noted instances in which local contractors had been contracted to  haul away waste and subsequently disposed of the waste in a burn pit  located in close proximity to the installation. In such instances, officials  stated that they requested that the contractors relocate the burn pit.  According to a DOD official, as of May 2018 there are two active burn pits  in the CENTCOM area of responsibility.", "Although burn pits help base commanders to manage waste, they also  produce smoke and emissions that military and other health professionals  believe may result in acute and chronic health effects for those exposed.  We previously reported that some veterans returning from the Iraq and  Afghanistan conflicts have reported pulmonary and respiratory ailments,  among other health concerns, that they attributed to burn pit emissions.  Numerous veterans have also filed lawsuits against a DOD contractor  alleging that the contractor mismanaged burn pit operations at several  installations in both Iraq and Afghanistan, resulting in exposure to harmful  smoke that caused these adverse health effects. We also previously  reported on the difficulty of establishing a correlation between  occupational and environmental exposures and health issues. For  example, in 2012 we reported that establishing causation between an  exposure and an adverse health condition can be difficult for several  reasons, including that for many environmental exposures, there is a  latency period\u2014the time period between initial exposure to a contaminant  and the date on which an adverse health condition is diagnosed. When  there is a long latency period between an environmental exposure and an  adverse health condition, choosing between multiple causes of exposure  may be difficult. In addition, in 2015 we reported that the Army had  recently published a study that evaluated associations between  deployment to Iraq and Kuwait and the development of respiratory  conditions post-deployment. However, the study was unable to identify a  causal link between exposures to burn pits and respiratory conditions."], "subsections": []}, {"section_title": "DOD Had Not Fully Assessed the Health Risks of Burn Pits", "paragraphs": ["In our 2016 report, we found that the effects from exposing individuals to  burn pit emissions were not well understood, and DOD had not fully  assessed these health risks. Under DOD Instruction 6055.01, DOD  Safety and Occupational Health (SOH) Program, it is DOD policy to apply  risk-management strategies to eliminate occupational injury or illness and  loss of mission capability or resources. DOD Instruction 6055.01 also  instructs all DOD components to establish procedures to ensure that risk- acceptance decisions were documented, archived, and reevaluated on a  recurring basis. Furthermore, DOD Instruction 6055.05, Occupational  and Environmental Health (OEH), requires that hazards be identified and  risk evaluated as early as possible, including the consideration of  exposure patterns, duration, and rates. Notwithstanding this guidance,  which applies to burn pit emissions among other health hazards, DOD  had not fully assessed the health risks of use of burn pits according to  DOD officials.", "According to DOD officials, DOD\u2019s ability to assess these risks was  limited by a lack of adequate information on (1) the levels of exposure to  burn pit emissions and (2) the health impacts these exposures had on  individuals. With respect to information on exposure levels, DOD had not  collected data from emissions or monitored exposures from burn pits as  required by its own guidance. DOD Instruction 4715.19 requires that  plans for the use of open-air burn pits include ensuring the area was  monitored by qualified force health protection personnel for unacceptable  exposures, and CENTCOM Regulation 200-2, CENTCOM Contingency  Environmental Standards, requires steps to be taken to sample or monitor  burn pit emissions. However, DOD officials stated that there were no  processes in place to specifically monitor burn pit emissions for the  purposes of correlating potential exposures. They attributed this to a lack  of singular exposure to the burn pit emissions, or emissions from any  other individual item; instead, monitoring was done for the totality of air  pollutants from all sources at the point of population exposure. As we  reported in September 2016, given the potential use of burn pits near  installations and their potential use in future contingency operations,  establishing processes to monitor burn pit emissions for unacceptable  exposures would better position DOD and combatant commanders to  collect data that could help assess exposure to risks.", "In the absence of the collection of data to examine the effects of burn pit  exposure on servicemembers, the Department of Veterans Affairs in 2014  created the airborne hazards and open-air burn pit registry, which  allows eligible individuals to self-report exposures to airborne hazards  (such as smoke from burn pits, oil-well fires, or pollution during  deployment), as well as other exposures and health concerns. The  registry helps to monitor health conditions affecting veterans and  servicemembers, and to collect data that would assist in improving  programs to help those with deployment exposure concerns.", "With respect to the information on the health effects from exposure to  burn pit emissions, DOD officials stated that there were short-term effects  from being exposed to toxins from the burning of waste, such as eye  irritation and burning, coughing and throat irritation, breathing difficulties,  and skin itching and rashes. However, the officials also stated that DOD  did not have enough data to confirm whether direct exposure to burn pits  caused long-term health issues. Although DOD and the Department of  Veterans Affairs had commissioned studies to enhance their  understanding of airborne hazards, including burn pit emissions, the then- current lack of data on emissions specific to burn pits limited DOD\u2019s ability  to fully assess potential health impacts on servicemembers and other  base personnel, such as contractors.", "For example, in a 2011 study that was contracted by the Department of  Veterans Affairs, the Institute of Medicine stated that it was unable to  determine whether long-term health effects are likely to result from burn  pit exposure due to inadequate evidence of an association. While the  study did not determine a linkage to long-term health effects, because of  the lack of data, it did not discredit the relationship either. Rather, it  outlined a methodology of how to collect the necessary data to determine  the effects of the exposure. Specifically, the 2011 study outlined the  feasibility and design issues for an epidemiologic study\u2014that is, a study  of the distribution and determinants of diseases and injuries in human  populations\u2014of veterans exposed to burn pit emissions. Further, the  2011 study reported that there were a variety of methods for collecting  exposure information, but the most desirable was to measure exposures  quantitatively at the individual level. Individual exposure measurements  could be obtained through personal monitoring data or biomonitoring.  However, if individual monitoring data were not available, and they rarely  are, individual exposure data might also be estimated from modeling of  exposures, self-reported surveys, interviews, job exposure matrixes, and  environmental monitoring. Further, to determine the incidence of chronic  disease, the study stated that servicemembers must be tracked from their  time of deployment, over many years.", "While the Institute of Medicine outlined a methodology of how to conduct  an epidemiologic study, DOD had not taken steps to conduct this type of  research study, specifically one that focused on the direct, individual  exposure to burn pit emissions and the possible long-term health effects  of such exposure. Instead, some officials commented that there were no  long-term health effects linked to the exposures of burn pits because the  2011 study did not acknowledge any. Conversely, Veterans Affairs  officials stated that a study aimed at establishing health effect linkages  could be enabled by the data in its airborne hazards and open-air burn pit  registry, which collects self-reported information on servicemembers\u2019  deployment location and exposure.", "In response to a mandate contained in section 201 of Public Law 112- 260, the Department of Veterans Affairs entered into an agreement with  the National Academies of Sciences, Engineering, and Medicine to  convene a committee to provide recommendations on collecting,  maintaining, and monitoring information through the registry. The  committee assessed the effectiveness of the Department of Veterans  Affairs\u2019 information gathering efforts and provided recommendations for  addressing the future medical needs of the affected groups. The study  was conducted in two phases. Phase 1 was a review of the data  collection methods and outcomes, as well as an analysis of the self- reported veteran experience data gathered in the registry. Phase 2 was  focused on the assessment of the effectiveness of the actions taken by  the Department of Veterans Affairs and DOD and provided  recommendations for improving the methods enacted. The committee  released its final report in February 2017. As we reported in September  2016, considering the results of this review as well as the methodology of  the 2011 Institute of Medicine study as part of an examination of the  relationship between direct, individual exposure to burn pit emissions and  long-term health effects could better position DOD to fully assess those  health risks.", "In our September 2016 report we recommended that the Secretary of  Defense direct the Under Secretary of Defense for Acquisition,  Technology, and Logistics to:  take steps to ensure CENTCOM and other geographic combatant  commands, as appropriate, establish processes to consistently  monitor burn pit emissions for unacceptable exposures; and  in coordination with the Secretary of Veterans Affairs, specifically  examine the relationship between direct, individual, burn pit exposure  and potential long-term health-related issues. As part of that  examination, consider the results of the National Academies of  Sciences, Engineering, and Medicine\u2019s report on the Department of  Veteran Affairs registry and the methodology outlined in the 2011  Institute of Medicine study that suggests the need to evaluate the  health status of service members from their time of deployment over  many years to determine their incidence of chronic disease, with  particular attention to the collection of data at the individual level,  including the means by which that data is obtained.", "DOD concurred with the first recommendation, stating that the  department will ensure that geographic combatant commands establish  and employ processes to consistently monitor burn pit emissions for  unacceptable exposures at the point of exposure and if necessary at  individual sources. In a May 2018 status update regarding this  recommendation, DOD stated that it will be updating applicable  department policy and procedures, its tactics techniques and procedures  manual, and guidance for sampling and analysis plans to improve  monitoring of burn pit emissions and other airborne hazard emissions.  Specifically, DOD stated it will update DOD Instruction 6490.03,  Deployment Health; that the update will provide revised procedures on  deployment health activities required before, during, and after  deployments, including Occupational and Environmental Health Site  Assessments; and that it estimates this will be completed by the 4th  quarter of fiscal year 2018. In addition, the department stated it will  update its Occupational and Environmental Health Site Assessments  tactics, techniques, and procedures manual and update guidance for  sampling and analysis plans and that the updates will provide revised  tactics, techniques, and procedures that will improve the quality of health  risk assessment. The department expects this to be completed by the 1st  quarter of fiscal year 2019. GAO believes that upon completion of these  actions, DOD will have met the intent of this recommendation.", "With respect to our recommendation to sponsor research, in coordination  with the Secretary of Veterans Affairs, to specifically examine the  relationship between burn pit exposure and potential health-related  issues, DOD partially concurred, stating that a considerable volume of  research studies had already been completed, were ongoing, or were  planned in collaboration with the Department of Veterans Affairs and  other research entities to improve the understanding of burn pit and other  ambient exposures to potential long-term health outcomes and that the  studies, where applicable, consider and incorporate the methodology  outlined in the 2011 Institute of Medicine study. In a May 2018 status  update regarding this recommendation, the department stated that DOD  and the Department of Veterans Affairs continue to collaborate with each  other and other entities on research activities that address burn pit and  other airborne exposures, and potential long-term health outcomes.  Specifically, the department cited a DOD/Veterans Affairs Airborne  Hazards Symposium held in May 2017; an update to the Veterans  Affairs/DOD Deployment Health Working Group \"Airborne Hazards Joint  Action Plan\" to be completed by the 3rd quarter of fiscal year 2018; and  the completion of research to examine airborne hazard exposures and  potential health-related issues. GAO believes that to the extent that  continued studies consider and incorporate the methodology outlined the  2011 Institute of Medicine study, where appropriate, DOD will have met  the intent of this recommendation.", "Chairman Dunn, Ranking Member Brownley, and Members of the  Subcommittee, this concludes my statement for the record."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact Cary Russell, Director, Defense Capabilities and Management, at  202-512-5431 or russellc@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this statement  include Guy LoFaro (Assistant Director), Lorraine Ettaro, Shahrzad Nikoo,  Jennifer Spence, and Matthew Young.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-672", "url": "https://www.gao.gov/products/GAO-18-672", "title": "Small Business Administration: Actions Needed to Improve Confidence in Small Business Procurement Scorecard", "published_date": "2018-09-27T00:00:00", "released_date": "2018-09-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year SBA produces a scorecard measuring federal contract spending allocated to small businesses. The 2016 NDAA included a provision for SBA to revise the scorecard's methodology and for GAO to evaluate the effects of those revisions for fiscal year 2017. This report discusses, among other things, (1) SBA's changes to the scorecard methodology and plans, if any, to evaluate the effects of these changes, (2) the extent to which SBA has processes to disseminate reliable information, and (3) views of selected stakeholders on the scorecard's effects on small business procurement opportunities.", "GAO analyzed SBA's prior and revised scorecard methodology and results and interviewed officials from SBA, four other federal agencies selected based on small business procurement volume and other attributes, and three groups representing the interests of small businesses."]}, {"section_title": "What GAO Found", "paragraphs": ["For fiscal year 2017, the Small Business Administration (SBA) revised the methodology for its Small Business Procurement Scorecard, which is used to assess federal agencies' progress toward small business procurement goals. SBA made revisions to address requirements specified in the National Defense Authorization Act for Fiscal Year 2016 (2016 NDAA). SBA (1) reduced the share of the total scorecard grade devoted to prime contracting achievement, which is the dollar amount of contracts awarded directly to small businesses, and (2) added an element calculating changes in the number of small businesses receiving prime contracts. SBA made two additional revisions\u2014with input from other agencies' representatives\u2014to increase the share of subcontracting achievement results and peer review of required activities designed to facilitate small business procurement (see figure). In July 2018, officials said they had begun developing a plan to evaluate the effects of the revised scorecard methodology but did not provide a draft plan. Conducting a well-designed and comprehensive evaluation could aid SBA in determining whether the scorecard is an effective tool for helping to achieve the agency's strategic goals.", "(Scorecard elements are expressed as a percentage of total scorecard grade.)", "The published fiscal year 2017 scorecards originally contained errors, including an incorrect grade and numeric score for one agency, and SBA does not have a process to ensure that scorecard results are published accurately. Although SBA later corrected the errors, the agency did not initially document that scorecards had been changed, which is inconsistent with SBA's policy on information quality. SBA officials said that errors occurred in the process of formatting scorecards for publication. Errors in the published scorecards\u2014and the initial lack of disclosure about corrections\u2014weaken data reliability and may undermine confidence in scorecard data.", "Agency officials and representatives of small business groups that GAO interviewed generally expected the scorecard revisions to have little impact on small business procurement opportunities. However, one agency's officials said they would focus more on tracking subcontracting activity as a result of changes to the scorecard."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that SBA (1) design and implement a comprehensive evaluation to assess scorecard revisions and (2) institute a process for reviewing scorecards for accuracy prior to publication and a mechanism for disclosing corrected information. SBA generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government, through contracts, purchased more than $440  billion worth of goods and services in fiscal year 2017. To help small  businesses access these federal contracting opportunities, Congress set  a requirement that the federal government allocate at least 23 percent of  its contracted spending to small businesses. In turn, according to the  Small Business Administration (SBA), small businesses provide the  federal government with quality, performance, innovation, agility, and  competitive pricing and are a key source of job creation. Each year, SBA  produces a Small Business Procurement Scorecard (scorecard) to  measure how much contracted spending federal agencies allocate to  small businesses and whether the federal government is meeting its  goals for awarding contracts to small businesses.", "As part of the National Defense Authorization Act for Fiscal Year 2016  (2016 NDAA), Congress directed SBA to take steps to revise the  scorecard methodology for measuring small business procurement. The  2016 NDAA also included a provision for us to evaluate how well the  scorecard methodology accurately and effectively measures federal  agencies\u2019 compliance with small business contracting goals and how well  it encourages federal agencies to expand small businesses\u2019 procurement  opportunities.", "This report discusses (1) revisions to the Small Business Procurement  Scorecard methodology and results of the revised fiscal year 2017  scorecard, as well as the extent to which SBA plans to evaluate the  effects of revisions; (2) the extent to which SBA\u2019s revised scorecard  methodology uses relevant and reliable information and SBA publishes  accurate scorecards; and (3) views of selected federal agencies and  industry stakeholders on the extent to which SBA\u2019s revised scorecard  methodology may encourage agencies to expand small business  procurement opportunities.", "To examine changes SBA made to the Small Business Procurement  Scorecard, we reviewed SBA\u2019s documentation describing the revised  scorecard methodology and interviewed SBA officials about their process  for implementing a revised scorecard methodology. We also interviewed  SBA officials about their plans, if any, to evaluate the revised scorecard.  We reviewed and analyzed scorecard data from fiscal years 2014 through  2017. We assessed the reliability of these data by analyzing them for  obvious errors of accuracy. We determined that SBA\u2019s corrected data  were sufficiently reliable for the purpose of our analyzing scorecard  results for fiscal year 2017. We evaluated SBA\u2019s process for revising the  scorecard against federal internal control standards. We also used GAO  guidance on evaluation design to identify examples of key attributes of  effective evaluation planning. We also interviewed representatives from  a judgmental, nongeneralizable sample of four agencies (the  Departments of Agriculture, Defense, Energy, and Homeland Security) to  obtain their views about the process of providing input on scorecard  revisions and the revised scorecard methodology. We selected the four  departments based on a variety of attributes, including small business  procurement volume, recent improvement in scorecard results, and level  of participation in discussions with SBA and other agencies about  potential changes to the scorecard. To determine the extent to which  SBA\u2019s revised scorecard methodology uses relevant and reliable  information, we examined SBA documentation about the revised  scorecard methodology for fiscal year 2017, as well as prior GAO work.  We also interviewed officials from SBA and the four departments listed  above. Finally, to obtain stakeholder views on the extent to which SBA\u2019s  revised scorecard methodology might encourage agencies to expand  small business procurement opportunities, we interviewed  representatives from the selected departments, as well as officials from  three groups representing the interests of small businesses. Appendix I  describes our objectives, scope, and methodology in greater detail.", "We conducted this performance audit from January 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of the Scorecard Process", "paragraphs": ["According to SBA, the purposes of the scorecard program are to monitor  government-wide performance in meeting small business contracting  goals and to provide accurate and transparent information through the  public reporting of small business procurement data for individual  agencies and government-wide. SBA uses its scorecard methodology to  calculate a numeric score for each agency annually. SBA then converts  those numeric scores to letter grades on an A+ through F scale. Each  year, SBA negotiates small business prime contracting goals with each  federal agency with procurement authority such that, in the aggregate, the  federal government meets its overall 23-percent goal for the percentage  of prime contract dollars awarded to small businesses. In setting annual  agency goals, SBA considers prior-year achievement and other factors.", "In addition to an overall prime contracting goal, Congress also  established statutory contracting goals for various socioeconomic  subcategories of small businesses. These small business subcategories  are small disadvantaged businesses, women-owned small businesses,  service-disabled veteran-owned small businesses, and businesses  located in Historically Underutilized Business Zones (HUBZone). SBA  does not negotiate agency-specific goals for prime contracting and  subcontracting achievement within each small business socioeconomic  subcategory. Instead, each agency\u2019s goal is the same as the government- wide goals. Prime contracting and subcontracting achievement goals for  each subcategory are shown in table 1 below."], "subsections": []}, {"section_title": "Procurement Data Systems", "paragraphs": ["SBA uses two government-wide data systems maintained by the General  Services Administration (GSA) to measure agencies\u2019 small business  contracting activity. SBA uses the Federal Procurement Data System- Next Generation (FPDS-NG) to calculate agencies\u2019 prime contracting  awards to small businesses. Federal agencies are required to report to  FPDS-NG all contracts whose estimated value is $3,500 or more, and  FPDS-NG also records whether the contract has gone to a small  business. GSA requires that agencies annually certify the accuracy of  data submitted. To measure subcontracting, SBA uses the Electronic  Subcontracting Reporting System (eSRS), which captures data on  spending on first-tier subcontracts, including spending directed to small  businesses. Prime contractors that hold one or more government  contracts totaling more than $700,000 are required to report their small  business subcontracting activity in eSRS."], "subsections": []}, {"section_title": "Role of the OSBDUs", "paragraphs": ["In 1978 Congress amended the Small Business Act to require that all  federal agencies with procurement powers establish an Office of Small  and Disadvantaged Business Utilization (OSDBU). These offices are  intended to advocate for small businesses in procurement and contracting  processes, and thus work with agencies to achieve contracting goals.  OSDBUs have multiple functions and duties that are codified in section  15(k) of the Small Business Act, as amended. In addition to their agency  responsibilities, OSDBU directors serve with the SBA administrator or a  designee on the Small Business Procurement Advisory Council, which  was established in 1994. The council\u2019s duties include identifying best  practices for maximizing small business utilization in federal contracting  and conducting peer reviews of each OSDBU to determine compliance  with section 15(k). SBA has included the results of this peer review as  part of its scorecard calculations for several years."], "subsections": []}]}, {"section_title": "SBA Made Several Revisions to the Scorecard for Fiscal Year 2017 but Has Not Completed a Plan to Evaluate Those Changes", "paragraphs": [], "subsections": [{"section_title": "Scorecard Revisions Focused Largely on Mandated Changes", "paragraphs": ["SBA revised the scorecard methodology prior to fiscal year 2017 to make  it consistent with changes required by the 2016 NDAA. Specifically, SBA  reduced the proportion of the total scorecard results related to prime  contracting performance from 80 percent to 50 percent and added an  element to calculate changes in the number of small business prime  contractors compared to the prior year. SBA officials said they  considered, but did not add, a scorecard element that calculated changes  in the number of small business subcontractors, which the 2016 NDAA  required to be included if data were available. Officials said that unlike  prime contracting data, which are validated by agencies, subcontracting  data are recorded by the prime contractor and are based on contracting  plans and not obligated federal funds. As a result, SBA officials said they  determined that data were not available to implement this change.", "SBA also made other changes to the scorecard methodology, as the  agency was permitted to do under the 2016 NDAA. SBA adjusted the  weights of other scorecard elements, increasing subcontracting  performance from 10 percent to 20 percent of the total scorecard result  and increasing the peer review evaluation element from 10 percent to 20  percent. SBA also established that the new statutorily required element to  assess changes in the number of prime contractors would be weighted at  10 percent. (See fig. 1 for a summary of revisions to the scorecard  methodology.) Officials said they increased the subcontracting weight  because it was an increasingly important area of small business  procurement activity.", "In addition, SBA officials and other Small Business Procurement Advisory  Council members revised the peer review evaluation methodology in an  effort to facilitate a more in-depth review of agencies\u2019 compliance with  section 15(k) requirements. SBA included the results from this new peer  review process in its revised scorecard methodology. Specifically, the  council changed the peer review process in an effort to have peer  reviewers make compliance determinations for categories that directly  corresponded to the individual subparts of section 15(k). The prior peer  review process asked reviewers to assign scores in seven areas, which  the process termed \u201csuccess factors.\u201d For the fiscal year 2017  scorecard, SBA asked peer reviewers to assess and provide scores for  18 of the 21 individual subparts. Categories for the three remaining  15(k) subparts were incorporated starting with the fiscal year 2018  scorecard methodology.", "SBA officials said members of the Small Business Procurement Advisory  Council were active participants in determining the revisions to the  scorecard methodology. For example, SBA officials said the council  members gave input on proposed revisions and recommended changes  prior to the adoption of the new scorecard methodology. OSDBU directors  also discussed potential methodological revisions in meetings of the  Federal OSDBU Directors Interagency Council. SBA officials said the  OSDBU directors\u2019 input was incorporated into SBA\u2019s revised scorecard  guidance and, as a result, the criteria within the scorecard were more  robust. Officials we interviewed from SBA and other agencies said the  adopted scorecard revisions were the result of a consensus among Small  Business Procurement Advisory Council members, although no formal  votes were taken. Revisions to the scorecard methodology were outlined  in a memorandum circulated to agencies in August 2016, about 8 weeks  before the start of fiscal year 2017. SBA officials said that many agencies  were tracking their progress toward goals using the revised methodology  before results were issued. Agencies also had an opportunity to review  preliminary scorecard results for fiscal year 2017 before the official  scorecard results were published in May 2018."], "subsections": []}, {"section_title": "Fiscal Year 2017 Scorecard Outcomes Were Similar to Those of Prior Years", "paragraphs": ["Scorecard results under the revised methodology were similar to those of  prior years. For example, in fiscal year 2017, the distribution of agencies\u2019  letter grade results was similar to those of fiscal years 2014 through 2016,  with between 19 and 21 of the 24 scored agencies achieving at least an A  grade each year (see table 2).", "Prime contracting achievement. Agencies\u2019 performance in small  business prime contracting was similar in fiscal year 2017 and fiscal year  2016 (see table 3). In both years, 18 of 24 agencies met their overall  prime contracting goals. In fiscal year 2017, 15 of 24 agencies met at  least three of the four small business subcategory goals\u2014one fewer than  in fiscal year 2016.", "Subcontracting achievement. In fiscal year 2017, 15 of 24 agencies  met their subcontracting goals compared to 16 of 24 in the prior year.  However, among the small business subcategories, more agencies met  at least three subcategory goals in 2017 (14 agencies) than in fiscal year  2016 (10 agencies) (see table 4).", "Peer review evaluations element. The fiscal year 2017 government- wide score for the peer review of section 15(k) compliance (a score of  19.25 out of a maximum 20.00) was nearly identical to the government- wide score for fiscal year 2016, once we adjusted for changes in the  scoring scale between the 2 years. The government-wide score in fiscal  year 2016 was 9.60 out of 10, which equates to 19.20 on a 20-point  scale.", "Number of small business prime contractors. The overall number of  small business prime contractors declined between fiscal years 2016 and  2017. The number of prime contractors overall decreased from 120,009 in  fiscal year 2016 to 117,480 in fiscal year 2017, a decrease of  approximately 2 percent. However, the 24 agencies, in aggregate, had  more small business prime contractors in three of the four small business  subcategories in fiscal year 2017 than in the prior year (see table 5).", "Comparison with prior scorecard weighting formula. We found that  agencies\u2019 numerical scores for fiscal year 2017 were generally lower  under the revised scorecard methodology than they would have been  under the fiscal year 2016 methodology\u2019s weighting of scorecard  elements. Twenty-two of 24 agencies had a lower score than they would  have had under the prior methodology\u2019s weighting. The revised  methodology adjusted the weight of multiple scorecard elements, and  there are a variety of reasons why an agency might have received a lower  score than under the fiscal year 2016 methodology\u2019s weighting. However,  reducing the weight for prime contracting achievement under the revised  methodology could explain at least part of the lower score for 21 of the 22  agencies. The overall median score for fiscal year 2017 was about 7  points lower than it would have been under the weighting formula used in  fiscal year 2016. (The median score for fiscal year 2017 scorecards was  111 and would have been 118 under the prior methodology\u2019s weighting  formula.)"], "subsections": []}, {"section_title": "SBA Said It Was Preparing but Had Not Completed a Plan to Evaluate the Effects of Scorecard Revisions", "paragraphs": ["In June 2018, SBA officials told us they were not preparing a plan for  evaluating the effects of scorecard revisions because they thought such a  plan would be premature. At that time, SBA officials said they had  identified some aspects of the revised methodology for further review,  including two issues related to the peer review evaluations\u2014the peer  review scoring scale and whether agencies believed SBA\u2019s requests for  supporting information were reasonable. In July 2018, however, SBA  officials said that, in response to our preliminary findings, they had begun  to develop a plan for evaluating the revised scorecard methodology\u2019s  effects, if any, on meeting the government-wide procurement goals. The  officials did not provide us a draft plan or details about the plan. They said  they expected to complete the evaluation plan by October 2018 and to  complete the evaluation itself by the end of December 2018.", "Federal internal control standards state that management should use  quality information to achieve the entity\u2019s objectives, such as those in an  agency\u2019s strategic plan. These standards also call for management to  design control activities to achieve goals and respond to risks\u2014for  example, activities to monitor performance measures and indicators.  SBA\u2019s strategic plan includes an objective to ensure federal contract and  innovation set-aside goals are met or exceeded. The agency uses  scorecard results to measure progress toward meeting or exceeding the  statutory goal of 23 percent for overall small business prime contracting.  Scorecard results are also used to measure progress toward other goals  for the small business socioeconomic subcategories.", "We have previously identified key attributes of effective program  evaluation design, which include the following:  clear criteria for making comparisons that would lead to strong,  defensible evaluation conclusions; an established evaluation scope that would ensure that the evaluation  is tied to its research questions, effectively defines the subject matter  to be assessed, and can be completed in a timely fashion to meet  reporting deadlines;  clear and specific research evaluation questions that use terms that  can be readily defined and measured; and  carefully thought-out data and analysis choices, which can enhance  the quality, credibility, and usefulness of the evaluation.", "A comprehensive evaluation of revisions to the scorecard that includes  the key attributes outlined above could aid SBA officials in determining  whether the revised scorecard provides better information and whether  the scorecard revisions are designed and implemented appropriately.  Such an evaluation also could assist SBA in understanding whether the  scorecard revisions may contribute to maximizing contract dollars  awarded to small businesses, which is one of the goals in SBA\u2019s strategic  plan. In addition, the 2016 NDAA requires that SBA report to Congress by  March 31, 2019, about changes stemming from the revised methodology  and recommend whether the scorecard program should continue or be  further modified. Such an evaluation could also be used by SBA to inform  its report to Congress and future decisions about the scorecard  methodology and program."], "subsections": []}]}, {"section_title": "SBA Uses Available Procurement Data to Calculate Scorecard Outcomes, but the Process for Producing Scorecards Has Weaknesses", "paragraphs": [], "subsections": [{"section_title": "Subcontracting Data Have Known Limitations That May Affect the Reliability of Scorecard Calculations", "paragraphs": ["The two data systems SBA uses to measure agencies\u2019 small business  contracting activity\u2014FPDS-NG and eSRS\u2014are the best available  sources of procurement data for calculating scorecard results, according  to SBA. However, eSRS has limitations that agency officials cited and  that we have previously identified that could hinder the reliability of  scorecard results on subcontracting. Federal law prohibits SBA from  requiring agencies to use alternative data collection methods for the  purposes of the scorecard calculations. GSA intends to replace both  systems as part of an initiative to consolidate the functions of several  existing data systems, according to GSA documents. As we reported in  2014, this new system is intended to better link prime contracting and  subcontracting data.", "Agency officials we interviewed said eSRS has limitations that make it  challenging to verify the accuracy of reported subcontracting activity, and  we also have identified eSRS limitations in our prior work. Prime  contractors are responsible for reporting their subcontracting activity to  the federal government, and the self-reported nature of these data is a  limitation that could hamper the accuracy of eSRS data, agency officials  said. Although prime contractors generally are required to submit a plan  describing planned subcontracting activity, officials explained that eSRS  did not provide a method to allow agency officials to verify that actual  subcontracting activity matched the levels described in prime contractors\u2019  plans. In addition, not all prime contractors are required to file  subcontracting plans. Exceptions to the requirement include, for example,  when the prime contract is for goods or services worth $700,000 or less  or if the prime contractor is exempt. Small business prime contractors  are one example of an exempt group that is not required to prepare  subcontracting plans.", "SBA officials added that measuring subcontracting activity also is  challenging because there are no federal funds obligated for  subcontracts. Therefore, the federal government does not have a verified  record of who performed subcontracting work and the amount paid. In  addition, our previous work has found that eSRS was not designed to  provide a list of subcontractors associated with a particular prime contract  and that linking small business subcontractors to prime contracts when  there is a subcontracting plan that pertains to multiple contracts is  especially difficult.", "In addition, our previous work has identified some limitations with FPDS- NG focused on specific agencies and small business programs, although  we have not more broadly assessed the reliability of the FPDS-NG data  fields that SBA uses to compile scorecard results. For example, we found  mismatches between certain accounting records from the Department of  Veterans Affairs and data captured in FPDS-NG, and we identified  challenges in using FPDS-NG data to monitor the eligibility of Alaska  Native Corporations for certain small business contracts available to small  disadvantaged businesses. However, officials from SBA and two  departments we interviewed for this work said prime contracting data in  FPDS-NG generally do not have the same weaknesses they identified  with subcontracting data in eSRS."], "subsections": []}, {"section_title": "Errors in Published Scorecard Results Weaken Reliability and Perceived Integrity of Scorecard Program", "paragraphs": ["Scorecard results originally published by SBA on May 22, 2018,  contained errors, including one agency scorecard published with an  incorrect letter grade. SBA officials said they discovered the publication  errors within approximately 2 days of publication and published corrected  versions. However, these corrections occurred after SBA issued a public  announcement highlighting the new results, and interested parties may  have downloaded erroneous results prior to the corrected versions being  posted on SBA\u2019s website.", "We identified errors from SBA\u2019s originally published scorecards  independent of SBA\u2019s determination that the agency had published  scorecards containing errors. The errors we and SBA identified were  concentrated in the scorecard for the Department of Education and the  government-wide scorecard:", "The scorecard for the Department of Education showed an incorrect  letter grade of A+, rather than the correct grade of A. The published  scorecard also showed an incorrect overall numeric score.", "The Department of Education\u2019s score for the peer review component  of the scorecard was incorrect.", "The government-wide scorecard showed incorrect scores for changes  in the number of women-owned small business contractors and the  number of service-disabled veteran-owned small business  contractors.", "SBA did not initially document on the corrected scorecards how they had  been changed from the original scorecards. However, SBA later added  documentation that the scorecards for the Department of Education and  government-wide results had been corrected. SBA took this step after we  inquired about the absence of documentation about revisions that had  been made to the fiscal year 2017 scorecards.", "SBA officials said they performed accurate calculations for determining  agencies\u2019 performance and that inaccuracies in the published scorecards  were the result of transcription errors associated with formatting the  results for publication. Officials said SBA used new software to publish  the fiscal year 2017 scorecards so that they could be accessible to  visually impaired readers. Making the scorecards more accessible  required some additional steps and at times required manual data entry  due to limitations in SBA\u2019s software. These additional steps resulted in  errors, officials said. One set of errors\u2014the inaccurate government-wide  scores for changes in the number of women-owned small business  contractors and the number of service-disabled veteran-owned small  business contractors\u2014canceled each other out and did not lead to  erroneous overall scorecard results. SBA officials said they review the  scorecard data and calculations before they are prepared for publication.  However, the agency does not have a process to review formatted  scorecards prior to publication to confirm that the version for publication  matches actual calculations. Agency officials said they believed that such  a process was not necessary. Additionally, agency officials said SBA has  instituted a process to update previously issued scorecards to make them  accessible for the visually impaired. SBA officials said they intend to  review the accuracy of these updated scorecards for characteristics such  as accurate letter grades as agency resources permit.", "Both the Office of Management and Budget and SBA have issued policies  related to transparency and integrity of government data. The Office of  Management and Budget has issued government-wide guidance on  transparency in sharing government data and instructed federal agencies  to develop their own policies. SBA\u2019s policy on information quality says  the policy is intended, in part, to ensure the integrity of information SBA  disseminates. SBA\u2019s policy also says the agency should have full,  accurate, transparent documentation and should identify and disclose to  users any error sources affecting data quality. In addition, federal internal  control standards cite the need for management to design controls\u2014 including controls over information processing\u2014to achieve objectives.", "Errors in the published scorecards may impair the other agencies\u2019 or  Congress\u2019s access to quality information to make informed decisions and  evaluate an agency\u2019s performance in meeting small business goals. The  scorecard errors that we and SBA identified after publication\u2014and the  lack of any indicator that scorecards had been corrected\u2014also may  undermine confidence in the integrity and transparency of the scorecard  data."], "subsections": []}]}, {"section_title": "Agency Officials and Other Stakeholders Expected the Revised Scorecard to Have Little Impact on Small Business Opportunities", "paragraphs": ["Agency officials and representatives of small business groups we spoke  with generally expected the revised scorecard methodology for fiscal year  2017 to have little impact on small business procurement opportunities.  OSDBU officials in the four agencies we interviewed said their offices, in  general, are not altering existing efforts at advocating for small business  opportunities as a result of scorecard revisions. Some agency officials  also said they would need additional years of scorecard data before  making any changes to their efforts or reassessing how their priorities  align with the revised scorecard\u2019s formula. However, officials from one  agency said they updated their agency\u2019s internal monitoring of  subcontracting activity as a result of the revised scorecard methodology\u2019s  increased emphasis on subcontracting measures. Officials said they  updated the monitoring process so the agency would place more  emphasis on small business subcontracting activity. Officials said the  change to this agency\u2019s internal monitoring process took effect for fiscal  year 2018.", "Officials from three of the four federal departments and representatives  from the three small business groups we interviewed said they had not  seen any changes in opportunities for small business prime contracting  as a result of the scorecard\u2019s methodological changes. Instead,  representatives from three small business groups and officials from two  departments said any changes in prime contracting opportunities that  might have occurred would be influenced by other government-wide  procurement initiatives. Specifically, representatives from the three small  business groups said the federal government\u2019s emphasis on \u201ccategory  management\u201d was resulting in fewer prime contracts available to all  government contractors, including small business contractors. Under the  category management initiative, the federal government groups  commonly purchased goods and services into categories to streamline  procurement processes with the goal of eliminating redundancies and  reducing costs. However, representatives of small business groups said  these policies result in fewer contract awards and opportunities for small  businesses. Representatives from the three small business groups said  that the new scorecard element that calculates the annual changes in the  number of small business contractors could help highlight the effects of  these prime contracting trends on procurement opportunities.", "According to agency officials and small business representatives,  subcontracting opportunities are also unlikely to be impacted by the  revised scorecard methodology, which increased the weight of  subcontracting performance. Officials from two of the four departments  we interviewed told us that their agencies have stable purchasing  patterns and that subcontracting activity is not likely to change as a result  of scorecard revisions. Representatives from two of the three small  business groups said the influence of the scorecard revisions in  incentivizing agencies to focus on subcontracting opportunities is limited  by the reliability of available subcontracting data, discussed previously.  For example, one agency told us that the shift from prime to  subcontracting performance reduces the agency\u2019s ability to influence  scorecard outcomes because the agency has no means of validating the  subcontracting data that are recorded. Similarly, representatives from two  of the three small business groups said that because the data on  subcontracting are entered by the prime contractors at the time of  proposed contracting rather than confirmed contracting, the data do not  include verification of subcontracting activity and therefore might not be  an accurate measure of subcontracting activity.", "Representatives from agencies and small business groups said the  scorecard program has generally played a role in drawing attention to  agencies\u2019 performance in identifying small business procurement  opportunities. For example, SBA officials said the scorecard results  provide public information about how well the government performed  overall in providing small business procurement opportunities and help to  ensure that all agencies are contributing toward those goals. Officials at  one agency told us that the scorecard was an important factor in driving  internal goals and opportunities for small businesses. Another agency  said that while it had been reaching its overall prime contracting goal, its  performance in certain small business subcategories was falling short of  goals. As a result, the agency has directed additional outreach efforts to  those types of small businesses. In addition, representatives of all three  small business groups said because results are public, the scorecard has  created additional pressure on agencies to meet procurement goals."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["SBA uses its scorecard program to monitor federal agencies\u2019 compliance  with goals set by Congress to promote small business participation in  federal contracting, and SBA has identified having agencies meet or  exceed those participation benchmarks as one of its agency-wide goals in  its strategic plan. The effects of recent changes to the scorecard and their  potential benefits for improving federal contracting opportunities for small  businesses are uncertain. SBA recently began to develop a plan for  evaluating whether or how changes to the scorecard might facilitate  SBA\u2019s ability to meet government-wide procurement goals. Completing  such an evaluation and making sure the evaluation plan is aligned with  key attributes for effective evaluations could help SBA management: determine whether the revised scorecard provides quality  information\u2014consistent with federal internal control standards\u2014and  whether it helps meet the agency\u2019s strategic goals;  fully address whether the revisions are effective in measuring and  creating small business procurement opportunities; and make a well-supported recommendation about whether to continue or  modify the scorecard program. Congress required that SBA  recommend by March 31, 2019, whether to continue or modify the  scorecard program.", "In addition, the scorecard appears to have played a role in drawing  attention to agencies\u2019 performance in identifying small business  procurement opportunities. However, there were errors in the initial fiscal  year 2017 scorecards published on SBA\u2019s website, and SBA did not  initially take steps to notify the public after it made corrections. SBA  officials said that SBA does not have a process to ensure that published  scorecard results are accurate. Errors in the published scorecards and a  lack of timely disclosure about corrections may impair other agencies\u2019 or  Congress\u2019s access to quality information to make informed decisions."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following two recommendations to SBA:  The SBA Administrator or her designee should complete the design and  implementation of a comprehensive evaluation of the Small Business  Procurement Scorecard aligned with key attributes of effective program  evaluations to assess the effectiveness of the revised scorecard in  measuring agency performance and promoting small business  procurement opportunities. (Recommendation 1)", "The SBA Administrator or her designee should institute a process to  review Small Business Procurement Scorecards for accuracy prior to  publication and a mechanism for publicly identifying when issued  scorecards have been revised. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to SBA for review and comment. In  written comments, reproduced in appendix II, SBA generally agreed with  both of our recommendations.", "Regarding our recommendation that SBA design and implement an  evaluation of the revised scorecard methodology, SBA said it planned to  evaluate the changes to the scorecard methodology mandated by the  2016 NDAA. As discussed in our report, in revising the scorecard, SBA  also made other changes not specifically mandated by the 2016 NDAA,  such as increasing the emphasis on small business subcontracting  activity and incorporating a revised peer review process to facilitate a  more in-depth review of agencies\u2019 compliance with section 15(k)  requirements. As stated in our report, we recommend that SBA plan and  implement an evaluation of all aspects of the revised scorecard  methodology. SBA also indicated that it will not complete the evaluation  until after it has validated data for the fiscal year 2018 procurement  scorecard. We note that SBA can prepare an evaluation plan and begin to  consider potential evaluation findings using available scorecard data from  fiscal year 2017. We also note that our recommendation states that SBA\u2019s  evaluation plan should be aligned with the key attributes of effective  evaluation design.", "Regarding our recommendation that SBA institute a process to review  scorecards for accuracy prior to publication and a mechanism for publicly  identifying when issued scorecards have been revised, SBA said it had  taken several steps to revise the processes for publishing accurate  scorecard results, including adding steps to compare the prepared  scorecard documents to source documents prior to publication and to  annotate any score corrections that are made to published scorecards.  While we have not yet had the opportunity to assess SBA\u2019s actions, the  steps SBA describes in response to our recommendation could improve  other agencies\u2019 or Congress\u2019s access to quality information.", "We will send copies to the Administrator of SBA and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report describes (1) revisions to the Small Business Procurement  Scorecard (scorecard) methodology for fiscal year 2017 and results of the  fiscal year 2017 scorecard, as well as the extent to which the Small  Business Administration (SBA) plans to evaluate the effects of revisions;  (2) the extent to which SBA\u2019s revised scorecard methodology uses  relevant and reliable information and SBA publishes accurate scorecards;  and (3) views of selected federal agencies and industry stakeholders on  the extent to which SBA\u2019s revised scorecard methodology may encourage  agencies to expand small business procurement opportunities.", "To examine the changes SBA made to the Small Business Procurement  Scorecard and the rationale for these changes, we reviewed relevant  documents, including the National Defense Authorization Act for Fiscal  Year 2016, SBA\u2019s descriptions of the prior and revised scorecard  methodology, and revised peer review guidance used for the scorecard  element that assesses compliance with section 15(k) of the Small  Business Act. We also interviewed officials from SBA and four other  agencies about the revisions to the scorecard calculation methodology,  the peer review guidance, the process for providing input on scorecard  revisions, and how revisions were implemented. The four agencies (the  Departments of Agriculture, Defense, Energy, and Homeland Security)  represented a judgmental, nongeneralizable sample of federal agencies  with procurement powers, selected based on small business procurement  volume, recent improvement in scorecard results, and level of  participation in discussions with SBA and other agencies about potential  changes to the scorecard. We also interviewed SBA officials about their  plans to evaluate the effects of scorecard revisions on small business  procurement opportunities and about their plans, if any, to evaluate the  revised scorecard. In addition, we reviewed federal internal control  standards and GAO\u2019s key attributes for designing effective evaluations.", "We analyzed the distribution of agencies\u2019 letter grade results (A+, A, B, C,  D, and F) from the fiscal year 2017 scorecard and compared this  distribution to fiscal years 2014 through 2016, which used a different  scorecard methodology. We also reviewed the distribution of results of  fiscal year 2017 individual scorecard elements\u2014specifically, results of  prime contracting achievement, subcontracting achievement, and peer  reviews\u2014and compared this distribution to results for fiscal year 2016.", "We compared agencies\u2019 prime contracting and subcontracting  performance against their small business procurement goals for fiscal  years 2016 and 2017. To compare peer review results across years, we  made adjustments to account for changes in the value of peer review  results (raised from 10 points to 20 points from fiscal years 2016 to 2017).  To adjust for this difference, we doubled the value of fiscal year 2016  scores to put both years\u2019 scores on a 20-point scale. Finally, we  compared actual fiscal year 2017 scorecard results to the results if SBA  had used the 2016 scorecard weighting. To do this, we increased the  weighting of fiscal year 2017 prime contracting results from 50 percent to  80 percent of each agency\u2019s total scorecard grade, decreased the weight  of subcontracting results from 20 percent to 10 percent, and decreased  the weight of peer review results from 20 percent to 10 percent. We also  excluded results from the new scorecard element calculating changes in  the number of small business contractors, which was not part of the 2016  methodology.", "To examine the extent to which SBA\u2019s revised scorecard methodology  considers relevant and reliable information, we interviewed officials from  SBA and the Departments of Agriculture, Defense, Energy, and  Homeland Security. We reviewed documents describing the prior and  revised scorecard methodology. We discussed limitations, if any, in the  electronic data systems that capture government-wide data on prime  contracting and subcontracting (which SBA uses to calculate those  respective scorecard elements). We also reviewed our prior work that  assessed these data systems. To assess the data reliability of the  published scorecards, we reviewed them for obvious errors and  interviewed SBA officials about the cause of errors we identified. We  found the scorecards to be reliable for analyzing scorecard results for  fiscal year 2017. We also compared SBA\u2019s revised scorecard  methodology against the agency\u2019s policies on information quality and  against GAO\u2019s standards for internal control in the federal government.", "To collect views on the extent to which SBA\u2019s revised scorecard  methodology may encourage agencies to expand small business  procurement opportunities, we interviewed officials from SBA and the four  selected departments cited above, as well as representatives from three  organizations representing the interests of small businesses. These three  organizations were selected to represent a mix of small business types:  one (The American Small Business Chamber of Commerce) represented  all types of small businesses; one (Women Impacting Public Policy)  represented a small business socioeconomic subcategory with a 5  percent goal for prime contracting and subcontracting (as a percentage of  total prime contracting and subcontracting); and one (The Task Force for  Veterans\u2019 Entrepreneurship, also known as Vet-Force) represented a  small business subcategory with a 3 percent goal for prime contracting  and subcontracting.", "We conducted this performance audit from January 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Andy Pauline (Assistant  Director), Steve Robblee (Analyst in Charge), William Chatlos, Holly  Hobbs, Marc Molino, Jessica Sandler, and Jennifer Schwartz made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The federal government is required to allocate at least 23% of its direct contract spending to small businesses. The Small Business Administration's annual scorecards track progress toward that goal.", "SBA changed how it calculates scores for fiscal year 2017 but didn't initially plan to evaluate the effect of the changes.", "We recommended SBA evaluate its new scoring methodology to assess how effectively the scorecards measure agency performance and promote contracting opportunities for small businesses. SBA could use the evaluation results to inform Congress in its upcoming required report."]}
{"id": "GAO-18-59", "url": "https://www.gao.gov/products/GAO-18-59", "title": "Coast Guard Health Records: Timely Acquisition of New System Is Critical to Overcoming Challenges with Paper Process", "published_date": "2018-01-24T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2010, the Coast Guard initiated an effort\u2014known as IHiS\u2014to replace its aging EHR system with a suite of modernized systems that was to automate various health care services for its nearly 50,000 military members. However, in October 2015, the Coast Guard announced that the modernization project would be canceled.", "GAO was asked to review the Coast Guard's efforts to develop a modernized EHR system. GAO's objectives were to (1) describe what led the Coast Guard to terminate further IHiS development, and how much was spent on the project; (2) evaluate the Coast Guard's management and oversight for the discontinued project and what, if any, lessons learned were identified; (3) describe the Coast Guard's current process for managing health records and the challenges, if any, it is encountering; and (4) determine the Coast Guard's plans for effectively implementing a new EHR system and the current status of its efforts. To do so, GAO reviewed project expenditures, analyzed key project management documentation, surveyed Regional Managers and clinical staff, and interviewed knowledgeable staff."]}, {"section_title": "What GAO Found", "paragraphs": ["Financial, technical, schedule, and personnel risks led to the United States Coast Guard's (Coast Guard) decision to terminate the Integrated Health Information System (IHiS) project in 2015. According to the Coast Guard (a military service within the Department of Homeland Security), as of August 2017, $59.9 million was spent on the project over nearly 7 years and no equipment or software could be reused for future efforts. In addition, the Coast Guard could not fully demonstrate the project management actions taken for IHiS, lacked governance mechanisms, and did not document lessons learned for the failed project.", "As a result of the cancelation of the IHiS project and the decommissioning of the two legacy electronic health record (EHR) systems IHiS was to replace, the Coast Guard directed its clinics to revert to maintaining health records using a predominantly paper process. Coast Guard Regional Managers and clinic and sick bay administrators informed GAO of the many challenges encountered in returning to a paper process. These challenges include the inability for some clinics to adequately track vital information such as the medications members are taking\u2014potentially causing harm to them.", "To help alleviate several of these challenges, the Coast Guard has developed alternative work-around processes. However, these alternative processes may not provide sustained solutions to overcoming these challenges.", "In February 2016, the Coast Guard initiated the process for acquiring a new EHR system. As of November 2017, agency officials had conducted research and recommended a solution based on performance, risk, cost, and schedule advantages. However, 2 years after canceling IHiS and moving toward a predominately manual process, the agency has not yet made a final determination on this. Successfully and quickly implementing an EHR system is vital to overcoming the challenges Coast Guard currently faces in managing paper health records. The expeditious implementation of such a system can significantly improve the quality and efficiency of care to the thousands of Coast Guard active duty and reserve members that receive health care."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending the Coast Guard (1) expeditiously and judiciously pursue the acquisition of a new EHR system, and in doing so (2) ensure key processes are implemented, (3) establish project governance boards, and (4) document lessons learned. The Department of Homeland Security concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States Coast Guard (Coast Guard), a military service within  the Department of Homeland Security, is the principal federal agency  responsible for maritime safety, security, and environmental stewardship  in U.S. ports and waterways. In addition, the Coast Guard acts as a first  responder and provides humanitarian services that aid individuals in  distress or those impacted by natural and man-made disasters, whether  at sea or ashore. The Coast Guard is also a law enforcement and  regulatory agency with broad legal authorities associated with maritime  transportation, hazardous materials shipping, bridge administration, oil  spill response, pilotage, and vessel construction and operation.", "In support of its missions, the Coast Guard is tasked with providing health  care to active duty and reserve members; ensuring the medical and  dental readiness of all Coast Guard members to maintain their ability for  worldwide deployment; and ensuring the availability of quality, cost- effective health care for all eligible beneficiaries. To assist with this task,  the Coast Guard has historically relied on electronic health record (EHR)  systems to perform such functions as scheduling patient appointments,  documenting patient consults and referrals, and tracking prescribed  medications.", "In 2010, the Coast Guard initiated an effort to replace its aging EHR  systems with a suite of modernized systems called the Integrated Health  Information System (IHiS). This system was to modernize various health  care services and provide additional functionality, such as a document  management system, which was previously lacking. However, in October  2015, the Coast Guard announced that the modernization project would  be canceled.", "In light of this decision, you asked us to review the Coast Guard\u2019s actions  related to its EHR modernization initiative and its current health records  management process. Our specific objectives were to (1) describe what  led the Coast Guard to the decision to terminate further IHiS  development, and how much was spent on the project; (2) evaluate the  Coast Guard\u2019s management and oversight actions for the discontinued  EHR modernization project and what, if any, lessons learned were  identified; (3) describe the Coast Guard\u2019s current process for managing  health records and the challenges, if any, it is encountering; and (4)  determine the Coast Guard\u2019s plans for effectively implementing a new  EHR system and the current status of its efforts.", "To address the first objective, we reviewed relevant IHiS documentation,  such as key contracts, the project plan, presentations by the project  management team regarding the status of development efforts, and IHiS- related memorandums. We also reviewed project expenditures  documentation developed by the Deputy Commandant for Mission  Support and the Acquisition Directorate. We supplemented our review  with interviews of agency officials within the Coast Guard\u2019s Health Safety  and Work-Life (HSWL) Directorate, Office of Budget and Programs, Office  of Resource Management, Office of Contract Operations, and Office of  Acquisition Support, along with interviews of six key IHiS contractors.", "To address the second objective, we reviewed the Coast Guard\u2019s  Command, Control, Communications, Computers, and Information  Technology (C4&IT) System Development Life Cycle (SDLC) Policy and  SDLC Practice Manual intended to guide the management and oversight  of the agency\u2019s acquisition projects. We compared available project  management documentation, such as project plans, the project\u2019s  schedule, decision memorandums, and Executive Oversight Council  (EOC) meeting minutes, which demonstrated actions taken by project  management staff during the IHiS project, against key SDLC Practice  Manual requirements. These included fundamental practices for  conceptual planning, planning and requirements, design, and  development and testing. In addition, we interviewed responsible Coast  Guard officials and contractors regarding their role in the project and  determined whether officials documented lessons learned for future  decisions for the new EHR project.", "To address the third objective, we reviewed Coast Guard medical records  management documentation, such as medical manuals, workflow  procedures, and standard operating policies and procedures for the Coast  Guard\u2019s 166 clinics and sick bays. We also administered a survey via e- mail to all of the 12 HSWL Regional Managers and a web-based survey  to all of the 166 clinic and sick bay administrators to obtain their views on  any challenges they face in managing paper health records, as well as  any mitigation strategies they have employed for the challenges they  identified.", "Before administering the surveys, we pretested them by interviewing 1  Regional Manager and 5 clinic and sick bay administrators to ensure  survey questions were accurately reflected. We received responses to the  survey from all 12 Regional Managers and from 120 of the 166 clinic and  sick bay administrators.", "To address the fourth objective, we reviewed available planning  documentation, such as a request for information, capabilities analysis  study plan and report, and the alternatives analysis report for the  acquisition or development of a new EHR system as of October 2017. We  also interviewed officials within the Acquisition Directorate to determine  the status of the efforts to acquire or develop a new EHR system. A full  description of our objectives, scope, and methodology can be found in  appendix I.", "We conducted this performance audit from October 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Electronic health records that are interoperable and contain all relevant  patient information are crucial for optimizing the health care provided to  patients. Historically, patient health information has been scattered across  paper records kept by different caregivers in many different locations,  making it difficult for a clinician to access all of a patient\u2019s health  information at the time of care. Lacking access to these critical data, a  clinician may be challenged in making the most informed decisions on  treatment options, potentially putting the patient\u2019s health at risk. Thus, the  move toward collecting, storing, retrieving, and transferring these records  electronically can significantly improve the quality and efficiency of care.", "This is especially true in the case of military personnel and veterans, such  as those in the Coast Guard, because they tend to be highly mobile and  may have health records at multiple facilities both within and outside the  United States. Therefore, EHRs that are interoperable among health care  systems of providers such as the Coast Guard, the Department of  Defense (DOD), and the Department of Veterans Affairs (VA) are key to  improving the care these patients receive.", "In April 2004, the President called for widespread adoption of  interoperable EHRs by 2014. Similarly, in August 2006, the President  instructed agencies, as they implemented, acquired, or upgraded health  information technology (IT) systems, to utilize systems and products that  met recognized interoperability standards. For nearly two decades both  DOD and VA have been working to implement interoperable health care  systems, although with little success."], "subsections": [{"section_title": "The Coast Guard Has Historically Relied on EHRs and Related Systems to Support Health Care Efforts", "paragraphs": ["The Coast Guard\u2019s HSWL Directorate is responsible for ensuring the  readiness and health of nearly 50,000 members throughout the United  States. In this regard, the Office of Health Services within HSWL is  charged with providing healthcare to Coast Guard members, other  military active duty and reserve members, retired personnel, and eligible  family members. The Coast Guard\u2019s healthcare services are supported by  41 U.S. based health clinics and 125 sick bays.", "In an effort to meet the need for interoperable EHRs, in 2002, the Coast  Guard implemented DOD\u2019s Composite Health Care System (CHCS) at  its clinics and sickbays. According to the Coast Guard\u2019s medical manual,  the clinics and sickbays used CHCS for various health care-related  activities, including scheduling patient appointments; documenting patient  consults and referrals; storing prescriptions; tracking and controlling  prescribed medications; and tracking laboratory orders. CHCS interfaced  with the DOD Defense Eligibility Enrollment Reporting System, which  provided verification of the identity and benefit eligibility of Coast Guard  members; other military active duty, reserve, and retired personnel; and  their eligible family members. CHCS also interfaced with other health  care-related systems, such as a DOD prescription repository, a patient  lab delivery system used by health care providers, a system that provided  eyewear-related services, and the military\u2019s health insurance provider\u2019s  system.", "To provide a more user-friendly way of accessing CHCS, the Coast  Guard implemented DOD\u2019s Provider Graphical User Interface (PGUI) in  2004. This interface also provided clinics and sick bays with additional  system functionality, such as the ability to create and store medical notes  electronically.", "According to HSWL staff, although CHCS and PGUI provided the Coast  Guard with a way to manage health records electronically, these systems  were outdated and lacked key functionality such as billing, scheduling,  and case management. Therefore, the Coast Guard intended to transition  from CHCS and PGUI to DOD\u2019s more modernized Armed Forces Health  Longitudinal Technology Application (AHLTA) in 2009 to achieve  interoperability with DOD and VA and comply with executive orders and  statutes that called for efficient health care initiatives. However, HSWL  staff stated that the cost of adopting and maintaining AHLTA, as well as  the need for the Coast Guard to meet its unique mission requirements,  led the agency to move forward with implementing a new system of its  own in 2010. The new system was intended to be interoperable with both  DOD\u2019s and VA\u2019s health information systems.", "Toward this end, on September 30, 2010, the Coast Guard awarded a 5- year, $14 million contract to acquire a commercial off-the-shelf (COTS)  EHR system. According to the Coast Guard\u2019s EHR business case, the  system was to provide ambulatory services, including online management  of patient health records; patient scheduling and billing services; dental  and radiology modules; management of prescribed medications and  tracking laboratory orders, among other capabilities.", "However, while working to implement the COTS EHR system, HSWL staff  determined that many other Coast Guard health care-related IT systems  were outdated and also needed modernization. As a result, the HSWL  Directorate began an effort to expand the original EHR modernization  effort to integrate these other necessary and outdated services. This  expanded project was called IHiS.", "According to the HSWL Directorate, IHiS was to provide additional  services such as work-life and safety data management, work-life case  management, wireless access, and an integrated patient portal that was  intended to allow patients to access their medical records at any time.  The project consisted of various contracts with 25 different vendors and  was estimated to cost approximately $56 million to implement, which  included the original $14 million COTS EHR contract.", "HSWL staff stated that, at the time that the IHiS project was being  planned and designed, the Department of State was also planning to  develop an EHR system. In order to reduce the overall cost to both  parties, in 2012, the Department of State signed an interagency  agreement with the Coast Guard to utilize IHiS for that department\u2019s  personnel. The system was to be implemented in phases with beta  testing at two to three selected Coast Guard clinics in October 2015, and  then subsequent implementation at the other clinics, sick bays, and  Department of State locations. However, on October 19, 2015, the Coast  Guard decided to terminate the IHiS project and decommissioned PGUI  in 2015 and CHCS in 2016."], "subsections": []}]}, {"section_title": "The Coast Guard Attributed IHiS Termination to Financial and Other Risks, after Spending Approximately $60 Million on the Project", "paragraphs": ["According to the Director of HSWL, who was appointed to the position in  August 2015, financial, technical, schedule, and personnel risks led the  Coast Guard\u2019s EOC to decide to terminate the IHiS project. Specifically,  the Director of HSWL provided us a written summary of information on  the IHiS project risks that she said she had verbally communicated to the  EOC during meetings on September 24, 2015, and October 6, 2015. The  financial risks that the Director presented were based on internal  investigations initiated in January 2015 and May 2015 to determine  whether the HSWL Directorate had violated the Antideficiency Act by  using incorrect funding sources and incorrect fiscal year funds for the IHiS  project. In this regard, the Coast Guard ordered project management and  contractor staff to cease work on IHiS until a determination was made  regarding the antideficiency violation.", "In addition, the Director stated that she relayed technical risks to the  EOC. These risks were identified in an e-mail in late August 2015 by  Coast Guard project management staff who participated in the design and  development efforts for IHiS. The Director and the related e-mail identified  the following technical risks:", "Lack of testing. IHiS lacked an independent security assessment to  verify that the system\u2019s security infrastructure was adequate. In  addition, full interface testing with systems such as the Defense  Eligibility Enrollment Reporting System had yet to be completed to  ensure security and data integrity.", "Limited system functionality. The system that was to provide user  verification and IHiS role management services was not yet complete.", "In addition, Coast Guard workstations could not yet access IHiS from  the network and the patient portal lacked two-factor authentication.  Further, the service that was to register new IHiS users in the system  had yet to be completed.", "The Director also presented schedule and personnel risks to the EOC:", "Delays in the implementation timeline. The Director stated that  between August 2015 and September 2015, she requested that the  DOD\u2019s Defense Health Agency Solution Delivery IT team  independently validate the IHiS timelines and the status of the project.  The Director said she requested this review because of the technical  risks identified in the August 2015 e-mail and concerns as to whether  IHiS would be ready to be piloted at the first clinic in the fall of 2015.  According to the Director, the Defense Health Agency team projected  the timeline for the first clinic implementation to be approximately 1  year later than originally estimated. The Director added that Defense  Health Agency team members stated that the timeline was delayed, in  part, because critical IHiS interfaces and workflows were not complete  or operational. The Director told us that these estimations were  provided by the Defense Health Agency team verbally and that the  team did not provide the Coast Guard any written documentation  outlining its findings.", "Changes in project management staff. Although HSWL staff had  been managing the IHiS project since it was initiated in 2010, C4&IT  was directed to assume the oversight responsibilities for IHiS  implementation in May 2015 due to concerns about the project\u2019s  adherence to established governance processes raised by the internal  investigators looking into the potential Antideficiency Act violations. By  August 2015, the key project management personnel that had  overseen the project since 2010 had been removed. According to  C4&IT staff, IHiS was cancelled during the transition of project  managers. As a result of the changes in staff, one vendor noted that it  was unclear as to who were stakeholders, responsible parties, and  decision makers.", "According to the Director, these risk factors had demonstrated that the  project was far from ready for deployment and that continuing IHiS could  cause significant stewardship and reputational harm to the Coast Guard.  As a result of the risks presented by the Director, the EOC members  made the decision to cancel IHiS, and did not consider any other  alternatives to its cancelation.", "Subsequent to the project\u2019s cancelation, the Deputy Commandant for  Mission Support conducted an analysis of the amount of money that had  been obligated for and spent on the project. According to the analysis,  which included obligations and expenditures from September 2010 to  August 2017, the Coast Guard had obligated approximately $67 million  and, of that amount, had spent approximately $59.9 million on the IHiS  project at the time of its cancelation. Further, according to Office of  Budget and Programs staff members, no equipment or software from the  IHiS project could be reused for future efforts.", "In addition, according to senior staff within the Acquisition Directorate, the  Coast Guard continued to pay millions of dollars to vendors over 2 years  after the project\u2019s cancelation to satisfy existing contractual obligations.  For example, according to staff within the Acquisition Directorate: $102,993 was paid in November 2017 to one vendor for leased  equipment that was damaged or missing, as part of closing out the  contract. $460,352 was paid in November 2017 to an equipment vendor  because the Coast Guard was obligated to do so after it had  exercised the contract option period just prior to canceling IHiS.", "Approximately $872, 000 was paid to various vendors by November  2017 as part of closing out other contractual obligations for items such  as software licensing and support and a data storage center.", "Approximately $2.4 million is to be paid to one vendor by February  2018 for software and licensing products.", "Approximately $2.8 million is to be paid by February 2018 for removal  and shipment of equipment.", "However, the amount spent on the project is likely underestimated  because the Coast Guard\u2019s analysis of spending did not include labor  costs for the agency\u2019s personnel (civilian or military) who spent  approximately 5 years managing, overseeing, and providing subject  matter expertise on the project. It also did not include any travel costs  incurred by these personnel."], "subsections": []}, {"section_title": "The Coast Guard Could Not Demonstrate Effective Project Management, Lacked Governance Mechanisms, and Did Not Document Lessons Learned for the IHiS Project", "paragraphs": ["The Coast Guard could not demonstrate that it effectively managed and  oversaw the IHiS project prior to its discontinuance. Specifically, although  the Coast Guard was to follow the SDLC Practice Manual to guide its  management and oversight of the project, the agency could not provide  complete evidence that it had addressed 15 of the 30 SDLC practices we  selected for evaluation. In addition, project team members provided  inconsistent explanations regarding whether or not documentation existed  to demonstrate the actions taken to manage and oversee the IHiS project.  Further, although the Coast Guard developed charters for various  governance boards to provide project oversight and direction, the boards  were not active and the Chief Information Officer (CIO) was not included  as a member of the boards, further contributing to a lack of key  governance mechanisms for IHiS. Finally, the Coast Guard did not  document and share lessons learned from the failed project to help  prevent similar outcomes for future IT projects."], "subsections": [{"section_title": "The Coast Guard Could Not Demonstrate That Selected Project Management Practices Were Addressed", "paragraphs": ["In an effort to institute disciplined, repeatable practices for IT  development and acquisition, the Coast Guard developed the SDLC  Practice Manual, which establishes the seven-phase methodology for  developing the Coast Guard\u2019s Assistant Commandant for C4&IT systems,  such as IHiS. The practice manual is intended to guide project  management teams through a progression of activities for managing and  overseeing IT projects from conceptual planning to disposition. (Appendix  II provides a discussion of each SDLC phase included in the practice  manual and the 30 selected practices that we evaluated.)", "Although IHiS was to adhere to the SDLC practices established in the  manual, the Coast Guard could not demonstrate that the staff providing  day-to-day management of the project had always done so. Specifically,  of the 30 selected project management practices that we evaluated for  the initial four SDLC phases of IHiS\u2014Conceptual Planning, Planning  and Requirements, Design, and Development and Testing\u2014Coast Guard  officials provided documentation that the project management team fully  addressed 15 practices and partially addressed 5 practices. The agency  could not provide documentation that the project team had addressed 10  other practices. Table 1 provides a complete listing of the SDLC project  management practices that we selected for evaluation and the extent to  which the Coast Guard could demonstrate that it completed each  practice.", "For this phase, the Coast Guard demonstrated that steps had been taken  to address five of the seven selected project management practices for  IHiS. Specifically, it assigned project management roles, such as the  project manager, asset manager, and the system\u2019s sponsor. The agency  also documented the initial IHiS business case and acquisition strategy,  as well as the designation memorandum that identified IHiS as a C4&IT  system.", "However, the Coast Guard could not demonstrate that the project  management team had validated the project\u2019s alignment with the  agency\u2019s enterprise architecture and that the project had received the  required phase exit approval. As a result, the Coast Guard could not  provide evidence that the necessary steps were taken to ensure that the  project would align with the agency\u2019s business objectives and that project  management staff had received approval to proceed to the next SDLC  phase."], "subsections": [{"section_title": "Planning and Requirements Phase", "paragraphs": ["For this phase, the Coast Guard demonstrated that 8 of the 11 selected  project management practices were performed for the IHiS project.  Specifically, the agency provided evidence that it had completed the  tailoring plan that detailed the SDLC processes that would be required  throughout the IHiS system\u2019s lifecycle, developed an initial risk  management plan that included a list of vulnerabilities and the measures  to overcome or lessen them, and conducted a cost benefit analysis. The  Coast Guard also documented functional requirements; reviewed external  mandates, such as those mentioned earlier; created an initial training  plan; and designated the system development and system support  agents. Finally, the Acting CIO approved the project to move to the next  phase and stated in a memorandum that the project had met all the  requirements of the planning and requirements phase.", "However, the Coast Guard could not demonstrate that it had fully  completed all of the requirements of this phase. For example, the Coast  Guard provided documentation that partially met the requirement to  develop a project management plan. Specifically, the agency created a  project management plan that included certain required elements, such  as a project description, work breakdown structure, and a life cycle cost  estimate. However, it did not complete other required elements.  Specifically, although the Coast Guard developed a project schedule for  IHiS, it was not well-constructed, which made the overall quality of the  IHiS schedule unreliable. For example, the IHiS schedule allowed for  many activities to slip a significant number of days before impacting the  dates of key events. Further, the Coast Guard could not demonstrate that  it had created a communication plan\u2014another element of the project  management plan\u2014that is essential to identifying how system  development progress is to be communicated across the project  management team.", "The Coast Guard also could not demonstrate that two other selected  practices were addressed. Specifically, the agency could not provide an  integrated logistics support plan that is intended to document processes  for ensuring IHiS data management and records management, among  other things. In addition, the Coast Guard could not demonstrate that it  had developed an information assurance plan that is intended to  articulate the information security controls required to ensure the  availability, integrity, authentication, and confidentiality of the patient  health information that was to be stored in IHiS. As a result, the Coast  Guard could not demonstrate that it had performed key steps to construct  a reliable schedule for IHiS, plan for how the project\u2019s progress was to be  communicated to key stakeholders, ensure appropriate data and records  management for information stored in IHiS, and plan for the controls  necessary to secure patient health information."], "subsections": []}, {"section_title": "Design Phase", "paragraphs": ["The Coast Guard demonstrated that actions had been taken to partially  address three of the eight selected project management practices for the  design phase. In this regard, the agency partially addressed the  requirement to develop a detailed system design. Specifically, the system  design documentation included a description of the operating system,  external and internal system interfaces, inputs and outputs of each  subsystem, administrative components that are intended to connect  systems, and system security requirements. However, the system design  documentation did not include information on the system architecture  components, system timing and sizing, and system auditing  requirements. The documentation also did not address all IHiS functional  requirements as required by the SDLC.", "The Coast Guard also partially addressed the requirement to develop an  operational analysis plan. For example, the plan included performance  and operating measures related to availability, maintainability, and  training. It also included support measures related to system utilization,  incident management, and problem management. However, the Coast  Guard had not included mission-related performance measures;  operating measures related to reliability, user satisfaction, and  effectiveness of technology; and other system support measures related  to change management.", "In addition, the agency partially addressed the requirement to create the  test and evaluation master plan. Specifically, the test and evaluation  master plan included required elements, such as the scope, content,  methodology, and sequence of testing, as well as the management of and  responsibilities related to testing activities. However, the plan did not  define activities for integration and security testing, both of which are  intended to validate that the integrated system components function  properly.", "The Coast Guard could not demonstrate that five other selected practices  were addressed for the IHiS project. In this regard, it could not  demonstrate that the project team had: held review sessions with the user community to ensure that the  requirements and the design were consistent with the new or  enhanced business requirements; developed contingency and disaster recovery plans to document the  steps necessary to continue IHiS operations in the event of a  disruption;  completed the privacy impact analysis to describe what information  was to be collected by IHiS, why the information was being collected,  intended use of the information, and how the information was to be  secured, among other things;  tested the system design to ensure that it would have met  requirements and support business processes; and obtained exit approval for the design phase to demonstrate that all  requirements of the phase were met.", "As a result, no evidence was provided that the Coast Guard performed all  of the required steps to translate detailed system requirements into the  system design and develop plans for life cycle support, such as those that  address contingencies, disaster recovery, and testing for IHiS."], "subsections": []}, {"section_title": "Development and Testing Phase", "paragraphs": ["The Coast Guard demonstrated that actions had been taken to address  two of the four selected practices and partially addressed one practice for  the development and testing phase. For example, the agency developed  the IHiS implementation plan that specified key activities, such as system  training and monitoring, and included a schedule of activities that were to  be accomplished during implementation. In addition, the Coast Guard  created a diagram of the IHiS system layout as part of its effort to address  one practice\u2014to develop system documentation. However, it could not  demonstrate that other required system documentation, such as system  and user manuals that specify how to use and operate the system, had  been created.", "Further, the Coast Guard could not demonstrate that it had conducted  IHiS system testing, although the agency granted an authority to operate  (ATO) and indicated in the ATO memorandum that the system had  undergone some form of testing. The Coast Guard\u2019s SDLC specifies that  system testing is to take place prior to the issuance of an ATO. However,  according to a memorandum signed by the IHiS authorizing official, a  short-term ATO was granted for the system on March 30, 2015, in an  attempt to ensure there would be a functioning replacement system in  place prior to the decommissioning of CHCS. Nevertheless, the Coast  Guard could not provide complete evidence that it took the necessary  steps intended to ensure that the system would function as expected,  such as conducing system testing."], "subsections": []}]}, {"section_title": "Relevant Documentation Was Often Not Available", "paragraphs": ["Over the course of our review, Coast Guard project team members  provided inconsistent explanations regarding the availability of  documentation to support the project management activities for IHiS. For  example, with regard to the SDLC practices that we identified as not  having been implemented, the former IHiS project manager and a  knowledgeable representative for the contractor responsible for providing  engineering and acquisition technical assistance for IHiS stated that the  agency had developed most of the supporting documentation which  would demonstrate that actions consistent with the SDLC practices had  been taken.", "In addition, annotations within the IHiS acquisition strategy indicated that  required SDLC artifacts, such as enterprise architecture documentation;  plans for integrated logistics support, contingency, and disaster recovery;  and a privacy impact assessment, among many others, were  documented, available, and maintained within a document management  tool. However, staff within the HSWL Directorate, the Office of Budget  and Programs, and the Office of Enterprise Applications   Management told us that the documentation either did not exist or could  not be located because several of the key project management team  members were no longer employees of the Coast Guard.", "The absence of the various documents and other artifacts that would  support the required SDLC activities raises doubts that the Coast Guard  took the necessary and appropriate steps to ensure effective  management of the IHiS project. Carrying out established procedures for  effective management and oversight of IT projects will be important for  supporting any system development and acquisition effort that the Coast  Guard undertakes to implement a future EHR system."], "subsections": []}, {"section_title": "The Coast Guard Lacked Governance Mechanisms for IHiS Oversight", "paragraphs": ["According to the IT Investment Management Framework, efforts to build a  foundation for IT governance involve establishing specific critical  processes, such as instituting investment boards and controlling  investments as they are developed. In addition, we have long reported  that federal IT projects have failed due, in part, to a lack of oversight and  governance especially at an executive-level, such as the CIO.", "The Coast Guard documented charters for four governance bodies that  were intended to provide oversight to the IHiS project:", "The Executive Steering Committee was to provide executive oversight  of the design, implementation, operation, and long term direction for  IHiS. Responsibilities of the committee were to include monitoring the  overall acquisition, integration, and operation of IHiS; authorizing  major changes in the project\u2019s objectives, scope, and requirements;  and reviewing the reliability, availability, and affordability of the  project, among other things. Members of the committee were to  include representatives from the Coast Guard\u2019s HSWL Directorate,  the Office of Enterprise Applications Management, and Department of  State representatives.", "The User Group was to make recommendations to the IHiS Program  Management Office on functionality and system design and to ensure  that decisions were based on end-user needs. Responsibilities of the  group were to include making suggestions on improving IHiS for the  user, participating in planning for future changes or upgrades to the  system, and evaluating strategies to maintain and improve system  efficiency. The IHiS project manager was to serve as chair of the  group, and the Coast Guard and Department of State were to  nominate user representatives from each functional area of IHiS as  additional group members.", "The Change Control Board was to evaluate change proposals in  regard to technical, user, and cost impact to the system and  recommend change requests to the IHiS baseline. Members of the  board were to include representatives from the Coast Guard\u2019s Office  of Enterprise Applications Management, the Business Operations  Division, and the Department of State.", "The System Security Committee was to manage the risk to IHiS and  identify and mitigate security vulnerabilities. Responsibilities of the  committee were to include reviewing IHiS security configurations,  changes to those configurations, and proposed changes to IHiS to  ensure that the system\u2019s security would not be compromised.  Members of the committee were to include representatives from the  Coast Guard\u2019s Office of Enterprise Applications Management, the  Business Operations Division, and Department of State security and  privacy representatives.", "While the Coast Guard chartered these various governance bodies for  IHiS oversight, the agency could not provide evidence that the boards  had ever been active in overseeing the project prior to its cancelation. As  a result, the IHiS project lacked important oversight mechanisms to  ensure the project\u2019s success.", "In addition, the CIO (Deputy Assistant Commandant for C4&IT) was not  included as a member of any of the IHiS governance bodies. According to  a memorandum signed by the Acting CIO in 2011, C4&IT was  responsible for ensuring that the IHiS project was compliant with SDLC  requirements. However, the Coast Guard could not provide evidence that  demonstrated how C4&IT and the CIO were involved in ensuring  compliance with the requirements. Taking steps to fully implement  governance boards that include the CIO will be important to the Coast  Guard\u2019s oversight efforts in implementing a future EHR system and may  decrease the risk of IT project failure."], "subsections": []}, {"section_title": "The Coast Guard Did Not Document Lessons Learned from the IHiS Project", "paragraphs": ["We developed the IT Investment Management Framework that stresses  the importance of identifying lessons learned to support future investment  decisions. We have also previously reported that mechanisms for  documenting, sharing, and disseminating lessons learned serve to  communicate acquired knowledge more effectively and ensure that  beneficial information is factored into planning, work processes, and  activities. Lessons learned provide a powerful method of sharing good  ideas for improving work processes, facility or equipment design and  operation, quality, safety, and cost-effectiveness. They can be based on  positive experiences or on negative experiences that result in undesirable  outcomes, such as the cancelation of the IHiS project. Additionally, it is  important to disseminate lessons learned since lessons are of little benefit  unless they are distributed and used by people who will benefit from  them.", "Although Coast Guard officials stated that lessons learned had been  identified throughout the process of developing IHiS, as of 2 years after  its cancelation, the agency had not documented and shared any lessons  learned from the project and does not have established plans for doing  so. According to an official from the Office of Budget and Programs, the  Coast Guard had not yet documented lessons learned because the  agency views the lessons learned process as ongoing.", "While the Coast Guard may view the lessons learned process as  ongoing, the IHiS project was canceled in 2015, and it is important to  document and share the lessons already identified so that this beneficial  information can be factored into the planning activities for future systems  and projects. Until the Coast Guard takes steps to document and share  identified lessons learned with individuals charged with developing and  acquiring its IT systems, opportunities to protect future systems against  the recurrence of mistakes that contributed to the failure of IHiS will likely  be missed."], "subsections": []}]}, {"section_title": "The Coast Guard Is Managing Health Records Using a Predominately Paper Process; Many Challenges Hinder Service Delivery", "paragraphs": ["In the absence of an EHR system, the Coast Guard currently relies on a  predominately paper health record management process to document  health care services for its nearly 50,000 military members. After  canceling the IHiS project in October 2015, the agency could not return to  managing health records using its legacy electronic capabilities because  PGUI was decommissioned in 2015 and CHCS was decommissioned in  January 2016. Thus, the Coast Guard directed clinics and sick bays to  remove relevant information from CHCS and PGUI and maintain all  health records for its members using a predominately paper process.", "The Coast Guard supplements its current paper process by using  applications that various other agencies operate and maintain. For  example, the Coast Guard uses the Navy\u2019s Medical Readiness Reporting  System to, among other things, track immunizations, periodic health  assessments, dental exams, dental status, and required physical exams.  In addition, the agency uses the Army\u2019s Aeromedical Electronic Resource  Office electronic tracking system to document aviation physical exams  and aero medical summaries. However, while these systems hold  valuable information, they are separate applications requiring separate  logins and do not encompass comprehensive Coast Guard health  beneficiary information.", "Currently, the Coast Guard\u2019s clinical staff (i.e., clinic administrators and  clinicians) are to generally perform the following steps to process each  paper health record:", "Schedule an appointment for patient using Microsoft Outlook\u2019s  calendar feature.", "Provide the patient with the required forms for completion upon his or  her arrival.", "Verify that all required paper forms are complete and correct.", "Handwrite clinical notes in a paper health record during the  appointment.", "Complete referrals on an internal referral form and fax the form to the  external provider.", "Handwrite prescription.", "Review and initial all lab and x-ray reports before filing them in the  paper health record.", "File forms in their assigned sequence within the health record.", "Store all paper health records in secure cabinets or other secure  areas of the facility.", "Conduct an accuracy and completeness check of the health record  upon notification that an individual will be transferred to another facility  and correct any identified deficiencies.", "Mail patient\u2019s paper health record to a new facility if there is a  permanent change of station, or provide the patient his or her health  record in a large sealed envelope to carry by hand.", "Figure 1 generally depicts the required steps for managing paper health  records."], "subsections": [{"section_title": "The Coast Guard Faces Numerous Challenges in Managing Its Paper Health Records and Has Adopted a Number of Manual Steps to Deliver Services", "paragraphs": ["In response to our survey, the 12 HSWL Regional Managers identified a  number of challenges that clinics and sick bays in their regions had  experienced in managing and maintaining paper health records. These  challenges were grouped into 16 categories. Further, the 120 clinic and  sick bay administrators that subsequently responded to a separate survey  reported varying degrees to which they viewed each category as  challenging. Figure 2 provides the clinic and sick bay respondents\u2019  views of the challenges.", "The following summarizes clinic and sick bay responses for each  identified challenge with managing and maintaining paper health  records:  Incomplete records. Ninety-eight (82 percent) of the respondents  reported incomplete records as challenging. In this regard, 34 of the  survey respondents reported that not all CHCS and PGUI records were  printed out and included in patients\u2019 paper health records as required  before the systems were retired; therefore, they had no way to ensure the  patients\u2019 paper records were complete. According to one respondent,  paper records are also often incomplete due to parts of the record being  dispersed across different medical facilities, thus, making it difficult to put  together a complete patient history and sometimes resulting in the need  to repeat testing and treatment of patients.", "Penmanship. Among the 91 (76 percent) survey respondents that  reported penmanship as challenging, several noted that it is difficult for  staff to read illegible handwritten medical notes. This, in turn, results in  difficulty determining the accurate diagnosis, the required prescription, or  a referral.", "Tracking medications. According to 89 (76 percent) of the respondents,  it is challenging to track medications without an EHR. For example, one  administrator stated that the lack of an EHR makes the management of  patient medication use difficult, as staff are unable to verify what  medications a patient is taking, what medications have been prescribed  from an outside location, and/or the effectiveness of medications. Another  administrator stated that staff members rely heavily on patients to  remember what medications they are taking\u2014potentially causing harm if  patients cannot remember what medications they are taking and the  medications have dangerous interactions.", "Amount of time to manage records. According to 86 (72 percent) of the  respondents, managing paper health records is challenging and requires  more time for staff to complete and file paperwork. Several respondents stated that the size of the paper health records has increased, resulting in  additional time required to review and file records.", "Ability to search within records. Eighty-three (70 percent) of the  respondents reported the ability of clinical staff to search within paper  health records for information as challenging. For example, one  respondent stated that providers must flip through individual pages of a  record to search for necessary information. Another respondent reported  that some patients have up to three volumes of a health record and it can  take up to 2 or 3 days to find requested information if the patient does not  recall when or where the medical care was performed. Figure 3 shows a  large paper health record and the multiple storage cabinets used to store  them, which illustrates the difficulty in manually searching for information  within the records.", "Missing records. Eighty-three (69 percent) of the survey respondents  stated that missing records are challenging. According to one  administrator, repeat evaluations that may not be required for chronically  ill patients are being conducted due to missing records. Another  administrator stated that information can often get misfiled in the record of  a patient with a similar name.", "Availability of records. Seventy-eight (65 percent) of the respondents  reported that the availability of records is challenging. For example, one  administrator reported that many records are located in different  locations, making it difficult to access the necessary information. Another  administrator stated that delays occur when clinic staff have to wait for  patients to bring records in for review or wait for updated notes from a  previous location.", "Amount of time for patient encounters. According to 65 (55 percent) of  the respondents, the lack of an EHR has resulted in an increase in the  amount of time required to check-in patients, complete patient  appointments, and enter information in the patient record. According to  one administrator, clinical documentation has to be completed by hand  and some clinicians wait until the end of the day to complete notes.  Another administrator reported that the clinician stays after the clinic  closes to complete notes.", "Conducting consultations. Sixty-one (51 percent) of the respondents  reported conducting consultations with paper records as challenging.  Several administrators stated that patient information is faxed or scanned  and submitted for the consulting provider to review. According to one  administrator, there are times when documentation must be faxed or  scanned multiple times in order to produce a legible copy, resulting in  increased time spent gathering and submitting information.", "Health trends. According to 59 (50 percent) of the respondents, the use  of paper records makes combining data to understand population health  trends challenging. According to one survey respondent, accomplishing  this without an EHR requires manually searching through every paper  health record.", "Ability to view and print laboratory reports. Fifty-six (47 percent) of the  survey respondents reported that the inability to view and print laboratory  reports without an EHR is challenging. One administrator stated that their  clinic could view and print the results from one particular laboratory, but if  a patient received services from any other lab the clinic staff would have  to request that the patient bring the laboratory results to the clinic.  Another administrator stated that it could take 2 or more days to receive  requested lab results because there was no way to easily obtain them via  a centralized system.", "Sending referrals. Forty-two (35 percent) of the respondents stated that  sending referrals is challenging. One administrator reported facing  challenges with faxed referral forms not being received after obtaining a  fax confirmation. Another respondent reported having to spend an  increased amount of time on the referral process with each referral  necessitating at least 20 minutes to complete the required forms and fax  them to the external provider\u2014with 10\u201325 referrals being sent each day.", "Cost of maintaining records. Thirty-nine (33 percent) of the  respondents reported that the cost of maintaining paper health records is  challenging. For example, one administrator reported that health records  are frequently mailed to other medical locations or to the National  Archives (for those separated or retired), which is a large expense for the  Coast Guard. Another administrator stated that the time taken to gather  paperwork, wait for civilian providers to send notes, and coordinate and  execute health record updates is costly to the Coast Guard. Lastly,  several administrators reported that expenditures for paper and printing  products have increased due to the lack of an EHR. For example, one  administrator reported that the clinic had increased its expenditure for  paper by 50 percent.", "Scheduling of appointments. Thirty-eight (32 percent) of the  respondents reported that the time it takes to schedule appointments is  challenging. One administrator stated that, due to the lack of a scheduling  system, patient appointments are being scheduled using the Outlook  calendar function, which is time consuming when there are network  slowdowns or freezes during high rates of utilization. Another  administrator reported that appointments are sometimes double  scheduled or occasionally disappear from the calendar and, in one  instance, a patient received an appointment reminder for an appointment  that the patient had never scheduled.", "Security/privacy of records. According to 34 (28 percent) of the  respondents, the security and privacy of health records is challenging.  One administrator reported that paper records are more prone to be  within reach of individuals that should not have access to them because  they are not stored in a secure EHR that has protections built in.", "Ordering x-rays. Thirty-one (26 percent) of the respondents reported that  the process for ordering x-rays is challenging. According to several  administrators, the current process for ordering x-rays involves submitting  a referral by fax, which takes additional time for processing and waiting  for results to be returned by fax. Several administrators reported that it is  difficult to know if all x-ray results have been received and filed.", "The responding clinic and sickbay administrators described a range of  alternative work-around processes that they have developed to help  alleviate several of the challenges. Specifically, they reported having  developed additional forms, tracking methods, and alternative processes,  as well as having notified Coast Guard HSWL management of the  challenges they face.", "Regarding developing forms, approximately 31 percent of the survey  respondents noted that they had developed additional forms in order to  more easily obtain the information that they would have had available to  them with an EHR in place. According to one administrator, these forms  are based on the most common patient encounter needs and capture  information such as medications, allergies, chronic issues, and family  history. In addition, these administrators reported developing electronic  file versions, such as a Microsoft Word document, of the standard health  forms so that they can e-mail them to patients and reduce the number of  paper forms that have to be completed by hand and scanned. According  to the administrators, these steps help address handwriting and space  challenges.", "In addition, approximately 37 percent of the respondents reported  developing tracking methods, such as Microsoft Excel spreadsheets and  logs, to collect data and assist in tracking patient and provider  information. One administrator reported that a spreadsheet was created  to track patients with conditions that require monitoring, since there is no  longer a system that has the data in one place. Another administrator  reported creating a spreadsheet to track referrals, numbers of physicals,  patient encounters, and medical readiness. Based on the survey  responses, these tracking methods have helped address the challenges  related to combining data to understand health trends, and tracking  medications and referrals.", "Further, 30 percent of the survey respondents noted that they have also  developed alternative processes to mitigate some of the challenges with  managing paper health records. For example, one administrator stated  that the clinic started conducting weekly reconciliations of referrals to  ensure that all treatment records from outside referrals were obtained by  the clinic and placed in the paper health record. Another administrator  stated that the clinic had begun e-mailing patient encounter notes to the  medical officer for review in an effort to ensure patient records are  complete.", "Finally, approximately 55 percent of the respondents reported that they  have notified HSWL senior management of the challenges encountered  with managing and maintaining paper records. According to an official  within the Acquisitions Directorate, the Coast Guard plans to mitigate  many of the challenges identified by the Regional Managers with a new  EHR system initiative. However, these alternative processes may not  provide sustained solutions to overcoming these challenges. Until Coast  Guard implements a new EHR solution, the challenges inherent in a  predominantly paper process will likely remain."], "subsections": []}]}, {"section_title": "The Coast Guard Intends to Acquire a New EHR System, but Has Not Yet Chosen a Solution", "paragraphs": ["The Coast Guard has begun taking steps to acquire a new EHR system  referred to as the Electronic Health Record Acquisition (eHRa). According  to the Acquisitions Directorate, the Coast Guard plans to manage and  oversee the acquisition of eHRa through its non-major acquisition  process (NMAP), as described in its Non-Major Acquisition Process  (NMAP) Manual. The NMAP requires formal approval reviews at three  discrete knowledge points called acquisition decision events (ADE) and  includes three phases to assess the readiness and maturity of the  acquisition. Figure 4 graphically represents the ADEs and phases of the  NMAP. (Appendix V provides a more detailed discussion of each ADE  and each of the three phases that make up the NMAP process.)", "Once the Coast Guard identifies the need for a new acquisition program,  the program\u2019s sponsor is to seek ADE-1 approval. ADE-1 occurs when  the program is designated as a non-major acquisition by the Deputy  Commandant for Mission Support. If an acquisition receives ADE-1  approval, it proceeds to the analyze/select phase of the NMAP. The  analyze/select phase is the first of three phases of the process, and  includes required work activities such as preparing a requirements  document, conducting market research to identify available alternatives,  developing an acquisition strategy, developing a life cycle cost estimate,  and preparing a project plan.", "The Coast Guard formally identified the need for a new EHR system on  February 1, 2016, and obtained ADE-1 approval on February 13, 2016.  Subsequent to the ADE-1 approval, the Coast Guard initiated the  following activities associated with the analyze/select phase:  Requirements development. As part of its efforts to develop new  system requirements for eHRa, the Coast Guard identified its capability  gaps as a result of the lack of an EHR in a Capability Analysis Report.  The report offered two courses of action to address the capability gaps:  (1) business process re-engineering to enhance the current paper-based  process, or (2) transition to a system-based solution. According to the  Acquisitions Directorate, the Coast Guard plans to use the report to  inform its effort in developing requirements for eHRa.", "Market research. The Coast Guard issued a request for information in  April 2017 to assess industry capabilities as part of market research for  the new system. The request for information asked that the solutions fall  into one of four categories that the Coast Guard was considering:", "Federal shared service. This option would allow the Coast Guard to  use a system that is already in use by another federal agency. In  addition, this option aligns with the Office of Management and  Budget\u2019s Federal Information Technology Shared Services Strategy,  issued in May 2012, which highlighted the prevalence of redundancy  in federal IT systems.", "Managed by the Coast Guard, but externally hosted. This solution  would require the Coast Guard to acquire a COTS system and  manage its implementation. However, the system would be  maintained by a vendor at an externally hosted data center.", "Commercial software as a service. This option involves purchasing  commercial software for an EHR solution that is operated and  maintained by a commercial vendor.", "In-house. With this solution, the Coast Guard would manage the  implementation and maintenance of a COTS system with support  from a commercial vendor.", "As a result of the Coast Guard\u2019s request for information, the agency  collected cost, schedule, and capabilities information from commercial  and government solution providers, including DOD and VA.", "The Coast Guard used the providers\u2019 responses to develop an  alternatives analysis report that was completed in October 2017. The  report recommended a solution based on performance, risk, cost, and  schedule advantages. The report indicated that the Coast Guard plans to  use the results of the alternatives analysis to refine the acquisition  strategy, and to support the development of artifacts which are required to  successfully achieve the ADE-2 milestone. Staff within the Acquisitions  Directorate stated that they were also in the process of finalizing a life  cycle cost estimate and a project plan for eHRa\u2014documents necessary  for ensuring that appropriate business decisions will be made regarding  eHRa\u2019s logistics, affordability, and resources, among other things.", "As of December 2017, the Coast Guard had not yet made a final  determination as to which option would be chosen as the solution for the  eHRa acquisition. Until a solution is chosen and successfully  implemented, the Coast Guard and its thousands of members will  continue to face the many challenges inherent with managing and  maintaining paper health records."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The Coast Guard abruptly discontinued the IHiS project in 2015, citing  financial, technical, schedule, and personnel risks. Coast Guard officials  estimate this failed project has thus far cost the agency about $60 million.  Further, this effort left the Coast Guard without any reusable system  components for future EHR efforts.", "The Coast Guard could not demonstrate that it had fully implemented  effective management and oversight for the IHiS project prior to its  discontinuance. Specifically, the Coast Guard could not fully show key  project management actions were taken for IHiS, lacked governance  mechanisms, and did not document lessons learned for the failed project.  By not doing so, the agency reduced the probability of the project\u2019s  success.", "The Coast Guard\u2019s decision to revert to a predominately paper process  has created a number of challenges for its many clinics and sick bays.  These challenges are hindering their ability to deliver services. To help  alleviate several of these challenges, the Coast Guard\u2019s clinics and sick  bays have developed alternative work-around processes. However, these  alternative processes will likely not provide sustained solutions.", "The Coast Guard is currently taking steps to plan for a new EHR system,  but as of December 2017\u2014over 2 years after the cancelation of the IHiS  project\u2014it had not yet selected another solution. Successfully and quickly  implementing an EHR system is vital to overcoming the challenges the  Coast Guard currently faces in managing paper health records. The  expeditious and judicious implementation of such a system can  significantly improve the quality and efficiency of care to the thousands of  Coast Guard active duty and reserve members that receive health care."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the Coast Guard:  The Commandant should direct the Chief Information Officer and the  Chief Acquisition Officer to expeditiously and judiciously pursue the  acquisition of a new EHR system. (Recommendation 1)", "The Commandant should direct the Chief Information Officer and the  Chief Acquisition Officer to ensure established processes required for the  future acquisition or development of an EHR are effectively implemented  and adequately documented. (Recommendation 2)", "The Commandant should direct the Chief Information Officer and the  Chief Acquisition Officer to establish and fully implement project  governance boards for the future EHR effort that include the Chief  Information Officer. (Recommendation 3)", "The Commandant should direct the Chief Information Officer and the  Chief Acquisition Officer to document any lessons learned from the  discontinued IHiS project, share them with the new project management  team, and ensure lessons learned are utilized for the future EHR effort.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["The Department of Homeland Security provided written comments on a  draft of this report. In its comments (reprinted in appendix VI), the  department concurred with our four recommendations and identified  actions being taken or planned to implement them. Among these actions,  the department stated that it is judiciously pursuing an EHR solution,  called eHRa, through its acquisition process, which is currently in the  analyze/select phase of the NMAP process. The department also stated  that a contract award for eHRa is planned for later this fiscal year. In  addition, the department stated that it established a designated  acquisition program with a dedicated program management office team  and oversight council for EHR activities, and that the EOC monitors  eHRa\u2019s progress through the acquisition process. The department further  added that governance boards for eHRa have been established that  include the CIO as required by the NMAP manual. Finally, the department  said that it plans to compile lessons learned from the discontinued IHiS  project by March 30, 2018.", "Given the actions identified, the department requested that we consider  the first three of our four recommendations to be closed. However, while  the Coast Guard is taking positive steps with regard to initiating the eHRa  program, the department noted that key decisions related to analyzing,  selecting, and acquiring the new system remain to be made. Further, the  Coast Guard has not yet awarded a contract for an EHR solution and is  not planning to do so until later this fiscal year. Thus, the extent to which it  establishes and effectively implements processes and governance boards  throughout the project, and expeditiously and judiciously pursues the  acquisition of the new system, remain to be seen. Accordingly, we will not  yet close any of the recommendations. The department also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Commandant of the  Coast Guard, 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) 512-9286 or pownerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this study were to (1) describe what led the United  States Coast Guard (Coast Guard) to the decision to terminate further  Integrated Health Information System (IHiS) development, and how much  was spent on the project; (2) evaluate the Coast Guard\u2019s management  and oversight actions for the discontinued electronic health records (EHR)  modernization project and what, if any, lessons learned were identified;  (3) describe the Coast Guard\u2019s current process for managing health  records and the challenges, if any, it is encountering; and (4) determine  the Coast Guard\u2019s plans for effectively implementing a new EHR system  and the current status of its efforts.", "To address the first objective, we reviewed relevant IHiS project  documentation, such as key contracts, the project plan, presentations by  the project management team, and IHiS-related memorandums. We also  reviewed project expenditures documentation developed by the Deputy  Commandant for Mission Support and the Acquisitions Directorate. We  supplemented our review with interviews of agency officials within the  Health Safety and Work-Life (HSWL) Directorate, Office of Budget and  Programs, Office of Resource Management, Office of Contract  Operations, and the Office of Acquisition Support, as well as six key  contractors.", "To address the second objective, we reviewed relevant policies and  guidance, such as the Coast Guard\u2019s Command, Control,  Communications, Computers and Information Technology (C4&IT)  System Development Life Cycle (SDLC) Policy and the SDLC Practice  Manual intended to guide the management and oversight of  development and acquisition projects at the Coast Guard. We evaluated  available IHiS project management documentation, such as project plans,  the project\u2019s schedule, decision memorandums, charters for IHiS  governing bodies, and Executive Oversight Council (EOC) meeting  minutes, which demonstrated actions taken by project management staff  during the IHiS project, and assessed them against selected practices  identified in the Coast Guard\u2019s SDLC Practice Manual. The practices we  selected are fundamental to effective information technology (IT)  management and oversight. These included practices for conceptual  planning, planning and requirements, design, and development and  testing. We selected the practices from each applicable phase that had  an associated artifact or called for the agency to take specific action(s)  that we were able to validate through evidentiary review. If an artifact was  applicable to multiple practices in multiple phases of the SDLC, we  evaluated the artifact in only one phase and one practice.", "We also interviewed agency officials from Coast Guard offices such as  the HSWL Directorate, Office of Budget and Programs, and Office of  Resource Management regarding their role in managing and overseeing  the IHiS project. In addition, we interviewed or received written responses  from knowledgeable representatives for six key contractors tasked with  providing the ambulatory care system and patient portal, safety data  management and user credentialing system, software, and engineering  and acquisition technical assistance. These interviews focused on the  contractor\u2019s role in the IHiS project, any issues they experienced, and the  status of the services they were providing at the time of cancelation.  Lastly, we interviewed Coast Guard officials within the HSWL and  Acquisition Directorates to determine whether lessons learned were  obtained and documented to inform future decisions for the new EHR  project.", "Our methodology to determine the extent to which the Coast Guard  demonstrated the completion of the selected SDLC phase practices  included three levels of assessment: (1) the Coast Guard provided  documentation that demonstrated that the IHiS project satisfied all of the  elements of the required SDLC project management practice; (2) the  Coast Guard provided documentation that demonstrated that the IHiS  project partially satisfied some but not all elements of the required SDLC  project management practice; and (3) the Coast Guard could not provide  documentation that demonstrated that the IHiS project satisfied any of the  elements of the required SDLC project management practice.", "To address the third objective, we reviewed Coast Guard medical records  management documentation, such as medical manuals, workflow  procedures, and standard operating policies and procedures for clinics  and sick bays. We also administered a survey via e-mail questionnaire to  all of the 12 HSWL Regional Managers and a web-based survey to all of  the 166 clinic and sick bay administrators. The survey to Regional  Managers included questions on whether the clinics and sick bays in their  region faced challenges in managing health records without an EHR  system in place and whether all the records from decommissioned EHR  systems had been included in the paper records. The survey to clinic and  sick bay administrators included questions on the challenges reported by  Regional Managers and the mitigation strategies, if any, employed for the  challenges identified. Before administering the surveys we pretested them  by interviewing 1 Regional Manager and 5 clinic and sick bay  administrators to ensure that our survey questions and skip pattern were  clear and logical and that respondents could answer the questions  without undue burden.", "We administered the survey to the 12 Regional Managers from March  2017 to April 2017; therefore, the corresponding responses reflect  information and views as of that time period. We received 12 responses,  for a 100 percent response rate. We administered the survey to the clinic  and sick bay administrators from April 2017 to August 2017; therefore, the  corresponding responses reflect information and views as of that time  period. We received 120 responses, for a 72 percent response rate.", "To address the fourth objective, we identified the process through which  the Coast Guard is managing its acquisition of its new system, the Non- Major Acquisition Process (NMAP) Manual. We then obtained planning  documentation, such as relevant memorandums that described the Coast  Guard\u2019s need for an EHR, the Coast Guard\u2019s request for information to  assess industry capabilities for market research purposes, and a  capabilities analysis study plan to identify gaps in the Coast Guard\u2019s EHR  capabilities. We also reviewed a capabilities analysis report which details  required capabilities for improving patient care, and an alternatives  analysis report which details solutions the Coast Guard should consider  based on performance, risk, cost, and schedule. We assessed these  documentation against requirements identified in the NMAP, specifically  within the first phase of the acquisition process. We also interviewed  officials within the Acquisition Directorate to determine the status of the  efforts to acquire or develop a new EHR system.", "We conducted this performance audit from October 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Summary of the Coast Guard\u2019s SDLC Phases and Selected Project Management Practices", "paragraphs": ["The Coast Guard implemented the Systems Development Life Cycle  (SDLC) process for non-major information technology (IT) acquisitions in  2004 to help ensure IT projects are managed effectively and meet user  needs. The process, as described in the Coast Guard\u2019s SDLC Practice  Manual, consists of seven phases and related practices\u201430 of which we  selected for evaluation for the initial four SDLC phases of Integrated  Health Information System (IHiS). The following is a summary of each  SDLC phase and a description of the project management practices we  selected for review:  Phase 1: Conceptual Planning  This phase is the first step of the development or significant enhancement  process. During this phase, high-level business needs are identified, a  concept for fulfilling the business needs is proposed and validated, and  resources are committed. Activities (or practices) we selected for review  in this phase include formalizing SDLC role designations, such as the  project manager, asset manager, and sponsor; developing the initial  business case with information regarding the background, system  justification, and project risk management, among other things; validating  alignment with the enterprise architecture; identifying the funding source  and providing a rough order of magnitude cost estimates as part of  developing the acquisition strategy; designating the system as a  Command, Control, Communications, Computers, and Information  Technology (C4&IT) system; and obtaining approval to exit the  conceptual planning phase.", "Phase 2: Planning and Requirements  This phase begins after the project has been defined and appropriate  resources have been committed. During this phase, business  requirements are collected, defined, and validated. More specifically, as  part of the phase practices we selected for review, the SDLC tailoring  plan is completed; and initial life cycle management plans for project  management, risk management, integrated logistics support, training,  and information assurance are developed. In addition, a cost benefit  analysis is conducted; functional requirements are documented; external  mandates are reviewed; the system development agent and system  support agent are designated; and approval to exit the planning and  requirements phase is obtained.", "During this phase, business requirements are translated into system  requirements to develop the detailed system design. Selected practices  for this phase include developing the detailed system design to specify  the operating system, architecture components, timing and sizing, and  interfaces, among other things; developing the operational analysis plan  to document system performance measures, system operating measures  that address reliability, maintainability, availability, training, and user satisfaction; and system support measures containing the level of effort  needed to support the system; conducting review sessions with the user  community to ensure that the system design sufficiently met all functional  requirements; developing contingency and disaster recovery plans;  completing the privacy impact analysis; documenting the test and  evaluation master plan with the scope, content, methodology, sequence,  management of, and responsibilities for test activities; testing the system  design according to the operational test and evaluation plan and  capturing design test results in the test and evaluation master plan; and  obtaining approval to exit the design phase.", "Phase 4: Development and Testing  The system is developed or acquired based on detailed system design  specifications and validated through a variety of tests during this phase.  The objective is to ensure that the system functions as expected and that  sponsor and user requirements are satisfied. More specifically, as part of  the phase practices that we selected, system testing is conducted;  system documentation, such as system manuals, user manuals, and  diagrams of the system is developed; an implementation plan is  developed; and an authority to operate is obtained.", "During this phase, the system is placed in the production environment  and system users are trained. It also includes efforts required to  implement the system and resolve problems identified during the  system\u2019s transition from development to deployment. We did not select  practices to evaluate in this phase since the system was discontinued  before implementation.", "Phase 6: Operations and Maintenance  The system becomes operational during this phase, and its main purpose  is to ensure that the system continues to perform according to  specifications. In addition, routine hardware and software maintenance  and upgrades are performed to ensure effective system operations; user  training continues as needed; and additional user support is provided to  help resolve reported problems. We did not select practices to evaluate in  this phase since the system was discontinued before implementation.", "This phase represents the end of the system\u2019s life cycle. It provides for  the systematic termination of a system to ensure that vital information is  archived. The emphasis of this phase is to ensure that the system (e.g.,  equipment, software, data, procedures, and documentation) is packaged  and disposed of in accordance with appropriate regulations and  requirements. We did not select practices to evaluate in this phase since  the system was discontinued before implementation."], "subsections": []}, {"section_title": "Appendix III: Copy of the Survey That GAO Administered to Coast Guard Health Safety and Work-Life Regional Managers", "paragraphs": ["The questions we asked in our survey of the 12 Health Safety and Work- Life (HSWL) Regional Managers from March 2017 to April 2017 are  shown below. For a more detailed discussion of our survey methodology  see appendix I."], "subsections": []}, {"section_title": "Appendix IV: Copy of the Survey That GAO Administered to Coast Guard Clinic and Sick Bay Administrators", "paragraphs": ["The questions we asked in our survey of the 166 clinic and sick bay  administrators from April 2017 to August 2017 are shown below. For a  more detailed discussion of our survey methodology see appendix I."], "subsections": []}, {"section_title": "Appendix V: Summary of the Coast Guard\u2019s Non-Major Acquisition Process Acquisition Decision Events and Phases", "paragraphs": ["Coast Guard\u2019s Non-Major Acquisition Process (NMAP) Manual defines  the process for the designation, management, and oversight of non-major  acquisitions. The NMAP requires formal approval reviews at three  discrete knowledge points called acquisition decision events (ADE) and  includes three phases to assess the readiness and maturity of the  acquisition. The phases represent work that must be accomplished to  demonstrate readiness to proceed to the next phase. The following is a  summary of each ADE and subsequent phase within the NMAP:", "ADE-1 occurs when the Deputy Commandant for Mission Support  designates the procurement as a non-major acquisition and approves  the acquisition to enter the analyze/select phase. Following ADE-1  approval, the Chief Acquisition Officer or Chief Information Officer  (CIO) designates a project manager. The analyze/select phase  includes project management activities such as conducting market  research to identify available alternatives, preparing a requirements  document, developing an acquisition strategy, developing a life cycle  cost estimate, and preparing a project plan.", "The primary purpose of ADE-2 is to approve the alternatives identified  through market research and to assess the readiness of the  acquisition for a contract award in which the acquisition moves into  the obtain phase. The CIO is the decision authority and provides  oversight for ADE-2. The obtain phase includes activities such as  evaluating whether the proposed solution can effectively meet the  functional requirements, initiating deployment planning, and  conducting usability testing.", "The primary purpose of ADE-3 is to assess the readiness of the  acquisition to be deployed and supported by authorizing the  acquisition to enter the produce/deploy and support phase. The CIO is  the decision authority and provides oversight for ADE-3. The  produce/deploy and support phase includes activities such as  ensuring the delivered product meets cost, schedule, and  performance baselines as described within the project plan, as well as  executing production contracts."], "subsections": []}, {"section_title": "VI: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Nicole Jarvis (Assistant Director), Ashfaq Huda (Analyst in Charge),  Chris Businsky, Juana Collymore, Sharhonda Deloach, Rebecca Eyler,  Andrea Harvey, Gina Hoover, Jason Lee, Rob Letzler, Monica Perez- Nelson, Kelly Rubin, and Andrew Stavisky."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-10", "url": "https://www.gao.gov/products/GAO-18-10", "title": "Counternarcotics: Overview of U.S. Efforts in the Western Hemisphere", "published_date": "2017-10-13T00:00:00", "released_date": "2017-10-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Western Hemisphere nations such as Mexico and Colombia are major sources of illicit drugs such as cocaine, heroin, methamphetamine, and marijuana. Precursor chemicals used in the production of illicit fentanyl and other dangerous synthetic drugs often originate in China but typically enter the United States through Canada and Mexico. U.S. agencies implementing the National Drug Control Strategy conduct several activities to disrupt the flow of illicit drugs and dismantle the organizations that control them (see fig.). In December 2016, Congress established the Western Hemisphere Drug Policy Commission to, among other things, evaluate the U.S.-funded counternarcotics programs in the Western Hemisphere.", "In this context, GAO was asked to review key issues related to U.S. counternarcotics efforts in the Western Hemisphere. This report examines (1) U.S. agencies' spending for counternarcotic efforts in the Western Hemisphere during fiscal years 2010-2015, the most recent data available; (2) how agencies are gathering and sharing best practices and lessons learned from their counternarcotics efforts domestically and internationally; and (3) mechanisms U.S. agencies have used to address changing drug threats. GAO analyzed agencies' data and documents, interviewed agency officials, and conducted fieldwork at the U.S. Southern Command and Joint Interagency Task Force South in Florida.", "GAO is not making any recommendations in this report. Several agencies provided technical comments on a draft of this report which we incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. agencies implementing the National Drug Control Strategy identified billions in spending for Western Hemisphere counternarcotics efforts in fiscal years 2010 through 2015. Agencies that track their counternarcotics spending regionally\u2014the Department of Defense (DOD), the Department of Homeland Security's (DHS) Immigration and Customs Enforcement, the Department of State, and the U.S. Agency for International Development\u2014reported spending nearly $5 billion for such activities in the region during this period. Agencies that do not track counternarcotics spending regionally\u2014DHS's Customs and Border Protection and Coast Guard; and the Department of Justice's Drug Enforcement Administration and Organized Crime Drug Enforcement Task Forces\u2014reported spending about $34 billion for counternarcotics activities in fiscal years 2010 through 2015. According to officials of these four agencies, most of their counternarcotics activities are in the Western Hemisphere. We are not reporting Federal Bureau of Investigation counternarcotics spending separately, since it is included as part of Organized Crime Drug Enforcement Task Forces.", "The Office of National Drug Control Policy (ONDCP), which coordinates the National Drug Control Program, facilitates the sharing of best practices and lessons learned at meetings such as the North American Drug Dialogue workshop, including Canada, Mexico, and the United States. In addition, 7 of the 10 agencies GAO reviewed described processes they have in place for identifying and collecting best practices or lessons learned from counternarcotics efforts in the Western Hemisphere. For example, DOD reported using a process, known as the Joint Lessons Learned Program, that consists of five phases: discovery, validation, resolution, evaluation, and dissemination.", "U.S. agencies use a variety of mechanisms to address changing narcotics conditions in the Western Hemisphere. ONDCP collaborates with agencies working directly on regional counternarcotics efforts to address emerging threats, as reflected in the annually updated National Drug Control Strategy and the Southwest Border Counternarcotics Strategy. In addition, documentary evidence GAO reviewed showed that a variety of interagency groups, task forces, and committees have been created to coordinate the U.S. government's responses to counternarcotics threats. For example, the National Heroin Coordination Group was established to provide guidance aimed at reducing the growing supply of heroin and illicit fentanyl in the U.S. market."]}], "report": [{"section_title": "Letter", "paragraphs": ["Most of the illicit drugs consumed in the United States originate in other  Western Hemisphere nations. For example, Mexico is the primary  supplier of heroin and a major source of methamphetamine smuggled into  this country. Similarly, Colombia is the leading producer of cocaine for the  U.S. market. Moreover, illicit drugs or components manufactured in other  parts of the world are smuggled into the United States through Western  Hemisphere countries. For example, according to the Drug Enforcement  Administration (DEA), precursor chemicals used in the production of illicit  fentanyl often originate in China but typically enter the United States  through Canada and Mexico.", "U.S. government efforts to reduce the trafficking of illicit drugs from other  Western Hemisphere countries have included the establishment of the  Office of National Drug Control Policy (ONDCP). ONDCP is responsible  for, among other things, developing the National Drug Control Strategy (in  this report, \u201cthe Strategy\u201d) and coordinating the efforts of National Drug  Control Program agencies implementing any aspect of the Strategy. In  addition, to bring attention to these and other challenges posed by illicit  drug production and trafficking in the Western Hemisphere and to identify  options for strengthening U.S. counternarcotics efforts in the region,  Congress mandated the establishment of the Western Hemisphere Drug  Policy Commission in December 2016. The commission is directed to,  among other things, evaluate U.S.-funded international counternarcotics  programs in the Western Hemisphere, including drug interdiction, crop  eradication, alternative development, drug production surveys, police and  justice sector training, demand reduction, and strategies to target drug  kingpins.", "You asked us to review key issues related to U.S. counternarcotics efforts  in the Western Hemisphere. This report describes (1) U.S. agencies\u2019  spending for counternarcotics efforts in the Western Hemisphere in fiscal  years 2010 through 2015, (2) agencies\u2019 efforts to gather and share best  practices and lessons learned from their counternarcotics efforts both  domestically and internationally, and (3) mechanisms that agencies have  used to address changing drug threats.", "To examine U.S. agencies\u2019 counternarcotics spending in the Western  Hemisphere, we obtained obligations data from eight U.S. departments,  agencies, and components that implement the National Drug Control  Strategy (collectively in this report, \u201cagencies\u201d): (1) the Department of  Defense (DOD); the Department of Homeland Security\u2019s (DHS) (2)  Customs and Border Protection (CBP), (3) Immigration and Customs  Enforcement (ICE), and (4) Coast Guard; the Department of Justice\u2019s  (DOJ) (5) DEA and (6) Organized Crime Drug Enforcement Task Forces  (OCDETF); the Department of State\u2019s (State) (7) Bureau of International  Narcotics and Law Enforcement Affairs (INL); and (8) the U.S. Agency for  International Development (USAID). We selected these eight agencies  because each conducts international counternarcotics efforts in one or  more program areas that the Western Hemisphere Drug Policy  Commission has been asked to review and because each agency  allocated a combined total of $50 million for counternarcotics efforts in the  four ONDCP-defined program areas\u2014intelligence, interdiction,  international, and investigations\u2014in fiscal year 2015. We worked with  agency officials to determine the amounts obligated (i.e., spent) for  counternarcotics activities in the Western Hemisphere in fiscal years 2010  through 2015, the most recent data available at the time of our analysis.", "We excluded ONDCP from this analysis because it plays a supporting  role as the agency that coordinates the National Drug Control Program  and does not conduct counternarcotics activities in the Western  Hemisphere. In addition, although the Federal Bureau of Investigation  (FBI) conducts counternarcotics-related investigations of transnational  criminal organizations in the Western Hemisphere, we are not reporting  the FBI\u2019s counternarcotics spending separately because the FBI is  reimbursed by OCDETF for its support of drug-related investigations;  therefore, we are including the FBI\u2019s counternarcotics spending in  OCDETF spending. Because some agencies do not track their  counternarcotics spending by region, we were unable to identify  obligations specific to these agencies\u2019 counternarcotics activities in the  Western Hemisphere. Also, to the extent possible, we excluded spending  for activities primarily related to domestically focused U.S.  counternarcotics activities. On the basis of our review of the data, our  review of each agency\u2019s annual accounting of its drug budget, and  interviews with agency officials, we determined that the data were  sufficiently reliable to present obligations that were primarily or partially  spent on counternarcotic activities in the Western Hemisphere.", "To examine agencies\u2019 efforts to gather and share best practices and  lessons learned, we sent a standard set of questions to, and interviewed,  officials of the eight selected agencies as well as ONDCP and the FBI  regarding any processes they use to identify, collect, disseminate, and  share best practices and lessons learned with partner nations and  regarding U.S. government\u2013wide efforts to share best practices and  lessons learned.", "To identify the mechanisms that the eight agencies, ONDCP, and the FBI  have used to address changing drug threats, we interviewed agency  officials about the mechanisms in place to address these threats. We also  reviewed key national documents directing U.S. counternarcotics efforts  as well as documents related to various coordination efforts. In addition,  we conducted fieldwork at DOD\u2019s U.S. Southern Command and the Joint  Interagency Task Force South in Florida. For a more detailed discussion  of our scope and methodology, see appendix I.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Major Drug-Producing and Drug-Transit Countries in the Western Hemisphere", "paragraphs": ["The majority of illicit drugs consumed in the United States is produced in  Mexico and South America and enters the United States across the  southwest border or through the Caribbean. Among countries in the  Western Hemisphere, Colombia and Peru are major producers of illicit  drugs, while Bolivia, Jamaica, and Mexico are both major producers and  major transit countries, according to State (see fig. 1).", "Mexico is a major source and transit country for heroin,  methamphetamine, and marijuana destined for the U.S. market. Jamaica  is likewise the largest Caribbean supplier of marijuana for the U.S.  market. Colombia is the world\u2019s top producer of cocaine and is the major  provider of cocaine available in the United States. While Bolivia and Peru  are also major producers of cocaine, cocaine from these countries is  generally smuggled into other South American countries for domestic  consumption or for shipment to Europe, East Asia, and beyond, according  to State.", "According to U.S. government estimates, illicit drugs originating in Mexico  enter the United States directly through the southwest border, but virtually  all cocaine from South America and marijuana from Jamaica are  trafficked to the United States through the \u201cTransit Zone\u201d\u2014a 7-million- square-mile area that encompasses Central America, Mexico, the eastern  Pacific Ocean, the Gulf of Mexico, and the Caribbean Sea. The Transit  Zone has four principal maritime trafficking routes: the Eastern Pacific,  Western Caribbean, Central Caribbean, and Eastern Caribbean. The  Transit Zone land route is funneled north through Central America into  Mexico, where it splits in several directions up to the U.S. southwest  border. Although Canada is not within the Transit Zone, various drugs,  including fentanyl, transit through it before entering the United States,  according to the Department of State."], "subsections": []}, {"section_title": "Illicit Drug-Trafficking Shifts and Related Challenges", "paragraphs": ["In recent years, the production, trafficking, and marketing of various illicit  substances consumed in the United States have undergone significant  shifts. For example, according to the 2016 National Drug Control  Strategy, over the previous 8 years, opioid abuse emerged as the  greatest drug threat to the nation. This development was complicated by  a spike in the supply and purity of heroin, primarily from Mexico, resulting  in a combined epidemic of heroin-opioid overdose deaths. According to  the Centers for Disease Control and Prevention, heroin overdose deaths  more than tripled between 2010 and 2015, as powerful synthetic opioids,  notably illicit fentanyl, were often mixed with heroin without the user\u2019s  knowledge. Similarly, in its 2017 International Narcotics Control Strategy  Report, State reported various indicators suggesting a significant increase  in cocaine production and trafficking from Colombia. For example,  according to this report, coca cultivation in Colombia increased by 39  percent in 2014 and by 42 percent in 2015, and the amount of cocaine  trafficked out of Colombia has reached record levels. Consistent with  these reported trends in cocaine production and trafficking, Centers for  Disease Control and Prevention data indicate that, after falling sharply in  the middle of the past decade, overdose deaths related to cocaine have  been gradually rising in the United States. Finally, while a significant  portion of the marijuana consumed in the United States continues to be  smuggled from Western Hemisphere countries, including Canada,  Jamaica, and Mexico, the domestic production and marketing of  marijuana are undergoing important shifts, as several states and the  District of Columbia have passed measures that legalize possession of  limited amounts of the drug and provide for regulation of its production,  processing, and sales. These shifting trends pose challenges for  agencies\u2019 counternarcotics efforts in the Western Hemisphere and  domestically, as they strive to respond to changing conditions."], "subsections": []}, {"section_title": "Role of ONDCP in U.S. Counternarcotics Efforts in the Western Hemisphere", "paragraphs": ["ONDCP coordinates the National Drug Control Program and develops a  5-year National Drug Control Strategy, which it updates annually, as well  as a number of companion strategies that focus on various geographical  areas and emerging threats, to articulate the administration\u2019s drug control  policy. ONDCP was established by the Anti-Drug Abuse Act of 1988 to,  among other things, enhance national drug control planning and  coordination and represent the drug policies of the executive branch  before Congress. In this role, ONDCP is responsible for (1) developing a  national drug control policy, (2) developing and applying specific goals  and performance measurements to evaluate the effectiveness of national  drug control policy and National Drug Control Program agencies\u2019  programs, (3) overseeing and coordinating the implementation of the  national drug control policy, and (4) assessing and certifying the  adequacy of the budget for national drug control programs.", "ONDCP requires National Drug Control Program agencies to submit an  annual drug control budget, categorized into 10 federal drug control  program areas. One program area is international efforts, which ONDCP  defines as activities focused on regions outside the United States that are  intended to reduce illegal drug availability in the United States or abroad.  Three additional ONDCP drug control program areas\u2014intelligence,  interdiction, and investigations\u2014include domestic as well as international  efforts, as interdictions may occur at or outside U.S. borders, and  intelligence and investigative efforts may target drug organizations  operating outside the United States."], "subsections": []}, {"section_title": "Key Agencies Involved in International Efforts to Combat Illicit Drugs Entering the United States", "paragraphs": ["In addition to ONDCP, eight agencies are involved in the four program  areas that support counternarcotics efforts in the Western Hemisphere to  stop the production and transshipment of illicit drugs or their precursors  destined for the United States. These activities include the following:  interdictions at U.S. borders; maritime drug interdictions in international waters and in international  interdictions in concert with partner nations in international and  territorial waters;  intelligence gathering to support drug interdictions, investigations, and  international activities;  investigations of drug organizations based in countries outside the  United States; eradication support and efforts; and building foreign partner capacity to conduct counternarcotics activities.", "Table 1 shows the eight U.S. government agencies that allocate  resources in one or more of the four ONDCP program areas\u2014 counternarcotics intelligence, interdiction, international activities, and  investigations\u2014that we included in our review. For a detailed description  of ONDCP\u2019s program areas, more information on the roles of these  agencies, and the countries in which they operate, see appendixes I, II,  and III, respectively."], "subsections": []}]}, {"section_title": "U.S. Agencies Identified Billions of Dollars in Spending Primarily or Partially for Western Hemisphere Counternarcotics Efforts for 2010 through 2015", "paragraphs": [], "subsections": [{"section_title": "Some Agencies Track Counternarcotics Spending by Region and Identified $5 Billion in Obligations for Activities in the Western Hemisphere", "paragraphs": ["Of the agencies included in our review, DOD, ICE, INL, and USAID track  counternarcotics spending on a regional basis and provided data on  funds obligated for counternarcotics activities in the Western  Hemisphere. As table 2 shows, these agencies obligated more than $5  billion for counternarcotics activities in the Western Hemisphere during  fiscal years 2010 through 2015. (See app. III for the agencies\u2019 regional or  country-level counternarcotics obligations, as available).", "DOD obligated a total of more than $2.8 billion for counternarcotics  activities in the Western Hemisphere for fiscal years 2010 through 2015.  According to DOD documents, these activities support U.S. domestic and  foreign government efforts to combat drug trafficking and drug-related  terrorist activities through detection and monitoring of illicit drug  smuggling, information and intelligence sharing, and capacity building.  DOD generally tracks its counternarcotics spending by geographic  combatant command and various functional areas. A significant portion of  DOD\u2019s counternarcotics activities in the Western Hemisphere are  conducted by U.S. Northern Command and U.S. Southern Command.  These resources fund DOD\u2019s training and equipment provided to foreign  partners conducting counternarcotics activities, surveillance and  communications systems, aircraft patrolling the transit zone, and costs  associated with operating DOD\u2019s Joint Interagency Task Force South.  However, the obligations for counternarcotics activities that DOD reported  for fiscal years 2010 through 2015 underrepresent its overall obligations  for such activities because the reported amounts do not include U.S.  Northern Command\u2019s and U.S. Southern Command\u2019s salaries and  expenses of its personnel and counternarcotics-related intelligence  activities. It also does not include DOD\u2019s agency-wide intelligence  gathering and training, as well as aircraft flight hours and ship days in  support of counternarcotics activities.", "ICE expended a total of about $212 million for salaries and expenses of  Homeland Security Investigations\u2019 (HSI) agents and analysts working on  drug cases in various countries in the Western Hemisphere during fiscal  years 2010 through 2015. ICE made these expenditures for the  following three HSI programs:", "The Domestic Investigations program covers enforcement efforts to  disrupt cross-border criminal activity related to contraband smuggling  and the dismantling of the transnational criminal organizations  responsible for these activities.", "International Operations covers HSI\u2019s international investigations  involving transnational criminal organizations and serves as ICE\u2019s  liaison to foreign law enforcement counterparts overseas.", "The Office of Intelligence provides intelligence services for Domestic  Investigations and International Operations to support criminal  investigations to disrupt and dismantle criminal organizations involved  in the transnational drug trade and associated money-laundering  crimes.", "INL obligated a total of more than $1.5 billion for counternarcotics  activities in the Western Hemisphere in fiscal years 2010 through 2015.  During this period, INL funded projects that were designed to improve  foreign law enforcement and intelligence-gathering capabilities; enhance  the effectiveness of criminal justice sectors to allow foreign governments  to increase drug shipment interdictions; investigate, prosecute, and  convict narcotics criminals; and break up major drug-trafficking  organizations. INL also used U.S. federal law enforcement entities to  provide technical assistance to its counterparts overseas. Examples of  INL\u2019s technical assistance include the following:  In Mexico, INL\u2019s efforts focused on enhancing the Mexican  government\u2019s capacity to interdict illegal narcotics while not impeding  the flow of legitimate goods. This included providing detection dogs,  equipment, and training to the Mexican Federal Police, Customs,  Army, and Navy.", "In Colombia, INL\u2019s program focused on aerial eradication of coca  plants, land and maritime interdictions, and capacity building for  counternarcotics forces.", "In Peru, INL programs included support for manual eradication of  coca plants, interdiction efforts, and drug demand reduction activities.", "In Central America, INL efforts included building interdiction capacities  such as funding vetted units sponsored by federal law enforcement  partners and providing technical assistance and equipment for air and  maritime interdiction.", "In the Caribbean, INL efforts focused on building partner nation  interdiction capacity, providing support for vetted units, and enhancing  information sharing among partner nations.", "USAID obligated a total of about $638 million for Western Hemisphere  counternarcotics activities in fiscal years 2010 through 2015, supporting  alternative development projects in Bolivia, Colombia, Ecuador, and  Peru. According to agency officials, the USAID mission in Colombia is  working to create licit alternatives to coca production, including holistic  support to viable and lucrative agricultural value chains, such as cacao,  specialty coffee, and other products that can be sold on domestic and  export markets; provision of rural financial services and credits for licit  opportunities; efforts to attract private sector investment into rural regions;  and, to a lesser degree, helping communities build infrastructure, such as  roads, to help licit products reach markets. USAID\u2019s alternative  development program in Peru aims to promote licit incomes and improved  governance to sustain coca reductions achieved through forced  eradication. In partnership with the Peruvian national drug commission,  the USAID mission in Peru facilitates the implementation of alternative  development programs in the country, including improving the drug  commission\u2019s ability to monitor and evaluate these programs. The  mission has also partnered with the private sector to improve processes  involved in preparing cacao crops for the market."], "subsections": []}, {"section_title": "Agencies That Do Not Track Counternarcotics Spending by Region Reported About $34 Billion for Activities Focused on the Western Hemisphere", "paragraphs": ["While the other agencies in our review\u2014CBP, Coast Guard, DEA, and  OCDETF\u2014do not track spending specific to their counternarcotics  activities in the Western Hemisphere, they conduct most of their  counternarcotics activities in the Western Hemisphere or target threats  originating in Western Hemisphere countries, according to agency  officials. Thus, while the agencies\u2019 overall counternarcotics obligations  overstate spending for such activities in the Western Hemisphere, these  obligations approximate the Coast Guard\u2019s, CBP\u2019s, and OCDETF\u2019s  spending on activities that were primarily for these purposes in the region.  However, DEA was not able to identify spending levels for  counternarcotics activities in the Western Hemisphere, and the  obligations it provided included spending for some domestic and other  international counternarcotics activities. These four agencies had total  obligations of nearly $34 billion for their overall counternarcotics activities  during fiscal years 2010 through 2015 (see table 3).", "The Coast Guard obligated a total of almost $5.3 billion for its drug- interdiction activities for fiscal years 2010 through 2015. As the nation\u2019s  principal federal agency for maritime safety, security, and stewardship,  the Coast Guard has a drug interdiction objective to reduce the flow of  illegal drugs entering the United States by denying smugglers access to  maritime routes. The Coast Guard\u2019s counternarcotics obligations in fiscal  years 2010 through 2015 covered the agency\u2019s operating expenses,  which include costs associated with operating Coast Guard facilities,  maintaining capital equipment, improving management effectiveness, and  maintaining an active duty military and civilian workforce. These funds  also supported reserve training and acquisition, construction, and  improvement of capital assets and facilities. The Coast Guard does not  maintain data on the portion of the agency\u2019s drug resources that are used  for the interdiction of drugs trafficked to or from countries outside the  Western Hemisphere. However, according to Coast Guard officials,  because the agency\u2019s counternarcotics efforts take place around U.S.  maritime borders and in transit zones in the Western Hemisphere, the  agency\u2019s drug resources are generally expended in the Western  Hemisphere.", "CBP obligated a total of more than $13 billion for its counternarcotics  activities in fiscal years 2010 through 2015. According to the agency\u2019s  budget documents, CBP used its counternarcotics spending to carry out  its border security mission at and between all ports of entry and to  conduct air and marine operations in source, transit, and arrival zones in  the Western Hemisphere. The agency also obligated funds to invest in  border security technology and infrastructure to detect and monitor  suspicious air, maritime, and land traffic. CBP\u2019s counternarcotics funds  also were used for training and information technology to support its  activities. CBP officials indicated that, because CBP\u2019s mission is to  protect U.S. borders, the agency\u2019s counternarcotics spending should  generally be considered resources spent in the Western Hemisphere.  However, CBP\u2019s reported obligations also include resources dedicated to  border protection measures to interdict shipments of drugs and precursor  chemicals from countries outside the Western Hemisphere.", "DEA obligated a total of almost $13 billion for its domestic and  international enforcement activities in fiscal years 2010 through 2015.  DEA is the lead U.S. agency responsible for the development of the  overall federal drug enforcement strategy, programs, planning, and  evaluation. DEA\u2019s budget includes categories for domestic enforcement,  international enforcement, and state and local support. While domestic  enforcement accounts for the majority of DEA\u2019s resources, DEA  coordinates its domestic and international enforcement activities (i.e.,  DEA\u2019s foreign offices) to pursue, at the highest level, multinational drug  organizations and, at the lowest level, independent drug cells, according  to documents. With regard to international enforcement, DEA tracks  regional spending for salaries and expenses associated with agents and  intelligence analysts posted in countries overseas. DEA\u2019s international  enforcement includes more than $1 billion in obligations for salaries and  expenses for personnel posted in Western Hemisphere countries in fiscal  years 2010 through 2015.", "OCDETF obligated a total of about $2.1 billion for counternarcotics- related efforts in fiscal years 2010 through 2015. According to OCDETF  reports, this funding supported investigations targeting the highest priority  drug-related transnational crime organizations. OCDETF\u2019s funds were  used to reimburse a number of DOJ components\u2014DEA, the FBI, and the  OCDETF Fusion Center, a multiagency intelligence center\u2014for their  support of OCDETF investigations of high-priority targets. According to  a senior OCDETF official, although the agency\u2019s financial system does  not contain information that would allow us to ascertain the amounts  obligated for investigations of international targets located in the Western  Hemisphere, very few OCDETF cases involve drugs coming into the  United States from outside the Western Hemisphere. Most OCDETF  investigations target drugs coming into the United States from other  Western Hemisphere countries."], "subsections": []}]}, {"section_title": "Agencies Reported Collecting and Disseminating Best Practices and Lessons Learned Related to Counternarcotics Efforts", "paragraphs": [], "subsections": [{"section_title": "ONDCP Facilitates Sharing of Counternarcotics Best Practices and Lessons Learned", "paragraphs": ["ONDCP facilitates the sharing of best practices and lessons learned with  interagency and foreign partners by including the topic on the agendas of  key meetings, according to ONDCP officials. For example, ONDCP  officials described the sharing of best practices and lessons learned with  stakeholders from Canada, Mexico, and the United States at technical  workshops of the North American Drug Dialogue held in March 2017. At  these workshops, the Department of State shared with its Mexican  partners lessons learned pertaining to Colombia and Peru, including the  following:", "Eradication of coca alone is not sufficient. A whole-of-government  approach that provides security, the incentive of alternative  development, the disincentive of eradication, and intelligence-led  interdiction efforts that deny harvesters or traffickers the ability to  profit from the product is essential.", "Results take time. For example, the 90-percent reduction in coca  production in San Martin, Peru, took 12 years.", "Efforts should be geographically targeted and driven by information  and intelligence, given scarce resources. For example, data can be  used to allow for planning targeted eradication operations, based on  intelligence or other information, and for the planning of  complementary interventions, such as rural development or target  eradication goals.", "According to ONDCP officials, best practices and lessons learned are  also described in the National Drug Control Strategy as well as  companion strategies such as the Southwest Border and Caribbean  Counternarcotics strategies. For example, according to the 2010 National  Drug Control Strategy, lessons learned such as the following can be  drawn from Colombia\u2019s experience that might be useful elsewhere:", "Host-government ownership. For example, although Plan Colombia  required extensive U.S. financial support, the Colombian government  demonstrated that it was fully committed to the initiative under  consecutive administrations.", "Government-wide approach. Eradication can be an effective deterrent  to illicit cultivation and can provide an incentive to move to licit crops.  However, eradication must be accompanied by a government  presence in rural areas; alternative development to preclude  replanting or dispersal of plots; and a focus on rule of law and human  rights, humanitarian needs, and social and economic reform to reduce  the incentive to revert to illicit crops.", "Security. Security is a precondition for the successful expansion of  social services and developmental assistance. Security must be  maintained to allow the expansion of legal economic activities and the  delivery of civilian services, including justice, education, and health, to  a population unaccustomed to a significant government presence.", "Flexibility. Programs must adapt to changing circumstances, including  adjusting programs that are not working as expected and adding new  initiatives, if necessary.", "Long-term approach. Major counternarcotics programs designed to  address complex and long-standing challenges require a multiyear  investment in terms of financial resources and political commitment.", "ONDCP has also promoted best practices through other efforts. For  example, the 2015 National Drug Control Strategy included an action item  to work with the Organization of American States\u2019 Inter-American Drug  Abuse Control Commission to strengthen counterdrug Institutions in the  Western Hemisphere. As part of this effort, ONDCP and the Department  of State participated in the Demand Reduction and the Alternatives to  Incarceration meetings, which focused on promoting best practices and  expanding host-nation capacity. Reflecting this effort, Organization of  American States\u2019 officials cited as a best practice the training of 300  Colombian and Argentinian judges and chief justices, who learned about  the Alternatives to Incarceration model, in November 2016."], "subsections": []}, {"section_title": "Most Agencies Reported Collecting Best Practices and Lessons Learned from Counternarcotics Efforts", "paragraphs": ["Officials at 7 of the 10 agencies included in our review reported having  processes for identifying and collecting best practices and lessons  learned from counternarcotics efforts in the Western Hemisphere.  Officials at each of these seven agencies also reported having  mechanisms to share best practices and lessons learned, including  through web-enabled systems, and sharing these best practices and  lessons learned with other U.S. agencies and foreign partners. In  addition, officials at six of the seven agencies reported having a formal  review process for determining best practices and lessons learned.", "USAID and DOD guidance and officials described comprehensive  processes for collecting and sharing information about best practices and  lessons learned. For example, according to USAID guidance, its Country  Development Cooperation Strategy \u201cshould include a summary of lessons  learned from the implementation of the previous Country Development  Cooperation Strategy or other strategic plans (if applicable) and from  previous experiences (e.g., projects and activities).\u201d The guidance  states that at least once during the course of implementing the Country  Development Cooperation Strategy, USAID missions must collect  information by conducting reviews of ongoing efforts and of options for  better aligning their programs with changes in the context, agency  direction, and lessons learned. In addition, according to USAID officials,  other levels of program planning incorporate lessons learned and good  programming, such as portfolio reviews and other processes involving the  periodic assessment of a particular aspect of a mission or a Washington  operating unit\u2019s strategy, projects, or activities. USAID evaluations of its  alternative development projects in Colombia include examples of best  practices and lessons learned, such as the following:", "The success of a project depends on reducing the appeal of coca by  improving the social and economic value of legal alternatives.", "Robust licit economies fueled by productive associations, local and  regional market integration, and improved transportation networks can  reduce coca cultivation.", "A necessary precondition for successful alternative development is  the allocation of resources and personnel to rural areas where coca is  cultivated.", "Only those strategies that can be accomplished within predetermined  time frames and resource parameters and that have a proven track  record of reducing coca cultivation should be implemented.", "Reinforcing local community institutions and providing youth-focused  programming can help insulate vulnerable communities against the  allure of drug trafficking and coca cultivation.", "DOD reported using a formal process for identifying and collecting best  practices and lessons learned through its Joint Lessons Learned  Program, which consists of five phases: discovery, validation, resolution,  evaluation, and dissemination. According to DOD officials, the collection  of best practices and lessons learned relating to counternarcotics in the  Western Hemisphere through this program is intended to enhance  readiness and effectiveness. DOD officials noted that the effort to collect  best practices and lessons learned is routine and helps inform policy and  budget proceedings. Annual conferences, such as the Counternarcotics  and Global Threats Coordination Conference and the Program Objective  Memoranda Conference, also offer an opportunity to identify, collect, and  disseminate best practices and lessons learned as they relate to DOD\u2019s  counterdrug and counter-transnational-organized-crime operations.  According to DOD officials, such conferences provide a forum for  participants to learn how other relevant DOD components working on  counternarcotics efforts are approaching counterdrug, transnational  organized crime, and related issues. DOD officials also noted that they  intend to use an interagency-agency-task-forces approach to  counternarcotics interdiction that the U.S. Southern Command developed  in Guatemala as a model for sharing best practices and lessons learned  in the region. According to DOD officials, the U.S. Southern Command\u2019s  support included training in interdiction tactics, techniques, and  procedures, and maintenance of provided equipment such as intercept  boats, tactical vehicles, communications gear, and night vision devices.  DOD officials reported that lessons learned include establishing the  interagency legal framework early, clearly defining interagency  relationships, developing the task force\u2019s intelligence capability,  implementing police authority and leadership, identifying measures of  success, communicating the task force\u2019s purpose and success to the  public, and maintaining equipment. DOD officials said that they plan to  use the Guatemalan interagency task force as a model with other foreign  partners and new counterdrug units in Guatemala and in the region.", "State\u2019s report, \u201cLessons Learned from the M\u00e9rida Initiative and Plan  Colombia with Regard to Judicial Reform Efforts,\u201d provides specific  examples of operational and tactical lessons, as follows:", "Political will is critical. According to State, one of the clearest symbols  of political will was Mexico\u2019s and Colombia\u2019s dedication of additional  resources (to initiatives under the M\u00e9rida Initiative and Plan  Colombia). In addition, according to State, the governments of El  Salvador, Guatemala, and Honduras created a joint regional plan, the  Plan of Alliance for Prosperity, underscoring their political will and  significant commitment to improve economic opportunities,  governance, and public safety. For example, these governments  identified $2.6 billion in their 2016 budgets to, among other things,  target criminal networks, tackle corruption, and strengthen  government institutions.", "No lasting security without enhanced access to justice. The  governments of Colombia and Mexico have undertaken efforts to  expand access to justice in their countries. Since 2008, the  government of Mexico has been working to improve the transparency  and efficiency of its judicial system by implementing an oral-based  accusatorial system.", "Partnership across agencies is critical. Plan Colombia represented a  whole-of-government approach, with a broad U.S. interagency  presence to work across the breadth of the Colombian government.  This U.S. interagency presence built linkages at all levels and ensured  continuity of vision through leadership transitions in the U.S. and  Colombian governments."], "subsections": []}]}, {"section_title": "U.S. Agencies Use Various Mechanisms to Address Changing Counternarcotics Conditions in the Western Hemisphere", "paragraphs": [], "subsections": [{"section_title": "ONDCP Strategies Lay Out Key Efforts to Respond to Emerging Counternarcotics Threats", "paragraphs": ["ONDCP works with agencies to coordinate responses to changing  conditions in a variety of ways. ONDCP is responsible for developing (1)  the National Drug Control Strategy, which sets forth a comprehensive  plan to reduce illicit drug use through programs intended to prevent or  treat drug use or reduce the availability of illegal drugs; and (2) several  associated companion strategies, which target government efforts to  respond to emerging counternarcotics threats for key geographic areas.", "The Strategy issued in 2010 laid out the administration\u2019s 5-year blueprint  for combatting drug use and included a section on counternarcotics  efforts in the Western Hemisphere. The 2010 Strategy described an  approach that reflected two core focus areas: (1) disrupting domestic drug  trafficking and production and (2) strengthening international partnerships  to reduce the availability of foreign-produced drugs in the United States.  The Strategy, including the portions associated with counternarcotics  efforts in the Western Hemisphere, is updated annually to reflect current  priorities and conditions. According to ONDCP officials, an example of a  key change since 2010 is the developing focus on the opioid crisis. In  2010, the President\u2019s first National Drug Control Strategy emphasized the  need for action to address opioid use disorders and overdose, while  ensuring that individuals with pain receive safe, effective treatment. On  April 19, 2011, the White House released its national Prescription Drug  Abuse Prevention Plan, which outlined its goals for addressing  prescription drug abuse and overdose.", "The 2016 Strategy continued the previous administration\u2019s focus on the  opioid crisis but recognized the growing threats from drug-trafficking  organizations involved in manufacturing and distributing cocaine and  synthetic drugs, including novel psychoactive substances such as  synthetic cannabinoids. To address these efforts, the Strategy described  U.S. agencies\u2019 interdiction activities, and DEA led efforts to disrupt  synthetic drug production and trafficking. The 2016 Strategy also noted  U.S. collaboration with China to limit the export of precursor chemicals  associated with the production of psychoactive substances.", "ONDCP also develops companion strategies with a geographic focus,  such as the National Southwest Border Counternarcotics Strategy, the  Northern Border Counternarcotics Strategy, and the Caribbean Border  Counternarcotics Strategy. The 2015 Strategy acknowledges the  companion strategies and indicates that the efforts they describe will be  carried out. These strategies include objectives such as enhancing  intelligence, interdicting drugs and drug proceeds, ensuring prosecution,  disrupting and dismantling drug-trafficking organizations, and improving  cooperation with international partners.", "The companion strategies have provided opportunities for more targeted  responses to address emerging threats in specific geographic areas,  which include the following:  National Southwest Border Counternarcotics Strategy focused  primarily on U.S. government efforts to prevent the trafficking of illicit  drugs\u2014heroin, methamphetamine, cocaine, and foreign-produced  marijuana\u2014across the U.S.-Mexican border. The strategy also  addressed the illegal outbound movement of weapons and bulk  currency from the United States, both of which are associated with  activities of narcotics traffickers. As an example of the growing threat  posed by the trafficking of heroin from Mexico, the quantity seized on  the southwest border nearly tripled, from 1,080 kilograms in 2010 to  3,158 kilograms in 2015. To address these threats, ONDCP  expanded the focus of the 2011 National Southwest Border  Counternarcotics Strategy to provide border communities with  enhanced prevention and drug treatment assistance, in the context of  maintaining strong and resilient communities. The 2013 strategy  stressed the same basic goals and objectives: substantially reduce  the flow of illicit drugs, drug proceeds, and associated instruments of  violence across the southwest border as well as maintain strong and  resilient communities. This strategy also included indicators related to  seizures of drugs at the border. The 2016 strategy differed slightly  from the 2013 strategy by elaborating on the threats of various illicit  drugs. It also noted that \u201canything that affects one part of the border  affects the entire border\u201d and noted that, for this reason, the National  Southwest Border Counternarcotics Strategy must be synchronized  with the other companion strategies, and the Heroin Availability  Reduction Plan.", "National Northern Border Counternarcotics Strategy. The 2012  National Northern Border Counternarcotics Strategy, which ONDCP  first issued that year, parallels the National Southwest  Counternarcotics Border Strategy and focuses on ongoing efforts to  reduce transnational organized crime threats on both sides of the  border between the United States and Canada, specifically the  movement of illicit drugs such as marijuana, ecstasy,  methamphetamine, and cocaine, and the proceeds from the sale of  those drugs. The 2014 strategy emphasizes enhanced federal  collaboration with state, local, and tribal law enforcement agencies.  The legislation mandating that ONDCP publish the National Northern  Border Counternarcotics Strategy requires that this document be  released biannually; as of June 2017, the 2016 version had not  been released.", "Caribbean Border Counternarcotics Strategy. The Caribbean Border  Counternarcotics Strategy, issued in January 2015, is substantially  equivalent to the national counternarcotics strategies for the  southwest and northern borders, according to ONDCP. The strategy  identifies cocaine as the principal drug threat and a source of  associated violence in the Caribbean region and notes that the  documented cocaine flow via the Caribbean to the United States more  than doubled from 2011 to 2013, rising from 38 metric tons to 91  metric tons. According to DEA, over 90 metric tons of cocaine was  trafficked from South America using sea routes through the Caribbean  corridor, primarily toward the Dominican Republic and Puerto Rico, in  2014."], "subsections": []}, {"section_title": "Interagency Groups, Task Forces, and Committees Coordinate Government Response to Emerging Counternarcotics Threats", "paragraphs": [], "subsections": [{"section_title": "Interagency Working Groups", "paragraphs": ["ONDCP facilitates a number of interagency working groups to address  emerging threats. According to ONDCP\u2019s 2016 National Southwest  Border Counternarcotics Strategy, interagency working groups relevant to  counternarcotics efforts allow agencies with different authorities and  resources to address common concerns, create a common operating  picture, identify resource and capability gaps, and leverage resources.  ONCDP has created working groups, such as groups focused on heroin  and cocaine, to develop actions, goals, and measures to reduce the  supply of those drugs in the U.S. market as a part of the overall effort to  address treatment and demand, as noted in the following examples:  In November 2015, ONDCP established the National Heroin  Coordination Group in coordination with the National Security  Council to provide guidance on interagency activities aimed at  reducing the supply of heroin and illicit fentanyl in the U.S market.  The working group includes agencies with federal law enforcement  responsibilities and their components, select High Intensity Drug  Trafficking Areas (HIDTA), the U.S. embassy in Mexico, and other  federal agencies and state entities. In June 2016, the group produced  the 5-year Heroin Availability Reduction Plan as part of the  administration\u2019s effort to prevent and treat heroin abuse.", "In January 2016, ONDCP created an internal working group on  methamphetamine and synthetic drugs to coordinate efforts across  drug control agencies. The group\u2019s priorities included working in  concert with federal partners, with source and transit countries to  reduce the availability of illicit methamphetamine in the United States,  and multilaterally to reduce the global trafficking of illicit  methamphetamine and precursor chemicals coming primarily from  Mexico.", "In September 2016, ONDCP created a National Cocaine Coordination  Group to address emerging threats from cocaine brought on by the  spike in coca cultivation and production as well as the associated  increase in its trafficking and use in the United States. In addition to  employing three permanent staff, the interagency group draws from  expertise in intelligence, public health, and international demand  reduction at DOJ, the FBI, other federal partners, and various parts of  ONDCP."], "subsections": []}, {"section_title": "Interagency Task Forces", "paragraphs": ["Agencies use task forces to enhance the interagency coordination  needed to respond to emerging threats, according to officials. For  example, to address the smuggling of illicit drugs over the southwest  border, in May 2014 DHS established three new joint task forces\u2014Joint  Task Force\u2013East, Joint Task Force\u2013West, and the Joint Task Force for  Investigations\u2014in support of its Southern Border and Approaches  Campaign. The task forces coordinate operations to combat transnational  criminal organizations and counter illegal drug flows at maritime  approaches and in between ports of entry. All three joint task forces  incorporate elements of the Coast Guard, CBP, and ICE as well as DHS\u2019s  U.S. Citizenship and Immigration Services. Joint Task Force\u2013East is  responsible for the southern maritime border and approaches, Joint Task  Force\u2013West is responsible for the southern land border and the West  Coast, and the Joint Task Force for Investigations focuses on  investigations in support of the geographic task forces.", "Task forces also enhance coordination, deconfliction, and information  sharing by colocating representatives from different entities, which  facilitates interaction and enables information sharing, as we previously  reported. For example, Joint Interagency Task Force South includes 26  agencies and 20 foreign partners that work together to detect and monitor  illicit trafficking in the air and maritime domains, facilitating international  and interagency interdiction and apprehension. Information sharing is a  critical aspect of the Joint Interagency Task Force South\u2019s strategic  approach in supporting national and foreign partner nation law  enforcement and promoting regional stability in the Western Hemisphere.  As part of this effort, Joint Interagency Task Force South uses a tool  known as the Cooperative Situational Information Integration system to  share strategic communications and information with foreign partner  nations, according to Joint Interagency Task Force South officials. In  addition, U.S. Tactical Analysis Teams, which are posted at U.S. missions  overseas, and liaison officers from foreign partner nations, provide for a  high level of integrated information, according to officials at Joint  Interagency Task Force South. Officials indicated that Tactical Analysis  Teams and liaison officers provide the information that results in 60 to 70  percent of all task force cases, directly contributing to 50 to 60 percent of  all Joint Interagency Task Force South drug seizures. The task force  reported that its efforts resulted in 80 percent of total U.S. cocaine  seizures (282 of 338 metric tons) in fiscal year 2016.", "According to Joint Interagency Task Force South, the advantages of  working as a task force include the ability to use the participants\u2019 various  legal authorities (see the text box for an example):", "DOD brings detection and monitoring authorities.", "DOJ and DHS bring anticrime authorities.", "The Coast Guard brings its maritime law enforcement authorities.", "DEA, the FBI, and HSI bring drug and finance laws enforcement  authorities.", "CBP and HSI bring customs and immigration authorities.", "Partner nations bring multiple authorities from their countries.", "A typical case that illustrates how the various authorities of component agencies  work together in the Joint Interagency Task Force South could start with receipt  of actionable law enforcement information from the Drug Enforcement  Administration. This information prompts the deployment of a Customs and  Border Protection or Coast Guard plane that subsequently detects and monitors  a suspect vessel until Joint Interagency Task Force South can deploy a Coast  Guard, U.S. Navy, or allied government\u2019s ship with an on-board law enforcement  detachment to investigate. When the deployed ship arrives at the vessel\u2019s  location, the Coast Guard assumes control of the investigation. If the suspect  vessel is not registered in the United States, the Coast Guard commander  implements a bilateral agreement with the vessel\u2019s country of registration to  confirm the vessel\u2019s nationality and to stop, board, and search the vessel for  drugs. If drugs are found, the State Department, Department of Justice, and the  vessel\u2019s country of registry coordinate jurisdiction over, and disposition of, the  vessel, drugs, and crew.", "OCDETF has also established multiagency Strike Forces (i.e., a type of  task force) in 12 key cities around the country. According to OCDETF\u2019s  fiscal year 2017 report to Congress, the Strike Forces aggressively target  the highest-level trafficking organizations and function as central points of  contact for OCDETF agents and federal prosecutors nationwide,  gathering intelligence and disseminating investigative leads throughout  neighboring areas. The report states that Strike Force members are  colocated in offices separate from their parent agencies and interact with  each other on a daily basis using the resources and support of their  parent agencies. According to OCEDTF\u2019s report, Strike Force efforts help  further counternarcotics investigations by combining the resources and  expertise of all OCDETF participating investigators and prosecutors. The  report also states that, in recognition of the nationwide heroin threat,  OCDETF adjusted its resources to target heroin investigations and that  when heroin use was rising in 2014 and 2015, the percentage of  indictments with heroin charges likewise increased over the same time  frame. According to OCDETF\u2019s report, Strike Force effectiveness is  reflected in the caseload of active investigations linked to OCDETF\u2019s  Consolidated Priority Organization Targets. OCDETF reported that, in  fiscal year 2015, 45 percent of Strike Forces\u2019 active investigations were  linked to OCDETF Consolidated Priority Organization Targets; in contrast,  22 percent of all OCDETF investigations addressing transnational  organized crime were linked to these targets."], "subsections": []}, {"section_title": "Interagency Policy Committees", "paragraphs": ["The National Security Council has a number of interagency policy  committees that prioritize counternarcotics, including changing conditions,  in the Western Hemisphere. National Security interagency policy  committees are the primary day-to-day forums for interagency  coordination of national security policy, according to Presidential Decision  Directive 1. National Security Presidential Directive 25 directs U.S.  government agencies to attack the vulnerabilities of drug-trafficking  organizations and disrupt key business sectors and weaken the economic  basis of the drug trade. For example, the Transborder Security and  Western Hemisphere Directorates interagency policy committee on  Mexico Security Priorities directed ONDCP to establish the National  Heroin Coordination Group. The agencies represented on the interagency  policy committees vary, but the core group involved in addressing heroin  and fentanyl include ONDCP, State, DOJ, DOD, DHS, the Department of  Health and Human Services, the Office of the Director of National  Intelligence, the U.S. Postal Inspection Service (as appropriate), and the  Office of Management and Budget.", "Several interagency policy committees related to addressing heroin  include (1) Transborder Security and Western Hemisphere, (2) Fentanyl  Surge, and (3) the Heroin Availability Reduction Plan. Among the topics  discussed at the committee meetings were the formation of the National  Heroin Coordination Group, which created the Heroin Availability  Reduction Plan, as well as approval of the plan, and deliberate and  tangible actions the interagency policy committees could take under the  Heroin Availability Reduction Plan to visibly disrupt the fentanyl supply  chain coming into the United States. There were also various efforts set  up to address common issues related to illicit opioids among the United  States, Mexico, and Canada, which were addressed in forums such as  the North American Drug Dialogue or the U.S.-Mexico Security  Cooperation Group. Subinteragency policy committees include the U.S.- Mexico Security Group; North American Drug Dialogue; and Fentanyl- Asia, Fentanyl-Cyber, Fentanyl Screening, and Fentanyl Sub-Interagency  Policy Committees. Among the topics discussed were the fentanyl threat  and sources of supply into the United States, tangible actions to disrupt  the fentanyl supply chain, Asia\u2019s role in the fentanyl supply and actions  that could be taken to address it, and an examination of the purchase and  sale of fentanyl over the Internet for shipment through the mail services  and actions taken to detect such shipments. The interagency policy  committees that address cocaine and methamphetamine generally  involve the same agencies that are involved in the interagency policy  committees addressing heroin."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We are not making recommendations in this report. We provided a draft  of this report to the DOD, DHS, DOJ, ONDCP, State, and USAID for  review and comment. We received technical comments from DHS, DOJ,  ONDCP, and State, which we incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 12 days from the  report date.  At that time, we will send copies to the appropriate  congressional committees; the Secretaries of Defense, Homeland  Security, and State; the Attorney General of the United States; and the  Director, Office of National Drug Control Policy.  In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-6991 or farbj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) U.S. agencies\u2019 spending for counternarcotics  efforts in the Western Hemisphere in fiscal years 2010 through 2015, (2)  agencies\u2019 efforts to gather and share best practices and lessons learned  from their counternarcotics efforts both domestically and internationally,  and (3) mechanisms that agencies have used to address changing drug  threats.", "To examine U.S. agencies\u2019 spending for counternarcotics efforts in the  Western Hemisphere in fiscal years 2010 through 2015\u2014our first  objective\u2014we selected eight U.S. departments and components  (collectively, in this report, \u201cagencies\u201d) that implement aspects of the  National Drug Control Strategy and conduct counternarcotics activities in  the Western Hemisphere: (1) the Department of Defense (DOD); the  Department of Homeland Security\u2019s (2) Customs and Border Protection  (CBP), (3) Immigration and Customs Enforcement (ICE), and (4) Coast  Guard; the Department of Justice\u2019s (DOJ) (5) Drug Enforcement  Administration (DEA) and (6) Organized Crime Drug Enforcement Task  Forces (OCDETF); the Department of State\u2019s (7) Bureau of International  Narcotics and Law Enforcement Affairs (INL); and (8) the U.S. Agency for  International Development (USAID). To select these eight agencies, we  used the following two criteria:  1.  Agencies that have international counternarcotics efforts in one or  more of the areas that the Western Hemisphere Drug Policy  Commission has been asked to review. The Office of National Drug  Control Policy (ONDCP), which coordinates the National Drug Control  Program, requires all National Drug Control Program agencies to  submit an annual drug budget identifying the amounts the agencies  plan to spend on counternarcotics efforts for the upcoming fiscal year.  The agencies report spending for such efforts in 10 program areas:  Corrections, Intelligence, Interdiction, International, Investigations,  Prevention, Prosecution, Research and Development, State and Local  and Tribal Law Enforcement Assistance, and Treatment. On the basis  of ONDCP\u2019s definitions of these program areas, we determined that  four of these areas\u2014Intelligence, Interdiction, International, and  Investigations\u2014were relevant to the areas that the Western  Hemisphere Drug Policy Commission has been directed to examine.  2.  Agencies that allocated a combined total of at least $50 million for  their counternarcotics efforts for the Intelligence, Interdiction,  International, and Investigations program areas in fiscal year 2015.  The following summarizes ONDCP\u2019s definitions of these four program  areas:  Intelligence. Intelligence efforts encompass several drug control  intelligence support, including the collection, analysis, and  membership, finances, communications, and activities of drug- areas. Such efforts include providing strategic drug\u2010related  dissemination of drug\u2010related information regarding structure,  trafficking organizations and the identification of drug\u2010related threats.", "Other activities facilitate the sharing among U.S. agencies of domestic  and foreign intelligence information on the production and trafficking  of drugs in the United States and foreign countries; analysis of the  willingness and ability of partner nation governments to carry out drug  control programs; federal, state, local, and tribal law enforcement  initiatives to gather, analyze, and disseminate information among  domestic law enforcement agencies; and all other activities that  provide intelligence and other information for use by national policy  makers, strategic planners, and local law enforcement.", "Interdiction. Interdiction activities are intended to reduce the  availability of illegal drugs in the United States or abroad by targeting  transportation links. Interdiction efforts encompass the interception of  shipments of illegal drugs and their precursors and the disruption of  trafficking networks and their proceeds; such efforts may include air  and maritime seizures and deterring transport via air, sea, and land  routes. Other efforts involve accurate assessment and monitoring of  interdiction programs; enhancing the ability of nations that are drug  sources to interdict drugs; interdicting the flow of drugs, weapons, and  bulk currency along borders; and other air and maritime activities that  disrupt illegal drug-trafficking operations.", "International. International activities are primarily focused on areas  outside the United States and are intended to reduce illegal drug  availability in the United States or abroad. Activities may include  source-country programs designed to help international partners  manage the consequences of drug production, trafficking, and  consumption in their own societies, including programs to train and  equip security forces; efforts to raise awareness of science-based  practices and programs to prevent, treat, and provide recovery from  substance abuse; and support for economic development programs to  help reduce the production or trafficking of illicit drugs. These efforts  may also include assessment and monitoring of international drug  production programs and policies; coordination and promotion of  compliance with international treaties, including those directed at the  eradication of illegal drugs and the production and transportation of  illegal drugs; involvement of other nations in international law  enforcement programs and policies to reduce the supply of drugs; and  all other overseas drug law enforcement efforts to disrupt the flow of  illicit drugs into the United States.", "Investigations. Investigations activities are designed to develop a  prosecutable case against individuals and organizations responsible  for the production and distribution of illegal drugs, including identifying  seize them; identifying the leaders of illegal drug and other criminal  profits and assets from drug\u2010related criminal enterprises in order to  organizations; gathering information about drug\u2010related criminal  activity; ensuring that legitimate controlled substances are handled,  manufactured, and distributed in accordance with federal laws and  regulations; and all other drug law investigative efforts to identify,  disrupt, and dismantle drug smuggling in the United States.", "We requested and obtained data on spending for counternarcotics  activities from these eight agencies and the Federal Bureau of  Investigation (FBI), which OCDETF reimburses for international  counternarcotics investigations. We also reviewed each agency\u2019s annual  accounting for its counternarcotics budget. In addition, we interviewed  agency officials to understand their counternarcotics budgets as they are  reported in the annual ONDCP budget and performance summary reports  and to determine the extent to which the agencies could identify the  funding they had obligated for counternarcotics activities in the Western  Hemisphere. Our methodology for identifying counternarcotics spending  varied by agency, since some of the agencies\u2014DOD, ICE, INL, and  USAID\u2014track such spending by region, while other agencies\u2014the Coast  Guard, CBP, OCDETF, and DEA\u2014do not. Moreover, with the exception  of DEA\u2019s and OCDETF\u2019s counternarcotics activities, the agencies\u2019  counternarcotics activities represent only one aspect of their larger  missions. On the basis of our review of the data, our review of each  agency\u2019s annual accounting of its drug budget, and interviews with  agency officials, we determined that the data were sufficiently reliable for  our reporting purposes. The following summarizes the Western  Hemisphere counternarcotics activities reflected in the funding data we  present for each agency. (The data we present for OCDETF include its  reimbursements to the FBI.)", "DOD. All DOD counternarcotics activities under U.S. Northern  Command and U.S. Southern Command.", "CBP. All CBP counternarcotics spending. Given that the agency\u2019s  jurisdiction is triggered by the illegal movement of criminal goods  across national borders, the agency considers all of its efforts to be  specific to the Western Hemisphere. However, the agency\u2019s spending  also includes interdictions and intelligence gathering to support these  interdictions of drugs coming from all locations outside the United  States.", "ICE. The portion of ICE\u2019s Homeland Security Investigations\u2019 spending  for investigation of Western Hemisphere drug organizations.", "Coast Guard. All Coast Guard counternarcotics spending. Given that  the Coast Guard\u2019s interdictions occur in Western Hemisphere waters,  the agency considers all of its counternarcotics efforts to be specific to  the Western Hemisphere.", "DEA. DEA obligations for Investigations, Intelligence, and  International program areas for domestic and international  enforcement activities. DEA was also able to provide its obligations for  salaries and expenses for investigations and intelligence-gathering  activities conducted by agents posted in overseas locations in the  Western Hemisphere (see app. III).", "OCDETF. OCDETF reimbursements for drug investigations  conducted by DEA, the FBI, and ICE as well as OCDETF  contributions to the OCDETF fusion center.", "FBI. OCDETF reimbursements for investigations of transnational  crime organizations with a drug nexus. (App. III details the FBI\u2019s  expenditure of OCDETF funds).", "INL. International Narcotics Control and Law Enforcement funds for  counternarcotics activities for Western Hemisphere countries.", "USAID. Economic Support Funds and Development Assistance funds  for alternative development activities in Western Hemisphere  countries.", "To examine how agencies gather and share best practices and lessons  learned from their counternarcotics efforts both domestically and  internationally\u2014our second objective\u2014we reviewed the National Drug  Control Strategy and companion strategies for examples of best practices  as well as other agency documents that identify best practices and  lessons learned. We also sent the eight selected agencies, the FBI, and  ONDCP a standard set of questions. These questions addressed how the  agencies collected and identified best practices and lessons, whether  they had formal definitions of best practices and lessons learned, whether  their efforts to identify and collect this information were routine, whether  they had review processes to assess the information, and whether they  shared these practices with other agencies and with international  partners. In addition, we asked the agencies to identify best practices  related to counternarcotics efforts in the Western Hemisphere. Further,  we conducted interviews with agency officials, seeking clarification to  written responses as appropriate and asking whether the agencies had  any policies or strategies regarding best practices, and we reviewed the  documents that were provided to us in response.", "To identify the mechanisms U.S. agencies have used to address  changing drug threats\u2014our third objective\u2014we reviewed key U.S.  government-wide and agency-specific documents pertaining to U.S.  counternarcotics efforts in the Western Hemisphere, including those that  encompass counternarcotics efforts as part of broader national security  areas. These documents include the National Drug Control Strategies,  Southwest Border Counternarcotics Strategies, Northern Border  Counternarcotics Strategies, the Caribbean Border Counternarcotics  Strategy, the Strategy to Combat Transnational Organized Crime, and the  National Interdiction Command and Control Plan. Agency-specific  strategic plans included CBP\u2019s Vision and Strategy 2020, Homeland  Security Investigations\u2019 Strategic Plan, ICE\u2019s Strategic Plan, DOJ\u2019s  Strategic Plan, DEA\u2019s Strategic Plan, OCDETF\u2019s Strategic Plan, the  Department of State\u2019s Functional Bureau Strategies and the Western  Hemisphere Affairs and Latin America and the Caribbean Joint Regional  Strategy, and USAID\u2019s Country Development Cooperation Strategies for  Colombia and Peru. We also interviewed ONDCP and agency officials  about the development of these strategies. We interviewed ONDCP  officials about, and obtained documentation describing, the roles of the  National Heroin Coordination Group and the Cocaine Coordination  Group, and we identified the roles of other working groups through  agency interviews and documents. To understand how agencies  coordinated efforts and cooperate with foreign partners, we visited the  U.S. Southern Command and the Joint Interagency Task Force South in  Miami and Key West, Florida, and interviewed officials at both locations.  Additionally, in discussions with officials from the other agencies we  reviewed, we asked whether the agencies cooperated with foreign  partners.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings based  on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: U.S. Agencies That Conduct Western Hemisphere Counternarcotics Activities", "paragraphs": ["The Office of National Drug Control Policy coordinates the National Drug  Control Program and develops the National Drug Control Strategy, which  is implemented by a number of U.S. government agencies. The following  summarizes the Western Hemisphere counternarcotics activities of key  National Drug Control Program agencies and their components as well as  the Federal Bureau of Investigation (FBI).", "The Department of Defense (DOD) maintains the lead role in  detecting and monitoring aerial and maritime transit of illegal drugs  into the United States and plays a key role in collecting, analyzing,  and sharing intelligence on illegal drugs with U.S. law enforcement  and international security counterparts. DOD supports other  interdiction activities with the use of its assets. DOD also provides  counternarcotics foreign assistance to train, equip, and improve the  counternarcotics capabilities of relevant agencies of foreign  governments.", "The Department of Homeland Security (DHS) is responsible for  U.S. policies related to interdiction of illegal drugs entering the United  States from abroad. Key agencies within DHS that participate in  counterdrug activities include the following:", "Customs and Border Protection (CBP) is the lead agency for  border security and is responsible for, among other things,  keeping terrorists and their weapons; criminals and their  contraband, including drugs; and inadmissible aliens out of the  country. CBP is responsible for border security at ports of entry;  the 6,000 miles of land borders between ports of entry; and nearly  2,700 miles of coastal waters surrounding the Florida Peninsula  and Puerto Rico.", "Immigration and Customs Enforcement\u2019s (ICE) primary mission  is to promote homeland security and public safety through the  enforcement of federal laws governing border control, customs,  trade, and immigration. ICE\u2019s office of Homeland Security  Investigations investigates immigration crime; human rights  violations and human smuggling; smuggling of narcotics,  weapons, and other types of contraband; financial crimes;  cybercrime; and export enforcement issues.", "The Coast Guard is the lead federal agency for maritime drug  interdiction in the Transit Zone. The Coast Guard provides  resources to the Joint Interagency Task Force South, generally  including major cutters, maritime patrol aircraft, and helicopters  capable of deploying airborne use of force.", "The Department of Justice (DOJ) is responsible for federal law  enforcement and to ensure public safety against foreign and domestic  threats, including illegal drug trafficking. The following are DOJ\u2019s  primary agencies that focus on international drug control activities:", "The Drug Enforcement Administration (DEA) is the nation\u2019s  federal agency dedicated to drug law enforcement and,  accordingly, works to disrupt and dismantle the leadership,  command, control, and financial infrastructure of major drug- trafficking organizations. DEA operates around the world to disrupt  drug-trafficking operations; dismantle criminal organizations;  enforce the drug-related laws of the United States; and bring to  justice those organizations and individuals involved in the growing,  manufacture, or distribution of illicit drugs destined for the United  States.", "The Federal Bureau of Investigation (FBI) conducts its  counternarcotics activities under the agency\u2019s broader strategy to  counter transnational criminal organizations by targeting their  command-and-control structures as well as the support networks  that facilitate the smuggling of illicit goods, including drugs, into  the United States.", "The Organized Crime and Drug Enforcement Task Forces\u2019  (OCDETF) primary goal is to identify, investigate, and prosecute  the transnational, national, and regional criminal organizations  most responsible for the illegal drug supply in the United States,  the diversion of pharmaceutical drugs, and the violence  associated with the drug trade. It effectively leverages the  resources and expertise of its seven federal agency members.", "The Department of State\u2019s Bureau of International Narcotics and  Law Enforcement Affairs develops, funds, and manages  counternarcotics and law enforcement assistance programs to help  reduce the entry of illicit drugs into the United States and minimize the  impact of international crime on the United States.", "The U.S. Agency for International Development supports the U.S.  counternarcotics effort through alternative development programs that  help farmers find legal sources of income through licit crops such as  cacao and coffee and that provide technical assistance, such as  training in modern farming techniques and access to capital for  investment in equipment."], "subsections": []}, {"section_title": "Appendix III: Selected Agencies\u2019 Obligations for Counternarcotics Activities in Fiscal Years 2010-2015", "paragraphs": ["The Department of Defense (DOD), the Department of Homeland  Security\u2019s Immigration and Customs Enforcement (ICE), the Department  of Justice\u2019s Federal Bureau of Investigation (FBI), the Department of  State\u2019s Bureau of International Narcotics and Law Enforcement Affairs  (INL), and the U.S. Agency for International Development (USAID)  provided data showing their obligations for counternarcotics activities in  the Western Hemisphere. The Drug Enforcement Administration (DEA)  provided data showing a portion of its counternarcotics obligations for  salaries and expenses associated with DEA agents posted overseas.", "DOD data show obligations for counternarcotics activities by the U.S.  Northern Command and the U.S. Southern Command, which have  responsibility over the Western Hemisphere. Table 4 contains the  commands\u2019 counternarcotics obligations for fiscal years 2010 through  2015.", "Table 5 shows the U.S Northern Command\u2019s and U.S. Southern  Command\u2019s counternarcotics obligations in support of foreign partners in  the Western Hemisphere, by country, for fiscal years 2013 through 2015.", "Table 6 shows ICE expenditures for counternarcotics investigations and  intelligence activities conducted by ICE agents for Western Hemisphere  drug cases, by country, during fiscal years 2010 through 2015.", "Table 7 shows DEA obligations for salaries, expenses, and administrative  costs for DEA personnel located in 30 Western Hemisphere countries  during fiscal years 2010 through 2015.", "Table 8 shows OCDETF reimbursements to the FBI for expenditures  related to its investigations of transnational Central American, South  American, Mexican, and Caribbean crime organizations; drug-smuggling  and money-laundering organizations; alien-smuggling organizations; and  drug-related public corruption cases in the Western Hemisphere, as well  as headquarters administration expenses, for fiscal years 2010 through  2015.", "Table 9 shows INL obligations for counternarcotics activities in 13  Western Hemisphere countries and for two regional programs in the  Western Hemisphere, the Central America Regional Security Initiative,  and the Caribbean Basin Security Initiative, during fiscal years 2010  through 2015.", "Table 10 lists USAID\u2019s obligations for alternative development projects in  four countries in the Western Hemisphere during fiscal years 2010  through 2015."], "subsections": []}, {"section_title": "Appendix IV: U.S. Agencies\u2019 Planning for Western Hemisphere Counternarcotics Efforts", "paragraphs": ["National Drug Control Program agencies\u2019 planning for counternarcotics  efforts in the Western Hemisphere is represented in a variety of strategic  documents, which may be broad or targeted, depending on their mission.  For example, the Department of Defense\u2019s (DOD) 2011 Counternarcotics  and Global Threats Strategy focuses primarily on the department\u2019s efforts  to combat narcotics trafficking and transnational organized crime. DOD  officials indicated that they are currently updating the strategy. Similarly,  the Coast Guard\u2019s 2014 Western Hemisphere Strategy includes  counternarcotics as part of the agency\u2019s broader regional mission.  According to Coast Guard officials, the Coast Guard does not plan to  update its strategy.", "The Department of Homeland Security (DHS) has several strategic  documents that relate to its components\u2019 counternarcotics activities, as  described below:", "Customs and Border Protection\u2019s Vision and Strategy 2020  incorporates counternarcotics efforts as part of its mission to facilitate  legitimate trade and safeguard land, air, and maritime borders.", "Immigration and Customs Enforcement also has a specific goal,  protecting the homeland against illicit trade, travel, and finance,  including an objective targeting drug-trafficking organizations in its  Homeland Security Investigations\u2019 Strategic Plan Fiscal Years 2012- 2016.", "The Department of Justice\u2019s (DOJ) Fiscal Years 2014-2018 Strategic  Plan includes the Drug Enforcement Administration\u2019s (DEA) goal of  disrupting and dismantling major drug-trafficking organizations within a  much broader set of law enforcement missions.", "DEA\u2019s Fiscal Years 2009-2014 Strategic Plan indicates the agency  has focused on international and domestic drug-trafficking and  money-laundering organizations identified as having the most  significant impacts internationally and domestically, known as  \u201cConsolidated Priority Organization Targets\u201d and \u201cPriority Targeted  Organizations.\u201d In addition, DEA\u2019s Drug Flow Attack Strategy,  developed in 2009, identifies vulnerable chokepoints to disrupt the  flow of drugs. DEA officials indicated they are updating the strategy.", "DOJ also released a Strategy for Combating the Mexican Cartels in  January 2010, which was designed to be consistent with the National  Drug Control Strategy and the National Southwest Border  Counternarcotics Strategy. The DOJ strategy\u2019s 10 objectives include  (1) reduce the flow of narcotics and other contraband entering the  United States, (2) strengthen Mexico\u2019s operational capacities and  enhance its law enforcement institutions, (3) increase bilateral  cooperation between Mexico and the United States on fugitive capture  and extradition activities, and (4) increase intelligence and information  sharing among law enforcement agencies in the United States and  Mexico to achieve focused targeting of the most significant criminal  organizations.", "DOJ\u2019s Organized Crime Drug Enforcement Task Forces (OCDETF)  has a long-term drug enforcement strategy for using its prosecutor- led, multiagency task forces in the field to conduct intelligence-driven,  coordinated, multijurisdictional prosecutions and investigations.  Specifically, OCDETF member agencies focus on Consolidated  Priority Organization Targets\u2014that is, \u201ccommand and control\u201d  organizations representing the most significant drug-trafficking and  money-laundering organizations threatening the United States.  OCDETF member agencies also pursue organizations identified as  regional priorities because they have a significant impact on the illicit  drug supply within a specific region.", "Officials in the Department of State\u2019s (State) Bureau of International  Narcotics and Law Enforcement Affairs (INL) stated that the bureau uses  a variety of strategic planning documents in its efforts to address  counternarcotics in the Western Hemisphere.", "INL\u2019s Functional Bureau Strategy includes the broad objective of  reducing illicit drug production and drug demand, along with other  activities such as working with the United Nations Office of Drug and  Crime.", "The Western Hemisphere Affairs and Latin America and the  Caribbean Joint Regional Strategy, which focuses on a goal of a  secure and democratic future for all citizens in Latin America and the  Caribbean, includes interdiction goals for specific drugs such as  opium gum (used for producing heroin) and cocaine.", "Integrated Country Strategies at posts and INL Country Plans are  focused strategies, targeting, for example, the eradication of a specific  number of hectares of coca or the seizure of a certain number of  metric tons of illicit drugs and precursor chemicals.", "The U.S. Agency for International Development (USAID) does not have a  specific strategy related to counternarcotics and instead relies on the  Office of National Drug Control Policy\u2019s National Drug Control Strategy to  help guide its alternative development activities in countries confronting  illicit drug production and trafficking, according to USAID officials.  USAID\u2019s targeted efforts are described in its Country Development  Cooperation Strategies for Colombia and Peru, where alternative  development efforts are currently underway. The Colombia strategy  describes the U.S. government\u2019s development assistance in support of  Colombian efforts to continue its transition out of conflict. According to the  Colombia strategy, investments under several of its development  objectives would help create conditions for alternative livelihoods and  legal behaviors, contributing to broader U.S. and Colombian efforts to  address drug trafficking. The Peru strategy includes alternatives to illicit  coca cultivation as a development objective in specific regions, supporting  the overall goal of strengthening stability and democracy through  increased social and economic inclusion, reductions in illicit coca  cultivation, and the illegal exploitation of natural resources. USAID  conducted operations focused on alternative development in Bolivia until  May 2013, when the mission closed."], "subsections": []}, {"section_title": "Appendix V: U.S. Agencies\u2019 Cooperation with Foreign Partners to Reduce Drug Trafficking in the Western Hemisphere", "paragraphs": ["Cooperation with foreign partners is a crucial element in addressing  changing narcotics conditions in the Western Hemisphere. For example,  the Department of State\u2019s (State) Bureau of International Narcotics and  Law Enforcement Affairs (INL), the U.S. Agency for International  Development (USAID); the Department of Homeland Security\u2019s (DHS)  Coast Guard and Customs and Border Protection (CBP); and the  Department of Justice\u2019s (DOJ) Drug Enforcement Administration (DEA)  and Federal Bureau of Investigation (FBI) work with host nation  counterparts on a variety of counternarcotics efforts.", "U.S. assistance programs to disrupt the flow of cocaine and other harmful  products are designed to build capacity of judicial, law enforcement, and  treatment institutions in partner countries, according to INL\u2019s 2017  International Narcotics Control Strategy Report. These programs are  carried out through the Central America Regional Security Initiative, the  Caribbean Basin Security Initiative, and the M\u00e9rida Initiative. Key  activities of these programs include drug interdiction cooperation,  especially maritime-based efforts in Central America and the Caribbean;  law enforcement capacity building; anticorruption initiatives and support;  and enhanced prosecution and judicial reform strengthening efforts. For  example:   In Mexico, as of September 2016, M\u00e9rida Initiative funding had  supported 238,000 federal, state, and municipal police officers\u2019  standardized training in their role as first responders in the country\u2019s  new criminal justice system, according to INL\u2019s report. The report also  stated that as of 2016, Mexico had seized over 230 metric tons of  illegal drugs and over $50 million in illegal currency with M\u00e9rida- funded equipment and training.", "In Central America, State has provided targeted assistance to help  enhance the ability of local partners to interdict drug shipments,  disrupt trafficking networks, and control domestic production,  according to State officials. For example, State officials reported that  State had partnered with DEA to support local vetted police units to  interdict drug shipments and investigate traffickers. According to the  officials, the 20-officer Maritime Interdiction Vetted Unit in Costa Rica  interdicted 1,151 kilograms of cocaine in April 2017, and similar units  in Guatemala seized 2,532 kilograms of cocaine in June 2017. In  addition, according to State officials, INL assisted the Guatemalan  counternarcotics police in developing an opium poppy eradication  program that resulted in the destruction of 1,000 acres of poppy  cultivation in a 2-month period in the spring of 2017. Moreover, State  officials reported that a State-provided wiretapping system and  associated training allowed Costa Rican prosecutors to convict seven  Sinaloa cartel members in May 2017, shutting down an operation that,  according to State officials, had been sending 14 metric tons of  cocaine per year to the United States.", "USAID also relies on international partnerships to implement its  alternative development activities. For example, USAID reported that it  plans to continue its mitigation of drug-related security threats in Peru by  replicating successes it had in the country\u2019s San Martin region and in  other coca-growing regions in collaboration with the government of Peru  and other U.S. government agencies, in its Peru Country Development  Cooperation Strategy for 2012 through 2016. Results from the Monzon  Valley in Peru also demonstrate how foreign partnerships can impact the  illicit drugs trade. USAID focused its alternative development assistance  on the coca stronghold of the Monzon Valley, which once supported  about 10,000 hectares of coca, from 2013 to 2015. The average income  was about $1.89 per day per person, well below the national extreme  poverty line of $2.20 per day per person in 2013. Households that  remained under assistance during the strategy period saw a 53-percent  increase in income. Moreover, the percentage of assisted families in  extreme poverty dropped by 25 percent, from 55 percent to 30 percent.  Coca cultivation dropped by more than 91 percent in all areas where  recent coca eradication was followed by sustained alternative  development assistance, according to the United Nations Office on Drugs  and Crime. The Central Intelligence Agency\u2019s Crime and Narcotics Center  recorded a less robust, but still impressive, reduction of 64 percent over  the same period, according to USAID officials. Furthermore, USAID  officials noted that while its resources for alternative development in Peru  diminished, the budget for the National Commission for Development and  Life without Drugs, Peru\u2019s development organization, grew from $15  million in 2011 to $38 million during 2014 and 2015.", "In Colombia, USAID reported in its 2014-2018 Country Development  Cooperation Strategy that it is trying to address the need for licit  economic opportunities by supporting cocoa, specialty coffee, rubber, and  dairy sectors in former coca-growing areas, which would help create the  conditions for alternative livelihoods and legal behaviors for small  producers in areas vulnerable to coca cultivation and drug production,  contributing to broad U.S. government and Colombian efforts to address  drug trafficking. This alternative development work increased under Plan  Colombia, with USAID and the government of Colombia working together  on several large-scale rural development projects. Three programs  evolved that incorporate public and private partnerships to facilitate  economic growth from 2006 to 2017. The first program reportedly  generated 250,000 new jobs by investing in agricultural sectors such as  rubber, cacao, and African palm enterprises as well as hotels and  tourism. The second program supported the provision of grant subsidies  to agricultural value-chains, linking small farmer associations with national  and international private-sector buyers. In the 2013 selection round, for  example, more than 30 selected projects included crops and products  such as cacao, rubber, fruits, dairy, and meat. In the third program,  USAID carried sustainable development by encouraging private-sector  investment in target areas. For example, USAID focused on developing  alliances with key private-sector leaders in the coffee and cacao sectors  in the former sector by raising yields and quality and addressing  infrastructure needs especially in conflict-prone zones. Today, Colombia  is the world\u2019s largest producer of premium-quality Arabica beans,  according to USAID. Likewise, fine cocoa is a successful crop in  Colombia, with a growing world demand, according to USAID. The  Colombian cocoa industry is relatively small, with 25,000 farmers  producing about 42,000 tons, or 0.2 percent of the global market.  However, about 85 percent of Colombian cocoa is from \u201cfine\u201d species,  giving Colombia a 3-percent share of global fine cocoa exports. USAID  also developed a private investment equity fund, providing capital to  small- and medium-sized enterprises in Colombia. The fund is now an  independent, for-profit enterprise providing small- and medium-sized  Colombian enterprises with capital and operational support.", "The Coast Guard\u2019s efforts to support foreign partners include its  Multilateral Maritime Counter Drug Summits, where U.S. and foreign  partners meet to discuss operational and legal issues. The summits are  attended by U.S. agencies including, among others, DEA, CBP, the  Department of Defense\u2019s Joint Interagency Task Force South, State, and  DOJ. Representatives from Western Hemisphere countries, including  Belize, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, El  Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay,  and Peru, among others, also attend the summits. For example, at a  summit held in May 2016, Mexico briefed about its judicial system\u2019s  transition to an adversarial system, and Honduras briefed about its  successes using increased penalties for money-laundering violations,  when it is proven that the money is from drug trafficking, according to a  Coast Guard document. On the operational side, Panama made  presentations on regional operations, and the U.S. Coast Guard  presented on capacity building for counterdrug operations, among other  efforts. Other issues\u2014such as how to leverage increased maritime  awareness regionally resulting from investments by partner nations in  radar and the linking of vessel-tracking technologies along their coastlines  with the Joint Interagency Task Force South\u2019s Cooperative Situational  Information Integration system\u2014are discussed at these meetings.", "DHS cooperates with foreign partners in variety of ways to target  emerging counternarcotics threats, as follows:  ICE\u2019s Homeland Security Investigations works with foreign partners to  (1) coordinate criminal investigations, including those related to  counternarcotics; (2) disrupt criminal efforts to smuggle people and  material, including drugs into the United States; and (3) build  international partnerships through outreach and training. In ONDCP\u2019s  fiscal year 2017 Budget and Performance Summary report, ICE  established a target of 29 percent of transnational drug investigations  resulting in the disruption or dismantlement of high-threat,  transnational drug-trafficking organizations or individuals for fiscal  year 2015. According to the report, ICE fell short at 15 percent but  indicated there were several reasons, including a methodology that  allowed double counting; as a result, the methodology was revised.", "CBP also has a network of attach\u00e9s and advisors, who serve in U.S.  diplomatic missions and act as liaisons between law enforcement  components such as DEA; the FBI; and DOJ\u2019s Bureau of Alcohol,  Tobacco, Firearms and Explosives. Attach\u00e9s and advisors also work  with foreign partners building capacity and provide training, technical  assistance, and mentoring on border security, according to CBP  officials. For example, CBP has trained over 1,000 Panamanian  customs and law enforcement officers since 2014. Also, since  February 2017, CBP helped vet, train, and mentor a unit of Peruvian  intelligence analysts. Twenty tons of cocaine have been seized since  the unit was created, according to CBP officials.", "CBP\u2019s National Targeting Center hosts representatives from  participating foreign agencies and works with these international  liaisons and other U.S. government agencies to detect and disrupt  narcotic-smuggling operations, drug-trafficking organizations, and  their associates. According to agency officials, in fiscal years 2015  and 2016, the center\u2019s efforts with foreign partners led to results in the  Western Hemisphere such as discovery and seizure of over 100 kilograms of cocaine,  identification of a previously unknown foreign company suspected  of narcotics involvement, and  seizure of counterfeit identification documents destined to the  United States with links for possible bank fraud and the illicit  money laundering.", "DOJ works with foreign country counterparts to conduct bilateral  investigations and support joint counterdrug operations, among other  things, such as the following:", "DEA\u2019s special agents, who work at embassies or consulates  overseas, conduct bilateral investigations with their foreign  counterparts. These special agents also carry out institution-building  activities with their counterparts.", "DEA reported that it provides investigative equipment and training, in  large part through its Sensitive Investigative Units in selected  countries, including Mexico and Colombia. The Sensitive Investigative  Units seek to create focused, well-trained, and vetted drug  investigative and intelligence units, targeting the most significant drug- trafficking organizations affecting the United States. DEA sees the  program\u2019s impact as building international cooperation, facilitating  institution building and professional development, and improving  judicial processes.", "DEA\u2019s International Drug Enforcement Conference is another venue  for cooperation with foreign partners. The conference brings senior  international drug law enforcement officials together, in regional and  bilateral meetings where, according to DEA, topics such as cross- border coordination of operations, intelligence sharing, and joint  training activities are addressed. According to INL\u2019s 2017  International Narcotics Control Strategy Report, at a meeting in Peru,  in April 2016, geographical regional and multiregional working groups  identified collective targets, agreed upon multilateral counterdrug  enforcement and interdiction operations, and assessed the progress  and evaluated intelligence on existing and emerging targets. The  2015 Caribbean Border Counternarcotics Strategy noted that the  DEA-led International Drug Enforcement Conference is a forum for  building coalitions between U.S. federal law enforcement and foreign  counterparts and that within the Caribbean, law enforcement officials  from over 20 nations participate in the annual meetings to discuss  regional investigative targeting efforts.", "One measure DEA tracks as contributing to ONDCP\u2019s National Drug  Strategy is the number of international, domestic, and diversion  priority targets linked to consolidated priority organization targets it  disrupts or dismantles. In ONDCP\u2019s fiscal year 2017 Budget and  Performance Summary, DEA reported that in fiscal year 2015, it set a  goal of disrupting or dismantling 440 targets linked to consolidated  priority organization targets and achieved 356 of these targets. DEA  indicated that it did not achieve its goal due to budgetary constraints.", "FBI legal attach\u00e9s carry out capacity-building programs, providing  equipment and training to enhance foreign partners\u2019 ability to combat  criminal activity connected to transnational criminal organizations,  according to FBI officials. These officials stated that FBI-trained and - vetted investigative units in Colombia and the Dominican Republic  target the most significant criminal organizations affecting the United  States.", "The FBI conducts multiple trainings with Mexican law enforcement as  a means of developing contacts and fostering cooperative  relationships with its law enforcement counterparts in Mexico,  according to FBI officials. These officials noted that the FBI\u2019s ability to  advance investigations with a nexus south of the border is greatly  enhanced through these contacts. According to these officials, the FBI  also sponsors numerous trainings throughout Latin America to  enhance its foreign partners\u2019 ability to deal with the increasing  transnational organized crime threat."], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Juan Gobel (Assistant  Director), Julie Hirshen (Analyst-in-Charge), Lynn Cothern, Martin De  Alteriis, Neil Doherty, Mark Dowling, Reid Lowe, and Shirley Min made  key contributions to this report. Dawn Locke and Diana Maurer provided  technical support."], "subsections": []}]}], "fastfact": ["Most of the illicit drugs consumed in the United States come from other countries in the Western Hemisphere. For example, most of the heroin and cocaine reaching the U.S. market originates in Mexico and Colombia, respectively. Congress established the Western Hemisphere Drug Policy Commission in 2016 to evaluate the activities of U.S. counternarcotics programs in the region.", "We reviewed these activities and found that, between 2010 and 2015, federal agencies spent about $39 billion to counter drug trafficking in the Western Hemisphere. There have also been a variety of federal efforts to collect and share best practices from these activities."]}
{"id": "GAO-18-493", "url": "https://www.gao.gov/products/GAO-18-493", "title": "Military Space Systems: DOD's Use of Commercial Satellites to Host Defense Payloads Would Benefit from Centralizing Data", "published_date": "2018-07-30T00:00:00", "released_date": "2018-07-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year, DOD spends billions of dollars to develop, produce, and field large, complex satellites. For such satellite systems, a single adversary attack or on-orbit failure can result in the loss of billions of dollars of investment and significant loss of vital capabilities. As DOD plans new space systems and addresses an increasingly contested space environment, it has the opportunity to consider different acquisition approaches. One such approach is to integrate a government sensor or payload onto a commercial host satellite.", "House Armed Services Committee report 115-200, accompanying a bill for the Fiscal Year 2018 National Defense Authorization Act, included a provision for GAO to review DOD's use of commercially hosted payloads. This report (1) determines the extent to which DOD uses commercially hosted payloads and (2) describes and assesses factors that affect their use.", "GAO reviewed DOD policies, documentation, and planning documents, and interviewed a wide range of DOD and civil government officials, and commercial stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO and others have found that using commercial satellites to host government sensors or communications packages\u2014called payloads\u2014may be one way DOD can achieve on-orbit capability faster and more affordably. Using hosted payloads may also help facilitate a proliferation of payloads on orbit, making it more difficult for an adversary to defeat a capability. Since 2009, DOD has used three commercially hosted payloads, with three more missions planned or underway through 2022 (see figure below).", "DOD estimates that it has achieved cost savings of several hundred million dollars from using commercially hosted payloads to date, and expects to realize additional savings and deliver faster capabilities on orbit from planned missions. Cost savings can result from sharing development, launch, and ground system costs with the commercial host company.", "Among the factors that affect DOD's use of hosted payloads are", "a perception among some DOD officials that matching government payloads to commercial satellites is too difficult; and", "limited, fragmented knowledge on how to mitigate various challenges", "GAO found that further opportunities to use hosted payloads may emerge as DOD plans new and follow-on space systems in the coming years. However, DOD's knowledge on using hosted payloads is fragmented, in part because programs are not required to share information. In 2011, the Air Force created a Hosted Payload Office to provide expertise and other tools to facilitate matching government payloads with commercial hosts. However, GAO found that DOD programs using hosted payloads are not required and generally do not provide cost and technical data, or lessons learned, to the Hosted Payload Office, or another central office for analysis. Requiring programs that use hosted payloads agency-wide to provide this information to a central location would better position DOD to make informed decisions when considering acquisition approaches for upcoming space system designs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD require programs using commercially hosted payloads to contribute resulting data to a central location. In implementing this recommendation, DOD should assess whether the Air Force's Hosted Payload Office is the appropriate location to collect and analyze the data. DOD concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year, the Department of Defense (DOD) spends billions of dollars to  develop, produce, and field its space systems. These systems provide the  government with critical intelligence information, communication and  navigation methods, weather data, and other capabilities vital to military  and civilian agencies and commercial industry. As satellites have become  more complex, they have required larger investments of money and time  to develop, produce, and launch. Some satellites, which have taken more  than a decade to develop due in part to their size and complexity, contain  technologies that are obsolete by the time they are launched. Additionally,  in recent years, threats to DOD space systems have emerged, including  anti-satellite weapons, communications jamming, and increased  environmental hazards in space, such as orbital debris. A single  adversary attack, on-orbit problem, or launch failure of a DOD satellite  can result in the loss of billions of dollars of investment and a significant  loss of capability.", "DOD is currently planning new and follow-on space systems for some of  its major space programs that are in production or have been fielded. As  such, program officials have the opportunity to consider fresh approaches  for acquiring space-based capabilities that may be more cost-effective,  place technologies on orbit more quickly, and potentially offer added  resilience and augmented capabilities to allay emerging threats. Both the  2010 National Space Policy and the 2013 National Space Transportation  Policy call on federal agencies to explore the use of inventive,  nontraditional arrangements for acquiring commercial space services.  One such arrangement is to place a government payload\u2014such as a  sensor or a communications package\u2014on a commercial host satellite. In  addition to launching with the host satellite, the hosted payload uses  available resources from the host satellite, such as power and  communication systems. The hosted payload approach allows both the  government and commercial entity to capitalize on shared development  and launch costs, potentially reducing overall costs for both. The House  Armed Services Committee report 115-200 accompanying a bill for the  National Defense Authorization Act for Fiscal Year 2018 contained a  provision for GAO to review DOD\u2019s use of hosted payloads. This report  (1) determines the extent to which DOD uses commercially hosted  payloads and (2) describes factors that affect DOD\u2019s use of hosted  payloads and assesses how DOD is addressing them.", "To determine the extent to which DOD uses commercially hosted  payloads, we reviewed DOD documentation of prior, current, and future  plans to use hosted payloads, including budget documentation and  informational briefings. We analyzed program office planning documents,  including management directives, hosted payload user guides, lessons  learned, and analyses of alternatives study guidance. We also studied  tools used to identify hosted payload opportunities and program contract  documents, including the 2014 Hosted Payload Solutions multiple award  indefinite delivery indefinite quantity vehicle. Because our review focused  on commercially hosted payloads, we did not assess DOD\u2019s efforts to  host its payloads on other government agency satellites. We interviewed  DOD officials from the offices of the Under Secretaries of Defense for  Acquisition and Sustainment, and Policy; the Office of the Secretary of  Defense Cost Assessment and Program Evaluation; DOD\u2019s Chief  Information Officer; Missile Defense Agency; the Navy\u2019s Program  Executive Office for Space Systems and Space and Naval Warfare  Systems Command; and research and development organizations,  including the Defense Advanced Research Projects Agency and Naval  Research Laboratory. Additionally, we conducted interviews with Air  Force personnel from Air Force Space Command, the Space and Missile  Systems Center\u2019s Hosted Payload Office (HPO), and the Space Test  Program.", "To describe and assess the factors that affect DOD\u2019s use of commercially  hosted payloads, we examined applicable policies, strategy documents  and briefings, including the 2010 National Space Policy, 2013 National  Space Transportation Policy, and the Air Force\u2019s Space Warfighting  Construct. To understand logistical, technical, and other considerations  for using commercially hosted payloads, we reviewed program  documents on commercially hosted payload arrangements from DOD and  interviewed the organizations listed above. We also interviewed officials  in the Departments of Commerce and Transportation, as well as the  National Aeronautics and Space Administration (NASA). Finally, we  interviewed a broad range of industry stakeholders, including commercial  satellite manufacturers and owner/operators, and industry associations\u2014 such as the Satellite Industry Association and the Hosted Payload  Alliance\u2014to understand perspectives on the factors that affect the use of  commercially hosted payloads. We compared DOD efforts to address  factors affecting their use of commercially hosted payloads to criteria  established in our work on strategic sourcing best practices as well as our  work on duplication, overlap, and fragmentation.", "We conducted this performance audit from July 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Commercially Hosted Payloads", "paragraphs": ["DOD defines a hosted payload as an instrument or package of  equipment\u2014a sensor or communications package, for example\u2014 integrated onto a host satellite, which operates on orbit making use of the  host satellite\u2019s available resources, including size, weight, power, or  communications. A commercially hosted DOD payload is a DOD payload  on a commercial satellite. In general, hosted payloads may be either  experimental or operational. Experimental payloads demonstrate new or  existing technologies on orbit for potential use on future operational space  systems. Operational payloads deliver required capabilities to end users.  Hosted payload arrangements may be unsuitable for some missions. For  example, some payloads may be too large or need too much power for a  host satellite to feasibly accommodate, or may require unique satellite  maneuvers that, if exercised, would negatively affect a host satellite\u2019s  primary mission. Civil government agencies, like NASA and the National  Oceanic and Atmospheric Administration (NOAA), have used or have  plans to use commercially hosted payloads. For more information on the  commercially hosted payloads that civil agencies have used or plan to  use, see appendix I."], "subsections": []}, {"section_title": "Potential Benefits of Using Commercially Hosted Payloads", "paragraphs": ["We and others have identified potential benefits of using commercially  hosted payloads to gain space-based capability, such as:", "Cost savings\u2014Commercially hosted payloads may increase  affordability because the government payload owner pays for only a  portion of the satellite development and shared launch and ground  systems costs, rather than for the entire system. Also, smaller, lighter,  and less complex systems may shorten procurement timelines,  reduce research and development investment, and reduce risk in  technology development. Some government agencies have reported  saving hundreds of millions of dollars to date from using innovative  arrangements such as hosted payloads.", "Faster on-orbit capability\u2014Because commercial satellites tend to  take less time from concept development to launch than DOD  systems do and have relatively frequent launches, hosting  government payloads on commercial satellites may achieve on-orbit  capability more quickly.", "Increased deterrence and resilience\u2014Distributing capabilities  across more satellites increases the number and diversity of potential  targets for an adversary and may make it more difficult for an  adversary to decide which assets to attack, serving as a deterrent.  Additionally, more frequent launches could increase DOD\u2019s ability to  reconstitute its satellite groups\u2014or constellations\u2014more quickly in  case of unexpected losses of on-orbit capabilities. Recent strategic  and policy guidance government-wide and at DOD have stressed the  need for U.S. space systems to be survivable, or resilient, against  intentional and unintentional threats\u2014both types of which have  increased over the past 20 years. Intentional threats can include  purposeful signal jamming, laser dazzling and blinding of satellite  sensors, missiles intended to destroy satellites, and ground system  attacks. Some unintentional threats to satellites are created by the  harsh space environment itself, like extreme temperature fluctuations  and radiation, and the growing number of satellites, used rocket parts,  and other space debris on orbit, which could collide with orbiting  satellites.", "Continual technology upgrades and industrial base stability\u2014 New technologies may be continually incorporated into space systems  using hosted payloads, which may be uniquely suited for higher rates  of production and launches than traditional DOD satellites. Using  commercial satellites for government payloads could help maintain  the U.S. commercial space industry\u2019s ongoing technology  developments by maintaining stable business and incentivizing new  companies to enter the marketplace. Further, increased production  may be distributed over multiple contractors\u2014including traditionally  lower-tier contractors\u2014to foster more competition.", "As we reported in October 2014, hosted payloads are among several  avenues DOD is considering to increase the resilience of its satellites in  the face of growing threats. DOD has been looking at ways to break up  larger satellites into multiple smaller satellites or payloads after decades  of building large, complex satellites to meet its space-based  requirements. The broader concept of breaking up larger satellites into  smaller ones is known as disaggregation. In 2014, we reported that DOD  lacked critical knowledge about the concept of disaggregation, including  how to quantify a broad range of potential effects. At the time, for  example, DOD did not have common measures for resilience, which we  found is a key consideration in making a choice as to whether to continue  with a current system architecture or to change it. Recently, senior DOD  officials have also made public statements that indicate a willingness to  consider innovative acquisition approaches so that acquisition timelines  can be reduced. For example, in a 2016 strategic intent document, the  Commander of Air Force Space Command stated that the Air Force  should seek innovative acquisition approaches that leverage DOD\u2019s  buying power across the industry. Additionally, the Secretary of the Air  Force stated that the Air Force is exploring more affordable and  innovative ways to acquire its satellite communication services through  investments in commercial industry and international partnerships."], "subsections": []}, {"section_title": "Matching Payloads with Commercial Host Satellites", "paragraphs": ["Opportunities to match a DOD payload with a commercial host can arise  in various ways. DOD may first develop a payload and seek to match it  with a commercial host, DOD may work in tandem with a commercial  company to develop a payload to be hosted, or commercial companies\u2014 likely the satellite owner, operator, or system integrator\u2014can first identify  upcoming satellite hosting opportunities to DOD. In each scenario, the  DOD program (or payload owner) and the commercial host generally  consider the basic properties of both the payload and host satellite in  attempting to find a match. These properties\u2014including the size, weight,  area, power, and required orbital characteristics of the payload and host  satellite\u2014should be complementary to create an arrangement that is  mutually compatible for each party, according to Aerospace Corporation  recommendations and officials we spoke with. Specifically, these  properties include:", "The size of the payload when it is stowed and when it is deployed on  orbit, including the available area on the host satellite;", "The available weight and mass distribution the host satellite can", "The available power on the host satellite;", "The thermal requirements of the payload and corresponding capability  of the host satellite;", "The requirements to limit electromagnetic interference\u2014disturbances  that affect electrical circuits on the payload and host satellite;", "The available command, telemetry, and mission data rate  requirements of the payload and corresponding capability of the host  satellite;", "The compatibility of interfaces between the payload and host satellite;", "The pointing accuracy and stability of the host satellite; and", "The necessary orbits, including altitude and inclination.", "Other considerations when matching a DOD payload with a host satellite  are the compatibility of radio frequency spectrum (spectrum) needs  between the payload and host, and the satellite\u2019s intended orbital  location. Spectrum is a natural resource used to provide essential  government functions and missions ranging from national defense,  weather services, and aviation communication, to commercial services  such as television broadcasting and mobile voice and data  communications. The frequencies, or frequency bands, of spectrum have  different characteristics that make them more or less suitable for specific  purposes, such as the ability to carry data long distances or penetrate  physical obstacles. Each frequency band has a limited capacity to carry  information. This means that multiple users operating at approximately  the same frequency, location, and time have the potential to interfere with  one another. Harmful interference occurs when two communication  signals are either at the same frequencies or close to the same  frequencies in the same vicinity, a situation that can lead to degradation  of a device\u2019s operation or service. As such, a payload or satellite\u2019s  specific placement in any given orbit could potentially interfere with a  neighboring payload or satellite in the same orbit.", "In the United States, the National Telecommunications and Information  Administration (NTIA) of the Department of Commerce is responsible for  establishing policy on regulating federal government spectrum use and  assigning spectrum bands to government agencies. The Federal  Communications Commission (FCC) allocates spectrum and assigns  licenses for various consumer and commercial purposes. Additionally, all  government and commercial satellite programs must apply for approval to  operate at a given orbital location using a given band of spectrum  internationally through the International Telecommunication Union (ITU).  The ITU is an agency of the United Nations and coordinates spectrum  standards and regulations."], "subsections": []}, {"section_title": "The Air Force\u2019s Hosted Payload Office", "paragraphs": ["In 2011, the Air Force created the Space and Missile Systems Center\u2019s  (SMC) Hosted Payload Office (HPO) to provide acquisition architectures  that achieve on-orbit capability more quickly and affordably. The HPO  uses various resources and capabilities to meet its objectives:", "Hosted Payload Solutions Contract: In 2014, SMC established the  Hosted Payload Solutions (HOPS) multiple award indefinite delivery  indefinite quantity (IDIQ) vehicle. According to HPO documents,  SMC established the contract\u2014available to all DOD and civil  agencies\u2014to streamline commercially hosted payload arrangements  by selecting a pool of commercial vendors that government payload  owners can use to access space on commercial host satellites.  Programs do not have to use HOPS, however, and may contract with  commercial companies directly. The HOPS vehicle includes 14  vendors across the commercial satellite industry. SMC awarded task  orders for studies to each of the vendors with a contract to gather  information on potential host opportunities, orbits and launch  schedules, cost estimates for hosting fees, and existing host satellite  interfaces.", "Feasibility Studies: Using the information it gathered from the 14  vendor studies, the HPO stated that it built a database to provide  information on potential satellite hosts and the suitability of certain  payloads for host opportunities, including cost estimates. The HPO  stated that it can use this information to assess the feasibility of a  hosted payload opportunity for interested SMC space programs. The  HPO also conducts feasibility studies for interested programs based  on publicly available information and from industry requests for  information.", "Hosted Payload Interface Design guidelines: The HPO published  hosted payload interface design guidelines to provide technical  recommendations for hosted payload developers. According to HPO  officials, the intent of these guidelines is to reduce integration costs  and improve the host-ability of all hosted payloads.", "Hosted Payload Data Interface Unit: The HPO is developing a  secure hosted payload data interface unit to protect payload data from  unauthorized access by the host. Following its release of draft  documentation to industry stakeholders in March 2018, the HPO is  currently integrating National Security Agency requirements into its  request for data interface unit prototype proposals. According to HPO  officials, the office plans to issue a request for prototype proposals in  May 2018, integrate a data interface unit and payload in 2020, and  launch the integrated system in 2022.", "Hosted Payload Expertise: The HPO provides general advice and  expertise to programs in the form of hosted payload architectural  studies, input on acquisition planning and strategy documents, and  other research efforts, according to the office."], "subsections": []}]}, {"section_title": "DOD Has Used Commercially Hosted Payloads Three Times and Three More Missions Are Planned or Underway", "paragraphs": ["Since 2009, DOD has launched three experimental payloads on  commercial host satellites and plans to conduct three more missions  through 2022, as shown in figure 1. DOD estimates that it has achieved  cost savings of several hundred million dollars from these experimental  payloads. According to DOD officials, DOD expects to realize additional  cost savings and be able to place capabilities on orbit more quickly from  several hosted payload efforts that are planned or underway.  Opportunities for additional hosted payload efforts may arise in the near  term amid DOD planning for upcoming and follow-on space systems."], "subsections": [{"section_title": "DOD Has Used Commercial Satellites to Host Three Experimental Payloads", "paragraphs": ["Since 2009, DOD has placed experimental payloads\u2014intended to test or  demonstrate an on-orbit capability\u2014for three programs on commercial  host satellites. Several officials within DOD told us that experimental  payloads tend to be smaller, less expensive, and their missions more risk- tolerant than traditional operational DOD payloads. In these ways, they  said experimental payloads are better-suited to hosting arrangements  than operational DOD payloads. The Air Force has not yet used the  HOPS multiple award IDIQ vehicle\u2014which was awarded to facilitate  commercially hosted payload arrangements\u2014to match a government  payload with a commercial host. The HPO told us that, in 2019, NASA  and NOAA will be the first agencies to use the HOPS vehicle to find a  host satellite for two of their payloads. Table 1 describes the three  experimental payloads hosted on commercial satellites to date. For more  information on civilian agencies that use or plan to use commercially  hosted payloads, see appendix I.", "Air Force officials told us that using commercial host satellites for their  experimental payloads has saved several hundred million dollars across  these programs and shortened timelines for launching payloads into  space. For example, the HPO estimated that the Air Force saved nearly  $300 million by using a commercial host satellite for its Commercially  Hosted Infrared Payload (CHIRP), as compared to acquiring the same  capability using a dedicated, free-flying satellite. In addition, Air Force  officials estimated that using commercial host satellites for its Responsive  Environmental Assessment Commercially Hosted (REACH) effort saved  the Air Force approximately $230 million. The REACH effort consists of  over 30 payloads hosted on multiple satellites. Further, because of the  commercial host\u2019s launch schedule, the Air Force achieved its on-orbit  capability sooner than if it had acquired free-flying satellites. In April  2013, we found that the Internet Protocol Routing in Space (IRIS)  payload, launched in 2009, was a commercially hosted payload pilot  mission that would provide internet routing onboard the satellite,  eliminating the need for costs associated with certain ground  infrastructure."], "subsections": []}, {"section_title": "DOD Has Three Commercially Hosted Payload Efforts Planned or Underway", "paragraphs": ["DOD and Air Force officials told us they are planning to pursue  commercially hosted payloads for three programs in the coming decade  to achieve cost savings and on-orbit capability more quickly. In each  case, officials said they have identified cost and schedule benefits for  their respective programs. For example, the Missile Defense Agency  (MDA) stated that it expects to save approximately $700 million compared  to the cost of traditional, free-flying satellites by acquiring its Spacebased  Kill Assessment capability as payloads on commercial host satellites, and  expects to achieve on-orbit capability years earlier than if it had acquired  dedicated satellites for these payloads. Additionally, a program official  from the Defense Advanced Research Projects Agency (DARPA) told us  DARPA plans to use a commercially hosted payload for the Phoenix  Payload Orbital Delivery effort to test more affordable ways to access  space. Moreover, Air Force officials told us they expect to save $900  million over free-flying satellites by using two Space Norway satellites to  fly an Enhanced Polar System Recapitalization payload. Space Norway  plans to launch its satellites in 2022, which the Air Force expects will  allow it to meet its need for DOD\u2019s required capability. See table 2 for  additional details on DOD\u2019s planned hosted payloads.", "Additional opportunities for commercially hosted payloads may be  forthcoming as DOD develops requirements and designs for new and  follow-on space programs. DOD has been analyzing various alternatives  to explore possible future space system designs and acquisition  strategies for several of its upcoming follow-on programs. In these cases,  the analysis of alternatives (AOA) study guidance, set forth by DOD\u2019s  Office of Cost Assessment and Program Evaluation, included direction for  the studies to consider new approaches for acquiring space capabilities.  For example, AOA guidance directed study teams to include hosted  payloads or other disaggregated designs, and commercial innovations in  technology and acquisition to meet some space mission requirements.  Table 3 provides further details of recently completed and ongoing AOAs  to study new designs\u2014or architectures\u2014for upcoming follow-on satellite  systems."], "subsections": []}]}, {"section_title": "Logistical and Data Challenges Contribute to Limited Use of Hosted Payloads", "paragraphs": ["Two factors have contributed to DOD\u2019s limited use of commercially  hosted payloads. First, DOD officials identified logistical challenges to  matching government payloads with any given commercial host satellite.  For example, most of the offices we spoke with cited size, weight, and  power constraints, among others, as barriers to using hosted payloads.  Second, while individual DOD offices have realized cost and schedule  benefits, DOD as a whole has limited information on costs and benefits of  hosted payloads. Further, the knowledge it has gathered is fragmented  across the agency\u2014with multiple offices collecting piecemeal information  on the use of hosted payloads. The limited knowledge and data on hosted  payloads that is fragmented across the agency has contributed to  resistance among space acquisition officials to adopting this approach."], "subsections": [{"section_title": "DOD Officials Cite Logistical Challenges to Matching Payloads to Hosts", "paragraphs": ["DOD acquisition officials within the Office of the Secretary of Defense told  us matching requirements between government payloads and  commercial satellites is typically too difficult for programs to overcome.  Specifically, they said the cumulative complexity of matching size, weight, power, and spectrum needs; aligning government and commercial timelines; and, addressing concerns over payload control and cybersecurity amounts  to too great a challenge.", "DOD\u2019s Hosted Payload Office is developing tools designed to help  address these challenges and DOD offices that have used hosted  payloads have also found ways to overcome them."], "subsections": [{"section_title": "Matching Size, Weight, and Power", "paragraphs": ["Officials from DOD acquisition and policy offices, as well as Air Force and  industry officials we spoke with, cited matching size, weight, and power  between DOD payloads and commercial host satellites as a challenge.  We similarly found in April 2013 that ensuring compatibility between  payloads and host satellites can pose challenges because not all  commercial satellites are big enough or have enough power to support  hosting a payload. Whether a host satellite can accommodate a payload  can depend on the size of the payload. Additionally, according to industry  representatives, the space taken up by the hosted payload affects the  amount of revenue-generating payloads the host may place on its  satellite, such as additional transponders\u2014devices that emit and receive  signals\u2014for the communications services it provides to customers. The  complexity of integrating a government payload onto a commercial host  can also drive the overall cost of the arrangement.", "However, officials said these challenges can be mitigated through the use  of various expertise and lessons learned. HPO officials and industry  representatives have proposed several approaches to help match  properties like size, weight, and power between a DOD payload and a  commercial host satellite. The HPO is developing a hosted payload  interface unit that could potentially provide a standard for payload  developers and system integrators to develop and test their systems. One  commercial company proposed an interface unit that would accommodate  a \u201cuniversal\u201d DOD payload. Additionally, industry experts stated that with  sufficient planning and time for system integration, nearly any payload  can be accommodated on a host satellite.", "The HPO issued guidelines in 2017 to assist DOD payload developers in  working toward typical payload requirements and standards for host  satellites in low Earth orbit and geostationary Earth orbit. These  guidelines inform the payload\u2019s electrical power and mechanical designs.  The principal guideline\u2014echoed by the successful CHIRP demonstration  in 2011\u2014is that the hosted payload must \u201cdo no harm\u201d to the mission  performance of its host. Also, satellite interfaces can vary from company  to company. Some commercial companies had experience with the  task\u2014and business opportunity\u2014of integrating multiple customers\u2019  payloads onto satellites since at least the 1990s."], "subsections": []}, {"section_title": "Matching Spectrum Needs", "paragraphs": ["Air Force, HPO, and industry officials told us that, ideally, the payload  should use the same spectrum allocation as the commercial host. They  said that this is due in part to the lengthy satellite registration process that  takes place in the United States and through the ITU that must be  undertaken prior to placing a satellite on orbit. Some DOD officials added  that the process for all new satellites from initial filing to ITU approval  takes around 7 years. If a satellite owner registers for one frequency band  of spectrum and later requires a different band, the owner has to begin  the registration process from the beginning\u2014restarting the 7-year  timeline. This can be problematic for DOD payload owners seeking to  match their military communications payload with an already-registered  host satellite\u2014particularly if the host satellite\u2019s spectrum allocation is  incompatible with the DOD payload. HPO and other DOD officials said  that very different spectrum needs between payload and host would  therefore preclude the match.", "Moreover, a need for military\u2014as opposed to commercial\u2014spectrum for  communications payloads can introduce additional  complications. Although a process exists for a commercial satellite  owner to license military spectrum for use by a hosted payload,  representatives from DOD\u2019s Chief Information Officer\u2019s (CIO) office could  cite only one instance where this has happened. One possible  explanation stems from a 2012 memorandum from DOD\u2019s CIO that  outlines various preferred processes for a commercial host satellite to  host military communications payloads. Several industry officials we  spoke to said that the various processes outlined in the 2012  memorandum would add to the already-lengthy process of spectrum  registration. Further, the memorandum instructs that contractual terms  between the payload and host satellite owners should restrict all military  spectrum use exclusively to the U.S. military. However, one industry  official told us that international entities do not necessarily recognize U.S.  military spectrum, and commercial companies that obtain licenses  through other countries are permitted to use those frequencies. For  example, a senior official of one commercial company we met with stated  that the company licensed U.S. military spectrum through another North  Atlantic Treaty Organization government after failing to successfully  coordinate an FCC request with DOD and NTIA. DOD and industry  representatives told us that from a business perspective, it makes little  sense for a commercial company to seek hosting opportunities for DOD  payloads that require U.S. military spectrum."], "subsections": []}, {"section_title": "Matching Government and Commercial Development and Acquisition Timelines", "paragraphs": ["Government and industry officials we spoke with said that aligning the  development and acquisition timelines of a government payload and  commercial host satellite is a challenge. The timeline associated with  developing government sensors is generally much longer than that of  commercial satellites, potentially creating difficulties in scheduling and  funding commercially hosted payload arrangements. For example, DOD  satellite systems take, on average, over 7 years to develop and launch a  first vehicle, while commercial satellite programs typically take between 2  and 3 years. DOD payload owners may find it challenging to accelerate  development and acquisition schedules to match those of the commercial  satellite host. Additionally, DOD officials we spoke with said that their  budget and planning processes require funding commitments up to 2  years in advance of actually receiving those funds. This can further  complicate alignment with commercial timelines because the  development of a government sensor would need to be underway well in  advance of a decision to fund a commercially hosted payload approach.  Furthermore, federal law generally prohibits agencies from paying in  advance for a future service or from obligating future appropriations.", "However, several DOD and other government agency officials we spoke  with said that it is possible to align government and commercial timelines.  For example, MDA adopted the commercial host\u2019s schedule to ensure its  Spacebased Kill Assessment payload was ready for integration and  launch without delaying the host satellite or worse\u2014missing its own ride  to space. DARPA officials told us they were also able to align DARPA  acquisition and development schedules with the commercial host. The Air  Force\u2019s Enhanced Polar System (EPS) Recapitalization program officials  were able to leverage existing documents such as requirements  documents and acquisition strategies from the predecessor program to  speed up the acquisition process. According to Air Force officials, the  EPS Recapitalization program had a unique opportunity to take  advantage of the availability of a commercial host and had the support of  a high ranking Air Force official that enabled the program to move forward  using a commercially hosted payload approach."], "subsections": []}, {"section_title": "Maintaining Payload Control and Cybersecurity", "paragraphs": ["Some officials cited concerns with combining government and  commercial space missions. For example, officials across DOD told us  they were wary of losing control over a hosted payload should a  commercial company\u2019s needs change. They said that theoretically, a  commercial provider could decide to turn off power to the government\u2019s  payload if the host satellite needed extra power to perform a certain  function. Additionally, DOD space program officials expressed concern  that commercial practices for ensuring the mission success of the payload  may not be up to government standards\u2014that commercial testing and  integration standards may be less robust than those used by traditional  government programs to ensure success, adding risk to the government  payload. Furthermore, officials in one DOD program office expressed a  distrust of commercial host motives in offering to support a government  payload on their satellite, suggesting that a company could be intending  to steal government technologies. However, industry officials we spoke  with said that DOD can generally issue a solicitation that includes  necessary stipulations. For example, including a condition to preserve the  payload\u2019s priority of mission and other terms to protect the government\u2019s  investment may provide some assurance to those officials that perceive  security risks.", "Additionally, some officials we spoke to cited cybersecurity concerns.  They cited loss of control over data security as a challenge to using  hosted payloads. Officials told us the data could be vulnerable to  eavesdropping or manipulation as it travels between government ground  systems and the commercially hosted government payload. However,  according to HPO officials, the Air Force overcame this challenge on the  CHIRP mission by procuring a secure interface that provided a data link  between the payload and dedicated transponder and ground terminal. As  mentioned previously, the Hosted Payload Office is developing a hosted  payload data interface unit to mitigate this challenge by securing payload  data communications from the host satellite."], "subsections": []}]}, {"section_title": "Department-wide Information on Commercially Hosted Payloads Is Limited and Fragmented Across Offices", "paragraphs": ["DOD, at the department-wide level, has limited information on  commercially hosted payloads\u2014mostly due to a lack of experience in  using hosted payloads and complexities associated with them. For  example, acquisition officials in the Office of the Secretary of Defense told  us that DOD needs more data and analysis of the potential costs and  benefits. However, realistic cost modeling for commercially hosted DOD  payloads is unavailable because costs can vary across potential hosts  and DOD has minimal experience using commercial hosts. Similarly, the  HPO performs market research and cost estimates based on data from  commercial companies, but according to one official in the HPO, the costs  tend to vary based on the supply and demand in the commercial satellite  industry. Additionally, HPO officials said their cost savings analyses are  based on only two real-world commercially hosted DOD payloads\u2014 CHIRP and REACH. HPO officials told us that with additional  government data they could compare the costs of system architectures  that include free-flier satellites with those that use commercially hosted  payloads. Additionally, some potential benefits of using commercially  hosted payloads, such as resilience, may be difficult to measure. In our  2014 report on disaggregation, we recommended that DOD define key  measures related to disaggregation, including developing metrics to  measure resilience. DOD is in the process of developing standard  metrics for resilience.", "DOD\u2019s knowledge of commercially hosted payloads is also fragmented  across the agency. Several DOD offices are independently conducting  activities related to commercially hosted payloads, such as pursuing  commercially hosted payload arrangements, developing lessons learned,  and determining demand for commercial hosts. For example, MDA  officials told us they have developed cost and technical data and lessons  learned based on MDA\u2019s Spacebased Kill Assessment payload\u2014 launched earlier this year\u2014but have not shared it across the agency. On  the other hand, the Space Test Program, also housed within the Air  Force\u2019s SMC develops lessons learned on its payloads, which are  government payloads on government host satellites and officials there  told us they provide lessons learned to the HPO. In October 2017,  SMC\u2019s Launch Office sent a request for data on hosted payloads to DOD  agencies, research laboratories, and universities, but the HPO was not an  active participant in this request. Independent efforts within DOD to  collect and analyze cost, schedule, and performance results from hosted  payloads can create fragmentation in DOD\u2019s knowledge base and can  increase the risk of duplicative efforts within DOD.", "DOD does not collect or consolidate agency-wide knowledge on  commercially hosted payloads and has no plans to do so. Agency officials  stated that DOD does not require programs outside of SMC to consult the  HPO when seeking commercially hosted payload arrangements. The Air  Force established the HPO to facilitate commercially hosted payloads,  however, the 2011 Program Management Directive that established the  HPO states that the HPO will coordinate with SMC directorates for  detailed implementation of hosted payloads but does not address  coordination with agencies or directorates outside of SMC. According to  an HPO official, programs are not required to use HPO expertise or tools  as they pursue using hosted payloads. Further, this official stated that  programs are not required to provide any data or lessons learned to the  HPO, or any other central point within DOD, following the pursuit or  completion of a hosted payload arrangement. The 2011 Program  Management Directive directs the HPO to provide lessons learned to  SMC directorates but does not direct SMC offices to share information\u2014 such as costs, technical data and lessons learned on completed  commercially hosted payload efforts\u2014with the HPO. An HPO official  indicated that the HPO obtains data through informal communication with  those programs using hosted payloads that are willing to share data.", "We found that limitations and fragmentation of data and knowledge are  contributing to resistance within DOD to using hosted payloads. Several  DOD acquisition and program officials we spoke with who did not have  experience with hosted payloads generally stated that the potential risks  to using hosted payloads outweighed the benefits, and that there was  little evidence-based analysis to prove otherwise. They were not aware of  existing tools that could assist them in making decisions even though the  HPO has been developing these tools and has made efforts to share  them within SMC. DOD acquisition and program officials consistently  cited a preference for maintaining the acquisition status quo over  introducing any perceived added risk to their programs. At the same time,  however, officials who have used hosted payloads were able to overcome  logistical and technical challenges and realize cost savings. However,  according to an HPO official, there is currently no requirement in place to  facilitate sharing their approaches to doing so. We have reported in the  past that DOD\u2019s culture has generally been resistant to changes in space  acquisition approaches and that fragmented responsibilities for  acquisitions have made it very difficult to coordinate and deliver  interdependent systems.", "Moreover, our past studies of commercial strategic sourcing best  practices have found that that leading companies centralize procurement  decisions by aligning, prioritizing, and integrating procurement functions  within the organization. Establishing the Hosted Payload Office is one  step in this direction, but the office is organized under the Advanced  Systems and Development Directorate\u2014a research and development  organization\u2014under SMC. Moreover, the 2011 directive that established  the HPO does not address coordination or responsibilities for agencies or  directorates beyond SMC. Consolidating knowledge is important because  it allows organizations to share information and data upon which to  develop consistent procurement tactics, such as ways to overcome  challenges in matching a government payload with a commercial host. As  we found in our work on commercial strategic sourcing best practices,  organizations that struggled with fragmented information in the past  overcame this challenge in part by consolidating their data on costs and  spending. While hosted payload acquisitions are not a typical service  acquisition, successful organizations have found that these techniques  work for highly specialized technical services for which few suppliers  exist."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As DOD considers new architectures and acquisition approaches,  commercially hosted payloads have the potential to play a role in  delivering needed capabilities on orbit more quickly and at a more  affordable cost than traditional DOD space acquisitions. Placing DOD  payloads on commercial satellites might also be an effective method by  which to increase resiliency. However, DOD\u2019s experience and the data  collected so far are limited in informing decisions on the use of these  payloads. DOD would benefit from leveraging the knowledge and  information gained from each hosted payload experience. Centralized  collection and assessment of agency-wide data would help enable DOD  to mitigate the logistical challenges inherent in matching payloads to  hosts, and better position DOD to make reasoned, evidence-based  decisions on whether a hosted payload would be a viable solution to meet  warfighter needs. Without such knowledge, and a way for interested  programs to leverage it, DOD may not be fully informed about using  hosted payloads and may risk missing opportunities to rapidly and  affordably address emerging threats in space."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Defense should require programs using hosted  payloads to provide cost and technical data, and lessons learned to a  central office. In implementing this recommendation, DOD should  consider whether the Hosted Payload Office is the most appropriate office  to centralize agency-wide knowledge. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Commerce, NASA,  and DOD for comment. The Department of Commerce provided technical  comments, which we incorporated as appropriate. NASA did not have  comments on our draft report. In its written comments, DOD concurred  with our recommendation and stated that SMC had initiated a major  reorganization since we drafted our report and that under the new  organizational construct, the Hosted Payload Office had changed and  may not be the appropriate office for centralizing DOD-wide hosted  payload knowledge. DOD\u2019s comments are reproduced in appendix II.  DOD also provided technical comments which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Commerce, the Secretary of Defense, the  Administrator of NASA, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or by email at chaplainc@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Civil and Other Agency Commercially Hosted Payloads", "paragraphs": ["As shown in table 4, civil and other government agencies use  commercially hosted payloads to enhance navigation systems, monitor  environmental pollution, conduct scientific missions, and improve search  and rescue systems. Officials from all of the agencies we spoke with cited  cost savings and the ability to leverage existing commercial schedules  and technologies among the reasons they use commercial host satellites."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Cristina T. Chaplain (202) 512-4841 or chaplainc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rich Horiuchi (Assistant  Director), Erin Cohen (Analyst in Charge), Claire Buck, Jon Felbinger,  Stephanie Gustafson, Matthew Metz, Sylvia Schatz, and Roxanna Sun  made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Defense spends billions of dollars a year on satellites that provide critical communications, reconnaissance, and other capabilities.", "We found that DOD may be able to save money and add capabilities faster by paying private companies to host government sensors or other equipment on their satellites. DOD estimates it has already saved hundreds of millions of dollars from this cost-sharing approach.", "We recommended that DOD gather data in a central location from its programs that use these commercially hosted payloads. Assessing this data could help DOD make reasoned, evidence-based decisions on future host satellite use."]}
{"id": "GAO-18-68", "url": "https://www.gao.gov/products/GAO-18-68", "title": "Health Insurance Exchanges: Changes in Benchmark Plans and Premiums and Effects of Automatic Re-enrollment on Consumers' Costs", "published_date": "2017-11-14T00:00:00", "released_date": "2017-12-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["During open enrollment, eligible returning consumers may re-enroll in their existing health insurance exchange plan or choose a different plan. Those who do not actively enroll in a plan may be automatically reenrolled into a plan. According to the Department of Health and Human Services, automatic re-enrollment is intended to help ensure consumers' continuity in coverage. However, some have questioned whether automatic reenrollment could have unintended financial consequences for consumers.", "GAO was asked to review automatic reenrollment and benchmark plans. GAO examined 1) the extent to which plans identified as benchmark plans remained the same plans from year to year, and how premiums for benchmark plans changed; 2) the proportion of exchange consumers who were automatically re-enrolled into the same or similar plans, and how these proportions compared to those for consumers who actively re-enrolled, and 3) the extent to which consumers' financial responsibility for premiums changed for those who were automatically re-enrolled compared to those who actively re-enrolled.", "GAO reviewed relevant guidance and analyzed county-based data from the Centers for Medicare & Medicaid Services (CMS) for the 37 states that used the federal information platform, healthcare.gov, from 2015 through 2017. GAO also interviewed CMS and ASPE officials and analyzed information from ASPE on reenrollment from 2015 to 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["Through the exchanges established under the Patient Protection and Affordable Care Act, consumers can directly compare and select among health plans based on a variety of factors, including premiums. Most consumers who purchase health plans through the exchanges receive tax credits to help them pay for their premiums. The value of a consumer's premium tax credit is based, in part, on the premium for the benchmark plan, which is the second lowest cost option available in the consumer's local area within the exchange's silver metal tier (one of four metal tiers that indicate the value of plans). Because plan premiums and plan availability can change over time, the benchmark plan in each local market can also change over time. GAO analyzed changes in benchmark plans and premiums from 2015 through 2017 and found:", "In most of the nearly 2,600 counties included in the analysis, the plans identified as benchmark plans, and the premiums for these plans, changed from year to year. For example, in 85 percent of counties, the 2015 benchmark plans were not benchmark plans in either 2016 or 2017.", "Gross benchmark premiums (exclusive of tax credits) increased from year to year, and increases were higher from 2016 to 2017 than they were from 2015 to 2016.", "Premium tax credits would limit the costs of increasing premiums for most consumers, though some consumers, including those not eligible for premium tax credits, would have incurred more or all of the higher premium costs.", "During the annual open enrollment period, consumers who do not make an active plan selection are automatically reenrolled into their existing plan or, if that plan is no longer available, they are generally re-enrolled into a similar plan if one has been identified. GAO analyzed information from the Office of the Assistant Secretary for Planning and Evaluation (ASPE) for consumers enrolled in both 2015 and 2016 and found:", "About 30 percent of consumers were automatically re-enrolled in 2016, while the remaining 70 percent chose to actively re-enroll.", "Median net monthly premiums\u2014what consumers paid after premium tax credits\u2014increased less from 2015 to 2016 for those who actively enrolled ($5) than for those who were automatically reenrolled ($22), although there was variation. Our findings are consistent with other work by ASPE that suggests that consumers consider possible cost savings when deciding to switch plans.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 2014, millions of consumers have purchased individual market  health insurance plans through the health insurance exchanges\u2014or  marketplaces\u2014established under the Patient Protection and Affordable  Care Act (PPACA). These consumers purchase health insurance for a  variety of reasons, including being self-employed or a small business  owner, or because their own employer does not offer insurance. Through  the exchanges, consumers can directly compare and select among health  plans based on a variety of factors, such as premiums and provider  networks. PPACA also established requirements for the benefits that  must be covered by health plans\u2014referred to as essential health benefits\u2014and required issuers to market their plans according to defined  categories (or metal tiers) that indicate the extent to which the plans  would be expected to cover the costs of consumers\u2019 medical care.", "Each year, there is an open enrollment period during which new  consumers may enroll for coverage and consumers who are already  enrolled in an exchange plan may re-enroll into that plan or choose a  different plan. Eligible consumers who do not make an active  re-enrollment selection are to be automatically re-enrolled in their existing  plan if it remains available. If that plan is no longer available, they are  generally automatically re-enrolled in a similar plan if one was identified,  or the consumers would have to actively re-enroll if a similar plan was not  identified. We refer to the similar plans into which automatic re-enrollees  were enrolled if their original plan was no longer available to them as a  \u201csimilar crosswalked plan\u201d throughout this report. According to guidance  from the Department of Health and Human Services\u2019 (HHS) Centers for  Medicare & Medicaid Services (CMS), the automatic re-enrollment  process was established to help ensure continuity in coverage. This  process can help ensure that continuity, but because the exchanges are  dynamic and plan availability and premiums can change from year to  year, some have questioned whether it could have unintended financial  consequences for consumers.", "PPACA includes a variety of provisions related to the exchanges that  could impact what consumers pay for their health insurance. For  example, most consumers purchasing health insurance through the  exchanges are eligible for premium tax credits that can reduce their  out-of-pocket payments for premiums. The amount of this credit is based  on the consumer\u2019s household income relative to the cost of premiums for  the second lowest cost silver plan available to the consumer\u2014referred to  as a benchmark plan\u2014even if the consumer chooses to enroll in a  different plan. A consumer who is eligible for the tax credit and enrolled  in a benchmark plan is responsible for paying a premium amount that is  limited to a certain percentage of his or her income, and the tax credit  generally covers the rest of the premium. If, however, the consumer  enrolls in a plan with a higher premium than the benchmark plan  premium, then the tax credit does not increase and the consumer must  make up the difference. In contrast, if the consumer enrolls in an eligible  plan with a lower premium than the benchmark plan premium, the tax  credit generally does not decrease and the consumer\u2019s payments would  be lower than if enrolled in the benchmark plan. Because plan premiums  and plan availability can change over time, the benchmark plan in each  local market can also change from year to year. Therefore, a consumer  enrolled in a benchmark plan in one year who is re-enrolled, either  actively or automatically, into the same plan the following year may find  that it is no longer the benchmark plan, and so may have to pay a lower  or higher share of income on premiums. Consumers who actively  re-enrolled in an exchange plan may have considered the financial  implications of remaining in the same plan or switching to a new plan.  Consumers who were automatically re-enrolled in an exchange plan,  however, may not have taken those considerations into account.", "You asked us to examine various aspects of automatic re-enrollment and  the potential implications for consumers. We examined:  1.  the extent to which plans identified as benchmark plans remained the  same plans or changed to different plans from year to year and how  premiums for those plans changed;  2.  the proportion of 2015 exchange consumers who were automatically  re-enrolled in the same or similar crosswalked plans, and how those  proportions compared to those for consumers who re-enrolled  actively; and   3.  the extent to which consumers\u2019 financial responsibility for premiums  changed for those who were automatically re-enrolled compared to  those who actively re-enrolled.", "To examine the extent to which plans identified as benchmark plans  remained the same plans or changed to different plans from year to year,  and how premiums for those plans changed, we reviewed relevant  guidance and analyzed data maintained by CMS. These data included  information about the qualified health plans and premiums available for  individual market consumers in 2,598 counties in the 37 states that used  the federal platform from 2015 through 2017. Specifically, we analyzed  data from CMS\u2019s Qualified Health Plan Landscape files and Plan  Attributes Public Use files to determine the plans and gross premiums  (exclusive of any premium tax credits) offered to consumers through the  exchanges during each year and to identify the likely benchmark plans by  county and year. We also analyzed data from CMS\u2019s Plan ID Crosswalk  Public Use files for the 2015 to 2016 and 2016 to 2017 transitions to map  health plan and premium changes across years. For our analyses, we  selected six consumer categories that represented a broad range of  nonsmoking consumers who have shopped for individual market health  insurance each year. They included individuals, aged 21; individuals,  aged 27; couples, aged 30, with no children; individuals, aged 40, with  one child; couples, aged 50, with 2 children; and individuals, aged 60.  The premium amounts and supporting plan information in each data  source used were self-reported by each issuer, and CMS required each  issuer to comply with a data validation and attestation process.", "To determine the proportion of 2015 exchange consumers who were  automatically re-enrolled in the same or similar crosswalked plans, how  those proportions compared to those for consumers who actively  re-enrolled, and the extent to which consumers\u2019 financial responsibility for  premiums changed for those who were automatically re-enrolled  compared to those who actively re-enrolled, we examined analyses  conducted by HHS\u2019s Office of the Assistant Secretary for Planning and  Evaluation (ASPE). Specifically, we examined analyses conducted as  part of ASPE\u2019s previously issued work on 2015 and 2016 enrollment data  from CMS\u2019s Multidimensional Insurance Data Analytics System (MIDAS),  as well as new analyses that built upon that work. At our request and in  accordance with specifications we provided, ASPE conducted additional  analyses and provided information on the percentages of consumers who  were automatically and actively re-enrolled in the same plans, similar  crosswalked plans, or other plans during the 2015 to 2016 transition and  the net change in monthly premiums, after the premium tax credit for  these consumers. This information was based on plan selections for  consumers enrolled in both 2015 and 2016 through exchanges using the  federal platform for enrollment and eligibility as of February 1, 2016\u2014the  day after open enrollment for health insurance in 2016 ended.", "To assess the reliability of the data on benchmark plans and premiums,  we conducted a series of manual and electronic tests to identify missing  data and other anomalies. These analyses were informed by our review  of relevant documentation and interviews with knowledgeable officials  from CMS. To assess the reliability of the data obtained from ASPE on  re-enrollment during the 2015 to 2016 transition, we conducted a series of  logic tests, including comparisons to ASPE\u2019s previously published data.  We also reviewed relevant documentation and interviewed  knowledgeable officials from ASPE and CMS. Using these methods, we  determined that the data were sufficiently reliable for the purposes of our  reporting objectives.", "We conducted this performance audit from August 2016 to November  2017, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["There are several aspects of individual market plans sold through the  exchanges for consumers to consider when selecting a plan, including:  (1) metal tiers; (2) premium variation and plan availability; (3) covered  benefits; and (4) premium tax credits. Current exchange consumers who  are eligible for continued health insurance and do not actively select and  enroll in a health plan for the subsequent year may be automatically  re-enrolled in the same or a similar crosswalked plan."], "subsections": [{"section_title": "Considerations for Selecting and Enrolling in Individual Market Health Plans through the Exchanges", "paragraphs": ["Plans sold through exchanges are offered at one of four levels of  coverage, or metal tiers\u2014bronze, silver, gold, and platinum\u2014that reflect  the out-of-pocket costs that may be incurred by a consumer. The four  metal tiers correspond to the plan\u2019s actuarial value\u2014a measure of the  relative generosity of a plan\u2019s benefits that is expressed as a percentage  of the covered medical expenses expected to be paid, on average, by the  issuer for a standard population and set of allowed charges for in-network  providers. The actuarial values of these metal tiers are as follows:  bronze (60 percent), silver (70 percent), gold (80 percent), and platinum  (90 percent). If an issuer sells a plan on an exchange, it must offer at  least one plan at the silver level and one plan at the gold level. Issuers  are not required to offer bronze or platinum plans.", "Premium Variation and Plan Availability  As we have previously reported, the range of premiums for health plans  offered through the exchanges can vary widely across counties and  states, and the number and type of plans available in the health insurance  exchanges vary from year to year. Issuers can add new plans and  adjust or discontinue existing plans from year to year, or they can extend  or restrict the locations in which plans are offered. As a result, the options  available to consumers can change from year to year.", "PPACA requires that health insurance plans offered through the  exchanges be certified as qualified health plans, meaning that they must  provide essential health benefits, comply with cost sharing limits, and  meet certain other requirements. Essential health benefits include items  and services within ten categories. Some health insurance plans offered  through the exchanges include benefits above and beyond the minimum  requirements. For these plans, only the percentage of the plan premium  that covers the essential health benefits is considered when determining  the consumer\u2019s benchmark plan.", "Certain consumers purchasing health insurance through the exchanges  are eligible for and receive premium tax credits that may reduce their  out-of-pocket costs for premiums. To be eligible for premium tax credits,  individuals and families must generally have a household income of at  least 100, but no more than 400, percent of the federal poverty level  (FPL).", "Consumers who are eligible for premium tax credits and enrolled in the  benchmark plan are responsible for paying premiums that are generally  limited to a percentage of household income, such that individuals and  families with lower household incomes contribute a smaller portion of their  income toward the health plan premium than individuals and families with  higher incomes, and premium tax credits may be applied to only the  portion of the premium that covers essential health benefits. For example,  in 2016, the percentage of household income that consumers who were  eligible for premium tax credits and who lived in the United States were  expected to pay toward the portion of their premiums for their benchmark  plan that covered essential health benefits was 2.03 percent for those at  100 percent of the FPL, 8.18 percent for those at 250 percent of FPL, and  9.66 percent for those at 400 percent of FPL. A consumer\u2019s required  contribution to the premium is the amount of that benchmark plan  premium that is not covered by the premium tax credit. (See table 1.)", "Although consumers\u2019 premium tax credit amounts are determined in part  based on the cost of premiums for their local benchmark plan, the credit  can also be applied towards the premiums for other eligible exchange  plans. However, the premium tax credit available to consumers does not  increase if they enroll in exchange plans with higher premiums than the  local benchmark plan. In such cases, consumers are responsible not only  for their required contribution but also for the difference in premiums.  Similarly, if a consumer chooses to enroll in an exchange plan with lower  premiums than the local benchmark plan premium, then the consumer\u2019s  premium tax credit would also generally remain the same, so the  consumer would pay less for that plan. The tax credit cannot, however,  exceed the total value of the premium. Because most consumers  enrolling in exchange plans are eligible for premium tax credits, most  consumers\u2019 out-of-pocket premium costs are lower than the advertised  cost of premiums. (See table 2.)"], "subsections": []}, {"section_title": "Process for Automatically Re-enrolling Consumers into Exchange Plans", "paragraphs": ["Re-enrollment in an exchange plan may occur through either an active  choice by a consumer or through automatic re-enrollment by the  exchange. Eligible returning consumers may enroll in a health insurance  plan through the exchange each year during an open enrollment period.  Federally facilitated exchanges automatically re-enroll eligible exchange  consumers for the next year, unless their health insurance is terminated  or the consumer makes an active plan selection. Through automatic  re-enrollment a consumer is re-enrolled in the same plan for the next year  if that plan remains available to him or her; if the same plan is no longer  available (e.g., because the issuer decided to discontinue a particular  plan or to stop offering the plan in certain locations), then the consumer is  generally re-enrolled in a similar crosswalked plan. The criteria HHS  established for identifying appropriate similar crosswalked plans have  changed over time, but the similar crosswalked plan is typically the same  metal tier level as the original plan. During the 2015 to 2016 transition,  all similar crosswalked plans were plans offered by the same issuer as  the original plan. If that issuer no longer offered an exchange plan, there  was generally no crosswalked plan and automatic re-enrollment was not  an option. Starting with the 2016 to 2017 transition, if the original issuer  did not offer a similar plan, then automatic re-enrollment could be into a  health plan offered by a different issuer, with plan similarity determined  using established criteria.", "Both issuers and exchanges have had roles in informing consumers  about the enrollment process. For example, prior to the start of the 2015  and 2016 open enrollment periods, both the exchange and health plan  issuer were to provide current exchange consumers with general  information about the upcoming enrollment period, including key dates and information regarding eligibility for re-enrollment. In addition, some  consumers were also to receive special notices from the exchange that  provided more detailed information regarding their application status,  eligibility for enrollment and affordability programs, and potential effects  on enrollment if they had not updated information about their income or  eligibility or reviewed their re-enrollment options with the exchange prior  to the end of the open enrollment period. Consumers who were  automatically re-enrolled by an exchange were to receive an additional  notice with updated information about their re-enrollment status.  According to CMS officials, automatically re-enrolled consumers were  provided with information about their new premium amount and any new  advance premium tax credit amounts in a message confirming their  enrollment."], "subsections": []}]}, {"section_title": "From 2015 to 2017, Most Plans Identified as Benchmark Plans Changed and Benchmark Plan Premiums Generally Increased", "paragraphs": ["In most of the nearly 2,600 counties included in our analysis, the plan that  we identified as the benchmark plan changed from 2015 to 2017. For  example, in 85 percent of the counties included in our analysis, the 2015  benchmark plans were not benchmark plans in either 2016 or 2017, the  other 2 years we studied. The benchmark plan was the same plan in all 3  years in only 3 percent of counties. (See table 3.)", "In addition, benchmark plan premiums were more likely to increase than  decrease from year to year, and increases were higher from 2016 to 2017  than they were from 2015 to 2016. Among all the counties in our analysis,  the median change in monthly premiums for the benchmark plans was an  increase of 11 percent from 2015 to 2016, and 28 percent 2016 to 2017.  As shown in figure 1, the gross premiums for benchmark plans increased  by more than 55 percent from 2016 to 2017 in 12.4 percent of the  counties in our analysis but did not increase by more than 55 percent in  any counties from 2015 to 2016. In contrast, although not particularly  common, relatively stable or even decreasing premiums from year to year  were more likely from 2015 to 2016 than from 2016 to 2017. Appendix I  provides examples of median benchmark plan premiums for 2015, 2016,  and 2017 for select groups of consumers. Because premium tax credits  limit eligible consumers\u2019 payments for benchmark plan premiums to a  percentage of their income, an increase in premiums may not increase  their financial responsibility. Instead, for eligible consumers, the amount  of the tax credit would increase. According to HHS, most exchange  consumers have been eligible for these tax credits; those who were not  eligible for tax credits would not have this protection from premium  increases. The premium increases for consumers who were not eligible  for premium tax credits, or for those who were eligible but who chose  plans that had higher premiums than their benchmark plan premiums,  could have had a more substantial financial impact, because premium tax  credits would not have offset, or fully offset, the higher premiums.", "Although gross premiums for benchmark plans were likely to increase  from 2015 to 2016 and from 2016 to 2017, we found that in many  counties, the implications for automatically re-enrolled consumers were  modest because net premiums\u2014after accounting for tax credits for those  eligible for those credits\u2014were limited. We compared the 2016 premiums  for plans that had been benchmark plans in 2015 to the 2016 benchmark  plan premiums, and we compared the 2017 premiums for plans that had  been benchmark plans in 2016 to the 2017 benchmark plan premiums.   To focus this analysis on the potential effects for those who were  automatically re-enrolled, we limited our comparisons to plans that were  available in both years, or plans for which a similar crosswalked plan had  been identified for the second year. For this analysis, we excluded plans  that were benchmark plans in one year and were also benchmark plans,  or were crosswalked to a benchmark plan, in the following year. We  found that in many counties, the new premiums for plans that had been  (but were no longer) benchmark plans differed only modestly from the  new benchmark plan premiums. For example, in 60 percent or more of  the counties in our analysis, the premium for the previous benchmark  plan was within plus or minus about 7.5 percent of the new benchmark  plan premium. This finding indicates that automatic re-enrollment from a  benchmark plan into a plan that was not a benchmark plan did not  necessarily result in substantially higher premiums compared to the  premiums for the new benchmark plans, and the same would be true for  consumers who actively chose their same or similar crosswalked plan.", "While modest premium differences were not uncommon in either year,  figure 2 also shows that some differences were substantial. (See fig. 2.)  Although consumers who were eligible for premium tax credits were  somewhat insulated from large differences in premiums, if they were  automatically re-enrolled in a plan with a premium that was higher than  their benchmark plan premium, no matter how great the difference, they  would have been be required to pay a larger share of their incomes on  those premiums. And, as already noted, the premium differences for  consumers who were not eligible for premium tax credits, or for those who  were eligible but who chose plans that had higher premiums than their  benchmark plan, could have had a more substantial financial impact  because premium tax credits would not have offset, or fully offset, the  higher premiums."], "subsections": []}, {"section_title": "Thirty Percent of Consumers Who Re-enrolled in 2016 Were Automatically Re-enrolled, and the Remaining Consumers Actively Re-enrolled, Generally into Different Plans", "paragraphs": ["Among consumers who were enrolled in plans through the federal  platform in both 2015 and 2016, 30 percent (about 1.7 million consumers)  were automatically re-enrolled. Of those consumers who were  automatically re-enrolled, 71 percent were re-enrolled in their same plan  and 29 percent were re-enrolled in a similar crosswalked plan, because  their 2015 plan had been discontinued or was no longer offered in the  consumer\u2019s local area. These data do not indicate whether these  consumers explored their options for switching plans and made an active  decision not to change plans.", "The remaining 70 percent of consumers who enrolled in exchange plans  through the federal platform in both 2015 and 2016 (more than 3.9 million  consumers) actively re-enrolled in 2016. Of these consumers, 39 percent  chose the same plan in which they had been enrolled in 2015 or the  similar crosswalked plan to which they would have been automatically  re-enrolled. The majority of consumers who re-enrolled actively, 61  percent, switched to a plan that was neither their 2015 plan nor the similar  crosswalked plan. (See fig. 3.) Of those consumers who actively switched  plans, more than half (54 percent) would have been automatically  re-enrolled in their same plan if they had not actively switched plans,  indicating that plan discontinuation was not the only factor involved in  consumers\u2019 decisions to change plans."], "subsections": []}, {"section_title": "Consumers\u2019 Financial Responsibility for Premiums Generally Increased Less with Active Re-enrollment than with Automatic Re-enrollment", "paragraphs": ["Consumers\u2019 median net monthly premiums (after premium tax credits)  generally increased less from 2015 to 2016 for those who actively  re-enrolled ($5) than for those who were automatically re-enrolled ($22).  As shown in table 4, consumers who actively re-enrolled had a lower  median increase in their net monthly premiums than consumers who were  automatically re-enrolled for both the same and similar crosswalked  plans. Moreover, table 4 also shows that consumers who re-enrolled  actively, and who switched plans from 2015 to 2016, enrolled in plans  with median monthly net premiums that increased the least overall\u2014a  median net increase of $1 compared to $13 per month for those who  enrolled in the same plan. In addition, the table shows that enrollment in a  similar crosswalked plan did not generally result in a higher median net  premium than enrollment in the same plan: whether enrollment was active  or automatic, consumers\u2019 median net monthly premiums increased less  for those who enrolled in a similar crosswalked plan than for those who  enrolled in the same plan. Changes in net monthly premiums varied  around these medians, however, with some consumers facing large  increases or, in some cases, large decreases in their net monthly  premiums. Large increases or decreases in net monthly premiums could  result from changes to eligibility for tax credits, selections of plans of  different metal levels, or other circumstances.", "Our findings are consistent with other work by ASPE that suggested that  consumers consider possible cost savings when deciding to switch plans.  For example, ASPE found that average net monthly premium for the 61  percent of consumers who actively switched plans in 2016 was $132,  which represented an average savings of $42 per month compared to  what they would have paid if they stayed in their same or similar  crosswalked plans. This work also found that the net monthly premiums  of consumers who actively chose to remain in their same or similar  crosswalked plans in 2016 were, on average, only $10 more than those  for consumers who actively switched plans. In addition, ASPE found  that consumers\u2019 plan selections indicated sensitivity to net premiums. For  example, ASPE found that consumers were much more likely to switch  plans when the net premium of their 2015 plan increased than when the  gross premium of their 2015 plan increased, but the net premium did   not."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for review and comment.  HHS  provided technical comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Acting Secretary of  Health and Human Services 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 staffs have any questions about this report, please contact  me at (202) 512-7114 or dickenj@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."], "subsections": []}]}, {"section_title": "Appendix I: Median Benchmark Plan Premiums for Select Groups of Consumers, 2015 through 2017", "paragraphs": ["Benchmark plan premiums generally increased from 2015 through 2017.  Table 5 shows the median monthly gross benchmark plan premiums  (exclusive of any applicable premium tax credits) for select consumer  groups."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Gerardine Brennan, Assistant  Director; Kristen Joan Anderson, Analyst-in-Charge; Todd Anderson; and  LaKendra Beard made key contributions to this report. Also contributing  were Muriel Brown; Daniel Lee; Laurie Pachter; and Emily Wilson."], "subsections": []}]}], "fastfact": ["Under the Affordable Care Act, people purchasing insurance through an exchange can re-enroll each year. If they don't select a plan, they're automatically re-enrolled in their existing plan or a similar one, if available. In 2016, 30% of re-enrollments were automatic.", "We examined whether automatic re-enrollment could have unintended financial consequences for consumers. We found that, from 2015 to 2016, the median monthly premium increase for those who were automatically re-enrolled, after tax credits, was $22; for those who actively re-enrolled, the increase was $5, partly because they may have switched to less expensive plans."]}
{"id": "GAO-18-140", "url": "https://www.gao.gov/products/GAO-18-140", "title": "FDA Medical Device Reviews: Evaluation is Needed to Assure Requests for Additional Information Follow a Least Burdensome Approach", "published_date": "2017-12-15T00:00:00", "released_date": "2018-01-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Determining that a new medical device is safe and effective is a substantial investment of time and resources for the sponsor and FDA, the agency that regulates medical devices. FDA relies on the device sponsor to provide supporting data at the time of its original submission, and the agency can request additional information during the review. The Federal Food, Drug, and Cosmetic Act, as amended, requires that when FDA requests additional information from sponsors, the agency consider the least burdensome means of evaluating a medical device.", "GAO was asked to provide information on FDA's implementation of the least burdensome requirements in its medical device review process. This report (1) describes FDA's requests for additional information and sponsor disagreements, (2) describes its least burdensome training efforts, and (3) describes FDA actions to improve its requests for additional information and examines the extent to which it has evaluated its implementation of the least burdensome requirements. GAO reviewed FDA documents and guidance and interviewed agency officials. GAO also interviewed officials from four relevant medical device manufacturing associations."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 1997, the Food and Drug Administration (FDA) has been required to consider the least burdensome means of evaluating certain types of medical devices for marketing, including when requesting that sponsors\u2014generally manufacturers\u2014seeking to market their medical devices provide information in addition to what was provided in their submissions. GAO found that, from 2001 through 2016, FDA issued letters asking sponsors to provide such information for a majority of the more than 62,000 medical device submissions that it reviewed. Sponsors may formally disagree with the request on the grounds that it is not the least burdensome method needed for FDA to review the submission. For example, sponsors appealed FDA decisions internally to agency management 63 times from 2013 through 2016, and of these, FDA identified 33 such appeals in which the sponsor raised an issue related to least burdensome requirements. FDA agreed or partially agreed with the sponsors in 11 of these appeals. Medical device industry representatives noted that these appeals may not fully represent the number of such disagreements, because applicants are generally concerned that an appeal would damage their relationship with FDA and potentially negatively affect future device applications.", "FDA provided staff training that was specifically dedicated to addressing the least burdensome requirements from 1997 through 1999. Since 1999, FDA has not offered a course dedicated to the least burdensome requirements, but has incorporated related concepts into other training programs, such as in a training mandatory for most new reviewers. In response to the 21st Century Cures Act, enacted in 2016, FDA is providing new least burdensome training to all relevant employees, and said that 80 percent had received the training as of October 2, 2017. Although FDA did not specifically evaluate the effectiveness of past training on least burdensome requirements, it is implementing an evaluation of all device-related training, including the new least burdensome training. It also plans to complete a required audit of training on least burdensome requirements by June 2018.", "FDA has not specifically evaluated implementation of the least burdensome requirements. However, in response to broader evaluations, such as an independent assessment of its medical device review process, the agency is in the early stages of developing processes that may improve its requests for additional information. For example, FDA plans to conduct an audit of letters requesting additional information. FDA is developing the audit's methodology and expects it will assess whether the agency's process was followed. However, due to their early stage, the extent to which these efforts will allow FDA to assess implementation of the least burdensome requirements is unclear. In 2002, FDA stated that it planned to periodically assess the implementation of the least burdensome principles, and federal internal control standards identify the importance of performance metrics for such assessments. However, the agency has yet to develop performance metrics to do so. Until such measures are developed and used, FDA will not be able to evaluate whether it effectively and consistently applies a least burdensome approach in its medical device reviews."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making one recommendation that FDA develop and use performance metrics to evaluate the implementation of the least burdensome requirements. The Department of Health and Human Services agreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Food and Drug Administration (FDA), within the Department of  Health and Human Services (HHS), is responsible for ensuring that  medical devices sold in the United States provide reasonable assurance  of safety and effectiveness and do not pose a threat to public health.  Making this determination represents a substantial investment of time and  resources for both FDA and the device sponsor, generally the  manufacturer. For example, in 2014, FDA reviewed about 4,100  submissions from sponsors seeking to market their medical devices, and  each review ranged from an average of 125 days for lower-risk devices to  an average of 330 days for higher-risk devices. In making its  assessment, FDA relies on the sponsor to provide supporting data at the  time of its initial premarket submission and may thereafter request  additional data in the course of the review to obtain sufficient evidence  supporting the safety and effectiveness of the medical device. However,  any request for additional information has the potential to impose undue  burden on the sponsor and delay the review of the device, and sponsors  may opt to formally disagree with the necessity of the requested  information.", "Given the resource investment involved in getting a medical device to  market, as well as the public health need, efforts have been made to  streamline the decision-making process without compromising scientific  integrity or FDA\u2019s ability to protect the public health. For example,  Congress has already taken several steps to reduce unnecessary  burdens associated with the medical device review process. For certain  types of premarket submissions, federal law requires FDA to utilize the  \u201cleast burdensome\u201d means possible in certain elements of the review  processes of medical devices. FDA has laid out broad principles in  guidance interpreting how those statutory provisions apply throughout its  reviews. In 2016, Congress required FDA to provide training for  appropriate staff on the meaning and implementation of the statutory least  burdensome requirements and conduct periodic assessments of  implementation to ensure that the least burdensome requirements are  fully and consistently applied.", "You asked us to provide information on FDA\u2019s implementation of the least  burdensome requirements, as well as any training FDA has done to  ensure staff are aware of the statutory requirements. This report  1.  describes FDA requests for additional information to support medical  device reviews and how least burdensome requirements were related  to sponsor disagreements about these requests,  2.  describes FDA efforts to ensure that its employees are trained on the  least burdensome requirements, and  3.  describes the steps FDA has taken to improve its requests for  additional information and examines the extent to which it has  evaluated its implementation of the least burdensome requirements.", "To describe FDA requests for additional information to support medical  device reviews and how least burdensome requirements were related to  sponsor disagreements about these requests, we analyzed agency  documents, such as FDA\u2019s guidance for industry and staff on the least  burdensome provisions and FDA\u2019s annual performance reports. For fiscal  year 2001 through fiscal year 2016, the years for which FDA had reliable  data, we analyzed counts of medical device submissions received and  reviewed by FDA, as well as FDA\u2019s requests for additional information  from medical device sponsors. We also reviewed internal appeals and  disputes of FDA decisions submitted by sponsors that FDA identified as  being related to the least burdensome requirements. Information on  internal appeals was limited to the period from May 2013 through fiscal  year 2016. To assess the reliability of data FDA provided, we interviewed  knowledgeable agency officials, conducted quality checks to identify any  obvious errors, and compared the detailed data FDA provided to us with  summary data that FDA had publicly reported on its website. We  determined these data were sufficiently reliable for the purposes of our  reporting objective. We also reviewed a non-generalizable sample of  requests for additional information FDA issued to sponsors during the  medical device review process. We interviewed FDA officials from the  Center for Devices and Radiological Health (CDRH) responsible for  reviewing medical devices. We also interviewed representatives of the  medical device industry to obtain the industry\u2019s perspectives on how the  least burdensome provisions have been involved in FDA\u2019s requests for  additional information.", "To describe FDA efforts to ensure that its employees are trained on the  least burdensome requirements, we asked FDA to identify any training  activities for medical device review staff that related to the least  burdensome requirements since they were first established with the  enactment of the Food and Drug Administration Modernization Act of  1997 (FDAMA). For certain of those activities, we examined the specific  course materials so we could further illustrate how these materials  referred to the least burdensome requirements. We also reviewed  documentation describing FDA evaluations of this training, as well as  planned evaluations. We interviewed FDA officials about how training on  the least burdensome requirements had changed and about the planned  changes to least burdensome training and training evaluations.", "To describe the steps FDA has taken to improve its requests for  additional information and examine the extent to which it has evaluated its  implementation of the least burdensome requirements, we reviewed  relevant statutes and guidance that set out relevant requirements for both  reviewers and sponsors outlining FDA\u2019s implementation of the least  burdensome requirements and its plans for evaluation of that  implementation. We also reviewed documentation describing, and spoke  with relevant FDA officials about, performance metrics that the agency  uses to monitor its implementation of the least burdensome requirements  and evaluations the agency had conducted or planned to conduct. We  compared the extent to which FDA has evaluated its implementation of  the least burdensome requirements with federal standards for internal  control.", "We conducted this performance audit from November 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FDA Medical Device Review Process", "paragraphs": ["FDA classifies each medical device type intended for human use into one  of three classes based on the level of risk it poses to the patient or the  user and the controls necessary to reasonably ensure its safety and  effectiveness. Examples of types of devices in each class include the  following:", "Class I: tongue depressors, elastic bandages, reading glasses, and", "Class II: electrocardiographs, powered bone drills, and mercury", "Class III: pacemakers and replacement heart valves.", "Before medical devices may be legally marketed in the United States,  they are generally subject to one of two types of FDA premarket review  processes.", "Premarket approval (PMA) process: Class III device types are  typically required to obtain FDA approval through the PMA process.  Under this process, the medical device sponsor must submit an  application that includes\u2014among other things\u2014full reports of  investigations, typically including clinical data, providing reasonable  assurance that the new device is safe and effective. The PMA  process is the most stringent type of premarket review. A successful  application results in FDA\u2019s approval to market the device. From 2001  through 2016, medical device sponsors submitted 651 PMA  applications, and FDA approved for marketing 506 of those  submissions. (See fig. 1.)", "Premarket notification, or 510(k), process: Most medical devices  requiring premarket review are subject to FDA\u2019s premarket notification  or 510(k) process. This includes class I and II device types that are  not specifically exempted from the 510(k) notification requirement.  Under this process, the medical device sponsor must notify FDA at  least 90 days before it intends to market a new device and  demonstrate to FDA that the new device is substantially equivalent to  a predicate device, and therefore does not require a PMA. For most  510(k) notifications, clinical data are not required and substantial  equivalence will normally be determined based on comparative  descriptions of intended device uses and technological  characteristics, and may include performance data. A successful  510(k) submission results in FDA\u2019s clearance to market the device.  From 2001 through 2016, medical device sponsors submitted 61,439  premarket notifications and FDA cleared 51,028 devices for market.  (See fig. 2.)", "During premarket review under both the PMA and 510(k) processes, FDA  and the medical device sponsor may engage in an interactive process. To  start, there may be a pre-submission meeting between FDA and the  sponsor, during which the parties discuss the upcoming review and try to  resolve potential obstacles for approval or clearance. Then, FDA receives  the premarket submission, makes a determination to accept or not accept  the submission, and assigns a reviewer. In making its assessment  whether to approve, or clear, a submission, FDA relies on the sponsor to  provide supporting data as part of the submission. However, the agency  can request additional information in the course of the review in order to  make a determination of reasonable assurance of safety and  effectiveness, or of substantial equivalence. This additional information  can be obtained through informal interactions, such as a phone call or  email. Alternatively, for more significant issues, FDA may make a more  formal request for additional information, known as a deficiency letter in  the case of a PMA application and additional information (AI) letter for a  510(k) notification. FDA will issue such requests if the submission lacks  significant information necessary for FDA to complete its review, and the  agency will request the sponsor amend the submission to provide the  necessary information regarding the device.", "If a sponsor disagrees with an FDA regulatory decision concerning a  medical device submission, including a CDRH employee\u2019s decision to  request additional information or a significant decision regarding approval  or clearance of a medical device, it can take multiple actions.  Specifically, a sponsor can, among other things, (1) contact the CDRH  Ombudsman for assistance, (2) file an internal appeal of an FDA  decision, or (3) request that the disagreement be resolved through  CDRH\u2019s Medical Device Dispute Resolution Panel, as described below.", "Ombudsman: According to FDA\u2019s guidance, prior to the agency  reaching a regulatory decision, the most effective means of resolving  a dispute between CDRH and an external stakeholder is through  discussion and agreement. The CDRH Ombudsman is available to  assist in clarifying issues, mediate meetings and teleconferences, and  conduct discussions with the parties in an effort to resolve  disagreements short of a formal review or internal appeal.", "Internal Appeal: Once FDA makes a regulatory decision, a sponsor  can request a supervisory review of that decision, which we refer to as  an internal appeal. For this process, the supervisor of an FDA  employee will, at the request of a medical device sponsor, review a  decision or action of the employee and issue a decision. The decision  rendered by the supervisor, acting as the review authority, customarily  takes one of the following forms: overturning the decision of the  employee; upholding the employee decision; or, in some  circumstances, referring the matter back to the employee for  reconsideration under defined conditions.", "Medical Device Dispute Resolution Panel: If the dispute remains  unresolved, the sponsor may request that FDA convene the Medical  Device Dispute Resolution Panel. The panel is intended to provide a  means for independent review of a scientific controversy or dispute  between a sponsor and FDA, and make a recommendation to the  Center director. According to FDA\u2019s guidance, the panel is primarily  intended to address scientific controversies rather than other issues  such as regulatory, legal, or statutory authority disputes.", "As part of its commitments associated with the Medical Device User Fee  Amendments of 2012 (MDUFA III), FDA agreed to participate in an  independent, comprehensive assessment of the medical device  submission review process. Acting on recommendations from the  contractor that conducted the assessment, FDA established working  groups for each submission type, including PMAs and 510(k)s, which  studied existing review processes and made recommendations. In  August 2017, the Medical Device User Fee Amendments of 2017  (MDUFA IV) reauthorized FDA\u2019s medical device user fee program, and  FDA committed to another independent assessment. FDA has  committed to hiring a contractor to conduct this assessment by the end of  December 2017 with a second phase to begin in 2020."], "subsections": []}, {"section_title": "FDA Least Burdensome Requirements", "paragraphs": ["In 1997, FDAMA added a requirement that the agency use the least  burdensome approach during certain parts of PMA and 510(k) reviews.  These requirements were intended to reduce unnecessary burdens  associated with the premarket approval and clearance processes;  however, they did not lower the statutory criteria for demonstrating a  reasonable assurance of safety and effectiveness or substantial  equivalence. While the language in FDAMA differs slightly for the PMA  and 510(k) processes, in both instances FDA was directed to consider the  \u201cleast burdensome\u201d means of requesting information needed for its  review. Specifically, FDAMA requires that when the agency specifies data  that must be submitted as part of a PMA application, the agency must  consider the least burdensome appropriate means of evaluating device  effectiveness that would have a reasonable likelihood of resulting in  approval. The agency must similarly consider the least burdensome  appropriate means of demonstrating substantial equivalence when  requesting information under the 510(k) notification process. In both  cases, FDA is statutorily required to request only information that is  necessary to support the determination that there is reasonable  assurance of effectiveness or substantial equivalence, respectively.", "Subsequent laws have clarified the least burdensome requirements. In  2012, the Food and Drug Administration Safety and Innovation Act clarified that the term \u201cnecessary\u201d means the minimum required  information that would support either a determination that a PMA  application provides reasonable assurance of the effectiveness of the  device or a determination, for a 510(k) notification, of substantial  equivalence between a new device and a predicate device. In 2016, the  21st Century Cures Act added a provision applying the least burdensome  concept to FDA\u2019s requests for additional information in the PMA  process. The law also applied the least burdensome concept to  significant decisions, such as denials of PMA applications, requiring such  decisions to include a brief statement regarding how least burdensome  requirements were considered and applied. Additionally, the law  mandated each FDA employee involved in premarket submission  reviews, including supervisors, to receive training on the least  burdensome provisions, and required the agency to conduct an audit of  the training, among other things, no later than June 2018.", "Although FDA officials have noted that the least burdensome principles  are broad and could apply to all activities within the PMA and 510(k)  premarket review process, they noted that the requests for additional  information represent a key juncture for the application of least  burdensome requirements. According to agency officials and industry  representatives, the requests for additional information\u2014deficiency letters  in the case of PMAs and AI letters for its 510(k) reviews\u2014are when FDA  and the sponsor could disagree on whether the requested information is  necessary for the agency to reach a final decision on the medical device  under review."], "subsections": []}, {"section_title": "FDA Implementation of the Least Burdensome Requirements", "paragraphs": ["Following the enactment of FDAMA in 1997, FDA went through a process  in collaboration with the medical device industry to define the least  burdensome concept and develop an approach to implement the  provisions. Based on this, FDA released multiple guidance documents  related to least burdensome requirements from 2000 through 2002.", "In November 2000 guidance, FDA outlined a four-part approach\u2014 referred to as \u201cfour-part-harmony\u201d by FDA staff\u2014for communicating  deficiencies to medical device sponsors in accordance with the least  burdensome requirements. The guidance helps reviewers describe  deficiencies identified in submissions in ways that are direct, concise,  and complete, thus ensuring a more effective use of reviewers\u2019 and  sponsors\u2019 time, effort, and resources. It also provides a suggested  format for sponsors to respond to FDA. FDA updated this guidance in  September 2017.", "In 2002 guidance, FDA described its principles for implementing the  least burdensome requirements and its activities to assess  implementation. The guidance outlines FDA\u2019s interpretation of the  least burdensome concept as described in FDAMA, and explains its  application to activities associated with PMA and 510(k) reviews. The  guidance also states that FDA was in the process of developing tools  to be used by both agency staff and its stakeholders to periodically  assess the implementation of the least burdensome principles. It  noted some measurement tools had already been developed and that  additional tools were also needed to assess the impact of the least  burdensome approach on expediting the development of new medical  technologies.", "In addition, FDA has included language about those requirements in other  guidance documents. For example, in 2014, FDA issued guidance on the  510(k) program that describes how the least burdensome principles may  affect the type of information necessary to demonstrate substantial  equivalence at different decision points in the review of a 510(k)."], "subsections": []}]}, {"section_title": "FDA Frequently Requested Additional Information to Support Medical Device Reviews, and Sponsor Disagreements Often Related to Least Burdensome Requirements", "paragraphs": [], "subsections": [{"section_title": "FDA Issued Deficiency and Additional Information Letters for a Significant Proportion of PMAs and 510(k)s", "paragraphs": ["FDA requested sponsors provide additional information for a majority of  the PMAs and 510(k)s it reviewed. For the period 2001 through 2016,  FDA issued a large number of deficiency and AI letters relative to the  number of submissions, although there was variation annually. For  PMAs, the number of deficiency letters as a percentage of new PMA  applications submitted ranged from about 54 percent to 113 percent  annually, or 82 percent on average, from 2001 through 2016. For the  years 2006 through 2010, this percentage, as well as the total number of  letters was higher, and FDA issued more deficiency letters than there  were PMA applications submitted. Similarly, AI letters as a percentage of  total 510(k) notifications received ranged from about 58 percent to more than 174 percent annually, or about 106 percent on average, from 2001  through 2016. While the number of 510(k) notifications remained similar  across the time period we examined, from 2009 through 2012, the  number of AI letters issued each year was, on average, nearly double the  number in other years. During this period, FDA issued more AI letters  than there were 510(k) notifications submitted. Since 2014, these  percentages have been lower for both PMAs and 510(k)s.", "FDA officials acknowledged the historical increase in the number of  deficiency and AI letters and noted the more recent decrease. The  officials attributed this decrease to a number of changes the agency  agreed to in MDUFA III. For example, FDA implemented a policy to  review submissions for administrative completeness prior to accepting the  submission. They said this allowed the agency to limit deficiency and AI  letters to issues related to the quality of the data provided and the studies  conducted in support of the submission rather than to administrative  issues. Also as a result of MDUFA III, the agency implemented an  interactive review process to increase informal interaction between FDA  and applicants and to minimize the number of review questions  communicated through deficiency and AI letters. (See table 1.)", "We identified changes in how the deficiency letters and AI letters  referenced the least burdensome requirements. Based on our sample of  73 letters from 1997 through 2016, FDA included an explicit  acknowledgment of the least burdensome requirements in the letters  issued from 2001 through 2009. However, based on our review, this  practice ended in 2010, and later letters did not include this standard  language. Representatives from the medical device industry told us that  including the least burdensome language in the deficiency letters was a  good practice because it raised awareness of the least burdensome  principles. In September 2017, FDA released updated deficiencies  guidance that, according to FDA officials, instructs staff how to better  articulate the reason that the information is needed in accordance with  the least burdensome requirements. This guidance does not set forth  boilerplate language regarding the least burdensome requirements for  use in deficiency letters, but does include examples of well-constructed  deficiencies, definitions for major and minor deficiencies, and a statement  that FDA will attempt to resolve minor deficiencies interactively."], "subsections": []}, {"section_title": "Though Data are Limited, Least Burdensome Requirements were a Significant Contributing Factor in Disagreements Raised by Medical Device Sponsors", "paragraphs": ["The least burdensome requirements were often a significant contributing  factor in disagreements raised by medical device sponsors, according to  FDA officials and available FDA data. According to FDA, the most  effective means of resolving disagreements is through discussion and  mediation, and to that end, the Ombudsman\u2019s office is routinely involved  in discussions between firms and medical device reviewers during the  review process. For example, in 2016, the CDRH Ombudsman was  involved with PMA and 510(k) medical device reviews 360 times out of  3,444 submissions. Although the agency was unable to identify which of  these interactions were related to least burdensome requirements,  agency officials told us that a substantial number likely resulted from a  difference of opinion between the applicant and FDA on the appropriate  level of scientific evidence, a portion of which likely have a least  burdensome component.", "The least burdensome provisions were also frequently related to issues  that applicants raised during internal agency appeals of FDA decisions of  PMA and 510(k) reviews. Although FDA did not have readily available  data on appeals that occurred prior to 2013, the agency was able to  provide information about the 63 appeals of significant decisions that  occurred from 2013 through 2016. Of these 63 appeals, FDA identified  33 appeals\u20142 related to PMAs and 31 related to 510(k)s\u2014in which the  issue identified by the sponsor was related to least burdensome  principles. According to medical device industry representatives,  sponsors may not always pursue an appeal, so the number of official  appeals may not represent the extent of least burdensome-related issues  that sponsors experience. They said the sponsor may determine it is best  to avoid conflict that could complicate future device submissions and  comply with the request for additional information, even if it disagrees.", "Of these 33 appeals, FDA agreed, or partially agreed with the sponsor for  11 appeals, which resulted in FDA overturning the decision or reopening  the file and continuing the review. For the remaining 22 appeals, the  agency upheld the initial reviewer decision. The following presents  examples of appeals where the issue identified by the sponsor was  related to the least burdensome requirements.", "In one appeal related to a 510(k) review, the sponsor objected to the  reviewer\u2019s finding that the device was not substantially equivalent to a  device already on the market. The sponsor stated that it had provided  sufficient data for a substantial equivalence determination, and the  FDA reviewer\u2019s request for additional risk mitigation measures and  supplemental testing was unwarranted and inappropriate. The review  authority determined that, while the information provided in the 510(k)  premarket submission was not sufficient to establish substantial  equivalence, some of FDA\u2019s requests were unwarranted. As a result  of the appeal, FDA reopened the file and provided the sponsor an  opportunity to respond to a new set of requests for additional  information.", "In an appeal related to a PMA review, the sponsor contended that  FDA\u2019s not approvable decision reflected an inconsistent and  erroneous interpretation of the clinical data supporting the safety and  effectiveness of the subject device, and that the data it had provided  was sufficient for FDA to reach an approved decision. The sponsor  further contended that the review staff failed to utilize the principles  outlined in FDA guidance. The review authority upheld FDA\u2019s initial  decision and determined there was not sufficient valid scientific  evidence to demonstrate a reasonable assurance that the subject  device was safe and effective under the proposed conditions of use.", "The Medical Device Dispute Resolution Panel, which provides another  avenue to resolve disagreements between sponsors and the agency, has  also addressed issues related to the least burdensome requirements.  Since the panel was created following FDAMA in 1997, medical device  sponsors have requested that FDA resolve three disagreements through  this avenue, each related to PMAs. Although not tracked by FDA, at our  request, officials reviewed the records and found that one of the three  disputes was related to the least burdensome requirements. Specifically,  for a September 2001 dispute, FDA officials said the sponsor requested  the panel after FDA initially found that the data from the clinical study  submitted by the sponsor did not sufficiently support effectiveness. After  reviewing evidence from the applicant and from FDA, the dispute  resolution panel determined that the sponsor had provided sufficient  evidence to prove effectiveness, and the device was ultimately approved."], "subsections": []}]}, {"section_title": "FDA Offered Some Training on the Least Burdensome Requirements, and Evaluates its Training for Effectiveness", "paragraphs": [], "subsections": [{"section_title": "FDA Offered Some Early Least Burdensome Training at Limited Times, and Has Incorporated Related Information in Broader Training", "paragraphs": ["FDA officials indicated that training specific to the least burdensome  requirements was held in the years following the enactment of FDAMA in  1997. FDA was unable to provide records of that training, including its  content. However, officials told us that the training was specific to the  least burdensome requirements and offered from 1997 through 1999.  FDA officials said the agency offered other presentations in subsequent  years that they said covered similar least burdensome topics. For  example, the agency provided slides from a presentation created in 2000  that provided an overview of FDA\u2019s implementation of the requirements.", "Although FDA officials told us this least burdensome specific training was  not offered after 1999, they identified various other trainings that they said  incorporated the least burdensome concept. For example, a 2005  presentation on clinical trial design has multiple slides on least  burdensome requirements, and specifically states that a course objective  is to \u201cunderstand how least burdensome principles apply.\u201d Least  burdensome requirements are also mentioned in other training materials  where they may not be the focus\u2014for example one slide of a presentation  on biomarkers included a mention of least burdensome requirements.  Officials also identified the training program for new reviewers that FDA  implemented in 2011 as a source of training on least burdensome  principles. Specifically, the Reviewer Certification Program is a training  curriculum that FDA has required most new device reviewers to complete  since 2011. The training curriculum covers a wide variety of courses on  topics related to a reviewer\u2019s responsibilities. While none of these  courses is specific to the least burdensome requirements, there are  courses covering related topics. For example, there is one course on  technical writing that includes FDA\u2019s guidance on developing deficiencies  with least burdensome principles. Five other courses on different topics  mention either the least burdensome requirements or related principles,  such as a course on FDA\u2019s legislative history that included a slide  identifying the least burdensome statutory provisions as an element of  FDAMA, though the slide did not explain the least burdensome  requirements or provide additional context. Of the 490 staff assigned to  review PMAs and 510(k)s, FDA indicated that as of the end of calendar  year 2016, 335 had completed the Reviewer Certification Program, 150  started working on premarket submissions prior to the beginning of 2011,  and the remaining 5 individuals did not complete the training for varying  reasons.", "In response to the 21st Century Cures Act, enacted in December 2016,  FDA is providing mandatory online training specific to the least  burdensome requirements. FDA indicated that the training focuses on key  behaviors that reflect the least burdensome approaches as documented  in updated guidance that FDA issued in September 2017. FDA officials  told us that, as of October 31, 2017, 91 percent of CDRH staff had  received the new least burdensome specific training. In addition to the  online training, FDA plans other activities, such as follow-up office-level  briefings to address questions or concerns and an introductory podcast  from the CDRH director. In addition to providing this training to current  employees, FDA plans to incorporate least burdensome requirement  training into new employee orientation and the Reviewer Certification  Program, and plans to include ongoing support and promotion of least  burdensome principles through a center working group on the least  burdensome requirements. In addition to course-based training, FDA  officials told us that least burdensome concepts are conveyed to  reviewers through mentoring. Officials explained that much of the training  on the least burdensome requirements occurs through mentoring and  conversations with supervisors, and that those encounters are not  documented."], "subsections": []}, {"section_title": "FDA Is Implementing Evaluations of All Training Courses for Medical Device Review Staff, including Courses that Address the Least Burdensome Requirements", "paragraphs": ["While FDA has not had processes in place to evaluate its medical device  training, it is implementing such processes for all training, including  courses related to the least burdensome requirements. In its June 2014  report, the contractor performing the independent evaluation noted that  CDRH did not have mechanisms in place to measure the quality and  effectiveness of its training programs. The report noted that FDA should  identify metrics and incorporate methods to better assess review process  training satisfaction, learning, and staff behavior changes. FDA officials  explained that while they had customer reaction evaluations for trainings  for at least 24 years, they started evaluating training participant learning  with the Reviewer Certification Program starting in 2010.", "FDA is in the process of implementing a training evaluation model, which  includes various levels of evaluation, from assessing participant response  to the training to evaluating its impact on the agency. As of 2017, FDA  reported it was evaluating training programs to determine participant  learning and preparing to evaluate whether that learning changed  participant behavior. Officials told us they anticipate beginning to conduct  evaluations that assess agency impact in fiscal year 2018, and they plan  to have the model completely implemented for all trainings by fiscal year  2020. FDA currently evaluates its Reviewer Certification Program to  determine participant learning, and though the least burdensome  requirements are not specifically addressed in the Reviewer Certification  Program evaluation materials FDA provided to us, they did include  questions on topics related to least burdensome requirements.", "In addition to its current training evaluation plan, FDA is also required by  the 21st Century Cures Act to conduct an audit of the training and its  effectiveness in implementing the least burdensome requirements.  Specifically, the training audit is to be conducted by the ombudsman  responsible for premarket reviews, identified by FDA as the CDRH  Ombudsman. According to a draft plan, FDA plans to conduct training  evaluations, a process review of 510(k) and PMA documentation to  assess reviewer compliance with FDA procedures, and seek feedback  from industry on its experience with the premarket review process and  how the least burdensome requirements are applied. Officials indicated  that criteria are still under development and that they hoped to have them  further developed in the first quarter of 2018, with the authorizing  legislation requiring completion of the audit by June 2018, 18 months  after enactment of the law."], "subsections": []}]}, {"section_title": "FDA is Taking Steps that May Improve Its Requests for Additional Information Overall, but Has Not Fully Evaluated Its Implementation of the Least Burdensome Requirements", "paragraphs": [], "subsections": [{"section_title": "FDA Is Implementing Processes to Improve the Consistency and Clarity of Its Requests for Additional Information during Medical Device Reviews", "paragraphs": ["Some stakeholders and others have raised concerns about the  consistency and clarity of FDA\u2019s requests for additional information during  medical device reviews. For the past 17 years, FDA has required  reviewers to only request information that is necessary to make a PMA  determination of \u201creasonable assurance of safety and effectiveness\u201d or a  510(k) determination of \u201csubstantial equivalence\u201d in their review of a  submission. Representatives of one of the organizations representing  the medical device industry noted the high percentages of medical device  submissions that involve a letter, and some of their member companies  have said that FDA reviewers may request additional information as a  result of intellectual curiosity rather than a \u201cneed to know.\u201d In addition, the  independent assessment\u2019s 2014 report, funded by FDA as part of  MDUFA III, found inconsistent decision-making among FDA review staff  throughout various stages of the review process, including additional  information requests. While the 2014 report did not address least  burdensome requirements explicitly, it examined related processes. For  example, according to the report, there was inconsistent decision-making  among FDA review staff throughout various stages of the review process,  including a lack of clarity regarding FDA reviewer thresholds for triggering  deficiency letters. The report recommended that FDA develop criteria and  establish mechanisms to improve consistency in decision-making  throughout the review process.", "To address problems identified during the independent assessment, FDA  is implementing several initiatives to improve center processes. FDA  officials told us that, in anticipation of MDUFA IV, they recognized a need  for a dedicated quality management infrastructure. In 2014, FDA  established a Quality Management Unit to improve center processes,  which they said would include those related to the least burdensome  requirements. The unit completed a framework that outlined its vision and  mission and established organizational objectives, such as developing a  document control system, providing training, and conducting quality  assessments, audits, and management reviews.", "In addition, FDA officials told us that starting in October 2017, FDA  planned to fulfill its MDUFA IV commitments to improve the clarity and  consistency of its deficiency letters and AI letters after releasing updated  guidance.", "In September 2017, FDA published guidance reflecting the  commitments under MDUFA IV that all deficiency letters and AI letters  include a statement indicating the specific basis for any cited  deficiencies. According to FDA officials, this new approach will help  ensure that the letters more consistently ground requests for  information in the specific reason that FDA is requesting the  information from the sponsor. For example, FDA may cite a law, final  rule, or specific scientific issue as the basis for its request, rather than  providing a more general statement of the request\u2019s relevance.  According to industry representatives, in the past, FDA reviewers  have, at times, asked for additional information without including  justification, and may have requested additional information as a  result of intellectual curiosity rather than a \u201cneed to know.\u201d The  representatives stated that this new policy may better ensure the  reviewers apply the least burdensome approach to their review.", "The updated guidance also explains that all deficiency letters and AI  letters will undergo supervisory review prior to issuance to ensure that  the information requested is relevant to a marketing authorization  decision, all four elements of the deficiency are included, deficiencies  are prioritized from most to least significant, and each deficiency is  appropriate to include in light of the totality of all deficiencies. Officials  told us that while supervisory concurrence was previously needed,  under the new guidance, supervisors are now expected to review for  certain criteria. For example, in the past, supervisors may have  considered whether four-part harmony was addressed in each  deficiency letter, but under the updated guidance this is now an  expected practice. Officials said this will increase the extent to which  deficiency letters are consistently constructed.", "In the MDUFA IV commitment letter, FDA agreed to base all  deficiency letters and AI letters on a complete review of the  submission and include all deficiencies. Therefore, FDA officials told  us that any deficiencies identified following that letter would generally  be limited to issues raised as a result of new information. For  example, if FDA asked for information on bio-compatibility testing,  FDA will first review that information, and based on that review may  ask for new information. In that instance, the information responding  to the initial deficiency is new information. FDA officials said that past  letters should also have included all deficiencies, but this may have  been done inconsistently.", "To further standardize its process for reviewing medical device  submissions and developing requests for additional information, FDA is  developing and implementing smart templates. FDA officials told us that  these templates guide device reviewers through a standardized process  for each submission. For example, they help reviewers identify the types  of information necessary and include prewritten deficiency letters that  have been approved by internal experts. FDA has had a smart template  in place for the 510(k) process since 2013, according to FDA reports.  FDA indicated that the template is already required for certain offices and  divisions within CDRH, and plans for full adoption in the future. FDA  officials told us that the agency also developed templates for de novo  premarket submissions, which are currently available for voluntary use  and will likely be mandatory in fiscal year 2018. Officials told us they  plan to hire a person to develop a template to guide PMA reviews, which  will likely take most of 2018. They told us the use of the smart template  for PMAS will likely become mandatory for use by all reviewers in 2019.  In addition to improving the consistency of deficiency letters, FDA officials  said the information generated from the templates could be used to track  deficiencies and requests for additional information, as well as provide  information on the number and type of deficiencies in the letters. FDA  officials told us that the plans for database and back-end analytical  capabilities using information from the smart templates were less certain  and dependent on available resources, and they pointed out that the  information technology infrastructure can present unforeseen challenges."], "subsections": []}, {"section_title": "FDA Has Not Developed Metrics to Evaluate Implementation of the Least Burdensome Requirements, and While a New Audit Process Could Aid Oversight, Its Scope Is Still Unclear", "paragraphs": ["FDA has not established performance metrics that would allow it to  evaluate its implementation of the least burdensome provisions. FDA  officials told us that the agency does not track concerns related to the  least burdensome requirements, such as by examining dispute data to  identify those that may be related. According to FDA\u2019s 2002 guidance, the  agency was in the process of developing tools to be used by both agency  staff and its stakeholders to periodically assess the implementation of the  least burdensome requirements. The FDA guidance identified a need  for additional tools to accurately assess the agency\u2019s incorporation of the  least burdensome principles into its various regulatory activities and to  assess the impact of the least burdensome approach on expediting the  development of new medical technologies. Agency officials told us FDA  had not developed these tools, but was now in the process of making  other tools available. For example, they cited the development of the  smart templates that will guide reviewers as they evaluate medical device  submissions and generate deficiency letters. Officials noted that, given  the scientific nature of the inquiry, and because least burdensome is a  general principle, developing a metric specific to the least burdensome  requirements is a challenge. While this can be a challenge, FDA officials  have noted that they are attempting to identify surrogate measures that  can provide an indication that the reviewer considered the least  burdensome requirements when making a request. According to federal  standards for internal control, performance metrics are important for  management to have relevant, reliable, and timely information available  for management decision\u2013making and external reporting purposes.  Without such a metric, FDA may be asking medical device sponsors to  provide information unnecessarily or in less efficient ways that are not in  compliance with the requirement to use the least burdensome approach  to medical device reviews.", "FDA is in the process of developing an audit program that could provide it  with information on its implementation of the least burdensome  requirements. FDA has committed to conducting annual quality audits,  which will be led by CDRH\u2019s Quality Management Unit. Accordingly, FDA  plans to identify, with industry input, areas to audit at least once per year.  Initially, the agency has agreed to complete an audit of deficiency letters  and pre-submissions by the end of fiscal year 2020. As of August 2017,  FDA was still planning the deficiency letters audit, and developing its  methodology and identifying audit outcomes. FDA officials told us the  agency plans to finalize a deficiency letters audit plan by the spring of  2018 and begin data collection by early summer of 2018. Officials  explained that the audit will focus on processes\u2014for example, the audit  will not examine the scientific content of deficiency letters but will instead  focus on whether CDRH has followed existing policies and procedures  surrounding deficiency letters. In addition, the Quality Management Unit  was still in the process of hiring most of its staff. As of August 2017, FDA  officials told us the unit had 6 staff reporting to an Associate Director, and  CDRH plans to gradually hire 20 more staff by 2020, starting once  MDUFA IV funds are available beginning in October 2017.", "In addition to these more specific efforts, FDA also plans to continue its  overall evaluation of the medical device review process. The 2016  independent assessment resulting from MDUFA III broadly evaluated  FDA\u2019s device review process, and although it mentioned least  burdensome requirements only briefly, it addressed a number of related  elements, including the quality of the review process and staff training.  Under MDUFA IV, FDA committed to another independent assessment in  two phases: (1) an evaluation of FDA\u2019s implementation of the corrective  action plan FDA developed in response to the MDUFA III assessment  and (2) an evaluation of FDA\u2019s premarket device review program to  identify efficiencies that should be realized as a result of the process  improvements and investments under MDUFA III and IV, among other  things. As with the prior assessment, the new assessment will likely  examine processes related to the least burdensome requirements, though  the extent to which it will address the requirements is not yet known.  Agency officials told us that FDA has committed to hiring a contractor by  the end of December 2017."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FDA must balance the need to obtain sufficient data to determine the  safety and effectiveness of medical devices under review, with the  potential for undue burden and approval delays if unnecessary data is  requested. Assuring that the agency uses the least burdensome method  to complete its review helps to ensure it is able to make decisions about  medical device approval in a timely way. While FDA implemented  guidance and training related to the least burdensome requirements  following the passage of FDAMA in 1997, it has taken few steps to  develop performance metrics to evaluate the extent to which reviewers  are using a least burdensome approach when reviewing medical device  submissions. Recently, FDA implemented several changes that have the  potential to improve its oversight of the least burdensome requirements  and the clarity with which reviewers communicate the need for additional  information. While planned audits of FDA\u2019s medical device review  process have the potential to provide the agency with evaluation tools  through which to assess performance, these audits are still early in their  development and the extent to which they will allow FDA to assess  implementation of the least burdensome requirements is unclear. A  complete and thorough assessment will be important for the agency to  assure itself and external stakeholders that its reviews adhere to the least  burdensome principles and requirements and thus are appropriately  balanced."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to FDA:  The Commissioner of FDA should develop performance metrics and use  them to evaluate the implementation of the least burdensome  requirements, such as during its planned audits of medical device  deficiency letters. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS. HHS concurred with our  recommendation and provided written comments, which are reprinted in  appendix I. In its written comments, HHS agreed that appropriate  implementation of the least burdensome requirements is essential to  FDA\u2019s evaluation of its PMA and 510(k) medical device submissions, and  agreed that it is important for FDA to evaluate how successfully it is  implementing the requirements. HHS also reiterated FDA\u2019s commitment  to the least burdensome principles and provided an overview of its related  efforts, several of which were noted in our draft report. HHS noted its  concern that our draft report did not sufficiently capture all of FDA\u2019s  efforts. While HHS cited FDA\u2019s efforts related to improving the science  underlying its regulatory decisions, which could reduce burden on medical  device sponsors, our review focused on the steps involved in FDA\u2019s  review process. In this regard, HHS concurred with our recommendation  that it develop performance metrics and use them to evaluate the  implementation of the least burdensome requirements, such as during its  planned audits of medical device deficiency letters. In response to this  recommendation, HHS indicated that FDA intends to assess how it  follows least burdensome requirements as part of these audits. We  continue to encourage FDA to develop the evaluation tools necessary to  ensure it conducts a complete and thorough assessment of its  implementation of the least burdensome requirements. In addition to  these general comments, HHS provided technical comments, which we  incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or crossem@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, William Hadley (Assistant Director),  Matthew Byer (Analyst-in-Charge), Luke Baron, and William Garrard  made key contributions to this report. Also contributing were Sam  Amrhein and Jennifer Rudisill."], "subsections": []}]}], "fastfact": ["FDA regulates medical devices to ensure they are safe and effective, and relies on the organization sponsoring the device (usually the manufacturer) to provide the relevant information when the device is submitted for review. FDA is required to use a \u201cleast burdensome\u201d approach in its review of medical devices, including when it requests additional information from sponsors.", "We looked at FDA\u2019s implementation of the least burdensome requirements, and found the agency hasn't developed performance metrics to evaluate them. We recommended that FDA develop metrics to evaluate whether it consistently applies a least burdensome approach in reviews."]}
{"id": "GAO-19-91", "url": "https://www.gao.gov/products/GAO-19-91", "title": "Foreign-Trade Zones: Board Should Document Consideration of All Required Criteria When Evaluating Applications", "published_date": "2018-11-27T00:00:00", "released_date": "2018-12-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FTZs allow companies to reduce, eliminate, or defer duty payments on foreign goods imported into FTZs for distribution or as components of other products before transferring the finished goods into U.S. commerce or exporting them overseas. The value of foreign and domestic goods admitted to FTZs in 2016 exceeded $610 billion. Responsibilities of the Board, consisting of officials from the Departments of Commerce (Commerce) and the Treasury, include evaluating production notifications and applications on the basis of factors such as the proposed activity's net effect on the U.S. economy. Federal regulations set forth requirements, pursuant to the Foreign-Trade Zones Act of 1934, for these evaluations.", "GAO was asked to review the Board's evaluation processes. This report examines the extent to which the Board has established and followed procedures aligned with regulations for evaluating (1) notifications and (2) applications. GAO analyzed the Board's regulations and procedures and interviewed Commerce, Treasury, and U.S. Customs and Border Protection officials. GAO also analyzed a nongeneralizable sample of 59 of 293 notifications the Board evaluated from April 2012 through September 2017, which GAO selected to include a range of Board decisions and exclude pending decisions. GAO also analyzed all three applications the Board issued decisions on during that period."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Foreign-Trade Zones Board (the Board) has procedures that generally align with its regulations for evaluating production notifications and followed these procedures for all 59 notifications GAO reviewed. Notifications are filed by companies proposing to bring foreign components into a foreign-trade zone (FTZ) for use in manufacturing finished products, among other purposes. GAO found, for example, that, following Board procedures, Board staff evaluating the notifications collected and considered comments from the general public, industry specialists, and U.S. Customs and Border Protection and recommended to the Board whether to authorize companies' proposed activities. Of the 59 notifications GAO reviewed for seven industry categories, 49 notifications either were approved or were approved with restrictions\u2014for example, the proposed activity was authorized for a limited time period or certain duty benefits were denied for one or more foreign components. Ten notifications were denied for reasons such as new or complex policy issues that required further review.", "The Board also has procedures that generally align with its regulations for evaluating production applications and followed these procedures for the three applications GAO reviewed. The applications were submitted by three of the companies whose notifications were denied. According to Board staff, if a notification is not approved or is approved with restrictions, a company may submit an application with additional details. Following Board procedures, Board staff, for example, collected and considered comments and recommended to the Board whether to authorize the proposed activities. Two of the applications were approved with restrictions, and the third was not approved. While the regulations require consideration of a number of criteria\u2014for example, consistency with U.S. trade and tariff law\u2014Board staff did not document consideration of all required criteria for two of the three applications, and the procedures do not require such documentation. Board staff said they document only the most relevant criteria in their reports. Standards for Internal Control in the Federal Government states that management should document its rationale for determining a criterion is not relevant and make this documentation readily available for examination. Without such documentation, the Board lacks an institutional record that all required criteria were considered and also lacks assurance that its decisions comply with U.S. trade and tariff law and public policy."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Commerce should require Board staff to document consideration of all criteria required in the regulations when evaluating production applications. Commerce concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Foreign-trade zones (FTZ) are secure areas throughout the United States  that, for the purpose of customs entry procedures\u2014including payment of  duties\u2014are generally treated as being outside U.S. customs territory.  Congress authorized the Foreign-Trade Zones program in 1934 to  expedite and encourage foreign commerce. Companies authorized to  operate in FTZs are able to import foreign-source components for use in  manufacturing finished goods without paying customs duties or fees until  the goods are transferred from the FTZs into U.S. commerce.  Under the  program, authorized companies operating in FTZs may be allowed, in  certain circumstances, to reduce, eliminate, or defer payment of customs  duties or fees for goods manufactured or stored in FTZs and pay no  duties or fees for goods exported directly from the FTZs to other  countries. In 2016, the value of foreign- and domestic-source components  admitted into FTZs exceeded $610 billion, of which $108 billion\u2014almost  18 percent\u2014represented foreign components to be used in the  production of finished goods in the zone. The value of goods exported  from FTZs to other countries in 2016 was approximately $76 billion.", "The U.S. Foreign-Trade Zones Board (the Board), consisting of the  Secretaries of Commerce and the Treasury, is responsible for, among  other things, authorizing the establishment of FTZs and reviewing  companies\u2019 production notifications and applications. A company seeking  production authority\u2014that is, permission to conduct proposed production  activities in an FTZ\u2014must first file a production notification with the Board  that summarizes the proposed activity. If the notification is approved with  restrictions or not approved, the company may choose to file a more  detailed production application to provide additional evidence for the  Board\u2019s consideration. In reviewing production notifications and  applications, the Board is responsible for taking into account a range of  criteria that include the net economic effect on the U.S. economy, such as  U.S employment. The Department of Homeland Security\u2019s Customs and  Border Protection (CBP) is responsible for oversight and enforcement in  FTZs, including collecting revenue and assessing risk of noncompliance  with U.S. laws and regulations. According to Board officials, the Board  issued updated and modified regulations for FTZs in February 2012 to  simplify the application process and expedite the review of applications  when possible.", "You asked us to review the Board\u2019s processes for evaluating production  notifications and applications. This report examines (1) the extent to  which the Board has established and followed procedures aligned with its  regulations for evaluating production notifications and (2) the extent to  which the Board has established and followed procedures aligned with its  regulations for evaluating production applications.", "To examine the extent to which the Board has established procedures  aligned with its regulations for evaluating production notifications and  applications, we analyzed the Board\u2019s regulations and procedures and  interviewed cognizant officials of the Department of Commerce  (Commerce), the Department of the Treasury (Treasury), and CBP. To  determine the extent to which the Board has followed any procedures it  established, we selected and analyzed a nongeneralizable sample of  case records for 59 of the 293 production notifications submitted to the  Board from April 2012 through September 2017. We also analyzed the  three applications that the Board reviewed and rendered final decisions  on during this period. We determined that these case records, which we  obtained from the Board\u2019s case tracking system, were sufficiently reliable  for our purposes of understanding the universe of notifications and  applications submitted for production authority and reviewing a sample  from that universe.  To make this determination, we took steps that  included reviewing related guidance for the Board\u2019s case records tracking  system; interviewing knowledgeable agency officials; and reviewing a  sample of cases with a data collection instrument, which confirmed  information included in the case tracking system data.", "The 59 notifications we reviewed comprised all notifications submitted  during this period for the following seven industry categories\u2014 silicones/polysilicon, textiles/footwear, oil refineries/petrochemical  facilities, other energy, chemicals, medical supplies and devices, and  miscellaneous. We selected these industry categories because the  notifications that the Board did not approve were all submitted by  companies in these categories. The 59 notifications we reviewed  included 34 that were approved, 15 that were approved with restrictions,  and 10 that were not approved, and they excluded any notifications for  which the Board\u2019s decisions were pending as of September 2017. The  three applications we reviewed were submitted, respectively, by three  companies that had each submitted 1 of the 59 notifications in our  sample. See appendix I for additional information about our objectives,  scope, and methodology.", "We conducted this performance audit from July 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FTZ Benefits", "paragraphs": ["Example of Foreign-Trade Zones  (FTZ)  Benefits   The FTZ Board might authorize an automobile  manufacturer that imports foreign-source  components, such as engines and  transmissions into an FTZ, to pay the customs  duty rate on the value of the finished vehicles  (2.5 percent) instead of the sum of the duties  owed for certain imported components. Duty  rates for those components generally range  from 0 percent to approximately 10 percent.   As a result, the company would pay lower  custom duties to manufacture automobiles in  an FTZ than it would pay outside the FTZ.", "To encourage companies to maintain and expand their operations in the  United States, the FTZ program offers a range of benefits, including the  possible reduction or elimination of duties on certain imported goods. For  example, a company operating in an FTZ that manufactures products  using foreign materials or components can pay lower overall duties by  electing to pay the duty rate for the finished product rather than for the  product\u2019s imported foreign component parts, which may have a higher  duty rate (see sidebar). This benefit provides an incentive to companies  to manufacture in the United States rather than move their manufacturing  operations overseas to avoid paying U.S. duties. We reported in July  2017 that, while FTZs were created to provide benefits to the American  public, little is known about their overall economic impact. Few  economic studies have focused on FTZs, and those studies have not  quantified economic impacts or examined the effect of companies\u2019 FTZ  status on regional and overall economic activity such as employment.", "As of June 2018, there were 262 approved FTZs in the United States,  with at least 1 in each state and in Puerto Rico, according to Board staff.  Most FTZs consist of multiple physical locations, known as sites or  subzones, which include individual companies\u2019 plants as well as multi- user facilities such as seaports or airports."], "subsections": []}, {"section_title": "FTZ Board and CBP Responsibilities", "paragraphs": ["According to Board staff, the Board\u2019s responsibilities include, among  others, approving the establishment of FTZs and reviewing notifications  and applications for production authority. The Board must authorize any  proposed production activity before a company can bring into an FTZ the  specified foreign-source materials or components for incorporation into a  final product and to potentially receive FTZ benefits. Current Board staff  are Commerce employees and comprise an Executive Secretary, eight  staff analysts who gather and analyze information for the Board\u2019s  consideration, and a coordinator who handles clerical tasks, according to  Board staff.", "CBP is responsible for oversight and supervision of FTZ operators,  including the collection of duties, taxes, and fees. CBP reviews  production notifications and applications with respect to its ability to  provide oversight and ensure program compliance and informs the Board  of its ability to oversee a proposed production activity if it were to be  authorized."], "subsections": []}, {"section_title": "Production Notification and Application Processes", "paragraphs": ["Federal regulations set forth processes and procedural rules for  companies applying for, and operating in, FTZs as well for the Board\u2019s  evaluation of notifications and applications for production authority,  pursuant to the FTZ Act of 1934 as amended. According to Board staff,  the Board issued updated and modified regulations for FTZs in February  2012 to simplify the application process and expedite the review of  applications when possible. The Board staff stated that they took into  consideration comments from industry, including companies whose  production activities require authorization decisions within short time  frames, when updating the regulations.", "The 2012 regulations divided the production application process into two  processes to create a less resource-intensive process for companies and  the U.S. government, according to Board staff. Board staff said that the  2012 regulations allow the Board to approve notifications and applications  with restrictions. For example, the Board may decide to, among other  things, (1) authorize the exemption of duty payments on some, but not all,  components named in the notification for the proposed production activity;  (2) authorize the activity for a limited time period; or (3) authorize the  activity for a specified quantity of the component to be brought into the  FTZ.", "The following describes the notification and application processes under  the 2012 regulations.", "Notification process. A company must first submit a production  notification\u2014which requires less information from companies than a  production application\u2014requesting production authority in an FTZ. If  the Board approves a company\u2019s notification, the company can begin  the production activity. For example, in a 2013 notification, a company  requested authority to produce printing plates used in the newspaper  industry and to pay duties at the duty rate applicable to the final  product (i.e., printing plates) instead of the duty rates applicable to the  five individual foreign-source components (e.g., aluminum coils). The  Board approved the notification without restrictions, allowing the  company to begin conducting the authorized activity. If a notification is  approved with restrictions, the company may begin the production  activity while adhering to the specified restrictions. For example, in  another 2013 notification, a company requested authority to produce  sports safety helmets, bicycle baby seats, and bicycle car-carrier  racks and pay duties on the final products instead of paying individual  duties on some foreign-source components (e.g., helmet and baby  seat parts). The Board approved the notification with a restriction,  authorizing the company to begin the production activity but requiring  it to pay duty on one foreign-source component (textile bags).", "Application process. According to Board staff, if a notification is  approved with restrictions or denied, the company may file a more  detailed production application to continue seeking authority for the  activity that was restricted or denied. If the Board does not  unanimously decide to authorize the application with or without  restrictions, the production authority is denied. For example, in 2012,  the Board determined that a notification requesting that a company\u2019s  existing authority to produce plastic adhesive bandages in an FTZ be  expanded to include production of fabric adhesive bandages using  foreign-source textile components warranted further review and  denied the notification. The company subsequently filed an application  for the expanded authority, providing additional information to support  its request, which the Board also denied. A company whose  application is denied may appeal the Board\u2019s decision to the U.S.", "Court of International Trade. According to Board staff, the  production application process is similar to the application process  under the pre-2012 regulations.", "Figures 1 and 2 provide an overview of the Board processes for  considering notifications and applications for production authority."], "subsections": []}, {"section_title": "Criteria Relevant to Evaluation of Production Notifications and Applications", "paragraphs": ["The 2012 regulations detail criteria for the Board to consider when  reviewing notifications and applications. These criteria include threshold  and economic factors as well as consideration of significant public  benefits (see table 1). According to the regulations, if the Board  determines that any of the threshold factors apply to a proposed or  ongoing production activity, it shall deny or restrict authority for the  activity. After reviewing the threshold factors, if there is a basis for further  consideration of the application, the Board shall consider economic  factors listed in the regulation when determining the net economic effect  of the proposed activity.", "The regulations\u2019 requirements for the Board to consider these criteria  when reviewing notifications and applications differ as follows (italics  added for emphasis):", "Notifications. Section 400.37 of the regulations states that the  Executive Secretary\u2019s recommendation shall consider, among other  things, comments submitted in response to the notification in the  context of the factors set forth in section 400.27. The regulation  does not state that the Executive Secretary\u2019s recommendation must  consider each factor individually.", "Applications. Section 400.27 states that the Board shall apply the  criteria set forth therein. According to section 400.27, the Board must  first review the threshold factors and after its review, if there is a basis  for further consideration of the application, must consider all of the  listed economic factors when determining the net economic effect of  the proposed activity. Additionally, the Board is to take the threshold  factors and economic factors into account in considering the  significant public benefit(s) that would result from the production  activity.", "Board staff observed that the notification process is designed for  identifying concerns related to the proposed production authority, not for  resolving such concerns. If the Board identifies any concerns that it  deems significant enough to deny a notification, the application process  allows the Board to collect more information to inform further analysis.  Board staff stated that examples of concerns related to production  notifications and applications might include objections from domestic  producers of component materials, such as textiles, who believe they  would be negatively affected by duty reduction on foreign-source  components used in the proposed production activity.", "According to the Board, of the 293 production notifications submitted from  April 2012 through September 2017 for which it rendered decisions, 218  notifications were approved without restrictions, 62 were approved with  restrictions, and 13 were not approved (see fig. 3). For further information  about the Board\u2019s decisions for the 293 notifications by industry category,  see appendix II.", "Of the companies that submitted the 75 production notifications approved  with restrictions or not approved from April 2012 through September  2017, nine companies subsequently submitted production applications.  As of September 2017, the Board had authorized two of these  applications with restrictions and had not authorized one application,  according to Board staff. For the remaining six applications, the Board  had not authorized one application and the Board\u2019s decisions were  pending for the other five applications as of August 2018."], "subsections": []}]}, {"section_title": "FTZ Board Followed Procedures Generally Aligned with Regulations in Evaluating Production Notifications We Reviewed", "paragraphs": [], "subsections": [{"section_title": "The Board\u2019s Procedures for Evaluating Notifications Generally Align with Regulations", "paragraphs": ["Our review of Board documents and interviews with Board staff found that  the Board has established procedures for the evaluation of notifications  that generally align with the Board\u2019s regulations. The Board\u2019s procedures  for evaluating notifications can be organized into three phases: (1)  information collection, (2) analysis and recommendation, and (3)  authorization decision (see fig. 4). Each phase includes steps specifying  the responsible party and the intended product and result.", "In general alignment with the regulations, the Board\u2019s procedures for  evaluating production notifications include steps for collecting information  from the notifications, from public comments submitted in response to  Federal Register notices of the notifications, from reviews of the  notifications by industry specialists at Commerce and other agencies, and  from CBP regarding its ability to oversee the proposed production activity.", "Notification information. The regulations specify that notifications  must (1) provide the identity and location of the FTZ user; (2) identify  the materials, components, and finished products associated with the  proposed activity; and (3) include information as to whether any  material or component is subject to a trade-related measure or  proceeding, such as orders for antidumping duties. The Board  procedures require staff to determine whether a notification is  complete before beginning to evaluate it. To help companies complete  the application, Board staff provide an instruction sheet listing the  information required by the regulations.", "Federal Register comments. The Board regulations require the  Executive Secretary to invite public comments in response to a  Federal Register notice, unless the Executive Secretary determines,  based on the notification\u2019s content, to recommend further review  without inviting public comment. The Board procedures instruct staff  to publish a notice in the Federal Register after determining that the  notification is complete.", "Agencies\u2019 reviews. The Board regulations do not require that  industry specialists review notifications. The Board procedures  instruct staff to request industry specialists at Commerce and, as  appropriate, at other agencies to review the notifications.", "CBP comments. The Board regulations do not require Board staff to  request CBP comments for notifications. The Board procedures  instruct staff to prepare a letter to the CBP Port Director. According to  CBP officials and guidance, CBP provides comments regarding its  ability to oversee the proposed production activity to help ensure FTZ  program rules and regulations are followed if it is approved."], "subsections": [{"section_title": "Phase 2: Analysis and Recommendation", "paragraphs": ["In general alignment with the regulations, the Board\u2019s procedures for  evaluating production notifications include steps to guide staff in  considering the information collected and in preparing a recommendation  to the Board regarding whether to approve the notification.", "Review of comments and other relevant factors. The Board  regulations require that the Executive Secretary\u2019s recommendation to  the Board consider any comments submitted in response to the  Federal Register notice; guidance from specialists within the  government; and other relevant factors based on Board staff\u2019s  assessment of the notification in the context of the criteria, including  threshold and economic factors listed in section 400.27. The Board  procedures require staff evaluating notifications to consider any public  comments submitted in response to the Federal Register notice and  comments from industry specialists and CBP", "Recommendations and memos. The Board regulations do not  require Board staff to prepare recommendations or memos. The  Board procedures require staff to use a prescribed format to prepare a  recommendation, based on the information collected, regarding  whether a notification should be approved (with or without restrictions)  or not approved because further review of the proposed production  activity is warranted. The staff also must prepare memos for the  Treasury and Commerce Board members. The staff are to provide the  memos with the recommendation to the Executive Secretary for  review before sending them to the Board members."], "subsections": []}, {"section_title": "Phase 3: Authorization Decision", "paragraphs": ["In general alignment with the regulations, the Board\u2019s procedures for  evaluating production notifications include steps for the Executive  Secretary to make a recommendation to the Board for its consideration  and for Board staff to notify the applicant of the Board\u2019s decision and to  ensure that evaluation of the notification is completed within specified  time frames.", "Executive Secretary\u2019s recommendation and Board\u2019s decision.", "The Board regulations specify that the Executive Secretary is required  to submit a recommendation to the Board regarding whether further  review of all or part of the proposed production activity is warranted.  The Board procedures require the Executive Secretary to review the  memos and recommendations prepared by the Board staff and submit  them to the Board members for their review and concurrence with the  recommendation.", "Notice to applicant. The Board regulations require the Executive  Secretary to inform the applicant of the Board\u2019s decision regarding  authorization of the notification. Similarly, the Board procedures  require Board staff to notify the applicant of the Board\u2019s decision.", "Evaluation time frames. The Board regulations and procedures  specify time frames for notification evaluation. For example, under  the regulations, the Executive Secretary shall submit to the Board a  recommendation on whether further review of all or part of the activity  subject to the notification is warranted within 80 days of receipt of the  notification. Similarly, the procedures state that Board staff will ensure  that the recommendation is finalized so that the recommendation and  memos can be sent to the Board members within 80 days of receipt of  the notification. In addition, the regulations and procedures require  that the applicant be informed of the Board\u2019s decision about the  notification within 120 days."], "subsections": []}]}, {"section_title": "FTZ Board Followed Its Procedures in Evaluating Production Notifications We Reviewed", "paragraphs": [], "subsections": [{"section_title": "Phase 1: Information Collection", "paragraphs": ["Our analysis of Board case records for 59 notifications and our interviews  with Board staff and Commerce, Treasury, and CBP officials showed that  when evaluating the notifications, the Board followed its procedures in  collecting the required information from the applicants; inviting public  comments in response to Federal Register notices; requesting reviews  from specialists at other agencies and Commerce; and, for most  notifications, requesting CBP comments.", "The Board collected the required information from applicants for the 59  notifications we reviewed. All of the notifications included (1) the identity  and location of the FTZ user; (2) the materials, components, and finished  products associated with the proposed activity; and (3) information on  whether any material or component was subject to a trade-related  measure or proceeding.", "For 5 of the 59 notifications we reviewed, Board staff recommended  further review of the proposed activity on the basis of the applicant  information and staff knowledge of the industry, according to Board staff.  The staff explained that if the Board is aware of issues that would require  a more detailed review of the proposed activity, the Board can decide,  without collecting additional information, not to approve the notification. In  such cases, the company must file a more detailed application if it wants  to proceed with its request for production authority. For example, for 2 of  these 5 notifications, Board staff recommended further review without  collecting additional information because they were already reviewing  production applications requesting similar production authorities for  carbon fiber. For another notification, staff recommended further review  without collecting additional information because the Board had not  previously reviewed a similar request and the staff needed the additional  information that would be collected through the application evaluation  process. Of the five companies that submitted these 5 notifications, three  companies decided to submit applications for production authority.", "For the remaining 54 notifications, Board staff published notices in the  Federal Register and received public comments on 5 of them. The  comments included both opposition and support from domestic producers  and associations. For example, in comments responding to one of the  notifications, a company opposed authorization of the proposed activity  because the company believed that the activity, if approved, would likely  have a negative impact on the domestic silicon metal industry. According  to the comments, the price of silicon metal had declined significantly and  granting the requested production authority would result in further  downward pressure on U.S. silicon metal prices. In comments responding  to another notification, a company supported the proposed extension of  FTZ authority to produce upholstered furniture and related parts. The  comments stated that the activity would, among other things, encourage  production in a related industry, domestic thread production.", "Board staff sought and received reviews of the 54 notifications from  industry specialists in six Commerce offices, including the Offices of  Textiles and Apparel, Consumer Goods, Materials, and Energy and  Environmental Industries. The specialists recommended approving 49 of  the notifications (with or without restrictions) and not approving the  remaining 5 notifications because further review was warranted.", "For example, for one notification, an industry specialist\u2019s review  recommended approval, noting that the competitive landscape in Puerto  Rico\u2014the FTZ\u2019s location\u2014had changed and some industry sectors had  shifted manufacturing to foreign locations. According to the review,  approval of the notification would therefore contribute to maintaining  manufacturing operations in Puerto Rico, which would provide  employment and an economic boost to the national economy. For a  second notification, an industry specialist\u2019s review recommended denying  the requested production authority because of concerns about the  possible effect of importing a textile component that was being produced  domestically. The review stated that if the notification were approved, the  company would avoid paying duties on the textile component, resulting in  a significant incentive for the use of imported products over those  produced domestically. For a third notification, the Board staff requested  and received comments from the Department of Justice regarding a  firearm import regulation for a notification seeking production authority for  the demilitarization (or disassembly) of munitions and other explosive  components.", "According to the industry specialists who had reviewed notifications in our  sample, their analyses were based on their knowledge of the industry,  including domestic manufacturers of components that applicants sought  to import into an FTZ, and on public comments submitted to the Federal  Register, among other things.", "For 6 of the 59 notifications, Board staff did not ask CBP about its ability  to oversee a proposed production activity because the staff were  recommending further review of the notification. For the remaining 53  notifications, we found that the Board requested comments from CBP  regarding its ability to provide oversight."], "subsections": []}, {"section_title": "Phase 2: Analysis and Recommendation", "paragraphs": ["We found that Board staff followed the Board\u2019s procedures in reviewing  comments and other relevant factors for all notifications in our sample  and providing recommendations to the Board regarding authorization of  the notifications.", "Review of Comments and Other Relevant Factors  Our review of Board case records found that Board staff prepared  evaluations for all 59 of the notifications we reviewed, documenting  consideration of public comments, any agency specialists\u2019 reviews, and  CBP comments. In addition, although the regulations do not explicitly  require consideration of the criteria listed in the regulations when  evaluating notifications, Board staff informed us that they always  considered economic and threshold factors when they had collected  information that identified potential areas of concern.", "Our review of the case records for the 59 notifications found that some of  the factors Board staff considered included whether similar production  authority had been granted in the past for another company and whether  concerns had been raised by domestic industries. For example, for one  notification requesting production authority for wind turbine components,  the Board staff\u2019s evaluation noted that the Board had previously approved  production authority involving wind turbines and related components for  other companies. For another notification, requesting production authority  to import a foreign-source textile fabric for adhesive bandages duty free,  the Board staff\u2019s evaluation noted that similar requests claiming lack of  availability of domestically produced textile fabric at competitive prices  had been strongly disputed by domestic producers, trade associations, or  both.", "More than half of the Board staff evaluations of the notifications we  reviewed included a discussion of economic factors, and nearly a third  included discussion of threshold factors. For example, 15 evaluations  discussed the proposed activity\u2019s potential impact on related domestic  industries. The evaluation of a notification requesting authority to produce  customized plastic containers stated that a domestic company producing  reusable plastic containers opposed the request on the grounds that the  proposed activity could harm that company in the U.S. market. In  addition, 13 evaluations discussed exporting and re-exporting finished  products. For example, an evaluation of a notification requesting authority  to produce automotive textile upholstery material noted that the company  did not intend to enter the finished product into the U.S. market for  domestic consumption (i.e., the company would re-export the finished  product for sale outside the U.S. market).", "Our review of case records for the 59 notifications found that the Board  staff prepared recommendations for each notification and also prepared  memos to the Treasury and Commerce Board members for the Executive  Secretary\u2019s review before providing them to the Board members.  Reasons noted in recommendations to authorize a production activity  without restrictions included prior authorization of a similar activity or lack  of impact on domestic industry. Reasons for recommending denial of  authorization included new or complex policy issues that required further  review. Recommendations to authorize an activity with restrictions  included restrictions on the quantity of a component that could be  imported duty-free into an FTZ, on the amount of time for which a  production activity would be authorized (e.g., 5 years), and on the  eligibility of some components for FTZ benefits. For example, for one  notification requesting authority to produce upholstered furniture, the  memo recommended, among other things, restricting the amount of a  specific foreign-source fabric that could be imported duty free into an FTZ  and requiring that all other foreign-source fabrics be admitted to an FTZ  under duty-paid status. We found that for all 59 notifications, the Board  staff\u2019s recommendations were in agreement with the industry specialists\u2019  comments."], "subsections": []}, {"section_title": "Phase 3: Authorization Decision", "paragraphs": ["Our review of the 59 sample notifications found that for each notification,  the Board\u2019s Executive Secretary followed the Board\u2019s procedures in  submitting a memo to the Board with recommendations for its decision  and notifying the applicants of the decision. In addition, the Board staff  generally followed time frames listed in the procedures.", "Executive Secretary\u2019s Recommendation and Board\u2019s Decision  The Board\u2019s Executive Secretary submitted a memo to the Board  recommending approving, approving with restrictions, or not approving  each of the 59 notifications we reviewed. The Executive Secretary  recommended approving 34 notifications, approving 15 notifications with  restrictions, and denying 10 notifications (see fig. 5). We found that the  Executive Secretary\u2019s recommendations concurred with the Board staff\u2019s  recommendations for all 59 notifications and that the Commerce and  Treasury Board members concurred with the FTZ Executive Secretary\u2019s  recommendations for 56 of the 59 notifications. For the remaining 3  notifications, the Executive Secretary recommended that further reviews  were warranted and the Commerce Board member concurred. Because  the notification was not approved, the Executive Secretary did not contact  the Treasury Board member for his concurrence. According to Board staff, a notification will not be approved if at least one Board member  determines further review is needed. See appendix III for more  information about the Board\u2019s decisions for the 59 notifications in our  sample.", "For all 59 notifications, Board staff informed the applicant of the Board\u2019s  decision.", "For the majority of the notifications in our sample, the Board generally  followed time frames listed in the procedures. For example, for 46 of the  59 notifications, the Board informed the applicant of its decision within  120 days after the notification\u2019s submission, as required by the  regulations and procedures. The other 13 cases were completed within  122 to 160 days. According to Board officials, processing some  notifications took more time because of a government shutdown or  internal procedural delays. (See app. IV for more information about the  processing times for notifications in our sample.) The Board staff also  noted that even when a case was delayed, processing the notification  took less time than if the company had submitted an application under the  production application process before the regulations were revised in  2012.", "According to Board staff, the notification process is designed to ensure  that the applicant receives an authorization decision within 120 days.  Board staff stated that, in general, any issues arising during evaluation of  a production notification will lead to an authorization with restriction or  denial of the notification, since decisions on the merits of such issues  would require extended comment and rebuttal periods and additional  analysis that could not be completed within the 120-day time frame for  notifications. Board staff stated that, in these cases, a company can  choose to submit a more detailed application, triggering the Board\u2019s  application evaluation process. Among the companies that filed the 59  production notifications we reviewed, three companies whose  notifications were not approved had filed a more detailed application for  production authority as of September 2017."], "subsections": []}]}]}, {"section_title": "FTZ Board Followed Procedures Generally Aligned with Regulations in Evaluating Applications We Reviewed, but It Did Not Consistently Document Consideration of All Required Criteria Board\u2019s Procedures Generally Align with Regulations for Evaluating Production Applications", "paragraphs": ["Our review of Board documents and interviews with Board staff showed  that the Board has established procedures for evaluating production  applications that generally align with its regulations. The Board\u2019s  procedures for evaluating production applications can be organized into  the same three phases as those for evaluating production notifications\u2014 (1) information collection, (2) analysis and recommendation, and (3)  authorization decision\u2014although some of the requirements differ (see fig.  6 for an illustration of the Board\u2019s application process). For each phase,  the procedures include steps that specify the responsible party and the  intended product and result.", "In general alignment with the regulations, the Board\u2019s procedures for  evaluating production applications include steps for collecting information  from the applications, from public comments submitted in response to  Federal Register notices of the applications, from reviews of the  applications by industry specialists at Commerce and other agencies, and  from CBP.", "Application information. The Board regulations require the applicant  to provide detailed information about the proposed production  activities, such as (1) a summary of the reasons for the application,  including a description of the finished products and imported  components; (2) the estimated annual value of benefits to the  applicant; and (3) an explanation of the requested production  authority\u2019s anticipated economic effects. To guide companies in  completing applications, the Board provides an application instruction  sheet with numerous questions, many of which are similar to  requirements listed in the regulations. The Board\u2019s procedures  require Board staff to determine whether the application is complete  before beginning to evaluate it.", "Federal Register comments. The Board regulations require that,  after Board staff determine that the application satisfies regulatory  requirements, the Executive Secretary shall, among other things,  publish a notice in the Federal Register inviting public comments.  Similarly, the Board procedures require the preparation of a notice for  the Executive Secretary\u2019s review and signature that will be transmitted  to the Federal Register.", "Agencies\u2019 review. While the Board\u2019s regulations do not specifically  require Board staff to ask industry specialists to review the production  applications, the procedures instruct staff to consult with industry  specialists at Commerce and other agencies as appropriate. See  the text box for a description of production application reviews by  industry specialists in Commerce\u2019s Office of Textiles and Apparel  (OTEXA).", "Description of Production Application Review by Department of Commerce Industry Specialists  According to industry specialists at the Department of Commerce, when Foreign-Trade Zones (FTZ) Board staff receive an application  pertaining to textiles products, they forward the application to the department\u2019s Office of Textiles and Apparel (OTEXA). OTEXA  officials then issue a mass mailing alerting industry (i.e., nongovernment) representatives that a textile case was submitted. In  addition, the industry specialists said that the department co-manages the Industry Trade Advisory Committee on Textiles and  Clothing, consisting of 23 vetted advisory committee members representing domestic producers, importers, retailers, distributors and  associations, among others. The specialists stated that OTEXA officials would notify this committee about the Federal Register notice  for the textile application to help ensure that the industries have seen the notice.", "According to the industry specialists, OTEXA will thoroughly review the case, taking into account public comments, and submit a  memo with a recommendation to the FTZ Board staff for consideration. The specialists stated that the main purpose of OTEXA\u2019s  review is to determine whether the applicant is seeking to bring into an FTZ a textile component that is being manufactured  domestically. According to the specialists, if OTEXA determines that the component is manufactured domestically, it will recommend  to the FTZ Board staff that the application should not be authorized. The industry specialists said that lack of opposition to the  application usually indicates that there is no domestic manufacturer of the product.", "CBP\u2019s review. The regulations require the Executive Secretary to  provide the application and Federal Register notice to CBP for review  and require CBP to submit any comments about the application to the  Executive Secretary by the conclusion of the Federal Register public  comment period. Similarly, the Board procedures require Board staff  to prepare a letter to the CBP Port Director. According to the Board  staff and CBP officials, a letter is sent to the local CBP Port Director to  collect information on CBP\u2019s ability to provide oversight and help  ensure that FTZ program rules and regulations are followed if the  activity is authorized."], "subsections": [{"section_title": "The Board Followed Its Procedures in Evaluating Production Applications We Reviewed", "paragraphs": [], "subsections": [{"section_title": "Phase 1: Information Collection", "paragraphs": ["Our review of available documents for each of the three applications in  our sample indicate that Board staff followed the Board\u2019s procedures in  collecting information from companies, publishing notices and obtaining  public comments from the Federal Register, and gathering comments  from agencies such as Commerce and CBP. All three companies  requested authority to import textiles from foreign suppliers into an FTZ  for use in manufacturing products that would be later imported from the  FTZ into the U.S. market for consumption.", "The Board staff collected information from all three companies\u2019  applications. For example, each company provided information regarding  (1) reasons for the application and an explanation of its anticipated  economic benefits; (2) the estimated total annual value of benefits of the  proposed activity to the company; (3) whether the activity was consistent  or inconsistent with U.S. trade and tariff law or policy formally adopted by  the executive branch; (4) whether approval of the activity under review  would seriously prejudice U.S. tariff and trade negotiations or other  initiatives; and (5) whether the activity involved items subject to  quantitative import controls or inverted tariffs.", "We found that two of the companies responded partially to a question  soliciting data on annual current and planned production capacity for the  proposed FTZ activity. In addition, one of these companies did not  respond to a question regarding whether the production activity would  result in significant public benefits, taking into account the threshold and  economic factors. According to Board staff, applicants may not be able to  provide the quantitative information needed to answer some of the  questions. The staff stated that, because the evaluation process does not  lend itself to specific calculations, the absence of certain data does not  prevent the Board\u2019s evaluation of the application. According to Board  staff, the Board\u2019s recommendations are based on the totality of qualitative  and quantitative information in the case record.", "The Executive Secretary posted notices in the Federal Register of the  three production applications, pursuant to the Board\u2019s procedures, and  received public comments on all three. One application received two  comments from a domestic textile producer that opposed the application.  Another application received three comments\u2014two from a domestic  textile producer and one from domestic textile industry trade  associations\u2014opposing the application and received a fourth comment\u2014 from a domestic textile producer\u2014supporting it. The third application  received 14 comments from domestic textile producers, textile  organizations, and congressional and city government officials, among  others. Twelve of the 14 comments supported the application; the  remaining 2 comments, from the same domestic producer, opposed it.", "Board staff requested that industry specialists review one of the three  production applications, although the Board\u2019s procedures do not require  such reviews, according to Board staff. In a memo from Commerce\u2019s  OTEXA, a specialist who reviewed the application recommended not  approving it because the textile components that the company had  planned to import into the FTZ were also produced domestically by other  manufacturers. In addition, the memo stated that granting the company\u2019s  request for FTZ production authority would provide a significant incentive  to use imported textile materials rather than textile materials produced  domestically, which could have negative economic effects on domestic  producers and companies supplying the production components.", "For the other two applications\u2014both related to the production of carbon  and other fiber with foreign-source components\u2014the Board staff did not  seek comments from industry specialists and initiated their own industry  research instead. According to Board staff, they did not reach out to  OTEXA because OTEXA had recently provided comments on a similar  carbon fiber case. The Board staff did not request that other agencies  review the three applications.", "CBP\u2019s local Port Director reviewed all three production applications and  responded that it could provide oversight of the proposed activities."], "subsections": []}, {"section_title": "Phase 2: Analysis and Recommendation", "paragraphs": ["We found that Board staff followed the Board\u2019s procedures in reviewing  comments and other relevant factors for the three production applications  and providing recommendations to the Board regarding approval of the  applications.", "Review of Comments and Other Relevant Factors  Our review of Board case records for the three applications found that in  evaluating the applications, Board staff considered the public comments  submitted in response to the Federal Register notices as well as  comments from industry specialists and CBP. In addition, although the  case records did not document consideration of all required criteria for  two of the three applications, we concluded after interviewing Board staff  that they had considered the required criteria. The procedures do not  require Board staff to document consideration of the required criteria. The  case records we reviewed also showed that Board staff considered the  authorization decisions of recent applications involving similar foreign- source components.", "Examiner\u2019s Reports and Recommendations  We found that the Board staff issued preliminary recommendations and  subsequently prepared detailed examiner\u2019s reports, with final  recommendations, for the three production applications. For two of the  applications, the examiner preliminarily recommended authorizing one of  the requested production activities with a restriction, namely, requiring  that the final product be re-exported and not sold on the U.S. market.  For the third application, the examiner preliminarily recommended, on the  basis of the OTEXA specialist\u2019s analysis, not approving the request for  expanded FTZ production authority. The Board staff also prepared  reports with final recommendations for the Executive Secretary\u2019s review,  taking into account new evidence and rebuttals that the applicants had  submitted in response to opposing public comments. The final  recommendations proposed by the Board staff were identical to the  preliminary recommendations.", "For the two applications that received final recommendations to authorize  with restrictions, the examiner\u2019s reports stated that an authorization  without restrictions would negatively impact a domestic producer and that  the applicants had not demonstrated a causal link between proposed  FTZ-related cost savings and an overall net positive national economic  effect, among other reasons. For the application that the industry  specialist had reviewed, the examiner\u2019s report stated that, after reviewing  all comments and information on the case record, OTEXA\u2019s position  continued to be that approving FTZ production authority in this  circumstance, given the domestic supply of required textile materials,  would encourage the use of imported textiles and reduce purchases from  domestic producers, which could cause domestic production to decline."], "subsections": []}, {"section_title": "Phase 3: Authorization Decision", "paragraphs": ["Our review of the case records for the three production applications found  that the Executive Secretary submitted the examiner\u2019s reports and  recommendations to CBP for review and comment and to the Board  members for their respective votes, pursuant to the Board\u2019s procedures  and regulations, and that the applicants were notified of the Board\u2019s  decisions. We also found that all three applications took longer than the  general 12-month time frame detailed by the regulations.", "Executive Secretary\u2019s Recommendation and Board\u2019s Decision  We found that CBP reviewed, and concurred with, the examiner\u2019s  recommendations for all three applications. The Executive Secretary  submitted copies of his memos for each of the three applications, along  with the examiner\u2019s reports and recommendations, to both the Treasury  and Commerce board members. The memos recommended authorizing  with restrictions two of the applications and not authorizing the third  application, in agreement with the examiner\u2019s recommendations. In  addition, the Executive Secretary\u2019s memo to the Board regarding the  application that OTEXA had reviewed stated that, as with recent cases  involving textile-based production components, the content of OTEXA\u2019s  memorandum established a key basis for the final recommendation for  the Board\u2019s action. The Board members unanimously concurred with  the Executive Secretary\u2019s recommendations for all three applications.", "For all three applications, the Board staff notified the applicants of the  Board members\u2019 decisions.", "Board staff developed the examiner\u2019s preliminary recommendation within  the general 150-day time frame cited in the Board\u2019s procedures for one of  the three applications we reviewed and took additional time for the other  two applications. Each of the three applications involved textiles related to  foreign-source components, which our review of the case records showed  can be controversial. For the three applications, the examiner took 116,  235, and 431 days, respectively, to complete the preliminary  recommendations. In addition, the Board\u2019s evaluation of each of the three  applications that we reviewed took longer than the general 12-month time  frame detailed by the regulations; however, the regulations state that  processing a case may take longer when it involves a controversial or  complex issue. Processing the three applications took approximately 18,  28, and 28 months, respectively, from the dates when the Board received  the applications to the dates when the applicants were notified of the  Board\u2019s decisions.", "For all three applications, preliminary recommendations to either  authorize with restrictions or not authorize led to the submission of  additional evidence by the applicants, opposition and support by various  parties through public comments in response to the Federal Register  notices, and the applicants\u2019 rebuttals of public comments. For example,  Board staff said that for one of the applications, the OTEXA specialist  who reviewed it asked the Board staff to request additional information  from the applicant to facilitate analysis of the potential impact of the  proposal. The applicant took more than 3 months to provide the  information. After the specialist and the Board staff reviewed the  additional information, a preliminary negative recommendation was  rendered, which necessitated opening an additional public comment  period. An opposing party requested an extension of that comment  period. After the extended comment period ended, the Board staff said  that it allowed a public comment period for rebuttal comments. According  to Board staff, another application that we reviewed involved somewhat  similar sets of complex circumstances. Board staff noted that these two  applications each involved a complex set of circumstances that needed to  be carefully and thoroughly reviewed."], "subsections": []}]}, {"section_title": "Lack of Consistent Documentation Made It Difficult to Verify the Board Considered All Required Criteria for Applications We Reviewed", "paragraphs": ["While the Board\u2019s procedures and regulations do not call for staff to  document their consideration of all criteria required by section 400.27 of  the regulations, the absence of such documentation for two of the three  applications we reviewed made it difficult to verify that the Board had  considered all of these criteria when evaluating the applications. For  example, the examiner\u2019s report for one of these two applications did not  include documentation to demonstrate that the Board staff had  considered the required threshold factors. Also, the reports for the two  applications did not include documentation that the staff had considered  several of the required economic factors, including (1) retention or  creation of value-added activity, (2) extent of value-added activity, and (3)  overall effect on import levels of relevant products. The records for all  three applications included documentation of consideration of the  proposed production activity\u2019s potential significant public benefits. Board  staff and the Executive Secretary explained in interviews and in written  responses to our questions how they had considered all the required  threshold and economic factors and any significant public benefits when  evaluating the three applications we reviewed.", "The examiner\u2019s reports for the two applications did not include  documentation indicating the Board staff\u2019s rationale for selecting criteria  as relevant. According to Board staff, each examiner\u2019s report includes  information that is most relevant to the analysis of the case. Each report  also provided a narrative discussing the criteria that the Board staff  considered relevant and that supported the recommendation, and each  report explained the rationale for the Board staff\u2019s decision to recommend  authorizing with restrictions or not authorizing the production activity.  According to the Board staff, because only the most relevant criteria are  included in the examiner\u2019s report, not all of the threshold and economic  factors are explicitly documented. According to Standards for Internal  Control in the Federal Government, management should clearly  document internal control and all transactions and other significant events  in a manner that allows the documentation to be readily available for  examination. If management determines that a criterion is not relevant,  management should support that determination with documentation that  includes its rationale. Without such documentation in the examiner\u2019s  reports, Board members lack readily available written assurance that the  recommendations reflect consideration of all of the required criteria and  that its decisions comply with U.S. trade and tariff laws and policy that  has been formally adopted by the executive branch. In addition, such  documentation would provide an institutional record of the examiner\u2019s  consideration of all the required criteria.", "According to Board staff, the examiner\u2019s reports may contain varying  levels of discussion on each criterion, depending on the specific  circumstances of the application. Board staff stated that the criteria listed  in section 400.27 of the regulations form the framework and basis of the  analysis in each examiner\u2019s report, although the analysis and discussion  in the reports may not refer directly to each economic factor. With respect  to the examiner\u2019s report that contained no documentation of the  consideration of the threshold factors, the Board staff stated that their  consideration of the economic factors had indicated that the application  should be denied and had formed the basis of the report\u2019s  recommendation. The recommendation and the Board\u2019s decision would  not be affected by including in the report a discussion of the threshold  factors, according to the Board staff.", "In addition, Board staff stated that the extent to which the examiner\u2019s  reports discuss specific pieces of evidence can vary depending on the  relevance and significance of each piece of evidence to determining  whether the applicant has met the burden of proof for approval under the  regulatory factors or criteria. The Board staff also noted that the extent to  which the examiner addresses each piece of evidence is generally a  subject of discussion with the Executive Secretary during the drafting of  the report. Only by interviewing Board staff, in conjunction with our review  of the case records, were we able to determine that the Board had  considered all of the required criteria when making its recommendations  to authorize (with or without restrictions) or not authorize an application  for production authority."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Board has procedures that generally align with the regulations for  evaluating production notifications and applications for production  authority, and our review of FTZ sample cases and interviews with Board  staff and other relevant agencies found that the Board followed these  procedures. The Board regulations include criteria that the Board is  required to consider during its review of an application for production  authority. However, the examiner\u2019s reports we reviewed did not  consistently include documentation demonstrating that the examiner  considered all required criteria before recommending whether the  applications should be authorized. While not required by the Board  regulations and procedures, such documentation would provide the Board  members readily available written assurance that the recommendations  reflect consideration of all of the required criteria and that its decisions  comply with U.S. trade and tariff laws. In addition, such documentation  would provide an institutional record of the examiner\u2019s consideration of all  the required criteria."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Commerce, as Chairman of the FTZ Board, should  ensure that the Board\u2019s Executive Secretary incorporates into its  procedures a requirement that each examiner\u2019s report document Board  staff\u2019s consideration of all required criteria listed in section 400.27 of the  regulations during evaluations of applications for production authority.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to Commerce, Treasury, and the  Department of Homeland Security for review and comment. Commerce  provided written comments, which are reproduced in appendix V. In its  comments, Commerce concurred with our recommendation and stated  that it had taken action to address it. In addition, Commerce and Treasury  provided technical comments, which we incorporated as appropriate. The  Department of Homeland Security stated by email that it had no  comments about our draft report.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretaries of  Commerce, the Treasury, and Homeland Security and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points  for our Office of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report examines (1) the extent to which the Foreign-Trade Zones  Board (the Board) has established and followed procedures aligned with  its regulations for evaluating production notifications and (2) the extent to  which the Board has established and followed procedures aligned with its  regulations for evaluating production applications.", "To examine the extent to which the Board has established procedures  aligned with its regulations for evaluating production notifications and  applications, we reviewed and compared the Board\u2019s 2012 regulations to  the Board\u2019s staff internal procedures. In conducting this analysis, we also  identified procedures that the Board is required to follow in evaluating  notifications and applications. We interviewed Board staff, industry  specialists in the Department of Commerce (Commerce), and officials  from the Department of the Treasury (Treasury) and the Department of  Homeland Security\u2019s Customs and Border Protection (CBP) to identify  their roles in the evaluation of notifications and applications and to clarify  the regulations\u2019 requirements and the Board\u2019s internal procedures.", "To examine the extent to which Board staff followed the Board\u2019s  procedures when evaluating production notifications and applications, we  selected and analyzed a nongeneralizable sample of case records for 59  of the 293 production notifications submitted to the Board from April 2012  through September 2017. We selected this time period to ensure that the  sample reflected the Board\u2019s activities between April 2012\u2014when,  according to staff, the Board began implementing regulations that it had  modified in February 2012\u2014and the end of fiscal year 2017. To select our  sample of 59 notifications, we first selected 10 of the 13 notifications  submitted during the selected time period that were not approved by the  Board. We did not select the remaining 3 notifications that were not  approved, because the companies that submitted those notifications  subsequently submitted production applications and the Board\u2019s  decisions about the applications were pending when we made our  selection. The notifications that were not approved were submitted by  companies in seven industry categories\u2014silicones/polysilicon,  textiles/footwear, oil refineries/petrochemical facilities, other energy,  chemicals, medical supplies and devices and miscellaneous. For each of  these seven categories, our sample of 59 notifications includes all  notifications for which the Board had rendered decisions at the time of our  selection and excludes any for which decisions were pending. Our  sample does not include six production notifications submitted by  companies in the textiles/footwear industry category that the Board did  not approve or approved with restrictions, because those companies  subsequently submitted applications. Our final sample of 59 notifications  includes all three types of Board decisions (34 approved, 15 approved  with restrictions, and 10 not approved). However, because of its size, our  final sample is not generalizable to all notifications submitted from April  2012 through September 2017. We also selected and analyzed three  production applications, respectively submitted by three companies that  submitted 3 of the 59 notifications we analyzed. These three applications  were the only applications that the Board reviewed and rendered final  decisions on from April 2012 through September 2017.", "We analyzed case records containing documents that companies  submitted when they filed their production notifications and applications;  information collected by Board staff from public comments in response to  Federal Register notices; comments from industry specialists at  Commerce, CBP, and the Department of Justice; and reports prepared by  Board staff, documenting their analyses and recommendations for each  notification and application. To conduct a systematic assessment of the  case records, we created a data collection instrument to determine,  among other things, whether the applicant submitted all required  information for each notification and application. In addition, at least two  analysts, including an economist, independently reviewed each case  record; any resulting disagreements were resolved through discussion  among team members and, as appropriate, with Board staff. Further, we  collected and analyzed data for these cases on the types of Board  decisions (approved, approved with restrictions, and not approved); the  extent of public comments received for both notifications and applications;  the extent of industry specialists\u2019 and CBP\u2019s comments; the types and  amount of notification restrictions; and whether the duration of the Board\u2019s  evaluations was within the time frames detailed in the Board\u2019s regulations  and procedures. We also determined the extent to which the  recommendations of the Board\u2019s analysts, Commerce\u2019s industry  specialists, the Board\u2019s Executive Secretary, and Board members were in  agreement. We determined that the case records data we reviewed,  which we obtained from the Board\u2019s case tracking system, were  sufficiently reliable for our purposes of understanding the universe of  notifications and applications submitted for production authority and  reviewing a sample from that universe. To make this determination, we  took steps that included reviewing related documentation guidance for the  Board\u2019s case records tracking system; interviewing knowledgeable  agency officials; and reviewing a sample of cases with our data collection  instrument, which confirmed information included in the case tracking  system data.", "Further, we analyzed the extent to which Board staff considered all  required threshold and economic factors and any significant public  benefits for the three applications in our sample. While neither the  Board\u2019s regulations nor its procedures require Board staff to document  consideration of all required threshold and economic factors and  significant public benefits, as detailed in section 400.27 of the regulations,  during their evaluations of production applications, Standards for Internal  Control in the Federal Government calls for such documentation. To  conduct this analysis, we reviewed the examiner\u2019s reports for all three  applications and interviewed Board staff to determine whether the  examiner had considered all of the required criteria. We cannot  generalize or extrapolate our analysis for the three applications to all  notifications and applications submitted to the Board from April 2012  through September 2017. We also interviewed relevant officials from  Commerce (including industry specialists), Treasury, and CBP to obtain  clarifications regarding some of the notifications and applications in our  sample.", "We conducted this performance audit from July 2017 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Foreign-Trade Zones Board Decisions for All Production Notifications Submitted April 2012\u2013September 2017", "paragraphs": ["From April 2012 through September 2017, the Foreign-Trade Zones  Board (the Board) rendered decisions on 293 notifications requesting  foreign-trade zones (FTZ) production authority that were submitted by  companies in 25 industry categories (see table 2). The Board reported  approving 218 notifications (74 percent), approving 62 notifications with  restrictions (21 percent), and not approving 13 notifications (4 percent).  Nine of the companies whose notifications were approved with  restrictions or not approved continued to seek production authority by  submitting production applications.", "Our analysis of the Board\u2019s decisions from April 2012 to September 2017  found the following.", "The Board approved all production notifications for six industry", "Auto parts (25 notifications)", "Pharmaceutical (21 notifications)", "Other electronics/telecommunications (10 notifications)", "Metals and minerals (7 notifications)", "Semiconductors (3 notifications)", "Oil drilling equipment (2 notifications)", "According to Board staff, companies in some industry categories,  such as auto parts and pharmaceutical, often have long-established  records of operating in FTZs. Board staff also stated that many  companies in these industry categories submit notifications requesting  production authority for items similar to those for which the Board has  granted authority in the past. Officials also stated that companies are  more likely to submit notifications requesting authorization for certain  production activities if other companies have previously received  authorization for similar activities.", "Textiles/footwear was the industry category with the largest number of  notifications that were approved with restrictions or not approved. Of  the 23 notifications submitted, 14 were approved with restrictions and  4 were not approved. Board staff noted that domestic textile  producers that could be affected by authorization of production  notifications are often those that oppose approval of the notifications.", "Of the companies that submitted the 75 production notifications that  were approved with restrictions or not approved, 9 companies  continued seeking production authority by filing a more detailed  production application with the Board. As of August 2018, 2  applications had been authorized with restrictions, 2 applications had  not been authorized, and the Board\u2019s decisions were pending for the  remaining 5 applications."], "subsections": []}, {"section_title": "Appendix III: Rationales for Foreign-Trade Zones Board Decisions for Selected Production Notifications Submitted April 2012\u2013September 2017", "paragraphs": ["We selected and analyzed Foreign-Trade Zones (FTZ) Board (the Board)  case records for a nongeneralizable sample of 59 notifications to identify  the rationales for the Board\u2019s decisions and the types of restrictions, if  any, included in the decisions. Table 3 shows the Board\u2019s decisions for  the 59 notifications in our sample, by industry category."], "subsections": [{"section_title": "Notifications That Were Approved", "paragraphs": ["The Board approved production authority for 34 of the 59 notifications in  our sample. Our analysis of Board case records found that the Board\u2019s  rationale for its decision for 32 of the 34 authorizations fell into one of the  following four categories:", "The Board had previously approved similar production authority  for another company (23 notifications). For example, in evaluating  a notification requesting production authority for lithium ion batteries  and electric vehicle motors, Board staff noted that the Board had  approved similar production notifications for other companies in recent  years.", "No opposition or concerns were raised by an industry or  industry analyst during the Board\u2019s review of the notification (4  notifications). For example, in evaluating one notification, Board staff  noted that no concerns were raised during the public comment period  or by Department of Commerce industry analysts.", "No duty savings would be realized for the finished product of the  proposed activity (3 notifications). For example, in evaluating a  notification requesting authority to produce finished upholstery grade  leather and cut parts, Board staff noted that duties for the finished  goods were not lower than the duties for the components (leather  hides) required for production.", "No products of foreign origin would be involved in the proposed  activity (2 notifications). For example, in evaluating one notification  Board staff noted that the applicant was not requesting the use of any  foreign-source steel in the proposed FTZ operations."], "subsections": []}, {"section_title": "Notifications That Were Approved with Restrictions", "paragraphs": ["Our sample of 59 notifications included 15 cases in which the Board  approved production authority with restrictions. Our analysis of Board  case records found that the restrictions imposed by the Board fell into one  or more of the following six categories.", "The Board required the company to pay duties on one or more  components before importing the component into the FTZ (9  notifications). For example, the Board\u2019s decision for one notification  stated that the company must pay duties on certain foreign-origin  upholstery fabrics before bringing them into the zone.", "The Board required the company to pay duties on some or all  components brought into the FTZ when transferring the finished  product from the zone, even if the components were used in  production (8 notifications). For example, for one notification, the  Board required the company to pay duties on upholstery leather  brought into an FTZ for manufacturing furniture when the furniture left  the FTZ.", "The Board authorized a limited quantity of certain components  specified in the notification (6 notifications). For example, the  Board decision for one notification limited the square yards of a given  fabric that the company was allowed to admit into an FTZ.", "The Board required the FTZ user to submit additional data and  information (6 notifications). For example, the Board decision for  one notification required the company to submit supplemental annual  report data and information for the purpose of monitoring by Board  staff.", "The Board restricted the duration of FTZ production authority (4  notifications). For example, the Board decision for one notification  limited production authority to 5 years.", "The Board required that a product be re-exported from the zone  (not for entry into U.S. market) (1 notification). For this notification,  the Board instructed the company to ship all of the foreign upholstery  fabric out of the subzone and not ship it into the United States for U.S.  consumption.", "For the 15 notifications that were approved with restrictions, our analysis  of Board case records found that the Board\u2019s rationales for its decisions  fell into one or more of the following six categories.", "Similar authority had been approved in the past (6 notifications).  For example, in its decision for one notification, the Board noted that a  similar authority had been requested by another company and that the  authority was granted with a similar restriction.", "The proposed activity supported U.S.-based production that  otherwise would be conducted abroad (4 notifications). For  example, in decisions for two notifications, the Board noted that the  approved production authority supported domestic U.S. production  that otherwise could be (or was being) conducted abroad. The  restriction for these notifications concerned the quantity of a fabric that  could be brought into the zone duty free.", "New or complex policy issues were involved (2 notifications). For  example, in its decision for one notification, the Board approved the  requested production authority for the first time and added a time  restriction that would allow the Board to identify any domestic impact.", "No opposition was raised by domestic industry or by industry  analysts (1 notification). In its decision for this notification, the Board  noted that industry analysts at Commerce had no concerns as long as  the company paid duties on imported fabric components specified in  the notification when the finished good left the zone.", "No duty savings would be realized for the finished product of the  proposed activity (1 notification). In its decision for this notification,  the Board noted that the applicant had indicated it would pay duties  on all foreign-source materials when leaving the zone for sale in the  United States.", "The proposed activity would have no duty-reduction benefit and  would help only with logistics or record-keeping (1 notification).  In its decision for this notification, the Board noted that production  authority had previously been approved with restrictions and that the  company had requested a change to the authorization for record- keeping purposes."], "subsections": []}, {"section_title": "Notifications That Were Not Approved", "paragraphs": ["The Board\u2019s reasons for not approving 10 notifications fell into one or  more of the following two categories.", "New or complex policy issues or concerns were involved (5  notifications). For example, in its decisions for these notifications,  the Board noted that (1) it had not previously approved production  authority for a given component or a given product, (2) circumstances  within the industry and opposition to the production notification  continued to evolve, (3) the production process made tracking the  source or destination of a given component difficult when it entered or  left the FTZ, (4) the component or product involved sensitive trade  policy issues, or (5) the economic impacts and potential precedents  were unclear.", "Further review was needed because of domestic industry  concerns (8 notifications). For example, in its decisions for these  notifications, the Board cited concerns that included the possibility that  authorization would put pressure on domestic industries already  experiencing low growth and depressed prices and would cause  disagreements between the applicant and industry members  regarding the domestic availability of an FTZ production component at  competitive prices. In addition, for one notification, the Board\u2019s  decision rationale stated that, although similar authority had been  approved several years earlier, authority was not currently being  granted because conditions had changed since the earlier  authorization."], "subsections": []}]}, {"section_title": "Appendix IV: Time Frames for Foreign-Trade Zone Board\u2019s Processing of Selected Production Notifications and Applications", "paragraphs": ["The Foreign-Trade Zones Board (the Board) regulations establish time  frames for evaluating notifications and applications submitted by  companies seeking permission to conduct production activities in a  foreign-trade zone (FTZ). The regulations require that the Executive  Secretary inform the applicant of the Board\u2019s authorization decision within  120 days of receiving the notification. The regulations also state that the  general time frame to process applications for production authority is 12  months. We selected and analyzed a nongeneralizable sample of 59  notifications and 3 applications and the Board\u2019s case records to examine,  among other things, whether the Board completed its processing of these  notifications and applications within the time frames detailed in the  Board\u2019s regulations. We found that the Board generally followed the 120- day time frame for the majority of the 59 notifications in our sample but,  for all 3 applications that we reviewed, took longer than the general 12- month time frame set in the regulations for the applications. According to  the regulations, additional time may be required to process applications  that involve a complex or controversial issue."], "subsections": [{"section_title": "Notification Processing Time Frame", "paragraphs": ["The Board generally completed its processing of the 59 notifications we  reviewed within the time frames detailed in the regulations. Eight cases  were completed in less than 120 days, with time frames ranging from 21  to 119 days. Twenty-five cases were completed in exactly 120 days. In 13  cases, the 120th day fell on a weekend or a holiday and the review was  completed on the next business day. Another 13 cases were delayed and  completed in 122 to 160 days. According to Board staff, processing 5 of  these 13 notifications exceeded the 120-day time frame because of a  government shutdown. In addition, according to the Board staff,  processing 8 of the 13 notifications exceeded the 120-day time frame  because of internal procedural delays, such as an industry specialist\u2019s  needing more time to analyze a notification. Of those 8 notifications, 7  were submitted by companies in the textiles/footwear industry and the  eighth was submitted by a company in the \u201cother energy\u201d industry  category.", "The time that the Board took to complete processing (i.e., finish its  evaluations and inform applicants of its decisions) for the 59 notifications  we reviewed varied by industry category (see table 4). For example, the  Board informed all of the applicants that submitted notifications in the  chemical, medical supply and device, and silicone/polysilicon industry  categories of its decisions within 120 days or within 120 days plus the  next business day. However, for 7 of 17 notifications from companies in  the textiles/footwear industry category, the Board informed applicants of  its decisions after the 120-day period."], "subsections": []}, {"section_title": "Application Processing Time Frame", "paragraphs": ["The Board\u2019s processing of each of the three applications in our sample  took longer than the general 12-month (365 days) time frame set in the  regulations. Processing of the three applications took 558, 866, and 864  days, respectively, from the date when Board received the application to  the date when the applicant was notified of the Board\u2019s decisions. For all  three applications, the Board issued preliminary recommendations either  to approve with restrictions or not to approve the requested production  authority. These preliminary decisions led to the submission of additional  evidence, rebuttals to additional evidence, and opposition and support by  various parties, which extended the time needed for final decisions by the  Board members.", "The regulations state that evaluating an application may take longer when  it involves a controversial or complex issue. The three applications we  reviewed involved textile-related foreign components, which the case  records and our interviews with Board officials showed can be  controversial. For the three applications, completing certain steps delayed  Board staff\u2019s processing of the applications, causing it to exceed the  general time frame set in the regulations. For example, the regulations  state that the examiner shall generally develop recommendations and  submit a report within 150 days after the end of the public comment  period. For the three applications, the examiner took 116, 235, and 431  days, respectively, to complete the preliminary recommendations.  According to Board staff, processing two of the applications took longer  than the general time frame because of a complex set of circumstances  that called for careful and thorough review.", "In addition, under the regulations, once the Executive Secretary has  circulated the examiner\u2019s report, the Department of the Treasury  (Treasury) Board member is generally expected to return a vote within 30  days. For the three applications we reviewed, Treasury took 26, 90, and  212 days, respectively, to return a vote. A Treasury official also stated  that before rendering a decision about two applications requesting the  same type of authorization, Treasury waited for Board staff to complete its  review of both applications.  The Treasury official stated that he held  substantial discussions with Board staff about each of the three  applications before reaching a decision."], "subsections": []}]}, {"section_title": "Appendix V: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Christine Broderick (Assistant  Director), Barbara R. Shields (Analyst-in-Charge), Claudia Rodriguez,  Pedro Almoguera, Martin de Alteriis, Grace Lui, Reid Lowe, and  Christopher Keblitis made key contributions to this report. Other  contributors include Lilia Chaidez, Philip Farah, Peter Kramer, and Julia  Robertson."], "subsections": []}]}], "fastfact": ["To encourage companies to maintain and expand operations in the United States, the Foreign-Trade Zones program offers a range of benefits, such as the possible reduction or elimination of customs duties on certain imported goods.", "A government board evaluates applications for establishing these zones as well as requests to reduce or eliminate specific duties and fees. We found the board followed its procedures\u2014such as considering public and industry comments\u2014in the cases we reviewed. However, its reports did not document that it considered all required criteria.", "We recommended that the board more thoroughly document its applicant evaluations."]}
{"id": "GAO-18-659", "url": "https://www.gao.gov/products/GAO-18-659", "title": "Tax Administration: Opportunities Exist to Improve Monitoring and Transparency of Appeal Resolution Timeliness", "published_date": "2018-09-21T00:00:00", "released_date": "2018-10-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Taxpayer Bill of Rights entitles taxpayers with the right to appeal a decision of the Internal Revenue Service (IRS) in an independent forum. GAO was asked to review this administrative appeal process within IRS.", "Among other things, this report (1) describes the IRS appeal process and staffing; (2) assesses how IRS monitors and manages the time to receive and resolve taxpayer appeals cases; and (3) evaluates the extent to which Appeals communicates customer service standards and assesses taxpayer satisfaction with the appeal process.", "GAO reviewed IRS guidance, publications, and documentation on the appeal process. GAO analyzed IRS data for administrative appeal cases closed in fiscal years 2014 through 2017 to compare appeal case resolution time for different types of cases. GAO interviewed IRS officials and a non-generalizable sample of external stakeholders, including attorneys and accountants, knowledgeable about the appeal process. Among other things, GAO compared IRS actions to federal standards for internal control and customer service."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) has a standard process to resolve a diverse array of taxpayer requests to appeal IRS proposed actions to assess additional taxes and penalties or collect taxes owed. The process begins with a taxpayer filing an appeal with the IRS examination or collection unit proposing the compliance action and ends with a decision from the Office of Appeals (Appeals).", "Appeals must have staff with expertise in all areas of tax law to review taxpayer appeals. However, its staffing levels declined by nearly 40 percent from 2,172 in fiscal year 2010 to 1,345 in fiscal year 2017. Appeals anticipates a continued risk of losing subject matter expertise given that about one-third of its workforce was eligible for retirement at the end of last fiscal year.", "Appeals monitors the number of days to resolve taxpayer appeals of examination, collection, and other tax disputes. However, IRS does not monitor the timeliness of transfers of all incoming appeal requests. GAO analysis showed that the time to transfer appeal requests from compliance units varied depending on the type of case (see table below).", "Collections workstreams \u2014taxpayer appeals where IRS (1) filed a notice of federal tax lien or proposed a levy (collection due process) or (2) rejected an offer to settle a tax liability for less than owed (offer in compromise).", "The Internal Revenue Manual (IRM), IRS's primary source of instructions to staff, requires transfer to Appeals within 45 days for the largest collection workstream. With manager approval, collection staff may have an additional 45 days to work with the taxpayer. Nearly 90 percent of collection appeals closed in fiscal years 2014 to 2017 were transferred to Appeals within 90 days.", "Examination workstreams \u2014taxpayer appeals of additional tax and penalty assessments IRS proposed based on its auditing of tax returns over a wide range of examination issues.", "IRS does not have an IRM requirement with guidelines and procedures for timely transfer for examination appeals. Accordingly, more than 20 percent of examination appeals closed in fiscal years 2014 to 2017 took more than 120 days to be transferred to Appeals. Delays in transferring appeals can result in increased interest costs for taxpayers.", "Although Appeals maintains data on total appeal resolution time\u2014from IRS receipt to Appeals' decision\u2014such information is not readily transparent to IRS compliance units or the public. GAO analysis of IRS data found that, for fiscal years 2014 to 2017, about 15 percent of all appeal cases closed within 90 days (see figure below). About 85 percent of all cases were resolved within one year of when the taxpayer requested an appeal. Total resolution times differed by case type. However, without easily accessible information on resolution times, taxpayers are not well informed on what to expect when requesting an appeal.", "Although Appeals has customer a service standard and conducts a customer satisfaction survey, its standard and related performance results are not readily available to the public. Under the GPRA Modernization Act of 2010 (GPRAMA) and Executive Orders, the Department of the Treasury is responsible for customer service performance. Appeals conducts outreach to the tax practitioner community but does not regularly solicit input before policy changes. Without a mechanism, such as leveraging existing IRS advisory groups or alternatively developing its own advisory body, Appeals is missing an opportunity to obtain public input on policy changes affecting the taxpayer's experience in the appeal process."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes seven recommendations to help enhance controls over and transparency of the IRS appeals process (several of the recommendations are detailed on the following page).", "GAO recommends, among other things, that the Commissioner of Internal Revenue", "Establish timeframes and monitoring procedures for timely transfer of taxpayer appeals requests by examination compliance units to the Office of Appeals.", "Direct the Office of Appeals to regularly report and share with each compliance unit the data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals.", "Provide more transparency to taxpayers on historical average total appeal resolution times.", "GAO recommends, among other things, that the Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, ensure that the Commissioner of Internal Revenue develops a mechanism to solicit and consider customer feedback on a regular basis on current and proposed IRS appeal policies and procedures.", "Treasury and IRS agreed with GAO's recommendations, and IRS said it will provide detailed corrective action plans."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Taxpayer Bill of Rights gives taxpayers the right to appeal a decision  of the Internal Revenue Service (IRS) in an independent forum. IRS  expounded further on this right, stating that \u201ctaxpayers are entitled to a  fair and impartial administrative appeal of most IRS decisions, including  many penalties, and have the right to receive a written response  regarding the Office of Appeals (Appeals\u2019) decision.\u201d If taxpayers  disagree with IRS decisions to assess additional tax or take collection  action, they can generally bring their disputes before Appeals.", "Appeals\u2019 mission is to resolve taxpayer disputes, without litigation, on a  basis which is fair and impartial to both the government and the taxpayer  in a manner that will enhance voluntary compliance and public confidence  in the integrity and efficiency of the IRS. Appeals\u2019 policy is to provide a  prompt conference and decision in each case. Timely appeal decisions  are important for (1) the taxpayer and IRS to know the amount of taxes  owed or outcome of other tax matters in dispute, and (2) the Department  of the Treasury (Treasury) to receive any additional revenue involved at  the earliest practicable date.", "You asked us to review the IRS administrative appeal process, the time to  resolve taxpayer appeals, and taxpayer satisfaction with the process. This  report (1) describes the steps and staffing levels for the IRS appeal  process and assesses the extent to which Appeals conducts workforce  planning in a time of declining resources; (2) assesses how IRS monitors  and manages the time to receive and resolve taxpayer appeals cases;  and (3) evaluates the extent to which Appeals communicates customer  service standards and assesses taxpayer satisfaction with the appeal  process.", "To describe the IRS administrative appeal process, we reviewed Internal  Revenue Manual (IRM) sections that detail how IRS employees are to  process appeal cases. We also reviewed the IRS website and IRS  documents and publications that describe the appeal process and  indicate how taxpayers are to file an appeal. We interviewed senior  Appeals managers to understand how Appeals operates and how cases  are processed when Appeals receives them. To understand the initial IRS  receipt of taxpayer appeals, we interviewed IRS examination and  collection officials in the Small Business/Self-Employed (SB/SE) and  Wage and Investment (W&I) business operating divisions. These two IRS  divisions accounted for 97 percent of appeal cases closed in fiscal year  2017. We interviewed Appeals administrative processing staff who  receive and route cases in Appeals as well as customer service staff who  handle taxpayer inquiries about the status of their appeals. We also  analyzed data from the Appeals Centralized Database System (ACDS)  for 346,038 appeals cases closed in fiscal year 2014 (the oldest complete  year available) through fiscal year 2017 (the last complete fiscal year  available at the time of our analysis). We used the data to calculate the  percentage of taxpayers who had a representative with them through the  process and to determine the percentage of cases that had a conference  with appeals, including those with an in-person conference. We also  conducted observational visits to Appeals locations in Philadelphia,  Pennsylvania and Atlanta, Georgia to interview a non-generalizable group of Appeals frontline supervisors and staff who handle a diversity of  appeals cases to better understand how appeals cases are assigned to  staff, as well as the case review process. We selected these locations  because they allowed us to interview Appeals frontline staff who work a  wide variety of taxpayer appeals across all seven Appeals work  categories.", "To describe the staffing levels and assess the extent to which Appeals  conducts workforce planning in a time of declining resources, we obtained  and analyzed staffing information and reviewed the IRM section that  explains the Appeals human capital programs and the IRS Strategic  Workforce Planning Team. We interviewed Appeals and IRS human  capital staff to better understand how they conduct workforce planning  and reviewed documentation about the IRS Strategic Workforce Planning  team\u2019s activities and timeframes. We then compared Appeals workforce  planning activities to our key principles of effective workforce planning.  We also reviewed a hiring tool Appeals uses to project case inventory  based on historical case data and current staffing levels to determine  workforce needs and interviewed Appeals managers about strategies and  policies for maintaining staff skills.", "To assess how IRS monitors and manages the time to receive and  resolve taxpayer appeals cases, we reviewed IRS documents, including  IRM sections, IRS procedures, and quarterly Appeals performance  reports and monthly reports to the Commissioner of Internal Revenue.  We compared the controls identified to federal standards for internal  control. We interviewed IRS officials responsible for managing Appeals\u2019  review process as well as SB/SE and W&I officials managing initial  appeals receipt for those compliance units. We reviewed the measures  IRS uses to describe timeframes to resolve appeals, which quantify case  review time in average days. Overall averages can be a broad measure  and may be affected by outliers. Finally, we analyzed data from the ACDS  for 346,038 appeals cases closed in fiscal year 2014 through fiscal year  2017. We calculated and compared average appeal case resolution time  for different types of cases. For purposes of this review, we determined  that the ACDS data used in our analysis were reliable. Our data reliability  assessment included reviewing relevant documentation, interviewing  knowledgeable IRS officials, and reviewing the data to identify obvious  errors or outliers.", "To evaluate the extent to which Appeals has and communicates customer  service standards and assesses taxpayer satisfaction with the appeal  process, we identified federal standards for customer service under the  GPRA Modernization Act of 2010 (GPRAMA), as well as customer  service-related Executive Orders, Office of Management and Budget  (OMB) guidance, and internal control standards and compared IRS  Appeals actions to those standards. We reviewed IRM documentation of  the Appeals customer service standard and related measures from the  Appeals Quality Measurement System (AQMS), as well as AQMS annual  reports for fiscal years 2014 through 2017.", "To understand how Appeals obtains customer feedback, we reviewed the  methodology for the annual Appeals customer satisfaction survey and  analyzed survey reports for fiscal years 2016 through 2017 as well as  focus group reports from fiscal years 2012 through 2014 (the last year  IRS held these focus groups). We drew on results from the surveys and  focus groups to describe factors that affect Appeals customer satisfaction.  We interviewed Appeals managers and staff who handle cases to  understand their views on factors that affect taxpayer satisfaction and  understand how Appeals communicates service standards and measures  customer satisfaction. We also conducted semi-structured interviews with  13 external stakeholders from law and accounting organizations who  have represented a mix of higher- and lower-income individuals as well  as corporations and other businesses to understand their experiences  with the appeal process. To select interviewees with prior experience with  IRS and its appeal process, we used a snowball sampling technique  based on our review of IRS partner and stakeholder organizations, public  comments about the appeals process, and referrals from initial interviewees. Information from this sample of stakeholders is not  generalizable.", "We conducted this performance audit from February 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Enforcing tax laws helps IRS collect revenue from noncompliant  taxpayers and, perhaps more importantly, promotes voluntary compliance  by giving taxpayers confidence that others are paying their fair share.  However, every year, taxpayers fail to pay hundreds of billions of dollars  in taxes. This tax gap\u2014the difference between tax amounts that  taxpayers should pay and what they actually pay voluntarily and on  time\u2014has been a persistent problem for decades. In our 2017   High-Risk Report we continued to include Enforcement of Tax Laws as a  high-risk area. Key components of this high-risk area include both  addressing the tax gap and improving tax compliance.", "IRS has four business operating divisions responsible for enforcing tax  law and providing taxpayer service to ensure taxpayer compliance, as  shown in table 1. For this report, we refer to these divisions as  compliance units and their staff as compliance staff."], "subsections": [{"section_title": "Role of the Office of Appeals", "paragraphs": ["Formed in 1927, Appeals is the only administrative function of IRS with  authority to consider settlements of tax controversies and has the primary  responsibility to resolve these disputes without litigation to the maximum  extent possible. IRS states that the appeal process is both less formal  and costly than court proceedings and is not subject to judicial rules of  evidence or procedure.", "The IRS Restructuring and Reform Act of 1998 (Restructuring Act)  specified that IRS must provide an independent appeals function.  Appeals carries out this function. Appeals is a separate unit within IRS,  and its chief reports directly to the Commissioner of Internal Revenue.  The Restructuring Act also prohibits communications between Appeals  staff and other IRS functions without the taxpayer or representative being  given an opportunity to participate. In 2016, IRS clarified that Appeals is  separate from the IRS compliance functions, including examination and  collection units, that initially review a taxpayer\u2019s case and that Appeals  may return cases to compliance units when taxpayers provide new  information for consideration."], "subsections": []}, {"section_title": "Appeal Eligibility", "paragraphs": ["Taxpayers may appeal many IRS decisions, including tax collection  actions and proposed tax assessments, with some exceptions.  Taxpayers cannot appeal solely due to moral, religious, political,  constitutional, conscientious, or other similar grounds. Taxpayers  requesting appeals can range from individuals to large multinational  corporations. IRS provides publications that explain taxpayer\u2019s rights for  both examination and collection appeals. IRS also developed online  self-help tools to help taxpayers understand what can be appealed.", "For collection actions, the Restructuring Act created a statutory right for  collection due process appeals and provides an impartial review for  taxpayers facing possible levies for collecting delinquent taxes or who  have had a notice of federal tax lien filed against them. IRS also offers a  collection appeals program for a broader range of collection issues, such  as when IRS rejects or terminates an installment agreement to pay taxes  owed. In contrast, for examination decisions, the tax code does not  provide statutory rights to administrative appeals. In certain  circumstances, IRS will designate an examination issue for litigation and  not offer access to the administrative appeal process. In other  circumstances, IRS may decide not to refer cases docketed in the U.S.  Tax Court to Appeals for settlement if it determines doing so will be in the  best interest of sound tax administration. For example, IRS may decide  not to refer a docketed case to Appeals in cases (1) involving a significant  issue common to other cases in litigation for which it is important that the  IRS maintain a consistent position or (2) related to a case over which the  Department of Justice has jurisdiction."], "subsections": []}, {"section_title": "Appeal Workstreams", "paragraphs": ["Appeals\u2019 workload is organized into seven workstreams based on  similarities in case characteristics. Two workstreams involve collection  appeals where IRS is pursuing taxpayers who failed to fully pay taxes and  penalties owed. Four workstreams include a wide range of examination  appeals where IRS is proposing additional tax and penalty assessments  based on auditing tax returns. The last workstream covers other cases  that do not fit into the collection and examination workstreams. Figure 1  below provides an overview of the appeal workstreams, including which  IRS business operating divisions transfer the cases to Appeals."], "subsections": []}, {"section_title": "Appeals Funding and Workload", "paragraphs": ["While Appeals is separate from IRS\u2019s examination and collection  compliance functions, its budget is part of the IRS enforcement budget  appropriation. From fiscal year 2010 to fiscal year 2018, Appeals  represented about 4 percent of the IRS enforcement budget  appropriation. Appeals\u2019 funding has decreased by 29 percent since 2010  to $175 million in 2018 (see fig. 2). Adjusting for inflation, Appeals funding  has decreased 38 percent since 2010.", "Over this same time period, Appeals received fewer cases as IRS  enforcement activities declined. For example, the individual examination  (or audit) coverage rate declined by about 50 percent from fiscal years  2010 to 2017. Also, the number of notices of federal tax liens filed  declined by nearly 60 percent over the period. Faced with declining  budgetary resources, IRS compliance units can prioritize and select fewer  taxpayers to examine or pursue collection action. Appeals officials said  their office generally must work every case received. Appeals aims to  close approximately the same number of cases each year as it  anticipates receiving during the year. Appeals closure rate\u2014or the  number of cases it resolved divided by the number it received in a   year\u2014improved from 98 percent for fiscal year 2010 to 103 percent for  fiscal year 2017. Annual closure rates for 2017 varied by workstream,  ranging from 72 percent for the innocent spouse workstream to nearly   109 percent for the examination workstream. Figure 3 shows the total  number of cases received and pending at year end since fiscal year 2010."], "subsections": []}]}, {"section_title": "Appeals Has a Standard Process to Resolve Diverse Taxpayer Cases but Has Not Assessed Critical Skills Gaps in Its Declining Workforce", "paragraphs": [], "subsections": [{"section_title": "IRS Uses a Standard Process to Resolve Taxpayer Appeals", "paragraphs": ["The diverse array of appeal requests across IRS compliance units that  flow into Appeals workstreams follows the same standard process. As  illustrated in figure 4, the appeal process involves multiple steps,  beginning with a taxpayer filing an appeal of a proposed IRS compliance  action and ending with a decision from Appeals. If the taxpayer and IRS  cannot reach agreement through the appeal process, the taxpayer may  have the case reviewed in federal court if eligible. While certain types of  cases must go through the appeal process before review by a court,  others may bypass it and taxpayers may directly petition IRS\u2019s proposed  actions in federal court.", "Compliance action. For proposed examination actions to assess  additional taxes and penalties or collection actions, such as filing a notice  of federal tax lien or proposing a levy to collect delinquent taxes, IRS  notifies the taxpayer in writing about the proposed compliance action and  explains their appeal rights. The notification states that the taxpayer has  30 days to file an appeal and includes a list of IRS publications and other  information on how to file an appeal.", "Taxpayer action. Within 30 days from the compliance notification,  taxpayers who disagree with the IRS proposed action must send a formal  written request to appeal. The appeal request must include:  the taxpayer\u2019s name and address, and a daytime telephone number; a statement that the taxpayer wants to appeal the IRS findings to the a copy of the letter showing the proposed changes and findings that  the taxpayer does not agree with;  the tax periods or years involved; a list of the changes that the taxpayer does not agree with, and why  the taxpayer does not agree;  the facts supporting the taxpayer\u2019s position on any issue that the  taxpayer does not agree with;   the law or authority, if any, on which the taxpayer is relying; and a signature on the written protest, stating that it is true, under the  penalties of perjury.", "Taxpayers may choose to represent themselves or have professional  representation before Appeals. A representative must be a federally  authorized practitioner, who can be an attorney, certified public  accountant, or enrolled agent authorized to practice before the IRS.  Low-income taxpayers or those who speak English as a second language  may be eligible for free or low cost representation from a Low Income  Taxpayer Clinic. Based on our analysis of ACDS data for appeal cases  closed from fiscal year 2014 through 2017, 57 percent of taxpayers had a  representative and 43 percent were taxpayers representing themselves.  The share of appeal cases with taxpayers representing themselves varied  significantly across the workstreams, ranging from 18 percent for large  case examination appeals to 95 percent for innocent spouse appeals.", "Taxpayers are instructed to send their appeal and supporting material to  the examination or collection compliance unit that proposed the action.  IRS states sending the appeal request directly to the Office of Appeals  will result in delays and may result in the appeal not being considered a  timely request.", "Compliance review. Compliance staff work directly with the taxpayer to  try to resolve the issue once they determine a taxpayer is requesting an  appeal. This may involve multiple interactions by telephone or  correspondence. Compliance staff will review any new information  submitted by the taxpayer as they attempt to resolve open collection or  examination matters. Figure 5 illustrates the steps compliance staff are to  follow when they receive an appeal.", "If compliance staff cannot reach agreement with the taxpayer, the  compliance unit forwards the appeal request and documentation from the  taxpayer along with the proposed compliance action documentation to  Appeals. Appeals provides a case routing tool on the IRS intranet with  instructions and addresses for compliance staff transferring appeal  documentation to an Appeals location. In general, taxpayer appeals  related to examination and collection campus cases are transferred to an  Appeals campus location. Appeals for field examination and collection  cases are transferred to an Appeals office near the taxpayer\u2019s location.  Compliance staff may not forward an appeal request to Appeals if the  taxpayer did not file the request in time or refuses to sign the appeal  under penalty of perjury, among other reasons.", "Appeals receipt and review. Figure 6 provides an overview of how  Appeals receives and assigns cases. Upon receipt of an appeal, Appeals  processing staff log each appeal case into the ACDS used to control and  track cases in Appeals inventory. Most appeal cases arrive from  compliance as paper files, and Appeals is working to receive certain  collection cases electronically. For examination cases, Appeals  processing staff also check that sufficient time remains for Appeals to  complete its review. Generally, examination cases must have at least   365 days remaining on the assessment statute expiration date when the  case is received in Appeals.", "An Appeals manager is to assess a case\u2019s complexity and difficulty to  determine how to assign the case. The manager is to consider the  factual and legal complexity of the case issues and the level of  conference negotiation skills needed to handle the case. The manager  also is to consider whether the case has industry-wide implications or the  decision would potentially affect other taxpayers and overall voluntary  compliance. Generally, Appeals employees with higher skill levels and  expertise are expected to be assigned more complex cases.", "The manager is then to assign the case to an Appeals staff person based  on the employee\u2019s grade level, ability, and case load. The Appeals  employee leading the case may also draw on support from Appeals  technical specialists, such as engineers and economists. For the large  case examination workstream, an Appeals team case leader may  oversee multiple Appeals employees working a large appeal case with  highly complex issues and disputed amounts of $10 million or more.", "Figure 7 provides an overview of the Appeals case review process once a  case is assigned to an Appeals employee. First, the Appeals employee  sends a letter to the taxpayer with information about the appeal process  and schedules a meeting. The letter details what additional material is  needed, if any, and explains that a determination will be made on the  information provided if there is no further contact from the taxpayer. The  letter states that Appeals is independent from IRS compliance offices and  refers to Publication 4227\u2014Overview of the Appeals Process. Finally, the  letter mentions that the taxpayer may be asked to participate in an  Appeals customer satisfaction survey after they have completed the  appeal process.", "Appeals offers conferences to provide taxpayers with an opportunity to  present their position (see fig. 7). Based on our analysis of ACDS data for  appeal cases closed, about 87 percent of appeal cases that were closed  in fiscal year 2014 through 2017 had a conference. Most conferences  are held by telephone which can be a quick and efficient means for  taxpayers to resolve their issues. Appeals campus locations conduct  telephone conferences because these locations currently are not  configured to accommodate in-person conferences. Appeals may be able  to resolve some taxpayer appeals with mail correspondence only. For  perspective, about 10 percent of appeal cases that were closed and also  had a conference from fiscal year 2014 through 2017 did so only by  correspondence, and the penalty workstream accounted for nearly   two-thirds of those appeal cases.", "Appeals also holds in-person conferences, usually at an Appeals office.  Alternatively, under its conference policy as of August 2018, Appeals staff  can meet taxpayers in a mutually convenient location when the taxpayer,  representative, or business is beyond a certain distance from an Appeals  office. In-person conferences may be used, among other things, for  reviews involving substantial books and records, judging the credibility of  witnesses, or accommodating with a taxpayer with a special need, such  as disability or hearing impairment. Based on our analysis of ACDS data  for appeal cases closed, about 6 percent of appeal cases that were  closed from fiscal year 2014 through 2017 had an in-person conference,  although this varied significantly by workstream. About half of the large  case examination appeals closed over the period had in-person  conferences, whereas about 3 percent of appeal cases closed in the  collection due process, innocent spouse, and penalty workstreams had  in-person conferences.", "As of August 2018, Appeals had revised its policy on in-person  conferences twice since October 2016. Prior to that, campus appeal  cases were transferred to a field office when taxpayers requested a face- to-face conference. For fiscal year 2017, Appeals limited in-person  conferences to appeal cases meeting specific criteria, such as involving  those with substantial books and records to review or where the taxpayer  has special needs that can only be accommodated with an in-person  conference. Appeals managers had final approval on granting taxpayer  requests for in-person conferences. In October 2017, Appeals further  revised its policy stating it would attempt to schedule in-person  conferences requested by taxpayers for field appeal cases at a time and  location reasonably convenient for both the taxpayer and Appeals.  Appeals stated it was intending to strike the right balance between  making in-person conferences available to taxpayers and ensuring the  process is efficient and workable for Appeals.", "Appeals also offers virtual technology interaction to potentially allow more  taxpayers, especially those in remote locations, to have an option other  than a phone conference. Using IRS virtual service delivery capacity,  Appeals staff at campus locations can conduct virtual conferences with  taxpayers who schedule to use video terminals at some taxpayer  assistance centers. In August 2017, Appeals began piloting web-based  virtual conferences.", "If taxpayers provide Appeals with new information or evidence, or raise a  new issue that requires additional investigation or analysis, Appeals will  return the case to the originating compliance unit for further review. After  a compliance unit transfers a case to Appeals, communication between  compliance staff and Appeals staff is generally restricted without the  taxpayer or representative being given an opportunity to participate.", "In line with its mission to resolve cases prior to litigation, Appeals is  authorized to review the facts of the case considering the hazards that  would exist if the case were litigated. Appeals is the only IRS unit  authorized to consider hazards of litigation when deciding whether to  allow taxes and penalties. This means that Appeals may recommend a  fair and impartial resolution somewhere between fully sustaining and fully  conceding the compliance unit\u2019s proposal that reflects the probable result  in the event of litigation.", "Appeals decision. Appeals makes a decision on a taxpayer\u2019s case after  weighing evidence from the compliance unit and the taxpayer. Appeals  determines whether IRS compliance decisions correctly reflect the facts,  as well as applicable law, regulations, and IRS procedures. To resolve an  examination appeal case, Appeals may (1) agree with the IRS  examination compliance unit and fully sustain its recommended  assessment, (2) disagree and reduce the recommended assessment to  partially sustain the assessment, or (3) fully concede to the taxpayer\u2019s  position and not sustain the assessment. To resolve a collection appeal  case, Appeals may (1) agree with and sustain the proposed enforcement  action, (2) disagree and modify the proposed action (e.g., propose an  installment agreement rather than a levy) or defer collection, or (3) fully  concede to the taxpayer\u2019s position and not sustain the collection action.", "This is the final decision by Appeals. Once Appeals makes its decision, it  informs the taxpayer in writing and also IRS. Taxpayers dissatisfied with  Appeals\u2019 decision may file a petition in tax court if they are eligible."], "subsections": []}, {"section_title": "Appeals Has Not Conducted a Skills Gap Analysis", "paragraphs": ["To handle the diverse array of taxpayer appeals across all workstreams,  IRS relies on an Appeals workforce that must have sufficient numbers of  staff with expertise in all areas of tax law. However, Appeals experienced  nearly a 9 percent annual attrition rate from fiscal year 2015 to fiscal year  2017 and projects a similar attrition rate for fiscal years 2018 and 2019.  As shown in figure 8, Appeals staffing levels have declined from 2,172 in  fiscal year 2010 to 1,345 in fiscal year 2017, nearly a 40 percent  decrease. As previously noted, Appeals workload also decreased over  this period of time as IRS examination and collection enforcement activity  declined.", "Appeals anticipates a continued risk of losing subject matter expertise  given that a large share of its workforce is eligible for retirement.  According to an Appeals report, at the end of fiscal year 2017, about   one-third of the Appeals workforce was eligible for retirement. Moreover,  Appeals officials reported that close to half of the staff who are critical to  Appeals\u2019 mission\u2014including those who handle the most complex   cases\u2014were eligible for retirement. Based on our analysis of ACDS data  for appeal cases closed, these types of cases accounted for about   one-third of appeal cases closed in fiscal years 2014 through 2017.", "Gaps in available staff with critical skills and training can result in delays  resolving appeal cases. For example, in fiscal year 2017 Appeals  received an increased number of innocent spouse appeals, and officials  told us they initially lacked sufficient numbers of trained staff ready to  review those cases. As of April 2018, the time from receipt by Appeals to  case closing for the innocent spouse workstream had increased by   39 percent over the same time period in 2017\u2014from 205 days to   285 days. In response, Appeals was training additional staff and is  working to resolve the increased volume of cases.", "Appeals has taken action to mitigate the risk of having a sufficient number  of staff needed to handle its workload. Appeals has a tool that draws on  historical ACDS case data to project the number of Appeals staff needed  to review the numbers and types of case receipts expected from IRS  compliance units. From fiscal year 2014 through fiscal year 2017,  Appeals requested and received approval to hire 292 employees. In  November 2017, IRS changed its policy to allow business units funded  from IRS\u2019s enforcement budget, including Appeals, to manage their own  staff levels in certain instances provided they do not exceed their fiscal  year staff limits. Under this policy, Appeals will be able to hire staff as its  workforce declines due to attrition. While the steps Appeals has taken can  be useful stopgap measures, they are not substitutes for nor do they  replace the longer-term benefits of strategic workforce planning and  conducting critical skills gap analysis.", "We have identified that key principles of effective workforce planning  include that an agency must define the critical skills that it will need to  meet its strategic goals and achieve its mission in the future. An agency  must then develop strategies tailored to address staffing and skills gaps in  its workforce, including how to acquire, develop, and retain staff to meet  its goals. We have previously reported that mission-critical skills gaps  within the federal workforce pose a high risk to the nation and that  individual agencies must take steps to address skills gaps. We have  also reported on the need to close government-wide mission critical skills  gaps and to develop strategies to help agencies meet their missions in an  era of highly constrained resources.", "Agencies that do not conduct a critical skills gap analysis risk significant  negative effects. We have previously reported that in a time of declining  resources, it is important for top management to take actions that ensure  the agency maintains capacity\u2014including its workforce\u2014in order to  achieve its mission. Once skill gaps are identified, strategies should be  tailored to address the gaps.", "Appeals has identified knowledge loss and maintaining expertise during a  time of declining staff levels as one of its top risks in its Business  Performance Reviews. Although it has not conducted a skills gap  analysis, Appeals has identified that maintaining expertise in all areas of  tax law is essential because it must have staff trained to work a diverse  array of appeal cases across all workstreams. Many Appeals staff who  review appeal cases, including those who conduct in-person conferences,  are in the appeals officer job series critical to Appeals\u2019 mission. As of July  2018, about 60 percent of the Appeals workforce was in this job series.", "As of September 2018, Appeals is participating in a larger IRS effort to  address workforce planning. IRS states that its workforce planning is to  involve an integrated and systematic process for identifying current and  future human capital needs, the competencies that align with future  organizational goals, and the strategies to be implemented to reduce the  gaps. Created in 2017, the IRS Workforce Planning Council is  comprised of representatives from all business units, including Appeals.  The council is to share workforce planning activities and best practices  across IRS and assist in developing the IRS strategic workforce plan. The  council is working to develop an agency-wide workforce plan, which will  include identifying gaps between current and projected workforce needs  and developing strategies to close the gaps.", "According to IRS human capital officials responsible for workforce  planning, a service-wide strategic workforce planning effort will include  identifying skills and competency gaps in mission critical occupations.  Initially planned for the middle of fiscal year 2018, the initiative was  delayed as of September 2018, according to IRS human capital officials.  IRS units redirected resources to implementation of Public Law 115-97\u2014 commonly referred to by the President and many administrative  documents as the Tax Cuts and Jobs Act\u2014and requested an extension.", "IRS human capital officials also told us the workforce planning team lost  resources due to attrition and anticipated the initiative would be complete  in the third quarter of fiscal year 2019. Appeals officials told us that they  expected to begin their activities once the IRS planning tools are in place.", "While the broader Treasury and IRS initiatives will benefit Appeals with  longer-term strategic workforce planning, Appeals faces ongoing  challenges in achieving its goal and may be unable to mitigate the risk of  maintaining staff expertise. Gaps in the Appeals workforce could delay  the timely review of Appeals cases. The large share of its staff who are  critical to the mission who are eligible for retirement underscores the  importance of conducting critical skills gap analysis for Appeals. Given  Appeals\u2019 unique role in ensuring taxpayers\u2019 administrative option to  dispute most IRS decisions, it is important for Appeals to have the tax  expertise necessary to review appeals cases across multiple  workstreams. These factors underscore the importance of Appeals  conducting a skills gap analysis in coordination with Treasury and IRS  human capital efforts to ensure Appeals immediate skill needs are  reflected in broader agency planning."], "subsections": []}]}, {"section_title": "IRS Does Not Monitor Timeliness of Transfers of All Incoming Appeal Requests and Appeals Does Not Communicate Total Resolution Times to Taxpayers", "paragraphs": [], "subsections": [{"section_title": "Appeals Has a Data- Driven Process and Measures to Track and Manage Case Workstreams", "paragraphs": ["Within the standard process that all appeal cases follow, Appeals has  developed a series of process measures that use ACDS data to monitor  the amount of time for a case to move through an Appeals workstream.  These measures track the number of days from Appeals receipt through  the appeal review process to when a case is closed in ACDS. Appeals  also measures the amount of time for compliance units to transfer  appeals cases. For the purpose of this report, total appeal resolution time  is the length of time from when a taxpayer submitted the appeal request  to IRS to when the case is closed in ACDS.", "Appeals managers use ACDS to monitor progress staff have made  reviewing each case assigned to them, including holding a conference  with the taxpayer and reaching a decision to resolve the appeal. ACDS  inventory reports allow managers to monitor total employee time per case  and determine if a case has not had any activity recorded for 60 days.  Appeals officials explained that the process measures are indicators that  assist in making management decisions and identifying data driven  process efficiencies to control workflow within each workstream. For  example, an Appeals manager may use the ACDS data to address case  review backlogs and offer assistance to help expedite case review.  Appeals reports its review time measure by workstream in its monthly  performance report to the Commissioner of Internal Revenue."], "subsections": []}, {"section_title": "IRS Does Not Always Transfer Collection Appeals on a Timely Basis and Does Not Monitor Incoming Examination Appeals or Time to Transfer to Appeals", "paragraphs": ["The IRS website states that if a taxpayer has not heard from Appeals and  it has been more than 120 days since the request was submitted, the  taxpayer should contact the IRS office to which they sent their appeal  request. According to IRS examination and collection officials we  interviewed, compliance unit staff attempt to resolve all taxpayer requests  and work with taxpayers to obtain additional information if needed and  answer questions about pending compliance actions. According to  Appeals officials, there are different levels of case complexity across the  workstreams.", "For appeal cases closed from fiscal years 2014 through 2017, table 2  shows the average number of days from when IRS received a taxpayer  appeal to when the compliance unit completed its review and transferred  the case file to Appeals. Across the appeals workstreams, the compliance  review time varied from 30 days for innocent spouse appeals to 108 days  for large case examination appeals. Any delay during compliance review  adds to the total time to resolve an appeal. As shown in table 2,  compliance review accounted for about a quarter of the total resolution  time for collection appeals. Among the examination workstreams, the  compliance review share of total resolution time ranged from 12 percent  for innocent spouse appeals to about 45 percent for penalty appeals.", "According to the IRM, IRS requires SB/SE collection units to review  collection due process appeals within a 45 day period of receipt of the  taxpayer requests. The 45 calendar days after receipt of an appeal  request includes time to ensure completeness of the request, obtain  additional information if necessary, and transfer the request to Appeals.  Collection unit staff reviewing appeal requests may experience delays  with taxpayers submitting additional material to support their requests.  With management approval, collection units may have an additional   45 days to continue working with the taxpayer to resolve the collection  issue in dispute. The IRM time requirement does not specifically apply to  offer in compromise collection appeals.", "According to our analysis of ACDS data for appeals closed in fiscal years  2014 to 2017, the majority of collection due process appeals were  transferred within the IRM time requirements. In fiscal year 2017,  approximately 57 percent of collections due process appeals were  transferred in less than 45 days and approximately 93 percent of these  cases were transferred within 90 days. However, IRS did not always  transfer collection due process appeals in a timely manner. For collection  due process appeal cases closed in fiscal year 2017, approximately   4 percent (1,559) of these collection appeals took more than 120 days to  be transferred to Appeals (see fig. 9).", "As shown in figure 9, the majority of offer in compromise collection  appeals were also transferred within 90 days, even though the IRM time  requirement applies specifically for collection due process appeals.  Approximately 11 percent (995) of these collection appeals took more  than 120 days to be transferred to Appeals in fiscal year 2017.", "Delays in transferring collection due process appeals, in turn, affect  prompt resolution for the taxpayer and IRS. Each tax assessment has a  collection statute expiration date of 10 years after the assessment. When  a taxpayer appeals a collection action within 30 days of receiving the  notice, IRS suspends further collection activity until Appeals decides the  case. When the IRS suspends the collection statute for a period longer  than its policy allows, this means that the taxpayer can face a longer  period where IRS can collect the balance owed.", "Standards for Internal Control in the Federal Government states that  management should establish and operate monitoring activities to monitor  internal controls. Management should evaluate the results and remediate  any identified deficiencies.", "SB/SE collection tracks the number of collection due process appeals that  are not transferred to Appeals within 45 days of receipt from the taxpayer.  SB/SE collection officials told us that they do not have reports or tools to  systematically track transfer times for other types of collection appeals.  Although SB/SE has the capacity to identify how long collection due  process appeals have been waiting, collection officials we interviewed  acknowledged that they do not always monitor whether they are meeting  the transfer time requirement. For non-docketed cases closed in fiscal  year 2017, the deficiency in transferring nearly 1,600 collection due  process appeals more than 120 days after receipt points to the lack of  monitoring. Evaluating the existing tracking reports for collection due  process appeals and remediating deficiencies in collection staff following  procedures would be a key step to achieve timely transfer of these  collection appeals."], "subsections": [{"section_title": "Examination Appeals", "paragraphs": ["Unlike the requirements for collection due process cases, the IRM does  not establish timeframes for compliance review and transfer of taxpayer  appeals of examination disputes. According to Appeals officials,  examination cases can have many issues, and the level of review to try to  resolve examination issues can be significant prior to the taxpayer appeal  request being transferred to Appeals. Review procedures differ across the  business operating divisions.", "In its examination quality standards, SB/SE field examination has national  standard timeframes, which include 20 days from the receipt of a  taxpayer appeal request to close the examination case and then 10 days  for SB/SE technical services to transfer the file to Appeals. IRS officials  acknowledged that SB/SE field does not always meet its 30-day  timeframe standard for appeal transfers, in part, because examiners must  review any new information submitted with a taxpayer\u2019s appeal request.", "Our analysis of ACDS data showed that about two-thirds of all  examination appeals closed in fiscal years 2014 through 2017 had been  transferred from IRS examination compliance units within 90 days.  However, nearly a quarter of examination appeals took more than   120 days to be transferred to Appeals (see fig. 10).", "As shown in figure 11, transfer times for examination appeals varied  across IRS examination compliance units. For appeal cases closed in  fiscal year 2017, more than two-thirds of examination appeals originating  in SB/SE and LB&I were transferred by those units within 90 days. For  examination appeals originating in W&I, less than half were transferred  within 90 days, and 37 percent took more than 120 days to transfer.  TE/GE transferred fewer appeals than the other units, but nearly half of  TE/GE appeals took more than 120 days to be transferred to Appeals.", "Delays in transferring examination appeal requests can result in  increased costs for taxpayers because interest continues to accumulate  on the tax liability during the appeal process. Further, taxpayers unsure of  the status of their appeals, particularly those over 120 days, may  generate additional calls and correspondence with IRS\u2014further tying up  other IRS staff to respond to inquiries on appeals experiencing delayed  transfer.", "IRS examination officials in SB/SE and W&I, which accounted for   97 percent of all examination appeals closed in fiscal year 2017, said that  their compliance units do not specifically track incoming appeal requests  and the time spent on initial appeal review within compliance. In effect,  appeal requests resolved during compliance review would be reflected as  compliance cases closed in the examination information systems. As a  result, IRS does not maintain readily available data on the total number of  examination appeal requests received and how many are resolved during  initial review by compliance.", "IRS campus examination officials we interviewed said that taxpayer  correspondence delays contribute to increased time to identify and  transfer correspondence examination appeals for SB/SE and W&I. A  taxpayer request for an appeal arrives like any other taxpayer  correspondence related to ongoing correspondence examinations.  However, according to W&I campus examination officials, taxpayer  requests may sit for months before they are identified as an appeal. Once  compliance unit staff determine an examination dispute cannot be  resolved in their unit, the appeal request will be transferred to Appeals.  SB/SE and W&I examination officials we spoke with said the steps to  transfer the files to Appeals take about 5 to 10 days.", "IRS examination officials we interviewed explained that they cannot  readily track information on the number of days between the taxpayer\u2019s  request for an appeal to when the case was transferred to Appeals. They  explained that it could require looking case by case in the examination  systems. SB/SE and W&I officials we interviewed were not aware of any  feedback from Appeals about the timeliness of the appeals requests  transferred from their units.", "Although Appeals has this information, it does not include compliance  transfer time information in its own monthly performance reports to the  Commissioner of Internal Revenue. Also, Appeals officials said that they  historically have not provided ACDS compliance transfer time data to IRS  compliance units. Appeals has quarterly coordination meetings with the  various IRS compliance units to discuss how compliance plans may affect  projected appeal case volumes as well as technical training opportunities.  Appeals officials said that information about transfer times has been  shared at prior meetings but is not a standing agenda item. As a result,  Appeals and compliance units do not consistently review performance  data on the amount of time for compliance units to transfer taxpayer  cases to Appeals.", "Critical information about the time it takes to transfer cases from  compliance units is collected by Appeals as part its process measures but  has not been shared within IRS, including with other units involved in the  appeal process. The ongoing coordination meetings between Appeals  and IRS compliance units could present a valuable opportunity to share  data about the length of time it takes for cases to be transferred to  Appeals. Sharing this information could be a low-cost first step to help  IRS examination units understand their current performance and how  compliance review factors into total appeal resolution time.", "Standards for Internal Control in the Federal Government also states that  management should define objectives in specific terms so they are  understood at all levels of the entity. This involves clearly defining what is  to be achieved, who is to achieve it, how it will be achieved, and the time  frames for achievement. Internal control standards require that controls  be documented, and an agency\u2019s documentation of them should be  properly managed and maintained.", "IRS requires primary sources of guidance with an IRS-wide or  organizational impact\u2014such as policy documents, procedures, and  guidelines\u2014to be included in the IRM. This requirement is intended to  ensure that IRS employees have the approved policy and guidance they  need to carry out their responsibilities in administering the tax laws. The  absence of defined timeframes for the initial compliance review and  documented controls over incoming examination appeals make it difficult  to hold IRS units accountable for ensuring timely transfer to Appeals."], "subsections": []}]}, {"section_title": "Appeals Case Review Times Vary Across Workstreams", "paragraphs": ["The IRM specifies that Appeals should complete a conference with a  taxpayer in a timely manner and make a prompt decision to resolve the  dispute. This enables the taxpayer to know with the least amount of  delay the final IRS decision about the amount of tax liability or other issue  in dispute. It also results in Treasury receiving any additional revenue  involved at the earliest practicable date.", "Within Appeals, the time from Appeals receipt to a decision closing the  case varies across the Appeals workstreams, as shown in figure 12. For  fiscal years 2014 to 2017, collection due process\u2014the workstream with the highest volume of closed cases\u2014averaged 193 days to resolve a  case within Appeals. Average appeals review time for large case  examination appeals, the smallest volume, averaged 529 days."], "subsections": []}, {"section_title": "Transparency for Taxpayer Total Resolution Time Is Limited", "paragraphs": ["Although IRS states on its website that it takes anywhere from 90 days to  1 year for Appeals to resolve a case, this generic timeframe does not  reflect the total resolution time counting from when a taxpayer requests  an appeal to when a final decision is made. Further, this timeframe does  not provide perspective on the range of resolution times across different  types of appeals. According to our analysis of ACDS data of appeal cases  closed from fiscal year 2014 through 2017, about 15 percent of all appeal  cases closed within 90 days. Approximately 85 percent of all cases were  resolved within 1 year of when the taxpayer requested an appeal.  However, over that same period, approximately 15 percent of all appeal  cases took more than one year in total to resolve, and of these,  approximately 2 percent of all closed cases took more than 2 years to  resolve.", "Total resolution times varied considerably across the Appeals  workstreams, as shown in figure 13. The share of cases closed within   90 days ranged from approximately 3 percent for the collection due  process workstream to 71 percent for the other workstream. The share of  appeals cases closed within a year ranged from approximately 30 percent  for the large case examination workstream to approximately 90 percent  for the other workstream.", "Information about actual total appeal resolution times is not shared with  taxpayers. Office of Appeals welcome letters include Appeals staff  contact information and a conference date, if applicable, but do not  provide total average appeal resolution time. According to the external  stakeholders we interviewed, no formal communication of total appeal  resolution time is shared with the taxpayer or their representative.  Responses to a focus group of taxpayer representatives who went  through the appeal process conducted by Appeals in 2014 shared a  similar perspective. Focus group participants indicated that the  acknowledgement letters did not contain enough or accurate information  to set expectations. Additionally, these focus group participants noted that  Appeals staff did not inform them how long the appeal process was  expected to take.", "Critical information about total appeal resolution time is not shared with  taxpayers. Without easily accessible information, taxpayers are not well  informed on what to expect when choosing to request an appeal.  Taxpayers may not understand how few appeals are likely to be resolved  within 90 days. Faced with the general timeframe that Appeals will  resolve cases in about a year, other taxpayers may choose to forgo their  opportunity to appeal rather than risk interest accumulating during the  appeal process.", "Standards for Internal Control in the Federal Government states that  management should externally communicate necessary quality  information to achieve the entity\u2019s objectives. Government entities should  report this information to government leaders and regulators, as well as  the general public.", "Feeling uninformed about appeal case wait times has been a consistent  theme with taxpayers and their representatives both in IRS\u2019s customer  satisfaction surveys and our interviews with external stakeholders. Total  resolution time information, such as historical averages, may be  especially valuable to taxpayers when considering that interest continues  to accrue on tax amounts in dispute while appeals are being reviewed. In  January 2017, we recommended that IRS develop and maintain an online  dashboard to display customer service standards and performance  information such that it is easily accessible and improves the  transparency of its taxpayer service. Similarly, more detailed information  on total average resolution times specific to different workstreams could  provide a more transparent view of the amount of time a taxpayer can  expect to receive a decision on their case from Appeals."], "subsections": []}]}, {"section_title": "Appeals Does Not Make Customer Service Standard Clear to Taxpayers, and It Does Not Have a Mechanism to Consider External Customer Input on Policy Changes", "paragraphs": [], "subsections": [{"section_title": "Appeals Measures Its Customer Service Standard Internally, but Does Not Make Performance Results Available to Taxpayers", "paragraphs": ["GPRAMA requires that agencies, in this case the Treasury, establish a  balanced set of performance indicators to be used in measuring progress  toward performance goals, including goals for customer service.  Executive Order 13571 stated that agencies set clear customer service  standards and expectations, including, where appropriate, performance  goals for customer service required by GPRAMA. Customer service  standards should inform customers what they have a right to expect when  they request services. The President\u2019s Management Agenda highlights  the importance of customer service through its cross-agency priority goal  of Improving Customer Experience with Federal Services.", "In response to GPRAMA, Executive Orders, and other policies, Treasury  and IRS have taken steps to define customer service targets and align  them to Treasury\u2019s and IRS\u2019s strategic and performance plans. As part  of the Appeals Quality Measurement System (AQMS) review process  outlined in the IRM, Appeals defines its standard for customer service as  whether Appeals has: (1) timely communications with the taxpayers in an  appropriate, professional manner; (2) addressed the taxpayers\u2019 needs;  and (3) respected the taxpayers\u2019 rights. AQMS lays out the internal  attributes and internal measures which track progress towards Appeals  customer service standard (see table 3).", "The performance results for the customer standard are shared as part of  the annual AQMS report with Appeals executives and employees. For  fiscal years 2014 through 2017, Appeals internal measures reflect that its  customer service performance exceeded 86 percent annually.", "Appeals also makes a written commitment to taxpayers about what they  can expect during the appeal process. IRS Publication 4227\u2014An  Overview of the Appeals Process\u2014explains that taxpayers should expect  the Office of Appeals to: (1) be fair and impartial; (2) be courteous and  professional; (3) listen to their concerns; (4) explain their appeal rights  and the appeal process; (5) be responsive; and (6) allow the taxpayer  reasonable time to respond to any requests for information. Appeals  officials explained that this publication, last updated in 2013, is included in  the acknowledgement letter taxpayers receive from the Office of  Appeals.", "However, most Appeals customers who participated in a focus group  conducted by the Office of Appeals in 2014 said that they did not  thoroughly review the Appeals acknowledgement letter and its  enclosures, which includes Publication 4227. Therefore, relying on  sharing this publication enclosed in the first letter the taxpayer receives  may not be an effective mechanism to make this commitment known to  taxpayers.", "Further, the official customer service standard and the related attributes  and measures are not transparent to the public, and the performance  results are not publicly reported. Taxpayer representatives with whom we  spoke were not aware of the Appeals customer service standards  outlined in the IRM and explained that publications included with letters  from Appeals, such as Publication 4227, are often not read by taxpayers.  Taxpayer representatives we interviewed also said that customer service  standards are not discussed in conferences with taxpayers.", "Standards for Internal Control in the Federal Government outlines that  management should externally communicate necessary quality  information to achieve an entity\u2019s objectives. Key elements of effective  customer service standards say that making customer service standards  publicly available is a key element to improve those standards and the  related services.", "While Appeals articulates its customer service standard in the IRM and  uses AQMS to internally measure customer service delivery, the standard  and related results are not available on the Appeals website and not  shared during interactions with taxpayers. According to Appeals officials,  Appeals, like the rest of IRS, does not publish its customer service  standard or explain how performance against the standard is measured.  However, as a separate entity within IRS, Appeals has an opportunity to  make customer service standards and related outcomes available to the  public. Without standards clearly and explicitly communicated, taxpayers  may not know what to expect, when to expect, and from whom to expect  interactions surrounding the appeal process.", "Likewise, Appeals does not make its customer service performance  results public, and Appeals officials said this is consistent with IRS  practice. However, in 2017, we recommended that IRS take similar  actions to make customer service standards and performance information  easily accessible and improve the transparency of its taxpayer service.", "Measuring performance allows organizations to track their progress and  gives managers crucial information on which to base their organizational  and management decisions. The absence of publicly reported standards  and related performance information does not allow customers to  understand what to expect for the services they seek."], "subsections": []}, {"section_title": "Appeals Annual Customer Satisfaction Survey Identifies Factors That Affect Taxpayer Satisfaction", "paragraphs": [], "subsections": [{"section_title": "Annual Customer Satisfaction Survey Process", "paragraphs": ["Appeals conducts an annual survey to assess customer satisfaction with  the appeal process over time and to identify areas where Appeals can do  more to improve customer service. According to Appeals officials,  Appeals has conducted a customer satisfaction survey for over a decade.  The annual survey yields an overall customer satisfaction score as well  as qualitative written comments on the appeal process. Appeals contracts  with a vendor to manage the survey sample selection based on Appeals  ACDS closed case data; pre-survey notification; management of the  online survey; telephone follow-up with non-respondents; and analysis of  the survey data.", "The survey vendor sends potential respondents pre-notification invitations  to complete the survey and follow-up attempts to connect with potential  respondents. In fiscal years 2015 and 2016, the response rate was   36 percent and 33 percent, respectively. In fiscal year 2017, Appeals  surveyed 1,447 out of approximately 107,000 possible customers with a  response rate of 37 percent. According to OMB Standards and Guidelines  for Statistical Surveys, agencies are to design surveys to achieve the  highest practical rates of response and conduct a statistical test for  potential bias if the expected response rate is below 80 percent. The  vendor provides a comparison of frequencies to understand any  overrepresentation in survey responses of certain taxpayer types or for  different workstreams within Appeals. For example, according to the  vendor\u2019s comparison of frequencies for the fiscal year 2017 survey (the  most recent available at the time of our work), fewer survey responses  were received from taxpayers who went through the collection due  process workstream\u2014the workstream with the highest volume of   cases\u2014than were in the population of potential respondents."], "subsections": []}, {"section_title": "Information about Customer Satisfaction", "paragraphs": ["The customer satisfaction survey annual report details the analysis of the  survey results and summarizes significant changes in satisfaction over  time, as well as customer satisfaction by categories such as taxpayer  type and the length of the appeal process. Appeals reports overall  customer satisfaction in its performance reports to the Commissioner of  Internal Revenue. For appeal cases closed in fiscal years 2014 through  2017, about two thirds of taxpayers who responded to the survey were  satisfied overall with the appeals process.", "According to the fiscal year 2017 annual survey report, customers who  have higher rates of satisfaction: (1) have professional representation;   (2) agree with the outcome of their case; and (3) have shorter case cycle  time. The 2017 report also states that customers were most satisfied  with the degree of respect shown and the professionalism of the Appeals  staff. Customers were least satisfied with the consideration of information  presented and the length of the appeal process.", "The annual survey also identifies the drivers of satisfaction with the  appeal process which, Appeals officials said, helps Appeals determine  which specific attributes of the appeal process have the most impact on  overall customer satisfaction. The 2017 survey identified the drivers of  overall satisfaction including: (1) how well Appeals listened to information  taxpayers presented related to their case and (2) how well Appeals  considered information taxpayers presented.", "Taxpayer representatives we interviewed identified similar factors that  affect how satisfied their clients are with the appeal process. Their  responses generally corroborated the drivers of satisfaction identified in  the annual customer satisfaction survey analysis. For example, taxpayer  representatives explained that their clients are more satisfied when they  feel their perspectives have been heard and the Appeals staff had an  open mind about the case. The representatives we interviewed also  stated that the amount of time, as well as transparency about the amount  of time, it takes Appeals to respond to a taxpayer\u2019s case is significant to  satisfaction with the appeal process."], "subsections": []}, {"section_title": "Appeals\u2019 Use of Customer Satisfaction Survey Information", "paragraphs": ["According to Appeals officials, the customer satisfaction survey is one  tool to assess customer satisfaction, and the survey information is part of  the overall information that Appeals uses in management decisions. The  national survey report is shared with the executive level staff each year  and survey results may be shared with staff. Appeals reports annual  overall customer satisfaction survey scores, along with other data on  business results, employee engagement, and staffing, in its performance  reports to the Commissioner of Internal Revenue. According to Appeals  officials, information from the customer satisfaction survey has been used  to improve Appeals procedures and interactions with taxpayers, including  changes to correspondence templates to improve comprehension and  readability, and how Appeals schedules taxpayer conferences."], "subsections": []}]}, {"section_title": "Appeals Conducts Outreach but Does Not Have a Mechanism to Solicit Customer Input to Inform Prospective Policy Changes", "paragraphs": ["Each year, Appeals conducts outreach presentations at tax practitioner  conferences to share information about its policy and procedures,  including recent changes or new initiatives that affect taxpayers and the  tax practitioner community. Appeals officials told us that Appeals, in  recent years, has also used these outreach presentations as an  opportunity to solicit input from the attendees about the appeal process  and implementation of operational or policy changes. According to  Appeals officials, they obtain feedback at outreach sessions and place an  emphasis on listening to commentary from the tax practitioner community.  Taxpayer representatives we interviewed generally corroborated this and  said that they saw improvement in their ability to communicate with  Appeals and offer feedback on recent policies.", "Outreach presentations at tax practitioner conferences present an  opportunity to obtain feedback and input on prospective policy changes  as well. According to taxpayer representatives that we interviewed, while  Appeals executives have more openly solicited feedback on policy  changes, the outreach requests for feedback usually took place after the  policy decision was made and implemented. For example, in October  2016 Appeals changed its policy to limit the availability of in-person  appeal conferences. Appeals officials explained that this policy change  was based on its data showing that for many appeal cases transferred to  field staff to accommodate taxpayer requests for in-person conferences,  the taxpayers ultimately chose to have phone conferences. Appeals  officials acknowledged that they had not solicited public input beforehand  and had received negative feedback that this was an unpopular change.  As a result of feedback from the tax practitioner community at outreach  events as well as written comments, in October 2017, Appeals revised its  policy and will now attempt scheduling in-person conferences requested  by taxpayers for field appeal cases.", "In its efforts to obtain feedback from the tax practitioner community at  conferences, Appeals has attempted to be inclusive of tax practitioners  representing a range of taxpayer types and income levels. According to  Appeals officials, Appeals obtained feedback from the Low Income  Taxpayer Clinics and conducted outreach sessions at their 2017 annual  conference. However, soliciting feedback at professional association  meetings for accountants and attorneys means that the opportunity to  provide comments to Appeals is limited to those in attendance at the  conferences. One taxpayer representative we interviewed said that he  was not sure how he could submit suggestions or input to Appeals other  than by attending a conference where Appeals executives were present  and solicited feedback from attendees. Further, several taxpayer  representatives we interviewed explained that taxpayers representing  themselves without professional representation face greater challenges in  the appeal process. Outreach relying on professional conferences may  not be inclusive of all taxpayer experiences and may miss opportunities to  understand the perspectives of individual and small business taxpayers  navigating without professional assistance.", "IRS has formal advisory committees that provide forums to discuss issues  with tax administration or taxpayer issues. Among these, the Internal  Revenue Service Advisory Council (IRSAC) provides an opportunity for  members to provide public perspective on IRS policies and procedures  and recommends policies with respect to emerging tax administration  issues. Conveying the public\u2019s perception of IRS activities to the  Commissioner, the IRSAC charter states that it is to be comprised of  individuals who bring substantial, disparate experience and diverse  backgrounds to the Council\u2019s activities. IRSAC reports that its  membership is balanced to represent the taxpaying public, the tax  professional community, small and large businesses, state tax  administration, and the payroll community.", "Although its role is to focus on broad policy matters, IRSAC recently took  action to comment specifically on recent changes to Appeals policy and  operations. In its 2017 public report, IRSAC commented on attendance of  IRS compliance and counsel personnel at Appeals conferences with  taxpayers. IRSAC stated that ensuring the independence of Appeals from  the operating divisions is indispensable to Appeals\u2019 achieving its mission.", "Executive Order 13571, building on GPRAMA requirements, stated that  agencies, in this case Treasury, should establish \u201cmechanisms to solicit  customer feedback on Government services\u201d and that agencies use \u201csuch  feedback regularly to make service improvements.\u201d In its strategic plan,  IRS outlines a strategic goal to collaborate with external partners  proactively to improve tax administration.", "Appeals has identified engaging with stakeholders to improve the  taxpayer experience in Appeals as a fiscal year 2018 organizational goal.  Appeals officials we interviewed said that Appeals\u2019 approach is to test and  learn, and that they anticipate issues and complaints will continue to  happen as future policy changes are implemented.", "While outreach is one way to get practitioner reaction as new policies are  rolled out, other mechanisms could serve as a way to receive regular  customer feedback and to hear the public\u2019s perspective and observations  about both current operations as well as proposed IRS policies,  programs, and procedures. For example, IRS already uses advisory  groups as another way to engage with external partners via open, two- way, external reporting lines for assistance with receiving and analyzing  customer feedback as well as offering a mechanism to solicit public input  before policies are finalized and implemented.", "Without an effective mechanism to regularly consider and review  customer feedback and policy changes before implementation, Appeals is  missing an opportunity to obtain public input on policy changes that can  substantially affect the taxpayer\u2019s experience in the appeal process.  Possible mechanisms could include leveraging existing IRS advisory  resources, exploring development of an Appeals advisory body, or  offering a public comment capacity, such as an email address. Engaging  with external stakeholders could offer opportunities for Appeals to gain  insight on how to bring transparency to its customer service standards  and measures along with providing ongoing assistance with considering  results from the annual customer satisfaction survey. This would enhance  Appeals\u2019 ongoing efforts to improve customer satisfaction with planned  service improvements or policy changes and make modifications where  appropriate."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Each year, Appeals resolves a diverse array of taxpayer appeals of IRS  enforcement actions and decisions. Faced with a declining workforce,  Appeals has identified that maintaining skills and expertise necessary to  review its case load is a top risk to achieving its mission. High retirement  eligibility rates underscore the importance for Appeals to be positioned to  identify any gaps in the skills of its workforce. Conducting a skills gap  analysis specific to Appeals mission needs is a key step towards  developing a strategy to help ensure Appeals will retain the necessary tax  expertise to review appeals cases across multiple workstreams.", "Time spent by IRS compliance units on initial review of taxpayer appeals  of IRS collection and examination actions can represent a significant  portion of the total appeal resolution time. For appeal cases closed in  fiscal year 2017, approximately 4 percent of collection appeals cases and  nearly one quarter of examination appeal requests took more than   120 days to be transferred from IRS to Appeals. Delays in transferring  requests to Appeals affect prompt resolution for the taxpayer and IRS.  Additional monitoring of collection transfer time requirements together  with establishing transfer time guidelines and procedures for examination  appeal review could improve appeal review timeliness and overall  taxpayer experience.", "Appeals maintains data on the time taken to transfer appeals and  monitors the progress and time to resolve appeals within its diverse  workstreams. Sharing these performance data within IRS could shed light  on actual transfer times and aid compliance units in improving and  establishing related controls to ensure more timely transfer. Increasing  the transparency of total case resolution time with more detailed  information by Appeals workstream would improve taxpayers\u2019  understanding about what to expect when choosing to request an appeal.", "Improving the taxpayer experience with the appeals process also  depends on clarity on customer service standards and related  performance results. Under GPRAMA and Executive Orders, Treasury is  responsible for customer service performance. Publicly stating what  service taxpayers should expect and from whom sets the stage for a  customer-focused appeals process where taxpayers can feel their story is  heard. This also helps fulfill Treasury\u2019s customer service responsibility.  Appeals has demonstrated its willingness to analyze customer  satisfaction feedback. IRS and Appeals share goals to work with  stakeholders, and Appeals has acted to address practitioner reactions to  operational changes underway. Developing a mechanism to leverage  public input on future policy and procedure proposals would better  position Appeals to bolster customer service and effectively implement  changes to improve the taxpayer experience."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to IRS and two  recommendations to the Department of the Treasury.", "The Commissioner of Internal Revenue should direct the Chief of  Appeals, in coordination with the IRS Human Capital Office, to conduct a  skills gap analysis specific to Appeals mission needs and develop a  strategy for mitigating any identified gaps. (Recommendation 1)", "The Commissioner of Internal Revenue should evaluate the existing  monitoring for collection due process appeal requests and address  deficiencies in collection staff meeting the requirement for timely transfer  to the Office of Appeals. (Recommendation 2)", "The Commissioner of Internal Revenue should establish timeframes and  monitoring procedures for timely transfer of taxpayer appeals requests by  examination compliance units to the Office of Appeals. (Recommendation  3)", "The Commissioner of Internal Revenue should direct the Chief of Appeals  to regularly report and share with each compliance unit the data on the  time elapsed between when a taxpayer requests an appeal to when it is  received in the Office of Appeals. (Recommendation 4)", "The Commissioner of Internal Revenue should provide more  transparency to taxpayers on historical average total appeal resolution  times. This could include publishing average total resolution times by  workstream on an Office of Appeals web page as well as including total  expected times in the Appeals welcome letter. (Recommendation 5)", "The Secretary of the Treasury, consistent with its responsibilities under  GPRAMA and Executive Orders for customer service, should ensure that  the Commissioner of Internal Revenue takes action to make Appeals  customer service standards and performance results more transparent to  the public. This could include publishing customer service standards and  related performance measure results on the Office of Appeals web page  on IRS.gov. (Recommendation 6)", "The Secretary of the Treasury, consistent with its responsibilities under  GPRAMA and Executive Orders for customer service, should ensure that  the Commissioner of Internal Revenue takes action to develop a  mechanism to solicit and consider public input and customer feedback on  a regular basis on current and proposed IRS appeal policies and  procedures. This could include leveraging existing IRS advisory bodies or  establishing an Office of Appeals advisory body representing the  taxpaying public, the tax practitioner community, and businesses to solicit  customer perspectives. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Commissioner of Internal  Revenue and the Secretary of the Treasury for review and comment. In  its written comments, reprinted in appendix I, IRS agreed with our five  recommendations directed to it and plans to provide detailed corrective  action plans in its 60-day letter response to Congress. IRS also provided  technical comments, which we incorporated where appropriate.", "In an email from the audit coordinator in the Office of the Deputy Chief  Financial Officer, Treasury agreed with our two recommendations  directed to it. During the agency comment period, we modified language  in recommendations 6 and 7 to clarify Treasury\u2019s role and responsibilities  for customer service. Treasury agreed to monitor IRS\u2019s actions to make  Appeals customer service standards and performance more transparent  as part of its coordination of the President\u2019s Management Agenda   cross-agency priority goal for customer experience. Treasury plans to  monitor IRS\u2019s actions to develop a mechanism to solicit public input on  appeal policies and procedures as part of the audit management process.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  Treasury, the Commissioner of Internal Revenue, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or LucasJudyJ@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff making key contributions to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, MaryLynn Sergent (Assistant  Director), Keith O\u2019Brien, (Analyst-in-Charge), James Cook, and Steven  Flint, made key contributions to this report. Shea Bader, Jehan Chase,  Lisa Pearson, Robert Robinson, Cynthia Saunders, and Tatiana Winger  also provided support."], "subsections": []}]}], "fastfact": ["Taxpayers don\u2019t have to go to court to appeal IRS decisions such as tax bills. They have the option of bringing their cases to IRS\u2019s Office of Appeals. Its mission is to resolve disputes in a timely manner that is fair to the government and taxpayer. Among other things, we found:", "information on the length of the appeals process was not readily available, making it hard for taxpayers to know what to expect", "the office solicits customer feedback but does not get input before changing the process", "We recommended more transparency about the time it takes to resolve appeals and a way for IRS to solicit input on the process, among other things."]}
{"id": "GAO-18-354", "url": "https://www.gao.gov/products/GAO-18-354", "title": "Homeland Security Grant Program: Additional Actions Could Further Enhance FEMA's Risk-Based Grant Assessment Model", "published_date": "2018-09-06T00:00:00", "released_date": "2018-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FEMA, a component of DHS, provides preparedness grants to state, local, tribal, and territorial governments to help prepare for, prevent, protect against, respond to, recover from and mitigate terrorist attacks or other disasters. SHSP grants fund the nation's 56 states and territories, while UASI grants fund eligible urban areas. Grant allocations have been based, in part, on FEMA's risk-based grant assessment model, with states and urban areas deemed to be at higher risk receiving more grant dollars than those deemed at lower risk. Since 2008, GAO and others have assessed the model and made recommendations to strengthen it.", "This report 1) describes SHSP and UASI grant awards during fiscal years 2008 through 2018, and factors affecting grant distributions; and 2) examines the steps that FEMA has taken to strengthen its risk assessment model for allocating preparedness grants, and any additional opportunities to improve the model. GAO analyzed the information in FEMA's model, and data on SHSP and UASI grant awards for fiscal years 2008 through 2018. GAO also interviewed FEMA and DHS officials and collected documents."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that various factors affected Federal Emergency Management Agency (FEMA) State Homeland Security Program (SHSP) and Urban Area Security Initiative (UASI) grant awards from fiscal year 2008 through 2018. SHSP grant awards to states were based on two factors\u2014(1) minimum amounts set in law each year, and (2) FEMA's risk model. For example, in fiscal year 2012, each state was to receive a minimum of approximately $2.74 million, with each state receiving additional funds based on its relative risk score. Conversely, UASI grant awards are made based on its FEMA's risk-based grant assessment model, which ranks each urban area relative to others in that year, and Department of Homeland Security (DHS) leadership decisions on how funding should be allocated. From fiscal year 2008 through 2018, the number of USAI grantees varied from year to year (see figure below).", "Since 2008, FEMA has taken steps to strengthen its risk-based grant assessment model, but has not incorporated additional scientific practices into its model. For example, in 2011 FEMA included more information in its model on potential targets and their vulnerability in each state and urban area, addressing a prior GAO recommendation. More recently in 2018, FEMA added additional factors to better assess vulnerability in each state and urban area, such as the number of special events where large crowds gather and soft targets susceptible to lone wolf attacks, among other things. However, GAO found that FEMA does not fully utilize scientific practices recognized by the National Research Council and the Office of Management and Budget as best practices. Specifically, FEMA did not fully document its model's underlying assumptions, such as the weights in its model or the justification for changes to these weights. FEMA also did not perform the level of analysis needed to determine how changes to its model could affect the resulting risk scores. Finally, FEMA has not coordinated an independent external peer review of its model. Applying such scientific practices could assist FEMA in further strengthening its model."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to FEMA to further strengthen its risk-based grant assessment model by (1) fully documenting the model's assumptions and justifications, (2) performing additional in-depth analyses, and (3) coordinating an external peer review. FEMA concurred with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security (DHS) through the Federal  Emergency Management Agency (FEMA) awarded over $50 billion in  preparedness grants from fiscal years 2002 through 2018. These grants  are designed to enhance the capabilities of state and local governments  to, prevent, prepare for, protect against, respond to, recover from, and  mitigate terrorist attacks and other disasters. The largest preparedness  grant programs are the State Homeland Security Program (SHSP), which  provides grants to the nation\u2019s 56 states and territories, and the Urban  Area Security Initiative (UASI), which awards grants to high-risk urban  areas. In order to make grant award decisions for SHSP and UASI  grants, FEMA has developed and maintains a risk-based grant  assessment model with the assistance of other DHS components such as  the Office of Intelligence and Analysis. FEMA uses this model to  represent potential threats, vulnerabilities, and consequences of a  terrorist attack, among other factors. Specifically, this risk model is used  to determine the relative risk order of (a) 56 states and territories, and (b)  the nation\u2019s 100 most populous urban areas for purposes of designating  high-risk urban areas that are eligible for funding, which serves to inform  DHS leadership in their final determinations of grant award amounts,  according to FEMA officials. According to FEMA officials, DHS  leadership considers multiple pieces of information when making grant  award decisions including historical funding, risk scores and ranking,  funding separation between jurisdictions, and any special circumstances.", "In June 2008, we reported that DHS\u2019s risk-based grant assessment  model for allocating grants was reasonable, but the way that this risk  model measured vulnerability across states and urban areas was limited.  We recommended that DHS and FEMA formulate a methodology to  measure variations in vulnerability across states and urban areas. DHS  concurred with our recommendation and we will discuss how they  implemented this recommendation later in this report.", "You asked us to report on the grant awards to states and urban areas  and any changes to FEMA\u2019s risk-based grant assessment model since  2008. Specifically, this report (1) describes SHSP and UASI total amounts  funded from fiscal years 2008 through 2018, and the factors that affect  the calculation of grant awards to states and territories, and urban areas;  and (2) examines the steps FEMA has taken to strengthen its risk model  for allocating SHSP and UASI grants, and what additional opportunities, if  any, exist to improve the model.", "To address our first objective, we reviewed applicable laws governing the  establishment and distribution of these grants programs, as well as  FEMA\u2019s annual grant announcements and guidance. We reviewed and  identified laws and regulations including the Homeland Security Act of  2002, the Implementing Recommendations of the 9/11 Commission Act of  2007, Department of Homeland Security appropriations acts and  accompanying congressional reports. We analyzed SHSP and UASI  annual grant awards to states, territories and urban areas, based on  publically-reported information contained in DHS and FEMA\u2019s grant  funding notifications for fiscal years 2008 through 2018. We compared  data in these public documents to annual program funding and grant  award data provided by FEMA, and determined the data were reliable for  our purposes.", "To address our second objective, we collected and reviewed policy,  guidance and annual grant funding notification documents from FEMA\u2019s  Grant Programs Directorate. We reviewed the risk-based grant  assessment models for fiscal years 2008 through 2018, and we  interviewed officials from FEMA\u2019s Grant Programs Directorate and DHS\u2019s  Office of Intelligence & Analysis. We reviewed the elements used in  FEMA\u2019s risk model, prior assessments of FEMA\u2019s model, and FEMA\u2019s  grant process to assess the status and continuing applicability of prior  recommendations. These included our prior reports and studies by  organizations such as the National Research Council (NRC) and DHS\u2019s  Homeland Security Advisory Council. We also interviewed FEMA and  DHS officials to determine the extent to which prior recommendations  were implemented. Finally, we reviewed guidance and key practices from  OMB and our past work to compare them against FEMA\u2019s processes and  updates to its risk model over fiscal years 2008 through 2018 to examine  what steps, if any FEMA undertook to improve its model.", "We conducted this performance audit from September 2017 to  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our finding 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DHS\u2019s Homeland Security Grant Program", "paragraphs": ["The federal government has provided financial assistance to public and  private stakeholders for preparedness activities through various grant  programs administered by DHS through its component agency, FEMA.  Through these grant programs, DHS has sought to enhance the capacity  of states, localities, and other entities, such as ports or transit agencies,  to prevent, prepare for, protect against, respond to, and recover from, and  mitigate a natural or manmade disaster, including terrorist incidents. Two  of the largest preparedness grant programs are the SHSP and UASI  grant programs.", "SHSP grants provide federal assistance to support states\u2019  implementation of homeland security strategies to address the  identified planning, organization, equipment, training, and exercise  needs at the state and local levels to prevent, prepare for, protect  against, and respond to acts of terrorism. SHSP grants are annually  awarded to all the nation\u2019s 56 states and territories. SHSP grant  awards are calculated in two parts. All states and territories are to  receive a minimum grant amount required by law, based on a  percentage of the total amount of SHSP and UASI appropriations in a  given fiscal year. The remaining award amounts are based on  FEMA\u2019s risk-based grant assessment model.", "UASI grants provide federal assistance to address the unique needs  of high-threat, high-density urban areas, and assists the areas in  building an enhanced and sustainable capacity to prevent, prepare  for, protect against, respond to acts of terrorism. Since 2015,  Congress has instructed through the Explanatory Statements  accompanying the annual DHS Appropriations Acts that the UASI  grants should be awarded to urban areas that reflect up to 85 percent  of nationwide risk. For the UASI program, FEMA uses the risk-based  grant assessment model each year to identify those urban areas that  will be eligible to receive funding.", "Annual funding for the SHSP and UASI programs have generally declined  over the period of fiscal years 2008 through 2018, but have remained  consistent since fiscal year 2016. Figure 1 shows the changes to SHSP  and UASI programs\u2019 annual funding during this period. For example,  annual funding for SHSP decreased from about $861 million in fiscal year  2008, to $402 million in fiscal year 2018. During this same period, annual  funding for UASI also declined, from about $782 million in fiscal year  2008 to $580 million in fiscal year 2018. However, annual funding for the  UASI program has been higher than the SHSP program since fiscal year  2010."], "subsections": []}, {"section_title": "FEMA\u2019s Risk-based Grant Assessment Model for Distributing Funding Awards", "paragraphs": ["Risk=Threat x Vulnerability x Consequence  Threat\u2013A natural or man-made occurrence,  individual, entity, or action that has or  indicates the potential to harm life,  information, operations, and/ or property  Vulnerability\u2013Physical feature operational  attribute that renders an entity, asset, system,  network, or geographic area open to  exploitation or susceptible to a given hazard.  Consequence\u2013Effect of an event, incident, or  occurrence, commonly measured in four  ways: human, economic, mission, and  psychological, but may also include other  factors such as impact on the environment.", "FEMA\u2019s risk-based grant assessment model uses three variables: Threat,  Vulnerability, and Consequence. The purpose of this model is to apply a  risk management process to provide a structured means of making  informed trade-offs and choices about how to use finite resources  effectively, and monitoring the effect of those choices. Specifically,  inherent \u201cuncertainty\u201d is associated with any effort to develop a risk model  such as assessing the risk of terrorist attacks, and thus, requires the  application of policy judgments and analytic assumptions. The effect that  uncertainty has on the results of the risk model can be especially  important if the model produces materially different results in response to  even small changes in assumptions, often referred to as the \u201csensitivity\u201d  or \u201crobustness\u201d of a model\u2019s assumptions and results.", "As we reported in June 2008, FEMA\u2019s risk-based grant methodology and  its continuous improvement efforts in estimating risk were part of a  reasonable process to assist in determining SHSP and UASI grant  allocations. For example, the risk-based grant assessment model used  from fiscal year 2001 through 2003 largely relied on measures of  population to determine the relative risk of potential grantees, and  evolved to measuring risk as the sum of threat, critical infrastructure and  population density calculations in fiscal years 2004 and 2005. Further, the  fiscal year 2006 process introduced a risk assessment model that  included measures of Threat, Vulnerability and Consequences.", "In June 2008, we reported that the way the risk-based grant assessment  model measured vulnerability across states and urban areas was  limited. We found that the model considered all states and urban areas  equally vulnerable to a successful attack, and as a result, the final risk  scores were determined exclusively by the Threat and Consequence  scores. Specifically, the risk model did not measure vulnerability for each  state and urban area; rather it assigned a vulnerability score of 1.0 to  every state and urban area. We recommended that DHS and FEMA  formulate a methodology to measure variations in vulnerability across  states and urban areas. DHS components concurred with our  recommendation to measure vulnerability in a way that captures  variations across states and urban areas and apply this measure in future  iterations of FEMA\u2019s model. In August 2011, FEMA reported that the  agency, in coordination with other DHS components, established a  Vulnerability Index for the fiscal year 2011 risk-based grant assessment  model to better capture the risk to states and urban areas, thereby  addressing our recommendation."], "subsections": []}, {"section_title": "Other Reviews of FEMA\u2019s Risk Methodology", "paragraphs": ["DHS and the National Research Council (NRC) have also performed  reviews of FEMA\u2019s risk assessment methodologies, providing their own  conclusions and recommendations, since our 2008 review. For example,  in 2010, the NRC reported that FEMA should strengthen its scientific  practices, such as documentation, analyses to determine how changes to  a model could affect its results, and peer review by technical experts  external to DHS, in order to further develop an understanding of the  uncertainties in its terrorism-related risk analyses.", "Additionally, in 2016, the Homeland Security Advisory Council reported  that processes by which FEMA uses to assess risk should be made more  inclusive, comprehensive and effective. The Homeland Security  Advisory Council recommended the following actions to strengthen this  process:", "FEMA should continue to send risk profiles to states and urban areas  to promote timely and meaningful feedback, and enable FEMA to  evaluate recommended adjustments.", "Before each year\u2019s budget submission, FEMA should discuss with  congressional appropriators the current grant allocation mechanism.", "We discuss FEMA\u2019s progress in implementing these recommendations  later in this report."], "subsections": []}]}, {"section_title": "Various Factors Affected SHSP and UASI Grant Allocations to States and Urban Areas From Fiscal Years 2008 Through 2018", "paragraphs": [], "subsections": [{"section_title": "SHSP Allocations Reflect Both a State\u2019s Relative Risk Score and the Minimum Allocation by Law", "paragraphs": ["While all states and territories receive minimum SHSP program grant  allocations by law, the risk-based grant assessment model also informs  the grant allocation of the remaining funds to each state. However, for a  majority of states each year, their SHSP grant awards are primarily based  on a legal minimum amount. For example, in fiscal year 2012, 34 states,  like New Mexico, were awarded $2,801,000, which included $2,745,000  based on the minimum amount by law, and $56,000 was based on its risk  level. By contrast, New York was one of the high-risk states based on the  risk model. For that same fiscal year (2012) New York received a total of  $55,610,000, which included $2,745,000 based on the minimum amount  by law, plus $52,865,000 based on its risk level.", "Over the period from fiscal years 2008 through 2018, the number of low- risk states whose SHSP grant awards were primarily based on the legal  minimum amount had varied from year to year, from 19 states in fiscal  year 2008, to 37 states in fiscal year 2018, as shown in table 1.", "In addition, from fiscal year 2008 through fiscal year 2018, there was a  decrease in the percent of total SHSP funds awarded to states and  territories based on FEMA\u2019s risk model. The percent of total SHSP  funding awarded to states and territories based on FEMA\u2019s model ranged  from a high of 63 percent in fiscal year 2009 (about $536 million of the  $851 million of total SHSP funds), to 51 percent (about $149 million of  $294 million of total SHSP funds) for fiscal year 2012. For fiscal year  2018, the total SHSP funds awarded to states and territories based on the  risk-based grant assessment model was 55 percent\u2014about $220 million  of $402 million.", "For specific details on SHSP grant allocations for fiscal years 2008  through 2018 by states and territories, see appendix I, table 4."], "subsections": []}, {"section_title": "UASI Grantee Eligibility and Allocations Reflect Results from FEMA\u2019s Risk- Based Grant Assessment Model", "paragraphs": ["The UASI program uses FEMA\u2019s risk-based grant assessment model to  identify which of the 100 of the nation\u2019s largest urban areas are eligible for  grant awards in a particular fiscal year. Then, FEMA\u2019s risk model also  helps inform DHS leadership\u2019s decisions on the final funding amounts for  each grantee, according to FEMA officials. Specifically, FEMA annually  assesses the risk of the 100 most populous metropolitan statistical  areas\u2014a geographical region with a relatively high population density at  its core and close economic ties throughout the area\u2014as defined by the  Office of Management and Budget, in determining the eligible urban  areas. From these 100 eligible urban areas, the risk-based grant  assessment model identifies those urban areas that reflect recent  congressional intent that up to eighty-five percent (85%) of nationwide  risk is funded each year. Those urban areas below this 85 percent  threshold are ineligible for UASI grant awards in that fiscal year,  according to FEMA officials.", "From fiscal years 2008 through 2018, the number of UASI grantees has  remained relatively stable since fiscal year 2011. As figure 2 shows, the  annual number of grantees has fluctuated from fiscal years 2008 through  2018, ranging from 60 to 64 grantees during fiscal years 2008, 2009 and  2010. However, since fiscal year 2011 the number of UASI grantees has  averaged 31 urban areas, with a high of 39 urban areas in fiscal year  2014 and a low of 25 urban areas in fiscal year 2013. For fiscal year  2018, 32 urban areas were UASI grantees.", "For additional details on UASI grant awards for fiscal years 2008 through  2018 by urban areas, see appendix I, table 5.", "Because the UASI grant program is required by annual congressional  guidance to fund only those urban areas that comprise up to 85 percent  of risk nationally, this eligibility cut off can result in different urban areas  being eligible from one year to the next. Specifically, as we demonstrated  in June 2008, the variation of risk across urban areas takes on the  distribution curve illustrated in figure 3.", "The few urban areas with the highest relative risk score are represented  along the steep part of the relative risk curve. For example, those urban  areas receiving the highest awards, informed by their risk scores and  ranks, are generally the same each fiscal year: New York City, Los  Angeles, and Chicago, as seen in table 2.", "Those urban areas that have less relative risk are represented along the  flat section of the curve. There are urban areas with less risk that may not  fall within the 85 percent of risk nationally during a specific year and thus  would be ineligible to receive UASI funding during that year. Table 3 lists  the lowest-funded urban areas for the last 5 fiscal years, based on our  analysis of the funding amounts each received within each fiscal year. For  example, during the period of fiscal year 2008 through fiscal year 2018  San Antonio, Texas, and Hampton Roads, Virginia only received awards  in fiscal years 2008, 2009, 2014, 2017, and 2018.", "In addition to changes to urban areas\u2019 risk ranking from one year to the  next, the amount that an urban area received of the total amount of UASI  funds in a given year can change. FEMA has established a process for  developing grant award funding options based on the results of the risk- based grant assessment model. These funding options are provided to  the Secretary of Homeland Security for consideration and final approval.  According to FEMA officials, the options may vary each year based on  DHS leadership\u2019s priorities and concerns at the time; however, all options  represent only those eligible grantees that represent up to 85 percent of  the nation\u2019s risk, as determined by the risk-based grant assessment  model.  In fiscal year 2013, FEMA shifted its UASI grant funding to a  process referred to as \u201cfunding bands.\u201d In fiscal year 2018, for example,  UASI grantees such as Orlando, Florida; Hampton Roads, Virginia; and  San Antonio, Texas each received a $1.5 million UASI grant, whereas a  grouping of UASI grantees that included Sacramento, California;  Pittsburgh, Pennsylvania; and Portland, Oregon each received $2.5  million.", "According to FEMA officials, grouping jurisdictions with similar risk scores  into funding bands is an effort to stabilize and retain grantees\u2019 funding  levels over multiple years, as annual UASI grants will fund projects that  are multiyear investments and carried out over a 24 to 36-month  performance period. For example, if one jurisdiction increased by four  ranks and another jurisdiction in the same group dropped six ranks, the  two jurisdictions would stay in the same funding band if the overall risk  scores remained close together. The purpose of the funding bands is to  ensure that some consistency in funding exists for jurisdictions, given  minor changes in the relative risk ranking. FEMA looks at the natural risk  breaks and historical grant allocation data for each year. For example,  each year FEMA presents for consideration by DHS leadership the  historical funding and the number of urban areas that have been placed in  specific funding bands in prior grant years, if any, and the differences  between the relative risk scores in the current fiscal year. According to  FEMA officials, the last few grant years had produced similar funding  bands, which are subject to change depending on DHS leadership\u2019s final  decisions."], "subsections": []}]}, {"section_title": "FEMA Has Improved Its Risk-based Grant Assessment Model, but Additional Steps Could Further Strengthen Its Model", "paragraphs": [], "subsections": [{"section_title": "FEMA Has Taken a Number of Steps to Improve the Risk-based Grant Assessment Model for Allocating SHSP and UASI Grants", "paragraphs": ["Since 2008, FEMA has taken a number of steps to assess and improve  its risk-based grant assessment model for allocating grants based on past  reviews, our prior recommendations, and various changes related to  evolving terrorist threats and real-world scenarios. For example, FEMA  added a Vulnerability Index to its risk model in 2011 in response to our  2008 recommendation. Most recently, for fiscal year 2018, FEMA has  included a \u201csoft target index.\u201d According to FEMA officials, this index was  added to account for the current threat for areas where crowds  congregate. Figure 4 illustrates the timeline of FEMA changes to the risk- based assessment model and prior assessments.", "Figure 5 depicts the risk-based grant assessment model used for fiscal  year 2018 SHSP and UASI grant awards.", "Figure 6 depicts the changes in the Threat, Vulnerability, and  Consequence indexes used in the risk-based grant assessments model  for fiscal year 2008, compared to 2018. As we noted above, the 2008 risk  model did not measure Vulnerability for each state and urban area, and  risk scores were essentially determined by Threat and Consequences  indexes.", "Changes to the Consequence Index can have the most impact on the  relative risk scores because of the weight of this index (50 percent),  relative to the weights for the Threat and Vulnerability indexes. Further,  the weight for population within the Consequence Index represented 30  percent of the total fiscal year 2018 risk model value. As a result, the  weight for the population index was greater than the weights of either the  Threat Index or Vulnerability Index, each 25 percent. FEMA has  decreased the weight for the population index over time, from 40 percent  in 2008 to 30 in 2011, where it has remained consistent through 2018.", "For fiscal year 2018, FEMA modified how the population index was  calculated within the Consequence Index to better account for attacks  staged by individuals, so-called lone wolves. FEMA did so, in part, by  reducing the importance of population density within the population index.  In past risk models, the population index had favored high-density, high- rise urban areas, commensurate with building destruction scenarios \u2014  the 9/11-style attack scenarios that focused on large building destruction  events, according to FEMA officials. The 2018 change to cap population  density in the population index reduces the impact those extremely-dense  population areas have in the methodology, according to FEMA officials.", "The other measures used to make up the Consequence Index remain  relatively unchanged since our review in 2008, although FEMA has  renamed the indexes."], "subsections": [{"section_title": "Vulnerability Index", "paragraphs": ["As explained earlier, FEMA added a Vulnerability Index to its risk-based  grant assessment model in 2011, in response to our 2008  recommendation. According to FEMA officials, the Vulnerability Index  helps support what DHS is trying to protect, primarily the protection of  citizens and critical infrastructure. For example, the Vulnerability Index  includes a measure designed to assess the extent that certain types of  national critical infrastructure assets may be considered for possible  attack. This Targeted Infrastructure Index measure uses actionable  intelligence on types of critical infrastructure targets, such as aviation,  mass transit and commuter rail. FEMA works with DHS\u2019s National  Protection and Programs Directorate to match its critical infrastructure  dataset to actionable intelligence from DHS\u2019s Office of Intelligence &  Analysis to compile this measure.", "Vulnerability Index   Designed to measure the likelihood of a  successful attack in a state or urban area,  based on a) intelligence information of those  critical infrastructure assets identified by  foreign or domestic terrorists; b) the extent of  international borders entries (land, sea and  air) located in a state or urban area, and c)  special events where crowds congregate and  are susceptible to homegrown extremism and  lone wolf attacks.", "For the fiscal year 2018 grant, FEMA has included a \u201csoft target index.\u201d  According to FEMA officials, this index was added to account for the  current threat for areas where crowds congregate. Based on previous  feedback received through this process, FEMA updated the fiscal year  2018 risk methodology to better account for the nation\u2019s current threat  environment. The soft target index is composed of two new data  elements:", "Visitors\u2014domestic and international\u2014using the same data used in  the calculation of the Population Index; and", "Special events measure\u2014uses Special Event Assessment Rating  data from DHS Office of Operations Coordination to identify large  events that are state and local events that may require federal  assistance. Examples of such events include the Super Bowl, the  Boston Marathon and New Year\u2019s Eve in Times Square.", "In fiscal year 2018, FEMA added a new \u201cisolation\u201d measure to account for  the challenges of response for those states, territories, and urban areas  outside the contiguous United States, who rely on prompt mutual aid from  neighboring jurisdictions. According to FEMA officials, the isolation data  element was included as a response to challenges the agency witnessed  as a result of the 2017 Hurricane season, specifically the unique  challenges of distant U.S. territories receiving timely mutual aid from other  states. For example, if Hawaii, Guam or American Samoa were attacked,  there would be little to no outside help for a number of days. As a result,  FEMA modified the fiscal year 2018 Border Crossings data element  weight, which was dropped from 6 percent to 4 percent, in order to  establish a 2 percent weight for the isolation measure."], "subsections": []}, {"section_title": "Threat Index", "paragraphs": ["The weight of the Threat Index was raised from 20 percent to 30 percent  in fiscal year 2011, and has been modified again for fiscal year 2018.  Specifically, according to FEMA and DHS officials, DHS leadership made  a policy decision to reduce the Threat Index\u2019s weight from 30 percent in  2017, to 25 percent in 2018, due to the change in current threat  environment, since Congress directed FEMA in the Explanatory  Statement accompanying the FY 2017 DHS Appropriations Act to review  the risk model to account for this changing threat environment. FEMA  officials further stated that they assumed, as domestic terrorism and soft  targets are considered to be prevalent nationwide and pose more of a  challenge in identifying the source of actionable threats. FEMA officials  stated that this modification to the Threat Index better reflects real-world  scenarios.", "Since fiscal year 2012, FEMA has included information on domestic  terrorism as well as international terrorism in its Threat Index. According  to DHS officials, home grown extremism is also a likely threat, often  through lone wolf attacks. DHS officials decided to assign all urban areas  a minimum threat score to reflect the fact that all areas have some level  of threat. According to DHS officials, the addition of a domestic terror  threat measure resulted in a decrease in the variation of threat scores  across states and urban areas. According to DHS officials, lone wolf  attacks are difficult to determine who the actors may be, or when and  where they will attack."], "subsections": []}, {"section_title": "Stakeholder Feedback", "paragraphs": ["FEMA annually transmits risk profile information to states and urban  areas to promote timely and meaningful feedback. According to FEMA  officials, draft risk profiles are sent to all 56 states and territories and 100  eligible urban areas closely after the enactment of DHS\u2019s annual  appropriations. States and urban areas are given a 2-week period prior to  the release of the Notices of Funding Opportunity to review their draft risk  profiles and provide FEMA any comments or data corrections that should  be considered. According to FEMA officials, it encourages and welcomes  stakeholders to make suggestions for new or different data sets for the  subsequent fiscal year's risk assessment at any time during the year  convenient to the stakeholder. FEMA also conducts webinars during this  period to can explain the risk profiles in detail, as well as discuss any  updates to data sets and/or any enhancements to the risk assessment.  This will often result in feedback on data elements and the methodology  of the risk-based grant assessment model, according to FEMA officials.  According to FEMA officials, this feedback process has been used to help  guide FEMA\u2019s consideration of enhancements to the risk-based grant  assessment model. For example, FEMA officials noted that this process  helped them in their efforts to develop the soft targets index into the 2018  risk model."], "subsections": []}]}, {"section_title": "FEMA Does Not Fully Make Use of Recognized Scientific Practices in Maintaining Its Risk Assessment Model", "paragraphs": ["In 2010, the National Research Council (NRC) recommended that  incorporating scientific practices can provide decision makers a further  understanding of the effects of its policy judgments and assumptions\u2014i.e.  addressing uncertainties\u2014in its terrorism-related risk analyses. The NRC  identified \u201cgood scientific practice\u201d for model-based work. Specifically, the  NRC recommended that detailed documentation for all risk models,  including rigorous mathematical formulations, be implemented  department-wide. Additionally, the NRC recommended that all risk  models undergo verification and validation\u2014or a sensitivity analysis at the  least\u2014of its risk-based grant assessment model. Finally, the NRC  recommended that FEMA should undertake an external peer review by  technical experts outside of DHS, and review its risk-informed formulas in  order to identify issues such as logic flaws, evaluate the ramifications of  the choices of weightings and parameters, and improve the risk model\u2019s  transparency. However, FEMA has not fully adopted these scientific  practices for its risk-based grant assessment model.", "Documentation: FEMA documentation on the sources of data used for  the model\u2019s calculations does not include information that would enable a  reviewer to understand the underlying assumptions that form the basis for  its risk-based grant assessment model\u2014such as the size of the weights  assigned to Threat, Vulnerability, and Consequence, or the justification  for changes to these weights from one year to the next. FEMA officials  stated that they focus their limited time and resources on developing the  executive summary-level materials that DHS leadership will use to  determine final grant eligibility and grant allocation amounts. Also, to a  lesser extent, FEMA officials said they rely on the expertise of the subject  matter experts from DHS\u2019s Office of Intelligence and Analysis, and DHS\u2019s  National Protection and Preparedness Division\u2019s Office of Cyber and  Infrastructure Analysis, parts of DHS that contribute to the annual risk  assessment process.", "In April 2018, we identified documentation as one of the key  methodological elements to the baseline structure of an economic  analysis. Specifically, the elements include that the analysis is clearly  written with a plain language summary, has clearly labeled tables that  describe the data used and results, and has a conclusion that is  consistent with these results. The analysis cites all sources used and  documents that it is based on the best available economic information.  The analysis documents that it complies with a robust quality assurance  process and, where applicable, the Information Quality Act, and should  disclose the use and contributions of contractors and outside consultants.  FEMA officials agreed with our analysis of FEMA\u2019s supporting  documentation, and officials stated that maintaining additional  documentation could further assist reviewers. Documenting how subject  matter expert assumptions are made would help FEMA increase the  transparency of the model for key internal and external stakeholders.", "In-Depth Analyses: Similarly, we could not determine whether FEMA  sufficiently performed all the analyses of the model\u2019s sensitivity needed to  determine how changes to its risk-based grant assessment model could  affect the resulting risk scores. FEMA officials stated that they have only  analyzed the effect of a data element when it has been added to the  model (e.g.: the Soft Target Index in 2018). Further, FEMA officials were  unable to provide us with documentation on their sensitivity analyses  processes or their results.", "DHS\u2019s Risk Lexicon states that sensitivity analysis can be used to  examine how individual variables can affect the outputs of risk  assessment methodologies. In addition, OMB Circular A-94 recommends  that the outcomes from a risk model should be analyzed to determine  how sensitive such outcomes are to changes in the model\u2019s  assumptions. The assumptions that deserve the most attention will  depend on the dominant elements and the areas of greatest uncertainty  of the program being analyzed. In addition, research in the actuarial  sciences also states that sensitivity analysis \u201cis of fundamental  importance to risk analysts, especially in the presence of complex  computational models with uncertain inputs.\u201d", "As we stated earlier, understanding the extent that uncertainty has on the  results of the model can be especially important if the model produces  materially different results in response to even small changes in  assumptions\u2014often referred to as the \u201csensitivity\u201d or \u201crobustness\u201d of a  model\u2019s assumptions and results. We have reported on FEMA\u2019s risk- based grant assessment model in June 2008 and March 2013, where we  found grant years when the risk model was sensitive to even small  changes. For example, we noted that a potential increase or decrease  in a measure would have resulted in one urban area displacing the  eligibility of another, thereby potentially shifting funding as well. FEMA  officials stated that they focus their limited time and resources on  developing the executive summary-level materials that DHS leadership  will use to determine final grant eligibility and grant allocation amounts.  FEMA officials agreed that they could better document the steps used in  their analyses across all the model\u2019s measures and weights so that a  complete understanding of potential impacts are documented and can be  made available to leadership when making decisions about changes.", "FEMA\u2019s implementation of sensitivity analyses could help the agency to  assess changes to the risk-based grant assessment model including the  introduction of new data elements into Threat, Vulnerability, and  Consequence indexes, the modifications to how existing data elements  are calculated, and the changing of the weights assigned to the Threat,  Vulnerability, and Consequence indexes. Further, FEMA\u2019s  implementation of sensitivity analyses has the ability to show decision  makers the impact or predicted impact of adjustments to FEMA\u2019s risk- based grant assessment model, including with potential shifts in funding  towards or away from certain grantees.", "Use of External Peer Review: FEMA has not subjected its risk-based  grant assessment model to a peer review by independent, external  technical experts, as previously recommended in 2010 by the NRC.  According to FEMA officials, its risk assessment methodology has  undergone comprehensive internal reconsideration over time to better  reflect real-world scenarios, but such reviews have not included external  peer reviews. FEMA officials stated that its risk-based grant assessment  model has gone through past reviews including a review as part of DHS\u2019s  quadrennial review in 2014, and the model is reviewed by internal subject  matter experts from DHS\u2019s Office of Intelligence and Analysis, and DHS\u2019s  National Protection and Preparedness Division\u2019s Office of Cyber and  Infrastructure Analysis as part of the annual risk assessment process.  FEMA officials stated that the agency is exploring the possibility of  participating in a DHS collaborative group to internally review and provide  feedback on the model\u2019s underlying assumptions and methods. Such a  group could review the underlying components of the current risk-based  grant assessment model and suggest improvements, as well as present  and evaluate other risk assessment theories and approaches. FEMA  officials told us they have encountered time and resources constraints on  establishing an external peer review process.", "As we have previously reported, independent external peer reviews can  increase the probability of success by improving the technical quality of  projects and the credibility of the decision-making process, and provide  reasonable assurance that the agency\u2019s approach is reproducible and  defensible. In addition, in December 2004, OMB issued the  memorandum \u201cFinal Information Quality Bulletin for Peer Review\u201d which  established government-wide guidance aimed at enhancing the practice  of peer review of government science documents. OMB noted that peer  review can increase the quality and credibility of the scientific information  generated across the federal government, which was an effort to improve  the quality of the scientific information upon which policy decisions are  based. OMB also noted that, while peer review may take a variety of  forms, agencies will need to consider at least the following issues when  coordinating an external peer review: individual versus panel review;  timing; scope of the review; selection of reviewers; disclosure and  attribution; public participation; disposition of reviewer comments; and  adequacy of prior peer review.", "These scientific processes are designed to help decision makers better  understand the impact or predicted impact of risk management  alternatives, and provide greater confidence in the reliability of the risk  assessment model\u2019s results. Full implementation of these processes  better position FEMA to provide further assurances that their risk-based  grant assessment model and grant allocation approaches are reasonable,  of high-quality, and credible."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given that risk management has been endorsed by the federal  government as a way to direct finite resources to states and those urban  areas that are most at risk of terrorist attack, it is important that FEMA\u2019s  risk-based grant assessment model supports the application of policy  judgments and analytic assumptions in the model\u2019s role of allocating  those limited resources. Decreased funding levels for SHSP and UASI  grant programs have increased the importance of using risk management  techniques to more effectively target finite federal dollars. DHS and FEMA  have strengthened its risk-based grant assessment model for allocating  grants, taking into account analysis and recommendations from a variety  of reviews. These improvements include the addition of a Vulnerability  Index and modifications to the Threat Index. We have identified  opportunities where FEMA could strengthen its scientific practices. First,  documenting the model\u2019s underlying assumptions and the results of  sensitivity analysis can assist decision makers in better understanding the  predicted impact of risk management alternatives. Second, expanding the  use of sensitivity analysis could further enhance the model. Developing a  greater understanding of the how uncertainty affects its risk-based grant  assessment model\u2019s results helps achieve the objectives of risk  management. Third, coordinating an independent external peer review of  the methodology of its risk-based grant assessment model would better  position the agency to provide reasonable assurance that FEMA\u2019s risk  model and grant allocation approach that FEMA uses for its SHSP and  UASI programs are reasonable, of high-quality, and credible. Applying  such scientific practices could assist FEMA in further strengthening its  risk-based grant assessment model."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to FEMA.", "The FEMA Administrator should fully document the underlying  assumptions and justifications that form the basis of the risk-based  grant assessment model, such as the size of the weights assigned to  Threat, Vulnerability, and Consequence, or the justification for  changes to these weights from one year to the next.", "The FEMA Administrator should perform sensitivity analyses to verify  how changes to the risk-based grant assessment model could affect  the resulting risk scores, and document the results.", "The FEMA Administrator should take steps to coordinate an  independent, external peer review of its risk-based grant assessment  model."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to the FEMA and DHS for comment.   In its comments, reproduced in appendix II, FEMA generally concurred  with our findings and three recommendations.", "In FEMA\u2019s concurrence to our first recommendation that the agency fully  document the underlying assumptions and justifications that form the  basis of the risk-based grant assessment model, FEMA requested that  GAO consider this recommendation resolved and closed as implemented.  As part of FEMA\u2019s response, they reiterate their process of providing draft  Risk Profiles to all 100 urban areas and 56 states and territories and their  annual communications to Congress on how FEMA calculated risk and  computed grant awards.  We recognized FEMA\u2019s stakeholder feedback  efforts in this report. However, as we noted, FEMA\u2019s documentation on  the sources of data used for the model\u2019s calculations does not include  information that would enable a reviewer to understand the underlying  assumptions that form the basis for its risk-based grant assessment  model.   Further, as stated earlier, documentation is one of the key  methodological elements to the baseline structure of this type of analysis,  documenting that it complies with a robust quality assurance process and,  where applicable, the Information Quality Act, and should disclose the  use and contributions of contractors and outside consultants. In order to  fully implement this recommendation, documenting how subject matter  expert assumptions are made would help FEMA increase the  transparency of the model for key internal and external stakeholders, and  will further support the efforts of an independent external peer review of  FEMA\u2019s risk-based assessment model.", "Regarding the second recommendation, FEMA concurred, stating that the  agency will expand the use of sensitivity analysis to review the entire risk  methodology, and will also document these results for leadership review,  as appropriate.  Finally, regarding the third recommendation, FEMA  concurred, stating that they will coordinate an independent external peer  review and develop a detailed written response to leadership for further  appropriate action.", "FEMA and DHS also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, and other interested  parties. This report will also be available at no charge on our Web site at  http://www.gao.gov. Should you or your staff have any questions  concerning this report, please contact me at (202) 512-8777 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."], "subsections": []}]}, {"section_title": "Appendix I: Grant Funding and Awards for State Homeland Security Grant Program (SHSP), and the Urban Area Security Initiative (UASI) Grant Program for Fiscal Years 2008 Through 2018", "paragraphs": [], "subsections": [{"section_title": "Fiscal Years Mississippi Total Award Amount above legal minimum", "paragraphs": [], "subsections": []}, {"section_title": "Fiscal Years West Virginia Total Award Amount above legal minimum", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Chris P. Currie, at (202) 512-8777 or CurrieC@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition, key contributors to this report were Aditi Archer, Chris  Keisling, Assistant Director, John Vocino, Analyst-in-Charge, Chuck  Bausell, Dominick Dale, Dorian Dunbar, Eric Hauswirth, Serena Lo, Heidi  Nielson, and Hadley Nobles."], "subsections": []}]}], "fastfact": ["The Federal Emergency Management Agency distributes money to states, territories, and urban areas to help them get ready for potential terrorist attacks. The amounts provided are based in part on a model FEMA uses to rank the risk posed to each area. Locations deemed at higher risk of an attack with major consequences, for example, may receive more money.", "We looked at FEMA's main grant programs and what it has done to improve its risk model. We recommended FEMA take additional steps to bolster the model's quality and credibility, including fully documenting the assumptions on which the model is based and subjecting it to external review."]}
{"id": "GAO-18-181", "url": "https://www.gao.gov/products/GAO-18-181", "title": "Reserve Component Travel: DOD Should Assess the Effect of Reservists' Unreimbursed Out-of-Pocket Expenses on Retention", "published_date": "2017-10-16T00:00:00", "released_date": "2017-10-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["About 91 percent of DOD's 811,000 reservists are part-time, performing military service in addition to civilian employment and careers. These reservists may have to travel to perform required military training or other duties.", "The National Defense Authorization Act for Fiscal Year 2017 contains a provision for GAO to review the cost of travel for members of the reserve components. This report (1) describes the conditions under which reservists may incur unreimbursed out-of-pocket travel expenses in connection with their service, and (2) addresses the extent to which DOD has assessed the effect of reservists' unreimbursed out-of-pocket travel expenses on retention.", "GAO reviewed DOD's Joint Travel Regulations and interviewed officials to determine conditions under which reservists might incur unreimbursed travel expenses. It also compared DOD's efforts to analyze the effect of such expenses with federal internal control standards, which state that management requires quality information to make informed decisions and evaluate an entity's performance in achieving key objectives."]}, {"section_title": "What GAO Found", "paragraphs": ["Reservists may incur unreimbursed out-of-pocket expenses under certain conditions in connection with their service. Although the Department of Defense's (DOD) six reserve components reported paying or reimbursing $925 million in travel costs for reservists in fiscal year 2015, the most recent year for which data were available, reservists may still incur various expenses that are not reimbursable under DOD's travel regulations.", "Officials responsible for travel regulations told us that unreimbursed travel expenses for reservists generally arise because it is DOD's policy to: (1) not provide reimbursement, except in limited circumstances, for the cost of travel to attend Inactive Duty Training (i.e., the \u201c1 weekend a month\u201d training commitment for reservists) and (2) consider longer duration training or assignments as a Permanent Change of Station\u2014a change in reservists' home of record\u2014and not as temporary travel. The National Defense Authorization Act for 2008 established a reimbursement program for Inactive Duty Training travel costs, but reservists must meet certain eligibility criteria, such as serving in a critical occupation, and not all service Secretaries have chosen to participate. Under the program, reimbursement is limited to $300 for each roundtrip to the training location. Further, DOD's policy to consider longer duration training or assignments as a Permanent Change of Station may also result in unreimbursed expenses. Specifically, according to DOD officials, reservists may have to maintain two households if, because of their part-time status, they decide not to move themselves and their families to the location of Active Duty Training for 140 days or longer, or of other active duty assignments for 181 days or longer.", "DOD and the services have conducted a few limited assessments of the potential effect of reservists' unreimbursed travel expenses on the retention of reservists. However, several DOD reports and studies and officials whom GAO interviewed have expressed concern that such unreimbursed expenses may, among other factors, be a challenge for reservists and may therefore negatively affect retention. For example, a 2012 survey commissioned by the Army Reserve of a small sample of reservist officers potentially eligible for battalion command positions reported that unreimbursed travel costs were among several factors that could influence their decision to apply for these positions. DOD and the reserve components are considering changes to reserve travel policy to mitigate the effect of unreimbursed expenses on reservists, by, for example, increasing the $300 limit for Inactive Duty Training reimbursement. However, without the benefit of quality information, DOD risks not managing the potential influence of these policies on reservists' retention or agency expenditures."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that DOD collect quality information and conduct an analysis of the potential effects of reservists' unreimbursed travel expenses on retention, and respond to these risks by considering the costs and benefits of any possible actions to address the identified issues. DOD concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Of the Department of Defense\u2019s (DOD) 2.1 million servicemembers in  2016, more than 811,000 serve in the department\u2019s six reserve  components\u2013the Army National Guard, the Army Reserve, the Air Force  Reserve, the Air National Guard, the Marine Corps Reserve, and the  Navy Reserve. In 2011, DOD stated that it had transformed its reliance  on the reserve component, from considering it to be a strategic force of  last resort to using the component as an operational reserve to be  deployed on a periodic basis. When not deployed, reservists travel to  perform training and other reserve duties, ranging from monthly weekend  drills to long-duration training for career fields such as cyber defense or  for maintaining skills such as proficiency in foreign languages. About 91  percent of reservists are part-time, performing military service in addition  to civilian employment, and may have to travel to perform training or other  duties if they do not live close to the location where they train or are  needed for other duties. DOD\u2019s 2012 Report of the Eleventh Quadrennial  Review of Military Compensation noted concerns over reservists\u2019  unreimbursed expenses to perform military service, and a 2008 report by  the Commission on the National Guard and Reserves cited similar  concerns as having possible effects on retention.", "The Under Secretary of Defense for Personnel and Readiness has overall  responsibility for commercial travel management and policy. The Defense  Travel Management Office oversees commercial travel management and  serves as the focal point for commercial travel within DOD. This office is  also responsible for any updates and revisions to the Joint Travel  Regulations, DOD\u2019s central source of travel policy for all  servicemembers. DOD is currently updating the Joint Travel Regulations,  which is expected to be published in fall 2017.", "The National Defense Authorization Act for Fiscal Year 2017 contains a  provision for us to review the cost of travel for members of the reserve  components. This report (1) describes the conditions under which  reservists may incur unreimbursed out-of-pocket travel expenses in  connection with their service, and (2) addresses the extent to which DOD  has assessed the potential effect of reservists\u2019 unreimbursed out-of- pocket travel expenses on the retention of reservists. Appendix I provides  DOD\u2019s reported fiscal year 2015 travel costs for the reserve components.  In addition, in June 2017, we provided a briefing to congressional  committees on these costs.", "To address our first objective, we reviewed DOD\u2019s Joint Travel  Regulations and interviewed officials from the Defense Travel  Management Office, each service\u2019s reserve policy office, and officials  from each component responsible for travel issues to understand and  characterize scenarios under which reservists would not be reimbursed  for travel expenses. To address our second objective, we collected and  reviewed selected DOD studies and reports on the subject of reservists\u2019  out-of-pocket travel expenses, and compared DOD\u2019s efforts to analyze  the potential effects of these expenses with federal internal control  standards. These standards state that management requires quality  information to make informed decisions and evaluate the entity\u2019s  performance in achieving key objectives and addressing risk. These  standards further require that management identify, analyze, and respond  to risks related to achieving the defined objectives. To report on DOD\u2019s  reported fiscal year 2015 travel costs for the reserve components we  obtained and reviewed fiscal year 2015 execution cost data, the most  recent complete data available. We interviewed budget officials from each  reserve component and from the Office of the Under Secretary of  Defense (Comptroller) concerning their efforts to assess the  completeness and accuracy of these cost data and determined that they  were sufficiently reliable for the purpose of summarizing the cost of  reserve component travel for fiscal year 2015.", "We conducted this performance audit from January 2017 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Selected Reserve comprises over 811,000 full- and part-time  members from the military services\u2019 respective National Guard and  reserve components, whom DOD can call to active duty to augment  military forces in time of war or national emergency. DOD requires these  reservists to maintain readiness by participating regularly in training to  maintain the military skills needed to perform their mission. About 91  percent of the members of the Selected Reserve, or 735,876 reservists,  are part-time, performing military service in addition to their civilian  employment and careers. Reservists typically train for about 1 weekend  a month and 2 weeks a year. Reservists may also be required to  participate in longer duration training to develop and maintain specialized  skills related to their military occupation, such as cyber specialists, or to  perform other activities such as backfilling positions in other reserve or  active units. The following are descriptions of reservists\u2019 required  training and other duties:", "Annual Training: All six reserve components require an annual  training period, typically 2 weeks, to acquire and maintain required  military skills.", "Inactive Duty Training: This training is commonly referred to as the  \u201c1 weekend a month\u201d commitment, and reservists fulfill this  commitment in connection with prescribed training or maintenance  activities of the units to which they are assigned.", "Active Duty for Training: So that reservists acquire and maintain  required military skills, individuals serving as reservists participate in  training programs such as initial basic training and advanced  individual training, and may attend full time specialized schools. The  duration of Active Duty for Training varies considerably, from days to  several months.", "Active Duty Other than Training: All six reserve components may  require that reservists perform other support activities, such as  backfilling a position in a reserve or active unit.", "For a variety of reasons, reservists may not live in the same location  where they train. For example, reservists may relocate for their civilian  occupation, and officials told us that as reservists are promoted,  command opportunities are more geographically dispersed. As a result,  travel may be necessary to facilitate their service. DOD\u2019s six reserve  components reported paying or reimbursing over $925 million in travel  costs for reservists in fiscal year 2015, representing about 4.3 percent of  the total obligations identified in the Reserve Personnel accounts. With  an actual part-time endstrength of 742,683 reservists in fiscal year 2015,  DOD spent an average cost of about $1,246 per reservist. Officials told us that DOD does not specifically collect and track data on reservists\u2019  unreimbursed travel expenses, which are therefore unknown. Officials  told us that reservists process their travel claims through DOD-wide or  military-service-based electronic data systems, such as the Defense  Travel Service or the Air Force\u2019s Reserve Travel System, or sometimes  using hard-copy forms, depending on the type of duty performed, the  reserve component, and other factors. DOD\u2019s Joint Travel Regulations  govern the extent to which reservists are eligible to be reimbursed for  travel expenses to participate in required training or in other duties. The  regulations authorize the reimbursement of different types of expenses  depending on the nature and duration of the assignment. Eligible  reimbursements include:", "Per diem, which includes reimbursement for food, temporary lodging,", "Transportation expenses, ranging from reimbursement for mileage  traveled in reservists\u2019 private vehicles to reimbursement for  commercial flights;", "Permanent Change of Station reimbursements related to reservists  changing their home of record to the location of the assignment, such  as reimbursement for the movement of household goods; and", "Basic Allowance for Housing, which is based on the costs of adequate  rental properties for civilians with comparable income levels in the  same location as the permanent duty station, which in the case of  reservists is generally the location of their home; is received when  reservists are in an active duty status, which includes Active Duty for  Training and Active Duty Other than Training; and is determined  based on the duration of reservists\u2019 active duty assignments.", "Reservists also receive cash compensation for the various types of  training and other duties they perform; non-cash compensation, such as  access to TRICARE Reserve Select and education benefits; and deferred  compensation, such as participation in the military retirement system. In  addition, reservists may be able to take advantage of a federal tax  deduction for out-of-pocket travel expenses associated with their  service."], "subsections": []}, {"section_title": "Reservists May Incur Out-of-Pocket Travel Expenses under Certain Conditions", "paragraphs": ["Reservists may incur expenses under certain conditions in connection  with their service that are not reimbursable under DOD\u2019s travel  regulations. Officials responsible for travel regulations and reserve policy  issues told us that this can occur because: (1) the cost to attend Inactive  Duty Training is a reservist\u2019s responsibility, except in limited  circumstances; and (2) DOD designates longer duration training or  assignments as a Permanent Change of Station\u2014a change in a  reservist\u2019s home of record\u2014and not as temporary travel."], "subsections": [{"section_title": "Travel Expenses to Attend Inactive Duty Training Are the Responsibility of Reservists Except for in Limited Circumstances", "paragraphs": ["Under most circumstances, travel expenses to and from the 1 weekend a  month training commitment are reservists\u2019 responsibility with no  reimbursement provided, and as a result reservists may incur  unreimbursed travel expenses to attend this training. Specifically, the  Joint Travel Regulations states that a reserve component member  performing Inactive Duty Training ordinarily receives no travel or  transportation allowances, particularly when the training duty is performed  at the reservist\u2019s assigned unit location. This principle is reflected in  travel policy such as the Navy Reserve\u2019s requirement that reservists who  live more than 100 miles from their Inactive Duty Training site sign a  waiver acknowledging that they will not be reimbursed for travel  expenses. Navy travel policy, citing a previous version of the Joint  Travel Regulations, states that as part of the requirement to perform  Inactive Duty Training, \u201cinherent to this obligation is the travel between  the member\u2019s home and the location at which the member normally  performs drills\u201d with no reimbursement provided.", "To mitigate expenses incurred by reservists traveling long distances, the  National Defense Authorization Act for Fiscal Year 2008 established a  reimbursement program for Inactive Duty Training whereby each  component may, at the discretion of the service Secretary and under  certain circumstances, provide reimbursement of up to $300 in expenses  for each roundtrip to the training location. The Joint Travel Regulations  further specifies that reservists must travel no fewer than 150 miles or  greater one way from their primary residence to their normal drilling site to  be eligible. DOD spent nearly $33.5 million on Inactive Duty Training  travel costs in fiscal year 2015. While each service Secretary decides  whether an individual component can participate in the program, the Joint  Travel Regulations requires such programs to make servicemembers  eligible for reimbursement when they meet one of the following criteria:  They are qualified in a skill designated as critically short by the Secretary assigned to a unit of the Selected Reserve with a critical staffing  shortage, or in a pay grade in the reservists\u2019 component with a critical  staffing shortage; or assigned to a unit or position that is disestablished or relocated as a  result of Base Realignment and Closure or other force structure  reallocation.", "See table 1 for scenarios illustrating reimbursement eligibility for Inactive  Duty Training expenses in the Army Reserve.", "Three of the six reserve components have established policies to allow  for reimbursement of expenses of travel related to Inactive Duty Training,  according to component-specific criteria. The Marine Corps Reserve and  the Air Force Reserve authorize Inactive Duty Training reimbursement for  several occupations, and in the case of the Marine Corps Reserve, entire  rank levels. The Army Reserve authorizes reimbursement, but according  to its policy targets reimbursements to soldiers and units with the highest  payoff in achieving readiness. Specifically, Army Reserve commanders  establish Inactive Duty Training reimbursement policy that designates and  prioritizes positions, units, and occupational specialties eligible to  participate. Both Air National Guard and Army National Guard officials  told us that their respective components do not authorize Inactive Duty  Training reimbursement. Similarly, Navy officials told us that the Navy  does not participate in the reimbursement program, primarily because  under its training construct Navy reservists conduct most Inactive Duty  Training at a Navy Operational Support Center close to their homes,  thereby limiting the training that may occur at a further distance from their  homes to a minority of sessions.", "Travel distances for reservists to their drilling site may have increased  over time. For example, the 2012 Report of the Eleventh Quadrennial  Review of Military Compensation noted that reservists traditionally lived  near a reserve site or drilling location, but reported that at the time of its  review more than 100,000 reservists lived more than 100 miles from their  drilling locations. Further, according to a 2008 report by the Commission  on the National Guard and Reserves, after Base Realignment and  Closure actions some reservists may have fewer locations available to  them to perform such training. As a result, reservists may be travelling  greater distances to attend such training. Officials also told us that the  travel distances required to attend Inactive Duty Training can be further  increased as reservists progress in their careers in certain occupational  specialties or ranks. For example, officials from the Marine Corps  Reserve told us that as reservists are promoted to higher ranks, there are  fewer positions, which can result in long-distance travel by reservists,  while Army Reserve officials told us that some reservists may turn down  command positions to avoid long-distance travel."], "subsections": []}, {"section_title": "DOD\u2019s Joint Travel Regulations Treats Long- Duration Training and Other Assignments of Long-Duration as a Permanent Change of Station", "paragraphs": ["DOD\u2019s Joint Travel Regulations treats Active Duty for Training and other  assignments of long-duration as a Permanent Change of Station, or a  change in a reservist\u2019s home of record, generally his or her civilian home,  and not as Temporary Duty. The treatment of long-duration training or  other assignments as a Permanent Change of Station applies equally to  reservists and active component members, as DOD travel regulations  require all military personnel at a given training or assignment to be in the  same status. However, officials told us that due to the interim nature of  such assignments reservists are unlikely to move their families, and  reservists may incur unreimbursed expenses due to the cost of  maintaining two homes. For example, according to a reserve policy  official, based on an internal analysis, about two-thirds of Air Reserve  members on long-duration training do not move from their civilian homes.  Further, the 2012 Report of the Eleventh Quadrennial Review of Military  Compensation concluded that reservists would likely return to their civilian  homes and employers at the conclusion of their assignments. In addition,  officials stated that long-duration training is becoming more common. For  example, Army language or medical training can routinely last longer than  140 days and require a Permanent Change of Station.", "The treatment of long-duration training and other assignments as a  Permanent Change of Station and not as Temporary Duty affects the type  of expenses that will be reimbursed and the Basic Allowance for Housing  rate received by reservists. A Permanent Change of Station is triggered  when Active Duty for Training assignments last 140 days or longer and  Active Duty for Other than Training assignments last 181 days or longer.  The changes in eligibility for reimbursement discussed below can affect  the amounts of reservists\u2019 unreimbursed expenses:", "Per diem: Reservists on training or other assignments that are  treated as a Permanent Change of Station are not eligible for  reimbursement of per diem expenses, including for temporary lodging  and meals. Reservists are unlikely to relocate their civilian homes for  such long-duration, though interim, training and assignments. They  may therefore incur expenses typically associated with a Temporary  Duty assignment, such as temporary lodging expenses, but for which  they cannot be reimbursed.", "Basic Allowance for Housing: Reservists on training or other  assignments that are treated as a Permanent Change of Station  receive an adjusted Basic Allowance for Housing based on the  location of their new duty station. This adjusted housing allowance  applies regardless of whether a reservist actually moves his or her  civilian home and family to the new duty station. Depending on the  new duty location, a reservist may receive Basic Allowance for  Housing at a higher or lower rate than the allowance amount based  on the location of their civilian home. If a reservist were in Temporary  Duty status\u2014training for 139 days or fewer, or an assignment for 180  days or fewer\u2014he or she would continue to receive Basic Allowance  for Housing based on the cost of maintaining his or her civilian home.", "If reservists decide not to relocate themselves and their families to the  location of the long-duration training or assignment, reservists may face  unreimbursed costs for maintaining two homes. Once a Permanent  Change of Station has been triggered, a reservist is no longer in a  Temporary Duty status and may no longer receive per diem for temporary  lodging. Reservists must either (1) move to government lodging and  forego any Basic Allowance for Housing, or (2) receive Basic Allowance  for Housing based on the location of the assignment, which may be  higher or lower than the allowance based on the location of their home of  record, generally their civilian home. In the first situation, reservists must  maintain their civilian home without payment of a Basic Allowance for  Housing, and thus may face unreimbursed costs associated with the  home\u2019s maintenance. In the second situation, reservists must maintain  both their civilian home and a new home with a Basic Allowance for  Housing adjusted for the location of the home at the new duty station.  Unreimbursed costs may result if the Basic Allowance for Housing  adjusted for the location of the new duty station is significantly lower than  the housing costs in the area of the reservist\u2019s civilian home. As shown in  the 2017 illustrative example in figure 1, reservists receive different levels  of payment for the temporary lodging allowance and the Basic Allowance  for Housing based on the duration of their Active Duty for Training  assignments.", "A service Secretary may grant a waiver for individuals attending a training  course to maintain Temporary Duty status beyond the 140-day time limit,  which normally would require a Permanent Change of Station. However,  such waivers apply to all course attendees, whether they are members of  the active or reserve components. DOD maintains data on the number of  these waivers, but not for the discrete number of waivers for reserve  component training. Individual reservists can also apply for a waiver for  the rate of their Basic Allowance for Housing payment to be based on the  location of their dependents, effectively allowing payment at the  geographic rate of a reservist\u2019s civilian home. However, this option is not  available to reservists without dependents."], "subsections": []}]}, {"section_title": "DOD Has Not Fully Assessed the Potential Effect of Unreimbursed Out-of- Pocket Travel Expenses on the Retention of Reservists", "paragraphs": ["Within the last decade, DOD and the services have conducted a few  limited assessments of the potential effect of unreimbursed out-of-pocket  travel expenses incurred by reservists to perform required training and  other reserve activities on retention of reservists. Although various entities  have raised concerns regarding reservists\u2019 out-of-pocket travel expenses,  the available information is either anecdotal or applicable to only one  reserve component or one aspect of travel policy. DOD reports have  noted that such unreimbursed travel expenses, among other factors, may  be a challenge for reservists and may therefore affect retention. For  example, in 2008, the Commission on the National Guard and Reserves  reported that travel requirements and associated costs had a negative  effect on DOD\u2019s ability to recruit and retain qualified personnel,  particularly for leadership positions. In addition, in minutes of its  meetings, the Air Reserve Forces Policy Committee has called for  changes to the Permanent Change of Station requirement for long- duration training, noting in 2015 that it, \u201cfrequently creates financial  hardship for RC  Airmen who typically maintain a  residence near their assigned unit or civilian employer.\u201d", "Three DOD studies have explored potential links between reservists\u2019  unreimbursed travel expenses and retention:", "A 2012 survey commissioned by the Army Reserve of a small sample  of reservist officers potentially eligible for battalion command positions  reported that unreimbursed travel costs were among several factors  that could influence their decision to apply for these positions.", "A 2014 study commissioned by the Marine Corps found that, based  on a statistical model of a sample of Marines eligible to participate in  its Inactive Duty Training travel reimbursement program between May  2012 and September 2013, the program had increased the Marine  Corps\u2019 ability to fill critical positions. The study also included an  assessment of the cost of increasing the level of reimbursement for  Inactive Duty Training and its possible effect on staffing.", "A 2016 survey commissioned by the Army Reserve, drawn from a  non-generalizable sample of a few thousand reservists, reported that  a significant majority of respondents in 2015 viewed the Inactive Duty  Training travel reimbursement program as an incentive for soldier  retention.", "In addition, during our review, officials from most of the reserve  components told us that despite the establishment of the reimbursement  program for travel costs associated with Inactive Duty Training, such  expenses continue to be a challenge for some reservists. In particular,  officials noted that this especially affects personnel who do not qualify for  reimbursement. One official noted that, in extreme cases, reservists may  find that the cost to attend Inactive Duty Training may exceed drill pay,  effectively requiring them to pay out-of-pocket to perform military service.", "While these reports and studies have alerted DOD to a potential problem,  DOD has not yet assessed the effect of unreimbursed travel expenses on  retention of reservists in a comprehensive manner and the related overall  cost to the federal government. For example, DOD has not yet  systematically collected data and assessed the potential effect of current  travel reimbursement policy on retention across all services, as measured  by outcomes such as fill rates for critical positions and other metrics, or  collected more basic information such as the number of reservists who do  not move their home during long-duration training, the distances traveled  for Inactive Duty Training, and the amount of unreimbursed expenses  incurred by reservists. The 2014 Marine Corps\u2019 study on Inactive Duty  Training reimbursement did explore fill rates for its potential effect on  critical positions. However, its findings are not necessarily applicable to  the other reserve components. In addition, DOD has not conducted an assessment on the issue of Permanent Change of Station rules for long- duration training or other assignments. While travel policy officials noted  that there is no requirement for such an assessment, some agreed that  more robust information would allow for a better understanding of the  situation as well as any potential changes that are necessary in DOD\u2019s  travel policy. One travel official stated that until a direct connection  between unreimbursed travel expenses and retention or related areas is  observed within their component, change is unnecessary.", "As of July 2017, DOD and the reserve components were considering  changes to reserve travel policy to mitigate the effect of out-of-pocket  expenses on reservists. Specifically, these changes include (1)  requesting that Congress increase reimbursement for Inactive Duty  Training travel expenses from $300 to $500 and (2) increasing the length  of time of Temporary Duty travel for training courses or other assignments  before such travel is considered a Permanent Change of Station. The  Marine Corps Reserve has developed a draft proposal for congressional  consideration for an increase in Inactive Duty Training reimbursement,  which an official stated was necessary to address the challenge of filling  critical occupations. The Military Advisory Panel, which advises on  defense travel issues, has considered an increase in the length of time of  Temporary Duty travel for training courses or other assignments before a  Permanent Change of Station would be required, but no specific  proposals have been developed.", "Federal internal control standards state that management requires quality  information to make informed decisions and evaluate an entity\u2019s  performance in achieving key objectives and addressing risk. They  further require that management identify, analyze, and respond to risks  related to achieving the defined objectives. However, without collecting  more comprehensive information on the potential effect of the current  travel policy on the retention of reservists, DOD would be considering  alternative proposals with only the limited data and analysis available to  date. Further, the lack of comprehensive data and analysis on the  influence of current travel policies will limit DOD\u2019s ability to reach an  analytically based decision which weighs the costs and benefits of any  potential changes. In deciding to continue or change current travel  policies relating to travel reimbursement without the benefit of quality  information, DOD risks not managing the potential influence of these  policies on reservists\u2019 retention or agency expenditures."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Reservists often maintain civilian careers and homes that in some cases  can require them to travel long distances to perform their part-time  military service. In some instances, such as when performing Inactive  Duty Training and long-duration Active Duty for Training or other active  duty assignments, such service can result in expenses that cannot be  reimbursed to the reservist under DOD\u2019s travel policy. Despite long- standing concerns that out-of-pocket travel expenses reservists incur to  perform their service may be increasing, DOD does not have sufficient  data and analysis on how reservists\u2019 incurring these expenses could  negatively affect DOD\u2019s ability to achieve its mission, the overall costs  and benefits of DOD\u2019s travel policy, and how various proposed changes  to the travel policy could potentially mitigate any of its possible negative  effects. As a result, DOD is not well positioned to move forward with  possible changes to travel policy absent further analysis."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Under Secretary of Defense for Personnel and  Readiness collect quality information and conduct an analysis of the  potential effects of unreimbursed travel expenses incurred by reservists to  perform military service on DOD\u2019s ability to retain reservists in the force,  and respond to these risks by considering the costs and benefits of any  possible actions to address the identified issues."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix II, DOD concurred with our  recommendation.", "We are sending copies of this report to appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Personnel and Readiness, the Secretaries of the military departments,  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 (213) 830-1011 or vonaha@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Reserve Components\u2019 Reported Travel Costs for Fiscal Year 2015", "paragraphs": ["To determine DOD\u2019s travel costs for the reserve components, we  obtained and reviewed fiscal year 2015 execution cost data, the most  recent complete data available, that each reserve component reported on  travel costs for training and other activities. These costs are reported in a  travel cost exhibit included in each component\u2019s annual Reserve  Personnel budget justification document. We did not include any travel  costs not included in the reserve components\u2019 Reserve Personnel  accounts, such as any travel costs in the components\u2019 respective  Operations and Maintenance accounts. We did not include travel costs for  the Active Guard and Reserve because individuals serving these  components are responsible for the full-time administration of the reserve  components and differ significantly from part-time drilling reservists in  their responsibilities and associated travel. We also did not include costs  for the Individual Ready Reserve because these reservists have different  training patterns than other reservists. In table 2, we summarize the costs  reported by DOD\u2019s six reserve components for Annual Training, Inactive  Duty Training, and all other travel costs for fiscal year 2015 by  component."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Margaret Best (Assistant  Director), Patricia Donahue, Mae Jones, Linda Keefer, Felicia Lopez,  Carol Petersen, and Adam Smith made major contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-480", "url": "https://www.gao.gov/products/GAO-18-480", "title": "Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement", "published_date": "2018-06-21T00:00:00", "released_date": "2018-06-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Covered entities can provide 340B drugs to eligible patients and generate revenue by receiving reimbursement from patients' insurance. The number of pharmacies covered entities have contracted with has increased from about 1,300 in 2010 to nearly 20,000 in 2017. GAO was asked to provide information on the use of contract pharmacies. Among other things, this report: 1) describes financial arrangements selected covered entities have with contract pharmacies; 2) describes the extent that selected covered entities provide discounts on 340B drugs dispensed by contract pharmacies to low-income, uninsured patients; and 3) examines HRSA's efforts to ensure compliance with 340B Program requirements at contract pharmacies. GAO selected and reviewed a nongeneralizable sample of 30 contracts between covered entities and pharmacies, 20 HRSA audit files, and 55 covered entities to obtain variation in the types of entities and other factors. GAO also interviewed officials from HRSA and 10 covered entities."]}, {"section_title": "What GAO Found", "paragraphs": ["The 340B Drug Pricing Program (340B Program), which is administered by the U.S. Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA), requires drug manufacturers to sell outpatient drugs at a discount to covered entities so that their drugs can be covered by Medicaid. Covered entities include certain hospitals and federal grantees (such as federally qualified health centers). About one-third of the more than 12,000 covered entities contract with outside pharmacies\u2014contract pharmacies\u2014to dispense drugs on their behalf. GAO's review of 30 contracts found that all but one contract included provisions for the covered entity to pay the contract pharmacy a flat fee for each eligible prescription. The flat fees generally ranged from $6 to $15 per prescription, but varied by several factors, including the type of drug or patient's insurance status. Some covered entities also agreed to pay pharmacies a percentage of revenue generated by each prescription.", "Thirty of the 55 covered entities GAO reviewed reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies. Of the 30 covered entities that provided discounts, 23 indicated that they pass on the full 340B discount to patients, resulting in patients paying the 340B price or less for drugs. Additionally, 14 of the 30 covered entities said they determined patients' eligibility for discounts based on whether their income was below a specified level, 11 reported providing discounts to all patients, and 5 determined eligibility for discounts on a case-by-case basis.", "GAO found weaknesses in HRSA's oversight that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies, such as:", "HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care.", "HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance.", "HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements.", "Given these weaknesses, HRSA does not have a reasonable assurance that covered entities have adequately identified and addressed noncompliance with 340B Program requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that HRSA's audits assess for duplicate discounts in Medicaid managed care, and HRSA require information on how entities determined the scope of noncompliance and evidence of corrective action prior to closing audits. HHS agreed with four of the recommendations, but disagreed with three recommendations, which GAO continues to believe are warranted to improve HRSA's oversight as explained in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The 340B Drug Pricing Program (340B Program), named for the statutory  provision authorizing it in the Public Health Service Act, requires drug  manufacturers to sell outpatient drugs at discounted prices to covered  entities\u2014certain hospitals and recipients of federal grants\u2014to have their  drugs covered by Medicaid. According to the Health Resources and  Services Administration (HRSA), the agency within the Department of  Health and Human Services (HHS) responsible for administering and  overseeing the 340B Program, the purpose of the 340B Program is to  enable covered entities to stretch scarce federal resources to reach more  eligible patients and provide more comprehensive services. In 2017,  there were more than 12,000 covered entities and more than 38,000 total  sites participating in the 340B Program.", "Participation in the 340B Program is voluntary for both covered entities  and drug manufacturers, but there are strong incentives to participate.  Covered entities can realize substantial savings through 340B price  discounts\u2014an estimated 20 to 50 percent of the cost of the drugs,  according to HRSA. In addition, covered entities can generate revenue as  they can purchase 340B drugs for eligible patients whose insurance  reimbursement exceeds the 340B price paid for the drugs. The statute  authorizing the 340B Program does not dictate how covered entities  should use this revenue or require discounts on the drugs to be passed  along to patients. Incentives for participation by drug manufacturers are  strong because they must participate in the 340B Program to receive  Medicaid reimbursement for their drugs.", "A covered entity typically purchases and dispenses 340B drugs through  pharmacies\u2014either through an in-house pharmacy; through the use of a  contract pharmacy arrangement, in which the entity contracts with an  outside pharmacy and pays it to dispense drugs on its behalf; or both.  The adoption and use of contract pharmacies in the 340B Program is  governed by HRSA guidance, and in March 2010, HRSA issued final  guidance allowing covered entities to have an unlimited number of  contract pharmacies. Since that time, the number of contract pharmacies  has increased significantly, from about 1,300 at the beginning of 2010 to  around 20,000 in 2017.", "Covered entities are required to meet certain conditions set forth both in  law and interpretive agency guidance. For example, they are prohibited  from diverting 340B drugs\u2014that is, transferring 340B drugs to individuals  who are not eligible patients of the covered entities. They are also  prohibited from subjecting manufacturers to \u201cduplicate discounts\u201d in which  drugs prescribed to Medicaid beneficiaries are subject to both the 340B  price and a rebate through the Medicaid Drug Rebate Program. Covered  entities that use contract pharmacies are responsible for overseeing  those pharmacies to ensure compliance with 340B Program prohibitions  on drug diversion and duplicate discounts. Some covered entities hire  and pay a private company, referred to as a third-party administrator  (TPA), to help determine patient eligibility and manage 340B inventory as  a means to ensure compliance with 340B Program requirements at  contract pharmacies.", "In a September 2011 report, we identified inadequacies in HRSA\u2019s  oversight of the 340B Program and recommended ways for HRSA to  improve oversight and ensure appropriate use of the program. In  response, HRSA has taken action to improve its oversight of covered  entities, including implementing a systematic approach to conducting  audits of covered entities. Given the growth in the 340B Program, there  has been continued interest in program oversight, and how the increase  in contract pharmacies affects the integrity of the program. You asked us  to review the use of contract pharmacies in the 340B Program. In this  report we  1.  describe the extent to which covered entities contract with pharmacies  to distribute 340B drugs, and characteristics of these pharmacies;  2.  describe financial arrangements selected covered entities have with  contract pharmacies and TPAs related to the administration and  dispensing of 340B drugs;  3.  describe the extent to which selected covered entities provide  discounts on 340B drugs dispensed by contract pharmacies to low- income, uninsured patients; and  4.  examine HRSA\u2019s efforts to ensure compliance with 340B Program  requirements at contract pharmacies.", "To examine the extent to which covered entities contract with pharmacies  to distribute 340B drugs and the characteristics of these pharmacies, we  analyzed HRSA\u2019s 340B Program database to identify the covered entities  registered to participate in the 340B Program and the contract  pharmacies registered to dispense 340B drugs for each entity, as of July  1, 2017\u2014the most current data available when we began our analysis.  The pharmacy characteristics we reviewed included the type of pharmacy  and the distance between the pharmacy and the covered entities with  which it had a contract. To determine the types of pharmacies that  participated as contract pharmacies, we matched the pharmacies  included in the 340B database with data from the National Council for  Prescription Drug Programs\u2019 DataQ\u2014a database used by health care  payers and claims processors across the country to identify pharmacies,  which contains information reported by pharmacies on their pharmacy  type and ownership, among other items. We used the addresses  included in the 340B database to determine the location of each covered  entity, its affiliated sites, and its contract pharmacies and used this  information to determine the distance between the entity and its contract  pharmacies. We calculated the distance (in miles) from the pharmacy to  the nearest site of the covered entity. To assess the reliability of the 340B  and DataQ databases, we obtained information from officials who are  knowledgeable about them regarding steps taken to ensure the accuracy  of the information contained in each, and performed checks to identify  missing or incorrect data. Based on these steps, we determined that the  data were sufficiently reliable for the purposes of our reporting objective.", "To describe financial arrangements selected covered entities have with  contract pharmacies and TPAs, we reviewed a sample of contracts  between entities and pharmacies and collected information from selected  entities and TPAs. We selected a nongeneralizable sample of 30  pharmacy contracts from among those that HRSA had collected\u2014 contracts the agency obtained during audits of covered entities from fiscal  years 2014 through 2016. We selected contracts to obtain variation in  the type of covered entity (15 hospitals and 15 federal grantees) and  geographic location. For these selected contracts, we identified the types  and amounts of fees that covered entities agreed to pay contract  pharmacies for dispensing and managing 340B prescriptions, as well as  determined factors that may have impacted the fee amounts. To describe  financial arrangements covered entities have with TPAs, beginning in  September 2017, we sent a data collection instrument\u2014which we refer to  as a questionnaire in this report\u2014to a nongeneralizable sample of 60  covered entities that had contract pharmacies to obtain information about  the arrangements they had with TPAs. We received responses from 55  of the covered entities\u201428 hospitals and 27 federal grantees. In addition,  we interviewed 10 of the 55 covered entities that responded to our  questionnaire to obtain more detailed information about the fees they pay  their TPAs. We selected covered entities to receive the questionnaire and  for interviews to achieve variation in terms of their type, geographic  location, and number of contract pharmacies. Finally, we interviewed two  TPAs to gain insights about the types of financial arrangements they have  with covered entities.", "To describe the extent to which selected covered entities provide  discounts on 340B drugs dispensed by contract pharmacies to low- income, uninsured patients, we used the same questionnaire as  previously noted to collect information about any discounts provided. This  included information on the proportion of pharmacies at which discounts  on 340B drugs were available, how covered entities determined which  patients were eligible for those discounts, the prices these patients  generally paid to obtain the drugs, and how covered entities inform  patients and contract pharmacies about the availability of discounts.  Additionally, we asked officials from the 10 covered entities we  interviewed for additional information about discounts provided on 340B  drugs dispensed to low-income, uninsured patients at contract  pharmacies.", "To examine HRSA\u2019s efforts to ensure compliance with 340B Program  requirements at contract pharmacies, we reviewed relevant policies,  procedures, and guidance, including HRSA\u2019s 2010 guidance on contract  pharmacy services and documentation of the agency\u2019s audit procedures.  We also analyzed summaries of HRSA\u2019s audits of covered entities for  fiscal years 2012 through 2017, posted on its website as of February 8,  2018. We conducted an in-depth review of a nongeneralizable sample  of 20 audits that were conducted from fiscal years 2014 through 2016 for  covered entities that had contract pharmacies at the time of the audit.  We selected this sample from among audits that were closed by HRSA to  obtain variation in terms of covered entity type and audit findings. We  also interviewed HRSA officials about their oversight activities, including  their audit process, and spoke with the contractor that has conducted  audits on HRSA\u2019s behalf since fiscal year 2017. Additionally, we asked  officials from the 10 covered entities interviewed about their practices for  overseeing contract pharmacies. Finally, we evaluated HRSA\u2019s contract  pharmacy guidance, covered entity oversight, and audit process against  federal internal control standards related to control activities, information  and communication, and monitoring.", "We conducted this performance audit from January 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The 340B Program was created in 1992 following the enactment of the  Medicaid Drug Rebate Program and gives 340B covered entities  discounts on outpatient drugs comparable to those made available to  state Medicaid agencies. HRSA is responsible for administering and  overseeing the 340B Program."], "subsections": [{"section_title": "340B Program Eligibility", "paragraphs": ["Eligibility for the 340B Program, which is defined in the Public Health  Service Act, has expanded over time. Covered entities generally become  eligible for the 340B Program by qualifying as certain federal grantees or  as one of six specified types of hospitals. Eligible federal grantees include  federally qualified health centers (FQHCs), which provide comprehensive  community-based primary and preventive care services to medically  underserved populations, as well as certain other federal grantees, such  as family planning clinics and Ryan White HIV/AIDS program grantees.  Eligible hospitals include critical access hospitals\u2014small, rural hospitals  with no more than 25 inpatient beds; disproportionate share hospitals\u2014 general acute care hospitals that serve a disproportionate number of low- income patients; and four other types of hospitals (see fig. 1).", "Some covered entities, typically hospitals and FQHCs, have multiple  sites: the main site, which HRSA refers to as the parent site, and one or  more other associated sites referred to as child sites. Child sites can  include satellite clinics, off-site outpatient facilities, hospital departments,  and other facilities. According to HRSA officials, to participate in the 340B  Program and be considered part of the covered entity, the associated  sites must meet program requirements and be registered with HRSA as a  child site."], "subsections": []}, {"section_title": "Program Structure, Operation, and Key Requirements", "paragraphs": ["The 340B price for a drug\u2014often referred to as the 340B ceiling price\u2014is  based on a statutory formula and represents the highest price a  participating drug manufacturer may charge covered entities. Covered  entities must follow certain requirements as a condition of participating in  the 340B Program. For example, covered entities are prohibited from  subjecting manufacturers to \u201cduplicate discounts\u201d in which drugs  prescribed to Medicaid beneficiaries are subject to both the 340B  price and a rebate through the Medicaid Drug Rebate Program. diverting any drug purchased at the 340B price to an individual who is  not a patient of the covered entity. Under HRSA guidance defining this  term, diversion generally occurs when 340B drugs are given to  individuals who are not receiving health care services from covered  entities or are receiving services that are not consistent with the type  of services for which the covered entity qualified for 340B status. (See  table 1 for more information on HRSA\u2019s definition of an eligible  patient.) Covered entities are permitted to use drugs purchased at the  340B price for all individuals who meet the 340B Program definition of  a patient regardless of their financial or insurance status."], "subsections": []}, {"section_title": "Contract Pharmacies", "paragraphs": ["Covered entities may choose to dispense 340B drugs they purchase  through contract pharmacies. The adoption and use of contract  pharmacies in the 340B Program is governed by HRSA guidance.  HRSA\u2019s original guidance permitting the use of contract pharmacies  limited their use to entities that did not have in-house pharmacies and  allowed each entity to contract with only one outside pharmacy.  However, March 2010 guidance lifted the restriction on the number of  pharmacies with which a covered entity could contract. Since that time,  the number of contract pharmacies has increased more than fifteen-fold,  from about 1,300 to approximately 20,000. According to HRSA guidance,  a covered entity is required to have a written contract in place with each  pharmacy through which it intends to dispense 340B drugs, but is not  generally required to submit its pharmacy contracts to HRSA. A covered  entity that has more than one site at which it provides health care may  enter into separate pharmacy contracts for the parent site and each child  site, or one comprehensive pharmacy contract including all sites intending  to use the pharmacy. It is up to the covered entity to determine which of  its sites will be included in a contract with a pharmacy, and thus have  what is referred to as a contract pharmacy arrangement with that  pharmacy. Figure 2 provides an illustration of a covered entity that has  four contract pharmacies but a total of six contract pharmacy  arrangements, as not all of the entity\u2019s sites have contracts with each of  the pharmacies.", "Covered entities that choose to have contract pharmacies are required to  register with HRSA the names of each of the pharmacies with which they  contract. Covered entities may register their contract pharmacies in one  of two ways: 1) only in relation to the parent site (use by child sites would  be allowed as long as the sites were included in a comprehensive  contract between the entity and the contracted pharmacies); or 2)  separately for each site (parent and child) involved in a contractual  arrangement with the pharmacy. As part of this registration, HRSA  guidance specifies that covered entities must certify that they have signed  and have in effect an agreement with each contract pharmacy and have a  plan to ensure compliance with the statutory prohibitions on 340B drug  diversion and duplicate discounts at their contract pharmacies.", "Like other pharmacies, when contract pharmacies fill prescriptions, they  collect payments from the patient; if the patient has health insurance, the  pharmacy will bill the insurer for the drug. In addition, each covered entity  must determine which prescriptions are for eligible patients of the entity,  and thus, can be filled with 340B drugs. One way that a covered entity  could choose to do this is to employ a TPA to review all the prescriptions  filled by a contract pharmacy to determine which, if any, prescriptions  were issued by the covered entity to an eligible patient, and thus are  eligible for the 340B discount. The covered entity then pays both the  contract pharmacy and the TPA fees that they have negotiated for their  roles in managing and distributing 340B drugs. These fees are typically  deducted from the reimbursed amounts received from patients and their  health insurers by the pharmacy and TPA, and then the balance is  forwarded to the covered entity. (See fig. 3 for an example of how  covered entities work with contract pharmacies and TPAs to dispense  340B drugs.)"], "subsections": []}, {"section_title": "HRSA\u2019s Oversight of Covered Entities", "paragraphs": ["In fiscal year 2012, HRSA implemented a systematic approach to  conducting audits of covered entities that is outlined on its website. HRSA  has increased the number of covered entities audited since it began  audits in fiscal year 2012, and now audits 200 entities per year. (See  table 2.) HRSA\u2019s audits include covered entities that are randomly  selected based on risk-based criteria (approximately 90 percent of all  audits conducted each year), and covered entities that are targeted based  on information from stakeholders such as drug manufacturers (10 percent  of the audits conducted). The criteria for risk-based audits include a  covered entity\u2019s volume of 340B drug purchases, number of contract  pharmacies, time in the 340B Program, complexity of its program, and  history of violations or allegations of noncompliance associated with  diversion and duplicate discounts.", "Among other things, HRSA\u2019s audits include reviews of each covered  entity\u2019s policies and procedures, including those for overseeing contract  pharmacies; an assessment of the entity\u2019s compliance with respect to  340B eligibility status, the prevention of duplicate discounts and diversion,  and other program requirements; and reviews of a sample of  prescriptions filled during a 6-month period, including prescriptions  dispensed by contract pharmacies, to identify instances of non- compliance. As a result of the audits conducted, HRSA has identified  instances of non-compliance with program requirements, including  violations related to drug diversion and the potential for duplicate  discounts. Based on the audits for which results were posted on  HRSA\u2019s website as of February 8, 2018, 72 percent of the covered  entities audited in fiscal years 2012 through 2017 had one or more  findings of noncompliance. When an audit of a covered entity has a  finding of noncompliance, covered entities are required to submit a  corrective action plan within 60 days of the audit being finalized for HRSA  approval. HRSA closes out the audit once the entity attests that the  corrective action plan has been fully implemented and any necessary  repayments have been made to affected manufacturers."], "subsections": []}]}, {"section_title": "About One-Third of Covered Entities Had One or More Contract Pharmacies, and Pharmacy Characteristics Varied", "paragraphs": ["As of July 1, 2017, about one-third of the more than 12,000 covered  entities in the 340B Program had contract pharmacies, but the extent to  which covered entities had contract pharmacies varied by type of entity.  Overall, a higher percentage of hospitals (69.3 percent) had at least one  contract pharmacy compared to federal grantees (22.8 percent). Among  the six types of hospitals, the percentage that had at least one contract  pharmacy ranged from 39.2 percent of children\u2019s hospitals to 74.1 percent  of critical access hospitals. Among the 10 types of federal grantees, the  percentage with at least one contract pharmacy ranged from 3.9 percent  of family planning clinics to 75.2 percent of FQHCs (see fig.4).", "Among covered entities that had at least 1 contract pharmacy, the  number of contract pharmacies ranged from 1 to 439, with an average of  12 contract pharmacies per entity. However, the number of contract  pharmacies varied by covered entity type, with disproportionate share  hospitals having the most on average (25 contract pharmacies), and  critical access hospitals having the least (4 contract pharmacies). (See  fig. 5 for the distribution of contract pharmacies by covered entity type.)  However, we found that a covered entity that contracts with a pharmacy  may not actually use the pharmacy to dispense 340B drugs. For example,  three covered entities that received our questionnaire told us that  although they had one or more contract pharmacies registered with  HRSA, they did not use those pharmacies to dispense 340B drugs.  Moreover, officials from a covered entity we interviewed reported that  while the entity maintained a contract with a specialty pharmacy, it had  not dispensed 340B drugs through that pharmacy in several years.  Officials explained that the covered entity maintained its contract and  continued to register this pharmacy with HRSA because it would be  financially beneficial should it have a patient fill a 340B-eligible specialty  drug at this pharmacy in the future.", "The actual number of 340B contract pharmacy arrangements\u2014the  number of contractual arrangements between contract pharmacies and  the sites of a covered entity\u2014is unknown because HRSA does not  require a covered entity to register pharmacies with each of its child sites.  Rather, HRSA gives covered entities the option to register contract  pharmacies only in relation to the parent site: child sites may use that  pharmacy if included in the written contract between the entity and the  pharmacy. Based on our analysis of HRSA data, 1,645 covered entities  that had at least one child site registered their contract pharmacies only  with their parent sites. These 1,645 covered entities had a total of 25,481  registered contract pharmacy arrangements. However, if the  pharmacies were contracted to work with all of the covered entities\u2019  sites\u2014the parents and all the child sites\u2014then these 1,645 entities could  have as many as 866,388 contract pharmacy arrangements. Therefore,  the number of contract pharmacy arrangements is likely higher than what  is reported in HRSA\u2019s database.", "Nearly 93 percent of the approximately 20,000 pharmacies that 340B  covered entities contracted with as of July 1, 2017, were classified as  community/retail pharmacies, less than 1 percent were classified as  specialty pharmacies, and about 7 percent were other types of  pharmacies including institutional and mail order pharmacies.  Furthermore, the majority (75 percent) of 340B contract pharmacies were  chain pharmacies, while 20 percent were independent pharmacies and 5  percent were other pharmacies. In contrast, slightly over half of all  pharmacies nationwide are chain pharmacies and about one-third are  independent. The five biggest pharmacy chains\u2014CVS, Walgreens,  Walmart, Rite-Aid, and Kroger\u2014represented a combined 60 percent of  340B contract pharmacies, but only 35 percent of all pharmacies  nationwide. Figure 6 shows how the types of pharmacies varied by type  of covered entity. Critical access hospitals had a higher proportion of  independent contract pharmacies (40 percent of their pharmacies)  compared to other covered entity types (which ranged from 11 percent for  disproportionate share hospitals to 21 percent for other federal grantees).  Our analysis suggests that this is likely due, in part, to a larger proportion  of critical access hospitals compared to other types of covered entities  being located in rural areas; independent contract pharmacies are also  more likely than other contract pharmacies to be located in rural areas.", "Across all covered entities, the distance between the entities and their  contract pharmacies ranged from 0 miles (meaning that the contract  pharmacy and entity were co-located) to more than 5,000 miles; the  median distance was 4.2 miles. Table 3 shows the distribution of  distances between covered entities and their pharmacies overall and by  entity type.", "While there was a range in distances between covered entities and each  of their pharmacies, about half of the entities had all their contract  pharmacies located within 30 miles, but this varied by entity type.  Specifically, more than 60 percent of critical access hospitals and FQHCs  had all of their contract pharmacies within 30 miles. In contrast, 45  percent of disproportionate share hospitals had at least one pharmacy  that was more than 1,000 miles away compared to 11 percent or less for  grantees and critical access hospitals. (See fig. 7.)"], "subsections": []}, {"section_title": "Selected Covered Entities Used Various Methods to Pay Contract Pharmacies and TPAs", "paragraphs": ["Contracts we reviewed between selected covered entities and contract  pharmacies showed that entities generally agreed to pay their contract  pharmacies a flat fee per 340B prescription, with some entities also  paying additional fees based on a percentage of revenue. Selected  covered entities and TPAs included in our review indicated two main  methods entities use to pay for TPA services: 1) per prescription  processed, or 2) per contract pharmacy."], "subsections": [{"section_title": "Contracts Reviewed Showed Covered Entities Agreed to Pay Contract Pharmacies a Fee per 340B Prescription; Some Also Agreed to Additional Fees", "paragraphs": ["Twenty-nine of the 30 contracts we reviewed between covered entities  and contract pharmacies included provisions for the entities to pay flat  fees for each eligible 340B prescription. For the remaining contract, the  covered entity and the contract pharmacy were part of the same hospital  system, and the contract provided that the entity would not pay fees for  340B prescriptions. In addition to payment of flat fees, 13 of the 29  contracts required the covered entity to pay the contract pharmacy a fee  based on a percentage of revenue generated for each 340B prescription.  Among the contracts we reviewed, more federal grantees than hospitals  had contracts that included both flat fees and fees based on the  percentage of revenue (see fig. 8).", "We found a wide range in the amount of flat fees covered entities agreed  to pay pharmacies in the contracts we reviewed, though they generally  ranged from $6 to $15 per 340B prescription. (See Appendix I for a  description of fees listed in each of the contracts we reviewed.) The  amount of the flat fees per 340B prescription varied by several factors  according to our review, including covered entity type, type of drug, and  patient insurance status:", "Flat fees were generally higher for hospitals than federal  grantees. In general, hospitals\u2019 flat fees were higher than those for  grantees, with most flat fees ranging from $15 to $25 per 340B  prescription for hospitals, compared to from $6 to $13 for grantees.", "Flat fees were sometimes higher for brand drugs. Three of the 29  contracts we reviewed specified different flat fees for brand and  generic drugs. In 2 of these contracts flat fees were $5 or $7 higher  for brand drugs. In the remaining contract, the fees for some brand  drugs were substantially higher, ranging from $75 to $1,750 for brand  drugs, compared to $0 for generic drugs. Additionally, some contracts  we reviewed only specified a fee for brand drugs, and 4 of the  contracts either excluded generic drugs from being purchased at the  340B price or limited the use of the 340B Program to brand drugs.", "Flat fees were different or substantially higher for certain  specialty drugs. For 2 of the 29 contracts we reviewed, flat fees were  for drugs to treat hemophilia. Given the different nature of  hemophilia treatment drugs, fees for these drugs were different than  those in the other contracts for other types of drugs, and provided for  payments of $.06 and $.09 per unit of blood clotting factor.  Additionally, 2 contracts contained substantially higher flat fees for  specialty medications. In 1 contract, the flat fees were $125 per  prescription for brand and generic human immunodeficiency virus  drugs, and $1,750 for brand hepatitis C drugs. In another contract the  flat fees were $65 for all specialty drugs, compared to $13 for other  drugs.", "Flat fees were sometimes higher for 340B prescriptions  dispensed to patients with insurance. Seven of the 29 contracts we  reviewed specified different flat fees for prescriptions provided to  patients with health insurance than for patients paying with cash or  through a drug discount card provided by the covered entity. The flat  fees entities would pay under these contracts ranged from $1 to $16  higher per 340B prescription dispensed to insured patients compared  to patients not using insurance.", "As previously noted, in addition to requiring flat fees for dispensing  prescriptions, 13 of the 29 contracts we reviewed included provisions for  the covered entity to pay the pharmacy a fee based on the percentage of  revenue generated by each prescription. These percentage fees only  applied to prescriptions provided to patients with insurance, and ranged  from 12 to 20 percent of the revenue generated by the prescriptions.  Generally there were two methods for determining the amount of revenue  generated. The first method used the reimbursement the pharmacy  received for the prescription, while the second method used the net  revenue after subtracting the 340B cost of the drug from the  reimbursement received by the pharmacy."], "subsections": []}, {"section_title": "Selected Covered Entities Use Two Main Methods to Pay TPAs", "paragraphs": ["Officials from the two TPAs we interviewed and questionnaire  respondents from the 39 covered entities that use TPAs described two  main methods entities use to reimburse TPAs for 340B services: 1) a fee  for each prescription processed by the TPA, and 2) a fee for each  contract pharmacy for which the TPA processes 340B claims on behalf of  the entity.", "Example of Fees between a Covered Entity  and Third-Party Administrator (TPA)  In the hypothetical example below, the TPA  receives $85 from the contract pharmacy.   This amount represents the total  reimbursement for the 340B drug, less fees  deducted by the contract pharmacy. Pursuant  to an agreement with the covered entity, the  TPA deducts a fee of $5, and forwards the  remaining balance of $80 to the covered  entity. This represents the total revenue the  covered entity generated from the 340B drug.", "Officials with the two TPAs we interviewed told us that their agreements  with covered entities most frequently involve covered entities  compensating them based on a fee for each prescription they process on  behalf of the entity. Officials from one of these TPAs described three  different fee-per-prescription options they offer to covered entities, with  the amount of the fees varying based on the option selected:", "A small fee, for example, 20 cents, for every prescription filled by the  covered entity\u2019s contract pharmacy, and reviewed and processed by  the TPA. This includes prescriptions that may not have originated  from the covered entity, and may not be 340B eligible, as contract  pharmacies can also fill prescriptions for individuals who are not  patients of the entity.", "A mid-sized fee, for example, $1.90, for each prescription filled by the  covered entity\u2019s contract pharmacy that the TPA reviewed and  determined originated from the covered entity. These prescriptions  may or may not be 340B eligible.", "A larger fee, for example, $5 to $7, for each prescription filled by the  covered entity\u2019s contract pharmacy that the TPA determined  originated from the entity and is 340B eligible.", "The 39 covered entities that responded to our questionnaire and reported  using a TPA most frequently reported paying their TPAs a fee per each  prescription processed, but the exact method varied. For example, some  covered entities said they paid their TPAs for each prescription regardless  of whether it was determined to be 340B eligible, others limited the fees  to prescriptions that were 340B eligible, and some reported paying TPAs  for 340B-eligible prescriptions dispensed to an insured patient. (See table  4.)", "Among the 10 covered entities we interviewed, officials from 8 of these  entities said they used TPAs; 5 said they pay their TPAs a fee per  prescription, 1 reported paying a fee per contract pharmacy, and 2  reported using both options. Among the covered entities that used fees  per prescription and told us the amounts of the fees they pay, the fees  ranged from $3.50 to $10.00 per 340B eligible prescription or $3.95 per  prescription regardless of whether the prescription was 340B eligible.", "For those that pay their TPA a fee per contract pharmacy, the fee was  $25,000 a year per pharmacy."], "subsections": []}]}, {"section_title": "About Half of the Covered Entities Reviewed Provided Low-Income, Uninsured Patients Discounts on 340B Drugs at Some or All of Their Contract Pharmacies", "paragraphs": ["Of the 55 covered entities responding to our questionnaire, 30 reported  providing low-income, uninsured patients discounts on 340B drugs  dispensed at some or all of their contract pharmacies, and 25 said they  did not offer discounts at their contract pharmacies. All 30 covered  entities providing patients with discounts reported providing discounts on  the drug price for some or all 340B drugs dispensed at contract  pharmacies. Federal grantees were more likely than hospitals to provide  such discounts and to provide them at all contract pharmacies (see fig.  9).", "Of the 30 covered entities that responded to our questionnaire that they  provided discounts on the drug price, 23 reported providing patients the  full 340B discount\u2014the patients obtained drugs from contract pharmacies  at the 340B price or less. In many cases, these covered entities indicated  that patients received drugs at no cost. Some covered entities reported  that patients would pay more than the 340B price, but less than the  wholesale price of the drug or what a self-paying patient would pay, and  others indicated they determined discounts for patients on a case-by-case  basis. A larger number of federal grantees than hospitals (15 compared to  8) indicated their patients would pay the 340B price or less for their drugs  at contract pharmacies where discounts were available. (See fig. 10.)", "In addition to providing discounts on the 340B drug price, some of the 30  covered entities also reported providing discounts on fees patients may  pay to contract pharmacies for 340B drugs. Contract pharmacies may  charge fees to dispense 340B drugs or cover administrative costs of  participating in a covered entity\u2019s 340B program, including costs  associated with tracking drug inventories and ordering new drugs. In  general, about two-thirds of the covered entities with patients who would  be subject to dispensing or administrative fees at contract pharmacies  reported providing discounts on the fees at some or all of their contract  pharmacies. Hospitals were more likely than grantees to provide  discounts on these fees when applicable. (See fig.11.)", "The 30 covered entities providing 340B discounts to low-income,  uninsured patients reported using a variety of methods to determine  whether patients were eligible for these discounts. Fourteen of the  covered entities said they determined eligibility for discounts based on  whether a patient\u2019s income was below certain thresholds as a percentage  of the federal poverty level, 11 reported providing discounts to all patients,  and 5 said they determined eligibility for discounts on a case-by-case  basis. For those 14 covered entities determining eligibility based on  income as a percentage of the federal poverty level, the threshold used to  determine who was eligible for discounts varied but most reported that  patients with incomes at or below 250 percent of the federal poverty level  would be eligible for discounts. (See table 5.)", "Covered entities reported making patients aware of the availability of  discounts at contract pharmacies primarily through oral communication by  staff located at either the entity or the pharmacy. In addition, the covered  entities reported using a variety of methods to inform contract pharmacies  about which patients were eligible for discounts, including through notes  in patient medical records sent to the pharmacy or by placing codes on  the patient\u2019s prescriptions sent to or presented at the pharmacy. (See  table 6.) Officials from one covered entity we interviewed said that it  provides patients eligible for discounts with an identification card (which  they referred to as a drug discount card) that patients present at the  contract pharmacy; this card informs pharmacy staff of the specific  discount amount. Officials from another covered entity said they place  codes on electronic prescriptions which informs the pharmacy about  discounts.", "Some covered entities that did not provide discounts on 340B drugs at  their contract pharmacies reported assisting patients with drug costs  through other mechanisms. For example, 6 of the 10 covered entities we  interviewed said that while they did not provide discounts on 340B drugs  dispensed at their contract pharmacies, they provide charity care to low- income patients, including free or discounted prescriptions. Additionally, 4  of the 25 covered entities that reported on our questionnaire that they did  not provide discounts at their contract pharmacies said they provided  patients with discounts on 340B drugs at their in-house pharmacies."], "subsections": []}, {"section_title": "Oversight Weaknesses Impede HRSA\u2019s Ability to Ensure Compliance at 340B Contract Pharmacies", "paragraphs": ["HRSA does not have complete data on the total number of contract  pharmacy arrangements in the 340B Program to inform its oversight  efforts, including information that could be used to better target its audits.  Additionally, weaknesses in HRSA\u2019s audit process compromise its  oversight of covered entities. Finally, the lack of specificity in HRSA\u2019s  guidance to covered entities potentially impedes covered entities\u2019  oversight of contract pharmacies."], "subsections": [{"section_title": "HRSA Does Not Have Complete Data on Contract Pharmacy Arrangements to Use for Its Oversight", "paragraphs": ["HRSA does not have complete data on all contract pharmacy  arrangements in the 340B Program to inform its oversight efforts. HRSA  requires covered entities to register their contract pharmacies with the  agency and recertify that registration annually. Contract pharmacies  registered to each covered entity are recorded in a publicly available  database, which according to HRSA, is used by various stakeholders to  validate the eligibility of entities and confirm shipping addresses for each  contract pharmacy eligible to receive 340B drugs on an entity\u2019s behalf.  However, because covered entities differ in the way they register their  contract pharmacies, HRSA, and its publicly available database, does not  have information on all of an entity\u2019s contract pharmacy arrangements.  Specifically, because HRSA does not require covered entities to  separately register contract pharmacies to each child site for which a  contractual relationship exists, HRSA does not have complete information  on which sites of an entity have contracted with a pharmacy to dispense  340B drugs. Our analysis of HRSA data showed that the registration of  contract pharmacies for 57 percent of covered entities with child sites only  specified relationships between contract pharmacies and the parent site;  thus HRSA may only have information on a portion of the actual number  of 340B contract pharmacy arrangements. Additionally, manufacturers do  not have complete information on which covered entity sites have  contracts with a pharmacy to dispense 340B drugs, according to HRSA  officials. Manufacturers could use such information to help ensure that  340B discounted drugs are only provided to pharmacies on behalf of a  covered entity site with a valid 340B contract with that site.", "HRSA officials told us that the number of contract pharmacy  arrangements recorded in HRSA\u2019s database increases a covered entity\u2019s  chance of being randomly selected for a risk-based audit. However, since  HRSA gives covered entities multiple contract pharmacy registration  options, the likelihood of an entity being selected for an audit is  dependent, at least in part, on how an entity registers its pharmacies as  opposed to the entity\u2019s actual number of pharmacy arrangements.  Without more complete information on covered entities\u2019 contract  pharmacy arrangements, HRSA cannot ensure that it is optimally  targeting the limited number of risk-based audits done each year to  entities with more contract pharmacy arrangements. Federal internal  control standards related to information and communication state that  management should use quality information to achieve the entity\u2019s  objectives, such as by obtaining relevant data that are reasonably free  from error and bias and represent what they purport to represent so that  they can be used for effective monitoring. Without complete information  on covered entities\u2019 use of contract pharmacies, HRSA does not have the  information needed to effectively oversee the 340B Program, including  information that could be used to better target its audits of covered  entities."], "subsections": []}, {"section_title": "Weaknesses in HRSA\u2019s Audit Process Impede Its Oversight of 340B Program Compliance at Contract Pharmacies", "paragraphs": ["HRSA primarily relies on audits to assess covered entities\u2019 compliance  with 340B Program requirements, including compliance at contract  pharmacies, according to HRSA officials; however weaknesses in its  audit process impede the effectiveness of its oversight. As a result of its  audits, HRSA has identified instances of diversion and the potential for  duplicate discounts at contract pharmacies, among other findings of  noncompliance. Specifically, through the audits conducted since fiscal  year 2012, HRSA identified at least 249 instances of diversion at contract  pharmacies and 15 instances of the potential for duplicate discounts for  drugs dispensed at contract pharmacies, as of February 2018. HRSA had  also identified 33 covered entities with insufficient contract pharmacy  oversight. (See Table 7.)", "However, we identified two areas of weaknesses in HRSA\u2019s audit process  that impede its oversight of covered entities\u2019 compliance with 340B  Program requirements at contract pharmacies: 1) the process does not  include an assessment of all potential duplicate discounts, and 2) the  process for closing audits does not ensure all covered entities have fully  addressed any noncompliance identified.", "Medicaid Delivery Systems  States provide Medicaid services through  either fee-for-service or managed care. Under  fee-for-service, states reimburse providers  directly for each service delivered. For  example, a pharmacy would be paid by the  state for each drug dispensed to a Medicaid  beneficiary. Under a capitated managed care  model, states typically contract with managed  care organizations to provide a specific set of  services to Medicaid beneficiaries (which  could include drugs) and prospectively pays  each organization a set amount per  beneficiary per month to provide or arrange  those services.", "Not all potential duplicate discounts are assessed. HRSA\u2019s audits  only assess the potential for duplicate discounts in Medicaid fee-for- service. They do not include a review of covered entities\u2019 processes to  prevent duplicate discounts for drugs dispensed through Medicaid  managed care. The potential for duplicate discounts related to Medicaid  managed care has existed since 2010 when manufacturers were required  to pay Medicaid rebates under managed care, and currently, there are  more Medicaid enrollees, prescriptions, and spending for drugs under  managed care than fee-for-service.", "HRSA officials told us that they do not assess the potential for duplicate  discounts in Medicaid managed care as part of their audits because they  have yet to issue guidance as to how covered entities should prevent  duplicate discounts in Medicaid managed care. They agreed that the  lack of Medicaid managed care guidance for covered entities was  problematic, and HRSA\u2019s December 2014 policy release stated, \u201cHRSA  recognizes the need to address covered entities\u2019 role in preventing  duplicate discounts under Medicaid managed care, and is working with  the Centers for Medicare & Medicaid Services (CMS) to develop policy in  this regard.\u201d According to HRSA, in the absence of formal guidance,  covered entities should work with their states to develop strategies to  prevent duplicate discounts in Medicaid managed care. However, 8 of the  10 covered entities we spoke with described challenges working with their  states and local Medicaid managed care organizations to ensure that  duplicate discounts were not occurring or expressed the need for more  guidance from HRSA on how to comply with 340B requirements related to  duplicate discount prevention. As a result of these challenges, some  covered entities acknowledged that they did not have assurance that  duplicate discounts were not occurring with their Medicaid managed care  claims, while other entities told us that they did not seek discounts for the  drugs of managed care patients due to compliance challenges.", "Federal internal control standards related to control activities and  monitoring state that agencies should 1) implement control activities  through policies, such as by determining the necessary policies based on  the objectives and related risks for the operational process; and 2)  establish and operate monitoring activities to monitor the internal control  system and evaluate results, such as by establishing and operating  monitoring activities that are built into each entity\u2019s operations, performed  continually, and responsive to change. In addition, federal law directs  the agency to develop detailed guidance describing methodologies and  options for avoiding duplicate discounts. Until HRSA develops guidance  and includes an assessment of the potential for duplicate discounts in  Medicaid managed care as part of its audits, the agency does not have  assurance that covered entities\u2019 efforts are effectively preventing  noncompliance. As a result, manufacturers are at risk of being required to  erroneously provide duplicate discounts for Medicaid prescriptions.", "Audit closure process does not ensure all identified issues of  noncompliance are addressed. Under HRSA\u2019s audit procedures,  covered entities with audit findings are required to 1) submit corrective  action plans to HRSA that indicate that the entities will determine the full  scope of any noncompliance (beyond the sample of prescriptions  reviewed during an audit); 2) outline the steps they plan to take to correct  findings of noncompliance, including any necessary repayments to  manufacturers; and 3) specify the timelines for implementing the  corrective action plans. HRSA closes the audit when a covered entity submits a letter attesting that its corrective action plan, including its  assessment of the full scope of noncompliance, has been implemented  and any necessary repayments to manufacturers have been completed.", "However, we identified two specific deficiencies in HRSA\u2019s approach.  First, although HRSA requires that covered entities determine the full  scope of noncompliance found in audits, it does not provide guidance as  to how entities should make this assessment. Specifically, HRSA does  not specify how far back in time covered entities must look to see if any  related noncompliance occurred and instead, relies on each entity to  make this determination. For example, a document from a fiscal year  2017 audit revealed that a covered entity that had participated in the  340B Program for 3 years only reviewed 5 months of claims to determine  whether any other instances of diversion had occurred, diminishing the  likelihood that its efforts identified the full scope of noncompliance.  Additionally, until April 2018, HRSA did not require covered entities that  were audited to communicate the methodology used to assess the full  scope of noncompliance, or the findings of their assessments, including  how many or which manufacturers were due repayment. Beginning April  1, 2018, HRSA requires covered entities subject to targeted audits to  document their methodology for assessing the full scope of  noncompliance. However, as previously noted, only 10 percent of the 200  audits HRSA currently conducts each year are targeted audits.  Consequently, the vast majority of covered entities audited are not  required to provide HRSA with information on their methodology for  assessing the full scope of noncompliance. Furthermore, HRSA officials  told us that they believe determining the scope of noncompliance is a  matter between the covered entities and manufacturers. Thus, HRSA  relies on manufacturers to determine the adequacy of a covered entity\u2019s  effort to assess the full scope of noncompliance. However, covered  entities only contact the manufacturers that they determine were affected  by the noncompliance based on the methodology they choose to apply;  thus, it is unclear how manufacturers not contacted would be in a position  to negotiate an acceptable assessment of the scope of noncompliance  and any applicable repayment.", "Federal internal control standards related to control activities state that  agencies should implement control activities through policies, such as by documenting policies in the appropriate level of detail to allow  management to effectively monitor the control activity. As HRSA does  not provide guidance on how covered entities are to assess the full scope  of noncompliance and does not review most entities\u2019 methodology for  making such assessments, the agency does not have reasonable  assurances that entities have adequately identified all instances of  noncompliance.", "Second, HRSA generally relies on each covered entity to self-attest that  all audit findings have been addressed and that the entity is now in  compliance with 340B Program requirements. Beginning April 1, 2018,  HRSA requires the 10 percent of covered entities that are subject to  targeted audits to provide documentation that they implemented their  corrective action plans prior to HRSA closing the audits. However, it still  relies on the remaining 90 percent of audited covered entities to self- attest to their compliance with program requirements.", "HRSA officials told us they believe that a covered entity providing a  description of the corrective actions is sufficient, and that the self- attestation of corrective action plan implementation provides HRSA with  the information necessary to close the audit. However, aside from the  self-attestation, HRSA\u2019s only mechanism to ensure that the majority of  audited covered entities have implemented their corrective action plans is  to re-audit the entities\u2014in other words, subject the entity to a targeted  audit. To date, the agency told us that it has re-audited 21 covered  entities, and based on those re-audits, determined that 1 entity did not  fully implement its corrective action plan from the original audit. However,  we found that of the 19 re-audited covered entities for which results were  available, 12 had similar findings of noncompliance in their second audits,  as were identified in their original audits (e.g., diversion findings in both  audits), 3 of which were caused by the same issue, according to  information provided to us by HRSA.", "Federal internal control standards for monitoring specify that agencies  should establish and operate monitoring activities to monitor the internal  control system and evaluate the results, for example by using ongoing  monitoring to obtain reasonable assurance of the operating effectiveness  of the service organization\u2019s internal controls over the assigned process.", "By only reviewing evidence of corrective action plan implementation for  the limited number of covered entities subject to targeted audits, HRSA  does not have reasonable assurance that the majority of covered entities  audited have corrected the issues identified in the audit, and are not  continuing practices that could lead to noncompliance, thus increasing the  risk of diversions, duplicate discounts, and other violations of 340B  Program requirements."], "subsections": []}, {"section_title": "HRSA\u2019s Guidance for Covered Entities\u2019 Oversight of Contract Pharmacies Lacks Specificity", "paragraphs": ["HRSA guidance for covered entities on their oversight of contract  pharmacies lacks specificity and thus provides entities with considerable  discretion on the scope and frequency of their oversight practices.  Specifically, HRSA\u2019s 2010 guidance on contract pharmacy services  specifies that covered entities are responsible for overseeing their  contract pharmacies to ensure that drugs the entity distributes through  them comply with 340B Program requirements, but states that, \u201cthe exact  method of ensuring compliance is left up to the covered entity.\u201d The  guidance also states that, \u201cannual audits performed by an independent,  outside auditor with experience auditing pharmacies are expected,\u201d but  HRSA officials told us that covered entities are not required to conduct  independent audits and instead are expected to do some form of periodic  oversight of their contract pharmacies. Thus, according to HRSA  officials, if a covered entity indicates that it has performed oversight in the  12 months prior to a HRSA audit, then HRSA considers the entity to have  met HRSA\u2019s standards for conducting contract pharmacy oversight  regardless of what the oversight encompassed.", "Due, at least in part, to a lack of specific guidance, we found that some  covered entities performed minimal contract pharmacy oversight.", "Officials from a grantee reported auditing claims of 5 randomly  selected patients quarterly, despite treating approximately 900  patients each month.", "Officials from a critical access hospital that serves about 21,000  patients a year at its outpatient clinics reported that the annual  independent audit of their hospital system reviewed five claims.", "Officials from two entities reported that they did not contract for an  independent audit of their 340B Program, despite HRSA\u2019s expectation  to do so.", "Additionally, of the 20 covered entities whose audits we reviewed, 6 had  no documented processes for conducting contract pharmacy oversight.", "The identified noncompliance at contract pharmacies raises questions  about the effectiveness of covered entities\u2019 current oversight practices.  Specifically, 66 percent of the 380 diversion findings in HRSA audits  involved drugs distributed at contract pharmacies, and 33 of the 813  audits for which results were available had findings for lack of contract  pharmacy oversight. However, the number of contract pharmacy  oversight findings may be limited by the fact that officials from HRSA\u2019s  contractor said that its auditors rely on verbal responses from entity  officials about any internal review or self-audits conducted by the entity.  This is despite the fact that HRSA officials told us that the agency  requires auditors to review documentation of covered entities\u2019 oversight  activities.", "Federal internal control standards related to control activities state that  agencies should implement control activities through policies, such as by  documenting the responsibility for an operational process\u2019s objectives and  related risks, and control activity design, implementation, and operating  effectiveness. The standards also specify that management should  periodically review policies, procedures, and related control activities for  continued relevance and effectiveness in achieving its objectives or  addressing related risks. As a result of the lack of specific guidance and  its numerous audit findings of noncompliance, HRSA does not have  assurance that covered entities\u2019 contract pharmacy oversight practices  are sufficiently detecting 340B noncompliance."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The 340B Program provides covered entities with discounts on outpatient  drugs and the ability to generate revenue on drugs purchased under the  program. Use of contract pharmacies enables covered entities to increase  the use of 340B drugs by expanding their distribution networks, thereby  increasing the volume of 340B drugs dispensed and generating  associated savings and revenue. The expansion of contract pharmacies  presents an opportunity for entities to fill more prescriptions with  discounted 340B drugs, but it also increases potential risks to the 340B  Program, such as risks related to diversion and duplicate discounts.  Although covered entities and HRSA have taken steps to ensure that  340B Program requirements are being met at contract pharmacies,  HRSA\u2019s audits continue to identify instances of noncompliance.", "As currently structured, weaknesses in HRSA\u2019s oversight impede its  ability to ensure compliance with 340B Program requirements at contract  pharmacies. HRSA cannot ensure that its limited number of audits target  covered entities with the most complex 340B programs, and thus the  greatest risk of noncompliance, because the agency does not have  complete data on entities\u2019 contract pharmacy arrangements. Additionally,  HRSA\u2019s audit process does not adequately identify compliance issues,  nor does it ensure that identified issues are corrected. HRSA\u2019s audits do  not assess compliance with a key 340B Program requirement (the  prohibition regarding duplicate discounts) as it relates to Medicaid  managed care, and HRSA does not provide audited entities with  guidance for determining the full scope of noncompliance, which reduces  the effectiveness of HRSA\u2019s audits in identifying drug diversion and  duplicate discounts. Moreover, where audits identify instances of  noncompliance, HRSA\u2019s process does not confirm that all covered  entities successfully correct the deficiencies and take steps to prevent  future noncompliance. Although HRSA made improvements to its process  for targeted audits during the course of our review, the agency does not  require most covered entities subject to an audit to provide evidence of  corrective actions taken.", "Moreover, the lack of specificity in HRSA\u2019s guidance to covered entities  on the methods through which they should ensure compliance may  impede the effectiveness of entities\u2019 oversight. For example, without  guidance instructing covered entities how to prevent duplicate discounts  in Medicaid managed care, entities are left to individually navigate the  policies and practices of states and private insurers. Furthermore, by not  clearly communicating expectations for covered entities\u2019 oversight of their  contract pharmacies, HRSA faces the risk that instances of  noncompliance, such as diversion, at contract pharmacies will not be  identified and addressed. As the 340B Program continues to grow, it is  essential that HRSA address these shortcomings."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following seven recommendations to HRSA:  The Administrator of HRSA should require covered entities to register contract pharmacies for each site of the entity for which a contract exists. (Recommendation 1)", "The Administrator of HRSA should issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care, working with CMS as HRSA deems necessary to coordinate with guidance provided to state Medicaid programs. (Recommendation 2)", "The Administrator of HRSA should incorporate an assessment of covered entities\u2019 compliance with the prohibition on duplicate discounts, as it relates to Medicaid managed care claims, into its audit process after guidance has been issued and ensure that identified violations are rectified by the entities. (Recommendation 3)", "The Administrator of HRSA should issue guidance on the length of time covered entities must look back following an audit to identify the full scope of noncompliance identified during the audit. (Recommendation 4)", "The Administrator of HRSA should require all covered entities to specify their methodology for identifying the full scope of noncompliance identified during the audit as part of their corrective action plans, and incorporate reviews of the methodology into their audit process to ensure that entities are adequately assessing the full scope of noncompliance. (Recommendation 5)", "The Administrator of HRSA should require all covered entities to provide evidence that their corrective action plans have been successfully implemented prior to closing audits, including documentation of the results of the entities\u2019 assessments of the full scope of noncompliance identified during each audit. (Recommendation 6)", "The Administrator of HRSA should provide more specific guidance to covered entities regarding contract pharmacy oversight, including the scope and frequency of such oversight. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["HHS provided written comments on a draft of this report, which are  reproduced in app. II, and technical comments, which we have  incorporated as appropriate. In its written comments, HHS concurred with  four of our seven recommendations, did not concur with three of our  recommendations, and stated that it had concerns with some of the other  information in our report.", "In concurring with four of our recommendations, HHS stated that HRSA is  making changes to its audit process to strengthen oversight of the 340B  Program. Regarding our recommendation related to guidance on  duplicate discounts, HHS concurred, but commented that the  recommendation did not account for the critical role that CMS would play  in its successful implementation. We agree that CMS would play an  important role in ensuring compliance with the prohibition on duplicate  discounts in Medicaid managed care, which is why we recommended that  HRSA coordinate with CMS on the guidance. HHS indicated that HRSA  and CMS are strategizing on effective ways to address this issue. HHS  also concurred with our recommendations to issue guidance related to  identifying the full scope of noncompliance and covered entities\u2019 oversight  of their contract pharmacies, although it noted that HRSA would face  challenges in issuing guidance related to areas where it does not have  explicit regulatory authority. While we recognize that HRSA\u2019s authority to  issue regulations governing the 340B Program may be limited, our  recommendations were focused on HRSA clarifying certain program  requirements through whatever format the agency deems appropriate.  Since the establishment of the 340B Program, HRSA has used  interpretative guidance and statements of policy to provide guidance to  covered entities regarding compliance with program requirements. HRSA  has also used certain of its audit procedures, such as the template  provided to covered entities for the development of corrective action  plans, to provide such clarifications. Our recommendations are intended  to expand the availability of information HRSA provides to covered  entities to help them improve compliance with existing program  requirements. As such, we continue to believe that further clarification,  whether provided as interpretive guidance, audit procedures, or another  format, is necessary to help ensure compliance with program  requirements.", "Among the recommendations with which HHS did not concur was our  recommendation to require covered entities to register contract  pharmacies for each site of the entity for which a contract exists. HHS  stated that its current registration process is responsive to our concerns  for all covered entity types other than hospitals and health centers.  However, as we note in the report, hospitals and FQHCs are typically the  covered entity types that have multiple sites, and are generally more likely  to have contract pharmacies. HHS cited administrative burden for both  covered entities and HRSA as a reason not to require covered entities to  provide more complete information about contract pharmacy  arrangements. However, given that HRSA requires covered entities to  register both their sites and their contract pharmacies with the agency, it  is unclear why there would be significant additional burden for covered  entities to indicate which of the previously registered sites had contracts  with which contract pharmacies. It is also important to note that contract  pharmacy use by covered entities is voluntary, and covered entities that  choose to have contract pharmacies are required to oversee those  pharmacies to ensure compliance with 340B Program requirements.  Therefore, the use of contract pharmacies inherently comes with  additional administrative responsibilities for the covered entity, and we  believe that the requirement to register each contract pharmacy  arrangement with HRSA should present limited additional burden on  covered entities.", "Rather than implementing our recommendation, HHS stated that HRSA  will make changes to its audit selection process; HRSA will assume that  all contract pharmacies registered with the parent site would also be used  by all sites of the covered entity prior to selecting entities for risk-based  audits. Although this may be a good step forward, it does not provide  information on the actual number of contract pharmacy arrangements for  each covered entity. As such, we continue to believe that HRSA needs  more complete information on contract pharmacy arrangements to best  target its limited number of audits to covered entities with the most  complex 340B programs. This is also important information to provide  manufactures to help ensure that 340B discounted drugs are only  provided to pharmacies on behalf of a covered entity site with a valid  340B contract with that site.", "HHS also did not concur with our two recommendations to require  covered entities to specify their methodologies for identifying the full  scope of noncompliance identified during their audits as part of their  corrective action plans, and to provide evidence that these plans have  been successfully implemented prior to HRSA closing audits. In its  response, HHS noted that on April 1, 2018, HRSA implemented these  requirements for entities subject to targeted audits (including re-audits),  which represent 10 percent of all entities audited. However, HRSA  indicated that implementing these requirements for all covered entities  that are audited would create a significant burden for these entities. As  we previously noted, HRSA already requires covered entities with audit  findings to determine the full scope of noncompliance and to submit  corrective action plans. Thus, it is unclear how requiring covered entities  to include written descriptions of their methodologies for identifying the full  scope of noncompliance, which should already be formulated, and to  provide evidence that the corrective actions that entities developed have  been implemented, would create significant additional burden for these  entities.", "HHS also expressed concern that these additional steps would  significantly delay the audit process and repayments to manufacturers.  We recognize that reviewing these documents may create some  additional work for HRSA and possibly require additional time to close  audits. However, we believe this additional work and time is necessary for  the audits to be effective at adequately identifying compliance issues and  ensuring that those issues are corrected. Furthermore, these additional  actions could reduce the need for re-audits which are burdensome in  terms of cost and time, for both the covered entity and HRSA.", "Finally, HHS also expressed concerns about some of the other  information included in the draft report.", "HHS stated that disclosing actual fees paid by covered entities to  pharmacies and TPAs could cause disruptions in the drug pricing  market and fluctuations in fees entities pay. Our report provides fees  for a small and nongeneralizable sample of contracts, covered  entities, and TPAs. For example, we provide contract pharmacy fees  for 30 of the thousands of contracts that exist between covered  entities and pharmacies. It is unclear how this information could cause  disruptions in the drug pricing market or lead to fluctuations in fees  covered entities may pay, and HHS did not provide any evidence to  support its assertion. Additionally, HHS has raised questions about  the effect of the 340B Program on drug pricing. As such, we believe  that our discussion of fees brings enhanced transparency to the 340B  Program, and provides Congress with important information it  requested to gain a better understanding of the program and enhance  its oversight.", "Regarding the distance between contract pharmacies and covered  entities, HHS noted that the longest distance was for a specialty  pharmacy that was registered for 17 days. As noted in our scope and  methodology, our analysis was of covered entities and contract  pharmacies participating as of July 1, 2017. Additionally, there were  other contract pharmacy arrangements of similarly long distances.  HHS also expressed concern that the draft report did not note that  such specialty pharmacies may be needed due to restricted  distribution by a manufacturer, which would be outside a covered  entity\u2019s control. In our report, we noted that the 340B database does  not provide information on why a covered entity may choose to  contract with a pharmacy that is located a long distance away.  However, the report does include some potential reasons HRSA  provided us as to why this may occur.", "HHS also commented that our table on the number and percent of  covered entities audited does not fully reflect HRSA\u2019s auditing efforts  because it does not include the number of entity sites and contract  pharmacies included within each audit. However, HRSA\u2019s audits of  covered entities generally do not include visits to multiple covered  entity sites, or all contract pharmacies that distribute 340B drugs on a  covered entity\u2019s behalf. Additionally, while the audits include a review  of a sample of 340B drugs distributed, that sample may not include  prescriptions written at, or dispensed from, all of the covered entity\u2019s  sites or contract pharmacies. As a result, information in our report  highlights the number of entities that were audited.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, the Administrator of HRSA, and other interested  parties. In addition, the report will be available at no charge on GAO\u2019s  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at DraperD@gao.gov. Contact points for our  Office of Congressional Relations and Office of Public Affairs can be  found on the last page of this report. Other major contributors to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Summary of Fees Included in 340B Pharmacy Contracts Reviewed", "paragraphs": ["Table 8 provides a brief description of the fees that covered entities pay  pharmacies with which they contracted to dispense 340B drugs based on  our review of 30 contracts."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Michelle Rosenberg (Assistant  Director), N. Rotimi Adebonojo (Analyst in Charge), Jennie Apter, George  Bogart, Amanda Cherrin, David Lichtenfeld and Dan Ries made key  contributions to this report. Also contributing were Julianne Flowers and  Vikki Porter."], "subsections": []}]}], "fastfact": ["To have their drugs covered under Medicaid, the \"340B\" program requires drug manufacturers to sell outpatient drugs to covered entities\u2014certain hospitals and clinics\u2014at a discount. These entities are increasingly contracting with pharmacies to dispense 340B drugs. Doing so can make it harder to ensure compliance with 340B rules. For example, contract pharmacies may also fill prescriptions for the general public, increasing the risk of dispensing 340B drugs to ineligible patients.", "We recommended ways to improve federal oversight of covered entities to help ensure compliance with 340B requirements."]}
{"id": "GAO-18-367T", "url": "https://www.gao.gov/products/GAO-18-367T", "title": "Positive Train Control: Many Commuter Railroads Still Have Significant Additional Implementation Work and Opportunities Exist to Provide Federal Assistance", "published_date": "2018-03-01T00:00:00", "released_date": "2018-02-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Forty-one railroads including 29 commuter railroads are required by statute to implement PTC. Commuter railroads unable to implement a PTC system by December 31, 2018, may receive a maximum 2-year extension if they meet certain statutory criteria.", "GAO was asked to review commuter railroads' PTC implementation. Among other objectives, this statement discusses (1) commuter railroads that may not be positioned to meet the PTC deadline or to qualify for an extension, and factors affecting their progress, and (2) the extent to which FRA's management and oversight approach has helped ensure that commuter railroads meet the deadline or qualify for an extension.", "GAO analyzed commuter railroads' most recently available quarterly progress reports and collected information on planned implementation schedules, interviewed 19 commuter railroads\u2014including 14 FRA identified as at-risk and 5 others further ahead with implementation\u2014and interviewed FRA officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Railroad Administration (FRA) is responsible for overseeing railroads' (including commuter railroads') implementation of positive train control (PTC) by December 31, 2018. PTC is a communications-based train control system designed to prevent certain types of accidents and involves the installation, integration, and testing of hardware and software components. For example, railroads must install equipment on locomotives and along the track, and complete field testing, including revenue service demonstration (RSD)\u2014an advanced form of testing that occurs while trains operate in regular service.", "GAO's analysis of commuter railroads' PTC scheduled milestones for two key activities necessary to meet the 2018 deadline or qualify for an RSD-based extension (one of the statutory options) found that as many as two-thirds of the 29 commuter railroads may not have allocated sufficient time to complete these milestones. Specifically, in comparing the commuter railroads' schedules to FRA's estimates of the time required to complete these milestones and the experiences of railroads that have already completed them, GAO's analysis found that from 7 to 19 commuter railroads may not complete the milestones before the 2018 implementation deadline or qualify for an RSD-based extension. For example, FRA estimates that field testing (one of the milestones) takes at least one year, but GAO found that 14 commuter railroads plan to start this testing less than a year before the 2018 deadline, increasing the potential risk that this milestone will not be completed. However, FRA has the authority to establish alternative criteria for an extension not based on RSD, and several other factors can affect commuter railroads' planned and future progress. As a result, the number of commuter railroads at risk of not meeting the deadline or qualifying for an extension could increase or decrease in the coming year.", "FRA's PTC management and oversight includes monitoring commuter railroads' progress, reviewing documentation, and sharing information with them, but the agency has not systematically communicated information or used a risk-based approach to help these railroads prepare for the 2018 deadline or qualify for an extension. GAO found that FRA has primarily used informal assistance, meetings with individual railroads, and participation in industry-convened groups to share information with commuter railroads, and in some cases the information conveyed has been inconsistent according to industry representatives. Some commuter railroads also told GAO that clarification about the agency's planned process for reviewing and approving extension requests would be helpful. Federal internal control standards state that management should externally communicate the necessary quality information to achieve its objectives. While FRA officials have said they are working to identify additional ways to convey extension-related information, they have not yet done so. Moreover, although FRA receives information from commuter railroads on their progress in implementing PTC, it has not used this information to prioritize resources using a risk-based approach. With the year-end 2018 deadline approaching, and an anticipated significant increase in FRA's workload, targeting resources to the greatest risk can help better ensure that FRA effectively fulfills its oversight responsibilities and provides commuter railroads the information they need to prepare for the 2018 deadline or seek an extension."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends FRA identify and adopt a method for systematically communicating information to railroads and use a risk-based approach to prioritize its resources and workload.", "DOT concurred with the recommendations. The agency also provided technical comments, which were incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our review of commuter  railroads\u2019 implementation of positive train control (PTC).", "In the wake of rail accidents such as the 2008 Los Angeles, California,  collision between a commuter train and a freight train, resulting in 25  deaths and over 100 injuries, legislation was enacted requiring certain  freight, intercity passenger, and commuter railroads to implement PTC\u2014 a communications-based train control system designed to help control  train movements, including braking\u2014by December 31, 2015. While the  safety of the rail industry has improved in recent years, additional  accidents, including the recent Amtrak derailment in Washington state in  late 2017, have demonstrated the continued need for technological  improvements that could help slow or stop a train to reduce the risk of  certain types of accidents such as train-to-train collisions and derailments  caused by exceeding safe speeds. In total, 41 railroads, including 29  commuter railroads, are currently required to implement PTC. Commuter  railroads provide approximately 490-million annual passenger trips over  8,440 miles of track. Their size varies significantly, from rail lines  providing approximately one-million passenger trips a year to those  providing over 80 million.", "Our prior work on PTC implementation has found that it is a complex and  lengthy process. It requires the integration of various components\u2014 including communication systems, hardware on locomotives and along  the side of the track, and software in centralized office locations as well  as onboard the train and along the track. In order to implement PTC,  railroads must design, produce, and install more than 20 major  components that will ultimately communicate trains\u2019 locations,  movements, and speed, and then slow or stop a train that is not being  operated safely. Many of these components are new technologies being  designed and developed for PTC, and railroads must integrate them with  their existing systems. Full implementation of PTC involves a number of  steps, including but not limited to: equipment installation, testing,  certification, and achieving interoperability. Interoperability will enable  trains to move seamlessly across track owned by different railroads with  potentially different PTC systems. U.S. railroads often operate their cars  as \u201ctenants\u201d on the track of another railroad, known as the \u201chost.\u201d The  Federal Railroad Administration (FRA) is responsible for overseeing  railroads\u2019 implementation of PTC.", "As part of our body of work examining railroads\u2019 progress in implementing  PTC, we found in September 2015 that nearly all railroads did not expect  to meet the originally mandated deadline of December 31, 2015. In  October 2015, Congress extended the deadline to December 31, 2018,  and established criteria that would enable FRA to grant railroads meeting  certain requirements a further extension up to 2020.", "You requested that we examine commuter railroads\u2019 implementation of  PTC. This statement describes the results of our review and focuses on:  commuter railroads\u2019 progress in implementing PTC; how many, if any, commuter railroads may be at risk of not meeting  the mandated PTC deadline or certain extension criteria, and what  factors may be affecting implementation progress; and  the extent to which FRA\u2019s management and oversight approach has  helped ensure that commuter railroads either meet the deadline or  qualify for an extension.", "To address these objectives, we reviewed applicable laws as well as  applicable FRA and PTC regulations, reports, and guidance. We also  interviewed FRA officials involved in PTC monitoring, enforcement, and  technical assistance. To describe commuter railroads\u2019 progress  implementing PTC, we reviewed the most recent available railroad  quarterly data that the 29 commuter railroads submitted to FRA that  outlines installation and implementation progress in selected areas as of  September 30, 2017. We assessed the reliability of the data in these  reports by reviewing them for anomalies, outliers, or missing information,  among other things. Based on these steps, we determined that these  data were sufficiently reliable for our purposes of describing progress in  PTC implementation. To identify railroads that may be at risk of not  meeting the PTC deadline or qualifying for certain extension criteria, we  collected additional information from all 29 commuter railroads related to  their planned schedules for key implementation milestones. We then  compared this information against FRA estimates for how long these  milestones may take and to the experiences of commuter railroads that  have already completed these milestones. To obtain perspectives on  factors that may affect implementation progress and FRA\u2019s oversight  approach, we interviewed representatives from 19 commuter railroads.  These selected railroads include: (1) 14 railroads that according to FRA  were identified in May 2017 as at risk of not meeting the 2018 full  implementation deadline and not completing statutory requirements  necessary to receive a deadline extension and (2) 5 other railroads that  were further ahead with implementation and that varied in geographic  location and size of rail system, among other factors. We also interviewed  representatives from all 7 of the Class I freight railroads, which are also  required to implement PTC; 5 major PTC equipment suppliers and  contractors identified by FRA; and 2 railroad industry associations.  Information from these interviews is not generalizable to all commuter  railroads or all PTC stakeholders but provide valuable insights into  implementation issues. Finally, we compared FRA\u2019s management and  oversight approach to federal internal control standards related to  communications and risk assessment. Appendix I describes our scope  and methodology in greater detail.", "We conducted this performance audit from July 2017 to February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Under the Rail Safety Improvement Act of 2008, a PTC system must be  designed to prevent train-to-train collisions, derailments due to excessive  speed, incursions into work zone limits, and the movement of a train  through a switch left in the wrong position. Railroads may implement any  PTC system that meets these requirements, and the majority of the 29  commuter railroads are implementing one of three primary types of  systems: the Interoperable Electronic Train Management System (I- ETMS), the Advanced Civil Speed Enforcement System, or Enhanced  Automated Train Control (E-ATC). PTC\u2019s intended safety benefits can  only be achieved when all required hardware has been installed and  tested, and a train is able to communicate continually and in real time with  the software and equipment of its own railroad and also with that of other  railroads operating on the same tracks. Real-time communication is  needed to account for changing track conditions, which may, for example,  include temporary speed restrictions where railroad employees are  conducting track maintenance. Figure 1 illustrates how one system is  intended to operate.", "PTC\u2019s multi-step implementation process can be grouped into three  primary phases (see fig.2). Each phase involves key activities for  railroads to complete\u2014such as installing PTC equipment\u2014as well as the  submission of key documents for FRA review and approval\u2014such as test  plans. Based on railroad data reported to FRA, most commuter railroads  are currently in the second phase, which involves system design,  installation, and testing. According to a recent FRA presentation,  completing key activities within this phase is the near-term focus for many  commuter railroads.", "According to FRA officials, railroads must complete certain  implementation steps sequentially, while other activities can be worked on  simultaneously; for example, railroads may work to finish installing  locomotive and wayside equipment while also beginning testing on an  initial track segment. Furthermore, based on railroads\u2019 PTC  implementation plans, the scale of implementation activities can vary by  railroad, based on the size of the railroad and the number of components to be installed. For example, one relatively large commuter railroad must  install computer hardware on 528 locomotives and 789 wayside units  along 218 route miles, while one relatively small commuter railroad\u2019s  installation is limited to 17 locomotives and 35 wayside units along 32  route miles.", "According to FRA, full implementation of PTC is achieved when a  railroad\u2019s system is FRA-certified and interoperable, and all hardware,  software, and other components have been fully installed and in operation  on all route miles required to use PTC. The PTC system is required to be  interoperable, meaning the locomotives of any host railroad and tenant  railroad operating on the same track segment will communicate with and  respond to the PTC system, including uninterrupted movements over  property boundaries.", "In early 2016, railroads required to install PTC had to submit revised  implementation plans to FRA that included a schedule and milestones for  specific activities, such as installing locomotive and wayside hardware,  acquiring radio spectrum (if necessary), and training employees who will  have to use and operate PTC systems. Railroads are required to report  annually to FRA certain information on their implementation progress.  As part of overseeing railroads\u2019 PTC implementation, FRA established a  PTC Task Force in May 2015 to track and monitor individual railroads\u2019  progress. Railroads are also required to report quarterly to FRA on the  status of PTC implementation in several areas such as: locomotives  equipped, employees trained, territories where revenue service  demonstration (RSD) has been initiated, and route miles in PTC  operation.", "FRA\u2019s oversight tools include assessing civil penalties if a railroad fails to  comply with legal requirements, including a railroad\u2019s failure to comply  with its implementation plan. FRA has a national PTC director,  designated PTC specialists in the 8 FRA regions, and a few additional  engineers and test monitors responsible for overseeing technical and  engineering aspects of implementation and reviewing railroad  submissions of documents and test requests. FRA officials told us they  conduct various types of PTC-related work simultaneously, such as  providing technical assistance to railroads, addressing questions, and  reviewing documentation submitted by railroads. As railroads progress  with testing and before completing implementation, FRA must review and  approve a safety plan for each railroad and certify the PTC system.", "Commuter railroads that will not be able to implement a PTC system by  December 31, 2018, may receive a maximum 2-year extension if they  meet six criteria set forth in statute. Specifically, commuter railroads must  demonstrate, to the satisfaction of the Secretary of Transportation, that  they have: (1) installed all PTC system hardware; (2) acquired all  necessary spectrum; (3) completed required employee training; (4)  included in a revised implementation plan an alternative schedule and  sequence for implementing their PTC system as soon as practicable; (5)  certified to FRA that they will be in full compliance with PTC requirements  by the date provided in the alternative schedule and sequence; and (6)  either initiated RSD on at least one territory required to have operations  governed by a PTC system or \u201cmet any other criteria established by the  Secretary.\u201d"], "subsections": []}, {"section_title": "Progress Reported in Some Implementation Areas, but Significant Work Remains", "paragraphs": ["Most of the 29 commuter railroads have reported progress in some of the  key areas of PTC implementation that FRA monitors, such as locomotive  and wayside equipment installation, but the amount of progress reported  varies across individual railroads (see fig. 3 below).", "Over half of the commuter railroads reported that they have made  substantial progress in some initial implementation activities, while other  railroads reported that they have made much more limited progress or  have yet to begin equipment installation or employee training. For  example, as of the end of September 2017:", "Locomotive Equipment Installation: 18 commuter railroads reported  50 percent or more of their locomotive PTC equipment was installed,  and of these, 13 had completed installation. In contrast, 6 railroads  reported that they had not started installation of locomotive  equipment.", "Wayside Equipment Installation: 16 commuter railroads reported 50  percent or more of their wayside PTC equipment was installed, and  half of them reported that they had completed installation. In contrast,  7 reported that less than 20 percent of this equipment was installed.", "Employee Training: 11 commuter railroads reported completing PTC  training for 50 percent or more of their employees requiring training.  Of these, four reported that they had completed employee training.  Thirteen commuter railroads had completed 10 percent or less of their  employee training, and of these, 11 reported that they had not started  training their employees. However, some commuter railroad  representatives we spoke with stated that they are waiting to conduct  training until their PTC system is closer to deployment. For example,  representatives from one railroad told us they are waiting to conduct  training so employees will be recently trained and familiar with PTC as  the system is rolled out.", "Notably, commuter railroads reported that they have made the most  progress in obtaining spectrum, which allows PTC components to  transmit information about a train\u2019s movements and location. Specifically,  15 of the 17 railroads that require spectrum reported that they have  obtained it. The two other railroads reported that they are in discussions  to obtain leased spectrum.", "Beyond the initial implementation activities, much work remains for the  majority of commuter railroads to complete other key PTC activities that  will enable them to complete implementation. PTC implementation  requires many additional steps to integrate equipment and software  systems that go beyond installing equipment and training employees, and  the majority of commuter railroads reported that they continue to work to  complete these steps, which are technically complex and time  consuming. For example, as of the end of September 2017:", "Locomotives Fully Equipped and PTC-Operable: Fifteen commuter  railroads reported that half or more of their locomotives were fully  equipped and PTC-operable, meaning that all necessary onboard  hardware and software is installed and commissioned, and is capable  of operating over a PTC-equipped territory. Eight commuter railroads  reported that none of their locomotives were fully equipped and  operable.", "Field Testing: Thirteen railroads reported that they had begun field  testing\u2014a key implementation milestone that precedes RSD and  allows railroads to assess how PTC components and software  function together. FRA officials said that the testing phase can be a  long and difficult process, as data obtained during field testing must  prove the functionality of the system and be included as part of a  railroad\u2019s application to enter RSD.", "RSD: Following successful field testing, FRA may grant a railroad  approval to enter the next level of testing, RSD. In RSD, testing is  performed on trains operating PTC as part of regular operations.", "According to FRA, RSD is the final phase of testing that a railroad  completes in order to validate and verify its PTC system, and the  results from RSD, along with earlier testing, are to be included in the  safety plan a railroad submits to FRA. While six commuter railroads  reported that they have begun RSD, most had not yet reached this  key milestone\u2014including some of the largest commuter railroads.", "Conditional Certification: Once FRA approves a railroad\u2019s safety plan,  the railroad receives a PTC system certification. According to FRA  officials, as of September 30, 2017, only two commuter railroads were  conditionally certified\u2014meaning FRA has reviewed their safety plans  and granted conditional approval for PTC operations, and the  railroads are providing regular service in PTC operations\u2014and two  additional commuter railroads had submitted a safety plan for FRA  review.", "Given the variation in commuter railroads\u2019 progress, especially related to  completing later-stage PTC activities such as testing and developing  safety plans, 13 of 29 commuter railroads told us they planned to seek a  deadline extension, and the remaining 16 told us they do not intend to  seek an extension. However, the number of commuter railroads planning  to seek an extension is subject to change before the end of 2018."], "subsections": []}, {"section_title": "Over Half of Commuter Railroads May Be at Risk of Not Meeting the 2018 Deadline or Criteria for RSD-based Extension, Though Numerous Factors Create Uncertainty", "paragraphs": ["Based on our analysis of the PTC schedules of the 29 commuter  railroads, over half may not have sufficient time to complete activities  needed to implement PTC by the end of 2018 or to qualify for an  extension of that deadline by meeting criteria based on initiating RSD\u2014 for the purposes of this statement, referred to as an RSD-based  extension. In particular, our analysis focused on the time likely needed for  railroads to conduct RSD activities, because RSD is both the final step of  field testing required by the 2018 deadline as well as one of the statutory  options railroads have in seeking a deadline extension. For our analysis,  we compared the amount of time railroads plan for completing two key  milestones\u2014installing the back office server and conducting field  testing\u2014to the amount of time FRA officials estimate is required for each  milestone and to the experiences of railroads that have already  completed RSD. However, it is important to recognize that numerous  factors could affect railroads\u2019 planned and future progress. For example,  commuter railroads could face delays due to unexpected issues with PTC  components or FRA reviews of documents submitted by the railroads."], "subsections": [{"section_title": "Over Half of Commuter Railroads May Be at Risk", "paragraphs": ["In May 2017, FRA sent letters to 14 commuter railroads and their  respective state departments of transportation and governors informing  the recipients that they had not installed at least 50 percent of their  required locomotive and wayside equipment. In these letters FRA raised  concerns that these railroads were at risk of not meeting the 2018  deadline and not completing requirements for a deadline extension.  Subsequently, in January 2018, FRA applied a more stringent  benchmark\u2014whether a railroad had installed at least 65 percent of all  equipment\u2014and determined that 13 commuter railroads remained at  risk. Using this more stringent criterion, only one railroad had made  enough progress installing equipment to no longer be classified as at risk  by FRA.", "In addition to FRA\u2019s benchmarks for equipment installation, for our  analysis we evaluated more broadly railroads\u2019 progress in completing  other implementation activities that follow equipment installation and that  FRA and stakeholders said are more difficult to achieve. Specifically, we  analyzed commuter railroads\u2019 planned schedules for two key milestones  to determine whether these railroads appear to have built sufficient time  into their implementation plans to complete these and other activities by  the 2018 deadline or to qualify for an RSD-based extension. The two  key milestones we examined, both of which need to be completed before  a railroad enters RSD, were:  installing the back office server (BOS) and associated software  necessary to connect and interface with wayside, locomotive, and  dispatch equipment (the BOS transmits and receives data among this  equipment that enables PTC to work); and  conducting field testing, in particular testing of installed infrastructure  and initial assessments of the PTC system\u2019s overall functionality on  trains that are not transporting passengers or operating during regular  passenger service.", "Our analysis found that at least one quarter, and potentially up to  approximately two thirds, of commuter railroads may not have sufficient  time to enter RSD and, thus, may not meet the 2018 PTC implementation  deadline or qualify for an RSD-based extension. These railroads vary by  size and type of PTC system and by whether they plan to apply for a  deadline extension. Specifically, our analysis found the following:", "Projection based on BOS status: Between 9 and 19 commuter  railroads appear to be at potential risk of not meeting the 2018  deadline or qualifying for an RSD-based extension based on our  analysis. Our analysis found that the 6 commuter railroads already in  RSD took an average of 10 months from installing the BOS to starting  RSD. However, the schedules of 9 railroads indicate that they plan  to install a BOS less than 10 months before the 2018 deadline. We  believe that given past experience of other railroads, this places these  9 railroads at potential risk. Moreover, FRA officials estimate that it  can take 2 to 3 years for a railroad to install and prepare the BOS and  associated software to support testing and RSD. Using FRA\u2019s 2-year  installation estimate (which would require BOS installation before  January 1, 2017) further exacerbates the potential risk of not meeting  the deadline or of not qualifying for any RSD-based extension for up  to 19 railroads.", "Projection based on time allowed to conduct field testing: Based on  our review of the planned schedules, between 7 and 14 railroads may  not have built sufficient time into their plans either to complete field  testing ahead of the 2018 deadline or to qualify for an RSD-based  extension. Commuter railroads and FRA officials told us that field  testing is challenging and can take a substantial amount of time due  to, for example, unanticipated issues and limited available track for  testing given regular passenger operations. On average, our analysis  found that the 6 commuter railroads already in RSD took 7 months to  move from starting field testing to starting RSD. However, 7 commuter  railroads plan to start their field testing less than 7 months before the  2018 deadline. This situation raises concerns about their ability to  conduct field testing before the 2018 deadline. Moreover, FRA  officials told us that moving from the start of field testing to the start of  RSD can take between 1 and 3 years, averaging about 2 years, and  that most railroads under-estimate the amount of time needed for  testing. When we applied the lower end of FRA\u2019s estimate, we found  that it further increases the potential risk for 14 railroads that plan to  start field testing less than a year prior to the 2018 deadline. As a  result, they could be at risk of not meeting the 2018 deadline or  qualifying for an RSD-based extension.", "We used RSD as a benchmark for our analysis of key milestones based  on the importance of this benchmark in implementing PTC and on the  three RSD-based alternative criteria that FRA has approved to date.", "While the three approved alternative criteria all include RSD, FRA has  broad authority to approve \u201cany other\u201d alternative criteria even if not  based on RSD, as noted above. One FRA official told us the agency  approved these three alternative criteria requests because they were all  based on specific, quantifiable measures, rather than because they  included RSD in particular. FRA officials stated that they have not issued  guidance on uniform alternative criteria because they will strive for  railroads to meet the criteria for a deadline extension that are listed in  statute and want the discretion to make determinations on a case-by-case  basis. In addition, FRA officials said they want to ensure that each  railroad\u2019s criteria are consistent with the statutory requirements for final  implementation by December 31, 2020. Because it is unknown what  alternative criteria FRA may establish in the coming months, which may  not include RSD, it is difficult to determine at this time whether the  railroads we found to be potentially at risk of not qualifying for an RSD- based extension might be more or less likely to qualify for an extension  based on other, non-RSD criteria."], "subsections": []}, {"section_title": "Many Factors May Affect Commuter Railroads\u2019 Ability to Meet the Deadline or Qualify for an Extension", "paragraphs": ["Much uncertainty exists regarding railroads\u2019 ultimate implementation  progress and their ability to meet the 2018 deadline or qualify for an  extension. This uncertainty is due, in part, to the fact that PTC is a new  way of operating and involves technologies that are more complex to  implement than many other railroad capital projects. Furthermore, a  number of factors can affect commuter railroads\u2019 planned and future  progress, including unexpected setbacks installing PTC components and  resources and capacity issues. Below we highlight some of the factors  that that could affect implementation progress."], "subsections": [{"section_title": "Limited Industry Expertise and Resources", "paragraphs": ["Three out of five PTC contractors and suppliers and about half of the  commuter railroads we spoke with acknowledged that industrywide, there  are a limited number of individuals with PTC technical expertise available  to successfully implement the technology. This can affect the ability of  railroads and contractors to meet planned schedules. For example, one  large commuter railroad said it took a year and a half to hire an internal  expert to continue work on its PTC project. In addition, five commuter  railroads told us that they faced other issues with their prime contractors  missing their milestones; such issues, going forward, could impact  railroads\u2019 progress during the coming year. Also, though most railroads  we spoke to are relying on contractors, some commuter railroads may  lack the in-house resources and expertise to plan and oversee a project  as large and complex as PTC. Representatives from three commuter  railroads we interviewed noted that PTC is not a traditional capital or  construction project for a railroad; therefore, it requires additional  expertise. FRA officials also stated that small commuter railroads may not  have technical capacity or expertise with large contracts for such complex  projects, especially given limited industry resources.", "In addition to limited expertise and resources, some commuter railroads  told us they faced unexpected delays in obtaining PTC equipment, such  as radios, from the supplier. Some PTC equipment is only available from  a single provider, which can lead to delays executing contracts and  obtaining equipment. Three commuter railroads we spoke with said they  encountered issues executing contracts for PTC radios, in particular  negotiating unique liability requirements sought by the only supplier of this  equipment, which resulted in delays or higher overall costs to the  railroads. One railroad noted that executing sole-source contracts for  such circumstances is particularly problematic for state and public  agencies."], "subsections": []}, {"section_title": "Interoperability and Host and Tenant Coordination", "paragraphs": ["As noted above, PTC is being implemented by different types of railroads  using different systems, and achieving interoperability among PTC  systems can complicate implementation. For example, Northeast Corridor  railroads that are implementing versions of the Advanced Civil Speed  Enforcement System need interoperability with freight railroads using I- ETMS. Even railroads that are installing the same PTC system have to  take significant steps to ensure that systems will communicate and  interoperate properly. In one case, a railroad told us that it is equipping its  locomotives with equipment for multiple PTC systems to ensure that it  can operate on various host railroads\u2019 tracks.", "Some commuter railroads that only operate as tenants on other railroads\u2019  tracks may be able to complete some PTC implementation work more  quickly, as these railroads may benefit from work the host railroads  already completed as they coordinate to implement PTC. For example,  representatives from one commuter railroad we spoke with said they have  to acquire and install PTC equipment on their locomotives but rely on the  host railroads to install the remainder of the necessary PTC infrastructure.  These tenant-only commuter railroads, however, have to coordinate field  testing and RSD with the host railroads."], "subsections": []}, {"section_title": "Schedule Changes", "paragraphs": ["Unexpected issues with components or technology can also require  additional time to complete certain activities, causing schedules to slip.  Such issues could affect railroads currently on schedule as well as  railroads pursuing aggressive schedules in an effort to overcome late  starts or early setbacks. For example, representatives from 10 railroads  we spoke with said that installing the BOS and associated software, and  ensuring it functions properly, can pose a challenge. One contractor told  us that once the BOS is delivered to a railroad, a lot of testing work  remains, and unexpected issues inevitably arise during testing, even if the  BOS works according to all specifications. Representatives from one  railroad said that despite strong organizational commitment to  implementation and setting internal targets for progress, their PTC project  schedule slipped many times over the course of implementation due to a  variety of issues, including on-going software updates that caused delays  while also straining the budget and burdening staff. Representatives from  that commuter railroad also noted that equipping vehicles with PTC  components took three times longer than originally expected (3 years  instead of 1 year). However, some railroads are looking for ways to  accelerate implementation. For example, representatives from one  railroad said they made the difficult decision to cut some weekend  passenger service to accelerate wayside equipment installation.  Therefore, as representatives from one railroad articulated, given the  schedule slippage experienced by railroads further along in  implementation, railroads with aggressive schedules would have a limited  ability to accommodate any additional delays."], "subsections": []}, {"section_title": "FRA\u2019s Resources and Capacity", "paragraphs": ["As the 2018 deadline approaches and railroads progress with  implementation activities, the amount of documentation railroads will  submit to FRA for review and approval is likely to increase significantly.  For example, FRA reported in summer 2017 that it had taken between 10  and 100 days to review each of the test requests it received from  railroads. As the 2018 deadline approaches, FRA will have to review a  considerable amount of additional test plans and procedures as well as  applications to begin RSD. In addition, FRA will have to concurrently  review any safety plans that are submitted by railroads reaching the  certification phase. At the American Public Transportation Association\u2019s  (APTA) Commuter Railroad Summit in June 2017, FRA officials said that  they expect each safety plan review\u2014which involves all the regional  specialists and some contract personnel\u2014to take between 6 and 12  months to review. These plans are about 5,000 pages in length. FRA  officials told us that reviewing all of the safety plans in a timely manner  will be a challenge given staff resources. FRA has 12 technical staff  dedicated to the review of railroads\u2019 PTC documentation and monitoring  of PTC testing. Representatives from 10 out of 19 commuter railroads we  interviewed said they are concerned about FRA\u2019s ability to review  submitted documentation in a timely manner."], "subsections": []}, {"section_title": "Lessons Learned", "paragraphs": ["As railroads continue to progress with their projects and the industry  becomes more experienced with PTC, railroads could benefit from  lessons learned. For example, representatives from one railroad that is  implementing I-ETMS, the system all large Class I freight railroads are  implementing, told us that they anticipate being able to capitalize on  lessons learned from freight railroads that have operated in RSD. By  leveraging the freight railroads\u2019 experiences, one commuter railroad  hopes to address issues before testing, rather than during, and therefore  move more quickly through the testing process. If commuter railroads are  able to apply lessons learned from other railroads\u2019 testing processes, then  they may be able to accelerate their implementation efforts. Railroads  may also accelerate implementation schedules as they become more  adept at the overall testing process, which involves submitting test  documents to FRA and scheduling multiple tests. This could potentially  shorten the average time it takes a railroad to complete one or more of  the key milestones analyzed. The two commuter railroads that have been  conditionally certified told us they have met with other commuter railroads  informally and have shared their project experiences as a way to facilitate  information sharing."], "subsections": []}]}]}, {"section_title": "FRA Monitors Railroads\u2019 Progress but Has Not Systematically Communicated with Them or Prioritized Efforts", "paragraphs": [], "subsections": [{"section_title": "FRA Monitors Railroads\u2019 Implementation Progress, Reviews Documents, and Shares PTC Information", "paragraphs": ["Since 2015, FRA has assumed additional roles and responsibilities\u2014 primarily through the PTC Task Force and regional PTC specialists\u2014to  monitor railroads\u2019 implementation progress, review required  documentation, and share information about implementation steps and  activities.", "Monitoring and Document Review: In response to a recommendation  in our September 2015 report, FRA began to identify and collect  additional information from the railroads to enable it to effectively track  and monitor railroads\u2019 PTC progress. For example, in 2016, the PTC  Task Force began collecting quarterly progress data and monitoring  railroads\u2019 annual reports to track progress in meeting the PTC  implementation milestones set out in railroads\u2019 implementation plans,  such as locomotive equipment installed at the end of the year. As  previously noted, the Task Force used this implementation progress  data in May 2017 to identify 14 commuter railroads at risk of not  meeting the 2018 deadline or requirements for an extension. FRA  also monitors railroads\u2019 PTC implementation through meetings with  railroad and industry associations, visits to individual railroads, and  reviewing and commenting on PTC documentation submissions, such  as requests to begin field testing and RSD. FRA officials told us that  they monitor railroads\u2019 progress to determine how much commuter  railroads understand about the implementation process and to trigger  discussions between FRA and the railroads. Regional PTC specialists  are responsible for reviewing and approving requests submitted by  railroads preparing to test system functionality as well as individual  testing procedures describing the specific equipment and movements  involved in each test. In addition, FRA officials told us that assessing  civil penalties and sending commuter railroads letters of concern are  the primary enforcement mechanisms they have available to oversee  PTC.", "Information Sharing: FRA officials said that they have primarily used  informal assistance and participation in group meetings to convey  information related to the implementation process and specific  milestones necessary to meet the 2018 deadline or qualify for an  extension. FRA officials acknowledged that they do not have the  capacity to provide frequent one-on-one assistance to all railroads  given their growing PTC workload and limited agency resources. As  such, FRA officials explained that in order to reach a wide audience  given the approaching deadline, their current focus is on  presentations at industry group meetings (e.g., APTA\u2019s Commuter  Rail Summit) and specific PTC systems user-group meetings. FRA\u2019s  regional PTC specialists told us they also provide direction on  technical aspects of PTC implementation and testing, primarily by  discussing issues at individual and railroad-industry meetings and  providing informal feedback on commuter railroads\u2019 PTC  documentation, such as testing requests."], "subsections": []}, {"section_title": "FRA Has Not Systematically Communicated Information to Help Railroads Prepare for the 2018 Deadline or to Qualify for Extensions", "paragraphs": ["While the majority of the railroad representatives we met with said FRA  officials were consistently available to discuss issues that arise during  day-to-day PTC implementation activities, the information conveyed by  these officials has sometimes been inconsistent. In particular, FRA\u2019s  heavy reliance on informal assistance and participation in group meetings  to convey information to commuter railroads has led, at least on some  occasions, to different or inconsistent information being communicated in  different meetings. For example, representatives from one PTC  equipment supplier said that FRA has not consistently commented on  different railroads\u2019 test plans, and as a result, they have not been able to  carry lessons learned on to other railroads\u2019 plans. In addition, while FRA\u2019s  officials said their position has been consistent with the regulations stating  that the host railroad must submit a safety plan to FRA, representatives  from one railroad we met with said they had heard conflicting information  from FRA. For example, these railroad representatives told us that FRA  officials originally said commuter railroads that are only tenants on other  railroads needed to submit their own safety plans but later stated at an  industry association meeting that tenant railroads could be included in the  host railroads\u2019 plans.", "In addition, commuter railroads have expressed a need for additional  clarification about the criteria for applying for an extension. FRA officials  also told us that they have received a lot of questions from commuter  railroads about the criteria for an extension related to RSD or other  alternative criteria. As noted above, to date, FRA has approved  alternative extension criteria for three railroads, and in each case, the  criteria involved RSD testing on a shorter track segment. However,  representatives from one contractor working with several commuter  railroads said it is unclear what \u201calternative criteria\u201d FRA will approve to  receive an extension. In addition, representatives from one commuter  railroad stated that any opportunity to clearly outline FRA\u2019s interpretation  of the PTC requirements, specifically the alternative extension criteria that  could, for example, allow for a shorter test segment, would enable  railroads to better position themselves to apply for an extension.", "Representatives from some commuter railroads we met with were  likewise unclear about the agency\u2019s approach to reviewing and granting  extension requests. Representatives from three commuter railroads said  clarification of FRA\u2019s planned approach would be helpful as the deadline  approaches. According to FRA officials, the statute does not set a  deadline by which railroads have to apply for an extension, and FRA has  not set a deadline or indicated the latest date by which a railroad should  apply. Nonetheless, for railroads that do not comply with PTC deadlines,  FRA officials said they could impose civil penalties for each day a railroad  fails to implement a PTC system by the applicable statutory deadline, but  the agency has yet to determine how it will handle railroads that do not  meet the deadline or receive an extension. With less than a year  remaining before the 2018 deadline, FRA officials stated that they  anticipate their workload is likely to increase as railroads submit additional  documentation to review and continue to progress with testing. More  systematic communication that delineates FRA\u2019s planned approach for  the upcoming deadline and extension process may be critical for the  agency to efficiently use its limited resources and convey consistent  information to all the railroads.", "Standards for internal control in the federal government state that  management should externally communicate the quality information  necessary to achieve the entity\u2019s objectives. These standards also note  that management should select the appropriate form and method of  communication, so that information is communicated widely and on a  timely basis. As we have previously found, the particular form of the  agency\u2019s communication\u2014for example, by oral presentation, written  guidance, or formal regulation\u2014will depend on multiple factors including  the purpose and content of the specific communication and applicable  legal requirements. Moreover, internal control standards indicate  agencies should have standard processes in place to determine which  form of communication is appropriate in each case. FRA officials told us  that the agency could issue written guidance explaining how it has  decided to apply its deadline extension authority and what type of  information railroads will then need to submit to get an extension.  However, FRA officials stated this written guidance would require time- consuming approval by the Office of Management and Budget under the  Paperwork Reduction Act, and would make timely issuance of such  guidance difficult. As noted, however, FRA may have the option to use  less formal, less time-consuming methods of communicating key  information about the extension process, such as webinars or conference  calls, to communicate information more systematically. FRA officials  acknowledged they are working to identify mechanisms such as these,  but they have yet to do so. Absent systematic communication articulating  the agency\u2019s planned approach for the extension process, railroads may  not have the information they need to effectively prepare for the deadline  or seek an extension."], "subsections": []}, {"section_title": "FRA Has Made Limited Use of Implementation Progress to Prioritize Efforts and Mitigate Risks", "paragraphs": ["While FRA has taken steps to more closely monitor railroads\u2019  implementation progress, the agency has not prioritized its efforts,  including its allocation of resources, based on an assessment of risk. In  its 2015 Railroad Accountability Plan, FRA stated that its PTC data  collection and monitoring efforts would allow the agency to inform, among  other things, its resource allocation and risk mitigation. While FRA has  used its data to identify at-risk railroads, it has not used this information to  prioritize how to allocate its resources or address risks. For example, as  discussed earlier after reviewing railroads\u2019 data on their progress in  installing PTC equipment, FRA notified 14 commuter railroads of their at- risk status in May 2017. However, while FRA officials said that they hold  regular meetings with many\u2014but not all\u2014of the at-risk railroads, 9 of  these 14 commuter railroads said that the formal letter they received did  not ultimately trigger any change in the type of interaction they have with  FRA. More recently, in December 2017, the Secretary of Transportation  notified all railroads required to implement PTC by letter of the  expectation that all possible measures be taken to ensure implementation  requirements are met by the 2018 deadline. However, these letters made  no distinction between railroads\u2014that is, the same letter was sent to  railroads with conditionally certified PTC systems and to railroads that  reported completing no training or installing no locomotive equipment to  date\u2014nor did the letters describe how FRA\u2019s approach to working with  the railroads would respond to their particular circumstances and risks.", "As noted above, FRA officials have stated that the agency does not have  the resources to meet more frequently with or provide additional  assistance to railroads. While the PTC Task Force helps monitor  railroads\u2019 progress, FRA still employs fewer than 12 individuals with the  requisite PTC expertise and experience to review technical documents  and help railroads implement PTC systems. In an environment with  limited agency resources, targeting agency efforts to areas of the greatest  risk or highest priority areas is one way to leverage existing resources.  According to standards for internal control in the federal government,  management should identify, analyze, and respond to risks. In addition,  FRA\u2019s Strategic Human Capital Plan states that developments including  the rapid introduction of new technologies, such as PTC, demand that  FRA continuously evaluate its programs and resources to adapt to  changing demands.", "However, FRA has not fully leveraged the implementation progress data  that railroads\u2019 submit to the agency to identify and develop a risk-based  approach to prioritize agency actions. At present, it is unclear whether the  agency\u2019s priorities are, for example, to help the largest commuter  railroads meet the deadline or extension requirements, push those  railroads that are very close to full implementation, or assist railroads that  are in the earliest stages of their PTC project. For example, one regional  PTC specialist we met with said that if he did not need to be reviewing  documentation or observing railroads\u2019 field testing, he could spend more  time with at-risk railroads. By not effectively targeting actions to help  mitigate risks posed by railroads most at risk of not meeting the PTC  deadline or qualifying for an extension, FRA misses the opportunity to  leverage its limited resources by providing direct assistance in the areas  of greatest need."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Much progress has been made in implementing PTC by commuter  railroads. Nevertheless, about half of commuter railroads plan to apply for  an extension, and many of the railroads\u2019 planned schedules raise  questions about their ability to complete key implementation milestones  and qualify for RSD-based extensions prior to the 2018 deadline. As the  2018 deadline rapidly approaches, the need for clear information that is  systematically communicated to all railroads implementing PTC becomes  even more critical. FRA cannot expect to provide information and  guidance to railroads individually, and therefore, adopting a risk-based  communication strategy could help it more efficiently share information in  the coming year. Moreover, the information FRA collects on railroads\u2019  progress has not been used to inform the agency\u2019s resource allocation  decisions. Using this information to better allocate resources could help  position FRA to better meet its responsibility to monitor and oversee PTC  implementation in the future."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to FRA:", "The Administrator of FRA should identify and adopt a method for  systematically communicating information to railroads regarding the  deadline extension criteria and process. (Recommendation 1)", "The Administrator of FRA should develop an approach to use the  information gathered to prioritize the allocation of resources to  address the greatest risk. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this statement to DOT for review and comment. In  its comments, reproduced in appendix II, the agency concurred with our  recommendations. DOT also provided technical comments, which we  incorporated as appropriate.", "Chairman Thune, Ranking Member Nelson, and Members of the  Committee, this completes my prepared statement. I would be pleased to  respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Susan Fleming, Director, Physical Infrastructure team at (202)  512-2834 or flemings@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Susan Zimmerman (Assistant Director), Sarah Arnett, Jim Geibel,  Delwen Jones, Joanie Lofgren, SaraAnn Moessbauer, Malika Rice, Amy  Suntoke, Maria Wallace, Eric Warren, and Crystal Wesco."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This statement examines commuter railroads\u2019 implementation of positive  train control (PTC). Specifically, this report addresses:  commuter railroads\u2019 progress in implementing PTC; how many, if any, commuter railroads may be at risk of not meeting  the mandated PTC deadline or certain extension criteria, and what  factors may be affecting implementation progress; and  the extent to which FRA\u2019s management and oversight approach has  helped ensure that commuter railroads either meet the deadline or  qualify for an extension.", "To address these objectives, we reviewed the Rail Safety Improvement  Act of 2008, the Positive Train Control Enforcement and Implementation  Act of 2015, and applicable Federal Railroad Administration (FRA)  regulations, reports, and guidance. Our review focused on the 29  railroads FRA officials identified as commuter railroads required to  implement PTC. We also reviewed previous GAO work on PTC and  applied Standards for Internal Control in the Federal Government to  FRA\u2019s role overseeing PTC implementation, including the principles that  management should externally communicate the necessary quality  information to achieve the entity\u2019s objectives and that management  should identify, analyze, and respond to risks. In addition, we interviewed  representatives from 19 commuter railroads to further understand their  implementation progress, factors that may be affecting progress, and the  interviewees\u2019 perspectives on FRA\u2019s management and oversight of PTC  implementation. We selected the 19 railroads to include the 14 railroads  that according to FRA were identified in May 2017 as at risk of both not  meeting the 2018 implementation deadline and not completing statutory  requirements necessary to receive a deadline extension, as well as 5  other railroads that were further ahead with implementation and that  varied in geographic location and size of rail system, among other factors.", "We met with relevant FRA officials involved in PTC monitoring,  enforcement, and technical assistance including the PTC Staff Director,  regional PTC specialists working in each of the FRA regions where  commuter railroads selected for interviews operate, and members of the  headquarters-based PTC Task Force. In addition, we met with FRA Office  of Railroad Safety specialists and engineers, among others. We also  interviewed representatives from all 7 of the Class I freight railroads  (which are also required to implement PTC), 5 major PTC equipment  suppliers and contractors identified by FRA, and representatives from 2  railroad industry associations\u2014the Association of American Railroads  and the American Public Transportation Association\u2014to obtain their  perspectives on commuter railroads\u2019 implementation of PTC, factors  affecting implementation progress, and FRA\u2019s PTC management and  oversight.", "To identify commuter railroads\u2019 progress in implementing PTC, we  reviewed railroads\u2019 third quarter progress reports submitted to FRA for the  period ending September 30, 2017. We reviewed the most recently  available quarterly data outlining the 29 commuter railroads\u2019 installation  and implementation progress in selected areas as of September 30,  2017, including: locomotive equipment installed, wayside equipment  installed, employee training, locomotives fully equipped and PTC- operable, spectrum obtained, the status of field testing, and revenue  service initiated. As necessary, we also reviewed the narrative fields in  the quarterly reports for additional context related to a given railroad\u2019s  implementation activities and the extent of progress made in specific  implementation areas. We assessed the data in these reports by  reviewing it for anomalies, outliers, or missing information, and reviewing  supporting narratives to ensure they aligned with the reported data,  among other things. Based on these steps, we determined that these  data were sufficiently reliable for our purpose of describing railroads\u2019  progress implementing PTC. We also reviewed other sources of  information, such as PTC Implementation Plans, railroads\u2019 2016 annual  progress reports, and interviews with railroad representatives.", "To assess progress on locomotive equipment installation and wayside  equipment installation, we compared the quantities installed to the total  quantities required for PTC implementation. Similarly, to assess progress  on employee training, we compared the number of employees trained to  the number of employees required to be trained for PTC implementation.  To assess progress in fully equipping locomotives to be PTC-operable,  we compared the quantity of locomotives that are fully equipped and  PTC-operable to the quantity required for PTC implementation. To assess  progress on obtaining spectrum, we reviewed the quarterly update on  spectrum. We concluded that a railroad had obtained spectrum if, for one  or more area or location, it reported that spectrum was either (1) acquired  but not available for use or (2) acquired and available for use. We also  reviewed the narrative, as appropriate. For some railroads, we concluded  that spectrum was not applicable because they use a PTC system that  does not require spectrum, or because their host railroad is responsible  for obtaining spectrum. To assess progress on field testing, we reviewed  the third quarter status on installation and track-segment progress. We  concluded that a railroad initiated field testing if one or more of its  segments were reported as (1) testing or (2) operational/complete. To  determine which railroads initiated revenue service demonstration (RSD),  we reviewed the cumulative territories where RSD had been initiated. If  the railroad reported that one or more territories had initiated RSD, we  concluded that RSD had been initiated.", "Finally, to determine which railroads anticipate completing implementation  before the December 31, 2018 deadline and which plan to seek any RSD- based extension, we obtained information from all 29 commuter railroads  to identify which railroads plan to implement PTC by the 2018 deadline  and which plan to submit an alternative schedule (that is, a request for an  extension) to implement PTC after the December 31, 2018 deadline.", "To identify commuter railroads at risk of meeting neither the PTC deadline  nor any RSD-based extension criteria, we first reviewed data on railroads\u2019  progress installing PTC locomotive and wayside equipment. We did this  because FRA used such installation progress to identify 14 commuter  railroads as being at risk and notified them via formal letter in May 2017.  To confirm FRA\u2019s identification of commuter railroads that would be at risk  based on an updated benchmark for the third quarter of 2017\u2014railroads  with less than 65 percent of total hardware installed\u2014we analyzed  railroads\u2019 reported locomotive and wayside equipment installation status  as of September 30, 2017 to determine the percentage of total hardware  installed for each commuter railroad.", "To build on this analysis, we collected information from all 29 commuter  railroads on their actual and planned schedules for key implementation  milestones. For the 19 commuter railroads we met with, we collected this  information as part of our interviews, and for the remaining 10 commuter  railroads, we collected this information by email using a standard data  collection instrument. The key implementation milestones covered  procuring a prime contractor for PTC implementation; applying for and  entering field testing and RSD, which is the final phase of field testing;  installing the back office server (BOS) and associated software; and  completing PTC implementation. This schedule information was collected  between September 2017 and January 2018.", "We compared the amount of time commuter railroads\u2019 planned for  completing two key milestones to the amount of time that FRA officials  estimate is required for each milestone and to the experiences of  railroads that already initiated RSD. The two milestones are as follows:  Install the BOS and associated software necessary to connect and  interface with wayside, locomotive, and dispatch equipment.", "Conduct field testing of installed infrastructure, which is an initial  assessment of the PTC system\u2019s overall functionality on trains that  are not transporting passengers or operating during regular  passenger service.", "We selected these two milestones because (1) each milestone follows  equipment installation (which FRA had previously analyzed to assess  commuter railroads PTC implementation progress); (2) a railroad must  complete both to enter RSD; and (3) several interviewees, including PTC  contractors and suppliers and FRA officials, said these activities are  important project milestones that are complex and time consuming. We  calculated the amount of time a commuter railroad planned for each  milestone (with initiating RSD as the endpoint for each milestone), and  compared that amount of time to two benchmarks: first, the anticipated  length of time FRA officials said that the milestones have taken or may  take, and second, the average amount of time (in months) that each  milestone took the six commuter railroads that had started RSD as of  September 2017. Since we used two benchmarks, we present a range of  railroads that may not have sufficient time to complete these milestones  and thus may be at risk of not meeting the 2018 deadline or qualifying for  an RSD-based extension."], "subsections": []}, {"section_title": "Appendix II: Agency Comments", "paragraphs": ["Appendix II: Agency Comments  This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-49", "url": "https://www.gao.gov/products/GAO-19-49", "title": "Information Technology: Departments Need to Improve Chief Information Officers' Review and Approval of IT Budgets", "published_date": "2018-11-13T00:00:00", "released_date": "2018-11-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In December 2014, Congress enacted FITARA, which was intended to improve covered agencies' acquisitions of IT. FITARA also provided an opportunity to strengthen the authority of CIOs to provide needed direction and oversight of agencies' IT budgets.", "GAO was asked to review whether CIOs' IT budgeting practices are consistent with FITARA and OMB's implementing guidance. This report addresses the extent to which selected federal agencies (1) established policies and procedures that address IT budgeting requirements, (2) could demonstrate that they had developed fiscal year 2017 IT budgets for sampled investments consistent with FITARA and OMB guidance, and (3) implemented processes to ensure that annual IT budgets are informed by reliable cost information.", "GAO selected four departments to review. These departments had the two highest and the two lowest average initial selfassessments scores of compliance with OMB's FITARA guidance, as well as a fiscal year 2017 IT budget of at least $1 billion. Within each of the departments, GAO also selected the component agencies with the largest fiscal year 2017 IT budget. For each selected department and component agency, GAO reviewed relevant IT budget policies and procedures, analyzed a sample of major and non-major investment proposals against key OMB requirements, and determined whether selected departments captured government labor costs, among other things."]}, {"section_title": "What GAO Found", "paragraphs": ["The departments GAO reviewed\u2014the Departments of Energy (DOE), Health and Human Services (HHS), Justice (DOJ), and the Treasury (Treasury)\u2014took steps to establish policies and procedures that align with eight selected Office of Management and Budget (OMB) requirements intended to implement information technology (IT) acquisition reform legislation (commonly referred to as the Federal Information Technology Acquisition Reform Act, or FITARA) and to provide the chief information officer (CIO) visibility into and oversight over the IT budget. For example, of the eight OMB requirements, all four departments had established policies and procedures related to the level of detail with which IT resources are to be described in order to inform the CIO during the planning and budgeting processes. Agencies varied, however, as to how fully they had established policies and procedures related to some other OMB requirements, and none of the four departments had yet established procedures for ensuring that the CIO had reviewed whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. (See table.)", "Where the departments had not fully established policies and procedures, it was due, in part, to having not addressed in their FITARA implementation and delegation plans how they intended to implement the OMB requirements. Until departments develop comprehensive policies and procedures that address IT budgeting requirements established by OMB, they risk inconsistently applying requirements that are intended to facilitate the CIO's oversight and approval of the IT budget.", "Departments varied in the extent to which they could demonstrate implementation of key IT budgeting requirements when developing fiscal year 2017 funding requests for sampled investments. Specifically, while DOJ demonstrated that it had fully implemented the selected requirements for the majority of the investments GAO sampled, HHS and Treasury partially demonstrated implementation for a majority of the sampled investments, and DOE could not demonstrate implementation for the majority of the sampled investments. For example, DOE, HHS, and Treasury were not able to fully show that their CIOs had reviewed whether estimates of IT resources included in the budget request were appropriate for two of their respective departments' largest fiscal year 2017 IT investments. Departments often could not demonstrate that they had implemented selected IT budgeting requirements at the investment level because they had not established comprehensive policies and procedures that required them to do so. As a result, departments could not show that CIOs were sufficiently involved in planning fiscal year 2017 IT expenditures at the individual investment level.", "All four selected departments lacked quality assurance processes for ensuring their IT budgets were informed by reliable cost information. Specifically, the selected departments did not have IT capital planning processes for (1) ensuring government labor costs have been accurately reported, (2) aligning contract costs with IT investments, and (3) utilizing budget object class data to capture all IT programs. This resulted in billions of dollars in requested IT expenditures without departments having comprehensive information to support those requests, and nearly $4.6 billion in IT contract spending that was not explicitly aligned with investments in selected departments' IT portfolios. This was due to a lack of processes for periodically reviewing data quality and estimation methods for government labor estimates, as well as a lack of mechanisms to cross-walk IT spending data in their procurement and accounting systems with investment data in their IT portfolio management systems. In August 2017, OMB developed a new approach of using a standard set of categories to group IT spending that, if properly implemented, has the potential to provide departments and CIOs enhanced visibility into IT costs across the portfolio. Nevertheless, until departments establish processes for assessing or otherwise ensuring the quality of relevant IT cost data used to inform their IT budgets, department CIOs will have less assurance that their budget includes appropriate and comprehensive estimates of IT resources."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 43 recommendations to the eight selected departments and component agencies to address gaps in their IT budgeting policies and procedures, demonstrate implementation of OMB requirements, and establish procedures to ensure IT budgets are informed by reliable cost information. HHS, the Centers for Medicare and Medicaid Services, DOJ, the Federal Bureau of Investigation, and the Internal Revenue Service agreed with our recommendations. DOE partially agreed with one recommendation and agreed with the other recommendations made to it, as well as with the recommendations made to its component agency\u2014the National Nuclear Security Administration. Treasury neither agreed nor disagreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Information systems are critical to the health, economy, and security of  the nation. Toward this end, the President\u2019s fiscal year 2018 budget  estimated that, for information technology (IT), the federal government  had invested approximately $94 billion in fiscal year 2017 and expected to  invest approximately $96 billion in fiscal year 2018\u2014the largest amount  ever. However, as we have previously reported, prior IT expenditures  have too often produced failed projects\u2014that is, projects with multimillion  dollar cost overruns and schedule delays measured in years, and with  questionable mission-related achievements.", "Moreover, the President\u2019s Management Agenda has pointed out that  federal executives have been challenged by the lack of visibility into, and  accuracy of IT spending data. In this regard, the agenda noted that 84  percent of the federal IT budget was assigned to the spending category of  \u201cother,\u201d and was not tied to a specific category of IT spending. The  Administration stated that this lack of granularity makes it difficult to  baseline federal IT investments and show the public whether the  government is spending taxpayer dollars effectively in order to drive the  large-scale change needed to improve business transformation and  citizen services.", "Recognizing the severity of issues related to the government-wide  management of IT, in December 2014, Congress enacted IT acquisition  reform legislation (commonly referred to as the Federal Information  Technology Acquisition Reform Act, or FITARA) as part of the Carl Levin  and Howard P. \u2018Buck\u2019 McKeon National Defense Authorization Act for  Fiscal Year 2015. FITARA was intended to improve covered agencies\u2019  acquisitions of IT and enable Congress to monitor their progress, as well as hold those agencies accountable for reducing duplication and  achieving cost savings. In addition, with the enactment of FITARA, the  federal government is to strengthen the authority of chief information  officers (CIO) to provide needed direction and oversight of covered  agencies\u2019 IT budgets. Among other things, FITARA requires the CIOs of  certain major civilian agencies to have a significant role in the decision  processes for all annual and multi-year planning and to approve the IT  budget requests of the agencies.", "In June 2015, the Office of Management and Budget (OMB) released  FITARA guidance (referred to as the \u201ccommon baseline\u201d). The common  baseline describes how covered agencies are to implement the  requirements of the law through the use of management controls,  including controls related to the development of IT budgets.", "With these requirements in mind, you asked us to determine whether  CIOs\u2019 IT budgeting practices are consistent with FITARA and  implementing guidance. This report examines the extent to which  selected federal agencies (1) established policies and procedures that  address the IT budgeting requirements of FITARA and related OMB IT  budget guidance, (2) could demonstrate that they had developed fiscal  year 2017 IT budgets for sampled investments consistent with FITARA  and OMB guidance, and (3) implemented processes to ensure that  annual IT budgets are informed by reliable cost information.", "To address our objectives, we selected four departments to review. First,  we identified a subset of the 24 agencies covered by the Chief Financial  Officers Act that had a fiscal year 2017 IT budget request of at least $1  billion. From this subset, we then identified the four agencies having the  two highest and the two lowest average initial FITARA self-assessment  scores (which reflected the extent to which the agencies had reported  implementing the specific requirements called for in the act\u2019s provisions).  In the event that one or more agencies had the same average  self-assessment scores, we selected the agency with the largest fiscal  year 2017 IT budget. Based on these criteria, we selected four  departments for our review: (1) the Department of Energy (DOE), (2) the  Department of Health and Human Services (HHS), (3) the Department of  Justice (DOJ), and (4) the Department of the Treasury (Treasury).", "In addition, for each of these four departments, we selected the  component agency that had the largest fiscal year 2017 IT budget  request. The component agencies within the four selected departments  were: (1) the National Nuclear Security Administration (NNSA) within  DOE, (2) the Centers for Medicare and Medicaid Services (CMS) within  HHS, (3) the Federal Bureau of Investigation (FBI) within DOJ, and  (4) the Internal Revenue Service (IRS) within Treasury.", "For the first objective, we compared the selected departments\u2019 IT  budgeting and capital planning policies and procedures to those  requirements in OMB\u2019s FITARA guidance that related to developing IT  budgets. In selecting the requirements, we reviewed 10 areas within  OMB\u2019s common baseline that related to budget formulation and  execution, and selected 8 requirements\u2014such as including the CIO in the  planning and budgeting stages for programs that are fully or partially  supported with IT resources\u2014that, in our professional judgment, would  significantly impact the development and approval of departments\u2019 annual  IT budgets.", "We also assessed selected component agencies\u2019 IT budgeting and  capital planning policies and procedures in cases where the department  had delegated the responsibility for performing the requirement to its  components. Of the four departments we reviewed, three departments\u2014 DOE, HHS, and Treasury\u2014had delegated the responsibility to component  agencies for performing certain IT budgeting and capital planning  requirements.", "With regard to the second objective, we determined whether the  departments had implemented key IT budgeting requirements for a  non-generalizable sample of investments in their fiscal year 2017 budget  formulation. In doing so, we chose 16 investments\u2014the largest major and  non-major investments at the department level and the largest major and  non-major investments at the component level\u2014based on the selected  departments\u2019 fiscal year 2017 IT budget requests.", "We then reviewed investment-related IT budget formulation artifacts\u2014 such as briefings, reports, meeting minutes, memorandums, and other  relevant documentation\u2014for the sampled major and non-major  investments at each of the departments and component agencies included in our review. We compared this documentation to the actions  agencies should have taken to implement five of the eight selected  requirements from the first objective. We focused on these five  requirements because, based on our professional judgment, the actions  taken to implement these requirements could be observed for individual  investments, such as whether the CIO was included in the planning and  budgeting stages for investments with IT resources.", "To address the third objective, we assessed the departments\u2019 efforts to  develop their fiscal year 2017 budget with reliable cost information by  comparing the selected departments\u2019 IT capital planning and budgeting  processes against three best practices (from among others) that we and  the International Organization for Standardization have identified:  capturing government labor costs, aligning contract costs with  investments, and utilizing budget object class data. We selected these  three practices because of their potential to inform the development of a  complete and accurate IT budget for a federal department.", "We then reviewed, for each selected department, government labor  estimates and contract-related information in the 2017 budget submission  reported on the Federal IT Dashboard, contract obligation data reported  within the Federal Procurement Data System-Next Generation,  documentation identifying the department\u2019s budget object classes, and  each selected department\u2019s IT capital planning policies and procedures.", "We analyzed each department\u2019s IT investment proposals and capital  planning procedures to determine whether the department was capturing  government labor costs for each investment, aligning contract costs with  investments, and utilizing budget object class data to inform its IT budget  formulation.", "We supplemented our analyses with interviews of relevant officials in the  selected departments\u2019 offices of the CIO and Chief Financial Officer, as  well as program offices. These interviews included discussions of our  observations of any shortfalls in their processes. A full description of our  objectives, scope, and methodology can be found in appendix I.", "We conducted this performance audit from January 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In addition to improving the government-wide acquisition of IT, FITARA  was intended to assist Congress in holding covered agencies  accountable for their progress towards reducing duplication and achieving  cost savings. The act also enhanced the CIO\u2019s authority in covered  agencies for the formulation and approval of their agency\u2019s IT budgets.  In this regard, the act requires CIOs to have a significant role in the  decision processes for all annual and multi-year planning, and to approve  the IT budget requests of the agency.", "In June 2015, OMB released guidance that describes how agencies are  to implement the requirements of FITARA. The guidance is intended to,  among other things: assist agencies in aligning their IT resources with statutory  requirements; establish government-wide IT management controls that will meet the  law\u2019s requirements, while providing agencies with flexibility to adapt to  unique agency processes and requirements;  strengthen the relationship between agency CIOs and component  CIOs; and  strengthen the CIO\u2019s accountability for IT costs, schedules,  performance, and security.", "The guidance identifies a number of actions that agencies are to take to  establish a basic set of roles and responsibilities (the common baseline)  for CIOs and other senior agency officials. One such action is that  agencies are to conduct a self-assessment to determine whether their  current policies and procedures meet or do not meet the common  baseline requirements. If the agencies do not meet the requirements, they  are to submit an implementation plan describing the changes they intend  to make to their policies and procedures in order to ensure that the  common baseline requirements are met. Further, the guidance notes that  senior agency officials\u2014including Chief Financial Officers and Chief  Acquisition Officers\u2014are to work in partnership to facilitate successful  implementation of the common baseline and to ensure the CIO is a  strategic partner in agency strategies, budgets, and operations.", "In its guidance, OMB states that agency CIOs are allowed to delegate  certain responsibilities from the common baseline to other agency  officials, such as component agency CIOs. For example, CIOs can  delegate to these officials, inclusion in the planning, programming, and  budgeting stages for programs with IT resources. However, according to  the guidance, agency CIOs cannot delegate their responsibility for  reviewing and approving the major IT investments portion of the budget  request. The guidance further states that, for delegated responsibilities,  agency CIOs are to establish plans that demonstrate how they will retain  accountability. These delegation plans should include procedures for  ensuring that the delegated official will execute the responsibility with the  appropriate level of rigor.", "In addition to the FITARA implementation guidance, OMB Circular A-130  establishes general requirements for the planning; budgeting;  governance; acquisition; and management of federal information,  personnel, equipment, funds, IT resources, and supporting infrastructure  and services. The circular identifies responsibilities for planning,  programming, and budgeting that reinforce requirements in OMB\u2019s  FITARA implementation guidance.", "Moreover, in May 2018 the President issued an executive order that  reinforces requirements in OMB\u2019s FITARA implementation guidance.  The order noted that its purpose was to further enhance the effectiveness  of CIOs by, among other things, requiring agency heads to ensure that  the CIO has a significant role in all IT-related annual and multi-year  planning, programming, budgeting, and execution decisions. In addition,  the executive order noted that agency heads are to direct the CIO to be a  voting member of and to chair agency governance boards, including  investment review boards, that have purview over IT or that set  agency-wide IT standards.", "We have previously testified that, while agencies have made progress in  implementing FITARA, its further implementation is critical to improving IT  management. We have also noted that, continued congressional  oversight of agencies\u2019 implementation of this law is essential to help  ensure that these efforts succeed.", "In addition, in an August 2018 report, we noted that 23 federal agencies  had reported wide variations in the authority over component-level IT  spending. For example, 8 agencies reported that the CIO had 100  percent authority over the agencies\u2019 IT spending (including for  components), while 10 agencies reported that these officials had authority  for less than 50 percent of such spending. These widely varying levels of  authority over agency-wide IT spending existed, in part, because OMB\u2019s  guidance did not completely define the authority that CIOs should have  over this spending. Accordingly, we recommended that OMB define the authority that the CIOs are to have when agencies report on their  authority over IT spending. OMB subsequently agreed with our  recommendation."], "subsections": []}, {"section_title": "Departments Took Steps to Establish Policies and Procedures for IT Budgeting, but Lacked Plans to Fully Implement FITARA Requirements", "paragraphs": ["As previously mentioned, OMB\u2019s guidance on implementing FITARA  requires departments to develop policies and procedures to address a  number of requirements identified in the basic set of roles and  responsibilities (the common baseline) for CIOs. These include the eight  selected common baseline requirements related to the CIO\u2019s  responsibility for IT budgeting. As identified in table 1, these requirements  can be categorized into three areas: (1) CIO visibility into IT resources,  (2) CIO input into IT resource plans, and (3) CIO review and approval of  IT budgets.", "OMB required federal agencies and departments to establish FITARA  implementation plans that articulated policies and procedures for  addressing each of the common baseline requirements and that  described changes the departments intended to make to address any  gaps in their policies and procedures. Further, for delegated  responsibilities, OMB required agency CIOs to establish delegation plans  that demonstrate how they intend to retain accountability for the  requirement and ensure that the delegated official will execute the  responsibility with the appropriate level of rigor.", "Toward this end, the selected departments had taken steps to establish  policies and procedures that addressed the common baseline  requirements established by OMB; however, most of the departments, or  their component agencies, lacked comprehensive policies and  procedures that fully addressed all of the requirements. Specifically, of  the eight common baseline requirements that we reviewed, all four  departments and their respective component agencies had fully  documented one requirement in their policies and procedures, and either  had partially documented or had not documented the other seven  requirements. While shortfalls existed for each department, DOJ had the  most comprehensive IT budgeting policies and procedures, followed by  Treasury, HHS, and DOE, respectively.", "In addition, department CIOs at Treasury, HHS, and DOE had delegated  many of the responsibilities for addressing the IT budgeting requirements  to component CIOs\u2014thus, these component agencies were to  supplement their departments\u2019 policies and procedures with their own IT  budgeting policies and procedures for the responsibilities they were  delegated.", "Among the three respective component agencies to which Treasury,  HHS, and DOE had delegated IT budgeting responsibilities, the extent to  which the components had documented requirements in their policies and  procedures varied. For example, IRS had documented policies and  procedures for all four of its delegated requirements. In addition, CMS  had documented policies and procedures that satisfied two, partially  satisfied two, and did not satisfy one of the five requirements delegated to  that component. For its part, NNSA had not documented any of its five  delegated requirements in the component\u2019s policies and procedures.", "Figure 1 illustrates the extent to which all four departments\u2019 policies and  procedures had addressed the selected OMB common baseline  requirements, and is followed by a discussion of each category of  requirement. In addition, the figure highlights areas where component  agencies addressed their delegated responsibilities or did not address  their delegated responsibilities. Appendices II through V (for DOE, HHS,  DOJ, and Treasury, respectively) provide additional details about our  assessment of the extent to which the departments\u2019 policies and  procedures had addressed the selected OMB common baseline  requirements, as well as the extent to which component agencies fulfilled  their delegated responsibilities."], "subsections": [{"section_title": "CIO Visibility into IT Resources", "paragraphs": [], "subsections": [{"section_title": "Establish the Level of Detail with Which IT Resources Are to Be Described in Order to Inform the CIO during the Planning and Budgeting Processes", "paragraphs": ["All four departments had policies and procedures that addressed the level  of detail with which IT resources are to be described in order to inform the  CIO during the planning and budgeting processes. For example, three of  the four departments (DOE, HHS, and Treasury) had policies that  required the IT budget to include a description of IT resource categories  that are required by OMB\u2019s IT capital planning guidance, such as  government labor and certain infrastructure resources. DOJ\u2019s policy  required the IT budget to include a description of 49 different IT resource  categories. As a result, the departments have increased the likelihood  that IT resources will be consistently described with the appropriate level  of detail for the CIO."], "subsections": []}, {"section_title": "Establish Agency-Wide Policy for the Level of Detail with Which Planned Expenditures for All Transactions That Include IT Resources Are to Be Reported to the CIO", "paragraphs": ["Each of the four departments had documented within their IT budgeting  procedures the level of detail that was required for reporting planned IT  expenditures to the CIO. However, the procedures did not explicitly  require that every transaction that related to IT resources be included in  the planned expenditure reporting to the CIO. Without explicitly requiring  that all transactions that have IT resources be included in the reporting of  planned expenditures, there is increased risk that the CIO cannot ensure  that all budget requests contain complete and accurate resource  estimates, in a consistent manner, to inform the department\u2019s annual IT  budget."], "subsections": []}]}, {"section_title": "CIO Input into IT Resource Planning", "paragraphs": [], "subsections": [{"section_title": "Include the CIO in the Planning and Budgeting Stages for Programs That Are Fully or Partially Supported with IT Resources", "paragraphs": ["The departments varied in the extent to which their policies and  procedures included a requirement for the department-level CIO to be  included in programs supported with IT resources. For example, DOE and  DOJ took steps to ensure that their CIOs are included in the planning and  budgeting of programs with IT resources by requiring that each IT  acquisition request include information about the investment in the CIO\u2019s  IT portfolio that is to support the acquisition. Adding this investment  information to each acquisition request is intended to allow the CIO to  ensure that the requests are factored into resource planning for the IT  budget.", "However, DOE\u2019s, HHS\u2019s, and Treasury\u2019s policies and procedures did not  always require that the CIO be included in the planning and budgeting  stages for every program with IT resources. For example, DOE\u2019s policies  called for the CIO to be included in the budget development process by  requiring the program offices to submit their IT budget to the CIO for  review and approval annually. On the other hand, this policy did not apply  to NNSA\u2019s IT programs because the responsibility to meet this  requirement was delegated to that component.", "NNSA drafted procedures to carry out the delegated responsibility, but  the procedures did not call for the DOE CIO\u2014in addition to the  component-level CIO\u2014to have input into the IT budget, as required by  the Secretary of Energy\u2019s October 2016 FITARA implementation  memorandum. According to officials in NNSA\u2019s Office of the CIO, the  component expects to finalize the procedures by the end of August 2018;  however, the officials did not say whether the finalized procedures would  include a requirement for NNSA to obtain input from the DOE CIO on its  IT budget. By not requiring that the department-level CIO be included in  the planning and budgeting stages for programs that are fully or partially  supported with IT resources, DOE, HHS, and Treasury are at increased  risk that the CIO is not providing input into key IT resource planning  decisions."], "subsections": []}, {"section_title": "Include the CIO as a Member of Governance Boards That Inform Decisions Regarding All IT Resources, Including Component-Level Governance Boards", "paragraphs": ["The charters for all four department-level investment review boards that  inform decisions regarding IT resources indicated that their respective  CIOs were included as members. In addition, the charters for  component-level investment review boards that inform decisions  regarding IT resources at CMS and IRS included their respective  component-level CIOs. However, a similar review board at FBI did not  include the component-level CIO as a member and NNSA had not yet  finalized its charter. Further, none of the charters for the selected  components\u2019 investment review boards indicated that the  department-level CIOs were members.", "Among the three CIOs at DOE, HHS, and Treasury that had delegated  the responsibility of component-level board membership to component  CIOs, the department-level CIOs at these agencies had not established  procedures for ensuring that the components had implemented this  responsibility, as required by OMB. As previously mentioned, while  department CIOs were allowed to delegate this responsibility, OMB  requires department CIOs to establish delegation plans that describe  each requirement being delegated, demonstrate how the department  CIOs will retain accountability for the requirement, and ensure that the  delegated official executed the responsibility with the appropriate level of  rigor. By not requiring that the department-level CIO be included in key  governance board decisions regarding IT investments or establishing  delegation plans that outline such activities for component CIOs, the  selected departments are at increased risk that the CIO is not providing  input into key IT resource planning decisions."], "subsections": []}, {"section_title": "Document the Processes by Which Program Leadership Works with the CIO to Plan an Overall Portfolio of IT Resources", "paragraphs": ["Departments varied in the extent to which they had documented the  process by which program leadership is to work with the CIO to plan an  overall portfolio of IT resources. For example, DOJ and Treasury  documented a detailed process with roles and responsibilities for how  program leadership is to work with their CIOs to plan resources for the  overall portfolio through their IT governance process.", "However, DOE and HHS had partially documented the process they were  to follow to meet this requirement. Specifically, these departments  documented that they were to utilize department-level governance boards  to plan IT resources with program leadership for investments subject to  the governance board reviews. However, they did not always document  how CIOs were to work with program leadership in planning IT resources  for other investments that were not subject to department-level  governance board reviews, such as existing HHS investments that are  greater than or equal to $20 million annually and DOE investments  initiated by NNSA. As a result of shortfalls in documenting policies and  procedures that require the CIO to work with program leadership to plan  the IT portfolio, DOE and HHS are at an increased risk that the CIO\u2019s role  in the formulation of IT budgets is limited."], "subsections": []}]}, {"section_title": "CIO Review and Approval of the IT Budget Request", "paragraphs": [], "subsections": [{"section_title": "Ensure the CIO Has Reviewed and Approved the Major IT Investments Portion of the Budget Request", "paragraphs": ["The four selected departments varied in the extent to which they had  documented in their policies and procedures how their CIOs are to review  and approve the major IT investments portion of the budget request. For  example, DOJ had a documented process for how the CIO is to review  and approve all major IT investments through the department\u2019s annual  budget planning and IT portfolio review processes.", "In contrast, the other three departments partially addressed the  requirement by documenting the requirement to review and approve  certain major investments, but not all major investments. To illustrate,  DOE documented policies and procedures that required the CIO to review  major IT investments, but the policies and procedures did not apply to  major IT investments within NNSA and the national laboratories, including  those related to high-performance computing.", "Further, NNSA had draft policies and procedures requiring its  component-level CIO to review major IT investments. However, these  policies and procedures had not yet been finalized and approved, and  they did not include a requirement for the DOE CIO\u2019s review of these  investments. Moreover, the department had not developed policies and  procedures stipulating this requirement for the national laboratories. While  officials in the department\u2019s Office of the CIO stated that they plan to  revise policies and procedures for the national laboratories to include the  CIO in their annual planning processes, the officials did not identify a time  frame for completing those revisions.", "As another example, HHS had documented a process that required the  department-level CIO to review and approve new major IT investments  greater than or equal to $20 million. In addition, the process required  that the review and approval of new and existing major investments  between $10 million and $20 million annually be delegated to the  department\u2019s component CIOs. Accordingly, CMS met this requirement at  the component level by documenting IT investment review board policies  and procedures that require the component CIO to review and approve major, high-risk, and mission critical IT investments with estimated costs  of less than $20 million. However, HHS did not fully address the  department-level requirement in that its process did not document how  the department-level CIO would review and approve existing (as opposed  to new) major investments greater than or equal to $20 million annually.  As a result of not fully documenting the process for how the departments  are to meet this requirement, DOE, HHS, and Treasury are at increased  risk that major investments will be submitted for the budget without being  reviewed and approved by the CIO."], "subsections": []}, {"section_title": "Ensure the CIO Has Reviewed IT Resources That Are to Support Major Program Objectives and Significant Increases and Decreases in IT Resources", "paragraphs": ["The departments we reviewed varied in the extent to which they had  documented in their policies and procedures how they are to ensure that  the CIO has reviewed IT resources that are to support major program  objectives and significant increases and decreases in resources. For  example, DOJ and Treasury had documented in their policies and  procedures their CIOs\u2019 role in reviewing IT resources that support major  program objectives and significant increases and decreases in their  resources.", "However, the other two departments\u2014HHS and DOE\u2014had not  documented this role for their CIOs. Specifically, HHS policies and  procedures did not include a requirement for the CIO to review significant  increases and decreases in IT resources. In addition, the HHS CIO  delegated to component-level CIOs the responsibility to review IT  resources that support major program objectives for investments of less  than $20 million annually. However, HHS had not established procedures  for ensuring its components carried out the responsibility, and the  component agency we selected\u2014CMS\u2014did not include this requirement  in its procedures.", "Similarly, DOE had not documented procedures for the department-level  CIO\u2019s role in reviewing IT resources that support major program  objectives and significant increases and decreases in IT resources. For  NNSA programs, DOE delegated the responsibility to the NNSA CIO.  However, NNSA had not documented the NNSA CIO\u2019s role in reviewing  planned IT support for major program objectives, as well as significant  increases and decreases in IT resources. Until DOE and HHS develop  policies and procedures that include how the CIO is to review whether  each investment\u2019s IT resources support major program objectives and  have increased or decreased significantly, they will have less assurance  that the IT budget request consistently supports the departments\u2019 goals  and objectives and that the CIOs have approved significant changes in  the budget."], "subsections": []}, {"section_title": "Ensure the CIO Has Reviewed Whether the IT Portfolio Includes Appropriate Estimates of All IT Resources Included in the Budget Request", "paragraphs": ["None of the four departments had documented in their policies and  procedures how their CIOs are to ensure, as part of the IT budget review  and approval process, that the IT portfolio includes appropriate estimates  of all resources. Specifically, DOE, HHS, Treasury, and DOJ had not  documented in their policies and procedures the necessary steps that  their CIOs would need to take in order to ensure that the portfolios  included the appropriate estimates of all IT resources in the budget  requests.", "In addition, Treasury delegated this responsibility to its component CIOs  for component-level investments, and IRS had documented procedures  for validating the estimates of all IT resources for the IRS budget request.  However, Treasury did not document the necessary steps to ensure that  its delegated authorities were being carried out, as required by OMB.", "Without documented policies and procedures for the steps the CIO is to  take to review whether the IT portfolio includes appropriate estimates of  all IT resources included in the budget request or delegation plans that  outline such activities for component CIOs, the selected departments may  be limited in their ability to assure that their CIOs are effectively  positioned to consistently and adequately review and approve the IT  budget request."], "subsections": []}]}, {"section_title": "Gaps in Departments\u2019 FITARA Implementation and Delegation Plans", "paragraphs": ["The shortcomings in the four departments\u2019 policies and procedures  related to CIO visibility into IT resources, CIO input into IT resource  planning, and CIO review and approval of the IT budget request were  due, in part, to having not addressed in their FITARA implementation and  delegation plans how they intended to implement the OMB common  baseline requirements.", "For example, none of the four departments\u2019 FITARA implementation  plans addressed how they intended to implement the requirement that all  transactions related to IT resources be included in planned expenditure  reporting to the CIO. These departments\u2019 implementation plans also did  not address the requirement that the CIO review whether the IT portfolio  includes appropriate estimates of all IT resources identified in the budget  request. Officials in DOE\u2019s Office of the CIO stated that the department is  in the process of determining ways to add specific review criteria to its  capital planning policies and procedures to identify how the department is  to review the appropriateness of IT resources in the portfolio. Had such  procedures been documented and identified in the department\u2019s FITARA  implementation plan, it would have been better positioned to demonstrate  how this common baseline requirement is being addressed.", "In addition, the HHS and Treasury FITARA delegation plans did not  address how their CIOs would ensure components carried out their  responsibilities for reviewing and approving the IT budget request.  Officials in HHS\u2019s Office of the CIO stated that delegation memorandums  issued to their components included procedures for ensuring components  carried out their responsibilities. However, the delegation plans they  provided to us did not include such procedures. Officials in Treasury\u2019s  Office of the CIO stated that they did not believe that it was their  responsibility to have procedures for verifying that components are  carrying out their delegated responsibilities because they viewed it as an  audit function. However, having such procedures is called for by OMB\u2019s  FITARA implementation guidance.", "Without FITARA implementation plans that address the shortfalls in  policies and procedures for ensuring the implementation of OMB\u2019s  common baseline requirements, departments have limited assurance that  their CIOs will implement the requirements as intended by OMB and  FITARA. In addition, without identifying the steps within the FITARA  delegation plans that departments intend to take to ensure the  responsibilities delegated to components are appropriately carried out,  the departments may have limited assurance that these actions have  been taken."], "subsections": []}]}, {"section_title": "Selected Departments Demonstrated Mixed Implementation of IT Budgeting Requirements in Developing Fiscal Year 2017 Budgets for a Sample of Investments", "paragraphs": ["While it is important for federal agencies to establish policies and  procedures that describe how they are to carry out IT budgeting  requirements identified in FITARA and OMB guidance, it is equally  important for them to implement the requirements when planning and  budgeting for individual IT investments and to retain supporting  documentation that would demonstrate that they have done so. Among  the eight selected OMB common baseline requirements related to IT  budgeting, five of the requirements are applicable at the individual  investment level. Table 2 shows how these five common baseline  requirements would be implemented at the individual investment level, as  well as the related categories.", "The selected departments and their respective component agencies  varied in the extent to which they could demonstrate that they had  implemented the five common baseline requirements when developing  their fiscal year 2017 funding requests for 16 sampled investments.", "Figure 2 and the subsequent discussion summarize the extent to which  the departments and their component agencies could demonstrate that  they had implemented the five requirements in developing fiscal year  2017 budgets for the sample of investments that we reviewed. As  described earlier, we reviewed the largest major and non-major  investment for each of the four departments and four component  agencies. In addition, appendices II through V provide further details  about our assessments of the extent to which the departments and  component agencies demonstrated that they had implemented the five  requirements."], "subsections": [{"section_title": "CIO Visibility into IT Resources", "paragraphs": [], "subsections": [{"section_title": "IT Resources for Each Investment Are Described in Order to Inform the CIO during the Planning and Budgeting Processes", "paragraphs": ["For the investments that we reviewed, the departments and their  components varied in the extent to which they could demonstrate that  they had described their investments\u2019 IT resources. For example, DOJ  and Treasury described specific IT resources, such as costs for  personnel and software, in spreadsheets or databases for processing  annual requests for resources for each proposed IT investment.", "Conversely, HHS and DOE did not fully describe in supporting  documentation their respective IT resources for their investments  included in our review. For example, HHS could not demonstrate that it  had described the department-level non-major investment\u2019s IT resources.  In addition, although HHS described non-labor resources that were  allocated for a portion of the sampled department-level major investment,  the department did not describe labor resources for the investment. HHS  also could not account for the investment\u2019s entire funding request\u2014 leaving nearly $17 million in resources that were not described. Officials  in HHS\u2019s Office of the CIO were unable to explain why supporting  documentation for the investment only accounted for a portion of the  investment\u2019s total funding request, and not the entire request.", "HHS and DOE officials provided various reasons as to why their  departments did not describe in supporting documentation all of the IT  resources associated with the investments we sampled. For example,  HHS could not demonstrate that it had described IT resources for the  non-major investment that we reviewed because officials in the Office of  the CIO did not have the supporting documentation associated with its  funding request. In addition, according to officials in HHS\u2019s Office of the  CIO, the department\u2019s omission of required labor resources from program  office artifacts supporting the funding request for the department-level  major investment was an oversight. According to the officials, during the  budget formulation cycle, the department did not consistently maintain  documentation for its investments that would describe the IT resources  and lacked a mature governance process for reviewing the IT resources  associated with the investment.", "Moreover, officials in DOE\u2019s Office of the CIO stated that the  department\u2019s budgeting procedures did not call for clearly identifying  specific IT resources. However, at a minimum, DOE\u2019s budgeting  procedures required that the budget estimate for investments include  planned government labor expenditures.", "Until HHS and DOE describe IT resources within their investments, the  CIO may have limited visibility into what the resources are that are being  requested in the annual IT budget."], "subsections": []}]}, {"section_title": "CIO Input into IT Resource Planning", "paragraphs": [], "subsections": [{"section_title": "The CIO Is Included in the Planning and Budgeting Stages for Investments with IT Resources", "paragraphs": ["The extent to which each of the four departments\u2019 could demonstrate that  their CIOs were included in the planning and budgeting stages for the  sampled investments with IT resources varied. Specifically, of the four  investments we reviewed for each agency, DOJ and its component  included the CIO in the planning and budgeting stages via an annual IT  portfolio review that included the four sampled investments.", "On the other hand, HHS, Treasury, and DOE\u2014along with their  components\u2014could not always demonstrate that the department-level CIO was included for their investments. For example, within HHS, its  component agency\u2014CMS\u2014partially implemented the requirement for  both of the sampled investments. Specifically, CMS documented the  CIO\u2019s review and approval of each investment\u2019s detailed IT resource  estimates during governance board reviews. However, HHS\u2019s supporting  documentation did not demonstrate that the department CIO was involved  in the planning process for these investments even though its capital  planning and investment control policy required this official to review,  validate, and approve these IT investments through the department-level  review board.", "Further, Treasury could not demonstrate that the department\u2019s CIO was  included in the planning and budgeting stages for the two  department-level investments that we reviewed. According to officials in  Treasury\u2019s Office of the CIO, the relevant documentation was not retained  for the selected department-level investments because procedures were  not in place to document reviews by the CIO and certain artifacts that  may have documented such reviews were no longer available in part due  to employee turnover within the program offices responsible for the  investments. Until DOE, HHS, and Treasury include the CIO in the  planning and budgeting stages for investments with IT resources, they  may be at risk of duplicating resources or funding investments without the  CIO\u2019s knowledge or approval."], "subsections": []}, {"section_title": "Program Leadership Works with the CIO to Plan the Investment\u2019s IT Resources", "paragraphs": ["The selected departments varied in their ability to demonstrate that their  CIOs worked with program leadership across the investments we  sampled for the fiscal year 2017 funding request\u2014both within and across  the departments. For example, DOJ demonstrated that the CIO worked  with program leaders in planning IT resources for both the major and  non-major investment at the department level by jointly developing a plan  for how business units were to utilize funds for IT services. At the  component-level, FBI demonstrated that IT officials assisted program  leadership in the planning of the major investment, but could not  demonstrate that the CIO worked with program leadership on both the  major and non-major investment.", "In addition, HHS fully demonstrated that the CIO worked with program  leaders in planning IT resources for its major investment. For example,  the CIO reviewed detailed IT resource narratives and line item estimates  for the investment at a department-level governance board meeting with  program leadership. However, HHS could not demonstrate that the CIO  worked with program leadership to plan the non-major investment. At the  component-level, CMS partially demonstrated that the CIO took such  actions to plan the component-level investments. Specifically, the CIO at  CMS worked with program officials to review and approve detailed IT  resource requests for the investments. However, HHS could not  demonstrate that its CIO was also involved in planning IT resources with  program leadership for the same investments, as required by the  department\u2019s policy. Officials in the Office of the CMS CIO stated that  they believed that the CMS CIO was an authorized delegate for this  responsibility. However, the officials could not provide documentation of  the delegation as required by OMB.", "Further, Treasury could not demonstrate that the CIO had worked with  program leadership in planning IT resources for the department-level  investments. According to officials in the Office of the CIO, they could not  demonstrate the actions the CIO took to work with program leadership  because documentation that would show the interaction was not retained.  The officials stated that documentation was not retained due to turnover  within the program offices responsible for the investments. At the  component-level, IRS partially demonstrated that the CIO took action to  work with program leadership for a portion of the component-level  investments\u2019 budget through IT budget reviews. However, IRS could not  demonstrate coordination with program leadership for the full amount of  the investments\u2019 budget because the agency did not maintain a document  trail for lower-level budgeting activities that included all relevant resource  planning for the investments.", "Lastly, DOE could not fully demonstrate that the CIO had worked with  program leadership in planning IT resources across all four investments  at the department and component. DOE could not demonstrate this, in  part, because the Office of the CIO\u2019s internal process, during the  formulation of the fiscal year 2017 budget, did not require input from all  relevant stakeholders, including senior leadership, directors, and program  managers. Officials in DOE\u2019s Office of the CIO acknowledged the gap in  its process and stated that the department and its component agency\u2014 NNSA\u2014are working to establish processes that include senior  management and program officials in the planning process. As of May  2018, DOE did not have a time frame for establishing these processes.", "The lack of consistent partnership of program leaders and the CIO to plan  an investment\u2019s IT resources at the department and component levels  limits the ability of the CIO to have a significant role in the formulation of  the department\u2019s IT budget."], "subsections": []}]}, {"section_title": "CIO Review and Approval of IT Budgets", "paragraphs": [], "subsections": [{"section_title": "The CIO Reviews Whether the Investment\u2019s IT Resources Support Major Program Objectives and Have Increased or Decreased Significantly", "paragraphs": ["The selected departments varied in the extent to which they could  demonstrate that the CIO had appropriately reviewed all the investments  we sampled. For example, DOJ demonstrated that the CIO reviewed  whether the IT resources for the department- and component-level  investments supported major program objectives and whether there were  increases and decreases in IT resources for the investments.", "In addition, HHS partially addressed the requirement for its  component-level investments. Specifically, while the component-level CIO  at CMS reviewed changes in the investments\u2019 resources, supporting  documentation did not show that alignment with major program objectives  was reviewed.", "Further, Treasury and DOE could not demonstrate that their CIOs  reviewed whether the investment\u2019s IT resources support major program  objectives and any significant increases or decreases in resources for  their department-level investments. According to officials in the offices of  the CIO at Treasury and DOE, relevant documentation that would have  demonstrated review activities had not been maintained for the  investments. Until DOE, HHS, and Treasury can consistently demonstrate  that the CIO has reviewed whether each investment\u2019s IT resources  support major program objectives and have increased or decreased  significantly, the departments will have less assurance that the IT budget  request supports their goals and objectives and that significant changes  in the budget are appropriate."], "subsections": []}, {"section_title": "The CIO Reviews Whether the Investment\u2019s Estimates of IT Resources in the Portfolio and Budget Request Are Appropriate", "paragraphs": ["The selected departments varied in the extent to which they could  demonstrate that the CIO took steps to review whether the investment\u2019s  estimates of IT resources in the portfolio and budget request were  appropriate.", "For example, the CIO for DOE\u2019s component agency\u2014NNSA\u2014 demonstrated the review and approval of the non-major investment\u2019s  estimates of IT resources. However, NNSA could not demonstrate that  the CIO reviewed the estimates for the major investment because it did  not retain documentation that would provide details on the investment\u2019s  budget formulation and approval.", "In addition, HHS\u2019s component agency\u2014CMS\u2014partially demonstrated  implementation of the requirement on the major investment. Specifically,  the CIO for CMS reviewed and approved supporting documentation for  the investment\u2019s detailed resource estimates totaling more than $500  million in developing the fiscal year 2017 budget request. However, the  fiscal year 2017 budget request for this investment was $399 million, and  according to officials in the CMS Office of the CIO, the CMS CIO did not  review and approve the lowered estimate\u2014ensuring the IT portfolio  reflected an appropriate estimate.", "According to CMS officials in the Office of the CIO, the lowered estimate  was the result of the user fees portion of the investment being removed  from the request before it was submitted to OMB because it was not  funded by annual appropriations. However, OMB\u2019s fiscal year 2017 IT  capital planning guidance required departments to report all budgetary  sources of funding for each investment, including amounts available for  obligation through collection of fees, as well as annual appropriations.", "Further, Treasury could not demonstrate that the CIO had reviewed the  resource estimates for the department-level investments. At the  component level, IRS demonstrated that officials in the Office of the CIO  reviewed supporting documentation for detailed cost estimates for the  component-level investments. However, these cost estimates only  accounted for a portion, and not the full amount, of the investment.", "Finally, DOJ could not demonstrate that the component agency CIO  ensured that the IT portfolio included appropriate estimates of all IT  resources for the non-major investment at the component level. While  officials in the FBI\u2019s Office of the CIO stated that the component\u2019s CIO  was involved in reviewing detailed resource estimates for the investment  prior to its submission to the department-level CIO, they could not provide  supporting documentation because the FBI had not established  procedures that explicitly required documenting the performance of this  activity. Until the CIOs at DOE, HHS, Treasury, and DOJ consistently  review IT resource estimates for each investment, departments will have  less assurance that the estimates in the budget request are appropriate."], "subsections": []}]}]}, {"section_title": "Departments Lacked Processes for Ensuring That Their IT Budgets Are Informed by Reliable Costs; the Administration Has Introduced an Initiative to Improve Cost Visibility", "paragraphs": ["GAO and international standards recommend certain quality assurance  practices that can assist departments in developing an IT budget that is  informed by reliable cost information. These practices include, among  others: (1) ensuring government labor costs have been accurately  reported for all investments, (2) aligning contract costs with the  investments, and (3) utilizing budget object class data to capture all IT  programs. Further, having documented IT capital planning processes to  implement these practices is important because OMB requires  department CIOs to fully account for and report on planned expenditures  in their annual IT budget requests.", "All of the four selected departments\u2014DOE, HHS, DOJ, and Treasury\u2014 lacked quality assurance processes to ensure government labor costs  have been accurately reported, align contract costs with IT investments,  and utilize budget data to capture all IT programs. However, OMB\u2019s fiscal  year 2019 IT capital planning guidance introduced several major changes  to the budgeting process which, if effectively implemented, should provide  departments and CIOs with enhanced visibility into IT costs across the  portfolio and additional assurance that the budget is being informed by all  relevant IT costs."], "subsections": [{"section_title": "The Administration\u2019s Efforts to Revise IT Budget Reporting Could Provide Department CIOs Additional Visibility into IT Spending", "paragraphs": ["OMB\u2019s fiscal year 2019 IT capital planning guidance, released in August  2017, introduced several major changes to the federal IT budgeting  process, including the practice of using a set of low-level cost categories  to group spending. Subsequently, the President\u2019s Management Agenda,  released in March 2018, identified \u201cimproving outcomes through federal  IT spending transparency\u201d as one of the Administration\u2019s 14 cross-agency  priority goals.", "According to the President\u2019s Management Agenda, the Administration  intends to accomplish the cross-agency priority goal related to improving  federal IT spending transparency by, among other things, increasing the  granularity in IT budget reporting by utilizing a set of cost categories from  OMB\u2019s capital planning guidance. Figure 3 identifies the standard cost  categories that OMB plans to implement in IT budget reporting.", "In its fiscal year 2019 IT capital planning guidance, OMB has recognized  potential value in utilizing budget object classes, or similar financial data,  to provide CIOs and Chief Financial Officers additional visibility into costs  that inform the budget. As noted in the guidance, OMB expects that this  new approach for utilizing financial data to inform the IT investment  portfolio will enable the reconciliation of this portfolio with the  department\u2019s budget submitted by the Chief Financial Officer. Further,  this effort is to help CIOs work more closely and in partnership with the  Chief Financial Officers by using budget object classes and sub-object  classes as a way to reconcile different presentations of estimated costs.  In addition, OMB\u2019s guidance stated that departments should begin to  identify where they lack capabilities or resources to deliver financial data  for the new low-level IT cost categories (shown in figure 3), consider what  changes are necessary to achieve the new reporting requirements, and  take steps to align reporting with the categories.", "Moreover, the President\u2019s Management Agenda stated that the changes  to how IT spending is to be categorized were made, in part, because  federal executives have long known that they could better manage the  more than $90 billion in federal government IT spending with increased  visibility and more accurate data. The President\u2019s Management Agenda  action plan identified several milestones and due dates for accomplishing  the goal of improving federal IT spending transparency, such as  determining data sources necessary for departments to report within the  low-level cost categories and establishing the common tools and services  for the required reporting by June 2019. Moreover, the action plan stated  that federal departments are expected to report all of the spending within  their IT portfolio against the cost categories by September 2019. Given  that improving federal IT spending transparency has been identified as  one of the President\u2019s top 14 management priorities and is critical to  enabling department CIOs in carrying out their IT budgeting authorities  from FITARA, it is important that OMB and departments take action now  in order to meet the 2019 reporting requirements.", "The Administration\u2019s approach for obtaining additional granularity on  department IT investment spending, when implemented, should provide  departments and CIOs enhanced visibility into IT costs across the  portfolio. If implemented effectively, this approach could also provide  departments additional assurance that their budgets are being informed  by relevant IT costs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Recognizing the importance of CIOs\u2019 ability to be responsible for IT  budgeting, OMB\u2019s common baseline includes eight requirements that  departments\u2019 policies and procedures should address to implement  FITARA. While the four selected departments in our review either fully or  partially addressed the majority of the requirements, none fully addressed  all of them. The lack of policies and procedures was due, in part, to the  fact that departments had not adequately addressed all of the required  common baseline requirements in their FITARA implementation and  delegation plans, as directed by OMB. Until the departments establish  policies and procedures that address all requirements, they risk  inconsistently applying requirements that are key to providing their CIOs  visibility into resources, input to resource plans, and meaningful review  and approval of IT budgets.", "In addition, the lack of policies and procedures has hampered the  departments\u2019 ability to demonstrate their implementation of the common  baseline requirements for their investments. While DOJ fully  demonstrated implementation for the selected requirements for the  majority of the investments we sampled, HHS and Treasury partially  demonstrated implementation for a majority of their investments, and  DOE had not demonstrated implementation for the majority of its  investments. As a result, departments were not always able to show that  these CIOs had adequate input to resource plans and review of their IT  budgets. Without retaining supporting documentation to show how  common baseline requirements have been addressed on individual  investments, the departments will be challenged in consistently  demonstrating that CIOs are sufficiently involved in planning and  budgeting annual IT expenditures.", "Finally, the four selected departments lacked quality assurance  processes for ensuring their IT budgets are informed by reliable cost  information. This resulted in billions of dollars that were requested without  departments having comprehensive information to support those  requests. Among other things, this was due to a lack of processes for  periodically reviewing data quality and estimation methods for  government labor estimates, as well as a lack of processes to cross-walk  IT spending data in their procurement and accounting systems with  investment data in their IT portfolio management systems.", "The Administration\u2019s new approach of using a standard set of low-level  cost categories to group IT spending could help departments address  their lack of processes if properly implemented. It is important that OMB  and departments meet the 2019 milestone dates associated with this  approach so that department CIOs have additional transparency into IT  spending and can make informed budget decisions. Nonetheless,  departments will continue to have limited insight into IT budgeting until  they capture all relevant IT costs in their budgets."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 43 recommendations, including 9 to DOE, 6 to  NNSA, 10 to HHS, 4 to CMS, 4 to DOJ, 1 to FBI, 8 to Treasury, and 1 to  IRS.", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  establish department-wide policy for the level of detail of planned  expenditure reporting to the CIO for all transactions that include IT  resources. (Recommendation 1)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  include the CIO in the planning and budgeting stages for all programs that  are fully or partially supported with IT resources. (Recommendation 2)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  include the CIO as a member of governance boards that inform decisions  regarding all IT resources, including component-level boards.  (Recommendation 3)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  document the processes by which program leadership works with the CIO  to plan an overall portfolio of IT resources. (Recommendation 4)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  document the process for the CIO\u2019s review and approval of the major IT  investments portion of the budget request. (Recommendation 5)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  document the CIO\u2019s role in reviewing IT resources that are to support  major program objectives and significant increases and decreases in IT  resources. (Recommendation 6)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, address gaps in the department\u2019s FITARA  plans by developing and implementing policies and procedures that  document the steps the CIO is to take to ensure whether the IT portfolio  includes appropriate estimates of all IT resources included in the budget  request. (Recommendation 7)", "The Secretary of Energy should direct the Office of the CIO and other  offices, as appropriate, to take steps to ensure that the actions taken to  comply with OMB\u2019s common baseline for implementing FITARA on  individual investments are adequately documented. (Recommendation 8)", "The Secretary of Energy should ensure that the Office of the CIO and  other offices, as appropriate, establish quality assurance processes\u2014 such as data quality checks, reviews of estimation methods, linkages  between the IT portfolio and procurement system data, and linkages  between the IT portfolio and financial system data\u2014for ensuring the  annual IT budget is informed by complete and reliable information on  anticipated government labor, contract, and other relevant IT  expenditures. (Recommendation 9)", "The Administrator of NNSA should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that establish agency-wide policy for the level of detail with  which planned expenditures for all transactions that include IT resources  are to be reported to the CIO. (Recommendation 10)", "The Administrator of NNSA should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that include the CIO in the planning and budgeting stages for  all programs that are fully or partially supported with IT resources.  (Recommendation 11)", "The Administrator of NNSA should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that include the CIO as a member of governance boards that  inform decisions regarding all IT resources. (Recommendation 12)", "The Administrator of NNSA should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that document the process for the CIO\u2019s review and approval  of the major IT investments portion of the budget request.  (Recommendation 13)", "The Administrator of NNSA should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that document the CIO\u2019s role in reviewing IT resources that  are to support major program objectives and significant increases and  decreases in IT resources. (Recommendation 14)", "The Administrator of NNSA should direct the Office of the CIO and other  offices, as appropriate, to take steps to ensure that the actions taken to  comply with OMB\u2019s common baseline for implementing FITARA on  individual investments are adequately documented. (Recommendation  15)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that establish department-wide policy for the level of detail of  planned expenditure reporting to the CIO for all transactions that include  IT resources. (Recommendation 16)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that include the CIO in the planning and budgeting stages for  all programs that are fully or partially supported with IT resources.  (Recommendation 17)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that include the CIO as a member of governance boards that  inform decisions regarding all IT resources, including component-level  boards. (Recommendation 18)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that document the processes by which program leadership  works with the CIO to plan an overall portfolio of IT resources.  (Recommendation 19)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that document the process for the CIO\u2019s review and approval  of the major IT investments portion of the budget request.  (Recommendation 20)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that document the CIO\u2019s role in reviewing IT resources that  are to support major program objectives and significant increases and  decreases in IT resources. (Recommendation 21)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, address gaps in the  department\u2019s FITARA plans by developing and implementing policies and  procedures that document the steps the CIO is to take to ensure whether  the IT portfolio includes appropriate estimates of all IT resources included  in the budget request. (Recommendation 22)", "The Secretary of Health and Human Services should direct the  department CIO to establish, for any OMB common baseline  requirements that are related to IT budgeting that have been delegated, a  plan that specifies the requirement being delegated, demonstrates how  the CIO intends to retain accountability for the requirement, and ensures  through quality assurance processes that the delegated official will  execute such responsibilities with the appropriate level of rigor.  (Recommendation 23)", "The Secretary of Health and Human Services should direct the Office of  the CIO and other offices, as appropriate, to take steps to ensure that the  actions taken to comply with OMB\u2019s common baseline for implementing  FITARA on individual investments are adequately documented.  (Recommendation 24)", "The Secretary of Health and Human Services should ensure that the  Office of the CIO and other offices, as appropriate, establish quality  assurance processes\u2014such as data quality checks, reviews of estimation  methods, linkages between the IT portfolio and procurement system data,  and linkages between the IT portfolio and financial system data\u2014for  ensuring the annual IT budget is informed by complete and reliable  information on anticipated government labor, contract, and other relevant  IT expenditures. (Recommendation 25)", "The Administrator of CMS should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that include the CIO in the planning and budgeting stages for  all programs that are fully or partially supported with IT resources.  (Recommendation 26)", "The Administrator of CMS should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that document the processes by which program leadership  works with the CIO to plan an overall portfolio of IT resources.  (Recommendation 27)", "The Administrator of CMS should ensure that the Office of the CIO and  other offices, as appropriate, develop and implement policies and  procedures that document the CIO\u2019s role in reviewing IT resources that  are to support major program objectives and significant increases and  decreases in IT resources. (Recommendation 28)", "The Administrator of CMS should direct the Office of the CIO and other  offices, as appropriate, to take steps to ensure that the actions taken to  comply with OMB\u2019s common baseline for implementing FITARA on  individual investments are adequately documented. (Recommendation  29)", "The Attorney General should ensure that the Office of the CIO and other  offices, as appropriate, address gaps in the department\u2019s FITARA plans  by developing and implementing policies and procedures that establish  department-wide policy for the level of detail of planned expenditure  reporting to the CIO for all transactions that include IT resources.  (Recommendation 30)", "The Attorney General should ensure that the Office of the CIO and other  offices, as appropriate, address gaps in the department\u2019s FITARA plans  by developing and implementing policies and procedures that include the  CIO as a member of governance boards that inform decisions regarding  all IT resources, including component-level boards. (Recommendation  31)", "The Attorney General should ensure that the Office of the CIO and other  offices, as appropriate, address gaps in the department\u2019s FITARA plans  by developing and implementing policies and procedures that document  the steps the CIO is to take to ensure whether the IT portfolio includes  appropriate estimates of all IT resources included in the budget request.  (Recommendation 32)", "The Attorney General should ensure that the Office of the CIO and other  offices, as appropriate, establish quality assurance processes\u2014such as  data quality checks, reviews of estimation methods, linkages between the  IT portfolio and procurement system data, and linkages between the IT  portfolio and financial system data\u2014for ensuring the annual IT budget is  informed by complete and reliable information on anticipated government  labor, contract, and other relevant IT expenditures. (Recommendation 33)", "The FBI Director should direct the Office of the CIO and other offices, as  appropriate, to take steps to ensure that the actions taken to comply with  OMB\u2019s common baseline for implementing FITARA on individual  investments are adequately documented. (Recommendation 34)", "The Secretary of the Treasury should ensure that the Office of the CIO  and other offices, as appropriate, address gaps in the department\u2019s  FITARA plans by developing and implementing policies and procedures  that establish department-wide policy for the level of detail of planned  expenditure reporting to the CIO for all transactions that include IT  resources. (Recommendation 35)", "The Secretary of the Treasury should ensure that the Office of the CIO  and other offices, as appropriate, address gaps in the department\u2019s  FITARA plans by developing and implementing policies and procedures  that include the CIO in the planning and budgeting stages for all programs  that are fully or partially supported with IT resources. (Recommendation  36)", "The Secretary of the Treasury should ensure that the Office of the CIO  and other offices, as appropriate, address gaps in the department\u2019s  FITARA plans by developing and implementing policies and procedures  that include the CIO as a member of governance boards that inform  decisions regarding all IT resources, including component-level boards.  (Recommendation 37)", "The Secretary of the Treasury should ensure that the Office of the CIO  and other offices, as appropriate, address gaps in the department\u2019s  FITARA plans by developing and implementing policies and procedures  that document the process for the CIO\u2019s review and approval of the major  IT investments portion of the budget request. (Recommendation 38)", "The Secretary of the Treasury should ensure that the Office of the CIO  and other offices, as appropriate, address gaps in the department\u2019s  FITARA plans by developing and implementing policies and procedures  that document the steps the CIO is to take to ensure whether the IT  portfolio includes appropriate estimates of all IT resources included in the  budget request. (Recommendation 39)", "The Secretary of the Treasury should direct the department CIO to  establish, for any OMB common baseline requirements that are related to  IT budgeting that have been delegated, a plan that specifies the  requirement being delegated, demonstrates how the CIO intends to retain  accountability for the requirement, and ensures through quality assurance  processes that the delegated official will execute such responsibilities with  the appropriate level of rigor. (Recommendation 40)", "The Secretary of the Treasury should direct the Office of the CIO and  other offices, as appropriate, to take steps to ensure that the actions  taken to comply with OMB\u2019s common baseline for implementing FITARA  on individual investments are adequately documented. (Recommendation  41)", "The Secretary of the Treasury should ensure that the Office of the CIO  and other offices, as appropriate, establish quality assurance  processes\u2014such as data quality checks, reviews of estimation methods,  linkages between the IT portfolio and procurement system data, and  linkages between the IT portfolio and financial system data\u2014for ensuring  the annual IT budget is informed by complete and reliable information on  anticipated government labor, contract, and other relevant IT  expenditures. (Recommendation 42)", "The IRS Commissioner should direct the Office of the CIO and other  offices, as appropriate, to take steps to ensure that the actions taken to  comply with OMB\u2019s common baseline for implementing FITARA on  individual investments are adequately documented. (Recommendation  43)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the four departments and four  component agencies included in our review, as well as to OMB. In  response, we received comments from two departments and three  component agencies (HHS, CMS, DOJ, FBI, and IRS) which agreed with  our recommendations. One department (DOE) partially agreed with one  recommendation and agreed with the other recommendations made to it,  as well as with the recommendations made to its component agency  (NNSA). In addition, one department (Treasury) neither agreed nor  disagreed with the recommendations. Further, OMB provided technical  comments, which we incorporated in the report, as appropriate.", "The following departments and component agencies agreed with all of the  recommendations that we directed to them:", "HHS provided written comments, reprinted in appendix VI, stating that  it concurred with the 10 recommendations made to the department,  and with the 4 recommendations made to CMS. Of the  recommendations made to the department, HHS stated that the  processes it currently has in place address the various gaps in the  department\u2019s FITARA plans, documentation, and quality assurance  processes. However, HHS did not provide additional evidence to  demonstrate that the weaknesses we identified have been mitigated.  Thus, we maintain that the department needs to take further actions to  address our recommendations. Until it takes the appropriate actions to  address gaps in its FITARA plans, document the actions taken to  comply with OMB\u2019s guidance, and implement key quality assurance  processes, the department will be at increased risk that its CIO is not  effectively engaged in IT budgeting decisions.", "With regard to its component agency, HHS stated that CMS would  take action to implement the recommendations made to it by updating  the relevant policies and procedures to more explicitly identify the role  of the CIO in developing the IT budget.", "In comments provided via email on September 27, 2018, an audit  liaison in the Internal Review and Evaluation Office of the Justice  Management Division stated that DOJ concurred with the four  recommendations made to the department, and with the one  recommendation made to FBI.", "IRS provided written comments, reprinted in appendix VII, stating that  it concurred with our recommendation, has taken steps to begin  implementing our recommendation, and is committed to making  further progress toward fully implementing all OMB requirements  when planning and budgeting for its individual investments.", "DOE provided written comments, reprinted in appendix VIII, in which it  concurred with eight of the nine recommendations made to the  department and partially concurred with one recommendation. The  department also concurred with all six recommendations made to NNSA.", "Of the nine recommendations made to DOE, the department stated that it  already had processes in place, or had taken action to address six of the  recommendations, including the recommendation with which it partially  concurred. However, the department did not provide sufficient evidence to  demonstrate that the weaknesses we identified had been mitigated. Thus,  we maintain that the recommendations warrant further actions. Until DOE  takes the appropriate actions to address gaps in its FITARA plans,  document the actions taken to comply with OMB\u2019s guidance, and  implement key quality assurance processes, the department will be at  increased risk that the CIO is not effectively engaged in IT budgeting  decisions.", "In addition, DOE stated that NNSA\u2019s Office of the CIO plans to develop  policies and procedures\u2014in collaboration with the component agency\u2019s  Office of Acquisition and Project Management and the agency\u2019s Office of  Management and Budget\u2014that should address the findings and six  recommendations made to NNSA. The department anticipates that the  policies and procedures will be finalized by March 31, 2019.", "Lastly, Treasury responded via email on September 28, 2018, but did not  state whether it agreed or disagreed with our eight recommendations.  Specifically, an audit liaison in Treasury\u2019s Office of the CIO stated that the  department believes it is implementing most of the OMB common  baseline requirements in practice, but agreed that gaps exist in its policies  and documentation. The official added that the department had started  work on strengthening existing policies and procedures or developing  new ones to close the gaps uncovered by our review.", "We are sending copies of this report to the appropriate congressional  requesters; OMB; the Secretaries of the Departments of Energy, Health  and Human Services, and the Treasury; the Attorney General; the  Administrator of NNSA, the Administrator of CMS, the FBI Director, and  the IRS Commissioner. 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) 512-4456 or at harriscc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine the extent to which selected federal  agencies (1) established policies and procedures in place that address  the information technology (IT) budgeting requirements of the Federal  Information Technology Acquisition Reform Act (FITARA) and related  Office of Management and Budget (OMB) IT budget guidance, (2) could  demonstrate that they had developed fiscal year 2017 IT budgets for  sampled investments consistent with FITARA and OMB guidance, and  (3) implemented processes to ensure that annual IT budgets are informed  by reliable cost information.", "To address our objectives, we first identified the subset of the 24  agencies covered by the Chief Financial Officers Act that had a fiscal year  2017 IT budget request of at least $1 billion. From this subset, we then  identified the four agencies having the two highest and the two lowest  average initial FITARA self-assessment scores, which included an  assessment of OMB\u2019s common baseline for IT management (common  baseline). In the event that one or more agencies had the same average  self-assessment scores, we selected the agency with the largest fiscal  year 2017 IT budget. Based on these criteria, we selected four  departments for our review: (1) the Department of Energy (DOE), (2) the  Department of Health and Human Services (HHS), (3) the Department of  Justice (DOJ), and (4) the Department of the Treasury (Treasury).", "In addition, for each of these four departments, we selected their  component agencies that had the largest fiscal year 2017 IT budget  request. The components within the four selected departments were:  (1) the National Nuclear Security Administration (NNSA) within DOE,  (2) the Centers for Medicare and Medicaid Services (CMS) within HHS,  (3) the Federal Bureau of Investigation (FBI) within DOJ, and (4) the  Internal Revenue Service (IRS) within Treasury.", "For the first objective, we compared the selected departments\u2019 policies  and procedures to requirements selected from OMB\u2019s FITARA guidance  (referred to as the common baseline) that related to developing  departments\u2019 IT budgets. In selecting the requirements, we reviewed 10  areas related to budget formulation and execution within OMB\u2019s common  baseline, and used professional judgment to select 8 requirements that  we believed would significantly impact the development and approval of  departments\u2019 annual IT budgets. In doing so, we excluded one  requirement that affected the development of annual IT budgets to a  lesser extent and combined one requirement that was similar to another.  Specifically, we excluded the requirement from the area related to the  chief information officer\u2019s (CIO) role in program management because the  CIO\u2019s review of program management artifacts could not be directly  related to the IT budget review and approval process.", "In addition, two common baseline areas had a similar requirement that  the CIO be involved in the internal planning of IT resources prior to the  budget submission. We combined these into one requirement for our  review. We consulted with OMB officials in the Office of the Federal CIO  on the requirements that we selected and how we planned to evaluate  them and the officials agreed with our approach.", "The eight OMB common baseline requirements within budget formulation  and execution that we identified and selected are: establish the level of detail with which IT resources are to be  described in order to inform the CIO during the planning and  budgeting processes; establish agency-wide policy for the level of detail with which planned  expenditures for all transactions that include IT resources are to be  reported to the CIO;  include the CIO in the planning and budgeting stages for programs  that are fully or partially supported with IT resources;  include the CIO as a member of governance boards that inform  decisions regarding all IT resources, including component-level  governance boards; document the processes by which program leadership works with the  CIO to plan an overall portfolio of IT resources; ensure the CIO has reviewed and approved the major IT investments  portion of the budget request; ensure the CIO has reviewed IT resources that are to support major  program objectives and significant increases and decreases in IT  resources; and ensure the CIO has reviewed whether the IT portfolio includes  appropriate estimates of all IT resources included in the budget  request.", "After determining the eight requirements that we would review, we  categorized them into three areas: CIO visibility into IT resources, CIO  input to IT resource plans, and CIO review and approval of IT budgets.", "We then reviewed the current policies and procedures that each  department had documented for its IT budgeting process to determine  whether the department documented a process for how they would  address each of the eight common baseline requirements we selected for  review. In addition to policies and procedures, we also reviewed each  department\u2019s FITARA implementation plan, which included a description  of the steps the department must take to ensure that all FITARA and  OMB requirements would be implemented; and the delegation  memorandums from department CIOs, in which formal assignments of  responsibilities to other department officials are documented, where  applicable.", "In cases where the department CIO fully or partially delegated  responsibilities to component officials, we requested relevant  documentation from the agency component with the largest fiscal year  2017 IT budget request. In such cases, we based our determination of  departments\u2019 implementation of the requirement on (1) the extent to  which the component agency had documented policies and procedures  that carried out the delegated requirement and (2) the extent to which the  department CIO had procedures for ensuring the delegation was being  carried out by the components.", "With regard to our second objective, we determined whether the selected  departments had implemented key IT budgeting requirements for a  non-generalizable sample of investments in their fiscal year 2017 budget  formulation. In doing so, we chose 16 investments\u2014the largest major and  non-major investments at the department level and the largest major and  non-major investments at the component level\u2014based on the selected  departments\u2019 fiscal year 2017 IT budget request. Although the  information obtained is not generalizable to all of the departments\u2019  investments, the sample provided a range of examples and conditions  under which the departments were implementing requirements found in  OMB\u2019s common baseline.", "We then identified a subset of requirements from the eight department  requirements for developing IT budgets found in OMB\u2019s common baseline  for which implementation could be observed at the investment level. In  doing so, we used professional judgment to select the subset of  requirements where actions taken to implement these requirements could  be observed for individual investments. Specifically, we did not select the  requirement to establish agency-wide policy for the level of detail with  which planned expenditures for all transactions that include IT resources  are to be reported to the CIO, because the requirement primarily applied  to enterprise-wide policymaking and reporting. Also, we did not select the  requirement to include the CIO as a member of governance boards that  inform decisions regarding all IT resources for review on individual  investments because certain investments may not have been subject to  governance board reviews during fiscal year 2017. In addition, we did not  select the requirement to ensure the CIO has reviewed and approved the  major IT investments portion of the budget request for review on  individual investments because half of the investments we selected were  not classified as major investments.", "The five requirements for which we selected and reviewed  implementation at the investment level were:  IT resources for each investment are described in order to inform the  CIO during the planning and budgeting processes;  the CIO is included in the planning and budgeting stages for  investments with IT resources; program leadership works with the CIO to plan the investment\u2019s IT  the CIO reviews whether the investment\u2019s IT resources support major  program objectives and have increased or decreased significantly;  and  the CIO reviews whether the investment\u2019s estimates of IT resources in  the portfolio and budget request are appropriate.", "For each investment, if available, we obtained artifacts for the fiscal year  2017 budget submission\u2014such as briefings, reports, meeting minutes,  memorandums, and other relevant documentation showing the CIO\u2019s  involvement in relevant reviews or decisions. We compared this  documentation to relevant OMB requirements for developing the IT  budget at the individual investment level.", "To address our third objective, we assessed the selected departments\u2019  efforts to develop their fiscal year 2017 budget with reliable cost  information by comparing the department\u2019s IT capital planning and  budgeting processes against best practices identified by us and the  International Organization for Standardization\u2014such as capturing  government labor costs, aligning contract costs with investments, and  utilizing budget object class data. We selected these three practices  (from among others) because of their potential to inform the development  of a complete and accurate IT budget for a federal department.", "Capturing government labor costs. We reviewed each selected  departments\u2019 IT capital planning policies and procedures and  government labor estimates within the 2017 IT budget submission  reported on the Federal IT Dashboard. For each selected department,  we identified the processes by which forecasted government labor  costs are to be captured within investment proposals submitted with  the annual IT budget. We then analyzed each department\u2019s 2017 IT  investment proposals to determine whether the department was  capturing government labor for each investment. In doing so, we  analyzed each selected department\u2019s IT portfolio submitted with its  fiscal year 2017 budget to determine whether the identified  investments had included planned government labor costs, as  required by OMB.", "Aligning contract costs with investments. We reviewed each  selected departments\u2019 IT capital planning policies and procedures,  contract-related information within the 2017 IT budget submission  reported on the Federal IT Dashboard, and contract obligation data  reported within the Federal Procurement Data System-Next  Generation. From these document reviews, we identified the  processes by which contract-related costs are to be captured within  investment proposals submitted with the annual IT budget. We then  determined whether departments were able to align current contracts  with 2017 IT investment proposals. In doing so, we identified fiscal  year 2016 contracts that departments reported in the Federal  Procurement Data System-Next Generation that had an IT-related  product or service code and an expected completion date that  extended into fiscal year 2017 or beyond. We then attempted to  match, using the unique procurement identification number for each  contract, a corresponding IT investment for those contracts in  departments\u2019 fiscal year 2017 IT budget data. For contracts that we  could not find a match, or alignment, with investments in departments\u2019  fiscal year 2017 IT budget data, we identified dollars obligated on  those contracts from October 2016 through September 2017.", "Utilizing budget object class data. We reviewed each selected  departments\u2019 IT capital planning policies and procedures, budget  object classes that are to help track IT financial transactions, and  OMB\u2019s fiscal year 2019 IT capital planning guidance that calls for  greater use of IT financial data. We then assessed whether  departments\u2019 IT capital planning processes utilized budget object  class information to ensure that relevant IT costs are being captured  as investments for the annual IT budget.", "We assessed the reliability of reported government labor costs by  identifying instances in which investments had not included planned  government labor costs and by corroborating those instances with  officials in the departments\u2019 offices of the CIO. We determined that the  data were sufficiently reliable for our purposes. Where we identified data  quality issues in capturing government labor costs for department  investments, we included those in the findings of this report. We also  assessed the reliability of Federal Procurement Data System-Next  Generation data by performing electronic testing of selected data  elements and reviewing existing information about the system and the  data it produces. Specifically, we reviewed the data dictionary, data  validation rules, and the fiscal year 2016 Federal Government  Procurement Data Quality Summary for agency data in the Federal  Procurement Data System-Next Generation. We determined that the data  were sufficiently reliable for our purposes.", "We supplemented our review with interviews with officials in the  departments\u2019 offices of the CIO, Chief Financial Officer, and program  offices to include discussions of our observations of any shortfalls in their  processes.", "We conducted this performance audit from January 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Department of Energy Detailed Analysis", "paragraphs": ["DOE established department-wide IT capital planning and budgeting  procedures that document the level of detail with which IT resources  are to be described during the planning and budgeting process. The  documented level of detail included OMB\u2019s required reporting on  government labor and certain resources for infrastructure  investments.", "This requirement was assigned at the department level.", "DOE documented IT capital planning procedures for the level of detail  of planned expenditure reporting. However, the procedures did not  explicitly require that all transactions with an IT component be  included in the expenditure reporting.", "DOE\u2019s FITARA implementation plan stated that the NNSA CIO was to  work with the chief financial officer and chief acquisition officer to  update NNSA\u2019s policies to ensure they documented the level of detail  for planned expenditure reporting for all IT transactions. However,  NNSA had not established such policies and procedures.", "DOE documented IT capital planning and annual budgeting  procedures that included the CIO in the planning and budgeting  stages for some, but not all programs identified as having IT  resources. Specifically, at the time of our review, the department had  not yet documented procedures for ensuring the CIO was included in  budget decisions for all programs with IT resources, including those  within NNSA and national laboratories.", "According to DOE\u2019s FITARA implementation plan and a  memorandum from the Secretary providing further instructions on  FITARA, NNSA was to provide an opportunity for the department CIO  to provide input in its planning and budgeting stages for programs  with IT resources and to document related review processes.  However, at the time of our review, NNSA had not yet established the  procedures that were to detail how this process was to be carried out.", "DOE developed charters that included the CIO as a member of  department-level IT governance boards, but had not included the CIO  as a member of component-level IT investment review boards.", "According to DOE\u2019s FITARA implementation plan, NNSA was to allow  the DOE CIO to provide input into NNSA acquisition decisions  through its IT investment review board. However, at the time of our  review, NNSA had not yet finalized its investment review board  charter and related procedures to include the DOE CIO."], "subsections": [{"section_title": "Department Rating GAO\u2019s assessment DOE", "paragraphs": ["DOE documented IT governance board procedures by which the CIO  is to work with program leadership in planning IT resources for some,  but not all of the programs subject to department-level governance  board reviews. Specifically, at the time of our review, the department  had not yet documented procedures by which the CIO was to work  with program leadership in planning IT resources within NNSA and  national laboratories, including high-performance computing efforts.", "This requirement was assigned at the department level.", "DOE documented IT capital planning and governance board  procedures for its CIO to review and approve some, but not all of its  major IT investments. Specifically, at the time of our review, the  department had not yet documented procedures for the CIO to review  major investments within NNSA and national laboratories, including  high-performance computing efforts.", "According to DOE\u2019s FITARA implementation plan, the NNSA CIO  was to review and approve NNSA major IT investments and provide  the DOE CIO an opportunity to review and provide input prior to the  final decision. However, at the time of our review, procedures to do  so had not yet been established.", "At the time of our review, DOE had not yet documented procedures  for reviewing IT resources that are to support major program  objectives and significant increases and decreases in IT resources for  other department and component agency budget requests. DOE  delegated the responsibility to meet this requirement to NNSA for  their programs.", "According to DOE\u2019s FITARA implementation plan, the NNSA CIO  was to review and approve NNSA major IT investments and provide  the DOE CIO an opportunity to review and provide input prior to the  final decision. However, at the time of our review, procedures to do  so had not yet been established. In addition, NNSA had not  documented procedures by which the NNSA CIO was to review IT  resources that are to support major program objectives as well as  significant increases and decreases in IT resources.", "DOE had not documented procedures for this requirement.", "This requirement was assigned at the department level.  \u25cf = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common  \u25d1 = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the  \u25cb = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB  common baseline requirement.  N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement.", "GAO\u2019s assessment  NNSA could not demonstrate that the CIO reviewed the investment\u2019s  alignment with major program objectives or changes in resources.", "The CIO reviewed IT resources that are to support major program  objectives through business case materials that described the goals  that the investment supported. In addition, the CIO reviewed decreases  in the annual resource requirements by reviewing acquisition planning  artifacts that included the investment\u2019s cost estimate details.", "DOE could not demonstrate that the CIO reviewed the appropriateness  of IT resource estimates underlying the investment\u2019s budget request.", "DOE could not demonstrate that the CIO reviewed the appropriateness  of IT resource estimates underlying the investment\u2019s budget request.", "NNSA could not demonstrate that the CIO reviewed the  appropriateness of IT resource estimates underlying the investment\u2019s  budget request.", "The NNSA CIO took steps to ensure the appropriateness of IT resource  estimates included in the investment\u2019s budget request by reviewing  acquisition planning artifacts that included details on the fiscal year  2017 cost estimates.  \u25cf = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment.  \u25d1 = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the  \u25cb = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment.", "This requirement was assigned at the department level.", "HHS documented IT capital planning procedures for the level of detail of  planned expenditure reporting. However, the procedures had not explicitly  required that all transactions with an IT component are included in the  expenditure reporting.", "This requirement was assigned at the department level.", "HHS documented IT capital planning procedures for including the CIO in  the planning and budgeting stages for new programs with IT resources that  are greater than or equal to $20 million annually. However, at the time of  our review, the department had not documented procedures for ensuring  the CIO was included in the budget decisions for existing programs with IT  resources that are greater than or equal to $20 million annually or for other  programs that may have IT resources, such as those that are not primarily  IT-oriented. The HHS CIO delegated the responsibility for carrying out this  requirement to component CIOs for investments less than $20 million  annually. However, HHS had not established procedures for ensuring its  components were carrying out this responsibility.", "CMS documented annual IT budget instructions and governance board  procedures for the component CIO\u2019s involvement in the planning and  budgeting stages for major investments less than $20 million annually.  However, CMS had not documented procedures for how the CIO was to be  involved in budgeting decisions for non-major investments.", "HHS developed charters that included the CIO on department-level  governance boards that inform decisions regarding IT resources, such as  the HHS Domain IT Steering Committee and the Chief Technology Officer  Council. However, the HHS CIO was not a member of the Service and  Supply Fund board\u2014which reviews and approves operations and common  service spending across the department\u2014and other component-level IT  investment review boards at CMS. The HHS CIO delegated the  responsibility for carrying out this requirement to CMS\u2019s CIO for  investments less than $20 million annually. However, HHS had not  established procedures for ensuring components were carrying out this  responsibility."], "subsections": []}, {"section_title": "Selected OMB common baseline requirements", "paragraphs": ["CMS included its CIO as a member of the IT investment review board to  oversee investments that are less than $20 million annually, consistent with  the delegation from the HHS CIO.", "HHS documented IT capital planning and governance board procedures by  which the CIO is to work with program leadership to plan IT resources for  new investments greater than or equal to $20 million annually. However,  the department had not established procedures by which the CIO is to work  with program leadership in planning resources for existing investments  greater than or equal to $20 million annually. HHS\u2019s CIO delegated the  responsibility of reviewing and approving IT investments to components for  investments less than $20 million annually. However, HHS had not  established procedures for ensuring its components were carrying out this  responsibility.", "CMS documented the procedures by which program leadership was to  work with the CMS CIO to plan IT resources for selected major and non- major investments through its IT investment review board. However, CMS  had not established procedures for how the CIO was to work directly with  program leadership on non-major IT investments that are not subject to the  IT investment review board.", "HHS documented IT capital planning and governance board procedures by  which the CIO is to review and approve new major IT investments greater  than or equal to $20 million annually. However, the department had not  established procedures by which the CIO was to review and approve other  major IT investments, including major investments greater than or equal to  $20 million annually that are not new investments. The HHS CIO delegated  the responsibility of the requirement to review and approve major  investments between $10 million and $20 million annually to its component  CIOs. However, at the time of our review, HHS had not established  procedures for ensuring its components carried out the responsibility.", "CMS documented procedures for its CIO to review and approve major IT  investments that are between $10 million and $20 million annually through  its IT capital planning and governance board procedures, consistent with its  delegation from the HHS CIO.", "HHS had not documented procedures for the CIO\u2019s review of significant  increases and decreases in IT resources. In addition, the HHS CIO  delegated the responsibility for the requirement to review IT resources that  are to support major program objectives to component-level CIOs for  investments less than $20 million annually. However, HHS had not  established procedures for ensuring its components carried out the  responsibility.", "CMS had not documented procedures for how the component was to  review IT resources that are to support major program objectives,  consistent with its delegated responsibility by the HHS CIO."], "subsections": []}, {"section_title": "Department Rating GAO\u2019s assessment HHS", "paragraphs": ["HHS has not documented procedures for this requirement.", "This requirement was assigned at the department level.  \u25cf = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common  \u25d1 = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the  \u25cb = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB  N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement.", "The HHS CIO was included in the planning and budgeting stages of the  sampled investment by reviewing the IT resources through budget  analysis meetings with the program office and department-level  governance board. However, the review board only discussed nearly  $15.8 million of the $33 million in total IT resources for the investment that  was reported to OMB, and HHS officials could not demonstrate that the  CIO was involved in the planning and budgeting stages for the remaining  portion of the budget request.", "HHS could not demonstrate that the CIO was involved in the planning and  budgeting stages for the sampled investment\u2019s IT resources.", "The CMS CIO was included in the planning and budgeting stages for the  sampled investment by reviewing and approving the investment\u2019s budget  request. However, HHS could not demonstrate that the department-level  CIO was involved in the budgeting process for the investment\u2019s IT  resources through governance board reviews, as required by HHS policy.  In addition, HHS could not demonstrate that the responsibility for this  requirement had been delegated to the CMS CIO for the fiscal year 2017  budget request.", "The CMS CIO was included in the planning and budgeting stages for the  sampled investment by reviewing the investment\u2019s budget. However, HHS  could not demonstrate that the department-level CIO was involved in the  budgeting process for the investment\u2019s IT resources through governance  board reviews, as required by HHS policy. In addition, HHS could not  demonstrate that the responsibility for this requirement had been  delegated to the CMS CIO for the fiscal year 2017 budget request.", "HHS demonstrated that the CIO worked with program leadership to plan  the investment\u2019s IT resources through a department-level governance  board meeting with program leadership, a briefing with the program office,  and direction to investment managers to plan for a different funding  scenario when determining the investment\u2019s IT resource estimate.", "HHS could not demonstrate that the CIO worked with program leadership  to plan the sampled investment\u2019s IT resources.", "The CMS CIO worked with program leadership to plan the investment\u2019s IT  resources by chairing the CMS IT investment review board that approved  the investment\u2019s funding proposal. However, HHS could not demonstrate  that the department-level CIO was involved in the planning process for the  investment\u2019s IT resources as required by HHS policy. In addition, HHS  could not demonstrate that the responsibility for this requirement had  been delegated to the CMS CIO for the fiscal year 2017 budget request.", "The CMS CIO worked with program leadership to plan the investment\u2019s IT  resources by chairing the CMS IT investment review board that reviewed  the investment\u2019s funding proposal. However, HHS could not demonstrate  that the department-level CIO was involved in the planning process for the  investment\u2019s IT resources as required by HHS policy. In addition, HHS  could not demonstrate that the responsibility for this requirement had  been delegated to the CMS CIO for the fiscal year 2017 budget request."], "subsections": []}, {"section_title": "Selected OMB common baseline requirements CIO review and approval of IT budgets", "paragraphs": ["The HHS CIO reviewed the investment\u2019s alignment with major program  objectives during an annual operational analysis review in December  2015. However, HHS did not demonstrate that the CIO reviewed the  increase in IT resources for the investment totaling $33 million, more than  double its initial estimate of nearly $15.8 million.", "HHS could not demonstrate that the CIO reviewed the investment\u2019s  alignment with major program objectives or changes in resources.", "The CMS CIO reviewed changes in resources identified within individual  activity funding requests related to the investment. However, CMS could  not demonstrate that the CIO reviewed the investment\u2019s alignment with  major program objectives. In addition, HHS could not demonstrate that the  department-level CIO was involved in reviewing changes in IT resources  for the investment. Moreover, HHS could not demonstrate that the  responsibility for reviewing changes in IT resources had been delegated  to the CMS CIO for the fiscal year 2017 budget request.", "The CMS CIO reviewed changes in resources identified within individual  activity funding requests related to the investment. However, CMS could  not demonstrate that the CIO reviewed the investment\u2019s alignment with  major program objectives. In addition, HHS could not demonstrate that the  department-level CIO was involved in reviewing changes in IT resources  for the investment. Moreover, HHS could not demonstrate that the  responsibility for reviewing changes in IT resources had been delegated  to the CMS CIO for the fiscal year 2017 budget request.", "The HHS CIO took steps to determine the appropriateness of nearly $15.8  million of the IT resource estimates for this investment by reviewing a line  item budget estimate prepared for a department-level governance board.  However, HHS could not demonstrate that the CIO took steps to  determine the appropriateness of the IT resources for the remaining  portion of the investment\u2019s total 2017 budget request of $33 million as  reported to OMB.", "HHS could not demonstrate that the CIO or a designee reviewed the  appropriateness of the IT resource estimates underlying the investment\u2019s  2017 budget request.", "The CMS CIO took steps to determine the appropriateness of the  investment\u2019s IT resources totaling approximately $500 million by reviewing  the detailed budget request at an IT investment review board meeting.  However, according to the Federal IT Dashboard, the fiscal year 2017  budget request for this investment totaled $399 million, and CMS could  not demonstrate that the CIO took steps to determine the appropriateness  of the revised budget total. In addition, HHS could not demonstrate that  the department-level CIO reviewed the appropriateness of the  investment\u2019s IT resources. Moreover, HHS could not demonstrate that the  responsibility for this requirement had been delegated to the CMS CIO for  the fiscal year 2017 budget request."], "subsections": []}, {"section_title": "Selected OMB common baseline requirements", "paragraphs": ["The CMS CIO took steps to determine the appropriateness of the  investment\u2019s IT budget request by reviewing the IT resource request  through the investment review board. However, HHS could not  demonstrate that the department-level CIO reviewed the appropriateness  of the investment\u2019s IT resources. In addition, HHS could not demonstrate  that the responsibility for this requirement had been delegated to the CMS  CIO for the fiscal year 2017 budget request.  \u25cf = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment.  \u25d1 = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the  \u25cb = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment.", "DOJ established department-wide IT capital planning and  budgeting procedures that document the level of detail with which  IT resources are to be described during the planning and  budgeting process. The documented level of detail went beyond  OMB\u2019s minimum required reporting to include 49 IT resources  across four business areas.", "This requirement was assigned at the department level.", "DOJ documented IT capital planning procedures for the level of  detail of planned expenditure reporting. However, the procedures  did not explicitly require that all transactions with an IT component  are included in the expenditure reporting.", "This requirement was assigned at the department level.", "DOJ documented procedures for including the CIO in the planning  and budgeting stages for programs with IT resources.", "This requirement was assigned at the department level.", "DOJ documented governance board charters that included the  CIO as a member of department-level IT governance boards.  However, the CIO was not included a member of key  component-level IT investment review boards, including those at  FBI.", "This requirement was assigned at the department level.", "DOJ documented procedures in its IT Governance Guide by  which the CIO is to work with program and component leadership  in planning the overall portfolio of IT resources.", "This requirement was assigned at the department-level.", "DOJ documented procedures in its IT Governance Guide and  Department Investment Review Council for the CIO to review and  approve major IT investments.", "This requirement was assigned at the department level.", "DOJ documented procedures in its IT Governance Guide and IT  capital planning guidance for the CIO to review IT resources that  are to support major program objectives and significant increases  and decreases in resources.", "This requirement was assigned at the department level.", "DOJ did not document procedures for this requirement.", "This requirement was assigned at the department level.  \u25cf = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common  \u25d1 = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the  \u25cb = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB  N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement.", "FBI included the DOJ CIO in the planning and budgeting stages for the  sampled investment through a review of the funding request during an  annual IT portfolio review in October 2015.", "FBI included the DOJ CIO in the planning and budgeting stages for the  sampled investment through a review of the funding request during an  annual IT portfolio review in October 2015.", "DOJ\u2019s CIO collaborated with program leaders in planning IT resources for  the investment through development of the annual operating plan for  DOJ\u2019s working capital fund and through meetings with component  business leadership and meetings with component CIOs.", "DOJ\u2019s CIO collaborated with program leaders in planning IT resources for  the investment through development of the annual operating plan for  DOJ\u2019s working capital fund.", "While FBI program leadership collaborated with IT representatives from  the Criminal Justice and Information Services Division in planning IT  resources, FBI could not demonstrate that the CIO was involved in the  planning or that the responsibility had been delegated to the division.", "FBI could not demonstrate that the CIO worked with program leadership  to plan the sampled investment\u2019s IT resources.", "DOJ\u2019s CIO reviewed IT resources that are to support major program  objectives and changes in IT resources through development of the  annual operating plan for DOJ\u2019s working capital fund and in an annual IT  portfolio review in October 2015.", "DOJ\u2019s CIO reviewed IT resources that are to support major program  objectives and changes in IT resources through development of the  annual operating plan for DOJ\u2019s working capital fund and in an annual IT  portfolio review in October 2015.", "FBI obtained a review from the DOJ CIO regarding IT resources that are  to support major program objectives and significant changes in IT  resources through an annual IT portfolio review in October 2015.", "FBI obtained a review from the DOJ CIO regarding IT resources that are  to support major program objectives and significant changes in IT  resources through an annual IT portfolio review in October 2015.", "DOJ\u2019s CIO took steps to ensure the investment included appropriate  estimates of IT resources in its budget request by reviewing spreadsheets  with additional and more detailed cost information during an annual IT  portfolio review in October 2015.", "DOJ\u2019s CIO took steps to ensure the investment included appropriate  estimates of IT resources in its budget request by reviewing spreadsheets  with additional and more detailed cost information during an annual IT  portfolio review in October 2015.", "While IT representatives within the Criminal Justice and Information  Services Division were involved in validating underlying IT resource  estimates, FBI could not demonstrate that the CIO was involved in the  planning or that the responsibility had been delegated to the division."], "subsections": []}, {"section_title": "Selected OMB common baseline requirements", "paragraphs": ["FBI could not demonstrate that the CIO or designee reviewed the  appropriateness of IT resource estimates underlying the investment\u2019s  budget request.  \u25cf = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment.  \u25d1 = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the  \u25cb = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment.", "This requirement was assigned at the department level.", "Treasury documented IT capital planning procedures for reporting  investments\u2019 planned IT expenditures. However, the procedures did not  explicitly require that all transactions with an IT component are included in  the expenditure reporting.", "This requirement was assigned at the department level.", "While the department documented procedures for including the CIO in the  planning and budgeting stages for department-level programs that are  identified as having IT resources, it did not document procedures for  ensuring the CIO is included in all department-level programs that may  have IT resources, including those that are not primarily IT-oriented. In  addition, Treasury\u2019s CIO delegated this requirement to component CIOs  for component-level investments. However, the agency had not  established procedures for verifying that components were carrying out  this delegated responsibility.", "IRS documented annual IT budgeting procedures for including the IRS  CIO in the component\u2019s planning and budgeting stages for all programs  that have IT resources.", "Treasury developed department-level IT governance board charters that  included the CIO as a member. In addition, the Treasury CIO delegated  the responsibility for this requirement to component CIOs for component- level IT governance boards. However, the department had not established  procedures for verifying that components were carrying out this delegated  responsibility.", "IRS included its CIO as a member of its IT investment review board  through its documented IT budgeting procedures.", "Treasury has documented procedures in its IT capital planning guidance  by which the CIO works with program and component leadership in  planning IT resources.", "This requirement was assigned at the department level."], "subsections": []}, {"section_title": "Selected OMB common baseline requirements CIO review and approval of IT budgets", "paragraphs": ["While Treasury documented procedures in its IT capital planning guidance  for the CIO to review major IT investments with each component, the  department had not documented procedures for how the CIO was to  approve those investments. In addition, the Treasury CIO delegated to  component CIOs the responsibility to develop proposed IT planning and  budgeting artifacts while the Treasury CIO would retain the authority to  approve them. However, the department had not established procedures  for verifying that components were carrying out this delegated  responsibility.", "IRS documented annual IT budgeting procedures that described how the  component CIO was to review and approve major IT investments.", "Treasury established procedures through its Quarterly Performance  Reviews and its IT capital planning guidance to review IT resources that  are to support major program objectives and significant changes in IT  resources. For example, during the annual Spring portfolio review with  each component, the CIO was to discuss strategic IT changes for the  component and any significant resource changes that have occurred on  individual investments.", "This requirement was assigned at the department level.", "Treasury had not documented procedures for ensuring the  appropriateness of IT resource estimates for department-level  investments. In addition, Treasury delegated the responsibility for this  requirement to component CIOs for component-level investments.  However, the department had not established procedures for verifying that  components were carrying out this delegated responsibility.", "IRS documented annual IT budgeting procedures for ensuring the  appropriateness of IT resources within the component-level IT portfolio.  The procedures included validating annual IT demand requests that form  the basis of the budget request.  \u25cf = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common  \u25d1 = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the  \u25cb = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB  N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement.", "IRS demonstrated that managers from the Office of the CIO  worked with program leadership from IRS business units in  developing a portion of the sampled investment\u2019s budget of $286  million through IT budget reviews conducted by an integrated  review team in July 2015. However, the component agency could  not demonstrate that Office of the CIO officials worked with  program leadership to develop the budget for the full investment  totaling $468 million.", "IRS demonstrated that managers from the Office of the CIO  worked with program leadership from IRS business units in  developing a portion of the sampled investment\u2019s budget of $40  million through IT budget reviews conducted by an integrated  review team in July 2015. However, the component agency could  not demonstrate that Office of the CIO officials worked with  program leadership to develop the budget for the full investment  totaling $343 million.", "Treasury could not demonstrate that the CIO reviewed the  investment\u2019s alignment with major program objectives or changes  in resources.", "Treasury could not demonstrate that the CIO reviewed the  investment\u2019s alignment with major program objectives or changes  in resources.", "IRS demonstrated that managers from the Office of the CIO  reviewed alignment with major program objectives and changes in  underlying resources for a portion of the sampled investment\u2019s  budget of $286 million through IT budget reviews conducted by an  integrated review team in July 2015. However, the component  agency could not demonstrate that Office of the CIO officials  reviewed alignment with major program objectives and changes in  resources for the full investment totaling $468 million.", "IRS demonstrated that managers from the Office of the CIO  reviewed alignment with major program objectives and changes in  underlying resources for a portion of the sampled investment\u2019s  budget of $40 million through IT budget reviews conducted by an  integrated review team in July 2015. However, the component  agency could not demonstrate that Office of the CIO officials  reviewed alignment with major program objectives and changes in  resources for the full investment totaling $343 million.", "Treasury could not demonstrate that the CIO or designee reviewed  the appropriateness of IT resource estimates underlying the  investment\u2019s budget request.", "Treasury could not demonstrate that the CIO or designee reviewed  the appropriateness of IT resource estimates underlying the  investment\u2019s budget request."], "subsections": []}, {"section_title": "Selected OMB common baseline requirement", "paragraphs": ["IRS demonstrated that managers from the Office of the CIO  reviewed detailed cost estimates for a portion of the sampled  investment\u2019s budget of $286 million through IT budget reviews  conducted by an integrated review team in July 2015. However,  the component agency could not demonstrate that Office of the  CIO officials reviewed detailed cost estimates for the full  investment totaling $468 million.", "IRS demonstrated that managers from the Office of the CIO  reviewed detailed cost estimates for a portion of the sampled  investment\u2019s budget of $40 million through IT budget reviews  conducted by an integrated review team in July 2015. However,  the component agency could not demonstrate that Office of the  CIO officials reviewed detailed cost estimates for the full  investment totaling $343 million.   \u25cf = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment.  \u25d1 = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the  \u25cb = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment."], "subsections": []}]}, {"section_title": "Appendix VII: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Dave Powner (Director), Nicole  Jarvis (Assistant Director), Joshua Leiling (Analyst-in-Charge), Chris  Businsky, Kara Epperson, Rebecca Eyler, Suellen Foth, Torrey Hardee,  Tarunkant Mithani, Monica Perez-Nelson, and Andrew Stavisky made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-85", "url": "https://www.gao.gov/products/GAO-18-85", "title": "Food Safety: FDA Continues to Evaluate and Respond to Business Concerns about the Produce Rule", "published_date": "2017-11-27T00:00:00", "released_date": "2017-11-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Although the United States has one of the safest food supplies in the world, foodborne illness is a common public health problem; some of this illness can be linked to produce. For example, in 2017, a Salmonella outbreak linked to imported papayas sickened more than 200 people in 23 states and killed 1. FDA's produce rule, one of a number of rules required by the FDA Food Safety Modernization Act, established the first enforceable national food safety standards for produce. The Agricultural Act of 2014 required that the produce rule include \u201ca plan to systematically\u2026develop an ongoing process to evaluate and respond to business concerns\u201d about the rule and a provision for GAO to report on FDA's efforts 1 year after the promulgation of the final rule and again the following year. In November 2016, GAO issued the first report.", "In this follow-up report, GAO examined (1) steps FDA has taken since GAO's 2016 review to evaluate and respond to business concerns regarding the produce rule, (2) steps FDA has taken to assess the effectiveness of its efforts to evaluate and respond to business concerns regarding the rule, and (3) challenges FDA officials reported facing in evaluating and responding to business concerns regarding the rule. GAO examined TAN questions submitted by businesses; interviewed FDA officials and representatives from groups, such as the Produce Safety Alliance, working with FDA to implement the rule; and interviewed representatives from produce industry associations and a farming organization.", "GAO is not making any recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["Since GAO's November 2016 report on the Food and Drug Administration's (FDA) 2015 produce rule, the agency has continued to use its Technical Assistance Network (TAN) to evaluate and respond to questions and concerns about the rule. GAO found that since the issuance of its 2016 report, which contained data as of September 3, 2016, 2,665 more questions were submitted to the TAN, 230 of which pertained to the produce rule, and of those 230 questions, 154 were submitted by businesses (see fig.).", "a The TAN also receives questions about other rules pertaining to the FDA Food Safety Modernization Act, such as rules on imported food and the sanitary transportation of food.", "b Others include members of academia, consumers, and federal or state regulators.", "Most produce rule-related TAN questions concerned agricultural water standards, such as methods for testing water. In addition to the TAN, FDA has taken other steps to evaluate and respond to business concerns, including funding training for industry and visiting farms. FDA is also reviewing the rule's water standards and published a proposed rule in September 2017 to extend the compliance dates associated with those standards in response to concerns.", "FDA has begun collecting survey results on the web page used for submitting TAN questions and continues to develop a survey to assess the timeliness and quality of TAN responses. FDA also continued to develop metrics intended to assess its overall efforts to evaluate and respond to business concerns, officials reported. Produce industry representatives told GAO that FDA is open to hearing questions and concerns, but businesses need more information to comply with the rule and are awaiting FDA's forthcoming guidance on parts of the rule.", "FDA officials reported facing two challenges in evaluating and responding to business concerns: identifying businesses subject to the rule and providing consistent, region-specific information in response to concerns. Officials said that the agency's cooperative agreement with 43 states plays a key role in addressing these challenges, as does the Produce Safety Network, a network of region-based FDA food safety experts."]}], "report": [{"section_title": "Letter", "paragraphs": ["Although the United States has one of the safest food supplies in the  world, foodborne illness is a common public health problem. Some of this  illness can be linked to produce. For example, beginning in the summer of  2017, a Salmonella outbreak linked to imported papayas sickened more  than 200 people in 23 states and killed 1, according to the Centers for  Disease Control and Prevention; in 2011, 147 people fell ill and 33 died  as a result of eating cantaloupes contaminated with Listeria. Other  produce-related outbreaks in recent years have involved cucumbers, hot  peppers, alfalfa sprouts, bean sprouts, and packaged salads. The Food  and Drug Administration (FDA), an agency within the Department of  Health and Human Services, is responsible for ensuring the safety of  produce, along with many other foods. Overall, FDA is responsible for  ensuring the safety of more than 80 percent of the U.S. food supply.", "Because produce is often consumed raw, without processing to reduce or  eliminate contaminants, preventing contamination is key to ensuring safe  consumption. In January 2011, the FDA Food Safety Modernization Act  (FSMA) was signed into law, representing the largest expansion and  overhaul of U.S. food safety law since the 1930s. FSMA, according to  FDA, marked a historic turning point by focusing on preventing rather  than reacting to foodborne illnesses. FSMA does so, in part, by requiring  FDA to promulgate new rules that, combined, provide a framework for  industry to implement preventive measures and for FDA to oversee  implementation. In response to FSMA, FDA developed seven  foundational rules; among them is the rule entitled Standards for the  Growing, Harvesting, Packing, and Holding of Produce for Human  Consumption\u2014also known as the produce rule. This rule, which FDA  promulgated in November 2015, established the first enforceable national  standards for on-farm growing, harvesting, packing, and holding of  domestic and imported produce. Among other things, the rule  established standards related to agricultural water quality; the use of soil  amendments, such as raw manure; the presence of domesticated and  wild animals; worker training, health, and hygiene; and sanitation of  equipment, tools, and buildings.", "Some in the produce industry have raised questions and expressed  concerns about the produce rule standards, including questions about the  types of produce covered by the rule. Others have expressed concerns  about the costs necessary to comply with the rule, particularly for smaller  businesses. The Agricultural Act of 2014, also referred to as the 2014  Farm Bill, required that FDA ensure the final produce rule include \u201ca plan  to systematically \u2026 develop an ongoing process to evaluate and respond  to business concerns.\u201d", "The act included a provision for GAO to report, 1 year after the  promulgation of the final produce rule and again the following year, on the  ongoing evaluation and response process. In November 2016, we issued  our first report. We found that FDA developed an information  clearinghouse, called the Technical Assistance Network (TAN), to  evaluate and respond to questions and concerns from businesses  regarding implementation of the produce rule and other FSMA rules. In  addition to using the TAN to respond to questions, FDA uses TAN  questions to help inform the development of FSMA policy, guidance, and  training to help businesses understand and comply with the produce rule  and other FSMA rules. FDA officials told us the agency was developing a  survey, along with other metrics, to assess the effectiveness of the TAN.", "This follow-up report examines (1) the steps FDA has taken since GAO\u2019s  2016 review to evaluate and respond to business concerns regarding the  produce rule; (2) the steps FDA has taken to assess the effectiveness of  its efforts to evaluate and respond to business concerns regarding the  rule; and (3) the challenges FDA officials reported facing in evaluating  and responding to business concerns regarding the rule.", "To examine the steps FDA has taken since GAO\u2019s 2016 review to  evaluate and respond to business concerns regarding the produce rule,  we reviewed information on FSMA and the produce rule on FDA\u2019s  website; attended relevant food safety conferences, including the  Association of Food and Drug Officials conference in Houston, Texas;  interviewed FDA officials involved in implementation of the rule; and  obtained data from FDA on the number of questions submitted to the  TAN. To better understand the types of issues businesses were  communicating to FDA, we also examined the full text of questions and  concerns about the rule that businesses submitted to the TAN. We  classified the questions and concerns into categories based on the type  of question, such as requests for additional information or clarification  regarding the produce rule. We assessed the reliability of the TAN data  by interviewing agency officials knowledgeable about the data and  determined that the data were sufficiently reliable for our report. In  addition, we interviewed representatives from four organizations assisting  FDA with implementation of the rule and an official from one state  department of agriculture. We also interviewed representatives from two  produce industry associations and a farming organization from the  northeastern United States. We selected groups with large  memberships; those representing both large and small business; those  representing specific produce commodities, such as sprouts; those  involved with educating businesses on produce rule implementation; and  those representing different geographic locations across the United  States. The information we obtained from these interviews is not generalizable to all produce industry associations, businesses, or others  affected by the produce rule, but it provides illustrative examples. To  examine the steps FDA has taken to assess the effectiveness of its  efforts to evaluate and respond to business concerns, we interviewed  FDA officials to learn about any ongoing or planned efforts. To examine  the challenges FDA faces in evaluating and responding to business  concerns, we interviewed FDA officials.", "We conducted this performance audit from December 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides an overview of the produce rule and describes how  FDA is partnering with states to implement the rule."], "subsections": [{"section_title": "Overview of the Produce Rule and Compliance Dates", "paragraphs": ["Produce is an important part of a healthy diet but is susceptible to  contamination from numerous sources, including agricultural water,  animal manure, equipment, and farm workers. The produce rule  established standards to help ensure the safe growing and handling of  produce. For example, the rule requires that businesses take steps to  ensure that agricultural water that comes into contact with produce is safe  and of adequate sanitary quality for its intended use. As part of this, the  rule established microbial water criteria to determine the presence of  generic E. coli, which is the most commonly used indicator of fecal  contamination, and referenced a testing method published by the  Environmental Protection Agency to test for the presence of generic E.  coli. The rule also established standards specific to sprouts, which are  especially vulnerable to contamination because of the warm, moist, and  nutrient-rich conditions needed to grow them. In addition to the general  requirements of the produce rule, the rule also includes requirements for  businesses specifically related to preventing contamination of sprouts,  which have been associated with foodborne illness outbreaks.", "The rule applies to businesses that grow, harvest, pack, or hold produce,  including produce that will be imported or offered for import, with some  exemptions based on the produce commodity and the size of a business.  For example, the rule does not apply to produce that is rarely consumed  raw, such as asparagus or black beans, and produce that is to be  consumed on the farm. In addition, the rule does not apply to  businesses that have an average annual monetary value of $25,000 or  less of produce sold during the previous 3-year period.", "FDA\u2019s implementation of the produce rule will occur over several years.  According to the rule, compliance dates are phased in from 2017 through  2022 based on business size and other factors. Compliance dates for  certain agricultural water standards and for sprouts differ from the  compliance dates for other provisions in the rule. For example,  compliance for large businesses under certain agricultural water  standards with covered activities not involving sprouts is due in January  2020; compliance for small businesses under certain agricultural water  standards with covered activities not involving sprouts is due in January  2021; and compliance for very small businesses under certain agricultural  water standards with covered activities not involving sprouts is due in  January 2022. In 2019, FDA intends to start inspecting produce  businesses, other than those growing sprouts. At that time, FDA is to  assess compliance with the produce rule, with the exception of the  agricultural water standards, for all produce other than sprouts. See fig.  1 for more information on implementation timelines."], "subsections": []}, {"section_title": "FDA-State Partnership in Helping to Ensure Compliance with the Rule", "paragraphs": ["FSMA authorized and encouraged FDA to coordinate with states in  helping to ensure compliance with the produce rule. According to FDA  officials, developing a working relationship with states to implement the  rule is of critical importance because states may have an understanding  of farming practices as a result of their historically close relationship with  farms. To facilitate coordination with states, FDA established the State  Produce Implementation Cooperative Agreement Program. The program  is to provide funds to support a variety of state activities, including  educating and providing technical assistance to produce businesses, to  the 43 participating states. Through the program, FDA obligated  approximately $22 million in 2016 to 42 states and approximately $31  million in 2017 to 43 states to help these states implement the rule.", "In addition, in September 2014, FDA entered into a 5-year cooperative  agreement with the National Association of State Departments of  Agriculture\u2014an organization representing state agriculture departments  in all 50 states and 4 U.S. territories. Under this cooperative agreement,  the association is working with FDA to support implementation of the  produce rule by, among other things, providing technical assistance to  states to help them implement their produce safety programs. FDA  renewed the cooperative agreement in 2016 with an expanded scope to  include states\u2019 assistance with helping businesses understand what is  expected of them ahead of compliance dates."], "subsections": []}]}, {"section_title": "FDA Has Continued to Take Steps to Evaluate and Respond to Business Concerns and Is Reviewing the Produce Rule Water Standards", "paragraphs": ["Since we last reported on the produce rule, FDA has continued to use its  information clearinghouse, the TAN, to take steps to evaluate and  respond to questions and concerns from businesses and other  stakeholders regarding the produce rule. FDA has also taken other steps,  including funding training for industry, conducting visits to farms, and  publishing guidance, to evaluate and respond to concerns. In addition,  FDA is reviewing the produce rule agricultural water standards and in  September 2017 published a proposed rule to extend compliance dates  associated with those standards."], "subsections": [{"section_title": "FDA Continues to Evaluate and Respond to Business Concerns through Its Information Clearinghouse", "paragraphs": ["FDA has continued to use the TAN to evaluate and respond to questions  and concerns from businesses and other stakeholders regarding all of the  FSMA rules, including the produce rule. Since our last report, we found  that FDA received 2,665 additional questions submitted to the TAN from  September 4, 2016, through June 30, 2017. Of those 2,665 additional  questions, 230 questions (about 9 percent) pertained to the produce  rule. Of those 230 questions, 154 questions (about 67 percent) came  from individuals who self-identified as belonging to \u201cbusiness/industry.\u201d  (See fig. 2.)", "We reviewed the full text of questions about the produce rule that were  submitted to the TAN by those who identified themselves as belonging to  business/industry. We reviewed all such questions submitted since  September 10, 2015, when the TAN first began operating, through March  31, 2017, the date of the most recently available information when we  conducted our audit work (321 total questions). Questions spanned a  variety of topics related to the rule, with the most commonly asked  questions pertaining to the rule\u2019s agricultural water standards. For  example, some businesses submitted questions to clarify whether a  specific water testing method they intended to use was acceptable. Other  commonly asked questions related to the types of produce covered by the  rule and whether a particular business was subject to the produce rule or  a related FSMA rule known as the preventive controls for human food  rule, which mandates new food safety requirements for food facilities,  such as food processing businesses. For example, one business owner  who grows almonds and also processes them submitted a question about  whether the business is subject to the produce rule or the preventive  controls rule. In addition, we found that most submissions (281 questions,  or 88 percent) contained requests for additional information or clarification  from FDA about implementing the produce rule. Examples of questions  about the produce rule that were submitted by businesses are shown in  figure 3.", "According to FDA data, as of June 2017, the agency had responded to  about 84 percent (312) of the 372 questions specifically about the  produce rule submitted by businesses to the TAN since it began  operating. The agency\u2019s median response time to these questions was 48  business days. As of June 2017, FDA had responded to 81 percent  (4,307) of all 5,291 questions submitted to the TAN, with a median  response time of 16 business days. Officials we interviewed said that  FDA\u2019s longer median response time for produce rule questions submitted  by businesses was because the agency needed additional time to  address several unique produce rule questions that were not considered  during the rulemaking process.", "To understand produce businesses\u2019 concerns in detail, FDA officials said  they track questions submitted to the TAN. For example, these officials  said they track the number of questions requesting more information  about implementing the standards in the produce rule. These officials said  that FDA is using these data to inform the development of resources to  help businesses comply with the rule. For example, the officials told us  that they are developing a set of commonly asked TAN questions about  the produce rule that businesses can examine on FDA\u2019s website prior to  submitting their questions to the TAN. FDA has already published similar  commonly asked TAN questions for some of the other FSMA rules.  Representatives we interviewed from two industry associations said that  such a list of questions would be helpful as businesses work to comply  with the produce rule."], "subsections": []}, {"section_title": "FDA Has Taken Other Steps to Evaluate and Respond to Business Concerns, Including Funding Training for Industry and Conducting Visits to Farms", "paragraphs": ["Since we last reported on the produce rule, FDA has taken steps in  addition to the TAN to evaluate and respond to business concerns  regarding the produce rule.", "Training: FDA has funded partnerships to deliver training to help produce  businesses meet the new requirements under the produce rule.", "The Produce Safety Alliance (PSA)\u2014a collaboration involving Cornell  University, FDA, and the U.S. Department of Agriculture\u2014has  developed a standardized national training curriculum about the  produce rule and has conducted training sessions for more than 6,100  industry participants in the United States and foreign countries. In  addition to serving an educational role, PSA training sessions help  FDA evaluate and respond to business concerns. For example, FDA  officials told us the agency uses questions submitted to the TAN to  inform PSA course content, thereby helping to ensure that the training  sessions address the most commonly asked questions. In addition,  FDA officials and PSA representatives we interviewed said that PSA  trainers are able to respond to questions from industry participants  during the training sessions. These representatives said that they  forward questions that PSA trainers are not able to answer during  training sessions to FDA using the TAN and through regular meetings  with FDA officials. One PSA trainer we interviewed said that face-to- face interactions with businesses at training sessions are the major  way her organization hears about business questions and concerns.", "The Sprout Safety Alliance (SSA) is a collaboration between the  Illinois Institute of Technology and FDA to enhance the sprout  industry\u2019s understanding of the produce rule. SSA has developed a  training curriculum to help businesses comply with produce rule  standards related to sprout production. SSA has conducted training  courses for over 100 industry participants in the United States and  Canada. According to an SSA representative, SSA has addressed  questions and concerns from sprout industry participants during  trainings. This representative also said SSA communicates with FDA  about questions SSA trainers are unable to answer.", "Table 1 provides information about trainings provided by PSA and SSA.", "Educational Farm Visits: FDA officials participated in educational farm  visits in 2016 and 2017 across the United States. According to FDA  officials we interviewed, these visits were intended to broaden FDA\u2019s  knowledge of industry practices on these farms and were not for  compliance or inspection purposes. FDA officials said they learned about  a variety of industry concerns during these visits, including industry\u2019s  concerns with the water standards under the produce rule. FDA  conducted these visits in a number of states, including Alaska, Arizona,  California, Colorado, Georgia, Maine, Maryland, Nevada, New Mexico,  Oregon, Texas, Vermont, Washington, Wisconsin, and the U.S. Virgin  Islands, according to agency officials.", "Outreach to Produce Industry Associations: According to FDA  officials, the agency performs outreach to various produce industry  associations to educate businesses about the produce rule, answer  questions, and learn about produce business concerns. For example,  FDA officials said that, since we last reported on the produce rule, they  have attended industry conferences and held outreach meetings with  produce industry associations and they learned about specific concerns,  such as businesses\u2019 need for additional training on the produce rule and  for information on how to identify materials that are suitable to properly  sanitize surfaces with which produce comes into contact.", "On-farm Readiness Reviews: According to agency officials, these are  voluntary reviews during which state inspectors and educators,  accompanied by FDA officials, review businesses\u2019 progress toward  meeting the produce rule standards to promote compliance with the rule.  States and FDA piloted the program in 2016 and, according to agency  officials, they plan to roll out the full program in late 2017 or early 2018.  In addition to helping businesses comply with the rule, FDA officials said  these reviews have helped the agency learn about businesses\u2019 questions  and concerns. For example, officials said they learned during these  reviews that some businesses needed additional information regarding  water testing methods under the rule, including information on the number  of water samples to be collected and the locations of testing laboratories.", "Produce Safety Network: Recognizing regional differences in growing  practices, FDA established the Produce Safety Network in 2017 to  address the unique needs of produce businesses in various parts of the  country, according to agency officials. This network was established, in  part, to respond to business questions and concerns, according to FDA  officials. The network is made up of FDA produce safety experts and  specialized investigators based in different parts of the country who help  evaluate and respond to questions from businesses, state regulators, and  other stakeholders in their regions, according to agency officials. For  example, according to FDA officials, these produce safety experts learned  about business questions regarding FDA\u2019s list of produce the agency  considers rarely consumed raw and not subject to the produce rule. In  response to these concerns, the network developed a fact sheet outlining  FDA\u2019s rationale for developing the list.", "Guidance: According to FDA officials, the agency has been working on  guidance to assist businesses in complying with the produce rule. FDA  officials said guidance allows FDA to respond to questions and concerns  related to the rule. For example, in January 2017, FDA published draft  guidance on sprout-specific requirements under the rule. FDA officials  told us they conducted outreach to sprout businesses before releasing  this guidance to let businesses know why the guidance was issued and  that it was available for public comment. In developing the guidance, FDA  also took into account public comments made during the rulemaking  process, according to FDA officials. An SSA representative we  interviewed confirmed this, saying that the draft guidance was responsive  to comments made by sprout businesses during rulemaking that asked  FDA to include specific examples of how businesses were to comply with  requirements. This representative said the draft guidance contained  relevant examples. In addition, in early September 2017, FDA published  guidance to help small businesses comply with the produce rule. The  guidance provides small businesses with information about who must  comply with the rule, training required, and which businesses are eligible  for qualified exemptions from the rule, among other things. See appendix  I for a list of published and forthcoming FDA produce rule guidance."], "subsections": []}, {"section_title": "FDA Is Reviewing the Produce Rule Water Standards in Response to Business Concerns and Is Proposing to Extend Compliance Dates", "paragraphs": ["FDA announced in March 2017 that it would conduct a review of the  agricultural water standards under the produce rule and, in September  2017, the agency published a proposed rule in the Federal Register that  would extend the compliance dates for the water standards by an  additional 2 years from the original compliance dates, depending on  business size, for produce other than sprouts (see fig. 4).", "According to FDA, its review of the water standards is an effort to simplify  the standards and make them easier for businesses to comply with. FDA  also said that it would use the extended compliance period to work with  produce businesses as it considers the best approach to respond to their  concerns about the standards. The extended compliance period will also  allow FDA to provide additional outreach and training.", "FDA officials we interviewed said that their decision to review the water  standards and extend compliance dates was in response to industry  concerns. They also said that they learned about these concerns through  some of the steps they have taken, which we identify in this report. For  example, FDA officials said they heard numerous questions and concerns  from businesses about the water standards during educational farm visits.  Also, as we note above, questions about the water standards were the  most common produce rule-related questions submitted to the TAN.  According to representatives we interviewed from two industry  associations, some businesses did not fully understand the water  standards because, among other things, they said the standards do not  provide a clear definition of \u201cagricultural water,\u201d leaving some businesses  uncertain about what water sources and water uses are subject to the  rule. In addition, according to documentation from an industry meeting  with FDA, some businesses have expressed concerns about costs  associated with the new water testing requirements. Some businesses  have also expressed concerns that the water testing method described in  the standards has not traditionally been used by industry and that finding  laboratories that use this method will be difficult. The standards allow for  the use of alternative testing methods, but some businesses have  expressed concerns that FDA has not specified these alternative testing  methods, thereby leaving businesses uncertain about what methods will  be acceptable to FDA. Along with its announcement of a review of the  water standards, in September 2017, FDA announced a list of eight water  testing methods it determined to be equivalent to the method described in  the standards. According to FDA officials, the list was established in  response to business concerns, and the agency will add to this list as  additional equivalent methods are identified.", "FDA officials we interviewed did not provide specific details or a timeline  for the agency\u2019s review of the water standards. These officials said the  agency is considering adding clarifying information on the standards in  forthcoming guidance and, if necessary, making changes to the standards  themselves by revising the produce rule. In addition, officials said they  plan on hosting a water summit in early 2018 with stakeholders and  technical experts."], "subsections": []}]}, {"section_title": "FDA Has Collected Some Survey Results to Assess the Effectiveness of the TAN and Has Continued to Develop Metrics to Assess Outcomes of Its Other Mechanisms", "paragraphs": ["FDA has begun collecting survey results to assess the effectiveness of its  information clearinghouse, the TAN, and has continued to develop  metrics that will assess outcomes related to the agency\u2019s overall efforts to  evaluate and respond to business concerns. In October 2016, FDA  implemented the first part of its survey assessing the TAN. This first part  of the survey, which FDA sent to businesses and other stakeholders that  submitted questions to the TAN, solicited feedback about the TAN web  page provided for submitting questions. This survey included questions  about how stakeholders learned about the TAN web page, the clarity of  the page, and how FDA could improve the page. Officials told us they  have begun making changes to the TAN web page based on the survey  results. For example, FDA increased the character limit for questions  submitted and provided additional information about FSMA on the web  page. FDA is also developing the second part of its TAN survey, which  will solicit feedback from stakeholders on the timeliness and quality of  answers provided by FDA through the TAN. FDA officials told us that the  agency will begin sending out this survey with its responses to TAN  questions in spring 2018.", "In addition to its assessment of the effectiveness of the TAN, FDA  officials told us that the agency is continuing to develop metrics intended  to assess a number of desired outcomes resulting from implementation of  the rule, including outcomes related to FDA\u2019s efforts to evaluate and  respond to business concerns. These outcomes are specified in a draft  strategic framework the agency has developed to monitor implementation  of the produce rule. The framework includes outcomes such as  businesses\u2019 compliance with the produce rule, expanded use of  incentives for compliance, and increased dissemination of good practices  and other on-farm findings. According to FDA officials, outcomes in the  framework that relate to FDA\u2019s efforts to evaluate and respond to  business concerns include:  increased effectiveness of technical assistance provided to  businesses by FDA and its partners,  improved working relationships with businesses, and  increased capacity of FDA partners to educate businesses.", "Performance metrics are to be targeted to measure these outcomes,  officials said. These officials also stressed that the draft strategic  framework is subject to change.", "Because FDA officials we interviewed said they are in the early stages of  assessing the TAN and the agency\u2019s other efforts to evaluate and  respond to business concerns, we asked produce industry  representatives for their perspectives on FDA\u2019s efforts, including  representatives from two produce industry associations, a farming  organization, and four organizations working with FDA to implement the  produce rule. Regarding the TAN, representatives we interviewed from  two of these groups said that they had received timely responses from  FDA to some questions they had submitted to the TAN, and most groups  we interviewed said that at least some of the TAN responses they  received provided useful information. However, representatives we  interviewed also had two major concerns:", "Representatives from three groups said that responses were often  slow to arrive; representatives from one of these three groups  commented that response times remained largely unchanged since  we last reported on the produce rule in November 2016.  Representatives from another group commented that FDA\u2019s response  times to TAN questions seemed to be related to the complexity of a  question. For example, questions that required straightforward  answers often received faster responses, while questions requiring  more complex answers often got slower responses and, in some  cases, FDA responded that the question would be answered in  forthcoming guidance.", "Representatives from four groups we interviewed also said that some  responses lacked sufficient clarity or specificity to adequately address  questions and that industry needed more specific, tailored responses  from FDA. For example, some FDA responses restated information  from the published produce rule without providing additional detail,  and other responses contained \u201ccanned\u201d language that did not directly  address the question.", "FDA officials acknowledged that it has been challenging for the agency to  provide timely and complete responses to TAN questions, especially early  on in the TAN\u2019s operation, but that the agency has to work through  complex policy questions related to the rule in order to respond. These  officials said they are working to respond more quickly to TAN questions  and are revising the FDA review process for TAN responses. Officials  also stated that they anticipate posting commonly asked produce rule  questions and responses on the TAN web page to provide immediate  assistance to businesses for some questions. This is similar to what the  agency has done for other FSMA rules, officials said.", "Regarding FDA\u2019s other efforts to evaluate and respond to business  concerns, representatives from one group we interviewed told us that  FDA continues to be open to hearing questions and concerns from the  produce industry. Nevertheless, representatives from four groups told us  that businesses need more information from FDA to comply with the  produce rule and are awaiting FDA\u2019s forthcoming guidance pertaining to  the rule. Representatives from one of these groups also commented that  guidance is needed to explain the produce rule in plain language so that  businesses can more easily understand the rule. In addition,  representatives from two of these groups said that the produce rule  training available to businesses is helpful but limited in the absence of  guidance. For example, some questions cannot be answered completely  during trainings without additional information from guidance.", "FDA officials told us they are aware of businesses\u2019 concerns about the  need for additional guidance. These officials said they are working to  publish guidance on various topics related to the produce rule, as we  have described elsewhere in this report. For example, officials said they  planned to issue draft compliance and implementation guidance near the  first compliance date of January 2018 for businesses producing  commodities other than sprouts (see app. I)."], "subsections": []}, {"section_title": "FDA Officials Reported Facing Challenges Identifying Businesses Subject to the Produce Rule and Providing Consistent and Region-Specific Information in Their Responses", "paragraphs": ["Through interviews with FDA officials, we identified two key challenges  that the agency faces in evaluating and responding to business concerns  about the produce rule: (1) identifying businesses subject to the produce  rule; and (2) providing consistent, region-specific information to  businesses in response to their questions and concerns. FDA officials told  us the agency\u2019s State Produce Implementation Cooperative Agreement  Program plays a key role in addressing these challenges, as does the  Produce Safety Network.", "Identifying businesses subject to the produce rule: While the produce  rule specifies the types of commodities subject to the rule, FDA does not  have an inventory of farms producing those commodities and therefore  does not know which businesses are subject to the rule. As we have  previously reported, FDA\u2019s existing business inventory data are drawn  from information provided by businesses required to register with FDA.  Farms, however, are not required to register. According to FDA officials,  the lack of a registration requirement for farms limits the data the agency  has to inform its implementation of the produce rule. For example, FDA  officials we interviewed said that not having data regarding farms can  make it difficult for FDA to connect businesses with the educational and  technical assistance resources to help them comply with the rule. FDA  officials told us the agency\u2019s State Produce Implementation Cooperative  Agreement Program should help address this challenge. The program,  which provides resources to each participating state to support a variety  of state activities related to implementing and enforcing the produce rule,  includes funding for states to develop and maintain an inventory of  businesses subject to the rule. According to the program\u2019s funding  announcement, inventory data will be used to determine education and  outreach needs related to the produce rule as well as to plan compliance  and enforcement activities. FDA officials told us that states participating in  the program have started to build their inventories of farms. According to  these officials, participating states plan to have their inventories  completed before they begin inspections of produce businesses. For  states not participating in the cooperative agreement program, FDA  officials said the agency is developing farm inventories.", "Providing consistent and region-specific responses to business  questions and concerns: FDA officials told us that it can be a challenge  to ensure that FDA and its state partners provide consistent responses to  businesses\u2019 questions that are also tailored to account for regional  differences in growing conditions. For example, officials said that if a  business in one part of the country receives information from one of  FDA\u2019s state partners, it can be a challenge to ensure that businesses in  other parts of the country also receive the same information, whether  from states or from FDA. At the same time, however, information provided  to businesses may need to be tailored to account for regional differences  in growing conditions. FDA officials told us that, to address this challenge,  FDA\u2019s Produce Safety Network staff are stationed around the United  States and work closely with states participating in FDA\u2019s Cooperative  Agreement Program. According to these officials, this relationship  provides a mechanism for states and FDA to share information about the  produce rule and helps ensure that information provided by states is  consistent with FDA\u2019s interpretation of the rule. In addition, these officials  stated that having network staff in different growing regions allows those  staff members to develop expertise in the growing conditions and  practices in their regions, which in turn enhances their ability to provide  outreach and technical assistance that is specifically tailored to the  unique needs of those regions. For example, according to FDA officials, if  a state in the Cooperative Agreement Program receives a question about  the rule from a business, Produce Safety Network staff work with the  state and FDA subject matter experts to craft a response that the state  can provide to the business and that is tailored to the growing practices  and conditions in the region. This approach helps ensure that FDA and its  state partners speak with one voice about the produce rule and that the  information provided is sensitive to regional differences in the produce  industry, officials said."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to HHS. HHS provided us with  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: FDA Outreach and Guidance Related to the Produce Rule", "paragraphs": ["Date(s)"], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Anne K. Johnson (Assistant  Director), Ramsey Asaly, Tim Bober, Kevin Bray, Alexandra Edwards,  Ellen Fried, Cindy Gilbert, Hayden Huang, Dan Royer, Kiki  Theodoropoulos, and Rajneesh Verma made key contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Food Safety: A National Strategy Is Needed to Address Fragmentation in  Federal Oversight. GAO-17-74. Washington, D.C.: January 13, 2017.", "Food Safety: FDA\u2019s Efforts to Evaluate and Respond to Business  Concerns Regarding the Produce Rule. GAO-17-98R. Washington, D.C.:  November 28, 2016.", "Food Safety: FDA Coordinating with Stakeholders on New Rules but  Challenges Remain and Greater Tribal Consultation Needed. GAO-16- 425. Washington, D.C.: May 19, 2016.", "Department of Health and Human Services, Food and Drug  Administration: Standards for the Growing, Harvesting, Packing, and  Holding of Produce for Human Consumption. GAO-16-299R. Washington,  D.C.: December 16, 2015.", "Federal Food Safety Oversight: Additional Actions Needed to Improve  Planning and Collaboration. GAO-15-180. Washington, D.C.: December  18, 2014."], "subsections": []}], "fastfact": ["People often eat fruits and vegetables raw, so it's important to prevent contamination that may lead to foodborne illness.", "In 2011, a new law brought major changes to food safety efforts. One of these changes was the Food and Drug Administration's produce rule. It established the first enforceable national food safety standards for produce.", "We reported in 2016 on FDA's use of an information clearinghouse to respond to business concerns about the standards. In this report, we examined FDA's responses since then, which have included funding training for industry and announcing a review of water quality standards under the rule."]}
{"id": "GAO-18-164", "url": "https://www.gao.gov/products/GAO-18-164", "title": "Faith-Based Grantees: Few Have Sought Exemptions from Nondiscrimination Laws Related to Religious-Based Hiring", "published_date": "2017-10-05T00:00:00", "released_date": "2017-11-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government provides billions of dollars in grant funding to organizations offering social services, including FBOs. In carrying out their mission, some FBOs prefer to hire individuals who share their religious beliefs. Although the 1964 Civil Rights Act prohibits employment discrimination based on religion, section 702(a) of the Act exempts FBOs from this prohibition, thereby allowing them to hire based on religion. However, some federal grant programs contain statutory restrictions prohibiting this practice. Since a 2007 DOJ legal opinion, federal agencies allow faith-based grantees to use RFRA as a basis for seeking an exemption to allow religious-based hiring.", "GAO was asked to review the extent to which faith-based grantees have sought RFRA exemptions from statutory restrictions on religious-based hiring. This report describes (1) what is known about faith-based grantees that have certified exemption from statutory restrictions on religious-based hiring, per RFRA, since 2007; and (2) how agencies inform grantees of statutory restrictions on religious-based hiring and requirements for demonstrating their eligibility for an exemption.", "GAO reviewed information from DOJ, HHS, and DOL grantees from fiscal years 2007 to 2015 that were subject to statutory restrictions on religious-based hiring. GAO interviewed faith-based grantees that certified as exempt and a selection of those that did not. GAO also reviewed agency grant documentation and guidance provided to grantees and interviewed cognizant officials to understand the processes FBOs must follow to certify as exempt."]}, {"section_title": "What GAO Found", "paragraphs": ["From fiscal years 2007 through 2015, few faith-based grantees sought an exemption based on the Religious Freedom Restoration Act of 1993 (RFRA) from nondiscrimination laws related to religious-based hiring. Specifically, GAO found that the Department of Justice (DOJ), Department of Health and Human Services (HHS), and Department of Labor (DOL) awarded funding to at least 2,586 grantees through at least 53 grant programs containing nondiscrimination hiring restrictions during this time. The number of relevant grant programs could be higher, because GAO could not identify all such programs due to data limitations. Across the 3 agencies, GAO identified 117 grantees that were potential Faith-Based Organizations (FBOs). Of the 117 potential FBOs, 9 DOJ grantees were FBOs that certified as being exempt from statutory restrictions on religious-based hiring. GAO interviewed 6 of these FBOs, all of which stated that hiring individuals who share their religious beliefs was critical to their mission, and that had the RFRA exemption not been available to them, they likely would not have sought the grant.", "DOJ, DOL, and HHS inform grant applicants and recipients of statutory restrictions on religious-based hiring and processes for obtaining an exemption from such restrictions generally through grant materials. DOJ and DOL also provide relevant information on their web sites. All three agencies require grantees that seek to make employment decisions based on religion to self-certify that they meet requirements to be eligible for an exemption, but vary in how they review and approve requests for exemptions. For example, DOJ, DOL, and HHS have policies requiring grantees to submit their exemption self-certification, but only DOL reviews exemption requests and either approves them or provides a reason for denial."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year the federal government provides billions of dollars to  organizations that provide social services to needy families and  individuals. Some of these funds are provided through competitive grants  to faith-based organizations (FBOs), which may include religious groups,  like churches, mosques, synagogues, and temples, or charitable  organizations affiliated with religious groups.", "In some instances, FBOs believe it is necessary to only hire individuals  who share their religious beliefs in order to carry out their mission. Title  VII of the Civil Rights Act of 1964 prohibits employment discrimination  based on religion, as well as other factors such as race, color, sex, and  national origin. However, section 702(a) of the Act exempts FBOs with  respect to basing employment decisions on religion, thereby permitting  FBOs to intentionally, and exclusively, hire individuals who share their  religious beliefs. In light of section 702(a), FBOs that receive federal  grant funding have generally been permitted to make employment  decisions based on religion. There are, however, certain federal grant  programs that are subject to statutory restrictions that prohibit grant  recipients from using grant funding, in whole or in part, to discriminate or  deny employment on the basis of religion, among other factors.", "In 2005, the Office of Justice Programs (OJP) within the Department of  Justice (DOJ) awarded grant funding to World Vision, a FBO, under a  program that was subject to a statutory provision that prohibited recipients  from considering religion when making employment decisions in  connection with the grant. World Vision had a policy to hire only Christian  staff in order to maintain its identity as a Christian organization. OJP  informed World Vision about the grant program\u2019s statutory restriction,  which prohibited religious-based hiring. World Vision petitioned OJP  arguing that it should be exempted from the statutory restriction based on  the Religious Freedom Restoration Act of 1993 (RFRA). Although RFRA  does not explicitly address religious-based hiring, under RFRA, the  government may not substantially burden a person\u2019s exercise of religion,  unless it can prove a compelling interest in doing so. World Vision  argued that being required to comply with the restriction substantially  burdened its exercise of religion and that the government did not have a  compelling interest in prohibiting World Vision from making religious- based hiring decisions. In response, DOJ\u2019s Office of Legal Counsel (OLC)  issued an opinion in June 2007 stating that RFRA could be reasonably  construed to require OJP to exempt World Vision from the statutory  requirement restricting federal grantees from hiring on the basis of  religion. Pursuant to this OLC opinion, and RFRA, certain federal  agencies have permitted FBOs that receive funding under a program that  is subject to a statutory restriction on religious-based hiring to certify that  they are exempt from such restrictions.", "Since OLC issued this opinion, however, the extent to which faith-based  grantees have certified that they are exempt from statutory restrictions on  religious-based hiring is not readily available. You asked us to examine  the extent of use and the various procedures regarding these exemptions.  This report addresses the following questions:  1.  What is known about faith-based grantees that have certified that they  are exempt from statutory restrictions on religious-based hiring, per  RFRA, since 2007?  2.  What processes do selected federal agencies use to notify grantees  about statutory restrictions on religious-based hiring and the related  exemption, per RFRA, and what processes do agencies require FBOs  to follow to demonstrate they are eligible for an exemption?", "In conducting our work, we reviewed the RFRA, the OLC opinion, laws  and regulations related to religious-based hiring, and our prior work on  the federal government\u2019s efforts to monitor FBOs and their performance.  We sought to include federal agencies that, because of their mission, may  be likely to provide funding to FBOs. Therefore, we selected the five  agencies required by Executive Order 13198 to establish a Center for  Faith-Based and Community Initiatives: DOJ, Department of Education  (Education), Department of Health and Human Services (HHS),  Department of Housing and Urban Development (HUD), and Department  of Labor (DOL). These centers were established in each department to  help the federal government coordinate a national effort to expand  opportunities for faith-based and other community organizations and  strengthen their capacity to meet social needs in American communities.", "To address our first objective, we asked each agency to identify any  grantees that certified they were exempt from statutory restrictions on  religious-based hiring. We also asked each agency to identify all grant  programs that met the following criteria\u2014the grant program was subject  to a statutory restriction on religious-based hiring; nonprofits, including  FBOs, were eligible to be primary recipients of the grant funding; and  funding was awarded during fiscal years 2007 through 2015. We selected  this timeframe because it covered the period immediately after the OLC  opinion was issued through the most recent fiscal year for which grant  awards had been announced at the start of our review. We subsequently  removed Education and HUD from our scope after the agencies reported  that they did not have any grant programs that met our criteria.", "We could not determine the complete universe of FBOs that are eligible  to be primary recipients of grant funding or the amount of federal funds  they receive because DOJ, DOL, and HHS do not maintain, and are not  required to maintain, information on whether or not an organization is an  FBO. Also, there is no formal, federal-level definition of FBOs, which  makes it difficult to identify and count them. In addition, DOJ was unable  to identify the total number of grant programs from fiscal years 2007  through 2015 that were subject to nondiscrimination provisions and for  which nonprofits, including FBOs, were eligible to be primary recipients of  grant funding, in time for our review. As a result, the information we  received may not represent the complete number of DOJ grant programs  and grantees subject to the provisions; therefore, we use the term \u201cat  least\u201d in our report because the number of relevant grant programs could  be higher.", "Because DOJ\u2019s OJP and Community Oriented Policing Services (COPS)  components, DOL, and HHS do not collect information on which grantees  are FBOs and potentially eligible for an exemption, we sought other ways  to identify potential FBOs. After reviewing Internal Revenue Service (IRS)  documents, in particular IRS Publication 4838, Instructions for Requesting  Information on Exempt Organizations (Effective January 2010), we  determined that the IRS collects and maintains data on tax-exempt  organizations that could indicate whether the organizations are faith- based. In addition, DOJ\u2019s Office on Violence Against Women (OVW)  component utilized progress reports that allow grantees to self-identify as  FBOs. We asked DOJ, DOL, and HHS to provide information, including  name, contact information, and Employer Identification Number (EIN), for  all of the grantees that received funding for each of the grant programs  that met our criteria. Additionally, we contracted with LexisNexis to  provide us with the relevant IRS data for each of the grantees. We  analyzed the IRS data to determine which grantees had at least one faith- based indicator; and for the purpose of our review, we refer to such  grantees as potential FBOs. If DOJ, DOL, or HHS had potential FBOs,  we provided the agency with a list of these grantees and asked them to  confirm whether any of these grantees certified that they were exempt  from statutory restrictions on religious-based hiring.", "We contacted all nine of the grantees that the agencies identified as  having certified that they were exempt, and six responded to our interview  requests. These interviews yielded information on how the grantees  certified that they were exempt from restrictions on religious-based hiring;  why they determined it was important to hire someone who shared their  religious beliefs; and what they would have done had the exemption  option not been available to them. Additionally, we contacted all 35  potential faith-based grantees we identified that agencies reported had  not filed a self-certification to be exempted from religious-based hiring  restrictions that were awarded funding in fiscal years 2014 and 2015  through any of the grant programs that met our criteria. We selected this  timeframe to increase the likelihood that grantees would be able to recall  the details of the grant application process. Five of the 35 potential faith- based grantees responded to our interview request. We interviewed these  faith-based grantees to discuss, among other things, whether the  grantees were familiar with the exemption option and why they decided  not to seek the exemption.", "To address our second objective, we obtained and reviewed grant  solicitations, language of the relevant statutory restrictions, grant  applications, agency policies, and exemption documentation submitted by  faith-based grantees. To better understand the agencies\u2019 familiarity with  the OLC opinion and the processes the agencies have in place to accept  and review exemption documentation, we interviewed agency officials  and attorneys from DOJ, DOL, and HHS.", "We conducted this performance audit from April 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Few Grantees Certified They Were Exempt from Statutory Restrictions on Religious-Based Hiring", "paragraphs": [], "subsections": [{"section_title": "Nine DOJ Grantees Certified They Were Exempt from Statutory Restrictions on Religious- Based Hiring", "paragraphs": ["From 2007 to 2015, HHS, DOL, and DOJ awarded funding to at least  2,586 grantees through at least 53 grant programs that were subject to  statutory restrictions on religious-based hiring. Specifically:", "HHS identified one grant program subject to statutory restrictions on  religious-based hiring for which nonprofits were eligible to be primary  recipients\u2014the Projects for Assistance in Transition from  Homelessness (PATH) program, which is administered by the  Substance Abuse and Mental Health Services Administration  (SAMHSA). Generally, only states are eligible to be primary  recipients for PATH grant awards. However, HHS may award PATH  grants directly to public or nonprofit entities if a state does not submit  an application or does not meet program requirements. From this  program, no grants were awarded to nonprofit organizations and  therefore no FBOs were awarded grants.", "DOL identified 18 grant programs subject to statutory restrictions on  religious-based hiring for which nonprofits were eligible to be primary  recipients. All 18 of these grant programs were in DOL\u2019s Employment  and Training Administration (ETA). From these 18 programs, 931  grantees were awarded grants, including 19 we identified as potential  FBOs.", "DOJ identified at least 34 relevant grant programs administered by  OVW, COPS, and six different program offices within OJP that were  subject to statutory restrictions on religious-based hiring. The 34  relevant grant programs represent the minimum number of grant  programs that were subject to nondiscrimination provisions and for  which nonprofit organizations were eligible from fiscal years 2007  through 2015. The number of relevant grant programs could be  higher. As discussed below, OJP was unable to identify the total  number of relevant grant programs and total number grantees  awarded grants under these programs, including potential FBOs.  More specifically within DOJ:", "OVW identified 20 grant programs subject to statutory restrictions  on religious-based hiring. From these 20 programs, 604 grantees  were awarded grants, including 25 that OVW identified as  potential FBOs.", "OJP identified at least 10 grant programs subject to statutory  restrictions on religious-based hiring. According to officials, OJP  was not able to readily identify grant solicitations that were  available to nonprofit organizations from fiscal years 2007 to 2015  and subject to statutory restrictions on religious-based hiring. This  effort, according to OJP, would have required a manual search of  each grant solicitation. However, OJP was able to identify at least  10 grant programs subject to statutory restrictions on religious- based hiring. From these 10 programs, at least 1,113 grantees  were awarded grants, including 74 we identified as potential  FBOs.", "COPS identified four grant programs subject to statutory  restrictions on religious-based hiring. From these four programs,  57 grantees were awarded grants, none of which were potential  FBOs.", "Of the 117 potential FBOs we identified across the three agencies, nine  faith-based grantees, all of which were awarded DOJ grants, certified that  they were exempt from statutory restrictions on religious-based hiring  (see figure 1). These 9 grantees were, therefore, allowed to consider a  prospective employee\u2019s religious faith when making employment decisions in connection with the grant. DOL and HHS reported that none  of their grantees have sought exemptions from religious-based hiring  provisions.", "As shown in Table 1, 8 of the 9 faith-based grantees that certified that  they were exempt were awarded funding through DOJ grant programs  from fiscal years 2008 to 2010. The remaining exempted grantee  received a funding award in 2015. The total funding awarded to the 9  grantees was approximately $3.2 million, which is less than 1 percent of  the $804 million in grants that DOJ awarded that are subject to statutory  restrictions from fiscal years 2007 to 2015. DOJ reported that 8 of these  grantees received the awards on a noncompetitive basis because they  were identified for funding in a DOJ appropriation or accompanying  committee report."], "subsections": []}, {"section_title": "Exempted Faith-Based Grantees Stated that Hiring Staff to Assist with Grant Activities on the Basis of Religion Was Critical to Their Mission", "paragraphs": ["We interviewed 6 of the 9 grantees that certified that they were exempt  from religious-based hiring restrictions. Each of the 6 grantees that we  interviewed stated that: hiring individuals who share their religious beliefs to assist with grant  activities was critical to their mission and organizational success;  they include a \u201cstatement of faith\u201d on their organization\u2019s job  application form and ask the applicant to attest to the statement of  faith, or hired individuals of the same faith already employed within  their organization; and had the RFRA exemption not been available to them, they likely would  not have sought the grant or they would have had to seek executive- level approval within their organization to apply for the grant.", "At least 3 of the 6 grantees stated that they were a recipient of other  federal grant funding, but those grants were not subject to statutory  restrictions on religious-based hiring, and therefore did not require an  exemption to make hiring decisions based on religion. Based on grant  award documentation, 6 of the 9 grantees used the funding to provide  assistance to at-risk youth. However, other services that the remaining  grantees provided included first responder training and programs to  reduce homelessness, among others, and support and response efforts  for victims of sexual assault.", "As discussed earlier, we also selected 35 potential faith-based grantees  that received funding in fiscal years 2014 and 2015 and that agencies  reported had not filed a self-certification to be exempted from religious- based hiring restrictions. We interviewed 5 of these 35 grantees to  discuss, among other things, whether the grantees were familiar with the  exemption options. The five faith-based grantees said they did not recall  seeing information about the exemption option in the grant application or  grant award documentation, or were not looking for information about the  exemption because they were not considering religion in their hiring  decisions. Two of the faith-based grantees that did not certify as exempt  told us that, while they ask that the applicant have an understanding of  the traditions, culture, or languages of their religion, they do not require  applicants to share the same faith."], "subsections": []}]}, {"section_title": "Federal Agencies Primarily Use Grant Documentation to Notify Grantees of Restrictions on Religious-Based Hiring and Requirements for Demonstrating Eligibility for Exemptions", "paragraphs": [], "subsections": [{"section_title": "Agencies Notify Grantees of Statutory Restrictions on Religious-Based Hiring through Grant Materials that Identify Relevant Regulations", "paragraphs": ["DOJ, DOL, and HHS inform grant applicants and recipients of statutory  restrictions on religious-based hiring and processes for obtaining an  exemption from such restrictions through grant announcements. The  agencies also use additional methods that varied across all three  agencies for providing this information to grantees.", "DOJ specifically made this information available on agency web pages as  well as in the documentation that is provided to grant recipients. DOJ\u2019s  Center for Faith-Based and Neighborhood Partnerships has a web page  specifically for FBOs that have applied for or received grant funding.  This web page includes a list of Frequently Asked Questions, including  one that addresses hiring employees with federal grant funds. The Office  for Civil Rights within OJP also provides information on its web page  regarding how FBOs may certify that they are exempt from statutory  restrictions on religious-based hiring. Additionally, it includes a link to a  copy of DOJ\u2019s exemption certification form. We interviewed  representatives from four potential faith-based grantees that received a  DOJ grant in fiscal years 2014 or 2015 and did not certify for an  exemption. All four grantees said they could not recall seeing information  in the grant application or award documentation about the exemption  option or were not looking for it because they were not considering  religion in their hiring decisions.", "Similarly, DOL has a web page devoted specifically to explaining statutory  restrictions on religious-based hiring to faith-based grant applicants and  recipients, which also covers the process for seeking exemptions from the  restrictions. The web page makes reference to DOL\u2019s regulations  related to religious-based hiring by FBOs and also has a link to the June  2007 OLC opinion. Additionally, DOL has prepared a guidance  document\u2014available from its grants program overview web page\u2014that  explains in detail the process for seeking exemptions and how they are  reviewed and approved. A representative from the one potential FBO we  interviewed that received a DOL grant in fiscal years 2014 or 2015 but did  not certify that they were exempt could not recall seeing information about  the exemption option.", "Lastly, in addition to providing information in grant announcements, HHS  provides all SAMHSA grant applicants seeking funds for substance abuse  prevention and treatment services with a form that cites laws and  regulations governing religious organizations that receive SAMHSA  funding, including the regulation that outlines the exemption process.   HHS requires the applicants to sign the form, and in doing so, the  applicants are certifying that they are aware of and will comply with  applicable laws that allow FBOs to provide SAMHSA-funded services  without impairing their religious character and without diminishing the  religious freedom of those who receive their services."], "subsections": []}, {"section_title": "Agencies Rely on Grantees to Self-Certify that They Meet Eligibility Requirements for Exemptions from Statutory Restrictions on Religious- Based Hiring", "paragraphs": ["DOJ, DOL, and HHS all require grantees that seek to make employment  decisions based on religion to self-certify that they meet requirements to  be eligible for an exemption from statutory restrictions on religious-based  hiring, but vary in how they review and approve requests for exemptions."], "subsections": [{"section_title": "Department of Justice", "paragraphs": ["DOJ faith-based grantees that wish to demonstrate they are eligible for an  exemption from statutory restrictions on religious-based hiring must  complete and sign a \u201cCertificate of Exemption for Hiring Practices on the  Basis of Religion.\u201d If an applicant is awarded a grant, it must submit a  copy of the signed version of this form through DOJ\u2019s Grants  Management System. By signing the form, the grantee is certifying that:  federally-funded services will be offered to all qualified beneficiaries  without regard for the religious or nonreligious beliefs of those  individuals; activities that contain inherently religious content will be kept separate  from grant-related activities or offered to clients voluntarily; and  the organization believes that the services provided are an expression  of its religious beliefs, employing persons of a particular religion is  important to its mission, and not being able to hire such persons  would be a substantial burden to the organization.", "DOJ does not review these self-certification submissions to approve or  deny the requests. It only reviews them for any indication that the  applicant may not be an FBO, in which case DOJ officials said they would  follow up with the grantee to get clarification. Agency officials also said  DOJ would review any self-certifications as part of grantee compliance  reviews and in response to complaints from other parties. The self- certification form covers the entire grant award period, and can cover  multiple DOJ grants as long as all of the grant programs are subject to the  same statutory restrictions on religious-based hiring. There is no deadline  for submitting the self-certification and DOJ officials told us that while it is  understood that self-certifications should be submitted before grant funds  are dispersed, grantees do not need to do so."], "subsections": []}, {"section_title": "Department of Labor", "paragraphs": ["DOL faith-based grantees that wish to demonstrate they are eligible for  an exemption also self-certify, but are required to submit their request to  DOL for review and approval by the Assistant Secretary responsible for  issuing or administering the grant. In its request, the grantee must  certify that: providing the services to be funded by the grant is an exercise of its without the grant, its ability to provide the services funded by the grant  would be substantially diminished, and providing those services is  demonstrably tied to the recipient\u2019s religious beliefs; employing individuals of a particular religious belief is important to its  religious identity, autonomy, or communal religious exercise;  conditioning the grant award on compliance with the nondiscrimination  provision creates substantial pressure on it, in providing the services  being funded, to abandon its belief that hiring based on religion is  important to its religious exercise; and  it will comply with the requirements of 29 C.F.R. part 2, subpart D,  Equal Treatment in Department of Labor Programs for Religious  Organizations; Protection of Religious Liberty of Department of Labor  Social Service Providers and Beneficiaries.", "The Assistant Secretary\u2019s office then reviews exemption requests and  approves them or provides a reason for denial. DOL has instituted a 30- day deadline to reply back to the grant applicant with its decision. DOL  implemented this process in response to the 2007 OLC opinion. However,  agency officials said they have never used this process because, as  explained earlier in this report, DOL has not received any exemption  requests. They also told us exemptions are only valid for the grant award  period and new requests must be re-submitted if the grant is renewed.  However, an exemption can cover multiple grants to the same grantee as  long as those grants are received from the same DOL component. Lastly,  the officials said that grant funds can be disbursed before the grantee has  submitted an exemption request."], "subsections": []}, {"section_title": "Department of Health and Human Services", "paragraphs": ["HHS faith-based grantees seeking to demonstrate that they are eligible  for an exemption from statutory restrictions on religious-based hiring must  self-certify that they meet several requirements outlined in HHS  regulations. To demonstrate its eligibility for an exemption, a grantee  must certify that:  it sincerely believes employing individuals of a particular religion is  important to the definition and maintenance of its religious identity,  autonomy, and/or communal religious exercise;  it makes employment decisions on a religious basis in analogous  programs;  it believes the grant would materially affect its ability to provide the  type of services in question; and providing the services in question is expressive of its values or  mission.", "Grantees must then submit their self-certification to HHS requesting an  exemption, and maintain supporting justification documentation on file if  needed for future review. However, as explained earlier in this report,  there is currently only one HHS grant program that is subject to a  statutory restriction on religious-based hiring and for which FBOs are  eligible to be primary recipients\u2014the PATH program. We did not identify  any faith-based recipients of grants from this program from fiscal years  2007 through 2015, and HHS officials confirmed that no nonprofit entities  received any grants from the program during this time."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Labor, Justice,  and Health and Human Services. Although the agencies did not provide  formal comments, the Departments of Justice and Health and Human  Services did provide technical comments that we incorporated, as  appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time we will send copies of this report to the  Secretaries of Health and Human Services and Labor; the Attorney  General; and appropriate congressional committees. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  either Diana Maurer at (202) 512-8777 or maurerd@gao.gov; or Cindy  Brown Barnes at (202) 512-7215 or brownbarnesc@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Key contributors to this report are  listed in Appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mary Crenshaw, Adam Hoffman,  and Kristy Love (Assistant Directors); David Ballard; Dominick Dale;  Michele Fejfar; Melissa Hargy; Joel Marus; Heidi Nielson; Kelly Rolfes- Haase; and Katrina Taylor made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-226", "url": "https://www.gao.gov/products/GAO-18-226", "title": "National Security: Ongoing Review of the Military Selective Service Process Could Benefit from Additional Information", "published_date": "2018-01-10T00:00:00", "released_date": "2018-01-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Military Selective Service Act established the Selective Service System whose mission, among other things, is to be prepared to provide trained and untrained manpower to DOD in the event of a national emergency when directed by the President and the Congress. In the NDAA for FY 2017, Congress included a provision requiring that DOD submit a report on the current and future need for a centralized registration system under the Military Selective Service Act. In addition, the act established a Commission to review, among other things, the military selective service process and report on it.", "The act also included a provision for GAO to review DOD's procedures for evaluating selective service requirements. In this report, GAO compared the information DOD included in its report with the act's required elements and identified additional information that could benefit the Commission as it further reviews the military selective service process.", "GAO reviewed DOD's report and the statutory elements and interviewed officials involved in the military selective service process to identify additional information that could benefit the Commission's ongoing review."]}, {"section_title": "What GAO Found", "paragraphs": ["In its July 2017 report to Congress and the National Commission on Military, National, and Public Service (i.e., \u201cthe Commission\u201d), the Department of Defense (DOD) provided information regarding each of the six required reporting elements contained in the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017. Specifically, DOD provided information on:", "1. the direct and indirect benefits of the military selective service system;", "2. the functions performed by the Selective Service System that would be assumed by DOD in the absence of a national registration system;", "3. the systems, manpower, and facilities needed by DOD to physically mobilize inductees in the absence of the Selective Service System;", "4. the feasibility and the utility of eliminating the focus on the mass mobilization of primarily combat troops in favor of a system that focuses on the mobilization of military occupational specialties, and the extent to which such a change would impact the need for both male and female inductees;", "5. DOD's personnel needs in the event of an emergency requiring mass mobilization; an analysis of any additional critical skills that would be needed in the event of a national emergency; and a timeline for when DOD would require the first inductees to report for service; and", "6. a list of the assumptions used by DOD to conduct its analysis.", "GAO identified additional information that may benefit the Commission's ongoing evaluation of the military selective service process. The fifth required reporting element required DOD to analyze its personnel needs in the event of an emergency requiring mass mobilization and a timeline for obtaining these inductees. In response, DOD provided the personnel requirements and timeline that were developed in 1994 and that have not been updated since. DOD officials stated that they did not conduct additional analysis to update these requirements because the all-volunteer force is of adequate size and composition to meet DOD's personnel needs. In 2012, GAO recommended that DOD establish a process to periodically reevaluate DOD's requirements for the Selective Service System. Although DOD concurred with this recommendation, it has not yet implemented it. GAO believes this recommendation is still valid. Having updated DOD Selective Service System requirements and timelines for a potential draft may be useful in supporting the ongoing evaluation of the military selective service process by the Commission.", "Further, military service officials told GAO that their perspectives on how selective service processes that could affect them had not been solicited in the preparation of DOD's report. Since the military services are to receive, train and integrate the inductees; provide support to the Selective Service System during a national emergency; and could help identify critical skill sets needed to meet emerging demands and the impact a draft could have on meeting those demands, the military service officials' perspectives could be useful to the Commission. DOD officials stated that they are currently collecting these perspectives and plan to provide this information to the Commission."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any new recommendations. GAO believes its 2012 recommendation to DOD to periodically reevaluate its requirements for the Selective Service System, which DOD concurred with, is still valid. DOD had no additional comments on this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Military Selective Service Act established the Selective Service  System whose mission, among other things, is to be prepared to provide  trained and untrained manpower to the Department of Defense (DOD) in  the event of a national emergency when directed by the President and the  Congress. The Selective Service System, an independent executive  branch agency with a budget of about $25 million, maintains a registration  database of individuals who could be drafted into the service of our  nation, if needed, in the event of a national emergency.", "In 2012, we reported on the military necessity of the Selective Service  System and examined alternatives to its current structure. We found that  because of DOD\u2019s reliance and emphasis on using the all-volunteer force,  DOD had not reevaluated requirements for the Selective Service System  since 1994, even though the national security environment had changed  significantly since that time. In our report, we recommended that DOD (1)  evaluate DOD\u2019s requirements for the Selective Service System in light of  recent strategic guidance and report the results to Congress; and (2)  establish a process of periodically reevaluating DOD\u2019s requirements for  the Selective Service System in light of changing threats, operating  environments, and strategic guidance. DOD concurred with these  recommendations and in response implemented the first recommendation  in February 2013. At that time, the Principal Deputy Assistant Secretary of  Defense for Readiness and Force Management reported that it had  reevaluated the mission and military necessity for the Selective Service  System and concluded that the all-volunteer force was of adequate size  and composition to meet the department\u2019s demands, and that there were  no operational plans that envision mobilization at a level that would  require conscription. Additionally, the reevaluation showed that although  there was no longer an immediate \u201cmilitary\u201d necessity for the Selective  Service System, there continued to be a \u201cnational\u201d necessity for it  because it provides the structure that would allow the military services to  more rapidly increase their size if that became necessary. As of  November 2017, DOD had not implemented our second  recommendation, as discussed later in this report.", "The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017  established the National Commission on Military, National, and Public  Service (the \u201cCommission\u201d) to, among other things, review the military  selective service process. Composed of 11 members, the Commission is  to submit a report to the President and Congress no later than 30 months  after its establishment date on its findings, conclusions, and  recommendations regarding the need for a military selective service  process and a means by which to foster a greater propensity to serve  among U.S. youth, among other things. To inform the Commission\u2019s  efforts, the NDAA for FY 2017 also included a provision that the Secretary  of Defense report to Congress and the Commission on the current and  future need for a centralized registration system under the Military  Selective Service Act. Specifically, DOD\u2019s report was to address six  elements related to the Selective Service System process. DOD  submitted its report to Congress and the Commission in July 2017.", "The NDAA for FY 2017 also included a provision for us to review DOD\u2019s  procedures for evaluating selective service requirements. Specifically, we  compared the information that DOD included in its report with the act\u2019s six  required reporting elements and identified additional information that  could benefit the Commission in its ongoing review of the military  selective service process.", "To address our objective, we compared the six reporting elements  required by the NDAA for FY 2017 with the report DOD produced to meet  the congressional mandate. We also discussed with officials within the  Office of the Assistant Secretary of Defense for Manpower and Reserve  Affairs, who developed the report, what information they used and what  analysis they performed to support their responses to each of the  required reporting elements. Additionally, we examined documentary  evidence cited in the report or that was provided by officials. Further, we  interviewed officials with whom the Office of the Assistant Secretary of  Defense for Manpower and Reserve Affairs consulted to prepare the  report. Specifically, we met with officials from the Office of the Deputy  General Counsel for Personnel and Health Policy, the Joint Advertising  and Market Research Service, the Joint Staff, the U.S. Military Entrance  Processing Command, and the Selective Service System and discussed  the extent and nature of the information they provided and their  involvement in the development of the report. We also reviewed  documents, such as selected instructions, regulations, and  memorandums.", "To identify any additional information that could benefit the Commission in  its ongoing review of the military selective service process, we spoke with  officials in organizations responsible for operating and maintaining the  selective service process, as well as those that would be involved in any  mass mobilization if a draft were utilized, to discuss topics that they  thought the report had not addressed. Further, we spoke with personnel  officials from the Army, the Navy, the Air Force, and the Marine Corps to  obtain their assessment of DOD\u2019s report and their insights into the  selective service and mass mobilization processes. We also reviewed a  previously issued GAO report regarding the Selective Service System  and related documents to determine whether DOD had implemented all  applicable recommendations. Finally, we interviewed the Chair and the  two Vice-Chairs of the National Commission on Military, National, and  Public Service to obtain their perspectives on DOD\u2019s report.", "We conducted this performance audit from June 2017 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Military Selective Service Act established the Selective Service  System whose mission is to be prepared to provide trained and untrained  manpower to DOD in the event of a national emergency when directed by  the President and the Congress. Additionally, the Selective Service  System is to be prepared to implement an alternative service program  within the civilian community for registrants classified as conscientious  objectors during a draft. The Selective Service System is an independent  agency, and it maintains a database that includes the names, birthdates,  social security numbers, and mailing addresses of men ages 18 through  25 who could be drafted into the service of our nation, if needed, in the  event of a national emergency. Further, the Selective Service System  also is to conduct peacetime activities, such as public registration  awareness and outreach; responding to public inquiries about registration  requirements; and providing training and support to its workforce of  career, non-career, full-time and part-time employees, uncompensated  employees, and selected military personnel.", "The Military Selective Service Act does not currently authorize the use of  a draft for the induction of persons into the armed forces. In order to meet  a national emergency requiring a mass mobilization, Congress and the  President would be required to enact a law authorizing a draft to  supplement the existing force with additional military manpower. In the  event of a draft, the regulation governing the Military Entrance Processing  Stations would have the Under Secretary of Defense for Personnel and  Readiness, with input from the military services, provide the Director of  the Selective Service System with the number of personnel needed to be  drafted. The Selective Service System would then conduct a lottery and  send induction notices to selected draftees to supply the personnel  requested by the Secretary of Defense. Each draftee would be required to  report to one of DOD\u2019s 65 Military Entrance Processing Stations  throughout the country at a specific time and date to undergo  assessments of their aptitude, character, and medical qualifications in  order to determine whether they are fit for military service based on  standards set by each military service. Fully qualified draftees would  receive induction orders and would be transported from one of the Military  Entrance Processing Stations to the appropriate military service\u2019s entry- level training location. According to DOD, the Selective Service System  must deliver the first inductees within 193 days from when the President  and the Congress authorize a draft, and the military services then are to  train, equip, and accommodate in other ways the new inductees.", "The military services are generally smaller today than they have been in  many years. In fiscal year 2003, for example, DOD\u2019s total active military  end strength was approximately 1.5 million, while in fiscal year 2017 the  number was 1.38 million. Additionally, DOD\u2019s total workforce mix has also  changed. For example, in late 2003 DOD directed the military services to  convert certain military positions to federal civilian or contract positions  based on evaluations that showed that many military personnel were  being used to accomplish work that was not military essential and that  civilians could often perform these tasks in a more efficient and cost- effective manner than military personnel. In May 2013, we reported that  DOD officials stated that about 50,000 military positions were converted  to DOD federal civilian positions or to contractors since fiscal year 2004 in  order to devote more military positions to the support of ongoing military  operations.", "Under current law, women may serve voluntarily in the armed forces but  are not required to register with the Selective Service System. In the  1981 case of Rostker v. Goldberg, the Supreme Court of the United  States upheld the constitutionality of our nation\u2019s practice of registering  only men. Recognizing the purpose of registration was to prepare for a  draft of combat troops and since women were excluded from combat, the  Supreme Court ruled that Congress could exclude women from  registration. DOD gradually began to eliminate prohibitions on the  assignment of women to direct ground combat positions and on January  24, 2013, the Secretary of Defense and the Chairman of the Joint  Chiefs of Staff rescinded a 1994 rule preventing women from serving in  direct ground-combat positions and directed the military services to  open all closed positions and occupations to women by January 1, 2016.  In December 2015, the Secretary of Defense announced that all military  occupational specialties were open to women and removed all final  restrictions on the service of women in combat. As part of the  congressional notification process when DOD decided to open previously- closed positions and occupations to women, the department was required  to provide a detailed legal analysis of the implications of the proposed  change with respect to the constitutionality of the Military Selective  Service Act to men only. DOD\u2019s July 2017 report on the purpose and  utility of a registration system for military selective service stated that in  December 2015, DOD advised Congress that the opening of all positions  and occupations to women \u201cfurther alters the factual backdrop\u201d to the  Supreme Court\u2019s ruling on a challenge to the exemption of women from  selective service registration. However, the report stated that DOD took  no further stance on the legal issues raised by the then-Secretary of Defense\u2019s decision to open all military positions to women. Further, DOD  stated that it would consult with the Department of Justice as appropriate  regarding these issues."], "subsections": []}, {"section_title": "DOD Included Information on the Six Required Reporting Elements but Additional Information May Benefit the Commission\u2019s Ongoing Review", "paragraphs": [], "subsections": [{"section_title": "DOD Included Information on the Six Required Reporting Elements in Its Report", "paragraphs": ["DOD included information on each of the six required reporting elements  in its July 2017 report to Congress and the Commission on the purpose  and utility of a registration system for military selective service, as shown  in table 1. In preparing the report, officials within the Office of the  Assistant Secretary of Defense for Manpower and Reserve Affairs stated  that they coordinated and consulted with subject matter experts at the  Selective Service System and the Joint Staff as well as with officials from  selected organizations within the Office of the Secretary of Defense,  including the U.S. Military Entrance Processing Command. Further, the  DOD report references internal DOD documents, a policy publication from  the Congressional Research Service regarding Selective Service  issues, statements from former DOD executives, and publications from  contributing authors on web-based foreign policy and national security  discussion sites for additional support."], "subsections": []}, {"section_title": "Additional Information May Be Useful for the Commission\u2019s Ongoing Review of the Military Selective Service Process", "paragraphs": ["While DOD included information on the six required reporting elements in  its report, we identified additional information that may be useful in  supporting the ongoing review of the military selective service process by  the Commission. Specifically, based on our review of DOD\u2019s report and  our prior work, the Commission could benefit from additional information  on (1) DOD\u2019s requirements and timelines for the induction of individuals  into the military services who are selected through a draft, and (2) the  perspectives of the military services on the military selective service  processes.", "First, one of the six required reporting elements in the NDAA for FY 2017  required DOD to provide a detailed analysis of its personnel needs in the  event of an emergency requiring a mass mobilization, along with a  timeline for obtaining these inductees. In response, DOD provided the  personnel requirements and a timeline that was developed in 1994 and  that have not been updated since. These requirements state that, in the  event of a draft, the first inductees are to report to a Military Entrance  Processing Station in 193 days and the first 100,000 inductees would  report for service in 210 days. DOD\u2019s report states that the all-volunteer  force is of adequate size and composition to meet DOD\u2019s personnel  needs and it has no operational plans that envision mobilization at a level  that would require a draft. Officials stated that the personnel requirements  and timeline developed in 1994 are still considered realistic. Thus, they  did not conduct any additional analysis to update the plans, personnel  requirements, or timelines for responding to an emergency requiring  mass mobilization. Further, they said that they were limited in the amount  of time that they were given to respond to the congressional mandate and  that they believed it would be most helpful to produce a report that  provided basic information that could serve as a starting point for the  Commission to begin a more in-depth review of the military selective  service process. As previously discussed, in 2012, we reported that  changes in the national security environment require DOD and the  services to reassess their force structure requirements, including how  many and what types of units are necessary to carry out the national  defense strategy. We reported that these changes represented  junctures at which DOD could systematically reevaluate service  personnel levels to determine whether they are consistent with strategic  objectives. As such, we recommended that DOD establish a process of  periodically reevaluating DOD\u2019s requirements for the Selective Service  System in light of changing operating environments, threats, and strategic  guidance. Since DOD did not perform additional analysis to reevaluate its  requirements or timelines for obtaining inductees to respond to this  mandate and the most recent requirements were determined based on  assumptions developed in 1994, we continue to believe our 2012  recommendation is valid. An updated analysis would also benefit the  Commission by informing their study and recommendations.", "Second, the military service officials that we met with told us that their  perspectives on the selective service processes that would affect them  had not been solicited in the preparation of DOD\u2019s report. For example,  while the military services are responsible for training inductees upon  their mobilization and integrating them into the force, service officials  expressed concerns to us regarding whether, for example, they would  have the training facilities, uniforms or funding to receive, train, equip, and  integrate a large influx of inductees in the event of a draft. Additionally,  the services are expected to provide support to the Selective Service  System during a national emergency. A 1997 memorandum of  understanding between the Selective Service System and DOD indicates,  among other things, that the Department of the Army will provide 1,500  enlisted Army retirees to augment the Selective Service System within 72  hours after a draft is initiated. According to officials within the Office of the  Under Secretary of Defense for Personnel and Readiness-Military  Personnel Policy, this memorandum of understanding was reviewed and  revalidated in 2014. However, Army officials told us that they believed  some of their service-specific procedures might require updates  identifying individuals to augment the Selective Service System\u2019s staff,  especially the retired personnel that would need to be recalled to duty.  They thought it would be beneficial for officials within the Office of the  Secretary of Defense to conduct a thorough, top-down review, and lead  an update of service instructions related to supporting a draft to ensure  the services are prepared to provide their share of personnel if needed.  These Army officials said, however, that their higher Army headquarters  saw no operational reason to review their policies and procedures related  to mass mobilization given that DOD has no operational plans that  envision mobilization at a level that would require a draft.", "As discussed previously in this report, DOD\u2019s workforce mix has been  changing. For example, over the last decade, the use of unmanned aerial  systems has emerged as an integral part of warfighting operations and  the demand for their use has outpaced the Air Force\u2019s ability to produce  pilots to operate them. Additionally, each of the services has reported  critical skill gaps in such areas as various military medical specialties.  Further, challenges exist in identifying cyber capabilities of all National  Guard units, as required by law, which could be used for the support of a  cyber-related emergency. Officials from the Office of the Under  Secretary of Defense for Personnel and Readiness-Military Personnel  Policy stated that critical skills identified as necessary today may not be  the critical skills needed in future crises. Additionally, they said that  creating and maintaining tools, such as databases of individuals with  these needed critical skills, is costly and may become outdated quickly.  We agree that the requirements for critical skills will evolve over time;  however, any discussion of a draft using the selective service process\u2014 as presented in DOD\u2019s July 2017 report\u2014that focuses on specific military  occupational specialties would benefit from the perspectives and input of  officials from the military services and the impact a draft may have on  meeting those demands. Specifically, these officials would be helpful in  identifying the needed critical skill sets for their emerging mission  demands and the impact a draft may have on meeting those demands.", "DOD officials within the Office of the Assistant Secretary of Defense for  Manpower and Reserve Affairs stated that they are currently collecting  the perspectives of the military services on the selective service process  and plan to provide this information to the Commission. DOD officials explained that they did not incorporate information from the military  services into their report because DOD\u2019s involvement in any potential  decision to initiate and implement a draft is mostly centralized within the  Office of the Secretary of Defense, not within the individual military  services. They further stated that information regarding the level of  additional personnel that would be needed using a draft in the event of a  national emergency comes from the war plans that are developed and  maintained by the Joint Staff. Additionally, they said that they primarily  produced a report that characterized the overall processes and was a  factual account of how DOD interacts with various aspects of the  Selective Service System.", "Another provision within the NDAA for FY 2017 required the Secretary of  Defense and other Cabinet-level government officials, along with any  experts designated by the President, to submit to the Commission and  Congress recommendations for the reform of the military selective service  process not later than 7 months after the Commission\u2019s establishment  date. To accomplish this, officials from the Office of the Assistant  Secretary of Defense for Manpower and Reserve Affairs said that they  initially developed a questionnaire on which the Commission provided  feedback. These officials stated that they sent it to 18 organizations,  including the Cabinet positions listed in the act and to additional  organizations that were recommended by the National Security Council or  that had some role or responsibility in the event of a draft. In order to  produce the Secretary of Defense\u2019s submission, these officials further  stated that they requested each of the military services and the Joint Staff  to complete the questionnaire by November 2017. Further, these officials  viewed the questionnaire as an opportunity for the respondents\u2014the  military services in the case of DOD\u2014to provide their ideas regarding  military selective service processes, both current and future."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In an  email, the Director of Accession Policy within the Office of the Deputy  Assistant Secretary of Defense for Military Personnel Policy stated that  the military services concurred with the report and DOD had no additional  comments.", "We are sending copies of this report to the appropriate congressional  committees; the National Commission on Military, National, and Public  Service; the Secretary of Defense; the Acting Assistant Secretary of  Defense for Manpower and Reserve Affairs; the Commander, U.S.  Military Entrance Processing Command; the Secretaries of the Army, the  Navy, and the Air Force; the Commandant of the Marine Corps; and the  Director, Selective Service System. 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) 512-3604 or farrellb@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 I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kimberly Seay, Assistant  Director; Rebecca Beale; Vincent Buquicchio; Mae Jones; Kevin Keith;  Jordan Mettica; and Amber Sinclair made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-454", "url": "https://www.gao.gov/products/GAO-18-454", "title": "Coast Guard Acquisitions: Actions Needed to Address Longstanding Portfolio Management Challenges", "published_date": "2018-07-24T00:00:00", "released_date": "2018-07-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Coast Guard spends billions of dollars on its major acquisition programs to meet its missions. GAO's prior work has identified the Coast Guard's reliance on its annual budget process to manage its acquisition portfolio as a challenge.", "GAO was asked to review the recapitalization of the Coast Guard's acquisition portfolio. This report assesses, among other topics, the extent to which the Coast Guard has made changes to how it manages its acquisition portfolio.", "GAO assessed Coast Guard's major acquisition programs to determine changes since GAO's 2014 portfolio review. GAO analyzed program baselines and interviewed Coast Guard officials. GAO analyzed the CIP for fiscal years 2014 through 2018, and reviewed the EOC's documentation."]}, {"section_title": "What GAO Found", "paragraphs": ["The Coast Guard, a component within the Department of Homeland Security (DHS), continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan (CIP)\u2014congressionally mandated and used for oversight. This management approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. Further, Coast Guard officials said the CIP reflects the highest priorities of the department\u2014such as the Offshore Patrol Cutter, which is the Coast Guard's highest priority\u2014and that trade-off decisions are made as part of the annual budget process. However, the effects of these decisions, such as which acquisitions would take on more risk so others can be prioritized and adequately funded, are not communicated in the CIP to key decision makers, because including such information is not statutorily required. Over the years, this approach has left the Coast Guard with a build up\u2014or bow wave\u2014of near-term unfunded acquisitions, negatively affecting recapitalization efforts and limiting the effectiveness of long-term planning. Including the effects of these trade-offs in the CIP would align with GAO's cost estimating best practices. Until it does so, the Coast Guard limits its ability to manage its acquisition portfolio in the long-term, beyond the time covered in the 5-year CIP.", "In response to a September 2012 GAO recommendation, the Coast Guard updated the Executive Oversight Council's (EOC)\u2014a cross-directorate group that oversees major acquisition programs\u2014charter in 2014 to require annual reviews of the acquisition portfolio collectively. However, EOC officials said that these annual reviews never occurred, and GAO found that the annual review requirement was removed from the charter in 2017. Thus, the Coast Guard is without a senior-level group charged to collectively review and ensure affordability of its acquisition portfolio. The Office of Management and Budget's Capital Programming Guide states that a senior-level executive committee should be responsible for reviewing the agency's entire asset portfolio and for making decisions on the proper composition of assets needed to achieve strategic goals within budget constraints."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the annual CIPs reflect acquisition trade-off decisions and their effects, and that the EOC review the overall acquisition portfolio and its affordability annually. DHS concurred with the CIP recommendation. DHS did not concur with the EOC recommendation. It noted that other existing Coast Guard bodies are responsible for evaluating and prioritizing funding. However, DHS stated that the EOC charter will be updated to require it to review the overall acquisition portfolio, including long-term planning. If this long-term planning accounts for budget realities for the acquisition portfolio, GAO believes the intent of the recommendation will be met."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 1996, the Coast Guard\u2014a component within the Department of  Homeland Security (DHS)\u2014has been acquiring a portfolio of new surface  and aviation assets as part of a multibillion-dollar recapitalization effort\u2014 replacing assets that have reached or will soon reach the end of their  service lives. These assets are intended to conduct missions that range  from illegal drug and migrant interdiction to search and rescue operations.  For more than 15 years, we have reported extensively on the Coast  Guard\u2019s portfolio of major acquisition programs and its risks and  uncertainties. In our prior work, we found shortcomings in the Coast  Guard\u2019s acquisition planning practices, such as its reliance on the annual  budget process to plan major acquisitions without a thorough plan to  ensure the affordability of the entire acquisition portfolio. This approach  has resulted in delayed acquisitions and reduced capabilities. In  September 2012, we recommended that the Coast Guard conduct a  comprehensive portfolio review to focus on acquisition priorities.", "Although DHS agreed with our recommendation at the time, as of  October 2017 it had not yet been implemented.", "Subsequently, in June 2014, we recommended that the Coast Guard  develop a 20-year fleet modernization plan to aid in identifying the assets  that need to be recapitalized, the resources required, and the trade-offs  necessary given fiscal constraints. DHS agreed with our  recommendation but the Administration has not yet approved a 20-year  plan.", "Delayed acquisitions have also strained existing Coast Guard resources.  Specifically, older assets in the fleet\u2014such as the 210-foot and 270-foot  Medium Endurance Cutters and Polar Star (heavy icebreaker)\u2014have  become more expensive to maintain as they continue to operate well  beyond the estimated service life dates determined when they were built.", "You asked us to review the Coast Guard\u2019s acquisition portfolio. This  report assesses (1) the extent to which the Coast Guard has made  changes to how it manages its acquisition portfolio and (2) how the Coast  Guard is sustaining existing assets until new assets become operational.", "To assess the extent to which the Coast Guard has changed how it  manages its acquisition portfolio, we assessed the Coast Guard practices  for managing the portfolio\u2019s affordability through long-term planning to  determine how it has changed since our last Coast Guard acquisition  portfolio review in 2014. We analyzed the Coast Guard\u2019s 5-year Capital  Investment Plans (CIP) that supported the budget requests for fiscal  years 2014 through 2018 to determine how the Coast Guard has  managed the affordability of its acquisition portfolio. We compared Coast  Guard practices for managing affordability and long-term planning with  best practices outlined in GAO\u2019s Cost Estimating and Assessment Guide  and prior GAO reports. We also reviewed a range of acquisition  programs based on if they were already major acquisition programs  (programs with a life-cycle cost estimate greater than or equal to $300  million or a total acquisition cost greater than or equal to $100 million) by  definition, the programs were part of our 2014 review, or they are likely to  be major acquisition programs that will require significant funding in the  near future. We reviewed charters for the Coast Guard\u2019s various cross  directorate groups that help oversee Coast Guard acquisitions to identify  responsibilities and membership, and conducted interviews with officials  from these bodies to better understand their portfolio oversight activities.  We also interviewed Coast Guard officials to ascertain the anticipated  content of the 20-year Long-term Major Acquisitions Plan.", "To assess how the Coast Guard is sustaining existing assets until new  assets become operational, we selected and reviewed assets that were at  or approaching their end of design service lives\u2014an estimated period  before the asset reaches obsolescence\u2014and if the Coast Guard was  planning to extend their design service lives through a Service Life  Extension Project. We collected and analyzed program documentation on  asset operational availability and mission capability, sustainment needs  and maintenance history, and plans for extending the service lives of  selected assets. We assessed Coast Guard expenditures on depot-level  maintenance\u2014which, according to the Coast Guard, is maintenance that  is beyond the capability of the crew of a cutter or other asset\u2014for fiscal  years 2010 through 2017 for legacy assets, and compared them with  annual funding estimates for those assets. Appendix I contains more  information regarding our scope and methodology.", "We conducted this performance audit from March 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of Coast Guard\u2019s Major Acquisition Programs", "paragraphs": ["As of March 2018, the Coast Guard\u2019s portfolio of major acquisitions has  10 programs, 2 more than during our June 2014 review, when the Coast  Guard had 8 major acquisition programs (see figure 1). DHS defines  major acquisition programs as those with life-cycle cost estimates of at  least $300 million.", "Appendix II provides information on the programs included in the Coast  Guard\u2019s major acquisition portfolio in 2018.", "Programs in the acquisition portfolio progress through a series of four  acquisition phases, accompanied by a series of acquisition decision  events (ADE), outlined in the DHS\u2019s acquisition life-cycle framework  (acquisition process). Figure 2 depicts the acquisition process."], "subsections": []}, {"section_title": "Oversight of the Coast Guard\u2019s Acquisition Portfolio", "paragraphs": ["The Coast Guard currently has three cross-directorate groups that include  members from the acquisitions, resources, and requirements directorates  and are responsible for addressing and overseeing issues across the  Coast Guard. Since 2011, these three groups\u2014the Executive Oversight  Council, the Systems Integration Team, and the Resource Councils\u2014 have helped oversee the Coast Guard\u2019s acquisition portfolio. Table 1  provides information on the roles and responsibilities of these three  groups.", "Each of these groups has a charter to identify its purpose and scope of  responsibilities, which involve providing cross-directorate representation  and information on all of the acquisition programs to help manage its  portfolio. The Coast Guard updated the roles and responsibilities for two  of its cross-directorate groups in its Major Systems Acquisition Manual,  including how the groups are to interact and work together within the  established acquisition governance framework. For example, the  Resource Councils are to serve as advisors to the senior-level Executive  Oversight Council. Each of the Resource Councils is to report directly to  the Executive Oversight Council for issues within its own domain and  report to the Systems Integration Team for issues that cross domains.  The Executive Oversight Council oversees the acquisition governance  framework and is positioned to delegate tasks to the other two cross- directorate groups or obtain information from them to assist in the  management of acquisitions to address problems related to acquisitions."], "subsections": []}, {"section_title": "Asset Service Life and Maintenance of Legacy Assets", "paragraphs": ["Coast Guard assets are developed with a specific design service life.  According to Coast Guard officials, the design service life for aircraft is  established as a maximum number of flight hours; while for cutters, the  design service life is the number of years the cutter is expected to operate  based on contractual design requirements.", "An asset\u2019s design service life can be extended through major  maintenance events, such as Service Life Extension Projects (SLEP).  SLEPs are funded with the Coast Guard\u2019s acquisition, construction, and  improvements appropriation account whereas routine depot-level  maintenance is funded with the Coast Guard\u2019s operating expenses  appropriation account. SLEPs address specific systems and major  maintenance to extend the service life of an asset beyond the original  plan. A SLEP is not designed to increase an asset\u2019s capability; it extends  the service life by replacing obsolete, unsupportable, or maintenance- intensive equipment. Table 2 provides more details about the design  service life and maintenance history of select legacy assets."], "subsections": []}, {"section_title": "Prior GAO Reviews", "paragraphs": ["We have issued several reports since 2012 on the Coast Guard\u2019s  management of its acquisition portfolio and the oversight of its depot-level  maintenance resources. We have made several recommendations in  these reports. For example, in September 2012, we found a mismatch  between resources needed to support all approved major acquisition  program baselines and expected funding levels. This resulted in the  Coast Guard requesting funding for programs as a part of its annual  budget process below the levels identified in programs\u2019 life-cycle cost  estimates, resulting in a bow wave of future funding requirements. At  the time, DHS and the Coast Guard acknowledged this resource  challenge, but we found they had not developed a clear strategy for  moving forward. At that time, DHS officials stated that funding variability  results in inevitable trade-off decisions being made on an annual basis.  We recommended that the Coast Guard conduct a comprehensive  portfolio review to develop revised baselines that reflect acquisition  priorities as well as realistic funding scenarios. DHS concurred with our  recommendation. Since 2014, the Coast Guard has undertaken efforts to  address this issue, but, as of October 2017, we found these efforts have  not led to the significant trade-off decisions needed to improve the  affordability of the Coast Guard\u2019s portfolio.", "Additionally, in September 2012, we found that the Coast Guard had  established an acquisition governance framework and that the Executive  Oversight Council was well positioned to receive information from other  cross-directorate groups in order to manage the acquisition portfolio.  However, while the Executive Oversight Council had been active in  overseeing individual programs, it had not met to oversee the portfolio  collectively. Officials told us at that time that the portfolio oversight was  done through the annual budget process. We found this approach to  managing portfolio affordability was ineffective and facilitated immediate  trade-offs, and did not provide the best environment to make decisions in  developing a balanced long-term portfolio. We recommended that the  Coast Guard identify the Executive Oversight Council as the governing  body to oversee the Coast Guard\u2019s acquisition enterprise with a portfolio  management approach. In addition, this council should supplement  individual program reviews with acquisition portfolio-wide reviews to make  performance and affordability trade-off decisions that will help ensure the  Coast Guard is acquiring a balanced portfolio to meet mission needs.  DHS concurred and the Coast Guard updated the Executive Oversight  Council\u2019s charter in 2014 to require the group to annually oversee the  acquisitions collectively as a balanced long-term and affordable portfolio.", "Similarly, in June 2014, we found that the Coast Guard had repeatedly  delayed and reduced its capabilities through its annual budget process  and did not know the extent to which it would meet mission needs and  achieve desired results. We reported that this was because the Coast  Guard did not have a long-term fleet modernization plan that identified all  acquisitions needed to meet mission needs over the next 20 years within  available resources. We recommended that the Coast Guard develop a  20-year fleet modernization plan that identifies all acquisitions needed to  maintain the current level of service and the fiscal resources necessary to  build the identified assets. We recommended this plan consider trade-offs  in cases where the fiscal resources needed to execute the plan are not  consistent with annual budgets. DHS concurred, but, according to Coast  Guard officials, the plan has yet to be approved.", "In addition to reporting on the Coast Guard\u2019s management of its  acquisition portfolio, we have also issued several reports on how it  oversees depot-level maintenance funding. For example, in July 2012, we  found that the Coast Guard\u2019s depot-level maintenance cost-estimating  process did not fully reflect best practices. We recommended that the  Coast Guard conform its estimated depot-level maintenance expenditures  with cost-estimating best practices. DHS concurred; however, it raised  several points that we found could limit the implementation of the  recommendation. DHS stated, for example, that cost-estimating best  practices are most applicable for new acquisitions. As our report noted,  our cost-estimating best practices guide is intended to be applicable to  programs and assets in all stages of their life cycles, including  maintenance and support.", "Additionally, in March 2017, we found that the cost estimates were not  adjusted or updated over the course of an asset\u2019s service life, leading to a  large discrepancy between expected and actual annual depot-level  maintenance expenditures. We recommended that the Coast Guard  periodically update standard support levels, which are annual estimates  for depot-level maintenance over the course of an asset\u2019s life cycle, to  account for actual expenditures. DHS concurred with our  recommendation and plans to complete actions to implement it by  December 2018."], "subsections": []}]}, {"section_title": "Effectiveness of the 5-Year Capital Investment Plan Is Limited and Coast Guard Does Not Review Its Acquisition Portfolio Collectively", "paragraphs": ["The Coast Guard\u2019s 5-year CIP, a congressionally mandated report, does  not fully reflect cost realities or acquisition needs. For example, the most  recent CIP\u2014from fiscal years 2018 through 2022\u2014projects funding for its  portfolio of major acquisitions that, over the 5-year period, exceeds  average budget requests in the last several years. As such, we found that  the Coast Guard continues to face the same programmatic risks that  annual CIP-based planning perpetuates, similar to what we have been  reporting since 2011. To address funding constraints, the Coast Guard  has been in a reactive mode by making prioritization decisions through  the annual budget process without identifying how trade-off decisions  made in the current budget cycle will affect the future of the acquisition  portfolio. As a result of this planning process, and as we found in 2012  and in this current review, the Coast Guard has continued to defer  planned acquisitions to future years and left a number of operational  capability gaps unaddressed that could affect future operations.  Moreover, the Coast Guard has not conducted portfolio-wide oversight  through its cross-directorate groups."], "subsections": [{"section_title": "Coast Guard CIP-based Planning Has Shortcomings That Limit Its Effectiveness", "paragraphs": ["The 5-year CIP is the Coast Guard\u2019s key acquisition portfolio planning  tool. However, since 2011, we have reported on shortcomings that limit its  effectiveness. As required by statute, the Coast Guard prepares a 5-year  CIP that is required to be updated and submitted annually with the  administration\u2019s budget request. This 5-year CIP provides information  on the proposed budget for the upcoming fiscal year and the following 4  fiscal years. Coast Guard officials told us the 5-year CIP is the starting  point for developing the acquisition, construction, and improvements  budget for a given year, which funds asset acquisitions as well as major  sustainment projects and infrastructure investments. Officials also  indicated that operational commanders provide input for the budget, as do  senior Coast Guard officials for operations, resources, and others who  have a role within its resource governance construct.", "As we have previously found, the Coast Guard\u2019s 5-year CIPs continue to  demonstrate a pattern of certain planning practices, to include: not identifying priorities or trade-offs between acquisition programs  and not showing the effect of current decisions on the overall  affordability of the acquisition portfolio; projecting funding levels for the current budget year that do not reflect  the full extent of the Coast Guard\u2019s projected acquisition needs; and projecting funding levels for future years that frequently surpass the  average funding amounts requested by the Coast Guard in recent  years.", "These shortcomings limit the Coast Guard\u2019s ability to manage the  affordability of its acquisition portfolio. Coast Guard officials said the CIP  reflects the highest priorities of the department within the given top  funding level and that prioritization and trade-off decisions are made as  part of the annual budget cycle. However, these decisions, and the  resulting impacts on affected programs, are not articulated in the CIPs.  While the Coast Guard is not required under statute to identify the effects  of trade-off decisions in the CIP, failing to show which acquisitions would  take on more risk so other acquisitions can be prioritized and adequately  funded within budget parameters also makes it difficult for Congress and  other stakeholders, such as DHS and the Office of Management and  Budget (OMB), to understand other options the Coast Guard considered.  GAO\u2019s Cost Estimating and Assessment Guide states that comparative  analyses showing facts and supporting details among competing  alternatives, such as budget priorities, should consider trade-offs needed  to identify solutions and manage risk. Our past work has also  highlighted other best practices for portfolio management, such as  demonstrating comprehensive knowledge of the portfolio, including  needs, gaps, and how to address those gaps; prioritizing investments  through alignment of requirements, acquisition, and budget processes;  and use of long-term planning.", "As we found in September 2012, the Coast Guard\u2019s approach of relying  on the annual budget process to manage portfolio affordability does not  provide the best basis for making decisions to develop a more balanced  and affordable portfolio in the long-term. In June 2014, we also found  that there is no evidence that short-term budget decisions will result in a  good long-term strategy, and the Coast Guard\u2019s annual budget-driven  trade-off approach creates constant churn as program baselines must  continually re-align with budget realities instead of budgets being  formulated to support program baselines. This results in trade-off  decisions between capability and cost being pushed into the future. For  example, the Coast Guard has a stated requirement for three medium  icebreakers and three heavy icebreakers, and has initiated an acquisition  program for heavy icebreakers. Assets acquired under this program will  replace the Coast Guard\u2019s only operating heavy icebreaker\u2014the Polar  Star\u2014which is well past the end of its original design service life. The  Coast Guard currently plans to have the three heavy icebreakers  delivered in 2023, 2025, and 2026. Additionally, the Coast Guard  operates one medium icebreaker, the Healy, which has an expected end  of service life in 2029. Despite the requirement for three medium  icebreakers, Coast Guard officials said they are not currently assessing  acquisition of the medium polar icebreakers because they are focusing on  the heavy icebreaker acquisition and plan to assess the costs and  benefits of acquiring medium polar icebreakers at a later time.", "This planning approach can also lead to delayed capabilities and program  risks, as the 5-year CIP does not prioritize acquisition programs in its  projections for the 5-year period. We found in 2017 that both acquisition  needs\u2014as articulated in program baselines\u2014as well as the 5-year CIP\u2019s  funding projections frequently surpass the average requested funding  amounts in recent years. Similarly, in this review, we found this to be the  case in the 5-year CIP covering fiscal years 2018 through 2022.", "Congressional appropriations for Coast Guard acquisition, construction,  and improvements in fiscal years 2013 through 2018 exceeded the Coast  Guard\u2019s requests. Explanatory materials on the annual appropriations  acts for these fiscal years indicated, among other things, that funding was  provided above requested amounts for procurement of one HC-130J  aircraft each year. The House Committee on Appropriations report  accompanying the Homeland Security appropriations bill for 2018 noted  that the Secretary is expected to include adequate funding in the fiscal  year 2019 budget request to normalize the recapitalization of the HC-130  fleet. Recent annual appropriations acts also direct the use of funds to  contract for three National Security Cutters that were not a part of the  program of record for the fleet of these cutters.", "Absent any additional funding appropriated by Congress above Coast  Guard requests, the acquisition portfolio put forth in the fiscal year 2018  CIP will not be affordable by fiscal year 2019 based on average recent  budget requests. Figure 3 shows aggregate projected funding for various  major Coast Guard acquisitions over the fiscal year 2018 through 2022  CIP, along with average budget requests and appropriations from fiscal  years 2014 through 2018.", "Further, the previous Commandant of the Coast Guard testified in  November 2017 that an annual acquisition budget of $2 billion is needed  to modernize the fleet and address other critical priorities, such as the  recapitalization of the Coast Guard\u2019s icebreaker fleet. However, the  fiscal year 2018 through 2022 CIP, dated October 2017, does not reflect  this need for any year in its 5-year budget window. By not providing  comprehensive information in the CIP on the acquisitions needed to  perform its missions as well as the trade-offs necessary at different  funding levels, the Coast Guard is not providing decision makers,  including those in Congress, information to help decide which programs  are the highest priority and which funding increases may or may not be  consistent with the Coast Guard\u2019s programs of record, as approved by  DHS. For example, even though recent annual appropriations acts direct  the use of funds to contract for three additional National Security Cutters,  the Coast Guard had not identified a need for these cutters as they were  not part of the original program of record."], "subsections": [{"section_title": "Coast Guard Is Developing a 20-Year Long-term Major Acquisitions Plan", "paragraphs": ["The Coast Guard has initiated the development of a 20-year Long-term  Major Acquisitions Plan, but it is incomplete as of March 2018. According  to Coast Guard officials, the Coast Guard\u2019s efforts were in response to  Congressional direction in 2016. In February 2016, Congress directed  that the Coast Guard develop a Long-term Major Acquisitions Plan to  cover the upcoming 2017 fiscal year, and for each of the 20 fiscal years  thereafter, and stated that it should be updated every 2 years.  Specifically, each plan is to include the following: (1) the number and  types of cutters and aircraft to be decommissioned; (2) the number and  types of cutters and aircraft to be acquired to replace the cutters and  aircraft or address an identified capability gap; and (3) the estimated level  of funding in each fiscal year required to acquire the cutters, aircraft, and  command and control systems as well as acquire, construct, or renovate  shore-side infrastructure.", "As of November 2017, officials told us that the Coast Guard was  developing a 20-year Long-term Major Acquisitions Plan that specifically  focused on its highest priority recapitalization and sustainment efforts for  its assets and will focus on meeting the intent of the 2016 congressional  mandate. These officials said that the plan will also be based on the  Coast Guard\u2019s 5-year CIP and will contain the necessary sustainment  activities for current assets, according to service life limitations and  recapitalization efforts for assets that reach the end of their service lives.  Coast Guard officials stated that the plan will not be a budget document,  but rather an overall planning document for future budgets. As of March  2018, the Coast Guard had not completed this long-term plan."], "subsections": []}]}, {"section_title": "Coast Guard Made Progress in Reducing Cost of the Portfolio but Reactive Planning Has Created Impending Surge of Unfunded Acquisitions", "paragraphs": ["Since our 2014 review, the Coast Guard has generally demonstrated  improved fiscal management of the major programs in its acquisition  portfolio and made progress in acquiring the assets in the portfolio. At that  time, we found that program cost increases were consuming significant  amounts of funding, and the Coast Guard was further from fielding its  planned fleet than it was in 2009, in terms of the fiscal resources needed  to finish those programs\u2014or the remaining investment required. Since  2014, program costs have generally been stable and, from 2014 to 2018,  the Coast Guard reduced the remaining investment required to complete  those acquisitions by $4.9 billion or 24 percent (see table 3).", "However, while the Coast Guard has reduced the remaining investment  required to complete its acquisition portfolio, there is little room for  additional major acquisitions based on recent budget requests. For  example, the National Security Cutter and Fast Response Cutter\u2014two of  the Coast Guard\u2019s most expensive acquisitions programs\u2014both  experienced delays and were not delivered as originally scheduled. As a  result, these delays stretched its acquisition budget longer than intended.  Going forward, our analysis indicated that once the Coast Guard begins  funding construction of Offshore Patrol Cutters\u2014another major  acquisition program critical in replacing vessels well past their service  lives\u2014that program is expected to consume a significant portion of the  Coast Guard\u2019s planned acquisition, construction, and improvements  budget between 2018 and 2032, also raising uncertainties in how the  Coast Guard will be able to fund other priorities.", "According to the previous Commandant of the Coast Guard, the Offshore  Patrol Cutter is the Coast Guard\u2019s top priority and, as such, the Coast  Guard will prioritize its budget requests for the Offshore Patrol Cutter  before other assets, potentially limiting funds requested for other  acquisition programs. This approach will limit the portfolio for the  foreseeable future and affect other new programs, such as the Heavy  Polar Icebreaker and Waterways Commerce Cutter. These two programs  represent critical needs for the Coast Guard, as the legacy assets they  are intended to replace are well past their designed service lives, but  there are limited resources for them if acquisition of the current portfolio is  to be completed as scheduled.", "The polar icebreaker program has an estimated total acquisition cost  of more than $3 billion and, according to the Coast Guard, is needed  to alleviate a potential icebreaking mission capability gap. Heavy  icebreakers are needed, as Coast Guard officials also indicated, to  provide year-round access to the Polar Regions, including the  clearance of a navigable channel for access to the National Science  Foundation\u2019s McMurdo Research Station on Ross Island, Antarctica  as well as to facilitate other national security interests in polar waters.  DHS approved the icebreaker program for entry into the obtain phase  of the acquisition process in March 2018. The Coast Guard\u2014in  partnership with the Navy\u2014is expected to award a contract for design  and construction of up to 3 heavy polar icebreakers by June 2019,  and plans for the first icebreaker to be delivered by the end of fiscal  year 2023. We recently reported on this program in April 2018 and  have an ongoing review that is expected to be completed by summer  2018.", "DHS recently approved a new program, known as the Waterways  Commerce Cutter program, to recapitalize aging vessels such as its  fleet of 35 Inland Tenders (river, buoy, and construction tenders). The  assets in the current fleet continue to age beyond their expected  service lives and the Waterways Commerce Cutter program is  currently in the analyze/select phase of the acquisition process. Coast  Guard officials said they are still determining how many new vessels  are needed to provide capabilities similar to the current fleet of  vessels that replace or relocate river buoys and builds fixed aids to  navigational marine structures. A life-cycle cost estimate has not yet  been developed for this program, but, according to Coast Guard  officials, the preliminary rough order of magnitude estimate for total  acquisition cost is $1.1 billion.", "As we reported in July 2017, the Coast Guard has no method in place to  capture the effects of deferred acquisitions on its future portfolio. The  lack of a long-term plan, as discussed earlier, and determining priorities  and making trade-off decisions based on the annual budget have put the  Coast Guard in a reactive planning mode each year. We found that this  type of reactive planning and the Coast Guard\u2019s constrained budget  environment have created a bow wave of near-term unfunded  acquisitions, negatively affecting future acquisition efforts and potentially  affecting future operations. This bow wave consists of new acquisition  programs and recapitalization efforts, as well as high-cost maintenance  projects that use the acquisition construction and improvements account,  which continue to put pressure on available resources. These projects  include some that are not currently identified in the acquisition portfolio.  For instance, the Coast Guard\u2019s 87-foot patrol boats are forecast to  require recapitalization beginning in 2023. Additionally, the ocean-going  175-foot coastal buoy tenders\u2014not included in the Waterways Commerce  Cutter program\u2014are past the point in their service lives when a midlife  maintenance availability would normally have been conducted.  However, we found that the Coast Guard has historically operated  vessels well past their expected end of service life, and it will likely need  to do so with these assets given limited available acquisition funding.", "Furthermore, the Coast Guard has identified more than $1.5 billion in  shore infrastructure projects, which are paid for with funding from the  acquisition, construction, and improvements account that it has not been  able to address, primarily due to lack of funding, among other reasons.  Some of these projects are detailed in an unfunded priorities list the  Coast Guard submitted to congressional committees in July 2017  pursuant to statutory requirements. Among the projects identified are  recapitalization for waterfront facilities damaged in hurricanes; major  acquisition systems infrastructure associated with homeporting the ninth  National Security Cutter; and a number of pier replacements, building  construction, and navigational aid realignment projects in several  locations. The Explanatory Statement regarding the Consolidated  Appropriations Act, 2018, reflected approximately $135 million in  acquisition, construction, and improvements funding for shore  infrastructure/construction projects, including for some previously  unfunded priorities. We currently have an ongoing review to assess  Coast Guard shore infrastructure projects and expect to issue a report in  early 2019.", "Figure 4 shows the current and future acquisitions that, based on current  Coast Guard programs and requirements, need to be addressed in order  for the Coast Guard to meet its statutory missions, along with the backlog  of shore infrastructure projects noted above. For more information about  the Coast Guard\u2019s 11 mission areas, including which assets perform each  mission, see appendix III.", "Federal standards for internal control state that quality information that is  appropriate, current, complete, accurate, accessible, and timely is  necessary for an organization to achieve its objectives. The Coast  Guard has not communicated quality information to Congress or  demonstrated how deferred acquisitions will affect the future acquisition  portfolio. Including information in the CIP, such as how trade-off decisions  will affect other programs in the portfolio, would allow decision makers,  including Congress, to better understand Coast Guard priorities and how  changes to one program might potentially affect other programs."], "subsections": []}, {"section_title": "Coast Guard Does Not Conduct Oversight of Its Acquisitions Portfolio Collectively", "paragraphs": ["The Coast Guard has a management body in place to conduct oversight  of its major acquisition programs; however, this management body has  not conducted oversight across the entire acquisition portfolio from a  collective approach. Among the Coast Guard\u2019s three cross-directorate  groups, the Executive Oversight Council is positioned to oversee the  portfolio collectively and has the potential to implement key portfolio-wide  management practices, including conducting formal reviews and issuing  reports. This council has cross-directorate senior-level management  representation, access to information on acquisition programs, and  support from the other two cross-directorate groups (the Systems  Integration Team and the Resource Councils). However, this council has  not carried out these portfolio-wide practices. Since 2012, the  responsibilities of the Executive Oversight Council regarding portfolio- wide management have been changed multiple times (see figure 5).", "In 2014, the Coast Guard updated the Executive Oversight Council\u2019s  charter, in response to our September 2012 recommendation, adding the  responsibility for portfolio-wide oversight to include conducting an annual  review to assess and oversee acquisitions collectively. However, during  our current review, we found that the Coast Guard revised the council\u2019s  charter in June 2017, removing this responsibility. According to Executive  Oversight Council officials, this responsibility was removed from the 2017  charter because the council did not conduct these annual reviews.  Instead, Executive Oversight Council officials indicated that the council  facilitates a balanced and affordable portfolio of acquisition programs  through the individual program-level reviews. GAO\u2019s best practices work  states that successful organizations assess product investments in  aggregate, rather than as independent products or programs. For  example, by considering the requirements, acquisition, and budget  processes collectively, it helps organizations prioritize their product  investments.", "In addition, Coast Guard officials said that a portfolio-wide affordability  review or assessment is undertaken by the Systems Integration Team\u2014a  cross-directorate, cross-enterprise group below the flag/Senior Executive  Service-level\u2014to help inform the annual budget process. The Systems  Integration Team\u2019s responsibilities outlined in its current charter include  addressing issues tasked by the Executive Oversight Council chair,  reporting to the council on cross-programmatic issues, and providing  recommendations to the council. For example, officials with the Systems  Integration Team said they met with, and gathered information from, each  of the Resource Councils and briefed the Executive Oversight Council in  February 2018 with proposals for looking at investments collectively  across the Coast Guard enterprise to include potential priorities and  trade-offs. They said the briefing included a review of the upcoming  annual budget, a look at the overall portfolio of major acquisition  programs over the next 10 years, and prospective new start initiatives at  low, medium, and high funding levels. It is unclear what actions the  Executive Oversight Council has taken as a result of the Systems  Integration Team briefing. However, we found that the Executive  Oversight Council did not review the portfolio from a collective  perspective.", "Further, the members of the Systems Integration Team, who inform and  report to the senior-level Executive Oversight Council, are not at the  appropriate senior position to oversee or make decisions for the  acquisition portfolio. Specifically, the Executive Oversight Council\u2019s  revised 2017 charter states that the Systems Integration Team is to  support the council in its role to facilitate a balanced and affordable  portfolio as a whole. However, as the higher-level cross-directorate group,  the Executive Oversight Council has not engaged in overseeing or  reporting on the acquisition portfolio collectively and annually. OMB\u2019s  2017 Capital Programming Guide outlines a capital programming process, including how agencies should effectively and collectively  manage a portfolio of capital assets. This OMB guidance states that a  senior-level executive review committee should be responsible for  reviewing the agency\u2019s entire capital asset portfolio on a periodic basis  and for making decisions or priorities on the proper composition of  agency assets needed to achieve strategic goals and objectives within  the budget limits. In the case of the Coast Guard, only the Executive  Oversight Council has representation at the senior-level executive level  and has the responsibility for oversight of its major acquisition programs.  Without collective portfolio reviews at the senior management level, the  Coast Guard does not have sufficient cross-directorate information to  determine needed trade-offs in the major acquisitions realm, considering  budget realities."], "subsections": []}]}, {"section_title": "Coast Guard Plans to Extend Service Lives of Certain Legacy Assets as Sustainment Costs and Other Risks Are Increasing", "paragraphs": ["Given the Coast Guard\u2019s limited acquisition budget in recent years, it is  unclear how the Coast Guard will be able to fund planned Service Life  Extension Projects (SLEP) on several aging assets in order to sustain  them\u2014that is, keep them operating at acceptable levels\u2014until  replacement assets are available. We found that each of these  sustainment efforts involves a certain amount of risk. For example,  according to Coast Guard officials, they plan to operate H-65 and H-60  helicopters to flight hours beyond what has been flown for those aircraft.  In addition, several of the Coast Guard\u2019s aging cutters have spent more  on depot-level maintenance than was planned. Combined, these  cutters\u2014the 210-foot and 270-foot Medium Endurance Cutters, the  icebreaker Polar Star, and Inland Tenders\u2014expended in excess of $460  million more than what was originally estimated (standard support levels)  from 2010 to 2017. When combined with the challenges facing the  acquisition portfolio noted above, the Coast Guard will likely struggle to  pay for the maintenance of older assets, a situation that could lead to  deferred maintenance and lost operational capability, as we found in our  July 2012 review and in our current review. As discussed earlier, the 20- year long-term plan, if completed as directed by our June 2014  recommendation and subsequent congressional direction, will begin to lay  out the prioritization of all efforts, trade-offs, and impacts."], "subsections": [{"section_title": "Coast Guard Intends to Extend the Service Lives of Certain Legacy Assets", "paragraphs": ["The Coast Guard currently operates several assets that have passed, or  will soon pass, the end of their design service lives\u2014the total period for  which they were designed to operate. We found that these legacy assets  are generally meeting metrics for availability to conduct operations;  however, they are in need of major maintenance overhauls\u2014or SLEPs\u2014 in order to continue providing capabilities to operators. According to  Coast Guard officials, SLEPs are necessary because the Coast Guard  does not have the funds available to initiate a new major acquisition  program to recapitalize these assets in the short term, or because a  significant amount of maintenance work is required to keep these assets  operational until replacements are fielded. Table 4 provides details about  the Coast Guard\u2019s plans for SLEPs for selected assets.", "These planned SLEPs involve several risks including technical,  scheduling, and funding. While SLEPs will extend these assets\u2019 expected  service lives, they will also add cost to an already constrained Coast  Guard acquisition, construction, and improvements account. Since these  projects use these funds, we would expect them to be included in the  Coast Guard\u2019s forthcoming 20-year long-term plan so that decision  makers and stakeholders can see their effects on the broader acquisition  portfolio. Additional detail on these planned SLEPs follows."], "subsections": [{"section_title": "H-65 and H-60 Aircraft", "paragraphs": ["The Coast Guard is planning to conduct a SLEP that will add an  additional 10,000 hours to the H-65 rotary-wing aircraft, taking the service  life of each aircraft in the fleet to 30,000 hours. The Coast Guard is  evaluating alternatives to extend the service lives of the H-60 fleet.  According to DHS, two options the Coast Guard is considering include  utilizing newer H-60 aircraft from the Navy and conducting a SLEP on  those aircraft to extend their service lives to 20,000 hours or extending  the life of the current fleet to 30,000 hours. Coast Guard officials said that  this will allow both the H-65 and H-60 aircraft to operate into the mid- 2030s so that the Coast Guard can focus funds from the acquisition,  construction, and improvements account on the Offshore Patrol Cutter  procurement and align its next helicopter acquisition effort with the  Department of Defense\u2019s future vertical lift acquisition plans. However,  there are risks associated with these SLEP plans. According to Coast  Guard officials, they plan to operate H-65 and H-60 helicopters to flight  hours beyond what has been flown for those aircraft. The Coast Guard is  working with the original manufacturers to identify structural components  that would need to be replaced to accomplish the service life extension.", "From fiscal years 2012 to 2017, the H-65 operational availability\u2014time  available to conduct missions\u2014averaged 70.9 percent and the H-60  averaged 73.5 percent, compared to their target of 71 percent. Both  aircraft generally met their target but are approaching their end of service  lives, with the H-65 expected to reach its 20,000 flight hour limit starting in  2020 and the H-60 in 2023. The Coast Guard expects the H-65 SLEP to  cost about $61.6 million, but the H-60 SLEP cost is unknown because the  effort has not progressed to the acquisition decision event at which a cost  estimate is required to be approved. The H-60 SLEP was recently  approved for entry into the analyze and select phase, where it was  designated as a level 1 program, which DHS defines as programs with  estimated life-cycle costs greater than or equal to $1 billion."], "subsections": []}, {"section_title": "Heavy Icebreaker Polar Star", "paragraphs": ["The Coast Guard conducted reactivation work on the Polar Star from  2010 to 2013, and the icebreaker resumed its missions for the annual  breakout of the National Science Foundation\u2019s McMurdo Research  Facility in Antarctica in 2014. The Coast Guard is planning a SLEP on the  Polar Star to keep it operational until the first and second new heavy polar  icebreakers are delivered (planned for 2023 and 2025, according to  current acquisition plans) in order to bridge a potential operational gap.  This approach would allow the Coast Guard to operate a minimum of two  heavy icebreakers once the first polar icebreaker is delivered. The  approach would also provide the Coast Guard with a self-rescue  capability\u2014the ability for one icebreaker to rescue the other if it became  incapacitated while performing icebreaking operations.", "The Coast Guard\u2019s plan to conduct the Polar Star SLEP during its existing  annual depot-level maintenance periods may not be feasible given the  amount of maintenance already required on the cutter. The Polar Star\u2019s  mission capable rating has been decreasing in recent years and reached  a low point of 29 percent\u2014well below the target of 41 percent\u2014from  October 2016 to September 2017. Based on mission capable data, we  found this is mostly due to additional time spent in depot-level  maintenance, which has increased in recent years from about 6 months in  2015 to more than 8 months in 2017.", "Additionally, the Polar Star has required extensions of about 3 months for  its annual dry dock periods\u2014the period of time when a cutter is removed  from the water so that maintenance can be conducted\u2014in 2016 and 2017  to complete required maintenance activities. These dry docks were  originally planned to last between 2-1/2 months and 4 months. These  extensions also compressed the amount of time that the crew had to  prepare for its annual mission to Antarctica, which, according to members  of the Polar Star crew, placed a large stress on the crew, risked the  quality of work, and reduced or eliminated the crews\u2019 planned rest and  personal preparation for their roughly 4-month deployment. Based on our  analysis, these delays and extensions are likely to continue as the cutter  ages. According to Coast Guard officials, the Polar Star\u2019s SLEP work will  be conducted during the annual dry dock periods by adding an additional  1 or 2 months to the annual dry docks. However, if the work is unable to  be completed during this time frame, it could force the Coast Guard to  miss its commitment to conduct the annual Antarctica mission. Coast  Guard maintenance officials stated that until the Polar Star completes the  SLEP, its repairs will likely continue to get more expensive and time  consuming. We will continue to monitor the Polar Star\u2019s SLEP through our  annual review of DHS programs.", "As we found in July 2017, the Polar Star SLEP effort has a rough order  cost estimate of $75 million, which is based on the reactivation work  completed in 2013. However, this estimate may be unrealistic based on  assumptions the Coast Guard used, such as that it would continue to use  parts from the Coast Guard\u2019s other heavy polar icebreaker, the Polar Sea,  which has been inactive since 2010. The Coast Guard\u2019s recent  assessment of the Polar Star\u2019s material condition\u2014the physical condition  of the cutter, which includes the hull structure, habitability, major  equipment systems, and spare parts availability\u2014was completed in  January 2018. The material assessment stated that many of the  available parts from the Polar Sea have already been removed and  installed on the Polar Star. As a result of the finite parts available from the  Polar Sea, the Coast Guard may have to acquire new parts for the Polar  Star that could increase the $75 million SLEP estimate. The Polar Star\u2019s  recent material assessment will form the basis to determine which  systems will be overhauled during the SLEP and for a more detailed cost  estimate. The Coast Guard expects the program to reach the obtain  phase of the acquisition life cycle by December 2019, at which time the  Polar Star could reach the end of its current useful service life (currently  projected to be between 2020 to 2023). This timeline contains risk that  the Polar Star could be rendered inoperable before the cutter is able to  undergo a SLEP."], "subsections": []}, {"section_title": "Medium Endurance Cutters", "paragraphs": ["The Coast Guard operates two fleets of Medium Endurance Cutters (270- foot and 210-foot cutters) and both are either approaching or have  exceeded their design service lives. According to Coast Guard  maintenance officials, the primary problem facing the 270-foot Medium  Endurance Cutters is obsolescence given the age of these cutters. The  cutters have several systems that are no longer manufactured, and in  many cases the original manufacturer no longer makes parts for the  systems, such as the generators, fire pumps, and main diesel engines. In  order to sustain the 270-foot Medium Endurance Cutters until the  Offshore Patrol Cutters\u2014replacements for the Medium Endurance  Cutters\u2014are delivered, the Coast Guard is planning to conduct a SLEP.  Officials stated they are evaluating how many of the 13 cutters will  undergo the SLEP. The Coast Guard does not have a cost estimate for  the SLEP, but officials said that the project should enter the obtain phase  and complete its first cost estimate by June 2019.", "Despite the age and condition of the cutters, the mission capable rate for  the 270-foot Medium Endurance Cutters has been increasing since the  fleet first started using the metric in August 2014 and has met its  minimum target of 49 percent. Specifically, the 270-foot Medium  Endurance Cutters\u2019 mission capable rate increased from 47.6 percent in  2015 to 69.4 percent in 2017. This indicates that the Coast Guard has  been increasing the amount of time that the cutters are available to  conduct operations. However, the mission capable rating of 69.4 percent  in 2017 is above the maximum target\u201461 percent\u2014which means the  Coast Guard is operating the cutters more than planned. This could be  troublesome since the percentage of time above the 61 percent target is  time that is allocated to depot-level maintenance, meaning these cutters  are not spending as much time as planned in maintenance. In May 2016,  we found that deferring maintenance can lead to declining ship conditions  and longer maintenance periods that can reduce a ship\u2019s operational  availability.", "The Coast Guard is also evaluating how long the 270-foot Medium  Endurance Cutters should remain in service. According to Coast Guard  officials, this decision is at least partially dependent on the delivery of the  Offshore Patrol Cutters\u2014specifically the shipbuilder\u2019s ability to deliver 2  cutters per year, which is expected to start in fiscal year 2024 with the 4th  and 5th cutters. Officials stated that the Coast Guard does not plan to  operate any Medium Endurance Cutters once all 25 Offshore Patrol  Cutters are operational, yet the fiscal year 2018 through 2022 CIP report  indicates that 7 of the 270-foot Medium Endurance Cutters will still be in  service when all 25 Offshore Patrol Cutters are delivered and operational.  Officials said this is a contingency plan in case not all Offshore Patrol  Cutters are delivered on time. As we found in June 2017, the Coast  Guard completed refurbishment work on the 210-foot and 270-foot  Medium Endurance Cutters in 2014, but this was not intended to extend  the cutters\u2019 service lives. Figure 9 shows the delivery dates for the  Offshore Patrol Cutters and the decommissioning dates for the legacy  Medium Endurance Cutters.", "The fiscal year 2018 through 2022 CIP shows that there is little, if any,  gap between when the 210-foot and 270-foot Medium Endurance Cutters  will be removed from service and when the Offshore Patrol Cutters will be  operational. However, both Medium Endurance Cutter classes will be well  past their end of service lives by the time they are decommissioned. For  instance, in our July 2012 report, we reported that the 210-foot Medium  Endurance Cutter Dependable reached its end of service life in 2006. In  addition, based on the fiscal year 2018 through 2022 CIP, we found that  the Coast Guard plans for the cutter to operate for an additional 23 years  (until 2029) without any major sustainment work to extend its service life.  While it is not unusual for the Coast Guard to operate cutters for longer  than originally planned, the acquisition schedule for fielding the Offshore  Patrol Cutters will result in some of the Medium Endurance Cutters being  expected to operate up to 30 years beyond their original design service  lives when they are removed from service.", "In the February 2017 Sustainability Assessment of the 210-foot Medium  Endurance Cutters, the Coast Guard rated 5 of the 14 cutters as a high  risk for sustainability, which reflects either a poor material condition or  high maintenance costs. Additionally, the most recent material condition  assessments for the Medium Endurance Cutters, which were completed  in 2015, found that the:", "210-foot Medium Endurance Cutters cannot be expected to meet  operational requirements using the normal depot-level maintenance  funding levels due to the time required to complete maintenance and  the increased maintenance costs in recent years; and mission effectiveness of the 270-foot Medium Endurance Cutters will  continue to degrade without a near-continuous recapitalization of  older sub-systems.", "Further, according to the fiscal year 2018 through 2022 CIP, the Coast  Guard is planning to operate some of the Medium Endurance Cutters for  about the same period of time as other Medium Endurance Cutters that  will undergo the SLEP project. This raises questions as to how those  cutters that do not go through the SLEP will continue operating until their  planned decommissioned date, which in some cases is the same time  period as those cutters undergoing the SLEP. As shown in figure 9, the  210-foot Medium Endurance Cutter Alert will be decommissioned in 2030  and will not undergo a SLEP, while the 270-foot Medium Endurance  Cutter Bear will also be decommissioned in 2030 and could undergo the  SLEP. In July 2012, we found that as assets age beyond their design  service lives, they can negatively affect the Coast Guard\u2019s operational  capacity to meet mission requirements as the cutters require more  maintenance. As discussed earlier, in response to Congressional  direction, as the Coast Guard continues its development of a 20-year  Long-term Major Acquisitions Plan, it is important to include more details  about the 270-foot Medium Endurance Cutter SLEP, including when the  SLEP should begin and how much service life the SLEP should add to  the cutters."], "subsections": []}]}, {"section_title": "Depot-Level Maintenance Costs for Aging Assets Are Increasing", "paragraphs": ["As legacy assets operate longer than originally planned, they are  becoming costlier to maintain, which introduces risk to an already  constrained Coast Guard budget. For example, depot-level maintenance  expenditures from fiscal years 2010 to 2017 for the 210-foot and 270-foot  Medium Endurance Cutters, Polar Star, and Inland Tenders exceeded by  $460 million the assets\u2019 estimated costs for depot-level maintenance  (standard support levels\u2014the Coast Guard\u2019s annual estimates for depot- level maintenance) since these assets are near the end of or have  exceeded their expected service lives. Specifically, over the 8-year period  the:", "210-foot Medium Endurance Cutters\u2019 expenditures were about $151  million (219 percent) more,", "270-foot Medium Endurance Cutters\u2019 expenditures were $192 million  (265 percent) more,", "Polar Star\u2019s expenditures were about $15 million (31 percent) more,  Inland Tenders expenditures were about $102 million (151 percent)  more than standard support levels.", "The most recent material assessments for the 210-foot and 270-foot  Medium Endurance Cutters, completed in September 2015 and  November 2015 respectively, stated that the cutters\u2019 current standard  support level funding is not sufficient to continue funding the necessary  maintenance activities. The assessments noted that there is the likelihood  that maintenance will be deferred, postponed, or modified to  accommodate this funding shortfall and that the cutters could degrade at  an increasing rate if additional funding is not identified. According to  Coast Guard guidance, once the cost to maintain or repair equipment is in  excess of 50 percent of a cutter\u2019s annual standard support level, it is  considered to have zero years of remaining service life. The 210-foot and  270-foot Medium Endurance Cutters and Inland Tenders exceeded this  threshold each year from 2010 to 2017 and the Polar Star exceeded this  threshold in 2016. This indicates that, although the legacy cutters we  reviewed continue to perform missions, the Coast Guard is accepting a  significant level of risk based on the cutters\u2019 increased depot-level  maintenance expenditures, and that these cutters could experience  catastrophic failures. Such an event could result in assets being removed  from service without available replacement assets. Our March 2017  recommendation that the Coast Guard periodically update standard  support levels to account for actual expenditures would, if implemented,  begin to address this problem so that standard support levels would  better align with depot-level maintenance expenditures."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Coast Guard continues to use the annual budget process to address  the affordability of its portfolio of major acquisition programs by making  trade-off decisions that result in delayed acquisitions and reduced  capabilities. This approach places decision makers, including those in  Congress in a position of committing fiscal resources to individual  programs without knowing whether they are affordable or achievable  within the context of the Coast Guard\u2019s overall portfolio. While the 5-year  CIP shows the Coast Guard\u2019s immediate trade-off decisions, it does not  show how these decisions could affect other programs in the portfolio or  future acquisition efforts. Not providing comprehensive information in the  CIP on the acquisitions needed to perform its missions, the trade-offs  necessary at different funding levels, and the impact of the trade-off  decisions made, the CIP limits the information available to decision  makers, including those in Congress.", "In addition, the Coast Guard currently is not conducting key oversight that  could facilitate a balanced, affordable portfolio. While the Coast Guard  has a group in place to conduct portfolio reviews as a part of the annual  budget cycle in the Systems Integration Team, it does not have senior- level executive representation or responsibilities necessary for the  oversight and management of the portfolio as a whole. The Executive  Oversight Council is a flag/Senior Executive Service-level group that  monitors major risks and provides direction to other cross-directorate  teams. In the past, this council had a documented role to annually review  and oversee the Coast Guard\u2019s overall acquisition portfolio, but it never  conducted these reviews. Without collective portfolio reviews at the senior  management level, the Coast Guard does not have sufficient information  to determine needed trade-offs between the major acquisition programs  while also considering the affordability of the portfolio and budget  realities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Coast Guard:  The Commandant of the Coast Guard should work with Congress to  include in the Coast Guard\u2019s annual 5-year CIP a discussion of the  acquisition programs it prioritized that describes how trade-off decisions  made could affect other acquisition programs, such as by delaying  recapitalization efforts or needing to conduct Service Life Extension  Projects for legacy assets. (Recommendation 1)", "The Commandant of the Coast Guard should require the Executive  Oversight Council, in its role to facilitate a balanced and affordable  acquisition portfolio, to annually review the acquisition portfolio  collectively, specifically for long-term affordability. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS\u2019s  written comments are reprinted in appendix IV. The Coast Guard also  provided technical comments that we incorporated into the report as  appropriate. In responding to a draft of our report, DHS concurred with  our first recommendation and non-concurred with our second  recommendation. In its response, with respect to our second  recommendation DHS noted that several existing organizations within the  Coast Guard\u2014such as its Investment Board, Deputies Council, and  Investment Review Board\u2014are responsible for making decisions  regarding out-year funding. Further, DHS noted that the Executive  Oversight Council works outside the Planning, Programming, Budgeting,  and Execution process and that the phrase \u201clong-term affordability\u201d is  subject to interpretation in the context of our recommendation. DHS also  stated that, to meet the spirit of our recommendation, the Coast Guard  will update the Executive Oversight Council\u2019s charter to require a review  of the collective acquisition portfolio, specifically evaluating long-term  planning.", "We believe that updating the Executive Oversight Council\u2019s charter to  include long-term planning is a positive step. However, long-term  affordability, as discussed throughout this report, should include the  budget realities faced by the Coast Guard in its major acquisition portfolio.  If the planning accounts for long-term funding considerations to achieve  the Coast Guard\u2019s acquisition goals and objectives, we believe the intent  of our recommendation would be met.", "We are sending copies of this report to the Secretary of Homeland  Security and the Commandant of the Coast Guard. In addition, the report  is available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Office 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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report are to assess (1) the extent to which the  Coast Guard has made changes to how it manages its acquisition  portfolio and (2) how the Coast Guard is sustaining existing assets until  new assets become operational.", "To examine the extent to which the Coast Guard has changed how it  manages its acquisition portfolio, we assessed Coast Guard practices for  managing the portfolio\u2019s affordability and long-term planning. We looked  at the portfolio to determine how its composition changed since our last  Coast Guard acquisition portfolio review in 2014. We selected a range of  acquisition programs based on if they were already major acquisition  programs (programs with a life-cycle cost estimate greater than or equal  to $300 million or a total acquisition cost greater than or equal to $100  million) by definition, the programs were part of our 2014 review, or they  are likely to be major acquisition programs that will require significant  funding in the near future.", "Using acquisition program baselines, we also identified changes in the  expected total acquisition costs of these programs using the threshold  costs and compared them with what we reported in 2014. We used the  threshold acquisition costs\u2014the maximum amount the program should  cost as approved by DHS\u2014when referring to the total acquisition cost of  a program. We calculated the remaining investment required for each  program by taking the total acquisition cost, as reported in the program\u2019s  acquisition program baseline, and subtracting the funding reflected for the  program in Explanatory Statements regarding annual appropriations acts  through fiscal year 2018 appropriations.", "We reviewed program documentation and interviewed officials from  program offices and the Coast Guard\u2019s capabilities and engineering  directorates. These discussions helped identify program achievements as  well as any risks associated with realizing planned cost, schedule, and  capability targets. We analyzed Coast Guard 5-year Capital Investment  Plans (CIP) that supported the budget requests for fiscal years 2014  through 2018 to determine how the Coast Guard has managed the  affordability of its acquisition portfolio. We also compared annual  appropriations acts and accompanying explanatory materials since fiscal  year 2014 with acquisition needs and capability gaps identified in the  CIPs. We compared Coast Guard practices for managing the affordability  of its acquisition portfolio and long-term planning with best practices  outlined in GAO\u2019s Cost Estimating and Assessment Guide and prior GAO  reports. In addition, we reviewed Atlantic Area Command annual area  planning assessments for fiscal years 2011 through 2016 and other Coast  Guard documents highlighting shore-side infrastructure and vessel  recapitalization needs. We reviewed charters for Coast Guard cross  directorate groups\u2014the Executive Oversight Council and Systems  Integration Team\u2014that help oversee Coast Guard acquisitions\u2014to  identify responsibilities and membership for these organizations, and  conducted interviews with officials from these bodies to better understand  their portfolio oversight activities. We also reviewed surface and aviation  fleet mix studies and other strategy and planning documents. We  interviewed Coast Guard officials about the anticipated content of the 20- year Long-term Major Acquisitions Plan. Additionally, we interviewed  officials from the Coast Guard resources directorate; the Coast Guard\u2019s  two operational commands (Pacific Area Command and Atlantic Area  Command); the Department of Homeland Security (DHS) offices for  Program Accountability and Risk Management, and Program Analysis  and Evaluation; and the Office of Management and Budget (OMB) to  discuss Coast Guard planning and budget preparation. We visited  Eastern Shipbuilding Group and the Offshore Patrol Cutter Project  Resident Office in Panama City Beach, Florida, to discuss Offshore Patrol  Cutter production.", "To examine how the Coast Guard is sustaining existing assets until new  assets become operational, we selected assets to review that were at or  approaching their end of design service lives\u2014an estimated period before  the asset reaches obsolescence\u2014and if the Coast Guard was planning to  conduct a Service Life Extension Project (SLEP). We collected and  analyzed program documentation on asset operational availability and  mission capability, sustainment needs and maintenance history, and  plans for extending the service lives of selected assets. We assessed  Coast Guard expenditures on depot-level maintenance\u2014which, according  to the Coast Guard, is maintenance that is beyond the capability of the  crew\u2014for fiscal years 2010 to 2017 for legacy assets, and compared  them with standard support levels\u2014annual funding estimates for depot- level maintenance\u2014for those assets over that same time period. We  interviewed Coast Guard officials from the Long Range Enforcer Product  Line Office, which is responsible for sustainment of the Polar Star, the  Coast Guard\u2019s only active heavy icebreaker. We conducted site visits\u2014 based on Coast Guard\u2019s availability of assets\u2014to the Coast Guard\u2019s  Medium Endurance Cutter Product Line Office in Portsmouth, Virginia,  and the Aviation Logistics Center in Elizabeth City, North Carolina. We  also toured a 270-foot Medium Endurance Cutter in Portsmouth, Virginia,  and interviewed the officers serving on the cutter at the time. Based on  the nature of the information we collected, we are not making any  generalizable statements from these site visits.", "We conducted this performance audit from March 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: The Coast Guard\u2019s Major Acquisition Portfolio", "paragraphs": ["The Coast Guard\u2019s major acquisition portfolio comprises 10 surface,  aviation, and command and control programs. Major acquisition programs  are those with life-cycle cost estimates of at least $300 million. Table 5  provides quantities and descriptions of each major acquisition program in  the Coast Guard\u2019s 2018 portfolio."], "subsections": []}, {"section_title": "Appendix III: Coast Guard Missions", "paragraphs": ["The Coast Guard performs 11 statutory missions, some of which align with DHS  missions (such as undocumented migrant interdiction; defense readiness; and  ports, waterways, and coastal security) and some of which are broader (such as  search and rescue, and living marine resources). Table 6 shows select Coast  Guard assets we reviewed and which of the 11 statutory missions they perform."], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S. Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact Staff and Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Marie A. Mak, (202) 512-4841 or makm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Rick Cederholm, Assistant Director,  Peter W. Anderson, John Crawford, Kristine Hassinger, Andrew Redd,  Suzanne Sterling, and Roxanna Sun all made key contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Homeland Security Acquisitions: Leveraging Programs\u2019 Results Could  Further DHS\u2019s Progress to Improve Portfolio Management. GAO-18- 339SP. Washington, D.C.: May 17, 2018.", "Coast Guard Acquisitions: Status of Coast Guard\u2019s Heavy Polar  Icebreaker Acquisition. GAO-18-385R. Washington, D.C.: April 13, 2018.", "Coast Guard Acquisitions: Limited Strategic Planning Efforts Pose Risk  for Future Acquisitions. GAO-17-747T. Washington, D.C.: July 25, 2017.", "Coast Guard Recapitalization: Matching Needs and Resources Continue  to Strain Acquisition Efforts. GAO-17-654T. Washington, D.C.: June 7,  2017.", "Coast Guard Cutters: Depot Maintenance Is Affecting Operational  Availability and Cost Estimates Should Reflect Actual Expenditures.  GAO-17-218. Washington, D.C.: March 2, 2017.", "Coast Guard Aircraft: Transfer of C-27J Aircraft Is Complex and Further  Fleet Purchases Should Coincide with Study Results. GAO-15-325.  Washington, D.C.: March 26, 2015.", "Coast Guard Acquisitions: Better Information on Performance and  Funding Needed to Address Shortfalls. GAO-14-450. Washington, D.C.:  June 5, 2014.", "Coast Guard: Portfolio Management Approach Needed to Improve Major  Acquisition Outcomes. GAO-12-918. Washington, D.C.: September 20,  2012.", "Coast Guard: Legacy Vessels\u2019 Declining Conditions Reinforce Need for  More Realistic Operational Targets. GAO-12-741. Washington, D.C.: July  31, 2012.", "Coast Guard: Action Needed as Approved Deepwater Program Remains  Unachievable. GAO-11-743. Washington, D.C.: July 28, 2011.", "Coast Guard: Progress Being Made on Deepwater Project, but Risks  Remain. GAO-01-564. Washington, D.C.: May 2, 2001."], "subsections": []}], "fastfact": ["The Coast Guard is spending billions of dollars to replace aging ships, aircraft, and other assets.", "Because the Coast Guard has managed its acquisitions with a short-term, asset-by-asset focus, it has at times lost sight of the balance and cost of its overall asset portfolio. For example, some high-priority acquisitions have been delayed.", "Also, the Coast Guard continues to operate its fleets for longer than originally planned, placing risk on its ability to accomplish its missions.", "We recommended, among other things, that the Coast Guard annually assess the long-term affordability and balance of its acquisition portfolio."]}
{"id": "GAO-19-221", "url": "https://www.gao.gov/products/GAO-19-221", "title": "Fees, Fines, and Penalties: Better Reporting of Government-wide Data Would Increase Transparency and Facilitate Oversight", "published_date": "2019-03-07T00:00:00", "released_date": "2019-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress has authorized federal agencies to collect hundreds of billions of dollars annually in fees, fines, and penalties. These collections can fund a variety of programs, including programs related to national security, and the protection of natural resources. Data on collections are important for congressional oversight and to provide transparency in agencies' use of federal resources.", "GAO was asked to review the availability of government-wide data on fees, fines, and penalties. This report examines (1) the extent to which data on collections of fees, fines, and penalties are publically available and useful for the purpose of congressional oversight; and (2) the benefits and challenges to government-wide reporting of fees, fines, and penalties. GAO assessed government-wide fee, fine, and penalty data against criteria for availability and usefulness based on multiple sources, including prior GAO work and input from staff of selected congressional committees. GAO interviewed OMB staff, Treasury officials, and representatives of organizations with expertise in federal budget issues and reviewed prior GAO work to identify benefits and challenges of reporting these data."]}, {"section_title": "What GAO Found", "paragraphs": ["There are no comprehensive, government-wide data at the level of detail that identifies specific fees, fines, or penalties. The Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) report data that include these collections at the budget account level, which generally covers a set of agency activities or programs. OMB and Treasury also report some summary data for budgeting and financial management purposes. In the Budget of the U.S. Government , for example, OMB data showed government-wide fees totaled just over $335 billion in fiscal year 2017. These reports, however, are not designed to inventory or analyze fee, fine, or penalty collections and have significant limitations for that purpose.", "Although OMB collects more disaggregated data on fees, fines, and penalties, it does not make the data publicly available. OMB uses the disaggregated data in its OMB MAX database\u2014such as the agency and account\u2014to compile reported totals, such as the government-wide fees total in the Budget of the U.S. Government . Until OMB makes more disaggregated data publicly available, Congress has limited information on collections by agency to inform oversight and decision-making.", "OMB's government-wide total of fees includes collections that are not fees and excludes some fee collections. The total includes all collections for accounts in which fees make up at least half of the account's collections and excludes all others. OMB does not direct agencies to regularly review and update the accounts included in the total. Therefore, if accounts' makeups change such that fee collections drop below, or rise above, the 50 percent threshold, accounts may have incorrect fee designations and the total may be inaccurate.", "Further, OMB does not disclose the limitation that the total may exclude some fees and include other collections that are not fees. As a result, some users of the data are likely unaware of the potential for the total fees to be overestimated or underestimated.", "Further, no source of government-wide data consistently reports data elements on fees, fines, and penalties that could help inform congressional oversight. Generally, congressional staff told us that additional data, such as amounts of specific penalties, would increase transparency and facilitate oversight. These data could help Congress identify trends in collections and significant changes that could be an indication of an agency's performance. While reporting government-wide fee, fine, and penalty data provides benefits, there are trade-offs in terms of the time and federal resources it would take to develop and implement a process for agencies to report these data. The level of federal investment would vary depending on factors, such as the number of data elements included and the level of detail reported. Developing a comprehensive and accessible data source would provide greater benefits, but would likely be resource intensive. Alternatively, incorporating a small number of data elements that Congress identifies as most useful for oversight into ongoing government-wide reporting efforts could incrementally improve transparency and information for oversight and decision-making, with fewer resources."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to enhance OMB reporting on fees, fines, and penalties, including making disaggregated data publically available, updating instructions to federal agencies to review accounts designated as containing fees, and disclosing limitations in data reported. OMB did not provide comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["Congress has authorized federal agencies to collect hundreds of billions  of dollars annually in fees, fines, and penalties. These collections can  fund a wide variety of programs, including programs integral to our  nation\u2019s security, to the security of our financial system, and to the  protection of our natural resources. Agencies are authorized to charge  more than 3,600 different user fees, such as for visiting national parks,  patent applications, and customs inspections. Agency authority to  assess and collect fines and penalties is a critical method for enforcing  policies and deterring violations of laws and regulations. For example, the  Office of Management and Budget (OMB) has identified more than 50  different agencies as having civil monetary penalty authority. In fiscal  year 2017, these federal agencies assessed millions of dollars in civil  monetary penalties for violations of statutory requirements, such as  phone calls that violated federal telemarketing law.", "Given the nation\u2019s fiscal condition, it is critical Congress has full visibility  over all federal resources. Federal collections of fees, fines, and penalties  vary in the extent to which revenue collected is dedicated to the related  program or agency and the extent to which the agency has authority to  obligate and expend collections. Congress retains oversight over fees,  fines, and penalties, regardless of agencies\u2019 authority to use these collections. As such, data that provide visibility on collections and how  they are used are important for Congress to oversee agencies and  programs, and provide transparency in agencies\u2019 use of federal  resources.", "OMB reports high-level, government-wide summary data on fee, fine, and  penalty collections in the Budget of the U.S. Government\u2019s Analytical  Perspectives and the Department of the Treasury (Treasury) reports data  on agency receipts in the Combined Statement of Receipts, Outlays, and  Balances (Combined Statement). These reports are designed to serve  specific purposes and audiences, and provide information targeted to  meet those needs.", "You asked us to review issues related to the availability of government- wide data on fees, fines, and penalties. This report examines: (1) the  extent to which government-wide data on collections of fees, fines, and  penalties are publicly available and useful for the purpose of  congressional oversight; and (2) the benefits and challenges to  government-wide reporting of specific fees, fines, and penalties including  data elements that facilitate congressional oversight.", "To address these objectives, we developed criteria for the availability and  usefulness of data on collections of fees, fines, and penalties for the  purpose of congressional oversight based on: our Standards for Internal Control,   requirements found in the Digital Accountability and Transparency Act  of 2014 (DATA Act), government-wide instructions from OMB on public access to data and our prior work on user fees, fines, and penalties, and  input from staff of congressional committees on appropriations,  budget, and oversight (see table 1).", "We shared the criteria with OMB staff and Treasury officials, and they  agreed the criteria are relevant and reasonable. See appendix I for more  information on the data elements that are useful for congressional  oversight.", "To determine the extent and usefulness of publicly available data for our  first objective, we first identified government-wide sources containing data  on fees, fines, and penalties to include in our review. We reviewed our  prior work, conducted background research, including reviewing  Congressional Budget Office and Congressional Research Service  reports, and interviewed Treasury officials and OMB staff. As a result, we  identified the Budget of the U.S. Government\u2014including Analytical  Perspectives, the Budget Appendix, and the Public Budget Database\u2014 produced by OMB, and the Combined Statement produced by Treasury.  We assessed these sources and related documents and processes using  the applicable criteria we developed on availability and usefulness of data  on fees, fines, and penalties for the purpose of congressional oversight  and Standards for Internal Control in the Federal Government.", "We also analyzed OMB and Treasury data to identify and report  government-wide totals for fees, fines, and penalties to the extent that  they were reported. To assess the reliability of OMB\u2019s MAX database  data related to the collections of fees, fines, and penalties, we reviewed  related documentation, interviewed knowledgeable OMB staff, and  conducted electronic data testing. To assess Treasury\u2019s Bureau of the  Fiscal Service data related to the collections of fees, fines, and penalties,  we reviewed related documentation and interviewed knowledgeable  Treasury officials. In both cases, we found the data to be reliable for our  purposes. We did not examine whether agencies accurately report  collections as fees, fines, and penalties to OMB and Treasury.", "To determine the benefits and challenges of government-wide reporting  of fees, fines, and penalties for our second objective, we interviewed staff  of congressional committees on appropriations, budget, and oversight,  OMB staff and Treasury officials, and external organizations on the  potential benefits and challenges of government-wide reporting of fees,  fines, and penalties. In addition, we reviewed our prior reports on the  DATA Act, federal program inventories, and federal fees to identify and  assess issues to consider in government-wide reporting. See appendix I  for additional details on our scope and methodology.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government receives funds from numerous sources in  addition to tax revenues, including collections of user fees, fines, and  penalties. According to the Budget of the U.S. Government, in fiscal year  2017, the U.S. government\u2019s total receipts were $3.3 trillion and  collections of fees, fines, penalties, and forfeitures were more than $350  billion.", "User fees (fees): Fees are charges assessed to users for goods or  services provided by the federal government, such as fees to enter a  national park, and charges assessed for regulatory services, such as  fees charged by the Food and Drug Administration for prescription  drug applications. Fees are an approach to financing federal  programs or activities that, in general, are related to some voluntary  transaction or request for government services above and beyond  what is normally available to the public. By requiring identifiable  beneficiaries to pay all or part of the cost of a good or service, fees  can promote both equity and economic efficiency.  Regularly  reviewing fees help ensure that agencies, Congress, and  stakeholders have complete information.", "Fines and penalties: Criminal fines and penalty payments are  imposed by courts as punishment for criminal violations. Civil  monetary penalties are not a result of criminal proceedings but are  employed by courts and federal agencies to enforce federal laws and  regulations. For example, civil monetary penalty payments are  collected from financial institutions by certain financial regulators,  such as the Federal Deposit Insurance Corporation, from enforcement  actions assessed against financial institutions for violations related to  anti-money laundering requirements. Reviews and, as needed,  adjustments to fines and penalties could help ensure they provide a  meaningful incentive for compliance.", "The design and structure of statutory authorities for fees, fines, and  penalties can vary widely. In prior work, we have identified key design  decisions related to how fee, fine, and penalty collections are used that  help Congress balance agency flexibility with congressional control and  oversight. Congress determines the availability of collections by defining  the extent to which an agency may obligate and expend them, including  the availability of the funds, the period of time the collections are available  for obligation, the purposes for which they may be obligated, and the  amount of the collections that are available to the agency. Fees, fines,  and penalties may be categorized as one of three types of collections  based on the structure of their statutory authority: offsetting collections,  offsetting receipts, or governmental receipts (see figure 1).", "Offsetting collections can provide agencies with more flexibility because  they are generally available for agency obligation without an additional  annual appropriation. In contrast, offsetting receipts and governmental  receipts involve greater congressional opportunities for control and oversight because, generally, additional congressional action is needed  before the collections are available for agency obligation. For example,  Congress must appropriate collections from offsetting receipts before  agencies are authorized to obligate these funds.", "The type of collection also determines how OMB and Treasury report the  collections. Offsetting collections and offsetting receipts result from  businesslike transactions and are recorded as offsets to spending.  Offsetting collections are authorized by law to be credited to appropriation  or fund expenditure accounts, while offsetting receipts are deposited in  receipt accounts. Because offsetting collections are offsets to spending,  an account will generally show the net amount that was collected and  spent at any point in time."], "subsections": [{"section_title": "Congressional Actions to Make Government-wide Data Publicly Available", "paragraphs": ["While there is no statutory requirement for government-wide reporting of  data of specific fees, fines and penalties, Congress has enacted  legislation to make other data on federal spending and federal programs  publicly available:", "The Digital Accountability and Transparency Act of 2014 (DATA  Act). The DATA Act built on previous transparency legislation by  expanding what federal agencies are required to report regarding their  spending. The act significantly increased the types of data that must  be reported, and required the use of government-wide data standards  and regular reviews of data quality to help improve the transparency  and accountability of federal spending data. These data are reported  on the USAspending.gov website.", "The GPRA Modernization Act of 2010 (GPRAMA). GPRAMA, in  part, requires OMB to present a coherent picture of all federal  programs by making information available about each federal program  on a website, including related budget and performance information.  Programs have been defined as an organized set of activities directed  toward a common purpose or goal that an agency undertakes or  proposes to carry out its responsibilities. A federal program  inventory would consist of the individual programs identified by the  agencies and OMB and information collected about each of them.  OMB and agencies implemented the inventory once, in May 2013. In  October 2014, we found several issues limited the usefulness of that  inventory and made several recommendations to OMB to ensure the  effective implementation of federal program inventory requirements  and to make the inventories more useful.  Further, in September  2017, we found that OMB continued to delay implementation of the  program inventory. We recommended that OMB consider a  systematic approach to developing the program inventory and issue  instructions to provide time frames and milestones for its  implementation. Although OMB updated its instruction in June 2018,  it did not provide any time frames or milestones for implementing the  inventory. OMB has yet to develop a systematic approach for  resuming implementation of the inventory or specific time frames for  doing so."], "subsections": []}]}, {"section_title": "OMB, Treasury, and Agencies Publicly Report Some Data on Fees, Fines, and Penalties, but the Data Have Significant Limitations", "paragraphs": [], "subsections": [{"section_title": "OMB, Treasury, and Agencies Report Broad Financial Information, but Not All Collections from Specific Fees, Fines, and Penalties", "paragraphs": ["There is no source of data that lists all collections of specific fees, fines,  and penalties at a government-wide or agency level. Both OMB and  Treasury report government-wide budgetary and financial data, including  some information on collections of fees, fines, and penalties; however,  none of the reports identifies all specific fees, fines, and penalties, and  their associated collection amounts at a government-wide level. OMB  reports budgetary and financial data in various parts of the Budget of the  U.S. Government, including Analytical Perspectives, the Budget  Appendix, and the Public Budget Database.  Treasury reports financial  data in the Combined Statement. Each source provides information for a  broader purpose than reporting on collections of fees, fines, and  penalties. OMB and Treasury provide specific instructions for agency  submission of the underlying data, as described in table 2.", "OMB\u2019s reports include budgetary and financial information on federal  collections at different levels of detail\u2014from aggregated government-wide  data to agency account-level data\u2014depending on the source and its  purpose. Analytical Perspectives identifies collections as fees and as  fines, penalties, and forfeitures and reports government-wide summary  information on these collections. For example, in a table summarizing  government-wide governmental receipts in Analytical Perspectives, OMB  reported fines, penalties, and forfeitures in federal funds as $20.98 billion  and in trust funds as $1.17 billion for fiscal year 2017. These summary  data do not provide a government-wide total of all federal collections from  fines, penalties, and forfeitures because they do not include those that  are categorized as offsetting collections or offsetting receipts, according  to OMB staff. OMB staff said that OMB does not publish a government- wide total of fines, penalties, and forfeitures. OMB data on governmental  receipts include source codes\u2014including a code that identifies fines,  penalties, and forfeitures\u2014but data on offsetting collections and offsetting  receipts do not include a comparable source code. In the Budget  Appendix and the Public Budget Database, OMB reports account-level  information by agency, identified by types of collections, such as  offsetting collections, offsetting receipts, and governmental receipts. The  Budget Appendix and the Public Budget Database do not label collections  as fees, fines, or penalties and therefore, cannot be used to calculate  government-wide totals for fees, fines, or penalties.", "To assemble Analytical Perspectives, the Budget Appendix, and the  Public Budget Database, OMB compiles data from federal agencies into  OMB MAX. OMB MAX,  which is not publicly available, contains  government-wide data at the account level and captures information such  as the type of collection and the type of fund to which collections are  deposited. While the data in OMB MAX help drive reporting in the Budget,  not all data compiled in OMB MAX appear in the Budget. For example,  OMB MAX  includes an indicator for accounts that contain fees, but that  information is not made available in the Budget of the U.S. Government.  According to congressional staff we spoke with, they do not have open  access to OMB MAX, but OMB provides excerpts of OMB MAX data to  staff upon request.", "Treasury\u2019s Combined Statement reports both government-wide totals and  agency account-level data for collections classified as receipts, by various  source categories\u2014such as proprietary receipts from the public,  miscellaneous receipts, and fines, penalties, and forfeitures.", "Fees. Fees may fall within several source categories. Therefore,  Treasury does not have a single government-wide total for fees. It  does present government-wide totals for various source categories,  including, Sale of Products and Fees for Permits and Regulatory and  Judicial Services, for example. Treasury also reports some fees under  non-fee categories, such as Miscellaneous Taxes and Excise Taxes.", "Fines, Penalties, and Forfeitures. Treasury reports a government- wide total of receipts of fines, penalties, and forfeitures, which in fiscal  year 2017 was $22.2 billion. Treasury\u2019s Combined Statement  presents these data, disaggregated by account, in the tables Receipts  by Source Categories and Receipts by Department. For example, it  identifies total Internal Revenue Service receipts in the category  Fines, Penalties, and Forfeitures of about $6.8 million in fiscal year  2017. Treasury also reports some fines, penalties, and forfeitures  receipts under other categories; these receipts are not included in its  total of fines, penalties, and forfeitures. For example, Department of  Homeland Security breached bond penalties are reported in two  categories labeled as fees: Miscellaneous Receipts \u2013 Fees for  Permits and Regulatory and Judicial Services and Offsetting  Governmental Receipts \u2013 Regulatory Fees (see figure 2).", "In addition to the government-wide data sources, agencies report some  data on their collections of specific fees, fines, and penalties in their  annual financial reports, congressional budget justifications, and on  agency websites. These data are dispersed by agency, are not  comprehensive, and cannot be aggregated to create government-wide  data because they vary in format and in the level of detail presented. For  example:", "The Environmental Protection Agency (EPA) has an online,  searchable database of enforcement and compliance information that  includes data on individual fine and penalty assessments for violations  of certain, but not all, statutes.", "The Department of Labor also makes selected enforcement data  accessible in an online database collected by the Employee Benefits  Security Administration, the Mine Safety and Health Administration,  the Occupational Safety and Health Administration, and the Wage and  Hour Division without Department of Labor-wide data standards on  individual fine and penalty assessments.", "USDA\u2019s Animal and Plant Health Inspection Service\u2019s 2019  Congressional Budget Justification, on the other hand, is a PDF  document that provides annual collection totals for Agriculture  Quarantine Inspection Fees, Import-Export User Fees, Phytosanitary  Certificate User Fees, Veterinary Diagnostics User Fees, and Other  User Fees, rather than disaggregated to individual fee assessments."], "subsections": []}, {"section_title": "OMB Reports Government-wide Totals that Cannot Be Disaggregated and Does Not Disclose Limitations or Regularly Review Its Designation of Fees", "paragraphs": [], "subsections": [{"section_title": "OMB Reports Government- wide Data that Cannot Be Disaggregated", "paragraphs": ["The government-wide totals for fees that OMB reports in Analytical  Perspectives are not presented at a more disaggregated level, such as by  agency or program, except for some major fee collections identified by  OMB. For example, in Analytical Perspectives for fiscal year 2017, OMB  reported $335.4 billion as a government-wide total of fee collections.   OMB also reported some disaggregated data for the subset of fees that  were offsetting collections and offsetting receipts. Specifically, it listed 11  fees totaling $258.4 billion collected by specific agencies and listed the  remaining $72.3 billion as \u201call other user charges\u201d without identifying the  agency or program. As described in table 1 above, clear and accessible  data can be aggregated or disaggregated by the user. OMB has more  detailed data on collections in OMB MAX, including the agency, account,  type of collection, and fund type, which it uses to compile reported totals  of fees as well as fines, penalties, and forfeitures.", "OMB does not publicly report these data disaggregated below the  government-wide level, such as at the agency level. OMB staff said that  they do not report the disaggregated data because the purpose of  Analytical Perspectives is to develop or support the President\u2019s policies  and more detailed tables may not be included if they are not considered  necessary for that purpose. However, Analytical Perspectives also serves  to provide other significant data that place the President\u2019s Budget in  context and assist the public and policymakers in better understanding  the budget proposals. For example, Analytical Perspectives includes a  chapter on aid to state and local governments that presents the  President\u2019s budget proposals for grant programs along with crosscutting  information on federal grants to state and local governments, including  government-wide grant spending, by agency and program. Analytical  Perspectives also presents a summary of fee proposals but does not  provide comparable crosscutting information about current fees. For fines  and penalties, neither proposals nor crosscutting information is presented  by agency. Until OMB makes more disaggregated data on fees, fines,  and penalties maintained in its OMB MAX  database\u2014such as collections  by agency\u2014publicly available, Congress has limited information on such  collections to inform oversight and decision-making."], "subsections": []}, {"section_title": "OMB Does Not Disclose Limitations or Regularly Review Its Designation of Fees", "paragraphs": ["Analytical Perspectives\u2019 government-wide totals of fees may include  inaccurately labeled collections\u2014other collections that are not fees\u2014and  may exclude some fee collections. Data that are clear and accessible are  presented with known limitations, as shown in table 1. OMB Circular No.  A-11 states that all accounts in which more than half of collections are  from fees will be designated as containing fees. OMB staff said that the  entire account is designated as containing fees because account-level  data are the most disaggregated data OMB collects from agencies. OMB  calculates its government-wide total for fees by adding collections in all  accounts designated in OMB MAX as containing user fees. However,  agency accounts can include multiple sources of budget authority. For  example, Treasury\u2019s U.S. Mint\u2019s account \u201cUnited States Mint Public  Enterprise Fund\u201d includes offsetting collections from Mint operations and  programs; these include the production and sale of commemorative coins  and medals, the production and sale of circulating coinage, the protection  of government assets, as well as gifts and bequests of property.  The  United States Mint Public Enterprise Fund is designated as containing  fees in OMB MAX.  Therefore, budget authority that is not derived from the  collection of fees but is still included in this account will be designated as  fees as well when calculating a government-wide total.", "Conversely, accounts in which fees contribute to less than half of  collections are not designated as containing fees amounts, and those  fees will not be included in the government-wide total OMB calculates.  OMB Circular No. A-11 describes the designation of fee accounts, but the  data presented in Analytical Perspectives as totals for fees do not  disclose OMB\u2019s designation criteria, including the limitations to the  accuracy of the data. OMB staff said they do not report this limitation  because they consider OMB Circular No. A-11 a more appropriate  document for providing technical information like the designation of  accounts containing user fees. However, the section on fees in Analytical  Perspectives does not direct the reader to OMB Circular No. A-11 for key  information related to the data presented on fees. For other topics,  including lease-purchase agreements, Analytical Perspectives directs the  reader to OMB Circular No. A-11 for further details. Furthermore, for other  topics, OMB provided explanatory information along with the data in  Analytical Perspectives. For example, OMB explained a recent change to  definitions in the research and development section of Analytical  Perspectives and the effect of the change on budget authority. Until OMB  provides a description of data limitations regarding the criteria used to  identify accounts with fees for compiling government-wide totals in  Analytical Perspectives, or directs users to the relevant section of OMB  Circular No. A-11, some users are likely to be unaware of the potential for  the total user fees to be overestimated or underestimated.", "In addition, OMB does not regularly review and update implementation of  its criteria for designating fees. Standards for Internal Control in the  Federal Government state that agency management should use quality  information to achieve the objectives, such as processing data into quality  information that is current and accurate.  OMB Circular No. A-11 states  that the fee designation is applied at the time the account is established.  OMB staff told us that when establishing a new account, OMB  collaborates with Treasury to determine the legal attributes of the  account, including any fee authorities, and whether to designate the  account as containing fees. OMB staff further explained they review the  designation when new legislation is enacted that would change the  attributes of the account, or if an agency informs OMB that the makeup of  an account has changed because of programmatic changes. However,  OMB Circular No. A-11 does not instruct agencies to regularly review or  update this designation and report changes to OMB. Therefore, if the  makeup of collections in an account changes so that fees go from being  more than half of the collections to less than half, or vice versa, the  account\u2019s fee designation may not be updated accordingly. Until OMB  instructs agencies to regularly review the fee designation in OMB MAX  and update the designation, as needed, OMB cannot provide reasonable  assurance that accounts are designated correctly, and that the  government-wide totals of fees reported in Analytical Perspectives are  accurate."], "subsections": []}]}, {"section_title": "OMB and Treasury Sources Do Not Completely Identify Fees, Fines, and Penalties", "paragraphs": [], "subsections": [{"section_title": "Users Cannot Disaggregate the Agency Account-Level Data to Specific Fee, Fine, and Penalty Collections", "paragraphs": ["While Analytical Perspectives reports government-wide data labeled as  fees, fines, and penalties, the other three sources we reviewed\u2014the  Budget Appendix, the Public Budget Database, and the Combined  Statement\u2014report account-level information by agency. Users cannot  further disaggregate the data presented to specific fee, fine, and penalty  collections. For example, USDA\u2019s Animal and Plant Health Inspection  Service (APHIS) is funded in part by six fees: (1) Agricultural Quarantine  Inspection (AQI) fee, (2) Phytosanitary Export Certification fee, (3)  Veterinary Services Import Export fee, (4) Veterinary Diagnostics fee, (5)  Reimbursable Overtime, and (6) Trust Funds and Reimbursable Funds.   However, a user cannot identify collections from each of these APHIS  fees in the Budget Appendix. The Budget Appendix specifically identifies  AQI fee collections\u2014$768 million in fiscal year 2017\u2014because they are  receipts deposited to a trust fund. The other five fees are combined within  the total for offsetting collections\u2014$152 million (see figure 3).", "The Budget Appendix, the Public Budget Database, and the Combined  Statement report data at the account level because the purposes of these  reports are broader than fees, fines, and penalties, and OMB and  Treasury instruct agencies to report data at that level. Treasury\u2019s  Financial Manual states that agencies post appropriations and spending  authorizations by Congress to accounts established by Treasury. OMB\u2019s  Circular No. A-11 instructs agencies to report data at the budget account  level in OMB MAX, which supports the data in the Budget Appendix and  the Public Budget Database. Because OMB and Treasury do not collect  data that can be disaggregated to the level of fee, fine, or penalty, the  collections for specific fees, fines, and penalties within accounts are not  identifiable within account totals."], "subsections": []}, {"section_title": "OMB Data Sources Label Data More Broadly than Fees, Fines, and Penalties", "paragraphs": ["Both the Budget Appendix and Public Budget Database label and present  data within each account by collection type: offsetting collections,  offsetting receipts, and governmental receipts. These collection types  include fees, fines, and penalties, as well as other sources of collections,  as shown in the text box below.", "Budgetary Collections as Labeled by the Budget of the U.S. Government Include  More than Fees, Fines, and Penalties", "Offsetting Collections and Offsetting Receipts include user fees as w ell as  reimbursements  for damages,  intragovernmental  transactions, and voluntary gifts  and donations  to the government.", "Governmental Receipts include collections that result from the government\u2019s  exercise of its sovereign pow er to tax or otherw ise compel  payment,  and include  taxes, compulsory  user fees, regulatory fees, customs duties, court fines, certain  license fees, and deposits of earnings by the Federal  Reserve System.", "As a result, the user cannot separate fees, fines, and penalties from other  collections. For example, offsetting collections may include fees,  reimbursements for damages, gifts or donations of money to the  government, and intragovernmental transactions with other government  accounts.", "Analytical Perspectives explains that amounts collected by government  agencies are recorded in two ways that broadly affect the formulation of  the government-wide budget, but may not provide detail on specific  agency collections: (1) governmental receipts, which are compared to  total outlays in calculating the surplus or deficit; and (2) offsetting  collections or offsetting receipts, which are deducted from gross outlays  to calculate net outlay figures. These collections are presented together  for budgeting purposes, but cannot be separated to specific fees, fines, or  penalties. Therefore, it is not clear what percentage of the reported  collections are fees, fines, and penalties as opposed to other collections."], "subsections": []}, {"section_title": "OMB Does Not Clearly Describe How the Public Budget Database Reports Certain Fee, Fine, and Penalty Collections", "paragraphs": ["Treasury\u2019s Combined Statement and OMB\u2019s Public Budget Database do  not identify offsetting collections, including collections of fees, fines, and  penalties. Instead, the Combined Statement reports net outlays, which  include any offsetting collections as deductions from outlays. Similarly,  the Public Budget Database reports budget authority net of any offsetting  collections. Treasury clearly describes this presentation of the data in the  Combined Statement, but OMB does not in the Public Budget Database.  In the \u201cExplanation of Transactions and Basis of Figures\u201d section of the  Combined Statement, Treasury describes that outlays are stated net of  collections representing reimbursements as authorized by law, which  include offsetting collections. With the description provided in the  Combined Statement, the user can understand that fees, fines, and  penalties that are offsetting collections are not identifiable in the data.", "OMB reports receipts and budget authority\u2014which include collections  from fees, fines, and penalties\u2014in separate spreadsheets of the Public  Budget Database. Similar to outlays reported in Treasury\u2019s Combined  Statement, the Budget Authority spreadsheet reports the net budget  authority of accounts after agencies have credited offsetting collections  from fees, fines, penalties, or other collections. For example, the National  Park Service reported net budget authority of $2.425 billion for the  Operation of the National Park System account in fiscal year 2017 in both  the Budget Appendix and the Public Budget Database, both of which  present data compiled in OMB MAX. The Budget Appendix presents  additional information, reporting offsetting collections that are at least  partially derived from fees of $35 million, and gross budget authority of  $2.46 billion, as shown in figure 4. The Public Budget Database, on the  other hand, does not identify the amount of offsetting collections in the  account or gross budget authority.", "OMB does not describe this presentation of the data in the Public Budget  Database User\u2019s Guide. As shown in table 1, data that are clear and  accessible are presented with descriptions of the data. The User\u2019s Guide  directs users who may not be familiar with federal budget concepts to  Analytical Perspectives and OMB Circular No. A-11. However, OMB does  not describe, either in the User\u2019s Guide or in the Budget Authority  spreadsheet of the Public Budget Database, that this source reports  budget authority net of offsetting collections, such as collections of fees,  fines, and penalties. OMB staff said they do not describe the presentation  because it is explained in Analytical Perspectives. However, the Public  Budget Database is available for download separate from Analytical  Perspectives, and the User\u2019s Guide specific to the Public Budget  Database includes other information describing the data in the  spreadsheets. Describing the presentation of the data in the User\u2019s  Guide would help ensure that users of the Public Budget Database can  correctly interpret the information and not underestimate agencies\u2019 fee,  fine, or penalty collections."], "subsections": []}]}, {"section_title": "Government-wide Sources Do Not Consistently Report Data that Would Facilitate Oversight", "paragraphs": ["No source of government-wide data consistently reports data elements  related to fees, fines, and penalties that could help inform congressional  oversight of agencies and programs, such as the amount collected  annually, account balances, and whether the collection is a fee, fine, or  penalty. See figure 5 for the extent to which data elements are included in  the Budget Appendix, Public Budget Database, and Combined  Statement. See appendix I for more detailed information on the data  elements that are useful for congressional oversight.", "To a limited extent there are some cases where government-wide reports  included data elements useful for the purpose of congressional oversight  of fees, fines, and penalties. In some cases the Budget Appendix includes  information on the fund type receiving collections and the extent to which  the collections from fees may be appropriated to the agency collecting the  fee. The Budget Appendix, for example, reports that collections for the  Agricultural Quarantine Inspection (AQI) fee are recorded under \u201cSpecial  and Trust Fund Receipts,\u201d as shown previously in figure 3. The user can  also identify the appropriation of collections from the AQI fee under  \u201cProgram and Financing, Budgetary resources,\u201d as shown below in figure  6. As discussed previously, the other five fees the Animal and Plant  Health Inspection Service(APHIS) collects are not individually identifiable  in the Budget Appendix, but fall under offsetting collections.", "OMB and Treasury reports, and the systems that support them, are  designed for budget and financial information and not for an inventory of  fees, fines, and penalties that includes the data elements that Congress  may use in oversight. OMB staff said the agency does not have a  requirement to prioritize reporting fee, fine, and penalty data over more  detailed information on other types of funds. OMB staff said while they  generally agree that additional data elements would be useful for  oversight, there are trade-offs between transparency and the burden of  collecting and reporting additional information."], "subsections": []}]}, {"section_title": "Better Reporting of Government-wide Data on Fees, Fines, and Penalties Would Increase Transparency and Data Available for Oversight, but Would Require an Investment of Federal Resources", "paragraphs": [], "subsections": [{"section_title": "Benefits Include Increased Transparency and Better Information for Oversight and Decision-Making", "paragraphs": ["According to OMB staff and officials from Treasury, the Congressional  Research Service, and external organizations with expertise in federal  budget issues and data transparency, there are two primary benefits to  government-wide reporting of fee, fine, and penalty data: increased  transparency and better information for congressional oversight and  decision-making. Generally, all congressional staff we spoke with said  making additional government-wide data on fees, fines, and penalties,  such as those data elements described previously, without additional  outreach to agencies, would be useful and increase transparency. While  some congressional staff said such data elements are available through  direct outreach to agencies, other congressional staff told us they could  not always obtain the information they wanted. For example, staff from a  congressional committee said that one of the most critical data elements  for the purpose of congressional oversight is information on agency  reporting of obligations and expenditures because, in their view, currently  many agencies do not adequately report this information and some  agencies do not report this information at all. These data would provide  Congress a more complete picture of individual agencies\u2019 activities and  any potential overlap or duplication in multiple agencies\u2019 activities.  Congressional staff also said having government-wide data on collections  of fees could inform efforts that are crosscutting in nature. For example,  APHIS  and Customs and Border Protection jointly implement the AQI  program to help prevent the introduction of harmful agricultural pests and  diseases into the United States, and AQI fee collections are divided  between the two agencies.", "Publicly available data on government-wide collections of fines and  penalties could inform the public on agency enforcement activities and  compliance of regulated parties, such as those related to health or safety.  Some officials from external organizations and congressional staff said  that it would be useful to have government-wide data on individual fines  and penalties levied by agencies. For example, the Environmental  Protection Agency publishes an online database on its compliance and  enforcement actions, Enforcement and Compliance History Online  (ECHO). According to the website, the data available on ECHO allows  the public to monitor environmental compliance in communities,  corporations to monitor compliance across facilities they own, and  investors to more easily factor environmental performance into decisions.  Further, an official from an external organization with expertise in data  transparency stated that, ideally, a user would be able to link fine and  penalty data to spending data on USAspending.gov to increase  transparency in instances where an organization receiving a federal grant  or contract has also had a fine or penalty levied against it.", "Last, publicly available government-wide data on collections could inform  the public, specifically payers of fees, fines, and penalties, and facilitate  their participation in public comment opportunities. For example, OMB  staff said government-wide data could provide the public with clear,  transparent information across agencies on fee collections and allow the  public to analyze differences in fee programs among agencies. Payers of  fees may be able to make more informed comments on proposed  changes to a fee program if they had information on how it relates to  other fee programs across the federal government.", "Government-wide fee, fine, and penalty data would provide more  information to facilitate congressional oversight. These data could help  Congress identify trends in collections and significant changes that could  be an indication of an agency\u2019s performance. For example, staff of a  Congressional committee stated that fine and penalty data can be used to  examine enforcement actions on a particular issue or to identify potential  trends over time as an indicator of stronger or weaker enforcement  actions by an agency. Congress could also use these data to identify  variations in enforcement action among geographic regions or as an  indicator of the frequency of violations.", "Additionally, data on review and reporting requirements can inform  congressional oversight of fees, fines, and penalties. We previously  reported that regular comprehensive reviews of fees provide opportunities  for agencies and Congress to make improvements to a fee\u2019s design  which, if left unaddressed, could contribute to inefficient use of  government resources. For example, fee reviews could help ensure that  fees are properly set to cover the total costs of those activities which are  intended to be fully fee-funded. Fee reviews may also allow agencies and  Congress to identify where similar activities are funded differently; for  example, one by fees and one by appropriations. One such example is  the export control system, in which the State Department charges fees for  the export of items on the U.S. Munitions List, while the Commerce  Department does not charge fees for those items exported under its  jurisdiction.", "Government-wide reporting of fee, fine, and penalty data could also  inform Congress\u2019s funding decisions by providing a clearer picture of  agencies\u2019 total resources. Congressional staff stated that knowing the  statutory authority to collect and obligate funding from fees, fines, and  penalties\u2014along with any appropriation an agency may have received  from an annual appropriation act, which are currently available to  congressional staff\u2014would provide a more complete picture of an  agency\u2019s total annual funding, including the portion attributed to the  taxpayer and the portion attributed to payers of specific fees, fines, and  penalties. For example, staff from congressional committees we spoke  with said it would be useful to have data to show programs that receive  appropriations from both offsetting collections and appropriations not  derived from offsetting collections to inform decisions on how the program  is funded. Congressional staff also said this would provide more  opportunities to track the flow of money in and out of the government.  Overall funding decisions may be affected if an agency has an increase in  fee collections, for example. Congressional committee staff also said it  would be useful to have government-wide data on specific fees, fines,  and penalties that are offsetting collections because these collections are  available for obligation without going through the annual appropriations  process. Our prior work has shown that it is important to consider how the  agencies and entities with this authority facilitate oversight to ensure  effective management, transparency, and public accountability. Some  committee staff said they can request data directly from agencies when  they need more disaggregated information on fees, fines, and penalties,  and reported different levels of responsiveness from agencies. Publicly  available data could reduce potentially overlapping or duplicative requests  from staff to agencies."], "subsections": []}, {"section_title": "Potential Challenges Exist for Standardizing Definitions of Fees, Fines, and Penalties", "paragraphs": ["According to officials from agencies and external organizations, there are  potential challenges to defining the government-wide data standard or  definition of fee, fine, and penalty programs by which agencies could  report. Because there is no statutory requirement for government-wide  reporting of fee, fine, and penalty data, agencies collect and use these  data for their own purposes, and are not using government-wide data  elements and standards that are consistent and comparable between  agencies. First, an agency may define a fee program as a single fee or a  set of related fees. For example, the U.S. Citizenship and Immigration  Services charges more than 40 immigration and naturalization fees to  applicants and petitioners that could be grouped together as related fees  or split into up to 40 different fee programs. Second, officials from  external organizations said there are also challenges in defining data  standards the level of detail to report.  For example, an official from an  external organization said, for large financial penalties, it may be useful  for oversight for the data to identify each instance of the penalty, including  the fined party. However, that level of detail could raise privacy  sensitivities. For example, reporting every individual that paid an entrance  fee at a national park could present privacy concerns. Finally, for  elements that are useful for congressional oversight, one challenge could  be the timing of when funds are collected compared to when they are  available for obligation. The amount of funds collected in a year does not  necessarily equal the amount available to the agency that year. For  example, collections of Harbor Maintenance Fees are deposited to the  Harbor Maintenance Trust Fund and are not available for obligation  without appropriation. Funds collected in one year may not be necessarily  appropriated and obligated until a subsequent year.", "Our prior work on the Digital Accountability and Transparency Act of 2014  (DATA Act) implementation underscores the importance of standardized  and clearly defined data elements. We found inconsistent and potentially  confusing instructions from OMB regarding the Primary Place of  Performance data elements that resulted in inconsistent reporting among  agencies. The standard established by OMB and Treasury defines  Primary Place of Performance as \u201cwhere the predominant performance of  the award will be accomplished\u201d while other instructions define it as \u201cthe  location of the principal plant or place of business where the items will be  produced, supplied from stock, or where the service will be performed.\u201d  We found some agencies used the first definition and some used the  second. In one case, the Departments of Labor and Health and Human  Services issued contracts to the same company for similar office printers,  but one reported the primary place of performance as California, the  location of the office where the printers were delivered and used. The  other agency reported the primary place of performance as New Jersey,  the location of the company that supplied the printers. As a result, the  data were not comparable between agencies or across the federal  government, limiting the usefulness for congressional oversight. We  previously recommended that OMB and Treasury provide additional  instruction to agencies on how to report Primary Place of Performance to  ensure the definitions are clear and the data standards are implemented  consistently by agencies.", "Staff from one congressional committee cautioned that attempts to  present information on budget authorities for fees, fines, and penalties in  a simple and accessible database create an unacceptable risk of  confusion and legislative error. The staff said an accurate description of  the nature of the spending\u2013-including whether there is authority to  obligate without further appropriation\u2013-would be labor intensive and  require significant legal analysis and research."], "subsections": []}, {"section_title": "Government-wide Reporting Would Require an Investment of Federal Resources", "paragraphs": ["Government-wide reporting of fees, fines, and penalties could increase  transparency and facilitate oversight and decision-making, but would  require time and resources to develop given that there is currently no  government-wide system or requirements for agencies to collect and  report detailed fee, fine, and penalty data. The level of federal investment  would vary depending on factors, such as the number of data elements  included and the level of detail reported. Developing a comprehensive  and accessible data source would provide greater benefits, but would  likely be resource intensive. We have reported on other federal  transparency efforts that could provide strategies for reporting  government-wide fee, fine, and penalty data. For example, to create a  clear and accessible government-wide data source that includes the data  elements we identified that would be useful for congressional oversight,  Treasury officials said the process would be similar to the implementation  of the DATA Act for spending data. To implement the DATA Act, OMB  and Treasury led an intensive effort starting in May 2014 through May  2017 when the first government-wide data were reported under the DATA  Act\u2019s new standards.", "Data Standards: OMB, in coordination with Treasury, established 57  standardized data element definitions and approximately 400  associated sub-elements for reporting federal spending information.  OMB and Treasury created opportunities for non-federal stakeholders  to provide input into the development of data standards, including  publishing a Federal Register notice seeking public comment on the  establishment of financial data standards; presenting periodic updates  on the status of DATA Act implementation to federal and non-federal  stakeholders at meetings and conferences; soliciting public comment  on data standards using an online collaboration space; and  collaborating with federal agencies on the development of data  standards and the technical schema through MAX.gov, an OMB- supported website.", "Technical Process for Reporting: Treasury developed the initial  DATA Act Information Model Schema, which provided information on  how to standardize the way financial assistance awards, contracts,  and other financial and nonfinancial data would be collected and  reported under the DATA Act.", "System to Collect and Validate Data: Treasury developed a system  that collects and validates agency data (the DATA Act Broker), which  operationalizes the reporting framework laid out in the schema. In  addition, Treasury employed online software development tools to  provide responses to stakeholder questions and comments related to  the development and revision of the broker.", "Public Reporting: Treasury created and updated the new  USAspending.gov website to display certified agency data submitted  under the DATA Act.", "Agencies also took steps to prepare to report spending data. They  reviewed data elements OMB identified, participated in standardizing the  definitions, performed an inventory of their existing data and associated  business processes, and updated their systems and processes to report  data to Treasury. OMB and Treasury issued policy directions to help  agencies meet their reporting requirements under the act. They also  conducted a series of meetings with participating agencies to obtain  information on any challenges that could impede effective implementation  and assess agencies\u2019 readiness to report required spending data.", "Although the steps to developing comprehensive, detailed reporting on  government-wide collections of fees, fines, and penalties might be similar  to the DATA Act efforts, the dollar amounts of collections would be  smaller than those of federal spending. In fiscal year 2017, federal  spending was $3.98 trillion compared to about $350 billion in collections  of fees, fines, penalties, and forfeitures reported by OMB.  On the other  hand, defining data elements and standards for fee, fine, and penalty data  could be more resource intensive than developing data standards for  DATA Act implementation because the DATA Act built on earlier reporting  requirements. The DATA Act amended the Federal Funding  Accountability and Transparency Act of 2006 (FFATA), which required  OMB to establish the website USAspending.gov to report data on federal  awards, including contracts, grants, and loans. The DATA Act required  OMB and Treasury to standardize data required to be reported by  FFATA. For fee, fine, and penalty data, OMB and Treasury would be  starting without the benefit of some data elements already defined.  Further, we have previously reported that effective implementation of  provisions to make federal data publicly available, including the DATA Act  and GPRAMA\u2019s program inventory, especially the ability to crosswalk  spending data to individual programs, could provide vital information to  assist federal decision makers in addressing significant challenges the  government faces.", "Incorporating a small number of data elements that Congress identifies as  most useful for oversight into ongoing government-wide agency reporting  efforts could incrementally improve transparency and information for  oversight and decision-making, with fewer resources. For example,  Congress required agencies to add selected data elements to their  annual financial reports on civil monetary penalties. Specifically, the  Federal Civil Penalties Adjustment Act Improvements Act of 2015  requires agencies to include information about the civil monetary  penalties within the agencies\u2019 jurisdiction, including catch-up inflation  adjustment of the civil monetary penalty amounts, in annual agency  financial reports or performance and accountability reports. As shown in  figure 7, to facilitate agencies\u2019 reporting, OMB provided a table to define  the data elements required in the act in its annual instructions, OMB  Circular No. A-136, Financial Reporting Requirements.", "Agencies started reporting these data in their agency financial reports in  fiscal year 2016. In July 2018, we reported that 40 of 45 required  agencies reported in their fiscal year 2017 agency financial report  information on civil monetary penalties as directed by the OMB  instructions. Similarly, if Congress sought additional fine and penalty  data elements, such as amounts collected and authority to spend  collections, OMB could expand this table in Circular No. A-136 to include  those data elements. Circular No. A-136 also outlines that agencies may  include the results of biennial reviews of fees and other collections in their  agency financial reports. OMB could also update this portion of the  circular to require agencies to report specific data elements that are  useful for oversight, such as review and reporting requirements. While  this information reported in agency financial reports would be  disaggregated in portable document format, or PDF, documents, it would  provide some transparency on agencies\u2019 activities that Congress could  use to prioritize its oversight efforts.", "In another example, if OMB implements the federal program inventory as  required by GPRAMA, it could include a data element on whether a  program has a fee, fine, or penalty. We previously reported that the  principles and practices of information architecture\u2014a discipline focused  on organizing and structuring information\u2014offer an approach for  developing such an inventory to support a variety of uses, including  increased transparency for federal programs. A program inventory  creates the potential to aggregate, disaggregate, sort, and filter  information across multiple program facets. For example, from a user\u2019s  perspective, a program could be tagged to highlight whether it includes  activities to collect fees, fines, or penalties. Then, a user interested in this  data facet could select a tag (e.g., fees) that could generate a list of  programs that also have fees, fines, or penalties. While the program  inventory is broader than agency collections of fees, fines, and penalties  and would include programmatic descriptions, it would increase  transparency by enabling Congress and the public to identify and isolate  all programs that include, as a source of funding or a key data element, a  fee, fine, or penalty to inform oversight and target additional requests for  information to agencies."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Federal agencies are authorized to collect hundreds of billions of dollars  from fees, fines, and penalties each year that fund a wide variety of  programs, but Congress and the American public do not have  government-wide data on these collections that would provide increased  transparency and facilitate oversight. OMB\u2019s MAX database contains  some disaggregated data labeled as fees, fines, and penalties, but OMB  does not make these data publicly available. Without more  disaggregated, government-wide, accessible data on collections of fees,  fines, and penalties, such as by agency, Congress and the public do not  have a complete and accurate picture of federal finances, the sources of  federal funds, and the resources available to fund federal programs.", "In addition, improving the data OMB currently reports related to fees,  fines, and penalties could help the user better understand the data and  the potential limitations. First, until OMB describes how it identifies  accounts with fees including that the government-wide totals of fees it  reports in Analytical Perspectives may include collections that are not  fees and exclude some fee collections, some users will likely be unaware  that reported totals could be over- or under-estimates. Second, without  OMB instruction to agencies to regularly review and update  implementation of the criteria for designating accounts that contain fees,  accounts could be designated incorrectly if the makeup of the collections  changes. Therefore, OMB cannot provide reasonable assurance that the  total amount of fees it reports is accurate. Third, until OMB describes in  the User\u2019s Guide that its Public Budget Database reports budget authority  net of offsetting collections, including collections of fees, fines, and  penalties, users could misinterpret the information and underestimate  collections in some cases.", "OMB and Treasury do not collect many of the data elements on fees,  fines, and penalties that would be useful for congressional oversight, such  as review and reporting requirements. There are trade-offs between the  potential costs and the potential benefits. While reporting government- wide data on specific fees, fines, and penalties would improve  transparency and information for decision-making, more data elements  would require greater investment of resources from OMB, Treasury, and  agencies. Any new reporting of fee, fine, and penalty data would be most  useful if it is designed to be compatible with other transparency efforts\u2014 the DATA Act reporting and the federal program inventory. Regardless of  the approach taken, linkage of data on fees, fines, and penalties with  other government-wide data reporting, such as USASpending.gov, would  enhance transparency and facilitate congressional oversight."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to OMB:  The Director of OMB should make available more disaggregated data on  fees, fines, and penalties that it maintains in its OMB MAX  database. For  example, OMB could report data on fee collections by agency in  Analytical Perspectives. (Recommendation 1)", "The Director of OMB should present, in Analytical Perspectives, the data  limitations related to the government-wide fee totals by describing the 50- percent criteria OMB uses to identify accounts with fees or by directing  users to the relevant sections of OMB Circular No. A-11.  (Recommendation 2)", "The Director of OMB should instruct agencies to regularly review the  application of the user fee designation in the OMB MAX data and update  the designation, as needed, to meet the criteria in OMB Circular No. A-11.  (Recommendation 3)", "The Director of OMB should describe in the Public Budget Database  User\u2019s Guide that budget authority is reported net of any offsetting  collections, such as collections of fees, fines, and penalties.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to Treasury and OMB for review and  comment on December 10, 2018. Treasury informed us that they had no  comments. As of March 4, 2019, OMB did not provide comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of the Treasury, and the  Director of the Office of Management and Budget. In addition, the report  is available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or nguyentt@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report examines: (1) the extent to which government-wide data on  collections of fees, fines, and penalties are publicly available and useful  for the purpose of congressional oversight, and (2) the benefits and  challenges to government-wide reporting of specific fees, fines, and  penalties including data elements that facilitate congressional oversight.", "To assess the extent and usefulness of publicly available data, we  developed criteria for the availability and usefulness for the purpose of  congressional oversight of data on collections of fees, fines, and penalties  reported in government-wide sources (see table 3).", "The first three criteria\u2014clear and accessible presentation, complete, and  accurate\u2014address the availability of the data and the final criterion,  useful for the purpose of congressional oversight, addresses content of  the data specific to congressional oversight needs. These criteria are  based on:", "Standards for Internal Control in the Federal Government related to", "Digital Accountability and Transparency Act of 2014 (DATA Act) government-wide instruction from the Office of Management and  Budget (OMB) on public access to data and open government, our prior work on user fees, fines, and penalties, and  input from staff of congressional committees on appropriations,  budget, and oversight.", "Using a standard list of semistructured interview questions, we  interviewed congressional staff that were available to meet with us on or  before November 1, 2018. We shared the criteria with OMB staff and  Department of the Treasury (Treasury) officials, and they agreed the  criteria are relevant and reasonable.", "To identify publicly available government-wide sources of data with  information on collections of fees, fines, and penalties, we reviewed our  prior work on user fees, fines, penalties, and permanent funding  authorities, conducted general background research including reviewing  Congressional Budget Office (CBO) and Congressional Research Service  (CRS) reports, and interviewed staff from OMB, and officials from  Treasury, CBO, and CRS. We identified the Budget of the U.S.  Government\u2014including Analytical Perspectives, the Budget Appendix,  and the Public Budget Database\u2014produced annually by OMB; the  Financial Report of the U.S. Government (Financial Report), the Daily  Treasury Statement, the Monthly Treasury Statement, the Combined  Statement of Receipts, Outlays, and Balances, and USAspending.gov  produced by Treasury; and CBO products, such as its budget projections  and historical budget tables as containing government-wide federal  budget or financial data.", "Of the sources we identified, we included Analytical Perspectives, the  Budget Appendix, the Public Budget Database, and the Combined  Statement of Receipts, Outlays, and Balances in our study because they  contain government-wide information on collections of fees, fines, and  penalties. We excluded the Treasury\u2019s Daily Treasury Statement, Monthly  Treasury Statement, Financial Report, and USAspending.gov from this  review because we determined that the information presented did not  differentiate between types of collections in a way that would allow us to  separately identify fees, fines, and penalties. For example, Treasury\u2019s  Financial Report reports government-wide information in categories that are broader than fees, fines, and penalties. Specifically, it reports \u201cearned  revenue,\u201d which includes collections of interest payments for federal loan  programs. Such collections are not fees. The Financial Report also  reports fines and penalties combined with interest and other revenues.  We also reviewed and excluded CBO products because the data reported  are not designed to differentiate between types of collections.", "We assessed Analytical Perspectives, the Budget Appendix, the Public  Budget Database, and the Combined Statement of Receipts, Outlays,  and Balances using the criteria we developed for clear and accessible  presentation, accurate, and complete. We also assessed the Budget  Appendix, the Public Budget Database, and the Combined Statement of  Receipts, Outlays, and Balances using the criteria for useful for the  purpose of congressional oversight.  Further, we assessed relevant  portions of OMB and Treasury instructions using Standards for Internal  Control in the Federal Government.", "We also used OMB and Treasury data to identify and report government- wide totals for fees, fines, and penalties to the extent that they were  reported. To assess the reliability of OMB\u2019s MAX database data related to  the collections of fees, fines, and penalties, we reviewed related  documentation, interviewed knowledgeable agency officials, and  conducted electronic data testing. To assess Treasury\u2019s Bureau of the  Fiscal Service data related to the collections of fees, fines, and penalties,  we reviewed related documentation and interviewed knowledgeable  agency officials. In both cases, we found the data to be reliable for our  purposes. We did not examine whether agencies accurately report  collections as fees, fines, and penalties to OMB and Treasury.", "In addition, we identified and reviewed other sources of data on fees,  fines, and penalties that are specific to federal agencies, including annual  financial reports and agency websites. We did not apply the criteria we  developed for available and useful for the purpose of congressional  oversight to these sources because they contain data for an individual  agency rather than government-wide data.", "To determine the benefits and challenges to government-wide reporting  of fees, fines, and penalties, we interviewed staff of congressional  committees on appropriations, budget, and oversight, OMB staff and  Treasury officials, staff of CBO, and external organizations, including the  Committee for a Responsible Federal Budget, the Data Coalition, the  Data Foundation, the Project on Government Oversight, the Peter G.  Peterson Foundation, and the Sunlight Foundation, on the potential  benefits and challenges of government-wide reporting of fees, fines, and  penalties. In addition, we reviewed our prior work on the DATA Act,  federal program inventories, and federal fees, to identify and assess  issues to consider in government-wide reporting.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Susan E. Murphy (Assistant  Director), Barbara Lancaster (Analyst in Charge), Michael Bechetti,  Jacqueline Chapin, Colleen Corcoran, Ann Marie Cortez, Lorraine Ettaro,  John Mingus, and Rachel Stoiko made key contributions to this report."], "subsections": []}]}], "fastfact": ["Federal agencies collect hundreds of billions of dollars annually in fees, fines, and penalties, such as national park entry fees and penalties for violations of federal telemarketing law.", "Government-wide data could help Congress identify trends in collections and significant changes that could be an indication of an agency\u2019s performance. Currently, there is no comprehensive, government-wide report that identifies specific fees, fines, and penalties.", "We made 4 recommendations to enhance the Office of Management and Budget's current reporting on these collections, such as making more specific data publically available."]}
{"id": "GAO-18-20", "url": "https://www.gao.gov/products/GAO-18-20", "title": "Identity Theft: Improved Collaboration Could Increase Success of IRS Initiatives to Prevent Refund Fraud", "published_date": "2017-11-28T00:00:00", "released_date": "2017-11-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IRS estimates that fraudsters attempted at least $14.5 billion in IDT tax refund fraud in tax year 2015. Since 2015, GAO's High-Risk List has included IRS's efforts to address IDT refund fraud. Starting with its March 2015 Security Summit, IRS has partnered with state tax administrators and tax preparation companies, among others, on initiatives aimed at better preventing and detecting IDT refund fraud.", "GAO was asked to examine IRS's efforts to collaborate with these partners. This report, among other things, (1) describes actions taken to implement the ISAC and RRT, (2) evaluates the extent to which the ISAC pilot aligns with leading practices for pilot design, and (3) identifies actions, if any, that IRS could take to improve the ISAC pilot.", "GAO reviewed planning and other documents on the initiatives. It interviewed IRS and state officials and industry and trade organization representatives, among others involved in the ISAC and RRT. GAO also conducted four non-generalizable focus groups with state and industry partners."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) launched an Identity Theft Tax Refund Fraud Information Sharing and Analysis Center (ISAC) pilot for the 2017 filing season. It aims to allow IRS, states, and tax preparation industry partners to quickly share information on identity theft (IDT) refund fraud. The ISAC pilot includes two components: an online platform run by IRS to communicate data on suspected fraud, and an ISAC Partnership, a collaborative organization comprised of IRS, states, and industry, which is intended to be the governance structure. As of November 2017, the ISAC had 48 members: 31 states (including full members and those receiving alerts only), 14 tax preparation companies, and 3 financial institutions. In addition, IRS is using a Rapid Response Team (RRT) in partnership with states and industry members to coordinate responses to IDT refund fraud incidents that pose a significant threat within 24 to 72 hours of being discovered. IRS deployed the RRT for six incidents in 2016 and once in 2017.", "GAO found that the ISAC pilot aligns with key aspects of all five leading practices for effective pilot design GAO previously identified, but none fully. For example, IRS has worked to incorporate stakeholder input, but its message about the ISAC's benefits has not fully reached states. Further, IRS does not have criteria for assessing whether the pilot's objectives have been met. Without this assessment and better alignment with leading practices, IRS, its partners, and Congress will have difficulty determining the effectiveness of the pilot and whether to implement it more broadly.", "IRS has taken actions to improve the ISAC pilot, but the ISAC Partnership does not have an outreach plan. While the ISAC Senior Executive Board limited industry participation to partners who participated in its Security Summit, the ISAC has obtained support from trade organizations. However, officials from almost all states represented in our focus groups noted that they either had not used, or were unfamiliar with, the ISAC-specific resources. While the ISAC Board has taken steps to engage stakeholders, the ISAC Partnership does not have an outreach plan to increase membership and improve states' and industry partners' understanding of the ISAC's benefits. Without such a plan, less effective collaboration is likely among stakeholders and opportunities to prevent IDT refund fraud may be missed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends IRS ensure (1) the ISAC better aligns with leading practices for effective pilot design, and (2) the ISAC Partnership develops an outreach plan to expand membership and improve understanding of the ISAC's benefits. IRS and the ISAC Board state and industry co-chairs agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Identity theft (IDT) tax refund fraud is an evolving and costly problem that  causes hardship for legitimate taxpayers who are victims of the crime and  demands an increasing amount of the Internal Revenue Service\u2019s (IRS)  resources. IDT refund fraud occurs when a refund-seeking fraudster  obtains an individual\u2019s Social Security number, date of birth, or other  personally identifiable information (PII), and uses it to file a fraudulent tax  return seeking a refund. This crime burdens honest taxpayers because  authenticating their identities is likely to delay the processing of their  returns and refunds. IRS estimates that at least $14.5 billion in IDT tax  refund fraud was attempted in tax year 2015, of which it prevented at  least $12.3 billion (85 percent). Of the amount attempted, IRS estimated it  paid at least $2.2 billion (15 percent).", "Given current and emerging risks, in 2015 we added IRS\u2019s efforts to  address IDT refund fraud to our high-risk area for enforcement of tax  laws. This is part of our broader body of work on IDT refund fraud since  2014. We previously reported that IRS had undertaken substantial  research efforts to combat this problem, such as estimating the cost of  IDT refund fraud. The efforts also include examining the size of the  problem and evaluating whether IRS\u2019s methods for authenticating  taxpayers provide reasonable assurance that the authentication  determination is accurate. Our work and associated recommendations  have helped IRS continue to adapt as it confronts new and evolving  schemes.", "To further address IDT refund fraud, IRS held a Security Summit in March  2015, with representatives such as state tax administrators and industry  partners, including tax preparation and software firms and financial  institutions. Following the Summit, seven working groups were created to  combat IDT refund fraud in different ways. These working groups\u2014 composed of Security Summit partners\u2014have collaborated on various  initiatives aimed at better detecting and preventing IDT refund fraud.", "You asked us to examine IRS\u2019s efforts to collaborate with state and  industry partners to combat IDT refund fraud. This report (1) describes  actions Security Summit partners are taking to implement two initiatives,  an Information Sharing and Analysis Center (ISAC) and a Rapid  Response Team (RRT); (2) evaluates the extent to which the ISAC pilot  aligns with leading practices for pilot design; and (3) identifies actions, if  any, that IRS could take to improve the ISAC pilot.", "We selected the ISAC and RRT from among those initiatives identified in  the June 2016 IRS Commissioner\u2019s Security Summit Update Report as  the focus of our review because of their importance, the potential for a  major effect on IDT refund fraud, and the timeline for planned actions.", "To address each objective, we reviewed documents from IRS, the ISAC  Senior Executive Board (Board), the ISAC working group, and the  Information Sharing working group. These documents included meeting  minutes, planning documents, the biweekly ISAC dashboard, and weekly  ISAC updates from IRS\u2019s contractor. We observed a training session  IRS\u2019s contractor conducted for new ISAC members, and we received a  demonstration from the contractor of the ISAC online platform  capabilities. In addition, we conducted semistructured interviews with  IRS, state, and industry co-leads of the ISAC and Information Sharing  working groups; ISAC Board co-chairs; the outreach and metrics ISAC  Board subgroups; and trade organizations including the Federation of Tax  Administrators and American Coalition of Taxpayer Rights.", "To further address all objectives, we conducted four focus groups in  March and April 2017\u2014two sessions with states and two sessions with  industry partners. We randomly selected states from among those with an  official who participated in the ISAC or Information Sharing working  groups and from among those that had not been involved in either  working group. We selected industry partners from among those involved  in those working groups. We excluded from our sample states or industry  partners with whom we previously conducted\u2014or planned to conduct\u2014a  separate semistructured interview. We asked similar questions of each  focus group with some variation between state and industry groups. We  transcribed the focus group sessions and analyzed the data to identify  common themes and patterns. We used these sessions to provide  illustrative examples of state and industry perceptions of the  accomplishments of, and challenges to implementing, the ISAC and RRT.", "The responses are non-generalizable and do not reflect opinions of all  states or industry partners.", "To evaluate the extent to which the ISAC aligns with the five leading  practices for pilot design, we reviewed our prior work and compared IRS  actions against these practices and criteria. Our April 2016 report  describes the criteria we developed for evaluating pilot design and the  methodology we used to do so. Further, we compared IRS actions to  the internal control standard for having a plan to meet its objective. See  appendix I for additional details on the objectives, scope, and  methodology.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Viewed broadly, IDT refund fraud is comprised of two crimes: (1) stealing  or compromising PII and (2) using stolen (or otherwise compromised) PII  to file a fraudulent tax return and collect a fraudulent refund. Figure 1  presents an example of how fraudsters may use stolen PII and other  information, real or fictitious (e.g., sources and amounts of income), to  complete and file a fraudulent tax return and receive a refund. In this  example, a taxpayer may alert IRS of IDT refund fraud. Alternatively, IRS  can detect IDT refund fraud through its automated filters that search for  specific characteristics as well as through other reviews of taxpayer  returns."], "subsections": [{"section_title": "Information Sharing and Analysis Centers", "paragraphs": ["In May 1998, Presidential Decision Directive 63 introduced and  promulgated the concept of ISACs, which help critical infrastructure  owners and operators protect facilities, personnel, and customers from  cyber and physical security threats and other hazards. ISACs typically  collect, analyze, and disseminate actionable threat information to their  members and provide members with tools to mitigate risks and enhance  resiliency. ISACs have been used in other sectors such as energy,  financial services, and surface transportation to facilitate coordination  between public and private entities. We have reported that ISACs have  developed diverse management structures and operations to meet the  requirements of their respective critical infrastructure sectors. Likewise,  we also have assessed federal support to fusion centers, information  sharing platforms between the government and the private sector that  prevent and respond to criminal and terrorist activity.", "ISAC characteristics differ across various sectors; however, we have  reported common challenges\u2014including information sharing\u2014that need  to be addressed for an ISAC to be successful. Barriers to information  sharing may stem from practical considerations because the benefits of  sharing information are often difficult to discern, while the risks and costs  of sharing are direct and foreseeable. As a result, we have noted that it is  important to lower the practical risks of sharing information through both technical means and policies, and to develop internal systems that are  capable of supporting operational requirements without interfering with  core operations.", "IRS\u2019s Information Sharing and Analysis  Center Mission   The mission is to provide a secure platform  via a sustainable public/private partnership to  facilitate information sharing, consistent with  applicable law, and analytics necessary to  detect, prevent, and deter activities related to  stolen identity refund fraud.", "IRS\u2019s ISAC\u2014the Identity Theft Tax Refund Fraud-Information Sharing  and Analysis Center\u2014 is intended to improve collaboration and  information sharing among IRS, states, and industry partners and began  as a pilot in January 2017. (See sidebar.) Two entities operate under the  ISAC umbrella. One entity is the ISAC Partnership, a collaborative  organization run jointly by IRS, states, and industry partners. The other  entity is the ISAC online platform, which is controlled by IRS and includes  an early warning alarm system that allows states and industry partners to  share information related to IDT refund fraud and schemes more quickly  to better defend against fraud."], "subsections": []}, {"section_title": "Additional Information Sharing Efforts", "paragraphs": ["Outside of the ISAC, four other efforts have supported information sharing  about potential IDT refund fraud for years.", "Suspicious Filer Exchange: The Federation of Tax Administrators  (FTA) operates an online platform for states to share information\u2014 including record-level data\u2014among themselves about suspected  fraud.", "Industry Leads Program: This IRS-operated program requires tax  preparation companies to perform post-filing analysis and provide, on  a recurring and timely basis, information to IRS on IDT refund fraud  patterns and indices as a condition of electronically filing returns. IRS  then provides this information to states, which are to use the  information to bolster their fraud detection and prevention efforts.", "External Leads Program: This IRS-operated program involves third  parties such as banks or other financial institutions providing  information to IRS about questionable refunds. If the questionable  refund is confirmed as fraudulent, IRS requests that the financial  institution return the refund.", "Opt-In Program: IRS operates this program that allows financial  institutions to electronically reject suspicious refunds and return them  to IRS and indicate why the institution is rejecting the refunds."], "subsections": []}, {"section_title": "Rapid Response Team", "paragraphs": ["The RRT, which began in the 2016 filing season, coordinates responses  to IDT refund fraud incidents that IRS, states, or industry partners believe  pose a significant and immediate threat to taxpayers or the tax system.  The Information Sharing work group is responsible for managing the RRT  and is led by one representative each from IRS, states, and industry. The  main component of the RRT process is a call among relevant IRS, state,  and industry partners to coordinate a response to the incident. IRS\u2019s goal  is to convene the call within 24 to 72 hours after an incident is discovered.  The RRT process describes the next steps for the first 3 days after an  incident is identified.", "The RRT process differs depending on whether the incident is reported  by IRS, a state, or an industry partner, based on the laws governing  information sharing discussed later in this report. For example, if a state  identifies an incident, the RRT process indicates that the state should  share that information\u2014including Social Security numbers as  appropriate\u2014with IRS and other states on the next business day and with  industry in the next 2 to 3 days. If IRS or an industry partner identifies an  incident, the RRT process indicates that IRS or the industry partner  should share relevant information in the next 2 to 3 days.", "In the 2016 filing season, the RRT was deployed for six incidents. For  example, as we reported in January 2017, IRS announced in February  2016 that cybercriminals had stolen more than 100,000 e-file Personal  Identification Numbers (PIN) from an online tool. Stolen e-file PINs  could be used to file fraudulent federal tax returns."], "subsections": []}]}, {"section_title": "IRS Has Taken Significant Actions to Facilitate Information Sharing through the ISAC and RRT", "paragraphs": ["IRS implemented the ISAC in 2017 to facilitate information sharing among  IRS, state, and industry partners\u2014subject to disclosure prohibitions\u2014by  launching an online platform, establishing a governance structure, and  recruiting members. IRS and state officials and industry representatives  attributed increased trust and improved relationships to IRS\u2019s efforts in  recent years. Additionally, IRS coordinated with state and industry  partners to establish the RRT in 2016, which has been initiated once thus  far in 2017."], "subsections": [{"section_title": "IRS Actions to Implement the ISAC Include Launching the Online Platform and Recruiting Members", "paragraphs": ["The ISAC online platform provides two capabilities\u2014alerts and record- level data\u2014which facilitate information sharing.", "Alerts: This capability consists of alerts on potential IDT refund fraud  that have been identified by IRS, states, or an industry partner and  shared on the ISAC online platform. Alerts are available to all states  and Security Summit partners who sign a terms of use agreement.  Alerts include detailed information about identified schemes,  indicators of suspicious activity, and types of accounts targeted,  among other things. Alerts may also include anecdotal evidence from  ISAC members who have already been targeted by this scheme.", "Record-level data and analysis: This capability consists of several  tools to facilitate IDT refund fraud prevention and detection, including  a secure data transfer tool that members can use to input IDT refund  fraud data and record-level data. Record-level data may include PII or  other details about suspected fraud. States and industry partners  share record-level data with the ISAC. However, according to IRS  officials, IRS does not due to legal restrictions. This part of the ISAC  also contains, among other things, analytic reports which identify, for  example, Internet Protocol (IP) addresses associated with potential  fraud. This space is only accessible to full ISAC members.", "Information that is shared and available to be reviewed by various ISAC  stakeholders is controlled by disclosure laws within the Internal Revenue  Code. According to IRS officials, IRS does not contribute Federal Tax  Information to the ISAC because those data are protected from disclosure  under section 6103 of the Internal Revenue Code, which generally  prohibits IRS from disclosing tax returns or return information. Similarly,  IRS does not control or have ownership of any record-level data on the  ISAC. Instead, IRS receives record-level data directly from states and  industry partners through other channels such as the External Leads  Program. IRS can, however, still contribute alerts that do not include  record-level data.", "Moreover, unless exempted, section 7216 of the Internal Revenue Code  prohibits disclosure or use of taxpayer information by preparers of returns  and imposes criminal penalties on knowing or reckless disclosure.  Disclosure of information from one preparer to another preparer or  disclosure to federal, state, or local officials to inform them of activities  that may constitute a crime is permitted by Department of the Treasury  (Treasury) regulation. As seen in figure 2, tax preparation companies\u2014 covered under section 7216 and referred to as industry 7216\u2014have full  access to all of the information provided to the ISAC. However, financial  institutions\u2014not covered under section 7216 and referred to as industry  non-7216\u2014are not able to view record-level data submitted by, or  comingled with data from, tax preparation companies. Three of the 17  industry members of the ISAC are financial institutions\u2014non-7216  entities\u2014and therefore have this more limited view.", "IRS contracted with a company to facilitate information sharing among  partners. The contractor developed and manages the online platform  and also analyzes data on IDT fraud, which it makes available to IRS\u2019s  ISAC members. In addition, IRS developed a governance structure for the  ISAC. Figure 3 shows these and other key events.", "Three of IRS\u2019s goals for the ISAC when it launched in 2017 were to (1)  launch the online platform, (2) establish the governance structure, and (3)  recruit new members.", "In terms of its first goal, as noted, the online platform became operational  January 23, 2017. IRS\u2019s contractor provided ISAC members with training  on how to use the online platform and how to use the data visualization  tools. (See figure 4.) The data visualization tools include charts and  figures with data on trends in refund fraud. The tools are available to  members of the ISAC with the exception of financial institutions that  cannot view data visualization tools compiled with tax preparation  company data (as noted in figure 2 earlier).", "The ISAC also established a community of practice (COP) that brings  together fraud analysts from IRS, states, and industry partners to share  leading practices. The intent is to encourage dialogue among staff  involved in implementing fraud prevention strategies. In our focus groups,  an industry official said that the COP has been a positive experience for  industry, but most state officials said they were not familiar with the COP.", "In terms of establishing a governance structure, the ISAC Partnership is  governed by the ISAC Senior Executive Board (Board) that consists of 15  members, with 5 representatives each from IRS, states, and industry. The  Board is principally responsible for crafting mission or vision statements  for the ISAC Partnership, recommending ISAC operating procedures,;  and nominating new ISAC Platform participants and recommending the  removal of such participants, among other responsibilities. An IRS  executive official must approve any recommendation by the Board that  affects the online platform. The partnership also includes three  subgroups: metrics, outreach, and governance.", "IRS also made progress on its goal of recruiting new participants. As of  November 2017, the ISAC had 24 full state members, 7 alerts-only state  members, 14 tax preparation company members, and 3 financial  institution members. An additional 7 states have membership pending. In  total, 38 states are members (either full members or those receiving only  alerts) or have membership pending. Goals moving into the 2018 filing  season include increasing the participation of current members, exploring  additional analytical capabilities, and establishing and refining  performance metrics."], "subsections": []}, {"section_title": "Partners Attributed Improved Collaboration to the Security Summit and ISAC", "paragraphs": ["In our focus groups, industry representatives said that they see ISAC  collaboration as critical to managing IDT threats. The ISAC is intended to  go beyond other efforts, most notably in that it brings IRS, states, and  industry together in equal partnership and allows for communication  among all stakeholders. IRS reports over 1.8 million leads submitted to  the ISAC from 14 partners. However, the number of leads does not reflect  their quality. Industry representatives we spoke with in our focus groups  said that they would like feedback from IRS on the usefulness of industry  leads so that they can adjust their fraud filters and provide more accurate  leads.", "These comments about the usefulness and quality of industry leads are  consistent with what our prior work has found on the value of external  leads. Specifically, in 2014, we recommended that IRS take the following  actions on its External Leads Program:  1.  provide aggregated information on both the success of external leads  in identifying suspicious returns, and also emerging trends (pursuant  to section 6103 restrictions), and  2.  develop a set of metrics to track external leads by the submitting third  party.", "IRS has taken steps to address these recommendations, including  developing timeliness metrics for managing leads and holding six  feedback sessions with financial institutions participating in the External  Leads Program. As of November 2017, we are following up with industry  members to determine if they consider the feedback accurate, timely, and  actionable. Without such feedback, the more than 600 external parties  participating in the External Leads Program do not know if the leads they  provide to IRS are useful and they may not be able to assess their  success in identifying IDT refund fraud or improve their detection tools.", "In the focus groups, both state officials and industry representatives said  the relationship among IRS, states, and industry has improved as a result  of increased collaboration over the last several years. As of November  2017, the ISAC had 48 members. Further, IRS officials said they think  trust and the relationship between all parties has and is continuing to  improve. Likewise, in the focus groups, industry officials cited benefits of  improved coordination from the Security Summit. For example, one  industry representative cited IRS\u2019s pushing out communications faster  because of the Security Summit, while another noted that participation in  the summit has made IRS officials more accessible.", "However, in focus groups, a few state officials noted that because IRS is  compartmentalized, they have found their interactions with IRS to be  inconsistent. For example, these state officials reported some IRS units  are more responsive than others and that information sometimes is not  shared among IRS units."], "subsections": []}, {"section_title": "IRS Established the RRT in 2016 and Initiated the RRT Process Once in the 2017 Filing Season", "paragraphs": ["As part of establishing the RRT, IRS outlined the responsibilities of IRS,  states, and industry to respond to significant IDT refund fraud incidents.  As noted earlier in this report, the RRT was activated six times in 2016.  IRS initiated the RRT once in the 2017 filing season for a data breach  related to the Department of Education.", "In March 2017, IRS and the Department of Education responded to  security concerns and removed access on https://www.fafsa.gov and  https://www.StudentLoans.gov to IRS\u2019s Data Retrieval Tool\u2014the online  process through which student financial aid applicants obtain their  family\u2019s tax information. IRS suspects that fraudsters used personal  information obtained elsewhere to access the Data Retrieval Tool in an  attempt to access tax information, particularly adjusted gross income.", "As of April 6, 2017, IRS reported that fewer than 8,000 fraudulent returns  from this incident had been filed, processed, and issued refunds, but IRS  estimated that about 100,000 taxpayers may have been affected. The  Data Retrieval Tool was taken offline while IRS and the Department of  Education made updates and will not be available for completing  applications for the current school year (2017-2018). As of November  2017, taxpayers could use the Data Retrieval Tool for completing financial  aid applications for the next school year (2018-2019). While IRS initiated  the RRT for this incident, an industry official said that the information  provided in the press release was more detailed than what was previously  provided to industry partners via the RRT.", "The RRT is administered separately from the ISAC. According to IRS  officials, they intend to eventually integrate components of the RRT into  the ISAC to further streamline information sharing. Specifically, IRS  envisions the ISAC serving as the primary mechanism for states and  industry partners to report and escalate IDT refund fraud incidents by  facilitating communication among participants. IRS does not have a  timeline for this integration."], "subsections": []}]}, {"section_title": "The ISAC Pilot Partially Aligns with Leading Practices for Pilot Design, but IRS Does Not Have a Plan to Improve Alignment", "paragraphs": ["In 2016, we identified five leading practices for designing a well- developed and documented pilot program: (1): ensuring stakeholder  communication, (2) establishing objectives, (3) ensuring scalability, (4)  having an assessment methodology, and (5) developing a data-analysis  plan. These practices enhance the quality, credibility, and usefulness of  evaluations and help ensure that time and resources are used effectively.  Each leading practice shares common elements but serves a unique  purpose and builds on the other. For example, four of the five leading  practices recommend either establishing criteria for assessing whether  the pilot\u2019s objectives have been met or developing a data plan necessary  for effectively evaluating the pilot.", "While the ISAC pilot is in nascent stages, IRS has taken steps that  partially align with key aspects of all five leading practices. (See figure 5.)", "Ensure appropriate two-way stakeholder communication: In 2016,  we reported that it is critical that agencies identify who the relevant  stakeholders are and communicate early and often to address their  concerns and convey the initiative\u2019s overarching benefits.", "IRS\u2019s efforts mostly aligned with this practice because IRS included  stakeholder input during the design, implementation, and preliminary  stages of the data-gathering and assessment phases of the pilot. IRS,  through the ISAC working group and the Board, communicated with  stakeholders before, during, and after forming the ISAC. Such  communication helped ensure that stakeholders were engaged and that  their views were understood and incorporated. For example, in 2016,  IRS\u2019s contractor conducted a preliminary assessment and interviews to  compile and present stakeholder views and aspirations for the ISAC. This  process included meeting with state officials and industry partners about  ISAC preferences, suggestions, concerns, and risks. According to the IRS  ISAC Executive Official, ahead of the ISAC launch, IRS established  several mechanisms to ensure ongoing stakeholder input, including  coordinating with both state and industry trade organizations, including  the FTA and the American Coalition of Taxpayer Rights, to gain their  endorsement.", "IRS and its contractor also solicited feedback at conferences, such as  FTA\u2019s annual conferences. During a 3-day fraud simulation exercise  hosted by IRS\u2019s contractor, participants discussed partner actions, needs,  and processes to inform the ISAC\u2019s development. Additionally, IRS  conducted a stakeholder analysis which documented stakeholders\u2019  engagement in the ISAC Partnership. This is intended to inform the  development of the ISAC communications plan. Finally, the ISAC\u2019s  Partnership governance structure, which includes representatives from  states and industry, helps facilitate communication among stakeholders.", "Despite these efforts, IRS\u2019s message about the ISAC\u2019s benefits has not  fully reached states. In our focus groups, a few state officials reported  they are unclear about the benefit of the ISAC. To help improve  communication, the Board invited relevant trade organizations to  participate in its July Board meetings. IRS officials reported that the  message about the benefits of the ISAC may not have initially reached  states because it took time to build trust among state and industry  partners. FTA confirmed that states may not have understood the benefits  of working with IRS and industry partners and were wary of joining the  ISAC. Further, IRS officials said that some trade organizations that  endorsed the ISAC had differing views about the organization of the  ISAC\u2014such as who should be invited to participate\u2014which made it  challenging for IRS to effectively garner support. A few states reported in  our focus groups that FTA\u2019s endorsement was important to their decision  to join the ISAC. Until IRS further communicates the ISAC\u2019s benefit to  current and potential stakeholders, IRS and the ISAC Board may face  challenges in reaching their goal of increasing robust participation in the  ISAC. We discuss how IRS can improve its outreach to state and industry  partners later in this report.", "Establish well-defined, appropriate, clear, and measureable  objectives: In our 2016 report, we found that well-formulated objectives  help ensure that appropriate evaluation data can be collected from the  outset of the pilot so that data are available for measuring performance  against clear goals and standards. Broad objectives should be translated  into specific researchable questions that articulate what will be  assessed. Additionally, we have reported that agencies should establish  measurable goals for determining when the pilot progresses from one  stage to the next to improve their ability to evaluate the success of the  pilot.", "IRS\u2019s efforts mostly aligned with this leading practice. For example the  ISAC\u2019s charter sets forth objectives, which include (1) exchanging  information among participants, (2) providing a forum for real-time  responses to fraud schemes, and (3) promoting strategies to detect and  prevent fraud. In February 2017, the Board established the metrics  subgroup to assess the performance of the ISAC and develop metrics.  The Board noted that metrics are essential for showing the value added  by the ISAC compared to other efforts. The ISAC Roadmap, a planning  document that outlines three developmental phases over 4 years, shows  that IRS and the Board have considered an implementation plan, as well  as how the online platform might evolve in the areas of program  operations, infrastructure, analytics, and partner engagement.  Additionally, IRS\u2019s contractor anticipated and developed risk mitigation  strategies to handle scenarios that might arise before, during, and after  the ISAC\u2019s launch and interfere with reaching the pilot\u2019s objectives.  Finally, ahead of ISAC\u2019s launch, the contractor refined key operational  attributes to help define ISAC\u2019s full desired capabilities.", "However, IRS has not translated its objectives into specific, researchable  questions that articulate what will be assessed. For example, one of the  ISAC\u2019s objectives is to facilitate the exchange of information among  members. While IRS closely monitors members\u2019 use of the ISAC, IRS  does not have performance goals, such as desired participation levels, or  a plan to assess progress towards those goals, such as members\u2019 usage  of ISAC data and tools. These are needed to ensure that appropriate  evaluation data are collected during the pilot. Furthermore, IRS does not  have measurable goals to determine when the pilot should progress to full  implementation.", "In the early stages of a new program or initiative within a program,  evaluation questions tend to focus on program process\u2014on how well  authorized activities are carried out and reach intended recipients. We  have previously reported that common evaluation questions include the  following:  Is the program being delivered as intended to the targeted recipients?", "Have any feasibility or management problems emerged?", "What progress has been made in implementing changes or new  provisions?", "According to IRS officials, the ISAC pilot is still in early stages; they did  not know what to expect the first year but knew they wanted to focus on  building trust and, therefore, did not set goals for participation. However,  we have previously reported that without well-defined, appropriate, clear,  and measurable objectives, it will be difficult to ensure appropriate  evaluation data are collected and available to measure performance  against the objectives and goals. In short, it will be difficult for IRS to  know whether it achieved its objectives. Without knowing this, IRS will  have difficulty justifying investing additional resources.", "Ensure scalability of pilot design: The purpose of a pilot is generally to  inform a decision on whether and how to implement a new approach in a  broader context. Identifying criteria or standards for identifying lessons  about the pilot will help inform an agency\u2019s decisions about scalability and  when to integrate pilot activities into overall efforts. We previously  reported that the criteria and standards should be observable and  measureable events, actions, or characteristics that provide evidence that  the pilot objectives have been met.", "IRS\u2019s efforts in designing the ISAC partially aligned with this leading  practice. First, IRS identified and integrated lessons learned into its pilot.  For example, ahead of ISAC\u2019s launch, IRS\u2019s contractor identified potential  capabilities of the ISAC based on lessons learned from four ISACs from  other industries and a 2-day collaborative session in summer 2015. In  February 2017, 1 month after the ISAC\u2019s launch, the Board established  the metrics subgroup to develop evaluation criteria to determine the  extent to which the pilot objectives have been met. According to ISAC  Board officials, the metrics subgroup is developing and testing metrics  that the ISAC Board expects to use beginning in the 2018 filing season.  The metrics are designed to measure participation in the ISAC,  contribution of data or information to the ISAC, and the effectiveness of  the data or information provided.", "IRS also took steps to improve the ISAC pilot design, which will help it  scale the pilot in the future. For example, in May 2017, IRS\u2019s contractor  presented lessons learned from the 2017 filing season, including what  was accomplished, what should be changed in future filing seasons, and  areas for future attention to consider how well the lessons learned can be  applied when the pilot is scaled up. The contractor\u2019s presentation also  outlined recommendations from a May 2017 independent assessment of  the ISAC, including the current status of each recommendation and  actions needed to implement them. In addition, during the July 2017 ISAC  Board meeting, IRS\u2019s contractor discussed lessons learned, and the IRS  ISAC Executive Official discussed takeaways thus far from standing up  the ISAC. Finally, IRS took steps to establish criteria for assessing the  pilot\u2019s performance, but these steps are primarily related to participation,  access, and data contribution requirements.", "IRS does not have criteria that would inform decisions about the ISAC\u2019s  scalability, including when it is appropriate to include more state and  industry members, how to identify additional members, or how to expand  the functionalities of the online platform. For example, IRS has yet to  articulate the criteria to determine the appropriate time frame for the ISAC  to remain in the pilot stage and does not have a plan to decide how and  when the ISAC will move from the pilot stage into full implementation.  However, IRS officials have said that the ISAC will likely continue in pilot  phase through the 2018 filing season.", "According to IRS officials, IRS had prioritized other activities and is now  turning its attention to plans for scaling the pilot. Without measurable  evaluation criteria that provide evidence that the ISAC pilot objectives  have been met, the Board will have difficulty assessing the ISAC\u2019s  performance and making decisions about scalability.", "Clearly articulate an assessment methodology: In 2016, we reported  that key features of an assessment methodology include a strategy for  comparing the pilot\u2019s implementation and results with other efforts; a clear  plan that details the type and source of the data necessary to evaluate  the pilot; and methods for data collection, including the timing and  frequency.", "While IRS\u2019s efforts minimally aligned with this leading practice, it has  taken some steps to clearly articulate its assessment methodology. For  example, according to the IRS ISAC Executive Official, IRS plans to  evaluate the extent to which the revenue protected by the ISAC pilot  compares to existing fraud detection and prevention efforts, including the  External Leads Program. To help accomplish this, IRS took preliminary  steps to collect and track metrics related to ISAC\u2019s performance and  compare ISAC\u2019s efforts against other mechanisms to combat fraud. For  example, IRS\u2019s contractor collects and disseminates program metrics and  ISAC analytics weekly, including the total number of members, leads,  alerts, and Internet Protocol (IP) addresses. This is intended to help  assess progress in expanding the ISAC and identifying fraud. In addition,  the metrics subgroup started comparing ISAC leads against information  collected from the states as part of its effort to assess ISAC data quality.", "However, IRS has not completed an assessment methodology and data  gathering strategy that outlines the type and source of data necessary to  evaluate the pilot to assess the progress in achieving each of the ISAC\u2019s  objectives, including whether the ISAC successfully facilitates the  exchange of information and helps detect and prevent fraud. IRS also  does not have a strategy for comparing the pilot\u2019s implementation and  results with other efforts. For example, while IRS officials expect to  determine federal revenue protected by the ISAC and compare that to  other efforts, IRS has not formalized this plan and IRS officials do not  expect to start until at least October 2017, when the needed data become  available. Additionally, according to IRS\u2019s ISAC Executive Official, state  and industry partners\u2014who are important stakeholders in the ISAC\u2014may  not be able to track dollars protected through the ISAC. As a result, IRS  may only know the federal dollars protected, while the amount protected  at the state level may remain unknown. This makes it more difficult to  communicate the potential benefits to states. Furthermore, the ISAC  could be collecting additional data to better meet its objectives. While  quantifying federal dollars protected is a key indicator of the ISAC\u2019s  success, that metric alone will not demonstrate the ISAC\u2019s benefit and  effectiveness.", "Without a documented strategy to compare the ISAC pilot to other efforts  and a methodology that details the type and source of data necessary to  evaluate the pilot\u2014beyond the federal dollars protected by the ISAC that  would otherwise have been undetected\u2014IRS may find it difficult to  assess the effectiveness of the pilot, identify areas for improvement, and  demonstrate its capabilities compared with other efforts.", "Develop a data-analysis plan: In conjunction with a clearly articulated  assessment methodology, a detailed data-analysis plan identifies who will  analyze the data as well as when and how data will be analyzed to  assess the pilot\u2019s performance and draw conclusions about how to  improve procedures moving forward. As we previously reported, the  results will show the successes and challenges of the pilot, and in turn,  how the pilot can be incorporated into broader efforts.", "While IRS\u2019s efforts minimally aligned with this leading practice, it has  taken some steps to measure performance at the activity level. For  example, IRS worked with its contractor to regularly track and report  engagement metrics; user statistics; and analytics on alerts, leads, and  device IP addresses, which at times are categorized and aggregated.  (See figure 4 earlier in this report for an example of the ISAC data  visualization tool with illustrative data.) IRS\u2019s contractor also surveyed  ISAC members to better gauge user experience with alerts and what  participants found to be most valuable on the online platform. In response  to other recommendations to develop metrics for measuring ISAC\u2019s  performance and success, the contractor\u2019s May 2017 ISAC evaluation  outlined actions, including beginning to track recommended metrics and  exploring means of quantifying the benefit.", "However, IRS has not formalized the plan to determine the amount of  revenue protected nor has it developed a detailed data-analysis plan to  determine how the ISAC pilot\u2019s performance will be tracked. The ISAC\u2019s  metrics subgroup reported that it is working to develop preliminary  performance metrics to benchmark the ISAC pilot\u2019s progress. It  acknowledged that metrics and a detailed analysis plan are essential to  demonstrate the ISAC\u2019s benefit. The subgroup reported it is in the  process of developing them. Without a detailed data analysis and  evaluation plan that identifies data sources and criteria, IRS cannot fully  determine or demonstrate the pilot\u2019s performance and challenges. As a  result, IRS, its partners, and Congress will have difficulty determining the  ISAC\u2019s effectiveness and whether IRS should expand the pilot.", "IRS officials said they are still learning about the five leading practices for  pilot design, and as noted, the ISAC at least partially aligns with each  one. According to internal control standards in the federal government, an  agency should formulate plans to achieve its objectives in order to meet  them. Without such a plan to inform decisions about the ISAC\u2019s benefits  and performance, IRS, its partners, and Congress will have difficulty  determining the effectiveness of the pilot and whether to proceed with full  implementation."], "subsections": []}, {"section_title": "The ISAC Board Should Develop an Outreach Plan to Improve the Pilot", "paragraphs": ["IRS took actions to improve the ISAC pilot, including waiving the  requirement for states to contribute data. However, IRS does not have an  outreach plan to increase membership or inform states about the ISAC\u2019s  benefits."], "subsections": [{"section_title": "IRS Waived the Data Contribution Requirement for 2017 and Improved Collaboration with Endorsing Organizations", "paragraphs": ["IRS officials determined that requiring participating states to contribute  data on suspected fraud may be a potential barrier and limit participation  in the ISAC. Therefore, IRS waived the data contribution requirement for  the first year and one state subsequently contributed data to the ISAC in  the 2017 filing season. However, as of October 2017, 5 states had  contributed data and 8 states had submitted 29 alerts. In our focus  groups, officials from a few states reported they were concerned about  the data contribution requirement and were unsure if they had the  resources to contribute such data and did not fully understand the terms  of the data contribution requirement. IRS officials attribute the low data  contribution this year to it taking time to build trust among partners. The  ISAC Board sought to reframe the discussion about data contribution and,  in July 2017, changed the language to describe data contribution as a  data/information opportunity.", "Endorsing organizations are another potential tool to increase  participation in the ISAC. Five trade organizations\u2014American Coalition of  Taxpayer Rights, Council for Electronic Revenue Communication  Advancement, Computer and Communications Industry Association, the  Free File Alliance, and FTA\u2014are supporting the ISAC Partnership as  endorsing organizations. According to IRS, endorsing organizations  provide additional support for the ISAC concept and are uniquely  positioned to serve as links between the ISAC and the sectors they  represent. While they are not ISAC members and therefore cannot  access the online platform, their role is important to build connections  between stakeholders. However, according to FTA officials, IRS did not  effectively leverage FTA to communicate the benefits to states during the  first year of the pilot, but IRS and the ISAC Board have since taken  important steps to improve collaboration.", "FTA endorsed the ISAC in February 2017 and, in our focus groups, both  state and industry officials said the endorsement was important for  securing more widespread state participation. According to FTA, IRS did  not incorporate its feedback about the probable response from states to  the ISAC, which FTA officials believe may have resulted in a lower-than- expected rate of participation by states in the early months of the ISAC.  According to IRS officials, IRS attempted to work with endorsing  organizations while standing up the ISAC online platform and received  comments from FTA and an industry trade organization that reflected  different interests and priorities. According to IRS officials, IRS attempted  to find a middle ground. More recently, the Board attempted to better  engage endorsing organizations by including them in a July 2017 meeting  about planning the next steps for the ISAC."], "subsections": []}, {"section_title": "Taxpayer Data Safeguards Determine Access to Information Shared in the ISAC", "paragraphs": ["IRS, states, and industry partners have all faced data safeguarding  challenges to participating in the ISAC. For example, IRS is unable to  share taxpayer or record-level data in the ISAC due to the section 6103  safeguards discussed earlier in this report. In a June 2017 report to  Congress, the Electronic Tax Administration Advisory Committee  (ETAAC) recommended IRS identify, analyze, and mitigate barriers that  preclude IRS from sharing information in the ISAC. IRS officials said  that IRS not sharing information in the ISAC limits the full benefit of the  ISAC. While the ISAC is designed to be a three-pronged collaboration  between IRS, states, and industry, because IRS does not view or  contribute record-level data, such data only flows between states and  industry. This limits the full value of the ISAC. Further, it may be  challenging for the ISAC partnership to meet a key goal of increasing  participation among state and industry members if a key stakeholder in  the partnership is unable to fully participate. IRS officials said the agency  is considering options to allow it to participate more fully in the ISAC.  Specifically, IRS included a request for a legislative change to section  6103 in a report to Treasury. This request is an important step to enable  the ISAC to be an effective information sharing and collaboration tool.", "Likewise, some states faced legal hurdles to joining the ISAC. According  to FTA, while it outlined potential concerns about those hurdles in a  memo to state legal counsels, it expected those would be manageable for  states.", "Furthermore, some industry partners face difficulties in accessing the  ISAC\u2019s online platform. As previously mentioned and shown in figure 2,  tax preparation companies\u2014covered under section 7216 and referred to  as 7216 industry partners\u2014have full access to all of the information  provided to the ISAC. However, financial institutions\u2014not covered under  section 7216 and referred to as non-7216 industry partners\u2014have limited  access to information in the ISAC. According to IRS officials, IRS is  considering a request from financial institutions to amend regulations  under section 7216 to allow them greater access to the ISAC."], "subsections": []}, {"section_title": "ISAC Partnership Has Not Developed an Outreach Plan to Improve State and Industry Partners\u2019 Participation", "paragraphs": ["In the 2017 filing season, contribution levels from IRS, states, and  industry partners varied significantly. While IRS invited states and  Security Summit partners to participate, other stakeholders\u2014such as  industry partners that are not members of the Security Summit\u2014have not  been included. While IRS has taken steps to reach out to state and  industry partners, IRS and the ISAC Partnership have opportunities to  more fully engage stakeholders.", "One challenge to state participation is that there has been a disconnect,  at times, between the ISAC Board\u2019s and states\u2019 perceptions of how the  ISAC can be used to prevent and detect fraud. For example, IRS views  the ISAC as the key tool for information sharing between IRS, states, and  industry partners in the future. However, officials from all states  represented in our focus groups noted that they either had not used, or  were unfamiliar with, the ISAC-specific resources\u2014such as the data  visualization tools shown previously in figure 4. These are intended to  help users identify IDT refund fraud trends more broadly. Moreover,  officials from a few states reported IRS already sends more data on  suspected fraud through other channels than they can effectively process  with their current resources.", "IRS is working to quantify the benefits of the ISAC, which could help  enhance states\u2019 understanding. The ISAC Board is working with IRS\u2019s  research organization to quantify the refund fraud averted and federal  dollars protected by analyzing Treasury receipts. According to IRS, it is  working with ISAC state members to communicate the value of the ISAC  to their leadership and share key activities, as appropriate, to enable their  continued involvement. IRS and the ISAC Board also took several steps  to inform states and members of industry\u2014both members of the ISAC  and non-members\u2014about the benefits of the ISAC. For example, IRS\u2019s  contractor provided training to users of the ISAC to demonstrate the  platform\u2019s functionality and tools. In addition, IRS officials presented  information about the ISAC at conferences with tax industry partners.", "Relatedly, ETAAC recently recommended that IRS encourage greater  participation in the ISAC by stakeholders involved in tax administration.", "In addition to inviting states to join the ISAC, IRS invited industry partners  who were members of the Security Summit to join. Security Summit  industry partners account for the majority of tax returns IRS accepts using  a paid preparer or tax software. The ISAC Board limited industry  participation in the ISAC Partnership to Security Summit partners  because it was concerned about securely authenticating new members  and scaling up the size of the pilot to accommodate additional  participants.", "Furthermore, although three ISAC members are non-7216 financial  institutions, IRS does not consider banks or credit unions\u2014both of which  cash refund checks\u2014to be fully represented in the ISAC. IRS officials  said they were focused on engaging tax preparation companies and  building trust among existing stakeholders. In June 2017, ETAAC  recommended that IRS should address expanding the participation of  financial institutions in the ISAC, as well as in other efforts.", "Although the ISAC Partnership does not have an outreach plan, such a  plan could, for example, address how to expand ISAC membership or the  disconnect between the benefits identified by the ISAC Board and how  states perceive the ISAC can be used to prevent and detect fraud in their  states. According to IRS officials, the ISAC Partnership has not  developed a plan yet because it has been focused on other priorities.", "Project management standards state that when an entity is planning a  project\u2014that is, a temporary endeavor to create a unique product,  service, or result\u2014it is important to define relevant activities and  determine the scope, sequence, and schedule of those activities, among  other things. In addition, federal Standards for Internal Control in the  Federal Government state that federal agencies should establish plans to  help ensure goals and objectives\u2014such as increasing participation in the  ISAC\u2014can be met. Additionally, internal control standards state that  documentation of agency decisions and activities is important because it  provides a means to retain organizational knowledge, mitigate the risk of  having that knowledge limited to a few personnel, and communicate that  knowledge to external parties, as appropriate. Furthermore, we have  reported that without developing a user outreach plan, an agency risks  being unable to provide services to its users where they need them  most. For the ISAC, this could mean less effective collaboration among  stakeholders or missed opportunities to prevent IDT refund fraud."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["IRS has taken important steps to improve its ability to respond to the  ongoing challenge of IDT refund fraud. Among these efforts, the ISAC  and RRT show promise for increasing information sharing and  collaboration among IRS, states, and industry to help detect and prevent  IDT refund fraud and coordinate responses to fraud incidents. The ISAC  pilot goes beyond existing fraud information sharing efforts and has  strengthened collaboration among stakeholders. While IRS has taken  actions that partially align with key aspects of five leading practices for  effective pilot design, its actions do not fully align with any of the  practices. Further, IRS has not developed criteria for assessing whether  the pilot\u2019s objectives have been met. Without this assessment and better  alignment with leading practices for pilot design, IRS, its partners, and  Congress will have difficulty determining the effectiveness of the pilot and  whether and when to proceed with full-scale implementation.", "The benefit of the ISAC can only fully be realized when there is robust  participation among stakeholders. However, officials from all states  represented in our focus groups noted that they either had not used, or  were unfamiliar with, the ISAC-specific resources. Part of the issue is that  IRS has not effectively communicated the benefits of the ISAC to states,  so they can better understand how the ISAC will help them combat IDT  refund fraud. Developing an outreach plan to broaden membership to  additional states, non-Security Summit members of industry, and financial  institutions would further promote stakeholders collaborating and sharing  fraud information."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to IRS:  The Acting Commissioner of Internal Revenue should ensure that the  Information Sharing and Analysis Center (ISAC) pilot better aligns with  leading practices for effective pilot design. This should include establishing criteria for assessing whether the pilot\u2019s objectives have  been met before making decisions about its scalability and whether,  how, and when to when to proceed to full implementation; and developing a data analysis plan that identifies data sources and  criteria necessary for effectively evaluating the pilot.  (Recommendation 1)", "The Acting Commissioner of Internal Revenue should ensure that the  ISAC Partnership develops an outreach plan to expand membership and  improve states\u2019 and industry partners\u2019 understanding of the ISAC\u2019s  benefits. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Third-Party Views", "paragraphs": ["We provided a draft of this report to IRS and the co-chairs of the ISAC  Board for comment. In written comments reproduced in Appendix II, IRS  agreed with both recommendations. IRS reported it will be finalizing an  Identity Theft Tax Refund Fraud Pilot Management Plan to help it better  align the ISAC pilot with leading practices for pilot design. Additionally,  IRS reported it will work with the ISAC Board to ensure that the Board  develops an outreach plan to expand membership and improve states'  and industry partners' understanding of the ISAC's benefits.", "In an email dated October 27, 2017, the ISAC Board state and industry  co-chairs also agreed with both recommendations and provided technical  comments which were incorporated, as appropriate.", "We are sending copies of this report to the Chairmen and Ranking  Members of other Senate and House committees and subcommittees that  have appropriation, authorization, and oversight responsibilities for IRS.  We are also sending copies to the Acting Commissioner of Internal  Revenue, the Secretary of the Treasury, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this engagement were to (1) describe actions Security  Summit partners are taking to implement an Information Sharing and  Analysis Center (ISAC) and a Rapid Response Team (RRT); (2) evaluate  the extent to which the ISAC pilot design aligns with leading practices;  and (3) identify actions, if any, that the Internal Revenue Service (IRS)  could take to improve the ISAC pilot.", "We selected the ISAC and RRT from among those initiatives identified in  the June 2016 IRS Commissioner\u2019s Security Summit Update Report as  the focus of our review because of their importance, the potential for a  major effect on IDT refund fraud, and the timeline for planned actions.  Although the External Leads Process and the Industry Leads Process are  discussed in this report, we did not select them for in-depth review.", "To address all objectives, we reviewed IRS, ISAC Senior Executive Board  (Board), ISAC working group, and Information Sharing working group  documents. These included meeting minutes, planning documents, the  biweekly ISAC dashboard, and IRS\u2019s contractor\u2019s weekly ISAC updates.  We also observed a training session IRS\u2019s contractor conducted for new  ISAC members and we received a demonstration of the ISAC online  platform capabilities, including the visualization tools. (See figure 4.) In  addition, we conducted semistructured interviews with IRS, state, and  industry co-leads of the ISAC and the Information Sharing working  groups; ISAC Board co-chairs; the outreach and metrics ISAC Board  subgroups; and trade organizations including the Federation of Tax  Administrators and American Coalition of Taxpayer Rights.", "To further address all objectives, we conducted four focus groups in  March and April 2017\u2014two sessions with states and two sessions with  industry partners:  1.  Five representatives from members of industry that were involved in  the ISAC or RRT.  2.  Seven representatives from members of industry that were involved in  the ISAC or RRT.  3.  Six officials from states randomly selected from among those with an  official who participated in the ISAC or Information Sharing working  groups.  4.  Five officials from states randomly selected from among those that  had not been involved in either working group.", "We excluded from our focus group sample those states or industry  partners with whom we previously conducted\u2014or planned to conduct\u2014 a  separate semistructured interview.", "We asked similar questions for each focus group with some variation  between state and industry groups. We recorded and transcribed the  focus group sessions for review. We analyzed the focus group transcripts  to identify common themes, patterns, and comments. We used these  focus group discussions to provide illustrative examples of state and  industry perceptions of the benefits and challenges to implementing the  ISAC and RRT. However, the responses are non-generalizable and do  not reflect opinions of all states or industry partners. Because of concerns  about identifying which state and industry partners have been involved in  these fraud prevention efforts, we are not identifying the focus group  participants or the state officials and industry representatives that we  interviewed.", "To evaluate the extent to which the ISAC aligns with the five leading  practices for pilot design, we reviewed our prior work and compared IRS  actions against these practices and criteria. Our April 2016 report  describes the criteria we developed for evaluating pilot design and the  methodology we used to do so. For this work, we evaluated each  subcomponent of the leading practices to determine if it met fully, mostly,  partially, or not at all with the criteria. Each of those assessments was  subsequently verified by another individual.", "To identify actions, if any, that IRS could take to improve the ISAC pilot,  we assessed IRS and the ISAC Board\u2019s efforts to implement the ISAC  pilot using internal control standards and performance management  standards.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, the following staff made key  contributions to this report: Joanna Stamatiades, Assistant Director;  Melissa King, Analyst-in-Charge; Parul Aggarwal; Amy Bowser; Ann  Czapiewski; Robert Gebhart; Layla Moughari; and Cynthia Saunders."], "subsections": []}]}], "fastfact": ["The IRS estimates that would-be thieves used false identities to try to steal $14.5 billion in refunds in the 2015 tax year.", "To address this high risk area, the IRS launched a pilot initiative in 2017 to help it, states, and tax industry members quickly share information. So far, 31 states and 17 industry groups are participating.", "We reviewed this effort and assessed how well it aligned with 5 leading practices for pilot design. We recommended that the IRS and the initiative's Executive Board (1) take steps to improve the pilot's implementation, and (2) develop a plan to expand membership to more states and tax industry members."]}
{"id": "GAO-18-460T", "url": "https://www.gao.gov/products/GAO-18-460T", "title": "Information Technology: Further Implementation of Recommendations Is Needed to Better Manage Acquisitions and Operations", "published_date": "2018-03-14T00:00:00", "released_date": "2018-03-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government plans to invest almost $96 billion in IT in fiscal year 2018. Historically, these investments have too often failed, incurred cost overruns and schedule slippages, or contributed little to mission-related outcomes. In December 2014, Congress and the President enacted FITARA, aimed at improving covered agencies' acquisitions of IT. Further, in February 2015, GAO added improving the management of IT acquisitions and operations across government to its high-risk list.", "This statement summarizes agencies' progress in improving the management of IT acquisitions and operations. Among others, GAO summarized its published reports on (1) data center consolidation, (2) incremental software development practices, (3) IT acquisitions, (4) IT workforce, and (5) legacy IT."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Management and Budget (OMB) and federal agencies have taken steps to improve the management of information technology (IT) acquisitions and operations through a series of initiatives, to include (1) data center consolidation, (2) implementation of incremental development practices, (3) approval of IT acquisitions, (4) implementation of key IT workforce practices, and (5) addressing aging legacy IT systems. As of March 2018, the agencies had fully implemented about 59 percent of the approximately 800 related recommendations that GAO made during fiscal years 2010 through 2015. However, important additional actions are needed.", "Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers, which was codified and expanded by a law commonly referred to as the Federal Information Technology Acquisition Reform Act (FITARA). GAO has since noted that, while this initiative could potentially save the government billions of dollars, weaknesses exist in areas such as optimization and OMB's reporting on related cost savings. Accordingly, GAO has made 160 recommendations to OMB and agencies to improve the initiative; however, about half of GAO's recommendations have not yet been implemented.", "Implementing incremental development . OMB has emphasized the need for agencies to deliver investments in smaller increments to reduce risk and deliver capabilities more quickly. Further, GAO has issued reports highlighting actions needed by OMB and agencies to improve their implementation of incremental development. In these reports, GAO made 42 related recommendations, but the majority of GAO's recommendations have not yet been addressed.", "Approval of IT acquisitions . OMB's FITARA implementation guidance required covered agencies' chief information officers (CIO) to review and approve IT acquisition plans. In January 2018, GAO reported that many agencies' CIOs were not reviewing and approving acquisition plans, as required by OMB. GAO made 39 recommendations to improve the review and approval of IT acquisitions, but they have not yet been implemented by the agencies.", "Implementation of key IT workforce practices . Effective IT workforce planning can help agencies improve their ability to acquire IT. In November 2016, GAO reported on agencies' IT workforce planning activities. GAO noted that five selected agencies had not fully implemented key workforce planning activities and recommended that they do so, but the agencies have not yet addressed the recommendations.", "Addressing aging legacy IT systems. Legacy IT investments across the federal government are becoming increasingly obsolete and consuming an increasing amount of IT dollars. In May 2016, GAO reported that many agencies were using systems which had components that were, in some cases, at least 50 years old. GAO noted, however, that several agencies did not have specific plans with time frames to modernize or replace these investments. GAO recommended that 12 agencies plan to modernize or replace legacy systems; all of which have not yet been implemented."]}, {"section_title": "What GAO Recommends", "paragraphs": ["From fiscal years 2010 through 2015, GAO made about 800 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. Among other recommendations, GAO made recommendations to improve the oversight and execution of the data center consolidation initiative, incremental development policies, the review and approval of IT acquisitions, implementation of key workforce planning activities, and aging federal IT systems. Most agencies agreed with GAO's recommendations. In addition, from fiscal year 2016 to present, GAO has made more than 200 new recommendations in this area. GAO will continue to monitor agencies' implementation of these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to provide an update on federal agencies\u2019  efforts to improve the acquisition of information technology (IT). As I have  previously testified, the effective and efficient acquisition of IT has been a  long-standing challenge in the federal government. In particular, the  federal government has spent billions of dollars on failed and poorly  performing IT investments, which often suffered from ineffective  management. Recognizing the severity of issues related to the  government-wide acquisition of IT, in December 2014, Congress and the  President enacted federal IT acquisition reform legislation (commonly  referred to as the Federal Information Technology Acquisition Reform Act,  or FITARA).", "In addition, in February 2015, we added improving the management of IT  acquisitions and operations to our list of high-risk areas for the federal  government. We recently issued an update to our high-risk report and  noted that, while progress has been made in addressing the high-risk  area of IT acquisitions and operations, significant work remains to be  completed.", "My statement today provides an update on agencies\u2019 progress in  improving the management of IT acquisitions and operations. The  statement is based on our prior and recently published reports that  discuss federal agencies\u2019 (1) data center consolidation efforts, (2) risk  levels of major investments as reported on the Office of Management and  Budget\u2019s (OMB) IT Dashboard, (3) implementation of incremental  development practices, (4) management of software licenses, (5)  approval of IT acquisitions, (6) implementation of key IT workforce  practices, and (7) efforts to address aging legacy IT. A more detailed  discussion of the objectives, scope, and methodology for this work is  included in each of the reports that are cited throughout this statement.", "We conducted the work upon which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["According to the President\u2019s budget, the federal government plans to  invest more than $96 billion for IT in fiscal year 2018\u2014the largest amount  ever budgeted. However, as we have previously reported, investments in  federal IT too often result in failed projects that incur cost overruns and  schedule slippages, while contributing little to the desired mission-related  outcomes. For example:", "The Department of Veterans Affairs\u2019 Scheduling Replacement Project  was terminated in September 2009 after spending an estimated $127  million over 9 years.", "The tri-agency National Polar-orbiting Operational Environmental  Satellite System was disbanded in February 2010 by the White  House\u2019s Office of Science and Technology Policy after the program  spent 16 years and almost $5 billion.", "The Department of Homeland Security\u2019s Secure Border Initiative  Network program was ended in January 2011, after the department  obligated more than $1 billion for the program.", "The Office of Personnel Management\u2019s Retirement Systems  Modernization program was canceled in February 2011, after the  agency had spent approximately $231 million on its third attempt to  automate the processing of federal employee retirement claims.", "The Department of Veterans Affairs\u2019 Financial and Logistics  Integrated Technology Enterprise program was intended to be  delivered by 2014 at a total estimated cost of $609 million, but was  terminated in October 2011.", "The Department of Defense\u2019s Expeditionary Combat Support System  was canceled in December 2012 after spending more than a billion  dollars and failing to deploy within 5 years of initially obligating  funds.", "Our past work found that these and other failed IT projects often suffered  from a lack of disciplined and effective management, such as project  planning, requirements definition, and program oversight and  governance. In many instances, agencies had not consistently applied  best practices that are critical to successfully acquiring IT.", "Such projects have also failed due to a lack of oversight and governance.  Executive-level governance and oversight across the government has  often been ineffective, specifically from chief information officers (CIO).  For example, we have reported that some CIOs\u2019 roles were limited  because they did not have the authority to review and approve the entire  agency IT portfolio."], "subsections": [{"section_title": "Implementing FITARA Can Improve Agencies\u2019 Management of IT", "paragraphs": ["FITARA was intended to improve covered agencies\u2019 acquisitions of IT  and enable Congress to monitor agencies\u2019 progress and hold them  accountable for reducing duplication and achieving cost savings. The law  includes specific requirements related to seven areas.", "Federal data center consolidation initiative (FDCCI). Agencies  covered by FITARA are required to provide OMB with a data center  inventory, a strategy for consolidating and optimizing their data  centers (to include planned cost savings), and quarterly updates on  progress made. The law also requires OMB to develop a goal for how  much is to be saved through this initiative, and provide annual reports  on cost savings achieved.", "Enhanced transparency and improved risk management. OMB  and covered agencies are to make detailed information on federal IT  investments publicly available, and agency CIOs are to categorize  their investments by level of risk. Additionally, in the case of major IT  investments rated as high risk for 4 consecutive quarters, the law  requires that the agency CIO and the investment\u2019s program manager  conduct a review aimed at identifying and addressing the causes of  the risk.", "Agency CIO authority enhancements. Agency heads at covered  agencies are required to ensure that CIOs have authority to (1)  approve the IT budget requests of their respective agencies, (2) certify  that OMB\u2019s incremental development guidance is being adequately  implemented for IT investments, (3) review and approve contracts for  IT, and (4) approve the appointment of other agency employees with  the title of CIO.", "Portfolio review. Covered agencies are to annually review IT  investment portfolios in order to, among other things, increase  efficiency and effectiveness and identify potential waste and  duplication. In establishing the process associated with such portfolio  reviews, the law requires OMB to develop standardized performance  metrics, to include cost savings, and to submit quarterly reports to  Congress on cost savings.", "Expansion of training and use of IT acquisition cadres. Covered  agencies are to update their acquisition human capital plans to  address supporting the timely and effective acquisition of IT. In doing  so, the law calls for agencies to consider, among other things,  establishing IT acquisition cadres or developing agreements with  other agencies that have such cadres.", "Government-wide software purchasing program. The General  Services Administration is to develop a strategic sourcing initiative to  enhance government-wide acquisition and management of software.  In doing so, the law requires that, to the maximum extent practicable,  the General Services Administration should allow for the purchase of  a software license agreement that is available for use by all executive  branch agencies as a single user.", "Maximizing the benefit of the Federal Strategic Sourcing  Initiative. Federal agencies are required to compare their  purchases of services and supplies to what is offered under the  Federal Strategic Sourcing Initiative. The Administrator for Federal  Procurement Policy was also required to issue regulations related to  the initiative.", "In June 2015, OMB released guidance describing how agencies are to  implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls that will meet the  law\u2019s requirements, while providing agencies with flexibility to adapt to  unique agency processes and requirements;  strengthen the relationship between agency CIOs and bureau CIOs;  and  strengthen CIO accountability for IT costs, schedules, performance,  and security.", "The guidance identified several actions that agencies were to take to  establish a basic set of roles and responsibilities (referred to as the  common baseline) for CIOs and other senior agency officials, which were  needed to implement the authorities described in the law. For example,  agencies were required to conduct a self-assessment and submit a plan  describing the changes they intended to make to ensure that common  baseline responsibilities were implemented. Agencies were to submit their  plans to OMB\u2019s Office of E-Government and Information Technology by  August 15, 2015, and make portions of the plans publicly available on  agency websites no later than 30 days after OMB approval. As of  November 2016, all agencies had made their plans publicly available.", "In addition, in August 2016, OMB released guidance intended to, among  other things, define a framework for achieving the data center  consolidation and optimization requirements of FITARA. The guidance  requires each agency on a quarterly basis to: maintain complete inventories of all data center facilities owned,  operated, or maintained by or on behalf of the agency; develop cost savings targets for fiscal years 2016 through 2018 and  report any actual realized cost savings; and measure progress toward meeting optimization metrics.", "The guidance also directs agencies to develop a data center  consolidation and optimization strategic plan that defines the agency\u2019s  data center strategy for fiscal years 2016, 2017, and 2018. This strategy  is to include, among other things, a statement from the agency CIO  indicating whether the agency has complied with all data center reporting  requirements in FITARA. Further, the guidance indicates that OMB is to  maintain a public dashboard that will display consolidation-related costs  savings and optimization performance information for the agencies."], "subsections": []}, {"section_title": "IT Acquisitions and Operations Identified by GAO as a High-Risk Area", "paragraphs": ["In February 2015, we introduced a new government-wide high-risk area,  Improving the Management of IT Acquisitions and Operations. This area  highlighted several critical IT initiatives in need of additional congressional  oversight, including (1) reviews of troubled projects; (2) efforts to increase  the use of incremental development; (3) efforts to provide transparency  relative to the cost, schedule, and risk levels for major IT investments; (4)  reviews of agencies\u2019 operational investments; (5) data center  consolidation; and (6) efforts to streamline agencies\u2019 portfolios of IT  investments. We noted that implementation of these initiatives was  inconsistent and more work remained to demonstrate progress in  achieving IT acquisition and operation outcomes.", "Further, our February 2015 high-risk report stated that, beyond  implementing FITARA, OMB and agencies needed to continue to  implement our prior recommendations in order to improve their ability to  effectively and efficiently invest in IT. Specifically, from fiscal years 2010  through 2015, we made 803 recommendations to OMB and federal  agencies to address shortcomings in IT acquisitions and operations.  These recommendations included many to improve the implementation of  the aforementioned six critical IT initiatives and other government-wide,  cross-cutting efforts. We stressed that OMB and agencies should  demonstrate government-wide progress in the management of IT  investments by, among other things, implementing at least 80 percent of  our recommendations related to managing IT acquisitions and operations  within 4 years.", "In February 2017, we issued an update to our high-risk series and  reported that, while progress had been made in improving the  management of IT acquisitions and operations, significant work still  remained to be completed. For example, as of March 2018, OMB and  agencies had fully implemented 476 (or about 59 percent) of the 803  recommendations. Figure 1 summarizes the progress that OMB and  agencies have made in addressing our recommendations as compared to  the 80 percent target, as of March 2018.", "In addition, in fiscal year 2016, we made 202 new recommendations, thus  further reinforcing the need for OMB and agencies to address the  shortcomings in IT acquisitions and operations. Also, beyond addressing  our prior recommendations, our 2017 high-risk update noted the  importance of OMB and covered federal agencies continuing to  expeditiously implement the requirements of FITARA.", "To further explore the challenges and opportunities to improve federal IT  acquisitions and operations, we convened a forum on September 14,  2016, to explore challenges and opportunities for CIOs to improve federal  IT acquisitions and operations\u2014with the goal of better informing  policymakers and government leadership. Forum participants, which  included 13 current and former federal agency CIOs, members of  Congress, and private sector IT executives, identified key actions related  to seven topics: (1) strengthening FITARA, (2) improving CIO authorities, (3) budget formulation, (4) governance, (5) workforce, (6) operations, and  (7) transition planning. A summary of the key actions, by topic area,  identified during the forum is provided in figure 2.", "In addition, in January 2017, the Federal CIO Council concluded that  differing levels of authority over IT-related investments and spending  have led to inconsistencies in how IT is executed from agency to agency.  According to the Council, for those agencies where the CIO has broad  authority to manage all IT investments, great progress has been made to  streamline and modernize the federal agency\u2019s footprint. For the others,  where agency CIOs are only able to control pieces of the total IT footprint,  it has been harder to achieve improvements."], "subsections": []}, {"section_title": "Congress Has Taken Action to Continue Selected FITARA Provisions and Modernize Federal IT", "paragraphs": ["Congress has recognized the importance of covered agencies\u2019 continued  implementation of FITARA provisions, and has taken legislative action to  extend selected provisions beyond their original dates of expiration.  Specifically, Congress and the President enacted laws to:  remove the expiration date for enhanced transparency and improved  risk management provisions, which were set to expire in 2019;  remove the expiration date for portfolio review, which was set to  expire in 2019; extend the expiration date for FDCCI from 2018 to 2020; and authorize the availability of funding mechanisms to help further  agencies\u2019 efforts to modernize IT.", "In particular, a law was enacted to authorize the availability of funding to  help further agencies\u2019 efforts to modernize IT. The law, known as the  Modernizing Government Technology (MGT) Act, authorizes agencies to  establish working capital funds for use in transitioning from legacy IT  systems, as well as for addressing evolving threats to information  security. The law creates a technology modernization fund within the  Department of the Treasury, from which agencies can \u201cborrow\u201d money to  retire and replace legacy systems as well as acquire or develop systems."], "subsections": []}, {"section_title": "The Current Administration Has Undertaken Efforts to Improve Federal IT", "paragraphs": ["The current administration has initiated additional efforts aimed at  improving federal IT, including digital services. Specifically, in March  2017, the administration established the Office of American Innovation,  which has a mission to, among other things, make recommendations to  the President on policies and plans aimed at improving federal  government operations and services. In doing so, the office is to consult  with both OMB and the Office of Science and Technology Policy on  policies and plans intended to improve government operations and  services, improve the quality of life for Americans, and spur job creation.", "In May 2017, the administration also established the American  Technology Council, which has a goal of helping to transform and  modernize federal agency IT and how the federal government uses and  delivers digital services. The President is the chairman of this council,  and the Federal CIO and the United States Digital Service Administrator  are among the members.", "In addition, on May 11, 2017, the President signed Executive Order  13800, Strengthening the Cybersecurity of Federal Networks and Critical  Infrastructure. This Executive Order tasked the Director of American  Technology Council to coordinate a report to the President from the  Secretary of the Department of Homeland Security, the Director of OMB,  and the Administrator of the General Services Administration, in  consultation with the Secretary of Commerce, regarding the  modernization of federal IT. As a result, the Report to the President on  Federal IT Modernization was issued on December 13, 2017, and  outlined the current and envisioned state of federal IT. The report  recognized that agencies have attempted to modernize systems but have  been stymied by a variety of factors, including resource prioritization,  ability to procure services quickly, and technical issues. The report  provided multiple recommendations intended to address these issues  through the modernization and consolidation of networks and the use of  shared services to enable future network architectures.", "In February 2018, OMB issued guidance for agencies to implement the  MGT Act. The guidance was intended to provide agencies additional  information regarding the Technology Management Fund, and the  administration and funding of the related IT Working Capital Funds.  Specifically, the guidance allowed agencies to begin submitting initial  project proposals for modernization on February 27, 2018. In addition, in  accord with the MGT Act, the guidance provides details of the Technology  Modernization Board, which is to consist of (1) the Federal CIO; (2) a  senior official from the General Services Administration; (3) a member of  the Department of Homeland Security\u2019s National Protection and Program  Directorate; and (4) four federal employees with technical expertise in IT  development, financial management, cyber security and privacy, and  acquisition, appointed by the Director of OMB."], "subsections": []}]}, {"section_title": "Agencies Can Improve IT Acquisitions and Operations", "paragraphs": ["Agencies have taken steps to improve the management of IT acquisitions  and operations. However, agencies would be better positioned to realize  billions in cost savings and additional management improvements, if they  addressed the numerous recommendations we have made aimed at  improving data center consolidation, increasing transparency via OMB\u2019s  IT Dashboard, implementing incremental development, managing  software licenses, reviewing IT acquisitions, implementing key IT  workforce activities, and addressing aging legacy systems."], "subsections": [{"section_title": "Agencies Have Made Progress in Consolidating Data Centers, but Need to Take Action to Achieve Planned Cost Savings", "paragraphs": ["One of the key initiatives to implement FITARA is data center  consolidation. OMB established FDCCI in February 2010 to improve the  efficiency, performance, and environmental footprint of federal data  center activities, and the enactment of FITARA codified and expanded the  initiative. However, in a series of reports that we issued from July 2011  through August 2017, we noted that, while data center consolidation  could potentially save the federal government billions of dollars,  weaknesses existed in several areas, including agencies\u2019 data center  consolidation plans, data center optimization, and OMB\u2019s tracking and  reporting on related cost savings. In these reports, we made a matter for  Congressional consideration, and a total of 160 recommendations to  OMB and 24 agencies to improve the execution and oversight of the  initiative. Most agencies and OMB agreed with our recommendations or  had no comments. As of March 2018, 83 of these recommendations  remained open.", "For example, in May 2017, we reported that the 24 agencies  participating in FDCCI collectively had made progress on their data center  closure efforts. Specifically, as of August 2016, these agencies had  identified a total of 9,995 data centers, of which they reported having  closed 4,388, and having plans to close a total of 5,597 data centers  through fiscal year 2019. Notably, the Departments of Agriculture,  Defense, the Interior, and the Treasury accounted for 84 percent of the  completed closures.", "In addition, that report noted that 18 of the 24 agencies had reported  achieving about $2.3 billion collectively in cost savings and avoidances  from their data center consolidation and optimization efforts from fiscal  year 2012 through August 2016. The Departments of Commerce,  Defense, Homeland Security, and the Treasury accounted for  approximately $2.0 billion (or 87 percent) of the total.", "Further, 23 agencies reported about $656 million collectively in planned  savings for fiscal years 2016 through 2018. This is about $3.3 billion less  than the estimated $4.0 billion in planned savings for fiscal years 2016  through 2018 that agencies reported to us in November 2015. Figure 3  presents a comparison of the amounts of cost savings and avoidances  reported by agencies to OMB and the amounts the agencies reported to  us.", "As mentioned previously, FITARA required agencies to submit no later  than the end of fiscal year 2016 and annually thereafter multi-year  strategies to achieve the consolidation and optimization of their data  centers. Among other things, this strategy is required to include such  information as data center consolidation and optimization metrics, and  year-by-year calculations of investments and cost savings through  October 1, 2020.", "Further, OMB\u2019s August 2016 guidance on data center optimization  contained additional information for how agencies are to implement the  strategic plan requirements of FITARA, and stated that agencies were  required to publicly post their strategic plans to their agency-owned digital  strategy websites by September 30, 2016.", "As of April 2017, only 7 of the 23 agencies that submitted their strategic  plans\u2014the Departments of Agriculture, Education, Homeland Security,  and Housing and Urban Development; the General Services  Administration; the National Science Foundation; and the Office of  Personnel Management\u2014had addressed all five elements required by the  OMB memorandum implementing FITARA. The remaining 16 agencies  either partially met or did not meet the requirements. For example, most  agencies partially met or did not meet the requirements to provide  information related to data center closures and cost savings metrics. The  Department of Defense did not submit a plan and was rated as not  meeting any of the requirements.", "To better ensure that federal data center consolidation and optimization  efforts improve governmental efficiency and achieve cost savings, in our  May 2017 report, we recommended that 11 of the 24 agencies take  actions to ensure that the amounts of achieved data center cost savings  and avoidances are consistent across all reporting mechanisms. We also  recommended that 17 of the 24 agencies each take action to complete  missing elements in their strategic plans and submit their plans to OMB in  order to optimize their data centers and achieve cost savings. Twelve  agencies agreed with our recommendations, 2 did not agree, and 10  agencies and OMB did not state whether they agreed or disagreed.", "More recently, in August 2017, we reported that agencies needed to  address challenges in optimizing their data centers in order to achieve  cost savings. Specifically, we noted that, according to the 24 agencies\u2019  data center consolidation initiative strategic plans as of April 2017, most  agencies were not planning to meet OMB\u2019s optimization targets by the  end of fiscal year 2018. Further, of the 24 agencies, 5\u2014the Department of  Commerce and the Environmental Protection Agency, National Science  Foundation, Small Business Administration, and U.S. Agency for  International Development\u2014reported plans to fully meet their applicable  targets by the end of fiscal year 2018; 13 reported plans to meet some,  but not all, of the targets; 4 reported that they did not plan to meet any  targets; and 2 did not have a basis to report planned optimization  milestones because they do not report having any agency-owned data  centers. Figure 4 summarizes agencies\u2019 progress in meeting OMB\u2019s  optimization targets as of February 2017, and planned progress to be  achieved by September 2017 and September 2018, as of April 2017.", "FITARA required OMB to establish a data center optimization metric  specific to measuring server efficiency, and required agencies to report  on progress in meeting this metric. To effectively measure progress  against this metric, OMB directed agencies to replace the manual  collection and reporting of systems, software, and hardware inventory  housed within agency-owned data centers with automated monitoring  tools and to complete this effort no later than the end of fiscal year 2018.  Agencies are required to report progress in implementing automated  monitoring tools and server utilization averages at each data center as  part of their quarterly data center inventory reporting to OMB.", "As of February 2017, 4 of the 22 agencies reporting agency-owned data  centers in their inventory\u2014the National Aeronautics and Space  Administration, National Science Foundation, Social Security  Administration, and U.S. Agency for International Development\u2014reported  that they had implemented automated monitoring tools at all of their data  centers. Further, 10 reported that they had implemented automated  monitoring tools at between 1 and 57 percent of their centers, and 8 had  not yet begun to report the implementation of these tools. In total, the 22  agencies reported that automated tools were implemented at 123 (or  about 3 percent) of the 4,528 total agency-owned data centers, while the  remaining 4,405 (or about 97 percent) of these data centers were not  reported as having these tools implemented. Figure 5 summarizes the  number of agency-reported data centers with automated monitoring tools  implemented, including the number of tiered and non-tiered centers.", "To address challenges in optimizing federal data centers, in our August  2017 report, we made recommendations to 18 agencies and OMB. Ten  agencies agreed with our recommendations, three agencies partially  agreed, and six (including OMB) did not state whether they agreed or  disagreed."], "subsections": []}, {"section_title": "Risks Need to Be Fully Considered When Agencies Rate Their Major Investments on OMB\u2019s IT Dashboard", "paragraphs": ["To facilitate transparency across the government in acquiring and  managing IT investments, OMB established a public website\u2014the IT  Dashboard\u2014to provide detailed information on major investments at 26  agencies, including ratings of their performance against cost and  schedule targets. Among other things, agencies are to submit ratings  from their CIOs, which, according to OMB\u2019s instructions, should reflect the  level of risk facing an investment relative to that investment\u2019s ability to  accomplish its goals. In this regard, FITARA includes a requirement for  covered agency CIOs to categorize their major IT investment risks in  accordance with OMB guidance.", "Over the past 6 years, we have issued a series of reports about the  Dashboard that noted both significant steps OMB has taken to enhance  the oversight, transparency, and accountability of federal IT investments  by creating its Dashboard, as well as concerns about the accuracy and  reliability of the data. In total, we have made 47 recommendations to  OMB and federal agencies to help improve the accuracy and reliability of  the information on the Dashboard and to increase its availability. Most  agencies agreed with our recommendations or had no comments. As of  March 2018, 19 recommendations remained open.", "In June 2016, we determined that 13 of the 15 agencies selected for in- depth review had not fully considered risks when rating their major  investments on the Dashboard. Specifically, our assessments of risk for  95 investments at the 15 selected agencies matched the CIO ratings  posted on the Dashboard 22 times, showed more risk 60 times, and  showed less risk 13 times. Figure 6 summarizes how our assessments  compared to the selected investments\u2019 CIO ratings.", "Aside from the inherently judgmental nature of risk ratings, we identified  three factors which contributed to differences between our assessments  and the CIO ratings:", "Forty of the 95 CIO ratings were not updated during April 2015 (the  month we conducted our review), which led to differences between  our assessments and the CIOs\u2019 ratings. This underscores the  importance of frequent rating updates, which help to ensure that the  information on the Dashboard is timely and accurately reflects recent  changes to investment status.", "Three agencies\u2019 rating processes spanned longer than 1 month.", "Longer processes mean that CIO ratings are based on older data, and  may not reflect the current level of investment risk.", "Seven agencies\u2019 rating processes did not focus on active risks.", "According to OMB\u2019s guidance, CIO ratings should reflect the CIO\u2019s  assessment of the risk and the investment\u2019s ability to accomplish its  goals. CIO ratings that do no incorporate active risks increase the  chance that ratings overstate the likelihood of investment success.", "As a result, we concluded that the associated risk rating processes used  by the 15 agencies were generally understating the level of an  investment\u2019s risk, raising the likelihood that critical federal investments in  IT are not receiving the appropriate levels of oversight.", "To better ensure that the Dashboard ratings more accurately reflect risk,  we made 25 recommendations to 15 agencies to improve the quality and  frequency of their CIO ratings. Twelve agencies generally agreed with or  did not comment on the recommendations and three agencies disagreed,  stating that their CIO ratings were adequate. However, we noted that  weaknesses in these three agencies\u2019 processes still existed and that we  continued to believe our recommendations were appropriate."], "subsections": []}, {"section_title": "Agencies Need to Increase Their Use of Incremental Development Practices", "paragraphs": ["OMB has emphasized the need to deliver investments in smaller parts, or  increments, in order to reduce risk, deliver capabilities more quickly, and  facilitate the adoption of emerging technologies. In 2010, it called for  agencies\u2019 major investments to deliver functionality every 12 months and,  since 2012, every 6 months. Subsequently, FITARA codified a  requirement that covered agency CIOs certify that IT investments are  adequately implementing incremental development, as defined in the  capital planning guidance issued by OMB. Further, subsequent OMB  guidance on the law\u2019s implementation, issued in June 2015, directed  agency CIOs to define processes and policies for their agencies which  ensure that they certify that IT resources are adequately implementing  incremental development.", "However, in May 2014, we reported that 66 of 89 selected investments  at five major agencies did not plan to deliver capabilities in 6-month  cycles, and less than half of these investments planned to deliver  functionality in 12-month cycles. We also reported that only one of the five  agencies had complete incremental development policies. Accordingly,  we recommended that OMB clarify its guidance on incremental  development and that the selected agencies update their associated  policies to comply with OMB\u2019s revised guidance (once made available),  and consider the factors identified in our report when doing so.", "Four of the six agencies agreed with our recommendations or had no  comments, one agency partially agreed, and the remaining agency  disagreed with the recommendations. The agency that disagreed did not  believe that its recommendations should be dependent upon OMB taking  action to update guidance. In response, we noted that only one of the  recommendations to that agency depended upon OMB action, and we  maintained that the action was warranted and could be implemented.", "Subsequently, in August 2016, we reported that agencies had not fully  implemented incremental development practices for their software  development projects. Specifically, we noted that, as of August 31, 2015,  22 federal agencies had reported on the Dashboard that 300 of 469  active software development projects (64 percent) were planning to  deliver usable functionality every 6 months for fiscal year 2016, as  required by OMB guidance. The remaining 169 projects (or 36 percent)  that were reported as not planning to deliver functionality every 6 months,  agencies provided a variety of explanations for not achieving that goal.  These included project complexity, the lack of an established project  release schedule, or that the project was not a software development  project.", "Further, in conducting an in-depth review of seven selected agencies\u2019  software development projects, we determined that 129 out of 287  software development projects delivered functionality every 6 months for  fiscal year 2015 (45 percent) and 113 out of 206 software projects (55  percent) planned to do so in fiscal year 2016. However, significant  differences existed between the delivery rates that the agencies reported  to us and what they reported on the Dashboard. For example, for four  agencies (the Departments of Commerce, Education, Health and Human  Services, and the Treasury), the percentage of delivery reported to us  was at least 10 percentage points lower than what was reported on the  Dashboard. These differences were due to (1) our identification of fewer  software development projects than agencies reported on the Dashboard and (2) the fact that information reported to us was generally more current  than the information reported on the Dashboard.", "We concluded that, by not having up-to-date information on the  Dashboard about whether the project is a software development project  and about the extent to which projects are delivering functionality, these  seven agencies were at risk that OMB and key stakeholders may make  decisions regarding the agencies\u2019 investments without the most current  and accurate information. As such, we recommended that the seven  selected agencies review major IT investment project data reported on  the Dashboard and update the information as appropriate, ensuring that  these data are consistent across all reporting channels.", "Finally, while OMB has issued guidance requiring agency CIOs to certify  that each major IT investment\u2019s plan for the current year adequately  implements incremental development, only three agencies (the  Departments of Commerce, Homeland Security, and Transportation) had  defined processes and policies intended to ensure that the CIOs certify  that major IT investments are adequately implementing incremental  development. Accordingly, we recommended that the remaining four  agencies\u2014the Departments of Defense, Education, Health and Human  Services, and the Treasury\u2014establish policies and processes for  certifying that major IT investments adequately use incremental  development.", "The Departments of Education and Health and Human Services agreed  with our recommendation, while the Department of Defense disagreed  and stated that its existing policies address the use of incremental  development. However, we noted that the department\u2019s policies did not  comply with OMB\u2019s guidance and that we continued to believe our  recommendation was appropriate. The Department of the Treasury did  not comment on its recommendation.", "More recently, in November 2017, we reported that agencies needed to  improve their certification of incremental development. Specifically,  agencies reported that 103 of 166 major IT software development  investments (62 percent) were certified by the agency CIO for  implementing adequate incremental development in fiscal year 2017, as  required by FITARA as of August 2016. Table 1 identifies the number of  federal agency major IT software development investments certified for  adequate incremental development, as reported on the IT Dashboard for  fiscal year 2017.", "Officials from 21 of the 24 agencies in our review reported that challenges  hindered their ability to implement incremental development, which  included: (1) inefficient governance processes; (2) procurement delays;  and (3) organizational changes associated with transitioning from a  traditional software methodology that takes years to deliver a product, to  incremental development, which delivers products in shorter time frames.  Nevertheless, 21 agencies reported that the certification process was  beneficial because they used the information from the process to assist  with identifying investments that could more effectively use an  incremental approach, and used lessons learned to improve the agencies\u2019  incremental processes.", "In addition, as of August 2017, only 4 of the 24 agencies had clearly  defined CIO incremental development certification policies and processes  that contained descriptions of the role of the CIO in the process and how  the CIO\u2019s certification will be documented; and included definitions of  incremental development and time frames for delivering functionality  consistent with OMB guidance. Figure 7 summarizes our analysis of  agencies\u2019 policies for CIO certification of the adequate use of incremental  development in IT investments.", "Lastly, we reported that OMB\u2019s capital planning guidance for fiscal year  2018 (issued in June 2016) lacked clarity regarding how agencies were  to address the requirement for certifying adequate incremental  development. While the 2018 guidance stated that agency CIOs are to  provide the certifications needed to demonstrate compliance with  FITARA, the guidance did not include a specific reference to the provision  requiring CIO certification of adequate incremental development. We  noted that, as a result of this change, OMB placed the burden on  agencies to know and understand how to demonstrate compliance with  FITARA\u2019s incremental development provision. Further, because of the  lack of clarity in the guidance as to what agencies were to provide, OMB  could not demonstrate how the fiscal year 2018 guidance ensured that  agencies provided the certifications specifically called for in the law.", "In August 2017, OMB issued its fiscal year 2019 guidance, which  addressed the weaknesses we identified in the previous fiscal year\u2019s  guidance. Specifically, the revised guidance requires agency CIOs to  make an explicit statement regarding the extent to which the CIO is able  to certify the use of incremental development, and to include a copy of  that statement in the agency\u2019s public congressional budget justification  materials. As part of the statement, an agency CIO must also identify  which specific bureaus or offices are using incremental development on  all of their investments.", "In our November 2017 report, we made 19 recommendations to 17  agencies to improve reporting and certification of incremental  development. Eleven agencies agreed with our recommendations, 1  partially agreed, and 5 did not state whether they agreed or disagreed.  OMB disagreed with several of our conclusions, which we continued to  believe were valid.", "In total, from May 2014 through November 2017, we made 42  recommendations to OMB and agencies to improve their implementation  of incremental development. As of March 2018, 34 of our  recommendations remained open."], "subsections": []}, {"section_title": "Agencies Need to Better Manage Software Licenses to Achieve Savings", "paragraphs": ["Federal agencies engage in thousands of software licensing agreements  annually. The objective of software license management is to manage,  control, and protect an organization\u2019s software assets. Effective  management of these licenses can help avoid purchasing too many  licenses, which can result in unused software, as well as too few licenses,  which can result in noncompliance with license terms and cause the  imposition of additional fees.", "As part of its PortfolioStat initiative, OMB has developed policy that  addresses software licenses. This policy requires agencies to conduct an  annual, agency-wide IT portfolio review to, among other things, reduce  commodity IT spending. Such areas of spending could include software  licenses.", "In May 2014, we reported on federal agencies\u2019 management of software  licenses and determined that better management was needed to achieve  significant savings government-wide. In particular, 22 of the 24 major  agencies did not have comprehensive license policies and only 2 had  comprehensive license inventories. In addition, we identified five leading  software license management practices, and the agencies\u2019  implementation of these practices varied.", "As a result of agencies\u2019 mixed management of software licensing,  agencies\u2019 oversight of software license spending was limited or lacking,  thus potentially leading to missed savings. However, the potential savings  could be significant considering that, in fiscal year 2012, 1 major federal  agency reported saving approximately $181 million by consolidating its  enterprise license agreements, even when its oversight process was ad  hoc. Accordingly, we recommended that OMB issue needed guidance to  agencies; we also made 135 recommendations to the 24 agencies to  improve their policies and practices for managing licenses. Among other  things, we recommended that the agencies regularly track and maintain a  comprehensive inventory of software licenses and analyze the inventory  to identify opportunities to reduce costs and better inform investment  decision making.", "Most agencies generally agreed with the recommendations or had no  comments. As of March 2018, 95 of the recommendations had not been  implemented. Table 2 reflects the extent to which agencies implemented  recommendations in these areas."], "subsections": []}, {"section_title": "Agencies Need to Ensure That IT Acquisitions Are Reviewed and Approved by Chief Information Officers", "paragraphs": ["FITARA includes a provision to enhance covered agency CIOs\u2019 authority  through, among other things, requiring agency heads to ensure that CIOs  review and approve IT contracts. OMB\u2019s FITARA implementation  guidance expanded upon this section of FITARA in a number of ways.  Specifically, according to the guidance:", "CIOs may review and approve IT acquisition strategies and plans,  rather than individual IT contracts;", "CIOs can designate other agency officials to act as their  representatives, but the CIOs must retain accountability;", "Chief Acquisition Officers (CAO) are responsible for ensuring that all  IT contract actions are consistent with CIO-approved acquisition  strategies and plans; and", "CAOs are to indicate to the CIOs when planned acquisition strategies  and acquisition plans include IT.", "In January 2018, we reported that most of the CIOs at the 22 selected  agencies were not adequately involved in reviewing billions of dollars of  IT acquisitions. For instance, most of the 22 selected agencies did not  identify all of their IT contracts. The selected agencies identified 78,249  IT-related contracts, to which they obligated $14.7 billion in fiscal year  2016. However, we identified 31,493 additional contracts with $4.5 billion  obligated, raising the total amount obligated to IT contracts in fiscal year  2016 to at least $19.2 billion. Figure 8 reflects the obligations agencies  reported to us relative to the obligations we identified.", "The percentage of additional IT contract obligations we identified varied  among the selected agencies. For example, the Department of State did  not identify 1 percent of its IT contract obligation dollars. Conversely, 8  agencies did not identify over 40 percent of their IT-related contract  obligation dollars. Many of the selected agencies that did not identify  these IT acquisitions did not follow OMB guidance. Specifically, 14 of the  22 agencies did not involve the acquisition office in their process to  identify IT acquisitions for CIO review, as required by OMB. In addition, 7  agencies did not establish guidance to aid officials in recognizing IT. Until  agencies involve the acquisitions office in their IT identification processes  and establish supporting guidance, they cannot ensure that they will  identify all IT acquisitions. Without proper identification of IT acquisitions,  agencies and CIOs cannot effectively provide oversight of these  acquisitions.", "In addition to not identifying all IT contracts, 14 of the 22 selected  agencies did not fully satisfy OMB\u2019s requirement that the CIO review and  approve IT acquisition plans or strategies. Further, only 11 of 96 randomly  selected IT contracts at 10 agencies that we evaluated were CIO- reviewed and approved as required by OMB\u2019s guidance. The 85 IT  contracts not reviewed had a total possible value of approximately $23.8  billion.", "Until agencies ensure that CIOs are able to review and approve all IT  acquisitions, CIOs will continue to have limited visibility and input into  their agencies\u2019 planned IT expenditures and will not be able to use the  increased authority that FITARA\u2019s contract approval provision is intended  to provide. Further, agencies will likely miss an opportunity to strengthen  CIOs\u2019 authority and the oversight of IT acquisitions. As a result, agencies  may award IT contracts that are duplicative, wasteful, or poorly  conceived.", "As a result of this report, we made 39 recommendations, including that  agencies ensure that acquisition offices are involved in identifying IT and  issue related guidance and ensure that IT acquisitions are reviewed  according to OMB guidance. OMB and 20 agencies generally agreed with  or did not comment on the recommendations. One agency agreed with  one recommendation, but disagreed with another. The remaining agency  disagreed with two recommendations. We subsequently removed one of  these recommendations from the final report, but not the other. As of  March 2018, all 39 recommendations remain open."], "subsections": []}, {"section_title": "Implementing Key IT Workforce Planning Activities Can Help Ensure Acquisition Skill Gaps Are Addressed", "paragraphs": ["An area where agencies can improve their ability to acquire IT is  workforce planning. In November 2016, we reported that IT workforce  planning activities, when effectively implemented, can facilitate the  success of major acquisitions. Ensuring program staff have the necessary  knowledge and skills is a factor commonly identified as critical to the  success of major investments. If agencies are to ensure that this critical  success factor has been met, then IT skill gaps need to be adequately  assessed and addressed through a workforce planning process.", "In this regard, we reported that four workforce planning steps and eight  key activities can assist agencies in assessing and addressing IT  knowledge and skill gaps. Specifically, these four steps are: (1) setting  the strategic direction for IT workforce planning, (2) analyzing the  workforce to identify skill gaps, (3) developing and implementing  strategies to address IT skill gaps, and (4) monitoring and reporting  progress in addressing skill gaps. Each of the four steps is supported by  key activities (as summarized in table 3).", "However, in our November 2016 report, we determined that the five  agencies that we selected for in-depth analysis had not fully implemented  key workforce planning steps and activities.For example, four of these  agencies had not demonstrated an established IT workforce planning  process. In addition, none of these agencies had fully assessed their  workforce competencies and staffing needs regularly or established  strategies and plans to address gaps in these areas. Figure 9 illustrates  the extent to which the five selected agencies had fully, partially, or not  implemented key IT workforce planning activities.", "The weaknesses identified were due, in part, to these agencies lacking  comprehensive policies that required such activities, or failing to apply the  policies to IT workforce planning. We concluded that, until these  weaknesses are addressed, the five agencies risk not adequately  assessing and addressing gaps in knowledge and skills that are critical to  the success of major acquisitions. Accordingly, we made five  recommendations to the five selected agencies to address the  weaknesses in their IT workforce planning practices that we identified.  Four agencies\u2014the Departments of Commerce, Health and Human  Services, Transportation, and the Treasury\u2014agreed with our  recommendations and one, the Department of Defense, partially agreed.  As of March 2018, the agencies had not addressed the five  recommendations."], "subsections": []}, {"section_title": "Agencies Need to Address Aging Legacy Systems", "paragraphs": ["IT investments across the federal government are becoming increasingly  obsolete. Specifically, in May 2016, we reported that many agencies were  using systems which had components that were, in some cases, at least  50 years old. For example, we determined that the Department of  Defense was using 8-inch floppy disks in a legacy system that  coordinates the operational functions of the nation\u2019s nuclear forces. In  addition, the Department of the Treasury was using assembly language  code\u2014a computer language initially used in the 1950s and typically tied  to the hardware for which it was developed. Further, in some cases, the  vendors were no longer providing support for hardware or software. For  example, each of the 12 agencies in our review reported using  unsupported operating systems and components. At the time, five of the  selected agencies reported using 1980s and 1990s Microsoft operating  systems that stopped being supported by the vendor more than a decade  ago. Table 4 provides examples of legacy systems across the federal  government that agencies report are 30 years old or older and use  obsolete software or hardware, and identifies those that do not have  specific plans with time frames to modernize or replace these  investments.", "To address this issue, we recommended that 12 agencies identify and  plan to modernize or replace legacy systems, including establishing time  frames, activities to be performed, and functions to be replaced or  enhanced. Most agencies agreed with our recommendations or had no  comment. As of March 2018, all of the recommendations remained open.", "In conclusion, the federal government has an opportunity to save billions  of dollars; improve the transparency and management of IT acquisitions  and operations; and to strengthen the authority of CIOs to provide needed  direction and oversight. The forum we held also recommended that CIOs  be given more authority, and noted the important role played by the  Federal CIO.", "Most agencies have taken steps to improve the management of IT  acquisitions and operations by implementing key initiatives, including data  center consolidation, efforts to increase transparency via OMB\u2019s IT  Dashboard, incremental development, management of software licenses,  approval of IT acquisitions, implementation of IT workforce key practices,  and addressing legacy IT; and they have continued to address  recommendations we have made over the past several years. However,  additional improvements are needed, and further efforts by OMB and  federal agencies to implement our previous recommendations would  better position them to improve the management of IT acquisitions and  operations.", "To help ensure that these efforts succeed, OMB\u2019s and agencies\u2019  continued implementation of recommendations is essential. In addition,  we will continue to monitor agencies\u2019 implementation of our previous  recommendations.", "Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly,  and Members of the Subcommittees, this completes my prepared  statement. I would be pleased to respond to any questions that you may  have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Dave Powner, Director, Information Technology at (202) 512- 9286 or pownerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Kevin Walsh (Assistant Director), Chris Businsky, Rebecca Eyler,  Meredith Raymond, and Jessica Waselkow (Analyst in Charge).", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-349T", "url": "https://www.gao.gov/products/GAO-18-349T", "title": "VA Disability Benefits: Opportunities Exist to Better Ensure Successful Appeals Reform", "published_date": "2018-01-30T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA's disability compensation program pays cash benefits to veterans with disabilities connected to their military service. In recent years, the number of appeals of VA's benefit decisions has been rising. For decisions made on appeal in fiscal year 2017, veterans waited an average of 3 years for resolution by either VBA or the Board, and 7 years for resolution by the Board. The Veterans Appeals Improvement and Modernization Act of 2017 makes changes to VA's current (legacy) appeals process, giving veterans new options to have their claims further reviewed by VBA or appeal directly to the Board. The Act requires VA to submit to Congress and GAO a plan for implementing a new appeals process, and includes a provision for GAO to assess VA's plan.", "This testimony focuses on the extent to which VA's plan: (1) addresses the required elements in the Act, and (2) reflects sound planning practices identified in prior GAO work. GAO's work entailed reviewing and assessing VA's appeals plan and related documents against sound planning practices, and soliciting VA's views on GAO's assessments."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs' (VA) plan for implementing a new disability appeals process while attending to appeals in the current process addresses most, but not all, elements required by the Veterans Appeals Improvement and Modernization Act of 2017 (Act). VA's appeals plan addresses 17 of 22 required elements, partially addresses 4, and does not address 1. For example, not addressed is the required element to include the resources needed by the Veterans Benefits Administration (VBA) and the Board of Veterans' Appeals (Board) to implement the new appeals process and address legacy appeals under the current process. VA needs this information to certify, as specified under the Act, that it has sufficient resources to implement appeals reform and make timely appeals decisions under the new and legacy processes.", "VA's appeals plan reflects certain sound planning practices, but it could benefit from including important details in several key planning areas:", "Performance measurement : VA's plan reflects steps taken to track performance, but could articulate a more complete and balanced set of goals and measures for monitoring and assessing performance on a range of dimensions of success. Specifically, the plan reports that VA is developing a process to track timeliness of the new and legacy processes. However, contrary to sound planning practices, the plan does not include timeliness goals for all five appeals options available to veterans, does not include goals or measures for additional aspects of performance (such as accuracy or cost), and does not explain how VA will monitor or assess the new process compared to the legacy process. Unless VA clearly articulates a complete and balanced set of goals and measures, it could inadvertently incentivize staff to focus on certain aspects of appeals performance over others or fail to improve overall service to veterans.", "Project management : VA's plan includes a master schedule for implementing the new appeals plan; however, this schedule falls short of sound practices because it does not include key planned activities\u2014such as its pilot test of two of the five appeals options. In addition, the schedule does not reflect other sound practices for guiding implementation and establishing accountability\u2014such as articulating interim goals and needed resources for, and interdependencies among, activities. Unless VA augments its master schedule to include all key activities and reflect sound practices, VA may be unable to provide reasonable assurance that it has the essential program management information needed for this complex and important effort.", "Risk assessment : VA has taken steps to assess and mitigate some risks related to appeals reform by, for example, pilot testing two of the five appeals options through its Rapid Appeals Modernization Program (RAMP). However, as designed, RAMP does not include key features of a well-developed and documented pilot test. For example, VA has not articulated how it will assess RAMP before proceeding with full implementation. In addition, RAMP is not pilot testing three options and, as a result, VA will not have data on the extent to which veterans will appeal directly to the Board when given the option. Unless VA identifies and mitigates key risks associated with implementing a new process, VA is taking a chance that untested aspects will not perform as desired."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its forthcoming report, GAO is considering recommending that VA: fully address all legally required elements in its appeals plan, articulate how it will monitor and assess the new appeals process as compared to the legacy process, augment its master schedule for implementation, and more fully address risk."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our review of the Department of  Veterans Affairs\u2019 (VA) plan for implementing a new disability appeals  process while processing pending appeals under the current, or legacy,  process. VA provides cash benefits to veterans for disabling conditions  incurred in or aggravated by military service, paying an estimated $67  billion to about 4.3 million veterans in fiscal year 2016. If veterans are  dissatisfied with VA\u2019s initial decision they can appeal\u2014first to the  Veterans Benefits Administration (VBA) and then, if not satisfied there, to  the Board of Veterans\u2019 Appeals (Board), a separate agency within VA. In  recent years, the number of appeals of VA\u2019s benefit decisions has been  rising. For appeals resolved in fiscal year 2017, veterans waited an  average of 3 years from the date they initiated their appeal to resolution  by either VBA or the Board\u2014and a cumulative average of 7 years for  appeals resolved by the Board. Due in part to the challenges VA faces  managing large workloads and deciding disability claims and appeals in a  timely manner, GAO in 2003 designated VA disability compensation and  other federal disability programs as one of the government\u2019s highest  management risks.", "In a March 2017 report, we examined VA\u2019s approaches to address  challenges it identified as contributing to lengthy appeals processing  times\u2014including VA efforts to hire staff, propose reform legislation to  Congress in April 2016, and upgrade its information technology  systems\u2014and the extent to which those approaches were consistent with  sound planning practices. We made five recommendations to improve  VA\u2019s ability to implement its proposed appeals process reform while  addressing a growing appeals workload. VA agreed in principle with our  five recommendations, which remain open as of January 2018. We  recommended, in essence, that VA develop: (1) a detailed workforce  plan, (2) a complete schedule of information technology (IT) updates, (3)  better estimates of future workloads and timeliness, (4) a robust plan for  monitoring appeals reform, and (5) a strategy for assessing whether the  new process improves veterans\u2019 experiences over the current process.  We also suggested that Congress require VA to pilot test appeals reform.", "Enacted on August 23, 2017, the Veterans Appeals Improvement and  Modernization Act of 2017 (the Act) will make changes to VA\u2019s appeals  process. Specifically, the Act replaces the current appeals process with a  process that gives veterans various options to have their claim reviewed  further by VBA or to bypass VBA and appeal directly to the Board. The  Act also requires VA to submit a comprehensive plan for implementing  the new appeals process and processing legacy appeals (appeals that  remain pending in the current process prior to fully implementing appeals  reform) to the appropriate committees of Congress and GAO. The Act  delineates the required elements of this plan, and required VA to submit  its plan within 90 days of enactment. VA submitted its plan on November  22, 2017. The Act also includes a provision for GAO to assess VA\u2019s  appeals plan, including whether the plan comports with sound planning  practices and/or contains gaps.", "My testimony today is based on work being conducted for a report that  GAO expects to issue pursuant to the Act. This statement focuses on the  extent to which VA\u2019s appeals plan (1) addresses the required elements in  the Act; and (2) reflects sound planning practices identified in prior GAO  work.", "To assess the extent to which VA\u2019s plan addresses the required elements  in the Act, we identified the required elements for VA\u2019s comprehensive  plan under section 3(a) and (b) of the Act; compared the required  elements against VA\u2019s appeals plan and supplemental materials VA  provided at our request; and made a preliminary determination as to  whether VA\u2019s plan addressed, partially addressed, or did not address  each element. We then shared the results of this review with VA officials,  and considered their comments in arriving at our assessment.", "To address the extent to which VA\u2019s plan reflects sound planning  practices, we compared the appeals plan and supplemental materials  against relevant sound planning practices and other criteria identified in  our prior work. Our analyses focused on the information and elements  VA presented in its appeals plan and supplemental materials provided by  VA, rather than auditing the underlying information. We conducted the  work for this statement 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "VA\u2019s Disability Compensation Claims Process", "paragraphs": ["VA\u2019s process for deciding veterans\u2019 eligibility for disability compensation  begins when a veteran submits a claim to VA. The veteran submits his or  her claim to one of VBA\u2019s 56 regional offices, where staff members assist  the veteran by gathering additional evidence, such as military and  medical records, that is needed to evaluate the claim. Based on this  evidence, VBA decides whether the veteran is entitled to compensation  and, if so, how much.", "A veteran dissatisfied with the initial claim decision can generally appeal  within 1 year from the date of the notification letter VBA sends to the  veteran. Under the current appeals process (now referred to by VA as the  legacy process), an appeal begins with the veteran filing a Notice of  Disagreement. VBA then re-examines the case and generally issues a  Statement of the Case that represents its decision.", "A veteran dissatisfied with VBA\u2019s decision can file an appeal with the  Board. In filing that appeal, the veteran can indicate whether a Board  hearing is desired. Before the Board reviews the appeal, VBA prepares  the file and certifies it as ready for Board review. If the veteran requests a  hearing to present new evidence or arguments, the Board will hold a  hearing by videoconference or at a local VBA regional office. The Board\u2019s  members, also known as Veterans Law Judges, review the evidence and  either issue a decision to grant or deny the veteran\u2019s appeal or refer (or  remand) the appeal back to VBA for further work."], "subsections": []}, {"section_title": "New Appeals Process", "paragraphs": ["The 2017 Act made changes to VA\u2019s legacy appeals process that will  generally take effect no earlier than February 2019, which is  approximately 18 months from the date of enactment. According to its  appeals plan, VA intends to implement the Act by replacing the current  appeals process with a process offering veterans who are dissatisfied  with VBA\u2019s decision on their claim one of five options: two of those  options afford the veteran an opportunity for an additional review of VBA\u2019s  decision within VBA, and the other three options afford them the  opportunity to bypass additional VBA review and appeal directly to the  Board.", "Under the new appeals process, the two VBA options will be:  1.  Request higher-level review: The veteran asks VBA to review its  initial decision based on the same evidence but with a higher-level  official reviewing and issuing a new decision.  2.  File supplemental claim: The veteran provides additional  evidence and files a supplemental claim with VBA for a new  decision on the claim.", "The three Board options will be:  3.  Request Board review of existing record: The veteran appeals  to the Board and asks it to review only the existing record without  a hearing.  4.  Request Board review of additional evidence, without a  hearing.  5.  Request Board review of additional evidence, with a hearing."], "subsections": []}, {"section_title": "VA\u2019s Appeals Plan", "paragraphs": ["The Act also requires VA to submit to the appropriate committees of  Congress and GAO, within 90 days of the date of enactment, a  comprehensive plan for (1) processing appeals under the legacy process  until there are no more to process, (2) implementing the new appeals  process, (3) processing of claims under the new appeals process in a  timely manner, and (4) monitoring implementation of the new appeals  process. In addition to these four broad elements, the Act lists 18  elements required to be included in the plan that relate to, among other  things:  staffing, information technology (IT), and other resources required to  implement the plan; estimated timelines for hiring and training VA employees; and a description of risks associated with each element of the plan.", "The Act also includes a provision for GAO to assess the plan within 90  days after VA submits it.", "The Act also requires VA to provide progress reports to the appropriate  committees of Congress and GAO at least once every 90 days (starting  after VA submits its plan), until the date the Act\u2019s legal changes to the  appeals process generally go into effect and then at least once every 180  days after this date for 7 years."], "subsections": []}, {"section_title": "Rapid Appeals Modernization Program (RAMP)", "paragraphs": ["The Act also authorized VA to carry out a program to test any  assumptions relied upon in developing its comprehensive plan and test  the feasibility and advisability of any facet of the new appeals process. In  its appeals plan, VA reported its decision to pilot test two of the five new  options by allowing veterans with pending appeals in the legacy process  (known as legacy appeals) to elect the VBA supplemental claim or the  higher-level review options beginning in November 2017. This program,  which VA refers to as RAMP, is intended to reduce legacy appeals by  providing veterans with a chance for early resolution of their claims within  VBA while the Board focuses on reducing its inventory of legacy appeals,  according to VA. Participation in RAMP is voluntary, but veterans must  withdraw their pending legacy appeal to participate, according to VA.  Veterans dissatisfied with their RAMP decisions must wait until VA fully  implements the new appeals process (in February 2019 at the earliest)  before pursuing an appeal with the Board under the new process,  according to VA officials."], "subsections": []}]}, {"section_title": "VA\u2019s Plan Addresses Most of the Act\u2019s Required Elements for the New and Legacy Disability Appeals Processes", "paragraphs": ["VA\u2019s appeals plan addresses 17 of the Act\u2019s 22 required elements,  partially addresses 4 related to monitoring implementation and workforce  planning, and does not address 1 element related to identifying total  resources. For example, VA\u2019s appeals plan addresses the required  elements related to, among others, identifying legal authorities for hiring  and removing employees, estimating timelines for hiring and training  employees, and outlining the outreach VA expects to conduct. For the  elements in the Act that VA\u2019s appeals plan partially addresses or does not  address, see table 1. For a detailed list of the 22 required elements in the  Act, see appendix I.", "When we provided VA with our preliminary assessment, VA officials said  they disagreed with our assessment and that their appeals plan  addresses all 22 of the required elements. In general, they said that data  are not available, and VA cannot yet forecast the information required by  the Act until aspects of the new appeals process are tested or  implemented.", "We continue to believe the information as presented in VA\u2019s appeals plan  and supplemental materials addresses 17 of the required elements,  partially addresses 4, and does not address 1 element. Without complete  information on all 22 of the required elements, Congress does not have  the information it needs to fully conduct oversight of VA\u2019s appeals plan  and the agency\u2019s efforts to implement and administer the new process  while addressing legacy appeals. VA also is required to provide  information on resources, among other areas, before it can certify that the  agency is prepared to carry out timely processing of appeals under the  new and legacy appeals process. Further, as discussed below,  addressing required elements through a more comprehensive plan and  underlying analysis is consistent with sound planning practices and would  better position VA to implement the new appeals process while attending  to legacy appeals; for example, a plan that provides for carefully  monitoring the new and legacy appeals processes against balanced goals  and metrics, and clearly articulates resources, milestones and other  information needed for effective program management."], "subsections": []}, {"section_title": "VA\u2019s Appeals Plan Reflects Certain Sound Planning Practices, but Could Improve on Others", "paragraphs": ["VA\u2019s appeals plan reflects certain sound planning practices, such as  convening a working group on performance tracking; however, the plan  could benefit from including important details related to three key planning  areas:  1.  articulating a balanced set of goals and related measures to  monitor and assess the performance of the new appeals process,  in conjunction with the legacy process;  2.  developing a high-quality and reliable implementation schedule to  manage key steps and activities of the project; and  3.  assessing key risks in a comprehensive manner, including  respective mitigation strategies, and articulating clear criteria and  an assessment plan for RAMP, and more fully testing or analyzing  all appeal options."], "subsections": [{"section_title": "VA\u2019s Appeals Plan Indicates Steps to Assess Process Changes, but Should Also Include Goals and Measures to Provide Full Picture of Success", "paragraphs": ["VA\u2019s appeals plan reflects steps taken to track performance, but it could  improve its planning practices related to monitoring and assessing  performance on a range of key dimensions of success. Sound planning  practices suggest that agencies develop overall goals tied to meaningful  and balanced performance measures. These measures include a mix of  outcome, output, and efficiency measures to ensure that an  organization\u2019s priorities\u2014as well as government-wide priorities such as  quality, timeliness, and cost of service\u2014are addressed.", "VA\u2019s appeals plan reports that the agency convened a working group to  design a process for tracking timeliness of both the legacy appeals and  appeals within the new process. In supporting documentation that we  requested, VA officials stated they are also determining the best way to  measure veterans\u2019 satisfaction with the new appeals process. VA\u2019s  appeals plan and supporting documentation also identify timeliness goals  for the two VBA-only options and one of the three Board options.  Nevertheless, its appeals plan does not articulate a set of goals and  measures that cover all aspects of its new appeals process, such as  accuracy of decisions and cost. The plan also does not provide details on the metrics the agency will develop, how it will assess if the new appeals  process is an improvement over the legacy appeals process, and how it  will monitor the allocation of resources between legacy and new appeals  claims. More specifically:", "VA\u2019s reported timeliness measures are incomplete: VA\u2019s appeals  plan outlines timeliness goals for the two VBA options (average  processing time of 125 days) and for the Board option that does not  include new evidence or a hearing (average processing time of 365  days). However, VA\u2019s plan does not establish timeliness goals for  the other two Board options: Board review of additional evidence  without a hearing and Board review of additional evidence with a  hearing. In commenting on our assessment, while VA officials  indicated they expect the new process to be more efficient than the  legacy process (and, therefore, more timely), data to inform goal  setting for all Board options will not be available until VA fully  implements these options. However, establishing timeliness goals for  all options would provide a more complete picture of VA\u2019s vision for  the new appeals process, and help VA to develop concrete, objective,  and observable performance measures to show progress in achieving  that vision, as well as inform resource estimates.", "VA\u2019s reported measures lack adequate balance: Other than  including certain timeliness goals, VA\u2019s appeals plan does not  articulate additional aspects of performance important for managing  appeals, such as accuracy of decisions, veteran satisfaction with the  process, or cost. We previously reported that VA officials said that  they wanted to also use veteran survey results, wait times, and  inventories as sources of information to measure progress under the  new appeals process. Further, VA\u2019s fiscal year 2018 annual  performance plan includes an overall customer satisfaction score for  veterans\u2019 benefits. However, these and other potential measures of  success are not specified in VA\u2019s appeals plan for monitoring the new  appeals process as compared with legacy appeals. By not articulating  a set of comprehensive and balanced goals and measures in its  appeals plan, VA could be inadvertently creating skewed incentives  by focusing on one area of program performance to the detriment of  other areas (e.g., processing claims quickly but inaccurately).", "In commenting on our assessment, VA officials recognized the need  to develop additional goals and measures and indicated, for example,  that they are developing and testing whether the existing quality  assurance goal\u2014requiring 92 percent accuracy\u2014is appropriate for  the new process. According to VA officials, once they have developed  these other goals and measures, VA will communicate this  information as part of the required progress reports to the appropriate  committees of Congress and GAO.", "VA\u2019s plan does not reflect how it will establish baseline data:  VA\u2019s approach for evaluating the efficiency and effectiveness of the  implementation of the new appeals process falls short of sound  practices for using baseline data to assess performance. Our prior  work has demonstrated that by tracking and developing a  performance baseline for all measures, including those that  demonstrate the effectiveness of a program, agencies can better  evaluate progress made and whether or not goals are being  achieved. However, VA\u2019s appeals plan did not provide important  details about what aspects of the new appeals process\u2019 performance  will be compared to what aspects of the legacy process\u2019 performance.", "In particular, section 5 of the Act lists a number of metrics VA is  required to report periodically, including some that could be used as  baseline measures. For example, VA is required to periodically  publish on its website the average time that elapsed between the filing  of an initial claim and the final resolution of the claim, for legacy  appeals as well as appeals under the new system, which is consistent  with our prior recommendation. However, VA\u2019s appeals plan does  not explain how or when the agency would collect and use these or  other data about the legacy and new processes\u2019 performance\u2014such  as accuracy, veteran satisfaction, and cost\u2014to assess their relative  performance.", "As we had previously reported, VA\u2019s business case for reform in some  instances relied on unproven assumptions and limited analyses of its  legacy process to identify root causes of performance problems.  Specifically, VA determined that the open-ended nature of its legacy  appeals process, whereby a veteran can submit additional evidence  numerous times at any point during the VA appeals process, can  cause additional cycles of re-adjudication, a process VA refers to as  \u201cchurning.\u201d According to VA, this re-adjudication can occur multiple  times and can add years to the time needed to reach a final decision  on an appeal. Without fully articulating a plan for collecting and using  baseline and trend data, VA cannot determine the extent to which the  new appeals process, which also allows for multiple appeal  opportunities, will achieve final resolution of veterans\u2019 appeals sooner,  on average, than the legacy process.", "In commenting on our assessment, VA indicated that it is working  toward capturing the metrics listed in section 5 of the Act. VA officials  also noted that reporting on the new appeals process will require IT  system functionality that currently does not exist, but stated that  efforts are underway to add this functionality.", "VA\u2019s plan does not explain how the agency will monitor  processing of legacy versus new appeals: In addition, VA\u2019s  appeals plan does not fully articulate how the agency will monitor  whether resources are being appropriately devoted to both the new  and legacy appeals process and how it will track both sets of  workloads. An appeals plan that does not specifically articulate how  VA will manage the two processes in parallel exposes the agency to  risk that veterans with appeals in the legacy process may experience  significant delays or otherwise poor results relative to those in the new  appeals process or vice versa. In commenting on our assessment, VA  officials noted that VA was not required under section 3 of the Act to  provide a description of its plans to capture metrics listed in section 5.  Even if not required by the Act, developing an approach for carefully  monitoring the management of new and legacy appeals would help  VA track progress being made and achievement of goals.", "Until VA establishes complete and balanced goals and measures,  identifies baseline data, and develops a plan for monitoring and  assessing both the new and legacy processes, VA runs the risk of  promoting skewed behaviors, or not fully understanding whether the new  process is an improvement or whether veterans with appeals in the  legacy process are experiencing poor results."], "subsections": []}, {"section_title": "VA\u2019s Appeals Plan Needs a Reliable Implementation Schedule to Manage the Project", "paragraphs": ["VA\u2019s appeals plan reflects certain aspects of sound planning practices  related to managing the implementation of process change; however,  other key components are not addressed. Sound planning practices for  implementing process change suggest establishing a transition team.  Consistent with such practices, VA\u2019s appeals plan states that the agency  convened an agency-wide governance structure to coordinate  implementation of its new appeals process; it is comprised of senior-level  employees with authority to make necessary decisions to keep the project  on track. VA\u2019s appeals plan also includes a copy of a master schedule. In  its plan, VA asserts that the master schedule reflects timelines, interim  goals and milestones, reporting requirements, and established deadlines,  and that it will be used to guide implementation. VA\u2019s appeals plan also  reports that VA is consulting with project management professionals, who  are using the master schedule, among other tools, to monitor  implementation. In addition, VA made progress addressing some of the  issues we previously identified by developing steps and timetables for updating training in anticipation of implementing the new appeals  process.", "However, VA\u2019s master schedule for implementing reform is missing  elements of a high-quality and reliable implementation schedule for key  activities. We have previously reported that having a well-planned  schedule is a fundamental management tool. Generally recognized sound  practices from the Project Management Institute (PMI) and GAO call for  organizations to employ an integrated and reliable master schedule that  defines when work activities will occur, who will complete the work, how  long they will take, how they are related to one another, and the  constraints affecting the start and completion of work elements, as well as  whether resources will be available when they are needed. Such a  project management schedule not only provides a road map for  systematic project execution, but also provides the means by which to  gauge progress, identify and address potential problems, and promote  accountability.", "The master schedule VA provided in its appeals plan should have  included other sound practices for project management related to a  reliable schedule. Specifically:", "Key activities and their duration are not included: VA\u2019s master  schedule does not capture the Rapid Appeals Modernization Program  (RAMP) activities, even though this pilot test is occurring at the same  time VA is preparing for full implementation of appeals options at VBA  and the Board. In addition, specific Board-related activities are  missing from the schedule, such as efforts to develop metrics, and the  schedule and other project plans we reviewed do not go beyond  February 2019. For example, the schedule does not indicate the  period of time when VA expects to no longer be processing legacy  appeals. When all key and necessary activities are not included, it  raises questions about whether all activities are scheduled in the  correct order, resources are properly allocated, or the estimated  completion dates are reliable. In addition, if the schedule does not  fully and accurately reflect VA\u2019s efforts, it will not serve as an  appropriate basis for analysis and may result in unreliable completion  dates and delays.", "Sequencing and linkages among activities are not identified: For  the high-level activities VA\u2019s appeals plan identifies, VA\u2019s master  schedule does not indicate whether there were linkages or  sequencing among them, which is not consistent with sound  scheduling practices. Linkages and sequencing would show, for  example, if any of these activities or sub-activities must finish prior to  the start of other activities, or the amount of time an activity could be  delayed before the delay affects VA\u2019s estimated implementation  date. For example, VA cannot train new employees until after it hires  them.", "The activities VA identifies also do not appear supported by lower- level project schedules. Specifically, when we requested  documentation to support VA\u2019s high-level summary of activities and  milestones, VA officials did not provide intermediate or more detailed  schedules that reflected these practices. In particular, VA\u2019s appeals  plan lacks a complete schedule for IT modifications that clearly  defines what is to be achieved and the time frames for achievement.  We previously recommended that VA develop a schedule for IT  updates that explicitly addresses when and how process reform will  be integrated into new systems and when these systems will be ready  to support the new appeals process at its onset. For example, VA\u2019s  appeals plan references several required IT modifications that do not  appear in its master schedule. Schedules that are defined at too  high a level may disguise risk that is inherent in lower-level  activities.", "Interim goals are not reflected: VA officials stated that they have  interim goals and milestones, though VA\u2019s appeals plan and  supporting documentation generally do not include this information.  Sound planning and redesign practices suggest closely monitoring  implementation and developing project goals that include a mix of  intermediate goals to be met at various stages. VA\u2019s appeals plan  does not include this information. We previously made a  recommendation that VA develop a more robust plan for closely  monitoring implementation of process reform, including metrics and  interim goals to help track progress, evaluate efficiency and  effectiveness, and identify trouble spots\u2014all of which are consistent  with sound planning practices.", "Resources are not assigned to all identified activities: The high- level summary schedule that VA provided us also lacks details  regarding the assignment of resources for all activities. Specifically,  while the plan identifies workgroups responsible for coordinating  elements in the plan, such as regulations, training, and outreach, the  schedule does not assign resources to the 40 listed activities. As  discussed previously, VA\u2019s appeals plan also does not provide  information on the total resources required for this reform effort.  Assigning resources to the listed activities, as well as providing other  information, could provide a better indication of the estimated total  resources required to implement the new appeals process and  address legacy appeals.", "In commenting on our assessment, VA officials stated that the agency is  developing lower-level project schedules for key activities\u2014such as  RAMP and IT requirements\u2014and will provide these schedules as part of  the required progress reports to the appropriate committees of Congress  and GAO. VA officials also noted that future updates will include  additional dependencies and risks, which VBA and the Board are still  developing. Until VA has a robust integrated master schedule, supported  by detailed project plans that adhere to sound practices, VA\u2019s appeals  plan does not provide reasonable assurance that decision makers have  the essential program management information needed for this complex  and important effort."], "subsections": []}, {"section_title": "VA\u2019s Plan Addresses Some but Not All Key Risks Related to the New Appeals Process", "paragraphs": ["VA\u2019s appeals plan includes an assessment of risks involved in  implementing the new appeals system, but could more comprehensively  reflect key risks posed by such a significant reform effort. VA\u2019s appeals  plan and supplementary materials include a \u201crisk register\u201d that describes  risks associated with many elements of its plan and the remaining level of  risk after its planned response to these risks. VA\u2019s appeals plan also  states that senior leaders will receive regular updates of risks and  mitigation strategies. However, because VA has not yet articulated a  balanced set of performance goals and measures in its appeals plan, it is  hindered in its ability to identify and assess risks.", "Federal internal control standards state, and our previous work at VA and  other agencies demonstrates, that establishing clear performance goals  and objectives is a necessary pre-condition to effectively assessing risk.  Having, for example, more complete timeliness goals, and goals and  measures reflecting other areas of performance, would allow VA to better  identify and target risks associated with managing two processes in  parallel, including the potential that veterans with appeals in the legacy  process may experience significant delays relative to those in the new  appeals process.", "Importantly, VA is missing an opportunity to fully benefit from RAMP by  not testing and assessing other aspects of the new appeals process. The  Act authorizes VA to test the feasibility and advisability of any facet of the  new appeals process, and VA is taking a positive step to mitigate some  risks by testing the two review options available within VBA (review of a  claim by a higher-level official based on the same evidence and review of  a supplemental claim with additional evidence) through RAMP. In  November 2017, VA began RAMP by inviting 500 veterans whose  appeals have been pending the longest to participate. According to VA  officials, each month VA plans to continue offering RAMP to additional  eligible veterans with pending legacy appeals until January 2019\u2014a  month before VA anticipates fully implementing the new appeals system.  However, as designed, RAMP does not include features that\u2014consistent  with a well-developed and documented pilot test program\u2014would provide  VA with an opportunity to evaluate fully the soundness of new processes  and practices on a smaller scale. Specifically:", "VA\u2019s plan does not clearly define success criteria for RAMP: VA\u2019s  appeals plan states that the agency will collect certain data from  RAMP, such as the rate at which eligible veterans opt into the  process, timeliness of claims processing, and individual employee  productivity. VA also established an overall average processing time  goal of 125 days for the two VBA options; however, the plan and  supporting documentation do not clearly articulate whether RAMP  reviews are expected to meet this timeliness goal. The plan also did  not identify other success criteria for RAMP or the types of results  expected before fully implementing the new appeals process. For  example, VA\u2019s plan does not articulate the expected number and type  of subsequent appeals to the Board that result from RAMP.", "In commenting on this assessment, VA noted that its intent in  implementing RAMP was to collect data and test aspects of the new  process, and that RAMP was not an initiative in and of itself. However,  developing performance measures and data gathering procedures  and defining success criteria for a pilot test before proceeding to full  implementation are sound practices for process redesign and pilot  testing. In addition, because RAMP was not included in VA\u2019s risk  assessment, we asked VA if it had identified any risks or mitigation  strategies specific to RAMP. In its supplemental materials, VA stated  that the greatest risk to RAMP is a low participation rate among  eligible veterans with legacy claims. VA also indicated that it would  need 10 percent of eligible veterans to opt into RAMP to yield  meaningful results. However, this threshold is not articulated in VA\u2019s  appeals plan as an explicit success criterion or objective. According to  data provided by VA, as of January 22, 2018, 238 veterans opted in.  Of veterans with pending claims in RAMP, two-thirds chose the  higher-level review option. VA also reported that 47 RAMP decisions  have been made so far. As of yet, no appeals of RAMP decisions  have been filed.", "VA\u2019s plan does not articulate how it will assess RAMP before  proceeding with full implementation: Although VA\u2019s appeals plan  describes a \u201cclose-out\u201d phase in which VA intends to assess the  results of RAMP, it does not detail the conditions that would have to  be met (or not met) to trigger changes. For example, VA\u2019s plan does  not explain when or how it might respond to low opt-in rates for  RAMP\u2014other than stating it will increase outreach to eligible  veterans\u2014or to unexpectedly high appeal rates to the Board resulting  from RAMP decisions. Sound redesign and change management  practices both suggest that pilot tests be rigorously monitored and  evaluated, and that further roll-out occur only after an agency\u2019s  transition team takes any needed corrective action and determines  that the new process is achieving previously identified success  criteria. Without fully articulating its plan for deciding how and when to  roll out changes more broadly, it is not clear whether VA would be  prepared to fully implement a new appeals process that achieves its  aim of better serving veterans.", "RAMP does not test all aspects of the new appeals process:  RAMP provides an opportunity to learn about experiences at VBA  under the new system, such as the rate at which eligible veterans  choose those options and the resources that will be required to  process their appeals. However, RAMP was not designed to test how  many veterans would choose to appeal directly to the Board and,  therefore, it will not provide comparable information on the Board  appeals options. Sound workforce planning practices suggest that  agencies identify the total resources needed to manage the risk of  implementing new processes and conduct scenario planning to  determine those needs.", "In addition, although we previously recommended VA conduct  additional sensitivity analyses to inform projections of future appeals  inventories, VA\u2019s appeals plan does not reflect VA\u2019s use or intended  use of sensitivity analyses when projecting staffing needs for new  appeals options at the Board. In commenting on our assessment,  VA officials said they do not plan to conduct additional sensitivity  analyses to project future workloads until they have more information  from RAMP to inform their assumptions. As a result, VA will lack data  on scenarios in which veterans may overwhelmingly choose options  available at the Board over those at VBA when the appeals plan is  fully implemented. This presents a risk that VA\u2019s early production  projections and initial resource allocations may not be properly  balanced between the Board and VBA. This, in turn, may result in an  unexpectedly large number of appeals pending with the Board, and  corresponding lengthy average wait and decision times for some, if  not all, Board options.", "Having information on the number of veterans who are likely to appeal  to the Board is particularly critical, given that similar efforts to create  additional review options at VBA did not achieve their goals of  reducing the percentage of appeals that continue on to the Board. In  2001, VA established the Decision Review Officer (DRO) process\u2014in  which senior staff have the authority to overturn an initial disability  claim decision without any new evidence\u2014to resolve more appeals at  the regional level and avoid long waits at the Board. However, we  reported in 2011 that, although the DRO process helped some  veterans get additional benefits at the regional office level, it did not  accomplish the program\u2019s primary goal of reducing the percentage of  appeals continuing on to the Board.", "In responding to our assessment, VA officials reiterated their plans to  increase outreach in the event of low opt-in rates for RAMP and indicated  they recently began to send follow-up RAMP invitation letters. With  respect to assessing all appeal options, VA officials stated that, while no  legal bar prevents testing of the Board options, the Board is focused on  reducing its inventory of pending appeals while RAMP provides early  resolution of appeals within the new VBA-only options. Officials conceded  that this approach means they cannot collect data on the rate at which  veterans opt to appeal directly to the Board (e.g., bypassing additional  VBA review) until the new process is fully implemented. However, they  noted that they can collect some data on the rate at which veterans  whose appeals go through RAMP file subsequent appeals to the Board,  even though the Board will not begin processing those appeals until full  implementation.", "By pursuing an approach that does not identify or mitigate significant risks  associated with implementing a new process, VA is taking a chance that  untested aspects will not perform as desired. The Act provides VA  authority to pilot aspects of the process and flexibility on the timing of  implementing the new process, which could allow some additional time  for VA to carefully measure performance under RAMP and determine  whether any corrective actions are necessary. If VA does not take full  advantage of this authority, it risks moving forward without knowing  whether the new appeals process improves experiences for veterans, and  potentially implementing a process that is more expensive or results in  longer wait times than originally anticipated.", "In conclusion, in implementing appeals reform after the enactment of the  Veterans Appeals Improvement and Modernization Act of 2017, VA is  undertaking a complex endeavor that has the potential to affect the lives  of hundreds of thousands of veterans with service-connected disabilities.", "Such an endeavor demands a commensurate level of planning to be  successful. While the Act required VA to submit its plan within 90 days of  enactment, VA had proposed and began to plan for appeals reform much  earlier, and had our March 2017 recommendations to guide its planning  efforts from a foundation of sound practices.", "VA\u2019s November 2017 appeals plan is a positive step forward. Certain  elements of the plan\u2014such as establishing an agency-wide governance  structure to oversee implementation and testing aspects of reform prior to  full implementation\u2014are notable gains since our March 2017 report. At  the same time, the plan partially addresses or does not address five of  the required elements called for by the Act, such as delineating the total  resources required by VBA and the Board to implement and administer  the new appeals process and address legacy appeals. The plan also is  not fully responsive to our past recommendations and does not reflect a  number of sound planning practices that are essential for gauging  progress, establishing accountability, and linking resources to results.", "One such key practice is articulating a desired \u201cend state\u201d\u2014a vision for  what successful implementation would look like for the new appeals  process as well as the wind-down of the legacy process, such as  accurate and timely processing of appeals while ensuring veteran  satisfaction. Without establishing a complete and balanced set of goals  and related performance measures to achieve this end state and  monitoring and assessing progress along the way, VA risks falling short of  its overarching objective\u2014to improve timeliness of appeals decisions for  veterans overall. By not fully articulating how it plans to monitor workloads  and devote resources to both the new and legacy processes, VA runs the  risk of disadvantaging veterans with legacy appeals relative to those in  the new process, or vice versa.", "Just as important is establishing a robust integrated master schedule\u2014 rather than a high-level timeline\u2014that is built upon and clearly reflects  extensive detailed planning and includes all of the activities necessary to  execute the program and interdependencies between these activities.  Without such a road map, VA\u2019s appeals plan does not provide reasonable  assurance that decision makers have the essential information needed to  manage this complex and important program.", "We are encouraged that VA has taken some steps toward assessing  risks, including establishing a risk register and implementing RAMP to  collect information on the two VBA appeals options; however, unless VA  assesses risks against a balanced set of goals and measures, VA may  not be fully aware of risks that may impede successful implementation of  appeals reform. Further, although VA will undoubtedly learn from the  RAMP experience, it may not learn all that it should from its efforts  without (1) establishing clear criteria for what success looks like (or the  circumstances that would cause VA to consider making course  corrections) and (2) building in time to take stock of the lessons learned  before moving to full implementation.", "VA\u2019s plan places a lot of weight on RAMP to, among other efforts,  mitigate risk and generate estimates of the resources needed for  successful implementation after fiscal year 2018, even though RAMP  does not fully test options for appealing to the Board that will be available  to veterans after full implementation. Unless VA addresses key risks  associated with fully implementing appeals reform\u2014by either testing or  conducting sensitivity analyses for all five appeals options, to better  understand potential workloads at the Board\u2014VA runs the risk of fully  implementing the process without knowing if it is improving the process  for veterans.", "In our forthcoming report, we anticipate making recommendations to  address these issues. Specifically, we are preliminarily considering  recommending that the Secretary of Veterans Affairs: address all of the required elements in the Act in VA\u2019s appeals plan to  Congress\u2014including delineating resources required for all VBA and  Board appeals options\u2014using sensitivity analyses and RAMP results,  where appropriate and needed.  clearly articulate in VA\u2019s appeals plan how VA will monitor and assess  the new appeals process compared to the legacy process, including  specifying a balanced set of goals and measures\u2014such as timeliness  goals for all VBA appeals options and Board dockets, and measures  of accuracy, veteran satisfaction, and cost\u2014and related baseline  data. augment the master schedule for VA\u2019s appeals plan to reflect all  activities\u2014such as RAMP and modifications to IT systems\u2014as well  as assigned responsibilities, interdependencies, start and end dates  for key activities for each workgroup, and resources, to establish  accountability and reduce overall risk of implementation failures. ensure that the appeals plan more fully addresses risk associated with  appeals reform\u2014for example, by assessing risks against a balanced  set of goals and measures, articulating success criteria and an  assessment plan for RAMP, and testing or conducting sensitivity  analyses of all appeal options\u2014prior to fully implementing the new  appeals process.", "Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes my prepared statement. I would be pleased to respond to  any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information about this testimony, please contact Elizabeth  Curda at (202) 512-7215 or curdae@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony. Other key contributors to this testimony  include Michele Grgich (Assistant Director), James Whitcomb (Analyst in  Charge), and Rachael Chamberlin. In addition, key support was provided  by Susan Aschoff, Mark Bird, David Chrisinger, Daniel Concepcion,  Clifton Douglas, Alex Galuten, Nisha Hazra, Melissa Jaynes, Benjamin  Licht, Patricia McClure, Sheila McCoy, Lorin Obler, Gloria Proa, Almeta  Spencer, James Sweetman, Walter Vance, and Greg Whitney."], "subsections": []}]}, {"section_title": "Appendix I: Our Assessment of VA\u2019s Appeals Plan Against Required Elements in the Act", "paragraphs": ["To assess the extent to which VA\u2019s appeals plan addresses the required  elements in the Veterans Appeals Improvement and Modernization Act of  2017 (the Act), we first identified and developed a checklist reflecting  each required element for VA\u2019s appeals plan (including sub-parts) under  section 3(a) and (b) of the Act. To compare the required elements and  their sub-parts against VA\u2019s appeals plan and supplemental materials  provided, we developed decision rules for determining whether the VA\u2019s  appeals plan addressed, partially addressed, or did not address each  required element. Specifically, we concluded that VA\u2019s plan addressed (or  partially addressed) a required element if the plan included information  related to all (or some) subparts of the requirement. We focused on the  plan as presented, rather than auditing the information VA relied on in  developing the plan. For example, the Act\u2019s section 3(b)(10) required  VA\u2019s plan to include a description of the modifications to the IT systems  that VBA and the Board require to carry out the new appeals system,  including cost estimates and a timeline for making the IT modifications.  We concluded that VA\u2019s plan addressed all sub-parts of this element  because it provided a description of required IT modifications, a reference  to costs included in the Appeals Modernization IT budget, and a timeline.  However, our determination that VA addressed this element should not  be construed to necessarily mean that VA fully identified or described all  IT requirements, or provided complete estimated costs and timelines  associated with those requirements, or that the information in VA\u2019s  appeals plan comported with sound planning practices. This type of  assessment was outside the scope of this objective. Table 2 summarizes  our assessment of VA\u2019s appeals plan against the 22 required elements in  the Act."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-136", "url": "https://www.gao.gov/products/GAO-19-136", "title": "DOD Space Acquisitions: Including Users Early and Often in Software Development Could Benefit Programs", "published_date": "2019-03-18T00:00:00", "released_date": "2019-03-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Over the next 5 years, DOD plans to spend over $65 billion on its space system acquisitions portfolio, including many systems that rely on software for key capabilities. However, software-intensive space systems have had a history of significant schedule delays and billions of dollars in cost growth.", "Senate and House reports accompanying the National Defense Authorization Act for Fiscal Year 2017 contained provisions for GAO to review challenges in software-intensive DOD space programs. This report addresses, among other things, (1) the extent to which these programs have involved users; and (2) what software-specific management challenges, if any, programs faced.", "To do this work, GAO reviewed four major space defense programs with cost growth or schedule delays caused, in part, by software. GAO reviewed applicable statutes and DOD policies and guidance that identified four characteristics of effective user engagement. GAO reviewed program documentation; and interviewed program officials, contractors, and space systems users. GAO also analyzed program metrics, test and evaluation reports, and external program assessments."]}, {"section_title": "What GAO Found", "paragraphs": ["The four major Department of Defense (DOD) software-intensive space programs that GAO reviewed struggled to effectively engage system users. These programs are the Air Force's Joint Space Operations Center Mission System Increment 2 (JMS), Next Generation Operational Control System (OCX), Space-Based Infrared System (SBIRS); and the Navy's Mobile User Objective System (MUOS). These ongoing programs are estimated to cost billions of dollars, have experienced overruns of up to three times originally estimated cost, and have been in development for periods ranging from 5 to over 20 years. Previous GAO reports, as well as DOD and industry studies, have found that user involvement is critical to the success of any software development effort. For example, GAO previously reported that obtaining frequent feedback is linked to reducing risk, improving customer commitment, and improving technical staff motivation. However, the programs GAO reviewed often did not demonstrate characteristics of effective user engagement that are identified in DOD policy and statute:", "Early engagement. OCX involved users early; JMS planned to but, in practice, did not; SBIRS and MUOS did not plan to involve users early.", "Continual engagement. JMS, OCX, and SBIRS all planned to continually involve users but, in practice, did not fully do so; MUOS did not plan to do so.", "Feedback based on actual working software. OCX and SBIRS provided users opportunities to give such feedback but only years into software development; JMS and MUOS did not provide opportunities for feedback.", "Feedback incorporated into subsequent development. JMS, OCX, and SBIRS all planned to incorporate user feedback but, in practice, have not done so throughout development; MUOS did not plan to do so.", "As reflected above, actual program efforts to involve users and obtain and incorporate feedback were often unsuccessful. This was due, in part, to the lack of specific guidance on user involvement and feedback. Although DOD policies state that users should be involved and provide feedback on software development projects, they do not provide specific guidance on the timing, frequency, and documentation of such efforts. Without obtaining user feedback and acceptance, programs risk delivering systems that do not meet users' needs. In selected instances, the lack of user involvement has contributed to systems that were later found to be operationally unsuitable.", "The programs GAO reviewed also faced software-specific challenges in using commercial software, applying outdated software tools, and having limited knowledge and training in newer software development techniques. For example, programs using commercial software often underestimated the effort required to integrate such software into an overall system. Secondly, selected programs relied on obsolete software tools that they were accustomed to using but which industry had since replaced. Finally, GAO found that two of the reviewed programs lacked knowledge of more modern software development approaches. DOD has acknowledged these challenges and has efforts underway to address each of them."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations that DOD ensure its guidance that addresses software development provides specific, required direction on the timing, frequency, and documentation of user involvement and feedback. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Department of Defense (DOD) space systems have grown increasingly  dependent on software to enable a wide range of functions, including  satellite command and control, early detection and tracking of objects in  the earth\u2019s orbit, global positioning system (GPS) signals, and radio  communication for military forces. Over the next 5 years, DOD plans to  spend over $65 billion on its space system acquisitions portfolio, including  many systems that rely on software for key capabilities. However, over  the last two decades, DOD has had trouble with space acquisition  programs where software is a key component, as evidenced by significant  schedule delays and billions of dollars of cost growth attributable in part to  software problems.", "For over 30 years, we have reported on DOD\u2019s challenges in acquiring  software-intensive weapon systems, including space systems. These  challenges include: ineffective management of system requirements,  critical software design deficiencies, deferred resolution of problems to  later phases of development, inadequate testing of systems, and a lack of  meaningful metrics. Congress has mandated DOD to improve its  approaches for software development within major defense acquisitions.  For example, in 2002, Congress required that each military department  establish a program to (1) improve the software acquisition process that  includes efforts to develop appropriate metrics for performance  measurement and continual process improvement; and (2) ensure that  key program personnel have an appropriate level of experience or  training in software acquisition. In 2010, Congress required that DOD  implement processes to include early and continual user involvement,  among other things. In 2014, Congress enacted information technology  (IT) acquisition reform legislation (referred to as the Federal Information  Technology Acquisition Reform Act, or FITARA), which, among other  things, requires covered agencies\u2019 chief information officers to certify that  incremental development is adequately implemented for IT investments.", "In response, DOD has made efforts to improve its software development  within weapon system acquisitions, such as revising the Department of  Defense Instruction (DODI) 5000.02\u2014its instruction for the management  of all DOD acquisition programs\u2014in 2015 for programs to use  development approaches such as incremental development and to  involve users more frequently. In addition, the DODI 5000.02 allows  programs to tailor its acquisition procedures to more efficiently achieve  program objectives.", "Senate and House reports accompanying the National Defense  Authorization Act (NDAA) for Fiscal Year 2017 contain provisions for us to  review software-intensive DOD space system acquisition programs,  among other things. This report addresses, for selected software-intensive space programs, (1) the extent to which these programs have  involved users and delivered software using newer development  approaches; and (2) what software-specific management challenges, if  any, these programs have faced.", "We reviewed four software-intensive major defense programs with cost  growth or schedule delays attributed, in part, to software development  challenges. In selecting these systems from an initial list of 49 DOD  space programs, we narrowed our selection to software-intensive Major  Defense Acquisition Programs and Major Automated Information Systems  as identified by DOD where software development has contributed in  some part to cost growth or schedule delays. We further narrowed to  those programs that experienced unit cost or schedule breaches or  changes and represented different DOD services and acquisition  categories. These programs are the Air Force\u2019s Joint Space Operations  Center Mission System Increment 2 (JMS), Next Generation Operational  Control System (OCX), Space-Based Infrared System (SBIRS); and the  Navy\u2019s Mobile User Objective System (MUOS).", "To address the objectives, we interviewed officials from the  Undersecretary of Defense for Acquisition and Sustainment, Office of the  Deputy Assistant Secretary of Defense for Systems Engineering, Office of Cost Assessment and Program Evaluation, Office of the Director of  Operational Test and Evaluation, Defense Digital Service, Defense  Innovation Board, and the Office of the Assistant Secretary of the Air  Force for Space Acquisition. We also interviewed officials from the  selected program offices and their respective contractors, space systems  users, DOD test organizations, and Federally Funded Research and  Development Centers.", "To determine how effectively selected DOD software-intensive space  programs have involved users and adopted newer software development  approaches, we reviewed the Fiscal Year 2010 NDAA, in addition to  DOD\u2019s 2010 report to Congress in response to this statute, and DODI  5000.02, which identified characteristics of user engagement. We then  reviewed relevant program plans and documentation\u2014such as human  engineering and human systems integration plans, and standard  operating procedures\u2014and interviewed program officials and end users  to determine the extent to which the program addressed the  characteristics. We also examined DOD guidance and applicable leading  practices to identify time frames for delivering software under incremental  and iterative software development approaches, and we compared these  time frames to program performance.", "To determine what software-specific management challenges, if any,  these selected programs have faced, we reviewed GAO reports and  industry reports and studies on software tools and metrics used to  manage software programs and also reviewed program management  reports, contract documents, and external reports. We also interviewed  program and contractor officials and officials from Federally Funded  Research and Development Centers. We also reviewed program metrics,  test and evaluation reports, and external program assessments. See  Appendix I for additional information on our objectives, scope, and  methodology.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Software development approaches have evolved over time. DOD weapon  system acquisition programs have traditionally developed software using  what is known as the waterfall development approach, first conceived in  1970 as linear and sequential phases of development over several years  that result in a single delivery of capability. Figure 1 depicts an overview  of the waterfall approach.", "Within industry, software development has evolved with the adoption of  newer approaches and tools. For example, while a traditional waterfall  approach usually is often broadly scoped, multiyear, and produces a  product at the end of a sequence of phases, an incremental approach  delivers software in smaller parts, or increments, in order to deliver  capabilities more quickly. This development technique has been preferred  for acquiring major federal IT systems, to the maximum extent  practicable, and in OMB guidance since at least 2000. In addition,  iterative development promotes continual user engagement with more  frequent software releases to users. Figure 2 shows an overview of  incremental and iterative development.", "DevOps is a more recent type of software development first used by  industry around 2009. According to the Defense Innovation Board,  DevOps represents the integration of software development and software  operations, along with the tools and culture that support rapid prototyping  and deployment, early engagement with the end user, and automation  and monitoring of software. Figure 3 shows a notional representation of  the DevOps approach based on DOD and industry information. There are  also a variety of other software development approaches.", "Incremental, Iterative, and DevOps approaches are further described as  follows:  Incremental development sets high level requirements early in the  effort, and functionality is delivered in stages. Multiple increments  deliver a part of the overall required program capability. Several builds  and deployments are typically necessary to satisfy approved  requirements. DOD guidance for incremental development for  software-intensive programs states that each increment should be  delivered within 2 years, and OMB guidance issued pursuant to  FITARA requires delivery of software for information technology  investments in 6-month increments.", "Iterative development takes a flexible approach to requirements  setting. In this approach, requirements are refined in iterations based  on user feedback. We include Agile development approaches in this  category of development; although most Agile approaches include  aspects of both iterative and incremental development, as shown in  figure 4. The Agile approach was first articulated in 2001 in what is  known as the Agile Manifesto. The Agile Manifesto states the  importance of four values: (1) individuals and interactions over  processes and tools, (2) working software over comprehensive  documentation, (3) customer collaboration over contract negotiation,  and (4) responding to change as opposed to following a pre-set plan.  Approaches that share common Agile principles include: Scrum,  Extreme Programming, and Scaled Agile Framework, among others.", "These approaches stress delivering the most value as early as possible  and constantly improving it throughout the project lifecycle based on user  feedback. Within industry, Agile development approaches typically  complete iterations within 6 weeks, and deliver working software to the  user at the end of each iteration. According to DOD and industry,  iterative development approaches have led to quicker development at  lower costs and have provided strategic benefit through rapid response to  changing user needs.", "DevOps is a variation of Agile that combines \u201cdevelopment\u201d and  \u201coperations,\u201d emphasizing communication, collaboration, and  continuous integration between both software developers and users.  According to the Software Engineering Institute, DevOps is commonly  seen as an extension of Agile into the operations side of the process,  implementing continuous delivery through automated pipelines. In  general, all stakeholders\u2014including operations staff, testers,  developers, and users\u2014are embedded on the same team from the  project\u2019s inception to its end, ensuring constant communication.  Automated deployment and testing is used instead of a manual  approach, and the developer\u2019s working copies of software are  synchronized with the users. Software code is continuously integrated  and delivered into production or a production-like environment.  According to industry reports, the use of DevOps may lower costs due  to immediate detection of problems as well as result in a greater  confidence in the software because the users have continuous  visibility into development, testing, and deployment.", "According to DOD officials from the Undersecretary of Defense, Research  and Engineering, adopting Agile and DevOps within DOD weapon system  acquisitions\u2014which includes DOD space programs\u2014is challenging and  requires programs to adopt comprehensive strategies that cover broad  topics. Officials said these strategies should include plans for cultural  adoption by the program office and contractor; training and certification  for program office and contractor personnel; and tools, metrics, and  processes that support continuous integration and delivery, among  others."], "subsections": [{"section_title": "Collaboration between Developers and Users Is Key to Reducing Program Risk", "paragraphs": ["While there are a variety of approaches to developing software, involving  users in early stages and throughout software development helps detect  deficiencies early. Industry studies have shown it becomes more  expensive to remove conceptual flaws the later they are found. Previous  GAO reports as well as other DOD and industry studies have also found  that user involvement is critical to the success of any software  development effort. For example, we previously reported that obtaining  frequent feedback is linked to reducing risk, improving customer  commitment, and improving technical staff motivation. We also  previously reported that two factors critical to success in incremental  development were involving users early in the development of  requirements and prior to formal end-user testing.", "In the Fiscal Year 2010 NDAA, Congress directed DOD to develop and  implement a new acquisition process for information technology systems  that, among other things, include early and continuous involvement of the  user. This statute, in addition to DOD\u2019s 2010 report to Congress in  response to the statute, and DODI 5000.02 identify characteristics of  effective user engagement for DOD acquisitions, including:", "Early engagement: Users are involved early during development to  ensure that efforts are aligned with user priorities.", "Continual engagement: Users are involved on a regular, recurring  basis throughout development to stay informed about the system\u2019s  technical possibilities, limitations, and development challenges.", "Feedback based on actual working software: User feedback during  development is based on usable software increments to provide early  insight into the actual implementation of the solution and to test  whether the design works as intended.", "Feedback incorporated into subsequent development: User  feedback is incorporated into the next build or increment."], "subsections": []}, {"section_title": "Software Enables Operational Capability in All Segments of Space Systems", "paragraphs": ["Defense space systems typically consist of multiple segments: one or  more satellites, ground control systems, and, in some cases, terminals for  end-users. Each segment depends on software to enable critical  functionality, such as embedded software in satellite vehicles, in  applications installed on computer terminals in ground control stations, or  embedded signal processing software in user terminals to communicate  with satellites, shown in figure 5."], "subsections": []}, {"section_title": "Selected Software- Intensive Space Systems Have a History of Cost Growth and Schedule Delays", "paragraphs": ["We have previously reported on significant cost growth and schedule  delays in numerous DOD space systems, with some space program costs  rising as much as 300 percent, and delays so lengthy that some satellites  spend years in orbit before key capabilities are able to be fully utilized.  In particular, the programs described below have experienced significant  software challenges, including addressing cybersecurity requirements,  which have contributed to cost growth and schedule delays."], "subsections": []}]}, {"section_title": "Joint Space Operations Center (JSpOC) Mission System Increment 2 (JMS)", "paragraphs": ["The Air Force's JMS program aims to replace an aging space situational  awareness and command and control system with improved functionality  to better track and catalogue objects in the earth's orbit to support  decision making for space forces. Increment 2 is to replace existing  systems and deliver additional mission functionality. The Air Force is  providing this functionality in three deliveries: the first delivery\u2014Service  Pack 7\u2014provided hardware and software updates and was delivered in  September 2014; the second delivery\u2014Service Pack 9\u2014aims to improve  functions currently being performed, such as determining space object  orbits and risks of collision; and the final delivery\u2014Service Pack 11\u2014 aims to provide classified functionality. The government is serving as  the system integrator directly managing the integration of government and  commercially developed software onto commercial, off-the-shelf  hardware, so there is no prime contractor.", "Historical software development challenges include:  In 2015, we found that inconsistencies in the program\u2019s software  development schedule made it unclear whether the program would be  able to meet its remaining milestones. The same year, the program  declared a schedule breach against its baseline due, in part, to delays  in resolving deficiencies identified during software testing.", "In 2016, DOD noted that the revised schedule was still highly  aggressive with a high degree of risk because the program was  concurrently developing and testing software.", "In 2017, developmental tests found a number of mission critical  software deficiencies, which delayed operational testing. The Director  of Operational Test and Evaluation also noted that additional work  remained to help provide adequate cyber defense for JMS.", "During operational testing in 2018, JMS was found not operationally  effective and not operationally suitable due, in part, to missing  software requirements, urgent deficiencies that affected system  performance, and negative user feedback.", "Mobile User Objective  System (MUOS)", "The Navy\u2019s MUOS program aims to provide satellite communications to  fixed and mobile terminal users with availability worldwide. MUOS  includes a satellite constellation, a ground control and network  management system, and a new waveform for user terminals. The  ground system includes the ground transport, network management,  satellite control, and associated infrastructure to both operate the  satellites and manage the users\u2019 communications. The MUOS  constellation is complete, and, according to program officials, software  development officially ended in 2012 with the delivery of the waveform  software. However, the user community still cannot monitor and manage  MUOS. MUOS has two types of users: ground operators responsible for  managing the MUOS communications network, and the military users of  radios. Space and Missile Defense Command / Army Forces Strategic  Command (SMDC/ARSTRAT) was the user representative while MUOS  was developed.", "While DOD allowed the program to move into sustainment\u2014the phase  after development is formally completed\u2014the program continues to  resolve challenges with the ground segment, and the contractor continues  to deliver software updates to address deficiencies. In 2017, the  program transitioned its software sustainment efforts to an Agile  development approach in preparation for a follow-on operational test  currently scheduled to begin in June 2019. While Lockheed Martin Space  Systems is the prime contractor for MUOS, we evaluated software efforts  conducted by General Dynamics, the subcontractor performing software  development.", "Historical software development challenges include:  In 2014, DOD found that 72 percent of the software was obsolete.", "Also in 2014, operational testing was delayed due to software  reliability issues in the ground system and waveform.", "In 2015, we found that over 90 percent of MUOS\u2019 planned capability  was dependent on resolving issues related to integrating the MUOS  waveform, terminals, and ground systems.", "Also in 2015, operational tests determined MUOS was not  operationally effective, suitable, or survivable due in part to  cybersecurity concerns in the ground system.", "As of 2016, there were still existing and emerging cybersecurity  vulnerabilities to be addressed.", "Lockheed Martin Space Systems (Prime)  General Dynamics (Software development  subcontractor)  Contract Type:   Cost Plus Incentive and Award Fee/Fixed  Price Incentive (Firm Target) and Award Fee   Naval Computer and Telecommunications  Area Master Station Pacific (NCTAMS PAC)  Space and Missile Defense Command /   Army Forces Strategic Command  (SMDC/ARSTRAT)", "Next Generation  Operational Control  System (OCX)", "The Air Force\u2019s OCX program is designed to replace the current ground  control system for legacy and new GPS satellites. OCX software is being  developed in a series of blocks: Block 0 is planned to provide the launch  and checkout system and support initial testing of GPS III satellites and  cybersecurity advancements. Blocks 1 and 2 are planned to provide  command and control for previous generations of satellites and GPS III  satellites as well as monitoring and control for current and modernized  signals. The OCX contractor delivered Block 0 in September 2017. The  Air Force took possession of Block 0 in October 2017 by signing a  certificate of conformance, and will accept it at a later date after Block 1 is  delivered.", "Historical software development challenges include:  In 2013, DOD paused OCX development due to incomplete systems  engineering, which led to continuous rework and deferred  requirements.", "In 2015, we reported that, among other things, OCX had significant  difficulties related to cybersecurity implementation.", "In 2016, the program declared a Nunn-McCurdy unit cost breach.  Also in 2016, the contractor began implementing DevOps at the  recommendation of Defense Digital Service but, according to the  program office and contractor, only planned to automate development  without the operations component of DevOps. The contractor did not  achieve initial planned schedule efficiencies.", "In 2017, the Air Force accepted Block 0 despite over 200 open  software defects. According to the program, when Block 0 was  accepted there was also a plan to resolve the open software defects  by the time of the first launch. Since then, according to the program  office, all necessary defects related to launch have been addressed.", "In 2018, DOD noted that the schedule was at risk since the program  made aggressive assumptions in its plan to develop, integrate, test  software, and resolve defects.", "Space-Based Infrared  System (SBIRS)", "The Air Force\u2019s SBIRS program is an integrated system of both space  and ground elements that aim to detect and track missile launches.  SBIRS is designed to replace or incorporate existing defense support  ground stations and satellites to improve upon legacy system timeliness,  accuracy, and threat detection sensitivity. The Air Force is delivering the  SBIRS ground system in one program with two increments: the first  increment became operational in 2001 and supports functionality of  existing satellites. The second increment, which is still in development, is  designed to provide new space segments, mission control software and  hardware, and mobile ground capability. The Air Force is delivering  these capabilities in multiple blocks: Block 10 was accepted in 2016 and  introduced new ground station software and hardware. Block 20 is  expected to be complete by late 2019 and is planned to further improve  ground station software.", "Historical software development challenges include:  In 2001, 2002, and 2005, cost increases and schedule delays due, in  part, to software complexity problems led to four separate Nunn- McCurdy unit cost breaches.", "In September 2007, we found that the amount of rework resulting from  unresolved software discrepancies was contributing to cost growth  and schedule delays. In addition, the program had software  algorithms that were not yet completed or demonstrated, hundreds of  open deficiency reports, and a lack of coordination between space  and ground system software databases.", "In 2016, DOD said that software deficiencies were contributing to  delays in delivering the ground architecture.", "In 2018, DOD noted that flight software development remained a  concern to the overall program schedule. According to SBIRS users  and the program office, cybersecurity issues found during Block 10  testing are still being addressed as a part of the Block 20 effort.", "DOD programs we reviewed frequently did not involve users early or  continually during development, base user feedback on actual working  software, or incorporate user feedback into subsequent software  deliveries. Most programs had plans to incorporate these elements of  user engagement throughout their software development efforts, but they  often did not follow those plans due, in part, to the lack of specific  guidance on user involvement and feedback. Regarding frequency of  software delivery, while DODI 5000.02 suggests that programs deliver  incremental software deliveries every 1 to 2 years, the programs we  reviewed often continued to deliver software consistent with the long  delivery schedules common to waterfall development. DOD is taking  steps to address this issue."], "subsections": [{"section_title": "Selected DOD Programs Often Did Not Effectively Engage Users", "paragraphs": ["The four programs we reviewed often did not demonstrate key  characteristics of effective user engagement as summarized below:", "Early engagement. OCX involved users early and JMS planned to  involve users early but, in practice, did not do so; SBIRS and MUOS  did not plan to involve users early in software development.", "Continual engagement. JMS, OCX, and SBIRS all planned to  continually involve users but, in practice, did not fully do so; MUOS  did not plan to do so.", "Feedback based on actual working software. OCX and SBIRS  have provided users opportunities to provide such feedback but only  years into software development; JMS and MUOS did not provide  opportunities for feedback.", "Feedback incorporated into subsequent development. JMS, OCX,  and SBIRS all planned to incorporate user feedback but, in practice,  have not done so throughout development; MUOS did not plan to do  so during software development.", "Program efforts to involve users often did not match what their planning  documentation described. In addition, when user input was collected,  program officials did not capture documentation of how user feedback  was addressed. Further, we found that, in practice, none of the programs  we reviewed had users providing feedback on actual working software  until years after system development began. This was the case even for  programs utilizing Agile or iterative-incremental software development  approaches, where user involvement and feedback from using functional  systems early in the development cycle is foundational.", "These shortcomings were due, in part, to the lack of specific guidance on  user involvement and feedback. Both DODI 5000.02 and DOD\u2019s guiding  principles for delivering information technology acquisitions note that  software should be developed via usable software deliveries to obtain  user acceptance and feedback for the next segment of work, but this  guidance lacks specificity. In particular, DOD does not specify when to  involve users and request their feedback, how frequently to seek user  involvement and feedback on software deliverables, how to report back to  users on how that feedback was addressed, and how to document the  results of user involvement and feedback.", "As a result of programs\u2019 shortcomings with user involvement and  feedback, programs risk delivering systems that do not meet user needs.  In selected cases, delivered software was deemed operationally  unsuitable by DOD testers and required substantial rework.", "Further details on the extent to which programs implemented the four key  characteristics are described below.", "JMS: Program documents created at the start of JMS system  development contain specific operating procedures for conducting  interactions with the user community\u2014Air Force personnel who track and  catalogue objects in orbit\u2014during acquisition and fielding. However, the  program has not followed these operating procedures during system  development.", "Early Engagement. The JMS program office planned to involve users  early in development but, in practice, did not do so. JMS program  documentation states that users were to be involved in user  engagement sessions within the first 4 weeks of iterative  development. However, the first documented user engagement  session was held more than a year after development start.", "Continual Engagement. The JMS program office planned to engage  users throughout development but, in practice, did not do so. JMS  program documentation states that user engagement sessions are to  be held regularly during development\u2014roughly every 2 to 4 weeks.  However, in practice, program officials told us they only involved  users as needed during software development. We found that the  frequency of user engagement events varied from several weeks to  more than 6 months. According to program officials, there were limited  users available, and their operational mission duties were prioritized  over assisting with system development.", "Feedback Based on Actual Working Software. The JMS program  office did not provide users an opportunity to give feedback based on  actual working software during development. According to program  documentation, designs and notional drawings, not working software,  were to be used for user engagement sessions. While JMS did  provide users opportunities to provide feedback, this feedback was  not on actual working software. Program officials said the goal of  these events was never intended to include user feedback on actual  working software. However, users told us that when they were finally  able to use the system for the first time, 4 years after development  started, it did not function as needed. The software did not execute  what it had been designed to do, and earlier user engagement on  actual working software may have identified these issues.", "Feedback Incorporated Into Subsequent Development. The JMS  program office planned to incorporate user feedback into development  but, in practice, did not do so. JMS program documentation states that  the program will document user feedback from user engagement  events using summary notes communicated back to the user.  However, JMS users said it was often unclear if their feedback was  incorporated. For example, in March 2016, a user engagement event  was held to discuss any questions and concerns relating to the  planned system\u2019s conjunction assessment\u2014a key feature that  predicts orbit intersection and potential collision of space objects\u2014 that resulted in 8 user-identified issues. When we met with the users  in 2018, they told us that conjunction assessment issues remained  unaddressed, and they would still be reliant on the legacy system to  fully execute the mission and perform their duties. The legacy system  is still needed, they said, because the program deferred critical  functions, and the most recent operational test found the system to be  operationally unsuitable.", "MUOS: The MUOS program office did not engage users\u2014Army Forces  Strategic Command personnel who support the narrowband and  wideband communications across the Air Force, Marines, Navy, and  Army\u2014during software development but are engaging users while  developing software during sustainment, the acquisition phase after  development when the program mainly supports and monitors  performance. Following the end of development, at an operational test  event in 2015, DOD testers deemed the system was operationally  unsuitable. The MUOS program office moved to an Agile development  approach in 2017 to address software deficiencies in preparation for the  next operational test event.", "Early Engagement. The MUOS program office did not engage users  early in development. Program documentation does not describe any  plans for user engagement or involvement during development and,  according to program officials, no users evaluated the actual system  during development.", "Continual Engagement. The MUOS program office did not  continually engage with users. Program documentation does not  describe any plans for user engagement or involvement during  development. Program officials said no users evaluated the system  during development because there were no users with real world  experience on a system like MUOS. However, as previously noted,  SMDC/ARSTRAT represented end users\u2019 interests during MUOS  development.", "Feedback Based on Actual Working Software. The MUOS program  office did not provide users an opportunity to give feedback based on  actual working software. Program documentation does not describe a  process for obtaining user feedback based on actual working  software. The first time users had a chance to fully operate the system  was after development ended, in preparation for operational testing in  2014, which identified numerous defects. Additionally, MUOS users  said that they have since identified 128 functions in 11 critical areas  that must be addressed or they will not accept the system. Users  also said that some of the vulnerabilities found during operational  testing, including cybersecurity vulnerabilities, have been deferred.", "Feedback Incorporated Into Subsequent Development. The  MUOS program office did not incorporate user feedback into  development. Program documentation did not describe plans to gain  user feedback or acceptance into the development of the MUOS  system. In addition, users and the contractor told us that program  officials did not allow direct interaction during development due to a  concern that such interactions could lead to changes in system  requirements. The program office said that user involvement to-date  has not caused delays to testing or software delivery.", "OCX: The OCX program had limited user engagement, but has recently  held user engagement events based on releases of actual working  software. The program has made efforts to obtain feedback from users,  but users have noted there is no time in the schedule to address much of  their feedback prior to delivering the system.", "Early Engagement. The OCX program office involved users early in  development in accordance with its plans. From 2011, OCX users  were involved in technical meetings where they provided feedback on  the concept of operations and the design of the system.", "Continual Engagement. The OCX program office planned to engage  users throughout development but, in practice, did not fully do so.  OCX planning documentation includes multiple opportunities for user  engagement at various stages of system development, including  operational suitability and \u201chands-on\u201d interaction with an integrated  system. According to the program office, numerous events were  held for users to give feedback on the system. However, since 2012,  the program has only held one of its planned events to address  operational suitability. In addition, other opportunities for users to  operate the system have been removed to accommodate the  program\u2019s schedule, such as \u201cday in the life\u201d events that allowed  users to validate the system as they would actually operate it. Users  said that removing events like these created fewer opportunities to  identify and resolve new deficiencies.", "Feedback Based on Actual Working Software. OCX did not plan to  provide users an opportunity to give feedback based on actual  working software but, in practice, did so years into development. OCX  planning documents rely on simulations and mock-ups for evaluating  system usability. However, users told us that mock-ups do not allow  them to test functionality and may not be representative of the final  delivered product. Starting in 2014\u20142 years after development  started\u2014users had opportunities to review the limited functionality  available at the time. Since 2017, users said they were able to test  working software.", "Feedback Incorporated Into Subsequent Development. The OCX  program office planned to incorporate user feedback into development  but, in practice, did not do so throughout development. OCX planning  documentation includes a user comment response process that would  collect and validate user comments and communicate results back to  the users. According to the program office, for OCX Block 0, users  provided feedback that was incorporated prior to the first launch.  While OCX users said that they have the opportunity to provide  feedback, there is a growing list of unaddressed Block 1 issues to be  resolved. Some of these feedback points, if left unresolved, may result  in operational suitability concerns and a delayed delivery to  operations. According to the program office, critiques from the users  have either been closed, incorporated into the OCX design, or are still  under assessment between the contractor and users. A majority of  user feedback points for the OCX iteration currently in development  remain unresolved, as depicted in figure 6. In 2016, DOD told the Air  Force and the contractor to utilize DevOps. As previously noted,  DevOps is intended to release automated software builds to users in  order to unify development and operations and increase efficiency.  The contractor stated it implemented DevOps in 2016. However, both  the Air Force and the contractor admitted in 2018 they never had  plans to implement the \u201cOps\u201d side of DevOps, meaning they didn\u2019t  plan to automatically deliver software builds to the users. Without  incorporating the users and experts in maintainability and deployment,  the program is not benefiting from continuous user feedback.", "SBIRS: SBIRS users\u2014Air Force personnel who operate, command, and  control SBIRS satellites to detect and track missile launches\u2014were not  involved during early system development and the program only recently  increased the frequency of user events. SBIRS users have been able to  provide feedback on working software but are unaware how this feedback  is incorporated into software development.", "Early Engagement. The SBIRS program office did not engage users  early in development because users were not in place and user  groups were not defined. The program planning documentation that  instituted the framework for user involvement was not in place until  2004. According to SBIRS users and test officials, this resulted in a  poor interface design and users being unable to respond adequately  to critical system alerts when using the system. Though the program  contractor told us that user involvement is critical for ensuring the  developers deliver a system that users need and will accept, DOD  officials said that users were not integrated with the development  approach until the software was ready to be integrated into a final  product.", "Continual Engagement. The SBIRS program office planned to  engage users throughout development but, in practice, did not do so.  SBIRS planning documentation includes users involved in regular  working groups throughout development. SBIRS users began to be  involved with system development in 2013 on a weekly basis. Users  were not involved during the 17 years of system development prior to  this time.", "Feedback Based on Actual Working Software. The SBIRS program  did not plan to provide users an opportunity to give feedback based  on actual working software during development but, in practice, did so  years into development. SBIRS documentation only outlines user  engagement as reviewing and commenting on design plans. While  users were able to provide feedback on working software in 2017,  these events did not occur until 21 years after the start of  development when the software was ready to be integrated. When  users were able to provide feedback, they identified issues with the  training system and cybersecurity.", "Feedback Incorporated Into Subsequent Development. The  SBIRS program planned to incorporate user feedback into  development but, in practice, did not do so. SBIRS planning  documentation includes methods for users to provide feedback, but  users said there is no feedback loop between them and the  developers; therefore, users are unaware if their comments and  concerns are addressed or ignored."], "subsections": []}, {"section_title": "Selected Programs Have Generally Not Delivered Software Frequently, but DOD Is Taking Steps to Improve Efforts", "paragraphs": ["DOD officials and DODI 5000.02 point to the benefits of delivering smaller  packages of software more frequently, but the four programs we  examined have generally delivered them infrequently. DOD is beginning  to take steps to address these issues, such as establishing an  independent advisory panel and considering recommendations issued by  the Defense Science Board on the design and acquisition of DOD  software.", "Selected programs continue to focus on infrequent deliveries.  According to industry practices, short, quick deliveries allow a program to  deliver useful, improved capabilities to the user frequently and continually  throughout development. Within industry, iterations for Agile development  approaches are typically up to 6 weeks, and working software is delivered  to the user at the end of each iteration. In addition, DODI 5000.02 states  that for incremental development increments should be delivered within 2  years.", "While two programs in our review\u2014JMS and MUOS\u2014say they have  undertaken elements of Agile development, which emphasize smaller  deliveries of frequent software to users, they still struggled to move away  from the long delivery schedules common to waterfall development. In  addition, the two programs with incremental development\u2014OCX and  SBIRS\u2014have not delivered within suggested DOD time frames. See  figure 7 below for program software deliveries.", "Further observations on each of the four programs follow:  JMS program officials and documentation indicate that the program is  using an Agile development approach to deliver smaller, rapid  deliveries to minimize risk. According to JMS program documentation,  software releases were to be delivered in 6-month intervals. However,  the program only delivered actual working software once during  development\u2014a delivery of capability in 2014. The program was  operationally accepted in late 2018. However, only 3 of 12 planned  capabilities were accepted for operational use.", "The MUOS program used a traditional waterfall approach during  development from 2004 to 2012 and has only had one overall  software product delivery during that time. The program completed  the software in 2012, yet continued to make changes during  sustainment using the waterfall methodology and adopted an Agile  approach in 2017 to address deficiencies. Since this adoption, it has  delivered software more frequently\u2014about every 3 months. This is a  significant improvement over the delivery time frames during the  MUOS waterfall development approach.", "The OCX program is using an \u201citerative-incremental\u201d development  approach. According to OCX software development plans, this  approach was to enable early and frequent deliveries of capabilities.  Specifically, the program plans for iterations to be completed every 22  weeks. However, since software development began in 2012, OCX  has delivered just one increment of software, referred to by the OCX  program as a block.", "The SBIRS program began in 1996, using a waterfall approach, and  has had two deliveries of software. SBIRS Increment 1 was delivered  in 2001, and the next increment, SBIRS Increment 2, Block 10, was  delivered 15 years later, in 2016. The next increment, SBIRS  Increment 2, Block 20, is expected to be delivered in 2019.", "Part of the reason programs delivered larger software packages less  frequently was the adherence to the process steps in the DODI 5000.02  that were designed under the waterfall approach. While DODI 5000.02  authorizes programs to tailor their acquisition procedures to more  efficiently achieve program objectives, none of the programs that were  trying to employ a newer development approach took steps to tailor  procedures in order to facilitate development. For example, the OCX  contractor said it was delayed by complying with technical reviews under  a military standard for traditional waterfall approaches, such as the  Preliminary Design Review, Critical Design Review, and others, but the  OCX program did not alter these reviews, despite having flexibility to do  so. The contractor told us a more tailored approach would enable  execution of smaller iterations of software deliverables. Similarly, the JMS  program office noted that it was not fully able to integrate Agile  development practices because of all the different technical reviews, but  JMS did not tailor these requirements to more efficiently achieve  outcomes, despite flexibility to do so.", "DOD officials have acknowledged these challenges and have  recently begun recommending steps to address them. Officials we  spoke with from Defense Digital Service, Director of Operational Test and  Evaluation, and DOD leadership said that rapid development of software  using newer software practices does not fit with the requirements of the  DOD acquisition process. Further, DOD\u2019s Special Assistant for Software  Acquisition said that DOD software development should be iterative,  providing the critical capabilities in smaller, more frequent deliveries  rather than delivering capabilities in a single delivery via traditional  waterfall software development. In addition, other DOD officials we  interviewed agreed that since DOD programs may not always know the  full definition of a system\u2019s requirements until late in development,  additional flexibility to tailor acquisition approaches could improve  software acquisitions.", "In acknowledging the challenges in moving from a waterfall model to a  more incremental approach, various DOD groups have made  recommendations to support delivery of smaller, more timely software  deliverables:  In February 2018, the Defense Science Board issued a series of  recommendations to support rapid, iterative software development.  The recommendations included requiring all programs entering  system development to implement iterative approaches and providing  authority to the program manager to work with users.", "In April 2018, the Defense Innovation Board made recommendations  to improve DOD software acquisitions, such as moving to more  iterative development approaches that would deliver functionality  more quickly.", "In June 2018, the DOD Section 809 Panel recommended eliminating  the requirements for Earned Value Management (EVM)\u2014one of  DOD\u2019s primary program planning and management tools\u2014in Agile  programs. However, other DOD and industry guides state that Agile  programs can still report EVM if certain considerations are made,  such as an Agile work structure that provides a process for defining  work and tracking progress of this work against planned cost and  schedule.", "Pursuant to the Fiscal Year 2019 National Defense Authorization Act,  DOD is required, subject to authorized exceptions, to begin  implementation of each recommendation submitted in the final report of  the Defense Science Board Task Force on the Design and Acquisition of  Software for Defense Systems by February 2020. For each  recommendation that DOD is implementing, it is to submit to the  congressional defense committees a summary of actions taken; and a  schedule, with specific milestones, for completing implementation of the  recommendation. We intend to monitor DOD\u2019s progress in implementing  the recommendations."], "subsections": []}]}, {"section_title": "Selected Program Offices Have Had Software-Specific Management Challenges but Are Taking Steps to Address Weaknesses", "paragraphs": ["The programs we reviewed faced management challenges using  commercial software, applying outdated software tools and metrics, and  having limited knowledge and training in newer software development.  DOD is taking steps to address these challenges."], "subsections": [{"section_title": "Selected DOD Programs Face Difficulties Identifying the Effort Required by and Mitigating the Risk Associated with Commercial Software", "paragraphs": ["DOD has previously encouraged DOD acquisition programs to use  commercial software where appropriate. For example, in 2000 and in  2003, DOD policy encouraged considering the use of commercial  software. In addition, regulations continue to emphasize consideration of  commercial software suitable to meet the agency\u2019s needs in acquiring  information technology. DOD officials said that, although the effort to  maintain commercial software may be equivalent to developing such  capabilities in-house, programs should still consider the use of  commercial software because DOD and its contractors may lack the  technical skillsets to develop a similar product.", "However, three of the programs we reviewed had difficulty integrating and  maintaining modified commercial software during development:", "The JMS acquisition approach was to only use commercial and  government-provided software with no new software development  planned, but the commercial products selected were not mature and  required additional development, contributing to schedule delays.", "The MUOS program underestimated the level of effort to modify  commercial software, which increased cost and introduced schedule  delays in completing both the ground system and the waveform.  According to an Aerospace official who advised the program on  software issues, the MUOS software development approach was to  use a commercial software solution but with substantial  modifications. In particular, the MUOS contractor planned to take a  commercial cellular system and substantially modify it for MUOS. This  official, along with the MUOS program office, said that  underestimating the level of effort to modify and integrate the  commercial software has been the program\u2019s biggest challenge.", "In September 2015, we found that the OCX contractor was overly  optimistic in its initial estimates of the work associated with  incorporating open source and reused software. Further, according to  the Air Force, OCX program managers and contractors did not appear  to follow cybersecurity screening or software assurance processes as  required. For example, open source software was incorporated  without ensuring that it was cybersecurity-compliant. These problems  led to significant rework and added cost growth and schedule delays  to address the cybersecurity vulnerabilities and meet cybersecurity  standards. In addition, in an independent assessment of OCX,  officials from the MITRE Corporation said that there is a lack of  appreciation for the effort required for commercial software  integration, stating that the level of effort is \u201ccategorically  underestimated.\u201d", "Some program officials noted that commercial software updates led to  system instability and increased costs. For example, OCX program  officials said that updating an operating system version led to 38 other  commercial software changes. Each of these changes had to be  configured, which took considerable time and added cost to the program.  Similarly, the SBIRS contractor said they have been concerned that  updates to commercial software could create a domino effect of  instability, and the risks could outweigh the benefits of the update. For  example, if one commercial software product is updated and becomes  unstable, instability may be introduced to other commercial software  products and software components. On the other hand, not updating  software products could lead to cybersecurity concerns. As we previously  noted, developers of commercial software generally update software to  address identified flaws and cybersecurity vulnerabilities. We also  reported in a review of weapon systems cybersecurity that, although there  are valid reasons for delaying or forgoing weapon systems patches, this  means some weapon systems are operating, possibly for extended  periods, with known vulnerabilities.", "In addition, the lifecycles of commercial software can contribute to  management challenges when these products become obsolete. For  example, in 2014, a MUOS Ground System Deep Dive review identified  that 72 percent of the MUOS software was considered to be obsolete.  According to program officials, commercial software became obsolete  before or soon after it was fielded, especially for operating systems and  browsers, due to the long MUOS development cycle. Software  obsolescence is also among the top risks of the OCX program and has  contributed to additional costs during development.", "DOD officials and others have started to acknowledge challenges in using  commercial software. For example, as we previously reported in 2018,  DOD has stated that many weapon systems rely on commercial and open  source software and are subject to any cyber vulnerabilities that come  with them. While DOD states that using commercial software is a  preferred approach to meet system requirements, some program officials  we interviewed told us that the effort to modify and update commercial  software is underestimated. DOD is working on helping programs  understand commercial software risks. For example, in January 2018,  DOD published a Guidebook for Acquiring Commercial Items. In addition,  Defense Acquisition University offers several modules designed to  address challenges in integrating commercial solutions."], "subsections": []}, {"section_title": "Selected DOD Programs Are Using Outdated Software Tools and Metrics but Are Updating Them", "paragraphs": ["Three of the DOD programs we reviewed have experienced challenges in  using outdated software tools or identifying appropriate performance  metrics as they transition to newer software development approaches.", "Contractors continue to rely upon outdated software tools and  experience challenges. We found that three of the programs we  reviewed used tools that are considered outdated and lack the flexibility  needed for iterative development. Contractors for three of the four  programs we reviewed have experienced software development  challenges due to outdated tools:", "The SBIRS contractor uses a suite of tools that is considered  outdated for newer commercial approaches. For example, one of  these tools relies on a central database that, if corrupted, will stop  development work and could take days or weeks to fix. According to  the contractor, fixing this database has led to multiple periods of  downtime and schedule delays.", "The MUOS contractor also uses a toolset that is considered outdated  by commercial software development experts. The program moved to  a newer Agile development approach in 2017 but has retained an  older software development toolset. The MUOS contractor said they  are heavily reliant on these tools for development and do not  anticipate changing the toolset.", "The OCX contractor also uses tools that are considered outdated by  commercial approaches. According to the contractor, these tools have  been in place for many years, and switching over to a new set of tools  would not be in the best interest of the program because it could be  disruptive to ongoing development. Defense Digital Service experts  said that a particular suite of tools used by the OCX contractor is  outdated because the tools lack the flexibility needed for iterative  development.", "Both MUOS and SBIRS contractors said that they have had to train  new employees to use their outdated tools. For example, the SBIRS  contractor told us that when new employees begin work on the SBIRS  program, they already know how to use newer tools but have to be  trained on the outdated tools used for SBIRS development. The  SBIRS contractor said this has affected retention of its workforce in  some cases, and the program has allocated funding to transition to  newer tools in order to better recruit and retain personnel.", "What is Cloud-Based Testing?  Cloud-based testing uses cloud computing  environments to simulate an application\u2019s  real-world usage.  According to international standards, cloud  testing can lead to cost savings, improved  testing efficiency, and more realistic testing  environments.", "Two contractors have taken steps to update their software tools to  increase automation and cloud-based testing but have not yet  experienced the anticipated efficiencies:", "The OCX contractor is attempting to employ cloud-based testing and  a DevOps approach. The contractor said it had to gain approval from  the DOD Chief Information Office to employ commercial cloud-based  testing for the unclassified portions of OCX but it has not gained  similar approval for the classified portion.", "The SBIRS contractor is using a software testing tool that would allow  for faster automated testing but is not yet realizing the full benefit of its  use. The SBIRS testers did not use this tool in the way it was  intended. Specifically, the contractor said that when the software was  deployed to the testing environment, testers deactivated the software  at the end of their shifts instead of allowing it to run continuously until  the tests were complete. The contractor said the testers did this  because there were concerns over unauthorized access to the system  if no one was present. As a result, the contractor separated the tests  into 8-hour segments rather than allowing the tests to run  continuously, reducing the effectiveness and value of automated  testing.", "The Defense Science Board, Defense Innovation Board, and others have  recommended DOD use tools that enable the developers, users, and  management to work together daily. As noted, DOD is required to begin  implementation of the recommendations made in the Defense Science  Board report.", "Software metrics are measurements which  provide insight to the status and quality of  software development.", "Metrics may not support newer development approaches. We have  previously found that leading developers track software-specific metrics to  gauge a program\u2019s progress, and that traditional cost and schedule  metrics alone may not provide suitable awareness for managing iterative  software development performance. Three programs have faced  challenges in identifying and collecting metrics that provide meaningful  insight into software development progress:  JMS planned to collect traditional software development metrics to  measure software size and quality, as well as Agile metrics that  provide insight into development speed and efficiency. However,  officials from the JMS government integrator managing sub-contracts  said they lack regular reporting of metrics and access to data from  subcontractors that would allow them to identify defects early. These  officials said this was a challenge because the program has to run its  own quality scans at the end of each sprint instead of being able to  identify defects on a daily basis.", "MUOS program officials were able to receive Agile metrics from the  contractor when they transitioned to Agile development, but they  lacked access to the source data, which they said hindered their  ability to oversee development.", "OCX program officials said they plan to use performance-based  metrics throughout the remainder of the program. However, the  metrics may not adequately track performance as intended. The  Defense Contract Management Agency reviewed OCX metrics,  particularly those related to DevOps, and expressed concern that  program metrics may only measure total defects that were identified  and corrected but may not provide insight into the complexity of those  defects.", "DOD is taking steps to identify useful software development metrics  and ways to include them in new contracts. DOD is aware of  challenges with metrics and is taking actions to address the issues. For  example, the Defense Innovation Board is consulting with commercial  companies to determine what metrics DOD should collect; and the Air  Force\u2019s Space and Missile Systems Center has tasked The Aerospace  Corporation with examining how to apply software performance metrics in  contracts for DOD space programs. DOD offices such as the Defense  Science Board and DOD Systems Engineering, as well as several  Federally Funded Research and Development Centers including the  Software Engineering Institute and The Aerospace Corporation, have also  attempted to identify new metrics in correlation with advances in software  development approaches."], "subsections": []}, {"section_title": "Two Program Offices Lacked Newer Software Development Knowledge, but DOD Is Working to Improve Training", "paragraphs": ["Two program offices we reviewed experienced challenges due to limited  software development knowledge:", "OCX experienced an extended period of inefficient processes  because it lacked an understanding of newer approaches. According  to Defense Digital Service, when the Office of Secretary of Defense  advised the OCX program in May 2016, it discovered that neither the  program office nor contractor had been aware of the benefits of  automated testing. Defense Digital Service helped the OCX contractor  automate a process that had been taking as long as 18 months to one  in which the same process takes less than a day. If the program office  had been aware of newer software approaches, it could have  recognized these inefficiencies much earlier and avoided unnecessary  schedule delays.", "The MUOS contractor lacked an \u201cAgile advocate\u201d in the program  office, which undermined its ability to fully employ an Agile  development approach. For example, even after the contractor  adopted an Agile approach, the program office directed the contractor  to plan out all work across software builds in order to maintain control  over requirements\u2014similar to a waterfall approach but inefficient in  Agile. According to the Software Engineering Institute, without an  Agile advocate in a program\u2019s leadership, organizations tend to do a  partial Agile or \u201cAgile-like\u201d approach.", "Program officials from the programs we reviewed said that while they  have taken some software development training, more would be  beneficial. The JMS program office said that there are external training  courses available locally as well as trainings at Air Force\u2019s Space and  Missile Systems Center, but neither are required. JMS program officials  said that, while specific software training has not been required for the  program outside of Defense Acquisition University certifications, courses  on managing software-intensive programs would have been beneficial.  Similarly, Defense Contract Management Agency officials told us that  OCX program officials would have benefited from more software  development training. The MUOS program office said its training on  software acquisition, software and systems measurement, software  planning supportability and cost estimating, and software policies and  best practices was sufficient, but the program office did not have newer  software development training prior to transitioning to an Agile  development approach.", "DOD is working to improve software acquisition training requirements and  update them to reflect changes in the software development industry. For  example, in 2017, the Defense Acquisition University introduced a course  on Agile software development that includes how Agile fits into the overall  Defense Acquisition System and how to manage an Agile software  development contract. DOD told us it is also working with the Defense  Acquisition University to help inform a course on DevOps automation."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Software is an increasingly important enabler of DOD space systems.  However, DOD has struggled to deliver software-intensive space  programs that meet operational requirements within expected time  frames. Although user involvement is critical to the success of any  software development effort, key programs often did not effectively  engage users. Program efforts to involve users and incorporate feedback  frequently did not match plans. This was due, in part, to the lack of  specific guidance on the timing, frequency, and documentation for user  involvement and feedback. The lack of user engagement has contributed  to systems that were later found to be operationally unsuitable.", "Selected programs have also faced challenges in delivering software in  shorter time frames, and in using commercial software, applying outdated  software tools and metrics, and having limited knowledge and training in  newer software development techniques. DOD acknowledges these  challenges and is taking steps to address them."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  The Secretary of Defense should ensure the department\u2019s guidance that  addresses software development provides specific, required direction on  when and how often to involve users so that such involvement is early  and continues through the development of the software and related  program components. (Recommendation 1)", "The Secretary of Defense should ensure the department\u2019s guidance that  addresses software development provides specific, required direction on  documenting and communicating user feedback to stakeholders during  software system development. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to the Department of Defense for  comment. In its comments, reproduced in appendix II, DOD concurred.  DOD also provided technical comments, which we incorporated as  appropriate.", "We are sending copies of the report to the Acting Secretary of Defense;  the Secretaries of the Army, Navy, and Air Force; and interested  congressional committees. In addition, the report will be available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Senate and House reports accompanying the National Defense  Authorization Act for Fiscal Year 2017 contained provisions for GAO to  review challenges in software-intensive Department of Defense (DOD)  space systems, among other things. This report addresses, for selected  software-intensive space programs, (1) the extent to which these  programs have involved users and delivered software using newer  development approaches; and (2) what software-specific management  challenges, if any, these programs have faced.", "To select the programs, we identified a non-generalizable, purposeful  sample of four major defense programs representing different space  military services where software is an essential component and where  each program has experienced cost growth or schedule delays attributed,  in part, to software challenges. We began our selection process with 49  DOD space programs from the U.S. Air Force and Navy services as  identified by the Office of the Assistant Secretary of the Air Force for  Space Acquisition and a GAO subject matter expert. We then narrowed  our selection to 19 Major Defense Acquisition Programs (MDAP) and  Major Acquisition Information System (MAIS) programs identified by  DOD. Next, using information from prior GAO Annual Weapons  Assessments, DOD Selected Acquisition Reports, DOD Defense  Acquisition Executive Summary Reports, and the Defense Acquisition  Management Information Retrieval system, we identified 15 programs  that were software-intensive systems as defined in the international  standard ISO/IEC/IEEE 42207. This standard states that a software- intensive system is one where software contributes essential influences to  the design, construction, deployment, and evolution of the system as a  whole. From these 15 programs, 8 were found to have had cost growth or  schedule delays attributed, in some part, to software development. We  further analyzed these 8 programs for unit cost or schedule breaches as  defined in 10 U.S.C. \u00a7 2433 and 10 U.S.C. \u00a7 2366b, ultimately resulting in  7 programs. Finally, from these 7 programs, we chose a purposeful  sample of 5 programs, ensuring representation from different DOD  services and Acquisition Categories.", "Family of Advanced Beyond Line-of-Sight Terminals (FAB-T); Air", "Next Generation Operational Control System (OCX); Air Force MDAP  Joint Space Operations Center Mission System Increment 2 (JMS);  Air Force MAIS", "Mobile User Objective System (MUOS); Navy MDAP", "Space-Based Infrared System (SBIRS); Air Force MDAP  We were unable to assess FAB-T software issues with the same level of  detail as the other programs we reviewed because, despite prior software  challenges, the program stated it does not have documentation that  separately tracks software-related requirements or efforts. This brought  our total to 4 selected programs.", "To address the objectives, we interviewed officials from the  Undersecretary of Defense for Acquisition and Sustainment, Office of the  Deputy Assistant Secretary of Defense for Systems Engineering, Office of  Cost Assessment and Program Evaluation, Office of the Director of  Operational Test and Evaluation, Defense Digital Service, Defense  Innovation Board, and the Office of the Assistant Secretary of the Air  Force for Space Acquisition. We also interviewed officials from the  selected program offices and their respective contractors, subcontractor,  integrator, space systems users, a DOD test organization, and Federally  Funded Research and Development Centers. In addition, we conducted a  literature search using a number of bibliographic databases, including  ProQuest, Scopus, DIALOG, and WorldCat. We reviewed documentation  that focused on software-intensive major military acquisitions. We  conducted our search in March 2018.", "To determine how effectively selected DOD software-intensive space  programs have involved users and adopted newer software development  approaches, we reviewed applicable DOD policies, guidance, and federal  statute that identify characteristics of user engagement. These sources  were the Department of Defense Instruction (DODI) 5000.02; Office of the  Secretary of Defense Report to Congress, A New Approach for Delivering  Information Technology in the Department of Defense; and National  Defense Authorization Act for Fiscal Year 2010. We supplemented this  with Defense Science Board and Defense Innovation Board  documentation, and other industry analyses. We then reviewed relevant  program plans and documentation, such as human engineering and  human systems integration plans, standard operating procedures,  acquisition strategies, software development plans, and other program  user engagement guidance to identify plans for user engagement. We  then conducted interviews with space system users and analyzed  software development documentation to evaluate the extent to which  programs met these DOD user engagement characteristics. We also  analyzed user feedback reports to identify trends in user feedback. We  also examined DOD and OMB guidance and applicable leading practices  to identify time frames for delivering software under incremental and  iterative software development approaches, and we compared these time  frames to program performance.", "To determine what software-specific management challenges, if any,  selected programs faced, we reviewed reports and studies on software  tools and metrics used to manage software programs, including GAO  reports, DOD policies and guidance, and studies from the Software  Engineering Institute. We then reviewed program documents, such as  Software Development Plans, System Engineering Plans, System  Engineering Management Plans, Software Resource Data Reports, Test  and Evaluation Master Plans, Master Software Build Plans, and  Obsolescence Plans, as applicable, as well as contracts and Statements  of Work. We reviewed defect metrics and reports on amounts of new,  reused, inherited, and commercial software; test and evaluation reports;  program management reports; and external program assessments. We  also evaluated program retrospectives and DOD reports on leading  practices to understand how programs are making efforts to address  challenges in these areas. We spoke with contractors and an applicable  subcontractor and government integrator, program officials, and officials  from Federally Funded Research and Development Centers to  understand program issues, including program office and contractor  training requirements.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Raj Chitikila, Assistant Director;  Pete Anderson, Erin Carson, Jordan Kudrna, Matthew Metz, Roxanna  Sun, and Jay Tallon made key contributions to this report. Assistance was  also provided by Mathew Bader, Virginia Chanley, Susan Ditto, Sarah  Gilliland, Carol Harris, Harold Podell, Andrea Starosciak, Anne Louise  Taylor, and Alyssa Weir."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Weapon Systems Cybersecurity: DOD Just Beginning to Grapple with  Scale of Vulnerabilities. GAO-19-128. Washington, D.C.: October 9,  2018.", "Weapon Systems Annual Assessment: Knowledge Gaps Pose Risks to  Sustaining Recent Positive Trends. GAO-18-360SP. Washington, D.C.:  April 25, 2018.", "Information Technology: Agencies Need to Involve Chief Information  Officers in Reviewing Billions of Dollars in Acquisitions. GAO-18-42.  Washington, D.C.: January 10, 2018.", "Global Positioning System: Better Planning and Coordination Needed to  Improve Prospects for Fielding Modernized Capability. GAO-18-74.  Washington, D.C.: December 12, 2017.", "Information Technology Reform: Agencies Need to Improve Certification  of Incremental Development. GAO-18-148. Washington, D.C.: November  7, 2017  Space Acquisitions: DOD Continues to Face Challenges of Delayed  Delivery of Critical Space Capabilities and Fragmented Leadership.  GAO-17-619T. Washington, D.C.: May 17, 2017.", "Defense Acquisitions: Assessment of Selected Weapon Programs.  GAO-17-333SP. Washington, D.C.: March 30, 2017.", "Immigration Benefits System: U.S. Immigration Services Can Improve  Program Management. GAO-16-467. Washington, D.C.: July 7, 2016.", "GPS: Actions Needed to Address Ground System Development Problems  and User Equipment Production Readiness. GAO-15-657. Washington,  D.C.: September 9, 2015.", "Defense Acquisitions: Assessments of Selected Weapon Programs.  GAO-15-342SP. Washington, D.C.: March 12, 2015.", "Defense Major Automated Information Systems: Cost and Schedule  Commitments Need to Be Established Earlier. GAO-15-282. Washington,  D.C.: February 26, 2015.", "Standards for Internal Control in the Federal Government. GAO-14-704G.  Washington, D.C.: September 2014.", "Software Development: Effective Practices and Federal Challenges in  Applying Agile Methods. GAO-12-681. Washington, D.C.: July 27, 2012.", "Information Technology: Critical Factors Underlying Successful Major  Acquisitions. GAO-12-7. Washington, D.C.: October 21, 2011.", "Space Acquisitions: Development and Oversight Challenges in Delivering  Improved Space Situational Awareness Capabilities. GAO-11-545.  Washington, D.C.: May 27, 2011.", "Significant Challenges Ahead in Developing and Demonstrating Future  Combat System\u2019s Network and Software. GAO-08-409. Washington,  D.C.: March 7, 2008.", "Space Based Infrared System High Program and its Alternative.  GAO-07-1088R. Washington, D.C.: September 12, 2007.", "Defense Acquisitions: Stronger Management Practices Are Needed to  Improve DOD\u2019s Software-Intensive Weapon Acquisitions. GAO-04-393.  Washington, D.C.: March 1, 2004.", "Information Security: Effective Patch Management is Critical to Mitigating  Software Vulnerabilities. GAO-03-1138T. Washington, D.C.: September  10, 2003.", "Test and Evaluation: DOD Has Been Slow in Improving Testing of  Software-Intensive Systems. GAO/NSIAD-93-198. Washington, D.C.:  September 29, 1993.", "Mission-Critical Systems: Defense Attempting to Address Major Software  Challenges. GAO/NSAID-93-13. Washington, D.C.: December 24, 1992.", "Space Defense: Management and Technical Problems Delay Operations  Center Acquisition. GAO/IMTEC-89-18. Washington, D.C.: April 20, 1989."], "subsections": []}], "fastfact": ["Developing software for DOD space systems, like GPS, has historically taken longer and cost billions of dollars more than planned.", "We looked at four software-intensive DOD space systems that had cost growth or delays.", "While DOD has started using better software development approaches, we found some challenges to making them work. For example, program offices and system developers don't consistently involve the systems' end users in development, making it hard to ensure that the systems will meet their needs.", "We recommended DOD provide specific direction on when and how often to involve users, and document the involvement to ensure it happens."]}
{"id": "GAO-18-602", "url": "https://www.gao.gov/products/GAO-18-602", "title": "Postal Retiree Health Benefits: Unsustainable Finances Need to Be Addressed", "published_date": "2018-08-31T00:00:00", "released_date": "2018-10-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["USPS is required to prefund its share of health benefits costs for its retirees. To do so, USPS is required to make payments into the RHB Fund, which is administered by OPM. However, USPS has not made any payments to the fund since fiscal year 2010. At the end of fiscal year 2017, USPS had missed $38.2 billion in payments, leaving the fund 44 percent funded. Pursuant to law, beginning in fiscal year 2017, OPM started drawing from the fund to cover USPS's share of postal retirees' health benefits premiums. GAO was asked to review issues related to the sustainability of the RHB Fund.", "This report examines (1) the financial outlook for the RHB Fund and (2) policy approaches for postal retiree health benefits, among other topics. GAO evaluated financial projections for the RHB Fund from OPM. GAO reviewed laws and regulations and identified policy approaches primarily by identifying legislative proposals, and literature on actions of companies and state governments to address retiree health benefits. These approaches are not exhaustive or mutually exclusive. GAO also interviewed experts in retiree health benefits and postal stakeholders, chosen on the basis of relevant publications and prior GAO work, and interviewed and obtained written responses from OPM and USPS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The financial outlook of the Postal Service Retiree Health Benefits Fund (RHB Fund) is poor. At the end of fiscal year 2017, the fund's assets declined to $49.8 billion and unfunded liabilities rose to $62.2 billion. Based on Office of Personnel Management (OPM) projections requested by GAO, the fund is on track to be depleted in fiscal year 2030 if the United States Postal Service (USPS) continues to make no payments into the fund. Annual payments of $1 billion or $2 billion into the fund would extend the projected depletion date by 2 to 5 years (see figure). USPS has said that its required payments to the fund are unaffordable relative to its current financial situation and outlook. For the past 11 years USPS has incurred large operating losses that it expects will continue. Additionally, USPS has stated that its opportunities for revenue generation and cost-cutting are limited. USPS reported that it did not make required fund payments in 2017 in order to preserve liquidity and cover operational costs. If the fund becomes depleted, USPS would be required by law to make the payments necessary to cover its share of health benefits premiums for current postal retirees. Current law does not address what would happen if the fund becomes depleted and USPS does not make payments to cover those premiums. Depletion of the fund could affect postal retirees as well as USPS, customers, and other stakeholders, including the federal government. About 500,000 postal retirees receive health benefits and OPM expects that number to remain about the same through 2035.", "GAO identified three categories of policy approaches for postal retiree health benefits, based on legislative proposals and pertinent literature. First, some approaches, such as generally requiring eligible postal retirees to participate in Medicare, would shift costs to the federal government. Second, some approaches would reduce benefits or increase costs to postal retirees and/or employees. Third, some approaches would change how benefits are financed (see table). All of these approaches have different potential effects and would require congressional action. Thus, it is up to Congress to consider the merits of different approaches and determine the most appropriate action to take. It would be preferable to take action when careful consideration is possible, rather than wait until lack of adequate funding could disrupt postal retiree health benefits."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider passing legislation to put postal retiree health benefits on a more sustainable financial footing. USPS agreed that congressional action is needed and offered views on some policy approaches discussed in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["About 500,000 postal retirees currently receive federal retiree health  benefits. Unlike most federal entities, the U.S. Postal Service (USPS) is  required to prefund its share of health benefits for its retirees. To do so,  USPS is required to pay money into the Postal Service Retiree Health  Benefits Fund (RHB Fund), which is administered by the Office of  Personnel Management (OPM). However, USPS has experienced  financial difficulties and has not made its required payments to the RHB  Fund since 2010. Those missed payments totaled $38.2 billion through  the end of fiscal year 2017. At the same time, the fund had assets of  $49.8 billion but liabilities of $112.1 billion\u2014leaving a shortfall of $62.2  billion in unfunded liabilities\u2014and thus only 44 percent of the liabilities  were funded. Further, pursuant to law, beginning in fiscal year 2017, OPM  started drawing from the RHB Fund to cover USPS\u2019s share of premiums  for postal retirees\u2019 health benefits.", "Challenges related to funding and providing retiree health benefits are not  unique to USPS. For years, private companies and state governments  have been similarly challenged with the rising costs of providing retiree  health benefits and have taken actions to address this issue. However, no  consensus exists about what actions should be taken to address the  growing financial shortfall for postal retiree health benefits. You asked us  to review issues related to postal retiree health benefits funding and what  lessons could be learned from the efforts of other organizations including  companies and state governments that have dealt with retiree health  benefits issues.", "This report examines (1) the financial outlook for the RHB Fund, (2)  actions that companies and state governments have taken to address  retiree health benefit costs, and (3) possible policy approaches regarding  postal retiree health benefits.", "To assess the financial outlook for the RHB Fund, we obtained OPM\u2019s  projections for the RHB Fund\u2019s income and expenses and reviewed  written comments of USPS and OPM officials on the fund. Next, we  evaluated the projections and statements against statutory provisions  specifying the fund\u2019s responsibilities for funding postal retiree health  benefits. We discussed the methods and assumptions underlying OPM\u2019s  estimates with OPM officials, and concluded that OPM\u2019s projections  would be reasonable for our purposes, but we did not otherwise evaluate  the underlying data, which were outside the scope of this review. The  baseline scenario that OPM developed was based on a continuation of  current practices in which USPS would make no additional payments into  the fund. In addition, we interviewed and obtained written responses  from OPM and USPS officials.", "To identify actions the private sector and state governments have taken  to address retiree health costs and obtain a broad perspective on how  these entities have dealt with issues in this area, we identified reports and  articles issued from 1998 through 2018 on retiree health benefits provided  by companies and state governments, based on searches in bibliographic  databases and other online resources, prior GAO work, and interviews  with experts on retiree health benefits. We conducted interviews with 20 experts in retiree health benefits and four postal stakeholders, including  two postal labor unions and two mailer groups, chosen on the basis of our  review of relevant publications and prior GAO work.", "In addition, we identified and used data from surveys on companies\u2019  provision of retiree health benefits. These surveys were sponsored by:  the Kaiser Family Foundation and the Health Research & Educational  Trust (Kaiser/HRET) from 1999 through 2017 and  the U.S. Department of Health and Human Services\u2019 Agency for  Healthcare Research and Quality (AHRQ), which sponsored the  Medical Expenditure Panel Survey, Insurance Component, from which  we used data from 2003 through 2016.", "The Kaiser/HRET and AHRQ surveys were selected because they were  generalizable at the national level and used comparable methodology  across time. We conducted a data reliability assessment of both surveys  by reviewing documentation related to how the survey data were  collected and processed. We found these surveys produced evidence of  sufficient quality for the purposes of our reporting objectives.", "To identify and select approaches that could address postal retiree health  benefits, we identified legislative proposals and the experiences of private  companies and state governments based on the work described above.  In addition, we considered input provided during our interviews with  experts in retiree health benefits and postal stakeholders, and drew on  our prior work.", "We conducted this performance audit from June 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Postal retiree health benefits are provided as part of the Federal  Employees Health Benefits Program (FEHBP). FEHBP covers federal  employees and retirees, including postal and nonpostal retirees, who  receive health insurance from companies that contract with OPM. Retiree  participation is voluntary; in fiscal year 2018, about 500,000 postal  retirees have participated in FEHBP.", "Funding requirements for postal retiree health benefits are established by  law, which divides responsibility among USPS, the federal government,  and postal retirees. USPS is responsible for a specific percentage of  premiums, the federal government is responsible for paying a prorated  share, and retirees are responsible for the rest. The funding  requirements for these benefits changed in 2006. Before then, a \u201cpay-as- you-go\u201d system governed USPS\u2019s payments, which required USPS to pay  its share of premiums for current postal retirees. The 2006 Postal  Accountability and Enhancement Act (PAEA) required USPS to start fully  \u201cprefunding\u201d retiree health benefits. This meant that USPS was required  to make annual prefunding payments to a newly established fund to build  up funds to cover USPS\u2019s share of future postal retiree health benefit  costs. PAEA also established the RHB Fund as a new fund in the U.S.  Treasury for USPS to deposit money into, and specified that beginning in  fiscal year 2017, the fund would be used by OPM to pay USPS\u2019s share of  postal retiree premiums for health benefits. Under PAEA, the first 10  years of prefunding payments were fixed\u2014ranging from $5.4 billion to  $5.8 billion annually from fiscal years 2007 to 2016. From fiscal years  2007 through 2016, USPS was also required to continue \u201cpay-as-you-go\u201d  payments for its share of premiums for current retirees. The permanent  schedule for USPS payments to prefund postal retiree health benefits  under PAEA started in fiscal year 2017.", "We have reported that USPS\u2019s financial condition continues to deteriorate  and its outlook is bleak. We have separately issued reports and  testimonies that examined USPS\u2019s financial condition, including its  liabilities, and identified strategies and options for USPS and Congress to  reduce postal costs, generate revenue, and restructure the funding of  USPS\u2019s pension and retiree health benefits. Looking forward, we have  reported that USPS is facing unsustainable financial challenges as First- Class Mail volume continues to decline. USPS has recently reported  that its revenue generation options are constrained, including by the price  cap on market-dominant mail, and that any cost-cutting opportunities  within its control are \u201crelatively limited and dwindling.\u201d USPS stated that  the opportunity for further cost savings within its control will not come  close to filling its financial gap.", "With respect to actions taken by companies and state governments, we  have previously reported on the long-term trend for these organizations to  eliminate or reduce retiree health benefits. Factors contributing to this  decline include financial challenges for companies and states, current and  expected retiree health benefit costs, and the legal ability to change  retiree health benefit programs."], "subsections": []}, {"section_title": "The Financial Outlook of the Postal Service Retiree Health Benefits Fund Is Poor", "paragraphs": ["The RHB Fund is on an unsustainable path and is projected to be  depleted in 12 years under the status quo. USPS has missed  approximately $38 billion in payments to the fund since fiscal year 2010,  and the fund\u2019s balance is declining. Beginning in fiscal year 2017, OPM  started drawing from the fund to pay USPS\u2019s share of premiums for postal  retirees\u2019 health benefits. OPM\u2019s payments in that year exceeded the  fund\u2019s income from interest, and OPM projects that, based on the status  quo, future payments will continue to exceed the fund\u2019s income from  interest. As long as USPS continues to miss its annual payments\u2014which  were nearly $4.3 billion in fiscal year 2017 and are $4.5 billion in fiscal  year 2018\u2014the fund is on track to be depleted in fiscal year 2030 based  on OPM projections requested by us (see fig. 1). We reported similar  results in our December 2012 report on postal retiree health benefits.", "At our request, OPM conducted a sensitivity analysis in which alternative  projections were made that assumed USPS made payments to the fund  of $1 billion per year or $2 billion per year; these alternative projections  extended the fund\u2019s projected depletion date from fiscal year 2030 to  fiscal years 2032 or 2035, respectively (see fig. 2). OPM estimates the  number of postal retirees eligible for federal retiree health benefits will  remain near the current level of 500,000 through fiscal year 2035.", "The outlook for the RHB Fund is poor as USPS has inadequate resources  to cover its required payments to the RHB Fund and, in our view, based  on past practices and USPS statements, appears unlikely to make partial  payments. USPS has repeatedly testified that its required payments to  the RHB Fund are \u201cunaffordable\u201d relative to its current financial situation  and outlook. In this regard, USPS accumulated net losses of more than  $65 billion in the last 11 years and has budgeted for a net loss of about  $5 billion in fiscal year 2018. Further, USPS reached its statutory  borrowing limit of $15 billion in 2012. Although USPS accumulated liquid  assets (cash and cash equivalents) of about $10.5 billion at the end of  fiscal year 2017, it did not make $6.9 billion in required payments for  retiree health and pension benefits. According to USPS officials, USPS  did not make these payments in order to preserve liquidity and cover  operational costs.", "If the RHB Fund is depleted, PAEA requires USPS to fill the resulting  financial gap by resuming \u201cpay-as-you-go\u201d payments for its share of  retiree health premiums that are currently being paid by the fund.  However, PAEA does not address how funding will be provided or  whether benefits will be provided if the fund becomes depleted and USPS  does not make payments to cover its share of premiums.", "OPM and USPS have identified the following issues should the fund be  depleted:", "According to OPM: (1) The RHB Fund is the initial funding source for  USPS\u2019s share of postal retirees\u2019 health insurance premiums as long  as money remains in the fund. (2) If the fund is depleted, then USPS  becomes the funding source responsible for paying USPS\u2019s share of  these premiums. (3) Regardless of whether funds are available to pay  USPS\u2019s share of premiums, postal retirees are statutorily entitled to  remain enrolled in their FEHBP plans. (4) Therefore, if the fund is  depleted and USPS does not pay its share of premiums, the providers  of these FEHBP plans would be underpaid.", "According to USPS: (1) Current law does not appear to contemplate a  situation in which USPS itself is unable to make payments to the RHB  Fund after the fund is depleted. (2) The law does not condition postal  retirees\u2019 eligibility for health benefits upon the fund or the payment of  government contributions by USPS and the federal government. (3)  Therefore, USPS stated it is reasonable to expect that postal retirees  would remain eligible for health coverage even if USPS is unable to  make payments to the RHB Fund after it is depleted. Regarding who  would pay for their health coverage at this point, USPS stated that  ultimately, it would be up to Congress to legislate a resolution to the  funding issue.", "As the above projections show, the RHB Fund could be depleted in as  little as 12 years\u2014and USPS may be unable to cover its share of retiree  health insurance premiums should its financial condition remain  precarious. Depletion of the fund could affect postal retirees\u2014who have  provided a vital service to the nation\u2014as well as USPS, postal customers  and other stakeholders, including the federal government."], "subsections": []}, {"section_title": "Many Companies and State Governments Have Cut Retiree Health Benefits to Control Costs", "paragraphs": [], "subsections": [{"section_title": "A Small and Decreasing Percentage of Companies Continue to Offer Retiree Health Benefits", "paragraphs": ["Survey data we reviewed indicate that most companies do not offer  retiree health benefits and that the number of companies providing such  benefits is decreasing over time. For example, the percentage of all  private and public organizations (e.g., state or local governments) with  more than 200 employees that offer employee health benefits and that  also offer retiree health benefits is estimated to have declined from 40  percent in 1999 to 25 percent in 2017, according to annual surveys  conducted by the Henry J. Kaiser Family Foundation and the Health  Research & Educational Trust (Kaiser/HRET).", "Focusing specifically on the results for private for-profit companies, the  2017 Kaiser/HRET survey estimated that only 11 percent of companies  with at least 200 employees that offered health benefits to active  employees also offered retiree health benefits in 2017, the smallest  percentage since comparable data were measured in 2012. The 2017  Kaiser/HRET survey also estimated that the percentage of companies  offering retiree health benefits was greater among companies with at  least 5,000 employees (35 percent) than those with 1,000 to 4,999  employees (18 percent) and those with 200 to 999 employees (9 percent)  (see fig. 3).", "Surveys sponsored by the Agency for Healthcare Research and Quality  (AHRQ) have estimated similar trends for private sector establishments  with at least 1,000 employees and with 100-999 employees. According  to the AHRQ surveys, an estimated 25 percent of private sector  establishments with at least 1,000 employees offered health insurance  coverage to retirees age 65 and older in 2016, down from 41 percent in  2003. For retirees under 65, an estimated 32 percent offered such  coverage in 2016, down from 42 percent in 2003 (see fig. 4)."], "subsections": []}, {"section_title": "Many Companies with Retiree Health Benefits Have Changed Eligibility or Benefit Structures", "paragraphs": ["Based on reports we reviewed and experts we interviewed, many  companies that have retained their retiree health benefits have done so  by making changes to control costs, including tightening eligibility and  restructuring benefits. Depending on the company, the changes have  applied to new hires, current employees, or retirees. Specific changes  have included the following:", "Tightening eligibility: Some companies have made new employees  and/or employees hired after a given date ineligible to receive retiree  health benefits, while other companies have increased the minimum  age and/or length of service requirements for eligibility, according to  reports and experts we interviewed.", "Restructuring benefits: Many companies have restructured retiree  health benefits to reduce the level of the benefit, to shift costs to  retirees, and to change how the benefits are provided. For example,  some companies have shifted from an approach under which a  company pays a percentage of premiums for a selected health benefit  plan, to an approach under which a company pays a fixed dollar  amount that employees may put toward health care costs. The 2017  Kaiser/HRET survey estimated that 30 percent of private and public  organizations with 200 or more employees that offer retiree health  benefits provide a fixed dollar amount that the retiree can use to  purchase a retiree health plan they choose. Experts on retiree  health benefits that we interviewed told us such companies often shift  costs to retirees by maintaining defined contributions at the same  level over time, even as overall health care costs increase."], "subsections": []}, {"section_title": "State Governments Have Also Changed Eligibility or Benefit Structures", "paragraphs": ["Based on multiple reports and experts, nearly all state governments  continue to offer retiree health benefits to at least some state government  retirees but generally have shifted some costs from the state to retirees  and/or active employees in various ways. For example, in 2016, the  Pew Charitable Trusts and the John D. and Catherine T. MacArthur  Foundation reported on the following recent changes at the state level  related to eligibility for retiree health benefits, benefit levels, and aspects  of how the benefits coordinate with Medicare:", "Tightening eligibility or limiting benefit levels: Most states varied  eligibility for retiree health benefits based on factors such as age and  years of service, and varied benefit levels based on factors such as  date of hire, date of retirement, or vesting eligibility; some states  varied benefit levels based on years of service. Between 2000 and  2015, more than a dozen states changed the minimum age or the  number of state service years required for retirees to be eligible for  health benefits. During that timeframe, at least 10 states adopted  formulas for prorating benefits that required different premium-sharing  amounts based on years of service, or altered existing prorating  formulas, bringing the total to 31 states that used prorating in 2015. At  least 5 states stopped making any contributions to health premiums  for certain retirees.", "Medicare coordination: Thirty-five states provided employer- sponsored Medicare Advantage or Medicare Part D plans, known as  Employer Group Waiver Plans, to provide health or prescription drug  benefit coverage for Medicare-eligible retirees since these options  were authorized in 2003. According to the report, \u201cThese cost- saving programs provide states with financial subsidies from the  federal Medicare program to provide Medicare plus wraparound  benefits.\u201d"], "subsections": []}]}, {"section_title": "Various Policy Approaches to Address the Sustainability of Postal Retiree Health Benefits Could Have Wide-Ranging Effects", "paragraphs": ["We identified eight potential policy approaches to address the financial  sustainability of postal retiree health benefits, primarily based on a review  of legislative proposals and pertinent literature on actions that were taken  by private companies and state governments and are discussed above.  These approaches fall into three categories: (1) approaches that shift  costs to the federal government; (2) approaches that reduce benefits or  increase costs to postal retirees and/or postal employees; and (3)  approaches that change how the benefits are financed.", "These eight approaches are not mutually exclusive, nor are they an  exhaustive list of possible approaches. Each approach could include a  range of specific options; thus, even if successfully implemented, no one  approach would necessarily be sufficient to make postal retiree health  benefits financially sustainable. Although our discussion of the various  policy approaches specifically addresses postal retiree health benefits,  most approaches could address federal retiree health benefits more broadly, as both postal and non-postal federal employees participate in  the same federal health benefits program.", "All approaches we identified have different potential effects and would  require congressional action because current law establishes certain  requirements for postal retiree health benefit plans, including basic rules  for benefits, enrollment, and participation, and how benefits are to be paid  for. Because the RHB Fund has a large and growing financial gap, any  approach that would have a significant financial impact could affect the  federal government, postal retirees, postal employees, USPS, and  customers to varying degrees."], "subsections": [{"section_title": "Some Approaches Would Shift Costs to the Federal Government", "paragraphs": ["Medicare Integration: Various legislative proposals have been made to  increase postal retirees\u2019 participation in Medicare\u2014a shift that would  decrease USPS\u2019s costs but increase Medicare\u2019s costs, according to  analyses by the Congressional Budget Office (CBO). These proposals  would establish a program within FEHBP for active postal employees and  postal retirees. Under these bills, Medicare-eligible postal retirees  enrolled in this program would generally also be required to be enrolled in  Medicare Parts A, B, and D. According to CBO analyses, the bills would  have resulted in USPS savings, in part because increased participation in  Medicare would shift primary responsibility for covering certain health  care services to Medicare for those who enroll. As we have previously  reported, the primary policy decision for Congress to make is whether to  increase postal retirees\u2019 use of Medicare.", "Supplemental federal appropriations: If the RHB Fund becomes depleted  and USPS does not fill the financial gap, supplemental federal  appropriations could be an alternative if Congress wants benefits to  continue at the same level. As previously noted, OPM officials told us  that regardless of whether funds are available to pay USPS\u2019s share of  premiums, postal retirees are statutorily entitled to remain enrolled in their  FEHBP plans. However, supplemental federal appropriations for postal  retiree health benefits could increase the federal budget deficit. In  addition, supplemental appropriations for postal retiree health benefits  would be inconsistent with USPS functioning as a self-financing entity that  covers its costs with revenue it generates."], "subsections": []}, {"section_title": "Some Approaches Would Reduce Benefits or Increase Costs to Postal Retirees and/or Employees", "paragraphs": ["Tighten eligibility or reduce or eliminate retiree health benefits: As some  companies and state governments have done, eligibility restrictions could  be tightened for postal retiree health benefits, or other actions could  reduce the level of benefits or even eliminate benefits, such as making  new hires ineligible to receive retiree health benefits. The effects would  depend on the specific changes and whether they were made to apply to  current retirees, current employees, or future hires. Depending on the  extent of the changes, this approach would reduce USPS\u2019s liability for  postal retiree health benefits and thereby reduce its unfunded liability.", "Increase premium payments by postal retirees and/or postal employees:  As some companies and state governments have done, premium  payments for postal retiree health benefits by postal retirees and/or postal  employees could be increased. For example, as others have reported,  some companies and state governments have required retirees to pay  100 percent of the health insurance premium for their retiree health  benefits. Similarly, a larger share of retiree health premiums could be  borne by postal retirees or postal employees could be required to pay  for retiree health benefits before they retire. Such changes would require  changes to current law that allocates specific financial responsibility for  payments among USPS, the federal government, and retirees  participating in FEHBP, as active postal employees make no payment for  retiree health benefits under current law.", "The expenses of the RHB Fund could be decreased by these approaches  that shift costs to postal retirees, postal employees, or both. Depending  on how much of the costs are shifted, the additional costs could increase  the challenge for retirees to ensure their accumulated resources last  throughout retirement, or for postal employees to save for retirement.  Further, as we have reported, rising health care costs can increase the  overall amount individuals may need to save to ensure they have an  adequate income once they retire.", "Change the federal contribution to a fixed subsidy: As some companies  and state governments have done, postal retiree health benefits could be  shifted to a structure with a fixed amount subsidizing the benefit. This  amount could be adjusted over time; any adjustments might or might not  keep up with costs. Depending on the initial size of the fixed subsidy and  any adjustments over time, this approach could reduce the expenses of  the RHB Fund and USPS\u2019s required payments. RHB Fund expenses  could be reduced over time if the fixed subsidy increases less than postal  retiree health premiums. This approach would require changes to current  law and regulations that prescribe the federal government\u2019s financial  contribution to FEHBP. For example, CBO recently identified one option  to change FEHBP\u2019s statutory structure from a premium-sharing structure  that is required by law to fixed subsidies for health benefits. Under this  option, the fixed subsidies would grow at the rate of inflation rather than at  the average rate of growth for FEHBP premiums; CBO stated this change  would be expected to slow the growth of federal contributions to FEHBP.  A fixed subsidy for retiree health benefits could increase incentives for  retirees to make less costly decisions with respect to health care.  However, this approach could result in greater cost exposure for retirees,  who may face difficult decisions regarding their health care, particularly if  their financial resources are limited. As we have reported, individuals face  the risk that rising and unpredictable health care or long-term care costs  may lead them to draw down their retirement savings faster than  expected.", "Establish a non-federal voluntary employees\u2019 beneficiary association  (VEBA) for postal retiree health benefits: As some companies have done  to provide retiree health benefits separately from the employer, a VEBA  outside the federal government could be established to manage postal  retiree health benefits. This approach means that postal retiree health  benefits would be provided through the VEBA instead of through the  OPM-administered FEHBP. The non-federal VEBA would administer the  postal retiree health benefits program, including determining the specific  benefits that would be provided and the level of contributions from the  VEBA members\u2014who could include retirees and employees\u2014and the  investing of its assets. Such an approach would require determining the  VEBA\u2019s governance structure, funding sources, level of funding, type of  investments, and associated market risks. One issue could be  determining the source and level of initial funding for a new VEBA for  postal retiree health benefits, such as whether initial funding would come  from the RHB Fund, the Treasury, or both. Other issues could be what  funds would be provided to the VEBA going forward, including the  source(s) and level of funding, and what the benefit levels would be. If the  entire RHB Fund were transferred into a VEBA, the current level of  benefits would ultimately not be sustainable unless further funding is  provided from one or more sources, such as from USPS, retirees, active  employees, or the federal government. Thus, trade-offs would involve  what level of benefits would be provided, who would bear the costs, and  what might happen if VEBA assets decline or become depleted."], "subsections": []}, {"section_title": "Some Approaches Would Change How Benefits Are Financed", "paragraphs": ["Reduce the required level of prefunding: Proposed legislation includes an  80 percent funding target for postal retiree health benefits instead of the  100 percent target established by current law. This would reduce  USPS\u2019s required payments to the RHB Fund but could increase costs for  future postal ratepayers and increase the risk that USPS may not be able  to pay for these costs. As previously discussed in this report, state  governments either do not prefund their retiree health benefits or generally have a low level of prefunding. We have expressed concern  about a proposed 80 percent funding target for postal retiree health  benefits that would have the effect of carrying a permanent unfunded  liability equal to roughly 20 percent of USPS\u2019s liability, which could be a  significant amount. As we previously reported, an alternative could be to  build in a schedule to achieve 100 percent funding in a later time period  after the 80 percent level is achieved. Although USPS payments with an  80 percent funding target would reduce USPS\u2019s required payments, fully  funded benefits protect against an inability to make payments later, make  promised benefits less vulnerable to cuts, and protect USPS\u2019s long-term  viability. Further, reducing the funding target is unlikely to have any  effect as long as USPS continues to make no payments to the RHB Fund,  as discussed earlier.", "We continue to believe that as long as USPS is required by law to pay its  share of retiree health benefits premiums, it is important for USPS to  prefund its retiree health benefit liability to the maximum extent that its  finances permit. We recognize that multiple options exist to prefund  benefits and amortize unfunded liability and that no prefunding approach  will be viable unless USPS can make the payments and maintain liquidity.  As we have reported, making affordable prefunding payments would  protect the viability of USPS by not saddling it with bills later on, when  employees are already retired and no longer helping it to generate  revenue; making payments can also make the promised benefits more  secure. We also have reported that deferring payments can pass costs  from current to future postal ratepayers. To the extent prefunding is  postponed by using a lower funding target, larger payments will be required later, when they likely would be supported by lower levels of  profitable First-Class Mail volume.", "Outside investment: Proposed legislation would initially require 25 percent  of the RHB Fund to be invested in index funds modeled after those used  for federal Thrift Savings Plan investments. The objective of investing  RHB Fund assets outside of U.S. Treasury securities would be to seek a  greater rate of return on these assets in an attempt to reduce unfunded  liabilities and the amount of required prefunding payments. Such outside  investment would require legislation because current law limits RHB Fund  assets to U.S. Treasury securities that are backed by the full faith and  credit of the federal government. A higher rate of return on RHB Fund  assets could reduce long-term funding needs. However, there are other  considerations. For example, we have reported that if fund assets were  invested in non-Treasury securities, the fund may experience losses in a  market downturn and would thus have reduced assets available for health  care. Assuming there would be no explicit federal guarantee of the  value of the invested assets, we stated that USPS is not well positioned  to deal with a potentially significant decline in their value, given its  significant operating losses and continuing decline in mail volume. We  also reported that the impact of any asset losses could be magnified  because a market downturn that negatively affects asset value could be  associated with a more general economic downturn that negatively  affects USPS mail volume and revenues."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["About a half million postal retirees receive retiree health benefits. Postal  retirees have provided a vital service to the nation, and resolving a key  aspect of their future situation warrants congressional action. Failure to  address the poor financial outlook of the RHB Fund could pose serious  consequences for these retirees as well as USPS, postal customers, and  other stakeholders, including the federal government. It is reasonable to  believe that USPS will not be able to fill the financial gap once the RHB  fund is depleted\u2014a situation that could occur in as little as 12 years under  the status quo. There is no certainty on what actions should be taken to  address this problem. However, we have identified multiple approaches  that could be used, individually or in combination, that Congress could  consider to help address the financial shortfall in this area. All of these  approaches have different potential effects, and it is up to Congress to  consider the merits of the approaches and determine the most  appropriate action to take. It would be preferable to take action when  careful consideration is possible, rather than wait until lack of adequate  funding could disrupt postal retiree health benefits."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider passing legislation to put postal retiree health  benefits on a more sustainable financial footing."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OPM and USPS for their review and  comment. OPM provided technical comments, which we incorporated as  appropriate. USPS provided a written response, which is reproduced in  appendix II of this report.", "In its written response, USPS stated that it concurred with our matter for  congressional consideration that congressional action is necessary to  achieve a financially sustainable Postal Service Retiree Health Benefits  Fund (RHB Fund). However, USPS said our discussion of potential policy  approaches for postal retiree health benefits would benefit from additional  context and balance. USPS also put forth additional information for three  of the potential policy approaches highlighted in our report. Our report  presents a high-level overview of eight potential policy approaches. It was  not designed to be a comprehensive catalog of possible options with an  analysis of the various considerations relevant to each.", "With regard to the Medicare integration approach, USPS stated that  increased Medicare participation by postal retirees is not limited to the  \u201cfull Medicare integration option,\u201d as represented in our report and  identified variations of such an approach. USPS said readers would  benefit from a fuller picture of Medicare integration practices, stating that  among employers that continue to provide retiree health benefits, full  Medicare integration is a uniform best practice. USPS cited a 2014 report  that said Medicare integration is the most common arrangement for  employer-provided retiree health benefits, adding that retiree health  benefits for Medicare-eligible employees are assumed to be merely  supplemental to Medicare as a matter of course. Our report discussed  Medicare integration by state governments, but did not present recent  data on the percentage of private companies that coordinate their retiree  health benefits with Medicare because such data are not publicly  available. Additionally, USPS said our report framed the issue of  Medicare integration as \u201csolely\u201d a tradeoff between USPS and Medicare  costs while there are other factors to consider, such as the relative  benefits to USPS compared to the overall cost for the Medicare program.  As we noted in our report, the eight potential policy approaches were not  designed to be mutually exclusive, nor an exhaustive list of possible  approaches. Additionally, we recognize there are various factors related  to this approach, but that the primary one is whether to increase postal  retirees\u2019 use of Medicare which would lead to further increasing Medicare  costs.", "Second, USPS said it believed our statements about approaches for  changing the level of prefunding for retiree health benefits below the 100  percent level were misplaced, citing \u201cuniversally accepted practices\u201d for  other entities to \u201cpay-as-you-go\u201d (i.e., not prefund at all), or to prefund at  much lower levels. We have reported on such funding levels in the past  as well. However, a proposed 80 percent funding target for postal  retiree health benefits would have the effect of carrying a permanent  unfunded liability equal to roughly 20 percent of USPS\u2019s liability, which could be a significant amount. As we previously reported, an alternative  could be to build in a schedule to achieve 100 percent funding in a later  time period after the 80 percent level is achieved. As our report also  explained, although USPS payments with an 80 percent funding target  would reduce USPS\u2019s required payments, fully funded benefits protect  against an inability to make payments later, make promised benefits less  vulnerable to cuts, and protect USPS\u2019s long-term viability.", "Finally, USPS said that our statements about potential risks associated  with investment of assets outside the U.S. Treasury seem  disproportionate given USPS\u2019s view that diversification of assets set aside  for retiree health benefits is \u201cuniversally accepted\u201d as a best practice. We  recognize that a higher rate of return on RHB Fund assets could reduce  long-term funding needs for the RHB Fund. However, there are  considerations specific to USPS. For example, assuming there would be  no explicit federal guarantee of the value of the invested assets, we  stated that USPS is not well positioned to deal with a potentially  significant decline in their value, given its significant operating losses and  continuing decline in mail volume. We also noted that, as we have  previously reported, the impact of any asset losses could be magnified  because a market downturn that negatively affects asset value could be  associated with a more general economic downturn that also negatively  affects USPS mail volume and revenues.", "In summary, we believe our report presents a balanced description of a  wide range of possible policy options; it does not endorse or recommend  any particular option for Congress. As we concluded, all of these  approaches have different potential effects, and the information we  present, as well as the additional views presented by USPS, provide  critical information for congressional decision-makers to assess as they  consider the merits of the approaches and determine the most  appropriate action to take.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Postmaster General; and the Director of  the Office of Personnel Management. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov. If you  or your staff have any questions concerning this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff that made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Postal Retiree Health Benefits Trend Data", "paragraphs": ["End of year  net funded  status  (unfunded)   (55.0)", "Missed USPS  payments to  the fund   (53.5)   (52.0)   (48.6)   (46.2)   (47.8)   (48.3)   (48.9)   (54.8)  (52.1)"], "subsections": [{"section_title": "2017 Total", "paragraphs": ["payments due on Sept. 30, 2017, of $955 million for the amortization of USPS\u2019s unfunded liability for  postal retiree health benefits, and $3.3 billion for the \u201cnormal costs\u201d of retiree health benefits. The  \u201cnormal cost\u201d is the annual expected growth in liability attributable to an additional year of employees\u2019  service."], "subsections": []}, {"section_title": "Fiscal Year", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Comments from the U.S. Postal Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Derrick Collins (Assistant  Director); Kenneth John (Analyst-in-Charge); Amy Abramowitz;  Taiyshawna Battle; William Colwell; Swati Deo; John Dicken; Leia  Dickerson; William Hadley; James Leonard; Emei Li; Thanh Lu; Sara Ann  Moessbauer; Joshua Parr; Malika Rice; Matthew Rosenberg; Amy  Rosewarne; Frank Todisco; and Crystal Wesco made key contributions to  this report."], "subsections": []}]}], "fastfact": ["About 500,000 postal retirees receive retiree health benefits. The Postal Service Retiree Health Benefits Fund pays most of the costs.", "The Postal Service has not made $38.2 billion in required payments to this fund through fiscal year 2017. If it makes no more payments, the Office of Personnel Management projects the fund will be depleted in fiscal year 2030.", "We highlighted several approaches to address this shortfall, such as requiring most eligible retirees to participate in Medicare, increasing cost-sharing, or reducing benefits.", "Congress should consider legislation to put postal retiree health benefits on a more sustainable footing."]}
{"id": "GAO-18-415", "url": "https://www.gao.gov/products/GAO-18-415", "title": "Compacts of Free Association: Actions Needed to Prepare for the Transition of Micronesia and the Marshall Islands to Trust Fund Income", "published_date": "2018-05-17T00:00:00", "released_date": "2018-05-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2003, the United States approved amended compacts of free association with the FSM and RMI, providing a total of $3.6 billion in economic assistance in fiscal years 2004 through 2023 and access to several U.S. programs and services. Compact grant funding, overseen by the Department of the Interior, generally decreases annually. However, the amount of the annual decrease in grants is added to the annual U.S. contributions to the compact trust funds, managed by joint U.S.-FSM and U.S.-RMI trust fund committees. Trust fund earnings are intended to provide a source of income after compact grants end in 2023, but GAO and others have previously found that the trust funds may not provide sustainable income.", "GAO was asked to examine preparations for the transition in 2023. This report examines (1) the use and role of U.S. funds and programs in FSM and RMI budgets, (2) projected trust fund disbursements and potential strategies to address risks to those disbursements, and (3) FSM and RMI plans to prepare for grant decreases and the transition to trust fund income. GAO reviewed compact agreements, audit reports, and U.S. law; modeled trust fund performance under existing conditions and using potential strategies; and reviewed FSM and RMI plans. GAO visited each country and interviewed FSM, RMI, and U.S. officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) continue to rely on U.S. grants and programs, including several that are scheduled to end in 2023. U.S. compact sector and supplemental education grants, both scheduled to end in 2023, support a third of the FSM's and a quarter of the RMI's expenditures. Agreements providing U.S. aviation, disaster relief, postal, weather, and other programs and services are scheduled to end in 2024, but some agencies may provide programs and services similar to those in the agreements under other authorities. FSM and RMI eligibility for some other U.S. grants and programs is expected to continue after 2023.", "Disbursements from the compact trust funds face risks that the trust fund committees have not addressed. GAO found that the trust funds are increasingly likely to provide no annual disbursements in some years and to not sustain their value. Potential strategies such as reduced trust fund disbursements or additional contributions from the countries or other sources could help address these risks. Changing the trust fund disbursement policies could also address these risks but may require revising the trust fund agreements with each country. However, the trust fund committees have not prepared distribution policies, required by the agreements, which could assist the countries in planning for the 2023 transition to trust fund income. The committees also have not prepared the required fiscal procedures for oversight of the disbursements or addressed differences between the timing of their annual determination of the disbursement amounts and the FSM's and RMI's annual budget cycles.", "The FSM and RMI did not implement planned budget reductions to address decreasing compact grants owing to increased revenues from other sources that offset the grant decreases. Current FSM and RMI infrastructure plans address the 2023 transition, while health and education plans focus on strategic goals. Both countries have established new compact planning committees to identify future challenges and develop plans for the 2023 transition to trust fund income."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Interior work with the compact trust fund committees to develop distribution policies and fiscal procedures for the funds and to address disbursement timing. Interior concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2003, the United States approved amended compacts of free  association with the Federated States of Micronesia (FSM) and the  Republic of the Marshall Islands (RMI) that provide for a total of $3.6  billion in compact sector grants, trust fund contributions, and other grants,  as well as access to several U.S. programs and services, in fiscal years  2004 through 2023. This compact assistance is intended to assist the  FSM and RMI governments in their efforts to promote the self-sufficiency  and budgetary self-reliance of their people. Compact sector grants,  managed by the U.S. Department of the Interior (Interior), generally  decrease annually before their scheduled end in 2023. However, the  amount of the annual decrease in compact sector grants (also referred to  as the annual decrement) is added to the annual U.S. contributions to the  compact trust fund established for the benefit of each country. Investment  earnings from the compact trust funds are intended to provide an annual  source of revenue after the compact sector grants are scheduled to end  in 2023. In 2007, we reported that the compact trust funds may not  provide sustainable income after the compact sector grants end. As  2023 approaches, questions remain as to whether the FSM and RMI will  successfully transition to greater self-reliance when the 20 years of U.S.  compact economic assistance end.", "You asked us to review issues related to the FSM\u2019s and RMI\u2019s transition  from compact grant assistance to relying on income from the compact  trust funds. This report examines (1) the use and role of U.S. funds and  programs in the FSM and RMI budgets, (2) projected compact trust fund  disbursements and potential strategies to address risks to those  disbursements, and (3) FSM and RMI efforts to prepare for the scheduled  decrements in compact grant funding and the transition to relying on  compact trust fund income.", "To examine the use and role of U.S. funds and programs in the FSM and  RMI, we interviewed U.S. officials, and we also interviewed FSM and RMI  officials during our site visits to each country in July and August 2017. In  addition, we reviewed U.S. law; the FSM and RMI compact agreements  and the associated military use and operating rights agreements  (MUORA) and programs and services agreements; the FSM and RMI  government and component unit single audit reports for fiscal years 2012  through 2016; and U.S. Region IX reports for fiscal years 2015 and  2016. To assess the reliability of federal program funding information, we  reviewed the single audit reports and found that the auditors did not  express any qualified or adverse opinions regarding the information the  auditors used to prepare the audits\u2019 Schedule of Expenditures of Federal  Awards listing the amount and use of federal grants. We therefore  concluded that these data were sufficiently reliable for estimating the role  of federal programs in the FSM and RMI budgets. To determine the legal  status of U.S. grants, programs, and services after 2023, we analyzed  U.S. law and requested review of our analysis from officials of U.S.  agencies that provide grants, programs, or services in the FSM and RMI.  Although we took multiple steps to validate our list of programs with the  FSM and RMI and the relevant U.S. agencies, our analysis may not have  captured all U.S. grants and programs provided in the FSM and RMI.", "To examine projected compact trust fund disbursements and actions to  address risks, we reviewed previous studies of the compact trust funds,  the U.S.-FSM and U.S.-RMI compact trust fund agreements and other  governance and reporting documents, such as investment policy  statements, presentations before the committees for each compact trust  fund, audits, and annual reports. We also interviewed compact trust fund  committee members and the funds\u2019 administrator, investment advisers,  and money managers.", "To project the compact trust funds\u2019 average disbursements, likelihood  of years with zero disbursement, and likelihood of maintaining value  after fiscal year 2023, we built a Monte Carlo simulation model and  performed 10,000 trial runs of projected returns and disbursements.  We used the unaudited fiscal year 2017 year-end balances of the  compact trust funds as the starting point for our projections. To  assess the reliability of the unaudited balances, we reviewed the  previous years\u2019 audits and discussed with the trust funds\u2019  administrator whether these audits had resulted in any significant  change between the preliminary unaudited balances and the final  audited balances. The March 2018 audited fund balances, released  after we completed our analysis, were within $5 of the unaudited fund  balances. We concluded that the unaudited balances were sufficiently  reliable as a basis for our projections of future trust fund performance.  To assess our net rate of return assumptions, we reviewed the trust  fund money managers\u2019 capital market assumptions and projections  and tested varying rates of return and return distributions.", "To consider the effects of alternative trust fund strategies, we again  performed the Monte Carlo analysis to determine the likely effects,  relative to the baseline, of five potential strategies that used one of  three approaches: (1) reducing annual compact trust fund  disbursements, (2) making additional contributions, and (3) changing  the disbursement policies, including strategies that would require  changes to the trust fund agreements. To select these potential  strategies, we reviewed previous studies of the compact trust funds  and interviewed agency and trust fund officials.", "To examine FSM and RMI preparations to address the compact grant  decrements and the transition to trust fund support, we interviewed FSM and RMI officials and reviewed the FSM and RMI decrement  management plans. We compared these plans to single audit reports,  budgets, and actions to determine whether the plans were implemented.  We also followed up with Interior and the FSM and RMI governments  regarding the status of the plans and plan updates. To identify current  planning documents for the key sectors of health, education, and  infrastructure in the FSM and RMI as well as the status of current  planning efforts, we obtained the plans from department heads in each  key sector from the RMI and FSM national and state governments and  confirmed our identification of the documents with FSM and RMI officials.  We then reviewed these plans to determine whether the plans discussed  budget changes to address the transition to relying on compact trust fund  income after 2023. We also interviewed U.S., FSM, and RMI officials and  reviewed documentation to identify and describe ongoing planning  committees and working groups for the 2023 transition.", "For more details of our objectives, scope, and methodology, see app. I.", "We conducted this performance audit from March 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The FSM and the RMI are independent countries located about 3,000  miles southwest of Hawaii (see fig. 1).", "The FSM is a federation of four semiautonomous states\u2014Chuuk, Kosrae,  Pohnpei, and Yap\u2014whose population and income vary widely. Chuuk,  the largest state by population, has the lowest per capita gross domestic  product (GDP). Overall, the FSM had a 2016 population of approximately  102,000 and a GDP per capita of about $3,200. The RMI\u2019s 2016  population was approximately 54,000 with a GDP per capita of about  $3,600. The RMI\u2019s most recent census, in 2011, found that approximately  three-quarters of the population lived in Majuro, the nation\u2019s capital, and  on the island of Ebeye in the Kwajalein Atoll. Table 1 shows the FSM\u2019s,  FSM states\u2019, and RMI\u2019s estimated population and annual GDP per capita  in fiscal year 2016."], "subsections": [{"section_title": "FSM and RMI Government Revenues", "paragraphs": ["The FSM states maintain considerable authority, relative to the FSM  national government, to allocate U.S. assistance and implement  budgetary policies. While the United States provides compact sector  grants directly to the FSM national government, a large portion of these  grants is passed through and provided to the four FSM states. The states  also receive other U.S. program grants that have been passed through  from the national government but may also receive grants directly from  U.S. agencies.", "Overall, FSM public sector revenue sources include U.S. compact and  program grants; grants from other countries; taxation, including taxation  of foreign corporations domiciled in the FSM; and Parties to the Nauru  Agreement fishing fees charged to vessels operating in its waters. In  addition to maintaining departmental budgets, both the FSM national  government and the FSM states have government-owned enterprises and  component units, such as public utilities and port authorities, whose  operations are supported by public funds. Some of these component units  also receive U.S. compact sector grants or other U.S. grants passed  through the FSM national or state governments or directly from U.S.  agencies. According to Graduate School USA, the FSM\u2019s public sector  accounted for about 53 percent of all employment in the FSM in fiscal  year 2016.", "The RMI government is responsible for allocating U.S. assistance in that  country, though the RMI\u2019s 24 local governments exercise local  government authority. RMI public sector revenue sources include U.S.  compact and program grants, grants from other countries, ship and  corporate registry earnings, and Parties to the Nauru Agreement fishing  fees. The RMI government also has state-owned enterprises and  component units whose operations are supported by public funds. Some  of these component units receive U.S. compact sector grants or other  U.S. grants passed through the RMI government or directly from U.S.  agencies. According to Graduate School USA, in fiscal year 2016, RMI\u2019s  public sector accounted for approximately 48 percent of all employment in  the RMI. The U.S. Army Garrison\u2013Kwajalein Atoll, located near Ebeye  island, also provides a significant source of employment for Marshallese.  In September 2017, U.S. Army Garrison-Kwajalein Atoll officials  estimated that approximately 1,100 Marshallese were employed at the  garrison."], "subsections": []}, {"section_title": "Compact of Free Association (1986\u20132003)", "paragraphs": ["U.S. relations with the FSM and the RMI began during World War II,  when the United States ended Japanese occupation of the region.  Beginning in 1947, the United States administered the region under a  United Nations trusteeship. During the 1940s and 1950s, the RMI was  the site of 67 U.S. nuclear weapons tests on or near Bikini and Enewetak  Atolls. The four states of the FSM voted in a 1978 referendum to become  an independent nation, while the RMI established a constitutional  government and declared itself a republic in 1979. Under the trusteeship  agreement, both newly formed nations remained subject to the authority  of the United States until 1986.", "In 1986, following a period of negotiations, the United States entered into  a compact of free association with the FSM and the RMI that provided for  economic assistance to the two countries, secured U.S. defense rights,  and allowed FSM and RMI citizens to migrate to the United States. The  compact provided a framework for the United States and the two  countries to work toward achieving the following three main goals: (1)  establish self-government for the FSM and the RMI, (2) ensure certain  national security rights for all of the parties, and (3) assist the FSM and  the RMI in their efforts to advance economic development and self- sufficiency. The compact\u2019s third goal was to be accomplished primarily  through U.S. direct financial assistance to the FSM and the RMI.", "Under the original compact, the FSM and the RMI used funds for general  government operations; capital projects, such as building roads and  investing in businesses; debt payments; and targeted sectors, such as  energy and communications. The FSM concentrated much of its spending  on government operations at both national and state levels, while the RMI  emphasized capital spending. While the original compact set out specific  obligations for reporting and consultations regarding the use of compact  funds, the FSM, RMI, and U.S. governments provided little accountability  over compact expenditures and did not ensure that funds were spent  effectively or efficiently."], "subsections": []}, {"section_title": "Amended Compacts of Free Association (2004\u2013 Present)", "paragraphs": ["In 2003, following a period of negotiations, the United States approved  separate amended compacts with the FSM and the RMI that went into  effect on June 25, 2004, and May 1, 2004, respectively."], "subsections": [{"section_title": "Compact Grants and Trust Fund Contributions", "paragraphs": ["The amended compacts\u2019 implementing legislation authorized and  appropriated direct financial assistance to the FSM and the RMI in fiscal  years 2004 through 2023, with the base amounts decreasing in most  years. The annual decrements in assistance are added to the amounts  deposited in the trust funds established under the amended compacts for  the two nations. Earnings from the compact trust funds are intended to  provide an annual source of revenue after the scheduled end of compact  sector grants at the end of fiscal year 2023. Both the compact sector  grants and trust fund contributions are partially adjusted for inflation each  fiscal year. Appendix II provides additional information on the base and  inflation-adjusted amounts of U.S. compact sector grants and trust fund  contributions in fiscal years 2004 through 2023.", "The amended compacts and associated fiscal procedures agreements  require that compact sector grants support the countries in six core  sectors\u2014education, health, infrastructure, environment, private sector  development, and public sector capacity building\u2014with the education and  health sectors having priority. These grants are described in section  211(a) of each compact and are referred to as compact sector grants or  211(a) grants. Section 211(b) of the RMI compact further states that the  RMI must target a specified amount of grants to Ebeye and other  Marshallese communities within Kwajalein Atoll. The RMI MUORA  states that the Kwajalein-related funds provided to the RMI in the  compacts shall be provided through fiscal year 2023 \u201cand thereafter for as  long as this agreement remains in effect.\u201d"], "subsections": []}, {"section_title": "Compact Trust Fund Management and Implementation", "paragraphs": ["The amended compacts and their subsidiary trust fund agreements  provided that each trust fund is to be managed by a compact trust fund  committee. Each compact trust fund committee includes representatives  from both the United States and the respective country, but the United  States is required by the terms of the trust fund agreements to hold the  majority of votes on each committee. The Director of Interior\u2019s Office of  Insular Affairs serves as the chair of each committee. Trust fund  committee responsibilities include overseeing fund operation, supervision,  and management; investing and distributing the fund\u2019s resources; and  concluding agreements with any other contributors and other  organizations. As part of this oversight, the committees are to establish  an investment and distribution policy. The committees are also to  determine fiscal procedures to be used in implementing the trust fund  agreements based on the fiscal procedures used for compact grant  administration unless otherwise agreed by the parties to the agreement.", "The trust fund agreements between the United States and the FSM and  the RMI allow for the agreements to be amended in writing at any time,  with mutual consent of the governments. However, the U.S. legislation  implementing the amended compacts requires that any amendment,  change, or termination of all or any part of the compact trust fund  agreements shall not enter into force until incorporated into an act of  Congress.", "According to the trust fund agreements, each trust fund committee is to  appoint a trustee and an independent auditor. Each committee has  retained an Executive Administrator to manage the daily operations of the  trust fund. In addition, the committee has the authority to appoint 1 or  more investment advisers and may enter into a separate agreement with  1 or more money managers. The investment policy statement for each  fund guides the fund\u2019s investment strategy and portfolio."], "subsections": []}, {"section_title": "Compact Trust Fund Structure", "paragraphs": ["The compact trust fund agreements state that no funds, other than  specified trust fund administrative expenses, may be distributed from the  compact trust fund prior to October 1, 2023. From fiscal year 2024  onward, the maximum allowed disbursement from each compact trust  fund is the amount of the fiscal year 2023 annual grant assistance, as  defined by the trust fund agreement, with full adjustment for inflation.", "In addition, the trust fund committees may approve additional amounts for  special needs. The RMI compact trust fund agreement excludes from  the calculation of the allowed disbursement the amount of the Kwajalein- related assistance defined in section 211(b) of the RMI compact.  Although the compact trust fund agreements state the maximum  allowable disbursement level, they do not establish or guarantee a  minimum disbursement level.", "Each country\u2019s compact trust fund consists of three interrelated accounts:  the \u201cA\u201d account, the \u201cB\u201d account, and the \u201cC\u201d account.", "The A account is the trust fund\u2019s corpus and contains the initial, and  any additional, U.S. and FSM or RMI contributions; contributions from  other countries; and investment earnings. No funds, other than  specified trust fund administrative expenses, may be disbursed from  the A account.", "The B account is the trust fund\u2019s disbursement account and becomes  active in fiscal year 2023. All income earned in 2023 will be deposited  in the B account for possible disbursement in 2024. Each subsequent  year\u2019s investment income will similarly be deposited into the B  account for possible disbursement the following year. If there is no  investment income, no funds will be deposited in the B account for  possible disbursement the following year.", "The C account is the trust fund\u2019s buffer account. Through 2022, any  annual income exceeding 6 percent of the fund balance is deposited  in the C account. From 2023 onward, if annual income from the A  account is less than the previous year\u2019s disbursement, adjusted for  inflation, the C account may be tapped to address the shortfall. After  2023, any funds in the B account in excess of the amount approved  for disbursement the following fiscal year are to be used to replenish  the C account as needed, up to the maximum size of the account. The  size of the C account is capped at three times the amount of the  estimated annual grant assistance in 2023, including estimated  inflation. If there are no funds in the C account, and no prior year  investment income in the B account, no funds will be available for  disbursement to the countries the following year.", "Figure 2 shows the compact trust fund account structure and associated  rules.", "According to the U.S. trust fund agreements with the FSM and the RMI,  contributions from other donors are permitted. In May 2005, Taiwan and  the RMI reached an agreement that Taiwan will contribute a total of $40  million to the RMI\u2019s compact trust fund A account between 2004 and  2023. A \u201cD\u201d account may also be established to hold any contributions  by the FSM and the RMI governments of revenue or income from  unanticipated sources. According to the trust fund agreements, the D  account must be a separate account, not mixed with the rest of the trust  fund. Only the RMI has a D account, governed in part by an agreement  between Taiwan and the RMI."], "subsections": []}, {"section_title": "Compact Accountability, Management Structures, and Reporting", "paragraphs": ["The amended compacts\u2019 implementing legislation and their subsidiary  fiscal procedures agreements established committees to oversee  compact grants to each country\u2014the Joint Economic Management  Committee (JEMCO) for the FSM and the Joint Economic Management  and Financial Accountability Committee (JEMFAC) for the RMI. Each five- member committee comprises three representatives from the U.S.  government and two representatives from the corresponding country, with  the Director of Interior\u2019s Office of Insular Affairs serving as the chair.", "JEMCO\u2019s and JEMFAC\u2019s designated roles and responsibilities include the  following:  reviewing the budget and development plans from each of the  governments; approving grant allocations and performance objectives; attaching terms and conditions to any or all annual grant awards to  improve program performance and fiscal accountability; evaluating progress, management problems, and any shifts in  priorities in each sector; and  reviewing audits called for in the compacts.", "JEMCO and JEMFAC can require that terms and conditions be attached  to any and all annual compact sector grant awards to improve program performance and fiscal accountability. Under the fiscal procedures  agreements governing the amended compacts, the Office of Insular  Affairs is responsible for using financial reports to monitor each country\u2019s  budget and fiscal performance and for using performance reports  submitted by the countries to evaluate sector grant performance. The  FSM and the RMI also must adhere to specific fiscal control and  accounting procedures and are required to submit annual audit reports,  within the meaning of the Single Audit Act as amended.", "The FSM and RMI compacts require each country to develop multiyear  plans that are strategic in nature and continuously reviewed and updated  through the annual budget process and that address the assistance for  the defined sectors. In 2013, we recommended that Interior, as Chair of  JEMCO and JEMFAC, ensure that the FSM and the RMI complete plans  to address the impact of declining compact sector grants (in this report,  decrement management plans). In November 2013, the FSM finalized  its decrement management plan for fiscal years 2014 through 2023; the  plan indicated that a similar planning process is to be repeated in 3-year  intervals. In September 2014, the RMI finalized its decrement  management plan for fiscal years 2015 through 2023; the plan similarly  stated that a comprehensive planning process to address the ongoing  decrement may proceed on a 3-year update schedule. Each decrement  management plan includes commitments for budget reductions in the  national governments and, in the FSM, the state governments, as well as  plans to undertake actions such as tax reform."], "subsections": []}, {"section_title": "Programs and Services Provided in Compact-Related Agreements", "paragraphs": ["The amended compacts\u2019 implementing legislation incorporates by  reference related agreements extending programs and services to the  FSM and RMI. The programs and services agreement with each country  identifies the following programs and services as being available to each  country: U.S. postal services, weather services, civil aviation, disaster  preparedness and response, and telecommunications. Each programs  and services agreement extends for 20 years from the compact\u2019s entry  into force. Therefore, the agreement with the FSM ends on June 24,  2024, and the agreement with the RMI ends on April 30, 2024."], "subsections": []}, {"section_title": "Programs Authorized by U.S. Legislation", "paragraphs": ["The amended compacts\u2019 implementing legislation (Pub. L. No. 108-188)  and other U.S. legislation authorize other U.S. grants, programs, and  services for the FSM and RMI. Pub. L. No. 108-188 authorized an annual  supplemental education grant (SEG) for the FSM and RMI in fiscal years  2005 through 2023, to be awarded in place of grants formerly awarded to  the countries under several U.S. education, health, and labor programs.  The FSM and RMI are not eligible for the programs replaced by the SEG  during these years. Unlike the compact sector grants, the amended  compacts\u2019 implementing legislation authorized the SEG but did not  appropriate funds for it. Funding for the SEG is appropriated annually to  the U.S. Department of Education (Education) and transferred to Interior  for disbursement. Other provisions of the amended compacts\u2019  implementing legislation, as well as other U.S. law, make the FSM and  RMI eligible for a number of additional programs. Other federal  departments are responsible for the administration and oversight of their  respective programs in the FSM and RMI."], "subsections": []}]}]}, {"section_title": "The FSM and RMI Continue to Rely on U.S. Grants and Programs That End in 2023", "paragraphs": ["Compact sector grants and the SEG, each of which end in 2023, continue  to support a substantial portion of government expenditures in the FSM  and RMI. In the FSM, compact sector grants and the SEG support about  one-third of all government expenditures. The four FSM states rely on  these grants to a greater extent than the FSM national government does.  In the RMI, compact sector grants and the SEG support about one- quarter of all government expenditures. The end of the compacts\u2019  programs and services agreements in 2024 would also require the FSM  and RMI to bear additional costs to provide services currently provided by  the United States as part of the Agreements. Appendix IV provides a  detailed summary of programs and services we identified that have been  provided through the amended compacts, the amended compacts\u2019  implementing legislation, compact-related agreements, and other  provisions of U.S. law, as well as their status in the FSM and RMI after  2023."], "subsections": [{"section_title": "U.S. Compact Grants and Other Grants Continue to Provide Substantial Support to the FSM and RMI Budgets", "paragraphs": [], "subsections": [{"section_title": "U.S. Grants Scheduled to End in 2023 Support About One- Third of Total FSM Government Expenditures", "paragraphs": ["The FSM national and state governments overall continue to rely on U.S.  support for program expenditures. Compact sector grants, the SEG, and  other U.S. grants supported almost half of FSM national and state  government expenditures in fiscal year 2016. Compact sector and  supplemental education grants that end in 2023 supported approximately  one-third of total FSM national and state government expenditures in  fiscal year 2016, while other U.S. grants supported an additional 15  percent of total FSM government expenditures (see fig. 3).", "Compact sector and supplemental education grants that end in 2023  support a larger proportion of FSM state governments\u2019 expenditures than  of the FSM national government\u2019s expenditures. In fiscal year 2016,  compact sector grants and the SEG supported 8 percent of national  government expenditures but supported 50 percent or more of each  state\u2019s government expenditures. Among the FSM states, Chuuk\u2014both  the largest state and the state with the lowest per capita income in the  FSM\u2014has the highest percentage of its expenditures supported by U.S.  grants. (See table 2 for a summary of FSM national and state government  expenditures supported by compact sector grants and the SEG, and by  other U.S. grants.) Compact sector grants and the SEG support an even  higher proportion of FSM states\u2019 health and education expenditures. See  app. III for a summary of the role of compact funds in the FSM health and  education sectors.", "The RMI continues to rely on U.S. support for program expenditures.  Compact sector and supplemental education grants that end in 2023  supported approximately 25 percent of the RMI\u2019s $123.5 million in  government expenditures in fiscal year 2016, while other U.S. grants  supported an additional 8 percent. Compact Kwajalein-related grants  that do not end in 2023 supported an additional 3 percent (see fig. 4).  Compact sector grants and the SEG support an even higher proportion of  RMI health and education expenditures. See app. III for a summary of the  role of compact funds in the RMI health and education sectors."], "subsections": []}]}, {"section_title": "End of the Programs and Services Agreements Would Also Affect FSM and RMI Budgets", "paragraphs": ["FSM and RMI budgets would be affected if the countries were to assume  responsibility for providing some additional programs and services  currently provided by the United States. Current U.S. law enables U.S.  agencies to continue providing some programs and services now  provided under the agreements after they end in 2024. However, under  current law, some programs and services provided in the programs and  services agreements will end and would require the FSM and RMI to bear  additional costs. See appendix IV for a summary of the status of  programs and services provided under the programs and services  agreements after the agreements end."], "subsections": []}]}, {"section_title": "Compact Trust Funds Face Continuing Risks That Trust Fund Committees Have Not Yet Addressed", "paragraphs": ["Previous studies of the FSM and RMI compact trust funds, including a  review we conducted in 2007, found that after fiscal year 2023 the funds  are unlikely to provide maximum annual disbursements, may provide no  disbursements at all in some years, and are unlikely to sustain the funds\u2019  fiscal year 2023 value. Our updated projections for the compact trust  funds show similar outlooks. Several potential strategies could improve  the compact trust funds\u2019 outlook; some of these strategies could be  implemented under the current trust fund agreements, while other  strategies may require changing the trust fund agreements. The compact  trust fund committees have not yet prepared distribution policies, required  by the trust fund agreements, that could assist the countries in planning  for the transition to trust fund income. In addition, the committees have  not established fiscal procedures for oversight of compact trust fund  disbursements as required by the trust fund agreements. Further, the  trust fund committees have not yet addressed a potential misalignment  between the timing of their annual calculation of the amounts available to  disburse and the FSM\u2019s and RMI\u2019s budget timelines, potentially  complicating each country\u2019s planning and management."], "subsections": [{"section_title": "Previous Studies of Compact Trust Funds Found Increasing Risks to Disbursements and Sustainability under Current Rules", "paragraphs": ["Previous studies of the compact trust funds have found that some yearly  disbursements from the funds after 2023 are likely to fall short of the  inflation-adjusted amount of annual grant assistance in 2023 and that the  funds may provide no disbursement at all in some years. Our 2007  analysis of the compact trust funds projected a wide range of potential  balances and found that the funds\u2019 capacity to provide the maximum  allowable disbursement would likely decrease over time. In addition, our  analysis showed an increasing likelihood that the trust funds would  exhaust the C account and be unable to provide any disbursements in the  latter years of our projection. Other analyses have similarly found risks  of low or zero disbursements and risks to sustainability.", "Graduate School USA has prepared an annual series of economic  reports on each country, including analyses of their compact trust  funds.", "In 2015, an Asian Development Bank report separately analyzed the  trust funds.", "The International Monetary Fund projected the status of the trust  funds as part of its biennial FSM and RMI consultations."], "subsections": []}, {"section_title": "Updated Projections Show Continuing Risks to Compact Trust Fund Disbursements and Sustainability", "paragraphs": ["Our updated projections for the FSM and RMI compact trust funds after  2023 indicate a continued likelihood that, given their balance at the end of  fiscal year 2017 and current compact trust fund rules\u2014the baseline  scenario\u2014the funds will be unable to provide maximum disbursements (equal to the inflation- adjusted amount of annual grant assistance in 2023) in some years; unable to provide any disbursement at all in some years, with the  likelihood of zero disbursement in a given year increasing over time;  and unable to maintain the inflation-adjusted value of the compact trust  fund after fiscal year 2023.", "The compact trust funds\u2019 C account\u2014designed as a buffer to protect  disbursements from the B account in years when the funds do not earn  enough to fund the disbursement\u2014could be exhausted by a series of  years with low or negative annual returns. Since current rules do not allow  disbursements from the compact trust fund corpus (the A account),  exhaustion of the C account would result in zero disbursement in years  when fund returns are zero or negative. Thus, there may be no funds  available to disburse even if the funds\u2019 A accounts have a balance. As a  result of low or zero disbursements, the countries could face economic  and fiscal shocks and significant challenges in planning programs and  budgets."], "subsections": [{"section_title": "FSM Compact Trust Fund Projections", "paragraphs": ["Our model projects that, given the baseline scenario and a 6 percent net  return, the FSM compact trust fund will experience declining  disbursements relative to the maximum allowable disbursements; an  increasing chance of zero disbursements; and a declining likelihood of  maintaining its 2023 balance. See appendix I for a full description of our  methodology and appendix V for the baseline results with alternative net  returns.", "Projected disbursements. We project that the FSM compact trust  fund will, on average, be able to provide disbursements equal to 82  percent of the maximum allowable disbursement\u2014the inflation- adjusted amount of 2023 annual grant assistance\u2014in its first decade  of disbursements. The likely average disbursement falls to 49 percent  of the maximum in the next decade and falls further in subsequent  decades. In addition, the amount available for disbursement may  fluctuate substantially from year to year. Depending on the compact  trust fund\u2019s performance in the previous year, disbursements may be  higher or lower than the average amount if the balance in the C  account is not sufficient to provide additional disbursements.", "Likelihood of providing zero disbursement. We project a 41  percent likelihood that the FSM compact trust fund will be unable to  disburse any funds in 1 or more years during the first decade of trust  fund disbursements. This likelihood increases over time, rising to 92  percent in fiscal years 2054 through 2063.", "Likelihood of maintaining inflation-adjusted 2023 balance. We  project a 13 percent likelihood that the FSM compact trust fund will  maintain or exceed its inflation-adjusted fiscal year 2023 value in  fiscal year 2033. This likelihood decreases in later years.", "Figure 5 shows our projections of the FSM compact trust fund\u2019s average  disbursements as a percentage of maximum disbursement, the likelihood  of 1 or more years of zero disbursement, and the likelihood of the fund\u2019s  maintaining its inflation-adjusted fiscal year 2023 balance given the  baseline scenario and a 6 percent net return.", "The FSM also maintains its own trust fund separate from the compact  trust fund (see app. VI for additional information). We did not  independently project the FSM Trust Fund\u2019s future balance or potential  disbursements after 2023."], "subsections": []}, {"section_title": "RMI Compact Trust Fund Projections", "paragraphs": ["Our model projects that, given the baseline scenario and a 6 percent net  return, the RMI compact trust fund will experience declining  disbursements relative to the maximum allowable disbursements; an  increasing chance of zero disbursements; and a declining likelihood of  sustaining its 2023 balance.", "Projected disbursements. We project that the RMI compact trust  fund will, on average, be able to provide disbursements nearly equal  to the inflation-adjusted amount of 2023 annual grant assistance as  defined by the trust fund agreement\u2014the maximum allowable\u2014in its  first decade of disbursements. However, the projected disbursements  as a percentage of the maximum disbursements decline by about 10  percentage points in each subsequent decade. In addition, the  amount available to disburse may fluctuate substantially from year to  year. Depending on the compact trust fund\u2019s performance in the  previous year, disbursements may be higher or lower than the  average amount if the balance in the C account is not sufficient to  provide additional disbursements.", "Likelihood of providing zero disbursement. We project a 15  percent likelihood that the RMI compact trust fund will be unable to  disburse any funds in 1 or more years during the first decade of trust  fund disbursements. This likelihood increases over time, rising to 56  percent in fiscal years 2054 through 2063.", "Likelihood of maintaining inflation-adjusted 2023 balance. We  project a 41 percent likelihood that the RMI compact trust fund will  maintain or exceed its inflation-adjusted fiscal year 2023 value in  fiscal year 2033. This likelihood decreases in later years.", "Figure 6 shows our projections of the RMI compact trust fund\u2019s average  disbursements as a percentage of maximum disbursement, its likelihood  of 1 or more years of zero disbursement, and its likelihood of maintaining  its inflation-adjusted fiscal year 2023 balance given the baseline scenario  and a 6 percent net return.", "The RMI also maintains its own D account separate from the compact  trust fund (see app. VI for additional information). We did not  independently project the D account balance or potential disbursements  from the D account after 2023."], "subsections": []}]}, {"section_title": "Reducing Disbursements, Making Additional Contributions, and Changing Disbursement Policies Would Each Affect the Outlook of the Compact Trust Funds", "paragraphs": ["We conducted a series of simulations to determine the likely effects of  potential strategies for improving the outlook of the FSM and RMI  compact trust funds. Prior studies by Graduate School USA, the Asian  Development Bank, and the International Monetary Fund examined the  effects of three general approaches for improving the trust funds\u2019  outlooks: (1) reducing planned disbursements from the funds, (2) making  additional contributions to the funds, and (3) changing the compact trust  fund disbursement policies. These prior studies included strategies that  would require changing the trust fund agreements to permit  disbursements from the A account. To isolate the impact of individual  changes on compact trust fund balance and disbursements, we  developed and analyzed five potential strategies based on the  approaches examined in the prior studies.  1.  Annual disbursements are reduced below the maximum allowable  disbursement.  2.  Additional annual contributions are made to the trust fund in fiscal  years 2018 through 2023.  3.  The trust fund agreement disbursement policies are modified to limit  the annual disbursement to a fixed percentage of the fund\u2019s moving  average balance over the previous 3 years, up to the maximum  disbursement amount defined by the current trust fund agreement.  4.  The trust fund agreement disbursement policies are modified to  reduce the amount of the annual disbursement if the compact trust  fund\u2019s moving average balance over the previous 5 years is lower  than a primary target amount.  5.  The trust fund agreement disbursement policies are modified to set  the target disbursement as 2.1 percent of the compact trust fund\u2019s  balance in fiscal year 2024. The disbursement amount is further  decreased if the fund\u2019s moving average balance over the previous 5  years is lower than the primary target balance.", "Implementing either of the first two potential strategies would not require  any changes to disbursement provisions in the existing trust fund  agreement, but implementing any of the remaining three strategies may  require such changes. In strategies 3, 4, and 5, we analyzed strategies  that would permit disbursement from the A account. Disbursing from the  A account would require changing the compact trust fund agreements.  The agreements can be amended in writing at any time, with mutual  consent of the governments. However, the U.S. legislation implementing  the amended compacts requires that any amendment, change, or  termination of all or any part of the compact trust fund agreements shall  not enter into force until incorporated into an act of Congress.", "All of the potential strategies we analyzed would reduce or eliminate the  risk of the compact trust funds experiencing years of zero disbursement.  However, all of the potential strategies would require the countries to  exchange a near-term reduction in resources for more predictable and  sustainable disbursements in the longer term. Appendix VII presents the  detailed results of our analysis."], "subsections": []}, {"section_title": "Compact Trust Fund Committees Have Not Addressed Issues Related to Distribution Policies, Fiscal Procedures, and Disbursement Timing", "paragraphs": [], "subsections": [{"section_title": "Trust Fund Committees Have Not Developed Distribution Policies Required by the Compact Trust Fund Agreements", "paragraphs": ["Under the compact trust fund agreements, each trust fund committee  must develop a distribution policy, with the intent that compact trust fund  disbursements will provide an annual source of revenue to the FSM and  RMI after fiscal year 2023. The trust fund committees could use  distribution policies to address risks to each fund\u2019s sustainability. For  example, the committees have the discretion to disburse an amount  below the established maximum. Our analysis of potential strategies for  improving the funds\u2019 outlook shows that reducing the size of  disbursements would improve each compact trust fund\u2019s long-term  sustainability. According to interviews with, and documents provided by,  the trust funds\u2019 administrator, the committees reviewed presentations in  2016, 2017, and early 2018 from the authors of previous studies and fund  managers regarding the likely status of the trust funds after 2023 and  have also reviewed options for addressing risks to the trust funds\u2019  disbursements and sustainability, including changes to disbursement  provisions in the compact trust fund agreements. However, as of January  2018, according to the trust funds\u2019 administrator, neither committee had  developed a distribution policy. Without a distribution policy that provides  information about the size of expected disbursements, the FSM and RMI  are hampered in their current and ongoing efforts to plan for the potential  reduction in U.S. compact assistance after 2023."], "subsections": []}, {"section_title": "Trust Fund Committees Have Not Established Fiscal Procedures Required by Compact Trust Fund Agreements", "paragraphs": ["The compact trust fund committees have not yet established fiscal  procedures for compact trust fund disbursements after fiscal year 2023.  Each trust fund agreement requires the respective committee to  determine the fiscal procedures to be used in implementing the trust fund  agreement. The committees are to base their procedures on the compact  fiscal procedures agreements, which define the membership and duties of  the JEMCO and JEMFAC and single audit report requirements, among  other things, unless the parties to the trust fund agreement agree to adopt  different fiscal procedures. No compact trust fund disbursements are to  be made unless the committee has established such trust fund fiscal  procedures.", "U.S., FSM, and RMI officials are aware of the need to determine the fiscal  procedures that will govern oversight of compact trust fund  disbursements. Issues related to future oversight of compact trust fund  disbursements have been raised for discussion with U.S. representatives  on JEMCO and JEMFAC. However, according to an RMI representative  on the compact trust fund committee, that committee has not discussed  fiscal procedures for the compact trust fund disbursements. In addition,  FSM officials noted that they were unsure whether the JEMCO or the  compact trust fund committees would approve specific projects. Without  fiscal procedures in place, the trust fund committees will not be able to  provide disbursements and the United States, the FSM, and the RMI will  lack clear guidance to ensure oversight for trust fund disbursements."], "subsections": []}, {"section_title": "Trust Fund Committees Have Not Addressed Issues Related to Disbursement Timing", "paragraphs": ["The timing of the trust fund committees\u2019 calculation of the amounts  available for annual disbursement to the FSM and the RMI does not align  with the countries\u2019 budget and planning timelines. The amounts  available for disbursement in a given fiscal year cannot be determined  until each fund\u2019s returns have been determined at the end of the prior  year. Further, if the disbursement amounts are calculated from audited  fund returns as determined by annual audits required by the trust fund  agreements, the amounts may not be determined until as late as March  31, 6 months into the fiscal year for which the disbursement is to be  provided. However, both the FSM and the RMI government budget  cycles are completed before the annual amounts available for  disbursement will be known. As a result, the FSM and RMI would have to  budget without knowing the amount to be disbursed, complicating their  annual budget and planning processes. See figures 7 and 8 for the FSM  and RMI budget timelines for fiscal year 2024, based on their current  budget calendars, relative to the dates when the compact trust fund  disbursement amounts will be determined on the basis of the funds\u2019  unaudited end-of-fiscal-year balances and of their audited balances.  Standards for Internal Control in the Federal Government\u2014which is  applicable to the U.S. government but can be adopted as a best practice  by nongovernmental entities\u2014states that management should use quality  information to achieve the entity\u2019s objectives. For example, as part of  using quality information, the entity obtains relevant data from reliable  internal and external sources in a timely manner based on the identified  information requirements.", "Given the FSM\u2019s and RMI\u2019s current budget processes, the FSM and RMI  will not have accurate and timely information on the amounts that will be  available for annual disbursements for each fiscal year. The FSM  Secretary of Finance and Administration, a member of the compact trust  fund committee, indicated that she is aware of the discrepancy between  the timing of the trust fund disbursement calculations and dates in the  FSM\u2019s budget and planning cycle and stated that the FSM would raise the  issue of this discrepancy as part of its planning for the transition to relying  on compact trust fund disbursements. One of the RMI\u2019s representatives  on the compact trust fund committee stated that the timing of the  disbursement calculations was a challenge and would complicate RMI  planning and management. Each trust fund committee received a briefing  in 2016 from the trust funds\u2019 administrator that discussed issues  associated with the timing of the disbursement calculations. However, as  of January 2018, the committees had not determined how they would  address this issue."], "subsections": []}]}]}, {"section_title": "FSM and RMI Decrement Plans Were Not Implemented Because of Increased Revenues, but Each Country Has Begun New Planning Efforts", "paragraphs": ["The FSM and RMI did not implement planned budget reductions to  address decreasing compact sector grants because of increasing  revenue from other sources. FSM officials stated that they did not  implement their plan\u2019s planned budgetary reductions due to increasing  revenues for the state and national governments. The RMI also did not  implement budget reductions but used increased revenue, particularly  from fishing fees, to offset the decrement in compact sector grants. FSM  and RMI strategic plans in the key sectors of education and health focus  on strategic goals and priorities rather than addressing the effect of the  2023 transition on health and education budgets. However, FSM and RMI  infrastructure plans discuss funding requirements and potential alternative  funding sources. The FSM, the RMI, and the United States have each  established bodies to plan to address issues related to the 2023 transition  to trust fund income."], "subsections": [{"section_title": "Previous Decrement Management Plans Were Not Implemented Because of Growth in Revenues", "paragraphs": [], "subsections": [{"section_title": "FSM Long-Term Fiscal Framework", "paragraphs": ["The FSM has not implemented budget reductions scheduled in its  decrement management plan, the FSM-Wide Long-Term Fiscal  Framework (Long-Term Fiscal Framework). The FSM\u2019s plan included a  firm commitment for a 6 percent reduction in real terms in FSM state  expenditures in fiscal year 2014. Two additional 6 percent expenditure  reductions were planned for fiscal years 2017 and 2020, but these were  contingent reductions that would not be implemented if the FSM states  received offsetting revenue to address the reductions. According to FSM  national government officials, revenue increases, including growth in  revenue from fishing fees, have enabled the FSM to avoid implementing  the 2017 contingent 6 percent expenditure reductions, and the further  reductions in fiscal year 2020 are not likely to be implemented. FSM  officials cited multiple reasons for not implementing the planned  reductions:  Increasing revenue to the state and national governments. The  FSM\u2019s Long-Term Fiscal Framework included a plan to increase the  proportion of compact sector grant funding distributed among the FSM  states and reduce the proportion retained by the national government.  This change in the FSM\u2019s internal compact grant distribution formula  reduced the amount of the decrement in compact sector grants  received by the states that would have otherwise occurred. The FSM  national government\u2019s revenue from fishing fees has increased rapidly  in recent years, allowing it to use this revenue in place of compact  sector grants.", "Effect of inflation adjustments on compact sector grants.", "According to FSM officials, because of inflation adjustments, the  nominal value of the compact sector grants has not significantly  declined. As a result, the FSM government questions the need for  expenditure reductions.", "In addition to scheduling budget reductions, the FSM\u2019s Long-Term Fiscal  Framework included plans to implement unified tax reform measures,  which also have not been implemented. However, plans to reduce the  national government\u2019s share of compact sector grants and to use  surpluses to mitigate the effect of fiscal reforms were implemented. (See  app. VIII for a summary of the FSM\u2019s planned actions and their  implementation.) As of January 2018, the FSM had not updated the Long- Term Fiscal Framework but had included information updates in its  annual budget submittal."], "subsections": []}, {"section_title": "RMI Decrement Management Plan", "paragraphs": ["The RMI government has not implemented budget reductions scheduled  in its decrement management plan. The RMI\u2019s decrement management  plan divided proposed budgetary reductions into three periods: fiscal  years 2016 through 2017, fiscal years 2018 through 2020, and fiscal  years 2021 through 2023. Only the reductions in the first period were to  be considered binding, with adjustments in the later periods subject to  review during the next 3-year planning cycle. According to RMI  government officials, significant growth in fishing fee revenue and growth  in ship registry and income tax revenue has minimized the initially  anticipated impact of the compact decrements, thereby reducing the need  to implement expenditure reductions. RMI officials noted that it expected  to continue to use its own revenue in place of compact funds in fiscal  years 2019 through 2023.", "In addition to scheduling the budget reductions, the RMI decrement  management plan includes plans to implement new taxes, program  fishing fees into the annual budget, reduce subsidies to state-owned  enterprises, and reduce compensation to Majuro landowners for the use  of their land for utilities. The RMI has programmed a portion of its fishing  fee surplus into the annual budget in each fiscal year from 2015 to 2017  but has not implemented other planned actions. (See app. VIII for a  summary of planned actions and their implementation.) As of January  2018, the RMI government had not updated its plan and did not intend to  do so, according to RMI officials. However, the officials stated that the  government has incorporated elements of the plan, particularly its  expenditure analysis, into the RMI\u2019s medium term budget and investment  framework, a planning and budgeting document submitted to JEMFAC in  August 2017. In comments on a draft of this report, the RMI stated that it  is developing a long-term fiscal framework in addition to the medium term  budget and investment framework. According to the RMI, the long-term  fiscal framework will have a 10-year outlook through 2028 and take into  account compact decrements and anticipated resources from the  compact trust fund and other sources."], "subsections": []}]}, {"section_title": "FSM and RMI Have Developed Plans for Health, Education, and Infrastructure", "paragraphs": [], "subsections": [{"section_title": "FSM Sector Plans", "paragraphs": ["FSM national and state infrastructure plans provide specific budgetary  information to address the fiscal year 2023 transition from compact sector  grants to trust fund income, such as funding requirements and sources of  funding for planned infrastructure projects in fiscal years 2016 through  2025. The FSM national and state health and education plans generally  focus on the national and state health and education departments\u2019  strategic goals and priorities rather than discussing budget changes or  new revenue generation strategies to address the possibility of reduced  resources after 2023.", "In addition to preparing sector strategic development plans, the FSM  national and state governments issued the 2023 Action Plan in 2014,  designed to address fiscal and economic challenges before and after  compact sector grant funding ends in fiscal year 2023. In contrast to the  FSM Long-Term Fiscal Framework, which committed to specific  expenditure reductions and government actions prior to fiscal year 2023,  the 2023 Action Plan includes an economic growth strategy that seeks to  boost private sector development. The plan addresses economic growth  strategies and improved performance in key economic sectors such as  tourism, agriculture, and fisheries and identifies the need for the FSM  national and state governments to limit expenditure growth in the medium  and long terms."], "subsections": []}, {"section_title": "RMI Sector Plans", "paragraphs": ["The RMI\u2019s infrastructure plan addresses the scheduled cessation of  compact sector grant assistance in fiscal year 2023 through a review of  potential future budgets, while the RMI\u2019s education and health plans  outline strategic goals and priorities. Similar to the FSM\u2019s infrastructure  plans, the RMI National Infrastructure Plan reviews budget information to  address the fiscal year 2023 transition, such as planned infrastructure  investments and potential alternative funding sources for fiscal years  2017 through 2026. The RMI\u2019s national education and health plans  primarily focus on goals and objectives to address key challenge areas in  health and education over the next few fiscal years and do not discuss  specific budget changes for the transition in 2023."], "subsections": []}]}, {"section_title": "FSM, RMI, and U.S. Planning Groups Have Been Formed to Prepare for Transition to Trust Fund Income", "paragraphs": ["Both the FSM and the RMI have formed planning committees and  charged them with planning for the fiscal year 2023 transition from  compact sector grants to compact trust fund income. In addition, the U.S.  Department of State (State) has organized a U.S. interagency planning  group to help coordinate U.S. policy related to the transition."], "subsections": [{"section_title": "FSM Joint Compact Review and Planning Committee", "paragraphs": ["In 2016, the FSM national government established a Joint Compact  Review and Planning Committee to coordinate FSM planning for the  transition from compact sector grants to trust fund income in 2023. The  committee is mandated to, among other things, set goals in anticipation of  the end of compact grants, develop strategies and alternatives, identify  financial assistance sources, analyze economic information, and provide  periodic reports to the FSM Congress. The committee first met in May  2017. In September 2017, the committee hired an Executive Director,  who in turn hired an economist and Executive Secretary prior to the  committee\u2019s February 2018 meeting. As of January 2018, according to  FSM officials, the committee had not produced any publicly available  products but had collected information from various FSM government  agencies."], "subsections": []}, {"section_title": "RMI Compact Review Commission", "paragraphs": ["According to the RMI Office of Compact Implementation, the RMI  established the Compact Review Commission in late 2016 to plan for the  fiscal year 2023 transition from compact sector grants to trust fund  income. According to the Office of Compact Implementation, the  commission is mandated to review the compact and make  recommendations to the cabinet regarding priorities to be addressed for  the fiscal year 2023 transition. Specific priorities may include the status of  federal programs that will expire in fiscal year 2023, the adequacy of the  compact trust fund to provide needed revenue, and other issues relevant  to the cessation of compact grant assistance. In January 2018, the RMI  Presidential Cabinet appointed a Compact Review Commission  Coordinating Committee, consisting of the RMI Ambassador to the United  States, the Director of the RMI Office of Compact Implementation, the  Secretary of Finance, a private sector representative, and a legal adviser,  and directed it to coordinate the commission\u2019s meetings, actions, and  reporting."], "subsections": []}, {"section_title": "Ongoing U.S. Interagency Working Group", "paragraphs": ["State began holding regular meetings of the Interagency Working Group  on the Freely Associated States in February 2017 to provide guidance  and oversight for policy concerning the Compacts of Free Association and  to coordinate U.S. policy in light of the fiscal year 2023 transition. The  group met monthly through the rest of 2017, except in November. The  monthly meetings have focused individually on the FSM and RMI, as well  as addressed cross-cutting issues such as donor coordination. For  example, in March and July 2017, the group\u2019s monthly meetings focused  on the FSM and included participation by the U.S. Ambassador and the  FSM Ambassador, respectively. Similarly, in April and June 2017, the  group\u2019s monthly meetings focused on the RMI and included participation  by the U.S. and RMI ambassadors, respectively. According to State  officials, the meetings will continue indefinitely on a monthly basis."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The U.S. compacts of free association with the FSM and the RMI  provided a framework for the United States and the two countries to work  toward, among other things, the goal of assisting the FSM and the RMI in  their efforts to achieve economic development and self-sufficiency. The  end of U.S. compact sector grants in fiscal year 2023 and the beginning  of disbursements from the compact trust funds in fiscal year 2024 will  mark a key transition in these ongoing efforts, and the FSM and RMI are  currently preparing plans for addressing issues associated with the  transition to compact trust fund income. The countries\u2019 transition to relying  on income from the compact trust funds will likely require significant  budgetary choices. However, lacking the trust fund distribution policies  required under the trust fund agreements, the FSM and RMI are  hampered in their efforts to plan for the potential reduction in U.S.  compact assistance after 2023. In addition, without the required fiscal  procedures governing trust fund actions after 2023, the trust fund  committees will be unable to make disbursements and the United States,  the FSM, and the RMI will not have assurance of necessary oversight of  trust fund disbursements. Finally, without alignment between the timing of  the trust fund committees\u2019 annual calculation of the amounts available for  disbursement and the countries\u2019 annual budget cycles, the FSM and RMI  will have to plan their budgets for each fiscal year without knowing the  amount of the disbursements from the compact trust funds."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to Interior:  The Secretary of the Interior should ensure that the Director of the Office  of Insular Affairs, as Chairman of the FSM compact trust fund committee,  works with other members of the committee to develop a distribution  policy for the FSM compact trust fund, as required by the compact trust  fund agreement, that takes into account potential strategies that could  address risks to the fund\u2019s ability to provide a source of income after fiscal  year 2023. (Recommendation 1)", "The Secretary of the Interior should ensure that the Director of the Office  of Insular Affairs, as Chairman of the FSM compact trust fund committee  and of the FSM Joint Economic Management Committee, works with  other members of the committees to develop the fiscal procedures  required by the compact trust fund agreement. (Recommendation 2)", "The Secretary of the Interior should ensure that the Director of the Office  of Insular Affairs, as Chairman of the FSM compact trust fund committee,  works with other members of the committee to address the timing of the  calculation of compact trust fund disbursements. (Recommendation 3)", "The Secretary of the Interior should ensure that the Director of the Office  of Insular Affairs, as Chairman of the RMI compact trust fund committee,  works with other members of the committee to develop a distribution  policy for the RMI compact trust fund, as required by the compact trust  fund agreement, that takes into account potential strategies that could  address risks to the fund\u2019s ability to provide a source of income after fiscal  year 2023. (Recommendation 4)", "The Secretary of the Interior should ensure that the Director of the Office  of Insular Affairs, as Chairman of the RMI compact trust fund committee  and of the RMI Joint Economic Management and Financial Accountability  Committee, works with other members of the committees to develop the  fiscal procedures required by the compact trust fund agreement.  (Recommendation 5)", "The Secretary of the Interior should ensure that the Director of the Office  of Insular Affairs, as Chairman of the RMI compact trust fund committee,  works with other members of the committee to address the timing of the  calculation of compact trust fund disbursements. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Agriculture,  Commerce, Defense, Education, Energy, Health and Human Services,  the Interior, Labor, State, the Treasury, and Transportation; the Federal  Communications Commission; the Federal Deposit Insurance  Corporation; the Federal Emergency Management Agency; the National  Science Foundation; USAID; and the U.S. Postal Service, as well as to  the FSM and RMI. We also provided copies of the draft to the  administrator of each compact trust fund and to Graduate School USA for  their technical review. The Department of the Interior, the U.S. Postal  Service, and the FSM and RMI provided official comments, which are  reproduced in appendixes IX through XII with, where relevant, our  responses. The Departments of Agriculture, Education, Health and  Human Services, Labor, State, and Transportation; the Federal Deposit  Insurance Corporation; USAID; the RMI; the trust funds\u2019 administrator,  and Graduate School USA provided technical comments, which we  incorporated as appropriate.", "The following summarizes the official comments from Interior, the U.S.  Postal Service, the FSM, and the RMI, and our responses.", "Interior concurred with our recommendations and stated that  discussions to address them are ongoing within the trust fund  committees. In addition, Interior stated that a working group  comprising staff from Interior\u2019s Office of Insular Affairs and the  Department of State\u2019s Office of Australia, New Zealand and Pacific  Island Affairs will present recommended actions related to our  recommendations to the trust fund committees in 2018.", "The U.S. Postal Service stated that, in general, the report includes  helpful information on the compact obligations regarding postal  services provided to the FSM and RMI. However, the U.S. Postal  Service also provided additional information on the reimbursement  shortfall for its services since 2002 in the freely associated states. The  U.S. Postal Service stated that it recommends that, upon expiration of  the programs and services agreements, the FSM and RMI be treated  as international postal origin and destination points.", "The FSM concurred with our recommendations to Interior. In addition,  the FSM stated that the programs and services provided by U.S.  agencies were essential to the FSM and should continue to the  greatest extent possible after 2023. The FSM would like to work with  U.S. officials to ensure timely approval of continuing these programs  and services. The FSM also noted that we had reported the potential  for the FSM compact trust fund to not provide disbursements sufficient  to cover the estimated value of expiring federal services in 2002, prior  to the signing of the amended compact. Further, the FSM provided  additional information regarding its Long-Term Fiscal Framework and  summarized ongoing public sector and tax reform efforts and its own  contributions to the FSM Trust Fund.", "The RMI concurred with our recommendations to Interior and  provided additional comments regarding the recommendations. The  RMI asserted that, absent accountability issues, the maximum annual  disbursement amount should be disbursed from the compact trust  fund. However, as our report notes, the compact trust fund  agreements state the maximum allowable disbursement level and do  not establish or guarantee a minimum disbursement level. The RMI  also stated that it would prefer that future accountability procedures  be based on a new agreement rather than a reshaping of the current  fiscal procedures agreement. In addition, the RMI raised the issue of  compensation under the tax and trade provision of the original  compact as well as the effect of delays in investing the RMI compact  trust fund on its current value. We discuss the tax and trade  provisions in Appendix VII of our report. The RMI also recommended  that amendments to the trust fund agreement should not require  action by the U.S. Congress. As our report notes, the U.S. legislation  implementing the amended compacts requires that any amendment,  change, or termination of all or any part of the compact trust fund  agreements shall not enter into force until incorporated into an act of  Congress. Finally, the RMI noted that programs and services provided  through the amended compacts' implementing legislation (Pub. L. No.  108-188) and the compact programs and services agreement were  essential and that the RMI could not replace them by using its own  resources.", "We are sending copies of this report to the appropriate congressional  committees and to the Departments of Agriculture, Commerce, Defense,  Education, Energy, Health and Human Services, the Interior, Labor,  State, the Treasury, and Transportation; the Federal Communications  Commission; the Federal Deposit Insurance Corporation; the Federal  Emergency Management Agency; the National Science Foundation;  USAID; and the U.S. Postal Service, as well as the President of the FSM  and the President of the RMI. In addition, the report will be available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have questions about this report, please contact me at  (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix XIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["We were asked to review issues related to the Federated States of  Micronesia\u2019s (FSM) and Republic of the Marshall Islands (RMI) transition  from compact grant assistance to relying on income from the compact  trust funds. This report examines (1) the use and role of federal funds and  programs in the FSM and RMI budgets, (2) projected compact trust fund  disbursements and potential strategies to address risks to those  disbursements, and (3) FSM and RMI efforts to prepare for the scheduled  decrements in compact grant funding and the transition to relying on  compact trust fund income."], "subsections": [{"section_title": "Federal Funds and Programs", "paragraphs": ["To identify the use and role of federal funds and programs, we reviewed  relevant documents and interviewed knowledgeable U.S., FSM, and RMI  officials during our site visits to the RMI in July 2017 and in the FSM in  July and August 2017. We reviewed U.S. law; the amended compacts  and associated programs and services agreements and military use and  operating rights agreements with each country; each country\u2019s  government and component unit single audit reports for fiscal years 2012  through 2016; and U.S. Region IX reports for fiscal years 2015 and  2016. We analyzed expenditure and funding data in FSM and RMI single  audit reports, including their Schedule of Expenditures of Federal Awards,  to identify the sources of funds expended by the FSM national and state  governments, the RMI national government, and their component units  and calculated federal funds as a percentage of each entity\u2019s total  resources. We reviewed the single audit reports and found that the  auditors did not express any qualified or adverse opinions regarding the  information they used to prepare the audits\u2019 Schedule of Expenditures of  Federal Awards, which lists the amount and use of federal grants. We  concluded that these data are sufficiently reliable for estimating the role of  federal programs in the FSM and RMI budgets.", "To identify the FSM and RMI national government component units and  FSM state government component units, we reviewed the websites of,  and audit reports from, the FSM Office of the National Public Auditor and  the RMI Office of the Auditor-General and confirmed the list of component  units we identified with FSM and RMI officials. We also discussed the  uses of federal funds in the countries with FSM national and state  government officials, RMI government officials, and FSM and RMI  component unit representatives during our site visits to the countries. Our  portrayal of the role of federal funds in the government and component  unit budgets does not capture the value of any noncash goods and  services that do not appear in the single audit reports. In addition, it does  not capture benefits that some programs provide to individuals, such as  U.S. Department of Agriculture rural housing loans and Federal Deposit  Insurance Corporation insurance that benefits depositors at the Bank of  the Federated States of Micronesia.", "To determine the legal status of U.S. programs, services, and grants after  fiscal year 2023, we analyzed the amended compacts, the compact- related agreements, and U.S. law governing the programs, services, and  grants that we identified to determine whether, under current law, they  would still be available to the FSM and RMI after the end of that fiscal  year. For the programs and services agreement with each country, we  reviewed the status of programs and services when the agreements end  in fiscal year 2024. Our legal analysis included programs, services, and  grants that we identified from the compacts, the amended compacts\u2019  implementing legislation, the military use and operating rights  agreements, and the programs and services agreements. We also  included in our legal analysis the programs (1) that we identified through  the single audit reports and Region IX reports and (2) that were not  already identified through our review of the compacts, the amended  compacts\u2019 implementing legislation, and the compact-related agreements;  and (3) that the single audit reports showed as having expenditures  above $200,000 in any year in fiscal years 2012 through 2016 or the  Region IX reports identified as providing more than $200,000 in federal  funding in fiscal years 2015 or 2016. We prepared an initial list of federal  programs based on our review. We then provided our list of programs to  the FSM, the RMI, and the U.S. Departments of State and the Interior for  their review and updated the list on the basis of information they provided.", "We prepared a preliminary analysis of the post-2023 status of the  programs and funding sources we identified and asked officials of the  relevant U.S. agencies to review and comment on the accuracy of the list.  As part of this analysis, we contacted officials from the Departments of  Agriculture, Commerce, Defense, Education, Energy, Health and Human  Services, the Interior, Labor, State, and Transportation; the Federal  Communications Commission; the Federal Deposit Insurance  Corporation; the Federal Emergency Management Agency; the National  Science Foundation; the U.S. Agency for International Development; and  the U.S. Postal Service. We incorporated into our analysis the comments  that these officials provided, and we again asked for their review of our  analysis before we completed our draft report. Our conclusions are based  on a review of current law. Therefore, any changes in the applicable law  subsequent to our report but before 2023 may affect the FSM\u2019s and RMI\u2019s  eligibility for U.S. programs and funding. In addition, the availability of  programs depends on appropriations made for that purpose. Although we  took multiple steps to validate our list of programs with the FSM and RMI  and the relevant U.S. agencies, our analysis may not have captured all  U.S. grants and programs provided in the FSM and RMI."], "subsections": []}, {"section_title": "Compact Trust Funds", "paragraphs": ["To examine projected compact trust fund disbursements and actions to  address risks, we reviewed previous studies of the compact trust funds;  the U.S.-FSM and U.S.-RMI compact trust fund agreements; and other  governance and reporting documents such as investment policy  statements, presentations to the compact trust fund committees, audits,  and annual reports. We also interviewed FSM and RMI officials, compact  trust fund committee members, authors of the previous studies, and the  funds\u2019 administrator, investment advisers and money managers.", "To project the compact trust funds\u2019 likely income at their current value and  under current trust fund rules (i.e., the baseline scenario), we built a  Monte Carlo simulation model and performed 10,000 trial runs of  projected returns and disbursements over a four-decade time period,  using random values for key variables.", "We used the following key assumptions in our compact trust fund  analysis:", "Compact trust fund balance. We used the unaudited FSM and RMI  fiscal year 2017 year-end compact trust fund balances.", "C account balance. We estimated the C account balance on the  basis of the unaudited FSM and RMI fiscal year 2017 year-end  balances.", "To assess the reliability of the unaudited balances, we reviewed the  previous years\u2019 audits and confirmed with the trust funds\u2019 Administrator  that previous years\u2019 audits had not resulted in any significant differences  between the preliminary balances and the final audited balances. We  concluded that the unaudited balances were sufficiently reliable as a  basis for our projections of future trust fund performance. The March  2018 audited fund balances, released after we completed our analysis,  were within $5 of the unaudited fund balances.", "Amount of future compact trust fund contributions. We based the  amounts of future annual U.S. contributions to both trust funds on the  inflation-adjusted amounts estimated in the U.S. Department of the  Interior\u2019s (Interior) Office of Insular Affairs\u2019 Budget Justifications and  Performance Information, Fiscal Year 2018. For the RMI, we assumed  that Taiwan would continue to contribute $2.4 million per year to the  RMI\u2019s A account each year through 2023 in keeping with Taiwan\u2019s  May 2005 agreement with the RMI.", "Estimated annual grant assistance for fiscal year 2023. We based  our estimates of fiscal year 2023 assistance on the inflation-adjusted  amounts estimated by the Office of Insular Affairs. The office  estimated that the FSM would receive $82 million in annual grant  assistance in fiscal year 2023 and that the RMI would receive $36  million, including Kwajalein-related assistance. In keeping with the  RMI compact trust fund agreement, we excluded from our analysis  grants provided to the RMI under compact section 211(b) for  Kwajalein-related assistance, resulting in an estimated $27 million in  grant assistance to the RMI under compact section 211 in fiscal year  2023. The actual amount of annual grant assistance in fiscal year  2023 will depend on actual inflation rates in the years preceding 2023.  Different assumptions about the inflation rates will result in different  estimates of the amount of fiscal year 2023 annual grant assistance.", "Net rate of return. In the baseline scenario, we present our results  based on a 6 percent rate of return after fees are deducted. To select  and assess the reasonability of this projected net rate of return, we  reviewed the capital market assumptions and projections used by the  money managers for the compact trust funds as well as historical  market rates of return. However, because projecting the funds\u2019 long- term performance using the current portfolio and economic  assumptions has limitations, we also conducted our analyses using  different nominal values for the net returns\u20145 percent, 7 percent, and  8 percent\u2014in each case using a standard deviation of 13 percent.  These results are presented in appendix V. We assumed a normal  distribution, but we tested the same baseline analyses with a t- distribution and found that a t-distribution did not substantially affect  the results.", "Inflation rate after fiscal year 2023. We applied the 2 percent long- term inflation rate projected by the Congressional Budget Office.", "To further analyze actions that could address risks to the compact trust  funds, we modeled alternative strategies for managing the funds that  were analyzed by previous studies of the compact trust funds. We  identified previous studies through a literature search and by interviewing  cognizant agency and trust fund officials. On the basis of this review, we  developed five potential strategies that are representative of the  approaches identified in previous studies. These five strategies are  examples of many possible strategies, including varying amounts of  disbursement reductions, additional contributions, and methods of  calculating annual disbursements. We are not recommending any specific  strategy. To provide additional information about potential outcomes, we  also analyzed another four strategies that assumed a lower amount of  additional trust fund contributions, lower disbursement reductions, or a  lower percentage of the compact trust fund balance that could be  withdrawn (see app. VII). To help ensure that we had appropriately  reproduced the methods used in previous studies, we shared our  preliminary results for strategy 4, which modeled the Moving Adjustment  Rule, and strategy 5, which modeled the Sustainability Adjustment for  Enhanced Reliability (SAFER), with the Graduate School USA  representatives who had initially prepared these potential strategies. We  analyzed each strategy separately to isolate the impact of individual  changes in the strategy on compact trust fund balance and  disbursements. However, in practice, these individual changes could  occur in combination with each other. We again performed the Monte  Carlo analysis, using the same key assumptions as in the baseline  scenario, to determine the likely effects, relative to the baseline, of five  potential strategies representing three approaches: (1) reducing annual  compact trust fund disbursements; (2) making additional contributions; (3)  and changing the disbursement policies, including strategies that would  require changing the trust fund agreements to permit disbursements from  the A account. We present the results of this analysis with a 6 percent net  return, a standard deviation of 13 percent, and a normal distribution and  tested the results with 5 percent, 7 percent, and 8 percent net returns  (see app. VII for further details).", "To summarize and compare our simulation results for the baseline and  alternate scenarios, we analyzed the average disbursements in nominal  dollars, the average disbursements in comparison with maximum  disbursements, the likelihood of 1 or more years with zero disbursement,  and the likelihood that the trust funds will maintain their inflation-adjusted  value after fiscal year 2023.", "We calculated the average disbursement in the given time periods by  averaging simulated disbursements over 10-year periods (averaging  first over 10 years and then over 10,000 simulated cases).", "We calculated the average disbursement as a percentage of the  maximum allowable disbursement by averaging the ratio of each  simulated disbursement to the maximum inflation-adjusted allowable  disbursement in the given period (averaging first over 10 years and  then over 10,000 simulated cases).", "We calculated the likelihood of zero disbursement by counting cases  with 1 or more years of zero disbursement among the 10,000  simulated cases in each 10-year period.", "We calculated the likelihood that the fund balance will maintain its  inflation-adjusted fiscal year 2023 value by counting simulation cases  where the simulated balance exceeds or equals its projected inflation- adjusted 2023 balance in the given year.", "We report the disbursement results averaged by decade for the first 40  years of compact trust fund disbursements\u2014fiscal years 2024 through  2033, fiscal years 2034 through 2043, fiscal years 2044 through 2053,  and fiscal years 2054 through 2063\u2014to summarize the overall trend in  disbursements. However, depending on market volatility, disbursements  during these decades are likely to fluctuate from year to year. While the  projected per-decade averages can show long-term trends in the funds\u2019  disbursements and sustainability and provide a comparison of the likely  effects of the potential strategies we analyzed, the projected averages do  not provide information about the volatility of changes in annual  disbursement. We compare the compact trust funds\u2019 projected value with  the projected inflation-adjusted fiscal year 2023 value through 2063 in 10- year increments beginning in fiscal years 2033.", "To document the status of the FSM Trust Fund and the RMI\u2019s D account  and their potential use to supplement FSM and RMI resources after 2023,  we reviewed information about the FSM laws establishing the FSM Trust  Fund, FSM economic reports, and the RMI-Taiwan agreement regarding  the D account. We also interviewed FSM and RMI officials. We did not  independently verify the FSM\u2019s projections of the future size of, and  disbursements from, its trust fund. The information on foreign law or on  foreign government operations in this report is not the product of our  original analysis, but is derived from interviews and secondary sources."], "subsections": []}, {"section_title": "FSM and RMI Plans", "paragraphs": ["To examine FSM and RMI efforts to prepare for the scheduled compact  grant decrements, we reviewed each country\u2019s decrement management  plans to determine the FSM\u2019s and RMI\u2019s planned budget reductions and  other actions. We then reviewed the FSM\u2019s and RMI\u2019s single audit reports  and budget documents and interviewed FSM and RMI officials to  determine whether the planned reductions had been implemented. We  compared the planned actions to current legislation, single audit reports,  or recent reports that discussed the status of FSM and RMI economic and  financial reforms. In addition, we interviewed Interior, FSM, and RMI  officials to determine whether FSM and RMI decrement management  plans had been revisited or updated, why the plans were or were not  adhered to, and whether the countries planned any future updates to the  plans. We also conducted interviews with U.S. officials from the  Department of State, a representative of Graduate School USA, and  representatives of the World Bank and the International Monetary Fund  regarding each country\u2019s previous and current planning efforts.", "To assess whether the FSM and RMI strategic plans for the key sectors  of health, education, and infrastructure addressed the 2023 transition  from compact grants and other U.S. assistance to compact trust fund  income, we first obtained the relevant plans from department heads in  each key sector of the FSM and RMI national governments and FSM  state governments and confirmed our identification of the documents with  FSM and RMI officials. We reviewed the plans to determine whether they  included any discussion of budget projections, economic or financial  reforms, alternative funding sources or other revenue generation  strategies, and expenditure cuts or saving strategies for periods before  and after fiscal year 2023. We also reviewed the FSM\u2019s 2023 Action Plan  and the RMI\u2019s updated Medium Term Budget and Investment Framework  to determine whether these documents discussed budget changes to  address the 2023 transition.", "Through our interviews with U.S., FSM, and RMI officials, we also learned  about other ongoing planning efforts to address the 2023 transition: the  U.S. Interagency Working Group on the Freely Associated States, the  FSM Joint Compact Review and Planning Committee, and the RMI  Compact Review Commission. Following our interviews, we reviewed and  summarized documentation related to the working group\u2019s purpose,  meetings, and membership. We also contacted FSM and RMI committee  members and officials to obtain additional information on the mandate,  membership, and status of the FSM and RMI committees. The  information contained in this report on foreign law or on foreign  government operations is not the product of our original analysis, but is  derived from interviews and secondary sources.", "We conducted this performance audit from March 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: U.S. Compact Sector Grants and Trust Fund Contributions, 2004 through 2023", "paragraphs": ["The amended compacts\u2019 implementing legislation authorized and  appropriated direct financial assistance to the FSM and the RMI in fiscal  years 2004 through 2023, and provided for partial inflation adjustment of  the base amount of compact sector grants and trust fund contributions  each year. The base amount is partially inflation-adjusted by the  percentage that equals two-thirds of the percentage change in the U.S.  gross domestic product implicit price deflator, or 5 percent, whichever is  less in any 1 year, using the beginning of 2004 as a base. As the base  amount of compact sector grants decreases, the trust fund contributions  generally increase by an equivalent amount. Figure 9 shows the amount  of compact sector grants and trust fund contributions each fiscal year  from 2004 through 2023.", "The cumulative inflation adjustment largely offsets the amount of the  decrement, resulting in a relatively steady nominal amount of compact  sector grants after inflation adjustments (see fig. 10). However, because  the inflation adjustment is not equal to full inflation, the value of compact  sector grants continues to decline in real terms."], "subsections": []}, {"section_title": "Appendix III: Compact Grants Supporting Health and Education in the FSM and RMI", "paragraphs": ["U.S. grants that end in 2023 play a significant role in the budgets of the  FSM states and the RMI in the health and education sectors. The  colleges of both countries have also relied on compact sector grants but  rely even more on Pell grants to support their operation.", "FSM states rely on U.S. grants scheduled to end in 2023 for the majority  of their health and education expenditures. In fiscal year 2016, compact  sector grants and the SEG supported 60 percent or more of health  expenditures and 82 percent or more of state education expenditures.  Table 3 shows the states\u2019 health and education expenditures of compact  sector grants and the supplemental education grant (SEG) in fiscal year  2016. In fiscal years 2012 through 2016, compact sector grants and the  SEG supported 56 to 99 percent of FSM states\u2019 health expenditures and  82 to 100 percent of FSM states\u2019 education expenditures.", "Total   expenditures  (dollars)", "Amount   (dollars)", "U.S. compact sector, supplemental education, and other grants also  supported approximately 76 percent of the average $21 million in annual  expenditures of the College of Micronesia\u2013FSM, an FSM government  component unit, in fiscal years 2012 through 2016. Compact sector  grants and the SEG, each of which end in 2023, supported approximately  15 percent of the college\u2019s annual expenditures. Pell grants, which  provide support for education expenses for qualifying students, supported  more than half of the college\u2019s annual expenditures. College officials told  us that the college would be unable to operate without Pell grants.  According to officials from the U.S. Department of Education, the college  will remain eligible after 2023 to receive Pell grants that benefit its  students as long as such grants are available to institutions and students  in the United States (see app. IV).", "The RMI relies on U.S. grants scheduled to end in 2023 for health and  education expenditures. In fiscal year 2016, compact sector and  supplemental education grants scheduled to end in 2023 supported  approximately 25 percent of RMI health expenditures and approximately  59 percent of RMI education expenditures (see table 4). Kwajalein-related  grants increased these percentages to 32 percent for health and 66  percent for education. In total, in fiscal years 2012 through 2016, compact  sector grants and the SEG supported approximately 58 percent of RMI  education expenditures and 29 percent of health expenditures. During  this period, the percentage of education expenditures supported by  compact sector and supplemental education grants scheduled to end in  2023 remained relatively steady and the percentage of health  expenditures decreased slightly.", "U.S. compact sector, supplemental education, and other grants also  supported approximately half of the average $11.9 million in annual  expenditures of the College of the Marshall Islands, an RMI government  component unit, in fiscal years 2012 through 2016. Compact sector  grants and the SEG, each of which end in 2023, supported approximately  8 percent of the college\u2019s annual expenditures. Pell grants supported  about 39 percent of the college\u2019s expenditures. According to officials from  the U.S. Department of Education, the college will remain eligible after  2023 to receive Pell grants that benefit its students, as long as such  grants are available to institutions and students in the United States (see  app. IV). Also in fiscal years 2012 through 2016, compact sector and  supplemental education grants scheduled to end in 2023 supported about  half of the expenditures of the RMI government component unit, the  Marshall Islands Scholarship, Grant, and Loan Board, which provides  financial assistance for educational and training opportunities. Kwajalein- related compact grants that do not end in 2023 supported an additional  13 percent of the board\u2019s expenditures."], "subsections": []}, {"section_title": "Appendix IV: Status of U.S. Grants and Programs in the FSM and RMI After 2023", "paragraphs": ["The amended compacts, compact-related agreements, the amended  compacts\u2019 implementing legislation, and other U.S. laws provide grants or  eligibility for U.S. programs and services for the FSM and RMI. The  amended compacts provided compact sector, Kwajalein-related, and  audit grants. Under current law, compact sector and audit grants are each  scheduled to end in 2023, but the RMI military use and operating rights  agreement (MUORA) extended the time frame of Kwajalein-related  compact grants for as long as the agreement is in effect. The amended  compacts\u2019 implementing legislation provided additional grants, including  authorizing a supplemental education grant (SEG), and identified several  specific U.S. programs as available to the FSM and RMI. Under current  law, the additional grants end in 2023 but the statutory authorizations for  some programs identified in Pub. L. No. 108-188 provide for the  continued eligibility of the FSM and RMI to receive benefits under the  programs. However, after fiscal year 2023, the FSM and RMI will no  longer be eligible under current U.S. law for some programs that the SEG  replaced. The compact-related programs and services agreements with  each country identify additional programs and services that the United  States makes available to the FSM and RMI. While these agreements will  end in 2024, under current law, some U.S. agencies may continue to  provide programs and services similar to those provided in the agreement  under other authorities. Based on the status of current law, the FSM\u2019s and  RMI\u2019s eligibility for other programs we identified that have been provided  under other current U.S. laws will not change after fiscal year 2023."], "subsections": [{"section_title": "Compact Sector and Audit Grants End in 2023, but Kwajalein-Related Grants for the RMI Will Continue", "paragraphs": ["Under current law, compact sector grants provided to the FSM and the  RMI under their compact sections 211(a) are scheduled to end in 2023.  However, the RMI is scheduled to continue to receive $7.2 million,  partially inflation adjusted, related to the U.S. military base in Kwajalein  Atoll and provided under section 211(b) of its compact. Under the terms  of the RMI MUORA, the United States agreed to provide these Kwajalein- related grants for as long as the MUORA is in effect. The MUORA  continues until 2066 and may be extended at the discretion of the United  States until 2086. The amended RMI compact provides for $18 million,  partially inflation adjusted, in annual payments to the RMI government to  compensate for impacts from the U.S. Army Garrison\u2013Kwajalein Atoll.  These payments will continue for as long as the MUORA is in effect.", "Annual compact grants of up to $500,000 (not inflation adjusted) to each  country to pay for required annual audits of compact grants are scheduled  to end in 2023. See table 5 for a summary of compact sector, Kwajalein- related, and audit grants."], "subsections": []}, {"section_title": "FSM and RMI are No Longer Eligible for Many Programs Replaced by the Supplemental Education Grant", "paragraphs": ["The supplemental education grant (SEG) authorized by the amended  compacts\u2019 implementing legislation is scheduled to end in fiscal year 2023  and, under current law, FSM and RMI eligibility for most programs that  the SEG replaced will not resume after fiscal year 2023. Absent changes  to current law, the FSM and RMI will not be eligible after fiscal year 2023  for the following programs that the SEG replaced during fiscal years 2005  through 2023: U.S. elementary and secondary education grant programs,  adult education and literacy programs, career and technical education  programs, job training programs, and Head Start early education  programs. However, under other provisions of current law, qualifying  individuals in the FSM and RMI will be eligible after fiscal year 2023 for  undergraduate education grants and work-study programs that the SEG  replaced. See table 6."], "subsections": []}, {"section_title": "Some Programs and Services in the Programs and Services Agreement Will End, while Others May Continue under Other Authorities", "paragraphs": ["Although the programs and services agreements with the FSM and RMI  will end in fiscal year 2024, current U.S. law enables U.S. agencies to  continue providing some programs and services now provided under the  agreements. No current provisions of U.S. law will enable the Federal  Emergency Management Agency (FEMA) to provide disaster response  funding or enable the Federal Deposit Insurance Corporation to provide  deposit insurance or the U.S. Postal Service to provide services to the  FSM and RMI after the agreements end. However, the National Weather  Service, the U.S. Department of Transportation\u2019s (DOT) Federal Aviation  Administration (FAA), and the U.S. Agency for International Development  (USAID) could, under other legal authorities, provide services similar to  those they now provide under the programs and services agreements.", "National Weather Service. The programs and services agreements  authorize the National Weather Service to fund the operations of  weather stations in the FSM and RMI, which it can continue to fund  after the end of the Agreements under other authorities, according to  Department of Commerce officials.", "Federal Aviation Administration. The programs and services  agreements authorize DOT\u2019s FAA to provide technical assistance in  the FSM and RMI, which it can continue to provide after the end of the  Agreements under other provisions of current U.S. law. However,  DOT officials stated that FAA would require new bilateral agreements  with the FSM and the RMI in order for the countries to continue to  receive the civil aviation safety services that FAA currently provides  under the programs and services agreements. The FAA would also  seek reimbursement for any technical assistance it provides to the  FSM and RMI. With regard to the civil aviation economic services of  the programs and services agreements, DOT officials stated that,  while the FSM and RMI could voluntarily decide to allow U.S. air  carriers to continue operations in the FSM and RMI, new bilateral  agreements would be needed to assure that result.", "U.S. Agency for International Development. Following a U.S.  presidential disaster declaration, FEMA provides the funding for  disaster relief and reconstruction, which is programmed through  USAID. Under current law, FEMA funds will no longer be available  for this purpose once the agreements end; however, USAID will be  able to provide foreign disaster assistance funding to the FSM and  RMI under the same terms as it provides this assistance to other  countries. After the programs and services agreements end, FEMA  will be able to support disaster relief efforts only if USAID or the  countries request it to do so on a reimbursable basis.", "In addition, according to State and Interior officials, telecommunications- related services that the two agencies provide to the FSM and RMI under  the programs and services agreements will continue as long as the FSM  and RMI provide appropriate authorization for such services. Table 7  shows the status after fiscal year 2024 of programs and services currently  provided to the FSM and the RMI under the agreements."], "subsections": []}, {"section_title": "Programs Identified in the Amended Compacts\u2019 Implementing Legislation Generally Continue after Fiscal Year 2023", "paragraphs": ["Additional grants provided to the FSM and the RMI under the amended  compacts\u2019 implementing legislation will end in fiscal year 2023, but the  countries\u2019 eligibility for programs now provided under that legislation will  generally continue under current U.S. law. Grants provided under the  amended compacts\u2019 implementing legislation for (1) judicial training in the  FSM and the RMI, and (2) agricultural and planting programs on the  RMI\u2019s nuclear-affected Enewetak Atoll are scheduled to end. However,  under current U.S. law, legal authorities permitting the operation of other  programs would remain available to the FSM and RMI after fiscal year  2023. Eligibility under these legal authorities continues either because the  amended compacts\u2019 implementing legislation does not specify an ending  date or because other provisions in current U.S. law make the FSM and  RMI eligible for the program.", "Programs provided in the amended compacts\u2019 implementing legislation  include U.S. Department of Agriculture Rural Utilities Service grant and  loan programs; U.S. Department of Education Pell grants for higher  education and grants under Part B of the Individuals with Disabilities  Education Act for children with disabilities; programs for nuclear-affected  areas in the RMI; and additional programs provided by the Departments  of Commerce and Labor as well as law enforcement assistance provided  by the U.S. Postal Service. See table 8 for a summary of the programs  identified in the amended compacts\u2019 implementing legislation and their  status as of the end of fiscal year 2023."], "subsections": []}, {"section_title": "Programs Identified in Other Legislation Generally Continue after Fiscal Year 2023", "paragraphs": ["In addition to being eligible for the programs provided through the  compact, its associated agreements, and the amended compacts\u2019  implementing legislation, the FSM and RMI are also eligible for a number  of programs under other provisions of current U.S. law. The FSM and  RMI have each received funds from the U.S. Department of Agriculture  for forestry and rural housing programs, multiple Health and Human  Services public health program grants, Interior technical assistance and  historic preservation programs, and the DOT FAA airport improvement  program, among others. Under current U.S. law, the legal authorities  permitting the provision of these programs in the FSM and RMI would not  necessarily change after 2023. Table 9 shows the FSM\u2019s and RMI\u2019s  eligibility for these additional grants and programs under current law after  fiscal year 2023."], "subsections": []}]}, {"section_title": "Appendix V: Compact Trust Fund Baseline Outcomes Calculated with Varying Return Assumptions", "paragraphs": ["In order to the test the sensitivity of our compact trust fund projections to  assumptions about the future rate of return, we also performed our Monte  Carlo analysis using alternate rates of return. We projected the compact  trust fund disbursements and balance under current compact trust fund  rules on the basis of a 6 percent net return and also estimated the trust  fund on the basis of 5 percent, 7 percent, and 8 percent net returns.  Higher rates of return would improve the outlook for each compact trust  fund. However, even with higher rates of return, our analysis shows a  high likelihood that available compact trust fund disbursements will not  reach an amount equivalent to maximum disbursements permitted by the  compact trust fund agreement (i.e., the inflation-adjusted amount of fiscal  year 2023 annual grant assistance, as defined by the trust fund  agreements), a continuing risk of zero disbursements, and a decreasing  likelihood that the fund will maintain or exceed its inflation-adjusted  balance in fiscal year 2023. See tables 10 and 11 for our projections of  FSM and RMI compact trust fund disbursements, likelihood of 1 or more  years with zero disbursement, and likelihood of maintaining or exceeding  its inflation-adjusted fiscal year 2023 value."], "subsections": []}, {"section_title": "Appendix VI: FSM and RMI Country Trust Funds", "paragraphs": ["The FSM and RMI each maintain their own country trust funds separate  from the compact trust funds. These country trust funds are also available  to provide a source of revenue after compact grants end at the end of  fiscal year 2023. We did not independently project the future balance or  potential disbursements from the FSM Trust Fund after 2023."], "subsections": [{"section_title": "FSM Trust Fund", "paragraphs": ["The FSM maintains its own trust fund, separate from the compact trust  fund, which can provide additional resources after fiscal year 2023 to  offset a reduction in resources relative to those made available as of  fiscal year 2023. The FSM Trust Fund, established in 1999, has grown  rapidly in recent years. In fiscal years 2012 through 2017, the FSM  appropriated a total of $73.3 million for contributions to its trust fund. In  addition, in 2015, the FSM changed its tax law to allocate 20 percent of  revenue collected by the states to state subaccounts within the FSM Trust  Fund. Along with investment gains, these appropriations and  contributions of tax revenue have increased the FSM Trust Fund\u2019s  balance from $8 million at the end of fiscal year 2011 to $115 million as of  the end of fiscal year 2017. As of 2017, the FSM proposed to continue  adding $10 million annually from national government surpluses into its  trust fund, with the aim of achieving a balance of $250 million by fiscal  year 2023 and $10 million in annual disbursements. However, as of early  2018, according to FSM officials, the FSM planned to add $15 million per  year to the FSM Trust Fund and projected that the fund would have a  balance of $275 million by the end of fiscal year 2023. However, like the  compact trust fund, the full balance of the FSM Trust Fund is not available  for disbursement. Under current FSM law, funds in the FSM Trust Fund  may not be withdrawn until fiscal year 2024. In addition, according to FSM  officials, the FSM can withdraw only the fund\u2019s earnings and cannot  withdraw the inflation-adjusted value of the FSM Trust Fund corpus."], "subsections": []}, {"section_title": "RMI D Account", "paragraphs": ["The RMI also maintains its own trust fund\u2014the compact trust fund\u2019s D  account. Although managed alongside the compact trust fund, the D  account is not subject to the same disbursement provisions as the  compact trust fund\u2019s A, B, and C accounts. Instead, disbursements from  the D account are subject to the provisions of the agreement between  Taiwan and the RMI under which Taiwan contributed the $10 million that  the RMI used to establish the D account. According to the terms of this  agreement, the RMI may withdraw income after consultation with Taiwan  but may not withdraw funds from the D account\u2019s $10 million corpus. At  the end of fiscal year 2017, the D account had a balance of $15.1 million,  with $5.1 million potentially available for use by the RMI."], "subsections": []}]}, {"section_title": "Appendix VII: Potential Trust Fund Strategies and Model Results", "paragraphs": ["We conducted a series of simulations to determine the likely effects of  potential strategies for improving the outlook of the FSM and RMI  compact trust funds. Prior studies by Graduate School USA, the Asian  Development Bank, and the International Monetary Fund examined the  effects of three general approaches for improving the trust funds\u2019  outlooks: (1) reducing planned disbursements from the funds, (2) making  additional contributions to the funds, and (3) changing the compact trust  fund disbursement policies. To isolate the impact of individual changes  on the compact trust fund balance and disbursements, we developed and  analyzed five potential strategies based on those examined in the  previous studies. Reduced disbursements and additional contributions  could occur without changes to the trust fund agreement, but changes to  the disbursement policies may require changing the agreements. In  strategies 3, 4, and, 5, we analyzed strategies that would permit  disbursement from the A account. Disbursing from the A account would  require changing the compact trust fund agreements. Table 12 shows the  5 potential strategies we analyzed.", "We analyzed two potential strategies that could be implemented without  changes to the trust fund agreements: reductions in the amount of  disbursements and additional contributions to the trust funds.", "Strategy 1: Annual disbursements are reduced below the maximum  allowable disbursement. We analyzed the likely effects of reducing  disbursements to an amount 30 percent below the maximum  disbursement, relative to the baseline scenario, for both the FSM and the  RMI compact trust funds.", "For the FSM, the average size of the disbursements would be lower in  the first 10 years of our projection, fiscal years 2024 through 2033, but  greater in later years. For the RMI, the average disbursement size  would remain lower than the disbursement amounts we projected  using the baseline scenario. Disbursement amounts would remain  volatile from year to year if the balance in the C account is not  sufficient to provide additional disbursements.", "For both countries, the risk of zero disbursements would be reduced,  but not eliminated, in each decade.", "For both countries, the likelihood that the funds would maintain or  exceed their inflation-adjusted fiscal year 2023 value after fiscal year  2023 would be higher in each decade.", "Reductions in annual disbursements could be effected by the compact  trust fund committees at their discretion, without changes to the compact  trust fund agreements. However, reductions in annual disbursements  below the maximum amount would require each country to permanently  adjust to having fewer resources for their budgets and economies than  the compact grants provided.", "Strategy 2: Additional annual contributions are made to the trust  fund in fiscal years 2018 through 2023. We analyzed the likely effects  of additional contributions equivalent to 5 percent of each country\u2019s fiscal  year 2016 GDP, relative to the baseline scenarios, for both the FSM and  the RMI compact trust funds.", "The average size of the disbursements would be greater.", "Disbursement amounts would remain volatile from year to year if the  balance in the C account is not sufficient to provide additional  disbursements.", "The risk of zero disbursements would be reduced but not eliminated.", "The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value after fiscal year 2023 would be higher.", "Additional contributions to the FSM or RMI trust funds could be accepted  at the discretion of compact trust fund committees, without changes to the  compact trust agreements. However, unless the compact trust fund  committees could identify other donors for these contributions, the  countries would have to choose to reprogram existing revenues from  other uses into compact trust fund contributions. The addition of funds  from other donors would have no negative impact on the trust funds\u2019  outlook if other conditions remained unchanged."], "subsections": [{"section_title": "Potential Strategies That Would Permit Disbursement from the A Account", "paragraphs": ["We analyzed three additional potential strategies that would involve  calculating annual disbursements as a percentage of the FSM and RMI  compact trust funds\u2019 balance and which would permit disbursement from  the A account. Disbursing from the A account would require changing the  compact trust fund agreements, necessitating negotiation and agreement  between the United States and each country and statutory enactment by  the U.S. Congress. In strategy 3, disbursements are calculated as a fixed  percentage of the funds\u2019 moving average balance over the previous 3  years. In strategies 4 and 5, disbursements are calculated on the basis of  the funds\u2019 moving average balance over the previous 5 years as well as  the committees\u2019 determination of the target size for the funds\u2019 balance or  disbursements. All three potential strategies would require the FSM and  the RMI to exchange a reduction in resources for more predictable  disbursements in the longer term.", "Strategy 3: The annual disbursement is set as a fixed percentage of  the fund\u2019s moving average balance over the previous 3 years, up to  the maximum disbursement amount defined by the current trust  fund agreement. We analyzed the likely effects of limiting annual  disbursements to 5 percent of the moving average balance over the  previous 3 years, relative to the baseline scenario for the FSM and the  RMI compact trust funds.", "In earlier years, average disbursements from the compact trust funds  would be smaller than those in the baseline scenario; in later years,  average disbursements would exceed those in the baseline scenario.  For the FSM, the average disbursement would start to exceed that in  the baseline scenario in the second decade after disbursements begin  (fiscal years 2034-2043). For the RMI, the average disbursement  would start to exceed that in the baseline scenario in the fourth  decade after disbursements begin (fiscal years 2054-2063).  Disbursement amounts would be less volatile from year to year than  the volatility that could be experienced in the baseline scenario when  the balance in the C account is not sufficient to provide additional  disbursements.", "The risk of zero disbursements would be eliminated.", "The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value after that year would be higher than in  the baseline scenario.", "Strategy 4: The amount of the annual disbursement is reduced if the  compact trust fund\u2019s moving average balance over the previous 5  years is lower than a primary target amount. We analyzed the likely  effects of implementing this strategy, relative to the baseline scenario for  the FSM and the RMI compact trust funds.", "In the FSM, the average disbursement would be lower than that in the  baseline scenario in earlier years but higher than that in the baseline  scenario in the fourth decade after disbursements begin (i.e., fiscal  years 2054-2063). In the RMI, the average disbursement would be  lower than that in the baseline scenario in earlier years but would  equal that in the baseline scenario in the fourth decade after  disbursements begin (i.e., fiscal years 2054-2063). Disbursement  amounts would be less volatile from year to year than the volatility that  could be experienced in the baseline scenario when the balance in  the C account is not sufficient to provide additional disbursements.", "The risk of zero disbursements would be greatly reduced but not  eliminated. In the FSM, the risk would be 55 percentage points lower  than in the baseline scenario in the fourth decade after disbursements  begin (i.e., fiscal years 2054-2063). In the RMI, the risk would be less  than 5 percent in each decade.", "The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value after that year would be higher than in  the baseline scenario.", "Strategy 5: The target disbursement is set as 2.1 percent of the  compact trust fund\u2019s balance in fiscal year 2024. The disbursement  amount is further decreased if the fund\u2019s moving average balance  over the previous 5 years is lower than the primary target balance.  Our analysis projected the following effects of implementing this strategy  relative to the baseline scenario for the FSM and the RMI compact trust  funds:", "For both countries, the average disbursement would be smaller than  that in the baseline scenario in the first 3 decades after disbursements  begin (i.e., fiscal years 2024-2053) but would exceed that in the  baseline scenario in the fourth decade. Disbursement amounts would  be less volatile from year to year than the volatility that could be  experienced in the baseline scenario between 2024 and 2063 when  the balance in the C account is not sufficient to provide additional  disbursements.", "The risk of zero disbursements would be almost eliminated.", "The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value would be much higher.", "Figures 11 through 16 compare projected compact trust fund  disbursements and fund balances in the baseline scenario with projected  disbursements and fund balances for the five selected potential strategies  for improving the trust funds\u2019 outlook.", "The amounts of disbursement reductions and additional contributions  varied among the strategies examined in prior studies. To provide  additional information about potential trust fund outcomes, we analyzed  another four examples of the selected strategies that assumed a lower  amount of additional trust fund contributions, lower disbursement  reductions, or a lower percentage of the compact trust fund balance that  could be withdrawn. Tables 13 and 14 show the results for all 9 analyses."], "subsections": []}]}, {"section_title": "Appendix VIII: Status of Other Planned Actions in the FSM and RMI Decrement Management Plans", "paragraphs": ["In addition to planning budget reductions in the FSM Long-Term Fiscal  Framework (its decrement management plan) and the RMI Decrement  Management Plan, the FSM and RMI planned other actions such as tax  reforms and subsidy reductions to address the scheduled decrement in  compact sector grants. The FSM implemented two of three planned  actions and the RMI implemented one of four planned actions. The FSM  did not implement unified tax reform measures but implemented a change  in the formula for sharing compact sector grants with the FSM states and  using planned surpluses to mitigate the effects of fiscal reforms. The RMI  did not implement planned new taxes, reductions in subsidies to state- owned enterprises, or reductions in payments to Majuro landowners for  the use of their land for utilities. The RMI did program a portion of its  fishing fee surplus into the annual budget.", "As of January 2018, the FSM national government had implemented two  of three actions that the FSM Long-Term Fiscal Framework indicated the  FSM would take in addition to budget reductions.  1.  Implementing unified tax reform measures", "Not implemented. The FSM Long-Term Fiscal Framework states  that substantial effort and progress has been made towards  comprehensive tax and revenue reform and that the FSM national  and state governments anticipated that the Long-Term Fiscal  Framework process would provide further impetus towards tax  reform. However, according to FSM officials, two FSM states  (Pohnpei and Yap) did not approve the Unified Revenue Act.  According to FSM officials, the FSM is currently considering other  models for tax reform and plans to revisit the issue in the future.  2.  Reducing the national government\u2019s share of compact grants and  reallocating it to the FSM states  Implemented. According to the Long-Term Fiscal Framework,  FSM Public Law 18-12 reduced the national government\u2019s share  of fiscal year 2014 compact grants from 10 percent to 5 percent,  with the amount of the reduction passed along to the FSM states.  In May 2014, FSM Public Law 18-57 further reduced the national  government\u2019s share of compact grants to 0 percent and increased  the amount of compact grants allocated to the state governments,  according to the FSM.  3.  Using planned surpluses for actions such as possible contributions to  activities that mitigate the effects of fiscal reforms, the FSM\u2019s compact  trust fund, retiring debt, or reform costs.", "Implemented. The FSM national government has made additional  trust fund contributions but, according to FSM officials, has made  a policy decision to make these contributions to the FSM Trust  Fund instead of the compact trust fund.", "As of January 2018, the RMI national government had implemented one  of four other actions that its decrement management plan indicated it  would take.  1.  Implementing a value-added tax and net profits tax in 2017", "Not implemented. Officials from the RMI Economic Policy,  Planning, and Statistics Office and Ministry of Foreign Affairs  confirmed that tax reform has not been implemented due to  political challenges. However, a tax task force has been  established to revisit tax revenue reforms.  2.  Programming 80 percent of unallocated Marshall Islands Marine  Resources Authority fishing fee surplus into the annual budget in  fiscal year 2015 and using the remaining 20 percent to develop the  fishing industry.", "Implemented. The RMI programmed a portion of its fishing fees  into the annual budget in fiscal years 2015 through 2017\u2014$15.8  million in fiscal year 2015, $26.3 million in fiscal year 2016, and  $40 million in fiscal year 2017. Although fishing fees were  programmed into the budget, according to RMI\u2019s Office of  Compact Implementation, the formula allocating 80 percent of  fishing fee revenue into the annual budget and the remaining 20  percent to develop the fishing industry is part of proposed RMI  legislation but has not become law.  3.  Reducing state-owned enterprise subsidies by 10 percent in fiscal  years 2016 and 2018.", "Not implemented. The RMI national government did not reduce  the total amount of state-owned enterprise subsidies by 10  percent in fiscal years 2016 as committed in the 2014 decrement  management plan. Audit reports for state-owned enterprises in  fiscal years 2015 and 2016 indicate that, while the RMI reduced  subsidy amounts for some state-owned enterprises, other subsidy  amounts increased and overall subsidies were higher in both fiscal  years 2015 and 2016 than in fiscal year 2014. See table 15.  for the government\u2019s use of their land for utilities by 20 percent in  fiscal years 2016, 2018, and 2021.", "Not implemented. The RMI national government has not reduced  government transfers to Majuro landowners to compensate for the  government\u2019s use of their land for utilities due to political  challenges, according to RMI officials. RMI Ministry of Finance  officials stated that, as of January 2018, there had been no  reductions in government transfers to Majuro landowners.  According to RMI government officials, the total rent payment bill  has in fact increased as utilities in Majuro have expanded."], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the U.S. Postal Service", "paragraphs": [], "subsections": [{"section_title": "Now on page 68.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix XI: Comments from the Federated States of Micronesia", "paragraphs": [], "subsections": [{"section_title": "GAO Comments", "paragraphs": ["1.  The FSM refers to our testimony in 2002 regarding the potential for  the FSM compact trust fund to not provide funds sufficient to cover the  estimated value of expiring federal services as early as 2002.  2.  The FSM includes a graphic showing the effect of the partial inflation  adjustments and the decrement in the compact sector grants. We  include a similar portrayal of this analysis in figure 10 in this report.  3.  The FSM states that the amount of the decrement in compact sector  grants that is used for annual contributions to the FSM compact trust  fund should be recorded as an FSM contribution to the fund.  However, Section 215 of the FSM compact refers to the annually  decreasing amounts provided to the compact trust fund as set forth in  Section 216 of the FSM compact as United States contributions to the  compact trust fund."], "subsections": []}]}, {"section_title": "Appendix XII: Comments from the Republic of the Marshall Islands", "paragraphs": [], "subsections": [{"section_title": "GAO Comments", "paragraphs": ["1.  The RMI states that, absent accountability issues, the maximum  annual disbursement amount should be disbursed from the compact  trust fund. However, as our report notes, although the compact trust  fund agreements state the maximum allowable disbursement level,  they do not establish or guarantee a minimum disbursement level.  2.  The RMI states that the 2-year delay in investing the compact trust  fund will result in a compounded total loss of $33.6 million by the end  of fiscal year 2023. Our 2007 analysis of the trust funds included  information about the delays in establishing the trust funds. We did  not update our 2007 analysis of the loss in income due to the delay in  investing the compact trust fund for this report.  3.  The RMI notes that the amended compacts' implementing legislation  extended several important federal programs. Appendix IV of this  report presents our conclusions, based on our analysis of current law,  that the RMI will remain eligible as of the end of fiscal year 2023 for  special education programs and for some programs replaced by the  supplemental education grant."], "subsections": []}]}, {"section_title": "Appendix XIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Emil Friberg (Assistant Director),  Ming Chen, Neil Doherty, Mark Dowling, Reid Lowe, Moon Parks,  Shaundra Patterson, and Michael Simon made key contributions to this  report. Justin Fisher, Jeff Isaacs, Julie Hirshen, Risto Laboski, Courtney  LaFountain, and Jeffery Malcolm provided technical assistance."], "subsections": []}]}], "fastfact": ["The U.S. is providing $3.6 billion in economic assistance to the nations of Micronesia and the Marshall Islands from 2004 through 2023. This assistance has increasingly been provided in the form of contributions to trust funds for each nation, and is intended to boost their self-sufficiency. After the assistance ends, the trust funds should generate revenue from investments.", "But we found the trust funds may not provide disbursements in some years or sustain their value after 2023.", "We made 6 recommendations, including that the U.S. Interior Department take steps to address the risks to the funds' ability to provide income after 2023."]}
{"id": "GAO-18-539", "url": "https://www.gao.gov/products/GAO-18-539", "title": "Public Transit Partnerships: Additional Information Needed to Clarify Data Reporting and Share Best Practices", "published_date": "2018-07-30T00:00:00", "released_date": "2018-07-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The public transit landscape is changing, as advances in technology have enabled more on-demand mobility services, such as ridesourcing and bike-share services. In response, some transit agencies have started to partner with private mobility companies with the aim of offering public transit riders more efficient and convenient options through on-demand services. FTA supports public transportation systems through a variety of federal grant programs.", "GAO was asked to review various issues related to such partnerships. This report examines, among other things: (1) the types of partnership projects that selected transit agencies have initiated with private mobility companies and (2) how DOT's efforts and funding and federal requirements may impact such partnerships. GAO interviewed DOT officials and reviewed DOT documents; interviewed 16 local transit agencies and 13 private mobility companies involved in transit partnerships; and reviewed 22 projects initiated by the selected partners, including 5 funded by the Mobility on Demand Sandbox grant program. GAO selected these partners to represent a range of service types and geographic locations; the results are non-generalizable."]}, {"section_title": "What GAO Found", "paragraphs": ["Some local transit agencies are pursuing partnerships with private mobility companies\u2014including car-share and \"ridesourcing\" companies such as Lyft and Uber, which provide access to a shared vehicle \u201con demand\u201d\u2014with the aim of offering public transit riders more efficient and convenient service options. Most of the transit partnership projects that GAO selected (14 of 22) involved private partners providing on-demand transportation for the \u201cfirst- and last-mile\u201d connections to or from public transit stations (see figure). Local transit agencies use first- and last-mile connections to increase their public transit ridership. Other services provided through selected projects included filling transit service gaps in under-served areas. Most selected projects have not yet been evaluated to determine whether they achieved intended outcomes.", "The Department of Transportation's (DOT) efforts, especially the Federal Transit Administration's (FTA) initiation of the Mobility on Demand Sandbox program, have facilitated partnerships, but confusion about how to meet some requirements and how to report data pose challenges to implementing projects. In October 2016, FTA announced the selection of 11 projects to receive grants and has since provided assistance to the grantees. FTA also issued clarifications about how certain federal requirements\u2014such as those related to the Americans with Disabilities Act of 1990 (ADA)\u2014apply to transit partnerships. However, most selected local transit agencies (14 of 16) said that additional information beyond what FTA has already disseminated, including how agencies have successfully structured partnerships and met federal requirements, would be helpful. Collecting and disseminating such information could help FTA be better positioned to respond to changes in the transit industry that could impact its own efforts and goals, such as planning for future Mobility on Demand grants. In addition, most selected local transit agencies reported confusion related to reporting information about their on-demand projects into the FTA's National Transit Database, including confusion about which on-demand project data would qualify for entry. This confusion has led to possible reporting inconsistencies by some local transit agencies. Ensuring that data contained in the National Transit Database are complete and accurate is important, since according to FTA officials, FTA uses these data (1) to apportion certain grant funds to local transit agencies based on factors such as passenger miles traveled, and (2) to track its progress in achieving goals such as promoting efficient transportation systems, among other things."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations including that FTA disseminate information about how partnership projects met federal requirements and how data on partnerships should be entered into the National Transit Database. DOT concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In response to recent developments in technology, local transit agencies  have started to partner with private mobility companies\u2014including car- share and bike-share companies, taxis, and \u201cridesourcing\u201d companies  such as Uber and Lyft\u2014with the aim of offering public transit riders more  efficient and convenient service options. Such transit partnerships may  become more common as mobility technologies emerge, many of which  are enabled by smartphone applications. Partnerships include, for  example, arrangements where local transit agencies seek to increase  public transit ridership by subsidizing ridesourcing rides to or from rail  stations, making access more convenient.", "In 2016, the Federal Transit Administration (FTA) launched a new  program to explore such transit partnerships and in turn to make  transportation services more integrated and efficient. FTA\u2019s funding  opportunity announcement for its Mobility on Demand (MOD) \u201cSandbox\u201d  grant program generated a lot of interest among transit providers such as  local transit agencies, generating 78 eligible proposals. From these  applications, FTA announced the selection of 11 projects to receive about  $8 million. Such partnerships can offer benefits, but some private mobility  companies\u2019 business models may run counter to providing accessible and  equitable transit. For example, riders without a smartphone could be  excluded from accessing some emerging services.", "In the light of these developments, you asked us to examine several  aspects of partnerships between local transit agencies and private  mobility companies such as ridesourcing companies, including potential  benefits from partnerships and challenges to their implementation. This  report addresses:  1.  the types of partnership projects that selected transit agencies have  pursued with private mobility companies and the potential effects of  these partnerships;  2.  how DOT\u2019s efforts and funding, and various federal requirements  impact such emerging partnerships; and  3.  other considerations that may affect the future prevalence of such  partnerships.", "To address these objectives, we reviewed documents from and  conducted interviews with a selection of local transit agencies and private  mobility companies engaged in transit partnerships. Specifically, we  selected 15 transit partnerships, to represent a range of type of project,  type of service, and geographic location. The selected transit  partnerships also include 5 projects that received funding through FTA\u2019s  MOD Sandbox grant program. We interviewed 29 stakeholders involved  in these partnerships including representatives from 16 local transit  agencies and 13 private mobility companies, including three ridesourcing  companies, 3 taxi companies, 5 technology companies focused on  transit, a bike-share company, and a car-share company. Although the  views of these selected officials are not generalizable to those of all local  transit agencies or private mobility companies, they represent a range of  perspectives and expertise regarding partnerships. We also interviewed  officials and reviewed documents from the Department of Transportation  (DOT), including in FTA and the Intelligent Transportation Systems Joint  Program Office (ITS JPO) and interviewed five other stakeholders with  knowledge of transit issues, such as the Shared Use Mobility Center  (SUMC) and the Community Transportation Association of America. In  addition, we reviewed industry and research documents and compared  DOT\u2019s efforts to federal internal control standards and leading practices  for collaboration identified in prior GAO work.", "We conducted this review from June 2017 to July 2018 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The growth of the \u201csharing economy\u201d has begun to impact public  transportation. DOT describes the sharing economy as a developing  phenomenon based on sharing, renting, and borrowing goods and  services, rather than owning them. One facet of the sharing economy is  shared mobility, meaning the shared use of a motor vehicle, bicycle, or  other transportation mode that is often facilitated by requests from users,  largely through mobile applications. See figure 1 for examples of shared  mobility services available \u201con demand\u201d through mobile applications.", "The increased use of ridesourcing services has been particularly  noticeable in recent years. Since Uber first initiated ridesourcing services  in the U.S. in 2010, such services have become increasingly popular,  especially in urban areas. While data on the use of ridesourcing are  limited, researchers reported in 2017 that about 21 percent of adults in  major U.S. cities had used ridesourcing services, and about a quarter of  them used these services on a frequent (weekly or daily) basis.  Ridesourcing services offer convenience benefits for riders (see fig. 2,  which explains how such services work).", "Millions of Americans\u2014especially those unable to provide their own  transportation due to age, disability or income constraints\u2014rely on public  transit to fully participate in society and access vital services. The types of  services typically provided by local transit agencies include:  rail services, in which vehicles operate along railways.  fixed-route bus services, which operate according to regular  schedules along prescribed routes with designated stops. paratransit services, which generally speaking are accessible,  origin-to-destination transportation services that operate in response  to calls or requests from riders. other demand-response services, which are sometimes called dial- a-ride.", "Local transit agencies have historically contracted out some services, in  part to decrease their operating costs. For example, a survey we  conducted in 2013 showed that a majority (61 percent) of the 463 responding local transit agencies contracted out one or more services.  Services most frequently contracted out included paratransit services for  individuals with disabilities and demand-response services. In particular,  taxi companies have often been used to fulfill paratransit services and  other demand-response services.", "Within DOT, FTA is responsible for providing grants that support the  development of safe, comprehensive, and coordinated public  transportation systems, among other things. Specifically, FTA:", "Annually distributes about $12 billion to support and expand transit  systems, according to DOT. Two of these funding sources are  Urbanized Area Formula Grants and Formula Grants for Rural  Areas. These grant funds go to local transit agencies, but these  local transit agencies may in some cases use these funds to procure  the services of third parties such as private mobility companies.", "Ensures that local transit agencies receiving certain federal financial  assistance do not discriminate based on race, color, religion, national  origin, sex, disability, or age. Furthermore, FTA ensures local transit  agencies comply with DOT regulations implementing certain portions  of Title VI of the Civil Rights Act of 1964, as amended, (Title VI) and  the Americans with Disabilities Act of 1990, as amended, (ADA).", "Administers the National Transit Database (NTD), which is intended to  provide information to the federal government and others on which to  base public transportation service planning. All recipients and direct  beneficiaries of grants from the urbanized area formula program and  rural area formula program are required by statute to submit data to  the NTD, such as financial and operating data.", "FTA\u2019s Office of Research, Demonstration, and Innovation recently  launched a new MOD program to further its goals of improving the  integration of transportation systems and increasing the accessibility and  efficiency of public transit services for riders. According to officials, FTA  believes that the U.S. public transportation system will be heavily  influenced by the \u201cMobility on Demand\u201d concept in the future, so has  incorporated this concept into its planned research efforts. The MOD  program is the agency\u2019s main effort to help local transit agencies to  explore emerging shared mobility technologies, in part by partnering with  private mobility companies. The MOD program involves several  components, including funding projects through the competitive MOD  Sandbox grant program. In May 2016, FTA published a notice of funding  opportunity and solicitation of project proposals for the MOD Sandbox  grant program. In October 2016 FTA announced the selection of 11  projects to receive about $8 million. According to FTA officials, the  agency designed the MOD program with several goals in mind, including:", "Funding those proposed grant projects with the most promise for  generating benefits for the respective communities.", "Helping agencies better understand how such partnerships work in  practice to promote emerging on-demand mobility options.", "Identifying any federal requirements that could impact the ability to  provide on-demand mobility services offered through partnerships.", "Evaluating the extent to which the MOD Sandbox projects achieve  their intended outcomes by developing and applying relevant  performance metrics."], "subsections": []}, {"section_title": "Partnerships Seek Various Service Efficiencies, but Their Full Impacts are Unknown", "paragraphs": [], "subsections": [{"section_title": "Most Selected Projects\u2019 On-Demand Services Aimed to Increase Transit Ridership", "paragraphs": ["As shown in figure 3 below, local transit agencies nationwide are pursuing  partnerships to offer a variety of on-demand services that aim to make  access to public transportation more efficient and convenient. The private  mobility companies involved in selected partnerships include some well- known companies such as Uber and Lyft, and some lesser-known types  of companies such as a bike-share company and technology companies  focused on transportation. Selected local transit agencies most  frequently partnered with ridesourcing companies (11 projects), while 8  partnership projects included more than one type of private partner. Five  of the 22 partnership projects were in FTA\u2019s MOD Sandbox program.", "Most selected projects (14 of 22) involved on-demand first- and last-mile  transportation connections, through which respective local transit  agencies aim to increase ridership on their transit systems (see table 1).  Addressing the first- and last- mile issue has been identified as an  ongoing challenge for many local transit agencies seeking to increase  their transit ridership. Research suggests that the easier it is to access a  transit system, the more likely people are to use it.", "Connecting on-demand services for the \u201cfirst- and last-mile\u201d\u2014which refers  to the distances riders need to travel to or from a public transit station or a  stop to arrive at their final destination\u2014could improve transit access by  effectively extending service beyond the respective fixed-route buses and  commuter trains (see fig. 4). To attract riders to use such first- and last- mile services, eight projects provided a discount to pay for a portion of the  fare for the ridesourcing ride to access public transit. Figure 5 below  shows a selected local agency\u2019s advertisement for such a voucher  program.", "The second most common type of service provided through selected  projects was on-demand paratransit service, which could help the  respective transit agencies offer eligible riders more convenient options  and also help address the high cost of providing such services. More than  half of the selected projects (13 of 22) provided on-demand services  targeted toward paratransit-eligible riders, either as the primary project  goal or to ensure equivalent service for eligible customers. Officials from  two local transit agencies told us that by providing more convenient ADA  paratransit services\u2014as compared to traditional services that require  booking a day or more in advance\u2014these projects in turn produce other  benefits. For example, officials from one local transit agency with such a  partnership thought their program could really benefit the broader  community because the targeted riders could make more spur-of-the- moment decisions to participate in activities such as shopping, work, and  church. Also, as we have previously reported, the costs of paratransit  services are much more costly to provide than fixed route trips.", "Some local transit agencies also aimed to improve their public trip  planning and ticketing systems, to increase convenience for riders in their  communities. Specifically, five selected local agency projects involved  early experiments with the Mobility as a Service (MaaS) concept,  meaning offering riders a central electronic platform\u2014such as an app\u2014to  plan end-to-end trips including booking, ticketing, and paying for any  transportation needed to make the trip, both public or private. If fully  implemented, MaaS would allow riders to, for example, use one app to  view and compare real-time availability of various modes (e.g., a traveler  might be directed to a train if one is arriving quickly, or to a ridesourcing  vehicle if train service has ended for the night). Riders could tailor their  trip to meet their needs and payments could be processed through their  phone. Implementing MaaS apps could increase convenience for  consumers, and may also increase transit ridership. As an example of an  \u2018early\u2019 MaaS experiment, Chicago Transit Authority\u2019s MOD Sandbox project seeks to integrate the city\u2019s bike-share system into CTA\u2019s central  trip planning and fare payment app, so that riders can more easily pay for  a bike-share ride along with their transit trip. Figure 6 shows a sample of  a current trip planner and a future MaaS concept.", "To initiate their on-demand projects, half of selected local transit agencies  relied on local funds and not federal funds. Specifically, officials from half  of the local transit agencies (8 of 16) indicated that their projects did not  use federal funds, with the projects either partially or entirely funded  through a local transit agency or local government subsidy, where the  transit agency subsidizes or pays the entire cost of the on-demand  service. The remaining 7 local transit agencies used federal funds for  their projects. For example, the 5 FTA MOD Sandbox projects in our  selection received federal funds to support 80 percent of project costs,  with the remaining 20 percent of project costs supported through local  matching funds. One FTA MOD Sandbox project involved two local  transit agencies."], "subsections": []}, {"section_title": "Long-Term Sustainability and Effects on Transit Ridership, Costs, and Communities Have Not Yet Been Determined", "paragraphs": ["Most of the selected projects have not yet been evaluated to determine  whether they achieved intended outcomes. However, a few transit  officials told us that their agencies\u2019 costs had decreased since initiating  the partnerships. For example, an official from one transit agency  reported that the on-demand service provided through their partnership  had helped them reduce costs for paratransit. Two of the completed  partnerships in our review generated insufficient ridership to succeed.  The partnerships were widely covered by the press, which transit agency  officials believe provides other transit agencies the opportunity to learn  from them as well. Specifically, Kansas City\u2019s Bridj project and the Go  Centennial project in the city of Centennial, Colorado failed to attract  sufficient riders despite the money and time invested by the local transit  agencies and their private partners. The transit officials involved indicated  that the projects should have incorporated more marketing of the services  being offered and allowed more time for riders to adapt to the new on- demand services, an issue which we will further discuss later in this  report.", "In addition, according to some selected local transit agencies and  literature, the increase in such partnerships may have negative effects on  public transit ridership and on local transit agencies more broadly. For  example, as riders become comfortable with the new on-demand options,  they may elect to use these transportation modes instead of public transit,  thus reducing public transit ridership. In addition to the possible loss of  ridership revenue, on-demand services could decrease other transit  agency revenues, such as parking fees charged at some transit stations.  Further, one researcher that regularly reviews emerging mobility topics  discussed the concern that over time, an increase in on-demand services  offered could result in inequitable public transit. Specifically, she noted  that if on-demand services offered continue to increase, riders may begin  to perceive fixed route transit services as inferior to these new services,  which could divert riders and revenues away from public transit.  Eventually, this could result in two systems: an inferior public transit  system and a superior on-demand system for those who can afford it.", "To provide more information about potential outcomes from such  partnerships, DOT officials have commissioned a study to evaluate the  outcomes of the MOD Sandbox partnerships and anticipate publishing  results in 2019. In collaboration, FTA and DOT\u2019s ITS JPO developed an  evaluation framework for each of the 11 funded MOD Sandbox projects.  As part of this evaluation, the transit agencies plan to collect information,  such as ridership and cost data, to demonstrate how the project has  influenced transit rider behavior. ITS JPO plans to use the data to  measure the extent to which each project has fulfilled its goals and  impacted travel behavior. The study will also include crosscutting  analyses and lessons learned for all MOD Sandbox projects. According to  DOT officials, FTA is also developing performance metrics to track the  projects over time to see the extent to which they promote integrated  transportation."], "subsections": []}]}, {"section_title": "While DOT Has Facilitated Partnerships, Some Requirements and Limited Data Pose Implementation Challenges FTA Has Facilitated Partnerships through the Mobility on Demand Program", "paragraphs": ["FTA\u2019s MOD program is a key effort under way to encourage and better  understand transit partnerships. Since first announcing the selected 11  MOD Sandbox projects to receive funding in October 2016, FTA has  supported the program through various efforts, and most (10 of 16)  selected local transit agencies in our review expressed positive views on  the program. Specifically:", "FTA has provided technical support to participants as the MOD  Sandbox projects have progressed. According to FTA officials, FTA  has contracted with the SUMC to provide technical assistance to  MOD Sandbox grantees. Officials from all six MOD grantees in our  selection said that FTA support throughout the grant and planning  processes has been helpful. For example, officials from one transit  agency indicated that this program shows FTA\u2019s dedication to the idea  of shared mobility and enables the grantees to try out new models in a  \u201cnurturing environment.\u201d", "FTA has held quarterly meetings open to all MOD Sandbox  participants, including local transit agencies and private mobility  companies. According to two private mobility companies in our  selection that participated in the MOD Sandbox program, these  meetings were a constructive forum where participants could discuss  challenges, lessons learned and other issues."], "subsections": [{"section_title": "Most Selected Transit Agencies Wanted Additional Information Describing How Transit Partnerships Have Met Federal Requirements", "paragraphs": ["Since initiating the MOD Sandbox program, FTA has gathered  information from grantees about federal requirements that may pose  challenges to implementing transit partnerships. For example, FTA\u2019s  MOD Sandbox notice of funding opportunity encouraged grant applicants  to identify any regulatory or policy waivers needed to implement proposed  projects. According to FTA officials, they received many such waiver  requests from applicants, many of which they could not grant. For  example, some of the MOD Sandbox grantees\u2019 private partners  requested waivers from ADA requirements, which according to FTA  officials the agency does not have the authority to waive. FTA officials  also clarified that they do not intend to immediately change policies or  regulations based on the feedback received through the MOD Sandbox  program. Instead, they aim to help MOD Sandbox participants meet  requirements and to provide technical assistance to local transit agencies  outside of the program. They said that, in the longer term, the agency  would consider potential policy and regulatory revisions if needed.", "Most selected transit agencies (11 of 16) and private mobility companies  (10 of 13) indicated that some federal requirements\u2014if applicable to a  certain partnership\u2014can impact these partnerships and in some cases,  make them more challenging to undertake. Table 2 below shows four  categories of requirements cited as having the potential to impact  partnerships, along with examples of stakeholder views on their potential  impacts. Although some stakeholders identified these requirements as  potentially impacting partnerships, they did not agree that the  requirements should be waived to facilitate partnerships. For example,  officials from two local transit agencies told us that requirements related  to providing accessible and equitable transportation are important to  maintain even if they could deter partnerships. However, FTA designed  the MOD Sandbox grant application process so that the applicant local  transit agencies could choose their private mobility partners using a  noncompetitive process, bypassing the procurement requirements that  normally require a full and open competition. One MOD grantee told us  that their ability to bypass a competitive process was helpful and  expedited their project planning efforts.", "As FTA has gained more knowledge about such partnerships, the agency  has sought to clarify how some of these requirements apply to such  partnerships. For example, in December 2016, shortly after announcing  MOD Sandbox grantees, FTA issued documentation clarifying various  aspects of transit partnerships, as well as certain federal requirements.", "FTA issued a \u201cDear Colleague\u201d letter to local transit agencies which  addressed how certain ADA and Title VI requirements apply when a  local transit agency enters into a partnership with a ridesourcing  company.", "FTA published a dedicated webpage of frequently asked questions  (FAQ) about shared-mobility partnerships. This website supplements  subject-specific FAQs already available on FTA\u2019s website that also  may apply to these partnerships; it includes FAQs on Civil Rights and  ADA requirements.", "In addition, FTA provides clarifying information to local transit agencies  upon request, according to FTA and several local transit agency officials.", "However, officials from most (14 of 16) selected local transit agencies told  us that additional information from FTA would be helpful, especially  examples of how local transit agencies are structuring their partnerships  to ensure they meet federal requirements. As noted above, FTA has  issued various documents for local transit agencies about how federal  requirements, such as Title VI requirements, apply to emerging  partnerships. Nonetheless, officials from some local transit agencies told  us that without examples, they were unclear about how such partnerships  could ever meet requirements. For instance, one transit official told us he  was unaware FTA has determined that local transit agencies may use  ridesourcing companies without requiring that these contractors undergo  drug and alcohol testing\u2014the aforementioned \u201ctaxicab exception\u201d\u2014if  riders are able to select from multiple providers for their on-demand rides.  In another example, officials from one agency told us that they had tried  to look at the NTD database to find peer local transit agencies with similar  on-demand programs to ask these agencies for advice, but could not find  any peers using that method. These officials wanted to know how other  local transit agencies were dealing with customers without bank cards in  their on-demand services. They told us that having more examples from  FTA of how various local transit agencies are structuring their transit  partnerships to comply with federal requirements could be especially  helpful.", "Selected local transit agencies with ridesourcing partners described  approaches that they believe help to ensure compliance with the drug and  alcohol testing, ADA, and Title VI requirements, including using a taxi  company, a paratransit company, or both. For example, transit officials  managing four of the 11 selected projects involving a ridesourcing  company told us they had added a taxi or paratransit company as an  option for riders to comply with requirements. According to two taxi  representatives we interviewed and research studies, taxi companies  already have procedures for fulfilling federally-required drug and alcohol  tests. Several local transit officials told us that taxi companies usually  have call centers and accept cash payments, making it easier to ensure  that the services comply with Title VI. In addition, according to taxi  representatives and research reports, taxi companies may have  experience complying with the ADA since some of DOT\u2019s implementing  regulations may already apply to them.", "Gathering and disseminating more information on partnerships  corresponds with best practices for collaboration with external parties  identified in prior work by GAO and others. For example, as we have  previously reported, if federal agencies can identify and share best  practices, this can help the entities that federal agencies oversee\u2014such  as local transit agencies in this case\u2014make changes to successfully  adapt to changes in the environment. Additionally, a recent industry  report argues that local transit agencies seeking to form transit  partnerships will strongly benefit from learning directly from peer agencies  with relevant experiences in the emerging area.", "As discussed above, FTA has gathered local transit partnership  information from its MOD Sandbox projects. However, the majority of  local transit agencies that participate in partnerships are not in the MOD  Sandbox program; and many of their projects may already be underway  or complete. Gathering information from those local transit agencies  would provide FTA with more information about how partnerships are  meeting federal requirements. It would also likely provide FTA with more  examples to disseminate to all local transit agencies interested in  pursuing partnerships to help those agencies structure their partnerships  in accordance with federal requirements. Finally, additional information on  these partnerships would better position FTA to respond to changes in  the transit industry that could impact its own efforts and goals, such as  planning for future MOD grants and improving the efficiency of transit  services overall."], "subsections": []}, {"section_title": "Selected Transit Agencies Reported Confusion about Whether and How On- Demand Project Data Should Be Entered into the National Transit Database", "paragraphs": ["To track its progress toward achieving its goals, such as increasing the  efficiency of public transit services, FTA can use data from NTD.  According to FTA officials, NTD is its primary source for information and  statistics on U.S. transit systems. As we have previously reported, NTD is  intended to provide timely, accurate information to help Congress and  FTA apportion funding and assess the continued progress of the nation\u2019s  public transportation systems. A key goal of the NTD is to gather  information from local transit agencies, such as financial and operating  data, to inform public transportation service planning. All recipients and  direct beneficiaries of grants from the Urbanized Area Formula Program  and Rural Area Formula Program\u2014such as local transit agencies\u2014 are  required to report certain data to NTD. For example, in 2016, over 950  urban transit agencies and others reported into NTD, and FTA  encourages transit agencies not receiving urbanized area and rural area  grant funds to report voluntarily so that NTD can be more complete.  Additionally, according to FTA officials, FTA uses certain NTD data to  apportion certain grant funds to local transit agencies nationwide,  including data on passenger miles traveled and vehicle revenue miles.", "Each year, urbanized area and rural area formula grant recipients and  beneficiaries are required to submit an NTD package with many different  types of data, including:  financial information, including operating expenses and funding  sources, asset inventory data, such as numbers of transit stations and  maintenance facilities, and  services supplied, including the number of passenger trips that year,  and miles traveled by passengers.", "To help local transit agencies with this reporting, FTA issues NTD  manuals annually that are updated with new information, as needed.  These manuals describe how to report all the various NTD data  requested, including how to report services that the transit agency  provided based on the transportation mode, divided between rail and non- rail, with non-rail including demand response services, potentially  provided by private mobility companies.", "According to FTA officials, some data that local transit agencies would  need to report on-demand project data into NTD and to measure project  outcomes\u2014such as whether the targeted riders are using the on-demand  rides to get to and from transit stations\u2014would be tracked by the private  mobility companies involved in the project. For example, to report data  about services supplied into NTD, the local transit agency would need  certain data such as: the numbers of trips and riders taken, distances  traveled in miles, time spent travelling, and the days of the week when the  services are offered. In the case of on-demand rides offered through  transit partnerships, much of that data would be tracked by the private  mobility company and potentially shared with the local transit agency for  NTD entry.", "Although FTA has made some information available that could facilitate  these transit partnerships\u2014including updated NTD manuals\u2014local transit  agencies in our selection reported the following issues:  confusion regarding whether and how to report on-demand service  data into NTD, and difficulties gathering data for NTD reporting from ridesourcing  companies."], "subsections": [{"section_title": "Confusion Regarding Whether and How to Report Data about On-Demand Services into NTD", "paragraphs": ["According to FTA officials and the most recent NTD manual, transit  agencies only report data to the NTD for services provided that meet the  statutory definition of public transportation. Under the statute, public  transportation means regular, continuing shared-ride surface  transportation services that are open to the general public or open to a  segment of the general public defined by age, disability, or low income.  However, public transportation does not include intercity passenger rail  transportation provided by Amtrak, intercity bus service, charter bus  service, school bus service, sightseeing service, courtesy shuttle service  for patrons of one or more specific establishments, or intra-terminal or  intra-facility shuttle services. FTA officials told us that for a  transportation service to be considered \u201cshared-ride\u201d the service must  have the real possibility of being offered on a shared-ride basis.  According to FTA officials, for a transportation service to be \u201copen to the  general public\u201d it cannot be limited to a specific group (except those  groups specified in the definition), and neither the driver nor passenger  can deny another person on board. For example, a service provided by a  ridesourcing company in which a passenger or driver can refuse  additional passengers would not be considered \u201copen to the general  public,\u201d according to FTA officials. Furthermore, FTA officials told us that  a time-limited pilot providing transportation service is not considered  \u201cregular\u201d and \u201ccontinuing.\u201d", "Additionally, FTA officials told us that, even if a transportation service  meets the statutory definition of public transportation, the local transit  agency may not be required to report the associated data if that agency  did not directly provide the transit service. For example, according to FTA  officials, whether or not a local transit agency would have to report  transportation service provided by a private partner would depend on the  contract between the local transit agency and the private partner. Also,  according to FTA officials, a local transit agency cannot report data about  service provided by a private partner if it is a voucher program, because  those services are not considered \u201cshared ride\u201d and thus do not meet the  statutory definition of public transportation. If the service provided by the  private partner meets the statutory definition of public transportation and  is considered a service provided by the local transit agency, then FTA  officials told us most services provided through these partnerships should  be reported under the Demand Response or Demand Response-Taxi  transportation modes.", "Despite available NTD manuals that discuss the statutory definition of  public transportation, officials from most (10 of 16) selected local transit  agencies expressed confusion about NTD reporting for on-demand  projects, such as about which types of on-demand rides qualify as \u201cpublic  transportation\u201d for NTD reporting purposes and how qualifying rides  should be entered into NTD. These officials told us that further  clarification is needed from FTA about this issue. For example, three  projects in our review offered similar on-demand paratransit rides\u2014 through ridesourcing or taxi company partners\u2014but officials from the  three local transit agencies involved had different views on whether and  how these rides should be entered into NTD.", "Officials from the first local transit agency told us that they were  planning to report these rides into NTD and had met with the FTA  officials responsible for maintaining NTD to ask them how to report  them. These FTA officials had told them it should theoretically be  possible to enter those rides into NTD, but they did not clarify how to  do so.", "Officials from the second transit agency told us that if they extend the  dates of their current partnership with two ridesourcing companies,  then they will need more clarification from FTA about the information  that should be reported into NTD, such as passenger miles traveled.  These officials also noted that they already use an extensive process  for entering paratransit information into NTD, including tracking  vehicle hours and passenger miles of all vehicles used to provide  such services.", "Officials from the third local transit agency told us that they did not  intend to report these rides into NTD. In these officials\u2019 opinion, these  rides should not be entered into NTD since they do not meet the  definition of public transportation in the NTD policy manual.", "Selected transit agencies in our review seem to be interpreting the  information about whether and how to enter data from their partner- provided on-demand services\u2014as outlined in NTD manuals\u2014differently,  leading to inconsistencies in whether and how these agencies planned to  enter data. For example, one local transit agency\u2019s project offered shared  microtransit services on-demand through a technology company partner.  In our interview, officials from this local transit agency told us that they  intended to report these rides into NTD, but had received unclear and  seemingly incorrect advice from the regional FTA staff on how to do so.  According to these officials, the regional FTA staff had told them to  include these microtransit rides with the agency\u2019s demand-response  paratransit rides, since some of the riders of this on-demand service were  also qualified for paratransit. The local transit officials told us that they  hesitated to report to NTD in the way instructed because it seemed  inaccurate. In this local transit agency\u2019s response to follow up questions,  the local officials said they were no longer planning to report data on their  on-demand service into NTD. We asked FTA officials if this type of  service provided by a private partner qualifies as public transportation,  and thus should be entered into the NTD by the local transit agency, and  FTA officials said it seemed to qualify for entry. In another example, one  transit official managing a first- and last- mile voucher project told us that  she planned to report these rides into NTD. However, FTA officials told us  services provided through voucher programs generally do not meet the  definition of public transportation and therefore do not qualify for NTD  entry.", "Federal internal control standards state that agencies should use quality  information to achieve the entity\u2019s objectives. To ensure that quality data  are used to track progress toward achieving objectives, agencies should  obtain relevant data from internal and external sources in a timely  manner, according to the standards. Further, the standards state that  agencies should use an iterative and ongoing process to identify what  information is needed. As changes to the agencies\u2019 objectives occur\u2014or  as external events occur that impact such objectives\u2014the standards  indicate that agencies should change information requirements as  needed to meet these modified objectives.", "The above examples of local transit agencies\u2019 confusion about NTD  reporting requirements raise questions about whether NTD data  accurately reflect the status of the U.S. public transportation system, a  key goal of the NTD. According to officials, FTA is considering issuing  more information clarifying required NTD reporting for on-demand  services provided through partnerships. They explained that rather than  change any reporting requirements, this new information would clarify  how emerging on-demand services fit into current NTD reporting  requirements. These officials also told us that local transit officials with  questions related to NTD reporting can call an FTA NTD help desk or  they can direct their questions to the designated NTD analyst. Officials  said that they would consider issuing a document on frequently asked  questions about NTD reporting for these partnerships, but that thus far  FTA had received few relevant questions from transit agencies.  Specifically, FTA officials told us that their NTD office had received  relevant questions from two local transit agencies (both of which are in  our selection), both about what types of ridesourcing services would be  reportable to the NTD. According to FTA officials, they responded to  these inquiries by explaining that all services entered into NTD must be  shared and meet the statutory definition of \u201cpublic transportation.\u201d", "While FTA officials told us that only two local transit agencies had  contacted them about NTD reporting confusion, this did not include some  other agencies in our selection that had contacted their regional FTA  offices for clarification. This raises the possibility that more transit  agencies nationwide with such partnerships might have confusion about  NTD reporting than the FTA headquarters office was aware of. FTA  officials also told us that, in the longer-term, they are considering  developing a separate NTD reporting category\u2014or transportation mode\u2014 for shared ridesourcing services that qualify as public transportation.  However, FTA officials did not commit to taking action on this issue.", "Without clarified information from FTA on whether services provided  through on-demand projects qualify as public transportation, and how to  enter data about these services into NTD, some local transit agencies will  likely remain confused, potentially leading to inaccurate data in the NTD.  Also, according to FTA officials, without accurate NTD data, (1) FTA will  not be able to effectively track its own progress toward achieving goals\u2014 such as improving the efficiency of transit systems, and (2) the  apportionment of certain grant funds to local transit agencies could be  affected."], "subsections": []}, {"section_title": "Difficulties Gathering Data from Some Ridesourcing Partners", "paragraphs": ["Selected local transit agencies reported difficulties obtaining some data  from their ridesourcing partners\u2014such as the total miles travelled with  passengers on board\u2014and according to some stakeholders, local transit  agencies nationwide have faced similar challenges. Some of these data  may be needed for NTD reporting but they could also be useful to local  transit agencies in tracking the outcomes of their on-demand projects.  Specifically, officials from six selected local transit agencies that had  partnered with ridesourcing companies had experienced issues obtaining  data from them, mostly due to these companies\u2019 concerns about rider  privacy and proprietary data. For example, one local transit official told us  that she requested, but did not receive, data needed for NTD reporting  from a ridesourcing company, including miles travelled with passengers  on board.", "While representatives from most selected private mobility companies we  spoke to (11 of 13) expressed no issues with sharing data,  representatives from the two large ridesourcing companies did.  Specifically, Uber and Lyft representatives said their companies are  uncomfortable with sharing riders\u2019 personally identifiable information,  such as the exact destination and origin addresses of their ridesourcing  trips, with a public entity without riders\u2019 previous consent because they  believed the data would be subject to Freedom of Information Act (FOIA)  requests. Representatives of two industry associations and a researcher  told us that issues gathering data from ridesourcing companies is a  broader challenge faced by local transit agencies in such partnerships.  However, representatives of the two ridesourcing companies stated that  they are working with local transit agencies and FTA to figure out how to  provide data to local transit agencies for NTD reporting while still  protecting privacy.", "FTA officials told us they have reached an informal agreement with  ridesourcing companies participating in the MOD Sandbox program,  including Uber and Lyft, for the collection of one category of data.  According to FTA officials, that agreement relates only to certain data  needed to assess the ADA equivalent level of service requirement. If the  local transit agencies participating in the MOD Sandbox program need  additional data for NTD reporting, FTA officials told us it is up to those  local transit agencies to obtain it from the ridesourcing companies. In  addition, FTA officials told us that local transit agencies partnering with  ridesourcing companies outside of the MOD Sandbox program would not  benefit from this informal agreement.", "To help address data collection issues, officials from some (5 of 16)  selected local transit agencies suggested that FTA could play a greater  role in encouraging ridesourcing companies to provide some minimum  level of data needed for NTD reporting. For example, several transit  officials suggested that FTA could circulate effective practices for data  sharing, such as a template contract between a local transit agency and a  private mobility company that includes data sharing obligations. Several  transit officials discussed how such additional information from FTA could  be helpful for local transit agencies in pursuing or maintaining their  partnerships. For instance, officials from one local transit agency argued  that FTA information in this area could help the many local transit  agencies that are too small to have sufficient market power to get the  needed NTD data from ridesourcing companies.", "The above examples of local transit agencies seeking templates of data  sharing agreements suggest that these and other local transit agencies  could benefit from more communication from FTA on this issue. If local  transit agencies could use such data sharing templates from FTA to  gather more complete and accurate data from their ridesourcing partners,  this would in turn help ensure the accuracy and completeness of NTD  data.", "As noted above, the internal control standards instruct federal agencies to  use quality data. If FTA communicated more information about practices  for data sharing, this would assist local transit agencies and also help  FTA be better poised to track its overall progress in furthering its goals,  including promoting efficient public transit systems.", "However, FTA officials told us that they do not track information about  partnerships that did not receive funding through the MOD Sandbox  program, such as details of data sharing agreements, and so could not  disseminate examples of how those local transit agency partnership  participants are handling data sharing issues. However, local transit  agencies with partnerships that are outside of the MOD Sandbox program  may still be required to report data into the NTD and could benefit from  additional information. FTA officials explained that they want to avoid  duplicating the work of other groups that are gathering and sharing  information about partnerships. For example, SUMC gathers some  information about such partnerships nationwide in a public database  and has sponsored conferences to facilitate information sharing about  local transit agencies\u2019 experiences with their partnerships. However,  SUMC\u2019s public database of partnerships does not include details about  how all partnerships are handling data sharing issues. Further, because  FTA oversees local transit agencies, the documents that it issues may be  viewed as more authoritative than those of a contracted agency such as  SUMC.", "As FTA continues its efforts to address data sharing with the ridesourcing  companies involved in the MOD Sandbox program, the agency could also  develop broader information on best practices for data sharing  agreements\u2014in collaboration with the MOD Sandbox grantees and  possibly also with SUMC\u2014and share that information so it would be  available for interested local transit agencies. By sharing such gathered  information on partnerships, FTA could in turn help transit agencies make  sound decisions regarding the data needed from their private mobility  partners, and about various options for structuring partnerships to achieve  that end."], "subsections": []}]}]}, {"section_title": "Considerations Impacting the Future Prevalence of Transit Partnerships Include Industry Changes, Available Funding for Local Transit, and Access to Services, Among Others Roles of Local Transit Agencies and Private Mobility Companies Could Change as the Broader Transportation Industry Evolves", "paragraphs": ["The transportation industry as a whole is rapidly evolving, with more on- demand services being offered, which could increase the use of transit  partnerships. According to SUMC, the U.S. is currently experiencing a  seismic shift in transportation, as breakthroughs in mobile technology, an  influx of new mobility options and changes in travel behavior have  significantly altered today\u2019s transportation landscape, a trend likely to  accelerate in the years ahead. Most selected local transit agencies (15  of 16) and private mobility companies (12 of 13) agreed that the industry  is changing, and some discussed how transit agencies\u2019 roles and  operations are changing as a result. For example, officials at five local  transit agencies told us that the transit industry is shifting to offer more  mobility on-demand services. Some of these stakeholders predicted that  as local transit agencies increasingly use contracted services, these  agencies will increasingly become \u201cmobility managers\u201d rather than direct  service providers. Officials from three agencies said they are already  making or planning for this shift.", "The increasing automation of vehicles is another key industry change that  could impact local transit agency operations and partnerships, but the timeframes needed for full automation remain unclear. As we have  reported, automated vehicles promise transformative benefits such as  reducing crashes and fatalities and increasing mobility, but such vehicles  also pose challenges for policymakers, such as assuring safety and  addressing data privacy and other issues. We also reported that these  technologies are rapidly evolving, but there is no consensus about the  time needed for their full deployment. According to a recent study,  vehicle automation could result in significant changes to transit agencies\u2019  operations. For example, FTA has reported that automated transit  vehicles could be used to address first- and last-mile issues, which could  in turn decrease the need for local transit agencies to partner with private  mobility companies to fill such gaps.", "According to several stakeholders and research reports, some  automakers and others have started investing in automated vehicle  technologies and in private mobility companies in response to the  projected rollout of shared automated vehicles in the near future. If these  entities continue making such investments, this could help address  challenges related to private mobility companies\u2019 long-term sustainability,  which could increase such companies\u2019 ability to enter into partnerships.  Of the 13 private mobility companies in our review, representatives of 5  told us that they receive significant financial support from an automaker.  In addition to a car-share company, recipients of such support included,  for example, three technology companies and a bike-share company.", "Representatives from two of these companies told us that such support  helps ensure their long-term sustainability or provides them with the  flexibility to try different business models and enter into transit  partnerships without worrying about each being profitable. Such  investments from well-established companies may also help address  some local transit agency concerns about whether some private mobility  companies would be reliable partners, thereby increasing partnerships.  For example, according to a recent industry report, some transit officials  have questioned the long-term financial viability of the ridesourcing  business model, citing high driver turnover rates and other factors as  concerns."], "subsections": [{"section_title": "Available Local Transit Funding and Transit Ridership Levels Will Impact Transit Partnerships", "paragraphs": ["All 16 selected local transit agencies and most private companies (10 of  13) told us that local transit agencies\u2019 constrained budgets will impact  transit partnerships, and most transit officials agreed that this would  encourage partnerships. For example, officials from one local transit  agency told us that they first began researching partnerships several  years ago, when they felt compelled to look for other viable alternatives to  certain bus routes after a local referendum to pay for increased bus  services failed.", "According to several transit officials, if the current decline in public transit  ridership continues, this could increase partnerships. For example, local  transit agencies may seek to maintain their transit riders by, for example,  offering first- and last-mile connections to make accessing transit services  more convenient. Based on GAO analysis of FTA data, overall transit  ridership decreased by about 1 percent between 2012 and 2016, but  ridership changes varied greatly by metropolitan area. For example, since  2010, some larger metropolitan areas have experienced more significant  ridership decreases, such as Los Angeles (over a 9 percent decrease)  and Washington, D.C. (over a 9 percent decrease). However, ridership  grew by more than 10 percent in several areas, including Seattle (24  percent increase), and Nashville (12.5 percent increase). According to  recent reports, it remains unclear if the recent decline in public transit  ridership, after a decade or more of growth, represents a long-term  change in rider behaviors or a short-term cycle related to factors such as  lower gas prices in recent years."], "subsections": []}, {"section_title": "Extent of Marketing and Outreach about On- Demand Services Can Impact Partnerships\u2019 Success and Increase Access to Services", "paragraphs": ["Most stakeholders we interviewed agreed that sufficient marketing and  outreach to target rider populations is critical for the success of new on- demand services, and this also impacts the overall success of the  partnerships. Most selected local transit agencies (12 of 16) and  companies (10 of 13) cited marketing as a significant factor impacting  new service use. For example, officials at several local transit agencies  told us that they dedicated resources for outreach to target riders to  ensure these riders understood the new services being offered. One  agency advertised its new on-demand taxi services for paratransit-eligible  customers through phone calls to customers and residential mailings, and  also encouraged the taxi companies involved to separately advertise  these services.", "Even with outreach and marketing to target riders, some potential riders\u2014 particularly the elderly and low-income earners\u2014may not be able to  easily access some on-demand services. For example, the current  ridesourcing model generally requires riders to have a smartphone and a  bank card to request a ride, which could exclude some riders.", "According to recent reports, less than one-third of Americans over age  65 own a smartphone and only 4 percent had used a ridesourcing  service as of 2016. However, according to literature, older  Americans will be a key demographic for transit providers to target in  coming years, since their numbers are projected to grow significantly  and some will stop driving their own vehicles in the near future.", "Reflecting similar concerns, several officials from local transit  agencies (4 of 16) told us that it can be challenging for older residents  in their communities to learn to use the smartphone apps that are  needed to access some on-demand services.", "According to a 2016 Pew Research Center report, of those surveyed  with household incomes greater than $75,000, 86 percent had heard  of ridesourcing services and 26 percent had used them. For those  surveyed with incomes less than $30,000, however, only 51 percent  had heard of these services and 10 percent had used them.  According to a recent report, those with lower incomes could  particularly benefit from more on-demand services, especially since  reliable access to transportation can help people acquire and keep  better jobs.", "Several selected transit and private mobility stakeholders had efforts  underway to address such access issues. For example, two local transit  agencies had done targeted outreach to senior communities to educate  them about using the new services, including instructions for using the  smartphone apps. According to transit officials involved, these efforts had  increased the use of these on-demand services by elderly riders. In  addition, one ridesourcing company offers gift certificates to offer an  option for those without bank cards, which can be purchased with cash  and used to redeem rides. In another example, staff at a bike-share  company said that their company already offers some options for those  without bank cards. Staff at a technology company told us they have  plans to offer more such payment options in the future."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As the sharing economy continues to grow, local transit agencies may  increasingly look for opportunities to leverage emerging technologies to  extend their services, address first- and last- mile and other issues, and  provide additional options for riders by partnering with private mobility  companies. Since the sharing economy is a relatively recent  phenomenon, FTA has an opportunity to proactively facilitate and share  information about ongoing transit partnership projects, including how  projects are meeting federal requirements related to accessibility and  equity. In addition, FTA could improve the quality of NTD data by advising  transit agencies on which on-demand services qualify for NTD entry and  how to accurately report about qualifying services. Without clearer  instructions on whether and how data from new on-demand services  should be reported into NTD, local transit agencies may remain confused,  potentially resulting in inconsistent reporting. Further, without more  consistent and complete data on partnership activities, including projects  that were not funded through the MOD Sandbox program, FTA may lack  key information needed to track progress in achieving its goals of  promoting more integrated and efficient transit systems. In the absence of  a clear statement from FTA about the minimum data needed from private  partners for entry into NTD, some local transit agencies will likely continue  encountering challenges getting needed data from partners. Finally,  absent more sharing of information on partnerships by FTA, including  how such partners are addressing data sharing issues, local transit  agencies will be poorly positioned to navigate ongoing changes in the  transit industry."], "subsections": []}, {"section_title": "Recommendations for Executive Action:", "paragraphs": ["We recommend that FTA take the following three actions:", "Gather and publicly share information on transit partnerships,  including those that did not receive funding through the MOD  Sandbox program, to include examples regarding how various local  transit agencies complied with federal requirements\u2014such as  procurement, drug and alcohol testing, ADA, and Title VI  requirements\u2014while offering new on-demand services in  partnerships. (Recommendation 1)", "Determine which on-demand services qualify as \u201cpublic  transportation\u201d based on the statutory definition and disseminate  information to clarify whether and how to report data from such  services into NTD. (Recommendation 2)", "Gather and publically share information on transit partnerships,  including those that were not part of the MOD Sandbox program, to  include: information on how the local transit agencies and their private  mobility company partners are facilitating data sharing, and minimum  data needed from a private partner to facilitate NTD reporting.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments:", "paragraphs": ["We provided a draft of this report to DOT for review and comment. We  received written comments from DOT, which are reprinted in appendix II.  DOT concurred with our three recommendations. The department stated  that, in line with these recommendations, it will continue its proactive  efforts related to the Mobility on Demand program, and continue to share  information about public transit partnerships. DOT also provided technical  comments, which we incorporated in the report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Transportation and other interested parties.  In addition, the report will be available at no charge on the GAO website  at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact Mark Goldstein at (202) 512-2834 or GoldsteinM@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Descriptions of Selected Transit Partnership Projects That GAO Reviewed", "paragraphs": ["Project description  From January 2017 through June 2018, LAVTA\u2019s GoDublin  Project provided first- and last-mile service for trips that begin and  end within the city limits of Dublin, CA. LAVTA paid half of the fare  of a ridesourcing ride, up to a maximum of $5.00. The service  included a service option for paratransit-eligible riders. The overall  goal of the pilot project was to see if rideshare programs reduce  congestion and parking issues in Dublin.", "Lyft Line, Via Mobility  Services, Denver  South Transportation  Management  Association,  Conduent (formerly  Xerox)", "GoCentennial, a demonstration project that operated from August  17, 2016 through February 17, 2017, was intended to increase rail  ridership by providing first- and last-mile Lyft Line rides  (microtransit) and accessible transportation service to and from  the Denver Regional Transportation District rail station located in  Centennial, CO. The service included a transportation option for  paratransit-eligible riders.", "Beginning in September 2017 WMATA\u2019s Abilities Ride program  provides riders that are eligible for WMATA\u2019s Metro Access  paratransit program the option to use on-demand taxi service for  trips that originate and end in WMATA\u2019s Maryland service area at  a discounted rate. The Metro Access customer pays the first $5 of  the fare; then WMATA pays up to the next $15. For a trip requiring  a Wheelchair Accessible Vehicle, WMATA pays an extra $10 to  the vendor for that trip.", "Beginning in December 2017, PSTA\u2019s Mobility on Demand  Sandbox project provides same day, on-demand door-to-door  service to a small subset of paratransit-eligible customers in  Pinellas County, FL.", "Beginning in February 2016, PSTA\u2019s Direct Connect program  provided first- and last-mile service, initially within two pilot zones.  PSTA expanded the program to eight zones in Pinellas County in  January 2017. As of April 2018, users can travel to or from 24  locations throughout Pinellas County. PSTA pays the first $5 of  the ride and the customer pays the rest. The service includes a  transportation option for paratransit-eligible riders.", "Beginning in August 2016, PSTA\u2019s TD Late Shift program has  provided service between home and work for lower-income riders  from 10:00 pm through 6:00 am when PSTA\u2019s regular service  does not operate. The service includes a transportation option for  paratransit-eligible riders.", "MARTA partnered with Uber for a promotional partnership to  provide first- and last-mile transportation in 2015, then again after  a bridge collapsed on Interstate 85 on March 30, 2017. MARTA  currently has informal partnerships with both Uber and Lyft in  which they advertise one another\u2019s services."], "subsections": [{"section_title": "Transit agency, location of project 8", "paragraphs": ["Project description  CTA is partnering with the Chicago Department of Transportation  and Divvy bike-share to integrate Divvy rentals into Ventra. Ventra  is CTA\u2019s central fare payment system that is accessible by  Smartphone application, through a Mobility on Demand Sandbox  project. CTA expects to launch the updated Ventra app in summer  2018.", "From October 2016 through June 2018, MBTA operated a pilot  program with Uber and Lyft to offer on-demand paratransit service  to customers that are eligible for MBTA\u2019s The Ride, MBTA\u2019s  regular paratransit service.", "Once launched in summer 2018, MBTA will partner with local  taxis on Curb\u2019s platform to provide on-demand paratransit service  to customers that are eligible for MBTA\u2019s The Ride, MBTA\u2019s  regular paratransit service.", "From March 2016 through April 2017 KCATA partnered with Bridj,  a company offering microtransit services, to offer riders services  within and between two zones around downtown Kansas City, MO  during weekday rush hours. The service included a transportation  option for paratransit-eligible riders.", "From May 2017 through April 2018, KCTA partnered with local  taxi companies owned by TransDev to provide subsidized on- demand service for paratransit-eligible customers. Customers that  are not eligible for paratransit could also use the service, but  KCATA did not subsidize the cost of the ride.", "Rabbit Transit has used demand-responsive service from Uber  and Lyft to fill gaps during peak travel periods when the agency\u2019s  regular services are running late.", "King County Metro and Sound Transit will be partnering with Via  to provide rides for customers traveling to and from bus and rail  stations in the Seattle, WA area as a sub-recipient of the Los  Angeles County Metropolitan Transportation  Authority\u2019s Mobility  on Demand Sandbox partnership. Expected launch of the service  is late 2018.", "King County Metro has dedicated four parking spaces at its  Northgate Transit Center Park & Ride to free floating car-share  vehicles to increase the number of options for customers to  connect to transit, including customers who do not own a personal  vehicle. The car-share spaces are also intended to enable more  customers to ride transit by increasing parking turnover at this  overcrowded lot.", "King County Metro will be operating a pilot program to provide on- demand first and last mile service to customers within a 2-mile  radius of the Eastgate, Northgate, and South Renton park & ride  lots. The service also will include a transportation option for  paratransit-eligible riders. Expected launch of the service is  August 2018."], "subsections": []}, {"section_title": "Transit agency, location of project 17", "paragraphs": ["Project description  Through its Mobility on Demand Sandbox project, LA Metro will be  partnering with Via to provide first- and last-mile rides to and from  locations where customers can board an LA Metro bus or train, in  an effort to increase transit ridership. LA Metro will provide  vehicles that can accommodate customers that need additional  assistance or customers in wheelchairs as well as a call center for  customers without smartphones. LA Metro aims to launch the  service in September 2018.", "LA Metro partnered with Uber for two weeks in May 2016 to  provide rides to and from Metro Expo Line stations. Customers  received a $10 discount on these Uber rides.", "Through the Adaptive Mobility with Reliability and Efficiency  (AMORE) Mobility on Demand Sandbox project, the Regional  Transportation Authority (RTA) of Pima County, AZ will offer riders  the ability to request services from Ruby Ride, a ridesourcing  company, via a phone app, for first- and last-mile transportation.  According to an RTA official, this project seeks to provide more  services to outlying areas, which previously had either infrequent  fixed routes or no service. The RTA and Metropia\u2014a technology  company involved in the project\u2014 also plan to offer riders  incentives, such as discounted services, to change their travel  behavior, such as changing their travel times to when roads are  less busy. The phone app will also include a carpool matching  service that will dynamically recommend potential driver/rider  combinations to customers. RTA plans to launch this service in  fall 2018. The service will include a transportation option for  paratransit-eligible riders.", "From January through June 2018, GoTriangle partnered with  TransLoc, a technology company, to provide first- and last-mile  Go OnDemand shuttle service (microtransit) in Research Triangle  Park and surrounding areas. Riders were able to hail GoTriangle\u2019s  shuttle service from their phone or online using the TransLoc  Rider app.", "From June 2017 through June 2019, the Greater Dayton Regional  Transit Authority (RTA) is partnering with Lyft and two other  providers to provide on-demand rides from designated RTA  Connect stops in underserved areas of the Greater Dayton  service area to a transfer point where riders can access fixed- route bus service. The on-demand service has replaced fixed- route bus service that was eliminated due to low ridership.", "Capital Metro partnered with Via Transportation, Inc. (Via) to  provide first- and last-mile on-demand microtransit service from  June 2017 through June 2018 to an area of Austin with few fixed  route options. Riders were able to book rides with Via, whose  service has no fixed routes or fixed schedules. The buses used  for the project were able to accommodate two wheel-chair riders  and up to nine seated occupants."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Heather MacLeod (Assistant Director);  Jessica Bryant-Bertail (Analyst-in-Charge); Lacey Coppage; Delwen  Jones; Terence Lam; Bonnie Pignatiello Leer; Josh Ormond; Oliver  Richard; and Kelly Rubin made key contributions to this report."], "subsections": []}]}], "fastfact": ["Have you tried bike- or car-sharing? Local transit agencies are partnering with private companies offering these and other new options to help riders connect to and use mass transit systems.", "The Federal Transit Administration (FTA) wants to support transit agencies undertaking such efforts. But transit agencies are seeking more information from FTA to help them form successful partnerships, including details on what data FTA needs\u2014such as on the number of rides shared\u2014to grant money to these agencies.", "We recommend that FTA share more information with transit agencies, including about how to report this data to FTA."]}
{"id": "GAO-18-623T", "url": "https://www.gao.gov/products/GAO-18-623T", "title": "Veterans Health Administration: Steps Taken to Improve Physician Staffing, Recruitment, and Retention, but Challenges Remain", "published_date": "2018-06-21T00:00:00", "released_date": "2018-06-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["As the demand for VHA's services grows\u2014due, in part, to increasing demand from servicemembers returning from the United States' military operations in Afghanistan and Iraq and the growing needs of an aging veteran population\u2014attracting, hiring, and retaining top talent is critical to VHA's mission to provide high quality and timely care for the nation's veterans.", "Physicians\u2014who provide and supervise a broad range of care including primary and specialty care\u2014serve an integral role in VHA's mission. Certain physician types are consistently among the most difficult to recruit and retain, and are thus considered mission-critical by VHA.", "Over the past two decades, GAO and others have expressed concern about VHA's ability to ensure that it has the appropriate clinical workforce, including physicians, to meet the current and future needs of veterans.", "This statement is based on GAO's October 2017 report and examines (1) VHA information on how many mission critical physicians provided care at VAMCs, (2) VHA guidance for determining its physician staffing needs, and (3) the strategies VHA used to support the recruitment and retention of physicians at VAMCs, and the extent to which it has evaluated these strategies to determine their effectiveness.", "For this statement, GAO updated the information from its October 2017 report and obtained information from VHA officials in June 2018 about steps they have taken to implement the 2017 recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) Veterans Health Administration (VHA) continues to face challenges related to physician staffing, recruitment, and retention, though it has begun work to implement recommendations made in GAO's October 2017 report. Specifically, GAO's report found the following:", "VHA's data on the number of physicians that provided care at VA medical centers (VAMC) were incomplete. GAO found that data were incomplete because they did not include data on the number of contract physicians and contained only limited data on the number of physician trainees\u2014two types of physicians that augment the care provided by physicians employed by VHA. Thus, VHA data underestimated the total number of physicians providing care in its medical centers leaving it unable to ensure that its workforce planning processes sufficiently addressed gaps in staffing. GAO recommended that VHA implement a process to accurately count all its physicians. VHA did not concur with this recommendation, stating that it used other tools for workforce planning. VHA has since implemented a new human resources (HR) database\u2014HR Smart\u2014that has the capability to track each position at its VAMCs. However, VHA officials told us they do not plan to include information on physician contractors in this database.", "VHA provided VAMCs with guidance on how to determine the number of physicians and support staff needed for some physician occupations, although it lacked sufficient guidance for its medical and surgical specialties. GAO recommended that VHA issue guidance to VAMCs on determining appropriate staffing levels for all physicians. VHA concurred and reported it would develop staffing guidance for its medical and surgical specialties. VHA officials told GAO VHA signed a specialty care workgroup charter November 27, 2017; the primary goal of the workgroup was to develop a specialty care staffing model that would include staffing information for all specialty care. VHA anticipates completing its work and issuing staffing guidance by December 2018.", "VHA used various strategies to recruit and retain its physician workforce, but had not comprehensively evaluated them to assess effectiveness . Without such an evaluation, VHA did not have complete information on the underlying causes of the difficulties VAMCs face, or whether its recruitment and retention strategies were meeting physician workforce needs. GAO recommended VHA (1) establish a system-wide method to share information about physician trainees to help fill vacancies across VAMCs and (2) conduct a comprehensive, system-wide evaluation of VAMCs' physician recruitment and retention efforts and establish an ongoing monitoring program. VHA concurred and reported it has since taken steps to address the recommendations. For example, VHA's Office of Workforce Management and Consulting has partnered with its Partnered Evidence-based Policy Resource Center to evaluate and recommend a systematic approach for allocating workforce management resources. In addition, VHA has added the capability to track physician trainees to its HR Smart database. VHA expects to complete its efforts by September 2018 and September 2019, respectively."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to participate in today\u2019s hearing on the  ability of the Department of Veterans Affairs (VA) Veterans Health  Administration (VHA) to recruit and retain high-quality physicians. A  strong clinical workforce capable of providing quality and timely care to  our nation\u2019s veterans is critical to the success of VHA, which operates  one of the largest health care systems in the United States, providing  care at 1,252 facilities, including 170 VA medical centers (VAMC). As the  demand for VHA\u2019s services grows\u2014due in part to increasing demand  from servicemembers returning from the United States\u2019 military operations  in Afghanistan and Iraq, and the growing needs of an aging veteran  population\u2014attracting, hiring, and retaining top talent is critical to VHA\u2019s  mission to provide high-quality and timely health care for our nation\u2019s  veterans.", "Physicians\u2014who provide and supervise a broad range of care, including  primary and specialty care\u2014serve an integral role in VHA\u2019s mission. VHA  indicated that physicians occupy a top spot on its annual list of mission- critical occupations, as a result of factors including the time frames  needed for VHA\u2019s hiring process, a limited supply of candidates, and  competition for candidates. Within the physician category, VHA has also  identified the top five physician occupations that are the hardest to recruit  and retain. We use the term \u201cmission-critical physician occupations\u201d to  refer to the top five physician occupations VHA identified in fiscal year  2016 as most in need of staffing: primary care, mental health,  gastroenterology, orthopedic surgery, and emergency medicine. VHA  hires more than 2,800 mission-critical physicians annually. Yet,  physicians have consistently been identified by VHA as a critical staffing  priority due to recruitment and retention concerns.", "Over the past two decades, we and others have expressed concerns  about VHA\u2019s ability to ensure that it has the appropriate clinical workforce  to meet the current and future needs of veterans. A 2015 independent  assessment found that if VHA does not increase its total number of  clinical employees, including physicians, it will be difficult for it to meet the  projected demand for services. Further, in July 2016, we found that the  number of physicians who leave VHA had steadily increased from fiscal  years 2011 through 2015. During this time, physicians were among the 10  occupations with the highest rates of attrition each year. The attrition was  primarily due to voluntary resignations and retirements.", "My statement today is based on our October 2017 report examining VHA  physician staffing, recruitment, and retention strategies. In particular, my  statement focuses on (1) VHA information on how many mission-critical  physicians provided care at VAMCs; (2) VHA guidance for determining its  physician staffing needs; and (3) the strategies VHA used to support the  recruitment and retention of physicians at VAMCs, and the extent to  which it has evaluated these strategies to determine their effectiveness.  As part of that work, we made several recommendations for VHA to  improve staffing, recruitment, and retention strategies for physicians.", "To do the work for our October 2017 report, we reviewed key documents  and interviewed knowledgeable officials from VHA in headquarters  offices, as well as in six VAMCs across the country. More detailed  information on the objectives, scope, and methodology for our 2017  report can be found in that report. For this statement, we obtained  information from VHA officials in June 2018 about any steps they have  taken to implement our 2017 recommendations.", "This statement is based on work conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The attrition among VHA physicians has been of particular concern given  that the Health Resources and Services Administration (HRSA)  anticipates that by 2025 the national demand for physician services will  exceed supply. HRSA\u2019s Office of Rural Health Policy reported, in 2017,  that physician shortages were exacerbated in rural areas, where  communities struggle to attract and keep well-trained providers. This  difficulty has posed a particular challenge for VHA, as approximately one  in four VAMCs is located in a rural area.", "Most physicians providing care at VAMCs are employed by VHA. VHA  also supplements the capacity of its employed physician staff by acquiring  additional physician services through fee-basis arrangements or  contracts. Under fee-basis arrangements, providers are paid a pre- agreed-upon amount for each service provided. Under contracts,  physician services may be obtained on a short-term basis; for example,  through sole-source contracts with academic affiliates. VAMCs may also  use physicians who volunteer their time, who are referred to as work- without-compensation providers.", "In addition to VHA-employed, contract, and fee-basis physicians, VAMCs  often supplement their capacity by using physician trainees, who include  medical residents and advanced fellows. In 2016, 135 of the 170 VAMCs  had active physician training programs. According to VHA officials, there  were 43,768 medical residents who trained at a VAMC in 2016. VHA has  been expanding its physician training program, as directed by the  Veterans Access, Choice, and Accountability Act of 2014, as amended.  In 2017, VHA added 175 physician trainee positions across VAMCs  nationwide, including 3 VAMCs that did not have physician trainees prior  to this expansion. VHA\u2019s objective is to add 953 additional physician  trainee positions to its VAMCs by 2025 in order to improve access and  hire additional physicians. Further, VHA officials told us they want to  continue to add new positions that would eventually allow all VAMCs  access to physician trainees."], "subsections": []}, {"section_title": "VHA Lacked Information on the Total Number of Mission-Critical Physicians Who Provided Care at VAMCs and Does Not Plan to Collect this Information", "paragraphs": ["In our October 2017 report, we found that VHA\u2019s data on physicians who  provided care at VAMCs were incomplete. Specifically, we found that  VHA had data on the number of mission-critical physicians it employed  (more than 11,000) and who provided services on a fee-basis (about  2,800), but lacked data on the number of contract physicians and  physician trainees. As a result, VHA did not have data on the extent to  which VAMCs used these arrangements and thus, underestimated its  physician use overall. Therefore, VHA was unable to ensure that its  workforce planning processes sufficiently addressed any gaps in staffing.", "All six VAMCs included in our review used at least one type of  arrangement other than employment for physicians, and five of the six  used contract physicians or physician trainees. (See fig. 1.) On average,  contract and fee-basis physicians made up 5 to 40 percent of the  physicians in a given mission-critical physician occupation at each VAMC  in our review. For example, officials from a large, highly complex VAMC  told us that, in March 2017, they augmented the 86 employed primary  care physicians with eight contract and three fee-basis physicians, which  represented about 16 percent of their primary care physician workforce.  Further, this VAMC also had about 64 primary care physician trainees  providing certain medical services under the supervision of a senior  physician.", "During the course of our work for the October 2017 report, VHA officials  told us that its personnel databases were designed to manage VHA\u2019s  payroll systems, but that these databases did not contain information on  contract physicians or physician trainees. VHA officials told us they were  working to include information on physician trainees in a new human  resources (HR) database\u2014HR Smart\u2014which at the time of our review,  was scheduled to be implemented in 2017. However, these officials were  not aware of plans to add information to the database on contract  physicians. Instead, VAMC leaders used locally devised methods to  identify and track contract physicians, fee-basis physicians, and physician  trainees. For example, one VAMC in our October 2017 review used a  locally maintained spreadsheet to track its physicians under  arrangements other than employment, while another VAMC asked  department leaders to identify how many of these provided care within  their respective departments. At each of the six VAMCs in our review, we  found that department leaders were generally knowledgeable about the  total number of physicians that provided care within the departments they  managed. However, this locally maintained information was not readily  accessible by VHA officials.", "To address the limitations in VHA\u2019s data, we recommended in our  October 2017 report that VHA develop and implement a process to  accurately count all physicians providing care at each of its VAMCs,  including physicians not employed by VHA. VHA did not concur with this  recommendation, stating that it uses other tools for workforce planning.  However, a VHA official acknowledged that data sources used for  workforce planning may not include all types of contract physicians or  work-without-compensation physicians.", "As we discussed in our prior report, implementing such a systematic  process would eliminate the need for individual VAMCs to use their own  mechanisms, such as a locally developed and maintained spreadsheet to  track its physician workforce, as was done by one VAMC in our prior  review. Further, local mechanisms may not be readily accessible to VHA  officials engaged in workforce planning, resulting in incomplete  information for decision-making purposes.", "Since our report, VHA officials told us that they have completed  implementation of HR Smart, which provides the capability to track every  position with a unique position number, and each employee\u2019s full  employment history. However, VHA officials told us they do not plan to  enhance the capability of HR Smart to track contractors.", "We continue to believe that having a systematic and consistent process  to account for all physicians who provide care across VAMCs, including  physicians not employed by VHA, would help address concerns that VHA  is unable to identify all physicians providing care at its VAMCs."], "subsections": []}, {"section_title": "VHA Has Begun to Develop Guidance for Determining Its Staffing Needs for All Physicians", "paragraphs": ["In our October 2017 report, we found that VHA gave responsibility for  determining staffing needs to its VAMCs and provided its facilities with  guidance, through policies and directives, on how to determine the  number of physicians and support staff needed for some physician  occupations. Specifically, VHA provided this guidance for primary care,  mental health, and emergency medicine, but lacked sufficient guidance  for its medical and surgical specialties, including occupations such as  gastroenterology and orthopedic surgery. For these occupations, VHA  provided guidance on the minimum number of physicians, but did not  provide information on how to determine appropriate staffing levels for  physicians or support staff based on the need for care.", "Specifically, the VHA guidance available at the time set a minimum  requirement that VAMCs of a certain complexity level have at least one  gastroenterologist and one orthopedic surgeon that is available within 15  minutes by phone or 60 minutes in person 24 hours a day, 7 days a  week. VHA guidance did not include information on how to use data,  such as workload data, to manage the demand for care or help inform  staffing levels for these physician occupations beyond this minimum  requirement. Officials from four of the six VAMCs we reviewed for our  October 2017 report told us that because they lacked (1) guidance on  how to determine the number of physicians and support staff needed, and  (2) data on how their staffing levels compared with those of similar  VAMCs, they were sometimes unsure whether their staffing levels were  adequate.", "In our October 2017 report, we discussed that VHA had previously  established, in 2016, a specialty physician staffing workgroup that  examined the relationships between staffing levels, provider workload and  productivity, veterans\u2019 access, and cost across VAMCs for its medical and  surgical specialties, including gastroenterology and orthopedic surgery.  This group\u2019s work culminated in a January 2017 report that found VHA  was unable to assess and report on the staffing at each VAMC, as  required by the Veterans Access, Choice, and Accountability Act of 2014,  because a staffing model for specialty care had not been established and  applied across VAMCs. This report made a number of recommendations,  including that VHA provide guidance to its VAMCs on what level of  staffing is appropriate for its mission-critical physician occupations.  However, as we noted in our October 2017 report, VHA leadership had  not yet taken steps to develop such staffing guidance. We reported that,  according to a VHA official, other priorities were taking precedence and  continued work in this area had not yet been approved by VHA  leadership. Although VHA officials agreed that further steps should be  taken, they did not indicate when these would occur. In our report, we  concluded that until VHA issues guidance on staffing levels for certain  physician occupations that provide specialty care to veterans, there would  continue to be ambiguity for VAMCs on how to determine appropriate  staffing levels.", "To address this, we recommended that VHA develop and issue guidance  to VAMCs on determining appropriate staffing levels for all mission-critical  physician occupations. VHA concurred with our recommendation and  reported it would evaluate and develop staffing guidance for its medical  and surgical specialties.", "Since our report, VHA officials told us that on November 27, 2017, the  Executive-in-Charge for VHA signed the specialty care workgroup  charter. The primary goal of the workgroup is to develop a specialty care  staffing model that will include staffing information for all specialty care.  VHA anticipates completing its work and issuing staffing guidance by  December 2018."], "subsections": []}, {"section_title": "VHA Used Multiple Strategies for Physician Recruitment and Retention, but Has Not Comprehensively Evaluated Them to Assess Effectiveness", "paragraphs": ["In our October 2017 report, we found that VHA used various strategies to  recruit and retain its physician workforce, including providing assistance  recruiting for mission-critical physician occupations through the National  Recruitment Program; policies and guidance; financial incentives to  enhance hiring and retention offers; and a national physician training  program. (See table 1.)", "In our October 2017 report, we found that VHA faced challenges using its  strategies for recruiting and retaining physicians. For example, according  to VHA officials, budget shortfalls in the Education Debt Reduction  Program\u2014which reimburses qualifying education loan debt for  employees, including physicians, in hard-to-recruit positions\u2014reduced  VAMCs\u2019 ability to offer this recruitment incentive to physician candidates.  In addition, the relatively small number of physician recruiters in VHA\u2019s  National Recruitment Program\u201419 recruiters for the 170 VAMCs at the  time of our report\u2014limited their ability to understand the particular  nuances of some markets, particularly in rural areas.", "Further, despite VHA\u2019s large and expanding graduate medical training  program, VAMCs experienced difficulties hiring physicians who received  training through its residency and fellowship programs. VHA did not track  the number of physician trainees who were hired following graduation, but  officials told us that the number was small in comparison to the almost  44,000 physician trainees educated at VAMCs each year.", "We found that VAMCs faced challenges hiring physician trainees, in part,  because VHA did not share information on graduating physician trainees  for recruitment purposes with VAMCs across the system. VHA officials  told us that recruitment efforts could be improved by developing and  maintaining a database of physician trainees, but said that VHA had no  such database. According to VHA officials, information sharing could help  both VAMCs in geographically remote locations that do not have a  residency program and help identify trainees who want to work at VHA  after graduating, but who received no offers from the VAMC they trained  at due to the lack of vacancies in their specialty.", "We also reported in October 2017 that VHA did not have complete  information on whether its recruitment and retention strategies were  meeting its needs. VHA had gathered feedback on barriers VAMCs face  when offering financial incentives to physician candidates through its  Education Debt Reduction Program and created a workgroup to look at its  overall use of physician retention strategies, although it had not  completed a comprehensive review of its recruitment and retention  strategies to identify any areas for improvement. As a result, VHA did not  have complete information on the underlying causes of the difficulties  VAMCs faced or whether its recruitment and retention strategies met its  objective of having a robust physician workforce to meet the health care  needs of veterans.", "To address these issues, we recommended that VHA (1) establish a  system-wide method to share information about physician trainees to help  fill vacancies across VAMCs, and (2) conduct a comprehensive, system- wide evaluation of its physician recruitment and retention efforts, and  establish an ongoing monitoring program. VHA concurred with our  recommendations, and reported it planned to enhance its personnel  database, HR Smart, to include physician trainees. Additionally, VHA said  it planned to complete a comprehensive, system-wide evaluation of the  physician recruitment and retention strategies.", "Since our report, VHA reported taking some steps to address these  recommendations. Specifically, officials told us they are working to  include information in the newly implemented HR Smart database on  work-without-compensation employees, such as physician trainees, and  anticipate conducting pilot projects at various sites before fully  implementing this capability by September 30, 2019. Additionally, officials  said that they are in the process of completing a review of physician  recruitment and retention incentives. Furthermore, according to VHA  officials, beginning in October 2017, VHA\u2019s Office of Workforce  Management and Consulting partnered with the Partnered Evidence- based Policy Resource Center\u2014an internal VHA resource center\u2014to  evaluate and recommend a systematic approach for allocating workforce  management resources, such as the Education Debt Reduction Program.  VHA expects to complete its efforts by September 2018.", "Chairman Dunn, Ranking Member Brownley, and Members of the  Subcommittee, this concludes my statement. I would be pleased to  respond to any questions you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information about this statement, please contact Debra A.  Draper at (202) 512-7114 or draperd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony. Key contributors to this statement were  Janina Austin (Assistant Director), Sarah Harvey (Analyst-in-Charge),  Jennie Apter, Frederick Caison, Alexander Cattran, and Krister Friday.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["We have long expressed concern about the Veterans Health Administration\u2019s ability to ensure that it has the staff to meet veterans' needs. This testimony is based on our 2017 report on its physician staffing challenges.", "We found VHA needed to:", "provide additional guidance on how to determine the staff size needed in some specialty areas. VHA reports this will be done by December.", "comprehensively evaluate its recruitment and retention strategies' effectiveness. VHA reports taking steps to address this.", "determine the number of contract and trainee physicians at its centers. VHA says it does not need this information for workforce planning."]}
{"id": "GAO-18-230", "url": "https://www.gao.gov/products/GAO-18-230", "title": "Defense Infrastructure: DOD Needs to Improve the Accuracy of Its Excess Capacity Estimates", "published_date": "2018-05-24T00:00:00", "released_date": "2018-05-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD has used the Base Realignment and Closure (BRAC) process primarily to reduce excess infrastructure capacity, transform the force, and produce cost savings. DOD completed hundreds of base closures and realignments in previous BRAC rounds and intends to work with Congress to address remaining excess capacity. The NDAA for Fiscal Year 2016 required DOD to submit, among other things, a force structure plan and a categorical infrastructure inventory of worldwide military installations. In response, DOD submitted its infrastructure capacity report to Congress in October 2017.", "The NDAA included a provision for GAO to evaluate DOD's report for accuracy and analytical sufficiency. In this report, GAO evaluates the extent to which (1) DOD's report included the required elements, and (2) DOD's methodology and analysis result in accurate and analytically sufficient information on excess capacity. To conduct this work, GAO reviewed DOD's 2017 report and compared it with the statutory requirements and generally accepted research standards. GAO also interviewed DOD and military service officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) 2017 infrastructure capacity report addressed four of five required elements from section 2815 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016. Specifically, DOD's report addressed the elements requiring it to submit", "a force-structure plan,", "a categorical inventory of worldwide military installations,", "a discussion of categories of excess infrastructure, and", "an assessment of the value of retaining certain excess infrastructure.", "DOD's report partially addressed the element to include a description of the infrastructure capacity required to support the force structure. Specifically, DOD's report did not provide a complete picture of the infrastructure needed. For example, infrastructure at Air Force large aircraft installations was described by square yards of apron space, but did not include other infrastructure needs such as aircraft hangars and maintenance facilities.", "DOD's excess capacity methodology and analysis has three key limitations that affect the accuracy and analytical sufficiency of the estimate. Specifically:", "DOD used a 1989 baseline for excess capacity that may lead to inaccurate results. This 1989 baseline does not reflect updates in DOD facility standards and requirements or requirements associated with new weapon systems.", "DOD's excess capacity methodology includes assumptions, such as not accounting for potential shortfalls\u2014not having enough infrastructure to support the mission\u2014that may not be reasonable. Specifically, when DOD's calculation identifies shortfall in capacity, DOD concludes that no excess capacity exists. As a result, DOD's analysis identifies no excess capacity in nearly half (14 of 32) mission categories. However, most installations support more than one mission and have more infrastructure present than the installation category metric measures. Thus, including potential capacity shortfalls could provide DOD and Congress with a more accurate estimate of excess capacity upon which to base decisions concerning the management of base infrastructure and excess capacity.", "DOD's method for estimating excess capacity is not always sufficient because the installation selection process does not result in a generalizable sample. Furthermore, DOD's method is not always implemented effectively because the military departments did not follow a consistent approach.", "According to DOD officials, specific department-wide guidance concerning DOD's methods for selecting installations in its analysis does not exist. Moreover, without developing guidance, the estimate of excess capacity may not be based on consistent methods across the department, resulting in inaccurate estimates. Furthermore, neither DOD nor Congress will have the necessary information to make decisions concerning the management of excess infrastructure capacity across the department."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to DOD to update the baseline; use reasonable assumptions; and develop guidance to improve its methods for estimating excess capacity. In comments on a draft of this report, DOD concurred with one recommendation, partially concurred with two recommendations, and plans to incorporate them in any future capacity analysis."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) has used the Base Realignment and  Closure (BRAC) process primarily to reduce excess infrastructure,  readjust bases to accommodate changes in the size and structure of  DOD\u2019s forces, and produce cost savings. Congress authorized five BRAC  rounds in 1988, 1991, 1993, 1995, and 2005, and DOD completed  hundreds of base closures and realignments as a result. To address  remaining excess capacity, between 2013 and 2017 DOD requested  additional BRAC rounds and, in February 2018, stated that it would work  with Congress to find common areas where reforms and changes could  be made. Congress has not authorized additional BRAC rounds to date.", "Section 2815 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2016 required the Secretary of Defense to submit: a force-structure plan for each military service\u2014the Army, Navy, Air  Force, and Marine Corps; a categorical infrastructure inventory of worldwide military installations  for each military department; a description of the infrastructure necessary to support the force a discussion of categories of excess infrastructure and infrastructure an assessment of the value of retaining certain excess infrastructure  to accommodate contingency, mobilization, or surge requirements.", "DOD provided its final report\u2014Department of Defense Infrastructure  Capacity\u2014to Congress on October 6, 2017.", "The act also included a provision for us to evaluate the force-structure  plan and categorical infrastructure inventory for accuracy and analytical  sufficiency. In this report, we evaluate the extent to which (1) DOD\u2019s 2017  infrastructure capacity report included the required elements and (2)  DOD\u2019s methodology and analysis in its report results in accurate and  analytically sufficient information on excess capacity.", "For objective one, we reviewed DOD\u2019s 2017 infrastructure capacity report  and compared it with the required elements contained in section 2815 of  the NDAA for Fiscal Year 2016. Specifically, two analysts independently  reviewed DOD\u2019s infrastructure capacity report using a scorecard to  determine whether the report included information that met the required  reporting elements. We considered an element to be \u201caddressed\u201d if  DOD\u2019s 2017 infrastructure capacity report provided any evidence to  support all aspects of the requirement. We considered an element to be  \u201cpartially addressed\u201d if the report provided evidence concerning some  aspects of the requirement and \u201cnot addressed\u201d if the report did not  provide any evidence concerning any aspect of the requirement. We then  reconciled the individual reviews, and reached a consensus on our  assessment.", "For objective two, we assessed the contents of DOD\u2019s 2017 infrastructure  capacity report against a relevant subset of the generally accepted  research standards that we have described in a previous report.  Specifically, we focused on whether assumptions were reasonable and,  where appropriate, consistent; methods were sufficient and successfully  executed; and the baseline and other data used to support the analyses  were determined to be reliable and valid. All of the applied standards  were considered to have equal importance regarding the accuracy and  analytical sufficiency of the report. Some modification of the wording of  some of the standards was needed for the standard to be relevant and  appropriate in the context of DOD\u2019s 2017 infrastructure capacity report. In  such instances, we kept the meaning of the standard, but modified the  language to align with the objectives and scope of DOD\u2019s tasks. Appendix  I describes all the research standards, identifies the standards we chose  to use in evaluating the quality of the research results conveyed in DOD\u2019s  report, and provides the rationale for the inclusion and exclusion of each  specific standard.", "To conduct our analysis of DOD\u2019s 2017 infrastructure capacity report  against the selected research standards, two analysts independently  reviewed the contents of the report for information indicating the extent to  which the presented analyses, results, and conclusions met these  standards. We considered the report to have \u201cmet\u201d a research standard  when its contents explicitly addressed all aspects of the standard with  sufficient specificity and detail. We considered the report to have \u201cpartially  met\u201d a standard when its contents addressed one or more attributes of  the standard, but not all of the standard\u2019s attributes, or without sufficient  specificity and detail. We considered the report to have \u201cnot met\u201d a  standard when its contents did not explicitly address any of the attributes  of the standard and any implicit references to the standard\u2019s attributes  were too vague or general to be useful. We then reconciled the individual  assessments, and reached a consensus on the overall assessment. To  further corroborate our scorecard assessment, we had a second pair of  technical experts independently assess the validity and reliability of the  methodology used to generate the report\u2019s results.", "We conducted this performance audit from April 2016 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Defense Base Closure and Realignment Act of 1990, as amended,  has governed the BRAC process since 1990. The law established the  procedures for making recommendations for base closures and  realignments and originally required DOD to submit a 6-year force- structure plan and base its closure and realignment decisions on that  plan. For the 1991, 1993, and 1995 BRAC rounds, DOD performed a  detailed capacity analysis based on extensive data-collection efforts to  identify specific bases capable of accommodating additional forces to  develop its proposed list of closures and realignments. In 1997, after  DOD requested another BRAC round, Congress required DOD to submit  a report on, among other things, the need for any additional BRAC rounds  and an estimate of the amount of DOD\u2019s excess capacity at the time. In  2001, when Congress authorized a BRAC round to begin in 2005, it  required DOD to submit a force-structure plan to cover a 20-year period  and an infrastructure inventory with its budget-justification documents for  fiscal year 2005 before proceeding with the extensive data gathering  efforts and analysis associated with the BRAC process. The submission  was also to discuss categories of excess infrastructure and infrastructure  capacity.", "Prior statutes included provisions for us to review DOD\u2019s 1998 and 2004  excess capacity reports, which used a method to estimate excess  capacity that was very similar to the method used in its 2017 report. Our  1998 and 2004 reports reviewed DOD\u2019s 1998 and 2004 excess capacity  reports, respectively. Our 2013 report assessed the estimating methods  used in both the 1998 and 2004 excess capacity reports. In these three  previous reports, we concluded that DOD\u2019s methodology to estimate  excess capacity had a number of limitations, and thus gave a rough  indication that excess capacity existed. Specifically, we identified the  following four limitations with the method used in DOD\u2019s 1998 and 2004  reports:  Installations were assigned to a single-mission category, yet most  installations perform more than one mission.", "Military services used different metrics to evaluate installations in  similar mission categories.", "DOD used a 1989 baseline that did not take into account any excess  capacity or capacity shortfall that may have existed at the time.", "DOD\u2019s analysis did not consider the possibility that a mission category  might have a capacity shortage; mission categories were determined  to have either an excess or no excess capacity.", "DOD agreed that our 2013 report properly highlighted the limitations in  DOD\u2019s methodology for estimating excess capacity. At that time, DOD  reiterated that the purpose of its methodology is to provide an indication  of whether sufficient excess exists to justify authorization of another  BRAC round. DOD concluded that only through the BRAC process is it  able to determine excess capacity by installation and mission or function  in a fair and thorough way. A list of related GAO products is included at  the end of this report."], "subsections": []}, {"section_title": "DOD\u2019s 2017 Infrastructure Capacity Report Addressed or Partially Addressed the Required Elements", "paragraphs": ["DOD\u2019s 2017 infrastructure capacity report addressed or partially  addressed the five required elements from section 2815 of the NDAA for  Fiscal Year 2016. As shown in table 1, DOD addressed four of the  required elements and partially addressed one element.", "DOD\u2019s report partially addressed the requirement to include a description  of the infrastructure capacity required to support the force structure  because the report describes only a small portion of the capacity needed.  For example, in the case of Air Force large aircraft installations, the  needed infrastructure was described in terms of the square yards of  apron space needed to support the assigned aircraft, but did not describe  other infrastructure needs such as aircraft hangars, maintenance  facilities, and administrative space used by squadrons assigned to the  installation. Similarly, in the case of Army maneuver installations, the  needed infrastructure was described in terms of maneuver acres needed,  but did not describe other infrastructure necessary to support assigned  units. Consequently, the description of infrastructure needed does not  provide DOD and Congress with a complete picture of the infrastructure  needed to support the force structure at these major installations.  However, as DOD points out in its report to Congress, the analysis  performed does not provide the detail necessary to identify specific  infrastructure for elimination; instead it provides an indicator of the  categories of excess. DOD also stated that this level of detail is only  provided through the formal BRAC process. Consequently, without a  formal BRAC round, DOD does not have the details necessary to identify  the total infrastructure necessary to support its current force structure.  Therefore, we are not making any recommendations concerning this  reporting requirement."], "subsections": []}, {"section_title": "DOD\u2019s Excess Capacity Methodology and Analysis Has Limitations That Affect the Accuracy and Analytical Sufficiency of the Estimate", "paragraphs": ["DOD\u2019s excess capacity methodology and analysis has limitations that  affect the accuracy and analytical sufficiency of the estimate. Specifically,  DOD\u2019s use of a 1989 baseline for excess capacity results in inaccurate  estimates of excess capacity; DOD\u2019s methodology included assumptions  that were not always reasonable; and DOD\u2019s approach to estimating  excess capacity is not always sufficient or implemented consistently  across the military departments. DOD noted some of these same  limitations in its 2017 infrastructure capacity report."], "subsections": [{"section_title": "DOD\u2019s Use of 1989 Data as the Baseline for Its Excess Capacity Analysis Results in Inaccurate Estimates of Excess Capacity", "paragraphs": ["DOD\u2019s use of 1989 data as the baseline for its excess capacity analysis  resulted in inaccurate estimates of excess capacity. According to  generally accepted research standards, listed in appendix I, the baseline  and other data used to support the analysis should be determined to be  reliable and valid. Specifically, the baseline should be fully and completely  identified and used consistently, where appropriate. In addition, the data  limitations should be identified and the effect of these limitations should  be fully explained. DOD has also recognized that using 1989 as a  baseline did not account for excess capacity that existed in 1989.  However, DOD only partially explained the effect of this limitation on its  estimate of excess capacity.", "First, using 1989 as the baseline assumes that the bases and facilities as  they existed in 1989 were appropriately sized to support their missions.  However, DOD\u2019s 2017 infrastructure capacity report did not provide a  rationale for either why 1989 was an appropriate baseline or why the  bases and facilities were assumed to be appropriately sized at that time.  In fact, as discussed below, DOD has stated that excess capacity existed  in 1989, but does not attempt to quantify the amount. Further, in at least  one mission category, Marine Corps Bases, DOD acknowledges that it  overstated excess capacity because the baseline ratio was based on  infrastructure numbers that were not adjusted to recognize the  documented shortfalls that existed in 1989.", "Second, the effects of DOD\u2019s assumptions about the 1989 baseline have  not been consistently reported by DOD. DOD has used the same  baseline in its three analyses conducted over the past 20 years, yet DOD  draws different conclusions concerning how the baseline affects its  estimates of excess capacity. For example, DOD concluded  in 1998 that excess capacity existed in the 1989 baseline because the  majority of realignment and closures took place after 1989;  in 2004 that very significant excess capacity existed in the 1989  baseline; and  in 2017, in DOD\u2019s infrastructure capacity report, that the 1989  baseline was both properly sized to support assigned missions and  forces and included significant excess capacity.", "Nevertheless, DOD has consistently stated that its estimate of excess  capacity is likely conservative because significant excess existed in 1989.  DOD also stated that its analysis provides an indicator of the categories  where excess might exist and that only through a BRAC round can the  department undertake the detailed analysis necessary to make closure  and realignment recommendations. Since 1988, DOD has completed five  BRAC rounds that have closed a significant number of DOD facilities. In  addition, as discussed below, DOD facility standards and requirements  have been updated and new weapon systems have been introduced,  which can affect the amount and type of infrastructure needed.  Consequently, without a definitive measure of the excess that existed in  1989, as well as adjustments in the method to account for the effect of  updated facility standards and requirements, and new weapons systems,  there is no clear rationale for using 1989 as a baseline year in the  estimate of excess capacity provided by DOD\u2019s analysis.", "Third, during the last 29 years DOD facility standards and requirements  have been updated and new weapon systems with greater ranges and  capabilities have been developed that have changed the amount and type  of infrastructure needed to support DOD\u2019s forces. For example, we  recently reported that only 11 of the Navy\u2019s 18 drydocks are configured to  perform maintenance on the newer ship and submarine classes like the  Ford-class aircraft carrier and Virginia-class submarine. Using such an  old baseline, without making adjustments in the method to account for  these changes, leads us to conclude that DOD\u2019s results are likely  inaccurate.", "Because DOD continues to use its outdated 1989 baseline we found that  DOD\u2019s 2017 excess capacity analysis results in estimates that are likely  inaccurate. Without updating the baseline that is used in the methodology  to calculate excess capacity across DOD, DOD will not have accurate  information for making critical decisions related to investments in  infrastructure. Furthermore, Congress will not have accurate information  to make fully informed decisions concerning whether and to what extent  another BRAC round is needed."], "subsections": []}, {"section_title": "DOD\u2019s Methodology for Estimating Excess Capacity Includes Assumptions That Are Not Always Reasonable", "paragraphs": ["DOD\u2019s excess capacity methodology includes assumptions that are not  always reasonable, such as assigning installations to only one mission  category. According to generally accepted research standards,  reasonable assumptions are characterized by being realistic, credible,  and accompanied by a statement of their rationale. In addition, these  standards also state that assumptions should support a sound analysis  (e.g., the assumptions should not skew the results of the analysis or  reduce the range of possible outcomes).", "We previously reported limitations related to DOD\u2019s assumptions when  we examined DOD\u2019s excess capacity analyses in 1998, 2004, and  2013. DOD continues to use the same methodology in 2017 that it has  previously used to estimate excess capacity; thus, these limitations  continue to exist in its methodology in its 2017 report. First, DOD\u2019s  approach of assigning an installation to only one mission category treats  an installation as if it has only one mission, yet most installations support  more than one mission. As a result, only a small portion of an  installation\u2019s infrastructure may be considered by DOD\u2019s analysis. For  example, in the case of Fort Bragg, North Carolina, which is included in  the maneuver base category by the Army, base acres are included in the  analysis, but more than 43.8 million square feet of infrastructure is not  considered. Similarly, in the case of Naval Base Kitsap, Washington,  which is included in the Naval Station category by the Navy, the pier  space is considered in the analysis, but the more than 7.5 million square  feet of facilities is not considered. In addition, as discussed later in this  report, there were instances where the military departments included  installations in more than one mission category. Finally, there are several  categories that measure capacity in terms of direct labor hours or work- years, but the analysis does not include the actual infrastructure, such as  buildings, structures, and linear structures. Consequently, the assumption  that each installation is included in one mission category may not be  reasonable because only a portion of the infrastructure at the installations  is being considered when identifying potential excess capacity.", "Second, as implemented, DOD\u2019s estimate of excess capacity may be  overstated because its methodology did not account for any potential  shortfalls in capacity\u2014not having enough infrastructure to support the  mission\u2014and did not provide a rationale for this approach in its  calculations. As illustrated in table 2, when DOD\u2019s calculation identifies  that the proportional capacity is less than the infrastructure capacity for  the year being analyzed (i.e., DOD needs less infrastructure than it has),  DOD concludes that excess capacity exists and provides a percentage  amount of excess capacity. However, when the proportional capacity  exceeds the infrastructure capacity for the year being analyzed (i.e., DOD  may need more infrastructure), DOD concludes that no excess capacity  exists. Moreover, DOD\u2019s calculation provides a zero percentage for  excess capacity, rather than a negative percentage that would account for  a potential capacity shortfall in its analysis. DOD\u2019s 2017 infrastructure  capacity analysis identifies zero percent excess capacity in nearly half (14  of 32) of the installation categories that needed more capacity\u2014included  in the analysis, including 8 or 12 Navy installation categories.", "Because DOD\u2019s methodology uses the excess capacity percentages from  the 32 installation categories to compute a weighted average for excess  capacity across the department, treating a negative percentage from a  mission category as 0.0 percent would increase DOD\u2019s overall excess  capacity percentage. DOD officials believe that treating these 14  installation categories as if they have 0.0 percent excess capacity is  appropriate because the purpose of the analysis is to identify the  categories where excess capacity may exist. In addition, they asserted  that treating these categories as if they had a shortfall would assume that  infrastructure from 1 of the 18 other installation categories identified as  having excess capacity could be used to offset the shortfall when the  categories are likely to have different metrics. DOD officials also told us  that, from their perspective, no increase does not mean that there is large  deficit of infrastructure within a mission category; it just means that the  infrastructure to force-structure ratio indicates that the particular category  does not have excess. We found, however, 6 installation categories  where the force-structure measure exceeds the capacity measure, which  indicates that a shortfall exists. In addition, because most installations  support more than one mission and have more infrastructure present than  the mission category metric measures, including potential capacity  shortfall in its analysis could provide DOD and Congress with a more  accurate estimate of excess capacity.", "DOD\u2019s methodology to estimate excess capacity includes assumptions  that are not reasonable. Without using assumptions to estimate excess  capacity that are considered reasonable (i.e., realistic, credible, and  accompanied by a statement of their rationale), DOD\u2019s methodology may  overstate its estimate of excess capacity."], "subsections": []}, {"section_title": "DOD\u2019s Method for Estimating Excess Capacity Is Not Always Sufficient or Implemented Consistently", "paragraphs": ["DOD\u2019s method for estimating excess capacity across the department is  not sufficient because it is based on a nongeneralizable sample and  therefore its reported estimates cannot be generalized to describe excess  capacity across the department. Furthermore, DOD\u2019s sampling method  is not always implemented effectively because some of the military  departments adjusted the sampling approach. According to generally  accepted research standards, the methods used and the analysis should  be sufficient for accomplishing the objectives of the study. In addition, the  analysis should be executed consistently with the study plan or the  described methodology. We found that the calculations performed by  DOD in the analysis were generally accurate.", "First, DOD and the military departments used a nongeneralizable sample  of different types of installations to develop an excess capacity estimate.  However, a nongeneralizable sample cannot be used to develop a  department-wide estimate of excess capacity because this technique is  not designed to yield a sound probable statistical estimate. Specifically,  when the analysis was first done in 1998, the military departments sorted  installations into categories and only included installations that were  considered by the departments to be \u201cmajor installations.\u201d The  departments were to assign each \u201cmajor installation\u201d to only one mission  category. The departments were to then calculate the estimated capacity  by mission category for both the baseline year, 1989, and the projected  force-structure year, 2003. The same approach was used for the 2017  analysis; however, neither the 1998 nor the 2017 analysis provided  guidance to the military department concerning what constitutes a \u201cmajor  installation.\u201d This approach for selecting and sorting samples of  installations relies on the judgment of each of the military departments,  yielding a nongeneralizable sample of installations that vary across the  military departments. Consequently, the results from the analysis cannot  be used to make inferences about the amount of excess capacity across  DOD.", "Second, the military departments did not follow a consistent approach  when calculating excess capacity. Specifically, the DOD method bases its  excess capacity estimate on the number of installations in each mission  category. However, we found that, in the 2017 analysis, the military  departments did not consistently follow the practice of including  installations in only one category across the services when the analysis  was performed in 2017. For example, we found several installations that  were included in more than one category by some of the military  departments:  In the 2017 analysis, the Air Force included two subcategories under  the heading of \u201cEducation and Training\u201d: \u201cFlight Training\u201d and  \u201cClassroom.\u201d The flight training subcategory included 13 installations  and the classroom subcategory included 14 installations. We found  that all 13 of the flight training installations were also included as  classroom installations. Yet, when the analysis was performed in both  1998 and 2004, the same 14 installations were used, but 8 of the  installations were then categorized as being flight training installations  and the other 6 installations were categorized as classroom  installations. If this previous categorization approach was used in the  2017 analysis, the Air Force estimate of excess capacity would have  been about 2 percent lower.", "In two instances, the Navy included the same installations in both the  \u201cNaval Station\u201d and \u201cAir Station\u201d categories and, in one instance, the  Navy included a joint base in both the \u201cNaval Station\u201d and \u201cShipyards\u201d  categories. According to a Navy official, these installations were  included in both categories because a major mission would have been  omitted from the analysis if the bases were included in only one  category. This treatment, however, is not consistent with DOD\u2019s  methodology.", "Including the same installation in multiple installation categories may have  resulted in double counting of capacity, and thereby affected the resulting  estimate of excess capacity for multiple installation categories.", "Third, the military departments did not consistently account for the joint  bases in their excess capacity analysis. In some instances, we found  that only the lead military department included the joint base in its  analysis. For example, in the case of Joint Base Lewis-McChord,  Washington\u2014an Army-led joint base comprising Fort Lewis and McChord  Air Force Base\u2014the Army, consistent with its treatment of Fort Lewis in  previous excess capacity analyses, included the joint base in its  maneuver category. However, the Air Force did not include McChord Air  Force Base in its analysis in 2017 although it had in previous years. In  these instances where only the lead military department included the joint  base in its analysis, the infrastructure associated with the tenant military  department was usually left out of the analysis because the metric used  by the leading department does not incorporate the same measures of  infrastructure and force structure as the tenant department. In the Joint  Base Lewis-McChord example, the Army included the base in the  maneuver category, which is measured by the ratio of maneuver acres to  maneuver battalion equivalents while the Air Force had previously used  the ratio of parking apron space to number of aircraft to measure capacity  at McChord Air Force Base. Consequently, DOD\u2019s analysis no longer  takes into account the infrastructure that supports the flying mission at  this joint base.", "In other instances, we found that both the lead military department and  the tenant military department included their portion of the infrastructure  in their analyses. For example, for Joint Base Charleston, South  Carolina\u2014an Air Force-led joint base comprised of Charleston Air Force  Base and Naval Support Activity Charleston\u2014each of the military departments continued to include their portion of the infrastructure in their  individual analyses. Consequently, DOD\u2019s analysis accounts for the  infrastructure that supports both missions at the joint base.", "DOD\u2019s method for estimating excess capacity is not always sufficient and  is not implemented consistently across the military departments because  DOD lacks specific department-wide guidance, according to DOD  officials. Specifically, explicit guidance does not exist that clearly defines  \u201cmajor installations,\u201d identifies whether and when it is appropriate to  include a facility in more than one category to take into account multiple  missions at the facilities, or provides protocols for assessing excess  capacity at joint bases. These topics were discussed in meetings with  military department officials, but, according to DOD officials, no specific  method was identified for department-wide use. Without developing  guidance for the military departments, the estimate of excess capacity  may not be based on consistent methods across the department,  resulting in inaccurate estimates."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD\u2019s 2017 excess capacity analysis does not have the accuracy and  analytical sufficiency to provide Congress with a reasonable estimate of  the actual excess capacity within the department. DOD recognizes the  limitations of its analysis, specifically noting that the resulting percentages  of excess capacity are at best indicators to justify the more detailed  analysis of excess capacity provided by a full BRAC analysis. Specifically,  DOD used a baseline for the analysis that did not fully take into account  changes in infrastructure needs since 1989, used assumptions in its  analysis that are not reasonable, and used methods that were not  sufficient or implemented consistently. These limitations resulted in  excess capacity estimates that do not have the accuracy and analytical  sufficiency to support decision making on future BRAC rounds. Without  improvements to DOD\u2019s method of estimating excess capacity, DOD is  not providing the information that Congress requires to make decisions  concerning the management of excess infrastructure capacity within the  department. Similarly, DOD does not have the information it needs to  appropriately manage its infrastructure capacity and therefore cannot  make informed decisions about what it needs to support its mission as  land and infrastructure requirements of newer weapon systems are  introduced. Moreover, the combined effect of neither DOD nor Congress  having the information means that DOD will continue to experience  challenges with funding related to its infrastructure and potential excess  costs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DOD:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Energy, Installations, and Environment reliably updates the  baseline used for estimating excess infrastructure capacity.  (Recommendation 1)", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Energy, Installations, and Environment uses assumptions in  estimating excess capacity that are considered reasonable (i.e., realistic,  credible, and accompanied by a statement of their rationale).  (Recommendation 2)", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Energy, Installations, and Environment develops guidance to  improve the methods used in the analysis and ensure consistent  implementation of DOD\u2019s methodology to produce reliable estimates of  excess capacity across the department. The guidance, at a minimum,  should clearly define \u201cmajor installations,\u201d identify whether and when it is  appropriate to include a facility in more than one category to take into  account multiple missions at the facilities, and provide protocols for  assessing excess capacity at joint bases. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Defense (DOD) for  comment. DOD provided written comments, which are reproduced in  appendix II.", "DOD concurred with one recommendation and partially concurred with  the other two recommendations.", "DOD stated that it concurred with our first recommendation, which called  for it to reliably update the baseline used for estimate excess  infrastructure capacity. Specifically, the department stated that it would  review methods to update the baseline for future excess capacity analysis  that is undertaken.", "The department partially concurred with our second recommendation,  which called for the department to use assumptions that were considered  reasonable (i.e. realistic, credible, and accompanied by a statement of the  rationale) in estimating excess capacity. Specifically, the department  agreed that its capacity report should lay out any assumptions made and  the rationale for each assumption and will ensure that any future capacity  report includes that information. The department did not concur, however,  that assumptions used in its 2017 infrastructure capacity report were  other than reasonable, realistic, or credible. While we are encouraged  that the department will lay out any assumptions and the rationale for  each assumption in future capacity reports, not all assumptions used in  the 2017 analysis were reasonable (i.e. realistic, credible, and  accompanied by a statement of the rationale) as outlined in this report.  For example, we found that assigning installations to only one mission  category was not realistic because most installations support more than  one mission.", "The department partially concurred with our third recommendation that  DOD develop guidance to improve the methods used in the analysis and  ensure consistent implementation of DOD\u2019s methodology to produce  reliable estimates of excess capacity across the department. This  guidance, at a minimum, should clearly define \u201cmajor installations,\u201d  identify whether and when it is appropriate to include a facility in more  than one category to take into account multiple missions at the facilities,  and provide protocols for assessing excess capacity at joint bases. DOD  concurred that guidance should precede any future infrastructure capacity  review and that such guidance should include definitions and  implementation instructions, but the three items identified would not  necessarily be applicable for a future analysis. Provided that future DOD  guidance addresses all appropriate characteristics for analysis, such  guidance would meet the intent of our recommendation.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, Navy,  and Air Force; and the Assistant Secretary of Defense for Energy,  Installations, and Environment. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on   the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Generally Accepted Research Standards Relevant to DOD\u2019s Infrastructure Capacity Report", "paragraphs": ["Table 3 describes the generally accepted research standards, identifies  the standards we used in evaluating the quality of the research results  conveyed in DOD\u2019s 2017 infrastructure capacity report and provides the  rationale for the inclusion and exclusion of each specific standard.", "Study plan, scope, and objectives follow   existing guidance?", "Do the study scope and objectives fully   address the mandated elements?", "Does the study plan address   specified guidance?", "Team is not aware of any standard  guidance for the development of this  document.", "Was the study plan followed?", "Team is not aware of any study plan  that guided the development of this  report.", "Were deviations from the study plan   explained and documented?", "Team is not aware of any study plan  that guided the development of this  report.", "Was the study plan updated over the course   of the study and the updates explicitly identified   in the study and updated study plan?  Assumptions and limitations are reasonable   and, where appropriate, consistent   Are assumptions and limitations   explicitly identified?", "Team is not aware of any study plan  that guided the development of this  report.", "Given the judgment required to   execute the analyses the   assumptions and constraints   are key to team\u2019s determination   of the accuracy and analytical  sufficiency of the report."], "subsections": [{"section_title": "Generally Accepted Research Standards II.a.1", "paragraphs": ["Are the assumptions reasonable in that they   are realistic, credible, and accompanied   by a statement of their rationale?", "Rationale for inclusion   in or exclusion from   GAO\u2019s review  Given the judgment required to execute  the analyses, the assumptions and  constraints are key to the team\u2019s  determination of the accuracy and  analytical sufficiency of the report.  Team felt that \u2018reasonable\u2019 was  sufficient and \u2018necessary\u2019 was not  readily apparent.", "Do the assumptions support a   sound analysis?", "Given the judgment required to execute  the analyses the assumptions and  constraints are key to team\u2019s  determination of the accuracy and  analytical sufficiency of the report.", "Are the assumptions used in analyses   common throughout the study and models?", "This standard is not needed to answer  the objectives of our report. Other  standards for study assumptions are  more relevant and sufficient for our  purposes.", "Do the assumptions contribute to an objective   and balanced research effort?", "Scenarios and threats are reasonable   Did they synthesize the supporting analyses such   that it is traceable back to formal guidance?", "Were the threat scenarios validated and   Joint Staff approved and documented?", "Do scenarios represent a reasonably complete   range of conditions?", "Were the threats varied to allow for the   conduct of sensitivity analysis?", "Methods are sufficient and   successfully executed  Were the study methods executed consistent   with the study plan and schedule?", "Were the methods and analyses sufficient   for accomplishing the objectives presented   in the study?", "Given the judgment required to execute  the analyses the methodology is key to  determine if DOD accomplishes its  objectives."], "subsections": []}, {"section_title": "Generally Accepted Research Standards IV.c", "paragraphs": ["Were the models used to support the analyses   adequate for their intended purpose?  //Were the calculations used to support   the analyses accurate?  Baseline and other data used to support the  analyses were determined to be reliable and valid?   Is the baseline fully and completely identified   and used consistently, where appropriate,   throughout the various analyses?", "Rationale for inclusion   in or exclusion from   GAO\u2019s review  Important to ensure the model is  designed well in addition to accurate  arithmetic calculations. DOD conducted  analyses and calculations in the report."], "subsections": []}, {"section_title": "V", "paragraphs": ["DOD report includes the use of   baseline data in the underlying  analyses.", "Were data limitations identified and the impact   of the limitations fully explained?", "DOD report uses data obtained   from DOD components.", "Were the data determined to be reliable   and valid?", "Incorporated with V.e below.", "Were the data reliability and validation   process documented?", "DOD report uses data obtained   from DOD components.", "Were the appropriate data gathered   to support the analyses?", "OSD obtained data from other DOD  components and used it to generate   the report.", "Analyses are reasonable   Was a verification, validation, and accreditation   report that addresses the models and data   certification signed by the study director   and included in the report?", "In the context of our engagement,  redundant with section II above.", "Were analytic limitations identified and explained?", "In the context of our engagement,  redundant with section II above.", "Has each analysis in the study been described?", "In the context of our engagement,  redundant with section II above.", "Were the analyses clearly explained,   documented?"], "subsections": []}, {"section_title": "Measures of effectiveness (MOEs) and essential elements of analysis (EEAs) are addressed Do MOEs adhere to the guidance in the study terms of reference?", "paragraphs": ["The mandate language does not   require DOD to include measures of  effectiveness in its report. Furthermore,  DOD is not required to submit a  strategic plan so Government  Performance and Results Act  requirements are not applicable.", "Are the MOEs fully addressed in the study?", "Same rationale cited above.", "Are the EEAs addressed in the study?", "Same rationale cited above."], "subsections": []}, {"section_title": "Generally Accepted Research Standards", "paragraphs": ["Standard   used in GAO\u2019s  review?", "Presentation of results support findings   Does the report address the objectives?", "Does the report present an assessment that   is well documented and conclusions that   are supported by the analyses?", "Are conclusions sound and complete?", "We will address conclusionary   language in the context of the   data used to support it above.", "Are recommendations supported by analyses?", "The mandate language does   not require DOD to include  recommendations and DOD   did not include recommendations.", "Is a realistic range of options provided?", "Not applicable. DOD\u2019s report does   not include range of options for force- structureplans and categorical  infrastructure inventory.", "Are the study results presented in the report   in a clear manner?", "Are study participants/stakeholders   (i.e., services and Combatant Commands)   informed of the study results and recommendations?"], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Gina Hoffman (Assistant  Director), Tracy Barnes, Ronald Bergman, Patricia Donahue, Kerstin  Hudon, Terrance Lam, Amie Lesser, Carol Petersen, Clarice Nassif  Ransom, Matt Spiers, Tristan To, and John Wren made key contributions  to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Military Base Realignments and Closures: DOD Has Improved  Environmental Cleanup Reporting but Should Obtain and Share More  Information. GAO-17-151. Washington, D.C.: January 19, 2017.", "Defense Infrastructure: DOD Efforts to Prevent and Mitigate  Encroachment at Its Installations. GAO-17-86. Washington, D.C.:  November 14, 2016.", "Defense Facility Condition: Revised Guidance Needed to Improve  Oversight of Assessments and Ratings. GAO-16-662. Washington, D.C.:  June 23, 2016.", "Defense Infrastructure: More Accurate Data Would Allow DOD to Improve  the Tracking, Management, and Security of Its Leased Facilities.  GAO-16-101. Washington, D.C.: March 15, 2016.", "Underutilized Facilities: DOD and GSA Information Sharing May Enhance  Opportunities to Use Space at Military Installations. GAO-15-346.  Washington, D.C.: June 18, 2015.", "Military Base Realignments and Closures: More Guidance and  Information Needed to Take Advantage of Opportunities to Consolidate  Training. GAO-16-45. Washington, D.C.: February 18, 2016.", "Military Base Realignment and Closures: Process for Reusing Property  for Homeless Assistance Needs Improvements. GAO-15-274.  Washington, D.C.: March 16, 2015.", "High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February  11, 2015.", "Federal Real Property: Strategic Focus Needed to Help Manage Vast and  Diverse Warehouse Portfolio. GAO-15-41. Washington, D.C.: November  12, 2014.", "DOD Joint Bases: Implementation Challenges Demonstrate Need to  Reevaluate the Program. GAO-14-577. Washington, D.C.: September 19,  2014.", "Defense Infrastructure: DOD Needs to Improve Its Efforts to Identify  Unutilized and Underutilized Facilities. GAO-14-538. Washington, D.C.:  September 8, 2014.", "Defense Infrastructure: Army Brigade Combat Team Inactivations  Informed by Analyses, but Actions Needed to Improve Stationing  Process. GAO-14-76. Washington, D.C.: December 11, 2013.", "Military Bases: DOD Has Processes to Comply with Statutory  Requirements for Closing or Realigning Installations. GAO-13-645. June  27, 2013.", "Defense Infrastructure: DOD\u2019s Excess Capacity Estimating Methods  Have Limitations. GAO-13-535. Washington, D.C.: June 20, 2013.", "Military Bases: Opportunities Exist to Improve Future Base Realignment  and Closure Rounds. GAO-13-149. Washington, D.C.: March 7, 2013.", "GAO\u2019s 2013 High Risk Series: An Update. GAO-13-283. Washington,  D.C.: February 2013.", "DOD Joint Bases: Management Improvements Needed to Achieve  Greater Efficiencies. GAO-13-134. Washington, D.C.: November 15,  2012.", "Military Base Realignments and Closures: The National Geospatial- Intelligence Agency\u2019s Technology Center Construction Project.  GAO-12-770R. Washington, D.C.: June 29, 2012.", "Military Base Realignments and Closures: Updated Costs and Savings  Estimates from BRAC 2005. GAO-12-709R. Washington, D.C.: June 29,  2012.", "Military Base Realignments and Closures: Key Factors Contributing to  BRAC 2005 Results. GAO-12-513T. Washington, D.C.: March 8, 2012.", "Excess Facilities: DOD Needs More Complete Information and a Strategy  to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.:  September 19, 2011.", "Military Base Realignments and Closures: Review of the Iowa and Milan  Army Ammunition Plants. GAO-11-488R. Washington, D.C.: April 1,  2011.", "GAO\u2019s 2011 High-Risk Series: An Update. GAO-11-394T. Washington,  D.C.: February 17, 2011.", "Defense Infrastructure: High-Level Federal Interagency Coordination Is  Warranted to Address Transportation Needs beyond the Scope of the  Defense Access Roads Program. GAO-11-165. Washington, D.C.:  January 26, 2011.", "Military Base Realignments and Closures: DOD Is Taking Steps to  Mitigate Challenges but Is Not Fully Reporting Some Additional Costs.  GAO-10-725R. Washington, D.C.: July 21, 2010.", "Defense Infrastructure: Army Needs to Improve Its Facility Planning  Systems to Better Support Installations Experiencing Significant Growth.  GAO-10-602. Washington, D.C.: June 24, 2010.", "Military Base Realignments and Closures: Estimated Costs Have  Increased While Savings Estimates Have Decreased Since Fiscal Year  2009. GAO-10-98R. Washington, D.C.: November 13, 2009.", "Military Base Realignments and Closures: Transportation Impact of  Personnel Increases Will Be Significant, but Long-Term Costs Are  Uncertain and Direct Federal Support Is Limited. GAO-09-750.  Washington, D.C.: September 9, 2009.", "Military Base Realignments and Closures: DOD Needs to Update Savings  Estimates and Continue to Address Challenges in Consolidating Supply- Related Functions at Depot Maintenance Locations. GAO-09-703.  Washington, D.C.: July 9, 2009.", "Defense Infrastructure: DOD Needs to Periodically Review Support  Standards and Costs at Joint Bases and Better Inform Congress of  Facility Sustainment Funding Uses. GAO-09-336. Washington, D.C.:  March 30, 2009.", "Military Base Realignments and Closures: DOD Faces Challenges in  Implementing Recommendations on Time and Is Not Consistently  Updating Savings Estimates. GAO-09-217. Washington, D.C.: January  30, 2009.", "Military Base Realignments and Closures: Army Is Developing Plans to  Transfer Functions from Fort Monmouth, New Jersey, to Aberdeen  Proving Ground, Maryland, but Challenges Remain. GAO-08-1010R.  Washington, D.C.: August 13, 2008.", "Defense Infrastructure: High-Level Leadership Needed to Help  Communities Address Challenges Caused by DOD-Related Growth.  GAO-08-665. Washington, D.C.: June 17, 2008.", "Defense Infrastructure: DOD Funding for Infrastructure and Road  Improvements Surrounding Growth Installations. GAO-08-602R.  Washington, D.C.: April 1, 2008.", "Military Base Realignments and Closures: Higher Costs and Lower  Savings Projected for Implementing Two Key Supply-Related BRAC  Recommendations. GAO-08-315. Washington, D.C.: March 5, 2008.", "Defense Infrastructure: Realignment of Air Force Special Operations  Command Units to Cannon Air Force Base, New Mexico. GAO-08-244R.  Washington, D.C.: January 18, 2008.", "Military Base Realignments and Closures: Estimated Costs Have  Increased and Estimated Savings Have Decreased. GAO-08-341T.  Washington, D.C.: December 12, 2007.", "Military Base Realignments and Closures: Cost Estimates Have  Increased and Are Likely to Continue to Evolve. GAO-08-159.  Washington, D.C.: December 11, 2007.", "Military Base Realignments and Closures: Impact of Terminating,  Relocating, or Outsourcing the Services of the Armed Forces Institute of  Pathology. GAO-08-20. Washington, D.C.: November 9, 2007.", "Military Base Realignments and Closures: Transfer of Supply, Storage,  and Distribution Functions from Military Services to Defense Logistics  Agency. GAO-08-121R. Washington, D.C.: October 26, 2007.", "Defense Infrastructure: Challenges Increase Risks for Providing Timely  Infrastructure Support for Army Installations Expecting Substantial  Personnel Growth. GAO-07-1007. Washington, D.C.: September 13,  2007.", "Military Base Realignments and Closures: Plan Needed to Monitor  Challenges for Completing More Than 100 Armed Forces Reserve  Centers. GAO-07-1040. Washington, D.C.: September 13, 2007.", "Military Base Realignments and Closures: Observations Related to the  2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007.", "Military Base Closures: Projected Savings from Fleet Readiness Centers  Likely Overstated and Actions Needed to Track Actual Savings and  Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29,  2007.", "Military Base Closures: Management Strategy Needed to Mitigate  Challenges and Improve Communication to Help Ensure Timely  Implementation of Air National Guard Recommendations. GAO-07-641.  Washington, D.C.: May 16, 2007.", "Military Base Closures: Opportunities Exist to Improve Environmental  Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property.  GAO-07-166. Washington, D.C.: January 30, 2007.", "Military Bases: Observations on DOD\u2019s 2005 Base Realignment and  Closure Selection Process and Recommendations. GAO-05-905.  Washington, D.C.: July 18, 2005.", "Military Bases: Analysis of DOD\u2019s 2005 Selection Process and  Recommendations for Base Closures and Realignments. GAO-05-785.  Washington, D.C.: July 1, 2005.", "Military Base Closures: Observations on Prior and Current BRAC  Rounds. GAO-05-614. Washington, D.C.: May 3, 2005.", "Military Base Closures: Assessment of DOD\u2019s 2004 Report on the Need  for a Base Realignment and Closure Round. GAO-04-760. Washington,  D.C.: May 17, 2004.", "Military Bases: Review of DOD\u2019s 1998 Report on Base Realignment and  Closure. GAO/NSIAD-99-17. Washington, D.C.: November 13, 1998."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-52", "url": "https://www.gao.gov/products/GAO-19-52", "title": "Internet Privacy: Additional Federal Authority Could Enhance Consumer Protection and Provide Flexibility", "published_date": "2019-01-15T00:00:00", "released_date": "2019-02-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In April 2018, Facebook disclosed that a Cambridge University researcher may have improperly shared the data of up to 87 million of its users with a political consulting firm. This disclosure followed other recent incidents involving the misuse of consumers' personal information from the Internet, which is used by about three-quarters of Americans. GAO was asked to review federal oversight of Internet privacy. This report addresses, among other objectives: (1) how FTC and FCC have overseen consumers' Internet privacy and (2) selected stakeholders' views on the strengths and limitations of how Internet privacy currently is overseen and how, if it all, this approach could be enhanced.", "GAO evaluated FTC and FCC Internet privacy enforcement actions and authorities and interviewed representatives from industry, consumer advocacy groups, and academia; FTC and FCC staff; former FTC and FCC commissioners; and officials from other federal oversight agencies. Industry stakeholders were selected to represent different sectors, and academics were selected because of their expertise in privacy, consumer protection, and regulatory issues."]}, {"section_title": "What GAO Found", "paragraphs": ["The United States does not have a comprehensive Internet privacy law governing the collection, use, and sale or other disclosure of consumers' personal information. At the federal level, the Federal Trade Commission (FTC) currently has the lead in overseeing Internet privacy, using its statutory authority under the FTC Act to protect consumers from unfair and deceptive trade practices. However, to date FTC has not issued regulations for Internet privacy other than those protecting financial privacy and the Internet privacy of children, which were required by law. For FTC Act violations, FTC may promulgate regulations but is required to use procedures that differ from traditional notice-and-comment processes and that FTC staff said add time and complexity.", "In the last decade, FTC has filed 101 enforcement actions regarding Internet privacy; nearly all actions resulted in settlement agreements requiring action by the companies. In most of these cases, FTC did not levy civil penalties because it lacked such authority for those particular violations. The Federal Communications Commission (FCC) has had a limited role in overseeing Internet privacy. From 2015 to 2017, FCC asserted jurisdiction over the privacy practices of Internet service providers. In 2016, FCC promulgated privacy rules for Internet service providers that Congress later repealed. FTC resumed privacy oversight of Internet service providers in June 2018.", "Stakeholders GAO interviewed had varied views on the current Internet privacy enforcement approach and how it could be enhanced. Most Internet industry stakeholders said they favored FTC's current approach\u2014direct enforcement of its unfair and deceptive practices statutory authority, rather than promulgating and enforcing regulations implementing that authority. These stakeholders said that the current approach allows for flexibility and that regulations could hinder innovation. Other stakeholders, including consumer advocates and most former FTC and FCC commissioners GAO interviewed, favored having FTC issue and enforce regulations. Some stakeholders said a new data-protection agency was needed to oversee consumer privacy. Stakeholders identified three main areas in which Internet privacy oversight could be enhanced:", "Statute . Some stakeholders told GAO that an overarching Internet privacy statute could enhance consumer protection by clearly articulating to consumers, industry, and agencies what behaviors are prohibited.", "Rulemaking . Some stakeholders said that regulations can provide clarity, enforcement fairness, and flexibility. Officials from two other consumer protection agencies said their rulemaking authority assists in their oversight efforts and works together with enforcement actions.", "Civil penalty authority. Some stakeholders said FTC's Internet privacy enforcement could be more effective with authority to levy civil penalties for first-time violations of the FTC Act.", "Comprehensive Internet privacy legislation that establishes specific standards and includes traditional notice-and-comment rulemaking and broader civil penalty authority could enhance the federal government's ability to protect consumer privacy."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider developing comprehensive legislation on Internet privacy that would enhance consumer protections and provide flexibility to address a rapidly evolving Internet environment. Issues that should be considered include what authorities agencies should have in order to oversee Internet privacy, including appropriate rulemaking authority."]}], "report": [{"section_title": "Letter", "paragraphs": ["In April 2018, Facebook disclosed that a Cambridge University researcher  may have improperly shared the data of up to 87 million of Facebook\u2019s  users with a political consulting firm. This followed other incidents in  recent years involving the misuse of consumers\u2019 personal information  from the Internet, which about three-quarters of Americans use. These  types of incidents raise public concern because people use the Internet  as an essential service for everyday social and economic purposes, and  consumer products are increasingly being connected to the Internet.  These Internet-based services and products often collect and use various  forms of personal information about users, including their location, search  terms, contact information, financial information, and many other forms of  inherently or potentially sensitive details that could cause users harm if  released.", "To address such privacy concerns, in May 2018, the European Union  implemented the General Data Protection Regulation, a set of Internet  privacy rules that give consumers control over the collection, use, and  sharing of their personal information. In addition, California passed its  own Internet privacy law in June 2018 that becomes effective in 2020.  The United States does not have a similar comprehensive data privacy  law at the federal level and instead relies in part on an industry-specific  (sectoral) privacy approach. This involves industry-specific laws enforced  by various agencies governing areas such as healthcare and financial  services. In addition, the Federal Trade Commission (FTC) currently has  the lead in overseeing Internet privacy across all industries, with some  exceptions. Specifically, FTC addresses consumer concerns about  Internet privacy using its broad authority under the FTC Act to protect  consumers from unfair and deceptive trade practices. FTC has jurisdiction  over a broad range of entities and activities that are part of the Internet  economy, including websites, applications (apps), advertising networks,  data brokers, device manufacturers, and others. The common carrier  exemption in the FTC Act, however, prohibits FTC from taking action  against common carriers, such as providers of telecommunications  services.", "From 2015 to 2017, the Federal Communications Commission (FCC)  classified broadband Internet service as a telecommunications service  and asserted statutory and regulatory authority to address privacy  concerns related to broadband providers of this service, known as  Internet service providers. FCC developed privacy regulations governing  these entities in 2016, but Congress repealed the regulations before they  took effect. In December 2017, FCC reversed its decision to classify  broadband as a telecommunications service, and in June 2018, FTC  resumed privacy oversight of Internet service providers.", "You asked us to examine issues related to federal oversight of Internet  privacy. This report discusses:  the benefits and concerns associated with the collection of Internet  users\u2019 personal information for commercial purposes, how FTC and FCC have overseen consumers\u2019 Internet privacy, and  selected stakeholders\u2019 views on the strengths and limitations of how  Internet privacy currently is overseen and how, if it all, this approach  could be enhanced.", "To determine what is known about the benefits and concerns associated  with the collection of Internet users\u2019 personal information for commercial  purposes, we reviewed public opinion surveys conducted by the  Commerce Department\u2019s National Telecommunications and Information  Administration (NTIA) in 2017 and the Pew Research Center in 2015 and  2018, prior GAO reports, and other related literature. For this and the other objectives, we interviewed FTC and FCC staff; NTIA officials;  stakeholders from 4 consumer advocacy groups and 4 industry groups; 6  Internet service providers; 6 Internet content providers; and 11  academics about Internet privacy. To obtain a variety of perspectives, we  selected 6 Internet service providers that represented different industry  sectors (i.e., cable, satellite, and telephone-based Internet service) and 6  Internet content providers that provide a variety of information and social  media services. Academic stakeholders were selected because of their  expertise in privacy, consumer protection, and regulatory issues. We  also interviewed a former congressional staff member who has expertise  on privacy issues and is now a consultant. Stakeholders were selected to  represent a range of views, but our interview results are not generalizable  to all stakeholders. Appendix I lists our interviewees.", "To address how FTC and FCC have overseen Internet privacy, we  analyzed 101 Internet privacy enforcement actions that FTC filed during  the last 10 years and an FCC Internet privacy case that was brought  during the 2015-2017 period when the agency asserted jurisdiction over  the privacy practices of Internet service providers. We also reviewed  FTC and FCC guidance on Internet privacy and enforcement and a  memorandum of understanding between FTC and FCC regarding Internet  privacy jurisdiction and coordination.", "To determine selected stakeholders\u2019 views on the strengths and  limitations of how Internet privacy currently is overseen and to identify  how, if it all, this approach could be enhanced, we reviewed pertinent  literature, the legislative history of FTC\u2019s statutory rulemaking authorities,  and consumer protection statutes and regulations. We also interviewed  the stakeholders identified above and eight former FTC and FCC  commissioners. We selected to interview former FTC and FCC  commissioners who served during the Barack Obama and George W.  Bush administrations and are from different political parties. We also  interviewed officials from other federal agencies that oversee various  industries about the strengths and limitations of their regulatory and  enforcement authorities and approaches. The interviews included officials  from three consumer protection agencies\u2014the Consumer Financial  Protection Bureau (CFPB), the Consumer Product Safety Commission  (CPSC), and the Food and Drug Administration (FDA)\u2014and two worker  protection agencies\u2014the Occupational Safety and Health Administration  (OSHA) and the Equal Employment Opportunity Commission (EEOC).  We selected these agencies because they had consumer- or worker- protection responsibilities. In addition, we compared FTC\u2019s authorities  regarding Internet privacy to characteristics we identified in our prior work  that should be reflected in new regulatory systems and to the Fair  Information Practice Principles, which are a set of internationally  developed voluntary principles for protecting the privacy and security of  personal information.", "This report focuses on Internet data privacy, which is affected by the  collection and use of consumers\u2019 personal information such as their  Internet browsing histories, purchases, locations, and travel routes.  Although this report discusses some Internet privacy enforcement actions  that also involved data security issues, for the purposes of this review we  are distinguishing between Internet data privacy and Internet data  security, the latter of which can involve illegal breaches of sensitive  information through hacking.", "We conducted semi-structured interviews; not all interviewees were  asked the same questions. Throughout this report, we use certain  qualifiers when describing responses from interview participants, such as  \u201csome,\u201d and \u201cmost.\u201d We define \u201csome\u201d as three or more but less than half  and \u201cmost\u201d as a majority of all interviewees or a relevant subset of them.", "We conducted this performance audit from October 2017 through January  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Internet Industry and Consumer Privacy", "paragraphs": ["To varying extents, Internet content providers\u2014also called \u201cedge  providers\u201d\u2014and Internet service providers collect, use, and share  information from their customers to enable their services, support  advertising, and for other purposes. Many companies describe these and  other privacy-related practices in privacy policies, to which consumers  may be required to consent in order to use the service. Consumers  access such services through a variety of devices, including mobile  phones and tablets, computers, and other devices connected to the  Internet by wired or wireless means.", "A nationwide survey that the U.S. Census Bureau conducted for NTIA in  2017 found that 78 percent of Americans ages 3 and older used the  Internet. Another nationwide survey that the Pew Research Center  conducted in 2018 found that 69 percent of American adults reported that  they use some kind of social media platform such as Facebook.", "No comprehensive federal privacy law governs the collection, use, and  sale or other disclosure of personal information by private-sector  companies in the United States. Rather, the federal privacy framework for  private-sector companies is comprised partly of a set of tailored laws that  govern the use and protection of personal information for specific  purposes, in certain situations, or by certain sectors or types of entities.  These laws include the Fair Credit Reporting Act, which protects the  security and confidentiality of personal information collected or used to  help make decisions about individuals\u2019 eligibility for such products as  credit or for insurance or employment; the Gramm-Leach-Bliley Act,  which protects nonpublic personal information that individuals provide to  financial institutions or that such institutions maintain; and the Health  Insurance Portability and Accountability Act which establishes a set of  national standards for the protection of certain health information. In  addition, as detailed in this report, FTC addresses consumer concerns  about Internet privacy using its broad authority to protect consumers from  unfair and deceptive trade practices.", "We have reported on a variety of Internet privacy concerns in recent  years that include the collection and use of data such as people\u2019s Internet  browsing histories, purchases, locations, and travel routes, including:  Internet of things: In 2017, we found that as new and more devices  become connected, they increase not only the opportunities for  security and privacy breaches, but also the scale and scope of any  resulting consequences.", "Vehicle data privacy: We found in 2017 that most selected  automakers reported limiting their data collection, use, and sharing,  but their written notices did not clearly identify data sharing and use  practices.", "Information resellers: In a 2013 report on companies that collect and  resell information on individuals, we found that no overarching federal  privacy law governs the collection and sale of personal information  among private-sector companies, including information resellers.  We found that gaps exist in the federal privacy framework, which does  not fully address changes in technology and the marketplace. Among  the issues we noted were the potential need for changes to privacy  controls for web tracking, mobile devices, and other technologies. We  recommended that Congress consider strengthening the consumer  privacy framework to reflect the effects of changes in technology and  the marketplace. Such legislation has not been enacted to date.", "Mobile device location data: In 2012, we found that, according to  privacy advocates, consumers are generally unaware of how their  location data are shared with and used by third parties. We  recommended that FTC consider issuing guidance establishing FTC\u2019s  views regarding mobile companies\u2019 appropriate actions to protect  location data privacy. FTC implemented that recommendation in  2013.", "To guide their privacy practices, many organizations and governments  have used the Fair Information Practice Principles. As noted above, these  principles\u2014which are not limited to Internet privacy\u2014address the  collection and use of personal information, data quality and security, and  transparency, among other things, and have served as the basis for many  of the privacy recommendations federal agencies have made. The  Organisation for Economic Co-Operation and Development developed a  version of these principles in 1980 that has been widely adopted and was  updated in 2013. In 2000, FTC recommended that Congress enact a  consumer Internet privacy statute that would require companies to comply  with broad and flexible definitions of the principles, and an FTC  commissioner said in a 2014 speech that they are a solid framework and  are flexible and effective. While they are principles, not legal  requirements, they provide a possible approach for balancing the need for  privacy with other interests. Table 1 provides more detailed information  about the principles."], "subsections": []}, {"section_title": "FTC and FCC Oversight of Internet Privacy", "paragraphs": ["FTC is primarily a law enforcement agency that, among other  responsibilities, currently has the lead in overseeing Internet privacy at  the federal level. Specifically, it addresses consumer concerns about  Internet privacy, both for Internet service providers and content providers,  using its general authority under section 5 of the FTC Act. Section 5, as  amended in 1938, prohibits \u201cunfair or deceptive acts or practices in or  affecting commerce.\u201d Although the FTC Act generally empowers FTC to  take enforcement action, it prohibits FTC from taking action against  common carriers such as telecommunication services, airlines, and  railroads under certain circumstances. FTC also does not have  jurisdiction over banks, credit unions, or savings and loans institutions.", "Even though the FTC Act does not speak in explicit terms about  protecting consumer privacy, the Act authorizes such protection to the  extent it involves practices FTC defines as unfair or deceptive. According  to FTC, an act or practice is \u201cunfair\u201d if it causes, or is likely to cause,  substantial injury not reasonably avoidable by consumers and not  outweighed by countervailing benefits to consumers or competition as a  result of the practice. FTC has used this \u201cunfairness\u201d authority to address  situations where a company has allegedly failed to properly protect  consumers\u2019 data. According to FTC, a representation or omission is  \u201cdeceptive\u201d if it is material and is likely to mislead consumers acting  reasonably under the circumstances. For example, the omission of terms  in an advertisement would need to be material and likely to mislead  consumers in order to be deceptive. FTC applies this \u201cdeceptive\u201d  authority to address deceptions or violations of written privacy policies  and representations concerning data security.", "FTC\u2019s Bureau of Consumer Protection investigates Internet privacy  complaints from various sources, including consumers, other agencies,  Congress, and industry, and also initiates investigations on its own. If the  bureau has reason to believe that an entity is engaging in an unfair or  deceptive practice, it may forward an enforcement recommendation to the  commission. The commission then determines whether to pursue an  enforcement action, which can include the following:  litigating commission-filed administrative complaints before an FTC  administrative law judge;  filing and litigating complaints in federal district court seeking  preliminary and permanent injunctions, monetary redress for  consumers or other equitable relief; or  referring complaints seeking civil penalties for violations of rules  authorizing such penalties or for violations of administrative orders to  the Department of Justice (DOJ) and assisting DOJ in litigating those  cases (if DOJ does not take action, FTC can pursue the action on its  own).", "FTC\u2019s Internet privacy enforcement cases may be settled without the  imposition of civil penalties. Instead, FTC typically enters into settlement  agreements requiring companies to take actions such as:  implementing reasonable privacy and security programs; being subject to long-term monitoring of compliance with the  settlements by outside entities; providing monetary redress to consumers;  forfeiting any money gained from the unfair or deceptive conduct; deleting illegally obtained consumer information; and providing transparency and choice mechanisms to consumers.", "If a company violates an FTC final consent order, the agency can then  request civil monetary penalties in court for the violations. In addition, as  discussed below, FTC can seek to impose civil monetary penalties  directly for violations of certain privacy statutes and regulations such as  the statute pertaining to the Internet privacy of children and its  implementing regulations. Although FTC can levy civil penalties up to  $41,484 per violation, per day, against an entity that violates a trade  regulation rule under the FTC Act, it has not promulgated trade regulation  rules under section 5 specific to privacy.", "Although FTC has not implemented its section 5 authority by issuing  regulations regarding Internet privacy, it has issued regulations to  implement other statutory authorities. Likewise, other federal agencies  use regulations to implement the statutes they are charged with  administering. The process by which federal agencies typically develop  and issue regulations is spelled out in the Administrative Procedure Act  (APA). Section 553 of the APA establishes procedures and requirements  for what is known as \u201cinformal\u201d rulemaking, also known as notice-and- comment rulemaking. Among other things, section 553 generally  requires agencies to publish a notice of proposed rulemaking in the  Federal Register. After giving interested persons an opportunity to  comment on the proposal by providing \u201cdata, views, or arguments,\u201d the  statute then requires the agency to publish the final rule in the Federal  Register. Regulations may be enforced in various ways, for example, by  seeking civil penalties for non-compliance. FTC has authority to seek civil  penalties, for example, when a company knowingly violates a regulation  or, as discussed below, a final consent order.", "In contrast to the APA section 553 rulemaking process, the rulemaking  process that FTC generally must follow to issue rules under the FTC Act  is spelled out in the Magnuson-Moss Warranty Act amendments to the  FTC Act (Magnuson-Moss). The Magnuson-Moss amendments\u2014 enacted in 1975 partly in response to industry opposition to FTC\u2019s trade  regulations, and amended in 1980\u2014require additional rulemaking steps  beyond APA section 553. For example, Magnuson-Moss requires FTC  to publish an advance notice of proposed rulemaking in addition to the  notice of proposed rulemaking required by the APA, and to offer  interested parties the opportunity for an informal hearing involving oral  testimony. FTC has not promulgated any regulations using the  Magnuson-Moss procedures since 1980; according to FTC staff, the  additional steps required under Magnuson-Moss add time and complexity  to the rulemaking process.", "The Children\u2019s Online Privacy Protection Act (COPPA), enacted in 1998,  governs the online collection of personal information from children under  the age of 13 by operators of websites or online services, including  mobile applications. COPPA required FTC to issue and enforce  regulations concerning children\u2019s online privacy and directed FTC to  promulgate these regulations using the APA section 553 notice-and- comment rulemaking process. COPPA contained a number of specific  requirements that FTC was directed to implement by regulation, such as  requiring websites to post a complete privacy policy, to notify parents  directly about their information collection practices, and to obtain  verifiable parental consent before collecting personal information from  their children or sharing it with others. The commission\u2019s original COPPA  regulations became effective on April 21, 2000, and amended COPPA  regulations took effect on July 1, 2013. According to an FTC staff  member, COPPA and FTC\u2019s implementing regulations reflect various  principles that are similar to the Fair Information Practice Principles.", "FCC regulates the telecommunications industry pursuant to the  Communications Act of 1934, as amended (Communications Act). FCC  follows the APA section 553 notice-and-comment rulemaking process to  promulgate regulations implementing the Communications Act. FCC also  has an enforcement bureau that pursues violations of its regulations and  the Communications Act.", "The Communications Act establishes separate definitions for \u201cinformation  services\u201d and \u201ctelecommunications services\u201d and treats these two types  of services differently. Specifically, information services are subject to  less regulation by FCC than telecommunications services under the  Communications Act. However, FTC is prohibited from regulating  telecommunications carriers (a provider of telecommunications services)  under the common carrier exemption. Prior to 2015, Internet services  were considered information services under the Communications Act, and  thus FTC was not prohibited from considering the privacy practices of  Internet service providers under its FTC Act authority to protect  consumers from unfair and deceptive practices. This changed in 2015  when FCC classified broadband as a telecommunications service, which  meant that broadband Internet service providers were considered  telecommunications carriers and FCC asserted primary oversight over  them. As a result of the reclassification, FTC no longer had jurisdiction  over Internet service providers. Once FCC had asserted primary  oversight over Internet service providers, FCC promulgated privacy  regulations specific to them. However, before the privacy regulations went into effect, Congress repealed them under the Congressional Review  Act. In December 2017, FCC reclassified broadband as an information  service\u2014reverting Internet service providers\u2019 classification to what it had  been prior to 2015. When that reclassification became effective in June  2018, jurisdiction of Internet privacy for Internet service providers was  effectively transferred from FCC back to FTC. As a result, FCC currently  has limited Internet privacy oversight responsibilities, as shown in figure  1."], "subsections": []}]}, {"section_title": "Stakeholders\u2019 Views Varied on the Benefits and Concerns with Collecting and Using Consumers\u2019 Data from the Internet", "paragraphs": ["Perspectives on the benefits of and concerns about the collection and use  of consumers\u2019 data from the Internet varied somewhat across stakeholder  groups. Various stakeholders we interviewed\u2014including those from  academia, industry, and government\u2014said that there should be a  balance between the freedom of companies to collect and use  consumers\u2019 data needed to provide services and the necessity to protect  consumers\u2019 privacy. In general, industry stakeholders highlighted the  benefits of data collection and use, such as facilitating innovation, while  consumer advocacy groups and other stakeholders emphasized concerns  about consumers\u2019 loss of control over their data and their lack of  understanding of how companies collect and use their information.  Additionally, surveys and other literature that we reviewed on Internet  privacy highlighted concerns among consumers. The key benefits of  information collection were identified as:", "Enables certain services. According to two industry stakeholders,  the collection and use of consumer data from the Internet enable  content providers to provide services. These stakeholders said that  sometimes a content provider must collect and use information from  consumers to provide the service. For example, a mapping service  must collect and use consumers\u2019 current location to provide them with  up-to-date directions.", "Provides low-cost or free services. A representative from a content  provider said that revenue from targeted advertising helps allow some  content providers\u2019 services to be offered to consumers at little or no  charge. Instead of charging a subscription fee, a social media  company may be able to provide free service because it uses  information that it collects from consumers to target advertisements to  users on a customized, user-by-user basis. These ads are targeted to  users based on interests they express through their use of social  media, among other things. According to a representative from an  Internet search engine, using consumer data for targeted advertising  may be relatively less important for some kinds of content providers,  such as search engines. This company representative said that  search engines may use keywords entered for a particular Internet  search to provide advertisements relevant to the search. For example,  a search for \u201ccar insurance\u201d can offer the consumer advertisements  from car insurance companies without any additional data from the  consumer other than the search\u2019s keywords.", "Supports innovation and customization. According to some  stakeholders, the collection and use of data also benefit consumers  through other means such as providing innovative products or  customized services. According to a representative from a content  provider, the collection of personal information, with consent, for  commercial purposes can at times have benefits. The representative  said, for example, that collection of images containing identifiable  information, like faces, can help in the development of new  technologies such as object and facial recognition. According to two  content providers, consumers may also benefit from customized  services and content. For example, according to a representative from  a travel-related company, that company can collect information about  a consumer to suggest travel itineraries and suggestions for activities.  Additionally, representatives from a consumer advocacy group and a  content provider stated that direct-marketing approaches are enabled  through data collection. Such marketing approaches allow consumers  to receive advertisements that are uniquely tailored to their interests.  For example, a consumer that a content provider has identified as  being a hiker may receive advertisements for hiking boots.", "Despite these benefits, public opinion surveys have shown concerns  about the collection and use of consumers\u2019 information on the Internet.  For instance, recent analyses based on surveys by the Pew Research  Center and NTIA showed that the public lacks trust in Internet privacy, a  concern that may limit economic activities. NTIA\u2019s survey results show  that privacy concerns may lead to lower levels of economic productivity  as people decline to make financial transactions on the Internet.  According to the NTIA analysis, in 2017, 24 percent of American  households surveyed avoided making financial transactions on the  Internet due to privacy or security concerns. Consumers NTIA surveyed  indicated that their specific concerns were identity theft, credit card or  banking fraud, data collection by online services, loss of control over  personal information, data collection by government, and threats to  personal safety. Stakeholders we interviewed elaborated on some of  these concerns:", "Public disclosure and data breaches. Some stakeholders, including  representatives from content providers, said that personal information  from the Internet can be publicly disclosed, including through data  breaches. An academic and a former FCC commissioner told us that  such disclosures are becoming more frequent. Various consumer  advocacy groups and state governments continue to report data  breaches. This personal information can include financial information  such as credit card information, the disclosure of which can result in  financial harm to the consumer. It can also include other kinds of  sensitive information such as political views or medical conditions, the  disclosure of which can cause non-financial harms such as  embarrassment or harassment. According to public reports, the 2017  breach of consumer information from Equifax, a credit-reporting  agency, resulted in the disclosure of 143 million American consumers\u2019  sensitive information. According to NTIA\u2019s 2017 survey, 45 percent of  households surveyed reported major concerns about credit card  fraud. Regarding non-financial information, in a recent case FTC  alleged that an Internet-based company publicly disclosed patients\u2019  sensitive medical information without their knowledge after patients  submitted what they thought were confidential reviews of physicians.  According to FTC, these reviews were then publicly posted on the  company\u2019s website.", "Financial and other harms. Stakeholders identified both potential  financial and non-financial harms associated with misuse of personal  information from the Internet. A former FTC acting chair has said that  privacy and data-security incidents can cause injuries that do not only  involve financial loss and that it may be difficult to measure this type  of non-financial injury. In a February 2018 speech, this former acting  FTC chair cited a case that the agency filed involving the misuse of  personal information from the Internet that resulted in people losing  jobs or job opportunities or being threatened, stalked, and harassed.  The acting chair said that in another case, there was evidence that  several people committed suicide after their names and other data  were disclosed. The commission can, by bringing suit in district court,  obtain an order compelling content providers to provide monetary  relief to consumers if a data disclosure results in financial harm to a  consumer. However, an academic noted that many data disclosures  of sensitive information cannot be financially redressed; information  can indefinitely persist on the Internet once it is disclosed.", "Consumers\u2019 lack of understanding. A range of stakeholders we  interviewed, including those from industry, said that consumers lack  an understanding of how their data are collected and used. Some  stakeholders said content providers are insufficiently transparent  about how they collect and use data. For instance, content providers\u2019  privacy policies, according to various stakeholders, may contain  technical language that is difficult for typical consumers to understand,  may be located in a difficult-to-access or inconspicuous part of the  content provider\u2019s website, or may be lengthy to the point where it  becomes prohibitively difficult for a consumer to set aside enough  time to read. Furthermore, according to an academic, companies may  have an incentive to intentionally obscure their privacy practices,  since clarity could put the companies at a competitive disadvantage.", "The academic also stated that different privacy policies may apply to  different parts of a consumer\u2019s experience on a single website. For  example, the academic described how a website may have contracts  with third-party vendors for specific services included on the website  that consumers use, such as an online shopping cart\u2019s features. The  privacy policy for the website and the third-party shopping cart can be  separate and unrelated to each other, and consumers may not be  aware of this since these policies may never appear to consumers or  be hard to obtain. A representative from a consumer advocacy group  also mentioned that consumers may be unaware that companies track  consumers\u2019 Internet activity in order to target those consumers with  customized prices. An academic said that these practices may  disproportionately affect people with low computer literacy, as they  may not be aware of tracking or know of ways to counteract it. In  2015, we found that the lack of computer and Internet skills is one of  the primary barriers people face in using the Internet and that this is a  particular problem for certain demographic segments who may lack  exposure to or knowledge about computers, such as those of age 65  and older and those with low levels of income and education.", "Consumer lack of control. Some academics and consumer  advocacy groups also identified a lack of control as a concern with  respect to Internet privacy\u2014consumers have little or no control over  how their information is collected, used, and shared. In a 2015 survey  conducted by Pew Research Center, 65 percent of respondents said it  is very important to be in control of what information is collected about  them. However, according to an academic and a consumer advocacy  group we interviewed, privacy policies offer consumers little or no  bargaining power, and consumers may be forced to either accept the  terms of the policy as written or not use the application or service at  all. Furthermore, we recently reported that sometimes consumers\u2019  information is used for purposes that are altogether separate from  what those consumers originally anticipated. For example, FTC  alleged in an enforcement action that in 2009 and 2010, a company  told consumers that it would track the websites they visited in order to  provide them with personalized offers, when in fact the company was  also transmitting credit card information it collected through such  tracking to third parties. The company settled with FTC. We also  recently reported on how devices that comprise the Internet of Things  pose privacy concerns for consumers, including that information  collected by such Internet-connected devices can be used in ways to  which the consumer was not given the option to opt out.", "As discussed above, stakeholders described various types of harm that  could result from Internet privacy violations. Regardless of whether  violations involve financial or other types of harm, a challenging factor in  providing Internet privacy oversight is identifying the responsible parties.  A former federal government official with experience in privacy issues  said that it frequently is difficult to identify which Internet entity in the  chain is ultimately responsible for a privacy-related harm. For example, if  a consumer is harmed by the theft of his or her Social Security number, it  can be difficult to determine which entity is responsible if multiple entities  have suffered data breaches of information systems that contained the  Social Security number. In addition to the challenges in identifying  responsible parties, the federal government has faced challenges in  providing Internet privacy oversight. Our prior work has found that such  efforts lack clearly defined roles, goals and performance measures,  and that gaps exist in the current privacy framework."], "subsections": [{"section_title": "FTC and FCC Have Used Different Approaches to Oversee Internet Privacy FTC Primarily Uses Settlement Agreements with a Range of Companies to Address Internet Privacy Violations", "paragraphs": ["We found that during the last decade, FTC filed 101 Internet privacy  enforcement actions for practices that the agency alleged were unfair,  deceptive, a violation of COPPA, a violation of a settlement agreement,  or a combination of those reasons. Most of these actions pertained to  first-time violations of the FTC Act for which FTC does not have the  authority to levy civil penalties. In those cases where a party violated an  FTC regulation or settlement agreement, however, FTC does have the  authority to impose civil penalties. The 101 cases\u2014filed between July 1,  2008 and June 30, 2018\u2014involved a variety of products, services, and  industries that collect and use personal information from the Internet.  During the years for which we examined full-year data, the number of  enforcement actions taken per year ranged from 5 in 2010 and 2016 to 23  in 2015. For example, in recent years, FTC took enforcement action  against the following entities for alleged conduct that the agency  contended violated section 5 or COPPA: a toy manufacturer for collecting personal information from children  online without providing direct notice and obtaining their parents\u2019  consent; a computer manufacturer for pre-loading laptops with software that  compromised security protections in order to deliver ads to  consumers; a mobile ride-hailing business for misrepresenting the extent to which  it monitored its employees\u2019 access to personal information about  users; a television manufacturer for installing software on its televisions to  collect viewing data on 11 million consumers without their knowledge  or consent and providing the viewing data to third parties; and a mobile advertising network for deceptively tracking the locations of  hundreds of millions of consumers, including children, without their  knowledge or consent, to serve them geographically targeted  advertising.", "Of the 101 actions filed during the 10-year period, 51 involved Internet  content providers, 21 involved software developers, 12 involved the sale  of information or its use in advertising, 5 involved manufacturers, 1  involved an Internet service provider, and 11 involved a variety of different  products, such as those provided by rent-to-own companies or  certification services. In nearly all 101 cases, companies settled with  FTC, which required the companies to make changes in their policies or  practices as part of the settlement. FTC levied civil penalties against two  of those companies for violating their settlement agreements. Also  during this 10-year period, FTC levied civil penalties against 15  companies (a total of $12.7 million) for alleged violations of the COPPA  regulations. The COPPA civil penalties ranged from $50,000 to $4 million  and the average amount was $847,333. FTC can also seek to compel  companies to provide monetary relief to those they have harmed. During  this time period, FTC levied civil penalties against companies for  violations of consent decrees or ordered monetary relief to consumers  from companies for a total of $136.1 million. These payment orders  ranged from $200,000 to $104.5 million and the average amount was $17  million.", "In the majority of these 101 enforcement actions that FTC settled, FTC  alleged that companies engaged in practices that were deceptive.   Examples of the charges FTC brought include:  \u201cDeceptive practices\u201d cases (61 cases): In 2016, FTC alleged that  Turn, Inc., an Internet advertising company, continued to track the  Internet activities of consumers for targeted advertising purposes after  the company had made representations that it would stop doing so.  According to FTC, the company led consumers to believe they could  turn off such tracking when in fact they were unable to do so.  \u201cUnfair practices\u201d cases (4 cases): In 2014, FTC alleged that  LeapLab, a data broker, knowingly provided scammers with hundreds  of thousands of consumers\u2019 sensitive personal information, including  Social Security and bank account numbers.  \u201cUnfair and deceptive\u201d practices cases (19 cases): In 2015, FTC  alleged that Equiliv Investments, a software developer, lured  consumers into downloading its \u201crewards\u201d application, saying it would  be free of malware, when the application\u2019s main purpose was actually  to load the consumers\u2019 mobile phones with malicious software to mine  virtual currencies for the developer.", "COPPA and COPPA regulations cases (6 cases): In 2011, FTC  alleged that Broken Thumbs Apps, a software developer, had  collected information from Internet applications that the developer  specifically targeted toward children under the age of 13. FTC\u2019s  complaint stated that the company had, among other things, failed to  provide notice of what information it collected and how it was used  and also had failed to inform parents of these practices and receive  their consent as COPPA required.", "Violation of settlement agreement cases (2 cases): In 2012, Google  agreed to pay a $22.5 million civil penalty to settle FTC charges that it  misrepresented to users of Apple\u2019s Safari Internet browser that  Google would not place tracking cookies or provide targeted ads to  those users, violating an earlier settlement agreement between the  company and FTC.", "In 14 of the 101 cases, FTC required companies to be audited by outside  entities to monitor compliance with the terms of the settlement. The audit  period ranged from 5 years to 20 years, with an average of 17.5 years.", "As noted above, 2 of the 101 cases involved a violation of FTC settlement  agreements. In addition, in March 2018, FTC announced that it is  investigating whether Facebook\u2019s privacy practices violate a 2012  Facebook settlement agreement with FTC. In the case that resulted in the  2012 settlement, FTC charged Facebook with deceiving consumers by  telling them they could keep their information private, but then allowing it  to be shared and made public.", "Appendix II contains more detailed information about the 101 cases."], "subsections": []}, {"section_title": "FCC Developed Internet Privacy Rule for Internet Service Providers That Was Later Repealed", "paragraphs": ["As stated earlier, in 2015, FCC classified broadband Internet service as a  telecommunications service, placing primary oversight of broadband  Internet service providers\u2019 privacy practices under FCC\u2019s jurisdiction  instead of FTC\u2019s jurisdiction. In 2016, FCC filed a privacy enforcement  action against a mobile Internet service provider, alleging, in part,  violation of section 222 of the Communications Act and FCC\u2019s Open  Internet Transparency Rule. Section 222 requires telecommunications  carriers to protect the confidentiality of customers\u2019 proprietary information.  In that case, FCC fined Verizon Wireless $1.4 million for failing to disclose  that it was inserting \u201cunique identifier headers,\u201d also called \u201cperma- cookies\u201d or \u201csuper cookies\u201d (mobile web tracking cookies that users  cannot remove), into customers\u2019 Internet traffic over its wireless network.  Although the settlement was finalized during the 2015-2017 period when  FCC had asserted jurisdiction over the privacy practices of Internet  providers, the Verizon Wireless practices occurred prior to the  classification of Internet service providers as telecommunications carriers.  The investigation therefore did not rely upon FCC\u2019s subsequent assertion  of authority over Internet service providers\u2019 privacy practices.", "In October 2016, after FCC had reclassified broadband as a  telecommunications service, the commission issued Internet service  provider privacy regulations, asserting its authority under section 222 of  the Communications Act. In April 2017, however, Congress repealed  these regulations under the Congressional Review Act before they took  effect. In December 2017, FCC then reversed its 2015 classification of  broadband, and oversight of broadband Internet service providers\u2019 privacy  practices reverted to FTC once the decision took effect in June 2018. In  explaining the December 2017 decision, FCC\u2019s new chair said that FTC\u2019s  privacy oversight approach regarding Internet service providers\u2014using its  authority to protect consumers against unfair, deceptive, and anti- competitive practices\u2014had worked well in the past and that this action  would \u201cput the nation\u2019s most experienced privacy cop back on the beat.\u201d  Under FCC\u2019s new legal approach, it no longer asserts jurisdiction to take  enforcement action against Internet service providers for privacy-related  matters, including mobile Internet service providers. As part of FTC\u2019s  resumption of Internet service provider oversight, FCC and FTC entered  into a memorandum of understanding in December 2017 spelling out their  roles and responsibilities regarding oversight of these companies. FTC  staff said that they regularly communicate with FCC and have an  agreement to share Internet privacy complaints."], "subsections": []}, {"section_title": "Selected Stakeholders Provided Various Views on the Effectiveness of Current Internet Privacy Oversight and How It Could be Enhanced Industry Stakeholders View Current Enforcement Approach as Providing Flexibility, While Consumer Stakeholders See Limitations with This Approach", "paragraphs": ["As previously discussed, no federal statute comprehensively and  specifically governs Internet privacy across all sectors. FTC oversees  some aspects of Internet privacy by using its FTC Act section 5 authority  to protect consumers from unfair and deceptive practices. FTC also uses  its specific COPPA authority to police the collection and use of personal  information from children by online services. Some industry  representatives said that FTC\u2019s enforcement has been effective because  the agency has expertise and experience in privacy issues and has the  flexibility to take enforcement action on a case-by-case basis. In addition,  a content provider said that FTC has taken enforcement actions against  companies of various sizes in different sectors and has a powerful tool by  being able to require companies to be audited by outside entities for up to  20 years.", "Industry stakeholders we interviewed generally said that \u201cdirect  enforcement\u201d of a statute is preferable to promulgating and enforcing  regulations implementing that statute (which constitutes enforcement of  the statute as well). These stakeholders noted several key concerns they  believe exist with regulatory versus statutory enforcement of Internet  privacy:", "Regulations can stifle innovation. Two industry stakeholders said  that regulations can hinder companies\u2019 ability to innovate. For  example, representatives from an Internet service provider said that  innovation can stop during the rulemaking process as the industry  waits for the regulation to be finalized.", "Regulations may create loopholes. Representatives from an  Internet industry group and a content provider said that regulations  can also contain loopholes that can be legally exploited because  imprecise language in a regulation may allow a company to legally  engage in an action that was originally unforeseen by the regulator.", "Regulations can become obsolete. Several industry stakeholders  said regulations also may become obsolete quickly because the  Internet industry is rapidly changing. An Internet industry  representative noted that there can be large shifts in the Internet  industry from year to year, while it often takes an agency much longer  than a year to adopt a rule. Industry stakeholders said the flexibility of  FTC\u2019s approach allows FTC to adapt continuously to changing market  conditions.", "Rulemakings can be lengthy. FCC officials said that in some cases,  rulemakings can take a long time, especially when the issues are  complex and there is no statutory deadline. Our previous work on  rulemaking found that length of time required for the development and  issuance of final rules varied both within and among agencies.", "Additionally, while some stakeholders suggested that regulations can  clarify acceptable practices, other stakeholders, including from industry  and academia, said that enforcement actions can send a similar  message. According to both a representative from a content provider and  an academic, enforcement actions such as settlement agreements, for  example, establish precedents that companies can follow, similar to the  way that case law developed by courts provides guidance for companies.", "Although some industry representatives we interviewed said that FTC\u2019s  use of settlement agreements provides companies with guidance, certain  trade associations took a different position in a recent case brought  before the U.S. Court of Appeals for the Third Circuit, FTC v. Wyndham  Worldwide Corp. 799 F.3d 236 (3d Cir. 2015). However, the court did not  agree with the associations\u2019 arguments. The case involved an  enforcement action against Wyndham Worldwide Corporation where FTC  alleged that data security failures led to three data breaches at the  company in less than 2 years. The court considered whether FTC could  bring an enforcement case involving cybersecurity using FTC\u2019s section 5  \u201cunfair practices\u201d authority and, if so, whether Wyndham had \u201cfair notice\u201d  that its specific cybersecurity practices could be deemed \u201cunfair.\u201d A  group of companies and the U.S. Chamber of Commerce wrote a friend- of-the-court brief supporting Wyndham, criticizing FTC\u2019s \u201cregulation- through-settlements\u201d approach. The companies argued this approach  subjects businesses to \u201cvague, unknowable, and constantly changing  data-security standards\u201d and businesses often are unaware of the  standards to which they are held until after they receive a notice of  investigation from FTC, at which point they must settle or expend  considerable resources fighting the agency.", "Potential Limits on Federal Trade  Commission (FTC) Remedies  A recently decided federal appeals court case  illustrates potential limits on the remedies that  FTC can order in an \u201cunfair practices\u201d  enforcement proceeding. In this 2018 case,   LabMD, Inc. v. FTC, 891 F.3d 1286 (11th Cir.  2018), the U.S. Court of Appeals for the  Eleventh Circuit found that FTC could not  direct a medical laboratory to create and  implement wholesale data-security protective  measures as a remedy to the laboratory\u2019s  alleged unfair practices.   FTC had filed a complaint against LabMD  under section 5 of the FTC Act for allegedly  committing an unfair act or practice by failing  to provide reasonable and appropriate  security for personal information on its  computer networks. The commission found  that LabMD\u2019s inadequate security constituted  an unfair act or practice and ordered LabMD  to take various actions, including establishing  and maintaining a reasonable and  comprehensive information security program.   On appeal, the Eleventh Circuit ruled that  FTC\u2019s order exceeded its authority because it  did not prohibit a specific act or practice but  instead, mandated a complete overhaul of the  company\u2019s data-security program. FTC had  argued that the FTC Act gives it broad  discretion to prevent unfair or deceptive acts  or practices that injure the general public and  that FTC had spelled out standards for  LabMD to craft a reasonable security  program. The court ruled, however, that such  a general approach would make it difficult for  a reviewing court to determine if LabMD had  complied with the order, in the event of a  future FTC challenge. company can reasonably foresee that a court could construe its conduct  as falling within the meaning of the statute.\u201d", "A majority of non-industry stakeholders we interviewed identified  limitations in the current Internet privacy oversight approach because they  view regulations in conjunction with enforcement as being more effective.  These stakeholders include all of the former FTC commissioners we  interviewed, three of the four former FCC commissioners we interviewed,  and representatives from consumer advocacy groups we interviewed. In  addition, a former FCC commissioner said that the current Internet  privacy oversight approach is limited in part because he viewed  regulations applying equally to all players in the Internet ecosystem in  conjunction with enforcement as being more effective. A representative  from a consumer advocacy group also said that regulations in conjunction  with enforcement are essential for effective privacy protection. Some of  these stakeholders noted key ways that they believe Internet privacy  regulations can provide clarity to industry and consumers, as well as  fairness and flexibility in enforcement:", "Regulations can provide clarity. An Internet industry group  representative said that various companies have favorable views of  regulations because they can provide clear expectations about what  actions are permissible. Similarly, a former congressional staff  member with expertise on privacy issues said that some companies  have favorable views of regulations because the regulations often  provide clearer expectations about what the companies can do. FCC  officials said that with respect to telephone privacy provisions of the  Communications Act, the telephone industry wanted rules because it  sought greater clarity about what it should be doing, what constituted  a violation, how to comply, and what behaviors were acceptable.", "Regulations may promote fairness. Some other stakeholders  discussed the ability of regulations to provide fairness. For example, a  former federal enforcement official described regulations as creating a  fair and consistent oversight regime across the entire industry in a  way that case-by-case enforcement actions do not. Another former  federal enforcement official said that regulations give companies fair  notice of what actions may be violations and thus help those  companies avoid surprising or unexpected enforcement.", "Regulations can be flexible. An academic said that by targeting  behaviors and not specific technologies, regulations can be written in  such a way that they do not become obsolete. An academic also said  that regulations based on broad performance-standards principles can  avoid being overly prescriptive. FCC officials also noted that  regulations can be amended to adapt to changes in technology often  faster than new laws can be enacted. Furthermore, regulations  determined to be obsolete can be repealed. FTC staff told us that the  agency systematically reviews all of its regulations every 10 years,  even though it is only legally required to review its most significant  ones, and that the number of FTC regulations has decreased because  the agency determined prior ones were obsolete. The Regulatory  Flexibility Act requires federal agencies to analyze the effect of their  regulations on small entities.", "Regulations can be a deterrent. FCC officials said that rules can  have a deterrent effect on bad practices in the industry or have a role  in mitigating the negative effects of bad practices after they occur.  They said, for example, that the practice of pretexting (improperly  obtaining people\u2019s telephone records) was greatly curtailed by an  FCC regulation prohibiting such practices. They also said that rules  can foreclose arguments by companies claiming that because no rule  was in place, they had no reasonable notice or awareness that they  should behave in a particular way.", "Consumer advocacy groups and other stakeholders, including some  former FTC and FCC commissioners, had concerns about the efficacy of  an enforcement approach such as FTC\u2019s approach to Internet privacy  oversight, which focuses on enforcing a statute rather than implementing  regulations. They said that FTC\u2019s enforcement approach limits the ability  of the agency to affect companies\u2019 behavior, and that any enforcement  activity occurs after the violation, undesirable behavior, harm, or illegal  action has already occurred. A former federal enforcement official also  said that regulations can prevent companies from engaging in bad  practices in the first instance and thus have a preventive effect. A former  FCC commissioner said that by the nature of a direct statutory- enforcement approach (as opposed to rulemaking), an agency would only  address a harm after it has occurred. As discussed above, for example,  data often cannot be removed from the Internet because copies of the  data can exist among many bad actors, and it can be difficult to identify  the entity responsible for unwanted disclosures. Therefore, it may be  more important to avoid such Internet privacy harms from occurring in the  first place. Another former FCC commissioner told us that Internet privacy  oversight should be returned to FCC because it has APA section 553  notice-and-comment rulemaking authority and considerable enforcement  experience.", "Representatives from consumer advocacy groups said that FTC\u2019s  enforcement action has been insufficient because it investigates only a  small portion of actual Internet-privacy violations or takes action regarding  only the most egregious or outrageous cases that it can win. FTC has  also stated in its strategic plan that it focuses on investigating and  litigating cases that cause or are likely to cause substantial injury to  consumers and that by focusing on practices that are actually harming or  likely to harm consumers, FTC can best use its limited resources.  Representatives from an Internet association said that FTC\u2019s Internet- privacy enforcement actions should focus on concrete harms. An FTC  staff member from the Division of Privacy and Identity Protection said that  the agency has been effective with the limited enforcement resources it  has available. Furthermore, the staff member said the agency uses no  formal written criteria or template to assess individual cases but considers  the size and scale of a company\u2019s effect on consumer privacy when  deciding whether to take enforcement action. However, a former FTC  commissioner told us that the agency needs more resources to effectively  oversee Internet privacy.", "We asked stakeholders whether it was clear under what circumstances  FTC will take Internet privacy enforcement action. In response, some  stakeholders said that FTC\u2019s enforcement priorities are reflected in its  settlement agreements, which provide information that is similar to a body  of case law. Individual commissioners also may issue statements  explaining their decisions. Two stakeholders also said that FTC\u2019s closing  letters, which the agency sends to companies and posts on its website  when it closes an investigation without taking enforcement action, may  explain its decisions. Other stakeholders said that more guidance would  be helpful to provide additional clarity on how the agency uses its Internet  privacy enforcement authority. FTC staff and other stakeholders also said  that FTC has provided useful Internet privacy guidance. For example, in  2015, FTC published guidance for businesses on complying with COPPA."], "subsections": []}, {"section_title": "Stakeholders and FTC Identified Potential Actions to Enhance Federal Oversight of Consumers\u2019 Internet Privacy", "paragraphs": ["Various stakeholders we interviewed said that opportunities exist for  enhancing Internet privacy oversight. A key component of FTC\u2019s mission,  as specified by the FTC Act, is to protect consumers against unfair and  deceptive practices. As discussed earlier, some stakeholders believe that  FTC\u2019s reliance on its unfair and deceptive practices authority to address  Internet privacy issues has limitations. In addition, although the Fair  Information Practice Principles provide internationally recognized  principles for protecting the privacy and security of personal information,  they are not legal requirements and FTC cannot rely on them to define  what constitutes unfair and deceptive practices related to privacy and  data security.", "We stated in our 2013 information resellers report that the current U.S.  privacy framework is not always aligned with the Fair Information Practice  Principles and that these principles provide a framework for balancing the  need for privacy with other interests. We found that there are limited  privacy protections under federal law for consumer data used for  marketing purposes. We said that although the Fair Information Practice  Principles call for restraint in the collection and use of personal  information, the scope of protections provided under current law has been  narrow in relation to: (1) individuals\u2019 ability to access, control, and correct  their personal data; (2) collection methods and sources and types of  consumer information collected; and (3) new technologies, such as  tracking of web activity and the use of mobile devices. Although we  recommended in that report that Congress consider strengthening the  consumer privacy framework to reflect the effects of changes in  technology and the marketplace, this matter for congressional  consideration was not specific to Internet privacy or to the oversight  authorities of any particular agency or agencies.", "As noted above, various stakeholders expressed concern about the ability  of consumers to control their data and understand how that data are  used. These concerns suggest that companies are not always following  the Fair Information Practice Principles, such as that companies\u2019 data  practices should be transparent, allow consumers the right to access and  edit their data, and limit the collection of data to the extent feasible.", "Those stakeholders who believe that FTC\u2019s current authority and  enforcement approach is unduly limited identified three main actions that  could better protect Internet privacy: (1) enactment of an overarching  federal privacy statute to establish general requirements governing  Internet privacy practices of all sectors; (2) APA section 553 notice-and- comment rulemaking authority; and (3) civil penalty authority for any  violation of a statutory or regulatory requirement, rather than allowing  penalties only for violations of settlement agreements or consent decrees  that themselves seek redress for a statutory or regulatory violation."], "subsections": [{"section_title": "Privacy Statute", "paragraphs": ["Stakeholders from a variety of perspectives\u2014including from academia,  industry, consumer advocacy groups, and former FTC and FCC  commissioners\u2014told us that a privacy statute could enhance Internet  privacy oversight by, for example, clearly articulating to consumers,  industry, and privacy enforcers what behaviors are prohibited, among  other things. In addition, a former FCC commissioner said that a new  privacy statute could enhance Internet privacy oversight by creating  uniform standards for all players in the Internet ecosystem that is focused  on the consumer rather than the regulatory legacy of the companies  involved (regulations that apply to specific types of companies based on  what they are or used to be, such as telecommunications carriers, cable  companies, broadcasters, and mobile wireless providers). The former  FCC commissioner said that as companies, technologies, and markets  change, there is a question about whether existing law should be  modernized. In 2015, FTC staff recommended that Congress enact broad-based legislation that is flexible and technology-neutral, while also  providing clear rules of the road for companies about such issues as how  to provide choices to consumers about data collection and use  practices. Some stakeholders suggested that such a framework could  either designate an existing agency as responsible for privacy oversight  (such as FTC) or create a new privacy-oriented agency. A representative  from a consumer advocacy group mentioned that the European Union, for  example, has established the European Data Protection Supervisor, an  independent data protection authority, to monitor and ensure the  protection of personal data and privacy. Similarly, in Canada, the Office of  the Privacy Commissioner, an independent body that reports directly to  the Parliament, was established to protect and promote individuals\u2019  privacy rights.", "Some stakeholders also stated that the absence of a comprehensive  Internet privacy statute affects FTC\u2019s enforcement. For example, a former  federal enforcement official said that FTC is limited in how it can use its  authority to take action against companies\u2019 unfair and deceptive trade  practices for problematic Internet privacy practices. Similarly, another  former federal enforcement official said that FTC is limited in how and  against whom it can use its unfair and deceptive practices authority  noting, for example, that it cannot pursue Internet privacy enforcement  over exempted industries such as common carriers. In addition, a former  FCC commissioner said that it is more difficult for FTC to take effective  action because its enforcement comes only after a complaint and after an  often lengthy review process. The former FCC commissioner also said  that without \u201cex ante\u201d rules (rules that define prohibited activity before it  has occurred), there inevitably will be delay, confusion, and lack of  knowledge about what is and is not acceptable behavior.", "In addition, some stakeholders\u2014including a representative from a  consumer group, a former federal enforcement official, and a former FCC  commissioner\u2014said FTC\u2019s section 5 \u201cunfair or deceptive practices\u201d  authority may not enable it to fully protect consumers\u2019 Internet privacy  because it can be difficult for FTC to establish that Internet privacy  practices are legally \u201cunfair.\u201d For example, under section 5, FTC has  charged companies with committing a \u201cdeceptive\u201d practice if their privacy  policies said they would not collect or use consumers\u2019 personal  information but then did so. However, a former congressional staff  member said that companies often write broad and vague policy  statements, making it difficult for FTC to charge companies with  committing deceptive practices. Instead, according to a representative  from a consumer advocacy group, FTC would have to show the  companies\u2019 actions were \u201cunfair,\u201d which, according to the representative,  is legally difficult to establish. We found in our 2017 report on vehicle data  privacy that most automakers\u2019 written privacy notices used vague  language. Similarly, we found in our 2012 report on mobile device  location data that although companies\u2019 policies stated that they shared  location data with third parties, they were sometimes vague about which  types of companies these were and why they were sharing the data.", "Some stakeholders said that FTC relies more heavily on its authority to  take enforcement action against deceptive trade practices compared with  the agency\u2019s unfair trade practices authority. This was confirmed in our  analysis of FTC\u2019s Internet privacy enforcement actions discussed  previously. However, a representative from a consumer advocacy group  said that FTC\u2019s ability to take such action is limited practically to instances  where a company violates its own privacy policy\u2014companies generally  can collect and use data in any way they want if they include language in  their policies asserting their intent to do so. According to a former FCC  commissioner, a privacy statute could clarify the situations in which FTC  could take enforcement action."], "subsections": []}, {"section_title": "APA Notice-and-Comment Rulemaking", "paragraphs": ["Various stakeholders said that there are advantages to overseeing  Internet privacy with a statute that provides APA section 553 notice-and- comment rulemaking authority. As discussed above, that provision lays  out the basic process by which so-called informal agency rulemaking  shall be conducted, namely, publication of proposed regulations in the  Federal Register; an opportunity for public comment (written and possibly  oral submission of data and views); and publication of final regulations in  the Federal Register with an explanation of the rules\u2019 basis and purpose.  Also as noted above, Congress imposed additional rulemaking steps on  FTC in the Magnuson-Moss Act when FTC is promulgating rules under  section 5 of the FTC Act. These additional steps include providing the  public and certain congressional committees with advance notice of  proposed rulemaking (in addition to notice of proposed rulemaking).  FTC\u2019s rulemaking under Magnuson-Moss also calls for, among other  things, oral hearings, if requested, presided over by an independent  hearing officer, and preparation of a staff report after the conclusion of  public hearings, giving the public the opportunity to comment on the  report. Finally, Congress made it easier for the public to appeal FTC\u2019s  Magnuson-Moss rules by making the agency meet a higher standard  when the rules are challenged in court. FTC staff said that these  additional steps add time and complexity to the rulemaking process.", "In congressional testimony in 2010, the then-Director of FTC\u2019s Bureau of  Consumer Protection said that \u201cif Congress enacts privacy legislation, the  commission agrees that such legislation should provide APA rulemaking  authority to the commission.\u201d According to FTC, this testimony was  voted on and approved by the commissioners and, therefore, constituted  the commission\u2019s official position at the time.", "Moreover, according to stakeholders, in many cases regulations can be  used to implement statutes. Officials from other consumer and worker  protection agencies we interviewed described their enforcement  authorities and approaches. For example, officials from the CFPB and the  FDA, both of which use APA section 553 notice-and-comment  rulemaking, said that their rulemaking authority assists in their oversight  approaches and works together with enforcement actions. OSHA officials  said that the standards that the agency promulgates under its authority  specify what employers are required to do to reduce safety and health  risks to workers. Such standards lay out the workplace conditions that  must be maintained by employers and require that employers implement  certain practices, operations, or processes that ensure worker  protections. EEOC officials said that regulations are used to guide  investigations that establish whether enforcement action is appropriate.  CPSC officials said that the agency conducts consumer protection not  only by establishing and enforcing mandatory regulations, but also  through collaborative actions such as educating industry, developing  consensus voluntary safety standards, removing defective products from  the marketplace through voluntary corrective actions, and litigating when  necessary. In addition, in contrast to FTC\u2019s approach, FCC has APA  section 553 notice-and-comment rulemaking authority and has issued  regulations implementing section 222 of the Communications Act using  that rulemaking authority to protect the privacy of telephone users."], "subsections": []}, {"section_title": "Ability to Levy Civil Penalties for Initial Violations and to Impose Larger Civil Penalties", "paragraphs": ["Some stakeholders suggested that FTC\u2019s current ability to levy civil  penalties could also be enhanced. Currently, FTC can levy civil penalties  against companies for violating certain regulations, such as COPPA  regulations, or if the company violates the terms of a settlement  agreement already in place. According to most former FTC  commissioners and some other stakeholders we interviewed, FTC should  be able to levy fines for initial violations of section 5 of the FTC Act. An  academic told us that the power of an agency to levy a fine is a tangible  way to hold industries accountable. Another academic noted, however,  that fines may be relatively less effective in industries where there is  limited competition because the costs of those fines may be more  effectively passed on to consumers in the form of higher prices for  services. In addition, some stakeholders said that payments required by  FTC orders are not large enough to act as a deterrent and that  companies may consider them to be a cost of doing business.", "There is a growing debate about the federal government\u2019s role in  overseeing Internet privacy. In a July 2018 congressional hearing, FTC\u2019s  new chair testified that the FTC Act cannot address all privacy and data- security concerns in the marketplace. The chair said, for example, that  FTC\u2019s lack of civil penalty authority for violations of the FTC Act reduces  its deterrent capability. He also noted the agency lacks authority over  non-profits and over common carrier activity, even though those entities  and activities often have serious implications for consumer privacy and  data security. In November 2018, FTC\u2019s chair testified before Congress  and urged Congress to consider enacting privacy legislation that would be  enforced by FTC. A majority of the commission has indicated support  for APA rulemaking and civil penalty authority for privacy. FTC also held  hearings in September, November, and December 2018 to advance the  discussion around privacy issues, among other topics, and FTC plans to  hold an additional hearing on data security and consumer privacy in  February 2019. In a Federal Register notice, FTC announced that it is  interested in the benefits and costs of various state, federal and  international privacy laws and regulations, including the potential conflicts  among those standards. FTC also indicated that it is particularly  interested in the efficacy of the commission\u2019s use of its current authority  and the identification of any additional tools or authorities the commission  may need to adequately deter unfair and deceptive conduct related to  privacy and data security. Also in July 2018, an NTIA official announced  that NTIA, in coordination with the Commerce Department\u2019s International  Trade Administration and National Institute of Standards and Technology,  had recently started holding stakeholder meetings to identify common  ground and formulate core, high-level principles on data privacy.", "Regarding the development of the Administration\u2019s approach to consumer  privacy, in September 2018, NTIA requested comments on ways to  advance consumer privacy while protecting prosperity and innovation.  Our 2009 report on a framework for assessing proposals for modernizing  the financial regulatory system similarly found that regulators should have  the authority to carry out and enforce their statutory missions. We  further said that a regulatory system should be flexible and forward  looking, allowing regulators to readily adapt to market innovations and  changes, including identifying and acting on emerging risks in a timely  way without hindering innovation. These factors are useful considerations  as the federal government explores how it can better oversee privacy and  data security. Having sufficient and appropriate authorities and providing  flexibility to address a rapidly evolving Internet environment could better  ensure that the federal government can protect consumers\u2019 privacy."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Recent developments regarding Internet privacy suggest that this is an  appropriate time for Congress to consider comprehensive Internet privacy  legislation. Although FTC has been addressing Internet privacy through  its unfair and deceptive practices authority, among other statutes, and  other agencies have been addressing this issue using industry-specific  statutes, there is no comprehensive federal privacy statute with specific  standards. Debate over such a statute could provide a vehicle for  consideration of the Fair Information Practice Principles, which are  intended to balance privacy concerns with the need for using consumers\u2019  data. Such a law could also empower a specific agency or agencies to  provide oversight through means such as APA section 553 rulemaking,  civil penalties for first time violations of a statute, and other enforcement  tools. Comprehensive legislation addressing Internet privacy that  establishes specific standards and includes APA notice-and-comment  rulemaking and first-time violation civil penalty authorities could help  enhance the federal government\u2019s ability to protect consumer privacy,  provide more certainty in the marketplace as companies innovate and  develop new products using consumer data, and provide better  assurance to consumers that their privacy will be protected."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider developing comprehensive legislation on  Internet privacy that would enhance consumer protections and provide  flexibility to address a rapidly evolving Internet environment. Issues that  should be considered include: which agency or agencies should oversee Internet privacy; what authorities an agency or agencies should have to oversee  Internet privacy, including notice-and-comment rulemaking authority  and first-time violation civil penalty authority; and how to balance consumers\u2019 need for Internet privacy with industry\u2019s  ability to provide services and innovate."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FTC, FCC, and the Department of  Commerce for their review and comment. FTC and FCC provided  technical comments, which we incorporated as appropriate. The  Department of Commerce indicated that it did not have comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the FTC chair, the FCC  chair, the Secretary of Commerce, and interested congressional  committees. In addition, the report will be available at no charge on the  GAO website at http://www.gao.gov.", "If you or members of your staff have any questions about this report,  please contact Alicia Puente Cackley at (202) 512-8678 or  cackleya@gao.gov or Mark Goldstein at (202) 512-2834 or  goldsteinm@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  Major contributors to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Interviewees", "paragraphs": ["For this review, we interviewed staff from agencies with roles in Internet  privacy; officials from other consumer- and worker-protection agencies;  stakeholders from consumer advocacy groups, industry groups, Internet  service providers, and Internet content providers; academics; and former  government officials. To obtain a variety of perspectives, we selected  Internet service providers that represented different industry sectors and  Internet content providers that provide a variety of information and social  media services. Academic stakeholders were selected because of their  expertise in privacy, consumer protection, and regulatory issues. We also  interviewed former Federal Trade Commission (FTC) and Federal  Communications Commission (FCC) commissioners who served during  the Barack Obama and George W. Bush administrations and are from  different political parties."], "subsections": [{"section_title": "Academics", "paragraphs": [], "subsections": []}, {"section_title": "Consumer advocacy groups", "paragraphs": [], "subsections": []}, {"section_title": "Federal government agencies", "paragraphs": ["Consumer Financial Protection Bureau (CFPB)  Consumer Product Safety Commission (CPSC)  Department of Commerce, National Telecommunications and Information  Administration (NTIA)  Equal Employment Opportunity Commission (EEOC)  Federal Communications Commission (FCC)  Federal Trade Commission (FTC)  Food and Drug Administration (FDA)  Occupational Safety and Health Administration (OSHA)"], "subsections": []}, {"section_title": "Former government officials", "paragraphs": [], "subsections": []}, {"section_title": "Industry groups", "paragraphs": [], "subsections": []}, {"section_title": "Internet content providers", "paragraphs": [], "subsections": []}, {"section_title": "Internet service providers", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Federal Trade Commission Internet Privacy Enforcement Cases", "paragraphs": ["The following table identifies 101 Federal Trade Commission (FTC)  Internet privacy enforcement actions filed between July 1, 2008 and June  30, 2018 in which the agency alleged a violation of either the Federal  Trade Commission Act (FTC Act) or the Children\u2019s Online Privacy  Protection Act (COPPA) and implementing COPPA regulations and  subsequently entered into a settlement agreement with the target entity.  Although some of these cases may involve both Internet data privacy and  security issues, this table does not include cases that involved data  security issues only."], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact names above, Andrew Huddleston, Assistant  Director; Kay Kuhlman, Assistant Director; Bob Homan, Analyst-in- Charge; Melissa Bodeau; John de Ferrari; Camilo Flores; Erica Miles;  Josh Ormond; and Sean Standley made significant contributions to this  report."], "subsections": []}]}], "fastfact": ["In April 2018, Facebook said that up to 87 million users' personal data may have been improperly disclosed. This was one of many recent Internet privacy incidents.", "We found that there is no comprehensive U.S. Internet privacy law governing private companies\u2019 collection, use, or sale of users\u2019 data. Consumer advocates and others told us greater regulatory powers are needed. Most industry representatives we interviewed favored the current enforcement approach and warned that regulations could hinder innovation.", "We recommended that Congress consider developing comprehensive Internet privacy legislation to better protect consumers."]}
{"id": "GAO-18-323", "url": "https://www.gao.gov/products/GAO-18-323", "title": "Railroad Retirement Board: Additional Controls and Oversight of Financial Interchange Transfers Needed", "published_date": "2018-04-19T00:00:00", "released_date": "2018-05-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["RRB collects payroll taxes and administers retirement, disability, and Medicare benefits for rail workers and their families. A financial interchange exists between RRB, SSA, and HHS in order to put the trust funds for these benefits in the same financial position as if Social Security covered rail workers. RRB generally transfers to the Social Security and Hospital Insurance trust funds the taxes that would be collected from rail workers and employers, while SSA provides RRB the benefits that would otherwise be paid directly to rail workers. GAO was asked to review the financial interchange calculation process.", "This report examines (1) the steps taken to calculate financial interchange amounts, (2) factors that could account for trends in transfers over time, and (3) the extent to which RRB, SSA, and HHS provide oversight to ensure calculations are accurate. GAO reviewed agency policies, procedures, and regulations; observed RRB staff calculating four cases selected for beneficiary type; reviewed data on payment and beneficiary trends; and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Established in 1937, the Railroad Retirement Board (RRB) administers retirement and disability benefits for rail workers and their families. A financial interchange between RRB and the Social Security Administration (SSA) was created in 1951, which as GAO previously reported, helped finance RRB benefits as they increased over time to keep pace with growing Social Security benefits to individuals. Through its financial interchange calculation, RRB takes steps each year to estimate the amount of funds that would have flowed in and out of Social Security's trust funds if rail beneficiaries were covered by Social Security instead of RRB. Five key steps go into the annual calculation:", "RRB is credited for (1) the estimated amount of benefits it would have paid to beneficiaries under SSA rules, (2) administrative costs, and (3) interest accrued on the financial interchange amount.", "SSA is credited for the revenues it would have received from rail workers if they paid into Social Security; specifically, (4) payroll taxes and (5) income taxes paid on benefits received.", "The determined net amounts are transferred between the agencies, which since 1958 have been from SSA to RRB each year. RRB received $4.1 billion in fiscal year 2016, almost one-third of the $12.4 billion in retirement and disability benefits it paid that year. The financial interchange was expanded to Medicare in 1965 to facilitate funding of Medicare benefits to rail workers; RRB transfers Medicare payroll taxes collected, income taxes paid on benefits received, and interest, minus administrative costs to the Department of Health and Human Services (HHS).", "A high ratio of beneficiaries to active railroad workers primarily explains the net transfers from Social Security's trust funds to RRB each year since 1958. Rail employment has fallen steadily since World War II, and the number of beneficiaries has exceeded the number of workers since 1961. RRB had 2.7 beneficiaries for every worker in 2015. As a result, RRB has paid out more in benefits than it has collected in payroll taxes and projects this to continue for the foreseeable future.", "RRB takes a number of steps each year to ensure the accuracy of its calculations, such as checking that the sample of cases used to estimate benefit payments is complete, reviewing the work of new employees, and using electronic alerts to help prevent staff from entering incorrect information into its computer system. SSA and HHS also conduct high-level reviews of the calculation results to identify any significant changes from one year to the next. However, RRB's process includes manual data entry and its electronic edit checks cannot flag entries that are incorrect but plausible, which could lead to calculation errors. RRB also has limited documentation of its calculation process, and does not have formal policies on how staff should address some potential calculation errors and on how supervisors should review staff work. This is contrary to internal control standards for having quality data and documenting procedures. In terms of SSA and HHS, they do not currently review case-level calculations made by RRB, and cannot reasonably ensure that work used to determine the transfers they made and received is correct."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes eight recommendations, including that RRB create formal policies and improve documentation of its processes, work with SSA to obtain data electronically, and that SSA and HHS increase their oversight. RRB and SSA agreed, while HHS did not, asserting that statute limits its authority; however, HHS continues to review this issue. HHS should seek this authority if it determines it necessary."]}], "report": [{"section_title": "Letter", "paragraphs": ["Established in 1937, the Railroad Retirement Board (RRB) administers  retirement and disability benefits for rail workers and their families. After  Medicare was enacted in 1965, RRB began administering these benefits  for rail employees and their families. For most other workers in the United  States, the Social Security Administration (SSA) administers retirement  and disability benefits and the Department of Health and Human Services  (HHS) administers Medicare benefits.", "We previously reported that the 1951 amendments to the Railroad  Retirement Act of 1937 substantially increased railroad retirement  benefits to bring them in line with benefit increases granted to individuals  under Social Security, and that a financial interchange was created  between the agencies in 1951 to help pay for these increases. The  financial interchange was expanded in 1965 to include HHS. The financial  interchange is intended to put the Old-Age and Survivors (OASI),  Disability Insurance (DI)\u2014which finance retirement and disability benefits  respectively\u2014and Hospital Insurance trust funds in the same position that  they would have been had railroad employment been covered under the  Social Security Act and the Federal Insurance Contributions Act.  Through this financial interchange, RRB typically receives sizable  transfers each year from the OASI and DI trust funds and transfers funds  to the Hospital Insurance Trust Fund. In fiscal year 2016, RRB reported  that it received about $4.1 billion in transfers from the OASI and DI trust  funds\u2014about one-third of the $12.4 billion it paid in retirement and  disability benefits.", "You asked us to review the financial interchange calculation process. This  report examines:  1.  What steps does RRB take to calculate financial interchange  amounts?  2.  What factors, if any, account for the trends in transfers between RRB,  SSA, and HHS through the financial interchange?  3.  To what extent do the agencies provide oversight to ensure that  financial interchange transfer amounts are accurate?", "To address the first objective we reviewed RRB guidance and  documentation to determine the methodology RRB uses for its financial  interchange calculations, as well as assessments of the soundness of the  methodology. We also observed RRB staff while they conducted  calculations on four non-generalizable four cases\u2014selected to provide  variation in terms of the type of benefits being received\u2014to determine the  steps taken by staff.", "To address the second objective, we analyzed data on the amounts of  financial interchange transfers from calendar year 1951 to 2015, the  number of RRB beneficiaries from fiscal year 1937 to 2016, and the  number of rail workers from calendar year 1937 to 2016, the most recent  available data. We assessed the reliability of these data by reviewing  RRB documentation regarding internal controls and interviewing  knowledgeable officials. We determined that the data on the number of  beneficiaries and workers were sufficiently reliable for our purposes. We  determined that the data we report on the amounts of financial  interchange transfers were sufficiently reliable for our purposes of  discussing trends in transfers over time.", "To address the third objective, we reviewed agency policies, procedures,  and documentation. We also observed RRB staff demonstrate, on the  four illustrative cases described above, the safeguards to prevent errors  that are built into the system they use to compute financial interchange  amounts. We compared these steps taken by the agencies to criteria for  using quality data and documenting agency procedures in standards for  internal controls in the federal government.", "For all three objectives, we reviewed relevant federal laws and  regulations, and interviewed staff at the three agencies to provide  additional context.", "We conducted this performance audit from January 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The rail industry was one of the first to pioneer private pensions for its  employees in the late 19th century, and by the 1930s, these pensions  were more developed than in most other industries. However, according  to RRB, these private rail pensions had serious defects that were  magnified by the effects of the Great Depression. For instance, RRB  noted that the plans were generally inadequately financed and that  employers could terminate the plans at will. In prior work, we noted that  the Railroad Retirement Act of 1937 was enacted at the urging of rail  labor and established the national railroad retirement system  administered by RRB. The program was to be solely supported by  employees and employers of the rail industry through payroll taxes.", "According to RRB, this system was created separately from Social  Security for several reasons. For instance, RRB notes that Social  Security\u2014created in 1935\u2014would not begin payments for several years  or credit workers for work prior to 1937, while the deteriorating state of  private rail pensions called for immediate retirement payments based on  prior service.", "We previously reported that the 1951 amendments to the Railroad  Retirement Act of 1937 substantially increased railroad retirement  benefits to bring them in line with benefit increases granted to individuals  under Social Security, and that a financial interchange was created  between the agencies in 1951 to help pay for these increases. RRB  annually computes the amounts that SSA would have collected in taxes  from rail workers and their employers, and what SSA would have paid in  benefits if rail workers had been covered under Social Security, with the  net difference transferred between the agencies. The amounts computed  under the financial interchange do not necessarily represent the actual  RRB benefits paid to rail workers and their beneficiaries. RRB determined  that it was due a net transfer from SSA each year since 1958.", "Financial interchange transfers make up a significant portion of the  financing for RRB\u2019s retirement, disability, and survivors benefits. In fiscal  year 2016, RRB paid about $12.4 billion in these benefits and collected  $5.9 billion in payroll taxes from rail employees and employers. RRB  reported that the remainder of its funding for these benefits came from the  financial interchange ($4.1 billion), transfers from the National Railroad  Retirement Investment Trust ($1.4 billion), income taxes collected on  RRB benefits ($758 million), and other funding sources, such as  appropriations. The interchange also serves as a vehicle to fund  Medicare Part A (Hospital Insurance) benefits for rail workers.", "The benefits provided by RRB consist of a core-level of benefits that are  similar to those available to most workers covered under Social Security,  including Medicare. Rail workers also receive a second level of retirement  benefits that approximate payments from private pension plans (see table  1).", "For non-rail workers, Social Security and Medicare benefits are paid from  their respective trust funds:", "Retirement benefits are paid from SSA\u2019s OASI Trust Fund;", "Disability benefits are paid from SSA\u2019s DI Trust Fund; and", "Medicare Part A benefits are paid from the Hospital Insurance Trust  Fund."], "subsections": []}, {"section_title": "RRB Calculates Financial Interchange Amounts by Approximating Key Flows In and Out of SSA and HHS Trust Funds", "paragraphs": ["The financial interchange is intended to place Social Security\u2019s OASI and  DI Trust Funds and HHS\u2019s Hospital Insurance Trust Fund on the same  financial footing as if rail workers and beneficiaries were covered under  Social Security instead of by RRB. Regarding Social Security, RRB is  credited for what it paid beneficiaries, administrative costs involved with  paying benefits, and interest for the time between the determination of the  interchange amount and its actual transfer. SSA is credited for the  amount of payroll and income taxes it would have collected from rail  workers and for income taxes that would have been paid by RRB  beneficiaries on Social Security equivalent benefits. The net of the five  amounts is the amount that is transferred (see fig. 1). A net transfer from  SSA to RRB means that rail workers would have been a net draw on  SSA\u2019s trust funds if covered under Social Security. RRB calculates the  financial interchange amount each year, which is done on a retrospective  basis, i.e., the amount is determined for the previous fiscal year. By law,  the agencies must complete their determination by June of each year.", "In keeping with the purpose of keeping the OASI and DI trust funds in the  same place as if rail workers were covered under Social Security, RRB  determines the retirement and disability benefits that rail workers and  dependents would have received if they were covered under Social  Security. Specifically, RRB uses railroad earnings data provided by  employers to replicate SSA\u2019s benefits calculations. Although the basic  retirement and disability benefits that SSA and RRB pay to their  beneficiaries are based on the same formulas, there are several eligibility  differences between the two programs. For instance, a rail worker may  receive unreduced retirement benefits at age 60 after 30 years of work,  whereas the earliest most workers covered under Social Security can  begin receiving retirement benefits is at age 62. According to RRB  officials, even though a 60-year-old railroad worker may be receiving RRB  retirement benefits, RRB would not receive credit through the interchange  for that individual. Once that individual turns 62, RRB determines the  amount of reduced Social Security retirement benefits for which he or she  would have been eligible, given the person\u2019s earnings history and Social  Security\u2019s benefits rules. According to RRB officials, the agency  receives a credit through the interchange for this amount even though the  individual is receiving full RRB retirement benefits.", "To account for these potential differences, RRB officials said that the  agency must make calculations for individual RRB cases. Additionally,  RRB officials said that in light of the number of RRB cases\u2014nearly  400,000\u2014it is not practical to make these calculations annually for each  case. Instead, RRB uses SSA rules to calculate benefits for a subset of  RRB cases in which the worker\u2019s Social Security number ends in 30,  which approximates a 1-percent sample. The sample size was about  4,000 for fiscal year 2016. Once RRB completes its benefit calculation for  each of those cases, it aggregates the result and produces an estimated  amount for its entire population of cases (see fig. 2).", "RRB reported in its annual financial interchange determination report that  it was credited $7.2 billion dollars in fiscal year 2016 for the estimated  amount beneficiaries would have been paid under Social Security."], "subsections": [{"section_title": "Administrative Expenses", "paragraphs": ["These expenses represent those that SSA would have incurred to  administer benefits had rail workers been covered under Social Security  (as opposed to the actual amount RRB spent to administer its programs).  These expenses, which SSA would have funded out of its trust funds,  include the cost to enroll individuals in its programs and maintain its  benefit rolls. RRB calculates the amount of administrative expenses  based on unit-cost data provided by SSA. RRB reported that it was  credited about $22 million in administrative costs for fiscal year 2016."], "subsections": []}, {"section_title": "Interest Charges", "paragraphs": ["SSA credits RRB for interest that accrues on the annual financial  interchange transfer from the period in time for which it is calculated (the  end of the fiscal year on September 30) until the amount is transferred to  RRB in June of each year. The interest rates are equal to those SSA  earns on its trust funds. RRB reported that it was credited about $163  million in interest for fiscal year 2016."], "subsections": []}, {"section_title": "Payroll Taxes", "paragraphs": ["This amount represents the payroll taxes rail employees and employers  would have paid into Social Security\u2019s trust funds had workers been  covered under Social Security. SSA and RRB generally levy payroll taxes  on earnings at the same rate, and RRB officials told us they use payroll  data from employers to determine this amount. RRB reported that it  credited SSA $2.4 billion for fiscal year 2016."], "subsections": []}, {"section_title": "Income Taxes", "paragraphs": ["Some RRB beneficiaries pay income taxes on the benefits they receive,  and that tax revenue is credited to SSA\u2019s trust funds through the financial  interchange. To put the OASI and DI trust funds in the same place as if  rail workers were covered under Social Security, RRB credits SSA for the  amount of income tax railroad beneficiaries paid on Social Security  equivalent benefits. RRB computes this amount using tax data from the  Department of the Treasury, and credited about $296 million to SSA for  fiscal year 2016.", "RRB also may adjust calculations on transfers from prior years; for  instance, if new income was reported for individuals or if benefit  overpayments are discovered for individuals in the sample."], "subsections": []}, {"section_title": "Medicare Transfers", "paragraphs": ["The process for determining the financial interchange transfer with HHS\u2014 which helps finance Medicare benefits for rail workers\u2014has fewer  components than for retirement and disability benefits. Generally, RRB  determines the Medicare payroll taxes and income taxes paid by rail  workers and transfers this amount, less administrative expenses, to HHS  (see fig. 3). RRB estimates how much it collects in Medicare payroll taxes  by using payroll data provided by employers for workers whose Social  Security numbers end in 30. RRB credited HHS for about $637 million  for fiscal year 2016.", "Overall, the procedures we observed, and which RRB explained and  demonstrated, for calculating the financial interchange are consistent with  the methodology agreed to by RRB, SSA, and HHS. An annual  determination report produced by the three agencies documents this  methodology. Additionally, several audits conducted for the RRB Office of  Inspector General determined that the methodology is appropriate for  achieving the purpose of the financial interchange. Specifically, the audits  concluded that the sample used in calculating benefits was representative  of RRB\u2019s population of beneficiaries, the formulas used to project the  results of the sample on the entire population of beneficiaries were  consistent with RRB\u2019s design, and that assumptions made by RRB when  carrying out calculations were reasonable."], "subsections": []}]}, {"section_title": "High Ratio of Beneficiaries to Rail Workers Has Resulted in Transfers From SSA to RRB Each Year Since 1958", "paragraphs": ["SSA has made a net transfer to RRB through the financial interchange  each year since 1958. The cumulative net transfer from the Social  Security trust funds to RRB through 2015 was approximately $266 billion  in 2016 dollars. Of this amount, transfers related to retirement and  survivor benefits comprised about $256 billion and disability benefits  accounted for about $10 billion. This trend in transfers is primarily  caused by RRB benefit payments exceeding payroll taxes collected as  calculated by the interchange, which has been the case each year of the  financial interchange, resulting in a net amount owed to RRB from SSA  each year (see fig. 4).", "Based on the data RRB reported, the continuing flow of funds to RRB  from SSA has largely been driven by a steadily shrinking number of active  workers in the rail industry paying payroll taxes in support of a larger  population of beneficiaries. According to RRB data, the number of  workers in the rail industry peaked at the end of World War II, when there  were almost 1.7 million workers. Since then, this number declined steadily  to about 231,000 in 2016. Additionally, the number of beneficiaries has  exceeded the number of active workers since 1961. According to RRB  data, there was about 1 beneficiary for every 10 workers in 1938; the ratio  had increased to 3 beneficiaries for every 10 rail workers in 1951, when  the financial interchange was created. By 2016, there were 28  beneficiaries for every 10 workers. Furthermore, RRB officials noted  that another factor causing increased fund transfers from SSA to RRB  was a series of successive amendments to the Social Security Act which  raised benefits immediately while deferring tax increases to pay for the  increased benefits. As a result of these two factors, the payroll taxes paid  by rail workers have not been sufficient to pay for all of the benefits paid  by RRB. Hence, the financial interchange has consistently transferred  money from SSA to RRB (see fig 5).", "According to SSA actuarial estimates, the flow of funds to RRB from SSA  is projected to continue. Social Security\u2019s 2017 trustees report projects  that the amount of transfers to RRB will continue to grow though at least  2026. Moreover, RRB\u2019s most recent actuarial valuation report estimates  that under three employment assumptions\u2014optimistic, moderate, and  pessimistic\u2014the number of beneficiaries will continue to exceed the  number of rail workers through at least 2088.", "RRB has collected payroll taxes for HHS since 1966. From 1966 through  2016, RRB reported that it transferred a total of $30 billion in 2016 dollars  through the financial interchange to the Hospital Insurance Trust Fund  (see fig. 6)."], "subsections": []}, {"section_title": "RRB Takes Measures to Oversee the Financial Interchange Calculation, but Shortcomings Increase the Risk of Errors", "paragraphs": [], "subsections": [{"section_title": "RRB Takes Oversight Steps, but Manual Data Entry and Systems Limitations May Prevent RRB from Detecting Mistakes", "paragraphs": ["RRB takes a number of steps to ensure that the financial interchange  amount is accurately calculated each year. For example:", "Sample verification: To make sure that the financial interchange  sample is up to date, RRB staff told us that they query their  beneficiary database at the beginning and end of the annual financial  interchange calculation to ensure that all beneficiaries who should be  part of its sample\u2014those with a Social Security number ending in  30\u2014are included. Those included in the sample can change from year  to year, for instance, when new beneficiaries join the retirement rolls  or when beneficiaries die.", "Supervisory review: RRB officials told us that the work of a new  employee who calculates the financial interchange is reviewed by  another employee until the new employee is determined to be  proficient.", "Error checks: Electronic error checks built into the system RRB uses  to calculate the financial interchange help prevent mistakes by  flagging erroneous values. These checks alert employees in real time  that an incorrect value may have been entered (for example, a benefit  amount that exceeds what beneficiaries can receive). Officials also  told us that they run similar checks in batches throughout the year to  sweep for any potential errors that were not addressed by employees.  They noted that they will work with staff to address all potential errors  before the financial interchange calculation is finalized. However,  RRB\u2019s error checks do not cover all potential erroneous values.", "High-level review: RRB officials told us that the Chief of Benefit and  Employment Analysis and his staff review the results of the  interchange calculations and determine if the end result is reasonable  compared to projections made earlier in the year, based on actual  payroll and beneficiary data.", "Despite these steps, limitations in RRB\u2019s error checks and its reliance on  manual data entry are potential sources of mistakes in financial  interchange calculations. The process RRB staff follow in computing  benefit amounts for the financial interchange involves manual data entry  of earnings data and SSA-equivalent benefits. RRB\u2019s error checks will  help identify values that are impossible\u2014such as a benefit amount that  exceeds the maximum a beneficiary can receive\u2014but not values that are  incorrect but still within the range of possibility. RRB staff demonstrated  this scenario for us and acknowledged this as a limitation in their internal  controls.", "Any data entry errors have the potential to result in larger errors in the  financial interchange determination. The benefits portion of the financial  interchange determination is based on a sample of all cases. Should any  errors occur in the sample, they will be magnified when RRB inflates the  estimate to arrive at an amount for the entire population of beneficiaries.  Additionally, RRB\u2019s process could result in incorrect transfers for years.  The sample is chosen in the same way each year\u2014individuals with Social  Security numbers ending in 30\u2014so the same cases will remain part of the  sample until the individuals leave the rolls. RRB officials told us that they  generally only have to do a full set of calculations for new cases or cases  in which additional income is detected that affects benefit amounts. RRB  officials estimated that about 20 percent of cases in the financial  interchange sample each year require a full calculation. For the remainder  of cases in the interchange sample, officials said that no annual  recomputation is needed. Instead, the previous year\u2019s results are  adjusted according to any cost of living increase. If a data entry error is  made in one of these cases, RRB may not discover it until the individual  leaves the rolls or dies, at which point RRB staff told us they recalculate  the individual\u2019s benefit amount.", "Data sharing between RRB and SSA could reduce the potential for data  entry errors, but the two agencies have not recently pursued this option.  RRB officials told us that prior to 2008 they used computer code to  automatically save data from SSA databases into spreadsheets, where  the data could be used for calculating the financial interchange. However,  SSA instructed RRB to stop using this method in 2008 because of  security concerns about saving this information outside of SSA systems.  RRB officials added that this constraint prevents them from developing a  more efficient method of data collection that would improve the accuracy  and timeliness of benefit calculations for the financial interchange.  However, RRB officials said that they have not formally approached SSA  in the last several years to discuss potential alternatives for gaining  greater access to data. SSA officials said that RRB should follow SSA\u2019s  procedures for requesting a data exchange if RRB wishes to revisit this  topic. Federal internal control standards state that agencies should use  quality information to achieve their objectives. By taking additional steps  to obtain data from SSA electronically, RRB can better position itself to  ensure that data entered into its systems are correct and that its  calculations are free of errors."], "subsections": []}, {"section_title": "Limited Documentation and Formal Policies Increase the Risk for Errors in Key Aspects of the Financial Interchange Process", "paragraphs": ["RRB has limited documentation and does not have formal policies to  guide several key aspects of the financial interchange calculation. While  we did not identify any actual errors in its calculations, these  shortcomings in its controls increase the risk of calculations being carried  out inconsistently or incorrectly."], "subsections": [{"section_title": "Limited Documentation of the Financial Interchange Process", "paragraphs": ["The broad steps that RRB takes to determine the amounts of the financial  interchange are documented in an annual determination report produced  by RRB. They include, for example, the factors used to calculate  administrative costs, discussion of adjustments made to calculations from  prior years, and descriptions of the formulas used to project the results of  RRB\u2019s benefit sample to the population of railroad beneficiaries. However,  the agency does not have clear documentation of the detailed steps used  by staff to calculate the interchange amounts. A 2010 audit of the  financial interchange process conducted for the RRB Office of Inspector  General found that documentation of the financial interchange process  was insufficient for a knowledgeable third party to replicate without verbal  explanation from RRB staff. In response, RRB officials told us that they  produced some documentation such as charts showing the workflows for  different portions of the process, such as for calculating benefits, payroll  taxes, and financial projection\u2014and instructions for staff in RRB\u2019s Bureau  of the Actuary for high-level review of the formulas and entries for the final  calculation results.", "However, the documentation did not provide enough detail about the  steps staff must take when conducting financial interchange calculations  so the process can be followed without additional explanation. For  instance, the documentation did not discuss the process by which staff  obtain earnings data and enter it into SSA\u2019s benefit calculator, manually  enter the results into RRB\u2019s system, or the different alerts that notify staff  of potential mistakes and how staff deal with them. Federal internal  control standards state that effective documentation provides a means to  retain organizational knowledge and mitigate the risk of having knowledge  limited to a few personnel, as well as a means to communicate that  knowledge as needed to external parities, such as auditors. Written  documentation with specific steps for carrying out the financial  interchange calculation and using its data system would help RRB ensure  that its staff and others could carry out and replicate its process  consistently."], "subsections": []}, {"section_title": "Limited Documentation of RRB\u2019s Computer System", "paragraphs": ["RRB does not have current or complete documentation related to the  computer system it uses to compute the financial interchange.  Specifically, RRB officials said that they do not have current  documentation such as a manual or data dictionary that would provide  information on the data elements in the system, their definitions,  descriptions, and range of potential values. They said a data dictionary is  not necessary because data are contained in a format in which rows and  columns are labeled according to fields and years. However, such  labeling does not include documentation, for example, about whether  values entered in those fields are allowable. Federal internal control  standards state that effective documentation is needed to retain  knowledge and prevent knowledge from being limited to a few staff. Even  if the data system is relatively uncomplicated, without such  documentation, it is difficult for RRB staff and others to fully understand  all elements in the system, and it could complicate efforts to make any  changes in the future or bring new staff up to speed on the system."], "subsections": []}, {"section_title": "No Written Documentation on Procedures for Overriding Potential Errors", "paragraphs": ["RRB does not have written procedures for how to address instances in  which staff do not correct potential errors flagged by its computer system.  As noted earlier, RRB\u2019s system for calculating the financial interchange  will alert staff to potential data entry errors. RRB officials said this system  has the ability to allow staff to override the alert in some cases, generally  in complex cases, such as when RRB benefits are offset by other public  pensions. In these cases, the system does not distinguish between an  actual error and instances in which additional work and review are  needed because of complex benefit calculations. Staff can override the  alert in these cases where there is no actual error, but officials noted that  a report of potential errors that is generated by the system would still  include these cases, which may be referred back to staff for clarification  or correction. If implemented correctly, these procedures could help  staff take appropriate action on these complex cases. However, current  procedures are not formally documented and officials said they have not  considered producing written procedures because they believe the  process for addressing alerts is clear. Federal internal control standards  indicate that effective documentation assists in management\u2019s design of  internal controls and can mitigate the risk that knowledge is limited to a  few staff. RRB\u2019s lack of written procedures can make it difficult for staff or  reviewers to know if procedures are carried out consistently\u2014such as  whether staff appropriately override an error alert\u2014and can create  challenges if there is staff turnover. It is important to ensure that all  potential errors are addressed correctly given that mistakes in the  financial interchange sample can be multiplied when estimating benefit  payments for the universe of RRB beneficiaries."], "subsections": []}, {"section_title": "No Formal Policy on Supervisory Review", "paragraphs": ["According to RRB officials, new employees will have their calculations  reviewed until the employees are deemed to be proficient, and  calculations by any staff member are subject to review and periodically  reviewed for accuracy. Federal internal control standards call for  documenting agency procedures. However, RRB does not have a  minimum or maximum time established for which it will review the work of  new staff, and does not have an overall policy for reviewing staff  members\u2019 work after they have been deemed proficient. Officials told us  they had not considered setting a policy regarding supervisory review.  They added that individualized, on-the-job training is more appropriate for  new staff than a formalized process. In the case of current employees,  any potential errors would be identified when the case is terminated, at  which time all cases are reviewed and recomputed. Additionally, officials  said that a formal policy would not increase the number of cases  reviewed and potentially constrain their ability to correct new errors as  they occur. Nonetheless, without formal policies on supervisory review,  RRB cannot reasonably ensure that the work performed by staff is  adequately or consistently reviewed for quality."], "subsections": []}]}, {"section_title": "SSA and HHS Do Not Review the Results of Case-Level Calculations", "paragraphs": ["SSA and HHS provide some oversight of the financial interchange  process, but do not review case-level calculations. Both agencies  approve the results of the financial interchange calculations, but officials  from SSA and HHS told us that their oversight is limited to high-level  reviews of RRB\u2019s calculations to determine whether results significantly  vary from previous years. For instance, staff from SSA\u2019s Office of the  Chief Actuary told us that they examine RRB\u2019s payments and revenues  against SSA\u2019s benefits paid and payroll taxes collected to determine if  there are large or inexplicable changes from year to year, in which case  they will ask RRB for additional information to understand the changes.  Additionally, RRB officials told us that formulas used in their spreadsheets  to calculate the results of the interchange have been reviewed by SSA  actuaries.", "While these actions could help identify larger errors, the agencies will not  be able to detect whether errors are made on complex, case-level  calculations or if SSA rules are being correctly followed. In response to  prior errors in financial interchange calculations, RRB officials told us that  SSA reviewed case-level calculations from the 1990s until 2002. SSA  officials told us that they have not reviewed cases since then because of  resource constraints. A 2009 SSA Office of the Inspector General report  recommended that the agency consider increasing its oversight of the  process, such as setting a schedule for review of individual cases given  the importance of reviews in verifying transfers. However, SSA has not  taken action on this recommendation. HHS officials told us that the  financial interchange is one of a number of relatively small funding  streams and the agency has never had cause to suspect mistakes and  has never examined case-level calculations. Federal internal control  standards state that agencies should establish and operate monitoring  activities to evaluate the results of activities. Without monitoring how  calculations are made, SSA cannot reasonably ensure that the transfers it  makes or receives with RRB are accurate. In commenting on a draft of  this report, HHS raised questions about whether it has the authority to  review case-level calculations, but noted in follow-up communication that  this issue is currently undergoing legal review at HHS. As a result, HHS  officials told us that they would not be able to provide additional  clarification at this time. We continue to believe that HHS would be better  positioned to ensure that transfers it makes and receives are calculated  correctly if it reviews case-level calculations."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The financial interchange provides RRB with a significant portion of its  funding, and trends in the number of beneficiaries and workers suggest  this will continue to be the case in the future. RRB developed a process to  calculate the financial interchange amount, and the accuracy of the  calculations depends in large part on correct data being manually entered  into RRB\u2019s computer system. However, RRB\u2019s current controls do not  address some potential sources of error. Having the ability to  electronically obtain data from SSA could help reduce the risk posed by  data entry errors.", "Further, RRB has limited written documentation for carrying out aspects  of the financial interchange calculation, such as how its computer system  is structured, how to address instances when staff override error alerts,  and how staff work is reviewed. Without such documentation, RRB puts  itself at risk of staff carrying out actions inconsistently, losing operational  knowledge when staff leave or retire, and complicating oversight of its  operations.", "Lastly, SSA and HHS increase the risk of errors by not performing case- level reviews of financial interchange calculations. This is especially true  for the SSA portion of the interchange, which involves complex  calculations performed according to SSA rules. In its role as the  administrator of the OASI and DI programs, SSA is best positioned to  determine if its rules are properly being applied to financial interchange  calculations. The large sums SSA transfers through the interchange\u2014 over $4 billion annually\u2014warrant additional oversight to ensure that  transfer amounts are correct."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of eight recommendations, including five to RRB  (The Board), two to the Commissioner of SSA, and one to the Secretary  of HHS.", "The Board should work with SSA to explore options for obtaining data  electronically and limiting the reliance of the financial interchange  process on manual data entry. (Recommendation 1)", "The Board should produce written documentation on the financial  interchange process such that a knowledgeable third party could carry  out and replicate its process consistently without further explanation.  (Recommendation 2)", "The Board should produce written documentation of its computer  system and its structure, such as a manual for the computer system,  and data dictionary to provide information on the data elements in the  system, their definitions, descriptions, and range of potential values.  (Recommendation 3)", "The Board should produce written documentation of its procedures for  instances when staff override error alerts generated by its computer  system. (Recommendation 4)", "The Board should produce formal policies on how the work of staff  performing the financial interchange is reviewed. (Recommendation 5)", "The Commissioner of SSA should work with RRB to explore options  for electronically sharing data and limiting the reliance of the financial  interchange process on manual data entry. (Recommendation 6)", "The Commissioner of SSA should take additional steps to provide  oversight of financial interchange calculations at the individual-case  level. This could include periodically reviewing a subset of these  cases. (Recommendation 7)", "The Secretary of HHS should, consistent with its existing statutory  authority, take additional steps to provide oversight of financial  interchange calculations at the individual-case level. If the Secretary  concludes that there are limitations in its authority in this area, the  Secretary should seek to obtain the necessary additional authority.  (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to RRB, SSA, and HHS for review and  comment. In written comments, both RRB and SSA agreed with the  recommendations. RRB noted that it will devote the resources needed to  improve the written documentation of its procedures and computer  system. RRB and SSA also provided technical comments which we  incorporated as appropriate. Copies of their written comments are  reproduced in appendixes I and II.", "In written comments, which are reproduced in appendix III, HHS  disagreed with the recommendation that it take additional steps to provide  oversight of financial interchange calculations at the individual-case level.  HHS noted that while in theory it may be a good idea to incorporate such  review into the process, it is limited by statute in its ability to oversee how  RRB calculates transfers between HHS and RRB. HHS went on to  describe a section of the Social Security Act that they noted \u201cpertains  more to Supplemental Medical Insurance trust fund draws for  administrative costs.\u201d Notably, with respect to HHS, our report does not  involve that trust fund, but rather addresses the Hospital Insurance Trust  Fund. Although HHS\u2019s comments did not clarify why it believes that this  section of law would limit its authority with respect to the Hospital  Insurance Trust Fund, it nevertheless asserted that it does apply in this  scenario. We reached out to HHS to seek clarification of its comments.   For example, we inquired about the applicability of a separate provision of  law that would appear to establish a role for HHS to work with RRB to  determine financial interchange amounts. Ultimately, HHS did not  provide the clarification we sought, instead indicating via email that this  recommendation is currently undergoing legal review and that HHS is  unable to provide a response to our questions at this time. HHS further  stated that it will continue to work on this issue to provide GAO with  updates in the future. In light of the uncertainty surrounding HHS\u2019s  authority in this area and the fact that HHS declined to respond to our  requests for clarification of its legal authority, we have modified our  recommendation to reflect the fact that HHS may need to seek additional  statutory authority to implement our recommendation, should HHS  determine it to be necessary.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Railroad Retirement Board,  the Commissioner of the Social Security Administration, and the  Secretary of the Department of Health and Human Services. In addition,  the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions, please contact me at (202) 512- 7215 or curdae@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made significant contributions to this report are listed in  Appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Railroad Retirement Board", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mark Glickman (Assistant  Director), Daniel R. Concepcion (Analyst-in-Charge), and Randy DeLeon  made key contributions to this report. Additional contributors include  David Ballard, Carl Barden, William Boutboul, James Cosgrove,  Alexander Galuten, Jennifer Gregory, Sheila McCoy, Jean McSween,  Mimi Nguyen, Joseph Silvestri, Almeta Spencer, and Kate van Gelder."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-424", "url": "https://www.gao.gov/products/GAO-18-424", "title": "Military Personnel: DOD Needs to Improve Funding Process for Morale, Welfare, and Recreation Programs", "published_date": "2018-08-08T00:00:00", "released_date": "2018-08-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD's MWR programs provide servicemembers and their families with three categories of programs: Category A (e.g., fitness and libraries), Category B (e.g., camping and performing arts), and Category C (e.g., golf). DOD oversees the percentage of appropriated funding allocated to MWR programs by category and measures the military services' compliance with established funding targets. DOD set the targets at 85 percent for Category A and 65 percent for Category B. DOD did not set a target for Category C since this category has the ability to generate revenue from user fees.", "House Report 115-200 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 includes a provision for GAO to review DOD' s MWR programs. GAO assessed the extent to which (1) the services have met DOD's established funding targets for each category of MWR programs and DOD has comprehensively evaluated the relevance of its targets, and (2) DOD has oversight structures and performance measures that include measurable goals, including those for cost-effectiveness, by which to review MWR programs. GAO analyzed MWR program information for fiscal years 2012-2017 and compared DOD's MWR policy with guidance for using measures and evaluating goals."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) established funding targets for two categories of Morale, Welfare, and Recreation (MWR) programs\u2014Category A, which promotes the physical and mental well-being of servicemembers, and Category B, which funds community support systems for servicemembers and their families. These targets are intended to ensure that the military services adequately fund these programs with appropriated funds instead of requiring servicemembers and their families to pay fees out of pocket to cover program costs. However, GAO found the following:", "In fiscal years 2012-2017, the military services generally met the DOD-set target to provide 85 percent of appropriated funding for Category A programs but not the 65-percent target for Category B programs. Service officials said they are taking steps to meet the Category B target, such as by restoring targeted levels of appropriated funding support in future budget planning. Data GAO reviewed indicate that these steps are helping the services get closer to meeting the target for Category B.", "DOD has not comprehensively evaluated the targets, established more than 20 years ago, to ensure that they are appropriate. DOD officials said they agree that it is time to evaluate the relevancy of the targets as the current operating environment is fundamentally different than when the targets were established 2 decades ago. Further, DOD officials said that they are unsure of the process or methodology used to originally develop the targets because they have no documentation supporting these decisions. Until DOD comprehensively evaluates the appropriateness of the targets and, based on its evaluation, documents any changes made, it cannot be certain that the targets reflect the current operating environment and do not pose undue financial burden on servicemembers.", "DOD established oversight structures and performance measures for MWR programs, but has not established measurable goals to assess the cost-effectiveness of the 55 activities that make up MWR programs. DOD's MWR policy identifies six broad performance measure categories for the program. DOD officials responsible for developing MWR program goals acknowledged that DOD's MWR policy does not include measurable goals for assessing the cost-effectiveness of program activities, and do not currently have plans to make any changes to the goals. Service officials told GAO that they collect and use various types of information within the categories to assess specific activities. While both the categories established by DOD and the service-specific efforts provide useful context about the status of individual MWR activities, they do not replace the need for measurable goals that can be used to assess whether the programs are operating cost-effectively. The services are in the early stages of developing more specific performance measures, but it is too early to determine whether these efforts will result in measurable goals that can be used to assess cost-effectiveness. Until DOD develops performance measures that include measurable goals, it cannot ensure that MWR programs meet servicemember needs in a cost-effective manner."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD evaluate the funding targets and document any changes needed and develop measurable goals for MWR programs' performance measures. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense\u2019s (DOD) Morale, Welfare, and Recreation  (MWR) programs are a multibillion dollar effort to provide  servicemembers and their families with a wide range of benefits designed  to support military missions and readiness, both in times of war and  peace. In fiscal year 2017, DOD spent approximately $3.9 billion on MWR  programs administered by the Army, the Navy, the Marine Corps, and the  Air Force. DOD\u2019s three categories of MWR programs are mission- sustaining programs promoting the physical and mental well-being of  servicemembers (Category A), community support system programs for  servicemembers and their families (Category B), and recreational  activities for servicemembers and their families that are revenue- generating (Category C). The Office of the Under Secretary of Defense  for Personnel and Readiness (USD(P&R)) oversees the percentage of  appropriated funding provided to MWR programs by category and  measures the services\u2019 compliance with established funding \u201ctargets.\u201d  These targets set the minimum level of appropriated funding by category  as a percentage of total expenses compared with funding received from  nonappropriated funding sources, such as fees collected from revenue- generating activities.", "House Report 115-200 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 includes a provision for us to  review DOD\u2019s MWR programs. Specifically, the committee expressed  concern that the services have not complied with established DOD policy  to ensure appropriate financial support of family, welfare, and recreational  programs for the past several years, particularly for programs within  Category B, which relies on both appropriated and nonappropriated  funding. For this report, we assessed the extent to which (1) the services  have met DOD\u2019s established funding targets for each category of MWR  programs and DOD has comprehensively evaluated the relevance of its  targets, and (2) DOD has oversight structures and performance measures  that include measurable goals, including those for cost-effectiveness, by  which to review MWR programs.", "For our first objective, we assessed the extent to which the Army, the  Navy, the Marine Corps, and the Air Force met DOD\u2019s established  funding targets in fiscal year 2012 through fiscal year 2017. We met with  officials from USD(P&R) and the services to discuss MWR program  policies and procedures and any challenges they have meeting funding  targets as well as any actions they plan to take to meet the targets. We  also reviewed memorandums the services developed showing their plans  to meet the funding targets when they missed them. Based on responses  to data reliability questionnaires from USD(P&R) and the services, we  determined that the data we obtained on DOD\u2019s MWR programs are  sufficiently reliable for the purpose of reporting program information\u2014 including costs from fiscal years 2012 through 2017, which are the most  current data available.", "For our second objective, we reviewed DOD Instruction 1015.10, Military  Morale, Welfare, and Recreation (MWR) Programs, which specifies  DOD\u2019s oversight roles and responsibilities for the MWR programs, the  goals for those programs, and the information the services should collect  on the programs. We compared this instruction with the Standards for  Internal Control in the Federal Government that states, among other  things, that managers should establish activities to monitor performance  measures. We also compared DOD\u2019s instruction with DOD\u2019s Financial  Management Regulation and with guidance we have identified in our  prior work on performance measurement. This work provides guidance  for using performance measures and evaluating whether goals were met  and for assessing cost-effectiveness. We met with officials from  USD(P&R) and the services to discuss oversight of the program and  processes they have in place for meeting program goals and measuring  cost-effectiveness.", "We conducted this performance audit from August 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DOD\u2019s MWR Program Categories and Funding Sources", "paragraphs": ["DOD Instruction 1015.10, Military Morale, Welfare, and Recreation  (MWR) Programs, establishes policy, assigns responsibilities, and  prescribes procedures for operating and managing programs for military  MWR programs. Specifically, the policy states that the services are to  establish MWR programs in order to maintain individual, family, and  mission readiness and that these programs are an integral part of the  military and its benefits package. The Office of USD(P&R) oversees  DOD\u2019s MWR programs, develops policy, and oversees MWR programs\u2019  funding. DOD\u2019s instruction specifies the purpose of, the funding sources  for, and the activities within each of MWR\u2019s three designated program  categories\u2014all of which are summarized below in table 1. For a complete  listing of the activities by program category, see appendix I.", "Each service supports MWR programs with a mix of appropriated and  nonappropriated funding. According to officials, the services allocate  appropriated funding amounts for MWR purposes, which primarily  supports Category A and B programs. Nonappropriated funding is  government money from sources other than amounts appropriated by  Congress and may be generated in a number of ways to support MWR  programs. For example, bowling programs, marinas, and golf programs  generate nonappropriated funding revenue through participation fees for  recreational activities paid by servicemembers and their families. Services  must use any nonappropriated funding generated from or associated with  MWR programs within their MWR programs."], "subsections": []}, {"section_title": "DOD\u2019s MWR Program Funding Targets", "paragraphs": ["According to DOD Instruction 1015.10, the MWR programs are divided  into three distinct categories, two of which also have specific funding  targets. According to DOD\u2019s 2016 report to Congress on appropriated  funding support for MWR programs, the funding targets are intended to  ensure that the services adequately fund MWR programs instead of  requiring the servicemembers and their families to pay out of their own  pockets for costs that should be borne by appropriated funding. While  DOD Instruction 1015.10 establishes minimum funding targets for MWR  Category A and B programs, it directs that the basic funding target,  regardless of program category, is to use appropriated funding for 100  percent of costs for which they were authorized. While DOD\u2019s Instruction  allows the services to use appropriated funding for 100 percent of  authorized costs, according to service officials this is generally not  possible given budget constraints. Therefore, for MWR Category A  mission sustaining programs, the DOD instruction establishes the funding  target\u2014stating that DOD is to use appropriated funding amounts for a  minimum of 85 percent of total expenditures. For the MWR Category B  community support system programs, the DOD instruction establishes the  funding target as DOD\u2019s use of appropriated funding amounts for a  minimum of 65 percent of total expenditures. For the MWR Category C  recreational activities for servicemembers and their families, appropriated  funding support should generally be limited because this category has the  highest capability of generating nonappropriated funding revenues."], "subsections": []}, {"section_title": "Budget, Funding, and Accounting Processes for MWR Programs", "paragraphs": [], "subsections": [{"section_title": "Budget Processes", "paragraphs": ["The services have annual budget processes for MWR programs that vary  based on whether appropriated or nonappropriated funding is being used.  For MWR programs supported by appropriated funding, according to  officials, the services submit and validate program requirements through  DOD\u2019s Planning, Program, Budgeting, and Execution process. DOD and  service guidelines for certain MWR programs as well as annual service- issued budget guidance provide input for determining MWR programs\u2019  requirements. Service officials from the Army, the Marine Corps, and the  Air Force also stated that they determine program requirements using  input from installations and service components, while service officials  from the Navy stated that they use a budget model along with  performance measures and budget guidance to determine program  requirements. The requirements are then submitted to higher level  components within the services for review, adjustment, and approval.  Once the services validate the requirements, they are provided to the  Office of the Secretary of Defense for inclusion in the President\u2019s Budget.  Figure 1 provides an overview of the general process the services use to  budget for appropriated funding support of MWR activities.", "Budget processes and authorities for nonappropriated funding, or  program-generated revenue, vary by service. Specifically, the services  maintain nonappropriated funding budgets and budget approvals at  different levels within the service organization. For example, officials  stated that Marine Corps and Air Force installations maintain and manage  nonappropriated funding generated at their locations while Army and  Navy installations submit nonappropriated funding and budgets to a  higher level of command, Installation Directorates for the Army and  Regions for the Navy, as well as the service headquarters component.  The services plan for and manage their nonappropriated funding budgets  based on a number of factors, including revenue generated; projected  revenues; and the amount, if any, of appropriated funding available.  Figure 2 provides an overview of the general process the services use to  approve and manage nonappropriated funding generated within the  service.", "Each service uses processes to provide funds for the implementation of  its MWR programs. Service officials stated that during program execution  the services execute their programs and make adjustments to their  budgets based on funding authorized from appropriated funding and  nonappropriated funding sources. Commanders have authority over  budget implementation and the guidelines and parameters for  commanders vary by service. For example, according to Army officials,  during the fiscal year Army commanders can change MWR program  budgets and have some flexibility to move funding to other non-MWR  command priorities. Installations report to the services actual  expenditures and income generated, which are included in the services\u2019  annual reports. Figure 3 provides an overview of the general process the  services use to provide funding for MWR programs.", "Each service uses accounting processes for its MWR programs.  According to service officials, accounting is handled differently at each  service depending on the service\u2019s organizational structure. According to  service officials, the Navy and the Marine Corps centrally manage their  MWR accounting processes at their service headquarters; the Army  manages its accounting process at its headquarters and at the Defense  Financial and Accounting Services Nonappropriated Financial Services;  and the Air Force manages its accounting process at its Secretariat and  at the service components. According to service officials, program  managers at the service headquarters and activity level are able to review  financial data, such as expenditures and revenues, for MWR programs on  a recurring basis. DOD\u2019s Instruction 1015.10 states that the services  should identify appropriated and nonappropriated funding accounts in  annual budgets, and the services have designated codes to categorize  expenditures. Service officials stated they use the codes to report  annually to USD(P&R) on MWR programs\u2019 expenditures for both  appropriated and nonappropriated funding."], "subsections": []}]}]}, {"section_title": "The Services Did Not Consistently Meet One of the Two Appropriated Funding Targets and Are Taking Steps to Address This, but DOD Has Not Comprehensively Evaluated the Targets to Ensure They Are Appropriate", "paragraphs": ["The services generally met the funding target for fiscal years 2012  through 2017 for MWR Category A mission-sustaining programs, but did  not consistently meet the target for Category B programs that provide  community support systems to servicemembers and their families during  the same time period. Service officials said they are taking steps to meet  the Category B target, such as restoring targeted levels of appropriated  funding support in future budget planning. Data indicate that the services  are getting closer to meeting the target. However, DOD has not  comprehensively evaluated the funding targets, which were established  more than 20 years ago, to ensure they currently are appropriate."], "subsections": [{"section_title": "The Services Generally Met the Funding Target for MWR Category A Mission- Sustaining Programs", "paragraphs": ["For MWR Category A mission-sustaining programs, the services  generally met the 85-percent target for appropriated funding support.  Specifically, the Navy and the Air Force consistently met or exceeded the  85-percent funding target in fiscal years 2012 through 2017, and the Army  met or exceeded the target every year except for fiscal year 2012 when it  reported that 84 percent of its Category A programs were supported with  appropriated funds. The Marine Corps exceeded the minimum funding  target for Category A programs in fiscal years 2012 through 2017, but  consistently fell below the target with appropriated funding support  ranging from 77 percent to 84 percent from fiscal years 2013 through  2016. Table 2 provides additional detail on the extent to which each  service met the 85-percent funding target for MWR Category A mission- sustaining programs in fiscal years 2012 through 2017."], "subsections": []}, {"section_title": "The Services Did Not Consistently Meet the Funding Target for MWR Category B Community Support Programs, but Are Taking Steps to Meet the Target in the Future", "paragraphs": ["For MWR Category B community support programs, the services missed  the 65-percent target for appropriated funding support with increasing  frequency from fiscal years 2012 through 2017. Service officials stated  that constrained budgets and competing priorities have made it difficult to  allocate the appropriated funding needed to support their programs.  However, service officials said they are taking steps to meet the Category  B funding target in the future. Specifically, we found that the services  collectively missed the funding target over 60 percent of the time from  fiscal years 2012 through 2017. All four services missed the funding  target in fiscal years 2015 and 2016 with appropriated fund support  ranging from 55 to 63 percent. Most recently, in fiscal year 2017 the Army  met the 65-percent funding target, but the Navy, the Marine Corps, and  the Air Force fell below the 65-percent funding target with appropriated  funding support ranging from 60 percent to 62 percent. Although the Air  Force did not meet the 65-percent target for fiscal years 2012\u20132017 citing  resource issues, Air Force leadership has increased appropriated funding  for the MWR programs each year to help get closer to meeting the  Category B funding target. Air Force officials said they plan to continue to  increase funding each year so they can meet the target in the future.  Table 3 provides additional detail on the extent to which each service met  the 65-percent funding target for MWR Category B community support  programs in fiscal years 2012 through 2017.", "The USD(P&R) monitors the services\u2019 compliance in meeting the targets.  When a funding target is missed, USD(P&R) officials said a memorandum  is sent to the services that asks for a detailed plan on how they will  achieve the required level of appropriated funding support for the missed  target in the future, and these officials said that each service has provided  such a plan when they fell below the 65-percent funding target. In  instances when a service does not respond to the initial request for a  remediation plan, USD(P&R) officials said a second memorandum is sent  notifying the service that they missed the funding target and that they  need to submit a plan detailing how they intend to come into compliance.  For example, in fiscal year 2015 the Army did not meet the 65-percent  funding target for Category B programs. In June 2016, the Assistant  Secretary of Defense for Manpower and Reserve Affairs sent the Army a  memorandum asking it to submit a plan on how it would meet the target.  After not receiving a response, the Assistant Secretary of Defense for  Manpower and Reserve Affairs sent the Army a second memorandum in  September 2016 that noted the missed target and reiterated the need to  submit a plan for achieving compliance with designated funding targets.  Following the second memorandum, the Army issued a memorandum in  December 2016 stating it would fully fund Category A and B programs to  the required targets in fiscal year 2017. Following these communications,  in February 2018, the Army sent USD(P&R) its fiscal year 2017 program  and metric report showing that it had successfully met the Category A and  B funding targets as planned.", "Service officials said they are taking steps to meet the Category B target,  and data from fiscal years 2015 through 2017 indicate that the services  are getting closer to meeting it. However, in the prior years when the  services have not met appropriated funding targets for Category B  programs, officials said that the services have relied on nonappropriated  funding as supplemental support to help ensure that such programs  continue to operate. Specifically, according to USD(P&R) officials, the  services have used nonappropriated funding\u2014that is, revenue generated  largely through user fees incurred by servicemembers and their families\u2014 to cover MWR program costs for which appropriated funding was  authorized. However, the use of nonappropriated funds to cover shortfalls  in appropriated funding support for MWR programs has been a long- standing issue about which Congress has previously expressed concern.  Specifically, in House Report 104-563, which accompanied H.R. 3230, a  bill for the National Defense Authorization Act for Fiscal Year 1997, the  House Committee on National Security established the annual DOD  Category A and B MWR programs reporting requirement to Congress,  after receiving testimony from the services\u2019 MWR managers and noting a  disparity in the degree of appropriated funding support afforded these  programs particularly in the area of Category A and B programs. While  the committee recognized that shortfalls in appropriated funding support  for MWR programs requires the use of nonappropriated funding to meet  requirements, it also stated that the use of nonappropriated funding  resources\u2014soldier, sailor, airman, and Marine money\u2014to subsidize  appropriated funding activities should be minimized.", "While the Army met the Category B funding target for fiscal year 2017,  the Navy, the Marine Corps, and the Air Force have each submitted plans  and briefed USD(P&R) on how they plan to meet the target in the future.  Navy officials said that they acknowledged the Navy\u2019s challenges with  meeting the Category B funding target and, as a result, began assessing  their Category B programs to eliminate those that had limited use,  consolidate some where possible, and implement operational efficiencies.  Marine Corps officials indicated that the Marine Corps is committed to  preserving valuable MWR programs and restoring appropriate levels of  appropriated funding support in future budget planning. Specifically, the  Marine Corps plans to readdress appropriated funding levels in the  budget planning process in 2019. However, Marine Corps officials noted  they may continue to have challenges meeting the 65-percent funding  target in fiscal year 2018. Air Force officials said they will continue to  advocate for retaining established MWR program funding in the budget  process. Air Force officials said that for fiscal years 2014 through 2017,  Air Force leadership has increased appropriated funding for the MWR  programs each year to help get the Air Force closer to meeting the  Category B funding target."], "subsections": []}, {"section_title": "DOD Has Not Comprehensively Evaluated the Funding Targets to Ensure They Are Appropriate", "paragraphs": ["DOD has not comprehensively evaluated the funding targets for Category  A and B programs, which were instituted more than 20 years ago, to  ensure they are appropriate. Standards for Internal Control in the Federal  Government recommends that management periodically review policies  and procedures for continued relevance and effectiveness in achieving an  entity\u2019s objectives. According to USD(P&R)officials, a limited evaluation  took place prior to 1995 that resulted in the Category A funding target in  DOD\u2019s instruction being changed from 100 percent to 85 percent.  USD(P&R) officials said that the Category A appropriated funding target  was changed because some of the activities within the category have  expenses, such as for the food and beverage elements, that are able to  generate revenue and thus not authorized to use appropriated funds.", "USD(P&R) officials stated that since that time there have been no further  evaluations of the Category A or Category B targets and agree that it is  time to evaluate the current relevance of the targets. Specifically they  noted the considerable changes to the budgeting and funding  environment that have taken place in the more than 20 years since the  Category A funding target was modified. In addition, officials told us they  also agree that it is time to evaluate the relevance of the Category B  funding target, which has never been modified. Specifically, officials said  that the services\u2019 extended engagement in overseas conflicts and  constrained budgets have resulted in an operating environment that is  substantially different from the peacetime setting in which the targets  were first established.", "Moreover, Standards for Internal Control in the Federal Government  requires management to document internal controls to meet operational  needs. Documentation of controls, including changes to controls, is  evidence that controls are identified, capable of being communicated to  those responsible for their performance, and capable of being monitored  and evaluated by an entity. Documentation also provides a means to  retain organizational knowledge and mitigate the risk of having that  knowledge limited to a few personnel, as well as a means to  communicate that knowledge as needed to external parties, such as  external auditors. As previously stated, officials stated that the Category A  funding target was updated sometime prior to 1995; however, officials did not have any specific documentation related to this change. Furthermore,  USD(P&R) officials said the targets were developed so long ago that  there is a general lack of information on the funding targets\u2019 origins and  that they are not sure of the process or methodology that was used to  develop them.", "The amount of time that has passed since Category A\u2019s target was  modified, recent challenges in meeting the Category B target, and the  general lack of information on the funding targets\u2019 origins raise concerns  about the appropriateness and continued relevance and effectiveness of  the targets in achieving MWR programs objectives. Until DOD  comprehensively evaluates the appropriateness of current targets for  Category A and B programs and, based on its evaluation, documents any  changes it makes to its funding targets, DOD cannot be certain that the  targets reflect the current operating environment and do not pose undue  financial burden on the servicemembers."], "subsections": []}]}, {"section_title": "DOD Has Established an Oversight Structure and Performance Measures for MWR Programs but Has Not Developed Measurable Goals for Determining Whether MWR Programs Are Cost-Effective", "paragraphs": [], "subsections": [{"section_title": "DOD Has Established a Structure to Provide Oversight of MWR Programs", "paragraphs": ["DOD has established a structure that specifies roles, responsibilities, and  procedures for overseeing MWR programs. Specifically, DOD Instruction  1015.10 assigns roles and responsibilities for oversight of MWR programs  to the USD(P&R), the Secretaries of the military departments, and the  Chiefs of the military services (i.e., the Chiefs of Staff for the Army and  the Air Force, the Chief of Naval Operations, and the Commandant of the  Marine Corps). In addition, the services\u2019 respective policies assign roles  and responsibilities for MWR program oversight to the commander level.  Table 4 summarizes the general oversight roles and responsibilities for  DOD\u2019s MWR programs.", "The first level of oversight responsibility for MWR programs is assigned to  the USD(P&R). Specifically, responsibilities include the development of  department-level policies, program goals, performance measures, funding  targets, and the oversight of appropriated and nonappropriated funding  and expenditures for all MWR programs. To help ensure consistent  quality, USD(P&R) monitors the services\u2019 compliance in meeting  minimum MWR funding targets and performance measures. As  previously discussed, if a service misses a funding target, USD(P&R)  officials said they ask that service to submit a remediation plan that  summarizes its intent to meet the target in the future, as USD(P&R) did in  fiscal year 2015 when several services missed appropriated funding  targets for Category A and B activities.", "The second level of oversight is assigned to the Secretaries of the military  departments who are responsible for designating a central point of  contact within their respective service to facilitate MWR programs policy  compliance, coordinating with USD(P&R), and establishing funding  priorities and strategy for MWR programs. For example, service officials  we met with from the military departments said they have designated their  respective Assistant Secretary Offices for Manpower and Reserve Affairs  as the central point of contact for the services\u2019 MWR programs.", "The third level of oversight is assigned to the Chiefs of the military  services who are responsible for the development of overall goals and  uniform quality measures, which could include performance measures, for  MWR programs consistent with the performance measures set by DOD in  its instruction. For example, the Commander, Navy Installations  Command has developed uniform quality measures for the Navy MWR  Fitness program based on items such as customer satisfaction, usage  rates, and equipment maintenance, among other things. According to  officials, these quality measures provide a common tool to measure  customer satisfaction and the quality of each installation\u2019s MWR Physical  Fitness program. Additionally, these Chiefs are also responsible for  helping to ensure MWR programs are resourced with appropriated and  nonappropriated funding according to financial categories and for  identifying their respective appropriated and nonappropriated accounts in  annual budgets to meet DOD funding goals. Service Chiefs are also  responsible for ensuring that military installations operate customer-driven  MWR programs that are determined locally by market analysis.", "Lastly, the services\u2019 respective policies assign roles and responsibilities  for MWR program oversight to the commander level. Additionally,  according to service officials, commanders assist with preparing an  annual briefing for USD(P&R) on their MWR programs, which includes  initiatives, challenges, program trends, and financial information. For  example, in fiscal year 2017, each of the services reported on new  initiatives to support MWR programs for servicemembers and their  families, some of which are highlighted in table 5."], "subsections": []}, {"section_title": "DOD and the Services Have Performance Measures to Assess MWR Programs but These Measures Lack Measurable Goals for Determining Cost- Effectiveness", "paragraphs": ["DOD Instruction 1015.10 identifies six broad categories of performance  measures that the services use to assess their respective MWR  programs. However, these measures do not include measurable goals,  which are needed to assess the cost-effectiveness of the 55 activities that  currently make up the MWR programs. Specifically, DOD identifies six  broad performance measure categories in its instruction and, according to  service officials, the services collect and use various types of information  within these categories to periodically assess and adjust these activities,  as appropriate. Table 6 summarizes the types of information that DOD  requires the services to collect across the six categories established in its  instruction.", "In addition to the information that is to be collected across these six broad  categories, DOD established separate, more specific performance  measures for 2 of the 55 activities\u2014namely, for Physical Fitness and for  Library Programs and Information Services. For the Physical Fitness  activity, the services are required to submit annual reports to DOD on  their compliance with meeting more specific performance measures in a  variety of areas such as administrative operations, staff qualifications,  facility equipment, and child play areas. Similarly, DOD requires the  services to report on a variety of areas related to the Library Programs  and Information Services activity, such as library operation plans,  customer programs and service, and technology infrastructure. Unlike the  broad measures contained in DOD\u2019s Instruction, the specific performance  measures DOD established for the Physical Fitness and Library  Programs and Information Services activities tell the services exactly  what information to collect and report in each performance measure  category instead of the services having to develop specific measures on  their own.", "In an effort to better evaluate MWR programs, the services also have  efforts underway that include the following to develop specific  performance measures for their programs beyond the broad performance  measures contained in DOD Instruction 1015.10.", "Army. Army officials told us that they partnered with the Army Public  Health Center to build evidence-based MWR programs. Based on this  review, the Army found that Army MWR Community Recreation and  Fitness programs have not been formally evaluated as directed by  DOD Instruction 1015.10 requirements to measure and assess  programs. Additionally, the Army found that, while the Army Office of  the Assistant Chief of Staff for Installation Management provides  program oversight, it does not possess the capability to conduct  program evaluations. According to the results of the Army Public  Health Center report issued in June 2017, the Army initiated a three- phase approach for evaluating its MWR programs. The report showed  that assessing the evaluability of the Army MWR programs is phase  one. According to the Army, these evaluations will enable the Army to  validate program outcomes and better position itself to compete for  scarce resources. The report also showed that many of the 13 Army  MWR programs selected for review do not have direct links between  activities and the priority outcomes with behavioral, social, and  physical health, and that they do not have sufficient outcomes data  that have been consistently collected. Army officials said that phase  two will include the development of formal evaluation plans for  selected evaluable MWR programs. Lastly, Army officials said that  phase three will be the execution of the evaluation for two selected  MWR programs, which is on target to be completed by December  2018. While Army officials are learning how to evaluate programs  through this partnership with the Army Public Health Center, they said  that they have also learned that these endeavors are costly. Officials  said that a very modest program evaluation requires approximately  $300,000 to $500,000. Army officials also stated that program  evaluation requires support and participation by those organizations  and people that deliver the programs. Furthermore, according to Army  officials, resource reductions at the operational level (garrisons) are  increasingly restrictive, preventing them from collecting critical  information to support this multiphase effort.", "Navy. Navy officials said that they use the MWR Enterprise Modeling  System, which is based on performance measures that have been  developed and routinely reviewed and updated by headquarters,  regional, and installation program managers. The MWR Enterprise  Modeling System is used as the baseline for the annual MWR  performance data call that measures actual program performance  against performance standards. Navy officials said that the  performance measures provide the business strategy and guidance to  ensure efficient, effective and market-driven delivery of programs and  services.", "Marine Corps. Marine Corps officials said they collaborated with the  RAND Corporation to provide an analytically rigorous assessment  framework to evaluate program performance. The RAND Corporation  provided draft measures of performance. Marine Corps officials said  that the RAND Corporation also provided a user guide that outlines an  evaluation methodology and ensures consistent and standard  application. Marine Corps officials said that they are reviewing the  draft measures to determine appropriate data collection and have  drafted an implementation plan. Specifically, Marine Corps officials  said that they plan to brief Marine Corps installations in June 2018 on  the performance measures they plan to collect data from, which will  begin in fall 2018.", "Air Force. Air Force officials said that they are building off the work  that the RAND Corporation undertook for the Marine Corps and have  also started collaborating with the RAND Corporation. The objective of  the Air Force study is to develop an evidence-based evaluation  framework for MWR programs that identifies immediate and mid-term  outcomes that contribute to airman and family readiness and  resilience. Specifically, the goal is to provide the Air Force with logic  models and performance measures that are tied to each of the  programs and services in the MWR portfolio. Air Force officials said  they expect to finish this study by June 2018. However, the officials  noted that implementing the performance measures will be a  challenge since these types of MWR programs are difficult to measure  and hard to capture data for.", "While both the broad and specific measures established by DOD and the  services can provide useful context about the status of individual MWR  activities, they do not contain measurable goals that service officials could  use to compare program results with costs to determine whether an  individual activity is cost-effectively operating. Because the services\u2019  efforts to develop specific performance measures are in early stages of  development it is too early to determine whether these efforts will result in  measurable goals that can be used to assess the cost-effectiveness of  the MWR programs.", "DOD\u2019s Financial Management Regulation specifies that performance  measurement should include program accomplishments in terms of  outputs and how those outputs effectively meet intended agency mission  goals. Further, cost itself can be a performance metric, but should also be  combined with an effectiveness measure, such as the percentage of a  goal achieved at a level of expected performance, to ensure that the  resulting output is cost effective. Additionally, through our prior work on  performance measurement, we have reported that performance goals  and measures should align with an agency\u2019s goals and mission. However,  in reviewing DOD Instruction 1015.10, we found no mention of any goals,  mission, objectives, or purpose for the MWR programs. There is one  section entitled \u201cpolicy\u201d in the instruction that included items that resemble  goals. Specifically, the instruction stated that MWR programs:  1.  are an integral part of the military and benefits package;  2.  build healthy families and communities and provide consistently high- quality support services that are commonly furnished by other  employers or by state and local governments to their employees and  citizens;  3.  encourage positive individual values and aid in recruitment and  retention of personnel; and  4.  promote esprit de corps and provide for the physical, cultural, and  social needs; general well-being; quality of life; and hometown  community support of servicemembers and their families.", "USD(P&R) officials who have responsibility for developing MWR program  goals acknowledged that these policy items function as strategic goals  but were not clearly identified as such in the instruction and also  acknowledged that the instruction does not include measurable goals for  assessing cost-effectiveness. In addition, USD(P&R) officials said that  they are starting a review of DOD Instruction 1015.10 and did not know  yet whether they would make any changes to the goals or expand the  reporting requirement to include all 55 activities. Until DOD develops  performance measures that include measurable goals, DOD officials and  other decision makers, such as Members of Congress, may find it difficult  to determine whether the MWR programs and the activities that make up  the MWR programs are meeting servicemember needs in a cost-effective  manner."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD\u2019s multibillion dollar MWR programs provide a wide range of benefits  for servicemembers and their families that ultimately help support military  missions and readiness, both in times of war and peace. DOD has  established funding targets for providing appropriated funding support for  Category A and B MWR programs. However, the funding targets have not  been comprehensively evaluated in the last 20 years to determine their  current relevance. Until DOD comprehensively evaluates the  appropriateness of current funding targets and documents any changes  made to the targets, DOD\u2019s funding targets may not reflect the current  operating environment, and may be posing an undue burden on the  servicemembers. DOD has also not developed performance measures  with measureable goals that would allow it to assess the cost- effectiveness of its MWR programs. Without performance measures that  include such measurable goals, it will be difficult for DOD and Congress  to determine whether the individual activities and overall MWR programs  are meeting desired outcomes in a cost-effective manner."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD.", "We recommend that the Secretary of Defense ensure that the USD(P&R),  in consultation with the Secretaries of the military departments,  comprehensively evaluate the funding targets for Category A and B MWR  programs and document any changes made to the targets and the  methodology used. (Recommendation 1)", "We recommend that the Secretary of Defense ensure that the USD(P&R),  in consultation with the Secretaries of the military departments, develop  measurable goals for its MWR programs\u2019 performance measures to  determine the programs\u2019 cost-effectiveness. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  comments, DOD concurred with our recommendations and noted actions  that it is taking. DOD\u2019s comments are reprinted in their entirety in  appendix II. DOD also provided technical comments, which we  incorporated into the report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, the  Navy, and the Air Force; the Commandant of the Marine Corps; and the  Under Secretary of Defense for Personnel and Readiness. 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) 512-3604 or farrellb@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 members who made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Department of Defense\u2019s Morale, Welfare, and Recreation Program Categories", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kimberly A. Mayo, Assistant  Director; Rebekah Boone; Mae Frances Jones; Felicia Lopez; Stephanie  Moriarty; Cynthia Saunders; John W. Van Schaik; Paul Seely; Carter  Stevens; and Roger Stoltz made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-117", "url": "https://www.gao.gov/products/GAO-19-117", "title": "VA Construction: Strengthened Pilot Design and a Dedicated Team Could Improve Real-Property Donation Pilot Program", "published_date": "2018-12-13T00:00:00", "released_date": "2018-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA has pressing infrastructure needs. The Communities Helping Invest through Property and Improvements Needed for Veterans Act of 2016 (CHIP-IN Act) authorized VA to accept donated real property\u2014such as buildings or facility construction or improvements\u2014through a pilot program. VA has initiated one project in Omaha, Nebraska, through a partnership with a donor group. VA can accept up to five donations through the pilot program, which is authorized through 2021.", "The CHIP-IN Act includes a provision for GAO to report on donation agreements. This report (1) examines the extent to which the VA's pilot design aligns with leading practices and (2) discusses what VA has learned from the pilot to date. GAO reviewed VA documents, including plans for the pilot program, and visited the Omaha pilot project. GAO interviewed VA officials, the Omaha donor group, and three non-federal entities that responded to VA's request seeking donors. GAO compared implementation of VA's pilot to leading practices for pilot design, organizational transformation, and cross-functional teams."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) is conducting a pilot program, called CHIP-IN, that allows VA to partner with non-federal entities and accept real property donations from them as a way to help address VA's infrastructure needs. Although VA signed its first project agreement under the program in April 2017, VA has not yet established a framework for effective design of the pilot program. Specifically, VA's pilot program design is not aligned with four of five leading practices for designing a well-developed and documented pilot program. VA has begun to implement one leading practice by improving its efforts to communicate with relevant stakeholders, such as including external stakeholders in key meetings. However, the VA offices involved have not agreed upon and documented clear, measurable objectives for the pilot program, which is a leading practice. Further, VA has not developed an assessment methodology or an evaluation plan that would help inform decisions about whether or how the pilot approach could be expanded. While VA officials said they intend to develop these items as tasks for the newly formed CHIP-IN steering committee, they have no timeline for doing so. Without clear objectives and assessment and evaluation plans, VA and Congress may have difficulty determining whether the pilot approach is an effective way to help address VA's infrastructure needs.", "To date, the CHIP-IN pilot suggests that donation partnerships could improve construction projects, but identifying donors and establishing a team for the pilot program have presented challenges. Officials from VA and the donor group for the first pilot project\u2014an ambulatory care center in Omaha, Nebraska\u2014said they are completing the project faster than if it had been a standard federal construction project, while achieving potential cost savings by using private sector practices. However, VA officials said it is challenging to find partners to make large donations with no financial return, and VA's lack of marketing and philanthropic development experience exacerbates that challenge. VA and the donor group agreed that a dedicated team of individuals with relevant expertise could facilitate the pilot's implementation. The new CHIP-IN steering committee could serve this purpose, but it lacks documented roles and responsibilities. Establishing a team with clear roles and responsibilities and identifying both available and needed staff resources could assist VA in partnering with additional donors and creating new opportunities to meet veterans' needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that VA: (1) establish pilot program objectives, (2) develop an assessment methodology and an evaluation plan, and (3) document roles and responsibilities and identify available and needed staff resources. VA concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) operates one of the largest  health care systems in the country with over 1,200 sites serving 9-million  veterans each year, as VA reported in 2018. However, VA\u2019s infrastructure  is aging and many facilities, designed for an inpatient health care system,  do not align with VA\u2019s current and future needs\u2014such as providing more  care in outpatient settings, similar to trends in the health care industry  overall. Further, our prior work has identified instances of VA facility  construction experiencing cost overruns totaling hundreds of millions of  dollars and schedule delays exceeding several years.", "In December 2016, a pilot program was enacted that helps to address  VA\u2019s infrastructure needs by allowing VA to partner with and accept  donations from non-federal entities to construct or improve some facilities.  Specifically, the Communities Helping Invest through Property and  Improvements Needed for Veterans Act of 2016 (CHIP-IN Act) authorizes  VA to accept donated real property, such as buildings, from non-federal  entities. The legislative history suggests that Congress was seeking innovative ways to help VA meet its pressing infrastructure needs. CHIP- IN donations can include an already constructed facility or construction of  a facility on either VA property or donated property. Examples of non- federal entities that can make donations under the pilot include state or  local authorities, a donor or donor group, limited liability corporations, or  tax-exempt organizations. The CHIP-IN Act allows VA to use funds that  have already been appropriated for a particular facility\u2019s construction  project to assist a donor of real property and improvements with  financing, designing, or constructing the facility. VA may accept up to five  donations through the pilot program, which is authorized through 2021.  As of September 2018, VA has entered into a formal agreement for one  CHIP-IN project\u2014the construction of an ambulatory care center on the  VA medical center\u2019s campus in Omaha, Nebraska (Omaha project). This  agreement created a partnership between VA and a nonprofit corporation  formed by a donor group in Omaha (Omaha donor group). In this case,  the donor, in consultation with VA, is leading the project\u2019s design and  construction efforts and will donate the completed facility to VA. VA plans  to use this facility to provide various outpatient services, including primary  care and certain surgical services. Additionally, according to agency  officials, VA has engaged in discussions with potential partners regarding  CHIP-IN donation opportunities in locations across the country but has  not signed any other formal agreements as of September 2018.", "The CHIP-IN Act included a provision for us to report on the pilot\u2019s  donation agreements on a biennial basis. This report (1) examines the  extent to which VA\u2019s CHIP-IN pilot program design aligns with leading  practices and (2) discusses what VA has learned from the pilot program  to date.", "To address both objectives, we reviewed statutes, journal articles and  published reports on real property donations, and VA documents,  including plans for the pilot program and the donation agreement for the Omaha project. We visited the Omaha project, where we toured the  construction site. We interviewed VA officials, representatives from the  Omaha donor group, and three of the five non-federal entities that  responded to VA\u2019s request for information (RFI) seeking CHIP-IN  donations but that had not met the CHIP-IN Act requirements. To  determine the extent to which VA\u2019s pilot design aligns with leading  practices, we compared steps VA has taken in developing the pilot to a  set of leading practices that we developed and identified in 2016. We  also reviewed the pilot\u2019s design in comparison to relevant federal  standards for internal control. In determining what VA has learned from  the pilot program to date, we reviewed the CHIP-IN pilot\u2019s implementation  as compared to several relevant leading practices, including our prior  work on organizational transformation, collaboration, and effective  cross-functional teams.", "We conducted this performance audit from March 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "CHIP-IN Act", "paragraphs": ["According to VA officials and Omaha donor group representatives, two  main factors coalesced to become the impetus for the CHIP-IN Act.", "One factor was an Omaha donor group\u2019s interest in constructing an  ambulatory care center that could help address the needs of veterans  in the area, given uncertainty about when or whether VA would be  able to build a planned replacement medical center. In 2011, VA  allocated $56 million for the design of the replacement medical center  in Omaha, which had a total estimated cost of $560 million. However,  VA officials told us that given the agency\u2019s backlog of construction  projects, the replacement medical center was not among its near-term  projects. In the meantime, according to VA officials and the Omaha  donor group, they discussed a change in the scope of the project\u2014 from the original plan of a replacement medical center to a smaller- scope project for a new ambulatory care center\u2014that could potentially  be constructed using the existing appropriation of $56 million plus a  donation from the Omaha donor group.", "Another factor was the Congress\u2019s and VA\u2019s broader interest in  testing innovative approaches to meeting VA\u2019s infrastructure needs.  According to VA officials, the agency was interested in constructing  medical facilities in a more expeditious manner and developing  legislation that allowed private money to help address VA\u2019s needs.", "The CHIP-IN Act authorized a total of five pilot projects but did not name  any specific project locations. Subsequently, the Omaha donor group  applied to participate in the pilot program\u2014with the construction of an  ambulatory care center\u2014and VA executed a donation agreement in April 2017. VA may accept up to four more real property donations under the  pilot program, which is authorized through 2021.", "The CHIP-IN Act places certain requirements on donations under the pilot  program. VA may accept CHIP-IN donations only if the property: (1) has  already received appropriations for a VA facility project, or (2) has been  identified as a need as part of VA\u2019s long-range capital planning process  and the location is included on the Strategic Capital Investment Planning  process priority list provided in VA\u2019s most recent budget submission to  Congress. The CHIP-IN Act also requires that a formal agreement  between VA and the non-federal entity provide that the entity conduct  necessary environmental and historic preservation due diligence, obtain  permits, and use construction standards required of VA, though the VA  Secretary may permit exceptions."], "subsections": []}, {"section_title": "Omaha Project", "paragraphs": ["VA entered into an agreement with the Omaha donor group for the design  and construction of an ambulatory care center in April 2017\u20144 months  after enactment of the CHIP-IN Act. According to this agreement, which  establishes the terms of the donation, the Omaha donor group will  complete the design and construction of the facility and consult with VA.  The facility will provide approximately 158,000 gross square feet of  outpatient clinical functions, including primary care, an eye clinic, general  purpose radiology and ambulatory surgery, specialty care, and mental  health care.", "According to VA officials, planning for the facility began in April 2017,  after the donation agreement was executed, and the project broke ground  in April 2018. This donation agreement includes the mutually agreed- upon design and construction standards, which incorporate both VA\u2019s standards and private sector building standards. The donation agreement  also sets the terms of VA\u2019s review of the design and construction  documents and establishes escrow operations for the holding and  disbursement of federal funds. Upon the Omaha donor group\u2019s  completion of the facility (scheduled for summer 2020) and VA\u2019s  acceptance, the Omaha donor group will turn the facility over to VA. The  total estimated project cost is approximately $86 million. VA is  contributing the $56 million that had already been appropriated for the  design of the replacement medical facility. The Omaha donor group will  donate the remaining approximately $30 million in private sector  donations needed to build the facility."], "subsections": []}, {"section_title": "Pilot Program", "paragraphs": ["As shown in figure 2 and described below, VA officials told us that several  offices are involved in various aspects of the CHIP-IN pilot\u2014such as  executing the Omaha project, seeking additional partnerships, and  establishing the overall pilot program effort. The VA Office of Construction  and Facilities Management (CFM) includes its Office of Real Property  (ORP) and Office of Operations. ORP has taken a lead role in  establishing the pilot program, while CFM Operations has led the execution of the Omaha project. Other VA offices that have been involved  at different stages include the Office of General Counsel and the  Secretary\u2019s Center for Strategic Partnerships. Within the Veterans  Health Administration (VHA), the local medical-center leadership was  involved with developing the Omaha project, and the Office of Capital  Asset Management, Engineering, and Support (Capital Asset  Management Office) has contributed to efforts to identify additional  projects. Some of these offices are involved with a steering committee  created to implement the CHIP-IN Act (CHIP-IN steering committee). This  steering committee met for the first time in September 2018."], "subsections": []}]}, {"section_title": "VA Has Not Yet Established a Framework for Effective Pilot Design for the CHIP-IN Pilot Program", "paragraphs": ["In 2016, we identified five leading practices for designing a well- developed and documented pilot program: articulating an assessment methodology, developing an evaluation plan, assessing scalability, and ensuring stakeholder communication. (See fig. 3.)", "These practices enhance the quality, credibility, and usefulness of pilot  program evaluations and help ensure that time and resources are used  effectively. While each of the five practices serves a purpose on its own,  taken together, they form a framework for effective pilot design.", "VA officials have worked to communicate with relevant stakeholders, but  have not yet established objectives, developed an assessment  methodology and evaluation plan, or documented how they will make  decisions about scalability of the pilot program."], "subsections": [{"section_title": "VA Has Not Established Clear Objectives", "paragraphs": ["In 2016, we reported that clear, measurable objectives can help ensure  that appropriate evaluation data are collected from the outset of a pilot  program. Measurable objectives should be defined in qualitative or  quantitative terms, so that performance toward achieving the objectives  can be assessed, according to federal standards for internal control. For  example, broad pilot objectives should be translated into specific  researchable questions that articulate what will be assessed. Establishing  well-defined objectives is critical to effectively implementing the other  leading practices for a pilot program\u2019s design. Objectives are needed to  develop an assessment methodology to help determine the data and  information that will be collected. Objectives also inform the evaluation  plan because performance of the pilot should be evaluated against these  objectives. In addition, objectives are needed to assess the scalability of  the pilot, to help inform decisions on whether and how to implement a  new approach in a broader context (i.e., whether the approach could be  replicable in other settings).", "Relevant VA stakeholders have not yet collectively agreed upon and  documented overall objectives for the CHIP-IN pilot program, but the  stakeholders said they are planning to do so. However, at the time of our  review, each of the VA offices we interviewed presented various ideas of  what the objectives for the pilot should be, reflecting their varied missions  and roles in the CHIP-IN pilot. For example,", "A senior VHA official said the objectives should include (1)  determining whether the CHIP-IN donation partnership approach is an  effective use of VA resources and (2) defining general principles for  the pilot, including a repeatable process for future CHIP-IN projects.", "A senior VA official who has been closely involved with the pilot said  one objective should be determining how VA can partner with the  private sector for future construction projects, whether through  donation partnerships or other means.", "Officials from ORP, who have taken a lead role in establishing the  pilot, told us their objectives include identifying the four additional  projects authorized by the CHIP-IN Act, developing a process to  undertake potential projects, and determining whether a  recommendation should be made that Congress extend VA\u2019s CHIP-IN  authority beyond the 5-year pilot. ORP officials said they have written  some of these objectives in an early draft of plans for the CHIP-IN  steering committee, but they have also discussed other objectives that  are not yet documented.", "While the various VA offices involved may have somewhat different  interests in the pilot program, developing a set of clear, measureable  objectives is an important part of a good pilot design. For example,  several VA officials who are involved in the pilot told us that it would be  useful for relevant internal stakeholders to collectively agree upon and  document overall objectives. ORP officials told us that the newly formed  CHIP-IN steering committee will discuss and formalize objectives for the  pilot. However, at the time of our review, a draft of these objectives had  not been developed and a timeline for developing objectives was not yet  established. A discussion of objectives was planned for the steering  committee\u2019s first meeting in September but had been rescheduled for the  next meeting in October 2018.", "VA officials told us that they did not immediately move to establish a  framework for the pilot program\u2014which would include objectives for the  pilot\u2014for various reasons. Some officials said that VA and the Omaha  donor group entered into formal discussions shortly after the CHIP-IN Act  was enacted, and that their focus at the time was on negotiating and then  executing a donation agreement for that particular project. As such,  formal efforts to establish the framework for the overall pilot effort were in  initial stages at the time of our review. ORP officials also said that the  enactment of the CHIP-IN Act was not anticipated at the time CFM was  planning and budgeting its resources for fiscal years 2017 and 2018, so  work on the pilot had to be managed within available resources, largely  as an additional duty for staff. In addition, a senior VHA official said a  meeting to agree upon the pilot program\u2019s objectives was needed but had  not been held yet, noting that VA has competing priorities and vacancies  at the senior executive level. ORP officials said they are now following  project management principles in implementing the pilot. As part of this  effort, they said that they intend to develop foundational documents for  review by the CHIP-IN steering committee\u2014such as a program plan  containing objectives\u2014but they have not done so yet.", "Without clearly defined and agreed-upon objectives, stakeholders within  VA may have different understandings of the pilot\u2019s purpose and intended  outcomes. As a result, the agency risks pursuing projects that may not  contribute to what VA hopes to learn or gain from the pilot. While VA  officials are planning to establish objectives as they formalize the CHIP-IN  steering committee, at the time of our review these objectives had not  been documented and no timeline has been established for when they  would be. Without clear, measurable objectives, VA will be unable to  implement other leading practices for pilot design, such as determining  how to make decisions about scalability. Further, not defining objectives  in the near future would ultimately affect VA\u2019s ability to evaluate the pilot  and provide information to Congress about its results."], "subsections": []}, {"section_title": "VA Has Not Developed and Documented an Assessment Methodology or Evaluation Plan", "paragraphs": ["We have reported that developing a clearly articulated assessment  methodology and a detailed evaluation plan are leading practices for pilot  design. The assessment methodology and evaluation plan should be  linked to the pilot\u2019s objectives so that evaluation results will show  successes and challenges of the pilot, to help the agency draw  conclusions about whether the pilot met its objectives. The assessment  methodology and evaluation plan are also needed to determine  scalability, because evaluation results will show whether and how the pilot  can be expanded or incorporated into broader efforts. Given that several  VA offices are involved in the pilot\u2019s implementation, it is important for  relevant stakeholders to be involved with defining and agreeing upon the  assessment methodology and evaluation plan.", "VA has not yet fully developed and documented either an assessment  methodology or evaluation plan for the pilot, but VA officials told us they  plan to do so. For example, ORP officials said they intend to collect  lessons learned and then evaluate the pilot at its end in 2021 by  reviewing this information with relevant stakeholders. However, more  specific details for this assessment methodology have not been defined in  accordance with this leading practice. For example, we found that ORP  has not yet determined which offices will contribute lessons learned, how  frequently that information will be collected, or who will collect it. Similarly,  details for an evaluation plan have not been defined, including who will  participate in the evaluation and how information will be analyzed to  evaluate the pilot\u2019s implementation and performance. Now that the CHIP- IN steering committee has met for the first time, this group intends to  discuss assessment of the pilot at a future meeting, but it is not clear  when that discussion will occur, what leading practices will be considered,  and when plans will be defined and documented.", "According to VA officials, an assessment methodology and evaluation  plan have not been developed because, as discussed above, after the  CHIP-IN Act was enacted, efforts were focused on negotiating the Omaha  donation agreement and then executing that project. As such, formal  efforts to establish the pilot through the CHIP-IN steering committee were  in initial stages at the time of our review. Further, until VA has agreed- upon and documented objectives for the pilot program, it may be difficult  to determine what information is needed for an assessment methodology  and how the pilot will be evaluated.", "Unless VA establishes a clear assessment methodology that articulates  responsibilities for contributing and documenting lessons learned, VA  may miss opportunities to gather this information from the pilot. For  example, while some stakeholders are documenting lessons learned  relevant to their roles in the pilot, others are not. Specifically, ORP and  CFM Operations are documenting lessons learned, but other VA offices  and the Omaha donor group have not, though some told us they would be  willing to share lessons learned if asked. Without an assessment  methodology, there may also be confusion about who is responsible for  documenting lessons learned. For example, a senior CFM official said  that the Omaha donor group was compiling lessons learned from the pilot  overall and would subsequently share those with VA. However,  representatives from the donor group told us they have not been asked to  share lessons learned with VA, but they would be willing to do so. When  key individuals leave their positions\u2014a situation that has occurred a  number of times during implementation of the CHIP-IN pilot\u2014their  lessons learned may not be captured. For example, VA officials and  donor group representatives told us that two VA officials who were  involved in developing the pilot have since left the agency. In addition,  stakeholders\u2019 memories of lessons learned may fade unless they record  them. Waiting to develop an evaluation plan\u2014which should include  details about how lessons learned will be used to measure the pilot\u2019s  performance\u2014may ultimately affect VA\u2019s preparedness to evaluate the  pilot and provide information to Congress about its results."], "subsections": []}, {"section_title": "VA Has Not Documented Plans to Assess Scalability", "paragraphs": ["The purpose of a pilot is to generally inform a decision on whether and  how to implement a new approach in a broader context\u2014or in other  words, whether the pilot can be scaled up or increased in size to a larger  number of projects over the long term. Our prior work has found that it is  important to determine how scalability will be assessed and the  information needed to inform decisions about scalability. Scalability is  connected to other leading practices for pilot design, as discussed above.  For example, criteria to measure scalability should provide evidence that  the pilot objectives have been met, and the evaluation\u2019s results should  inform scalability by showing whether and how the pilot could be  expanded or how well lessons learned from the pilot can be incorporated  into broader efforts.", "VA officials have begun to implement this leading practice by considering  the pilot as a means of testing the viability of the donation partnership  approach; however, plans for assessing scalability have not been fully  defined and documented. A senior VA official said scalability is seen as a  way to determine if the donation approach or other types of private sector  partnerships are a viable way to address VA\u2019s infrastructure needs.  Similarly, ORP officials told us they are first considering scalability in  terms of whether the CHIP-IN donation approach is an effective or  feasible way of delivering VA projects. These officials said scalability will  be largely determined by whether all five authorized projects can be  executed before authorization for the CHIP-IN pilot program sunsets. For  example, if VA can find four additional projects and execute donation  agreements before the pilot\u2019s authority expires, then potentially VA could  seek congressional reauthorization to extend the program beyond the 5- year pilot. ORP officials are also considering scalability in terms of any  changes to the program, such as incentives for donors, that could  potentially increase its effectiveness. However, ORP officials explained  that scalability may be limited because the types of projects that can be  accomplished with the CHIP-IN donation approach may not be the  projects that are most needed by VA. Along with other pilot design topics,  the CHIP-IN steering committee intends to discuss scalability at a future  meeting, but it is not clear when that discussion will occur. Thus, while VA  officials have considered what scalability might look like, they have not  fully determined and documented how to make decisions about whether  the pilot is scalable.", "Since VA has not defined and documented the pilot\u2019s objectives and its  evaluation plans, it may be more difficult to determine how to make  decisions about scalability. Considering how the pilot\u2019s objectives and  evaluation plans will inform decisions about scalability is critical to  providing information about the pilot\u2019s results. For example, at the end of  the pilot, VA and Congress will need clear information to make decisions  about whether the CHIP-IN donation approach could be extended beyond  a pilot program, if any changes could enhance the program\u2019s  effectiveness, or if particular lessons learned could be applied to VA  construction projects more broadly. Without clear information about  scalability, VA may be limited in its ability to communicate quality  information about the achievement of its objectives. Such communication  is part of the federal standards for internal control."], "subsections": []}, {"section_title": "VA Is Making Efforts to Improve Communication with Relevant Stakeholders", "paragraphs": ["We have reported that appropriate two-way stakeholder communication  and input should occur at all stages of the pilot, including design,  implementation, data gathering, and assessment. To that end, it is  critical that agencies identify who or what entities the relevant  stakeholders are and communicate with them early and often. This  process may include communication with external stakeholders and  among internal stakeholders. Communicating quality information both  externally and internally is also consistent with federal standards for  internal control.", "VA has begun to implement this practice, with generally successful  communication with the Omaha donor group. While VA has experienced  some external and internal communication challenges about the pilot,  officials have taken steps to help resolve some of these challenges.", "External communication. VA officials and representatives from the  Omaha donor group generally described excellent communication  between their two parties. For example, donor group representatives  told us that in-person meetings helped to establish a strong  relationship that has been useful in negotiating the donation  agreement and executing the project to date. Further, VA officials and  donor group representatives said that all relevant stakeholders\u2014such  as the donor group\u2019s construction manager, general contractor, and  architect, as well VA\u2019s engineer, project manager, and medical center  director\u2014were included in key meetings once the Omaha project  began, and said that this practice has continued during the  construction phase.", "Although the Omaha donor group reported overall effective relations  and communications with VA, donor group representatives noted that  additional public relations support from VA would have been helpful.  For example, after the CHIP-IN project was initiated in Omaha, the  donor group encountered a public relations challenge when news  reports about unauthorized waiting lists at the Omaha medical center  jeopardized some donors\u2019 willingness to contribute to the project.  While donor group representatives said this challenge was addressed  when the donor group hired a public relations firm, they also explained  that it would be helpful for VA headquarters to provide more proactive  public relations support to the local areas where future CHIP-IN  projects are located.", "VA officials stated that they experienced some initial challenges  communicating pilot requirements to external entities that are  interested in CHIP-IN donation partnerships, but officials said that in  response the agency has changed its outreach approach. As  discussed below, the donation commitment aspect of the pilot can be  a challenge. When interested entities contact VA to request  information on the CHIP-IN pilot, VA officials told us they find the  entities are often surprised by the donation commitment. For example,  two entities that responded to VA\u2019s RFI told us they were not clear  about the donation requirement or the expected level of donation, or  both. One respondent did not understand the pilot required a  donation and would not provide an opportunity for a financial return on  investment. Another respondent indicated that when they asked VA  for clarification about the expected project\u2019s scope, personnel from a  headquarters office and the local VA medical center could not fully  answer their questions. VA officials acknowledged these challenges  and said they have changed their outreach efforts to focus on certain  potential CHIP-IN locations, rather than RFIs aimed at a broader  audience. Further, VA officials said that when speaking with potential  donors going forward, they plan to involve a small group of officials  who are knowledgeable about the pilot and its donation approach.", "Internal communication. While VA initially experienced some  challenges in ensuring that all relevant internal stakeholders have  been included in the pilot\u2019s implementation, according to officials, the  agency has taken recent steps to address this concern and involve  appropriate internal offices. For example, officials from the Capital  Asset Management Office said they could have assisted ORP in  narrowing the list of potential projects in the RFIs but were not  consulted. Later, after revising the marketing approach, ORP reached  out to the Capital Asset Management Office and other relevant offices  for help in determining priority locations for additional CHIP-IN  projects, according to an ORP official. Officials from the Capital Asset  Management Office told us that with improved engagement they were  able to participate more actively in discussions about the pilot. In  addition, initial plans for the CHIP-IN steering committee did not  include VHA representation. However, in summer 2018 ORP  expanded the planned steering committee to include VHA  representatives, a plan that some other VA offices told us is needed to  ensure that the pilot addresses the agency\u2019s healthcare needs and  that VHA offices are informed about pilot efforts."], "subsections": []}]}, {"section_title": "CHIP-IN Pilot Suggests That Donation Partnerships Can Improve Project Implementation, but Challenges Include Identifying Donors and Establishing Responsibilities", "paragraphs": [], "subsections": [{"section_title": "VA and Omaha Donor Group Agree That the CHIP-IN Donation Approach and Private Sector Practices Have Improved the Omaha Project\u2019s Implementation", "paragraphs": ["Based on the experience with the Omaha project, the CHIP-IN donation  approach can result in potential cost and time savings\u2014through the  leveraging of private-sector funding, contracting, and construction  practices\u2014according to VA officials and the Omaha donor group.  Regarding cost savings, one VA official stated that using donations  makes VA\u2019s appropriated funds available to cover other costs. In addition,  based on the experience with the Omaha project, other VA officials told  us that a CHIP-IN project can potentially be completed for a lower cost  because of practices resulting from private sector leadership. Specifically,  VA estimated that the Omaha ambulatory care center would cost about  $120 million for VA to build outside of a donation partnership\u2014as a  standard federal construction project. Under the CHIP-IN pilot, however,  the total estimated cost of the Omaha facility is $86 million\u2014achieving a  potential $34 million cost savings. Regarding time savings, CHIP-IN  projects can potentially be completed at a faster pace because of the use  of certain private sector practices and because projects can be addressed  earlier than they otherwise would be, according to VA officials.", "The use of private-sector building practices can result in cost and time  savings in a number of ways, according to VA officials and the Omaha  donor group, as follows:", "The use of private-sector building standards contributed to cost  savings for the Omaha project, according to VA officials and donor  group representatives. VA and the donor group negotiated a  combination of industry and VA building standards. A CFM official told  us that using this approach and working with the private sector donor  group encouraged the design team to think creatively about the risk  assessment process and about how to meet the intent of VA\u2019s  physical security standards, but at a lower cost than if they were  required to build a facility using all of VA\u2019s building standards as  written. For example, when assessing the safety and physical-security  risk, the donor group and VA identified a location where two sides of  the facility will not have direct exposure to the public or roadway  traffic. Prohibiting exposure to roadways on two sides of the facility  will mean spending less money to harden (i.e., protect) the facility  against threats such as vehicular ramming. According to VA officials,  using the combined standards did not compromise security on the  Omaha project.", "Involving the general contractor early on in the design for the Omaha  project, an approach VA does not typically take, contributed to both  time and cost savings. VA officials told us that engaging the general  contractor during the project\u2019s design stage allowed the project to  begin more quickly and was also helpful in obtaining information about  costs and keeping the project within budget. However, VA officials  said that depending on the project and contracting method used, it  might not be possible to apply this contracting practice to VA  construction projects outside of the pilot program.", "A private-sector design review method helped to save time. The  Omaha donor group used a software package that allowed all design- document reviewers to simultaneously review design documents and  then store their comments in a single place. VA officials said this  approach was more efficient than VA\u2019s typical review method and cut  about 18 weeks from the project\u2019s timeline. VA officials also said use  of this software was a best practice that could be applied to VA  construction projects more broadly. In addition, the donor group and  VA employed fewer rounds of design reviews than VA typically uses;  this streamlining also helped to save time during the design process,  according to VA officials.", "Further, VA officials said that the CHIP-IN donation approach can allow  VA to address projects more quickly because they are addressed outside  of VA\u2019s typical selection and funding process. For example, VA officials  told us that because of the agency\u2019s current major construction backlog,  using the CHIP-IN donation approach allowed work on the Omaha project  to begin at least 5 years sooner than if the CHIP-IN approach had not  been used. The Omaha project\u2019s priority was low relative to other  potential projects, so that it was unlikely to receive additional funding for  construction for several years. For example, one agency official noted  that even if the project was at the top of VA\u2019s priorities, there is a backlog  of 20 major construction projects worth $5 billion ahead of it\u2014meaning  the Omaha project would probably not be addressed for at least 5 years.  VA officials also told us that as they consider future CHIP-IN projects,  they are looking for other projects that, like the one in Omaha, are  needed, but may not be a top priority given available funding and could  be moved forward with a private sector donation. In addition, use of the  CHIP-IN donation approach and decision to pursue an ambulatory care  center contributed to an earlier start on a project to address veterans\u2019  needs. However, as mentioned earlier, VA officials said that future  construction projects will be necessary to address some needs that were  part of the original replacement medical center plan."], "subsections": []}, {"section_title": "Stakeholders Agreed That Relying on Philanthropic Donations and Identifying Donors Is a Challenge to Establishing Pilot Partnerships", "paragraphs": ["A main challenge to establishing pilot partnerships is the reliance on large  philanthropic donations, according to VA officials, the Omaha donor  group, and RFI respondents. In general, the potential donor pool may not  be extensive given the size of the expected donations\u2014in some cases  tens or hundreds of millions of dollars\u2014and the conditions under which  the donations must be made. For example, as discussed earlier, VA  officials said that when interested entities contact them about the pilot,  they are often surprised by the donation commitment. When we spoke  with two entities that responded to VA\u2019s RFI, one told us that they \u201ccould  not afford to work for free\u201d under the pilot while another told us that  developers are more likely to participate in the pilot if they see an  incentive, or a return on their financial contribution. Also, VA officials told  us that some potential project locations have not received any  appropriations\u2014making the projects\u2019 implementation less appealing to  potential donors. The Omaha donor group noted that a VA financial  contribution at or above 50 percent of a project\u2019s estimated cost is  essential for demonstrating the agency\u2019s commitment and for leveraging  private-sector donations.", "To address challenges involving the philanthropic nature of the pilot, ORP  officials told us that VA has tried to identify strategies or incentives that  could encourage donor involvement. For example, the CHIP-IN steering  committee is considering what incentives might be effective to encourage  greater participation. One ORP official told us that such incentives could  include potential naming opportunities (that is, authority to name items  such as facility floors, wings, or the actual facility), although offering such  incentives may require changes in VA\u2019s authority. Further, because it  may be difficult to secure donations for larger, more costly projects, some  VA officials, donor group representatives, and one RFI respondent we  spoke to suggested that VA consider developing less costly CHIP-IN  projects\u2014giving VA a better chance of serving veterans by filling gaps in  service needs. Other VA officials, however, said they wanted to focus on  larger projects because the pilot allows only five projects.", "Another challenge is that VA generally does not possess marketing and  philanthropic development experience. VA officials told us that this makes  the inherent challenge of finding donors more difficult. While VA officials  have used the assistance of a nonprofit entity that has marketing  expertise, they also said that going forward it would be helpful to have  staff with relevant marketing and philanthropic development experience to  assist with identifying donors. VA officials said this expertise could  possibly be acquired through hiring a contractor, but funding such a hire  may be difficult within their existing resources."], "subsections": []}, {"section_title": "CHIP-IN Team Lacks Documented Roles and Responsibilities and Has Limited Available Staffing", "paragraphs": ["As discussed above, the CHIP-IN pilot presents an uncharted approach  to VA\u2019s implementation of projects, and using CHIP-IN has aspects of an  organizational transformation in property acquisition for the agency  because it leverages donation partnerships and streamlines VA\u2019s typical  funding process. We have found that a key practice of organizational  transformation includes a dedicated implementation team to manage the  transformation process  and that leading practices for cross-functional  teams include clear roles and responsibilities, and committed members  with relevant expertise. VA officials and Omaha donor group  representatives acknowledged that a dedicated CHIP-IN team could help  focus pilot implementation\u2014and that no such team existed within the  agency. ORP officials told us that the newly formed CHIP-IN steering  committee would provide the necessary leadership for pilot  implementation. They anticipate that a working group will be part of the  committee and serve as a dedicated team for the pilot. However, as  discussed below, roles and responsibilities have not been defined and  staff resource decisions have not been made.", "Clear and documented roles and responsibilities. Several VA officials  told us that responsibility for managing the overall pilot effort had not  been assigned, and that they had different interpretations of which office  had responsibility for leading the pilot. Some officials identified ORP as  the leader, while others thought it was CFM or the Center for Strategic  Partnerships. One CFM official told us that a clear definition of  responsibilities is needed under the pilot along with a dedicated office or  person with the ability to make decisions when an impasse across offices  exists. Similarly, a senior VHA official told us that leadership roles and  responsibilities for the pilot are not fully understood within the agency,  which has made establishing partnerships under the pilot a challenge. For  example, both VA officials and Omaha donor group representatives  identified the lack of a senior-level leader for the pilot as a challenge and  emphasized the need for strong pilot leadership going forward. Now that  a CHIP-IN steering committee is being formed to provide pilot leadership,  ORP officials intend to discuss committee members\u2019 roles and  responsibilities. This discussion was planned for the first committee  meeting but was rescheduled for the next meeting in October 2018. ORP  officials, however, told us that they do not expect to assign individual  members\u2019 roles and responsibilities until a future date. VA officials did not  have a timeline for when committee or individual members\u2019 roles and  responsibilities would be formally documented.", "ORP officials said that roles and responsibilities for the pilot have not  been defined because after enactment of the CHIP-IN Act, their first  priority was to engage the Omaha donor group and negotiate an agreement. Later, after the Omaha project was progressing, ORP officials  said they turned their attention to formalizing the pilot program and  identifying additional donation partnerships. While it is important to  concentrate on completion of individual projects, it is also important to  plan for the overall pilot\u2019s implementation\u2014to help ensure that the pilot\u2019s  purpose and goals are met and in a timely manner. We have found that  clarifying roles and responsibilities is an important activity in facilitating  strong collaboration and building effective cross-functional teams. In  addition, we have found that articulating roles and responsibilities is a  powerful tool in collaboration and that it is beneficial to detail such  collaborations in a formal, written document.", "Committed team members. Various VA offices and staff members have  worked on the CHIP-IN pilot in addition to their other responsibilities, but  several VA officials told us the resources currently dedicated to the pilot  are insufficient. During our review, an ORP official told us that two ORP  staff each spent about 4 to 6 hours per week on the pilot, as collateral  duties. However, since that time, one of these two staff members has left  the agency. A senior VA official told us that ORP and the Center for  Strategic Partnerships could each use two to three more dedicated staff  members to work solely on the pilot. While one ORP official said that  additional staff would likely be assigned after other CHIP-IN projects are  identified, a Center for Strategic Partnerships official said a specified  percentage of staff time should be dedicated now to identifying potential  donors. As mentioned above, VA officials told us they anticipate a  working group will be part of the CHIP-IN steering committee and will  serve as the dedicated team to implement the pilot. However, VA has not  yet documented how it will staff the working group, including how it will  obtain the needed expertise within its existing resources.", "According to one VA official, staff had not been initially dedicated to the  pilot because the CHIP-IN Act did not provide resources to fund a  dedicated team for the pilot, so VA has needed to implement the pilot  within its existing resources. This VA official also told us that they were  not certain VA could support a dedicated team with existing resources.  Another official indicated that VA would need to consider how to  incorporate CHIP-IN into the agency\u2019s operations if the pilot program  were expanded beyond the initial pilot and then dedicate needed resources. Dedicating a strong and stable implementation team is  important to ensuring that the effort receives the focused, full-time  attention needed.", "Team members with relevant knowledge and expertise. As previously  discussed, VA officials told us that it would be helpful for a CHIP-IN team  to include stakeholders with certain expertise, such as marketing and  philanthropic development experience. In addition, representatives from  the Omaha donor group said going forward, proactive public relations  expertise is needed from VA headquarters (in particular, for external  communications outside of the partnership) to quickly and positively  address any incidents that could negatively impact VA\u2019s ability to  encourage donor participation in the pilot at the local level. For example,  in the event of critical news reports about a local VA facility, such as what  occurred in Omaha, donor group representatives said that additional  public relations support would be helpful. VA officials also told us that a  CHIP-IN team should be a collaborative effort across several offices.  Specifically, one senior VA official said a cross-functional team with  representation from ORP, CFM Operations, the Center for Strategic  Partnerships, VHA, and the Office of Asset Enterprise Management  (which has budget and finance expertise) would be useful in focusing and  implementing the pilot. Leading practices for cross-functional teams  include having members with a wide diversity of knowledge and  expertise.", "Having a dedicated team or working group that consists of committed  members with clear roles and responsibilities could assist VA in  implementing the CHIP-IN pilot. For example, the working group could  focus time and attention on strengthening design of the pilot program as a  whole, instead of implementing projects on a piecemeal basis. Further,  clearly identifying and documenting roles and responsibilities could help  relevant stakeholders define and agree upon pilot objectives as well as an  assessment methodology and evaluation plan. In addition, including  stakeholders with relevant expertise on the dedicated team may assist VA  in identifying viable projects and negotiating partnership agreements  more readily."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The CHIP-IN pilot is a unique, time-limited opportunity for VA to test a  new way of building needed medical facilities by using non-federal  funding sources\u2014donors\u2014to leverage federal funds. Though the first  project is still under way, stakeholders have already noted benefits of the  donation partnership approach, including potential cost and time savings  as well as learning about private sector practices that could be applied  more broadly to VA construction. However, VA is not yet collecting the  information it needs to support decisions by VA or Congress about the  pilot. Without a strengthened pilot design\u2014including measurable  objectives, an assessment methodology, and an evaluation plan\u2014that  can help inform decisions about the scalability of the pilot, it may not be  clear to VA and Congress whether the CHIP-IN approach could be part of  a longer-term strategy or how lessons learned could enhance other VA  construction efforts. While leadership for the pilot had not been previously  assigned, a newly formed CHIP-IN steering committee is meant to focus  on the pilot\u2019s implementation. Defining and documenting roles and  responsibilities for this committee\u2014and identifying the resources needed  to effectively implement the pilot\u2014could assist VA in partnering with  additional donors and creating new opportunities to meet the urgent  needs of veterans."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to VA.", "The Secretary of VA should ensure that internal stakeholders\u2014such  as the CHIP-IN steering committee\u2019s members\u2014agree to and  document clear, measurable objectives for the CHIP-IN pilot that will  help inform decisions about whether and how to scale the program.  (Recommendation 1)", "The Secretary of VA should ensure that internal stakeholders\u2014such  as the CHIP-IN steering committee\u2019s members\u2014develop an  assessment methodology and an evaluation plan that are linked to  objectives for the CHIP-IN pilot and that help inform decisions about  whether and how to scale the program. (Recommendation 2)", "The Secretary of VA should ensure that the CHIP-IN steering  committee documents the roles and responsibilities of its members  and identifies available staff resources, including any additional  expertise and skills that are needed to implement the CHIP-IN pilot  program. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for comment. In its written  comments, reproduced in appendix I, VA concurred with our  recommendations and stated that it has begun or is planning to take  actions to address them. VA also provided a general comment on the role  of VHA in the CHIP-IN pilot, which we incorporated in our report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, 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 regarding this report, please  contact me at (213) 830-1011 or vonaha@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Vetera ns Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Cathy Colwell (Assistant  Director), Kate Perl (Analyst in Charge), Melissa Bodeau, Jennifer  Clayborne, Peter Del Toro, Shirley Hwang, Terence Lam, Malika Rice,  Crystal Wesco, and Elizabeth Wood made key contributions to this report."], "subsections": []}]}], "fastfact": ["A 2016 law allows a VA pilot program to accept donations for facility construction or improvements. In Omaha, Nebraska, one donor group\u2014in consultation with the VA\u2014is building an ambulatory care center. The VA and the donor group said this project is proceeding faster and at a lower cost than a typical VA project. However, VA officials said it is hard to find partners to make large donations.", "We made 3 recommendations, including ways to make the program's steering committee more effective at finding partners."]}
{"id": "GAO-18-76", "url": "https://www.gao.gov/products/GAO-18-76", "title": "Small Business Contracting: SBA Efforts May Clarify the Assignment of Industry Codes, and Most Code Appeals Were Dismissed", "published_date": "2017-12-05T00:00:00", "released_date": "2018-01-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal regulations require that contracting officers assign the NAICS code that best describes the principal purpose of the acquisition. SBA's OHA is responsible for reviewing appeals of NAICS code assignments. Questions have been raised about whether agencies assign the appropriate NAICS codes to ID/IQ contracts with multiple task orders.", "GAO was asked to review several issues related to NAICS codes. In this report, GAO examines (1) what contracting officers consider when assigning NAICS codes to federal contracts and the status of efforts to clarify code assignment and (2) industry views on NAICS code assignment and the number and outcomes of appeals.", "GAO reviewed policies and procedures of the four agencies with the highest ID/IQ obligations from fiscal years 2011\u20132015: Army, Navy, Department of Homeland Security (DHS), and Department of Health and Human Services (HHS); reviewed one contract and 10 related task orders at each of the selected agencies and interviewed the related contracting officers; analyzed 2016 federal contracting data to identify commonly used NAICS codes and size standards; interviewed three industry groups and five firms that filed appeals for industry views on NAICS code assignment; and analyzed SBA decisions on NAICS code appeals in 2014\u20132016.", "The Department of Defense, DHS, and SBA had no comments on the report. The General Services Administration and HHS had technical comments, which we incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies' contracting officers consider various factors in assigning North American Industry Classification System (NAICS) codes to federal contracts, and the Small Business Administration (SBA) issued a rule in 2013 intended to clarify NAICS code assignment. NAICS codes are the basis for SBA's size standards; therefore, the code that the contracting officer assigns determines whether a firm is eligible for federal contracting preferences, such as small business set-asides. The contracting officers GAO interviewed cited several factors that affect their assignment of NAICS codes, including information on the work to be performed and input from agency small business specialists. However, they stated that assigning a NAICS code can be challenging when one or more codes could apply to a contract. In the 2013 rule, SBA clarified that under certain circumstances, contracting officers may assign more than one code to multiple-award contracts. Such contracts are awarded to two or more contractors under a single solicitation and include indefinite delivery/indefinite quantity (ID/IQ) contracts used when quantities and timing are not known at the time of the award. However, updates to the Federal Acquisition Regulation (FAR)\u2014the rules governing the federal government's purchasing process\u2014are required to fully implement SBA's final rule. The agencies GAO interviewed plan to implement this rule after it is adopted into the FAR and they can make necessary updates to their information technology for contracting. This FAR rule-making process is ongoing.", "Some industry groups and firms GAO interviewed expressed concerns about how contracting officers assign NAICS codes, but SBA's Office of Hearings and Appeals (OHA) dismissed most appeals and denied more than half of the remaining appeals. Some industry groups and firms GAO interviewed expressed concerns that contracting officers may assign NAICS codes based on the size standard (thereby affecting the number of firms that can compete as a small business) and not the work to be performed. However, some also stated it was difficult to determine how often this practice occurs, and OHA officials noted it is the office's role to review the appropriateness of appealed NAICS codes, not the contracting officer's intention when assigning the code. Of the 62 NAICS code appeals that were filed in calendar years 2014\u20132016, OHA dismissed 35, denied 15, and granted 12 (see fig.). Appeals were dismissed because, among other things, they were untimely or the contracting officer cancelled the acquisition."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2016, about $100 billion in federal contracts were awarded  to small businesses. The Small Business Administration (SBA) uses the  North American Industry Classification System (NAICS), the federal  standard for classifying businesses by industries, as the basis for its small  business size standards. Size standards determine eligibility for receiving  federal contracting preferences, such as small business set-asides. The  Federal Acquisition Regulation (FAR)\u2014the principal set of rules  governing the federal acquisition process\u2014requires that contracting  officers assign the NAICS code that best describes the principal purpose  of the product or service being acquired. The contracting officer\u2019s code  assignment is final unless SBA or an affected firm files an appeal. SBA\u2019s  Office of Hearings and Appeals (OHA) reviews appeals of NAICS code  assignments.", "Questions have been raised about the extent to which contracting officers  choose a NAICS code because they want a certain size standard, not  because it best describes the principal purpose of the acquisition.  Questions have also been raised about the assignment of NAICS codes  to indefinite delivery/indefinite quantity (ID/IQ) contracts, which are  awarded to one or more firms for the same or similar products or services  and are used when the exact times and quantities of future deliveries are  not known at the time of award. These contracts may consist of multiple  awards and orders, and one concern is that the NAICS code assigned to  a contract may not represent the work performed under the majority of the  orders.", "You asked us to review several issues related to NAICS codes. In this  report, we examine (1) what contracting officers consider when assigning  NAICS codes to federal contracts and the status of efforts to clarify code  assignment and (2) industry views on NAICS code assignment and the  number and outcomes of appeals filed with SBA OHA.", "For our first objective, we reviewed federal laws and regulations related to  NAICS code assignment and relevant policies and procedures from the  four agencies with the highest ID/IQ obligations from fiscal years 2011\u2013 2015 (the 5 most recent years of data available from the Federal  Procurement Data System-Next Generation (FPDS-NG) when we began  our review): Army, Navy, Department of Homeland Security (DHS), and  Department of Health and Human Services (HHS). To understand how  these selected agencies assign NAICS codes to contracts, we reviewed  contract documentation, such as acquisition plans and market research  documents, for one ID/IQ contract from each of the agencies and  interviewed the relevant contracting officers, small business specialists,  and SBA procurement center representatives (PCR). We also selected  and reviewed 10 orders from each contract and compared the order  purposes to the base award purposes. To determine the status of  ongoing efforts to clarify code assignment, we reviewed proposed and  final regulatory changes and interviewed officials at SBA and the General  Services Administration (GSA) (the agency responsible for managing the  operation, maintenance, and updating of FPDS-NG). To assess the  reliability of the FPDS-NG data we used, we conducted electronic testing  for missing data, outliers, and inconsistent coding, and compared the data  on selected contracts to contract documentation we obtained. We  determined that these data were sufficiently reliable for the purposes of  determining ID/IQ obligations and identifying trends in NAICS codes  assigned (as discussed below).", "For our second objective, we interviewed officials from three industry  groups and five firms that filed NAICS code appeals during calendar  years 2014\u20132016 (the 3 most recent years of data available). To identify  commonly used NAICS codes and commonly used size standards, we analyzed data from FPDS-NG to identify the top NAICS codes by  obligations and by number of contracts awarded in fiscal year 2016. To  assess whether contracting officers were more likely to use a NAICS  code after the corresponding size standard increased, we analyzed  FPDS-NG data on fiscal year 2009\u20132016 obligations and number of  contracts awarded for NAICS codes with size standards that SBA  increased in 2012. To understand SBA OHA\u2019s process for reviewing  NAICS code appeals, we reviewed federal regulations and interviewed  OHA officials. For context, we compared OHA\u2019s process for NAICS codes  appeals to its processes for other types of appeals. To identify the  number and outcomes of NAICS code appeals, we analyzed SBA\u2019s OHA  decisions on NAICS code appeals filed during calendar years 2014\u20132016.  Appendix I provides additional details on our scope and methodology.", "We conducted this performance audit from October 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based in our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "NAICS Codes and SBA\u2019s Size Standards", "paragraphs": ["The Economic Classification Policy Committee of the Office of  Management and Budget (OMB), Statistics Canada, and Mexico\u2019s  Instituto Nacional de Estadistica y Geografia developed NAICS codes as  a standard for collecting and analyzing data describing the economies of  North American countries. The U.S Census Bureau assigns a 6-digit  NAICS code to each industry based on its primary activity that generates  the most revenue. The Economic Classification Policy Committee  reviews NAICS codes every 5 years for potential revisions to ensure the  relevance, accuracy, and timeliness of the classifications.", "Additionally, SBA uses NAICS codes as the basis for its small business  size standards. The Small Business Act authorizes SBA to establish size  standards for determining eligibility for federal small business assistance,  including contracting preferences. Size standards vary by industry and  are generally expressed either as the average number of employees over  a 12-month period or the average annual receipts in the previous 3  years. For certain codes, there are more than one size standard. SBA  refers to these additional size standards as exceptions. For example,  NAICS code 541712 (Research and Development in the Physical,  Engineering, and Life Sciences, Except Biotechnology) with a general  size standard of 1,000 employees has three exceptions related to aircraft  and aircraft engines (1,500 employees), other aircraft parts (1,250  employees), and guided missiles and space vehicles (1,250 employees).  The Small Business Jobs Act of 2010 requires SBA to review at least  one-third of all size standards during every 18-month period from the date  of its enactment and to review all size standards at least every 5 years.  SBA has completed the first 5-year review of all size standards.", "To help ensure that small businesses receive a share of federal  procurement contract dollars, Congress has set an annual government- wide goal of awarding not less than 23 percent of prime contract dollars to  small businesses. For firms to compete for government contracts set  aside for small businesses, these firms have to meet the small business  size standard for the procurement and have the capacity to provide the  goods and services."], "subsections": []}, {"section_title": "Indefinite Delivery/Indefinite Quantity (ID/IQ) Contracts", "paragraphs": ["ID/IQ contracts provide flexibility in cases where the government cannot  determine the exact quantities and required timing for a product or  service. We found in 2017 that from fiscal years 2011 through 2015, the  proportion of spending by federal agencies on ID/IQ contracts remained  stable and accounted for about a third (more than $130 billion annually) of  total government contract obligations. Contracting officers may award  either a single-award or multiple-award ID/IQ contract to meet  procurement needs. Single-award ID/IQ contracts refer to situations when  only one contract is awarded under a solicitation and are used in certain  circumstances such as when only one contractor is capable of providing  the product or service. Multiple-award ID/IQ contracts refer to situations  when contracts are awarded to two or more contractors under a single  solicitation. The FAR contains policies for using multiple-award ID/IQ  contracts and states a preference for multiple-award (rather than single- award) ID/IQ contracts."], "subsections": []}, {"section_title": "NAICS Code Assignment and Acquisition Process", "paragraphs": ["Contracting officers have the authority to enter into, administer, or  terminate contracts and are responsible for assigning the appropriate  NAICS code and corresponding size standard to an acquisition. The  FAR requires that contracting officers assign the NAICS code that best  describes the principal purpose of the acquisition and states that the  contracting officer\u2019s assignment of the NAICS code is final unless a  person adversely affected by the decision or SBA files an appeal. The  FAR states that when selecting the NAICS code, contracting officers are  to give primary consideration to the industry descriptions in the NAICS  Manual, the product or service description in the solicitation, the relative  value and importance of the components of the procurement making up  the end item being procured, and the function of the goods or services  being purchased. It also notes that a procurement is usually classified  according to the component that accounts for the greatest percentage of  contract value.", "In addition to the contracting officer, a number of agency officials and  offices provide input on the assignment of NAICS codes to federal  contracts during different phases of the acquisition process  (presolicitation, pre-award, and award) (see fig. 1).", "Presolicitation phase. The program office identifies a need and  contacts the contracting officer for guidance on developing and  preparing key acquisition documents, such as the market research  report and acquisition plan. The contracting officer and program  office may also seek advice from the small business specialist and  assigned PCR. After the approval of the procurement request, the  contracting officer and program office work together to revise planning  documents as necessary. Also during the presolicitation phase, the  contracting officer coordinates with agency small business specialists  and SBA\u2019s assigned PCR using a small business coordination form.  The contracting officer then publishes the presolicitation notice to  summarize proposed contract actions.", "Pre-award phase. After the approval of the NAICS code, the  contracting officer publishes the solicitation, which specifies the  assigned NAICS code and corresponding size standard.", "Award phase. The agency awards the contract and publishes the  award notice. Agencies use their contracting writing systems to  execute the acquisition life-cycle from planning to contract award and  use FPDS-NG to report contract awards.", "Firms interested in challenging a NAICS code assigned to a solicitation  may file an appeal with SBA OHA. OHA was established in 1983 and is  responsible for reviewing appeals of NAICS code assignments. OHA also  reviews appeals of certain SBA program decisions such as size  determinations; eligibility determinations for service-disabled veteran- owned (SDVO) small businesses, women-owned small businesses  (WOSB), and economically disadvantaged women-owned small  businesses (EDWOSB); and 8(a) business development program  eligibility determinations, suspensions, and terminations."], "subsections": []}]}, {"section_title": "Contracting Officers Consider Various Factors When Assigning NAICS Codes, and SBA\u2019s 2013 Rule Provides Additional Guidance for Multiple-Award Contracts", "paragraphs": [], "subsections": [{"section_title": "Contracting Officers Consider Several Factors When Assigning NAICS Codes", "paragraphs": ["Officials at the Army, the Navy, DHS, and HHS stated that contracting  officers refer to the FAR when assigning NAICS codes and consider a  variety of factors. Additionally, in 2010 the Department of Defense (DOD)  disseminated a memorandum to its components, which include the Army  and the Navy, reiterating the process for determining the size status of  contractors, including the requirement that contracting officers determine  the appropriate NAICS code and related small business size standard  and include them in solicitations. Although these agencies did not have  training that specifically focused on NAICS codes, the training for  contracting officers included discussion of NAICS code assignment.", "Contracting officers at these four agencies cited several factors, including  a contract\u2019s scope of work, that are involved in determining the NAICS  code for a contract solicitation or an order:", "Statements of work and market research reports. The contracting  officers we interviewed at all four agencies stated that they review the  statements of work and assign the code that represents the majority  of the work. One contracting officer stated that she also reviews the  market research report when assigning the NAICS code. All of the  contracting officers we interviewed at the four agencies stated that the  market research reports usually include the relevant NAICS code. We  found evidence of market research for two of the four contracts that  we reviewed and found that the market research reports included the  NAICS codes assigned to the contracts. Navy and HHS contracting  officers were unable to provide evidence of market research for the  contracts included in our review. Navy officials stated that the  contracting team conducted market research but was unable to find  copies of the documents. The HHS contracting officer stated that he  conducted market research for the contract, but did not document it in  a market research report. Instead, he noted in the small business  coordination form that he reviewed prior or similar acquisitions as part  of efforts to locate small business sources.", "Input from small business specialists. These four agencies\u2019  contracting officers consult with their agencies\u2019 small business  specialists when deciding the NAICS code for a contract. Each of the  four agencies we reviewed required their contracting officers to  complete small business coordination forms prior to issuing  solicitations for their agencies. When completing the forms,  contracting officers must include the NAICS code designation and the  corresponding size standard. Small business specialists must review  the form before the contracting officer can issue the solicitation. All  four agencies provided small business coordination forms related to  the selected contract we reviewed. Additionally, each form included  the signature of the small business specialist and listed the NAICS  code and size standard, as required.", "All four of the agencies\u2019 small business specialists we interviewed  stated that they rarely disagreed with contracting officers on NAICS  code assignments. They also noted that they coordinate with  contracting officers on the NAICS code early in the acquisition  process, for example, during market research. If they are unable to  reach agreement on the code assignment, the specialists can elevate  their concerns to the SBA PCR assigned to the office. According to  SBA officials, the PCR will examine the research and either concur  with the decision or file an appeal to the contracting officer. None of  the specialists we interviewed had elevated any concerns to their  PCR.", "Contract writing system requirements. The contracting officers we  interviewed at all four agencies stated that they assign a single NAICS  code for each solicitation, including for multiple-award contracts,  because their contract writing systems and FPDS-NG do not allow  them to enter more than one code per contract. While acquisition  officials at each agency confirmed that contracting officers can assign  only one code per multiple-award contract in their contract writing  systems, they noted that contracting officers may list multiple codes  for a multiple-award contract in the solicitation.", "Codes assigned to other contracts. Contracting officers we  interviewed at all four agencies stated that if the solicitation is for a  recurring contract, they refer to the previously assigned code. Two  of the four contracting officers also consider the codes assigned to  other contracts within their agencies that consisted of similar work.", "The purpose of the order. To issue an order under a contract, the  purpose of the order must be within the scope of the underlying base  contract. The four contracts we reviewed all had one NAICS code.  The contracting officers we interviewed at all four agencies stated that  if an order did not relate to the base award\u2019s statement of work or  NAICS code, they would award the order through another existing  contract or award a new contract. We reviewed 10 orders from each  of the four selected contracts and found that all 40 of the orders  appeared to reflect the purpose of the base award and appeared to  relate to the assigned NAICS code.", "However, the contracting officers we interviewed at two of the four  agencies noted some challenges in assigning NAICS codes. They stated  that because NAICS code definitions are broad, sometimes more than  one code could be assigned to a solicitation. In reviewing the 40 orders  associated with the four contracts we selected, we noted that in some  instances more than one code could appear to apply to a contract. For  example, the purpose of one order was to provide recommendations on  design, testing, and evaluation in support of engineering activities. We  found that this order could relate to the Research and Development in the  Physical, Engineering, and Life Sciences (Except Biotechnology) code  that was assigned as well as to the Engineering Services code because  both include studies and development using engineering sciences. One  contracting officer also noted that assigning the NAICS code is subjective  and two different contracting officers could review the same contract and  find different codes to be appropriate. We also noted this in reviewing our  sample of orders. We found that some orders had similar purposes but  were assigned different NAICS codes with different corresponding size  standards. For example, as shown in table 1, we found two orders related  to the installation of closed-circuit TV systems that had different NAICS  codes.", "Three of the four contracting officers we interviewed stated that there are  no unique challenges associated with assigning NAICS codes to ID/IQ  contracts compared to other contracts. However, one small business  specialist noted that assigning NAICS codes to ID/IQ contracts may be  challenging for contracting officers because the statements of work may  cover more than one code. One contracting officer we interviewed also  stated that it can be challenging to assign NAICS codes to ID/IQ contracts  because it is difficult to predict the nature of future orders associated with  the base award, especially for research and development contracts."], "subsections": []}, {"section_title": "SBA\u2019s 2013 Rule May Clarify NAICS Code Assignments on Multiple- Award Contracts", "paragraphs": ["In 2013, SBA issued a rule on assigning NAICS codes to multiple-award  contracts that may further clarify code assignment for contracting officers.  The purpose of the rule was to implement the Small Business Jobs Act of  2010, which amended the Small Business Act to allow small business  set-asides for parts of multiple-award contracts, for orders placed against  multiple-award contracts, and for reserving one or more contract awards  for small business concerns. The final rule clarifies that if a multiple- award contract consists of discrete categories, contracting officers may  assign a different NAICS code and corresponding size standard to each  category. Additionally, under the final rule, contracting officers may issue  orders under each category as long as the category\u2019s NAICS code  matches the order\u2019s NAICS code. SBA officials stated that they  developed the rule because contracting officers were unclear on how to  assign NAICS codes to orders from multiple-award contracts.", "Updates to the FAR and FPDS-NG are required to fully implement the  portion of SBA\u2019s final rule related to NAICS codes. In a 2016 proposed  rule to update the FAR, DOD, GSA, and the National Aeronautics and  Space Administration (NASA) proposed changes to implement SBA\u2019s  2013 rule and stated that enhancements to federal data systems were in  process. In June 2017, GSA officials told us that updates to FPDS-NG  would be required because the system does not currently allow agencies  to assign a NAICS code to an order that differs from the code assigned to  the base contract. They also told us that GSA was working on a new  version of FPDS-NG that would allow contracting officers to assign  NAICS codes to orders that differ from the code assigned to the base  contract. SBA officials told us that this planned change would be  responsive to their rule. As of mid-November 2017, the final FAR rule had  not been issued, and updates to FPDS-NG will depend on the final rule.  The four agencies we interviewed were aware of SBA\u2019s 2013 final rule  and the 2016 proposed update to the FAR, and stated they would apply  the guidance in the rule and update their contract writing systems once  the FAR update was finalized."], "subsections": []}]}, {"section_title": "Some Stakeholders Expressed Concerns about NAICS Code Assignments, but Few Appeals Have Been Filed", "paragraphs": [], "subsections": [{"section_title": "Some Industry Groups and Firms Expressed Concern That Contracting Officers Assign NAICS Codes Based on Size Standards", "paragraphs": ["Some of the stakeholders we interviewed\u2014three industry groups and five  small businesses that had filed NAICS code appeals (appellants)\u2014 expressed concern that some contracting officers assign NAICS codes  because they want specific size standards, not because they are the most  appropriate codes, but several also stated it was difficult to determine  how often this occurs. Specifically, the three industry groups and four of  the five appellants we interviewed contended that contracting officers in  some instances assign NAICS codes that allow them to make an award  to a firm that would not be considered a small business under the  \u201cappropriate\u201d code. Conversely, an official of one firm we interviewed told  us that contracting officers in some instances assign NAICS codes with  smaller size standards to limit competition for a contract. Because  agencies have a federal mandate to meet small business contracting  goals, contracting officers are required to provide maximum practicable  opportunity to award contracts to small businesses in support of those  goals.", "The following are specific concerns that industry groups and firms  expressed:", "Ambiguous and overlapping language. An official from one firm  told us that the language in the NAICS Manual can be ambiguous and  noted overlap in the descriptions of certain codes with different size  standards. For example, NAICS codes 541330 (Engineering Services)  and 541712 (Research and Development in the Physical, Engineering  and Life Sciences except Biotechnology) both include engineering,  but have different size standards ($15 million and 1,000 employees,  respectively). An official from another firm stated that the broad  NAICS code descriptions result in solicitations that describe identical  work having different NAICS codes and size standards. One industry  group official stated that the practice of assigning a code based on the  size standard and not the principal purpose is particularly a concern  for research and development, professional services, and construction  contracts. The definitions of the NAICS codes for these industries are  broad and there is some overlap. For example, the Professional,  Scientific, and Technical Services sector (Sector 54) includes  research and development, engineering, legal and accounting, and  computer systems design services, among other services. The  Construction sector (Sector 23) also includes engineering services in  addition to housing construction, water and sewer line construction,  and plumbing and heating contractors.", "Preference for incumbent. Officials from two firms we interviewed  told us that when recompeting an existing contract, the contracting  officer may choose the NAICS code that best positions the incumbent  company to compete rather than the code that best represents the  work. Officials of one of these firms also stated that they are  concerned when the NAICS code assigned to an existing contract that  is being recompeted has changed and, in their opinion, the body of  work to be performed under the new contract remains the same as  the existing contract.", "Need to select multiple NAICS codes. In addition, one firm we  interviewed stated that it is difficult to predict the code that a  contracting officer will use for a procurement. Therefore, the firm  selects multiple NAICS codes in its SAM entity registration so  contracting officers will consider it for a variety of contracts. The other  four firms we interviewed also told us that they selected multiple  NAICS codes in SAM. As shown in table 2, a hypothetical firm that  has 450 employees and revenue of $200 million would be a small  business under some NAICS codes and large under other codes.  Certain NAICS codes such as 541330 (Engineering Services) have  exceptions to accommodate military procurement needs.", "However, one industry group and some firms stated that it is difficult to  determine how often the practice of assigning a code based on the size  standard and not the principal purpose occurs. Industry groups and firms  also acknowledged that other factors could lead to the assignment of  inappropriate NAICS codes. For example, one industry group official  stated that human error, not ill intentions, may lead to the assignment of  inappropriate codes. In addition, two firms we interviewed cited the  inexperience of some contracting officers as a cause. One of these firms  also noted that there could be legitimate disagreements about the  appropriate NAICS code because individuals can perceive the nature of  the work differently, including what is the preponderance of work to be  performed. Another industry group official noted that the intended use of  NAICS codes is for statistical purposes, not procurement, and as a result,  the codes do not always align with procurement needs and the  contracting marketplace. OHA officials acknowledged that assigning  codes based on size standards may occur, but noted that it is OHA\u2019s role  to review the appropriateness of appealed NAICS code assignments, not the contracting officer\u2019s intention behind assigning the code. As discussed  in more detail later in this report, the standard for OHA\u2019s review is  whether the NAICS code designation was based on clear error of fact or  law.", "When we shared stakeholders\u2019 concerns about the assignment of NAICS  codes with officials at the four agencies we reviewed and SBA, officials at  three of the five agencies told us that they did not agree with some of the  concerns. For example, DHS officials said that some of the  observations\u2014particularly the statement that contracting officers may  assign the NAICS code that best positions the incumbent company to  compete for the contract\u2014were unfair and could be taken out of context.  HHS officials told us they did not believe that contracting officers at HHS  assign NAICS codes because they want specific size standards. SBA  officials also questioned the stakeholders\u2019 statements and pointed to the  results of NAICS code appeals as an indication that the practice of  assigning NAICS codes based on the size standard was not widespread.", "In addition, we analyzed the use of NAICS codes from fiscal years 2009\u2013 2016 to determine whether contracting officers used NAICS codes whose  size standard increased in 2012 more often than codes whose size  standard did not increase. We selected three sectors with size standard  increases in 2012 (Sectors 48\u201349 and 54) for this analysis because these  sectors were among the first that SBA reviewed and adjusted.  We  found that the proportion of obligations and new contracts, respectively,  related to NAICS codes with size standards that increased in 2012  remained relatively consistent for Sector 54 and increased for Sectors  48\u201349 after the size increase. See appendix II for more details."], "subsections": []}, {"section_title": "SBA\u2019s Process for NAICS Code Appeals Includes Expediting Them", "paragraphs": ["According to OHA officials, OHA expedites NAICS code appeals over  other appeals it receives, issuing the decision as soon as practicable  because the decision is effectively moot if it is not made before offers are  due. They stated that the NAICS code appeal process takes an average  of 18 to 30 days to complete, depending on the complexity of the appeal.  SBA\u2019s process for NAICS code appeals includes (1) determining if appeals are timely and within OHA\u2019s jurisdiction, (2) determining if the  appellant is adversely affected by the assignment, and (3) expediting  NAICS code appeals that are accepted. Interested parties filing a NAICS  code appeal do not have to follow a particular format, but the appeal must  include the following information: the solicitation or contract number; the  name, address, and telephone number of the contracting officer; a full  and specific statement as to why the NAICS code designation is alleged  to be in error, and argument in support of such allegations; and the name,  address, and telephone number of the appellant or its attorney.", "Once an appeal is filed, an administrative judge is assigned to adjudicate  it. The judge issues a Notice and Order informing the parties of the filing  of the appeal petition, establishing the close of record as 15 days after  service of the Notice and Order, and informing the parties that OHA must  receive any responses to the appeal petition no later than the close of  record. Upon receiving notice of the appeal, the contracting officer must  place a hold on the solicitation; inform the public about the appeal and the  procedures and deadline for interested parties to submit arguments  concerning the appeal; and send OHA copies of the solicitation and  inform them of any amendments, actions, and developments concerning  the procurement in question. When reviewing NAICS code appeals, the  judge first considers whether the appeal is timely and within OHA\u2019s  jurisdiction. SBA regulations define timely appeals as those that are filed  within 10 calendar days after issuance of the solicitation or amendment to  the solicitation affecting the NAICS code. According to OHA officials,  because the office has jurisdiction over small businesses only, large  businesses cannot file appeals. If the appeal is untimely or outside OHA\u2019s  jurisdiction, the appeal is dismissed.", "If the appeal is not dismissed, OHA officials told us the judge then  reviews the NAICS Manual, SBA regulations on size standards, OHA  precedent, and the written records to make a final and independent  decision. The standard of review is whether the NAICS code designation  was based on clear error of fact or law. If there was no clear error of fact  or law, OHA will deny the appeal. If it finds a clear error of fact or law,  OHA will grant the appeal (see fig. 2).", "We found that OHA\u2019s process for reviewing NAICS code appeals is  generally similar to other types of OHA appeals (see table 3). For  example, NAICS code appeals and other SBA appeals generally must be  filed by an interested party that has been adversely affected. In addition,  NAICS code appeals and some other SBA appeals must be filed within  10 calendar or business days. NAICS code appeals are different from  other SBA appeals in that OHA is adjudicating an action taken by a  contracting agency as opposed to a determination made by an SBA  official.", "Four of the five firms (appellants) that we interviewed to discuss their  experience with NAICS code appeals were generally satisfied with the  appeals process. Of the five appellants, four used a legal counsel and  expressed general satisfaction with the time frames for filing a NAICS  code appeal. Four of the five appellants noted that filing within the 10  calendar days was not a challenge, two of them indicating that they had  known about the code for some time because it was included in the  agency\u2019s request for information or proposals. Three of the four firms that  used a legal counsel also told us the NAICS code filing process was  straightforward. However, the remaining appellant said that 10 calendar  days was not enough time. In addition, two appellants noted that firms  may not file appeals because they are concerned that filing an appeal will  affect their ability to receive future awards from the contracting officer."], "subsections": []}, {"section_title": "Few NAICS Code Appeals Were Filed, and Most Were Dismissed or Denied", "paragraphs": ["Of the 62 NAICS code appeals filed during calendar years 2014\u20132016,  the majority were dismissed or denied. During this same time period,  approximately 1.4 million new federal contracts were awarded, and 284  other types of appeals were filed with OHA.", "The majority of NAICS code appeals were dismissed, and less than half  of the remaining appeals were granted (see fig. 3).", "Thirty-five appeals were dismissed for procedural reasons. For  example, OHA dismissed NAICS code appeals that were not filed  before the 10 calendar day deadline.", "Fifteen appeals were denied, meaning that OHA determined that the  NAICS code designation was not based on a clear error of fact or law.", "Twelve appeals were granted, meaning that OHA determined that the  NAICS code designation was based on a clear error of fact or law."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We requested comments from DOD, DHS, GSA, HHS, and SBA on a  draft of this report. DOD, DHS, and SBA had no comments on the draft  report. GSA and HHS provided technical comments, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to DOD, DHS,  GSA, HHS, and SBA and appropriate congressional committees. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what contracting officers consider when  assigning North American Industry Classification System (NAICS) codes  to federal contracts and the status of efforts to clarify code assignment  and (2) stakeholder views on NAICS code assignment and the number  and outcomes of appeals filed with the Small Business Administration\u2019s  (SBA) Office of Hearings and Appeals (OHA).", "For our first objective, we reviewed federal laws and regulations related to  NAICS code assignment and relevant policies and procedures from the  four agencies with the highest indefinite delivery/indefinite quantity (ID/IQ)  contract obligations from fiscal years 2011\u20132015 (the 5 most recent years  of Federal Procurement Data System-Next Generation (FPDS-NG) data  available when we began our review): Army, Navy, Department of  Homeland Security (DHS), and Department of Health and Human  Services (HHS). These agencies accounted for approximately $347  billion in obligations and 47 percent of all ID/IQ obligations in fiscal years  2011\u20132015. To understand how these selected agencies assign NAICS  codes to contracts, we reviewed contract documentation, such as  acquisition plans and market research documents, for one ID/IQ contract  from each of the agencies (see table 4).", "We selected the four contracts we reviewed based on (1) whether they  had small business set-asides, (2) the NAICS code, and (3) the number  of orders. We selected contracts to obtain a mix of assigned NAICS  codes and corresponding size standards. We selected contracts awarded  in fiscal years 2014 and 2015 with codes from NAICS industry Sector 54  (Professional, Scientific, and Technical Services) because this sector  accounted for half of the 10 NAICS codes with the highest ID/IQ  obligations from fiscal years 2011\u20132015 (see table 5). We focused on  ID/IQ contracts for our contract review because orders for these contracts  are ordered after the base contract is awarded, potentially leading to  challenges when assigning the NAICS code.", "We interviewed contracting officers, small business specialists, and SBA  procurement center representatives (PCR) associated with each  contract. Of the contracting officers who assigned the NAICS codes to  the selected contracts, three no longer worked at the agencies. As such,  we interviewed the contracting officer currently assigned to the contract.  We also interviewed either the small business specialist who reviewed the  NAICS code assignment or the specialist currently responsible for the  contract or program office.", "To understand how orders relate to the base awards and their NAICS  codes, we reviewed 10 orders from each contract and compared each  order\u2019s purposes to the base award purposes and to the NAICS code  definition. We selected a mix of (1) orders that had product and service  codes different from the codes assigned to the majority of the contract\u2019s  orders or did not contain key words contained in the contract\u2019s statement  of work and (2) orders that were the top orders in terms of obligations.  To determine the status of ongoing efforts to clarify code assignment, we  reviewed proposed and final regulatory changes to NAICS code  assignment and interviewed officials at SBA and the General Services  Administration (the agency responsible for managing the operation,  maintenance, and updating of FPDS-NG).", "For our second objective, to understand stakeholders\u2019 views on NAICS  code assignment, we interviewed officials from three industry groups and  five firms that filed NAICS code appeals during calendar years 2014\u2013 2016 (the 3 most recent years of data available). We selected three  industry groups to interview that were small business trade associations  or contracting interest groups with information on their websites about  NAICS codes. We interviewed 5 of the 14 firms that filed appeals in  calendar years 2014\u20132016 of NAICS codes in Sector 54 (the sector with  the most appeal decisions). We selected these firms to get a variety of  results (granted, denied, or dismissed) and focused on firms that had filed  multiple appeals or recent appeals.", "To identify commonly used NAICS codes and commonly used size  standards, we analyzed data from FPDS-NG to identify the top NAICS  codes by obligations and by number of contracts awarded in fiscal year  2016. To assess whether contracting officers were more likely to use a  NAICS code when the corresponding size standard increased, we  analyzed fiscal year 2009\u20132016 obligations and number of contracts  awarded for NAICS codes in three sectors with size standards that SBA  increased in 2012. We assessed the reliability of the FPDS-NG data we  used by electronically testing for missing data, outliers, and inconsistent  coding, and by comparing the data on selected contracts to contract  documentation we obtained, including the NAICS code and whether or  not the contract was an ID/IQ contract. We determined that the data were  sufficiently reliable for the purposes of identifying trends in NAICS codes  assigned.", "To understand SBA OHA\u2019s process for reviewing NAICS code appeals,  we reviewed federal regulations and interviewed OHA officials. For  context, we compared OHA\u2019s process for NAICS code appeals to its  processes for other types of appeals. To identify the number and  outcomes of NAICS code appeals, we obtained and analyzed SBA\u2019s OHA  decisions on NAICS code appeals filed during calendar years 2014\u20132016.  We summarized the year, agency, outcome, and challenged code for  each of the decisions in this time period.", "We conducted this performance audit from October 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based in our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Analysis of Federal Procurement Data System-Next Generation Data on North American Industry Classification System Code Assignments", "paragraphs": ["In this appendix, we present analyses of FPDS-NG data on NAICS codes  by obligations and number of contracts awarded. Specifically, we  analyzed (1) FPDS-NG data for fiscal year 2016 to determine commonly  used NAICS codes and size standards and (2) FPDS-NG data for fiscal  years 2009 through 2016 to determine whether selected NAICS codes  were used more often when the corresponding size standards increased."], "subsections": [{"section_title": "Commonly Used NAICS Codes", "paragraphs": ["Tables 6 and 7 contain data on the top 50 NAICS codes by obligations  and number of new contracts awarded, respectively, in fiscal year 2016.", "Tables 8 and 9 contain data on commonly used revenue-based size  standards and employee-based size standards by obligations.", "Tables 10 and 11 contain data on commonly used revenue-based size  standards and employee-based size standards by new contracts  awarded."], "subsections": []}, {"section_title": "Use of NAICS Codes with Size Standard Increases in 2012", "paragraphs": ["Industry stakeholders we interviewed stated that contracting officers may  assign NAICS codes because they want specific and usually higher size  standards, not because they are the most appropriate codes. We  analyzed the use of NAICS codes from fiscal years 2009\u20132016 to  determine whether contracting officers used NAICS codes whose size  standard increased in 2012 more often than codes whose size standard  did not increase. We selected three sectors with size standard increases  in 2012 (Sectors 48\u201349 and 54) for this analysis because these sectors  were among the first that the Small Business Administration reviewed and  adjusted. As shown in figures 4 and 5, the proportion of obligations and  new contracts, respectively, with NAICS codes where size standards  increased in 2012 remained relatively consistent for Sector 54 and  increased for Sectors 48\u201349 after the size increase."], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Paige Smith (Assistant Director),  Juliann Vadera (Analyst in Charge), Pamela Davidson, Timothy DiNapoli,  Suellen Foth, Julia Kennon, John McGrail, Marc Molino, Ifunanya  Nwokedi, and Tovah Rom made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-304", "url": "https://www.gao.gov/products/GAO-18-304", "title": "Federal Buildings: Agencies Focus on Space Utilization As They Reduce Office and Warehouse Space", "published_date": "2018-03-08T00:00:00", "released_date": "2018-03-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government continues to work to reduce its real property inventory and associated costs. GSA provides space for agencies in government-owned and commercially leased buildings. In 2015, the OMB issued a memorandum requiring the 24 agencies with chief financial officers to reduce their domestic office and warehouse space. These agencies are required to set annual reduction targets for a 5-year time period and update their real property plans annually.", "GAO was asked to review the implementation of this space reduction initiative. This report discusses: (1) the approaches and any challenges the 24 agencies identified to achieving their reduction targets for all their domestic office and warehouse space; (2) the extent these agencies reduced their space and met their fiscal year 2016 targets; and (3) how GSA manages vacated space it had leased to these agencies.", "GAO conducted a content analysis of the 24 agencies' real property plans for fiscal years 2016 and 2017 and analyzed agencies' data as submitted to GSA on their targets and reductions for fiscal year 2016, the only year for which data were available. GAO selected five agencies as case studies based on several factors, including size of the agencies' office and warehouse portfolio, agency reduction targets, and fiscal year 2016 reported reductions. GAO reviewed relevant documentation and interviewed officials from GSA, OMB, and GAO's case study agencies. GAO provided a draft of this product to GSA, OMB, and our case study agencies for comment. GAO incorporated technical comments, as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Most of the 24 agencies with chief financial officers reported to the Office of Management and Budget (OMB) and the General Services Administration (GSA) that they planned to consolidate their office and warehouse space and allocate fewer square feet per employee as the key ways to achieve their space reduction targets. For example, the Department of Agriculture reported it will consolidate staff from five component agencies in two office buildings. When complete, the space allocated per employee will average about 250 square feet down from a high of 420 square feet per employee. In taking these actions, the agencies most often identified the cost of space reduction projects as a challenge to achieving their targets. Agencies cited costs such as for space renovations to accommodate more staff and required environmental clean-up before disposing of property as challenges to completing projects. Some agencies required to maintain offices across the country reported that their mission requirements limit their ability to reduce their space.", "In fiscal year 2016, 17 of the 24 agencies reported they reduced their space, but had varying success achieving their first-year targets. Of the 17 agencies, 9 exceeded their target and reduced more space than planned, 7 missed their target (by anywhere between 2.8 and 96.7 percent), and 1 reduced space, despite a targeted increase. Agency officials said that it is not unusual for projects to shift to different years and that such shifts could lead to missing targets one year and exceeding them the next.", "GSA has processes to manage the space vacated by agencies that is leased through GSA. For example, starting in November 2016, GSA started tracking agencies' space release requests centrally to help standardize the process and established an e-mail address to which agencies can submit requests. GSA relies on regional offices to manage real property in their regions and to identify tenants for vacant space or to remove unused space from the inventory. GSA's regional officials said regular monitoring and coordinating with agencies minimizes the likelihood GSA is caught off guard by a return of space. These processes also help them to plan ahead. GSA met its 2016 performance goal to have an annual vacant space rate of no more than 3.2 percent in its federally owned and leased buildings. However, given the recent implementation of the space reduction initiative, it is too early to determine the extent to which agencies will return space to GSA prior to the end of their leases and the effect on GSA's inventory."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government is committed to reducing vacant and  underutilized real property and its associated costs. Federal real property  management has been on our High-Risk list since 2003, in part because  we have found that the government maintains more property than it  needs. In 2012, the Office of Management and Budget (OMB) directed  the 24 Chief Financial Officers (CFO) Act agencies to \u201cfreeze\u201d their  footprint and maintain their civilian real estate inventory at or below their  then-current levels. In 2015, OMB issued its Reduce the Footprint (RTF)  policy requiring the CFO Act agencies to set annual targets for reducing  their portfolio of domestic office and warehouse space. As the federal  government\u2019s principal landlord, the General Services Administration  (GSA) plays a large role in providing space for agencies in both  government-owned buildings that GSA leases to federal agencies and  space GSA acquires in commercially-leased buildings for agencies.", "You asked us to review the implementation of the RTF policy to  determine to what extent its goals are being met. This report determines:  (1) the approaches and any challenges CFO Act agencies have identified  to achieving their RTF-reduction targets for all their domestic office and  warehouse space; (2) the extent to which these agencies reduced their  space and met their fiscal year 2016 RTF targets; and (3) how GSA  manages vacated space that it had leased to these agencies.", "To determine the approaches used and any challenges reported by  agencies to achieving their RTF-reduction targets for all their domestic  office and warehouse space, we conducted a content analysis of the 24  CFO Act agencies\u2019 5-year Real Property Efficiency Plans (Plan) for fiscal  years 2016 and 2017. Each Plan describes the agency\u2019s overall strategic  and tactical approach to managing its real property, provides a rationale  for and justifies its optimum portfolio, and directs the identification and  execution of real property disposals, efficiency improvements, and cost  savings measures. The content analysis of the Plans helped us to  understand the approaches agencies expected to use to reduce space,  how space-reduction targets were set, and any challenges they  experienced in reducing their space. We also selected five agencies as  case studies to further understand their experiences in implementing the  RTF policy. We selected the agencies using a variety of considerations  such as diversity in the size of the agency\u2019s domestic office and  warehouse portfolio, agency reduction targets, the extent to which the  agency met its fiscal year 2016 RTF targets, types of real property  authorities the agency has, as well as suggestions from GSA and OMB  related to agencies\u2019 experiences. Based on these factors, our selected  case study agencies included the: (1) Department of Commerce  (Commerce); (2) Department of Energy (Energy); (3) Department of  Housing and Urban Development (HUD); (4) Department of the Interior  (Interior); and (5) Department of the Treasury (Treasury). While our case  study agencies and their experiences reducing their space are not  generalizable to all CFO Act agencies, they provide a range of examples  of how a number of agencies are implementing the RTF policy.", "To determine the extent to which agencies reduced their space and met  their fiscal year 2016 RTF office and warehouse reduction targets, we  analyzed the 24 CFO Act agencies\u2019 data as submitted to GSA on their  RTF targets and reported reductions. At the time of our review, fiscal year  2016 was the first and only year of RTF data available as the policy was  implemented in March 2015. We conducted a data reliability assessment  of the RTF data by interviewing GSA officials and reviewing  documentation, and concluded the data were reliable for our purposes.  We also interviewed officials at GSA, OMB, and our five selected case- study agencies to obtain supporting documentation and to improve our  understanding of how agencies set their RTF targets, agencies\u2019 progress  toward those targets, and the approaches used and challenges faced in  meeting those targets. We also visited three office buildings occupied by  our case study agencies in the Washington, D.C., area with ongoing or  recently completed RTF projects. We selected the buildings based on  recommendations from officials at our case study agencies.", "To determine how GSA manages vacated federally owned and  commercially leased space that it had leased to agencies, we reviewed  federal requirements and GSA policies and vacancy data. We conducted  a data reliability assessment of GSA\u2019s vacancy and cost avoidance data  by interviewing GSA officials and reviewing documentation, and  concluded the data were reliable for our purposes. We also interviewed  GSA headquarters and regional officials and obtained documentation on  how GSA manages space returned by agencies. For more information on  our scope and methodology, see appendix I.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government owns and leases hundreds of thousands of  buildings across the country that cost billions of dollars annually to  operate and maintain. In recent years, the federal government has taken  steps to improve the management of federal real property and address  long-standing issues by undertaking several government-wide initiatives  and issuing memorandums to the CFO Act agencies. Within the executive  branch, OMB and GSA provide leadership in managing federal real  property. As the chief management office for the executive branch, OMB  oversees how federal agencies devise, implement, manage, and evaluate  programs and policies. OMB provides direction to federal agencies by,  among other things, issuing policies and memorandums on real property  management.", "In 2012, OMB issued a memorandum that required agencies to move  aggressively to dispose of excess properties held by the federal  government and more efficiently use real estate assets. This  memorandum initially laid out the requirement to \u201cfreeze the footprint.\u201d In  2013, OMB issued a memorandum clarifying the Freeze the Footprint  policy. This memorandum required agencies going forward to maintain  no more than their fiscal year 2012 total square footage of domestic office  and warehouse space. The policy required agencies to specifically  identify existing properties to be disposed of to offset any new property  acquisitions.", "In March 2015, OMB transitioned from freezing the federal government\u2019s  real property footprint to reducing it. Specifically, OMB issued the National  Strategy for the Efficient Use of Real Property (National Strategy) to  provide a framework to guide agencies\u2019 real property management,  increase efficient real property use, control costs, and reduce federal real  property. The National Strategy outlined three key steps to improve real  property management: (1) freeze growth in the inventory; (2) measure  performance and use data to identify opportunities to improve the  efficiency of the real property portfolio; and (3) reduce the size of the  inventory by consolidating, co-locating, and disposing of properties.", "OMB also issued the RTF policy which clarified existing policy to dispose  of excess properties and promote more efficient use of real property  assets. The RTF policy requires agencies to: (1) submit annual Real  Property Efficiency Plans (Plan) to GSA and OMB; (2) issue a policy that  specifies a design standard for maximum useable square feet by  workstation for use in domestic office space; (3) set and specify in their  Plans annual reduction targets for their domestic office and warehouse  space for a 5-year period; (4) set and specify in their Plans annual  reduction targets for domestic owned building properties reported in the  Federal Real Property Profile; and (5) continue to not increase the square  footage of their domestic inventory of office and warehouse space.  Additionally, agencies must identify in their Plans potential projects  related to office and warehouse consolidation, co-location, disposal, as  well as construction and acquisition efforts. OMB is responsible for  reporting the progress of agencies\u2019 efforts in reducing the amount of  federal real property space under the RTF policy.", "GSA has two key leadership responsibilities related to real property  management. First, GSA\u2019s Public Buildings Service functions as the  federal government\u2019s principal landlord. In this role, GSA acquires,  manages, and disposes of federally owned real property for which it has  custody and control on behalf of federal agencies that occupy the  space. Additionally, GSA leases commercial buildings on behalf of  agencies and manages the lease agreements. In these situations, GSA  executes an occupancy agreement with a customer agency for each  space assignment that is similar to a sublease between GSA and the  agency. The occupancy agreement outlines both the financial specifics of  the agreement and the responsibilities of GSA and the customer agency.  There are certain unique advantages for customer agencies when GSA  leases on their behalf. For example, GSA is able to enter into longer-term  leases, and agencies can release space back to GSA with 4 months\u2019  written notice if certain conditions are met, relieving the agencies of the  cost for the returned space. Second, GSA\u2019s Office of Government-wide  Policy is responsible for, among other things, identifying, evaluating, and  promoting best practices to improve the efficiency of management  processes. In this policy role, GSA provides guidance for federal agencies  and publishes performance measures. It also maintains the Federal Real  Property Profile, a real property inventory database that contains  information on federal real property government-wide."], "subsections": []}, {"section_title": "Agency Plans Identified Similar Strategies to More Efficiently Use Space and Common Challenges", "paragraphs": [], "subsections": [{"section_title": "Agencies Identified Space Consolidation, Co- location, or Property Disposal as Ways to Achieve Space Reductions", "paragraphs": ["Based on our review of agencies\u2019 2016 and 2017 Plans, we found that all  24 CFO Act agencies described strategies for reducing office and  warehouse space. As previously mentioned, these annual Plans must  include all potential projects related to office and warehouse  consolidation, co-location, disposal, as well as construction and  acquisition efforts. The agencies\u2019 Plans cited consolidation, co-location,  and disposal as the primary means to reduce their office and warehouse  space, activities mentioned in the National Strategy. Agencies also cited  other methods, such as utilizing telework and decreasing the space they  allocate per person to achieve space reductions.", "The space reduction strategies included most often in the Plans we  reviewed include the following.", "Consolidation: All 24 agencies reported planned or ongoing efforts to  reduce their space by consolidating their offices or operations. For  example, we spoke with officials at HUD, which is in the process of  consolidating staff from four offices in the National Capital Region into  its 1.12-million square foot headquarters building in Washington, D.C.  HUD started by remodeling one floor to create a more open floor plan  and intends to apply this design throughout the building. As part of the  consolidation project, HUD has reduced the size of some office  cubicles from 64 square feet to 56 square feet. (See fig. 1.) HUD  leases its space through GSA and estimates that it will be able to  return about 175,000 square feet of unneeded space back to GSA  once all four offices are closed. At that point, GSA would then bear  the cost of the space and work to lease it to another agency or  otherwise dispose of it. Once the project is completed, HUD estimated  that its headquarters building will accommodate about 500 more  personnel (for a total of 3,200) and reduce its annual lease payments  by about $11 million.", "Fifteen of the 24 agencies identified consolidation opportunities  outside of their headquarters buildings. For example, the Department  of Agriculture (USDA) discussed a consolidation project involving five  component agencies in Albuquerque, New Mexico, in its fiscal year  2017 Plan. According to USDA officials, four component agencies  occupying nearly 44,500 square feet in one building were to be  consolidated into about 34,000 square feet of space in another  building already occupied by a different USDA agency. In the prior  location, the multiple components spaces\u2019 square footage per person  averaged 327, but the proposed consolidation would bring the  utilization rate down to 255 square feet per person. USDA estimated  that the consolidation project would result in about $238,000 in annual  rent cost savings for the four components. Additionally, to enable this  consolidation project, the component agency already occupying the  building consolidated and vacated about 20,000 square feet, a move  that resulted in an annual rental savings of about $500,000. In its  fiscal year 2017 Plan, Interior\u2019s Bureau of Reclamation anticipated  eliminating 87,000 square feet of office space by consolidating  operations from two buildings in Denver, Colorado. Interior estimated  that the consolidation will result in a 40 percent reduction in its overall  utilization rate to 165 square feet per person and an annual cost  savings of about $2.1 million.", "Co-location: Thirteen of the 24 agencies\u2019 Plans stated that they are  exploring or implementing co-location projects to reduce space by  merging staff from different components or agencies into another  agency\u2019s space. For example, the Social Security Administration  (SSA) recently initiated a co-location pilot program with the Internal  Revenue Service (IRS) within Treasury to combine SSA field offices  with IRS Taxpayer Assistance Centers. Co-location of operations can  reduce the overall space required by allowing agencies to share  common space such as waiting rooms, an action that can reduce rent  and operating costs for the co-located agencies. Since the inception  of the 1-year program in January 2017, four IRS offices are  participating and have moved into SSA field offices. According to  SSA, IRS and SSA staff have adjusted to sharing space and the IRS  presence in SSA space has not affected SSA wait times or created  security or parking issues. According to an IRS official, IRS  employees continue all normal operations from their co-located offices  with SSA, including meeting with taxpayers in-person. The official also  noted that IRS has extended the terms of its agreement with SSA for  an additional year. However, SSA noted that the agencies are still  working through customer access issues that could determine  whether it would be possible to expand the pilot program and pursue  additional co-location opportunities. In another example, according to  Interior officials, the U.S. Geological Survey is co-locating staff from  Menlo Park, California, to a National Aeronautics and Space  Administration facility in the nearby city of Mountain View, California.  About 40 percent of the staff will move early in fiscal year 2019, and  the U.S. Geological Survey expects the remaining staff to be co- located by the end of 2021. Interior officials estimate that the co- location will result in an overall reduction of 165,000 square feet  (about 50 percent of its space) and expects to save about $12 to $14  million in annual rent costs.", "To help agencies identify potential co-location opportunities and work  with other agencies to meet their space requirements, GSA developed  and provided agencies access to its Asset Consolidation Tool in fiscal  year 2015. This database tool provides agencies with information  about federal spaces in their area, including the buildings\u2019 vacancy  and utilization rates.", "Disposal of unneeded space: Thirteen of the 24 agencies reported  that they plan to reduce their real property footprint by disposing of  unneeded space, including selling or demolishing federal buildings or  terminating leases, among other actions. For example, IRS has five  tax submission-processing centers that receive all mailed income-tax  returns and have warehouses that store the physical tax records.  Each of these five processing centers, which include both office and  warehouse spaces in multiple buildings, is approximately 500,000  square feet. According to IRS officials, 87 percent of all 2016  individual income-tax returns were filed electronically. As a result, the  IRS plans to dispose of three of the five centers by 2024 to align with  its reduced need for income-tax return processing and storage space.", "GSA has the statutory authority to dispose of property for all federal  agencies and generally does so on their behalf. In addition, some  federal agencies, such as Energy, or departmental components have  statutory authority to dispose of buildings and other types of property  and are not required to notify or use the services of GSA to complete  the disposal.", "Better utilization of existing space: In their Plans, agencies also  reported using tactical tools, such as incorporating space utilization  rates into their capital-planning process, to identify opportunities to  reduce space. For example, 22 of the 24 agencies reported  incorporating office space design standards and agency utilization  rates into their processes to identify space reduction opportunities.  Agencies set their own space design standards and space utilization  rates, which may vary based on agency mission requirements across  their components. The RTF policy requires agencies to establish a  design standard for the maximum workstation size, which should, at a  minimum, be applied to all space renovations and new acquisitions. In  addition, GSA has a recommended office space-utilization rate range  of 150 to 200 square feet per person.", "Officials from our case study agencies noted several practices they  said were helpful to identify opportunities to better utilize and  ultimately reduce their space. For example, Commerce officials  described developing a process for identifying and prioritizing space  reduction opportunities using a two-factor matrix. Through this  process, Commerce plans to target office space with a large number  of employees and poor utilization rates (compared to its 170 square  foot utilization rate). According to Commerce officials, these situations  may offer the most opportunity for space reductions and achieving  significant rent and operating cost savings, particularly in high-cost  real estate markets. Using this process, Commerce identified the  potential for reducing as much as 1.6-million square feet (16 percent)  of its total office space within 52 high priority facilities. According to  IRS, retirements, hiring freezes, budget reductions, and increased  telework have resulted in excess space throughout its portfolio. In  fiscal year 2016, IRS started using a Strategic Facility Plan model to  help identify space reduction projects. IRS\u2019s objectives include  consolidating multiple offices within a metropolitan area, closing  outlying buildings, and leveraging telework, mobility, and its attrition  rates. This model utilizes a template form to provide a consistent  decision-making framework for assessing various options, articulating  the rationale for selecting the preferred option, and documenting  decisions and concurrence. According to IRS officials, this model has  helped IRS to reduce a lot of its space.", "In 2014, GSA developed and provided agencies with access to the  Real Property Management Tool, which can aid agencies that want to  more effectively utilize their space. The database tool provides  agencies with the capability to comprehensively view their real  property portfolio by consolidating data from the assets that agencies  directly manage with the assets that GSA manages on their behalf. As  such, regardless of whether an agency initiated the action or GSA did  so on its behalf, the tool gives an agency the ability to see all of its  data, such as on expiring leases, in one place. The tool enables  agencies to create individualized analytic reports allowing them to  analyze the data in various ways.", "Teleworking and hoteling: Fifteen of the 24 agencies also described  alternate workplace arrangements enabled by information technology,  such as telework and hoteling, to help reduce office space. Telework  is a work flexibility arrangement under which an employee performs  their work responsibilities at an approved alternative worksite (e.g.,  home). Executive agencies are required to establish policies that  authorize eligible employees to telework, determine the eligibility of all  employees to participate in telework, and notify all employees of their  eligibility. Federal law also requires that agencies consider whether  space needs can be met using alternative workspace arrangements  when deciding whether to acquire new space. As such, some  agencies are eliminating designated offices for staff who primarily  telework, a step that can improve space utilization. In a hoteling  arrangement, employees use non-dedicated, non-permanent  workspaces assigned for use by reservation and on an as needed  basis. For example, the Office of Personnel Management  implemented a workspace sharing initiative at one of its program  offices. Staff who are not physically present in the office 4 or more  days per week are required to share cubicles and offices. The Office  of Personnel Management estimated that the initiative resulted in a 47  percent office space reduction for the program office."], "subsections": []}, {"section_title": "Cost and Mission Considerations Were Cited as Leading Challenges to Reducing Space", "paragraphs": ["As part of their fiscal year 2016 and 2017 Plans, the 24 CFO Act  agencies also described the major challenges they anticipated facing in  their efforts to meet their space reduction targets. The agencies most  frequently cited the following challenges:", "Space reduction costs: Twenty of 24 agencies stated that the costs of  space reduction projects pose a challenge. Agencies are generally  responsible for the up-front costs associated with relocations and  tenant improvements, such as acquiring new furniture and renovating  existing areas to reduce space or to accommodate more personnel in  a smaller area. For example, the Department of Labor (Labor)  reported in its fiscal year 2017 Plan that it did not have sufficient  funding to implement a space reduction project that would have  reduced commercially leased office space by 4,000 square feet.  Similarly, the Department of Veterans Affairs\u2019 fiscal year 2017 Plan  noted that assuming a limited budget, large scale consolidations  would be difficult to achieve.", "Some agencies have used or report that they intend to use funding  from GSA\u2019s Consolidation Activities program to help fund their space  reduction projects. According to GSA, from fiscal years 2014 to  2017, GSA\u2019s Consolidation Activities program funded projects that will  eliminate 1.4-million rentable square feet from the GSA inventory and  reduce agencies\u2019 annual rent payments by $54 million. According to  the IRS, GSA\u2019s Consolidation funds have helped the agency reduce  about 500,000 square feet of space. IRS officials noted that these  funds helped the agency implement larger and more expensive space  reduction projects than it would have been able to do otherwise.  However, according to officials from several agencies, to use this  program, agencies must also contribute funds to the projects. HUD  officials stated that they considered applying for project funding  through GSA but did not do so because HUD did not have sufficient  funds for the agency\u2019s share of project costs.", "Three of the 24 agencies specifically noted that the cost to clean up  environmentally contaminated buildings is a challenge to disposing of  excess office and warehouse space. Agencies are required to  consider the environmental impact of property disposals. We have  previously found that assessments and remediation of contaminated  properties can be expensive and complicate the disposal process.  Also, agencies are responsible for supervising decontamination of  excess and surplus real property that has been contaminated with  hazardous materials of any sort. In its fiscal year 2017 Plan, Energy  estimated that over 60 percent of its excess buildings require  extensive decontamination prior to disposal. Overall, Energy projected  that its total liability for environmental clean-up could cost more than  $280 billion.", "Mission delivery: Thirteen of the 24 agencies reported that mission  delivery requirements can also affect their ability to reduce space.  Agency missions may require office locations in certain areas or  require additional space to accommodate activities such as customer  interactions. These requirements may preclude disposals or limit  opportunities to reduce space. For example, in its fiscal year 2017  Plan, SSA stated that its efforts to reduce space are affected by its  mission, which requires offices widely dispersed throughout the  country to administer and support its benefit programs, among other  things. SSA has about 1,500 office spaces nationwide, most of which  require space to accommodate the public. SSA had an overall office  space utilization rate of 301 square feet per person, which exceeded  GSA\u2019s recommended office space utilization rate range of 150 to 200  square feet per person. USDA\u2019s fiscal year 2017 Plan stated that its  missions require office space in rural areas to, among other things,  provide program assistance and leadership on food, agriculture,  natural resources, rural development, nutrition, and related issues. In  its fiscal year 2017 Plan, USDA also observed that the real estate  market in rural areas is less competitive than in urban areas because  there are fewer rental options, a situation that can also drive up rent  costs. As such, USDA noted that these factors may contribute to  difficulties identifying disposal opportunities and finding alternate  spaces that could allow for more effective space utilization.", "Employee organization concerns: Ten of the 24 agencies reported  that considering employee organizations\u2019 concerns and addressing  collective bargaining requirements when reconfiguring space can add  time and affect the extent of their space reductions. For example, in  its fiscal year 2017 Plan, SSA noted that the agency must meet with  three employee unions when revising office space policies or design  standards and collaborating with these organizations adds to the  project\u2019s implementation timeline. In July 2017, we reported that SSA  officials met with employee union groups about the impact of potential  changes to its space configuration or usage. Officials said that while  the interactions with the union groups were positive\u2014including  gaining input on issues such as ergonomics, the security of field  offices, and overall implementation\u2014at times, these negotiations  caused delays to individual projects and complicated reduction efforts  by requiring union buy-in. In addition, Labor reported in its fiscal  year 2017 Plan that its collective bargaining agreement and agency  mission requirements for offices and work stations do not always  enable it to take advantage of the previously discussed GSA  Consolidation Funding program as well as GSA\u2019s Total Workplace  Furniture & Information Technology program. For example, the Total  Workplace Furniture & Information Technology program requires that  cubicles and offices must not exceed a specified square footage.  However, according to Labor officials, Labor\u2019s Departmental Space  Management Regulation requires a certain utilization rate per person  which may make it challenging to also stay within the program\u2019s  square footage requirements.", "Workload growth: Eight of the 24 agencies noted that increases in  their workload limited their ability to achieve overall agency space  reductions. For example, according to the Department of Justice\u2019s  fiscal year 2017 Plan, the agency anticipated having to provide  additional court rooms to support an increased volume of immigration  cases and accommodate the additional immigration judges needed to  handle that volume. The Department of Justice estimated that the  space needed to accommodate the new judges and additional public  areas could add about 155,000 square feet to its portfolio. Also,  according to the Department of Health and Human Services\u2019 fiscal  years 2016 and 2017 Plans, the Office of Medicare Hearings and  Appeals experienced a 30 percent growth in cases and expected 1.2- million new cases annually after 2017. The Department of Health and  Human Services projected that the growth in cases and additional  staff needed to process the cases required additional field offices,  which would increase its total office space square footage."], "subsections": []}]}, {"section_title": "The Majority of Agencies Reported Space Reductions in Fiscal Year 2016 but Achieved Varied Success in Meeting Their Targets", "paragraphs": ["As previously mentioned, agencies are required to set annual square foot  reduction targets for domestic office and warehouse space in their annual  Plans. According to an OMB official, to help ensure the targets are  realistic, agencies are also required to identify the specific projects that  will help them to achieve their space reduction targets. According to GSA  and OMB officials, agencies submit their Plans, including their reduction  targets, and their Plans are reviewed by both GSA and OMB. But each  individual agency ultimately establishes its targets based on what it  determines to be cost-effective and feasible. Through its Real Property  Efficiency Plan template, GSA provides guidance to agencies on what is  expected in their annual submissions. Each agency is required to  document its internal controls, such as the process for identifying and  prioritizing reductions to office and warehouse space and disposal of  properties based on return on investment and mission requirements. The  identified internal controls should help ensure that an agency\u2019s proposed  space reduction projects reflect an efficient use of space and are cost  effective. A review of our five case study agencies illustrated some of the  different approaches agencies used to determine their reduction targets.  For example, several agencies\u2019 targets were based on the total estimated  feasible reductions identified by each agency component. In contrast, one  agency centrally established a reduction target percentage and then  asked its components to develop projects to meet that target. According  to case-study agency officials, the agencies considered many factors,  including their missions, priorities, component needs, and available  budgets, when determining their targets.", "We found that the number and magnitude of the space reduction projects  agencies identified in their fiscal year 2017 Plans varied greatly and were  generally proportional to the size of the agency\u2019s real property portfolio.  The number of projects identified in agency Plans ranged from as few as  3 projects (the minimum required in the Plans) to nearly 400 projects. The  estimated space reductions per project across agencies ranged from  about 1,400 to over 94,000 square feet. For example, the Department of  Veterans Affairs has a relatively large office and warehouse portfolio of  over 28-million square feet. As part of its fiscal year 2017 Plan, the  agency reported 320 planned or ongoing projects with an average space  reduction of about 1,800 square feet per project. Conversely, the Office of  Personnel Management has a relatively small office space portfolio of  about 1-million square feet; its fiscal year 2017 Plan identified 4 ongoing  or potential projects with an average space reduction of about 6,000  square feet.", "In fiscal year 2016\u2014the first and only year RTF data were available at the  time of our review\u2014the majority (71 percent or 17 of the 24 agencies)  reported they achieved reductions in their office and warehouse space  even though the agencies had varying success in achieving the individual  targets they set for themselves. For example, as shown in figure 2, of  the 17 agencies that reduced space, 9 exceeded their targets (i.e.,  reduced more space than planned); 7 reduced space but missed their  target (by anywhere between 2.8 and 96.7 percent); and 1 agency  expected to increase in square footage, but reduced space.", "Whether an agency met its target is not the only indicator of an agency\u2019s  success in reducing space. For example, although some agencies missed  their targets, they reduced their office and warehouse space by a larger  percentage than some agencies that exceeded their targets. Also, the fact  that some agencies missed their targets can in part be attributed to  setting more aggressive targets than other agencies. Agencies\u2019 fiscal year  2016 targets ranged from a 0.8 percent increase to an 8.4 percent  decrease in office and warehouse space. Of the 9 agencies that  exceeded their reduction targets, 4 more than tripled their target. As  mentioned, agency targets are set by the agency and are a reflection of  their unique situation including mission needs and priorities and therefore  cannot be generalized across agencies. For example, Energy exceeded  its fiscal year 2016 reduction target and reduced 292,140 square feet of  space (0.8 percent of its total square footage). However, the  Environmental Protection Agency missed its target, which was the second  most aggressive target across all the agencies at 7.2 percent of its total  square footage; but the agency reduced 174,003 square feet (3.24  percent of its total square footage). Of the three agencies with the most  aggressive target reductions\u2014those that ranged between 6.7 and 8.4  percent of their total square footage\u2014only one met its target. Figure 3  shows the extent to which each of the CFO Act agencies met its fiscal  year 2016 targets. See appendix II for more detailed information on each  agencies\u2019 square footage of space, reduction targets and fiscal year 2016  reductions.", "Officials from our case study agencies cited a number of factors that  influenced whether or not they met their fiscal year 2016 targets, and may  also affect their target achievement in subsequent years. Of our five case  study agencies, three exceeded their fiscal year 2016 reduction target  and two missed their target.", "Timing and funding: Officials from two case study agencies cited  timing as a factor, noting that there is fluidity to the project\u2019s planning,  implementation, and disposal process that may not always be within  an agency\u2019s control. As a result, space reductions anticipated in one  fiscal year may not be realized until a subsequent fiscal year;  conversely, some space reduction opportunities may present  themselves unexpectedly. For example, according to officials at HUD,  which missed its fiscal year 2016 reduction target, some projects take  longer than anticipated to start or complete. HUD officials said that  their fiscal year 2016 target may have been too ambitious and  planned projects were delayed because they were unable to secure  sufficient funding. As such, the officials said the agency must carefully  select which projects to move forward with in a given fiscal year, but  expected to move forward with their delayed, planned projects in the  next fiscal year. Energy on the other hand, exceeded its fiscal year  2016 reduction target. Energy officials said that they tend to be  conservative in listing potential RTF projects in their Plans. They  noted that it takes a long time to dispose of a building and the timing  was dependent on the building\u2019s level of contamination, location, size,  agency budget, and other factors. As a result, even though the  agency may have planned to dispose of a building in a given fiscal  year, there were numerous reasons why the project may get delayed.", "Further, RTF is a long-term effort and should not be judged based on  agencies\u2019 progress in their first year. According to an OMB official, it is  understood that there may be circumstances in a given year that may  hinder agencies from reaching their RTF targets, such as budget  constraints or the timing of leases; however, the expectation is that  agencies will continue to work toward accomplishing their target in the  next year. Accordingly, under RTF, agencies set annual space  reduction targets for a 5-year period. Officials from our case study  agencies emphasized that the 5-year targets are not static, but rather  are subject to annual updates. The RTF policy also acknowledged  that changes to mission requirements and the availability of budgetary  resources may require modifications to an agency\u2019s targets,  particularly in each of the subsequent years. Lastly, given that the  RTF policy is still relatively recent, an OMB official noted that  agencies are still in the process of learning how to set appropriate  targets.", "Previous space reductions: Officials from three of our case study  agencies noted that prior space reductions made during the Freeze  the Footprint policy limited their ability to reduce space more  aggressively. Though the thrust of Freeze the Footprint was to  maintain the fiscal year 2012 size of an agency\u2019s portfolio, agencies  started to look more strategically for opportunities to dispose of  excess space in their portfolios. The majority of agencies (18 of 24)  have been decreasing the square footage of their domestic office and  warehouse space since the Freeze the Footprint policy was  implemented in 2013. OMB reported that under Freeze the Footprint,  agencies achieved a 24.7-million square foot reduction between fiscal  years 2012 and 2015. Officials from the IRS, which accounts for 70  percent of Treasury\u2019s real property inventory, noted it has released  2.7-million square feet (approximately 10 percent) in the past 5 years,  bringing its total square footage down to 25.3 million. According to  officials from three of our case study agencies, a certain amount of  space is required to effectively fulfill their missions. As such, the  closer agencies get to attaining their optimum footprint, their ability to  achieve further space reductions may be limited."], "subsections": []}, {"section_title": "GSA Has Processes to Track Space Release Requests and Manage Vacant Space", "paragraphs": ["In November 2016, GSA put into effect a new standard operating  procedure to, among other things, standardize and streamline the  process of receiving, reviewing, and documenting agencies\u2019 space  release actions. As previously mentioned, GSA\u2019s occupancy agreements  for space it leases on behalf of its customer agencies generally allow the  agencies to release space back to GSA with as little as 4 months\u2019 notice,  if certain conditions are met. This can enable agencies to reduce their  space and related rent costs relatively quickly without penalty. As a  result of this new process, GSA established a centralized e-mail for  agencies to submit their space release requests. The e-mail is maintained  at GSA headquarters before it is forwarded to the respective GSA region.", "GSA also developed a centralized space release tracking spreadsheet to  help ensure that all GSA regions were (1) notifying the customer agency  of GSA\u2019s determination on whether the space release request was within  GSA\u2019s policy, and (2) processing the space release and ceasing rent  billings in a timely manner. According to GSA headquarters officials, this  new process was implemented to rectify past concerns that space release  requests were not centrally tracked, GSA regions may not have been  making consistent determinations, and some requests either were missed  or were not processed within the appropriate time frames.", "GSA officials noted that GSA similarly manages all vacant space in  federally owned property under its custody and control and in commercial  space it leases, and the agency seeks to utilize the space as quickly as  possible. GSA has 11 regional offices throughout the country that  generally conduct the day-to-day real property management activities for  its customer agencies. These responsibilities include acquiring,  managing, and disposing of real property, as well as executing, renewing,  and terminating leases on behalf of its customer agencies in exchange for  a monthly fee for GSA\u2019s services. GSA headquarters officials told us that  GSA regional offices track all the occupancy agreements and proactively  work with customer agencies to help manage their space needs well  before the agreements expire to understand ongoing space requirements.  For example, according to GSA headquarters officials, this process  includes working with agencies at a strategic level and helping them think  about how they can accomplish their space needs and meet their targets  4 to 5 years in advance. GSA headquarters and regional officials noted  that the advance planning helps the GSA regional officials integrate  agencies\u2019 potential space needs into the work they are already doing in  the region as GSA manages the regional inventory as a whole, including  managing the amount of vacant space. GSA regional officials told us that  they work closely with the agencies in their space consolidation and  reduction efforts to minimize the likelihood that GSA would be caught off  guard by a release of space. This work enables GSA to develop options  for either filling vacant space based on the known needs in the region or  developing an alternative plan to effectively utilize the unneeded space.", "One of GSA\u2019s strategic objectives is to improve the federal utilization of  space in order to lower the government\u2019s operational costs. To assess  progress, GSA has an agency-wide vacant space performance goal of  3.2 percent for its federally-owned and leased inventory (with a 5 percent  goal for federally owned and 1.5 percent goal for leased space). Based  on GSA data, the agency has steadily lowered its percentage of vacant  space under its custody and control from 3.8 percent in fiscal year 2013  to 3 percent in fiscal year 2016, exceeding its performance goal of 3.2  percent for the first time in 4 years. The vacant space performance  goal\u2019s data help GSA evaluate its real property assets and plan for and  make investment decisions while meeting its customer\u2019s needs.  According to GSA officials, the lower vacant space percentage is a  reflection of the agency\u2019s continued focus on working with its customer  agencies to: (1) move into federally owned space, when possible; (2)  decrease the size of commercially leased space to reduce agency rental  costs and overall government reliance on leased space; and (3) dispose  of unneeded federally owned assets. However, GSA officials noted that a  certain level of vacant space is necessary to meet the space needs of  new customers and customers with changing space requirements.", "According to GSA officials, GSA also tracks and reports annual cost  avoidance data for all office and warehouse space reductions. These data  include space covered under RTF in federally owned buildings under  GSA\u2019s custody and control and commercial space that GSA leases. Cost  avoidance is defined as the results of an action taken in the immediate  timeframe that will decrease future costs. The government-wide cost  avoidance for fiscal year 2016 was $104 million based upon a net 10.7  million square foot reduction to all office and warehouse space. Of the  government-wide figure, according to GSA, the total cost avoidance  associated with office and warehouse space reductions in federally- owned space under GSA\u2019s custody and control and commercial space  GSA leased in fiscal year 2016 was over $75.8 million and 3.1 million  square feet. In its cost avoidance calculation, GSA accounts for space  returned to it by customer agencies only if there is a net square footage  reduction in GSA\u2019s total square footage across all the space that it  manages.", "Similarly, the space returned to GSA does not reduce the federal  government\u2019s overall office and warehouse square footage unless GSA  disposes of it. However, space that is returned to GSA is reflected as a square footage reduction for the customer agency and contributes toward  that agency\u2019s RTF target reduction. According to GSA regional officials,  agencies\u2019 requests to return space prior to the end of their occupancy  agreements appear to have increased since the implementation of the  RTF policy. Thus far, GSA has processes to manage agencies\u2019 space  release requests and keep its vacant space to a minimum. However, it is  too early to determine how the recent increase in space release requests,  in combination with agencies\u2019 continued focus on occupying a smaller  footprint and reducing their square footage, will affect: (1) the size of  GSA\u2019s inventory of vacant space in the long term, (2) GSA\u2019s regional  office workload to manage the requests, and (3) the cost savings for the  federal government."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to GSA, OMB, Commerce, Energy,  HUD, Interior, and Treasury for review and comment. We received  technical comments from Energy, which we incorporated, where  appropriate. GSA, OMB, Commerce, HUD, Interior, and Treasury did not  have comments on our draft report.", "We are sending copies of this report to the appropriate congressional  committees; the Administrator of GSA; the Director of the OMB; the  Secretaries of the Departments of Commerce, Energy, HUD, the Interior,  and the Treasury; and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine: (1) the approaches and any challenges  the 24 Chief Financial Officers (CFO) Act agencies identified to  achieving their Reduce the Footprint (RTF) reduction targets for all their  domestic office and warehouse space; (2) the extent to which these  agencies reduced space and met their fiscal year 2016 RTF targets; and  (3) how the General Services Administration (GSA) manages vacated  space that it had leased to these agencies.", "To obtain background information for all three objectives, we reviewed  relevant literature, including laws governing federal real-property  management and agencies\u2019 efforts to reduce their real property portfolios  and Office of Management and Budget\u2019s (OMB) and GSA\u2019s  memorandums and guidance governing the RTF policy. We also  reviewed prior GAO and GSA inspector general reports describing  agencies\u2019 real-property management and efforts to more efficiently  manage their real property portfolios.", "To determine the approaches used and any challenges faced by the CFO  Act agencies in achieving their RTF reduction targets for all their domestic  office and warehouse space, we conducted a content analysis of the  agencies\u2019 5-year Real Property Efficiency Plans (Plans) for fiscal years  2016 and 2017. These Plans were obtained directly from each of the  agencies. Each Plan describes an agency\u2019s overall strategic and tactical  approach in managing its real property, provides a rationale for and  justifies its optimum portfolio, and directs the identification and execution  of real property disposals, efficiency improvements, general usage, and  cost-savings measures. The content analysis of the Plans helped us to  understand the approaches agencies used to reduce space, how space- reduction targets were set, and any challenges they experienced in  reducing their space. To identify agencies\u2019 approaches to achieving their  RTF targets, we reviewed all agencies\u2019 Plans to determine the most  frequently mentioned approaches agencies reported using or planned to  use to reduce their real-property footprints. As part of their plans, each  agency is required to include a section detailing approaches it plans to  use to reduce space. While these sections were the primary focus of the  analysis, we analyzed the Plans as a whole for any additional mention of  agencies\u2019 approaches to reduce space. Based on the frequently identified  approaches, codes were developed. An analyst reviewed all the  agencies\u2019 Plans and coded the approaches and another analyst reviewed  the coding. If there was a disagreement, the two analysts reviewed and  discussed until they reached an agreement. As a result of the analysis,  five approaches were identified that agencies most frequently reported  using or were planning to use to achieve their RTF targets. These five  approaches are described in more detail in the report: (1) consolidation;  (2) co-location; (3) disposition of unneeded space; (4) better utilization of  existing space; and (5) teleworking and hoteling. For the purposes of our  report, telework and hoteling were combined because these approaches  are often used in combination. For example, agencies can use telework  strategically to reduce space needs and increase efficiency by making  hoteling (i.e., desk sharing) possible.", "To identify any challenges agencies faced in achieving their RTF targets,  we similarly conducted a content analysis of agencies\u2019 fiscal year 2016  and 2017 Plans. As part of their Plans, each agency included a section  describing challenges it faced to reducing space. While these sections  were the primary focus of the analysis, we analyzed the Plans as a whole  for any additional mention of agencies\u2019 challenges. Based on the  frequently identified challenges, codes were developed. An analyst went  through all the agencies\u2019 Plans to code the challenges and another  analyst reviewed the coding. If there was a disagreement, the two  analysts reviewed and discussed until they reached an agreement. As a  result of the analysis, we identified the four challenges that agencies most  frequently described in their Plans: (1) space reduction costs; (2) mission  delivery; (3) employee organization concerns; and (4) workload growth. In  our report, we relied specifically on agencies\u2019 fiscal year 2016 and 2017  Plans to provide examples and context for our description of the  approaches agencies use and challenges they experience in achieving  their RTF targets. However, after these Plans were submitted, agencies  reported that the specific details as described in their Plans may in some  instances, have changed due to a variety of factors. For our case study  agencies, to the extent possible, we have provided updated information  from agency officials as of December 2017.", "We selected five agencies as case studies to inform our first two  objectives. We selected the agencies using a variety of considerations  such as the diversity in the size of the agency\u2019s domestic office and  warehouse portfolio, the extent to which the agency met its fiscal year  2016 RTF targets, the types of real property authorities the agency has,  as well as suggestions from GSA and OMB related to agencies\u2019  experiences. Based on these factors, we selected the: (1) Department of  Commerce (Commerce); (2) Department of Energy (Energy); (3)  Department of Housing and Urban Development (HUD); (4) Department  of the Interior (Interior); and (5) Department of the Treasury (Treasury).  While our case-study agencies and their experiences reducing their  space are not generalizable to all CFO Act agencies, they provide a  range of examples of how agencies are implementing the RTF policy. We  interviewed officials at the selected agencies as well as GSA and OMB,  and reviewed relevant agency real-property management and RTF  guidance, to obtain more detailed information about agencies\u2019 RTF  approaches, challenges, specific RTF projects, RTF project funding and  prioritization, and experiences in meeting their RTF targets. In addition,  we visited three office buildings of our case study agencies in  Washington, D.C., with ongoing or recently completed RTF projects that  illustrated approaches the agencies used to reduce space and met with  officials to discuss the projects in more detail. The spaces we visited were  the headquarters buildings for Commerce, HUD, and Interior. We  selected the buildings based on recommendations from officials at our  case study agencies.", "To determine to what extent agencies reduced their space and met their  fiscal year 2016 RTF targets, we analyzed the 24 CFO Act agencies\u2019 data  as submitted to GSA on their RTF targets and reported reductions for  fiscal year 2016. The office and warehouse square footage reductions are  calculated annually using GSA occupancy agreement data and agencies\u2019  self-reported data in GSA\u2019s Federal Real Property Profile. For example,  for fiscal year 2016, the space reduction calculations based on these data  sources at the end of the fiscal year was compared to the square footage  reported in fiscal year 2015. At the time of our review, this was the first  and only year of RTF data available as the policy was implemented in  March 2015. We conducted a data reliability assessment of the RTF data  GSA provided by interviewing GSA officials and reviewing documentation,  and concluded the data were reliable for our purposes. We also  interviewed officials at GSA and OMB and reviewed relevant  documentation to learn more about each agency\u2019s role and the  requirements of the RTF policy. We interviewed officials from our selected  case-study agencies to obtain supporting documentation and to improve  our understanding of how agencies set their RTF targets, agencies\u2019  progress toward those targets, and the approaches used and challenges  faced in meeting those targets. We also asked the agency officials for  examples of successful practices used to reduce their office and  warehouse space.", "To determine how GSA manages vacated federally owned and  commercially leased space that it leases to agencies, we reviewed  federal requirements and GSA policies and vacancy data. We conducted  a data reliability assessment of GSA\u2019s vacancy and cost avoidance data  by interviewing GSA officials and reviewing documentation, and  concluded the data were reliable for our purposes. We also interviewed  GSA headquarters and regional officials and obtained documentation on  how GSA manages space returned by agencies.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Agencies\u2019 Reported Baselines, Targets, and Fiscal Year 2016 Reductions", "paragraphs": ["FY 2016-  FY 2020 target  reduction  (118,127)", "Social Security Administration  Missed target and increased in space  Department of Health and Human  Services  (170,147)  (520,987) (15,466) (47,946)  (56,062)"], "subsections": [{"section_title": "CFO Act Agencies", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Maria Edelstein (Assistant  Director); Lacey Coppage; Edgar Garcia; Delwen Jones; Catherine Kim  (Analyst-in-Charge); Michael Mgebroff; Malika Rice; Kelly Rubin; and  David Wise made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-270", "url": "https://www.gao.gov/products/GAO-18-270", "title": "Inspectors General: Information on Vacancies and IG Community Views on Their Impact", "published_date": "2018-03-09T00:00:00", "released_date": "2018-03-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The IG Act established OIGs to conduct and supervise audits and investigations; recommend policies to promote economy, efficiency, and effectiveness; and prevent and detect fraud and abuse. The Inspector General Empowerment Act of 2016 included a provision for GAO to review prolonged IG vacancies during which a temporary appointee has served as the head of the office. This report addresses (1) the status of IG vacancies as of the end of fiscal year 2017, and the number and duration of IG vacancies for fiscal years 2007 through 2016, and (2) the IG community's views about how IG vacancies impact the OIGs' ability to carry out their duties effectively, including views on the impact on independence.", "GAO analyzed data related to IG vacancies; interviewed officials from the Council of the Inspectors General on Integrity and Efficiency (CIGIE); and conducted a web-based survey to obtain the views of (1) the 52 permanent IGs serving as of August 22, 2017; (2) 9 acting IGs who had served in OIGs that had vacancies of over 365 days during fiscal years 2014 through 2016; and (3) a stratified random sample of employees in OIGs with IG vacancies of over 365 days during fiscal years 2014 through 2016. Survey response rates ranged from 71 percent to 100 percent.", "CIGIE and nine OIGs provided technical comments, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["For the 10-year period covering fiscal years 2007 through 2016, 53 of the 64 IG Act OIGs experienced one or more periods of IG vacancy with the cumulative durations ranging from about 2 weeks to 6 years.", "Plan and conduct work. Overall, at least eight of the nine acting IGs responded \u201cno impact\u201d for the questions in this area. The estimated percentage of OIG employees who believed that working under an acting IG has \u201cno impact\u201d ranged by question from 49 percent to 69 percent, \u201cnegative impact\u201d ranged from about 8 percent to 24 percent, and \u201cpositive impact\u201d ranged from 6 percent to 13 percent.", "Interact with agency management. The responses of seven of the nine acting IGs and 63 percent to 65 percent of OIG employees indicated that an acting IG position had no impact in this area. Approximately 16 percent of the OIG employees believed that there was a negative impact on timely access to documentation, while 7 percent believed that there was a positive impact.", "Managing OIG and personnel. Four of the nine acting IGs and about 36 percent of OIG employees responded that an acting IG position had a negative impact on employee morale. An estimated 44 percent of employees believed that working under an acting IG had no impact on employee morale while about 10 percent believed it had a positive impact. Four acting IGs also responded that it had a negative impact on office restructuring.", "With regard to independence, GAO's survey of permanent IGs found that while the majority who responded did not think that acting IGs are inherently less independent, they did indicate by a similar majority that an acting IG is less independent in appearance than a permanent IG, especially when the acting IG is applying for the IG position."]}], "report": [{"section_title": "Letter", "paragraphs": ["Inspectors general (IG) play a key role in federal agency oversight by  enhancing government accountability and protecting the government\u2019s  resources. IGs have a unique oversight role under the Inspector General  Act of 1978, as amended (IG Act), including identifying areas for  improved economy, efficiency, and effectiveness through independent  and objective oversight; preventing and detecting fraud, waste, abuse,  and mismanagement; and recommending corrective actions. Among  other things, each IG provides oversight through audits and investigations  of the respective federal agency while maintaining an independent  working relationship with the agency head and Congress. However, in  recent years the number and length of IG vacancies have raised  questions about the effect of these vacancies on the ability of the offices  of inspector general (OIG) to carry out their statutory duties and  responsibilities.", "The Inspector General Empowerment Act of 2016 includes a provision for  GAO to review prolonged IG vacancies during which a temporary  appointee has served as the head of the office. This report addresses (1)  the status of IG vacancies as of the end of fiscal year 2017, and the  number and duration of IG vacancies from fiscal years 2007 through  2016, and (2) the views of the IG community on the impacts, if any, of IG  vacancies on the OIGs\u2019 ability to effectively carry out their duties,  including views on independence and permanent IG suggestions for  improvements in the appointment process. To address these objectives  we included in our scope the 64 active OIGs that were established under  the IG Act.", "To determine the status of IG vacancies as of the end of fiscal year 2017  and the number and duration of IG vacancies from fiscal years 2007  through 2016, we obtained vacancy data for fiscal years 2007 through  2017 from the Council of the Inspectors General on Integrity and  Efficiency (CIGIE) and a congressional website, and we confirmed that  information with the respective OIGs. We also interviewed CIGIE officials  to obtain an understanding of issues related to IG vacancies and discuss  the reliability of IG vacancy data.", "To obtain the views of the IG community\u2014specifically, permanent IGs,  acting IGs, and employees working under an acting IG\u2014we conducted a  web-based survey on the impact that a prolonged vacancy could have on  the OIG\u2019s ability to carry out its duties, including any impact on  independence. These surveys included both multiple choice questions  and open-ended questions for written responses to obtain the views of  the IG community on the impacts of vacancies, if any, and views on  independence, challenges, and positive outcomes. We surveyed (1)  permanent IGs serving as of August 22, 2017, to obtain their views on the  impact that an IG vacancy could have on an OIG\u2019s ability to conduct its  oversight, including any independence issues presented by acting IGs;  (2) acting IGs who had served in OIGs that had vacancies of over 365  days during fiscal years 2014 through 2016 to obtain their views on the  impact that a prolonged vacancy could have on an acting IG\u2019s ability to  carry out his or her duties, including any impact on independence; and  (3) employees of OIGs headed by acting IGs. For our survey of OIG  employees, we surveyed a stratified random sample of Senior Executive  Service (SES) and non-SES employees working in offices with an IG  vacancy that lasted over 365 consecutive days during fiscal years 2014  through 2016. Views expressed in the open-ended questions may not be  representative of all acting IGs, permanent IGs, or employees on given  topics. We did not assess the merits of the individual comments or  suggestions provided in response to the open-ended survey questions.  See appendix I for further details on the survey and our scope and  methodology.", "We conducted this performance audit from February 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The IG Act establishes OIGs both at select major federal agencies, called  establishments, and at some smaller agencies, called designated federal  entities (DFE), to conduct oversight of their programs and operations.  The IG Act also sets out, among other things, (1) the duties and  responsibilities of each IG with respect to the entity within which its office  is established; (2) how IGs are appointed, whether by the President with  the advice and consent of the Senate, or by the head of the DFE; and (3)  the processes for removing an IG."], "subsections": [{"section_title": "Duties, Responsibilities, and Authorities under the IG Act", "paragraphs": ["The IG Act established OIGs to be independent and objective units to (1)  conduct and supervise audits and investigations relating to the programs  and operations of government establishments; (2) provide leadership and  coordination and recommend policies for activities designed to promote  economy, efficiency, and effectiveness in the administration of and to  prevent and detect fraud and abuse in such programs and operations;  and (3) provide a means for keeping the head of the agency and  Congress fully and currently informed about problems and deficiencies  relating to the administration of such programs and operations and the  necessity for and progress of corrective action.", "IGs covered by the IG Act have been granted broad oversight authority,  including to  conduct, supervise, and coordinate audits and investigations; directly access the records and information related to the applicable agency\u2019s programs and operations; request assistance from other federal, state, and local government agencies; subpoena information and documents; administer oaths when conducting interviews; hire staff and manage their own resources; and receive and respond to complaints from agency employees, whose identities are to be protected.", "In addition to their duties, responsibilities, and authorities in conducting  their oversight work, IGs derive independence through numerous  provisions in the IG Act. These provisions include the following:  the requirement that IGs be appointed without regard to political affiliation and solely on the basis of integrity and demonstrated ability; the authority to select, appoint, and employ OIG officers and employees, as noted above; the authority of IGs to report violations of law directly to the Department of Justice; the requirement for agency heads to transmit the IGs\u2019 semiannual reports of their activities to Congress without alteration; the authority of IGs to perform any audit or investigation without interference from the agency head or others except under certain conditions specified by the act; and the requirement for the President or the agency head to communicate to Congress the reasons for removing an IG."], "subsections": []}, {"section_title": "IGs Established by the IG Act and the Appointment Process", "paragraphs": ["The IG Act establishes the basis on which an IG is to be appointed; which  OIGs are required to have presidentially appointed, Senate confirmed  (PAS) IGs; and which are DFE OIGs, with IGs appointed by the heads of  the agencies. For the purposes of the IG Act, subject to some specifically  enumerated exceptions, the head of the DFE is the DFE\u2019s board or  commission, or if an entity does not have a board or commission, any  person or persons designated by statute as the head of the DFE.", "Of the 64 active IG offices established under the IG Act, 32 have PAS IGs  and 32 have DFE IGs. Both PAS and DFE IGs are required to be  appointed without regard to political affiliation and solely on the basis of  integrity and demonstrated ability in accounting, auditing, financial  analysis, law, management analysis, public administration, or  investigations. See table 1 for a list of PAS and DFE agencies as  designated by the IG Act.", "The process for appointing PAS IGs generally has three main steps: (1)  President\u2019s selection and nomination, (2) Senate\u2019s evaluation and  confirmation, and (3) President\u2019s official appointment. CIGIE assists the  White House Office of Presidential Personnel (OPP) in the vetting of  candidates for the IG nomination process. According to CIGIE officials,  CIGIE\u2019s Candidate Recommendations Panel receives r\u00e9sum\u00e9s for  potential candidates in various ways, including submissions from  interested candidates through a link on the CIGIE website. The CIGIE  panel also proactively reaches out to potential candidates who members  of this panel believe would be good choices for IG positions.", "According to a CIGIE official, during the prior administration, the panel  reviewed r\u00e9sum\u00e9s from potential IG candidates and sent the r\u00e9sum\u00e9s of  those most qualified to the White House OPP for its process. Under the  current administration, the CIGIE panel conducts interviews of potential  IG candidates in addition to reviewing r\u00e9sum\u00e9s, and then refers those  candidates that the panel deems the most qualified to the White House  OPP. CIGIE\u2019s panel assesses potential candidates\u2019 leadership philosophy  and skills, as well as their understanding of the independent, non-partisan  role of an IG.", "PAS IGs may be removed from office by the President, who must  communicate the reasons for removal in writing to both Houses of  Congress not later than 30 days before the removal.", "A DFE IG is appointed by the head of the entity in accordance with the  applicable laws and regulations governing appointments within that entity.  DFE IGs do not require presidential appointment or Senate confirmation.  DFE IGs may be removed from office by the agency heads, or for an  entity led by a board or a commission, removal requires written  concurrence of a two-thirds majority of the board or commission. Similar  to the President removing a PAS IG, the head of the entity must  communicate the reasons for removal in writing to both Houses of  Congress not later than 30 days before the removal.", "After a PAS IG retires or otherwise leaves office, the Federal Vacancies  Reform Act of 1998 (Vacancies Act) instructs the official previously  serving as first assistant to the vacant position to perform the duties of  that position in an acting capacity, absent other action by the President.  For DFE OIGs, acting IGs may be appointed according to laws,  regulations, and policies governing appointments for each agency.  Neither the IG Act nor the Vacancies Act places limits on the authority of  acting IGs (relative to that of officially appointed IGs) to carry out the  statutory responsibilities of the IG. However, the IG Act\u2019s requirement  for congressional notification prior to removal of a permanent IG does not  apply to an acting IG."], "subsections": []}]}, {"section_title": "IG Vacancies as of Fiscal Year 2017 and the Number and Duration of IG Vacancies for Fiscal Years 2007 through 2016", "paragraphs": ["As of September 30, 2017, there were 12 IG vacancies in the 64 IG Act  offices. Over the 10-year period covering fiscal years 2007 through 2016,  the total number of IG vacancies varied with a low of 6 total vacancies as  of the end of fiscal year 2007 to a high of 11 vacancies as of the end of  fiscal years 2009, 2014, and 2016. In addition, some OIGs experienced  prolonged continuous vacancies ranging from over 1 year to  approximately 6 years."], "subsections": [{"section_title": "Twelve IG Positions Were Vacant as of September 30, 2017", "paragraphs": ["As of September 30, 2017, there were 12 IG vacancies consisting of 10  vacancies in PAS IGs and 2 in DFE IGs, as shown in table 2. Two of  these vacancies had presidential nominations that were awaiting Senate  evaluation as of September 30, 2017. During fiscal year 2017, four OIGs  had an IG position that became vacant: Small Business Administration,  Federal Election Commission, Department of Housing and Urban  Development, and Tennessee Valley Authority."], "subsections": []}, {"section_title": "Number of IG Vacancies Varied from Fiscal Years 2007 through 2016", "paragraphs": ["For the 10-year period from October 1, 2007, through September 30,  2016, the total number of IG vacancies at the ends of the fiscal years  ranged from 6 to 11 vacancies, as shown in figure 1. For the PAS IGs,  the number of IG vacancies increased from 3 at the end of fiscal year  2007 to 9 at the end of fiscal year 2016. For DFE IGs, the number of IG  vacancies ranged from 0 to 4 vacancies at the ends of the fiscal years  during the 10-year period."], "subsections": []}, {"section_title": "The Cumulative Duration of IG Vacancies Ranged from Less Than 1 Month to Almost 6 Years for Fiscal Years 2007 through 2016", "paragraphs": ["From October 1, 2006, through September 30, 2016, 53 of the 64 IG Act  offices experienced vacancies, as shown in figure 2. Of the 32 PAS IGs,  26 experienced at least one vacancy during the 10-year period with the  cumulative duration ranging from 25 days to 5 years and 258 days. Of the  32 DFE IGs, 27 experienced at least one vacancy during the 10-year  period with the cumulative duration ranging from 13 days to 3 years and  67 days.", "Of the 26 PAS IGs that had vacancies during the 10-year period from  fiscal years 2007 through 2016, 20 experienced at least one vacancy with  a cumulative duration of more than 1 year, and for 11 of these IGs the  cumulative vacancy period was over 3 years, as shown in figure 3. In  addition, 5 of the 20 agencies with a cumulative IG vacancy of 1 year or  more were the result of the agency experiencing two or more periods of  IG vacancy over the 10-year period.", "The Department of State experienced the longest period of continuous  PAS IG vacancy during the 10-year period, with 5 years and 258 days  without a permanent IG. The Department of State IG vacancy began on  January 16, 2008, and no nomination was made by the President until  June 27, 2013. The nominee was confirmed by the Senate on September  17, 2013, and the vacancy ended on September 30, 2013.", "The Department of the Interior experienced the second longest PAS IG  vacancy during the 10-year period, with 4 years and 273 days without a  permanent IG as of the end of fiscal year 2016, and the vacancy  remained as of the end of fiscal year 2017. The Department of the Interior  IG vacancy began on January 1, 2012. The acting IG was nominated by  the President on June 8, 2015. The nomination was received in the  Senate and referred to the Committee on Energy and Natural Resources,  which held a hearing on October 20, 2015. The nomination was returned  to the President on January 3, 2017, under the provisions of a Senate  rule that require nominations that are not confirmed or rejected during the  congressional session be returned to the President. Once returned, the  Senate will not consider the nomination until the President provides the  Senate a new nominee.", "Other PAS IGs experienced several vacancies throughout the 10-year  period. For example, the Department of Defense OIG had four periods of  vacancy from fiscal years 2007 through 2016, two of them 1 year or  longer, and one that began in January 2016 and remained vacant as of  September 30, 2016.", "Of the 27 DFE IG offices that experienced IG vacancies during the 10- year period from fiscal years 2007 through 2016, 12 experienced at least  one vacancy with a cumulative duration of more than 1 year as shown in  figure 4. In addition, 5 of the 12 agencies with a cumulative IG vacancy of  1 year or more were the result of the agency experiencing two or more  periods of IG vacancy over the 10-year period.", "The U.S. International Trade Commission (USITC) experienced the  longest continuous DFE IG vacancy during the 10-year period, with 3  years and 67 days without a permanent IG. The position was filled and  the vacancy ended on December 6, 2009. In fiscal year 2011, we  reported that the USITC OIG lacked an appointed IG and adequate  budget and staff resources for fiscal years 2005 through 2009, which  contributed significantly to the OIG\u2019s limited oversight of USITC. We  recommended that the Chairman of USITC revise formal orientation  information provided to the commissioners to include sections on, among  other things, the responsibilities of the Chairman to maintain an appointed  IG. USITC implemented these recommendations. The National Archives  and Records Administration experienced the second longest DFE IG  vacancy during the 10-year period, with 2 years and 190 days without a  permanent IG. The vacancy started when the IG was placed on  administrative leave, which lasted from September 14, 2012, until August  9, 2014. The National Archives and Records Administration was not able  to replace the IG during this time. The position was eventually filled on  March 23, 2015."], "subsections": []}]}, {"section_title": "Acting IG, OIG Employee, and Permanent IG Views on the Impact of IG Vacancies, and Permanent IG Suggestions for Improving the Appointment Process", "paragraphs": ["We surveyed the acting IGs and OIG employees who worked under an  acting IG among the 64 active OIGs established under the IG Act and  asked for their views on the impact that having an acting IG has on an  OIG\u2019s ability to carry out its duties and responsibilities. While overall the  survey responses indicated that having an acting IG had no impact on the  OIGs\u2019 ability to perform their statutory functions, responses varied in  areas related to (1) planning and conducting work, (2) interacting with  agency management, and (3) managing the OIG and personnel. In  addition, a number of survey responses also pointed to challenges or  positive outcomes in their experiences of working under an acting IG, and  certain permanent IGs provided suggestions for improvements in the IG  appointment process. For details on our survey methodology, see  appendix I."], "subsections": [{"section_title": "Acting IG and OIG Employee Views on the Impact of IG Vacancies", "paragraphs": [], "subsections": [{"section_title": "Views on the Impact of IG Vacancies on the OIG\u2019s Ability to Plan and Conduct Work", "paragraphs": ["Acting IGs: When asked whether, during their tenure as acting IGs, the  vacancy had a positive impact, negative impact, or no impact on several  areas related to the OIG\u2019s ability to plan and conduct work, overall, at  least eight of the nine acting IGs indicated that having an acting IG had  no impact on the OIG\u2019s ability to plan and conduct work. Table 3  summarizes the responses from the acting IGs related to the OIG\u2019s ability  to plan and conduct audit work.", "One of the nine acting IGs reported that the vacancy had a positive  impact on developing comprehensive work plans for audits,  investigations, and other OIG work, as well as addressing high-risk and  high-priority issues.", "OIG employees: As shown in figure 5, the estimated percentage of OIG  employees who worked under an acting IG who believe this has no  impact ranged by question from 49 percent to 69 percent for the areas  related to the OIG\u2019s ability to plan and conduct audit work. In contrast,  based on our survey results, almost a quarter of the OIG employees  believed that working under an acting IG had a negative effect on their  OIG\u2019s ability to complete reports and other OIG work products in a timely  fashion, issue high-visibility or high-risk reports, and address high-risk  and high-priority issues. According to the survey results, from 6 percent to  13 percent of the employees found a positive impact in these areas.", "We also asked OIG employees to identify any additional challenges, in  written comments, that they experienced in relation to their work under an  acting IG. Four OIG employees provided responses related to the ability  to plan and conduct work, specifically, on the timely completion of reports  and other OIG work products, as noted in the following examples of  individual comments:  \u201cHowever,  seemed to struggle to \u2018see the forest through the trees\u2019 and the timeliness (and associated impact) of our work suffered significantly.\u201d \u201cSometimes it would take longer to get a report out because  were  a review from the  IG.\u201d", "We also asked OIG employees to identify any positive outcomes or  improvements based on their experiences with working under an acting  IG. The following are some OIG employee written responses that were  received regarding positive outcomes or improvements, which were  related to the acting IG\u2019s ability to plan and conduct work.", "The acting IG came from within the OIG. Thirteen OIG employees  provided comments related to the acting IG coming from within the OIG  ranks and having expertise in the agency issues, as noted in the following  examples of individual comments:  \u201cOur acting IG was already a part of our OIG when appointed. Thus, they were already invested in the mission, our offices, and staff.\u201d \u201cThe acting Inspector General had significant experience with agency management, and with our office processes and procedures, so products were issued timely.\u201d \u201cA positive  is that the acting Inspector General usually comes with a wealth of knowledge about the OIG\u2019s current practices and can hit the ground running to keep things moving along effectively.\u201d \u201cBecause of the acting IG\u2019s investigative background as well as his lack of interest in further political appointment I think we actually got more done than under the former and current IG.\u201d"], "subsections": []}, {"section_title": "Views on the Impact of IG Vacancies on the OIG\u2019s Ability to Interact with Agency Management", "paragraphs": ["Acting IGs: When asked whether, during their tenure as acting IGs, the  vacancy had a positive impact, negative impact, or no impact on the  OIG\u2019s ability to interact with agency management, seven of the nine  acting IGs indicated that there was no impact on the OIG\u2019s ability to  interact with the agency. Other acting IGs indicated a positive impact in  regard to responsiveness from agency management, meeting with senior  agency leadership, responsiveness of agency to recommendations, and  timely access to agency documentation. One of the nine acting IGs  indicated a negative impact regarding responsiveness of the agency to  recommendations, and another saw a negative impact in timely access to  agency documentation, as summarized in table 4.", "While the majority of the acting IGs responded that there was no impact  in interactions with agency management, in commenting about  challenges faced during their acting IG tenure that affected their ability to  carry out their responsibilities, one acting IG commented that agency  managers failed several times to disclose relevant information that  affected both the results and timeliness of the OIG\u2019s audit work. In  addition, one acting IG found that agency officials were more open to  recommendations and more supportive of the OIG during the acting IG\u2019s  tenure than under the previous permanent IG tenure.", "OIG employees: As shown in figure 6, we estimate that 63 percent of the  OIG\u2019s employees working under an acting IG believed that there was no  impact on the responsiveness from agency management and an  estimated 65 percent believed that there is no impact on timely access to  agency documentation. Based on our survey results, the estimates for  positive impact ranged from 7 percent to 9 percent, and approximately 17  percent of the OIG employees believed that working under an acting IG  has a negative impact on these two areas.", "Acting IGs: Responses of the acting IGs regarding their ability to  manage the OIG and employees varied by question, as summarized in  table 5. For example, regarding employee morale, four of the nine acting  IGs indicated that an acting IG leading the office had a negative impact,  three indicated that the vacancy had a positive impact, and one indicated  that the vacancy had no impact.", "In written comments included in the survey, three acting IGs provided  additional information regarding restructuring the office and developing or  changing office policy. Specifically, two acting IGs indicated a reluctance  to make changes that could not be easily reversed by an incoming  appointed IG or to \u201cshake up the organization\u201d only to experience further  changes once an IG was in place. The third acting IG identified  constraints as typical for acting officials in making personnel, policy, or  organizational changes, especially when the length of the tenure as the  acting official is unknown.", "We also asked the acting IGs if they had faced any challenges during  their tenure that affected their ability to carry out their statutory duties and  responsibilities. Of the three acting IG respondents who answered \u201cyes,\u201d  two provided written responses citing challenges in the area of OIG  management and personnel, such as difficulty in promotions and hiring  decisions and OIG employee resistance to changes. For example, one  acting IG indicated that the acting IG needed to get a special delegation  from the agency to approve certain office promotions and hiring  decisions. Another acting IG indicated the agency\u2019s Office of General  Counsel had to resolve a matter involving an employee who refused to  relinquish his or her duties after the acting IG\u2019s decision to reassign the  employee.", "OIG employees: As shown in figure 7, just over 50 percent of the OIG  employees working under an acting IG believe that an acting IG had no  impact or a positive impact on these two areas. We also estimate that  about 36 percent of the OIG employees believed that working for an  acting IG negatively affected employee morale and about 23 percent  believed that it negatively affected the ability to attract and retain qualified  employees.", "We asked OIG employees to identify any additional challenges they have  experienced in relation to their work under an acting IG. Eighty-three  employees provided written responses, and 65 of those responses were  related to areas that affect the ability to manage the OIG and its  personnel, which are summarized below.", "Strategic planning. Nineteen OIG employees provided comments  related to difficulty in strategic planning, as noted in the following  examples of individual comments:  \u201cAn acting IG is a caretaker, someone internal who is expected to maintain the status quo. Therefore, having an acting IG in place for an  extended period may have delayed the implementation of reforms or  bold changes that would normally be expected from new leadership.\u201d  \u201cInternal processes, which may need to be changed, may not change in anticipation of the new leadership.\u201d \u201cCertain decisions such as \u2018strategic vision\u2019 or filling high-level positions within the organization may be delayed pending appointment of a permanent IG.\u201d \u201c are not as willing to make changes at the agency because it may not be what the new  IG wants. [Acting IGs] are more stewards of the organization until the new IG arrives.\u201d", "Uncertainty. Fifteen OIG employees provided comments related to the  uncertainty within the OIG, as noted in the following examples of  individual comments:  \u201cThe ability to make long-term decisions is affected due to uncertainty  incoming Inspector General will support the decisions made by the acting Inspector General.\u201d \u201cWaiting for a permanent selection and the uncertainty as to the future impact of the person selected is disconcerting. It also negatively affects employee morale and motivation.\u201d \u201cWorking under an acting Inspector General creates a climate of uncertainty within the organization . . . . They   hesitate to make a decision that would be contrary to the views and/or opinions of the new IG and put them in what they perceive to be a bad light.\u201d \u201cI think the biggest challenges we had were related to employee morale and the direction of the organization as a whole. Employees did not know who was going to permanently lead the organization, or when the decision would be made on this.\u201d", "Staffing. Twelve OIG employees provided comments related to  addressing staffing needs or issues with staffing, as noted in the following  examples of individual comments:  \u201cThere were several difficulties related to meeting human resource needs without the proper authority to make decisions such as removals, promotions and/or bonuses.\u201d \u201cIssues with staffing could not be finalized pending the appointment of a new  IG.\u201d \u201cEveryone except a select few in the OIG senior staff was leaving.\u201d", "Morale. Eight OIG employees provided comments related to morale  issues, as noted in the following examples of individual comments:  \u201cPromotions were unnecessarily delayed under the acting IG. Not good for morale.\u201d \u201cCertain issues relating to personnel management were left unaddressed or dismissed (i.e., problem managers)  morale to dip among staff members.\u201d \u201cThe acting IG appeared to have the need to prove to the agency what power they had. This, in effect, caused a great discord amongst not only agency  management and  OIG, but also between the OIG and the rest of the agency that we are still working to overcome.\u201d", "Lack of leadership and office structure. Eight OIG employees provided  comments related to the lack of leadership and office structure, as noted  in the following examples of individual comments:  \u201c management organization was seemingly dysfunctional. In part, because alliances  likely to change once  permanent IG .\u201d \u201cThere isn\u2019t a sense of real structure without  IG.\u201d \u201cLack of guidance on ongoing audits at that time. The acting IG wore too many hats: Acting IG, Assistant IG for Audits, and Assistant IG for Investigations.\u201d", "Acting IGs are risk-averse pending permanent IG nomination. Two  OIG employees provided the following comments related to the pending  IG nomination:  \u201cI think it\u2019s fair to say, although granted, it is a generalization, that an acting IG is more likely to be tentative and risk-averse than a fully confirmed IG. Also, within the OIG itself, senior staff may likewise be tentative and risk-averse knowing that new leadership is in the wings.\u201d \u201cThe acting IGs are always hesitant to make waves . . . . One of them was in the process of being nominated, so  didn\u2019t want  to do anything that could be seen as controversial or unpopular with  staff. It  the status quo being continued until a new official is  confirmed.\u201d", "Negatively affects budget discussions. One employee provided the  following comment related to budget discussions: \u201cIn budget discussions  with Congress and the administration, there is no trust that the acting IG  understands the will of Congress . . . or has administration support.\u201d", "We also asked OIG employees to identify any additional positive  outcomes or improvements, in written comments, based on their  experience from having an acting IG. Sixty-five employees provided  written responses, and 12 of those responses related to the acting IG\u2019s  ability to manage the OIG and personnel, which are summarized below.", "Higher morale. Twelve OIG employees provided comments related to  higher morale with an acting IG, as noted in the following examples of  individual comments:  \u201c scores  remarkably higher under .\u201d \u201cThe acting IG, a career civil servant, established trusting relationships meant for the long haul with the leadership team and staff, and also members of the overseen agency, and with the Congress. Morale was high and productivity was exceptionally high.\u201d \u201cI believe that the morale and overall quality of work that I witnessed at OIG offices during the tenures of the two acting IGs that I worked for was superior to that of offices that I worked in under one or more Senate-confirmed IGs.\u201d"], "subsections": []}]}, {"section_title": "Acting IG, Permanent IG, and OIG Employee Views on the Impact of IG Vacancies on the Ability to Maintain Independence and Permanent IG Suggestions regarding Independence", "paragraphs": ["The following summarizes (1) responses from acting IGs, permanent IGs,  and OIG employees regarding the impact, if any, of a prolonged vacancy  on the OIG\u2019s ability to maintain independence and (2) permanent IGs\u2019  suggestions on how to improve independence."], "subsections": [{"section_title": "Acting IG Views on the Impact of IG Vacancies on the Ability to Maintain Independence", "paragraphs": ["We asked acting IGs if they felt that serving as an acting IG instead of a  permanent IG created threats (such as self-interest threat or bias threat)  to their independence of mind or independence in appearance, and eight  responded \u201cno\u201d and one responded \u201cyes.\u201d  The eight acting IGs who  responded \u201cno\u201d to independence threats provided additional written  comments to explain their answers, as noted in the following examples of  individual explanations:  \u201cBecause I\u2019d been in the office since inception . . . I understood the importance of independence in all aspects.\u201d \u201cI was appointed to carry out the duties and functions of the IG and that is what I did to the best of my abilities. As an OIG employee, independence is always a factor, regardless of position and taking on additional duties and responsibilities did not impact that.\u201d \u201cI stated clearly and repeatedly to agency management and to Capitol Hill stakeholders that I was not interested in seeking the IG nomination on a permanent basis, in order to mitigate any concerns about independence or bias that could arise from seeking an appointment from officials I was charged with auditing/investigating.\u201d \u201cI declined the position of permanent Inspector General, in part to preserve my independence in the face of the potential conflict that could be perceived were I seeking the appointment. Serving in an acting capacity per se creates no threat to independence in fact or in  appearance insofar as I am concerned based on my experience.\u201d  \u201cServing as acting IG had no threats to independence.\u201d", "The acting IG that responded \u201cyes\u201d commented that there may be an  appearance of independence problem if the acting IG is lobbying for the  permanent position.", "We also asked the acting IGs if their independence was ever questioned  by agency officials or others because of their role. Eight of the nine acting  IGs answered \u201cno,\u201d while one acting IG answered \u201cyes\u201d and indicated that  an external entity had questioned the independence of the acting IG. The  acting IG further commented that certain Members of Congress had  questioned the independence of acting IGs."], "subsections": []}, {"section_title": "Permanent IG Views on the Impact of IG Vacancies on the Ability to Maintain Independence", "paragraphs": ["We asked 52 permanent IGs whether they felt that an acting IG is  inherently less independent than a permanent IG and whether an acting  IG is less independent in appearance. While the majority of permanent  IGs who responded did not think that acting IGs are inherently less  independent, they did indicate by a similar majority that an acting IG is  less independent in appearance than a permanent IG, especially in  situations when the acting IGs are applying for the IG positions. Of the 49  IGs who responded to the question of whether an acting IG is inherently  less independent, 13 said \u201cyes,\u201d 30 said \u201cno,\u201d and 6 responded that they  had no basis for judgment, as shown in figure 8.", "Of the13 permanent IGs that answered \u201cyes\u201d to the acting IG being  inherently less independent, 12 provided written comments as noted in  the following examples of individual explanations.", "An acting IG who is a candidate for position. Six permanent IGs  provided comments related to an acting IG who is seeking the permanent  position, as noted in the following examples of individual comments:  \u201cIf the selecting officials (or recommending officials) are also subject to audit or investigation by the acting , and the acting  is interested in the permanent position they may actually be influenced to not report aggressively.\u201d \u201cThey  could be perceived as less independent if they are a candidate for the job and they often are.\u201d \u201cGenerally speaking, the position of Inspector General would be a desirable promotion for an acting IG (sometimes the Deputy IG). An acting/Deputy IG, interested in the IG position and striving to impress  the agency leadership/White House for consideration of the IG job,  could be less aggressive (independent) in an effort to please the  \u2018hiring official\u2019 (agency head/White House). Agency leaders/White  House understand this dynamic, so in order to avoid/minimize any  negative reports by the OIG, the agency heads can delay filling IG  positions in order to have more \u2018control\u2019 over their acting IG.\u201d", "Lack of Senate confirmation. Three permanent IGs provided comments  in this category related to an acting IG having less authority to deal with  agency officials and Congress than a permanent IG as the acting IG  lacked Senate confirmation, as noted in the following individual  comments:  \u201cNot having the full backing of the President, nor confirmation of the Senate, does not provide an even playing field when the IG negotiates with PAS agency heads and other PAS or senior level officials.\u201d \u201cFirst, because the agency knows that the acting IG is only temporarily in that position, the willingness of agency officials (particularly middle management and component leadership) to inappropriately respond to and challenge OIG oversight efforts increases. Second, an acting PAS IG (unlike a confirmed PAS IG) has not been approved for that position by the Senate and therefore doesn\u2019t have that stamp of approval if there is a need to respond to inappropriate efforts by the agency to interfere with the OIG.\u201d \u201cIn my experience, discussions between the Dept\u2019s  political leaders and the \u2018permanent,\u2019 politically-appointed IG (as well as between Congress and that IG) are different\u2014more frank\u2014in substance and tone.\u201d", "Of the 30 permanent IGs that answered \u201cno\u201d to the acting IG being  inherently less independent, 28 provided written comments as noted in  the following examples of individual explanations.", "An acting IG has the same statutory authority as a permanent IG.  Eight permanent IGs provided responses related to the acting IG having  the same statutory authority as a permanent IG and the OIG structure  having independence safeguards, as noted in the following examples of  individual comments:  \u201cBecause of the inherent structure of an OIG, with the independence safeguards that are derived from the IG Act, the Office of Inspector General should continue to be independent even if headed by an acting IG.\u201d \u201cAn acting IG has the same independence protections as a \u2018permanent IG\u2019.\u201d \u201c have the same statutory powers as an appointed IG to fulfill their role.\u201d", "Having a permanent title should not be a factor in independence.  Ten permanent IGs provided responses related to a permanent title not  being a factor in independence as the acting IGs are held to the same  standards and independence is driven by the acting IG\u2019s character and  background, as noted in the following examples of individual comments:  \u201cIndependence is a matter of personal mindset and perceptions drawn by others based on individual/Office actions. Having the permanent title is not a key element required in order for the above to effectively exist.\u201d \u201cAn acting IG can carry out his/her responsibilities as independently as a permanent IG; there are no inherent restrictions on their ability/capacity due solely to  status. It boils down to the individual involved and their willingness/ability to do so in the context in which they operate.\u201d \u201cThe independence resides in the position regardless of whether  being occupied by an acting or permanent IG.\u201d \u201cThe independence of an IG is largely driven by his or her character, background, and experience.\u201d \u201cIndependence is obtained by the characteristics of the individual in the position of Inspector General. Just because the person occupying the position is \u2018acting\u2019 does not mean they are not independent.\u201d", "An acting IG is usually a career OIG employee. Five permanent IGs  provided comments related to the acting IG being a career OIG employee  and knowing the importance of independence, as noted in the following  examples of individual comments:  \u201cCareer OIG employees place a high value on the independence of the office.\u201d \u201cGenerally acting IGs come from within the OIG and have long service in the community and an understanding of and commitment to the role of the IG.\u201d", "We also asked permanent IGs whether they felt that an acting IG is less  independent in appearance than a permanent IG. Thirty of the 49 IGs  who responded to this question answered \u201cyes\u201d and 13 answered \u201cno,\u201d as  shown in figure 9.", "Of the 30 permanent IGs who answered \u201cyes\u201d to this question, 27  provided written comments, some of which are summarized below.", "An acting IG will be less independent in appearance if he or she is  seeking the permanent position. Sixteen permanent IGs provided  comments related to an acting IG being less independent in appearance if  he or she is seeking the permanent position or perceived to be seeking  the permanent IG position, as noted in the following examples of  individual comments:  \u201cThere will always be an appearance issue regarding the judgment of an acting IG if that individual is seeking the permanent position.\u201d \u201cThere may be an appearance that an acting IG is less independent from the agency, particularly where he or she is seeking to become the permanent IG and needs the endorsement of the agency to move  forward. This scenario could create an appearance of, or an actual,  conflict of interest.\u201d  \u201cIf the incumbent aspires to the permanent appointment, I feel the designation as acting Inspector General carries the inherent risk that the incumbent may be vulnerable to political pressures, since the incumbent\u2019s chances of being appointed as the permanent Inspector General may be adversely influenced by sensitive or controversial decisions made during the period that he/she served as acting Inspector General.\u201d \u201cAn \u2018acting\u2019  may be reluctant to assert independence if the acting  believes that he or she may be in the running for the vacant IG job. This may create a conflict under certain facts.\u201d \u201cUnfortunately, if an acting IG is interested in becoming the IG, people who are looking for reasons to find fault with their work can make an argument that they are pulling punches to better their chances of being selected. I don\u2019t think this is true in most cases, but the argument is made.\u201d", "An acting IG is also perceived as less independent. Six permanent  IGs provided comments related to an acting IG being perceived as less  independent by Congress, the public, and other organizations, as noted in  the following examples of individual comments:  \u201cI am aware of at least one instance where the press and certain Members of Congress speculated or implied that an acting IG who wanted to be considered for appointment as the IG was lenient toward the agency.\u201d \u201cCongress and the public . . . have both expressed this concern.\u201d \u201cThere is an inherent suspicion that the acting IG will pull his or her punches on audits and inspections in order to get nominated by the agency he is auditing.\u201d \u201cSome judge an acting IG for the actions they take or don\u2019t take through the prism of partisan politics and often unfairly ascribe decisions to the acting IG\u2019s interest in becoming an IG.\u201d", "Of the 13 permanent IGs who answered \u201cno,\u201d 11 provided written  comments, some of which are summarized below.", "Acting IGs have the same authority as permanent IGs. Three  permanent IGs provided comments related to an acting IG having the  same authority as a permanent IG, as noted in the following examples of  individual comments:  \u201cThe law doesn\u2019t change and tenets such as independence are the same regardless of whether you are acting or not.\u201d \u201cAn acting IG still heads an independent Office of Inspector General and as long as that office continues to act independently, there should be no appearance issue.\u201d \u201cThe acting Inspector General has the same authority as a permanent IG.\u201d", "Acting IGs should be able to perform their work independently. One  permanent IG provided the following comment related to an acting IG  performing his or her work independently: \u201cI don\u2019t necessarily think an  acting IG has an appearance of lack of independence per se. Again, I  think it depends on the acting IG, the agency, and the relationship  between the OIG and the agency.\u201d", "We also asked permanent IGs for suggestions on how the independence  of the acting IG role could be improved. Although the majority of  permanent IGs did not provide specific suggestions, the following  summarizes the 12 written responses received:", "Expedite the appointment process (7 respondents).", "Make acting IGs ineligible for the permanent position (1 respondent).", "Establish a legislative solution for filling positions quickly (1 respondent). Specifically, there should be requirements that (1) acting IGs be named within 30 days of vacancy and the IG position filled within a certain amount of time; (2) DFE IG positions be filled within 180 days of a vacancy, and if not, the agency head should be required to report every 30 days to the agency\u2019s oversight committees on the reason for delay; and (3) for PAS IG positions, a candidate should be nominated within 180 days.", "For visibility, make clear whether the acting IG is under consideration for the permanent position (1 respondent). The administration should do this for a PAS IG, and the agency should for a DFE IG.", "Extend statutory protection to acting IGs (1 respondent). \u201cThe independence of the acting Inspector General role could be improved by extending the same protections mandated for the Inspector General position to the acting Inspector General (as appropriately tailored for the temporary nature of the \u2018acting\u2019 role).\u201d", "Rotate the individuals who will be in the acting IG position (1 respondent).", "In addition to views on the acting IG\u2019s independence, we asked  permanent IGs to provide additional comments and identify any  challenges related to the acting IG role and prolonged IG vacancies.  Thirty-one written responses were provided for this question, some of  which are summarized below.", "Importance of permanent IGs. Six permanent IGs provided written  comments related to the importance of the permanent IG and  impediments in the role of acting IGs, as noted in the following examples  of individual comments:  \u201cProlonged IG vacancies are never good, and negatively impact the entire IG community and CIGIE because we need fully engaged IGs who can participate in IG and CIGIE business knowing that they will be in the position for the long-term and without wondering when and whether they will be replaced.\u201d \u201cIG vacancies  have been allowed to be vacant for years. While the role of an acting IG may be filled successfully, it is important to each agency/department to have a permanent IG who is appointed by the appropriate process.\u201d \u201cExtended vacancies undermine the system of checks and balances.\u201d \u201cI generally believe that it is detrimental for an OIG to have a prolonged IG vacancy with an acting IG. I believe that acting IGs may be disinclined to take necessary agency actions because of their temporary status. In addition, the acting IG is vulnerable to attacks on his or her independence, particularly where he or she is seeking a permanent position and requires the agency\u2019s endorsement.\u201d", "Effect on strategic planning. Eight respondents pointed out challenges  acting IGs face in long-term planning, as noted in the following examples  of individual comments:  \u201cOne of the biggest challenges to an acting IG may be the ability to make long-term plans for the organization.\u201d \u201cA prolonged vacancy creates a leadership gap for the OIG and the entity.\u201d \u201cActing IGs do not feel empowered to take on new initiatives or projects on behalf of the office, and may feel inhibited in terms of management issues, including hiring.\u201d", "Authority. Four respondents commented on the need for authority  provided by permanent leadership, as noted in the following examples of  individual comments:  \u201cRegardless of whether the discussion is focused on acting IG positions or any acting leadership position (within Mission or otherwise), there is some level of authority in terms of institutional impact and ability to effect change that comes from knowing those advancing mission have some level of anticipated continuity in service and ability to see things through.\u201d \u201cThe acting  did a remarkable job at getting the office through a very difficult time, but largely saw  as a caretaker. [The acting IG] did not feel comfortable doing the things that I immediately recognized needed to be done. The Office\u2019s work got little traction while the acting  was in charge, in part because the Office was without a permanent leader and the agency did not feel compelled to pay attention to OIG recommendations.\u201d \u201cI believe the greatest challenge to anyone in an acting role has more to do with authority than it has to do with independence . . . . I believe  it is often difficult for anyone in an acting position to think long-term  and make decisions that have long-term implications because they (1)  have no idea how long they will be acting and (2) may be overruled or  have decisions reversed by a permanent appointee. So I think acting  individuals tend to \u2018keep the home fires burning\u2019 as well as they can  but don\u2019t necessarily think in terms of leading the organization in the  direction it needs to go in the future, especially since they don\u2019t know  what the future will bring.\u201d", "OIG morale. Four respondents reported morale problems in OIGs without  a permanent IG, as noted in the following examples of individual  comments:  \u201cProlonged vacancies in senior leadership positions, whether in an OIG or other government offices, can lead career employees to lose their focus and their dedication to fulfill the mission of the office. When new leadership is finally put into place, it often encounters stiff resistance to any changes because the employees have enjoyed being \u2018home alone\u2019.\u201d \u201cThe prolonged vacancy at the agency diminished the stature of the office and did not make it an inviting place for experienced oversight staff to want to work.\u201d", "IG vacancies seen as lack of support. Five respondents reported that  prolonged vacancies are seen as a lack of congressional or agency  support for the OIG, as noted in the following examples of individual  comments:  \u201cProlonged vacancies in the IG position . . . can be viewed by some as a lack of support for the IG oversight mission on the part of the Administration and Congress.\u201d \u201cAny individual serving in any position with the word \u2018acting\u2019 in front of it inherently carries less authority than the same individual in the same position serving in a permanent capacity. The longer an IG position is left vacant the greater the appearance that the agency does not want to have an IG providing oversight.\u201d"], "subsections": []}, {"section_title": "OIG Employees\u2019 Views on the Impact of IG Vacancies on the Ability to Maintain Independence", "paragraphs": ["OIG employees\u2019 views on the inherent independence of an acting IG as  compared to the independence of a permanent IG are summarized in  figure 10.", "Based on our survey, we estimate that 16 percent of the OIG employees  believe that an acting IG is inherently less independent than a permanent  IG. Of the employees who responded \u201cyes,\u201d 25 provided written  explanations along with their answers, some of which are summarized  below.", "The acting IG may be seeking a permanent position. Eleven OIG  employees provided comments related to the acting IG seeking a  permanent position, as noted in the following examples of individual  comments:  \u201cIf interested in permanent appointment, there is a risk that  acting IG becomes more interested in being liked by and pleasing the agency, thus independence could be impaired.\u201d \u201cAn acting Inspector General may be seeking an IG appointment. He/she wants the agency to like him, to support his nomination, and may kowtow  to them. This dynamic may result in a \u2018don\u2019t rock the boat\u2019 mentality.\u201d \u201cIf the acting IG is going to be a candidate for the IG position, and is appointed by the head of the agency, they may stay away from reviewing sensitive issue areas.\u201d", "The acting IG came from within the OIG. Three OIG employees  provided comments related to the acting IG selected from within the OIG  having preconceived notions, as noted in the following examples of  individual comments:  \u201cOur acting Inspector General was previously the  IG for Audits and Evaluation. As such,  entered the position with substantial preconceived notions about the other directorates. In contrast, our permanent IG came to the position with limited preconceived notions. In the future, it would be better if the Acting IG came from another IG (as opposed to temporarily promoting from within).\u201d \u201cI believe that an acting IG is inherently less independent because he or she has no official term, may either receive an appointment as IG, or be replaced at the discretion of the President.\u201d \u201cBring in an acting IG from another agency for independence reasons or  ensure other acting positions are filled and the acting IG is not performing multiple roles.\u201d", "Based on our survey, we estimate that 52 percent of the OIG employees  believe that an acting IG is not inherently less independent than a  permanent IG. Of the 71 employees who responded \u201cno\u201d to this question,  56 provided written explanations, some of which are summarized below.", "There is no difference between the permanent IG and an acting IG.  Eighteen OIG employees provided comments related to the acting IG and  permanent IG as having no difference, as noted in the following examples  of individual comments:  \u201cWe saw absolutely no difference in the independence of the acting IG  the appointed IG.\u201d \u201cThe acting title (as compared to a permanent IG title) is irrelevant. It ALL comes down to the specific individual occupying the position.\u201d \u201cThe Inspector General is independent by law. The authority of the position is the same, whether it is filled by an acting IG or a permanent IG. . . . I have not encountered circumstances in which I felt the acting IG was inherently less independent.\u201d \u201cThe acting IG at  was the Deputy IG who is a strong ethical and principled leader. There was no change to our mission, focus, or independence, nor in our ability to conduct our work. To suggest that, merely because there was an acting IG, independence was inherently compromised is unfounded, bespeaks a lack of understanding of OIG standards and ethics, and is just wrong.\u201d \u201cThe acting IG served as any IG would be expected to in the area of independence. No difference there.\u201d", "An acting IG is independent. Nineteen OIG employees provided  comments related to the acting IG\u2019s independence, as noted in the  following examples of individual comments:  \u201cBased on my experience, both acting IGs were career OIG employees  understood and embraced independence.\u201d \u201cI felt the acting IG was very independent and did a fantastic job.\u201d \u201cAll persons within the OIG are to be objective and independent, no matter their position.\u201d \u201c acting IG  the same level of independence that is expected of all IG employees.\u201d \u201c acting IG is as independent as our previous  and is not hesitant to report problems and weaknesses to Congress.\u201d", "An acting IG and permanent IG follow the same independence  standards. Six OIG employees provided comments related to the acting  IG and permanent IG as having the same independence standards, as  noted in the following examples of individual comments:  \u201cThe acting  is subject to the same standards.\u201d \u201cThe acting IG is just as important and they adhered to all the laws and regulations as the  IG.\u201d \u201cActing or permanent, they are held to the same standards of independence.\u201d", "An acting IG position is not less independent. Six OIG employees  provided comments related to the acting IG position not being less  independent and depending on the individual in the role, as noted in the  following examples of individual comments:  \u201cWhether an acting IG is able to maintain independence is dependent upon the person holding the position and his or her confidence, strength of character, leadership capabilities and subject matter expertise. The same is true for  IGs.\u201d \u201cIt depends on the individual. If a particular acting IG is a strong person, who puts aside any desire to pander to the agency head in the hope of being made permanent, there would be no effect on his/her independence.\u201d", "We also asked OIG employees to identify any additional challenges they  experienced in relation to working under an acting IG. Overall, 83  employees provided written responses, and 4 of those responses were  additional challenges related to OIG independence, as noted in the  following examples of individual comments:  \u201cHaving worked in  OIGs and  observed functioning in other OIGs, the acting IG issue seems serious. There are subtle pressures to go along with management. Few acting IGs deliberately decide to compromise their principles, but many seem to wind up doing so.\u201d \u201cBecause the acting IG wanted to gain the support of others,  was not independent.\u201d \u201cThe one challenge I am concerned  with an acting IG is if that person has applied for the IG position and will not commit to certain decisions that will negatively impact their opportunity to obtain the permanent position as IG.\u201d", "We also asked OIG employees to provide suggestions on how the  independence of the acting IG role could be improved. The majority of the  25 respondents who provided written comments to this question did not  provide suggestions for improving the independence. The comments that  provided suggestions are summarized below:  Timely appoint an IG (4 respondents).", "Consult with other CIGIE IGs to help monitor and assess the acting IG based on clear criteria and expectations (1 respondent).", "Limit the amount of time an acting IG can serve (1 respondent).", "Bring in an acting IG from another agency for independence reasons or ensure that other acting positions are filled and the acting IG is not performing multiple roles (1 respondent)."], "subsections": []}]}, {"section_title": "Suggestions from Permanent IGs for Improving the Appointment Process", "paragraphs": ["Prolonged IG vacancies have been the subject of congressional hearings  because of the importance of these key oversight positions. Delays in  the presidential nomination and Senate confirmation process for all  positions filled by this process, including PAS OIGs, have also been the  subject of recent academic studies. For example, a recent study that  explored the failure of nominations and the delay in confirmation of  successful nominations across recent administrations from 1981 to 2014,  found that nominations for the IG position had about a 24 percent failure  rate. Given that in recent years, certain OIGs have experienced  prolonged IG vacancies, especially IGs that require presidential  nomination and Senate confirmation, we asked the 52 surveyed  permanent IGs to provide comments on their experience with the  appointment process and any suggestions for improving the process and  minimizing the duration of IG vacancies. Comments were provided by 45  permanent IGs in these areas, including eight suggestions to minimize  the duration of IG vacancies, as noted in the following individual  comments:  \u201cOne thing that could be improved  an agreement between the , Congress and  on a  format for  information. I was required to provide essentially the same information (with small variations) three times. But the precise formatting and framing of the questions [asked of the nominees] was different in each case, taking time and creating the possibility of inconsistencies.\u201d \u201cA possible suggestion would be to improve the timeliness of the selection, vetting, and confirmation process of IGs, particularly given the current number of vacancies. IGs play a vital role in ensuring that government programs and operations are functioning efficiently and effectively, and greater emphasis on the part of the White House and Congress to nominate and confirm IGs in a timely manner would provide great benefit.\u201d \u201cI believe the process could be improved by streamlining the number of committees involved so that each nominee need only obtain approval from one committee.\u201d \u201cWhile I worked through the paperwork requirements efficiently, it was a tremendous lift and I wonder if all that is required is necessary and in the form it took. I found a good degree of duplication in what was asked of  from the  . . . and Senate. I think there are opportunities to streamline with better coordination.\u201d \u201c a timeline from start to finish would be helpful. I also recommend that Congress prioritize IG confirmations above most other confirmations.\u201d \u201cFaster consideration and vote would be useful.\u201d \u201cThe Senate  be required to act on IG candidates within 90 days of their nomination by the President.\u201d \u201cAlthough I think it is very important for any IG to have a strong working relationship with the agency head, it seems inappropriate for the agency head to have a strong voice in selecting the nominee for a residentially appointed, Senate-confirmed IG who is supposed to provide independent oversight of the agency. I suggest changing the process to omit the pre-selection interview with the agency head and substitute instead  a pre-nomination courtesy meeting.\u201d"], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to CIGIE for comment and CIGIE  shared the draft with the 64 OIGs active under the IG Act. CIGIE and the  OIGs at the National Credit Union Administration and U.S. Election  Assistance Commission provided written comments, which are discussed  below and reprinted in appendixes II, III, and IV, respectively.", "CIGIE expressed appreciation for the review and analysis efforts that we conducted for the purposes of this report. CIGIE also noted some information regarding the Central Intelligence Agency IG and the Intelligence Community IG, which were outside the scope of our work.", "CIGIE stated that both IGs are PAS and that the Central Intelligence  Agency IG position has been vacant for over 3 years.", "The National Credit Union Administration OIG stated that while it did not have a vacancy during the 10-year period we reviewed, it agreed that looking at this area to reduce IG vacancies is an important endeavor.", "The U.S. Election Assistance Commission OIG expressed concurrence with the facts as they pertain to its office and stated that the report will contribute to improving the appointment process for IGs.", "In addition, CIGIE and the OIGs at the Appalachian Regional  Commission, Denali Commission, Department of Commerce, Department  of Education, Department of Housing and Urban Development, Federal  Deposit Insurance Corporation, General Services Administration, National  Reconnaissance Office, and U.S. Election Assistance Commission  provided technical comments, which we incorporated as appropriate. The  remaining OIGs did not provide comments.", "We are sending copies of this report to the Executive Director of CIGIE  and to the 64 IG Act offices listed in this report as well as interested  congressional committees. In addition, the report is available at no charge  on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to determine (1) the status of inspector  general (IG) vacancies as of the end of fiscal year 2017, and the number  and duration of the IG vacancies for fiscal years 2007 through 2016, and  (2) the views of the IG community on the impacts, if any, of IG vacancies  on the Offices of Inspector General\u2019s (OIG) ability to effectively carry out  their duties, including views on independence and permanent IG  suggestions for improvements in the appointment process. To address  these objectives we included in our scope the 64 active OIGs that were  established under the IG Act of 1978, as amended (IG Act).", "To determine the status of IG vacancies as of the end of fiscal year 2017,  we obtained the vacancy data from the 64 OIGs active under the IG Act,  and documented any changes for fiscal year 2017. To identify IG  vacancies and changes for fiscal years 2007 through 2016, we first  obtained vacancy data from the Council of the Inspectors General on  Integrity and Efficiency (CIGIE). We interviewed CIGIE personnel to  obtain an understanding of issues related to IG vacancies and to discuss  the reliability of the vacancy data. Data obtained from CIGIE included the  resignation dates of the permanent IGs, vacancy start and end dates,  names of the acting IGs, names of newly appointed IGs, and whether  each IG was presidentially appointed, Senate confirmed (PAS) or  appointed by the head of a designated federal entity (DFE). We also  obtained nominations from Congress.gov, which included information on  nominated IGs and the status of those nominations. As part of our data  reliability procedures, we confirmed the vacancy data with the 64 OIGs  established under the IG Act. We reviewed and summarized the IG  vacancy data and documented any changes in IG vacancies for fiscal  years 2007 through 2016. In 2014, the IG appointment structure for the  IGs of the National Security Agency and National Reconnaissance Office  was changed from DFE to PAS. For the 10-year period under review,  these two OIGs experienced vacancies during both their DFE and new  PAS status. However, to avoid duplicating the agencies, we only counted  the number and length of vacancies for each agency under the PAS IGs.", "To obtain the views of the IG community\u2014specifically, permanent IGs,  acting IGs, and employees working under an acting IG\u2014on the impact  that a prolonged IG vacancy can have on the OIG\u2019s ability to carry out its  duties effectively, including any impact on independence, we conducted  web-based surveys of 54 IG Act OIGs. These surveys included both  multiple choice and open-ended questions for written responses to obtain  the views of the IG community on the impacts of vacancies, if any, and  views on independence, challenges, and positive outcomes. The  surveyed groups were as follows:  Fifty-two permanent IGs serving as of August 22, 2017.We used both multiple choice questions and open-ended questions to obtain their views on the impact that an IG vacancy could have on the OIG\u2019s ability to conduct its oversight, including any independence issues presented by acting IG. We also asked the permanent IGs to provide any suggestions for improvements in the appointment process. The survey was administered on the web from August 22, 2017, through September 29, 2017. The survey response rate of permanent IGs was 96 percent: 50 of the 52 permanent IGs completed the survey. Two permanent IGs did not respond to the survey.", "Nine acting IGs who had served for over 365 days from fiscal years 2014 through 2016. We used both multiple choice questions and open-ended questions to obtain their views on the impact that a prolonged vacancy could have on the acting IG\u2019s ability to carry out his or her duties, including any impact on independence. The survey was administered on the web from August 22, 2017, through September 29, 2017. The survey response rate of acting IGs was 100 percent. While 14 acting IGs met our selection criteria, 4 have either retired or have since left the government and were not surveyed. The National Reconnaissance Office\u2019s acting IG was excluded because of concerns regarding sensitive personally identifiable information. Of the 9 remaining acting IGs, 2 are now permanent IGs but provided responses for their acting IG tenure, which were included with those of the 7 acting IGs. In this report, we refer to all nine as acting IGs.", "A stratified random sample of 185 OIG employees consisting of 39 Senior Executive Service (SES) employees and 146 non-SES OIG employees, from OIGs with an acting IG in place for over 365 days from fiscal years 2014 through 2016. We used both multiple choice questions and open-ended questions to obtain the employee views about challenges related to working under an acting IG as compared to a permanent IG. The web-based survey was administered from September 11, 2017, through September 29, 2017. We had a weighted survey response rate of 71 percent; 133 of the sample of 185 employees completed the survey.", "Because we followed a probability procedure based on random  selections, our OIG employee sample is only one of a large number of  samples that we might have drawn. Since each sample could have  provided different estimates, we express our confidence in the precision  of our particular sample\u2019s results as a 95 percent confidence interval  (e.g., plus or minus 10 percentage points). This is the interval that would  contain the actual population value for 95 percent of the samples we  could have drawn. Confidence intervals are provided along with each  sample estimate in the report. Estimates from the employee survey are  generalizable to the population of employees from OIGs that had an  acting IG in place for over 365 days from fiscal years 2014 through 2016.  To minimize nonsampling errors, and to enhance data quality, we  employed recognized survey design practices in the development of the  questionnaire and in the collection, processing, and analysis of the survey  data. To minimize errors arising from differences in how questions might  be interpreted and to reduce variability in responses that should be  qualitatively the same, we conducted pretests with permanent IGs, acting  IGs, and employees.", "To ensure that we obtained a variety of perspectives on our survey  questions, we randomly selected three permanent IGs, two acting IGs,  and two employees for the pretests. Based on their feedback, we revised  each survey in order to improve the clarity of the questions. An  independent survey specialist within GAO also reviewed a draft of each  survey prior to its administration. To reduce nonresponse, another source  of nonsampling error, we followed up by e-mail or phone with the IGs,  acting IGs, and employees who had not responded to encourage them to  complete the survey.", "We did not survey a total of 10 IG Act OIGs. Nine OIGs were not  surveyed because there was no permanent IG in position or the acting IG  at the time of our survey did not meet our criteria of serving for more than  365 days from fiscal year 2014 through 2016. Those OIGs were at the  U.S. Postal Service, Social Security Administration, Small Business  Administration, Office of Personnel Management, National Security  Agency, Federal Election Commission, Department of Housing and Urban  Development, Department of Energy, and Department of Defense. In  addition, one OIG, the National Reconnaissance Office, was not surveyed  because of concerns regarding sensitive personally identifiable  information.", "We also performed a two-step content analysis on the open-ended survey  responses to summarize key ideas. In the first step, analysts read the  respondents\u2019 comments and jointly developed categories for them. In the  second step, each open-ended response was coded by one analyst, and  then those codes were verified by another analyst. Any coding  discrepancies were resolved by the analysts discussing the comments  and then agreeing on the code. In some cases, we edited responses for  clarity or grammar. Views expressed in the open-ended questions may  not be representative of all acting IGs, permanent IGs, or employees on  given topics. We did not assess the merits of the individual comments or  suggestions provided in response to the open-ended survey questions.", "We conducted this performance audit from February 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Council of the Inspectors General on Integrity and Efficiency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the National Credit Union Administration Office of Inspector General", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S. Election Assistance Commission Office of Inspector General", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Elizabeth Martinez (Assistant  Director), Carl Barden, Jason Kirwan, Christopher Klemmer, Jill Lacey,  Won Lee, Yvonne Moss, and Lisa Rowland made key contributions to this  report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-50", "url": "https://www.gao.gov/products/GAO-18-50", "title": "Border Patrol: Issues Related to Agent Deployment Strategy and Immigration Checkpoints", "published_date": "2017-11-08T00:00:00", "released_date": "2017-11-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Border Patrol has primary responsibility for securing the border between U.S. ports of entry. On the southwest border, Border Patrol deploys agents along the immediate border and in areas up to 100 miles from the border as part of a layered approach known as the defense in depth strategy. Immigration checkpoints, generally located between 25 and 100 miles from the border, are one element of this strategy. GAO was asked to review the defense in depth strategy.", "This report addresses: (1) the factors Border Patrol considers in deploying agents, (2) where apprehensions of illegal crossers and seizures of contraband are occurring, and (3) what data show about how checkpoints contribute to apprehensions and seizures, among other objectives. To answer these questions, GAO analyzed Border Patrol documents and data on apprehensions and seizures from fiscal year 2012 through 2016, visited two southwest border sectors, interviewed officials from the other seven southwest border sectors and Border Patrol headquarters, and reviewed prior GAO work on border security."]}, {"section_title": "What GAO Found", "paragraphs": ["According to U.S. Border Patrol (Border Patrol), agent deployment decisions are based on factors such as staffing levels and the availability of agents, among other things. As of May 2017, nationwide, Border Patrol had about 1,900 fewer agents than authorized, which officials cited as a key challenge for optimal agent deployment. In recent years, attrition has exceeded hiring (an average of 904 agents compared to 523 agents) according to officials. GAO analyzed scheduling data, including time that agents were scheduled to be not working (for example, off duty or on leave) because these activities can affect deployment decisions by reducing the number of agents available on a particular day. GAO found that agents were available for deployment about 43 percent of the time.", "From fiscal years 2012 through 2016, Border Patrol apprehended a total of almost 2 million individuals along the southwest border, and these apprehensions increasingly occurred closer to the border, with 42 percent of apprehensions occurring one-half mile or less from the border in fiscal year 2016 compared to 24 percent in fiscal year 2012. One driver for this change is the increasing number of apprehensions of children, whom officials report may turn themselves in to Border Patrol without attempting to evade detection. Meanwhile, over this period, the locations where seizures of contraband occurred remained roughly the same, with the majority occurring 10 or more miles from the border.", "For fiscal years 2013 through 2016, GAO found that 2 percent of apprehensions and 43 percent of seizures occurred at checkpoints; however, determining the extent to which apprehensions and seizures are attributable to checkpoints is difficult because of long-standing data issues. More apprehensions and seizures may be attributable to checkpoints, but Border Patrol's reporting does not distinguish apprehensions that occurred \u201cat\u201d versus \u201caround\u201d a checkpoint. Border Patrol is drafting guidance to clarify how checkpoint apprehension and seizure data are to be recorded that would respond to a 2009 GAO recommendation to improve the internal controls for management oversight of checkpoint data. GAO also determined that seizures at checkpoints differed from those at other locations. Specifically, 40 percent of seizures at checkpoints were 1 ounce or less of marijuana from U.S. citizens. In contrast, seizures at other locations were more often higher quantities of marijuana seized from aliens."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any new recommendations at this time but has previously recommended that Border Patrol establish internal controls for checkpoint data, among other things. DHS concurred with this recommendation and has taken some steps to improve the quality of checkpoint data, but additional actions are needed to fully implement the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States\u2019 international border with Mexico continues to be  vulnerable to illegal cross-border traffic. The U.S. Border Patrol (Border  Patrol)\u2014an office within the Department of Homeland Security\u2019s (DHS)  U.S. Customs and Border Protection (CBP) that has primary responsibility  for securing the border between the U.S. ports of entry\u2014recorded more  than 400,000 apprehensions and more than 15,000 seizures in fiscal year  2016. Agents are among the key resources Border Patrol deploys\u2014 along with infrastructure and technology\u2014to respond to cross-border  threats, and Border Patrol\u2019s most recent strategic plan calls for a risk- based approach to resource deployment.", "Along the southwest border, Border Patrol deploys agents along the  immediate border and in areas up to 100 miles from the border as part of  a layered approach the agency refers to as the defense in depth strategy.  As part of this strategy, Border Patrol deploys agents on temporary duty  assignments to Forward Operating Bases (FOBs) located in difficult to  access areas near the border to reduce the response time to threats in  these areas, and it also deploys agents to immigration checkpoints  (checkpoints) that are generally located on highways 25 to 100 miles from  the border.", "At checkpoints, Border Patrol agents screen vehicles for aliens who were  able to illegally cross the border undetected at or between ports of entry.  Border Patrol checkpoints are located on major U.S. highways and  secondary roads. This permits checkpoints to be far enough inland to  detect and apprehend aliens in violation of U.S. immigration law,  smugglers, and potential terrorists attempting to travel farther into the  interior of the United States on ingress routes after evading detection or  otherwise avoiding required inspection at the border. According to Border  Patrol data, there are about 140 locations that Border Patrol uses for  checkpoint operations near the southwest border, although not all of them  are operational at all times. Some of these checkpoints have a  permanent structure with off-highway inspection lanes and technology to  facilitate inspection and convenience, while other checkpoints have  temporary infrastructure in the form of trailers and generators. DHS\u2019s  Congressional Justification for the fiscal year 2018 budget notes that,  because checkpoints are an integral part of the defense in depth strategy,  measurements of checkpoint events (apprehensions and seizures) serve  as barometers of the effectiveness of Border Patrol\u2019s overall strategy to  deny illegal entries into the United States.", "Communities located near the southwest border may be positively or  negatively impacted by the placement and operation of checkpoints and  other Border Patrol resources deployed under the defense in depth  strategy. You requested that we review Border Patrol\u2019s defense in depth  strategy. This report addresses the following questions:  1.  What factors does Border Patrol consider in deploying agents to the  different layers of the defense in depth strategy along the southwest  border, including FOBs along the border and checkpoints?  2.  Where are apprehensions and seizures occurring in relation to the  border, as a reflection of Border Patrol\u2019s defense in depth strategy?  3.  What do data show about how checkpoints contribute to  apprehensions and seizures?  4.  What is known about the effects of Border Patrol\u2019s defense in depth  strategy on surrounding communities, and how, if at all, does Border  Patrol engage with these communities to identify and respond to any  such effects?", "To address these objectives, we analyzed Border Patrol data and  documents, visited two southwest border sectors, and interviewed Border  Patrol officials from the other seven southwest border sectors and Border  Patrol headquarters. Specifically, we analyzed Border Patrol data on  planned agent deployment, apprehensions, and seizures across all nine  southwest border sectors from fiscal years 2012 through 2016. We  selected these years because they were the five most recent fiscal years  for which complete data were available at the time of our review.", "We also selected the two sectors to visit (Tucson sector and Rio Grande  Valley sector) based on the role of checkpoints in those locations, the  presence of FOBs, the role of known community groups that engage with  Border Patrol, and a relatively high level of known cross-border illegal  activity in those sectors, among other factors. In these two sectors, we  met with sector and station officials, local law enforcement agencies, and  community groups. We selected local law enforcement agencies and  community groups based on recommendations from sector officials and  geographic considerations, such as proximity to checkpoints. We also  visited Border Patrol facilities including checkpoints and FOBs. Both in- person during our visits to the two selected sectors and by phone with the  remaining seven sectors, we interviewed officials responsible for making  agent deployment decisions to discuss how sectors and stations decide  to deploy agents, the operational results of agent deployment, and how  sectors and stations respond to any effects of Border Patrol\u2019s defense in  depth strategy on the surrounding community. We also interviewed  officials from Border Patrol headquarters\u2014specifically officials from the  Checkpoint Program Management Office (CPMO) and from the Border  Community Liaison (BCL) Program\u2014and officials responsible for  overseeing and analyzing Border Patrol deployment, apprehension, and  seizure data. These interviews focused on Border Patrol\u2019s oversight of  and data regarding agent deployment, enforcement actions, and  checkpoints.", "We also reviewed our prior work regarding checkpoints, the defense in  depth strategy, and issues related to private property damage along the  southwest border. In particular, we reviewed recommendations from our  August 2009 report on checkpoints and assessed actions taken in  response to these recommendations to determine whether they had been  implemented.", "To address our first objective, we analyzed data on planned agent  deployment from the Border Patrol Enforcement Tracking System  (BPETS) for fiscal years 2013 through 2016. We reviewed the activities  in the data to determine broad categories represented among the  activities. Border Patrol officials responsible for overseeing the data  concurred with our categories and how we organized the activities into  these categories. We assessed the reliability of these data by testing for  missing data and obvious errors, reviewing related documentation, and  interviewing knowledgeable agency officials. We determined that the data  used in our analyses were sufficiently reliable for the purposes of this  report.", "To address our second and third objectives, we obtained and analyzed  apprehension and seizure data from Border Patrol\u2019s Enforcement  Integrated Database/e3 (e3) database for fiscal years 2012 through 2016.  We assessed the reliability of these data by testing for missing data and  obvious errors, reviewing related documentation, and interviewing  knowledgeable agency officials. We used Global Positioning System  (GPS) coordinates contained in the e3 data to analyze distance from the  border and proximity and relation to checkpoints for apprehensions and  seizures. In assessing the reliability of these data, we identified some  apprehension and seizure records with GPS coordinates that were  outside the scope of our review. We excluded the small percentage of  records that had missing GPS coordinates or had GPS coordinates that  were not within the boundaries of southwest Border Patrol sectors. We  determined that the data used in our analyses were sufficiently reliable for  the purposes of this report. For our analysis of apprehensions\u2019 and  seizures\u2019 proximity and relation to checkpoints, we analyzed data for  fiscal years 2013 through 2016 because a listing of checkpoints that were  operational in fiscal year 2012 was not available.", "To address our fourth objective, we reviewed BCL program documents  from headquarters and all nine southwest border sectors, interviewed  officials in these sectors, and met with community members and local law  enforcement officials in the two sectors we visited. We spoke with officials  from all nine southwest border sectors about their views on the effects  that Border Patrol and illegal cross-border activity have had on nearby  communities up to 100 miles from the border. Our interviews also focused  on Border Patrol\u2019s efforts to identify and respond to any effects, including  the organization of and actions taken as part of the BCL program.  Although the information we obtained from these interviews cannot be  generalized to other communities near border checkpoints, these  interviews provided important insights and perspectives about the  checkpoints.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Border Patrol\u2019s Organizational Structure", "paragraphs": ["Border Patrol divides responsibility for southwest border security  operations geographically among nine sectors, each with its own sector  headquarters. Each sector is further divided into varying numbers of  stations. For example, the Tucson sector has divided geographic  responsibility across eight stations, seven of which have responsibility for  miles of land directly on the U.S.-Mexico border. Stations\u2019 areas of  responsibility are divided into zones. Border Patrol refers to \u201cborder  zones\u201d\u2014those having international border miles\u2014and \u201cinterior zones\u201d\u2014 those without international border miles. For example, as shown in figure  1, within the Tucson sector, the Sonoita station has only border zones,  the Willcox station has only interior zones, and the other stations have a  mix of both border and interior zones. According to Border Patrol officials,  dividing stations into zones allows sectors to more effectively analyze  border conditions, including terrain, when planning how to deploy agents.  Zone dimensions are largely determined by geography and topographical  features, and zone size can vary significantly."], "subsections": []}, {"section_title": "Staffing Levels and Agent Deployment", "paragraphs": ["In fiscal years 2011 through 2016, Border Patrol was statutorily required  to maintain a minimum of 21,370 full-time equivalent agent positions, but  Border Patrol has faced challenges in staffing to that minimum level. As  of May 2017, Border Patrol had about 19,500 agents on board.  Additionally, in January 2017, an executive order called for the hiring of  5,000 additional Border Patrol agents, subject to available appropriations,  and Border Patrol is aiming to have 26,370 agents by the end of fiscal  year 2021. The Acting Commissioner of CBP reported in a February  2017 memo to the Deputy Secretary for Homeland Security that from  fiscal year 2013 to fiscal year 2016, Border Patrol hired an average of 523  agents per year while experiencing a loss of an average of 904 agents  per year. The memo cited challenges such as competing with other  federal, state, and local law enforcement organizations for applicants. In  particular, the memo noted that CBP faces hiring and retention  challenges compared to DHS\u2019s U.S. Immigration and Customs  Enforcement (which is also planning to hire additional law enforcement  personnel) because CBP\u2019s hiring process requires applicants to take a  polygraph examination, Border Patrol agents are deployed to less  desirable duty locations, and Border Patrol agents generally receive lower  compensation.", "Border Patrol headquarters, with input from the sectors, determines how  many authorized agent positions will be allocated to each of the sectors.  According to Border Patrol officials, these decisions take into account the  relative needs of the sectors, based on threats, intelligence, and the flow  of illegal activity. Each sector\u2019s leadership determines how many of the  authorized agent positions will be allocated to each station within their  sector. Sector leadership also distributes newly assigned agents\u2014those  agents recently hired whom headquarters has assigned to the sector, or  existing agents who are being transferred\u2014to specific stations within the  sector. Table 1 shows the number of authorized agent positions for each  southwest border sector as well as the number of agents who were  assigned to each of those sectors, as of May 2017.", "Once a sector assigns agents to a station, station officials assign agents  to a shift. Most agents work 10-hour shifts, which allows for some overlap  in time for the outgoing shift to relay key information to the incoming  shift. Most agents work 5 days per week with 2 off duty days."], "subsections": []}, {"section_title": "FOBs and Checkpoints", "paragraphs": ["Border Patrol has 17 FOBs that are established in forward or remote  locations in five of the nine southwest border sectors to sustain Border  Patrol operations. According to Border Patrol officials, the primary  function of these facilities is to give the Border Patrol a tactical advantage  by reducing response time to threats or actionable intelligence. Typically,  agents are assigned for 7 days, during which they reside at the FOB and  deploy to their assigned duties. FOBs allow agents to be pre-positioned  at these locations, which reduces the portion of an agent\u2019s shift that is  spent in transit between the station and the patrol location. In addition,  these facilities are intended to increase security awareness and presence  in the border areas where they are located. FOBs are staffed by Border  Patrol agents on temporary duty assignments from their permanent duty  station. After their shift, they are normally required to remain at the FOB  to rest, prepare for their next shift, and be available, if needed, to respond  to operational issues. Figure 2 includes a photo of a FOB in the Rio  Grande Valley sector. Five of the nine southwest border sectors\u2014Yuma,  Tucson, El Paso, Big Bend, and the Rio Grande Valley\u2014have FOBs,  whereas the other four sectors\u2014San Diego, El Centro, Del Rio, and  Laredo\u2014do not.", "Border Patrol operates two types of checkpoints\u2014permanent and  tactical\u2014that differ in terms of size, infrastructure, and location. While  both types of checkpoints are generally operated at fixed locations,  permanent checkpoints\u2014as their name suggests\u2014are characterized by  their brick and mortar structures, that may include off-highway covered  lanes for vehicle inspection and several buildings including those for  administration, detention of persons suspected of smuggling or other  illegal activity, and kennels for canines used in the inspection process.  Figure 2 shows examples of permanent and tactical checkpoints we  observed in the Rio Grande Valley and Tucson sectors, and figure 3 is a  map depicting the locations of permanent checkpoints near the southwest  border.", "Border Patrol agents at checkpoints have legal authority that agents do  not have when conducting roving patrols away from the border. The  United States Supreme Court ruled that Border Patrol agents may stop a  vehicle at fixed checkpoints for brief questioning of its occupants even if  there is no reason to believe that the particular vehicle contains illegal  entrants, and also held that the operation of a fixed checkpoint does not  require a judicial warrant. The Court further held that, provided the  intrusion is sufficiently minimal so as not to require particularized  justification, Border Patrol agents \u201chave wide discretion\u201d to refer motorists  selectively to a secondary inspection area for additional brief  questioning. In contrast, the Supreme Court held that Border Patrol  agents on roving patrol may stop a vehicle only if they have reasonable  suspicion that the vehicle contains aliens who may be illegally in the  United States\u2014a higher threshold for stopping and questioning motorists  than at checkpoints. The constitutional threshold for searching a vehicle  is the same, however, and must be supported by either consent or  probable cause, whether in the context of a roving patrol or a checkpoint  search. Probable cause can include a canine detecting something it is  trained to detect (e.g., concealed people, narcotics). Figure 4 shows a  Border Patrol canine team inspecting a vehicle at a checkpoint."], "subsections": []}, {"section_title": "Previous GAO Work", "paragraphs": ["We have previously reported on topics related to the defense in depth  strategy, and specifically on checkpoints. In August 2009, we reported  on the measurement of checkpoint performance and the impact of  checkpoint operations on nearby communities, among other things  related to checkpoints. In that report, we made recommendations to,  among other things, strengthen checkpoint design and staffing and  improve the measurement and reporting of checkpoint effectiveness,  including measuring community impacts. CBP has implemented two of  our recommendations from that report\u2014specifically, Border Patrol  explored and considered the feasibility of a checkpoint performance  model and required that traffic volumes be studied and considered when  designing new permanent checkpoints. Appendix I provides details on the  status of all six recommendations from that report. We also reported in  December 2012 on how Border Patrol manages personnel resources at  the southwest border, including aspects of the defense in depth strategy,  such as where apprehensions and seizures were occurring relative to the  southwest border. That report focused on the Tucson sector\u2014which at  the time had the most Border Patrol apprehensions of the nine southwest  border sectors\u2014and compared data on agent deployment,  apprehensions, and seizures from the Tucson sectors with data for other  sectors."], "subsections": []}]}, {"section_title": "Border Patrol Deploys Agents Based on Availability and Geography, Among Other Factors, and Agent Activity Schedules Vary By Sector", "paragraphs": [], "subsections": [{"section_title": "Border Patrol Assigns Agents Based on Factors Such As Availability, Geography, and Illegal Traffic Patterns", "paragraphs": ["According to sector officials, decisions about agent deployment in terms  of location and activity are based on multiple factors, including the  availability of agents for a given shift, the geography in a station\u2019s area of  responsibility, and illegal traffic patterns. For example, when considering  the various assignments that need to be filled for a given day, supervisors  must take into account agents that are unavailable because they are off  duty, on scheduled leave, or are scheduled to attend training. The  geography in a station\u2019s area of responsibility can also affect decisions  about where to deploy available agents. For example, Border Patrol may  have limited access to certain areas because of challenging terrain,  limited or poor quality roads, or private ownership. Supervisors also  review information about illegal traffic patterns in their areas of  responsibility to determine where enforcement operations may be  needed."], "subsections": [{"section_title": "Number and Availability of Agents", "paragraphs": ["One key factor in how Border Patrol makes deployment decisions at the  station level is the overall number of agents available. Officials from all  nine southwest border sectors cited current staffing levels and the  availability of agents as a challenge for optimal deployment. Nationwide,  as of May 2017, Border Patrol had nearly 1,900 fewer agents than  authorized and has faced hiring and retention challenges in recent years.  As shown in table 1 earlier, eight of the nine southwest border sectors  were below their authorized agent staffing levels as of May 2017. As  such, resources are constrained and station officials must make decisions  about how to prioritize activities for deployment given the number of  agents available.", "Within sectors, some stations may be comparatively more understaffed  than others because of recruitment and retention challenges, according to  officials. Generally, sector officials said that the recruitment and retention  challenges associated with particular stations were related to quality of  life factors in the area near the station\u2014for example, agents may not  want to live with their families in an area without a hospital, with low- performing schools, or with relatively long commutes from their homes to  their duty station. This can affect retention of existing agents, but it may  also affect whether a new agent accepts a position in that location. For  example, officials in one sector said that new agent assignments are not  based solely on agency need, but rather also take into consideration  agent preferences. These officials added that there is the potential that  new agents may decline offers for stations that are perceived as  undesirable, or they may resign their position earlier than they otherwise  would to pursue employment in a more desirable location.", "Supervisors make decisions about how to deploy agents based on the  number of agents assigned to a shift who are available to work the shift  on a particular day. On any given day, some agents will be off duty, in  training, or have annual or sick leave scheduled, thereby reducing the  number of agents available for deployment during a shift.", "To assess how Border Patrol has scheduled and deployed agents across  the southwest border sectors, we analyzed the scheduled deployment  data that supervisors entered into BPETS for fiscal years 2013 through  2016. Supervisors enter data into BPETS in advance of a shift to track  expected time and attendance. Supervisors record work status by  indicating whether an agent will be working, off duty, or otherwise not  working (for example, on annual leave or scheduled sick leave), and for  agents who are working, the supervisors also record an assignment to  which the agent is expected to be deployed that day. We analyzed these  assignments to determine how agents\u2019 work time was distributed among  activities in the following categories:", "Operations and Patrol refers to frontline activities that involve identifying  and apprehending illegal entrants and identifying and seizing contraband.  Some specific examples include linewatch, sign cutting, and checkpoint  duties.", "Operational Support refers to activities, such as intelligence gathering or  surveillance, that support frontline agents conducting operations and  patrol activities.", "Processing refers to activities that occur after apprehending an individual,  including transport, processing, detention, and removal.", "Legal Support and Litigation refers to activities, such as attending court  proceedings, that involve prosecution of apprehended individuals.", "Training refers to activities that involve providing instruction, attending  training, or completing qualification/certification tests.", "Administrative and Other Non-Enforcement Activities refers to activities  other than those above, including public relations, hiring and recruitment,  and policy and compliance.", "Our analysis included time that agents were scheduled to be off duty or  on scheduled leave because scheduled time off can affect supervisors\u2019  deployment decisions by reducing the number of agents available on a  particular day.", "As shown in figure 5, agents were unavailable for deployment for a total  of 42 percent of time (off duty time, scheduled non-work time, and  training), and about 43 percent of agents\u2019 time was scheduled for  operations and patrol activities in the field. As an example, this means  that a station with 300 total agents\u2014with 100 agents assigned to each of  three shifts\u2014would have had on average about 42 of the 100 agents per  shift unavailable because of planned time not working (off duty or other  scheduled non-work time) or in training. Of the remaining 58 agents, on  average, about 43 would have been scheduled to field-based operations  and patrol activities, and 15 would have been assigned to other activities.", "Furthermore, it is important to note that BPETS deployment schedules  reflect the scheduled availability and deployment of agents, rather than  actual deployment. Actual availability or deployment may have differed  because of changes in circumstances or other factors, and supervisors  are not required to update BPETS to reflect these deployment changes.  For example, an agent who was assigned to patrol the border might do so  for part of a shift, but upon apprehending an illegal entrant the agent may  spend some or all of the remainder of the shift processing the  apprehended individual. According to Border Patrol officials, additional  agents in the field may also be pulled from their patrol activities to  conduct processing when large groups are apprehended."], "subsections": []}, {"section_title": "Geography", "paragraphs": ["Border Patrol station officials also make deployment decisions based on  the unique geographical factors in their area of responsibility, such as  proximity to population centers and access to certain areas (including  remote areas where FOBs are located). In addition, whether the station is  responsible for the operation of checkpoints is another factor that station  officials consider in making decisions about how to most effectively use  available agents for operations and patrol activities in the field.", "In relatively populated areas close to the border, the window of time  Border Patrol has to respond to illegal crossings may be shorter than in  more remote areas where agents may have more time to apprehend  illegal crossers. Thus, proximity to population centers is a factor that  officials consider when deciding how many agents to deploy to particular  locations within a station\u2019s area of responsibility. In February 2017, we  reported that Border Patrol officials said that populated urban  environments offer an advantageous setting for illegal entrants because  within seconds to minutes these entrants can blend in with the local U.S.  community after crossing the border. Therefore Border Patrol has  intended to divert illicit cross-border activities into more remote or rural  environments, where illegal entrants may require hours or days to reach  the nearest U.S. community. For example, El Centro sector officials told  us that an outlet mall located at the immediate border posed a threat in  terms of the limited time it would take illegal crossers to assimilate into  the population. Similarly, officials in one station in the Rio Grande Valley  sector identified a town that is very close to the Rio Grande River, and  Border Patrol agents must aim to apprehend crossers within a two to  three block distance to prevent crossers from blending in with residents of the town. Sector officials generally stated that stations prioritize  deployment to areas along the immediate border.", "Border Patrol may have limited access to certain areas because of land  ownership or limited road infrastructure, and this may affect decisions  about how to deploy agents (if at all) to these areas. Some sectors  consist primarily of privately owned land, and Border Patrol officials must  obtain permission from the landowner, or a judicial warrant, to access any  private lands further than 25 miles from the border. Border Patrol  officials in one sector noted that some landowners do not want Border  Patrol on their property. Additionally, the availability and condition of road  infrastructure can make it challenging for agents to get to some locations.  For example, officials in sectors with mountainous terrain cited challenges  related to accessing and patrolling mountainous areas. In particular,  officials in the Tucson sector noted that the sector includes seven  mountain ranges and estimated that about 20 percent of the 262 miles of  land border in the sector are inaccessible by vehicle. As a result, these  officials said that agents deployed to those areas patrol by foot,  horseback, and air.", "In some areas where there are terrain and road access challenges,  Border Patrol may establish FOBs to facilitate access to areas near the  immediate border and enable agents to spend a greater proportion of  their shifts on patrol. Border Patrol sector officials in the five sectors that  currently operate at least one FOB, as well as officials in one other sector  that previously operated a FOB, said that FOBs are beneficial for  maximizing patrol time in difficult to reach locations. Assigning agents to  these locations on temporary duty assignments reduces the portion of an  agent\u2019s shift that is spent in transit between the station and the patrol  location. For example, officials in one sector said that the transit time  between the station and the FOB is a 5 to 6 hour round trip. Thus, transit  to that location could comprise 50 to 60 percent of a shift for agents deployed to that patrol area if they were to report to the station each day  prior to beginning their patrol duties. Instead, agents travel between the  station and the FOB only as part of the first and last day of their multi-day  assignment to the FOB, and on the days in between they are pre- positioned at the FOB to begin patrols at the start of their shift.", "Although FOBs can help facilitate access to some remote locations, there  can also be associated challenges, and therefore, they may not be an  effective solution in all cases to improving access to remote areas. For  example, officials in one sector noted that Border Patrol had considered  establishing a FOB to improve accessibility to that location, but there  were challenges to securing the rights to access private property and  providing for adequate facilities given that the area of interest did not  have infrastructure to supply water to the FOB if it were to be built. In  February 2016, the DHS Office of the Inspector General reported that  although the challenge of supplying water to FOBs rarely causes Border  Patrol to shut down a FOB, it is a frequent problem that often requires  additional resources to resolve. Additionally, some remote or difficult to  access locations may be located on private or tribal lands, which require  Border Patrol to negotiate access and other aspects of FOB operations,  or on wildlife refuges, which may have limitations regarding the types of  infrastructure or operations in order to preserve the local habitat.", "Stations that have responsibility for checkpoints in their areas of  responsibility consider checkpoint operations in their deployment  decisions. Border Patrol\u2019s checkpoints policy includes a recommended  minimum number of agents to operate the checkpoint. The nature of a  checkpoint\u2014whether it is permanent or tactical\u2014can also affect  deployment. Permanent checkpoints are generally intended to be  operational most of the time, meaning that stations with responsibility for  permanent checkpoints generally assign at least the minimum number of  agents to those checkpoints to ensure continuous operation. In contrast,  tactical checkpoints are intended to be set up for short-term or intermittent  use. Accordingly, a station can make a decision about whether to operate  a tactical checkpoint based on a determination of whether it is more  effective to staff the checkpoint or whether it is more effective to deploy  those agents elsewhere. Stations with responsibility for both the  immediate border and interior checkpoints must balance agent  deployment across both responsibilities. In contrast, border stations that  do not contain checkpoints in their areas of responsibility do not have to  distribute agents between checkpoint and patrol activities. Similarly,  interior stations that do not have responsibility for the border can prioritize  checkpoints.", "Additionally, for stations with checkpoints, supervisors must determine  how many agents, if any, to deploy to the areas around a checkpoint  through which illegal entrants or smugglers may travel to circumvent the  checkpoint (known as circumvention routes). We reported in August 2009  that Border Patrol policy highlights the need to detect and respond to  circumvention activity, but at the time, officials stated that other priorities  sometimes precluded positioning more than a minimum number of agents  and resources in checkpoint circumvention routes. Similarly, as part of  this review, sector officials said checkpoint circumvention routes may not  be patrolled at all times because of the need to deploy agents elsewhere,  including to the checkpoint itself to meet the minimum number of agents  needed to keep the checkpoint operational. According to officials, in some  locations, sensors and cameras assist with monitoring traffic in  circumvention routes, and when technology detects traffic, agents can be  deployed to respond.", "In our August 2009 report, we reported that checkpoint performance can  be hindered by limited staffing at checkpoints. Border Patrol policy  recommended the minimum number of agents for checkpoint operation,  but sector managers may have had other priorities for staff placement,  and thus stations may have only staffed checkpoints\u2014and circumvention  routes\u2014with the minimum number of agents. Additionally, as part of that  review, we found that design and planning documents for the planned  Interstate 19 checkpoint in the Tucson sector did not include an estimate  of the number of agents who would be deployed to address circumvention  activity at the new checkpoint. We recommended that, in connection with  planning for new or upgraded checkpoints, CBP should conduct a  workforce planning needs assessment for checkpoint staffing allocations  to determine the resources needed to address anticipated levels of illegal  activity around the checkpoint.", "In January 2017, Border Patrol began construction of a new checkpoint  facility on U.S. Highway 281 south of Falfurrias, Texas, that will replace  the existing checkpoint. The current checkpoint has a maximum of five  lanes of traffic, whereas the new checkpoint will have a maximum of eight  lanes. Border Patrol provided us an estimate for the number of agents,  supervisors, and canine units that are expected to be needed to operate  the new checkpoint; however, the information provided lacked supporting  details, such as a discussion of what data were collected and how the  data were analyzed to determine how many agents would be needed to  staff the checkpoint and the surrounding circumvention routes. Given  existing staffing constraints, having an accurate workforce planning needs  assessment is important to inform future considerations for how to deploy  agents to address anticipated levels of illegal activity at and around the  checkpoint. Therefore, we continue to believe this recommendation is  warranted."], "subsections": []}, {"section_title": "Intelligence Information about Illegal Traffic Patterns", "paragraphs": ["Sector officials said they consider intelligence information\u2014such as  information about illegal traffic patterns and data on apprehensions and  seizures; the types of threats in the area (e.g., illegal border crossing,  drug smuggling); and transnational criminal organizations\u2019 tactics,  techniques, and procedures\u2014when determining where to deploy  available agents. Officials said they also receive information on suspected  illegal traffic from community members, and stations may deploy agents  to respond."], "subsections": []}]}, {"section_title": "Sectors Vary in How Much Time Agents Are Scheduled for Operations and Patrol Activities and Where Such Activities Are Scheduled to Occur", "paragraphs": ["From fiscal years 2013 through 2016, the nine southwest border sectors  varied in how they distributed work time scheduled to activities in the six  categories previously discussed\u2014(1) operations and patrol, (2)  operational support, (3) processing, (4) legal support and litigation, (5)  training, and (6) administrative and other non-enforcement\u2014although all  the sectors scheduled the majority of agents\u2019 time (between 61 and 77  percent) to operations and patrol activities. As shown in figure 6, the Rio  Grande Valley sector scheduled the smallest percentage of agents\u2019 work  time to operations and patrol activities (61 percent) and the highest  percentage of time to processing (13 percent). As discussed later in this  report, the Rio Grande Valley had the highest number of apprehensions  out of the nine southwest border sectors from fiscal year 2012 through  2016, thereby affecting the time needed for processing or otherwise  attending to apprehended individuals.", "The scheduling data also show variations in the locations where sectors  plan to deploy agents to operations and patrol activities in proximity to the  border. Specifically, as shown in figure 7, the sectors ranged from  scheduling 34 to 61 percent of operations and patrol time in border zones  (for the Big Bend and Rio Grande Valley sectors, respectively) and from  17 to 52 percent of operations and patrol time in non-border zones (for  the Del Rio and Big Bend sectors, respectively). In some cases, the data  do not include a zone assignment, and sectors varied in what percentage  of operations and patrol scheduling assignments did not have a zone  assignment. Including a zone assignment is not required by Border Patrol  policy, and headquarters and sector officials identified some possible  reasons why an assignment may not include a zone. For example,  officials said that an agent could be deployed to an activity that has  responsibility for multiple zones or no specific zone, such as roving patrol,  specialty units (such as an intelligence unit or special operations), or  assisting CBP\u2019s Air and Marine Operations. Officials from one sector  noted that a zone may not be assigned in the data because supervisors  assign them orally when agents arrive at the start of a shift, and this  provides supervisors flexibility to make the assignments based on the  most up-to-date information about traffic patterns. Border Patrol  headquarters officials said that the reasons for variations in border zone  deployment are the same as we previously reported in December 2012\u2014 specifically, differences in geographical factors among the southwest  border sectors (such as varying topography, ingress and egress routes,  and land access issues, and structural factors such as technology and  infrastructure deployments) that can affect how sectors operate and may  preclude closer deployment to the border.", "Sectors also varied in terms of the proportion of operations and patrol  time scheduled for checkpoint-related activities. Across the nine  southwest border sectors from fiscal year 2013 through fiscal year 2016,  approximately 9.4 percent of agents\u2019 time scheduled for operations and  patrol was scheduled for checkpoint activities. However, the number of  agent hours scheduled for checkpoint activities\u2014and what percentage of  operations and patrol time these hours represent\u2014vary by sector because of differences in factors, such as the number of checkpoints in a  sector, the relative size of checkpoints, and the overall number of agents  in a sector. For example, as shown in table 2, the El Centro and Big Bend  sectors scheduled a similar number of hours to checkpoint-related  activities, but these hours represented different percentages of total  scheduled operations and patrol activities time\u201413.9 percent and 21.0  percent, respectively\u2014which partly reflects that the El Centro sector has  almost double the number of agents and fewer checkpoints than the Big  Bend sector."], "subsections": []}]}, {"section_title": "Apprehensions Occurred Closer to the Border in Fiscal Year 2016 Compared to Fiscal Year 2012, While Seizure Locations Remained Relatively Unchanged", "paragraphs": [], "subsections": [{"section_title": "Apprehensions", "paragraphs": ["From fiscal years 2012 through 2016, 33 percent of southwest border  apprehensions were made one-half mile or less from the border, and over  this time period apprehensions increasingly occurred closer to the border,  as shown in figure 8. Specifically, from fiscal years 2012 through 2016,  apprehensions one-half mile or less from the border increased from 24  percent to 42 percent. During the same time period, the percentage of  apprehensions occurring more than 20 miles from the border steadily  dropped, from 27 percent in fiscal year 2012 to 15 percent of all  apprehensions in fiscal year 2016.", "While all nine southwest border sectors exhibited this trend of an increase  in apprehensions one-half mile or less from the border and a decrease in  apprehensions farther than 20 miles from the border, the Rio Grande  Valley sector had the greatest influence on the overall southwest border  trend because that sector accounted for almost half (42 percent) of all  southwest border apprehensions during this time period. Consistent with  the overall trend for southwest border apprehensions in figure 8 above,  the percentage of Rio Grande Valley sector apprehensions one-half mile  or less from the border increased (from 27 percent in fiscal year 2012 to  48 percent in fiscal year 2016) and the sector\u2019s percentage of  apprehensions more than 20 miles from the border decreased (from 30  percent in fiscal year 2012 to 12 percent in fiscal year 2016). Appendix II  provides more detailed information about trends in apprehensions by  sector for fiscal years 2012 through 2016.", "According to Border Patrol officials and apprehension data, one key driver  for apprehensions occurring closer to the border is the increasing number  of apprehensions of children (either unaccompanied or as part of family  units) from countries other than Mexico. We have previously reported  that CBP officials have attributed high apprehension rates in the Rio  Grande Valley sector to the high number of unaccompanied children and  adults with children, many of whom turn themselves in to Border Patrol  without attempting to evade detection. Officials said children are often  told by smugglers to wait in specific locations where agents frequently  patrol so that they will be found. According to Border Patrol officials,  persons apprehended from Central America are often fleeing violence,  and once apprehended they may assert claims for asylum in the United  States.", "As shown in table 3, apprehensions of individuals, particularly children,  from Central American countries (specifically, El Salvador, Guatemala,  and Honduras) increased, while apprehensions of Mexicans, including  children, decreased. In particular, in the Rio Grande Valley sector, the  number of children apprehended from El Salvador, Guatemala, and  Honduras increased almost tenfold, from 6,869 in fiscal year 2012 to  60,084 in fiscal year 2016. Such apprehensions also increasingly  occurred closer to the border. In fiscal year 2016, Border Patrol  apprehended 36,882 children from these countries (about 61 percent)  one-half mile or less from the border, compared to 1,830 (about 27  percent) in fiscal year 2012. Although other sectors accounted for smaller  percentages of overall southwest border apprehensions, all sectors saw  notable increases in the percent of apprehensions who were children  from Central America and who were apprehended closer to the border.  Border Patrol officials said other factors may also have contributed to the  change in apprehension patterns, such as changes in where patrols  occurred during the time period we analyzed."], "subsections": []}, {"section_title": "Seizures", "paragraphs": ["From fiscal year 2012 through fiscal year 2016, seizure locations  remained roughly the same, with between 64 and 70 percent of seizures  occurring 10 or more miles from the border each year and between 9  percent and 11 percent of seizures occurring one-half mile or less from  the border each year, as shown in figure 9.", "Trends within individual sectors varied, but unlike with apprehensions, no  single sector dominated the proportion of seizures to strongly influence  the overall pattern for the southwest border. The greatest number of  seizures during the 5 fiscal years occurred in the Tucson, Big Bend, and  Rio Grande Valley sectors (34, 19, and 16 percent of all seizures  respectively). These sectors each had different distributions of where  seizures occurred, as shown in figure 10. In particular, about 1 percent of  seizures in the Big Bend sector occurred within 1 mile of the border,  compared to 13 percent of seizures in the Tucson sector and 37 percent  of seizures in the Rio Grande Valley sector. Appendix III provides more  detailed information about trends in seizures by sector for fiscal year 2012  through fiscal year 2016."], "subsections": []}]}, {"section_title": "Long-Standing Data Quality Issues Make It Difficult to Precisely Measure Checkpoints\u2019 Contributions to Apprehensions and Seizures", "paragraphs": [], "subsections": [{"section_title": "Checkpoints\u2019 Role in Apprehensions and Seizures Is Difficult to Measure with Precision Because Of Long- Standing Data Quality Issues", "paragraphs": ["According to our analysis of Border Patrol data, checkpoints accounted  for about 2 percent of apprehensions and almost half of seizures in  southwest border sectors. However, determining the extent to which  apprehensions and seizures farther from the border are attributable to  checkpoints is difficult because of data quality issues that have persisted  since we previously reported on checkpoints in August 2009. In that  report, we found that Border Patrol had established a number of  measures for checkpoint performance to inform the public on program  results and provide management oversight, including measures related to  apprehensions and seizures at checkpoints and on circumvention routes.  However, we reported that information gaps and reporting issues  hindered public accountability and that inconsistent data collection and  entry hindered Border Patrol\u2019s ability to monitor the need for program  improvement. Specifically, we found that a lack of management oversight  and unclear checkpoint data collection guidance resulted in the  overstatement of checkpoint performance results in agency performance  reports, as well as inconsistent data collection practices at checkpoints.  For example, officials at some checkpoints were including apprehensions  that occurred within a 2.5-mile radius of the checkpoints in their reporting  of apprehensions at checkpoints, which led to inconsistent reporting  across checkpoints. We reported that the lack of oversight and unclear  data collection guidance hindered management\u2019s ability to monitor the  need for program improvement. We therefore recommended, among  other things, that Border Patrol establish internal controls for  management oversight of the accuracy, consistency, and completeness  of checkpoint performance data.", "In response to our recommendations, Border Patrol issued several  memoranda in 2009 and 2010 related to the collection of checkpoint data,  including guidance intended to distinguish between apprehensions and  seizures occurring at checkpoints compared to those occurring in  circumvention routes. In particular, these memoranda stated that:  \u201cAt the checkpoint\u201d is defined as the area including the checkpoint itself  and the roadway prior to the checkpoint marked with cones and/or  warning signs related to checkpoint operations (which, according to  Border Patrol\u2019s checkpoint policy, are to begin on the roadway one-half  mile from the checkpoint itself). Apprehensions and seizures occurring  at a checkpoint are to be recorded by selecting the appropriate  checkpoint location from a dropdown list of landmarks (landmark data  field).  \u201cCircumvention\u201d is defined as \u201cany deviation from a normally used route  of egress in order to avoid detection by a checkpoint,\u201d and if an individual  was apprehended while attempting to circumvent a checkpoint, the  apprehension is to be recorded by marking a checkbox labeled  \u201cCircumvention App?\u201d (There is no data field for seizures that indicates  that Border Patrol seized contraband from someone attempting to  circumvent a checkpoint, but the seizure can be associated with an  apprehension or arrest record for the person carrying the contraband,  and the apprehension or arrest record may have the \u201cCircumvention  App?\u201d box checked.)", "However, as discussed below, these memoranda have not fully  addressed our recommendation because our analysis indicates that  issues persist regarding the accuracy and consistency of data on  checkpoint apprehensions and seizures. These issues continue to affect  how Border Patrol monitors and reports on checkpoint performance  results.", "According to Border Patrol officials, since the implementation of these  memoranda, Border Patrol has reported on apprehensions and seizures  at checkpoints based solely on the landmark data field. Specifically, an  apprehension or seizure event is reported as having occurred at a  checkpoint if the landmark associated with the event corresponds to the  landmark for a checkpoint (checkpoint landmark). In September 2016, the  Border Patrol Chief testified before a congressional committee that  Border Patrol apprehended 8,503 individuals and seized over 75,000  pounds of drugs at checkpoints nationwide in fiscal year 2015, and the  officials responsible for overseeing and analyzing the data said that these  numbers were generated by determining the number of apprehensions  and seizures associated with a checkpoint landmark. Furthermore,  CBP\u2019s fiscal year 2018 congressional budget justification noted that  measurement of checkpoint activities\u2014such as apprehensions at  checkpoints\u2014can gauge checkpoint operational effectiveness and  provide insight into the effectiveness of the Border Patrol\u2019s overall  national border enforcement strategy. CBP reported in the budget  justification that apprehensions at checkpoints ranged from 1.34 to 2.52  percent of nationwide apprehensions across fiscal years 2013 through  2016.", "To assess Border Patrol\u2019s efforts to implement our August 2009  recommendation and determine the extent to which Border Patrol\u2019s  reporting of checkpoint statistics provides accurate information about  enforcement actions at and around checkpoints, we analyzed  apprehension and seizure data from fiscal years 2013 through 2016.  For example, as shown in table 4, an apprehension or seizure event that  occurred one-half mile or less from a checkpoint (according to the GPS  coordinates of the event) and that was also associated with the nearest  checkpoint landmark was considered category 1.", "Our analysis of Border Patrol data, as shown in table 5, indicates that at  least 31,639 apprehensions and 30,449 seizures\u2014those that are in  category 1\u2014occurred at checkpoints from fiscal years 2013 through 2016  based on both the GPS coordinates and the landmarks associated with  those apprehensions and seizures. These apprehension and seizure  events would be considered as occurring \u201cat checkpoint\u201d for Border Patrol  reporting purposes because a checkpoint landmark was associated with  the event.", "However, for the 19,759 apprehensions and 1,182 seizures in category  2\u2014which are not included in Border Patrol\u2019s reporting\u2014it is unknown  what proportion should be considered \u201cat a checkpoint.\u201d This is because  for each of these apprehensions and seizures, the associated landmark  does not correspond to the nearest checkpoint landmark, even though the  GPS coordinates indicate that these apprehensions and seizures  occurred one-half mile or less from a checkpoint location. Border Patrol  officials said that one reason why the checkpoint landmark might not be  indicated for apprehensions and seizures that occur one-half mile or less  from a checkpoint is if the checkpoint is nonoperational at the time.  However, our analysis suggests that not all apprehensions and seizures  recorded in category 2 would reflect instances of checkpoints being non- operational. For example, about 30 percent of apprehensions that were  one-half mile or less from the Falfurrias, TX, checkpoint (4,278 of 14,345  apprehensions) did not use the landmark for that checkpoint. Border  Patrol officials in the Rio Grande Valley sector said the Falfurrias  checkpoint is rarely closed, so the checkpoint being closed does not fully  explain why the relevant checkpoint landmark was not used. Because  Border Patrol\u2019s policies do not provide guidance about recording data  differently when a checkpoint is operational or nonoperational, it is  unclear what proportion of apprehensions or seizures in category 2 reflect  inconsistent application of Border Patrol\u2019s guidance versus instances of a  checkpoint being nonoperational.", "There are also inconsistencies in how Border Patrol is recording and  reporting on apprehensions and seizures on potential circumvention  routes. Events in category 3 appear to have occurred in circumvention  routes rather than at checkpoints\u2014they occurred farther than one-half  mile from a checkpoint, and thus do not fit Border Patrol\u2019s definition of an  apprehension that occurs \u201cat a checkpoint\u201d\u2014but because they are  associated with a checkpoint landmark, Border Patrol\u2019s reporting of  events at checkpoints includes these apprehensions and seizures.", "Additionally, officials responsible for compiling checkpoint data said that  they have not analyzed the use of the \u201cCircumvention App?\u201d checkbox to  separately determine apprehensions that occur around checkpoints.  Although the GPS coordinates and associated landmarks suggest that  apprehensions in category 4 are not related to checkpoints, there were  over 27,000 apprehensions in this category that had the \u201cCircumvention  App?\u201d box checked. However, these apprehensions have not been  included in statistics related to checkpoints because Border Patrol\u2019s  reporting to date has focused on events associated with checkpoint  landmarks and has not separately analyzed or reported the number of  apprehensions for which the \u201cCircumvention App?\u201d box was checked. In  doing so, Border Patrol\u2019s reporting does not differentiate between  apprehensions that occurred at versus around a checkpoint. Border  Patrol officials agreed that the agency\u2019s policies could better differentiate  between these areas and how to record data for events that occur in each  location.", "Examining apprehensions specific to an individual checkpoint further  illustrates the inconsistencies in data recorded for checkpoints. Figure 11  shows how apprehensions at and around one checkpoint have been  recorded using GPS coordinates and landmarks, in relation to the one- half mile radius around the checkpoint.", "Border Patrol\u2019s methodology for determining the number of  apprehensions and seizures at checkpoints\u2014which counts only  apprehensions and seizures associated with checkpoint landmarks\u2014may  result in overstating or understating apprehensions and seizures that  occurred at checkpoints; however, the precise number of apprehensions  and seizures that occurred at checkpoints cannot be determined because  of the data inconsistencies noted above. For example, Border Patrol\u2019s  reporting\u2014such as in the Border Patrol Chief\u2019s testimony or CBP\u2019s fiscal  year 2018 budget justification\u2014may overstate apprehensions at  checkpoints by including apprehensions in category 3, while it may  understate apprehensions by not including some portion, or all, of the  apprehensions in category 2. For the 4 fiscal years of data we analyzed,  this means that Border Patrol\u2019s methodology for attributing apprehensions  to checkpoints would potentially overstate by 1,746 apprehensions (about  0.1 percent of total southwest border apprehensions) and potentially  understate by as many as 19,759 apprehensions (about 1.2 percent of  total southwest border apprehensions). Although these numbers  represent relatively small percentages of total southwest border  apprehensions, they are important for the measurement of checkpoint  apprehensions given that Border Patrol has generally reported that about  2 percent of apprehensions occur at checkpoints, and in particular,  adding 1.2 percentage points to the reported 2 percent would increase  the reported contributions of checkpoints by about 50 percent.", "Although Border Patrol issued guidance in 2009 and 2010 in response to  our recommendation, our analysis demonstrates that this guidance does  not provide sufficient clarity on how data are to be recorded, and as a  result data quality issues have persisted. For example, Border Patrol\u2019s  guidance does not indicate what landmark should be used when an agent  apprehends an individual who was attempting to circumvent a checkpoint.  Additionally, Border Patrol has not provided sufficient oversight of the  accuracy, consistency and completeness of checkpoint data since the  guidance was issued. In July 2013, Border Patrol issued a memorandum  to establish the Checkpoint Program Management Office (CPMO), and  the memorandum tasked CPMO with overseeing checkpoint data quality  and accuracy, among other things. However, CPMO was not officially  formed until the summer of 2016 when we began this review. Officials  noted that while Border Patrol staff had been consistently assigned to  oversee checkpoint data as a collateral duty, these assignments were not  within an officially formed CPMO and there was no centralized oversight  of checkpoint data or performance. The Associate Chief responsible for  overseeing CPMO told us he had not been aware of the memorandum  establishing CPMO until we requested checkpoint policies as part of this  review, and he explained that CPMO had not been formally established  under his predecessor at the time of the July 2013 memorandum.", "In late summer 2016, the Associate Chief formally established CPMO  with the two Border Patrol agents who were, at the time, assigned part- time to oversee checkpoints. However, the CPMO establishing memo  called for two full-time staff members, and one of the staff assigned to  CPMO part-time moved to another position within Border Patrol several  months later. The first full-time staff person was assigned to CPMO in  January 2017. In March 2017, CPMO officials said they agreed with our  findings regarding inconsistent recording of checkpoint data, and they  said they have drafted a policy to provide additional guidance, including  how to distinguish how data are recorded for apprehensions and seizures  that occur at the checkpoint versus around the checkpoint. The Assistant  Chief for CPMO, in consultation with sector and data analysis officials,  has drafted additional guidance for recording apprehensions and seizures  data in a manner that differentiates between events that occurred at  versus around checkpoints. According to this official, this guidance will be  included in a larger update to Border Patrol\u2019s checkpoint policy because  the checkpoint policy was last updated in 2003. Border Patrol officials  said they expect the updated checkpoint policy with additional data entry  guidance and procedures will be in place by March 2018, following Border  Patrol and CBP management review and approval and programming  changes to Border Patrol\u2019s data systems.", "Having quality control procedures in place to accurately document  apprehensions and seizures that occur at and around checkpoints is  important to enable Border Patrol to measure checkpoint effectiveness  and to make better deployment decisions about the extent to which  circumvention routes should be staffed. Distinguishing between the  locations of apprehensions and seizures, relative to checkpoints, would  provide more visibility into illegal traffic patterns at and around  checkpoints that can be used for staffing and other resource decisions.  Until revised internal control practices are in place, including data  collection guidance and sufficient oversight of the recording of the data,  our 2009 recommendation that Border Patrol establish internal controls  for management oversight of the accuracy, consistency, and  completeness of checkpoint performance data remains warranted. As  part of our regular follow up on implementation of our recommendations,  we will monitor Border Patrol\u2019s progress in issuing and implementing the  planned update to its checkpoint policy."], "subsections": []}, {"section_title": "Almost Half of Seizures that Occurred at Checkpoints Were One Ounce or Less of Marijuana from U.S. Citizens", "paragraphs": ["In addition to analyzing where apprehensions and seizures occurred, we  analyzed marijuana seizure data to determine how seizures that occurred  at checkpoints compared to those that occurred at other locations. As  shown in figure 12, out of the 30,449 seizures that occurred at  checkpoints, at least 12,214 (40 percent) were 1 ounce or less of  marijuana seized from U.S. citizens. In contrast, seizures occurring at  non-checkpoint locations were more often higher-quantities seized from  aliens. For example, more than three-quarters of marijuana seizures at  non-checkpoint locations were of over 50 pounds (25,792 out of 33,477  seizures). (Appendix III includes additional detail on the distribution of  marijuana seizures by quantity seized.)", "Border Patrol officials said that the primary purpose of checkpoints is to  enforce immigration laws, but agents at checkpoints are also expected to  take action when they incidentally encounter violations of other federal  laws. In particular, they noted that when a trained canine alerts agents to  the presence of a concealed human or substance the canine was trained  to detect, agents are required to respond to the alert. Based on the  canine alert, agents do not know until they conduct a search of the  vehicle what the canine detected (concealed human or illicit substance) or  what quantity of a substance might be present\u2014and therefore, agents  cannot determine prior to an inspection whether the occupants of the  vehicle are travelling with what would generally be considered a personal  use quantity of a substance or whether they are carrying larger quantities  potentially with the intent to distribute, dispense, or manufacture."], "subsections": []}]}, {"section_title": "Collecting Additional Data Could Improve Border Patrol\u2019s Existing Efforts to Identify and Respond to Community Concerns Regarding the Defense in Depth Strategy", "paragraphs": [], "subsections": [{"section_title": "Defense in Depth Strategy\u2019s Effects on Surrounding Communities are Difficult to Quantify, but Collecting Additional Data Could Inform Actions to Address Such Effects", "paragraphs": ["Members of state and local law enforcement and business and  community groups that we spoke to generally support Border Patrol\u2019s  efforts, but some raised concerns about checkpoint operations and the  broader defense in depth strategy. Members of all three community  groups we met with during our visits to the Rio Grande Valley and Tucson  sectors generally supported Border Patrol. Additionally, officials from law  enforcement agencies we interviewed generally said they had a positive  working relationship with Border Patrol and that Border Patrol has played  a role in limiting cross-border illicit activity in their communities. For  example, one law enforcement official from the Tucson sector said that  the community would be overwhelmed without Border Patrol\u2019s efforts in  the area, and another said that without the defense in depth approach,  illegal activity would likely be worse, although this latter official noted  there can be communication and coordination challenges in working with  Border Patrol. Some residents and law enforcement officials we met with  in the two sectors we visited said that they support Border Patrol\u2019s use of  checkpoints. For example, the leader of one community group said the  group\u2019s members viewed checkpoints positively, and members from  another group said that some residents in their community believe that  their local checkpoint is making the community safer through law  enforcement presence.", "However, Border Patrol\u2019s defense in depth deployment strategy may also  result in communities ranging up to 100 miles from the border  experiencing effects associated with Border Patrol enforcement actions to  interdict illicit cross-border activity. In April 2015, we reported that illicit  cross-border activity can negatively affect business and the safety of  farms and ranches on or near the border. Although data are limited to  support the extent of criminal activity tied to cross-border illegal traffic,  available data indicate that cross-border traffic affects areas beyond the  immediate border. For example, in fiscal year 2016, 20 percent of all  Border Patrol apprehensions and 77 percent of all seizures occurred  more than five miles from the border. Therefore, illegal crossers and drug  smugglers may sometimes travel near or through communities and  private property in areas that are not along the immediate the border,  prior to being apprehended by Border Patrol. For example, members of  one community group we interviewed said that there are hundreds of  illegal crossers and smugglers who attempt to circumvent the local  checkpoint by walking through the surrounding ranches. Echoing views  from ranchers we interviewed for a December 2012 report, members of  one community group we spoke with as part of this review said that they  would like to see Border Patrol direct more enforcement efforts at the  immediate border to prevent illegal crossers from entering their  communities or properties. Officials we interviewed from two sheriffs\u2019  departments in nearby counties said they have heard similar views from  residents.", "Community groups and law enforcement officials we met with as part of  this review identified concerns regarding private property damage and  public safety resulting from illegal cross border traffic, similar to concerns  we have reported in the past.", "Private Property Damage: Community members have reported damage  to private property suspected to have occurred as a result of individuals  trying to illegally cross the border or Border Patrol enforcement actions.  Border Patrol officials we spoke with in six of nine sectors cited concerns  from community residents about illegal crossers and Border Patrol agents  traveling on their private property. Additionally, officials from two sheriffs\u2019  departments told us that ranchers in their communities have voiced  complaints about damage on their properties resulting from illegal  crossers or Border Patrol activity. These concerns are similar to concerns  we identified in an April 2015 report, in which we reported that  landowners had reported damage to private property\u2014including broken  gates, destroyed crops, and injured or lost livestock\u2014as a result of  individuals trying to illegally cross the border (see fig. 13).", "In addition to identifying damage suspected to be caused by illegal  crossers, landowners we spoke with as part of that review also reported  damage that may have resulted from Border Patrol\u2019s enforcement efforts.  We previously reported in April 2015 that some landowners had filed tort  claims alleging damage to their property as a result of the conduct of an  employee of Border Patrol or any CBP component that was acting within  the scope of his or her official duties. Examples of such claims include  CBP vehicles crashing through properties and damaging fences, gates,  irrigation pipes, and crops.", "Public Safety: Additionally, according to Border Patrol and local law  enforcement officials, illegal entrants and smugglers could pose a public  safety risk to communities along the border or further inland. We  previously reported in December 2012 that ranchers in the Tucson sector  said they were most concerned about safety. Officials from law  enforcement agencies that we interviewed as part of this current review  said that crime resulting from illicit cross-border activity has affected  border communities. In particular, law enforcement officials we spoke  with cited drug smuggling (including recruiting juveniles to engage in drug  smuggling), home invasions, burglaries, and vandalism. The effects  related to public safety and private property associated with Border  Patrol\u2019s defense in depth strategy may be felt more acutely in  communities near checkpoints; in particular, one of Border Patrol\u2019s stated  goals for checkpoints is to deter and disrupt smuggling efforts, and as a  result, smuggling traffic may be pushed onto checkpoint circumvention  routes, which may pass through these communities. We previously  reported in August 2009 that Border Patrol officials acknowledge that this  approach can adversely impact communities near checkpoints, and said  that sometimes there were not enough agents in place to deter illegal  activity or apprehend trespassers in surrounding areas. As noted earlier  in this report, this remains true\u2014checkpoint circumvention routes are not  always patrolled.", "We are unable to measure the extent Border Patrol\u2019s defense in depth  strategy has affected communities through measures such as crime rates  or effects on property values. As part of previous reviews, we have  reviewed information related to the impacts of illegal cross-border activity  on local communities, including reports of property damage (such as tort  claims) and available crime data. As a result, we have previously reported  that methodological challenges existed and data were unavailable to  substantiate the extent to which illegal border crossings and drug  smuggling have affected local communities in terms of public safety and  private property damage. In August 2009 we reported that a comparison  of community impacts for the time before and after a checkpoint was  established would require a complete set of historical data to develop a  baseline understanding, before interpreting factors that can change the  baseline. However, there are limited data sets for specific geographic  areas around checkpoints, with county level data being the smallest  possible geographic area, in many cases. For instance, in terms of crime  data, officials from one police department in the Tucson sector told us  that they did not track criminal activity committed by illegal entrants. In  2011, as part of Border Patrol\u2019s efforts to implement our August 2009  recommendations, Border Patrol requested a study to identify the effects  of checkpoints on nearby communities and develop an approach to  measure these effects, and this study also noted data limitations that  affect conclusions regarding the effects of checkpoints on surrounding  communities.", "Implementing two of our August 2009 recommendations could help  Border Patrol collect relevant data to examine the community effects of  checkpoint operations specifically and take corresponding actions to  respond to ongoing community concerns. In August 2009 we reported  that Border Patrol had previously identified performance measures to  examine the effect checkpoint operations have on quality of life in the  surrounding communities, but the agency was not using these measures.  As a result, Border Patrol was hindered in its ability to assess the impact  of checkpoints on local communities. We recommended that Border  Patrol (1) implement quality of life measures identified by Border Patrol to  evaluate the impact that checkpoints have on local communities; and (2)  use the information generated from the quality of life measures in  conjunction with other relevant factors to inform resource allocations and  address identified impacts.", "Border Patrol agreed with the recommendations but has not yet fully  implemented them. In 2010, Border Patrol asked a DHS Center of  Excellence, co-led by the University of Arizona and the University of  Texas at El Paso, to conduct a study to help address our  recommendations. The resulting December 2012 report made several  recommendations to Border Patrol on evaluating the impact of  checkpoints on local communities using quantitative measures and with  maintaining regular contact with the public to elicit opinions on  experiences with the checkpoint, both positive and negative. Border  Patrol has since reported plans for implementing our recommendations  but has revised the estimated completion dates several times. (See  appendix I for more information about Border Patrol\u2019s planned actions to  address these recommendations.) As discussed later in this report,  Border Patrol provides opportunities for members of the community to  express concerns related to the defense in depth strategy since our  previous review of checkpoint operations in 2009, however, some  residents and local law enforcement officials near checkpoints we spoke  to for this review remain concerned about the effects checkpoints may  have on their communities. Measuring performance, such as quality of life  measures related to checkpoints, would give Border Patrol critical  information on which to base decisions for improving checkpoint  operations. Therefore, we continue to believe that our recommendations  remain warranted."], "subsections": []}, {"section_title": "Border Patrol Is Taking Steps to Identify and Respond to Community Concerns", "paragraphs": ["Border Patrol uses a variety of methods to collect feedback from  community members related to the defense in depth strategy. It receives  feedback through direct communication and informal relationships, which  are facilitated in part by communication and outreach events organized by  sector Border Community Liaison (BCL) programs. Border Patrol initiated  the BCL program in April 2011 in an effort to enhance Border Patrol\u2019s  relationships with landowners and the community as a whole. According  to the July 2012 CBP implementation memo, the BCL program\u2019s function  and associated positions are intended to enhance CBP\u2019s interaction with  communities and provide a fact-based understanding of community  views, concerns, and issues as they relate to CBP. According to Border  Patrol officials, sector BCL agents interact with members of the local  community to address complaints and also introduce the community to  how Border Patrol operates so that there is a better understanding and  relationship between Border Patrol agents and the surrounding  community.", "Each sector has its own BCL program designed to address complaints  and improve the relationship between Border Patrol agents and the  surrounding community, and the efforts within each program range from  official events to informal communications. Sector and station BCL  programs organize official events such as cook-offs, stakeholder events,  and open houses where community members learn about Border Patrol\u2019s  activities and have the opportunity to share their concerns. As an  example of informal communications, Border Patrol officials from one  station in the Rio Grande Valley sector told us that agents and officials  make an effort to be very approachable to community members, as  demonstrated through actions such as the station\u2019s patrol agent in charge  providing a personal cell phone number to local residents to facilitate  direct communication.", "In addition, every southwest border sector uses the Compliments and  Complaints Management System (CCMS). The CCMS is a computerized  system that allows users to log and track complaints or compliments. The  CCMS is meant to identify trends and patterns in community comments to  better address complaints and compliments, but Border Patrol officials  have questioned its usefulness. Following a pilot program, in January  2017, CCMS became a permanent program to all CBP offices that have  interaction with the public. Comments can be entered directly by residents  or by Border Patrol officials who have received feedback from the  community. According to the memo, CBP also standardized the response  time for compliments and complaints entered into the system throughout  the agency. Agency officials are to send an acknowledgment of receipt  within 5 business days and complete responses within 45 days.", "Officials from six of nine sectors said they generally preferred the less  formal methods of interacting with the community, as discussed above,  compared to the CCMS. Some of the reasons they identified included that  community members often prefer to speak with an agent instead of  inputting their concern into a system, very few complaints or compliments  are logged into the CCMS by residents, the system is not user friendly,  and it is rarely used for data recall. According to a report generated by  Border Patrol headquarters, there were 599 comments entered into the  CCMS nationwide in calendar year 2016. Of those, 81 were compliments.", "Border Patrol takes various actions to respond to community concerns it  has identified, including considering the input of local stakeholders when  making deployment decisions. For example, officials from the Tucson  sector told us that agents engage with ranchers who have game cameras  on their properties so station officials can consider the flow of illegal  entrants or drug smugglers on their properties when making deployment  decisions. Moreover, officials from the Rio Grande Valley sector said that  sector and station officials take into account population centers when  making deployment decisions to attempt to deploy agents in positions to  apprehend entrants prior to reaching population centers because once  they enter the general population they are more difficult to detect and  apprehend. Additionally, community members and Border Patrol officials  told us that agents respond to calls of suspected illegal cross-border  activity on private lands. Border Patrol has various mechanisms in place  for community members to notify agents of suspected activity. For  example, one station in the Rio Grande Valley sector created a mobile  phone application and released a limited number of licenses for ranchers  and landowners to take a picture if they see suspicious activity and send  it directly to Border Patrol. Moreover, landowners in the Rio Grande  Valley sector told us that Border Patrol has been responsive to calls when  something out of the ordinary has been spotted on private land."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Homeland Security  for their review and comment. In its comments, reproduced in appendix  IV, DHS provided an update on planned actions to implement the four  open recommendations from our August 2009 report. DHS also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Status of GAO Recommendations Related to Checkpoints", "paragraphs": ["In August 2009, we reported on and made recommendations regarding  the measurement of checkpoint performance and the impact of  checkpoint operations on nearby communities, among other things  related to checkpoints. In comments provided on our August 2009 report,  the Department of Homeland Security (DHS) concurred with those  recommendations. This appendix provides additional detail regarding the  status of the recommendations from that report, including two  recommendations that U.S. Customs and Border Protection (CBP) has  implemented.", "Recommendation 1: Establish milestones for determining the feasibility  of a checkpoint performance model that would allow the Border Patrol to  compare apprehensions and seizures to the level of illegal activity  passing through the checkpoint undetected.", "Status: Closed \u2013 Implemented  In August 2009, we reported that the Border Patrol had developed some  useful measures of checkpoint performance, but the agency lacked a  model or method that would allow the agency to compare the number of  apprehensions and seizures made at the checkpoint to the level of illegal  activity passing through the checkpoint undetected. The lack of this  information challenged the Border Patrol\u2019s ability to measure checkpoint  effectiveness and provide public accountability. In 2010, Border Patrol  asked a DHS Center of Excellence to study checkpoint performance,  including developing a checkpoint performance model, and the DHS  Center of Excellence issued its report in December 2012. In June 2013,  Border Patrol reported that the agency had considered the checkpoint  performance models proposed by the National Center for Border Security  and Immigration\u2014the DHS Center of Excellence\u2014but determined it was  not feasible to use the proposed models due to cost prohibitions and  other factors. This action was responsive to the intent of our  recommendation to study the feasibility of a checkpoint performance  model, and this recommendation has been closed as implemented.", "Recommendation 2: Establish internal controls for management  oversight of the accuracy, consistency, and completeness of checkpoint  performance data.", "In August 2009, we reported on inconsistencies in the way agents  collected and entered performance data into the checkpoint information  system. As a result, data reported in the system were unreliable. In  October 2009, Border Patrol issued a memorandum specifying which  data fields agents should use to indicate that an enforcement activity  occurred at a checkpoint (or on a circumvention route, for  apprehensions), and in January 2010 Border Patrol issued an additional  memorandum on checkpoint data integrity that further specified  definitions for \u201cat the checkpoint\u201d and \u201ccircumvention.\u201d In subsequent  years, Border Patrol officials reported to us that they were taking steps to  develop a redesigned checkpoint information system, implement a data  oversight procedure, and provide training, and estimated completion  dates were revised several times. In its comments on this report (see app.  IV), DHS stated that it expects to issue an updated checkpoint policy,  including updates on data entry guidance and oversight to address data  integrity, by February 28, 2018. As discussed earlier in this report, data  quality issues have persisted, and without established internal controls,  the integrity of Border Patrol\u2019s performance and accountability system  with regard to checkpoint operations remains uncertain.", "Recommendation 3: Implement the quality of life measures that have  already been identified by the Border Patrol to evaluate the impact that  checkpoints have on local communities. Implementing these measures  would include identifying appropriate data sources available at the local,  state, or federal level, and developing guidance for how data should be  collected and used in support of these measures.", "In August 2009, we reported that Border Patrol had identified some  measures to evaluate the impact that checkpoints have on local  communities in terms of quality of life, but Border Patrol had not  implemented the measures. As a result, the Border Patrol lacked  information on how checkpoint operations could affect nearby  communities. In October 2009, the Border Patrol reported that it was  reevaluating its checkpoint performance measures, including quality of life  measures. In December 2012, the DHS Center of Excellence completed  a study for CBP on checkpoints. This study made several  recommendations to Border Patrol on evaluating the impact of  checkpoints on local communities using quantitative measures and with  maintaining regular contact with the public to elicit opinions on  experiences with the checkpoint, both positive and negative. At the time,  the Border Patrol noted it intended to develop quantitative measures on  community impact, such as on public safety and quality of life, using  information collected in the new checkpoint information system it was  planning. Border Patrol also noted that it was considering the budgetary  feasibility of (1) conducting a survey of checkpoint travelers to gather  detailed information about the community and impact metrics that are of  highest importance to the public and (2) implementing an expedited lane  for regular and pre-approved travelers. In July 2014, the Border Patrol  revised the expected completion date for its actions to address this  recommendation to March 2015, noting that it planned to request ideas  from the field commanders on what the agency could measure that would  accurately depict the impact of checkpoints on the community. In June  2015, Border Patrol revised the expected completion date to September  2015. In September 2016, officials from Border Patrol\u2019s Checkpoint  Program Management Office said quality of life measures had not been  implemented and they were not aware of any plans to develop and  implement such measures. In its comments on this report (see app. IV),  DHS stated that it expects to establish performance measures related to  community impacts by February 28, 2018. As noted earlier in this report,  residents and local law enforcement officials near checkpoints we spoke  to for this review remain concerned about the effects checkpoints may  have on their communities. Measuring performance, such as quality of life  measures related to checkpoints, would give Border Patrol critical  information on which to base decisions for improving checkpoint  operations.", "Recommendation 4: Use the information generated from the quality of  life measures in conjunction with other relevant factors to inform resource  allocations and address identified impacts.", "In August 2009, we reported that while the Border Patrol\u2019s national  strategy cites the importance of assessing the community impact of  Border Patrol operations, the implementation of such measures was  lacking in terms of checkpoint operations. In October 2009, the Border  Patrol reported that once it had completed an upgrade of its existing  checkpoint data systems and had reevaluated its checkpoint performance  measures, the agency would begin using information garnered by these  performance measures to inform future resource allocation decisions.  This was originally expected to be completed by September 30, 2010, but  due to budgetary and other issues, the checkpoint system upgrades were  not yet completed as of June 2013. Border Patrol then reported to us in  June 2013 that the redesigned and upgraded checkpoint information  system was expected to be implemented in September 2014, but this  system has not been developed or implemented, and in September 2016,  officials from Border Patrol\u2019s Checkpoint Program Management Office  stated that they were not aware of any planned or completed actions to  address this recommendation. In its comments on this report (see app.  IV), DHS stated that it expects to establish performance measures related  to community impacts by February 28, 2018, and that these measures will  be used to inform resource allocation decisions. As noted earlier in this  report, residents and local law enforcement officials near checkpoints we  spoke to for this review remain concerned about the effects checkpoints  may have on their communities. Measuring performance, such as quality  of life measures related to checkpoints, would give Border Patrol critical  information on which to base decisions for improving checkpoint  operations.", "Recommendation 5: Require that current and expected traffic volumes  be considered by the Border Patrol when determining the number of  inspection lanes at new permanent checkpoints, that traffic studies be  conducted and documented, and that these requirements be explicitly  documented in Border Patrol checkpoint design guidelines and standards.", "Status: Closed \u2013 Implemented  In August 2009, we reported that Border Patrol did not conduct traffic  studies when designing three recently constructed checkpoints. As a  result, we could not determine if the Border Patrol complied with its  checkpoint design guidelines to consider current and future traffic  volumes when determining the number of inspection lanes at the three  checkpoints. In the absence of documented traffic studies, the Border  Patrol could not determine if the number of inspection lanes at each of  these checkpoints was consistent with current and projected traffic  volumes, or if a different number of lanes would have been more  appropriate. On October 28, 2009, the Border Patrol finalized an  addendum to the Border Patrol Facilities Design Standard, which requires  the Border Patrol to acquire, document, and utilize traffic study data  collected by the state Departments of Transportation regarding current  and projected traffic volumes on roadways where permanent checkpoints  are to be constructed. The traffic studies are to be documented by the  Border Patrol and utilized as the baseline requirement to determine the  number of inspection lanes at new permanent checkpoints, and therefore  this recommendation has been closed as implemented.", "Recommendation 6: In connection with planning for new or upgraded  checkpoints, conduct a workforce planning needs assessment for  checkpoint staffing allocations to determine the resources needed to  address anticipated levels of illegal activity around the checkpoint.", "In August 2009, we reported that Border Patrol\u2019s checkpoint strategy to  push illegal crossers and smugglers to areas around checkpoints\u2014which  could include nearby communities\u2014underscores the need for the Border  Patrol to ensure that it deploys sufficient resources and staff to these  areas. In October 2009, Border Patrol reported that the agency was  evaluating its checkpoint policy regarding the establishment of a new  checkpoint or the upgrade of an old checkpoint, and checkpoint policy  changes would be finalized by September 30, 2010. Border Patrol also  reported that checkpoint system upgrades that capture data on  checkpoint performance would help management determine future  resource needs at checkpoints. In June 2013, Border Patrol reported that  due to budget and other issues, the checkpoint system upgrade had not  been completed, and the rewritten checkpoint data protocol had not been  approved. In June 2013, Border Patrol reported that as part of the  checkpoint study conducted by the DHS Center of Excellence, the Center  created checkpoint simulation tools that would help inform resource  allocations when determining the number of inspection lanes on current  or new checkpoints. The Border Patrol agreed with the utility of such a  model, but noted that the Border Patrol would need to purchase modeling  software\u2014a cost-prohibitive measure in the current budget environment.  In the interim, Border Patrol is developing a formal workforce staffing  model to identify staffing strategies for all Border Patrol duties. Border  Patrol expected to implement this model for checkpoint staffing  assignments in fiscal year 2014. However, in July 2014, Border Patrol  reported that the Border Patrol\u2019s Personnel Requirements Determination  project was still being developed and that process would inform staffing at  checkpoints, although the project is not specific to checkpoint staffing  needs. As a result, Border Patrol revised its expected implementation  date to September 2015. However, according to the Border Patrol official  overseeing the project, subsequent changes in leadership and factors  unrelated to checkpoints have affected the overall time frames for the  Personnel Requirements Determination project. In September 2016,  Border Patrol officials reported that the agency\u2019s Personnel Requirements  Determination process would not provide information on staffing needs  until fiscal year 2017 or 2018. In its comments on this report (see app.  IV), DHS stated that it expects to use information from the Personnel  Requirements Determination process to determine staffing requirements  and address our recommendation by September 30, 2019. Given that  local residents continue to express concerns about the impacts of  checkpoints on communities, conducting a needs assessment when  planning for a new or upgraded checkpoint could help better ensure that  officials consider the potential impact of the checkpoint on the community  and plan for a sufficient number of agents and resources."], "subsections": []}, {"section_title": "Appendix II: Trends in Southwest Border Apprehensions, Fiscal Years 2012 through 2016", "paragraphs": ["This appendix contains additional detail about trends in southwest border  apprehensions from fiscal years 2012 through 2016, including trends in  the: number of apprehensions by sector, distribution of apprehensions by sector and by distance from the border, distribution of apprehensions by sector and by proximity to checkpoints."], "subsections": [{"section_title": "Apprehensions by Sector", "paragraphs": ["From fiscal years 2012 through 2016, Border Patrol apprehended a total  of almost 2 million individuals in southwest border sectors. The number  of apprehensions over this period rose to a peak in fiscal year 2014,  declined in fiscal year 2015, and rose again in fiscal year 2016. Over this  5-year period, about two-thirds of the apprehensions occurred in the Rio  Grande Valley and Tucson sectors (42 percent and 23 percent,  respectively), and the Rio Grande Valley sector accounted for an  increasing percentage of total southwest border apprehensions over this  time period (from 27 percent of all southwest border apprehensions in  fiscal year 2012 to 46 percent of apprehensions in fiscal year 2016). As  shown in figure 14, apprehensions also increased in five other sectors,  but the other sectors represented consistently smaller percentages of all  apprehensions over the 5-year period.", "The Secretary of the Department of Homeland Security stated during  testimony before the Senate Committee on Homeland Security and  Governmental Affairs that apprehensions have dropped sharply since the  beginning of 2017. He stated, for example, that Border Patrol  apprehended approximately 1,000 unaccompanied alien children in  March 2017 (a time of year he noted when apprehensions generally are  higher) compared to over 7,000 unaccompanied alien children in  December 2016."], "subsections": []}, {"section_title": "Distribution of Apprehensions by Sector and by Distance from the Border", "paragraphs": ["As noted in this report, apprehensions overall for the southwest border  increasingly occurred closer to the border. Table 6 shows the distribution  for each sector of apprehensions by distance from the border during fiscal  years 2012 through 2016."], "subsections": []}, {"section_title": "Apprehensions at Checkpoints by Sector", "paragraphs": ["For fiscal years 2013 through 2016, the percent of apprehensions  occurring at checkpoints varied by sector. We assigned each  apprehension into one of four location categories based on whether the  GPS coordinates for the event occurred close enough to the GPS  coordinates for a checkpoint to be considered \u201cat a checkpoint\u201d and  whether the event\u2019s landmark corresponds to the nearest checkpoint  landmark. Table 7 shows the distribution of apprehensions for each  sector by location category during fiscal years 2013 through 2016, and  the extent to which apprehensions were identified as checkpoint  circumventions based on use of the \u201cCircumvention App?\u201d checkbox.  Differences in sector apprehensions at checkpoints could depend in part  on the number of checkpoints within a sector, the amount of time  checkpoints are operational, and the extent to which sectors consistently  apply guidance on how to enter data for apprehensions that are related to  checkpoint operations."], "subsections": []}]}, {"section_title": "Appendix III: Trends in Southwest Border Seizures, Fiscal Years 2012 through 2016", "paragraphs": ["This appendix contains additional detail about trends in southwest border  seizures from fiscal years 2012 through 2016, including trends in the: number of seizures by type of contraband seized, number of seizures by sector, distribution of seizures by sector and by distance from the border,  seizures related to Border Patrol checkpoints each available year by  sector, and marijuana seizures at checkpoints by quantity seized."], "subsections": [{"section_title": "Seizures by Type of Contraband Seized", "paragraphs": ["Border Patrol seized almost 90,000 prohibited items in southwest border  sectors from fiscal year 2012 through fiscal year 2016. Most of these  seizures (92 percent) were narcotics, and 87 percent of narcotics  seizures were marijuana. The remaining seizures were of firearms,  ammunition, currency, or other property. As shown in table 8, the number  of seizures on the southwest border generally decreased from fiscal year  2012 to fiscal year 2016, with the exceptions of slight rises in the amount  of methamphetamines and heroin seized during this period."], "subsections": []}, {"section_title": "Seizures by Sector", "paragraphs": ["The greatest number of seizures during the 5 fiscal years occurred in the  Tucson, Big Bend, and Rio Grande Valley sectors (34, 19, and 16 percent  respectively). Collectively, these three sectors accounted for 69 percent  of southwest border seizures from fiscal years 2012 through 2016. For all  southwest border sectors except the Big Bend sector, the numbers of  seizures decreased during this 5-year period. For example, the number of  seizures in the Tucson sector decreased 12 percent, and the number of  seizures in the Rio Grande Valley sector decreased 36 percent during this  period. The number of seizures in the Big Bend sector increased 39  percent from fiscal years 2012 through 2016. Figure 15 shows the  number of seizures from fiscal years 2012 through 2016 by sector."], "subsections": []}, {"section_title": "Distribution of Seizures by Sector and by Distance from the Border", "paragraphs": ["As noted in this report, the location where seizures occurred remained  relatively stable from fiscal year 2012 through fiscal year 2016, with the  majority of seizures occurring 10 miles or more from the southwest  border. Table 9 shows the distribution of seizures for each sector by  distance from the border during fiscal years 2012 through 2016."], "subsections": []}, {"section_title": "Seizures at Checkpoints by Sector", "paragraphs": ["For fiscal years 2013 through 2016, the percent of seizures occurring at  checkpoints varied by sector. We assigned each seizure into one of four  location categories based on whether the GPS coordinates for the event  occurred close enough to the GPS coordinates for a checkpoint to be  considered \u201cat a checkpoint\u201d and whether the event\u2019s landmark  corresponds to the nearest checkpoint landmark. Table 10 shows the  distribution of seizures for each sector by checkpoint location category  during fiscal years 2013 through 2016. Differences in sector seizures at  checkpoints could depend in part on the number of checkpoints within a  sector, the percent of time checkpoints are operational, and the extent to  which sectors consistently apply guidance on how to enter data for  seizures that are related to checkpoint operations."], "subsections": []}, {"section_title": "Marijuana Seizures by Quantity Seized", "paragraphs": ["Most southwest border seizures were narcotics, and most narcotics  seizures were marijuana. As noted in this report, marijuana seizures at  checkpoints were often for smaller quantities compared to marijuana  seizures at non-checkpoint locations. Table 11 shows that about 67  percent of marijuana seizures at checkpoints were for quantities less than  or equal to 1 ounce, whereas the quantities seized at non-checkpoint  locations were often larger. For example, more than three-quarters of  marijuana seizures at non-checkpoint locations were of over 50 pounds  (25,792 out of 33,477 seizures)."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Adam Hoffman (Assistant  Director), David Alexander, Alana Finley, Eric Hauswirth, Monica Kelly,  John Mingus, Sasan J. \u201cJon\u201d Najmi, Christine San, Adam Vogt, and  Tomas Wind made significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-404T", "url": "https://www.gao.gov/products/GAO-18-404T", "title": "Analyzing Regulatory Burden: Policies and Analyses under the Regulatory Flexibility Act and Retrospective Reviews Could Be Improved", "published_date": "2018-02-27T00:00:00", "released_date": "2018-02-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal financial regulators must comply with various rulemaking and review requirements, including those in RFA and EGRPRA. These statutes require analyses relating to regulatory burden, small entities, or both. RFA requires analyses of a rule's impact on small entities and alternatives that may minimize any significant economic impact. It also requires agencies to review rules (within 10 years) to determine if the rules should be amended or rescinded. EGRPRA directs specified regulators to review regulations at least every 10 years and identify areas that are outdated, unnecessary, or unduly burdensome on insured depository institutions.", "This statement is based on findings from GAO's January 2018 report on RFA implementation ( GAO-18-256 ) and February 2018 report on regulatory burden on community banks and credit unions ( GAO-18-213 ). GAO discusses regulatory burdens and how financial regulators address regulatory burdens through the rulemaking process and retrospective reviews. For those reports, GAO's work included reviewing Federal Register notices; regulators' workpapers, policies and procedures; and reports to Congress on EGRPRA reviews. GAO also interviewed more than 60 community banks and credit unions."]}, {"section_title": "What GAO Found", "paragraphs": ["More than 60 smaller depository institutions told GAO that regulations for reporting mortgage characteristics; reviewing transactions for potentially illicit activity; and disclosing fees, conditions, and mortgage terms to consumers were the most burdensome. Institution representatives said these regulations were time-consuming and costly because the requirements were complex and required reporting that had to be reviewed for accuracy. Financial regulators and others noted these regulations provide various benefits as well, such as preventing lending discrimination or use of the banking system for illicit activity.", "The Regulatory Flexibility Act (RFA) requires federal agencies to analyze the impact of their regulations on small entities. GAO found several weaknesses with the analyses of six financial regulators\u2014Board of Governors of the Federal Reserve System (Federal Reserve), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission, Commodity Futures Trading Commission, and Consumer Financial Protection Bureau (CFPB)\u2014that could undermine the goal of RFA and limit transparency and public accountability. For example, some analyses lacked important information, such as data sources, methodologies, and consideration of broad economic impacts. Evaluations of potential economic effects and alternative regulatory approaches also were limited. Finally, regulators generally lacked comprehensive policies and procedures for RFA implementation. By not developing such policies and procedures, regulators' ability to consistently and effectively meet RFA objectives may be limited.", "The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) and RFA require regulators to conduct retrospective reviews, and GAO found weaknesses.", "EGRPRA. GAO found limitations in activities regulators undertook for retrospective reviews under EGRPRA. CFPB, which has regulatory authority for a number of consumer financial laws, was not included in the most recent review process. Moreover, as part of their EGRPRA reviews, the Federal Reserve, OCC, FDIC, and the National Credit Union Administration had not conducted and reported analyses of quantitative data nor had these regulators assessed the cumulative effect of regulations. Addressing these limitations in the EGRPRA processes likely would make the analyses they perform more transparent, and potentially result in additional burden reduction.", "RFA. The issues GAO identified with RFA retrospective reviews (section 610 reviews) included some regulators using the EGRPRA process to fulfill RFA requirements and gaps or weaknesses in analysis and documentation. But EGRPRA requirements do not fully align with RFA's, and it is not clear if the EGRPRA process satisfies the requirements of section 610. Also, regulators generally have not developed policies and procedures for section 610 reviews. By meeting section 610 review requirements, regulators will be in a better position to minimize any significant economic impact of a rule on a substantial number of small entities, as the statute seeks to ensure."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made a total of 20 recommendations to the financial regulators in the two reports to improve their policies and procedures and analysis under RFA and in retrospective reviews. The regulators generally agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent work on regulatory  burden for small entities (such as community banks and credit unions)  and efforts by financial regulators to reduce such burden when  developing and retrospectively assessing regulations. Federal financial  regulators normally must comply with various rulemaking and review  requirements, including those in the Regulatory Flexibility Act (RFA) and  the Economic Growth and Regulatory Paperwork Reduction Act of 1996  (EGRPRA). These statutes require analyses relating to regulatory burden,  small entities, or both:", "Analyses during rulemaking. RFA requires federal agencies,  including financial regulators, to provide an assessment\uf8e7known as a  regulatory flexibility analysis\uf8e7of a rule\u2019s potential impact on small  entities and consider alternatives that may minimize any significant  economic impact on small entities. Alternatively, agencies may certify  that a rule would not have a significant economic impact on a  substantial number of small entities instead of performing a regulatory  flexibility analysis.", "Retrospective reviews. (1) EGRPRA directs three depository  institution regulators\u2014the Board of Governors of the Federal Reserve  System (Federal Reserve), the Federal Deposit Insurance  Corporation (FDIC), and the Office of the Comptroller of the Currency  (OCC)\u2014to review regulations at least every 10 years and identify  areas that are outdated, unnecessary, or unduly burdensome on  insured depository institutions. (2) RFA requires agencies to review  within 10 years of publication those rules assessed as having a  significant economic impact on a substantial number of small entities.  Agencies are to determine if rules should be continued without  change, amended, or rescinded to minimize such impacts.", "My remarks today are based on our January 2018 report on RFA  implementation and our February 2018 report that includes an analysis of  the EGRPRA review process. My statement will focus on (1) regulations  community banks and credit unions regarded as most burdensome and  why; (2) the extent to which financial regulators performed analyses  required by RFA and established policies and procedures for complying  with RFA requirements; (3) efforts to reduce regulatory burden on  community banks and credit unions during EGRPRA reviews; and (4)  retrospective reviews required by RFA.", "For the January 2018 report, our work included a review of the RFA  section of the Federal Register notices and financial regulators\u2019 internal  workpapers for all RFA certifications made in the final rule (66) and all  rules for which agencies performed an initial regulatory flexibility analysis  in the proposed rule and a final regulatory flexibility analysis in the final  rule (39) in calendar years 2015 and 2016. We also reviewed internal  agency policies, procedures, and guidance for RFA analyses and  certifications and documentation of retrospective reviews required by RFA  (section 610 reviews) performed from calendar years 2006 through 2016.  For the February 2018 report, our work included reviewing the EGRPRA  report the Federal Reserve, FDIC, OCC, and the National Credit Union  Administration (NCUA) issued in 2017. To identify regulations that  community banks and credit unions viewed as most burdensome, we  obtained opinions from a non-probability selection of more than 60  community banks and credit unions. We also reviewed comment letters  received and transcripts of public meetings held as part of the review. We  compared the requirements of Executive Orders 12866, 13563, and  13610 with actions regulators took implementing reviews. Detailed  information on our scope and methodology can be found in our January  and February 2018 reports.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Regulatory Flexibility Act", "paragraphs": ["RFA requires that federal agencies, including financial regulators,  engaged in substantive rulemaking analyze the impact of proposed and  final regulations on small entities. If a rule might have a significant  economic impact on a substantial number of small entities, regulators are  to consider any significant regulatory alternatives that will achieve  statutory objectives while minimizing any significant economic impact on  small entities. RFA defines \u201csmall entity\u201d to include small businesses,  small governmental jurisdictions, and certain small not-for-profit  organizations. RFA does not seek preferential treatment for small entities.  Rather, it requires agencies to use an analytical process that includes  identifying barriers to small business competitiveness and seeks a level  playing field for small entities.", "For each draft rule that requires a notice of proposed rulemaking, RFA  requires regulators to prepare an initial regulatory flexibility analysis that  contains an assessment of the rule\u2019s potential impact on small entities and describes any significant alternatives to reduce the rule\u2019s significant  economic impact on small entities while achieving statutory objectives.  Following a public comment period, RFA requires regulators to conduct a  similar analysis when they promulgate the final rule. If the head of the  agency certifies in the Federal Register that the rule would not have a  significant economic impact on a substantial number of small entities,  agencies do not have to conduct the initial or final analysis. Certifications  must include a statement providing a factual basis for the certification.", "Section 610 of RFA requires agencies to review, within 10 years of a final  rule\u2019s publication, those rules assessed as having a significant economic  impact on a substantial number of small entities to determine if they  should be continued without change, amended, or rescinded (consistent  with statutory objectives) to minimize any significant economic impact on  small entities.", "RFA designates certain responsibilities to the Small Business  Administration\u2019s Chief Counsel for Advocacy, including monitoring agency  compliance with RFA and reviewing federal rules for their impact on small  businesses. Executive Order 13272 requires the Small Business  Administration\u2019s Office of Advocacy (Office of Advocacy) to provide  notifications and training about RFA requirements. The Office of  Advocacy published guidance on RFA compliance in 2003 (updated in  2012 and August 2017). For example, the guidance details components  regulators should include in their certifications to obtain meaningful public  comments, such as a description and estimate of the economic impact."], "subsections": []}, {"section_title": "Economic Growth and Regulatory Paperwork Reduction Act of 1996", "paragraphs": ["Under EGRPRA, the Federal Reserve, FDIC, and OCC are to categorize  their regulations by type and provide notice and solicit public comment on  all regulations for which they have regulatory authority to identify areas of  the regulations that are outdated, unnecessary, or unduly burdensome.  The act also includes requirements on how the regulators should conduct  the reviews, including reporting results to Congress.", "The first EGRPRA review was completed in 2007. The second began in  2014, and the report summarizing its results was submitted to Congress  in March 2017. While NCUA is not required to participate in the  EGRPRA review, NCUA has been participating voluntarily. NCUA\u2019s  assessment of its regulations appears in separate sections of the 2007  and 2017 reports to Congress."], "subsections": []}]}, {"section_title": "Community Banks and Credit Unions Saw Regulations on Mortgage Reporting and Disclosures and Anti-Money Laundering as Most Burdensome", "paragraphs": ["Community bank and credit union representatives we interviewed  identified three areas of regulations as most burdensome to their  institutions:  1.  Data reporting requirements related to loan applicants and loan terms  under the Home Mortgage Disclosure Act of 1975 (HMDA).  2.  Transaction reporting and customer due diligence requirements as  part of the Bank Secrecy Act and related anti-money laundering  regulations (collectively, BSA/AML).  3.  Disclosures of mortgage loan fees and terms to consumers under the  Truth in Lending Act and the Real Estate Settlement Procedures Act  of 1974 Integrated Disclosure (TRID) regulation.", "Institution representatives told us they found these regulations were time- consuming and costly to comply with because the requirements were  complex, required individual reports that had to be reviewed for accuracy,  or mandated actions within specific timeframes. For example, among the  28 community banks and credit unions whose representatives  commented on HMDA-required reporting in our focus groups, 61 percent  noted having to conduct additional HMDA-related training.  Representatives in most of our focus groups said that they had to  purchase or upgrade software systems to comply with BSA/AML  requirements, which can be expensive, and some representatives said  they have to hire third parties to comply with BSA/AML regulations.  Representatives in all of our focus groups and many of our interviews  said that the TRID regulations have increased the time their staff spend  on compliance, increased the cost of providing mortgage lending  services, and delayed the completion of mortgages for customers.", "However, federal regulators and consumer advocacy groups\u2019  representatives said that benefits from these regulations were significant,  such as collecting HMDA data that has helped address discriminatory  practices. Staff from Financial Crimes Enforcement Network (FinCEN),  which has delegated authority from the Secretary of the Treasury to  implement anti-money laundering regulations, told us that the transaction  reporting required and due-diligence programs required in BSA/AML rules  are critical to safeguarding the U.S. financial sector from illicit activity,  including illegal narcotic trafficking proceeds and terrorist financing  activities.", "The Consumer Financial Protection Bureau (CFPB) has taken steps to  reduce the burdens for community banks and credit unions associated  with the HMDA and TRID regulations. Also, FinCEN has developed  several efforts in reducing the reporting requirements from BSA/AML  regulations to reduce regulatory burden, such as a continuous evaluation  process to look for ways to reduce burden associated with BSA reporting  requirements, soliciting feedback through an interagency working group  about potential burden, and expanding the ability of institutions to seek a  Currency Transaction Report filing exemption when possible.", "To reduce institutions\u2019 misunderstanding of the TRID regulation, CFPB  has published a Small Entity Compliance Guide and a Guide to the Loan  Estimate and Closing Disclosure Forms. However, CFPB officials  acknowledged that some community banks and credit unions may be  misinterpreting the regulation\u2019s requirements. We found that CFPB had  not directly assessed the effectiveness of the guidance it provided to  community banks and credit unions. Until the guidance is assessed for  effectiveness, CFPB may not be able to respond to the risk that small  institutions have implemented TRID incorrectly. We recommended that  CFPB should assess the effectiveness of TRID guidance to determine the  extent to which TRID\u2019s requirements are accurately understood and take  steps to address any issues as necessary. CFPB agreed with the  recommendations and intends to solicit public input on how it can improve  its regulatory guidance and implementation support."], "subsections": []}, {"section_title": "Financial Regulators Consider Burden When Developing Regulations, but Their Reviews under RFA Need to Be Enhanced", "paragraphs": ["One of the ways that financial regulators attempt to address the burden of  regulations is during the rulemaking process. For example, staff from the  Federal Reserve, FDIC, and OCC all noted that when promulgating rules,  their staff seek input from institutions and others throughout the process  to design requirements that achieve the goals of the regulation at the  most reasonable cost and effort for regulated entities. Once a rule has  been drafted, the regulators publish it in the Federal Register for public  comment. The staff noted that regulators often make revisions in  response to the comments received to try to reduce compliance burdens  in the final regulation. Under RFA, financial regulators conduct analyses  during the rulemaking process that are intended to minimize economic  impact on small entities. However, we found several weaknesses with the  RFA analyses, policies, and procedures of six financial regulators\u2014 Federal Reserve, OCC, FDIC, Securities and Exchange Commission  (SEC), Commodity Futures Trading Commission (CFTC), and CFPB\u2014 that could undermine the goal of RFA and limit transparency and public  accountability."], "subsections": [{"section_title": "Certifications Were Not Always Consistent with Office of Advocacy Guidance and Other Best Practices", "paragraphs": ["In reviewing 66 certifications by the six regulators, we found that in most  (43 of 66) the regulators provided a factual basis and concluded the rule  would not apply to small entities or have any economic impact.  According to the regulators, these rules included activities in which small  entities do not engage, pertained to the regulator\u2019s internal processes, did  not create new regulatory requirements, or eliminated duplicative rules.  Additionally, regulators concluded in 5 of 66 certifications that the rule  would have a beneficial impact on small entities.", "Other certifications lacked information that would help explain the  determination. Specifically, in 18 of 66 certifications, the regulators found  the rule would have some economic impact on small entities, but  concluded the impact would not be significant for a substantial number of  small entities. But the factual basis provided for most of the 18  certifications (across all six regulators) lacked key components the Office  of Advocacy and the Office of Management and Budget (OMB)  recommended for understanding the analyses regulators used to support  their conclusion. Examples include the following:", "Data sources or methodologies. In 15 of 18 certifications regulators  did not describe or did not fully describe their methodology or data  sources for their conclusions.", "Broader economic impacts. The certifications generally did not  address broader economic impacts such as cumulative effects,  competitive disadvantage, or disproportionality of effects and focused  most of the analysis on specific compliance costs.", "Defining key criteria. Regulators generally did not define the criteria  they used for \u201csubstantial number\u201d and \u201csignificant economic impact\u201d  in their certifications.", "Limited information. Three certifications included none of the Office  of Advocacy\u2019s suggested components, such as the number of affected  entities, the size of the economic impacts, or the justification for the  certification.", "While many of the regulators\u2019 certification determinations incorporated  key components, the weaknesses and inconsistencies we found could undermine the act\u2019s goal. For example, incomplete disclosure of  methodology and data sources could limit the public and affected entities\u2019  ability to offer informed comments in response to regulators\u2019 certification  assessments in proposed rules."], "subsections": []}, {"section_title": "Many RFA-Required Analyses Had Weaknesses", "paragraphs": ["Our review of recent rules in which the agency performed an initial and  final regulatory flexibility analysis found that the evaluation of key  components\u2014potential economic effects and alternative regulatory  approaches\u2014was limited in many cases, although the extent varied by  regulator. RFA requires initial and final analyses to include information to  assist the regulator, regulated entities, and the public in evaluating the  potential impact of rules on small entities. The most important  components include the assessment of a rule\u2019s potential economic effects  on small entities\u2014such as compliance costs\u2014and the identification and  evaluation of alternative regulatory approaches that may minimize  significant economic effects while achieving statutory objectives.", "The evaluations for some rules of economic impact on small entities  did not describe or estimate compliance costs. Analyses we  reviewed also generally did not evaluate differences in estimated  compliance costs for identified alternatives.", "Five of six regulators did not consistently disclose the data sources or  methodologies used for estimating the number of subject small  entities or compliance costs.", "By not fully assessing potential economic effects or alternatives,  regulators may not be fully realizing the opportunity to minimize  unnecessary burdens on small entities, which is the primary goal of RFA."], "subsections": []}, {"section_title": "Regulators Lacked Comprehensive Policies and Procedures for RFA Analyses", "paragraphs": ["Five of six regulators have written guidelines that restate statutory  requirements for certifications and preparing regulatory flexibility analyses  and provide some additional guidance for staff. However, the regulators  generally have not developed comprehensive policies and procedures to  assist staff in complying with RFA, which may contribute to the  weaknesses we identified in some certifications and regulatory flexibility  analyses. Federal internal control standards state the importance for  agency management to establish through policies and procedures the  actions needed to achieve objectives.", "The extent to which regulators\u2019 guidance included policies and  procedures varied. But the guidance generally did not include procedures  for evaluating a rule\u2019s potential economic impact on small entities;  identifying and assessing regulatory alternatives that could minimize  economic impact on small entities; disclosing methodology and data  sources; and creating and maintaining documentation that supports  findings.", "By developing policies and procedures that provide specific direction to  rulemaking staff, the regulators could better ensure consistent and  complete implementation of RFA requirements and more fully realize the  RFA goal of appropriately considering and minimizing impacts on small  entities during and after agency rulemakings.", "In our January 2018 report, we recommended that each of the regulators  develop and implement specific policies and procedures for consistently  complying with RFA requirements and related guidance for conducting  RFA analyses. Five agencies generally agreed with this recommendation  and one did not provide written comments."], "subsections": []}]}, {"section_title": "EGRPRA Reviews Resulted in Some Reduction in Burden, but the Reviews Have Limitations", "paragraphs": ["Regulators took some actions to reduce burden as part of EGRPRA  reviews, but we also identified opportunities to improve analyses and  reporting."], "subsections": [{"section_title": "Results of 2017 EGRPRA Review Included Some Actions to Reduce Regulatory Burden", "paragraphs": ["To conduct the most recent EGRPRA review, the Federal Reserve, FDIC,  and OCC sought comments from banks and others and held public  meetings to obtain views on the regulations they administer. In the report  they issued in March 2017, the regulators identified six significant areas in  which commenters raised concerns: (1) capital rules, (2) Call Reports, (3)  appraisal requirements, (4) examination frequency, (5) Community  Reinvestment Act, and (6) BSA/AML regulations. In the report, these  regulators described various actions that could address some of the  concerns that commenters raised including:", "On September 27, 2017, the regulators proposed several revisions to  capital requirements that would apply to banks with less than $250  billion in assets and less than $10 billion in total foreign exposure. For  example, the revisions simplify capital treatment for certain  commercial real estate loans and would change the treatment of  mortgage servicing assets.", "The regulators developed a new Call Report form for banks with  assets of less than $1 billion and domestic offices only. In June 2017  and November 2017, the regulators issued additional proposed  revisions, effective June 2018, to the three Call Report forms that  banks are required to complete. For example, community banks  would report certain assets (nonperforming loans not generating their  stated interest rate) less frequently\u2014semi-annually instead of  quarterly.", "The regulators proposed raising the threshold for commercial real  estate loans requiring an appraisal from $250,000 to $400,000. They  also recently issued guidance on how institutions could obtain waivers  or otherwise expand the pool of persons eligible to prepare appraisals  if suitable appraisers are unavailable.", "The three regulators also issued a final rule in 2016 making qualifying  depository institutions with less than $1 billion in total assets eligible  for an 18-month examination cycle rather than a 12-month cycle.", "Although NCUA is not required to participate in the EGRPRA process, the  2017 EGRPRA report also includes a section in which NCUA describes  actions it has taken to address regulatory burdens on credit unions. In the  report, NCUA identified five significant areas raised by commenters  relating to credit union regulation, including: (1) field of membership and  chartering; (2) member business lending; (3) federal credit union  ownership of fixed assets; (4) expansion of national credit union share  insurance coverage; and (5) expanded powers for credit unions.", "In response, NCUA took various actions. For example, NCUA modified  and updated its field of credit union membership by revising the definition  of a local community, rural district, and underserved area, which provided  greater flexibility to federal credit unions seeking to add a rural district to  their field of membership. NCUA also lessened some restrictions on  member lending to small business and raised some asset thresholds for  what would be defined as a small credit union so that fewer requirements  would apply to these credit unions."], "subsections": []}, {"section_title": "CFPB Was Not Included in 2017 Review and Significant Mortgage Regulations Were Not Assessed", "paragraphs": ["One of the limitations in the EGRPRA process is that the statute  mandating the process does not include CFPB and thus the significant  mortgage-related regulations and other regulations that it administers\u2014 regulations that banks and credit unions generally must follow\u2014were not  included in the most recent EGRPRA review. The depository institution  regulators cannot address these mortgage regulation-related burdens  because they no longer have rulemaking authority for certain consumer  financial statutes.", "However, CFPB does have its own processes to assess the burden of  regulations it has implemented. For example, section 1022(d) of the  Dodd-Frank Wall Street Reform and Consumer Protection Act requires  CFPB to conduct a one-time assessment of each significant rule it adopts  under federal consumer financial law within 5 years of the rule\u2019s effective  date. But CFPB staff told us that they have not yet determined whether  certain other regulations that apply to banks and credit unions, such as  the revisions to requirements, will be designated as significant and thus  subjected to the one-time assessments.", "During 2017, CFPB launched an internal task force to coordinate and  bolster its continuing efforts to identify and relieve regulatory burdens for  small businesses, such as community banks, that potentially will address  any regulation the agency has under its jurisdiction. However, CFPB has  not provided public information on the extent to which it intends to review  regulations applicable to community banks and credit unions or provided  information on the timing and frequency of the reviews. In addition, it has  not indicated the extent to which it will coordinate the reviews with  depository institution regulators as part of EGRPRA reviews.", "Until CFPB publicly provides additional information indicating its  commitment to periodically review the burden of all its regulations,  community banks, credit unions, and other depository institutions may  face diminished opportunities for regulatory relief.", "In our February 2018 report, we recommended that CFPB issue public  information on its plans for reviewing regulations, including information on  the scope of regulations, timing and frequency of reviews, and the extent  to which the reviews will be coordinated with the other regulators as part  of the EGRPRA reviews. CFPB agreed with the recommendation and  committed to developing additional plans for reviews of key regulations  and publicly releasing such information. In the interim, CFPB stated it  intends to solicit public input on how it should approach reviewing  regulations."], "subsections": []}, {"section_title": "Regulators Have Not Conducted or Reported Quantitative Analyses", "paragraphs": ["Another limitation in the EGRPRA process conducted by the Federal  Reserve, FDIC, OCC, and NCUA was that these regulators did not  conduct or report on quantitative analyses during the EGRPRA process to  help them determine if changes to regulations would be warranted. Our  analysis of the 2017 EGRPRA report indicated that in responses to  comments in which the regulators did not take any action, the regulators  generally provided only their arguments against taking actions and did not  cite analysis or data to support their narrative.", "EGRPRA does not require the regulators to collect and report on any  quantitative data they collected or analyzed as part of assessing the  potential burden of regulations. In contrast, executive branch agencies  tasked under executive orders to conduct retrospective reviews of  regulations generally must collect and analyze quantitative data as part of  assessing the costs and benefits of changing existing regulations.  Conducting quantitative analysis for retrospective reviews could serve as  a best practice for the depository institution regulators.", "By not performing and reporting quantitative analyses where appropriate  in the EGRPRA review, the regulators may be missing opportunities to  better assess regulatory impacts, (including identifying the need for any  changes or identifying benefits) and making their analyses more  transparent to stakeholders.", "In our February 2018 report, we recommended that the four depository  institution regulators develop plans for their regulatory analyses  describing how they will conduct and report on quantitative analysis  whenever feasible to strengthen the rigor and transparency of the  EGRPRA process. The regulators agreed with the recommendation. For  example, the Federal Reserve plans to coordinate with FDIC and OCC to  identify opportunities to conduct quantitative analyses where feasible  during future EGRPRA reviews. NCUA also said it should improve its  quantitative analysis."], "subsections": []}, {"section_title": "Regulators Have Not Considered the Cumulative Effects of Regulations", "paragraphs": ["An additional limitation in the EGRPRA process we identified was that the  depository institution regulators had not assessed the ways in which the  cumulative burden of the regulations they administer may have created  overlapping or duplicative requirements. Under the current process, the  regulators have responded to issues raised about individual regulations  based on comments they have received, not on bodies of regulations.", "However, congressional intent in tasking regulators with EGRPRA  reviews was to ensure they considered the cumulative effect of financial  regulations. A 1995 Senate Committee on Banking, Housing, and Urban  Affairs report stated while no one regulation can be singled out as being  the most burdensome, and most have meritorious goals, the aggregate  burden of banking regulations ultimately affects a bank\u2019s operations, its  profitability, and the cost of credit to customers.", "In our February 2018 report, we recommended to the Federal Reserve,  FDIC, NCUA, and OCC that as part of their EGRPRA review they develop  plans for conducting evaluations that would identify opportunities to  streamline bodies of regulation. The regulators generally agreed with the  recommendation and said they would work together to identify ways and  opportunities to decrease the regulatory burden created by bodies of  regulation. In addition, FDIC stated it would continue to monitor the  cumulative effects of regulation; for example, through a review of  community and quarterly banking studies and community bank Call  Report data."], "subsections": []}]}, {"section_title": "Regulators\u2019 Approach to RFA-Required Retrospective Reviews Varied, Including the Extent to Which They Developed Policies", "paragraphs": ["Financial regulators took varying approaches to performing retrospective  reviews for RFA; additionally, some regulators had not yet developed  policies and procedures for conducting and reporting reviews."], "subsections": [{"section_title": "Federal Banking Regulators Relied on Other Retrospective Reviews to Meet RFA Section 610 Requirements", "paragraphs": ["We assessed section 610 reviews and found that the Federal Reserve,  FDIC, and OCC conducted retrospective reviews that did not fully align  with RFA\u2019s requirements. Officials at each of the agencies stated that  they satisfy the requirements to perform section 610 reviews through the  EGRPRA review process.", "But the requirements of the EGRPRA reviews differ from those of the  RFA-required section 610 reviews. For example, the EGRPRA review  process relies on public comments to identify rules that may be outdated,  unnecessary, or unduly burdensome, while public comments are only one  component of section 610 reviews. The Office of Advocacy stated that  agencies may satisfy section 610 requirements through other  retrospective reviews if these other reviews meet the criteria of section  610. According to an official from the Office of Advocacy, the office has  not yet made a determination on whether the EGRPRA review process  satisfies those requirements.", "Although the agencies stated that they fulfill RFA requirements through  EGRPRA, without confirming this with the Office of Advocacy, it is  possible that they are not meeting RFA section 610 requirements and  therefore may not be achieving the small-entity burden reduction that the  statute seeks to ensure.", "In our January 2018 report, we recommended that the Federal Reserve,  FDIC, and OCC coordinate with the Office of Advocacy to determine  whether the EGRPRA review process satisfies the requirements of  section 610 and, if not, what steps should be taken to align the process  with section 610 requirements. The Federal Reserve and FDIC generally  agreed with this recommendation, and OCC did not provide written  comments."], "subsections": []}, {"section_title": "SEC Reviews Were Late and Not Fully Consistent with RFA Requirements or Office of Advocacy Guidance", "paragraphs": ["Our review of 46 SEC section 610 reviews found that they were  conducted late and were not fully consistent with RFA requirements or the  Office of Advocacy\u2019s guidance for such reviews. RFA requires rules to be  reviewed within 10 years of their publication as final rules, but SEC  conducted all but one of its reviews 12 years after the rules were  published. The reviews generally lacked substantive analysis, and no  rules were amended as a direct result of their section 610 review. The  reviews generally provided no evidence of empirical analysis and no data  to support the conclusions of the reviews, as recommended by the Office  of Advocacy and OMB. In most cases, the reviews lacked a description of  whether, or to what extent, the rule was affecting small entities.", "SEC does not have written policies or procedures for completing rule  reviews pursuant to RFA section 610, potentially contributing to the  weaknesses we identified (timing and lack of data and analysis to support  findings). Therefore, in our January 2018 report, we recommended that  SEC develop and implement specific policies and procedures for  performing section 610 reviews. SEC generally agreed with the  recommendation.", "SEC also does not publicly disclose the findings or conclusions of its  section 610 reviews. Although RFA does not require that agencies  publish the results of 610 reviews, the Office of Advocacy recommends  that to enhance transparency, agencies should communicate with  interested entities about the reviews. Executive orders also highlight  public disclosure of retrospective reviews. Lack of public disclosure  limits the transparency of the reviews, hindering the public\u2019s ability to hold  agencies accountable for the quality and conclusions of their reviews. In  our January 2018 report, we recommended that SEC publicly disclose its  section 610 reviews, or summaries, with the basis for any conclusions.  SEC generally agreed with the recommendation."], "subsections": []}, {"section_title": "CFTC and CFPB Plan to Develop Policies and Procedures for Future Retrospective Reviews", "paragraphs": ["CFTC and CFPB plan to put procedures in place for section 610 reviews.  According to CFTC officials, the agency has not conducted any section  610 reviews in at least the last 10 years. CFPB has not yet been required  to conduct any section 610 reviews. Section 610 reviews are required  within 10 years of a rule\u2019s publication as a final rule; to date, none of the  rules issued by CFPB, which was created in 2010, have met this  deadline.", "In our January 2018 report, we recommended that CFTC and CFPB  develop policies and procedures for section 610 reviews that would  include documenting analyses and public reporting of results. CFTC and  CFPB generally agreed with the recommendation.", "Chairman Chabot, Ranking Member Vel\u00e1zquez, and members of the  Committee, this concludes my statement. I would be pleased to respond  to any questions you may have."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Michael E. Clements, Director, Financial Markets and Community  Investment, at (202) 512-8678 or clementsm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this testimony are Cody Goebel (Assistant Director), Stefanie Jonkman  (Assistant Director), Katherine Carter (Analyst in Charge), Kevin Averyt,  Bethany Benitez, Jeremy A. Conley, Pamela R. Davidson, Nancy Eibeck,  Andrew Emmons, Courtney L. LaFountain, William V. Lamping, Marc  Molino, Lauren Mosteller, Barbara Roesmann, and Jena Y. Sinkfield.  Other assistance was provided by Farrah Graham and Tim Bober.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-192", "url": "https://www.gao.gov/products/GAO-18-192", "title": "Warfighter Support: An Assessment of DOD Documents Used in Previous Efforts to Rebalance to the Pacific", "published_date": "2018-05-24T00:00:00", "released_date": "2018-05-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2011, President Obama announced that the United States would turn its attention to the Asia-Pacific region and make the U.S. presence there a top priority. Rebalancing to the Pacific became strategic guidance that informed military planning. By the end of 2015, DOD published strategy documents that included references to the rebalance to the Pacific or related concepts. In February 2018, the Assistant Secretary of Defense for Asian and Pacific Security Affairs stated that while DOD continues to prioritize the Asia-Pacific region, the rebalance to the Pacific is no longer U.S. policy. DOD has published the 2018 National Defense Strategy, which establishes an objective of maintaining a favorable regional balance in the Pacific region, among other regions.", "Prior to the change in policy, House Report 114-102 included a provision for GAO to review matters related to the U.S. rebalance to the Asia-Pacific region. GAO evaluated the extent to which DOD developed strategy documents to guide the rebalance to the Pacific that included desired elements of an effective national strategy.", "GAO analyzed six DOD strategy documents that officials identified as providing guidance for the rebalance to the Pacific to determine whether, as a set, they included desired elements associated with an effective national strategy. DOD had no comments on this report."]}, {"section_title": "What GAO Found", "paragraphs": ["Department of Defense (DOD) strategy documents that collectively guided the rebalance to the Pacific included most of the desired elements of an effective national strategy. The U.S. Pacific Command (PACOM), which is responsible for the Asia-Pacific region, used DOD strategy documents to implement the President's direction to rebalance to the Pacific, which generally refocused U.S. efforts to that region. PACOM officials told GAO that there was no single rebalance-specific strategy document. Instead, officials identified a number of strategy documents published since 2012 that guided activities associated with the rebalance to the Pacific, including: Sustaining U.S. Global Leadership: Priorities for 21st Century Defense ; Quadrennial Defense Review ; National Military Strategy ; Guidance for the Employment of the Force ; Joint Strategic Capabilities Plan ; and the PACOM 2015 Theater Campaign Plan (DRAFT) .", "Based on GAO's analysis, DOD's six strategy documents that guided the rebalance to the Pacific included 24 of the 31 desired elements of an effective national strategy. However, two key elements were missing from the group of strategy documents: (1) a definition of the rebalance to the Pacific, and (2) the identification of the overall results desired, or end state, for the rebalance. DOD officials also could not identify a definition for the rebalance to the Pacific in the strategy documents or provide a definition that was used consistently across the department.", "According to a DOD official with performance management responsibilities, defining the rebalance to the Pacific and identifying the initiative's strategic objectives, or end state, were important for establishing accountability and measuring progress. For instance, a clear definition of rebalance could have helped those charged with implementation to distinguish activities essential to operationalizing the strategic guidance from activities that were peripheral to that effort. Similarly, knowing the end state could have helped management make the best use of resources, enable the assessment of progress, and facilitate the development of strategic and military objectives. In moving forward in the Asia-Pacific region, considering the identification of strategic end states as well as other missing elements could help position DOD to achieve its objectives in the region."]}], "report": [{"section_title": "Letter", "paragraphs": ["In the fall of 2011, President Obama announced that the United States  would turn its attention to the Asia-Pacific region and make the U.S.  presence there a top priority. According to the President, the United  States was going to play a larger and long-term role in shaping the Asia- Pacific region after spending a decade at war in Iraq and Afghanistan.  The President then directed his national security team to conduct a  global, strategic assessment of U.S. priorities. The team made key  determinations including that a pivot toward the Asia-Pacific region would  help to rebalance the projection and focus of U.S. power. Rebalancing  efforts to the Pacific subsequently became defense strategic guidance  that began to inform military planning. Consequently, in 2012 the  commander of U.S. Pacific Command (PACOM) described the military  focus of the rebalance as strengthening relationships with allies and  partners; adjusting military posture and presence; and employing new  concepts, capabilities and capacities. In a 2015 address, the Secretary of  Defense outlined other aspects of the rebalance such as reinforcing  partnerships and enhancing posture in the Asia-Pacific region. By the end  of 2015, the Department of Defense (DOD) had published strategy  documents that included references to the rebalance to the Pacific or  related concepts. PACOM used these documents as guidance for  developing the command\u2019s plans to implement the rebalance to the  Pacific.", "In January 2018, DOD published the 2018 National Defense Strategy  which establishes an objective of maintaining a favorable regional  balance in the Pacific region. In February 2018, the Assistant Secretary  of Defense for Asian and Pacific Security Affairs stated that while DOD  continues to prioritize the Asia-Pacific region, the rebalance to the Pacific  is no longer U.S. policy.", "Prior to the change in policy, House Report 114-102 included a provision  for GAO to review matters related to the U.S. rebalance to the Asia- Pacific region. We evaluated the extent to which six DOD-developed  strategy documents used to guide the previous rebalance to the Pacific  effort included the desired elements of an effective national strategy.  Based on interviews with DOD officials from multiple offices, we identified  six key DOD strategy documents that were used for the rebalance and  contained information about the rebalance, such as purpose and scope.  We systematically reviewed these strategy documents to determine  whether this set of strategy documents included desired elements  associated with an effective national strategy. Additionally, we  interviewed DOD officials from numerous organizations responsible for  planning, providing guidance or implementing the rebalance to the  Pacific. See appendix I for more details on our scope and methodology.", "We conducted this performance audit from July 2015 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DOD Strategies Inform Combatant Command Plans", "paragraphs": ["DOD, through the Secretary of Defense and the Chairman of the Joint  Chiefs of Staff, develops department-wide strategic guidance based on  direction from the President and issues this guidance through strategy  documents. According to joint doctrine and Chairman of the Joint Chiefs  of Staff guidance, combatant commanders use strategy documents as  guidance for planning operations. Specifically, combatant commanders  translate this guidance into their commands\u2019 campaign and contingency  plans. The military services organize, train, equip, and provide forces to  the combatant commanders to execute command plans. The combatant  commander must make certain the combatant command can execute  these plans.", "PACOM is one of six geographic Unified Combatant Commands of the  U.S. Armed Forces. With an area of responsibility extending from the  waters off the west coast of the United States to the western border of  India, and from Antarctica to the North Pole, PACOM is the primary U.S.  military authority in the Pacific. In 2016, PACOM reported that  approximately 380,000 U.S. military and civilian personnel were assigned  to this area. PACOM describes the 36 nations that comprise the Asia- Pacific region as home to more than 50 percent of the world\u2019s population  and 3,000 different languages, several of the world\u2019s larger militaries, and  five nations allied with the United States through mutual defense treaties  or agreements. PACOM\u2019s commander reports to the President and the  Secretary of Defense through the Chairman of the Joint Chiefs of Staff,  and is supported by four service component commands: U.S. Pacific  Fleet, U.S. Pacific Air Forces, U.S. Army Pacific, and U.S. Marine Forces,  Pacific."], "subsections": []}, {"section_title": "DOD\u2019s Previous Rebalance to the Pacific Strategy and Current Policy", "paragraphs": ["In President Obama\u2019s speech to the Australian Parliament in November  2011, he stated that after a decade of fighting two wars, the United States  was turning its attention to the vast potential of the Asia-Pacific region.  The President described the U.S. as a historic Pacific power whose  interests are inextricably linked with Asia\u2019s economic, security, and  political order. According to a senior administration official, the United  States planned to implement a comprehensive, multidimensional strategy  in the Asia-Pacific region.", "PACOM used military strategy documents to implement presidential  strategic direction to rebalance efforts to the Pacific. However, according  to officials from the Office of the Under Secretary of Defense for Policy,  the Joint Staff, and the U.S. Pacific Command there was no single  rebalance-specific strategy document. Instead, these officials identified a  number of strategy documents published since 2012 that guided activities  associated with the rebalance to the Pacific effort. Based on our  interviews with U.S. Pacific Command (PACOM) and DOD officials, we  focused our review on six strategy documents, issued between 2012 and  2015, that these officials considered relevant and representative of DOD\u2019s  previous strategy to implement the rebalance to the Pacific through 2016.  The six documents that we reviewed are:", "Sustaining U.S. Global Leadership: Priorities for 21st Century  Defense. DOD issued this document in January 2012. This  publication reflected presidential strategic direction to DOD and  described the key military missions for which the department would  prepare. In describing the security environment, this strategic  guidance stated that the United States would, of necessity, rebalance  toward the Asia-Pacific region.", "Quadrennial Defense Review (QDR). According to DOD guidance,  the QDR articulates a national defense strategy consistent with the  broader government-wide National Security Strategy by defining force  structure, modernization plans, and a budget plan allowing the military  to successfully execute the full range of missions within that  strategy. The 2014 QDR referred to the rebalance to the Pacific as a  part of sustaining U.S. presence and posture abroad to better protect  U.S. national security interests.", "National Military Strategy (NMS). The 2015 NMS described how  DOD would employ military forces to protect and advance U.S.  national interests. The NMS provided focus for military activities by  defining a set of military objectives and concepts used by the  combatant commanders and others. The 2015 NMS referenced the  rebalance to the Pacific as part of a national military objective. The  NMS was informed by the QDR.", "Guidance for the Employment of the Force (GEF). According to  joint doctrine, the GEF provides direction to combatant commands for  operational planning, force management, security cooperation, and  posture planning. The GEF is the method through which the  Secretary of Defense translates strategic priorities in the QDR and  other strategy documents into direction for operational activities. The  GEF is described in joint doctrine as an essential document for  combatant command planners as it provides the strategic end states  for the deliberate planning of campaign and contingency plans.", "Joint Strategic Capabilities Plan (JSCP). The JSCP is the primary  vehicle through which the Chairman of the Joint Chiefs of Staff directs the preparation of joint plans. The JSCP provides military strategic  and operational guidance to combatant commanders for the  preparation of plans based on current military capabilities. The JSCP  tasks combatant commanders to develop campaign, contingency, and  posture plans and translates requirements from the GEF and other  guidance into prioritized military missions, tasks, and plans. The JSCP  is informed by the GEF and the NMS.", "PACOM 2015 Theater Campaign Plan (DRAFT) (TCP). Campaign  plans, such as PACOM\u2019s TCP, focus on the combatant command\u2019s  steady-state or daily activities and operationalize combatant  command theater strategies. According to joint doctrine, joint planning  draws from tasks identified in the GEF and JSCP and campaign plans  should focus on the combatant command\u2019s steady-state activities.  These include ongoing operations, military engagement, security  cooperation, deterrence, and other shaping or preventive activities.  Campaign plans provide the vehicle for linking steady-state shaping  activities to the attainment of strategic and military end states.", "In January 2018, DOD announced its new 2018 National Defense  Strategy that cited as the department\u2019s principal priorities the long-term  strategic competition with China and Russia. The strategy also stated that  concurrently the department would sustain its efforts to deter and counter  rogue regimes such as North Korea and Iran, defeat terrorist threats to  the United States, and consolidate gains in Iraq and Afghanistan while  moving to a more resource-sustainable approach. In February 2018, the  Assistant Secretary of Defense for Asian and Pacific Security Affairs  notified GAO that although DOD continues to prioritize the Asia-Pacific  region, the rebalance to the Pacific is no longer U.S. policy."], "subsections": []}]}, {"section_title": "DOD Strategy Documents Associated with Rebalancing to the Pacific Collectively Included Most of the Desired Elements of an Effective National Strategy", "paragraphs": ["Six DOD strategy documents that helped guide the rebalance to the  Pacific collectively included most of the desired elements of an effective  national strategy.", "We have previously reported that effective national strategies incorporate  six characteristics, and their associated desired elements. Table 1 lists  desired elements that we adapted from our prior work and tailored toward  our review of the six DOD strategy documents.", "We found these six DOD strategy documents that collectively guided the  rebalance to the Pacific included, to varying degrees, 24 of the 31 desired  elements we determined as being the most relevant to an effective  strategy for the rebalance. For example, as a set, the six strategy  documents contained a detailed description of the operating environment  in which activities for the rebalance were to take place and included  references that described the relationship of the rebalance to the Pacific  to other strategies, goals, and objectives. The strategy documents  referenced their purposes and, in unclassified and general descriptions,  the threats that the strategies were to address including long-range  missile threats and weapons of mass destruction. Collectively, the  strategy documents referred to selected types of resources needed, such  as the deployment of ships and aviation assets, and who would be  implementing the strategies.", "We were, however, unable to find any reference to 7 of the 31 elements  in any of the six strategy documents. For example, 2 of the 7 missing  elements were:  Lack of a documented, consistent definition of the rebalance to the  Pacific. Based on our systematic review, we found that none of DOD\u2019s  six strategy documents issued from 2012 to 2015 included a definition of  the rebalance to the Pacific that described the rebalance\u2019s key terms,  major functions, mission areas or activities. Further, DOD officials from  the Office of the Under Secretary of Defense for Policy, the Joint Staff,  and the U.S. Pacific Command involved in planning and implementing the  rebalance to the Pacific were unable to identify a definition for the  rebalance to the Pacific in the strategy documents, and consequently  could not provide a definition that was in use consistently across the  department. During discussions about the absence of a definition, these  PACOM officials told us that all PACOM activities were rebalance  activities, even activities that were underway before the President\u2019s  announcement to rebalance. Senior DOD policy officials referred us to the  speeches of senior administration officials given since the President\u2019s  2011 address to derive the definition of the rebalance. However, as noted  earlier, after the President\u2019s speech in 2011, there were a number of  pronouncements from senior administration officials that varied over time.  The lack of consistent attributes to a strategy can make it difficult for  policy makers to assess its effectiveness and accountability.", "Lack of a documented end state for the rebalance to the Pacific.  Based on our systematic review, we found that none of DOD\u2019s six  strategy documents from 2012 to 2015 identified an end state for the  rebalance to the Pacific. Identifying the end state is a desired element  associated with establishing goals and objectives for effective strategies  and plans. Joint doctrine also states that military planners must know  where to look for the guidance to ensure that plans are consistent with  national priorities and are directed toward achieving national security  goals and objectives.", "A national strategy that identified the end state of the rebalance could  distinguish new efforts from the longstanding U.S. military presence in the  region, and the associated increase in resources to support the post-2011  rebalancing. For example, we found a lack of clarity concerning the end  state for the rebalance. DOD officials from the Office of the Under  Secretary of Defense for Policy, Joint Staff, and PACOM\u2014whom we  interviewed because they were involved in planning and implementing the  rebalance to the Pacific\u2014said that they were unaware of an end state for  DOD\u2019s efforts to rebalance. The same officials told us that there was no  foreseeable end state because, as long as the Asia-Pacific region was  important to the U.S., the focus would remain on the region. However,  officials from different military service components told us that their  individual services had an end state for their service-specific activities to  support the rebalance. For example, officials from U.S. Army Pacific told  us that they had completed their service\u2019s rebalance. They stated that  they achieved the end state with the completion of force posture changes  and that some efforts supporting rebalancing had begun before  rebalancing was inaugurated. In contrast, a Marine Corps official in the  Pacific reported there was no end state for rebalancing. According to the  official, Marine Corps activities such as posture realignments supported  rebalancing, but these longstanding activities were ongoing prior to the  President\u2019s announcement to rebalance.", "Moreover, we found a lack of an awareness of a command-wide end  state for rebalancing and coordination among the various military service  activities in support of rebalancing. It was unclear how service-defined  end states could have been fully integrated or prioritized for funding  without a consistent overall end state for DOD\u2019s overall effort. In such  instances, a department-wide defined end state could have helped with  the allocation of resources because the most important priorities would be  known.", "A clear and consistent definition for rebalance and the identification of an  end state, as well as the inclusion of the other 5 missing elements, could  have better positioned decision makers to effectively plan, manage, and  assess DOD\u2019s progress toward rebalancing efforts to the Pacific.  According to DOD officials from the Office of the Under Secretary of  Defense for Policy responsible for policy for the rebalance to the Pacific,  the speeches by senior administration officials between 2012 and 2015  supplanted the need to identify and document a definition of the  rebalance or an end state in a strategy document. However, as noted  earlier, these statements included varying descriptions of the strategy and  objectives over time. According to a DOD official from an office with  department-wide performance management responsibilities, defining the  rebalance to the Pacific and identifying the initiative\u2019s strategic objectives,  or end state, were both important for establishing accountability and  measuring progress. For instance, a definition could have helped those  charged with implementation to distinguish activities essential to  operationalizing the strategic guidance to rebalance from those activities  that were routine or peripheral to that effort.", "Further, knowing the end state could have helped management make the  best use of resources, enable the assessment of progress toward a  particular goal, and as described in joint doctrine, facilitate the  development of strategic and military objectives. In moving forward in the  Asia-Pacific region, considering the identification of strategic end states  (one of the desired elements of an effective national strategy that is also  discussed in joint doctrine) \u2014as well as the other missing elements\u2014  could help position DOD to achieve its objectives in the region."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review. DOD had no  comments.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Under Secretary of Defense  for Policy; the commander of the U.S. Pacific Command; the Chairman of  the Joint Chiefs of Staff; and the Secretaries of the military departments.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you have any questions about this report or need additional information,  please contact me at (202) 512-5431 or RussellC@gao.gov. Contact  points for our Office of Congressional Relations and Public Affairs may be  found on the last page of this report. Key contributors to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To determine the extent to which the Department of Defense (DOD) has  developed strategy documents to guide the rebalance to the Pacific that  include desired elements of an effective national strategy, we conducted  a search of the literature, from January 2010 to July 2015, to identify  official statements on, guidance for, and studies of DOD\u2019s implementation  of the rebalance to the Pacific. We reviewed department guidance, such  as Chairman of the Joint Chiefs of Staff instructions and joint publications,  to understand DOD\u2019s processes and procedures for developing and  disseminating guidance and strategic plans. We also interviewed DOD  officials from numerous organizations listed below who were involved with  planning, providing guidance or implementing the rebalance to the Pacific  to identify DOD\u2019s rebalance efforts and whether a strategy or strategies  existed that focused on or included the rebalance. The organizations  contacted included:", "Under Secretary of Defense (Comptroller) and Chief Financial Officer", "Office of the Deputy Chief Management Officer, Deputy\u2019s", "Assistant Secretary of Defense for Asian and Pacific Security Affairs", "Assistant Secretary of Defense for Logistics and Materiel Readiness", "Assistant Secretary of Defense for Strategy, Plans and Capabilities", "Director of the Office of the Secretary of Defense Cost Assessment", "U.S. Marines Corps Forces, Pacific", "U.S. Pacific Air Forces", "U.S. Transportation Command  Based on these interviews and written responses to questions we  submitted to the officials associated with these organizations, officials  identified documentation and speeches that they indicated informed DOD  organizations about implementing the rebalance. Also, based on this  information, we found that there was not a single strategy or plan that  provided guidance for or outlined DOD\u2019s implementation of the rebalance  to the Pacific. Instead, DOD officials from multiple offices identified a  number of strategy documents that guided activities associated with the  rebalance to the Pacific, including government-wide documents. Based  on our interviews with U.S. Pacific Command (PACOM) and DOD  officials, we focused our review on the six selected strategy documents,  issued between 2012 and 2015, that these officials considered relevant  and representative of DOD\u2019s previous strategy to implement the  rebalance to the Pacific. Those six strategy documents are described  earlier in the main report.", "We reviewed and analyzed these six strategy documents to determine  whether, as a set, they included the 31 desired elements of the  associated key characteristics of an effective national strategy. Our prior  work on effective national strategies included examples of desired  elements that we adapted and tailored toward our review of DOD strategy  documents. We selected 31 desired elements as most relevant to DOD\u2019s  rebalance effort and for systematically reviewing DOD\u2019s strategy  documents associated with the rebalance. These elements and  associated key characteristics are described in table 2 below.", "To determine whether as a set these strategy documents included the  desired elements of an effective national strategy, we reviewed each  strategy document using a scorecard method, using the following steps:", "First, we developed scorecards with a two-level scale of \u201caddress\u201d  and \u201cdid not address.\u201d We used a binary scale of \u201caddress\u201d or \u201cdid not  address\u201d and scored a passage as \u201caddress\u201d if it included any part of  an element description in order to provide the widest latitude in  determining whether the selected passage included the specific  element. Also, we used 31 desired elements from the six  characteristics to make the comparison because these elements  provided more specificity than the broad six characteristics.", "Second, analysts reviewed all of the selected passages from each  strategy document and determined whether they were relevant to  understanding the rebalance to the Pacific in order to reach  agreement on which passages they would consider in the comparison  to the desired elements. The readers agreed upon the inclusion and  exclusion of passages before assessing whether these passages  included the desired elements.", "Third, two analysts reviewed the relevant passages in each strategy  document related to the rebalance and determined whether or not the  passages included the element. The analysts used the scorecards to  score each passage.", "Fourth, upon completion of the independent scoring process for each  strategy document, the analysts compared their respective scores and  reconciled any differences, thereby reaching a consensus on the final  score. As needed, a third analyst facilitated reconciliations where  there was a difference in the assessment reached by the individual  analysts and documented the consensus results.", "Lastly, upon completion of scoring, the team compiled and  summarized the results.", "To further corroborate our systematic review of the six strategy  documents, we asked officials from DOD organizations responsible for  the Asia-Pacific region a standard set of related questions. We asked  officials these questions in order to obtain DOD\u2019s perspective regarding  the applicability of using the selected desired elements and associated  key characteristics in reviewing these specific DOD strategy documents.", "We conducted this performance audit from July 2015 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Guy LoFaro, (Assistant Director), Pedro Almoguera, Patricia  Donahue, Richard Powelson, Paulina Reaves, Michael Shaughnessy,  and Stephen Woods."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Combating Terrorism: Strategy to Counter Iran in the Western  Hemisphere Has Gaps That State Department Should Address.  GAO-14-834. Washington, D.C.: September 29, 2014.", "U.S. Public Diplomacy: Key Issues for Congressional Oversight.  GAO-09-679SP. Washington, D.C.: May 27, 2009.", "Influenza Pandemic: Further Efforts Are Needed to Ensure Clearer  Federal Leadership Roles and an Effective National Strategy.  GAO-07-781. Washington, D.C.: August 14, 2007.", "Financial Literacy and Education Commission: Further Progress Needed  to Ensure an Effective National Strategy. GAO-07-100. Washington, D.C.:  December 4, 2006.", "Rebuilding Iraq: More Comprehensive National Strategy Needed to Help  Achieve U.S. Goals. GAO-06-788. Washington, D.C.: July 11, 2006.", "Combating Terrorism: Evaluation of Selected Characteristics in National  Strategies Related to Terrorism. GAO-04-408T. Washington, D.C.:  February 3, 2004.", "Combating Terrorism: Observations on National Strategies Related to  Terrorism. GAO-03-519T. Washington, D.C.: March 3, 2003."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-181", "url": "https://www.gao.gov/products/GAO-19-181", "title": "Federal Workforce: Key Talent Management Strategies for Agencies to Better Meet Their Missions", "published_date": "2019-03-28T00:00:00", "released_date": "2019-04-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Much has changed since the federal government's employment policies were designed generations ago. Without careful attention to strategic human capital management, the federal government may continue to struggle to compete for workers with the skills needed to address the nation's social, economic, and security challenges.", "GAO was asked to review issues related to the future of federal work and the workforce. This report identifies: (1) key trends affecting federal work and workers, and (2) key talent management strategies for achieving a high-performing workforce, given those trends.", "GAO analyzed data from OPM and the Bureau of Labor Statistics, and reviewed reports from GAO, OPM, and selected think tanks. GAO also held group interviews with agency Chief Human Capital Officers, and interviewed human capital experts and representatives of federal labor unions, managers, and executives. Additionally, GAO spoke with private consulting firms and foreign governments regarding human capital strategies that officials said were helpful to improving their organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal work is changing amid demographic and technological trends (see figure below).", "Given these trends, key talent management strategies can help agencies better manage the current and future workforce. These strategies are all within agencies' existing authorities:", "Align human capital strategy with current and future mission requirements. With shifting attitudes toward work, technological advances, and increased reliance on nonfederal partners, agencies need to identify the knowledge and skills necessary to respond to current and future demands. Key practices include identifying and assessing existing skills, competencies, and skills gaps.", "Acquire and assign talent. To ensure agencies have the talent capacity to address evolving mission requirements and negative perceptions of federal work (e.g., that it is too bureaucratic), agencies can cultivate a diverse talent pipeline, highlight their respective missions, recruit early in the school year, support rotations, and assign talent where needed.", "Incentivize and compensate employees. While federal agencies may struggle to offer competitive pay in certain labor markets, they can leverage existing incentives that appeal to workers' desire to set a schedule and to work in locations that provide work-life balance.", "Engage employees. Engaged employees are more productive and less likely to leave, according to the Office of Personnel Management (OPM). Agencies can better ensure their workforces are engaged by managing employee performance, involving employees in decisions, and developing employees."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has open recommendations to OPM related to key talent management strategies, including developing a core set of metrics that agencies should use to close mission-critical skills gaps. OPM agreed with most of these recommendations and has made some progress, but additional actions are needed. OPM provided technical comments, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal workforce is critical to federal agencies\u2019 ability to address the  complex social, economic, and security challenges facing the country.  The government\u2019s system of current employment policies was designed  generations ago for a workforce and type of work that largely no longer  exist. Much has changed since the Civil Service Reform Act of 1978 and  the Classification Act of 1949 laid the foundation of much of today\u2019s  federal personnel system. Agencies\u2019 missions have evolved and  employees\u2019 expectations of work and the workplace are changing. Recent  publications by the administration and others have raised concerns about  whether the government\u2019s employment policies and practices are still  relevant and desirable to the current and future workforce. Further, an  increasingly volatile world makes understanding and responding to  evolving trends and issues essential. Without careful attention to  strategic human capital management, the federal government may  continue to struggle to compete for high-performing workers with the skills  and abilities to meet agencies\u2019 missions and respond to evolving trends.", "The federal government faces long-standing challenges in strategically  managing its workforce. We first added federal strategic human capital  management to our list of high-risk government programs and operations  in 2001. Although Congress, the Office of Personnel Management  (OPM), and individual agencies have made improvements since then,  federal human capital management remains a high-risk area because  mission-critical skills gaps within the federal workforce pose a high risk to  the nation. Of the 34 other high-risk areas on our 2019 High-Risk List,  skills gaps played a significant role in 16 of the areas, including  information technology management and acquisitions, and veterans\u2019  health care.", "You asked us to review issues related to the future of federal work and  the workforce. This report identifies (1) key trends affecting federal work  and workers; and (2) key talent management strategies that agencies can  employ to achieve a high-performing workforce, given those trends.", "To address both objectives, we reviewed literature from OPM, academic  reports, and our past studies related to human capital and the future of  work. We also analyzed data from OPM\u2019s Enterprise Human Resources  Integration (EHRI) system. EHRI contains personnel action and onboard  data for most executive branch and some legislative branch federal  civilian employees. Additionally, we interviewed 22 experts in the areas  of human capital, strategic foresight, and the future of work. We selected  these experts using a nonprobability sample based on our literature  review, suggestions from OPM officials and our own human capital  experts, and relevance of their expertise to our objectives. We also  selected experts to ensure our analysis included a variety of viewpoints.  Appendix II lists the experts we interviewed.", "To identify key trends in the workforce and workplace, we analyzed U.S.  Bureau of Labor Statistics (BLS) Current Population Survey (CPS) data,  reviewed our prior work, and reviewed reports from OPM and selected  think tanks and consulting firms. To identify key areas to help agencies  manage the workforce, we analyzed employee responses to questions  from OPM\u2019s 2017 Federal Employee Viewpoint Survey, the most recent  data available at the time of our analysis. We assessed the reliability of  OPM and BLS data by reviewing technical documentation and  interviewing officials, among other steps. We found the data sufficiently  reliable for the purposes of this report.", "To identify key talent management strategies, we interviewed human  capital managers from four private organizations and officials from three  foreign governments. We selected the private organizations based on the  similarities of their talent pool to that of the federal government, among  other factors. We selected foreign governments based on factors  including whether the country recently made improvements to human  capital policies or practices. To better understand the potential  opportunities and challenges of applying human capital practices used by  other sectors in federal agencies, we held moderated group interviews  with agency Chief Human Capital Officers. We also interviewed federal  employee and management groups. We selected employee groups using  several factors\u2014including ensuring a broad representation of federal  employees\u2014and selected a management group that represented federal  managers, supervisors, and executives. We selected strategies that  officials said were helpful to improving their organizations and that the  federal government could feasibly implement. See appendix I for details  on our methodology.", "We conducted this performance audit from April 2017 to March 2019 in  accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["We and others have identified challenges facing the federal human  capital system\u2019s ability to recruit, retain, develop, and engage workers,  both today and in the future. For example:", "Classification system. The General Schedule classification  system\u2014which defines and organizes federal positions, primarily to  assign rates of pay\u2014has not kept pace with the government\u2019s  evolving requirements.", "Recruiting and hiring. Federal agencies need a hiring process that is  applicant friendly and flexible, and meets policy requirements.", "Pay system. Employees are compensated through an outmoded  system that (1) rewards length of service rather than individual  performance and contributions, and (2) automatically provides across- the-board annual pay increases, even to poor performers.", "Performance management. Federal agencies have faced long- standing challenges developing modern, credible, and effective  employee performance management systems and dealing with poor  performers.", "Employee engagement. Agencies can improve employee  engagement and performance through analysis and sharing of  promising practices. Employee engagement is generally defined as  the sense of purpose and commitment employees feel toward their  employer and its mission.", "The administration is moving forward with broad efforts to address  government-wide human capital challenges, improve government  efficiency, and understand how key trends will affect the future of federal  work and the workforce. For example, the President\u2019s Management  Agenda\u2019s cross-agency priority goal on the 21st century workforce aims  to (1) improve employee performance management and engagement, (2)  train staff to develop new skills and redeploy human capital resources,  and (3) enable simple and strategic hiring practices.", "In 2018, OPM issued the first Federal Workforce Priorities Report to  communicate key government-wide human capital priorities, suggest  strategies, and help inform agency strategic and human capital  planning. The report identifies changes in the external environment that  will likely affect federal human capital management, including the evolving  role of workers, changes in technology, employee health, and shifting  generational demographics. In addition, OPM is developing a foresight  program to help federal agencies navigate emerging strategic workforce  challenges and harness potential opportunities. As part of its foresight  efforts, OPM has also hosted a series of symposia that provide human  capital specialists insight on addressing workforce challenges of the  future."], "subsections": []}, {"section_title": "Federal Work Is Changing Amid Demographic and Technological Trends", "paragraphs": ["We identified key trends in agency operations and attitudes toward work  that are affecting how federal work is done and, consequently, the skills  and competencies that workers need to accomplish agency missions, as  illustrated by figure 1. These trends will require a federal workforce that  can better adapt to and leverage constantly evolving technology and  mission requirements. They will also require a federal workforce that can  effectively collaborate and partner with workers both within and outside of  the federal sector to achieve national policy objectives."], "subsections": [{"section_title": "Technological Advances", "paragraphs": ["Technological advances will change the way work is done. Advances in  automation, artificial intelligence, robotics, and information and  communication technology have the potential to accelerate changes in  federal work beyond any past experience, but they also involve risks.  Advances in automation and robotics are changing the way that work is  done by altering the balance between what tasks are completed by  humans and those completed by machines. The federal workforce will  need to develop new skill sets and expertise to effectively utilize and  manage these technological advances.", "In 2017, we convened a forum that highlighted several applications of  artificial intelligence, many of which could affect agencies and federal  work. For example, robots enabled by artificial intelligence could assist  patients with medication management and mobility support in clinical  settings; developments in automated vehicles could affect work related to  government vehicle pools, safety, and transportation management; the  use of artificial intelligence in criminal justice and cybersecurity  applications could bring benefits but would need to be carefully managed  with regard to privacy protection, among other concerns; and the  accelerated pace of change associated with artificial intelligence may  strain workforce systems\u2019 capacity to train and hire individuals with  appropriate skill sets.", "Technology is also changing human capital management, according to  experts we contacted. Experts stated that technology can help improve  recruitment efforts, streamline hiring processes, and match employees to  tasks. For example, they said that employers can develop mobile apps to  make the hiring process easier to navigate and use artificial intelligence to  better screen and align applicants with job positions. Experts also stated  that employees will need to constantly update their digital literacy to stay  current with emerging technology.", "OPM has also explored the effect of technology on the federal workforce.  In February 2018, OPM reported that, in most jobs, certain activities may  be automated rather than the entire occupation. OPM also reported that  machine assistance may amplify the value of expertise and may increase  work capacity by providing employees time to focus on more important  work. Further, OPM reported that it is seeking to acquire or develop  enterprise technological solutions to improve the analytic capabilities of  the federal human capital community. Improved data analytics should  help support more informed and evidence-based planning and decision- making.", "OPM suggested that the technological changes will require agencies to  coordinate efforts to (1) fund technological experimentation and pilots; (2)  promote acquisition of skills that are not replaced by technology (e.g.,  creativity, relationship building, and innovation); and (3) engage in  strategic foresight activities. Relatedly, OPM, the Office of Management  and Budget, and the Department of Defense are developing a plan to  identify ways to provide employees impacted by automation with other  work, and to identify skills needed in the future. The agencies\u2019 efforts are  part of the cross-agency priority goal on the 21st century workforce.", "Federal work is also being affected by increased use of virtual  communication, which provides flexibility in where employees can do their  work. In both the workforce-at-large and the federal workforce, the  percentage of employees who telework has increased. For example,  OPM reported that the percent of eligible employees teleworking  increased from 29 percent in 2012 to 51 percent in 2016.", "We have previously reported that the federal government has increasingly  recognized telework as an important human capital strategy that can give  employees more work-life balance and help agencies continue operations  during emergency events. However, federal agencies also face costs  associated with telework, including training staff, ensuring supervisors  have the necessary skills to manage remote staff, and overseeing the  telework program to ensure compliance and reduce the risk of fraud. In  July 2016, we found that OPM provided resources to agencies to help  them with their telework programs, but was missing other opportunities to  help agencies better identify the net cost savings associated with their  telework programs.", "We recommended that OPM work with the Chief Human Capital Officers  Council to provide clarifying guidance on options for developing  supporting data for benefits and costs associated with agency telework  programs. OPM concurred with the recommendation and in October  2018 provided documentation showing it is developing draft guidance on  evaluating work-life programs, including telework. To fully implement this  recommendation, it will be important for OPM to finalize and provide this  guidance to agencies."], "subsections": []}, {"section_title": "Increased Reliance on Nonfederal Partners", "paragraphs": ["An increased reliance on nonfederal partners to achieve policy goals will  require new skills and competencies for which agencies will need to  identify, recruit, and hire. Increasingly, the federal government works with  state and local governments, as well as other partners, to achieve a wide  range of policy goals. The federal government uses grants as a tool to  achieve national priorities through nonfederal partners, including state  and local governments, educational institutions, and nonprofit  organizations.", "Federal grant outlays to state and local governments have generally  increased as measured in constant fiscal year 2015 dollars from $230  billion in fiscal year 1980 to $624 billion in fiscal year 2015. We previously  reported that a range of skills are needed to manage the various tasks  associated with the grants life cycle. For example, the grants workforce  needs to notify grant awardees of the general terms and conditions of the  grant, including statutory and regulatory requirements.", "In support of their missions and activities, agencies also use contractors  to procure a variety of services and products, including products that  cannot be easily and clearly defined in advance and that are difficult to  verify after delivery. In addition, agencies use contractors to provide the  skills needed to help them manage complex operations. In fiscal year  2017, federal agencies obligated almost $306 billion for service contracts.  Contractors can help agencies meet surge capacity needs, among other  benefits. However, the Office of Federal Procurement Policy and our prior  work have identified risks of overreliance on contractors and the need for  increased management attention on certain types of services, such as  professional and management support services.", "In addition to using grants and contractors, Congress has given broad  statutory authority across the executive branch to use various open  innovation strategies. Open innovation involves using various tools and  approaches to harness the ideas, expertise, and resources of those outside an organization to address an issue or achieve specific goals. Our  October 2016 report highlighted cases where agencies are using open  innovation strategies\u2014such as crowdsourcing and prize competitions\u2014to  effectively engage and collaborate with each other, and to leverage  knowledge outside the federal workforce to achieve their goals.", "For example, at the time we found that every 2 years since 2009 the  Federal Highway Administration had engaged a broad range of public-  and private-sector stakeholders to identify and implement innovative  ideas that measurably improved highway construction projects. Federal  workers in charge of such open innovation initiatives will need to be able  to work in collaborative, cross-cutting environments. To that end, in June  2017, we identified various government-wide and agency-level resources  \u2014such as interagency communities of practice and dedicated staff  positions\u2014the executive branch has put into place to support effective  implementation of open innovation initiatives."], "subsections": []}, {"section_title": "Fiscal Constraints", "paragraphs": ["Increasing fiscal constraints require agencies to reevaluate and  reprioritize what the federal government does, how it does business, and,  as appropriate, who conducts its business. The nation is on a long-term,  unsustainable fiscal path. We have previously reported that the federal  government is spending far more money than it is collecting and is  projected to do so going forward. Further, fiscal pressures have already  begun to affect the management of the federal workforce, including  decisions to hire, retain, train, contract, and collaborate. Without careful  attention to strategic and workforce planning and other approaches to  managing and engaging personnel, the reduced investments in human  capital may have lasting, detrimental effects on the capacity of an  agency\u2019s workforce to meet its mission.", "In May 2014, we identified strategies to help agencies maintain their  human capital capacity while facing fiscal constraints. These strategies  include strengthening coordination within the human capital community,  using enterprise solutions to address shared challenges, and creating  more agile talent management to address inflexibilities in the current  system.", "Also, guidance from the Office of Management and Budget directs federal  agencies to reconsider priorities, determine how to make trade-offs, and  evaluate the potential effects of these decisions. In June 2018, we  reported that as federal agencies reexamine their role in carrying out  specific missions and programs, they should determine 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."], "subsections": []}, {"section_title": "Evolving Mission Requirements", "paragraphs": ["Evolving mission requirements challenge agencies to adapt their work  and workforces as they respond to policy shifts, technology changes, and  resource constraints affecting their work.", "Our previous work on the Census Bureau (Bureau) highlights this trend.  The Bureau is redesigning its approach to the 2020 Census to address  rising costs and declining response rates. In May 2017, we reported that  the basic design of the enumeration\u2014mail out and mail back of the  census questionnaire with in-person follow-up for nonrespondents\u2014has  been in use since 1970. However, this traditional design is no longer  capable of cost effectively counting the population, and the Bureau has  fundamentally reexamined its approach for conducting the 2020 Census.  For example, the Bureau is planning to offer households the option of  responding to the survey through the internet.", "The Bureau is also leveraging nonfederal partners and technology to  respond to evolving mission requirements. For example, the Bureau plans  to enhance its work with nonfederal partners to successfully complete the  enumeration, particularly for hard-to-count groups, such as minorities,  renters, and young children. In July 2018, we reported that to facilitate  this effort, the Bureau plans to hire nearly twice as many partnership  specialists as it had planned for the 2010 Census.", "These partnership specialists will need core relationship-building skills  and advanced knowledge of digital media. However, the Bureau faces a  significant challenge in hiring staff with these skills because it is operating  in a much tighter labor market than it did prior to the 2010 Census.  Likewise, the Bureau has had difficulty filling key positions to oversee  information technology contracts. In August 2018, we reported that a  government program management office is managing the contractor that  will integrate all of the Bureau\u2019s key systems and infrastructure for the  decennial. However, in June 2018, Bureau officials reported that 33 of  the office\u2019s 58 federal employee positions were vacant. These vacancies  create risks for the program management office\u2019s ability to oversee  contractor cost, schedule, and performance."], "subsections": []}, {"section_title": "Changing Demographics and Shifting Attitudes towards Work", "paragraphs": ["Changing demographics and shifting attitudes towards work may require  new skills to manage a diverse workforce that seeks purpose, autonomy,  and career mobility. We found increases in the percentage of federal  employees who had a disability, identified as a minority, were veterans, or  who held an advanced degree over the past 10 years (see figure 2).", "This increasing diversity should help provide agencies with the requisite  talent and multidisciplinary knowledge to accomplish their missions. While  the percentage of federal employees 40 years and older remained  relatively flat, the federal workforce had a higher percentage of individuals  who are 40 and older compared to the U.S. employed civilian labor force.  The federal workforce had a higher percentage of people with a disability,  who were veterans, or held an advanced degree (see figure 3).", "Agencies face a potential risk related to retirement, particularly among the  Senior Executive Service (SES). Specifically, we found that retirement  rates for SES employees are higher than for all employees, with 7 to 8  percent of SES retiring every year for the past 6 years (see figure 4).  Cumulatively, 41 percent of the permanent SES workforce in fiscal year  2012 retired by fiscal year 2017. If turnover is not strategically managed  and succession plans are not in place, gaps can develop in an agency\u2019s  institutional knowledge and leadership as experienced employees retire.  While retirements can aggravate the problem of skill gaps, they also  present an opportunity for agencies to realign their workforce with needed  skills and leadership levels to better meet existing and newly emerging  mission requirements.", "Based on expert interviews, we also identified shifts in employee attitudes  toward work, which present recruiting opportunities and challenges for the  federal government. Experts said that employees seek meaningful work (i.e., work that can influence the greater society); autonomy within the workplace (i.e., opportunities to develop creative  and innovative solutions to complex problems);  control over their work environment (i.e., they want to set a schedule  and to work in a location that provides work-life balance); and  career mobility, including opportunities for upward mobility (i.e.,  promotions) and lateral mobility (i.e., opportunities to rotate to different  roles or projects within the same agency, a different agency, or  outside of government).", "Related to career mobility, experts said that employees are seeking  greater developmental opportunities and would prefer longer-term  employment where they can continue to build their skills and train.  Experts noted that while employees change jobs more often than in the  past, this phenomenon can be a result of employers investing less in  employee development, which has led to greater turnover. OPM also  recently reported that millennials are known for frequently transitioning  from one job to the next.", "While federal agencies offer unique opportunities to pursue meaningful  work, achieve autonomy, and have a healthy work-life balance, experts  also highlighted key challenges regarding perceptions surrounding federal  work from the potential applicants. These challenges include perceptions  that the government is too bureaucratic, federal work lacks innovation and  involves maintaining the status quo, federal work is less prestigious than  the private sector, and federal workers do not get to see the immediate  effect of their work. Officials from federal employee and manager groups  believed that furloughs, government shutdowns, pay freezes, and  negative rhetoric from elected officials have all contributed to the negative  perceptions among potential applicants. For example, from December 22,  2018, to January 25, 2019, a partial government shutdown occurred as a  result of a lapse in appropriations affecting some, but not all federal  agencies. It was the second multiweek lapse in appropriations causing a  government shutdown since 2013 and the longest shutdown in American  history. Federal employees at the affected agencies did not receive a  paycheck during the government shutdown. Experts we interviewed  noted that the perception of job security offered by federal work is  attractive to employees. However, prolonged shutdowns may alter this  perception and harm the government\u2019s recruitment and retention efforts.", "Given the changing demographic composition of the federal workforce  and shifting attitudes toward work, our analysis suggested that it may be  important to select and train managers and supervisors who possess  several leadership competencies. These competencies include fostering  an inclusive workplace (valuing diversity and individual differences and  leveraging these differences to achieve the agency\u2019s mission); team  building (inspiring and fostering team commitment, spirit, pride, and trust);  interpersonal skills (treating others with courtesy, sensitivity, and respect);    and managing conflict (encouraging differing opinions to be expressed  and resolving disagreements in a constructive manner). Such  competencies can help managers and supervisors develop an agency  culture where all employees feel valued, respected, engaged, and able to  contribute toward an agency\u2019s mission."], "subsections": []}]}, {"section_title": "Key Talent Management Strategies Can Help OPM and Agencies Better Manage the Current and Future Workforce", "paragraphs": ["In light of trends discussed, we identified actionable strategies that  agencies may be able to use to effectively manage the future federal  workforce in key talent management areas (see table 1). While these  strategies are not an exhaustive list, collectively they suggest basic steps  that agencies can take within existing authorities to position themselves to  meet their talent needs. Since, in some cases, agencies already use  these strategies, focused attention to leadership, culture, and sound  management practices can help agencies prepare for the future  workforce.", "For each strategy, we highlight some of the challenges agencies face,  actions OPM can take to implement open, related recommendations from  our prior work, and practices that may help agencies implement the  strategy. These practices are based on our review of related reports,  group interviews with federal Chief Human Capital Officers (CHCO), and  interviews with selected private organizations and foreign governments."], "subsections": [{"section_title": "Align Human Capital Strategy with Current and Future Mission Requirements", "paragraphs": ["Why Is Aligning Human Capital Strategies  Important?  Strategic workforce planning aligns an  organization\u2019s human capital program with its  current and emerging mission and  programmatic goals, and develops long-term  strategies for acquiring, developing, and  retaining staff to achieve programmatic goals.  This process\u2014in conjunction with identifying  skills and competencies and analyzing gaps\u2014 enables the organization to be agile, resilient,  and responsive to current and future  demographic and technological trends, as well  as other demands. These efforts can also  help agencies tailor their recruiting programs.", "In our prior work, we reported that high-performing organizations define  what they want to accomplish and what kind of organization they want to  be. They then identify and analyze the personnel skills, competencies,  numbers, and other factors needed to achieve those objectives. However,  these steps are a challenge for agencies that lack the capacity for  strategic workforce planning. Consequently, these agencies\u2019 human  capital efforts tend to focus on support and transactional activities and  compliance with rules and regulations. While these functions are  important, successful strategic human capital management requires  human capital professionals to integrate human capital strategies with  their agency\u2019s core business practices. In addition, high-performing  organizations recognize the fundamental importance of measuring both  the outcomes of human capital strategies and how these outcomes have  helped the organizations accomplish their missions and programmatic  goals."], "subsections": [{"section_title": "Set Workforce Goals and Assess Skills and Competencies Needed to Achieve Them", "paragraphs": ["Identify existing skills and competencies. In May 2014, we reported  that agencies should be aware of existing skills and competencies in their  workforce to help inform workforce planning. According to the  Department of the Treasury (Treasury) CHCO, establishing a skills  inventory can help managers assign the right talent to the right place at  the right time. For example, the CHCO told us that during the Puerto  Rico debt crisis, Treasury needed to be able to identify the necessary  skills to manage the crisis. The agency is now implementing an Integrated  Talent Management System to facilitate workforce and succession  planning as well as learning and performance management.", "In May 2014, we recommended that OPM work with the CHCO Council to  review the extent to which new capabilities are needed to develop tools  that help identify existing skills. OPM agreed and took a number of  actions to address this and other related recommendations. For example,  OPM developed an action plan template for closing skills gaps that  adheres to our selected best practices for project planning. However, as  of November 2018, other actions were still needed to fully address this  and other related recommendations.", "Assess gaps in existing and future skills and competencies. With  shifting attitudes toward work, technological advances, and increased  reliance on nonfederal partners, agencies need to assess whether there  are gaps in existing and future skills and competencies. We previously  reported that most federal human resources (HR) systems\u2014reflecting the  General Schedule classification system\u2014only identify employee skills and  competencies by their occupational series, job title, and grade. This  level of detail does not adequately address the multidisciplinary nature of  modern work. For example, cybersecurity spans many occupational  families. Similarly, with technological advances, agencies may need  interdisciplinary talent such as workforce specialists in information  technology. Agencies may be better able to assess gaps in such talent by  defining, developing, and deploying workers based on skills and  competencies, not by occupational series.", "According to the Department of Defense Civilian Human Capital Officer,  agencies can assess gaps in skills and competencies through functional  communities, in which experienced leaders in areas such as acquisition  or financial management define, assess, and determine how to distribute  skills and competencies in the workforce. She said that although her  department and other agencies have made progress in closing skills  gaps, only functional communities themselves can define the skills and  competencies needed for current and future work. She also said that a  mature functional community can help align workforce planning to agency  strategic goals and objectives.", "In January 2015, we recommended that OPM work with agency CHCOs  to (1) establish a schedule specifying when OPM will modify its Enterprise  Human Resources Integration (EHRI) database to capture staffing data  that it currently collects from agencies through its annual workforce data  reporting process; and (2) bolster agencies\u2019 ability to assess workforce  skills and competencies by sharing competency surveys, lessons learned,  and other tools and resources. In December 2018, OPM released a  memorandum outlining plans for a phased, government-wide competency  assessment of program and project managers beginning in May 2019.  Additionally, in March 2019, OPM reported that it had identified a data  source that was more efficient and accurate in identifying staffing gaps  than EHRI data. We will continue to monitor OPM\u2019s progress in  implementing its planned actions.", "Monitor progress toward closing skills gaps. We previously reported  that the federal government faces skills and competencies gaps in a  number of agency-specific and government-wide occupations. One  such occupation is in the HR profession. Skills gaps in HR occupations  can hamper both strategic and transactional HR activity, exacerbate  additional skill gaps, and hinder agencies\u2019 ability to accomplish their  missions. For example, our December 2016 report highlighted how the  Veterans Health Administration\u2019s limited HR capacity undermined its  ability to improve delivery of health care services to veterans.", "Further, OPM officials said that a challenge to federal hiring efforts is high  turnover among HR staff, and one CHCO said her HR staff is not up to  date on hiring options. As a result, OPM officials noted that HR offices are  missing specialists who understand the agencies\u2019 specific hiring needs  and flexibilities.", "In January 2015, we recommended that OPM (1) work with the CHCO  Council to develop a core set of metrics that all agencies should use to  close mission-critical skills gaps, among other HR goals; and (2)  coordinate with the interagency working group that identified the list of  skills gaps to explore the feasibility of collecting necessary information  during a CHCO-led review of HR goals. OPM concurred with the  recommendation in 2015. In March 2019, OPM stated it had addressed  the recommendation by developing a multifactor model consisting of core  metrics. This model included quit rates and retirement rates. OPM said  that it provides the model to agencies for identifying mission-critical  occupations. OPM added that agencies should have the autonomy to  determine which human capital metrics are important for achieving their  missions. While this is an important step forward, to close the  recommendation, OPM needs to provide evidence that agencies are  using the multifactor model as a common set of metrics to close mission- critical skills gaps, regardless of other agency-specific metrics."], "subsections": []}]}, {"section_title": "Acquire and Assign Talent", "paragraphs": ["Why Is Acquiring and Assigning Talent  Important?  To ensure agencies have the capacity to  address evolving mission requirements,  agencies will need to compete with other  sectors to acquire top talent, as well as have  the flexibility to reassign existing talent to  where they are most needed. This helps  ensure the right people, with the right skills,  are assigned to the right roles at the right  time.", "According to OPM data, expert interviews, and our previous work, the  federal government faces a range of challenges acquiring and assigning  talent. These challenges include a lengthy hiring process and negative  perceptions of government. In 2017, the average government-wide time- to-hire was 106 days, according to OPM. Candidates do not consider this  time frame to be reasonable, according to human capital experts and  federal employee and management groups. OPM\u2019s government-wide  goal is 80 days.", "Further, only 42 percent of respondents to the 2017 Federal Employee  Viewpoint Survey (FEVS) think their work unit can recruit the right skills.  Human capital experts, CHCOs, and OPM officials reported that agencies  face challenges (1) matching applicants with job positions best suited to  their skills, and (2) moving existing employees with specific skills to  address emerging, temporary, or permanent needs across an agency.", "In the sections below, we highlight actions OPM can take to implement  open recommendations from our prior work, and practices agencies can  follow to address these challenges by (1) sourcing and recruiting talent,  (2) assessing and screening candidates, and (3) assigning employees  where needed."], "subsections": [{"section_title": "Source and Recruit Talent", "paragraphs": ["Sourcing and recruiting is the process of attracting strong applicants who  are prepared to perform successfully on the job. Some practices agencies  can use to better source and recruit include cultivating a talent pipeline,  highlighting agency mission, recruiting continuously, starting the hiring  process early in the school year, reviewing available hiring flexibilities,  and writing user-friendly vacancy announcements.", "Cultivate a diverse talent pipeline. In our prior work, we have noted the  importance of active campus recruiting that goes beyond infrequent  outreach to college campuses. Active campus recruiting includes  developing long-term institutional relationships with faculty,  administrators, and students. In addition, OPM guidance emphasizes that  agencies should develop an inclusive approach to their talent acquisition  strategies. This includes developing strategic partnerships with a  diverse range of colleges and universities, trade schools, apprentice  programs, and affinity organizations from across the country.", "Likewise, representatives of consulting firms we interviewed stated they  cultivate a talent pipeline by building a brand on campus, developing  relationships with college students, and recruiting on campuses for entry- level positions and internship programs. One consulting firm  representative said that the firm sends \u201cbrand ambassadors\u201d to build  relationships with college freshmen and sophomores, and to discuss  working in the professional services industry. Another consulting firm  representative said that the firm uses social media to develop  relationships with students prior to a campus visit. Consulting firm  representatives also noted that they expanded their talent pool by visiting  technical conferences, veteran groups, and campuses with students of  diverse backgrounds.", "Consulting firm representatives stated that their internship programs are  among their most successful practices for cultivating a talent pipeline  because the firms can offer full-time positions to rising seniors during the  internship. Similarly, CHCOs and federal employee and management  group representatives we interviewed noted that internships are important  for establishing a pipeline for recruitment.", "Highlight agency mission. Agencies can help counter negative  perceptions of federal work by promoting their missions and innovative  work, according to expert and CHCO interviews. For example, the Department of Homeland Security (DHS) provides \u201cDay in the Life\u201d  information on its work to promote public awareness of how its everyday  tasks tie in with its mission of protecting the United States, according to  the DHS CHCO. The DHS CHCO stated that promoting agency mission  can be done while cultivating a talent pipeline and assessing applicants\u2019  abilities. For example, the department holds recruitment events where  potential candidates can participate in law enforcement-related activities  such as fitness testing. The CHCO noted that in addition to promoting  homeland security careers, these events help prospective candidates  determine if a position is a good fit for them.", "Recruit continuously and start the hiring process early in the school  year. The ability to hire students is critical to ensuring that agencies have  a range of experience levels for succession planning and a talent pipeline  to meet mission requirements. One of the key challenges agencies face  in recruiting students is managing the timing of recruitment. The federal  fiscal year begins on October 1\u2014about when private sector firms we  interviewed start recruiting on campus. Frequently, however, federal  agencies have been unable to hire at this time of year because of the  limitations of continuing resolutions. Yet if agencies wait to start the  recruiting and hiring process until they receive funding, many graduates  will have taken other job opportunities.", "Agencies can overcome these timing challenges by recruiting  continuously and starting the hiring process early in the school year. To  recruit continuously, CHCOs from the U.S. Departments of Agriculture  and Homeland Security said they advertise funding-conditional positions  throughout the year. Similarly, representatives of some consulting firms  said they post positions that are contingent on funding and complete the  hiring paperwork, among other requirements, for these positions before  obtaining federal funding. This has helped navigate the timing of annual  appropriations because these organizations can onboard candidates as  soon as they receive funding.", "Representatives of one federal management group also stated that  recruiting continuously and starting the hiring process earlier is a good  practice even when agencies receive funding in October, since it can  reduce stress from cumbersome recruiting and hiring work when a  position needs to be filled.", "Strategically leverage available hiring flexibilities. CHCOs cited the  complex competitive examining process as a cause of the lengthy hiring  time. This has been a long-standing concern: In our 2002 report on  human capital flexibilities, we noted that for many years prior, federal  managers had complained that competitive examining procedures were  rigid and complex.", "However, agencies can use a number of additional hiring authorities  beyond competitive examining. These authorities can add flexibility to  the process and CHCOs expressed a desire for more. However, we  previously found that agencies relied on only a small number of available  authorities. In fiscal year 2014, 20 hiring authorities were used to make  around 90 percent of the new appointments, although agencies used 105  hiring authority codes in total.", "We recommended that OPM use information from its review of agencies\u2019  use of certain hiring authorities to determine whether opportunities exist  to refine, consolidate, or expand agency-specific authorities, and  implement changes where OPM is authorized, including seeking  presidential authorization or developing legislative proposals if  necessary. OPM agreed with our recommendation and has made progress in these areas, although more work is needed. As of July 2018,  OPM had started a project to review hiring authority data and to create an  inventory of authorities used by agencies. In its July 2018 study on  excepted service hiring authorities, OPM identified possible opportunities  to streamline authorities and outlined planned actions to promote a more  effective and efficient hiring process. As of December 2018, OPM said  that it continues to research and examine these streamlining opportunities  as part of the broader initiative to modernize federal hiring practices under  the President\u2019s Management Agenda. To fully implement the  recommendation, OPM needs to complete these efforts and, as  appropriate, develop legislative proposals in consultation with the CHCO  Council.", "Write user-friendly vacancy announcements. We previously reported  that some federal job announcements were unclear. This can confuse  applicants and delay hiring. In July 2018, OPM officials stated that  agencies can develop more effective vacancy announcements when  hiring managers partner with HR staff. According to OPM, hiring  managers can work with HR staff to identify the critical competencies  needed in the job, develop a recruiting strategy, and ensure the job  announcement accurately and clearly describes the required  competencies and experience. To promote collaboration between hiring  managers and HR staff, OPM is training agencies on the role of hiring  managers in writing vacancy announcements, according to OPM officials.", "As we reviewed human capital practices in foreign governments,  Canadian officials told us that Canada\u2019s Public Service Commission  shortened job announcements and reduced the number of qualifications  required to apply for most positions. Canadian officials also noted that  they simplified their job application portal, which reduced the time to apply  for a job."], "subsections": []}, {"section_title": "Assess and Screen Candidates", "paragraphs": ["Assessing includes developing and implementing tests, structured  interviews, and other evaluations to determine whether candidates are  qualified for the position and to gauge their relative levels of knowledge,  skills, and abilities. Screening involves reviewing qualified candidates for  potential suitability concerns and conducting background investigations.  Practices for assessing and screening include using relevant assessment  methods, sharing hiring lists, and improving the security clearance  process.", "Use relevant assessment methods and share hiring lists. CHCOs and  OPM officials stated that roadblocks to hiring the right skills include issues  with assessment methods. Specifically, agencies may use methods that  are less relevant for assessing the desired skills or agencies may  experience issues incorporating multiple assessments in the hiring  process. For example, one CHCO said that her agency uses multiple- choice questions to assess candidates, but essay questions more  effectively assess the skills she seeks. OPM issued guidance to agencies  on how to use additional assessment methods, including how to rank  applicants.", "Additionally, federal employee and management group representatives  said agencies could reduce the time of the assessment process by  sharing hiring lists. The Competitive Service Act of 2015 allows agencies  to share hiring lists, but agencies have only started to pilot the practice  within departments, according to OPM officials. OPM and agencies  discussed sharing hiring certificates with the CHCO Council, and OPM is  planning virtual training sessions on this topic. However, one federal  employee group representative noted that to be consistent with merit  principles, agencies may need to refresh the list every 2-to-3 months to  give new candidates the opportunity to enter the application pool.", "In looking at human capital practices in foreign governments, we found  that Australian agencies incorporated more relevant assessment methods  and shared hiring certificates. According to officials from the Australian  Public Service Commission, Australian agencies previously relied on  interviews as the main assessment method. However, the Australian  Public Service Commission encouraged agencies to use a range of  different assessment methods, such as prescreening questionnaires,  video interviews, and technical multiple-choice questions. As a result,  officials stated that Australian agencies interview fewer but more suitable  candidates, which can save time and resources. Also, Australian  agencies can hire from a list of candidates that one agency already  determined to be qualified in certain skills.", "Improve the security clearance process. The security clearance  process can contribute to onboarding delays, according to CHCOs. For  example, at one agency, the CHCO said it takes applicants more than  400 days to receive their security clearances. Also, our previous work  found that 98 percent of agencies did not meet the 60-day timeliness  objectives for initial secret clearances in fiscal year 2016, an increase of  25 percentage points since fiscal year 2012.", "In January 2018, we added the security clearance process to our High- Risk List and reported a backlog of more than 700,000 background  investigations as of September 2017. In December 2017, we made three  recommendations to the National Background Investigations Bureau  within OPM.", "These recommendations included developing a plan for reducing the  security clearance backlog, increasing total investigator capacity, and  implementing a comprehensive strategic workforce plan that focuses on  what workforce and organizational needs and changes will enable the  National Background Investigations Bureau to meet the current and future  demand for its services. OPM concurred with the recommendations, and  officials reported in February 2019 that the National Background  Investigations Bureau had taken steps to reduce backlog of pending  security clearance investigations to approximately 565,000 and increase  the number of investigators to almost 8,700. The National Background  Investigations Bureau has also reported publically on the security  clearance background investigations, including investigator headcounts,  in September 2018, and quarterly on performance.gov. While an  important step, OPM needs to complete the workforce plan and identify  workforce goals to fully implement the recommendation.", "The Department of Homeland Security (DHS) CHCO said DHS navigates  this challenge by onboarding talented, qualified applicants as soon as  possible, then, while waiting for their high-level clearance, assigning them  tasks that do not require the clearances. She also said that DHS has  issued more interim clearances and has redesignated some positions so  they can be held by employees with a lower clearance classification."], "subsections": []}, {"section_title": "Assign Employees Where Needed", "paragraphs": ["Our previous work noted that it is important for agencies to be able to  place employees where needed, especially since utilizing skills of  employees already in the workforce could improve agencies\u2019 ability to  meet emerging or temporary mission needs more cost-effectively than  hiring employees.", "Develop a culture of agility. We previously reported that to develop a  culture of agility, agencies need to be able to (1) identify the skills  available in their existing workforces, and (2) move people with specific  skills to address emergency, temporary, or permanent needs within and  across the agencies. Agencies can develop a culture of agility to meet  mission needs by supporting rotational assignments for employees. For  example, the Nuclear Regulatory Commission established an oversight  board when it faced a period of downsizing and could not hire externally  as a result of contraction within the nuclear industry, according to the  agency CHCO. This board helped ensure that employees with the  required skill sets were considered first before an approval to hire would  be granted. Through its active rotational program and hiring oversight, the  commission met its mission amidst the downsizing, according to the  agency\u2019s CHCO.", "Relatedly, Canada and two of the private government contractors we  interviewed have used internal job application platforms to promote a  culture of agility. Canada\u2019s internal job platform, Career Marketplace,  allows all government employees to share profiles and career  opportunities, particularly for short-term projects. One company\u2019s  representatives said their internal job platform posts openings in different  countries and industries across the company. According to these  representatives, this company established a culture where supervisors  understand that staff work for the entire company, not just a particular unit  or program. Another company supplements its internal job platform with  tools to recognize employee skills and find opportunities that best fit those  skills."], "subsections": []}]}, {"section_title": "Incentivize and Compensate Employees", "paragraphs": ["Why Is Incentivizing and Compensating  Employees Important?  Changing mission requirements and  technological trends requires the federal  government to compete with other sectors for  in-demand skill sets, and compensation and  incentives are key determinants of where  employees choose to work. While federal  agencies may struggle to offer competitive  compensation for highly skilled workers given  fiscal constraints, leveraging existing  incentives such as work-life balance programs  can help agencies to better compete for top  talent even in labor markets where federal pay  may not be competitive.", "While federal agencies may face challenges implementing competitive  compensation in certain labor markets, certain benefits and incentives  other than pay can help federal agencies better compete in the labor  market. However, agencies do not always promote these benefits and  incentives as part of a total compensation package, in part because  managers are not always aware of the importance of doing so. In the  sections below, we highlight practices agencies can use to promote  current benefits and incentives, and discuss our open recommendations  to leverage existing pay flexibilities."], "subsections": [{"section_title": "Leverage Benefits and Incentives", "paragraphs": ["In cases where federal pay may not be competitive, certain benefits and  incentives, such as work-life balance programs, tax-exempt health  savings plans, and retirement savings plans, could give the government  an edge to recruit and retain employees. Some practices agencies can  use to leverage these benefits and incentives are as follows.", "Increase awareness of benefits and incentives, such as work-life  programs. In 2017, the majority of federal employees were satisfied with  compensation, and employees who participated in work-life programs  were satisfied with those incentives (see table 2 and figure 5). However,  OPM\u2019s 2018 Federal Work-Life Survey Governmentwide Report found  that one of the most commonly reported reasons employees do not  participate in work-life programs is lack of program awareness among  employees and supervisors. For example, 23 percent of those who did  not participate in the employee assistance program said they were  unaware of the program services.", "Some agencies are addressing this issue by advertising and helping  employees use available benefits, work-life balance programs, and other  resources. For example, the National Science Foundation offers  employees many opportunities to learn about existing benefits, according  to the foundation\u2019s CHCO. These opportunities include triannual  retirement seminars where employees receive personalized retirement  estimates, quarterly financial planning seminars where employees receive  a free 1-hour consultation, and annual benefit fairs where employees can  learn about various health care providers, the work-life programs, and the  employee assistance program.", "Tailor benefits and incentives to employees\u2019 needs. Our analysis of  CHCO and expert interviews also found that employees may value  different benefits and incentives depending on their stage in life. By better  understanding the desires of the workforce at various life stages,  agencies can better tailor benefits packages and incentives to their  employees. For example, the Social Security Administration\u2019s CHCO said  that the agency\u2019s younger workers value work-life and wellness  programs, so the agency implemented a health-tracking program and a  fitness discount program for all employees. CHCOs also suggested  identifying and incorporating the benefits that would be most useful to  various groups of employees, such as sabbaticals for midlevel employees  or paid parental leave for employees starting families. One CHCO found  that her cybersecurity workforce values subsidies for training and  additional certifications more than bonus pay.", "Further, OPM\u2019s 2018 Federal Work-Life Survey Governmentwide Report  found that the number of respondents who anticipate adult dependent  care responsibilities in the next 5 years (31 percent) is double the number  of number of respondents with current adult dependent care needs (15  percent). OPM officials stated in light of this change, agencies may need  to provide greater workplace flexibilities and other support services to  retain talent.", "Address barriers to telework. Telework can serve as an important  recruitment and retention tool. According to OPM\u2019s 2018 Federal Work- Life Survey Governmentwide Report, 68 percent of employees who  telework said they intended to remain at their agencies, compared to 62  percent of those who do not telework. However, our previous work and  OPM\u2019s 2018 Federal Work-Life Survey Governmentwide Report  found  that some supervisors discourage telework despite agency participation  goals and that managers may make telework decisions before taking  relevant training.", "In February 2017, we recommended that OPM develop tools to help  agencies assess and analyze persistent barriers to telework, including  managerial resistance. While OPM disagreed with our recommendation, it  took steps consistent with the recommendation. For example, in 2017,  OPM administered the first government-wide work-life survey. This survey  included questions about a number of work-life programs, including  telework, to help identify common barriers to participation in telework,  including managerial resistance. Specifically, the survey discussed  supervisory perceptions of employees' reported telework participation  outcomes, supervisors' confidence to effectively manage telework  performance, and key drivers for telework approvals and denials. OPM  then provided individualized reports on results to agencies and agency  components. OPM also developed and distributed a video tutorial to help  agencies analyze their results. In 2019, following receipt and review of  documentation from OPM, we determined that these actions will help  agencies prioritize ways to improve their telework programs. We then  closed the recommendation as implemented.", "In our review of other countries\u2019 human capital practices, we found that  Australia encouraged managers to support telework by passing legislation  outlining standards and developing a culture that supports work-life  programs. For example, Australia\u2019s Parliament passed legislation  outlining standards for work-life programs, but Australian officials also  stated that commitment from top management was instrumental in  creating a culture that supported work-life programs, including telework.  More than 80 percent of respondents to the Australian Public Service  employee census reported that their supervisor actively supports work-life  programs."], "subsections": []}, {"section_title": "Leverage Existing Pay Authorities", "paragraphs": ["It is the policy of Congress that pay for federal workers under the General  Schedule (GS) classification system\u2014the pay system covering the  majority of federal employees\u2014align with pay for comparable nonfederal  workers. However, in 2012, we reported that recent studies comparing the compensation of federal employees to workers in other sectors  arrived at different conclusions as to which sector had the higher pay and  the size of the pay disparities, in part because each study included  different sets of assumptions. When necessary, agencies can use  special payment authorities strategically to help ensure pay is  competitive.", "Use special payment authorities strategically. A variety of authorities  can help agencies compete in the labor market for top talent, but  agencies only use them for a small number of employees. In December  2017, we reported that agencies can tap an array of special payments  when they need to recruit or retain experts in engineering, cybersecurity,  or other in-demand fields. These payments include, for example,  payments for recruitment, retention, or critical positions. We found that  agencies reported that these payments were helpful, but few documented  their impacts, and OPM had not assessed their effectiveness. Further, we  analyzed EHRI data and found that less than 5 percent of employees  received payments for recruitment or retention annually in the past 10  years.", "In December 2017, we recommended that OPM track the effectiveness of  special payment authorities, provide guidance and tools to assess their  effectiveness, and review and consider ways to streamline approval  procedures. OPM partially concurred with the recommendation to track  the effectiveness of special payment authorities, saying that agencies are  in the best position to take this action. Moreover, in December 2018,  OPM stated that it established a baseline to measure changes in the use  of special payment authorities over time, and that it is focused on  government-wide, mission-critical occupations to help identify trends  where there may be recruitment and retention difficulties. OPM is also  working with the CHCO Council to administer a survey to agencies to  obtain input on possible improvements to special payment authorities and  whether agencies have best practices to share on effective use of special  payment authorities. OPM officials said that they plan to review approval  procedures in 2019 for ways to streamline them; however, they have not  yet provided documentation on how this and future reviews will identify  ways to streamline the procedures. We will continue to monitor OPM\u2019s  actions to implement this recommendation."], "subsections": []}]}, {"section_title": "Engage Employees", "paragraphs": ["Why Is Engaging Employees Important?  Employee engagement\u2014 generally defined  as the sense of purpose and commitment  employees feel toward their employer and its  mission\u2014is important because engaged  employees are more innovative, more  productive, more committed, more satisfied,  and less likely to leave, according to OPM.", "OPM\u2019s study on engagement and our prior work found that what matters  most in improving engagement levels is valuing employees by  authentically focusing on their performance and career development.  Specifically, our prior work found that the strongest drivers of engagement  were similar across age groups and include constructive performance  conversations and communication from management, career  development and training, inclusion and involvement in decisions  affecting employees\u2019 work, and work-life balance.", "The challenge for agencies, then, is to (1) overcome weaknesses in the  performance management process, including rewarding strong  performers and dealing with poor performers; (2) create support for an  inclusive work environment; and (3) develop and implement strategies for  prioritizing training during times of fiscal constraint. In the sections below,  we highlight actions OPM can take to implement open recommendations  from our prior work and practices agencies can take to improve employee  engagement."], "subsections": [{"section_title": "Manage Employee Performance and Create a \u201cLine of Sight\u201d Between Individual Performance and Organizational Results", "paragraphs": ["Experts said that employees desire an environment where they can  collaborate with their peers and feel a sense of comradery. In contrast,  even a small number of poor performers can negatively affect employee  morale and agencies\u2019 capacity to meet their mission, according to CHCOs  and our previous work. In the 2017 FEVS, 64 percent of federal employee  respondents agreed that their supervisor provides them with constructive  suggestions to improve job performance and 31 percent agreed that  steps are taken to deal with poor performers. Without effective  performance management, agencies risk not only losing the skills of top  talent, they also risk missing the opportunity to effectively address  increasingly complex and evolving mission challenges. Agencies can  make performance management more effective with the following  practices.", "Improve selection and training of supervisors and managers.  Agencies can improve employee engagement by having a strong  management team that can provide constructive performance  conversations and deal with poor performers. This can be done by  selecting managers who (1) are inclined toward and interested in  supervision, and (2) have the ability to coach staff and provide  constructive performance feedback. One way agencies can ensure they  are selecting managers who want to manage is to establish a dual career  ladder structure, which allows advancement opportunities for employees  who have technical skills but are not inclined to manage.", "Representatives of private consulting firms we interviewed use the dual  career ladder and said it helps expand opportunities for employees to  move around internally. We recommended in 2015 that OPM determine if  promising practices, such as the dual career ladder structure, should be  more widely used across government. In November 2018, OPM officials  said that the President\u2019s Management Agenda requires agencies to  ensure first-line supervisors possess critical leadership competencies  within the first year of appointment, either through selection or  development. We will continue to monitor OPM\u2019s actions in this area.", "Agencies can also train managers to ensure they have skills to address  poor performance. In February 2015, we reported that supervisors may  not possess confidence or experience in having difficult performance  conversations, and they may not have skills or training on addressing  poor performance. These factors point to the importance of effective  selection, assessment, and development of new supervisors, as well as  to the importance of providing refresher training for current supervisors.", "Link agency\u2019s mission and employees\u2019 work. We have previously  reported that high-performing organizations create a \u201cline of sight\u201d  between individual performance and organizational results by aligning  employees\u2019 daily activities with broader results. Further, agencies can  motivate and retain employees by connecting them to their agency\u2019s  mission, according to human capital experts and federal employee and  management group representatives we interviewed. Employee responses  to FEVS indicate the federal government appears to be performing well in  this area. In 2017, 84 percent of employees knew how their work related  to the agency goals and priorities.", "Several private consulting firms we spoke with connect employees to their  missions in various ways. One firm aligns individual performance  expectations with the organization\u2019s goal of serving federal clients  objectively with the highest caliber of scientific and technical excellence.  According to the firm\u2019s representative, this effort has improved employee  satisfaction scores. Other firms train employees on the firm\u2019s core values  and its clients\u2019 missions. According to the firms\u2019 talent directors, this  practice helps keep employees interested in working for the firm.", "Implement meaningful rewards programs. We have previously  reported that high-performing organizations seek to create effective  incentive and reward systems that clearly link employee knowledge,  skills, and contributions to organizational results. However, agencies  sometimes struggle to allocate limited resources between mission  requirements and recognition, according to CHCOs and representatives  of one federal management group. According to the representatives,  some managers may not implement reward programs because they are  time intensive, and managers may not understand the importance of  reward programs to motivating the workforce. Among 2017 FEVS  respondents, 50 percent reported that they were satisfied or greatly  satisfied with the recognition received for doing a good job.", "Further, our November 2018 report highlighted challenges in recognizing  employee performance. We noted that approximately one-third of 2017  FEVS respondents agreed or strongly agreed with the statement, \u201cIn my  work unit, differences in performance are recognized in a meaningful  way.\u201d We also found that employees in supervisory roles responded more  positively to statements related to rewarding performance than other  employees. For example, in 2017, an estimated 69 percent of senior  leaders agreed or strongly agreed with the statement. In contrast, an  estimated 48 percent of supervisors and an estimated 33 percent of  nonsupervisors and team leaders agreed or strongly agreed.", "Human capital experts and federal employee and management group  representatives said that recognizing employees for their contribution to  achieving the agency\u2019s mission can be as strong an incentive as money.  For example, according to the Social Security Administration CHCO, the  agency offers a variety of awards programs. These programs include  agency-wide monetary awards that are based on performance ratings,  monetary awards that are not based on performance ratings, and  nonmonetary awards, some of which are showcased in a virtual  ceremony during Public Service Recognition Week. The Social Security  Administration also incorporates office-level awards to recognize  employee contributions. For example, in some offices, supervisors give  \u201cLife Saver\u201d or \u201cYou Rock\u201d certificates.", "Share innovative approaches to performance. In November 2018, we  found that opportunities exist to share innovative approaches to  performance management. We recommended that OPM work with the  CHCO Council to develop a strategic approach for identifying and sharing  emerging research and innovations in performance management.  Examples of innovations OPM has found include changes in performance  ratings models and setting goals that are focused on growth. We also  recommended that OPM develop and implement a mechanism for  agencies to share promising practices, such as focusing on performance  conversations and recognition to increase engagement and performance.  OPM agreed with our recommendations and reported that it plans to  formalize its processes for sharing emerging research and soliciting views  from the CHCOs. We will monitor OPM\u2019s efforts to implement the  recommendations."], "subsections": []}, {"section_title": "Involve Employees in Decisions", "paragraphs": ["Our analysis of expert interviews found that employees seek autonomy in  the workplace, meaningful work, and opportunities to achieve results by  developing creative and innovative solutions. Also, experts noted that in  some cases, connecting employees to a sense of inclusion and meaning  can compensate for the opportunity to make higher salaries in other  sectors. Having an inclusive work environment is one practice that can  help increase employee involvement in decisions.", "Increase support for an inclusive work environment. An increasingly  diverse workforce can help provide agencies with the requisite talent and  multidisciplinary knowledge to accomplish their missions. We previously  reported that diversity in the workforce can help address complex  challenges and foster innovation and creativity. We also reported that  fostering a diverse and inclusive workplace could help organizations  reduce costs by reducing turnover, increasing employee retention across  demographic groups, and improving morale. To harness diverse talent,  agencies need to continue using thoughtful strategies to engage  employees. In 2017, almost 70 percent of FEVS respondents stated that  supervisors work well with employees of different backgrounds, and about  half were satisfied in other areas related to inclusiveness (see table 3).", "In January 2005, we reported that top management commitment is a  fundamental element in the implementation of diversity management  initiatives. We\u2019ve also reported on the importance of diversity in the  Senior Executive Service (SES) corps. In January 2003, we stated that  diversity can bring a wider variety of perspectives to bear on policy  development and decision-making that help agencies achieve results.  Other practices that can help agencies support an inclusive environment  include having a diversity strategy and plan that are developed and  aligned with the organization\u2019s strategic plan. Agencies should also  involve employees in driving diversity throughout the organization (e.g.,  implementing mentoring programs or advisory groups).", "Practices implemented by the United Kingdom (UK) and Australia  emphasize the importance of setting an inclusive tone from the top. For  example, according to country officials, the UK and Australia designate  high-level agency officials to champion a particular government-wide  initiative, such as increasing diversity and inclusion, work-life balance,  and well-being. In the UK, champions promote the initiatives by blogging  or chairing interagency groups of senior civil servants to share best  practices, among other activities.", "Agencies can promote an inclusive work environment by providing  employees opportunities to share common interests and involving  employees in decisions. Private consulting firms we interviewed help  employees feel involved in the organization by sponsoring employee  groups where employees can gather around common interests, such as  community service, or skill sets, such as cybersecurity or acquisition  management. One firm incorporates results of its annual employee  survey into its decision-making and modified its career progression  trajectory based on feedback from employee focus groups."], "subsections": []}, {"section_title": "Develop Employees", "paragraphs": ["Agencies can use career developmental opportunities, including training,  details, and rotations, to (1) help the workforce develop skills to meet  evolving mission requirements, (2) ensure managers are well qualified,  and (3) appeal to current and future workers\u2019 desires for career mobility.  Some actions OPM can implement and practices agencies can take  include prioritizing training and encouraging mobility opportunities.", "Prioritize training for employees and managers. CHCOs and federal  employee and management group representatives said that more can be  done to prioritize training, particularly given resource constraints. Further,  our past work found that diversity training can help employees develop  concrete skills to assist in communicating and increasing productivity.", "However, in 2017, only 55 percent of FEVS respondents were satisfied  with training.", "In 2012, we recommended that OPM include in its guidance steps and  factors agencies should consider when prioritizing training. OPM  partially agreed with our recommendation and has taken steps to  implement it. In July 2017, OPM officials reported they were gathering  information on agencies\u2019 talent development processes, tools, and  procedures, and would use the information they gathered to develop  criteria for ranking training. We requested an update in December 2018  and will continue to monitor OPM\u2019s actions to implement this  recommendation.", "As an example of agency training efforts, the Social Security  Administration has national and regional development programs that offer  12 to 18 months of training and rotations for entry-, mid-, and senior-level  employees to strengthen foundational, technical, and leadership  knowledge and skills, according to the agency\u2019s CHCO. For example, its  Leadership Development Program assigns selected GS-9 through GS-12  employees to developmental assignments in new areas of work, and  provides leadership training that broadens their perspective of the  agency\u2019s mission.", "Encourage details, rotations, and other mobility opportunities.  According to our group interviews with CHCOs and interviews with human  capital experts and federal management groups, upward and lateral  mobility opportunities are important for retaining employees. CHCOs also  said that in some cases, lateral mobility opportunities such as rotations,  details, and opportunities to gain experience in other sectors can help  employees gain new skills more cost effectively than training, particularly  for rapidly changing skill sets such as those related to the sciences. We  previously reported that effective interagency rotational assignments can  develop participants\u2019 collaboration skills and build interagency networks.", "Further, providing supervisory candidates with details or rotational  opportunities could help them develop and demonstrate supervisory  competencies.", "Regarding upward mobility, the 2017 FEVS found that only 37 percent of  respondents were satisfied with opportunities to get a better job in their  organization. Agencies can use details and rotations to meet employees\u2019  desire for mobility, according to our CHCO group interviews and  interviews with human capital experts and federal employee and  management groups. However, according to OPM data, few federal  employees moved horizontally in 2017 (see table 4).", "Few employees move horizontally because managers are sometimes  reluctant to lose employees, according to federal manager group  representatives and our previous work. Furthermore, federal budgeting  and account structures create disincentives to share resources across  agencies. Additionally, barriers to rotations in other sectors may include  challenges identifying willing industry partners and addressing concerns  regarding conflict of interest and access to sensitive information.  Meanwhile, federal employees who have left for another sector must  apply competitively to return at a higher level.", "We have previously made recommendations that could help address  these challenges. In 2014, we recommended that OPM review the extent  to which new capabilities are needed to promote mechanisms for  increasing employee mobility within an agency and government-wide.  OPM agreed with the recommendation and since October 2016 has been  exploring a pilot project, GovConnect, that tests models for workforce  agility that includes cloud-based skill deployment across organizational  components and employee-initiated innovation initiatives. In November  2018, OPM officials also stated that the President\u2019s Management Council  Interagency Rotations Program offers rotational assignments across  agencies. We will continue to monitor OPM\u2019s efforts in this  recommendation.", "In 2015, we recommended that OPM determine if promising practices,  such as providing detail opportunities or rotational assignments to  managerial candidates prior to promotion, should be more widely used  across government. OPM partially concurred with this recommendation  and agreed to work with the CHCO Council to explore more government- wide use of rotational assignments. However, OPM noted that agencies  already have authority to take these actions. As of October 2018, OPM  had not provided us with information regarding how it plans to implement  the recommendation.", "In looking at human capital practices in foreign governments, we found  that the UK encourages rotation and promotion opportunities through its  developmental programs for entry-, mid-, and senior-level employees. For  example, participants in its entry-level program, called Fast Stream, are  centrally employed in the UK Cabinet Office. For the first 3 to 4 years,  Fast Stream participants rotate among agencies and receive technical  training in a specific field, such as accounting, finance, or human capital.  While evaluating Fast Stream\u2019s feasibility in the federal workforce, one  federal employee group representative emphasized the need to provide  career development opportunities to all employees, not just selected  program participants."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Acting Director of OPM for review  and comment. OPM provided technical comments, which we incorporated  as appropriate. We revised the report to further emphasize how agencies  can use work-life programs to recruit, retain, and engage federal  employees. We also added the concept of interpersonal skills to our  discussion of the leadership competencies needed to manage the future  workforce. OPM\u2019s comments also included updates to prior  recommendations on enterprise human capital solutions, skills gaps,  telework, and special pay authorities. We incorporated these comments  as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Acting Director of the Office of Personnel  Management, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we identify (1) key trends affecting federal work and  workers, and (2) key talent management strategies agencies can employ  to achieve a high-performing federal workforce, given those trends.", "To address both objectives, we reviewed our own reports as well as those  from the Office of Personnel Management (OPM), academia, think tanks,  and public opinion organizations related to human capital and the future  of work. We also analyzed data from OPM\u2019s Enterprise Human  Resources Integration (EHRI) system. EHRI contains personnel action  and onboard data for most executive branch and some legislative branch  federal civilian employees. We analyzed government-wide EHRI data on  demographics, including veterans status; employee movement such as  details and transfers; and retirement eligibility. We analyzed 10-year  trends from fiscal years 2008 to 2017, the most recent, complete fiscal  year of data available at the time of our review.", "For our analysis of demographic trends, we included permanent,  temporary, and term-limited employees. However, we focused on  permanent employees in our analysis of personnel movement and  retirement eligibility because these employees (1) comprise most of the  federal workforce and (2) become eligible to retire with an annuity, for  which temporary and term-limited employees are ineligible.", "To calculate the number of federal civilian employees, we included all  onboard staff, regardless of their pay status. Cases with missing values  on a variable were excluded from the reported statistics for that variable.  To calculate eligibility for retirement within the next 5 years, we computed  the date at which the employee would be eligible for voluntary retirement  with an unreduced annuity, using length of service, birth date, and  retirement plan coverage. Since work schedule does not affect retirement  eligibility, we included permanent employees with full-time schedules and  part-time, seasonal, and other schedules in these results.", "We assessed the reliability of the EHRI data through electronic testing to  identify missing data, out-of-range values, and logical inconsistencies. We  also reviewed our prior work assessing the reliability of these data and  corresponded with OPM officials knowledgeable about the data to discuss  its accuracy and the steps OPM takes to ensure reliability. On the basis of  this assessment, we believe the EHRI data we used are sufficiently  reliable for the purpose of describing demographic trends and workforce  management challenges facing the federal government."], "subsections": [{"section_title": "Objective 1", "paragraphs": ["To identify key trends in the workforce and workplace, we analyzed data  from the U.S. Bureau of Labor Statistics (BLS) Current Population Survey  (CPS) and Federal Procurement Data System \u2013 Next Generation,  reviewed our prior work, and reviewed reports from OPM and selected  think tanks and consulting firms.", "Key trends in the workforce. To assess key trends in the workforce, we  analyzed data from the CPS, a national survey designed and  administered jointly by BLS and the Census Bureau. The CPS is a key  source of official government statistics on employment and  unemployment in the United States, and also contains data on poverty  rates, earnings, and labor market demographics. We analyzed 2017  annual averages on age, racial or ethnic minority status, disability status,  veteran status, and educational attainment of the U.S. civilian labor force.", "The CPS uses a probability sample conducted monthly. As with all  samples, estimates produced from the CPS are subject to sampling and  nonsampling error. Sampling error results from the fact that the samples  are one of a large number of random samples that might have been  drawn. We followed the BLS technical guidance for estimating the  standard errors of annual average totals from CPS data. We used the  standard errors to construct 95 percent confidence intervals for each  estimate presented in this report. This is the interval that would contain  the actual population value for 95 percent of the CPS samples that the  BLS could have drawn. All estimates from the CPS presented in this  report have a margin of error of plus or minus 4 percentage points or  fewer at the 95 percent confidence level. Nonsampling error results from  issues such as inability to obtain information about all people in the  sample, or the inability or unwillingness of respondents to provide correct  information in the self-reporting process. We assessed the reliability of  CPS data by reviewing related technical documentation from the BLS  website on the concepts and methodology of the CPS, and obtaining BLS  feedback on our analysis. We conducted manual data testing for obvious  errors and compared selected underlying data to CPS annual reports. We  found the data were sufficiently reliable for the purposes of comparing  characteristics of the federal workforce to those of the U.S. civilian labor  force.", "Key trends in the workplace. To assess key trends in the workplace, we  reviewed our prior work on human capital management and trends in  government and the workforce. We also reviewed OPM reports on  human capital trends and management, including the 2018 Work-Life  Survey Governmentwide Report, 2018 Federal Workforce Priorities  Report, and 2016 Federal Employee Benefits Survey Results. We  interviewed OPM officials knowledgeable on these topics to better  understand the methodology used to obtain report findings, and to  understand previous and current efforts to assess federal human capital  policies. We also reviewed selected reports from think tanks, public  opinion organizations, and consulting firms on workplace trends. For  reports used in our analysis, we corresponded with knowledgeable staff  to better understand the methodologies used to obtain findings in the  report and we assessed the methodologies against our own standards.", "Service contracts. To describe the size of service contract obligations in  fiscal year 2017, we reviewed data from the Federal Procurement Data  System \u2013 Next Generation. We found the data sufficiently reliable for this  purpose based on our review of related documentation."], "subsections": []}, {"section_title": "Objective 2", "paragraphs": ["To identify key areas to help agencies manage the workforce, we  analyzed employee responses to questions from OPM\u2019s 2017 Federal  Employee Viewpoint Survey (FEVS) and spoke with various groups. We  interviewed human capital experts, federal employee and management  groups, and held moderated group interviews with agency Chief Human  Capital Officers (CHCO).", "Federal Employee Viewpoint Survey. To obtain information on federal  employee attitudes toward work and the workplace, we analyzed  employee responses to questions from OPM\u2019s 2017 FEVS, the most  recent data available at the time of our analysis. The FEVS provides a  snapshot of employees\u2019 perceptions about how effectively agencies  manage their workforce. The FEVS includes a core set of 84 questions.", "Agencies have the option of adding questions to the surveys sent to their  employees. The 84 questions address the following areas: (1) work  experience, (2) work unit, (3) agency, (4) supervisor, (5) leadership, (6)  satisfaction, (7) work-life, and (8) demographics. OPM has administered  the FEVS annually since 2010.", "The FEVS is based on a sample of full- and part-time, permanent,  nonseasonal employees of departments and large, small, and  independent agencies. The total sample size for the 2017 FEVS was  1,139,882 employees and the response rate was 45.5 percent. According  to OPM, the 2017 sample size was sufficient to ensure a 95 percent  chance that the true population value would be between within 1 percent  of any estimated percentage for the total federal workforce. Since each  sample could have provided different estimates, we express our  confidence in the precision of the FEVS statement estimates using the  margin of error at the 95 percent level of confidence. This margin of error  is the half-width of the 95 percent confidence interval for a FEVS  estimate. A 95 percent confidence interval is the interval that would  contain the actual population value for 95 percent of the samples that  could have been drawn.", "For our analysis, we selected FEVS questions related to work unit  recruitment, satisfaction with compensation and incentives, management,  employee involvement, and career opportunities. We categorized  responses into three categories\u2014positive, neutral, and negative, as  shown in table 5. In our findings, we included the percent of positive  responses to FEVS questions. Neutral responses ranged from 6.7 to 29.3  percent, as shown in table 5 below.", "To assess the reliability of the FEVS data, we reviewed FEVS technical  documentation. On the basis of these procedures, we believe the data  were sufficiently reliable for our purposes.", "Interviews with experts. To identify key strategies for managing a high- performing workforce, we conducted semistructured interviews with 22  experts in the areas of human capital, strategic foresight, and the future of  work. See appendix II for a list of experts interviewed. We selected these  experts using a nonprobability sample based on our literature review,  suggestions from OPM officials and our own human capital experts, and  relevance of their expertise to our objectives. We selected experts from a  range of organizations to ensure our analysis included a variety of  viewpoints. During these interviews, we asked about, among other things,  future trends that are likely to affect the federal workforce and innovative  practices to recruit and retain a high-performing workforce.", "We analyzed the interviews using qualitative analysis software to  describe employees\u2019 shifting attitudes toward work, and to categorize the  practices into key strategies for managing a high-performing workforce.  We corroborated these practices with federal human capital experts,  CHCOs, and federal employee and management groups, and reflected  their input in our report.", "Interviews with private organizations and foreign governments. To  identify examples of human capital practices for managing a high- performing workforce, we conducted semistructured interviews with  human capital managers from four private organizations (Noblis, Deloitte,  Accenture, and NetImpact Strategies) and officials from three foreign  governments (Australia, Canada, and the United Kingdom). We selected  the private organizations based on (1) the similarities of their talent pool  to that of the federal government, (2) accolades received for being a good  place to work, and (3) size of the organization and types of services  offered. We selected foreign governments based on (1) similarities to the  United States in terms of percent of the labor force in civil service, and (2)  the country having recently improved human capital policies or practices,  or having been recognized for having human capital practices that  positively affect recruitment and retention. In our report, we included  examples of human capital practices that managers and officials told us  were helpful to improving their organization, and that could feasibly be  implemented within the federal government.", "Interviews with federal employee and management group  representatives. We interviewed representatives from federal employee  and management groups to assess the feasibility of applying the  identified examples to the federal sector, including identifying any  opportunities or challenges. We selected employee groups that  represented the broadest population of blue- and white-collar federal  employees from all 24 Chief Financial Officers Act agencies: the  American Federation of Government Employees and the National  Treasury Employees Union. We selected the Federal Managers  Association due to its representation of federal managers, supervisors,  and executives.", "Group Interviews with CHCOs. We also held two virtual, moderated  group interviews with a nongeneralizable sample of CHCOs. We invited  23 CHCOs from the 24 Chief Financial Officers Act agencies; of those,  nine were available and participated (see table 6). To ensure the  questions were valid and understandable, we pretested the questions  with our CHCO and Deputy CHCO. During each group interview, one of  our own moderators used a standard set of discussion questions to ask  participants to (1) assess the feasibility of specific examples for improving  employee recruitment and retention, (2) explain challenges to  implementing these examples in specific agencies, and (3) identify other  agency examples. At the group interviews, at least two analysts took and  reconciled their notes to summarize the results. We reviewed our  summaries of the group interviews to identify key themes discussed.  When highlighting examples from CHCOs, we provided summaries of the  examples to the CHCOs for comment and incorporated technical edits,  where appropriate. Because of the dynamics inherent in a group interview  setting, we cannot be sure whether the participating CHCOs discussed  the same information in the group format with other CHCOs present that  they might have discussed in individual interviews without other CHCOs  present.", "We conducted this performance audit from April 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Experts We Interviewed", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Shannon Finnegan, Assistant  Director; Shelby Kain, Analyst-in-Charge; Justine Augeri; Jehan Chase;  Arpita Chattopadhyay; Ann Czapiewski; Robert Gebhart; John Hussey;  Krista Loose; Meredith Moles; Rachel Stoiko; Jessica Walker, and Edith  Yuh made major contributions to this report. James Ashley, Chelsa  Gurkin, Elizabeth Hennemuth, and Walter Vance also contributed to the  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Best Practices and Leading Practices in Human Capital Management.  https://www.gao.gov/key_issues/leading_practices_in_human_capital_ma nagement/issue_summary.", "Strategic Management of Human Capital\u2014High Risk Issue.  https://www.gao.gov/key_issues/strategic_human_capital_management/i ssue_summary.", "Federal Workforce: Opportunities Exist for OPM to Further Innovation in  Performance Management. GAO-19-35. Washington, D.C.: November  20, 2018.", "Federal Pay: Opportunities Exist to Enhance Strategic Use of Special  Payments. GAO-18-91. Washington, D.C.: December 7, 2017.", "Federal Hiring: OPM Needs to Improve Management and Oversight of  Hiring Authorities. GAO-16-521. Washington, D.C.: August 2, 2016.", "Federal Workforce: Additional Analysis and Sharing of Promising  Practices Could Improve Employee Engagement and Performance.  GAO-15-585. Washington, D.C.: July 14, 2015.", "Federal Workforce: Improved Supervision and Better Use of Probationary  Periods Are Needed to Address Substandard Employee Performance.  GAO-15-191. Washington, D.C.: February 6, 2015.", "Federal Workforce: OPM and Agencies Need to Strengthen Efforts to  Identify and Close Mission-Critical Skills Gaps. GAO-15-223. Washington,  D.C.: January 30, 2015.", "Human Capital: OPM Needs to Improve the Design, Management, and  Oversight of the Federal Classification System. GAO-14-677.  Washington, D.C.: July 31, 2014.", "Human Capital: Strategies to Help Agencies Meet Their Missions in an  Era of Highly Constrained Resources. GAO-14-168. Washington, D.C.:  May 7, 2014.", "Federal Workers: Results of Studies on Federal Pay Varied Due to  Differing Methodologies. GAO-12-564. Washington, D.C.: June 22, 2012."], "subsections": [{"section_title": "Organizational Change and Transformation", "paragraphs": ["Government Reorganization: Key Questions to Assess Agency Reform  Efforts. GAO-18-427. Washington, D.C.: June 13, 2018."], "subsections": []}]}], "fastfact": ["Technology, demographics, and attitudes toward work are evolving in the private and public sectors. But federal government employment policies were designed generations ago. As a result, the government may struggle to compete for talented workers\u2014which is one reason why federal human capital management is an issue on our High Risk list.", "We reported on talent management strategies, among other things. For example, agencies can attract and keep talented workers by", "Offering work/life balance such as flexible scheduling", "Recruiting graduating students earlier in the school year", "Making work meaningful and offering development opportunities"]}
{"id": "GAO-18-491", "url": "https://www.gao.gov/products/GAO-18-491", "title": "Grants Workforce: Actions Needed to Ensure Staff Have Skills to Administer and Oversee Federal Grants", "published_date": "2018-09-20T00:00:00", "released_date": "2018-09-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2017, the federal government awarded approximately $675 billion in grants to state and local governments. GAO was asked to review the federal grants workforce training. GAO reviewed (1) OPM's, OMB's, and the CFOC's actions to address the grants workforce's training needs; (2) the extent to which grants workforce training at selected agencies is consistent with leading practices; and (3) how selected agencies monitor and oversee training of their grants workforce. GAO selected HHS, USDA, and Education and several of their sub-agencies based on their grants spending and numbers of grants management specialists. GAO reviewed OPM and OMB memorandums and guidance, compared selected agency training practices against leading training practices, and interviewed officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Offices of Personnel Management (OPM) and Management and Budget (OMB) and the Chief Financial Officers Council (CFOC) have taken some steps to help ensure the federal grants workforce receives training. For example, OMB worked with the CFOC to issue five basic grants training modules and a \u201cCareer Roadmap\u201d for grants managers; however, they did not widely publicize the resources. Many of the officials with whom GAO spoke at selected sub-agencies at the Departments of Health and Human Services (HHS), Agriculture (USDA), and Education (Education) were unfamiliar with the Career Roadmap and made limited use of the training resources. Further, OMB and CFOC do not collect detailed user data or feedback, limiting their abilities to determine the usefulness of these resources.", "GAO found that sub-agencies at HHS, USDA, and Education vary in following leading training practices for planning, designing, implementing, and evaluating their grants training programs. Additionally, HHS, USDA, and Education could not readily identify grants management specialists\u2014the 1109 job series\u2014or employees in other job series working on grants without querying each sub-agency. These agencies cannot do so because their central offices do not have a reporting mechanism tracking their sub-agencies' grants workforce. Further, agency central offices do not evaluate sub-agency grants training efforts. Without sufficient monitoring and oversight, the agencies cannot have reasonable assurance that their sub-agencies are sufficiently training their grants workforce so they have the necessary knowledge, skills, and abilities to properly manage, administer, and monitor the billions of dollars that the federal government spends on grants annually."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations including that OMB, working with the CFOC, should (1) publicize the Career Roadmap and (2) collect data metrics and user feedback on its use. HHS, USDA, and Education should establish processes to centrally monitor and evaluate their grants training, including identifying the grants workforce and ensuring consistency with leading practices. HHS and USDA concurred, Education generally concurred, and OMB partially concurred with our recommendations. OPM had no comments on the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the federal government awarded approximately $675  billion in grants to state and local governments for a wide variety of  purposes, including rural development programs such as housing  assistance and business development; health and social services, such  as the Children\u2019s Health Insurance Program and mental health services;  and education, such as hiring and training teachers and increasing  student access to higher education. Federal grants play an important role  in achieving national objectives and have grown considerably in value  and complexity over the past three decades. Therefore, it is important  that the federal workforce that manages, administers, and monitors grants  has the necessary knowledge, skills, and abilities to perform these  functions effectively.", "The important role that training plays in the effective management of  grants can be seen, for example, in the fact that in December 2017, the  Council of the Inspectors General on Integrity and Efficiency identified  \u201cgrants oversight\u201d as one of six critical issues in the federal government.  The Council reported that grant subject matter experts \u201cnoted that the root  of many problems with grant awards was a lack of resources and training  on both sides of the grant process.\u201d", "You asked us to review the training provided for the grants workforce.  This report reviews (1) the actions the Office of Personnel Management  (OPM), the Office of Management and Budget (OMB), and the Chief  Financial Officers Council (CFOC) have taken to address the need for  federal grants management training; (2) the extent to which grants  workforce training at selected agencies is consistent with selected leading  training practices; and (3) how selected agencies monitor and oversee  training of their grants workforce. In addition, we provide information on  certification standards for the grants workforce, including a comparison to  the federal acquisition workforce, in appendix I.", "To address the first objective, we reviewed OPM and OMB  memorandums and government-wide grants training resources. We also  interviewed OPM and OMB staff responsible for strategic workforce  planning and financial management, respectively, to obtain information on  their roles and responsibilities for federal grants management training,  among other topics. In addition, we used data from OPM\u2019s Enterprise  Human Resource Integration (EHRI) system to report government-wide  data on the grants management specialist 1109 job series. The 1109 job  series is a classification for those federal employees whose job  responsibilities primarily involve management of grants. To determine the  reliability of the EHRI data, we reviewed EHRI documentation and  interviews from a previous GAO engagement completed in October 2016.  We found no significant changes to the EHRI data reporting process and  determined the EHRI data were sufficiently reliable for the purposes of  this review.", "We identified training resources developed by the agencies and  requested \u201cGrants Training 101\u201d and \u201cCareer Roadmap\u201d website metrics  from OMB on the total usage of these grants management resources.  \u201cGrants Training 101\u201d is an introductory online course designed by OMB  to provide a basic knowledge of grants and cooperative agreements and  the \u201cCareer Roadmap\u201d is a resource for workforce development and  career progression of the federal financial assistance management  workforce. OMB provided (1) user and course completion data for Grants  Training 101 between December 2015 and November 2017 and (2) the  number of users and user sessions collected for the Career Roadmap  Report website between September 2017 and January 2018.", "To select agencies for our review, we obtained and analyzed fiscal year  2016 spending data from USAspending.gov. We selected the  Departments of Health and Human Services (HHS), Agriculture (USDA),  and Education (Education) for review primarily because the total  combined federal grant awards for these three agencies was 79 percent  of all federal grant awards reported in fiscal year 2016. We also  considered the number of 1109 job series employees in our agency  selection. We selected HHS and USDA because they had the highest  number of 1109 job series employees and selected Education because,  while it was one of the largest grant-making agencies, it had no  employees classified in the Grants Management Specialist 1109 job  series.", "We also selected a total of 11 sub-agencies from HHS, USDA, and  Education for our review primarily based on the size of their grant awards  and the number of grants workforce employees in the 1109 and non-1109  job series.", "For HHS, we selected the Centers for Medicare and Medicaid  Services, Administration for Children and Families, National  Institutes of Health, and Health Resources and Services  Administration. When combined, these four sub-agencies  represented 97 percent of the total HHS fiscal year 2016 grant  award amounts. The combined grants workforce for selected sub- agencies also represented 76 percent of the total 1109 job series  and 61 percent of the total HHS grants workforce employees.", "For USDA, we selected the National Institute of Food and  Agriculture, Forest Service, Rural Development, and Food and  Nutrition Services. Collectively, these four sub-agencies  represented 97 percent of the total USDA fiscal year 2016 grant  award amounts. The combined grants workforce for selected  USDA sub-agencies also represented 77 percent of the total 1109  job series and 95 percent of the total USDA grants workforce  employees.", "For Education, we selected the Office of Elementary and  Secondary Education, Office of Special Education and  Rehabilitative Services, and Office of Postsecondary Education.  Together these three sub-agencies represented 93 percent of the  total Education fiscal year 2016 grant award amounts. The  combined grant workforce for selected sub-agencies represented  74 percent of the total Education grants workforce employees.", "To better understand federal grants workforce training at the selected  agencies and sub-agencies, we asked HHS, USDA, and Education  officials for internal data on all sub-agency grant awards and the number  of 1109 and non-1109 job series employees working on grants at each  sub-agency. We provided each of the selected agencies and sub- agencies with the specific definition for identifying the grants workforce  that was used in our 2013 report on grants management training.", "Our second and third objectives compared agencies\u2019 training practices  described in agency interviews and documents against selected leading  practices we identified in our prior work, including our online Best  Practices and Leading Practices in Human Capital Management, our  2004 Human Capital Guide on training, and Standards for Internal Control  in the Federal Government, for monitoring, evaluation, and oversight.  The Human Capital Guide is organized into four components of the  training and development process\u2014planning, design/development,  implementation, and evaluation. We selected the practice from each  component that is most relevant to grants workforce training to compare  against current agency training practices. In developing the Human  Capital Guide, we noted that users of this guide should keep in mind that  the guide can and should be modified to fit the unique circumstances and  conditions relevant to each agency.", "We conducted this performance audit from February 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Training Is Important for Effective Grants Management", "paragraphs": ["In fiscal year 2017, the federal government awarded approximately $675  billion in grants to state and local governments. As shown in figure 1,  approximately 80 percent of the grant dollars awarded by the federal  government in fiscal year 2017 came from the three agencies we  reviewed for this report\u2014HHS, USDA, and Education.", "A range of skills are needed to manage the various tasks associated with  the grants lifecycle. For example, during the award phase, grant staff at  federal grant-making agencies are to send all grantees a grant award  notification that provides details about the grant, including the amount of  the award; and the general terms and conditions of the grant, including  statutory and regulatory requirements. Figure 2 below illustrates the four  distinct phases of the grants lifecycle.", "Given the billions of dollars in federal grants funding that are awarded  every year, effective training could help provide grants managers with the  skills and competencies they need to better manage and oversee those  dollars. As one example of the importance of rigorous grants  management and training, in April 2017 we found that Education grants  staff inconsistently documented key required monitoring activities and, as  a result, about $21 million in discretionary grants lacked the correct  documentation of grantee performance. We recommended that  Education establish and implement detailed written supervisory review  procedures for official grant files to provide reasonable assurance that  grant staff perform and document key monitoring activities. Education officials agreed with the recommendation and said they would develop a  department-wide standard operating procedure (SOP) that will, among  other things, provide standards for timeliness of documenting key  monitoring and administrative activities and require the periodic review of  grant files. Officials expect to complete the SOP by September 30, 2018.", "In 2011, OMB established the Council on Financial Assistance Reform  (COFAR), an interagency group of executive branch officials with the  stated aim of creating a more streamlined and accountable structure to  coordinate financial assistance, including grants. In 2012 and again in  fiscal years 2016 and 2017, COFAR identified the need to develop a  qualified and professional workforce as one of six priorities to guide its  work on grants management reform. According to OMB staff, they  disbanded COFAR on June 15, 2017 as part of OMB\u2019s efforts to reduce  grants-related requirements once COFAR had recommended policies and  actions to effectively deliver financial assistance. COFAR\u2019s  recommendations resulted in the Uniform Administrative Requirements,  Cost Principles, and Audit Requirements for Federal Awards, which is  intended to improve performance, transparency, and oversight for federal  awards.", "Moving forward, the responsibility of coordinating financial assistance  priorities was given to the Chief Financial Officers Council (CFOC), a  group of 24 agency chief and deputy chief financial officers that work  together to improve financial management in the U.S. government.  According to OMB staff, the controller of OMB\u2019s Office of Federal  Financial Management is the chair of the CFOC. In addition, OPM is  responsible for providing leadership and guidance over federal agency  training to ensure the effective promotion and coordination of federal  agency training programs and operations. Further, the President\u2019s  Management Agenda established \u201cresults-oriented accountability for  grants\u201d as a cross-agency priority goal to \u201cmaximize the value of grant  funding by applying a risk-based, data-driven framework that balances  compliance requirements with demonstrating successful results for the  American taxpayer.\u201d"], "subsections": []}, {"section_title": "Certification Standards for the Grants Workforce", "paragraphs": ["In 2013, we examined grant workforce and training issues and found  there were no specific government-wide training requirements for the  federal grants workforce. As of June 2018, this continued to be the  case. By contrast, there are government-wide training requirements for  the acquisitions workforce intended to help ensure its quality and  effectiveness. For example, OMB\u2019s Office of Federal Procurement Policy  (OFPP) provides government-wide guidance on managing the  acquisitions workforce. The Federal Acquisition Institute, which  coordinates with the OFPP, promotes the development of the civilian  acquisitions workforce. Further, OFPP has developed Federal  Acquisition Certification requirements for acquisition professionals serving  as contracting staff, contracting officer\u2019s representatives, and  program/project managers. Notably, in fiscal year 2017, the federal  government spent approximately $166 billion more on grants to state and  local governments than it did on federal acquisitions. OMB staff explained that the acquisitions workforce faces more requirements  because contracts have more uniform requirements and are specified in  law. They stated that grants, on the other hand, are diverse and are  established by individual statutes with varying conditions.", "Our work in the acquisitions area identifies the importance of providing  reasonable assurance of an appropriately trained staff through  certification. Certification programs are designed to ensure that  individuals attain the knowledge and skills required to perform in a  particular occupation or role by establishing consistent standards. For  example, for the acquisition workforce, OFPP requires a minimum set of  career-specific courses, along with education and experience  requirements, to obtain certification. To ensure acquisition professionals  remain current on acquisition policies and practices, OFPP also requires  the acquisition workforce to meet continuing learning requirements. See  appendix I for a comparison of training for the federal acquisition  workforce versus the federal grants workforce.", "Education, HHS, and USDA delegate the decision to their various sub- agencies of whether grants employees should obtain professional grants  certifications. Of the 11 sub-agencies we reviewed, 3 at HHS\u2014the  Centers for Medicare and Medicaid Services Discretionary Grants Office,  the Health Resources and Services Administration, and the National  Institutes of Health\u2014and 2 at Education\u2014the Office of Special Education  and Rehabilitative Services and the Office of Post-Secondary  Education\u2014required certification of some of their grants employees.  Officials at the remaining 6 sub-agencies offered certification to their  grants employees on an optional basis. USDA sub-agency officials said  they often recommend the certificate program to their grants employees,  and Education\u2019s sub-agency officials at the Office of Elementary and  Secondary Education said they nominate staff to take the grants  certificate program whom they believe would benefit the office most by  receiving the training.", "While COFAR officials explored the possibility of establishing certification  standards for the grants workforce by September 2015, OMB staff said  they determined that certification was not the most appropriate course of  action for the grants workforce for several reasons including risk  management and internal control concerns and the need for a variety of  skills for the grants workforce. As previously mentioned, OMB disbanded  COFAR in June 2017, and CFOC took over COFAR\u2019s responsibilities.  When we spoke with OMB staff in the fall of 2017, they said their focus  had shifted from establishing certification standards for the grants  workforce to providing guidance on needed competencies and enabling  the grants workforce to obtain them."], "subsections": []}]}, {"section_title": "OPM, OMB, and CFOC Have Taken Some Steps to Help Provide Grants Training but Have Opportunities for Further Improvements", "paragraphs": [], "subsections": [{"section_title": "OPM, OMB, and CFOC Developed a Grants Competency Model Among Other Steps", "paragraphs": ["OPM, in consultation with OMB and the CFOC, took several steps to  ensure the federal grants management workforce has access to grants  management competencies and training. For example, OPM identified  grants management competencies that could be used in agency efforts  for workforce planning, training and development, performance  management, recruitment, and selection. After establishing grants  management competencies, OPM officials told us they established the  1109 job series partly because OMB and CFOC staff requested a new  grants management job series in response to the increased grant awards  and staffing needs created because of the 2009 American Recovery  Act. Figure 3 illustrates the timeline of the main steps taken by OPM,  OMB, and CFOC over the last decade.", "In 2008, OPM initiated a government-wide study to identify critical  competencies for grants management work. After the government-wide  study was completed, OPM issued a memorandum to all federal agencies  announcing a grants management competency model that included  general competencies such as accountability, writing, and computer  skills. OPM also included technical competencies such as grants  management, financial analysis, and compliance. In our prior work, we  found that grants management competency models can be used to  establish an overall framework to guide agencies\u2019 training efforts.", "Before OPM established the 1109 job series in 2010, no other agency- specific job classification series existed for the many federal employees  responsible for carrying out managerial and administrative tasks related  to grants, including ensuring compliance with OMB and agency policies  and procedures. In the absence of a specific job classification, we  reported in 2013 that officials at selected agencies told us they had  classified these employees under a variety of other job series that did not  focus on grants, such as general, administrative, and subject-matter job  titles.", "According to OPM officials, the agency\u2019s development of the \u201cPosition  Classification Flysheet for the Grants Management Series (1109)\u201d  leveraged the competencies and tasks from the Competency Model for  Grants Management and input from federal agencies\u2019 subject matter  experts on grants management work.The Flysheet includes a job series  definition, a basic job title, general occupational information, and a link to  the position classification standard. The 1109 job series manage,  supervise, lead, or perform administrative business, policy, and analytical  work involving the: (1) management, award, or obligation of funds for  grants; (2) competitive or non-competitive evaluation of grants proposals;  and/or (3) administration or termination, and/or closeout of grants and/or  grants assistance and agreement awards. The work requires knowledge  of laws, regulations, rules, policies, procedures, and financial methods to  help ensure accountability of the grant funds.", "As of fiscal year 2016, grant-making agencies reported 2,035 federal  employees in the 1109 job series, and HHS reported 38 percent of those  employees (see figure 4). We used fiscal year 2016 data to determine the  agency-wide numbers of 1109 job series employees because this was the  most recent set of full year data available at the time of our analysis.", "The federal grants workforce also includes a wide range of employees in  other non-1109 job series positions. OPM does not collect data on grants  workforce employees in these other job series positions as they span a  large number of different job series that can vary by agency. Non-1109  employees working on grants typically possess expert knowledge in the  specific area necessary to meet a grant\u2019s goals (e.g., announcing the  terms and conditions of a grant, recommending potential grantees, and  monitoring grantees\u2019 progress in achieving the grants goals). Reflecting  the wide variety of federal programs that grants support, these individuals  typically possess expertise in a specialized program or subject.", "A number of factors affect usage of the 1109 job series within agencies.  According to OMB staff, various agency employees have told them that  many agency employees would rather be classified as a subject matter  specialist, such as a scientist, rather than a grants management specialist  whose primary tasks are grants management under the 1109 job series.  In addition, OMB staff said that some agencies preferred recruiting staff  using a more general non-1109 job series classification. OMB staff also  said that some agencies indicated their grants workforce employees do  not want to be classified as grants specialists because the other job  series are more general and are a better fit in terms of the needed subject  matter expert skills and duties.", "We found that one of our selected agencies, Education, does not use the  1109 job series at all because, according to Education sub-agency  officials, they require grants employees to have specialized grant program  content knowledge in the field of their grant program focus, such as  rehabilitation, special education, behavior science, and other areas (e.g.,  standards and assessments, state accountability systems). The sub- agency officials said that 1109 grants management specialists would not  have the specific content knowledge and experience associated with the  specific educational grant programs that Education requires. We also  found that over 61 percent of HHS grants workforce employees and over  90 percent of the USDA grants workforce was not part of the 1109 job  series.", "OPM officials told us that, in April 2017, they started a government-wide  Grants Management Post Classification Implementation Study that may  change the Grants Management Classification Flysheet and revalidate  the Competency Model for Grants Management Work. OPM officials  developed the study after meeting with grant-making agency HHS and  will include a survey of the grants management workforce government- wide. OPM officials also stated they are in the final stages of developing  and clearing the government-wide survey and anticipate issuing it in the  fall of 2018. They said the study will take several additional months to  complete because the team must review the results of the government- wide survey and update competencies, job classifications, and  compliance policy/requirements."], "subsections": []}, {"section_title": "OMB and CFOC Have Provided Some Grants Training and Guidance, but Use Has Been Limited Among Selected Agencies", "paragraphs": ["OMB\u2019s role with the grants management workforce includes issuing  government-wide guidance and providing a framework that enables  agencies to take actions to align their grants training with OMB\u2019s internal  control standards. In this role, OMB has taken some actions to provide  grants guidance for federal agencies that include the Career Roadmap  Report, Career Roadmap Builder, and Grants Training 101. However, we  found that almost all of the officials we interviewed at the 11 selected sub- agencies were not familiar with the Career Roadmap Report and Career  Roadmap Builder. Additionally, almost all of them did not mention using  Grants Training 101 as part of their grants workforce training."], "subsections": [{"section_title": "Financial Assistance Career Roadmap", "paragraphs": ["OMB, in collaboration with the CFOC, COFAR, and federal awarding  agencies, developed the Financial Assistance Career Roadmap Report in  June 2017. OMB staff said that the Career Roadmap Report is one  vehicle used to address grants training for the federal agency grants  workforce. It is a tool for federal agencies to identify and document the  competencies needed for successful job performance of federal financial  assistance management professionals. According to the CFOC, the  competencies and related elements outlined in the Career Roadmap  Report are to be used to identify and prioritize training needs for the  federal financial assistance management workforce. This is an optional  tool for the federal grants workforce and may be customized to reflect an  organization\u2019s unique requirements and specifications. That workforce  includes the grants management 1109 job series employees, as well as  employees performing grants responsibilities as program, finance, and  audit experts who are classified under other job series.", "During the initial development of the Career Roadmap Report, a team  consisting of OMB staff and industrial and organizational psychologists  collected financial assistance research and documentation from OMB,  federal awarding agencies, and OPM. The team analyzed this information  to identify foundational competencies and create a draft competency  model which OMB reviewed. The team also facilitated two workshops  with specialists on financial assistance management to gather feedback  on the Career Roadmap Report. Figure 5 below shows the 14 different  competencies from the Career Roadmap Report that are divided into two  types of competencies: functional and leadership.", "After the report\u2019s release, CFOC developed and released an interactive  version called the Career Roadmap Builder available to the public  online. This version allows users to build their own customized financial  assistance management Career Roadmap based on their specific mission  and needs. To obtain a custom Career Roadmap Report, users complete  several steps in the Career Roadmap Builder involving selection of one or more of nine functional competencies; one or more of three job levels (foundational, practitioner, or one of three proficiency levels for each functional competency  (basic, intermediate, or advanced); an option to include a leadership competency; and one of three different leadership levels (entry, mid, or senior) and  a leadership proficiency rating (basic, intermediate, or advanced).", "The user then receives a customized report with relevant competencies,  career levels, a sample of the associated developmental experiences and  recommended training courses.", "Department-level officials we spoke with at HHS, USDA, and Education  were familiar with the Career Roadmap Report. However, almost all of the  officials we interviewed at the 11 selected sub-agencies were not aware  the Career Roadmap Report was available to them.", "All but one of the officials we spoke with at four HHS sub-agencies  said they were unaware of the Career Roadmap Report and grants  management competencies.", "While USDA\u2019s agency-wide Federal Financial Assistance Committee  received a copy of the Career Roadmap Report in August 2017 and  discussed it at their monthly meetings, almost all of the officials at the  four USDA sub-agencies we reviewed said they had not received it.  However, three sub-agency officials were familiar with the report  because they had been involved with agency-wide efforts to provide  grants management competency support and information. All other  USDA sub-agency officials with whom we spoke were unfamiliar with  the Career Roadmap Report or the grants workforce competencies.", "Almost all of the officials we interviewed at three Education sub- agencies were unaware of the Career Roadmap Report. However,  one official from one sub-agency was familiar with the Career  Roadmap Report as he had been part of the Career Roadmap Report  development process.", "OMB staff stated they publicized the report by sending a \u201cController Alert\u201d  on July 3, 2017 to agency chief financial officers and to members of the  Financial Assistance Committee for E-Government notifying them of its  availability and OMB\u2019s future plans to map it to existing training  resources, place it on OPM\u2019s website, and develop an online interactive  tool including position competencies. However, we found it difficult to  locate the \u201cController Alert\u201d on the COFC website as it is not located on  the same tab where the Career Roadmap Report is published but instead  in a news section that users may not know to search. Further, OMB\u2019s  \u201cController Alert\u201d states that it \u201cdoes not constitute official guidance or  prescribe specific tasks for agencies beyond consideration of appropriate  steps to address the issue.\u201d OMB did not issue any official government- wide memorandums to explain that it supported the Career Roadmap  Report, or that the report included updated competencies for both the  1109 and non-1109 job series workforce.", "Our internal control standards state that management should internally  communicate the necessary quality information to achieve the entity\u2019s  objectives. However, if all levels of an agency are not aware of  government grants workforce competencies and guidance, the agency  may not be able to ensure that grants workforce employees have the  training resources needed to develop and maintain skills to achieve the  objectives of grant awards."], "subsections": []}, {"section_title": "OMB Grants Training 101", "paragraphs": ["OMB also worked with federal grant-making agencies, COFAR, and the  CFOC to establish Grants Training 101, a set of five online training  modules designed to provide federal officials a basic knowledge of grants  and cooperative agreements. According to OMB staff, the Grants Training 101 webpage states that the training is not designed to provide detailed  administrative, accounting, and audit requirements specific to statutory  provisions, agency regulation, and guidance because agencies need to  have flexibility in designing grants training programs to meet those grant- specific statutory requirements. OMB staff said they designed the training  modules in response to a request from the federal grants community for a  government-wide grants management training resource to ensure some  level of consistent training among grant-awarding agencies. In addition,  OMB staff said it was optional for agencies to incorporate Grants Training  101 into established grants training and that each agency is responsible  for the means by which they conduct grants management training.", "Only one of the agencies we reviewed had plans to include OMB\u2019s Grants  Training 101 as part of its grant-training program. HHS officials said they  are developing an internal online grants 101 course and plan to  incorporate parts of OMB\u2019s Grants Training 101. However, most agency  and sub-agency officials we spoke with did not use OMB\u2019s Grants  Management 101 as part of their grants workforce training. OMB staff  said that Grants Management 101 modules cover the grant lifecycle and  the requirements of the Uniform Guidance, and are intended to  complement other trainings that agencies provide to their grants  managers. OMB staff said that agencies make the decision whether to  use the Grants Training 101 modules and can integrate parts of the  training modules into their agency- specific training requirements. For  example, officials at one of the agencies\u2014Education\u2014stated they cover  many of OMB\u2019s Grants Training 101 learning objectives through their  cross-cutting grant training program courses as well as sub-agency  specific training. Furthermore, OMB staff said that each agency would  have to internally monitor grants employees\u2019 completion of the grants  training modules."], "subsections": []}]}, {"section_title": "OMB and CFOC Do Not Collect Detailed User Data or Feedback to Determine Usefulness of Grants Training and Guidance", "paragraphs": ["OMB staff told us that OPM initially had the responsibility of hosting the  first two modules of Grants Training 101 on the OPM website while the  remaining three modules were under development. After these remaining  modules were completed, all five of the modules were moved to the  CFOC webpage. In addition, OPM was responsible for collecting the  Grants Training 101 user and completion data. OMB provided us the  Grants Training 101 data which totaled 1,277 users registered between  December 2015 and November 2017; however, we found that the data  were incomplete due to missing data fields.", "OMB staff stated that the Grants 101 training website was moved to the  CFOC webpage so the general public can access it. The CFOC will not  collect data on the access dates, the agency names, or the number of  Grants Training 101 users; however, the CFOC will collect data on the  number of visitors that go to the Grants Training 101 website. OMB staff  also said that agencies can decide to track Grants Training 101 users  internally because OMB and the CFOC will not collect specific data on  users. In addition, OMB staff said OMB and CFOC have not collected any  formal Grants Training 101 feedback from users and have no plans to do  so. OMB reported that a total of 175 visitors went on the Career Roadmap  Report website between September 2017 and January 2018.", "Our Standards for Internal Control in the Federal Government advise  management to process data into quality information that is appropriate,  current, complete, accurate, accessible, and provided on a timely basis.  It further states that management should also evaluate the processed  information and revise when necessary so that it can be used to make  informed decisions. In addition, our 2004 Human Capital Guide states  that it is increasingly important for agencies to be able to evaluate their  training and development programs to demonstrate how these efforts  help develop employees and improve the agencies\u2019 performance. As  part of this approach, the Human Capital Guide also states that assessing  training and development efforts should consider feedback from  employees.", "OMB, CFOC, and COFAR devoted time and multiple resources to  developing the Career Roadmap Report to identify and document the  competencies needed for successful job performance of federal financial  assistance management professionals. Obtaining more detailed user  information and regular feedback from federal agencies on the usefulness  of the Career Roadmap Report and the online Career Roadmap Builder  could help OMB and CFOC to evaluate the effectiveness of these grant  training tools. In addition, obtaining user information and feedback from  federal agencies on the usefulness of Grants Training 101 can also help  OMB and CFOC evaluate its effectiveness."], "subsections": []}]}, {"section_title": "HHS, USDA, and Education Vary in Following Selected Leading Training Practices", "paragraphs": ["In 2004, we issued a framework of principles and key questions that  federal agencies can use to ensure that their training and development  investments are targeted strategically and are not wasted on efforts that  are irrelevant, duplicative, or ineffective. Our framework identifies four  components of the training and development process: (1) Planning, (2)  Design and Development, (3) Implementation, and (4) Evaluation. Within  each component, the guide identifies leading practices and questions for  agencies to consider when assessing each of these four components. We  compared current grants training practices at the selected agencies and  sub-agencies with selected leading training practices from the guide. We  found variation among sub-agencies in following those selected training  practices.", "Planning: skills and competencies assessment. In our guide, we  stated that effective workforce planning and training begins with a skills  and competency assessment. A leading practice under this component is  that agencies use an organization-wide knowledge and skills inventory  and industry benchmarks to help identify performance problems in their  workforces. We stated that workforce planning should entail the  collection of valid and reliable data on such indicators as distribution of  employees\u2019 skills and competencies.", "Officials we interviewed at all the selected sub-agencies explained that  grants training needs are primarily identified by grants management  supervisors or self-identified by grants workforce employees. The training  needs are identified on an ad hoc basis during (1) manager evaluations or  observations of employee performance, (2) annual and semiannual  performance assessments, and (3) employee career individual  development plans.", "When it came to implementing a more rigorous process involving a  knowledge and skills inventory or the collection of valid and reliable data,  we found varied use among the 3 agencies and 11 sub-agencies with  only some employing such a method.", "The four HHS sub-agencies we reviewed assess new grants  workforce employees\u2019 knowledge, skills, and abilities by identifying  skills gaps when onboarding new grants workforce employees,  through supervisor observation of employee performance, or  employee feedback.", "In fiscal year 2015, USDA\u2019s Food and Nutrition Service (FNS)  sub-agency started holding monthly meetings with its Regional  Grants Management Division Directors to identify national training  needs for its grants management staff. In fiscal year 2017, FNS  also conducted a nationwide qualitative survey of its grants  employees to identify training gaps and needs. The remaining  three sub-agencies we reviewed informally identify skills gaps and  training needs through ongoing discussions between supervisors  and grants employees and during annual performance  evaluations.", "Officials from Education\u2019s central Learning and Development  office stated they issue a department-wide competency  assessment and training needs assessment to the various  department sub-agencies annually or bi-annually. Officials from  Education\u2019s Office of Elementary and Secondary Education sub- agency told us they also conduct their own grants workforce  learning needs assessment examining grants tasks, content  knowledge, and general skills. Officials at the other two Education  sub-agencies told us they assess skills gaps and training needs  through ongoing discussions between supervisors and grants  employees, supervisor observation of employee performance, and  also during annual performance evaluations.", "Without a formal knowledge and skills inventory or collection of valid and  reliable data on the grants workforce\u2019s skills and competencies, some  sub-agencies may be limited in identifying performance problems,  competency gaps, and training needs in their grants workforce.", "Design and development: using a mix of approaches, sources, and  delivery. Design and Development involves identifying specific training  and development initiatives that the agency will use, along with other  strategies, to improve individual and agency performance. One of the  leading practices under this component is choosing the most appropriate  mix of centralized and decentralized management of training programs;  internal and external training sources; and training delivery mechanisms  (e.g., classroom, computer-based, on the job, etc.). All three agencies  provide the majority of their grants training at the sub-agency level. In  most cases, the sub-agencies use a mix of training sources and delivery  methods in developing and implementing their grants training programs,  including identifying training needs and training content, as detailed in  appendix III.", "HHS and USDA primarily use decentralized approaches to grants training  while Education uses a hybrid approach of centralized and decentralized  grants training.", "Although there is no overarching grants training program across  HHS, the department\u2019s central offices provide topic-specific  training to Chief Grants Management Officers (CGMO) within  each sub-agency on an ad hoc basis as new grant policies or  requirements are developed. CGMOs then decide how to  disseminate this information within their respective sub-agencies  (e.g., through webinars, teleconferences, or ad hoc trainings). An  HHS council comprised of CGMOs also meets on a quarterly or  biannual basis to discuss new grants policy and requirements.  Further, HHS\u2019s central grants offices are developing a  foundational \u201cGrants 101\u201d course to help standardize a baseline of  grants knowledge across all of HHS\u2019s sub-agencies, which they  expect to complete by November 2018. Currently, the sub- agencies provide the majority of grants-specific training, which  focuses on grants topics and mission requirements relevant to  their specific areas.", "USDA\u2019s Office of Chief Financial Officer (OCFO) provides some  required training courses across the agency such as suspension  and debarment and federal appropriations law training; however,  these trainings are not specific to just the grants workforce  employees. The sub-agencies provide all grants-specific training.", "Of the three selected agencies, Education provides the most  central office training. For example, Education\u2019s OCFO provides  agency-wide training on discretionary and formula grants financial  and budgetary courses; Learning and Development provides  introductory grant courses; and Risk Management Services  provides risk-based grants training covering topics including cost  analysis, budgetary review, monitoring grants, and uniform  guidance. Additionally, Education\u2019s sub-agencies provide mission-  and program-specific grants training to augment the centrally  provided trainings.", "Centralized and decentralized training approaches may present different  advantages for agencies and sub-agencies. On the one hand, efficiencies  may be achieved by centralizing the design and delivery of some grants  training that has widespread applicability throughout the agency.  Additionally, if each sub-agency is responsible for implementing its own  grants training program, the potential exists for inconsistent grants  workforce training across the agency. On the other hand, each sub- agency is able to tailor the training to its own needs when it manages and  provides the training itself. In making this decision, it is important for  agencies to carefully analyze and consider trade-offs.", "Implementation: establishing agency-level accountability.  Implementation involves ensuring effective and efficient delivery of  training and development opportunities in an environment that supports  learning. One of the leading training practices under this component is an  agency organization that is held accountable, along with the line  executives, for the maximum performance of the workforce. According to  our Human Capital Guide, there are different ways of ensuring  accountability, including establishing clear lines of authority in agency  policies, issuing agency-wide guidance to ensure consistency, and  establishing a central oversight office, among others.", "We found variation among the three selected agencies in following this  leading training practice with HHS and Education having some agency  level of accountability but USDA having less.", "HHS\u2019 central Office of Grants Policy, Oversight, and Evaluation  assigns desk officers to work with sub-agency CGMOs in helping  them understand available training resources and needs. HHS  also has an Executive Committee for Grants Administration Policy  Council that meets quarterly to discuss regulations, policies, and  grants administrative requirements. This committee is made up of  CGMOs from each HHS sub-agency. HHS describes the roles of  officials involved in overseeing grants management in an agency- wide grants policy manual.", "USDA has not defined roles for central offices to hold them  accountable for grants training. While its central OCFO provides  some guidance on federal financial assistance policies and grants  terms and conditions, and ensures department-wide training  requirements are met, USDA has no agency-wide grants training  guidance, no agency-wide grants manual, or a central office that  oversees grants training at the component level.", "Education officials stated that the agency has two agency-wide  grants policy manuals and some Education offices have roles in  overseeing grants training. For example, the central Learning and  Development office provides some oversight of employee  development, training programs, and providers. Further,  Education officials stated that Risk Management Services  oversees Education\u2019s licensure training program across the sub- agencies, and OCFO provides agency-wide training on financial  management of grants.", "Holding a central office accountable for grants training can provide  agencies with reasonable assurance that training is being delivered  efficiently and effectively and that grant staff have sufficient  developmental opportunities. In this way, agencies can better ensure the  maximum performance of the grants workforce.", "Evaluation: using data to assess training results. Evaluation involves  assessing the extent to which training and development efforts contribute  to improved performance and results. A selected leading training practice  under this component is the use of performance data (both qualitative and  quantitative measures) to assess the results achieved through training  and development efforts.", "The three agencies we reviewed primarily conduct evaluation at the sub- agency level. The sub-agencies vary as to how they carry out their  evaluations and few use any quantitative performance measures to  determine if training was successful.", "HHS officials stated the central offices do not measure the  effectiveness of training, nor is there centralized information  sharing on how well training works. Officials at the HHS sub- agencies we reviewed told us they primarily use informal feedback  such as ongoing conversations between employees and  supervisors after training completion and supervisor observations  of employee performance to determine if grants training is  successful. Officials at HHS\u2019 Health Resources and Services  Administration also said they receive data regarding employee  scores on required grants training courses. Some HHS sub- agencies use an external vendor for some grants training and  employees complete a survey at the end of each of these courses,  but HHS officials do not see those results. HHS officials rely on  employee feedback after training completion to determine if  external vendor training is effective.", "Officials at the USDA sub-agencies we reviewed told us they  primarily use informal feedback through supervisory review of  employee performance and employee individual development  training plans; internal local level reviews and audits of grant  processes; and some course completion surveys.", "Officials at Education\u2019s central Learning and Development office  told us they conduct electronic course evaluation surveys. Officials  at the Education sub-agencies we reviewed told us they primarily  use informal feedback from employees, supervisor observation of  an employee\u2019s progress after training, and some course  evaluations.", "While informal, qualitative feedback from employees taking grants training  is useful, it is not quantifiable or measurable. Using a balanced approach  that reflects feedback from employees as well as organizational results is  more effective in terms of evaluating the usefulness of grants training  efforts.", "Many of the issues discussed above regarding following leading training  practices stem from limited oversight of the sub-agencies, which we  describe in the next section."], "subsections": [{"section_title": "Selected Agencies Provide Limited Monitoring and Oversight of Sub- agencies\u2019 Grants Training Efforts Selected Agencies Cannot Readily Identify All Employees Working on Grants and Provide Limited Oversight of Sub- Agencies\u2019 Grants Training Efforts", "paragraphs": ["As previously mentioned, the federal grants workforce consists of  employees in the OPM Grants Management Specialist 1109 job series as  well as employees in various other OPM job series (referred to as non- 1109s in this report). HHS and USDA both employ 1109s as well as non- 1109s in their respective grants workforces while Education only employs  non-1109s. According to HHS, USDA, and Education officials, each sub- agency is responsible for identifying its grants workforce employees and  ensuring they receive needed grants training. However, the central offices  do not have a reporting mechanism tracking sub-agencies\u2019 grants  workforce. After querying each sub-agency, at our request, officials from  the three agencies provided us with data on 1109 and non-1109 grants  personnel. As figure 6 shows, the majority of grants personnel at the  three agencies we reviewed are non-1109 employees.", "Standards for Internal Control in the Federal Government state that,  \u201cManagement should demonstrate commitment to recruit, develop, and  retain competent individuals.\u201d Furthermore, internal controls state that  \u201cmanagement evaluates competence of personnel across the entity in  relation to established policies.\u201d Since the agencies we reviewed cannot  readily identify their total grants workforce, they have limited ability to  evaluate the competence of grants personnel across the entity to ensure  they are receiving needed training.", "Since the three agencies we reviewed do not centrally monitor their sub- agencies\u2019 identification of grants employees, they cannot readily identify  the agency\u2019s total grants workforce. Consequently, the selected agencies  do not have reasonable assurance that all employees working on grants  across their agency are receiving needed grants training and have the  necessary knowledge, skills, and abilities to properly manage, administer,  and monitor grants.", "Central offices at HHS, USDA, and Education provide limited oversight of  the types of training sub-agencies provide to their grants workforce. Our  Human Capital Guide identifies having an agency organization that is  held accountable, along with the line executives, for the maximum  performance of the workforce as a leading practice. Further, the guide  states that the agency\u2019s training organization and line executives should  work together to establish control mechanisms to ensure that agency  employees successfully complete required and assigned training and  development. Additionally, the guide states that agencies must assign  authority and delegate responsibility to the proper personnel and  establish clear accountability for maximizing workforce performance.", "However, as mentioned earlier, there is no overarching office responsible  at the selected agencies for overseeing the types of grants training sub- agencies provide. Additionally, the central offices at the selected agencies  do not evaluate sub-agency grants training efforts. We found variation  among the 11 sub-agencies\u2019 grants training programs (as shown in  appendix III), which highlights the importance of central office oversight  for making sure the training variation is appropriate. As a result of these  issues, the selected agencies do not have assurance that grants training  provided across the various sub-agencies is sufficient in meeting the  needs of the various employees working on grants.", "Since there is no overarching central office at any of the three agencies  we reviewed actively being held accountable for sub-agency grants  training programs, HHS, USDA, and Education cannot ensure that all of  the sub-agencies working on grants are sufficiently training their grants  employees. Without central agency oversight and accountability across  sub-agency grants training programs, not all grants employees may be  sufficiently trained on grants processes and procedures, which could  affect grant oversight in terms of grants employees monitoring grants  properly."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given the importance of grants as a tool to achieve federal objectives and  the large outlays the federal government makes to fund them each year, it  is critical that the people who manage these grants\u2014the federal grants  workforce\u2014be well-trained to handle their responsibilities. To help  provide training to this workforce, OPM, OMB, and CFOC created grants  management competencies, a grants job series, some grants training,  and a career roadmap. However, they have not widely publicized the  roadmap and some sub-agencies we reviewed were unaware of it.  Moreover, OMB and the CFOC are not collecting detailed data on users  or feedback, which limits their ability to determine how useful these  resources are to the federal grants workforce.", "The selected agencies varied in following selected leading training  practices and they provided limited monitoring and oversight of their sub- agencies\u2019 grants training efforts. Without sufficient monitoring and  oversight, the agencies cannot have reasonable assurance that their sub- agencies are sufficiently training their grants workforce so they have the  necessary knowledge, skills, and abilities to properly manage, administer,  and monitor the billions of dollars that the federal government spends on  grants annually."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations, including two to OMB  and one to each of the selected agencies in our review. Specifically:  OMB\u2019s Office of Federal Financial Management\u2019s Controller (the CFOC  chair) should ensure CFOC formally publicizes the Career Roadmap  guidance among the 24 CFO agencies through memorandums, briefings,  trainings, regular CFOC meetings, or technical assistance and clearly  posts its \u201cController Alert\u201d on the CFOC website with the Career  Roadmap Report. (Recommendation 1)", "The Director of OMB, working with CFOC, should (1) collect data metrics  regularly on the Career Roadmap Builder online tool and Grants Training  101 to determine how widely the resources are being used, and (2) obtain  periodic feedback from federal agencies on the usefulness of these tools  and any needed improvements. (Recommendation 2)", "The Secretary of HHS should establish a process to monitor and evaluate  HHS\u2019s grants training at the central office level. This process should  include (1) a method for identifying all employees working on grants  across the agency, and (2) oversight procedures to evaluate the  sufficiency of sub-agencies\u2019 grants training efforts including the  incorporation of leading practices related to assessing competencies,  training approaches, accountability, and training results.  (Recommendation 3)", "The Secretary of USDA should establish a process to monitor and  evaluate USDA\u2019s grants training at the central office level. This process  should include (1) a method for identifying all employees working on  grants across the agency, and (2) oversight procedures to evaluate the  sufficiency of sub-agencies\u2019 grant-training efforts including the  incorporation of leading practices related to assessing competencies,  training approaches, accountability, and training results.  (Recommendation 4)", "The Secretary of Education should establish a process to monitor and  evaluate Education\u2019s grants training at the central office level. This  process should include (1) a method for identifying all employees working  on grants across the agency, and (2) oversight procedures to evaluate  the sufficiency of sub-agencies\u2019 grants training efforts including the  incorporation of leading practices related to assessing competencies,  training approaches, accountability, and training results.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to Education, HHS, OMB, OPM, and  USDA for review and comment. In written comments reproduced in  appendixes IV and V respectively, HHS concurred and Education  generally concurred with our findings and recommendations directed at  them. Both agencies described the steps they were taking to implement  our recommendations. In an email, the Chief Learning Officer said that  USDA concurred with our findings and recommendation. In an email, a  Management Analyst said that OPM had no comments on the draft  report.", "OMB staff provided us with oral comments stating that the agency  partially concurred with our first two recommendations. Specifically, for  our first recommendation, OMB generally agreed with our finding that the  Career Roadmap guidance should be better publicized. However, OMB  believes this is not its responsibility but rather the responsibility of federal  agencies. OMB stated that federal agencies could incorporate a method  into their improvement plans to ensure that sub-agencies are made aware  of the Career Roadmap Guidance. We believe that, as the federal  government\u2019s central management agency and developer of the Career  Roadmap, OMB has a responsibility for ensuring that federal agencies  are aware of the Career Roadmap guidance by formally publicizing it  through memorandums, briefings, trainings, regular CFOC meetings, or  technical assistance.", "For the portion of our first recommendation that discusses clearly posting  the \u201cController Alert,\u201d OMB stated it will look at the alert\u2019s placement on  the CFOC website to see if the agency can make it more prominent. We  continue to believe that the \u201cController Alert\u201d should be easily accessible  to anyone visiting the website and should be located on the same page  as the Career Roadmap, where it would have greater visibility.", "For our second recommendation, OMB agreed that user feedback data  regarding the Career Roadmap Builder and Grants Training 101 is useful.  However, OMB stated that while it will continue to collect data on the  number of users, it believes that federal agencies should be responsible  for collecting specific, detailed user data if they are using those  resources. We continue to believe that OMB and CFOC would benefit  from collecting specific, detailed user data on these tools, which they  devoted time and multiple resources to developing. Collecting detailed  data metrics that go beyond the number of users can help OMB and  CFOC to better evaluate the effectiveness of these grants training tools.  Additionally, OMB stated the agency is committed to working with CFOC  to review the Grants Training 101 module to determine how useful it is  and if any improvements or adjustments are needed.", "All five agencies provided technical comments on the report draft, which  we incorporated where appropriate.", "We are sending copies of this report to the Secretaries of Education,  HHS, and USDA and to the Directors of OMB and OPM. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov. If you or your staff have any questions about this  report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov.  Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Comparison of Federal Acquisition Training and Grants Workforce Training", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Grants Workforce by Job Series for Health and Human Services, Agriculture, and Education as of March 2018", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Grants Training Programs at the Departments of Health and Human Services, Agriculture, and Education", "paragraphs": ["The Department of Health and Human Services (HHS). HHS is a large  agency with 11 sub-agencies administering a wide variety of health and  human services that takes a decentralized approach to training its grants  workforce. While HHS\u2019 central Assistant Secretary for Financial  Resources (ASFR) office provides grant policy and regulatory guidance  updates to HHS sub-agencies, ASFR officials said they leave the decision  on how to implement grants training to each of those sub-agencies. The  selected sub-agencies we reviewed\u2014the Administration for Children and  Families, Centers for Medicare and Medicaid Services, Health Resources  and Services Administration, and National Institutes of Health\u2014all  implement their own grants training programs and procedures.", "The four sub-agencies at HHS that we reviewed take different  approaches in how they implement their respective grants training  programs. For example, some sub-agencies require that grant personnel  take required courses while others make them optional; some provide  internal grants training while others also use the services of an external  training vendor; and some require certification while others make it  optional. Table 3 highlights some of the grants training programs\u2019  characteristics at the four HHS sub-agencies we reviewed.", "The Department of Agriculture (USDA). USDA is made up of 29  agencies and offices at more than 4,500 locations across the country and  abroad. While its central Office of the Chief Financial Officer (OCFO)  provides some guidance on federal financial assistance policies and  grants terms and conditions, and ensures department-wide training  requirements are met, it, like HHS, leaves the decision on how to  implement grants training to each of its sub-agencies. The selected sub- agencies we reviewed\u2014the Food and Nutrition Service, Forest Service,  National Institute of Food and Agriculture, and Rural Development\u2014all  implemented their own respective grants training programs and  procedures. Table 4 highlights some of the grants training programs\u2019  characteristics at the four USDA sub-agencies we reviewed.", "The Department of Education (Education). Education approaches  grants training by combining both centralized and decentralized  approaches for its eight principal offices that conduct grant work.  Education\u2019s central OCFO offers broad financial grants training such as  Oversight of Financial Management of Ed Formula/Discretionary Grants  and Discretionary Grant Budget Reviews. Education\u2019s central Learning  and Development office offers broad introductory grants training such as  Introduction to Grants and Cooperative Agreements, Uniform  Administrative Guidance, and Cost Principals. According to Education  officials, Education\u2019s Risk Management Services (RMS) offers risk  management-based grants training including Discretionary Grants  Overview, Conducting a Cost Analysis and Budget Review, Monitoring  Grants, Suspension and Debarment, and Risk Assessment and Risk  Mitigation. RMS also manages Education\u2019s licensing program and  oversees training for new license holders geared towards grants  administration.", "In addition to these central office trainings, each Education sub-agency  also provides specific training tailored for its mission as verified by the  three Education sub-agencies we reviewed\u2014the Office of Special  Education and Rehabilitative Services (OSERS), the Office of Elementary  and Secondary Education (OESE), and the Office of Post-Secondary  Education. For example, according to Education officials, OSERS trains  grant staff on the Individuals with Disabilities Education Act grant  application review process, and OESE recently identified a need for and  developed and taught a course on improving the grantee communication  process. Table 5 highlights some of the grants training programs\u2019  characteristics at the three Education sub-agencies we reviewed."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tom James (Assistant Director),  Jyoti Gupta (Analyst-in-Charge), Benjamin Adrian, Dawn Bidne, Jeff  DeMarco, Karin Fangman, Joseph Fread, Robert Gebhart, Shirley  Hwang, Serena Lo, Sharon Miller, Meredith Moles, Steven Putansu,  Kayla Robinson, Robert Robinson, Cynthia Saunders, Stewart Small, and  Dan Webb made key contributions to this report."], "subsections": []}]}], "fastfact": ["The federal government awards billions of dollars in grants to state and local governments each year for everything from children's health insurance to higher education.", "We looked at the training federal grants managers receive at selected agencies. We found that while agencies provided some training and the Office of Management and Budget developed some career assistance resources, none had evaluated the effectiveness of their efforts.", "We made 5 recommendations, including that:", "OMB better publicize and evaluate available career resources", "Health and Human Services, USDA, and Education take steps to better evaluate their grants training"]}
{"id": "GAO-18-218", "url": "https://www.gao.gov/products/GAO-18-218", "title": "Military Housing Privatization: DOD Should Take Steps to Improve Monitoring, Reporting, and Risk Assessment", "published_date": "2018-03-13T00:00:00", "released_date": "2018-03-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 1996 Congress provided DOD with authorities enabling it to obtain private-sector financing and management to repair, renovate, construct, and operate military housing. DOD has since privatized 99 percent of its domestic housing.", "The Senate Report accompanying a bill for the National Defense Authorization Act for 2017 included a provision that GAO review privatized military housing projects and the effect of recent changes in the basic allowance for housing on long-term project sustainability. This report examines the extent to which DOD has (1) assessed and reported the financial condition of each privatized housing project; (2) assessed the effects of recent reductions in the basic allowance for housing on privatized housing; and (3) defined notification requirements for project changes and risk tolerances relative to privatized housing goals. GAO reviewed policies, project oversight reports, and financial statements, and interviewed DOD officials and privatized housing developers."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has regularly assessed the financial condition of its privatized housing projects; however, it has not used consistent measures or consistently assessed future sustainment (that is, the ability to maintain the housing in good condition), or issued required reports to Congress in a timely manner. Specifically:", "Some data used to report on privatized housing across the military services are not comparable. For example, there are inconsistencies among the projects in the measurements of current financial condition (for example, the ability to pay debts and maintain quality housing).These differences have not been identified in reports to Congress.", "The military departments vary in the extent to which they use measures of future sustainment, and information regarding the sustainment of each of the privatized housing projects has not been included in the reports to Congress.", "DOD's reporting to Congress has not been timely. DOD is statutorily required to report to Congress the financial condition of privatized housing projects on a semiannual basis, but it has not reported on any fiscal year since 2014.", "By taking steps to improve the consistency of the information provided and meet the reporting requirement, DOD would provide decision makers in Congress with useful, timely information about the financial condition of the privatized housing projects as they provide required oversight.", "DOD has not fully assessed the effects of reductions, relative to calculations of market rates for rent and utilities, in servicemembers' basic allowance for housing payments on the financial condition of its privatized housing projects. In August 2015, DOD required the military departments to review their privatized housing portfolios and outline any effects of the reductions. Each military department reported that the reductions would decrease cash flows to their long-term sustainment accounts. However, the reports did not specify the significance of the reductions on each project's future sustainment or identify specific actions to respond to shortfalls at individual projects. If DOD fully assesses the effects of the basic allowance for housing reductions on privatized housing and identifies actions to respond to any risks, DOD and Congress will be better informed to make decisions affecting the projects.", "DOD has not defined when project changes require prior notice to the Assistant Secretary of Defense for Energy, Installations, and Environment or its tolerance for risk relative to its goal of providing servicemembers with quality housing, including the risk from reduced sustainment funding. Specifically, the military departments had different understandings of when project changes, such as financial restructurings, required prior notice. Additionally, DOD has not required the military departments to define their risk tolerances\u2014the acceptable level of variation in performance relative to the objectives\u2014regarding the future sustainability of the projects. By clearly defining the conditions that require advance notification and developing risk tolerance levels, DOD would have consistent information that would improve its oversight of privatized housing and inform its response to any future sustainment challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making eight recommendations, including that DOD improve the consistency and timeliness of the information reported on the financial condition of its privatized housing projects, fully assess the effects of the reductions in basic allowance for housing on the projects, clarify when project changes require notice, and define tolerances for project risks. DOD concurred with each of our recommendations and identified actions it plans to take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["In the mid-1990s, the Department of Defense (DOD) had designated  nearly two-thirds of its domestic family housing inventory as needing  repair or complete replacement. At the time, DOD estimated that it would  need about $20 billion in appropriated funds and up to 40 years to  eliminate the poor quality housing through new construction or renovation  using the traditional military construction approach. DOD became  concerned that the poor quality of its housing was having a negative  effect on servicemembers\u2019 quality of life and detracting from readiness by  contributing to servicemembers\u2019 decisions to leave the military. To enable  DOD to privatize its housing, Congress provided the department with a  variety of authorities to obtain private-sector financing and management  to repair, renovate, construct, and operate military housing. In more than  a decade since, the military departments have worked with private-sector  developers who have rebuilt and renovated the housing. These  developers now operate 99 percent of domestic military family housing,  as well as a limited amount of housing for unaccompanied military  personnel. The developers rely on servicemembers\u2019 basic allowance for  housing payments as a key revenue source for this privatized housing,  but DOD began reducing these payments in 2015.", "Since 1998, we have conducted various reviews related to military  housing privatization and the basic allowance for housing. In 2009, we  reported, among other things, that some privatization projects with  occupancy rates below 90 percent were challenged in generating enough  revenue to fund construction, make debt payments, and set aside funds  for future major renovations and rebuilds. We also stated that turmoil in  the financial markets had reduced available construction funds, resulting  in more renovations relative to new construction and reduced amenities at  some projects. We recommended, among other things, that DOD include  information in its reports to Congress on the effects that current financial  market conditions have on housing projects. DOD agreed with our  recommendations, and in its February 2010 semiannual status report to  Congress included more detailed information on the financial  performance of ongoing projects. In 2011, we reported that DOD uses a  data-intensive process to set housing allowance rates, but that  enhancements related to data collection and definitions for data  collection, as well as cost estimating for budget estimates, could enhance  the process. We recommended, among other things, that DOD assess  the benefits and drawbacks of revising its definition of \u201cavailable\u201d housing  for data collection purposes, and that it develop a communications  process for installations to share information on housing tools. DOD  generally concurred with our recommendations and took steps to  implement them. In 2014, we reported, among other things, that the  military services conducted several analyses and considered several  other factors to determine whether to privatize housing for  unaccompanied personnel. The Army and Navy concluded that  privatization could be used under a narrow set of circumstances at  specific installations, and the Air Force and Marine Corps concluded that  privatization was not suitable for meeting any of their unaccompanied  housing needs. We did not make any recommendations in that report.", "The Senate Armed Services Committee report accompanying a bill for the  National Defense Authorization Act for Fiscal Year 2017 included a  provision for us to review privatized military housing projects and the  effect of recent changes in servicemembers\u2019 basic allowance for housing  on the long-term sustainability of the projects. In this report, we examine  the extent to which DOD has (1) assessed and reported the financial  condition of each privatized housing project; (2) assessed the effects of  recent reductions in the basic allowance for housing on privatized  housing, and identified any other challenges and options to address those  challenges; and (3) defined notification requirements for project changes  and risk tolerances relative to privatized housing goals.", "For objective one, we reviewed DOD guidance on the oversight and  management of privatized military housing and documentation used by  each military department to oversee the financial condition of each of their  privatized housing projects. This included documentation on each of their  portfolios as a whole through portfolio-wide oversight reports, monthly  and quarterly reports on each privatized housing project, and the projects\u2019  audited financial statements from fiscal years 2013 to 2016. We also  reviewed DOD\u2019s annual report to Congress on privatized housing, as well  as data for privatized housing projects from fiscal years 2013 through  2016. We met with officials involved in the oversight and management of  privatized housing to discuss their oversight and management of the  financial condition of privatized housing projects. Additionally, we  examined the differences among and within the military departments in  determining the financial condition of their projects. We compared the  extent of DOD\u2019s actions to assess and report the financial condition of  each privatized housing project with DOD\u2019s housing policy and federal  internal control standards related to quality information. For this and  each of our objectives, we visited a non-generalizable sample of  privatized housing projects.", "For objective two, we reviewed DOD guidance on applying reductions in  the basic allowance for housing to privatized military housing, as well as  other documentation on DOD\u2019s reductions in basic allowance for housing  payments. Specifically, we reviewed the military departments\u2019 reports on  the projected effects of the reductions in basic allowance for housing on  their portfolios and quarterly project oversight reports from fiscal years  2016 and 2017 to identify challenges and options to address challenges.  We interviewed officials from each military department involved with  privatized housing, officials at the installations in our non-generalizable  sample involved in privatized housing, and officials of five leading  privatized housing developers for their perspectives on challenges to their  privatized housing and options to address them. We reported examples of  challenges that were identified by at least two of the three military  departments. Additionally, we interviewed officials at the Defense Travel  Management Office for information on the basic allowance for housing  calculations and military department officials for their perspectives on the  reductions in the basic allowance for housing. We compared military  department reports on the projected effects of the reductions in the basic  allowance for housing with federal internal control standards related to  risk assessment. We also reviewed policy guidance on DOD\u2019s privatized  housing responsibilities to determine the level of authority needed for the  options to address challenges.", "For objective three, we reviewed DOD guidance on oversight and  management of privatized military housing, interviewed DOD and  developer officials responsible for privatized housing, and reviewed DOD  documentation. Specifically, we reviewed DOD housing policies and  guidance and military department guidance on overseeing privatized  housing. We also interviewed officials familiar with notification processes  for changes to privatized housing projects and with approaches to  managing risks to privatized housing projects, and officials in the Office of  Management and Budget familiar with privatized military housing. We  compared the extent to which DOD has defined notification requirements  for project changes and the extent to which DOD has defined risk  tolerance for privatized housing with federal internal control standards  related to internal communication and risk assessment. Further details  on our scope and methodology can be found in appendix I.", "We conducted this performance audit from December 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DOD Goals, Roles, and Responsibilities for the Privatized Housing Program", "paragraphs": ["DOD\u2019s policy is to ensure that eligible personnel and their families have  access to affordable, quality housing facilities and services consistent  with grade and dependent status, and that the housing should generally  reflect contemporary community living standards. It is also DOD\u2019s policy  to rely on the local private sector as the primary source of housing for  servicemembers who are normally eligible to draw a housing allowance,  whether unaccompanied or accompanied by family. About a third of  eligible servicemembers generally live on an installation, with the rest  living in the surrounding local communities.", "The Assistant Secretary of Defense for Energy, Installations, and  Environment (ASD (EI&E)) is the program manager for all DOD housing,  whether DOD-owned or privatized. In this capacity, the ASD (EI&E)  provides guidance and general procedures related to military housing  privatization. One responsibility of ASD (EI&E) is to provide required  reports to Congress on privatized military housing projects. However, it is  the responsibility of the military departments, rather than ASD (EI&E), to  execute and manage privatized housing projects, including conducting  financial management and monitoring their portfolio of projects. Each  military department has issued guidance that outlines its responsibilities  for privatized housing, such as key offices responsible for overseeing  privatized housing projects. For each privatized military housing project,  developers maintain day-to-day operational decision making and manage  each project."], "subsections": []}, {"section_title": "Military Housing Privatization Authorities and Project Structures", "paragraphs": ["The military housing privatization initiative provided DOD with various  authorities to obtain private-sector financing and management to repair,  renovate, construct, and operate military housing. These authorities  included the ability to make direct loans to and invest limited amounts of  funds in projects for the construction and renovation of housing units for  servicemembers and their families. The projects were generally  financed through both private-sector financing and funds provided by the  military departments. Specifically, projects obtained private-sector  financing by obtaining bank loans and by issuing bonds, which are held  by the public. In addition, the military departments provided additional  financing. The Army and the Navy generally structured their privatized  housing projects as limited liability companies in which the military  departments formed partnerships with the developers and invested funds  into the partnership. The Air Force generally provided direct loans to the  developers. Because privatized housing projects involve budgetary  commitments of the federal government, each project was scored at  inception by the Office of Management and Budget to determine the  amount of funds that needed to be budgeted for that particular project.", "The number of projects can change over time. For example, a project  may be sold, and new projects can be created. As of October 2017, there  were 82 privatized military housing projects, each of which can consist of  one or multiple installations. The Army has 35 projects, the Navy and  Marine Corps together have 15, and the Air Force has 32. Most of these  are family housing projects, but the Army and Navy have created a small  number of privatized housing projects for servicemembers without  families (that is, unaccompanied housing).", "The military departments have flexibility in how they structure their  privatized housing projects, but project structures share certain  similarities. For a typical project, a military department leased land to a  developer for a 50-year term and conveyed existing homes located on the  leased land to the developer for the duration of the lease. The developer  then became responsible for leasing renovated and newly constructed  homes, giving preference to servicemembers and their families.", "Each privatized housing project is a separate and distinct entity governed  by a series of legal agreements that are specific to that project. These  agreements include, among others, an operating agreement, a property  management agreement, and an agreement that describes the  management of funds in the project, including the order in which funds  are allocated within the project. However, while each project is distinct,  there are some common elements in how projects invest and utilize  funds. Every project takes in revenue, which consists mostly of rent  payments. Projects then pay for operating expenses, including  administrative costs, day-to-day maintenance, and utilities, among other  things. After that, projects generally allocate funds for taxes and  insurance, followed by debt payments. Figure 1 shows a typical funding  structure for a privatized housing project.", "In the typical privatized housing project depicted in figure 1, once debt  payments are made, funds are allocated to accounts that fund scheduled  maintenance. These accounts exist to fund repair and replacement of  items such as roofs, heating and cooling systems, and infrastructure.  After that, funds are allocated to a series of management incentive fees,  such as the property management fee. Finally, the project divides these  remaining funds according to a fixed percentage between accounts that  fund major renovations and rebuilds on the one hand and go the  developer on the other hand. The percentages may vary, but the majority  of funds go toward the accounts funding major renovations and rebuilds."], "subsections": []}, {"section_title": "Housing Allowance and Occupancy of Privatized Housing", "paragraphs": ["DOD\u2019s Defense Travel Management Office annually calculates rent and  utility rates for locations across the United States based on estimates of  local market conditions, which are then adjusted for an individual\u2019s pay  grade and dependency status. These calculations, which can fluctuate  from year to year, are then used to determine individual servicemembers\u2019  monthly basic allowance for housing payments. DOD does not require  servicemembers, other than certain key personnel and junior  unaccompanied personnel, to live on an installation and thus in military  privatized housing. Because only about a third of eligible servicemembers  generally live on an installation, the basic allowance for housing payment  is designed to enable servicemembers to live off-base comparably to their  civilian counterparts. Servicemembers pay their rent\u2014whether living on  the installation or off\u2014with their basic allowance for housing payments.  Therefore, DOD\u2019s privatized housing competes with available housing  options in the local market.", "Active-duty servicemembers are given priority for privatized military  housing. However, projects can advertise and lease to tenants other than  active-duty servicemembers, including civilians in some cases, generally  once occupancy dips below a specific level. For example, the Air Force  has approved leasing to other tenants when any given project\u2019s  occupancy rate falls below 98 percent."], "subsections": []}]}, {"section_title": "DOD Regularly Assesses Projects\u2019 Financial Conditions but Has Not Consistently Assessed Future Sustainment Needs or Issued Required Reports to Congress", "paragraphs": ["DOD regularly assesses the financial condition of its privatized housing  projects through recurring internal reporting by the military departments  on each of their projects; however, key data on current financial  conditions are not mutually comparable. Moreover, the military  departments vary in the extent to which they use measures of future  sustainment needs and funding to assess project sustainability. In  addition, DOD has not consistently issued required reports to Congress  on the financial condition of privatized housing projects in a timely  manner."], "subsections": [{"section_title": "The Military Departments Regularly Assess the Financial Condition of Their Privatized Housing Projects", "paragraphs": ["The military departments regularly assess the current financial condition  of their privatized housing projects through internal, recurring monthly or  quarterly financial reporting. DOD policy requires the military departments  to manage their housing, including privatized housing, through financial  management and reporting. DOD\u2019s housing manual states that because  housing privatization projects create a long-term governmental interest in  privatized housing, it is essential that projects be monitored attentively,  and that the military departments monitor their portfolios of projects.  Specifically, each military department produces\u2014based on information  provided by each project\u2014or receives from each project quarterly or  monthly reports detailing the financial condition of each individual  privatized housing project. Each military department also produces  periodic reports on the condition of its portfolio as a whole. These reports  include financial measures such as revenue and operating expenses, as  well as a measure of the ability to make required debt payments, referred  to as debt coverage ratio or debt service coverage ratio.", "In their assessments, each military department emphasizes somewhat  different measures of current financial condition, although each uses debt  coverage ratio as a key measure of the current financial condition of  privatized military housing projects. Specifically, in its portfolio-wide  reports, the Army uses three key performance metrics to measure  financial condition\u2014a measure of revenue, net operating income, and the  debt coverage ratio. The Air Force also rates projects\u2019 financial  condition based on three metrics, but the metrics differ from those used  by the Army. The Air Force\u2019s metrics are operating expenses compared  with budgets, net operating income compared with the original project  plan, and debt coverage ratio. In its portfolio-wide reports, the Navy  provides debt coverage ratio as its measure of current financial condition.  Regardless of the different metrics used, the military departments rated  almost all of the privatized housing projects as having acceptable current  financial conditions. Specifically:", "Army: For the quarter ending June 30, 2017, all 34 Army projects  generated enough cash to continue operations and make required  debt payments, according to the Army\u2019s portfolio-wide reporting.  However, the Army rated 8 family housing and 4 unaccompanied  housing projects as below or well below expectations, in terms of  current finances. For example, the Army rated the project at Fort  Bragg, North Carolina, as being well below expectations, due to  occupancy challenges resulting from off-post competition and higher- than-expected expenses.", "Navy and Marine Corps: For the 6 months ending June 30, 2017, all  16 Navy and Marine Corps projects were generating enough cash to  continue operations and make required debt payments, according to  the Navy\u2019s portfolio-wide reporting. However, 5 of the 16 projects  were on a watch list, due to financial challenges. For example, the  Marine Corps\u2019 project comprising Camp Lejeune, North Carolina;  Marine Corps Air Station Cherry Point, North Carolina; and Stewart  Air National Guard Base, New York was experiencing low  occupancy rates due to local market competition, and as such was  included on the watch list.", "Air Force: For the quarter ending June 30, 2017, the Air Force rated  27 of its 32 projects\u2019 current finances as acceptable or exceptional.  However, the Air Force rated 2 of its 32 projects as unacceptable, and  3 as marginal, for current finances, according to Air Force portfolio- wide reporting. For example, the Air Force rated the Nellis Air Force  Base project in Nevada as having an unacceptable current financial  condition as of June 2017. In March 2017, the Office of Management  and Budget approved the budgetary scoring of a financial  restructuring of the project. In the restructuring, the Air Force reduced  the interest rate on the government\u2019s direct loan to the project and  extended the loan\u2019s maturity date, redistributed residual project cash  flows, and reduced certain returns due to the developer. In another  example, the Air Force rated the Air Combat Command II project,  which comprises Holloman Air Force Base, New Mexico, and Davis- Monthan Air Force Base, Arizona, as having a marginal current  financial condition as of June 2017. Specifically, basic allowance for  housing rates for the project were only 85 percent of original  expectations, and the project was unable to compensate for that  shortfall by controlling expenses. The Office of Management and  Budget has approved the budgetary scoring of a financial restructure  of the project, including a reduction in the interest rate on the  government\u2019s loan to the project and a reduction in certain returns and  fees previously owed to the developer."], "subsections": []}, {"section_title": "Data on Current Financial Condition of Privatized Housing Projects Reported to the Office of the Secretary of Defense and Congress Are Not Comparable", "paragraphs": ["Based on our analysis, data on the current financial condition of privatized  housing projects that have been reported by the military departments to  ASD (EI&E) and Congress have not been comparable because (1) there  are inconsistencies in the calculation of the reported debt coverage ratios,  and (2) the data requested have not followed consistent time periods.  Debt coverage ratios are a key measure used by the military departments  to report on the current financial condition of privatized housing projects,  and the measures are also the main financial measure for privatized  housing projects that DOD has previously reported to Congress.  However, we found the following inconsistencies in the debt coverage  ratio data reported to ASD (EI&E):", "Adjustments made to income for the purposes of calculating debt  coverage ratios affect the ratios\u2019 consistency: The expenses that are  or are not included in a project\u2019s calculation of the debt coverage ratio  are dictated by each project\u2019s business agreements. ASD (EI&E)  defines debt coverage ratio as the project\u2019s net operating income\u2014 income remaining after all project expenses are paid, but before debt  service and depreciation\u2014divided by its required debt payments.  However, we found that in practice, projects make various  adjustments to net operating income for the purposes of calculating  debt coverage ratios. These adjustments may include adding or  subtracting from net operating income any of the following:  sustainment fund deposits; various types of management fees,  including performance incentive fees and asset management fees;  certain utility costs; and taxes. Military department officials stated that  the debt coverage ratios calculated using these adjustments, while  different for different projects, are accurate and appropriate. However,  while the calculation methods may be sufficient for any given project,  the differences in calculation methods reduce the comparability of the  data.", "Different project accounting methods affect the comparability of debt  coverage ratios: Some projects conduct financial accounting based on  the amount of cash received or paid during the period (referred to as  cash basis accounting), while other projects do so based on when  revenue is earned and when expenses are incurred, regardless of  when cash is received or paid (called accrual basis accounting).  These accounting differences can significantly affect the debt  coverage ratio. For example, a cash basis project may have cash on  hand to pay its debt obligations, but not enough to cover future  expenses that would have been recognized under an accrual project.  The specific accounting method used reflects each project\u2019s particular  business agreements, but the differences in accounting methods  reduce the comparability of the debt coverage ratios across the  projects.", "Moreover, as the program manager for all DOD housing, ASD (EI&E)  requested debt coverage ratio data across varying time frames for  required reports to Congress on privatized housing projects. Specifically,  ASD (EI&E) has alternated between requesting annual average debt  coverage ratio data and requesting data as of the end of the reporting  period, thus reducing the comparability of the data over time. In  instructions for its fiscal year 2014 data collection, the office requested  the average debt coverage ratio over the full fiscal year; in instructions for  its fiscal year 2015 data collection, it requested data as of the end of the  reporting period; and in its fiscal year 2016 data collection, the office  again requested data for the average over the full fiscal year.", "Furthermore, the instructions provided by ASD (EI&E) to the military  departments for fiscal year 2015 did not specify the time period of the  data to be reported. Therefore, each military department provided a  different time period of data in response, further reducing the  comparability of the data. Specifically, one of the military departments  provided quarterly data, another military department provided data for the  full year, and the other military department provided one-month data,  according to military department officials.", "Using data from different time periods not only reduces their  comparability, but also can produce a different outlook on a project\u2019s  financial condition. For example, we found that debt coverage ratios for a  single fiscal quarter can be significantly different from the ratio for the  same project for the full fiscal year. In some cases, a quarterly ratio  showed insufficient funds to continue operations and make required debt  payments, while the full-year ratio showed sufficient funds for that  purpose. Conversely, another project\u2019s ratios showed the single quarter  as having sufficient funds, but the full year as having insufficient funds.  ASD (EI&E) officials stated that data for previous reports were collected  by different staff in that office and that the current officials were not sure  why the time period for fiscal year 2015 data collection was different from  that of the other two fiscal years.", "Standards for Internal Control in the Federal Government states that  management should use quality information and externally communicate  the necessary quality information to achieve the entity\u2019s objectives.  Information, among other things, should be complete and  understandable. This involves processing data into information and then  evaluating the processed information so that it is quality information. The  standards also state that management should obtain relevant data from  reliable sources, which provide data that are reasonably free from error  and faithfully represent what they purport to represent.", "However, in prior reports to Congress, ASD (EI&E) did not clarify the  differences in how debt coverage ratios were calculated, resulting in  information that lacked full context. Moreover, the information provided by  the military departments to ASD (EI&E) and to Congress to conduct their  oversight activities has not been consistent and comparable because  ASD (EI&E) has not revised its guidance on privatized housing to ensure  that data reported to Congress, such as data on debt coverage ratios, are  consistent in terms of time periods. Officials in ASD (EI&E) acknowledged  that the differences in debt coverage ratio calculation methods and  project account methods can affect the comparability of the data. They  also noted that in the future they plan to continue the annual time period  for data collection and reporting, though they did not identify any  additional steps they plan to take to ensure consistent and comparable  data. Without contextual information on how the military departments  calculate debt coverage ratios\u2014a key measure of the current financial  condition of privatized housing projects\u2014and on the effect these  differences have on comparing the data across projects, data reported to  Congress may not be fully useful in supporting congressional oversight of  privatized military housing. Additionally, by revising guidance to ensure  that data reported to Congress are comparable (that is, across the same  time frames), ASD (EI&E) will provide additional assurance that DOD and  Congress will have quality information on which to base decisions  regarding privatized housing projects."], "subsections": []}, {"section_title": "The Military Departments Have Varying Methods of Assessing a Project\u2019s Sustainability", "paragraphs": ["During the course of our review, we found that the military departments  take different approaches in assessing a project\u2019s sustainability (that is,  future sustainment needs and funding). Army officials stated that the  Army validates project sustainment plans, and is developing, but has not  yet implemented, a model to independently assess project sustainability.  The Navy validates sustainment plans generated by the developers  managing its projects. In addition to reviewing developers\u2019 sustainment  plans, the Air Force conducts an independent analysis of each project\u2019s  sustainment needs by conducting site tours of each project location and  by using its own financial model to forecast sustainment needs, according  to Air Force officials. The Air Force then compares its analysis with that of  the developer. In most cases, according to Air Force officials, this  comparison has shown that the Air Force\u2019s estimates of sustainment  needs were greater than the developer\u2019s original estimates, which would  require additional sustainment funding beyond what the developer  estimated.", "Moreover, the military departments do not all use measures of future  sustainment for their internal portfolio-wide reports on privatized housing  projects. Specifically:", "Army: The Army does not include a measure of future sustainability  among the key finance performance metrics it emphasizes in its  portfolio-wide oversight reports. The Army tracks the balance of funds  for long-term major renovations and rebuilds as compared with  expectations, but it does not include a measure of expected future  sustainment needs versus funding in its portfolio-wide reports. As of  June 2017, seven Army projects had fallen below expectations in  current funding levels for long-term major renovations and rebuilds,  according to the Army\u2019s portfolio-wide report for the quarter ending  June 2017.", "Navy: In its portfolio-wide reports, the Navy includes a measure of  sustainability. Specifically, the reports show modeled surpluses or  shortfalls in sustainment funding through the term of each project. As  of June 30, 2017, the Navy reported five projects expecting shortfalls  in sustainment funding, four of which the Navy anticipated would  require project plan modifications to address the shortfalls.", "Air Force: In its portfolio-wide reporting, the Air Force has adopted  measures of long-term financial condition, including measures of  future sustainment funding. Specifically, the Air Force gives each  project a \u201clong-term outlook\u201d rating. This rating includes measures of  projected sustainment funding levels relative to projected needs,  among other measures. As of June 30, 2017, the Air Force rated 6 of  its 32 projects as having \u201cunacceptable\u201d long-term outlooks, and  another 6 as having \u201cmarginal\u201d long-term outlooks. For example, the  Air Force considered the Air Combat Command II project, which  comprises Holloman Air Force Base, New Mexico, and Davis- Monthan Air Force Base, Arizona, to have severely underfunded  planned maintenance funds and a projected inability to meet any  future needs for major renovations and rebuilds, due to lower-than- expected basic allowance for housing levels.", "DOD guidance states that because privatization creates a long-term  governmental interest in privatized housing, it is essential that projects be  attentively monitored. DOD has recognized that a lack of sustainment  funding can decrease the desirability of housing over time, thus reducing  occupancy and further jeopardizing financial stability. However, DOD has  not required the military departments to incorporate measures of future  sustainment into their assessments of privatized housing projects.  Measures of current financial condition, such as the ability to make debt  payments, do not necessarily indicate the ability of a project to fund its  sustainment accounts sufficiently to maintain housing quality in the future.  A project may generate enough revenue to cover operating expenses and  make required debt payments, but the level of projected funding available  for planned renovations over the course of the project may still be  insufficient, as shown by Navy and Air Force portfolio-wide oversight  reports. The Navy and Air Force include measures of future sustainment  needs and funding in their portfolio-wide oversight. While Army officials  stated that the Army regularly reviews sustainment funding levels, the  Army does not include forecasts of future sustainment needs and funding  in its portfolio-wide assessment reports because they are not required by  ASD (EI&E). Without a requirement to include sustainment measures in  their oversight of privatized housing projects, military department officials  may choose to review such measures or not. If ASD (EI&E) does not  require the military departments to include measures of future  sustainment in their assessments of privatized housing projects, the  military departments may not consistently incorporate such measures into  their portfolio-wide assessments, and therefore the military departments  and ASD (EI&E) may not have sufficient oversight of the projects\u2019 future  sustainability. ASD (EI&E) officials agreed that such a requirement would  help ensure that the military departments are consistent in their oversight  of future sustainment."], "subsections": []}, {"section_title": "DOD Has Not Met the Requirement for Financial Oversight Reports to Congress in a Timely Manner and Has Not Included Sustainability Information on Each Privatized Housing Project", "paragraphs": ["DOD has not consistently provided required reports to Congress in a  timely manner, and as a result Congress does not have up-to-date  information on the financial condition of privatized housing. Section  2884(c) of Title 10 of the United States Code requires the Secretary of  Defense to report semiannually an evaluation of the status of oversight  and accountability measures for military housing privatization projects,  including, among other things, information about financial health and  performance and the backlog of maintenance and repair. DOD provided a  report covering fiscal year 2013 to Congress in November 2014, and then  did not provide another report, covering fiscal year 2014, until October  2017. ASD (EI&E) officials stated that they have not provided the  reports in a timely manner in recent years due to staff turnover and limited  resources, as well as efforts to ensure the quality of the data included in  the reports. An ASD (EI&E) official stated that DOD is planning to resume  timely reporting, with a consolidated report covering fiscal years 2015 and  2016 to be submitted to Congress in the second quarter of fiscal year  2018, and a report covering fiscal year 2017 to be submitted in late fiscal  year 2018.", "Furthermore, in prior reports submitted to Congress, ASD (EI&E) has not  reported information on the future sustainment of each privatized housing  project. The statute does not require the reporting of information on future  sustainability for each project. However, ASD (EI&E) has noted that long- term sustainability has become a priority as projects have completed their  initial development periods, and therefore information on future  sustainment has become more critical to understanding the projects\u2019  financial health.", "Standards for Internal Control in the Federal Government states that  management should use quality information and externally communicate  the necessary quality information to achieve the entity\u2019s objectives. In  the past, DOD has not consistently reported on the financial condition of  privatized housing projects to Congress and in cases where data were  reported, the department focused its reports on measures of current  financial health such as debt coverage ratios, which do not provide  information about the future sustainment of the projects. An ASD (EI&E)  official stated that the office will streamline the report\u2019s narrative while  adding additional details to figures as a means to expedite future report  submission, but the official did not provide additional details of how future  reports will be completed in a more timely fashion. ASD (EI&E) officials  also stated that in the past they were focused on the initial  implementation phases of the privatized housing projects and are now  shifting to focus on sustainment, but they have not provided sustainment  information on each project to Congress. ASD (EI&E) officials agreed that  it would be beneficial to include information on sustainment in their  reports to Congress. If DOD does not take steps to comply with statutory  time frames for reporting on the financial condition of privatized housing  projects moving forward, decision makers in Congress will not have up-to- date information about financial conditions of projects as they provide  oversight of a program that represents a long-term commitment for the  department. Furthermore, reporting financial information on the future  sustainability of projects will help provide Congress a complete picture of  the financial condition of each project."], "subsections": []}]}, {"section_title": "DOD Has Not Fully Assessed the Effects of the Basic Allowance for Housing Reductions but Has Identified Other Privatized Housing Challenges and Options to Address Them", "paragraphs": ["DOD has completed some analysis of the projected effects of recent  reductions in the basic allowance for housing on its privatized housing  portfolios, but it has not fully assessed the significance of the effects on  the future sustainment of each of its privatized housing projects.  Moreover, DOD has not identified a course of action to address possible  shortfalls resulting from the reductions in the basic allowance for housing.  The military departments have also identified a variety of other challenges  that could affect the financial condition of their privatized housing projects,  including reductions in assigned personnel and the higher-than-expected  cost of utility infrastructure. The military departments have identified  options to address potential financial challenges to their privatized  housing projects, including actions to increase revenue, actions to reduce  expenses, and extraordinary measures to improve project financial  conditions."], "subsections": [{"section_title": "Reductions in the Basic Allowance for Housing Could Decrease Privatized Housing Projects\u2019 Revenue and Future Sustainment Funding", "paragraphs": ["According to the military departments, reductions in the basic allowance  for housing relative to market rent and utility calculations by the Defense  Travel Management Office\u2014a 4 percent reduction as of 2018\u2014will  decrease funding for future sustainment and could affect the privatized  housing projects\u2019 ability to continue operations and make required debt  payments. Specifically, housing developers stated that declines in  revenue have already been felt by certain projects, and that any reduction  in their ability to sustain the privatized housing projects over the term of  their 50-year leases will result in the degradation of the housing, leaving  the homes less marketable. Unlike challenges that may affect one or a  few projects, the reductions in the basic allowance for housing affect all  projects, since basic allowance for housing is a basis for revenue for all of  the projects.", "DOD has established that the amount charged to servicemembers for  renting housing on base was equal to their basic allowance for housing  rate. Thus, the privatized housing projects were developed with the  assumption that they would receive full basic allowance for housing  payments as rent, according to officials from each military department.  However, at DOD\u2019s request, Congress included provisions in the Carl  Levin and Howard P. \u201cBuck\u201d McKeon National Defense Authorization Act  for Fiscal Year 2015 and National Defense Authorization Act for Fiscal  Year 2016 that authorized the department to reduce the housing  allowance to servicemembers below the Defense Travel Management  Office\u2019s typical basic allowance for housing calculations, starting with a 1  percent reduction in 2015 and reaching a 5 percent total reduction by  2019. As of 2018, the department has reduced basic allowance for  housing payments by 4 percent. Because of this reduction, the revenue  that projects receive from rent payments has decreased at certain  projects. However, according to officials representing the military  departments, the reductions in the basic allowance for housing will not be  the sole reason that any project is struggling. A project may be struggling  due to other challenges the military departments identified, examples of  which we describe in this report, such as aging utility infrastructure.  However, officials representing each military department stated that the  reductions will have a compounding effect on projects that are facing  other challenges."], "subsections": []}, {"section_title": "DOD Has Not Fully Assessed the Effects of the Reductions in the Basic Allowance for Housing That Began in 2015", "paragraphs": ["An August 2015 memorandum issued by ASD (EI&E) directed the military  departments to complete a thorough review of their privatized housing  portfolios. Additionally, the military departments were to provide a report  outlining any effects of changes in the basic allowance for housing on  their portfolios. However, the military departments have not fully assessed  the effects of the basic allowance for housing reductions. Instead, in  response to this memorandum, the military departments completed some  analysis on the effects of the reductions in the basic allowance for  housing and provided reports outlining the projected effects of the  reductions on their privatized housing portfolios. Each military department  reported that the reductions in the basic allowance for housing would  decrease project revenue, and each provided estimates across multiple  scenarios. Specifically:", "The Army\u2019s September 2015 report projected an average decrease in  long-term sustainment accounts of $104 million per project through  2039 based on a 5 percent reduction in basic allowance for housing  rates. Out of the 35 projects in the Army\u2019s privatized housing  portfolio, the report looked at the 15 projects projected to lose 5  percent or more of their assigned personnel and estimated the funds  available to support each project from 2015 until the end of 2039.", "The Navy\u2019s October 2015 report projected a decrease in long-term  sustainment accounts across the portfolio of privatized housing  projects of $2 billion based on a 5 percent reduction in basic  allowance for housing rates. The report also summarized any  projected effects in the first year of reductions on the debt coverage  ratio and specified the calendar years when sustainment shortfalls  could begin to occur per project.", "The Air Force\u2019s November 2015 report projected a decrease of $48  million per year across the portfolio based on a 5 percent reduction in  basic allowance for housing rates. The report indicated that project  ratings could begin to be affected in the same year as the reductions  in the basic allowance for housing were implemented, and that  funding for long-term sustainment would be diminished.", "However, DOD does not have the information needed to fully assess the  effects of the reductions that began in 2015, because it did not direct the  military departments to specify in their reports the significance of the  effects of the reductions on each individual project. The August 2015 ASD  (EI&E) memorandum directed the military departments to provide reports  with a \u201cthorough review,\u201d but it did not specify the inclusion of information  that would detail the extent of the effects on the sustainment of each  individual project. As a result, the reports did not fully assess specific  effects on each project to enable the identification of and response to  specific risks. For example, generally, the reports did not include certain  information for the full term of all projects, as detailed below:  two of the reports did not include information on when deficits related  to reductions in the basic allowance for housing will occur per  project;  two of the reports did not include information on the decrease in the  sustainment accounts due to reductions in the basic allowance for  housing versus the amount that the project requires for planned  sustainment per project; and none of the reports included information on the likely effects of  particular sustainment funding deficits (for example, how many units  will forgo needed renovations or rebuilds).", "In addition, the military departments did not identify specific actions in the  reports to respond to particular, identified shortfalls for individual projects  resulting from reductions in the basic allowance for housing. In its August  2015 memorandum, ASD (EI&E) noted that individual projects may have  different solutions to address the effect of the reductions in the basic  allowance for housing. The military departments did not outline solutions  for each individual project but, as requested by ASD (EI&E), proposed  recommendations in their reports to mitigate the overall effects of the  reductions in the basic allowance for housing by charging  servicemembers the out-of-pocket rate. The out-of-pocket rate reflects a  servicemember cost-sharing adjustment that would require the  servicemember to pay the amount by which his or her allowance was  reduced.", "However, neither DOD nor the military departments have taken action to  address the reports\u2019 recommendations, nor have they determined any  other courses of action for individual projects in response to the  reductions in basic allowance for housing. While the Army has a policy  that would allow individual projects to propose charging servicemembers  the out-of-pocket amount, subject to Army approval, the policy states that  the Army strongly prefers that projects not charge servicemembers.  According to Army officials, none of the projects had done so as of  August 2017. Further, according to privatized housing developers  representing Army projects, they have not proposed charging the out-of- pocket rate because doing so could result in a reduction in occupancy at  that project, as servicemembers would begin to look for other housing.  Unlike the Army, the Navy and Air Force do not have a policy that would  allow developers to charge the out-of-pocket amount. According to ASD  (EI&E), Navy and Air Force officials stated that their lack of policy is  based in large part on the fact that servicemembers from all three military  departments reside at nearly every installation, and that without having  written assurance that the other military departments will also charge the  out-of-pocket rate, the Air Force and Navy cannot agree to do so.", "Standards for Internal Control in the Federal Government states that  management should analyze the identified risks to estimate their  significance, which provides a basis for responding to the risks, and  design responses to the analyzed risks so that risks are within the defined  risk tolerance for the defined objective. In its August 2015  memorandum, ASD (EI&E) noted that the reductions in the basic  allowance for housing could create shortfalls that in turn could lower the  quality of homes in privatized housing communities. However, DOD has  not fully assessed the significance of this risk by considering the  magnitude of impact, the likelihood of occurrence, and the nature of the  risk because, generally, the reports do not include certain information for  the full term of all projects, as detailed above. Specifically, DOD has not  fully assessed the significance of the risk of the reductions in the basic  allowance for housing by considering how the reductions will affect the  quality of its housing. If DOD does not fully assess the effects of the  reductions in the basic allowance for housing, DOD and Congress will not  be fully informed before making decisions that could affect all of the  projects. Furthermore, if DOD does not respond to the risk of reduced  sustainment funds by designing specific actions, DOD and the military  departments may not be well positioned to reduce any risks and meet  their objective of providing quality housing for servicemembers."], "subsections": []}, {"section_title": "The Military Departments Have Identified Various Challenges to Sustaining Their Privatized Housing Projects", "paragraphs": ["The military departments have identified various challenges that could  affect the financial condition and future sustainment of their privatized  housing projects. Examples of these challenges include the following:", "Reductions in assigned personnel at installations have reduced  occupancy rates: Information from military department officials shows  that the loss of personnel assigned to an installation has reduced  occupancy at some projects. Reductions in assigned personnel can  occur at an installation because of large-scale troop reductions or the  inactivation of units. The decrease in occupancy at some projects has  led to revenue and cash flow challenges. For example, Army officials  noted that the occupancy rate dropped from about 95 percent to about  70 percent at the Fort Knox project in Kentucky in 2014 when a unit  was inactivated. This drop in occupancy resulted in challenges for the  privatized housing project because the number and type of housing  units originally built were determined on the basis of the unit\u2019s  remaining at the installation.", "Aging utility infrastructure has increased sustainment costs, resulting  in reduced cash flows for some projects: According to DOD and  officials representing the military departments, the costs of  maintaining infrastructure for utilities has reduced cash flows for some  projects. In some privatized housing agreements, the military  departments transferred responsibility for utility infrastructure to the  projects. According to DOD and military department officials, this  oversight and maintenance have been more costly than project  owners had expected. Air Force officials stated that aging utility  infrastructure is not something the projects are equipped to handle  because there is not enough revenue in their project structures to  cover the costs of maintaining the infrastructure. Air Force officials  said that they noticed the challenges related to transferring utility  infrastructure in the earlier projects and that they made a decision to  stop transferring infrastructure to developers in later projects.  Moreover, according to Air Force officials, some project owners are  now asking for the military departments to take back the  infrastructure. For example, the Air Force agreed to take back some  of the gas and electric infrastructure at the Air Force Academy project  in Colorado as part of a financial restructuring.", "Perceived disconnects between basic allowance for housing  calculations and market rates: Military department officials and  privatized housing developers perceive the Defense Travel  Management Office\u2019s basic allowance for housing calculations as  challenging because they believe that the calculations are  unpredictable and do not always reflect the realities of local markets.  Officials in each military department stated that the data used for the  calculations sometimes do not accurately reflect the local market  surrounding the project. For example, officials from the Navy\u2019s  Midwest project noted that the calculation for Millington, Tennessee\u2014 an area covered by the Midwest project\u2014was higher than that for the  Chicago area of the project in 2014\u2014an area that they felt should  have had the higher costs of the two. Additionally, according to  Army officials, basic allowance for housing rates fluctuate at certain  projects from year to year and do not reflect the local market. For  example, the average basic allowance for housing rate for Fort  Huachuca in Arizona dropped 11 percent from 2014 to 2015,  increased 4.6 percent in 2016, and dropped 9 percent in 2017. Army  officials stated that these fluctuations did not match rental costs in the  local market.", "Actual costs of utilities in some locations are not covered by the basic  allowance for housing utility rates: Officials representing two military  departments stated that the Defense Travel Management Office\u2019s  basic allowance for housing calculations do not accurately reflect the  actual costs of utilities. According to Army officials, the utility  component of the Defense Travel Management Office\u2019s calculations  does not cover the actual cost of utilities for project homes at some  locations. This difference can result when the surveys for utility costs  are from homes in the local community that are not comparable to  those on base. For example, in Fairbanks, Alaska\u2014where the  Army\u2019s Fort Wainwright/Greely project is located\u2014off-base homes get  the majority of their heat from wood stoves that report no cost element  to the surveys used by the Defense Travel Management Office. By  underreporting or not otherwise adjusting for these costs, according to  Army officials, the basic allowance for housing calculations fail to  account for the funds necessary to cover the costs of traditional,  metered utilities.", "Unexpected project expenses can reduce cash flows for some  projects: Officials representing two military departments stated that  unexpected expenses can be a challenge for some projects. These  expenses can occur because of unexpected events, such as weather  events, environmental damage, or unexpected litigation. For example,  the Navy\u2019s Mid-Atlantic project has experienced unexpected expenses  related to water intrusion and mold issues and the ensuing litigation,  causing fewer funds to flow to the project\u2019s sustainment accounts.  There are also expenses for snow removal, hurricanes, and flooding.  Navy officials stated that they did not anticipate a lot of sustainment  work in the first 5 to 10 years of the projects, but needs have arisen  due to these unexpected events. Additionally, according to information  from the Navy\u2019s New Orleans project in Louisiana, hurricane and  tropical storm damage may drain $1.5 million to $2 million from the  project\u2019s sustainment accounts every 3 to 4 years.", "Determining the amount DOD must budget for a project may affect  future expansions or changes to existing projects: Military department  officials also noted potential challenges with the way that the Office of  Management and Budget will be scoring future projects. Scoring  seeks to determine the cost that should be recognized and recorded  as an obligation of DOD for budgeting purposes at the time a contract  is signed. When the privatized housing initiative began, developers  sought private borrowing, knowing that only the government funding  would be scored because a 1997 Office of Management and Budget  memorandum established that private funds for the projects would not  be scored as government participation or activity. However,  according to a 2005 Office of Management and Budget memorandum,  as of September 30, 2010, new privatized housing projects and  expansions to existing projects using the limited liability or corporation  approach are subject to traditional scoring rules. These rules require  projects proposing the use of a purely private entity to be scored as a  private activity, and projects proposing the use of a co-owned limited  liability corporation to be scored as government activity. Some  military department and developer officials have expressed concern  with the uncertainties surrounding future scoring. Specifically, military  department officials and developers are concerned that the reversion  to traditional scoring will affect any plans for obtaining mid-term loans  and any potential expansions or other changes to existing projects.  Office of Management and Budget officials stated that any future  federal government contributions to privatized housing projects in the  form of direct loans or loan guarantees will be fully scored at the value  of the loan or loan guarantee."], "subsections": []}, {"section_title": "Privatized Housing Projects Have Various Options to Mitigate Financial Challenges", "paragraphs": ["Military department and developer officials have identified various options  to address financial challenges such as those previously discussed in this  report. These include actions to increase revenues, actions to reduce  expenses, and extraordinary measures to improve project financial  conditions. As the project manager, the developer may act unilaterally in  some cases, and other actions may require approval from the military  department, coordination with ASD (EI&E), or notification to the Office of  Management and Budget. Although these actions may improve a  project\u2019s financial condition, there are limitations, such as the potential to  reduce tenant satisfaction and therefore occupancy levels, or costs to the  government. The extent to which any of these options will be sufficient to  address a particular project\u2019s financial challenges depends on the degree  of the financial challenge and the effectiveness of the option. For  example, a project may seek to raise revenue by advertising to tenants to  increase occupancy, but the response may be insufficient. Likewise, a  project may engage in a financial restructuring to return the project to a  healthy financial footing, but ongoing low occupancy or unexpectedly high  expenses may continue to challenge the project financially."], "subsections": [{"section_title": "Actions to Increase Revenue", "paragraphs": ["Developers and military departments cited several options for increasing  project revenues, including the following examples:  Renting to tenants other than active-duty servicemembers: The military  departments have the option to increase project revenues by allowing  projects to rent to tenants other than active-duty servicemembers. The  Navy and Air Force have policies that determine the priority ordering of  types of tenants to whom a project can rent. An Army official stated that  the Army does not have a department policy, but allows projects to rent to  tenants other than active-duty servicemembers based on project  agreements. For example, a project may offer to rent to tenant groups in  the following order: active-duty personnel, reserve-duty personnel, DOD  civilian employees, military retirees, and general public tenants. As of  June 2017, 33 of 35 Army privatized housing projects were renting to  tenants other than active-duty servicemembers; 14 of 16 Navy and  Marine Corps projects were renting to tenants other than active-duty  servicemembers; and 28 of 32 Air Force projects were renting to tenants  other than active-duty servicemembers. While renting to tenants other  than active-duty servicemembers can increase revenue, the usefulness of  this action is limited when a project is already operating at a high rate of  occupancy or when additional demand is limited.", "Other steps to increase occupancy: Developers can take other actions to  increase project occupancy, to include increased advertising, promotions,  or offering rent concessions. While these actions can increase  occupancy, advertising adds costs to project operations, and rent  concessions lower the per-unit revenue earned for the project. Figure 2  shows an advertisement by a privatized housing project seeking tenants  outside of Naval Station Norfolk in Virginia.", "Charging fees for services: Developers stated that they have considered  charging fees for services that had previously been provided free of  charge\u2014such as community center rentals and pet fees\u2014as another  means of increasing project revenue. However, a developer\u2019s ability to  charge fees varies based on project agreements and military department  policies. Developers also need to consider potentially negative effects on  tenant satisfaction."], "subsections": []}, {"section_title": "Actions to Reduce Expenses", "paragraphs": ["Developers and military departments cited several options for reducing  project expenses, including the following examples:  Reducing or eliminating services: Projects can reduce or eliminate project  services as a means of reducing operating expenses. Officials have taken  these steps at certain Army, Navy, and Air Force projects. For example,  Navy officials told us that the developer cut portions of the landscaping  program at the Navy\u2019s Midwest project in Illinois, Indiana, and Tennessee  and eliminated one 24-hour service desk at the Navy\u2019s Hampton Roads  Unaccompanied Housing project in Virginia in order to reduce  expenses. While these actions reduce operating expenses, providing  reduced or fewer services may make a project less marketable or  desirable to tenants and can lead to declines in tenant satisfaction and  occupancy.", "Deferring routine maintenance: In response to financial distress, projects  can curtail routine maintenance to realize savings. For example, when  Nellis Air Force Base in Nevada was facing cash flow challenges, officials  told us that the project curtailed its preventive maintenance program that  includes the inspection and repair of heating, ventilation, and air  conditioning systems; water heaters; plumbing and plumbing fixtures;  roofs; and carpeting. These expense-saving measures help operating  costs in the near term, but deferring maintenance can reduce the quality  of the housing, reduce tenant satisfaction, and increase expenses over  time by reducing the effective life of the items not being maintained.", "Delaying sustainment: Another option to reduce project expenses is to  delay certain sustainment actions. At the Army\u2019s Fort Knox project in  Kentucky, officials stated that the sustainment plan initially included the  demolition and rebuild of each unit or full renovation of historic units over  the 50-year project lease; however, they no longer project that there will  be funds to complete those improvements. Instead of full rebuilds,  officials stated that they expect to conduct piecemeal renovations. Over  time, deferred sustainment can lead to reduced housing quality, in turn  reducing occupancy levels and tenant satisfaction, and thereby reducing  project revenues."], "subsections": []}, {"section_title": "Extraordinary Measures", "paragraphs": ["Developers and the military departments can also take various  extraordinary measures to improve the financial condition of a project.  Extraordinary measures are options that can alter project agreements or  project financial arrangements with the military department. These  options may require approval from the military department, coordination  with ASD (EI&E), or notification to the Office of Management and Budget.  Examples of such actions include the following:  Retaining and renting excess units: Projects can earn additional revenue  by retaining and renting units that were originally slated for demolition.  Some project plans included the transfer of existing housing units,  deemed in excess of project needs, to the developer with the intention of  demolishing them. For retaining and renting excess units to be an option,  a project must have some excess units slated for demolition and sufficient  demand for their rental.", "Reducing project scope: Projects may reduce the scope of planned work  to reduce potential expenditures or improve the project\u2019s financial state.  Reductions in scope may be in the form of the number of units to be built,  renovated, or demolished. For example, following the inactivation of a  brigade combat team at Fort Knox in Kentucky, the project made plans to  eliminate 280 units due to changes in servicemember housing needs from  when the project originally started construction.", "Deferring fees: Developers can defer project fees due to them, such as  fees for construction or management services, so that more funds are  available for other project needs. Developers agreed to defer fees for  several Navy and Air Force projects as a means to ensure adequate  funding for the completion of project construction. Projects can defer fees  to meet shortfalls in project funding, but the deferral can place additional  financial strain on a project, as funds later must be used to repay the  deferred fees.", "Making additional investment contributions: Developers can make  additional financial investments in the project to cover underfunded  project expenses. For example, Air Force officials stated that developers  have made additional financial investments at the Robins Air Force Base I  project in Georgia to ensure that the project had sufficient funds to make  debt payments. According to officials, the Air Force agreed to the  additional investment contributions on the basis that they be repaid from  any future excess cash flows.", "Returning assets: In some instances, project assets can cost the  developer more than anticipated due to the expenses necessary to  maintain the asset. To alleviate the resulting financial challenges, projects  can transfer ownership of the assets back to the military departments. For  example, the Air Force took back five historic units from the Robins II  project in Georgia that, according to officials, were not financially viable  within the project and that the Air Force wanted for purposes other than  housing. When assets are returned to a military department, the military  department may have to begin budgeting for their costs through its annual  budgeting process.", "Transferring assets: The military department can transfer assets to a  project that developers can sell to fund projects. For example, the Navy  transferred land and units to the Navy\u2019s Midwest project with the intention  that the developer would sell the land and units to supplement project  funding. Asset sales can be unreliable funding sources if assets sell for  less than the project expected.", "Financial restructurings: Military departments can seek to financially  restructure projects to improve their financial condition. This process  requires the military departments to renegotiate project agreements with  the developer to improve financial condition. For example, the Air Force  recently completed financial restructurings of the Nellis Air Force Base  project in Nevada and the Air Combat Command Group II project, which  comprises Davis-Monthan Air Force Base in Arizona and Holloman Air  Force Base in New Mexico. Air Force and developer officials stated that  the Nellis Air Force Base project began to have problems making debt  payments because of declines in basic allowance for housing payments  associated with falling local rental market prices. For Nellis, the Air Force  and the developer negotiated a financial restructuring whereby the Air  Force reduced the interest rate on the government\u2019s loan to the project  and extended the loan\u2019s maturity date. The Air Force also gave the  developer an additional portion of project profits. In exchange, the  developer agreed to forgive an outstanding balance of payments due to  them.", "An ASD (EI&E) official stated that financial restructuring agreements may  require notification to the Office of Management and Budget, which  scores changes to privatized military housing projects. Restructurings can  provide relief to projects that are facing imminent default or longer-term  sustainment funding shortfalls, but they can also add financial costs to the  military department. The ability to financially restructure also may be  limited by the willingness of the developer to give concessions during  negotiations and the ability to obtain the approvals necessary to complete  the restructure."], "subsections": []}]}]}, {"section_title": "DOD Has Not Defined When Project Changes Require Advance Notice or Defined Risk Tolerance Levels for Not Achieving Housing Goals", "paragraphs": ["DOD has not clearly defined in its policy the circumstances in which ASD  (EI&E), as the DOD-wide housing program manager, should receive  advance notice of changes to address financial challenges in privatized  military housing projects. In addition, DOD has not defined its risk  tolerance levels for achieving its goal of providing quality housing to  servicemembers that reflects community living standards\u2014in particular,  its tolerance for declining levels of funding for future sustainment that can  pose a risk to this goal."], "subsections": [{"section_title": "The Military Departments Have Varied Understandings of When Privatized Military Housing Project Changes Require Notification", "paragraphs": ["The military departments have varied understandings of what changes to  privatizing housing projects require notification to ASD (EI&E)\u2014DOD\u2019s  program manager for privatized housing. Military department officials  provided somewhat differing explanations when asked about the types of  project changes that require notification to ASD (EI&E). Specifically:", "Army officials stated that the Army provides notice any time there is a  planned use of or change to a project involving privatized military  housing authorities related to government loans and loan guarantees,  the leasing of housing units, or government investments in privatized  housing projects, as well as any action that requires congressional  notification. The Army also notifies the office if a project\u2019s number of  units is expanded relative to its approved plan.", "Navy officials stated that they provide notice any time there is an  action that requires congressional notification, any time there are  project changes with a potential effect on military housing privatization  authorities, any time new projects or project phases are considered,  and any changes to a project\u2019s previously approved scope, as well as  any time ASD (EI&E) requests notification.", "Air Force officials stated that notification is required when the military  department makes a material change to a project that has a financial  or scope effect relative to the details that were originally approved.", "Officials added that any project changes that require approval from  the Office of Management and Budget would require ASD (EI&E)  concurrence.", "Under current DOD housing policy, ASD (EI&E) is required to notify the  Office of Management and Budget of any significant changes to privatized  housing projects that may require scoring consideration. However, DOD  policy does not establish the circumstances in which the military  departments should notify ASD (EI&E) of significant project changes, and  it does not define which project changes qualify as significant. DOD  guidance requires ASD (EI&E) to provide guidance and general  procedures relating to housing privatization. An ASD (EI&E) official also  told us that the military departments are providing notification of project  changes based on limited guidance, and that ASD (EI&E) is conducting  oversight on a case-by-case basis. Moreover, Office of Management and  Budget officials stated that they will analyze project changes to determine  whether an action would constitute a project expansion significant enough  to require scoring.", "Standards for Internal Control in the Federal Government states that  management should develop policies that address the entity\u2019s objective to  achieve an effective internal control system. In addition, management  should obtain and internally communicate the necessary quality  information to achieve the entity\u2019s objectives, while communicating quality  information down and across reporting lines to enable personnel to  perform key roles. Moreover, the standards state that the oversight body  receives quality information that flows up from the reporting lines from  management and personnel that is necessary for effective oversight of  internal control. However, DOD\u2019s guidance does not clearly define the  types of project changes for which ASD (EI&E) requires prior notification  from the military departments, which could result in ASD (EI&E) not being  notified of project changes. ASD (EI&E) has draft guidance on oversight  and management of privatized military housing, which would define the  circumstances under which military departments should notify ASD  (EI&E) of project changes, but officials stated that they have not  established a time frame for issuing this policy. An ASD (EI&E) official  stated that the policy is being coordinated with the military departments,  and this has resulted in delays to its issuance. Without issuing guidance  to clearly define and communicate to the military departments the  conditions that require notification, the military departments will not be  able to consistently fulfill their responsibilities and ASD (EI&E) will not be  able to completely fulfill its oversight function."], "subsections": []}, {"section_title": "DOD Has Not Defined Its Tolerance for Risk to Privatized Housing Goal", "paragraphs": ["Office of Management and Budget guidance on the preparation,  submission, and execution of the federal budget suggests that public- private partnerships such as privatized military housing projects contain  some elements of risk to the government. For example, the projects are  frequently constructed on government land and they include government  financing in the form of direct investments or direct loans. However, the  military departments have not defined their risk tolerance levels for  privatized housing relative to the program\u2019s objective of providing quality  housing that reflects community living standards. Specifically, the Army  and Navy have not identified the level of risk they are willing to accept in  their ability to fund future sustainment. Army officials stated that the Army  is not responsible for taking any actions to restore a project\u2019s financial  condition. Navy officials stated that they do not use a risk model, and that  one is not required by DOD. The Air Force has not formally defined its  risk tolerance levels for future sustainment, but it has identified the  circumstances in which projected sustainment funding deficits will cause it  to take extraordinary measures\u2014specifically, to seek a financial  restructuring of the project. For example, if future planned maintenance is  funded at less than 85 percent of estimated needs within the next 5-year  period, the Air Force may seek a financial restructuring, according to Air  Force officials. Likewise, according to Air Force officials, if planned major  renovations and rebuilding are funded at below 30 percent of estimated  needs, the Air Force will seek a financial restructuring.", "Standards for Internal Control in the Federal Government states that  agencies need to define risk tolerance relative to their program  objectives. Risk tolerance is the acceptable level of variation in  performance relative to the achievement of objectives. However, DOD  has not required the military departments to define their risk tolerances  regarding the future sustainability of the projects. ASD (EI&E) officials told  us that they are considering establishing parameters for risk tolerance for  the military departments, but have not yet done so. Officials also noted  that DOD had been focused on the initial development periods of the  privatized housing projects, whereas it is now shifting focus to  sustainment as the projects have moved from the initial development  stage. Given this focus on sustainment, if the military departments do not  define their risk tolerances regarding the future sustainability of their  privatized housing projects, they will lack a consistent basis on which to  determine when the risks to achieving their objectives require responses,  and the nature of those responses."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD\u2019s ability to maintain quality housing is critical, because housing can  affect retention, readiness, and servicemembers\u2019 quality of life. Since  Congress provided the department with authorities to do so, DOD has  worked with private developers to improve the quality of housing available  on military installations. The military departments regularly review the  financial condition of their privatized housing projects, but they calculate a  basic measure of current financial health\u2014the debt coverage ratio\u2014 differently among their projects, which limits the ability of ASD (EI&E),  and in turn Congress, to compare project financial health based on this  measure without additional information to give the data full context. DOD  has also previously reported such information for differing time periods in  different reports to Congress, further limiting the data\u2019s usefulness, and  has not issued revised guidance on privatized housing to help ensure  consistent reporting. The military departments also vary in the extent and  manner in which they oversee measures of future sustainment of their  privatized housing projects. DOD has not reported measures of future  sustainment to Congress, or issued a report on the financial condition of  privatized housing projects, since the report covering fiscal year 2014.  Without consistent and up-to-date information on the financial condition of  projects, DOD and Congress will not be able to conduct informed and  effective oversight of the projects.", "The military departments have identified the reductions in basic allowance  for housing as one of the various challenges affecting the financial  condition of privatized housing projects. At the request of ASD (EI&E), the  military departments have provided analysis on the effects of the  reductions on their portfolios, but they have not been required to fully  assess the significance of the effects of the reductions on the future  sustainment of each of their projects, or identified specific actions to  respond to the reductions, as detailed by federal internal control  standards related to risk assessment. Without complete assessment of  the risks of the reductions in the basic allowance for housing on each  project, and developing any appropriate courses of action, DOD and the  military departments will not be able to know when to take action to  address deficits in the funding of long-term sustainment accounts that  could lead to diminishment in the quality of military housing. Additionally,  DOD and Congress will not be fully informed of the risks and possible  effects before making decisions that affect all of the privatized housing  projects\u2014such as approving any further reductions in the basic allowance  for housing.", "The military departments have various options for attempting to improve  the financial condition of their privatized housing projects, but some of  these options require prior notice to ASD (EI&E). The absence of clearly  defined requirements as to when this office should be notified of project  changes to address financial challenges has led to varied understandings  among the military departments about when notification should occur.  Without a clear identification of when ASD (EI&E) should be notified of  project changes, the military departments will not have consistent and  clear guidance as to when this office needs to be informed prior to an  action being taken by a military department regarding its privatized  housing projects, and thus, the oversight office may not be fully informed  on the projects it intends to oversee. In addition, DOD has not required  the military departments to define their tolerances for risk to the goal of  providing quality housing to servicemembers in line with community  standards, including its ability to fund future sustainment needs. Without  doing so, DOD will not have key information needed to determine when  the risks to achieving their objectives require responses, or to determine  the nature of the responses."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of eight recommendations to the Secretary of  Defense and the Assistant Secretary of Defense for Energy, Installations,  and Environment. The Secretary of Defense should ensure that:  The Assistant Secretary of Defense for Energy, Installations, and  Environment provides additional contextual information in future reports to  Congress on privatized military housing to identify any differences in the  calculation of debt coverage ratios and the effect of these differences on  their comparability. (Recommendation 1)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment revises its existing guidance on privatized housing to ensure  that financial data on privatized military housing projects reported to  Congress, such as debt coverage ratios, are consistent and comparable  in terms of the time periods of the data collected. (Recommendation 2)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment revises its guidance on privatized military housing to include  a requirement that the military departments incorporate measures of  future sustainment into their assessments of privatized housing projects.  (Recommendation 3)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment takes steps to resume issuing required reports to Congress  on the financial condition of privatized housing in a timely manner.  (Recommendation 4)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment reports financial information on future sustainment of each  privatized housing project in its reports to Congress. (Recommendation 5)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment provides guidance directing the military departments to  assess the significance of the specific risks to individual privatized  housing projects resulting from the reductions in the basic allowance for  housing and identify courses of action to respond to any risks based on  their significance. (Recommendation 6)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment finalizes guidance in a timely manner that clearly defines the  circumstances in which the military departments should provide  notification of project changes and which types of project changes require  prior notification or prior approval. (Recommendation 7)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment revises its guidance on privatized military housing to require  the military departments to define their risk tolerances regarding the  future sustainability of their privatized housing projects.  (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to DOD and  the Office of Management and Budget. We initially made our  recommendations to the Assistant Secretary of Defense for Energy,  Installations, and Environment. We have updated our recommendations  to also include the Secretary of Defense. In written comments, DOD  concurred with each of our recommendations and identified actions it  plans to take to implement them. DOD\u2019s comments are reprinted in their  entirety in appendix III. DOD and the Office of Management and Budget  also provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Office of Management and  Budget. In addition, the report is available at no charge on our website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Brian Lepore at (202) 512-4523 or leporeb@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Senate Report 114-255 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2017 included a provision for us to  assess the solvency of each privatized military housing project in the  United States and the effect of recent changes in basic allowance for  housing on long-term project sustainability. This report examines the  extent to which the Department of Defense (DOD) has (1) assessed and  reported the financial condition of each privatized housing project; (2)  assessed the effects of recent reductions in the basic allowance for  housing on privatized housing, and identified any other challenges and  options to address challenges; and (3) defined notification requirements  for project changes and risk tolerances relative to privatized housing  goals.", "For all objectives, we scoped our review to include all privatized housing  projects in each military department. We excluded privatized temporary  lodging because its financial structure is substantially different than all  other privatized housing projects. We reviewed relevant policies and  collected information by interviewing officials from the Office of the  Secretary of Defense (the Office of the Assistant Secretary of Defense for  Energy, Installations, and Environment); the Army (Office of the Assistant  Secretary of the Army for Installations, Energy, and Environment, and the  Office of the Assistant Chief of Staff for Installation Management); the  Navy (Office of the Deputy Assistant Secretary of the Navy for  Installations and Facilities, the Commander, Navy Installations Command,  and the Naval Facilities Engineering Command); the Marine Corps  (Marine Corps Installations Command); and the Air Force (Office of the  Deputy Assistant Secretary of the Air Force for Installations, and the Air  Force Civil Engineering Center).", "Additionally, we met with the five leading developers of privatized housing  projects: Balfour Beatty, Corvias, Lend Lease, Lincoln Military Housing,  and Hunt Companies. We also visited a non-generalizable sample of five  privatized housing projects to interview on-site military department  officials and tour the housing. For this sample, we selected one or two  projects from each of the military departments, emphasizing projects that  had identified financial difficulties or were located in close proximity to  military department oversight offices. We made site visits to the following  areas and installations: Norfolk, Virginia, where we met with officials of  the Naval Facilities Engineering Command and visited the Homeport  Hampton Roads and Mid-Atlantic Military Family Communities privatized  housing projects; San Antonio, Texas, where we met with officials at the  Air Force Civil Engineer Center; Las Vegas, Nevada, where we met with  officials and visited the privatized housing project at Nellis Air Force Base;  Fort Knox, Kentucky, where we met with officials and visited the  privatized housing project at the Army\u2019s Fort Knox; and Fort Meade,  Maryland, where we met with officials and visited the privatized housing  project at Fort Meade.", "To determine the extent to which DOD has assessed and reported the  financial condition of each privatized housing project, we reviewed DOD  guidance on the oversight and management of privatized military  housing. We also reviewed documentation used by each military  department to oversee the financial condition of each of their privatized  housing projects, and each of their portfolios as a whole through portfolio- wide oversight reports, monthly and quarterly reports on each privatized  housing project, and audited project financial statements from fiscal years  2013 to 2016. We reviewed DOD\u2019s fiscal year 2013 and 2014 annual  reports to Congress on privatized housing, as well as data for privatized  housing projects from fiscal years 2013 through 2016. We also met with  officials involved in the oversight and management of privatized housing  in the Office of the Assistant Secretary of Defense for Energy,  Installations, and Environment (ASD (EI&E)), and each of the military  departments to discuss their oversight and management of the financial  condition of privatized housing projects. Additionally, we requested data  for each privatized housing project, including audited financial statements,  and examined the differences among and within the military departments  in determining the solvency of their projects. For each military  department, we assessed the number of projects doing financially well  and those not doing financially well through correspondence with  knowledgeable officials at each military department and found those  department-level numbers sufficiently reliable to report the number of  projects in each financial category. We compared DOD\u2019s and the military  departments\u2019 actions to assess and report on the financial condition of  their privatized housing projects with DOD\u2019s housing policy and with  standards for quality information in Standards for Internal Control in the  Federal Government to determine whether DOD has fully assessed and  reported the financial condition of each project.", "To determine the extent to which DOD has assessed the effects of recent  reductions in the basic allowance for housing on privatized housing and  identified any other challenges and options to address those challenges,  we reviewed DOD guidance on applying reductions in basic allowance for  housing to privatized military housing and other DOD documentation on  the reductions in basic allowance for housing payments. Specifically, we  reviewed the military departments\u2019 reports on the projected effects of the  reductions in the basic allowance for housing on their portfolios and  quarterly project oversight reports from fiscal years 2016 and 2017.  Additionally, we interviewed officials at the Defense Travel Management  Office for information on the basic allowance for housing calculations and  military department officials for their perspectives on the reductions in  basic allowance for housing. We compared the military department  reports on the projected effects of the reductions in basic allowance for  housing with standards for risk assessment in Standards for Internal  Control in the Federal Government to determine whether DOD has fully  assessed the effects of the reductions. We determined challenges  identified by DOD and the military departments and options to address  challenges through interviews with ASD (EI&E) officials, officials from  each military department involved with privatized housing, and officials at  select installations involved in privatized housing. We also met with  officials of five leading privatized housing developers for their  perspectives on challenges to their privatized housing and options to  address them. Additionally, we reviewed quarterly project oversight  reports to identify challenges associated with privatized housing. We  reported examples of challenges that were identified by at least two of the  three military departments. Additionally, we assessed the number of  projects renting to tenants other than active-duty servicemembers by  obtaining information from each military department and found those  department-level numbers sufficiently reliable to report the number of  projects that were renting to these tenants. We reviewed quarterly project  oversight reports to identify the options for addressing challenges, and  DOD\u2019s policy guidance on privatized housing responsibilities to determine  the level of authority needed for the options.", "To determine the extent to which DOD has defined notification  requirements for project changes and risk tolerances relative to privatized  housing goals, we reviewed DOD guidance on oversight and  management of privatized military housing, interviewed DOD and  developer officials responsible for privatized housing, and reviewed DOD  documentation. Specifically, we reviewed DOD housing policies and  guidance, reviewed military department guidance on overseeing  privatized housing, and interviewed military department officials familiar  with notification processes for changes to privatized housing projects and  approaches to managing risks to privatized housing projects. We also  interviewed officials in the Office of Management and Budget familiar with  privatized military housing. We compared DOD\u2019s policy guidance on  privatized housing responsibilities with standards related to internal  communication in Standards for Internal Control in the Federal  Government to determine the level of notification needed. We also  compared the extent to which DOD has defined risk tolerance for  privatized housing with federal internal control standards related to risk  assessment.", "We conducted this performance audit from December 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Complete Listing of the Department of Defense\u2019s Privatized Military Housing Projects as of October 2017", "paragraphs": ["The following is a complete listing of the Department of Defense\u2019s 82  privatized military housing projects, as of October 2017. The projects can  consist of one or multiple installations."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kristy Williams (Assistant  Director), Tracy Barnes, Ronnie Bergman, Timothy Carr, Kelly Friedman,  Simon Hirschfeld, Terence Lam, Amie Lesser, Jeffrey Love, Richard  Powelson, Nancy Santucci, Mike Silver, and Cheryl Weissman made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Infrastructure: Army Has a Process to Manage Litigation Costs  for the Military Housing Privatization Initiative. GAO-14-327. Washington,  D.C.: April 3, 2014.", "Military Housing: Information on the Privatization of Unaccompanied  Personnel Housing. GAO-14-313. Washington, D.C.: March 18, 2014.", "Military Housing: Enhancements Needed to Housing Allowance Process  and Information Sharing among Services. GAO-11-462. Washington,  D.C.: May 16, 2011.", "Military Housing Privatization: DOD Faces New Challenges Due to  Significant Growth at Some Installations and Recent Turmoil in the  Financial Markets. GAO-09-352. Washington, D.C.: May 15, 2009.", "Military Housing: Management Issues Require Attention as the  Privatization Program Matures. GAO-06-438. Washington, D.C.: April 28,  2006.", "Military Housing: Further Improvement Needed in Requirements  Determination and Program Review. GAO-04-556. Washington, D.C.:  May 19, 2004.", "Military Housing: Better Reporting Needed on the Status of the  Privatization Program and the Costs of Its Consultants. GAO-04-111.  Washington, D.C.: October 9, 2003.", "Military Housing: Opportunities That Should Be Explored to Improve  Housing and Reduce Costs for Unmarried Junior Servicemembers.  GAO-03-602. Washington, D.C.: June 10, 2003.", "Military Housing: Management Improvements Needed as the Pace of  Privatization Quickens. GAO-02-624. Washington, D.C.: June 21, 2002.", "Military Housing: DOD Needs to Address Long-Standing Requirements  Determination Problems. GAO-01-889. Washington, D.C.: August 3,  2001.", "Military Housing: Continued Concerns in Implementing the Privatization  Initiative. GAO/NSIAD-00-71. Washington, D.C.: March 30, 2000.", "Military Housing: Privatization Off to a Slow Start and Continued  Management Attention Needed. GAO/NSIAD-98-178. Washington, D.C.:  July 17, 1998."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-201", "url": "https://www.gao.gov/products/GAO-18-201", "title": "VA Facility Security: Policy Review and Improved Oversight Strategy Needed", "published_date": "2018-01-11T00:00:00", "released_date": "2018-01-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Veterans Health Administration (VHA is responsible for providing a safe and secure, yet welcoming environment for staff, patients, and visitors at nearly 170 medical centers. These facilities have been the target of violence, threats, and other security-related incidents. Assessing and managing risks a critical element for ensuring adequate physical security at these facilities.", "GAO was asked to review VA's physical security risk-management policies and practices. This report: (1) assesses how VA's policies for risk management reflect prevailing standards, and (2) evaluates VA's oversight of risk management at VHA medical facilities. GAO compared VA policies to ISC standards; reviewed VA documents; interviewed VA and ISC officials; and assessed risk assessment activities at nine medical centers selected based on factors such as patient and security-incident data and geographical diversity. While not generalizable, these nine locations provide illustrative examples of how VA's policies are carried out."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs' (VA) risk management policies include some but not all of the elements of standards set by the Interagency Security Committee (ISC). ISC was established via executive order to develop security standards and best practices that federal agencies are to follow when developing and conducting risk assessments. As part of this process, VA's policy identifies minimum countermeasures as called for in ISC's standards. In other areas, VA policy only partially adheres or does not adhere to ISC's standards, for example:", "Of the five factors ISC calls for when calculating a facility's security level, VA considers three but does not consider a facility's population and size.", "VA policy does not include performance measures, such as the number of countermeasures in use or the percentage of facility assessments completed; this percentage is a key element of ISC's standards for assessing the effectiveness of an agency's security programs.", "Officials at VA said that its risk management program was developed prior to the ISC standards' being issued in 2013 and that it is up to each agency to determine how to best apply the standards. Nevertheless, VA officials said they are currently reexamining their policies. Until VA reviews its policies in accordance with ISC standards, its approach to risk management may not yield the appropriate security posture needed to adequately protect its medical centers.", "VA's oversight activities for risk management do not encompass key aspects of the Standards for Internal Control in the Federal Government and Circular A-123 from the Office of Management and Budget that require agencies to conduct oversight activities to ensure the accountability and effectiveness of agency programs. VA has an oversight process to ensure that biennial assessments of individual facilities' security are completed. However, VA:", "does not review the quality of medical centers' required risk assessments,", "does not identify whether countermeasures were implemented appropriately by the medical centers, and", "does not collect system-wide data to gain an understanding of physical security issues across medical centers.", "In the absence of a comprehensive VA-wide strategy or guidance that reflects these internal control standards, individual sites have established their own approaches to carrying out VA's risk management policy. For example, the nine sites GAO reviewed conducted their security assessments differently, and none of the assessments indicated that all of the threat categories in VA's policy were reviewed. The lack of a system-wide oversight strategy means that the differences among medical center approaches, along with the security effects of those different approaches, are unknown. Accordingly, VA does not know if its medical centers are adequately protected, and it may be missing opportunities to leverage resources nationally and make better informed, proactive policy decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Department of Veterans Affairs review and revise its risk management policies to reflect prevailing standards, and develop an oversight strategy to assess the effectiveness of risk management programs at VHA facilities. VA agreed with GAO's recommendations and identified steps to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs\u2019 (VA) Veterans Health Administration  (VHA) provides critical health services to approximately 9-million enrolled  veterans at its nearly 170 medical centers. In recent years, however,  these facilities have been the target of violence, threats, and other  security-related incidents\u2014including bomb threats and violent attacks  involving weapons. For example, in 2015, a psychologist was fatally shot  while working at a VA medical clinic. Ensuring physical security for these  medical centers can be complicated because VA has to balance safety  and security with providing an open and welcoming health-care  environment. Furthermore, VA serves a vulnerable population with high  rates of post-traumatic stress disorder and substance abuse.", "VHA is responsible for physical security at its facilities and has issued  policies and standards that the facilities must follow when assessing  physical security risks. To fulfill this responsibility, VHA conducts a range  of activities such as performing risk assessments, implementing  countermeasures designed to minimize risks, and providing law  enforcement services through VA police departments. To help agencies  such as VA with their physical security, the Interagency Security  Committee (ISC) issued standards for risk management of federal  facilities, and agencies are supposed to follow the standards.", "You asked us to examine how VA ensures it is providing a secure  environment at VHA facilities. This report: assesses the extent to which VA\u2019s policies for managing risk related  to physical security reflect key elements of ISC\u2019s risk management  standards, and evaluates VA\u2019s oversight of risk management for physical security at  VHA\u2019s various facilities.", "To assess how VA policies for physical security-risk management reflect  key elements of ISC\u2019s risk management standards, we reviewed VA\u2019s  policies pertinent to its risk management process and its risk assessment  methodology and compared the policies to ISC\u2019s risk management  standards. This process included reviewing the Risk Management  Process for Federal Facilities (ISC Standard) for assessing physical  security and providing recommended countermeasures at federal  facilities. To assess VA\u2019s oversight of risk management of physical  security at VHA facilities, we identified and examined oversight and  management mechanisms at the national, regional, and local levels,  including reporting mechanisms that prioritize or track facility risks or the  implementation of countermeasures at VHA facilities. We also reviewed  VA\u2019s oversight activities against Standards for Internal Control in the  Federal Government, because internal controls play a significant role in  helping agencies achieve their mission-related responsibilities using  proper oversight mechanisms. In addition, we reviewed VHA police  responsibilities for physical security and law enforcement, including  conducting risk assessments and identifying needed countermeasures.", "As part of our review, we selected nine VHA medical centers to include a  range of patient volumes, rates of security incidents per patient, and  locations, among other considerations. For each of these medical  centers, we assessed the most recent physical security documents and risk  reviewed the data and reporting mechanisms used to prioritize and  track facility risks and the implementation of countermeasures at VHA  facilities, and  conducted semi-structured interviews with VA police, facility directors,  and union representatives at these medical centers.", "These steps enabled us to identify: (1) the officials\u2019 approach to physical  security, (2) which countermeasures were adopted, and (3) what  additional countermeasures or other efforts, if any, remain to be  implemented. While the results from these nine medical centers are not  generalizable to all VA medical centers, they provide illustrative examples  of how the department\u2019s risk assessment policies are being implemented  as well as a range of perspectives on physical security activities. See  appendix I for more details on our scope and methodology.", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions, based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VA has faced a growing demand by veterans for its health care services,  due in part to both service members returning from military operations in  Afghanistan and Iraq and to the growing needs of an aging veteran  population. As part of providing care to millions of veterans, VA is  expected to provide a safe environment not only for the veterans, but also  for staff and visitors at a diverse makeup of VHA facilities.", "Although many of these facilities face similar challenges, differences in  facilities may require different levels and types of security. For example,  medical centers with large numbers of staff, patients, and visitors may  require more resources for securing the facility compared to smaller  medical centers with fewer people frequenting the facility daily. Some  medical centers are located in densely populated urban areas, while  others are located in non-urban areas, and their security challenges may  differ. For example, facilities in urban areas may be located near busy  public roads, making it more difficult to implement physical security  enhancements such as barriers or setbacks from the street.  Furthermore, some VHA medical centers consist of a single hospital and  others may include a campus with many buildings.  According to VA  officials, these differences can lead to unique security challenges.  Medical centers offer different types of services, which can influence the  types of security required. For example, officials from multiple medical  centers we reviewed told us that emergency rooms and mental health  areas experience high levels of security incidents, requiring additional  security measures in these areas.", "VA specifies various physical security requirements for its medical  centers. These include physical access control systems, security  cameras, silent alarm distress signaling, and perimeter fencing.  Furthermore, each VHA facility has its own police department to help  deter, detect, defend against, and respond to security threats. See  appendix II for more information regarding the roles and responsibilities of  VA police departments. See figure 1 for a depiction of a medical center  that consists of a campus and a variety of buildings and examples of the  physical security elements deployed.", "To determine the specific countermeasures needed at each facility, VA  has a two-part risk management process that begins with VA police  assessing a facility\u2019s security risk(s) by conducting \u201cvulnerability  assessments\u201d biennially (see fig. 2). VA police at each of VHA\u2019s medical  centers report the findings, including recommended countermeasures, to  medical center directors. These directors are responsible for developing an action plan in response to the assessments and making decisions  about if and how recommended countermeasures will be addressed.", "Across VA, numerous entities at the headquarters, regional, and local  level have some role in carrying out physical security responsibilities.  Figure 3 provides an overview of VA components with physical security  roles and responsibilities at VHA facilities.", "At the headquarters level, VA\u2019s Office of Security and Law Enforcement  (OSLE), located within VA\u2019s Office of Operations, Security, and  Preparedness, develops policies and standards for assessing physical  security risks and providing physical security for facilities under VA\u2019s  custody and control, including VHA facilities used for providing healthcare  services to veterans. VA organizes its system of care into regional  networks called Veterans Integrated Service Networks (VISN). Each  VISN is responsible for managing and overseeing medical centers within  a defined geographic area. However, the primary operational  responsibility for VA\u2019s physical security program is at the medical centers  themselves, where the medical center directors at each of VHA\u2019s 170  medical centers are responsible for implementing OSLE\u2019s policies and  standards and overseeing VHA police activities. Police at each facility  conduct the key activities involved in this program, including conducting  risk assessments and identifying needed countermeasures. Beyond risk  assessment, VA police have additional responsibilities for protecting the  safety of medical centers. For information about their additional  responsibilities and oversight of their operations, see appendix II.", "The ISC was established via Executive Order 12977 in 1995 to enhance  security at federal facilities. Its mission is to develop standards and best  practices. ISC\u2019s Risk Management Process for Federal Facilities,  among other things, includes standards for agencies\u2019 facility risk  assessment methodologies. This process can help agencies effectively  prioritize efforts to protect their facilities. ISC\u2019s process consists of six  steps designed to help agencies identify the appropriate protective  measures for their facilities, and to ensure their effectiveness. (see fig 4.)", "ISC\u2019s Risk Management Process is applicable to all buildings and  facilities in the United States occupied by federal employees for  nonmilitary activities, including special-use facilities. Agencies may  customize their implementation of elements of ISC\u2019s standards, such as  the countermeasures they determine are appropriate for their facilities or  situations. Changes to these elements are to be made as a result of a  risk-based analytical process. In December 2016, ISC issued its Agency  and Facility Compliance Benchmarks to provide guidance to departments  and agencies for ensuring compliance with ISC\u2019s standards."], "subsections": []}, {"section_title": "VA\u2019s Risk Management Process Partially Reflects the ISC\u2019s Standard", "paragraphs": ["VA\u2019s risk management process does not fully reflect the standards  established by ISC shown in figure 4. Although structured differently, we  found that VA\u2019s process includes some elements of ISC\u2019s process but is  missing other elements, gaps that could result in risks\u2019 not being fully  assessed and appropriate countermeasures not being identified. See  figure 5.", "Determine facility security level: ISC\u2019s standard requires that facility  security levels (I-V) are to be based on an equal weighting of five factors  (mission criticality, symbolism, facility population, facility size, and threats)  and the consideration of \u201cintangibles.\u201d According to the ISC, each of these  factors is important to quantifying a facility\u2019s attractiveness as a target for  adversarial acts and the severity of consequences should such an act  occur.", "VA policy calls for three of the factors to be used in determining a facility\u2019s  risk level, which partially reflects the ISC Standard. VA policy indicates  that VA police are to identify an \u201casset risk value\u201d that reflects the  expected effect a threat would have to the functioning of VHA facilities  and the continued delivery of services. This score is used to calculate an  \u201coverall risk value.\u201d The greater the threat a facility faces relative to its  physical security posture and the greater the impact on VA operations,  the higher the overall risk value. The determination of the overall risk  value reflects the ISC\u2019s prescribed use of facility security levels to identify  a facility\u2019s level of risk.", "VA\u2019s policy does not articulate that factors used to determine the overall  risk value be equally weighted, nor does it include facility population and  facility size as factors. As a result, VA may not be considering all the  relevant risk factors that make a facility a more or less desirable target for  threats.", "Identify the facility\u2019s baseline countermeasures: The ISC Standard  calls for baseline countermeasures to vary based on facility\u2019s risk level.  For example, depending on a facility\u2019s security level and the type of  undesirable threat posed, the use of X-ray or magnetometers may be  required to screen visitors. Alternatively, agencies are allowed to create  templates by facility type. That is, an agency can identify the specific risks  posed to particular facility types and customize different sets of  countermeasures that can serve as the baseline for those facility types.", "VA has created templates based on facility types rather than varying its  baseline countermeasures relative to a facility\u2019s risk level, which is  permissible under the ISC Standard. These templates outline the specific minimum countermeasures for different types of facilities or  components of VHA facilities such as medical center pharmacies. VA\u2019s  minimum requirements for countermeasures in their facilities were  designed to meet the needs of the medical center environment and  clientele.", "Identify and assess risk: ISC has established 33 specific undesirable  events that agencies are to use when assessing risks to facilities.  Additionally, the ISC requires that an agency\u2019s risk assessment  methodology consider three factors\u2014threat, vulnerability, and  consequence\u2014in examining these events in order to be credible.  Agencies may customize the threats they assess to their specific  situations, after having considered the 33 undesirable events. According  to ISC officials, agencies are expected to periodically review their list of  undesirable events as updates to the standards occur and document  determinations and justifications for excluding any undesirable event.", "VA has identified 8 categories of threats that VA police are to review as  part of vulnerability assessments, which includes consideration for threat,  vulnerability, and consequence. These threat categories are: 1) assault,  2) physical threats of violence, 3) illegal weapons, 4) suicidal behavior, 5)  theft/vandalism, 6) explosive devices, 7) mail-borne hazards, and 8)  protection of hazardous materials and narcotics. This listing reflects the  ISC Standard that agencies examine risks from undesirable events.", "However, VA cannot demonstrate how its categories relate to ISC\u2019s 33  undesirable events. According to VA officials, VA originally selected its  threat categories in 2001 and updated them in 2009 to the current 8  categories. They told us that officials at the time considered the ISC\u2019s full  list of undesirable events and that these eight threat categories were and  remain the most prevalent in the health care\u2019s operating environment that  represents the majority of VHA facilities. However, officials could not  provide documentation of how their eight categories related to ISC\u2019s  defined undesirable events and why certain undesirable events appear to  be included and others excluded within VA\u2019s policies pertaining to risk  management. By not reviewing all the undesirable events identified by the  ISC, VA may be overlooking some potential threats present at its  facilities.", "Determine necessary countermeasures: ISC calls for agencies to  determine if their baseline countermeasures or templates address a  facility\u2019s established risk level following an assessment. ISC has also  clarified that its standards allow for countermeasures to be customized to  specific facilities and situations. For instance, if the risks from undesirable  events at a specific facility are found to be higher or lower than the level  of protection afforded by the baseline set of countermeasures, the   baseline countermeasures can be changed (up or down) to meet the level  of assessed risk.", "VA policy calls for police at each of VHA\u2019s medical centers to conduct  vulnerability assessments biennially. As a part of these assessments, VA  police are to recommend countermeasures that represent the best value  in terms of providing protection against multiple threats given the existing  level of defense or security equipment. This procedure reflects the ISC  Standard that necessary countermeasures be identified at the facility level  by an agency\u2019s security organization.", "However, VA policy does not require recommended countermeasures to  be related to the baselines established in the templates. This policy is  inconsistent with the ISC Standard, which calls for countermeasures to be  increased or decreased from the baseline to meet the level of assessed  risk. This policy could leave staff, patients, and visitors, as well as  property vulnerable to unmitigated risks.", "Implement countermeasures or accept unmitigated risk: The ISC  Standard requires agencies to document decisions, in particular, any  decision to reject or defer implementation of countermeasures due to cost  (or other factors). The ISC Standard also requires agencies to document  the acceptance of risk in these instances and outline alternative strategies  considered or implemented, and opportunities in the future to implement  needed countermeasures. The ISC Standard notes, in particular, that  risks accepted at the facility level may have a bearing on agency-wide  risk management efforts and therefore documentation of risk acceptance  shall be provided to the headquarters security office.", "As previously discussed, medical center directors are to determine if and  how to implement recommended countermeasures. This reflects the ISC  Standard that information from assessments be forwarded to and used by  decision makers. However, VA policy does not require the documentation  of risk acceptance. That is, VA has no policy requiring its officials to  document the rationale for rejected or deferred countermeasures,  proposed alternative mitigations, and future planning. Without such a  requirement, OSLE does not have full knowledge of the extent of risk  acceptance that has occurred or what alternative countermeasures have  been pursued.", "Measure performance: According to the ISC Standard, agencies are to  assess and document the effectiveness of their security program through  performance measurement and testing. Measures should be based on  agency mission goals and objectives. As examples of performance  measures, the ISC Standard suggests that agencies could track the  number of countermeasures in use or the percentage of facility  assessments completed. Moreover, the ISC Standard states that agency- level leadership must communicate its priority and commitment to  performance measurement and ensure that the physical security  performance measures enhance accountability, prioritize security needs,  and justify investment decisions to maximize available resources.", "VA lacks documented policies or performance measures in place for  assessing the effectiveness of its security program, which does not reflect  the ISC Standard. VA policy outlines that local medical-facility directors at  VHA facilities shall ensure that law enforcement activities (such as  vulnerability assessments) are conducted in a legally and technically  correct manner, but provides no guidance to ensure uniform measures  and processes are being used to assess the performance of security  programs. Without a policy that establishes uniform performance  measures, VA cannot evaluate the effectiveness of physical security  programs being locally implemented across its facilities.", "According to VA officials, VA\u2019s risk management process was developed  before the ISC\u2019s standard for risk management processes was originally  issued in 2013. VA officials we spoke with said as a member of ISC they  utilize it as a forum for exchanging ideas on best practices and  interpreting the standards but it is then up to each agency to determine  how best to apply ISC standards. VA officials said that they are currently  reexamining their policies but have not reached out to the ISC for  assistance. ISC officials told us they are available to act as resource for  any agency requesting aid in developing or reviewing risk management  processes.", "VA cannot assure that the differences between its process and the ISC  Standard are inconsequential to how it identifies and manages risk at  local facilities and across its real property portfolio. According to the ISC  Standard, not using an appropriate risk-management process can result  in facilities that may either have (1) less protection than needed resulting  in inadequate security or (2) more protection than needed resulting in an  unnecessary use of resources. This situation might reduce the availability  of resources that could be applied elsewhere. For example, although all  VHA medical centers have the same mission, variations in location and  physical configuration of a facility may create unique risks or risks that are  relatively higher or lower in some cases than at other VHA facilities with  the same mission."], "subsections": []}, {"section_title": "VA Does Not Assess the Effectiveness of Its Risk Management Process", "paragraphs": ["Agencies are expected to manage the effectiveness of program  operations in achieving their missions. A range of federal standards and  guidance assist agencies improve the accountability and effectiveness of  their programs by helping agencies adapt to shifting environments,  evolving demands, changing risks, and new priorities. For example, in  July 2016, OMB updated guidance to establish management\u2019s  responsibilities for enterprise risk management (ERM). ERM is intended  to yield an \u201centerprise-wide,\u201d strategically aligned portfolio view of  organizational challenges that provides better insight about how to most  effectively prioritize resource allocations to ensure successful mission  delivery. More specifically, the guidance discusses both internal control  and ERM and how these fit help together to manage agency risks.  Additionally, Standards for Internal Control in the Federal Government  describes internal control as a process put in place by an entity\u2019s  oversight body, management, and other personnel, a process that  provides reasonable assurance that objectives related to operations,  compliance, and reporting will be achieved, and that serves as the first  line of defense in safeguarding assets. Elements within these standards  include: holding people accountable for their responsibilities, having effective operations that produce intended results in a manner  that minimizes the waste of resources, and using quality information to achieve objectives.", "However, according to OSLE officials, OSLE does not assess program  effectiveness, Instead, officials said that OSLE\u2019s role in overseeing VHA\u2019s  risk management process is limited to reviewing the activities of each  VHA medical center\u2019s police department\u2019s activities. Specifically, as it  relates to the risk assessment process discussed earlier, the OSLE  review focuses on whether (1) vulnerability assessments are completed  within the required time frame (at least every 2 years); (2) annual physical  security surveys that are used to inform the vulnerability assessments are  completed and documented, and (3) intruder detection tests are  completed. The OSLE inspectors may also spot-check specific areas to  determine whether physical security measures that are in place meet  VA\u2019s standards. The areas checked are at their discretion and not  identified in policy. Findings from these inspections, including any  deficiencies identified in physical security, are reported to the medical  center director for action.", "According to OSLE officials, they do not have any authority to ensure  deficiencies are corrected and thus generally do not follow up on the  status of their findings prior to the next inspection. Although the results of  these inspections are stored by OSLE, we did not find that it uses them to  identify trends in security deficiencies or track medical centers\u2019 risk levels.", "OSLE does not assess the medical center\u2019s compliance with VA\u2019s overall  risk management process, the extent to which recommended security  measures have been implemented, or decisions not to implement security  recommendations. Furthermore, OSLE does not collect data that would  allow it to know what security deficiencies have been identified across all  VHA facilities and the status of recommended countermeasures. Because  VHA lacks an oversight strategy that includes these elements, it cannot  begin to assess the effectiveness of security at its facilities.", "The lack of a system-wide oversight strategy is particularly troublesome  given the authority and autonomy of medical center directors to determine  the appropriate physical security measures needed for their facilities. At  the nine medical centers, we found differences in how they implemented  the risk management requirements and countermeasures and in how they  collected security related data. Without a strategy for system-wide  oversight, VA cannot ensure that local physical security-decisions are  based on actual risk, are appropriate to protect the facility, and are  effective, or whether the variations or the security impact of them are  important.", "Implementing VA\u2019s risk management requirements: A key element of  internal controls is having a process in place to hold people accountable  and ensure that the agencies\u2019 policies are being implemented as  intended. While OSLE\u2019s inspections assess whether the vulnerability  assessments were completed, we found that they did not assess the  quality of those assessments or whether they aligned with VA\u2019s policy  requirements. Specifically, we found differences in how the assessments  were done at the nine medical centers we reviewed and that some were  not consistently reviewing the full range of threats required by VA policy.  For example, none of the vulnerability assessments we reviewed included  documentation that all eight of VA\u2019s threat categories were reviewed, and  at three locations, no threat categories were documented as reviewed in  the assessments. Additionally, in some instances, VA police assessed  different threat categories than the required 8 categories. OSLE officials  told us that local VHA police have the discretion to review any threats  they perceive relevant to their facility; however, they reported that this  should be done in addition to the eight threat categories identified in VA  guidance. In a decentralized environment such as VA\u2019s, there may be  greater risk that VA police will inconsistently apply VA\u2019s risk management  process. Furthermore, as discussed earlier, VA has not established  performance measures, in accordance with ISC standards, for its risk  management process. This, according to the ISC, would help to ensure  accountability, prioritize security needs, and justify investment decisions  to maximize available resources.", "Implementing countermeasures: Internal controls guidance speaks to  having effective operations that produce intended results in a manner that  minimizes the waste of resources. ERM also speaks to the effective and  efficient use of resources. We found wide variation in the progress made  in implementing countermeasures across the nine locations we reviewed.  This variation happens, in part, because of competing priorities and lack  of dedicated physical- security budgets. As a result, medical center  directors make localized decisions about where they spend their  resources. The police force is responsible for identifying appropriate  countermeasures, but it is then up to the medical center directors and the  managers in the areas for which deficiencies have been identified to  implement the corrective actions. All of the medical center directors we  interviewed reported weighing decisions to fund infrastructure deficiencies  affecting healthcare delivery versus funding physical security projects. For  example, one acting director told us that the center needs to repair a  leaking roof in its hospice care unit. The director told us that this project,  which uses funding from the same pool of money as physical security  projects, will be prioritized because it directly impacts the quality of patient  care.", "Officials at the sites we reviewed described varying levels of commitment  from medical center directors to prioritize physical security infrastructure  projects. Officials at one site said that they currently have difficulty getting  the resources they request to implement security countermeasures, but  that the same had not been the case at previous medical centers where  they worked. Specifically, one official noted that it can be difficult to  convince a medical center director to fund security measures designed to  protect the site from situations that have not yet occurred, such as  countermeasures to improve perimeter security or increase standoff  distance for critical areas, which are important parts of prevention for  active-shooter type scenarios.", "One of the key countermeasures medical centers use for physical  security is the police force. We noted variations in police staffing at the  nine locations we studied. VA policy sets a minimum level for the number  of VA police officers who must be on patrol at any given time if certain  conditions are met. Some local VHA officials we spoke with said they  need to staff above this level because following the minimum staffing  level can be problematic when officers are needed to respond to multiple  incidents at the same time, such as escorting one patient and responding  to a disruptive patient in a different wing of the hospital, officials stated.  Officials noted that incidents can be the driving factor for changes. One  site we reviewed increased their police presence in the emergency room,  in response to a stabbing incident that occurred there.", "The critical role that police play at these medical centers can be adversely  affected, however, because of challenges related to recruiting and  retaining law enforcement personnel. All sites we reviewed reported hiring  vacancies in their departments, and multiple sites discussed challenges in  maintaining any police at the recommended level at their facilities,  hindering the ability of the police to respond to multiple incidents. As  further described in appendix II, each VHA medical center police force is  managed locally, under the control of the medical center director.", "We also found varying levels of security provided by VA medical centers  for their community based outpatient clinics. VA policy does not require a  permanent security presence at the community-based outpatient clinics,  and medical centers may rely on local police to respond to security  incidents. However, some sites we reviewed use contract guards to  provide a security presence at outpatient clinic locations, and one site  reported completing an effort to staff VA police officers at each of the  outpatient clinics under the medical center director\u2019s authority. In the  absence of system-wide oversight strategy, VA does not know if these  variations in countermeasures are resulting in different levels of security,  which may leave some facilities at risk and not be the most strategic use  of resources at other facilities.", "Tracking security deficiencies: The availability of reliable data is  essential for assessing the effectiveness of policies and programs and for  allowing managers to make sound decisions. In the absence of a VHA- wide strategy and guidance about how to collect data or track  deficiencies, individual sites have established their own processes for  tracking the status of identified security deficiencies. For example, one of  the medical centers in our review reported 15 deficiencies resulting from  its assessment, whereas another medical center reported over 540  deficiencies. In reviewing the data further, we found that the numbers  may be misleading as to the extent of security concerns, because of the  different ways in which the findings were reported. For example, in  reporting the results of inspections of information telecommunication and  data closets, one location identified a recurring deficiency as one issue,  where another location identified a similar deficiency in each closet they  inspected resulting in over 200 identified deficiencies. A system-wide  oversight strategy could help VA identify what information is needed to  assess the effectiveness of its security programs and the impact of  varying practices at its facilities.", "In the past, VA collected system wide information and tracked physical  security across medical centers. When VA first started conducting  vulnerability assessments in 2010, the assessments were done by a  central team directed by OSLE, and the findings were tracked in a central  database. In addition, a work group tracked how facilities were meeting  VA\u2019s standards and requirements and which countermeasures were  getting prioritized and implemented. However, VA officials told us that this  database crashed and that the information is no longer accessible.  Moreover, the central team was dissolved, and medical center directors  became fully responsible for ensuring that vulnerability assessments were  conducted. The collection or assessment of data also became the  responsibility of local medical centers.", "Although OSLE has no current plans to re-establish a database, in 2015  the Acting Deputy Under Secretary for Health for Operations  Management identified a need for information about the level of security  at its facilities. He has directed VISN management to identify gaps  between its facilities and VA\u2019s 2015 physical-security design standards.  This effort is separate from VA\u2019s risk management process but would be  expected to identify some of the same security deficiencies. VISNS are  expected to use these results to develop and prioritize projects to bring  facilities in line with the current VA physical security standards."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["VA faces the challenge of providing secure, open, and welcoming medical  facilities while providing medical care for nearly 9-million veterans  annually. Having a process that incorporates ISC standards is critical to  VA and ensuring that it is positioning itself to appropriately protect its  facilities. However, until VA reviews its policies against the ISC standards  to explore areas where it differs from these standards, it will not be able to  ensure that its approach to risk management will yield and has yielded  the appropriate security posture relative to the different risks faced by its  diverse set of facilities. While not currently required, collaboration with the  ISC would be helpful for the VA as it reexamines its risk management  process. Additionally, the decentralized nature of VA\u2019s organizational  structure can help VHA tailor its programs to local situations. But without  a system-wide oversight process, VA cannot assess the overall  performance of its security program and whether medical centers are  adequately protected. Thus, it may be missing opportunities to leverage  resources nationally, or make informed, proactive policy decisions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to VA:  The Secretary of VA should, in collaboration with ISC, review and revise  VA\u2019s risk management policies for VHA facilities to ensure VA  incorporates ISC standards, as appropriate. (Recommendation 1)", "The Secretary of VA should develop an oversight strategy that allows VA  to assess the effectiveness of risk management programs at VHA  facilities system-wide. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  (VA) and Department of Homeland Security (DHS) for comment. In  written comments, which are reproduced in appendix III, VA agreed with  our conclusions and concurred with our recommendations. In its  comments, VA stated that it is in the process of updating its vulnerability  assessment program and will work with the ISC to ensure VA is in  compliance with applicable standards. VA also stated that it will work with  the ISC as VA updates its risk management process to ensure it reflects  the applicable standards established by the ISC. VA also intends to  evaluate its current roles and responsibilities for assessing internal  controls for risk management. VA estimates that it will complete these  actions by January 2019. VA also provided a technical comment, which  we have clarified in the report. DHS provided only technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of the Department of Veterans Affairs; the  Secretary of the Department of Homeland Security; and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov. If you or your staff have any questions  about this report, please contact me at (202) 512-2834 or  rectanusl@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our report were to assess (1) the extent that VA\u2019s  policies for physical-security risk management reflect elements of  federally established risk management standards and (2) VA\u2019s oversight  of risk management of physical security at VHA facilities. To help inform  our research, we reviewed reports and documentation on physical  security. For example, we reviewed prior reports from GAO on the  security of federal government facilities and effective program  management, as well as documentation from the Department of  Homeland Security\u2019s Interagency Security Committee (ISC), including  physical security standards it has developed by the ISC. Our review  focused on security at medical facilities under the custody control of VHA.", "To determine how VA policies for physical security risk management  reflect key elements of federally established risk management standards,  we assessed how VA\u2019s methodologies reflect ISC\u2019s risk management  standards. This included reviewing the Risk Management Process for  Federal Facilities (the ISC Standard) for assessing physical security and  providing recommended countermeasures at federal facilities. We  obtained and analyzed VA\u2019s facility-security policies and procedures for a  risk management methodology. According to the ISC Standard, agencies\u2019  risk management methodologies should determine facility security level (FSL);  identify facility\u2019s baseline countermeasure;  identify and assess risk; determine necessary countermeasures;  implement protective measures and/or accept risk; and  To assess VA\u2019s oversight of risk management of physical security at VHA  facilities, we identified and examined oversight and management  mechanisms at the national, regional, and local levels, including reporting  mechanisms that prioritize or track facility risks or the implementation of  countermeasures at VHA facilities. We also reviewed Standards for  Internal Control in the Federal Government because internal controls play  a significant role in helping agencies achieve their mission related  responsibilities using proper oversight mechanisms. To help determine if  VA has established an environment in which it can ensure it is achieving  its objectives, we reviewed agency documentation, such as vulnerability  reports, police inspections, and the tracking reports related to security  countermeasure recommendations at a non-generalizable sample of 9 VA  medical centers. At these locations, we also conducted semi-structured  interviews with facility management, VA police, and union representatives  to identify the officials\u2019 approach to physical security. Our findings from  our review of the selected medical centers are not generalizable to all  VHA facilities, but provide insight into and illustrative examples about risk- management and oversight methodologies at selected facilities.", "We selected these sites based on a mix of criteria that included: (1)  geographic location, including medical centers in various Veteran  Integrated Service Networks (VISN), and in cities of different sizes; (2)  patient volume, including medical centers with a mix of different levels of  patient population; (3) reported security incidents, including locations with  high and low levels of reported security incidents ; and (4) patient to  incident ratio, including medical centers with high and low ratios of  incidents per patient, among other considerations. Based on the selection  criteria listed above, the team selected the following nine medical center  locations for our review:  1.  Bedford, MA   2.  Houston, TX   3.  Greater Los Angeles   4.  Bay Pines, FL   5.  Sheridan, WY  6.  Washington, D.C.  7.  Puget Sound, WA  8.  Orlando, FL  9.  Louisville, KY  Considering the extent to which VA uses its police force in its risk  management approach, we also reviewed the lines of authority and  oversight for VA police personnel. For example, we identified VA\u2019s police- reporting structures and data-collecting efforts.", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions, based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Overview of VA Police Departments\u2019 Roles and Responsibilities", "paragraphs": ["The Department of Veterans Affairs (VA) police consist of over 4,000  uniformed police officers in 153 police units across the nation. Each VHA  medical center has, in effect, its own police force."], "subsections": [{"section_title": "Key Activities", "paragraphs": ["Aside from VA\u2019s role in assessing physical security risks, VA police\u2019s day- to-day role at VHA medical centers largely revolves around their law  enforcement functions. Specifically, police officers patrol medical center  campuses in an effort to deter, detect, defend, and respond to threats to  patients and staff. Officers can make arrests for violations of federal law,  can confiscate drugs, alcohol or other contraband, and can conduct  investigations and collect basic evidence to the extent necessary to  determine whether a crime has been committed. In addition, VA police  officers might respond to incidents involving disruptive patient behavior\u2014 a continual concern for staff at VHA facilities, according to officials from  the sites we spoke with. Staff can alert VA police to such incidents  through means such as duress alarm systems at their facilities, and at  some locations we spoke with, police respond as part of multi-disciplinary  teams that try to de-escalate incidents involving disruptive patients. For  example, police can be on the Disruptive Behavior Committees at their  facilities. These multi-disciplinary committees review incidents involving  disruptive patients and can suggest mitigations for future incidents  including placing a \u201cflag\u201d on a patient\u2019s record. These flags alert staff to  prior concerns with a patient\u2019s behavior and may include instructions for  preventative measures such as a requiring the patient to check in with VA  police when arriving on campus or requiring the patient to have a police  escort while at the facility.", "VA police at some sites included in our review described challenges  officers face when responding to incidents. For example, according to VA  police officials, not all incidents involving disruptive patients constitute a  violation of the law, limiting the ability of a police officer to intervene.  Police officials spoke about trying to de-escalate situations first, before  making arrests or physically intervening in an altercation. Furthermore,  VA police officers are limited in their authority to engage in certain actions  such as pursuing non-federal offenses, investigating crimes off-campus,  and carrying service weapons off campus, officials told us. In addition,  some VA police we spoke with stated that the Assistant U.S. Attorney\u2019s  office is reluctant to prosecute veterans, so the VA police do not have  much leeway or leverage in detaining, arresting or pressing charges  against patients or visitors. For example, according to VA police officials  from one site we spoke with, the Assistant U.S. Attorney declined to  prosecute a stabbing incident. As a result the police had to work with the  local police to recharge the case and go through the state court for  prosecution.", "As a part of the policing role, police have various reporting  responsibilities. For example, police officers are expected to report their  daily operational activity into a computerized database called the VA  Police System that: (1) documents all criminal activity at the medical  centers, (2) records daily incident reporting at each facility in a 24-hour  period, and (3) lists all individuals who come into contact with VA police.  VA police chiefs at each location use this data to generate a localized  Unified Crime Report (UCR) for each campus. Each police chief  maintains his or her own UCR, which can include all incidents reported by  officers, from petty theft to homicide. VA police are to conduct predictive  analysis of crime patterns and adjust patrols or investigative activities  accordingly.", "In addition to recording all activities into the database, VA police are  required to report certain incidents (including incidents that are likely to  result in national media or congressional attention), to the VA\u2019s Integrated  Operations Center through a Serious Incident Report. Police officers are  required to report serious incidents as soon as possible, but no later than  2 hours after awareness of the incident. Reportable incidents include,  among others, sexual or aggravated assaults and VA police-involved  shootings. The Integrated Operations Center staff provides reports and  real-time information on these incidents to the Secretary and the VA  administrators for their awareness; however, the staffers do not conduct  their own investigations into incidents. Officials from the Office of Security  and Law Enforcement told us that they have started pulling together  internal, monthly rollups of law-enforcement-related serious incident  reports. These reports are provided to the VA police chiefs to inform them  of serious incidents and provide situational awareness on law  enforcement and criminal activity happening at VHA medical centers  across the nation. These reports contain law-enforcement sensitive  information and are intended for internal VA police use for crime analysis  specific to VA law enforcement matters affecting VA campuses and are  not to be released to the public or individuals or organizations outside law  enforcement."], "subsections": []}, {"section_title": "Police Oversight and Management", "paragraphs": ["The Office of Security and Law Enforcement (OSLE) develops and issues  policies and procedures for physical security, law enforcement, and  training activities for VA police. In addition, OSLE and VISN police chiefs  share responsibility for the police inspection program described in this  report. OSLE does not provide any sort of centralized command over  police chiefs or officers, however. This level of oversight and  management of VHA police is done through the senior leadership at each  local medical center. Police chiefs set the standard- operating procedures  for their departments and report to an associate or assistant medical  director, who provides daily supervision and approves their performance  management appraisals. Medical center directors are ultimately  responsible for the hiring of VA police officers and funding their training  through VA\u2019s Law Enforcement Training Center.", "If allegations of police misconduct arise, the local VA police departments,  and specifically the police chiefs, are responsible for investigating these  claims. According to officials we spoke with, there are multiple methods  police misconduct can be reported: directly through the medical center; to  the VA Inspector General complaint hotline, or, in some instances,  directly to OSLE within VA\u2019s headquarters. OSLE\u2019s Criminal Investigation  Division will generally investigate criminal allegations and if appropriate  will refer issues to the US Attorney for action. OSLE does not have  supervisory authority over the VA police departments, and so any  administrative actions must be taken by the local medical center officials."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Maria Edelstein (Assistant  Director); William Carpluk; Raymond Griffith; Geoffrey Hamilton; Joshua  Ormond; Amy Rosewarne; Friendly Vang-Johnson; and Elizabeth Wood  made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-250", "url": "https://www.gao.gov/products/GAO-18-250", "title": "Oil and Gas Wells: Bureau of Land Management Needs to Improve Its Data and Oversight of Its Potential Liabilities", "published_date": "2018-05-16T00:00:00", "released_date": "2018-06-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2016, private entities operated about 94,000 oil and gas wells on federal lands overseen by BLM. Once wells cease production, they can become inactive and potentially orphaned if an operator does not perform required reclamation and if an operator's bond is insufficient to cover the expenses. BLM considers oil and gas wells on federal and Indian lands and the associated leased lands as potential liabilities for the federal government because BLM may have to cover the costs of reclaiming well sites. To better manage its potential liabilities, BLM issued well and bond adequacy review policies in 2012 and 2013, respectively.", "GAO was asked to review how BLM manages its potential oil and gas well liabilities. This report examines, among other things: (1) how BLM's actual costs and potential oil and gas well liabilities have changed for fiscal years 2010 through 2017 and (2) the extent to which BLM has implemented its well and bond review policies. GAO analyzed BLM's policies and data and interviewed BLM officials and representatives from stakeholder organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's analysis indicates that the Bureau of Land Management's (BLM) actual costs incurred and potential liabilities for reclaiming oil and gas wells have likely increased for fiscal years 2010 through 2017. However, the full extent of the increase is not known because BLM does not systematically track needed data. Based on GAO's analysis of data obtained from 13 of BLM's 33 field offices that manage oil and gas programs, the average annual reclamation cost was $267,600, an increase compared to the $171,500 annual average across all BLM offices that GAO reported in 2010. Similarly, GAO's analysis of BLM data found that the number of known orphaned wells, those that generally have no responsible or liable parties, for all field offices has increased from 144 in 2010 to 219 as of 2017. However, BLM's database that contains information on oil and gas wells on federal and Indian lands does not collect information on costs incurred or on potential liabilities that might result from an increase in the number of orphaned wells. Under federal internal control standards, management should use quality information to achieve the entity's objectives. Without systematically tracking such information, BLM does not have assurance that it has sufficient bonds or financial assurances to cover the costs of reclaiming orphaned wells.", "GAO was unable to fully assess the extent to which BLM field and state offices have implemented the agency's policies on reviewing wells and bond adequacy in part because of deficiencies in BLM's monitoring approach. For example, reports BLM headquarters used to monitor field offices' implementation of the policies have limitations. GAO identified discrepancies between the well and bond adequacy review reports that BLM state offices submitted to headquarters and the national summary consolidating states' information. Out of 10 state offices, 3 reported a different number of reviews completed in fiscal year 2016 than what BLM reported in its fiscal year 2016 national summary. Leading practices for monitoring the implementation of agency policies call for taking steps such as collecting and analyzing data on performance indicators. Without strengthening BLM's approach to monitoring, its ability to assess field offices' reviews of all inactive wells and determine the adequacy of all bonds is limited."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that BLM systematically track the agency's actual reclamation costs and potential liabilities and strengthen its approach to monitoring field offices' implementation of the well review and bond adequacy review policies. BLM agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Oil and natural gas resources on federal and Indian lands are an  important source of our nation\u2019s energy supply. According to the  Department of the Interior\u2019s Bureau of Land Management (BLM), in fiscal  year 2015, the most recent year for which data are available, wells on  federal and Indian lands were responsible for providing 11 percent of the  natural gas and 7 percent of the oil used in the United States. In fiscal  year 2016, private entities operated about 94,000 oil and gas wells on  federal lands overseen by BLM. Once these wells cease production, they  can become inactive. Inactive wells, which are non-producing wells, have  the potential to create physical and environmental hazards if operators fail  to reclaim the well sites, which may involve plugging the well, removing  structures, and reshaping and revegetating the land around the wells (i.e.,  returning well sites as close to their original natural conditions as  reasonably practical). For example, inactive wells that are not plugged or  not properly plugged can leak methane or contaminate surface water and  groundwater. BLM considers both oil and gas wells on federal and Indian  lands as well as the associated leased land as potential liabilities because  BLM may have to pay for reclamation if the well operator fails to do so.", "BLM regulations and federal laws contain requirements aimed at  managing BLM\u2019s potential oil and gas well liabilities. For example, to help  ensure that operators reclaim well sites, BLM requires operators to  provide a bond before drilling operations begin. Operators are required to  reclaim well sites before their bonds are released. These bonds may be  surety bonds, which are third-party guarantees that operators purchase  from private insurance companies, or personal bonds accompanied by a  financial instrument, such as a cashier\u2019s check. Inactive wells become  orphaned if an operator does not perform required reclamation and if the  bond is insufficient to cover reclamation expenses and there are no other  responsible or liable parties to do so. In these cases, BLM is responsible  for completing the reclamation of the well site and uses appropriated  funds to perform reclamation. The Energy Policy Act of 2005 (EPAct  2005) directs the Secretary of the Interior to establish a program to  reclaim orphaned, abandoned, or idled oil and gas wells on federal  lands. The act requires that the program identify persons providing a  bond or other financial assurance and establish a means of recovering  the costs of reclaiming wells.", "We have previously reported on the actual costs BLM has incurred to  reclaim orphaned wells and reported on and made recommendations  related to BLM\u2019s potential oil and gas well liabilities and the agency\u2019s  efforts to manage these liabilities. For example, in January 2010, we  documented the amount that BLM paid to reclaim orphaned wells from  1988 through 2009 ($3.8 million to reclaim 295 orphaned wells), and  identified the number of orphaned wells that BLM had not yet reclaimed  (144 orphaned wells). In addition, in February 2011, we found  incomplete bond information in BLM\u2019s data system, as well as incomplete  data on the number of well and bond adequacy reviews. We  recommended that BLM develop a comprehensive strategy to better  manage potential oil and gas well liabilities. BLM agreed and, partly in  response to our recommendations, issued a well review policy in 2012  and a bond adequacy review policy in 2013.", "You asked us to review how BLM manages its potential oil and gas well  liabilities. This report examines (1) how BLM\u2019s actual costs incurred to  reclaim orphaned wells and potential oil and gas well liabilities have  changed, if at all, for fiscal years 2010 through 2017 (since we last  reported on these issues); (2) the extent to which BLM has implemented  its 2012 well review and 2013 bond adequacy review policies; and (3)  BLM officials\u2019 and stakeholders\u2019 views on what challenges, if any, BLM  faces in managing its potential oil and gas well liabilities.", "To examine how BLM\u2019s actual reclamation costs incurred and potential oil  and gas well liabilities have changed, we analyzed data from BLM\u2019s  Automated Fluid Minerals Support System (AFMSS) on oil and gas wells  on federal and Indian lands, including inactive and orphaned wells\u2014 which represent potential liabilities. AFMSS provides a snapshot of the  time that the data are queried, and so AFMSS does not include historical  data over time. As such, to examine the number of inactive wells on  federal and Indian lands and how long these have been inactive, we  combined AFMSS data with data from the Department of the Interior\u2019s  Office of Natural Resources Revenue (ONRR) Oil and Gas Operations  Report\u2019s (OGOR) data system. The Department of the Interior requires  monthly OGORs from operators. These OGORs document and record the  volume of oil and gas produced from wells on federal and Indian lands.  To assess the reliability of AFMSS and OGOR data, we reviewed agency  documents, met with relevant agency officials, and performed electronic  testing. We found the data on the number of inactive wells and how long  they have been inactive and the data for the number of wells BLM has  identified as orphaned to be sufficiently reliable for our purposes.", "However, because AFMSS does not contain information on actual costs  incurred to reclaim orphaned wells, we obtained documentation of the  actual reclamation costs that 13 selected BLM field offices incurred for  fiscal years 2010 through July 2017. To analyze these costs, we reviewed  purchase orders and invoices. We also obtained documentation, including  spreadsheets with estimated potential reclamation costs that these 13  offices faced as of July 2017. We compared estimated costs provided  by the 13 field offices to historical actual costs and determined that overall  estimated reclamation costs were sufficiently reasonable for providing a  sense of the general magnitude of potential costs, though we did not  assess the underlying inputs or assumptions used. We selected the 13  BLM field offices because they are responsible for about 80 percent of all  oil and gas wells managed by BLM. We also interviewed officials from  the 13 selected BLM field offices and the 6 BLM state offices associated  with these field offices. Findings from the selected offices cannot be  generalized to BLM offices we did not include in our review. We also  reviewed documentation provided by BLM and compared BLM\u2019s policies  and procedures on recording information on actual costs incurred to  reclaim orphaned wells and potential liabilities against the information and  communication standard outlined in Standards for Internal Control in the  Federal Government.", "To examine the extent to which BLM has implemented its 2012 and 2013  policies for conducting well and bond adequacy reviews, we analyzed  BLM\u2019s well review and bond adequacy review reports for fiscal year 2016.  We also reviewed AFMSS data on wells and bonds as of October 2017.  We were unable to fully assess BLM\u2019s performance against the directives  in the agency\u2019s 2012 well review and 2013 bond adequacy review policies  due to limited agency data and documentation. We identified data  accuracy and consistency concerns with some of the data elements in the  agency\u2019s well review and bond adequacy review reports as well as some  AFMSS data on wells and bonds, which we discuss later in this report. In  addition, we reviewed documentation from a random, non-generalizable  sample of 62 well reviews and 58 bond adequacy reviews, as reported by  the 13 selected BLM field offices. Information from our documentation  reviews is not generalizable to all BLM field offices but provides  illustrative examples of the information contained in BLM\u2019s well and bond  adequacy reviews. We compared BLM\u2019s procedures detailing how offices  are to count or report a well review and procedures for maintaining data  quality against the control activities standard outlined in Standards for  Internal Control in the Federal Government. We also compared BLM\u2019s  procedures for monitoring implementation of policy directives against  leading practices for monitoring agency policies.", "To examine any challenges that BLM faces in managing its potential oil  and gas well liabilities, we interviewed officials from 20 BLM offices and  interviewed or obtained written responses from representatives from 8  stakeholder organizations knowledgeable about BLM\u2019s oil and gas well management, including academic, environmental, industry, and state  organizations. In addition, we spoke with knowledgeable officials from  ONRR and the Department of the Interior\u2019s Office of Indian Energy and  Economic Development, Division of Energy and Mineral Development. To  identify knowledgeable stakeholders, we conducted a literature search,  reviewed previous GAO reports, and obtained recommendations from  BLM officials. We then used a technique in which the initial group of BLM  officials and stakeholders we interviewed identified additional contacts to  interview. From this list, we selected stakeholders who could provide a  range of viewpoints. The views of the BLM officials, stakeholders, and  other agency personnel we interviewed are not generalizable to BLM  officials, similar stakeholders, and other agency personnel we did not  interview. Lastly, we compared how BLM identified and managed certain  inactive wells, as well as how BLM managed nationwide and statewide  bonds, against the control activities standard outlined in Standards for  Internal Control in the Federal Government; and BLM\u2019s resource  management practices against certain requirements in EPAct 2005 and  leading practices by the Project Management Institute\u2019s The Standard for  Program Management. (App. I lists the BLM offices and knowledgeable  stakeholders we interviewed and provides additional information on our  scope and methodology).", "We conducted this performance audit from November 2016 to May 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides information on (1) BLM headquarters, state, and  field offices; (2) the lifecycle of oil and gas wells; (3) BLM\u2019s bonding  regulations; and (4) BLM\u2019s 2012 well review and 2013 bond adequacy  review policies."], "subsections": [{"section_title": "BLM Headquarters, State, and Field Offices", "paragraphs": ["BLM is responsible for issuing leases for private entities to develop oil  and gas resources on and under roughly 700-million acres of (1) BLM  land, (2) other federal agencies\u2019 land, and (3) private land where the  federal government owns the mineral rights. According to BLM,  approximately 32-million acres were leased for oil and gas operations at  the end of fiscal year 2015. BLM also oversees oil and gas operations on  56-million acres of Indian lands.", "BLM administers its programs through its headquarters office in  Washington, D.C.; 12 state offices; 38 district offices; and 127 field  offices. Of these, 10 state offices and 33 field offices manage oil and gas  programs, and these are located primarily in the Mountain West, the  center of much of BLM\u2019s oil and gas development. BLM headquarters  develops guidance and regulations for the agency, and the state, district,  and field offices manage and implement the agency\u2019s programs. Because  BLM has few acres of land in the eastern half of the United States, the  Eastern States State Office, in Washington, D.C., is responsible for  managing land in 31 states, and the remaining state offices generally  conform to the boundaries of one or more states. Figure 1 shows the  boundaries of the 12 BLM state offices."], "subsections": []}, {"section_title": "Lifecycle of Oil and Gas Wells", "paragraphs": ["Once operators obtain federal oil and gas leases and drill wells, those  wells can be actively producing, inactive, or reclaimed. An orphaned well  is a well that BLM determined has no responsible or liable party and for  which there is insufficient bond coverage for reclamation. This situation  may occur, for example, when an operator has declared bankruptcy.  Shut-in and temporarily abandoned wells are examples of types of  inactive wells that can become orphaned. Shut-in wells are physically and  mechanically capable of producing oil or gas in paying quantities or  capable of service use. For example, an operator may put a well in shut- in status if it has not been connected to a sales line or the line is too far  away and it is not economical to connect to at this time. Temporarily  abandoned wells are another type of inactive well that is not physically or  mechanically capable of producing oil or gas in paying quantities but that  may have value for a future use. Figure 2 depicts the lifecycle of oil and  gas wells overseen by BLM."], "subsections": []}, {"section_title": "BLM\u2019s Bonding Regulations", "paragraphs": ["The Mineral Leasing Act of 1920, as amended, requires that federal  regulations ensure that an adequate bond is established before operators  begin preparing land for drilling to ensure complete and timely  reclamation of the land. Accordingly, BLM regulations require operators to  submit a bond to ensure compliance with all of the terms and conditions  of the lease, including, but not limited to paying royalties, plugging wells,  and reclaiming disturbed land. BLM regulations generally require  operators to have one of the following types of bond coverage:  individual lease bonds, which cover all of an operator\u2019s wells under  one lease, and the minimum amount is set at $10,000;  statewide bonds, which cover all of an operator\u2019s leases in one state,  and the minimum amount is set at $25,000; or nationwide bonds, which cover all of an operator\u2019s leases in the  United States, and the minimum amount is set at $150,000.", "BLM can accept two types of bonds: surety bonds and personal bonds. A  surety bond is a third-party guarantee that an operator purchases from a  private insurance company approved by the Department of the Treasury.  The operator is required to pay a premium to the surety company to  maintain the bond. These premiums can vary depending on various  factors, including the amount of the bond and the assets and financial  resources of the operator. If operators fail to reclaim the land they disturb,  the surety company can either pay BLM the amount of the bond to help  offset reclamation costs, or in some circumstances, BLM may allow the  surety company to perform the required reclamation. A personal bond  must be accompanied by one of the following financial instruments:  certificates of deposit issued by a financial institution whose deposits  are federally insured, granting the Secretary of the Interior authority to  redeem it in case of default in the performance of the terms and  conditions of the lease;  cashier\u2019s checks; negotiable Treasury securities, including U.S. Treasury notes or  bonds, with conveyance to the Secretary of the Interior to sell the  security in case of default in the performance of the lease\u2019s terms and  conditions; or  irrevocable letters of credit that are issued for a specific term by a  financial institution whose deposits are federally insured and meet  certain conditions.", "If operators fail to reclaim the land they disturb, BLM will redeem the  certificate of deposit, cash the check, sell the security, or make a demand  on the letter of credit to pay the reclamation costs."], "subsections": []}, {"section_title": "BLM\u2019s 2012 Well Review and 2013 Bond Adequacy Review Policies", "paragraphs": ["In response to our previous recommendations that BLM develop a  comprehensive strategy to improve monitoring agency performance in  conducting well reviews and bond adequacy reviews, BLM issued a 2012  well review policy and a 2013 bond adequacy review policy. These  policies contain directives for conducting reviews when wells and bonds  meet certain criteria. The well review policy directs:  that field office officials evaluate every shut-in well at least once every  5 years;  that field office officials review all wells that have been inactive for 25  years or longer and that have no anticipated beneficial use by March  29, 2013;  that if field office officials determine that there are wells that are not  capable of producing oil or gas in paying quantities or have no  beneficial use, officials are to send the operator a written order  directing the operator to demonstrate that these wells are capable of  producing oil or gas in paying quantities or have a future beneficial  use, or the operator is to submit plans to reclaim the wells;  that each state office submit to BLM headquarters a consolidated  annual report recording well reviews; and  that the annual report identify the leases that were reviewed and the  wells that were reviewed on each lease, and describe what follow-up  action the field office official conducting the review performed.", "The bond adequacy review policy directs:  that field offices perform bond adequacy reviews on all bonds at least  once every 5 years or whenever a bond review is warranted;  that field offices verify and tie all federal wells to their appropriate  bond number and enter bond information and bond adequacy review  data into AFMSS;  that field offices perform adequacy reviews on all bonds using specific  instructions and a worksheet that assigns points for three risk factors:  (1) status of wells covered by the bond (share of inactive wells, deep  wells, and wells with marginal production); (2) operator-specific  compliance history; and (3) reclamation stewardship diligence;  that if the field office official performing the review determines that the  bond amount is insufficient, the official is to take the necessary steps  to determine the appropriate bond amount and increase the bond;  that if the bond being reviewed is a statewide or nationwide bond, field  offices are to review the wells within their field office jurisdiction; and  that each BLM state office with an oil and gas program submit a semi- annual bond adequacy review report to BLM headquarters."], "subsections": []}]}, {"section_title": "BLM\u2019s Actual Reclamation Costs and Potential Oil and Gas Well Liabilities Have Likely Increased, but the Agency Does Not Systematically Track These", "paragraphs": ["BLM\u2019s actual costs incurred to reclaim orphaned wells and potential  liabilities have likely increased for fiscal years 2010 through 2017 based  on our analysis of available information. Precisely how the agency\u2019s  actual reclamation costs and potential liabilities have changed is unclear  because BLM does not systematically track them at an agency-wide level.  BLM headquarters officials we interviewed told us that they did not have  any information on actual costs incurred to reclaim orphaned wells and  stated that BLM\u2019s data systems were not designed to track incurred  reclamation costs. In addition, AFMSS provides a snapshot of orphaned  wells as identified at the time that the data are queried and does not  provide data for prior time periods.", "Because BLM headquarters does not record actual reclamation costs  incurred at an agency-wide level, we requested documentation for the  reclamation costs incurred by 13 selected BLM field offices for fiscal  years 2010 through July 2017. This documentation identified about $2.1  million in reclamation costs incurred over this period, or an average of  about $267,600 per year by these 13 field offices. We estimate that total  actual reclamation costs for all field offices are likely to be higher than this  amount as other field offices may have also reclaimed orphaned wells  during this period. In January 2010, we found that, for all field offices  across the agency, BLM spent about $3.8 million from fiscal years 1988  through 2009, or an average of about $171,500 per year. Comparing  the average costs incurred by the 13 selected field offices to the data we  previously reported demonstrates that actual total reclamation costs  incurred have likely increased since 2010.", "In addition to actual costs increasing, potential liabilities are also likely to  have increased, though BLM does not systematically track information on  potential liabilities that might result from an increase in the number of  orphaned wells. Potential liabilities include costs that the agency may  incur to reclaim wells that operators fail to reclaim. We believe these  costs have also increased because the number of known orphaned wells  on federal and Indian lands managed by BLM has increased. We  identified changes in the number of known orphaned wells since we last  reported on this matter in January 2010. In January 2010, we found that  BLM had identified and was managing 144 orphaned wells. Over half of  those 144 wells (75) were still identified in AFMSS as orphaned as of July  2017, and the total number of identified orphaned wells on federal lands  had increased from 144 to 219. Also, BLM officials from the 13 selected  field offices identified about $46.2 million in estimated potential  reclamation costs associated with orphaned wells and inactive wells that  officials deemed to be at risk of becoming orphaned.", "Also concerning potential liabilities, our analysis of AFMSS data and  OGOR production data through September 2016 found that BLM  managed about 15,600 inactive wells, of which over 1,000 were inactive  for 25 years or more. In contrast, a document provided to us by BLM  headquarters indicates 325 wells had been inactive for 25 years or more  as of around 2017. This document summarizes data from AFMSS queries  conducted by BLM field and state offices at various times from 2013  through 2014 and queries conducted at various times from 2016 through  2017. BLM officials told us that this difference could be because AFMSS  reports sometimes return conflicting data since the reports draw from  current and historical statuses of wells from both AFMSS and OGOR. We  combined AFMSS and OGOR data to identify the number of inactive  wells because although BLM records the total number of wells on federal  lands over time\u2014a rough indicator of how potential reclamation costs  may change\u2014the agency does not systematically record more specific  types of wells that may be at higher risk of becoming orphaned, such as  inactive wells or wells that have been inactive for 25 years or more.", "Moreover, we identified inconsistencies between the data and the  document provided to us by BLM headquarters summarizing the data. For  example, BLM\u2019s summary document did not include one state office, even  though the data include that state office as having two wells that were  inactive for 25 years or more in 2014. BLM\u2019s summary document states  that there had been a reduction in the number of wells that were inactive  for 25 years or more between the times of the two data queries. However,  because BLM does not systematically track the number of inactive wells,  in particular those wells that are at high risk of becoming orphaned, the  agency does not know how its potential liabilities may be changing. These  liabilities include wells inactive for 25 years or more.", "Although we were unable to determine the full extent of the increase in  BLM\u2019s potential liabilities because BLM does not have the data needed  for such an analysis, other factors also suggest such an increase. For  example, there has been an increase in oil and gas development on  federal lands, and therefore, there is the potential for an increase in the  total number of wells on federal lands at risk of becoming orphaned and  needing to be reclaimed in the future. BLM\u2019s portfolio of oil and gas wells  on federal lands has changed over the years, based on overall trends in  the oil and gas industry. According to AFMSS data provided by BLM,  the total number of wells on federal lands that are capable of production  increased along with rising oil and gas prices, from about 89,600 wells in  fiscal year 2010 to peaking to about 94,800 wells in fiscal year 2014. As  oil and gas prices declined starting in 2014, the total number of wells  capable of production also declined to about 94,100 wells in fiscal year  2016.", "In addition, declining oil and gas prices (by nearly half from 2010 through  2017) have placed financial stress on oil and gas operators, thereby  increasing bankruptcies and the risk of wells becoming orphaned. For  example, coalbed methane\u2014natural gas extracted from coal beds\u2014was  economical to produce when natural gas prices were higher and  thousands of coalbed methane wells were drilled on federal lands.  However, coalbed methane production has declined because the spread  of shale gas production has driven down natural gas prices. Officials we  interviewed in one BLM field office told us that the drop in natural gas  prices contributed to an increasing number of bankruptcies for operators  of coalbed methane wells. Our analysis of AFMSS data suggests that  there were thousands of inactive coalbed methane wells as of October  2017. To the extent that market conditions remain unfavorable for  coalbed methane production, BLM\u2019s potential future reclamation costs  may increase if any operators of these wells go bankrupt or are otherwise  unwilling or unable to pay the full costs of reclamation, leaving these wells  orphaned.", "According to federal internal control standards, management should use  quality information, which should be complete, to achieve the entity\u2019s  objectives. However, BLM does not systematically or comprehensively  track the agency\u2019s actual costs incurred to reclaim orphaned wells and  the information necessary to determine potential liabilities, including  indicators of potential future reclamation costs, such as the number of  inactive wells, orphaned wells, and estimates of reclamation costs for  orphaned wells. BLM headquarters officials said that they sometimes  check AFMSS to see how many orphaned wells there are, but without  doing so systematically and recording the results of these checks, it is not  possible to determine how the agency has been making progress in  managing the number of orphaned wells. EPAct 2005 requires that the  costs of reclaiming orphaned wells be recovered from persons or entities  providing a bond or other financial assurance. Without systematically and  comprehensively tracking actual reclamation costs incurred and the  information necessary to determine potential liabilities including the  numbers of orphaned wells and inactive wells over time, BLM cannot  ensure that it has sufficient bond coverage or other financial assurances  to minimize the need for taxpayers to pay for the costs of reclaiming  orphaned wells."], "subsections": []}, {"section_title": "The Extent to which BLM Implemented Its Well Review Policy and Bond Adequacy Review Policy Directives Is Unclear", "paragraphs": ["The extent to which BLM has implemented its well review policy and bond  adequacy review policy is unclear. Specifically, we were unable to fully  assess the extent to which BLM\u2019s field and state offices have  implemented directives included in these policies because of inconsistent  well review information, inaccurate well and bond data in AFMSS, and  inadequate monitoring of well and bond policies\u2019 implementation.", "Inconsistent well review information. We were unable to fully assess  the extent to which BLM implemented some directives in the well review  policy because the well review information reported by field offices  differed across the agency. For example, officials we interviewed at the  13 selected BLM field offices had different understandings of what  specific actions constitute a well review, and therefore differed in their  understanding of which wells were to be included in the annual reports for  documenting well reviews. Specifically, officials from 11 out of 13 selected  field offices told us that a well review consisted of actions\u2014such as  reviewing a well\u2019s status, conducting a physical inspection, and providing  additional notices or letters to the well operator when a well is inactive.  Officials in 2 other field offices told us that while they conduct similar  actions, they consider the sole action of correcting data on a well\u2019s status  to constitute a well review. For example, a BLM official told us that one  reported well review was conducted on a well that had been reclaimed in  1986 but that was not noted in AFMSS. The official told us that following  this well review, they corrected the well status in AFMSS and noted that  this well should not have been on the list of wells to review. While  correcting well data helps improve the accuracy of AFMSS, when some  offices count such corrections as well reviews and others do not, this  variance results in inconsistent information in BLM\u2019s annual well review  reports.", "Such inconsistencies in what counts as a well review may be the result of  a lack of clarity in BLM\u2019s well review policy that does not specify what  constitutes a well review. Unlike the bond adequacy review policy, which  provides instructions to field offices on how to conduct a bond adequacy  review and directs field offices to use a specific worksheet to calculate  bond adequacy, the well review policy does not contain specific  instructions on what actions field offices are to take to conduct a well  review, such as how to count reviews or report them. A January 2018  report by the Department of the Interior\u2019s Office of Inspector General  (OIG) similarly found that BLM\u2019s well review policy does not specifically  outline how to conduct and document reviews of shut-in wells (shut-in  wells, as noted earlier, are inactive wells that are physically and  mechanically capable of producing oil or gas in paying quantities or  capable of service use). Under federal standards for internal control,  management should design control activities to achieve objectives and  respond to risks; such activities include appropriate documentation of  internal control in management directives, administrative policies, or  operating manuals. Without developing and communicating specific  instructions outlining what actions constitute a well review for annual- reporting purposes, BLM cannot have reasonable assurance that its field  offices are conducting and reporting on well reviews in a consistent  manner.", "Inaccurate well and bond data in AFMSS. Our ability to assess the  extent to which BLM implemented its well review and bond adequacy  review policies was impeded by inaccuracies in certain AFMSS data.  BLM officials told us that some of the data in AFMSS on wells and bonds  were not reliable. For example, BLM officials told us that there may be  discrepancies between the bonds listed in AFMSS and the bonds listed in  the Bond and Surety System, which is BLM\u2019s official database for all oil  and gas bonds. Officials told us that bonds may be missing from AFMSS  because BLM field offices are responsible for manually entering the bond  number from the Bond and Surety System into AFMSS.", "In addition, AFMSS data we reviewed contained other inaccuracies.  Specifically, the data we reviewed contained future dates for when wells  were completed, or capable of production, when some wells last changed  statuses, and when some well reviews were reportedly conducted. BLM  officials told us that AFMSS allows users to enter future dates, which can  result in inaccurate data. Having inaccurate dates for wells\u2019 statuses and  wells\u2019 reviews is problematic because it means it is not possible to assess  whether reviews are being conducted as directed by BLM policy. For  example, BLM\u2019s well review policy directs field offices to review each  shut-in well every 5 years. BLM\u2019s performance against this directive  cannot be assessed without reliable information on when wells become  shut-in and when well reviews are conducted.", "In written responses to our request for information, BLM officials stated  that AFMSS has some edit checks, but the accuracy of the data entered  into AFMSS is dependent on field office officials responsible for data  entry. BLM officials stated that AFMSS has some electronic safeguards,  such as certain number fields only accepting numbers. In addition,  AFMSS has dropdown menus and checkboxes to narrow the parameters  of certain data being entered. However, there are no edit checks to  prevent field offices from inputting future status dates. In addition, BLM\u2019s  data administration and management handbook establishes that data  stewards are to, among other things, establish target quality levels, data  quality plans (including audits and other quality assurance steps), and  certify the quality of the data. BLM officials stated that they have national  level AFMSS data stewards and information-technology data stewards.  However, BLM officials stated that the agency has not defined AFMSS  target quality levels and did not provide any data quality plans. Officials  stated that BLM headquarters conducts annual data reviews and will  periodically review sample well files to detect data inconsistencies and  errors. In addition, BLM officials stated that field offices are responsible  for certifying the accuracy of the data they enter into AFMSS, and BLM  headquarters is responsible for providing oversight. However, BLM  headquarters officials did not provide documentation of any data  certifications or data reviews, raising concerns over the extent of this  oversight.", "Under federal standards for internal control, management should design  control activities, including control activities used in information  processing, to achieve objectives and respond to risks. Examples of such  control activities include:  conducting edit checks of data entered, accounting for transactions in numerical sequences, and  comparing file totals with control accounts.", "Without taking steps to improve AFMSS data quality, such as by  conducting more edit checks and having data stewards certify the quality  of the data, BLM cannot have reasonable assurance that management  has the accurate information it needs to track whether field offices are  conducting well and bond adequacy reviews as intended.", "In its January 2018 report, the OIG found similar issues related to the  accuracy of AFMSS data. Specifically, the OIG found that AFMSS data  were unreliable due to inaccurate well status information. The OIG also  found that BLM officials update AFMSS manually during a well review or  as needed, as opposed to automating the data, meaning that information  about the status of individual wells in AFMSS and data used for BLM\u2019s  annual well report are not timely. The OIG recommended that BLM  develop and implement a quality control process to identify inaccurate or  incomplete data in AFMSS. BLM concurred with this recommendation.", "Inadequate monitoring of well and bond policies\u2019 implementation.  BLM headquarters has taken some actions to monitor the implementation  of its well and bond adequacy review policies across the agency, but its  efforts have been limited, and the agency cannot ensure that its policy  directives have been fully implemented. For example, BLM headquarters  officials told us that headquarters relies on national well review and bond  adequacy review reports to monitor the extent to which field offices are  conducting well and bond adequacy reviews. These well and bond  adequacy review reports provide some information on how BLM field  offices conducted their reviews during a given year, but the reports as  previously mentioned above have data limitations and do not consistently  record a field office\u2019s progress in meeting the policies overall. For  example, annual well review reports list the wells field offices reviewed in  a given year, but do not compare this statistic to a list of the wells that  each field office should have reviewed. Similarly, field offices\u2019 bond  adequacy review reports list the bonds that the field offices reviewed in a  given year. However, the reports do not compare the bonds reviewed to a  list of bonds each field office should have reviewed.", "In addition, our analysis of 58 selected bonds reported as reviewed  across the 13 selected field offices found that 4 bonds\u2014about 7  percent\u2014were not reviewed, even though field offices had reported that  they had conducted the reviews. The bond adequacy review policy  directs field offices to review all bonds once every 5 years or whenever a  bond review is warranted. Therefore, the bond adequacy review reports  on their own provide insufficient information for BLM headquarters to  monitor progress about whether field offices are fully implementing the  directive.", "We also identified discrepancies between the annual well review and  semi-annual bond adequacy review reports that state offices submitted to  BLM headquarters and the information in headquarters\u2019 national  summary, which consolidates the state office information. These  discrepancies limit the usefulness of the national summary for monitoring  the extent to which field offices are conducting well and bond adequacy  reviews as directed by the policies. For example, 3 out of 10 state offices  reported a different number of bond adequacy reviews completed in their  fiscal year 2016 state reports than what was reported in BLM\u2019s fiscal year  2016 national report. Similarly, 6 out of 9 state offices reported a  different number of completed well reviews in their fiscal year 2016 state  report than what was reported in BLM\u2019s fiscal year 2016 national report.", "Similarly, the OIG\u2019s January 2018 report found that BLM can only report  its progress in reviewing wells that have been inactive for 25 years or  more by using field office spreadsheets, coupled with AFMSS data. The  report stated that using spreadsheets and AFMSS data have made it  difficult, however, for BLM to demonstrate proper oversight. BLM\u2019s  headquarters officials had to ask state office officials how many wells had  been reviewed and then had to summarize those results in a  spreadsheet. The OIG recommended that BLM monitor and track reviews  of shut-in wells in a management system. BLM concurred and stated that  AFMSS and an update to AFMSS that is under development were the  appropriate databases for monitoring and tracking well reviews.", "Overall, we found that BLM\u2019s current approach to monitoring the agency\u2019s  progress in implementing its well and bond adequacy review policies has  been limited. We reviewed leading practices for monitoring the  implementation of agency policies. These practices call for, among  other things: (1) periodically collecting and analyzing data on performance  indicators, (2) establishing procedures for ensuring the quality of data on  performance indicators, (3) documenting that monitoring plans were  executed, and (4) considering performance information in making  management decisions. Without taking actions to strengthen its approach  to monitoring, such as collecting and analyzing data on performance  indicators and ensuring the quality of those data, BLM\u2019s ability to assess  the extent to which field offices are reviewing all inactive wells and  determining the adequacy of all bonds is limited."], "subsections": []}, {"section_title": "Agency Officials and Stakeholders Identified Several Challenges BLM Faces in Managing Its Potential Oil and Gas Well Liabilities", "paragraphs": ["According to BLM officials and stakeholders we interviewed, BLM faces  several challenges in managing its potential liabilities. In particular, BLM  officials and stakeholders told us that one challenge in managing BLM\u2019s  potential liabilities was identifying and managing shut-in wells and  preventing them from becoming orphaned. Another challenge identified  was limited resources and competing priorities in reclaiming orphaned  wells. Other challenges to managing BLM\u2019s potential liabilities include  difficulties in reviewing nationwide bonds, minimum bond amounts, and  operators\u2019 unresponsiveness."], "subsections": [{"section_title": "BLM Faces Challenges Identifying and Managing Shut-in Wells and Preventing Them from Becoming Orphaned", "paragraphs": ["BLM officials from 6 of the 20 BLM offices\u2014including headquarters and  selected state and field offices\u2014and 2 of the 10 stakeholders told us that  one of the challenges that BLM faces in managing its potential liabilities is  identifying and managing shut-in wells. As previously mentioned, shut-in  wells are inactive wells that are physically and mechanically capable of  producing oil or gas in paying quantities or capable of service use. Since  shut-in wells may become orphaned and therefore involve BLM resources  to reclaim, identifying and managing them is a way for BLM to manage its  potential liabilities. BLM\u2019s 2012 well review policy directs field offices to  review all shut-in wells on federal and Indian lands every 5 years and to  ensure that shut-in wells no longer capable of production are reclaimed.  However, operators are generally not required to notify BLM when they  place a well in shut-in status. As a result, officials noted that it is difficult  for field offices to identify all shut-in wells in order to review them. Officials  from one field office told us that identifying when a well becomes shut-in  is challenging unless inspectors are able to physically find the well.", "Even when wells have been identified to BLM as shut-in, some BLM  officials at selected field offices said that they have few policy tools to  manage shut-in wells. In reviewing the well review policy, we found that it  contains certain directives for wells that are temporarily abandoned,  including that an operator is to conduct well integrity testing prior to  placing a well in temporarily abandoned status and a 30-day limit for how  long operators can place wells in temporarily abandoned status without  receiving BLM approval. However, the policy contains no similar  directives related to testing or limited time frames for placing wells in shut- in status. As a result, BLM may be unable to identify and reduce its  inventory of shut-in wells, including wells that have been in shut-in status  for an extended period of time.", "In its January 2018 report, the OIG similarly found that the well review  policy does not provide field offices the leverage to make an operator  conduct integrity testing since the policy does not have instructions on the  method, frequency, and way to proceed with a notice or order. Without  having these test results available to them, the report found that BLM staff  cannot be certain that an inactive well is environmentally sound and  capable of production. The report recommended that BLM develop and  implement guidance or update the well review policy to require integrity  testing on inactive wells at specific periods.", "Strengthening the identification and management of shut-in wells could  be particularly helpful in managing BLM\u2019s potential liabilities because  such wells have represented a large portion of orphaned wells. According  to our analysis of AFMSS data, 138 of the 242 orphaned wells BLM  manages were in shut-in status prior to becoming orphaned. Moreover,  one of these wells had been in shut-in status since 1926. BLM\u2019s Colorado  and New Mexico state offices have taken steps to address the challenges  associated with shut-in wells becoming orphaned. For example, in  September 2016, BLM\u2019s New Mexico state office issued a policy that  directed operators to obtain BLM\u2019s approval in order to place a well in  shut-in status for more than 90 days and directed the operator to conduct  periodic testing to verify that wells that have been inactive for more than  12 consecutive months remain capable of production. Under federal  standards for internal control, management should design control  activities\u2014such as by clearly documenting internal control in  management directives, administrative policies, or operating manuals\u2014to  achieve objectives and respond to risks. Without providing greater  specificity in current policy or new supplemental guidance to all BLM field  offices on how to identify and manage shut-in wells, the agency is at an  increased risk of having unidentified shut-in wells, and wells that remain  in shut-in status for extended periods of time, leading to increased  potential liabilities if such wells become orphaned."], "subsections": []}, {"section_title": "BLM Faces Challenges Related to Limited Resources and Competing Priorities", "paragraphs": ["BLM officials and stakeholders told us that one of the challenges BLM  faces in managing its potential liabilities is limited resources, including  staff and funding, and competing priorities. Specifically, officials from 14  of the 20 BLM offices and 3 of the 10 stakeholders told us that BLM field  offices have limited staff and therefore prioritize other work, such as  processing drilling permits, over conducting well and bond adequacy  reviews, which are used to manage potential liabilities. BLM prioritizes  processing drilling permits over well and bond adequacy reviews in part  because the agency is required by statute to process drilling permits  within 30 days of receiving a complete application. BLM headquarters  officials told us that processing permits is the agency\u2019s highest priority  activity and that they ask field offices for monthly progress reports with  projected goals for processing permits within the next 90 days, and  compare the offices\u2019 accomplishments to agency targets. BLM  headquarters officials told us that prioritizing processing permits  increases the workload at the national, state-office, and field-office levels.", "Officials from one BLM state office told us that other challenges to  managing its potential liabilities are staffing limitations and the time it  takes to conduct bond adequacy reviews. These state office officials told  us that bond reviews can take a long time to complete because some  bonds are associated with several hundred wells. Similarly, officials from  one field office stated that conducting bond adequacy reviews was time  consuming and that they had only one staff member dedicated to  conducting the reviews. In 2011, we found that a lack of resources and  higher agency priorities were the primary reasons for why many BLM field  office officials we interviewed had not conducted well and bond adequacy  reviews or did not know the number of reviews they had conducted.", "In addition, officials from 6 of the 20 BLM offices and 1 stakeholder told  us that another challenge BLM faces in managing its potential liabilities is  prioritizing funding to reclaim orphaned wells. For example, an official  from one state office told us that securing funding to reclaim orphaned  wells is a challenge because BLM does not set aside funding to pay for  reclamation costs. BLM officials in one field office told us that they had  not received funding from BLM headquarters specifically for reclamation  in over 10 years, despite managing a growing number of orphaned wells.  An official from this field office told us that without dedicated funds from  BLM headquarters for this purpose, the field office was unable to reclaim  the orphaned wells. In addition, officials from another field office told us  that time frames for competing and awarding contracts to perform  reclamation work do not coincide with securing funding from BLM  headquarters, and that funding has to be obligated by the end of the fiscal  year. These officials explained that in one instance, by the time they  obtained funding for well reclamation, it was too late to issue a contract  for the work.", "EPAct 2005 requires the establishment of a program to reclaim orphaned,  abandoned, or idled oil and gas wells on federal lands. As part of this  program, BLM conducts well reviews and bond adequacy reviews. As  discussed above, about half of the orphaned wells BLM identified in 2009  were not reclaimed and remained orphaned in 2017, and BLM officials  cited funding as the issue. The Project Management Institute, Inc. has  established a standard on program management. Under the standard,  program resource management planning ensures that all required  resources are made available for managers to enable the delivery of  benefits for a program. Resource management planning involves  identifying existing resources and the need for additional resources. The  program manager analyzes the availability of each resource, in terms of  both capacity and capability, and determines how these resources will be  allocated to avoid over-commitment or inadequate support. Such  planning, through a resource management plan, forecasts the expected  resources across a program to allow the program manager to identify  potential resource shortfalls or conflicts over the use of scarce or  constrained resources. The plan is also to describe guidelines for making  program resource prioritization decisions and resolving resource conflicts.", "Based on our discussions with BLM headquarters and field office officials,  BLM does not have a resource management plan. For example, when we  discussed resources for reclaiming orphaned wells with BLM  headquarters officials, they told us that some BLM offices obtain funding  from state funds established for reclaiming orphaned wells, but not all  offices have been able to access such funds. If unable to secure funding  from the states, offices may request funding from BLM headquarters for  reclamation, and as mentioned previously, occasionally try to use  unexpended funds left at the end of a fiscal year. In its comments on the  draft report, Interior noted that BLM engages in annual work planning  processes designed to facilitate agency resource allocation decisions.  However, BLM overall does not have information on the federal resources  needed to reclaim known orphaned wells. Without developing a resource  management plan addressing resources needed for conducting well and  bond adequacy reviews and reclaiming orphaned wells, BLM cannot have  reasonable assurance that it is achieving the program\u2019s objectives."], "subsections": []}, {"section_title": "Agency Officials and Stakeholders Identified Several Additional Challenges BLM Faces in Managing Its Potential Liabilities", "paragraphs": ["Agency officials and stakeholders cited additional challenges including  BLM\u2019s ability to review nationwide bonds, minimum bond amounts, and  operator unresponsiveness.", "Reviewing nationwide bonds. Officials from 10 of the 20 BLM offices  told us that they encountered challenges reviewing nationwide bonds  because of a lack of coordination between BLM offices. The purpose  section of the bond adequacy review policy states that field offices are to  review bonds to determine whether the bond amount appropriately  reflects the level of potential risk posed by the operator. However, the  bond adequacy review policy also states in a directive that if the bond  being reviewed is a nationwide or statewide bond, field offices are only to  review the wells within their field office. Officials from one field office told  us that without insights into an operator\u2019s activities in the jurisdictions of  other field offices, bond adequacy reviews do not cover when an operator  has been cited with an Incident of Noncompliance or the number of  inactive wells the operator may have in other jurisdictions. These field  office officials said that it is important to communicate and coordinate with  other field offices when there is a need to require an operator to secure a  larger bond. For example, to require a well operator to increase the  amount of its bond, BLM must show that the operator meets the point  system\u2019s threshold in the bond adequacy review\u2019s calculation  worksheet. Officials in one state office told us that under a nationwide or  statewide bond, an operator might not reach the agency\u2019s threshold for  requiring a bond increase based on an operator\u2019s activities in the  jurisdiction of one field office but may meet the threshold if BLM\u2019s bond  adequacy review assessed all of the operator\u2019s operations within a state  or across the nation.", "Under federal standards for internal control, management should design  control activities to achieve objectives and respond to risks, such as by  clearly documenting internal controls, and having the documentation  appear in management directives, administrative policies, or operating  manuals. While BLM has documented its policy, the purpose of the  policy to ensure that the bond amount appropriately reflects the level of  potential risk posed by the operator conflicts with a directive of the policy  that offices are only to review wells within their own jurisdiction. Officials  told us that BLM is currently revising the bond adequacy review policy. As  the agency revises its bond adequacy review policy, BLM has the  opportunity to ensure that bond adequacy reviews reflect the overall risk  presented by operators. By having the policy ensure that the reviews of  nationwide and statewide bonds account for overall operator risk, BLM  can have better assurance that it will reduce the likelihood of using  taxpayer funds to pay to reclaim orphaned wells.", "Minimum bond amounts. Officials from 9 of the 20 BLM offices and 1  stakeholder told us that BLM faces challenges related to federal minimum  bond amounts that in their opinion are too low. For example, officials from  one BLM state office expressed concerns about operators with multiple  wells covered by the minimum bond amounts, which the officials believed  to be inadequate to cover total potential reclamation costs. Minimum bond  amounts were set in the 1950s and 1960s and have not been updated to  keep up with inflation. Specifically, the $10,000 minimum for individual  bonds was established in 1960, and the bond minimums for statewide  bonds ($25,000) and nationwide bonds ($150,000) were established in  1951. If adjusted to 2016 dollars, these amounts would be $63,613 for an  individual bond, $189,825 for a statewide bond, and $1,138,952 for a  nationwide bond. According to BLM headquarters officials, the agency  does not require that operators provide full liability bonds. These officials  told us that they believed that most operators would not be able to remain  in business if bond amounts were based on estimated total reclamation  costs.", "Operators\u2019 unresponsiveness. Officials from 8 of the 20 BLM offices  and 2 stakeholders told us that BLM faces challenges dealing with  unresponsive operators when requiring operators to increase bond  amounts or issuing Incidents of Noncompliance. For example, officials  from one BLM state office told us that operators do not always respond to  letters informing them of a requirement to secure an increase in their  bond. Officials from another BLM state office told us that the agency can  place operators on a noncompliance list prohibiting them from holding  leases or conducting operations on federal lands. However, these officials  also said that they have seen operators ask relatives to obtain leases in  order to circumvent such prohibitions. Officials from one field office told us  of one particular instance in which BLM had spent over 7 years  attempting to enforce the requirements for reclamation activities. BLM  had issued an Incident of Noncompliance, but the operator did not  respond and instead reorganized as a separate corporate entity.  Subsequently, the operator went bankrupt, requiring BLM to restart the  communications process from the beginning with the newly formed entity.  BLM officials told us that the agency has very little leverage when  companies change their name or reorganize in an attempt to evade  performing required reclamation activities. BLM headquarters officials told  us that working with operators was a delicate balance, especially when oil  and gas prices are down, and BLM field offices would benefit from  conducting periodic operator outreach to have an open dialogue with the  operators."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["BLM is responsible for overseeing oil and gas development on federal  lands and for balancing the sometimes competing priorities of  encouraging oil and gas development, while ensuring that when wells run  dry, operators return well sites to their original natural conditions. Federal  laws, regulations, and BLM\u2019s own policies call for the agency to take  various actions to manage its potential oil and gas well liabilities and  reclaim orphaned wells. However, BLM does not systematically or  comprehensively track how much the agency has spent to reclaim  orphaned wells or information, such as the number of orphaned wells and  inactive wells over time, necessary to determine the agency\u2019s potential  liabilities. Without systematically or comprehensively tracking information  on BLM\u2019s well reclamation costs and indicators of potential future costs,  its ability to monitor its progress and plan for its potential liabilities  associated with orphaned wells is limited.", "In addition, implementation of BLM\u2019s well and bond adequacy review  policies by the field offices is hampered by officials having different  understandings of what constitutes a well review. This variance is  because BLM\u2019s well review policy does not outline specific instructions on  what actions field offices should take when conducting a well review. This  situation results in inconsistent ways of conducting well reviews and  annually reporting on them. Without developing and communicating  specific instructions outlining what actions constitute a well review for  annual-reporting purposes, BLM cannot have reasonable assurance that  its field offices are conducting and reporting on well reviews in a  consistent manner. Further, inaccuracies in certain AFMSS data, such as  the dates that wells last changed statuses, raise questions about the  quality of data BLM headquarters uses to determine the extent to which  its offices are implementing the well review and bond adequacy review  policies. BLM has not taken steps to improve AFMSS\u2019 data quality such  as through the use of additional edit checks to prevent field offices from  inputting erroneous data or having data stewards certify the quality of the  data. Without taking such steps, BLM cannot have reasonable assurance  that management has accurate information it needs to track whether field  offices are conducting well and bond adequacy reviews as intended. In  addition, BLM\u2019s approach to monitoring the implementation of its well and  bond adequacy review policies is limited because the reports the agency  uses to monitor implementation provide insufficient and at times  conflicting information. Without taking actions to strengthen its approach  to monitoring, such as collecting and analyzing data on performance  indicators and ensuring the quality of those data, BLM\u2019s ability to assess  the extent to which field offices are reviewing all inactive wells and  determining the adequacy of all bonds will continue to be limited.", "BLM officials and stakeholders identified several challenges that BLM  faces in managing its potential oil and gas well liabilities, including  identifying and managing certain inactive wells\u2014specifically wells that are  in shut-in status and that have the potential to become orphaned. This  problem is because operators are generally not required to notify BLM  when they place a well in shut-in status. Without providing greater  specificity in current policy or supplemental guidance to all field offices,  the federal government may face increased potential liabilities if shut-in  wells become orphaned. In addition, BLM faces challenges related to  limited resources and competing priorities, such as not setting aside  funding to pay for reclaiming orphaned wells. Without developing a  resource management plan addressing resources needed for conducting  well and bond adequacy reviews and reclaiming orphaned wells, BLM  cannot have reasonable assurance that it is achieving the program\u2019s  objectives. BLM also faces challenges related to conducting nationwide  and statewide bond adequacy reviews because the bond adequacy  review policy overall contains conflicting information on how field offices  are to review bonds\u2019 adequacy. BLM is currently revising the bond  adequacy review policy and has an opportunity to ensure that the reviews  of nationwide and statewide bonds reflect operators\u2019 overall risks."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following seven recommendations to BLM:  The Director of BLM should systematically and comprehensively track the  actual costs BLM incurs when reclaiming orphaned wells and the  information, including the number of orphaned wells and inactive wells  over time, necessary to determine the agency\u2019s potential liabilities.  (Recommendation 1)", "The Director of BLM should develop and communicate specific  instructions on what actions constitute a well review for annual-reporting  purposes. (Recommendation 2)", "The Director of BLM should take steps to improve AFMSS data quality,  for example, by conducting more edit checks and by having data  stewards certify the quality of the data. (Recommendation 3)", "The Director of BLM should strengthen its approach to monitoring field  offices\u2019 implementation of the well review and bond adequacy review  policies, such as by collecting and analyzing data on performance  indicators and ensuring the quality of those data. (Recommendation 4)", "The Director of BLM should provide greater specificity in current policy or  supplemental guidance to all BLM field offices on how to identify and  manage all shut-in wells. (Recommendation 5)", "The Director of BLM should develop a resource management plan  addressing resources needed for conducting well and bond adequacy  reviews and reclaiming orphaned wells. (Recommendation 6)", "The Director of BLM should, in revising the bond adequacy review policy,  ensure that the reviews of nationwide and statewide bonds reflect the  overall risk presented by operators. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of the Interior for  review and comment. In its comments, reproduced in appendix II, Interior  generally concurred with our recommendations. Interior stated that,  following GAO\u2019s 2011 report on potential oil and gas well liabilities, BLM  implemented comprehensive policies to better manage and minimize the  risks of idle and orphaned wells on federal and Indian lands. Interior  agreed that there are areas where BLM can improve the accuracy of its  data and further reduce the risks associated with idle and orphaned wells.", "Interior indicated that it will update and improve its existing policies and  guidance consistent with the findings and recommendations in our report.", "In response to our sixth recommendation\u2014that BLM develop a resource  management plan addressing resources needed for conducting well and  bond adequacy reviews and reclaiming orphaned wells\u2014Interior stated  that BLM conducts annual work planning processes which facilitate  decisions regarding the allocation of agency resources and requested  additional information clarifying how our recommendation fits into or  differs from these. We expanded our description of resource management  planning and added language regarding BLM\u2019s annual work planning  processes to the report. However, we were not able to review the scope  or adequacy of BLM\u2019s annual work planning processes as they relate to  resource planning for well and bond reviews and reclaiming orphaned  wells for this report.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how BLM\u2019s actual costs incurred to reclaim  orphaned wells and potential oil and gas well liabilities have changed, if at  all, for fiscal years 2010 through 2017; (2) the extent to which BLM has  implemented its 2012 well review and 2013 bond adequacy review  policies; and (3) BLM officials\u2019 and stakeholders\u2019 views on what  challenges, if any, BLM faces in managing its potential liabilities.", "To examine how BLM\u2019s actual reclamation costs incurred and potential oil  and gas well liabilities have changed, we analyzed data in BLM\u2019s  Automated Fluid Minerals Support System (AFMSS) on oil and gas wells  on federal and Indian lands, including inactive wells\u2014which represent  potential liabilities. We reviewed documentation provided by BLM and  compared BLM\u2019s policies and procedures on recording information on  actual costs incurred to reclaim orphaned wells and potential liabilities  against the information and communication standard outlined in  Standards for Internal Control in the Federal Government. We selected  and interviewed officials from 13 BLM field offices because, according to  fiscal year 2016 data from the Department of the Interior\u2019s Office of  Natural Resources Revenue (ONRR) Oil and Gas Operations Report  (OGOR) data system we analyzed, these offices were responsible for  about 80 percent of all oil and gas wells managed by BLM. In addition,  we interviewed officials from the 6 BLM state offices associated with the  13 selected field offices (see table 1). Findings from selected offices  cannot be generalized to those we did not include in our review.", "However, because AFMSS does not contain information on actual costs  incurred to reclaim orphaned wells, we obtained documentation of the  actual reclamation costs that 13 selected BLM field offices incurred for  fiscal years 2010 through July 2017. To analyze these costs, we reviewed  purchase orders, invoices, and other documentation for actual  reclamation work performed. We also obtained documentation, including  spreadsheets with estimated potential reclamation costs that these 13  selected field offices faced as of July 2017. To assess the  reasonableness of estimated reclamation costs, we reviewed estimates  provided by officials from the selected field offices and compared those to  historical actual costs that we previously reported in January 2010. We  determined the overall estimated reclamation costs were sufficiently  reasonable for providing a sense of the general magnitude of potential  costs, though we did not assess the underlying inputs or assumptions  used. The information we received is not generalizable to reclamation  costs for other BLM offices that we did not review.", "We also analyzed AFMSS data on the number of wells capable of  production on federal lands from fiscal years 2010 to 2016. The AFMSS  database provides a snapshot of the time that the data are queried, and  so does not include historical data over time. As such, to examine the  number of inactive wells on federal and Indian lands and how long these  have been inactive, we combined AFMSS data with data from the OGOR  data system through September 2016. The Department of the Interior  requires monthly OGORs from operators, which document and record the  volume of oil and gas produced from wells on federal and Indian lands.  From AFMSS, we identified the appropriate population of wells by  selecting wells only located on federal and Indian lands, and excluded  wells that were on state or private lands. Because we did not find data in  AFMSS on how long a well had been in its last recorded status to be  reliable, we analyzed production records from the OGOR data system.  We also excluded data on wells that were in statuses in which there was  no associated potential liability, such as wells pending an application for  permit to drill.", "For each reporting date through September 2016, we aggregated data  from multiple well completions to the 10-digit unique well identifier level.  We then matched the unique well identifiers in AFMSS to those listed in  the OGOR data system to enumerate inactive wells by duration of  inactivity. For each reporting date, we designated wells with at least one  completion showing non-zero production volumes or in drilling or  monitoring status in the OGOR data system as active. We also  designated a well as active at a certain date if AFMSS data indicated any  of its completions were completed on that date. Otherwise we deemed  wells where all completions had zero production reporting on a date as  inactive for the corresponding period. In some cases, (i) no OGOR  records existed with non-zero production volumes or drilling or monitoring  well status and (ii) no AFMSS well completion date was provided, and so  we calculated inactivity by using the earliest record date for that well in  the OGOR data set. We discussed our methodology for calculating the  number of wells with BLM officials. We compared the number of inactive  wells from our analysis to those reported in BLM national and state  reports to identify data inconsistencies. In addition, we analyzed AFMSS  reports, as of July 2017, to analyze data on the number of orphaned  wells. To assess the reliability of OGOR and AFMSS data, we reviewed  agency documents, met with relevant agency officials, and performed  electronic testing by verifying, for example, missing or out-of-range data  values. We found the data for the number of inactive wells and how long  they have been inactive as well as the data for the number of wells BLM  has identified as orphaned to be sufficiently reliable for our purposes.", "To determine the extent to which BLM has implemented its 2012 and  2013 policies for conducting well reviews and bond adequacy reviews, we  reviewed applicable laws and analyzed the well review and bond  adequacy review policies. We reviewed information contained in BLM\u2019s  well review and bond adequacy review reports for fiscal year 2016 as well  as data generated through AFMSS on bonds and wells as of October  2017. We were unable to fully assess BLM\u2019s performance against the  directives in the agency\u2019s 2012 well review and 2013 bond adequacy  review policies due to limited agency data and documentation as  discussed in the report. Specifically, we identified data accuracy and  consistency concerns with some of the data elements in the agency\u2019s well  review and bond adequacy review reports as well as some AFMSS data  on wells and bonds, which we discuss in this report. We performed  electronic testing by verifying out-of-range values, such as dates of well  reviews conducted that were listed as being in the future. We also  interviewed officials from BLM headquarters, the 13 selected field offices,  and the 6 associated BLM state offices, to obtain information on the  extent to which the selected offices implemented the 2012 and 2013  policy directives. We compared BLM\u2019s procedures detailing how field  offices are to count or report a well review as well as procedures for  maintaining data quality against the control activities standard outlined in  Standards for Internal Control in the Federal Government. We also  compared BLM\u2019s procedures for monitoring implementation of policy  directives against leading practices for monitoring agency policies.", "We also reviewed documentation for a random, non-generalizable sample  of 62 well reviews and 58 bond adequacy reviews, as reported by the 13 selected BLM field offices, for a total of 120 reviews. A GAO statistician  selected a random sample of five well reviews for unique well numbers  and five bond reviews of unique bond numbers that the 13 selected field  offices had reviewed from the fiscal year 2016 well report and bond  adequacy report. Due to variations in field offices\u2019 reporting, some well  and bond reviews from prior fiscal years were also included in the random  selection. The Farmington field office also did not conduct any bond  adequacy reviews in fiscal year 2016, and so we included bond reviews  that the field office conducted in fiscal year 2015 in the random selection.  In addition, the Pinedale and Rawlins field offices had not conducted any  bond adequacy reviews in fiscal year 2016. As a result, we randomly  selected additional reviews from fiscal year 2015 for those field offices.  The Pinedale, Rawlins, and Colorado River Valley field offices conducted  less than 5 bond reviews in each office in that fiscal year, so we selected  and reviewed documentation in support of only those reviews they had  conducted. We assessed the documentation to determine whether or not  field offices conducted reviews and complied with selected directives of  the well review and bond adequacy review policies. Information from our  documentation reviews is not generalizable to all BLM field offices but  provides illustrative examples of the information contained in BLM well  and bond adequacy reviews.", "To examine BLM officials\u2019 and stakeholders\u2019 views on what challenges, if  any, BLM faces in managing its potential oil and gas well liabilities, we  conducted semi-structured interviews with officials from BLM  headquarters, the 13 selected BLM field offices, and the 6 BLM state  offices associated with these 13 field offices. In addition, we interviewed  or obtained written responses from a standard set of questions from 8  representatives of stakeholder organizations. These representatives were  knowledgeable about BLM\u2019s oil and gas well management, and included  academic, environmental, industry, and state organizations (see table 2).  In addition, we spoke with knowledgeable officials from the Department of  the Interior\u2019s Office of Natural Resources Revenue (ONRR) and the  Department of the Interior\u2019s Office of Indian Energy and Economic  Development, Division of Energy and Mineral Development. To identify  knowledgeable stakeholders, we conducted a literature search, reviewed  previous GAO reports, and obtained recommendations from BLM officials  and stakeholders using a snowball technique in which an initial group of  BLM officials and stakeholders we interviewed identified additional  contacts to interview. From this list, we selected stakeholders who could  provide a range of viewpoints. We generally asked the same questions  during each interview but also discussed individual stakeholders\u2019  perspectives, as appropriate. In our interviews, we asked officials and  stakeholders what challenges, if any, BLM offices face in managing their  potential oil and gas well liability. We also asked what challenges, if any,  BLM offices face in conducting well reviews and bond adequacy reviews.  To identify the challenges identified most often in the interviews, two  analysts developed categories of challenges identified by BLM offices and  stakeholders, and each analyst independently determined whether each  BLM office and stakeholder had identified challenges that fit into these  categories. The two analysts discussed and resolved any differences in  their coding. The views of the BLM officials, stakeholders, and other  agency personnel we interviewed are not generalizable to BLM officials,  similar stakeholders, and other agency personnel who we did not  interview. Lastly, we compared how BLM identified and managed certain  inactive wells, as well as how it managed nationwide and statewide  bonds, against the control activities standard outlined in Standards for  Internal Control in the Federal Government and BLM\u2019s resource  management practices against certain requirements in the Energy Policy  Act of 2005 (EPAct 2005) and leading practices by the Project  Management Institute in The Standard for Program Management.", "We conducted this performance audit from November 2016 to May 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Quindi Franco (Assistant  Director), Marie Bancroft (Analyst-in-Charge), Richard Burkard, John  Delicath, Cindy Gilbert, Shylene Mata, Celia Mendive, Dan Royer,  Barbara Timmerman, Carolyn Voltz, Jack Wang, and Jina Yu made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Oil and gas companies operating wells on federal and Indian lands are required to reclaim sites after wells are no longer used\u2014plug wells, remove structures, and replant. Companies provide bonds up front to cover reclamation, but if they don't reclaim the site, or if it costs more than expected, the Bureau of Land Management may be liable.", "Reclamation costs and potential liabilities likely increased since 2010, but we couldn't determine how much because BLM does not systematically track this data.", "We made 7 recommendations to help BLM better manage its risk, including improving the way it tracks reclamation costs and potential liabilities."]}
{"id": "GAO-19-25", "url": "https://www.gao.gov/products/GAO-19-25", "title": "Project Management: DOE and NNSA Should Improve Their Lessons-Learned Process for Capital Asset Projects", "published_date": "2018-12-21T00:00:00", "released_date": "2018-12-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The MOX project, located at DOE's Savannah River Site in South Carolina and overseen by NNSA, experienced significant cost increases and schedule delays following the start of construction in 2007. After spending nearly $6 billion, NNSA terminated the project in October 2018. While DOE and NNSA have made some recent progress, they have historically struggled to complete, within their original cost and schedule estimates, other major construction projects intended to help maintain the nuclear security complex.", "GAO was asked to review issues related to oversight of the MOX project. This report examines (1) when NNSA's project management oversight processes recognized cost and schedule problems at the MOX project and the actions the agency took to address them and (2) the extent to which DOE requires that project management lessons learned from MOX and other projects be documented and shared. GAO reviewed agency documents, visited the MOX project, and interviewed DOE and NNSA officials and representatives of the MOX contractor."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) has strengthened its oversight of the Mixed Oxide Fuel Fabrication Facility (MOX) project since 2011 and, as a result, began recognizing cost and schedule problems. The project, begun in 1997, was intended to dispose of large quantities of weapons-grade plutonium no longer required for national security. Prior to 2011, NNSA's project staff failed to recognize signs that the project would not be completed on time or within its approved cost. An independently conducted analysis, prepared in 2014 in response to a GAO recommendation, determined that NNSA staff did not recognize early problems because they were inexperienced in project management. To strengthen oversight, NNSA in late 2010 and 2011 began actions, such as conducting additional reviews and transferring oversight of the project to a newly established office specializing in project management. NNSA continued to identify the contractor's performance problems, such as the lack of credible, reliable cost and schedule data. These continued problems contributed to NNSA's decision to terminate the project.", "DOE requires that project staff document and share project management lessons learned on capital asset projects like the MOX project, but not all lessons are to be documented consistently or shared in a timely manner. GAO found that DOE's and NNSA's offices document project management lessons learned differently and that not all of the documented lessons learned are readily accessible to other staff. Additionally, GAO found that DOE does not require that project staff share lessons learned for capital asset projects until the start of construction, which can occur many years after the start of the project. Under key practices, such lessons should be stored in a logical, organized manner, be easily retrievable, and be submitted in a timely manner (see fig.). By developing requirements that clearly define how and where project management lessons learned should be documented and requiring that the lessons be shared in a timely manner, DOE could improve its lessons-learned process and help improve the success of future capital asset projects. Also, for capital asset projects, DOE does not require the evaluation of the results of all corrective actions to respond to lessons learned to ensure that problems are resolved, consistent with key practices. By developing requirements to evaluate the effectiveness of corrective actions, DOE could better verify whether the actions had the intended outcome."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that DOE and NNSA develop requirements for defining how and where project management lessons learned for capital asset projects should be documented and shared routinely and in a timely manner, and for evaluating the effectiveness of corrective actions taken in response to lessons learned. DOE agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Energy (DOE) and the National Nuclear Security  Administration (NNSA), a separately organized agency within DOE, are  spending billions of dollars on numerous construction projects that,  among other things, are used to help maintain the nuclear weapons  stockpile, process nuclear waste into forms suitable for long-term storage  or permanent disposal, and conduct research and development in the  areas of high-energy physics and nuclear physics. DOE and NNSA use  the capital asset acquisition process to undertake many of these  projects. The cost of these projects can vary greatly, with projects  estimated to cost less than $750 million designated as nonmajor, and  those estimated to cost greater than or equal to $750 million designated  as major. Some of the more complex, first-of-a-kind, major nuclear  construction projects can cost several billions of dollars.", "For many years, NNSA has encountered numerous cost, schedule, and  technical challenges that resulted in a reassessment of alternatives and,  in some cases, the cancellation of entire projects or portions thereof.  NNSA terminated one such project\u2014the Mixed Oxide Fuel Fabrication  Facility (MOX) project\u2014after experiencing numerous cost, schedule, and  technical challenges. DOE initiated the MOX project in 1997 at its  Savannah River Site in South Carolina as a key component of NNSA\u2019s  strategy to dispose of large quantities of weapons-grade plutonium  deemed no longer required for national security. Construction began in  2007 after DOE formally approved the project\u2019s cost estimate of $4.8  billion and estimated completion date of September 2016. Since  construction began in 2007, DOE\u2019s cost estimate for the MOX project  increased significantly to about $17.2 billion, and the estimated  completion date for the project was extended to as late as 2048, a  potential delay of nearly 32 years.", "In February 2016, DOE proposed terminating the MOX project in favor of  an alternative, referred to as \u201cdilute and dispose,\u201d which was expected to  be less expensive than the MOX project. Congress continued funding  the MOX project. For example, the National Defense Authorization Act for  Fiscal Year 2018 required DOE to proceed with MOX construction unless,  among other things, the Secretary certified that the life-cycle cost of the  dilute and dispose option would be less than half the life-cycle cost of the  MOX project. In May 2018, the Secretary of Energy submitted the  certification and reported that the life-cycle cost estimate was $19.9 billion  for the dilute and dispose option compared with $49.4 billion for the MOX  project. In October 2018, NNSA terminated the MOX project. At the time  of its termination, NNSA had spent nearly $6 billion on the MOX project.", "Significant cost increases and schedule delays are not unique to the MOX  project, as DOE and NNSA have historically struggled to complete  projects within their initial cost and schedule estimates. Since 1990, we  have designated DOE\u2019s management of major contracts and projects,  including those executed by NNSA, as an area at high risk for fraud,  waste, abuse, and mismanagement. In response, DOE and NNSA have  undertaken a number of efforts to improve their management of contracts  and projects, and in February 2013, we narrowed the focus of the high- risk designation to major projects within DOE\u2019s Office of Environmental  Management and NNSA to acknowledge progress made in managing  nonmajor projects. However, not all of the actions taken by DOE and  NNSA have resulted in improved project management. As we found in  April 2015, NNSA has had a long history of identifying corrective actions  and declaring them successfully resolved, only to identify additional  actions to address the same problems that had reemerged. The repeat  nature of some of these problems and their considerable effect on the  cost and schedule of DOE and NNSA projects has raised concerns that  lessons from past experiences on projects are not being identified and  applied to current and future projects.", "Given NNSA\u2019s shift in focus from the MOX project to the alternative dilute  and dispose approach, you requested that we review issues related to  DOE\u2019s and NNSA\u2019s oversight of the MOX project. This report examines  (1) when NNSA\u2019s project management oversight processes recognized  cost and schedule problems at the MOX project and the actions the  agency took to address them and (2) the extent to which DOE requires  that project management lessons learned from MOX and other projects  be documented and shared.", "To examine when NNSA\u2019s project management oversight processes  recognized cost and schedule problems at the MOX project and to  examine what actions the agency took to address them, we reviewed  DOE and NNSA documents outlining the agencies\u2019 overall direction for,  and oversight of, the MOX project. In addition, we reviewed DOE\u2019s,  NNSA\u2019s, and MOX Services, LLC\u2019s (MOX Services) documents, as well  as independent reviews and assessments, concerning the performance  and status of the MOX project, including a May 2014 report prepared for  DOE that identified and analyzed the root causes behind the cost  increases for the MOX project through 2012. Additionally, we  interviewed officials from DOE and NNSA to discuss how and when they  identified the MOX project\u2019s cost and schedule problems. We conducted  a site visit at the Savannah River Site to tour the MOX project before the  project was terminated and interviewed officials from NNSA\u2019s MOX  Project Management Office and representatives from MOX Services. We  also monitored the status of the MOX project.", "To examine the extent to which DOE requires that project management  lessons learned from MOX and other projects be documented and  shared, we reviewed DOE\u2019s Order 413.3B, which outlines the primary  set of project management requirements governing DOE\u2019s and NNSA\u2019s  capital asset projects that have a total project cost of greater than $50  million. We also reviewed documents from NNSA and DOE\u2019s Offices of  Environmental Management and Science. In addition, we collected  examples of capital asset project-management lessons learned from DOE  and NNSA, including those from the MOX project, from a variety of  sources. Further, we reviewed reports by us, the U.S. Army\u2019s Center  for Army Lessons Learned, and the Project Management Institute that  identify and discuss key practices for lessons learned. We then compared  the project management lessons-learned requirements in DOE Order  413.3B against these key practices. We also discussed project  management lessons-learned requirements and processes with officials  from DOE\u2019s Offices of Environmental Management, Project Management,  and Science and NNSA\u2019s Office of Acquisition and Project Management.  See appendix I for additional information on our objectives, scope, and  methodology.", "We conducted this performance audit from May 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section discusses (1) the history and status of the MOX project; (2)  the roles of DOE, NNSA, and the contractor in managing and overseeing  the MOX project; (3) project management lessons learned; and (4) DOE\u2019s  and NNSA\u2019s recurring project management problems."], "subsections": [{"section_title": "History and Status of the MOX Project", "paragraphs": ["DOE began the MOX project over 20 years ago, in 1997, as part of a  strategy to manage the disposition of large quantities of surplus,  weapons-grade plutonium no longer needed for defense purposes. This  strategy, now undertaken through NNSA\u2019s Plutonium Disposition  program, originally planned to dispose of the plutonium through a dual  approach\u2014(1) conversion into mixed-oxide fuel and (2) immobilization in  glass or ceramic material\u2014but NNSA later cancelled the immobilization  approach in favor of the approach for only mixed-oxide fuel. In 1999,  DOE awarded a contract to design, construct, and operate a MOX facility  to the contractor consortium of Duke, Cogema, Stone & Webster, LLC\u2014 now called MOX Services, LLC (MOX Services).", "In February 2002, NNSA reported to Congress that the construction of the  MOX project would begin in fiscal year 2004, with operations set to begin  in fiscal year 2007, and cost nearly $1 billion to design and construct.  However, as figure 1 shows, construction of the MOX project did not  begin until 2007 after DOE formally approved the project\u2019s estimated cost  of about $4.8 billion and estimated completion date of September 2016.", "In December 2008, DOE approved a revised cost estimate for completing  construction of the MOX project of $4.9 billion and a 1-month delay in the  start of operations to October 2016. From 2009 through 2011, the  estimated cost to complete construction of the MOX project remained at  $4.9 billion. However, the MOX project\u2019s cost and schedule estimate  changed significantly in 2012. That year, at NNSA\u2019s direction to update  the estimate, the MOX contractor submitted a proposal to increase the  cost of the facility to about $7.7 billion\u2014an increase of about $2.8 billion  from the 2008 estimate\u2014with the start of operations delayed by about 3  years, to November 2019.", "After receiving the MOX contractor\u2019s revised estimate that indicated  significant cost increases and schedule delays to the project, NNSA  stated in its fiscal year 2014 budget request that pursuing the MOX  approach might be unaffordable and proposed to slow down construction  while the agency assessed alternative approaches for plutonium  disposition. After a series of reviews, DOE ultimately concluded that  pursuing an alternative disposition approach\u2014referred to as \u201cdilute and  dispose\u201d\u2014could significantly reduce the life-cycle cost of the Plutonium  Disposition program, compared with continuing the program using the  MOX approach. Following the identification of a potentially less costly  approach to plutonium disposition, in February 2016, DOE\u2019s fiscal year  2017 budget request proposed terminating the MOX project in favor of  pursuing the dilute and dispose approach. Congress appropriated  funding for the MOX project for fiscal years 2017 and 2018 and directed  DOE to continue work on the project.", "In August 2016, DOE issued a revised cost estimate of approximately  $17.2 billion to complete construction of the MOX project by 2048. In the  face of this significant cost increase, the National Defense Authorization  Act for Fiscal Year 2018 authorized the Secretary of Energy to terminate  the MOX project if, among other things, he could certify that the remaining  life-cycle cost for an alternative option for carrying out plutonium  disposition would be less than approximately half of the estimated  remaining life-cycle cost of carrying out the MOX project. In May 2018,  DOE completed this certification and notified Congress of its intention to  terminate construction of the MOX project and to instead pursue the dilute  and dispose option. The Secretary of Energy reported that the life-cycle  cost estimate was $19.9 billion for the dilute and dispose option  compared to $49.4 billion for the MOX project. In October 2018, NNSA  terminated the project. Additional information on the history and status of  the MOX project is in appendix II."], "subsections": []}, {"section_title": "Roles of DOE, NNSA, and the Contractor in Managing the MOX Project", "paragraphs": ["DOE and NNSA are responsible for providing overall direction to, and  oversight of, the contractor for the MOX project. The contractor, MOX  Services, is responsible for the design, construction, and operation of the  MOX facility.", "DOE. The Office of Project Management participates in a number of  the MOX project\u2019s oversight activities. In particular, the office has led  independent reviews of the MOX project to validate its cost and  schedule estimates and has conducted certification and surveillance  reviews of the MOX contractor\u2019s earned value management (EVM)  system.", "NNSA. Subsequent to its establishment in 2000, several NNSA  offices have provided overall direction to, and oversight of, the  contractor for the MOX project, including the Office of Fissile Materials  Disposition and the Office of Defense Nuclear Nonproliferation. In  November 2011, after starting to place increased emphasis on  improving its management of projects, the newly created Office of  Acquisition and Project Management began providing overall direction  to, and oversight of, the contractor for the MOX project. In March  2013, the Office of Acquisition and Project Management established  the NNSA MOX Project Management Office at the Savannah River  Site to lead the onsite project and contract management direction,  administration, and oversight of the MOX project.", "MOX Services. As the contractor for the MOX project, MOX Services  is responsible for designing, constructing, and operating the MOX  facility. MOX Services has also subcontracted work to complete  certain construction activities, such as the fabrication of specific types  of equipment, including the complex gloveboxes needed for handling  plutonium and the heating, ventilation, and air conditioning systems.", "Figure 2 depicts the roles of, and interrelation among and between, DOE,  NNSA, and the MOX contractor in overseeing the MOX project."], "subsections": []}, {"section_title": "Project Management Lessons Learned", "paragraphs": ["According to key practices that we and others have identified for both  program and project management, it is important to identify and apply  lessons learned from programs, projects, and missions to limit the chance  of recurrence of previous failures or difficulties. As such, the use of  lessons learned\u2014such as project management lessons learned\u2014is a  principal component of an organizational culture committed to continuous  improvement. Lessons learned, therefore, serve to communicate  knowledge more effectively and to ensure that beneficial information is  factored into planning, work processes, and activities. They also provide a  powerful method of sharing ideas for improving work processes, facility or  equipment design and operation, quality, and cost-effectiveness.  Moreover, as we and others have previously found, agencies can learn  lessons from an event and make decisions about when and how to use  that knowledge to change behavior. Key practices of a lessons-learned  process include collecting, analyzing, saving or archiving, and sharing  and disseminating information and knowledge gained on positive and  negative experiences (see fig. 3)."], "subsections": []}, {"section_title": "DOE and NNSA Have Faced Recurring Project Management Problems", "paragraphs": ["For more than 2 decades, we and others have reported on the recurring  nature of the problems affecting DOE\u2019s and NNSA\u2019s ability to manage  contracts and projects effectively. Many of these problems have related to  DOE\u2019s and NNSA\u2019s struggles with managing projects, such as the MOX  project, within their initial cost and schedule estimates, including the  following:  In 1999, the National Academy of Science\u2019s National Research  Council reported that recurring problems with project management  had raised questions about the credibility of DOE\u2019s conceptual  designs and cost estimates.", "In a March 2007 report, we found that 9 of 12 major projects we  reviewed\u2014including the MOX project\u2014had exceeded their original  cost estimates, schedule estimates, or both, principally because of  ineffective project oversight and contractor management.", "In a November 2014 report, the Congressional Advisory Panel on the  Governance of the Nuclear Security Enterprise (Augustine-Mies  Panel) stated that NNSA\u2019s inability to estimate costs and execute  projects according to plan has been a major source of dissatisfaction  among the national leadership and had significantly undermined  NNSA\u2019s credibility.", "Further, in April 2015, we found that NNSA has had a long history of  identifying corrective actions for problems and declaring them  successfully resolved, only to then identify additional actions needed to  address the problems. As we found, the recurrence of such problems  suggests that NNSA did not have a full understanding of the root causes  of its contract- and project-management challenges. Moreover, our 2017  high-risk report found that DOE had taken several important steps that  demonstrate its commitment to improving contract and project  management, but that DOE\u2019s efforts had not fully addressed several  areas where the department continues to have shortcomings. Areas with  shortcomings include acquisition planning for major contracts and the quality of enterprise-wide cost information available to DOE managers  and key stakeholders. Additional information on our prior work  highlighting selected DOE and NNSA project management problems is in  appendix III."], "subsections": []}]}, {"section_title": "NNSA Recognized Certain Indicators of Cost and Schedule Problems after Strengthening Its Oversight in 2010 and 2011", "paragraphs": ["Prior to 2011, NNSA project staff had failed to recognize and fully resolve  certain cost and schedule problems that indicated that the MOX project  would not be completed on time or within its approved cost estimates.  However, after taking actions to strengthen its project management  oversight in late 2010 and 2011, NNSA recognized indicators of a number  of problems with the MOX project that contributed to NNSA\u2019s decision to  terminate the project."], "subsections": [{"section_title": "NNSA Failed to Recognize and Fully Resolve Certain Cost and Schedule Problems Affecting the MOX Project Prior to 2011", "paragraphs": ["Prior to 2011, NNSA\u2019s staff responsible for overseeing the MOX project  failed to recognize and fully resolve certain cost and schedule problems  that indicated that the project would not be completed on time or within its  approved cost estimates. The NNSA staff responsible for overseeing the  MOX project at that time were generally inexperienced in overseeing  complex nuclear construction projects. From 2007 through 2011, staff  overseeing the MOX project were primarily familiar with large  programmatic initiatives and operations but had little experience in  managing large, complex first-of-a-kind nuclear construction projects,  according to a May 2014 root cause analysis. Although information  available to the NNSA staff showed that there were cost and schedule  problems that indicated the increasing likelihood that the project would  not be completed within its approved total cost estimate of $4.9 billion, the  staff did not recognize and fully resolve four key problems.", "First, information about the contractor\u2019s use of inaccurate rates to  estimate the time needed to complete certain construction activities\u2014 commonly referred to as unit rates or planned production rates\u2014indicated  that the project would not be completed within its approved cost estimate.  These rates are used to reflect levels of productivity during construction  and to help develop projects\u2019 cost and schedule estimates, including  updates to annual forecasted estimates. Following the start of  construction in August 2007, the MOX contractor began to experience  lower-than-estimated productivity rates for key construction activities,  according to the May 2014 root cause analysis report. Despite this  issue, the contractor did not incorporate more realistic assumptions  regarding the unit and production rates, such as by updating the  estimated costs and time needed to complete specific construction  activities, when developing the contractor\u2019s annual forecasted estimates  of the project\u2019s total cost for 2008 through 2011. MOX contractor  representatives told us that the unit rates they used to develop cost and  schedule estimates were realistic based on assumptions at that time and  that DOE was involved in the development of the unit rates. In addition,  the MOX contractor\u2019s representatives told us that expected improvements  in unit rates did not materialize because of higher than expected levels of  worker turnover.", "NNSA staff overseeing the project at that time did not recognize that the  unit rates for calculating and updating unit rate estimates should be  realistic and reflect levels of productivity during construction, as called for  in project management principles, or resolve the issues. As a result, the  staff did not take action to resolve the MOX contractor\u2019s continued use of  unrealistic unit rates that did not reflect actual construction progress being  made. Furthermore, NNSA staff did not recognize the extent to which  decreased productivity by the contractor created future cost increases and schedule delays or resolve the issue. Consequently, from 2008 to  2011, the MOX contractor continued to use its overly optimistic and  unrealistic unit rate estimates when developing its annual forecasted cost  estimates.", "Second, the MOX contractor\u2019s annual forecasted estimates for the project  consistently increased from 2008 through 2011, and the level of  confidence in those estimates decreased, indicating that the project would  not be completed within its approved cost estimate. Beginning in 2008,  the MOX contractor submitted an annual update to its forecasted estimate  for the project. These estimates increased each year, rising by about  $140 million to $280 million annually, with the estimated total project cost  increasing from about $4.1 billion in 2008 to about $4.7 billion in 2011 (an  increase of about 15 percent). The MOX contractor\u2019s representatives said  they attempted to mitigate the increases, such as by identifying cost  savings on the project. Additionally, as the May 2014 root-cause analysis  report stated, the level of confidence for completing the MOX project  within the approved $4.9 billion total project cost estimate declined each  year, from an 85 percent likelihood of completing the project within the  estimate in 2009 to 45 percent in 2011. Both the annual increases in  forecasted estimates and the annual decline in level of confidence  illustrated the increasing likelihood that the MOX contractor would not  complete the project for $4.9 billion.", "As a result of inexperience, the NNSA staff overseeing the project at that  time did not adequately examine the potential consequences of such cost  performance trends over the future schedule and through project  completion or resolve the issues. As the May 2014 root-cause analysis  report stated, NNSA staff did not fully recognize how the risks and  challenges the MOX project faced negatively affected not only the  project\u2019s performance but also its cost and schedule. For example, that  report found that the staff were unable to determine that there were  fundamental problems with completing the MOX project\u2019s design and with  maintaining construction efficiency and progress; both of which  contributed to schedule delays and cost increases. The May 2014 root- cause analysis report stated that because of inexperience in project  management, NNSA staff did not direct the MOX contractor to develop a  more realistic and achievable forecasted estimate for the total cost to  complete the MOX project until January 2012.", "Third, information about procuring materials out of sequence and the  resulting rework indicated that the project would not be completed on  schedule or within its approved cost estimate. According to NNSA  officials, the MOX contractor\u2019s method for measuring earned value  incentivized the contractor to purchase and procure materials early and,  in a number of cases, out of sequence, as this helped demonstrate  progress. For example, figure 4 shows outdoor \u201claydown yards\u201d and an  offsite warehouse storing large amounts of commodities, such as pipes  and electrical panels, that NNSA officials said the MOX contractor  procured earlier than needed. The May 2014 root-cause analysis report  stated that between 2007 and 2011, the equipment and material procured  out of sequence resulted in the need for rework in some cases because  later design changes required changes to the equipment or the need to  procure different items, leading to additional costs for the project.", "The MOX contractor\u2019s representatives told us they disagreed with  NNSA\u2019s characterization that they procured material too early. According  to the contractor representatives, they purchased materials in support of  both the project schedule and planned construction end date of 2016, as  well as to achieve the efficiencies through bulk pricing or reduced delivery  charges from procuring larger quantities of items or multiple items at the  same time. Additionally, the MOX contractor representatives disagreed  that they structured the methods for measuring earned value performance  to claim earned value in ways that did not reflect actual progress. In  particular, the MOX contractor representatives said that NNSA staff were  involved in the development of the original methods used for measuring  earned value.", "NNSA staff did not take steps to resolve the issues with the  disproportionate value earned by the MOX contractor for purchasing,  procuring, and placing certain commodities until 2015 when the MOX  contractor revised its methods for measuring earned value.  Consequently, the reported commodity installation data based on the  MOX contractor\u2019s methods for measuring claimed earned value inflated  the amount of progress being made on the construction of the MOX  project compared with the amount of work completed.", "Fourth, information about the use of management reserve funds early in  the project indicated that the project would not be completed within its  approved baseline. To address cost increases experienced early in the  project, the MOX contractor began to use the project\u2019s management  reserve funds. A May 2010 surveillance review of the MOX contractor\u2019s  EVM system prepared for DOE by an independent contractor identified  this issue and concluded that the rate at which the MOX contractor was  using its management reserve indicated that it was unlikely that there  would be any reserve left to address any risks that were expected to be  encountered later in the project. DOE\u2019s June 2011 follow-up review of  the MOX contractor\u2019s EVM system found that the MOX contractor was no  longer covering cost variances by using management reserve; however,  the MOX contractor\u2019s previous use of management reserve to cover cost  overruns had resulted in inaccurate, inflated cost performance and  understated forecasted cost estimates. The MOX contractor\u2019s  representatives told us they disagreed with the premise that the  management reserve was used to obscure cost performance. Moreover,  they noted that NNSA\u2019s cost-accounting and management staff worked  with the contractor on all EVM issues, including the use of management  reserve.", "NNSA staff did not recognize and resolve issues with the contractor\u2019s use  of the management reserve to mitigate cost overruns or the effect on the  project\u2019s cost performance and forecasted cost estimates in part because,  as the May 2014 root cause analysis report stated, the staff possessed  little experience in project management. According to project  management principles, management reserve should be prevented from  being consumed too early so as to ensure that enough reserve remains  available to address any problems that may arise late in the project. The  inexperienced NNSA staff also did not recognize that certain problems  were creating cost overruns because, as stated in the May 2010  surveillance review, the MOX contractor\u2019s use of the management  reserve to cover such overruns hid the problems and did not alleviate  their root causes. As a result of not recognizing or resolving the MOX  contractor\u2019s inappropriate use of the management reserve earlier, NNSA  reported inaccurate measurements of cost performance to DOE and other  stakeholders."], "subsections": []}, {"section_title": "DOE\u2019s Project Management Changes Strengthened Oversight of the MOX Project", "paragraphs": ["In late 2010 and 2011, DOE began to implement actions to strengthen  project management across the department, including NNSA. These  actions, which agency officials said were primarily undertaken in  response to project management problems we and others had identified,  contributed to the steps NNSA began to take to strengthen its project  management and oversight of the MOX project. Changes that  strengthened NNSA\u2019s oversight of the MOX project included: (1) initiating  project peer reviews and (2) making several organizational changes to  improve project oversight. These changes to DOE\u2019s and NNSA\u2019s  oversight of the MOX project contributed to the decision to terminate the  project.", "First, in its November 2010 update to requirements for capital asset  projects, DOE established a requirement to conduct peer reviews at least  once a year for large or high-visibility projects with a total project cost of  $100 million or greater. The update required peer reviews more frequently  for complex projects or those experiencing performance challenges.  According to DOE and NNSA officials, they added the requirement in  response to a recommendation in our May 2008 report. According to  NNSA officials, as a result of this requirement, NNSA began conducting  peer reviews of the MOX project in 2011. These reviews led NNSA to  identify significant cost and schedule problems at the MOX project and  included a number of recommendations to improve project performance.  For example, a March 2012 NNSA peer review found that the MOX  project\u2019s total cost may have been understated by anywhere from $600  million to $900 million, in part because the contractor\u2019s estimated unit  rates and planned production rates were not reflective of the actual  performance at that time. Moreover, the peer review found that the  estimated completion date of October 2016 was also at risk. As a result,  the peer review team recommended, among other things, that the MOX  contractor develop an update to its formal cost and schedule estimate.", "As a result of the findings and recommendations from its peer reviews,  NNSA requested and the MOX contractor submitted in September 2012 a  proposal that included a revised cost estimate for the MOX project of  about $7.7 billion and an estimated completion date of November 2019.  In response to the significant cost increases, schedule delays, and project  risks captured in the MOX contractor\u2019s updated cost and schedule  estimate, NNSA proposed a slowdown of MOX project construction  activities in its fiscal year 2014 budget request to begin assessing  alternative plutonium disposition strategies.", "Second, NNSA carried out several organizational changes starting in  2011 that led to improved oversight of the MOX project in some areas and the continued identification of cost and schedule problems.  Specifically, NNSA transitioned management and oversight of the MOX  project from the Office of Defense Nuclear Nonproliferation to the Office  of Acquisition and Project Management, an office newly created in  January 2011 to improve project oversight through the application of  project management principles. In 2013, the Office of Acquisition and  Project Management created the MOX Project Management Office at the  Savannah River Site to provide project and contract management  oversight for the MOX project.", "After establishing the MOX Project Management Office, the Office of  Acquisition and Project Management sought to better address long- standing staffing challenges. For example, a May 2006 external  independent review conducted for DOE found that, among other things,  NNSA understaffed the oversight of the MOX project and recommended  that DOE acquire sufficient personnel with the proper skills to manage  and perform oversight of the project. However, NNSA did not address  this issue until after the creation of the Office of Acquisition and Project  Management. The Office of Acquisition and Project Management  increased the number of staff with specific project management skillsets  at the MOX Project Management Office from 20 for fiscal years 2010 to  2012 to 36 (18 federal employees and 18 support service contractors) for  fiscal years 2016 to 2018.", "As a result of the staffing changes, the NNSA MOX Project Management  Office strengthened its oversight of the MOX project, which contributed to  the identification of additional problems, as described below.", "Conducted more in-depth assessments of the MOX contractor\u2019s  EVM system. After initially certifying the MOX contractor\u2019s EVM  system in May 2008, a May 2010 surveillance review of the MOX  contractor\u2019s EVM system prepared for DOE by an independent  contractor identified a number of issues. The MOX contractor  addressed the issues, according to DOE\u2019s June 2011 review, resulting  in the recertification of the EVM system at that time. According to  NNSA officials, NNSA\u2019s MOX Project Management Office conducted  more in-depth assessments of the MOX contractor\u2019s EVM system  starting in 2013. These assessments led NNSA staff to identify a  number of concerns with the contractor\u2019s EVM system, such as  earned value data errors; overstatements of the data on the  percentage of work completed in certain areas; and in one instance,  about $300 million in known cost growth that was not incorporated  into the MOX project\u2019s forecasted estimate of total project cost.", "According to NNSA officials, in March 2016, the NNSA federal project  director requested an in-depth review of the contractor\u2019s EVM system  because of the continued identification of issues with the system, and  the MOX contractor not adequately addressing them. According to its  October 2016 review, DOE\u2019s Office of Project Management identified  significant deficiencies representing systematic and material internal  control weaknesses and concluded that the MOX contractor\u2019s EVM  system could not be relied upon to provide credible and reliable cost  and schedule performance data for either the project\u2019s current status  or its forecasted cost and schedule estimates. As a result, DOE\u2019s  Office of Project Management rescinded the MOX contractor\u2019s EVM  system certification because the system was no longer in compliance  with the relevant standards.", "Implemented a more rigorous invoice review process. According  to NNSA officials, prior to 2014, NNSA did not have a rigorous  process in place to review the contractor\u2019s invoices. The officials said  that NNSA staff did not review all invoices and, for the reviews that  were completed, they did not always thoroughly examine the details  behind the invoices, such as reviewing invoices to verify that costs  were allowable under DOE regulations. The NNSA officials told us  that as part of their efforts to improve oversight of the MOX  contractor\u2019s invoice submissions, NNSA\u2019s MOX Project Management  Office staff developed a more rigorous invoice review process that  resulted in a September 2014 guide. In addition, the NNSA MOX  Project Management Office assigned an additional staff member to (1)  help conduct invoice reviews due to the volume of work needed to  review the MOX contractor\u2019s invoices and (2) ensure that payments  were made within the 14 days generally required by regulation.  According to NNSA officials, as a result of the changes implemented  by the office, NNSA identified a number of potentially unallowable  costs ranging from less than $1,000 to more than $2 million.", "Reviewed the MOX contractor\u2019s annual incurred costs. NNSA  officials said that incurred cost audits were supposed to be conducted  at least annually for the MOX project and that the Defense Contract  Audit Agency was supposed to conduct the audits. However, these  officials explained that due to a significant backlog, the Defense  Contract Audit Agency did not complete all of the required audits. In  light of the Defense Contract Audit Agency\u2019s significant backlog\u2014as  well as a requirement prohibiting the agency from conducting non- defense agency audits\u2014the NNSA MOX Project Management Office  arranged to have a third party conduct an audit of the MOX  contractor\u2019s fiscal year 2010 incurred costs. This third-party audit  identified more than $30 million in potentially unallowable costs.", "The significant cost and schedule problems that NNSA staff identified  after strengthening its oversight of the MOX project contributed to NNSA\u2019s  decision to terminate it. Project management principles state that effective  project management helps organizations to, among other things, increase  the chances of success; resolve problems and issues; and identify,  recover, or terminate failing projects. After NNSA\u2019s project peer reviews  and the MOX contractor\u2019s proposed update to the project\u2019s cost and  schedule estimate showed the significant likelihood of additional cost  growth and schedule delays, NNSA proposed slowing down construction  of the MOX facility in 2013 and ultimately terminated the project in  October 2018."], "subsections": []}]}, {"section_title": "DOE Has Requirements for Documenting and Sharing Lessons Learned, but They Do Not Ensure Consistent or Timely Documentation or the Evaluation of Corrective Actions", "paragraphs": ["As outlined in DOE Order 413.3B, DOE requires that project management  staff document and share project management lessons learned on capital  asset projects like MOX but does not require that all project management  lessons learned from capital asset projects be documented consistently  or shared in a timely manner. Moreover, DOE Order 413.3B does not  require the evaluation of the results of corrective actions taken in  response to lessons learned that are identified during the course of  capital asset projects such as the MOX project to ensure that the  problems experienced are resolved department-wide."], "subsections": [{"section_title": "DOE\u2019s Requirements for Documenting and Sharing Lessons Learned for Capital Asset Projects", "paragraphs": ["DOE\u2019s requirements for capital asset projects, as outlined in Order  413.3B, specify that project management lessons learned should be  captured\u2014that is, documented\u2014throughout the continuum of a project.  According to the order, there are five critical decisions (CD) that structure  the life of a project. The CDs, which are summarized in figure 5, include  approving: mission need (CD-0); alternative selection and cost range  (CD-1); project performance baseline (CD-2); the start of construction or  execution (CD-3); and the start of operations or project completion (CD- 4). DOE Order 413.3B requires project staff to submit project  management lessons learned to DOE\u2019s Office of Project Management  within 90 days of two critical decision points: (1) upfront planning and  design lessons learned are to be submitted within 90 days of CD-3  approval and (2) project execution and facility startup lessons learned are  to be submitted within 90 days of CD-4 approval.", "DOE Order 413.3B also requires that lessons learned for capital asset  projects be collected, analyzed, and disseminated by project  management support offices. These offices consist of DOE or NNSA staff  who provide support to federal project directors and are established  exclusively to oversee and manage the activities associated with projects.  Additionally, DOE Order 413.3B states that the Project Management Risk  Committee should support project management activities within DOE by  enabling the sharing of lessons learned on a routine basis.", "DOE and NNSA officials told us that program and project offices  document and save project management lessons learned for capital asset  projects in different ways. In particular, DOE and NNSA officials told us  that peer reviews, which are saved in DOE\u2019s Project Assessment and  Reporting System (PARS II) database, are a primary source of project  management lessons learned. The officials also said that project  management lessons learned are saved through monthly project reports,  monthly staff meetings, Project Management Risk Committee meeting  notes, and project management workshops and training courses. In  addition, DOE and NNSA officials told us that some lessons learned are  shared through informal person-to-person discussions that allow lessons  learned to be shared among staff. Further, the officials said that they  address project management problems identified in lessons learned by  making changes to DOE Order 413.3B.", "In addition, while not required, DOE may capture some lessons learned  for projects during the project review process. For example, DOE\u2019s  standard-operating procedures for conducting external independent  reviews state that the scope of such reviews can include assessing  whether project teams are documenting and sharing lessons learned from  their projects internally and externally. However, as noted in the  standard-operating procedures, this is an example of an area that can be  included as part of an external independent review, although there is no  requirement to do so."], "subsections": []}, {"section_title": "DOE\u2019s Lessons-Learned Requirements for Capital Asset Projects Do Not Ensure Consistent or Timely Documentation and Sharing or the Evaluation of Corrective Actions", "paragraphs": ["DOE Order 413.3B requires project management lessons learned for  capital asset projects to be documented throughout the life of a project  but does not specifically require lessons learned to be documented and  saved in a consistent manner or shared routinely or in a timely manner.  Moreover, the order does not require all corrective actions related to  these lessons learned to be evaluated for effectiveness."], "subsections": [{"section_title": "DOE Does Not Require That Lessons Learned for Capital Asset Projects Be Documented and Saved Consistently", "paragraphs": ["Although DOE and NNSA use multiple means to document and save  lessons learned, we found DOE and NNSA program and project offices  do not document and save such lessons consistently so that they are  readily accessible by other staff. For example, NNSA uses an internal  database to save project management lessons learned for its projects.  However, NNSA officials told us that DOE staff outside of NNSA must  request access to the database before they can read and examine the lessons learned that are documented and saved in the database. Officials  from DOE\u2019s Office of Science told us that their office submits some  lessons learned to the PARS II database and maintains some project  management lessons-learned reports on a publicly available webpage. A  senior official from DOE\u2019s Office of Environmental Management told us  that some lessons learned from its projects are sent to its staff through  monthly lessons-learned bulletins, but the bulletins are not entered into  PARS II. In addition, DOE and NNSA officials said that project staff can  enter specific lessons learned gleaned from their project in a lessons- learned repository within PARS II. For example, as of November 2017,  PARS II contained 20 entries for project management lessons learned  from the MOX project.", "According to key practices for lessons learned identified by us and the  Center for Army Lessons Learned, a central component of a successful  lessons-learned process is to ensure that lessons learned are stored in a  logical, organized manner. Specifically, as we have previously found,  lessons learned should be stored in a manner\u2014such as an electronic  database\u2014that allows users to perform information searches using key  words and functional categories. Moreover, information in the database  should be updated regularly and provide a logical system for organizing  information that is easily retrievable and made available to any requester.  We have also found that relying on person-to-person discussions to share  lessons learned can be problematic because personal networks can  dissolve\u2014for example, through attrition or retirement\u2014and informal  information sharing does not ensure everyone is benefiting from the  lessons that are gleaned. Further, by not documenting and saving all  lessons learned (e.g., those shared through person-to-person  exchanges), there is also generally no way to ensure the validation of the  information shared. This is not consistent with the key practice from the  Center for Army Lessons Learned, which states that by documenting and  saving project management lessons learned in a logical, organized  manner such as an electronic database, lessons learned can be archived,  managed, and made available for review by other projects and applied to  them at a future date.", "Because DOE Order 413.3B does not indicate where all project  management lessons learned should be documented and saved in a  consistent manner, the department cannot ensure that future capital asset  projects will be able to take advantage of experiences from past projects.  We found that DOE and NNSA did not document all lessons learned in a  consistent manner, and DOE officials acknowledged that DOE Order  413.3B does not require documenting or saving lessons learned that are  presented through various formal or informal means in a common  location. By developing requirements that clearly define how and where  all project management lessons learned should be documented and  saved to make them readily accessible across the department, such as in  a database, DOE\u2014including NNSA\u2014could improve the agency\u2019s existing  lessons-learned process."], "subsections": []}, {"section_title": "DOE Does Not Require That Lessons Learned for Capital Asset Projects Be Submitted and Shared Routinely or in a Timely Manner", "paragraphs": ["DOE Order 413.3B\u2019s requirements for project management lessons  learned do not require that all lessons learned be shared routinely or in a  timely manner. In particular, the order does not require that lessons  learned be submitted and shared routinely until CD-3\u2014the start of  construction. Consequently, DOE and NNSA staff are not required to  submit lessons learned during the CD-0, CD-1, and CD-2 phases of a  project. These earlier phases, which involve upfront planning and design  for the selected project, often occur many years before the approval and  start of construction. Notably, both the MOX and Uranium Processing  Facility (UPF) projects took about 10 years to reach the start of  construction (CD-3) and experienced cost increases and schedule  delays.", "We and others have previously found that lessons learned should be  submitted in a timely manner so as to ensure that key information is  available to identify and address problems or incorporate successful  activities as early and quickly in the process as possible. For example, we  found that lessons-learned reports (i.e., reports documenting lessons- learned reviews) should be prepared promptly so that knowledgeable  personnel are available to contribute to the reports, important details are  recalled accurately, and there are no delays in the dissemination of  lessons learned. Moreover, according to the Center for Army Lessons  Learned, the guiding principle in executing a sharing strategy for lessons  learned is to get the right information to the right person at the right  time. Such a strategy can entail developing a process for creating  timelines for sharing lessons learned that are tied to the urgency of the  information and a means to disseminate that information.", "Because DOE Order 413.3B does not require lessons learned to be  submitted prior to CD-3, the department is limiting its ability to promptly  evaluate and address early issues with projects and apply such lessons  learned to other projects department-wide. This approach could affect the  successful completion of capital asset projects, particularly those that  experience prolonged upfront planning and design phases similar to  those the MOX and UPF projects experienced. By developing  requirements for sharing project management lessons learned from early  in the CD phases of projects (i.e., prior to CD-3) routinely and in a timely  manner to improve the ability to identify and evaluate problematic  practices and positive experiences, DOE\u2014including NNSA\u2014could help  improve the success of future capital asset projects and avoid the  problems encountered overseeing the MOX project."], "subsections": []}, {"section_title": "DOE Does Not Require the Evaluation of the Effectiveness of Corrective Actions Taken", "paragraphs": ["DOE Order 413.3B does not require the evaluation of the results of  corrective actions taken to address project management lessons learned  that are identified during the course of capital asset projects such as  MOX. According to DOE guidance and statements, officials track whether  lessons identified through reviews or other efforts are implemented. For  example, according to DOE\u2019s standard-operating procedures for  conducting external independent reviews and officials from DOE\u2019s Office  of Project Management, DOE staff conducting external independent  reviews of projects should assess whether project teams are reviewing  and incorporating applicable lessons learned. In addition, DOE project  management officials told us that peer review recommendations and the  corrective actions to be taken to address them are tracked until the  closure of each recommendation. However, DOE has not evaluated  whether corrective actions taken have led to the resolution of the  problematic practices identified in the lessons learned because DOE  Order 413.3B does not require this type of evaluation.", "According to key practices for lessons learned identified by the Center for  Army Lessons Learned and us, a central component of a successful  lessons-learned process is to establish a means to ensure that issues are  being resolved as intended. The Center for Army Lessons Learned states  that while not all issues require a formal process to resolve, there should be a process in place to identify and prioritize the most important things  that need to be fixed. For example, this process could entail addressing  only those problems that may necessitate the need for department-wide  improvements, as some issues may be narrowly focused and be specific  to one project or site. The Center for Army Lessons Learned further  states that an organization\u2019s ability to change behavior by implementing a  lesson is ineffective unless the organization observes changes in  behavior and verifies that the lesson is learned. Additionally, we have  found that if agency management decides to take action to apply an  identified lesson, then it should take subsequent action to observe that  the change in behavior actually occurred and collect additional  information to verify that the change had the desired effect.", "Although DOE Order 413.3B does not require DOE to evaluate the  effectiveness of corrective actions other than those associated with peer  reviews, other DOE orders and guidance require the evaluation of the  effectiveness of other types of corrective actions. For example, DOE  Order 226.1B requires that DOE\u2019s organizations and contractors  implement oversight processes that ensure they evaluate and correct  relevant quality assurance problems on a timely basis to prevent their  recurrence. In addition, DOE\u2019s order and guide for implementing an  effective quality assurance program highlight the importance of  undertaking corrective actions to prevent the recurrence of problems,  including determining the effectiveness of the corrective actions for  significant problems. By developing requirements for evaluating the  effectiveness of corrective actions taken in response to project  management problems in capital asset projects, particularly those that necessitate the need for department-wide improvements, DOE\u2014including  NNSA\u2014could verify that changes made as a result of lessons learned  had the intended outcome as the agency does for contractors."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["DOE and NNSA made changes that strengthened oversight of large  capital asset projects. These changes helped NNSA better identify cost  and schedule problems affecting the MOX project and contributed to  NNSA\u2019s decision to ultimately terminate the project.", "DOE\u2019s Order 413.3B includes certain requirements for documenting and  sharing project management lessons learned. However, the requirements  in DOE Order 413.3B do not fully incorporate several key practices for  lessons learned. For example, the order does not require that DOE or  NNSA document project management lessons learned for capital asset  projects consistently or that such lessons learned are shared in a timely  manner. By developing requirements that clearly define how and where  all project management lessons learned should be documented and  saved to make them readily accessible across the department, such as in  a database, DOE\u2014including NNSA\u2014could improve the existing lessons- learned process and enable future projects across the department to take  advantage of experiences from past projects.", "In addition, because DOE Order 413.3B does not require lessons learned  for capital asset projects to be submitted prior to the start of construction  (CD-3), the department is limiting its ability to promptly evaluate and  address early issues with projects as well as applying such lessons  learned to other projects department-wide. By developing requirements  for sharing project management lessons learned from the beginning of a  project routinely and in a timely manner to improve DOE\u2019s ability to  identify and evaluate problematic practices and positive experiences,  DOE\u2014including NNSA\u2014could help improve the success of future capital  asset projects and avoid the problems the agency encountered on the  MOX project.", "Moreover, while DOE tracks the implementation of certain project  management lessons learned for capital asset projects, DOE Order  413.3B does not require that DOE\u2014including NNSA\u2014evaluate corrective  actions identified outside the peer review process and taken in response  to lessons identified to verify that the changes made had the desired  effect. By developing requirements for evaluating the effectiveness of  corrective actions taken in response to project management problems in  capital asset projects, particularly those that necessitate the need for  department-wide improvements, DOE could verify that changes made as  a result of lessons learned had the intended outcome as the agency does  for contractors."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DOE:", "The Secretary of Energy, in coordination with DOE\u2019s Office of Project  Management and NNSA\u2019s Office of Acquisition and Project  Management, should develop requirements that clearly define how  and where project management lessons learned for capital asset  projects should be documented and saved to make them readily  accessible across the department. (Recommendation 1)", "The Secretary of Energy, in coordination with DOE\u2019s Office of Project  Management and NNSA\u2019s Office of Acquisition and Project  Management, should develop requirements for sharing project  management lessons learned for capital asset projects from the  beginning of a project (i.e., prior to the start of construction at CD-3)  routinely and in a timely manner to improve DOE\u2019s ability to identify  and evaluate problematic practices and positive experiences.  (Recommendation 2)", "The Secretary of Energy, in coordination with DOE\u2019s Office of Project  Management and NNSA\u2019s Office of Acquisition and Project  Management, should develop requirements for evaluating the  effectiveness of corrective actions taken in response to project  management problems for capital asset projects, with a focus on  those lessons that necessitate the need for department-wide  improvements. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments, Third-Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOE, NNSA, and MOX Services for  review and comment. In written comments, which are reproduced in full in  appendix IV, DOE concurred with the report\u2019s recommendations and  described actions that it intends to take in response to our  recommendations.", "In response to our first recommendation, DOE intends to issue a policy  memorandum by December 2019 and revise DOE Order 413.3B to  identify the project management lessons learned repository and outline  the kinds of information the repository will collect. In response to our  second recommendation, DOE intends to issue a policy memorandum by  December 2019 and revise DOE Order 413.3B to collect lessons learned  as part of its peer review process. Because DOE Order 413.3B requires  that peer reviews for projects of $100 million or greater be conducted  once between CD-0 and CD-1, annually between CD-1 and CD-2, at least  annually between CD-2 and CD-4, and more frequently for the most  complex projects or those experiencing performance challenges, this  action is responsive to our recommendation and should help DOE begin  to identify lessons learned in a more routine and timely manner. In  response to our third recommendation, DOE plans to revise the Project  Management Risk Committee charter by assigning it the responsibility to  qualitatively evaluate the effectiveness of corrective actions taken in  response to project management lessons learned from projects with a  total cost greater than $750 million having department-wide implications.  We are encouraged that DOE agrees with our recommendation and view  this change as a positive first step. However, this action may not fully  address the recommendation. For example, the planned action states that  the Project Management Risk Committee would evaluate the  effectiveness of corrective actions for projects with total costs of $750  million or more, but there may be some lessons learned with applicability  department-wide from projects that do not meet this cost threshold.  Additionally, DOE\u2019s planned action as described in its response does not  discuss who would be responsible for evaluating the effectiveness of  corrective actions or a timeline for performing the assessments. The  Project Management Risk Committee has typically served as a review  group and has not itself performed such evaluations.", "DOE and MOX Services also provided technical comments, which we  incorporated in our report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Administrator of NNSA, and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our report examined (1) when the National Nuclear Security  Administration\u2019s (NNSA) project management oversight processes  recognized cost and schedule problems at the Mixed Oxide Fuel  Fabrication Facility (MOX) project and the actions the agency took to  address them and (2) the extent to which the Department of Energy  (DOE) requires that project management lessons learned from MOX and  other projects be documented and shared.", "To address both objectives, we reviewed relevant documents from DOE,  NNSA, and MOX Services, LLC (MOX Services), the contractor  constructing the MOX project. We reviewed past reports by GAO and the  National Academy of Sciences\u2019 National Research Council to examine  previously identified weaknesses in DOE project management, contractor  performance, and federal oversight of individual projects, as well as  DOE\u2019s efforts to make improvements. We also reviewed DOE reports  focused on analyzing the root causes of contract- and project- management issues affecting DOE and NNSA and identifying potential  corrective actions and other general improvements. We visited the  Savannah River Site to tour the MOX project while it was under  construction and interviewed officials from NNSA\u2019s MOX Project  Management Office, including the federal project director, and  representatives from MOX Services. We also monitored the status of the  MOX project.", "To examine when NNSA\u2019s project management oversight processes  recognized cost and schedule problems at the MOX project and the  actions the agency took to address them, we identified and reviewed  DOE and NNSA documents outlining the agencies\u2019 management and  oversight roles and responsibilities and the processes the agencies used  to monitor the cost and schedule of the MOX project. We also examined  NNSA guidance and memorandums detailing the 2011 transition of  oversight responsibilities for the construction of the MOX project from  NNSA\u2019s Office of Defense Nuclear Nonproliferation to its Office of  Acquisition and Project Management and the effect this change had on  NNSA\u2019s efforts to oversee the project. In addition, we reviewed DOE,  NNSA, and MOX Services documents, as well as independent reviews  and assessments, concerning the performance and status of the MOX  project. In particular, we reviewed a May 2014 report prepared for DOE  that identified and analyzed the root causes behind the cost increases  that affected the MOX project through 2012, after the formal approval of  its cost and schedule estimates in 2007. We also reviewed surveillance  reviews and a May 2013 assessment of the MOX contractor\u2019s earned  value management (EVM) system, which the contractor and NNSA used  to monitor project performance and status, including cost and schedule,  after construction began. Moreover, we examined project cost and  budget information that DOE, NNSA, MOX Services, and others  developed\u2014such as the contractor\u2019s September 2012 baseline change  proposal and DOE\u2019s August 2016 revised cost and schedule estimate\u2014to  determine when they began to identify the MOX project\u2019s cost increases  and schedule delays and why such problems might have occurred. We  also reviewed reports by GAO and DOE\u2019s Office of Inspector General that  identified and discussed cost and schedule problems affecting the MOX  project. Additionally, we interviewed officials from DOE and NNSA to  discuss how and when they identified the MOX project\u2019s cost and  schedule problems.", "To examine the extent to which DOE requires that project management  lessons learned from MOX and other projects be documented and  shared, we reviewed DOE\u2019s Order 413.3B, which outlines the primary  set of project management requirements governing DOE and NNSA  capital asset projects that have a total project cost of greater than $50  million. We also reviewed DOE guidance documents, such as those  related to DOE Order 413.3B, to further understand DOE\u2019s suggested  approaches for meeting its existing lessons learned requirements.  Similarly, we reviewed documents from NNSA and DOE\u2019s Offices of  Environmental Management and Science, such as those found in  business-operating procedures and standard-operating policies and  procedures, to examine how those documents supplement the lessons  learned requirements included in DOE Order 413.3B. In addition, we  collected examples of capital asset project-management lessons learned  from DOE and NNSA, including those from the MOX project, from a  variety of sources, such as lessons-learned reports, project peer reviews,  entries stored in DOE\u2019s Project Assessment and Reporting System  (PARS II) and NNSA\u2019s internal databases, monthly lessons-learned  bulletins, and presentations, among others. To better understand lessons  learned and their role within project management, we reviewed reports by  GAO, the U.S. Army\u2019s Center for Army Lessons Learned, and the  Project Management Institute that identify and discuss key practices for  lessons learned. We selected these sources because they are widely  recognized for key practices on lessons learned. We then compared the  project management lessons learned requirements outlined in DOE Order  413.3B against these key practices. We also discussed project  management lessons learned requirements and processes with officials  from DOE\u2019s Offices of Environmental Management, Project Management,  and Science and NNSA\u2019s Office of Acquisition and Project Management.", "We conducted this performance audit from May 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Timeline of Selected Information and Events Pertaining to the MOX Project", "paragraphs": ["Appendix II: Timeline of Selected Information  and Events Pertaining to the MOX Project Details  DOE announced a plan to dispose of surplus, weapons-grade plutonium through a dual  approach that would include constructing a facility for the purposes of converting the  plutonium into mixed-oxide fuel for use in modified commercial reactors.  The initial estimate for the MOX project\u2014that is, not an approved baseline\u2014totaled $1.4  billion, with completion of construction expected to be in September 2004.", "DOE awarded the contract for designing, constructing, and operating a MOX facility to the  consortium of Duke, Cogema, Stone & Webster, LLC\u2014now MOX Services, LLC, or MOX  Services.  According to a December 2005 DOE Inspector General report, in 1999, an independent team  reviewed the MOX contract and warned of the potential for escalating costs because the  contractor had no incentives to minimize costs nor penalties for overruns or poor  performance.", "DOE announced that it would construct the MOX project (as well as two other facilities) at the  Savannah River Site located in Aiken, South Carolina.", "A February 2001 independent cost estimate of the MOX contractor\u2019s preliminary cost estimate  for the MOX project concluded that it would cost about $2.4 billion to construct and operate it.  The independent cost estimate concluded that it would cost about $1.1 billion to construct the  facility.", "The National Nuclear Security Administration\u2019s (NNSA) February 2002 report to Congress on  the disposition of surplus defense plutonium at the Savannah River Site concluded that the  facility component of the mixed-oxide fuel option identified would cost about $2.2 billion to  implement over about 20 years. According to the report, about $1 billion of these costs would  be for designing and constructing the facility, with construction being completed during fiscal  year 2007.", "According to DOE\u2019s fiscal year 2004 budget request, a preliminary estimate of the MOX  project\u2019s total cost totaled about $1.8 billion.", "A July 2004 independent review found that the MOX project had experienced a cost increase  of about 300 percent for the design and development phase compared to what was  preliminarily planned for in 1999, in part to due to a number factors, including design changes  and underestimates. Moreover, the report cited the MOX project as an example of a DOE  project greater than $500 million that should have had an approved performance baseline  many years prior given that it had reached critical decision (CD)-1 approval, or the approval of  alternative selection and cost range, in 1997.", "According to a December 2005 report by DOE\u2019s Office of Inspector General, as of July 2005,  NNSA\u2019s not-yet-validated estimate for the design and construction of the MOX project was  about $3.5 billion ($2.8 billion for construction)."], "subsections": [{"section_title": "Phases", "paragraphs": ["Details  In February 2006, DOE\u2019s fiscal year 2007 budget request reported a preliminary estimate for  the MOX project totaling about $3.6 billion, but the department reiterated that the estimate  would be finalized following the completion of the project\u2019s performance baseline. The request  also noted that design costs for the MOX project increased from $243 million to $765 million,  primarily due to the decision to fund some design work for gloveboxes and enhanced aqueous  polishing during the design phase as opposed to the construction phase and increased design  work to adapt the facility to handle and treat several tons of pure plutonium resulting from the  cancelation of plutonium immobilization, which would have entailed incorporating plutonium  into a corrosion-resistant ceramic matrix and then encasing the immobilized plutonium in  glass along with highly radioactive nuclear wastes that already existed at DOE sites, thereby  rendering the plutonium as inaccessible and unattractive for reuse in nuclear weapons.  However, NNSA canceled this approach in 2002.  A July 2006 external independent review of the MOX project\u2019s preliminary cost and schedule  estimate projected the MOX project\u2019s total cost to be about $4.7 billion, with the project  expected to be completed in April 2016. The review\u2019s estimated total project cost reflected an  increase of $352 million over the proposed total project cost of $4.3 billion due to increases in  the cost of some construction activities and contingency.", "In February 2007, DOE\u2019s fiscal year 2008 budget request reported that the revised total cost  for the MOX project totaled about $4.7 billion and that the estimate was in the final stages of  validation as part of the department\u2019s critical decision process. The request stated that the  revised cost was a change from the prior not-yet-validated $3.6 billion estimate in DOE\u2019s fiscal  year 2007 budget request, with over 50 percent of the $1.1 billion cost increase attributed to  an increase in contingency funds for the project during construction and cold startup.  Also in February 2007, responsibility for the MOX contract was officially transferred to the  Savannah River Site Office.", "In April 2007, DOE formally approved a cost estimate, or baseline, for the MOX project of $4.8  billion and start of operations in September 2016.  In August 2007, construction of the MOX project began.", "In May 2008, DOE certified the MOX contractor\u2019s earned value management (EVM) system.  A July 2008 independent project review identified a number of concerns, including that only  one person was dedicated to the development and upkeep of the MOX project\u2019s procurement  status information and that the project\u2019s procurement strategy would require additional  procurement and engineering staff to meet future demands.  In December 2008, as a result of funding reductions for fiscal year 2008, DOE approved a  revised cost estimate for the MOX project of $4.9 billion and a 1-month delay in the start of  operations to October 2016.", "According to a July 2009 report, the MOX contractor\u2019s 2009 annual forecasted estimate for  completing the MOX project totaled approximately $4.4 billion, an increase of about $283.8  million from the 2008 annual forecasted estimate.", "In May 2010, an independent review of the MOX contractor\u2019s EVM system found that the  contractor\u2019s performance data could not be used to accurately assess the cost performance of  the project, in part because the contractor was inappropriately using management reserve  funds to cover cost overruns. The MOX contractor began to implement a number of corrective  actions in response to the report\u2019s findings.  According to an August 2010 report, the MOX contractor\u2019s 2010 annual forecasted estimate  for completing the MOX project totaled approximately $4.6 billion, an increase of about $207.1  million from the 2009 annual forecasted estimate."], "subsections": []}, {"section_title": "Phases", "paragraphs": ["Details  In February 2011, DOE\u2019s Office of Acquisition and Project Management\u2014now the Office of  Project Management\u2014changed the overall status of the MOX project from green to yellow,  indicating that the project was at risk of breaching its approved cost estimate (i.e.,  performance baseline).  A May 2011 project peer review found that the MOX project faced expected cost growth and  would be challenged in identifying approximately $364 million in cost savings necessary to  deliver the project at its total project cost (of $4.9 billion).  A June 2011 follow-on to the May 2010 independent review of the MOX contractor\u2019s EVM  system found that the project was likely to exceed the total project cost by anywhere from  $104 million to $699 million, with an estimated most likely cost overrun of $493 million.  Nonetheless, DOE recertified the MOX contractor\u2019s EVM system after the MOX contractor  completed a number of corrective actions.  According to a July 2011 report, the MOX contractor\u2019s 2011 annual forecasted estimate for  completing the MOX project totaled approximately $4.7 billion, an increase of about $142.4  million from the 2010 annual forecasted estimate.", "In January 2012, NNSA directed the MOX contractor to add additional scope for plutonium  metal oxidation capability and to include updates to the project\u2019s current cost and schedule  projections, with a baseline change proposal due by the end of May 2012.  A March 2012 project review found that the MOX project\u2019s cost and schedule baselines had a  very low probability of being met, and estimated that the total project cost was likely  underestimated by anywhere from $600 to $900 million when compared to the project\u2019s  approved total cost of $4.9 billion. The review team recommended that the project should  develop an updated and more realistic baseline.  Also in March 2012, DOE changed the overall status of the MOX project from yellow to red,  indicating that the project was expected to breach its approved cost estimate (i.e., its  performance baseline).  A July 2012 project peer review found that the MOX project\u2019s likely total project cost would fall  within the range of $6.9 billion to $7.3 billion as opposed to the project\u2019s approved total cost of  $4.9 billion.  In September 2012, the MOX contractor submitted its revised baseline change proposal to  update the MOX project\u2019s cost and schedule projections, including additional scope of work  that would provide the MOX project with a plutonium metal oxidation capability, referred to as  direct metal oxidation. According to the contractor\u2019s proposal, it would cost about $7.4 billion  to complete the MOX project without the direct metal oxidation by November 2019. The  addition of the direct metal oxidation scope of work would cost an additional $262.3 million,  which would be completed in June 2023 after the completion of MOX project and the start-up  of operations by November 2019."], "subsections": []}, {"section_title": "Phases", "paragraphs": ["Details  In April 2013, DOE\u2019s fiscal year 2014 budget request proposed a slowdown of construction of  the MOX project while NNSA took steps to assess alternative plutonium disposition strategies.  According to the request, NNSA cited the increase to the contractor\u2019s total estimated cost for  the project and the budget environment as factors in its decision to pursue a slowdown of the  MOX project while conducting an assessment of potential alternative plutonium disposition  strategies.  According to NNSA, a May 2013 estimate prepared by the U.S. Army Corps of Engineers  estimated that, not including contractor fee, it would cost $9.4 billion to construct the MOX  project by 2024 at an annual funding level of $630 million.  According to NNSA, a June 2013 estimate prepared by the MOX contractor estimated that it  would cost between $8.5 and $9.7 billion to construct the MOX project, with completion from  2023 to 2032 depending on whether the annual funding level totaled $350 million or $500  million.  In September 2013, NNSA estimated it would cost about $10.5 billion to construct the MOX  project by 2027 at an annual funding level of $500 million.  According to NNSA, a November 2013 estimate prepared by the U.S. Army Corps of  Engineers estimated that it would cost from $10 to $11.7 billion to construct the MOX project,  with completion from 2026 to 2036 depending on whether the annual funding level totaled  $350 million or $500 million.", "In March 2014, DOE\u2019s fiscal year 2015 budget request stated that ongoing analysis led to the  determination that the MOX project would be significantly more expensive than anticipated  and concluded that, due to cost increases, the MOX approach was not viable within available  resources. The request, therefore, called for placing the facility in cold stand-by so NNSA  could further study more efficient options for plutonium disposition.  A May 2014 root cause analysis report found that some of the cost drivers that contributed to  the MOX project\u2019s cost increases since 2007 included not having sufficiently experienced  project teams in place, basing the approved cost and schedule estimates on incomplete front- end planning, not sufficiently developing designs to support the project\u2019s fast-track  procurement and construction, experiencing greater than expected inefficient execution of  construction activities, not implementing effective corrective actions, and not adequately  applying federal oversight to identify and address project performance issues  Also in May 2014, the DOE Office of Inspector General reported continuing concerns about  the achievability of the estimated cost and completion date for the MOX project. The report  also noted that the MOX project no longer had an approved cost and schedule estimate and  in light of the project continuing to receive significant funding, recommended that the MOX  contractor develop a new cost and schedule estimate.  In September 2014, in light of certain insufficient project data, NNSA directed the MOX  contractor to conduct a review to determine and validate the work completion status\u2014that is,  state of completeness\u2014for all commodities being installed in the MOX project.  In December 2014, both the Carl Levin and Howard P. McKeon National Defense  Authorization Act for Fiscal Year 2015 and the Consolidated and Further Continuing  Appropriations Act, 2015 directed DOE to continue construction and project or program  support activities related to the MOX project. However, the National Defense Authorization Act  also directed DOE to report on, among other things, alternatives to the MOX project, including  cost estimates for each alternative, and how such alternatives would conform to the Plutonium  Management and Disposition Agreement."], "subsections": []}, {"section_title": "Phases", "paragraphs": ["Details  In February 2015, DOE\u2019s fiscal year 2016 budget request called for the continued construction  of the MOX project, in part because all four congressional committees of jurisdiction directed  that construction on the MOX project continue in fiscal year 2015 while NNSA conducted  additional cost studies and technology alternative studies.  In March 2015, NNSA\u2019s MOX Project Management Office assessed the MOX contractor\u2019s use  of level of effort versus the discrete method of earned value and determined a  disproportionate use of level of effort\u2014around 56 percent\u2014was masking the performance of  the contractor\u2019s discrete work and therefore affecting the accurate measurement of the  project\u2019s progress.  In April 2015, the Aerospace Corporation completed a report on the MOX project and  estimated that the MOX project\u2019s total cost would be about $21.5 billion, with projected  completion in 2045 at an annual funding level of $500 million.  In June 2015, the MOX contractor finished its completeness verification review and found that  it had over-reported on the results of certain commodities being installed in the MOX project.  As a result of this review, the MOX contractor revised the amount of earned value claimed for  these commodities to address the over-reporting and provide a more realistic accounting of  the selected commodities.", "In February 2016, DOE\u2019s fiscal year 2017 budget request proposed terminating the MOX  project in favor of the dilute and dispose option as the path forward for the disposition of the  nation\u2019s surplus, weapons-grade plutonium. According to the request, the MOX project was  found to be significantly more expensive than anticipated and would require approximately  $800 million to $1 billion annually for decades.  A May 2016 report prepared for the MOX contractor by High Bridge Associates, Inc.,  estimated that completing the construction of the MOX project could cost about $5.2 billion  and be completed in 10 years, with an annual funding level of about $520 million.  In July 2016, the MOX contractor submitted its annual forecasted estimate for completing  construction of the MOX project and estimated the total project cost to be about $10 billion,  with completion in 2029, with an annual funding level of $350 million.  In August 2016, DOE issued an updated performance baseline estimating that it would cost  approximately $17.2 billion to complete construction of the MOX project by 2048 assuming an  annual funding level of $350 million. DOE further estimated that it would cost about $14.3  billion to complete construction of the MOX project by 2035 assuming an annual funding level  of $500 million.  In October 2016, DOE rescinded the MOX contractor\u2019s EVM system certification of  compliance in response to an August 2016 surveillance review that identified material non- compliances such as the overstatement of earned value and percentage complete."], "subsections": []}, {"section_title": "Phases", "paragraphs": ["Details  A February 2017 report by the U.S. Army Corps of Engineers found that there is likely to be a  substantial amount of rework at the MOX project but noted that the magnitude of the likely  rework has yet to be determined. The report stated that some of the rework is attributed to  design constructability issues as well as procuring, fabricating, and completing work out of  sequence.  In May 2017, DOE\u2019s fiscal year 2018 budget request reiterated for the second consecutive  year, a plan to terminate the MOX project in favor of pursuing the dilute and dispose option for  plutonium disposition.  Also in May 2017, a DOE Office of Inspector General report stated that NNSA was not aware  of the total cost of rework at the MOX project because the time and cost of rework were not  definitively tracked prior to fiscal year 2014.  In December 2017, section 3121 of the National Defense Authorization Act for Fiscal Year  2018 authorized the Secretary of Energy to terminate the MOX project if, among other things,  the Secretary certified that the remaining life-cycle cost for an alternative option for carrying  out plutonium disposition would be less than approximately half of the estimated remaining  life-cycle cost of carrying out the plutonium disposition approach utilizing the MOX project.", "In February 2018, DOE\u2019s fiscal year 2019 budget request reiterated for the third consecutive  year a plan to terminate the MOX project in favor of pursuing the dilute and dispose option for  plutonium disposition.  In May 2018, the Secretary of Energy waived existing requirements to continue MOX  construction, but the state of South Carolina obtained an injunction in federal district court  temporarily blocking the waiver in June, which NNSA subsequently appealed.  In October 2018, a federal appellate court granted a stay of the federal district court\u2019s  injunction that prohibited termination of the MOX contract and cessation of construction  operations. NNSA subsequently issued a notice of termination to the MOX contractor."], "subsections": []}]}, {"section_title": "Appendix III: Selected GAO Recommendations from Prior Reports", "paragraphs": ["We have made numerous agency recommendations in prior reports to  improve contract and project management in the Department of Energy  (DOE) and the National Nuclear Security Administration (NNSA). Some  reports contain recommendations for department and agency policies,  and others address project management problems for specific projects or  also address other agencies besides NNSA. A description of some of our  key recommendations, with the status of implementation as of December  2018, is provided below in table 2. For the most up-to-date status of these  agency recommendations, see our website: http://www.gao.gov."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Hilary Benedict (Assistant  Director), Rodney Bacigalupo, Antoinette Capaccio, Tara Congdon,  Pamela Davidson, Richard P. Johnson, Eleni Orphanides, Kevin  Remondini, Karen Richey, Sara Sullivan, and Tatiana Winger made key  contributions to this report."], "subsections": []}]}], "fastfact": ["In 2007, the Department of Energy's nuclear security agency started building a facility to dispose of unneeded weapons-grade plutonium. After cost increases, schedule delays, and nearly $6 billion in spending, Energy cancelled the project in 2018.", "While this project was running, Energy took steps to address inexperience among its project management staff. As oversight improved, the project contractor's performance problems became clearer.", "Energy has historically struggled to complete projects\u2014in addition to this one\u2014within cost and schedule estimates. We made 3 recommendations to improve how Energy uses the lessons learned from its projects."]}
{"id": "GAO-18-613T", "url": "https://www.gao.gov/products/GAO-18-613T", "title": "Critical Infrastructure Protection: Progress and Challenges in DHS's Management of Its Chemical Facility Security Program", "published_date": "2018-06-14T00:00:00", "released_date": "2018-06-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Thousands of facilities have hazardous chemicals that could be targeted or used to inflict mass casualties or harm surrounding populations in the United States. In accordance with the DHS Appropriations Act, 2007, DHS established the CFATS program in 2007 to, among other things, identify and assess the security risk posed by chemical facilities. DHS inspects high-risk facilities after it approves facility security plans to ensure that the facilities are implementing required security measures and procedures.", "This statement summarizes progress and challenges related to DHS's CFATS program management. This statement is based on prior products GAO issued from July 2012 through June 2017, along with updates conducted in June 2018 on DHS actions to address prior GAO recommendations. To conduct the prior work, GAO reviewed relevant laws, regulations, and DHS policies for administering the CFATS program, how DHS assesses risk, and data on high-risk chemical facilities. GAO also interviewed DHS officials and reviewed information on DHS actions to implement its prior recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) has made progress addressing challenges that GAO's past work identified to managing the Chemical Facility Anti-Terrorism Standards (CFATS) program. The following summarizes progress made and challenges remaining in key aspects of the program.", "Identifying high-risk chemical facilities. In July 2015, GAO reported that DHS used self-reported and unverified data to determine the risk of facilities holding toxic chemicals that could threaten surrounding communities if released. GAO recommended that DHS should better verify the accuracy of facility-reported data. DHS implemented this recommendation by revising its methodology so it now calculates the risk of toxic release, rather than relying on facilities to do so.", "Assessing risk and prioritizing facilities. In April 2013, GAO reported weaknesses in multiple aspects of DHS's risk assessment and prioritization approach. GAO made two recommendations for DHS to review and improve this process, including that DHS enhance its risk assessment approach to incorporate all of the elements of consequence, threat, and vulnerability associated with a terrorist attack involving certain chemicals. DHS launched a new risk assessment methodology in October 2016 and is currently gathering new or updated data from about 27,000 facilities to (1) determine which facilities should be categorized as high-risk because of the threat of sabotage, theft or diversion, or a toxic release and (2) assign those facilities deemed high risk to one of four risk-based tiers. GAO has ongoing work assessing these efforts and will report later this summer on the extent to which they fully address prior recommendations.", "Reviewing and approving facilities' site security plans . DHS is to review security plans and visit facilities to ensure their security measures meet DHS standards. In April 2013, GAO reported a 7 to 9 year backlog for these reviews and visits. In July 2015, GAO reported that DHS had made substantial progress in addressing the backlog\u2014estimating that it could take between 9 and 12 months for DHS to review and approve security plans for the approximately 900 remaining facilities. DHS has since taken additional action to expedite these activities and has eliminated this backlog.", "Inspecting facilities and ensuring compliance. In July 2015, GAO reported that DHS conducted compliance inspections at 83 of the 1,727 facilities with approved security plans. GAO found that nearly half of the inspected facilities were not fully compliant with their approved security plans and that DHS did not have documented procedures for managing facilities' compliance. GAO recommended that DHS document procedures for managing compliance. As a result, DHS has developed an enforcement procedure and a draft compliance inspection procedure and expects to finalize the compliance inspection procedure by the end of fiscal year 2018."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made various recommendations to strengthen DHS's management of the CFATS program, with which DHS has generally agreed. DHS has implemented or described planned actions to address most of these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our past work on the Department  of Homeland Security\u2019s (DHS) efforts to manage its Chemical Facility  Anti-Terrorism Standards (CFATS) program. Thousands of facilities that  produce, use, or store hazardous chemicals could be of particular interest  to terrorists who are intent on using toxic chemicals to inflict mass  casualties in the United States. These chemicals could be released from  a facility to cause harm to surrounding populations; they could be stolen  and used as chemical weapons or as their precursors (the ingredients for  making chemical weapons); or they could be stolen and used to build an  improvised explosive device. Past incidents remind us of the danger that  these chemicals pose, including the 2013 ammonium nitrate explosion at  a fertilizer storage and distribution facility in West, Texas, which killed at  least 14 people and damaged or destroyed at least 200 homes, and the  1995 domestic terrorist attack on the federal building in Oklahoma City,  Oklahoma, where 168 people were killed using ammonium nitrate  fertilizer mixed with fuel oil.", "The Department of Homeland Security Appropriations Act, 2007, required  DHS to issue regulations to establish risk-based performance standards  (performance standards) for securing high-risk chemical facilities. DHS  subsequently established the CFATS program in 2007 to, among other  things, identify high-risk chemical facilities and assess the risk posed by  them; place facilities considered to be high risk into one of four risk-based  tiers (with tier 1 being the highest risk tier and 4 being the lowest); assess  facility security; approve security plans prepared by facilities; and inspect  facilities to ensure compliance with regulatory requirements. DHS\u2019s  CFATS rule established 18 performance standards that identify the areas  for which a facility\u2019s security posture are to be examined, such as  perimeter security, access control, and cyber security. To meet these  standards, facilities are free to choose whatever security programs or  processes they deem appropriate so long as DHS determines that the  facilities achieve the requisite level of performance in each of the  applicable areas. The Protecting and Securing Chemical Facilities from  Terrorist Attacks Act of 2014 (CFATS Act of 2014) enacted in December  2014, in effect, reauthorized the CFATS program for an additional 4  years, while also imposing additional implementation requirements on  DHS for the program. DHS\u2019s National Protection and Programs  Directorate\u2019s Infrastructure Security Compliance Division manages the  CFATS program. According to DHS, the Department received  approximately $911 million for the CFATS program for the period  beginning fiscal year 2007 through fiscal year 2018.", "My testimony today summarizes our past work examining DHS\u2019s  management of the CFATS program, and provides updates on actions  DHS has taken to address our prior recommendations. This testimony is  based on our reports issued from July 2012 through June 2017. For  these reports, we reviewed applicable laws and regulations, DHS policies  and procedures, DHS data on tiered facilities, information on the  approach DHS used to determine a facility\u2019s risk and process for  reviewing security plans. We also interviewed DHS officials about facility  tiering, how DHS assesses risk, and how it processes security plans.  Additional details on the scope and methodology are available in our  published reports. In addition, this statement contains updates as of June  2018 from DHS on actions it has taken to address the recommendations  made in our prior reports. The work upon which this statement is based  was conducted 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."], "subsections": [{"section_title": "DHS Has Made Progress Addressing Past Challenges, But Some Actions are Still In Progress", "paragraphs": ["Our past work has identified progress and challenges in a number of  areas related to DHS\u2019s management of the CFATS program including (1)  the process for identifying high risk chemical facilities; (2) how it assesses  risk and prioritizes facilities; (3) reviewing and approving facility security  plans; (4) how it conducts facility compliance inspections; and (5) efforts  to conduct stakeholder outreach and gather feedback. DHS has made a  number of programmatic changes to CFATS in recent years that may also  impact its progress in addressing our open recommendations; these  changes are included as part of our ongoing review of the program."], "subsections": [{"section_title": "Identifying High-Risk Chemical Facilities", "paragraphs": ["In May 2014, we found that more than 1,300 facilities had reported having  ammonium nitrate to DHS. However, based on our review of state data  and records, there were more facilities with ammonium nitrate holdings  than those that had reported to DHS under the CFATS program. Thus,  we concluded that some facilities that were required to report may have  failed to do so. We recommended that DHS work with other agencies,  including the Environmental Protection Agency (EPA), to develop and  implement methods of improving data sharing among agencies and with  states as members of a Chemical Facility Safety and Security Working  Group. DHS agreed with our recommendation and has since addressed  it. Specifically, DHS compared DHS data with data from other federal  agencies, such as EPA, as well as member states from the Chemical  Facility Safety and Security Working Group to identify potentially  noncompliant facilities. As a result of this effort, in July 2015, DHS  officials reported that they had identified about 1,000 additional facilities  that should have reported information to comply with CFATS and  subsequently contacted these facilities to ensure compliance. DHS  officials told us that they continue to engage with states to identify  potentially non-compliant facilities. For example, as of June 2018, DHS  officials stated they have received 43 lists of potentially noncompliant  facilities from 34 state governments, which are in various stages of review  by DHS. DHS officials also told us that they recently hired an individual to  serve as the lead staff member responsible for overseeing this effort.", "DHS has also taken action to strengthen the accuracy of data it uses to  identify high risk facilities. In July 2015, we found that DHS used self- reported and unverified data to determine the risk categorization for  facilities that held toxic chemicals that could threaten surrounding  communities if released. At the time, DHS required that facilities self- report the Distance of Concern\u2014an area in which exposure to a toxic  chemical cloud could cause serious injury or fatalities from short-term  exposure\u2014as part of its Top-Screen. We estimated that more than  2,700 facilities with a toxic release threat had misreported the Distance of  Concern and therefore recommended that DHS (1) develop a plan to  implement a new Top-Screen to address errors in the Distance of  Concern submitted by facilities, and (2) identify potentially miscategorized  facilities that could cause the greatest harm and verify that the Distance  of Concern of these facilities report is accurate. DHS has fully  addressed both of these recommendations. Specifically, DHS  implemented an updated Top-Screen in October 2016 and now collects  data from facilities and calculates the Distance of Concern itself, rather  than relying on the facilities\u2019 calculation. In response to our second  recommendation, in November 2016, DHS officials stated they completed  an assessment of all Top-Screens that reported threshold quantities of  toxic release chemicals of interest and identified 158 facilities with the  potential to cause the greatest harm. As of May 2017, according to ISCD  officials, 156 of the 158 facilities submitted updated Top-Screens and 145  of the 156 Top-Screens had undergone a quality assurance review  process."], "subsections": []}, {"section_title": "Assessing Risk and Prioritizing Facilities", "paragraphs": ["DHS has also taken actions to better assess regulated facilities\u2019 risks in  order to place the facilities into the appropriate risk tier. In April 2013, we  reported that DHS\u2019s risk assessment approach did not consider all of the  elements of threat, vulnerability, and consequence associated with a  terrorist attack involving certain chemicals. Our work showed that DHS\u2019s  risk assessment was based primarily on consequences from human  casualties, but did not consider economic consequences, as called for by  the National Infrastructure Protection Plan (NIPP) and the CFATS  regulation. We also found that (1) DHS\u2019s approach was not consistent  with the NIPP because it treated every facility as equally vulnerable to a  terrorist attack regardless of location or on-site security and (2) DHS was  not using threat data for 90 percent of the tiered facilities\u2014those tiered for  the risk of theft or diversion\u2014and using 5-year-old threat data for the  remaining 10 percent of those facilities that were tiered for the risks of  release or sabotage. We recommended that DHS enhance its risk  assessment approach to incorporate all elements of risk and conduct a  peer review after doing so. DHS agreed with our recommendations and  has made progress towards addressing them.", "Specifically, with regard to our recommendation that DHS enhance its risk  assessment approach to incorporate all elements of risk, DHS worked  with Sandia National Laboratories to develop a model to estimate the  economic consequences of a chemical attack. In addition, DHS worked  with Oak Ridge National Laboratory to devise a new tiering methodology,  called the Second Generation Risk Engine. In so doing, DHS revised the  CFATS threat, vulnerability, and consequence scoring methods to better  cover the range of CFATS security issues. Additionally, with regard to our  recommendation that DHS conduct a peer review after enhancing its risk  assessment approach, DHS conducted peer reviews and technical  reviews with government organizations and facility owners and operators,  and worked with Sandia National Laboratories to verify and validate the  new tiering approach. We are currently reviewing the reports and data  that DHS has provided about its new tiering methodology as part of our  ongoing work and will report on the results of this work later this summer.", "To further enhance its risk assessment approach, in fall 2016, DHS also  revised its Chemical Security Assessment Tool (CSAT), which supports  DHS efforts to gather information from facilities to assess their risk.  According to DHS officials, the new tool\u2014called CSAT 2.0\u2014is intended to  eliminate duplication and confusion associated with DHS\u2019s original CSAT.  DHS officials told us that they have improved the tool by revising some  questions in the original CSAT to make them easier to understand;  eliminating some questions; and pre-populating data from one part of the  tool to another so that users do not have to retype the same information  multiple times. DHS officials also told us that the facilities that have used  the CSAT 2.0 have provided favorable feedback that the new tool is more  efficient and less burdensome than the original CSAT. Finally, DHS  officials told us that as of June 2018, DHS has completed all notifications  and has processed tiering results for all but 226 facilities. DHS officials  stated they are currently working to identify correct points of contact to  update registration information for these remaining facilities. We are  currently assessing DHS\u2019s efforts to assess risk and prioritize facilities as  part of our ongoing work and will report on the results of this work in our  report later this summer."], "subsections": []}, {"section_title": "Reviewing and Approving Facility Site Security Plans", "paragraphs": ["DHS has also made progress reviewing and approving facility site  security plans by reducing the time it takes to review these plans and  eliminating the backlog of plans awaiting review. In April 2013, we  reported that DHS revised its procedures for reviewing facilities\u2019 security  plans to address DHS managers\u2019 concerns that the original process was  slow, overly complicated, and caused bottlenecks in approving plans.  We estimated that it could take DHS another 7 to 9 years to review the  approximately 3,120 plans in its queue at that time. We also estimated  that, given the additional time needed to do compliance inspections, the  CFATS program would likely be implemented in 8 to 10 years. We did not  make any recommendations for DHS to improve its procedures for  reviewing facilities\u2019 security plans because DHS officials reported that  they were exploring ways to expedite the process, such as reprioritizing  resources and streamlining inspection requirements. In July 2015, we  reported that DHS had made substantial progress in addressing the  backlog\u2014estimating that it could take between 9 and 12 months for DHS  to review and approve security plans for the approximately 900 remaining  facilities. DHS officials attributed the increased approval rate to  efficiencies in DHS\u2019s review process, updated guidance, and a new case  management system. Subsequently, DHS reported in its December 2016  semi-annual report to Congress that it had eliminated its approval  backlog.", "Finally, we found in our 2017review that DHS also took action to  implement an Expedited Approval Program (EAP). The CFATS Act of  2014 required that DHS create the EAP as another option that tier 3 and  tier 4 chemical facilities may use to develop and submit security plans to  DHS. Under the program, facilities may develop a security plan based  on specific standards published by DHS (as opposed to the more flexible  performance standards using the standard, non-expedited process). DHS  issued guidance intended to help facilities prepare and submit their EAP  security plans to DHS, which includes an example that identifies  prescriptive security measures that facilities are to have in place.  According to committee report language, the EAP was expected to  reduce the regulatory burden on smaller chemical companies, which may  lack the compliance infrastructure and the resources of large chemical  facilities, and help DHS to process security plans more quickly. If a tier 3  or 4 facility chooses to use the expedited option, DHS is to review the  plan to determine if it is facially deficient, pursuant to the reporting  requirements of the CFATS Act of 2014. If DHS approves the EAP site  security plan, it is to subsequently conduct a compliance inspection.", "In 2017, we found that DHS had implemented the EAP and had reported  to Congress on the program, as required by the CFATS Act of 2014. In  addition, as of June 2018 according to DHS officials, only 18 of the 3,152  facilities eligible to use the EAP opted to use it. DHS officials we  interviewed attributed the low participation to several possible factors  including:", "DHS had implemented the expedited program after most eligible  facilities already submitted standard (non-expedited) security plans to  DHS;  facilities may consider the expedited program\u2019s security measures to  be too strict and prescriptive, not providing facilities the flexibility of  the standard process; and  the lack of an authorization inspection may discourage some facilities  from using the expedited program because this inspection provides  useful information about a facility\u2019s security.", "We also found in 2017 that recent changes made to the CFATS program  could affect the future use of the expedited program. As discussed  previously, DHS has revised its methodology for determining the level of  each facility\u2019s security risk, which could affect a facility\u2019s eligibility to  participate in the EAP. DHS continues to apply the revised methodology  to facilities regulated under the CFATS program and but it is too early to  assess the impact on participation in the EAP."], "subsections": []}, {"section_title": "Inspecting Facilities and Ensuring Consistent Compliance", "paragraphs": ["In our July 2015 report, we found that DHS began conducting compliance  inspections in September 2013, and by April 2015, had conducted  inspections of 83 of the 1,727 facilities that had approved security plans.  Our analysis showed that nearly half of the facilities were not fully  compliant with their approved site security plans and that DHS had not  used its authority to issue penalties because DHS officials found it more  productive to work with facilities to bring them in compliance. We also  found that DHS did not have documented processes and procedures for  managing the compliance of facilities that had not implemented planned  measures by the deadlines outlined in the plans. We recommended that  DHS document processes and procedures for managing compliance to  provide more reasonable assurance that facilities implement planned  measures and address security gaps. DHS agreed and has taken steps  toward implementing this recommendation. DHS updated its CFATS  Enforcement Standard Operating Procedure (SOP) and has made  progress on the new CFATS Inspections SOP. Once completed these  two documents collectively are expected to formally document the  processes and procedures currently being used to track noncompliant  facilities and ensure they implement planned measures as outlined in  their approved site security plans, according to ISCD officials. DHS  officials stated they expect to finalize these procedures by the end of  fiscal year 2018. We are examining compliance inspections as part of our  ongoing work and will report on the results of our work in our report later  this summer."], "subsections": []}, {"section_title": "Stakeholder Outreach and Feedback", "paragraphs": ["In April 2013, we reported that DHS took various actions to work with  facility owners and operators, including increasing the number of visits to  facilities to discuss enhancing security plans, but that some trade  associations had mixed views on the effectiveness of DHS\u2019s outreach.  We found that DHS solicited informal feedback from facility owners and  operators in its efforts to communicate and work with them, but did not  have an approach for obtaining systematic feedback on its outreach  activities. We recommended that DHS take action to solicit and document  feedback on facility outreach consistent with DHS efforts to develop a  strategic communication plan. DHS agreed and implemented this  recommendation by developing a questionnaire to solicit feedback on  outreach with industry stakeholders and began using the questionnaire in  October 2016.", "Chairman Shimkus, Ranking Member Tonko, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgements", "paragraphs": ["If you or your staff members have any questions about this testimony,  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 statement. Other individuals making key  contributions to this work include John Mortin, Assistant Director; and  Brandon Jones, Analyst-in-Charge; Michael Lennington, Ben Emmel, and  Hugh Paquette.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-574", "url": "https://www.gao.gov/products/GAO-18-574", "title": "Defense Health Care: Expanded Use of Quality Measures Could Enhance Oversight of Provider Performance", "published_date": "2018-09-17T00:00:00", "released_date": "2018-09-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The National Defense Authorization Act for fiscal year 2016 contains provisions for GAO to review DOD's plans to (1) improve the experience of beneficiaries who receive care through military hospitals and clinics or from civilian providers and (2) reduce variation in the quality of care.", "In this report, GAO examines (1) measures DOD uses to assess the quality of direct and purchased care, and (2) the extent to which DOD has established performance standards related to the measures and corrective action requirements for providers who do not meet those standards.", "GAO reviewed the measures in DOD's Core Dashboard for direct care and Purchased Care Dashboard for purchased care. It also reviewed DOD documents and reports to Congress, and interviewed MHS officials, including officials from the Army, Navy, and Air Force. GAO also compared the quality measures DOD uses to those used in Medicare and by private insurers, which have been vetted by multiple stakeholders. GAO assessed DOD's use of performance standards and corrective action requirements in the context of federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Defense Authorization Act for fiscal year 2016 (NDAA 2016) directed the Department of Defense (DOD) to align its measures of health care quality used in the Military Health System (MHS) to improve beneficiary experience and reduce variation in the quality of care. GAO reviewed the quality measures DOD identified in March 2017 in response to the NDAA 2016; DOD senior leadership tracks these measures on dashboards to gauge progress on MHS strategic goals. GAO found that DOD does not use a common set of measures on its dashboards to assess the quality of care provided by either military hospitals and clinics\u2014known as direct care\u2014or networks of civilian hospitals and other providers, known as purchased care. (See figure.) As a result, DOD's senior leadership has limited information on the extent to which MHS beneficiaries receive consistently high quality care across the MHS.", "Furthermore, for both direct and purchased care, DOD uses measures on its dashboards that track a limited range of quality care areas and medical conditions compared to the measures adopted by Medicare and by private health insurers. For example, whereas civilian hospitals report to Medicare information on 11 measures of patients' self-reported experience in hospitals, Military hospitals report only 1 such measure. By using a limited range of quality measures, DOD may not detect key quality issues. Further, when selecting quality measures, the MHS does not prioritize using common measures across direct and purchased care or expanding the range of measures it uses.", "GAO also found that for direct care DOD has established performance standards and corrective action requirements for military hospitals or clinics that do not meet those standards in direct care. The performance standards indicate the level of performance providers should meet on the various quality measures DOD tracks on its dashboards, and the corrective action requirements instruct providers to take steps to improve care. However, for purchased care, DOD has not established similar performance standards for individual providers. Without consistent performance standards and corrective action requirements, DOD is limited in its ability to address variation in the quality of care delivered and help ensure that its beneficiaries receive consistent high quality care across the MHS."]}, {"section_title": "What GAO Recommends", "paragraphs": ["The MHS should (1) prioritize, as appropriate, selecting quality measures common for both direct and purchased care that expand the range of quality areas covered by the measures and (2) establish consistent performance standards and corrective action requirements for direct and purchased care providers. DOD concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense\u2019s (DOD) Military Health System (MHS) offers  a full range of health care services to over 9 million eligible beneficiaries,  including active duty servicemembers and their dependents, medically- eligible National Guard and Reserve members and their dependents, and  retirees and their dependents and survivors, among others. These  beneficiaries may receive care from military treatment facilities (MTFs)\u2014 known as direct care\u2014or from civilian hospitals, physicians, and other  clinicians participating in DOD-sponsored health plans that are  administered by contractors\u2014known as purchased care. While MTFs  take the lead in delivering health care to active duty servicemembers,  eligible beneficiaries can receive a wide array of primary and specialty  care from the MTFs, purchased care providers, or both. Overall, about 60  percent of all the health care services that beneficiaries received in 2017  were delivered through purchased care.", "In 2014, the Secretary of Defense ordered a comprehensive review of the  MHS that found considerable variation in the quality of care delivered. For  example, the review found that 8 of 17 MTFs with high volume surgery  programs had higher than expected rates of surgical complications.  Furthermore, in the case of purchased care, the review found that DOD  had limited information on the quality of care delivered by those civilian  providers.", "The information DOD has on the quality of care in the MHS comes from  what it collects on various quality measures. In general, health care  quality measures are standard, evidence based metrics\u2014such as the  percentage of patients receiving a screening or the rate of hospital  readmissions or surgical complications\u2014that health care systems such as  the MHS use to quantify health care processes, outcomes, and other  aspects of care. Health care quality measures can be linked to  performance standards established for providers. For example, a quality  measure may indicate the percentage of patients who receive a diabetes  screening, while a related performance standard may be that providers  are expected to ensure that at least a certain percentage of applicable  patients receive the screening each year.", "Section 730 of the National Defense Authorization Act for Fiscal Year  2016 (NDAA 2016) directed DOD to develop plans to enhance the  experience of beneficiaries receiving care under the MHS and eliminate  variation in the quality of care that beneficiaries receive across direct and  purchased care. The Act stipulated that DOD align the measures used to  assess the quality of direct and purchased care to improve care across  the MHS as a whole. In March 2017, DOD issued its response to section  730, reporting that it had established two sets of quality measures\u2014 a set  of measures for direct care described as \u201ccore measures\u201d and another set  of measures for purchased care. The MHS reported to Congress that the  core direct care measures and purchased care measures are the key  quality measures DOD\u2019s senior health care leadership use to track DOD\u2019s  progress towards achieving the department\u2019s overall strategic goals of  providing high quality care across the MHS as a whole. DOD reported  that it aligned these quality measures across direct and purchased care  where possible.", "Section 730 of the NDAA 2016 also includes a provision for us to assess  the strengths and limitations of DOD\u2019s plans for achieving the Act\u2019s  objectives. In this report, we examine  1.  the core direct care measures and purchased care measures DOD  uses to assess the quality of care in the MHS; and  2.  the extent to which DOD has established performance standards  related to its core direct care measures and purchased care measures  and corrective action requirements for providers that do not meet  these performance standards.", "To examine the core direct care measures and purchased care measures  DOD uses to assess the quality of care in the MHS, we focused our  review on the measures listed on the Core Dashboard and Purchased  Care Dashboard, which are used in direct care and purchased care,  respectively. We focused on the dashboard measures because the MHS  reported to Congress that these are the measures that DOD health care  leaders rely on to establish accountability throughout the MHS and  identify areas where quality improvement is needed. The measures on  the dashboards are periodically updated, and we examined the measures  included on the dashboards as of March 31, 2018 and the extent to which  the measures on one dashboard aligned with those on the other. We also  examined the range of quality care areas and medical conditions  assessed by the dashboard measures and compared these to the range  of quality care areas and medical conditions assessed by the measures  included in the Hospital Compare measure set for inpatient care and the  Core Quality Measure Collaborative (CQMC) measure sets for outpatient  care. Because the Hospital Compare and CQMC measures for inpatient  and outpatient care have been vetted and reviewed by multiple health  care stakeholders and widely adopted, we determined that they  represented appropriate benchmarks for assessing the scope of the  MHS\u2019s quality assessment. We also reviewed DOD documents to  understand DOD senior health leadership\u2019s decisions to select and track  the measures on the Core and Purchased Care Dashboards and not  others. Specifically, we systematically reviewed minutes from 335  meetings of the MHS governance bodies\u2014which represent the three  military services that provide health care services under the MHS (Army,  Navy, and Air Force) and other components of the MHS\u2014that make final  decisions on the measures to be included on the Core and Purchased  Care Dashboards. We supplemented this document review with  interviews of the MHS officials responsible for managing direct care as  well as those responsible for overseeing the MHS\u2019s contracting of  purchased care. We also interviewed representatives of the medical  commands for each of the three military services to obtain their  perspectives on the measures that the MHS had selected to assess the  quality of care provided to their active duty members and other  beneficiaries. In addition, we interviewed the Chair of the Health Care  Subcommittee of the Military Coalition, a group of 32 military, veterans,  and uniformed services organizations. Although not representative, this  allowed us to obtain the perspectives of beneficiaries on the MHS\u2019s  quality measurement efforts.", "To examine the extent to which DOD has established performance  standards related to its core direct care measures and purchased care  measures and corrective action requirements for providers that do not  meet performance standards, we reviewed policies related to the MHS\u2019s  oversight of provider performance on the measures on its Core and  Purchased Care Dashboards. We also interviewed MHS officials and  reviewed relevant MHS documents to determine whether the MHS sets  specific performance standards for MTFs and civilian providers related to  the quality measures on the Core and Purchased Care Dashboards. We  also examined whether or to what extent MHS has established  requirements for initiating corrective actions when providers do not meet  those performance standards. The relevant documents we reviewed  include the minutes of the MHS governance body meetings noted above;  the MHS reports to Congress on direct and purchased care; documents  related to the purchased care contracts; and reports that contractors  submitted to the MHS for purchased care. Additionally, in our review of  the MHS governance body meeting minutes, we examined MHS officials\u2019  decisions, their rationale, and any actions taken in response to the trends  being monitored on the Core and Purchased Care Dashboard quality  measures. We compared these MHS efforts to federal standards for  internal control related to monitoring.", "We conducted this performance audit from June 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Health Care Quality Measures", "paragraphs": ["As we have previously reported in reviews of health care quality outside  of the MHS, health care quality measures are standard, evidence-based  metrics designed to assess the extent to which patients receive health  care that increases the likelihood of desired health outcomes and are  consistent with current professional knowledge. These measures may  be used to assess the quality of care in various settings, including  hospitals and physician offices. Health care quality measures are  intended to (1) inform providers about opportunities for potential  improvements in their delivery of care, (2) encourage or incentivize  providers to consistently provide high quality care, and (3) inform  consumers about which providers are most likely to deliver high quality  care. There are broad categories of clinical quality measures that address  various aspects of quality of care. See table 1 for a description of these  broad categories of quality measures.", "The data used to calculate the results of health care quality measures can  come from a number of different sources. Some measures often require  detailed clinical information obtained from patient medical records, such  as process measures that indicate whether timely and effective care was  provided in a specific situation, for example, or whether stroke patients  received clot-dissolving medication appropriately. Other measures are  designed to use information on patient demographics and diagnoses that  can be obtained from more readily accessible sources, such as claims  data or other administrative data that have already been collected for  other purposes such as billing. In addition, patients can be asked directly,  usually through surveys, to report on their experiences receiving care."], "subsections": []}, {"section_title": "The MHS Structure and Administration of Direct and Purchased Care", "paragraphs": ["The MHS is a complex organization in which responsibility for the delivery  of health care is primarily shared among the military services\u2014Army,  Navy, and Air Force\u2014and the Defense Health Agency (DHA). The  Army, Navy and Air Force medical commands report through their service  chiefs to their respective military department Secretaries and then to the  Secretary of Defense. DHA reports through the Office of the Assistant  Secretary of Defense for Health Affairs and the Under Secretary of  Defense for Personnel and Readiness to the Secretary of Defense. The  Office of the Assistant Secretary of Defense for Health Affairs manages  the Defense Health Program appropriation, which funds the medical and  health care programs at the medical commands of the military services.  As of fiscal year 2018, most of the MTFs, including military hospitals and  clinics, were under the direction and control of the military services, which  are responsible for staffing, training, and equipping those MTFs to meet  mission requirements. DHA has responsibility for the managed care  support contracts through which the MHS administers its purchased care,  and DHA also administers several MTFs in the vicinity of Washington,  DC. Figure 1 depicts the MHS organizational structure.", "Recently enacted changes will affect the administration of the MTFs in  future years. Most notably, DOD will alter administration of the MTFs,  shifting responsibility from the military services to DHA. Section 702 of the  National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017)  directed DOD to give DHA responsibility for the administration of all  MTFs, including budgetary matters, information technology, and health  care administration and management. In the conference report for  NDAA 2017, Congress stated its intention that the creation of a single  agency responsible for all MTFs would improve and sustain readiness,  reduce costs, and increase efficiency. DOD has since prepared a series  of implementation plans as it works to develop the specific policies and  procedures to enable this change to take effect starting October 1, 2018.  The most recent plan issued by DOD in June 2018 envisions a 3-year  transition to be completed October 1, 2021.", "For purchased care, DOD contracts with civilian health care contractors to  manage its civilian providers on a regional basis. The primary  responsibilities of these managed care support contractors include the  following: developing civilian provider networks, which include hospitals and ensuring adequate access to health care;  referring and authorizing beneficiaries to receive health care; processing health care claims; educating providers and beneficiaries; and  conducting utilization management and quality management  programs.", "There have been several generations of multi-year contracts since 1996.  In July 2016, DOD awarded its fourth generation of managed care  support contracts to two regional contractors, and on January 1, 2018, the  MHS began health care delivery under these contracts."], "subsections": []}, {"section_title": "Selection of Measures to Assess Quality of Direct and Purchased Care", "paragraphs": ["According to our review of DOD documents, the MHS uses a structured  process to select the measures on its dashboards that are used to assess  the quality of direct and purchased care. Specifically, DOD documents  state that the core direct care measures that are on the Core Dashboard  are selected through the MHS\u2019s performance management system called  Partnership for Improvement (P4I), which began in 2015. The  documents show that proposals for potential quality measures are  developed by work groups that focus on different specialized areas, such  as maternity care or mental health. These proposals are reviewed and  approved by the Steering Committee for P4I, which develops the list of  core quality measures for direct care. The Steering Committee then  presents the list of core quality measures to a succession of governance  bodies\u2014each of which incorporates representation from the three military  services plus DHA\u2014for review and approval. DOD documents indicate  that the MHS repeats this process annually as it decides which quality  measures to add, drop, or modify for the coming fiscal year from the Core  Dashboard.", "The DOD documents we reviewed lay out a parallel process that the MHS  follows to select which purchased care quality measures will be tracked in  the Purchased Care Dashboard. A work group that specializes on  purchased care issues with representation of DHA and the three military  services develops the proposed list of quality measures for the Purchased  Care Dashboard. This list is then reviewed and approved by the same  succession of governance bodies that decide on the Core Dashboard  measures.", "Officials told us and DOD documents confirmed that the MHS and the  purchased care contractors also track additional quality measures that  are not included in the Core and Purchased Care Dashboards. For  example, MHS clinicians who provide maternity care track a set of  measures developed by the National Perinatal Information Center.  Similarly, a number of military hospitals report on surgical quality  measures to the National Surgical Quality Improvement Program. The  MHS also conducts surveys of MHS beneficiaries from which it obtains  data for patient experience measures for both direct and purchased care.  Additionally, the MHS requires the managed care support contractors that  administer the MHS\u2019s networks of civilian providers for purchased care to  monitor several different sets of quality measures or indicators, many of  which focus on patient safety. These include patient safety indicators,  hospital acquired conditions, and serious reportable events. They also  analyze measures selected from Hospital Compare and the Healthcare  Effectiveness Data and Information Set (HEDIS), some of which  correspond to measures included in the Core and Purchased Care  Dashboards."], "subsections": []}, {"section_title": "The Hospital Compare and Core Quality Measures Collaborative Measure Sets Adopted by Medicare and Private Health Insurers", "paragraphs": ["While health care systems in the United States can use a variety of  measures to assess the quality of care, two of the most widely adopted  sets of quality measures include the Hospital Compare measure set  developed by Centers for Medicare & Medicaid Services (CMS) for  inpatient care and the CQMC measure sets jointly developed by CMS  and major private health insurers for outpatient care. Since 2005, CMS  has collected results for individual hospitals on a specific list of health  care quality measures that are posted on a website known as Hospital  Compare. CMS does this to make comparable information on the quality  of care provided by different hospitals publicly available. Hospital  Compare currently covers more than 4,000 hospitals that participate in  the Medicare program. These hospitals supply data to CMS for quality  measures of inpatient and emergency department care. These data  reflect the care provided to all patients treated at these hospitals, not just  those covered by Medicare. Each year CMS goes through a formal  process, including receiving input from experts and stakeholders, to  review and revise the mix of quality measures that these hospitals are  expected to report. The purpose of this review, according to CMS, is to  ensure that the set of measures reported on Hospital Compare provides  meaningful information for quality improvement while reducing  unnecessary administrative burden.", "Initiated in 2014, the CQMC is a multi-stakeholder voluntary effort  focused on quality measure alignment that has developed eight sets of  measures for outpatient primary and specialty care, known as the CQMC  measure sets. In developing the measure sets, CMS and private health  insurers negotiate sets of core measures on which they agree to focus on  measuring care quality for certain conditions. Physician specialty  societies, employer groups, consumer groups, and regional collaboratives  also participate in the negotiations. The CQMC measure sets have been  adopted by CMS for Medicare and by 15 major private health insurers for  commercial health plans. Additionally, section 728 of the NDAA 2017  directs the MHS to use, to the extent appropriate, these quality measures  to assess the quality of direct and purchased care. CQMC documents  show that the members of the CQMC intend to continually update these  core measure sets as more meaningful measures are developed over  time. CMS and the private health insurers plan to expand their application  of these measures incrementally, as CMS conducts its annual reviews of  Medicare\u2019s quality measures and the insurers update or renew their  contracts with different providers."], "subsections": []}]}, {"section_title": "The MHS Does Not Use a Common Set of Quality Measures for Direct and Purchased Care, and the Measures It Uses Assess a Limited Range of Quality Areas", "paragraphs": ["The MHS does not use a common set of measures on its Core and  Purchased Care Dashboards to assess the quality of care provided  through direct and purchased care. In addition, for both direct and  purchased care, the MHS uses measures on its dashboards that assess  a more limited range of quality care areas and medical conditions as  compared to the Hospital Compare and CQMC measures adopted by  Medicare and private health insurers."], "subsections": [{"section_title": "The MHS Does Not Use a Common Set of Quality Measures for Direct and Purchased Care", "paragraphs": ["Although the NDAA 2016 directed the MHS to align its quality measures  for direct and purchased care, we found that as of March 31, 2018, the  MHS used separate sets of measures on the Core and Purchased Care  Dashboards to assess the quality of care delivered in direct and  purchased care, respectively. To assess the quality of direct care, the  MHS tracks 43 measures on its Core Dashboard, and to assess the  quality of purchased care, the MHS tracks 18 measures on its Purchased  Care Dashboard. The MHS tracks 8 measures that are the same for both  dashboards, leaving 35 measures tracked only on the Core Dashboard  for direct care and 10 measures tracked only on the Purchased Care  Dashboard for purchased care. (See fig. 2.)", "According to MHS officials, since launching the P4I performance  management system in 2015, the MHS has focused on making  systematic improvements in the quality of care across the MTFs in direct  care. As a result, the 43 measures they have chosen for the Core  Dashboard reflect their priorities for quality improvement within direct care  only. In the case of purchased care, MHS officials stated that requiring  civilian providers to report on the same 43 measures that are used on the  Core Dashboard for direct care would add burden, and the MHS had  concerns that this would make civilian providers less likely to participate  in purchased care. Instead, the MHS tracks 18 measures on the  Purchased Care Dashboard that rely on information sources other than  provider reporting, such as claims that the providers submit in the normal  course of receiving payment for their services and surveys that the MHS  conducts of its beneficiaries. MHS officials explained that they try to  minimize the reporting burden for purchased care providers because for  most of these civilian providers, eligible MHS beneficiaries represent only  a small proportion of their patient population.", "We also found that for direct care, the MHS uses its quality measures on  the Core Dashboard to assess the quality of care delivered to  beneficiaries served by individual MTFs, such as hospitals or clinics.  However, for purchased care, the MHS uses its quality measures on the  Purchased Care Dashboard to assess the quality of care delivered to the  beneficiary population served by each contractor\u2019s network as a whole\u2013 not the quality of care delivered by individual civilian hospitals, clinicians,  or other providers in the network. Specifically:  In direct care, the MHS uses the 43 measures on the Core Dashboard  to track the quality of care delivered by individual MTFs. For example,  on a measure of central line-associated bloodstream infections, the  MHS tracks the incidence of such infections by individual MTF and by  military service (i.e., the incidence of such infections in Army, Navy  and Air Force MTFs).", "In contrast, in purchased care, the MHS assesses information on the  18 measures on the Purchased Care Dashboard for all beneficiaries  in each of the networks administered by the two managed care  support contractors. For example, on a measure of the percentage of  beneficiaries with diabetes who have their hemoglobin level tested  annually, the MHS calculates an overall rate of hemoglobin testing  across all the diabetic patients that receive care in each contractor\u2019s  network.", "The beneficiary population-level reporting on quality measures on the  Purchased Care Dashboard reflects the nature of the MHS\u2019s relationship  with its managed care support contractors for purchased care. Under the  terms of the contracts that the MHS has negotiated with the contractors  that administer the networks of civilian providers to care for eligible  beneficiaries, the contractors bear responsibility for ensuring the quality of  care delivered by those providers. While the MHS requires the managed  care support contractors to monitor different sets of quality measures or  indicators, such as patient safety indicators, hospital acquired conditions,  and serious reportable events to identify possible cases of individual  patient harm and determine appropriate interventions, the contractors  report this information in annual reports to the MHS for their network as a  whole, as opposed to reporting on individual providers.", "Because the MHS largely uses separate measures for direct and  purchased care on its dashboards and tracks the quality of care delivered  by civilian providers in purchased care in the aggregate rather than  individually, the MHS lacks the information it needs to make comparable  assessments of the quality of care delivered across the MHS as a whole.  This, in turn, limits the MHS\u2019s ability to ensure it has the information  needed to determine whether it is achieving the department\u2019s overall  strategic goals of providing high quality care across the MHS as a whole  and ensuring that beneficiaries receive a consistent level of high quality  care regardless of whether that care is delivered in direct or purchased  care. Moreover, using a different set of quality of measures on the  dashboards for direct and purchased care is inconsistent with section 730  of the NDAA 2016, which directs the MHS to align its measures for direct  and purchased care so it can reduce performance variation across the  MHS. MHS officials acknowledge in principle the value of using aligned  measures to assess quality of care in direct and purchased care, but the  officials cited a range of factors that pose challenges to achieving this  objective, such as the large number of civilian providers and the lack of  common health information technology systems.", "Based on our review, we found that one way the MHS could have a  common set of quality measures for both direct and purchased care,  without increasing the reporting burden on civilian providers, would be to  use, as appropriate, Hospital Compare and CQMC quality measures.  Notably, the MHS states on its website that almost all of the civilian  hospitals that are in the contractors\u2019 networks for purchased care already  report information on the measures posted on the Hospital Compare  website. As a result, there potentially would be no additional burden for  these purchased care providers to report information on the Hospital  Compare quality measures. Similarly, major health plans report that they  have begun implementing the CQMC measure sets in their contracts with  physicians, meaning that physicians participating in those plans already  report information on CQMC outpatient quality measures. To the extent  that those physicians are also in the MHS contractors\u2019 networks for  purchased care, the information the physicians report on the CQMC  measures could be used by the MHS.", "We found the MHS is already using some Hospital Compare and CQMC  measures for inpatient and outpatient care. There are a total of 76  measures that Medicare and private health insurers report to Hospital  Compare and a total of 60 CQMC outpatient measures. Besides the  measures used in the Core and Purchased Care Dashboards, MHS also  collects 24 of 76 Hospital Compare measures and 10 of the 60 CQMC  outpatient measures. For the most part, these measures are not part of  the direct and purchased care dashboards that MHS leadership uses to  assess the performance of direct and purchased care. Furthermore, MHS  officials told us that they have no specific plans to increase the number of  measures that the MHS uses from Hospital Compare for inpatient care  delivered in its hospitals. In the case of outpatient care, our review of  DOD documents shows that the MHS plans on expanding reporting to  only 5 more CQMC quality measures, in large part to minimize its  reporting burden."], "subsections": []}, {"section_title": "The MHS Uses Quality Measures that Assess a Limited Range of Quality Care Areas and Medical Conditions Compared to Measures Adopted by Medicare and Private Health Insurers", "paragraphs": ["We found that the measures the MHS uses on its Core and Purchased  Care Dashboards to assess the quality of direct and purchased care  address only a limited range of quality areas and medical conditions when  compared with the Hospital Compare and CQMC measure sets that are  adopted by Medicare and private health insurers. According to the  National Quality Forum, which plays a central role in developing and  annually reassessing the Hospital Compare measure set and also was  consulted in the development of the CQMC measure sets, the measures  used to assess quality of care should comprise an appropriate mix of  recognized measure types, including outcome measures, process  measures, experience of care measures, and cost and structure  measures. These measures should cover a broad enough range of  measure types and medical conditions so that they provide an accurate  overall assessment of the quality of care patients receive.", "Based on our analysis, Table 2 below shows the limited range of  measures on the Core and Purchased Care dashboards used by the  MHS to assess inpatient care, as compared to the range of inpatient  measures that Medicare hospitals report for Hospital Compare. In  general, each of the five types of measures shown in the table below  addresses different aspects of health care quality in hospital settings. For  direct care, the MHS uses no more than one measure on its Core  Dashboard for all of these five measure types except for \u201cOutcome\u201d  measures; for purchased care, the MHS does not use any inpatient care  measures on its Purchased Care Dashboard.", "Similarly, based on our analysis, Table 3 below shows the limited range  of measures on the Core and Purchased Care Dashboards used by the  MHS to assess outpatient care, as compared to the range of outpatient  measures that are part of the CQMC measure sets adopted by Medicare  and private health insurers. The MHS uses measures on its dashboards  that assess fewer clinical focus areas and medical conditions as  compared with those measures included in the CQMC measure sets. As  with hospital care, the difference is greatest with respect to purchased  care.", "The limitations we found in the quality measures used by the MHS\u2014the  relatively narrow range of measures as well as the relatively few  measures used across direct and purchased care\u2014reflect the MHS\u2019s  priorities in selecting quality measures. In short, the MHS focuses on the  value and impact of implementing individual measures, but does not  prioritize aligning the measures used across direct and purchased care or  expanding the range of medical conditions and quality areas covered in  the aggregate by the measures. The MHS\u2019s annual assessment of quality  measures focuses only the Core Dashboard measures. For each Core  Dashboard measure for which a change is under consideration\u2014such as  dropping, modifying, or adding another quality measure to the Core  Dashboard\u2014MHS officials apply a standard set of criteria involving both  the feasibility of collecting the data needed for that measure and the utility  of that measure for addressing a strategic priority or promoting  performance improvement. When asked about the potential value of  increasing the number of Hospital Compare measures, MHS officials said  they need to make a value-based determination of whether the benefits of  obtaining results for any given Hospital Compare measure justified the  costs of collecting and transmitting the data required for that measure. In  discussions about potential measures for the Purchased Care  Dashboard, MHS officials also focused on the characteristics of specific  measures being considered for inclusion in the dashboard.", "Because the MHS does not prioritize expanding the range of medical  conditions and quality areas covered by common measures across direct  and purchased care, the measures the MHS uses provide DOD\u2019s senior  health care leadership with an incomplete picture of the quality of care  across the MHS. As we have noted, the MHS has reported to the  Congress that its DOD health care leaders rely on the Core and  Purchased Care Dashboard measures to establish accountability  throughout the MHS and identify areas where quality improvement is  needed. However, the current approach may not lead to the selection of  quality measures for the two dashboards that would enable MHS officials  to identify the most critical quality of care issues in the MHS. The lack of  that information, in turn, limits the ability of DOD\u2019s senior health care  leadership to target their performance improvement efforts most  effectively in support of DOD\u2019s overall strategic goals of providing high  quality care across the MHS as a whole."], "subsections": []}]}, {"section_title": "The MHS Has Established Performance Standards and Related Corrective Action Requirements for Individual Providers in Direct Care but Not in Purchased Care", "paragraphs": ["The MHS has established performance standards in direct care related to  the Core Dashboard measures and has corrective action requirements for  MTFs that do not meet the standards. However, the MHS has not  established performance standards related to the Purchased Care  Dashboard measures for individual civilian providers in purchased care  and therefore does not have related corrective action requirements for  these providers."], "subsections": [{"section_title": "The MHS Has Established Direct Care Performance Standards and Related Corrective Action Requirements for Military Treatment Facilities", "paragraphs": ["As part of its P4I performance management system for direct care, the  MHS has established specific performance standards that each MTF  must meet in delivering quality care to MHS beneficiaries. These  standards\u2014some of which are under development\u2014specify a minimum  level of performance that each MTF should achieve related to the Core  Dashboard quality measures tracked in direct care. For example, in the  case of the HEDIS All Cause Readmission measure on the Core  Dashboard, the MHS\u2019s performance standard is that MTFs should have a  rate of unplanned acute readmissions within 30 days of an initial hospital  admission that is as good as or better than the national 75th percentile.  This performance standard is based on the readmission rates that the  National Committee for Quality Assurance, the lead entity for that  measure, has observed across U.S. hospitals.", "During regularly recurring governance meetings throughout the year,  MHS governance bodies review how MTFs have performed relative to the  performance standards for the Core Dashboard measures. Our review  found that during these meetings, the governance bodies generally do not  examine the circumstances of MTFs that do not perform well on the  performance standards related to the Core Dashboard measures.  Consequently, DOD\u2019s senior health care leadership within the  governance bodies may receive limited information on the challenges  faced by low-performing individual MTFs. However, during these  meetings, officials from the military services and DHA highlight MTFs that  are performing well on the established performance standards, and the  officials share best practices and specific strategies used to achieve high  performance.", "We also found that in direct care, the MHS requires MTFs that do not  meet the MHS\u2019s performance standards related to its Core Dashboard  measures to take corrective actions to improve the quality of care they  deliver. The military services\u2014Army, Navy and Air Force\u2014and DHA have  been responsible for implementing this requirement. For example, Navy  officials explained that they periodically review information collected on  the MHS\u2019s Core Dashboard quality measures to analyze areas where  MTFs do not meet established performance standards tied to these  measures and to oversee MTFs\u2019 efforts to correct these deficiencies.  Officials told us that each of the services exercises its discretion to  independently develop and implement the corrective actions that the  service determines best address the performance issues identified  through the use of the MHS\u2019s quality measures. For example, to help  reduce the number of Central Line-Associated Bloodstream Infections  (CLABSI), the Army began financially awarding MTFs that performed well  on the CLABSI measure, whereas the Air Force developed a toolkit to  help providers prevent CLABSI.", "As the MHS moves to transfer administration of the MTFs from the  individual military services to DHA as directed by section 702 of the  NDAA 2017, the approach for assessing performance and implementing  corrective actions is likely to change. The MHS\u2019s recently issued  implementation plan as of June 2018 outlines some alterations to the  current performance assessment process. Specifically, MTFs will create  and submit a performance plan that will be reviewed and approved by  DHA. DHA will host monthly review sessions with MTFs to track  performance on the plan. MTFs will be evaluated using a set of measures  aligned to the Quadruple Aim that will include many but not all of the Core  Dashboard measures."], "subsections": []}, {"section_title": "The MHS Has Not Established Performance Standards and Related Corrective Action Requirements for Individual Civilian Providers in Purchased Care", "paragraphs": ["The MHS has not established performance standards related to the 18  Purchased Care Dashboard measures for individual civilian hospitals,  clinicians, or other providers in purchased care. Instead, the MHS has  established performance standards related to the 18 Purchased Care  Dashboard measures that MHS officials use to track the performance of  each of the two managed care support contractors. According to MHS  officials, the MHS does not require the contractors to ensure that each  individual hospital, physician, or other provider in these networks meets  the performance standards related to the Purchased Care Dashboard  measures. For example, in the case of a measure on the use of imaging  for low back pain, the MHS has set a performance standard for each  managed care support contractor, one that aims at avoiding excessive  imaging across the beneficiary population in the contractor\u2019s network.  However, officials told us that the information that the MHS collects on the  measure\u2014the number of beneficiaries in each of the contractors\u2019  networks who receive imaging services for low back pain\u2014does not  indicate the extent to which each individual civilian provider in the  contractor networks meets or fails to meet the performance standard.  Thus, the information the MHS obtains on the quality measure and its  related performance standard does not identify which hospitals, clinicians,  or other providers need to improve their performance in order for all  beneficiaries to receive the expected level of care quality that the  performance standard represents.", "Because the MHS has not established performance standards related to  the Purchased Care dashboard measures for individual civilian hospitals,  clinicians, or other providers in purchased care, there are no related  requirements for corrective action. Instead, the MHS requires its  managed care support contractors to undertake other activities to  promote improved quality of care across civilian providers in their  networks. These include investigations of quality issues, focused reviews,  analyses of Hospital Compare data, and value-based purchasing pilots,  as discussed further below. However, our review found that these efforts  are not applied comprehensively across all individual purchased care  providers.", "Investigations of Quality Issues. One approach the MHS uses to promote  improved quality of care across purchased care providers is to direct its  managed care support contractors to investigate whether individual  beneficiaries have experienced what the MHS refers to as a quality issue.  Potential quality issues are defined by the MHS as any instance when  there are indications that a purchased care provider has deviated from  what the managed care support contractors deem acceptable standards  of professional practice. The contractors can identify these potential  quality issues through beneficiary complaints; analyses of patient safety  indicators, hospital acquired conditions, and serious reportable events; or  by the MHS or contractor staff. Once potential quality issues are  identified, they are investigated by a clinician, who reviews the patient\u2019s  complete medical record. Based on the clinician\u2019s review of the patient\u2019s  medical records, the clinician verifies whether or not a quality issue has  occurred and, if so, assigns the quality issue a severity level. To  address the quality issue, the managed care support contractors may  take a range of steps, including educating the provider, monitoring the  provider, notifying the appropriate state or federal bodies, and removing  the provider from the MHS\u2019s purchased care provider network. In  practice, however, MHS officials said and documents we reviewed show  that providers are rarely removed from the network. For example, MHS  officials reported that one contractor estimated that one provider was  removed from its network over quality issues every 1 to 2 years.", "Focused Reviews. Another way the MHS uses its managed care support  contractors to promote improved quality of care across purchased care  providers is through focused reviews. During these reviews, the managed  care support contractors review the medical records for a selected patient  population to determine the extent to which a specified quality concern is  a widespread problem. For example, in 2015 one contractor reviewed the  medical records of 96 beneficiaries to determine the frequency of  obstetric trauma, an injury related to vaginal deliveries. If a focused  review determines that there is a widespread quality problem, the  contractor may implement a quality improvement initiative designed to  prompt all of its network providers to address that concern, as opposed to  targeting specific providers.", "Analyses of Hospital Compare Data. The MHS also requires the  contractors to conduct an annual examination of the performance of  hospitals in their networks on the different quality measures reported on  Medicare\u2019s Hospital Compare. However, the managed care support  contractors have considerable flexibility in deciding how to structure these  analyses and how to follow-up on results. Consequently, the two  managed care support contractors have adopted different analytical  approaches to define and identify hospitals with relatively low  performance. For example, the managed care support contractors  chose to examine different quality measures and use different criteria to  identify hospitals with relatively low performance. In their most recent  annual reports issued during 2017, both managed care support  contractors indicated that they were considering contacting the lower  performing hospitals to prompt remedial action, but because no action  had yet occurred, the reports leave open what steps were ultimately taken  and how these hospitals responded. Nonetheless, these activities  suggest that the managed care support contractors have the ability to use  Hospital Compare to analyze and address individual provider  performance on a standard set of quality measures. However, the MHS  has not specified how this process should proceed, leaving it to the  managed care support contractors to decide what and how much they will  do in conducting these analyses of individual hospitals.", "Value-Based Purchasing Pilots. The MHS has recently begun to test  different approaches to incentivize purchased care providers to deliver  high quality care through several value-based purchasing pilots. For  example, in February 2018 the MHS launched a maternity care pilot that  pays providers more for better performance on specified quality  measures. The pilot also implements a \u2018steerage model\u2019 approach that  identifies higher performing providers in directories provided to patients  by indicating providers as \u201cGold Stork\u201d or \u201cSilver Stork.\u201d These pilots may  provide the MHS another way to influence the quality of care provided by  certain subsets of its purchased care providers. MHS officials stated that  although DOD has not arrived at specific goals, it plans to expand these  pilots to cover around 20 to 25 percent of its purchased care services by  2020.", "The use of performance standards and corrective action requirements for  individual hospitals, clinicians, or other providers who serve MHS  beneficiaries is consistent with federal internal control standards for  monitoring, which state that management should establish monitoring  activities, evaluate the results, and remediate any deficiencies. While  the MHS has established performance standards related to its Core  Dashboard measures in direct care and has corrective action  requirements for MTFs that do not meet those standards, it has not done  so for individual civilian hospitals, clinicians, or other providers in  purchased care related to its Purchased Care Dashboard measures.  Additionally, if the MHS aligned quality measures on the Core and  Purchased Care Dashboards at the provider level, the MHS could require  its managed care support contractors to monitor the performance of  individual civilian providers relative to set performance standards  comparable to the ones that the MHS has established for MTFs. This  approach would allow the MHS to determine the extent of performance  variability, both among individual civilian providers and across MTFs and  individual civilian providers. By not establishing consistent performance  standards at the provider-level for direct and purchased care and  requiring corrective action requirements to ensure that these standards  are met by providers in both direct and purchased care, the MHS is  limited in its ability to address variation in the quality of care delivered.  This further limits the MHS\u2019s ability to ensure that it is achieving the  department\u2019s overall strategic goals of providing high quality care across  the MHS as whole and ensuring that beneficiaries receive a consistent  level of high quality care regardless of whether that care is delivered in  direct or purchased care."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Congress directed DOD to reduce variation in the quality of care  beneficiaries receive through the MHS. DOD has taken important steps  towards this goal by identifying a set of core measures that DOD senior  health care leadership use to assess quality of care in direct care and  another set of measures that they use to assess quality in purchased  care. DOD health care leaders rely on these measures on their Core and  Purchased Care Dashboards to establish accountability throughout the  MHS and identify areas where quality improvement is needed. However,  with few exceptions, the MHS uses different measures on its Core and  Purchased Care Dashboards to assess the quality of direct and  purchased care, making it difficult to determine the extent to which it is  ensuring consistent quality across the MHS as a whole. Furthermore, for  both direct and purchased care, the MHS uses measures on its  dashboards that assess a limited range of quality areas and medical  conditions when compared to the widely used quality measure sets  adopted by Medicare and private insurers. Without using a broader range  of available quality measures available\u2014measures that many purchased  care providers already report to CMS and private health insurers\u2014DOD is  missing an opportunity to better target the most critical quality of care  issues in the MHS. The limitations we identified in the MHS\u2019s Core and  Purchased Care Dashboard quality measures reflect the fact that in its  annual measure selection process, the MHS does not prioritize aligning  the quality measures across direct and purchased care and expanding  the range of measures it uses across the two systems of care.", "Finally, our review shows that while DOD has established performance  standards for the core measures in direct care and corrective action  requirements for MTFs that do not meet these standards, DOD has not  done so for individual purchased care providers. Notably, DOD does not  set clear expectations that individual purchased care providers should  meet the performance standards related to the quality measures on the  Purchased Care Dashboard. Performance standards and related  corrective action requirements are critical for holding both MTFs and  individual civilian providers accountable for providing quality care. Without  consistent standards and related corrective action requirements across  the MHS, DOD is limited in its ability to ensure that beneficiaries  consistently receive high quality care, regardless of whether they receive  that care in the direct or purchased care systems."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to the Assistant Secretary of  Defense for Health Affairs.", "As MHS governing bodies conduct their recurring reviews of quality  measures selected for MHS\u2019s Core Dashboard and Purchased Care  Dashboards, the Assistant Secretary of Defense for Health Affairs should  direct those bodies to prioritize, as appropriate, the selection of measures  that apply to both direct and purchased care at the provider level and that  expand the range of quality measure types and medical conditions that  are assessed. (Recommendation 1)", "The Assistant Secretary of Defense for Health Affairs should establish, as  appropriate, performance standards related to the Purchased Care  Dashboard measures that are consistent with the MHS\u2019s performance  standards for direct care; ensure they are applied to individual purchased  care providers; and take steps, such as amending its managed care  support contracts, if necessary, to require corrective actions to be taken  when providers do not meet those standards. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review, and DOD provided  written comments, which are reprinted in appendix I. In its written  comments, DOD concurred with both of our recommendations. With  regards to the first recommendation, DOD stated that it plans to enhance  the process for selecting quality measures that apply to both direct and  purchased care; optimize use of data on Hospital Compare to expand the  types and medical conditions evaluated; augment their governance  reporting structure so that senior leadership can review quality measures  included on the Core Dashboard and Purchased Care Dashboard; and  implement the CQMC measure sets for outpatient care. Additionally, DOD  stated that it has efforts underway to create a library of all quality  measures used across direct and purchased care.", "With regards to the second recommendation, DOD acknowledged the  need to strengthen accountability for meeting performance standards that  apply to both direct and purchased care providers.  It also agreed that  measures of individual provider performance in purchased care should be  augmented and consistent with measures in direct care, where possible.  DOD noted, however, that because it works through managed care  support contractors for purchased care, it can hold the contractors  accountable for meeting performance standards but cannot currently take  action against individual providers based solely on performance. Instead,  DOD stated that rather than taking a corrective action approach, it plans  to expand its value-based purchasing efforts and incentivize providers  that meet and exceed certain quality standards.  This raises concerns, as  DOD\u2019s current plans to expand its value-based purchasing efforts would  only be applicable for between 20 and 25 percent of the services MHS  beneficiaries receive from purchased care providers by 2020, as we  noted in our report. Without having all providers managed consistently  and subject to prompt remediation of deficiencies, DOD is missing an  opportunity to improve the quality of purchased care, and it increases the  risk that not all beneficiaries will receive a consistent level of high quality  care across the MHS. Acknowledging DOD\u2019s comment that it cannot  currently take action against individual providers based solely on  performance, we have modified our recommendation to clarify that DOD  should take the steps it determines are necessary, such as amending its  managed care support contracts, to institute corrective action  requirements for purchased care providers.", "We are sending copies of this report to the Secretary of Defense and  appropriate congressional committees. The report is also available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff has any questions regarding this report, please contact  me at (202) 512-7114 or silass@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rashmi Agarwal, Assistant  Director; Eric Peterson Analyst-in-Charge; Muriel Brown; Shaunessye  Curry; Michael Erb; Krister Friday; Jacquelyn Hamilton; and Colbie  Holderness made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Health Reform: Steps Taken to Plan the Transfer of the  Administration of the Military Treatment Facilities to the Defense Health  Agency, but Work Remains to Finalize the Plan. GAO-17-791R.  Washington, D.C.: Sep 29, 2017.", "Health Care Quality: HHS Should Set Priorities and Comprehensively  Plan Its Efforts to Better Align Health Quality Measures. GAO-17-5.  Washington, D.C.: Oct 13, 2016.", "VA Health Care Quality: VA Should Improve the Information It Publicly  Reports on the Quality of Care at Its Medical Facilities. GAO-17-741.  Washington, D.C.: Sep 29, 2017."], "subsections": []}], "fastfact": ["DOD\u2019s Military Health System allows patients to use military or civilian health care providers. We examined the measures DOD's leadership reviews to assess providers' quality of care across its health system and found that DOD:", "is not using common measures across all providers;", "uses measures covering a limited range of medical conditions; and", "hasn\u2019t created consistent standards and requirements related to providers' performance on the measures.", "We recommended that, for all providers, DOD use common key quality measures, expand their range, and develop consistent performance standards and requirements."]}
{"id": "GAO-18-48", "url": "https://www.gao.gov/products/GAO-18-48", "title": "Federal Employee Misconduct: Actions Needed to Ensure Agencies Have Tools to Effectively Address Misconduct", "published_date": "2018-07-16T00:00:00", "released_date": "2018-08-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Misconduct is generally considered an action by an employee that impedes the efficiency of the agency's service or mission. Misconduct incidents can affect other aspects of employee morale and performance and impede an agency's efforts to achieve its mission.", "GAO was asked to examine how executive branch agencies address employee misconduct. This report (1) describes the process agencies are required to follow in responding to employee misconduct; (2) identifies alternative approaches to the formal process that agencies can use and assesses what factors affect agencies' responses to misconduct; (3) describes trends in removals and other adverse actions resulting from misconduct; and (4) identifies key practices agencies can use to help them better prevent and address misconduct. To address these objectives, GAO reviewed relevant sections of title 5 of the U.S.C; analyzed MSPB and OPM data, and interviewed, among others, agency officials and subject-matter experts."]}, {"section_title": "What GAO Found", "paragraphs": ["Chapter 75 of title 5 of the U.S. Code specifies the formal legal process that most agencies must follow when taking adverse actions, i.e., suspensions, demotions, reductions in pay or grade, and removals, for acts of employee misconduct. Chapter 75 details the built-in procedural rights certain federal employees are entitled to when faced with adverse actions.", "Depending on the nature of misconduct, an agency may use utilize alternative discipline approaches traditionally used in government to correct behavior. Alternative discipline is an approach to address misconduct that is available to agencies in lieu of traditional penalties (e.g., letters of reprimand and suspensions of 14 days or less). An example is a last chance agreement, whereby an employee recognizes the agency's right to terminate him or her should another act of misconduct occur.", "Based on the data collected by the Office of Personnel Management (OPM), agencies formally discipline an estimated 17,000 employees annually under Chapter 75, or less than 1 percent of the federal workforce, for misconduct. Based on OPM data, in 2016, agencies made 10,249 suspensions, 7,411 removals, and 114 demotions for misconduct. However, because of weaknesses in OPM's data on employee misconduct, which is provided by the agencies, OPM is unable to accurately target supervisory training to address misconduct, and decision-makers do not know the full extent or nature of this misconduct.", "Key lessons learned can help agencies better prevent and respond to misconduct. For example, tables of penalties provide a list of the infractions committed most frequently by agency employees, along with a suggested range of penalties for each to ensure consistent treatment for similar offenses. However, not all agencies have a table of penalties, including OPM, nor are agencies required by statute, case law or OPM regulations. Subject-matter experts we contacted identified additional promising practices that agencies can use to respond employee misconduct. Some of these are presented below.", "Agencies are accountable for providing required training to their managers. However, agency officials and subject-matter experts we interviewed said federal managers may not address misconduct because they are unfamiliar with the disciplinary process, have inadequate training, or receive insufficient support from their human resources offices."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that OPM, working with the Chief Human Capital Officers Council, (1) take steps to improve the quality of data collected on misconduct; (2) leverage lessons learned to help agencies address misconduct; and (3) improve guidance on training supervisors and human resources staff on addressing misconduct. OPM partially concurred with two recommendations, and disagreed with the first, stating that its guidance has been successfully relied upon by agencies. GAO maintains the action is needed to help strengthen oversight."]}], "report": [{"section_title": "Letter", "paragraphs": ["An average of less than 1 percent of the federal government\u2019s 2.1 million  employees are formally disciplined for misconduct annually, according to  our analysis of the Office of Personnel Management\u2019s (OPM) data. While  this number is relatively small, even a few cases of employee misconduct  can have significant impacts on workplace morale and impede an  agency\u2019s efforts to achieve its mission. Indeed, according to a 2008 study  by the Merit System Protection Board (MSPB), \u201cMisconduct affects not  only the employee and the supervisor; it also impacts those who interact  with the employee.\u201d To that end, it is important for agencies to timely and  effectively address cases of employee misconduct while simultaneously  respecting employees\u2019 procedural and due process rights.", "The term \u201cemployee misconduct\u201d does not have a general definition in a  statute or government-wide regulations. Agencies may elaborate on types  of misconduct in handbooks and other internal guidance. However,  according to OPM, there is a large body of decisional law by MSPB  addressing discipline for employee misconduct in the federal government  that contains definitions of various forms of misconduct, such as  \u201cinsubordination,\u201d \u201cexcessive absence,\u201d and \u201cmisuse of government  property,\u201d as well as instances where specific types of misconduct are  referenced concerning appointment into the competitive service.  According to OPM officials, the lack of a general definition of misconduct  gives agencies flexibility in the manner in which they address misconduct.  Ultimately, when an agency needs to take an adverse action against an  employee for inappropriate workplace behavior, it must do so \u201cfor such  cause as will promote the efficiency of the service\u201d as provided for in 5  U.S.C. Chapter 75. Such actions could include, but are not limited to,  instances of misconduct. The efficiency of the service standard provides  managers with maximum flexibility to pursue adverse actions whether the  impetus was a conduct issue, a failure to perform, or something else.", "Activities that may be considered misconduct can vary from agency to  agency. According to agency officials and subject-matter experts we  interviewed, examples of misconduct include  time and attendance infractions; physical aggression toward an employee;  improper use of a government-issued credit card; misuse of government equipment (such as viewing pornography or use of public position for private gain; and behavior that affects national security.", "It should be noted that the law differentiates misconduct from  substandard performance. Poor performance can generally be described  as an employee\u2019s inability to carry out work responsibilities, while  misconduct can be described as an employee, willfully or otherwise,  violating stated policies or norms. In certain cases, however, employee  performance and misconduct can overlap, combining the two issues.  Sleeping on the job, for example, is both a failure to abide by norms of  conduct an agency would expect of an employee on duty and a failure to  perform.", "Our prior work on poor performers found that adverse actions, including  suspensions, demotions, and removals, take time to resolve and because  of a lack of internal support, concerns over litigation and other factors,  supervisors may be hesitant to initiate required procedures outlined in the  United States Code (hereinafter U.S.C.). Supervisors can address  misconduct through alternative discipline approaches which can shorten  the timeline and eliminate costly litigation if the employee decides to  appeal an adverse action. When used under the right circumstances,  alternative discipline may be more efficient and effective than traditional  discipline.", "You asked us to examine the process for addressing misconduct and to  identify any challenges to removing employees for misconduct. Our  objectives were to (1) describe the process that agencies are required to  follow in responding to employee misconduct in the federal service; (2)  identify alternative approaches to the formal legal process that agencies  can use to respond to misconduct, and assess what factors affect  agencies\u2019 responses; (3) describe trends in removals and other adverse  actions resulting from misconduct; and (4) identify key practices agencies  can use to help them better prevent and address misconduct.", "To address the first objective, we reviewed relevant sections of Title 5  chapter 75 of the U.S.C. (hereinafter chapter 75) which contains the  statutory process for taking such adverse actions as are necessary to  promote the efficiency of the service, which would include adverse  actions to address misconduct. We also reviewed OPM regulations  implementing chapter 75 adverse action procedures and describing  employee grievance and appeal rights. Additionally, we reviewed 5  U.S.C. \u00a7\u00a7 7701 and 7702 (hereinafter chapter 77), which contain the  statutory process for adverse action appeals to the MSPB and  subsequent appeals to the Equal Employment Opportunity Commission  (EEOC) when the employee has alleged that an adverse action within the  jurisdiction of the MSPB was taken on account of discrimination within the  jurisdiction of the EEOC. To provide context for our review of Chapters  75 and 77, we interviewed current and former practitioners, subject- matter experts, and academics. We selected our subject-matter experts  based on our guidance for selecting experts, including their depth of  experience on this issue and their present and past employment history,  the subject-matter experts\u2019 practical experience in applying and practicing  administrative law related to employee misconduct, and academicians  who have conducted research on employee misconduct.", "To address the second objective, we interviewed OPM and MSPB  officials and reviewed MSPB documents to obtain alternative discipline  approaches agencies may use to address employee misconduct. We  reviewed OPM regulations and documents to determine the legal  framework within which most agencies address employee misconduct in  the federal service, including formal procedural and employee appeal  rights. To describe and assess factors that affect an agency\u2019s response to  employee misconduct, we interviewed a panel of chief human capital  officers (CHCO) from selected agencies as well as current and former  human capital practitioners and other individuals and organizations with  expertise in working on employee misconduct issues. These interviews  helped us to gain insight into the agency perspective on addressing  employee misconduct.", "To address the third objective, we analyzed data from OPM\u2019s Enterprise  Human Resources Integration (EHRI) database and MSPB data from  fiscal years 2006 to 2016 to describe trends in misconduct-related  personnel actions and determine the number of adverse actions that  agencies take against employees government-wide. Some agencies are  excluded from the EHRI database, such as those in the intelligence  community. For this report, the term \u2018adverse action\u2019 refers to non- appealable and appealable personnel actions listed under chapter 75,  which includes reductions in grade or pay, suspensions, and removals.  Adverse actions can be taken for reasons that will promote the efficiency  of the service. Such actions include, but are not limited to, misconduct.", "To address the fourth objective, we conducted a literature review to  identify promising practices and lessons learned associated with  employee misconduct in the federal sector. We interviewed officials from  OPM, MSPB, the EEOC, and the Office of Special Counsel (OSC), to  obtain their perspectives on responding to employee misconduct through  alternative approaches. We also interviewed officials from the  Environmental Protection Agency (EPA) to obtain their perspectives on  recent efforts to better coordinate with EPA\u2019s Inspector General to  address cases of employee misconduct. We obtained the perspectives of  a panel of CHCOs from selected agencies through the CHCO Council.  We also interviewed former human capital practitioners and other subject- matter experts with extensive experience working on employee  misconduct issues identified through literature reviews and  recommendations from other experts. For further information on our  scope and methodology, see appendix I.", "We conducted this performance audit from July 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We  independently assessed OPM and MSPB\u2019s data by determining data  checks and quality control steps taken on entering and maintaining the  data. We determined the data from both agencies to be sufficient and  reliable for our purposes. We believe that the evidence obtained provides  a reasonable basis for our findings and conclusions based on our audit  objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Misconduct can occur in any workplace. When employee misconduct  happens, an agency may incur a number of direct and indirect costs  depending on how the agency chooses to address misconduct. For the  agency, direct costs can mean potentially significant time and resource  investments, including investigations, adversarial relationships between  management and the employee, costs to the agency as a result of the  misconduct committed (e.g., time and attendance or credit card fraud),  and reduced employee engagement. The subject-matter experts we  interviewed told us that, based on their experiences, the time it takes to  address a case of misconduct may range from a couple of weeks to  years. The time range depends on whether the employee appeals their  case and other factors.", "Agencies may also incur litigation expenses if an employee decides to  appeal an adverse action. While there are costs to addressing  misconduct, agencies also incur indirect costs when misconduct goes  unaddressed in the workplace. These indirect costs include corrosive  effects on other employees\u2019 morale, higher employee turnover, reduced  productivity, and lower employee commitment to their work or agency.  Indirect costs also include redirecting management\u2019s attention away from  achieving the agency\u2019s mission.", "Employee misconduct in the federal government is regulated by a well- developed body of statutes and regulations as well as decisions from  MSPB and U.S. Court of Appeals for the Federal Circuit and Supreme  Court. While there is no general definition of the term \u201cemployee  misconduct\u201d in a statute or government-wide regulation, Standards of  Ethical Conduct are prescribed by the Office of Government Ethics at 5  CFR Part 2635 and agencies may also elaborate on types of misconduct  in handbooks, tables of penalties (listings of some of the most common  offenses with recommended ranges of penalties), and other internal  guidance. There is a large body of law by MSPB addressing discipline for  employee misconduct in the federal government that contains criteria of  various forms of misconduct, such as, \u201cinsubordination,\u201d \u201cexcessive  absence,\u201d and \u201cmisuse of government property.\u201d According to OPM  officials, there are instances in law and regulation where types of  misconduct are referenced concerning appointment into the competitive  service. Chapter 73 (Suitability, Security, and Conduct) addresses certain  types of misconduct of executive branch employees.", "Generally speaking, an employee\u2019s violation of an agency\u2019s regulation or  policy may cause the agency to take disciplinary or corrective action.  Ultimately, if an agency needs to take an adverse action for inappropriate  workplace behavior, it must do so \u201cfor such cause as will promote the  efficiency of the service\u201d as provided for in Title 5, Chapter 75. OPM has  also prescribed some regulations on employee responsibilities and  conduct. One of the nine Merit System Principles set forth by the Civil  Service Reform Act of 1978 that govern the management of the federal  workforce states that federal employees \u201cshould maintain high standards  of integrity, conduct, and concern for the public interest.\u201d", "According to MSPB, when there is misconduct by a federal employee,  management\u2019s goal should be to either persuade the employee to behave  properly or to remove the employee if the conduct is serious enough.  Moreover, OPM maintains that supervisors have a responsibility to set  clear rules and expectations for employees in the workplace. It is  imperative that federal agencies manage their workforces effectively,  which includes the effective use of discipline when addressing employee  misconduct. In addition, employees may be disciplined for conduct that  that they knew or should have known was unacceptable. Similarly,  federal executive branch employees have a responsibility to adhere to  principles of ethical conduct and should avoid any actions that appear to  violate the law or ethical standards.", "Overall, the objective of discipline is to deal with employees who are  unwilling or unable to behave properly, and, where management deems it  possible and appropriate, correct deficiencies in employee conduct. When  management decides to take an action short of removal, discipline can  deter misconduct and correct situations interfering with productivity.  Conduct-based actions are important tools designed to aid supervisors in  maintaining an efficient and orderly work environment."], "subsections": []}, {"section_title": "Agencies Must Follow Statutory and Regulatory Procedures When Taking Adverse Actions for Employee Misconduct Under Chapter 75 of Title 5", "paragraphs": ["Most agencies are required to adhere to formal, statutorily established  guidelines under chapter 75 when taking adverse actions against an  employee for misconduct. Chapter 75 of Title 5 includes two subsections  that outline the requirements for (1) non-appealable adverse actions such  as suspensions of 14 days or less or (2) appealable adverse actions  such as reductions in pay or grade, suspensions of more than 14 days,  and removals (see figure 1). Subchapter I actions are covered by  sections 5 U.S.C. 7501-7504 (Subsection I) and are referred to as \u201cnon- appealable actions,\u201d while Subchapter II actions covered by sections 5  U.S.C. 7511-7514 are referred to as \u201cappealable actions\u201d based on  whether or not they can be appealed to the MSPB.", "According to a MSPB report, through the Civil Service Reform Act of 1978  (CSRA), \u201cCongress sought to ensure that agencies could remove  employees who engage in misconduct while protecting the civil service  from the harmful effects of management acting for improper reasons,  such as discrimination or retaliation for whistleblowing.\u201d OPM  regulations specify the process agencies must pursue to take adverse  actions. These regulations also specify the procedural and appeal rights  to which employees facing adverse actions are entitled. According to  OPM officials, agency policies usually cover lesser disciplinary actions,  such as oral and written reprimands, letters of warning, and letters of  counseling. Employees may grieve these actions depending on the  agency\u2019s administrative or negotiated grievance processes. According to  OPM, agencies may issue these actions without following the procedural  requirements for adverse actions under 5 U.S.C. Chapter 75.", "The procedural rights due to employees subject to adverse actions  covered by Chapter 75 are derived both from Chapter 75 and from the  U.S. Constitution. In 1985, the U.S. Supreme Court held that tenured or  post-probationary public employees who may be terminated only for  cause have a constitutional property interest in continued employment  and cannot be deprived of their jobs without due process of law. The  process that was due in that case was notice of the proposed removal  before it occurred and the opportunity to present reasons why the  proposed action should not be taken. Chapter 75 and OPM regulations  promulgated thereunder establish additional procedural requirements  extending to actions other than removal that go beyond what the Due  Process Clause of the U.S. Constitution would itself require under current  precedent. For example, they require that employees be given advance  notice of a suspension or a reduction in pay with the opportunity to  respond in writing with supporting affidavits."], "subsections": [{"section_title": "Subchapter I of Chapter 75 and Corresponding Regulations Describe Procedures for a Suspension of 14 Days or Less", "paragraphs": ["An agency may take an adverse action under Subchapter I of Chapter 75  only for such cause as will promote the efficiency of the service. When  proposing to suspend an employee for 14 days or less, an agency must  give the employee advance written notice stating the reasons for the  proposed suspension. The agency must also inform the employee of his  or her right to review the material which is relied on to support the  reasons for the action. The agency must give the employee a reasonable  time (no less than 24 hours) to answer orally and in writing, to furnish  affidavits and other documentary evidence in support of the answer, and  to be represented by an attorney or other representative. Lastly, the  agency is to give the employee a written decision with the specific  reasons for the suspension on or before the effective date of the action.", "An employee may challenge a suspension of 14 days or less through an  agency administrative grievance procedure, if applicable. If the employee  is represented by a union with a collective bargaining agreement (CBA)  with the agency that includes an applicable grievance procedure, the  employee may challenge the suspension only under the CBA unless the  employee is alleging that the suspension was discriminatory. If the  employee wishes to challenge the suspension as discriminatory or  retaliatory under the EEO laws, the employee may file an EEO complaint  with agency followed by a request for a hearing with the EEOC. The  employee may also file a complaint with the OSC and then, if necessary,  an Individual Right of Action appeal with the MSPB, to assert that the  suspension was in retaliation for the employee\u2019s whistleblower activity. If  the employee is represented by a union that has a collective bargaining  agreement with the agency that includes an applicable negotiated  grievance procedure, the employee may only file a grievance under the  agency\u2019s collective bargaining agreement."], "subsections": []}, {"section_title": "Subchapter II of Chapter 75 Describes Steps Agencies Must Take to Address More Significant Cases of Employee Misconduct Than Those Addressed Under Subchapter I", "paragraphs": ["Subchapter II of Chapter 75 addresses steps agencies must follow to take  the four adverse actions listed below. These following actions are referred  to as appealable adverse actions:  suspensions longer than 14 days;  reductions in pay; and  removals.", "An agency may take an adverse action under Subchapter II only for such  cause as will promote the efficiency of the service. Subchapter II and  OPM regulations contain more extensive procedural requirements for  removals, reductions in pay or grade, and suspensions of over 14 days.  The employee is entitled to at least 30 days advanced written notice of  the proposed action, unless there is reasonable cause to believe the  employee has committed a crime for which a sentence of imprisonment  may be imposed. The notice must state the reasons for the action and  inform the employee of their right to review the material on which the  reasons stated in the notice are based. Agencies typically provide the  material supporting the proposal to the employee with the notice. The  proposal is usually prepared by the employee\u2019s supervisor in consultation  with human resources and, sometimes, the agency\u2019s legal staff.", "The agency must give the employee a reasonable amount\u2014no less than  7 days\u2014of official time to review the supporting material, to prepare an  answer orally and in writing, and to furnish affidavits and other  documentary evidence in support of the answer. According to OPM and  MSPB officials, normally the agency designates an official other than the  person who proposes the adverse action to review the employee\u2019s  response and make the decision. The employee is entitled to be  represented by an attorney or other representative, including a union  steward if the employee is a bargaining unit member. The employee is  entitled to a written decision on or before the effective date specifying the  reasons for the decision and advising the employee of any appeal and  grievance rights under 5 CFR \u00a7 752.405.", "An employee may challenge discipline under Subchapter II through an  agency administrative grievance procedure, if applicable, or by filing a  grievance under an applicable CBA. An employee may also appeal  adverse actions covered by Subchapter II to the MSPB unless the  employee first filed a grievance challenging the action under the CBA.  Accordingly, a large number of MSPB decisions address the elements  and relative seriousness of various kinds of misconduct.", "According to OPM, if the employee wishes to challenge an appealable  adverse action under subchapter II as discriminatory or retaliatory under  the EEO laws, the employee may file a \u201cmixed case\u201d EEO complaint with  agency. The agency then issues a final agency decision that may be  appealed to the MSPB. An employee affected by an appealable action  (removal, suspension for more than 14 days, reduction in pay or grade) who believes that the action was motivated by prohibited discrimination,  such as a person\u2019s race, color, religion, sex, national origin, age or  disability, may also file a \u201cmixed case\u201d appeal directly with MSPB and  raise the discrimination claim in that forum. The employee may seek  review of MSPB\u2019s decision on the discrimination claim before the EEOC.  If MSPB and EEOC disagree on the discrimination claim and MSPB does  not defer to EEOC\u2019s view, then a special panel of the EEOC and MSPB  will be convened to resolve the disagreement.", "When deciding an appropriate penalty for misconduct, agency officials  are to make decisions on a case-by-case basis, taking into consideration  all relevant circumstances. Deciding officials within the agency should  consult the Douglas Factors \u201312 criteria developed by MSPB to guide  such decisions (see appendix II). In the Douglas vs. Veterans  Administration decision, MSPB found that a penalty will be sustained as  long as \u201cmanagerial judgment has been properly exercised within  tolerable limits of reasonableness.\u201d The list of Douglas Factors is not  exhaustive. According to MSPB, weighing all relevant aggravating and  mitigating factors and the totality of the circumstances is critical in any  disciplinary case. The process agencies use to identify and address  employee misconduct is illustrated in figure 2.", "Agencies may use progressive discipline to help determine which course  of action to take when responding to misconduct. OPM officials define  progressive discipline as the \u201cimposition of the least serious disciplinary  or adverse action applicable to correct the issue or misconduct with  penalties imposed at an escalating level for subsequent offenses.\u201d The  Douglas factors incorporate the concept of using a lesser penalty in  appropriate circumstances. For instance, if an employee commits a first  offense, the agency may choose to suspend the employee for 14 days or  less. After that, the employee might learn from his or her mistake or  correct the action, and not commit another offense, and therefore the  agency will not discipline the employee again. However, the President  has now prescribed that \u201csupervisors and deciding officials should not be  required to use progressive discipline\u201d, and that \u201cthe penalty for an  instance of misconduct should be tailored to the facts and  circumstance.\u201d This will affect how agencies will determine appropriate  penalties going forward.", "Alternatively, if the employee commits the same offense a second time,  the agency may choose to suspend the employee for longer, or impose  stronger adverse actions, including removal. According to OPM officials,  progressive discipline is not defined or required by civil service law, rules  or regulations.", "Chapter 75 provides that an employee with appeal rights who wants to  contest an agency decision to remove, suspend for over 14 days, or  reduce in pay or grade may appeal the agency\u2019s decision with MSPB. If  that employee is a member of a collective bargaining unit, the employee  also has the option of pursuing a grievance under negotiated grievance  procedures if the appeal has not been excluded from coverage by the  collective bargaining agreement. The employee may pursue either option,  but not both. The employee may seek review of an arbitrator\u2019s decision  before the U.S. Court of Appeals for the Federal Circuit. If the employee  is challenging an adverse action within the jurisdiction of the MSPB and  also alleged unlawful discrimination before the arbitrator or was prevented  from doing so by the negotiated grievance procedure, the employee may  appeal the arbitrator\u2019s decision to the MSPB. In addition, the union may  appeal an arbitration award concerning a suspension of 14 days or less to  the Federal Labor Relations Authority (FLRA) on behalf of the  employee. See figure 3 for the collective bargaining unit appeals  process for major disciplinary actions.", "Employees may use several avenues if they elect to appeal adverse  actions through the statutory appeals process for such actions (removal,  suspension of more than 14 days, and reduction in grade or pay). If the  employee believes the disciplinary action was motivated by unlawful  discrimination, he or she may file a discrimination complaint with the  agency or file an appeal directly with MSPB. If the employee believes the  disciplinary action was taken in retaliation for whistleblowing, he or she  may choose to file a whistleblower retaliation complaint before deciding to  appeal to the MSPB. If the employee or agency does not agree with the  decision rendered by a MSPB administrative judge (AJ), he or she may  seek review before the full MSPB. See figure 4 for statutory appeals  process."], "subsections": []}, {"section_title": "Initial Appeals to MSPB Take Around 100 Days to Resolve", "paragraphs": ["We analyzed MSPB\u2019s data and found initial appeals at MSPB generally  take from 63 to152 days to render a decision. MSPB has a policy goal  of resolving cases by an administrative judge on or before 120 days after  the filing of the appeal. An employee or agency can appeal an initial  MSPB decision in a process called petition for review (PFR). PFR cases  are reviewed by the full MSPB, and range from an additional 99 to 251  days, based on our analysis of the MSPB\u2019s data. The time that it takes to  resolve cases at MSPB is consistent for demotions, suspensions of  greater than 14 days, and removals. According to MSPB officials, the  system is designed to require an individual to choose a path of review to  the exclusion of other paths. Depending on the claims raised, there may  be multiple levels of review of a single action before multiple fora.  However, there is only one hearing at the administrative level; therefore,  the timeline to resolve an adverse action appeal can be longer than the  initial appeal and PFR.", "According to MSPB officials, the selected CHCOs, and the subject-matter  experts we interviewed, agencies most often make the following errors  which may cause MSPB to reverse the adverse action decision:", "Failure to follow procedures by agency: MSPB may overturn an  adverse action decision if the agency did not adhere to the processes  set out in statute and regulation. This most often means that the  agency did not give the employee a chance to respond to the adverse  action charge or did not notify them of their rights to an attorney.", "Failure to follow procedures by deciding official: An action may be  vulnerable to a modification or reversal upon appeal if the deciding  official did not fulfill their role appropriately in weighing the evidence  through a Douglas Factors analysis.", "Ex parte communications: A challenge may be overturned if a  deciding official gave consideration to any issue not in the proposal  letter.", "Incorrect labeling (or charge): Nothing in law or regulation requires  an agency to attach a label to a charge of misconduct. However, if  labels are used, they must be proven. An example used by MSPB  provides that if an agency uses the label of \u201ctheft\u201d as its charge, then  the agency must prove that the employee \u201cintended to permanently  deprive the owner of possession\u201d of the item in question. Experts  told us that MSPB requires agencies to prove all legal aspects of a  misconduct label.", "Federal courts have held that it is impermissible to allow the official who  makes the final decision in a removal proceeding to rely on aggravating  factors regarding either the alleged offense or the proposed penalty that  were not contained in the notice, and to which the employee did not have  an opportunity to respond. MSPB is bound by this precedent."], "subsections": []}]}, {"section_title": "Alternative Disciplines Can Help Agencies in Determining the Appropriate Response to Misconduct but Several Factors Affect How Agencies Respond", "paragraphs": ["Alternative discipline is an approach to address misconduct that is  available to agencies in lieu of traditional penalties (e.g., letters of  reprimand and suspensions of 14 days or less). According to MSPB,  agencies may choose to offer alternative discipline at any stage of the  disciplinary process. OPM officials said alternative disciplines tend to be  more focused on taking a corrective or remedial response rather than  punitive actions against an employee. In a report on alternative discipline,  MSPB states that alternative discipline can take many forms and is an  effort undertaken by an employer to address employee misconduct using  a method other than traditional discipline.", "As an alternative discipline approach, it is recommended by MSPB that  agencies may consider entering into an agreement with an employee. In  general, such an approach involves a legally binding written agreement  between the employee and the agency addressing an act of misconduct.  If the employee violates the agreement, the agency will proceed with  additional or more serious forms of discipline, up to and including  removal. MSPB also recommends that managers and human resources  personnel consult with legal counsel when drafting and implementing an  alternative discipline agreement that requires the employee\u2019s consent,  adding that it is extremely important for agreements to meet certain legal  requirements to form a valid agreement.", "We compiled a non-exhaustive list of alternative discipline based on a  literature review and interviews. Subject-matter experts, including the  panel of CHCOs, reviewed this list and they cited benefits and drawbacks  to some of the approaches (see table 1).", "MSPB noted in its 2008 report that the specific alternative discipline  approach an agency decides to use should be based on the nature and  severity of the misconduct. According to OPM officials, alternative  discipline approaches are not appropriate for egregious acts of  misconduct or when the employee is remorseless but rather lower level  offenses where an employee may show remorse for the misconduct and  demonstrate that she or he can be rehabilitated. Egregious acts of  misconduct may involve discrimination, reprisal or retaliation, or sexual  harassment. Alternative discipline approaches are also not appropriate  when the employee\u2019s continued presence in the workplace would pose a  threat to the employee or others.", "On a case by case basis, an agency may decide to provide counseling or  additional training as appropriate, depending on the facts and  circumstances that address specific acts of minor misconduct.  Additionally, agencies have flexibility in using alternative discipline as a  final effort before taking formal action such as suspension or removal.  However, in its 2008 report, MSPB found that managers had applied  alternative discipline approaches ineffectively, resulting in further  inefficiencies in the civil service. Specifically, MSPB recommended that  managers and human resources personnel consult with legal counsel  when drafting and implementing an alternative discipline agreement that  requires the employee\u2019s consent, adding that it is extremely important for  agreements to meet certain legal requirements to form a valid agreement.  CHCOs and subject-matter experts said managers and supervisors  should coordinate internally with human resources staff, employee  relations, and legal counsel when assessing whether an alternative  discipline approach would result in correcting improper behavior and  ultimately improve their workforce.", "Some subject-matter experts we interviewed expressed concern that  workforces would view alternative discipline measures as providing  opportunities for employees to avoid accountability or encouraging similar  negative behaviors from coworkers rather than penalizing the employee  more stringently through a formal adverse action process. These subject- matter experts identified community service, buy-outs, involvement in  process improvements, and clean-slate agreements as approaches that  had this kind of effect. Additionally, some subject-matter experts told us  that alternative discipline approaches such as community service and  paper suspension agreements could have the unintended effect of  benefiting the employee being disciplined. For example, community  service may allow the employee to serve the alternative discipline during  their scheduled duty time instead of performing their regularly assigned  duties. This may require the employee\u2019s co-workers to take on additional  work while the employee serves the alternative discipline. Additionally,  while a paper suspension limits interruption to work production, it also  allows the employee to work in a pay status while carrying out the  suspension. According to feedback we received from the CHCOs, some  of these alternative discipline approaches were used more often than  others and some approaches were more effective at addressing  employee misconduct. We did not evaluate how often or the extent to  which any of these approaches are used at agencies, nor did we consider  the propriety or legality of these approaches.", "According to the CHCOs and subject-matter experts, agency managers  and supervisors may be able to effectively resolve employee misconduct  cases through the use of alternative approaches, which can shorten the  timeline and simplify the adverse action process in a manner that has the  most potential to prevent additional harm to the workplace and avoid the  potentially high costs of litigating a misconduct case."], "subsections": [{"section_title": "Several Factors Can Affect Whether and How an Agency Addresses Employee Misconduct", "paragraphs": ["Current and former agency officials and subject-matter experts we  interviewed told us in interviews that several factors can affect whether  and how an agency responds to misconduct. Both agency officials and  subject-matter experts told us that supervisors may not report misconduct  due to fear that an employee could counter with their own complaint.  Several CHCOs and subject-matter experts told us that an agency\u2019s  approach to dealing with misconduct can influence how first-line  supervisors act. In a recently released MSPB publication that highlighted  selected results of its 2016 Merit Principle survey of managers and  supervisors about challenges to addressing employee misconduct, 80  percent of managers and supervisors agree to some extent or a great  extent that their agency\u2019s culture poses a challenge when attempting to  remove an employee for serious misconduct. Additionally, MSPB\u2019s  report provided the perspectives of managers and supervisors regarding  the factors that affect how agencies address misconduct, including", "77 percent of managers/supervisors agree to some extent or a great  extent that they do not feel supported by their agencies\u2019 senior  leadership in their actions to remove an employee for serious  misconduct.", "88 percent of managers/supervisors somewhat or strongly agree that  some supervisors do not manage their employees\u2019 conduct because  the supervisors want to avoid conflict.", "64 percent of managers/supervisors agree to some extent or a great  extent that they do not fully understand the process to remove an  employee for misconduct.", "MSPB\u2019s 2016 survey findings were consistent with what agency officials  and subject-matter experts told us during interviews."], "subsections": []}]}, {"section_title": "Removal Actions for Misconduct Taken Under Chapter 75 Are Relatively Rare", "paragraphs": ["Our analysis of OPM data from fiscal year 2006 to 2016 shows that, on  average, agencies disciplined approximately 17,000 or less than 1  percent of the federal workforce per year under Subchapter II of Chapter  75. The number of employees who separate from the federal workforce  for misconduct under alternative means, such as settlements, is not  known and would not be recorded as misconduct in OPM\u2019s EHRI  database, according to agency officials and experts. Many of the CHCOs  and subject-matter experts we interviewed told us that while data around  such cases are not collected government-wide, they believe internal  resolutions using alternative approaches to address misconduct occur  frequently."], "subsections": [{"section_title": "Trends in Misconduct Removals Are Associated with Fluctuations in Probationary Employee Numbers", "paragraphs": ["According to EHRI data, as the number of probationary employees  fluctuated over time, the number of terminations generally followed the  same trend. One of the likely reasons for this fluctuation is that  probationary employees are more likely to be terminated than career  employees who are no longer in a probationary status because  probationary employees are not yet subject to the Chapter 75 process  protection afforded career employees.", "Similar to addressing performance issues, it is generally easier to  terminate employees for misconduct during the probationary period. As  we previously reported, the probationary period is an important  management tool to evaluate the conduct and performance of an  employee and should be treated as the last step in the hiring process.  According to OPM, appropriate actions taken within the probationary  period are the best way to avoid long-term problems."], "subsections": []}, {"section_title": "The Most Widely Used Form of Formal Discipline for Misconduct Is Suspension; Approximately One-Fourth of Suspended Employees Have Multiple Suspensions", "paragraphs": ["Our data analysis of personnel actions against employees for misconduct  shows that the most common form of discipline is suspension. In 2016,  agencies made 10,249 suspensions, 7,411 removals, and 114 demotions  for misconduct (the numbers refer to the number of adverse actions that  agencies made in 2016, not the number of employees that received  adverse actions; one employee can be suspended multiple times, and  each suspension is recorded as a separate personnel action in the  employee\u2019s SF-50). The data we analyzed indicated that approximately  one-fourth of suspended employees have multiple suspensions.  According to OPM officials, third parties such as the MSPB will review  whether disciplinary actions are taken \u201conly for such cause as will  promote the efficiency of the service\u201d which includes the assessment of  the relevant Douglas factors.", "Figure 5 shows how many suspensions, demotions, and removals took  place from fiscal years 2006 to 2016 according to EHRI data."], "subsections": []}, {"section_title": "Better Data on Employee Misconduct Could Strengthen OPM\u2019s Oversight and Provide Clarity to Agencies Regarding How to Address Misconduct", "paragraphs": ["OPM collects data on personnel actions reported by most agencies and  stores this information in the EHRI database, but these data could be  improved to provide OPM with better information to help agencies  address misconduct. Because not all misconduct data are entered into  the database, the data presented in this report do not represent the  entirety of employee misconduct instances that occur in the federal  government. Personnel actions in the EHRI database originate from  data that agencies send to OPM through the Standard Form 50 (SF-50),  a form that documents personnel actions. OPM officials told us that lesser  disciplinary actions such as a letter of reprimand are not documented by  an SF-50. Without maintaining comprehensive data regarding the extent  and nature of misconduct in the federal government, OPM risks missing  opportunities to provide agencies with guidance and other tools, such as  targeted training to help agencies better address cases of misconduct.  Indeed, better data could help OPM and agencies identify systemic  misconduct issues, such as misuse of government property or physical  aggression toward a co-worker, as well as emerging problems that benefit  from early detection and/or more comprehensive approaches.", "It should be noted that for the codes that indicate performance or  misconduct as the underlying cause for the adverse action, it is not  possible to make a clear distinction between whether the action was  specifically related to misconduct, performance, or a mix of the two.  Therefore, some cases include a mix of employee poor performance and  misconduct. OPM officials said they do not have a sense of how  frequently agencies use these (and other non-specific) nature of action  (NOA) codes for misconduct-related actions. According to OPM officials,  by establishing rules in terms of improving the efficiency of the service  and the types of actions that will require specific procedures, Congress  provided managers with maximum flexibility to pursue adverse actions  whenever it would promote the efficiency of the service, whether the  underlying impetus was a conduct issue or a failure to perform.", "OPM officials told us the Guide to Processing Personnel Actions directs  agencies to indicate the nature of personnel actions in the EHRI database  through the NOA codes. These codes indicate the employee type, the  nature of the personnel action to be recorded in EHRI, as well as the  underlying cause (e.g., conduct or performance) for the personnel action.  OPM performs validity checks on the NOA codes and legal authorities to  assure the agencies are compliant with OPM reporting  requirements. OPM also periodically reviews agencies\u2019 use of NOA codes  and legal authorities in general.", "The EHRI database does not collect or store the specific type of  misconduct\u2014only that the personnel action belongs in the misconduct  category. Several CHCOs and subject-matter experts who we interviewed  agreed this flexibility is helpful to agencies. For example, officials said that  while common types of misconduct exist, such as time-and-attendance  infractions, many unique types of misconduct cannot be placed into easily  identifiable categories. The officials added that it would be easy for  agencies to mislabel misconduct. For instance, OPM officials said that  disobeying an agency\u2019s policy or rules could manifest itself in many  different ways.", "Moreover, we found inconsistencies in the data OPM provided. For  example, during this review, we initially used stored EHRI data from  previous audits for fiscal years 2006 to 2014. We used NOA codes  provided by OPM officials to analyze employee misconduct data in the  executive branch. When we compared the results of our data analysis for  this period to the data OPM provided for the same period, we found their  data identified approximately 500 more adverse actions per year. Though  we consulted with OPM, we were unable to resolve these differences.  OPM officials noted that agencies submit data on a rolling basis and may  later correct it, and, some SF-50 forms are filed after the fiscal year ends,  so our stored data may not include these actions.", "According to OPM officials, agencies generally have day-to-day oversight  for determining use of NOA codes and legal authorities. Agencies are  required to report a valid NOA code and legal authorities that is found in  OPM\u2019s Guide to Data Standards. Guidance to agencies for classifying  misconduct into the correct nature of action codes is provided in The  Guide to Processing Personnel Actions. Although OPM verifies that  agencies provide valid NOA codes in their data, they assert that agencies  have responsibility for determining which NOA codes to use for each  personnel action based on OPM documentation.", "As we noted in a 2017 report on federal human resources data, OPM  developed EHRI to (1) provide for comprehensive knowledge  management and workforce analysis, forecasting, and reporting to further  strategic management of human capital across the executive branch; (2)  facilitate the electronic exchange of standardized human resources data  within and across agencies and systems and the associated benefits and  cost savings; and (3) provide unification and consistency in human capital  data across the executive branch.", "An important part of OPM\u2019s role is to support federal agencies\u2019 human  capital management activities, which includes ensuring that agencies  have the data needed to make staffing and resource decisions to support  their missions. EHRI data are essential to government-wide human  resource management and evaluation of federal employment policies,  practices, training, and costs. The ability to capitalize on this information  is dependent, in part, on the reliability and usefulness of the collected  data. According to Federal Internal Control Standards, management is to  obtain relevant data from reliable internal and external sources in a timely  manner based on the identified information requirements.", "More specific guidance from OPM to agencies on which NOA codes to  use for misconduct cases will increase confidence in the data, without  requiring practitioners to capture and tabulate the type of misconduct.  More importantly, enhanced data on the extent and nature of misconduct  will improve OPM\u2019s oversight ability and agencies\u2019 ability to target  management training and identify specific trends in misconduct."], "subsections": []}, {"section_title": "Most MSPB Appeals Are Resolved by the Parties, Which Benefits Both the Agency and Appellant, According to Officials", "paragraphs": ["Our analysis of MSPB data found that the most frequent appeal outcome  is a settlement. MSPB said settlements often benefit both the agency and  the appellant because they manage risk. The officials said that when  entering an adverse action appeal with MSPB, both the agency and the  appellant face a risk: the agency is at risk of spending time and money for  litigation only to, in some cases, have its decision overturned; the  appellant is at risk of being removed from his or her position with a  permanent mark on his or her record, which may make finding another  job difficult. To avoid these outcomes for both parties, an agency may  offer the employee a variety of settlement options to incentivize them to  willingly leave. Settlement options may include, but are not limited to back-pay for the time that the employee was out of work, but still  litigating the appeal; and paying the employee\u2019s attorney fees.", "OPM notes, on the other hand, that the MSPB\u2019s data might not always  reflect voluntary settlements. According to OPM officials, the MSPB has a  large caseload and typically strives to induce the agency to settle. OPM  officials noted that the pressure to settle cases regardless of merit after  the agency has made the determination that discipline is necessary and  has gone through the procedure to carry it out may be one of the most  significant deterrents to dealing with misconduct or performance under  Chapter 75.", "Figure 6 shows the number of MSPB appeals that were filed from fiscal  years 2006 to 2016 that were affirmed, reversed, settled, or dismissed.", "We also analyzed data from MSPB\u2019s database of appeals cases. MSPB  hears appeals from those adverse actions that Congress made  appealable under Subchapter II of chapter 75, including suspensions of  greater than 14-days, demotions, and removals. These actions can be  taken for performance problems as well as misconduct under Chapter  75\u2014MSPB does not differentiate between performance and misconduct  in its database. Rather, the agency categorizes its cases by legal  authority. Therefore, similar to OPM\u2019s EHRI data, any analysis with  MSPB\u2019s data may include performance appeals as well as misconduct  appeals under Chapter 75."], "subsections": []}]}, {"section_title": "Key Steps Agencies Can Take to Better Prevent and Address Employee Misconduct", "paragraphs": ["On the basis of our literature review, as well as interviews with CHCOs  and subject-matter experts, we identified key promising practices and  lessons learned that can help agencies better prevent and address  employee misconduct. These key practices include tables of penalties,  engaging employees, making full use of the probationary periods, and  maintaining effective lines of communication and collaboration between  the human resources office staff, line-level management, and agencies\u2019  legal counsel. Going forward, it will be important for OPM and agencies,  in concert with the CHCO Council to examine each of these practices and  lessons learned, refine, as appropriate, and share how best to implement  these practices."], "subsections": [{"section_title": "Tables of Penalties Can Help Guide Responses to Misconduct", "paragraphs": ["We found that tables of penalties\u2014a list of recommended disciplinary  actions for various types of misconduct\u2014though not required by statute,  case law, or OPM regulations, nor used by all agencies, can help ensure  the appropriateness and consistency of a penalty in relation to an  infraction. Further, tables of penalties can help ensure the disciplinary  process is aligned with merit principles because they make the process  more transparent, reduce arbitrary or capricious penalties, and provide  guidance to supervisors.", "According to the panel of CHCOs and the subject-matter experts we  interviewed, a table of penalties may also provide information on the  period over which offenses are cumulative, for purposes of assessing  progressively stronger penalties. The officials described tables of  penalties as a listing of common infractions committed most frequently by  agency employees, along with a suggested range of penalties for first,  second and third offenses; however, the range of penalties should not be  too broad, and the penalties should be progressive, meaning that they  increase in harshness with each subsequent offense committed by the  employee. The CHCOs and subject-matter experts said a table of  penalties should also provide sufficient flexibility in the penalty range  (e.g., 1-day to 5-day suspensions for a first offense) to consider mitigating  and aggravating factors when considering discipline for misconduct. OPM  officials stated that where an agency elects to have a table of penalties, it  should serve as a guide in addressing misconduct, noting that it does not  serve as a substitute for management\u2019s judgment. According to OPM  officials, management must take into account the applicable Douglas  Factors, and must consider other appropriate circumstances not covered  by the Douglas Factors. Neither OPM nor MSPB provide any written  guidance to agencies in developing their tables of penalties. However,  OPM officials told us their agency is available to provide assistance upon  request to agencies that elect to use a table of penalties.", "Views on the usefulness of the tables of penalties were mixed among  agency officials and subject-matter experts. On the one hand, some  agency officials and other subject-matter experts told us the table of  penalties can assist agencies in determining an appropriate penalty and  ensure consistency of penalty selection from case to case. For that  reason, they said the tables can also help ensure the action taken is  legally defensible based on past similar cases. MSPB officials told us that  they believe table of penalties, which rely on the Douglas Factors, can  help human capital practitioners when making decisions about employee  misconduct cases. On the other hand, several subject-matter experts and  agency officials, including OPM, indicated that table of penalties tend to  be too broad in the range of penalties for individual offenses, which they  said ultimately limited their usefulness in the decision-making process.", "OPM officials said their agency does not use a table of penalties nor does  it support encouraging agencies to establish tables of penalties.  According to OPM officials, where table of penalties exist, they are  established at an agency\u2019s discretion and not under OPM\u2019s auspices.  OPM officials believe agencies have the ability to address misconduct  appropriately without a table of penalties and with sufficient flexibility to  determine the appropriate penalty for each instance of misconduct.  Further, OPM officials said that agencies that adopt a table of penalties  will be required to consider its table of penalties, if applicable, as part of  the MSPB\u2019s Douglas Factors analysis which, in their view, imposes an  additional condition on the agency\u2019s ability to defend its actions. Finally,  OPM said there is no substitute for management judgment and that tables  of penalties should not be applied so inflexibly as to impair consideration  of other factors relevant to the individual case.", "In short, tables of penalties, if drafted at an appropriate level of detail and  used in conjunction with the Douglas Factors and other case-specific  forms of discretion, could provide agencies with reasonable assurance  that similar cases of misconduct are addressed with similar penalties as  appropriate, and can reduce the risk of inconsistently and potentially  unfairly applying remedial measures."], "subsections": []}, {"section_title": "Set Clear Expectations and Engage Employees", "paragraphs": ["Agency officials and subject-matter experts told us that having effective  agency policies and programs that set clear expectations around behavior  and that engage employees may help reduce the number of misconduct  incidents that occur. These policies and programs may also mitigate the  damage when an incident does occur. Several subject-matter experts  said that agencies should set formal expectations early and reinforce  these expectations throughout an employee\u2019s career. To this point, as we  discussed in our 2015 report on addressing substandard employee  performance, when addressing misconduct agencies should help  managers and supervisors take appropriate action if misconduct occurs  during an employee\u2019s probationary period.", "Some subject-matter experts indicated that agencies may also consider  conducting more thorough job screening and hiring processes which  could help determine if the individual is a good fit for their agency.  Specifically, the subject-matter experts mentioned that agencies should  take a closer look at a prospective employee\u2019s work history and carefully  check references. We also learned from our interviews that, as a  deterrent, agencies must clearly communicate that an employee will be  held accountable for any acts of misconduct.", "According to OPM, agencies can mitigate the risks of these difficulties by  establishing a well-trained, experienced, and empowered employee and  labor relations staff. OPM said these individuals play a crucial role in  educating supervisors and managers in taking appropriate and  sustainable disciplinary actions. CHCOs and subject-matter experts  provided a number of key promising practices that an agency can use to  mitigate and address employee misconduct, including:", "Demonstrating positive conduct at the agency\u2019s senior leadership  (tone at the top): Through policies and their own individual actions,  senior leaders must exhibit positive workplace behavior as an  example to agency employees.", "Maintaining a good workplace atmosphere: Agencies should take  steps to monitor workforce morale and initiate programs that  encourage respect and community.", "Engaging employees by connecting them directly to the agency\u2019s  mission: Employees should have a sense of purpose and commitment  toward their employer and its mission which can lead to better  organizational performance.", "Making full use of the probationary period for employees: Supervisors  should use probationary periods as an opportunity to evaluate an  employee\u2019s performance and conduct to determine if an appointment  to the civil service should become final.", "Setting and communicating clear rules and expectations regarding  employee conduct: Agencies should set expectations about  appropriate conduct in the workplace and communicate  consequences of inappropriate conduct at the earliest possible time  after on-boarding an employee.", "Assuring that employees conform to any applicable standards of  conduct: Supervisors and managers, with the support of their  agencies\u2019 leadership and human resources staff, should train and  monitor employee compliance with its stated conduct policies.", "Maintaining effective lines of communication and collaboration with  the human resources office staff, line-level management, and  agencies\u2019 legal counsel: Agencies should establish clear lines of  communication across relevant offices to ensure misconduct cases  are addressed effectively and consistently.", "Conducting on-going training for supervisors and holding them  accountable for addressing misconduct in a timely manner when it  occurs: Supervisors should be trained in identifying employee  misconduct cases and knowledgeable about the process for  addressing such cases."], "subsections": []}, {"section_title": "More Effective Training Could Help Supervisors Identify and Deal with Misconduct", "paragraphs": ["MSPB and OPM officials as well as subject-matter experts said human  resources staff and line-level supervisors and managers would benefit  from additional training in how to address employee misconduct. The  subject-matter experts told us that managers do not receive sufficient  training in how to identify and subsequently deal with misconduct in the  workplace. Specifically, subject-matter experts told us that many  supervisors and managers do not understand the requirements needed to  remove an employee for misconduct, including misconceptions about the  standard of proof required. Many subject-matter experts repeated  observations MSPB made in its 2008 report that without sufficient training  managers and supervisors may find it difficult to engage in challenging  one-on-one conversations with an employee about misconduct.", "Agency officials and subject-matter experts also told us that supervisory  training varies by agency. Our subject-matter experts said some agencies  are more structured and provide staff with training curricula with required  timetables to complete, while others rely on staff to self-guide the training  they need. We found many agencies contract out specific training or  provide learning opportunities to staff on their intranet sites via e-learning  tools. Most subject-matter experts said that misconduct training is likely  more effective when delivered in-person, due to the broad range of issues  related to misconduct.", "OPM officials told us that supervisors and managers are responsible for  observing and enforcing applicable laws in the federal workplace. OPM  officials also indicated that training, resource allocation, skills, and  knowledge all have a bearing on the administration of the disciplinary  process. According to OPM, good communication and partnerships are  also critical to processing a solid, sustainable response related to  misconduct. OPM guidelines require that agencies provide training when  employees make critical career transitions, for instance from  nonsupervisory to manager or from manager to executive. Further,  OPM\u2019s Supervisory and Managerial Curriculum Framework highlights  human resources technical areas and leadership competencies  necessary for success. The curriculum framework includes employee and  labor relations with supporting learning objectives.", "OPM has specific regulatory requirements for training and development of  supervisors, managers, and executives under 5 CFR \u00a7 412.202, including  to provide training within 1 year of an employee\u2019s initial appointment to a  supervisory position and follow up periodically, but at least once every  3 years, by providing each supervisor and manager additional training  on the use of appropriate actions, options, and strategies:  improve employee performance and productivity;  conduct employee performance appraisals in accordance with agency  appraisal systems; and  identify and assist employees with unacceptable performance.", "According to 5 U.S.C. \u00a7 4103, it is the responsibility of each agency to  train its employees. According to OPM officials, it is not responsible under  the CSRA for providing training for the federal workforce. However, while  agencies are accountable for providing required training for their  supervisors, OPM has a key role in ensuring the training meets the  government-wide needs of supervisors. By taking steps to help agencies  improve the training they provide supervisors and managers on  addressing misconduct, OPM could help those managers ensure they  have the knowledge and skills to effectively deal with misconduct in the  workplace. For example, OPM could consider the feasibility of developing  more in-person training modules designed to provide interactive or role  play scenarios around addressing employee misconduct. Furthermore,  subject-matter experts said if an agency is not training new supervisors to  equip them with the appropriate skills to address misconduct, there may  be inconsistencies in how an agency handles misconduct across the  agency. Without sufficient training, supervisors and managers may not be  addressing misconduct appropriately, if at all."], "subsections": []}, {"section_title": "Internal Collaboration Can Help Agency Components Better Communicate about Misconduct Cases", "paragraphs": ["Many of the subject-matter experts we interviewed said that it is important  that the primary stakeholders\u2014first-level supervisors and managers and  human resources and general counsel offices\u2014collaborate on the  agency\u2019s approach to dealing with misconduct.", "We found agencies vary in how collaboration takes place. For example,  some subject-matter experts and CHCOs told us that an agency may  choose to handle a case by having their human resources staff and  management work closely together. The subject-matter experts we  interviewed said this collaboration can sometimes include general  counsel staff, if necessary. For example, at EPA, the human resources  office collaborates with the office of general counsel and the agency\u2019s  Office of Inspector General Office of Investigations (OI). EPA officials told  us that their agency\u2019s human resources office, OI, general counsel, and  labor relations meet bi-weekly to discuss ongoing misconduct  investigations to provide a report of investigations to EPA\u2019s senior  management on the facts surrounding allegations of employee  misconduct.", "According to EPA, OI also provides real-time notification whenever OI  receives information concerning serious misconduct, before the  investigation is completed, so EPA management can take appropriate  immediate mitigating steps, should it be necessary. However, OI does not  have a role in determining the type of discipline, if any, to be imposed  upon the employee, nor does OI have any role in helping to prevent  misconduct in EPA\u2019s workplace. We did not obtain data to verify that this  process has been successful, but agree that enhanced communication  among key stakeholders is important to addressing misconduct."], "subsections": []}, {"section_title": "An Agency\u2019s Culture and Mission Can Impact How Agencies Approach and Respond to Misconduct", "paragraphs": ["Most of our subject-matter experts told us an agency\u2019s culture and the  nature of its work play a significant role in how the agency addresses  employee misconduct. For example, several subject-matter experts told  us law enforcement and defense-related agencies or other particular jobs  where injuries may occur or lives may be at risk often have significantly  less tolerance for employee misconduct than other agencies. In addition,  OPM officials said that according to MSPB past studies, if an agency  views federal employee due process procedural rights as burdensome  and restrictive, this may discourage supervisors from addressing  misconduct as it occurs. An MSPB report addressed concerns that the  culture in many federal agencies prevents them from effectively dealing  with problem employees. Many of the subject-matter experts we  interviewed indicated that if an agency\u2019s culture is risk averse, it may be  less aggressive in pursuing adverse actions, and instead either ignore  misconduct or reassign an employee without holding him or her  accountable for the misconduct."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The process for dismissing an employee for misconduct can be complex  and lengthy. However, many of these process challenges can be avoided  or mitigated with effective performance management. Supervisors who  take performance management seriously and have the necessary training  and support to address misconduct can help employees either change  their conduct or be subject to removal from the federal workforce.", "OPM has a role in ensuring that agencies have the tools and guidance  they need to effectively address misconduct and maximize the  productivity of their workforces. Though OPM already provides a variety  of tools, guidance, and training to help agencies address issues related to  misconduct, we found opportunities to do more to identify the nature of  employee misconduct, improve training tools for managers, and make  tools and guidance available for agencies when and where they need it."], "subsections": []}, {"section_title": "Recommendations for Executive Action:", "paragraphs": ["We are making the following three recommendations to the Director of  OPM:", "The Director of OPM, after consultation with the CHCO Council,  should explore the feasibility of improving the quality of data on  employee misconduct by providing additional guidance to agencies on  how to record instances of misconduct in OPM\u2019s databases.  (Recommendation 1)", "The Director of OPM, after consultation with the CHCO Council,  should broadly disseminate to agencies the promising practices and  lessons learned, such as those described in this report, as well as  work with agencies through such vehicles as the CHCO Council, to  identify any additional practices. (Recommendation 2)", "The Director of OPM, after consultation with the CHCO Council,  should provide guidance to agencies to enhance the training received  by managers/supervisors and human capital staff to ensure that they  have the guidance and technical assistance they need to effectively  address misconduct and maximize the productivity of their workforces.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluations", "paragraphs": ["We provided a draft of this product to the Acting Chairman of MSPB and  Acting Director of OPM for comment. The Acting Chairman of MSPB  provided technical comments on the draft. We incorporated these  comments, as appropriate. MSPB did not comment on the  recommendations.", "OPM\u2019s Associate Director for Employee Services provided written  comments on the draft, and these comments are reproduced in appendix  III. In its comments, OPM noted that while we had made many of the  changes OPM suggested, the changes still did not reflect all of OPM\u2019s  feedback, and also contained what it believed to be inaccurate  information and incomplete representations of OPM\u2019s views. To the  contrary, we maintain that our report contains accurate factual information  and represents the views of OPM that we collected through reviewing  documents, interviewing OPM officials, and incorporating OPM\u2019s written  feedback. Of our three recommendations, OPM partially concurred with  two recommendations, and did not concur with one recommendation. For  those recommendations OPM partially concurred with, OPM described  the steps it planned to take to implement them. We stand by our  recommendations which we maintain would give OPM and Congress  better visibility over the extent and nature of employee misconduct in the  federal government, as well as help strengthen agencies\u2019 capacity to  address misconduct.", "With respect to OPM\u2019s overall comments, OPM noted that Chapter 75 is a  set of procedural requirements that must be met when certain actions are  contemplated that would impact an employee\u2019s pay, specifying that it was  never intended to encompass or catalogue all forms of action an agency  could take to address misconduct. On this issue, we agree with OPM on  the purpose of Chapter 75 and noted as much in our description of the  statutorily established guidelines and procedures throughout this report.  OPM also noted that there is no general statutory definition of  misconduct, and that managers need maximum flexibility to pursue  adverse actions, whether the underlying impetus is a conduct issue, a  failure to perform, or any other reasons related to federal employment.  We also agree with OPM on this point, as our report makes clear that, in  certain cases, employee performance and misconduct can overlap,  conflating the two issues.", "As indicated in this report, OPM believes a table of penalties creates  additional conditions and restrictions on an agency\u2019s ability to address  misconduct and does not improve the agency\u2019s ability to address  misconduct effectively. Accordingly, OPM does not require or encourage  agencies to adopt tables of penalties. Our report recognizes both the pros  and cons of an agency having a table of penalties and the circumstances  under which they could be effective. However, we believe the use of a  table of penalties ensures the appropriateness and consistency of a  penalty in relation to the charge. It also ensures merit system principles  guide the process by providing penalty transparency, reducing arbitrary or  capricious penalties, and serve as a guide for managers and supervisors  who deal with these issues.", "With respect to our recommendations, OPM did not concur with our first  recommendation to explore the feasibility of improving the quality of data  on employee misconduct by providing additional guidance to agencies on  how to record instances of misconduct in OPM\u2019s databases. Specifically,  OPM noted that the OPM Guide to Processing Personnel Actions is a  thorough resource that has been and continues to be successfully relied  upon by agencies to document adverse actions as expressly defined in  Chapter 75. We acknowledge OPM\u2019s view that NOA codes were never  intended or designed to allow reporting of adverse actions down to the  degree of a particular kind of misconduct involved, but we maintain that  our recommendation would increase confidence in the data on  misconduct and make it more useful to OPM and agencies. Further,  OPM\u2019s non-concurrence with this recommendation seems inconsistent  with the Administration\u2019s own initiatives, including the May 2018  Executive Order Promoting Accountability and Streamlining Removal  Procedures Consistent with Merit System Principles, which was released  after OPM commented on our draft report. Specifically, the Executive  Order requires all federal agencies, beginning in FY18, and for each fiscal  year thereafter, to provide a report to the OPM Director containing  detailed data about how it addressed issues of misconduct. For example,  agencies will need to report out on  (i)  the number of civilian employees in a probationary period or otherwise  employed for a specific term who were removed by the agency;  (ii)  the number of adverse personnel actions taken against civilian  employees by the agency, broken down by type of adverse personnel  action, including reduction in grade or pay (or equivalent), suspension,  and removal; and  (iii) the number of decisions on proposed removals by the agency taken  under chapter 75 of title 5, United States Code, not issued within 15  business days of the end of the employee reply period.", "We maintain that enhanced data on the extent and nature of misconduct  will help strengthen OPM and congressional oversight and better position  agencies to address misconduct through management training and other  approaches.", "OPM partially concurred with our second recommendation to broadly  disseminate to agencies the promising practices and lessons learned,  such as those described in this report, as well as work with agencies  through such vehicles as the CHCO Council, to identify any additional  practices to help agencies better address employee misconduct. Indeed,  the President\u2019s Management Agenda (PMA) for 2018 states, \u201cAligning  and managing the Federal workforce of the 21st Century means  spreading effective practices among human resources specialists.\u201d In  response to this recommendation, OPM noted that some of the key practices and lessons discussed in this report are already part of OPM\u2019s  comprehensive accountability toolkit in addressing employee misconduct  across the federal government and are frequently communicated through  on-going educational outreach to federal agencies and available on  OPM\u2019s website. Specifically, OPM said it will decide which appropriate  measures it should take to obtain examples of practices agencies believe  are promising and will broadly disseminate any of these practices and  lessons learned as identified by OPM. We acknowledge OPM\u2019s existing  efforts to develop and disseminate promising practices and lessons  learned, and also maintain that OPM should also be open to considering  additional practices from other sources.", "OPM also partially concurred with our third recommendation to provide  guidance to agencies to enhance the training received by  managers/supervisors and human capital staff to ensure that they have  the guidance and technical assistance they need to effectively address  misconduct and maximize the productivity of their workforces. In its  response, OPM said it will continue to play its statutory role under 5  U.S.C. Chapter 41 and will support agencies on a cross-agency priority  goal, which it believes could be read to encompass training, pursuant to  the PMA, for example by providing guidance to agencies on training  requirements for managers, supervisors and human resources staff.  However, OPM notes that it is not responsible under current statute for  providing training to the federal workforce. As stated in the report, while  agencies are accountable for providing required training for their  supervisors, OPM has a key role in ensuring the training meets the needs  of supervisors. Further, OPM\u2019s position on this recommendation seems  inconsistent with the Administration\u2019s own initiatives, including the May  2018 Executive Order which states that \u201cthe OPM Director and the Chief  Human Capital Officers Council shall undertake a Government-wide  initiative to educate Federal supervisors about holding employees  accountable for unacceptable performance or misconduct under those  rules,\u201d following any final rules issued pursuant to parameters set in the  Order. Indeed, the PMA states, \u201cIn order to best leverage the workforce to  achieve our mission efficiently and effectively, Government needs to  remove employees with the worst performance and conduct violations.\u201d  By taking steps to help agencies improve the training they provide  supervisors and managers on addressing misconduct, OPM could help  those managers ensure they have the knowledge and skills to effectively  deal with misconduct in the workplace.", "OPM also provided technical comments, which we have incorporated as  appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Director of the Office  of Personnel Management, the Chairman of the Merit Systems Protection  Board, as well as to the appropriate congressional committees and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report please contact  me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["You asked us to examine the process for addressing misconduct and to  identify any challenges in removing employees for misconduct. Our  objectives were to (1) describe the process that agencies are generally  required to follow in responding to employee misconduct in the federal  service; (2) identify alternative approaches to the formal legal process  that agencies can use to respond to misconduct, and assess what factors  affect agencies\u2019 responses; (3) describe trends in removals and other  adverse actions resulting from misconduct; and (4) identify key steps  agencies can take to help them better prevent and address misconduct.", "To describe the process that most agencies are generally required to  follow in responding to employee misconduct in the federal service, we  reviewed relevant sections of Title 5 Chapter 75 of the U.S.C. (herein  Chapter 75) which contains the statutory process for formally disciplining  employees for misconduct and performance. We also reviewed the Civil  Service Reform Act and OPM regulations to describe and determine the  authority agencies have to address employee misconduct in the federal  service, including formal procedural and employee appeal rights.  Additionally, we reviewed 5.U.S.C. \u00a7\u00a7 7701 and 7702 (herein Chapter  77), which contains the statutory process for employee appeals with the  Merit Systems Protection Board (MSPB) subsequent appeals to the Equal  Employment Opportunity Commission (EEOC).", "5 U.S.C. \u00a7 7701(a)-(b); 5 U.S.C. \u00a7 7702(b). counted the outcomes of the cases from 2006-2016, by year and in  aggregate (e.g. out of the total number of cases, how many were  reversed, upheld, mitigated, or settled). For the purpose of our analysis,  we used the following nature of action (NOA) code categories in OPM\u2019s  EHRI database: (1) codes directly attributed to misconduct; and (2) codes  that indicate a mix of misconduct or poor performance. Based on data  limitations in both databases, we did not make any evaluative  assessments from our data analysis.", "To identify alternative approaches to the formal legal process, we  reviewed documentation provided by the Merit System Protection Board  (MSPB) on alternative discipline approaches used by agencies to address  employee misconduct. We also reviewed OPM regulations and  documents to determine the authority agencies have to address  employee misconduct in the federal service, including formal procedural  and employee appeal rights. We interviewed current and former  practitioners, subject-matter experts, and academics to identify alternative  approaches that they were aware of or were commonly used at agencies  to address employee misconduct.", "To develop our list of alternative discipline approaches to addressing  employee misconduct, we conducted a literature review and reviewed  reports and documents to identify alternative discipline approaches  commonly used to address employee misconduct in the federal sector.  After compiling our non-exhaustive list of alternative approaches, we  contacted our previously interviewed subject-matter experts and asked  them to provide their final thoughts or suggestions to our alternative  discipline approaches. We included those additional approaches to the  list. We interviewed human capital experts from academia, unions, and  former and current human resources practitioners. We also interviewed a  panel of CHCOs to gain insight into the agency perspective on  addressing employee misconduct. To identify CHCO members, we asked  the Director of the CHCO council to select CHCOs that have knowledge  and experience in addressing employee misconduct. Agency size and  mission were also considered as part of the selection process to gain a  range of perspectives. Our panel of CHCOs was from the Departments of  Commerce, Defense, and Housing and Urban Development, the National  Science Foundation, and the Nuclear Regulatory Commission. We also  reviewed prior work by MSPB in developing our list of commonly used  alternative discipline approaches to employee misconduct in the federal  sector.", "To describe and assess the factors that can affect an agency\u2019s response  to employee misconduct, we interviewed:", "OPM officials and representatives from Employee Services, Human  Resources Solutions, Planning and Policy Analysis, and the Office of  the Chief Information Officer", "MSPB officials from the Office of the acting Chairman & Vice  Chairman, Office of Information Resources Management, and the  Office of Policy & Evaluation;", "Panel of Chief Human Capital Officers (CHCO)", "National Treasury Employees Union officials;", "American Federation of Government Employees officials;", "Federal Managers Association officials;  Individual members of the Federal Employees Lawyers Group;", "Partnership for Public Service officials;", "Senior Executives Association officials; and", "Selected individuals with expertise in human capital management,  specifically focused on employee misconduct, from academia and the  private sector.", "We selected our list of interviewees based on GAO\u2019s guidance for  selecting experts, the interviewees\u2019 practical experience in applying and  practicing administrative law, and for academics in their specific areas of  research. To assess the factors that agencies use to deal with employee  misconduct, we analyzed the interviewee responses and identified key  themes that were common throughout our interviews and, we counted the  frequency of those key themes.", "To describe the trends in removals and adverse actions resulting from  misconduct at Chief Financial Officer (CFO) Act agencies, we analyzed  OPM\u2019s Enterprise Human Resource Integration (EHRI) data from fiscal  years 2006 to 2016.", "The 24 CFO Act agencies are listed at 31 U.S.C. \u00a7 901(b) and include: U.S. Departments  of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services,  Homeland Security, Housing and Urban Development, the Interior, Justice, Labor,  Transportation, the Treasury, Veterans Affairs, and State, as well as the U.S. Agency for  International Development, Environmental Protection Agency, General Services  Administration, National Aeronautics and Space Administration, National Science  Foundation, Nuclear Regulatory Commission, Office of Personnel Management, Small  Business Administration, and the Social Security Administration. These agencies account  for a very high proportion of the total federal labor force.", "For reporting purposes, we only provide data on the number of adverse actions rather  than use the number of employees subject to an adverse action, because one employee  may be subject to more than one adverse action. This can be a result of progressive  discipline or could indicate issues related to data reliability. As part of our analysis, we  identified all employees subject to each type of adverse action (removal, suspension, and  demotion) and quantified the number of similar adverse actions taken against the same  person.   5 U.S.C. \u00a7\u00a7 7502 and 7512. probationary employees to provide some relative statistics. To show  trends in misconduct removals associated with probationary employees,  we identified the number of adverse actions taken against probationary  employees (overall and by type of action).", "To determine the trends in employee appeals to MSPB, we analyzed  MSPB\u2019s appeals data, on adverse actions taken under Chapter 75 from  fiscal years 2006 to 2016. To understand what types of adverse actions  are driving appeals to MSPB, we calculated the underlying adverse action  for each case by fiscal year of appeal filing. To determine how appeals  were resolved by MSPB, we identified the number of appeals that were  settled, mitigated, dismissed, reversed, affirmed, or otherwise resolved.  We calculated overall trends by fiscal year as well as trends by fiscal year  for each type of underlying adverse action. To determine how long the  appeals process takes, we calculated the mean time for resolution along  with other statistics (minimum, maximum, 25th percentile, 75th percentile)  for different types of adverse action. Additionally, because appellants can  file a Petition for Review (PFR) to the larger MSPB body, we looked at the  time for the initial appeal, the PFR, and the total time from filing through  final decision.", "To assess the reliability of both EHRI and MSPB data, we reviewed past  GAO data reliability assessments, interviewed relevant agency officials,  and conducted electronic testing to evaluate the accuracy and  completeness of the data used in our analyses. We determined the data  used in this report to be sufficiently reliable for our purposes, subject to  the constraints identified in our report.", "To identify and provide key promising practices and lessons learned at  agencies from encountering and responding to employee misconduct, we  conducted a literature review to identify practices and lessons learned  associated with employee misconduct in the federal sector. We  interviewed officials from OPM, MSPB, the Equal Employment  Opportunity Commission (EEOC), and the Office of Special Counsel  (OSC), to obtain their perspectives on responding to employee  misconduct through alternative approaches. We interviewed officials from  the Environmental Protection Agency (EPA) to obtain their perspectives  on recent efforts to better coordinate with their Inspector General to  address cases of employee misconduct.  We also obtained the  perspectives of a panel of CHCOs from selected agencies as well as  former human capital practitioners and other subject-matter experts with  extensive experience working on employee misconduct issues."], "subsections": []}, {"section_title": "Appendix II: Douglas Factors \u201312 Criteria Developed by the MSPB to Guide Agency Decisions on Employee Misconduct", "paragraphs": ["The Merit Systems Protection Board in its landmark decision, Douglas vs.  Veterans Administration, 5 M.S.P.R. 280 (1981), established non- exclusive criteria that supervisors must consider, as appropriate, in  determining an appropriate penalty to impose for an act of employee  misconduct (\u201cThe Douglas Factors\u201d). The following relevant factors must  be considered in determining the severity of the discipline:  1.  The nature and seriousness of the offense, and its relation to the  employee\u2019s duties, position, and responsibilities, including whether the  offense was intentional or technical or inadvertent, or was committed  maliciously or for gain, or was frequently repeated;  2.  the employee\u2019s job level and type of employment, including  supervisory or fiduciary role, contacts with the public, and prominence  of the position;  3.  the employee\u2019s past disciplinary record;  4.  the employee\u2019s past work record, including length of service,  performance on the job, ability to get along with fellow workers, and  dependability;  5.  the effect of the offense upon the employee\u2019s ability to perform at a  satisfactory level and its effect upon supervisors\u2019 confidence in the  employee\u2019s work ability to perform assigned duties;  6.  consistency of the penalty with those imposed upon other employees  for the same or similar offenses;  7.  consistency of the penalty with any applicable agency table of  8.  the notoriety of the offense or its impact upon the reputation of the  9.  the clarity with which the employee was on notice of any rules that  were violated in committing the offense, or had been warned about  the conduct in question;  10. the potential for the employee\u2019s rehabilitation;  11. mitigating circumstances surrounding the offense such as unusual job  tensions, personality problems, mental impairment, harassment, or  bad faith, malice or provocation on the part of others involved in the  matter; and  12. the adequacy and effectiveness of alternative sanctions to deter such  conduct in the future by the employee or others. The list was not  intended to be exhaustive."], "subsections": []}, {"section_title": "Appendix III: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": ["Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Tom Gilbert, Assistant Director,  and Anthony Patterson, Analyst-in-Charge, supervised the development  of this report. Isabel Band, Crystal Bernard, Jehan Chase, Sara Daleski,  Shirley Jones, Serena Lo, Krista Loose, Amanda Miller, and Kayla  Robinson made major contributions to all aspects of this report. Robert  Gebhart and Robert Robinson provided additional assistance."], "subsections": []}]}], "fastfact": ["Employee misconduct encompasses a range of behavior, including physical aggression towards a co-worker. The number of federal employees formally disciplined for misconduct is relatively small\u2014less than 1 percent of the workforce, annually. But even a few cases can have a big impact on an agency\u2019s morale and effectiveness. So, are supervisors addressing employee misconduct?", "We found that federal agencies made 10,249 suspensions, 7,411 removals, and 114 demotions for misconduct in 2016.", "We recommended that the Office of Personnel Management improve their tools for helping agencies prevent, identify, and address misconduct."]}
{"id": "GAO-17-773", "url": "https://www.gao.gov/products/GAO-17-773", "title": "Nuclear Nonproliferation: NNSA Needs to Improve Its Program Management Policy and Practices", "published_date": "2017-09-28T00:00:00", "released_date": "2017-09-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The threat posed by the proliferation of nuclear and radiological weapons remains a pressing national security challenge. DNN implements nuclear nonproliferation programs worldwide. To carry out its mission, for fiscal year 2018 DNN requested an appropriation of about $1.5 billion for its 4 major programs and their 13 subprograms.", "A House Armed Services Committee report, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to review and assess DNN's project and program management processes and systems. GAO's report examines the extent to which (1) selected DNN subprograms use program management leading practices to manage schedule and cost (2) DNN has incorporated leading practices in its revised program management policy.", "GAO selected 4 DNN subprograms to review that had defined end dates and/or work scope and that GAO had not recently examined. GAO reviewed documentation on DNN and NNSA's program management policies and practices; reviewed selected leading practices published by PMI and GAO; and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The 4 selected subprograms from the National Nuclear Security Administration's (NNSA) Office of Defense Nuclear Nonproliferation (DNN) GAO reviewed generally do not use selected program management leading practices to manage schedule and cost. According to generally recognized leading practices from the Project Management Institute (PMI) and GAO, programs should (1) establish schedules necessary to achieve the program's goal, (2) establish life-cycle cost estimates, and (3) measure performance against schedule and cost baselines. However, none of the DNN subprograms have schedule and cost estimates covering their planned life cycles and none measure performance against schedule and cost baselines. The following figure illustrates the extent to which the selected subprograms have established schedule and cost estimates compared to their planned life cycles.", "NNSA officials said that the subprograms do not have schedules and cost estimates that cover their life cycles and do not measure performance against baselines, in part, because DNN management does not require such estimates or baseline measurements.", "The lack of a requirement is consistent with the limitations in DNN's revised program management policy, which does not address leading practices on establishing schedule estimates, estimating life-cycle costs, and measuring against such baselines. According to leading practices, in developing schedule and cost estimates a program should define assumptions tailored to the program such as its life-cycle phases. Updating the DNN policy to include requirements and guidance on cost estimating and tracking performance against schedule and cost baselines could help ensure that NNSA managers and Congress have better information on how much DNN programs and subprograms may cost, the time they may need to achieve their goals, and how effectively they are being executed compared to plans."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DNN revise its program management policy to require DNN programs and subprograms to follow life-cycle program management, such as requiring life-cycle estimates and measuring against baselines. NNSA neither agreed nor disagreed with the recommendation but plans to take action to revise its policy."]}], "report": [{"section_title": "Letter", "paragraphs": ["The threat of nuclear and radiological proliferation, including the concern  that non-state actors or additional countries could obtain nuclear or  radiological weapons, poses one of the greatest challenges to U.S. and  international security. To address this threat, the National Nuclear  Security Administration (NNSA)\u2014a separately organized agency within  the Department of Energy (DOE)\u2014implements nuclear nonproliferation  programs worldwide under its Office of Defense Nuclear Nonproliferation  (DNN). DNN\u2019s mission is to develop and implement policy and technical  solutions to eliminate nuclear and radiological materials, enhance the  security of nuclear material in place and during transport, and limit or  prevent the spread of these materials, technology, and expertise related  to nuclear and radiological weapons and programs around the world. To  support this mission, for fiscal year 2018, DNN requested an  appropriation of approximately $1.5 billion for its 4 major programs, which  organize work under 13 subprograms, as shown in figure 1.", "In recent years, we have reported on program management challenges in  DOE and NNSA, including those within DNN. For example, in November  2014, we found that DOE and NNSA programs were not required to meet  any cost-estimating best practices, such as developing a life-cycle cost  estimate. We recommended, among other things, that DOE revise its  departmental directives that apply to programs to require that DOE,  NNSA, and its contractors develop cost estimates in accordance with best  practices. We also found in November 2016 that DOE had not  established a department-wide policy addressing internal control  standards or leading practices related to program management, and we  recommended that DOE develop such a policy. DOE is in the process of  taking actions to address these recommendations or has plans to do so.  At the time of our November 2016 review, we also learned that DNN did  not have a program management policy in effect because its 2005 policy  was outdated and fell out of use around 2010.", "In February 2017, DNN approved a revised program management  policy. The revised policy outlines program management processes,  roles, and responsibilities for DNN programs and subprograms. The  policy requires that program management functions be conducted over  the next 5 fiscal years, referred to as the Future Years Nuclear Security  Program (FYNSP). In addition, the policy\u2019s objectives include  establishing a DNN-wide policy that incorporates leading practices for  program management and that facilitates the implementation of methods  for programs and subprograms to monitor, measure, analyze, and  improve management processes.", "Program management involves aligning multiple components to achieve  the program\u2019s goals and allows for optimized or integrated cost, schedule,  and effort. The Project Management Institute (PMI) and GAO have  established standards and guides that are generally recognized as  leading practices for program management. When organizations apply  leading program management practices they may be able to enhance  their chances of achieving success across a range of programs.", "A House Armed Services Committee report, accompanying a bill for the  National Defense Authorization Act for Fiscal Year 2017, included a  provision for us to review and assess DNN\u2019s project and program  management processes and systems. Our report examines the extent  to which (1) selected DNN subprograms use program management  leading practices to manage schedule and cost, and (2) DNN has incorporated program management leading practices in its revised  program management policy.", "To conduct this work, we reviewed 4 selected DNN subprograms \u2013 the  Nuclear Material Removal and Highly Enriched Uranium (HEU) Reactor  Conversion subprograms, which DNN manages under its Material  Management and Minimization program and the Radiological Security  and International Nuclear Security subprograms, which DNN manages  under its Global Material Security program. We selected these  subprograms for review because they had defined start dates, end dates,  and/or work scope and were not the subject of other ongoing or recently  completed GAO reviews. The information we obtained from these  subprograms is not generalizable, but we obtained important insights into  DNN\u2019s schedule and cost management of these subprograms.", "To examine the extent to which the selected DNN subprograms use  program management leading practices to manage schedule and cost,  we identified selected leading practices from PMI and GAO. The  selected leading practices we identified were the use of a master  schedule necessary to achieve a program\u2019s goals, cost estimates that  cover the full life cycle of a program, and schedule and cost baselines to  measure performance. We reviewed documentation on the use of these  practices by the 4 selected DNN subprograms including documentation  on their schedule and cost estimates and their use of baselines, and we  compared the documentation to the leading practices. We also  interviewed NNSA officials who manage the selected DNN subprograms  about the use of these practices.", "To examine the extent to which DNN has incorporated leading practices  into its revised program management policy, we reviewed the revised  DNN policy and interviewed NNSA officials about the development of the  new policy. We also reviewed program management plans for the  selected subprograms. We reviewed program management leading  practices identified by PMI in The Standard for Program Management and  by GAO in its schedule and cost guides and federal internal control  standards. We compared these practices with DNN guidance and  requirements contained in the revised DNN policy. During interviews with  NNSA officials, we obtained their views on why specific practices were  included in the revised policy and others were not.", "We conducted this performance audit from June 2016 to September 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix I provides more  detail on our scope and methodology."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DNN Selected Subprograms", "paragraphs": ["Within DNN, the work of the four selected subprograms\u2014Nuclear  Material Removal, HEU Reactor Conversion, Radiological Security, and  International Nuclear Security\u2014focuses on efforts to remove and dispose  of excess nuclear material from civilian sites worldwide, convert civilian  research reactors to the use of non-weapons-useable nuclear fuel, secure  radiological materials at their source in the United States and abroad, and  improve the security of weapons-useable nuclear material in key  countries. The selected subprograms organize their work in programmatic  areas which we refer to as components, and under each component the  subprograms manage projects. Table 1 below describes the work of each  subprogram and the components in which the subprogram organizes its  work scope."], "subsections": []}, {"section_title": "Program Management Leading Practices Related to Schedule and Cost Management", "paragraphs": ["PMI\u2019s The Standard for Program Management and GAO\u2019s schedule and  cost guides identify program management leading practices related to  schedule and cost estimating and measuring performance against  baselines, as follows:", "PMI guidelines. According to PMI\u2019s guidelines, programs practice  life-cycle management, which involves schedule and financial  management throughout the course of the program\u2019s life-cycle  phases\u2014program definition, benefits delivery, and closure. In  particular, PMI states that in conducting program schedule  management, programs use a master schedule that integrates the  schedules of program components necessary to achieve the  program\u2019s goal. In program financial management, program cost  estimates should be clearly defined and should consider the full life- cycle costs of the program. According to PMI, programs should also  establish and measure performance against baselines for both  schedule and cost.", "GAO schedule and cost guides. GAO\u2019s schedule and cost guides,  which draw from federal organizations and industry, define best  practices about the processes needed for the development and  management of high-quality and reliable schedule and cost  estimates. Similar to PMI\u2019s guidelines, according to the GAO guides,  programs should establish and use an integrated master schedule,  establish cost estimates that cover the full life cycle of the program,  document and define assumptions tailored to the program,  incorporate analysis of program risk and uncertainty in schedule and  cost estimates, and manage a program\u2019s schedule and cost by  measuring against a baseline."], "subsections": []}]}, {"section_title": "Selected DNN Subprograms Generally Do Not Use Selected Leading Practices to Manage Schedule and Cost", "paragraphs": ["The four DNN subprograms we chose for review generally do not use  selected leading program management practices to manage schedule  and cost. Specifically, at the time of our review, none of the subprograms  had schedule and cost estimates that encompassed its entire life cycle,  although one subprogram planned to develop such estimates for its  recently-extended life cycle. In addition, none of the selected  subprograms measure their overall schedule and cost performance  against baseline estimates. NNSA officials said that the subprograms had  not developed schedule and cost estimates that cover their life cycles and  did not measure the subprograms against baselines due, in part, to  uncertainty in planning scope and schedules that rely on the cooperation  of other countries. DNN also does not require subprograms to have such  estimates or to measure performance against schedule and cost  baselines. Following these practices, however, would provide NNSA  managers and other stakeholders more complete information to evaluate  how much the subprograms may cost to achieve their goals, the amount  of time they may need to achieve these goals, and their actual versus  planned performance.", "According to leading practices, programs should (1) establish a master  schedule that integrates the schedules of program components  necessary to achieve the program\u2019s goal, such as specified performance  to be achieved over a defined life cycle, (2) determine costs that consider  the full life-cycle costs of the program, and (3) measure performance  against baselines for both schedule and cost. Figure 2 illustrates the  extent to which the selected subprograms have established schedule and  cost estimates compared to their planned life-cycle completion dates, if  any.", "The Nuclear Material Removal subprogram had schedule and cost  estimates that encompassed all three of its subprogram components  through the subprogram\u2019s previously planned completion date of fiscal  year 2022. However, the subprogram had yet to update its schedule and  cost estimate through its new planned completion date of fiscal year  2027, which was established in May 2017. The subprogram did not have  readily available information on performance against its former schedule  and cost estimates. Specifically:", "Schedule. As of April 2017, the subprogram\u2019s schedule, which  encompassed all three subprogram components, included 52 ongoing  and planned projects with estimated completion dates by the end of  fiscal year 2022 for most of these projects to reach a goal to remove  or disposition a total of 8,466 kilograms of nuclear material. In May  2017, the subprogram extended its life cycle from fiscal year 2022 to  fiscal year 2027 but at the time of our review had yet to update its  schedule of planned projects to be completed during fiscal years 2023  through 2027. According to NNSA officials, they extended the  subprogram\u2019s life cycle in part because certain projects planned to be  completed by fiscal year 2022 were delayed and the subprogram\u2019s  work was expanded.", "Cost. The subprogram had a cost estimate for its planned work  through fiscal year 2022 but at the time of our review had yet to  update its cost estimate for the overall subprogram through its new  planned completion date of fiscal year 2027. Specifically, as of June  2017, the subprogram had a cost estimate of about $595 million,  according to our analysis of information provided by the subprogram.  This estimate covered the planned work scope of all three  subprogram components to be completed during fiscal year 2017  through 2022. The subprogram, however, did not have estimated  costs for completing work scope planned during fiscal years 2023  through 2027. According to NNSA officials, as of June 2017, they  were developing a cost estimate for the remaining years, although the  officials did not specify when the cost estimate would be completed.", "Measuring performance against baselines. The subprogram did  not measure its overall performance against schedule and cost  baselines. NNSA reported to Congress in July 2014 that the  subprogram planned to remove or disposition approximately 3,000  kilograms of nuclear material by fiscal year 2022 at an estimated cost  of about $600 million. However, the subprogram did not track  information on its performance against the cost estimate. According to  NNSA officials, removal projects have too many uncertain costs.  Instead, NNSA officials said that they update the subprogram\u2019s life- cycle cost each year as part of the annual planning for the next fiscal  year\u2019s budget request. Until the subprogram develops schedule and  cost estimates to support the recently revised life-cycle completion  date of fiscal year 2027, it does not have the baselines it needs to  measure its overall schedule and cost performance. Although the  subprogram did not measure its overall performance against  established schedule and cost baselines, according to monthly  performance reports, the subprogram baselined and measured the  schedule performance of individual removal projects by tracking the  difference in number of days between forecasted project completion  dates and baseline completion dates. However, the subprogram did  not have information that integrated project performance information  to provide an overall picture of schedule performance for the entire  subprogram."], "subsections": [{"section_title": "HEU Reactor Conversion", "paragraphs": ["The HEU Reactor Conversion subprogram had schedule and cost  estimates that covered the remaining work scope to complete two of three  subprogram components by fiscal year 2033 but not for a third  component estimated to be completed in fiscal year 2035. The  subprogram also did not measure its overall performance against  schedule and cost baselines. Specifically:", "Schedule. The HEU Reactor Conversion subprogram did not have a  schedule for the overall subprogram through completion of its life  cycle. Instead, the subprogram had a schedule for all work scope  planned for the 5-year FYNSP, which included the schedule for the  remaining work to complete one of the three subprogram  components\u2013Molybdenum 99 (Mo99) efforts. Beyond the FYNSP  planning period, the subprogram has an estimated completion date of  fiscal year 2033 for a second component\u2014U.S reactor conversions\u2014 and has developed a schedule for completion of the component. For  the third subprogram component\u2014international reactor conversions\u2014 the subprogram estimates a fiscal year 2035 completion date for its  remaining work scope to convert or verify the shutdown of 44  international reactors, but it had not developed a complete schedule  to meet that date. Specifically, the subprogram\u2019s schedule was not up- to-date for 22 of the 44 international reactors in the subprogram\u2019s  planned work scope to support the estimated fiscal year 2035  completion date for these reactors. Instead, in the subprogram\u2019s  schedule, these reactors had estimated completion dates by fiscal  year 2030. NNSA officials explained that the schedule was not up-to- date for these reactors because the reactors are in countries where  the subprogram cannot currently plan or implement the conversions  due to limitations in cooperation with these countries. For example,  DNN cannot plan the schedule for conversion of reactors in Russia  that are in the subprogram\u2019s scope until the United States and Russia  resume joint nuclear security activities that the United States  discontinued following Russia\u2019s invasion of Ukraine in 2014. NNSA  officials said that the 2035 date is their best judgment of the earliest  date when the subprogram could complete the conversions or verify  certain reactors\u2019 shutdowns based on the assumption that the United  States and Russia may resume nuclear security cooperation in the  2020s. Because of the high degree of uncertainty with this date, the  subprogram did not update the schedule to reflect the 2035 date,  according to the officials. Appendix II provides tables that list the  planned reactor and facility projects in the HEU Reactor Conversion  subprogram, their locations, and estimated conversion or shutdown  completion dates.", "Cost. The HEU Reactor Conversion subprogram did not have a life- cycle cost estimate for the overall subprogram, but had overall life- cycle cost estimates for two of the three subprogram components.  The subprogram had cost estimates that totaled approximately $1.1  billion through fiscal year 2033 and that included the remaining  estimated life-cycle costs for the subprogram\u2019s U.S. reactor  conversions component and its Mo99 efforts. For the third  component\u2014international reactor conversions\u2014the subprogram only  estimated costs for the 5-year FYNSP, not through the estimated  completion date for the component of fiscal year 2035. According to  NNSA officials, developing a cost estimate that includes all remaining  international reactor conversions through 2035 would be challenging  because the costs for these projects are highly uncertain and vary  depending on the willingness of each country to cooperate as well as  the unique technical, regulatory, and other factors that vary for each  reactor in each country. The subprogram, however, had established  estimated life-cycle budgets for completing the conversion or verifying  the shutdown of each reactor in its work scope, which could be used,  along with other information, to develop a cost estimate for the  subprogram component.", "Measuring performance against baselines. The subprogram did  not measure overall subprogram performance against schedule and  cost baselines. Specifically, as mentioned above, the subprogram did  not have schedule and cost estimates for the overall subprogram that  it could use to establish baselines to measure the performance of the  overall subprogram. Although the subprogram had life-cycle estimates  for its U.S. reactors and Mo99 components, the subprogram did not  use these estimates as baselines to measure the overall subprogram  components\u2019 performance. The subprogram measured schedule  performance of individual projects under its three components against  baselines by tracking the difference in number of days and months  between forecasted project completion dates and baseline completion  dates. However, it did not integrate and roll up the project information  to provide an assessment of its overall schedule performance. In  addition, the subprogram baselined and measured cost performance  of the U.S. High Performance Research Reactor project\u2014which  constitutes six of the seven reactors under its U.S. reactor  conversions component\u2014by tracking changes in the project\u2019s  estimated life-cycle cost. However, the subprogram did not have  similar information that tracked changes in cost estimates of other  projects under its three components."], "subsections": []}, {"section_title": "Radiological Security", "paragraphs": ["The Radiological Security subprogram did not have schedule and cost  estimates for three components through the subprogram\u2019s planned  completion date in fiscal year 2033. The subprogram also did not  measure overall subprogram performance against schedule and cost  baselines. Specifically:", "Schedule. The subprogram has an estimated completion date of  fiscal year 2033 but did not have an overall schedule that covered its  three components for meeting the 2033 date. Instead, the subprogram  had a schedule that covered work to be completed under its three  components during the 5-year FYNSP (fiscal years 2017 through  2021). Specifically, for two of the three subprogram components\u2014 radiological source removal and nonradioisotopic technologies\u2014the  subprogram has not established specific work scope and schedules  beyond fiscal year 2021 because of uncertainty about the future. For  example, according to the subprogram\u2019s director, planning the  adoption of nonradioisotopic technologies is uncertain because the  timing of when such technologies can be adopted depends, in part, on  regulations and international laws, making it challenging for the  subprogram to define the scope of work. For the third subprogram  component\u2014radiological source protection\u2014the subprogram has an  estimated completion date of fiscal year 2033 to reach a total target to  secure 4,394 buildings in its inventory of sites worldwide with high- priority radiological sources. However, the subprogram had not  developed a schedule of specific projects to be completed beyond the  5-year FYNSP to meet that date and target. NNSA officials said that  they are often uncertain when a project will be able to start because it  depends greatly on circumstances in each country. Appendix III  provides the Radiological Security subprogram\u2019s planned work scope  for the radiological source protection component from fiscal years  2017 through 2033.", "Cost. The Radiological Security subprogram did not have a life-cycle  cost estimate for the overall subprogram through its estimated  completion date of fiscal year 2033. Specifically, the subprogram  had a cost estimate of about $849 million for all three components  covering the 5-year FYNSP. However, for two of the three  subprogram components\u2014radiological source removal and  nonradioisotopic technologies\u2014the subprogram had not developed  cost estimates beyond the 5-year FYNSP because, as mentioned  above, it had not developed work scope for these components in the  out-years. For example, according to the subprogram\u2019s director, the  subprogram\u2019s radiological source removal component depends on the  voluntary participation of users of radiological sources that register  their sources with the subprogram. Therefore, the subprogram cannot  estimate the number of sources to be removed in out-years. For the  third subprogram component\u2014radiological protection\u2014the  subprogram had assumed a stable budget to complete its target to  secure 4,394 buildings by fiscal year 2033. However, according to the  director of the subprogram, this budget assumption was not intended  to be a reliable life-cycle cost estimate.", "Measuring performance against baselines. As mentioned above,  the subprogram did not have schedule and cost estimates for the  overall subprogram needed to establish baselines to measure their  overall performance. The subprogram, however, baselined and  measured the schedule performance of individual projects under its  three components by tracking the difference in number of days  between forecasted project completion dates and baseline completion  dates. The subprogram, however, did not integrate and roll up the  project schedule performance information to provide performance  information for the overall subprogram."], "subsections": []}, {"section_title": "International Nuclear Security", "paragraphs": ["The International Nuclear Security subprogram maintained schedule and  cost estimates for the 5-year FYNSP (fiscal years 2017 through 2021) but  did not have schedule and cost estimates for work scope in the years  beyond the FYNSP. In addition, the subprogram did not measure overall  performance against baselines. Specifically:", "Schedule. The International Nuclear Security subprogram had not  established a life-cycle schedule for the overall subprogram or its two  component efforts, as it had not identified specific work scope or end- point targets beyond fiscal year 2021 and considers its mission to be  enduring (i.e. without an end-date). Instead, the subprogram had only  estimated a schedule for work scope in individual countries during the  5-year FYNSP. According to the subprogram director, the subprogram  is expected to operate indefinitely and continue as long as nuclear  materials exist to improve security in countries possessing such  materials. However, the subprogram had not planned project-specific  work scope in years beyond the FYNSP because, according to the  subprogram director, it is difficult to estimate the subprogram\u2019s likely  level of foreign counterpart engagement in individual countries beyond  5 years.", "Cost. Because it has not identified out-year work scope, the  International Nuclear Security subprogram did not have an overall life- cycle cost estimate and only had an estimate of about $530 million for  the work to be completed during the 5-year FYNSP period.  According to NNSA officials, they have not developed a cost estimate  for work scope in the years beyond the FYNSP because assumptions  about future work will likely change due to the uncertainty in  relationships with partner countries.", "Measuring performance against baselines. The International  Nuclear Security subprogram did not measure performance of the  subprogram against schedule and cost baselines. Specifically, as  mentioned above, the subprogram did not have the schedule and cost  estimates for the subprogram\u2019s life cycle beyond fiscal year 2021  needed to establish baselines to measure its overall performance. In  addition, the subprogram did not use its 5-year FYNSP estimates as  baselines to measure performance. Instead, the subprogram updates  the FYNSP estimates each year in planning the next fiscal year\u2019s  budget request. Moreover, unlike the other three subprograms, the  International Nuclear Security subprogram did not have project  schedule baseline information that could be integrated and rolled up  to provide information on the performance of the overall subprogram.", "In general, NNSA officials explained that uncertainty in planning the  selected subprograms\u2019 work scope or schedules, particularly for  components with projects that rely on the cooperation of foreign  countries, was among the reasons they did not have schedule and cost  estimates that covered the subprograms\u2019 life cycles or that went beyond  the 5-year required planning period. In addition, according to these  officials, DNN senior management does not require subprograms to  establish schedule and cost estimates that cover the entire subprogram  life cycle and to use these estimates as baselines to measure  subprogram performance.", "However, uncertainty should not prevent these subprograms from  establishing more complete or longer-term estimates to account for the  time and resources they need to achieve their goals. As mentioned  above, without such estimates, the subprograms do not have the baseline  information they need to track their performance. According to leading  practices, developing reliable schedule and cost estimates can be  achieved by following steps that address data limitations and risks and  uncertainties for a program. For example, according to the GAO schedule  guide, a reliable schedule should reflect all of a program\u2019s activities and  recognize that uncertainties and unknown factors in schedule estimates  can stem from, among other things, data limitations. In addition,  according to the GAO cost guide, the cost-estimating process involves  defining and documenting assumptions that are tailored to the specific  program, such as about the program\u2019s life-cycle phases, political issues,  or technology development. Assumptions should be based on historical  data to minimize uncertainty and risk. These same assumptions should  also be used to develop the program schedule. For management to make  good decisions, the program estimate must reflect the degree of  uncertainty so that a level of confidence can be given about the  estimate. Accordingly, because assumptions defined for a particular  program\u2019s schedule and cost estimate can vary, they should always be  inputs to the program\u2019s risk analyses of cost and schedule.", "Programs use different methods to quantify uncertainty and risk in  developing a schedule or cost estimate. DOE\u2019s cost estimating guide  describes approaches for programs to incorporate risk and uncertainty in  cost estimates such as the use of lower- and upper-bound cost ranges  that are developed based on risk analysis. Other NNSA programs use  these approaches in developing schedule and cost estimates for highly  uncertain, long-term program plans. In particular, NNSA\u2019s Office of  Defense Programs develops and reports high- and low-range cost  estimates for elements of NNSA\u2019s nuclear weapons modernization  programs in part to account for the uncertainty in these long-term  program estimates. As mentioned above, such estimates would provide  NNSA managers and other stakeholders information to help evaluate  resources and compare the costs and benefits of different programs and  priorities. Because the selected subprograms do not measure their overall  schedule and cost performance against baselines, NNSA managers,  stakeholders, and Congress have incomplete information about these  subprograms\u2019 actual-versus-planned schedule and cost performance over  their duration and are, therefore, at risk of being unable to assess when a  subprogram is likely to be completed or whether it will cost more or less  than planned."], "subsections": []}]}, {"section_title": "DNN\u2019s Program Management Policy Includes Some Leading Practices, but Does Not Address Life-Cycle Schedule and Cost Management", "paragraphs": [], "subsections": [{"section_title": "DNN\u2019s Revised Policy Includes Leading Practices on Risk and Quality Management", "paragraphs": ["DNN\u2019s 2017 revised policy includes new sections that address leading  practices on risk and quality management that all DNN programs and  subprograms should follow. NNSA officials said they added these  sections based on their review of leading practices in PMI\u2019s The Standard  for Program Management and GAO\u2019s Standards for Internal Control in the  Federal Government to ensure these leading practices were incorporated  and required for DNN programs.", "Risk management. According to leading practices on risk  management, programs should have processes to manage risks,  including processes to identify, assess, and respond to risks. In the  revised DNN policy, under a new section on risk management, all  DNN programs and subprograms are required to prepare risk  management plans to help identify, analyze, handle, and monitor risk.  For example, a DNN subprogram may identify the risk of schedule  slippage due to political constraints in working with foreign countries  and could incorporate and monitor that risk in planning.", "Quality management. According to program management leading  practices on quality management, program quality should be  continuously monitored. A new DNN policy section on continual  improvement requires DNN programs and subprograms to plan and  implement methods, such as program evaluations and management  assessments, in order to monitor and improve processes. For  example, a DNN subprogram may use an independent review by the  NNSA Office of Management and Budget to help improve its program  management processes, such as how it tracks cost, scope, and  schedule. The revised policy also outlines steps for corrective actions  to be taken when noncompliance is detected. These steps range from  determining the cause of noncompliance to reviewing the  effectiveness of corrective actions taken.", "These new sections added requirements for DNN program management  that were not previously documented. For example, in the prior policy, risk  management was not a requirement for DNN programs and  subprograms. In addition, NNSA officials said that they added the  continual improvement section to the revised policy after reviewing PMI\u2019s  practices on quality assurance, which they believed would clarify  responsibilities regarding management assessments and independent  reviews."], "subsections": []}, {"section_title": "The Revised DNN Policy Does Not Include Leading Practices on Life-Cycle Schedule and Cost Management", "paragraphs": ["The revised DNN policy does not address or require leading practices on  life-cycle schedule and cost management for DNN programs or  subprograms. Specifically, the revised policy does not outline  requirements for programs or subprograms to establish life-cycle cost  estimates or measure performance against schedule or cost baselines.  Instead, the revised policy provides requirements on schedule and cost  management limited to the NNSA budgeting process covering the 5-year FYNSP. For example, according to the revised DNN policy, programs and  subprograms must conduct program management activities, such as  budget formulation, in alignment with anticipated resources in the FYNSP.  Additionally, the policy requires programs and subprograms to establish  performance measurement data and track cost or schedule performance,  but only within the FYNSP.", "According to leading practices, life-cycle management is important to  program management and includes schedule and cost management  activities that span the duration of the program. According to PMI, all  programs, regardless of length, have life cycles; furthermore, leading  practices indicate that activities related to managing the schedule, cost,  and scope of a program should be conducted for the life of the program.  For example, leading practices call for calculating cost estimates as close  to the beginning of a work effort as possible that consider the full program  life cycle, and then documenting this baseline to measure performance.", "According to NNSA officials, the revised DNN policy does not include  requirements to practice life-cycle management, including life-cycle  schedule and cost management, because officials determined that life- cycle management did not apply to some DNN programs that NNSA  officials believe are enduring or continuous. For example, as mentioned  above, the director of the International Nuclear Security subprogram said  that the subprogram will phase out of certain areas or reduce  engagement with certain countries in the future but that it is expected to  continue as long as nuclear materials exist and will work to improve  security in countries possessing such materials.", "We disagree that life-cycle program management does not apply to  programs or subprograms that may have an enduring mission. Managers  need to make informed decisions about whether a program is affordable  within the agency\u2019s portfolio. NNSA and DNN should be able to compare  DNN\u2019s various programs\u2019 requirements several years beyond its 5-year  planning period. According to the GAO cost guide, in developing  estimates, programs should define assumptions tailored to the program,  such as assumptions about the program\u2019s life-cycle phases. For example,  the International Nuclear Security subprogram could take steps to define  end-point targets for when it may phase out work in certain areas or  countries in the future. In addition, according to the GAO schedule guide,  a comprehensive schedule should reflect all of a program\u2019s activities and  recognize that uncertainties and unknown factors in schedule estimates  can stem from, among other things, data limitations. Moreover, because  assumptions themselves can vary, they should always be inputs to  program risk analyses of cost and schedule.", "According to NNSA officials, although the revised policy does not include  requirements for life-cycle cost estimating, DNN programs could address  this in their individual program management plans. NNSA officials stated  that these program management plans for programs and subprograms  should be detailed enough to also provide information on how the  program will track progress, including by identifying changes to the  planned schedule.", "However, the revised DNN policy does not clearly require DNN programs  or subprograms to have program management plans, nor does it specify  elements of such plans. Specifically, the revised DNN policy requires  each program to develop \u201cprogram management documentation\u201d that  identifies program scope, schedule, and cost during the fiscal year and  operating procedures for the fiscal year, but it does not outline similar  requirements for the program\u2019s life cycle. In addition, the revised policy  does not specify requirements or guidance, such as on cost estimation,  for what programs or subprograms are to include in the program  management documentation. In contrast, PMI indicates that programs  should develop a program management plan that includes plans for  program financial management, schedule management, and scope  management for all phases of the program\u2019s life cycle. According to  NNSA officials, the revised DNN policy is the only directive or  documentation that spells out what is needed or required to be included in  a program management plan.", "Although the revised DNN policy does not clearly require DNN programs  or subprograms to have program management plans, some DNN  programs have developed or are developing such plans. For example, the  Global Material Security program, which oversees the Radiological Security and International Nuclear Security subprograms, issued a new  program management plan in April 2017. The Global Material Security  program management plan requires that each subprogram maintain a 5- year budget for the FYNSP with cost estimates, but it does not require or  provide guidance on developing life-cycle schedule or cost estimates.  NNSA officials said that DNN underwent a major reorganization of its  programs in January 2015, and some of the new program offices are still  preparing their program management plans. For example, the Material  Management and Minimization program that oversees the Nuclear  Material Removal and HEU Reactor Conversion subprograms is still  developing its program management plan, according to NNSA officials.", "In addition, the four selected subprograms had various documented  plans, but none fully addressed life-cycle schedule and cost  management.", "Nuclear Material Removal. The subprogram did not have a current  program management plan that had been updated since the 2015  reorganization of DNN but instead relied on an older plan that covered  a different scope than the scope of the current subprogram.", "HEU Reactor Conversion. The subprogram did not have a program  management plan for the overall subprogram. Instead, the  subprogram had project execution plans for its U.S. reactor  conversion projects and its Mo99 projects and relied on an outdated  document for its international reactor conversion projects.", "Radiological Security. The subprogram had a program management  plan that included requirements for the use of project life-cycle  baselines and for conducting cost estimation for the 5-year FYNSP.  However, the plan had no requirement for developing a cost estimate  for the life cycle of the subprogram and for using such an estimate to  measure performance of the overall subprogram.", "International Nuclear Security. The subprogram had a program  management plan that required cost estimating for 1 fiscal year.  However, the plan did not include requirements for life-cycle estimates  and for using initial or updated baselines to measure performance.", "NNSA subprogram officials said that they do not have readily available  life-cycle cost estimates and baseline measurement data in part because  they are not asked to provide it. For example, NNSA officials from the  HEU Reactor Conversion subprogram said that they did not have  sufficient staff to track performance against initial baselines because it  was not a priority for management, although it would be possible to do so  if required. One of the stated goals of the revised DNN policy is to  facilitate DNN-wide implementation of methods for programs and  subprograms to monitor, measure, and improve management processes.  However, because the policy does not require more complete information  from DNN programs and subprograms on their cost, schedule, and  performance against baselines\u2014consistent with leading practices\u2014it is  not clear that this policy goal can be achieved."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["When organizations apply leading program management practices\u2014such  as establishing schedules and cost estimates covering their planned life  cycles and measuring performance against such baselines\u2014they may be  able to enhance their chances of achieving success across a range of  programs. However, the four selected DNN subprograms are generally  not applying these selected leading practices for life-cycle program  schedule and cost management, due in part to the uncertainty and risks  in working with international partners. However, methods and approaches  exist that allow programs to account for uncertainty and risk in developing  schedule and cost estimates for their planned scope of work.  Furthermore, while the revised DNN program management policy has  incorporated some leading practices, it does not include requirements  and guidance for DNN programs and subprograms to practice life-cycle  schedule and cost estimating and does not require program management  plans that could be the vehicle for DNN programs and subprograms to  specify the use of such estimates. Updating the DNN program  management policy to include requirements for DNN programs and  subprograms to follow leading practices for life-cycle program  management would help NNSA ensure that managers, stakeholders, and  Congress have better information on how much DNN programs and  subprograms may cost to achieve their goals, the amount of time they  may need to achieve these goals, and how efficiently and effectively they  are actually being executed compared to plans."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The NNSA Deputy Administrator for DNN should revise the DNN program  management policy to require DNN programs and subprograms to follow  life-cycle program management. These requirements should include  development of schedule and cost estimates that cover the life cycle of  DNN programs and subprograms, use of methods to account for  uncertainty and risk in such estimates, use of cost and schedule  baselines to measure performance over program and subprogram life  cycles, and development of program management plans.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided NNSA with a draft of this report for its review and comment.  In written comments, which are summarized below and reproduced in  appendix IV, NNSA neither agreed nor disagreed with our  recommendation to revise the DNN program management policy to  require DNN programs and subprograms to follow life-cycle program  management. However, NNSA stated that it plans to take action in  response to the recommendation.", "In general, NNSA stated that DNN will update its program management  policy to formally document current practice and clarify expectations for  addressing uncertainty. Specifically, NNSA said it will update the policy  to: (1) reflect that life-cycle cost and schedule management should be  applied at the project or subprogram level where appropriate, considering  the extent of uncertainty impacting scope, potential timelines, and  executability; (2) define the methodologies to (a) account for uncertainties  where applying these techniques would result in a reasonable range of  estimates that would be useful for planning and scheduling purposes or  (b) document risk and track actions to reduce uncertainty where  applicable; (3) address expectations for assessing cost and schedule  performance, commensurate with the level of certainty present at  baselining; and (4) address requirements for documenting program  management plans.", "Although we acknowledge NNSA\u2019s plan to update its policy, we have  concerns regarding whether its proposed actions will ensure that DNN  programs and subprograms effectively follow leading practices for life- cycle schedule and cost management in the future. First, we do not  believe that updating the DNN program management policy to formally  document current program management practice addresses our  recommendation. NNSA\u2019s response suggests that its update to the policy  is intended to reflect current DNN program management practices rather  than signal a need for corrective action to address the DNN program  management limitations we identified. Specifically, as we stated in our  report, none of the four subprograms we reviewed had schedule and cost  estimates that encompassed the entire life cycle, although one  subprogram planned to develop such estimates for its recently-extended  life cycle. In addition, NNSA\u2019s proposed update to the DNN program  management policy to reflect life-cycle schedule and cost management  \u201cwhere appropriate\u201d is vague, and may give programs and subprograms  too much discretion to avoid the requirement. To have an effective  requirement on life-cycle program management and to be responsive to  our recommendation, NNSA will need to clearly define the criteria for  when a program should be exempt from a requirement to follow life-cycle  program management.", "Finally, the meaning of NNSA\u2019s proposed update to the policy to address  expectations for assessing cost and schedule performance,  commensurate with the level of certainty present at baselining is unclear.  Specifically, it is unclear whether NNSA plans to require that DNN  subprograms use cost and schedule baselines to measure performance,  or whether it plans to exempt programs or subprograms from such  practices based on unstated expectations. As we stated in our report,  none of the subprograms we reviewed measured their overall schedule  and cost performance against baseline estimates. To ensure that DNN  subprograms take steps to measure schedule and cost performance  against baselines and to be responsive to our recommendation, NNSA  will need to define clear expectations for DNN programs and  subprograms to follow.", "NNSA also provided general comments in its written comments regarding  DNN program management.", "First, NNSA commented that DNN currently implements elements of life- cycle program management where appropriate and reasonable. However,  according to NNSA, the majority of its international activities operate with  an unusually high level of uncertainty regarding potential international  cooperation and with limited information on international operations to  understand the scope of work required to support useful planning and  estimating. In NNSA\u2019s view, the high uncertainty would result in range  estimates so broad as to serve no useful purpose, and there is no  appreciable cost-benefit to expending resources on such calculations.", "We recognize that organizations need flexibility to determine when it is  appropriate and useful to apply leading practices on life-cycle program  management. However, as noted in our report, managers need to make  informed decisions about whether a program is affordable within the  agency\u2019s portfolio. Without more complete schedule and cost information  on DNN subprograms, NNSA managers and other stakeholders have  degraded information on the elements of DNN\u2019s portfolio, which may limit  their ability to assess and justify the affordability of long-term plans. If  NNSA believes that some of DNN\u2019s planned international work scope is  too uncertain for subprograms to develop estimates of schedule and cost  that cover their life cycles, then NNSA should evaluate whether it is  appropriate to identify such work scope in DNN\u2019s long-term plans at all.", "Second, NNSA commented that no specific requirement exists for DNN  programs and subprograms to implement life-cycle cost estimates, and  that DNN complies with current requirements. NNSA also commented  that the proper application of leading practices recognizes that cost- benefits, as well as the potential usefulness and reliability of estimates,  are important considerations. In instances in which uncertainty is  extremely high, NNSA stated that focus shifts to disclosure of risks, and  the establishment and tracking of actions to reduce the level of  uncertainty. According to NNSA\u2019s comments, DNN discloses risks and  tracks actions to reduce the level of uncertainty extensively, and this was  reflected in the most recent update to the DNN program management  policy with the addition of a new section on risk management. NNSA also  stated that as uncertainty is reduced, then other principles can be applied  where appropriate.", "We stated in our report that no specific requirement exists for DNN  programs and subprograms to implement life-cycle cost estimates.  Specifically, we noted that the DNN policy required that program  management functions be conducted over the 5-year FYNSP. Therefore,  we agree that the DNN subprograms we chose to review complied with  current requirements. However, our review was not focused on  compliance with requirements but rather on the use of leading or good  program management practices. We also noted that NNSA\u2019s stated  objectives for the DNN policy include establishing a DNN-wide policy that  incorporates leading practices for program management and that  facilitates the implementation of methods for programs and subprograms  to monitor, measure, analyze, and improve management processes.  Leading practices on life-cycle program management are important for an  organization to successfully plan the resources it needs to achieve its  goals and assess its performance in doing so. DNN\u2019s revised policy did  not acknowledge management of the program life-cycle as an essential  program management function and did not include any requirements on  leading practices on life-cycle schedule and cost management.", "We agree that risk management processes should be used to monitor  risks and track actions to reduce uncertainty. As we stated in our report,  the revised DNN policy included a new section on risk management  under which all DNN programs and subprograms will be required to  prepare risk management plans to help identify, analyze, handle, and  monitor risk. However, the new section did not include criteria for DNN  subprograms to follow when uncertainty related to risks being monitored  is low enough to allow a subprogram to develop life-cycle schedule and  cost estimates.", "We are sending copies of this report to the appropriate congressional  committees, the NNSA Administrator, the NNSA Deputy Administrator for  Defense Nuclear Nonproliferation, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or oakleys@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the extent to which (1) selected subprograms within  the National Nuclear Security Administration\u2019s (NNSA) Office of Defense  Nuclear Nonproliferation (DNN) use program management leading  practices to manage schedule and cost, and (2) DNN has incorporated  program management leading practices in its revised program  management policy.", "To conduct this work, we reviewed 4 selected DNN subprograms. DNN  has 4 major programs that manage a total of 13 subprograms (a  subprogram is a program managed as part of another program).  Specifically, we selected the Nuclear Material Removal and Highly  Enriched Uranium (HEU) Reactor Conversion subprograms, which DNN  manages under its Material Management and Minimization program. In  addition, we selected the Radiological Security and International Nuclear  Security subprograms, which DNN manages under its Global Material  Security program. We selected these subprograms for review because  they had defined start dates, end dates, and/or work scope indicating that  they had project-like aspects. These subprograms organize their work in  programmatic areas which we refer to as components and under each  component the subprograms manage various types of projects, such as  projects to remove nuclear material from civilian sites worldwide. We also  selected the 4 subprograms because they were not the subject of other  ongoing or recently completed GAO reviews. The information we  obtained from these subprograms is not generalizable, but we believe  that we obtained important insights into DNN\u2019s cost and schedule  management of these subprograms.", "To examine the extent to which the selected DNN subprograms use  program management leading practices to manage cost and schedule,  we identified selected leading practices by the Project Management  Institute (PMI) in The Standard for Program Management and by GAO in  its schedule and cost guides. The selected leading practices we  identified were the use of a master schedule necessary to achieve a  program\u2019s goals, cost estimates that cover the full life-cycle of a program,  and schedule and cost baselines to measure performance. We collected  and reviewed subprogram planning documents, monthly performance  reports, and spreadsheet data on work scope, historical costs, schedules  and cost estimates established by the subprograms, and their use of  project baselines to measure performance. We also reviewed information  the subprograms reported in NNSA\u2019s fiscal year 2017 and 2018  congressional budget justifications. We also interviewed NNSA officials  and their contractors who manage the program management information  system used by 3 of the 4 subprograms to manage schedule and cost  information to understand its capabilities. We interviewed NNSA officials  who manage the selected DNN subprograms about the use of these  practices and their views on challenges or limitations in using them. We  also interviewed representatives at Argonne National Laboratory and  Pacific Northwest National Laboratory, which operate projects for the  subprograms, to identify how projects develop schedule and cost  estimates and pass information on to the subprograms.", "To assess the reliability of the schedule and cost estimates on the  selected subprograms, we interviewed NNSA officials and national  laboratory contractors who were knowledgeable about the process  followed to develop and update the estimates and the program  management information systems used to manage the schedule and cost  information and generate reports. We determined that the data were  sufficiently reliable for our purposes, which were to report the  subprograms\u2019 estimated schedule completion dates and cost estimates,  as well as report the fiscal years and subprogram components and  projects covered by the subprogram schedule and cost estimates.", "To examine the extent to which DNN has incorporated leading practices  into its revised program management policy, we reviewed DNN\u2019s revised  program management policy approved in February 2017. We compared  the revised policy to the 2005 version to identify the changes included in  the revised policy. We reviewed program management leading practices  by PMI in The Standard for Program Management and by GAO in its  schedule and cost guides and federal internal control standards. For  example, we considered the applicable leading practices on schedule and  cost management identified above as well as other practices such as  those on risk management, quality management, and development of  program management plans. We compared these practices to DNN\u2019s  requirements and guidance contained in the revised DNN policy. We  interviewed NNSA officials about the development of the new policy and  their views on the reasons specific leading practices were included in the  revised policy and others were not, as well as challenges DNN\u2019s  programs and subprograms face in managing program schedule and  cost. We also reviewed program management plans for the 4 selected  subprograms and the major programs under which these subprograms  operate. We then interviewed NNSA officials from the selected  subprograms to determine their involvement in developing the revised  DNN program management policy and the status of individual program  management plans that were under development at the time of our  review.", "We conducted this performance audit from June 2016 to September 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Scope and Completion Dates for the Highly Enriched Uranium Reactor Conversion Subprogram", "paragraphs": ["The Office of Defense Nuclear Nonproliferation\u2019s Highly Enriched  Uranium (HEU) Reactor Conversion subprogram consists of three  components: (1) U.S. research reactor conversions, (2) international  research reactor conversions, and (3) Molybdenum 99 (Mo99) efforts,  which include international Mo99 isotope production reactor conversions  and projects to establish new U.S. non-HEU Mo99 production facilities.  The subprogram\u2019s current goal is to convert or verify shutdown of 156  HEU reactors and isotope production facilities and to support the  establishment of a domestic, non-HEU-based Mo99 production capability.  Tables 2 through 4 below list the U.S. reactor conversions, international  reactor conversions or shutdowns, and Mo99 projects in the HEU Reactor  Conversion subprogram\u2019s planned scope of work, for each of the  subprogram\u2019s three components, as of July 2017."], "subsections": []}, {"section_title": "Appendix III: Scope and Completion Dates for the Radiological Security Subprogram\u2019s Source Protection Component", "paragraphs": ["The Office of Defense Nuclear Nonproliferation\u2019s Radiological Security  subprogram\u2019s current goal for the radiological source protection  component is to upgrade security in 4,394 buildings worldwide by fiscal  year 2033. Table 5 shows the estimated number of buildings to be  completed each year as of June 2017."], "subsections": []}, {"section_title": "Appendix IV: Comments from the National Nuclear Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Shelby S. Oakley, (202) 512-3841 or oakleys@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, William E. Hoehn (Assistant  Director), Natalie M. Block, R. Scott Fletcher, Brian M. Friedman, Cindy  Gilbert, Jason T. Lee, TyAnn Lee, Duc Ngo, Jeanette Soares, Sheryl  Stein, and Sara Sullivan made key contributions to this report."], "subsections": []}]}], "fastfact": ["What is the U.S. government doing to keep nuclear weapons out of the wrong hands?", "The National Nuclear Security Administration implements nonproliferation programs to reduce the threat of more nations or non-state actors acquiring nuclear weapons or radiological materials for a \u201cdirty bomb.\u201d The agency requested about $1.5 billion for 2018 to fund these programs, but we found that they do not have complete schedule and cost information, limiting the ability to assess performance toward achieving their goals.", "We are making a recommendation to bring the agency's nonproliferation program management in line with leading practices."]}
{"id": "GAO-18-387", "url": "https://www.gao.gov/products/GAO-18-387", "title": "Puerto Rico: Factors Contributing to the Debt Crisis and Potential Federal Actions to Address Them", "published_date": "2018-05-09T00:00:00", "released_date": "2018-05-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Puerto Rico has roughly $70 billion in outstanding debt and $50 billion in unfunded pension liabilities and since August 2015 has defaulted on over $1.5 billion in debt. The effects of Hurricanes Irma and Maria will further affect Puerto Rico's ability to repay its debt, as well as its economic condition. In response to Puerto Rico's fiscal crisis, Congress passed the Puerto Rico Oversight, Management, and Economic Security Act (PROMESA) in 2016, which included a provision for GAO to review Puerto Rico's debt.", "This report describes the factors that contributed to Puerto Rico's financial condition and levels of debt and federal actions that could address these factors. Consistent with PROMESA, GAO focused on actions that would not increase the federal deficit.", "To address these objectives, GAO reviewed documents and interviewed officials from the Puerto Rico and federal governments and conducted a review of relevant literature. GAO also interviewed former Puerto Rico officials and experts in Puerto Rico's economy, the municipal securities markets, and state and territorial budgeting, financial management, and debt practices, as well as officials from the Financial Oversight and Management Board for Puerto Rico (created by PROMESA).", "GAO is not making recommendations based on the federal actions identified because policymakers would need to consider challenges and tradeoffs related to implementation.", "The Puerto Rico government generally agreed with the factors we identified and provided additional information. GAO incorporated technical comments from SEC as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The factors that contributed to Puerto Rico's financial condition and levels of debt relate to (1) the Puerto Rico government running persistent annual deficits\u2014where expenses exceed revenues\u2014and (2) its use of debt to cope with deficits. Based on a literature review and interviews with current and former Puerto Rico officials, federal officials, and other relevant experts, GAO identified factors that contributed to Puerto Rico's persistent deficits:", "The Puerto Rico government's inadequate financial management and oversight practices. For example, the Puerto Rico government frequently overestimated the amount of revenue it would collect and Puerto Rico's agencies regularly spent more than the amounts Puerto Rico's legislature appropriated for a given fiscal year.", "Policy decisions by Puerto Rico's government. For example, Puerto Rico borrowed funds to balance budgets and insufficiently addressed public pension funding shortfalls.", "Puerto Rico's prolonged economic contraction. Examples of factors contributing to the contraction include outmigration and the resulting diminished labor force, and the high cost of importing goods and energy.", "Additional factors enabled Puerto Rico to use debt to finance its deficits, such as high demand for Puerto Rico debt. One cause of high demand was that under federal law, income from Puerto Rico bonds generally receives more favorable tax treatment than income from bonds issued by states and their localities.", "Based on an assessment of relevant literature and input from current and former Puerto Rico officials, federal officials, and other relevant experts, GAO identified three potential federal actions that may help address some of these factors. GAO also identified considerations for policymakers related to these actions.", "Modify the tax exempt status for Puerto Rico municipal debt. Making interest income from Puerto Rico bonds earned by investors residing outside of Puerto Rico subject to applicable state and local taxes could lower demand for Puerto Rico debt. However, reduced demand could hinder Puerto Rico's ability to borrow funds for capital investments or liquidity.", "Apply federal investor protection laws to Puerto Rico. Requiring Puerto Rico investment companies to disclose risks with Puerto Rico bonds and adhere to other requirements could lower demand for the bonds. However, this action could also limit Puerto Rico's ability to borrow funds.", "Modify the Securities and Exchange Commission's (SEC) authority over municipal bond disclosure requirements. SEC could be allowed to require timely disclosure of materials\u2014such as audited financial statements\u2014associated with municipal bonds. Over the past decade, Puerto Rico often failed to provide timely audited financial statements related to its municipal bonds. Timely disclosure could help investors make informed decisions about investing in municipal bonds. However, a broad requirement could place additional burdens on all U.S. municipal issuers, such as the costs of standardizing reporting."]}], "report": [{"section_title": "Letter", "paragraphs": ["Puerto Rico has roughly $70 billion in outstanding public debt and $50  billion in unfunded pension liabilities and, since August 2015, has  defaulted on over $1.5 billion in debt payments. In a 2006 report, we  highlighted Puerto Rico\u2019s weakening fiscal condition, noting that Puerto  Rico had experienced a steady, decade-long increase in debt. In 2014,  we reported that Puerto Rico had accumulated debt representing a much  larger share of personal income than in any U.S. state.", "In September 2017, Hurricanes Irma and Maria made landfall on Puerto  Rico. The effects of these hurricanes, which caused loss of life, significant  displacements, and substantial damage in Puerto Rico, will further affect  Puerto Rico\u2019s ability to repay its debt, as well as its economic condition.", "In response to Puerto Rico\u2019s long-term fiscal crisis, Congress passed and  the President signed the Puerto Rico Oversight, Management, and  Economic Stability Act (PROMESA) in June 2016. PROMESA  established a structure for oversight of Puerto Rico\u2019s fiscal affairs and a  process for Puerto Rico to restructure its debts. As required by  PROMESA, in October 2017 we reported on public debt and fiscal issues  in Puerto Rico and other territories. We reported that Puerto Rico\u2019s total  public debt outstanding per capita had almost doubled since fiscal year  2005, and that Puerto Rico\u2019s outlook on repaying its debt depended on  the outcomes of its debt restructuring process.", "PROMESA also included a provision for us to examine factors  contributing to the debt crisis and federal actions for preventing a future  one. This report describes (1) the factors that contributed to Puerto  Rico\u2019s financial condition and levels of debt and (2) federal actions that  could address the factors that contributed to Puerto Rico\u2019s financial  condition and levels of debt. Consistent with PROMESA, we focused on  actions that would not increase the federal deficit.", "To describe the factors that contributed to Puerto Rico\u2019s financial  condition and levels of debt, we collected and reviewed Puerto Rico  government documents on its financial condition and on its processes for  budget development and execution, debt issuance, and financial  management. We also conducted a literature review and collected data  from a non-generalizable sample of 20 large bond prospectuses issued  by Puerto Rico agencies and public corporations between 2000 and  2017.", "To describe federal actions that could address the factors that contributed  to Puerto Rico\u2019s financial condition and levels of debt, we reviewed  documents from the U.S. Department of the Treasury (Treasury) and the  Securities and Exchange Commission (SEC), and our past reports on  Puerto Rico, and conducted a literature review. Consistent with the  provision in PROMESA that was the statutory requirement for this work,  we focused on actions that were non-fiscal in nature\u2014that is, actions that  would not increase the federal deficit.", "For both objectives, we also interviewed current Puerto Rico officials from  several agencies\u2014the Puerto Rico Department of Treasury (known by its  Spanish name Hacienda), Government Development Bank for Puerto  Rico (GDB), the Puerto Rico Office of Management and Budget (Spanish  acronym OGP), Fiscal Agency and Financial Advisory Authority (FAFAA),  and the Puerto Rico Electric Power Authority (PREPA). We also  interviewed 13 former Puerto Rico officials that held leadership positions  at Hacienda, GDB, or OGP, or a combination thereof. These former  officials served between 1997 and 2016 for various gubernatorial  administrations associated with the two political parties in Puerto Rico  that held the governorship during that period. We also interviewed  officials from Treasury, SEC, the Federal Reserve Bank of New York, and  the Financial Oversight and Management Board for Puerto Rico (created  by PROMESA). Additionally, we conducted another 13 interviews with  experts on Puerto Rico\u2019s economy, the municipal securities markets,  state and territorial budgeting and debt management\u2014including credit  rating agencies\u2014and with select industry groups in Puerto Rico. We  selected the experts we interviewed based on their professional  knowledge closely aligning with our engagement objectives, as  demonstrated through published articles, congressional testimonies, and  referrals from agency officials or other experts. For additional details on  our scope and methodology, see appendix I.", "We conducted this performance audit from January 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Application of Federal Laws in Puerto Rico", "paragraphs": ["Puerto Rico, which has approximately 3.3 million residents according to  U.S. Census Bureau (Census) estimates, is the largest and most  populous territory of the United States. As a territory, Puerto Rico is  subject to congressional authority, though Congress has granted it broad  authority over matters of internal governance\u2014notably, by approving  Puerto Rico\u2019s constitution in 1952. Individuals born in Puerto Rico are  U.S. citizens and can migrate freely to the states.", "Puerto Rico and its residents are generally subject to the same federal  laws as the states and their residents, except in cases where specific  exemptions have been made, such as with certain federal programs. For  example, Puerto Rico residents generally have full access to Social  Security and unemployment insurance; however, for some programs,  such as Medicaid, federal funding in Puerto Rico is restricted as  compared to funding in the states.", "Residents of Puerto Rico are exempt from paying federal income tax on  income from sources in Puerto Rico. Residents are required to pay  federal income tax on income from sources outside of Puerto Rico. They  are also required to pay federal employment taxes, such as Social Security and Medicare taxes, on their income regardless of where it was  earned. Puerto Rico residents are also ineligible for certain federal tax  credits.", "Corporations located in Puerto Rico are generally subject to the same  federal tax laws as corporations located in a foreign country. Corporations  in Puerto Rico are generally exempt from federal taxes on profits except  as such profits are effectively connected to a trade or business in the  states, and so long as those profits remain held outside of the states.  Additionally, these corporations were subject to a withholding tax on  certain investment income from the United States not connected to a  trade or business. Under the 2017 Public Law 115-97, starting in 2018  U.S. corporations that are shareholders in foreign corporations, such as  those organized under Puerto Rico law, generally do not owe tax on  dividends received from those foreign corporations. Prior to this law,  dividend payments to U.S. corporate shareholders were considered  taxable interest for the U.S. parent corporation.", "Prior to 1996, a federal corporate income tax credit\u2014the possessions tax  credit\u2014was available to certain U.S. corporations that located in Puerto  Rico. In general, the credit equaled the full amount of federal tax liability  related to an eligible corporation\u2019s income from its operations in a  possession\u2014including Puerto Rico\u2014effectively making such income tax- free. In 1996, the tax credit was repealed, although corporations that  were existing credit claimants were eligible to claim credits through  2005."], "subsections": []}, {"section_title": "Puerto Rico\u2019s Economy and Labor Force", "paragraphs": ["Puerto Rico\u2019s economy is in a prolonged period of economic contraction.  According to data from Puerto Rico\u2019s government, Puerto Rico\u2019s economy  grew in the 1990s and early 2000s. However, between 2005 and 2016\u2014 the latest year for which data were available as of March 1, 2018\u2014Puerto  Rico\u2019s economy experienced year-over-year declines in real output in all  but two years, as measured by real gross domestic product (GDP). From  2005 to 2016, Puerto Rico\u2019s real GDP fell by more than 9 percent (from  $82.8 billion to $75.0 billion in 2005 dollars). Puerto Rico\u2019s gross  national product (GNP) followed a similar pattern over the same period,  declining by more than 11 percent from 2005 to 2016 (from $53.8 billion  to $47.7 billion in 2005 dollars). Figure 1 shows Puerto Rico\u2019s real GDP  and GNP growth rates from 1991 through 2016.", "The decline in Puerto Rico\u2019s output has, in more recent years, occurred in  conjunction with a decline in Puerto Rico\u2019s population. According to  Census estimates, Puerto Rico\u2019s population declined from a high of  approximately 3.8 million people in 2004 to 3.3 million people in 2017, a  decline of 12.8 percent. This population loss closely matched the  decline in real output. From 2004 to 2016, Puerto Rico\u2019s real GNP fell by  9.5 percent, while its real GNP per capita increased by 1.6 percent over  the same time period.", "In addition to Puerto Rico\u2019s declining population, the territory also has a  lower share of employed persons compared to the United States as a  whole. As of 2017, approximately 37 percent of Puerto Rico residents  were employed compared to approximately 60 percent for the United  States as a whole. Puerto Rico\u2019s employment-to-population ratio reached  highs in 2005 and 2006 when it was approximately 43 percent, according  to data from the Federal Reserve Bank of St. Louis. According to data  from the Bureau of Labor Statistics (BLS), between 2005 and 2017,  Puerto Rico\u2019s unemployment rate fluctuated between 10.2 percent and  17.0 percent, with an average of 13.1 percent. During the same period,  the nationwide unemployment rate fluctuated between 4.1 percent and  10.0 percent, with an average of 6.5 percent. These factors have  combined to leave Puerto Rico with a small and declining labor force.  From January 2006 to December 2017\u2014the latest month for which data  were available as of March 1, 2018\u2014Puerto Rico\u2019s labor force decreased  from approximately 1.4 million persons to 1.1 million persons, according  to data from BLS."], "subsections": []}, {"section_title": "Puerto Rico Government Financial Condition", "paragraphs": ["Puerto Rico\u2019s government has operated with a deficit\u2014where expenses  exceed revenues\u2014in each fiscal year since 2002, and its deficits grew  over time (see figure 2).", "Puerto Rico\u2019s governmental activities can be divided among the primary  government and component units. Puerto Rico\u2019s primary government  provides and funds services such as public safety, education, health care,  and economic development. Puerto Rico\u2019s component units are legally  separate entities for which its government is nonetheless financially  accountable, and provide services such as public transportation,  highways, electricity, and water.", "In fiscal year 2014, the latest for which audited financial data are  available, the Puerto Rico government collected $32.5 billion in revenue,  of which $19.3 billion was collected by the primary government, and  $13.2 billion was collected by the component units. That year Puerto  Rico\u2019s government spent $38.7 billion, of which $22.0 billion was spent  directly by the primary government, while $16.7 billion was spent by the  government\u2019s various component units. The Puerto Rico Electric Power  Authority (PREPA), which operates the territory\u2019s electricity generation  and distribution infrastructure, represented the largest component unit  expenditure in fiscal year 2014. Figures 3 and 4 show a breakdown of  expenses for Puerto Rico\u2019s primary government and its component units,  respectively.", "Puerto Rico\u2019s government spending accounts for more than a third of the  territory\u2019s GDP. In fiscal year 2014\u2014the latest year for which audited  spending data were available as of March 1, 2018\u2014primary government  expenditures of $22.0 billion represented 21 percent of the territory\u2019s  GDP. Including component spending, total public expenditures were  $38.7 billion, which represented 38 percent of the territory\u2019s GDP. By  comparison, our prior work has shown that in 2014, total state and local  government expenditures represented about 14 percent of GDP for the  United States as a whole, excluding territories. Federal government  expenditures were 20 percent of GDP for the United States as a whole in  2014."], "subsections": []}, {"section_title": "Puerto Rico Debt", "paragraphs": ["Puerto Rico\u2019s total public debt as a share of its economy has grown over  time. In 2002, the value of its debt was 42 percent of the territory\u2019s GDP,  and 67 percent of its GNP. Both of these ratios grew over time such that  by 2014, Puerto Rico\u2019s total public debt was 66 percent of the territory\u2019s  GDP and 99 percent of its GNP. Figure 5 compares Puerto Rico\u2019s total  public debt to its GDP and GNP, in both aggregate and per capita.", "As of the end of fiscal year 2014, the last year for which Puerto Rico  issued audited financial statements, Puerto Rico had $67.8 billion in net  public debt outstanding, or $68.1 billion excluding accounting adjustments  that are not attributed in the financial statements to specific agencies. Of  the $68.1 billion, $40.6 billion was owed by Puerto Rico\u2019s primary  government, and $27.6 billion was owed by its component units, as  shown in figure 6 (these amounts do not sum to $68.1 billion because of  rounding).", "The growth of Puerto Rico\u2019s total debt resulted in greater annual debt  servicing obligations. In fiscal year 2002, it cost Puerto Rico $2.7 billion to  service its debt, representing about 12 percent of Puerto Rico\u2019s $21.6  billion in total public revenue for that year. By fiscal year 2014, Puerto  Rico\u2019s annual debt service cost rose to $5.0 billion, representing just over  15 percent of Puerto Rico\u2019s $32.5 billion in total public revenue for that  year. Following years of expenditures that exceeded revenue, and a  growing debt burden, in August 2015, Puerto Rico failed to make a  scheduled bond payment. Since then, Puerto Rico has defaulted on over  $1.5 billion in debt.", "In June 2016, Congress enacted and the President signed PROMESA in  response to Puerto Rico\u2019s fiscal crisis. PROMESA established a Financial  Oversight and Management Board for Puerto Rico (Oversight Board), and  granted it broad powers of fiscal and budgetary control over Puerto Rico.  PROMESA also established a mechanism through which the Oversight  Board could petition U.S. courts on Puerto Rico\u2019s behalf to restructure  debt. Under federal bankruptcy laws, Puerto Rico is otherwise prohibited  from authorizing its municipalities and instrumentalities from petitioning  U.S. courts to restructure debt. The Oversight Board petitioned the U.S.  courts to restructure debt on behalf of Puerto Rico\u2019s Highways and  Transportation Authority and the Government Employees Retirement  System on May 21, 2017 and on behalf of PREPA on July 2, 2017."], "subsections": []}, {"section_title": "Pension Obligations", "paragraphs": ["In addition to its debt obligations, Puerto Rico also faces a large financial  burden from its pension obligations for public employees. Puerto Rico\u2019s  public pension systems had unfunded liabilities of approximately $49  billion as of the end of fiscal year 2015, the most recent year for which  data are available. Unfunded pension liabilities are similar to other kinds  of debt because they constitute a promise to make a future payment or  provide a benefit."], "subsections": []}]}, {"section_title": "Officials and Experts Cited Various Factors as Contributing to Puerto Rico\u2019s Financial Condition and Levels of Debt Factors that Contributed to Puerto Rico\u2019s Persistent Deficits", "paragraphs": ["Based on interviews with current and former Puerto Rico officials, federal  officials, and other relevant experts, as well as a review of relevant  literature, the factors that contributed to Puerto Rico\u2019s financial condition  and levels of debt related to: (1) Puerto Rico\u2019s government running  persistent deficits and (2) its use of debt to cope with deficits.", "As previously mentioned, Puerto Rico\u2019s government has operated with a  deficit in all years since 2002, and deficits grew over time. To cope with  its deficits, Puerto Rico\u2019s government issued debt to finance operations,  rather than reduce its fiscal gap by cutting spending, raising taxes, or  both. Through interviews with current and former Puerto Rico officials;  federal officials; experts in Puerto Rico\u2019s economy, the municipal  securities markets, and state and local budgeting and debt management;  as well as a review of relevant literature, we identified three groups of  factors that contributed to Puerto Rico\u2019s persistent deficits: (1) inadequate  financial management and oversight practices, (2) policy decisions, and  (3) prolonged economic contraction. Some of the factors in these groups  may be interrelated."], "subsections": [{"section_title": "Factors that Enabled Puerto Rico to Use Debt to Finance Operations", "paragraphs": ["To cope with its persistent deficits, Puerto Rico issued debt to finance  operations. In reviewing 20 of Puerto Rico\u2019s largest bond issuances from  2000 to 2017, totaling around $31 billion, we found that 16 were issued  exclusively to repay or refinance existing debt and to fund operations.  According to ratings agency officials and experts in state and local  government, states rarely issue debt to fund operations, and many states  prohibit this practice. According to former Puerto Rico officials and  experts on Puerto Rico\u2019s economy, high demand for Puerto Rico debt and  the Government Development Bank for Puerto Rico (GDB) facilitating rising debt levels enabled Puerto Rico to continue to use debt to finance  operations."], "subsections": [{"section_title": "High Demand for Puerto Rico Debt", "paragraphs": ["Puerto Rico issued a relatively large amount of debt, given the size of its  population. Based on an analysis of fiscal year 2014 comprehensive  annual financial reports of the 50 states and Puerto Rico, Puerto Rico had  the second highest amount of outstanding debt among states and  territories, while its population falls between the 29th and 30th most  populous states. By comparison, California, the state with the largest  amount of outstanding debt, is the most populated state. Various factors  drove demand for Puerto Rico municipal bonds, even as the  government\u2019s financial condition deteriorated.", "Triple tax exemption: According to a former Puerto Rico official,  Federal Reserve Bank of New York officials, and an expert on Puerto  Rico\u2019s economy, Puerto Rico\u2019s municipal bonds were attractive to  investors because interest on the bonds was not subjected to federal,  state, or local taxes, regardless of where the investors resided. In  contrast, investors may be required to pay state or local taxes on  interest income earned from municipal securities issued by a state or  municipality in which they do not reside.", "Investment grade bond ratings: Puerto Rico maintained investment  grade bond ratings until February 2014, even as its financial condition  was deteriorating. Credit ratings inform investment decisions by both  institutional investors and broker dealers. According to a current  Puerto Rico official and an expert on Puerto Rico\u2019s economy,  investment grade ratings for Puerto Rico municipal bonds may have  driven demand for these securities in the states. Based on  interviews with ratings agency officials and a review of rating agency  criteria, we found that Puerto Rico may have maintained its  investment grade rating for two reasons. First, Puerto Rico could not  seek debt restructuring under federal bankruptcy laws, prior to the  passage of PROMESA in 2016. According to rating agency officials,  bonds with assumed bankruptcy protection tend to rate higher than  those without such protection. Second, legal frameworks that prioritize  debt service are often viewed as positive for credit ratings, according  to rating agency criteria. In the event that the Puerto Rico government  does not have sufficient resources to meet appropriations for a given  fiscal year, Puerto Rico\u2019s constitution requires that the government  pay interest and amortization on the public debt before disbursing  funds for other purposes in accordance with the order of priorities  established by law. The prior Puerto Rico Governor cited this  constitutional provision as providing the authority to redirect revenue  streams from certain entities to the payment of general obligation  debt. This redirection of revenue streams is commonly known as a  clawback.", "Lack of transparency on its financial condition: Municipal market  analysts told us that untimely financial information made it difficult for  institutional and individual investors to assess Puerto Rico\u2019s financial  condition, which may have resulted in investors not being able to fully  take the investment risks into account when purchasing Puerto Rico  debt. According to one report, between 2010 and 2016 municipal  issuers issued their audited financial statements an average of 200  days after the end of their fiscal years. However, between fiscal  years 2002 and 2014, Puerto Rico issued its statements an average  of 386 days after the end of its fiscal year, according to our analysis of  Puerto Rico\u2019s audited financial statements. Moreover, Puerto Rico  had not issued its fiscal years 2015 and 2016 audited financial  statements as of March 1, 2018, or 975 and 609 days after the end of  those fiscal years, respectively.", "Estate tax structures: Puerto Rico residents had incentive to invest in  municipal bonds issued in Puerto Rico over those issued in the United  States because of federal and Puerto Rico estate tax structures.  Current and former Puerto Rico officials told us that this incentive  drove demand among Puerto Rico residents for bonds issued in  Puerto Rico. For federal estate tax purposes, Puerto Rico residents  are generally considered non-U.S. residents and non-citizens for all of  their U.S.-based property, including investments. Estates of Puerto  Rico residents are required to pay the prevailing federal estate tax\u2014 which ranges from 18 percent to 40 percent depending on the size of  an estate\u2014for any U.S.-based property valued over $60,000. In  contrast, prior to 2017, all Puerto Rico-based property was only  subject to the Puerto Rico estate tax of 10 percent. Puerto Rico\u2019s  estate tax was repealed in 2017."], "subsections": []}, {"section_title": "Puerto Rico\u2019s Government Development Bank Facilitated Rising Debt Levels", "paragraphs": ["In addition to financing from the municipal bond markets, GDB also  provided an intragovernmental source of financing. Prior to April 2016,  GDB acted as a fiscal agent, trustee of funds, and intergovernmental  lender for the Government of Puerto Rico. GDB issued loans to Puerto  Rico\u2019s government agencies and public corporations to support their  operations. GDB provided loans to government entities valued at up to 60  percent of GDB\u2019s total assets, as shown in Figure 11. In general, these  entities did not fulfill the terms of their borrowing agreements with GDB,  while they independently accessed the municipal bond market.  Additionally, according to GDB\u2019s audited financial statements, GDB did  not reflect loan losses in its audited financial statements until 2014  because it presumed that Puerto Rico\u2019s legislature would repay loans  through the general fund or appropriations, as generally required by the  acts that approved such loans.", "Facing non-repayment of public sector loans, GDB took on debt to  maintain liquidity. According to GDB documents, repayment of amounts  owed to GDB was a main reason for the creation of the Puerto Rico Sales  Tax Financing Corporation (COFINA), an entity backed by a new sales  tax, through which Puerto Rico issued some of its debt. Though initially  intended as a means to repay GDB and other debt, COFINA bonds were  also used to finance operations."], "subsections": []}]}]}, {"section_title": "Actions That Could Address Factors that Contributed to Puerto Rico\u2019s Unsustainable Debt Levels", "paragraphs": ["Through our interviews and an assessment of relevant literature, we  identified three potential federal actions that could help address some of  the factors that contributed to unsustainable indebtedness in Puerto Rico.  Consistent with the provision in PROMESA that was the statutory  requirement for this work, we focused on actions that were non-fiscal in  nature\u2014that is, actions that would not increase the federal deficit. There  are tradeoffs for policymakers to consider when deciding whether or how  to implement any policy. For each action, we describe a specific  challenge as it relates to debt accumulation in Puerto Rico, identify a  possible federal response to the challenge, and describe other  considerations for policymakers."], "subsections": [{"section_title": "Action 1: Modify SEC\u2019s Authority over Municipal Securities Disclosure Requirements", "paragraphs": ["To help address the factors that contributed to the high demand for  Puerto Rico debt relative to other municipal debt, legislative and  executive branch policymakers could further ensure that municipal  securities issuers provide timely, ongoing, and complete disclosure  materials to bondholders and the public. Specifically, Congress could  authorize SEC to establish requirements for municipal issuers on the  timing, frequency, and content of initial and continuing disclosure  materials."], "subsections": [{"section_title": "Challenge", "paragraphs": ["In general, the municipal securities market is less regulated and  transparent than other capital markets, such as equity markets. For  example, SEC\u2019s authority to directly establish or enforce initial and  continuing disclosure requirements for issuers\u2014including those in Puerto  Rico\u2014is limited. SEC requires that underwriters (sellers of municipal  securities) reasonably determine that issuers have undertaken continuing  disclosure agreements (CDA) to publicly disclose ongoing annual  financial information, operating data, and notices of material events.  However, federal securities laws do not provide SEC with the authority to  impose penalties on municipal issuers for noncompliance with CDAs,  which may limit any incentive for issuers to comply with SEC disclosure  and reporting guidance. As a result, SEC has limited ability to compel  issuers to provide continuing disclosure information.", "As previously discussed, the Puerto Rico government often issued its  audited financial statements in an untimely manner, thus failing to meet  its contractual obligations to provide continuing disclosures for securities  it issued. SEC could not directly impose any consequences on Puerto  Rico\u2019s government for failing to adhere to the terms of, or enforce  compliance with, the CDAs. Additionally, as previously discussed,  municipal market analysts told us that untimely financial information made  it difficult for institutional and individual investors to assess Puerto Rico\u2019s  financial condition."], "subsections": []}, {"section_title": "Addressing the Challenge", "paragraphs": ["Timely disclosure of information would help investors make informed  decisions about investing in municipal securities and help protect them  against fraud involving the securities. These disclosures would be made  to investors at the time of purchasing securities and throughout the term  of the security, including when material changes to an issuer\u2019s financial  condition occur. According to SEC staff, enhanced authority could prompt  more municipal issuers to disclose financial information, including audited  financial statements, in a timelier manner. For example, SEC staff said  that if the agency had required that issuers provide timely financial statements at the time of issuing a municipal security, this may have  precluded Puerto Rico from issuing its $3.5 billion general obligation bond  in 2014. However, any rulemaking SEC would or could take as a result of  enhanced authority would depend on a number of factors, such as  compliance with other SEC guidance and related laws."], "subsections": []}, {"section_title": "Other Considerations", "paragraphs": ["Since this action would apply to all U.S. municipal securities issuers, it  has policy and implementation implications that extend well beyond  Puerto Rico. For example, establishing and enforcing initial and  continuing disclosure requirements for municipal securities issuers could  place additional burdens on state and local issuers, and not all municipal  issuers use standardized accounting and financial reporting methods. As  a result, state and local governments may need to spend resources to  adjust financial reporting systems to meet standardized reporting  requirements. However, in a 2012 report proposing this action, SEC said  it could mitigate this burden by considering content and frequency  requirements that take into account, and possibly vary by, the size and  nature of the municipal issuer, the frequency of issuance of securities, the  type of municipal securities offered, and the amount of outstanding  securities."], "subsections": []}]}, {"section_title": "Action 2: Apply Federal Investor Protection Laws to Puerto Rico", "paragraphs": ["To help address the factors that contributed to the high demand for  Puerto Rico debt relative to other municipal debt, Congress could ensure  that investors residing in Puerto Rico receive the same federal investor  protections as investors residing in states. Specifically, Congress could  subject all investment companies in Puerto Rico to the Investment  Company Act of 1940, as amended (1940 Act). In recent years, the  House and Senate separately have passed legislation that would achieve  this action."], "subsections": [{"section_title": "Challenge", "paragraphs": ["Certain investment companies in Puerto Rico and other territories\u2014 specifically, those whose securities are sold solely to the residents of the  territory in which they are located\u2014are exempt from the 1940 Act\u2019s  requirements. The 1940 Act regulates investment companies, such as  mutual funds that invest in securities of other issuers and issue their own  securities to the investing public. It imposes several requirements on  investment companies intended to protect investors. For example, it  requires that investment companies register with SEC and disclose  information to investors about the businesses and risks of the companies  in which they invest, and the characteristics of the securities that they  issue. It also restricts investment companies from engaging in certain  types of transactions, such as purchasing municipal securities  underwritten by affiliated companies.", "According to a former Puerto Rico official, some broker-dealers in Puerto  Rico underwrote Puerto Rico municipal securities issuances and  investment companies managed by affiliated companies of these  underwriters purchased the securities, packaged them into funds, and  marketed the funds to investors residing in Puerto Rico. This practice  would be prohibited or restricted for investment companies subject to the  1940 Act, as it might result in investment companies not acting in the best  interests of their investors."], "subsections": []}, {"section_title": "Addressing the Challenge", "paragraphs": ["If all Puerto Rico investment companies had been subject to the 1940  Act, they would have been prohibited or restricted from investing in  Puerto Rico municipal bonds underwritten by affiliated companies. Also,  these investment companies may have further disclosed the risks  involved in Puerto Rico municipal bonds to Puerto Rico investors. As a  result, demand for Puerto Rico municipal bonds from Puerto Rico  investment companies and residents may have been lower had the 1940  Act requirements applied to all Puerto Rico investment companies, and it  may have been more difficult for the Puerto Rico government to issue  debt to finance deficits."], "subsections": []}, {"section_title": "Other Considerations", "paragraphs": ["SEC staff told us that industry groups had raised objections to extending  the 1940 Act provisions to all investment companies in Puerto Rico.  These industry groups noted that, among other things, certain investment  companies would have difficulty meeting the 1940 Act\u2019s leverage and  asset coverage requirements and adhering to some restrictions on  affiliated transactions. However, SEC staff noted that under certain  legislation that passed the House or Senate separately, as described  above, Puerto Rico investment companies would have three years to  come into compliance if they were newly subject to the 1940 Act. Further,  under that legislation, after three years, investment companies in Puerto  Rico could also request an additional three years to come into  compliance. Regarding affiliated company restrictions, SEC has  previously waived some requirements for investment companies if they  are unable to obtain financing by selling securities to unaffiliated parties  with an agreement to repurchase those securities at a higher price in the  future, known as repurchase agreements. According to SEC staff, SEC  would consider allowing companies in Puerto Rico to enter into reverse  repurchase agreements with their affiliates if the 1940 Act applied to  them."], "subsections": []}]}, {"section_title": "Action 3: Modify the Tax Exemption Status for Puerto Rico Municipal Securities", "paragraphs": ["To help address the factors that contributed to the high demand for  Puerto Rico debt relative to other municipal debt, Congress could remove  the triple tax exemption for Puerto Rico\u2019s municipal securities. This action  would mean that interest income from Puerto Rico municipal securities  earned by investors residing outside of Puerto Rico could be taxed by  states and local governments, while still being exempt from federal  income taxes, similar to the current tax treatment of municipal bond  income in the states."], "subsections": [{"section_title": "Challenge", "paragraphs": ["As mentioned previously, former Puerto Rico officials and experts in  municipal securities told us that the triple tax exemption fueled investor  demand and enabled Puerto Rico to continue issuing bonds despite  deteriorating financial conditions. Some of the demand for Puerto Rico municipal securities came from certain U.S. municipal bond funds. These  funds concentrated their investments in one state to sell to investors  within that state, but also included Puerto Rico bonds in their portfolios.  Puerto Rico bond yields generally were higher than state bonds yields,  according to industry experts. When added to a fund, the higher yields  from Puerto Rico bonds would increase the overall return on investment  yield of a fund."], "subsections": []}, {"section_title": "Addressing the Challenge", "paragraphs": ["Modifying the triple tax exemption for Puerto Rico\u2019s municipal securities  might result in reduced demand for Puerto Rico\u2019s debt. In response to  reduced demand for its debt, Puerto Rico\u2019s government may need to  address any projected operating deficits by decreasing spending, raising  revenues, or both."], "subsections": []}, {"section_title": "Other Considerations", "paragraphs": ["According to U.S. Treasury officials, this action could increase the  proportionate share of investors in Puerto Rico debt that reside in Puerto  Rico, because of reduced demand from investors in the states. In the  event of a future debt crisis, this could result in a concentration of  financial losses within Puerto Rico. Also, debt financing allows  governments to make needed capital investments and provides liquidity  to governments, and can be a more stable funding source to manage  fiscal stress. Reduced market demand for Puerto Rico\u2019s bonds could  make access to debt financing difficult, as the Puerto Rico bond market  may not support the Puerto Rico government\u2019s future borrowing at  reasonable interest rates, according to Treasury officials. Alternately, a  variant of this action would be to retain the triple tax exemption for Puerto  Rico debt only for bonds related to capital investments rather than for  deficit financing, according to Treasury officials."], "subsections": []}]}, {"section_title": "Other Federal Actions Taken to Address Puerto Rico\u2019s Fiscal Condition", "paragraphs": ["Various provisions in PROMESA were intended to help Puerto Rico  improve its fiscal condition. PROMESA requires that the Oversight Board  certify fiscal plans for achieving fiscal responsibility and access to capital  markets. The intent of the fiscal plans is to eliminate Puerto Rico\u2019s  structural deficits; create independent revenue estimates for the budget  process; and improve Puerto Rico\u2019s fiscal governance, accountability, and  controls, among other things. From March 2017 to April 2017, the  Oversight Board certified the fiscal plans the Government of Puerto Rico  developed for the primary government and certain component units, such  as PREPA. As a result of the effects of Hurricanes Irma and Maria, the  Oversight Board requested that the Government develop updated fiscal  plans. Although the Government of Puerto Rico developed and submitted  updated fiscal plans, the Oversight Board did not certify them, with the  exception of the plan for GDB. Instead, in April 2018, the Oversight Board  certified fiscal plans it developed itself, as PROMESA allows.  PROMESA also requires the Oversight Board to determine whether or not  Puerto Rico\u2019s annual budgets, developed by the Governor, comply with  the fiscal plans prior to being submitted to Puerto Rico\u2019s legislature for  approval.", "Technical assistance is another area where the federal government has  taken action to help Puerto Rico address its fiscal condition. In 2015,  Congress first authorized Treasury to provide technical assistance to  Puerto Rico, and has continued to reauthorize the technical assistance,  most recently through September 30, 2018. For example, Treasury  officials told us that they helped Puerto Rico\u2019s Planning Board develop a  more accurate macroeconomic forecast, which should enable Hacienda  to develop more accurate revenue estimates and receipt forecasts.  Treasury officials also told us that the agency began helping Puerto Rico  improve its collection of delinquent taxes\u2014for example, by helping  Hacienda develop an office dealing with Puerto Rico\u2019s largest and most  sophisticated taxpayers, which are often multinational corporations. With  Puerto Rico focused on hurricane recovery efforts, Treasury and the  Puerto Rico government are reassessing the types of assistance that  Treasury might provide in the future, according to Treasury officials.", "Current and former Puerto Rico government officials and experts on  Puerto Rico\u2019s economy also told us that the federal government could  further help Puerto Rico address its persistent deficits through federal  policy changes that are fiscal in nature. For example, it could change  select federal program funding rules\u2014at a cost to the federal  government\u2014such as eliminating the cap on Medicaid funding and  calculating the federal matching rate similar to how the rate is calculated  in the states. Likewise, the Congressional Task Force on Economic  Growth in Puerto Rico (Congressional Task Force), as established by  PROMESA, issued a report in December 2016 that recommended  changes to federal laws and programs that would spur sustainable long- term economic growth in Puerto Rico, among other recommendations."], "subsections": []}, {"section_title": "Puerto Rico Plans to Take Actions to Address Its Fiscal Condition and Debt Levels", "paragraphs": ["In addition to federal actions that could address the factors that  contributed to Puerto Rico\u2019s fiscal condition and debt levels, the Puerto  Rico government plans to take various actions. For example, according to  current Puerto Rico officials and the Puerto Rico government\u2019s April 2018  fiscal plan, the government is:", "Planning to implement an integrated new information technology  system for financial management, to include modernized revenue  management and accounting and payroll systems. Hacienda officials  stated that they are in the process of developing a project schedule  for this long-term effort.", "Developing a new public healthcare model in which Puerto Rico\u2019s  government pays for basic services and patients pay for premium  services. The government will begin implementing the new healthcare  model in fiscal year 2019 and expects to achieve annual savings of  $841 million by fiscal year 2023.", "Collaborating with the private sector for future infrastructure and  service projects, including for reconstruction efforts related to  Hurricanes Irma and Maria, which it expects will stimulate Puerto  Rico\u2019s weakened economy.", "We also asked Puerto Rico officials about progress made toward  addressing many of the factors we identified. However, they did not  provide us this information."], "subsections": []}]}, {"section_title": "Agency Comments, Third Party Views, and Our Evaluation", "paragraphs": ["We provided a draft of this report for review to Treasury, SEC, the  Federal Reserve Bank of New York, the Government of Puerto Rico, and  the Oversight Board. Treasury and SEC provided technical comments,  which we incorporated as appropriate. The Federal Reserve Bank of New  York and the Oversight Board had no comments.", "We received written comments from the Government of Puerto Rico,  which are reprinted in appendix II. In its comments, the Government of  Puerto Rico generally agreed with the factors we identified that  contributed to Puerto Rico\u2019s financial condition and levels of debt. It also  provided additional context on Puerto Rico\u2019s accumulation of debt, such  as Puerto Rico\u2019s territorial status and its effect on federal programs in  Puerto Rico and outmigration.", "The Government of Puerto Rico also noted that the federal actions we  identified to address factors contributing to Puerto Rico\u2019s unsustainable  debt levels did not include potential actions that were fiscal in nature or  that addressed Puerto Rico\u2019s long-term economic viability. As we note in  the report, we excluded fiscal actions from our scope, consistent with the  provision in PROMESA that was the statutory requirement for this work.  We excluded potential actions that could promote economic growth in  Puerto Rico because these actions would address debt levels in Puerto  Rico only indirectly and because the Congressional Task Force on  Economic Growth in Puerto Rico already recommended actions for  fostering economic growth in Puerto Rico in its December 2016 report.", "We are sending copies of the report to the appropriate congressional  committees, the Government of Puerto Rico, the Secretary of the  Treasury, the Chairman of the Securities and Exchange Commission, and  other interested parties. In addition, this report is available at no charge  on the GAO website at http://gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or krauseh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to describe (1) the factors that contributed to Puerto  Rico\u2019s financial condition and levels of debt; and (2) federal actions that  could address the factors that contributed to Puerto Rico\u2019s financial  condition and levels of debt. Consistent with the provision in the Puerto  Rico Oversight, Management, and Economic Stability Act (PROMESA)  that was the statutory requirement for this work, we focused on actions  that would not increase the federal deficit.", "For both objectives we interviewed current Puerto Rico officials from  several agencies\u2014the Puerto Rico Department of Treasury (Hacienda in  Spanish), Government Development Bank for Puerto Rico (GDB), the  Puerto Rico Office of Management and Budget (Spanish acronym OGP),  Fiscal Agency and Financial Advisory Authority (FAFAA), and the Puerto  Rico Electric Power Authority. We also interviewed 13 former Puerto Rico  officials that held leadership positions at Hacienda, GDB, or OGP, or a  combination thereof. These former officials served between 1997 and  2016 for various gubernatorial administrations associated with the two  political parties in Puerto Rico that held the governorship during that  period. We also interviewed officials from the U.S. Department of the  Treasury (Treasury), the Securities and Exchange Commission (SEC),  the Federal Reserve Bank of New York, and the Financial Oversight and  Management Board for Puerto Rico (created by PROMESA). Additionally,  we conducted another 13 interviews with experts on Puerto Rico\u2019s  economy, the municipal securities markets, state and territorial budgeting  and debt management\u2014including credit rating agencies\u2014and with select  industry groups in Puerto Rico. We selected the experts we interviewed  based on their professional knowledge closely aligning with our  engagement objectives, as demonstrated through published articles,  congressional testimonies, and referrals from agency officials or other  experts.", "To describe the factors that contributed to Puerto Rico\u2019s financial  condition and levels of debt, we reviewed our prior work related to Puerto  Rico\u2019s financial condition and levels of public debt. We also collected and  analyzed additional financial data from Puerto Rico\u2019s audited financial  statements for the fiscal years 2002 to 2014, the last year for which  audited financial statements were available. To determine how the  Puerto Rico government used bond proceeds, we reviewed a  nongeneralizable sample of Puerto Rico bonds prospectuses issued  between 2000 and 2017 from the Electronic Municipal Market Access  database of the Municipal Securities Rulemaking Board.", "We reviewed literature\u2014including academic reports, congressional  hearing transcripts, and credit rating agency reports\u2014that described  Puerto Rico\u2019s economy and factors that contributed to Puerto Rico\u2019s  levels of debt. We also reviewed credit rating agency reports that  described Puerto Rico\u2019s municipal debt and the agencies\u2019 methodologies  for rating municipal debt. We also collected and reviewed Puerto Rico  government documents related to budget formulation and execution, debt  issuance, and financial management. We considered factors to include,  but not be limited to, macroeconomic trends, federal policies, and actions  taken by Puerto Rico government officials. Our review focused largely,  though not exclusively, on conditions that contributed to the debt crisis  during those years for which we collected financial data on Puerto Rico,  fiscal years 2002 to 2014.", "Finally, we also conducted a thematic analysis of the summaries of our  interviews to identify common patterns and ideas. Although these results  are not generalizable to all current and former officials and experts with  this subject-matter expertise, and do not necessarily represent the views  of all the individuals we interviewed, the thematic analysis provided  greater insight and considerations for the factors we identified.", "To describe federal actions that could address the factors that contributed  to Puerto Rico\u2019s financial condition and levels of debt, we reviewed our  prior reports and documents from Treasury and SEC, conducted a  literature review, and conducted various interviews. Specifically, we met  with federal agencies with subject-matter expertise or whose scope of  responsibilities related to these actions, as well as with current and former  Puerto Rico officials and municipal securities experts. Consistent with  PROMESA, we omitted from our scope: (1) actions that could increase  the federal deficit (i.e., fiscal options), (2) actions that could be taken by  the Puerto Rico government, (3) actions that could infringe upon Puerto  Rico\u2019s sovereignty and constitutional parameters, and (4) actions that  would imperil America\u2019s homeland and national security. We considered  actions that could promote economic growth in Puerto Rico as outside of  scope, as they could address debt levels in Puerto Rico indirectly, rather  than directly, and because a study issued by the Congressional Task  Force on Economic Growth in Puerto Rico already identified actions that  Congress and executive agencies could take to foster economic growth in  Puerto Rico. We also considered actions that could address Puerto  Rico\u2019s unfunded pension liability as outside of our scope. The actions we  identified may also help avert future unsustainable debt levels in other  territories; however, we did not assess whether and how each action  would apply to other territories.", "We conducted this performance audit from January 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Government of Puerto Rico", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jeff Arkin (Assistant Director),  Amy Radovich (Analyst in Charge), Pedro Almoguera, Karen Cassidy,  Daniel Mahoney, A.J. Stephens, and Justin Snover made significant  contributions to this report."], "subsections": []}]}], "fastfact": ["View Spanish version of Highlights (PDF, 1 page).", "Puerto Rico has roughly $70 billion in outstanding debt, and since August 2015 has defaulted on over $1.5 billion in debt.", "One factor contributing to Puerto Rico\u2019s debt levels is the Puerto Rico government's persistent annual deficits, where expenses exceeded revenues. Puerto Rico\u2019s government has borrowed money to finance its operations, rather than cutting spending, raising taxes, or both.", "We identified various potential federal actions that could help address factors contributing to the debt crisis. These include altering the tax-exempt status of Puerto Rico municipal debt, and applying federal investor protection laws to Puerto Rico."]}
{"id": "GAO-18-450", "url": "https://www.gao.gov/products/GAO-18-450", "title": "Mental Health: Federal Procedures to Oversee Protection and Advocacy Programs Could Be Further Improved", "published_date": "2018-05-24T00:00:00", "released_date": "2018-05-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["PAIMI grant awards, established by Congress in 1986 and totaling $36 million in 2016, are administered by SAMHSA to support state protection and advocacy programs. PAIMI programs protect and advocate for the rights of individuals with significant mental illness by investigating reports of incidents of abuse and neglect of such individuals in facilities such as hospitals, and in the community, among other activities.", "The 21st Century Cures Act included a provision for GAO to review the PAIMI programs and their compliance with federal statutory and regulatory requirements. This report examines (1) the outcomes reported by PAIMI programs in selected states, and (2) SAMHSA's oversight of state PAIMI programs, including their compliance with federal requirements. GAO reviewed FY 2015 and 2016 PAIMI program documentation for eight of 57 programs selected for variation in funding amount, geographic location, and other factors. GAO also reviewed relevant SAMHSA policies and procedures and assessed them against federal standards for internal control."]}, {"section_title": "What GAO Found", "paragraphs": ["The eight selected state Protection and Advocacy for Individuals with Mental Illness (PAIMI) programs GAO reviewed reported a range of positive outcomes from their work on behalf of individuals with mental illness. For example, in fiscal year (FY) 2016, the selected programs reported resolving in the individual's favor 1,772 out of 2,390 cases (74 percent) related to complaints of alleged abuse, neglect, and rights violations. The remaining cases were reported as withdrawn by the client, closed due to lack of merit, or not resolved in the individual's favor. These programs also reported concluding a variety of broader, system-level activities\u2014referred to as systemic activities\u2014intended to benefit groups of individuals with mental illness. These systemic activities resulted in, for example, changes to procedures in mental health institutions and correctional facilities.", "Source: GAO analysis of 2016 Substance Abuse and Mental Health Services Administration data. | GAO-18-450", "The Substance Abuse and Mental Health Services Administration (SAMHSA), which oversees the state PAIMI programs, has a variety of procedures in place to monitor performance and compliance. However, two areas warrant additional attention, as follows:", "SAMHSA has not consistently examined changes to performance benchmarks\u2014the goals, objectives, and targets that PAIMI programs set annually for their planned work. Programs are permitted to modify these benchmarks, and GAO found that four had done so. A new SAMHSA system implemented in 2017 could improve recording of benchmark changes, but SAMHSA lacks procedures to examine changes across years, which could help identify performance concerns.", "SAMHSA often failed to complete its periodic, in-depth reviews of programs and to provide findings of identified deficiencies to PAIMI programs on a timely basis. SAMHSA has plans to improve the efficiency of its review process. However, it is unclear the extent to which these plans will resolve the timeliness issues, which could delay resolution of any issues found in the reviews."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that SAMHSA take steps to ensure that changes to performance benchmarks are examined over time, and to ensure onsite reviews are completed\u2014and findings are provided to state programs\u2014in a timely manner. The Department of Health and Human Services concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Congress passed the Protection and Advocacy for Individuals with Mental  Illness (PAIMI) Act in 1986 in response to concerns about the vulnerability  of individuals with mental illness to abuse and neglect, and gaps in state  systems to address such issues. The PAIMI Act established a grant  program to support independent, state-level protection and advocacy  systems\u2014referred to in this report as state PAIMI programs\u2014designed to  safeguard the rights of individuals with mental illness at risk for abuse or  neglect. To qualify for federal grant support, state PAIMI programs must  have specific authority to investigate incidents of potential abuse and  neglect of individuals with significant mental illness; the ability to pursue  administrative, legal, and other appropriate remedies to protect these  individuals; and access to records needed to pursue these investigations  and remedies. In addition to investigating complaints, the PAIMI Act  requires PAIMI programs to protect and advocate for the rights of  individuals with significant mental illness.", "Given their authority, access rights, and presence across all states and  territories, state PAIMI programs play an important role in supporting a  vulnerable population of individuals with serious mental health disorders.  The Substance Abuse and Mental Health Services Administration  (SAMHSA), within the Department of Health and Human Services (HHS),  administers and oversees the PAIMI programs. SAMHSA approves  PAIMI grant applications annually and oversees program compliance with  statutory and regulatory requirements, such as those regarding grievance  procedures, public engagement, and appropriate use of federal funding.  In fiscal year 2016, SAMHSA provided approximately $36 million in grants  to 57 state-based PAIMI programs to fund these activities. While  comprising a relatively small portion of SAMHSA\u2019s total budget authority  for mental health programs (about $1.1 billion in fiscal year 2016) the  PAIMI grant program is the only federal program supporting protection  and advocacy services for individuals with significant mental illness.", "The 21st Century Cures Act of 2016 included a provision for GAO to  review PAIMI program activities and their compliance with federal  statutory and regulatory requirements. This report examines  1.  the outcomes reported by the PAIMI programs in selected states; and  2.  SAMHSA\u2019s oversight of the state PAIMI programs, including  procedures for ensuring compliance with federal statutory and  regulatory requirements.", "To examine the outcomes reported by PAIMI programs, we reviewed the  annual program performance reports for a nongeneralizable selection of  eight PAIMI programs for federal fiscal years 2015 and 2016: California,  Georgia, Indiana, Louisiana, Massachusetts, Texas, Vermont, and Washington. We selected these programs based on a variety of factors  such as size of the grant, number of clients served, program type (that is,  whether the program was operated by the state or by a private nonprofit),  and geographic region. Performance data we reviewed included both  standard measures that all programs are required to report, such as the  number of abuse or neglect complaints addressed, as well as specific  measures reporting progress toward goals selected by each program. To  assess the reliability of the program performance data, we reviewed  related documentation, interviewed SAMHSA officials, and assessed the  data for obvious errors. We determined that the performance data for the  eight selected programs were sufficiently reliable for our reporting  purposes. We also reviewed SAMHSA documentation of program  performance for fiscal years 2011 and 2012 and an evaluation of the  PAIMI programs commissioned by the agency and published in 2011. In  addition, we interviewed state PAIMI program staff for four of the eight  programs to obtain in-depth examples of program activities. We also  interviewed members of two state PAIMI program advisory councils about  their roles and their perspective about the state PAIMI programs. To  obtain additional perspectives about the state PAIMI programs, we  interviewed members of two national-level mental health organizations  and two state-level mental health organizations.", "To assess SAMHSA oversight of the state PAIMI programs, we examined  agency policies and procedures related to review and monitoring activities  conducted by the agency, including checklists or guidelines for  conducting annual reviews of program applications and program  performance data and periodic onsite monitoring reviews. We assessed  these policies and procedures against relevant statutory and regulatory  program requirements and federal internal control standards on  monitoring and the design of control activities. In addition, we developed  and completed a data collection instrument that allowed us to  systematically examine SAMHSA\u2019s documentation of its review of annual  program applications and program performance data for fiscal years 2015  and 2016. We completed the instrument for the eight selected PAIMI  programs, plus an additional two programs\u2014Oklahoma and Puerto  Rico\u2014selected because the programs had been placed on \u201crestricted  status,\u201d which triggers enhanced oversight. Furthermore, we reviewed  the monitoring reports for nine PAIMI programs (Idaho, Illinois, Maryland,  Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, and Washington) for  which SAMHSA conducted an onsite review in fiscal years 2015 or 2016.  We supplemented our review of documentation with interviews with  SAMHSA officials, staff from six PAIMI programs, and staff from the  association representing PAIMI programs, the National Disability Rights  Network (NDRN).", "We conducted this performance audit from July 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Mental health disorders affect millions of adults and children in the United  States and can range in severity. In 2016, an estimated 4.2 percent of the  adult population\u2014more than 10.4 million individuals\u2014were considered to  have a serious mental illness based on federal survey data. Individuals  with mental illness may reside and receive care in a variety of settings,  including inpatient institutional settings, such as public or private  hospitals, other residential treatment facilities, or community-based  settings. When originally established under the PAIMI Act, state PAIMI  programs were required to investigate reports of potential abuse and  neglect of individuals with significant mental illness residing in institutional  facilities and to protect and advocate the rights of these individuals.  Examples of institutional facilities covered under the PAIMI Act include  hospitals, nursing homes, and correctional facilities. In 2000, the PAIMI  Act was amended to allow certain PAIMI programs to also assist eligible  individuals who live in community settings, including their own homes,  although programs must still prioritize services for eligible individuals  residing in institutional settings. For example, state PAIMI programs  assist individuals with abuse, neglect, and rights violation cases in school  settings."], "subsections": [{"section_title": "Key State PAIMI Program Requirements and Activities", "paragraphs": ["State PAIMI programs are administered by either state agencies or non- profit organizations that have been designated by the governor of each  state to operate a protection and advocacy system. The state PAIMI  programs are allotted federal grants through a formula that is based  equally on (1) the population in each state, and (2) the population in each  state weighted by its relative per capita income. In 2016, state PAIMI  program grants ranged from $229,300 to $3,133,536. (See appendix I for  allotment by program.) To receive a PAIMI grant, each protection and  advocacy organization must submit an annual application, and the PAIMI  programs they operate must meet applicable statutory and regulatory  requirements. (See table 1.)", "Approved state PAIMI programs use their grants to protect and advocate  for individual clients, such as investigating specific complaints. They may  also conduct broader system-level protection and advocacy activities,  such as facility monitoring, intended to benefit larger groups of individuals  with significant mental illness. These systemic activities, as we refer to  them in this report, include efforts to drive changes in policies and  practices of the state\u2019s mental health agency, treatment facilities, and  other systems, such as school systems, that impact people with  significant mental illness. (See table 2.)", "Each state PAIMI program, with input from the advisory council and  governing authority, sets priority goals and short-term, measurable  objectives and targets annually as performance benchmarks for the work  it plans to conduct. Programs can also revise these benchmarks during  the year to align with changing needs. For example, the types of  individual cases programs accept and work on may depend on the types  of complaints that are received, which may vary over time."], "subsections": []}, {"section_title": "SAMHSA Oversight of State PAIMI Programs", "paragraphs": ["SAMHSA administers the PAIMI grants and is responsible for oversight  and monitoring of the state PAIMI programs. To oversee the state  PAIMI programs, SAMHSA conducts both ongoing reviews of the annual  application and performance information submitted by the programs, and  periodic, in-depth reviews:", "Ongoing monitoring activities. PAIMI grant applications are  effective for 4-year periods, but programs submit additional grant  applications annually to update certain information, such as the  program budget and goals. SAMHSA awards PAIMI grants based on  criteria such as whether the grantee submitted a statement of annual  program priorities, including quantifiable targets and measurable  outcomes. In addition to the application, programs must submit key  data annually in a program performance report. The performance  report must describe a program\u2019s individual and systemic activities,  accomplishments, and expenditures during the most recent fiscal year  and must include a section prepared by the advisory council. The  performance report requires programs to report on both standard  measures required of all programs and on progress towards the  program-specific priority goals, objectives, and targets. SAMHSA  reviews information submitted by the programs annually through  grants applications and performance reports, including completing a  review checklist and following up with programs with questions.", "Periodic monitoring. SAMHSA conducts four to five onsite  monitoring reviews of state PAIMI programs each year, which officials  told us means a given program would be reviewed approximately  every 10 years. Programs are reviewed on a rotating basis, but some  may be reviewed more frequently if concerns have been identified,  according to officials. The onsite monitoring process, which includes  an onsite visit and review of program documentation, is intended to  monitor program compliance and provide guidance on improving  program effectiveness. SAMHSA has procedures for the scope and  time frame of the reviews."], "subsections": []}]}, {"section_title": "Selected State PAIMI Programs Reported Achievements in Ending and Preventing Abuse, Neglect, and Rights Violations of Those with Significant Mental Illness", "paragraphs": ["The eight selected state PAIMI programs reported favorably resolving a  majority of individuals\u2019 cases related to alleged abuse, neglect, or rights  violations. In addition, these selected programs reported concluding a  variety of systemic activities, with a significant focus on monitoring and  addressing issues of abuse or neglect at facilities. Through their work with  individuals and completion of systemic activities, the selected programs  reported meeting a majority of their priority goals and objectives."], "subsections": [{"section_title": "Outcomes of Individual Cases", "paragraphs": ["Selected programs reported favorably resolving about 74 percent of  individual cases related to alleged abuse, neglect, or rights violations in  fiscal year 2016, on average (see table 3). The remaining 26 percent of  cases were reported as withdrawn by the client, closed due to lack of  merit, or were not resolved in the individual\u2019s favor. Across the  programs there was variation in the percentage of cases resolved  favorably, with two of the selected programs reporting half, or less than  half, of their cases resolved favorably, and one program reporting nearly  100 percent of cases closed favorably. SAMHSA officials and NDRN staff  cited a number of factors that could contribute to the variation, including  complexity of the complaint, variation in the programs\u2019 criteria for  accepting cases, program resources, or characteristics of the court or  state mental health system. For example, SAMHSA officials told us that possible explanations for variation could include a program accepting  particularly challenging cases, or a program obtaining additional funding  from other nonfederal grants that could provide greater legal staff support  in addressing complaints.", "All eight selected programs reported closing cases in each of the three  categories of complaints: abuse, neglect, and rights violations during  fiscal year 2016. Five of the eight programs reported that a majority of  their cases were related to complaints about rights violations, which  occurred in both facility- and community-based settings (see fig. 1).", "These complaints included denials of legal assistance or privacy rights,  employment discrimination, or\u2014the most frequently reported case  complaint\u2014failure to provide special education consistent with state  requirements. Issues of abuse and neglect of individuals with mental  illness were also common. The most frequent complaint reported by the  eight selected programs related to neglect was a lack of discharge  planning for release from a facility, and for alleged abuse, it was failure to  provide appropriate mental health treatment.", "Program staff reported examples of how state PAIMI programs resolved  cases related to abuse, neglect, and rights violations for individuals in  institutions and the community:", "Program staff in California described a rights violation case of a young  girl with a mental health disability who was eligible for special  education services, but the district placed her in a restricted,  segregated school setting where she was restrained multiple times.  The program staff negotiated her move to a general education  campus with classroom behavior support. The PAIMI program  monitored her transition, including ensuring her inclusion in school  activities, academic remediation, and social skill development.", "Program staff in Georgia reported that they were contacted by a  woman in a hospital who was overmedicated such that they could not  initially understand what she was saying. The staff worked with her  hospital treatment team to adjust her medication and the woman  became more articulate. In working to address her overmedication,  the staff further discovered there were not appropriate discharge  plans for her and so they worked to ensure that she was discharged  into an appropriate facility.", "To address individual cases, selected programs reported using a variety  of strategies, ranging from administrative actions to legal remedies.  Programs reported that the most frequently utilized strategy (used 62  percent of the time in fiscal year 2016) was \u201cshort-term assistance\u201d\u2014 time-limited advice or counseling, such as assisting a client with preparing  a letter or making a phone call to resolve an issue. Selected programs  reported using legal remedies about 5 percent of the time in fiscal year  2016."], "subsections": []}, {"section_title": "Outcomes of Systemic Activities", "paragraphs": ["The eight selected programs conducted a range of systemic activities,  and reported successfully concluding a total of 367 of these activities in  fiscal year 2016 (see figure 2).", "Facility monitoring was reported as the most frequent systemic activity in  fiscal year 2016, comprising about 71 percent of the total systemic  activities concluded by the selected programs. The selected programs  described a range of activities involving facility monitoring. For example,  California reported that the program had an effort focused on monitoring  the conditions at selected county jail systems and juvenile halls. As part  of that work, the program reported that it released five public reports and  worked with counties on policy improvements, such as reducing the use  of pepper spray on youth. Another program, Louisiana, reported that staff  used to conduct regular monitoring visits to a state\u2019s psychiatric hospital  and addressed patient complaints that they heard during these visits.  However, with limited resources and other emerging urgent issues at  other facilities, the program decided to cease the regular monitoring and  now conducts as-needed visits to the hospital in response to specific  complaints from the patients or staff.", "In addition to facility monitoring activities, other systemic activities  conducted varied across the selected programs, reflecting differences in  their resources and priorities. Some systemic activities\u2014such as class  action litigation\u2014take significant time and resources to undertake, and  program staff may consider various factors before beginning one. For  example, program staff from Indiana told us the program filed a lawsuit  alleging restrictive housing of prisoners with significant mental illness that  involved 4 years of negotiations. In addition, program staff from Vermont  told us after engaging in successful litigation against hospitals that helped  reduce unnecessary force, isolation, and coercion tactics, the program re- prioritized and focused on other issues, such as helping individuals  integrate into the community from facilities. However, the program  recently noticed an increase in force, isolation, and coercion tactics and  predicted another shift in focus to once more address those issues."], "subsections": []}, {"section_title": "Performance on Program Priority Goals", "paragraphs": ["Through their efforts to resolve individual cases and systemic activities,  selected programs reported largely meeting the performance  benchmarks\u2014priority goals, objectives, and targets\u2014they determine for  themselves. For example, the Georgia program reported that to meet its  fiscal year 2016 priority goal of protecting individuals with psychiatric  disabilities in Georgia from abuse and neglect, its objective was to  investigate and advocate to address allegations of abuse and neglect,  including suspicious or unexplained deaths and inappropriate treatment  or medication issues for people with psychiatric disabilities. The  measurable target for this objective was to conduct 50 such  investigations. In its performance report for the fiscal year, the program  reported that it had completed 51 investigations of allegations of  extensive abuse and neglect during the performance year. Overall, the  selected programs reported meeting more than 95 percent of their priority  goals in fiscal year 2016. While selected programs varied in their priority  goals, all had a goal that focused on protecting individuals from abuse,  neglect, and rights violations. (See Appendix II for more information about  the types of priority goals set by the selected programs.) When objectives  were not met, the programs reported, for instance, focusing on other  priorities or that an activity was still ongoing and could not be included as  part of their performance for the year.", "Although the eight selected PAIMI programs reported that they largely  met their goals, they also reported several overarching challenges to their  efforts to do so, such as limited resources, lack of access authority, or  delays in access (e.g., to documents, records, or institutions). For  instance, the selected programs collectively reported that 617 PAIMI- eligible clients were not served within 30 days due to insufficient funding  in fiscal year 2016. Additionally, five selected programs reported delays in  access to records. For example, Vermont program staff reported delays in  receiving records related to the status of prisoner grievances or medical  records, and Texas program staff reported delays and use of significant  attorney resources to address facilities that challenge their ability to  access records or premises."], "subsections": []}]}, {"section_title": "SAMHSA Has Controls in Place to Oversee Program Compliance with PAIMI Requirements, but Oversight of Program Effectiveness Is More Limited", "paragraphs": [], "subsections": [{"section_title": "SAMHSA Has Controls in Place to Monitor Compliance with Program Requirements", "paragraphs": ["SAMHSA has controls in place for monitoring the PAIMI programs\u2019  compliance with statutory and regulatory requirements through its  ongoing and periodic in-depth monitoring activities. We found evidence  that SAMHSA had identified and resolved a variety of compliance issues  through these activities."], "subsections": [{"section_title": "Ongoing Monitoring", "paragraphs": ["On an annual basis, SAMHSA monitors compliance with statutory and  regulatory program requirements by reviewing information reported by the  programs through the application and program performance report. (See  table 4.) SAMHSA\u2019s project officers review and approve the applications  and performance reports submitted by the state PAIMI programs using a  checklist developed by the agency that prompts them to record specific  information, such as whether there are vacant advisory council seats. Not  all areas of compliance are covered by the checklist; however, SAMHSA  officials told us that the entire application and performance report are  reviewed, and that a project officer\u2019s approval signature on a checklist  indicates that potential issues observed during a review have been  resolved satisfactorily.", "In our review of fiscal year 2015 and 2016 documentation, we found  evidence that the application and performance report review process  helped identify and resolve a range of potential compliance issues. For  example, SAMHSA followed up with one program in which the advisory  council had failed to meet the threshold of 60 percent of its membership  being individuals who have received or are receiving mental health  services, or are family members of such individuals. Failing to meet this  threshold could raise concerns about whether a program is sufficiently  engaging individuals and family members affected by mental illness as  required by regulation. In this instance, SAMHSA requested a plan of  action to recruit and maintain members to meet the threshold, which the  program provided along with updated information that they had  successfully recruited an additional member that put the council make-up  over the threshold. In another example, SAMHSA followed up with one  program that had reported not meeting 3 of 6 objectives and requested a  plan of action for reducing the number of unmet objectives. The program  subsequently provided information that it had incorrectly categorized  some objectives they had met as \u201cnot met.\u201d (See table 5.)", "In addition to the annual application and performance report reviews,  SAMHSA officials told us that they use monthly conversations with other  federal agencies, referred to as federal partners, to help them identify  potential compliance issues. These federal partners oversee federal  grants for other populations of people with disabilities made to the  protection and advocacy systems that administer the PAIMI program.  SAMHSA officials told us that coordination with these federal partners  helped identify risks in at least two of our selected programs, Puerto Rico  and Oklahoma. For example, one of the federal partners conducted an  onsite monitoring visit to Puerto Rico and found several issues with its  protection and advocacy system, such as inadequately trained staff and  conflicts of interest arising from a lack of independence from the  governor\u2019s office. Puerto Rico\u2019s protection and advocacy system failed  to develop an adequate corrective action plan to address the federal  partner\u2019s findings, leading the federal partner to place the system in  restricted\u2014that is, high-risk\u2014status. According to SAMHSA officials,  these actions led them to more closely monitor Puerto Rico\u2019s PAIMI  program, resulting in the identification of the protection and advocacy  system\u2019s failure to comply sufficiently with PAIMI program requirements.  For example, SAMHSA found that Puerto Rico\u2019s PAIMI program did not  have the capacity to protect and advocate for individuals with mental  illness, as required by statute, because they had an insufficient number of  attorneys. Furthermore, the federal partner that originally placed Puerto  Rico\u2019s protection and advocacy system in restricted status requested that  SAMHSA do so as well. As a result, SAMHSA also placed the Puerto  Rico PAIMI program in restricted status."], "subsections": []}, {"section_title": "Periodic Onsite Monitoring Reviews", "paragraphs": ["In addition to its ongoing monitoring, SAMHSA has procedures to oversee  state PAIMI program compliance during its periodic onsite monitoring  reviews. When SAMHSA conducts an onsite monitoring review, its  procedures specify that officials are to interview program staff, governing  board members, and advisory council members; as well as review a  sample of case record files and other documentation of program  activities. The state PAIMI program is also to submit a detailed set of  documentation to support the program\u2019s compliance with statutory and  regulatory requirements. Agency officials are to review this information  and report back to the programs on any compliance issues or  recommendations to improve program processes.", "In our review of fiscal year 2015 and 2016 documentation for the nine  onsite monitoring reviews SAMHSA conducted, we found evidence that  this process helped identify and resolve a range of potential compliance  issues. For example, SAMHSA found that one program\u2019s bylaws could be  misinterpreted to permit lobbying for legislation for PAIMI-eligible  individuals using PAIMI funding, when federal law prohibits grants  programs from using federal funds to engage in such activity. As a result, the program\u2019s governing board reviewed and modified the bylaws to  clearly indicate that PAIMI funds are not to be used for lobbying.", "As another example, SAMHSA found that one program did not have  sufficient documentation to support that the advisory council chair was an  individual who had received or was receiving mental health services, or a  family member of such an individual, as required by regulations. As a  result, the program revised its practice to include having the advisory  council chair verify in writing that he or she meets the criteria for serving  in the position. (See table 6.)"], "subsections": []}]}, {"section_title": "SAMHSA Has Not Consistently Examined Changes to Program Benchmarks or Completed and Provided Onsite Review Findings in a Timely Manner", "paragraphs": ["We identified two weaknesses that could be limiting SAMHSA\u2019s oversight  of program effectiveness. First, SAMHSA\u2019s PAIMI program monitoring did  not consistently record changes to program priority goals, objectives, and  targets\u2014collectively, \u201cbenchmarks\u201d\u2014made during a performance year,  and the agency did not have procedures for examining such changes  over time. Second, the agency did not provide timely information to  programs on identified deficiencies from onsite monitoring. As of March  2018, SAMHSA was in the process of implementing new processes for its  oversight of state PAIMI programs that officials believe will streamline the  agency\u2019s monitoring activities. However, these changes may not fully  address the weaknesses we identified."], "subsections": [{"section_title": "Inconsistent Recording of Changes to Performance Benchmarks and Lack of Procedures for Examining Changes across Years", "paragraphs": ["We found that SAMHSA did not always record changes programs made  to their performance benchmarks and did not have procedures for  examining benchmark changes over time. According to federal internal  control standards, an agency should evaluate the results of its  monitoring\u2014in this case, the information collected regarding benchmark  modifications\u2014to determine program performance.", "In our review of SAMHSA\u2019s oversight of 10 programs for fiscal years 2015  and 2016, we found that SAMHSA did not consistently record program  modifications to performance benchmarks. Specifically, we found that  four programs appeared to have modified their performance benchmarks  during the year\u2014in some cases upward when results exceeded original  targets, and in other cases downward when results were lower than  original targets. However, these changes were not recorded by SAMHSA  reviewers in the review checklists. For instance, one program revised 17  of its 21 targets to closely match the program\u2019s actual results, but these  changes were not recorded in the area of the review checklist that  prompts the project officer to note if such changes were made.", "According to SAMHSA officials, in fiscal year 2017, SAMHSA transitioned  from paper forms to a web-based system for submission and review of  applications and performance reports. Officials told us that under the new  system, programs will be required to consult with SAMHSA officials about  and submit modifications to performance benchmarks through the  system. The system will record and display both the original priority goals,  objectives, and targets as approved at the time of the application, as well  as any modifications a program submits throughout the year. The system  will also record that information over time, providing the ability to review  and track program modifications to benchmarks over multiple years.", "SAMHSA\u2019s new system should improve recording of benchmark changes,  however, SAMHSA lacks procedures for examining such changes across  years to assess whether the changes could indicate larger performance  issues. SAMHSA officials acknowledged that they did not have specific  procedures in place directing project officers to examine changes to  performance benchmarks across multiple years, but said that other  relevant procedures were in place. For example, officials noted that  programs are not able to modify benchmarks without approval by  SAMHSA project officers. However, without implementing procedures  aimed specifically at examining trends in benchmark modifications across  years, SAMHSA lacks assurances that its project officers will consistently  examine whether a particular program is regularly making changes to  benchmarks that may be indicative of a potential performance problem,  such as revising its targets downwards over multiple years."], "subsections": []}, {"section_title": "Failure to Provide Timely Information on Identified Deficiencies", "paragraphs": ["We found that SAMHSA generally failed to meet its timelines for  producing and providing onsite monitoring review reports to the state  PAIMI programs under review during fiscal years 2015 and 2016. This  inability to produce and provide onsite monitoring reports to PAIMI  programs in a timely manner is inconsistent with SAMHSA\u2019s internal  requirements and with federal internal control standards regarding  evaluating issues and remediating deficiencies on a timely basis.", "Specifically, for onsite monitoring reviews, SAMHSA\u2019s procedures specify  the agency is to provide an initial report to the reviewed program within  150 days of the onsite visit. However, for eight of the nine monitoring  review reports we reviewed for fiscal years 2015 and 2016, SAMHSA  provided the report more than a year after the visit. One program that had  just received its report at the time of our review told us that it was difficult  to plan the necessary changes to its work without an official report with  findings and recommendations to help guide them in restructuring their  operations. Program staff said they had moved ahead and made some  changes but were uncertain whether those changes would be deemed  sufficient because of the lack of feedback from the agency.", "SAMHSA officials told us that they may have missed some deadlines as a  result of competing priorities and restricted resources\u2014for example,  recently only two of four PAIMI project officer positions have been  occupied. Officials reported that the agency was taking steps to  streamline the process to make it more efficient and to bring on more staff  resources. The officials said that in 2018 SAMHSA planned to shift  responsibility for the project officers\u2019 portion of the onsite reviews to a  dedicated onsite monitor, which they hoped would expedite the review  process. In addition, the agency had taken steps to streamline its onsite  monitoring review process, such as by revising and standardizing its  reporting template.", "There are uncertainties with regard to how effective these changes will be  in increasing timeliness. For example, the planned efficiencies target  some, but not all, of the key components of the reviews. In particular,  SAMHSA officials told us that these review process changes do not  pertain to the portion of the onsite review that focuses on state PAIMI  program compliance with applicable fiscal requirements. Officials noted  that the SAMHSA office that conducts the fiscal portion of the review has  had staff shortages for the past 16 months and is not able to operate  within normal time frames for completing this portion of the report.  Without meeting its deadlines for completing its review and providing  timely, detailed information and feedback to PAIMI programs, SAMHSA  cannot ensure that identified issues are resolved in a timely manner, thus  potentially endangering the effectiveness of the programs."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Individuals with mental illness can face abuse, neglect, and rights  violations in both institutional and community treatment settings, including their own homes. The protection and advocacy services provided by state  PAIMI programs play an important role in reducing these serious issues  for this vulnerable population. Therefore, it is important to monitor how  effective the programs are in addressing such issues. SAMHSA has a  number of procedures in place to monitor program compliance with  statutory and regulatory requirements, which enable the agency to  identify and resolve potential issues with program compliance, and it is  taking steps to streamline and improve its compliance oversight. At the  same time, the agency\u2019s processes for oversight of program effectiveness  could be improved, such as by examining trends in mid-performance  changes programs make to their priority goals, objectives, and targets  across multiple years. Without such monitoring, SAMHSA may not  recognize a pattern of changes that signal larger concerns about that  program\u2019s effectiveness. Finally, SAMHSA has not been timely in  completing its onsite monitoring reviews or providing the results of these  reviews to the programs. Although SAMHSA has plans to make reviews  more efficient and to add resources, it is unclear to what extent these  steps will resolve the lack of timeliness."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to SAMHSA:  The Assistant Secretary for Mental Health and Substance Use should  establish procedures to better ensure that mid-performance changes to  program priority goals, objectives, and targets are examined across  multiple years. (Recommendation 1)", "The Assistant Secretary for Mental Health and Substance Use should  take steps, including the steps it has planned, to ensure onsite reviews  are completed and findings are provided to programs on a timely basis.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for comment.  In its written  comments, HHS concurred with both of our recommendations and  indicated that it will examine ways to implement them.  HHS\u2019s comments  are reprinted in appendix III. HHS also provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, 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) 512-7114 or at iritanik@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Protection and Advocacy for Individuals with Mental Illness (PAIMI) Grants by Program, Fiscal Year 2016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Selected State PAIMI Program Priority Goal Categories in Fiscal Year 2016", "paragraphs": ["State Protection and Advocacy for Individuals with Mental Illness (PAIMI)  programs determine their priority goals each fiscal year to prioritize the  work they hope to accomplish. Our analysis of the priority goals reported  in the annual program performance reports by eight selected state PAIMI  programs found that all programs had at least one priority goal focused  on Protection and Civil Rights in fiscal year 2016 (see fig. 3).  Access/Discrimination was the next most frequently set priority goal  category\u2014with seven of the eight programs establishing these goals. We  also reviewed program goal categories from fiscal year 2015 and  identified few significant differences between 2015 and 2016.", "Eight priority goal categories emerged from our analysis:", "Access/Discrimination: This category refers to issues broadly  related to access to services or benefits, and reduction of  discrimination, e.g., advocating for access to legal services or  elimination of barriers to housing, employment, and education  services.", "Community Integration: This category refers to issues of integrating  the individual into community facilities or ensuring they can be  independent outside of a facility.", "Education: This category refers to specific issues related to access  or equality in education services.", "Employment: This category refers to specific issues related to  access to employment.", "Health Care Services: This category refers to specific issues related  to access to health care services within the community or state.", "Housing: This category refers to specific issues related to access to  housing.", "Information/Outreach: This category refers to activities related to  distributing publications or performing outreach to individuals.", "Protection and Civil Rights: This category refers to issues broadly  related to rights violations and protection from restraint, seclusion, or  other abuse or neglect."], "subsections": []}, {"section_title": "Appendix III: Agency Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Susan Barnidge, Assistant  Director; Hannah Marston Minter, Analyst-in-Charge; Joanna Wu  Gerhardt; and Emily Beller Holland made key contributions to this report.  Also contributing were Jennie Apter, Muriel Brown, and Emily Wilson."], "subsections": []}]}], "fastfact": ["Individuals with mental illness are a vulnerable population. To investigate potential abuse or neglect, the Department of Health and Human Services provides grants for state-based Protection and Advocacy for Individuals with Mental Illness programs. In 2016, it gave $36 million to 57 programs.", "We found that the programs reported a range of positive outcomes, including a high percentage of cases resolved in the individual's favor.", "We also identified needed improvements to HHS's oversight procedures, including a need to track long-term performance changes and be more timely in completing program reviews, and recommended HHS address these gaps."]}
{"id": "GAO-18-637", "url": "https://www.gao.gov/products/GAO-18-637", "title": "Low-Income Housing Tax Credit: Improved Data and Oversight Would Strengthen Cost Assessment and Fraud Risk Management", "published_date": "2018-09-18T00:00:00", "released_date": "2018-09-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["LIHTCs encourage private investment in low-income rental housing and have financed about 50,000 housing units annually since 2010.The LIHTC program is administered by IRS and credit allocating agencies (state or local housing finance agencies). The program has come under increased scrutiny following reports of high or fraudulent development costs for certain LIHTC projects. GAO was asked to review the cost-efficiency and effectiveness of the LIHTC program.", "This report examines (1) development costs for selected LIHTC projects and factors affecting costs, (2) allocating agencies' oversight of costs, and (3) factors limiting assessment of costs. GAO compiled and analyzed a database of costs and characteristics for 1,849 projects completed in 2011\u20132015 (the most recent data available when compiled) from 12 allocating agencies. The agencies span five regions and accounted for about half of the LIHTCs available for award in 2015. GAO also reviewed the most recent allocating plans and related documents for 57 allocating agencies and reviewed federal requirements."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identified wide variation in development costs and several cost drivers for Low-Income Housing Tax Credit (LIHTC) projects completed in 2011\u20132015. Across 12 selected allocating agencies, median per-unit costs for new construction projects ranged from about $126,000 (Texas) to about $326,000 (California). Within individual allocating agencies, the variation in per-unit cost between the least and most expensive project ranged from as little as $104,000 per unit (Georgia) to as much as $606,000 per unit (California). After controlling for other characteristics, GAO estimates that", "larger projects (more than 100 units) cost about $85,000 less per unit than smaller projects (fewer than 37 units), consistent with economies of scale.", "Allocating agencies use measures such as cost and fee limits to oversee LIHTC development costs, but few agencies have requirements to help guard against misrepresentation of contractor costs (a known fraud risk). LIHTC program policies, while requiring high-level cost certifications from developers, do not directly address this risk because the certifications aggregate costs from multiple contractors. Some allocating agencies require detailed cost certifications from contractors, but many do not. Because the Internal Revenue Service (IRS) does not require such certifications for LIHTC projects, the vulnerability of the LIHTC program to this fraud risk is heightened.", "Weaknesses in data quality and federal oversight constrain assessment of LIHTC development costs and the efficiency and effectiveness of the program. GAO found", "inconsistencies in the types, definitions, and formats of cost-related variables 12 selected agencies collected.", "allocating agencies did not capture the full extent of a key indirect cost\u2014a fee paid to syndicators acting as intermediaries between project developers and investors that IRS requires be collected.", "IRS does not require allocating agencies to collect and report cost-related data that would facilitate programwide assessment of development costs. Further, Congress has not designated any federal entity to maintain and analyze LIHTC cost data.", "Even without a designated federal entity, opportunities exist to advance oversight of development costs. In particular, greater standardization of cost data would lay a foundation for allocating agencies to enhance evaluation of cost drivers and cost-management practices."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider designating a federal agency to maintain and analyze LIHTC cost data. GAO also makes three recommendations to IRS to enhance collection and verification of cost data. IRS disagreed with the recommendations and said it lacked certain data collection authorities. GAO maintains the recommendations would strengthen program oversight and integrity and modified one of them to allow IRS greater flexibility in promoting data standards."]}], "report": [{"section_title": "Letter", "paragraphs": ["Low-Income Housing Tax Credits (LIHTC) are the largest source of  federal assistance for developing affordable rental housing and  represented an estimated $8.4 billion in foregone revenue in 2017. The  program encourages private investment in low-income housing through  tax credits, but the cost of this housing has come under increased  scrutiny following reports of high or fraudulent development costs in  certain LIHTC projects. In addition, analysis of trends and variation in  LIHTC development costs and of federal and state efforts to oversee  these costs has been limited to date.", "The LIHTC program, established under the Tax Reform Act of 1986, has  financed approximately 50,000 housing units annually since 2010. The  program is jointly administered by the Internal Revenue Service (IRS)  within the Department of the Treasury (Treasury) and by credit allocating  agencies, typically state housing finance agencies established to meet  affordable housing needs of their residents.", "You requested we review the cost-efficiency and effectiveness of the  LIHTC program. This report analyzes (1) development costs for LIHTC  projects completed in 2011\u20132015 in selected locations and factors  affecting these costs, (2) steps allocating agencies have taken to oversee  LIHTC development costs, and (3) factors limiting assessment of LIHTC  development costs.", "To analyze development costs for LIHTC projects, we created and  analyzed a database of costs and characteristics for 1,849 projects that  submitted final cost certifications (which detail a project\u2019s total costs,  including the costs used in calculating credit awards) to 12 selected  allocating agencies in 2011\u20132015. The 12 allocating agencies accounted  for 50 percent of the total 2015 credit ceiling amount and spanned the five  major geographic regions. Although the database we created includes  nearly all projects completed by the 12 allocating agencies in 2011\u20132015,  it is not generalizable to all allocating agencies. To describe costs and  characteristics of LIHTC projects, we calculated summary statistics  (distributions and medians) for key elements in our database, and  compared results across the 12 agencies. We also developed a  regression model to estimate relationships between development costs  and relevant project and location characteristics. We interviewed officials  from the 12 agencies, selected industry groups, and selected researchers  to discuss our data collection and analysis. To assess the reliability of  the project data, we tested the data for missing values, outliers, and obvious errors and interviewed allocating agency officials about  interpretations of various data fields, among other things. We concluded  the data were sufficiently reliable for purposes of comparing LIHTC  development costs within and across allocating agencies and for  examining development cost drivers and trends.", "To analyze steps allocating agencies took to oversee LIHTC development  costs, we reviewed the 2017 (or most recent as of August 2017) Qualified  Allocation Plans (QAP) and related documents for 57 allocating agencies  to identify cost-management and cost-verification approaches (policies  and practices to limit development costs and fees and confirm the  accuracy of project costs). We interviewed IRS and Treasury officials for  information and perspectives on LIHTC cost-verification requirements and  Department of Housing and Urban Development (HUD) officials to identify  development cost-verification practices of other federal housing  programs. We also interviewed officials from the 12 selected allocating  agencies, representatives from two national accounting firms with  expertise in LIHTC, and the National Council of State Housing Agencies  (NCSHA) about cost management and the cost-certification process.", "To analyze factors limiting assessment of LIHTC development costs, we  assessed the data we collected from the 12 allocating agencies. We  identified and documented the consistency in cost-related variables  agencies collected and how they defined variables. We documented the  formats in which agencies provided and maintained the data we  requested and steps we took to standardize and combine data. We  reviewed Section 42 of the Internal Revenue Code (Section 42) and  related regulations to ascertain requirements for reporting development  costs and other information to allocating agencies and IRS. We also  interviewed IRS and Treasury officials about these requirements. For  more information on our scope and methodology, see appendix I.", "We conducted this performance audit from May 2015 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Credit Allocation and Cost Oversight", "paragraphs": ["Each state receives an annual LIHTC allocation. Allocating agencies  then evaluate developers\u2019 proposals to use tax credits to help develop  new or rehabilitate existing housing against their QAPs. The QAPs  identify agencies\u2019 priority housing needs and contain selection criteria for  awarding credits. In addition to meeting criteria outlined in a QAP,  projects awarded tax credits must remain affordable to qualifying  households for at least 30 years.", "The amount of LIHTCs allocating agencies award to a project is primarily  based on the project\u2019s eligible basis. The agencies should allocate no  more credits than they deem necessary to ensure the project\u2019s financial  feasibility through the 10-year credit period. To determine financial  feasibility, Section 42 requires allocating agencies to consider the reasonableness of developmental and operating costs, any proceeds or  receipts expected to be generated through the tax benefit, and the  percentage of credit amounts used for project costs other than the cost of  intermediaries such as syndicators (discussed later in this section).  Section 42 also requires allocating agencies to evaluate available private  financing and other federal, state, and local funding a developer plans to  use and adjust the award accordingly.", "Allocating agencies must review costs to determine the credit amount at  three points in time: application (when the proposal is submitted),  allocation (when the agency commits to providing credits to a specific  project), and placed in service (when the project is ready for occupancy  under state and local laws). When a project is placed in service, the  developer must submit a final cost certification to the allocating agency.  This certification details a project\u2019s total costs and eligible basis. In  general, the cost certification must be accompanied by an unqualified  audit report from a certified public accountant, conducted in accordance  with generally accepted auditing standards. An agency\u2019s QAP (or  related documents) may outline policies and procedures for reviewing  costs."], "subsections": []}, {"section_title": "Investors and Project Financing", "paragraphs": ["Once a project is awarded tax credits, developers often attempt to obtain  funding for the project by attracting investors willing to contribute equity  financing. Developers typically sell an ownership interest in their LIHTC  projects in exchange for equity from investors (a process commonly  referred to as selling tax credits). The equity contributions (or  investments) reduce debt burden on LIHTC projects, making it possible  for project owners to offer lower, more affordable rents. Generally,  investors buy an ownership interest in a LIHTC partnership (commonly  referred to as buying tax credits) to lower their tax liability.", "Investors in LIHTC projects may invest directly or through intermediaries  known as syndicators. Direct investors are typically larger institutional  investors, such as banks that have the internal capacity to fund and  manage the acquisition, underwriting, and management of the underlying  development project. Under the direct investment model, an investor  owns a \u201climited\u201d partner interest in the partnership owning the underlying  property, with the developer typically assuming the \u201cgeneral\u201d partner  interest (see fig. 1).", "Alternatively, investors may invest in a fund organized and managed by a  syndicator. The syndicator-managed funds are limited partnerships in  which investors own the limited partner interest in the fund (upper-tier  partnership), with the fund in turn owning the limited partner interest in  various property partnerships (lower-tier partnership). The money  investors pay for a partnership interest in the fund is paid to associated  LIHTC projects as equity financing. Syndicators manage two types of  funds: proprietary (or single-investor) funds and multi-investor funds (see  fig. 2). In both cases, the syndicator originates potential investments,  performs underwriting, and presents the potential investments to  investors.", "Syndicators receive a fee from investors\u2014typically a percentage of the  gross equity raised\u2014for their services in establishing, originating,  underwriting, and closing on projects for investment funds. This fee is  often referred to as an \u201cacquisition fee\u201d or an \u201cupper-tier syndication fee.\u201d  The syndicator also may charge a fee to each project partnership in a  fund for project-specific legal and accounting costs. This fee is often  referred to as a \u201clower-tier syndication fee.\u201d", "LIHTC projects typically do not produce income through rents for  investors. Rather, investors use the credits to offset their income tax  liabilities over the 10-year credit period. As a result, for a LIHTC  investment to be financially beneficial to an investor, the present value of  10 years of LIHTCs and any related benefits, such as taxable losses and  depreciation, generally must exceed the amount the investor contributes  in equity. This consideration, in part, drives the price investors are  willing to pay for tax credits. Under normal economic conditions, equity  pricing per tax credit has ranged from the $0.80s to mid-$0.90s per $1.00  of tax credit.", "Projects often require financing in addition to investors\u2019 equity  contributions to cover development costs. This gap may be filled by  federal, state, local, and private sources\u2014for example, certain HUD  grants and loans, state tax credits modeled after the federal program, and  mortgage loans without government guarantees. A developer also may  defer its developer fee to cover all or a portion of a funding gap."], "subsections": []}, {"section_title": "Program Oversight", "paragraphs": ["IRS and allocating agencies jointly administer the LIHTC program, with  other entities providing additional types of oversight, as follows.", "IRS administration of the LIHTC program includes developing and  publishing regulations and guidance, enforcing taxpayer compliance,  and overseeing allocating agencies\u2019 monitoring of taxpayer  compliance. The IRS Office of Chief Counsel, with assistance from  Treasury\u2019s Office of Tax Policy, develops and publishes regulations  and guidance based on requirements in Section 42. In general, IRS  collects and reviews information necessary for tax administration,  including data on LIHTCs awarded and other information necessary to  check the amount claimed on tax returns. According to IRS officials,  IRS also regularly communicates with allocating agencies and  stakeholders about LIHTC compliance issues and best practices at  industry meetings and conferences.", "IRS relies on allocating agencies to administer and oversee the  LIHTC program in states. In addition to awarding credits to qualified  projects, allocating agencies are responsible for monitoring LIHTC  properties for compliance with program requirements (for example,  rent ceilings, tenant income, and habitability). Noncompliance with  LIHTC requirements may result in IRS denying claims for the credit in  the current year or recapturing (taking back) credits claimed in prior  years.", "Investors and syndicators also monitor projects by performing due  diligence in relation to their viability and eligibility for tax credits, in part  to ensure they receive the expected tax credits.", "Although not an administering agency, HUD plays a role in collecting  data on the program. Specifically, the agency has to collect  information on LIHTC tenant characteristics, as mandated in the  Housing and Economic Recovery Act of 2008. Since 1996, HUD  voluntarily has collected LIHTC project-level data because of the  importance of the credits as a source of funding for low-income  housing. HUD also has a role in designating difficult development  areas and qualified census tracts.", "In addition, NCSHA has identified recommended practices to  allocating agencies for administering the LIHTC program, including  oversight of QAPs and cost verification."], "subsections": []}]}, {"section_title": "LIHTC Project Costs Varied Widely, and Scale, Location, and Tenant Characteristics Explained Some Differences", "paragraphs": [], "subsections": [{"section_title": "Median Cost of LIHTC Projects Was About $200,000 Per Unit, and the Range and Composition of Costs Varied by Construction Type", "paragraphs": ["The median per-unit cost of the LIHTC projects completed in our 12  selected allocating agency jurisdictions in 2011\u20132015 was $204,000.  The median per-unit cost of new construction projects was about $50,000  higher than for rehabilitation projects ($218,000 compared to about  $169,000). For new construction projects, the median per-unit cost was  about $38,000 higher in urban areas than in nonurban areas (about  $230,000 compared to $192,000). For rehabilitation projects, the  median per-unit cost was about $72,000 higher in urban areas than in  nonurban areas (about $196,000 compared to $124,000). The  development costs we report may be somewhat understated, because  the documentation we obtained from allocating agencies did not  consistently include the value of all costs\u2014for example, donated land\u2014 which we discuss later in this report.", "As shown in figure 3, the median per-unit LIHTC equity investment was  about $147,000 for new construction projects (about 67 percent of the  total development cost) and $103,000 for rehabilitation projects (about 61  percent of the total development cost). Other funding sources, such as  private loans or state and local programs, made up for differences  between project costs and equity investments. We estimated equity  investments for the selected projects based on their LIHTC allocations  and the reported prices investors paid for the credits. The median credit  price increased from about $0.80 in 2011 to about $0.93 in 2015.", "Although rehabilitation projects generally had lower per-unit costs than  new construction, both types of projects had similar proportions of hard  and soft costs (see fig. 4). Hard costs (which include land, existing  structures, and construction) were roughly 70 percent of new construction  and rehabilitation project costs. Costs for acquisition of existing structures  were proportionally higher and construction costs proportionally lower for  rehabilitation projects than for new construction. Land costs were close in  proportion. Soft costs (which include contractor fees, architect and  engineer fees, developer fees, and other soft costs such as construction  loan financing) were proportionally similar for new construction and  rehabilitation projects\u2014roughly 30 percent."], "subsections": []}, {"section_title": "Project Cost Trends Differed by Construction Type and Are Difficult to Compare to Market-Rate Projects", "paragraphs": ["In nominal terms, the median per-unit cost of new construction projects  increased by about 13 percent during 2011\u20132015, and the median per- unit cost of rehabilitation projects decreased by about 21 percent. After  accounting for inflation, the median per-unit cost for new construction  projects increased by about 7 percent (from about $208,000 to $222,000  in 2015 dollars), while the median per-unit cost for rehabilitation projects  decreased by about 26 percent (from about $207,000 to $153,000 in  2015 dollars). However, this analysis does not account for changes in  the composition of projects that were built (such as size or location). In  addition, the overall trends were substantially affected by certain  allocating agencies.", "For example, California accounted for about 24 percent of the new  construction projects in our sample. During 2011\u20132015, the median  per-unit cost of California\u2019s new construction projects increased by  about 11 percent (about 18 percent in nominal terms), while the  median per-unit cost of all other new construction projects in our  sample decreased by about 4 percent (in nominal terms, increased by  about 2 percent).", "Additionally, New York City accounted for about 19 percent of the  rehabilitation projects in our sample, and the median per-unit cost of  its projects declined by about 33 percent (about 32 percent in nominal  terms) in 2011\u20132012. During this same period, the median per-unit  cost of all other rehabilitation projects increased by about 13 percent  (about 15 percent in nominal terms) but did not show a clear trend in  2011\u20132015.", "To provide some context for the project costs and trends discussed  above, we compared the annual rates of change for median new  construction costs\u2014generally site work, construction materials and labor,  and contractor fees\u2014to the annual rates of change in a Bureau of Labor  Statistics index for construction costs that tracks price changes for  various types of new construction.", "The median per-unit construction cost of the LIHTC projects (unadjusted  for inflation) and the index both increased over the analysis period\u2014by 11  percent and 10 percent, respectively. However, while the index  consistently increased annually by an average of about 2 percent, the  magnitude and direction of changes for the LIHTC projects varied,  increasing by as much as about 8 percent in 2013\u20132014 and decreasing  by about 5 percent in 2014\u20132015.", "Figure 6 shows the annual median per-unit construction costs for new  construction LIHTC projects and a projected trend if they had increased at  the rate of the Bureau of Labor Statistics index beginning in 2011. These  results suggest that factors besides the price of construction inputs (such  as material, labor, and contractor fees) drove changes in the median cost  of LIHTC projects completed during 2011\u20132015. Project locations and  characteristics varied each year, and a number of these factors were  associated with per-unit costs, as discussed later.", "To provide context for our cost analysis, we also examined the feasibility  of comparing LIHTC development costs to development costs for market- rate projects. However, we were unable to obtain data on market-rate  developments from industry groups we contacted that represented  developers and lenders, or from researchers who had conducted similar  studies. Additionally, allocating agencies did not consistently maintain key  project data\u2014such as gross square footage, number of stories, or  construction wages\u2014needed to benchmark LIHTC project costs using a  construction cost estimation tool. We discuss these and other data  challenges in greater detail later in this report.", "Nonetheless, several factors provide possible explanations for why  construction costs, developer fees, and other soft costs may differ  between LIHTC and market-rate projects:", "Durability. LIHTC project developers may have incentive to use more  durable (and potentially more expensive) construction components  than they might for market-rate developments. They may seek to limit  replacement costs before the end of the 15-year compliance period\u2014 after which they may seek additional LIHTCs for rehabilitation or  convert units to market-rate. As revenue from tenant rents is generally  lower for LIHTC projects than for market-rate projects, and because  investors prefer not to refinance during the 15-year compliance period  and lower their returns, LIHTC project owners are more limited in their  ability to recapitalize aging projects. On the other hand, market forces  may encourage market-rate developers to provide higher-grade  finishes and amenities than LIHTC developers in some markets.", "Agency and local requirements. Allocating agencies can use QAP  minimum standards and scoring incentives to influence the types of  projects developers propose and build. Although these preferences  can help achieve a variety of policy priorities, some can increase  costs. For example, QAPs may provide developers with incentives to  pursue historic preservation projects or require them to add on-site  commercial space or amenities such as community rooms. Green  building and energy-efficiency standards are also common QAP  incentives that can increase development costs, although they may  offset some future operating costs through lower utility expenses.  Some QAPs also may incentivize urban infill projects on sites that  require extensive demolition or environmental remediation, which add  to costs.", "Profit motive. LIHTC projects may be less attractive financially for  developers than market-rate projects because they yield lower profits  from rental income. Accordingly, allocating agencies allow a  developer fee, for which tax credit equity generally pays. For the  projects in our sample, developer fees represented about 11 percent  of development costs at the median. In comparison, market-rate  developers are generally compensated through rental income or from  the sale of their developments.", "Other soft costs. LIHTC projects may have higher soft costs (other  than developer fees) compared to market-rate and other types of  affordable developments for a number of reasons, including the  following:", "Financing projects through LIHTC equity is a complex process  that can result in higher legal, accounting, and syndication  fees and can also require developers to hire outside  consultants and develop sophisticated internal capacity.", "LIHTC developers also generally rely on multiple public and  private funding sources in addition to tax credit equity to fully  finance projects. For example, projects in California used  about six funding sources in addition to LIHTC equity, on  average. These additional sources can increase legal,  accounting, and other fees due to the costs associated with  seeking additional sources, writing applications, and complying  with further appraisal, audit, and regulatory requirements.  Securing additional funding sources also can delay the  development process, which may increase land holding and  interest expenses."], "subsections": []}, {"section_title": "LIHTC Project Costs Varied across Selected Allocating Agencies", "paragraphs": ["As shown in figure 7, the median per-unit cost of new construction  projects across the 12 selected allocating agencies ranged from a low of  about $126,000 in Texas to a high of $326,000 in California. The  median per-unit cost was less than $200,000 for 4 of the 12 allocating  agencies (Arizona, Georgia, Ohio, and Texas); from $200,000 to  $300,000 for 6 of the 12 allocating agencies (Florida, Illinois, New York,  New York City, Pennsylvania, and Washington); and greater than  $300,000 for 2 of the 12 agencies (Chicago and California).", "Median per-unit costs for rehabilitation projects were lower and varied  less than those for new construction projects, ranging from a low of about  $107,000 in Illinois to a high of about $258,000 in both Chicago and New  York. In all selected allocating agencies, the median per-unit cost for  rehabilitation projects was lower than for new construction projects. For  example, the median in California was about $184,000, compared to  about $326,000 for new construction. For additional details on the cost of  rehabilitation projects, see appendix III.", "As also shown in figure 7, within individual allocating agencies, the cost  difference between the least and most expensive project was as little as  $104,000 per unit (Georgia) and as much as $606,000 per unit  (California). Project costs tended to be clustered around the median for  each allocating agency, but were still widely distributed between the 25th  and 75th percentiles for some allocating agencies. For example, the  difference between the 25th and 75th percentiles was more than $75,000  in half of the locations we reviewed (California, Chicago, Illinois, New  York, New York City, and Pennsylvania).", "Although projects costs were among the highest for the Chicago and New  York City allocating agencies, they were within the range of costs for five  other cities that had comparable population and density and were in the  jurisdictions of other allocating agencies within our sample (see fig. 8).", "Hard costs as a proportion of total development costs varied among the  selected allocating agencies. Agencies\u2019 hard costs ranged from about 66\u2013 76 percent for new construction projects completed in 2011\u20132015, with  soft costs accounting for the remainder (see fig. 9). The proportions of  hard and soft costs were generally similar across higher- and lower-cost  locations. For example, California had the highest median per-unit cost  among selected allocating agencies, but had hard and soft costs (about  67 and 33 percent) proportionally similar to those in Texas (about 68 and  32 percent) and Georgia (about 69 and 31 percent), where median per- unit costs were among the lowest.", "In relation to hard costs, median per-unit construction costs were highest  in Chicago, where construction costs constituted about 72 percent of total  development costs (but were about 63 percent elsewhere, on average). In  comparison, construction costs in California were just 56 percent of total  development costs due to higher land costs (about 12 percent of total  development costs, but about 5 percent elsewhere, on average).", "For soft costs, developer fees and other soft costs (such as construction  loan interest and permit fees) varied more widely across the allocating  agencies than architect and engineer fees and contractor fees. Developer  fees ranged from about 6 percent of development costs in Chicago to  about 13 percent of development costs in Florida. Other soft costs  similarly ranged from about 7 percent of development costs in  Pennsylvania to about 14 percent of development costs in California. In  comparison, architect and engineer fees ranged from about 3 percent to 5  percent of development costs, and contractor fees ranged from about 5  percent to 9 percent of development costs."], "subsections": []}, {"section_title": "Scale, Location, and Other Characteristics of LIHTC Projects Explained Some Cost Differences", "paragraphs": ["By design, the LIHTC program gives allocating agencies flexibility to  address local housing needs and agency priorities through their award  processes. As a result, the characteristics of each agency\u2019s LIHTC  projects generally can be expected to reflect the real estate conditions,  built environment, and populations of the areas they serve. For example,  in locations with less density and inexpensive land, low-rise multibuilding  developments may be more cost-effective, while in locations with higher  density and expensive land, taller single-building developments may be  more cost-effective. Therefore, it is important to consider the cost  reasonableness of LIHTC developments within the context of local  conditions.", "As previously noted, we developed a regression model to examine the  relationship between the cost of developing LIHTC projects and various  building, location, and other variables. Our model results indicate that a  number of key characteristics were associated with significant increases  or decreases in the per-unit costs of LIHTC projects that received tax  credit awards from our selected allocating agencies. Differences in the  prevalence of these characteristics among the allocating agencies help  explain the cost variation among and within them. While our results  indicate that these characteristics may have directly or indirectly affected  per-unit cost, their specific effects varied by allocating agency, suggesting  that our estimates are sensitive to the particular conditions of the  locations we sampled.", "First, construction type (new construction or rehabilitation) and scale  (number of units and unit size, measured by number of bedrooms)\u2014were  associated with cost, controlling for other characteristics.", "Construction type. We previously noted that the median per-unit cost for  new construction was about $50,000 higher than the per-unit cost for  rehabilitation projects, but after controlling for other characteristics, we  estimated this difference to be $39,000. New construction projects were  more costly than rehabilitation projects because they had higher  construction costs (primarily site work, materials, and labor). For  perspective, $39,000 represents about 19 percent of the median per-unit  cost ($204,000) of projects in our sample.", "Number of units. In general, we found that per-unit costs decreased as  the number of units in a project increased, consistent with economies of  scale in construction. Specifically, we estimated that the per-unit cost of  projects with more than 100 units was about $85,000 less than projects  with fewer than 37 units (see fig. 10). In addition, we estimated that the  per-unit cost of projects with 37\u201350 or 51\u2013100 units was about $31,000 or  $56,000 lower, respectively, than projects with fewer than 37 units.", "However, due to data limitations, our analysis does not account for  building type\u2014for example high-rise or low-rise structures\u2014that may  have affected per-unit cost. To account for some variation in building  type, we compared projects with one or more larger buildings (60 or more  units) to projects with more typical building designs. We found that the  per-unit cost of projects with larger buildings\u2014which were also taller on  average\u2014was about $15,000 more (about 7 percent of the median per- unit cost). This difference may be attributable to specific design  requirements of larger and taller structures, such as construction  materials and sprinkler systems.", "Unit size (number of bedrooms). As would be expected when  comparing costs on a per-unit basis, we estimated that projects with  larger units had higher per-unit costs. We estimated that the per-unit cost  decreased by about $2,000 (or about 1 percent of the median per-unit  cost) as the number of units with fewer than two bedrooms increased  by10 percent. Conversely, the per-unit cost increased by about $3,000 as  the number of units with more than two bedrooms increased by 10  percent.", "Second, we also found that the types of organizations that developed  LIHTC projects and the tenants they targeted were associated with per- unit cost, after controlling for other characteristics.", "Tenant type. We estimated that the per-unit cost of projects targeted to  seniors was about $7,000 lower than nonsenior projects (or about 3  percent of the median per-unit cost). Compared to nonsenior projects,  units in senior projects generally had less residential square footage (for  which we did not control), which may help explain their lower per-unit  costs.", "Target income level. We also estimated that the per-unit costs of  projects targeted to predominantly low-income tenants was about  $11,000 more than for mixed-income projects (or about 5 percent of the  median per-unit cost). Mixed-income projects might be expected to have  higher costs as they generate more rent revenue to support higher  development costs. But, because LIHTC allocations are calculated based  on the ratio of low-income units to total units, predominantly low-income  projects receive proportionally more LIHTC equity, which may allow them  to support higher development costs. For example, we estimated that  projects targeted towards predominantly low-income tenants generated  LIHTC equity equal to about 67 percent of development cost, whereas  mixed-income project generated LIHTC equity equal to about 50 percent  of development cost.", "Nonprofit participation. Section 42 requires a portion of each state\u2019s tax  credit allocation to be set aside for projects involving a qualified nonprofit  organization. We estimated that the per-unit cost of these projects was  about $15,000 more than projects not in the set-aside (or about 7 percent  of the median per-unit cost). Other studies of the LIHTC program have  suggested potential explanations for this result. For example, nonprofit  organizations may focus more on populations that are more costly to  serve, such as special-needs tenants who may require additional or  enhanced facilities. Additionally, nonprofit developers may have higher  costs because they are often smaller, produce fewer projects, and may  need to spend more time and resources on activities such as fundraising  and market research, compared to their for-profit counterparts.", "Third, controlling for other characteristics, we found that a number of  geographic and economic variables were associated with cost  differences.", "Location. We estimated that urban locations were associated with a per- unit cost about $13,000 higher than for suburban locations (or about 6  percent of the median per-unit cost), and that per-unit costs in rural areas  were not statistically different from suburban areas. Consistent with this  estimate, the data in our sample show that per-unit land and construction  costs were greater in urban areas than in nonurban areas.", "In addition, urban projects were more likely to include parking structures,  which we found were associated with a per-unit cost increase of about  $56,000 in California and Arizona (or about 27 percent of the median per- unit cost), where parking structure data were available. Among these  projects, about 98 percent of projects with parking structures were in  urban areas.", "Urban projects were also located in closer proximity to transit, which we  found increased per-unit construction costs. In an alternative specification  of our model limited to projects near fixed-guideway transit stations, we  estimated that the per-unit construction costs of projects that were 0.5  miles or less from a transit station\u2014known as transit-oriented  developments\u2014were about $17,000 more than projects that were  between 0.5 miles and 1.0 miles from a transit station.", "Local housing market and economy. As discussed previously, difficult  development areas are those with high construction, land, and utility costs  relative to area median gross income; qualified census tracts are areas  with higher rates of low-income households or poverty rates. We did not  find that projects in these areas were associated with cost differences  compared to projects outside these areas.", "However, we found cost differences among projects in difficult  development areas and qualified census tracts when we estimated  alternative specifications of our model that excluded some geographic,  economic, and local housing market variables that may be associated  with the areas and tracts. For example, using a model specification that excluded local property values, we estimated that difficult development  areas were associated with about a $9,000 increase in per-unit costs. In a  separate estimation that excluded poverty rates and some other  economic and geographic variables, we estimated that projects in  qualified census tracts were associated with a per-unit cost increase of  about $18,000 (or about 9 percent of the median per-unit cost). In both  cases, the project characteristics of interest (difficult development area or  qualified census tract) are likely associated with the excluded variables  mentioned, as difficult development areas are characterized by high land  costs and qualified census tracts are characterized by high poverty rates,  among other factors. In the absence of the excluded geographic or local  housing market variables, the estimated influence of these project  characteristics is more pronounced.", "Finally, we found that the presence of federal funding sources in addition  to LIHTC were associated with cost differences, after controlling for other  characteristics.", "American Recovery and Reinvestment Act funding. We estimated that  projects that received funding through either of two LIHTC programs (Tax  Credit Assistance Program or Section 1602 Program) under the American  Recovery and Reinvestment Act of 2009 (ARRA) were associated with a  decrease of about $13,000 in per-unit costs (or about 6 percent of the  median per-unit cost). Projects received ARRA funds during a period of  economic recovery, and the relative scarcity of private funds may have  motivated developers to pursue less costly projects. Because about 91  percent of projects that received ARRA funds were completed in 2011\u2013 2012, we restricted our ARRA estimate to projects completed in that  period.", "We estimated that soft costs were about $4,000 per unit lower for ARRA  projects than for non-ARRA projects. Soft costs, which we previously  mentioned were about one-third of total development costs, may have  been lower for ARRA projects because proportionately fewer of these  projects used tax credit equity to fund development costs. For example,  about 30 percent of these projects received ARRA funds entirely in lieu of  tax credits. As a result, ARRA projects may have had lower or no tax  credit partnership and syndication costs. However, we did not estimate a  significant difference in construction costs between ARRA and non-ARRA  projects.", "Rural Development funding. Projects that received at least one Rural  Development loan or grant, from the Department of Agriculture, were  associated with about a $32,000 decrease in per-unit cost (or about 16  percent of the median per-unit cost). However, projects that received  these loans or grants may have had unique characteristics that affected  cost. According to an allocating agency official from California\u2014where  about 19 percent of the projects we reviewed used at least one Rural  Development loan or grant\u2014projects that received these funds may have  had lower total development costs because high-cost projects were not  financially feasible in some rural areas due to lower rents and less local  public funding. In addition, projects to house seasonal farm workers that  receive funding from Rural Development\u2019s Section 514/516 Farm Labor  Housing programs may lack some amenities\u2014such as in-unit kitchens  and bathrooms\u2014that increase costs and are more common in other  LIHTC projects. Furthermore, private loans guaranteed through Rural  Development\u2019s Section 538 Guaranteed Rural Rental Housing Program  are subject to per-unit limits, which may have hindered the feasibility of  higher-cost projects.", "Other federal funding. We also estimated that projects that received  HOPE VI funds were associated with about an $18,000 increase in per- unit costs (or about 9 percent of the median per-unit cost).", "However, the cost increase that we estimated may not have fully captured  all additional costs associated with these projects. Several of the 23  HOPE VI projects included in our sample were phases of larger HOPE VI  Revitalization Grant projects and may have included only the project  costs associated with a smaller portion of a multibuilding development. In  addition, some predevelopment expenses associated with the overall  grant project, such as the demolition of existing structures and tenant  relocation, may not have been included in the cost certifications we  reviewed.", "In contrast to the HOPE VI projects we reviewed, we did not find that  projects that received Community Development Block Grant (CDBG) or  HOME Investment Partnerships Program (HOME) funds had statistically  different per-unit total development costs. However, like HOPE VI  projects, CDBG and HOME projects were associated with increases in  per-unit construction costs (about $15,000 or $6,000, respectively). The  presence of HOME funds also was associated with an increase in per-unit  soft costs (about $2,000), while CDBG or HOPE VI funds were not  strongly associated with differences in per-unit soft costs.", "While these sources were associated with cost differences, controlling for  other characteristics, the association may not be entirely causal. The use  of CDBG, HOME, and HOPE VI funds may have directly increased  construction costs, as fund usage can trigger federal prevailing wage  requirements. On the other hand, CDBG and HOME funding (for  example) may have been used in addition to LIHTC equity to fill funding  gaps for projects with particularly high costs.", "Finally, to examine the relationship our model characteristics had on the  per-unit cost of low- and high-cost projects, we compared the  characteristics of new construction projects below the 25th percentile for  per-unit cost against those above the 75th percentile.", "As shown in table 1, projects below the 25th percentile generally had a  higher proportion of characteristics that were associated with decreases  in per-unit cost. These projects were larger, had smaller units, were more  often targeted toward seniors, and were located in rural areas. In  comparison, projects above the 75th percentile generally had a higher  proportion of characteristics associated with increases in per-unit cost (or  less of a decrease). These projects were smaller, had larger units, were  more often located in urban areas, and were built in more expensive real  estate markets, as the following examples illustrate.", "About 70 percent of the projects below the 25th percentile had either  51\u2013100 units or more than 100 units\u2014which we found were  associated with lower per-unit cost\u2014compared to just 46 percent of  the projects above the 75th percentile.", "About 40 percent of the projects below the 25th percentile were senior  projects\u2014which we also found were associated with lower per-unit  costs\u2014compared to 18 percent for projects above the 75th percentile.", "About 88 percent of the projects above the 75th percentile were in  urban areas\u2014which we found were associated with higher per-unit  costs\u2014compared to 71 percent of the projects below the 25th  percentile."], "subsections": []}]}, {"section_title": "Allocating Agencies Took Steps to Manage and Verify Development Costs, but LIHTC Policies Do Not Require Detailed Cost Information", "paragraphs": ["Allocating agencies used approaches that include cost and fee limits and  cost-based scoring criteria to manage project-development costs. A few  agencies adopted additional measures such as detailed contractor  certifications at project completion to help guard against a risk of fraud  involving misrepresentation of contractor costs, but LIHTC policies do not  require these enhancements."], "subsections": [{"section_title": "The 57 Allocating Agencies Managed Development Costs through Approaches That Included Cost and Credit Limits, Fee Limits, and Scoring Criteria", "paragraphs": ["As shown in table 2, the eligibility requirements and scoring systems that  the 57 allocating agencies used to evaluate credit applications generally  included approaches that seek to limit development costs or incentivize  lower costs. For information on the approaches each of the agencies  used, and in what combination, see appendix VI.", "The types and number of cost-management approaches employed by  each agency varied, as illustrated in table 3. More than one-third of the  agencies used all four types of cost-management approaches we  identified (one or more cost limits, credit allocation limits, fee limits, and  cost-based scoring criteria). In contrast, a few agencies used just one  type of approach. The number of approaches used by an agency is not  necessarily indicative of the effectiveness of its cost management.", "Additionally, the way that agencies implemented each type of approach  varied.", "The cost-management approaches agencies identified in their QAPs and  related documents were as follows.", "Cost limits. More than two-thirds of the allocating agencies (39 of 57) set  limits on the total development cost for each project or set limits on the  total eligible basis (or both). Total development cost is the overall cost to  develop a project, whereas eligible basis typically includes costs  associated with acquisition, construction and rehabilitation, and most soft  costs, but excludes costs associated with land, permanent financing, and  tax credit syndication. For information on cost limits for each of the 57  agencies, see appendix VI, table 32.", "Thirty-three agencies set limits on the total development cost for each  project. For example, Illinois limited total costs by bedroom type,  number of units, and location, based on the agency\u2019s analysis of  historical cost data.", "Ten agencies set cost limits on a project\u2019s eligible basis, and their  approaches to these limits varied. For example, two agencies adopted  universal eligible basis limits of $250,000 per unit (Pennsylvania) and  $300,000 per unit (New York City), whereas most others had multiple  limits based on project characteristics such as type (new construction  or rehabilitation), number of bedrooms, and location.", "Six agencies, including Georgia, applied cost limits from a HUD  program that insures mortgages for rental housing for moderate- income families. According to Georgia officials, adopting the HUD  limits was more cost-effective than developing cost limits based on a  market analysis.", "Credit allocation limits. About two-thirds (34) of the allocating agencies  had limits on the amount of LIHTCs available, generally per project or per  developer, and the limits varied by type and amount. For information on  credit allocation limits for each of the 57 agencies, see appendix VI, table  33.", "Twenty-nine agencies had allocation limits per project, which included  dollar limits (from $500,000 to $2.5 million) and percentage limits  (from 10 percent to 60 percent of an agency\u2019s total available credits  per project), and two of these agencies also had a per-unit limit. For  example, Illinois limited credits per project to the lesser of $1.5 million  or 28,500 credits per unit. California limited credits per project to $2.5  million, and Washington limited credits to 10 percent of the agency\u2019s  total available credits.", "Fourteen agencies had credit limits per developer or for the number of  projects a developer can sponsor in a given year. One of these  agencies also had a per-unit limit. The developer credit limits included  dollar limits (from about $1.2 million to $3 million per developer) and  percentage limits (from 10 percent to 25 percent of the agency\u2019s total  available credits). For example, Pennsylvania limited credits to $1.2  million per developer, and Washington limited developers to 15  percent of the agency\u2019s total LIHTCs and two projects per application  round. Another agency limited the number of projects (two) a  developer can sponsor in a given year.", "Fee limits. Fifty-one agencies limited developer fees and 47 also limited  contractor fees. The agencies\u2019 approaches to developer and contractor  fee limits varied. As for other limits, 14 agencies limited fees for other  project team members such as architects. For information on fee limits  for each of the 57 agencies, see appendix VI, table 34.", "Twenty-seven agencies had a flat limit on developer fees based on a  percentage of the total development cost (typically 15 percent,  although percentages ranged from 8 percent to 20 percent), while two  others had dollar caps ($13,000 and $18,000 per unit).", "Twenty-one agencies set tiered limits for developer fees based on the  number of units in or cost of the project. For example, Arizona and  Texas based their two- and three-tiered limits on the number of units  in a project. Chicago and Illinois had tiered percentage limits based  on a project\u2019s development costs.", "Twenty-five agencies had separate developer fee limits for acquisition  costs, ranging from 4 percent to 15 percent, or tiered limits based on  development costs.", "Fourteen agencies set dollar caps on the total fees developers could  receive per project, ranging from $1 million to $3.75 million.", "Twenty-seven agencies also limited fees earned by related-party  developers and contractors. For example, Pennsylvania set a  related-party developer fee limit (12 percent) lower than its developer  fee limit (15 percent). Illinois required related-party developers to  reduce their fees by their related general contractor\u2019s profit.", "Cost-based scoring criteria. A large majority (51) of the allocating  agencies used a competitive scoring process that incorporated one or  more cost-based criteria to award LIHTCs. For information on cost-based  scoring criteria for each of the 57 agencies, see appendix VI, table 35.", "Twenty-four agencies awarded points to projects with costs under an  agency\u2019s limits. For example, Washington awarded points to projects  for which the developer fee was below the agency\u2019s limit of 15  percent.", "Eighteen agencies awarded points to projects with comparatively  lower costs. For example, New York City awarded points to projects  with costs below the median total development cost of all submitted  applications.", "Eleven agencies awarded points to applications for credit efficiency,  which many of the agencies measured by the dollar amount of credits  requested relative to the number of units proposed. For example,  Ohio awarded a sliding scale of points to projects based on the ratio  of the credits requested to the proposed number of units, with lower  ratios (representing greater credit efficiency) earning more points.", "Three agencies\u2019 competitive scoring criteria included penalties for  developers with poor past cost performance. For example, they  awarded negative points to developers that exceeded cost limits or  provided incomplete cost information for previous projects.", "In addition, 35 agencies included a cost-based criterion in their  application scoring tiebreakers. For example, Arizona included a  credit efficiency criterion as a tiebreaker.", "Other cost-related approaches (12 selected agencies). Through our  interviews and review of documentation, we also identified several other  steps that our 12 selected allocating agencies took to manage LIHTC  project costs at application and during construction.", "Officials from two agencies (Georgia and Ohio) told us that their cost- reasonableness reviews included identifying high-cost outliers. For  example, Ohio replaced its total development cost limit with a process  for identifying and removing from consideration projects with the  highest total development costs compared with other competing  applications.", "Chicago and Florida officials said they required or encouraged a bid  process for selecting contractors or subcontractors. Florida officials  told us that competitive selection of subcontractors, rather than using  related-party subcontractors, provided cost transparency and could  lead to lower costs.", "Similarly, New York City officials told us that nearly all the agency\u2019s  LIHTC projects received funds from a city subsidy loan program that  can require competitive selection of contractors, and the agency  reviewed each contractor bid for cost reasonableness.", "Illinois required third-party cost reviews of some projects as part of its  cost-reasonableness review. Projects with related parties and all  rehabilitation projects had to provide a construction cost breakdown  completed by an independent third party. Additionally, Georgia\u2019s QAP  provided discretion to the agency to require a third-party cost review  as needed.", "According to officials from 11 of the 12 agencies, policies they used to  discourage cost increases during construction included restrictions on  change orders, such as by requiring agency approval and  documenting a project\u2019s cost increases (8 agencies); requiring  developers or general contractors to pay for cost increases using  contingency funds, profits, or other sources of funding (10 agencies);  and penalizing developers for cost increases in future application  rounds (5 agencies).", "Nine of the 12 selected agencies conducted site inspections directly  or by a third party to monitor construction progress, ranging from one  visit to biweekly site visits. For example, New York officials said they  conducted regular and unannounced site visits. Officials from the  other 3 agencies said they did not conduct site visits and relied on  other public funding partners, private lenders, developers, and  syndicators to monitor projects during construction and in some  cases, provide monitoring reports for the agency\u2019s review.", "Although officials from many of the selected allocating agencies  acknowledged the importance of managing LIHTC development costs, for  the most part agencies have not determined the specific cost effects of  their approaches. A June 2016 report by Enterprise Community Partners  recognized the complexity of assessing the cost implications of individual  agency actions, while also noting that the wide range of agency  approaches represented an opportunity for experimentation, innovation,  and sharing of leading practices. The report recommended that as  agencies establish goals and make changes to QAPs, they should  regularly evaluate cost trends and outcomes. But as discussed later in the  report, limitations in the cost-related data allocating agencies collect and  the format in which they maintain them have hampered such evaluation."], "subsections": []}, {"section_title": "Some Allocating Agencies Have Enhanced Cost- Verification Requirements to Manage a Fraud Risk, but LIHTC Policies Do Not Require It", "paragraphs": ["While a few allocating agencies have implemented additional cost- certification controls\u2014such as contractor-level certifications\u2014to help  address the risk of fraud involving misrepresentation of contractor costs,  there are no LIHTC requirements to do so. Rather, allocating agencies  oversee costs at project completion by reviewing final developer cost  certifications. LIHTC regulations require developers of projects with more  than 10 units to submit a cost certification, which includes total project  costs and eligible basis, to the allocating agency and for the certification  to be audited by a certified public accountant. As illustrated in figure 11,  developer cost certifications do not break out specific contractor costs;  rather, they aggregate contractor costs into several broad categories.", "While the extent of fraud in the LIHTC program is not known, federal legal  actions involving LIHTC projects in Florida highlight the risk of  unscrupulous developers, contractors, and subcontractors inflating costs  and obtaining excess program resources for personal financial gain. For  example, according to the Department of Justice\u2019s U.S. Attorney\u2019s Office  for the Southern District of Florida:", "Several developers and contractors conspired in a contract inflation  scheme affecting numerous LIHTC projects. The scheme involved  submitting fraudulently inflated cost information to the allocating  agency, resulting in $36 million in excess LIHTCs and federal grants.  Seven individuals pled guilty and received sentences that included  forfeiture of fraudulently obtained funds and for three individuals,  prison time.", "In another scheme affecting four LIHTC projects, developers working  with a related-party contractor and subcontractor submitted  fraudulently inflated cost information to the allocating agency. Under a  prosecution agreement, the subcontractor has paid $5.2 million in  forfeiture and fines.", "But only a limited number of allocating agencies\u20145 of the 12 we selected  and at least 4 of the remaining 45 agencies\u2014have additional cost- certification controls to help address the risk of fraud involving  misrepresentation of contractor costs. These controls are outlined in the  agencies\u2019 QAPs. Agencies outside of the 12 we selected for more  detailed review could have requirements beyond what appears in their  QAPs. However, two national accounting firms with LIHTC practices  confirmed that, as of early 2018, a limited number of allocating agencies  had implemented controls to address the risk of fraud involving  misrepresentation of contractor costs.", "Of the 12 selected agencies, 4 required general contractor cost  certifications, which provide information that can be used to  corroborate costs listed in developer cost certifications (see fig. 12).  More specifically, Florida and Ohio required general contractor cost  certifications for all projects, and Arizona and Georgia required cost  certifications only from related-party general contractors.", "In addition, California required auditors performing developer cost  certifications for projects with related parties to audit to the level of the  subcontractor. According to one national accounting firm, this may  involve examining source documents from subcontractors (such as  invoices, fee agreements, contracts, or deeds) to verify consistency  with construction line items in the developer cost certification.", "Among the 45 remaining agencies, Delaware, Kentucky, Michigan,  and Missouri had QAPs that required general contractor cost  certifications for all projects. None of the 45 agencies\u2019 QAPs cited a  requirement for cost certifications for related-party general  contractors.", "Officials from a few of the 12 selected agencies and a LIHTC accounting  firm told us that unrelated parties also may present a fraud risk. The  LIHTC development community is small in some markets, and unrelated  developers and contractors may work together repeatedly. These  relationships may pose risks similar to related-party relationships by  increasing opportunities to collude in misrepresenting costs.", "Requiring information beyond the developer cost certification provides  greater cost transparency, which may help to deter or detect  misrepresentation of costs. Federal LIHTC regulations do not require  developers to provide contractor- or subcontractor-level cost information  to LIHTC allocating agencies, or for auditors to verify the consistency of  these costs with the developer cost certification. As a result, the  regulations do not fully address the risk of fraud involving  misrepresentation of contractor costs.", "Federal internal control standards state that management should consider  the potential for fraud when identifying, analyzing, and responding to  risks. IRS and Treasury officials told us they have not considered  implementing changes to the cost-certification requirement and that  neither allocating agencies nor industry groups had suggested to them  that the existing regulation needed clarification. They suggested that  allocating agencies could enhance the requirement at their discretion.", "In contrast, NCSHA revised its recommended practices for allocating  agencies in 2017, advising that agencies should require additional cost  certification due diligence for all housing credit developments. According  to NCSHA, this additional due diligence may include audits of general  contractors\u2014alone or with an additional review of a sampling of  subcontractor invoices\u2014to verify consistency with the developer cost  certification. However, NCSHA\u2019s recommended practices are voluntary  and it remains to be seen how many agencies implement these enhanced  measures and in what form.", "Moreover, NCSHA, a national accounting firm, some developers, and  several of the selected allocating agencies told us that additional cost- certification requirements can provide more detailed cost information and  help deter fraud by providing more cost transparency to allocating  agencies and auditors. Two of these allocating agencies estimated that  requiring general contractor cost certifications could increase project  costs by about $5,000\u2013$15,000. NCSHA and two other selected agencies  noted that additional cost certification requirements would not significantly  increase project costs.", "Under the existing federal cost certification requirement\u2014which stops at  the developer level\u2014the vulnerability of the LIHTC program to a known  fraud risk is heightened, particularly in states in which allocating agencies  have not implemented additional cost certification measures."], "subsections": []}]}, {"section_title": "Weaknesses in Data Quality and Federal Oversight Constrain Assessment of LIHTC Costs", "paragraphs": [], "subsections": [{"section_title": "Data Limitations Hinder Detailed Evaluation of LIHTC Development Costs", "paragraphs": ["Data limitations, including inconsistencies among allocating agencies in  the collection, definition, and format of key variables, constrain analysis  and oversight of LIHTC development costs. While we were able to  provide a cost analysis earlier in this report, our analysis was limited to  those variables we were able to consistently collect and that were  similarly defined across the selected allocating agencies.", "LIHTC regulations require developers to submit cost certifications to  allocating agencies and the agencies to evaluate all sources and uses of  funds for each project. However, IRS does not specifically require  allocating agencies to collect and report cost-related data that would  facilitate programwide assessment of development costs. IRS officials  said that doing so would be inconsistent with their authority and role,  which is focused on taxpayer compliance rather than program evaluation.  As a result, allocating agencies have flexibility in what cost-related data to  collect, how to maintain these data, and how to define variables for  purposes of program evaluation.", "Our tax expenditure evaluation guide suggests federal agencies assess  (determine and define) what data are needed to evaluate tax  expenditures. Without standardized, accessible data on LIHTC  development costs, federal agencies and credit allocating agencies  cannot rigorously assess the factors that drive costs, the reasonableness  of costs, and the efficiency of LIHTCs in producing affordable housing.  Currently, no standards exist for collecting and maintaining data related to  LIHTC project costs."], "subsections": [{"section_title": "Agencies Inconsistently Collected or Defined Key Variables", "paragraphs": ["In conducting our evaluation of LIHTC development costs, we aimed to  collect data that would allow us to assess costs associated with federal preferences for LIHTC  developments outlined in Section 42; assess costs associated with certain allocating agency preferences,  which we identified through a literature review and interviews with  selected industry groups; and  compare LIHTC development costs to market-rate development costs,  a potentially useful step in assessing the reasonableness of project  costs as required under Section 42.", "Comprehensive information about project costs and characteristics is  needed to conduct such an evaluation. However, inconsistencies in  allocating agencies\u2019 collection or definition of certain variables  complicated our efforts to estimate statistical associations with costs, as  follows.", "Developer characteristics. Allocating agencies did not maintain  information on developers in a manner that readily permitted classification  by for-profit or nonprofit status. We estimated the association between  nonprofit status and development costs based on projects that received  credits under nonprofit set-asides. A limitation of this approach is that it  does not account for projects with nonprofit developers that received  credits apart from the set-asides. For example, almost 80 percent of  Washington\u2019s projects in our sample had a nonprofit developer, but only  32 percent received credits under the nonprofit set-aside.", "Additionally, allocating agencies maintained tax identification numbers  that would allow them to assess the influence of developer experience or  incumbency\u2014that is, how frequently a developer is awarded credits\u2014on  costs. But this information was not part of our data set, and we found that  alternative variables (such as developer name) were unreliable for  purposes of conducting a similar analysis.", "Tenant type. Allocating agencies identified and defined tenant types  differently, partly as a result of their specific QAP priorities. For  example, New York defined 39 distinct tenant types and Texas defined 2  (family and elderly). Consequently, we could not standardize tenant types  across agencies and estimate associations with development costs, other  than for projects targeted to seniors, a population for which there is a  specific federal definition.", "Energy efficiency. Among our 12 selected allocating agencies, only  California, Florida, and Texas collected information needed to assess the  influence of energy-efficiency features on project-development costs. This  information generally took the form of whether a project received a  Leadership in Energy and Environmental Design (LEED) certification, a  component of which is energy efficiency.", "Payment of prevailing wages. Some states also may require the  payment of prevailing wages (generally, the hourly wage and benefits  paid to the majority of workers in a particular area). In addition, certain  federal funding sources commonly used as gap financing in LIHTC  projects require the payment of prevailing wages. However, the agencies  in our sample did not consistently capture information on whether projects  paid these wages.", "Proximity to transit or other amenities. Most of the selected allocating  agencies required or awarded points to projects located near certain  amenities such as grocery stores, hospitals, or public transit. However,  none maintained readily accessible data indicating which completed  projects had this characteristic. Therefore, to estimate statistical  associations between a development\u2019s proximity to transit and  development costs, we merged project address information with federal  and local transit data. We were not able to estimate associations  between other amenities and development costs.", "Square footage. Four of the 12 selected allocating agencies  independently determined, or provided us with information we could use  to calculate, the gross square footage of projects. Construction cost per  gross square foot is a commonly used measure in the construction  industry and useful for comparing LIHTC project costs to construction  industry benchmarks. Additionally, because it encompasses the entire  size of the structure, this measure relates project cost to project scale  more precisely than other common measures, such as cost per unit and  cost per residential square foot.", "Building type. The selected allocating agencies varied in how they  defined and classified building types\u2014such as single-family, multifamily,  high-rise, mid-rise, or low-rise. As previously discussed, we classified  projects generally based on the number of units and number of buildings  they contained because data inconsistencies precluded more precise  classifications.", "Number of residential and nonresidential buildings. All of the selected  allocating agencies collected data on the number of residential buildings  in each project, but only five collected data on the number of  nonresidential buildings. As with gross square footage, this information  would allow cost assessments based on a project\u2019s entire physical  footprint. Additionally, this information would allow agencies to refine per- unit cost measures by subtracting the cost of nonresidential spaces (for  example, community or other common areas) from per-unit cost totals.", "Primary construction materials. The project documents we reviewed  from the selected allocating agencies generally did not include data on  the primary construction materials (for example, steel, concrete, brick, or  wood). Including this information in data maintained on completed  projects would help better explain cost variances between otherwise  similar projects (for example, a 3-story building constructed with brick  versus a 3-story building constructed with wood). This information is  similarly useful for comparing LIHTC project costs to construction industry  benchmarks.", "Number of stories per building. A few agencies, including Arizona,  California, and Texas, collected data on the number of stories per building  in each of their projects. As previously discussed, development costs may  increase for taller structures due to design requirements. As a result, data  on the number of stories would facilitate cost comparisons across similar  structures and assessment of costs against construction industry  benchmarks.", "Total syndication expenses. As discussed later in this report, none of  the selected allocating agencies collected information on total tax credit  syndication expenses. This information is necessary for understanding  the cost of developing affordable-housing projects with LIHTCs."], "subsections": []}, {"section_title": "Agencies Maintained Data in Different Formats", "paragraphs": ["We also found that the 12 allocating agencies maintained cost-related  LIHTC data in a variety of formats, ranging from paper records or  electronic files for individual projects to electronic spreadsheets with  information on multiple projects, as shown in the following examples.", "Illinois provided us with scanned copies of paper applications and cost  certifications for each project.", "California provided us with a mix of scanned copies of paper and  electronic applications and cost certifications for individual projects.", "Ohio provided us with a consolidated (or single) electronic  spreadsheet containing line-item costs for all projects.", "This variation made it difficult to efficiently collect the data and put them in  a format suitable for analyzing cost trends and drivers. To create a data  set suitable for analysis, we manually entered data for 1,356 projects with  paper files and consolidated data from spreadsheets using statistical  software for 493 projects.", "Agencies did not collect data using standardized cost categories for  analysis. As a result, we met with individual allocating agency officials to  define each variable and ensure that we consistently categorized data  across the agencies. Some examples of differences in how the data were  defined include the following:", "New York City did not separate construction-related fees from  construction costs. As a result, we were not able to compare  construction costs for projects in New York City to construction costs  for projects from the other 11 allocating agencies.", "Some allocating agencies\u2014for example New York\u2014did not include a  line item for syndication expenses on their cost certifications. On cost  certifications without a syndication line item, developers generally are  expected to report those costs on the legal or partnership line item. As  a result, we were unable to report information on syndication  expenses incurred at the project level.", "Similarly, some allocating agencies\u2019 cost certifications combined line- item costs that others did not. For example, 11 of the selected  allocating agencies required developers to separately report general  contractor overhead, profit, and general requirements, while 1 (New  York City) generally required developers to combine the three costs  under one line item. As a result, we had to create broad cost  categories and were not able to assess costs at the line-item level."], "subsections": []}, {"section_title": "Ways in Which Standardized Data Can Facilitate Agencies\u2019 Cost Assessments", "paragraphs": ["Few of the selected allocating agencies comprehensively or  systematically evaluated data to determine the effect of their policies,  including their cost-management approaches, on project development  costs. Our analysis in the previous sections of this report highlighted  ways in which allocating agencies can use and benefit from standardized  data, including for project cost assessments.", "Individual allocating agencies could use data to more effectively identify  cost drivers and trends over time. We have discussed how certain project  characteristics were associated with higher and lower per-unit  development costs. Our analysis illustrates how agency priorities and  practices may influence costs, as shown in the following examples.", "Texas had the lowest median per-unit development costs among the  selected agencies and tended to award credits to large garden-style  apartments (low, clustered buildings).", "Georgia also had comparatively lower development costs. The  agency funded the highest percentage of senior projects among the  selected states (48 percent) and also funded the lowest percentage of  urban projects (55 percent).", "Washington had among the lowest soft costs as a percentage of total  development costs. Agency officials told us they used a consolidated  application for awarding public funds\u2014including LIHTCs, state tax  credits, and HOME funds\u2014that streamlines the application process  for developers and reviewers and helps reduce soft costs.", "California had the highest land costs and soft costs among the  selected agencies. The agency prioritized funding projects in job  centers (urban areas) and completed projects used six funding  sources in addition to tax credit equity, on average.", "Chicago had the highest construction costs as a percentage of  development costs among the 12 selected agencies, and did not have  a cap on development costs or eligible basis.", "Florida had the highest developer fees among the selected agencies.", "Our analysis showed the median developer fee in Florida was about  $2.1 million for projects completed in 2011\u20132015; the next highest  median fee was about $1.5 million (in New York and Texas). The  agency\u2019s 2017 QAP set developer fees generally at 16 percent of  development costs, one of the highest rates among the selected  agencies.", "In turn, agencies that have identified their cost drivers and trends could  look to the experience of other agencies for examples of relevant ways to  contain costs. For example, agencies with comparatively high costs\u2014 either overall or in particular cost categories\u2014might benefit from  considering the cost-management approaches of agencies with lower  costs."], "subsections": []}]}, {"section_title": "Complete Data on Total Tax Credit Syndication Expenses Are Lacking", "paragraphs": ["Syndication expenses represent a significant cost of producing affordable  housing with LIHTCs, but complete data on syndication partnerships  generally were lacking. As shown in figure 13, syndication expenses  include expenses at the upper-tier and lower-tier partnerships of a LIHTC  deal. Investors pay for upper-tier expenses in the form of a syndication  fee, similar to a load fee paid to a mutual fund manager. The fee covers  expenses related to establishing, originating, underwriting, and closing on  projects for the investment fund and is paid out of the equity investors  contribute to the partnership. As a result, the fee facilitates equity  investment in a fund\u2019s LIHTC projects, while also reducing the amount of  the equity investment available to each project. At the lower-tier  partnership level, a project developer may pay a fee to the syndicator for  project-specific legal and accounting expenses. The lower-tier syndication  fee is typically less than the upper-tier fee.", "In a February 2017 report on the role of LIHTC syndicators, we cited an  industry stakeholder\u2019s estimate that upper-tier syndication fees for LIHTC  funds were 2\u20135 percent of equity. According to a 2018 report by a  national accounting firm, upper-tier syndication fees ranged from 5\u20138  percent of equity for multi-investor funds closed in recent years. For  perspective, 2\u20138 percent of a $7.6 million investment (the estimated  median amount for our 12-agency project sample) is $152,000\u2013$608,000.  The accounting firm report also noted that the market for acquiring  projects and attracting investor capital is highly competitive. As a result,  syndicators may reduce or defer their fees to attract projects and investor  capital.", "IRS regulations require project developers to report syndication expenses  on their final cost certifications. IRS officials told us that the regulations  require the reporting of all syndication expenses, including upper-tier and  lower-tier fees, on the cost certification. They said the regulation helps to  ensure that allocating agencies have complete information to assess the  financial feasibility of projects, as required under Section 42. Additionally,  written guidance for IRS examiners states that syndication costs need to  be accounted for, although they are not includable in eligible basis  (allowable costs for calculating tax credit awards), to ensure they have  not been accumulated with other costs for a line item on the certification.", "However, our 12 selected allocating agencies did not require developers  to report upper-tier syndication expenses on final cost certifications and  generally did not have data on these expenses. Allocating agency  officials told us that developers generally report costs directly attributable  to the project (including lower-tier syndication expenses) on the cost  certifications.", "In explaining their practices, allocating agency officials said they did not  consider upper-tier syndication expenses to be project costs because  they are not directly incurred by the developer. Some of the officials noted  that developers select investors based on the net equity (gross equity  minus upper-tier expenses) or net price offered in exchange for the tax  credits, and therefore may not be aware of the fees investors pay  syndicators. Additionally, accounting firm officials said that if upper-tier  expenses were included on the cost certification, they would not be able  to access or verify documentation from the upper-tier partnership when  auditing cost certifications because the upper- and lower-tier partnerships  are separate legal entities.", "Outside of the cost-certification process, some of the selected allocating  agencies said they receive investor letters or other documentation from  syndicators that disclose upper-tier syndication expenses. These  letters typically state the gross and net equity amounts attributable to  each project, or a gross and net credit price offered in exchange for a  developer\u2019s credits. Some of the letters we reviewed also detailed the  syndicator\u2019s services and related expenses in addition to gross and net  equity amounts or credit prices (for example, amounts for investor fees,  organizational and offering expenses, acquisition expenses, and reserves  and working capital). These examples suggest that information on upper- tier syndication expenses is available and allocable to specific projects.", "The gap between IRS\u2019s expectations and allocating agencies\u2019 practices  developed, in part, because IRS has not clearly communicated  expectations to allocating agencies about reporting of upper-tier  syndication expenses. None of the documents IRS pointed to\u2014the  regulations, Technical Advice Memorandum, or Revenue Ruling  previously cited\u2014draw a clear distinction between upper- and lower-tier  expenses, leaving the requirement open to interpretation. The documents  also do not address issues that developers, allocating agencies, and  auditing firms may have in obtaining and reviewing upper-tier fees.", "Federal internal control standards state that management should  externally communicate\u2014to contractors and regulators, among others\u2014 the necessary quality information to achieve the entity\u2019s objectives.  Without clear communication to allocating agencies on how to report  syndication costs, IRS lacks assurance that the cost-certification  requirement provides the level of financial transparency and  accountability it expects.", "More complete collection of data on syndication expenses also would  help answer key questions in our 2013 tax expenditures evaluation guide,  which provides a framework for evaluating the effectiveness of tax  expenditures. Examples of questions relevant to syndication expenses  include the following:", "What are the costs of the resources used to generate the tax  expenditure\u2019s benefits? The costs of using syndicators cannot be  known without disclosure of the upper-tier expenses for which LIHTC  investors pay from their equity contributions.", "Who actually benefits from the tax expenditure? Disclosure of the  fees syndicators receive would aid assessment of the benefits  received by syndicators in relation to benefits received by other LIHTC  program participants.", "The ability to answer these questions more fully would help Congress  assess the costs, benefits, and efficiency of the LIHTC program relative to  affordable housing programs that use delivery mechanisms other than tax  expenditures."], "subsections": []}, {"section_title": "No Federal Agency Monitors and Assesses LIHTC Development Costs", "paragraphs": ["No federal agency monitors or assesses LIHTC development costs,  which are key to evaluating the efficiency and effectiveness of the tax  credit program. In a July 2015 report on federal oversight of LIHTC, we  found that although IRS is the only federal agency responsible for  overseeing the LIHTC program, it does not assess the performance of the  program. IRS officials said the agency\u2019s role is focused on ensuring  taxpayer compliance and that the agency generally does not have the  authority or funding to assess the performance of tax expenditures,  including LIHTC.", "Unlike for the LIHTC program, Treasury collects and reports data on the  New Markets Tax Credit program, for which Treasury has a more direct  administrative role. The Community Development Financial Institutions  Fund within Treasury uses its Awards Management Information System  and its Community Investment Impact System to collect and report  detailed information on New Markets Tax Credit projects, including certain  cost and project characteristics data. Treasury produces annual research  reports and periodic research briefs using these data.", "Consistent with a recommendation in our July 2015 report, IRS and  Treasury officials said HUD may be better equipped to determine what  data should be collected to assess LIHTC performance. Although HUD  is the government\u2019s lead housing agency, it currently plays a limited role  in collecting and reporting data for the LIHTC program. Specifically, HUD  collects and periodically reports information on LIHTC tenant  characteristics as mandated by the Housing and Economic Recovery Act  of 2008. In addition, since 1996, HUD voluntarily has collected LIHTC  project-level data in its LIHTC database. While HUD may have the  technological capacity to collect and maintain additional LIHTC data,  absent additional authority, the agency does not have access to IRS  taxpayer (developers and allocating agencies) data, including cost data. If  HUD or another agency were given authority to collect and report on  these data, it likely would need additional budgetary resources to carry  out this function.", "Our tax expenditure evaluation guide outlines information Congress could  consider when determining which federal agencies should manage the  evaluation of tax expenditures. The guide cites statutory requirements  that set the expectation that agencies should consider tax expenditures in  measuring and communicating progress in achieving their missions and  goals. It also states that for tax expenditures without logical  connections to program agencies, Treasury may be the most appropriate  agency to conduct an evaluation. Historically, IRS and Treasury (the  agencies with the authority to oversee the LIHTC program) have devoted  few resources to that task. And although HUD has a logical connection to  LIHTC as the lead federal housing agency, it does not have oversight  authority, access to key data, or existing resources to carry out additional  data collection for and assessments of the LIHTC program. Without  federal monitoring and assessment of LIHTC development costs, federal  agencies and Congress do not have information to assess the tax credit\u2019s  efficiency and effectiveness."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The LIHTC program plays an important role in addressing the housing  needs of low-income renters, but some LIHTC projects have been  scrutinized for high or fraudulent development costs. Our analysis  provides a broad perspective on development costs across a range of  allocating agencies and illustrates the types of insights than can be  gained from standardized data on project costs and characteristics.  These include identification of cost drivers and trends that may help target  cost-management efforts.", "However, our work also identified shortcomings in program data and  administration that hamper oversight and are inconsistent with federal  evaluation criteria and internal control standards.", "Although the LIHTC program represents the largest source of federal  assistance for developing affordable housing, Congress has not  specifically designated an agency to evaluate the program\u2019s  performance. Without a designated entity for collecting, maintaining,  and assessing data on LIHTC project costs, federal agencies and  Congress lack information needed to oversee billions of dollars in tax  expenditures.", "The current IRS cost-certification requirement for LIHTC projects is  limited to aggregated developer costs and does not directly address a  known fraud risk. General contractor cost certifications required by  some allocating agencies may help deter fraud by providing  information that can be used to corroborate developer cost  certifications. But because IRS does not require general contractor  cost certifications for LIHTC projects, the LIHTC program may be  vulnerable to fraud involving misrepresentation of costs.", "The lack of standards for collecting and maintaining data related to  LIHTC project costs has resulted in inconsistent data quality and  formats among allocating agencies. In the absence of a federal  agency designated to collect data and assess program performance,  greater standardization of cost data by allocating agencies would lay a  foundation for deeper analysis of cost drivers and cost-management  practices by allocating agencies and industry stakeholders. This  analysis could be used to help increase the efficiency of the LIHTC  program.", "IRS has not clearly communicated how allocating agencies should  collect and review syndication expenses\u2014particularly, upper-tier  fees\u2014to meet a regulatory requirement. As a result, information on a  significant program cost is not transparent or available to conduct the  types of financial assessments IRS expects allocating agencies to  perform."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider designating an agency to regularly collect  and maintain specified cost-related data from credit allocating  agencies and periodically assess and report on LIHTC project  development costs. (Matter for Congressional Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations to IRS:  IRS\u2019s Associate Chief Counsel, in consultation with Treasury\u2019s  Assistant Secretary for Tax Policy, should require general contractor  cost certifications for LIHTC projects to verify consistency with the  developer cost certification. (Recommendation 1)", "To help allocating agencies analyze development cost trends and  drivers and make comparisons to other agencies, IRS's  Commissioner of the Small Business/Self-Employed Division should  encourage  allocating agencies and other LIHTC stakeholders to  collaborate on the development of more standardized cost data,  considering information in this report about variation in data elements,  definitions, and formats. (Recommendation 2)", "IRS\u2019s Associate Chief Counsel, in consultation with Treasury\u2019s  Assistant Secretary for Tax Policy, should communicate to credit  allocating agencies how to collect information on and review LIHTC  syndication expenses, including upper-tier partnership expenses.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency and Third- Party Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to IRS, Treasury, and HUD for their  review and comment. IRS provided written comments that are reprinted in  appendix VII. Treasury and HUD did not provide comments. We also  provided a draft to NCHSA for its review and comment. NCSHA provided  written comments that are reprinted in appendix VIII.", "IRS disagreed with our recommendation to require general contractor  cost certifications for LIHTC projects. IRS said it was not clear whether  the recommendation would uncover and deter misrepresentation of  contractor costs. We maintain that requiring general contractor cost  certifications would help address this fraud risk by providing greater cost  transparency to allocating agencies and auditors. Our report notes that a  number of allocating agencies already have similar controls and that the  Florida agency began requiring general contractor cost certifications in  response to fraudulent contract-inflation schemes that were the subject of  federal legal actions. Furthermore, NCSHA\u2019s recommended practices  advise allocating agencies to implement additional cost certification due  diligence for all LIHTC projects. We believe that general contractor cost  certifications should be required to help ensure the efficient and effective  use of federal resources programwide.", "IRS disagreed with the recommendation in our draft report to collaborate  with LIHTC stakeholders to develop a framework for the collection of cost- related data. The purpose of this recommendation was to promote  creation of more standardized data to help allocating agencies analyze  cost trends and drivers and make comparisons to other agencies. IRS  said that in the absence of specific authorization, it collects data only to  the extent necessary for tax administration, and that collecting LIHTC cost  data is not necessary for that purpose. IRS added that without statutory  authorization or a tax administration need, any data collection would be a  misuse of IRS resources. In response, we modified the recommendation  in our final report to give IRS greater flexibility in promoting  standardization of LIHTC cost data in ways consistent with its authority.  For example, IRS could encourage development of more standardized  data in its communications with LIHTC allocating agencies and  stakeholders at industry meetings and conferences. Our report  recognizes that IRS has not had a role in assessing the performance of  tax expenditures. For this reason, our report also states Congress should  consider designating an agency to regularly collect and maintain specified  cost-related data from allocating agencies and assess and report on  LIHTC project-development costs.", "Finally, IRS disagreed with our recommendation to communicate to  allocating agencies how to collect and review information on LIHTC  syndication expenses, including upper-tier partnership expenses. IRS  said that existing regulations require agencies to collect and evaluate all  sources and uses of project funds and that this covers syndication  expenses, including upper-tier partnership expenses. IRS said to the  extent that we were recommending that it revise regulations, the agency  did not necessarily have the authority to mandate how allocating agencies  collect syndication expense data. IRS\u2019s response suggests the reporting  requirements are clear. However, as stated in our report, the 12 allocating  agencies we reviewed and other LIHTC stakeholders did not share IRS\u2019s  understanding of the requirement. Consequently, the allocating agencies  did not require developers to report upper-tier syndication expenses and  generally did not have data on the expenses. In its comments on our  report, NCSHA also expressed surprise at IRS\u2019s explanation (see  discussion below and app. VII). Finally, our report does not state that IRS  should revise its regulations. Rather, it recommends that IRS  communicate its requirement to allocating agencies. The wording of our  recommendation provides IRS the flexibility to communicate the  requirement in whatever way it deems appropriate. As a result, we made  no changes to the recommendation.", "In its comments, NCSHA expressed concerns about our recommendation  and matter for congressional consideration about collecting and analyzing  LIHTC cost data. NCSHA questioned the cost-effectiveness of requiring  consistent data across states and did not believe that cross-state  comparisons were critical for evaluating LIHTC. For example, NCSHA  said the utility of comparing Hawaii costs to Arkansas costs was not clear.  NCSHA also noted LIHTC was designed to give allocating agencies  flexibility, including in program design and data collection. We maintain  consistent data are important for program management and oversight.  While cost drivers in states differ, our report notes that at least one  allocating agency has funded a study to compare development costs with  neighboring states. While we understand the LIHTC program gives states  flexibilities, a more standardized approach to data collection would not  restrict allocating agency funding decisions or prevent agencies from  collecting data they consider important. Furthermore, consistent data  collection would facilitate state and federal evaluations of the cost- effectiveness of a multibillion dollar tax expenditure. NCSHA also  expressed concern that Congress might require the data collection but  not appropriate funds to implement the mandate. Our report  acknowledges that if Congress were to grant an agency the authority to  collect and report on LIHTC cost data, that agency likely would need  additional budgetary resources to carry out this function.", "Regarding our recommendation on general contractor cost certifications,  NCSHA noted that more allocating agencies were likely to adopt  NCSHA\u2019s recommended practices and require or encourage such  certifications. However, allocating agencies voluntarily adopt  recommended practices, and some agencies may view a general  contractor cost certification as unnecessary. NCSHA added that  instances of fraud were rare in the 30-year history of LIHTC, and affected  agencies had responded in each known instance. We noted in our report  that under the existing federal cost certification requirement\u2014which stops  at the developer level\u2014the vulnerability of the LIHTC program to  misrepresentation of general contractor costs is heightened. And while  known instances of fraud schemes (such as the Florida examples cited in  our report) may be limited, the true extent of fraud in the program is  unknown. Federal internal control standards state that management  should consider the potential for fraud when identifying, analyzing, and  responding to risks. Requiring general contractor cost certifications for all  LIHTC projects could help address this known fraud risk and further  strengthen the integrity of the program.", "Regarding our recommendation on syndication expenses, NCSHA was  surprised IRS officials told us LIHTC regulations require reporting of all  syndication expenses (including upper-tier expenses) on the project cost  certification. NCSHA said it long understood that the cost certification  must include only costs paid by the project partnership for the individual  property (the developer) and that IRS never communicated otherwise.  NCSHA also identified some potential difficulties with collecting and  reporting information on upper-tier syndication fees. While our report  discusses some similar concerns, it also provides examples of at least  two allocating agencies that collect such information. NCSHA\u2019s response  further supports our finding of a gap between IRS expectations and  allocating agency practices for reporting syndication expenses and  underscores the need for IRS to more clearly communicate its  expectations on how to collect and review this information.", "Finally, NCSHA said findings from its recently commissioned study of  LIHTC development costs, which had not been released as of August  2018, were generally consistent with cost analyses in our report. NCSHA  said its study and other information suggest LIHTC development costs  generally were consistent with overall apartment development costs and  grew at a similar or slower rate. We believe broad comparisons between  LIHTC and non-LIHTC development costs should be viewed with caution.  As our report notes, numerous limitations in available LIHTC cost data  (among other factors) make it difficult to produce methodologically sound  comparisons. If implemented, our recommendations to improve collection  and analysis of LIHTC data could help overcome some of these  difficulties.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Treasury, the Secretary of Housing and  Urban Development, and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to analyze (1) development costs for  Low-Income Housing Tax Credit (LIHTC) projects completed in 2011\u2013 2015 in selected locations and factors affecting these costs, (2) steps  allocating agencies have taken to oversee LIHTC development costs, and  (3) factors limiting assessment of LIHTC development costs.", "We selected 12 credit allocating agencies (representing 10 states and 2  cities) as the focus for key parts of our analysis discussed in more detail  later in this appendix:", "Arizona Department of Housing", "California Tax Credit Allocation Committee", "Chicago Department of Planning and Development", "Florida Housing Finance Corporation", "Georgia Department of Community Affairs", "New York City Department of Housing Preservation and Development", "New York State Division of Housing and Community Renewal", "Ohio Housing Finance Agency", "Pennsylvania Housing Finance Agency", "Texas Department of Housing and Community Affairs", "Washington State Housing Finance Commission  To select these agencies, we ranked all states in order of their credit  ceiling amount for 2015 and selected the two highest-ranking states in  each of five geographic regions (West, Southwest, Midwest, Southeast,  and Northeast). We then selected for review the 12 allocating agencies  within those 10 states that administered 9 percent LIHTCs. These  allocating agencies accounted for 50 percent of the total 9 percent credit  ceiling amount in 2015.", "To obtain general information for all of our objectives, we interviewed  officials from the 12 selected allocating agencies, the Department of  Housing and Urban Development (HUD), Department of the Treasury  (Treasury), and Internal Revenue Service (IRS). We also interviewed  representatives from 10 groups representing allocating agencies,  developers, investors, syndicators, and other LIHTC interests, including  Affordable Housing Investors Council; Affordable Housing Tax Credit  Coalition; Recap Real Estate Advisors; Housing Partnership Network;  Enterprise Community Partners; Mortgage Bankers Association; National  Association of Home Builders; National Association of State and Local  Equity Funds; National Council of State Housing Agencies (NCSHA); and  Stewards of Affordable Housing for the Future. Additionally, we  interviewed representatives of two national accounting firms\u2014 CohnReznick LLP and Novogradac & Company LLP\u2014that have LIHTC  practices and have conducted research on the LIHTC program."], "subsections": [{"section_title": "Data Used in Our Analysis of Costs and Characteristics", "paragraphs": ["To analyze the development costs of LIHTC projects completed in 2011\u2013 2015 in selected locations and characteristics associated with project  costs, we created and analyzed a database of costs and characteristics  for the 1,849 LIHTC projects that submitted final cost certifications to the  12 selected allocating agencies in that period and for which the cost  certification was available."], "subsections": [{"section_title": "Collecting LIHTC Project Data", "paragraphs": ["We first requested relevant documentation and data from the selected  allocating agencies. Specifically, we requested the final cost certification  for all projects that received 9 percent LIHTCs and were submitted in  2011\u20132015. We also included projects for which the selected allocating  agencies initially reserved a tax credit allocation but exchanged the  allocation for American Recovery and Reinvestment Act of 2009 funds.", "In addition to cost certifications, we also requested documentation and  data that described project characteristics associated with project costs.  We determined relevant characteristics to collect through a review of  existing housing-agency-sponsored literature on LIHTC project costs. We  identified existing literature through a literature search, and we confirmed  the completeness of the literature with selected industry groups. The  project characteristics we collected from the selected allocating agencies  included the following:", "Address (street, city, state, and zip code)", "Construction type (new construction or rehabilitation)", "Income limits for low-income units", "Number of buildings (residential and non-residential)", "Number of units (low-income, market-rate, and employee-occupied)", "Square footage (gross and residential)", "Structural features (the presence of an elevator, green building  certifications, and parking structures)", "Net tax credit price", "Tenant type (senior or nonsenior)", "Unit sizes (number of bedrooms)", "Year of completion (year final cost certification signed)", "We used manual data entry and a statistical program to input the project  costs and characteristics into individual databases we created for each  selected allocating agency. We verified the accuracy of the manual data  entries by having a second analyst review the entries of the first analyst.  Additionally, a second analyst reviewed the statistical programs we  created and a sample of the databases they created to verify their  accuracy. After compiling the 12 databases, we compared our list of  projects against HUD\u2019s LIHTC database to verify the completeness of our  sample. For projects that we determined had been omitted, we requested  their documentation and data from the relevant allocating agency, which  we then manually entered into our databases and verified in the manner  previously described."], "subsections": []}, {"section_title": "Consolidating LIHTC Project Data", "paragraphs": ["To perform analyses across all sampled projects, we consolidated the 12  allocating agency databases into one sample-level database. We first  interviewed each of the selected allocating agencies to define data  elements\u2014including how to treat missing data\u2014and determine the  comparability of the data they provided. We also requested additional  documentation and data, such as missing project addresses and data  elements we identified after our initial data request. Additionally, we  interviewed a national accounting firm that specializes in LIHTC cost  certifications to further define cost data and learn more about their  comparability across allocating agencies.", "We then categorized project costs into aggregated categories. Line items  in cost certifications were not comparable across all selected allocating  agencies due to differences in how data were reported. For example,  market study costs were listed separately on some cost certifications but  aggregated with appraisal costs on others. To improve the comparability  of cost data across allocating agencies, we developed and implemented a  plan to categorize and consolidate cost data using a statistical program.  We developed the plan by reviewing the overlap between the line-item  costs we collected. We also reviewed a study of multiple allocating  agencies that was conducted by an accounting firm specializing in LIHTC  cost certifications and which used a similar methodology to consolidate  costs. Based on our plan, we categorized costs into three hard-cost and  four soft-cost categories:", "Construction: Costs related to the direct physical development of  the project site and structures. These include change orders;  construction trade material and labor (such as electrical, masonry,  or roofing); contingencies; demolition; environmental remediation;  furniture, fixtures, and equipment; landscaping and fencing; off- site and on-site improvements; other property assets (such as  maintenance, office, or playground equipment); prevailing wages;  site security (if listed separately from contractor fees); tenant  relocation; and utilities during construction.", "Existing structures: The purchased or appraised value of  acquired structures.", "Land: The purchased or appraised value of acquired or leased  land.", "Architect and engineer fees: Fees for architectural design and  supervision and engineer services.", "Contractor fees: Contractor general requirements, overhead, and  profit.", "Developer fees: Developer overhead and profit.", "Other soft costs: Costs related to financing, tax credit partnership  and syndication, predevelopment, professional services, and other  indirect construction activities, as shown in the following examples.  These include accounting; agency fees (such as application,  reservation, allocation, extension, compliance monitoring, and waivers  fees); appraisals; broker fees and closing costs; capital needs  assessments; certifications; construction-management fees; project  supervision or monitoring; consultant fees; credit reports;  environmental reports (such as asbestos and lead-paint tests); green  building and energy efficiency design services; impact and utility  connection fees; inspections; insurance (such as builders risk, general  liability, hazard, and title insurance); surveys; legal fees; loan fees and  interest (such as for predevelopment loans, construction loans, bridge  loans, and permanent loans); market studies; payment or  performance bonds; permits and other local fees; real estate taxes  (during construction); soil borings and tests; and title searches and  recording.", "We also collected each project\u2019s total development cost and eligible basis  from the cost certification. To isolate development costs, we subtracted  from each project\u2019s total development cost all costs associated with  prefunded reserves and postconstruction activities, such as marketing  and rent-up period operating expenses.", "We also developed and implemented a plan to consolidate project  characteristics data into the sample-level database using a statistical  program. We interviewed officials and reviewed documentation from  selected allocating agencies about data definitions to determine the  comparability of the characteristics data we collected. We then recoded  comparable data elements using a standard coding system across all 12  allocating agencies. We conducted verification checks on the programs  we created and the final database.", "To assess the reliability of the project data, we tested each data field for  missing values, obvious errors, and outliers\u2014for example, whether per- unit costs were more than two standard deviations from an allocating  agency\u2019s average. We communicated some outliers and inconsistencies  to relevant allocating agency officials and made corrections to the  database as necessary. We concluded that the data were sufficiently  reliable for purposes of comparing LIHTC development costs within and  across allocating agencies and for examining development cost drivers  and trends. As an additional test, we compared summary statistics from  applicable data elements in our database to comparable data elements in  HUD\u2019s LIHTC database. We found that our data elements did not differ in  significant ways from HUD\u2019s."], "subsections": []}, {"section_title": "Incorporating Location Data from Secondary Sources", "paragraphs": ["We then merged several additional location characteristics into our  database from federal and public statistical sources. We first validated  project addresses and then used them to determine the census tract for  each project. We then used census tracts to incorporate data from the  American Community Survey, including census tract size and population  (which we used to calculate population density), median home value,  poverty rate, and unemployment rate.", "Using the census tract, we also identified the Rural-Urban Commuting  Area codes classification for each project, which we recoded to  categorize each project as rural, suburban, or urban. We also identified  whether each project was located in a qualified census tract or difficult  development area using the 2017 HUD lists. Lastly, we used geographic  information system software and the Department of Transportation\u2019s  Fixed-Guideway Transit Network database to identify the distance from  each project to the nearest transit station (train and bus rapid transit  stations).", "Before conducting our analyses, we prepared data analysis plans and  interviewed selected representatives from industry groups and  researchers to inform our efforts. We also clarified data interpretations  and limitations with officials from the selected allocating agencies on an  as-needed basis."], "subsections": []}]}, {"section_title": "Costs and Characteristics of LIHTC Projects", "paragraphs": ["To describe the costs and characteristics of LIHTC projects, we  calculated and compared summary statistics for relevant database  elements. To account for inflation, we converted all costs to 2015 dollars  using the calendar-year, chain-weighted Gross Domestic Product price  index. We also normalized costs by dividing the total development cost by  the number of units. We then calculated and compared summary  statistics for key categories, such as the number and median per-unit cost  of new construction projects, and subcategories, such as the number and  median per-unit cost of new construction projects in urban areas. We  also repeated these analyses for each selected allocating agency.", "To compare the cost of Chicago\u2019s and New York City\u2019s projects to other  urban locations, we calculated and compared their median per-unit costs  to costs in five other cities within our 12-agency sample that had  comparable populations and densities. Using 2010 Census data, we  selected the five densest cities (people per square mile) with populations  of 300,000 or more, population densities of 5,000 or more people per  square mile, and 10 or more new construction projects completed in  2010\u20132015. They were Los Angeles, Miami, Philadelphia, San Francisco,  and Seattle. To identify all projects within the five selected cities, we  matched the three-digit zip code prefixes associated with their U.S Postal  Service area (known as a sectional center facility) to the zip codes for  sampled projects.", "To determine the composition of project costs in terms of hard and soft  costs, we compared the sum of all hard costs and the sum of all soft costs  to the sum of all total development costs by construction type. Hard costs  included existing structures, land, and construction costs; soft costs  included architect and engineer fees, contractor fees, developer fees, and  other costs. We also compared the cost categories (such as construction  costs) using the same approach as for hard and soft costs. We then  repeated these steps for each selected allocating agency.", "We also reviewed how LIHTC equity investments differed by construction  type. We first calculated the equity investment for each project by  multiplying the LIHTC allocation by the net credit price (both adjusted to  2015 dollars). We then calculated and compared the median per-unit  equity investment and the percentage of the median per-unit total  development cost that it comprised for new construction and rehabilitation  projects.", "To determine how total development costs changed over time, we  calculated and compared the median per-unit cost for each year by  construction type. We then repeated these steps for each allocating  agency to determine how their costs changed over time. We also  repeated the sample-level analysis over time excluding California\u2019s  projects from the new construction pool and New York City\u2019s projects  from the rehabilitation pool because, in both cases, their costs were  among the highest, changed sharply in some years, and represented  roughly one-fifth of all new construction and rehabilitation projects,  respectively.", "To determine how LIHTC construction costs changed over time relative to  a federal index of construction costs, we calculated and compared the  annual rates of change in the median per-unit cost of construction and  contractor fees for sampled new construction projects to the rates of  change in the annual averages for the Bureau of Labor Statistics\u2019  Producer Price Index by Commodity for Final Demand: Construction. This  index tracks monthly price changes for construction materials, labor,  equipment, and contractor fees. To account for the delay between when  construction costs were incurred and projects completed, we compared  the annual rates of change for the LIHTC projects to the annual rates of  change in the average index value from the prior year. We also used the  prior-year rate of change to generate a projection of LIHTC construction  costs to determine how the sample trend differed from the index trend.  For example, we calculated the projected cost in 2012 by inflating the  actual cost in 2011 by the change in the average index value in 2010\u2013 2011.", "To determine the association between the project characteristics we  collected and per-unit development cost, we developed a statistical model  and used ordinary least squares regression to estimate the controlled  effect of specified characteristics on per-unit cost. For more detail on our  statistical model and results, see appendix II. To further describe how  project characteristics may have influenced costs, we calculated and  compared summary statistics for the model characteristics among new  construction projects below the 25th percentile or above the 75th  percentile for per-unit cost within each allocating agency."], "subsections": []}, {"section_title": "Steps Taken to Assess Allocating Agencies\u2019 Oversight of LIHTC Development Costs", "paragraphs": ["To analyze steps allocating agencies have taken to oversee LIHTC  development costs, we reviewed the Qualified Allocation Plans (QAP)  and related documents (for example, policy manuals) for all 57 allocating  agencies as of 2017. These agencies included all 50 states, the District  of Columbia, the 4 U.S. territories that received a LIHTC allocation in  2017 (Guam, Northern Mariana Islands, Puerto Rico, and U.S. Virgin  Islands), and the Cities of Chicago and New York. We conducted a  structured analysis of the QAPs and related documents to gather  information about agencies\u2019 policies and practices for managing and  verifying project-development costs. We defined \u201ccost management\u201d as  practices allocating agencies used to contain or limit development costs  and fees, such as cost limits, credit allocation limits, fee limits, and cost- based scoring criteria. We defined \u201ccost verification\u201d as practices the  agencies used to confirm the accuracy of project costs following  construction\u2014that is, whether the amount paid equaled the amount billed.", "To obtain supplementary information on allocating agency approaches to  cost management, we interviewed officials and reviewed additional documentation from the 12 selected allocating agencies, identified  previously. Through this work, we identified a number of other steps those  agencies took to limit LIHTC development costs. While the results of our  supplementary work cannot be generalized to all allocating agencies, they  provide additional insight into the cost-management approaches and  cost-verification requirements of a diverse group of allocating agencies.  For further context on cost-management approaches, we reviewed GAO  and industry reports that analyzed allocating agency QAPs from prior  years.", "We also interviewed federal officials to obtain information about relevant  LIHTC requirements and cost-management practices used in other  federal programs that support development of affordable multifamily  housing. Specifically, we spoke with IRS and Treasury officials about  LIHTC cost-verification requirements and the approaches of allocating  agencies to cost management. In addition, we interviewed HUD officials  to identify cost-verification practices used in the HOME Investment  Partnerships Program and the Federal Housing Administration\u2019s  Multifamily Mortgage Insurance programs. To obtain additional  information about allocating agency practices and the cost-certification  process, we interviewed representatives of NCSHA, CohnReznick LLP,  and Novogradac & Company LLP."], "subsections": []}, {"section_title": "Steps Taken to Evaluate Factors Limiting Assessment of LIHTC Development Costs", "paragraphs": ["To analyze factors limiting assessment of LIHTC development costs, we  assessed the data we collected from the 12 allocating agencies. We  identified and documented the consistency in cost-related variables  agencies collected in several key documents and data sources, and how  they defined the variables. We documented the formats in which  agencies provided and maintained the data we requested and steps we  took to standardize and combine data. We compared the variables the  agencies collected against federal tax credit allocation priorities outlined  in Section 42 of the Internal Revenue Code (Section 42), as well as  certain allocating agency priorities. In addition, we reviewed an off-the- shelf software package for cost-estimation to determine what project  characteristics were required to calculate estimates with the software, and  evaluated the extent to which the selected agencies collected these  characteristics.", "We also reviewed Section 42 and related regulations to ascertain  requirements for reporting syndication expenses to allocating agencies  and IRS, and interviewed IRS and Treasury officials about these  requirements. We interviewed the selected allocating agencies about their  practices for collecting and reviewing syndication expense information.  We also interviewed CohnReznick LLP and Novogradac & Company LLP  about the different fees syndicators charge to investors and developers,  and the extent to which these fees are reported to allocating agencies.  Finally, we reviewed our prior work on federal oversight of the LIHTC and  other tax credit programs.", "We conducted this performance audit from May 2015 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Description of Our Statistical Model to Examine Factors Associated with Development Costs for Low-Income Housing Tax Credit Projects", "paragraphs": ["This appendix provides an overview of our statistical analysis of factors  associated with the cost of producing affordable rental housing supported  by the Low-Income Housing Tax Credit (LIHTC). We developed a  regression model that explains the costs based on a number of project  characteristics and other factors. As described in appendix I, we  developed a data set based primarily on information from 12 selected  allocating agencies. The data set contains detailed information on 1,849  LIHTC projects with final cost certifications signed in 2011\u20132015 and  provides broad geographic coverage, including urban, suburban, and  rural locations. whether a project was located in a qualified census tract or a difficult  development area.", "We augmented these data with information from the American  Community Survey and from USDA to enable us to control for certain  neighborhood characteristics that may be associated with the cost of  developing and constructing LIHTC projects."], "subsections": [{"section_title": "Key Characteristics of the Projects", "paragraphs": ["Table 4 below provides an overview of project costs and some key  attributes of projects in our sample and highlights the variation across the  allocating agencies. The average total cost per unit in our data set is  about $220,000 (in 2015 dollars). The average total cost per unit was  greater than $300,000 in California and Chicago and less than $150,000  in Georgia and Texas. Construction costs were greater than or  approaching $200,000 in Chicago and New York City and less than  $100,000 in Georgia and Texas. Project scale varied across the  agencies, reflecting differences in built environments, property costs, and  other factors and averaged 66 units and 7.5 buildings.", "The cost of land and existing structures can be a large component of  project development costs. Land costs can scale with project size (an  apartment complex of 12 buildings could require twice as much land as a  complex of 6 buildings) as well as with underlying market land values.  The median land value across all projects was about $400,000, and was  more than $1,000,000 in California and Florida. But the median land cost  in New York City was about $1, suggesting that land and structures were  donated. Given the market values of New York City real estate, total  development costs for some New York City projects are likely to be  understated when compared to projects in other jurisdictions."], "subsections": []}, {"section_title": "Variable Definitions", "paragraphs": [], "subsections": [{"section_title": "Variables Describing Project Characteristics", "paragraphs": ["The data set includes detailed information on program characteristics  (discussed previously) that we used to define explanatory variables. We  included the size of projects as defined by total units and placed them in  four size categories (fewer than 37 units, 37\u201350 units, 51\u2013100 units, and  more than 100 units).", "To develop a project-type categorization, we incorporated information on  the number of residential buildings. Projects can come in many  combinations of building count and building size (number of units). For  instance, a 60-unit project could be a single 60-unit building, 10 6-unit  buildings, or 30 2-unit buildings. We distinguished projects in which the  average building size had at least 60 units (\u201clarger buildings\u201d category)  and projects with at least 20 buildings (\u201cmany buildings\u201d category). We  placed all remaining projects in a large residual category. This category is  somewhat independent of size and primarily is meant to distinguish  among types of projects that might require specialized construction or  project-management skills.", "We also created variables to provide information on the distribution of  units by number of bedrooms within each project. Bigger units, those with  more bedrooms, are more costly to build. We created three unit size  categories: 0-1 bedroom, 2 bedrooms, and 3 or more bedrooms. We  defined the values as shares of total units in the category. For example, if  a given project had 80 units, 20 of which had 1 bedroom, 40 of which had  2 bedrooms, and 20 of which had 3 bedrooms, the values for these  variables would be 0.25, 0.5, and 0.25 respectively. The values sum to 1  across the categories.", "We used binary variables to indicate if projects were new construction or  rehabilitation. New construction is generally thought to be more expensive  than rehabilitation on average, given site work and possible demolition  requirements. We also developed variables to indicate if a project was  targeted to seniors and if it served low-income tenants exclusively or a  mix of low-income and other tenants.", "We used two variables (yes or no binaries) to indicate if a project was in a  qualified census tract or difficult development area. Within the LIHTC  program, the size of the credit awarded for a given project may be  increased if the project is located in such areas.", "We also used information on other project characteristics that would  affect costs, which we obtained for some, but not all, allocating agencies.  For instance, for two agencies we could indicate that the project included  parking structures (as opposed to a surface parking lot or stand-alone  garage or carports), and for three agencies, that projects were built  according to Leadership in Energy and Environmental Design (LEED)  standards."], "subsections": []}, {"section_title": "Variables Describing Project Financial Support and Developer Type", "paragraphs": [], "subsections": []}, {"section_title": "Variables from Other Sources to Control for Neighborhood and Geography", "paragraphs": ["A broad set of factors related to local conditions, as well as conditions  such as whether project locations are rural or urban, likely influence the  costs of developing and building projects. Thus, we also used codes  developed by USDA (the Rural-Urban Commuting Area codes) to place  each project into rural, suburban, or urban categories. because a given dollar amount of rent represents access to different  housing quality in different places. That is, neighborhoods in which  rents are high or low may share common characteristics across the  country.", "We also used a series of allocating agency dummy variables and a series  of project year dummy variables to control for otherwise unmeasured  factors that may be common across projects or conditions in each agency  jurisdiction or year, respectively."], "subsections": []}, {"section_title": "Information on Omitted Categories for Categorical Variables", "paragraphs": ["Many of the explanatory variables in the model are categorical variables,  and thus the coefficient estimates presented in the tables in this appendix  need to be interpreted in terms of differences from an omitted category.  The omitted categories are  for project scale, projects with fewer than 37 units;  for project type, all projects in which there are fewer than 60 units per  building and fewer than 20 residential buildings;  for unit size, the 2-bedroom group;  for age of housing stock, median year built between 1945 and 1994;  for contract rent, neighborhoods in which the median contract rent is  between the 25th percentile and median values of the state-wide  contract rent; and  for geographic area, suburban.", "Some allocating agencies did not have complete information about  whether other program funding, such as funding from Rural Development  or ARRA programs, were used for projects. Conceptually, these variables  are yes or no binaries. One approach is to add an \u201cunknown\u201d category in  addition to the usual yes or no binary. That is, the categorization becomes  \u201cknown yes,\u201d \u201cknown no,\u201d and \u201cunknown.\u201d An alternative approach is to  treat missing information as the absence of the characteristic of interest.  Using the three-category approach generally yielded virtually identical  results to the alternative in which \u201cmissing\u201d information was treated as the  absence of the characteristic.", "In general, we used a traditional binary structure. In one case, we kept  the three-category structure. Specifically, we created a measure across  agencies as to whether projects were targeted solely to low-income  tenants or to a mix of low-income and other tenants. In many cases and  across many agencies, we were not able to reliably make this  determination using information in the data set. For estimation purposes,  we included the unknown and known low-income category binary  variables and omitted the known mixed-income category. The  interpretation of the known low-income category is still the difference from  the known mixed-income category. Other variables are binary, indicating  the presence of the characteristic (such as if the project used a Rural  Development loan or not, or was in a qualified census tract or not)."], "subsections": []}]}, {"section_title": "Regression Strategy", "paragraphs": ["Following Cummings and DiPasquale, we estimated a regression model  to explain total development costs per unit\u2014and alternatively, measures  of construction costs and soft costs separately\u2014as depending on these  project and neighborhood characteristics. We developed a base case  model including the variables discussed previously and estimated this  model using all 1,849 observations. The pooled sample, because it  provides a broad range of conditions and policy responses, can permit a  similarly broad view of the influences on LIHTC project costs.", "At the same time, we wanted to have some idea about how sensitive  broad, overall results were to the influence of conditions and policy  responses of particular jurisdictions. (We would expect housing market  conditions and housing policy responses to differ across agencies.) Thus,  we also present the same model estimated on three different subsamples  in which the projects of particular allocating agencies were excluded. The  pooled sample and subsample results are shown in table 5 later in this  appendix.", "Specifically, we present results on samples excluding projects in  California, New York City, and Texas in turn.", "California had the highest average total cost, highest (observed) land  costs, and biggest program in terms of allocation of tax credits and  units placed in service.", "New York City is a completely urban jurisdiction. About 75 percent of  its projects were rehabilitation projects (compared to about one-third  for the entire sample). More than half of its projects were in  neighborhoods in which the median year housing stock was built was  1945 or before (compared to about 15 percent for the entire sample).", "Texas had the lowest total cost and lowest construction costs and soft  costs per unit, with many large, multibuilding projects that may be  impractical in some other contexts. It was second to California in  allocation of tax credits and units built.", "Housing conditions in the three jurisdictions and policy options favored by  these jurisdictions may not represent conditions and policy options easily  available or desirable in other jurisdictions.", "We also present estimates explaining construction costs per unit and soft  costs per unit as alternatives to total costs. The construction cost  measure includes costs for site and structure work and fees paid to the  building contractor. We defined a broad soft cost measure to include  predevelopment costs, financing costs, legal fees, architect and engineer  fees, developer fees, and project-level partnership and syndication fees.  Some factors may be more associated with the construction-cost  component and less associated with the soft cost project-development  component, or vice versa. These results are shown in table 6."], "subsections": [{"section_title": "Sensitivity Analysis", "paragraphs": ["We also present results using the pooled sample set for three variations  of the base specification. The first variation omitted the property value  variable. Property values vary within states and metropolitan areas, as  well as across the states. We examined the extent the presence of this  control affected the influence of other factors. The second variation  omitted variables related to neighborhood characteristics. The third  variation omitted the variables related to other types of housing support  (for example, HOME funds). These results are shown in table 7. received final cost certifications in 2011 and 2012. In table 9 we present  results concerning possible cost-related features (parking structures,  LEED certification, and developer type) for specific agencies and a subset  of projects.", "We addressed whether our estimates were sensitive to the possibility that  observed values for total cost might be artificially low when land or  structures were acquired at very low or zero cost. We restricted projects  to those in which land and structure costs accounted for at least 1 percent  of total development costs and estimated our model on this subsample  using both total costs and construction costs as dependent variables. We  present our results in table 10.", "We examined whether the results were sensitive to the form in which  some credits were granted in New York City. That is, credits awarded in  New York City to many single-building projects appeared to be part of  larger neighborhood clusters under common development. In an  alternative version, we aggregate project-level information to the level of  multibuilding project clusters. We present the results in table 11.", "Finally, we looked at whether proximity to transit affected project costs.  Some allocating agencies may offer incentives for transit-oriented  developments\u2014or projects within certain proximity to public transit. These  areas may have higher land and construction costs due to higher density  and demand within urban environments. Using projects within 2 miles of a  transit station and various distance ranges, we estimated the association  with per-unit total and construction costs. We present the results in table  12."], "subsections": []}, {"section_title": "Regression Specification", "paragraphs": ["We used ordinary least squares estimation with heteroscedasticity  consistent standard errors. This model allowed us to make statements  concerning the association of explanatory factors on project costs, given  that other explanatory factors were held constant. As is the case in such  models, we generally only can discuss associations between explanatory  factors and the cost measure to be explained, and not causality. For  example, the use of other sources of government funding may have  directly increased construction costs, as fund usage can trigger federal  prevailing wage requirements. On the other hand, these other funding  sources may have been used in addition to LIHTC equity to fill funding  gaps for projects with particularly high costs. Additionally, econometric  estimates can be sensitive to model specification, variable definitions, and  the omission of variables (for example, due to unavailable data) relevant  to the outcome of interest.", "Because the data used to estimate the model include only LIHTC projects  that were placed in service, we cannot make statements about how the  costs of developing these projects may compare to other potential LIHTC  projects or to projects developed and financed by the private sector. It is  probably true that allocating agencies could have selected lower-cost (or  higher-cost) projects compared to those actually selected, but whether or  not this counterfactual housing would have better served the low-income  population is a different question."], "subsections": []}]}, {"section_title": "Estimation Results", "paragraphs": ["Our results are presented in tables 5 through 12. Our estimates include  allocating agency and project year dummy variables, which are not  presented in the tables. The allocating agency dummy variables are  agency-specific intercept shifts, given the estimation of common slopes,  and largely pick up unexplained deviations from the pooled average  costs. The project year dummy variables were estimated to be small and  only rarely statistically significant. We also estimated a version in which  each agency and project year combination had its own intercept shift, but  these results were quite similar. The dependent variable in most cases is  total development cost per unit, adjusted for inflation."], "subsections": [{"section_title": "Base Case Results and Sensitivity to Included Allocating Agencies", "paragraphs": ["level. Without California in the sample, per-units costs in the \u201cmany  buildings\u201d projects indicator were estimated to be more than $10,000  higher than more typical projects, controlling for other characteristics. This  amount was estimated to be much smaller and statistically insignificant  with California observations. The share of 3-bedroom units was  associated with higher cost per unit and was not particularly sensitive to  the sample, although the degree to which a higher share of smaller units  led to reduced cost per unit was less clear. Costs to develop senior  projects were modestly lower, but estimates and statistical significance  were sensitive to the agencies included.", "Projects targeted exclusively to low-income households (most projects)  were estimated to be more costly to develop than mixed-income projects.  These results were quite sensitive to the presence of projects approved  by the New York City allocating agency. More than 40 percent of the  mixed-income projects in the entire sample were in New York City. Many  of New York City\u2019s mixed-income projects had donated land and might  not be comparable from a cost perspective to mixed-income projects in  other locations. When we excluded New York City projects, our estimates  showed no statistically significant difference in per unit costs for low- and  mixed-income projects.", "Notably, Rural Development loans were associated with sizeable effects  on costs (costs were lower). This may be partly due to the types of  projects supported by Rural Development loans, such as farm labor  housing (which may lack some amenities that can increase costs) and  program limits on costs per unit. Projects supported by HOME and CDBG  funds were estimated to be more costly to develop, although these  differences were not generally statistically significant. The effect of HOPE  VI financial support was estimated to be large and statistically significant,  but only about 1 percent of projects in the sample were supported with  this program. The projects that received financial support from this source  might be idiosyncratic, or could include other unobserved characteristics  that influence costs. For example, tenant relocation requirements for  HOPE VI projects may have contributed to the higher per-unit costs. $15,000. Projects in neighborhoods with low rents (relative to the state  distribution) were estimated to be less costly, typically in the range of  $20,000\u2013$30,000 per unit. Costs in neighborhoods with higher rents were  estimated to be modestly higher, but rarely significant. Older  neighborhoods were associated with higher costs per unit, while newer  neighborhoods were associated with lower costs per unit, as compared to  projects in neighborhoods in which the median year built was between  1945 and 1994 (and controlling for other characteristics). In the pooled  sample, estimated magnitudes were about $18,000 higher in older  neighborhoods and about $17,000 lower in newer neighborhoods."], "subsections": []}, {"section_title": "Examining Construction and Soft Cost Components", "paragraphs": ["Table 6 shows that many of the same factors affected total costs,  construction costs, and soft costs similarly. For instance, all costs scaled  with project size and new construction, and many of the neighborhood  effects remained significant. A higher share of 3-bedroom units was  associated with higher costs in all cost categories. \u201cLarger buildings\u201d  projects had higher total costs and construction costs, but modestly  negative and insignificant soft costs. The latter result is consistent with  the idea that soft costs scale with the number of units, but not with the  size or number of buildings in a project.", "Projects with Rural Development loans were associated with lower  construction and soft costs. For construction costs, the result is consistent  with the loans being able to be used for projects characterized by lower- than-average costs of construction. Soft costs may be affected more  directly to the extent that Rural Development loans provide a key source  of funding that may reduce the difficulty of other project financing efforts.  The HOME indicator was associated with modestly significant higher  construction and soft costs. Slightly more than one-third of projects  across all allocating agencies received HOME funds.", "Finally, the lower costs associated with senior projects were more  statistically significant for soft costs than total costs or construction costs."], "subsections": []}, {"section_title": "Sensitivity to Specification", "paragraphs": ["In table 7, we present model variations that exclude, in turn, particular  portions of the base case explanation. Other remaining factors, including  those associated with the LIHTC program, may be sensitive to the  omitted factors. For instance, the estimated effect of a Rural Development  loan may be sensitive to the presence of a rural control variable, or the  estimated effect of a location in a qualified census tract may be sensitive  to other indicators of neighborhood characteristics.", "Because the value of land influences the total cost of housing  development, we first excluded the home value variable (a measure of  variation in property values within and across allocating agency  jurisdictions). Estimates of the effect of other neighborhood measures,  such as housing stock age and rent quartiles, changed in the absence of  the property value measure. The age of housing stock variables were  highly significant with and without the inclusion of the property value  measure. In the model with the property value measure included, the  difference between the estimated cost in an older neighborhood and the  estimated cost in a newer neighborhood is about $35,000. That is, the  estimated cost in an older neighborhood was about $18,000 more and the  estimated cost in a newer neighborhood was about $17,000 less than the  estimated cost in in a neighborhood in which the median year built was  between 1945 and 1994. In the model with the property value measure  excluded, this difference increased to about $50,000, which may reflect  the underlying correlation of age of neighborhood and property value that  we observe in our data set. For projects in locations in the upper half of  the state contract rent distribution, the estimate became much larger and  statistically significant at the 1 percent level. poverty rate measure became much smaller, decreasing from about 390  to about 125, and insignificant. In the sample, the 25th percentile poverty  rate was about 14 percent, and the 75th percentile value about 37  percent. In the base case, an increase of 23 percentage points  represented an increase in total costs per unit of about $9,000, but in the  specification without the measure of property value the estimate was  about $2,900 (controlling for other characteristics in both specifications).  The overall fit, expressed as adjusted R-squared, was reduced from  0.648 to 0.618 in the absence of the property value measure.", "Compared to the base case, most results were not particularly sensitive  to the absence of the neighborhood variables (housing stock age, rent  quartiles, and poverty rate). However, the qualified census tract variable  became larger (from about $7,000 to about $18,000) and statistically  significant in the absence of the neighborhood variables. The property  value effect also became somewhat larger, suggesting that costs  increased by about $41,000 per unit, compared to $33,000 in the base  case, given a change in property value from the first to the third quartile  and controlling for other characteristics. The overall fit worsened from  0.648 to 0.627.", "The omission of the other housing program support variables had very  little effect, which is not that surprising given the lack of large effects other  than the presence of Rural Development loans. The overall fit, expressed  as adjusted R-squared, was reduced from 0.648 to 0.641."], "subsections": []}, {"section_title": "Examining Effects of the American Recovery and Reinvestment Act of 2009", "paragraphs": ["Activities funded through nonrefundable tax credits require the entities  claiming the credit to have (or expect to have) sufficient federal income  tax liability to make the credit desirable. During the 2007\u20132009 recession,  some investors in tax credit-related activities saw reductions in their tax  liability. ARRA created the possibility that low-income housing projects  could be supported by federal grants that allocating agencies would  allocate in much the same manner as they allocated tax credits.", "Of all LIHTC projects receiving some ARRA support, more than 90  percent had final costs certified in 2011 and 2012. Thus, we examined the  effects of ARRA, expressed as a binary indicator of participation, using  the same model but with projects restricted to those that were certified in  2011 and 2012. That is, we believe this was the time period for which  ARRA was likely to be most relevant and thus any effects likely to be  most pronounced. About one-half of the projects in our data for project  years 2011 and 2012 received some ARRA support.", "We present results for total costs, construction costs, and soft costs  separately, the motivation being that grant funding may reduce the costs  of project finance and syndication relative to the traditional credit-based  context (see table 8). Construction costs might be expected to be less  directly affected by a change in the project finance regime.", "In general, the overall results are similar to those presented in table 6.  The ARRA indicator is negative and significant in the total and soft cost  versions, and negative but insignificant in the construction cost context.  The ARRA coefficient was estimated to reduce soft costs by a little more  than $4,000 per unit, holding other factors constant. For context, the  average soft cost per unit during this time period was about $53,000."], "subsections": []}, {"section_title": "Examining Effects of Variables Not Available for All Allocating Agencies", "paragraphs": ["nonprofit developers do not expect to earn a return on investment, so  they may be able to develop projects at lower cost. Nonprofit and for- profit developers also may select different kinds of projects, so it is  possible that nonprofit developers more often pick projects that are more  costly in observable and unobservable characteristics.", "Table 9 provides the results of total cost models estimated using the  relevant allocating agency subsamples. In both the parking structure and  LEED models, we included categories for missing information. The  omitted category is the known absence of parking or LEED construction,  respectively. Both of these subsamples were heavily weighted by  California projects.", "The estimated effect of parking structures was quite large and statistically  significant at the 1 percent level. Regardless of the true magnitude of  the effect, projects in which parking structures were included clearly were  likely to cost more. It is unlikely that all projects envision tenants with  cars. For those that do, a surface parking option often may be feasible,  but when it is not, project costs will be larger.", "LEED certification was associated with costs of about $19,000 more per  unit than other projects, holding other factors constant. LEED projects  represent about 18 percent of projects in which LEED status was clearly  known. Most LEED projects were new construction, and only about 5  percent of the rehabilitation projects with known LEED status were built to  LEED standards.", "Nonprofit set-aside provisions were associated with an increase in total  cost per unit of about $15,000, controlling for other characteristics.  Nonprofit set-aside projects had different characteristics from those of  projects developed without nonprofit set-asides. For instance, nonprofit  set-aside projects typically were smaller, more likely to be in older  neighborhoods, less likely to be in low-rent neighborhoods, and less likely  to receive Rural Development loans\u2014characteristics we estimated to be  associated with increases in total cost per unit. When we estimated the  model shown in table 9, but without the set-aside indicator, and multiplied  the coefficients by mean values of the explanatory variables calculated  separately for each group, we calculated that per-unit costs for projects  developed without the set-aside are about $220,000 and the estimated  cost for projects developed with the set-aside are about $250,000. As  shown in table 9, the fact that we estimated an increase in total cost per  unit even while controlling for other factors suggests that unobserved  factors may be important. For instance, as mentioned in the body of this  report, nonprofit organizations may focus more on populations that are  more costly to serve, such as special-needs tenants who may require  additional or enhanced facilities."], "subsections": []}, {"section_title": "Examining Effects of Donated Land or Property", "paragraphs": ["estimations, the fits improved, providing some evidence that the excluded  observations introduced some noise to the estimation.", "In table 11, we examined the effect of aggregating certain projects in New  York City. In principle, observations in a regression should be  independent from one another. When individual building-level  observations appear to be parts of larger projects under common  development, this condition is violated. In New York City, it appears that  separate tax credit allocations were made to single-building projects in  close proximity to other tax credit projects awarded to the same  developers at the same time or in consecutive years. For example, three  buildings being renovated by the same developer in the same relatively  small area could be considered as three separate one-building projects or  one three-building project. Clustering the single-building projects as one  project for the model made very little difference in the estimates, but led  to modest improvements in the overall fit of the model and reduced the  number of observations because of the aggregation of projects.", "We also examined the association between LIHTC costs and the  proximity of projects to public transit. Some allocating agencies offered  incentives for the production of transit-oriented LIHTC developments\u2014 projects within 0.5 mile of a transit station. Research generally describes  transit-oriented developments as compact, mixed-use, walkable  neighborhoods located near transit facilities. These types of  developments are intended to advance other policy goals, such as  furthering opportunities for employment.", "We used the Department of Transportation\u2019s Fixed-Guideway Transit  Network database to identify the distance from each project to the nearest  transit station (train and bus rapid transit). For this model specification, we  restricted our estimates to projects within 2 miles of a transit station  because not all transit agencies reported station locations to the  Department of Transportation database\u2014making our transit distance  variable quite large for some projects. As shown in table 12, while we did  not find that projects within 0.5 mile of a transit station had significantly  different costs than those between 0.5 and 1 mile (the omitted category),  we did find that per-unit construction costs were about $17,000 greater for  transit-oriented developments, controlling for other characteristics.", "Finally, table 13 presents the mean values for our full project sample and  base case model."], "subsections": []}]}]}, {"section_title": "Appendix III: Development Costs for LIHTC Projects Completed in 2011\u20132015, for 12 Allocating Agencies", "paragraphs": ["This appendix provides data on the development costs of Low-Income  Housing Tax Credit (LIHTC) projects completed in 2011\u20132015 that  received tax credits from 12 selected allocating agencies. Figure 14  shows how median per-unit costs for new construction and rehabilitation  projects changed over that period for each allocating agency. Table 14  (new construction projects) and table 15 (rehabilitation projects) break  down the median per-unit costs into hard and soft costs and their  component parts. Tables 16 and 17 provide data on alternative cost  measures\u2014cost per-bedroom and per-square foot\u2014although this  information was not available for all 12 allocating agencies. All the cost  data in this appendix are presented in 2015 dollars. For additional  information on the cost categories we describe, see appendix I.", "Projects Completed in 2011\u20132015, for 12  2011  (dollars)", "2012  (dollars)", "2013  (dollars)", "2014  (dollars)", "2015  (dollars)"], "subsections": [{"section_title": "Two Studies Identifying Associations between Project Characteristics and Per-Unit Cost California", "paragraphs": ["Two of the five studies we reviewed used statistical models to identify the  association between project characteristics and per-unit cost.", "The authors of a 2014 study sponsored by several California agencies  found that the median per-unit cost (excluding land costs) of 400 new  construction projects approved for 4 percent or 9 percent LIHTCs in  2001\u20132011 was $276,000. Using a regression analysis to control for  multiple characteristics, they found a variety of characteristics were  associated with differences in per-unit costs.", "Similar to our results, the authors found that per-unit costs decreased  as the number of units increased or as the unit size decreased.", "Projects with buildings that had four or more stories were also about  10 percent more expensive per-unit. The authors found higher land  costs tended to indirectly increase construction costs, because  developers responded by building taller and more often included  structured parking\u2014another cost driver.", "Also similar to our results, they estimated that senior projects were  less costly than projects targeted to families (by about 18 percent),  and projects from nonprofit developers were more expensive than  projects from for-profit developers (by about 9 percent).", "The authors of the California study also reviewed characteristics that we  did not. For example, they found that projects with a higher degree of  construction quality, durability, and energy efficiency had higher costs.  Local factors, such as design review and approval requirements, also  added to per-unit total cost.", "While data limitations prevented the authors from comparing the cost of  LIHTC projects to market-rate developments in a conclusive way, they  found that the per-unit construction costs of LIHTC projects in their  sample were within the 50th and 75th percentile of estimated costs for  market-rate projects with similar height, area, location, and wages."], "subsections": [{"section_title": "Washington", "paragraphs": ["The authors of a 2009 study sponsored by the Washington State  Department of Commerce reviewed 65 affordable multifamily housing  projects, including 41 LIHTC projects that received funding from the  state\u2019s Housing Trust Fund in 2003\u20132009. The average per-unit cost of  new construction projects was about $177,000. Similar to our results,  about 62 percent of the cost was attributed to construction.", "Using a regression analysis to control for multiple characteristics, the  authors found that projects financed with LIHTCs tended to be larger and  more expensive than affordable non-LIHTC projects.", "Architect fees were most strongly associated with per-unit costs,  because architect fees may have approximated the complexity of the  projects\u2019 designs.", "Similar to our results, they found higher costs among urban projects  relative to rural ones.", "In contrast to our results, the authors did not find that per-unit costs  decreased as the number of units increased. Rather, for new  construction LIHTC projects in urban areas, per-unit construction  costs increased as the number of units increased. According to the  authors, the cost increases may have been due to amenities  associated with larger urban projects, such as structured parking.", "The authors also noted several characteristics that were not  associated with per-unit costs, including the presence of a special  needs population or the developer type."], "subsections": []}]}, {"section_title": "Three Studies Comparing Cost Differences", "paragraphs": ["The remaining three studies we reviewed compared cost differences  among groups, typically by comparing averages between exclusive  categories (for example, senior and nonsenior projects). But they did not  statistically control for characteristics that may have differed among  projects."], "subsections": [{"section_title": "Colorado", "paragraphs": ["The authors of a 2016 study sponsored by the Colorado Housing and  Finance Authority analyzed 247 LIHTC projects that applied for 4 percent  or 9 percent LIHTCs in Colorado in 2011\u20132016. They found the average  per-unit cost of new construction projects increased by about 32 percent  during this period to about $258,000 in 2016. The authors noted that the  increase may have stemmed from the decreasing size of projects in  Colorado and the increasing cost of construction.", "The authors studied the characteristics of the highest- and lowest-cost  projects and stated that only two characteristics (project size and year of  application) were consistently different between the groups. For projects  that received 9 percent credits, characteristics such as location,  developer type, and tenant types did not consistently differ between the  highest- and lowest-cost projects.", "The authors also conducted 25 interviews with architects, consultants,  developers, and general contractors, who stated that the most significant  contributor to cost increases was higher labor costs due in part to  shortages among skilled laborers and federal prevailing wage  requirements. In addition, developers stated that while affordable housing  developers were more focused on the long-term durability of their projects  than market-rate developers, hard costs were generally similar between  affordable and market-rate projects. However, soft costs tended to be  higher as a result of legal fees associated with LIHTC syndication."], "subsections": []}, {"section_title": "New Mexico (and Other States)", "paragraphs": ["The authors of a 2014 study sponsored by the New Mexico Housing  Mortgage Finance Agency reviewed cost drivers across 259 new  construction projects that received 9 percent LIHTCs in 2006\u20132013 from  multiple allocating agencies\u2014Arizona, Colorado, Nevada, New Mexico,  Texas, and Utah. The authors found the average per-unit cost (including  reserves) ranged from about $124,000 in Texas to about $199,000 in  Colorado. In New Mexico, average per-unit costs generally decreased in  2007\u20132010 and then increased thereafter through 2013. Similar to our  results, the authors found that hard and soft costs comprised about 65  and 35 percent of project costs, respectively, among the states.", "Although the authors of the New Mexico study did not use a statistical  analysis that would have controlled for multiple differences among project  characteristics, the authors reported differences in construction costs  among several groups.", "Similar to our results, the authors found slightly lower per-unit  construction costs among senior projects compared to nonsenior  projects, and that the largest projects (60 units or more) were  generally less costly than the smallest projects (30 units or fewer).", "In contrast to our results, they noted higher per-unit construction costs  among rural projects compared to urban projects.", "Also in contrast to our findings, the authors did not find a difference in  the per-unit construction costs of nonprofit and for-profit developers."], "subsections": []}, {"section_title": "Minnesota", "paragraphs": ["In a 2013 study, a research intern working for the Minnesota Housing  Finance Agency reviewed the costs of 412 affordable housing projects  that applied for agency financing in 2003\u20132012, including 216 LIHTC  projects, to determine the extent to which costs changed in response to  cost containment strategies. The author found that the average per-unit cost of new construction LIHTC projects in the Minneapolis-St. Paul  metropolitan area was about $237,000.", "Similar to our results and those of the other studies we reviewed, the  author estimated that construction costs comprised about 61 percent  of LIHTC project costs.", "Also similar to our findings, the author found that the per-unit cost of  all affordable new construction projects generally increased during the  sample period while the per-unit cost of rehabilitation projects  generally decreased.", "For LIHTC projects specifically, the per-unit cost decreased by about  8 percent compared to about an 18 percent decrease among non- LIHTC affordable projects in 2003\u20132012. The author noted that these  decreases are important as they coincided with an increased focus by  the housing agency on characteristics expected to have increased  costs, such as green building standards.", "The author also noted that the housing agency previously found\u2014in a  separate study using its predictive cost model\u2014that construction costs for  the agency\u2019s affordable housing projects were about 12 percent higher  than estimates for similar market-rate projects in the same geographical  area."], "subsections": []}]}]}, {"section_title": "Appendix VI: Cost-Management Approaches for Each Allocating Agency, as of 2017", "paragraphs": ["This appendix provides information on cost-management approaches of  allocating agencies, based on our review of qualified allocation plans  (QAP) and related documents for 57 agencies as of 2017. The agencies  were located in all 50 states, the District of Columbia, the 4 U.S. territories  that received a Low-Income Housing Tax Credit (LIHTC) allocation in  2017 (Guam, the Northern Mariana Islands, Puerto Rico, and the U.S.  Virgin Islands), and two suballocating agencies (Chicago and New York  City). See table 29 for the name and location of each agency.", "We identified four main approaches that agencies used to manage  project-development costs: cost limits, credit allocation limits, fee limits,  and cost-based scoring criteria. Agencies implemented these approaches  in various ways, as shown in table 30.", "In addition, the types and number of cost-management approaches  employed by each agency varied, as shown in table 31. The quantity of  approaches used by an agency is not necessarily indicative of the quality  or effectiveness of an agency\u2019s cost management, which we were unable  to measure."], "subsections": [{"section_title": "Cost limits", "paragraphs": ["\u25cf  -  -  -  -  \u25cf  \u25cf  \u25cf  -  -  \u25cf  \u25cf  -  -  -  -  -  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  -  \u25cf  -  -  -  \u25cf  -  \u25cf  -  \u25cf  -  -  \u25cf  \u25cf  -  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  -  \u25cf  \u25cf  \u25cf  \u25cf  \u25cf  The extent of each agency\u2019s practices for each type of cost-management  approach also varied, as shown in tables 32\u201335."], "subsections": []}, {"section_title": "Total development cost limits", "paragraphs": [], "subsections": []}, {"section_title": "Fee", "paragraphs": [], "subsections": []}, {"section_title": "Fee", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix VII: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the National Council of State Housing Agencies", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Steve Westley (Assistant  Director), Cory Marzullo (Analyst in Charge), Stephen Brown, Heather  Chartier, Farrah Graham, Brandon Kruse, John McGrail, John Mingus,  Marc Molino, Ed Nannenhorn, Daniel Newman, and Barbara Roesmann  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Developers can apply for federal Low-Income Housing Tax Credits to help them build affordable housing projects. The amount of credit depends largely on project costs.", "Project costs we looked at varied widely (shown below), and federal oversight of costs is limited. Federal and state agencies could use data on variables that affect cost\u2014such as square footage and building type\u2014to better monitor the tax credit. State agencies that administer the credit aren't required to report the kind of detailed cost data that could reduce fraud risks.", "We recommended ways to make better data available to the government and improve oversight of the credit."]}
{"id": "GAO-18-469T", "url": "https://www.gao.gov/products/GAO-18-469T", "title": "Immigration Courts: Observations on Restructuring Options and Actions Needed to Address Long-Standing Management Challenges", "published_date": "2018-04-18T00:00:00", "released_date": "2018-04-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOJ's EOIR is responsible for conducting immigration court proceedings, appellate reviews, and administrative hearings to fairly, expeditiously, and uniformly administer and interpret U.S. immigration laws and regulations.", "This statement addresses (1) scenarios that experts and stakeholders have proposed for restructuring EOIR's immigration court system and the reasons they offered for or against these proposals; and (2) how EOIR manages and oversees the immigration courts, including hiring and performance assessment, among other things.", "This statement is based on a report GAO issued in June 2017, with selected updates conducted through April 2018 to obtain information from EOIR on actions it has taken to address the report's recommendations. GAO's report incorporated information obtained by reviewing EOIR documentation, analyzing EOIR data, and interviewing agency officials and immigration court experts and stakeholders. For the selected updates, GAO reviewed EOIR documentation."]}, {"section_title": "What GAO Found", "paragraphs": ["In June 2017, GAO reported that some immigration court experts and stakeholders have recommended restructuring the Executive Office for Immigration Review's (EOIR) administrative review and appeals functions within the immigration court system\u2014immigration courts and Board of Immigration Appeals\u2014to improve its effectiveness and efficiency. The 10 experts and stakeholders GAO interviewed stated that they generally supported one of the following scenarios for restructuring the immigration court system, all of which would require a statutory change to implement:", "a court system outside of the executive branch to replace EOIR's immigration court system, including both trial and appellate tribunals;", "a new, independent administrative agency within the executive branch to carry out EOIR's quasi-judicial functions with both trial-level immigration judges and an appellate level review board; or", "a hybrid approach, placing trial-level immigration judges in an independent administrative agency within the executive branch, and an appellate-level tribunal outside of the executive branch.", "Six of the 10 experts and stakeholders GAO interviewed supported restructuring the immigration court system into a court independent of the executive branch. Experts and stakeholders offered several reasons for each of the proposed scenarios, such as potentially improving workforce professionalism and credibility. They also provided reasons against restructuring options, including that restructuring may not resolve existing management challenges, such as difficulties related to hiring immigration judges.", "GAO also reported in June 2017 that EOIR could take several actions to address management challenges. EOIR has since taken some steps to address these challenges, but additional actions are needed. For example, GAO found that EOIR did not have efficient practices for hiring immigration judges, which contributed to judges being staffed below authorized levels. EOIR hiring data showed that on average from February 2014 through August 2016, EOIR took more than 21 months to hire an immigration judge. GAO recommended that EOIR assess the immigration judge hiring process to identify opportunities for efficiency. As of January 2018, EOIR had increased the number of its judges but remained below its authorized level for fiscal year 2017. Hiring additional judges is a positive step; however, to fully address GAO's recommendation, EOIR needs to assess its hiring process to identify opportunities for efficiency.", "In June 2017, GAO also reported on ways EOIR could enhance its video teleconferencing (VTC) program, through which judges conduct hearings by VTC. GAO found that EOIR had not, in accordance with best practices, established a mechanism to solicit feedback and comments about VTC from those who use it regularly to assess whether it meets user needs. GAO recommended EOIR develop and implement such a mechanism. EOIR concurred and implemented this recommendation in December 2017 by establishing a mechanism on its public website to solicit feedback from respondents regarding their satisfaction with VTC hearings. This effort should help EOIR ensure VTC hearings it conducts meet all user needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its June 2017 report GAO made 11 recommendations to improve EOIR's hiring process and performance assessment, among other things. EOIR generally concurred with the recommendations, has implemented 1, and reported actions planned or underway to address the remaining 10."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our work on expert and  stakeholder proposals for restructuring the immigration court system and  management challenges facing the Department of Justice\u2019s (DOJ)  Executive Office for Immigration Review (EOIR). As you know, EOIR is  responsible for conducting immigration court proceedings, appellate  reviews, and administrative hearings to fairly, expeditiously, and uniformly  administer and interpret U.S. immigration laws and regulations. Each  year, the Department of Homeland Security (DHS) initiates hundreds of  thousands of cases with the U.S. immigration court system to decide  whether respondents\u2014foreign nationals charged on statutory grounds of  inadmissibility or deportability\u2014are removable as charged; and, if so,  should be ordered removed from the United States or granted any  requested relief or protection from removal and permitted to lawfully  remain in the country.", "A significant and growing case backlog\u2014the number of cases pending at  the start of each fiscal year\u2014before the immigration courts has been the  subject of attention by Congress, immigration court experts and  stakeholders, and others. In June 2017, we reported that the immigration  courts\u2019 case backlog more than doubled from fiscal years 2006 through  2015, reaching a backlog of about 437,000 cases pending in 2015.  Further, our analysis showed that initial case completion time increased  more than fivefold over this 10-year period. For example, the median  number of days to complete a removal case, which comprised 97 percent  of EOIR\u2019s caseload for this time period, increased by 700 percent from 42  days in fiscal year 2006 to 336 days in fiscal year 2015. Since we  completed our work, DOJ has indicated that the case backlog remains a  challenge. For example, a December 2017 memorandum from the  Attorney General indicated that there were well above a half million cases  pending before the immigration courts.", "To address the case backlog and other challenges, various organizations,  such as the American Bar Association, have recommended, among other  things, management improvements; incremental reform of the  immigration courts within the existing EOIR structure; and major structural  changes, such as creating an immigration court system independent of  any executive branch department or agency. Experts and stakeholders,  such as individuals affiliated with professional legal organizations and  former EOIR immigration judges, have also proposed changing the  immigration court system\u2019s structure, organizational location among the  three branches of government, and aspects of its operations.", "EOIR\u2019s quasi-judicial functions are carried out by the immigration court  system, which includes 58 immigration courts located nationwide that are  overseen by the Office of the Chief Immigration Judge, whose  immigration judges preside over removal proceedings to determine  respondents\u2019 removability and eligibility for any relief being sought, and  the Board of Immigration Appeals (BIA), whose members hear and issue  decisions regarding appeals of immigration judges\u2019 decisions and certain  DHS decisions. Additionally, the Office of the Chief Administrative  Hearing Officer adjudicates immigration-related employment and  document fraud cases.", "In June 2017, we reported on, among other things, (1) scenarios that  experts and stakeholders have proposed for restructuring EOIR\u2019s  immigration court system and the reasons they offered for or against  these proposals; and (2) how EOIR manages and oversees immigration  court operations, including workforce planning, hiring, performance  assessment, and technology utilization. This statement summarizes information on immigration court restructuring and EOIR\u2019s management  of the immigration courts from that report as well as actions EOIR has  taken, as of April 2018, to address resulting recommendations for  addressing management challenges.", "For the June 2017 report, we identified scenarios that experts and  stakeholders have proposed for restructuring the immigration court  system and their reasons for or against these proposals. To identify these  scenarios, we reviewed publications and interviewed individuals affiliated  with eight entities and two former immigration judges, all selected based  on their expertise in immigration court issues. In selecting these 10  experts and stakeholders, we considered, among other things, their depth  of experience with the immigration court system and the relevance of their  published work to immigration court restructuring. We also considered  input from our identified experts and stakeholders, as well as EOIR, on  any additional experts or stakeholders we should interview. To ensure a  diversity of perspectives regarding proposed scenarios for restructuring  the immigration court system, we selected experts and stakeholders from  a variety of organizations, including federal agencies, immigration lawyer  and respondent advocacy groups and individuals, and the immigration  judges\u2019 union.", "To assess EOIR\u2019s workforce planning, hiring, performance assessment,  and technology utilization, we analyzed relevant documentation, such as  contracts for workforce planning services; EOIR data on, among other  things, immigration judge hiring; and interviewed EOIR and DHS officials  from headquarters and six immigration courts. More detailed information  on our objectives, scope, and methodology is contained in our June 2017  report. Additionally, after the issuance of our report through April 2018 we  obtained and analyzed information and documentation on actions EOIR  has taken to address our recommendations. The work upon which this  statement is based was conducted 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."], "subsections": [{"section_title": "Experts and Stakeholders Have Proposed Restructuring EOIR\u2019s Immigration Court System", "paragraphs": ["As we reported in June 2017, some immigration court experts and  stakeholders have recommended restructuring EOIR\u2019s administrative  review and appeals functions within the immigration court system\u2014 immigration courts and BIA\u2014and the Office of the Chief Administrative  Hearing Officer, to improve the effectiveness and efficiency of the system  or, among other things, increase the perceived independence of the  system and professionalism and credibility of the workforce.", "We found that the 10 experts and stakeholders we interviewed generally  supported one of the following scenarios for restructuring the immigration  court system, all of which would require a statutory change to implement: a court system independent (i.e., outside) of the executive branch to  replace EOIR\u2019s immigration court system, including both trial and  appellate tribunals; a new, independent administrative agency within the executive branch  to carry out EOIR\u2019s quasi-judicial functions with both trial-level  immigration judges and an appellate level review board; or a hybrid approach, placing trial-level immigration judges in an  independent administrative agency within the executive branch, and  an appellate-level tribunal outside of the executive branch.", "Six of the 10 experts and stakeholders we interviewed supported  restructuring the immigration court system into a court independent of the  executive branch. Two of the experts and stakeholders we contacted  supported a new independent administrative agency within the executive  branch. One of the experts and stakeholders supported the hybrid  scenario, placing trial-level immigration judges in an independent,  administrative agency within the executive branch, and an appellate-level  tribunal outside of the executive branch.", "As we reported in June 2017, experts and stakeholders offered several  reasons for each of the proposed scenarios, such as potentially  increasing judicial autonomy over courtrooms and dockets; as well as  provided reasons against restructuring options, such as that restructuring  may not resolve existing management challenges. These reasons for and  against each of the scenarios are summarized in table 1 and discussed  further below. We are not taking a position on any of these restructuring  proposals, or on any of the reasons offered for or against them. We  present the information we obtained from the experts and stakeholders to  inform policymakers about proposals that have been put forth regarding  restructuring the immigration court system.", "We found in our June 2017 report that experts and stakeholders we  interviewed cited several reasons for the proposed restructuring  scenarios, as described in table 1 and below.", "Independence: Six of the 10 experts and stakeholders we  interviewed stated that establishing a court system independent (i.e.,  outside) of the executive branch could increase the perceived  independence of the system. For example, 1 of the 10 experts and  stakeholders we interviewed explained that the public\u2019s perception of  the immigration court system\u2019s independence might improve with a  restructuring that removes the quasi-judicial functions of the  immigration courts and the BIA from DOJ, because DOJ is also  responsible for representing the government in appeals to the U.S.  Circuit Courts of Appeals by individuals seeking review of final orders  of removal. Another 1 of the 10 experts and stakeholders we  interviewed explained that under the existing immigration court  system, respondents may perceive, due to the number of immigration  judges who are former DHS attorneys and the co-location of some  immigration courts with DHS U.S. Immigration and Customs  Enforcement\u2019s Office of the Principal Legal Advisor offices, that  immigration judges and DHS attorneys are working together. Two of  the 10 experts and stakeholders we interviewed also proposed that an  immigration court system independent of the executive branch would  be less susceptible to political pressures within the executive branch.  Experts and stakeholders cited similar independence-related reasons  for supporting the administrative agency and hybrid scenarios.", "Judicial autonomy: Four of the 10 experts and stakeholders we  interviewed stated that a court system independent of the executive  branch might give immigration judges and BIA members more judicial  autonomy over their courtrooms and dockets. For example, 1 of the  10 experts and stakeholders we interviewed stated that immigration  judges in an independent court system would be able to file  complaints against private bar attorneys directly with the state bar  authority instead of filing the complaint with DOJ first, as required for  immigration judges acting in their official capacity. EOIR officials  explained that while immigration judges cannot directly file a  complaint with the state bar authority, EOIR\u2019s Disciplinary Counsel,  which is charged with investigating these complaints, can file a  complaint with the state bar on behalf of the immigration judge.", "Workforce professionalism or credibility: Experts and stakeholders  also stated reasons why a court system independent of the executive  branch might also improve the professionalism or credibility of the  immigration court system\u2019s workforce. For example, 1 of the 10  experts and stakeholders we interviewed explained that if the judge  career path was improved under a restructuring such that immigration  judges were able to advance to more prestigious judgeships, this  could assist in attracting candidates to the immigration bench.  Regarding the hybrid scenario, 1 of the 10 experts and stakeholders  we interviewed noted that this proposal may attract a more diverse  and balanced pool of candidates for immigration judge positions.", "Organizational capacity or accountability: Experts and  stakeholders who supported a court system independent of the  executive branch also cited enhanced organizational capacity or  accountability as a reason for adopting this scenario. One of the 10  experts and stakeholders we interviewed explained that this type of  restructuring may allow the immigration court system to improve its  organizational capacity by changing the way it staffs its managerial  and supervisory positions. For example, this individual explained that  instead of placing immigration judges in managerial positions, EOIR  could, as an independent court system, more easily attract and fill  managerial positions with individuals who have experience in court  management and public administration instead of placing immigration  judges in these positions. Similarly, this same individual also noted  that if the restructured immigration court system was placed within the  purview of the Administrative Office of the U.S. Courts, which provides  a wide range of support services to the federal judiciary (including  administrative, technological and legal services), it could use its  expertise in court management to assist with managing the system.", "In terms of enhancing organizational accountability, 1 of the 10 experts  and stakeholders we interviewed explained that an independent court  system could also increase the transparency of the performance  evaluation system for immigration judges by incorporating feedback from  court stakeholders, such as DHS and private bar attorneys, on the judges\u2019  performance as well as increasing the transparency of the process for  making complaints against immigration judges. According to this  individual, the complaint process for other federal judges is more  transparent and the judges are given an opportunity to address the  complaint and appeal any decisions that resulted from the complaint.", "We also found in our June 2017 report that the experts and stakeholders  we interviewed cited several reasons against the proposed restructuring  scenarios, as described in table 1 and below.", "Appointment of immigration judges: Two of the 10 experts and  stakeholders we interviewed noted that requiring the presidential  nomination and Senate confirmation of immigration judges under an  independent court system could further complicate and delay the  hiring of new judges by making the appointment of additional judges  more dependent on external parties.", "Administrative challenges: Two of the 10 experts and stakeholders  we interviewed stated that it may be difficult to establish and  administer a court system independent of the executive branch.  Specifically, these experts and stakeholders expressed concern that  the Administrative Office of the U.S. Courts may be reluctant to  assume the vast responsibility of administering a newly created court  system. Regarding administrative challenges associated with the  establishment of an independent administrative agency, 1 of the 10  experts and stakeholders we interviewed explained that this scenario  might be overly complicated to implement since EOIR would need to  develop its own administrative functions outside of DOJ. According to  another 1 of the 10 experts and stakeholders we interviewed, creating  a hybrid court system may further complicate the administration of the  immigration court system and potentially result in difficulties for  respondents.", "Procurement of resources: Five of the 10 experts and stakeholders  we interviewed expressed the concern that a restructured immigration  court system, regardless of the scenario, would not be able to procure  sufficient resources outside of DOJ. For example, 1 of the 10 experts  and stakeholders noted that a restructured independent court or  administrative agency might have less leverage outside of DOJ to  compete for resources.", "Trial level disconnection from the appellate level: One of the 10  experts and stakeholders we interviewed stated that if the hybrid  scenario were to be adopted, the trial level may become more  disconnected from the appellate level, due to the placement of the  immigration courts within the executive branch and the appellate body  outside of the executive branch.", "Resolution of existing management challenges or case backlog:  Two of the 10 experts and stakeholders we contacted stated that a  court system independent of the executive branch may not address  the immigration courts\u2019 management challenges, such as the case  backlog. For example, 1 of the 10 experts and stakeholders stated  that the immigration court system would likely have a large caseload  regardless of how it is structured."], "subsections": []}, {"section_title": "EOIR Has Initiated Actions to Improve Its Management of the Immigration Courts, but Additional Steps Are Needed to Address Long- Standing Challenges", "paragraphs": ["We also reported in June 2017 that EOIR could take several actions to  address long-standing management and operational challenges and  reduce the case backlog. In particular, we identified challenges related to,  and made 11 recommendations to improve, EOIR\u2019s workforce planning,  hiring, performance assessment, and technology utilization. EOIR  generally concurred with our recommendations, and, has initiated actions  to address them. Overall, EOIR has fully implemented 1 recommendation  but needs to take additional steps to fully implement the remaining 10  recommendations to help strengthen the agency\u2019s management and help  reduce the case backlog.", "Workforce Planning. In June 2017, we reported that EOIR could help  address its case backlog and staffing challenges, such as by hiring more  immigration judges to meet its authorized number of judges and through  better workforce planning and hiring practices. During the course of our  review we found that EOIR estimated staffing needs using an informal  approach that did not account for long-term staffing needs, reflect EOIR\u2019s  performance goals, or account for differences in the complexity of court  cases. For example, in developing its staffing estimate, EOIR did not  calculate staffing needs beyond the next fiscal year or take into account  resources needed to achieve the agency\u2019s case completion goals.", "Furthermore, we found that, according to EOIR data, approximately 39  percent of all immigration judges were eligible to retire as of June 2017,  but EOIR had not systematically accounted for these impending  retirements in its staffing estimate.", "At the time of our review, EOIR had begun to take steps to account for  long-term staffing needs, such as by initiating a workforce planning report  and a study on the time it takes court staff to complete key activities.  However, we found that these efforts did not align with key principles of  strategic workforce planning that would help EOIR better address current  and future staffing needs. EOIR officials also stated that the agency had  begun to develop a strategic plan for fiscal years 2018 through 2023 that  could address its human capital needs. We recommended that EOIR  develop and implement a strategic workforce plan that addresses key  principles of strategic workforce planning.", "EOIR agreed with our recommendation. In February 2018, EOIR officials  told us that they had established a committee and working group to  examine the agency\u2019s workforce needs and would include workforce  planning as a key component in EOIR\u2019s forthcoming strategic plan.  Specifically, EOIR officials stated that the agency had established the  Immigration Court Staffing Committee in April 2017 to examine how to  best leverage its existing judicial and court staff workload model to  address its short- and long-term staffing needs, assess the critical skills  and competencies needed to achieve future programmatic results, and  develop strategies to address human capital gaps, among other things. In  February 2018, EOIR officials stated that the agency replaced this  committee, which had completed its work, with a smaller working group of  human resource employees charged with addressing the agency\u2019s  strategic workforce planning. Additionally, EOIR officials stated that the  agency was developing a strategic plan that includes human capital  planning as a critical component, which will be used to guide workforce  planning for the agency. These are positive steps, but to fully address our  recommendation, EOIR needs to continue to develop, and then  implement a strategic workforce plan that: (1) addresses the agency\u2019s  short- and long-term staffing needs; (2) identifies the critical skills and  competencies needed to achieve future programmatic results; and (3)  includes strategies to address human capital gaps. Once this strategic  workforce plan is completed, EOIR needs to monitor and evaluate the  agency\u2019s progress toward its human capital goals.", "Hiring. Additionally, in our June 2017 report, we found that EOIR did not  have efficient practices for hiring new immigration judges, which has  contributed to immigration judges being staffed below authorized levels  and to staffing shortfalls. For example, in fiscal year 2016, EOIR was  allocated 374 immigration judge positions and had 289 judges on board  at the end of the fiscal year. EOIR officials attributed these gaps to  delays in the hiring process. Our analysis of EOIR hiring data supported  their conclusion. Specifically, we found that from February 2014 through  August 2016, EOIR took an average of 647 days to hire an immigration  judge\u2014more than 21 months. As a result, we recommended that EOIR  (1) assess the immigration judge hiring process to identify opportunities  for efficiency; (2) use the assessment results to develop a hiring strategy  that targets short- and long-term human capital needs; and (3) implement  any corrective actions related to the hiring process resulting from this  assessment.", "In response to our report, EOIR stated that it concurred with our  recommendation and was implementing a new hiring plan as announced  by the Attorney General in April 2017 intended to streamline hiring.  Among other things, EOIR stated that the new hiring plan sets clear  deadlines for assessing applicants moving through different stages of the  process and for making decisions on advancing applicants to the next  stage, and allows for temporary appointments for selected judges  pending full background investigations. In February 2018, EOIR indicated  to us that it had begun to use the process outlined in its hiring plan to fill  judge vacancies. The Attorney General also announced in April 2017 that  the agency would commit to hire an additional 50 judges in 2018 and 75  additional judges in 2019. In January 2018, EOIR officials told us that the  agency had a total of 330 immigration judges, an increase of 41 judges  since September 2016. Hiring these additional judges is a positive step;  however, EOIR remains below its fiscal year 2017 authorized level of 384  immigration judges based on funding provided in fiscal years 2016 and  2017. Additionally, the Consolidated Appropriations Act, 2018 provided  funding for EOIR to hire at least 100 additional immigration judge teams,  including judges and supporting staff, with a goal of fielding 484  immigration judge teams nationwide by 2019. To fully address our  recommendation, EOIR will need to continue to improve its hiring process  by (1) assessing the prior hiring process to identify opportunities for  efficiency; (2) developing a hiring strategy targeting short- and long-term  human capital needs; and (3) implementing corrective actions in response  to the results of its assessment of the hiring process.", "Performance Assessment. Regarding EOIR\u2019s performance assessment,  we reported in June 2017 that EOIR had previously established  performance monitoring activities and measures to assess aspects of the  immigration courts, but it had eliminated several of these performance  assessment mechanisms. EOIR also had goals for some cases it  adjudicated, such as respondents in detention, but no longer had goals  for most cases, including some cases it had prioritized for adjudication.  For example, we found that EOIR did not have performance measures or  goals for completing cases in which the respondent is not detained (non- detained cases), which comprised 83 percent of immigration courts\u2019 total  caseload from fiscal year 2010 through fiscal year 2015. To help EOIR  more effectively monitor its performance and fully evaluate whether the  immigration courts are achieving EOIR\u2019s mission, we recommended that  EOIR establish and monitor comprehensive case completion goals,  including a goal for completing non-detained cases not captured by  performance measures, and goals for cases it considers a priority.", "EOIR agreed with this recommendation and has taken steps to address it.  For example, EOIR issued guidance in January 2018 to all immigration  court staff that established the agency\u2019s goals for each immigration court  in adjudicating cases. In particular, EOIR identified in this guidance a  case completion goal for non-detained cases: courts must complete 85  percent of all non-detained removal cases that do not qualify as a \u201cstatus  case\u201d within 1 year of filing of the Notice to Appear (NTA) in court,  reopening or recalendaring of the case, remand from the Board of  Immigration Appeals, or notification of release from custody. According  to this guidance, EOIR has also retained case completion goals for other  categories it considers a priority, such as cases in which the respondent  is detained and credible fear reviews. In its January 2018 guidance,  EOIR stated that it will track these measures and the courts\u2019 performance  in meeting them as well as regularly auditing these measures. To fully  address this recommendation, EOIR needs to monitor courts\u2019  performance in meeting these goals.", "In June 2017, we also reported that EOIR collected information on the  extent and reasons why immigration judges issue continuances\u2014 temporary adjournments of case proceedings until a different day or  time\u2014but did not systematically assess these data to identify and  address potential operational challenges affecting the immigration courts  or areas where immigration judges could benefit from additional guidance  or training. An immigration judge may continue a case for good cause  shown, such as to allow respondents to obtain legal representation or  DHS to complete required background investigations and security checks. Our analysis of continuance records from fiscal year 2006  through fiscal year 2015 showed that the use of continuances had grown  over time. Specifically, all types of continuances increased by 23 percent  from fiscal year 2006 through fiscal year 2015 and operational  continuances, such as those caused by a lack of foreign language  interpretation or a video-teleconference (VTC) malfunction, increased by  33 percent over this same time period. We recommended that EOIR  systematically analyze immigration court continuance data to identify and  address any operational challenges faced by courts or areas for  additional guidance or training.", "EOIR agreed with this recommendation and, in July 2017, issued updated  guidance for immigration judges on fair and efficient docket management  relating to the use of continuances. For instance, according to this  guidance, judges must annotate the case worksheet on disposition of the  case with a continuance code describing the reason for the continuance  and court staff must ensure that each continuance code is accurately  entered into the agency\u2019s case management system for all cases. EOIR  also issued guidance in October 2017 updating case continuance codes  and their definitions to assist immigration judges in recording this  information on the case worksheet. These are positive steps, and  analyzing the use of continuances on a systematic basis would give EOIR  greater insight into more widespread operational issues that the courts  may be facing. To fully address our recommendation, EOIR will need to  systematically analyze immigration court continuance data to identify and  address any operational challenges faced by courts or areas for  additional guidance or training.", "We also reported in June 2017 that EOIR could improve the reliability of  its case management data and reports on case completion times by  ensuring that court staff accurately record NTAs in a timely manner. We  found that EOIR did not have guidance or data integrity efforts to ensure  the timely and accurate recording of NTAs in its case management  system, and that at least 16 percent of NTA dates were unreliable. EOIR  uses NTA dates to calculate case completion times, which are used to  assess court performance. The agency reports this information publicly in  DOJ\u2019s Annual Performance Report. We concluded that improving the  reliability of NTA data would allow EOIR to provide more accurate  information on case completion times to Congress and the public. We  recommended that EOIR update its policies and procedures to promote  the timely and accurate recording of NTAs. In response to our report,  EOIR stated that it partially concurred with our recommendation and  stated that it would continue to monitor the timeliness and accuracy of  NTA recording, and implement corrective actions as needed. In January  2018, as part of its policy on case completion goals, EOIR also created a  goal that 100 percent of all electronic and paper records be accurate and  complete. This goal is a positive step, and updating policies and  procedures to remind staff about the importance of timely and accurate  recording of all NTAs would provide EOIR greater assurance that this  goal could be consistently met. To fully address our recommendation,  EOIR will need to update its policies and procedures to ensure the timely  and accurate recording of NTAs.", "Technology Utilization. We also made several recommendations to  EOIR in our June 2017 report to improve its technology utilization,  including the agency\u2019s oversight of the ongoing development of a  comprehensive electronic-filing (e-filing) capability\u2014a means of  transmitting documents and other information to immigration courts  through an electronic medium, rather than on paper. EOIR identified the  implementation of an e-filing system as a goal in 2001, but has not, as of  April 2018, fully implemented this system. In 2001, EOIR issued an  executive staff briefing for an e-filing system that stated that only through  a fully electronic case management and filing system would the agency  be able to accomplish its goals. This briefing also cited several benefits  of an e-filing system, including, among other things, reducing the data- entry, filing, and other administrative tasks associated with processing  paper case files; and improving communication with external court  stakeholders, such as respondents and attorneys, providing the ability to  file court documents from private home and office computers. As we  reported in June 2017, EOIR initiated a comprehensive e-filing effort in  2016\u2014the EOIR Court and Appeals System (ECAS)\u2014for which EOIR  had documented policies and procedures governing how its primary  ECAS oversight body\u2014the ECAS Executive Committee\u2014would oversee  ECAS through the development of a proposed ECAS solution. However,  we found that EOIR had not yet designated an entity to oversee ECAS  after selection of a proposed solution during critical stages of its  development and implementation.", "In our June 2017 report, we recommended that in order to help ensure  EOIR meets its cost and schedule expectations for ECAS, the agency  identify and establish the appropriate entity to oversee ECAS through full  implementation. EOIR concurred and stated that it had selected and  convened the EOIR Investment Review Board to serve as the ECAS  oversight body with the Office of Information Technology directly  responsible for the management of the ECAS program. EOIR officials told  us in February 2018 that the board convened in October 2017 and  January 2018 to discuss, among other things, the ECAS program.  However, as we reported in June 2017, EOIR officials previously told us  that the EOIR Investment Review Board was never intended to oversee  ECAS implementation due to the detailed nature of this system\u2019s  implementation. EOIR has recently provided us with documentation  related to its oversight of ECAS, which we are reviewing to help  determine the extent to which EOIR has met the intent of our  recommendation. Additionally, we recommended in June 2017 EOIR  develop and implement a plan that is consistent with best practices for  overseeing ECAS to better position the agency to identify and address  any risks and implement ECAS in accordance with its cost, schedule, and  operational expectations. As of April 2018, EOIR has not indicated that it  has developed such a plan.", "In June 2017 we also reported on ways EOIR could enhance its VTC  program. EOIR is authorized by statute to hold immigration removal  proceedings through VTC. According to EOIR officials, EOIR largely  uses VTC for hearings for detained individuals, including both master  calendar and individual merits hearings. We reported in June 2017 that  officials from all six of the immigration courts we visited identified  challenges related to VTC hearings, including difficulties maintaining  connectivity, hearing respondents, exchanging paper documents,  conducting accurate foreign language interpretation, and assessing the  demeanor and credibility of respondents and witnesses. We further found  that EOIR had not, in accordance with best practices, (1) evaluated its  VTC program to ensure that it is outcome-neutral, or (2) established a  mechanism to solicit feedback and comments about VTC from those who  use it regularly to assess whether it meets user needs.", "Therefore, we recommended that EOIR take three actions to provide  further assurances that its use of VTC in immigration hearings is  outcome-neutral, including that it collect more complete and reliable data  related to its VTC use (e.g., the number of hearings it conducts by VTC)  and use the data to assess any effects of VTC on immigration hearings.  EOIR partially concurred with these actions and has since taken some  steps to implement these recommendations, such as piloting a project to  collect data on respondent appeals related to the use of VTC in their  cases. Additionally, EOIR officials told us in August 2017 that the agency  is studying how to collect more complete and reliable data on the number  and type of hearings it conducts through VTC and use these and other  data to assess any effects of VTC on immigration hearings.", "We also recommended that EOIR develop and implement a mechanism  to solicit and monitor feedback from respondents regarding their  satisfaction and experiences with VTC hearings. EOIR concurred and  implemented this recommendation in December 2017 by establishing a  mechanism on its public website to solicit open-ended feedback from  respondents regarding their satisfaction with VTC hearings, including the  audio and visual quality of the hearing. According to EOIR officials, a  group of individuals within EOIR\u2019s Office of the Chief Immigration Judge is  responsible for monitoring and addressing feedback received through this  portal. These efforts should help EOIR ensure VTC hearings it conducts  meet all user needs and identify and address technical issues with VTC  hearings.", "Chairman Cornyn and Ranking Member Durbin, this completes my  prepared statement. I would be happy to respond to any questions you or  the members of the committee may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Taylor Matheson (Assistant  Director), Kathleen Donovan, Sasan J. \u201cJon\u201d Najmi, Robin Nye, and Erin  O\u2019Brien.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-283", "url": "https://www.gao.gov/products/GAO-18-283", "title": "Military Recruiting: Army National Guard Has Implemented Internal Controls for Soldier Incentives but Needs to Better Plan to Maintain the Integrity of Those Controls", "published_date": "2018-02-16T00:00:00", "released_date": "2018-02-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["ARNG provides trained and equipped units ready to defend life and property in the 54 states, territories, and the District of Columbia. In 2011, the Army Audit Agency reported weaknesses in internal controls over soldier incentive payments in the California ARNG that led to some improper payments. DOD initially took actions to recoup some of these payments, but the National Defense Authorization Act for Fiscal Year 2017 allowed for the waiver or other forgiveness of debt.", "The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to assess policies and procedures for minimizing and waiving the recoupment of improper payments. This report (1) evaluates the extent to which ARNG has implemented and planned to adjust the internal controls for its Selected Reserve Incentive Program to prevent improper payments and (2) describes which DOD organizations have the authority to waive ARNG incentive debts and steps taken to improve waiver documentation. GAO conducted site visits to six states based on the value of their incentive programs, reviewed documentation used to manage incentive programs, examined incentive debt waiver cases, and interviewed DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In response to the over $22 million in improper payments the California Army National Guard (ARNG) made in cash bonuses and other soldier incentives from 2004 through 2010, ARNG officials implemented some internal controls to prevent future improper incentive payments. These internal controls include automated and manual checks of soldier incentive contracts to verify soldiers' eligibility for incentive payments. For example, ARNG implemented automated rules in its Guard Incentive Management System\u2014an online system that tracks incentive contracts\u2014to monitor a soldier's eligibility for an incentive by comparing the data received from multiple personnel systems against the soldier's contract. If any issues are found, the Guard Incentive Management System will flag the incentive case for review by state ARNG officials and will stop future payments until the issue is resolved.", "While these internal controls have improved accountability over soldier incentive payments, ARNG is still in the process of completing further actions. For example, in April 2017, ARNG issued the fiscal year 2017 Selected Reserve Incentive Program policy. However, ARNG did not incorporate changes as a result of this policy into the Guard Incentive Management System to ensure that the automated checks captured these policy changes\u2014including one that affects approximately 8,000 solider incentive contracts, according to ARNG officials. ARNG officials told us that they had not updated the Guard Incentive Management System with this policy because of technical challenges resulting from a transition in vendors for the Reserve Component Manpower System\u2014an information system that houses the Guard Incentive Management System. ARNG officials also told us that they plan to update the Guard Incentive Management System to include the 2017 policy in February 2018.", "GAO also found that ARNG had not developed and implemented a plan for future significant changes that could affect its internal controls over soldier incentive payments. These changes include, for example, the end of the current vendor contract in 2020 to support the Reserve Component Manpower System and the Army National Guard's migration to the Integrated Personnel and Pay System \u2013 Army that is scheduled to occur in 2018. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to significant changes that could affect an internal control system. Specifically, because conditions affecting an organization and its environment continually change, management needs to anticipate and plan for significant changes by using a forward-looking process to prepare for those changes. Without taking action to plan for such changes, ARNG puts itself at risk of making improper payments in the future.", "The Defense Finance and Accounting Service and the Defense Office of Hearings and Appeals review and adjudicate requests for waivers of incentive debt. DOD has taken two steps to improve the availability of documentation needed to adjudicate waiver cases. First, DOD has clarified the policy in its Financial Management Regulation on the documentation soldiers are required to provide. Second, officials review documentation in the Guard Incentive Management System before validating an incentive payment, which may reduce delays associated with missing documentation when processing waiver requests."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that ARNG develop and implement a plan that identifies, analyzes, and responds to significant changes that could affect internal controls for its Selected Reserve Incentive Program. ARNG concurred with the recommendation and has identified planned actions to address the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Army National Guard (ARNG) provides trained and equipped units  ready to defend life and property in the United States, including serving  key roles in responding to natural disasters and protecting the homeland.  Additionally, ARNG assists in bolstering the nation\u2019s active-duty military  forces in times of need. ARNG is authorized to have an end strength of  343,500 in fiscal year 2018. In order to recruit and retain personnel to  reach this end strength, ARNG contracts with current and prospective  soldiers to provide enlistment, re-enlistment, and other financial  incentives for specified terms of service in certain occupational  specialties. In order to receive these incentives, soldiers must fulfill the  obligations specified in their contracts. In fiscal year 2016, ARNG  disbursed more than $185 million to soldiers for these incentives.", "Following a 2011 report by the Army Audit Agency detailing weaknesses  in internal controls over incentive payments\u2014including fraud\u2014in the  California ARNG, the National Guard Bureau (NGB) conducted a review  of all payments to California ARNG soldiers under its Selected Reserve  Incentive Program, which provides cash bonuses and other payments,  during fiscal years 2004 through 2010. California ARNG officials had  identified more than $22 million in improper incentive payments during  that time period. While the Department of Defense (DOD) initially took  actions to recoup some of these payments, subsequent guidance from  the Office of the Secretary of Defense in October 2016 and the National  Defense Authorization Act for Fiscal Year 2017 allowed for the waiver or  other forgiveness of debt for most of the affected California ARNG  soldiers.", "The National Defense Authorization Act for Fiscal Year 2017 included a  provision for us to assess policies and procedures for identifying and  minimizing improper payments and requests to waive the recoupment of  improper payments. This report (1) evaluates the extent to which ARNG  has implemented and planned to adjust the internal controls for its  Selected Reserve Incentive Program to prevent improper payments and  (2) describes which DOD organizations have the authority to waive ARNG  soldiers\u2019 incentive debt and any steps DOD has taken to improve the  availability of documentation to adjudicate waiver cases.", "For objective one, we reviewed applicable DOD guidance on the use of  incentive programs and compared this guidance with our observations of  how this guidance was implemented in six selected states. We selected a nonprobability sample of six states based on the value of the incentives  their respective programs awarded in fiscal year 2016 and the number of  soldier contracts ARNG was considering for termination (termination  being a necessary step before beginning recoupments). The six states we  selected were California, Delaware, Illinois, Nebraska, Nevada, and  Virginia. We conducted site visits to each of our six selected states to  catalogue their procedures related to incentive payments. Specifically, we  conducted interviews with state incentive managers to discuss their  procedures for managing incentive payments, and we observed incentive  managers performing these procedures in information systems such as  the Guard Incentive Management System, among others. We also  discussed challenges they experienced using these systems. Although  the findings from our site visits to these six selected states are not  generalizable to all states and territories, they provide important insights  into how the incentive process is managed across a range of states.", "Because ARNG serves as the focal point for processing all incentive  cases, we also conducted interviews with ARNG officials to discuss their  roles in managing incentive payments, and we observed their use of the  Guard Incentive Management System. We discussed challenges they  experienced using the system. Based on these discussions, we  performed additional work to identify the steps that NGB was taking to  address these challenges. This work included reviewing documents  associated with the Reserve Component Manpower System and its  associated modules, such as the Guard Incentive Management System;  interviewing vendors that were awarded the contracts to manage the  Reserve Component Manpower System; and interviewing NGB officials to  discuss their roles in managing contracts associated with the Reserve  Component Manpower System and the ARNG Incentive Support Team.  We compared our observations against federal internal control standards  related to risk assessment.", "For objective two, we reviewed applicable DOD guidance on the roles  and responsibilities of the organizations that participate in the process\u2014 the Defense Finance and Accounting Service and the Defense Office of  Hearings and Appeals. We interviewed officials at these organizations to  better understand the source of delays in adjudicating waivers, which they  identified as a lack of documentation. Based on these interviews, we  collected and examined ARNG Selected Reserve Incentive Program  recoupment waiver cases that were adjudicated by the Defense Office of  Hearings and Appeals in calendar years 2014 through 2016 to identify the  frequency with which documentation was missing. During site visits to our  selected states, we also interviewed ARNG officials to determine the  processes designated for generating and maintaining documentation.", "We conducted this performance audit from January 2017 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["ARNG is one of two reserve components of the Department of the Army;  it has units located in each of the 54 states, territories, and the District of  Columbia. The Secretary of the Army is responsible for creating  overarching policy and guidance for all of the components of the Army,  including ARNG. The Chief of NGB, among other responsibilities, acts as  the official channel of communication between the Department of the  Army and the 54 states, territories, and the District of Columbia in which  ARNG has personnel assigned and is responsible for ensuring that  ARNG personnel are accessible, capable, and trained to protect the  homeland and to provide combat resources to the Army."], "subsections": [{"section_title": "The Selected Reserve Incentive Program", "paragraphs": ["During fiscal years 2010 through 2016, ARNG disbursed more than $1.8  billion in financial incentives to bolster its recruiting and retention efforts.  The ARNG program, called the Selected Reserve Incentive Program,  includes cash bonuses and other payments. The ARNG regulation for  Selected Reserve Incentive Programs includes over a dozen sub- categories of cash bonuses, such as those for newly enlisted soldiers,  active duty soldiers who join ARNG, and soldiers who re-enlist or extend  with ARNG. In addition to cash bonuses, ARNG makes incentive  payments as part of the Student Loan Repayment Program. Under this  type of incentive, ARNG disburses incentive payments directly to a third  party lender.", "The Director of ARNG is responsible for determining the overall policy for  the Selected Reserve Incentive Program and issued the regulation that  governs incentive procedures and eligibility criteria for soldiers entering  into an incentive agreement. On a periodic basis, ARNG updates the  policy for a specific fiscal year through a policy or an education and  incentive operational message. These updates, which are intended to  help ARNG meet its readiness requirements, can provide instructions on  the value and frequency of incentives, as well as directing the targeting of  incentives to address a particular skill or unit need. The updates can also  direct changes to eligibility requirements in order to enable a soldier to  receive an incentive.", "Each of the 54 states, territories, and the District of Columbia has a state  incentive manager in ARNG who provides oversight for authorization,  verification, validation, establishment, monitoring, and termination of all  incentive payments, including recoupment of incentives. State incentive  managers work with recruiting and retention personnel to assist in the use  of bonuses. For example, state incentive managers can ensure that the  contracts used by recruiting and retention personnel comply with ARNG  policy. Additionally, each ARNG unit has personnel who track information  on soldier performance, such as attendance, physical fitness, and  training. To manage these activities, ARNG uses the Reserve Component  Manpower System\u2014 an information system that houses manpower  readiness data and includes approximately 40 subsystems."], "subsections": []}, {"section_title": "Improper Payments in the California ARNG", "paragraphs": ["A 2008 California National Guard audit revealed that Selected Reserve  Incentive Program incentives, including student loan repayments, were  being improperly paid to numerous California ARNG soldiers and that  some of these cases were results of fraud. In subsequent audits of  California ARNG, 17,485 soldiers were identified as having received a  bonus or student loan repayment in the period of 2004 through 2010 that  was potentially improper and subject to recoupment. By the end of 2016,  several follow-on reviews had identified improper incentive payments to  more than 1,400 soldiers.", "These investigations and audits determined that ARNG lacked internal  controls over its incentive process. For example, the state incentive  manager could authorize and approve an incentive and then forward the  payment request to the state\u2019s U.S. Property and Fiscal Office, the office  responsible for authorizing payment. To improve the process, in 2010  ARNG established a contract for an Incentive Support Team to, among  other things, review soldier incentives. In 2011, ARNG developed a  module within the Reserve Component Manpower System called the  Guard Incentive Management System. The Guard Incentive Management  System was designed to aid in managing the incentive process across all  states by providing an online system to track, monitor, and prioritize all  incentive cases. The Guard Incentive Management System was also  intended to increase oversight through automated notifications and  reporting features and to add a budget control mechanism for NGB and  the states, among other things. In 2012, ARNG began a phased  implementation of the Guard Incentive Management System in each state  and territory. ARNG subsequently expanded the Guard Incentive  Management System to include the Student Loan Repayment Program."], "subsections": []}, {"section_title": "Process Before NGB Establishes a Debt", "paragraphs": ["NGB goes through a process before it establishes and collects on a  debt. State incentive managers are responsible for ensuring that  soldiers receiving incentive payments are satisfying contractual  requirements. If the state incentive manager determines that the soldier  has violated the contract tied to the incentive payment, the state incentive  manager sends a certified letter to the soldier that (1) states the reason  the payment may potentially be determined to be improper and (2) lists  the steps that the soldier can take to adjudicate the issue. ARNG officials  informed us that, if the soldier does not respond to the letter within 45  days, a debt is established in Defense Finance and Accounting Service  systems. In response, the soldier may provide documents to address the  issue or, should documents already exist, may request that NGB make an  exception to policy\u2014a determination by NGB that the circumstances of a  soldier\u2019s case merit allowing the soldier to retain the incentive payment.  Incentive managers in some states told us that they will assist soldiers in  requesting an exception to policy and will sometimes request these  exceptions on their behalf in the case of events\u2014such as a  reorganization of a state\u2019s ARNG units\u2014that could result in a large  number of soldiers not meeting the terms of their incentive contracts. If  these steps do not resolve the issue, the soldier can seek recourse  through the Army Board for the Correction of Military Records. Once  these options are exhausted, the debt is established in Defense Finance  and Accounting Service systems."], "subsections": []}]}, {"section_title": "ARNG Has Implemented Internal Controls to Prevent Improper Payments but Has Not Planned for Future Significant Changes That Could Affect Its Internal Controls ARNG Has Implemented Internal Controls to Prevent Improper Incentive Payments", "paragraphs": ["ARNG has implemented internal controls, including automated and  manual reviews, to prevent improper incentive payments, and it also  reviews its incentive programs on a periodic basis. First, ARNG has  implemented the Guard Incentive Management System and expanded its  use over time to oversee its incentive contracts through automation. In  2012, ARNG began using the Guard Incentive Management System to  manage the life cycles of contracts between ARNG and soldiers for  incentives and education entitlements, including those for the Selected  Reserve Incentive Program. When a soldier signs a contract with a  recruiter or retention officer, the Guard Incentive Management System  alerts the state incentive manager that an incentive is ready for review.  ARNG has also implemented automated rules in the Guard Incentive Management System\u2014known as monitor rules\u2014that continuously  monitor a soldier\u2019s eligibility for an incentive. The system does this by  comparing the data it receives from multiple personnel systems against  the soldier\u2019s contract. If any issues are found, the Guard Incentive  Management System will flag the incentive case for review by the state  incentive manager and will stop future payments until the issue is  resolved. In California, for example, we observed an incentive manager  reviewing a case that had been flagged for violating a monitor rule  because the soldier was no longer in the unit stipulated in the incentive  contract. The incentive manager told us that the soldier was informed of  the situation and that corrective action would be required before any  additional payments could be made. If a soldier is deemed ineligible or  loses eligibility at any time during this process, the state incentive  manager will stop payments and review the case to determine whether  the contract needs to be terminated.", "State incentive managers are also required to verify certain eligibility  criteria and personnel documents manually in the Guard Incentive  Management System. State incentive managers use checklists to review  a soldier\u2019s incentive contract and unit orders to determine eligibility. The  Selected Reserve Incentive Program requires that incentive contracts of  more than three years be paid out in installments. State incentive  managers or their designees are required to manually review each  incentive contract before making an anniversary payment. During our site  visits, we observed state incentive managers using the Guard Incentive  Management System to review whether a soldier was eligible to receive a  payment. For example, in Nebraska we observed an incentive manager  using the Guard Incentive Management System to verify a soldier\u2019s  contract period, unit assignment, and physical fitness test scores, among  other items, to confirm the soldier\u2019s eligibility to receive a payment. In  Illinois, we observed an incentive manager using the Guard Incentive  Management System to verify a soldier\u2019s identity, unit transfer orders, and  an eligible student loan before approving a student loan repayment for  further review at the national level. We also observed an incentive  manager in Illinois reviewing a soldier\u2019s incentive contract, which was  being terminated because the soldier had failed to attend required drills.  ARNG personnel in each of the states we visited told us that the Guard  Incentive Management System provides a strong barrier against soldiers  receiving improper payments. The Guard Incentive Management System  also tracks and records each user\u2019s actions on each incentive case to  provide an audit trail, which we observed in multiple states.", "In addition to reviews conducted at the state level, ARNG conducts  another review of incentive payments using the Guard Incentive  Management System. Once a contract has been reviewed at the state  level, state incentive managers forward it to the ARNG Incentive Support  Team for another review. The ARNG Incentive Support Team has  provided assistance to all 54 states, territories, and the District of  Columbia, by conducting reviews of 100 percent of incentive payments  and terminations, among other things. After the ARNG Incentive Support  Team\u2019s review, ARNG officials perform a final review of an incentive  payment before it is certified. Specifically, ARNG officials review a  random sample of 10 percent of contracts from a batch of incentive  payments that the Guard Incentive Management System generates.  ARNG officials told us that if 25 percent or more of this 10 percent sample  is rejected because it contains errors, all of the contracts in the batch are  returned to the ARNG Incentive Support Team or their respective states  for additional review. If less than 25 percent are rejected, the individual  contracts with errors are returned to the ARNG Incentive Support Team  or their respective states for additional review. The remainder of the batch  passes ARNG review, and the Guard Incentive Management System  generates payment files electronically and transfers them to the Defense  Finance and Accounting Service, which disburses funds to the soldiers,  as shown in figure 1.", "Second, ARNG conducts periodic reviews of its incentive program.  Specifically, National Guard Regulation 600-7, Selected Reserve  Incentive Program\u2014issued in August 2014\u2014classifies incentive  programs as a high-risk function that should be evaluated every year to  mitigate risks, and that management controls must be evaluated at least  once every five years. Each of the six states we visited had either  conducted an internal review of its incentive program since 2016 or told  us that it had plans to conduct one within the next year. For example,  ARNG officials in Nevada had evaluated and certified the internal controls  of their incentive program in 2017, and ARNG officials in Delaware told us  that they plan to request an external evaluation of their incentive program  in 2018."], "subsections": [{"section_title": "ARNG Has Taken Steps to Address Some Weaknesses Affecting Its Internal Controls but Has Not Planned for Future Significant Changes", "paragraphs": ["ARNG took steps to address some identified weaknesses to its internal  controls for managing soldier incentive contracts, but has not developed  and implemented a plan for future significant changes that could affect its  internal controls. For example, in October 2015, a previous contract to  support the ARNG Incentive Support Team expired, and performance of  the follow-on contract was delayed for approximately two years\u2014until  September 2017\u2014by actions related to two GAO bid protests. From  October 2015 to January 2016, ARNG used a 3-month bridge contract  with the previous contractor to provide support and enable the ARNG  Incentive Support Team to continue to perform 100 percent reviews.  However, in January 2016, the ARNG Incentive Support Team stopped  conducting 100 percent reviews of incentive contracts. At that time,  according to ARNG officials, ARNG increased their review of incentive  contracts from 10 percent to 30 percent to help mitigate the loss of the  100 percent review that the ARNG Incentive Support Team had  previously provided. On September 30, 2017, the current contract for the  ARNG Incentive Support Team was awarded and according to ARNG  officials, the ARNG Incentive Support Team reinstated 100 percent  reviews of soldier incentive contracts on December 8, 2017. ARNG also  adjusted their review of soldier incentive contracts from 30 percent back  to 10 percent.", "As another example, in April 2017, ARNG issued the fiscal year 2017  Selected Reserve Incentive Program policy. Among other things, the  policy changed the eligibility requirement for receiving an incentive  payment based on soldier performance on the Army Physical Fitness  Test. Under the previous policy, soldiers who failed two consecutive  fitness tests would be ineligible to receive an incentive. The fiscal year  2017 policy changed this requirement to two failures during the lifetime of  a soldier\u2019s incentive contract, which could be up to six years. According to  ARNG officials, approximately 8,000 incentive contracts are affected by  this requirement. NGB requires the vendor managing the Reserve  Component Manpower System, which includes the Guard Incentive  Management System, to update the system with any policy changes.  However, ARNG officials told us that they had not updated the Guard  Incentive Management System with the fiscal year 2017 policy.  Therefore, the system\u2019s automated reviews are unable to check for this  eligibility requirement.", "Additionally, according to ARNG officials, ARNG did not publish official  guidance regarding this discrepancy. Instead, ARNG informally discussed  with state incentive managers that the fiscal year 2018 policy, once  issued, would eliminate this requirement. ARNG officials told us that a  separate transition of vendors for the Reserve Component Manpower  System that began in 2016 had delayed their ability to update the Guard  Incentive Management System with the fiscal year 2017 policy. ARNG  had not anticipated that the vendor would be unable to update the Guard  Incentive Management System as a result of technical challenges  following the transition. ARNG officials also told us that they are currently  developing the fiscal year 2018 policy and would update the Guard  Incentive Management System with this policy when it is ready. On  December 6, 2017, we provided our observations to ARNG on the  inability of the Guard Incentive Management System to perform  automated monitoring on these 8,000 incentive contracts. According to  ARNG officials, on December 7, 2017, they submitted a formal change  request to the vendor to incorporate this rule in the Guard Incentive  Management System, and they expect the rule to be incorporated in  February 2018.", "ARNG has also taken steps to address unforeseen technical issues that  have affected its incentive program. For example, ARNG officials told us  that they have implemented several recommendations that were made as  part of the Army\u2019s administrative investigation of the transition in vendors  managing the Reserve Component Manpower System, of which the  Guard Incentive Management System is a component. The investigation  determined that ARNG was not positioned to provide sufficient technical  oversight of the transition, and in September 2016, the investigation\u2019s  report recommended that ARNG, among other things, assign a highly  skilled Information Technology subject matter expert to provide oversight  of all government and contractor activities related to the Reserve  Component Manpower System. ARNG officials also told us they had  since assigned this expert and had implemented other recommendations  from the investigation, but were not tracking progress on those recommendations. Additionally, ARNG officials told us that, as of October  2017, they were in the process of revising their performance work  statement for the current vendor. These revisions may include, among  other things, providing other types of technical support and reducing the  amount of time that the system would be unavailable to ARNG and  others. Finally, ARNG officials told us that they plan to use an existing  Information Technology steering committee to provide oversight for the  Reserve Component Manpower System; however, these same officials  told us that the steering committee had not met from May 2017 through  October 2017.", "While ARNG has taken steps to remedy some technical issues and  weaknesses in its internal controls, it has not demonstrated that it has  learned from its past experiences by planning for significant changes to  its incentive program that could affect its internal controls, such as its  information systems not functioning correctly or data related to incentive  contracts not being readily updated or available for an extended period of  time. These changes include, for example, the next vendor transition for  the Reserve Component Manpower System, which is expected to be re- competed in 2020. Additionally, as ARNG continues deployment of the  Integrated Personnel and Pay System \u2013 Army in 2018, it is anticipated  that aspects of the Reserve Component Manpower System will change.  Standards for Internal Control in the Federal Government states that  management should identify, analyze, and respond to significant changes  that could affect the entity\u2019s internal control system. Because conditions  affecting the entity and its environment continually change, management  can anticipate and plan for significant changes by using a forward-looking  process to prepare for change. Planning for significant changes\u2014 including those cited earlier\u2014requires time and coordination in advance  of the changes occurring. However, ARNG officials have been unable to  demonstrate their planning efforts to identify, analyze, and respond to any  significant changes to ARNG\u2019s internal controls that may arise if, for  example, the contract is awarded to a new vendor or as the Reserve  Component Manpower System fully interfaces with the Integrated  Personnel and Pay System \u2013 Army. Without taking action to plan for  potentially significant changes to its internal controls for the Reserve  Component Manpower System, ARNG is at risk of not being prepared for  these changes that could contribute to the potential for making improper  payments."], "subsections": []}]}, {"section_title": "DOD Components Have the Authority to Waive Soldier Incentive Debt, and DOD Has Improved the Availability of Documentation to Adjudicate Waiver Cases Two DOD Components Have the Authority to Waive ARNG Soldier Incentive Debts for Military Pay and Allowances", "paragraphs": ["The Defense Finance and Accounting Service (DFAS) and the Defense  Office of Hearings and Appeals (DOHA) have the authority to waive  erroneous incentive debts for ARNG soldiers. DFAS is a DOD  component that maintains records of soldiers\u2019 debts and has the authority  to waive established debts of $10,000 or less. DOHA, another DOD  component, adjudicates waivers for debts of more than $10,000. For  established debts, DFAS will notify the soldier that a debt exists and will  be collected. In response, the soldier can submit a request to DFAS to  waive the debt. DFAS has the statutory authority to waive debts incurred  as a result of erroneous payments of up to $10,000 to members of the  armed services, including ARNG soldiers. If DFAS denies all or part of the  waiver request, it informs the waiver applicant of the right to file an appeal  of the denial to DOHA within 30 days. Soldiers can file for a waiver of  indebtedness from DFAS for a period of up to 5 years from the date an  erroneous payment is discovered. DFAS may not consider waiver  applications that it receives after that 5-year period.", "DOHA has the authority to review waiver cases forwarded by DFAS and  to adjudicate appeals from soldiers whose waiver applications have been  denied. According to DOHA officials, they review only cases in which (1)  the payment has been identified as erroneous, (2) a collection action has  been started, and (3) the soldier has been given rights under the Fair  Debt Collection Practices Act. DOHA officials told us that they do not  have authority over the establishment or collection of a debt or the  authority to conduct a hearing for a soldier contesting the validity of a  debt. However, DOHA officials told us that they will verify the correctness  of the debt before adjudicating a waiver case and may request  information from DFAS\u2014such as documentation\u2014including enlistment  contracts, payment vouchers, and leave and earnings statements.  Additionally, DOHA officials told us that they do not have the authority to  adjudicate debts for payments made under the Student Loan Repayment  Program\u2014one type of payment under the Selected Reserve Incentive  Program\u2014because of their determination that their authority to waive  debts for erroneously paid \u201cpay and allowances\u201d as defined in 32 U.S.C. \u00a7  716 and 10 U.S.C. \u00a7 2774(a) does not apply to payments to lenders for  educational expenses. Those cases are reviewed and adjudicated at the  discretion of the Secretary of the Army. If DOHA denies a soldier\u2019s waiver  application, the soldier may request that DOHA reconsider its decision,  which DOHA officials told us is accomplished by an appeals panel of  three DOHA attorneys. The decision of this panel is final and ends the  waiver of indebtedness adjudication process, as depicted in figure 2."], "subsections": [{"section_title": "DOD Has Improved the Availability of Documentation to Adjudicate Waiver Cases", "paragraphs": ["DOD has improved the availability of the documentation that is used to  adjudicate waiver cases for soldiers\u2019 debts. DOHA officials told us that  adjudication was sometimes delayed because case files lacked  documentation. As part of our review of DOHA waiver case files, we  found several examples of ARNG cases involving Selected Reserve  Incentive Program debts that had been adjudicated between January  2014 and December 2016, in which DOHA adjudicators had to acquire  missing information, including documentation, from external sources  before adjudicating the case. For example, in one case from Alabama  that was adjudicated in 2014, it was 83 days before DOHA officials  received the documentation they needed. DOHA officials told us this  information included the soldier\u2019s bonus agreement, leave and earnings  statements, and transfer orders. In another case from California that was  adjudicated in 2016, it took adjudicators 74 days to obtain additional information. DOHA officials told us this information included payment  vouchers.", "DOD\u2019s use of the Guard Incentive Management System has facilitated  the availability of documentation needed to adjudicate waiver cases. For  example, the system stores incentive payment and eligibility  documentation, which may help to reduce delays in the adjudication of  waivers associated with missing documentation. Before making an  incentive payment, state incentive managers are required to inspect case  documentation in the Guard Incentive Management System to validate  the payment. During our site visits to selected states, we observed state  incentive managers using the Guard Incentive Management System to  review documents, such as re-enlistment contracts and unit orders. In  several cases, we observed state incentive managers identifying errors in  documents, and we observed their ability to correct these documents. For  example, in Nebraska we observed a case in which a soldier\u2019s military  occupational specialty code in the Guard Incentive Management System  was not in line with what was in the incentive contract, because the unit  had been reorganized. We then observed a state incentive manager  confirming the soldier\u2019s transfer orders and uploading this documentation  into the Guard Incentive Management System. Our observations are not  generalizable across all states or for all contracts, but they suggest that  documentation required to adjudicate waiver cases is now more readily  available and will continue to be in the future.", "DOD also updated its Financial Management Regulation to improve the  availability of documentation. DOHA officials told us that DOD had  updated the Financial Management Regulation in January 2016.  Specifically, Volume 16, Chapter 4, Section 040403 of the DOD Financial  Management Regulation instructs applicants to include in their waiver  requests (1) copies of all supporting documentation, (2) copies of leave  and earnings statements, (3) copies of notifications of personnel actions,  and (4) any statements from the applicant in support of the waiver  application. DOHA officials stated that this revision should reduce  documentation-related delays during their review of future waiver  submissions. Additionally, DOHA officials told us that they have taken  steps to train DFAS personnel, who are responsible for reviewing waiver  applications, in an effort to reduce delays."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["ARNG has made progress in improving its internal controls since  widespread improper payments were identified in California in 2008. By  using the Guard Incentive Management System and requiring multiple  levels of review before incentives are paid, ARNG may have reduced the  likelihood of future widespread improper payments similar to what  occurred in California. However, it is important for ARNG to be forward  looking in preserving the integrity of its internal controls. ARNG has faced  challenges during the transition between vendors managing the system  that resulted in the weakening of internal controls, including those built  into the Guard Incentive Management System. To its credit, ARNG has  taken mitigating actions to prevent improper payments while attempting to  address those issues. These challenges, and the need for mitigating  actions, could have been prevented if ARNG had identified and prepared  in advance for challenges potentially resulting from the vendor transition.  If ARNG does not proactively identify, analyze, and plan to respond to  significant changes that could affect the internal controls to its incentive  program, there is an increased risk that additional weaknesses to its  internal controls could emerge and result in an increased likelihood of  improper payments."], "subsections": []}, {"section_title": "Recommendation", "paragraphs": ["We are making one recommendation to ARNG:  The Director of the Army National Guard should develop and implement a  plan to identify, analyze, and address any significant changes that could  affect internal controls for its Guard Incentive Management System.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to ARNG for comment. In its comments,  reproduced in appendix I, ARNG concurred with our recommendation and  stated that they initiated a project to improve internal control measures as  significant changes are made to the Guard Incentive Management  System to align the system with policy. ARNG also stated that the project  would look at the time required to adjust incentives to effect change within  the organization and achieve its strength goals. ARNG expects the  project to be completed in August 2018. We believe this action would  meet the intent of our recommendation.", "We are sending copies of this report to the Secretary of Defense, the  Chief of the National Guard Bureau, and the Director of the Army National  Guard. 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) 512-9971 or kirschbaumj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Army National Guard", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tina Won Sherman (Assistant  Director), David Blanding Jr., Vincent Buquicchio, Wesley Collins, Joanne  Landesman, Amie Lesser, Jim Melton, and Paul Seely made significant  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-32", "url": "https://www.gao.gov/products/GAO-18-32", "title": "Newborn Health: Federal Action Needed to Address Neonatal Abstinence Syndrome", "published_date": "2017-10-04T00:00:00", "released_date": "2017-10-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["As the opioid crisis has increased in recent years, so has the number of pregnant women who use opioids, which can result in NAS. A recent peer-reviewed study found that cases of NAS have grown nearly five-fold between 2000 and 2012 and that most infants with NAS are covered under Medicaid.", "The Comprehensive Addiction and Recovery Act of 2016 includes a provision for GAO to examine NAS in the United States and related treatment services covered under Medicaid. This report 1) describes the hospital and non-hospital settings for treating infants with NAS and how Medicaid pays for services, 2) describes recommended practices and challenges for addressing NAS, and 3) examines HHS's strategy for addressing NAS.", "GAO reviewed HHS documentation and interviewed HHS officials. GAO also conducted site visits to four states\u2014Kentucky, Vermont, West Virginia, and Wisconsin\u2014selected based on several factors, including incidence rates of NAS and geographic variation. GAO interviewed stakeholders from 32 organizations, including health care providers and state officials in the selected states."]}, {"section_title": "What GAO Found", "paragraphs": ["The prenatal use of opioids or other drugs can produce a withdrawal condition in newborns known as neonatal abstinence syndrome (NAS). Health care providers, state officials, and other stakeholders told GAO that most infants with NAS are treated in the hospital\u2014such as in a neonatal intensive care unit\u2014though some may be referred to a non-hospital setting\u2014such as a neonatal withdrawal center with nursery rooms\u2014to complete their treatment. The table below provides more information on settings for treating infants with NAS and on how Medicaid pays for services in these settings.", "According to stakeholders GAO interviewed and literature reviewed, there are several recommended practices and challenges associated with addressing NAS. The most frequently recommended practices included prioritizing non-pharmacologic treatment to infants\u2014treatment that does not involve medications\u2014such as allowing the mother to reside with the infant during treatment; educating mothers and health care providers on treatment of NAS, among other things; and using a protocol in the hospital or non-hospital setting for screening and treating infants with NAS. The most frequently cited challenges included the maternal use of multiple drugs\u2014or polysubstance use\u2014as it can exacerbate NAS symptoms; stigma faced by pregnant women who use opioids; hospital staff burden and limited physical capacity to care for infants with NAS; limited coordination of care for mothers and infants with NAS; and gaps in research and data on NAS, such as research on the long-term effects of the condition.", "In May 2017, the Department of Health and Human Services (HHS) published a strategy document that makes key recommendations to address NAS. The Strategy recommends, for example, that health care providers receive continuing education on managing and treating infants with NAS and promote non-pharmacologic treatment. According to HHS officials, these recommendations will inform planning and policy across the department. However, HHS has yet to determine how and when the recommendations will be implemented, including establishing priorities; the roles and responsibilities of other federal, state, and public stakeholders; implementation timeframes; and methods for assessing progress. HHS officials told GAO that they expect to develop an implementation plan sometime in 2017 but had no timeline for doing so. Without a plan that clearly specifies how HHS will implement the Strategy and assess its progress, the department increases the risk that its recommendations for addressing NAS will not be implemented."]}, {"section_title": "What GAO Recommends", "paragraphs": ["HHS should expeditiously develop a plan for implementing the recommendations included in its strategy related to addressing NAS. HHS concurred that it should expeditiously address NAS, but noted implementation of the strategy is contingent on funding."]}], "report": [{"section_title": "Letter", "paragraphs": ["Opioid misuse, including the use of heroin and misuse of opioids  prescribed for pain management, has been recognized by the federal  government, states, researchers, and others as a growing crisis in the  United States. As opioid misuse has increased in recent years, so has the  number of pregnant women who use opioids. The prenatal use of opioids  by pregnant women\u2014including opioid misuse, use of opioids prescribed  for pain management, and use of certain medications given to treat opioid  addiction\u2014can produce a withdrawal condition in newborn infants known  as neonatal abstinence syndrome (NAS). NAS symptoms range from  excessive crying and irritability to difficulties with breathing and feeding.  NAS is a rapidly increasing public health problem, with the incidence of  NAS in the United States growing nearly five-fold between 2000 and  2012. Specifically, cases of NAS increased from a rate of 1.2 per 1,000  hospital births per year in 2000 to 5.8 per 1,000 hospital births per year in  2012, reaching a total of 21,732 infants diagnosed with NAS. A 2015  study noted that by 2012 one infant was born about every 25 minutes with  NAS.", "While experts consider NAS to be an expected and treatable result of  prenatal opioid exposure, infants with NAS require specialized care that  typically results in longer and more complicated and costly hospital stays.  More than eighty percent of the NAS cases identified in the 2015 study  were paid for by Medicaid, the federal-state program that finances health  care coverage for low-income and medically needy populations, including  children and aged or disabled adults.", "Due to the growing opioid epidemic and its deleterious effects, including  the effects on infants, Congress has held hearings and passed legislation  aimed at addressing various aspects of this epidemic. For example, the  Protecting Our Infants Act of 2015 directed the Department of Health and  Human Services (HHS) to conduct a study and develop  recommendations for preventing and treating prenatal opioid use  disorders, including NAS. This law also required HHS to review its  planning and coordination related to NAS and to develop a strategy to  address gaps in research and gaps, overlap, and duplication among  federal programs to address NAS. We have previously reported that  HHS has nine agencies involved with addressing NAS and has a council  dedicated to coordinating activities across the department to address  NAS.", "The Comprehensive Addiction and Recovery Act of 2016 (CARA)  included a provision for GAO to examine NAS in the United States and  the treatment services for the condition covered under Medicaid in  hospital settings as well as any non-hospital settings. The act required  us to report within a year after passage, and to meet this mandated date,  we briefed your staff on our preliminary findings in July 2017. This report  includes information shared during that briefing and  1.  describes the hospital settings for treating infants with NAS and how  Medicaid pays for services in these hospital settings;  2.  describes the non-hospital settings for treating infants with NAS and  how Medicaid pays for services in these non-hospital settings;  3.  describes the recommended practices and challenges for addressing  4.  examines HHS\u2019s strategy for addressing NAS.", "To address our first three audit objectives describing care settings for  treating infants with NAS, Medicaid payment for NAS treatment, and the  recommended practices and challenges for addressing NAS, we did the  following:", "We selected 32 stakeholders based on their relevant experience to  cover a range of perspectives on NAS. This included stakeholders  from site visits we conducted in four states\u2014Kentucky, Vermont, West  Virginia, and Wisconsin. We selected these states because they met  the following criteria: (1) high incidence rate of NAS as of 2013; (2)  variation in United States geographic regions with high rates of NAS  as of 2012; (3) more than 40 percent of births in the state were  financed by Medicaid in 2016; and (4) the state has a perinatal quality  collaborative\u2014a state or multi-state network of teams working to  improve health outcomes for mothers and infants\u2014with work related  to NAS. The stakeholders we selected within these states consisted  of four state agencies, including Medicaid officials; officials from the  perinatal collaborative that work on NAS in each state; officials from  one residential treatment facility in each state that provides prenatal  and postpartum care to mothers; and hospital providers, including  physicians or nurses, from eight hospitals (two hospitals in each  state). We also selected 12 additional stakeholders outside of these  four states, including health care providers or administrators in four  non-hospital settings across the United States; officials from five  medical specialty societies, such as the American Academy of  Pediatrics and the American College of Obstetricians and  Gynecologists; and three experts, such as the authors of studies we  identified.", "We interviewed each of these 32 stakeholders and requested  information from stakeholders about treating infants with NAS,  including the utilization of available hospital and non-hospital care  settings and associated costs of treatment services. For example, we  requested protocols for screening and treating infants with NAS from  hospital and non-hospital care settings. We reviewed available  protocols provided by hospitals and a non-hospital care setting. We  also reviewed available information reported by state officials, hospital  and non-hospital providers, and state perinatal collaboratives on the  utilization of hospital and non-hospital care settings, the facility\u2019s cost  of treating NAS in hospital and non-hospital settings, length of stay for  treating infants with NAS, or the amount of Medicaid payments for  treating infants with NAS. We discussed the information provided by  stakeholders and examined the information for obvious errors. The  information obtained from these stakeholders is not generalizable to  other states or other hospital and non-hospital settings. In addition, in  some cases, stakeholders collected information differently, including  information on Medicaid payments; as a result, the information  reported by stakeholders is not directly comparable.", "We conducted a literature review to identify relevant peer-reviewed  articles published between January 2013 and December 2016. As a  result, we identified and reviewed 40 relevant studies. We examined  the methodologies for each of these studies and determined that the  studies were sufficiently reliable for our audit objectives.", "We interviewed officials from HHS, including those from the Centers  for Medicare & Medicaid Services (CMS) and HHS\u2019s Behavioral  Health Coordinating Council\u2014which includes officials from the  Substance Abuse and Mental Health Services Administration  (SAMHSA), the Indian Health Service, the Centers for Disease  Control and Prevention (CDC), and the Food and Drug Administration,  among others\u2014concerning NAS treatment services, settings of care,  Medicaid payment, and recommended practices and challenges  related to addressing NAS.", "We conducted a web-based survey administered to Child Welfare  Directors in fifty states and the District of Columbia and included in the  survey questions about whether Child Welfare Directors had received  federal or state guidance related to NAS. All 51 respondents  completed the survey for a response rate of 100 percent.", "To examine our last audit objective on HHS\u2019s strategy related to  addressing NAS, we interviewed agency officials and reviewed  documents on the department\u2019s efforts to develop a strategy. Specifically,  we interviewed relevant officials from CMS and HHS\u2019s Behavioral Health  Coordinating Council concerning their efforts to develop a strategy related  to addressing NAS. In reviewing relevant HHS documents, we focused on  HHS\u2019s Protecting Our Infants Act Report to Congress, which includes a  strategy to address identified gaps, challenges, and recommendations  related to NAS and prenatal opioid use. In addition, we reviewed the  relevant standards for internal control in the federal government and the  relevant criteria from GAO\u2019s body of work on effectively managing  performance under the Government Performance and Results Act  (GPRA) of 1993 and the GPRA Modernization Act of 2010. See  appendix I for further details of our methodology related to these  objectives.", "We conducted this performance audit from September 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "NAS and Prenatal Opioid Use", "paragraphs": ["NAS is a withdrawal condition within infants that can result from the  prenatal use of opioids by pregnant women. Prenatal opioid use occurs  when a woman, during the course of her pregnancy, uses an opioid- based medication or substance. Prenatal opioid use can take various  forms, including (1) the use of prescriptions for pain management, such  as fentanyl and oxycodone; (2) medication-assisted treatment for opioid  addiction, such as methadone and buprenorphine; (3) prescription drug  misuse or use disorder (such as using an opioid without a prescription,  using a different dosage than prescribed, or continuing to use an opioid  when it is no longer needed for pain); and (4) illicit opioid use, such as  heroin use. These types of prenatal opioid use are not mutually exclusive.  A 2014 study found that almost 22 percent of pregnant Medicaid  beneficiaries filled a prescription for an opioid during their pregnancy.  Medication-assisted treatment\u2014an approach that combines the use of  certain medications and behavioral therapy\u2014is generally considered by  HHS and medical specialty societies to be the standard of care for  treating pregnant women with opioid use disorders, depending on the  individual and her circumstances. SAMHSA and several medical  specialty societies, including the American College of Obstetricians and  Gynecologists and the American Society of Addiction Medicine, have  noted that providing medication-assisted treatment during pregnancy  prevents complications associated with illicit opioid use, encourages  prenatal care, and reduces the risk of obstetric complications. Further,  women may use multiple substances in addition to opioids during  pregnancy\u2014known as maternal polysubstance use\u2014such as tobacco,  alcohol, or anti-depressants, among others.", "GAO reported in 2015 that the gaps in efforts to address prenatal opioid use and NAS  most commonly cited by federal agency officials and experts were related to the treatment  of prenatal opioid use and NAS. Agency officials and experts said that there has not been  adequate research comparing different types of treatment approaches and that research  is needed on how best to treat a pregnant woman with an opioid use disorder so that the  treatment is most effective for the woman while offering minimal risk to the fetus. See  GAO-15-203. For more information on factors that can affect access to medication- assisted treatment, see GAO, Opioid Addiction: Laws, Regulations, and Other Factors  Can Affect Medication-Assisted Treatment Access, GAO-16-833 (Washington, D.C.: Sept.  2016). respiratory distress.", "There is currently no national standard of care for screening or treating  NAS. There have been a few scoring tools developed to screen the infant  to determine the appropriate course of treatment. Health care providers  predominantly diagnose NAS using the Finnegan Neonatal Abstinence  Scoring Tool, which calculates a score based on a variety of central  nervous, metabolic, respiratory, and gastro-intestinal symptoms that  might be observed. The American Academy of Pediatrics and the  American College of Obstetricians and Gynecologists recommend that  infants with NAS should not be initially treated with medication, known as  pharmacologic treatment. Instead, these organizations recommend  starting with non-pharmacologic treatment, which includes placing the  infant in a dark and quiet environment, swaddling, breastfeeding,  rooming-in with the mother, and providing high-calorie nutrition, among  other things. For example, rooming-in\u2014allowing the mother to reside with  the infant during the infant\u2019s treatment\u2014may have benefits, such as  helping to develop a bond between the mother and infant and to reduce  the severity of the infant\u2019s NAS symptoms. Pharmacologic treatment,  such as using methadone or morphine, may be necessary only for the  relief of moderate to severe signs of NAS. See figure 1 for more  information on non-pharmacologic and pharmacologic treatment."], "subsections": []}, {"section_title": "Federal Resources on NAS and Prenatal Opioid Use", "paragraphs": ["HHS has published several guidance and educational resources related  to NAS and prenatal opioid use. These documents serve as tools to help  stakeholders, including state entities and health care providers, who work  with this population. For example, SAMHSA published a clinical report for  health care providers in 2016 that provides recommendations to help  them when making decisions regarding the evaluation, care, and  treatment of women with opioid use disorders and infants with NAS. As  of July 2017, SAMHSA is in the process of producing a clinical guide  based on this report and expects to publish an updated report later this  year. In another example, SAMHSA published a guidance document in  2016 that aims to support the efforts of states, tribes, and local  communities in addressing the needs of pregnant women with opioid use  disorders and their infants. Among other things, the document includes  strategies and guidance to promote care coordination among  stakeholders, including child welfare agencies and medical professionals,  when treating infants with NAS. (See app. II for a list of federal  educational resources related to NAS and prenatal opioid use published  by HHS.)"], "subsections": []}, {"section_title": "Medicaid Program Overview", "paragraphs": ["As we previously noted, more than 80 percent of NAS cases are paid for  by Medicaid, which is a federal-state health care program that finances  health care coverage for low-income and medically needy populations,  including children and aged or disabled adults. States administer their  Medicaid programs within broad federal requirements and according to a  state plan approved by CMS, the federal agency within HHS that  oversees Medicaid. The Medicaid program allows states to design and  implement their programs within certain federal parameters, resulting in  more than 50 distinct state-based programs. For example, states  generally determine the type and scope of services to cover, set payment  rates that different health care providers will receive for various covered  services, and pay these providers for claims submitted for services  rendered. In addition, states vary in the extent to which they enroll  beneficiaries in managed care versus delivering care through the more  traditional fee-for-service model. Under a managed care delivery model,  states typically contract with managed care plans to provide a specific set  of Medicaid-covered services to beneficiaries and pay them a set amount  per beneficiary\u2014referred to as capitation payments\u2014to provide those  services. Under fee-for-service, Medicaid pays health care providers a  fee for each service provided to a Medicaid beneficiary. Medicaid\u2019s Early  and Periodic Screening, Diagnostic, and Treatment benefit, which states  are required to provide, covers comprehensive health screenings,  preventive health services, and all medically necessary treatment and  services\u2014for Medicaid eligible-children under the age of 21\u2014to correct or  ameliorate health conditions discovered through screenings."], "subsections": []}]}, {"section_title": "Most Infants with NAS Complete Treatment in Various Hospital Settings, and in Selected States Medicaid Pays for Services Using Bundled Payments", "paragraphs": [], "subsections": [{"section_title": "Hospital Settings for Treating Infants with NAS", "paragraphs": ["According to the literature we reviewed, most infants with NAS in the  United States are treated in a hospital setting, often in the neonatal  intensive care unit (NICU), which has a relatively high daily cost of care.  Stakeholders we interviewed told us that these infants may also be  treated in other hospital settings. According to state and perinatal  collaborative officials in the four selected states we reviewed, infants  diagnosed with NAS begin\u2014and most complete\u2014treatment for the  condition in various hospital settings which provide different levels of  care: a well newborn nursery (level I), special care nursery (level II), or  NICU (level III or IV). For example, according to these officials, most  infants with NAS in Vermont are treated in well newborn nurseries, while  most infants with NAS in Kentucky and Wisconsin are treated in NICUs.  West Virginia perinatal collaborative officials told us that about a third of  infants with NAS are treated in well newborn nurseries, while two-thirds  receive treatment in either a special care nursery or NICU. According to  perinatal collaborative officials and hospital providers in the four selected  states, the severity of the infant\u2019s NAS symptoms or the hospital\u2019s  capability to treat NAS can determine whether the infant receives care in  a nursery or NICU.", "Health care providers in the four selected states described the general  clinical approach for treating infants with NAS. According to these  providers, they generally start with non-pharmacologic treatment\u2014for  example, swaddling or placing the infant in a quiet, dark room. Health  care providers may continue to monitor and assess the severity of the  infant\u2019s NAS symptoms using one of the available scoring tools for NAS.  If the infant\u2019s symptoms meet or exceed a certain threshold, these  providers may initiate pharmacologic treatment by administering  morphine or methadone, for example.", "Some perinatal collaborative officials that we interviewed in the four  selected states told us that not all hospitals may have the capability to  provide pharmacologic treatment. For example, these officials told us that  level I hospitals\u2014hospitals with only well newborn nurseries\u2014in Kentucky  and Wisconsin may not provide pharmacologic treatment to infants with  NAS because these hospitals may not have the staff expertise to  administer the needed medication and monitor the infants who receive it.  Instead, these hospitals may transfer infants with NAS who require  pharmacologic treatment to hospitals with higher levels of care, such as  those with a NICU. Table 1 provides information on the eight selected  hospitals in our review that provide NAS services.", "According to a 2015 study we reviewed, nationwide, infants with NAS  who require pharmacologic treatment generally have longer average  hospital stays (23 days) compared with infants with NAS who do not  require such medication (17 days). Health care providers from our  selected hospitals also indicated a similar trend\u2014the average length of  hospital stay in calendar year 2016 for infants with NAS who received  pharmacologic treatment ranged from 7 to 30 days, while the stays for  infants who did not require such medication ranged from 3 to 7 days."], "subsections": []}, {"section_title": "Medicaid Payments for NAS Treatment Services Provided in Hospital Settings", "paragraphs": ["Medicaid generally pays for NAS treatment services in our four selected  states using a diagnosis-related group (DRG) based payment system, in  which hospitals receive a fixed amount for a bundle of services. In  general, the DRG-based system used in Medicaid pays for the medical  services necessary for treating infants with NAS, such as medication, bed  space, and nursing staff, according to CMS officials. CMS officials said  that the DRG-based system generally does not pay for professional  services, such as physician visits; instead, these services are typically  paid under a fee-for-service payment schedule, in which states or  contracted managed care plans pay health care providers directly for their  services.", "Officials in our selected states said information on total Medicaid  payments for hospital-based NAS services was not readily available.  Several DRGs are typically used to bill Medicaid for services provided to  infants. However, these codes alone cannot provide an accurate estimate  of Medicaid payments for NAS treatment services because the codes are  not used exclusively for NAS. For example, according to some health  care providers we interviewed, two DRG codes that may be used to bill  Medicaid and other payers for NAS treatment services are 791  (prematurity with major problems) and 793 (full term neonate with major  problems). However, these codes could be used to bill for over 2,000  diagnoses\u2014for example, pneumonia or measles. One state official said  that while they could provide us with information on Medicaid payments  for these infants, they could not parse out the costs by diagnosis codes,  such as those related to NAS. Thus, estimates of total Medicaid  payments based only on DRG codes likely overstate the amount paid for  NAS hospital-based services.", "Officials from two of the four selected states told us that their state has a  public health surveillance system that tracks the incidence of infants  diagnosed with NAS; however, the surveillance systems do not capture  financial information, including Medicaid payments for NAS. At our  request, one of the states cross-referenced their surveillance and  Medicaid data and estimated that in 2016, their state Medicaid program  spent over $22 million to treat 1,565 infants with NAS.", "While selected states generally could not provide information on total  Medicaid payments for infants with NAS, some hospitals in our selected  states were able to generate this information at our request using  diagnosis codes that they identified as related to NAS from hospital  claims data. Six of our selected eight hospitals reported that in calendar  year 2016, the average Medicaid payment for treating infants with NAS  ranged from about $1,500 to about $20,200 per infant per stay. The wide  range in Medicaid payment averages may be because the averages  included both infants who did and did not require pharmacologic  treatment and because these hospitals treated infants in various settings,  such as a nursery or a NICU. The literature we reviewed also had limited  information on Medicaid payments for NAS treatment services provided in  hospitals. A recent study reported that from 2009 through 2012\u2014the most  recent data available at the time of the study\u2014Medicaid payments to  hospitals for NAS treatment services increased from about $564 million to  $1.2 billion nationwide."], "subsections": []}]}, {"section_title": "Some Infants with NAS May Complete Treatment in Non- Hospital Settings Available in Certain States, and in These States Medicaid Pays for a Subset of Services", "paragraphs": [], "subsections": [{"section_title": "Non-Hospital Settings for Treating Infants with NAS", "paragraphs": ["While most infants with NAS typically complete treatment in a hospital  setting, stakeholders told us that some of these infants may be  transferred to a non-hospital setting to complete pharmacologic treatment  and continue non-pharmacologic treatment. HHS officials told us that  there is not a comprehensive list of facilities that may treat infants with  NAS outside of the hospital. Based on information from the stakeholders  we interviewed and the literature we reviewed, we identified two types of  non-hospital settings available in certain states that treat infants with  NAS: (1) outpatient clinics and programs and (2) neonatal withdrawal  centers. For the purposes of this report, we defined neonatal withdrawal  centers as facilities that can treat infants who are prenatally exposed to  drugs, including infants with NAS, within the facility.", "Outpatient clinics and programs to treat NAS  Through stakeholder interviews and the literature we reviewed, we  identified examples of outpatient clinics and programs in certain states  where infants with NAS can continue pharmacologic treatment after their  discharge from the hospital. For example, some stakeholders we  interviewed told us about a Neonatal Medical Follow-Up Clinic in Vermont  used to follow-up with infants with NAS who have been discharged from  the hospital and are being weaned off methadone on an outpatient basis.  Hospital providers train the infant\u2019s family on how to administer the  infant\u2019s medication at home and provide a referral to the clinic. After  hospital discharge, the infant and family have follow-up visits in the clinic  every 1 to 2 weeks, during which the family discusses with health care  providers the weaning schedule and demonstrate how they administer the  infant\u2019s medication. Health care providers told us that they also  encourage the family to continue providing non-pharmacologic treatment  to the infant. After weaning is complete, the infant continues to follow-up  at the clinic every 1 to 2 months until the infant reaches 12 to 18 months  of age.", "Literature we reviewed indicated that other outpatient treatment clinics or  programs such as the one in Vermont have been established or  considered in other states. Specifically, four studies we reviewed  described instances in which infants began their treatment in the hospital  but completed their treatment through a dedicated outpatient program in  Florida, Ohio, and Pennsylvania. Each study noted that the inpatient-to- outpatient approach can result in a shorter hospital length of stay. For  example, one 2015 study found that infants who began treatment in a  hospital and completed their treatment in an outpatient setting stayed in  the hospital an average of 11 days, compared to infants who completed  treatment in the hospital, where the stays averaged about 25 days.  However, the studies also noted that the inpatient-to-outpatient approach  resulted in a longer overall treatment duration across the two settings.", "Neonatal withdrawal centers to treat NAS  Some stakeholders we interviewed, including health care providers,  described examples of neonatal withdrawal centers in two states, where  infants with NAS can continue pharmacologic treatment after their  discharge from the hospital. Health care providers in these facilities told  us that in Washington and West Virginia, some infants with NAS who  began treatment in a hospital may be referred to these facilities, where  they reside until they complete treatment and are discharged from the  facility. These providers explained that in these facilities, the infants are  placed in nursery rooms, where health care providers can monitor them  and administer and adjust their medication as needed. In addition,  nursing staff or other caregivers are responsible for providing continuous  non-pharmacologic treatment, and mothers are encouraged to visit and  continue this care. For example, health care providers told us that in  Washington, two to three infants may share a nursery room where trained  caregivers provide them with non-pharmacologic treatment. In West  Virginia, health care providers said infants are typically placed in  individual nursery rooms where nurses provide them with non- pharmacologic treatment. The rooms in the West Virginia facility are also  equipped with a rocking chair to encourage mothers to visit and provide  this care as well. Health care providers told us that the facility currently  offers one nursery room equipped with a bed to help prepare mothers on  what to expect after discharge; they also said that they encourage  mothers to spend the night prior to the infant\u2019s discharge from the facility.  (See text box below).", "Treating infants with neonatal abstinence syndrome (NAS) in a neonatal  withdrawal center  One health care provider from a neonatal withdrawal center told us that the practice of  rooming-in helps to facilitate the bond between the mother and infant. He also said  that rooming-in allows health care providers to model care for the mothers and for  mothers to learn how to care for their infants with NAS.   Health care providers told us that the facility currently offers one nursery room  equipped with a bed to help prepare mothers on what to expect after discharge and  that they encourage mothers to spend the night prior to the infant\u2019s discharge from the  facility. One health care provider told us that one mother, after staying overnight with  her infant, realized that she was not prepared to take care of her infant and  consequently gave up custody of the infant. Because of rooming-in, health care  providers were able to ensure that the infant was safe because the mother came to  this realization at the facility, rather than alone at home.   Although the lack of physical space at the facility currently makes it difficult to  accommodate rooming-in for the entire course of the infant\u2019s treatment, these  providers noted the importance of this practice and that they are committed to parental  involvement when treating infants with NAS at their facility.", "Figure 2 depicts nursery rooms in the neonatal withdrawal center in West  Virginia. Efforts are also underway to open a neonatal withdrawal center  in Arizona and Ohio, according to stakeholders we interviewed.", "Stakeholders we interviewed and the literature we reviewed suggest  some limitations as well as benefits of treating infants with NAS in non- hospital settings, including factors to consider in these settings.", "Health care providers from one of the hospitals we visited in Vermont  told us that their hospital is the only one in the state that allows infants  with NAS to complete pharmacologic treatment through the Vermont  outpatient clinic because they have established the necessary  infrastructure to ensure families\u2019 compliance and safe practices at  home. These providers said that they worked with one local pharmacy  to ensure proper dispensing of the medication. Additionally, these  providers measured the amount of medication left over at each follow- up visit with the families.", "Some state and perinatal collaborative officials told us that neonatal  withdrawal centers may not be the best environment to treat infants  with NAS because these settings may limit a mother\u2019s access to her  infant, since she may not always be allowed to reside with the infant.  Such limits, according to officials, do not facilitate bonding between  mother and infant.", "Another state perinatal collaborative official, as well as health care  providers and staff, told us that neonatal withdrawal centers may be  better for treating infants with NAS because the environment is quieter  and less stimulating than hospital settings, such as NICUs.", "Several studies we reviewed also emphasized that the inpatient-to- outpatient approach requires ongoing coordination, communication,  and commitment from multidisciplinary providers, as well as the  families. These studies highlighted instances in which these  approaches reduced the length of the infants\u2019 stay in a hospital,  though the studies emphasized that more work needs to be done to  determine whether these are the optimal approaches for infants with  NAS, as well as the potential long-term benefits of such approaches."], "subsections": []}, {"section_title": "Medicaid Payments for NAS Treatment Services Provided in Non-Hospital Settings", "paragraphs": ["Medicaid pays for NAS treatment services provided in the non-hospital  settings we identified in certain states, according to CMS officials and  other stakeholders we spoke with, but generally pays for these services  separately, in contrast with the single bundled payment paid to  hospitals. State officials and health care providers in the non-hospital  settings we examined described various ways in which Medicaid covered  services they provided to treat infants with NAS. For example:", "Outpatient follow-up clinic in Vermont. State officials and staff at  this facility told us that the Vermont Medicaid program pays for an  infant\u2019s outpatient physician visits using a fee-for-service payment  schedule. They added that the Vermont Medicaid program also pays  for the infant\u2019s medication used in pharmacologic treatment and  explained that the pharmacy that dispenses the medication bills  Medicaid for these services.", "Neonatal withdrawal center in Washington. Health care providers  at this facility told us that the Washington Medicaid program or their  contracted managed care plans pay for physician visits using a fee- for-service payment schedule, noting that the facility decided to stop  billing Medicaid for medical supplies because of the low  reimbursement. Additionally, these providers suggested that  because the facility does not meet the Medicaid standards required  for receiving payment for hospital inpatient, nursing, or other covered  facility services, the facility is ineligible to receive Medicaid payment  for the costs of room and board. These providers said that they  receive funding for the cost of these services through state  appropriations, foster care payments, city contracts, grants, and  private donations.", "Neonatal withdrawal center in West Virginia. State officials and  health care providers at this facility told us that West Virginia pays for  NAS services through two mechanisms, depending on whether the  infant is in foster care. Specifically, if the infant is in foster care, the  facility receives a bundled payment from the state Medicaid program  and the Bureau of Children and Families. However, if the infant is  not in foster care, the state Medicaid program pays for physician visits  using a fee-for-service schedule. Additionally, the facility can receive  payment under a per diem rate that is negotiated with state Medicaid  managed care plans. The health care providers said that they also  receive funding through grants and private donations to help cover the  costs of NAS services.", "Stakeholders we interviewed and literature we reviewed suggest that the  costs of treating infants with NAS in non-hospital settings were lower than  treating them in hospital settings. However, supporting data and research  of the costs in different settings are anecdotal or otherwise limited. For  example:", "Health care providers from the neonatal withdrawal center in  Washington told us that their facility could treat infants at a lower  average cost per day than could hospitals\u2014at about $700 per infant  per day compared to an average cost of about $1,500-2,500 per infant  per day in a hospital. These providers said that this cost savings is in  part due to their limited staffing of nurses and their ability to leverage  specially trained caregivers to provide infants with non-pharmacologic  treatment and hands-on care, such as feeding and bathing. These  providers also said they use volunteers to help with household duties,  such as laundry and replenishing supplies.", "A health care provider from the neonatal withdrawal center in West  Virginia conducted a study that found that the average daily charges  per infant were about $400 in their facility, compared to about $2,600  in a special care nursery and $4,000 in a NICU.", "Two studies we reviewed found that inpatient-to-outpatient treatment  approaches reduced hospital costs for NAS treatment; however, these  studies were not generalizable and did not account for the duration of  treatment across the two settings. Specifically, one study found that  an inpatient-to-outpatient treatment approach reduced hospital length  of stay by 55 percent\u2014estimated to save hospitals $396 million  annually\u2014compared with treatment provided solely in a hospital.  The second study found that infants who received care for NAS  through an inpatient-to-outpatient treatment approach had an average  length of stay of 13 days and cost about $14,000, while an inpatient- only approach had an average length of stay of 25 days and cost  about $28,000."], "subsections": []}]}, {"section_title": "Recommended Practices for Addressing NAS Include Prioritizing Non-Pharmacologic Treatment, While Challenges Include Maternal Use of Multiple Substances", "paragraphs": [], "subsections": [{"section_title": "Recommended Practices for Addressing NAS Include Prioritizing Non- Pharmacologic Treatment, Educating Mothers, and Addressing Stigma", "paragraphs": ["The 32 stakeholders we interviewed and the literature we reviewed  identified several recommended practices for addressing NAS\u2014that is,  treating women with opioid use disorders during pregnancy or treating  infants diagnosed with NAS after birth. The most frequently  recommended practices were (1) prioritizing non-pharmacologic  treatment, such as allowing the mother to reside with the infant during  treatment, to facilitate the mother-infant bond; (2) educating mothers on  prenatal care, treatment for NAS, and available resources for after an  infant\u2019s discharge; (3) educating health care providers on the stigma  faced by women who use opioids during pregnancy and on how to screen  for and treat NAS; and (4) using a protocol in a hospital or non-hospital  setting for screening and treating infants with NAS. These  recommended practices are described in more detail below.", "Volunteer programs to provide non- pharmacologic treatment for neonatal  abstinence syndrome (NAS)  Some stakeholders told us that some  hospitals have established volunteer cuddler  programs that train volunteers to help provide  some of these non-pharmacologic  treatments\u2014-namely, swaddling, feeding,  soothing, and coddling infants. However,  health care providers at some facilities noted  that volunteers are not necessarily available  during late shifts. indicated that non-pharmacologic treatment may (1) facilitate the mother- infant bond, (2) reduce the severity of NAS symptoms, (3) reduce the  need for pharmacologic treatment, and (4) reduce the length of an infant\u2019s  hospital stay. For example, two of the articles we reviewed noted that  rooming-in has been shown to help decrease the need for pharmacologic  treatment, the number of admissions to the NICU, and the length of an  infant\u2019s hospital stay. Additionally, 17 of the stakeholders we interviewed  and nine articles we reviewed recommended that mothers be allowed to  breastfeed while their infants are treated for NAS, as it helps to build a  bond between the mother and infant. Most of these articles also noted  that breastfeeding has been shown to reduce the severity of NAS.", "Educating mothers on prenatal care, treatment for NAS, and  resources for after an infant\u2019s hospital discharge. Most stakeholders  we interviewed and several of the literature articles we reviewed  recommended providing comprehensive, ongoing education to mothers  on prenatal care and treatment for NAS and on the resources that are  available after an infant\u2019s discharge. (See text box below). The  stakeholders and literature indicated that this education may (1) facilitate  a non-combative relationship between the mother and health care  providers; (2) help to reassure and support the mother, who may feel  responsible for the infant\u2019s suffering, in addition to facilitating treatment of  NAS; and (3) help the mother understand her infant\u2019s behavior and  develop greater confidence in her parenting skills. For example, one  article noted that an infant\u2019s withdrawal behavior, such as fisting, back  arching, and jaw clenching, may be misinterpreted by the mother as  dislike of touch, and that educating mothers on these behaviors can help  alleviate feelings of guilt.", "Education for mothers on prenatal care, treatment for neonatal abstinence  syndrome (NAS), and resources for after an infant\u2019s hospital discharge", "Explaining to the mother during the prenatal period what she can expect when the  infant is born to help ensure she understands the effects of and treatment for NAS;  Informing the mother about non-pharmacologic treatment techniques that can help  reduce the severity of the infant\u2019s NAS symptoms;", "Modeling good parenting skills, such as demonstrating how to comfort an infant  who may be crying inconsolably for hours because of withdrawal; and  Informing the mother about contraception for preventing future pregnancies.", "Educating health care providers on the stigma faced by women who  use opioids during pregnancy, and how to screen for and treat NAS.  Most stakeholders we interviewed and several of the literature articles we  reviewed recommended educating health care providers, including  providers who are not addiction specialists, on both the stigma faced by  women who use opioids during pregnancy as well as on how to screen for  and treat infants with NAS. The stakeholders and literature indicated that  this education may: (1) improve care so that mothers with opioid use  disorders feel more comfortable seeking and obtaining prenatal care, (2)  help health care providers know how to recognize NAS symptoms to help  ensure infants receive appropriate treatment, and (3) allow for more  consistency among these providers in NAS screening and treatment. For  example, 26 stakeholders told us that educating health care providers  about stigma is important because provider attitudes affect how and if  pregnant women obtain prenatal care and treatment for their opioid use  disorders, which can affect the severity of NAS. Additionally, several  articles we reviewed noted the importance of educating and training  clinicians on how to administer the screening tools used to identify infants  with NAS, which helps ensure infants are identified and receive optimal  care.", "Using a protocol for screening and treating infants with NAS. While  there is no single national standard of care for screening and treating  NAS, most stakeholders we interviewed and several of the literature  articles we reviewed recommended that hospital and non-hospital  settings use a protocol to screen for and treat infants with NAS. The  stakeholders and literature indicated that having a protocol can help: (1)  identify infants at risk for NAS, (2) ensure that care is provided  consistently, and (3) reduce the length of stay for infants receiving  pharmacologic treatment. For example, the stakeholders we interviewed  explained that a standard protocol also helps health care providers  understand the tools used to assess the severity of NAS; know the types  of medication used in treatment, including amounts and duration; and  learn how to wean the infant off these medications. Similarly, one article  we reviewed noted that infants who were treated at facilities that adopted  standard treatment protocols experienced shorter durations of  pharmacologic treatment compared with infants who were treated at  facilities that did not use a standard protocol."], "subsections": []}, {"section_title": "Challenges Faced by Health Care Providers in Addressing NAS Include Maternal Use of Multiple Substances and Stigma Faced by Women Who Use Opioids", "paragraphs": ["Stakeholders we interviewed and literature we reviewed identified several  challenges health care providers face in their efforts to address NAS.  The most frequently cited challenges included (1) the use of multiple  substances by pregnant women, which can exacerbate NAS; (2) the  stigma faced by women who use opioids during pregnancy, which may  affect whether they seek prenatal care to address NAS, among other  things; (3) hospital staff burden and limited physical capacity to care for  infants with NAS; (4) limited coordination of care for mothers and infants  with NAS; and (5) gaps in research and data on NAS. These challenges  are described in more detail below.", "The use of multiple substances by pregnant women, which can  exacerbate NAS. Most stakeholders we interviewed and some of the  literature we reviewed noted that the use of multiple substances by  pregnant women, including opioids\u2014referred to as maternal  polysubstance use\u2014can be a challenge, and some stated that the use of  these substances can exacerbate NAS symptoms. According to the  stakeholders, the substances can include methamphetamines, nicotine,  alcohol, cocaine, marijuana, benzodiazepines, and Gabapentin. The  stakeholders and literature indicated that maternal polysubstance use can  lead to multiple conditions in the infant\u2014such as prematurity or Hepatitis  C\u2014that can exacerbate NAS symptoms and prolong the length of an  infant\u2019s hospital stay. For example, one expert noted that many women  with opioid use disorders are also heavy cigarette smokers, and the  nicotine typically exacerbates NAS withdrawal symptoms. Additionally,  officials from a hospital and non-hospital setting we visited told us that  they had developed a separate protocol for treating infants exposed to  multiple substances that includes the use of several medications to  address the more severe NAS withdrawal symptoms.", "Stigma faced by women who use opioids which may affect whether  they seek prenatal care to mitigate the severity of NAS, among other  things. Most stakeholders we interviewed and several of the literature  articles we reviewed noted that the stigma faced by pregnant women with  opioid use disorders is a challenge in addressing NAS. The stakeholders  and literature indicated that stigma may: (1) prevent pregnant women  from seeking substance use treatment or prenatal care; (2) prevent them  from disclosing their drug use to health care providers during pregnancy;  or (3) cause the women to fear punitive effects, such as losing custody of  their children, being detained, or losing their jobs. For example, officials  from one perinatal quality collaborative told us that these women may fail  to seek care because of stigma, which can ultimately make it more  difficult for health care providers to build relationships with these women  and identify infants at risk for NAS.", "Hospital staff burden and limited physical capacity to care for  infants with NAS. According to most stakeholders we interviewed and  some literature we reviewed, staff burden and a limited physical capacity  at facilities can pose challenges for addressing NAS. The stakeholders  and literature indicated that there is increased burden on staff to care for  these infants because they require frequent, personal attention. For  example, the stakeholders explained that a hospital may have to increase  the number of nurses on duty in order to provide the care the infants  need. Health care providers at one hospital said that nurses still struggle  to care for infants with NAS, even with additional staff, because these  infants are overstimulated, cry, and do not eat or sleep well. As a result,  they require much time and one-on-one attention\u2014including cuddling\u2014 from nurses. With respect to physical capacity, some stakeholders told us  that limited physical capacity can make it difficult to (1) find space in the  facility where the infants can be protected from high levels of stimulation  and (2) facilitate the mother-infant bond. For example, some stakeholders  told us that hospitals may not have a dedicated space for rooming-in,  making it more difficult to facilitate bonding between mothers and infants.", "Limited coordination of care for mothers and infants with NAS. Most  stakeholders we interviewed explained that the lack of coordination  among health care providers and others for the mother and infant with  NAS during the prenatal period, after the infant is born, and following the  infant\u2019s discharge can be a challenge. This coordination includes  organizing patient care activities and sharing information among health  care providers, social workers, and all other participants concerned with  the mother and infant\u2019s care. The stakeholders indicated that this lack of  coordination can make it difficult for families to get the resources or  support they need. (See text box below). For example, some  stakeholders told us that women may miss health care visits because of a  lack of access to enabling services such as transportation or child care.", "Limited coordination of care for mothers and infants with neonatal abstinence  syndrome (NAS)   One expert told us that there is a disproportionate number of infants with NAS born in  rural areas. Infants in these areas may be discharged from the hospital without many  follow-up services, such as transportation and care coordination.", "Gaps in research and data on NAS. Some stakeholders we interviewed  noted that gaps in research and data on NAS make it challenging to  conduct research on the affected population and fully understand the  magnitude of the problem. The stakeholders indicated that there are gaps  in adequate research and data on (1) the different types of treatment  approaches for NAS; (2) the extent and effects of maternal polysubstance  use among pregnant women; (3) the long-term effects of prenatal drug  exposure, including the effects seen in childhood and adolescence; and  (4) the efforts to ensure more consistent provider diagnosis and  screening, such as through an improved screening tool. For example, the  stakeholders told us that gaps in research and data may contribute to a  lack of a national standard of care for screening and treating infants with  NAS. According to some stakeholders, this may result in missed  opportunities for identifying and treating infants with NAS. Some  stakeholders also told us that because of gaps in research on the long- term effects of prenatal drug exposure, there is limited information on the  types of services that infants with NAS may need in early childhood.  Additionally, some stakeholders noted they found that because NAS was  not consistently diagnosed and coded in medical records using diagnosis  codes, the condition may be under-reported, and researchers may be  limited in their ability to track these infants."], "subsections": []}]}, {"section_title": "HHS\u2019s Strategy Includes Recommendations Related to Addressing NAS but Lacks Priorities, Timeframes, and Responsibilities for Implementing the Recommendations", "paragraphs": ["In May 2017, HHS published the Protecting Our Infants Act: Report to  Congress, which\u2014among other things\u2014presents a strategy that identifies  key recommendations related to addressing NAS. Specifically, HHS\u2019s  strategy\u2014known as the Protecting Our Infants Act: Final Strategy\u2014made  39 recommendations related to the prevention, treatment, and related  services for NAS and prenatal opioid use. Of the 39 recommendations  HHS made in its report, we found that 28 of them directly relate to the  recommended practices or challenges that we describe above. For  example, the Strategy recommends the following: promoting non-pharmacologic treatment, such as rooming-in; providing continuing medical education to health care providers for  managing and treating infants with NAS, such as on NAS treatment  protocols;  conducting research on the long-term effects of prenatal drug  exposure so that appropriate services can be developed for infants  with NAS; and establishing clear definitions of NAS and standardizing the use of  diagnosis codes to collect more meaningful and actionable data on  NAS.", "According to the Strategy, the recommendations will be used to inform  planning and policy across HHS. However, HHS does not include any  information in the Strategy on how the department and other stakeholders  will implement the recommendations. Specifically, HHS does not include  in its Strategy the following:  the explicit priorities among the numerous recommendations and  associated efforts the department has initiated related to NAS;  timeframes for partial or full implementation of these  recommendations;  clear roles and responsibilities for the recommendations, such as the  extent to which HHS will need to rely on the medical community and  federal and public stakeholders for implementation; and  the methods that will be used to assess the department\u2019s progress in  implementing any of these recommendations.", "HHS officials told us that they expect to develop a separate plan to guide  implementation of the recommendations and that efforts to develop this  plan were likely to begin in July 2017. However, as of September 2017,  HHS could not provide any documentation that it had started to develop  this implementation plan or establish a timeline for completing the plan;  nor was HHS able to provide any information on what the plan may  include. Having such a plan in place is important to ensure priorities are  known and responsibilities are clear so that agencies and stakeholders  can take appropriate action. Federal internal control standards call for  agencies to have defined objectives clearly as part of their objective- setting process and to assign roles and responsibilities for achieving  these objectives. Objectives defined in specific and measurable terms  allow for the assessment of performance toward achieving objectives.  Furthermore, leading principles on sound planning we have identified in  our prior work call for developing robust plans to achieve agency goals.  Until HHS finalizes an implementation plan that includes specific  priorities, timeframes, responsibilities, and methods for evaluating  progress, it is at risk of not being able to provide reasonable assurance  that it can successfully implement these recommendations in a timely  manner and assess the effectiveness of its efforts."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The rising opioid crisis has caused a significant increase in the number of  infants born and diagnosed with NAS, a condition that affects infants and  their families, hospitals, and other health care providers who are treating  them. The increase in infants born with NAS also increases medical and  other treatment costs experienced by the federal government and states.  HHS recently published a strategy with key recommendations that have  the potential to address some of the challenges related to treating NAS.  However, HHS lacks a sound plan for implementing these recommendations. The absence of such planning raises questions about  whether and when HHS will be able to implement these  recommendations in a timely manner and be able to assess its progress."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of HHS should expeditiously develop a plan\u2014that includes  priorities, timeframes, clear roles and responsibilities, and methods for  assessing progress\u2014to effectively implement the NAS-related  recommendations identified in the Protecting Our Infants Act: Final  Strategy. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for review, and HHS provided  written comments, which are reprinted in appendix III. HHS also provided  technical comments, which we incorporated as appropriate. In its written  comments, HHS concurred with our recommendation to expeditiously  take steps to address NAS and re-stated that its Strategy will be used to  inform planning and policy across HHS. Specifically, HHS said that as  part of its broader initiative to address the opioid crisis, the department  will develop and implement a plan\u2014that will include priorities, timeframes,  roles and responsibilities, and methods for assessing progress\u2014to  address as appropriate and possible, the NAS-related recommendations  in its Strategy. HHS also stated that full implementation would be  contingent on funding, though it provided no information on how much  funding was needed or how the funding would be used. Developing a  plan to guide implementation can help the department determine what  resources, if any, are needed to implement the recommendations in its  Strategy.", "We are sending copies of this report to the appropriate congressional  addressees, the Secretary of Health and Human Services, and other  interested parties. In addition, the report will be available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at iritanik@gao.gov. Contact points for our Office  of Congressional Relations and Office of Public Affairs can be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Detailed Scope and Methodology", "paragraphs": ["To address our first three audit objectives to describe care settings for  treating infants with neonatal abstinence syndrome (NAS), Medicaid  payment for NAS treatment, and the recommended practices and  challenges for addressing NAS, we selected 32 stakeholders based on  their relevant experience to cover a range of perspectives on NAS.  Specifically, these stakeholders included those from site visits we  conducted to four states\u2014Kentucky, Vermont, West Virginia, and  Wisconsin. We selected these states because they met the following  criteria:  1.  the state had one of the top 10 highest incidence rates of NAS,  according to data from the Centers for Disease Control and  Prevention (CDC) for 2013, the most recent year of publicly available  data;  2.  the state provided variation in United States geographic regions with  high rates of NAS, as of 2012;  3.  more than 40 percent of births in the state were financed by Medicaid,  according to a 2016 Kaiser Family Foundation Medicaid Budget  Survey; and  4.  the state has a perinatal quality collaborative\u2014a state or multi-state  network of teams working to improve health outcomes for mothers  and infants\u2014with work related to NAS, which we identified through  the American College of Obstetricians and Gynecologists.", "As part of these site visits, we interviewed (1) officials from each of the  four states, including Medicaid officials, Maternal and Child Health  Directors, and Women\u2019s Services Coordinators; (2) representatives from  the four state perinatal collaboratives; (3) health care providers (including  physicians or nurses) from eight hospitals of varying levels of care (two  hospitals in each state), which were selected based on recommendations  from the state perinatal collaboratives because of the hospitals\u2019  experience treating NAS; and (4) officials from a residential treatment  facility in each of the four states that provide prenatal and postpartum  care to mothers, which were also selected based on recommendations  from the state perinatal collaboratives regarding the facilities\u2019 experience  with pregnant women with opioid use disorders and their infants with  NAS.", "In addition to our site visits, we selected 12 additional stakeholders that  included health care providers or administrators in non-hospital settings  across the United States; officials from medical specialty societies; and  experts. Specifically, we spoke with (1) health care providers (including  physicians or nurses) or administrators from four non-hospital settings in  Arizona, Ohio, Washington, and West Virginia, which were selected  based on recommendations from stakeholders we interviewed and on the  availability of such settings and their experience treating NAS; (2) health  care providers from five medical specialty societies, including the  American Academy of Pediatrics, the American College of Obstetricians  and Gynecologists, the American Society of Addiction Medicine, MedNAX  (a network of physicians that specialize in neonatal care, including NAS  treatment), and the National Association of Neonatal Nurses; and (3)  three experts, including the authors of published literature we reviewed.", "We interviewed each of these 32 stakeholders and requested information  from stakeholders about treating infants with NAS, including the utilization  of available hospital and non-hospital care settings and associated costs  of treatment services. For example, we requested protocols for screening  and treating infants with NAS from hospital and non-hospital care  settings. We reviewed available protocols provided by hospitals and a  non-hospital care setting. We also reviewed available information  reported by state officials, hospital and non-hospital providers, and state  perinatal collaboratives on the utilization of hospital and non-hospital care  settings, the facilities\u2019 cost of treating NAS in hospital and non-hospital  settings, the lengths of stay for treating infants with NAS, or the amount of  Medicaid payments for treating infants with NAS. We discussed the  information provided by stakeholders and examined the information for  obvious errors. The information obtained from these stakeholders is not  generalizable to other states or other hospital and non-hospital settings.  In addition, in some cases, stakeholders used different methods to collect  the information they reported, including information on Medicaid  payments; as a result, the information reported by stakeholders is not  directly comparable.", "Additionally, we interviewed officials from HHS, including those from the  Centers for Medicare & Medicaid Services (CMS) and HHS\u2019s Behavioral  Health Coordinating Council\u2014which includes officials from the Substance  Abuse and Mental Health Services Administration (SAMHSA), the Indian  Health Service, the Centers for Disease Control and Prevention (CDC),  and the Food and Drug Administration, among others\u2014concerning NAS  treatment services, settings of care, Medicaid payment, and  recommended practices and challenges related to addressing NAS.", "We also conducted a comprehensive literature review to identify relevant  studies on NAS published in peer-reviewed journals from January 2013 to  December 2016. We searched more than 40 databases for research  published in relevant peer-reviewed journals, including BIOSIS  Previews\u00ae, Embase\u00ae, Gale Group Health Periodicals Database,  MEDLINE\u00ae, and New England Journal of Medicine. Key search terms  included \u201cneonatal abstinence syndrome,\u201d \u201cneonatal opioid withdrawal  syndrome,\u201d and \u201cnewborn infants.\u201d After excluding duplicates, we  identified and reviewed 325 abstracts. For those abstracts we found  relevant, we obtained and reviewed the full study and selected 40 that  were relevant to (1) hospital and non-hospital settings and related  treatment services for infants with NAS; (2) the costs associated with  treating infants with NAS, including Medicaid payments for services in  these care settings; or (3) recommended practices and challenges for  addressing NAS. We examined the methodologies for each of these  studies and interviewed some of their authors. We determined that the  studies were sufficiently reliable for our audit objectives. For a complete  list of the studies we reviewed, see below.", "To examine our last audit objective on HHS\u2019s strategy related to  addressing NAS, we interviewed agency officials and reviewed agency  documents on the agency\u2019s efforts to develop a strategy. Specifically, we  interviewed relevant officials from CMS and HHS\u2019s Behavioral Health  Coordinating Council concerning their efforts to develop a strategy related  to addressing NAS. In reviewing relevant HHS documents, we focused on  HHS\u2019s Protecting Our Infants Act Report to Congress, which includes a  strategy to address identified gaps, challenges, and recommendations  related to NAS and prenatal opioid use. In addition, we reviewed the  relevant standards for internal control in the federal government and the  relevant criteria from GAO\u2019s body of work on effectively managing  performance under the Government Performance and Results Act  (GPRA) of 1993 and the GPRA Modernization Act of 2010."], "subsections": [{"section_title": "Studies GAO Reviewed", "paragraphs": ["Allocco, E., M. Melker, F. Rojas-Miguez, C. Bradley, K. A. Hahn, and E.  M. Wachman. \u201cComparison of Neonatal Abstinence Syndrome  Manifestations in Preterm Versus Term Opioid-Exposed Infants.\u201d  Advances in Neonatal Care, vol. 16, no.5 (2016).", "Artigas, V. \u201cManagement of Neonatal Abstinence Syndrome in the  Newborn Nursery.\u201d Nursing for Women\u2019s Health, vol. 18, issue 6 (Dec.  2014/Jan. 2015).", "Asti, L., J. S. Magers, E. Keels, J. Wispe, and R. E. McLead. \u201cA Quality  Improvement Project to Reduce Length of Stay for Neonatal Abstinence  Syndrome.\u201d Pediatrics, vol. 135, no. 6 (2015).", "Busch, D. W. \u201cClinical management of the Breast-Feeding Mother-Infant  Dyad in Recovery from Opioid Dependence.\u201d Journal of Addictions  Nursery, vol. 27, no. 2 (2016).", "Casper, T. and M. Arbour. \u201cEvidence-Based Nurse-Driven Interventions  for the Care of Newborns with Neonatal Abstinence Syndrome.\u201d  Advances in Neonatal Care, vol. 14, no. 6 (2014).", "Chau, K. T., J. Nguyen, B. Miladinovic, C. M. Lilly, T. L. Ashmeade, and  M. Balakrishnan. \u201cOutpatient Management of Neonatal Abstinence  Syndrome: A Quality Improvement Project.\u201d The Joint Commission  Journal on Quality and Patient Safety, vol. 42, no. 11 (2016).", "Cirillo, C. and K. Francis. \u201cDoes Breast Milk Affect Neonatal Abstinence  Syndrome Severity, the Need for Pharmacologic Therapy, and Length of  Stay for Infants of Mothers on Opioid Maintenance Therapy During  Pregnancy?\u201d Advances in Neonatal Care, vol. 16, no.5 (2016).", "Clark, L. and A. Rohan. \u201cIdentifying and Assessing the Substance- Exposed Infant.\u201d MCN in Advance (2015).", "Demirci, J. R., D. L. Bogen, and Y. Klionsky. \u201cBreastfeeding and  Methadone Therapy: The Maternal Experience.\u201d Substance Abuse, vol.  36, no. 2 (2015).", "Edwards, L. and L. F. Brown. \u201cNonpharmacologic Management of  Neonatal Abstinence Syndrome: An Integrative Review.\u201d Neonatal  Network, vol. 35, no. 5 (2016).", "Gregory, K. E. \u201cCaring for the Infant with neonatal Abstinence Syndrome  in a Community-Based Setting.\u201d The Journal of Perinatal & Neonatal  Nursing, (2014).", "Grim, K., T. E. Harrison, and R. T. Wilder. \u201cManagement of Neonatal  Abstinence Syndrome from Opioids.\u201d Clinics in Perinatology, (2013).", "Hahn, J., A. Lengerich, R. Byrd, R. Stoltz, J. Hench, S. Byrd, and C. Ford.  \u201cNeonatal Abstinence Syndrome: The Experience of Infant Massage.\u201d  Creative Nursing, vol. 22, issue 1 (2016).", "Hall, E. S., S. L. Wexelblatt, M. Crowley, J. L. Grow, L. R. Jasin, M. A.  Klebanoff, R. E. McClead, J. Meinzen-Derr, V. K. Mohan, H. Stein, and M.  C. Walsh. \u201cA Multicenter Cohort Study of Treatments and Hospital  Outcomes in Neonatal Abstinence Syndrome.\u201d Pediatrics, vol. 134, no. 2  (2014).", "Hall, E. S., S. L. Wexelblatt, M. Crowley, J. L. Grow, L. R. Jasin, M. A.  Klebanoff, R. E. McClead, J. Meinzen-Derr, V. k. Mohan, H. Stein, and M.  C. Walsh. \u201cImplementation of a Neonatal Abstinence Syndrome Weaning  Protocol: A Multicenter Cohort Study.\u201d Pediatrics, vol. 136, no. 4 (2015).", "Holmes, A. V., E. C. Atwood, B. Whalen, J. Beliveau, J. D. Jarvis, J. C.  Matulis, and S. L. Ralston. \u201cRooming-In to Treat Neonatal Abstinence  Syndrome: Improved Family-Centered Care at Lower Cost.\u201d Pediatrics,  vol. 137, no. 6 (2016).", "Jones, H. E., K. Deppen, M. L. Hudak, L. Leffert, C. McClelland, L. Sahin,  J. Starer, M. Terplan, J. M. Throrp Jr., J. Walsh, and A. A. Creanga.  \u201cClinical Care for Opioid-Using Pregnant and Postpartum Women: The  Role of Obstetric Providers.\u201d American Journal of Obstetrics &  Gynecology, vol. 210, issue 4 (2014).", "Jones, H.E., C. Seashore, E. Johnson, E. Horton, K.E. O\u2019Grady, K.  Andringa, M. R. Grossman, B. Whalen, and A.V. Holmes. \u201cBrief Report:  Psychometric Assessment of the Neonatal Abstinence Scoring System  and the MOTHER NAS Scale.\u201d American Journal on Addictions, (2016).", "Kraft, W.K., M. W. Stover, and J. M. Davis. \u201cNeonatal Abstinence  Syndrome: Pharmacologic Strategies for the Mother and Infant.\u201d  Seminars in Perinatology, vol. 40, issue 3 (2016).", "Krans, E. E., G. Cochran, and D. L. Bogen. \u201cCaring for Opioid Dependent  Pregnant Women: Prenatal and Postpartum Care Considerations.\u201d  Clinical Obstetrics and Gynecology, vol. 58, no. 2 (2015).", "Lee, J., S. Hulman, M. Musci Jr., and E. Stang. \u201cNeonatal Abstinence  Syndrome: Influence of a Combined Inpatient/Outpatient Methadone  Treatment Regimen on the Average Length of Stay of a Medicaid NICU  Population.\u201d Population Health Management, vol. 18, no.5 (2015).", "MacMullen, N. J., L. A. Dulski, and P. Blobaum. \u201cEvidence-Based  Interventions for Neonatal Abstinence Syndrome.\u201d Pediatric Nursing, vol.  40, no. 4 (2014).", "Maguire, D. J., \u201cMothers on Methadone: Care in the NICU.\u201d Neonatal  Network, vol. 32, no. 6 (2013).", "Marcellus, L. \u201cSupporting Women with Substance Use Issues: Trauma- Informed Care as a Foundation for Practice in the NICU.\u201d Neonatal  Network, vol. 33, no.6 (2014).", "McKeever, A. E., S. Spaeth-Brayton, and S. Sheerin. \u201cThe Role of Nurses  in Comprehensive Care Management of Pregnant Women with Drug  Addiction.\u201d Nursing for Women\u2019s Health, vol. 18, no.4 (2014).", "Meyer, M. and J. Phillips. \u201cCaring for Pregnant Opioid Abusers in  Vermont: A Potential Model for Non-Urban Areas.\u201d Preventive Medicine,  vol. 80 (2015).", "Newnam, K. M. \u201cThe Right Tool at the Right Time: Examining the  Evidence Surrounding Measurement of Neonatal Abstinence Syndrome.\u201d  Advances in Neonatal Care, vol. 14, no.3 (2014).", "Orlando, S. \u201cAn Overview of Clinical Tools Used to Assess Neonatal  Abstinence Syndrome.\u201d Journal of Perinatal and Neonatal Nursing, vol.  28, no.3 (2014).", "Patrick, S.W., M.M. Davis, C.U. Lehman, and W.O. Cooper. \u201cIncreasing  Incidence and Geographic Distribution of Neonatal Abstinence Syndrome:  United States 2009 to 2012.\u201d Journal of Perinatology, vol. 35 (2015).", "Patrick, S.W., H.C. Kaplan, M. Passarella, M.M. Davis, and S.A. Lorch.  \u201cVariation in Treatment of Neonatal Abstinence Syndrome in U.S.  Children\u2019s Hospitals, 2004-2011.\u201d Journal of Perinatology, vol. 34, no. 11  (2014).", "Patrick, S.W., J. Dudley, P.R. Martin, F.E. Harrell, M.D. Warren, K.E.  Hartmann, E.W. Ely, C.G. Grijalva, and W.O. Cooper. \u201cPrescription  Opioid Epidemic and Infant Outcomes.\u201d Pediatrics, vol. 135, no.5 (2015).", "Patrick, S.W., R. E. Schumacher, J. D. Horbar, M. E. Buus-Frank, E. M.  Edwards, K. A. Morrow, K. R. Ferrelli, A. P. Picarillo, M. Gupta, and R. F.  Soll. \u201cImproving Care for Neonatal Abstinence Syndrome.\u201d Pediatrics, vol.  137, no. 5 (2016).", "Reece-Stremtan, S., and K. A. Marinelli. \u201cABM Clinical Protocol #21:  Guidelines for Breastfeeding and the Drug-Dependent Woman, Revised  2015.\u201d Breastfeeding Medicine, vol. 10, no.3 (2015).", "Shaw, M. R., C. Lederhos, M. Haberman, D. Howell, S. Fleming, and J.  Roll. \u201cNurses Perceptions of Caring for Childbearing Women Who Misuse  Opioids.\u201d The American Journal of Maternal-Child Nursing, vol. 41, no. 1  (2016).", "Sublett, J. \u201cNeonatal Abstinence Syndrome: Therapeutic Interventions.\u201d  The American Journal of Maternal-Child Nursing, vol. 38, no. 2 (2013).", "Sutter, M. B., L. Leeman, and A. Hsi. \u201cNeonatal Opioid Withdrawal  Syndrome.\u201d Obstetrics and Gynecology Clinics of North America, vol. 41,  issue 2 (2014).", "Teague, A. H., A. J. Jnah, and D. Newberry. \u201cIntraprofessional Excellence  in Nursing: Collaborative Strategies for Neonatal Abstinence Syndrome.\u201d  Neonatal Network, vol. 34, no.6 (2015).", "Terplan, M., A. Kennedy-Hendricks, and M. S. Chisolm. \u201cPrenatal  Substance Use: Exploring Assumptions of Maternal Unfitness.\u201d  Substance Abuse: Research and Treatment (2015).", "Tolia, V. N., S. W. Patrick, M. M. Bennett, K. Murthy, J. Sousa, P. B.  Smith, R. H. Clark, and A. R. Spitzer. \u201cIncreasing Incidence of the  Neonatal Abstinence Syndrome in U.S. Neonatal ICUs.\u201d The New  England Journal of Medicine, vol. 372, no. 22 (2015).", "Wiles, J. R., B. Isemann, L. P. Ward, A. A. Vinks, and H. Akinbi. \u201cCurrent  Management of Neonatal Abstinence Syndrome Secondary to  Intrauterine Opioid Exposure.\u201d Journal of Pediatrics, vol. 165, no. 3  (2014)."], "subsections": []}]}, {"section_title": "Appendix II: Department of Health and Human Services\u2019 Resources Related to Neonatal Abstinence Syndrome and Prenatal Opioid Use", "paragraphs": ["The Department of Health and Human Services (HHS) has published  several guidance and educational resources related to neonatal  abstinence syndrome and prenatal opioid use. According to HHS, these  documents serve as tools to help stakeholders, including state entities  and health care providers, and policymakers. Examples of these  resources are listed below.", "Centers for Disease Control and Prevention (CDC), Pregnancy and  Opioid Medications Factsheet, accessed June 8, 2017,  https://www.cdc.gov/drugoverdose/pdf/pregnancy_opioid_pain_factsheet- a.pdf.", "CDC Public Health Grand Rounds, Primary Prevention and Public  Strategies to Prevent Neonatal Abstinence Syndrome (Atlanta, GA: CDC,  last updated August 18, 2016), accessed July 19, 2017,  https://www.cdc.gov/cdcgrandrounds/archives/2016/August2016.htm.", "CDC, Treating for Two: Safer Medication Use in Pregnancy Initiative  (Atlanta, GA: CDC, last updated May 5, 2016), accessed June 8, 2017,  https://www.cdc.gov/pregnancy/meds/treatingfortwo.", "Department of Health and Human Services, Opioids: The Prescription  Drug & Heroin Overdose Epidemic (Washington, D.C., last reviewed  March 24, 2016), accessed June 8, 2017,  https://www.hhs.gov/opioids/index.html.", "Department of Health and Human Services, National Center for  Substance Abuse and Child Welfare, Resources & Topics on Neonatal  Abstinence Syndrome, accessed June 8, 2017,  https://www.ncsacw.samhsa.gov/resources/opioid-use-disorders-and-me dication-assisted-treatment/neonatal-abstinence-syndrome.aspx.", "Jean Y. Ko. et al., \u201cCDC Grand Rounds: Public Health Strategies to  Prevent Neonatal Abstinence Syndrome,\u201d Morbidity and Mortality Weekly  Report (Centers for Disease Control and Prevention, March 10, 2017),  accessed June 8, 2017,  https://www.cdc.gov/mmwr/volumes/66/wr/mm6609a2.htm.", "National Institute on Drug Abuse, Principles of Substance Abuse  Prevention for Early Childhood: A Research Based Guide (last updated  March 2016), accessed June 8, 2017,  https://www.drugabuse.gov/publications/principles-substance-abuse-prev ention-early-childhood/principles-substance-abuse-prevention-early-child hood.", "National Institute on Drug Abuse, Substance Use in Women (last updated  September 2016), accessed June 8, 2017,  https://www.drugabuse.gov/publications/research-reports/substance-use-i n-women/summary.", "Reddy, Uma M. J. M. Davis, Z. Ren, and M. F. Greene, \u201cOpioid Use in  Pregnancy, Neonatal Abstinence Syndrome, and Childhood Outcomes:  Executive Summary of a Joint Workshop.\u201d Obstetrics and Gynecology,  vol. 130, issue 1 (July 2017).", "Substance Abuse and Mental Health Services Administration, A  Collaborative Approach to the Treatment of Pregnant Women with Opioid  Use Disorders. HHS Publications No. (SMA) 16-4978. Rockville, MD:  Substance Abuse and Mental Health Services Administration, 2016.", "Substance Abuse and Mental Health Services Administration, \u201cAdvancing  the Care of Pregnant and Parenting Women With Opioid Use Disorder  and Their Infants: A Foundation for Clinical Guidance,\u201d Rockville, MD:  Substance Abuse and Mental Health Services Administration, 2016.", "Substance Abuse and Mental Health Services Administration,  \u201cMethadone Treatment for Pregnant Women.\u201d HHS Publication No.  (SMA) 14-4124 (Rockville, MD: Substance Abuse and Mental Health  Services Administration, revised 2014)."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Rashmi Agarwal, Assistant  Director; Amy Leone, Analyst-in-Charge; Melissa Duong; Krister Friday;  Jacquelyn Hamilton; Giao N. Nguyen; and Laurie Pachter made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Drug Control Policy: Information on Status of Federal Efforts and Key  Issues for Preventing Illicit Drug Use. GAO-17-766T. Washington, D.C.:  July 26, 2017.", "Medicaid Expansion: Behavioral Health Treatment Use in Selected States  in 2014. GAO-17-529. Washington, D.C.: July 21, 2017.", "VA Health Care: Actions Needed to Ensure Medical Facility Controlled  Substance Inspection Programs Meet Agency Requirements.  GAO-17-242. Washington, D.C.: February 15, 2017.", "Highlights of a Forum: Preventing Illicit Drug Use. GAO-17-146SP.  Washington, D.C.: November 14, 2016.", "Opioid Addiction: Laws, Regulations, and Other Factors Can Affect  Medication-Assisted Treatment Access. GAO-16-833. Washington, D.C.:  September 27, 2016.", "Drug Enforcement Administration: Additional Actions Needed to Address  Prior GAO Recommendations. GAO-16-737T. Washington, D.C.: June  22, 2016.", "Office of National Drug Control Policy: Progress toward Some National  Drug Control Strategy Goals, but None Have Been Fully Achieved.  GAO-16-660T. Washington, D.C.: May 17, 2016.", "Veterans Justice Outreach Program: VA Could Improve Management by  Establishing Performance Measures and Fully Assessing Risks.  GAO-16-393. Washington, D.C.: April 28, 2016.", "State Marijuana Legalization: DOJ Should Document Its Approach to  Monitoring the Effects of Legalization. GAO-16-1. Washington, D.C.:  December 30, 2015.", "Prescription Drugs: More DEA Information about Registrants\u2019 Controlled  Substances Roles Could Improve Their Understanding and Help Ensure  Access. GAO-15-471. Washington, D.C.: June 25, 2015.", "Mental Health: Better Documentation Needed to Oversee Substance  Abuse and Mental Health Services Administration Grantees.  GAO-15-405. Washington, D.C.: May 12, 2015.", "Prenatal Drug Use and Newborn Health: Federal Efforts Need Better  Planning and Coordination. GAO-15-203. Washington, D.C.: February 10,  2015.", "Medicare Program Integrity: CMS Pursues Many Practices to Address  Prescription Drug Fraud, Waste, and Abuse. GAO-15-66. Washington,  D.C.: October 24, 2014.", "Office of National Drug Control Policy: Office Could Better Identify  Opportunities to Increase Program Coordination. GAO-13-333.  Washington D.C.: March 26, 2013.", "Child Welfare: States Use Flexible Federal Funds, But Struggle to Meet  Service Needs. GAO-13-170. Washington, D.C.: January 30, 2013."], "subsections": []}], "fastfact": ["The rising opioid epidemic has contributed to an increase in the number of babies born with neonatal abstinence syndrome\u2014a withdrawal condition with symptoms including excessive crying and difficulty breathing.", "The Department of Health and Human Services identified key recommendations to help guide its efforts to prevent and treat this syndrome\u2014such as providing medical education to healthcare providers on how to treat these infants. However, we found that it is unclear how the department will implement these recommendations, if at all.", "We recommended that HHS develop a plan to implement these recommendations."]}
{"id": "GAO-18-172", "url": "https://www.gao.gov/products/GAO-18-172", "title": "Transportation Security Administration: After Oversight Lapses, Compliance with Policy Governing Special Authority Has Been Strengthened", "published_date": "2017-12-21T00:00:00", "released_date": "2017-12-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TSA is responsible for securing the nation's transportation systems and uses security technologies to screen airline passengers and their luggage to prevent prohibited items from being carried on commercial aircraft. TSA has special authority for using OTAs, which are not subject to certain federal contract laws and requirements. OTAs provide flexibility to help meet mission needs, but potentially carry the risk of reduced accountability and transparency.", "GAO was asked to examine TSA's use of OTAs. This report addresses: (1) the extent and purposes of TSA's use of OTAs, and (2) how TSA ensures prices are reasonable and how it oversees OTAs.", "To address TSA's use of OTAs, GAO analyzed data on OTA awards and obligations from the Federal Procurement Data System-Next Generation from fiscal years 2012 to 2016 (the most recent years for which data were available). GAO determined that data were sufficiently reliable to report on TSA's minimum use of OTAs. To examine how TSA prices and oversees OTAs, GAO selected a nongeneralizable sample of 29 OTAs from the 8 TSA programs that awarded them based on program size and OTA value. GAO reviewed relevant documentation, and interviewed contracting and program officials."]}, {"section_title": "What GAO Found", "paragraphs": ["During fiscal years 2012 through 2016, the Transportation Security Administration (TSA) awarded at least 1,039 other transaction agreements (OTA) and obligated at least $1.4 billion on them. These agreements, which are neither traditional contracts nor grants, were primarily used to reimburse airports and law enforcement agencies for the costs associated with TSA security programs. For example,", "TSA awarded at least 109 OTAs and obligated at least $783 million from fiscal years 2012 through 2016 to reimburse airports for the allowable design and construction costs associated with installing, updating, or replacing checked baggage screening systems.", "TSA also used OTAs for intelligence analysis and to offset the costs of providing canines for explosives detection, among other things.", "TSA Used Other Transaction Agreements to Reimburse Airports for Design and Construction Costs Associated with Checked Baggage Screening Systems", "For the selected 29 OTAs GAO reviewed, GAO found that the methods TSA used to determine price reasonableness varied depending on the complexity of the requirement. For example,", "For complex design and construction projects, TSA compared independent government cost estimates with contractor bids. Certified program managers monitored project schedule and scope through site visits and status reports.", "In contrast, TSA independently verified the rates set by the local power authority when reimbursing some airports for electricity costs to operate TSA screening equipment.", "GAO also found that TSA has taken action to address prior lapses in oversight, resulting in improved compliance. In 2015, TSA identified significant gaps in OTA file documentation and data reported in the Federal Procurement Data System-Next Generation. TSA took action to address these deficiencies by (1) updating its policy, (2) requiring additional training for contracting officers, (3) instituting monthly data verification, and (4) monitoring compliance through quarterly reviews. GAO's analysis confirmed that the quality of the data had improved between fiscal year 2012 and 2016. Moreover, the 29 OTAs generally met key requirements of TSA's policy that GAO identified."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Transportation Security Administration (TSA) is responsible for  securing the nation\u2019s transportation systems while facilitating the  movement of passengers and commerce using security-related  technologies. To fulfill this mission, TSA must ensure that all airline  passengers and their carry-on and checked baggage are screened to  deter, detect, and prevent the carriage of prohibited and other dangerous  items, such as explosives, on board commercial aircraft. As one of the  largest components of the Department of Homeland Security, TSA  obligated more than $1.4 billion through instruments called other  transaction agreements (OTA) from fiscal years 2012 to 2016. Congress  granted TSA other transaction authority in 2001, allowing it to enter into  agreements other than standard government contracts or other traditional  mechanisms. OTAs entered into under this authority are generally not  subject to certain federal laws and regulations related to federal contracts  such as the Federal Acquisition Regulation (FAR), allowing TSA to  customize them to help meet project requirements and mission needs. As  we and others have previously reported, the use of OTAs provides  flexibility but carries the risk of reduced accountability and transparency,  in part because such agreements are exempt from the FAR and the  related controls and oversight mechanisms that apply to contracts.", "You asked us to review TSA\u2019s use of OTAs. This report addresses (1) the  extent and purposes of TSA\u2019s use of OTAs and (2) how TSA ensures  prices are reasonable and how it oversees OTAs.", "To address the extent to which TSA uses OTAs, we analyzed data from  the Federal Procurement Data System-Next Generation (FPDS-NG) on  obligations through contracts and OTAs from fiscal year 2012 to 2016.  We assessed the reliability of the OTA data in FPDS-NG by performing  electronic testing and comparing it to data from TSA\u2019s financial  management and accounting systems. We found that over this timeframe  the data in all three systems were incomplete and we therefore excluded  OTAs that did not match in two or more systems. As a result of this step,  we determined that the data were sufficiently reliable to report on TSA\u2019s  minimum use of OTAs; however, we were not able to independently verify  TSA\u2019s total OTA obligations during this timeframe.", "To address the purposes of TSA\u2019s use of OTAs and how TSA prices and  oversees them, we reviewed relevant TSA policy and guidance and  selected a nongeneralizable sample of 29 OTAs from the eight TSA  programs that awarded them from fiscal year 2012 to 2016. Table 1  shows a breakdown by TSA program of the OTAs we reviewed.", "The number of OTAs we reviewed varied by program based on total  obligations through the programs, OTA values, and the extent to which  OTAs awarded under a program were similar. For example, we reviewed  a larger percentage of OTAs awarded by the Electronic Baggage  Screening Program and Advanced Surveillance Program because these  programs accounted for about 79 percent of TSA\u2019s overall obligations  through OTAs from fiscal year 2012 to 2016. By contrast, we reviewed a  smaller percentage of OTAs from the Law Enforcement Officer  Reimbursement Program, National Explosives Detection Canine Team  Program, and Checkpoint Janitorial and Utilities Program because OTAs  under these programs were generally for a similar purpose. We reviewed  all of the OTAs awarded by the Office of Security Policy and Industry  Engagement and the Office of Global Strategies because each of the  OTAs awarded by these offices was unique. For each OTA, we requested  information from TSA on the total period of performance, including  unexercised options and obligations as of the end of fiscal year 2017. We  also reviewed file documents including the determination and findings,  business clearance memoranda, and acquisition plans as applicable and  interviewed contracting and program officials. Our review focused on five  key areas: rationale for using an OTA instead of a traditional contract,  method of selecting OTA recipients, OTA type, determination of price  reasonableness, and contracting officer\u2019s representative (COR)  monitoring. We also reviewed COR files for a sample of OTAs awarded  by the top three programs that awarded cost reimbursable OTAs and one  that awarded fixed-price OTAs to provide greater insight into monitoring  methods. In addition, we reviewed TSA OTA compliance reviews from  fiscal years 2015 and 2016 and interviewed officials responsible for OTA  policy and oversight. Appendix I summarizes information on the 8  programs and 29 OTAs in our review based on documentation provided  by TSA.", "We conducted this performance audit from October 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Following the terrorist attacks of September 11, 2001, Congress passed  the Aviation and Transportation Security Act which created TSA as the  federal agency responsible for security in all modes of transportation,  including civil aviation. Among its responsibilities, TSA must generally  ensure that all passengers and property are screened before being  transported on a commercial passenger aircraft. This statute also  provided TSA the authority to enter into OTAs. TSA defines an OTA as a  set of legally enforceable promises between TSA and another party that  is other than a procurement contract, grant, cooperative agreement,  lease, or loan.", "Every agency has inherent authority to enter into contracts to procure  goods or services for its own use; however, agencies must receive  specific authority to award OTAs. Under these authorities, agencies may  develop agreements that do not follow a standard format or include terms  and conditions that are typically required when using traditional  mechanisms such as FAR-based contracts. Agreements entered into  using other transaction authority are not generally subject to certain  statutory and regulatory requirements related to government contracting  such as the FAR and the terms and conditions of each individual OTA  may be tailored to meet the specific situation. For example, OTAs may be  fixed-price, cost-reimbursable, or provide that each party bear the costs of  their participation. In addition, the length of an OTA is negotiable, with  some agreements lasting a few days and others for years.", "As we reported in 2016, Congress has granted other transaction authority  to 11 federal agencies. The statutory authorities for most agencies,  however, include some limitations on the use of the agreements, although  the extent and type of limitations vary. We found that most of the 11  agencies used OTAs for two purposes: (1) research, development, and  demonstration; and (2) prototype development. Three agencies\u2014the  Federal Aviation Administration, TSA, and the National Aeronautics and  Space Administration\u2014used OTAs for different activities, such as airport  security and education and outreach. Only a few agencies, including TSA  and the National Aeronautics and Space Administration, have  unrestricted authority to award OTAs. We also found that 9 of the 11  agencies had fewer than 90 active OTAs per fiscal year, but that, in  contrast, TSA and the National Aeronautics and Space Administration  had hundreds, and thousands, respectively."], "subsections": [{"section_title": "TSA\u2019s OTA Policy", "paragraphs": ["TSA\u2019s Office of Contracting and Procurement established policy and  procedures for the use, award, and oversight of OTAs in 2011. Prior to  2011, TSA had no governing policy for OTAs. According to TSA\u2019s policy,  which has been revised several times since its inception, OTAs are best  suited for situations where: an entity is not a traditional contracting partner, for example, airlines,  airport authorities, trade associations, quasi-governmental entities, or  research and development organizations;  there are cost sharing mechanisms that require the recipient to  contribute to the overall cost of the effort; or  the recipient must recoup all costs through third-party user-fees.", "Further, the policy states that OTAs may not be used when the principal  purpose of the agreement is to acquire (by purchase, lease, or barter)  property or services for the direct benefit or use of the United States  government. Table 2 identifies some of the key provisions of TSA\u2019s OTA  policy.", "This framework for awarding and overseeing OTAs is similar to those for  contracts. Further, according to TSA\u2019s OTA policy, contracting officers  who award OTAs must be certified at Federal Acquisition Certification in  Contracting Level III and demonstrate possession of a level of  experience, responsibility, business acumen, and judgment that enables  them to operate in the relatively unstructured business environment of the  OTA."], "subsections": []}]}, {"section_title": "TSA Obligates Millions Annually through OTAs, Primarily to Reimburse for Costs Associated with TSA Security Programs", "paragraphs": ["From fiscal years 2012 through 2016, TSA reported obligating millions  annually through OTAs, which amounted to at least $1.4 billion, or about  13 percent of its overall obligations during this time. Five TSA  reimbursement programs used OTAs to partially or fully reimburse  airports and law enforcement agencies for the allowable costs associated  with TSA security programs such as the design and construction of  checked baggage inline systems. These five reimbursement programs  accounted for about 99 percent of the $1.1 billion that TSA obligated on  OTAs that were awarded during this period. The remaining three non- reimbursement programs accounted for a small amount of obligations and  awarded a low number of OTAs for services including intelligence  analysis and the development of aviation standards."], "subsections": [{"section_title": "TSA Obligates Millions Annually through OTAs", "paragraphs": ["From fiscal year 2012 to 2016, TSA reported obligating millions annually  through OTAs, amounting to at least $1.4 billion, or about 13 percent of  its overall obligations through contracts and OTAs. Annual OTA  obligations remained fairly stable over this period, except for fiscal year  2013 when obligations spiked and then sharply declined in fiscal year  2014. This spike was driven in large part by the Electronic Baggage  Screening Program, which obligated $519 million on 54 OTAs in fiscal  year 2013 but obligated only $4 million on one OTA in fiscal year 2014.  See table 3 for TSA\u2019s obligations on contracts and OTAs."], "subsections": []}, {"section_title": "TSA Primarily Uses OTAs to Reimburse Airports and Law Enforcement Agencies for the Costs Associated with Security Programs", "paragraphs": ["From fiscal year 2012 to 2016 eight TSA programs used OTAs to meet a  variety of mission requirements. Five reimbursement programs used  OTAs to partially or fully reimburse airports and law enforcement  agencies for the allowable costs associated with TSA security programs.  This accounted for about 99 percent of all OTA awards and obligations  from fiscal year 2012 to 2016. The remaining three non-reimbursement  programs accounted for a small amount of obligations and awarded a low  number of OTAs for services including intelligence analysis and the  development of aviation standards. See table 4 for the number of OTA  awards and obligations by program. For more information on the  programs and OTAs we reviewed, see appendix I.", "The five reimbursement programs awarded numerous OTAs to different  airports and law enforcement agencies for similar requirements. These  programs each used a class determination and findings that describes the  general requirement and other parameters such as a range of possible  award amounts or periods of performance. TSA has an OTA template  with standard provisions. Terms tailored to the specific airport or law  enforcement agency are then provided in the individual OTAs. The  following examples illustrate some of the ways TSA has used OTAs to  reimburse airports and law enforcement agencies for the costs associated  with TSA security programs.", "The Electronic Baggage Screening Program is an acquisition  program that tests, procures, deploys, and maintains checked  baggage screening equipment at federalized airports. TSA uses  FAR-based contracts to buy things like explosives detection machines  and engineering support services. TSA uses OTAs to reimburse  airports for the allowable design and construction costs associated  with facility modifications needed for installing, updating, or replacing  in-line checked baggage screening systems. These systems use  conveyor belts to route checked luggage through an explosives  detection machine which captures an image of the checked bag to  determine if the bag contains any type of threat item including  explosives. Agreements generally range in value from $50,000 to  $150 million, and the anticipated period of performance can range  from 6 months to 3 years, depending on the size and complexity of  the project. In one example, TSA entered into an OTA to reimburse  the City of Cleveland about $24 million for work at Cleveland Hopkins  International Airport for installation of explosive detection systems  within the checked baggage screening area.", "The Law Enforcement Officer Reimbursement Program provides  partial salary reimbursement to approximately 325 airports to offset  the costs of carrying out aviation law enforcement responsibilities in  support of passenger screening activities. Reimbursement is based  on an established \u201cnot-to-exceed\u201d hourly rate or the actual cost per  hour, whichever is lower. Agreements range in value depending on  the airport category, the number of checkpoints and law enforcement  officers, hours of operation, and availability of funds. The period of  performance for these agreements is generally 3 to 5 years. For  example, TSA entered into an agreement with the Dallas/Fort Worth  International Airport Board that lasted from October 2012 to March  2016 to reimburse the airport about $5.5 million.", "While the five reimbursement programs awarded numerous OTAs for the  same purpose to different airports and law enforcement agencies, the  remaining three non-reimbursement programs awarded few OTAs and  their use was more varied. Specifically, the Office of Security Policy and  Industry Engagement, the Office of Law Enforcement/Federal Air Marshal  Service, and the Office of Global Strategies used OTAs for a range of  services including intelligence analysis and the development of aviation  standards. For example:", "The Office of Security Policy and Industry Engagement is  responsible for developing security policies to reduce the risk of  catastrophic terrorist attacks. From fiscal year 2012 to 2016, the office  awarded four OTAs. These included two awards to the American  Public Transportation Association to meet ongoing requirements for  intelligence gathering, public transit information sharing and analysis,  and the development of mass transit and passenger rail security  practices.", "The Office of Law Enforcement/Federal Air Marshal Service  awarded 13 OTAs to pay for parking for federal air marshals and  authorized Law Enforcement Office employees at airports including  John F. Kennedy International and Washington Dulles International.  However, in September 2016, TSA competitively awarded a contract  to manage parking expenses at numerous airports. According to  officials, parking requirements for the Office of Law  Enforcement/Federal Air Marshal Service will be met through the  contract and as a result, existing OTAs for this requirement are being  phased out.", "Other than the parking OTAs, TSA officials noted that the requirements  for the seven remaining programs that used OTAs from fiscal year 2012  to 2016 are ongoing and that TSA will continue to use OTAs for the same  purposes in fiscal year 2017 and beyond, contingent on available funding.  They also noted that they do not anticipate any new uses of OTAs."], "subsections": []}]}, {"section_title": "Methods to Price and Monitor Selected OTAs Reviewed Varied, and TSA Has Taken Action to Strengthen Oversight", "paragraphs": ["Our review of 29 OTAs awarded by 8 TSA programs from fiscal years  2012 through 2016 found that the methods used to determine price  reasonableness and monitor these OTAs varied based on the complexity  of the requirement. Further, for the key areas we reviewed, the OTAs  generally met the requirements of TSA\u2019s policy. Nonetheless, TSA\u2019s own  2015 internal compliance review found significant gaps in OTA  documentation and reporting. In response to these deficiencies, TSA has  taken action to strengthen oversight and compliance with its policy."], "subsections": [{"section_title": "Methods to Determine Price Reasonableness and Monitor OTAs Varied by Program", "paragraphs": ["TSA\u2019s OTA policy requires contracting officers to determine that the price  negotiated under the OTA is reasonable and to appoint a COR to provide  monitoring and a range of administration tasks to ensure that  requirements are satisfactorily delivered. For the 29 OTAs we reviewed,  we found that the methods used to determine price reasonableness and  provide monitoring varied based on the complexity of the requirement.", "Approaches to determining price reasonableness ranged from instances  where TSA extensively evaluated proposed costs to more straightforward  analysis. For OTAs awarded by the Electronic Baggage Screening  Program where the requirements for infrastructure design and  construction can be complex, the program produces an independent  government cost estimate based on design drawings and specifications  from the airports which are required to follow TSA\u2019s detailed guidance.  The program compares the estimate with the airport authority\u2019s  independent bid for the design and construction. Any discrepancies are  noted in the technical evaluation, which the contracting officer reviews  and documents in the business clearance memorandum. For example, in  fiscal year 2016, TSA awarded an OTA for $23 million to the City of  Chicago for the recapitalization of the checked baggage resolution area at  O\u2019Hare International Airport. Certain proposed costs in the contractor\u2019s  bid were higher than TSA\u2019s independent government cost estimate. The  contracting officer performed an evaluation of the costs and determined  that they were reasonable and that the difference was, in part, the result  of the airport having greater familiarity with the existing conditions at the  site than TSA\u2019s cost estimators.", "By contrast, some programs took a more straightforward approach to  determining price reasonableness, including cases where the costs were  predetermined or not negotiable. For example, the Checkpoint Janitorial  and Utilities Program used OTAs as a vehicle for reimbursing airport  authorities for the costs of electricity to operate TSA screening equipment  and for janitorial services in checkpoint areas. TSA had independently  verified electricity prices set by the local power authority. Prices for  janitorial services were verified based on the airport\u2019s competitively- awarded janitorial contracts. In one case, TSA entered into an OTA to  reimburse the Massachusetts Port Authority for $678,000 for one year.  TSA performed price analysis on historical data from agreements dating  back to 2008 and reviewed changes to the checkpoint square footage  and changes in electrical consumption based on use of new TSA  equipment. The airport authority provided documentation verifying  electrical rates set by the local power authority that TSA\u2019s contracting  officer used to determine fair and reasonable pricing. Janitorial costs were  based on TSA\u2019s pro-rated share of the airport\u2019s competitively-awarded  janitorial contract and considered to be fair and reasonable based on  adequate competition in the commercial market-place. TSA verified the  rates each year prior to executing options.", "COR monitoring similarly varied depending on the complexity of the  requirement. For the more complex design and construction projects  under the Electronic Baggage Screening Program, COR monitoring was  more rigorous than for programs with less complex requirements.  According to 2016 guidance, the COR is the primary interface between  TSA and the airport and is responsible for performing stakeholder  coordination functions. During the design phase, the COR is to review the  airport\u2019s design documentation to ensure compliance with TSA\u2019s  guidelines and standards in collaboration with TSA subject matter  experts. During the construction phase, the COR is responsible for  performing ongoing oversight including reviewing invoices prior to  payment. For an OTA awarded to the Miami Dade Aviation Department  the COR reviews monthly milestone progress status reports as well as  weekly status reports prepared by TSA\u2019s site integration contractor  highlighting work completed, ongoing activities, and program risks. A  contracting official noted that schedule slippage is a big risk for cost  reimbursement projects which is mitigated by COR oversight, as well as  the ongoing oversight of the site leads. A contracting official also noted  that most CORs for these OTAs have DHS certification for program and  project management providing them with greater technical and  administrative expertise to monitor more complex projects.", "In one instance on another project with complex requirements under the  Advanced Surveillance Program, project monitoring resulted in TSA and  the airport working together to contain costs when a project did not go as  expected. In fiscal year 2012, TSA awarded an OTA for $7.2 million to the  Port Authority of New York and New Jersey for the design, installation  and maintenance of a security system, including closed-circuit television  cameras and associated software, at John F. Kennedy International  Airport. In fiscal year 2013, TSA modified the OTA to add more cameras,  thereby increasing the cost of the project to $21 million. However, during  installation, the Port Authority experienced several unforeseen issues with  the project, including reduced work hours available for unionized labor  and asbestos abatement costs. As a result, the Port Authority reassessed  its original cost estimate and determined that it was not sustainable. In  fiscal year 2017, TSA and the Port Authority agreed to decrease the  scope of the project from 751 cameras to 389 cameras to stay within the  original $21 million estimate."], "subsections": []}, {"section_title": "TSA Found Improved Compliance in Its Reviews of OTAs after Taking Action to Address Lapses in Oversight", "paragraphs": ["Starting in fiscal year 2015, four years after it issued its 2011 OTA policy,  TSA began to include OTAs in its contract compliance review program.  Compliance reviews are conducted quarterly based on a selection of  contracts and OTAs awarded in the previous quarter and intended to  improve contracting operations, ensure compliance with applicable  standards and policies, and identify best practices. Based on the number  of findings identified in its review of six OTA actions included in a 2015  quarterly review, TSA commissioned an OTA-specific compliance review  in June 2015. The OTA-specific review covered 30 actions with a total  value of about $82 million and identified significant gaps in documentation  and reporting. For example, 18 of 27 OTAs awarded after TSA\u2019s 2011  policy was issued did not include a determination and findings approving  the action. As noted above, this is a key document that describes the  rationale for using an OTA instead of a traditional contract and the  determination of price reasonableness. The review also found that 18 of  30 files did not document the assignment of a COR to perform oversight  and that 20 of 30 FPDS-NG records were incorrect.", "In response to the findings of the OTA-specific compliance review, TSA  implemented a number of actions and has subsequently found  improvement in OTAs meeting documentation and reporting  requirements. We found that TSA revised the OTA policy to clarify  requirements and increased training for contracting officers with OTA  warrants. Specifically, to obtain the OTA warrant, contracting officers  must complete webinar training and 3 days of classroom training. To  maintain the warrant, contracting officers must retake the webinar training  every two years. According to TSA contracting officials, all of the 56  contracting officers had completed the new training requirements as of  May 2017. In addition, TSA has continued to include OTAs in its quarterly  compliance review process. Based on our analysis of TSA\u2019s fiscal year  2016 compliance reviews, we found that TSA reviewed 16 OTAs with a  total value of $62 million. In those reviews, 12 of the 16 findings were  determined to be low risk. For example, several of the files did not include  documentation of COR certification. The remaining four OTAs had  findings that were determined to be medium risk. This includes, for  example, one case where the OTA period of performance started 5  months before the OTA was signed. None of the OTAs, however, was  missing a determination and findings and three had missing or incorrect  FPDS-NG entries. Officials noted that their efforts to increase training,  oversight, and enforcement of OTA policies and procedures have resulted  in increased awareness of reporting requirements and greater  compliance.", "In addition, TSA also recently increased oversight of the COR program to  support efficient OTA and contract oversight and administration. A TSA  official responsible for the COR program reported that in fiscal year 2017,  TSA began to conduct quarterly compliance reviews of the COR program  to ensure greater consistency in oversight practices across the agency.  According to COR compliance review guidance issued in 2016, the  reviews are intended to highlight positive practices, effective management  techniques, and identify areas of improvements.", "Our analysis of data in FPDS-NG showed that issues with incomplete  data have been corrected over time, in part due to increased oversight.  We compared data reported in TSA\u2019s financial management and  accounting systems with data reported in FPDS-NG and found that the  percentage of new OTAs reported in FPDS-NG increased from 37  percent in 2012 to 95 percent in 2016. TSA\u2019s policy requires that OTAs be  reported in the OTA module within FPDS-NG. The awarding contracting  officer has responsibility for accurately entering OTA information,  including the value of the award and the period of performance. TSA  contracting officials attributed gaps in data in part to the fact that the  process for entering OTA data into FPDS-NG is manual, whereas FPDS- NG automatically pulls data for contracts from TSA\u2019s contract writing  system. According to officials, OTAs are excluded from the contract  writing system due to system limitations and this additional step increases  the chance that a contracting officer may forget to enter the data into  FPDS-NG or enter it into the system incorrectly. TSA officials noted that  they have taken steps to improve the accuracy of the data reported in  FPDS-NG by reviewing and verifying entries on a monthly basis in  accordance with TSA\u2019s policy.", "Our review of 29 OTAs also demonstrated that the OTAs generally met  the requirements for the key areas of TSA policy that we reviewed. For  example, TSA\u2019s policy states that if the OTA will be awarded without  competition, the determination and findings must include a discussion of  the method for selecting the OTA recipient. None of the OTAs we  reviewed was competed because TSA determined that competition was  not applicable due to the nature of the requirements. Nonetheless, all the  determination and findings included a discussion of the method for  selecting OTA recipients, a process that varied by program. For example,  the Law Enforcement Officer Reimbursement Program posts a solicitation  and selects eligible applicants based on review criteria. By contrast, the  Advanced Surveillance Program prioritizes projects using a risk-based  matrix that assesses threats, vulnerabilities, and consequences populated  with data from 449 airports.", "Despite improvements, TSA officials acknowledged the need for  continued vigilance based on several issues we identified. For example,  TSA entered into a \u201cno funding\u201d OTA in 2013 with Signature Flight  Support, a commercial fixed-base operator at Ronald Reagan  Washington National Airport. A fixed-base operator is an organization  granted the right by an airport to provide aeronautical services such as  fueling, hangaring, tie-down and parking, aircraft rental, aircraft  maintenance, flight instruction, and similar services. Under the  agreement, Signature Flight Support collects and remits special security  screening and threat assessment fees from airline operators on behalf of  TSA, fees that are required due to the airport\u2019s location within a flight  restricted zone and special flight rules area. TSA does not obligate funds  through the OTA, which primarily establishes the responsibilities and  procedures for the fee collection and remittal. Our review found that TSA  did not take any action to extend or renew the agreement after it expired  in December 2014. However, TSA program officials told us that Signature  Flight Support continued to provide the service although an agreement  was not in place. When we brought this issue to TSA\u2019s attention, officials  agreed the OTA period of performance should have been extended each  year. Officials told us that as of October 2017 they anticipate awarding a  new OTA for this requirement in the second quarter of fiscal year 2018,  more than three years after the OTA expired. In addition to the steps TSA  has taken to improve OTA oversight, such as revising its OTA policy and  increasing training requirements, TSA officials told us that they will  continue to conduct quarterly compliance reviews and monthly data  verification in accordance with their policy."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Homeland Security  for comment. The Department provided only technical comments, which  we incorporated as appropriate.", "We are sending copies of this report to the Senate Committee on  Homeland Security and Governmental Affairs and the Secretary of the  Department of Homeland Security. The report is also available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or woodsw@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."], "subsections": []}]}, {"section_title": "Appendix I: Summary of Key Areas for the Other Transaction Agreements GAO Reviewed", "paragraphs": [], "subsections": [{"section_title": "Electronic Baggage Screening Program", "paragraphs": ["Purpose: Reimburses airports for the allowable costs related to various  airport checked baggage screening projects including the design and  construction of checked baggage inline systems and the recapitalization  of existing inline systems. Agreements generally range in value from  $50,000 to $150 million, and the anticipated period of performance can  range from 6 months to 3 years, depending on the size of airport and  complexity of the project.", "TSA rationale for using Other Transaction Agreement (OTA): Airports  are owned and operated either by city or county municipalities, airport  boards or trusts, or, in some cases as not-for-profit entities. Given that the  program requires modifications to airport terminals that are owned by an  entity other than the federal government, it is more practical for the airport  to oversee and monitor the construction or modifications required for their  facilities.", "Method of selecting OTA recipient: Airports submit applications  through the airport\u2019s Federal Security Director\u2014a TSA employee  responsible for security operations at federalized airports\u2014including a  description of the requirement, schematic design, budgetary cost  estimate, and data relating to number of bags processed and airlines  served. TSA prioritizes applications using a risk-based model and by  considering several factors such as the cost share the airport is willing to  assume and the readiness of the airport to begin the project.", "OTA type: Partial cost share/reimbursement. Depending on the airport\u2019s  size, TSA will reimburse 90 or 95 percent of the allowable, allocable and  reasonable cost of certain projects. In other types of projects, TSA  provides 100 percent reimbursement\u2014for example, for existing systems  requiring the correction of security or safety deficiencies.", "Method of determining price reasonableness: TSA produces an  independent government cost estimate based on design drawings and  specifications received from the airport and approved by TSA. The  estimate is developed using industry standards and is used for evaluating  total project cost. When bids are received from the airport, TSA compares  the bid amount with the estimate. TSA may conduct further analysis and  discussion to ensure that the estimate correctly reflects the scope  included in the bid documents.", "Contracting Officer\u2019s Representative (COR) monitoring: The COR is  the primary interface between TSA and the airport and is responsible for  performing stakeholder coordination functions. During the design phase,  the COR is to review the airport\u2019s design documentation to ensure  compliance with TSAs guidelines and standards in collaboration with TSA  subject matter experts. During the construction phase, the COR is to  monitor project schedule and scope through processes such as weekly  and monthly reporting.", "Purpose: Provides partial reimbursement to approximately 325 airports  to offset the allowable costs of carrying out aviation law enforcement  responsibilities in support of passenger screening activities.", "TSA rationale for using OTA: Participants are not traditional contracting  partners; most participants must contribute to the cost of providing law  enforcement officer support at the checkpoints; and the agreements do  not acquire property or services for the direct benefit or use of the  government.", "Method of selecting OTA recipient: The program posts a solicitation to  FedBizOpps.gov with eligibility requirements, application process, review  criteria, and selection process. Airports as well as state, local, or other  public institutions/organizations responsible for commercial airport  operations that have incurred law enforcement service costs due to TSA  security mandates are eligible. The Federal Security Director\u2014a TSA  employee responsible for security operations at federalized airports\u2014 along with the Law Enforcement Officer Program Office, Office of Chief  Counsel, and the contracting officer, participate in selecting eligible  applicants.", "OTA type: Partial cost reimbursement.", "Method of determining price reasonableness: OTAs are negotiated to  provide reimbursement for law enforcement officer support at an  established \u201cnot-to-exceed\u201d hourly rate or the actual cost per hour,  whichever is lower. The amount of partial reimbursement is based on  airport category, the number of checkpoints, hours of operation, and  availability of funds.", "COR monitoring: CORs provide technical direction and day-to-day  oversight of the program, work with the airport Federal Security Director  to make sure that requirements are being satisfied, and approve invoices  prior to payment.", "Purpose: Provides reimbursement for the allowable costs incurred to  design, install, or expand surveillance systems to meet the required views  of the local TSA. Project costs generally range from $200,000 to $21  million with an anticipated period of performance ranging from 6 months  to 3 years depending on the complexity of the system and facility size.", "TSA rationale for using OTA: The primary beneficiary of the  surveillance equipment is the facility that will take ownership of the  system and be solely responsible for its operation. The use of an OTA  provides for the facility to manage and perform the work but allows TSA  oversight and control over the expenditure of TSA funds. TSA will not  benefit directly from the purchase, installation, and operation of the  system, so a traditional contract would not be appropriate.", "Method of selecting OTA recipient: The program prioritizes projects  based on a risk-based matrix that assesses threats, vulnerabilities, and  consequences based on data from 449 airports. Airports must be willing  to complete the project within the required timeframe.", "OTA type: Cost reimbursement.", "Method of determining price reasonableness: The program uses a  pre-award systems engineering process which culminates in a project  evaluation and plan, a comprehensive surveillance assessment of TSA  managed areas, and an independent government cost estimate. TSA  reviews the cost elements to, for example, validate labor categories, labor  hours, materials, and other direct costs based on industry standards and  comparison with other projects. The program also uses market research  and historical data to inform price analysis.", "COR monitoring: The COR works with project coordinators to monitor  OTA performance and maintains direct contact with the transportation  facility and the local TSA representatives. The COR reviews invoices to  ensure that the transportation facility (via its contractor) has met all  acceptance criteria prior to approval and payment of each invoice. Upon  completion of installation and testing, TSA obtains an acceptance report  to be signed by the transportation facility authority and major stakeholders  including facility representatives, and the responsible TSA Federal  Security Director, contracting officer, and COR.", "Purpose: Provides partial reimbursement to airports, mass transit  systems, and state and local law enforcement participants for the  allowable costs incurred associated with the operation of the authorized  canine teams and explosives storage magazines. Allowable costs that will  be reimbursed include handlers' salaries and care for the canines. In turn,  the local jurisdiction agrees to a set of responsibilities including using TSA  trained canine teams at least 80 percent of their on-duty time in the  transportation environment and to maintain a minimum of three certified  teams available for around-the-clock incident response. The program  reimburses participants up to $50,500 per canine team for allowable costs  incurred. The period of performance for these OTAs is up to 5 years.", "TSA rationale for using OTA: A standard procurement contract is not  suitable because the airports, mass transit, and maritime facilities are not  owned by TSA, but by airport authorities, and state and local agencies.  These entities have the responsibility for the control and oversight of  security operations at a specific location, either by having their own law  enforcement officers, or using the state or local law enforcement officers.  Since TSA does not own the airport or have primary law enforcement  responsibility and only provides participants partial reimbursement for the  operating costs of the teams, an OTA is warranted.", "Method of selecting OTA recipient: Transportation authorities and/or  local law enforcement entities submit a written request outlining their  desire to join the program in which they outline the need for the canine  teams within their respective transportation system/s. TSA selects  recipients based on a review of the transportation system\u2019s risk profile  and the program\u2019s available team openings.", "OTA type: Partial cost reimbursement.", "Method of determining price reasonableness: The $50,500 per team  stipend only covers a portion of the cost to the participant. There are  instances after award that require an additional price reasonableness  determination, such as when a participant requests reimbursement for a  supply or service that is either unknown to the program or inconsistent  with program historical prices for the given supply/service. If the program  determines that the item is allocable the program will determine whether it  was procured competitively and any facts that may support it being higher  than historical prices paid. If the item was not procured competitively, the  program will look at current price lists and catalogs for a same or similar  item and consult program subject matter experts on their personal  knowledge of the item(s) being purchased.", "COR monitoring: The program assigns a Field Canine Coordinator who  is responsible for overseeing the participant\u2019s compliance with the  agreement through periodic reporting and assessments. Reimbursement  is to be made upon receipt and review of summited expenses by the COR  and contracting officer.", "Purpose: The Checkpoint Janitorial and Utilities program uses OTAs to  define the terms and conditions for TSA\u2019s use of checkpoint space in  mandated non-leased space at airports and to provide a vehicle for  reimbursing the cost of electrical consumption and janitorial services.", "TSA rationale for using OTA: A procurement contract is not suitable  since the airport is a governmental entity, not a commercial vendor.  Additionally, airports often contract directly with a utility provider or  janitorial company.", "Method of selecting OTA recipient: Airports request reimbursement for  utility costs and janitorial services in mandated non-leased space at TSA  security checkpoints. TSA Federal Security Directors who are responsible  for security operations at federalized airports confirm the need for  reimbursing the cost of utilities and janitorial services at the checkpoint  space. These OTAs are not available for competition as the only available  source is the airport authority.", "OTA type: Cost reimbursement.", "Method of determining price reasonableness: TSA reimburses airports  at cost for the costs of electrical consumption by TSA screening  equipment located in the checkpoint space based on a cost allocation  methodology. TSA reimburses airports for its pro-rata share of the  airports janitorial costs per square foot also based on a cost allocation  methodology. In the files we reviewed, prices were considered to be fair  and reasonable based on documentation verifying the rates set by the  local power authority. Costs were considered to be fair and reasonable  based on the airports\u2019 competitively-awarded janitorial contracts and rates  established by the local utility authority.", "COR monitoring: Provides technical direction, contractor oversight, and  certification of payments.", "Purpose: The office has an ongoing requirement for intelligence  gathering, public transit information sharing and analysis, and  development of mass transit and passenger rail recommended security  practices.", "TSA rationale for using OTA: The American Public Transportation  Association is a not-for-profit trade association which therefore may not  currently have the experience, knowledge, or past performance to support  a FAR type contract.", "Method of selecting OTA recipient: Through market research, TSA  determined that the American Public Transportation Association was  uniquely capable of meeting requirements.", "OTA type: Fixed price.", "Method of determining price reasonableness: In 2014, price was  determined to be fair and reasonable based primarily on historical data  and prices consistent with the preceding interagency agreement and the  office\u2019s independent government cost estimate. In 2016, the program  updated the independent government cost estimate based on a quote  from the American Public Transportation Association which provided for  greater clarity, insight, and definition to the actual costs. Additional market  research is planned to determine the best way to fulfill this requirement in  the future.", "COR monitoring: The COR developed a contract management plan  which identifies a detailed list of work products and delivery schedule.  The expected deliverables are also detailed in the OTA statement of  work. Responsibilities of the contractor include developing and managing  a project plan; updating the plan as the project evolves; reporting project  progress and status via monthly reports; and, participating in TSA- scheduled conference calls, if necessary, to review project progress,  identify and discuss issues, and discuss corrective action.", "Purpose: The Surface Division of the Office of Security Policy and  Industry Engagement has a need to maintain railroad police personnel  involvement and a liaison relationship with the FBI\u2019s National Joint  Terrorism Task Force. The requirement entails the direct employment of  intelligence gathering focused on preventing terrorist acts affecting the  nation\u2019s passenger and freight-rail infrastructure to facilitate the continuity  of communications, liaison, intelligence analysis and information sharing  among federal, state, local and railroad industry police/security agencies.", "TSA rationale for using OTA: A procurement contract is not suitable for  this requirement, as the purpose of the action is to not acquire property or  services for the direct benefit or use of the United States government.  Rather, the requirement entails the direct employment of intelligence  gathering focused on preventing terrorist acts affecting the nation\u2019s  passenger and freight-rail infrastructure.", "Method of selecting OTA recipient: Since 2003, the Association of  American Railroads has provided the TSA with a railroad police officer  charged with collecting and analyzing intelligence information. Market  research reveals the Association of American Railroads to be one of two  major railway representation groups in the U.S. counting among its  membership the seven largest freight and passenger rail carriers in North  America. A follow-on agreement with the Association of American  Railroads maintains an uninterrupted flow of the critical intelligence  necessary in monitoring the safety and security of the nation\u2019s railway  infrastructure.", "OTA type: Fixed price.", "Method of determining price reasonableness: The program developed  an independent government cost estimate based on prices paid under a  previous agreement which allows for an inflationary cost adjustment of 3  percent per year and determined the annual funding cost to be fair and  reasonable in meeting this requirement.", "COR monitoring: The COR is responsible for the technical  administration and liaison of the agreement and is to review and certify  invoices for completeness and accuracy before approving them for  payment. As authorized by the FBI, the assigned railroad police officer is  to provide a monthly written report that summarizes the activities and  accomplishments related to the tasks outlined in the agreement.", "Purpose: Ronald Reagan Washington National Airport is located within  the Flight Restricted Zone and Special Flight Rules Area. As such, the  Office of Security Policy and Industry Engagement developed a security  program for approved general aviation aircraft operators which requires  stringent security measures including requirements for background  checks, physical screening of passengers and baggage. Aircraft  operators are responsible for reimbursing TSA for the cost of the security  screening. TSA requires the use of the airport facility to perform the  screening function and a mechanism for the collection of security  screening and threat assessment fees from aircraft operators and  remittance of those fees to TSA.", "TSA rationale for using OTA: A procurement contract is not suitable for  this requirement because TSA is not acquiring, purchasing, or leasing any  product or service. The OTA primarily establishes the responsibilities of  the parties and the fee collection and remittal procedures.", "Method of selecting OTA recipient: TSA determined that Signature  Flight Support, as the sole commercial fixed base operator granted the  right to operate at Reagan National Airport to provide aeronautical  services such as fueling, hangaring, parking, aircraft rental, aircraft  maintenance, flight instruction, and similar services\u2014is therefore the only  entity capable of providing the facilities and services required to  implement this program.", "OTA type: No funding.", "Method of determining price reasonableness: Not applicable.", "COR monitoring: The COR is responsible for providing technical  direction and administration.", "Purpose: The Office of Global Strategies is directed to encourage the  development of civil aviation security, and is authorized to furnish to  international organizations certain technical expertise and assistance.  The office awarded an OTA to the International Civil Aviation  Organization\u2014a specialized agency of the United Nations committed to  preventing and deterring unlawful interference with international civil  aviation\u2014to cover the salaries and benefits for three TSA employees  assigned to the organization as senior security advisors. TSA actively  participates in the organization\u2019s Aviation Security Panel of Experts,  which is responsible for promulgating international security standards.", "TSA rationale for using OTA: An OTA is best suited for this requirement  since the International Civil Aviation Organization is a United Nations  specialized agency and TSA is not acquiring any property or services for  the direct benefit or use of the United States government.", "Method of selecting OTA recipient: There are no known alternative  sources.", "OTA type: Fixed price.", "Method of determining a fair and reasonable price: Both the Program  Office and the Contracting Officer solely relied upon historical salaries as  previously used with the International Civil Aviation Organization.", "COR monitoring: The COR reviews and the contracting officer approves  all invoices prior to payment.", "Purpose: TSA has a requirement to obtain parking spaces/permits for  Federal Air Marshals during their mission flights for various airports.", "TSA rationale for using OTA: A procurement contract is not suitable for  this requirement as airport parking is not considered a commercial  item/service to the public; it is only available to business partners. An  OTA allows TSA to participate in an airport\u2019s business partner category.  Further OTAs provide a practical vehicle because the airport authority is  considered a U.S. state government entity.", "Method of selecting OTA recipient: TSA conducted market research  which found that an OTA with the airport provides a significant cost  savings to the government compared with other alternatives. TSA  compared the costs of parking as a business partner with the cost of  parking at the typical rates at the airport.", "OTA type: Fixed price.", "Method of determining a fair and reasonable price: TSA prepared an  independent government cost estimate based upon commercial market  pricing for airport parking.", "COR monitoring: TSA will pay the airport the variable fixed rate on a  monthly basis. All costs will be invoiced based on actual costs incurred,  but not to exceed the OTA amount. To receive payment from TSA, the  airport submits one-page invoice to include the quantity used, unit price,  and extended prices of the monthly deliverable. The invoice will be  reviewed and approved by the COR and contracting officer prior to  payment.", "Purpose: TSA has a need for parking for authorized Office of Law  Enforcement Employees at Washington Dulles International Airport.", "TSA rationale for using OTA: Need for parking can be met more  economically with mechanism to directly reimburse Metropolitan  Washington Airports Authority.", "Method of selecting OTA recipient: TSA conducted market research  which found that an OTA with the Metropolitan Washington Area Airport  authority provides a significant cost savings to the government compared  with other alternatives.", "OTA type: Fixed price.", "Method of determining a fair and reasonable price: TSA conducted  price analysis and found that other available lots are all more expensive,  farther away from the airport, and lack the capacity to service 400 people.", "COR monitoring: Perform surveillance to assure performance and  compliance with the terms and conditions of the agreement. Certify  invoices to the contracting officer for payment."], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tatiana Winger (Assistant  Director), Angie Nichols-Friedman (Analyst in Charge), Peter Anderson,  Lorraine Ettaro, Julia Kennon, Carol Petersen, Lindsay Taylor, Westley  Tsou, Alyssa Weir, and Robin Wilson made key contributions to this  report."], "subsections": []}]}], "fastfact": ["TSA is responsible for securing the nation's transportation systems. To carry out this mission, Congress gave it special authority to use \"other transaction agreements.\" These agreements are not subject to federal contract laws, so they are more flexible than traditional contracts or grants. However, they also carry the risk of reduced accountability and transparency.", "We found that TSA awarded 1,039 of these agreements between 2012-2016\u2014largely for reimbursing airports for installing, updating, or replacing checked baggage screening systems. We also found that TSA has improved how it oversees these agreements."]}
{"id": "GAO-18-184T", "url": "https://www.gao.gov/products/GAO-18-184T", "title": "Low-Dose Radiation: Interagency Collaboration on Planning Research Could Improve Information on Health Effects", "published_date": "2017-11-01T00:00:00", "released_date": "2017-11-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's September 2017 report, entitled Low-Dose Radiation: Interagency Collaboration on Planning Research Could Improve Information on Health Effects ( GAO-17-546 )."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy (DOE), Nuclear Regulatory Commission (NRC), Environmental Protection Agency (EPA), and Food and Drug Administration generally used the advice of scientific advisory bodies to develop and apply radiation protection requirements and guidance for workers and the public in the radiation exposure settings that GAO reviewed. These settings were: (1) the operation and decommissioning of nuclear power plants; (2) the cleanup of sites with radiological contamination; (3) the use of medical equipment that produces radiation; and (4) accidental or terrorism-related exposure to radiation. Specifically, the agencies relied on the advice of three scientific advisory bodies that supported the use of a model that assumes the risk of cancer increases with every incremental radiation exposure. Accordingly, the agencies have set regulatory dose limits and issued guidance to confine exposure to levels that reduce the risk of cancer, while recognizing that scientific uncertainties occur in estimating cancer risks from low-dose radiation. For example, NRC requires nuclear power plants to consider measures for limiting workers' exposure below NRC's regulatory dose limit, such as by using robots for maintenance work in radiation areas.", "GAO identified seven federal agencies that funded research on low-dose radiation's health effects. In fiscal years 2012 to 2016, DOE, NRC, EPA, and four other federal agencies obligated about $210 million for such research . Although the agencies have collaborated on individual projects on radiation's health effects, they have not established a collaborative mechanism to set research priorities. GAO's previous work has shown that federal agencies can use such mechanisms to implement interagency collaboration to develop and coordinate sound science policies. In the past, DOE took a leading role in this area because DOE provided stable funding and advocated for greater coordination on research on low-dose radiation's health effects. However, since fiscal year 2012, DOE has phased out funding for one of its main research programs in this area. This has created a void in coordination efforts among federal agencies, and no other agency has stepped forward to fill this void. Because of DOE's prior experience as a leader in this area of research and its research responsibility under the Atomic Energy Act of 1954, it could play an important role in helping federal agencies establish a coordinating mechanism for low-dose radiation research.", "Dollars are in millions and have not been adjusted for inflation", "Source: GAO analysis of agency data. | GAO-17-546"]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss federal agencies\u2019 requirements  and guidance for protecting workers and the public from the harmful  effects of ionizing radiation and agencies\u2019 support for research on the  health effects of radiation at low doses. Radiation comes from natural  sources as well medical, commercial, and industrial activities. It has  beneficial uses, such as treating cancer, but a large amount of exposure  can cause sickness or even death within days, according to the  Environmental Protection Agency (EPA). In contrast, low levels of  exposure are not known to cause acute health effects but may increase a  person\u2019s risk of developing cancer.", "To protect against cancer and other harmful effects associated with  exposure to radiation, EPA, the Nuclear Regulatory Commission (NRC),  and other federal agencies have established requirements and issued  guidance that apply to a wide range of settings in which such exposure  can occur. For example, these requirements include limits on  occupational dose, such as for workers in nuclear power plants, and limits  on the dose that a facility, such as an industrial site with radiological  contamination, can cause to members of the public.", "The Department of Energy (DOE) and other federal agencies have also  funded research to determine the health effects of exposure to low levels  of radiation. However, uncertainties remain about these effects, as DOE\u2019s  Biological and Environmental Research Advisory Committee recognized  in 2016, when it issued a report stating that further research on the  cancer risk from low-dose radiation could decrease uncertainty in cancer  risk estimates.", "My statement today summarizes our September 2017 report on low-dose  radiation, which examined (1) how selected federal agencies have developed and applied radiation protection requirements and guidance for  workers and the public and (2) the extent to which federal agencies have  funded and collaborated on research on the health effects of low-dose  radiation. For our report, we reviewed agency documentation and  interviewed agency officials on the development of their radiation  protection requirements and guidance. In particular, we identified four  federal agencies\u2014EPA, NRC, DOE, and the Food and Drug  Administration (FDA) within the Department of Health and Human  Services (HHS)\u2014that have developed requirements or guidance for four  settings in which radiation exposure can occur: operation and  decommissioning of nuclear power plants, cleanup of sites with  radiological contamination, use of medical equipment that produces  radiation, and accidental or terrorism-related exposure to radiation.  Findings from our reviews of these four agencies in the four settings we  selected cannot be generalized to all agencies and settings in which  radiation exposure can occur but provide illustrative examples. We also  collected and examined data on support for low-dose radiation research  from seven federal agencies that fund this research\u2014the Centers for  Disease Control and Prevention (CDC) within HHS, the Department of  Defense (DOD), DOE, EPA, the National Aeronautics and Space  Administration (NASA), the National Institutes of Health (NIH) within HHS,  and NRC. In particular, we requested these seven agencies to provide  data on obligations for low-dose radiation research for fiscal years 2012  through 2016 and information on the type of research funded.", "More detailed information on the scope and methodology of our work can  be found in our September 2017 report. We conducted the work on which  this statement is based 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 summary, we found that EPA, NRC, DOE, and FDA have generally  used the advice of scientific advisory bodies to develop and apply  radiation protection requirements and guidance for workers and the public  for the four radiation settings in our review. Specifically, the agencies  relied on the advice of three scientific advisory bodies that supported the  use of the linear no-threshold model for such requirements and guidance.  This model assumes that the risk of cancer increases with every  incremental increase in radiation exposure. Accordingly, the agencies  have set regulatory dose limits and issued guidance to confine exposure  to levels that reduce the risk of cancer, while recognizing that scientific  uncertainties occur in estimating cancer risks from low-dose radiation.", "We also found that, for fiscal years 2012 through 2016, seven federal  agencies\u2014CDC, DOD, DOE, EPA, NASA, NIH, and NRC\u2014obligated  about $210 million for research on the health effects of low-dose  radiation, but annual funding decreased by 48 percent. During the period  we reviewed, the seven federal agencies that funded this research  collaborated on particular projects, but they did not use a collaborative  mechanism to address overall research priorities, such as research needs  that advisory bodies identified regarding health effects of low-dose  radiation. In the past, DOE provided leadership in this area and  advocated for greater coordination on research on low-dose radiation\u2019s  health effects. However, since fiscal year 2012, its leadership role and  funding have decreased because it has phased out funding for its main  research program in this area, and no other agency stepped forward to fill  this role. We recommended that DOE lead development of a mechanism  for interagency collaboration on research on low-dose radiation\u2019s health  effects. DOE disagreed with our recommendation, stating that agencies  set their own research priorities. We continue to believe that DOE is in the  best position to lead such an effort."], "subsections": [{"section_title": "Background", "paragraphs": ["According to NRC\u2019s website, the higher the radiation dose, the sooner the  effects of radiation will appear, and the higher the probability of death.  Radiation doses such as those received by survivors of the atomic bombs  in Japan can cause cancers such as leukemia and colon cancer and, if  levels are high enough, acute radiation syndrome. The symptoms of this  syndrome range from nausea, fatigue, and vomiting to death within days  or weeks. In contrast, the effects of low-dose radiation are more difficult to  detect. In particular, below about 100 millisieverts (mSv) (10 rem)\u2014the  level below which the National Academies of Sciences, Engineering, and  Medicine\u2019s (National Academies) 2006 report on radiation and human  health considered radiation to be low dose\u2014data do not definitively  establish the dose-response relationship between cancer and radiation  exposure."], "subsections": []}, {"section_title": "Selected Agencies Generally Used Advice from Scientific Advisory Bodies to Develop and Apply Radiation-Protection Requirements and Guidance", "paragraphs": ["In developing and applying radiation protection requirements and  guidance for workers and the public\u2014specifically, limits on dose or  increased health risk and guidance levels on exposure\u2014EPA, NRC,  DOE, and FDA have generally taken the advice of scientific advisory  bodies. In particular, they have relied on the advice of the International  Commission on Radiological Protection, the National Council on  Radiation Protection and Measurements, and the National Academies\u2019  Nuclear and Radiation Studies Board. This advice includes the use of  the linear no-threshold model, which assumes that the risk of cancer  increases with every incremental increase in radiation exposure. For  example, the National Academies published a report in 2006 stating that  the balance of evidence from various types of studies tends to favor a  simple proportionate relationship between radiation at low doses and  cancer risk. According to the National Academies, the availability of new  and more extensive data since the publication of its previous report in  1990 strengthened confidence in the 2006 report\u2019s estimates of cancer  risk.", "The advisory bodies have recognized challenges in accurately estimating  cancer risks from very low doses of radiation exposure when using the  linear no-threshold model. For example, much of the data on health  effects of radiation exposure come from non-U.S. populations, such as  Japanese atomic bomb survivors. These individuals received a large  exposure to radiation over a short period of time (an acute exposure), and  there is uncertainty about the extent to which the health effects for these  populations can be extrapolated to a U.S. population that is regularly  (chronically) exposed to low-dose radiation.", "Nevertheless, NRC officials told us that, in the absence of convincing  evidence that there is a dose threshold below which low levels of  radiation are beneficial or not harmful, NRC will continue to follow the  recommendations of scientific advisory bodies to use the linear no- threshold model. Similarly, officials from EPA told us that they would  consider changing the use of the linear no-threshold model as the basis  of their requirements and guidance only if there were a strong  recommendation from scientific advisory bodies on radiation protection as  well as an endorsement of the change by the National Academies.", "Under this model, federal regulations set dose limits for radiation  exposure that are below the level in the National Academies\u2019 2006 report  on radiation and human health for defining low-dose radiation. For  example, NRC\u2019s annual dose limit for members of the public (excluding  natural, or background, sources of radiation) from operation of nuclear  power plants is a hundredth of the level the National Academies  considers low dose. NRC based the dose limit on an advisory body  recommendation that the cancer risk to the general public from exposure  to radiation should be comparable to the public\u2019s risk from everyday  activities, such as taking public transportation.", "The low-dose radiation limits and guidance that federal agencies have  developed and applied vary depending on the settings in which exposure  can occur. For example, NRC has established limits on occupational dose  that apply to nuclear power-plant workers; these limits are higher than  NRC\u2019s annual dose limit for members of the public but are still below the  level the National Academies considers low dose. In keeping with  advisory body recommendations, NRC also applies the principle that  doses should be kept as low as reasonably achievable (ALARA). NRC  defines ALARA to mean making every reasonable effort to maintain  exposures to radiation as far below dose limits as is practical. At a  nuclear power plant we visited as part of our work, representatives told us  that under their ALARA plan, the plant set its own dose limit for workers at  40 percent of the NRC\u2019s regulatory limit. Moreover, officials at the plant  told us that they have been able to keep exposures below the plant\u2019s own  limit by continuously seeking opportunities to reduce unnecessary worker  exposure to radiation, such as using robots to perform maintenance work  in radiation areas.", "In contrast to radiation exposure received from nuclear power plants, FDA  officials stated that the agency regulates the maximum radiation output of  medical equipment, instead of setting limits on the total amount of  radiation exposure to patients. According to FDA officials, FDA does not  generally have the authority to regulate the total amount of radiation  exposure a patient receives from medical imaging equipment. However,  in keeping with the principle that radiation exposure should be kept as low  as reasonably achievable, FDA encourages voluntary measures by health  care providers, such as to investigate and determine whether it is  possible to reduce radiation exposure to patients from the use of medical- imaging equipment."], "subsections": []}, {"section_title": "Seven Agencies Have Funded Research on the Health Effects of Low-Dose Radiation but Have Not Collaborated on Overall Research Priorities", "paragraphs": ["From fiscal year 2012 through fiscal year 2016, seven federal agencies  obligated $209.6 million for research on the health effects of low-dose  radiation, but they did not use a collaborative mechanism to address  overall research priorities in this area. DOE and NIH accounted for most  of the funding, with DOE obligating $116.3 million and NIH obligating  $88.6 million, or about 56 percent and 42 percent of the total,  respectively. The five other agencies\u2014NRC, NASA, DOD, EPA, and  CDC\u2014obligated the remaining $4.7 million, or about 2 percent of the  total.", "DOE has two offices that have funded research on the health effects of  low-dose radiation\u2014the Office of Science and the Office of Environment,  Health, Safety and Security\u2014according to funding information DOE  provided. The Office of Science established the Low Dose Radiation  Research Program in 1998 and funded it through fiscal year 2016. A  primary focus of this program was radiobiological research, which  examines molecular and cellular responses to radiation exposure.  According to DOE\u2019s website for the program, the program provided data  and information about the low-dose range of exposure, producing 737  peer-reviewed publications as of March 2012. The Office of Environment,  Health, Safety and Security provided funding for epidemiological studies,  including studies involving Japanese atomic bomb survivors.", "NIH has funded and conducted both epidemiological and radiobiological  studies on low-dose radiation, according to NIH officials. The officials  stated that the studies are conducted through the National Cancer  Institute\u2019s internal research program for radiation epidemiology, as well as  through NIH\u2019s research programs for external funding of investigator- initiated research. Other institutes of NIH, including the National Institute  of Environmental Health Sciences, also fund research related to the  health effects of radiation exposure as part of NIH\u2019s overall mission to  fund medical research.", "Among the other agencies that provided some funding to low-dose  radiation studies, several provided funding to the Epidemiological Study  of One Million U.S. Radiation Workers and Veterans (Million Person  Study)\u2014an ongoing study headed by the National Council on Radiation  Protection and Measurements. DOE also provided funding for this study.", "In fiscal years 2012 through 2016, the seven agencies who provided  funding for research on health effects of low-dose radiation collectively  decreased their annual funding obligations in this area by 48 percent,  from $57.9 million in fiscal year 2012 to $30.4 million in fiscal year 2016.  DOE accounted for a large portion of this overall decrease in annual  funding. Specifically, over this 5-year period, DOE reduced its annual  funding obligations for this area of research by 45 percent\u2014from $32.6  million in fiscal year 2012 to $18.0 million in fiscal year 2016. According to  DOE, the decrease was primarily due to DOE\u2019s reduction in funding for its  Low Dose Radiation Research Program. According to DOE officials,  decreases in funding for the program reflected a shift toward bioenergy  and environmental research. Similarly, over the 5-year period, NIH\u2019s  funding for low-dose radiation research decreased by 48 percent\u2014from  $23.1 million in fiscal year 2012 to $12.0 million in fiscal year 2016. NIH  officials explained that funding levels for a particular disease or research  area can fluctuate depending on several factors, including the number  and quality of research proposals submitted and the outcome of NIH\u2019s  peer reviews of the proposals, as well as the overall research budget.", "The seven agencies that funded research on health effects of low-dose  radiation for fiscal years 2012 through 2016 collaborated on particular  research projects through various mechanisms, including joint funding of  individual projects, but they did not use a collaborative mechanism to  address overall research priorities. As previously noted, the 2016 report  of DOE\u2019s Biological and Environmental Research Advisory Committee  provided information about research needs in low-dose radiation and  found that further research could decrease uncertainty in predicting  cancer risk from low-dose radiation. The report stated that other  agencies\u2014including NRC, NIH, EPA, DOD, and NASA\u2014could benefit  from the reduction in uncertainty that could be obtained by this research.", "In our September 2017 report, we recommended that the Secretary of  Energy lead the development of a mechanism for interagency  collaboration to determine roles and responsibilities for addressing  priorities related to research on the health effects of low-dose radiation.  We made this recommendation because our previous work has shown  that collaborative mechanisms can serve multiple purposes, such as  leading interagency efforts to develop and coordinate sound science and  technology policies across the federal government. Although collaborative  mechanisms differ in complexity and scope, they all benefit from certain  key features, such as leadership.", "We directed this recommendation to DOE for several reasons. In the  past, DOE took a leading role in advocating for greater communication  and coordination between the fields of radiation biology and  epidemiology. In addition, DOE is the federal agency that currently has  primary responsibility under the Atomic Energy Act of 1954 for research  related to the protection of health during activities that can result in  exposure to radiation. DOE is well positioned to lead an effort to ensure  that federal agencies have a mechanism for interagency collaboration to  address overall research priorities related to low-dose radiation health  effects because of the agency\u2019s past experience as a leader in this area  of research. Such an effort could help DOE and the collaborating  agencies determine roles and responsibilities, including leadership when  addressing shared research priorities.", "DOE did not agree with our recommendation. In particular, DOE stated  that EPA and NRC also have legal mandates to research low-dose  radiation exposure and that these agencies establish their research  priorities in accordance with their respective budget authorities and  recommendations from independent advisory bodies. DOE stated that as  a result, it would not be appropriate for DOE to lead the development of a  mechanism for interagency collaboration.", "We believe that DOE\u2019s concerns stem from a misinterpretation of our  recommendation, and we made several changes to our report and our  recommendation to clarify DOE\u2019s role. We noted that we did not  recommend that a mechanism for interagency collaboration serve as a  replacement for agencies\u2019 legal mandates, budget authorities, and  recommendations from independent advisory bodies. Instead, this  mechanism would help agencies address shared research priorities. In  making our recommendation, we did not specify the coordinating  mechanism that agencies should use and instead left it to DOE to lead  the development of an appropriate mechanism. We continue to believe  that an interagency coordination mechanism for low-dose research is  needed and that DOE is in the best position to lead agencies in  developing the most appropriate mechanism.", "Chairman Weber, Ranking Member Veasey, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact John Neumann at (202) 512-3841 or neumannj@gao.gov. In  addition, contact points for our Offices of Congressional Relations and  Public Affairs may be found on the last page of this statement. Individuals  who made key contributions to the report on which this testimony is based  include Allen Chan, Kendall Childers, Joseph Cook, Richard Johnson,  Cynthia Norris, Josie Ostrander, Amber Sinclair, and Jack Wang.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Federal agencies have established requirements to protect workers and the public against cancer and other harmful effects associated with low doses of radiation exposure. We testified that federal agencies have generally used the advice of scientific advisory bodies to develop and apply these requirements.", "Additionally, for fiscal years 2012 through 2016, the Department of Energy and other federal agencies obligated about $210 million for research on the health effects of radiation. In the report on which this testimony is based, we recommended that Energy lead efforts to enhance interagency collaboration on this research."]}
{"id": "GAO-18-411", "url": "https://www.gao.gov/products/GAO-18-411", "title": "Oil and Gas Lease Management: BLM Could Improve Oversight of Lease Suspensions with Better Data and Monitoring Procedures", "published_date": "2018-06-04T00:00:00", "released_date": "2018-06-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Oil and gas leases on federal lands generate billions of dollars in rents and royalty payments for the federal government each year, but these revenues can be reduced if leases are suspended (i.e., placed on hold). Questions have been raised about whether some suspensions, particularly those in effect for more than 10 years, may hinder oil and gas production or adversely affect the use of federal lands for other purposes, such as recreation.", "GAO was asked to review oil and gas lease suspensions on federal lands managed by BLM. This report examines, among other things, (1) the extent of and reasons for such suspensions and (2) the approach BLM uses to monitor the status of lease suspensions. GAO analyzed all data on suspensions in a BLM database and the official lease files for a nongeneralizable sample of 48 leases recorded as suspended in, Montana and Wyoming, which GAO selected based in part on the large number of suspensions these states had. GAO also reviewed BLM documents and interviewed BLM officials."]}, {"section_title": "What GAO Found", "paragraphs": ["According to data at the end of fiscal year 2016 from the Bureau of Land Management (BLM), a small portion of oil and gas leases were suspended for various lengths of time (as shown below), but the reasons for the suspensions were difficult to determine. During a suspension, the government generally does not collect revenues from the lease. Determining the reasons for suspensions is difficult, in part because BLM does not require the inclusion of this information in its database. To obtain this information, BLM officials would have to review the official lease files, of which many are in hard copy. Under Standards for Internal Control in the Federal Government , management should use quality information to achieve the entity's objectives. BLM field officials GAO interviewed said that additional, more detailed information in the database on reasons for suspensions would be helpful in tracking lease suspensions. By including a data field in the database to record the reasons for suspensions, BLM could better ensure that federal lands are not being inappropriately kept from development\u2014potentially foregoing revenue\u2014or from other valuable uses of public lands.", "The approach BLM uses to monitor lease suspensions does not ensure consistent and effective oversight because BLM does not have procedures in place for monitoring. BLM state offices generally delegate responsibility for monitoring lease suspensions to their field offices. Officials from 12 selected field offices in two states with relatively large numbers of lease suspensions reported various frequencies in their monitoring of suspensions, ranging from every few months to rarely or not at all. In the absence of BLM monitoring procedures, field officials have discretion in how and when to monitor. By developing procedures for monitoring lease suspensions, including when to conduct monitoring efforts, BLM could better ensure that lease suspensions in effect are warranted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["To better ensure that federal lands are not being inappropriately kept from development, GAO is making four recommendations, including that BLM record the reasons for lease suspensions in its database and develop procedures for monitoring suspensions. Interior concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Oil and gas leases on onshore federal lands managed by the Department  of the Interior\u2019s Bureau of Land Management (BLM) generate billions of  dollars in rents and royalty payments for the federal government each  year. According to BLM\u2019s database for mineral and land use\u2014the Legacy  Rehost 2000 System (LR2000)\u2014approximately 41,000 oil and gas leases  cover 28 million subsurface acres. Under the terms of these leases,  operators have 10 years to begin drilling for oil and gas unless BLM  suspends their leases. BLM may suspend leases, for example, when an  environmental review is necessary to avoid harm to endangered species  on the leased lands or during periods of extraordinary weather conditions,  such as hurricanes or other natural catastrophes. Suspensions typically  remain in effect until the conditions that led to the suspensions no longer  apply. There is no limit on how long a lease can be suspended. During a  suspension of operations and production, the government does not  collect rents or royalty payments and the time remaining to begin drilling  is reserved so that the operator is not penalized for the time the lease is  in suspension.", "BLM is responsible for implementing the Federal Land Policy and  Management Act of 1976, as amended, which directs Interior to manage  federal lands for multiple uses, such as recreation and resource  extraction, while also taking any action required to prevent \u201cunnecessary  or undue degradation\u201d of these lands. Members of Congress and others  have raised questions about whether some suspensions, particularly  those that have been in effect for more than 10 years, may hinder oil and  gas production or adversely affect the use of federal lands for other  purposes, such as recreation.", "You asked us to review oil and gas lease suspensions on lands that BLM  manages. This report examines (1) the process BLM uses to determine  whether to suspend oil and gas leases; (2) the extent of oil and gas lease  suspensions and the reasons for the suspensions of selected leases; and  (3) the approach that BLM uses to monitor the status of lease  suspensions and the extent to which this approach provides for oversight  of such lease suspensions.", "To examine the process BLM uses to determine whether to suspend oil  and gas leases, we reviewed applicable laws, agency documents, and  the criteria used by BLM officials when considering lease suspensions.  We also interviewed BLM officials about how they use these criteria. To  examine the extent of oil and gas lease suspensions and the reasons for  the suspensions, we analyzed data on all lease suspensions recorded in  BLM\u2019s LR2000 database as of September 30, 2016. We took a number  of steps to assess the reliability of these data\u2014such as checking the  extent to which the data were complete and within expected ranges and  interviewing BLM officials about how the data were collected\u2014and  determined that the data were sufficiently reliable to give a high-level  summary of suspension information, such as the number of leases in  suspension and the lengths of the suspensions (see app. I for additional  detail).", "We also analyzed information contained in the official lease files,  maintained by BLM state offices, for a nongeneralizable sample of leases  in suspension in Montana and Wyoming to identify the reasons behind  the suspensions as well as to assess their status. We chose these states  because they were among the states with the largest numbers of  recorded lease suspensions. We also selected Montana because their  files were electronically maintained and easily accessible and Wyoming  because it had some leases recorded as suspended for the longest  period of time of any state as of September 30, 2016. We selected 48  suspended leases in these two states and limited the extent to which we  selected multiple leases that were suspended at the same time for the  same reason. For Montana leases, we found that there were only 12  suspension dates. Therefore, we randomly selected a single lease from  each date. For Wyoming, we selected leases based on a combination of  suspension date, similarity of lease numbers, and field office of  jurisdiction. In addition, to review suspensions that had been in effect for  a relatively long period of time, we selected suspensions that had been in  effect for 20 or more years. The results of our review of selected leases  are not generalizable to other BLM leases in suspension but provide  examples of the types of reasons given for suspensions.", "To verify the status of each selected lease, we compared information in  LR2000 and the official lease file with information in the Office of Natural  Resources Revenue\u2019s database. We also interviewed officials from the  BLM state and field offices in our sample about specific lease files to  learn more about the status of specific lease suspensions and the  reasons why these suspensions were still in effect. We compared how  BLM maintains and verifies its lease suspension information with  Standards for Internal Control in the Federal Government for information  and communication. To examine the approach BLM uses to monitor the  status of lease suspensions and the extent to which this approach  provides for oversight of such lease suspensions, we reviewed agency  databases and documents, including information in LR2000 and selected  lease files from the Montana and Wyoming state offices. These two state  offices comprised a total of 12 field offices that were responsible for  monitoring the 48 suspended leases in our sample. We also interviewed  BLM officials from BLM headquarters and those state and field offices to  learn about how, if at all, they monitor lease suspensions or oversee such  monitoring. We compared their actions with agency guidance, federal  regulations, and federal standards for internal control for control  activities.", "We conducted this performance audit from September 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides information on oil and gas leasing and development  on federally managed lands, lease revenues, lease suspensions, and  BLM\u2019s LR2000 database."], "subsections": [{"section_title": "Oil and Gas Leasing and Development on Federally Managed Lands", "paragraphs": ["BLM is responsible for managing approximately 700 million acres of  subsurface mineral estate throughout the country, including the acreage it  leases to operators for oil and gas development. At the end of fiscal year  2016, about 41,000 oil and gas leases accounted for approximately 28.2  million acres in 32 states, according to BLM data (see app. II for  additional details).", "The Federal Land Policy and Management Act of 1976, as amended,  requires the Secretary of the Interior to develop land use plans for public  lands. These plans identify federal lands and mineral resources that will  be available for oil and gas leasing and development and other activities.  The act requires the plans to be revised as appropriate, and BLM  generally evaluates plans for potential revisions at least every 5 years.", "As part of developing or revising land use plans, BLM is required under  the National Environmental Policy Act of 1969, as amended, to evaluate  likely environmental effects of any decisions in the plan, such as selecting  areas for oil and gas development. Generally, Interior prepares an  environmental impact statement\u2014a detailed statement of the likely  environmental effects of the proposed action\u2014in preparing land use  plans. BLM officials said the agency uses the land use plans and  environmental impact statements to (1) help develop \u201creasonably  foreseeable development scenarios\u201d to estimate outcomes, such as the  number of wells and likely surface disturbance that may occur under the  land use plan; (2) identify lands open and closed to leasing; (3) identify  resource-protection measures, such as lease stipulations and  environmental best management practices; and (4) establish monitoring  protocols. With a completed land use plan and its associated  environmental impact statement, BLM can offer for lease the mineral  rights identified in the plan.", "The parcels of land that BLM offers for potential leasing and development  are nominated by industry and the public or identified by BLM. BLM offers  leases through a competitive bidding process and requires a uniform  national minimum bid of $2 per acre, due as a one-time payment when a  bidder is awarded the lease. If BLM receives any bids on an offered  lease, the lease is awarded to the bidder with the highest bid. Since  1992, BLM has offered leases with a 10-year primary term\u2014the initial  period of time prescribed in a lease to begin oil and gas development.  Operators generally begin oil and gas exploration on leased lands by  analyzing available geologic and seismic information and other testing to  determine if economically viable oil and gas reservoirs exist. If the  findings are positive, the operators may begin efforts to prepare for  development, such as completing the environmental studies required to  apply for permits to begin lease development activities. For example,  operators holding leases for oil and gas development must submit a  drilling permit application to BLM and obtain approval before preparing  the land and drilling new oil or gas wells. After receiving a permit  application, BLM generally communicates with operators until they  provide all of the required documents, including necessary environmental  information or studies. The Energy Policy Act of 2005 requires BLM to  approve or defer permit applications within 30 days of submission by the  operator. After such applications are approved, operators may begin  development activities, including building roads to the well site,  constructing platforms, drilling wells, and constructing additional pipeline  transportation necessary to transport the oil and gas to market.", "BLM has the authority to inspect federal oil and gas sites, including well  pads and production facilities, under the Federal Oil and Gas Royalty  Management Act of 1982, as amended. According to the agency\u2019s  handbook for its inspection and enforcement program, BLM must ensure  that oil and gas operations on federal lands are prudently conducted in a  manner that ensures protection of the surface and subsurface  environment."], "subsections": []}, {"section_title": "Lease Revenues", "paragraphs": ["For issued leases, the operator pays a fixed amount of rent each year  until the lease begins producing or expires. Under the Mineral Leasing  Act of 1920, as amended, once a federal lease begins producing, the  operator pays royalties on the oil and gas it produces in lieu of paying  rent. The act sets the royalty rate for competitive leases at not less than  12.5 percent of the amount or value of production. A producing lease  remains in effect so long as the operator continues to produce oil and gas  in paying quantities.", "The Office of Natural Resources Revenue, within Interior, is responsible  for managing and collecting revenues from operators that produce or  extract resources from federal leases. In fiscal year 2016, approximately  164 million barrels of oil and 3.25 trillion cubic feet of gas were produced  on federal lands, according to agency data. According to Office of Natural  Resources Revenue data, in fiscal year 2016, the federal government  collected approximately $1.6 billion in gross revenue from the production  of these resources on federal land. The majority of this revenue\u2014nearly  $1.5 billion, or 91 percent\u2014came from royalties. The remaining revenue  came from bids made on new leases\u2014more than $120 million\u2014and rent  for existing leases\u2014more than $20 million."], "subsections": []}, {"section_title": "Lease Suspensions", "paragraphs": ["According to agency guidance, specifically the Suspensions of  Operations and/or Production Manual, BLM generally uses two types of  suspensions for oil and gas leases: (1) suspension of operations or (2)  suspension of operations and production. A suspension of operations  halts the operations associated with a particular lease, such as drilling or  developing a well pad and roads. A suspension of operations and  production\u2014the most common type of suspension, according to BLM  officials\u2014is broader because it halts both operations and any production  of oil and gas. BLM\u2019s guidance also states that a suspension of  operations may be granted in cases in which the operator is prevented  from operating or producing on the lease for reasons beyond the  operator\u2019s control, and a suspension of operations and production may be  granted only in the interest of the conservation of natural resources.  During either type of suspension, the time remaining in the primary term  of the lease is reserved until the suspension is terminated, so that the  operator is not penalized for the time the lease is in suspension.", "According to BLM officials, lease suspensions typically are initiated by the  operator but may also be initiated by BLM. BLM guidance states that  before an operator can request a suspension, the operator must first  demonstrate being hampered in performing some operation or activity on  the lease. The operator must submit thorough documentation of the  reason for requesting a suspension and should include evidence that  activity has been attempted on the lease, such as filing an application for  a drilling permit, and that the activity has been prevented by actions  beyond the operator\u2019s control. For BLM\u2019s part, according to BLM\u2019s  guidance, requests filed less than 30 days prior to the expiration of the  lease are considered late and should normally be denied. If a request is  filed in a timely manner, BLM is to assess the request and, if the reasons  for the request are acceptable and justify a suspension, BLM should  approve the request, according to BLM guidance. The state director at  each BLM state office is responsible for reviewing and approving requests  for lease suspensions; however, BLM\u2019s guidance encourages the  delegation of this responsibility to the field manager at the field office with  jurisdiction over the lease. According to BLM officials, BLM state offices  generally delegate responsibility for monitoring lease suspensions to their  field offices."], "subsections": []}, {"section_title": "BLM\u2019s LR2000 Database and Other Interior Databases", "paragraphs": ["According to BLM officials, LR2000 is a national database that provides  internal and external users with access to, among other things, land and  mineral use authorizations for oil, gas, and other mineral development;  land titles; and other data extracted from case files that support BLM land,  mineral, and resources programs. LR2000 contains information on  approximately 6 million land and mineral case files. BLM designed the  database for use by the oil and gas industry, mining industry, land and  mineral title companies, utilities, state and local governments, interest  groups, and members of the public that need access to BLM land and  mineral case files.", "The agency has conducted a series of reviews of LR2000 over the last 5  years in an attempt to improve the accuracy of the data in the system,  according to BLM officials we interviewed. In particular, the officials  informed us that they created a tool, known as Data Flux, to improve the  accuracy of the data, and that the tool has helped identify numerous data  errors. BLM officials told us that each spring a report is generated using  Data Flux that highlights the errors found in LR2000, and BLM state  offices are responsible for taking action to address the identified errors for  their respective states. These officials also told us that BLM plans to  either significantly update or replace LR2000 but has not set a definitive  date for doing so.", "Interior and BLM manage several other databases that contain  information about the development and production of oil and gas on  federal lands. In prior work, we found weaknesses in how Interior tracks  and uses some information in its data systems. Specifically, in July 2010,  we reported that BLM\u2019s publicly available data related to protests, or  challenges, to lease sales were incomplete or inconsistent, and we  recommended that Interior determine and implement an agency-wide  approach for collecting protest information that is complete, consistent,  and available to the public. BLM agreed with the recommendation and  issued guidance to standardize data collection. In addition, we found in  July 2016 that Interior could improve the data it collects to help track  progress toward its goal of reducing methane emissions from oil and gas  operations. We made four recommendations to improve BLM\u2019s reporting  of emissions data. The agency generally concurred with all of the  recommendations and has implemented two of them. Further, in April  2017, we found that BLM field offices had not effectively used data  collected during environmental inspections, which could have enhanced  BLM\u2019s ability to assess and mitigate environmental impacts. We  recommended that BLM develop guidance and consistently track  inspections data, among other things. BLM generally concurred with  these recommendations."], "subsections": []}]}, {"section_title": "BLM Uses a Multistep Process in Determining Whether to Suspend Leases", "paragraphs": ["BLM uses a multistep process to determine whether to suspend oil and  gas leases, and this process, according to BLM guidance and officials,  typically begins with an operator submitting a suspension request to the  appropriate BLM field office. Once the request is received, the cognizant  BLM field official\u2014usually a petroleum engineer at the field office\u2014 reviews it for completeness and whether the reasons cited meet the  suspension criteria established in federal regulations and BLM\u2019s  Suspensions of Operations and/or Production Manual. These criteria  require that lease suspensions be approved only in the interest of the  conservation of natural resources or for circumstances beyond the  operator\u2019s control. Officials we interviewed stated that field officials  generally have broad discretion in how to apply suspension criteria when  considering a request. See figure 1, below, for examples of  circumstances for which suspensions can be issued.", "According to BLM officials, if the field office recommends approving the  operator\u2019s request for suspension, the field office is to forward the request  to the appropriate BLM state office for final review, as shown in figure 2  below. In cases in which the state office agrees with the field office\u2019s  recommendation, the state office is to issue a decision letter to the  operator noting the changes to the terms and conditions of the lease. A  copy of the letter is also to be sent to the Office of Natural Resources  Revenue, if necessary, requesting deferment of rent and royalty  payments while the lease is suspended.", "Conversely, if the field office recommends that the suspension request be  denied, the field office is to inform the operator in writing, BLM officials  said. According to agency guidance, the operator can appeal the field  office\u2019s recommendation to the state office director within 20 days after  receiving the notification. The state director then has 10 days to render a  decision. If the state director denies the request for suspension, the operator can challenge the decision at the Interior Board of Land  Appeals. After the board\u2019s decision, the operator may make additional  appeals in federal court. In cases in which a decision is overturned, the  state office is to issue a decision letter to the operator that highlights  changes in the lease\u2019s terms and conditions. The state office is to record  the new terms and conditions in LR2000, notify the Office of Natural  Resources Revenue of any rental or royalty payments that are to be  deferred, and update the official lease file in the state office. Other  affected parties (i.e. any party who is adversely affected by a decision)  can also appeal a suspension decision, according to BLM officials.", "Agency officials stated that BLM field offices are primarily responsible for  monitoring the status of lease suspensions they issue to ensure that the  conditions for granting the suspension still exist. If the conditions have  changed, the field office is to recommend that the lease suspension be  terminated and notify the operator. The state office is to terminate the  suspension and send a letter to the operator with the updated lease terms  and conditions, which should extend the original lease expiration date to  reflect the length of the suspension. BLM guidance states that the state  office also is to send a copy of the suspension termination letter to the  Office of Natural Resources Revenue to alert that office that any rental  and royalty payments on hold for the lease should resume. The state  office is then responsible for updating LR2000 and the official lease file  regarding any new lease terms and conditions, according to BLM officials."], "subsections": []}, {"section_title": "A Small Portion of BLM\u2019s Oil and Gas Leases Were Recorded as Suspended, but Reasons for Suspensions Were Difficult to Determine", "paragraphs": ["A small portion of BLM\u2019s oil and gas leases were suspended as of the  end of fiscal year 2016, according to the agency\u2019s LR2000 data, but the  reasons for the suspensions were difficult to determine. These data  indicated that as of September 2016, about 2,750 of BLM\u2019s approximately  41,000 oil and gas leases were suspended in various locations for various  lengths of time. LR2000 did not always contain the reasons for  suspensions, which required us to take additional steps to identify the  reasons."], "subsections": [{"section_title": "As of September 2016, about 2,750 Oil and Gas Leases Were Recorded as Suspended and Varied in Their Location and Length of Suspension", "paragraphs": ["According to LR2000 data, approximately 2,750 oil and gas leases were  suspended at the end of fiscal year 2016. Our analysis of these data  showed that the lease suspensions spanned 16 states and accounted for  about 3.4 million acres of federally managed land. The data also showed  that most of the suspensions were in five Mountain West states:  Colorado, Montana, New Mexico, Utah, and Wyoming. These five states  accounted for more than 2,350 of the approximately 2,750 recorded lease  suspensions and encompassed more than 2.9 million acres of federally  managed land (see app. II for additional details). Figure 3, below,  provides information on the location of oil and gas leases and recorded  suspensions across the United States.", "Our analysis of LR2000 data showed that, of the approximately 2,750  recorded lease suspensions, about 630 had been in place for less than 3 years, about 1,150 had been in place for 3 years to less than 10 years, about 190 had been in place for 10 years to less than 20 years, about 130 had been in place for 20 years to less than 30 years, and about 650 had been in place for 30 years or more.", "See figure 4 and appendix III for additional details."], "subsections": []}, {"section_title": "Reasons for Suspensions Were Not Always Recorded in BLM\u2019s Database and Required Reviews of Official Lease Files to Identify", "paragraphs": ["BLM\u2019s database, LR2000, did not always contain information on the  reasons for oil and gas lease suspensions. BLM officials said that while  LR2000 does not have a field to specifically capture the reason for a  suspension, and inclusion of this information is not mandatory, the  general remarks field could be used for this purpose.", "Because we found this remarks field was rarely used to capture the  reason for suspensions, we reviewed the official lease files for a sample  of 48 leases in Montana and Wyoming that were suspended as of  September 30, 2016, and we interviewed field office staff for clarification.  The reasons for suspensions in this sample generally fell into four broad  categories: environmental reviews, delays in reviewing applications for  permits to drill, logistical conflicts, and other reasons.", "Our review of the official lease files for our sample found the following  reasons cited for suspensions:", "Sixteen leases were suspended for large-scale environmental  concerns, such as wilderness or wildlife protection areas or  environmental reviews that affected large parcels of land. These 16  suspensions had been in effect for approximately 6 years to 38 years.  One of these leases was suspended because of a court order that  also resulted in suspension of 422 other leases; the leases  suspended as a result of this court order accounted for most of the  suspensions that had been in place for more than 30 years.", "Fourteen leases were suspended because BLM required additional  time to complete its review of the operator\u2019s drilling permit application.  These 14 suspensions had been in effect for approximately 1 year to  13 years. Seven of these 14 suspensions were issued because BLM  needed additional time to review the environmental assessments  submitted with the drilling permit applications.", "Eight leases were suspended because they faced logistical conflicts  with other surface development, such as mining activities occurring on  the lease or adjacent lands. These suspensions had been in effect for  approximately 4 years to 25 years.", "Five leases were suspended for other, short-term reasons, such as  weather-related issues or economic conditions, but were recorded in  LR2000 as suspended for approximately 22 years to 74 years.", "We were unable to determine the reasons why the 5 remaining leases  were suspended. These leases were recorded as suspended for  approximately 28 to 82 years. The agency was unable to provide  lease files for 1 of the leases. Field officials said that some of these  suspensions may have been issued at the state level, and the officials  had no additional information on them.", "According to Standards for Internal Control in the Federal Government,  management should use quality information to achieve the entity\u2019s  objectives; quality information may be defined as appropriate, current,  complete, accurate, accessible, and provided on a timely basis. BLM  does not have quality information on the reasons for suspensions, in part  because such reasons are not routinely included in LR2000, and there is  no specific data field for them. To obtain this information, BLM officials  would have to review the official lease files, as we did, and most of the  files were available only in hard copy in BLM state offices. Therefore, the  information is not readily accessible across the agency. Field officials we  interviewed from one field office said that additional information on  reasons for suspension in the database would be helpful in monitoring  lease suspensions and in communicating with others, such as  management or the public, about suspensions. BLM headquarters  officials said they are planning to update or replace LR2000. By including  a data field in the update or replacement for LR2000 to record the  reasons for suspensions, BLM could better ensure that federal lands are  not being inappropriately kept from development\u2014potentially foregoing  revenue\u2014or from valuable uses of public lands."], "subsections": []}]}, {"section_title": "BLM Relies on an Informal Monitoring Approach That May Not Provide for Consistent and Effective Oversight of Lease Suspensions", "paragraphs": ["BLM uses an informal approach to monitor lease suspensions and does  not have procedures in place for monitoring suspensions, which may not  ensure consistent and effective oversight. We also found that BLM\u2019s state  offices do not always maintain current information on lease suspensions  in the official lease files or LR2000, and BLM headquarters and state  officials told us they generally do not oversee the monitoring of lease  suspensions."], "subsections": [{"section_title": "Monitoring Varies Among Field Offices, and BLM Does Not Have Procedures for How to Conduct It", "paragraphs": ["Field offices vary in how they monitor lease suspensions, and BLM does  not have official agency procedures in place for monitoring, relying  instead on an informal approach. We found that the field offices we  reviewed differed in the frequency of their monitoring activities for lease  suspensions. According to officials we interviewed from these offices:", "8 field offices monitor with varying frequency, depending on the", "3 field offices monitor rarely.", "Officials who monitored with varying frequency said that the frequency  depends in part on the nature of the suspension. For instance, they said  suspensions that involve seasonal protection of wildlife habitat, which can  last for several months, typically require relatively little monitoring  because the time frames for these suspensions are more clearly defined.  In contrast, suspensions involving environmental reviews often require  more frequent monitoring because the time frames associated with these  suspensions are less definitive and can range from several months to  several years. Several of these officials said that their offices have  established prompts to alert staff when to conduct monitoring activities.  For example, an official from 1 field office told us the office\u2019s staff use  handwritten notes to track their lease suspensions. An official from  another field office informed us that their office uses an electronic  calendar feature to alert staff when to monitor, and several other field  office officials reported that they rely on various spreadsheets and emails  to remind them when to monitor. Officials from 1 field office also stated  that their office uses an estimated end date for every suspension\u2014that  is, the date the suspension is expected to terminate\u2014to prompt them to  review the current conditions to ensure that the suspension is still  warranted.", "Officials who monitored with varying frequency also said that the  frequency depends on the availability of staff for monitoring. These  officials said they generally rely on petroleum engineers in their  respective offices to monitor lease suspensions because these individuals  are normally the most familiar with leases. However, some officials  added that staffing limitations, particularly a shortage in petroleum  engineers, have hindered their ability to monitor lease suspensions in a  timely manner. Several of the field officials we interviewed noted that, in  recent years, they have had to rely on other staff or petroleum engineers  who were on loan from other field offices because their offices did not  have a petroleum engineer on staff. According to two field officials we  interviewed, while assistance from other field offices is needed and  appreciated, there is invariably a lack of consistency in the knowledge  that engineers from other offices have about the lease sites involved.  Field officials also said that there have been instances in which petroleum  engineers left the agency for the private sector, resulting in a loss of  institutional knowledge about certain leases, possibly contributing to  lapses in follow-up on particular leases. Officials from offices that rarely or  never conduct monitoring also cited problems with staff availability. We  reported on human capital challenges at BLM, specifically in hiring and  retaining petroleum engineers, in March 2010. We also noted BLM\u2019s  human capital constraints in our High-Risk Series update report in  February 2011, and we reported on human capital issues at BLM in  January 2014 and September 2016. In several of these reports, we  recommended that BLM take a number of actions, including using  existing authorities and incentives to improve staff retention. BLM  generally agreed with these recommendations and has taken action on  some, but not all, of these recommendations.", "Nonetheless, the extent of variability we found, including 3 field offices  that monitor rarely or not at all, indicates that allowing individual field  offices to determine when to monitor suspensions may not ensure that  monitoring takes place. Under Standards for Internal Control in the  Federal Government, management should design control activities, such  as procedures, to ensure the objectives of the program are achieved.  The Office of Management and Budget has also acknowledged the  importance of internal guidance documents to channel the discretion of  employees, increase efficiency, and enhance the fair treatment of  similarly situated parties. Some field officials we interviewed said that  procedures to help guide them on monitoring could be beneficial and  provide a level of consistency. By developing procedures for monitoring  lease suspensions, including when to conduct monitoring efforts, BLM  could promote more consistent monitoring to better ensure that lease  suspensions in effect are warranted."], "subsections": []}, {"section_title": "BLM State Offices and Headquarters Generally Do Not Oversee Field Office Monitoring of Lease Suspensions and Do Not Always Have Current or Complete Information on Suspensions", "paragraphs": ["Officials from BLM\u2019s state offices told us that they do not oversee field  office monitoring of suspensions, and we found that they did not always  have current or complete information on suspensions. We found that  more than three-quarters of the official lease files in BLM state offices we  reviewed contained outdated documentation regarding the status of lease  suspensions. Specifically, files for 37 of the 48 lease suspensions we  reviewed did not contain updated information on whether the lease  suspension had been monitored or reviewed since the suspension was  initially issued. For example, we reviewed a lease file for a suspension  issued in 1949 for economic reasons, but the file only contained information on the suspension issuance and not whether monitoring  occurred to assess the economic conditions associated with the lease.  Additionally, we discovered that some official lease files were not  complete and did not have certain required information, such as letters  issuing the suspension. For example, three of the lease files we reviewed  were missing required information. We could not verify the reasons these  leases were suspended, their current status, or any information  concerning monitoring efforts associated with them. Field officials we  interviewed did not have any information on these suspensions and said  that they may have been initiated by the state office more than 30 years  ago. However, BLM state officials were unable to confirm or deny this.  For another lease, there was no lease file. Officials in BLM headquarters  and state offices said that there is no requirement for them to oversee the  field offices\u2019 monitoring activities. However, they said that performing  such oversight could help to ensure effective and consistent monitoring of  lease suspensions.", "We also identified some instances in LR2000 where data on suspensions  were not up to date. Specifically, 7 of the 48 leases we reviewed were  recorded in LR2000 as suspended, but information we received from  agency officials indicated that the suspensions were no longer warranted.  We later confirmed with state and field officials that none of the 7  suspensions remained in effect. Five of these 7 leases were recorded as  being in suspension for 22 years or more for what appeared to be short- term reasons, such as weather-related issues or economic conditions.  One Wyoming suspension, for instance, was granted in 1990 because of  low oil prices at the time, which made repairing wells uneconomical.  While this lease was still recorded as suspended in LR2000 as of  September 2016, a termination letter in the lease file indicated that the  suspension was terminated in 1991. In another example, a lease was  listed in the official lease file as suspended for 3 years because of delays  in processing a drilling permit application. When we followed up with field  officials about the lease, they informed us that the suspension should  have been terminated years ago; however, we found no termination letter  in the official lease file maintained by the state office. Field officials  speculated that the letter may not have been sent because the case  manager had retired and no one in the field office knew to follow up on  the lease. Because field officials informed us that these leases were no  longer suspended, we confirmed with officials from Interior\u2019s Office of  Natural Resources Revenue that payments were being appropriately  collected for these 7 leases.", "Moreover, these data are not available in a standardized report that could  be used to help oversee monitoring, such as a report showing the  average length or frequency of suspensions. BLM produces standardized  reports from LR2000 for other aspects of oil and gas leases, such as  when leases have been issued or are set to expire. BLM officials said that  a standardized report for lease suspensions could assist headquarters  and state officials in conducting oversight of field offices\u2019 monitoring  efforts.", "Standards for Internal Control in the Federal Government state that  management should design control activities, such as conducting top- level reviews of actual performance, to ensure the objectives of the  program are being achieved. By requiring that management, particularly  cognizant headquarters and state office officials, conduct top-level  reviews of field offices\u2019 monitoring efforts, as well as top-level reviews of  official lease files and databases, BLM could better ensure that lease  suspensions in effect continue to be warranted and that information on  suspensions is current and complete. Additionally, federal standards for  internal control state that management should design control activities,  such as developing mechanisms that enforce management\u2019s directives,  to achieve the entity\u2019s objectives and address related risks. By developing  mechanisms, such as summary reports on lease suspensions, as BLM  updates or replaces LR2000, BLM could assist cognizant officials in  headquarters and state offices with their oversight of monitoring."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The ability of federal agencies to manage their programs effectively  depends in part on the information systems the agencies use and the  quality of the data within these systems. Over the past several years,  BLM has worked to improve the quality of the data in LR2000, including  data related to oil and gas lease suspensions. These efforts have helped  to improve the accuracy of certain data, but they do not address some constraints of LR2000. In particular, LR2000 does not contain a data field  for recording the reasons for suspensions. BLM officials told us that they  will upgrade or replace LR2000 in the near future. By including a data  field in the update or replacement for LR2000 to record the reasons for  suspensions, BLM could better ensure that federal lands are not being  inappropriately kept from development\u2014potentially foregoing revenue\u2014 or from other valuable uses of public lands.", "BLM\u2019s ability to effectively manage the program also depends on the  establishment of effective internal controls. To date, BLM has not  developed procedures for monitoring lease suspensions. By developing  procedures for monitoring lease suspensions, including when to conduct  monitoring efforts, BLM could promote more consistent monitoring to  better ensure that lease suspensions in effect are warranted. Additionally,  BLM does not conduct top-level reviews to oversee field offices\u2019  monitoring efforts, and we found instances in which BLM\u2019s information on  suspensions was outdated or incomplete. By requiring that management,  particularly cognizant headquarters and state office officials, conduct  reviews of field offices\u2019 monitoring efforts, as well as official lease files  and databases, BLM could better ensure that information on suspensions  is current and complete. Finally, BLM does not have mechanisms to  provide officials with some key information relevant for oversight, such as  when suspensions were last reviewed or the average length and  frequency of suspensions. By developing mechanisms, such as summary  reports on lease suspensions, as BLM updates or replaces LR2000, BLM  could assist cognizant officials in headquarters and state offices with their  oversight of monitoring."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to BLM:  As BLM updates or replaces its database, the Director of BLM should  include a data field to record the reasons for suspensions.  (Recommendation 1)", "The Director of BLM should develop official agency procedures for  monitoring oil and gas lease suspensions, including when to conduct  monitoring activities. (Recommendation 2)", "The Director of BLM should require cognizant officials in headquarters  and state offices to conduct top-level reviews of field offices\u2019 monitoring of  oil and gas lease suspensions, as well as of official lease files and  databases to ensure they are current and complete. (Recommendation 3)", "As BLM updates or replaces LR2000, the Director of BLM should ensure  the development of mechanisms, such as standardized summary reports  on lease suspensions, to assist cognizant officials in headquarters and  state offices with oversight of field offices\u2019 monitoring efforts.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to Interior for review and comment. In its  comments, reproduced in appendix IV, Interior generally agreed with our  findings and recommendations.  Interior also outlined plans for  addressing the recommendations.", "Regarding our first recommendation, Interior stated that it agrees that any  future database used to track information on oil and gas lease  suspensions should include a data field to more explicitly record the  reasons for suspensions.", "Interior also stated that it will develop standardized procedures for  monitoring oil and gas lease suspensions, consistent with our second  recommendation. These procedures will be instituted agency-wide,  according to Interior, and agency policy and handbooks will be updated  as needed to implement the procedures.", "With respect to our third recommendation, Interior stated that it will  provide updated guidance and online training to assist the state and field  offices in managing, monitoring, and reviewing lease suspensions. These  actions are positive steps and may address our recommendation  depending on their implementation.", "Finally, consistent with our fourth recommendation, Interior stated that  any future update to or replacement of LR2000 database will include the  capability to create standardized reports for oil and gas lease  suspensions.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the process the Bureau of Land Management  (BLM) uses to determine whether to suspend oil and gas leases; (2) the  extent of oil and gas lease suspensions and the reasons for the  suspensions of selected leases; and (3) the approach that BLM uses to  monitor the status of lease suspensions and the extent to which this  approach allows for oversight of such lease suspensions.", "To examine the process BLM uses to determine whether to suspend oil  and gas leases, we reviewed applicable laws, agency documents, and  the criteria BLM uses when considering lease suspensions. Specifically,  we reviewed BLM\u2019s statutory requirements for granting a lease  suspension. We also reviewed BLM\u2019s guidance for reviewing suspension  requests\u2014Suspensions of Operations and/or Production Manual\u2013\u2013which  outlines the process and criteria BLM uses to approve or deny a lease  suspension request as well as the process for appealing a suspension  decision. We interviewed BLM officials at headquarters, as well as state  and field offices responsible for leases in our review, about how they  apply these criteria when assessing suspension requests. We also  interviewed representatives from the Interior Board of Land Appeals  about suspension decisions that are appealed to the board, how these  appeals are handled, board decisions that are subsequently appealed,  and the process involved with those appeals.", "To examine the extent of oil and gas lease suspensions and the reasons  for the suspensions of selected leases, we analyzed data on lease  suspensions from BLM\u2019s Legacy Rehost 2000 System (LR2000)  database as of September 30, 2016. We took a number of steps to  assess the reliability of suspension data and related fields in LR2000.  Specifically, we performed electronic tests to check the extent to which  data were complete and within expected ranges. Testing included  comparison of data extractions prepared by BLM officials for us against  data we downloaded directly from LR2000. We also interviewed BLM  officials responsible for managing the system about how data are  collected and entered into the system as well as the steps the officials  take to help ensure that the data are accurate and complete. We also  clarified discrepancies regarding lease suspension data with these  officials when necessary. We determined the data were sufficiently  reliable to give a high-level summary on suspensions, including  information on the number and location of leases, the number in  suspension, and suspension length.", "LR2000 contains information on activities related to an oil and gas lease\u2019s  status, among other things. For each lease, we identified the latest  record, if any, for actions in fiscal year 2016 and earlier that indicate  suspension initiation or termination. We determined that a lease was in  suspension if the most recent action related to a suspension indicated  that the suspension was initiated. We determined the length of  suspension based on the date of that initiation record. We then  determined distributions of the numbers of leases recorded as still in  suspension in each state as of the end of fiscal year 2016.", "We also reviewed the official lease files, maintained by BLM state offices,  for a nongeneralizable sample of leases recorded as suspended as of  September 30, 2016, in Montana and Wyoming to assess their status and  the reasons behind the suspensions. We chose these two states because  they were among the states with the largest numbers of suspended  leases. Montana\u2019s official lease files were electronically maintained and  easily accessible, while Wyoming, which had leases recorded as  suspended for the longest period of time as of September 30, 2016,  maintained hard copy official lease files. Montana and Wyoming  collectively represent about 50 percent of all oil and gas leases recorded  as suspended. We used the following approaches to select a sample of  48 suspended leases in these states and limited the extent to which we  selected multiple leases that were suspended at the same time for the  same reason.", "For Montana leases, we found that only 12 suspension initiation dates  were recorded for the leases in suspension as of the end of fiscal year  2016. We therefore randomly selected for review a single lease from  those suspended on each of these dates. For Wyoming, the suspension  initiation dates were much more dispersed, so we identified groups of 15  or more leases based on a combination of suspension date, similarity of  lease numbers, and the field office of jurisdiction. From these groups, we  selected 19 suspended leases\u2014each lease was the lease with largest  acreage from each field office within its group. There were a number of  leases that did not fit into these groups because there were fewer than 15  suspensions on a given date with similar lease numbers, so we selected  a single lease file with the largest acreage from each year that was at  least 20 years old. This allowed us to review suspensions that have been  in effect for a relatively long period of time. This approach resulted in our  selection of an additional 17 suspended leases in Wyoming. While our  review of suspended lease files is not generalizable to other BLM lease  suspensions, our findings provide examples of types of reasons that are  cited for lease suspensions.", "To verify the status of each selected lease, we compared information in  LR2000 and the official lease file to information in the Offices of Natural  Resources Revenue\u2019s database. The Office of Natural Resources  Revenue, within the Department of the Interior, is responsible for  collecting rental and royalty payments associated with oil and gas leases.  We also interviewed the BLM state and field office officials responsible for  the specific lease files we reviewed to obtain additional information about  the status of certain lease suspensions and the reasons these  suspensions remained in effect. We compared how BLM maintains and  verifies its lease suspension information with Standards for Internal  Control in the Federal Government for information and communication.", "To examine the approach BLM uses to monitor the status of lease  suspensions and the extent to which the approach provides for oversight,  we reviewed agency data, guidance and requirements, and official lease  documents. In particular, we reviewed monitoring information in LR2000,  BLM\u2019s Suspensions of Operations and/or Production Manual, and  monitoring information in the official lease files for our sample of 48  leases recorded as being in suspension as of September 30, 2016. We  also interviewed officials from BLM headquarters, as well as BLM\u2019s state  offices in Montana and Wyoming and the field offices responsible for the  48 selected leases in our review\u2014a total of 12 field offices, 2 from  Montana and 10 from Wyoming. We interviewed officials from 11 field  offices about the approaches they used to monitor lease suspensions,  including the frequency of monitoring and the staff involved. We also  interviewed officials at headquarters and state offices to examine the  extent to which these approaches provided for oversight of lease  suspensions. We compared BLM\u2019s actions and documentation with  agency guidance, federal regulations, and federal standards for internal  control for control activities.", "We conducted this performance audit from September 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Bureau of Land Management Oil and Gas Leases, Suspensions, and Acreage, as of September 30, 2016", "paragraphs": [], "subsections": [{"section_title": "Number of leases 242", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix III: Bureau of Land Management Oil and Gas Leases Recorded as in Suspension", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Dan Haas (Assistant Director),  Karla Springer (Assistant Director), John C. Johnson (Analyst-in-Charge),  Richard Burkard, Cindy Gilbert, John W. Hocker, Cynthia Norris, Daniel  Purdy, Stuart Ryba, Sara Sullivan, Kiki Theodoropoulos, Barbara  Timmerman, Jack Wang, and Khristi Wilkins made key contributions to  this report."], "subsections": []}]}], "fastfact": ["Oil and gas leases on federal land generate billions of dollars in revenues to the government. Lease holders typically have 10 years to begin drilling for oil and gas. However, the clock is stopped (sometimes for decades) and payments can be halted if the Bureau of Land Management suspends the lease\u2014for example, due to permit issues or environmental reviews.", "We looked at a sample of lease suspensions and found that BLM doesn't consistently monitor them or track the reasons for suspensions in their database. We recommended that BLM develop a procedure to monitor lease suspensions, and that it track the reasons for suspensions in its database."]}
{"id": "GAO-19-212", "url": "https://www.gao.gov/products/GAO-19-212", "title": "Contractor Business Systems: DOD Needs Better Information to Monitor and Assess Review Process", "published_date": "2019-02-07T00:00:00", "released_date": "2019-02-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Contractor business systems produce critical data that contracting officers use to help negotiate and manage defense contracts. These systems and their related internal controls act as important safeguards against fraud, waste, and abuse of federal funding. Federal and defense acquisition regulations and DOD policies require that DOD take steps to review the adequacy of certain business systems, but GAO and other oversight entities have raised questions about the sufficiency and consistency of DOD's review process.", "The National Defense Authorization Act for Fiscal Year 2018 contained a provision for GAO to evaluate how DOD implemented legislation intended to improve its business system review process. Among other things, this report examines (1) the changes DOD made to its review process and (2) the extent to which DOD is ensuring timely business system reviews.", "GAO analyzed DOD acquisition regulations, policies, and procedures for conducting contractor business system reviews and analyzed data on reviews conducted between fiscal years 2013 and 2018."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2011, the Department of Defense (DOD) has implemented several changes to its processes for reviewing contractor business systems\u2014which include systems such as accounting, estimating, and purchasing. Among other changes, DOD", "clarified the roles and responsibilities of the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA)\u2014the two agencies that are responsible for conducting the reviews;", "clarified timeframes for business system reviews and established criteria for business systems; and", "withheld payments from contractors that were found to have significant deficiencies in their business systems.", "DOD does not have a mechanism to monitor and ensure that these reviews are being conducted in a timely manner. For its part, DCAA has conducted few business system audits since 2013, as it focused its efforts on other types of audits. DCAA plans to significantly increase the number of business system audits over the next 4 years, but its success in doing so depends on its ability to shift resources from other audits; to use public accounting firms to conduct other, non-business system audits; and DCAA staff's ability to execute new audit plans in a timely manner.", "DCMA relies on the three offices responsible for conducting DCMA-led reviews to manage the reviews, but DCMA does not formally monitor whether these reviews are being conducted consistent with policy nor does it monitor DCAA's efforts to complete the audits for which it is responsible. DCMA is ultimately responsible for approving a contractor's business systems. DCMA currently lacks a mechanism based on relevant and reliable information, such as the number of reviews that are outstanding and the resources available to conduct such reviews, to ensure reviews are being completed in a timely fashion. Such information could help inform more strategic oversight on whether the current review process is achieving its intended results, or whether additional changes to the timing of or criteria for conducting reviews are needed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DCMA, in collaboration with DCAA, develop a mechanism to monitor and ensure contractor business system reviews are conducted in a timely fashion. DOD concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Contractor business systems, which include a contractor\u2019s accounting,  estimating, and property management systems, produce critical data that  Department of Defense (DOD) contracting officers use to help negotiate  and manage hundreds of billions of contract dollars each year. These  business systems and their related internal controls act as the first line of  defense against fraud, waste, and abuse of federal funding. For example,  an approved accounting system can help prevent contractors from  overcharging or mischarging federal contracts. Federal and defense  acquisition regulations and DOD policy require DOD to take steps to  review the adequacy of these business systems and to ensure that  contractors correct identified deficiencies. These reviews and audits are  conducted primarily by two defense agencies: the Defense Contract  Management Agency (DCMA) and the Defense Contract Audit Agency  (DCAA). DCMA generally has responsibility for approving contractors\u2019  business systems; DCMA and DCAA have specific responsibilities for  reviewing these systems.", "In 2009, the Commission on Wartime Contracting and GAO highlighted  significant concerns about how DOD was conducting CBS reviews at that  time. Congress later enacted Section 893 of the National Defense  Authorization Act (NDAA) for Fiscal Year 2011. This provision mandated  that DOD develop a program to improve contractor business systems.  Subsequently, Section 893 of the NDAA for Fiscal Year 2017 amended  the earlier provision to 1) define \u201ccovered\u201d contractors generally as those  with government contracts subject to cost accounting standards that  account for more than 1 percent of the company\u2019s total gross revenue  and 2) allow contractors to use registered public accounting firms to  review their systems in place of DOD\u2019s review.", "Section 890 of the NDAA for Fiscal Year 2018 contained a provision for  GAO to evaluate the implementation and effectiveness of these changes  to the contractor business system (CBS) review process. This report (1)  describes the changes DOD made to its CBS review process; (2)  examines the extent to which DOD is ensuring CBS reviews are being  conducted in a timely fashion; and (3) describes the steps DOD has taken  to implement selected provisions of Section 893 of the NDAA for fiscal  year 2017.", "To determine what changes DOD made to its CBS review process, we  reviewed Section 893 of the NDAA for Fiscal Year 2011, applicable  Federal Acquisition Regulation (FAR) and Defense Federal Acquisition  Regulation Supplement (DFARS) sections and clauses, and relevant  DCMA and DCAA policies, instructions, and memoranda. We compared  current steps in the CBS review process to those used by DCMA and  DCAA prior to the Fiscal Year 2011 NDAA to gain a better understanding  of the changes made and discussed those changes with DCMA and  DCAA officials. We also analyzed DCMA and DCAA data to determine  the number of business systems reviewed by either agency from fiscal  years 2015 through 2017\u2014the last three fiscal years for which we could  obtain data for all CBS systems. To determine the reliability of these data,  we interviewed appropriate DCMA and DCAA officials and collected  information on the steps taken by their agencies to ensure data reliability.  Based on these steps, we determined the data were sufficiently reliable  for the purposes of reporting the number of systems reviewed and how  many deficiencies were found.", "To further our understanding of how changes to the CBS review process  were implemented and to gain insight into the effect they had on  contractors and program offices, we selected a nongeneralizable sample  of six defense contractors based on such factors as the amount of DOD  contract obligations awarded to the contractor in fiscal year 2017; the  contractor\u2019s size (i.e., large or small); and whether one or more of the  contractor\u2019s business systems were disapproved as reported in DOD\u2019s  Contract Business Analysis Repository (CBAR) as of November 2017. To  better understand the process of identifying and resolving system  deficiencies, we selected five contractors that had at least one business  system that had been found to be materially deficient and one contractor  that had not had any material deficiencies identified. We interviewed  representatives from each of the six contractors as well as DCMA officials  responsible for approving the contractor\u2019s business systems. Finally, we  interviewed contracting officers from military department buying  commands to determine how these officials mitigate risk when awarding  contracts or overseeing contractors with business system deficiencies.  When available, we collected and analyzed contract file documentation  describing how business system deficiencies affected contract awards.", "To determine the extent to which DCMA and DCAA are ensuring CBS  reviews are being conducted in a timely fashion, we reviewed DCMA and  DCAA policies, instructions, and memoranda to identify the offices and  individuals responsible for providing management oversight, conducting  CBS audits and reviews, and approving contractor business systems. We  interviewed DCMA and DCAA officials and collected relevant data, such  as DCAA\u2019s planned audits for fiscal years 2019 through 2022, to  understand their approach to prioritizing reviews and the challenges, if  any, in completing the reviews in a timely fashion.", "To determine the extent to which DOD has implemented changes to its  CBS review process in response to the NDAA for Fiscal Year 2017, we  interviewed DOD Defense Pricing and Contracting (DPC) officials  responsible for drafting the proposed regulations. We also interviewed  DCMA and DCAA policy officials, contractors, and program offices to  obtain their perspectives on the potential benefits and challenges  associated with these changes. We reviewed selected contractors\u2019 annual  U.S. Securities and Exchange Commission filings to gauge what effect, if  any, the amended statutory definition of what is considered a covered  contractor may have on these contractors. The 20 contractors we  reviewed represented 86 percent of obligations in fiscal year 2016 on  contracts that were identified in the Federal Procurement Data System- Next Generation as covered by cost accounting standards.", "We conducted this performance audit from September 2017 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal acquisition regulations require certain contractors who do  business with the government to maintain acceptable business systems  that reduce risk to the government and taxpayer. Contractors may have  up to six major business systems that require review. DOD\u2019s acquisition  regulation establishes criteria for each of the six types of contractor  business systems, which are implemented by the inclusion of certain  contract clauses. Where a contract includes these clauses, the  contractor\u2019s business systems generally must meet the criteria. Factors  such as the type of contract and the dollar value determine whether the  clauses are included in a contract (see table 1).", "In certain cases, the absence of an adequate system may preclude the  government from using a particular contract type or may require  additional oversight or analysis. For example, the FAR states that:", "A cost-reimbursement contract may be used only when, among other  things, contractors\u2019 accounting systems are adequate for  determining costs applicable to the contracts or orders; an adequate  accounting system is also required for the use of progress payments.", "Without an approved purchasing system, contractors may require  additional oversight of their subcontracting decisions.", "Significant deficiencies with contractors\u2019 estimating systems shall be  considered during negotiation. Alternatively, an adequate estimating  system may reduce the scope of reviews to be performed on  individual proposals, expedite the negotiation process, and increase  the reliability of proposals.", "DCMA and DCAA are responsible for providing contracting and audit  support to the military departments and are responsible for conducting  business system reviews, along with a host of other responsibilities (see  table 2).", "Under DCMA\u2019s November 2013 instruction, the final determination of  adequacy for all of the contractor business systems resides with the  DCMA administrative contracting officers (ACO). An ACO may have  responsibility for all or a portion of a single large business or may be  responsible for a number of smaller contractors within a particular region.  To help inform their system determinations, an ACO can request that  either DCMA or DCAA conduct business system reviews or audits when  needed. Among other responsibilities, ACOs are responsible for taking  actions to impose consequences when contractors do not comply with  business system standards."], "subsections": [{"section_title": "Prior Reports by GAO, Other Accountability Organizations, and Legislative Actions", "paragraphs": ["Throughout the last 10 years, GAO and other accountability organizations  have reported on challenges DOD faces when conducting CBS reviews  or other critical contracting audits, such as incurred cost audits. Over this  time Congress has also taken actions through various NDAAs to initiate  changes to the CBS review process.", "In 2009, the Commission on Wartime Contracting and GAO highlighted  significant concerns about how DOD was conducting CBS reviews at that  time. For example:", "The Commission reported that billions of dollars in contingency- contract costs in Iraq and Afghanistan could not be verified by  government auditors and that inadequate internal controls over  contractor business systems hampered the government\u2019s insight into  cost errors and material misstatements. The report highlighted  instances where DCMA and DCAA came to different conclusions  when reviewing the same contracts and had inadequate resources to  complete business system reviews. It also stated that DCMA was not  aggressive in motivating contractors to improve their business  systems because it accepted corrective action plans as sufficient  progress to address deficiencies. The commission made  recommendations to address each of these issues.", "We found issues with independence of auditors, sufficiency of  evidence, and incomplete reporting of DCAA\u2019s findings. As result,  we made 17 recommendations to DOD to help improve the quality of  DCAA\u2019s audits, most of which the agency has implemented.", "Since then, subsequent GAO and DOD Inspector General (IG) reports  have pointed to other issues with the CBS review process and DCAA\u2019s  incurred cost audit process. Namely,  In November 2011, we found that DCAA could not complete the  number of CBS reviews needed to be consistent with its guidelines  because it was focused on higher priority areas\u2014such as incurred  cost audits\u2014and, as a result, DCMA contracting officers maintained  systems\u2019 determinations as adequate even though the systems had  not been audited by DCAA in a number of years. Among our  recommendations, we proposed that DCMA and DCAA identify  options, such as hiring external auditors, to assist in the conduct of  CBS reviews until DCAA could adequately fulfill those responsibilities  with its own workforce. In July 2014, DOD published a proposal to  change the DFARS to allow public accounting firms to perform  reviews of accounting, estimating, and material management and  accounting systems. According to DPC officials, however, the  department\u2019s IG raised concerns about consistency between the  proposed change and statutory and regulatory requirements for IG  oversight of outside audit services. Further, the private sector  expressed concerns that CBS audit criteria did not align with generally  accepted accounting principles used in the private sector. As result of  these challenges, DOD did not implement the proposed regulation  change.", "In December 2012, we found that DCAA\u2019s backlog of incomplete  incurred cost audits was a contributing factor in DOD\u2019s inability to  close out contracts in a timely manner. To address this backlog,  DCAA began implementing a new, risk-based approach that was  expected to shift DCAA\u2019s resources to focus on incurred cost audits  involving high-dollar value and high risk proposals.", "In October 2015, the DOD IG found that DCMA contracting officers  did not always comply with requirements to report business system  deficiencies and found instances where CBS determinations based on  DCAA-led reviews were not reported within required timeframes. The  IG concluded that this likely caused delays in correcting significant  business system deficiencies and lengthened the time the  government was unable to rely on data generated by those business  systems.", "In September 2017, we found that despite efforts by DCAA to reduce  the backlog of incurred cost proposals awaiting audit, the agency was  not able to meet its goals to eliminate the backlog by fiscal year 2016  and that it was unlikely to meet a revised goal of fiscal year 2018.  We recommended that DCAA assess and implement options for  reducing the length of time to begin incurred cost audits and establish  related performance measures. DCAA concurred with these  recommendations and took actions to reduce the time it takes to begin  audits.", "Most recently, in a January 2018 report, the Advisory Panel on  Streamlining and Codifying Acquisition Regulations\u2014commonly referred  to as the Section 809 panel after the legislative provision that created it\u2014 reiterated the importance of business system internal controls. Noting  that DOD\u2019s CBS reviews are untimely and inconsistent, the Panel made  several recommendations that seek to complete reviews, especially for  accounting systems, in a more timely way. Among these  recommendations are the use of public accounting firms to supplement  the DOD audit workforce, a change to accounting system review  standards and criteria, and the development of new guidance for the  conduct of business system reviews.", "During the past 10 years, Congress also enacted three provisions related  to improving how DOD conducts business system reviews and incurred  cost audits. Specifically,", "Section 893 of the NDAA for Fiscal Year 2011 directed the Secretary  of Defense to initiate a program to improve contractor business  systems so that the systems provide timely and reliable information.  The NDAA required that this program, among other things, establish  requirements for each system and a process for identifying significant  deficiencies within systems. It also required that DOD identify those  officials responsible for approval and disapproval of a system, and  that approval or disapproval of a system would be based on whether  the system has a significant deficiency. Further, the law authorized  DOD to withhold up to 10 percent of contract progress payments,  interim payments, and performance-based payments from certain  contracts when systems are disapproved based on a significant  deficiency. Contractors that require review\u2014or \u201ccovered  contractors\u201d\u2014were defined as those subject to the cost accounting  standards.", "Section 893 of the NDAA for Fiscal Year 2017 amended the fiscal  year 2011 NDAA provisions by (1) revising the definition of a \u201ccovered  contractor\u201d to generally mean those with government contracts  subject to the cost accounting standards accounting for more than 1  percent of the contractor\u2019s total gross revenue and (2) allowing public  accounting firms to conduct contractor business system  assessments.", "Section 803 of the NDAA for Fiscal Year 2018 required DOD to be  compliant with certain standards of risk and materiality in the  performance of incurred cost audits for its contracts. It also required  that DOD use public accounting firms to, among other things, perform  a sufficient number of incurred cost audits to eliminate the incurred  cost audit backlog by October 1, 2020 and to allow DCAA to allocate  resources to higher-risk and more complicated audits.", "Figure 1 below summarizes these reports and congressional actions  related to contractor business system activities over the last decade."], "subsections": []}]}, {"section_title": "DOD Revised Its Policies and Procedures Related to the Contractor Business System Review Process", "paragraphs": ["Since 2011, DOD has taken actions to (1) clarify the roles and  responsibilities of DCMA and DCAA in conducting CBS reviews and  consolidate the number of reviews to be performed; (2) clarify how often  DOD should conduct CBS reviews; (3) establish what criteria are used to  evaluate a contractor\u2019s business system; (4) establish timeframes by  which ACOs are to make a determination on the adequacy of the  contractors\u2019 business systems; and (5) implement the use of payment  withholds for contractors that are found to have significant deficiencies in  their contractor business systems. DCMA and DCAA officials noted that  these changes were implemented primarily to address the 2011 statutory  provisions. Our review of six selected contractors\u2019 business system  reviews found that the whole process from the review or audit, to the  follow up and resolution, can be lengthy. In three out of six selected cases  we reviewed, it took 4 or more years for a contractor\u2019s system to be  approved."], "subsections": [{"section_title": "DOD Clarified DCMA and DCAA\u2019s Roles and Responsibilities and Consolidated the Number of Business System Reviews", "paragraphs": ["Prior to 2011, DCAA conducted a series of 10 internal control audits on a  cyclical basis, while DCMA performed more targeted testing on three  systems. During that time, both DCMA and DCAA could review a  contractor\u2019s purchasing or earned value management (EVM) system but  would evaluate different aspects of each system. As a result, DCMA and  DCAA reviewers could issue deficiency reports based on their separate  reviews of the same contractor business systems for the consideration of  ACOs. As reported in August 2009 by the Commission on Wartime  Contracting, these overlapping reviews led to instances where DCMA and  DCAA came to different conclusions about the adequacy of the same  business system.", "To address this issue and clarify roles and responsibilities, in November  2013 DCMA established policies that guide oversight and implementation  of the CBS review process, to include approval responsibilities and  procedures for the conduct and reporting of reviews. DCMA has  separate instructions for each type of contractor business system with the  exception of accounting. These separate instructions provide more details  about appropriate stakeholders for specific reviews, noting particular  functional experts such as offices within DCMA or DCAA that are to lead  the conduct of the reviews. DCAA issued a separate memorandum in  April 2012 that details changes made to accounting system reviews as a  result of changes from the NDAA for fiscal year 2011.", "Under these revised processes, DCMA now has responsibility for  reviewing three contractor business systems and DCAA is responsible for  the other three. In all cases, the DCMA ACO makes the final  determination on whether a system is approved or disapproved. Further,  the revised process consolidated the number of audits that DCAA  conducts on the adequacy of the contractor\u2019s accounting system from five  separate audits to one comprehensive system audit. According to DCAA,  this consolidation was based on a comprehensive reassessment of the  processes for assessing accounting systems and combined elements  from previous internal control reviews. Figure 2 shows DCMA and DCAA  responsibilities before and after the changes implemented from the NDAA  for Fiscal Year 2011."], "subsections": []}, {"section_title": "Revised Process Clarified Specific Timeframes for How Often DOD Should Conduct Business System Reviews", "paragraphs": ["The revised DCMA instructions and related DCAA memorandums for the  CBS review process also clarified timeframes for how often a contractor\u2019s  business system must be reviewed. Generally, each system should be  reviewed every 3 years unless the ACO makes a determination that a  review is not necessary based on a risk assessment or other factors (see  table 3)."], "subsections": []}, {"section_title": "DFARS Revisions Established Specific Criteria for Business Systems", "paragraphs": ["DOD also revised the DFARS in 2012 to provide definitions for  acceptable contractor business systems and established individual  DFARS clauses that define the criteria for each of the six business  systems. As appropriate, these clauses are included in contracts and  generally require the contractor to maintain adequate business systems,  allow for the government to withhold payments when systems are found  to have significant deficiencies, and list the criteria that the systems must  meet. The number of criteria varies by system. For example, the DFARS  clause for accounting systems includes 18 criteria used to evaluate  system features such as proper segregation of direct and indirect costs,  timekeeping, and exclusion of unallowable costs. For EVM systems, a  contractor\u2019s system must comply with private, institutional standards and  includes procedures that generate timely, reliable, and verifiable reports.", "To test how DCAA-led audits were being implemented under these new  criteria, DCAA began a pilot program in 2014 comprised of a team of  dedicated auditors to conduct CBS reviews who, in turn, were to  recommend changes in audit plans and other practices. DCAA initially  focused on material management and accounting systems audits, then  moved to estimating systems, and finally accounting systems. As result of  this pilot, DCAA issued new audit guidance for all three systems in 2018,  with the latest guidance for accounting system audits issued in October  2018. DCAA officials told us that they are implementing lessons learned  from the pilot program and developing training on how to conduct the  revised audit plans."], "subsections": []}, {"section_title": "DCMA Established Timeframes for ACOs to Make Adequacy Determinations", "paragraphs": ["The revised DCMA instructions provide timeframes for ACOs to  communicate their initial and final determinations to contractors (see  textbox) and define the responsibilities of DCMA management and ACOs  for confirming significant deficiencies and resolving disagreements  between functional specialists and the ACO.", "Revised Contractor Business System Review Process Timeframes  According to the revised contractor business system review process, when significant  deficiencies are found:  Administrative Contracting Officers (ACO) have 10 days to communicate an initial  determination of business system compliance to the contractor under review.  The contractor is requested to respond to the letter within 30 days after that to  respond to the letter communicating whether or not it concurs with the determination.  The ACO issues a final determination 30 days after receipt of the contractor\u2019s  response.", "According to Defense Contract Management Agency (DCMA) officials, data for fiscal year  2017 indicated that 80 percent of final determination letters were issued within this  required timeframes.", "In instances where deficiencies are found, these findings are reviewed by  a panel within DCMA to help ensure standards are consistently applied.  When there is disagreement between the ACO and functional specialist  concerning the nature or severity of deficiencies found, a DCMA board of  review may be requested by the ACO to resolve differences and produce  a final determination. According to DCMA officials responsible for  maintaining business system review policies, differences between  functional specialists and contracting officers are generally resolved  without the need for a board discussion. These officials said that only a  few board discussions have been convened since implementation of the  new review structure."], "subsections": []}, {"section_title": "Mandatory Payment Withholds Drive Timely Contractor Response to Significant Deficiencies", "paragraphs": ["Section 893 of the NDAA for Fiscal Year 2011 generally established that  DOD be allowed to withhold payments under certain contracts when DOD  disapproves one or more of a covered contractor\u2019s business systems.  DCMA officials previously had the latitude to withhold a portion of the  payments owed to contractors as result of deficiencies identified in their  reviews, but were not required to do so. From 2011 through 2013, DOD  revised the DFARS and related agency instructions to generally require  that ACOs apply a 2 to 5 percent contract payment withholding for a  single deficient system and a maximum of a 10 percent withhold when  multiple systems are found to have significant deficiencies. ACOs are  authorized to reduce the amount being withheld after the ACO determines  that the contractor has submitted an adequate corrective action plan and  began its implementation.", "Our review of DCMA and DCAA information indicates that for all the CBS  reviews conducted between fiscal years 2015 and 2017, DCMA and  DCAA often identified significant deficiencies in three business systems.  These were the cost estimating, material management and accounting,  and purchasing systems. For example, DCAA identified a significant  deficiency in nine of the 12 material management and accounting  systems reviewed, while DCMA identified significant deficiencies in 260 of  the 330 purchasing systems reviewed (see table 4).", "Because DCMA and DCAA officials do not maintain historical data on  payment withholdings, it is not possible to determine the number of  payment withholdings that were implemented over these years as a result  of these significant deficiencies. The system used to track the status of  systems and payment withholdings, CBAR, is updated by ACOs as  corrective actions are completed and payment withholdings are removed,  and thus shows only a snapshot in time. Our review of CBAR data from  July 2018 found that DOD was withholding payments from 11 contractors  with a total collective value of approximately $238 million at that time.  One third of these payment withholdings were associated with significant  deficiencies found in contractors\u2019 estimating systems. DCMA and DCAA  officials we spoke with noted that the withhold provision has led to  contractors\u2019 increased response to deficiencies, but they did not have  data to determine the extent to which contractors\u2019 responsiveness has  increased. Some contractors we spoke with stated that because  deficiencies will affect the company\u2019s cash flow, senior management and  board members have become more engaged in matters of business  system compliance."], "subsections": []}, {"section_title": "CBS Review and Corrective Action Process Can Be Lengthy", "paragraphs": ["Our review of six selected contractors\u2019 business system reviews  illustrates the challenges in identifying and resolving deficiencies in a  timely manner. Overall, our review of these six cases found that it took  from 15 months to 5 years or more to resolve deficiencies initially  identified by DCAA or DCMA. Factors contributing to the time it took to  resolve these issues included contractors submitting inadequate  corrective action plans, DCMA or DCAA identifying additional deficiencies  in subsequent reviews or audits, and the use of different auditors to  conduct the reviews.", "While the selected cases are not generalizable to all CBS reviews, they  do highlight issues that can arise during the process. For example:  In one case it took almost 4 years to resolve deficiencies identified in  a contractor\u2019s accounting system. In this case, DCAA issued an audit  report in July 2014 that found seven significant deficiencies including  inadequate monitoring and adjusting of rates the contractor was billing  the government. DCMA subsequently issued an initial determination 7  days later disapproving the system, citing three of the seven  deficiencies identified by DCAA. In August 2014, the contractor  responded by providing a corrective action plan for the three  deficiencies DCMA cited. DCMA sent a second determination letter  the next month citing two additional deficiencies identified by DCAA.  In October, the assigned ACO for the contractor left and new staff was  assigned to the review. Ten days later, the contractor submitted a  second corrective action plan to address the two deficiencies  identified. Disagreement between the ACO and DCAA on the  inclusion of the two remaining deficiencies identified by DCAA for the  accounting system resulted in a need to convene a board of review by  DCMA. The board decided that the two deficiencies would be included  in the final determination. This, in turn, delayed issuance of a final  determination until mid-December 2014. According to contractor  representatives, over the next 3 years, they submitted various  corrective action plans that DCMA determined were inadequate to  address the deficiencies. Each time, the ACO requested additional  information and follow-up DCAA audits to help assess the adequacy  of the contractor\u2019s corrective action plans. Eventually the contractor\u2019s  accounting system was approved in June 2018.", "In another case, a contractor\u2019s estimating system has been  disapproved for over 5 years. In June 2013, DCAA identified four  significant deficiencies in the contractor\u2019s system, including  inadequate support for commerciality determinations. As a result,  following a final determination of inadequacy, DCMA implemented a  payment withhold of 5 percent. In response, the contractor submitted  a corrective action plan in September 2013 addressing the  deficiencies that was accepted by DCMA and the withhold was  reduced to 2 percent. In a follow-up review in July 2014, DCAA  identified two new deficiencies, which the contractor corrected. In  March 2015 DCAA reviewed the contractor\u2019s forward pricing rate  proposal and identified 11 new deficiencies in the estimating system.  By August 2015, the contractor had corrected the new deficiencies but  the system remained disapproved because the previous four  deficiencies remained uncorrected. Finally, in September 2016, DCAA  canceled its audit of the estimating system because these four  deficiencies remained. According to officials, the contractor was not  ready for re-evaluation. At the time of this review the system remains  disapproved.", "In another case, a contractor\u2019s property management system was  disapproved for more than 4 years. In November 2013, DCMA  reviewed the contractor\u2019s property management system and,  according to officials, identified nine significant deficiencies, including  those related to missing records and supporting documentation for all  contracts. DCMA issued an initial determination of disapproval. DCMA  officials stated that they did not receive an adequate response from  the contractor for nearly 7 months, and in June 2014, DCMA issued a  final determination of system disapproval. The contractor  subsequently submitted a corrective action plan in August to address  the deficiencies. A DCMA official stated that they re-analyzed the  system in November 2014 and found one outstanding issue.  According to the official, the DCMA property administrator in charge of  the review elevated the issue to the assigned ACO, but received no  response. According to contractor representatives, they requested a  follow-up review from the DCMA ACO several times from August  2014 to June 2015 but did not receive a response until after June  2015. According to a DCMA official, this was due to resource issues  as the review went dormant because the new ACO assigned to the  contractor went overseas. The system was reviewed again in  November 2017 and the contractor\u2019s system was approved in January  2018.", "In another case, an audit of a contractor\u2019s estimating system took  DCAA 2 years to complete. The DCAA audit began in November  2014. According to contractor representatives, they were initially told  that the review would take 9 to 12 months, but a number of different  DCAA auditors were assigned to the review over time and each  identified different findings which led to a prolonged process. DCMA  approved the contractor\u2019s estimating system in December 2016.", "In another case, a contractor\u2019s estimating system was disapproved for  15 months. In June 2016 DCMA disapproved a contractor\u2019s estimating  system due to three significant deficiencies, including one related to  performing adequate price and cost analysis on subcontractor  proposals. According to contractor representatives, they submitted a  corrective action plan, but after submitting the plan DCAA performed  an audit of the contractor\u2019s forward pricing rates and identified  additional deficiencies. In December 2016 DCMA officials determined  that the corrective action plan the contractor provided was not  sufficient. DCMA subsequently approved the contractor\u2019s estimating  system in September 2017.", "DCMA and DCAA officials believe the cases we analyzed were not  representative of the length of time needed to complete the CBS review  process, but could not provide data to support their views because DCMA  and DCAA do not track data on the length of time it takes to complete the  entire CBS review process (i.e., from the start of an audit or review to the  resolution of system deficiencies and final determination). Our review of  selected cases was not intended to be projectable to all reviews and  audits conducted by DCMA and DCAA, but rather to be illustrative of the  challenges that may be encountered during the review process.", "From the perspective of program and contracting officers, the status of a  contractor\u2019s business system may have an impact on both contract award  decisions and contract monitoring, but officials stated that they can  mitigate the risks associated with a disapproved system. For example,  Army and Air Force program officials noted that a contractor leading  certain weapon system development and logistics efforts had a deficient  cost estimating system. According to the contracting officials, as the  government could not rely on the contractor\u2019s proposed costs to use a  fixed-price contract, they awarded a fixed-price incentive contract for the  program to better monitor the contractor\u2019s cost reporting compared to  under a fixed-price contract."], "subsections": []}]}, {"section_title": "DOD Does Not Have a Mechanism to Monitor and Ensure That Contractor Business System Reviews and Audits Are Conducted in a Timely Manner", "paragraphs": ["DCMA and DCAA do not have a mechanism to monitor and ensure that  CBS reviews and audits are conducted in a timely manner. DCAA\u2019s data  show that it conducted few business system audits in the past 6 years,  due, in part, to the need for it to reduce its backlog on completing incurred  cost audits. Looking to the future, DCAA has developed plans for the  number of CBS audits it intends to perform over the next 3 years and  expects that it will be caught up in conducting the audits for which it is  responsible by fiscal year 2022. Successfully executing its plan is  dependent on several factors, including the ability to shift resources from  conducting incurred cost audits to business systems audits, the use of  public accounting firms to perform a portion of the incurred cost audits,  and the ability of DCAA auditors to use new audit plans and complete the  required audits in a timely manner. For its part, DCMA relies on the  offices that perform the reviews of the three systems to maintain the  information on the reviews completed and to plan for future reviews, but  DCMA headquarters does not centrally track its reviews or whether audits  conducted by DCAA are being completed within the timeframes described  in policy."], "subsections": [{"section_title": "DCAA Plans to Address Previous Shortfalls in Conducting CBS Audits Are Dependent on Several Factors", "paragraphs": ["DCAA officials acknowledged they have not been able to conduct audits  of contractor business systems within the timeframes outlined in DCMA  instructions. DCAA officials attributed their inability to do so to the need to  conduct higher priority audits\u2014such as incurred cost audits\u2014and staffing  constraints. For example, in fiscal year 2017, DCAA initially proposed to  perform a total of 76 CBS audits for the three business systems in its  purview. However, DCAA completed only nine audits after assessing  available resources. Further, DCAA estimates that in fiscal year 2017 it  spent approximately 44 percent of its resources addressing incurred cost  audits, and 17 percent on other audits such as forward pricing rate  agreements. In contrast, only 6 percent of its resources were devoted to  business system audits and related activities.", "Recognizing that it cannot perform all of the required CBS audits in a  timely fashion to meet current DCMA policy requirements, DCAA officials  told us they focus their audits on business systems they identify as high- risk. To do so, DCAA officials consider factors such as the contractor\u2019s  current system status, the contractor size in terms of dollars on contract,  the amount of cost-type contracts, organizational changes, audit requests  by a DOD contracting officer or an ACO, and the types of deficiencies  identified and its impact on cost and schedule. DCAA headquarters  officials assess the candidates at an annual DCAA planning meeting to  determine which audits can be performed given the level of resources  available. DCAA officials told us, however, that the current policy  requirement\u2014which generally requires review of the systems every three  years\u2014would require DCAA to dedicate substantial resources to CBS  audits to maintain currency. As of November 2018, DCAA identified 285  systems that require an audit. DCAA officials stated that a risk based  approach to reviewing these systems would provide more value than a  routine 3 year cycle. DCAA officials stated they are willing to work with  others within DOD to develop risk factors that can be used to determine  when a business system needs a review.", "To better assess and plan future workload, DCAA issued a memorandum  in January 2017 to introduce a strategic workload resource initiative that  will project workload and resource availability in the out-years. Under this  process, DCAA field management teams provide information on workload  projections in March, and DCAA executive level officials make workload  planning recommendations in June that result in an agency-wide plan.  DCAA officials noted, however, that the projection for the second year is  less accurate, and as a result, the further out year projections are  reviewed every six months with adjustments made as needed. DCAA  officials also told us that the planning process is currently being expanded  to allow the agency to plan three years out. DCAA officials stated that the  fiscal year 2021 plans will be tentatively approved by the end of January  2019 and fiscal year 2022 plans will be approved by June 2019.", "Based on these planning efforts, DCAA plans to conduct a total of 285  CBS audits from fiscal years 2019 through 2022, including 50 audits in  fiscal year 2019 and 104 in fiscal year 2020. It also plans to shift some of  the hours previously devoted to incurred cost audits to CBS audits (see  figure 3).", "Our analysis indicates that successfully executing this plan is dependent  on several factors, including the ability to shift resources from conducting  incurred cost audits to business systems audits, the use of public  accounting firms to perform a portion of the incurred cost audits, and the  ability of DCAA auditors to use new audit plans and complete the required  audits in a timely manner.", "First, the plan is contingent upon DCAA being able to successfully  shift resources from incurred cost audits to CBS audits. According to  DCAA data, DCAA plans to shift more than 378,000 hours from  incurred cost audits to CBS audits between fiscal years 2018 and  2020. DCAA officials noted, however, that although they have made  significant progress in addressing incurred cost audits, the fiscal year  2018 NDAA requires DCAA to have all incurred cost audits performed  within 12 months. DCAA officials noted that this means it will have to  continue to spend significant resources on incurred cost audits in  fiscal year 2019 to meet this legislative requirement.", "Second, DCAA officials stated that these estimates include the  resources that are expected to become available to perform CBS  audits as DCAA starts using public accounting firms to perform  incurred cost audits. In its October 2018 report to Congress on the  progress made to implement Section 803 of the Fiscal Year 2018  NDAA, DCAA estimated that public accounting firms would be able to  perform 100 incurred cost audits per year for 2019 and 2020, which  would then increase to 200 each year for 2021 through 2025. DCAA  further projected, for example, that about 147,500 hours would  become available in 2020 based on the proposed plan to use public  accounting firms. DCAA officials told us they are in the process of  developing a solicitation to contract for these services, which they  anticipate releasing in the spring of 2019.", "Lastly, these plans assume that each audit conducted by DCAA can  be completed within an average number of hours based on the  experiences of the team that developed the revised audit plans  released in 2018. DCAA officials noted that these hours assume that  DCAA audit teams will experience some challenges conducting the  initial set of audits, but will be able to conduct them in fewer hours as  they gain more experience in implementing the new audit plans.  DCAA officials told us that, if successful, this plan will enable it to be  caught up on CBS reviews by 2022."], "subsections": []}, {"section_title": "DCMA Headquarters Makes Limited Use of Data Collected by Functional Offices to Assess the CBS Review Process and does not Monitor DCAA\u2019s Progress In Completing Its Audits", "paragraphs": ["For the DCMA-led reviews, DCMA relies on its functional offices that  perform reviews of their respective systems to monitor the status of CBS  reviews, but does not use the information to ensure that all three reviews  are conducted within the timeframes established under DCMA\u2019s  instructions. The three DCMA functional offices use spreadsheets to  manually track reviews their office has completed, and track data on  when the next review should be scheduled. Each functional office plans  and tracks this data individually. For example,", "The property management functional office identifies the number of  contractor property systems requiring review on a monthly basis, and  tracks its progress in completing these reviews. In fiscal year 2018,  this functional office completed over 95 percent of the 850 property  system reviews required.", "The EVM system functional office identifies the number of reviews  that should be conducted annually. In fiscal year 2018, the office  reported completion of 92 percent of the 125 required EVM system  reviews.", "The purchasing functional office uses a rolling process to determine  which systems require a review. To do this, the ACO performs a  required risk assessment every 3 years to identify whether a full  business system review is required and then the purchasing functional  office develops a prioritization plan for the systems flagged for review.  The exact number of reviews conducted in a single year is dependent  upon the risk assessments; however, an official from the purchasing  system functional office estimated that their office is staffed to  complete approximately 125 reviews per year. The official also noted  that they do track to ensure all systems are reviewed in the required  timeframes.", "Officials from the functional offices described to us what information they  provide to senior leadership, but DCMA headquarters does not collect or  use this information to oversee the CBS review process. For example, a  supervisor from the property management functional office told us that the  office reports monthly to their supervisors on the status of their reviews  and whether they are on schedule, which also serves as a method for  requesting additional resources if necessary. EVM system functional  officials told us they report the number of planned and completed reviews  to a DCMA internal website for senior leadership to review, but did not  know what senior leadership does with this information. Purchasing  officials said their office provides monthly reports on the status of reviews  for specific large contractors, and weekly reports of the number of reviews  completed to the agency director and component heads. DCMA  headquarters officials stated that they informally share information with  ACOs in a variety of ways, including quarterly meetings, but headquarters  officials could not provide documentation on how this information is used  to monitor and assess whether CBS reviews were being conducted in  accordance with the policy timeframes.", "Further, DCMA officials indicated that they do not formally monitor  DCAA\u2019s efforts to complete the audits for which DCAA is responsible.  Despite being the agency responsible for issuing the instructions and  whose ACOs are responsible for making final determinations of business  system compliance, DCMA officials indicated that it is not their  responsibility to monitor or assess DCAA\u2019s efforts to complete the reviews  in DCAA\u2019s area of responsibility. DCMA and DCAA officials stated,  however, that they recently began to hold quarterly meetings, during  which time they can discuss CBS issues, including potential revisions to  the criteria and timeframes for conducting CBS reviews. But it is uncertain  what outcomes will come from this or the extent to which this will  contribute to improved management of CBS reviews.", "According to federal standards for internal controls, an agency should use  quality information to help ensure that it achieves its objectives. These  internal controls also state that monitoring activities should be conducted  to ensure that agency objectives are being met. Developing a mechanism  to track and monitor the number of CBS reviews that are outstanding, the  risk level assigned to those systems and the resources available to  conduct such reviews, would help DCMA and DCAA better manage the  CBS review process to ensure that contractor systems that are reviewed  and approved in a timely fashion."], "subsections": []}]}, {"section_title": "DOD Has Not Yet Implemented Recent Legislative Provisions to Change the Definition of a Covered Contractor or to Enable the Use of Public Accounting Firms", "paragraphs": ["Section 893 of the Fiscal Year 2017 NDAA amended the CBS provisions  of the Fiscal Year 2011 NDAA by revising the statutory definition of a  covered contractor and by allowing contractors to use registered public  accounting firms to review their business systems in place of DOD\u2019s  review. As of November 2018, DOD had not yet proposed regulations to  implement these legislative changes, and therefore we were unable to  fully evaluate the potential effects of these provisions. The Fiscal Year  2017 NDAA did not provide a specific timeframe for DOD to revise its  regulations, but the Director of the Defense Acquisition Regulation  Council\u2014who is responsible for promulgating proposed and final rule  changes to the DFARS\u2014 tasked her staff to draft a proposed rule by  March 2017. This deadline was subsequently extended to January 23,  2019. In November 2018, Defense Pricing and Contracting (DPC) officials  told us that they now expect to issue the proposed rule for public  comment in the third or fourth quarter of fiscal year 2019. DPC officials  attributed this delay, in part, to a recent executive order that calls for the  reduction and control of regulatory costs, as well as the complexity of  having public accounting firms perform CBS reviews.", "Section 893 of the Fiscal Year 2017 NDAA changed the definition of  covered contractors\u2014those contractors that may require CBS reviews\u2014 from contractors subject to cost accounting standards to generally only  those with contracts subject to cost accounting standards that account for  more than 1 percent of their gross revenue. DPC officials stated that DOD  may require contractors to self-report on their revenue levels to determine  whether the contractor\u2019s systems require review. DPC officials told us,  however, that they had not yet considered certain aspects of how  contractors may calculate revenues. For example, DPC officials had not  yet decided whether revenue should be determined based on specific  business segments, or whether it should include international sales  revenue. These officials also had not yet decided how many years of  revenue should be included in the analysis. Further, DPC officials could  not yet estimate the potential effect of implementing this provision on  contractors. Based on our analysis of publicly available contractor  financial data for the 20 contractors that we reviewed, the lowest  percentage of total revenue derived from government contracts was  10 percent.", "Section 893 of the 2017 NDAA also authorized the use of registered  public accounting firms to assess compliance with DOD\u2019s CBS  requirements. Under this provision, if a registered public accounting firm  certifies that a contractor\u2019s business system meets DOD\u2019s requirements,  it would eliminate the need for further review by DOD. Some  government acquisition officials we spoke with expressed concerns that  would need to be addressed to effectively implement the legislation,  including:", "Ensuring that public accounting firms have sufficient understanding of  the processes or regulations to conduct the audits and provide  conclusions that DOD could rely upon.", "Encouraging DCMA and DCAA functional experts and auditors to  accept public accounting firms\u2019 findings rather than conduct additional  reviews and audits on their own, which would undermine the ability to  save both government and contractor resources.", "Determining the potential for the cost of public accounting firm reviews  being passed on to the government through the contracts of the  businesses under review.", "The DPC official responsible for implementing this provision stated that  they are aware of these concerns. He also stated that, as a first step in  implementation, his office has requested that DCMA and DCAA review  the criteria and audit plans used by their staff and identify areas where  these criteria and plans could be adjusted to make them more consistent  with criteria that public accounting firms use in the private sector."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["By clarifying DCMA and DCAA\u2019s roles and responsibilities as well as the  timeframes for conducting the audits, DOD has improved the CBS review  process. But there are still issues that need to be addressed. DCAA  acknowledges it is well behind in its efforts to complete the three CBS  audits for which it is responsible but believes that it can be caught up by  the end of fiscal year 2022 if significantly more resources are available. In  addition, DCMA does not monitor progress of either its functional offices  or of DCAA against the policies that the six systems each be reviewed  generally every 3 years. This is because DOD currently lacks a  mechanism based on relevant and reliable information, such as the  number of CBS reviews that are outstanding, the risk level assigned to  those systems, and the resources available to conduct such reviews, to  ensure CBS reviews are being completed in a timely fashion. Such  information could help inform more strategic oversight to determine  whether the current CBS review process is achieving intended results, or  whether additional changes to the timing of or criteria for conducting CBS  reviews are needed. As the agency that is responsible for issuing the  overarching policies that govern CBS reviews and is ultimately  responsible for approving contractor business systems, DCMA is in the  best position to lead the effort to develop this mechanism. As each  agency is responsible for executing its mission and managing its  resources, however, this effort should be conducted in collaboration with  DCAA."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Director, DCMA, in collaboration with the  Director, DCAA, develop a mechanism to monitor and assess whether  contractor business systems reviews are being completed in a timely  manner. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["DOD agreed with the recommendation. In an email, a DPC official stated  that DCMA and DCAA are collaborating to determine the best way to  implement the recommendation. DOD\u2019s comments are reprinted in  Appendix I.", "We are sending copies of this report to the appropriate congressional  committees; the Acting Secretary of Defense; the Under Secretary of  Defense for Acquisition and Sustainment; the Under Secretary of Defense  \u2013 Comptroller; the Director, DCMA; the Director, DCAA; 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 concerning this report, please  contact me at (202) 512-4841 or by e-mail at dinapolit@gao.gov. Contact  points for our Office of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report were Tatiana Winger (Assistant Director),  Emily Bond, Matthew T. Crosby, Suellen Foth, Sameena Ismailjee, Jean  McSween, Ramzi Nemo, Miranda Riemer, Christy Smith, Roxanna Sun,  Tom Twambly, and Jacqueline Wade."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}], "fastfact": ["The Department of Defense uses data from contractors' business systems\u2014e.g., accounting or purchasing systems\u2014to guard against fraud, waste, and abuse in DOD contracts. For example, reviewing data from a contractor's accounting system can help keep the contractor from overcharging.", "DOD must review contractors' business systems to ensure that the data from them can be used. We've previously found that it was years behind on some of these reviews.", "DOD has an ambitious plan to catch up on these reviews in 3 years, but has no way to measure its progress. We recommended that DOD monitor and assess whether it's completing these reviews as planned."]}
{"id": "GAO-19-44", "url": "https://www.gao.gov/products/GAO-19-44", "title": "Treasury Judgment Fund: Transparency and Reliability Needed in Reporting Fund Balances and Activities", "published_date": "2018-12-07T00:00:00", "released_date": "2018-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Treasury Judgment Fund, managed by Fiscal Service, annually pays billions of dollars of claims on behalf of federal agencies. Transparent and reliable information is important for Congress to provide effective oversight of the Judgment Fund. In May 2017, the Committee requested that Treasury provide (1) Schedules of the Judgment Fund for fiscal years 2010 to 2016 prepared in accordance with U.S. GAAP, including appropriate disclosures to answer nine questions, and (2) information on processes and procedures used when paying claims.", "GAO was asked to review the information that Treasury provided to the Committee. This report (1) evaluates the extent to which the Treasury-prepared information responds to the Committee's request and reconciles to financial information included in annual, audited financial reports and other reports and (2) describes Fiscal Service's documented procedures and related control activities for processing agency claims. To address these objectives, GAO compared the information provided by Treasury to other Treasury reports, conducted interviews with agency officials, and reviewed documented procedures for processing claims."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of the Treasury (Treasury) did not provide the House Committee on the Judiciary (Committee) with the information the Committee requested on the Treasury Judgment Fund. Specifically, Treasury did not provide the Committee the Schedules of the Judgment Fund Non-Entity Assets, Non-Entity Costs, and Custodial Revenues that were prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Treasury also did not include appropriate note disclosures or Management's Discussion and Analysis, as requested by the Committee. Rather, Treasury provided nine exhibits containing selected Judgment Fund information to answer nine questions included in the Committee's request.", "In addition, GAO identified numerous differences between amounts included in Treasury's exhibits and its annual Judgment Fund transparency reports to Congress and certain audited financial reports. GAO requested explanations for these differences, and Treasury provided explanations for some of them. Subsequently, Treasury officials discovered and explained that the exhibits were created in a faulty manner, resulting in an increased risk that they may contain unreliable information. Treasury officials stated that rather than expending resources to further explain differences and reconcile the exhibits with the other information, Bureau of the Fiscal Service (Fiscal Service) staff planned to submit new exhibits to the Committee; however, they did not provide a date by which they would do so.", "GAO found that Treasury did not take appropriate steps consistent with its existing guidance for disseminating information to the public, such as performing appropriate reviews of information in the exhibits prior to providing them to the Committee, to ensure the quality and responsiveness of the information provided. The lack of reliable information on the Judgment Fund impairs the Committee's ability to provide effective oversight, including considering whether enacting new legislation would benefit the American people by ensuring better management of the Judgment Fund.", "Fiscal Service has policies and procedures to help ensure that it only certifies payments for awards, judgments, and compromise settlements (claims) from the Judgment Fund that meet the following four tests: (1) claims are final, (2) claims are monetary, (3) one of the authorities specified in the Judgment Fund statute permits payment, and (4) payment is not legally available from any other source of funds (e.g., claims are only paid from the Judgment Fund when payment is not otherwise provided for in a specific appropriation or by another statutory provision)."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Fiscal Service take steps to ensure that information provided to Congress undergoes a documented review to ensure the quality and responsiveness of the information provided. Fiscal Service did not concur or nonconcur with the recommendation but agreed with GAO concerns regarding the reliability of information provided to the Committee."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Treasury Judgment Fund, managed by the U.S. Department of the  Treasury\u2019s (Treasury) Bureau of the Fiscal Service (Fiscal Service),  annually pays billions of dollars for eligible judicially or administratively  ordered monetary awards, judgments, and compromise settlements  against the U.S. government (collectively referred to in this report as  claims) on behalf of federal agencies. Transparent and reliable  information concerning these payments and other financial activities is  important in order for Congress to provide effective oversight of the  Judgment Fund. The Schedules of Non-Entity Assets, Non-Entity Costs,  and Custodial Revenues, which were prepared and audited until fiscal  year 2013, included Judgment Fund balances and activities along with  other Treasury-managed accounts. Subsequently, the Judgment Fund  balances and activities have been subjected to audit through the annual  audit of Treasury\u2019s department-wide financial statements.", "In May 2017, the House Committee on the Judiciary (Committee)  requested that Treasury provide the Committee with (1) Schedules of the  Judgment Fund Non-Entity Assets, Non-Entity Costs, and Custodial  Revenues, prepared in accordance with U.S. generally accepted  accounting principles (U.S. GAAP), for fiscal years 2010 through 2016;  (2) appropriate disclosures in the notes to the Schedules or Management\u2019s Discussion and Analysis (MD&A) of sufficient detail to  answer nine specific questions regarding annual payments made by the  Judgment Fund and related costs and other information; and   (3) information about the processes and procedures used when paying  Judgment Fund claims. Upon receipt of Treasury\u2019s response to this  request, you asked GAO to review the information Treasury provided to  the Committee and to describe the procedures and controls that Fiscal  Service follows when processing agency requests for payments from the  Judgment Fund. This report (1) evaluates the extent to which the  Treasury-prepared information responds to the Committee\u2019s request for  information about the Judgment Fund balances and activities and  reconciles to financial information included in annual, audited financial  reports and other selected reports and (2) describes Fiscal Service\u2019s  documented procedures and related control activities for processing  agency requests for payments from the Judgment Fund, including how  Fiscal Service ensures that appropriate agency officials approve claims,  and what reviews are required, if any, to ensure receipt of required  documentation.", "To determine the extent to which the Treasury-prepared information  responded to the Committee\u2019s request for information about the  Judgment Fund balances and activities, we compared the information that  Treasury provided to the Committee with the Committee\u2019s request to  Treasury. For each item requested by the Committee, we reviewed the  information provided by Treasury and determined the extent to which it  was responsive to the request.", "To determine the extent to which the Treasury-prepared exhibits  reconciled to information included in annual, audited financial reports and  other selected reports, we compared, and identified any differences  between, the Treasury-prepared exhibits with information included in  Treasury\u2019s (1) unaudited Judgment Fund transparency reports to  Congress (transparency reports) for fiscal years 2010 through 2016;   (2) audited Schedules of Non-Entity Assets, Non-Entity Costs, and  Custodial Revenues (Schedules) for fiscal years 2010 through 2013; and  (3) audited department-wide financial statements (Financial Statements)  for fiscal years 2010 through 2016. We determined the information  contained in these reports to be sufficiently reliable for the purpose of our  reporting objective. In addition, we interviewed Fiscal Service staff to  obtain explanations for and reconcile differences that we identified.", "To describe Fiscal Service\u2019s documented procedures and related control  activities for processing agency requests for payments from the Judgment  Fund, we reviewed Treasury\u2019s standard operating procedures and  external user manuals for the Judgment Fund Internet Claims System  (JFICS), the application Fiscal Service uses to process claims, and  observed Fiscal Service staff entering and reviewing Judgment Fund  claims in JFICS. In addition, we obtained and reviewed selected  independent public accountant (IPA) audit documentation related to the  Judgment Fund supporting the IPA\u2019s fiscal year 2017 audit of Treasury\u2019s  Financial Statements. Additional details about our scope and  methodology are discussed in appendix I.", "We conducted this performance audit from February 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Judgment Fund is a permanent, indefinite appropriation, statutorily  created in 1956, available to pay many types of eligible monetary claims  that may be judicially or administratively ordered against the U.S.  government. The Judgment Fund is also available to pay interest and  costs on claims in certain circumstances. Administration of the Judgment  Fund has changed substantially since its inception, with varying degrees  of control and oversight by Congress, GAO, and Treasury. Originally, the  Judgment Fund was limited to paying judgments of less than $100,000,  as certified by the Comptroller General and entered by the U.S. Court of  Claims (the predecessor to the current U.S. Court of Federal Claims) or a  U.S. District Court, as well as authorized interest and costs. In the 1960s,  new laws extended the Judgment Fund\u2019s availability to awards and  compromise settlements. In the next decade, the Supplemental  Appropriations Act, 1977, eliminated the Judgment Fund\u2019s $100,000  payment ceiling, resulting in no upper limit on the amount that could be  paid from the Judgment Fund on any particular claim. The General  Accounting Office Act of 1996 transferred certification of payments from  the Judgment Fund from GAO to Treasury. Since 1996, Treasury has  managed the Judgment Fund, including certifying payments. Treasury  established Fiscal Service in October 2012, and delegated key Judgment  Fund functions to that bureau.", "Fiscal Service is responsible for, among other things, providing central  payment services to federal agencies. Fiscal Service is the primary  disburser of payments to individuals and businesses on behalf of federal  agencies, including benefit payments made by the U.S. Social Security  Administration and the U.S. Department of Veterans Affairs, federal  income tax refund payments, and payments to businesses for goods and  services provided to the federal government. Annually, Fiscal Service  disburses more than a billion payments, with an associated total dollar  value of more than $2.4 trillion.", "Administering the Judgment Fund is among the services that Fiscal  Service provides. A federal agency may request payment of a claim from  the Fund on its behalf only in instances where funds are not legally  available to pay the claim from the agency\u2019s own appropriations or other  funding source. Amounts paid from the Fund vary from year to year.  Treasury reported that the Fund paid about $3 billion and $4 billion for  administrative and litigative claims in fiscal years 2015 and 2016,  respectively.", "Fiscal Service carries out its mission through direct support from its three  divisions. The primary focus of the Judgment Fund Branch is to receive  and process claims for Judgment Fund payments. As shown in figure 1,  the Judgment Fund Branch operates within Fiscal Service\u2019s Financial  Services and Operations Division.", "Fiscal Service only certifies payments of claims from the Judgment Fund  when the following four tests have been met: (1) claims are final,   (2) claims are monetary, (3) one of the authorities specified in the  Judgment Fund statute permits payment, and (4) payment is not legally  available from any other source of funds (e.g., claims are only paid from  the Judgment Fund when payment is not otherwise provided for in a  specific appropriation or by another statutory provision). Generally,  federal agencies are not required to reimburse the Judgment Fund. Two  exceptions are Judgment Fund payments made pursuant to (1) the  Contract Disputes Act of 1978 (CDA) and (2) the Notification and Federal  Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act).", "Currently, Treasury produces, and posts on its website, a voluminous  spreadsheet\u2014referred to as the Judgment Fund Transparency Report to  Congress\u2014when Congress requests it, but is not otherwise required to  do so. The spreadsheets are data extracts from JFICS that provide  information on the types and amounts of claims and the agencies for  which the payments were made. Members of Congress introduced  legislative proposals in the recent past related to the Judgment Fund. For  example, in the 115th Congress, a bill entitled the Judgment Fund  Transparency Act of 2017 (H.R. 1096), as reported (amended) by the  Committee on the Judiciary on October 16, 2017, would amend the  Judgment Fund statute to require Treasury to post on its website  information related to claims on the Judgment Fund."], "subsections": []}, {"section_title": "Treasury-Provided Information Was Not Fully Responsive and Not Fully Reconciled", "paragraphs": ["In response to the Committee\u2019s request for Schedules of the Judgment  Fund Non-Entity Assets, Non-Entity Costs, and Custodial Revenues  prepared in accordance with U.S. GAAP and related information,  Treasury provided to the Committee nine \u201cexhibits\u201d that contained  selected information on Judgment Fund payments and other related  information to answer nine questions in the Committee\u2019s request. We  reviewed the Treasury-provided information and found that it did not  provide the Schedules of Judgment Fund Non-Entity Assets, Non-Entity  Costs, and Custodial Revenues for fiscal years 2010 through 2016,  prepared in accordance with U.S. GAAP, and appropriate note  disclosures or MD&A to the Committee, as requested.", "In addition, we identified numerous differences between amounts  included in the exhibits provided to the Committee and those reported in  Treasury\u2019s (1) unaudited transparency reports, (2) audited Schedules, or  (3) audited Financial Statements. For example, we identified differences  between administrative and litigative payments for fiscal years 2010  through 2016 reported on Exhibits 1 and 2 - Judgment Fund  Administrative and Litigative Payments by Defendant Agency and Fiscal  Year and those reported in Treasury\u2019s (1) unaudited transparency reports,  (2) audited Schedules, and (3) audited Financial Statements, for all years  presented (as shown in tables 1, 2, and 3).", "Further, we identified numerous differences between financial and  nonfinancial information in Treasury\u2019s exhibits and comparable  information contained only in the transparency reports. For example, the  Committee asked Treasury to disclose the amount of Judgment Fund  payments for attorneys\u2019 fees pursuant to the Equal Access to Justice Act  (EAJA) for fiscal years 2010 through 2016. In response, Treasury  provided Exhibit 8 - Amounts Paid from the Judgment Fund for EAJA  Claims by Fiscal Year. We compared total payments for each fiscal year  reported in Exhibit 8 with those reported in the transparency reports for  the same years and identified differences in payments for principal,  attorneys\u2019 fees, and costs, as shown in table 4.", "We provided Treasury the results of our comparisons and requested  explanations for the differences we identified, and Treasury provided  explanations for some of them. Subsequently, Treasury officials informed  us that they discovered that the exhibits were created in a faulty manner,  and rather than expending resources to reconcile and explain the  numerous differences we identified, they indicated that Fiscal Service  staff would submit new exhibits to the Committee; however, they did not  provide a date by which they would do so.", "Judgment Fund Branch staff further explained that the Committee\u2019s  request was a unique request for information that could not be fulfilled  with existing standard reports and queries. To respond to the request,  Fiscal Service created ad hoc queries of the JFICS database using  different instructions for extracting data for the exhibits than those used  for creating the transparency reports. The Judgment Fund Branch relied  on these ad hoc queries, primarily from JFICS, to prepare the exhibits  answering the nine questions included in the Committee\u2019s request.  However, according to Judgment Fund Branch officials, the Judgment  Fund Branch does not prepare financial statements, such as the  Schedules of Non-Entity Assets, Non-Entity Costs, and Custodial  Revenues. Rather, its primary focus is receiving and processing claims  for Judgment Fund payments. In addition, these officials told us that they  could not confirm whether the Judgment Fund Branch worked with the  Fiscal Accounting Branch to respond to the Committee\u2019s request or  prepare the exhibits provided to the Committee.", "Treasury\u2019s policy is to ensure and maximize the quality, objectivity, utility,  and integrity of the information that it disseminates to the public. This  policy directs Treasury bureaus and departmental offices to develop  standards for information quality and ensure that the standards are used  when disseminating information. The policy also directs that such  information be accurate, clear, complete, and unbiased. In addition, policy  guidelines specifically state that in situations where public access to data  and methods will not occur, especially rigorous checks to analytic results  should be applied and documented. According to Fiscal Service officials,  this policy applies strictly to information disseminated to the public, and  the related procedures in the policy do not apply to information  transmitted to federal entities, including Congress. Fiscal Service officials  did not provide evidence of a similar policy or procedures for ensuring the  quality of the information disseminated to Congress and other federal  entities. Fiscal Service officials also did not provide us with  documentation indicating that any checks or reviews were performed on  the exhibits\u2014in a manner consistent with Treasury\u2019s written policy and  review procedures for disseminating information to the public\u2014before  Treasury provided them to the Committee.", "As a result, the exhibits that Treasury provided to the Committee were not  responsive to the Committee\u2019s request and are at increased risk that they  may contain unreliable information. Accordingly, the Committee lacks  important, reliable information needed to effectively oversee Judgment  Fund activities, including considering whether enacting new legislation  would benefit the American people by ensuring better management of the  Judgment Fund."], "subsections": []}, {"section_title": "Treasury Has Documented Procedures and Control Activities for Processing Payments", "paragraphs": ["According to Fiscal Service\u2019s documented policies and procedures,  payments from the Judgment Fund may be made only upon certification  by Fiscal Service. An important step in the claims payment certification  process is for the Fiscal Service claims analyst and claims reviewer to  confirm that an agency\u2019s claim for payment from the Judgment Fund is  not otherwise provided for by another source of funds. This confirmation  is necessary to make sure that the Judgment Fund is not used for  payments that should be paid directly by the involved agency or another  funding source. Another important step in the claims payment certification  process is to confirm that the claim is final, meaning that the applicable  federal officials have fully resolved the claim\u2019s underlying dispute and the  only outstanding issue is payment of the claim. Additionally, Fiscal  Service calculates the amount of any interest that may be authorized and  initiates action under federal debt collection law to offset any known  indebtedness to the United States by the claimant. In the actual  \u201ccertification\u201d step, Fiscal Service does not review or evaluate the merits  of the underlying claim.", "Payments made by the Treasury Judgment Fund on behalf of agencies  are initiated upon the receipt of claim requests that agencies submit to  Fiscal Service. These requests must be submitted online through JFICS  or by sending completed payment request forms to the Judgment Fund  Branch via fax or mail.", "Claims submitted through JFICS must be accompanied by a FS Form  197, Voucher for Payment, page 2, signed by the claimant, and either a  (1) settlement agreement or (2) court order. Claims submitted via fax or  mail must contain a (1) FS Form 194, Judgment Fund Transmittal Form;  (2) FS Form 196, Judgment Fund Award Data Sheet; and (3) FS Form  197, Voucher for Payment, page 1, and a document that authorizes  payment.", "Upon receipt of mailed or faxed forms, Fiscal Service staff manually enter  the data from the submitted forms into JFICS. Fiscal Service staff review  the forms for completeness and ensure that each FS Form 194 has been  signed by the agency authorizing official. Fiscal Service relies on this  signature and the presence of a U.S. government email address on the  FS Form 194 as its primary controls for ensuring that a mailed or faxed  claim has been authorized by the agency. Fiscal Service also relies on  this signature to confirm that the claim is appropriate and is eligible to be  paid from the Judgment Fund. For claims entered directly in JFICS by  an agency, the agency authorizing official must click on \u201cI agree\u201d on the  JFICS certification page to affirm that the claim is authorized by the  agency and appropriate for payment from the Judgment Fund. (See fig. 2  for a depiction of the Judgment Fund claims process.)", "Depending on the claim amount, Fiscal Service staff perform a minimum  of two levels of review on Judgment Fund claims, whether the claims are  received by fax or mail or directly entered into the JFICS system by  agencies. First, the claims analyst reviews the claim to ensure that the  agency has provided all of the information necessary to process it. Once  the claims analyst determines that all of the information has been  provided, the claim is forwarded electronically to the claims reviewer. The claims reviewer performs a secondary review to determine if all the  information required has been provided, as well as to ensure that the  claims analyst entered the mailed or faxed information into JFICS  correctly. Claims for less than $1 million do not require further review and  are submitted to the Treasury Disbursing Office for payment. Claims for  $1 million or more are subject to management review, and claims for $50  million or more are sent to the Fiscal Service Office of Chief Counsel for  review."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["In connection with its oversight efforts, the Committee requested certain  information from Treasury about Judgment Fund financial balances,  activities, and other information. However, the information that Treasury  provided to the Committee in response to this request did not include  Judgment Fund Schedules of Non-Entity Assets, Non-Entity Costs, and  Custodial Revenues prepared in accordance with U.S. GAAP, including  appropriate note disclosures and MD&A, as requested. Further, Treasury  officials stated that the exhibits provided to the Committee were created  in a faulty manner, resulting in an increased risk that they may contain  unreliable information. Although Treasury directs its bureaus and offices  to take steps to ensure the quality of information disseminated to the  public, Fiscal Service did not take appropriate steps to ensure that the  information it provided to the Committee was responsive and complete.  Without sufficient financial and other information, the Committee\u2019s ability  to effectively oversee Judgment Fund activities, including considering  whether enacting new legislation would benefit the American people by  ensuring better management of the Judgment Fund, may be hampered."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to Treasury:  The Commissioner of the Bureau of the Fiscal Service should take steps  to ensure that information provided to Congress undergoes a  documented review to ensure the quality and responsiveness of the  information provided. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Treasury for review and comment. In  written comments, reproduced in appendix IV, Fiscal Service did not  concur or nonconcur with our recommendation, but stated that it agreed  with our concerns regarding the reliability of information contained in the  exhibits provided to the Committee and that a new set of data has been  compiled and undergone a documented review to ensure its reliability.  We are encouraged by the steps being taken to ensure the reliability of  this information, but it is unclear to what extent steps have been, or will  be, taken to ensure the quality and responsiveness of other information  that may be provided to Congress in the future. We believe that such  steps are necessary to help ensure that the Committee has sufficient  financial and other information to effectively oversee Judgment Fund  activities.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Treasury, the Inspector General of the  Department of the Treasury, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9816 or rasconap@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our audit were to (1) evaluate the extent to which the  information the U.S. Department of the Treasury (Treasury) provided to  the House Committee on the Judiciary (Committee) responds to the  Committee\u2019s May 2017 request for information about Judgment Fund  balances and activities and reconciles to financial information included in  annual, audited financial reports and other selected reports and   (2) describe the Bureau of the Fiscal Service\u2019s (Fiscal Service)  documented procedures and related control activities for processing  agency requests for payments from the Judgment Fund, including how  Fiscal Service ensures that appropriate agency official approve claims  and what reviews are required, if any, to ensure receipt of required  documentation.", "To determine the extent to which the Treasury-prepared information  responds to the Committee\u2019s request for information about the Judgment  Fund balances and activities, we compared the information provided by  Treasury to the Committee with the Committee\u2019s request letter to  Treasury. For each item requested by the Committee, we reviewed the  information provided by Treasury and determined whether it was  responsive to the request.", "To determine the extent to which the Treasury-prepared exhibits reconcile  to information included in annual, audited financial statements and other  reports, we compared, and identified any differences between, the  Treasury-prepared exhibits and certain information included in the  following Treasury reports: unaudited Judgment Fund transparency reports to Congress for fiscal  years 2010 through 2016; audited Schedules of Non-Entity Assets, Non-Entity Costs, and  Custodial Revenues for fiscal years 2010 through 2013; and audited department-wide Financial Statements for fiscal years 2010  through 2016.", "To determine the reliability of the financial information contained in the  unaudited transparency reports, we reviewed relevant documentation,  interviewed knowledgeable agency officials, and conducted basic testing  of the data. Based on these efforts, we concluded that the data were  sufficiently reliable for the purpose of our reporting objective. In addition,  we interviewed Fiscal Service staff to obtain (1) explanations for and  reconcile differences we identified based on our comparisons and   (2) Treasury\u2019s related policies for reviewing information provided to  Congress to ensure its quality and responsiveness. Further, because the  Treasury Office of Inspector General (OIG) is currently conducting an  audit that includes the Treasury Judgment Fund, we communicated with  the OIG staff regarding the OIG\u2019s current audit to ensure no duplication in  our audit work.", "To describe Fiscal Service\u2019s documented procedures and related control  activities for processing agency requests for payments from the Judgment  Fund, we reviewed Treasury\u2019s standard operating procedures and  external user manuals for the application Fiscal Service uses to process  claims (the Judgment Fund Internet Claims System (JFICS)). We also  observed Fiscal Service staff entering and reviewing Judgment Fund  claims in JFICS. In addition, we obtained and reviewed selected  independent public accountant (IPA) audit documentation related to  processing Judgment Fund claims supporting the IPA\u2019s fiscal year 2017  audit of Treasury\u2019s department-wide financial statements."], "subsections": []}, {"section_title": "Appendix II: Differences GAO Identified between Treasury-Prepared Exhibits and Other Treasury-Issued Reports", "paragraphs": ["The U.S. Department of the Treasury (Treasury) provided the House  Committee on the Judiciary (Committee) nine exhibits in response to nine  questions included in the Committee\u2019s request. Information included in  these exhibits and differences we identified based on comparisons of this  information with information included in certain Treasury annual audited  financial reports and other reports is summarized below.", "Exhibits 1 and 2 - Judgment Fund Administrative and Litigative Payments  by Defendant Agency and Fiscal Year shows, by agency and type of  payment, the amounts paid from the Judgment Fund on behalf of federal  agencies. We compared information in these exhibits with Treasury\u2019s   (1) unaudited Judgment Fund transparency reports to Congress for fiscal  years 2010 through 2016; (2) audited Schedules of Non-Entity Assets,  Non-Entity Costs, and Custodial Revenues (Schedules) for fiscal years  2010 through 2013; and (3) audited department-wide financial statements  (Financial Statements) for fiscal years 2010 through 2016 (see tables 5,  6, and 7).", "Exhibit 3 - Judgment Fund Collections from Federal Agencies by Fiscal  Year presents, by Treasury account symbol, recoveries and  reimbursements from federal agencies. Exhibit 4 - Judgment Fund  Accounts Receivable from Federal Agencies by Fiscal Year presents, by  Treasury account symbol, amounts due from federal agencies for  payments made on their behalf. We compared information in Exhibit 3  with the Schedules and information in Exhibit 4 with the Schedules and  the Financial Statements for all available fiscal years. Information  contained in Exhibits 3 and 4 were not payment related (these exhibits  were receipts from agencies and accounts receivable owed by agencies)  and therefore could not be traced to the transparency reports. The  differences identified based on our comparisons of Exhibit 3 to the  Schedules and Exhibit 4 to the Financial Statements are shown in tables  8 and 9, respectively.", "Exhibit 5 - Judgment Fund Costs Paid by Citation Code and Fiscal Year  shows, by fiscal year, amounts paid for each type of citation code. We  identified differences in each fiscal year between the total amounts paid  as presented in Exhibit 5 and the total amounts contained in the  transparency reports (see table 10).", "Exhibit 6 - Top 25 Attorney Law Firms that Received Payments from the  Judgment Fund by Fiscal Year presents, by attorney and law firm,  amounts paid for each of the 7 years. Because Treasury has identified  this exhibit as containing personally identifiable information protected by  the Privacy Act of 1974, we do not present information from Exhibit 6.", "Exhibit 7 - EAJA Payments to Plaintiffs\u2019 Counsel in Decending  Order  shows, by attorney and law firm, amounts paid to each related to Equal  Access to Justice Act (EAJA) claims. When we compared the exhibit to  the transparency reports, we identified differences in the total amounts for  all fiscal years (see table 11).", "Exhibit 8 - Amounts Paid from the Judgment Fund for EAJA Claims by  Fiscal Year shows, by cost citation code, amounts paid for principal,  attorneys\u2019 fees, costs, and interest for each fiscal year. When we  compared Exhibit 8 to the transparency reports, we identified differences  in the amounts reported for principal, attorney\u2019s fees, and costs for most  fiscal years (see table 12).", "Exhibit 9 - Major Recipients of Judgment Fund Payments by Fiscal Year  presents amounts paid to major recipients (top 25) of payments from the  Judgment Fund. Because Treasury has identified this exhibit as  containing personally identifiable information protected by the Privacy Act  of 1974, information about Exhibit 9 is not presented."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Heather I. Keister (Assistant  Director), Anthony Clark, Patrick Frey, Lauren S. Fassler, Nadine  Ferreira, Valerie Freeman, James Kernen, Ned Malone, Lisa Motley, and  Taya R. Tasse made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-449", "url": "https://www.gao.gov/products/GAO-18-449", "title": "Counterterrorism: DOD Should Fully Address Security Assistance Planning Elements in Global Train and Equip Project Proposals", "published_date": "2018-05-30T00:00:00", "released_date": "2018-05-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States has undertaken several efforts, including DOD's Global Train and Equip program, to help foreign partners strengthen their security capacity. Presidential Policy Directive 23 states that agencies should target security assistance where it can be effective and highlights the importance of addressing several planning elements in project proposals. DOD develops proposals, using guidance implementing the directive, and selects projects with the Department of State.", "The fiscal year 2015 National Defense Authorization Act included a provision for GAO to review the Global Train and Equip program. In this report, GAO examines (1) the status of funding DOD allocated for Global Train and Equip projects in fiscal years 2009 through 2017, (2) the extent to which DOD addressed key security assistance planning elements in project proposals in fiscal years 2016 and 2017, and (3) DOD's reporting on the achievement of Global Train and Equip project objectives and any factors affecting its ability to achieve those objectives. GAO analyzed agency data and program documents and interviewed DOD and State Department officials in Washington, D.C., and at selected combatant commands and embassies."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) obligated $3.7 billion of $4.1 billion allocated for the Global Train and Equip program in fiscal years 2009 through 2017 to build partner nations' capacity to counter terrorism. DOD increased allocations for the program in 2016, responding to an influx of funding from appropriations to the Counterterrorism Partnerships Fund. As of December 2017, DOD had disbursed about $2.5 billion of the obligated funds.", "Global Train and Equip project proposals for fiscal years 2016 and 2017 consistently addressed only one of four elements of security assistance planning outlined in Presidential Policy Directive 23 . GAO found all 72 proposals in those years included the first element, project objectives. From 2016 to 2017, the percentage of proposals addressing the second element\u2014absorptive capacity\u2014rose from 32 percent to 84 percent. Most 2016 and 2017 proposals included the third element, baseline assessments, but less than three-quarters included complete sustainment plans, the fourth element. DOD guidance for 2016 and 2017 did not include instructions for addressing project sustainment when sustainment was not anticipated, though the 2017 guidance included instructions for addressing the other three planning elements. According to DOD officials, they have developed an informal quality review process to better ensure that 2018 project proposals address all four planning elements. However, DOD has not formalized this informal process as written policy. Standards for Internal Control in the Federal Government calls for documenting internal control activities and policies. Formalizing the proposal review process would help DOD provide consistent oversight of project development and ensure access to complete information about each planning element, including sustainment needs. Such information is critical in helping decision makers ensure efficient use of funding to build partners' capacity.", "DOD reporting for 2016 and 2017 indicates progress in building partner capacity to combat terrorism and conduct stability operations as well as factors affecting the progress achieved. According to DOD documents, partner nation recipient units' overall capabilities were greater after implementation of 8 of 21 Global Train and Equip projects, and some of the remaining 13 projects produced some positive results. DOD documents and officials also identified factors\u2014such as equipment suitability and procurement issues\u2014that may have limited the achievement of project objectives."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends DOD (1) update project proposal guidance to include instructions for documenting sustainment planning and (2) formalize as written policy its informal process for ensuring Global Train and Equip project proposals fully document the four required planning elements. DOD agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Transnational terrorist groups, such as the Islamic State of Iraq and Syria,  continue to threaten the national security of the United States and its  partners. The United States has long recognized that the diversity and  complexity of threats to our national security require a collaborative  approach, both within the U.S. government and among allies, partners,  and multilateral organizations. A goal of U.S. security assistance policy is  to help partner nations build sustainable capacity to address challenges  such as transnational threats. Programs to build foreign partner capacity  can help partners to confront extremists before such threats require U.S.  military intervention or to work alongside U.S. forces to confront terrorist  threats. The United States has undertaken several efforts, including the  Department of Defense\u2019s (DOD) Global Train and Equip program, to build  the capacity of its foreign partners to counter terrorism.", "The Carl Levin and Howard P. \u201cBuck\u201d McKeon National Defense  Authorization Act (NDAA) for fiscal year 2015 included a provision for  GAO to conduct biennial audits of programs conducted pursuant to 10  U.S.C. \u00a7 2282 for the Global Train and Equip program. In April 2016, we  issued our first report addressing this provision. In this report, we  examine (1) the status of funding that DOD allocated for Global Train and  Equip projects in fiscal years 2009 through 2017, (2) the extent to which  DOD addressed security assistance planning elements in project  proposals in fiscal years 2016 and 2017, and (3) DOD\u2019s reporting on the  achievement of Global Train and Equip project objectives and any factors  affecting its ability to achieve those objectives.", "To examine the status of funds allocated, obligated, and disbursed for  Global Train and Equip projects in 2009 through 2017, we analyzed  program funding data. To determine the extent to which DOD addressed  key elements of security sector assistance in project proposals in 2016  and 2017, we reviewed Presidential Policy Directive 23: Security Sector  Assistance and DOD guidance, which identify four planning elements to  be considered for security assistance programs. We then analyzed the  content of agency-approved 2016 and 2017 project proposals, as well as  congressional notifications developed subsequent to agency approval of  the proposals, to determine the extent to which those documents include  information about the four planning elements. To examine the results that  DOD has reported related to project objectives, we analyzed DOD  assessment reports for 2016 and 2017. Specifically, we compared  baseline assessments of recipient unit capability and performance levels  when the projects were proposed with assessments of the recipient unit\u2019s  capability and performance levels after program assistance was  delivered. We also reviewed the 2016 and 2017 assessment reports to  identify factors affecting the extent to which project objectives were  achieved.", "To address multiple objectives, we discussed the project proposal  process and key elements of project planning, documentation, and  assessment with officials from DOD and the Department of State (State);  relevant geographic combatant commands; and U.S. embassies in  Jordan, Niger, and Uganda. We selected these countries on the basis of  their having received a higher proportion of DOD\u2019s allocations for the  Global Train and Equip program in fiscal years 2016 and 2017; we also  considered factors such as embassy officials\u2019 project assessment  experience and the countries\u2019 regional geographic distribution. To assess  the reliability of the data we obtained, we took steps such as comparing  funding data with previously published information and interviewing  cognizant agency officials about funding data and project assessments;  we determined that all of the data were sufficiently reliable for the purpose  of our review. We relied on DOD\u2019s assessment reports and did not  systematically validate the assessment results. For more details of our  scope and methodology, see appendix I.", "We conducted this performance audit from July 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Global Train and Equip Authority to Build Foreign Partner Capacity", "paragraphs": ["DOD has used the Global Train and Equip program to provide training,  equipment, and small-scale military construction activities intended to  build the capacity of partner nations\u2019 military forces to conduct  counterterrorism operations. The program was originally authorized under  Section 1206 of the 2006 NDAA and has been amended several times.  The 2015 NDAA permanently authorized the Secretary of Defense, with  concurrence of the Secretary of State, to conduct programs to (1) build  the capacity of a foreign country\u2019s national military forces to conduct  counterterrorism operations or participate in, or support, ongoing allied or  coalition military or stability operations that benefit the national security  interests of the United States; (2) build the capacity of a foreign country\u2019s  national maritime or border security forces to conduct counterterrorism  operations; and (3) build the capacity of a foreign country\u2019s national-level  security forces that have among their functional responsibilities a  counterterrorism mission in order for such forces to conduct  counterterrorism operations. The fiscal year 2017 NDAA repealed Section  2282 of Title 10 of the U.S. Code and created Section 333 of the same  title (Section 333). Section 333 authorized DOD to continue providing  training and equipment to the national security forces of foreign countries  for the purpose of building the capacity of such forces to conduct  counterterrorism operations, among other things. The fiscal year 2017  NDAA also contained several administrative and organizational  instructions for the management and oversight of DOD security  cooperation policy.", "According to DOD, counterterrorism and stability operations assistance  generally consist of security capability projects that fortify a partner  nation\u2019s land, sea, or air capability. Projects often provide equipment or  training intended to build partner communications, intelligence,  surveillance, and reconnaissance capabilities. Figure 1 shows an  example of a UH-60 helicopter\u2014a type of equipment that has been  provided through Global Train and Equip projects."], "subsections": []}, {"section_title": "U.S. Security Assistance Policy", "paragraphs": ["Presidential Policy Directive 23, published in April 2013, was aimed at  strengthening the ability of the United States to help allied and partner  nations build their own security capacity. The directive states that U.S.  agencies should target security sector assistance where it can be  effective. The directive identifies principal goals of, and guidelines for,  security sector assistance that highlight the importance of including the  following four planning elements in project design and execution:  identifying objectives that address partner nation needs;  considering partner nations\u2019 capacity to absorb U.S. assistance;  integrating assessment, monitoring, and evaluation to provide  policymakers, program managers, and implementers with information  and evidence necessary to make effective decisions and maximize  program outcomes; and anticipating sustainment needs."], "subsections": []}, {"section_title": "Global Train and Equip Program Management and Project Planning", "paragraphs": ["During the reporting period covered by this review, DOD\u2019s Office of the  Assistant Secretary of Defense for Special Operations/Low-Intensity  Conflict was responsible for providing policy guidance and oversight of  the Global Train and Equip program. The office coordinated with State\u2019s  Bureau of Political-Military Affairs and other stakeholders in an  interagency process to solicit project proposals annually, in accordance  with guidance that DOD revises each year to reflect lessons learned,  congressional concerns, and other considerations. DOD 2016 and 2017  guidance implements Presidential Policy Directive 23, requiring that  project proposals for the Global Train and Equip program address the  four planning elements highlighted in the directive.", "Figure 2 illustrates the conceptual framework of the project proposal,  approval, and implementation processes in 2016 and 2017. According to  DOD officials, various elements of the proposal development, review,  selection, and notification process occurred simultaneously, as proposal  submission and review occurred on a rolling basis and agency-approved  projects were notified to Congress in multiple groups throughout each  fiscal year.", "As figure 2 shows, DOD instituted some changes to the proposal  development and approval process for projects notified to Congress in  2017. According to DOD officials, for 2017, geographic combatant  commands and embassy staff first submitted high-level concepts for  review rather than fully drafted project proposals. These concepts were  intended to provide information on project objectives for an interagency  working group\u2019s review and approval before further resources were  committed to developing full proposals. DOD officials told us that the  2017 process remains in place for 2018 and 2019 projects. DOD officials  said that in prior years, including 2016, geographic combatant commands  and embassy staff were required to draft full proposals without  confirmation that DOD and State would approve the proposals for  notification to Congress.", "In 2016 and 2017, DOD and State officials reviewed proposals\u2014 approved by the geographic combatant command and ambassador or  chief of mission\u2014and selected projects to recommend to the Secretaries  of Defense and State. Following approval by the Secretary of Defense,  with concurrence from the Secretary of State, DOD prepared and  submitted congressional notifications for each project it intended to fund  through the program. These notifications summarized project information  such as the project\u2019s objectives, the partner nation\u2019s absorptive capacity,  the baseline assessment of the recipient unit\u2019s capabilities, and  arrangements for the project\u2019s sustainment. Congressional notifications  were submitted for each project to the appropriate committees at least 15  days before activities were initiated. According to DOD, project  implementation did not begin immediately after the 15-day notification  period if congressional staff requested additional time for briefings and for  DOD to ensure that the congressional committees agreed with the  proposed activities. After congressional notification, DOD\u2019s Defense  Security Cooperation Agency assumed responsibility for overseeing the  obligation of funds for training and equipment procurement before the end  of the relevant fiscal year, while officials from the security cooperation  office at U.S. embassies were responsible for coordinating in-country  project implementation. DOD planned to conduct assessments of  selected projects 12 to 18 months after delivering major project  components, to evaluate the extent to which U.S. assistance has  contributed to building recipient unit capabilities and the extent to which  the partner nation applied its capabilities consistent with the project\u2019s  intent."], "subsections": []}]}, {"section_title": "DOD Has Obligated the Majority of Over $4 Billion Allocated for Global Train and Equip Projects since 2009 and Disbursed About Two-Thirds of Obligated Funds", "paragraphs": ["Of the $4.1 billion allocated for Global Train and Equip projects in 2009  through 2017, DOD has obligated approximately $3.7 billion and  disbursed $2.5 billion. Table 1 details Global Train and Equip program  funding, by fiscal year of appropriation, in 2009 through 2017. As table 1  shows, DOD reported no unobligated balances as of December 2017.", "Figure 3 details Global Train and Equip allocations in 2009 through 2017,  according to the fiscal year in which DOD allocated the funds. As figure  3 shows, allocations averaged about $276 million in 2009 through 2014  and about $827 million in 2015 through 2017. DOD\u2019s allocations for  Global Train and Equip activities increased from $675 million in 2015 to  about $1.2 billion in 2016 because of an influx of funding from the  Counterterrorism Partnerships Fund, which was created in 2015 and  authorized to fund Global Train and Equip projects. In addition, in 2015,  DOD allocated funds from the European Reassurance Initiative, which  also was created that year and authorized to fund Global Train and Equip  projects. DOD\u2019s allocations for Global Train and Equip activities for 2017  totaled $635 million.", "DOD concentrated allocations of Global and Train Equip funding in 2016  and 2017 on projects for Jordan and Lebanon, which received a  combined total of $856 million, or 47 percent of total allocations during  that period (see fig. 4). In 2016, allocations for projects in Jordan and  Lebanon amounted to about $579 million\u2014nearly 50 percent of  approximately $1.2 billion in total allocations that year. In 2017,  allocations for projects in those countries amounted to about $279  million\u201444 percent of $635 million in total allocations. For more  information about allocations for specific Global Train and Equip projects  in 2016 and 2017, see appendix II."], "subsections": []}, {"section_title": "DOD Consistently Addressed Only One of Four Planning Elements in 2016 and 2017 Proposals but Reported Efforts to Ensure Inclusion of All Elements in 2018", "paragraphs": ["DOD\u2019s 2016 and 2017 proposals for Global Train and Equip projects  consistently addressed only one of the four security assistance planning  elements called for by DOD guidance, but agency officials reported  implementing an informal process to improve coverage of these planning  elements in 2018 proposals. DOD\u2019s 2016 and 2017 guidance for Global  Train and Equip project proposals called for proposal packages to  address (1) project objectives, (2) partner nation absorptive capacity, (3)  baseline assessments of partner nation capabilities, and (4) project  sustainment needs. All 72 proposal packages we reviewed for 2016 and  2017 included project objectives. Slightly more than 30 percent of  proposal packages in 2016 and over 80 percent in 2017 included  information about partner nations\u2019 absorptive capacity, compared with 19  percent in 2015 (see fig. 5). More than 90 percent of 2016 and 2017  proposal packages included baseline assessments, in contrast to 63  percent in 2015. However, less than three-quarters of proposal packages  in 2016 and 2017 included complete sustainment plans, with the  percentage that did so declining from 73 percent in 2016 to 68 percent in  2017. Although DOD\u2019s 2016 and 2017 guidance called for proposals to  address sustainment planning, it did not provide instructions for doing so  when sustainment was not anticipated. According to DOD officials, the  department has hired additional staff and developed an informal quality  review process to better ensure that proposal packages include all key  elements but, as of February 2018, had not documented this process as  written policy. Standards for Internal Control in the Federal Government  calls for documenting internal control activities aimed at ensuring effective  use of resources and documenting in policies an organization\u2019s internal  control responsibilities. More complete information about each of the  four planning elements\u2014including sustainment costs, even when  negligible\u2014would improve DOD\u2019s ability to plan and allocate funding for  the program, while formalizing the quality review process would also  enable DOD to provide greater consistency in its oversight of project  development."], "subsections": [{"section_title": "Project Proposals in 2016 and 2017 Consistently Addressed Only Project Objectives but Improved Coverage of Absorptive Capacity and Baseline Assessments", "paragraphs": [], "subsections": [{"section_title": "All 2016 and 2017 Project Proposals Included Information about Project Objectives", "paragraphs": ["We found that DOD included information that addressed project  objectives in all 72 proposals for Global Train and Equip projects in 2016  and 2017. We previously reported that all 2015 proposals for the program  addressed project objectives. DOD\u2019s guidance notes that it is important  for geographic combatant commands and chiefs of mission to produce  proposals that include a clear narrative about how the proposed  capability-building effort will fit into the theater campaign plans and  integrated country strategies and advance U.S. interests. DOD officials  from one geographic combatant command noted that 2017 Global Train  and Equip project objectives were initially developed at the country level  by the Security Cooperation Office and other embassy personnel and  were based on theater campaign plans. Each proposal we reviewed from  2016 and 2017 outlined the objectives for the project. For example, one  proposal stated that the training and equipment outlined in the proposal  would enhance the partner nation\u2019s armed forces\u2019 ability to effectively  conduct border security, counterincursion, and other night operations."], "subsections": []}, {"section_title": "Less Than Half of 2016 Project Proposals Included Information about Absorptive Capacity, but Most 2017 Proposals Addressed This Element", "paragraphs": ["DOD improved its efforts to include information about partner nations\u2019  absorptive capacity in Global Train and Equip project proposals in 2016  and 2017. Thirty-two percent (13 of 41) of 2016 proposals and 84 percent  (26 of 31) of 2017 proposals addressed this planning element. We  previously reported that less than 20 percent (10 of 54) of 2015 proposals  addressed absorptive capacity. Before 2017, DOD guidance called for  project proposals to address absorptive capacity, but the project proposal  template did not include a required field for it. However, DOD updated its  proposal template in 2017 to include a required field for analyzing and assessing the partner nation\u2019s security forces\u2019 current capability and  current performance level in employing the proposed counterterrorism  capabilities while serving in the desired counterterrorism role. According  to DOD officials, they updated the proposal template to better identify  problems with absorptive capacity because of its importance and because  it is an area of high congressional interest.", "DOD assessments of partner nations\u2019 absorptive capacity noted a range  of abilities to absorb assistance. For example, DOD assessed one  country as having the capacity to immediately employ new equipment  once training was completed and assessed another country\u2019s ability to  absorb training and equipment as average, noting that previous training  had resulted in continuous improvements. DOD officials acknowledged  that assessing absorptive capacity has been a consistent challenge. One  senior official also noted that pressing national security goals, such as  quickly developing the capabilities of strategic partners for ongoing  operations, required the U.S. government to assume some risk by  supporting a project without fully assessing or documenting a partner  nation\u2019s absorptive capacity."], "subsections": []}, {"section_title": "Most Project Proposals Included Baseline Assessments in 2016 and 2017", "paragraphs": ["We found that 92 percent (66 of 72) of 2016 and 2017 Global Train and  Equip proposal packages included baseline assessments, compared with  63 percent (34 of 54) of 2015 proposal packages. DOD\u2019s assessment  framework is based on a dual-purpose document that includes portions  for assessing the recipient unit\u2019s capabilities at baseline\u2014that is, before a  project begins\u2014and after project delivery and implementation. DOD\u2019s  2016 and 2017 program guidance states that a baseline assessment of  recipient unit capabilities should be completed prior to submission of each  proposal. According to DOD officials, baseline assessments are the  primary mechanisms to identify and document the recipient unit\u2019s  capabilities at the time the project is proposed and its needs to improve  its capabilities to meet its mission. The baseline assessments are  intended to be submitted with project proposals and later used for project  outcome assessments by assessment teams, policy officials, embassy  staff, and other stakeholders."], "subsections": []}, {"section_title": "Less Than Three-Quarters of Proposals Included Complete Sustainment Plans in 2016 and 2017", "paragraphs": ["Less than three-quarters of Global Train and Equip proposals included  complete sustainment plans in 2016 and 2017, and the percentage of  proposals with complete plans declined from 2016 to 2017. While 73  percent (30 of 41) fully addressed this planning element in 2016, 68  percent (21 of 31) fully addressed it in 2017. We previously reported that  76 percent of 2015 proposals included complete sustainment plans.  According to DOD\u2019s Global Train and Equip guidance for 2016 and 2017,  complete sustainment plans include three elements: (1) an identification  of funding sources for project sustainment, (2) an estimate of the annual  sustainment costs, and (3) an assessment of the sustainment capability  of the partner nation. Most 2016 and 2017 proposals included information  about sustainment funding sources and the partner nation\u2019s sustainment  capability. However, the percentage of proposals that estimated annual  sustainment costs varied: 85 percent of proposals estimated sustainment  costs in 2016 and 71 percent of proposals estimated such costs in 2017.", "DOD officials told us that sustainment costs may not have been  documented in some cases if sustainment was not expected to be a  significant factor in the proposed project. For example, officials explained  that some projects provided assistance, such as ammunition and training,  that is expendable and does not require sustainment. Officials also noted  that other projects provided assistance that may not have been intended  to be sustained. For instance, long-term sustainment would be  unnecessary for a project with a discrete objective, such as providing  equipment to allow for closer coordination with U.S. and North Atlantic  Treaty Organization forces in support of the International Security  Assistance Force\u2013Afghanistan. Nevertheless, DOD officials said that  when project sustainment is not anticipated, proposals for the projects  should explain why sustainment costs are not included.", "DOD\u2019s 2015 guidance for Global Train and Equip proposals included  instructions for addressing sustainment planning when sustainment is not  anticipated; however, the guidance for 2016 and 2017 did not include  these instructions. Standards for Internal Control in the Federal  Government states that internal control activities aimed at ensuring  effective use of resources should be clearly documented and that  documentation should be readily available for examination. Updating the  guidance for Global Train and Equip proposals to include instructions  addressing sustainment planning when sustainment is not anticipated  would help ensure decision makers\u2019 access to complete information on  annual sustainment costs, including costs expected to be negligible."], "subsections": []}]}, {"section_title": "DOD Recently Implemented an Informal Process to Ensure Proposals Address All Four Planning Elements but Has Not Formalized the Process as Policy", "paragraphs": ["To improve management of the Global Train and Equip program, DOD  officials told us that they developed an informal quality review process  designed to ensure that proposals in 2018 and subsequent years address  required elements. According to DOD officials, this informal process  includes the following steps:  Interagency \u201cred teams\u201d evaluate each proposal line by line to verify  that the proposal is complete.", "Proposals with missing elements are returned to the drafters for  revision and reevaluation.", "After proposals clear interagency review, senior DOD officials also  review the proposals for completeness before approving them.", "According to DOD officials, the department is developing this process as  part of its review and approval of proposals under the new Section 333  authority to build partner capacity and is in the process of hiring staff to  support this effort. For example, in February 2018, DOD officials said they  had created a position for a full-time contractor who will be based at  headquarters and charged with verifying that proposal packages include  all required security assistance planning elements. DOD officials told us  in February 2018 that they were also soliciting feedback on the process  from relevant stakeholders. However, according to the officials, DOD had  not yet determined whether to formalize the proposal review process as  written policy. According to Standards for Internal Control in the Federal  Government, management should document in policies the internal  control responsibilities of an organization. Formalizing as written policy  its informal process to ensure that proposals address all four required  planning elements would enable DOD to provide consistent oversight of  Global Train and Equip project development and ensure decision makers  have access to complete information about each element. Such  information would, in turn, help DOD and State decision makers to ensure  the efficient use of funding under the new Section 333 authority."], "subsections": []}]}, {"section_title": "DOD Reported Progress in Achieving Project Objectives, Factors Limiting Progress, and Efforts to Improve Assessments", "paragraphs": ["DOD reporting on the achievement of Global Train and Equip project  objectives in 2016 and 2017 indicated progress in building partner  capacity to combat terrorism and conduct stability operations as well as  factors that affected the progress achieved. According to DOD  assessment reports and supporting documents, partner nation recipient  units\u2019 overall capabilities were greater after implementation of 8 of 21  Global Train and Equip projects, and some of the remaining 13 projects  produced some positive results. (See app. III for the number of  assessment reports conducted between 2006 and 2015 out of the total  number of projects implemented in those years.) DOD documents and  officials also identified several factors\u2014including proposal design  weaknesses, equipment suitability and procurement issues, partner  nation shortfalls, and workforce management challenges\u2014that may have  affected the extent to which DOD was able to achieve project objectives.  DOD officials described several changes they are making to improve  assessments of Global Train and Equip projects."], "subsections": [{"section_title": "Reports on Projects Assessed in 2016 and 2017 Indicate Some Progress in Building Partner Capacity", "paragraphs": ["DOD assessment reports for 2016 and 2017, which included baseline and  post-implementation assessments of recipient units\u2019 capabilities for 21  Global Train and Equip projects, indicated some progress in building  partner capacity. For 8 of the 21 projects, the recipient units\u2019 capability  levels were assessed as having increased by at least one rating level  after the project\u2019s implementation (see fig. 6).", "Although the recipient units for the remaining 13 projects were assessed  as showing no change in capability levels, the assessment reports for  some of these projects described some positive project outcomes. For  example, one 2017 assessment report of a project initiated in 2015 found  that, while the recipient unit had not yet been integrated into the special  operations force (a stated goal of the project), the project had resulted in  some increased capacity for the recipient unit. Specifically, the  assessment found that the project increased the recipient unit\u2019s capability  to support counterterrorism operations while also enhancing command  and control capabilities and interoperability. Further, the 2016  assessment report for several related projects in one country found that,  although the recipient unit had not increased its overall capability level,  the equipment provided by the Global Train and Equip projects had  assisted the recipient unit in executing its border security mission.  Additionally, the 2016 assessment report for a 2010 project found that,  whereas the recipient unit\u2019s overall capability level had not changed, the  unit\u2019s abilities to conduct internal defense operations throughout the  country had increased as a result of Global Train and Equip assistance.", "To conduct the assessments, DOD uses a standard framework for  evaluating the capabilities and performance of each recipient unit before  and after a project has been implemented. For the baseline assessments,  DOD rates the recipient unit\u2019s level of capability and performance on a 5- point scale; 1 is defined as the ability to perform some basic tasks to at  least a low standard of performance and 5 is defined as the ability to  perform most of the advanced tasks for the unit\u2019s missions and to operate  almost continuously throughout its assigned area of operations. After  project implementation, DOD uses the same 5-point scale to identify any  changes in the recipient unit\u2019s level of capability and performance since  receiving the assistance. As we have previously reported, these ratings  do not represent only the effect of the provision of training and equipment  on the recipient unit\u2019s capability and performance, as other factors may  contribute to changes in performance level."], "subsections": []}, {"section_title": "DOD Reports and Officials Described Several Factors That Can Limit Achievement of Global Train and Equip Objectives", "paragraphs": ["DOD\u2019s assessment reports and supporting documents, as well as agency  officials we interviewed, described several factors that can affect the  extent to which DOD is able to achieve Global Train and Equip project  objectives. These factors\u2014project design weaknesses, equipment  suitability and procurement issues, partner nation shortfalls, and  workforce management challenges\u2014are consistent with the challenges  noted in our April 2016 report.", "Project design weaknesses. According to DOD assessment reports,  project designs that did not adequately reflect a partner nation\u2019s ability  to contribute resources to a project or sufficiently address recipient  unit needs and capabilities challenged the achievement of project  objectives. For example, DOD\u2019s 2016 assessment of several projects  in one partner nation indicated that small-scale construction projects  often present problems in achieving objectives. According to the  assessment, these problems are largely due to the limited number  and capability of construction firms willing to bid on work in remote  locations and a dollar ceiling for small-scale projects ($750,000) that  often cannot cover all expenses at such sites. The assessment found  that relying on a partner nation to provide the additional funds  frequently results in the construction not being completed. In addition,  DOD\u2019s 2016 assessment report indicated a problem with the  adequacy of an airplane spare-parts package provided in some  Global Train and Equip projects. The assessment found that the  Cessna Caravan spare parts, intended to cover 2 years of  maintenance, proved insufficient for high-speed combat flight  operations. (See fig. 7 for an example of a Cessna Caravan at a  partner nation airbase.) The report also noted that this problem had  been identified in other Global Train and Equip projects that included  spare-parts packages for Cessna Caravans. The report indicated that  the equipment manufacturers determine the package contents without  regard to the unique operational and environmental conditions in the  receiving partner nation.", "Equipment suitability and procurement issues. A lack of suitability  of equipment provided by Global Train and Equip projects, as well as  problems with procuring the equipment, can make it difficult to  achieve desired capability-building objectives. For example, a 2017  assessment report of a 2015 project found that size distributions for  body armor and helmets were not aligned with the general size  requirements\u2014an issue that had been identified in other countries  receiving Global Train and Equip assistance. Additionally, the  assessment noted that consideration was not given to providing body  armor with built-in buoyancy for personnel operating in a maritime  environment. Further, the assessment noted that bright orange life  jackets were provided as tactical equipment, when a subdued color  would have been more appropriate. Moreover, the 2016 assessment  report found that equipment procurement issues in a 2012 project  caused maintenance problems for the partner country. According to  the report, the U.S. Army did not have an existing contract to obtain  diesel vehicles from the manufacturer specified in the project proposal  and congressional notification and therefore used an existing contract  to obtain vehicles from a different manufacturer. The assessment  observed that, while delivery of available vehicles provides some  value, in this case it created maintenance problems for the partner  nation because there was no dealership in the country to provide  repairs and spare parts for the vehicles. The assessment found that in  such situations it may be best to delay fulfillment until a contract is  available to procure vehicles from the specified manufacturer.", "Partner nation shortfalls. Shortfalls of partner nations, including not  using assistance for the envisioned purposes, inability to maintain and  sustain equipment, and difficulty in manning and training recipient  units, can negatively affect the achievement of project objectives. For  example, the 2016 assessment report for a 2015 project found that,  although the recipient unit was able to plan and execute more  complex operations to combat regional threats, such as Boko Haram,  in a professional manner, the assessment team received no evidence  that the unit had played more than a minor role in counter\u2013Boko  Haram operations. In a separate review of a partner nation\u2019s Global  Train and Equip projects, the 2016 assessment found that the  recipient unit had difficulties in maintaining weapons in a fully mission- capable status. The assessment found that a number of the unit\u2019s  small arms were old and many had warped barrels, making them  much less accurate. A 2017 assessment of a 2013 project found that  the recipient unit suffered from shortages of junior noncommissioned  officers and officers. The unit was also found to have few soldiers in  specialty jobs who had received school training. The assessment  report acknowledged that certain conditions in the partner nation,  such as low levels of education, presented a multitude of problems in  ensuring the development and maintenance of national security forces  capable of working with, and integrating, a range of modern combat  systems.", "Workforce management challenges. DOD officials indicated that  workforce challenges, particularly related to turnover and staffing  levels, can inhibit effective project design, program implementation,  and oversight. DOD officials acknowledged that staff turnover, an  issue that we previously identified, remains a challenge. According  to the officials, there is a high degree of institutionalized turnover,  particularly among security cooperation officers, at U.S. embassies  and to some extent within the geographic combatant commands. As  a result, the officials overseeing project implementation may not have  been responsible for project development and are less likely to  understand the capabilities of the intended recipient units or the  capability gaps that could be addressed by equipment and training.  DOD officials also told us that they have been challenged to meet  programmatic demands with current staffing levels, particularly given  the influx of funds appropriated for the Counterterrorism Partnerships  Fund in 2015. DOD officials said that the volume of Global Train and  Equip projects expanded with the large increase in funding in 2015  and 2016, which stressed the foreign military sales system as well as  geographic combatant commands\u2019 ability to plan for, and manage, the  program with existing resources. For example, DOD officials said that  teams of three staff at geographic combatant commands were  managing over three times more funding than in prior years. As a  result, staff were unable to maintain consistent levels of due diligence  on issues such as ensuring that proposal packages addressed  absorptive capacity and sustainment planning. According to DOD  officials, negative effects of this inconsistent due diligence included  the arrival of equipment not suitable for operations and overestimation  of one partner nation\u2019s absorptive capacity, necessitating unplanned  training and resulting in project delays. DOD officials said that they  are now in the process of acquiring additional staffing to address  capacity constraints."], "subsections": []}, {"section_title": "DOD Officials Described Several Ongoing Changes to Improve Assessments", "paragraphs": ["DOD officials told us that they are in the process of evaluating the  effectiveness of the assessment process conducted in 2016 and 2017  and described a variety of changes that they are making to improve  assessments of Global Train and Equip projects. DOD officials  acknowledged that baseline and post-implementation assessments, as  well as monitoring activities, had been conducted inconsistently in prior  years, including for the projects developed and implemented in 2016 and  2017. DOD officials said that staffing constraints were a contributing  factor. In March 2017, we also identified some weaknesses in the design  of evaluations for Global Train and Equip projects and recommended that  DOD develop a plan for improving the quality of these evaluations.", "While prior laws required DOD to conduct assessments and evaluate the  program\u2019s effectiveness, the fiscal year 2017 NDAA requires that DOD  maintain a program of assessment, monitoring, and evaluation in support  of the agency\u2019s security cooperation programs and activities. Given the  requirements for an assessment, monitoring, and evaluation program,  and recognizing the importance of improving the assessment processes,  DOD officials said they are developing an enhanced assessment process  that includes increased staffing dedicated to monitoring and evaluation.  For example, DOD officials said that they had hired several full-time contractors to perform key tasks related to monitoring and evaluation.  According to the officials, several full-time contractor positions will be  located in the various geographic combatant command locations, with  responsibilities to develop baseline assessments in coordination with the geographic  combatant commands and oversee the quality and completeness of  those assessments; write performance indicators and performance plans into every Global  Train and Equip project proposal;  conduct monitoring and provide reports to the geographic combatant  command and to the Defense Security Cooperation Agency on the  status of project objectives and performance indicators; and  conduct annual, independent evaluations to assess a few Global Train  and Equip projects in detail.", "In addition, DOD officials stated that they had hired a full-time contractor  who will be based at headquarters and provide further support for each  geographic combatant command and who will be charged with  documenting that baseline assessments were completed and conducting  quality reviews of assessment-related documents."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Global Train and Equip program is a critical tool for building partner  capacity to counter terrorism worldwide, and allocations for the program  totaled more than $4.1 billion in 2009 through 2017. DOD has established  an interagency process to develop and select Global Train and Equip  projects that takes into account four required security assistance planning  elements. However, although DOD consistently addressed project  objectives in its 2016 and 2017 project proposals, DOD did not  consistently address the other three planning elements. In addition, DOD  guidance no longer includes instructions for addressing one of these  elements, sustainment planning, in proposals for projects for which DOD  does not intend or anticipate sustainment. Updating its guidance to  include such instructions would help ensure decision makers\u2019 access to  complete information on annual sustainment costs, even costs anticipated  to be negligible. Moreover, although officials reported having recently  developed an informal quality review process designed to ensure that  proposal packages address all required planning elements, DOD has not  formalized this process as written policy. Formalizing the process would  enhance DOD\u2019s ability to provide consistent oversight of project  development and to ensure that decision makers have access to  complete information about each planning element for proposed projects.  This information would, in turn, help DOD and State decision makers  ensure the efficient use of funding under the new Section 333 authority to  build partner capacity."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  The Director of the Defense Security Cooperation Agency should update  guidance for project proposal packages to require an explanation when  sustainment plans are not documented for projects for which sustainment  is not intended or anticipated. (Recommendation 1)", "The Director of the Defense Security Cooperation Agency should  formalize as written policy its informal process for ensuring that project  proposal packages fully address and document all four required security  assistance planning elements. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD and State for comment. In its  comments, DOD concurred with our recommendations and noted that the  Defense Security Cooperation Agency will seek to update guidance for  project proposal packages. DOD\u2019s comments are reproduced in appendix  IV. State did not provide comments.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense and State, and the Director of the  Defense Security Cooperation Agency. 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) 512-5130 or mazanecb@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Carl Levin and Howard P. \u201cBuck\u201d McKeon National Defense  Authorization Act (NDAA) for Fiscal Year 2015 contains a provision for  GAO to conduct biennial audits of such program or programs conducted  or supported pursuant to 10 U.S.C. \u00a7 2282 during the preceding 2 fiscal  years. This report examines (1) the status of funding that the Department  of Defense (DOD) allocated for Global Train and Equip projects in 2009  through 2017; (2) the extent to which DOD addressed security assistance  planning elements in project proposals in 2016 and 2017; and, (3) DOD\u2019s  reporting on the achievement of Global Train and Equip project objectives  and any factors affecting its ability to achieve those objectives.", "To address these objectives, we analyzed funding data, program  guidelines, project proposal documents, and congressional notifications.  We discussed the funding data, project proposal process and key  elements of project planning, documentation, and assessment with  officials from DOD and the Department of State (State); geographic  combatant commands in whose areas of responsibility partner nations  received 2016 or 2017 assistance\u2014the U.S. Africa Command, the U.S.  Central Command, and the European Central Command; and the U.S.  embassies in Jordan, Niger, and Uganda. We selected these countries on  the basis of their having received a higher proportion of DOD\u2019s allocations  for the Global Train and Equip program in fiscal years 2016 and 2017; we  also considered factors such as the number of project assessments  conducted in each country, the maturity of projects, embassy officials\u2019  project assessment experience, and the countries\u2019 geographic  distribution.", "To identify the status of funding that DOD allocated for Global Train and  Equip projects in fiscal years 2009 through 2017, we assessed funding  data for 2009 through 2017. DOD provided data on allocations, amounts  reallocated, unobligated balances, unliquidated obligations, and  disbursements of funds for program activities according to the fiscal year  when the funds were appropriated. We analyzed these data to determine  the extent to which funds had been allocated, obligated, and disbursed.  DOD also provided data on project funding by year of allocation. We used  these data to report allocations for Global Train and Equip projects by  fiscal year and recipient country. We assessed the reliability of these data  by interviewing cognizant agency officials and comparing the data with  previously published data. We determined that the data were sufficiently  reliable for our purposes.", "To assess the extent to which DOD addressed key elements of security  sector assistance for projects it planned to implement in 2016 and 2017,  we analyzed agency documents and interviewed agency officials. We  reviewed Presidential Policy Directive 23 on Security Sector Assistance,  which identified four key elements to be considered for security sector  assistance programs: (1) project objectives that address partner needs,  (2) the absorptive capacity of the recipient unit, (3) the baseline  capabilities of the recipient unit, and (4) the arrangements for the  sustainment of the project. We also reviewed DOD guidance, which  requires these elements to be considered in project proposal  development. To determine the extent to which DOD addressed these  elements in project proposals, we analyzed the content of agency- approved project proposals in 2016 and 2017. Two reviewers  independently analyzed 41 proposal packages for 2016 and 31 proposal  packages for 2017. The reviewers resolved any disagreements through  discussion of the information used to make their independent  determinations. We also interviewed State and DOD officials who develop  and review proposals, discussing (1) how they use information in the  project proposal packages to consider planning elements and (2) other  factors they may consider in developing and reviewing proposals.", "Further, we reviewed congressional notifications DOD developed  subsequent to agency approval of Global Train and Equip project to  determine the extent to which those documents included information  about the four planning elements. With respect to our reporting on  support for information about baseline assessments, congressional  notifications lay out a standardized assessment framework to be used to  assess the effects of projects. This framework includes a baseline  assessment that DOD requires to be completed for inclusion in project  proposal packages. DOD provided baseline assessments for 38 of 41  project proposals notified to Congress in 2016 and 30 of 31 project  proposals notified to Congress in 2017. To evaluate the completeness of  the required baseline assessment sections, we compared these 38  baseline assessment documents included in 2016 project proposal  packages and 30 baseline assessment documents in 2017 project  proposal packages with DOD internal guidance. To assess the  completeness of sustainment plans, we used DOD\u2019s Global Train and  Equip guidance for 2016 and 2017, which defined complete sustainment  plans to include three elements: (1) an identification of funding sources  for project sustainment, (2) an estimate of the annual sustainment costs,  and (3) an assessment of the sustainment capability of the partner nation.", "To examine DOD reporting on the achievement of project objectives in  2016 and 2017, we reviewed agency documents and interviewed agency  officials. In particular, we analyzed DOD\u2019s annual project assessment  reports and supporting documents for 2016 and 2017 as well as the  assessment framework handbook. DOD submitted an annual assessment  report to Congress in 2016 but was not required to submit an annual  assessment report in 2017. As a result, DOD prepared country-level  assessments in 2017 but did not compile them and submit them to  Congress as it did in 2016. To examine the extent to which DOD\u2019s  assessments and supporting documents indicated progress in building  partner capacity, we compared baseline assessments of recipient unit  capability and performance levels, conducted when projects were  proposed, with post-implementation assessments of recipient unit  capability levels, conducted after the delivery of program assistance.  DOD uses a standard framework for evaluating the capabilities and  performance of each recipient unit. Baseline assessments rate the  recipient unit\u2019s level of capability and performance before project  implementation on a 5-point scale, with 1 defined as the ability to perform  some basic tasks to at least a low standard of performance and 5 defined  as the ability to perform most of the advanced tasks for the unit\u2019s  missions and to operate almost continuously throughout its assigned area  of operations. After project implementation, project assessments and  supporting documents use the same 5-point scale to rate any changes  (positive or negative) in the recipient unit\u2019s level of capability and  performance. DOD\u2019s 2016 assessment report and 2017 country-level  assessment reports included information on 84 Global Train and Equip  projects; of these, 21 projects included both a baseline and a post- implementation assessment of the recipient unit. We relied on DOD\u2019s  assessment reports and did not systematically validate the assessment  results because it was beyond the scope of this engagement to assess  the reliability of the assessments. However, for the purposes of this  analysis, we met with DOD and contracted officials responsible for  conducting and reviewing project assessments to gather information  about their processes for assessing recipient unit capabilities. In addition,  we reviewed DOD\u2019s project assessment guidance and their template for  conducting project assessments, which was consistently used in the  assessments we reviewed.", "Finally, to examine DOD reporting on factors affecting the achievement of  project objectives, we reviewed the assessment reports and interviewed  DOD officials responsible for implementing the program, including officials  from DOD\u2019s policy guidance and oversight office and its geographic  combatant commands; officials at embassies in the three selected  countries; and officials at State\u2019s Bureau of Political-Military Affairs. We  also considered the factors that we identified as affecting the  achievement of project objectives for our 2016 report that considered  2015 project proposals. On the basis of our review of DOD\u2019s  assessments and supporting documents and our interviews with agency  officials, we grouped the key factors they identified into four categories:  (1) proposal design weaknesses, (2) equipment suitability and  procurement issues, (3) partner nation shortfalls, and (4) workforce  management challenges.", "We conducted this performance audit from July 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Allocations for Global Train and Equip Projects in Fiscal Years 2016 and 2017", "paragraphs": ["Table 2 shows the total amount of funding DOD allocated for Global Train  and Equip projects in 2016 and 2017 combined."], "subsections": []}, {"section_title": "Appendix III: Global Train and Equip Projects and Allocations Included in DOD\u2019s 2012- 2017 Assessment Reports", "paragraphs": ["As figure 8 shows, in 2012 through 2017, the Department of Defense  (DOD) prepared assessment reports for 31 percent of the projects (82 of  262 projects) it had implemented in 2006 through 2015. These 82  projects account for 28 percent of the nearly $3 billion DOD allocated for  the program in those fiscal years. The Carl Levin and Howard P. \u201cBuck\u201d  McKeon National Defense Authorization Act for Fiscal Year 2015 required  DOD to assess the results of the Global Train and Equip program;  however, DOD was not required to assess a specific number or  percentage of projects in each fiscal year."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Drew Lindsey (Assistant  Director), Jon Fremont (Analyst-In-Charge), Emily Desai, Reid Lowe,  Martin de Alteriis, and Ashley Alley made key contributions to this report.  In addition, Chris Keblitis provided technical assistance."], "subsections": []}]}], "fastfact": ["Providing training and equipment to the nation's foreign partners is one of the Department of Defense's approaches to fighting terrorism.", "We reviewed the Global Train and Equip program and found that DOD allocated $4.1 billion for the program in fiscal years 2009 through 2017.", "In addition, we looked at how thoroughly proposals for Global Train and Equip projects addressed security assistance planning requirements. We recommended improving guidance and formalizing a quality review process for proposals. This can help decision-makers ensure that program funding is used efficiently."]}
{"id": "GAO-18-425", "url": "https://www.gao.gov/products/GAO-18-425", "title": "High School Sports: Many Schools Encouraged Equal Opportunities, but Education Could Further Help Athletics Administrators under Title IX", "published_date": "2018-05-10T00:00:00", "released_date": "2018-06-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Research has found that sports participation yields many benefits for youth. Girls' participation in sports has increased dramatically since the passage of Title IX in 1972, but is still lower than for boys. Further, investigations by OCR, which enforces and implements Title IX, have highlighted instances of disparities in the resources provided to girls' and boys' teams.", "GAO was asked to review how public high schools encourage equal athletic opportunities. This report examines (1) measures public high schools and athletics administrators have taken to encourage equal athletic opportunities for boys and girls, and (2) factors that affect boys' and girls' participation levels in public high school sports programs. GAO conducted a nationally generalizable probability survey of athletics administrators at 784 public high schools. GAO interviewed nine subject matter specialists selected to provide a range of perspectives. GAO also reviewed relevant federal laws, regulations, and guidance and interviewed OCR officials."]}, {"section_title": "What GAO Found", "paragraphs": ["According to GAO's nationally generalizable survey of athletics administrators, public high schools recently took various measures to encourage equal opportunities for boys and girls in sports. For example, a majority assessed resources such as equipment, travel opportunities, and facilities that they provided to girls' and boys' teams and some schools took steps to gauge student interest in specific sports as a means of encouraging equal opportunities, according to GAO's survey. Education's Office for Civil Rights (OCR) guidance indicates that Title IX coordinators\u2014which school districts are required to designate and make visible per regulations for Title IX of the 1972 Education Amendments (Title IX)\u2014should work closely with athletics administrators to determine whether action is needed to address any underrepresentation, or to otherwise encourage equal athletic opportunities. However, GAO estimates that 51 percent of athletics administrators either were unaware of or unsupported by their Title IX coordinator, according to the survey (see figure). These findings raise questions as to whether Title IX coordinators are familiar with and using Education's guidance. Officials from an association for Title IX coordinators said this lack of communication with athletics administrators may be related to some Title IX coordinators' limited understanding of Title IX and athletics. OCR officials said that they did not know the extent to which Title IX coordinators are working with their athletics administrators to encourage equal athletic opportunities because Education generally does not collect this information. Better information on Title IX coordinators could help Education support school districts' efforts to encourage equal sports opportunities for girls and boys.", "The factors that most affect boys' and girls' participation in public high school sports are the number of, and interest in, participation opportunities offered, according to GAO's survey and interviews with nine subject matter specialists. Though the survey provided no clear consensus on factors that discourage students from participating in sports, athletics administrators most often perceived students' competing responsibilities as discouraging participation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that OCR determine the extent of K-12 Title IX coordinators' knowledge and use of tools in its existing guidance and use this information in its efforts to encourage them to work with athletics administrators to help ensure equal athletic opportunities. Education partially concurred, stating it would consider GAO's recommendation in its complaint investigations, technical assistance activities, and communication practice reviews."]}], "report": [{"section_title": "Letter", "paragraphs": ["We have previously reported that sports participation yields many benefits  for youth, ranging from positive health outcomes to improved academic  achievement to increased self-esteem, and schools are uniquely  positioned to provide students with opportunities to participate in sports.  We have also reported that girls began playing high school sports in large  numbers only after the passage of Title IX of the 1972 Education  Amendments (Title IX), which prohibits discrimination on the basis of sex  in any education programs and activities by recipients of federal financial  assistance. However, girls\u2019 sports participation remains lower than boys\u2019  participation. Further, the Department of Education (Education) has found  instances of disparities or potential disparities in the benefits and services  provided to girls\u2019 and boys\u2019 teams, including equipment, facilities, and  schedules for practices and games.", "You asked us to examine how public high schools encourage equal  athletic opportunities for members of both sexes. This report examines  (1) what measures public high schools and athletics administrators have  taken to encourage equal athletic opportunities for boys and girls, and (2)  what factors affect boys\u2019 and girls\u2019 participation levels in public high  school sports programs.", "To examine both of these questions, we conducted a nationally  generalizable web-based survey of athletics administrators in a stratified,  random sample of 784 U.S. public high schools. The survey asked about  factors that encourage or discourage boys\u2019 and girls\u2019 participation in  interscholastic sports (team-based organized sports activities that offer  competition among schools), activities schools conduct related to  encouraging equal opportunities in these sports, and challenges they  encounter in doing so. The survey, which we administered from June  through early September 2017, had a weighted response rate of 42  percent, and the results are generalizable. To obtain additional context  and illustrative examples to supplement our survey data, we conducted  follow-up interviews with eight athletics administrator respondents, who  were selected for variation in their survey responses, such as the extent  to which they conducted activities to encourage equal opportunities, and  their schools\u2019 characteristics, such as locale type (urban, suburban, or  rural). We also interviewed subject matter specialists at nine  organizations, including national associations of athletics and Title IX  administrators (whose membership includes Title IX coordinators);  organizations that advocate for sports and gender equity issues; and  research centers that study these issues. We selected individuals and  organizations to interview to represent a range of perspectives on these  issues. We also reviewed federal laws, regulations, and guidance, and  interviewed officials at Education\u2019s Office for Civil Rights (OCR). Our  analysis should not be used to make conclusions about legal compliance  with Title IX requirements or the presence or absence of discrimination in  public high school interscholastic sports programs.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Research has found that girls\u2019 participation in sports has increased  dramatically since the passage of Title IX. However, research has also  found that progress toward equal sports participation between boys and  girls has slowed since 2000, and a participation gap remains between the  sexes. We previously reported that federal data from school year 2013- 14 showed that national girls\u2019 participation rates in public high school  interscholastic sports remained nearly 10 percentage points lower than  boys\u2019 rates. The same data showed that at nearly half of schools, girls\u2019 share of sports participation was less than their share of enrollment by 5  percentage points or more."], "subsections": [{"section_title": "Education\u2019s Role", "paragraphs": ["Within Education, OCR enforces and implements Title IX, which applies  at all educational levels, including colleges, universities, and public school  districts, with limited exceptions. OCR\u2019s most recent annual report  describes its mission as ensuring equal access to education and  promoting educational excellence throughout the nation through vigorous  enforcement of civil rights laws. OCR\u2019s core activities include  responding to civil rights complaints filed by the public and conducting  agency-initiated investigations to enforce federal civil rights laws;  providing technical assistance to help institutions achieve compliance with  the civil rights laws that OCR enforces; and issuing regulations and policy  guidance to ensure equal access to educational opportunity. OCR also  conducts the Civil Rights Data Collection (CRDC), which collects key  information related to civil rights from public elementary and secondary  schools and school districts, including information on interscholastic  sports and teams offered for boys and girls and their participation.", "With respect to athletics, Education\u2019s Title IX regulations require schools  that offer sports teams to provide equal opportunities for members of both  sexes. The regulations, along with OCR guidance, specify key elements  OCR considers, among other things, in determining whether schools are  offering equal opportunities (see fig. 1). OCR uses the number of  participants on a school\u2019s sports teams as a proxy for participation  opportunities when determining whether those opportunities are  proportionate for boys and girls.", "Recipients of federal education funds, such as public school districts,  bear the responsibility for complying with Title IX. Districts are required  to designate an employee to coordinate efforts under Title IX, and to  make this Title IX coordinator visible. In 2014, we recommended OCR  clarify and disseminate information on the roles and responsibilities of  these Title IX coordinators. In response, during fiscal year 2015, OCR  issued several pieces of Title IX guidance, including a Dear Colleague  letter delineating the specific requirements and duties of coordinators, in  addition to a letter to coordinators and a Title IX resource guide, which  includes guidance on monitoring compliance in athletics. This guide  states that the Title IX coordinator should work closely with many different  members of the school community, including athletics administrators.  Regarding athletics, it recommends tools that Title IX coordinators can  use to encourage equal opportunities in athletics, which include  evaluating whether there is unmet interest in a particular sport and  comparing expenditures on boys\u2019 and girls\u2019 sports teams as an indicator  of benefits provided to those teams."], "subsections": []}]}, {"section_title": "Athletics Administrators Reported Schools Took Some Steps to Encourage Equal Opportunities, but About Half Did Not Receive Title IX Coordinator Support", "paragraphs": [], "subsections": [{"section_title": "To Encourage Equal Opportunities, the Majority of Athletics Administrators Reported That Their Schools Assessed Resources Provided to Boys\u2019 and Girls\u2019 Teams", "paragraphs": ["The majority of public high schools assessed some aspects of their sports  programs over the past 2 years to encourage equal opportunities for  boys\u2019 and girls\u2019 sports teams, according to our nationally generalizable  survey of athletics administrators. Specifically, the estimated percentage  of schools assessing key athletic resources provided to these teams  ranged from 63 percent of schools assessing travel opportunities to 76  percent assessing uniforms (see fig. 2).", "In our interviews with eight athletics administrators, we heard a variety of  approaches to assessing these resources. For example, when scheduling  practice times and competitions, five athletics administrators said that  they scheduled a boys\u2019 competition only if they could also schedule a  girls\u2019 competition. Four athletics administrators described watching  practices, inspecting equipment to identify when it needed replacement,  or replacing equipment as their coaches requested it. Four athletics  administrators said that coaches can sometimes influence the distribution  of resources. For instance, one athletics administrator noted that in the  past, his school had unequal facilities for boys\u2019 baseball and girls\u2019 softball,  stemming in part from the boys\u2019 baseball coach being a stronger  advocate for his team. However, these athletics administrators generally  described working with the coaches to ensure that resource allocation did  not create inequalities.", "Most schools reported using a mix of public and private funds to support  their athletic programs. An estimated 75 percent of public high schools  received public funding (state or local) for their sports programs; for some  individual sports or school athletics programs, public funding may be the  primary funding source. We estimate that about 52 percent of schools  that received public funding monitored or directed its use to help  encourage equal resources for boys\u2019 and girls\u2019 teams. OCR\u2019s Title IX  Resource Guide encourages Title IX coordinators to periodically review  expenditures on male and female athletic teams as part of their review of  resources. At four schools, athletics administrators told us that they paid  attention to the actual resources girls and boys received rather than  focusing on expenditures, and three of these administrators explained  there could be valid reasons for spending differences. For example, one  athletics director said that both boys\u2019 and girls\u2019 hockey teams at his  school participated in annual tournaments, but the girls preferred a  tournament that did not require a hotel stay, so it was less expensive.", "In addition, we estimate that about 81 percent of public high schools had  at least one booster club and, according to our survey, an estimated 51  percent of these schools monitored or directed the club to encourage  equal opportunities. Among the eight athletics administrators we  interviewed, relationships with booster clubs varied. For instance, some  issued booster club guidelines and approved their purchases in advance,  while others had no oversight of booster club expenditures. For  example, one athletics administrator told us that he provides booster club  presidents with written guidelines and approves purchases to make sure  they do not create a Title IX compliance issue. Another athletics  administrator\u2019s school had recently undergone negotiations to obtain  access to booster club expenditure records for the first time so that they  could regularly review those expenditures. OCR has stated in compliance  decisions, and OCR officials confirmed to us in interviews, that it  considers resources provided through the use of private funds, including  booster funding, in assessing whether schools are providing equivalent  resources to teams of each sex. An official from a national association  representing athletics administrators stated that administrators who take  the association\u2019s Title IX trainings are often surprised to learn they should  monitor or direct booster club spending to help ensure equal  opportunities."], "subsections": []}, {"section_title": "Some Athletics Administrators Reported That Their Schools Used Surveys and Other Tools to Gauge Student Sports Interests, Which Can Help Encourage Equal Opportunities", "paragraphs": ["In addition to assessing the various school and booster club resources  provided to boys\u2019 and girls\u2019 teams, some schools recently took steps to  gauge student interest in specific sports as a means of encouraging equal  opportunities, according to our survey. For example, we estimate that 40  percent of schools surveyed students about their sports interests over the  last 2 school years and 25 percent added or changed their sports  offerings based on requests from the underrepresented sex in their  school\u2019s sports program (see fig. 3).", "An estimated 31 percent of schools had not recently used any of these  tools, or did not know if they had used the tools, to gauge student interest.  And, according to our analysis of Education\u2019s data, 60 percent of schools  had one sex underrepresented by more than 5 percent in their sports  programs in school year 2013-14.", "OCR guidance states that where one sex is underrepresented in sports,  schools can demonstrate they are providing equal participation  opportunities by using multiple indicators to identify, among other things,  whether the sports currently offered meet student interest. OCR  guidance also states that in its investigations the agency determines on a  case-by-case basis whether sports participation numbers at a school are  disproportionate, and whether the school is taking sufficient steps to  accommodate the athletic interests and abilities of both girls and boys.  In addition, OCR guidance describes tools that schools and school  districts can use to assess for themselves whether action is needed to  address any underrepresentation, or to otherwise encourage equal  athletic opportunities. According to the guidance, these efforts should be  led by the school district\u2019s Title IX coordinator."], "subsections": []}, {"section_title": "About Half of Athletics Administrators Were Either Unaware of or Unsupported by Their District Title IX Coordinator", "paragraphs": ["About 51 percent of athletics administrators were either not aware of or  not supported by their Title IX coordinator, according to our survey.  Specifically, we estimate that 40 percent of athletics administrators\u2013 serving about 6,110 schools and 5 million students\u2013were unaware of a  Title IX coordinator in their school district and that an additional 12  percent were aware of their Title IX coordinator but received little to no  support from them (see fig. 4). We also found that almost all of the  athletics administrators who were not aware of having a Title IX  coordinator were in a district that had, in fact, designated one.  Specifically, when we matched athletic administrators\u2019 survey responses  with OCR\u2019s data and extrapolated to the population overall, we estimated  that 99 percent of the athletics administrators who were not aware of a  Title IX coordinator in their district were in a school district that had listed  a coordinator in school year 2013-14. Further, an estimated 26 percent of  athletics administrators wanted additional guidance or assistance related  to encouraging equal opportunities for boys and girls, according to our  survey.", "Given the significant number of athletics administrators who reported  being unaware of or unsupported by their Title IX coordinators, our survey  results raise questions as to whether Title IX coordinators\u2014whom school  districts must designate and make visible in accordance with Title IX  regulations\u2014are familiar with and using OCR\u2019s guidance on their role and  responsibilities. This guidance states that the Title IX coordinator should  support and work closely with members of the school community,  including athletics administrators, to ensure compliance with Title IX.  When asked about these survey results, officials from an association for  Title IX coordinators and for other related administrators told us that they  were not surprised that a number of athletics administrators were not  aware of or supported by their Title IX coordinator, because the results  are consistent with what they hear when interacting with their members  across the country. Based on these interactions, these association  officials said they have observed that there is often a separation between  athletics and other school departments, and that Title IX coordinators  without an athletics background may be reluctant to engage in oversight  of that department.", "Based on their experiences providing training to Title IX coordinators,  these association officials also said that Title IX coordinators\u2019 familiarity  with Title IX requirements has improved somewhat since the release of  OCR\u2019s 2015 guidance delineating their role and responsibilities, but their  familiarity with these requirements is still generally low, particularly with  respect to athletics. In these officials\u2019 opinion, this lack of understanding is  due in part to the complex and wide-ranging nature of Title IX and to the  lack of resources for training in many school districts. These and other  subject matter specialists we interviewed said that other potential factors  contributing to athletics administrators\u2019 lack of awareness of their Title IX  coordinator included high turnover among athletics administrators and  myriad responsibilities of staff in both roles. When Title IX coordinators do  not work closely with athletics administrators, as OCR guidance suggests  they do, they may miss opportunities to make those administrators aware  of tools the guidance recommends that could help advance equal  opportunities. In addition, OCR guidance recognizes that the most serious  Title IX violations tend to occur in districts without a supportive Title IX  coordinator.", "OCR officials said that they had learned from their complaint  investigations and compliance reviews that some athletics administrators  were not working with their districts\u2019 Title IX coordinators. However, these  officials said they did not know the extent to which Title IX coordinators  themselves were aware of and using the tools recommended in their  guidance because, outside of these enforcement activities, OCR  generally does not collect information on Title IX coordinators\u2019 knowledge  of or activities related to the guidance. Standards for internal control in  the federal government state that agencies should both obtain quality  information from and communicate quality information to external parties  to help achieve the agency\u2019s objectives and address risks. In OCR\u2019s case, its objectives include ensuring schools actively encourage equal  opportunities for boys and girls as articulated in Education\u2019s Title IX  regulations and OCR guidance, and risks include violations of Title IX that  have not resulted in formal complaints. Absent better information on Title  IX coordinators\u2019 awareness and use of Title IX guidance, OCR may not  have a complete picture of school districts\u2019 ongoing efforts to encourage  equal opportunities, challenges they encounter in doing so, and  successful strategies that might be shared with a broader audience.  Collecting and analyzing this information could enable OCR to target its  communication to Title IX coordinators, and further encourage them to  work with athletics administrators on ensuring equal athletic opportunities."], "subsections": []}]}, {"section_title": "Available Opportunities Helped Drive Public High School Sports Participation Levels, but Family Resources and Other Factors Could Limit Participation", "paragraphs": [], "subsections": [{"section_title": "The Number of and Interest in Opportunities Offered by Schools Encouraged Higher Participation Levels", "paragraphs": ["The number of participation opportunities schools offered, as well as  student interest in those opportunities and in working with specific  coaches at the school, were top factors that encouraged interscholastic  sports participation among public high school students, according to our  survey of public high school athletics administrators. We estimate that  over 70 percent of athletics administrators viewed the number of  interscholastic athletic participation opportunities at their school as  encouraging boys and girls to participate in high school sports (see fig.  5).", "Our 2017 report on high school sports access and participation found that  in school year 2013-14, public high schools overall offered the same  number of sports and teams for boys and girls. Of the nine subject  matter specialists we interviewed for this report, six described specific  knowledge of factors that encourage or discourage participation in high  school sports. All six of these subject matter specialists agreed that  opportunity is an important factor affecting student participation,  especially for girls; several specialists also said that the continued  participation gap shows that girls do not have access to an equal number  of roster spots on teams as boys. For example, one researcher, as well  as a representative of a national association of athletics administrators,  suggested that one reason the gap between boys and girls persists is that  schools do not offer girls\u2019 sports with roster sizes equivalent to popular  boys\u2019 sports, such as football. One of the eight athletics administrators  said that this was the case at her school, noting that none of her girls\u2019  teams came close to the size of the football teams. The gap may be  particularly acute for minority girls, according to one subject matter  specialist. Our 2017 report on public high school sports access and  participation found that, for both boys and girls, fewer students attended  high minority and high poverty schools that offered sports, compared to  students at other schools, and these schools had lower participation rates  when they did offer sports.", "We estimate that over 75 percent of athletics administrators viewed the  level of student interest in the sports offered by their school as  encouraging participation in their school\u2019s teams. Several subject matter  specialists agreed that offering sports that align with students\u2019 specific  interests is an important aspect of providing meaningful opportunities, but  a few also noted that some schools fail to consider which sports most  interest their female students.", "We estimate that 70 percent or more of athletics administrators viewed  student interest in working with certain coaches as a factor that  encouraged participation at their school. As explained by one researcher,  coaching quality plays a large role in encouraging high school sports  participation and a good coach can pull students into a sport and keep  them participating. Alternatively, another researcher noted that less  qualified or inexperienced coaches depress participation. These views  are consistent with our work, in which we reported that the quality of  coaching is a key factor in maximizing the positive effects of sports  participation on students\u2019 personal development.", "In addition, research shows that the state of athletic facilities can also  affect a student\u2019s choice to participate in high school sports, and a few  athletics administrators and subject matter specialists we interviewed also  cited this as a factor. For example, one study found that proximity to  sports facilities was a factor predicting children\u2019s participation in team  sports. Another study found that student participation in interscholastic  sports is higher at schools with more sports facilities compared with  schools that have few sports facilities. A few of the subject matter  specialists and one athletics administrator made similar observations  about the relationship between facilities, participation, and inequity. For  example, the athletics administrator said that at his high school, baseball  and softball participation has decreased because their athletic facilities  are located off campus, requiring additional travel for both students and  parents for practices and games. Additionally, representatives from two  advocacy groups noted that parents may have concerns related to school  sports facilities, particularly for the safety of their daughters. For example,  one said that some schools have girls\u2019 teams practice in off-campus  facilities, sometimes in unsafe neighborhoods, without offering  transportation. The other said parents may be concerned when fields are  insufficiently lit or their daughters come home late from practices."], "subsections": []}, {"section_title": "Factors Related to Family and Community Resources and Cultural Expectations May Discourage Participation in Sports", "paragraphs": ["We found no clear consensus in our survey of athletics administrators  regarding factors that tend to discourage students from participating in  sports, and the eight athletic administrators we interviewed had mixed  views on the subject. That said, the most frequently mentioned factors  that were perceived to discourage participation (representing an  estimated 15-35 percent of athletic administrators) were (1) competing  responsibilities, (2) lack of access to athletic feeder programs, (3) the  perceived benefits of joining club teams, and (4) participation costs to the  student.", "Competing responsibilities. Over one-quarter of athletics  administrators cited students\u2019 competing responsibilities as  discouraging participation in public high school sports. This could  include a range of responsibilities, including schoolwork, other school  activities, and family obligations. Among the athletic administrators we  interviewed, one noted that many students at his magnet school were  more focused on academics than athletics. A few cited examples of  competing responsibilities that were tied to family resources. For  example, two said that many of their students have jobs and family  responsibilities that prevent them from participating in sports. One of  these administrators said that his school\u2019s student population largely  comes from lower-income families, and many are juggling jobs; in  response, the school changed practice schedules to better match  students\u2019 availability, which has made it easier for more students to  participate.", "Lack of access to athletic feeder programs. Some athletics  administrators also mentioned a lack of access to athletic feeder  programs\u2014club or community-based youth sports programs that train  younger children before they enter high school\u2014as discouraging  participation in sports at their public high schools. In addition, a few of  the eight athletics administrators we interviewed saw this lack of  access as being closely related to community or family resources.  Two of these administrators, who worked in lower-income schools,  reported that younger children in their area have very little access to  community or club sports and that students who do not have previous  exposure to sports may lack the skills to participate at the high school  level. One of these administrators also said that having more  community youth sports might increase student interest in playing at  the high school level. A third athletics administrator said that feeder  programs help drive participation in high school sports. In his school\u2019s  competitive environment, students trying out for sports for the first  time when they get to high school are, in most cases, likely to be cut  from the team. He added that he has found that family income is a  major contributing factor to children\u2019s ability to begin training early,  which puts lower income students at a disadvantage. His point was  echoed in one research study that found that as family income  increases, boys and girls tend to enter organized sports at a younger  age.", "Perceived benefits of joining club teams. Athletics administrators  also mentioned the presence of club teams that students may choose  over school teams as discouraging participation in public high school  teams. This may be particularly true for higher-income students, as  competitive travel and club teams\u2014which parents and students may  see as offering higher-caliber coaching, more specialized training, and  greater opportunities to compete against elite athletes\u2014can be quite  expensive. Several subject matter specialists we interviewed cited this  as an issue that affects high school sports participation. Further, a few  of the high school athletics administrators we interviewed observed  decreased student participation at their schools due to the presence  of club teams. One athletics administrator from the Southwest  explained that participation is weaker for his school\u2019s Olympic sports,  such as swimming, due to competition from club sports. He noted that  at his high school, this phenomenon makes it more difficult to recruit  other students because the school teams become less competitive.  Another athletics administrator from the Midwest explained that at his  high school, the presence of club sports disproportionally depressed  girls\u2019 participation in high school sports. In particular, he said the  popularity of club girls\u2019 volleyball in the winter reduced participation in  his girls\u2019 basketball teams.", "Participation costs. The cost to students of participating in athletics  was also mentioned by some athletics administrators as discouraging  participation in public high school teams. The subject matter  specialists and athletics administrators we interviewed had mixed  views on the effect of costs on student participation. Among the  subject matter specialists, two said that the increasing prevalence of  fees in high school sports programs is threatening participation by  lower-income students. One athletics administrator agreed, saying  that in the past he has dissuaded his school district from charging  participation fees for this reason. Another said that his school does  not charge fees, but students could still be discouraged by the  fundraising required for \u201cextras\u201d such as team t-shirts. In contrast, one  subject matter specialist said that it is typically higher-income schools  that charge students fees to participate in sports, and therefore fees  do not generally affect students in lower-income schools.", "In addition to the four most commonly cited barriers from our survey,  several research studies noted that cultural expectations around family  responsibilities and gender roles may also discourage some student  groups more than others. For example, one study found that Hispanic  girls quit sports to take care of younger siblings at higher rates than their  white peers. This and another study noted that students from recent  immigrant families may also be discouraged from participating in sports  because of different cultural expectations around prioritizing sports, and  girls may be additionally affected by expectations around gender roles.  For example, it found that immigrant parents are more likely than non- immigrant parents to believe that boys are more interested in sports than  girls, and that 75 percent of immigrant sons were involved with organized  or team sports compared with 43 percent of immigrant daughters.  Similarly, a study of sports involvement among East African immigrant  girls found that those the researchers interviewed face social barriers to  participation, such as peer criticism, parents\u2019 fears of interactions with  male athletes, and lack of parental support.", "Several of the subject matter specialists and athletics administrators with  whom we spoke made similar observations around cultural expectations.  One suggested that differences in sports participation among immigrant  communities may stem from the opportunities to play sports in the  family\u2019s country of origin, noting that the United States is unique in tying  sports teams to its academic institutions. Officials from two advocacy  organizations, one of which advocates for the Hispanic community, noted that some Hispanic families expect daughters to come home after  school to help care for their siblings. This can interfere with participating  in after-school activities. In addition, one athletics administrator we  interviewed, whose school serves a predominantly Hispanic community,  commented that his coaches have seen girls from this community quit  sports teams on several occasions due to family responsibilities. One of  the advocacy organization officials added that schools wanting to improve  participation among Hispanic girls should, for example, consider more  creative scheduling to allow these students to attend practices."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While sports participation for girls has risen dramatically over the last 45  years, a significant gap still remains between boys and girls in public high  school sports. Our findings suggest that the reasons for this gap are  varied and complex, and according to our survey, at many schools,  athletics administrators are not aware of or do not receive support from  their Title IX coordinator. OCR\u2019s guidance suggests that uninvolved Title  IX coordinators are associated with serious Title IX violations, but OCR  does not collect information about coordinators\u2019 level of involvement with  districts and schools outside of its complaint investigations and  compliance reviews. Better information about Title IX coordinators\u2019  awareness and use of OCR\u2019s guidance could help OCR support schools\u2019  and districts\u2019 efforts to provide equal opportunities in their sports  programs."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Department of Education\u2019s Assistant Secretary for Civil Rights should  determine the extent to which Title IX coordinators at the K-12 level are  aware of and using the tools recommended in OCR\u2019s existing guidance  and any barriers preventing their use of this guidance, and use this  information in OCR\u2019s efforts to encourage them to work with athletics  administrators on ensuring equal athletic opportunities. (Recommendation  1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education for review and comment.  Education provided written comments that are reproduced in appendix III,  as well as technical comments that we incorporated, as appropriate.", "In its written comments, Education stated that it partially concurs with our  recommendation that OCR determine the extent of K-12 Title IX  coordinators\u2019 knowledge and use of tools in its existing guidance and use  this information in its efforts to encourage them to work with athletics  administrators to help ensure equal athletic opportunities. Specifically,  Education stated that when OCR conducts investigations in response to  complaints it would look for opportunities to examine whether K-12 Title  IX coordinators were aware of, and using, the tools in OCR\u2019s guidance.  Education also said that when OCR engages in technical assistance  activities, it will encourage Title IX coordinators to work with athletics  administrators to encourage equal opportunities. Education also said that  it will consider our recommendation during its frequent reviews of the  agency\u2019s communications practices.", "We agree that these are important first steps in helping ensure that Title  IX coordinators are working with athletics administrators and otherwise  fulfilling their responsibilities to encourage equal opportunities. However,  given our finding that about half of public high school athletics  administrators were unaware of or unsupported by their Title IX  coordinator, we continue to believe the systemic approach we  recommend is necessary. The activities that OCR described in its  response are predicated on a complaint being filed or technical  assistance being requested. This narrow approach means that OCR will  likely not learn the full extent to which K-12 Title IX coordinators are  unaware of or not using the tools in OCR\u2019s guidance. It also means that  its reviews of the agency\u2019s communication practices may be hampered by  incomplete information on how best to encourage Title IX coordinators to  use these tools and work with athletics administrators to ensure equal  opportunities.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Education, and other  interested parties. In addition, this report will be available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff should have any questions about this report, please  contact me at 617-788-0580 or nowickij@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["The objectives of this study were to examine: (1) what measures public  high schools and athletics administrators have taken to encourage equal  athletic opportunities for boys and girls, and (2) what factors affect boys\u2019  and girls\u2019 participation levels in public high school sports programs. To  address these objectives, we used a variety of methods, including a web- based survey of public high school athletics administrators; follow-up  interviews with eight survey respondents; reviews of federal law,  regulations, and guidance; and interviews with federal officials at the  Department of Education (Education) and with subject matter specialists."], "subsections": [{"section_title": "Web-based Survey of Public High School Athletics Administrators", "paragraphs": ["To obtain school-level perspectives on factors that affect boys\u2019 and girls\u2019  participation levels in public high school sports programs and approaches  schools and athletics administrators have used to encourage equal  athletic opportunities, we designed and administered a survey to athletics  administrators at a generalizable, stratified random sample of public high  schools in the United States. The survey included questions about what  sports and levels of competition the school offered for each sex, how  many boys and girls participated in sports in school year 2015-16, and  factors that encourage and discourage girls\u2019 and boys\u2019 sports participation  at the school. The survey also included a variety of questions related to  the school\u2019s and athletics administrator\u2019s activities to encourage equal  opportunities in the prior 2 years, challenges they faced in encouraging  equal opportunities, sources of guidance on Title IX, booster club  structures and oversight, and data they maintained on funding and  expenditures. In addition, it included a question on whether, to the  athletics administrator\u2019s knowledge, their school district had a Title IX  coordinator.", "Our population of interest for the survey was athletics administrators at  public high schools. In terms of the schools, we defined our target  population as public schools offering at least one high school level grade  (9, 10, 11, or 12) that appeared in both Education\u2019s Common Core of  Data (CCD) and Civil Rights Data Collection (CRDC) for the 2013-14  school year, were located in the 50 states and the District of Columbia,  and indicated in the CRDC that they offered interscholastic sports. We  excluded schools that were listed as closed or not operational according  to the school year 2015-16 CCD, as well as single-sex schools and  schools located in U.S. territories. We also obtained the most current  school contact information from the school year 2015-16 CCD.", "We originally selected a stratified random sample of 813 from a  population of 15,330 schools in our sampling frame. However, we  ultimately excluded 26 schools from our original population and sample  because they had closed, did not serve high school grades, or did not  offer interscholastic sports, and thus were not considered eligible for our  survey. In addition, we found schools in the population and sample that  shared sports programs and athletics administrators, effectively reducing  the population by 10 schools and the sample by 3 schools for purposes of  our survey. This resulted in a sample of 784 schools from the eligible  population of 15,294.", "We stratified this sample based on school type (charter or traditional),  concentration of minority students (low = 0-25 percent, mid = 26-74  percent, high = 75-100 percent),  locale type (urban, suburban, or rural),  and participation rates of male and female students in school year 2013- 14. This created 24 strata as noted in table 1. For the participation rate  strata, we calculated each school\u2019s male and female students\u2019  participation rates using data from the school year 2013-14 CRDC.  Participation rates were defined as the number of sports participants of  that gender divided by the number of enrolled students of that gender,  and these rates were then compared to determine which gender had  higher participation: females or males. We placed schools with equal  participation rates for males and females into the \u201cFemales\u201d participation  category because, given the overall higher participation rates for boys, schools with both equal participation rates and higher rates for girls are  rarer.", "We chose these strata to ensure schools with the stratum characteristics  were included in the sample. The total sample size of n=813 was inflated  for an expected 60 percent response rate, and we distributed the sample  across the strata for workload and analysis considerations. The sample  size in table 1 optimizes for some groups, while controlling the distribution  across the 24 strata. Specifically, we calculated the Neyman optimal  sample size that resulted in an overall 5 percent margin of error for an  attribute estimate. We allocated samples across strata to achieve  precision goals at two levels: overall population percentage estimates  with margins of errors within plus or minus 5 percentage points, and  subpopulation percentage estimates (i.e. school type, minority level,  locale, or participation group) with margins of errors within plus or minus  10 percentage points, both at the 95 percent confidence level.  Additionally, we ensured a minimum sample of 10 schools in every  stratum.", "Based solely on the constraint of an overall margin of error within plus or  minus 5 percentage points, some reporting groups were expected to have  margins of errors that were less than 10 percentage points without the  need of additional explicit constraints. For other reporting groups, we  implemented constraints so that the designed margin of error was within  plus or minus 10 percentage points. Specifically, we included the  following constraints for margins of error of attribute estimates with 95  percent confidence intervals within each reporting group, for a realized  response rate of 60 percent: margins of error within plus or minus 5 percentage points overall, within plus or minus 10 percentage points for urban schools, within plus or minus 10 percentage points for high minority schools, within plus or minus 10 percentage points for charter schools.", "Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we expressed our confidence in the precision of our particular  sample\u2019s results as a 95 percent confidence interval (e.g., plus or minus 7  percentage points). This is the interval that would contain the actual  population value for 95 percent of the samples we could have drawn.  Unless otherwise noted, all percentage estimates in this report have  confidence intervals within plus or minus 7.7 percentage points. For other  estimates, the confidence intervals or margins of error are presented  along with the estimates themselves.", "We took several steps to minimize non-sampling error. We used several  methods to identify the names and email addresses of the athletics  administrators for our selected sample of schools. In some states, the  high school associations had directories we used to obtain this  information. For those that did not, we searched the school\u2019s website or  called the school or district. We administered the survey from June  through early September 2017. To obtain the maximum number of  responses to our survey, we sent e-mails to the principals of the schools  in the sample prior to the survey\u2019s launch, asking them to support and  encourage their athletics administrator to complete the survey. We also  worked with the National Federation of State High School Associations to  have the state associations e-mail their members and encourage them to  participate in the survey. Finally, we sent direct reminder emails to  nonrespondents and contacted nonrespondents over the telephone.", "We took additional steps to minimize non-sampling errors, including  pretesting draft instruments and using a web-based administration  system. During survey development, we met with officials from national  groups representing high school activities associations and athletics  administrators and held discussion groups with nine athletics  administrators to explore the feasibility of responding to the survey  questions. We then pretested the draft instrument from April through May  2017 with five athletics administrators in public high schools that were  diverse across a range of characteristics, such as region, school type and  locale, and minority enrollment. In the pretests, we asked about the clarity  of the questions and the flow and layout of the survey. A survey specialist  independent of the project team within GAO also reviewed a draft of the  questionnaire prior to its administration. Based on feedback from the  pretests and the independent review, we made revisions to the survey  instrument. To further minimize non-sampling errors, we used a web- based survey, which allowed respondents to enter their responses  directly into an electronic instrument. Using this method automatically  created a record for each respondent in a data file and eliminated the  errors associated with a manual data entry process.", "Despite these efforts, like most surveys, our survey had nonresponse.  Specifically, the weighted response rate was 42 percent. Survey  nonresponse raises the possibility that those athletics administrators who  did respond to the survey may not be representative of the intended  population, due to nonresponse bias. We carried out a nonresponse bias  analysis and identified three potential factors that may have been related  to athletics administrators\u2019 propensity to respond: school concentration of  minority students, school size, and region. In order to adjust for the  potential nonresponse bias, we adjust the sampling weight with a  nonresponse adjustment to form a final weight. Data analyzed using the  final, nonresponse-adjusted sampling weight is assumed to be missing at  random, given the nonresponse adjustments, and therefore unbiased for  the intended population. We used response propensity weighting class  adjustments based on a model that included the variables identified in the  nonresponse bias analysis. We conducted our analysis using survey  software that accounted for the sample design and weighting."], "subsections": []}, {"section_title": "Survey Follow-Up Interviews", "paragraphs": ["To gain further insights into factors that encourage or discourage  participation in sports, schools\u2019 efforts to encourage equal opportunities,  and the role of the Title IX coordinator, we conducted follow-up interviews  with 8 athletics administrators, chosen from the 105 who had responded  to our survey as of late August and indicated that they were willing to  participate in a follow-up discussion on their responses. Specifically, we  selected respondents to obtain diversity in their responses to a few key  survey questions, as well as certain characteristics of their schools. In  making our selections, we considered their responses to survey questions  on:   their awareness of their Title IX Coordinator, activities their schools conducted within the last two years to  encourage equal opportunities for boys and girls in sports, and whether the school maintains expenditure data on sports and their  willingness to share these data.", "We identified school characteristics with the data sources used to create  our survey sampling frame. The characteristics we considered to further  narrow our selection were:  school type (charter or traditional),  school locale (urban, suburban, or rural),  concentration of minority students (low-, mid-, or high-minority).", "Additionally, we reviewed open-ended responses in the survey to  determine if there were answers that necessitated additional discussion  or clarification (see table 2).", "In our interviews with the athletics administrator at each school, which we  conducted by phone, we asked officials to describe their relationship with  their Title IX coordinator, familiarity with Title IX requirements overall, and  their familiarity with state and local guidance, specifically. We also asked  them to describe their efforts to encourage equal opportunities in sports  and the nature of challenges they have faced in doing so. In addition, we  asked them about funding sources and their use of expenditure data, the  role of booster clubs, and the role of outside funding. For each school  where the athletics administrator reported that they had expenditure data,  we requested a copy of these data. We obtained expenditure data from  three schools. In some cases we obtained additional documentation  such as booster club guidelines, processes for adding school sports, and  participation data. Because we selected the schools for follow-up  interviews judgmentally and only conducted eight interviews we cannot  generalize our findings about their policies, practices, and challenges."], "subsections": []}, {"section_title": "Review of Law, Regulations, and Guidance and Interviews with Education Officials", "paragraphs": ["To understand the requirements for providing equal athletic opportunities  in public high schools and how Education\u2019s Office for Civil Rights (OCR)  monitors and supports public school districts in meeting these  requirements, we reviewed Title IX of the 1972 Education Amendments  (Title IX), Education\u2019s Title IX regulations, and related guidance  documents. We also interviewed OCR and other Education officials.", "In addition, we reviewed selected research studies that provided context  and insight into factors affecting high school sports participation."], "subsections": []}, {"section_title": "Interviews with Subject Matter Specialists", "paragraphs": ["To obtain additional context and insights, we selected and interviewed  subject matter specialists, including researchers and officials from  advocacy groups and associations. We selected these subject specialists  so that, together with the athletics administrators we surveyed and  interviewed, they would provide a variety of perspectives on factors that  affect boys\u2019 and girls\u2019 participation in high school sports and approaches  schools use to encourage equal athletic opportunities. The researchers  and officials we interviewed were located at:  the Institute for Research on Women and Gender and the Sport,  Health, and Activity Research and Policy Center at the University of  Michigan,  the Tucker Center for Research on Girls and Women in Sport at the  University of Minnesota,  the Department of Recreation, Sport and Tourism at the University of  Illinois,", "National Women\u2019s Law Center,", "Women\u2019s Sports Foundation,", "National Interscholastic Athletics Administrators Association", "National Federation of State High School Associations, and", "Association of Title IX Administrators.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Survey of Public High School Athletics Administrators", "paragraphs": [], "subsections": [{"section_title": "The questions we asked in our survey of public high school athletics administers, as well as definitions used, are shown below. The blanks in the survey were filled in with the name of each athletics administrator\u2019s school. Some questions were only asked if the athletics administrator responded a certain way to a prior question.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the individual named above, Bill MacBlane (Assistant  Director), Lauren Gilbertson and Jamila Jones Kennedy (Analysts-in- Charge), Christina S. Cantor, MacKenzie Cooper, Jill Lacey, Benjamin  Sinoff, Andrew Stavisky, Sonya Vartivarian, and Khristi Wilkins made key  contributions to this report. Also contributing to this report were James  Bennett, Deborah Bland, Barbara Bovbjerg, Randy De Leon, Holly Dye,  David Forgosh, Amy MacDonald, and Sheila R. McCoy."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["K-12 Education: High School Sports Access and Participation.  GAO-17-754R. Washington, D.C.: September 14, 2017.", "Child Welfare: Federal Agencies Can Better Support State Efforts to  Prevent and Respond to Sexual Abuse by School Personnel. GAO-14-42.  Washington, D.C.: January 27, 2014.", "K-12 Education: School-Based Physical Education and Sports Programs.  GAO-12-350. Washington, D.C.: February 29, 2012."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-419", "url": "https://www.gao.gov/products/GAO-18-419", "title": "2016 Presidential Campaign: Actions Needed to Address U.S. Secret Service Overpayments for Travel Costs", "published_date": "2018-05-30T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Secret Service incurs millions of dollars in travel expenses to provide security during the fast-paced operational tempo of a presidential campaign. In connection with the 2016 presidential campaign, the Secret Service provided protection for four presidential candidates, two vice presidential candidates, and six of the candidates' family members.", "GAO was asked to review the Secret Service's travel-related expenses for the 2016 presidential campaign. This report examines (1) how much the Secret Service incurred in travel-related expenses, and (2) the extent to which travel-related payments and reimbursements were made in accordance with laws, regulations, and policies. GAO analyzed Secret Service data to determine the travel expenses incurred by the agency for the 2016 presidential campaign. GAO also randomly selected 40 overnight trips to assess the Secret Service's compliance with provisions of its lodging policies and the Federal Travel Regulation. GAO analyzed the Secret Service's payments to campaign committees to determine whether committees were reimbursed the correct amounts for charter flights."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Secret Service's (Secret Service) travel expenses during the 2016 presidential campaign totaled approximately $58 million. Of the $58 million, $17.1 million was for reimbursements to the four campaign committees for chartered aircraft flights. In the case of campaign travel, Secret Service special agents often fly with protected individuals on aircraft chartered by the campaign committees. The Secret Service reimburses the campaign committees for the number of seats occupied by special agents on board each charter flight.", "For the 40 overnight trips GAO reviewed, the Secret Service generally followed its policies and regulations for lodging payments. However, GAO found that the agency overpaid the campaign committees at least an estimated $3.9 million when reimbursing them for special agents' seats on charter flights. Since at least 1977, the Secret Service's policy has been to pay the lower of two fares when reimbursing campaign committees for special agents' travel on chartered aircraft flights. Specifically, the Secret Service is to pay the lower of the following two fares: the lowest commercially available first-class airfare, or the pro rata fare\u2014the cost of the agent's seat on the charter flight calculated by taking the total cost of the charter divided by the number of passengers on board. However, during the 2016 presidential campaign, Secret Service officials misinterpreted a Federal Election Commission regulation, and as a result, did not conduct the comparison. Instead, the Secret Service solely paid the pro rata fare to the campaign committees. Eight months before the end of the 2016 presidential campaign, Secret Service officials determined the interpretation was erroneous, but did not ensure the agency reverted to its long standing policy. During these 8 months, 66 percent of all campaign-related flights with special agents on board were taken.", "Federal agencies are generally required to collect on debts that have been determined by an appropriate official of the federal government to be owed to the United States. Debts include overpayments. Pursuing debt collection, however, will require the Secret Service to calculate the specific amount it overpaid to the campaign committees and determine how to proceed with seeking repayment from the various committees, as appropriate."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that the Secret Service should (1) calculate its overpayments to the campaign committees for special agents' seats on chartered aircraft flights, and (2) determine how it should proceed with respect to collecting on identified debts. The Department of Homeland Security concurred with the recommendations and identified actions underway to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Secret Service (Secret Service), a component within the  Department of Homeland Security (DHS), incurs millions of dollars in  travel expenses to provide protection during the fast-paced operational  tempo of a presidential  campaign. The Secret Service is authorized to  protect major presidential and vice presidential candidates, and within  120 days of a general presidential election, their spouses. In addition,  protection is provided  for children or others not specifically identified  in  statute when directed by the President. Accompanying each protected  individual,  among others, are special agents who provide  24/7 protection,  and advance teams who provide site security. Secret Service special  agents often fly with protected individuals  on aircraft chartered by the  campaign committees and the agency reimburses the committees for the  number of seats occupied by special agents  on board each charter flight.  Candidates often visit multiple cities per day and multiple states per week,  and the necessary Secret Service protective assets must always arrive  and deploy before each visit.", "You requested that we review the Secret Service\u2019s travel expenses during  the 2016 presidential campaign. Specifically, this report addresses the  following questions:  (1) How much did the Secret Service incur in transportation, lodging, and other travel-related expenses when providing protection during the 2016 presidential campaign? (2) To what extent did the Secret Service reasonably assure that payments and reimbursements for travel-related protection expenses were made in accordance with applicable laws, regulations, and  policies during the 2016 presidential campaign?", "To determine how much the Secret Service incurred in travel-related  expenses, we obtained expense data from the Secret Service for the  2016 presidential campaign. Specifically, we reviewed expenses for the  12 protected individuals associated with campaign committees for the  following Presidential candidates: Senator Bernie Sanders, Dr. Benjamin  Carson, Mr. Donald Trump, and Secretary of State Hillary Clinton. We  analyzed the travel expenses incurred by the Secret Service for each of  the protected individuals (a total of 12) to determine the total expenses for  each campaign committee and for the 2016 presidential campaign as a  whole. Additionally,  we determined the amount of the total travel-related  expenses that were reimbursed to the campaign committees for special  agents\u2019 seats on aircraft chartered by the committees. We determined  that the expense data were sufficiently reliable after, among other things,  discussing with Secret Service officials how the data are entered and  maintained in the agency\u2019s financial systems, reviewing the data for  obvious errors and anomalies, and comparing the reimbursement data to  data campaign committees reported to the Federal Election Commission  (FEC).", "To determine the extent to which the Secret Service\u2019s payments and  reimbursements for travel-related protection expenses were made in  accordance with applicable laws, regulations, and policies, we analyzed  the Secret Service\u2019s lodging payments and charter aircraft  reimbursements to the campaign committees. Of the 962 overnight trips  taken during the 2016 presidential campaign, we randomly selected 40\u2014 10 for each of the 4 presidential candidates\u2014to assess the Secret  Service\u2019s compliance with its internal lodging policy and select provisions  of the Federal Travel Regulation (FTR). Although the results of our  analysis are not generalizable to all overnight trips taken during the 2016  presidential campaign, it provided us insight to the Secret Service\u2019s  compliance with select provisions of its lodging policy and the FTR. With  regard to whether the Secret Service reimbursed the four campaign  committees the correct amounts for special agents\u2019 seats on campaign  chartered aircraft, we compared the Secret Service\u2019s payments to the  committees to the agency\u2019s charter aircraft reimbursement policy. To  estimate whether and, if so, by how much the Secret Service incorrectly  paid the campaign committees for special agents\u2019 seats on chartered  aircraft flights, we selected a generalizable stratified random sample of  650 flight segments from the 2,318 flight segments taken from November  1, 2015 through the end of the 2016 presidential campaign that had an  identifiable airport.", "To determine whether the Secret Service followed its policy with regard to  accepting and reviewing chartered aircraft invoices submitted by the  campaign committees, we compared the agency\u2019s policy requirements to  all 76 invoices submitted by the four campaign committees. Further, we  used the Standards for Internal Control in the Federal Government to  assess whether the Secret Service\u2019s requirements for chartered aircraft  invoices, and the review of the invoices, are specific enough to help  ensure that the Secret Service is making correct reimbursements for  chartered aircraft flights. Additional  details regarding our scope and  methodology are provided in appendixes I and II.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Authorization of Secret Service Protection during Presidential Campaigns", "paragraphs": ["During the 2016 presidential campaign, a Secret Service detail was to be  activated once a candidate for the Office of the President or Vice  President requested protection, met the requirements for major candidate  status (e.g., entered at least 10 state primaries), and received authorization by the Secretary of Homeland Security after consultation  with an advisory committee. Under the direction of the Secretary of  Homeland Security, the Secret Service is authorized to provide protection  for spouses of major presidential and vice presidential candidates within  120 days of the general presidential election. There is no statute that  addresses the protection of candidates\u2019 children during the campaign.  During the 2016 presidential campaign, the Secret Service provided  protection for certain children of candidates at the request of the  President. According to Secret Service officials, the Secret Service has  historically provided protection for individuals not specifically identified in  statute when directed by the President. In connection with the 2016  presidential campaign, the Secret Service provided protection for 12  individuals\u20144 presidential candidates, 2 vice presidential candidates, and  6 of the candidates\u2019 family members. Figure 1 below shows the dates of  protection through Election Day, November 8, 2016."], "subsections": []}, {"section_title": "Role of the Secret Service in Providing Presidential Campaign Protection", "paragraphs": ["Secret Service protective operations have evolved over the years.  Originally, protection involved special agents serving as bodyguards.  Protection now includes not only special agents in close proximity to the  protected individual,  but also advance security surveys of locations to be  visited, coordination with state and local law enforcement entities, and  analysis of present and future threats. Site surveys and threat  assessments help the Secret Service determine the resources and assets  needed to accompany each candidate and other individuals protected  during the presidential campaign. These resources and assets, among  other things, generally include: special agents who provide 24/7 protection while on detail; advance teams who provide site security;", "Explosive Ordnance Disposal and other technical support personnel  (e.g., counter-surveillance and counter sniper personnel); magnetometer screening capabilities; and protective intelligence personnel who investigate threats."], "subsections": []}, {"section_title": "Travel Laws and Regulations", "paragraphs": ["Federal law provides for agencies to pay for or reimburse transportation  and lodging expenses for their employees when they are traveling on  official business. It further directs the General Services Administration  (GSA) to issue regulations governing this travel. The FTR issued by  GSA is applicable to Secret Service special agents\u2019 transportation and  use of hotel rooms when traveling during presidential campaigns to  protect candidates and their family members.", "Transportation. According to the FTR, coach-class service is to be  utilized unless an agency determines that an exception is warranted. For  example, an exception may be granted to allow a special agent to use  business class accommodations when the protected individual  is doing  the same and security demands warrant it. In the case of presidential  campaign travel, the Secret Service may also accompany protected  individuals aboard chartered aircraft. The Secret Service reimburses  campaign committees for the seats occupied by its special agents. In  1977, we were asked to review the Secret Service\u2019s reimbursement  method, and in that decision stated that GAO did not object to the method  used by the Secret Service as long as it was used consistently and the  amount reimbursed did not exceed the first-class airfare.", "Lodging and other use of hotel rooms. The Secret Service utilizes  hotel rooms for various purposes when protecting a candidate. The  purpose of the room dictates the authority the Secret Service relies on to  authorize payment and the related requirements. Hotel rooms used  exclusively for special agent overnight sleeping facilities are governed by  the FTR. The FTR allows agencies to pay for lodging based on per diem  allowances set by GSA for the applicable location and date or the actual  expenses of the travel. Actual expense allowance, which can be in  excess of the per diem rate, is permitted for a variety of reasons, such as  costs escalating due to special events (e.g., sporting events or disasters)  or because of mission requirements. However, the maximum amount  that an employee may be reimbursed under the actual expense  allowance method is limited to 300 percent of the applicable per diem  rate.", "The Secret Service also utilizes hotel rooms for operational purposes. For  example, the Secret Service may use a room as a command center or  reserve rooms adjacent to the protected individual  to better secure the  individual. In addition, to meet operational security demands, the Secret  Service may require a certain number of special agents to stay in the  particular hotel that the protected individual is staying and within certain  proximity to the individual. The legal authorities the Secret Service relies  on to pay for these kinds of rooms do not limit how much the agency can  pay."], "subsections": []}]}, {"section_title": "Secret Service\u2019s 2016 Presidential Campaign Travel Expenses Totaled Approximately $58 Million, Including $17.1 Million in Reimbursements to the Campaign Committees", "paragraphs": ["The Secret Service\u2019s travel expenses for the 12 individuals protected  during the 2016 presidential campaign totaled approximately $58 million,  according to our analysis of Secret Service data. Travel expenses  included airfare, vehicle rentals, hotel rooms, meals and incidental  expenses, and baggage charges for special agents accompanying  protected individuals. The $58 million in travel expenses was used by  the Secret Service to support 3,236 travel stops made by the 12 protected  individuals throughout the presidential campaign. The breakdown of  these expenses and number of travel stops by campaign committee and  protected individual  are shown in figure 2 below.", "Of the $58 million the Secret Service incurred in 2016 presidential  campaign travel expenses, $17.1 million was for reimbursements to the 4  campaign committees for 2,548 chartered aircraft flights. In the case of  campaign travel, Secret Service special agents often fly with protected  individuals on aircraft chartered by the campaign committees. The Secret  Service reimburses the campaign committees for the number of seats  occupied by special agents on board each charter flight. Figure 3 below  shows the amount and number of flights for which the Secret Service  reimbursed each of the campaign committees."], "subsections": []}, {"section_title": "Secret Service Did Not Always Follow its Travel Policies, Resulting in Overpayments of at Least an Estimated $3.9 Million", "paragraphs": [], "subsections": [{"section_title": "Secret Service Generally Followed its Policies and Applicable Regulations for Lodging Payments during the 2016 Presidential Campaign for the Trips Reviewed", "paragraphs": ["We reviewed special agents\u2019 lodging expenses while accompanying  individuals protected during the 2016 presidential campaign on 40  randomly selected overnight trips. Our review found that (1) for most  trips\u201430 of 40\u2014the documented hotel expenses were within GSA per  diem lodging rates, (2) the Secret Service generally followed its policy of  requiring a lodging variance (i.e., waiver) for any hotel rooms exceeding  the GSA lodging rate for that location, and (3) the Secret Service did not  exceed the maximum amount allowed for lodging for these trips.", "The Secret Service required field offices responsible for booking hotel  rooms to request and submit a waiver for any room that may exceed the  designated GSA lodging rate by any amount. Our review of the receipts  for hotel room expenses incurred by the Secret Service found that each  trip involved multiple special agents staying in multiple rooms.  Specifically, of the 40 trips we reviewed, 30 included hotel rooms that  were within GSA lodging rates and 9 included hotel stays exceeding the  GSA lodging rate. The Secret Service was unable to locate a hotel bill for  1 trip and we therefore were unable to determine the rate paid for that  trip.", "In accordance with Secret Service policy, special agents submitted  waivers to the agency\u2019s Logistics Resource Center (LRC) for all 9 hotel  stays exceeding the GSA lodging rate. According to LRC officials, before  approving a waiver, they generally wanted to know how many alternative  hotels were contacted, whether any hotels were available at or below the  GSA lodging rate, and whether staying at a hotel at or below the GSA  lodging rate would incur additional expenses that would negate the  savings. For example, if a rental vehicle would be required, use and  parking of the vehicle may have resulted in total costs that exceeded the  price of the more expensive hotel. According to LRC officials, in order to  spend travel money judiciously, some special agents stayed at hotels  nearby the protected individual\u2019s hotel that had rates at or closer to the  GSA lodging rate.", "Under the FTR\u2019s actual expense reimbursement method, agencies may  pay up to 300 percent of the applicable total GSA per diem allowance\u2014 the GSA established rates for (1) lodging and (2) meals and incidental  expenses\u2014for an employee\u2019s daily expenses. However, the agency is to  subtract any allowance granted for meals and incidental expenses from  the total, with the remainder being available for lodging. DHS and  Secret Service policy, however, restricts the 300 percent actual expense  allowance for lodging to 300 percent of the GSA lodging rate only.  Consistent with DHS and Secret Service policy, none of the hotel rates  paid exclusively for lodging in the 40 trips we reviewed exceeded the  applicable GSA lodging rate by more than 300 percent. As a result, we  determined that the Secret Service\u2019s expenditures for lodging for the trips  we reviewed were consistent with its policies and applicable regulations."], "subsections": []}, {"section_title": "Secret Service Did Not Follow its Policies for Chartered Aircraft Flights and Did Not Thoroughly Review Invoices Prior to Payment", "paragraphs": [], "subsections": [{"section_title": "Secret Service Overpaid the Campaign Committees an Estimated $3.9 Million or More for Chartered Aircraft Flights", "paragraphs": ["As discussed earlier, as part of their mission to protect presidential  candidates, Secret Service special agents frequently accompany  candidates on chartered aircraft provided by the presidential campaigns.  The Secret Service is to later reimburse the candidate\u2019s campaign  committee for the cost of having special agents fly on those planes. The  Secret Service\u2019s policy for determining the amount to reimburse has been  used since at least 1977. Under this policy, the Secret Service is to pay  the lower of two applicable fares when reimbursing the campaign  committees for special agents\u2019 travel on chartered aircraft flights.  Specifically, according to the policy the Secret Service is to compare the  lowest commercially available first-class airfare for a flight segment (one  airport to another airport) to the pro rata fare of the charter (total charter  cost divided by the number of passengers). The Secret Service is then to  reimburse the campaign committee for the lower of the two fares. The  following text box includes an example of the pro rata fare calculation.", "In July 2015, an attorney from the law firm representing the Hillary for  America Committee sent Secret Service Financial Management Division  (FMD) officials an e-mail stating that in their view, the reimbursements for special agents\u2019 seats should be the pro rata fare based on an FEC  regulation. In response, in August 2015, the Secret Service\u2019s Office of  the Chief Counsel made a decision to agree with the interpretation of this  law firm. As a result, the Secret Service ceased to adhere to its  longstanding reimbursement policy and agency officials were directed to  use the pro rata calculation method for reimbursing all campaigns for  agent airfares. Consequently, the Secret Service did not conduct the  comparison between first-class and pro rata fares during the 2016  presidential campaign. Instead, the Secret Service solely paid the pro rata  fare to the campaign committees.", "In March 2016, in response to a congressional inquiry about presidential  campaign charter flight reimbursements, the Office of the Chief Counsel  determined that its August 2015 decision was a mistake. Specifically, the  Office recognized that the FEC regulation at issue did not apply to the  Secret Service\u2019s use of chartered aircraft. According to the Office of the  Chief Counsel, they notified an official in the Office of Protective  Operations, which collects submissions for reimbursements from the  protected individual  or the related campaign committee. However, the  Office of the Chief Counsel did not notify LRC, which is to obtain the first- class airfares for comparison from the Secret Service\u2019s travel agency.  Further, the Office of the Chief Counsel was uncertain but believed FMD,  which issues payments for the flights, was notified. FMD officials told us  that they were not notified. As a result, the Secret Service continued to  reimburse the campaign committees the pro rata fares for the remainder  of the 2016 political campaign (i.e., through mid-November 2016).", "Despite being aware of the error for eight months before the end of the  2016 presidential campaign that the pro rata fare should be compared to  the lowest available first-class airfare, the Office of the Chief Counsel did  not ensure the agency reverted to its long standing policy. During this 8  month period, the Secret Service accompanied protected individuals on  1,671 (66 percent) of the 2,548 total campaign-related flight segments. As  a result of solely reimbursing the pro rata fare instead of reimbursing the  lower of the pro rata fare versus the lowest commercially available first- class airfare, we estimate based on our sample of 650 flight segments  that the Secret Service overpaid the 4 campaign committees at least $3.9  million for special agents\u2019 seats on chartered aircraft.", "Federal agencies are generally required to try to collect on debts\u2014 including overpayments\u2014they determine are owed to them. A federal  debt or claim is any amount of funds that has been determined by an  appropriate official of the federal government to be owed to the United  States. It includes, without limitation, overpayments. Under the federal  debt collection authorities as provided in 31 U.S.C. chapter 37, federal  agencies are required to try to collect on claims arising out of their  activities. However, they have the authority to compromise (i.e., accept  less than full value) claims, or suspend or end collection, such as when  the cost of collecting the claim is likely to be more than the amount  recovered.", "In response to our finding that the Secret Service had overpaid for travel  on chartered aircraft, Secret Service officials told us in February 2018 that  they planned to take action to determine the overpayment amounts and  seek refunds from the campaign committees. In light of the problems we  discuss in appendix II regarding information on aircraft flights provided by  the campaign committees and available historical data on airfares, Secret  Service officials told us they were attempting to calculate the  overpayments and would weigh the feasibility and costs of collecting  refunds. However, as of April 2018, the Secret Service lacked specific  plans, timeframes, and milestones for calculating the amounts of  overpayments to the campaign committees and making key decisions on  how and the extent to which the Secret Service will proceed with  collections. Making such determinations can help ensure the Secret  Service is complying with applicable federal law and recovering funds that  could be used to support its protective operations or deposited into the  general fund of the United States Treasury as appropriate."], "subsections": []}, {"section_title": "Secret Service Did Not Adhere to Its Directive on Policy Revisions", "paragraphs": ["According to Secret Service officials, the decision to change the  reimbursement calculation method in August 2015 was inconsistent with  the Secret Service\u2019s directive on policy revisions. Specifically, the Secret  Service\u2019s directive on policy revisions states that the \u201cresponsible  office\u201d\u2014FMD in this case\u2014is accountable for ensuring policies are  current and accurate. In addition, this office is to review, research, and  revise the policy, if such a revision is deemed necessary. Further, all  significantly affected offices and divisions of the Secret Service, including  members of the Secret Service\u2019s Executive Resources Board, are to be  provided the opportunity to read and comment on the changes, among  other required actions. See figure 4 for a summary of key steps in the  Secret Service\u2019s policy creation, revision, and issuance process.", "According to Secret Service officials, however, the process outlined in the  directive on policy revisions was not followed in August 2015. As a result,  the decision to change the reimbursement calculation method was not  fully vetted or reviewed by all members of the Secret Service\u2019s Executive  Resource Board as would be required under the directive on policy  revisions. According to agency officials and confirmed in communications  we reviewed, the Office of the Chief Counsel misinterpreted the regulation  and directed that the erroneous interpretation be followed. The official  leading FMD at the time, who was in the role on a temporary basis,  adhered to the Office of the Chief Counsel\u2019s interpretation of the  regulation because the matter was legal in nature. Agency officials further  added that the increased operational tempo (i.e., heavy workload) at the  time may have resulted in a failure to adhere to the Secret Service\u2019s  directive on policy revisions.", "An important role within the Secret Service\u2019s policy creation and revision  process is the directives control point. The directives control point is to  help develop and implement policy that is clear, enforceable, and  effective. In addition, the directives control point provides guidance for  filing, structuring, and organizing policy instruments. Standards for  Internal Control in the Federal Government states that management  should design control activities to achieve objectives and respond to  risks. Control activities are the policies, procedures, techniques, and  mechanisms that enforce management\u2019s directives to achieve the entity\u2019s  objectives and address related risks. Secret Service officials stated that  the agency could better ensure that its existing directive for policy  revisions is followed by requiring that its directives control point be  notified of any legal advice or direction proposed by the Office of the  Chief Counsel that could modify or amend agency policy. By requiring\u2014in  policy and practice\u2014that the Secret Service\u2019s directives control point be  notified when the Office of the Chief Counsel provides advice to offices  that is likely to result in policy changes, the Secret Service could better  ensure that operational changes inconsistent with existing policy are not  made without the full consideration of all affected parties. Moreover, it  could reduce errors and the potential for unnecessary costs associated  with decisions that do not go through the required review process."], "subsections": []}, {"section_title": "Secret Service Did Not Ensure the Accuracy of Charter Flight Invoices Prior to Reimbursing Campaign Committees", "paragraphs": ["Secret Service policy requires that protected individuals\u2014and by  extension their campaign committees\u2014seeking reimbursement for  special agents on chartered aircraft flights to submit an invoice with the  following information:  (1) Name, address, and bank account information for the protected  individual.  (3) Date(s) of charter.  (4) Itinerary by flight segment (the three letter airport code should be  provided for the departure and arrival airports for each segment).  (5) Total aircraft cost per flight segment.  (6) Total number of passengers for each flight segment (to include seats  occupied by the Secret Service).  (7) Total number of seats occupied by the Secret Service for each flight  segment.", "The policy also requires that if an invoice is incomplete or inaccurate that  it should be returned to the protected individual within seven days of  receipt for completion or correction.", "We found that 20 of the 76 invoices submitted to the Secret Service  during the 2016 presidential campaign had incomplete or inaccurate  information, and therefore should have been returned to the protected  individual, or the related campaign committee. The 76 invoices included  2,548 flight segments. Information for 558 (22 percent) of the flight  segments was incomplete or inaccurate. However, the Secret Service did  not return any invoices to the four candidates or their campaign  committees during the 2016 presidential campaign, according to Secret  Service officials. Specifically, we found the following instances of  incomplete and inaccurate information in the charter flight invoices  provided by the campaign committees on behalf of protected individuals  to the Secret Service:", "Airport Code: The Hillary for America Committee submitted two  invoices containing two flight segments missing an airport code. The  Carson America Committee submitted one invoice that did not clearly  show the destination airport for seven flight segments and one invoice  with three flight segments missing an airport code. The Donald J.  Trump for President Committee submitted 12 invoices for then- candidate Trump with 336 flight segments missing an airport code.  Only a city name with multiple possible airports was listed, leaving it  unclear which airport was used. For example, in several instances  \u201cNew York, NY\u201d was listed, which could be LaGuardia Airport or JFK  International  Airport.", "Total Cost or Passengers: The Donald J. Trump for President  Committee submitted 4 invoices for flights taken by Vice Presidential  Candidate Mike Pence with 210 flight segments which did not include  the total cost or the total number of passengers for each flight  segment. The total cost and number of passengers are necessary to  verify the pro rata cost of the flight segment.", "Double Billing: The Donald J. Trump for President Committee  double-billed the Secret Service for three flight segments taken on  March 1, 2016 resulting in a cumulative overpayment of approximately  $21,000 by the Secret Service for these segments.", "Other Errors: The invoices for the Hillary for America Committee had  1 (less than 1 percent) of 1,317 flight segments with a mathematical  error; the Donald J. Trump for President Committee had errors on 16  (2 percent) of 965 flight segments; and the Bernie 2016 Committee  had errors on 29 (18 percent) of 159 flight segments. These 46 flight  segments with mathematical errors resulted in a net Secret Service  underpayment to the campaign committees of approximately  $63,000.", "According to Secret Service officials, although these errors were made by  the campaign committees, Secret Service officials failed to detect the  errors. Per the Secret Service\u2019s reimbursement policy, it is the  responsibility of the special agents overseeing the protected individual\u2019s  travel to review the invoices to ensure they include the required  information and the provided information is accurate. The policy further  states that absent complete and accurate information, the invoices are to  be rejected for correction prior to reimbursement. Based on our review of  the invoices, the special agents verified the dates of the flights and  number of special agents on board the flight segments included in the  invoices, but did not, for example, reject invoices that did not contain the  three letter airport code or total number of passengers. According to  Secret Service officials, the incomplete invoices should have been  rejected, but were not because of the operational tempo associated with the presidential campaign. As discussed earlier, operational tempo was  also a rationale provided by Secret Service officials for why they did not  adhere to the directive on policy revisions. Standards for Internal Control  in the Federal Government states that management should design control  activities to achieve objectives, such as compliance with policies. In  addition, the standards suggest that agency management should  evaluate excessive pressure on personnel and help personnel fulfill their  assigned duties. To help ensure that the Secret Service is adhering to its  travel policies, the Secret Service may need to assess its existing control  activities and determine how they can be enhanced to address the fast- paced operational tempo of presidential campaigns.", "Further, according to FMD officials, when invoices marked certified  reached FMD for payment, it was assumed by FMD that the invoices had  been certified as complete and accurate, as indicated by the signature of  a special agent or an authorized certifying officer. Secret Service policy  does not assign responsibility for verifying the accuracy of the pro rata  fare and checking that flight segments have not already been billed.  Additionally,  for three of the four campaign committees, the Secret  Service had no assurance when paying the pro rata fare that it was being  charged its share correctly since it did not receive copies of the charter  companies\u2019 invoices. Specifically, the Secret Service relied on invoices  created by the campaign committees for reimbursement purposes without  supporting receipts, invoices, or other documentation to verify the  charges against. According to Secret Service officials, only the Hillary for  America Committee forwarded copies of invoices from the charter  companies it used, allowing the Secret Service to verify the accuracy of  the amounts billed. The Secret Service policy on reimbursement of  chartered aircraft flights does not require that copies of charter company  invoices or receipts be forwarded by the protected individual or their  campaign committee.", "Standards for Internal Control in the Federal Government states that  management should design control activities to achieve objectives and  respond to risks. Such activities include proper execution of transactions  (e.g., assuring that only valid transactions are entered into) and controls  over information processing (e.g., comparing charter flight invoices to the  amounts billed to the Secret Service by the campaign committees).  Secret Service officials agreed that the accuracy of flight segment details  and costs should be verified prior to reimbursing for charter flights. In  addition, they further agreed that responsibility for verifying the accuracy  of the pro rata fare and checking that flight segments have not already  been billed should be assigned. They also agreed that the Secret Service  should require the charter companies\u2019 invoices to verify that the campaign  committees are correctly charging the Secret Service for its share of the  total flight cost.", "Without updating its charter aircraft reimbursement policy, the Secret  Service does not have reasonable assurance that correct payments will  be made. These changes include: (1) assigning responsibility for verifying  that all calculations done by the campaign committees on behalf of the  protected individual  are accurate, (2) requiring a secondary review  process to confirm the accuracy of charter flight costs prior to making  payment, and (3) requiring that copies of charter companies\u2019 invoices be  provided to ensure that the reported pro rata costs are accurate prior to  reimbursement. In response to our finding, in February 2018 the Secret  Service began drafting an initial version of proposed policy changes,  consistent with its directive on revising policy. Specifically, Secret  Service officials started initial policy research and began reviewing and  drafting the policy, consistent with step two of their policy revision process  (see figure 4). However, several additional steps remain to be completed  before the planned changes are implemented. Until the Secret Service  completes all the necessary steps to update its charter aircraft  reimbursement policy, it remains at risk for making incorrect payments."], "subsections": []}, {"section_title": "Current Policy Does Not Ensure Correct Reimbursements for Chartered Aircraft Flights", "paragraphs": ["Secret Service\u2019s charter aircraft reimbursement policy does not specify  whether its travel agency is to include taxes when identifying the lowest  available first-class airfare. As discussed earlier, Secret Service is to pay  the lower of two applicable fares (lowest available first-class fare, and the  pro rata fare) when reimbursing the campaign committees for special  agents\u2019 travel on chartered aircraft flights. The Secret Service obtains the  lowest available first-class airfare from its travel agency. LRC officials  initially told us that the Secret Service\u2019s travel agency had been including  taxes in the lowest available first-class airfare. However, after inquiring  with the travel agency, an LRC official learned that taxes had not been  included. After further discussion with us, Secret Service officials told us  that taxes should be included.", "Including taxes can make the difference between a first-class airfare  being less or more expensive than the pro rata fare for a charter flight,  therefore dictating which fare the Secret Service should reimburse the  protected individual  and campaign committee. For example, if a pro rata  fare costs $1,000, and the lowest available first-class airfare (without  taxes) is $950, then the lower fare is the first-class airfare. However, if the  lowest available first-class airfare (with taxes) is $1,050, then the lower  fare is the pro rata fare.", "The Secret Service\u2019s policy on reimbursement of special agents\u2019 seats on  chartered aircraft also lacks important details to ensure that its travel  agency can accurately identify the lowest available first-class airfares and  make accurate reimbursements. The policy requires the protected  individual to provide the Secret Service the 3-letter airport code for the  departure and arrival airports for each flight segment for which it is  seeking reimbursement. However, it does not specify that the 3-letter  airport code needs to be the International  Air Transport Association  (IATA) code and not the Federal Aviation Administration (FAA) code.  Airports in different countries can have the same IATA  and FAA codes.  Providing the FAA code can result in the Secret Service\u2019s travel agency  identifying the wrong airport when determining the lowest first-class  airfare for a travel segment since the travel agency searches IATA codes.  For example, when we asked the Secret Service\u2019s travel agency to  research the lowest available first-class airfare for campaign travel  segments based on the reported destination codes in campaign  committee invoices the travel agency identified \u201cSGJ\u201d as Sagarai, Papua  New Guinea based on the IATA code. However, SGJ is the FAA code for  the Northeast Florida Regional Airport. Similarly, another reported  destination code in a campaign committee\u2019s invoice, LOM, is the FAA  code for Wings Field Airport, Pennsylvania and is also the IATA  code for Lagos de Moreno, Colombia. Since the travel agency searches on the  basis of IATA codes, using FAA codes that are designated as foreign  destinations in the IATA  system can result in confusion for the travel  agency when identifying the lowest available first-class airfare for a flight  segment.", "Secret Service officials told us that they had not considered specifying  whether the lowest first-class airfares should include taxes since the  Secret Service had been using the same representative at its travel  agency since 1986 to identify the lowest available first class fare. They  said they assumed that their representative knew the policy through  practice. Also, Secret Service officials told us that they were not aware of  the difference between IATA and FAA codes. Secret Service officials  agreed that the reimbursement policy should be revised to make it clear  that taxes are to be included when the Service\u2019s travel agency identifies  the lowest available first-class airfare when determining the correct  reimbursement amount, and that protected individuals are to provide the  IATA  code for airports.", "Standards for Internal Control in the Federal Government states that  management should internally and externally communicate the necessary  information to achieve the entity\u2019s objectives and that effective information  and communication are vital for an entity to achieve its objectives. The  Secret Service could better ensure that its travel agency is able to identify  the lowest commercially available first-class airfare for comparison to the  pro rata fare by updating its charter aircraft reimbursement policy to  specify that (1) taxes are to be included in the lowest commercially  available first-class airfare, and (2) protected individuals\u2019 invoices include  the IATA  airport codes for arrival and departure airports. In response to  our finding, in February 2018 the Secret Service started to draft an initial  version of proposed changes to its charter aircraft reimbursement policy,  consistent with its directive on revising policy. Secret Service officials  were in the process of conducting initial policy research, reviewing, and  drafting the policy, consistent with step two of their policy revision process  (see figure 4). However, the Secret Service needs to complete several  additional steps before the planned changes go into effect. Until then, the  Secret Service remains at risk of not correctly identifying the lowest  applicable airfare."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The Secret Service plays a vital  role in protecting our nation\u2019s leaders,  including presidential and vice presidential candidates, and their family  members. During the 2016 presidential campaign, for the trips we  reviewed, the Secret Service generally followed its internal policies and  federal regulations  governing payment for lodging costs incurred while  protecting candidates. However, due to an erroneous legal decision in  August 2015, the Secret Service did not follow its reimbursement policy  for chartered aircraft during the campaign. By not adhering to its policy,  the Secret Service overpaid campaign committees at least an estimated  $3.9 million dollars  for charter flights. Until the Secret Service determines  the amounts owed and how it will proceed with seeking repayment from  the various  campaign committees, these funds will not be recovered by  the federal government.", "Further, in making the erroneous legal decision in August 2015, the  Secret Service did not adhere to its directive on policy revisions. The  decision to effectively  change a policy was not fully vetted,  reviewed, or  communicated in accordance with the directive. This was largely  due to  the lack of a requirement to notify the directive control point when legal  decisions are made that can result in policy changes. This could result in  similar policy changes not being reviewed in the future.", "Finally,  presidential campaigns create a fast-paced operational  tempo at  the Secret Service, and according to agency officials, this tempo  contributed to their failure to comply with travel policies during the 2016  presidential campaign. Until Secret Service evaluates  the pressure  caused by this tempo and implements appropriate  mechanisms, it cannot  ensure that agency officials responsible for travel reimbursements are  complying with policy during presidential campaigns. In addition,  Secret  Service\u2019s charter aircraft reimbursement policy does not assign primary  and secondary reviews of invoices  provided by campaign committees.  The policy also does not require that campaign committees and the  agency\u2019s travel agency provide  all the information necessary to verify the  accuracy of the invoices. Without these requirements, Secret Service may  continue to reimburse campaign committees incorrect amounts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to the Director of the  Secret Service.", "Consistent with the federal debt collection authorities as provided in 31  U.S.C. chapter 37, the Director should complete the process of  calculating the amounts of its overpayments to the campaign committees  for special agents\u2019 seats on chartered aircraft during the 2016 presidential  campaign, and determine how it should proceed with respect to collecting  on identified debts. (Recommendation 1)", "To help ensure that the agency\u2019s existing directive on policy revisions is  followed, the Director should require in policy and practice that the  directives control point be notified when the Office of the Chief Counsel  provides advice to offices that is likely to result in policy changes.  (Recommendation 2)", "The Director should assess its existing control activities and implement  appropriate mechanisms to help ensure compliance with the agency\u2019s  travel cost policies during presidential campaigns. (Recommendation 3)", "The Director should update the charter aircraft reimbursement policy to  assign the offices responsible for verifying that all calculations done by  the campaign committees are accurate, and require a secondary review  process prior to making payment. (Recommendation 4)", "The Director should update the charter aircraft reimbursement policy to  specify that protected individuals are to provide IATA  codes and copies of  the charter companies\u2019 invoices, and that the Secret Service\u2019s travel  agency is to provide lowest available first-class airfares that include taxes.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to DHS, GSA,  and FEC.", "DHS provided written comments, which are reproduced in appendix III.  In  its comments, DHS concurred with our recommendations. DHS also  stated it had taken or planned to take actions to address all five of our  recommendations. In addition, after we provided this report to DHS for  comment, Secret Service provided us documentation, including a revised  travel policy, highlighting actions they have taken to address our  recommendations. We will review the documentation and take steps to  close the recommendations in the future, as appropriate.", "DHS and FEC provided technical comments, which we incorporated as  appropriate. GSA and FEC did not provide written comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 1 day from the report  date. At that time, we will send copies to the Secretary of Homeland  Security, Administrator of the General Services Administration, and Staff  Director of the Federal Election Commission. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9627 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report addresses the U.S. Secret Service\u2019s (Secret Service) 2016  presidential campaign travel expenses and payment of those expenses.  Specifically, our objectives were to examine the following questions:  (1) How much did the Secret Service incur in transportation, lodging, and  other travel-related expenses when providing protection during the  2016 presidential campaign?  (2) To what extent did the Secret Service reasonably assure that  payments and reimbursements for travel-related protection expenses  were made in accordance with applicable laws, regulations, and  policies during the 2016 presidential campaign?", "To determine how much the Secret Service incurred in travel-related  expenses, we obtained expense data from the Secret Service for each of  the individuals protected for the 2016 presidential campaign. In total, the  Secret Service protected 12 individuals associated with 4 campaign  committees (see table 1 below).", "We analyzed the travel expenses for each of these protected individuals  to determine the total travel expenses incurred by the Secret Service for  each campaign committee and for the 2016 presidential campaign as a  whole. Travel expenses include those captured by the Secret Service  under object class 21\u2014travel and transportation of persons. Object class  21 expenses include airfare, vehicle rentals, hotel rooms, meals and  incidental expenses, and baggage charges for special agents  accompanying protected individuals. Additionally,  we determined the  amount of the total travel-related expenses that were reimbursements to  the campaign committees\u2014all of which were for special agents\u2019 seats on  campaign chartered aircraft.", "To assess the reliability  of the Secret Service\u2019s expense data, we  discussed with the Secret Service officials how the data are entered and  maintained in the Secret Service\u2019s official financial system of record\u2014 Travel Manager, Oracle, PRISM, Sunflower system\u2014which is used to  track operating and travel expenses, among other things. We also  reviewed the data for any obvious errors and anomalies. We compared  the data to the invoices the Secret Service received from the campaign  committees seeking reimbursements in order to verify the amounts the  campaigns were reimbursed. Further, we compared the Secret Service\u2019s  reimbursement data to data the campaign committees reported to the  Federal Election Commission (FEC) on payments they received from the  Secret Service. As a result, we determined that the expense data were  sufficiently reliable for reporting the Secret Service\u2019s total travel  expenses, expenses broken out by campaign committee and protected  individual, and the portion of expenses that were reimbursements to the  committees.", "To determine the number of travel stops made by the campaign  committees for which the Secret Service provided protection, we used  data from the Secret Service\u2019s Agent Manpower Protection System. To  assess the reliability of these data, we reviewed responses provided by  the Secret Service on how the data are entered and maintained in the  system. We further matched a sample of the travel stops data to hotel  bills for those stops. As a result, we determined that the data on travel  stops were sufficiently reliable for reporting the total number of travel  stops made during the campaign and number of stops per campaign  committee.", "To determine whether the campaign committees charged the Secret  Service appropriate rates for the use of candidate-owned assets, we tried  to identify whether any portion of the Secret Service\u2019s reimbursements to  the campaign committees were for the use of candidate-owned assets.  Candidates flew on various types of charter aircraft, including jets and  helicopters. Pursuant to law and FEC regulations, campaign committees  must report and maintain certain information regarding the use of these  aircraft. However, this information was not sufficient for us to determine  whether aircraft for which the Secret Service provided reimbursement  were owned by candidates. Further, the Secret Service does not collect  information about a campaign\u2019s use of candidate-owned assets, including  aircraft. We contacted all four campaign committees using various  methods, including email, phone, and in-person visits to identify  reimbursements received for candidate-owned assets, but none of the  committees responded to our questions. As a result, we were unable to  determine whether any portion of the Secret Service\u2019s reimbursements  were for the use of candidate-owned assets.", "To determine the extent to which the Secret Service\u2019s payments and  reimbursements for travel-related protection expenses were made in  accordance with applicable laws, regulations, and policies, we analyzed  the Secret Service\u2019s lodging payments and charter aircraft  reimbursements. Of the 962 overnight trips taken during the 2016  presidential campaign, we randomly selected 40\u201410 for each of the  presidential candidates\u2014to assess the Secret Service\u2019s compliance with  (1) its internal policy requiring a waiver when a hotel room exceeds the  General Services Administration (GSA) per diem rate by any amount,  and (2) provisions of Federal Travel Regulation (FTR) that limit hotel  spending to 300 percent of the GSA rate. To determine the GSA per  diem lodging rate, we reviewed the GSA rates applicable on the date of  the hotel stay and for that location. If the amount of the room exceeded  the GSA rate we identified whether the Secret Service had a waiver for  the trip and also checked whether the amount paid exceeded the  maximum amount available for lodging under Department of Homeland  Security (DHS) and Secret Service policy and under the FTR. The time  and effort associated with collecting trip bills from many field offices were  primary considerations in determining the number of candidates\u2019 trips to  review. The Secret Service\u2019s retention of hotel bills is decentralized; that  is, the field office responsible for the geographic area where the  protective operation occurs retains hard copies of the bills. Although the  results of our analysis are not generalizable to all overnight trips taken  during the 2016 presidential campaign, it provided us insight to the Secret  Service\u2019s compliance with its lodging policy and the FTR.", "With regard to whether the Secret Service reimbursed the four campaign  committees the correct amounts for special agent travel on campaign  chartered aircraft, we compared the Secret Service\u2019s payments to the  committees to our estimate of what the Secret Service would have paid  had its own charter aircraft reimbursement policy been followed. We  determined the Secret Service did not use the correct reimbursement  method throughout the 2016 presidential campaign. To determine  whether the Secret Service followed its directive on the review and  approval of policy changes, we compared the steps required to effect a  change in policy to the steps taken by the Secret Service when its  reimbursement method was altered.", "To estimate whether and, if so, by how much the Secret Service overpaid  the campaign committees for special agents\u2019 seats on chartered aircraft  flights based on the reimbursement policy change mentioned above, we  selected a generalizable stratified random sample of 650 flight segments  from the 2,318 flight segments taken from November 1, 2015 through the  end of the 2016 presidential campaign that had an identifiable  airport.  Appendix II provides further technical details on the statistical methods  we used. To determine whether the Secret Service should try to collect on  the overpayments to the campaign committees, we reviewed relevant  federal authorities, including 31 U.S.C. chapter 37.", "To determine whether the Secret Service followed its policy with regard to  accepting and reviewing chartered aircraft invoices, we compared all 76  invoices submitted by the four campaign committees to the agency\u2019s  policy requirements for invoice completeness and accuracy. Further, we  used Standards for Internal Control in the Federal Government to assess  whether the Secret Service\u2019s requirements for charter aircraft invoices,  and the review of the invoices, are specific enough to help ensure that the  Secret Service is making correct reimbursements for charter aircraft  flights.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Analysis of a Stratified Random Sample of Flight Segments for GAO\u2019s Overpayment Analysis", "paragraphs": ["To estimate whether and, if so, by how much the U.S. Secret Service  (Secret Service) overpaid the campaign committees for special agents\u2019  seats on chartered aircraft flights, we selected a generalizable stratified  random sample of flight segments from campaign invoices sent to the  Secret Service. Specifically, we selected 650 flight segments from the  2,318 flight segments taken from November 1, 2015 through the end of  the 2016 presidential campaign that had an identifiable airport. We  stratified the population of 2,318 flight segments into 11 mutually  exclusive strata by campaign (Trump, Clinton, Sanders, and Carson) and  three size categories based on the number of special agents that  indicated being on board a flight. We chose to stratify based on the  number of special agents on board to minimize the variance of the total  cost within each stratum in an attempt to gain statistical efficiency in the  sample design.", "The sample size of 650 flight segments was based primarily on available  resources to have the Secret Service\u2019s travel agency extract cost data  from the airfare database. We allocated the sample of 650 flight  segments to the 11 strata using proportional allocation within each  campaign. We then adjusted the allocation in each stratum in an attempt  to match a Neyman allocation method that would minimize the variance of  an estimate of total cost. We randomly selected the allocated sample size  of flight segments within each of the 11 strata.", "For each of the 650 flight segments selected in the sample, we obtained  two measures of the lowest first-class airfare from the Secret Service\u2019s  travel agency, one with fees and taxes and one without (base fare). This  was due to some confusion at the Secret Service about whether taxes  and fees should be included when determining the lowest first-class  airfare. We then compared these first-class airfares to the individual fare  (i.e., the pro rata fare) paid by the Secret Service to the campaign  committees. We classified a flight segment as overpaid if the lowest first-class airfare was less than the pro rata fare paid by the Secret Service.  To determine the total amount of overpayment per flight segment, we  multiplied the difference between the pro rata fare paid by the agency and  the lowest first-class airfare by the number of Secret Service special  agents on board the flight. We assigned flight segments that were  classified as not overpaid a total overpaid value of zero.", "From our sample of 650 flight segments, we identified 295 flights for  which the Secret Service overpaid a total of about $1.5 million. To  estimate the proportion of overpaid flight segments and the total amount  overpaid by the Secret Service for all 2,318 flight segments in the  population from which we sampled, we weighted the sample results by  the inverse of the probability of selection based on the stratified sample  design. We used estimation methods appropriate for a stratified random  sample design and generated 95 percent confidence intervals for each  estimate. Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample\u2019s results as a 95 percent confidence interval (e.g., plus or minus 7  percentage points). This is the interval that would contain the actual  population value for 95 percent of the samples we could have drawn. As  a result, we are 95 percent confident that each of the confidence intervals  in this report will include the true values in the study population. The  weighted percentage estimates of the full population from our sample  have margins of error at the 95 percent confidence level of plus or minus  4 percentage points or fewer and the estimate of the total amount  overpaid by the Secret Service has a relative error of plus or minus 12  percent of the estimate or less.", "Based on these results, we estimate that total overpayments in the  population of 2,318 flight segments from November 1, 2015 through the  end of the campaign would be at least $3.9 million. We estimate that the  Secret Service overpaid invoices for about 49 percent (+/- 4 percentage  points) of the flight segments. The estimated $3.9 million represents the  lower bound of the 95 percent confidence interval of the estimated total  dollar amount overpaid based on our sample. The lower bound  represents relative error of about 12 percent."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Joseph P. Cruz (Assistant  Director), Lisa Canini, Jeffrey Fiore, Chad Johnson, Janet Temko-Blinder,  and Jonathan Tumin made key contributions to this report. Also  contributing to this report were David Alexander, Jim Ashley, Dominick  Dale, Eric Hauswirth, John Mingus, and Carol Petersen."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-483", "url": "https://www.gao.gov/products/GAO-18-483", "title": "Puerto Rico: Limited Federal Data Hinder Analysis of Economic Condition and DOL's 2016 Overtime Rule", "published_date": "2018-06-29T00:00:00", "released_date": "2018-06-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Puerto Rico, the largest and most populous territory of the United States, is subject to congressional authority, although it has broad authority over matters of internal governance. After it defaulted on over $1.5 billion in public debt since 2015, Congress passed PROMESA to establish federal oversight of fiscal affairs. This debt crisis coincided with DOL finalizing the 2016 Overtime Rule, which was invalidated in federal court and is being appealed. PROMESA included a provision for GAO to assess the rule's impact on Puerto Rico and examine its economic condition.", "This report (1) examines the economic conditions in Puerto Rico as of the end of 2016, and (2) assesses the potential effects of applying the 2016 Overtime Rule to Puerto Rico. GAO analyzed 1990-2016 economic data and replicated DOL's impact analysis of the 2016 Overtime Rule using 2015 ACS data, the same year used by DOL in its analysis. GAO also reviewed federal laws, regulations, court documents, agency guidance, and criteria related to the federal overtime rule; facilitated group discussions with employers in Puerto Rico from industries most likely to be impacted by the rule; and interviewed relevant stakeholders and labor groups."]}, {"section_title": "What GAO Found", "paragraphs": ["Unreliable economic and limited labor data make conditions in Puerto Rico difficult to evaluate.", "Puerto Rico Planning Board data show that from 2005 to 2016 Puerto Rico's gross domestic product (GDP), a principal economic indicator, decreased by over 9 percent, after adjusting for inflation, and the devastation brought by Hurricane Maria in 2017 has worsened economic conditions. While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic needs and develop long-range plans. The Bureau of Economic Analysis (BEA), within the U.S. Department of Commerce (Commerce), does not calculate GDP for Puerto Rico, as it does for the other U.S. territories. For 6 years, BEA has provided technical support to the Planning Board to update its methods and Planning Board officials described plans to do so, but its methods remain outdated. A 2016 Congressional Task Force recommended that BEA calculate Puerto Rico's GDP, and BEA considers it a long-term goal; however, BEA has not taken steps to do so.", "Further, Puert Rico has limited labor statistics because it is not included in the Current Population Survey (CPS), which is produced by Commerce's Census Bureau (Census) and Department of Labor's (DOL) Bureau of Labor Statistics (BLS). CPS provides detailed information about employment, such as hours of work and earnings. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico. Census officials said that they estimated the cost of such a study but have not yet conducted it. Census officials also cited concerns with data collection burdens. However, without CPS data on Puerto Rico, policymakers are limited in estimating the full economic impact of different policy changes. For example, DOL did not have the data needed to include Puerto Rico in its assessment of the economic impact of DOL's 2016 Overtime Rule. Conducting such a study would help policymakers consider the tradeoffs of including Puerto Rico in the CPS.", "GAO used a different dataset\u2014American Community Survey (ACS)\u2014to assess the potential effects of applying the 2016 Overtime Rule, which would have increased the salary level threshold from $23,660 to $47,476 at which executive, administrative, and professional workers would not be eligible for overtime pay. GAO estimated that about 47,250 of 1.06 million workers in Puerto Rico would be affected\u2014that is, they would become eligible for overtime pay. In response to a salary level threshold increase, employers from selected industries in Puerto Rico told GAO that they might increase certain workers' salaries, but cut overtime hours for other workers, and adjust the number of staff. An economist and a labor group official said that employers could respond by adjusting the number of staff or their hours, but the impacts to employers may be limited and the workforce could benefit. In 2017, a federal district court invalidated the 2016 Overtime Rule and the overtime salary threshold remains at $23,660, but that decision is currently on appeal."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that BEA include Puerto Rico in its reporting on GDP and that Census and BLS study the feasibility of including Puerto Rico in the CPS. Commerce agreed with our recommendations and DOL did not have any comments on the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Puerto Rico\u2014the largest and most populous territory of the United  States\u2014has a relationship with the federal government that is in some  ways similar to the states and in other ways distinct. As a territory,  Puerto Rico is subject to congressional authority, although it has been  granted broad authority over matters of internal governance. However,  since 2015, Puerto Rico has defaulted on over $1.5 billion in debt  payments. In June 2016, the Puerto Rico Oversight, Management, and  Economic Stability Act (PROMESA) was enacted. The law established a  structure for oversight of Puerto Rico\u2019s fiscal affairs and a process for the  territory to restructure its debts. Puerto Rico\u2019s fiscal decline coincided with  the Department of Labor\u2019s (DOL) publication of a final rule that increased  the salary threshold for overtime pay among executive, administrative, or  professional (EAP) employees in the states and Puerto Rico.", "PROMESA included a provision for GAO to conduct an assessment and  issue a report to examine the economic conditions of Puerto Rico as well  as the impact of applying the regulation to Puerto Rico. Prior to its  effective date, during the course of our work, the Federal District Court of  the Eastern District of Texas found the rule to be unlawful. This report (1)  examines the economic conditions in Puerto Rico as of the end of 2016,  and (2) assesses the potential effects of applying the 2016 Overtime Rule  to Puerto Rico.", "To address our objectives, we collected data from fiscal years 1990  through 2016, the most recent data available, on Puerto Rico\u2019s gross  domestic product (GDP) from the Puerto Rico Planning Board. We also  collected monthly data from 2016 and 2017 on the flow of passengers on  one-way flights to and from Puerto Rico from the Bureau of  Transportation Statistics (BTS). Additionally, we collected data on  individual earnings from the 2015 5-year American Community Survey  (ACS) because DOL used 2015 data in its analysis of the impact of the  2016 Overtime Rule on the states. We assessed the reliability of the ACS  data by reviewing data documentation and interviewing officials at the  Department of Commerce\u2019s Census Bureau (Census) who use and  maintain the dataset. We determined that the data from these sources  were reliable for the purposes of our report.", "For both objectives, we also reviewed relevant federal laws, regulations,  court documents, and agency guidance related to the 2016 Overtime  Rule. In addition, we reviewed federal laws and regulations related to  labor in Puerto Rico, as well as agency guidance related to statistical  measures for Puerto Rico. We also reviewed federal internal control  standards related to management\u2019s use of quality information to achieve  objectives. We interviewed DOL and Department of Commerce officials at  the national level and Puerto Rican government officials. We also  interviewed representatives of national and Puerto Rican employer and  labor organizations and conducted 10 facilitated group discussions in  Puerto Rico with employers in the restaurant, hotel, hospital,  manufacturing, and professional service industries. These are some of  the industries that employ the largest number of people in Puerto Rico  and are among the most likely to be impacted by any changes to the  overtime regulations. We interviewed several economists, identified from  prior work and interviews with agency officials, industry groups, and labor  groups as having expertise relating to the 2016 Overtime Rule or the  Puerto Rico economy, regarding the economic conditions of Puerto Rico  and the potential economic impacts of the 2016 Overtime Rule.", "To examine Puerto Rico\u2019s economic condition, we reviewed related GAO  reports concerning Puerto Rico and its economy. To assesses the  potential effects of applying the 2016 Overtime Rule to Puerto Rico, we  used a methodology similar to the one used by DOL in its final economic  impact analysis of the 2016 Overtime Rule in the United States.  Specifically, DOL estimated the number of people who would be directly  affected by the rule because their salary level would make them no longer  exempt from overtime pay. However, while DOL used Census\u2019s Current  Population Survey (CPS) data, which does not include Puerto Rico, we  used ACS data, which does. For more information on our scope and  methodology, see appendix I.", "We conducted this performance audit from September 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Puerto Rico\u2019s Territorial Status and Residents\u2019 Status", "paragraphs": ["Puerto Rico is the most populous U.S. territory with approximately 3.3  million residents. Puerto Rico and its residents are generally subject to  the same federal laws as the states and their residents, except in cases  where specific exemptions have been made, such as with certain federal  programs. Individuals born in Puerto Rico are U.S. citizens and can  migrate freely to the states."], "subsections": []}, {"section_title": "Hurricane Maria", "paragraphs": ["On September 20, 2017, Hurricane Maria, a category 4 storm, devastated  Puerto Rico and left nearly all its residents without potable running water  and electricity. In addition, the existing infrastructure for cellular and  wireless service was rendered virtually useless, hampering  communication. Four months after Hurricane Maria, more than a third of  Puerto Rico\u2019s energy customers remained without power. The lack of  power and communication impeded residents\u2019 ability to return to work.  According to the Federal Emergency Management Agency (FEMA),  rebuilding will take years."], "subsections": []}, {"section_title": "Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)", "paragraphs": ["PROMESA established a Financial Oversight and Management Board for  Puerto Rico (Oversight Board), and granted it broad powers of fiscal and  budgetary control over Puerto Rico. The Oversight Board is comprised of  seven members appointed by the President of the United States from a  list of recommendations from House and Senate Leadership and one ex- officio member designated by the Governor of Puerto Rico. PROMESA  also established a mechanism through which the Oversight Board could  petition U.S. courts on Puerto Rico\u2019s behalf to restructure debt."], "subsections": []}, {"section_title": "Government Assessment of Puerto Rico\u2019s Economic Condition", "paragraphs": ["Under Puerto Rico law, the Puerto Rico Planning Board (Planning Board)  has the legal responsibility of developing an economic outlook and a  detailed analysis of the economy, including gross domestic product  (GDP), and producing an annual Economic Report to the governor and to  the legislature. The Planning Board Chairperson releases GDP  measures only after approval from the governor\u2019s office, according to  Planning Board officials.", "The Department of Commerce\u2019s Bureau of Economic Analysis (BEA)  produces economic accounts statistics that enable government and  business decision-makers, researchers, and the American public to follow  and understand the performance of the nation\u2019s economy. To do this,  BEA collects source data, conducts research and analysis, develops and  implements estimation methodologies, and disseminates statistics to the  public. BEA calculates GDP for the United States, including for the  territories of American Samoa, Guam, the U.S. Virgin Islands and the  Commonwealth of the Northern Mariana Islands. Since 2009 the  Department of the Interior\u2019s Office of Insular Affairs has reimbursed BEA  for estimating and publishing GDP for these territories. This office carries  out the administrative responsibilities of the Secretary of the Interior and  the Assistant Secretary for Insular Areas by coordinating federal policy for  these territories, but does not for Puerto Rico.", "Census in cooperation with the Department of Labor\u2019s Bureau of Labor  Statistics (BLS) produces the Current Population Survey (CPS), which  provides statistics on work, earnings, and education. CPS is one of the  oldest, largest, and most well-recognized surveys in the United States,  according to Census. In addition to being the primary source of monthly  labor force statistics, the CPS is used to collect data for a variety of other  studies that provide information on economic and social well-being  factors. The CPS does not collect or report data for Puerto Rico or any of  the other U.S. territories.", "Census also produces the American Community Survey (ACS). It is an  ongoing survey that provides national information on a yearly basis that  includes information for the States, as well as for Puerto Rico. The ACS  includes data on jobs and occupations, educational attainment, veterans,  whether people own or rent their homes, and other topics. Information  from the survey generates data that help determine how more than $675  billion in federal and state funds are distributed each year."], "subsections": []}, {"section_title": "Federal Labor Laws", "paragraphs": ["DOL\u2019s Wage and Hour Division (WHD) administers the wage, hour, and  child labor provisions of the Fair Labor Standards Act of 1938 (as  amended) that sets the minimum wage and overtime pay standards  applicable to most U.S. workers. The Fair Labor Standards Act (FLSA)  requires employers to compensate employees who are covered by the  act and not specifically exempt from its provisions, at least federal  minimum wage (currently $7.25 per hour) and with premium pay (at one- and-one-half the regular rate) for overtime hours worked in excess of 40  hours in a workweek. There are a number of exemptions from the  requirements of the FLSA. For example, employees working in a \u201cbona  fide executive, administrative, or professional capacity\u201d (EAP) are not  entitled to premium pay for overtime.", "The FLSA was enacted to address problems associated with substandard  working conditions by, in part, establishing a floor on wages and a ceiling  on hours, beyond which the employer is required to pay extra wages.  With a requirement for overtime pay, employers would either have to hire  more workers or assume extra wage costs in order to achieve the same  amount of work. Employees would be assured additional pay to  compensate them for the burden of a workweek in excess of 40 hours.  The Minimum Wage Study Commission of 1981 justified the EAP  exemption in part because these employees are associated with higher  base pay, higher promotion potential, and greater job security than most  of the U.S. labor force.", "For employers and employees, the practical effects of the exempt  employee classification can be important. An exempt employee may be  required to work as many hours as it takes to complete a task. Although  this may be more than 40 hours per week, the employee will not be  entitled to overtime pay. Thus, an exempt financial manager may be  required to work 60 hours a week and be paid a set weekly salary. On the  other hand, a nonexempt bookkeeper may be required to work 60 hours  per week, but must be paid for 20 hours of overtime, in addition to a set  weekly salary.", "The FLSA authorizes DOL to define EAP exemptions. Balancing the  competing interests of expanding exemptions and restricting them, DOL  regulations establish specific tests that must be met before an employee  may be classified as an EAP and exempt from overtime. In general, there  are three tests:", "Salary Basis Test. The employee must be paid on a salary basis,  rather than an hourly basis. This means that the employee must be  paid at least the guaranteed amount, regardless of the number of  hours actually worked and the quality or quantity of worked  performed.", "Salary Level Test. The employee must meet a minimum salary level  that indicates managerial or professional status.", "Duties Test. The employee must have duties and responsibilities  associated with an exempt EAP position.", "In 2003, DOL reviewed the regulations for EAP exemptions in response  to a GAO recommendation. Based on its review, in 2004 DOL increased  the minimum \u201csalary level\u201d threshold for an employee to be exempt from  receiving overtime pay to $23,660. In May 2016, DOL again updated  minimum the salary level threshold for EAP employees to be exempt from  receiving overtime pay to $47,476 in the 2016 Overtime Rule (see fig. 1)."], "subsections": []}, {"section_title": "Status of the 2016 Overtime Rule", "paragraphs": ["In July 2015, DOL proposed updating the overtime regulations relating to  the EAP exemption, and published a notice of proposed rulemaking.  After receiving approximately 294,000 comments, the Secretary of Labor  published the final rule on May 23, 2016 (2016 Overtime Rule). The major  changes included increasing the salary level threshold from $455 per  week ($23,660 annually) to $913 per week ($47,476 annually) and  providing an automatic update to the salary level every 3 years. DOL  estimated that about 4.2 million EAP employees in the states would  become newly entitled to overtime pay under the revised salary level  threshold. At the time of publication, the 2016 Overtime Rule would have  applied to Puerto Rico; however, on June 30, 2016, prior to the rule\u2019s  effective date of December 1, 2016, PROMESA was enacted which, in  part, delayed the applicability of this rule to Puerto Rico.", "Prior to the 2016 Overtime Rule going into effect, several states and  various business groups challenged the rule in the Federal District Court  of the Eastern District of Texas. On November 22, 2016, this court issued  a nationwide preliminary injunction preventing DOL from implementing  and enforcing the 2016 Overtime Rule for the duration of the case. In  the interim, the 2004 Overtime Rule salary level threshold for EAP  employees of $23,660 remained in effect. In July 2017, DOL published a  Request for Information to gather additional information to begin the  rulemaking process to replace and update the overtime regulations. In  August 2017, the district court determined that the 2016 Overtime Rule  was unlawful and ordered it invalidated. In October 2017, DOL filed a motion to appeal that ruling with the Fifth Circuit Court of Appeals. In  November 2017, DOL filed a motion to stay the appeal pending the  outcome of its rulemaking, and the Fifth Circuit granted this motion.  DOL\u2019s comment period for the Request for Information ended on  September 25, 2017, and the agency currently is reviewing submissions.  DOL plans to publish a Notice of Proposed Rulemaking on the salary  level threshold for EAP employees in October 2018. Meanwhile, the  2004 Overtime Rule continues to remain in effect as of today, while the  appeal and rulemaking are pending."], "subsections": []}, {"section_title": "Puerto Rico\u2019s Labor Laws", "paragraphs": ["In addition to FLSA, workers and employers in Puerto Rico may be  subject to various other federal, Puerto Rican, and local labor laws or  regulations depending on eligibility, exemptions, and other limitations. In  some cases, including sick leave, vacation leave, mandatory meal period,  weekly day of rest, and maternity leave, these laws may be more  generous to workers than federal law, according to Puerto Rico  Department of Labor officials.", "Sick leave. Non-exempt employees in Puerto Rico are entitled to  accrue at least 1 day of paid sick leave after working at least 130  hours per month.", "Vacation leave. Non-exempt employees in Puerto Rico are entitled to  accrue paid vacation after working at least 130 hours per month. Non- exempt employees hired before January 26, 2017, are entitled to a  minimum monthly vacation leave accrual rate of one-and-a-quarter  days. Non-exempt employees hired on or after January 26, 2017, are  entitled to a minimum monthly vacation leave accrual rate of a half- day during the first year of service; three-quarters of a day after the  first year of service up to the fifth year of service; 1 day after the fifth  year of service up to the fifteenth year of service; and one-and-a- quarter days after the fifteenth year of service. However, in the case  of Puerto Rico resident employers who have less than 12 employees,  the minimum monthly vacation leave accrual rate is a half-day.", "Mandatory meal period. Non-exempt employees in Puerto Rico are  entitled to a mandatory meal period between the third and sixth  consecutive hour of work. In general, any employer that employs or  allows an employee to work during the meal period is required to pay  said period or fraction thereof at a pay rate equal to twice or one and  one-half times the regular pay rate, as applicable.", "Weekly day of rest. Non-exempt employees in Puerto Rico are  entitled to a mandatory weekly day of rest for every six consecutive  days of work. Work performed during the day of rest is considered  overtime and requires extraordinary compensation, regardless of the  total number of hours that the non-exempt employee worked in the  preceding 6 days.", "Maternity leave. Pregnant women in Puerto Rico are entitled to paid  maternity leave 4 weeks before and 4 weeks after childbirth. Working  mothers may opt to take only 1 week of pre-natal leave and extend  post-natal leave up to 7 weeks. Women who adopt a child 5 years old  or younger are entitled to 8 weeks of maternity leave."], "subsections": []}, {"section_title": "Possessions Tax Credit", "paragraphs": ["The Tax Reform Act of 1976 created the possessions tax credit to assist  Puerto Rico and other insular areas in obtaining employment-producing  investments. The credit effectively reduced federal taxes on income  earned by qualifying U.S. corporations from operations in U.S. insular  areas. However, the credit was repealed in 1996, but existing claimants  were allowed to continue to use the credit during a 10-year phaseout  period ending in 2006. In 2006, we reported that U.S. corporations  claiming the credit dominated Puerto Rico\u2019s manufacturing sector in the  late 1990s and that after the tax credit began to phase out in 1996, the  activities of these corporations decreased significantly."], "subsections": []}]}, {"section_title": "Unreliable Economic Data Make Conditions in Puerto Rico Difficult to Evaluate", "paragraphs": [], "subsections": [{"section_title": "Prior to Hurricane Maria, Puerto Rico Had Already Experienced Prolonged Economic Decline", "paragraphs": [], "subsections": [{"section_title": "Overall Economic Decline", "paragraphs": ["Puerto Rico Planning Board (Planning Board) data show that Puerto Rico  has been in an economic decline for more than a decade. From 2005 to  2016, Puerto Rico\u2019s GDP decreased by over 9 percent, after adjusting for  inflation. Beginning in 2006, Puerto Rico\u2019s economy experienced declines  in real output in 9 of the next 11 years, as measured by real GDP (see fig.  2). While we have concerns about the precision of the Planning Board\u2019s real GDP measure from year to year, as discussed later, we are confident  in the downward direction of growth.", "Puerto Rico officials described the economic contraction as a downward  spiral, where negative economic growth spurred outmigration by skilled  workers, leading to decreased tax revenue and thereby increasing public  debt per capita. This, in turn, they said decreases new investment and the  cycle repeats.", "Five Main Factors that Contributed to  Puerto Rico\u2019s Economic Condition  In May 2018, GAO reported on five main  factors it identified through discussions with  officials and experts and a review of literature.  The factors were:  Outmigration and diminished labor force.  Some experts tied Puerto Rico\u2019s negative  economic growth to a steady decline in its  population and labor force since 2005.  According to Census data, Puerto Rico\u2019s  aging population means there are  proportionally fewer individuals of working  age.   Regulatory challenges of doing business  in Puerto Rico. Some experts cited the high  cost to businesses of complying with Puerto  Rico\u2019s regulations, such as the permitting  process for new businesses, and federal laws,  such as the minimum wage law.  High cost of importing goods and energy.  Many of the goods used by businesses in  Puerto Rico must be imported, significantly  increasing their costs and in turn the cost of  doing business. Petroleum, the main source  of electronical energy generation, is a good  whose high cost was particularly  consequential to Puerto Rico\u2019s economic  struggles, according to Puerto Rico  government officials, experts, and a literature  reviews.  Phaseout of the possessions tax credit.  The loss of the tax credit was been cited by  some as a potential cause of Puerto Rico\u2019s  economic decline since 2006; however, there  was no consensus as to the magnitude.  Banking and housing struggles. Puerto  Rico\u2019s banks have struggled and several have  closed. Puerto Rico\u2019s housing prices peaked  in 2009, but fell 25 percent by January 2017,  according to Federal Housing Finance Agency  data.", "In our May 2018 report examining the Puerto Rico debt crises, we spoke  with officials and experts, and conducted a literature review, and identified  five main factors contributing to Puerto Rico\u2019s current economic condition:  outmigration and a diminished labor force; regulatory challenges of doing  business in Puerto Rico; the high cost of importing goods and energy; the  phaseout of the possessions tax credit; and banking and housing  struggles (see sidebar)."], "subsections": []}, {"section_title": "Hurricane Maria\u2019s Economic Impact", "paragraphs": ["Puerto Rico was already experiencing a long economic contraction when  Hurricane Maria made landfall in September 2017. Previous U.S. natural  disasters, such as Hurricane Katrina in the Gulf Coast, have had  significant adverse impacts on the economies of the affected regions,  including significant outmigration. Immediately following Hurricane  Katrina, the Gulf Coast experienced a number of challenges to its  economy including a rise in unemployment; an increase in outmigration  and decrease in housing units; a decline in state tax revenue; and a  decline in imports and exports. Puerto Rico may experience similar  challenges. For example, a February 2018 Federal Reserve Bank of New  York press briefing on the impact of Hurricanes Maria and Irma  characterized the 4 percent local job losses in Puerto Rico as  substantial. Further, the briefing indicated that the true economic cost  may be understated because some workers who are still employed likely  suffered a drop in income, there may be unmeasured effects on the  informal economy, and the value people place on quality of life issues are  not measured.", "The substantial damage to the territory also accelerated outmigration and  will likely worsen its economic condition. A January 2018 report from the  Puerto Rico government identified the 2017 hurricanes as having a  significant impact on the economy and projected that the population will  decline by 10 percent over the next 2 years and could decline by nearly  20 percent over the next 5 years as people leave the island due to poor  economic conditions. Initial data from the U.S. Bureau of Transportation  Statistics show that 92,284 more people flew out of Puerto Rico with one- way tickets than flew into Puerto Rico in October 2017, the first full month  after Hurricane Maria. That number represents a 255 percent increase  over similar statistics in August 2017 and a 1,195 percent increase over  October 2016 (see fig. 3). By December 2017, 17,281 more people flew  out of Puerto Rico with one-way tickets than flew into Puerto Rico. This is  149 percent increase over similar statistics for December 2016. While the  extent to which citizens of Puerto Rico may return to the territory is  unclear, the initial outmigration could prolong negative economic growth."], "subsections": []}]}, {"section_title": "Methods Currently Used To Measure Puerto Rico\u2019s Economy Are Outdated and Lead to Unreliable Measures", "paragraphs": [], "subsections": [{"section_title": "Measuring GDP in Puerto Rico", "paragraphs": ["Outdated methods for measuring GDP make it difficult for the Puerto Rico  government to fully analyze specific economic needs and develop long- range plans. There is no federal statistical measure of Puerto Rico\u2019s  GDP. The U.S. Census\u2019 Economic Census of Island Areas provides  some limited insights into Puerto Rico\u2019s economic performance by  industry, including revenue, payroll, employee count, and inventories.  The Economic Census of Island Areas is updated every 5 years, but does  not include total GDP. Instead, each year, BEA calculates GDP for four  other territories and is reimbursed by the Department of the Interior\u2019s  Office of Insular Affairs for the estimation and publication of this  information.", "In contrast, Puerto Rico\u2019s Planning Board calculates GDP, but its  methods are outdated and therefore unreliable, as they do not provide a  precise measure of economic activity. Specifically, a 2011 White House  Task Force Report examining Puerto Rico\u2019s economic challenges found  the Planning Board\u2019s methods were outdated because they did not follow  the same standards used for the rest of the United States. The Task  Force also found that the methodology was not in line with modern  statistical techniques, resulting in a less precise measure of Puerto Rico\u2019s  economic activity. Accurately calculating GDP is necessary to  adequately measure total output of goods and services in Puerto Rico.  GDP is also useful in measuring productivity and conducting monetary  policy, and may be used to develop and apply appropriate policies for  promoting economic growth. For example, a reliable and timely measure  of GDP helps government officials calculate more accurate projections of  tax revenue.", "The Planning Board\u2019s method for calculating GDP does not effectively  adjust for inflation because, the methodology uses a fixed-weighted index  method that assumes the structure of the economy\u2014what is being  produced and prices of what is being produced relative to each other\u2014is  roughly constant over time. Further, the Planning Board is using this  method to report inflation adjusted GDP based on the prices in a 1978  \u201cmarket basket\u201d\u2014a fixed set of goods and services that people buy for  day-to-day living. The Planning Board then uses 1954 as the reference  year in its inflation adjustment to report GDP based on the price of goods  and services. Consequently, the Planning Board\u2019s real GDP measure  may not be accurately adjusted to reflect current purchasing patterns and  inflation in the prices of purchased products.", "BEA provides Puerto Rico\u2019s Planning Board with some support in its  calculation of GDP, but does not verify the accuracy of the calculation. In  response to the 2011 White House Task Force findings, BEA began  providing technical assistance and support to the Planning Board in  updating its methods to adjust GDP for inflation and developed a report  with recommendations for updating economic accounts. BEA found that  the Planning Board\u2019s methods did not comply with the internationally  agreed upon standards for compiling measures of economic activity.  Officials said that BEA was helping the Planning Board update its  methods; however, a change in the level of communication slowed the  update from 2013 through 2014. As a result, the Planning Board  continued to use the same outdated methods.", "In January 2017, the Planning Board and BEA signed an agreement to  modernize Puerto Rico\u2019s economic accounts and align them with  international guidelines. The agreement also tasked the Planning Board  with providing deliverables in regular intervals beginning in spring 2017,  including publication of alternative estimates of GDP that implement steps  towards modernization. BEA officials told us that they are providing  support to the Planning Board, and Planning Board officials told us they  are working on updating the methodology. However, as of March 2018,  the Planning Board had not yet produced all of the agreement  deliverables, including publication of alternative GDP estimates.", "Given the impact of Hurricane Maria, it may be challenging for Puerto  Rico to modernize its GDP measures. Planning Board officials told us in  August 2017 that they were working to update their GDP methodology, so  that it is similar to the one used by BEA, and that they would be updating  to a 2007 \u201cmarket basket.\u201d Board officials said the new GDP figures  were expected to be completed in December 2017. Their release was  delayed in the aftermath of Hurricane Maria, but officials said they now  expect to release GDP measures using the new methodology in summer  2018. Officials added that they plan to continue publishing GDP  measures using the old methodology along with the new one for trend  comparisons. The Planning Board and BEA estimated the cost to the  Puerto Rico government to modernize its GDP measure is $2 million \u2014 including staff time and computing infrastructure.", "A 2016 bi-partisan Congressional Task Force on Economic Growth in  Puerto Rico (2016 Congressional Task Force) recommended BEA  calculate GDP for Puerto Rico as it does for the states and other  territories, and BEA\u2019s long-term goals include this objective. Further, in  February 2018, the Financial Oversight and Management Board for  Puerto Rico recommended that the Governor of Puerto Rico support  efforts to implement the Congressional Task Force recommendation. BEA  officials told us one of the agency\u2019s long-term goals is calculating GDP for  Puerto Rico and they have discussed including Puerto Rico in its  reporting of GDP. Officials noted that including Puerto Rico in GDP  reporting would require additional funds similar to reimbursements it  received for the other four territories\u2019 calculations.", "BEA\u2019s mission is to promote a better understanding of the entire U.S.  economy by providing the most timely, relevant, and accurate economic  accounts data in an objective and cost-effective manner. BEA has  provided technical assistance and support for 6 years; however the  Planning Board has not yet modernized its methods to report a reliable  GDP measure, and BEA has not included Puerto Rico in its reporting  efforts. Federal standards for internal control state that management  should use quality information to achieve the entity\u2019s objectives. The  lack of a federal GDP measure for Puerto Rico makes it difficult to make  reasoned policy recommendations, adds uncertainty around issues  affecting Puerto Rico\u2019s economy, and makes it more difficult to identify  fiscal and economic recovery plan priorities. Without modernized GDP  methods, it remains difficult to compare Puerto Rico\u2019s GDP with the rest  of the United States and the other four territories for which BEA calculates  GDP. Finally, without such a measure of GDP, federal policy makers and  private investors must rely on various and sometimes unreliable data  sources to try to establish common facts about Puerto Rico\u2019s economic  condition\u2014an impediment in reaching consensus, engaging in meaningful  policy discourse, and investment."], "subsections": []}, {"section_title": "U.S. Government Labor Statistics for Puerto Rico", "paragraphs": ["Federal labor statistics for Puerto Rico are incomplete because the  Current Population Survey (CPS) does not include Puerto Rico and four  other U.S. territories, and the American Community Survey (ACS)  primarily provides data on population and housing, rather than labor.  PROMESA recognized this and recommended that Census consider the  feasibility of including Puerto Rico, and the other territories in the CPS.  Specifically, PROMESA suggested that Census conduct a study to  determine the feasibility of expanding data collection to include Puerto  Rico and the other four U.S. territories in the CPS and if necessary,  request the funding required to conduct this feasibility study as part of its  budget submission to Congress for fiscal year 2018. Census officials  told us they estimate a feasibility study including all of the U.S. territories  will cost $1.1 million in fiscal year 2018, but did not request funding. The  2016 Congressional Task Force also recommended that BLS and Census  take reasonable steps to include the territories.", "Federal standards for internal control state that management should use  quality information to achieve the entity\u2019s objectives. CPS data are  intended to provide a comprehensive body of labor data that can be used  to keep the nation informed about the economic and social well-being of  its people, but Census and BLS are unable to report on the economic and  social well-being of a segment of the nation and its people. Census  officials told us they are concerned about unduly burdening Puerto Rico  citizens with data collection efforts that would provide state level  estimates. However, Census has not studied the feasibility of including  Puerto Rico in the CPS, which would inform officials\u2019 decision on whether  to include Puerto Rico and the other territories in the CPS. By conducting  such a study, Census would better understand the tradeoffs of including  or continuing to omit Puerto Rico from CPS, including the extent to which  it can be considered in public policy decisions, such as the 2016 Overtime  Rule."], "subsections": []}]}]}, {"section_title": "Increasing the Overtime Threshold Would Affect a Small Percentage of Workers in Puerto Rico and Could Affect Employment Conditions", "paragraphs": [], "subsections": [{"section_title": "The 2016 Overtime Threshold Increase Would Likely Affect Less Than 5 Percent of the Workforce in Puerto Rico", "paragraphs": ["Our estimates suggest that a larger percentage (about 4.5 percent) of  Puerto Rico\u2019s total workforce would have been affected by the Overtime  Rule than the states (about 2.6 percent), based on our analysis of ACS  data and DOL\u2019s analysis of CPS data. Specifically, DOL\u2019s analysis  estimated that of 159.9 million wage and salary workers in the states,  about 4.2 million (or about 2.6 percent) might be directly affected by the  2016 Overtime Rule. In our analysis of the Overtime Rule for Puerto  Rico, we estimated that about 47,250 (about 4.5 percent) of 1.06 million  wage and salary workers in Puerto Rico would have been directly  affected (see fig. 4).", "The lack of data from CPS on Puerto Rico and the effects of Hurricane  Maria hinder our ability to fully assess the potential effect of the 2016  Overtime Rule on Puerto Rico. Instead, we used data from the 2015 5- year ACS to estimate the impact of the Overtime Rule on Puerto Rico.  The ACS employment data lack multiple variables available in the CPS;  hence, we were limited in what we could estimate. For example, DOL\u2019s  estimate for the states included the wealth transfer from employers to  employees, which is important for understanding the economic effects of  the 2016 Overtime Rule. We do not provide similar insights because of the difference in variables in the ACS and CPS. (See table 2 in appendix I  for the differences between our analysis and that of DOL.) Additionally,  DOL estimated the effect the Overtime Rule would have on the probability  that a worker had multiple jobs, but the limitations of the data we used  kept us from performing this analysis.", "Our analysis estimates that the impact of the 2016 Overtime Rule in  Puerto Rico would have been largely concentrated in four industries:  education and health services, wholesale and retail trade, public  administration, and financial activities. We estimated that in these four  industries about 76 percent (about 36,000) of our approximate 47,250  total workers would have been directly affected (see table 1). The largest  directly affected industry, education and health services, makes up about  43 percent (about 20,000) of this total."], "subsections": []}, {"section_title": "Raising the Overtime Threshold Could Increase Wages for Some, but Reduce Overall Hours and Employment in Certain Industries", "paragraphs": ["Depending on how employers respond to an increase in the overtime  threshold, the effect of amending the overtime regulations could vary  across employees. Similar to employers in the states, employers in  Puerto Rico could respond to changes in the overtime regulations based  on the current employee\u2019s salary and work schedule by: 1) making no  changes, 2) paying overtime, 3) raising salaries, or 4) adjusting hours  worked (see fig. 5). In its analysis of the impact of the 2016 Overtime  Rule in the states, DOL estimated the largest impact would be an  aggregate transfer of income from employers to employees, which would  be seen as a positive for some employees (e.g., increased pay, fewer  hours for same pay, or new hires) and a negative for others (e.g.,  employers in our facilitated discussion groups said they would have  layoffs, move employees from salaried to hourly, or lower benefit  amounts).", "While we were unable to conduct a full impact analysis identical to DOL\u2019s  because of data limitations, we held facilitated discussion groups, to gain  insight into how employers would have responded if the 2016 Overtime  Rule was implemented in Puerto Rico. Views reported by participants in  these groups may not be representative of all Puerto Rico employers, but  they provide illustrative examples of the types of steps employers might  have taken if the 2016 Overtime Rule were implemented. Employers in 2  of our 10 discussion groups said they would make staff adjustments by  increasing the salary of some employees while, in some cases,  minimizing the role of others. However, employers in 9 of our 10 of our  discussion groups said they might also need to convert the remaining  employees to part-time or hourly work, reduce their hours, or lay them off. \u201cWe have 125 exempt employees. The rule  change would impact our labor costs a lot. We  would need to minimize employees/hours to  reduce the labor costs. We may adjust our  contribution to medical plans to make up for  the increased labor costs.\u201d  \u201cWith the new rule, half  would  need to be paid overtime or increase salary.  This would leave us not enough flexibility to  cover the hours or operation.\u201d  \u201cWe have a total of 850 employees. About 8  would be affected by the change. Of those 8,  3 we would boost their salary; the others will  be switched to hourly. This may affect their  benefits.\u201d", "Through these facilitated discussion groups, we also learned that  employer responses to the 2016 Overtime Rule may differ by industry.  Employers in 3 of 10 industry discussion groups said they would be able  to absorb some of the higher costs associated with an increase in the  Overtime Rule threshold. For example, some manufacturers told us it  would not be difficult for their businesses to absorb these additional costs,  particularly if the salary threshold was at a somewhat lower level.  Similarly, some hotel employers told us they would be able to absorb  costs associated with the change across their many hotel locations, but  others said they may not be able to assimilate the threshold increase.  Hospital employers who participated in our facilitated discussion groups  told us they have lower margins and face threats of closure even without  the threshold increase. Some restaurant and hotel employers who  participated in our facilitated discussion groups said they may be unable  to pass associated increased labor costs to consumers; some would have  to require exempt workers to work longer hours and reduce the number of  full time employees or hours (see sidebar).", "Employers could respond by adjusting staff if the 2016 Overtime Rule  goes into effect, but the impacts to employers may be limited and the  workforce could benefit from the 2016 Overtime Rule change according to  our interviews with 1 economist and 1 labor group official. One   economist suggested that instead of having two employees who work 60  hours each, an employer might hire a third employee so that each works  40 hours. Additionally, this economist said an increase to the threshold  would not be as burdensome to business, because employee wages  have risen above the current overtime salary threshold. One labor group  representative suggested that the 2016 Overtime Rule would have a  minimal impact because very few workers in Puerto Rico earn enough to  meet the 2004 salary threshold. Further, one economist said that under  the current threshold, workers work excessive hours and do not have the  same bargaining power. An increased overtime threshold would improve  these dire working conditions. Specifically, this economist said that  implementing the 2016 Overtime Rule would encourage firms to hire  more workers, provide employees with more bargaining power, and help  prevent worker exploitation.", "One economist said implementing the 2016 Overtime Rule only in the  states could increase the wage differential between Puerto Rico and in  turn increase outmigration from Puerto Rico. One member of the Puerto  Rico Economic Administration said that if Puerto Rico were to have a  lower threshold than the U.S. mainland the effects might be worse than  those caused by the increased labor costs of implementing the higher  threshold. Another economist said that while hours may be adjusted or  layoffs may occur immediately following implementation of the Overtime  Rule, these impacts would not be a major concern within 3 to 4 years."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Puerto Rico has long been experiencing severe economic challenges and  its default on over a billion dollars of debt payments since 2015 has  focused the need for attention to this territory. As Puerto Rico officials  were in the process of taking action to update their methodology for  reporting inflation-adjusted GDP, Hurricane Maria exacerbated the  territory\u2019s economic challenges. FEMA estimates that it may take years  for Puerto Rico to recover. The lack of accurate economic and  comprehensive labor data hinders policymaking, including a  determination of the potential impact of changes to the overtime  regulations. To help address Puerto Rico\u2019s economic challenges now and  in the future, the federal government and investors need updated and  reliable data. Going forward, having BEA include Puerto Rico in its  calculation of GDP would provide federal and local authorities, as well as  businesses and investors, with reliable data on Puerto Rico\u2019s economic  condition that can be directly compared with the United States and other  territories. BEA\u2019s long-term goals include measuring Puerto Rico\u2019s GDP,  but having reliable data now would help address significant economic  challenges in the short term. Likewise, studying whether including Puerto  Rico in the Current Population Survey is feasible would allow DOL and  other policymakers to be better positioned to fully consider the cost of  including the territory against the implications of exclusion."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations, including two to  Commerce and one to DOL. Specifically:  The Secretary of Commerce should ensure that the Bureau of Economic  Analysis includes Puerto Rico in its reporting on gross domestic product,  as it does for four other U.S. territories. (Recommendation 1)", "The Secretary of Commerce, in cooperation with DOL\u2019s Bureau of Labor  Statistics, should conduct a study on the feasibility of including Puerto  Rico in its reporting of the Current Population Survey. (Recommendation  2)", "The Secretary of Labor, in cooperation with the Commerce\u2019s Census  Bureau, should conduct a study on the feasibility of including Puerto Rico  in its reporting of the Current Population Survey. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the report to the Government of Puerto Rico, the  Department of Commerce (Commerce), and the Department of Labor  (DOL) for review and comment. In written comments that are reproduced  in appendix IV, Commerce agreed with the recommendations made to it.  In an email, DOL\u2019s Deputy Assistant Secretary for Policy stated that the  agency did not have any comments on the report. In addition, Commerce  and the Government of Puerto Rico provided technical comments, which  we incorporated into the report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Government of Puerto Rico, the Secretary of the  Department of Commerce, the Secretary of the Department of Labor, and  other interested parties. In addition, this report is available at no charge  on the GAO website at http://gao.gov.", "If you or your staff have any questions about this report, please contact  Cindy Brown Barnes at (202) 512-7215 or Oliver Richard at (202) 512-  8424.You may also reach us by e-mail at brownbarnesc@gao.gov or  richardo@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our review addressed: (1) the economic conditions in Puerto Rico as of  the end of 2016; and (2) the potential effects of implementing the 2016  Overtime Rule on Puerto Rico\u2019s economy.", "To evaluate the current economic conditions in Puerto Rico quantitatively,  we analyzed (1) data from the Puerto Rico Planning Board\u2019s (Planning  Board) Statistical Appendix for the Governor that includes data on Puerto  Rico\u2019s gross domestic product (GDP) from 1990 through 2016 and (2)  passenger data for Puerto Rican airports for years 2016 and 2017 from  the Bureau of Transportation Statistics (BTS).", "To analyze the real GDP of Puerto Rico from 1990 through 2016 and  Puerto Rico GDP by industry for 2016, we relied on data from the  Planning Board\u2019s Statistical Appendix for the Governor. We interviewed  Planning Board officials responsible for producing the annual GDP  estimates to understand how the data were prepared and any limitations  to the data, and concluded that the while we have concerns over the  precision of real GDP data, they were sufficiently reliable for our purposes  of determining the direction of growth.", "To analyze the flow of passengers through Puerto Rican airports before  and after Hurricane Maria, we relied on the BTS\u2019 monthly passenger data  for 2016 and 2017 as accessed through Diio Mi: Market Intelligence for  the Aviation Industry. Diio Mi is a private contractor that provides online  access to U.S. airline financial, operation, and passenger data. We  reviewed the relevant documentation of the dataset and previous GAO  reports and found the dataset sufficiently reliable for our purposes.", "To assess the potential effects of the 2016 Overtime Rule on Puerto Rico  quantitatively, we analyzed and reported data from the American  Community Survey (ACS) for calendar year 2015, because DOL used  2015 data in its impact analysis of the Overtime Rule on the states. The  ACS is a national survey designed and administered by the Census  Bureau (Census), and it contains data on individual earnings. Since 2005,  the ACS has also included the Puerto Rico Community Survey (PRCS)  which extends the survey through Puerto Rico. Our data set selection  process included interviews with current and former agency officials as  well as review of dataset documentation such as data handbooks, data  dictionaries, and guidance on the different versions of data available. The  ACS is conducted annually with estimates based on 1-year and 5-year  data with benefits and drawbacks for each version. The 1-year ACS is  updated the earliest and gives the most current data; however, according  to Census\u2019 guidance on the different ACS samples, it also contains the  smallest sample size and is more appropriate for analyzing large  populations than small ones. The 5-year ACS is the most reliable data,  according to Census\u2019 ACS guidance, as it includes the largest population  size, which can be used to analyze small populations; however, the 5- year ACS is the least current version of the data. Additionally, while the  2015 5-year ACS data were not the most recent available, we used them  because the Department of Labor (DOL) used 2015 data in its impact  analysis of the 2016 Overtime Rule for the states. Based on these  benefits and limitations, we chose to use the 2015 ACS 5-year  estimates. Estimates produced from ACS data are subject to sampling  error. For all of our estimates we weighted observations based on the  individual weight. We compared our estimates of values derived from our  weighting procedures to those published by the DOL and found them to  be consistent. In addition to estimates, we generated standard errors or  the margin of error for the 95 percent confidence interval, and report them  with estimates in figures and tables. Based on our data checks, reviews  of documentation and interviews with agency officials, we found the ACS  data to be sufficiently reliable for our purposes.", "In addition to the quantitative data collected, we reviewed relevant federal  laws, regulations, court documents, agency guidance, and internal  controls related to the 2016 Overtime Rule, labor in Puerto Rico, and  federal statistical measures for Puerto Rico. Additionally, we reviewed  previous GAO reports on Puerto Rico and its economy. We interviewed  DOL and Commerce officials at the national level. We interviewed Puerto  Rican government officials to better understand current economic  conditions and the statistical measure used to reflect the economic  conditions. We interviewed representatives of national and Puerto Rican  employer and labor organizations to gain their perspectives on the impact  of the 2016 Overtime Rule and the condition of the economy. We  conducted 10 facilitated group discussions with Puerto Rican employers  in the manufacturing, restaurant, hotel, hospital, and professional services  industries.  These are some of the industries that employ the largest  number of people in Puerto Rico and are among the most likely to be  impacted by the 2016 Overtime Rule. Employers were selected to  represent both large and small business perspectives in each industry.  Views reported by participants in these groups are not representative of  those of all Puerto Rico employers and for that reason are not  generalizable. We also interviewed four economists, identified from prior  work and interviews with agency officials, industry groups, and labor  groups as having expertise relating to the 2016 Overtime Rule or the  Puerto Rico economy, regarding the economic conditions of Puerto Rico  and the potential economic impacts of the 2016 Overtime Rule."], "subsections": [{"section_title": "Analysis of American Community Survey Data", "paragraphs": ["For our analysis of the effects of the 2016 Overtime Rule on Puerto Rico,  we mirrored the analysis conducted by DOL for the impacts of the rule on  the United States. While the methodologies are similar, the DOL analysis  used the Current Population Survey (CPS) data that do not include  Puerto Rico. The ACS data we use serves a similar role; however, we  made a few adjustments to the analysis in light of available data.  Specifically, in the ACS, there is no variable identifying whether the  individual works an hourly job. In order to simulate the removal of hourly  workers from the sample, we randomly assign hourly worker designation  to the same proportion of the population that are classified as hourly  workers in DOL\u2019s analysis (41.01 percent). A few assumptions are  associated with this manipulation: 1) We are assuming that the proportion  of the population that works an hourly job in Puerto Rico is similar to that  of the 50 states, and 2) when we perform industry and region analyses,  we assume the same hourly worker proportion across all industries and  regions. Additionally, in its final rule, DOL analyzes the impact of the 2016  Overtime Rule on individual worker\u2019s propensity to work multiple jobs; the  ACS does not identify workers employed in multiple jobs and we could  not perform this analysis. Also, the CPS data contain several variables on  the number of hours worked that allowed DOL to analyze who likely  works overtime on a regular basis. While the ACS includes a variable  indicating the usual number of hours worked per week over the past year,  we found it does not capture the schedule fluctuations as accurately as  the CPS variables. As such, we do not calculate the dollar amount  transfers from employers to employees and dead weight losses, or the  loss in economic efficiency from the rule that DOL shows in its analyses.  To the extent possible, we used DOL\u2019s methodology to determine the  potential effect of the 2016 Overtime Rule in Puerto Rico. However, due  to data limitations there were some ways in which our approach differed  from the approach used by DOL.", "In DOL\u2019s analysis, the sample includes only the workers covered by its  regulation. We adapt the sample to match the DOL\u2019s analysis as follows:  1) remove military personnel, unpaid volunteers, self-employed  individuals, clergy and other religious workers, and federal employees, 2)  remove blue-collar workers and workers paid hourly; and 3) remove  workers who are categorized under occupation and industry codes that  are generally exempt under other exemptions.", "For consistency, our analysis makes the same adjustments to our sample  that DOL makes in its analysis. Since we use the 2015, 5-year ACS data,  we first put all wages into 2015 levels using ACS defined variables. Next,  we inflate from 2015 to 2017 levels using the calendar year consumer  price index (CPI-U). Just as in DOL\u2019s analysis, we do not know whether  any specific worker satisfies the duties test of the 2016 Overtime Rule, so  we follow the same steps DOL took in its final rule. These steps include  using DOL\u2019s probabilities that specific job codes meet the duties test and  assigning the probability to individual workers using the gamma  distribution with the shape parameter alpha was set to the squared  quotient of the sample mean divided by the sample standard deviation,  and the scale parameter beta was set to the sample variance divided by  the sample mean. Additionally, DOL explicitly removes certain industries  and occupations from the sample and we follow its methodology exactly  to remove these. Finally, to estimate the population that would have been  affected by the 2016 Overtime Rule, we limit the sample to only those  above the 2004 overtime salary threshold ($23,660) and below the 2016  salary threshold ($47,476) just as DOL did in its analysis.", "DOL\u2019s estimates for industries and regions use different groupings than  those provided in the ACS; however, since the ACS variables use the  same coding but, a finer level, we can recreate the variables used in  DOL\u2019s analysis. For example, we used Census guidance on converting  2012 industry codes to create a major industry variable from the ACS  industry codes. Similarly, to compare our estimates to DOL estimates by  region, we take the ACS data, which is reported state-by-state, and put it  into larger regions, such as \u201cNortheast.\u201d", "We conducted this performance audit from September 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Effects of Implementing Alternative Overtime Rule Thresholds on Puerto Rico", "paragraphs": ["Table 3 shows how different populations of workers would be affected by  applying alternative overtime thresholds in Puerto Rico. For our analysis,  in order to more closely replicate Department of Labor\u2019s (DOL) design, we  use the same alternative salary thresholds DOL analyzed in its final rule,  which are defined as follows:", "Alternative 1: Inflate the 2004 Level - takes the 2004 overtime  threshold and inflates it to fiscal year 2015 dollars using the consumer  price index. This method leads to an overtime threshold of $570 per  week or $29,640 per year.", "Alternative 2: 2004 Methodology - uses the 2004 final rule and  updates it with data from the third quarter of 2015. This method leads  to an overtime threshold of $596 per week or $31,015 per year.", "Alternative 3: Kantor Long Test - is based on a 1958 Report and  Recommendations on Proposed Revision of Regulations, Part 541, by  Harry S. Kantor. This methodology uses data collected on actual  salaries paid to executive, administrative, or professional (EAP)  employees grouped by geographic region, industry group, number of  employees, and city size. DOL then used the long-duties test such  that no more than about 10 percent of exempt EAP employees in the  lowest-wage region, lowest-wage industry, smallest establishment  group, or smallest city group will fail to meet the test. This method  leads to a threshold of $684 per week or $35,568 per year.", "Alternative 4: 40th Percentile of Full-time Salaried Workers  (Nationally) - takes all full-time salaried workers in the United States  and calculates the 40th percentile of their wages. This method leads  to a threshold of $972 per week or $50,544 per year.", "Alternative 5: Kantor Short Test - is also based on the Kantor method  described in the third alternative, but uses the methodology  associated with the short-duties test instead of the long-duties test. To  do this, DOL took the $684 per week of the Kantor Long Test and  inflated it by the average percent wage difference between the long  and short test from 1949 through 1975 (149 percent). Multiplying $684 per week by 149 percent yields a Kantor Short Test threshold of  $1,019 per week or $52,984 per year.", "Alternative 6: Inflate 1975 Short Test Level - takes the 1975 short- duties test salary level and inflates it to fiscal year 2015 dollars. This  leads to a threshold level of $1,100 per week or $57,205 per year."], "subsections": []}, {"section_title": "Appendix III: Data Checks for American Community Survey", "paragraphs": ["The following tables show how the Department of Labor\u2019s (DOL) analysis  of the 2016 Overtime Rule in the United States using the analysis of  Current Population Survey (CPS) data compares to our analysis using the  American Community Survey (ACS) data. This analysis was conducted  to support using ACS data as an alternative to CPS data. The  methodologies used in our analysis and the DOL analysis are similar, but  some adjustments were made to our analysis to attempt to replicate the  DOL\u2019s analysis of CPS data because variables were missing from the  ACS data. Between the slightly different methodologies and different data  sets, we expect the estimates to be of similar magnitudes, but not  necessarily identical. The results indicate that our adjustments to the  methodology and use of a different data yield similar results and add  validity to our estimates for Puerto Rico."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "GAO Acknowledgments", "paragraphs": ["In addition to those named above, Kimberley Granger and Seyda  Wentworth, Assistant Directors; Amber Yancey-Carroll, Analyst-in- Charge; Pedro Almoguera and Michael Naretta made key contributions to  this report. Also contributing to this report were Jeffrey Arkin, David  Blanding, David Chrisinger, Sarah Gilliland, Robin Marion, Jonathan S.  McMurray, Sheila R. McCoy, Thomas Moscovitch, Dominic Nadarski,  Mimi Nguyen, Karissa Robie, Benjamin Sinoff, Almeta Spencer, Amy  Sweet, Anjali Tekchandani, Rosemary Torres Lerma, and Kathleen van  Gelder."], "subsections": []}]}], "fastfact": ["View Spanish version of Highlights (PDF, 1 page).", "After Puerto Rico defaulted on $1.5 billion in debt payments, Congress established federal oversight of the U.S. territory's fiscal affairs. This debt crisis coincided with a new Labor Department rule that made more people eligible for overtime pay. A federal court invalidated the rule and that decision has been appealed.", "We found:", "Puerto Rico's GDP has been trending down since 2000", "There is limited federal data on its economy", "The 2016 Overtime Rule would have affected about 4.5% of its workforce, but limited data hindered full analysis", "We recommended that agencies work to include Puerto Rico in more federal economic and labor data reporting."]}
{"id": "GAO-17-798T", "url": "https://www.gao.gov/products/GAO-17-798T", "title": "Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet", "published_date": "2017-09-07T00:00:00", "released_date": "2017-09-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since January 2017, the Navy has suffered four significant mishaps at sea that resulted in serious damage to its ships and the loss of 17 sailors. Three of these incidents involved ships homeported in Japan. In response to these incidents, the Chief of Naval Operations ordered an operational pause for all fleets worldwide, and the Vice Chief of Naval Operations directed a comprehensive review of surface fleet operations, stating that these tragic incidents are not limited occurrences but part of a disturbing trend in mishaps involving U.S. ships.", "This statement provides information on the effects of homeporting ships overseas, reducing crew size on ships, and not completing maintenance on time on the readiness of the Navy and summarizes GAO recommendations to address the Navy's maintenance, training, and other challenges.", "In preparing this statement, GAO relied on previously published work since 2015 related to the readiness of ships homeported overseas, sailor training and workload issues, maintenance challenges, and other issues; GAO updated this information, as appropriate, based on Navy data."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's prior work shows that the Navy has increased deployment lengths, shortened training periods, and reduced or deferred maintenance to meet high operational demands, which has resulted in declining ship conditions and a worsening trend in overall readiness. The Navy has stated that high demand for presence has put pressure on a fleet that is stretched thin across the globe. Some of the concerns that GAO has highlighted include:", "Degraded readiness of ships homeported overseas : Since 2006, the Navy has doubled the number of ships based overseas. Overseas basing provides additional forward presence and rapid crisis response, but GAO found in May 2015 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan. As a result, the crews of these ships did not have all of their needed training and certifications. Based on updated data, GAO found that, as of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews based in Japan\u2014including certifications for seamanship\u2014had expired. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since GAO's May 2015 report. The Navy has made plans to revise operational schedules to provide dedicated training time for overseas-based ships, but this schedule has not yet been implemented.", "Crew size reductions contribute to sailor overwork and safety risks: GAO found in May 2017 that reductions to crew sizes the Navy made in the early 2000s were not analytically supported and may now be creating safety risks. The Navy has reversed some of those changes but continues to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload\u2014both of which have contributed to some sailors working over 100 hours a week.", "Inability to complete maintenance on time: Navy recovery from persistently low readiness levels is premised on adherence to maintenance schedules. However, in May 2016, GAO found that the Navy was having difficulty completing maintenance on time. Based on updated data, GAO found that, in fiscal years 2011 through 2016, maintenance overruns on 107 of 169 surface ships (63 percent) resulted in 6,603 lost operational days (i.e., the ships were not available for training and operations).", "Looking to the future, the Navy wants to grow its fleet by as much as 30 percent but continues to face challenges with manning, training, and maintaining its existing fleet. These readiness problems need to be addressed and will require the Navy to implement GAO's recommendations\u2014particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made 11 recommendations in prior work cited in this statement. The Department of Defense generally concurred with all of them but has implemented only 1. Continued attention is needed to ensure that these recommendations are addressed, such as the Navy assessing the risks associated with overseas basing and reassessing sailor workload and factors used in its manpower requirements process."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today to discuss issues related  to Navy readiness in the wake of four significant mishaps at sea thus far  in 2017. The most recent of these occurred in August when an Arleigh  Burke class destroyer\u2014the USS John S. McCain (DDG 56)\u2014collided with  an oil tanker while underway near Singapore. This collision resulted in  serious damage to the ship, the loss of 10 sailors, and injury to five more.  It was the second collision involving the loss of life for Navy ships  underway in the last three months and the fourth significant at sea mishap  in the past year. In response to these incidents, the Chief of Naval  Operations ordered an operational pause for all fleets worldwide, and the  Vice Chief of Naval Operations directed a comprehensive review of  surface fleet operations, stating that these tragic incidents are not limited  occurrences but part of a disturbing trend of mishaps involving U.S.  warships.", "While we await the Navy\u2019s official findings on this matter, you asked us to  testify today on findings from our recent Navy readiness reviews. Before  we begin, however, it is important to set the context for the challenges the  Navy faces. In June 2017, we issued a report highlighting five key mission  challenges facing the Department of Defense (DOD). In that report, we  noted that the United States faces an extremely challenging national  security environment at the same time that it is grappling with addressing  an unsustainable fiscal situation in which DOD accounts for  approximately half of the federal government\u2019s discretionary spending.  Within this environment, DOD is working to both rebuild the readiness of  its forces and modernize to meet future threats while facing constrained  budgets. Each of the military services today are generally smaller and  less combat ready than they have been in many years, and each military  service has been forced to cut critical needs in areas such as training,  maintenance, and modernization due to budgetary constraints. Put  simply, our work has shown that readiness challenges persist across a  number of areas including, but not limited to, the Navy.", "This statement provides information on Navy readiness, including the  effects of homeporting ships overseas, reducing crew size on ships, and  not completing maintenance on time, and summarizes GAO  recommendations to address the Navy\u2019s challenges. This statement is  based on our body of work issued between 2015 and 2017 examining the  readiness of ships homeported overseas, sailor training and workload  issues, maintenance challenges, and other readiness issues. To perform  our prior work, we analyzed Navy readiness, training, and maintenance  data, and interviewed cognizant Navy officials involved in fleet operations.  The reports cited throughout this statement contain more details on the  scope of the work and the methodology used to carry it out. This  statement also includes updates to information as of August 2017, as  appropriate, based on Navy documentation and discussions with Navy  officials.", "The work on which this testimony is based was conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Since January 2017, the Navy has suffered four significant mishaps at  sea that have resulted in serious damage to Navy ships and the loss of  17 sailors (see figure 1). Three of the four at sea mishaps that have  occurred\u2014two collisions and one grounding\u2014have involved ships  homeported overseas in Yokosuka, Japan. Appendix II provides a  summary of major mishaps for Navy ships at sea in fiscal years 2009  through 2017.", "The Navy currently has 277 ships, a 17 percent reduction from the 333  ships it had in 1998. Over the past two decades, as the number of Navy  ships has decreased, the number of ships deployed overseas has  remained roughly constant at about 100 ships; consequently, each ship is  being deployed more to maintain the same level of presence. We  reported in September 2016 that the Navy, along with the other military  services, had been reporting persistently low readiness levels. The Navy  attributes these, in part, to the increased deployment lengths needed to  meet the continuing high demand for its aircraft carriers, cruisers,  destroyers, and amphibious ships. For example, the deployment lengths  for carrier strike groups had increased from an average of 6.4 months  during the period of 2008 through 2011 to a less sustainable 9 months for  three carrier strike groups that were deployed in 2015. In 2016, the Navy  extended the deployments of the Harry S Truman and Theodore  Roosevelt Carrier Strike Groups to 8 and 8.5 months, respectively. In  addition, the Navy has had to shorten, eliminate, or defer training and  maintenance periods to support these high deployment rates. These  decisions have resulted in declining ship conditions across the fleet and  have increased the amount of time required for the shipyards to complete  maintenance on these ships. Lengthened maintenance periods, in turn,  compress the time that ships are available for training and operations."], "subsections": []}, {"section_title": "Ships Homeported Overseas Provide Increased Forward Presence but Train Less, Defer More Maintenance, Degrade Faster, and Cost More to Operate", "paragraphs": ["As we previously reported, to help meet the operational demands using  its existing inventory of ships, the Navy has assigned more of its surface  combatants and amphibious ships to overseas homeports. Since 2006,  the Navy has doubled the percentage of the fleet assigned to overseas  homeports. In 2006, 20 ships were homeported overseas (7 percent of  the fleet); today, 40 ships are homeported overseas (14 percent of the  fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will  be homeported in Yokosuka, Japan in 2018 (see figure 2).", "According to the Navy, homeporting ships overseas is an efficient method  for providing forward presence and rapid crisis response. Our prior work  confirms that having ships homeported overseas provides additional  presence, but it comes at a cost. For example, we found in May 2015 that  homeporting ships overseas results in higher operations and support  costs than homeporting ships in the United States. In addition, the  operational schedules the Navy uses for overseas-homeported ships limit  dedicated training and maintenance periods, resulting in difficulty keeping  crews fully trained and ships maintained. In fact, the primary reason that  Navy ships homeported overseas provide more deployed time than ships  homeported in the United States is that the Navy reduces their training  and maintenance periods in order to maximize their operational  availability. Ships homeported overseas do not operate within the  traditional fleet response plan cycles that apply to U.S.-based ships.  Since the ships are in permanent deployment status during their time  homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational  schedules (see figure 3). Navy officials told us that because the Navy  expects these ships to be operationally available for the maximum  amount of time, their intermediate and depot-level maintenance are  executed through more frequent, shorter maintenance periods or deferred  until after they return to a U.S. homeport\u2014generally after 7 to 10 years  overseas.", "In May 2015, we also found that high operational tempo for ships  homeported overseas limits the time for crew training when compared  with training time for ships homeported in the United States. Navy officials  told us that U.S.-based crews are completely qualified and certified prior  to deploying from their U.S. homeports, with few exceptions. In contrast,  the high operational tempo of ships homeported overseas had resulted in  what Navy personnel called a \u201ctrain on the margins\u201d approach, a  shorthand way to say there was no dedicated training time set aside for  the ships so crews trained while underway or in the limited time between  underway periods. We found that, at the time of our 2015 review, there  were no dedicated training periods built into the operational schedules of  the cruisers, destroyers, and amphibious ships homeported in Yokosuka  and Sasebo, Japan. As a result, these crews did not have all of their  needed training and certifications. We recommended that the Navy  develop and implement a sustainable operational schedule for all ships  homeported overseas. DOD concurred with this recommendation and  reported in 2015 that it had developed revised operational schedules for  all ships homeported overseas. However, when we contacted DOD to  obtain updated information for this testimony, U.S. Pacific Fleet officials  stated that the revised operational schedules for the cruisers and  destroyers homeported in Japan were still under review and had not been  employed. As of June 2017, 37 percent of the warfare certifications for  cruiser and destroyer crews homeported in Japan had expired, and over  two-thirds of the expired certifications\u2014including mobility-seamanship  and air warfare\u2014had been expired for 5 months or more. This represents  more than a fivefold increase in the percentage of expired warfare  certifications for these ships since our May 2015 report. The Navy\u2019s  Surface Force Readiness Manual states that the high operational tempo  and frequent tasking of ships homeported overseas requires that these  ships always be prepared to execute complex operations and notes that  this demand for continuous readiness also means that ships homeported  overseas should maintain maximum training, material condition, and  manning readiness.", "With respect to the material condition of the ships, we found in May 2015  that casualty reports\u2014incidents of degraded or out-of-service equipment\u2014nearly doubled over the 2009 through 2014 time frame, and  the condition of overseas-homeported ships decreased even faster than  that of U.S.-based ships (see figure 4). The Navy uses casualty reports to  provide information on the material condition of ships in order to  determine current readiness. For example, casualty report data provide  information on equipment or systems that are degraded or out of service,  the lack of which will affect a ship\u2019s ability to support required mission  areas. In 2015, Navy officials acknowledged an increasing number of  casualty reports on Navy ships and a worsening trend in material ship  condition. They stated that equipment casualties require unscheduled  maintenance and have a negative effect on fleet operations, because  there is an associated capability or capacity loss.", "In our May 2015 report, we recommended that the Navy develop a  comprehensive assessment of the long-term costs and risks to its fleet  associated with the Navy\u2019s increasing reliance on overseas homeporting  to meet presence requirements; make any necessary adjustments to its  overseas presence based on this assessment; and reassess these risks  when making future overseas homeporting decisions. DOD concurred  with this recommendation, but, as of August 2017, it has not conducted  an assessment, even though it has continued to increase the number of  ships homeported overseas."], "subsections": []}, {"section_title": "Size and Composition of Ship Crews May Contribute to Sailor Overwork and Create Readiness and Safety Risks", "paragraphs": ["In the early 2000s, the Navy made several changes to its process for  determining the size and composition of ship crews that may contribute to  sailor overwork and create readiness and safety risks. These changes  were intended to drive down crew sizes in order to save on personnel  costs. However, as we reported in May 2017, these changes were not  substantiated with analysis and may be creating readiness and safety  risks. With fewer sailors operating and maintaining surface ships, the  material condition of the ships declined, and we found that this decline  ultimately contributed to an increase in operating and support costs that  outweighed any savings on personnel (see figure 5). The Navy eventually  reassessed and reversed some of the changes it had made during this  period\u2014known as \u201coptimal manning\u201d\u2014but it continued to use a workweek  standard that does not reflect the actual time sailors spend working and  does not account for in-port workload\u2014both of which may be leading to  sailors being overworked. Additionally, we found that heavy workload  does not end after ships return to port. Crews typically operate with fewer  sailors while in port, so those crew members remaining must cover the  workload of multiple sailors, causing additional strain and potential  overwork.", "In 2014, the Navy conducted a study of the standard workweek and  identified significant issues that could negatively affect a crew\u2019s  capabilities to accomplish tasks and maintain the material readiness of  ships, as well as crew safety issues that might result if crews slept less to  accommodate workload that was not accounted for. The Navy study  found that sailors were on duty 108 hours a week, exceeding their weekly  on-duty allocation of 81 hours. This on-duty time included 90 hours of  productive work\u201420 hours per week more than the 70 hours that are  allotted in the standard workweek. This, in turn, reduced the time  available for rest and resulted in sailors spending less time sleeping than  was allotted, a situation that the study noted could encourage a poor  safety culture. Moving forward, the Navy will likely face manning  challenges, especially given its current difficulty in filling authorized  positions, as it seeks to increase the size of its fleet by as much as 30  percent over its current size. Navy officials stated that even with  manpower requirements that accurately capture all workload, the Navy  will be challenged to fund these positions and fill them with adequately  trained sailors at current personnel levels. Figure 6 shows the Navy\u2019s  projected end strength and fleet size.", "In our May 2017 report, we found that the Navy\u2019s guidance does not  require that the factors it uses to calculate manpower requirements be  reassessed periodically or when conditions change, to ensure that these  factors remain valid and that crews are appropriately sized. We made  several recommendations to address this issue, including that the Navy  should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its  manpower requirements process, and (4) update its ship manpower  requirements. DOD concurred with our recommendations, stating that it is  committed to ensuring that the Navy\u2019s manpower requirements are  current and analytically based and will meet the needs of the existing and  future surface fleet. As of August 2017, DOD had not yet taken any  actions to implement these recommendations. We believe that, until the  Navy makes the needed changes, its ships may not have the right  number and skill mix of sailors to maintain readiness and prevent  overworking its sailors."], "subsections": []}, {"section_title": "The Navy\u2019s Inability to Complete Ship Maintenance on Time Hampers Its Efforts to Rebuild Readiness", "paragraphs": ["To address its persistently low readiness levels, the Navy began  implementing a revised operational schedule in November 2014, which it  referred to as the optimized fleet response plan. This plan seeks to  maximize the employability of the existing fleet while preserving adequate  time for maintenance and training, providing continuity in ship leadership  and carrier strike group assignments, and restoring operational and  personnel tempos to acceptable levels. The Navy\u2019s implementation of the  optimized fleet response plan\u2014and readiness recovery more broadly\u2014is  premised on adherence to deployment, training, and maintenance  schedules.", "However, in May 2016, we found that the Navy was having difficulty in  implementing its new schedule as intended. Both the public and private  shipyards were having difficulty completing maintenance on time, owing  primarily to the poor condition of the ships after more than a decade of  heavy use, deferred maintenance, and the Navy\u2019s inability to accurately  predict how much maintenance they would need. We reported that in  2011 through 2014 only 28 percent of scheduled maintenance for surface  combatants was completed on time and just 11 percent was completed  on time for aircraft carriers. We updated these data for the purposes of  this testimony to include maintenance availabilities completed through the  end of fiscal year 2016 and found continued difficulty completing  maintenance on time for key portions of the Navy fleet (see figure 7):", "Aircraft Carriers (CVNs): In fiscal years 2011 through 2016,  maintenance overruns on 18 of 21 (86 percent) aircraft carriers  resulted in a total of 1,103 lost operational days\u2014days that ships were  not available for operations\u2014the equivalent of losing the use of 0.5  aircraft carriers each year.", "Surface Combatants (DDGs and CGs): In fiscal years 2011 through  2016, maintenance overruns on 107 of 169 (63 percent) surface  combatants resulted in a total of 6,603 lost operational days\u2014the  equivalent of losing the use of 3.0 surface combatants each year.", "Submarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011  through 2016, maintenance overruns on 39 of 47 (83 percent)  submarines resulted in a total of 6,220 lost operational days\u2014the  equivalent of losing the use of 2.8 submarines each year.", "Navy officials are aware of the challenges faced by both the public and  private shipyards and have taken steps to address the risks these pose to  maintenance schedules, including hiring additional shipyard workers and  improving their maintenance planning processes. However, Navy officials  have told us that it will take time for these changes to bring about a  positive effect. For example, as of May 2016, data on the public  shipyards\u2019 workforce showed that 32 percent of all employees had fewer  than 5 years of experience. According to Navy officials, this workforce  inexperience negatively affects the productivity of the shipyards, and it will  take several years for them to attain full productivity."], "subsections": []}, {"section_title": "Navy Readiness Rebuilding is Part of a Broader DOD Effort", "paragraphs": ["In September 2016, we found that although DOD has stated that  readiness rebuilding is a priority, implementation and oversight of  department-wide readiness rebuilding efforts did not fully include key  elements of sound planning, and the lack of these elements puts the  overall rebuilding efforts at risk. The Navy states that its overall goal for  readiness recovery is to reach a predictable and sustainable level of  global presence and surge capacity from year to year. The Navy identified  carrier strike groups and amphibious ready groups as key force elements  in its plan for readiness recovery and had set 2020 for reaching a  predictable and sustainable level of global presence and surge capacity  by implementing the optimized fleet response plan. However, we found in  2016 that the Navy faced significant challenges, such as delays in  completing maintenance and emerging demands, in achieving its  readiness recovery goals for carrier strike groups and amphibious ready  groups, and projections show that the Navy will not meet its time frames  for achieving readiness recovery.", "As a result, we recommended that DOD and the services establish  comprehensive readiness goals, strategies for implementing them, and  associated metrics that can be used to evaluate whether readiness  recovery efforts are achieving intended outcomes. DOD generally  concurred with our recommendations and, in November 2016, issued  limited guidance to the military services on rebuilding readiness; it has  also started to design a framework to guide the military services in  achieving readiness recovery but has not yet implemented our  recommendations. The Navy has since extended its time frame for  readiness recovery to at least 2021, but it still has not developed specific  benchmarks or interim goals for tracking and reporting on readiness  recovery. Navy officials cited several challenges to rebuilding readiness,  chief among them the continued high demand for its forces, the  unpredictability of funding, and the current difficulty with beginning and  completing ship maintenance on time.", "In January 2017, the President directed the Secretary of Defense to  conduct a readiness review and identify actions that can be implemented  in fiscal year 2017 to improve readiness. DOD and Navy officials told us  that, as part of this readiness review, the Navy prioritized immediate  readiness gaps and shortfalls. These officials added that this review  would guide the Navy\u2019s investment decisions in future budget cycles, with  the intention to rebuild readiness and prepare the force for future  conflicts. However, high demand for naval presence will continue to put  pressure on a fleet that is already stretched thin across the globe.  Looking to the future, the Navy has plans to grow its fleet by as much as  30 percent, but it has not yet shown the ability to adequately man,  maintain, and operate the current fleet. These readiness problems need  to be addressed and will require the Navy to implement our  recommendations\u2014particularly in the areas of assessing the risks  associated with overseas basing, reassessing sailor workload and the  factors used to size ship crews, and applying sound planning and  sustained management attention to its readiness rebuilding efforts. In  addition, continued congressional oversight will be needed to ensure that  the Navy demonstrates progress in addressing its maintenance, training,  and other challenges.", "Chairmen Wilson and Wittman, Ranking Members Bordallo and Courtney,  and Members of the Subcommittees, this concludes my prepared  statement. I would be pleased to respond to any questions you may have  at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgements", "paragraphs": ["If you or your staff have questions about this testimony, please contact  John Pendleton, Director, Defense Capabilities and Management at (202)  512-3489 or pendletonj@gao.gov.", "Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Suzanne Wren, Assistant  Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne  Landesman, Amie Lesser, Tobin McMurdie, Shari Nikoo, Cody  Raysinger, Michael Silver, Grant Sutton, and Chris Watson."], "subsections": []}]}, {"section_title": "Appendix I: Implementation Status of Prior GAO Recommendations Cited in this Testimony", "paragraphs": ["Over the past three years, we issued several reports related to Navy  readiness cited in this statement. Table 1 summarizes the status of  recommendations made in these reports, which contained a total of 11  recommendations. The Department of Defense generally concurred with  all of these recommendations but has implemented only one of them to  date. For each of the reports, the specific recommendations and their  implementation status are summarized in tables 2 through 4."], "subsections": []}, {"section_title": "Appendix II: Summary of Major Mishaps for Navy Ships at Sea for Fiscal Years 2009 Through 2017, as of August 2017", "paragraphs": ["The Navy defines a class A mishap as one that results in $2 million or  more in damages to government or other property, or a mishap that  resulted in a fatality or permanent total disability. We analyzed data  compiled by the Naval Safety Center for fiscal years 2009 through 2017  to provide a summary of major Navy mishaps at sea (see table 5)."], "subsections": []}, {"section_title": "Appendix III: Related GAO Products", "paragraphs": ["Report numbers with a C or RC suffix are Classified. Classified reports  are available to personnel with the proper clearances and need to know,  upon request.", "Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C.  Washington, D.C.: June 13, 2017. (SECRET)", "Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 7, 2016.", "Navy and Marine Corps: Services Face Challenges to Rebuilding  Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016.  (SECRET//NOFORN)", "Military Readiness: Progress and Challenges in Implementing the Navy\u2019s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.", "Navy Force Structure: Sustainable Plan and Comprehensive Assessment  Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas  Homeports. GAO-15-329. Washington, D.C.: May 29, 2015.", "Military Readiness: Navy Needs to Assess Risks to Its Strategy to  Improve Ship Readiness. GAO-12-887. Washington, D.C.: September 21,  2012.", "Force Structure: Improved Cost Information and Analysis Needed to  Guide Overseas Military Posture Decisions. GAO-12-711. Washington,  D.C.: June 6, 2012.", "Military Readiness: Navy Needs to Reassess Its Metrics and  Assumptions for Ship Crewing Requirements and Training. GAO-10-592.  Washington, D.C.: June 9, 2010.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-126", "url": "https://www.gao.gov/products/GAO-19-126", "title": "Modernizing the Nuclear Security Enterprise: NNSA Is Taking Action to Manage Increased Workload at Kansas City National Security Campus", "published_date": "2019-04-12T00:00:00", "released_date": "2019-04-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Modernization of the nation's nuclear stockpile depends on timely procurement and production of nonnuclear parts and components. Such parts and components make up over 80 percent of the items in a nuclear weapon. The Kansas City site procures or produces most of these parts, under NNSA oversight. In fiscal year 2012, the site completed construction of a modern production facility. The new facility was expected to accommodate rising future workload demands, based on the forecasts that were current in 2012, according to Kansas City site contractor representatives.", "The Senate committee report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the Kansas City site's staffing plans and capabilities to meet national security requirements. This report examines (1) workload forecasts for the site since 2012, and (2) management challenges the site has identified for achieving the forecasted workload, and actions the site has taken to mitigate these challenges.", "GAO reviewed NNSA and contractor documents from 2012 through 2018 relevant to workload changes, and associated workload capacity, including information on infrastructure, equipment, and business processes\u2014as well as personnel data. GAO also interviewed NNSA program and field officials and contractor representatives."]}, {"section_title": "What GAO Found", "paragraphs": ["Workload forecasts have significantly changed at the National Nuclear Security Administration's (NNSA) primary site for procuring or producing nonnuclear parts and components of nuclear weapons since the site's modern production facility was built in 2012. Specifically, workload projections made by the contractor operating the site, known as the Kansas City National Security Campus (Kansas City site), has increased significantly from forecasts used in planning the site's new production facility. More recent forecasts show that to meet workload requirements, production and administrative staff will need to almost double by 2020 compared to 2014 levels. For example, workload to modernize the B61-12 and W88 weapons systems will double during fiscal years 2020 through 2022.", "According to NNSA officials and contractor staff, the site has identified and begun to mitigate management challenges to meeting future workload, including:", "Ensuring sufficient production and office space. Because the current space is not sufficient for the increase in projected workload, the site is leasing additional space until long-term solutions, currently in planning, can be implemented.", "Updating production equipment. To update aging production equipment, the site is developing a 10-year equipment strategy, among other things.", "Retaining and recruiting a sufficient workforce. The site has offered rewards and benefits to retain existing staff, about a third of whom are eligible to retire. It is also recruiting skilled new staff in tight labor markets and seeking to expedite security clearances for them.", "Ensuring adequate external supplier capacity. The site procures about 65 percent of its nonnuclear components from external suppliers. The site is assessing capacity and risk of existing suppliers and developing new ones.", "Current mitigation efforts should help the site meet currently planned increased workload and capacity demands, according to contractor and NNSA analyses. However, the February 2018 Nuclear Posture Review\u2014conducted by the Department of Defense under the direction of the President to determine the role of nuclear weapons in the nation's security strategy\u2014may change requirements and add to the site's workload in ways not yet fully known because studies and plans in response to the review are not fully complete."]}], "report": [{"section_title": "Letter", "paragraphs": ["Modernization of our nation\u2019s nuclear stockpile depends on the timely  procurement and production of nonnuclear parts and components, which  make up over 80 percent of the parts and components that compose a  typical nuclear weapon. Delays in or disruption to procurement or  production of these parts and components could jeopardize the nation\u2019s  ability to accomplish nuclear weapons modernization goals in a timely  manner. Most of these parts and components are procured or produced  by the contractor operating the Kansas City National Security Campus  (Kansas City site). This site operates under the direction and oversight of  the National Nuclear Security Administration (NNSA)\u2014a separately  organized agency within the Department of Energy (DOE). Honeywell  Federal Management and Technologies, LLC, has managed and  operated the site since 2000. The most recent management and  operating contract for this site began in July 2015. Nonnuclear parts and  components that the site provides\u2014through procurement or  production\u2014for NNSA include fasteners, electrical interconnects,  machined parts, electronic microcircuits, polymers, plastics, foams, and  other engineered materials. The Kansas City site is also responsible for  quality assurance for all the parts and components it provides.", "In November 2012, the site completed construction of a more modern,  leased production facility. The new facility was expected to accommodate  increasing future workload demands, based on the forecasts that were  current in 2012, according to Kansas City site contractor representatives  and NNSA documents. According to these representatives, the workload  of the Kansas City site has increased and is currently at the highest level  since the end of the Cold War. According to NNSA reports and officials,  NNSA will continue to modernize most of the nuclear weapons systems in  the U.S. stockpile in the coming years, and some refurbishment efforts  currently planned were not reflected in 2012 workload demand forecasts.  In addition, the February 2018 Nuclear Posture Review contains policy  direction that could further increase the Kansas City site\u2019s workload if  eventually implemented.", "We and others have made recommendations to NNSA aimed at  improving modernization planning in light of increasing workload. For  example, in 2017 we found that the next decade is particularly  challenging for NNSA\u2019s nuclear modernization efforts because the agency  needs to ensure sufficient production capacity to execute life extension  programs (LEP), along with major construction projects and programs to  modernize its uranium and plutonium capabilities. We further found that  NNSA\u2019s modernization budget estimates for fiscal years 2022 through  2026 may exceed the funding levels programmed for modernization in  future budgets, raising affordability concerns, and we recommended that  NNSA include an assessment of the affordability of its modernization  programs in future versions of its annual plan on stockpile stewardship.  Although NNSA did not explicitly agree or disagree with the  recommendation, we continue to believe it is valid and are monitoring any  actions NNSA takes that may the address the recommendation. In addition, a congressional advisory panel examining the governance of the  nuclear security enterprise recommended that NNSA take action to  stabilize long-term workload across NNSA\u2019s nuclear security enterprise  sites, including its Kansas City site, to better support its weapons  modernization efforts.", "The Senate committee report accompanying a bill for the National  Defense Authorization Act for Fiscal Year 2018 included a provision for us  to review the Kansas City site\u2019s staffing plans and capabilities to meet  national security requirements. This report examines (1) workload  forecasts for the Kansas City site since 2012, and (2) management  challenges the Kansas City site has identified for achieving the forecasted  workload and actions the site has taken to mitigate these challenges.", "To address these objectives, we visited the site and obtained and  reviewed workload planning documents, such as NNSA contractor  planning charts and graphs showing workload forecast information for  future years through 2036. We also interviewed officials from NNSA\u2019s  headquarters offices and its Kansas City field office\u2014co-located with the  management and operating contractor\u2014as well as contractor  representatives at the site. To examine workload forecasts for the Kansas  City site since 2012\u2014the year construction was completed for the modern  production facility\u2014we obtained information on the Kansas City site  workload as full production commences for upcoming modernization  efforts, especially the B61-12 gravity bomb LEP and W88 submarine  launched ballistic missile Alteration (Alt) 370 work. We also examined  steps the Kansas City site has taken to forecast workload demand from  2012 through 2018.", "To examine management challenges the Kansas City site had identified  at the time of our review in 2018 for achieving the forecasted workload,  and any actions the site has taken to mitigate these challenges, we interviewed NNSA officials and contractor representatives. We then  reviewed relevant documentation and data, available at the time of our  review in 2018, on the nature of the challenges and any mitigation steps  to determine if the Kansas City site is addressing previously identified  challenges. Among other things, we reviewed Kansas City site capacity  analyses; personnel data regarding worker attrition, aging, retention, and  hiring; information on worker clearances; analyses of information on the  capacity of external suppliers; and lessons learned from recently  completed work on the LEP for the W76-1 submarine-launched ballistic  missile warhead. We obtained information on actions the Kansas City site  has taken over the past several years, particularly from 2012\u2014when the  new modern production facility was built\u2014through 2018, regarding  infrastructure, business processes, staffing, and other areas to manage  current workload demands. To corroborate information provided by the  Kansas City site on management challenges and associated mitigation  action(s), we interviewed additional NNSA headquarters officials;  reviewed alternative documentation or analyses; and obtained examples  of the specific action(s) being taken, when available. See appendix I for  more details regarding our objectives, scope, and methodology and for  specific examples of steps we took to corroborate the information  obtained from the Kansas City site.", "We conducted this performance audit from November 2017 to April 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."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes the (1) Kansas City site\u2019s role in providing  nonnuclear parts and components, and (2) current and planned nuclear  weapons stockpile life extension and alteration efforts that drive workload."], "subsections": [{"section_title": "Kansas City Site\u2019s Role in Providing Nonnuclear Parts and Components", "paragraphs": ["The Kansas City site is NNSA\u2019s primary site for procuring or producing  nonnuclear parts and components, providing over 80 percent of the parts  and components that compose a typical nuclear weapon. The Kansas  City site interacts with a number of other NNSA sites that comprise the  nuclear security enterprise to support the nuclear weapons stockpile. For  example, NNSA\u2019s design laboratories develop precise parts or  component specifications or requirements to which production sites, such  as the Kansas City site, must conform in procuring or producing these  items for use in the nation\u2019s nuclear weapon stockpile. Figure 1 depicts  how sites in the nuclear security enterprise interact with each other to  design, produce, procure, and assemble nonnuclear components.", "Components procured or produced by the Kansas City site range from  simple items such as nuts and bolts to more complex components such  as radars, arming and firing mechanisms, and critical nuclear safety  devices meant to prevent accidental detonation. The site delivers  approximately 100,000 parts annually, according to our previous report.  According to Kansas City site contractor documents, the primary mission  of the site is keeping the nation\u2019s nuclear stockpile safe, secure, and  reliable by delivering mission-critical mechanical, electrical, and  engineered material components and services.", "NNSA and the Department of Defense (DOD) jointly manage LEPs and  Alts under a multi-step process known as the phase 6.X process (see fig.  2). Phase 6.4 of this process, or the production engineering phase,  involves activities to adapt designs for production and prepare production  facilities, including the Kansas City site. For example, according to a  senior NNSA official, activities to adapt designs could include updating  product specifications to make parts easier to produce, changing or  refining tester limits, and substituting among commercial off-the-shelf  parts. The B61-12 LEP and W88 Alt 370 are currently in phase 6.4  (production engineering) of this process and are approaching production.  Other LEP efforts are in earlier phases."], "subsections": []}, {"section_title": "Current and Planned Nuclear Weapons Stockpile Life Extension and Alteration Efforts", "paragraphs": ["NNSA describes its plans to meet nuclear weapons stockpile life  extension and alteration goals in two key documents that also describe  NNSA\u2019s operations and budget estimates for implementing these plans.  These documents, which NNSA updates annually, constitute NNSA\u2019s  nuclear security budget materials. First, the Stockpile Stewardship and  Management Plan is NNSA\u2019s formal means of communicating to  Congress information on modernization and operations plans and budget  estimates over the following 25 years. Second, NNSA\u2019s annual  justification of the President\u2019s budget provides program information and  budget estimates for the following 5 years. This 5-year plan is called the  Future-Years Nuclear Security Program (FYNSP), and the budget  estimates in this plan reflect amounts approved by the Office of  Management and Budget. These estimates align with those presented for the first 5 years included in the Stockpile Stewardship and  Management Plan.", "According to the Fiscal Year 2018 Stockpile Stewardship and  Management Plan, NNSA and its nuclear security enterprise are  conducting a substantial level of activity to ensure the continued credibility  of the nation\u2019s nuclear weapons stockpile. Specifically, in fiscal year 2018  NNSA was executing three nuclear weapons LEPs and one major Alt,  which are described in table 1.", "In addition, the 2018 Nuclear Posture Review calls for NNSA to resume a  program to replace the W78 warhead in fiscal year 2019; produce a low- yield submarine launched ballistic missile warhead, known as the W76-2;  and consider options for providing a nuclear warhead for a potential sea- launched cruise missile. According to NNSA officials and contractor  representatives, NNSA developed an early production planning roadmap  for implementing the Nuclear Posture Review in late 2018. The  conference report accompanying DOE\u2019s fiscal year 2019 appropriations  act directed the agency to spend a specified amount on the W78 warhead  replacement and W76-2 efforts."], "subsections": []}]}, {"section_title": "Projected Workload for the Kansas City Site Has Increased Significantly from 2012 Forecasts", "paragraphs": ["Projected workload for the Kansas City site has increased significantly,  based on NNSA\u2019s stockpile plan changes from 2012\u2014when the new  modern facility was built\u2014to the 2018 stockpile plan update. A  comparison between the 2012 and 2018 plans shows that the start of full  production for the B61-12 LEP and the W88 Alt were delayed by  approximately 2 years, and their completions were delayed by 3 years  from initial schedule estimates in 2012. The 2018 plan also accelerates  production of the W80-4 LEP by approximately 5 years. Figure 3 below  shows the change in the full production timelines for key weapons  systems.", "Using an enterprise risk management approach, the Kansas City site  determined that this change in production schedule represented a  significant challenge that needed to be better understood and regularly  monitored. NNSA contractor representatives at the Kansas City site  developed a strategy for analyzing workload to better understand the  enterprise risk and ensure the site\u2019s ability to provide an adequate supply  of nonnuclear components under variable requirements scenarios.  Specifically, in 2015, the Kansas City site increased the frequency of  using its \u201cwhat-if\u201d approach that models standard production work and  allows for an in-depth review of labor, equipment, and material capacity  information, according to contractor representatives at the Kansas City  site. This analytic capability is intended to help ensure that the site  contractor can accurately predict future workload demand across multiple  scenarios representing different production requirements. Contractor  representatives update the model every quarter to reflect the current  hardware schedules; testing requirements; and nuclear weapon scope,  production quantities, and schedules. These representatives use the  model to develop hourly staffing, equipment, and other capacity-related  forecasts and plans. For example, contractor representatives evaluate  capital equipment capacity quarterly for multiple programs, with a primary  focus on equipment that is at or above a two-shift capacity. However,  according to these representatives, this approach has not been in place  long enough to allow comparison of historical data with forecasts from the  model to assess their accuracy.", "According to site contractor documents and representatives, forecasting  data from the what-if models project that, under the 2018 plans, the full- time equivalent workload for production of nonnuclear parts and  components will continue to increase annually through 2020.", "Specifically, the number of production and administrative staff at the time  of the relocation to the new facility in 2014 was almost 2,500, based on  needs at that time. However, the fiscal year 2018 updates, based on  \u201cwhat-if\u201d capacity analyses, now show that the headcount will need to  almost double, growing to more than 4,900 administrative and production  staff by 2020. For example, according to 2018 \u201cwhat-if\u201d capacity analyses  prepared by site contractor representatives, personnel dedicated  exclusively to two efforts\u2014the B61-12 LEP and W88 Alt 370\u2014will double  from 251 full-time equivalents needed in fiscal year 2018 to over 500  during fiscal years 2020 through 2022, as shown in figure 4.", "Full-time equivalent reflects the total number of regular straight-time  hours (i.e., excluding overtime or holiday hours) worked by employees  divided by the number of compensable hours applicable to each fiscal  year. Annual leave, sick leave, and compensatory time off and other  approved leave categories are considered to be \u201chours worked\u201d for  purposes of defining full-time equivalent employment. In this figure, the  full-time equivalents reflect workload forecasts for hourly production staff  only for the B61-12 LEP and W88 Alt 370."], "subsections": []}, {"section_title": "Kansas City Site Has Identified and Begun to Mitigate Several Management Challenges Related to Forecasted Workload, Which May Further Increase", "paragraphs": ["NNSA officials and contractor representatives at the Kansas City site  have identified and begun to mitigate several management challenges to  meeting the forecasted workload for known future production  requirements, but they face uncertainties about future workload demands.  Specifically, current mitigation efforts should help the site meet currently  forecasted increased workload and capacity demands, according to  NNSA analysis and consistent with the program plan included in the  Fiscal Year 2018 Stockpile Stewardship and Management Plan.  However, the February 2018 Nuclear Posture Review, the results of  which were not fully reflected in the Fiscal Year 2018 Stockpile  Stewardship and Management Plan, may change requirements and add  to the site\u2019s workload because it calls for additional weapons efforts."], "subsections": [{"section_title": "Current Efforts to Mitigate Identified Challenges Should Support Meeting Forecasted Future Workload Increases at the Kansas City Site", "paragraphs": ["Kansas City site contractor representatives have identified management  challenges that could affect the site\u2019s ability to meet forecasted future  workload increases based on 2018 analyses and its Enterprise Risk  Management process, and NNSA officials agreed with the challenges the  contractor representatives identified. These management challenges  include ensuring that the site has (1) sufficient production and  administrative office space, (2) up-to-date production equipment, (3) a  sufficient workforce with necessary security clearances, (4) capable and  reliable external suppliers, and (5) complete weapons designs early  enough in development to minimize production changes and delays. The  Kansas City site has identified strategies to mitigate the effects of each of  these management challenges and has begun taking steps to implement  these strategies.", "NNSA\u2019s Enterprise Modeling and Analysis  Consortium   NNSA\u2019s Enterprise Modeling and Analysis  Consortium is composed of NNSA site  representatives and program representatives  from NNSA\u2019s Defense Programs offices and  is a principal source for NNSA model- informed analytics for decisions about  stockpile stewardship program management,  policy, and implementation. The consortium  conducts modeling based on common data  sets and assumptions of current and planned  stockpile plans, design alternatives,  commodity requirements, and nuclear  security enterprise capacity. One of the  consortium\u2019s projects includes analyzing the  nuclear security enterprise\u2019s capacity to  execute the nuclear weapon production  program of record to identify any important  issues or bottlenecks within or between sites.", "NNSA analysis concludes that current mitigation efforts initiated at the  Kansas City site should support currently planned increased workload  and an increased capacity to achieve the 2018 workload forecast.  Specifically, according to analyses conducted by NNSA\u2019s Enterprise  Modeling and Analysis Consortium, the Kansas City site\u2019s operations will  be stressed above current capacity for multiple consecutive years in the  future, and current mitigation efforts should reduce risk associated with  the elevated workload. In addition, NNSA Kansas City Field Office and  headquarters officials said that they have high confidence in the ability of  the Kansas City site to forecast and manage infrastructure and staffing  needs at the site to support currently planned nuclear weapon stockpile  life extension needs over the coming decades. In particular, NNSA\u2019s  recent annual performance evaluation reports\u2014which document the  contractor\u2019s overall performance for a fiscal year\u2014show that the Kansas  City site contractor has delivered the vast majority of hardware on time,  within budget, and in a safe and secure environment."], "subsections": [{"section_title": "Production and Administrative Office Space", "paragraphs": ["Kansas City site officials indicated that ensuring adequate production and  administrative office space at the site is a management challenge  because the current facility is too small to accommodate future workload.  Specifically, forecasted workload demand has grown significantly since  the modern facility was built in 2012. The new facility, which  accommodates both production and administrative staff, replaced a  deteriorating World War II-era facility that was much larger and had  significant maintenance and operations costs, according to site contractor  representatives. For example, according to NNSA documents, the move  reduced the footprint of the site\u2019s production activities from about 3 million  square feet to 1 million square feet. According to site contractor  representatives, the modern facility was designed to be more flexible in  accommodating changes in the production line. For example, equipment  can more easily be removed or installed at any location in the facility, to  accommodate increased workload, because there is ready access to  electrical, ventilation, or other necessary hookups and connections.  Figure 5 shows a photo of the new facility.", "The Kansas City site has identified that it needs an additional 250,000  square feet of production space in 2019 and ultimately a total of an  additional 400,000 square feet to support the forecasted workload and  associated staff increase. To mitigate the challenge of insufficient  production and administrative space to support the forecasted increase in  production staff, Kansas City site officials told us they are pursuing  multiple short- and long-term strategies.", "With respect to production space, under the short-term plan the  Kansas City site is pursuing a temporary lease of commercial space  to allow for the offsite storage of unclassified materials that are  currently at the production facility. According to site contractor  representatives, this new lease would free up production space at the  main site. Further, the site submitted a request to NNSA for leasing an  additional 250,000 feet of production space\u2014an increase of almost 30  percent over current production space in the modern facility. Kansas  City site contractor representatives stated that the cost of this lease  will be based on competitive offers, and they expect the lease to be  awarded by summer 2019.", "With respect to administrative office space, the site has leased more  than 150,000 square feet of space since 2014 for the short term at a  cost of more than $3.5 million per year.", "Under the long-term plan, expected to take a minimum of 5 years to  implement, the site will complete an analysis of alternatives and  submit a combined office and production space expansion project  plan to NNSA, which will determine final costs and timelines.  Currently, the mission need statement for the project indicates the  need for over 400,000 square feet of additional production and  administrative space to accommodate the planned increased  workload for known production and supporting administrative  requirements\u2014an increase of roughly 50 percent over current  leased production space. According to Kansas City site contractor  representatives, at this early stage, costs would be based on the  current Kansas City site lease of $43 per square foot, or roughly $17  million per year. This long-term plan would include space for  approximately 1,200 administrative personnel. Kansas City site  contractor representatives told us in September 2018 that, depending  on the selected long-term solution, the short-term leases for  administrative space could either be terminated or modified into long- term arrangements.", "In 2017, we reported in our high risk list update that federal agencies  have not demonstrated that they have the capacity to reduce their  reliance on costly leases, particularly high-value leases\u2014defined as  $2.85 million and above per year in lease costs\u2014where owning  properties would be less costly in the long run. In particular, we reported  that the General Services Administration had not implemented our 2013  recommendation to develop a strategy to increase ownership of  investments for a prioritized list of high-value leases where ownership  would be less expensive in the long run. The Kansas City site\u2019s plans  for significantly expanding its production and office space underscores  the challenges that exist in meeting these space needs while at the same  time limiting overall reliance on costly leases."], "subsections": []}, {"section_title": "Production Equipment", "paragraphs": ["NNSA and its contractor at the Kansas City site have identified  challenges in ensuring that the plant has up-to-date production  equipment. Recapitalizing equipment was not a significant part of the  move to the new modern production facility, according to site contractor  representatives. Information from NNSA\u2019s Master Asset Plan 2017, for  example, states that most of the equipment used for producing  nonnuclear parts and components at the Kansas City site is nearing or  past the end of its useable life\u2014defined as 15 years. Specifically, as  shown in figure 6 below, 39 percent of the equipment at the Kansas City  site is from 6 to 15 years old, and 27 percent is 16 years old or more,  according to the plan. Much of the oldest equipment is located in  functional areas used for machining, refurbishment, and dismantlement  operations, or for production functions using rubber and plastics. The  oldest piece of equipment still maintained is more than 60 years old.", "In addition to age-related challenges, officials at the Kansas City site  identified equipment challenges regarding capacity, based on an  equipment workload forecast analysis performed in 2015. For example,  according to this forecast, starting late in calendar year 2019, demand for  vibration- and shaker-test equipment will become consistently greater  than existing capacity, requiring additional equipment.", "To address these challenges, Kansas City site contractor representatives  stated that they evaluate equipment needs across the facility at least  annually, based on production and maintenance schedules. The  representatives then develop a master list of equipment requests\u2014 weighted for risk, age and condition of existing equipment, and whether  an external supplier can provide the functional need, among other  factors\u2014and ranked according to current and future business needs,  according to these officials and contractor representatives. NNSA officials  at the Kansas City site and senior contractor representatives then review  the master list to determine priorities for equipment purchases. Site  contractor representatives are developing a 10-year equipment strategy,  expected to be completed in December 2019, to sharpen focus on the  future needs of the production facility to support capacity and capability,  according to NNSA officials at the Kansas City site.", "Budgets for equipment procurements at the Kansas City site vary from  year to year and are subject to change. According to Kansas City site  contractor representatives, the site is regularly adjusting and  communicating its equipment needs to reflect the results of equipment  evaluations to ensure that the funding NNSA will request for equipment  procurement is adequate. For example, according to Kansas City site  contractor representatives, the site originally received $4.5 million in fiscal  year 2018 to fund planned equipment procurements and received an  additional $13.4 million from NNSA in April 2018 to move fiscal year 2019  work scope into fiscal year 2018. The remaining funding available is  $11.6 million, which covers the remaining fiscal year 2019 work scope.  Site plans for fiscal year 2018 specifically included capital equipment  replacement and upgrades needed for parts assembly, electronics and  fabrication, and non-destructive testing of nonnuclear parts and  components.", "For fiscal year 2019, planned procurements include equipment for testing  of parts and components, rubber- and plastics-related production,  precision milling, machining and welding, paint and heat treatment,  fabrication, and chemical processing. NNSA officials at the Kansas City  site stated that planned budgets for fiscal years 2019 through 2023\u2014 which currently include $8 million in equipment procurements and $2  million for area modifications for each of the 5 years\u2014are subject to  adjustment based on ongoing evaluation of site equipment needs. These  estimates could change, depending on the outcome of the 10-year  equipment strategy, according to NNSA Kansas City site officials and  contractor representatives.", "In addition to new equipment procurements, the Kansas City site has  developed other mitigation plans also focused on equipment capacity  risks. For example, these plans include options such as better allocating  equal workload amongst similar equipment, and additional batching of  material, according to Kansas City site officials. The batching of material  processed by a certain set of equipment increases efficiencies because it  consolidates material into larger portions, which minimizes inefficiencies  associated with starting and stopping the equipment multiple times,  according to NNSA contractor representatives."], "subsections": []}, {"section_title": "Workforce", "paragraphs": ["Kansas City site officials and contractor representatives have identified  three management challenges in ensuring the site can achieve a  sufficient contractor workforce to meet forecasted future workload: (1)  retention of existing staff, (2) recruiting skilled staff in a competitive job  market, and (3) obtaining security clearances for new staff in a timely  manner. To address these challenges, the site has been taking actions to  retain existing staff, hiring and recruiting hundreds of new staff, and  working to speed the security clearance process, according to site  contractor representatives.", "Kansas City site contractor representatives said that retaining existing  staff is challenging because the majority of the workforce falls into either  of two categories: (1) recent, younger hires who have a high attrition  rate, or (2) staff eligible to retire. More than half (53 percent) of all staff  have 5 years or less of service working at the site (see fig. 7).", "In addition, approximately 32 percent of the Kansas City site\u2019s contractor  staff are eligible to retire. Figure 8 shows the distribution of staff by age  at the Kansas City site, with the highest number in their late 50s and the  next highest number in their late 20s.", "According to Kansas City contractor representatives and NNSA  documents, site strategies for retaining newly hired and retirement-eligible  staff include improvements in rewards and recognition programs, along  with an emphasis on pay for performance. Contractor representatives  also noted that the site offers telecommuting from a home office for those  approved, flexible work hours\u2014such as working 9-hour days to allow for a  day off every 2 weeks\u2014and flexible work options, including part-time  employment.", "To better retain retirement-eligible staff the site has also created talking  points to better prepare managers to discuss retirement and delayed  retirement, covering topics such as the potential for reduced hours or  returning to work after retirement, consistent with certain restrictions and  policies. Because of these steps, according to Kansas City contractor  representatives, many retirement-eligible staff are electing to continue to  work; projected retirements are less than 20 percent of those eligible for  retirement, based on actual retirement data for years 2013 to 2017. For  example, although an employee may be eligible to retire at age 55 with at  least 25 years of service, contractor representatives we interviewed noted  that most retirements on average are at age 62 with 30 years of service.", "Kansas City site contractor representatives we interviewed have identified  a management challenge in recruitment because of a gap between the  critical technical skills needed at the site and those available in the local  labor market. In particular, they cited high demand for skilled labor in the  Kansas City area and low unemployment in the labor market at 4 percent,  which can make it difficult to fill positions. Contractors at the site said that  filling skilled positions can take an average of 58 days and that certain  positions, such as electrical engineers and toolmakers, are particularly  difficult to fill.", "Kansas City site contractors noted that they have taken actions to  mitigate this challenge. These actions, which contractor site  representatives have characterized as largely successful, include  participation in and development of university relations programs,  involvement in research and development partnerships and consortiums,  recruitment from area trade schools and technical schools, and  expanding the market area in which the site searches for recruits. For  example, contractors noted the site\u2019s participation in a service academy  career conference in San Diego, California, in August 2018. They also  said they are considering ways to recruit skilled positions that are in high  demand, such as toolmakers, by offering to cover relocation expenses for  newly hired workers. They further noted that the site maintains an  internship program and has plans to double the number of interns, from  35 in 2018 to 71 in 2019, as a strategy to increase talent in critical areas.", "According to Kansas City site contractor representatives, the site  increased the total number of contractor staff by about 65 percent in a 4- year period, from 2,492 in August 2014 to 4,134 in August 2018, and is  expected to continue to increase to nearly 5,000 staff by August 2019.  Figure 9 shows the change in number of Kansas City site staff during the  last fiscal year for which data are complete, and the reasons for the  changes, as reported to us by site contractor representatives. To meet  forecasted workload increases, the site plans to continue to increase staff  in each year through 2020, with the numbers of planned annual hires  ranging from 800 to more than 1,000 staff, according to site contractor  representatives.", "Obtaining Timely Security Clearances for New Staff  Kansas City site officials identified a challenge in obtaining appropriate,  high-level security clearances for new staff on a timely basis. Contractor  representatives we interviewed noted that 100 percent of staff who  directly contribute to the design, disposition, fabrication, inspection,  scheduling, and protection of products and services related to nuclear  weapons require a Q clearance. They further noted that the large  majority of support functions also require a Q clearance. As we reported  in March 2018,  the National Background Investigation Bureau had a  backlog of more than 700,000 investigations as of February 2018. As  we reported, this backlog was caused in part by two 2015 breaches of  Office of Personnel Management personnel records. We designated the  government-wide personnel security clearance process as a high-risk  area in January 2018.", "Of this national backlog, 3,609 were investigations of Q applicants. As of  April 2018, over 790 Kansas City site personnel were awaiting Q  clearances, according to Kansas City site contractor representatives.  According to these representatives, historically, the Bureau took 80 days,  on average, to investigate most Q applicants prior to the 2015 breaches;  however, as of February 2018, the Bureau took 316 days, on average, to  do so. According to Kansas City site contractor representatives, the  Bureau is not projecting normal operations until late 2019 or early 2020.  From fiscal year 2017 through March 2018, 778 Q clearances were  granted for the Kansas City site, with an average of 335 days at the  Bureau and another 27 days at NNSA to make a final determination.  According to site contractor representatives, these long wait times may  contribute to less than full employee utilization at the site. For example,  they noted that fully cleared staff are able to perform roughly 38 percent  more productive work than uncleared staff, and that difference amounts to  approximately 695 direct labor hours of productive work per person in a  year.", "The Kansas City site is taking steps to mitigate the challenges associated  with the Bureau\u2019s backlog. For example, the site is hiring hourly  production factory staff well in advance of the full production schedule for  the B61-12 and W88 Alt 370 weapons systems in fiscal year 2019, in part  to ensure these staff will be cleared in time to meet workload demands,  according to site contractor representatives. Site contractor  representatives told us that they have also worked to expedite the  issuance of clearances by working with local Office of Personnel  Management officials on interviews for clearance cases. In addition, the  site has worked to ensure that new staff can be trained and productive  while awaiting clearances. Specifically, according to contractor  representatives, the site has established segregated training space for uncleared workers;  created security plans and escorting practices that allow uncleared  staff supervised access into secure areas to perform unclassified  work, where possible; and  temporarily converted some production space into areas where  uncleared staff can perform unclassified hand assembly work.", "In addition, the Kansas City site has requested 339 interim Q clearances,  267 of which had been approved, as of January 2018. DOE\u2019s order that  establishes requirements for processing and granting security clearances  allows for interim security clearances to be issued under exceptional  circumstances and when such action is clearly consistent with agency  and national interests. DOE considers interim clearances to be temporary  measures pending completion of the investigation, which must be in  process when the interim clearance is granted. As of September 2018,  less than 1 percent of interim clearances approved for the Kansas City  site had been cancelled once full investigations were completed,  according to site contractor representatives."], "subsections": []}, {"section_title": "External Suppliers", "paragraphs": ["Kansas City site contractor representatives identified challenges  regarding the site\u2019s monitoring and management of external suppliers\u2019  capacity and skills, and other challenges\u2014such as ensuring that suppliers  are willing to establish long-term partnerships with the Kansas City site\u2014 that could affect supply chain risk. Since the site procures about 65  percent of its nonnuclear components from external suppliers, these  management challenges are highly important, according to site contractor  representatives. For example, disruption to the established supply chain  due to insufficient capacity, skills, or a supplier\u2019s decision not to do  business with the Kansas City site can result in production delays.  According to Kansas City site contractor representatives, delays in such  instances are possible because site contractor representatives would  need to take additional time to either replace the lost supplier or develop  its own production line to produce the parts in-house at the Kansas City  site.", "To help mitigate challenges regarding the site\u2019s overall monitoring and  management of suppliers\u2019 capacity, skills, and other risks, the Kansas  City contractor representatives said that they developed two key analytic  tools. These tools are a Supplier Capacity Analysis Tool, developed in  2018, and a Supplier Overall Risk Tool, which has been evolving since  2015, according to these representatives. According to Kansas City site  officials, contractor representatives use these analytical tools to evaluate  over 230 suppliers on a quarterly basis and to evaluate the top 39  suppliers monthly. The evaluations assess factors such as operational  performance and financial health, whether a supplier is the sole  commodity supplier, and a supplier\u2019s willingness to partner with the site.", "To help mitigate supplier capacity risks, the site develops plans, using  information from the supplier evaluations, to ensure sufficient external  supplier capacity, according to Kansas City site contractor  representatives. For example, Kansas City site contractor representatives  used the supplier capacity analysis tool to identify capacity gaps for at- risk commodities, including machine parts, and to develop gap-closure  plans, according to these contractor representatives. As a result of these  plans, contractor representatives certified two new suppliers and entered  into agreements with several other suppliers to provide reserve capacity.  In addition, NNSA\u2019s Enterprise Modeling and Analysis Consortium  conducted alternate analysis on the Kansas City site\u2019s workload capacity  that corroborated the Kansas City site\u2019s conclusion that mitigation steps  being taken at the Kansas City site, including ensuring adequate external  supplier capacity, should address increased workload concerns.", "To help mitigate risks regarding suppliers\u2019 skills in working with the  Kansas City site, site contractor representatives also said that the site has  taken steps to help train new suppliers. For example, site contractor  representatives perform multiple on-site training exercises within the first  6 months of new supplier relationships. These exercises educate the  suppliers on purchase order requirements, terms, drawing definitions, and  quality expectations using a documented, comprehensive, nine-step  process, according to site contractor representatives.", "To help mitigate risks regarding suppliers\u2019 willingness to establish long- term partnerships with the Kansas City site, site contractor  representatives told us that they have begun taking steps to encourage  and foster long-term partnerships with suppliers. According to these  representatives and a study NNSA conducted of lessons learned from an  essentially complete warhead life extension program, facilitating  effective supply chains for the nuclear enterprise requires enduring  business relationships with suppliers of commercial off-the-shelf  components. Because specifications for weapons components and  materials are exacting and quantities required are frequently low, many  potential suppliers are reluctant to expose themselves to the risk of  production for a niche market, according to Kansas City site officials and  contractor representatives. To mitigate reluctance to partner with the  Kansas City site, contractor representatives stated that the site has  developed points of contact with each supplier. These points of contact  work toward establishing and maintaining a collaborative partnership in  which production forecasts are routinely shared and performance metrics  are discussed to foster continuous improvement when needed.", "In addition, Kansas City site contractor representatives stated that the site  is taking steps to develop relationships with other sites to address site- wide challenges regarding supplier evaluations, which can contribute to  risks such as lower efficiency and effectiveness and higher costs. The site  is taking this action in response to a July 2018 DOE Office of Inspector  General (OIG) report that identified the potential duplication of supplier  evaluations among NNSA sites, including the Kansas City site, resulting  in lower efficiency and effectiveness, and higher costs. The OIG report  noted that the need to minimize duplication of efforts will become even  more important when considering the additional demands on production  related to upcoming weapon refurbishment efforts, which are expected to  increase the number of supplier quality auditors needed by the Kansas  City site. The OIG recommended that to maximize efficiencies and  effectiveness, NNSA should work with contractors, including the Kansas  City site, to assess ways to improve the efficiency of supply chain  management activities, among other things.", "Steps the Kansas City site has taken in response to this OIG report  include establishing a point of contact with Sandia National Laboratories,  which is leading an overarching effort across the nuclear security  enterprise to address duplication concerns, according to site contractor  representatives. In addition, a December 2018 report to the President by  DOD, in consultation with other agencies, identified supply chain risks in  the government\u2019s manufacturing and defense industrial base, including at  DOE and NNSA sites, and recommended that DOE establish an  Industrial Base Analysis and Sustainment program to address risks within  the energy and nuclear sectors. According to NNSA officials at the  Kansas City site, they are still determining how it will respond to this  recommendation."], "subsections": []}, {"section_title": "Weapons Design Changes", "paragraphs": ["With increasing concurrency of production forecasted, Kansas City  contractor representatives have identified challenges regarding their need  to minimize weapons design changes during production, which in the past  contributed to cost increases and schedule delays for the W76-1 life  extension. According to Kansas City contractor representatives and  NNSA officials, at least two general weapons design issues can  contribute to overall schedule pressure at the Kansas City site. For  example, delays due to design changes intended to make parts easier to  produce can exacerbate schedule delays by compressing the overall  weapons refurbishment schedule. In addition, design changes are  undertaken for other reasons, such as in response to weapons testing  results.", "First, according to NNSA\u2019s B61-12 program manager, even though both  design laboratories and production site team members advocate for the  design changes that make parts easier to produce, the enterprise-wide  impact of these changes late in the design process may, as site  contractor representatives noted, impact the LEP\u2019s schedule and may  require more resources and plant/vendor capacity to meet the schedule.  According to this official, given the resource demands of simultaneously  occurring major weapons refurbishments, such as the B61-12 and W88  Alt 370, schedule impacts can be magnified and have caused justifiable  concern with leadership at NNSA, the design laboratories, and the  Kansas City site.", "Second, Kansas City site officials expressed concern that some  component design requirements continue to change late in the production  development phase, sometimes because of test results, which creates  tension between improving the design and stabilizing production  requirements and processes in preparation for full-scale production.  Kansas City site officials stated that such design changes pose an  ongoing management challenge. Specifically, time lost because of design  delays in the earlier stages of weapons\u2019 design and development often  needs to be recovered later, during time allotted for production, to meet  established delivery schedules, according to Kansas City site officials.  Such delays have triggered the need for schedule recovery plans at the  Kansas City site in the past.", "In response to the concerns, NNSA has led several mitigation steps to  address schedule risk as both the B61-12 and W88 Alt 370 enter the final  stages before full production begins, according to NNSA\u2019s B61-12  program manager. For example, NNSA revised its baseline change  process for the B61-12 and W88 Alt 370 to require all changes, including  production-related changes, to be reviewed, according to NNSA\u2019s B61-12  program manager. Specifically, NNSA implemented a change  management board with several tiers for review and approval of proposed  design changes based on the type of change, and potential impact to  program milestones, cost, and risk. Varying levels of required review and  approval, depending on the change, can include NNSA production and  design agency officials, senior site managers, B61-12 or W88 Alt 370  project officers, or other senior managers at DOD and NNSA. The intent,  according to this official, is to screen all the changes and determine if they  are really needed and when, and if site-wide resources and schedules  can support the changes.", "In addition, Kansas City site contractor representatives said that they  have developed management strategies to help mitigate production- related impacts of design changes, such as adding work shifts to increase  production output. For example, an August 2017 analysis by Kansas City  site contractor representatives shows the use of three shifts\u2014both partial  and full shifts\u2014to meet workload demand in multiple functional areas,  including production of cables, high voltage assembly, encapsulation and  welding, arming and firing mechanisms, machining, and environmental  and pressure laboratories. Using additional shifts can help the Kansas  City site recover from schedule delays that might result from late design  changes, according to site contractor representatives. Moreover, lessons  learned from the W76-1 LEP\u2014which will complete production in 2019\u2014 are helping to improve coordination between production sites and design  agencies, specifically through increased coordination earlier in the  weapon development process, according to Kansas City site contractor  representatives."], "subsections": []}]}, {"section_title": "Further Changes to Stockpile Requirements Are Anticipated, Which May Affect Existing Workload Plans at the Kansas City Site", "paragraphs": ["While current efforts to mitigate the challenges Kansas City site  contractor representatives have identified are expected to help address  the site\u2019s anticipated future workload, as discussed previously, this  workload could further increase if certain 2018 Nuclear Posture Review  policy statements, based on nuclear weapons stockpile studies now  underway in response to the review, result in changes to production  requirements. For example, the Nuclear Posture Review called for  modifying existing sea-launched ballistic missile warheads to provide a  low-yield option; advancing a program to replace the W78 Intercontinental  Ballistic Missile warhead by 1 year; the study of a sea-launched,  nuclear-armed cruise missile; and sustaining the B83 strategic nuclear  bomb past its currently planned retirement date. NNSA and DOD are  developing studies and implementation plans for the 2018 Nuclear  Posture Review, but it is too soon to know to what extent these studies  and plans may affect the Kansas City site. One early indication of how  implementing the 2018 Nuclear Posture Review may affect the Kansas  City site is that, according to the Fiscal Year 2019 Stockpile Stewardship  and Management Plan, concurrent production of the W80-4 LEP and  the W78 replacement LEP is now expected to extend into the 2030s. In  addition, the 2019 plan anticipates that alts may be needed to sustain the  B83, if the weapon system remains in the stockpile for long enough.", "We concluded in an April 2017 report that the new Nuclear Posture  Review comes during a particularly challenging decade for NNSA\u2019s  nuclear modernization efforts, as the agency plans to simultaneously  execute at least four nuclear LEPs along with major construction projects,  such as efforts to modernize NNSA\u2019s uranium and plutonium  capabilities. We further concluded that NNSA\u2019s modernization budget  estimates for fiscal years 2022 through 2026, which reflected past  program plans, may exceed the funding levels programmed for  modernization in future budgets, raising affordability concerns. Moreover,  we concluded that NNSA had not addressed a projected \u201cbow wave\u201d of  future funding needs\u2014that is, an impending and significant increase in  requirements for additional funds\u2014or the mismatch between potential  funding needs and potential funding available even before the Nuclear  Posture Review was completed. We recommended that NNSA include an  assessment of affordability of NNSA\u2019s portfolio of modernization  programs in future versions of the Stockpile Stewardship and  Management Plan\u2014for example, by presenting options NNSA could  consider to bring its estimates of modernization funding needs into  alignment with potential future budgets. NNSA did not explicitly agree or disagree with our recommendation, but we will continue to monitor any  action NNSA takes in response to the recommendation.", "In addition to addressing affordability concerns, NNSA has been advised  to stabilize long-term workload at operating sites. A congressional  advisory panel examining the governance of the nuclear security  enterprise issued a report in November 2014 recommending, among  other things, actions intended to stabilize long-term workload at operating  sites. In particular, it recommended that NNSA, working with DOD,  create a long-term operating plan to support the nation\u2019s warhead  modernization strategy; it further specified that this plan should be  designed to create a relatively stable, long-term workload. The panel\u2019s  report stated that a stable baseline of design, engineering, and production  is needed to make effective use of the available capabilities in the  weapons complex, provide the basis for sizing and modernization of the  weapons complex, and identify potentially conflicting demands on  available capabilities. While NNSA has taken some actions in response to  this recommendation, an expert panel concluded in March 2018 that  NNSA\u2019s overall response had been inadequate and called for NNSA to  develop, among other things, an integrated strategic plan for the entire  nuclear security enterprise. The panel concluded that, given NNSA\u2019s  expected increase in workload across the nuclear weapons complex, and  the new 2018 Nuclear Posture Review uncertainties, NNSA\u2019s ongoing  implementation of this and other recommendations made by the Panel  over the next several years will take on additional importance."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to NNSA for its review and comment.  NNSA provided technical comments, which we incorporated into this  report, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of the National Nuclear Security  Administration, and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or bawdena@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Senate committee report accompanying a bill for the National  Defense Authorization Act for Fiscal Year 2018 included a provision for us  to review the Kansas City site\u2019s staffing plans and capabilities to meet  national security requirements. Our report examines (1) workload  forecasts for the Kansas City site since 2012, and (2) management  challenges the Kansas City site has identified for achieving the forecasted  workload and actions the site has taken to mitigate these challenges.", "To examine workload forecasts for the Kansas City site since 2012, we  visited the site, obtained and reviewed workload documents, and  interviewed officials from the National Nuclear Security Administration\u2019s  (NNSA) Kansas City site office and headquarters offices, and NNSA  contractor representatives at the site. In particular, we obtained  information on the Kansas City site forecasted workload based on fiscal  years 2012 and 2018 Stockpile Stewardship and Management Plans  (SSMP), comparing full production schedules, including upcoming B61-12  Life Extension Program (LEP) and W88 Alteration (Alt) 370 work.  Because the design and capacity of the modern production facility,  completed in 2012, was based largely on the 2012 SSMP and previous  plans, we used this as the baseline plan. We then compared nuclear  weapons systems LEP and Alt schedules in the 2012 SSMP with the  2018 SSMP because Kansas City contractor representatives told us that  plans and associated workload had changed significantly by 2018. In  addition, we reviewed Kansas City contractor information provided by the  \u201cwhat-if\u201d capacity analyses tool, including graphs and charts depicting  workload for each weapons system undergoing LEPs or Alts. Whenever  possible, we validated or corroborated contractor-forecasted data on  workload and facility capacity by reviewing other sources such as NNSA\u2019s  Enterprise Modeling and Analysis Consortium analysis and conclusions  and SSMP information.", "To examine management challenges the Kansas City site has identified  for achieving the forecasted workload, and any actions the site has taken  to mitigate these challenges, we visited the Kansas City site, obtained  and reviewed documentation, and interviewed NNSA and contractor  officials who identified management challenges in five areas: ensuring  that the site has (1) sufficient production and administrative office space,  (2) up-to-date production equipment, (3) a sufficient workforce, (4)  capable and reliable external suppliers, and (5) complete weapons  designs early enough in development to minimize production changes  and delays. We selected these five areas for review based on NNSA  officials\u2019 and contractor representatives\u2019 identification of such challenges  as being the most significant at the Kansas City site.", "To corroborate information on management challenges and associated  mitigation action(s) provided by the Kansas City site, we conducted  interviews with additional sources, reviewed alternative documentation or  analyses, and obtained examples of the specific action(s) being taken,  when available. For example, regarding the first management challenge  of ensuring adequate production and administrative office space, we  reviewed Kansas City site information, including information on space in  the modern facility, the mission needs statement for expanding the site\u2019s  space, and NNSA budget justifications for fiscal years 2018 and 2019.  We also obtained information on short- and long-term plans for meeting  forecasted workload demands.", "Regarding the second management challenge\u2014ensuring it has up-to- date production equipment\u2014we reviewed Kansas City site information  and information from an alternative source. Specifically, we reviewed  NNSA\u2019s 2017 Master Asset Plan, which provided additional information  and alternate analyses concerning the age of the Kansas City site\u2019s  production equipment. Regarding the third management challenge\u2014 ensuring a sufficient, capable, and security-cleared workforce\u2014we  reviewed both site-level information and information from other sources,  including from NNSA and the Department of Energy (DOE). For example,  we reviewed NNSA\u2019s Fiscal Year 2018 Stockpile Stewardship and  Management Plan, which also includes workforce information and  analyses. In addition, we asked the Kansas City site contractor  representatives and NNSA officials for additional clarification and detail  concerning the management challenges and mitigation actions, as well as  specific examples to support their statements. For issues related to the  clearance process, we contacted DOE officials to obtain information on  DOE supplemental guidance for interim clearance mitigation steps. To  confirm the accuracy of staffing-related information provided by Kansas  City site contractor representatives, we obtained information from these  representatives on how the site performed certain calculations, such as  determining the change in number of Kansas City site staff; number of  Kansas City site staff, by years of service; and distribution of Kansas City  staff, by age. We reviewed the various formulas Kansas City contractor  representatives used in preparing its analyses in order to understand the  logic used in making these determinations. Furthermore, we validated  that these calculations were accurate by independently performing the  calculations to see if our results matched the site\u2019s results.", "For information concerning the fourth management challenge\u2014ensuring  capable and reliable external suppliers\u2014we interviewed a senior NNSA  headquarters official overseeing NNSA\u2019s Enterprise Modeling and  Analysis Consortium, which conducted alternate analyses on the Kansas  City site\u2019s workload capacity, equipment, and workforce. The Consortium  corroborated the Kansas City site\u2019s conclusion\u2014that mitigation steps  being taken at the Kansas City site should address increased workload  concerns. Regarding the fifth and last management challenge\u2014ensuring  complete weapons designs early in development to ensure that  production changes and delays are kept to a minimum\u2014we reviewed the  W76 lessons learned report, which also describes design completion  issues affecting the Kansas City site. In addition, we interviewed NNSA\u2019s  B61 program manager to obtain additional perspective on design-related  challenges facing upcoming B61-12 refurbishments.", "We conducted this performance audit from November 2017 to April 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."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Allison B. Bawden, (202) 512-3841 or bawdena@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Jonathan Gill (Assistant  Director), Christopher Pacheco (Analyst in Charge), and Sophia Payind  made significant contributions to this report. Also contributing to this  report were Elizabeth Dretsch, R. Scott Fletcher, Thomas Gilbert, Richard  Johnson, Cynthia Norris, Jeanette Soares, and Sara Sullivan."], "subsections": []}]}], "fastfact": ["In the United States, nuclear weapons contain over 80 percent non-nuclear parts. Most of these parts are procured or produced by the National Nuclear Security Administration's site in Kansas City. This site constructed a new facility in FY 2012.", "However, we found that workload projections have increased significantly from forecasts used to plan this facility\u2014for instance, production and administrative staff will need to almost double by 2020 to meet workload demands. NNSA expects to meet future workload demands through actions such as hiring staff and leasing an additional 250,000 square feet of production space in 2019."]}
{"id": "GAO-18-294", "url": "https://www.gao.gov/products/GAO-18-294", "title": "Elections: Observations on Voting Equipment Use and Replacement", "published_date": "2018-04-11T00:00:00", "released_date": "2018-04-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Much of the voting equipment acquired with federal funds after the enactment of the Help America Vote Act in 2002 may now be reaching the end of its life span, and some states and local election jurisdictions\u2014which number about 10,300 and generally have responsibility for conducting federal elections\u2014have or are considering whether to replace their equipment. GAO was asked to examine voting equipment use and replacement.", "This report addresses (1) the types of voting equipment jurisdictions used for the 2016 general election and their perspectives on the equipment; (2) factors considered when deciding whether to replace equipment and replacement approaches in selected jurisdictions; and (3) stakeholder perspectives on how federal voting system guidelines affect replacing and developing equipment.", "GAO surveyed officials from a nationwide generalizable sample of 800 local jurisdictions (68 percent weighted response rate) and all 50 states and the District of Columbia (46 responded) to obtain information on voting equipment use and replacement. GAO also interviewed officials from (1) five jurisdictions, selected based on population size and type of voting equipment used, among other things, to illustrate equipment replacement approaches; and (2) seven voting system vendors, selected based on prevalence of jurisdictions' use of equipment, type of equipment manufactured, and systems certified, to obtain views on federal voting system guidelines. These interviews are not generalizable, but provide insights into jurisdictions' and vendors' experiences."]}, {"section_title": "What GAO Found", "paragraphs": ["Local election jurisdictions primarily used optical scan and direct recording electronic (DRE), also known as touch screen, equipment during the 2016 general election and were generally satisfied with voting equipment performance. Specifically, on the basis of GAO's nationwide generalizable survey of local election jurisdictions, GAO estimated that jurisdictions with 63 percent (from 54 to 72 percent) of the population nationwide used optical or digital scan equipment as their predominant voting equipment during the election, while jurisdictions with 32 percent (from 23 to 41 percent) of the population nationwide used DREs. In addition, the survey results indicated that accurate vote counting and efficiency of operation were top benefits experienced by jurisdictions for both types of equipment, and storage and transportation costs were a top challenge. Further, GAO estimated that jurisdictions with 93 percent (from 88 to 96 percent) of the population nationwide did not experience equipment errors or malfunctions on a very or somewhat common basis and jurisdictions with 96 percent (from 94 to 98 percent) of the population were very or generally satisfied with the performance of their equipment during the 2016 general election.", "GAO identified four key factors that jurisdictions and states consider when deciding whether to replace voting equipment\u2014(1) need for equipment to meet federal, state, and local voting system standards and requirements; (2) cost to acquire new equipment and availability of funding; (3) ability to maintain equipment and receive timely vendor support; and (4) overall performance and features of equipment. When replacing equipment, the five jurisdictions GAO selected for interviews used varying approaches based on their specific needs and resources. For example, Los Angeles County, California, which has a large and diverse electorate, is self-designing its own voting equipment and, according to officials, has incorporated a user-centered approach that prioritizes the needs and expectations of its voters. Lafayette County, Florida, which has a small population, joined a consortium of other small counties to help obtain funding and pool purchasing power to replace its equipment.", "The state election officials we surveyed and the seven selected voting system vendors we interviewed, among other stakeholders, had varying perspectives on how the current voluntary federal voting system guidelines affected the replacement and development of voting equipment. These guidelines can be used to test and certify equipment to verify that it meets baseline functionality, accessibility, and security requirements. The stakeholders we surveyed or interviewed generally indicated that the guidelines and their associated testing processes provide helpful guidance for equipment developers, cost savings for states that do not have to duplicate federal testing, and assurance that certified equipment meets certain requirements. However, some of these stakeholders stated that aspects of the guidelines could discourage the development of innovative equipment and limit the choices of voting equipment on the market. The Election Assistance Commission (EAC), which is responsible for developing the federal guidelines, is updating them with stakeholder input and plans to issue a new version in late summer 2018.", "GAO incorporated technical comments provided by the EAC and election officials from the selected local jurisdictions and their respective states as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The voting equipment that is used to cast and count the ballots of millions  of voters nationwide is essential to our nation\u2019s electoral process.  Challenges experienced during the 2000 presidential election with the  effectiveness and accuracy of some voting equipment for casting and  counting votes raised questions about existing voting equipment and  highlighted the need to replace aging equipment. To help address some  of the issues identified in the 2000 election, the Help America Vote Act  (HAVA) was enacted in 2002 and authorized over $3 billion in federal  funding over several fiscal years to assist state and local governments in  making improvements in election administration, such as replacing aging  voting equipment. Further, to help promote effective state and local  administration of federal elections, HAVA established the Election  Assistance Commission (EAC) as an independent federal commission  and, among other things, directed the Commission to develop voluntary  voting system guidelines against which voting equipment can be tested  and certified. According to HAVA, participation in the EAC testing and  certification program is optional but states may, by law or practice, require  some participation in this program, such as by formally adopting the  voluntary guidelines and making these guidelines mandatory in their  jurisdictions or requiring equipment to be tested by a federally accredited  laboratory. If vendors choose to have their voting equipment tested and  certified against the voluntary guidelines, their equipment must meet the  guidelines\u2019 requirements in order to receive federal certification.", "After the enactment of HAVA and the subsequent distribution of federal  funds to replace voting systems, many local election jurisdictions and  states acquired new voting equipment. Many states also incorporated the  use of the EAC\u2019s voluntary voting system guidelines or its testing and  certification program into their own state-level requirements for approving  the use of equipment. However, studies have reported that much of the  voting equipment that was procured by state and local election  administrators with federal funds more than 10 years ago is now at or  approaching the end of its designed service life. Some state and local  election officials have noted that the use of aging equipment can  potentially affect how efficiently and accurately elections are carried out  and can require administrators to devote increasingly more resources and  effort to keep the equipment operational. Some states and local election  jurisdictions are considering whether they need to replace their voting  equipment and others have recently replaced their equipment or are in  the process of doing so.", "The process for replacing voting equipment exists within an administrative  and regulatory framework in which the authority to regulate and carry out  elections is shared by federal, state, and local officials. For example,  states are responsible for administering elections; however, the local  election jurisdictions within each state are largely responsible for  managing, planning, and conducting elections, with about 10,300 local  election jurisdictions nationwide performing these duties. With respect to  voting equipment, this decentralization of the responsibility for  administering elections has led to the use of a diverse variety of  equipment, as well as different processes and approaches for carrying  out the responsibilities related to the selection, funding, implementation,  and maintenance of the equipment.", "Since 2001, GAO has issued a number of reports on various aspects of  the election process describing the types of voting equipment used in  federal elections, how the performance of the equipment is measured,  and the federal voting system certification process, among other issues.  Given the potential challenges that can result from the use of aging voting  equipment, you asked us to obtain and examine information about the  voting equipment being used across the country, plans by states and  local election officials to replace voting equipment, and the EAC\u2019s efforts  to update the voluntary voting system guidelines, among other things.  This report addresses the following questions:  1.  What types of voting equipment did local election jurisdictions use for  the 2016 general election, and what are jurisdiction perspectives on  equipment use and performance?  2.  What factors are considered when deciding whether to replace voting  equipment and what approaches have selected jurisdictions taken to  replace their equipment?  3.  What are selected stakeholders\u2019 perspectives on how federal voting  system guidelines affect the replacement and development of voting  equipment, and what actions has the EAC taken to update the  guidelines?", "To address our first objective, we conducted a web-based survey of  officials from a stratified random sample of 800 local election jurisdictions  nationwide. In total, we received 564 completed questionnaires for a  weighted response rate of 68 percent. In stratifying our nationwide  sample, we used a two-level stratified sampling method in which the  sample units, or jurisdictions, were broken out into rural and non-rural  strata. We surveyed the officials about the types of voting equipment  they used, various characteristics of the equipment used, their  perspectives on the benefits and challenges they experienced while using  the equipment, and how satisfied they were with its performance during  the election. Unless noted otherwise, the point estimates we report are  national-level point estimates representing the experiences, views, and  opinions of all local election jurisdictions nationwide with populations  greater than 2,500. We also provide some point estimates for jurisdiction  population subgroups, such as large jurisdictions (greater than 100,000  persons), medium jurisdictions (25,001 to 100,000 persons), and small  jurisdictions (2,501 to 25,000 persons), and jurisdictions that used a  particular type of voting equipment, in cases where statistically significant  differences exist between the subgroups that may be of interest. The  jurisdictions we surveyed were selected with probability proportionate to  population size, so rather than expressing the point estimates in terms of  the percentage of jurisdictions nationwide that had a specified  characteristic, we express the point estimates for the survey responses in  terms of the percentage of the population nationwide that resides within  jurisdictions that had a specified characteristic. Similarly, in instances  where we report point estimates for jurisdiction subgroups, we express  the point estimate in terms of the percentage of the population that  resides within jurisdictions of that respective subgroup that had a  specified characteristic.", "To address our second objective, we used our local election jurisdiction  survey described above to obtain information from jurisdictions about the  factors they consider when determining whether to replace their voting  equipment. In addition to the local election jurisdiction survey, we also  conducted a web-based survey of the state-level election offices in the 50  states and the District of Columbia about issues pertaining to the states\u2019  roles in selecting and acquiring voting equipment, including the factors  considered when determining whether to replace voting equipment. We  obtained responses from 46 of these offices, while 5 did not respond (a  90 percent response rate). For additional perspectives and context on the  factors considered when replacing voting equipment, we also reviewed  reports and studies about voting equipment and elections and interviewed  nine selected election subject matter experts, including representatives  from nongovernmental research and other organizations involved in the  field of election administration and voting equipment. We selected these  subject matter experts based on our review of reports and studies related  to voting equipment and their expertise and work in this area. Further, we  interviewed election officials from five local jurisdictions\u2014Los Angeles  County, California; Travis County, Texas; Anne Arundel County,  Maryland; Lafayette County, Florida; and Beaver County, Utah\u2014that  replaced their voting equipment between 2012 and 2016 or plan to  replace their equipment in time for the 2020 general election to learn  about the approaches and practices they used and obtain their  perspectives on the replacement process. We selected these jurisdictions  to obtain variation in, to the extent possible, population size, type of voting  equipment replaced and selected, state involvement in selecting and  funding voting equipment, and particular practices used to replace  equipment (e.g., self-designing equipment, leasing equipment), among  other factors. For each jurisdiction, we interviewed\u2014on site or by  phone\u2014local election officials, state election officials in the jurisdiction\u2019s  state, and individuals who have served as poll workers at the jurisdiction\u2019s  polling locations if applicable. While these five jurisdictions are not  representative of all local election jurisdictions nationwide that replaced or  plan to replace their voting equipment, they provide examples of various  approaches for replacing voting equipment and perspectives on key  issues related to replacing equipment. We corroborated various  information we obtained through these interviews by reviewing relevant  state statutes and documentation that these jurisdictions provided to us,  such as postelection reports, voting system studies, expenditure  summaries, and solicitations for vendor proposals to provide voting  equipment and services.", "To address our third objective, we used responses to our survey of state  election officials and interviews with seven selected voting system  vendors and the nine selected subject matter experts mentioned above to  obtain perspectives on how federal voting system guidelines and their  associated testing and certification processes affect the replacement and  development of voting equipment. We selected the seven vendors based  on the prevalence of jurisdictions\u2019 use of their equipment, type of voting  equipment manufactured, and systems certified, among other criteria.  The perspectives of the seven voting system vendors and nine subject  matter experts are not generalizable but provide examples of views on  the federal guidelines and their associated testing and certification  processes from a range of stakeholders. We also reviewed EAC and  National Institute of Standards and Technology (NIST) documents on  actions taken to update the guidelines and interviewed officials from the  EAC and NIST and the seven voting system vendors about their  involvement in and perspectives on these actions. See appendix I for  additional information on our scope and methodology.", "We conducted this performance audit from June 2016 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of Election Administration", "paragraphs": ["In the United States, election authority is shared by federal, state, and  local officials, and election administration is highly decentralized and  varies among state and local jurisdictions. Congressional authority to  regulate elections derives from various constitutional sources, depending  upon the type of election. Federal election laws have been enacted that  include provisions pertaining to voter registration, protecting the voting  rights of certain minority groups, and other areas of the elections process.  States regulate various election activities, including some requirements  related to these federal laws, but generally delegate election  administration responsibilities to local jurisdictions."], "subsections": [{"section_title": "Federal Roles and Responsibilities", "paragraphs": ["Congress has passed legislation in major functional areas of the voting  process. For example, HAVA includes a number of provisions related to  voting equipment and other election administration activities, including, for  instance, requiring at least one voting system equipped for persons with  disabilities at each polling place in federal elections. After HAVA was  enacted, Congress appropriated more than $3 billion for the EAC to  distribute to states to make election administration improvements, such  as the replacement of punch card and mechanical lever voting  equipment.", "In addition to HAVA, federal laws have been enacted in other areas of the  voting process. For example, the Voting Rights Act of 1965, as amended,  contains, among other requirements, provisions designed to protect the  voting rights of U.S. citizens of certain ethnic groups whose command of  the English language may be limited. In accordance with the act,  covered states and jurisdictions must provide written materials\u2014such as  ballots or registration forms\u2014in the language of certain \u201clanguage  minority groups\u201d in addition to English, as well as other assistance, such  as bilingual poll workers."], "subsections": []}, {"section_title": "State and Local Roles and Responsibilities", "paragraphs": ["The responsibility for the administration of elections resides at the state  and local levels. States regulate various election activities, such as  absentee and early voting requirements and Election Day procedures, but  generally delegate election administration responsibilities to local  jurisdictions. Some states have mandated statewide election  administration guidelines and procedures that foster uniformity in the  ways local jurisdictions conduct elections, including the types of voting  equipment used. Other states have guidelines that generally permit local  election jurisdictions considerable autonomy and discretion in the way  they run elections. Although some states bear some election costs,  including those associated with voting equipment, local jurisdictions  generally pay for most aspects of election administration. Unless states  require otherwise, local jurisdictions generally have discretion over  activities such as training election officials and, in most states, over the  selection and purchase of voting technology. Among other things, local  election officials register eligible voters; design ballots; educate voters on  how to use voting technology; provide information on the candidates and  ballot measures; arrange for polling places; recruit, train, organize, and  mobilize poll workers; prepare and test voting equipment for use; and  count ballots."], "subsections": []}]}, {"section_title": "The Voting Process", "paragraphs": [], "subsections": [{"section_title": "Voting before Election Day", "paragraphs": ["States have established alternatives for voters to cast a ballot other than  at the polls on Election Day, including absentee voting and early voting.  All states and the District of Columbia have provisions allowing voters to  cast their ballots before Election Day by voting absentee, with variations  on who may vote absentee, whether the voter needs to provide an  excuse for requesting an absentee ballot, and the time frames for  applying for and submitting absentee ballots. Some states also permit  registered voters to apply for an absentee ballot on a permanent basis so  that those voters automatically receive an absentee ballot in the mail prior  to every election without providing an excuse or reason for voting  absentee. In addition to absentee voting, some states allow early in- person voting. In general, early voting allows voters from any precinct in  the jurisdiction to cast their vote in person without providing an excuse,  before Election Day either at one specific location or at one of several  locations. Further, three states and a number of local election jurisdictions  in other states conduct vote-by-mail elections, wherein ballots are  automatically sent to every eligible voter."], "subsections": []}, {"section_title": "In-Person Voting on Election Day", "paragraphs": ["For in-person voting on Election Day, election authorities subdivide local  election jurisdictions into precincts. Voters generally cast their ballots at  the polling places for the precincts to which they are assigned by election  authorities. In addition, some states provide jurisdictions the discretion to  allow voters to cast their ballots at vote centers, which are polling places  at which any registered voter in the local election jurisdiction may vote on  Election Day, regardless of the precinct in which the voter resides.", "Within the polling place, poll workers check in voters and determine their  eligibility to vote by verifying their registration using voter lists or poll  books\u2014a list of individuals eligible to vote within the voting precinct or  local jurisdiction. After checking the voters in, poll workers direct them to  a voting booth to mark their electronic or paper ballots, and then voters  submit the ballots for counting. The manner in which votes are cast and  counted can vary depending on the voting method and technology  employed by the jurisdiction."], "subsections": []}, {"section_title": "Postelection Activities", "paragraphs": ["Following the close of the polls on Election Day, election officials and poll  workers complete steps such as securing equipment and ballots,  transferring paper ballots or electronic records of vote counts to a central  location for counting, and determining the outcome of the election. Votes  counted include those cast on Election Day, absentee ballots, early votes  (where applicable), and valid provisional ballots. While preliminary  results are available usually by the evening of Election Day, the certified  results are generally not available until a later date."], "subsections": []}]}, {"section_title": "EAC Voluntary Voting System Guidelines and Testing and Certification Program", "paragraphs": [], "subsections": [{"section_title": "Overview of Voluntary Guidelines and Testing and Certification Program", "paragraphs": ["The EAC has responsibility for developing the voluntary voting system  guidelines and overseeing the testing and certification of voting systems  based on these guidelines. The EAC works in conjunction with NIST and  the Technical Guidelines Development Committee (TGDC) to develop the  voluntary guidelines. According to the EAC, these guidelines are a set  of specifications and requirements against which voting systems,  including hardware and software, can be tested to receive a certification  from the EAC. According to NIST, the guidelines are intended to ensure  that federal testing provides assurance to state and local election officials  that the voting systems meet a defined set of requirements. The EAC  testing and certification program verifies that voting systems comply with  basic functionality, accessibility, and security capabilities established by  the voluntary guidelines. Typically, voting system vendors submit their  systems to the EAC for testing and certification and the systems are  evaluated by EAC-accredited voting system test laboratories against the  guidelines. These laboratories make recommendations regarding  certification to the EAC. According to the EAC, an EAC-certified voting  system means that the voting system has been tested by a federally  accredited test laboratory and complies with the guidelines."], "subsections": []}, {"section_title": "Establishment of Federal Voting System Guidelines and Updates", "paragraphs": ["According to the EAC, prior to its establishment and the creation of its  voluntary voting system guidelines, the first set of federal voluntary Voting  System Standards were adopted in 1990 by the Federal Election  Commission. The National Association of State Election Directors  voluntarily assumed the role of accrediting voting system test laboratories  and certifying voting systems to the federal standards. In 2002, the  Federal Election Commission adopted a new version of the federal  standards.", "After the EAC\u2019s creation, in 2005, the EAC developed and adopted the  third iteration of federal standards, in accordance with HAVA, and the  standards were renamed the Voluntary Voting System Guidelines  (VVSG). This third iteration of federal voting system guidelines was  referred to as the 2005 VVSG or VVSG 1.0, as it is called today.  According to the EAC, VVSG 1.0 increased security requirements for  voting systems and were intended to expand access, including  opportunities to vote privately and independently, for individuals with  disabilities. In 2006, the National Association of State Election Directors  terminated its voting system testing program and subsequently, in 2007,  the EAC launched its own testing and certification program. In March  2015, a fourth iteration of the voluntary guidelines was adopted by the  EAC, referred to as VVSG 1.1. According to the EAC, VVSG 1.1 clarified  the guidelines to improve testability by testing laboratories, among other  updates, and focused on areas that could be improved without requiring  significant changes to the testing and certification process. In January  2016, the EAC adopted an implementation plan for VVSG 1.1 whereby all  new voting systems being tested for certification would be required to be  tested against the VVSG 1.1 beginning on July 6, 2017. As of  November 2017, no voting systems have been certified using VVSG 1.1.", "The EAC, NIST, and TGDC are in the process of developing the next  iteration of the voluntary guidelines (known as VVSG 2.0), and these  guidelines are expected to be issued in late summer 2018. Typically, a  lag exists between when guidelines are issued and when they are used  for testing and certification. EAC officials stated that it has generally taken  about 18 months before the guidelines are ready for use for testing voting  systems. This is due in part to the need for the voting system test  laboratories to be reaccredited to test to the new voluntary guidelines by  the EAC. According to EAC officials, after the guidelines are approved  for use, it typically takes 2 to 4 years before voting system vendors can  develop voting systems that are ready for testing and certification."], "subsections": []}, {"section_title": "States\u2019 Participation in the EAC Testing and Certification Program", "paragraphs": ["Participation in the EAC testing and certification program is voluntary.  Each state determines its own standards for voting systems in statute or  administrative regulation, which can be based on the voluntary guidelines  established by the EAC. Specifically, most states require some level of  participation in the EAC testing and certification program as mandated by  their state laws or regulations. As of December 2017, 13 states require  federal certification of their voting systems, 24 states and the District of  Columbia require testing by a federally accredited laboratory or require  testing to federal voting system standards, and 13 states have no federal  requirements. Some states have their own voting system standards and  conduct their own testing and certification to these standards, either in  addition to or as an alternative to the federal voluntary guidelines.  Vendors that want to supply their voting systems to local jurisdictions and  states must comply with state requirements. See appendix II for federal  certification and testing requirements by state, including the associated  statutes and regulations we reviewed."], "subsections": []}]}]}, {"section_title": "Local Election Jurisdictions Primarily Used Two Types of Voting Equipment, Monitored Such Equipment, and Were Generally Satisfied with Equipment Performance", "paragraphs": [], "subsections": [{"section_title": "Local Election Jurisdictions Primarily Used Optical/Digital Scan and Direct Recording Electronic Equipment during the 2016 General Election", "paragraphs": ["According to our analysis of the predominant type of equipment used to  process the largest number of ballots during the 2016 general election,  jurisdictions using optical/digital scan equipment represented the largest  estimated share of the population nationwide, followed by jurisdictions  using direct recording electronic (DRE) equipment. Specifically, on the  basis of our local election jurisdiction survey, we estimate that  jurisdictions with about 63 percent of the population nationwide used  optical/digital scan equipment as their predominant voting equipment  during the election, while jurisdictions with an estimated 32 percent of the  population nationwide used DREs. Jurisdictions with less than 1 percent  of the population nationwide used paper hand-counted ballots. See  figure 1.", "Within the optical/digital scan equipment category, the most widely used  model of optical/digital scan equipment was the precinct count  optical/digital scan, with jurisdictions having an estimated 46 percent of  the population nationwide using it as their predominant voting  equipment. Figure 2 shows the predominant types of voting equipment  that were used by jurisdictions during the 2016 general election, broken  out by model of equipment used.", "While many jurisdictions predominantly used one type of voting  equipment, some reported using multiple types. Jurisdictions may choose  to use more than one type of equipment as a means to process different  types of ballots such as absentee or provisional or to provide accessibility  options for voters with disabilities. Overall, we estimate that jurisdictions  with about 59 percent of the population nationwide used only one type of  equipment during the 2016 general election, while jurisdictions with about  37 percent of the population nationwide used multiple types of equipment  during the election. Jurisdictions that used two types of equipment are  estimated to have about 30 percent of the population nationwide, while  those that used more than two types of voting equipment had  approximately 6 percent of the population nationwide. See figure 3 for  the types of voting equipment used."], "subsections": []}, {"section_title": "Local Election Jurisdictions Monitored Equipment Performance in Various Ways", "paragraphs": ["According to results from our survey of local election jurisdictions,  jurisdictions monitored the performance of their voting equipment during  the 2016 general election through a variety of methods, such as  equipment testing, performance measurement and tracking of  malfunctions, and postelection audits and recounts. Such monitoring can  provide information to jurisdictions about how their equipment is  functioning and help ensure the accuracy of the outcomes of elections  and address any identified issues or problems."], "subsections": [{"section_title": "Testing of Voting Equipment", "paragraphs": ["Results from our survey of local election jurisdictions indicate that the  extent to which jurisdictions tested their voting equipment varied by test  type. Key types of voting equipment testing include acceptance testing,  logic and accuracy testing, and parallel testing. Acceptance testing  verifies that new equipment or any equipment that has been outside  election administrators\u2019 control (e.g., for repair) conforms to the purchase  agreements and is identical to equipment that was tested and certified by  state or federal testing organizations. According to our local jurisdiction  survey results, jurisdictions with an estimated 49 percent of the population  nationwide conduct acceptance testing of their equipment. Logic and  accuracy (also known as functional or readiness) testing is performed in  advance of an election to determine whether voting equipment will  function properly, such as displaying the correct ballot, collecting votes,  and tabulating results. Parallel testing is performed on Election Day by  running test votes cast with known results, then comparing the actual and  expected results. Of these two types of testing, according to our local  jurisdiction survey results, logic and accuracy testing was the most widely  performed type of testing as jurisdictions with 99 percent of the population  nationwide conducted such testing for the 2016 general election.  Jurisdictions with an estimated 37 percent of the population nationwide  conducted parallel testing."], "subsections": []}, {"section_title": "Performance Measures and Reported Errors and Malfunctions", "paragraphs": ["According to our local jurisdiction survey results, jurisdictions monitored  the performance of their predominant voting equipment during the 2016  general election using a variety of measures. Accuracy of the equipment  in counting votes was tracked, measured, or assessed by jurisdictions  having an estimated 87 percent of the population nationwide. Another widely monitored aspect of voting equipment performance was the  accuracy of the equipment in recording voter selections before counting\u2014 jurisdictions with 78 percent of the population nationwide tracked,  measured, or assessed that aspect. Overvotes and undervotes were  also widely used measures, with jurisdictions having about 63 and 64  percent of the population nationwide, respectively, tracking, measuring, or  assessing those measures.", "According to the results of our local jurisdiction survey, most jurisdictions  did not experience extensive or widespread errors or malfunctions with  their equipment during the 2016 general election. We estimate that  jurisdictions with 93 percent of the population did not experience  equipment errors or malfunctions on a \u201csomewhat\u201d or \u201cvery\u201d common  basis during the election. Of those that did experience equipment errors  or malfunctions of some type on a \u201csomewhat\u201d or \u201cvery\u201d common basis,  the error or malfunction most frequently encountered was jams or  misfeeds. We estimate that this error or malfunction was experienced on  a \u201cvery common\u201d basis by jurisdictions with about 1 percent of the  population nationwide and on a \u201csomewhat common\u201d basis by  jurisdictions with about 3 percent of the population nationwide. The next  most frequent error or malfunction experienced as a \u201cvery\u201d or \u201csomewhat\u201d  common occurrence was that equipment response was sluggish or  slower than acceptable, which was experienced by jurisdictions with an  estimated 3 percent of the population nationwide."], "subsections": []}, {"section_title": "Postelection Audits and Recounts", "paragraphs": ["State and local election officials also determined how their voting  equipment performed and verified election results by conducting  postelection audits and recounts. According to 35 out of 46 respondents  to our state survey, the state election agency or local election jurisdictions  in their states conducted postelection audits or targeted recounts of  results from the 2016 general election. On the basis of our local  jurisdiction survey, we estimate that jurisdictions with approximately 45  percent of the population nationwide conducted postelection audits or  targeted recounts. Among jurisdictions of different size, large  jurisdictions had a higher estimated share of their population within  jurisdictions that conducted postelection audits or recounts than did  medium or small jurisdictions. Specifically, jurisdictions with 82 percent of  the population within large jurisdictions conducted postelection audits or  recounts. In contrast, an estimated 55 percent and 37 percent of the  population within medium and small jurisdictions, respectively, was  represented by jurisdictions that conducted postelection audits or  recounts."], "subsections": []}]}, {"section_title": "Local Election Jurisdictions Experienced Various Benefits and Challenges with Voting Equipment and Were Generally Satisfied or Very Satisfied with Equipment Performance Benefits and Challenges of Predominant Equipment Used", "paragraphs": ["According to the results of our local election jurisdiction survey,  jurisdictions using the two main types of voting equipment (DRE or  optical/digital scan) experienced mostly similar benefits as a result of  using their respective type of predominant equipment. Table 1 shows  the top benefits experienced by jurisdictions according to the type of  predominant voting equipment used.", "In addition to the benefits mentioned above, jurisdictions experienced  other benefits associated with using their respective type of predominant  voting equipment. For example, jurisdictions that had an estimated half or  more of the population within jurisdictions using each of the different  types of voting equipment also experienced the following benefits from  using their equipment:  Jurisdictions predominantly using DREs: accessibility for individuals  with disabilities or impairments, timely election night reporting, ease of  presenting lengthy ballots in a clear and understandable way,  protection and preservation of votes cast against potential non- cybersecurity related threats, and customer support and problem  resolution assistance from vendor.", "Jurisdictions predominantly using optical/digital scan equipment:  timely election night reporting, ease of troubleshooting or resolving  equipment malfunctions during Election Day, preventing or alerting  voters of any overvotes or undervotes before ballot is cast, ability to  facilitate a postelection audit, security of equipment against outside  electronic hacking or intrusion, and ease of conducting routine  maintenance.", "Jurisdictions also experienced challenges while using their predominant  voting equipment, although to a lesser extent overall than they  experienced benefits. Table 2 shows the top challenges experienced by  jurisdictions according to the type of predominant voting equipment used.", "The next most frequently experienced challenges by jurisdictions were  the following (estimates with the values for the 95 percent confidence  intervals are shown in parentheses):  Jurisdictions predominantly using DREs: cost to maintain voting  equipment (an estimated 12 percent; 6, 19); cost to operate voting  equipment (8 percent; 3, 14); and ease of conducting routine  maintenance (7 percent; 2, 14).", "Jurisdictions predominantly using optical/digital scan equipment: cost  to operate voting equipment (an estimated 11 percent; 7, 15);  preventing or alerting voters of any overvotes or undervotes before  ballot is cast (9 percent; 2, 23), and ease of connectivity with other  election administration systems (e.g., voter registration, election night  reporting) (9 percent; 2, 23)."], "subsections": [{"section_title": "Satisfaction with Predominant Voting Equipment", "paragraphs": ["On the basis of our local election jurisdiction survey, we estimate that  jurisdictions with approximately 96 percent of the population nationwide  were very satisfied or generally satisfied with the performance of their  predominant voting equipment during the 2016 general election.  Specifically, we estimate that jurisdictions with approximately 70 percent  of the population nationwide were very satisfied with their voting  equipment\u2019s performance and 26 percent were generally satisfied (see  fig. 4). Jurisdictions with about 2 percent of the population nationwide  were generally dissatisfied or very dissatisfied with the performance of  their predominant voting equipment.", "When comparing satisfaction with the performance of their predominant  voting equipment used in the 2016 general election against the  performance of their predominant equipment used in the 2012 general  election, we estimate that jurisdictions with 67 percent of the population  nationwide were just as satisfied with their equipment\u2019s performance in  2016 as in 2012, while 16 percent reported they were more satisfied (see  fig. 5). Among jurisdictions that used different predominant types of  equipment, jurisdictions that predominantly used optical/digital scan  equipment that were more satisfied with their equipment\u2019s performance in  2016 had a larger estimated share of their population (20 percent)  compared to jurisdictions that predominantly used DRE equipment (4  percent)."], "subsections": []}]}]}, {"section_title": "Local Election Jurisdictions and States Consider Multiple Factors and Selected Jurisdictions Have Varying Approaches When Replacing Voting Equipment", "paragraphs": [], "subsections": [{"section_title": "Local Election Jurisdictions and States Consider Multiple Factors When Deciding Whether to Replace Voting Equipment", "paragraphs": ["On the basis of our review of literature and studies, interviews with  election subject matter experts, and analysis of our local election  jurisdiction and state surveys, we identified four key factors and related  issue areas within them that jurisdictions and states consider when  deciding whether to replace voting equipment. After considering the  factors, jurisdictions may decide to replace their equipment or continue  using their existing equipment. The four key factors we identified are: (1)  the need for voting equipment to meet federal, state, and local voting  system standards and requirements; (2) the cost to acquire new  equipment and availability of funding; (3) the ability to maintain equipment  and receive timely vendor support; and (4) the overall performance and  features of voting equipment. In our local election jurisdiction and state  surveys, we asked election officials to rate issue areas related to each of  these factors as to how important they were when determining whether to  replace voting equipment and then rank the issue areas in terms of which  were \u201cmost important\u201d in making the determination. Analysis of the  results of our surveys indicates that the 24 issue areas within the four  factors vary in their relative importance to jurisdictions and states when  determining whether to replace voting equipment."], "subsections": [{"section_title": "Need for Voting Equipment to Meet Federal, State, and Local Voting System Standards and Requirements", "paragraphs": ["The need for voting equipment to meet applicable federal, state, and local  voting system standards and requirements is a factor considered by local  election jurisdictions and states when determining whether to replace  equipment. At the federal level, HAVA generally requires that voting  equipment be accessible to individuals with disabilities. As discussed  earlier, HAVA also established the EAC which developed and maintains  the voluntary guidelines that voting equipment can be tested against to  receive federal certification. In turn, many states have established  requirements that voting equipment be federally certified or meet some or  all of the standards established by the federal guidelines. According to  election subject matter experts we spoke with, in addition to federal  requirements and standards, some states have imposed additional  requirements that voting equipment must meet or satisfy such as having  the capability to present all ballot issues and candidates on one page or  presenting ballots in multiple languages, for example.", "We identified four issue areas related to this factor. Figure 6 shows the  importance local jurisdictions and state election officials attributed to the  various issue areas within this factor when determining whether to  replace voting equipment. For example, the need for equipment to meet  state and local requirements and standards was considered \u201cvery  important\u201d by jurisdictions with 87 percent of the population nationwide  and as one of the three \u201cmost important\u201d issue areas overall by  jurisdictions with 36 percent of the population nationwide. Among the  states, this issue area was considered as \u201cvery important\u201d by 18 out of the  25 states that indicated having a role in determining whether to replace  voting equipment and as one of the three \u201cmost important\u201d issue areas  overall by 7 out of the 25 states.", "According to election subject matter experts we spoke with, the costs to  acquire new equipment and the availability of funding to pay those costs  is a key factor that jurisdictions and states consider when determining  whether to replace voting equipment. Acquiring new voting equipment  involves a variety of costs and expenses. For example, in addition to the  cost of the equipment itself, there can be other associated costs, such as  training for poll workers and elections staff on the new equipment and  voter outreach and education about the change in equipment, that may  be incurred as existing equipment is replaced. These related acquisition  and transition costs and expenses are incurred by the jurisdictions and  states, which in turn must obtain or allocate resources to cover those  costs.", "We identified four issue areas related to this factor. Figure 7 shows the  importance local jurisdictions and state election officials attributed to  these issue areas when determining whether to replace voting equipment.  For example, the availability of state and local funds was considered \u201cvery  important\u201d by jurisdictions with 62 percent of the population nationwide  and as one of the three \u201cmost important\u201d issue areas overall by  jurisdictions with 18 percent of the population nationwide. Among the  states, this issue area was considered as \u201cvery important\u201d by 20 out of the  25 states that indicated having a role in determining whether to replace  voting equipment and as one of the three \u201cmost important\u201d issue areas  overall by 9 out of the 25 states.", "Given the importance of funding for the acquisition of new voting  equipment and the assistance federal HAVA grants have previously  provided, we asked states and jurisdictions additional questions in our  surveys about their funding practices and the extent to which they have  HAVA grant funds remaining to acquire voting equipment. The results  from our surveys provided the following additional information about these  issues:", "Use of local and state funding sources for acquisition of new voting  equipment: On the basis of our local election jurisdiction survey, we  estimate that, among various potential funding sources, jurisdictions  with 79 percent of the population nationwide obtain funds to acquire  new voting equipment through local general funds or budgets as a  direct appropriation. Additionally, we estimate that jurisdictions with  43 percent of the population nationwide use state financial assistance  or cost sharing as a source of funds for new equipment. According  to the results from our state survey, states have different levels of  involvement in providing funds for the acquisition of voting equipment.  Over half (24) of the 46 states that responded to our survey indicated  that they do not provide any financial assistance or cost sharing to  local jurisdictions for equipment acquisition, while 11 indicated that  they cover all acquisition costs. Eight states indicated that their state  provides some financial assistance or cost sharing with local  jurisdictions for equipment acquisition, while 2 states indicated a  different type of involvement in funding the acquisition of voting  equipment, such as covering only the costs of acquiring accessible  voting equipment.", "Availability of HAVA funds: On the basis of our local jurisdiction  survey, we estimate that jurisdictions with 10 percent of the population  nationwide had HAVA funds remaining to apply toward the acquisition  of new voting equipment, with jurisdictions representing 6 percent of  the population only having enough HAVA funds to acquire a portion of  the equipment needed. Additionally, we estimate that jurisdictions  with 42 percent of the population nationwide had no HAVA funds  remaining while jurisdictions with 46 percent of the population did not  know whether they had any HAVA funds remaining.", "Impact of lack of HAVA funds: Among jurisdictions that did not have  any HAVA funds remaining or only enough to buy a portion of the  equipment needed, jurisdictions with an estimated 36 percent of the  population indicated that the lack of HAVA funds had affected their  decisions regarding the replacement of voting equipment. Further,  jurisdictions with an estimated 57 percent of the population in this  subgroup (of jurisdictions that indicated that the lack of HAVA funds  affected their replacement decisions) delayed the replacement of  voting equipment while jurisdictions with 25 percent of the population  in this subgroup were not able to acquire the equipment that would  best meet their needs."], "subsections": []}, {"section_title": "Ability to Maintain Equipment and Receive Timely Vendor Support", "paragraphs": ["The ability of local election jurisdictions and states to maintain voting  equipment and receive timely vendor support is a factor considered when  determining whether to replace equipment, particularly as the equipment  ages. Election subject matter experts we spoke with noted the importance  of access to replacement parts for existing voting equipment as  something jurisdictions and states may consider when determining  whether to replace equipment. Without adequate access to replacement  parts and technical service, either from vendors or supplied by in-house  expertise, it can be difficult for jurisdictions and states to maintain their  current equipment at a satisfactory level.", "We identified five issue areas related to this factor. Figure 8 shows the  importance local jurisdictions and state election officials attributed to  these issue areas when determining whether to replace voting equipment.  For example, the sufficiency of vendor support and problem resolution  was considered \u201cvery important\u201d by jurisdictions with 81 percent of the  population nationwide and as one of the three \u201cmost important\u201d issue  areas overall by jurisdictions with 7 percent of the population  nationwide. Among the states, this issue area was considered as \u201cvery  important\u201d by 15 out of the 25 states that indicated having a role in  determining whether to replace voting equipment but no state considered  it as one of the three \u201cmost important\u201d issue areas overall.", "The overall performance and features, both of the existing voting  equipment and of potential replacement equipment, is also a factor  considered by local election jurisdictions and states when determining  whether to replace voting equipment. For example, jurisdictions and  states may consider the age of their current equipment and how well it is  performing, as well as how its performance compares to that of new  equipment available for acquisition. In addition, according to elections  literature we reviewed and election subject matter experts we spoke with,  jurisdictions and states may also take into account specific features new  voting equipment can provide that might better meet their needs. The  desired features may vary from jurisdiction to jurisdiction depending on  specific needs and circumstances, but such features may include an  enhanced ability to process a high volume of absentee ballots, capability  to present ballots in multiple languages, or ease for poll workers to set up  and for voters to use, for example.", "We identified 11 issue areas related to this factor. Figure 9 shows the  importance local jurisdictions and state election officials attributed to  these issue areas when determining whether to replace voting equipment.  For example, the overall performance of the voting equipment was  considered \u201cvery important\u201d by jurisdictions with 83 percent of the  population nationwide and as one of the three \u201cmost important\u201d issue  areas overall by jurisdictions with 20 percent of the population  nationwide. Among the states, this issue area was considered as \u201cvery  important\u201d by 18 out of the 25 states that indicated having a role in  determining whether to replace voting equipment while 4 out of the 25  states considered it as one of the three \u201cmost important\u201d issue areas  overall.", "Given the potential challenges local election officials have identified with  using aging or outdated equipment, in our local election jurisdiction  survey we asked jurisdictions when they first used their predominant  voting equipment. Based on their responses, we estimate that  jurisdictions with over half of the population nationwide used predominant  voting equipment in the 2016 general election that was first deployed  between 2002 and 2006 (see fig. 10) Jurisdictions with the next largest  estimated share of the population (28 percent) used equipment that was  first deployed between 2012 and 2016."], "subsections": []}]}, {"section_title": "Approaches to Replacing Voting Equipment Varied across Selected Jurisdictions", "paragraphs": ["The five local election jurisdictions we selected to include in our review  either replaced their voting equipment between 2012 and 2016 or plan to  replace their equipment in time for the 2020 general election. We  selected these jurisdictions to obtain variation in, to the extent possible,  population of jurisdiction, type of voting equipment replaced and selected,  and state involvement in selecting and funding voting equipment  replacement, among other factors. Table 3 summarizes information  related to voting equipment replacement across the five selected  jurisdictions.", "These jurisdictions illustrate varying approaches that localities have used  or are using to replace their voting equipment based on their specific  needs, circumstances, and resources. For example,", "Los Angeles County, California. The county has a large and diverse  electorate and is in the process of self-designing its own voting  system, which is expected to consist of ballot marking devices that  produce paper ballots to be tallied on central count digital scanners.  County officials stated that the current design concept for the new  equipment is intended to provide greater flexibility in administering  elections, provide a more user-friendly and accessible voting  experience, enhance accuracy and auditability, and could potentially  lower costs for system upgrades if developed as planned. For  example, according to officials, the ballot marking device is intended  to provide the ease of use of a touch screen interface, which would  incorporate features such as scrolling and tapping that are familiar to  voters who use mobile devices, and will include a headset, tactile  keypad, and other devices for voters with disabilities. It would also  allow the county to have ballots with multiple formats and a large  number of races.", "The county\u2019s process for developing and deploying its new voting  equipment began in 2009 and has five phases\u2014(1) public opinion and  stakeholder baseline research, (2) establishment of voting system  guiding principles, (3) system design and engineering, (4)  manufacturing and certification, and (5) phased implementation.  According to officials, the county has taken a user-centered approach  to the design of the new voting equipment that prioritizes the specific  needs and expectations of the voters. The county is currently in the  manufacturing and certification phase and reported that about $19  million has been expended to develop the new voting equipment as of  December 31, 2017. County officials told us they plan to retain  ownership of the intellectual property rights of the new voting  equipment so that the system remains publicly owned and not  proprietary like traditional vendor equipment. The county plans to pilot  the new equipment in some early voting locations in 2019 and fully roll  it out in 2020.", "Travis County, Texas. The county began its efforts to design its own  voting equipment based in part on findings and recommendations  from an election study group it convened in 2009. In 2012, it  developed a concept for a DRE with a voter-verified paper audit trail  that centered on system security, auditability, and the use of  commercial off-the-shelf technology. In September 2017, the county  announced that it had decided to no longer pursue building the voting  equipment because the proposals it received from vendors and other  organizations for developing key components of the equipment were  not sufficient to build a complete voting system, among other reasons.  According to county officials, the county plans to acquire either DREs  or ballot marking devices with precinct count digital scanners from a  voting system vendor with the goal that whatever equipment it  acquires incorporates some of the key features it had intended for its  self-designed equipment. For example, officials stated that the new  equipment must produce printed paper records that can be tallied and  connected with electronic voting records through an automated  process and allow for third party verification of results and better  postelection audits. They noted that they are prepared to work with  vendors to customize existing equipment to meet the county\u2019s  requirements if needed. County officials estimate that the new  equipment will cost about $16 million and stated that acquisition will  be funded through local bonds. The county issued a request for  proposals for the equipment in November 2017 and plans to have it in  place for the 2020 election.", "Anne Arundel County, Maryland. In 2016, the county replaced its  DREs with a system in which voters manually mark paper ballots and  insert them into precinct count digital scanners which then count  them. Maryland requires the use of uniform voting equipment in  polling places statewide and the state and counties each pay 50  percent of the costs of acquiring equipment. In 2007, Maryland  enacted a law that prohibited the use of a voting system unless the  State Board of Elections (SBE) determined that the system provides a  voter-verifiable paper record, thereby requiring the state\u2019s DREs to be  replaced. According to Maryland SBE officials, state law specifically  required the purchase of precinct count scanners so the board did not  consider other types of voting equipment.", "The SBE issued a request for proposals for the new voting equipment  in July 2014 and four vendors responded. The board formed an  evaluation committee to analyze the technical and financial details of  the proposals, and according to officials, the committee hosted a  public demonstration to collect feedback on the equipment under  consideration and worked with the University of Baltimore to perform  usability and accessibility testing on the equipment. The SBE decided  to lease rather than purchase the equipment for a number of  reasons. For example, officials said that leasing provided increased  flexibility to update or replace equipment more frequently and had  lower upfront costs. According to SBE officials, the current payment to  the vendor for leasing the digital scan equipment statewide is  approximately $1.1 million per quarter. SBE and Anne Arundel County  officials stated that deployment of the new equipment in the 2016  general election went smoothly with no significant challenges. The  state contracted with a third party vendor to conduct a postelection  audit of the 2016 general election by using independent software to  tally all digital ballot images. The audit confirmed the accuracy of the  election results. According to SBE officials, the new equipment\u2019s  ability to capture and store digital images of the ballots made this type  of audit possible. Anne Arundel County officials stated that the ability  to conduct such an audit is one of the main benefits of the new  equipment.", "Lafayette County, Florida. Lafayette County has a small population  and, in 2016, replaced its precinct count optical scan equipment with  precinct count digital scan equipment. The county formed a  consortium with 11 other counties in the state to help acquire its new  equipment. According to the county\u2019s Supervisor of Elections,  having the consortium approach state officials as a group helped  secure HAVA funds to help the counties purchase the voting  equipment. In addition, he stated that being a part of the consortium  helped the counties negotiate a lower price for their equipment than  what they could have obtained individually because they pooled their  purchases and acquired a higher volume of machines. According to  the Supervisor of Elections, the consortium decided to purchase  precinct count digital scanners from the same vendor the counties had  used before because county staff were familiar with the vendor and  equipment, among other reasons. He stated that the total cost to  purchase Lafayette County\u2019s new voting equipment was about  $70,000.", "The Supervisor of Elections said that the digital scanners have  features that were an improvement over the county\u2019s previous optical  scan equipment. For example, he told us that the new scanners have  more robust security features, such as locking panels, seals, and a  requirement for a passcode to access the system. He also noted  that the scanners digitally capture and store ballot images. The  Supervisor of Elections and the two poll workers we interviewed  stated that deployment of the new voting equipment went smoothly  and the county did not experience any challenges because the new  and previous equipment are both precinct count scanning systems.  According to the Supervisor of Elections, a postelection audit that was  conducted, in which the county manually tallied ballots from a  randomly selected race and precinct, found that the results were  accurate.", "Beaver County, Utah. Beaver County has a small population and  previously used DREs with a voter-verified paper audit trail. In 2014,  Beaver County began conducting vote-by-mail elections and replaced  its DREs with central count digital scan equipment to support this  change. County officials said that, in 2014, they verbally requested  proposals for the new equipment from their current vendor and an  elections services company that the county had employed in 2012 to  provide training, systems testing, and other support for elections.  According to the Deputy Clerk, the county requested proposals from  these two entities because county officials were familiar with them and  were not aware of other vendors that might submit proposals. Officials  stated that the county received a proposal from the elections services  company, and selected the company because it was the only bid  received and the equipment the company sold met the county\u2019s needs  and was federally certified. The county reported that the cost to  purchase the equipment was about $46,000. Officials said that they  are very satisfied with the performance of the new voting equipment.  They noted that conducting vote-by-mail elections and using central  count scanners allow them to administer elections from one location  on Election Day, which requires less time and resources than having  to manage multiple polling places. Officials also stated that the new  digital scanners are able to count a high volume of ballots in a short  period of time. According to officials, the county conducted two  postelection audits for the 2016 general election\u2014one required by the  state and another that the county initiated. They reported that both  audits validated the election results.", "See appendix V for additional details about voting equipment replacement  in our five selected jurisdictions, including the factors that influenced their  decisions to replace voting equipment; selection, acquisition, and  implementation of their equipment; and perspectives on the process."], "subsections": []}]}, {"section_title": "Stakeholders Have Varying Views on How the Voting System Guidelines Affect Equipment Replacement and Development, and the EAC is Updating the Guidelines with Stakeholder Input", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Provided Varying Perspectives on How the Current Voluntary Guidelines and Testing and Certification Processes Affect Replacing and Developing Voting Equipment", "paragraphs": ["On the basis of our survey of state election officials and interviews with  officials from selected voting system vendors and subject matter  experts\u2014representatives from nongovernmental research and other  organizations involved in the field of election administration\u2014we found  that these stakeholders have varying perspectives on how the current  Voluntary Voting System Guidelines (VVSG 1.0 and VVSG 1.1) and their  associated testing and certification processes facilitated or posed  challenges to the replacement and development of voting equipment.  The states we surveyed and the other selected stakeholders we  interviewed primarily had experience with VVSG 1.0. As discussed  earlier, the VVSG 1.1 were issued in March 2015, but due to the time it  generally takes to implement updates to new guidelines, including  developing testing programs, among other things, no systems had been  certified under this version of the guidelines as of November 2017. One  vendor\u2019s system underwent partial testing using VVSG 1.1 but the vendor  withdrew the system before the testing was completed."], "subsections": [{"section_title": "Perspectives on How the Voluntary Guidelines Facilitate Replacing and Developing Voting Equipment", "paragraphs": ["States and selected vendors and subject matter experts provided varying  perspectives on how aspects of the current voluntary voting system  guidelines and their associated testing and certification processes  facilitate the replacement and development of voting equipment.  Generally, stakeholders indicated that the guidelines and processes  provide assurance that new equipment meets certain requirements,  provide guidance for equipment developers, provide a model for state  standards, and provide cost savings for states that do not have to  duplicate federal testing. For example, 15 of the 26 state survey  respondents said the guidelines provide assurance that new voting  equipment meets baseline requirements related to security, functionality,  usability, accessibility, and privacy. One of these 15 state respondents  noted that if the EAC certified voting equipment against the federal  guidelines, he believes it meets the highest election standards and also  meets requirements set by his state. Another of these 15 state  respondents noted that voting equipment that has been tested using the  federal guidelines and certified by the EAC will have a higher level of  reliability than equipment that has not met these guidelines or been  certified by the EAC.", "Subject matter experts from one nongovernmental organization noted that  states that establish their own voting system standards often use the  federal guidelines as a base to help develop their standards because the  federal guidelines have comprehensive requirements and are well vetted.  Experts from another nongovernmental organization said that the  guidelines establish a standard for voting equipment features and  performance, which may help small jurisdictions that want to acquire new  voting equipment but may not have the expertise to independently  evaluate the equipment. Further, officials from most of the vendors we  interviewed agreed that the federal standards serve as effective baseline  requirements. For example, officials from five of the seven vendors we  interviewed said that when they are developing voting systems, the  federal guidelines help them define the baseline standards that their  systems should meet, and five of the nine subject matter experts said the  federal guidelines provide baseline requirements.", "Further, 4 of the 26 state survey respondents indicated that the current  voluntary guidelines help reduce the costs and resources needed for  states to test and approve new voting equipment. For example, one of the  4 state respondents reported that states do not have to rely on their own  voting system testing laboratories for all aspects of the testing and  certification of new voting equipment to meet state requirements because  most of the testing and certification relevant to state requirements has  already been done by EAC-accredited testing laboratories and the EAC.  The official noted that this allows the states to do less testing, which could  save them money."], "subsections": []}, {"section_title": "Perspectives on How the Voluntary Guidelines Pose Challenges to Replacing and Developing Voting Equipment", "paragraphs": ["The states we surveyed and selected vendors and subject matter experts  we interviewed also reported that aspects of the current voluntary voting  system guidelines and their associated testing and certification processes  could pose challenges to the replacement and development of voting  equipment in a number of ways. Specifically, some stakeholders indicated  that aspects of the guidelines and processes could discourage innovation  in equipment development, could limit the choices of voting equipment on  the market because the testing and certification processes take too long,  and could be costly for states and vendors. For example, officials  representing three of the seven vendors we interviewed said the current  federal guidelines may discourage innovation for new voting equipment  because they are too specific or overly prescriptive. Officials from one of  these three vendors said the current guidelines require a specific oval  size on the ballots, prescribing how tall and wide the oval should be.  Instead of such requirements, the officials said they would like the  guidelines to be more performance-based and state, for example, that  voters should be able to successfully mark a ballot a specified percentage  of the time. Further, officials from another vendor said that the current  guidelines are generally written for the purpose of testing and certifying  end-to-end voting systems rather than system components such as ballot  marking devices, which are generally developed by smaller vendors. As a  result, according to this vendor, smaller vendors may face challenges  getting new technology certified and into the market. EAC officials stated  that they recognize that the current guidelines should be more flexible  because specificity may limit innovation and they believe the updates to  the VVSG 2.0 should help address this issue.", "In addition, some stakeholders said they believed that the voluntary  guidelines and associated testing and certification processes take too  long, and thus limit the choices of voting equipment on the market and  make it difficult to make improvements to existing equipment. For  example, officials from 8 of the 27 state survey respondents and three  subject matter experts said the guidelines and their respective processes  limit the number of voting systems that are available for acquisition. Three  of the 8 states and three subject matter experts said, in their view, the  EAC testing and certification process takes too long. In addition,  according to one subject matter expert, if a jurisdiction wants to make  changes to its existing voting equipment, such as incorporating new  software, it can be a difficult and lengthy process to certify the modified  equipment, and in some cases the entire system must be recertified.  Also, an official from one vendor said that the federal certification  processes are complicated, onerous, and time-consuming and they  discourage vendors from making modifications to their voting systems  even though the modifications might improve the systems. EAC officials  said they have heard from stakeholders that the certification process  takes too long but stated that this perception was more accurate in the  years immediately following the EAC\u2019s issuance of the VVSG 1.0 in 2005.  They said that if voting equipment has been modified and is ready for  testing and there are no significant problems encountered during the  testing, certifying modifications should take a few weeks to a few months  to complete and full system testing and certification of new systems  should take about 6 to 9 months.", "Further, officials from 4 of the 27 states that responded to our survey said  the EAC testing and certification process can be costly. One state  election official said that the cost of certification may discourage vendors  from developing new systems and pursuing EAC certification for their  systems, which could limit their ability to sell or supply their systems to  state and local election jurisdictions. In addition, this state election official  noted that costly federal certification of voting systems has limited the  voting equipment choices for election officials. Further, officials from one  vendor said that they submitted a new voting system for EAC testing and  certification and spent over $12 million before they learned that there  were significant issues with getting their system certified. According to  EAC officials, this was an uncommon occurrence that resulted from the  vendor submitting a system that needed additional work and was not  ready for certification. The vendor decided to withdraw its system from the  testing and certification process."], "subsections": []}]}, {"section_title": "The EAC Is Updating the Voluntary Voting System Guidelines with Stakeholder Input and Plans to Issue the New Version in 2018", "paragraphs": ["Shortly after the adoption of VVSG 1.1 in March 2015, the EAC, in  conjunction with NIST and the TGDC, began work to develop the next  iteration of the guidelines, VVSG 2.0, and anticipates issuing the new  version in late summer 2018. The EAC, NIST, and the TGDC have taken  actions to develop VVSG 2.0 that may address some of the issues with  the earlier iterations of the guidelines that were raised by stakeholders.  For example, they have established goals to guide the VVSG 2.0 development process, established working groups to inform the guidelines, and developed VVSG 2.0 high-level principles and guidelines."], "subsections": [{"section_title": "Establishment of Voluntary Voting System Guidelines Development Goals and Working Groups", "paragraphs": ["According to the EAC and NIST, in August 2014, the Future VVSG  Working Group, which consisted of officials from state and local election  offices, technical experts in such areas as security and disability, and  voting system vendors, among others, began work which culminated in  the creation of 12 goals to guide the development efforts for the voluntary  guidelines. One goal, for example, states that the guidelines\u2019  requirements should be performance based and technology neutral. The  goal statement further elaborates that the guidelines should be free from  detailed descriptions of any technology, and that the guidelines should be  functional in nature so that they can more easily be redefined as  technology changes. Another development goal states that the voluntary  guidelines and its testing and certification processes should not impose  unanticipated cost burdens onto organizations. These goals are designed  to address some of the issues with the current voluntary guidelines  identified by the stakeholders we interviewed as posing challenges to the  replacement and development of voting systems, such as discouraging  innovation because they are too specific and discouraging vendors and  other voting system developers from pursuing EAC certification for their  systems because the process is potentially costly.", "After the 12 goals for the voluntary guidelines were developed, the EAC  and NIST established a new process for developing the next guidelines  that is intended to allow for broader and more transparent stakeholder  involvement than prior guidelines\u2019 development efforts. This new process  brings stakeholders together through a working group structure to  develop the guidelines. According to the EAC, the previous process did  not fully allow for stakeholder input or effectively leverage stakeholder  expertise in developing the guidelines because comments on the  guidelines were solicited from the Standards Board and external  stakeholders after most of the work had been done.", "In 2015, the EAC and NIST established seven working groups to obtain  feedback and input from stakeholders early in the voluntary guidelines  development process. According to the EAC and NIST, the four  constituency and three election cycle working groups were created as a  public/private partnership to inform the development of the guidelines and  are composed of state and local election officials, representatives from  the federal and private sectors, members of standards bodies, EAC  committee members, academic researchers, and other interested  parties.", "The working groups are led by EAC and NIST staff, and have more than  600 participants across the seven groups. EAC and NIST officials stated  that they have informed election officials and other stakeholders about  opportunities to participate on these working groups to share their ideas.  The four constituency working groups represent areas related to human  factors (accessibility and usability), cybersecurity, interoperability, and  testing and are charged with developing guidance or other deliverables  related to these four areas. For example, one objective for the human  factors working group is to identify gaps or issues with current  accessibility and usability requirements for voting. The election cycle  working groups\u2014focused on pre-election, election, and postelection  activities\u2014develop process models related to election activities. For  example, an objective for the election working group is to identify the  necessary functionality of election systems needed to administer early  voting and Election Day activities. The work by these seven working  groups will help inform the development of the voluntary guidelines\u2019  requirements. Table 4 shows the seven working groups and their  respective responsibilities.", "Some of the stakeholders we interviewed participate in these working  groups. For example, officials from six of the seven voting system  vendors we contacted said they have a representative on one or more of  the constituency working groups. Generally, these six vendors said the  working groups are a positive feature of the voluntary guidelines\u2019  development process. For example, officials from one vendor said they  have been encouraged by the amount of collaboration on the working  groups, and officials from another vendor said it is beneficial that vendors  are part of the working groups because they bring experience and  expertise with designing and developing various types of voting systems."], "subsections": []}, {"section_title": "Development of the VVSG 2.0 High-Level Principles and Guidelines", "paragraphs": ["In August 2017, the TGDC adopted high-level principles and supporting  guidelines for the VVSG 2.0. These principles and guidelines are  intended to provide system design goals and broad descriptions of the  functions that make up a voting system, in contrast to the VVSG 1.1  which focused more on device- or system-specific requirements. The  VVSG 2.0 will be supplemented by requirements consisting of technical  details voting system vendors can use to design devices that meet the  new guidelines. The supplemental requirements will also detail test  assertions for how the accredited test laboratories will validate that a  system complies with the requirements. One of the VVSG 2.0 principles,  for example, is that ballots and vote selections should be presented in a  clear, understandable way so that they can be marked, verified, and cast  by all voters. The corresponding guidelines for this principle focus on  ballots being perceivable, operable, and understandable. For example,  the guideline for perceivable ballots notes that default voting system  settings for displaying ballots should work for the widest range of voters  and allow voters to adjust settings and preferences to meet their needs.", "Another VVSG 2.0 principle is that the voting system should be designed  to support interoperability, including having voting devices that can  interface with each other. The corresponding guidelines for this principle  include using standard data formats and commercial off-the-shelf devices  if they meet applicable requirements. According to NIST officials, one  goal of the interoperability working group is to develop guidance that will  enable election equipment and interfacing software to interoperate more  easily and \u201cspeak the same language.\u201d NIST officials stated that this goal  is intended to allow vendors to build and certify system components  instead of a full voting system. These principles are designed to help  address some of the issues reported by stakeholders, such as the impact  of prescriptive requirements for ballot designs on vendor innovation and  the challenges encountered with component certification under the  current voluntary guidelines.", "Further, officials from the EAC told us that one key change with the VVSG  2.0 is that the EAC commissioners no longer have to approve changes to  the supplemental requirements and test assertions, which will instead be  vetted by the EAC\u2019s Board of Advisors and Standards Board. EAC  officials noted that this allows for greater flexibility to make improvements  to the requirements and testing process, including making changes in  response to technological advancements. Additionally, depending on the  situation, the new voluntary guidelines are intended to allow for more  streamlined testing and certification processes. For example, EAC  officials said that under the new guidelines, if there are modifications that  have been made to a voting system that has already been certified, the  changes can be tested without having the entire voting system go back  through the testing and certification process."], "subsections": []}, {"section_title": "Next Steps in Developing the VVSG 2.0", "paragraphs": ["According to EAC officials, the next steps in the VVSG 2.0 development  process are to share the high-level principles and guidelines with the  EAC\u2019s Board of Advisors and Standards Board for further vetting, provide  the public the opportunity to comment on them, and provide them to the  EAC commissioners for approval. Specifically, before final adoption of the  guidelines, both boards are to review and submit comments and  recommendations regarding the guidelines to the commissioners. EAC  officials anticipate that the EAC boards will likely review and pass  resolutions in support of the principles and guidelines in April 2018.  Following the board reviews, there will be a 90-day period for public  comment on the VVSG 2.0, as required by HAVA. The EAC hopes that  the time it typically takes to respond to public comments will be shorter  than for prior voluntary guidelines, due to the extensive feedback and  comments received and considered by the working groups during the  development phase. EAC officials anticipate that the EAC commissioners  will vote on the VVSG 2.0 principles and guidelines in August or  September 2018, and the VVSG 2.0 will be issued after they are  approved. According to EAC and NIST officials, the working groups have  begun developing the supplemental requirements for the new guidelines.  They said that the requirements are expected to be drafted by the  summer of 2018 and test assertions for most voting systems are  expected to be developed by the summer of 2019.", "EAC officials noted that it will likely take 12 to 24 months after the EAC  commissioners approve the new guidelines before they are ready for use.  EAC officials plan to submit to the EAC commissioners a range of  recommended dates to consider for implementation. They added that in  developing these dates, including when vendors will be required to test  new equipment against the updated guidelines, they must consider  various factors such as the time voting equipment vendors will need to  build their new equipment to VVSG 2.0, and reaccreditation of voting  system test laboratories to ensure they can test to VVSG 2.0. Because of  the lag between when the guidelines will be issued and when they will be  used for testing and certification, EAC officials stated that it is unlikely that  systems will be certified in time to be ready for use in the 2020 election.  However, these officials noted that they are available to meet with  vendors that would like to start developing equipment based on the new  guidelines."], "subsections": []}]}]}, {"section_title": "Agency and Third- Party Comments", "paragraphs": ["We provided a draft of this report to the EAC, NIST, and election offices in  the five local election jurisdictions that we selected and their respective  states for review and comment. The EAC, two jurisdictions, and two  states provided technical comments, which we incorporated in the report  as appropriate. NIST, three jurisdictions, and three states indicated that  they had no comments in e-mails received from March 1 through March  23, 2018.", "We are sending copies of this report to the EAC, NIST, election offices in  the five selected local jurisdictions and their respective states that  participated in our research, appropriate congressional committees and  members, and other interested parties. In addition, this report is available  at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions, please contact Rebecca Gambler  at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made significant contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report addresses the following questions:  1.  What types of voting equipment did local election jurisdictions use for  the 2016 general election, and what are jurisdiction perspectives on  equipment use and performance?  2.  What factors are considered when deciding whether to replace voting  equipment and what approaches have selected jurisdictions taken to  replace their equipment?  3.  What are selected stakeholders\u2019 perspectives on how federal voting  system guidelines affect the replacement and development of voting  equipment, and what actions has the Election Assistance Commission  (EAC) taken to update the guidelines?"], "subsections": [{"section_title": "Objective 1", "paragraphs": ["For our first objective, we conducted a web-based survey of officials from  a stratified random sample of 800 local election jurisdictions nationwide to  obtain information from the jurisdictions on the voting equipment used  during the 2016 general election and perspectives on equipment use and  performance. In total, we received 564 completed questionnaires for a  weighted response rate of 68 percent. We surveyed the officials about  the types of voting equipment they used, various characteristics of the  equipment used, their perspectives on the benefits and challenges they  experienced while using the equipment, and how satisfied they were with  its performance during the election.", "Overall, there are 10,340 local election jurisdictions nationwide that are  responsible for conducting elections. States can be divided into two  groups according to how they delegate election responsibilities to the  local election jurisdictions. One group is composed of 41 states that  delegate election responsibilities primarily to counties. We also included  the District of Columbia in this group of states. However, even within this  group there are some exceptions to how election responsibilities are  delegated. For example, there are no counties in Alaska, so the state  groups all of its Boroughs and Census Areas into four election regions;  and 6 states\u2014Illinois, Maryland, Missouri, Nevada, New York, and  Virginia\u2014delegate responsibilities to some cities independently from  counties. The group of 41 states and the District of Columbia contains  about one-fourth of the local election jurisdictions nationwide. The other  group is composed of 9 states that delegate election responsibilities to  subcounty governmental units, known by the U.S. Census Bureau as  Minor Civil Divisions (MCD). This group of states contains about three- fourths of the local election jurisdictions nationwide. The categorization of  the 50 states and the District of Columbia by how election responsibilities  are organized is as follows (states in bold delegate election  responsibilities to some cities independently from counties):", "County-level states: Alabama, Alaska (four election regions), Arizona,  Arkansas, California, Colorado, Delaware, the District of Columbia,  Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,  Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana,  Nebraska, Nevada, New Jersey, New Mexico, New York, North  Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania,  South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia,  Washington, West Virginia, and Wyoming", "MCD\u2013level states: Connecticut, Maine, Massachusetts, Michigan,  Minnesota, New Hampshire, Rhode Island, Vermont, and Wisconsin  While 27 percent of election jurisdictions nationwide are in states that  delegate election responsibilities primarily to counties, according to the  2010 Census, 89 percent of the U.S. population lived in these states. The  U.S. population distribution between the two state groups is shown in  table 5.", "The sampling unit for our survey was the geographically distinct local  election jurisdiction at the county, city, or MCD level of local government  (or, in Alaska, the election region). We constructed our nationwide sample  frame of all local election jurisdictions using 2010 decennial Census data  and information on local jurisdictions from state election office websites.  Census population data were available for all counties, county  equivalents, and MCDs.", "To obtain a representative sample that included a mix of both rural and  non-rural jurisdictions, we used a two-level stratified sampling method in  which the sample units, or jurisdictions, were broken out into rural and  non-rural strata. To do this, we used the U.S. Department of Agriculture\u2019s  Economic Research Service\u2019s Rural-Urban Continuum Code (RUCC)  system which classifies counties into a nine-category continuum based on  their characteristics and location relative to metropolitan areas. The  RUCC continuum coding scheme is shown in table 6.", "To assign a continuum code to each local election jurisdiction, we  matched the RUCC county code to each county in the population frame.  Cities that are independent local election jurisdictions and spread  geographically across one or more counties received the lowest  numbered code among the counties which contain them (i.e., most  urban). For independent cities that administer their own elections but are  contained geographically within a single county, the city received the  code assigned to the county. Where necessary, the parent state\u2019s 2010  decennial Census report was checked to make sure all counties that  included part of the independent city were identified. MCDs in New  England and the Midwest received the code of the parent county that  contained them. For our sampling purposes, the rural stratum was  defined as all local election jurisdictions with an RUCC code of 7, 8, or 9.  The non-rural stratum was defined as all local election jurisdictions with a  code of 1, 2, 3, 4, 5, or 6. Of the 10,340 local election jurisdictions  nationwide, 70 percent were classified as non-rural while 30 percent were  classified as rural.", "We selected a two-level stratified sample of 800 local election  jurisdictions. Using the RUCC codes, we allocated 600 sampling units, or  jurisdictions, to the non-rural stratum and 200 to the rural stratum. To  obtain a sample that also reflected the population distribution across  jurisdictions nationwide, we used the population of the local election  jurisdiction as the measure of unit size and selected the sample units  within each stratum with probability proportionate to population of the  local election jurisdiction, without replacement. We used jurisdiction  population size, rather than the number of eligible or registered voters,  because these Census data were readily available for all counties and  MCDs nationwide. Because the sample was selected with probability  proportionate to population size, any jurisdiction (county or MCD) with  more than about 225,000 people was selected with certainty. Table 7  shows the breakout of jurisdictions by population size, the total population  within each size grouping, and the number of jurisdictions sampled.", "After selecting the units to be included in our survey sample, we obtained  contact information for the chief election official within the jurisdictions  selected. To do this, we first collected contact information for local  election jurisdictions from state election office websites and other publicly  available sources. We then called the jurisdiction offices directly to  confirm the accuracy of the information and the appropriate official and e- mail address to which the survey URL and the respondent\u2019s login  information for the questionnaire should be sent. We launched our web- based local election jurisdiction survey on March 27, 2017, and made it  available to respondents to complete online through July 14, 2017. Log in  information to the survey was e-mailed to the chief election official of each  sampled jurisdiction. Between April 4, 2017, and July 10, 2017, we  conducted follow-up with nonrespondents by phone and e-mail. During  this follow-up, we learned that some MCDs in Minnesota contract with  their respective counties to carry out election administration  responsibilities, including those concerning the use of voting equipment.  In these cases, we reassigned and sent the questionnaire for the  particular MCD to the appropriate county election official for completion.  Finally, we adjusted the sampling weights to compensate for  nonresponse using weighting classes within each stratum that were  based upon population size of the jurisdictions.", "All sample surveys are subject to sampling error\u2014that is, the extent to  which the survey results differ from what would have been obtained if the  whole population had been observed. Because we followed a probability  procedure based on random selections, our sample is only one of a large  number of samples that we might have drawn. As each sample could  have provided different estimates, we express our confidence in the  precision of our particular sample\u2019s results as a 95 percent confidence  interval. This is the interval that would contain the actual population value  for 95 percent of the samples we could have drawn. As a result, we are  95 percent confident that each of the confidence intervals based on our  web-based survey includes the true values in the sample population.", "In addition to the reported sampling errors, the practical difficulties of  conducting any survey may introduce other types of errors, commonly  referred to as nonsampling errors. For example, differences in how a  particular question is interpreted, the sources of information available to  respondents, or the types of people who do not respond can introduce  unwanted variability into the survey results. We took numerous steps in  questionnaire development, data collection, and the editing and analysis  of the survey data to minimize nonsampling errors. For example, to inform  the development of our questionnaire, we reviewed existing reports and  studies about voting equipment and elections, such as those by various  national public policy research organizations and professional  associations of state and local officials involved in election administration,  as well as previous GAO surveys and work related to this issue area. In  addition, we interviewed election subject matter experts and  representatives from organizations in the field of election administration  and voting equipment to obtain their views and perspectives on potential  issues and subject areas to consider covering in our questionnaire. We  also pretested the draft questionnaire by telephone with officials in 4 local  election jurisdictions (3 counties and 1 MCD) of various sizes in 4 states  and had the draft questionnaire reviewed by two election experts. We  used these pretests and reviews to further refine our questions, develop  new questions, clarify any ambiguous portions of the questionnaire, and  identify any potentially biased questions, and made revisions, as  necessary. Further, during our analysis of the responses, we found that  due to a higher level of nonresponse by very small jurisdictions of 2,500  persons or less, some national-level estimates that included responses  from jurisdictions of all sizes had wider than desired confidence intervals.  To improve the precision of these national-level estimates, we  subsequently excluded the very small jurisdictions of 2,500 persons or  less from our analysis. Computer analyses were conducted to identify any  inconsistencies in response patterns or other indications of questionnaire  response errors. All computer syntax was peer reviewed and verified by  separate programmers to ensure that the syntax had been written and  executed correctly.", "Unless noted otherwise, the point estimates we report are national-level  point estimates representing the experiences, views, and opinions of all  local election jurisdictions nationwide with populations greater than 2,500.  We also provide some point estimates for jurisdiction population  subgroups, such as large jurisdictions (greater than 100,000 persons),  medium jurisdictions (25,001 to 100,000 persons), and small jurisdictions  (2,501 to 25,000 persons), and jurisdictions that used a particular type of  voting equipment, in cases where statistically significant differences exist  between the subgroups that may be of interest. The jurisdictions we  surveyed were selected with probability proportionate to population size,  so rather than expressing the point estimates in terms of the percentage  of jurisdictions nationwide that had a specified characteristic, we express  the point estimates for the survey responses in terms of the percentage of  the population nationwide that resides within jurisdictions that had a  specified characteristic. Similarly, in instances where we report point  estimates for jurisdiction subgroups, we express the point estimate in  terms of the percentage of the population that resides within jurisdictions  of that respective subgroup that had a specified characteristic."], "subsections": []}, {"section_title": "Objective 2", "paragraphs": ["For our second objective, we used our local election jurisdiction survey as  described above to obtain information from jurisdictions about the factors  they consider when determining whether to replace their voting  equipment. In addition to the local election jurisdiction survey, we also  conducted a web-based survey of the state-level election offices in the 50  states and the District of Columbia about issues pertaining to the states\u2019  role in selecting and acquiring voting equipment, including the factors  considered when determining whether to replace voting equipment. In  total, we obtained 46 responses (a 90 percent response rate). We took  the same steps to develop the state questionnaire as we did in  developing the local election jurisdiction questionnaire described above.  We conducted pretests of our draft state questionnaire by telephone with  election officials of 4 states with varying election system characteristics  such as type of voting equipment used, population size, use of federal  voting equipment certification processes, and age of equipment, among  other characteristics. We also had the draft questionnaire reviewed by  two election experts. We used these pretests and reviews to help further  refine our questions, develop new questions, clarify any ambiguous  portions of the survey, and identify any potentially biased questions, and  made revisions, as necessary.", "Prior to fielding our state survey, we contacted the secretaries of state or  other responsible state-level officials, as well as officials from the District  of Columbia, to confirm the contact information for the director of  elections or comparable official for their respective state. We launched  our web-based state survey on April 6, 2017, and made it available to  respondents to complete online through May 19, 2017. Log-in information  to the survey was e-mailed to directors of elections or comparable  officials. Between April 12, 2017, and May 16, 2017, we conducted follow- up with nonrespondents by phone and e-mail. The total number of  responses to individual questions may be fewer than 46, depending upon  how many respondents were eligible or chose to respond to a particular  question. For example, survey respondents who indicated that their state  did not have a role in determining whether to replace voting equipment  were directed to skip all subsequent questions related to the factors  considered when determining whether to replace equipment.", "Because this survey was not a sample survey, there are no sampling  errors. However, the practical difficulties of conducting any survey may  introduce nonsampling errors. For example, differences in how a  particular question is interpreted, the sources of information available to  respondents, or the types of people who do not respond can introduce  unwanted variability into the survey results. We included steps in both the  data collection and data analysis stages for the purpose of minimizing  such nonsampling errors. For example, we examined the survey results  and performed computer analyses to identify inconsistencies and other  indications of error. Where these occurred, survey respondents were  contacted to provide clarification and the response was modified to reflect  the revised information. A second, independent analyst checked the  accuracy of all computer analyses. The scope of this work did not include  verifying states\u2019 survey responses with local election officials.", "For additional perspectives and context on the factors considered by  jurisdictions and states when replacing voting equipment, we also used  our reviews of existing reports and studies about voting equipment and  elections and interviews with election subject matter experts, including  representatives from nongovernmental research and other organizations  involved in the field of election administration and voting equipment. For  our review of existing reports and studies, we reviewed literature covering  the period from 2005 through 2017 including general news, trade and  industry articles, association and nonprofit publications, and government  reports related to voting system technology, specifically on the  replacement and development of voting systems and voting system  standards or guidelines. For our interviews, we identified and selected  nine subject matter experts based on our review of reports and studies on  voting equipment, their expertise and work in this area, and  recommendations from these and other researchers. These subject  matter experts represented the following organizations: (1) Brennan  Center for Justice, (2) National Conference of State Legislatures, (3)  National Association of Secretaries of State, (4) National Association of  Counties, (5) National Association of State Election Directors, (6) Verified  Voting, (7) Kennesaw State University Center for Election Systems, (8)  Center for Election Innovation and Research, and (9) Election Data  Services, Inc. The information we obtained from these experts cannot be  generalized; however, these experts provided additional perspectives and  information on the factors considered by jurisdictions and states when  replacing voting equipment.", "In addition, we interviewed election officials from five local jurisdictions\u2014 Los Angeles County, California; Travis County, Texas; Anne Arundel  County, Maryland; Lafayette County, Florida; and Beaver County, Utah\u2014 that replaced their voting equipment between 2012 and 2016 or plan to  replace their equipment in time for the 2020 general election to learn  about the approaches and practices they used and obtain their  perspectives on the replacement process. We selected these jurisdictions  to reflect variation in, to the extent possible, population of jurisdiction, type  of voting equipment replaced and selected, state involvement in selecting  and funding voting equipment, and particular practices used to replace  equipment (e.g., self-designing equipment, leasing equipment), among  other factors. For each jurisdiction, we interviewed\u2014on site or by  phone\u2014local election officials, state election officials in the jurisdiction\u2019s  state, and individuals who have served as poll workers at the jurisdiction\u2019s  polling locations if applicable. While these five jurisdictions are not  representative of all local election jurisdictions nationwide that replaced or  plan to replace their voting equipment, they provide examples of various  approaches for replacing voting equipment and perspectives on key  issues with replacing equipment. We corroborated various information we  obtained through these interviews by reviewing relevant state statutes  and documentation that these jurisdictions provided to us, such as  postelection reports, voting system studies, expenditure summaries, and  solicitations for vendor proposals to provide voting equipment and  services."], "subsections": []}, {"section_title": "Objective 3", "paragraphs": ["To address objective 3, we used responses to our survey of state election  officials and interviews with seven selected voting system vendors, the  nine selected subject matter experts mentioned above, and officials from  the EAC and National Institute of Standards and Technology (NIST) to  obtain perspectives on how federal voting system guidelines and their  associated testing and certification processes affect the replacement and  development of voting equipment. We obtained perspectives on the most  recent federal voluntary voting system guidelines (Voluntary Voting  System Guidelines, versions 1.0 and 1.1) because they are currently  being used to federally test and certify voting systems. We selected the  seven voting system vendors based on the prevalence of jurisdictions\u2019  use of their equipment, and to obtain variation in the type of voting system  manufactured, such as optical scanners and direct recording electronic  voting equipment, and whether systems were federally certified, under  test to be certified, or not certified. We also wanted to include a  company that plans to enter the voting system market and potentially  submit its product for federal certification. Based on these criteria, we  selected the following voting equipment vendors\u2014Dominion Voting  Systems, DFM Associates, Election Systems and Software, Everyone  Counts, Hart InterCivic, Open Source Election Technology Institute, and  Unisyn Voting Solutions.", "To determine the actions taken or planned by the EAC to update the  federal voluntary voting system guidelines, we reviewed EAC and NIST  documents and interviewed officials from the EAC and NIST about these  actions. We also interviewed the seven selected voting system vendors  about their involvement, if any, in updating the guidelines and their  perspectives on these actions.", "The perspectives of the seven voting system vendors and nine subject  matter experts are not generalizable but provide examples of views on  the federal guidelines and their associated testing and certification  processes from a range of stakeholders.", "We conducted this performance audit from June 2016 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Categories of State Requirements for Federal Certification and Testing of Voting Systems", "paragraphs": ["We reviewed state statutes and regulations as of December 2017  regarding the testing and certification of voting systems to describe the  extent to which state laws and regulations reference federal voting  system certification or testing standards and the extent to which states  require the use of these standards. As shown in table 8 below, we  grouped the state laws into three categories for the purposes of this  report: (1) requires full federal certification; (2) requires testing by a  federally accredited laboratory and/or testing to federal voting system  standards; and (3) no federal requirements. Category 2 includes states  that use some aspect of the federal testing and certification program but  do not require full certification. A number of states in this category require  both testing by a federally accredited laboratory and testing to federal  standards, but we included in this category states that had either  requirement in state law or regulation. Category 3 includes some states  that utilize the federal certification or testing standards to some extent but  that do not require certification or testing to meet federal standards by law  or regulation. We then sent our categorization to state officials in the 50  states and the District of Columbia and incorporated changes that we  received from those officials."], "subsections": []}, {"section_title": "Appendix III: Results of GAO\u2019s Survey of Local Election Jurisdictions on Voting Equipment", "paragraphs": ["To determine the types of voting equipment local election jurisdictions  used for the 2016 general election, jurisdiction perspectives on equipment  use and performance, and the factors jurisdictions consider when  deciding whether to replace voting equipment, we conducted a web- based survey of officials from a stratified random sample of 800 local  election jurisdictions nationwide. In total, we received 564 completed  questionnaires for a weighted response rate of 68 percent. The  questions we asked in our survey are shown below. Our survey was  composed of closed- and open-ended questions. In this appendix, we  include all survey questions and results of responses to the closed-ended  questions; we do not provide information on responses provided to open- ended questions.", "The tables below represent the estimated percentages of the jurisdictions\u2019  responses to the closed-ended questions. The estimates we report are  rounded to the nearest percentage point and are national-level point  estimates representing the experiences, views, and opinions of all local  election jurisdictions nationwide with populations greater than 2,500.  Because our estimates are from a generalizable sample, we express our  confidence in the precision of our particular estimates as 95 percent  confidence intervals which are also provided in the tables. As the  jurisdictions we surveyed were selected with probability proportionate to  population size, rather than expressing the point estimates in terms of the  percentage of jurisdictions nationwide that had a specified characteristic,  we express the point estimates for the survey responses in terms of the  percentage of the population nationwide that resides within jurisdictions  that had a specified characteristic. For a more detailed discussion of our  survey methodology, see appendix I."], "subsections": [{"section_title": "Survey Contact", "paragraphs": ["Question 1 (open-ended question): What is the name, title, telephone  number, and e-mail address of the primary person completing this  questionnaire so that we may contact someone if we need to clarify any  responses?"], "subsections": []}, {"section_title": "Use of Commercial Off-the-Shelf (COTS) Components", "paragraphs": ["The Election Assistance Commission\u2019s (EAC) Voluntary Voting System  Guidelines, Version 1.1, defines commercial off-the-shelf (COTS)  products as software, firmware, devices, or components that are used in  the United States by many different people or organizations for many  different applications other than certified voting systems and are  incorporated into the voting system with no manufacturer- or application- specific modification. Examples of COTS components include hardware  that can be purchased commercially (e.g., tablet devices, scanners,  printers, memory cards or chips, etc.) and integrated as part of voting  equipment. The next series of questions asks about your jurisdiction\u2019s  integration of COTS components into voting equipment that was acquired  from a vendor or self-designed by your jurisdiction. For the purpose of  questions 30-36 (the next 7 questions), the term \u201cvoting equipment\u201d refers  only to the equipment your jurisdiction used to cast and count votes."], "subsections": []}, {"section_title": "Additional Comments", "paragraphs": ["Question 58 (open-ended question): If you have any additional comments  concerning any of the topics covered in this questionnaire, please use the  space below."], "subsections": []}]}, {"section_title": "Appendix IV: Results of GAO\u2019s Survey of States on Voting Equipment", "paragraphs": ["To obtain information on the types of voting equipment used in the 2016  general election and the factors states consider when deciding whether to  replace voting equipment, we conducted a web-based survey of state- level election offices in the 50 states and the District of Columbia. The  questions we asked in our survey of state election offices are shown  below. Our survey was composed of closed- and open-ended questions.  In this appendix, we include all survey questions and results of responses  to the closed-ended questions; we do not provide information on  responses provided to open-ended questions that required manually  entered text responses. The tables below represent the frequencies of  state responses to the questions. We received surveys from 46 states (a  90 percent response rate), while 5 states did not respond. However, the  total number of responses to individual questions may be fewer than 46,  depending upon how many states were eligible or chose to respond to a  particular question. For a more detailed discussion of our survey  methodology, see appendix I."], "subsections": [{"section_title": "Survey Contact", "paragraphs": ["Question 1 (open-ended question): What is the name, title, telephone  number, and e-mail address of the primary person completing this  questionnaire so that we may contact someone if we need to clarify any  responses?"], "subsections": []}, {"section_title": "Additional Comments", "paragraphs": ["Question 46 (open-ended question): If you have any additional comments  concerning any of the topics covered in this questionnaire, please use the  space below."], "subsections": []}]}, {"section_title": "Appendix V: Approaches to Voting Equipment Replacement in Selected Local Election Jurisdictions", "paragraphs": ["The five local election jurisdictions we selected to include in our review\u2014 Los Angeles County, California; Travis County, Texas; Anne Arundel  County, Maryland; Lafayette County, Florida; and Beaver County, Utah\u2014 used varying approaches in replacing their voting equipment. Election  officials in these jurisdictions and in their respective state election offices  provided a range of perspectives on their experiences and the  replacement process."], "subsections": [{"section_title": "Los Angeles County, California", "paragraphs": ["Los Angeles County is the most populous local election jurisdiction in the  nation. It currently uses hand-marked paper ballots that are tallied using  central count optical scan equipment, which has been in place since  2003. Prior to 2003 and dating back to 1968, these same ballots were  used for its punch card voting system. The county is in the process of  self-designing its own voting system, which is expected to consist of  electronic ballot marking devices (BMDs) that produce paper ballots to be  tallied on central count digital scanners, and plans to fully implement it in  2020."], "subsections": [{"section_title": "Key Factors That Influenced the County\u2019s Decision to Replace Its Voting Equipment", "paragraphs": ["According to county officials, the overall performance and features of the  county\u2019s voting equipment and the need for the equipment to meet  potential state and local requirements were among the key factors that  influenced the county\u2019s decision to begin the process of replacing its  optical scan system. County election officials stated that while the  county\u2019s current voting equipment is reliable, accurate, and familiar to  voters, the design and the age of the equipment do not offer the technical  and functional flexibility necessary to continue to accommodate potential  state regulatory changes and the growing and increasingly diverse county  electorate. For example, officials stated that the current equipment may  not be able to effectively accommodate state mandates that may require  changes to ballot formats or length. Specifically, officials said that state  legislation enacted in 2015 requires many cities within Los Angeles  County to consolidate their elections with the county\u2019s by 2022, and as a  result, the number of races and measures on the ballot may exceed the  12-page capacity that the current equipment can accommodate. They  also noted that the technical limitations of the equipment present  challenges to providing voters with greater voting options, such as early  voting or the use of vote centers on Election Day, and features that  enhance accessibility and ease of use."], "subsections": []}, {"section_title": "Planned New Voting Equipment and In-Person Voting Process", "paragraphs": ["The county has developed a design concept and specifications for its new  voting equipment and is in the process of soliciting and selecting vendors  to manufacture it. It has acquired several functional prototypes of the  current design for the new equipment and has outlined the planned in- person voting process using this equipment, as shown in figure 11.  According to county officials, the equipment specifications and in-person  voting process have not been finalized and continue to be refined.", "County officials stated that the current design concept for the new  equipment is intended to provide greater flexibility in administering  elections, provide a more user-friendly and accessible voting experience,  enhance accuracy and auditability, and could potentially lower costs for  system upgrades if developed as planned:", "Greater flexibility for administering elections. According to county  election officials, the new equipment is designed to provide more  flexibility for administering elections and to respond to changing  legislative provisions on conducting elections. For example, the  California Voter\u2019s Choice Act, which was enacted in September 2016,  generally authorizes Los Angeles County to conduct vote center  elections beginning in 2020 if certain conditions are met. Officials  stated that the proposed new equipment is expected to facilitate the  use of vote centers because it would have the capability to  electronically retrieve a voter\u2019s ballot regardless of the precinct in  which the voter is registered. They also noted that the BMD would  allow the county to have ballots with multiple formats and a large  number of races.", "A more user-friendly and accessible voting experience. County  election officials stated that the BMD is intended to provide the ease  of use of a touch screen interface, which would incorporate features  such as scrolling and tapping that are familiar to voters who use  mobile devices. The BMD would also allow voters to select from  English or the 11 other languages the county plans to support and is  designed to include accessibility devices, such as a headset and  tactile keypad for voters with vision impairments and other  disabilities. Voters would be able to make their selections and cast  their paper ballot without having to handle the ballot. Officials stated  that these features are expected to allow voters with special needs to  use the same equipment as all other voters and cast their votes  independently and privately. The county\u2019s proposed design also  includes an interactive sample ballot which voters can access from  their computers or mobile devices to pre-mark their vote selections,  convert to a Quick Response (QR) code, and then scan into the voting  equipment to populate their ballots. Officials stated that this feature  may help reduce lines by decreasing the time it takes for voters to  mark their ballots once they reach the BMD.", "Enhance accuracy and auditability. The new voting equipment is  designed to record vote selections on paper in human readable text.  County officials stated that this is expected to more clearly capture  voter intent than manually marked ballots, reduce the time and  resources needed by county staff to interpret voters\u2019 intent, and  increase the accuracy of election results and public trust in the voting  process. Officials stated that the new equipment is also expected to  improve the county\u2019s auditing capabilities. For example, the digital  scanner is designed to allow the county to efficiently audit the results  of individual races and measures, including conducting risk-limiting  audits in which a specified number of ballots cast for a particular race  are reviewed to confirm the election result for that race. According to  officials, the county\u2019s current equipment tallies ballots by precinct and  does not keep an electronic record of the specific votes cast on  individual ballots. As such, it provides the capability of auditing the  results by precinct but not individual races at the ballot level.", "Easier and less costly upgrades. According to county officials, the  design of the voting equipment is intended to be modular so that key  components can be replaced individually. Officials stated that this is  intended to allow the county to more easily update equipment and  incorporate technological advances because it will be able to swap  out components if more affordable, better technology becomes  available on the market. Officials said that the cost of replacing  equipment parts is expected to be lower than with traditional voting  systems."], "subsections": []}, {"section_title": "Process for Developing the New Voting Equipment", "paragraphs": ["Los Angeles County\u2019s Voting Systems Assessment Project (VSAP) was  established by the Registrar-Recorder/County Clerk in 2009 to help guide  the development and acquisition of the county\u2019s new voting equipment.  According to county election officials, the VSAP has taken a user- centered approach to the design of the new voting equipment that  prioritizes the specific needs and expectations of the voters and  incorporates the requirements of county election administrators. Officials  also stated that they sought to have a transparent design process that  included voter input and participation to help promote public confidence in  the new voting equipment. The project has five phases\u2014(1) public  opinion and stakeholder baseline research, (2) establishment of voting  system guiding principles, (3) system design and engineering, (4)  manufacturing and certification, and (5) phased implementation. The  county is currently in the manufacturing and certification phase. Officials  reported that about $19 million has been expended to develop the new  voting equipment as of December 31, 2017. Officials also stated that after  the new system is certified, an additional $49 million in state funds from  the Voting Modernization Bond Act of 2002 will be available to the  county. Table 108 describes the VSAP phases, their associated expenditures and funding sources, and examples of key actions taken or  planned in each phase.", "County officials told us they plan to retain ownership of the intellectual  property rights of the new voting equipment so that the system remains  publicly owned and not proprietary like traditional vendor equipment. The  county also plans to use an open source technology framework wherein  the source code for the system software is available for review and use  by other election jurisdictions and entities by license. According to  county election officials, this will allow other jurisdictions to, for example,  have similar systems manufactured for their use. Officials stated that  having the county own the system design on behalf of the public and  using an open source software model are expected to provide greater  flexibility for any jurisdictions using the software to cost-effectively make  modifications to the equipment and adapt it to their varying needs and  requirements. For example, jurisdictions would no longer be limited to  relying on a single manufacturer if they would like to make an  enhancement to the equipment or replace parts.", "Officials noted that there is currently no licensing model or institutional  framework in use for a publicly owned elections system. However, they  stated that open source technology solutions in other industries have  been successfully implemented and administered, and the county\u2019s new  system software could potentially be licensed and administered in a  similar manner. In addition, county officials stated that they have outlined  a clear business plan in the Request for Proposal (RFP) and during  various information sessions with vendors which officials believe will help  incentivize them to participate in building the system without potentially  owning the equipment or its intellectual property rights. Specifically,  officials noted that vendors would primarily receive revenue from the  services they would provide, such as building the equipment and software  platform and providing ongoing maintenance and support, rather than  from selling the equipment itself.", "County officials stated that implementing the new voting equipment and  moving to vote center elections in 2020 are changes to administering  elections for the county that will require a substantial educational and  informational effort. Officials noted that they have involved numerous  stakeholders throughout the VSAP process to help effectively prepare for  these changes and plan to allocate resources to educate voters and train  poll workers. Some of these efforts are already underway. For example,  the county has posted information and videos on the planned new voting  equipment and process on the VSAP website and has been using the  BMD prototype for public demonstrations and internal training on the new  voting process."], "subsections": []}]}, {"section_title": "Travis County, Texas", "paragraphs": ["Travis County currently uses direct recording electronic (DRE) equipment  without a voter-verified paper audit trail (VVPAT), which has been in place  since 2001. The county also has conducted vote center elections since  2011. Starting in 2009, the county took steps to design and build its own  equipment, including developing a concept for a DRE with a VVPAT that  centered on system security and auditability. In September 2017, the  county decided to no longer pursue building the voting equipment and  plans to purchase equipment from a vendor. The county plans to have the  new equipment in place for the 2020 election."], "subsections": [{"section_title": "Key Factors That Influenced the County\u2019s Decision to Replace Its Voting Equipment", "paragraphs": ["According to county officials, the overall performance and features of the  county\u2019s voting equipment was the primary reason for deciding to begin  the process of replacing its DREs. In 2009, the Travis County Clerk  convened an Election Study Group to assess the county\u2019s current  equipment and make recommendations for future equipment. This group  was composed of 45 members representing election officials and  workers, advocacy organizations, voters with disabilities, computer  security experts, academics, and other segments of the community.  According to the report that the group issued, most members expressed  confidence in the way Travis County conducted elections and in the  accuracy of its current equipment. However, they also expressed  concerns over the equipment\u2019s age and the lack of a paper trail, which  they said decreased voter trust in the system and increased the risk of  election equipment tampering. The group noted that the Travis County  Clerk\u2019s Office\u2019s use of safeguards and security and testing procedures  beyond those required by law helped minimize the risk of tampering. The  report recommended that the county move toward using equipment that  offers an electronic count and paper record as soon as an alternative that  met the county\u2019s requirements became available."], "subsections": []}, {"section_title": "Selection and Acquisition of New Voting Equipment", "paragraphs": [], "subsections": [{"section_title": "Development of Self-Designed Voting Equipment", "paragraphs": ["The Election Study Group outlined 19 key requirements that Travis  County\u2019s new equipment should meet. The requirements included, for  example, producing a paper voting record that can be verified by the voter  and be used to independently, transparently, and efficiently reconcile an  electronic tally in an audit or recount; allowing voters with special needs  to vote using the same equipment as other voters; enabling early voting  and the use of vote centers; and having reasonable purchase,  operational, and system upgrade costs. The group found that no  equipment on the market in 2009 met the needs of the county and, as a  result, the county began exploring options to design its own equipment.  Officials stated that this effort was also intended to provide an alternative  to the current vendor model that could reduce maintenance costs and  annual licensing fees that are incurred with proprietary systems.", "In 2012, the county Clerk convened a group of election administrators,  usability experts, and academic experts in computer science and  statistics, and through a series of discussion sessions, developed the  concept for the county\u2019s new system, which they named STAR (Secure,  Transparent, Auditable, and Reliable) Vote. STAR-Vote was designed to  be centered around a DRE that produces verifiable and auditable paper  records. At the polling place, voters would make their selections on a  DRE device with a commercial off-the-shelf (COTS) tablet, which would  also be equipped with an auditory interface for visually impaired voters  and other features to assist individuals with special needs. The voters\u2019  selections would be encrypted and stored on the internally networked  DRE devices, and voters would also receive a printed paper record with  their choices. After reviewing the paper record and confirming their  selections, voters would feed the paper record into a ballot box scanner to  cast their vote. Once the polls closed, the devices storing the votes  would be transported to receiving stations, where voting data are  transmitted for electronic tabulation. The paper records would be  available for audit or recount purposes.", "In addition, county officials stated that the equipment\u2019s proposed  encryption technology was designed to potentially allow for the following  features without revealing any individual\u2019s vote:", "Voters would receive a receipt that was attached to their paper  records at the polling place and could go online after Election Day and  use a code on the receipt to verify that their ballots had been cast and  counted.", "Third parties, such as the League of Women Voters or political  parties, could access encrypted voting data to verify that the results  the county had reported matched vote totals they had independently  derived from the data.", "The county could conduct risk-limiting audits to verify the consistency  between the electronic and printed vote records and test the accuracy  of the reported election outcomes. Audits could be conducted on  individual ballots or races if needed.", "In June 2015, the county issued a Request for Information for STAR-Vote  to solicit input on the design, development, implementation, and  maintenance of the equipment. Based on information gathered from the  request, it issued an RFP in October 2016 to solicit proposals from voting  system vendors and others for the development and implementation of  key components of the equipment for in-person voting. The county also  issued a Statement of Intent for the equipment to inform interested parties  of the county\u2019s planned approach for the long-term management and  support of STAR-Vote. According to these documents, the county  planned to own the intellectual property rights for the equipment and  provide open source software for its system to the elections community  under a licensing agreement, which would allow other jurisdictions to use  similar equipment. The Statement of Intent described the formation of a  nonprofit organization to manage and support STAR-Vote and sought $25  million in funding from interested parties to complete the development of  the open source software components, support the organization\u2019s  operating budget for the first 5 years, and provide a cash reserve. The  county planned to use these funding commitments and local budget  appropriations to develop, build, and deploy the equipment.", "In September 2017, the county announced that it had decided to no  longer pursue developing and building STAR-Vote. The county stated that  it received 12 proposals in response to the RFP but they were not  sufficient to build a complete voting system. According to county officials,  none of the proposals included the election management system for the  equipment that would handle ballot definition and the tallying of results,  among other related tasks. In addition, officials stated that they received  limited responses to their solicitation for financial commitments in the  Statement of Intent and thus lacked the necessary funding to develop and  build the equipment. Officials noted that the open source software  platform they had envisioned was seen by voting equipment vendors as a  low-revenue business model in the current elections marketplace. They  added that potential participants in a STAR-Vote entity may not have had  a clear concept of how its business model might work, which they said  was perhaps due to the county\u2019s more limited focus on this aspect when  they were initially designing the system. Given these obstacles and the  age of the county\u2019s current equipment, the county decided that it needed  to move toward acquiring more immediately deliverable voting equipment  through a voting system vendor."], "subsections": []}, {"section_title": "Selection and Acquisition of New Voting Equipment from a Vendor", "paragraphs": ["The county has incorporated some of the features of STAR-Vote into its  requirements for new voting equipment. According to county officials, the  county plans to acquire either DREs or ballot marking devices with  precinct count digital scanners because, in their view, they are accurate  (e.g., prevent voter errors, such as overvotes or stray marks on the ballot,  and minimize questions about voter intent), allow individuals with  disabilities to vote on the same equipment as other voters, support vote  center elections, and offer fast reporting of election results. The county  also plans to require that its next voting equipment have the following  features:", "A voter-verified, paper list of choices for recount purposes. County  officials stated that the equipment must produce printed paper records  that can be tallied and connected with electronic voting records  through an automated process. This electronic connectivity would  allow paper-ballot recounts to be conducted on individual races.", "Security features that include support for third party verification of  results and better postelection audits. According to county officials,  the equipment they acquire must allow for third parties to  independently verify reported election results and must support risk- limiting audits.", "Officials stated that they believe there is or will be equipment on the  market in the near future that could support these features. They noted  that they are also prepared to work with vendors to customize existing  equipment to meet the county\u2019s requirements if needed, acknowledging  that such additions may increase expenses or require additional time to  recertify parts of the voting system. County officials estimate that the new  equipment will cost about $16 million and stated that acquisition will be  funded through local bonds.", "County officials said they would like to have the new equipment in place  for the 2020 election, which would require them to start deploying it no  later than May 2019. The county issued an RFP for the system in  November 2017, and officials stated that they plan to assemble a group of  stakeholders similar to those who participated in the 2009 Election Study  Group, as well as the individuals who designed STAR-Vote, to help  evaluate the proposals received. Officials noted that their current  equipment is functioning and robust, but that the new equipment must be  deployed before the current equipment begins to degrade. In addition,  they stated that the May 2019 implementation date is the latest possible  date in order to allow sufficient time to educate voters and train county  staff and election judges on the new equipment before using it in the 2020  election."], "subsections": []}]}]}, {"section_title": "Anne Arundel County, Maryland", "paragraphs": ["Anne Arundel County had used DREs without a VVPAT since 2004 and  replaced its equipment in 2016 with a system in which voters manually  mark paper ballots and insert them into precinct count digital scanners  which then count them. Maryland requires the use of uniform voting  equipment in polling places statewide and the state and counties each  pay 50 percent of the costs of acquiring equipment. In our state survey,  Maryland officials reported that the state determines when voting  equipment is to be acquired and selects the type and model of voting  equipment that local jurisdictions use."], "subsections": [{"section_title": "Key Factors That Influenced Maryland\u2019s Decision to Replace Its Voting Equipment", "paragraphs": ["According to the Maryland State Board of Elections (SBE) and Anne  Arundel County Board of Elections officials, the need for voting equipment  to meet state requirements, the overall performance and features of the  equipment, and the ability to maintain the equipment were among the key  factors that influenced the state\u2019s decision to replace its equipment.", "Specifically, in 2007, Maryland enacted a law that prohibited the use of a  voting system unless the SBE determined that the system provides a  voter-verifiable paper record, thereby requiring the state\u2019s DREs to be  replaced. SBE officials said that the passage of the new law was driven  primarily by a push from voting advocates to move to new equipment that  used paper ballots and provided a verifiable paper trail. Although the law  was enacted in 2007, state funding for the new equipment was not  available until 2014 due to budgetary constraints.", "While the change in state law was the main reason for replacing its voting  equipment, both SBE and Anne Arundel County officials noted that the  state\u2019s previous DRE equipment was nearing the end of its life cycle and  various problems had begun to occur more frequently. For example, SBE  officials said that nonresponsive touch screens and battery unit failures  became more common with the equipment used in the state. In addition,  Anne Arundel County officials stated that while their equipment generally  performed satisfactorily, some of the touch screens had begun to degrade  and develop calibration issues, which resulted in the appearance of  incorrectly recording voters\u2019 selections. In addition, county officials said  that the equipment could no longer support certain software or security  updates, and replacement parts were challenging to acquire."], "subsections": []}, {"section_title": "Selection and Acquisition of New Voting Equipment", "paragraphs": ["According to SBE officials, state law specifically required the purchase of  precinct count scanners so the board did not consider other types of  voting equipment. The SBE issued an RFP in July 2014 and four voting  system vendors submitted proposals. The SBE formed an evaluation  committee to analyze the technical and financial details of the proposals.  According to SBE officials, the committee\u2019s members included a state  official with expertise on voting systems, a county election director, a  county technical specialist, and election experts and researchers, among  others. Anne Arundel County election officials stated that the SBE also  established various subcommittees to solicit input from county officials as  the state made its selection. They said that relevant local elections staff  members were involved in the selection process and that in their view, the  process had worked well.", "According to SBE officials, in addition to assessing the vendors\u2019  proposals, the evaluation committee worked with the University of  Baltimore to perform usability and accessibility testing on the equipment  under consideration. The committee also hosted a public demonstration  to collect feedback on such areas as ease of use and confidence that  votes were accurately cast. Officials stated that after conducting its  assessment of the equipment, the committee presented its findings to the  SBE, and in October 2014, the board selected the voting equipment to be  acquired based on the committee\u2019s recommendation.", "Maryland requires equipment to be certified by the EAC and the SBE  before use in the state. The selected equipment had been certified by the  EAC in July 2014 and was certified by the SBE in December 2014. As  part of the certification process, the SBE tested the equipment to ensure  that it met requirements in the Maryland elections code, including  simulating primary and general elections using ballots typically used by  jurisdictions in the state, and reviewed the findings from the public  demonstration and usability testing performed during the selection  process.", "The SBE decided to lease rather than purchase the equipment for a  number of reasons. Specifically, SBE officials said that leasing provided  increased flexibility to update or replace equipment more frequently and  had lower upfront costs. In addition, the state did not want to buy new  equipment until the implementation of updated federal guidelines. Under  the current contract to lease the digital scan equipment, payments are  made to the vendor on a quarterly basis. According to SBE officials, the  current payment to the vendor for leasing the digital scan equipment  statewide is approximately $1.1 million per quarter.", "SBE officials said that the process to acquire new equipment is inherently  challenging, but in their view, the process generally went well. Knowing  what type of equipment the state needed to acquire simplified the process  and reduced the number of proposals that officials needed to review.  Nevertheless, they noted that the process took more of their time and  resources than they had anticipated, which presented challenges  because the state was holding elections during the same time period it  was selecting and acquiring the equipment. However, the SBE met its  goal of implementing the new equipment by 2016."], "subsections": []}, {"section_title": "Deployment of New Voting Equipment", "paragraphs": ["SBE and Anne Arundel County officials stated that deployment of the new  equipment in the 2016 general election went smoothly with no significant  challenges. The officials said they took a number of steps to help ensure  a successful rollout. For example, SBE officials said that they established  a strong project management team and hired contractors to assist with  tracking progress toward key deadlines; drafting policies, procedures, and  training manuals; and testing equipment and sending it to the counties.  Anne Arundel County officials said that they hired about 40 temporary  staff to assist with deploying the new equipment and other tasks during  the general election. In addition, they stated that the county conducted  extensive election judge training and held mock elections using the new  equipment. The officials noted that with the new paper-based system, the  county needed to recruit and train more election judges compared to past  elections to hand out ballots, show voters how to operate the equipment,  and handle provisional voting. The two election judges we interviewed  stated that the training they received was very comprehensive and  effectively prepared them for Election Day.", "Both SBE and Anne Arundel County officials stated that additional voter  education efforts would have been beneficial. According to SBE officials,  the SBE had developed plans for a statewide multimedia effort to educate  voters on the new equipment but did not receive funding to implement it.  A scaled down effort was carried out instead, which included  demonstrating voting equipment at meetings and fairs around the state,  producing local media news stories, and posting a video on the SBE\u2019s  website on how to use the new equipment. SBE and Anne Arundel  County officials stated that the more limited voter education efforts might  have contributed to longer lines on Election Day in some polling places  because many voters were unfamiliar with the equipment and some had  questions or needed assistance with using it. However, these officials  noted that voter wait times were not a widespread or significant issue  during the general election. The two election judges we interviewed  stated that some voters needed help inserting their ballots into the  scanner, but observed that voters generally appeared to find the new  equipment easy to use. They also noted that some voters commented  that paper ballots provided them with reassurance with regards to the  security of their vote.", "SBE and Anne Arundel County officials said that the equipment itself  performed satisfactorily in the 2016 general election with only minor  problems. For example, state officials said that the scanners jammed  occasionally, but this was easily resolved by elections personnel. In  addition, most polling locations in the state were allocated only one  scanner, so some jurisdictions with two-page ballots, such as Anne  Arundel County, experienced lines because of the length of time it took  for voters to scan their ballots. Anne Arundel County officials plan to  analyze voter registration data to help determine the number of scanners  needed at each polling place and share the information with the SBE to  help inform allocations for future elections. More generally, SBE officials  noted that the new system has less equipment to manage\u2014about 2,600  digital scan units compared to the approximately 18,000 DRE units used  statewide in prior elections\u2014so there is less pre-election testing and  postelection maintenance that has to be done, saving time and labor for  the state and counties.", "The state contracted with a third party vendor to conduct a postelection  audit of the 2016 general election by using independent software to tally  all digital ballot images. The audit confirmed the accuracy of the election  results. According to SBE officials, the new equipment\u2019s ability to  capture and store digital images of the ballots made this type of audit  possible. Anne Arundel County officials stated that the ability to conduct  such an audit is one of the main benefits of the new equipment."], "subsections": []}]}, {"section_title": "Lafayette County, Florida", "paragraphs": ["Lafayette County has a small population and, in 2016, replaced its  precinct count optical scan equipment with precinct count digital scan  equipment. The county formed a consortium with other counties in the  state to help acquire its new equipment."], "subsections": [{"section_title": "Key Factors That Influenced the County\u2019s Decision to Replace Its Voting Equipment", "paragraphs": ["According to the county\u2019s Supervisor of Elections, the cost to acquire new  equipment and availability of funding and the need to meet state  requirements were among the key factors that influenced the county\u2019s  decision to replace its voting equipment. He stated that Lafayette  County\u2019s optical scanners were approximately 15 years old but were  generally in good condition and performed satisfactorily in prior elections.  County officials had planned to replace the county\u2019s aging voting  equipment by 2018 or 2020, but decided to replace it in 2016 because of  the opportunity to join a consortium of counties that formed to acquire  new equipment, which the Supervisor stated helped secure funding for  and lower the costs of purchasing the equipment.", "In addition, the Supervisor of Elections said that, to comply with state law,  the county needed to acquire a paper ballot system with a BMD to  replace the DRE it had used for voters with disabilities. Specifically, as of  July 2008, Florida law required all voting in the state to be done using  mark-sense paper ballots, which are generally counted using optical or  digital scanners, except for voting by individuals with disabilities. Current  state law requires jurisdictions to use these paper ballots for accessible  voting by 2020. As such, according to the Supervisor of Elections, part of  the impetus for acquiring new voting equipment was to replace the  county\u2019s DRE to meet the 2020 deadline in the law."], "subsections": []}, {"section_title": "Selection and Acquisition of New Voting Equipment", "paragraphs": ["The Supervisor of Elections stated that Lafayette County is a small county  and does not have much purchasing power. He said that Lafayette  County and other small counties in the state formed a consortium to lobby  the state for assistance and to leverage their collective purchasing  power. The 12-county consortium was established in a 2015 meeting  that was attended by county election officials, the Florida Deputy  Secretary of State, and the vendor that supplied the counties\u2019 previous  voting system. According to the Lafayette County Supervisor of  Elections, the consortium decided to purchase precinct count digital  scanners from the same vendor the counties had used before because  county staff were familiar with the vendor and equipment, and the cost for  the equipment was lower than similar equipment from another vendor that  some counties in the consortium had considered. In addition, the  Supervisor of Elections stated that the digital scanners have features that  were an improvement over the county\u2019s previous optical scan equipment.  For example, he stated that the new scanners have more robust security  features, such as locking panels, seals, and a requirement for a passcode  to access the system. He also noted that the scanners have touch  screens that flip up and are back-lit, which are easier for voters and poll  workers to read and more clearly identify overvotes. Further, he stated  the scanners digitally capture and store ballot images. The two Lafayette  County poll workers we interviewed confirmed that the new equipment  more clearly identified overvotes for them and for voters than did the  previous equipment.", "According to the county\u2019s Supervisor of Elections, having the consortium  approach state officials as a group helped secure HAVA funds to help the  counties purchase the voting equipment. In addition, he stated that being  a part of the consortium helped the counties negotiate a lower price for  their equipment than what they could have obtained individually because  they pooled their purchases and acquired a higher volume of machines.  While the consortium negotiated as a unit, each county has an individual  contract with the vendor. The Supervisor of Elections stated that the total  cost to purchase Lafayette County\u2019s new voting equipment\u2014which  included seven digital scanners, seven BMDs for voters with disabilities,  and various system components\u2014was about $70,000. The equipment  was acquired primarily with HAVA funds, although he noted that the  county allocated about $12,000 in local funds to purchase three additional  BMDs. A memorandum of agreement for funding and purchasing the  equipment was signed by Lafayette County and the state in November  2015 and, according to the Supervisor of Elections, the equipment was  acquired in late 2015 and first used in the March 2016 primary election."], "subsections": []}, {"section_title": "Deployment of New Voting Equipment", "paragraphs": ["The Supervisor of Elections and the two poll workers we interviewed  stated that deployment of the new voting equipment went smoothly and  the county did not experience any challenges because the new and  previous equipment are both precinct count scanning systems. The  Supervisor noted that the voting process remained the same for the voter,  so extensive voter education efforts were not needed. He stated that  Lafayette County did not experience any equipment malfunctions during  the November 2016 general election, and a postelection audit that was  conducted, in which the county manually tallied ballots from a randomly  selected race and precinct, found that the results were accurate."], "subsections": []}]}, {"section_title": "Beaver County, Utah", "paragraphs": ["Beaver County has a small population and previously used DREs with a  VVPAT. In 2014, Beaver County began conducting vote-by-mail elections  and replaced its DREs with central count digital scan equipment to  support this change."], "subsections": [{"section_title": "Key Factors That Influenced the County\u2019s Decision to Replace Its Voting Equipment", "paragraphs": ["According to Beaver County officials, the overall performance and  features of the equipment and the ability to maintain the equipment were  among the key factors in their decision to replace the county\u2019s equipment.  Officials stated that the county had been using DREs since 2005 and that  by 2013, they had come to the conclusion that the equipment was not  very efficient or user-friendly for administering elections. For example, the  Deputy Clerk stated that it was time consuming to both set up the  equipment and tally the votes, which required collecting and uploading  the memory component from each of the DREs. She also noted that the  operating software for the equipment\u2019s election management system had  become out-of-date and did not have a user-friendly interface. According  to the Deputy Clerk, this made it difficult for staff to navigate without  detailed training, which was time consuming and costly. In addition,  county election officials said that they were unsure about future  maintenance and system upgrade costs and decided it would be more  cost-effective to spend funds on purchasing new voting equipment rather  than on upgrades to equipment with which they were not very satisfied.", "In 2013, the county decided to begin conducting vote-by-mail elections  the following year and to acquire new equipment to support this change.  According to county officials, this decision was due to the performance of  their DREs and a desire to reduce costs and increase the efficiency of  administering elections, among other reasons. Officials said that because  the county was moving to vote-by-mail elections and DREs would no  longer be needed for each precinct, the county would instead acquire  central count scanners designed to count the mail-in ballots it would  receive at the county elections office."], "subsections": []}, {"section_title": "Selection and Acquisition of New Voting Equipment", "paragraphs": ["According to Beaver County officials, the main individuals involved in the  process to select and acquire the county\u2019s new voting system included  the current Beaver County Clerk, Deputy Clerk, a county information  technology official, and the previous county clerk, among others. When  the county started the process in 2013, the state had not initiated any  efforts to help local jurisdictions acquire new equipment. As such, both  Utah and Beaver County election officials said that the state was aware of  the county\u2019s decision to replace its equipment but was not involved in the  selection and acquisition process.", "County officials stated that they wanted to acquire central count scanners  to support conducting vote-by-mail elections and a BMD for in-person  voting at the elections office for individuals with disabilities. Officials said  that, in 2014, they verbally requested proposals from their current vendor  and an elections services company that the county had employed in 2012  to provide training, systems testing, and other support for elections.  According to the Deputy Clerk, the county requested proposals from  these two entities because county officials were familiar with them and  were not aware of other vendors that might submit proposals. Officials  said that the county received a proposal from the elections services  company, and selected the company because it was the only bid received  and the equipment the company sold met the county\u2019s needs and was  federally certified. They stated that one of the challenges they  experienced as a small county looking to purchase equipment was that  vendors were not actively marketing to them. In addition, the Deputy  Clerk noted that she had limited elections and information technology  experience when the county started the selection process. However, she  said that the election services company was familiar with Utah\u2019s elections  code and federal voting system requirements, helped negotiate with the  vendor to acquire the new equipment, and educated county staff on the  equipment.", "Beaver County reported that the cost to purchase the equipment\u2014two  central count digital scanners, a BMD, and associated system  components\u2014was about $46,000. Local funds were used to purchase the  scanners and HAVA funds were used to purchase the BMD. According to  Beaver County officials, county commissioners approved the procurement  of the equipment in spring 2014 and it was first used in the June 2014  primary elections."], "subsections": []}, {"section_title": "Deployment of New Voting Equipment", "paragraphs": ["Beaver County officials stated that they deployed the new equipment in  2014 because it was more manageable to conduct such a transition  during a non-presidential election year. They noted that they needed to  educate the public about both voting by mail and the new voting  equipment. Officials stated that the county used local newspaper ads,  social media posts, and direct mailings to provide information on these  changes. Officials also posted information on the county\u2019s website and  allowed people to observe logic and accuracy testing of the equipment.  They noted that educating the public on the new voting method and  equipment in smaller elections during 2014 and 2015 helped voters  become more comfortable with what to expect for the presidential election  in 2016.", "County officials said that they are very satisfied with the performance of  the new voting equipment. They noted that conducting vote-by-mail  elections and using central count scanners allow them to administer  elections from one location on Election Day, which requires less time and  resources than having to manage multiple polling places. Officials also  stated that the new digital scanners are able to count a high volume of  ballots in a short period of time. They said that, for the November 2016  general election, the vote tallying was completed within an hour of the  polls closing, which allowed the county to report results quickly. However,  one challenge they experienced was that the new equipment\u2019s data  format for election night reporting of results to the state was not  compatible with the state\u2019s reporting system. To address this issue,  county officials reformatted the data to produce a report that could be  uploaded into the state\u2019s system, but cautioned that this may not be  feasible for larger jurisdictions.", "According to officials, the county conducted two postelection audits for  the 2016 general election\u2014one required by the state and another that the  county initiated. For the state audit, the county hand counted 1 percent of  total ballots from a randomized list. In addition, the county conducted its  own audit by running all ballots on its other digital scanner to compare  results. According to officials, both audits validated the election results."], "subsections": []}]}]}, {"section_title": "Appendix VI: GAO Contact and Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Tom Jessor (Assistant Director),  David Alexander, Carl Barden, Chuck Bausell, Brett Fallavollita, Sally  Gilley, Christopher Hatscher, Eric Hauswirth, Richard Hung, Jill Lacey,  Serena Lo, Jan Montgomery, Heidi Nielson, Shannin O\u2019Neill, Claire  Peachey, Jeff Tessin, and Johanna Wong made significant contributions  to this report.", "We gratefully acknowledge the substantial time and cooperation of the  state and local election officials, and stakeholders and experts whom we  interviewed."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-297", "url": "https://www.gao.gov/products/GAO-18-297", "title": "Homeownership: Information on Mortgage Options and Effects on Accelerating Home Equity Building", "published_date": "2018-03-15T00:00:00", "released_date": "2018-03-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government has a number of programs to help increase access to affordable homeownership for first-time buyers and lower-income households, including programs that provide guarantees for certain types of mortgages and funding that can be used for down-payment assistance. Generally, homeowners can build home equity by making payments on a mortgage to reduce the outstanding principal (assuming home value does not depreciate). Recently, there has been interest in mortgage products that accelerate home equity building.", "GAO was asked to explore options for building equity through homeownership. This report discusses (1) how federal homeownership assistance programs affect home equity building; and (2) options, including private-sector mortgage products, through which borrowers can accelerate home equity building and the trade-offs of these options for both borrowers and lenders.", "GAO analyzed relevant laws and program guidance of federal homeownership assistance programs. GAO attended housing conferences and interviewed relevant federal and state agency officials, academics, and industry stakeholders, including mortgage insurers and lenders, to identify existing and proposed accelerated equity-building products and mechanisms and to better understand the benefits and trade-offs of accelerated equity building. GAO also developed examples of mortgage scenarios to illustrate the trade-offs of accelerated equity building. Federal agencies provided technical comments, which were incorporated where appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal homeownership assistance programs generally are not designed to accelerate equity building (home equity is the difference between the value of a home and the amount owed on a mortgage). For example, programs that offer grants for down-payment assistance can provide a one-time boost to home equity. However, these programs are not specifically designed to accelerate equity building\u2014that is, increasing the pace of paying off principal more quickly than would be the case with a 30-year fixed-rate mortgage. Instead, the focus of federal programs is on providing affordable access to homeownership, including through grants, loans, and mortgage insurance or guarantees. For instance, federal mortgage insurance programs help provide market liquidity by protecting lenders from losses, in turn increasing access to credit and homeownership, and ultimately, the opportunity for equity building for home buyers.", "Borrowers have options to accelerate equity building that include obtaining shorter-term mortgages, making more frequent or additional payments, or choosing a mortgage product designed to accelerate equity building. For example, a mortgage product introduced by private lenders in 2014\u2014the Wealth Building Home Loan (WBHL)\u2014has features designed to accelerate equity building, including shorter terms (15 or 20 years) and the option to buy down the interest rate. The product also allows for no down payment. However, these products have trade-offs, including the following:", "Shorter-term loans build home equity (in terms of principal reduction) at a faster rate, but require higher monthly payments (see fig.). Payments for a 15-year fixed-rate mortgage can be more than 40 percent higher than for a 30-year fixed-rate mortgage.", "Higher payments may make mortgages less affordable or limit access for lower-income borrowers. For example, higher payments may result in a higher debt-to-income ratio for some home buyers, which may prevent them from qualifying for a mortgage unless they buy a less expensive home.", "In contrast, all else equal, loans with a shorter term generally have reduced credit risk\u2014the likelihood of a home buyer defaulting on a mortgage\u2014for lenders.", "Note: Monthly mortgage payments do not include property tax or any type of insurance. Interest rates used are generally consistent with market rates in September and October 2017."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government has a number of programs to help increase  access to affordable homeownership for first-time buyers and lower- income households, including programs that provide guarantees for  certain types of mortgages and funding that can be used for down- payment assistance. Homeownership has long been perceived to  provide a number of financial and nonfinancial benefits. For example,  homeownership can build wealth through the accumulation and  appreciation of home equity\u2014the difference between the value of a home  and the amount owed on the mortgage. Home equity can serve as a  financial cushion in times of hardship or financial emergencies, especially  among lower-income households for whom housing generally constitutes  a larger percentage of assets than for higher-income households.", "According to the U.S. Census Bureau, the homeownership rate was  about 64 percent at the end of the third quarter 2017, and according to  the Board of Governors of the Federal Reserve (Federal Reserve), the  total outstanding mortgage debt in the same period was $10.5 trillion. In  addition, more than 21 percent of homeowners had less than 20 percent  equity in their homes (see app. II for more information). According to our  analysis, for a borrower who bought a home with a 30-year fixed-rate  mortgage and a small down payment, it could take more than 8 years in  the current interest rate environment to achieve 20 percent equity in the  home (assuming the home\u2019s value remained unchanged from loan  origination). Homeownership can build wealth, but it also entails risks  (such as depreciating home values) and costs (such as for maintenance,  taxes, and insurance). Recently there has been some interest in  mortgage products designed to accelerate equity building\u2014that is,  products that increase the ongoing pace of paying off the loan principal  compared to a traditional 30-year fixed-rate mortgage\u2014and improve  access to homeownership.", "You asked us to explore options for building equity through  homeownership. This report describes (1) how federal homeownership  assistance programs affect home equity building, and (2) options,  including private-sector mortgage products, through which borrowers can  accelerate home equity building and the trade-offs of these options for  both borrowers and lenders. You also asked us to include regional data  on equity building, which is included in an appendix to this report.", "To address these objectives, we reviewed relevant literature, including  prior GAO reports on housing assistance and homeownership, housing  finance, and mortgage reforms. We interviewed officials with knowledge  of federal homeownership assistance programs from the Department of  Housing and Urban Development (HUD), Federal Housing Finance  Agency (FHFA), Department of Agriculture (USDA), Department of  Veterans Affairs (VA), Fannie Mae, Freddie Mac, Federal Home Loan  Banks (FHLBanks), and state housing finance agencies. We attended  housing conferences and met with housing experts and stakeholders from  academia, housing advocacy organizations, and industry, including  mortgage lenders and insurers, selected because they made proposals to  increase homeownership or build home equity faster, wrote on  homeownership issues, were recommended by government officials, or  were involved in providing mortgage products designed to accelerate  equity building. From interviews with industry stakeholders and housing  conferences we attended, we were able to identify and review information  on two private-sector mortgage products\u2014one existing and one  proposed\u2014designed to accelerate home equity building. We used  examples from those products to illustrate effects and trade-offs on home  equity of select scenarios. See appendix I for more information on our  scope and methodology.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Home Equity Building", "paragraphs": ["A homeowner can build home equity immediately by making a down  payment on their home, assuming the down payment is not financed  separately as a loan. Throughout the life of a mortgage, homeowners  can continue to build equity (1) by making regular mortgage payments to  reduce the principal amount outstanding, (2) by making additional  payments to further reduce the principal amount outstanding, and (3)  through appreciation in their home\u2019s value. Additionally, the components  of a mortgage (discussed below) may affect the pace of home equity  building.", "Throughout this report, for the purposes of illustrating home equity  building, we assumed that a home\u2019s value remained unchanged from the  time of the loan origination. However, home values are highly contingent  on market conditions and other factors that are beyond a homeowner\u2019s  control. For example, although homes can appreciate in value, homes  also can depreciate in value, which can have a negative effect on  homeowners\u2019 equity. Homeowners also could lose money on their home if  they sold it shortly after purchasing because principal reduction in the  initial years of a mortgage is relatively small and the benefit of any home  value appreciation would be limited. Additionally, selling a home incurs  transaction costs, such as realtor commissions. To avoid losing money on  a home sale, homeowners would need to sell their home at an amount  higher than their purchase price plus transactions costs. For example, if a  homeowner buys a home for $250,000 (all fees included) and plans to  sell it 3 years later, assuming transaction costs of 10 percent (or  $25,000), the homeowner would have to sell the home for at least  $275,000 to break even, meaning an annual appreciation in home value  of more than 3 percent. If the home\u2019s value did not appreciate at that rate,  or depreciated, the homeowner would lose money on the sale."], "subsections": []}, {"section_title": "Mortgage Loan Components", "paragraphs": ["The majority of American families achieve homeownership by taking out a  loan\u2014a mortgage\u2014to cover at least some of the purchase price. The  primary components of a mortgage loan are the following:", "Term (duration). The most common term is 30 years. According to  the Urban Institute, the 30-year fixed-rate mortgage represented  approximately 90 percent of the fixed-rate purchase mortgages (that  is, not for refinancing an existing mortgage) originated every month  from January 2010 through July 2017, and 15-year fixed-rate  purchase mortgages represented about 6 percent.", "Down payment. Most mortgage lenders require borrowers to make a  down payment (of 3 percent or more of the purchase price, depending  on the mortgage) that is applied to the purchase price of the home. A  down payment also helps a borrower build home equity, assuming the  down payment is not financed as a separate loan.", "Interest rate. Lenders charge borrowers a percentage of the  mortgage amount, in exchange for providing funds to buy a home. An  interest rate can be fixed or adjustable for the life of the mortgage  (adjustable-rate mortgage or ARM). Because a fixed-rate mortgage\u2019s  interest rate does not change regardless of prevailing rates, a  borrower\u2019s payments for principal and interest remain the same for the  life of the mortgage. In contrast, an adjustable-rate mortgage\u2019s  interest rate, for which the initial interest is generally lower than for a  fixed-rate mortgage, will adjust at agreed-upon intervals. As a result,  adjustable-rate mortgage payments can increase or decrease  depending on the changes in interest rates and terms of the loan.", "Payment frequency and amount. Payments are generally made on  a monthly basis. Fixed- and adjustable-rate mortgages generally have  fully amortizing payment schedules\u2014that is, the regularly scheduled  payments will fully pay down the principal and interest over the life of  the mortgage, with the amounts allocated to reducing principal and  interest changing over time (see fig. 1)."], "subsections": []}, {"section_title": "The Federal Role in Mortgage Markets", "paragraphs": ["The U.S. markets for single-family housing finance include a primary  market, in which lenders make (originate) or refinance mortgage loans,  and a secondary market, in which mortgage loans are purchased from  lenders and packaged into securities\u2014known as mortgage-backed  securities\u2014that are sold to investors. The federal government  participates in the primary and secondary mortgage markets.", "In the primary market, federal agencies provide homeownership  assistance programs and products intended for increasing access to and  affordability of homeownership. Relevant federal agencies and a  government-sponsored enterprise that provide homeownership  assistance and their primary housing-related policy goals include the  following:", "Department of Housing and Urban Development provides housing  assistance to low-and moderate-income families and promotes urban  development.", "Federal Housing Administration (FHA) seeks to broaden  homeownership, strengthen the mortgage marketplace, and  increase access to credit by providing mortgage insurance.", "Public and Indian Housing helps ensure safe, decent, and  affordable housing through programs such as housing choice  vouchers.", "Community Planning and Development seeks to develop viable  communities and provide decent housing and a suitable living  environment through block grant assistance.", "Department of Veterans Affairs assists service members, veterans,  and eligible surviving spouses of veterans to become homeowners  through guaranteeing and issuing (in limited circumstances)  mortgages for home purchases.", "Rural Housing Service (RHS), which is an agency within USDA,  insures and guarantees housing loans for home purchases, repair,  and rental housing development.", "Federal Home Loan Banks help provide liquidity to each bank\u2019s  member financial institutions to support housing finance and  community investment. FHLBank members include commercial  banks, thrifts, and credit unions. FHLBanks provide 10 percent of their  earnings for affordable housing programs, including grants for  affordable housing for households with incomes at or below 80  percent of the area median.", "Federal homeownership assistance programs can be categorized in  terms of the products or services they offer or the mechanisms they use.  The categories include mortgage guarantees and insurance, down- payment assistance, vouchers, and direct loans (discussed in more detail  later in this report). In addition to these categories of homeownership  assistance, tax expenditures, such as exclusions, exemptions, deductions  (including the mortgage interest deduction), credits, deferrals, and  preferential rates, can promote homeownership. For example,  homeowners can take advantage of tax deductions (by choosing to  itemize deductions on their tax returns) to help lower their taxable income.  Taxpayers who itemize deductions may deduct qualified interest they pay  on their mortgage. Taxable income may be reduced by the amount of  interest paid on first and second mortgages of up to $750,000 for homes  purchased generally after December 15, 2017. Additionally, taxpayers  generally may deduct up to $10,000 for state and local taxes, including  property taxes paid by homeowners on their homes.", "Participation in the secondary mortgage market occurs through the  following entities:", "Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are  government-sponsored enterprises (enterprises)\u2014congressionally  chartered, for-profit, shareholder-owned companies. They are the two  largest participants operating in the secondary mortgage market.  Generally, Fannie Mae and Freddie Mac purchase mortgage loans  that meet certain criteria for size, features, and underwriting  standards\u2014known as conforming loans\u2014from lenders. In  purchasing loans, the enterprises provide market liquidity, so lenders  can provide more loans to borrowers.", "Ginnie Mae. Ginnie Mae is a wholly-owned government corporation.", "Ginnie Mae guarantees the timely payment of principal and interest on  mortgage-backed securities supported by pools of loans backed by  government-insured mortgages, including mortgages insured by FHA,  VA, and USDA."], "subsections": []}, {"section_title": "Mortgage-Related Regulations", "paragraphs": ["In a process called underwriting, mortgage lenders evaluate the  creditworthiness of potential borrowers in making mortgage loans, among  other things. Amid concerns that risky mortgage products and poor  underwriting standards contributed to the recent housing crisis, Congress  included mortgage reform provisions in the Dodd-Frank Wall Street  Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank  Act generally requires lenders to determine consumers\u2019 ability to repay  home mortgage loans before extending credit and provides a  presumption of compliance with the ability-to-repay requirement for  qualified mortgages.", "The ability-to-repay regulations set forth lenders\u2019 responsibilities to  determine a borrower\u2019s ability to repay a residential mortgage loan, and  special payment calculation rules apply for loans with balloon payments,  interest only payments, or negative amortization. The regulations  require lenders to make a reasonable and good faith determination of a  consumer\u2019s reasonable ability to repay a loan. The regulations establish a  safe harbor and a presumption of compliance with the ability-to-repay rule  for certain qualified mortgage loans (QM). The rule generally prohibits  loans with negative amortization, interest-only payments, or balloon  payments from being qualified mortgages, and limits the points and fees a  lender may charge borrowers on a qualified loan. The regulations  establish general underwriting criteria for qualified mortgages. For  example, under QM requirements borrowers generally cannot exceed a  maximum monthly debt-to-income ratio of 43 percent, unless the loan is  eligible for sale to an enterprise. If a mortgage loan meets the  requirements of a QM loan, it is eligible for the safe harbor and the lender  is deemed to have complied with the ability-to-pay requirement unless the  loan is a higher priced mortgage loan. A higher priced mortgage loan that  otherwise meets the definition of a QM is presumed to have complied with  the ability-to-pay requirements, but the presumption can be rebutted if the  consumer proves that the lender did not make a good faith and  reasonable determination of the consumer\u2019s ability to repay.", "Additionally, federal mortgage insurance is included in the determination  of whether an FHA-insured loan is a higher priced mortgage loan."], "subsections": []}]}, {"section_title": "Federal Homeownership Assistance Programs Can Have Equity- Building Effects, but Are Not Specifically Designed to Accelerate Equity Building", "paragraphs": ["Existing federal homeownership assistance programs use features and  mechanisms that can have equity-building effects, but the programs are  not specifically designed to accelerate equity building. The programs can  assist homeowners to build equity over time by providing access to  homeownership, but the programs do not have an explicit focus on  accelerating the ongoing pace of paying down the loan principal faster  than a 30-year fixed-rate mortgage. Rather, the overall focus of the  programs is on providing affordable access to homeownership, according  to officials of relevant agencies and entities and based on their mission  goals. For example, the goal of FHA\u2019s mortgage insurance program is to  facilitate access to affordable mortgages for home buyers who might not  be well-served by the private market. FHA implements this goal by  providing insurance to lenders to facilitate access to mortgage financing  for lower-income home buyers.", "See table 1 for examples of federal homeownership assistance programs,  by major program types and potential for affecting equity building, either  at a point in time or throughout the life of a mortgage."], "subsections": [{"section_title": "Federal Mortgage Insurance and Loan Guarantees Increase Market Liquidity", "paragraphs": ["Federal mortgage insurance and guarantee programs increase market  liquidity, which ultimately expands access to homeownership. The federal  government commits to pay part or all of a loan\u2019s outstanding principal  and interest loss to a lender or other mortgage holder if the borrower  defaults. Because they obtain insurance or a guarantee against the  possibility of loss from borrower default, lenders are more willing to  provide loans to borrowers who might not otherwise be served by the  private market, allowing more homeowners\u2014particularly lower-income  borrowers\u2014an opportunity to build home equity.", "FHA offers mortgage insurance and RHS and VA provide loan  guarantees. For example, FHA will insure loans with a down payment as  low as 3.5 percent from most borrowers, and conventional mortgages will  allow down payments as low as 3 percent. FHA-insured loans also have  more lenient credit requirements that particularly benefit minority  households and first-time home buyers who might otherwise find it difficult  or more expensive to take out a mortgage. Among federal mortgage  insurance programs, FHA has the highest volume of mortgages insured."], "subsections": []}, {"section_title": "Federal Down-Payment Assistance Programs Can Have Equity-Building Effects", "paragraphs": ["Federal and federally mandated programs that provide funding for grants  and loans for down-payment assistance can have equity-building effects.  Although accelerated equity building is not the policy goal of these  programs, down-payment assistance can lower the barrier to  homeownership for some lower-income home buyers so that the equity-building effects of homeownership can accrue. Examples of programs  include the following:", "HUD\u2019s HOME Investment Partnership Program is a block grant  program that provides funding to states and localities to be used  exclusively for affordable housing activities to benefit low-income  households. Funds can be used for down-payment assistance for  eligible low-income home buyers. According to HUD data, more than  75 percent of low-income home buyers who have received assistance  from the HOME program have used HOME funds for purchasing a  home (which includes down-payment assistance) since the program\u2019s  inception in 1992, directly contributing to homeowner equity building.", "HUD\u2019s Community Development Block Grant (CDBG) program also  provides funding to eligible states and localities for community and  economic development efforts, including housing assistance.  Eligible uses of home-buyer assistance include grants for down  payments and closing costs. In fiscal year 2016, CDBG funds  provided direct housing assistance for down payment and closing  costs to 2,483 households.", "FHLBanks contribute funding to the Affordable Housing Program  (AHP), which can provide grants for down-payment assistance  through either the AHP competitive or set-aside program. Member  financial institutions of the FHLBanks can apply for the set-aside  funds and then distribute the funds as grants to eligible households.  Set-aside grants may be no greater than $15,000 per household, and  at least one-third of the FHLBanks\u2019 annual set-aside allocation must  be used for eligible first-time home buyers. According to FHFA, the  FHLBanks funded about $77 million for down-payment or closing-cost  assistance in 2016 (almost 90 percent of total set-aside program  funding). The down-payment assistance grants have an immediate  equity-building effect.", "RHS and HUD administer self-help grant programs that provide  opportunities for very-low and low-income home buyers to purchase  subsidized homes: Program participants help construct homes in  exchange for subsidies, including down-payment assistance. RHS  officials told us that the home buyer\u2019s labor serves as a down  payment for the home, providing the home buyer with equity at the  time of purchase. RHS\u2019s program also includes a subsidized interest  rate determined by the home buyer\u2019s income, as well as a 33-year  mortgage duration that can be extended up to 38 years, to reduce the  monthly mortgage payment and make the loan as affordable as  possible.", "HUD officials raised concerns about the extent to which down-payment  assistance promotes home equity building. For example, some  mortgages with down-payment assistance can be associated with higher  delinquency rates. Specifically, HUD officials pointed to data indicating  that FHA has experienced higher loan delinquency rates for loans with  down-payment assistance. As with any homeownership-assistance  programs or mortgages, the potential for home equity building requires a  homeowner to sustain and pay down the mortgage.", "In addition to down-payment assistance, HOME, CDBG, and AHP funds  can be used for buying down the mortgage interest rate. Interest-rate  buy-downs have accelerated equity-building effects throughout the life of  the mortgage because a higher proportion of monthly mortgage payments  are applied to the mortgage principal. However, agency and enterprise  officials and housing experts with whom we spoke said the down payment  is the biggest barrier to homeownership, and in the current environment  of low interest rates, buy-downs of interest rates are not common.", "In addition to federal programs, some state housing finance agencies also  provide down-payment assistance grants and loans that have accelerated  equity-building effects. For example, the Minnesota Housing Finance  Agency provides a monthly payment loan (in addition to the mortgage) of  up to $12,000 to be used for down payments or closing costs. The  monthly payment loan has an interest rate equal to the rate on the  borrower\u2019s first mortgage, and the loan can be paid back over a 10-year  period. According to Minnesota Housing Finance Agency officials, by  making payments directly on the monthly payment loan, the borrower is  effectively accelerating equity building on that part of the home purchase  because of the shorter term compared to a 30-year mortgage."], "subsections": []}, {"section_title": "Federal Voucher Program Can Facilitate Equity Building", "paragraphs": ["HUD\u2019s Housing Choice Voucher Program provides assistance in helping  a homeowner pay for monthly mortgage and other homeownership  expenses, which facilitate homeownership and equity building.  Vouchers are administered locally by public housing agencies, but not all  public housing agencies participate in the program. A home buyer would  have to apply for a housing choice voucher with a participating public  housing agency to use the funding for a mortgage instead of rent. First- time homeowners who meet income limits and receive homeownership  counseling can qualify for the program. The payment assistance  generally continues as long as the family resides in the home, and the  maximum term for the assistance is 15 years if the home purchase is  financed with a mortgage longer than 20 years. According to HUD,  about 11,000 homeowners were receiving assistance from the  Homeownership Voucher Program as of September 2017, about 0.5  percent of all vouchers."], "subsections": []}, {"section_title": "Federal Direct Loans Can Provide Access to Homeownership", "paragraphs": ["RHS and VA both offer direct loans for home purchases to eligible  borrowers who may otherwise be unable to obtain financing in the private  marketplace, providing access to homeownership and equity building.  RHS offers direct loans to borrowers in rural areas with incomes of  generally not more than 80 percent of the area median income. Loan  funds can be used to build, repair, renovate, or relocate a home, or to  purchase and prepare sites, including providing water and sewage  facilities. RHS provided 7,089 direct loans for single-family homes in fiscal  year 2016.", "VA provides direct home loans to eligible Native American veterans to  finance the purchase, construction, or improvement of homes on federal  trust land, or to refinance a prior direct loan to reduce the interest rate.  According to VA, 13 direct loans were provided to Native Americans in  fiscal year 2016."], "subsections": []}]}, {"section_title": "Options and Mechanisms That Accelerate Equity Building Present Trade-offs for Homeowners and Lenders", "paragraphs": ["Borrowers have options to accelerate equity building that include  obtaining shorter-term mortgages, making more frequent or additional  payments, or choosing a mortgage product available in the private  mortgage market designed to accelerate equity building. These options  accelerate equity building by affecting the key components of a  mortgage\u2014term (duration), down payment, interest rate, or payment  frequency or amount. The advantages of building equity faster can  include using home equity as a financial cushion in emergencies, like  unexpected medical expenses. However, there are trade-offs to these  options, such as higher monthly payments for shorter-term mortgages.  Additionally, stakeholders identified key trade-offs and considerations in  introducing new products and mechanisms for accelerating home equity  building that could affect the success of the products or mechanisms."], "subsections": [{"section_title": "Home buyers and Homeowners May Take Actions on Their Own to Accelerate Equity Building", "paragraphs": ["Home buyers and homeowners may take actions on their own to  accelerate home equity building. For example, home buyers can choose  a 15- or 20-year mortgage rather than a 30-year mortgage. The shorter- term product will increase the relative pace of equity building. In July  2017, almost 6 percent of all new purchase mortgage originations were  for 15-year fixed-rate mortgages, according to the Urban Institute.  However, shorter-term loans may present trade-offs for borrowers, which  we discuss later in the report.", "Homeowners also can make extra mortgage payments to further reduce  the principal balance, which can accelerate equity building and shorten  the mortgage term. For example, according to our analysis, a homeowner  making an extra monthly payment of $100 on a 30-year fixed-rate  mortgage for $225,000 would accelerate equity building and reduce the  mortgage duration by more than 4 years (see fig. 2). Homeowners  generally have the flexibility to make extra payments at their discretion  and could discontinue the extra payments at any time if they need the  funding for other priorities.", "Homeowners also can refinance their mortgage to take advantage of  lower interest rates, shorter mortgage terms or both. Lower-interest and  shorter-term loans can help build equity faster. About 27 percent of  mortgage refinances were for 15-year fixed-rate mortgages in October  2017, according to enterprise data reported by FHFA. However,  refinancing (similar to purchase loans) incurs transaction costs (see table  2). A lender may offer low- or no-cost refinancing, but likely would  charge a higher interest rate in exchange for lowering or eliminating fees.  Additionally, other payments might be required at closing (which would be  out-of-pocket expenses unless they were financed), including upcoming  mortgage insurance and property taxes.", "Also, homeowners who refinance to take advantage of lower interest  rates could extend their mortgage term or choose to cash out some of the  existing home equity, thereby eliminating the potential for accelerated  equity-building effects in refinancing. See figure 3 for a comparison of  how different refinancing options can affect home equity building."], "subsections": []}, {"section_title": "A Recently Introduced Mortgage Product Accelerates Equity Building through Shorter Terms and Lower Interest Rates", "paragraphs": ["The Wealth Building Home Loan (WBHL) is a relatively new private- sector mortgage product that incorporates a number of features  specifically designed to accelerate equity building (see fig. 4). The WBHL,  which has been offered commercially on a limited basis for about 3 years,  has shorter mortgage terms (15 or 20 years), can have a fixed or  adjustable rate, and allows the interest rate to be bought down. A lower  interest rate would allocate a greater portion of each monthly payment to  reduce mortgage principal and also reduce the amount of the monthly  payments.", "Moreover, the WBHL allows for no down payment (including allowing the  financing of closing costs). The no down-payment feature is designed to  facilitate access to homeownership. According to lenders we spoke with  who offer WBHLs, allowing for no down payment is the key feature that  distinguishes the WBHLs from standard 15- or 20-year mortgage loans  available in the private-sector mortgage marketplace. Consistent with  what we heard from lenders, officials from Fannie Mae and Freddie Mac  told us loans that do not require a down payment generally are not  available in the private-sector mortgage marketplace. Additionally,  because of the low or no down-payment features, lenders we spoke with  who offer WBHLs typically require private mortgage insurance, which is  provided by a major mortgage insurer.", "As shown in figure 4, the monthly mortgage payments of a WBHL can  increase substantially, compared with the payments of a 30-year fixed- rate mortgage.", "Some lenders we interviewed offer WBHLs with the option to buy down  the interest rate, and some require a minimum buy-down.", "One lender requires borrowers to pay 2 points (or 2 percent of the  mortgage loan amount), which buys down one-half of a percentage  point of the interest rate.", "Another lender offers a 15-year loan with an option to pay 3 points to  buy down the interest rate to 1.75 percent for the first 7 years. Rates  increase to 5 percent for the remaining 8 years. The lender also offers  a 20-year loan with the option to pay 2 points to buy down the interest  rate to 2.99 percent for the first 7 years. Rates increase to 5.25  percent for the remaining 13 years.", "Although the option to buy down the interest rate has been advanced as a  feature that accelerates equity building, some lenders we interviewed said  that borrowers tend to pay the minimum required points only, because  borrowers generally prefer to pay as little cash as possible at loan  origination. Additionally, some lenders and other stakeholders have said  that, in a low interest-rate environment, the incentive for borrowers to buy  down the mortgage interest rate is greatly reduced."], "subsections": []}, {"section_title": "A Proposed Mortgage Product May Accelerate Equity Building through an Equity Savings Account", "paragraphs": ["Another mortgage product that we identified during our review\u2014the  Fixed-Payment Cost-of-Funds Index (Fixed-COFI) Mortgage\u2014has been  proposed by two economists, but has not yet been offered by private- sector lenders. This type of mortgage is intended to provide another  option for consumers that encourages equity building and limits exposure  for borrowers and lenders to interest rate fluctuations. The Fixed-COFI  would allow borrowers with little or no money down to obtain an  adjustable-rate mortgage that features a fixed monthly mortgage payment  and an equity savings account. Funds in the equity savings account  could be used to pay down the mortgage principal, thereby accelerating  home equity building. According to the economists of this proposed  product, the low to no down-payment feature may help individuals with  little to no savings access homeownership, particularly those who live in  high-cost areas where the rent payment is comparable to a mortgage.", "In addition to the borrower\u2019s fixed monthly payments, the Fixed-COFI  mortgage also would determine how the borrower\u2019s fixed payments would  be allocated, including to the equity savings account. The borrower\u2019s fixed  monthly payment would be fully amortizing and be calculated based on  prevailing rates for a 30-year fixed-rate mortgage at the time of loan  origination. But the interest portion of the payment due to the lender  would be separately calculated each month, based on a rate derived from  COFI plus a gross margin to account for lenders\u2019 costs and insurance risk  premiums. Each month, the difference between the borrower\u2019s fixed  payment and interest due the lender based on the COFI rate plus a gross  margin would determine if any funds from the borrower\u2019s payment would  be added to the equity savings account.", "The funds allocated to the equity savings account are designed to be  used to pay down the principal. However, the ways in which the home  equity funds could be used to pay down mortgage principal depend on  the terms of each loan. If the home equity account were depleted, lenders  might cover any payment shortfalls and seek insurance reimbursements.  In addition, the accelerated equity-building effect of the Fixed-COFI  mortgage product would rely on the historical difference between the  COFI rate and 30-year fixed rate (see fig. 5). If the difference between the  rates narrowed, the savings allocated to the equity savings account would  lessen, and equity-building effects would be reduced. That is, in months  in which the COFI rate plus the gross margin was lower than the 30-year  fixed rate used to calculate the monthly payments, the difference between  the COFI-based and fixed amounts would be deposited into a home  equity savings account. In months in which the fixed payment would not  cover the interest payment (because the COFI rate plus the gross margin  is higher than the 30-year fixed rate used to calculate the fixed monthly  payment), funds could be withdrawn from the equity savings account to  cover any shortfall. If the equity savings account had a zero balance, the  lender could seek an insurance payout.", "According to the economists, some details of the Fixed-COFI contract can  be modified for different rules concerning refinancing and savings. For  example, a borrower and a lender can agree to how and when funds in  the home equity savings account could be applied to pay down the  mortgage principal. However, the Fixed-COFI mortgage contract would  place limits on a borrower\u2019s options to refinance\u2014for instance, only in the  case of the loss of a job\u2014because it is designed to protect borrowers and  lenders from fluctuations in interest rates.", "If interest rates drop significantly, benefits from the rate decrease for a  borrower with a Fixed-COFI mortgage would be limited as compared with  the benefits of a borrower with a 30-year fixed-rate mortgage who  refinances. For example, the additional savings from lower interest rates  for the borrower with a Fixed-COFI mortgage could only be used to pay  down the mortgage principal. In contrast, although refinancing has costs,  borrowers with a traditional 30-year fixed-rate mortgage would be able to  refinance to take advantage of the lower rate and reduce their monthly  payment. They could use the resulting difference in monthly payments  from the new, refinanced loan to pay down mortgage principal, build up  savings, or for any other purposes."], "subsections": []}, {"section_title": "Advantages of Accelerated Home Equity Building Include a Financial Safeguard", "paragraphs": ["For some homeowners, building home equity faster can provide financial  benefits. Home equity can serve as a financial asset to fund retirement,  education expenses, or absorb financial emergencies like the loss of a  job. All else being equal, having more home equity also can help sustain  homeownership through a downturn in the housing market. For example,  default rates are generally higher for loans with higher loan-to-value (LTV)  ratios.", "Although some accelerated equity-building options are designed to be  originated with high LTV ratios (in some cases exceeding 100 percent),  the accelerated equity-building effect can lower the LTV ratio at a faster  pace than for a 30-year fixed-rate mortgage. As shown in figure 6,  according to our analysis, LTV ratios can converge after about 5 years for  a 15-year fixed-rate mortgage with a high LTV and a 30-year fixed-rate  mortgage with a higher down payment. More specifically, in about 5 years  a 15-year fixed-rate loan with an LTV ratio of 103 percent at origination  will reach the same LTV ratio as a 30-year fixed-rate loan with an LTV  ratio of 80 percent at origination. Borrowers under both mortgage  scenarios would have accrued close to 30 percent equity in about 5  years, assuming no change in the home\u2019s value.", "Lenders and proponents of accelerated equity building with whom we  spoke said that having substantial equity in a home provides more  options for remediation in the event the homeowner encounters difficulties  making mortgage payments. For instance, a lender with whom we spoke  said that having more equity in a home provides a borrower with a better  opportunity to refinance to get a better interest rate and also extend their  loan term, both of which would lower their monthly payment. Two lenders  with whom we spoke also said that accelerated equity-building options  can provide financial discipline and serve as a forced savings mechanism  by, for example, paying additional principal on the mortgage. In addition,  proponents of accelerated equity building have suggested that  homeowners with more equity at stake may have more incentive to stay  in their home because they have more invested in the home.", "In addition to building equity, borrowers with shorter-term mortgages or  those opting to make extra payments on 30-year mortgages would reduce  overall loan expenditures\u2014relative to the interest they would pay on a 30- year loan (see fig. 7). However, the overall higher mortgage payments  can make these options less affordable for lower-income borrowers or  limit financial flexibility, as discussed below."], "subsections": []}, {"section_title": "Trade-offs for Home Buyers and Homeowners Include Limited Access to Shorter-Term Loans and Reduced Affordability", "paragraphs": [], "subsections": [{"section_title": "Limited Access", "paragraphs": ["Accelerated equity-building products, such as a 15-year fixed-rate  mortgage or a WBHL, may not be accessible for all borrowers, partly due  to tighter credit requirements. Officials from a state housing finance  agency told us that minimum credit score requirements for some WBHLs  limit access for borrowers with lower credit scores, which includes many  lower-income borrowers. For example, a private mortgage insurer for  WBHLs requires a minimum credit score of 680, compared with the  minimum for the state housing finance agency of 640 for 30-year fixed- rate mortgages. The average score for WBHLs insured by the private  mortgage insurer is 749.", "Moreover, requirements for a minimum debt-to-income ratio may also  limit lower-income borrowers\u2019 ability to access WBHLs or 15-year fixed- rate loans. According to a private mortgage insurer, the average income  of borrowers for WBHLs it insures is 177 percent of county median  income. As mentioned previously, the QM rule generally requires home  buyers to have a debt-to-income ratio of 43 percent or less. As we  previously reported, although QM regulations are not expected to  significantly affect the overall mortgage market, some researchers have  estimated that QM regulations could adversely affect certain lower- income home buyers, particularly those living in high-cost areas. The  higher monthly payments of shorter-term loans can result in debt-to- income ratios significantly above the 43 percent limit, as illustrated in  table 3.", "In areas where housing costs are high, research suggests that lower- income home buyers are more likely to have high debt-to-income ratios.  Higher monthly payments for accelerated equity-building mortgages could  make some of these borrowers ineligible for those types of loans, or  essentially limit those borrowers to significantly smaller loans, as  discussed in the following section."], "subsections": []}, {"section_title": "Reduced Affordability and Financial Flexibility", "paragraphs": ["The biggest barrier to homeownership is affordability, which includes  having enough savings for a down payment as well as sufficient monthly  income to sustain a mortgage, according to agency officials and  stakeholders with whom we spoke. For example, 53 percent of adults  were unable to save any money in 2016 and 13 percent of adults had  difficulty paying their bills at least once in 2016 because of income  volatility, according to the Federal Reserve. For the same loan amount,  the monthly payments of a 15-year mortgage can be more than 40  percent greater than the monthly payments of a 30-year mortgage,  depending upon the current market interest rates. The higher monthly payments may make shorter-term loans unaffordable for many low- income home buyers or leave borrowers with less discretionary income to  cover other obligations, including paying off higher-interest debt, putting  some of them at greater risk of defaulting on monthly mortgage  payments.", "The higher monthly payments of shorter-term loans thus reduce  homeowners\u2019 financial flexibility. In contrast, experts and stakeholders  highlighted the greater flexibility a 30-year mortgage affords homeowners,  including for situations where individuals may experience instability or  fluctuations in their income. For example, though some home buyers may  have adequate income over the course of a year to afford monthly  mortgage payments, fluctuations in monthly income can affect a  homeowner\u2019s ability to sustain a higher monthly mortgage payment.  However, a 30-year fixed-rate mortgage may enable a homeowner to  make additional payments to build equity faster and still maintain a lower  monthly payment than a 15-year mortgage. As shown in the scenario in  figure 7 above, a homeowner could pay off a 30-year mortgage in 15  years by making additional monthly payments."], "subsections": []}, {"section_title": "Reduced Home Purchasing Power", "paragraphs": ["The higher monthly payment required of a shorter-term mortgage can  reduce a home buyer\u2019s purchasing power. As seen in table 4, a longer- term mortgage allows for a substantially higher home purchase price for  the same monthly payment for principal and interest.", "Borrowers are likely to qualify for smaller loan amounts for shorter-term  mortgages because of the effect of the higher monthly payments (of  shorter-term mortgages) on their debt-to-income ratio. Some proponents  of accelerated equity-building loans advertise that the monthly payment  amounts of shorter-term and 30-year fixed-rate mortgages are  comparable, with minimal loss in purchasing power. This might be the  case if the loan amount for the shorter-term mortgage were less than the  loan for the 30-year fixed-rate mortgage, as illustrated in table 4.  However, determining loss of purchasing power based on the monthly  payments of two mortgages with different loan amounts may not provide  an equivalent comparison."], "subsections": []}, {"section_title": "Potential Lower Lifetime Wealth", "paragraphs": ["Shorter-term mortgages can reduce lifetime wealth. This is because the  difference between the higher monthly payments and the monthly  payments of a 30-year mortgage could have been invested elsewhere to  produce a higher return\u2014assuming an individual has the financial  knowledge and discipline to invest the funds. The higher required  monthly payments of a 15-year mortgage can ensure a larger investment  in home equity. However, some research suggests that, depending on  market conditions and the risk appetite of a homeowner, purchasing a  house with a 30-year fixed-rate mortgage can provide a higher lifetime  return on investment compared to a 15-year fixed-rate mortgage because  the difference between the monthly payments can be invested at a rate of  return that likely would be higher than the difference in mortgage interest  rates between 30- and 15-year mortgages.", "In addition, homeownership may not always be the most effective means  of building household wealth. For example, in some circumstances  individuals may achieve greater household wealth through renting rather  than buying a home. Individuals for whom rental payments would be less  than mortgage payments for a comparable home can invest the  difference and build greater wealth\u2014if the return on their investment  exceeded the return associated with the appreciation of the value of a  home. However, factors such as an individual\u2019s financial literacy and  risk tolerance, and overall market conditions can affect the success of any  investment strategy, including investing in a home or in any alternatives."], "subsections": []}]}, {"section_title": "Trade-offs for Lenders Include Market Uncertainty", "paragraphs": ["For lenders, shorter-term mortgages generally reduce credit risk\u2014the  likelihood of loss with default\u2014compared with longer-term loans. In  addition, lenders with whom we spoke said that borrowers choosing  shorter-term loans (such as WBHLs) generally have good credit and high  incomes, further reducing credit and default risk. However, market  uncertainties related to the lack of a secondary market and performance  data could limit lenders\u2019 willingness to offer accelerated equity-building  products."], "subsections": [{"section_title": "Lack of a Secondary Market", "paragraphs": ["Products like WBHLs are not currently eligible for purchase by Fannie  Mae and Freddie Mac. According to Fannie Mae and Freddie Mac,  WBHLs are not currently traded in the secondary mortgage market  because of factors such as the low volume of transactions and the high  LTV ratio.", "Lenders with whom we spoke who offer WBHLs generally have been  holding the loans in their own portfolio, which can expose them to credit  risk and interest-rate risk. Some of the lenders told us they only offer  adjustable-rate WBHLs, to reduce interest-rate risk. But homeowners  could experience a rate shock when the interest rate adjusts. For  example, according to our analysis, if a WBHL for $250,000 adjusted the  interest rate after 7 years, the monthly payment could increase by more  than $200 (13 percent). The rate adjustment also might increase credit  risk for lenders, because some borrowers then might be less able to  sustain the monthly payments.", "Some lenders may be unwilling to take on these risks, which could limit  the availability of accelerated equity-building mortgages in the market.  However, lenders with whom we spoke have been exploring options to  sell loans that have \u201cseasoned\u201d\u2014for example, after the LTV ratio of the  loan reached 97 percent\u2014on the secondary market."], "subsections": []}, {"section_title": "Risk Premium", "paragraphs": ["Mortgages with LTV ratios of 96.5 percent or more (those that have 3.5  percent or less in down payment) also would be ineligible for some  federal guarantee programs. Generally, high-LTV loans have a greater  risk of default, and lenders with whom we spoke who offer WBHLs all  require private mortgage insurance for those loans. Lenders and private  mortgage insurers may price WBHLs at a premium\u2014for example, through  higher fees, interest rates, or insurance premiums\u2014to account for the  risk, which may add to the costs of monthly payments and make these  mortgages less affordable for some borrowers."], "subsections": []}, {"section_title": "Lack of Performance Data", "paragraphs": ["Because WBHLs are new (introduced in 2014) to the marketplace, there  are not enough data on loan performance to adequately assess payment  delinquency and default risk. The number of lenders currently offering  WBHLs is limited. According to the American Enterprise Institute, about  $100 million of WBHLs have been originated since 2014. Mortgage  insurers with whom we spoke provided a similar estimate.", "Lenders told us that the performance of their WBHLs is strong but may  not offer a meaningful indicator of future performance if the loans were to  become more widely available (because WBHLs currently tend to attract  less-risky borrowers). According to lenders and housing experts with  whom we spoke, performance data on similar loans, such as fixed-rate  15-year mortgages, cannot be readily used to project performance for  WBHLs because WBHLS are not strictly comparable (they have higher  LTV ratios)."], "subsections": []}]}, {"section_title": "Other Trade-offs Include Limited Promotion and Adoption Due to Product Complexity", "paragraphs": ["Stakeholders, including agency officials, also identified key trade-offs and  considerations in introducing new products and mechanisms to  accelerate equity building, such as how product complexity and reduced  market liquidity could affect the success and the costs to borrowers of the  products or mechanisms. These trade-offs and considerations apply to  proposed products such as the Fixed-COFI as well as to actions or  mechanisms for accelerating equity building, such as making mortgage  payments on a biweekly basis and paying off a percentage of the loan  principal in a shorter term (such as financing 20 percent of the principal in  5 years).", "Some stakeholders said that new products that have unfamiliar or  complex features, such as the Fixed-COFI mortgage\u2019s underlying  adjustable rate and equity savings account, could be difficult for lenders,  borrowers, and investors to understand, which could limit the promotion  and adoption of such products. In addition, administering new products or  mechanisms to accelerate equity building could have additional  complications, such as how to schedule and credit biweekly payments.  For example, lenders or servicers may not have a structure in place to  properly credit additional payments on a biweekly basis and may hold the  extra payment until the end of the month, negating the accelerated equity- building effect of the extra payment. Moreover, a few stakeholders said  that lenders or servicers may charge additional fees for processing  biweekly mortgage payments.", "Stakeholders and agency officials also noted that any new mortgage  product would not (at least initially) be eligible for securitizing and trading  in the secondary market. As a result, a new product would not be as liquid  as current products securitized and sold in the secondary market by  Fannie Mae or Freddie Mac, such as 30-year fixed-rate mortgages.  Because of the lack of market liquidity for new products, lenders may  charge a premium, making the products less affordable for lower-income  borrowers."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HUD, FHFA\u2014and FHFA also  provided copies to Fannie Mae and Freddie Mac, FHLBanks, Agriculture,  and VA for their review and comment. HUD, FHFA, FHLBanks, and  Agriculture provided technical comments on the report draft, which we  incorporated where appropriate.", "We are sending copies of this report to appropriate congressional  committees, the Secretary of HUD, the Director of FHFA\u2014who provided  copies to the President and Chief Executive Officer of Fannie Mae and  the Chief Executive Officer of Freddie Mac, the President of the FHLBank  of Des Moines (coordinating for the FHLBanks), the Secretary of  Agriculture, the Secretary of Veterans Affairs, 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) 512-8678 or GarciaDiazD@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report describes (1) how federal homeownership assistance  programs affect home equity building, and (2) options, including private- sector mortgage products, through which borrowers can accelerate home  equity building and the trade-offs of these options for both borrowers and  lenders. We define accelerated equity building as any mortgage product  or feature that accelerates the pace of principal reduction on a mortgage  debt, relative to a 30-year fixed-rate mortgage. We used the 30-year  fixed-rate mortgage as our point of comparison because it is the most  common type of mortgage product and represents the market standard.", "To describe how federal homeownership assistance programs affect  home equity building, we reviewed relevant federal statutes, regulations,  and agency program policies and guides and other resources to identify  relevant homeownership assistance programs from the Departments of  Housing and Urban Development (HUD), Veterans Affairs (VA), and  Agriculture (USDA); and Fannie Mae, Freddie Mac, and the Federal  Home Loan Banks (collectively, the enterprises). We reviewed prior GAO  reports on federal homeownership assistance programs and the U.S.  housing finance system. We also reviewed relevant academic papers  and literature discussing homeownership and equity building.", "We interviewed agency and enterprise officials to discuss the relevant  homeownership assistance programs and policy goals, including the  extent to which products or mechanisms used in the programs affect or  accelerate home equity building, and the role of the secondary mortgage  market in providing market liquidity for new mortgage products. In  addition to federal agencies and the enterprises, we interviewed officials  from two state housing finance agencies. Some stakeholders we  interviewed recommended the two state housing agencies because the  agencies likely placed a greater focus on accelerating home equity  building.", "To describe the options (or mortgage products) borrowers have to  accelerate home equity building, including any trade-offs, we used  databases such as ProQuest and searched for and reviewed papers and  literature published from 2007 to 2017 by individuals who discussed  options to accelerate home equity building. We also attended two housing  conferences and met with housing experts and stakeholders from  academia, housing advocacy organizations, and industry, including  mortgage lenders and insurers, selected because they made proposals to  increase homeownership or build home equity faster, wrote on  homeownership issues, were recommended by government officials, or  were involved in providing mortgage products designed to accelerate  equity building. From interviews with industry stakeholders and housing  conferences we attended, we identified two products: (1) the Wealth  Building Home Loan (WBHL), which has been introduced in the  marketplace, and (2) the Fixed-Payment Cost-of-Funds Index (COFI)  Mortgage, which has been proposed but is not currently offered by any  lenders.", "We reviewed and analyzed relevant academic papers and literature on  the advantages and trade-offs of options to accelerate equity building. We  also conducted interviews with academics, experts, industry stakeholders  (including mortgage lenders and insurers), and organizations to discuss  advantages and trade-offs of accelerated equity-building products, and  the role of the secondary market in providing market liquidity for new  mortgage products. We selected academics, experts, and industry  stakeholders and organizations who proposed accelerated equity-building  mortgage products, had written on homeownership and wealth building  issues, or whom officials of federal agencies and the enterprises or our  other interviewees recommended. We also attended housing  conferences, which provided additional suggestions for publications to  review and academics and stakeholders to interview.", "Furthermore, to illustrate methods to accelerate home equity building and  compare the effects of different mortgage products on home equity  building, we developed hypothetical mortgage scenarios. For the  mortgage scenarios, we used Excel\u2019s payment function to calculate the  amortization schedule of the mortgages in our hypothetical scenarios.  The payment function is a standard formula that calculates monthly  payment schedules based on inputting interest rate, number of payment  periods over the life of a mortgage, and the present value of the  mortgage. The scenarios we developed were only several possible  scenarios out of the many that we could have chosen. We identified  specific mortgage features in papers and literature by individuals who  proposed mortgage products designed to accelerate home equity  building. For illustration purposes, we used an average of the monthly  interest rates published in Freddie Mac\u2019s Primary Mortgage Market  Survey for September and October 2017, as well as current market rates  advertised by private mortgage lenders, to inform our selection of interest  rates for our scenarios.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: CoreLogic Home Equity Data, by State", "paragraphs": ["This appendix provides regional data on equity building that we obtained  from CoreLogic. CoreLogic is a publicly traded company that provides  data, analytics, technology, and services related to the mortgage industry,  among other things. The data in figure 8 show the percentage of  homeowners in each state who have 20 percent equity or less in their  homes. The level of home equity can be affected by a number of factors,  including the age of the loan, the amount of principal paid down, and  home market values. We did not assess the reliability of CoreLogic\u2019s  data."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Andrew Pauline (Assistant  Director), Kun-Fang Lee (Analyst in Charge), Steve Brown, Raheem  Hanifa, Jeff Harner, Jill Lacey, Barbara Roesmann, Jessica Sandler,  MaryLynn Sergent, Jena Sinkfield, Anne Stevens, and Jim Vitarello made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-229", "url": "https://www.gao.gov/products/GAO-18-229", "title": "Federal Law Enforcement: DHS and DOJ Are Working to Enhance Responses to Incidents Involving Individuals with Mental Illness", "published_date": "2018-02-08T00:00:00", "released_date": "2018-02-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Law enforcement encounters with individuals with mental illness may require special training and skills and can sometimes involve volatile situations, risking tragic injuries or even death.", "The 21st Century Cures Act includes a provision for GAO to review the practices that federal first responders, tactical units, and corrections officers (for the purposes of this study, \u201claw enforcement officers and agents\u201d) are trained to use in responding to incidents involving individuals with mental illness. This report addresses (1) challenges that federal law enforcement officers and agents face; (2) applicable training, policies, and guidance; and (3) existing leading practices, relevant tools, and efforts to leverage information.", "GAO selected the five DHS and five DOJ law enforcement components (e.g., Secret Service, Federal Bureau of Investigation) that represent the largest concentration of law enforcement officers within the two departments. GAO reviewed the training, policies, and guidance in place, as well as efforts to enhance them, and discussed these matters with knowledgeable officials. In addition, GAO held discussion groups with a nongeneralizable sample of law enforcement officers and agents, selected through component contacts, to discuss their perspectives. GAO also reviewed studies on law enforcement responses to individuals with mental illness to help identify leading practices and tools and interviewed stakeholders, selected through a structured process, to obtain their perspectives."]}, {"section_title": "What GAO Found", "paragraphs": ["Law enforcement officers and agents from the Departments of Homeland Security (DHS) and Justice (DOJ) cited a number of challenges in our discussion groups related to their response to incidents involving individuals with a mental illness.", "All of the federal law enforcement components in GAO's review either offer, receive, or are developing some form of training to their law enforcement officers and agents that addresses responding to incidents involving individuals with a mental illness. Further, all components have relevant policies or guidance in place, and all are undertaking efforts to enhance their practices in accordance with departmental guidance. Since DHS and DOJ components have varying missions and operational needs and interact with the public in different capacities, the nature and scope of training, as well as the number and duration of courses offered in response to individuals with mental illness varies; however, they generally include elements focusing on de-escalation and communication. In addition, DHS and DOJ both have efforts underway to have components review their training and policies under departmental guidance and plan to begin implementing any changes by 2018.", "Stakeholders cited leading practices and tools for effective law enforcement responses, and DHS and DOJ components have generally leveraged information from other knowledgeable parties. For example, the Crisis Intervention Team approach involves training selected law enforcement officers on mental health topics and dispatching those officers on mental-health related calls. While models like this are typically used by state and local law enforcement agencies, their benefits could be considered in other settings such as federal law enforcement. DHS and DOJ officials are also using collaborative mechanisms within their departments, such as conference calls and working groups with officials, that have helped them leverage information from knowledgeable parties. In addition, DOJ's Bureau of Justice Assistance (BJA), which supports programs and initiatives in the areas of law enforcement, among other activities, has developed and makes publicly available resources such as its Police-Mental Health Collaboration Toolkit. BJA also is working to stand up a national training and technical assistance center to improve law enforcement responses to people with mental illness. While aimed at state, local, and tribal law enforcement, a BJA official also acknowledged that the center could serve as an additional resource for federal law enforcement agencies to consult as they review relevant trainings, policies, and guidance on this topic."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the International Association of Chiefs of Police (IACP), law  enforcement officers nationwide are increasingly called upon to respond  to and intervene on behalf of people affected by mental illness. Based on  estimates from the Substance Abuse and Mental Health Services  Administration\u2014an agency within the Department of Health and Human  Services\u201444.7 million adults in the United States had a mental illness in  2016. Since law enforcement officers can encounter individuals affected  by mental illness in the course of their duties, the nature of their  interaction has become an issue of national concern. In particular,  research has demonstrated that such encounters: may require special training and skills to address; may depend on the availability of community and mental health  resources for a positive outcome; are often time-consuming and difficult for law enforcement officers to  typically involve repeat contacts with individuals who have unmet  mental health needs; and  can involve volatile situations, risking tragic injuries or even death.", "Such concerns and potential safety issues underscore the importance of  developing tailored approaches, training, and policies to help guide police  departments and law enforcement officials.", "To date, most efforts to promote such training or policies have been  focused on state and local law enforcement agencies, such as police  departments. While federal law enforcement agencies typically do not  serve as first responders to emergency calls, they do interact with the  public in the course of their duties and can encounter individuals with  mental illness. At the federal level, the Department of Homeland Security  (DHS) and Department of Justice (DOJ) are responsible for enforcing  many laws regarding the safety and security of the United States, and  these two departments house the majority of federal law enforcement  officers nationwide.", "The 21st Century Cures Act includes a provision for us to review, among  other things, practices that federal first responders, tactical units, and  corrections officers are trained to use in responding to incidents involving  individuals with mental illness. This report addresses the following key  questions: (1) What challenges, if any, do federal law enforcement  officers and agents at selected DHS and DOJ components face when  responding to incidents involving individuals with mental illness? (2) What  type of training, policies, and guidance, if any, are in place at selected  DHS and DOJ components to prepare federal law enforcement officers  and agents for responding to incidents involving individuals with mental  illness? (3) What leading practices or tools have relevant stakeholders  cited for effective responses to incidents involving individuals with mental  illness, and how have DHS and DOJ components leveraged information  from other knowledgeable parties?", "We focused our review on the training, policies, and guidance put forth by  the DHS and DOJ components listed in table 1 below because they  comprise nearly all of the federal law enforcement officers in these  departments.", "To identify the challenges that federal law enforcement officers and  agents at our selected DOJ and DHS components face when responding  to incidents involving individuals with mental illness, we held discussion  groups with six to eleven agents or officers within each selected  component to ask about their experiences. We worked with officials at  each component to identify officers and agents with varied tenures and  experiences. We then summarized the information collected from the  discussion groups and identified common themes across the selected  components. We worked closely with the departments to organize these  discussion groups; however, these officers\u2019 and agents\u2019 perspectives  cannot be generalized to their entire components or to all federal law  enforcement components. Nevertheless, their views provided valuable  insights into the challenges they face on the job.", "To identify the training, policies, and guidance in place, we reviewed  documents from each of our selected law enforcement components,  when available, and conducted interviews with officials at the selected  components responsible for the development or delivery of training or  policies. We also reviewed fiscal year 2018 budget justifications for each  of our selected components to identify changes in staffing levels or  training plans that may be related to officers\u2019 and agents\u2019 response to  incidents involving individuals with mental illness. In addition, since  section 504 of the Rehabilitation Act of 1973, as amended (section 504)  prohibits discrimination on the basis of disability, which includes mental  illness, in federally funded and federally conducted programs and  activities, we took steps to understand the section\u2019s applicability to  federal law enforcement operations. Specifically, we reviewed  departmental guidance related to section 504 and reviewed the selected  components\u2019 documentation of efforts to review their training, policies,  and procedures in accordance with that guidance. We also interviewed  department and component officials familiar with the review efforts.", "To identify leading practices stakeholders cited for effective law  enforcement responses to incidents involving individuals with mental  illness, we used a multi-stage process. We first conducted a search of  databases and organizational websites to identify published work related  to law enforcement responses to individuals with mental illness that had  been published on or after January 1, 2007. We then narrowed our  search and reviewed only literature review articles, meta-analyses, and  summary papers published by academics, think tanks and advocacy  groups, or government agencies to identify any potential leading  practices. Through our review, we identified two potentially leading  practices in the field of law enforcement responses to incidents involving  individuals with mental illness.", "Next, we identified potential stakeholders through a search of literature  review articles, meta-analyses, and organizational websites related to law  enforcement responses to incidents involving individuals with mental  illness. Through our review of these documents and websites, we  selected six stakeholders in the field of law enforcement-mental health to solicit their opinions on leading practices. These stakeholders consisted  of four organizations and two independent researchers who have either  published research or implemented programs, among other criteria,  related to law enforcement responses to incidents involving individuals  with mental illness. Specifically, we asked stakeholders to validate that  the two practices that we had initially identified were in fact leading  practices, and to provide any additional leading practices.", "To determine if DOJ and DHS components leverage information from  other knowledgeable parties, we conducted interviews with or gathered  written information from agency officials from the selected components  who are responsible for training and policy development. Further details  about our scope and methodology can be found in Appendix I.", "We conducted this performance audit from February 2017 through  February 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform an  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Law Enforcement Interaction with Individuals with Mental Illness", "paragraphs": ["Since the 1960s, the percentage of individuals with mental illness being  treated in a hospitalized setting has decreased dramatically in an effort to  move care away from institutional settings into a wider range of  community-based treatment. This process, known as  \u201cdeinstitutionalization,\u201d has been driven in part by limited funding available  for mental health services, changes in treatment philosophy, and medical  advancements. According to a 2015 Federal Bureau of Investigation (FBI)  publication, one result from this shift is that local police departments have  had to meet the growing needs of individuals suffering mental health  emergencies (e.g., a schizophrenic episode), and are often the first  source of assistance in helping to arrange treatment for these  individuals.", "Similarly, the IACP reports that police officers often have to \u201cmanage  situations that result from a history of mental health policy and legislative  decisions made by federal and state governments.\u201d According to the  IACP, law enforcement officers\u2014generally local police\u2014may then find  themselves serving in a role similar to that of a social worker in attempting  to locate treatment services for such individuals. The IACP also reports  that such increasing interactions may result in individuals with mental  illness being arrested and placed in jail, rather than receiving treatment  from mental health facilities. This can result in a cycle of arrest,  imprisonment, and recidivism for such individuals. In addition,  interactions between law enforcement officers and individuals with mental  illness have the potential to escalate into violence.", "In recent years, a number of professional organizations and advocacy  groups such as IACP, the Police Executive Research Forum (PERF), the  National Alliance on Mental Illness, and Council of State Governments  Justice Center (CSG JC) have researched and advocated for different  approaches that may reduce the likelihood of violent encounters or help  officers connect the individuals they encounter with proper treatment  services. In addition, DOJ\u2019s Bureau of Justice Assistance (BJA), within  its Office of Justice Programs, has created a compendium of existing  information and research in the field of state and local law enforcement  responses to individuals with mental illness.", "Federal law enforcement officers and agents may interact with individuals  displaying signs of mental illness in a number of different types of  incidents while performing their various missions, such as protecting  federal property or officials or when apprehending subjects of an  investigation. Figure 1 provides one example of a possible incident an  officer or agent might experience and the response options available.  Generally, when federal officers and agents encounter individuals  displaying signs of mental illness\u2014and there is no evidence of a federal  crime\u2014they may refer them to local law enforcement or health care  providers to assess their mental health and determine whether they need  further health care. If local providers determine that such care is  needed, it is generally provided through a voluntary or involuntary  commitment to a local mental health services provider. One exception to  this is for correctional officers and other staff within BOP, as these staff  interact with individuals with a diagnosed mental illness as part of their  daily duties in ensuring a secure prison environment. BOP pre- designates all inmates entering its institutions and assigns initial mental  health and medical screen assignments. Throughout an inmate\u2019s  incarceration, BOP\u2019s psychologists, psychiatrists, and qualified mid-level  practitioners can determine a new mental health care level following a  review of records and a face-to-face clinical interview."], "subsections": []}, {"section_title": "Relevant Legislation and Departmental Efforts", "paragraphs": ["Under section 504 of the Rehabilitation Act of 1973, as amended,  discrimination on the basis of disability in federally funded and federally  conducted programs and activities is prohibited. A person with a  disability includes anyone who has a physical or mental impairment that  substantially limits one or more major life activities, has a record of such  impairment, or is regarded as having such an impairment.", "DHS and DOJ both currently have efforts underway, in various stages of  development, to have their components review their existing policies,  guidance, and training in response to departmental guidance on  addressing individuals with disabilities and obligations under section 504.  Pursuant to departmental guidance, after completing their reviews,  components are to determine areas that could be enhanced. Within DHS,  components have been asked to report on the status of their efforts to  DHS\u2019 Office for Civil Rights and Civil Liberties (CRCL). Within DOJ, the  Office of the Deputy Attorney General (ODAG) is overseeing components\u2019  efforts.", "In addition, the 21st Century Cures Act requires the Attorney General to  provide direction and guidance for the following by December 13, 2017:  \u201cPrograms that offer specialized and comprehensive training, in  procedures to identify and appropriately respond to incidents in which  the unique needs of individuals who have a mental illness are  involved, to first responders and tactical units of\u2014(A) Federal law  enforcement agencies; and (B) other Federal criminal justice  agencies, such as  and the Administrative Office of the United  States Courts, and other agencies that the Attorney General  determines appropriate.\u201d  \u201cThe establishment of, or improvement of existing, computerized  information systems to provide timely information to employees of  Federal law enforcement agencies, and Federal criminal justice  agencies to improve the response of such employees to situations  involving individuals who have a mental illness.\u201d"], "subsections": []}]}, {"section_title": "Discussion Groups Identified Several Challenges that Officers and Agents Encounter When Responding to Incidents Involving Individuals with Mental Illness", "paragraphs": ["According to the DHS and DOJ law enforcement officers and agents we  interviewed, they are not positioned to diagnose any specific mental  health condition that an individual might have, as they are not trained  mental health professionals. However, responding to incidents involving  individuals with mental illness can be challenging for multiple reasons,  including determining whether the person is suffering from a mental  illness or from another issue, such as drug addiction, and communicating  with the person, for example, when a person may be suffering from  delusions. These officers and agents face these challenges while also  being responsible for ensuring their own safety and that of others in the  area. Some of the common challenges officers and agents identified  during our discussion groups follow.", "Identifying Whether an Individual Has a Mental Illness  Some officers and agents in our group discussions stated that when  encountering individuals displaying erratic behavior (e.g., rapid or  nonsensical speech, paranoid or delusional statements), it can be difficult  to determine if that behavior is attributable to a mental illness or the  influence of drugs. Specifically, Border Patrol agents\u2014who are broadly  responsible for preventing the illegal entry or exit of people and goods at  places other than ports of entry\u2014stated that determining whether  someone has a mental illness or is experiencing other issues is  challenging and may be complicated by language barriers. Border Patrol  agents may at times encounter large groups of people attempting to cross  the border at one time and thus have limited time to make that  determination. ATF officers\u2014who may encounter individuals with a  mental illness who are targets of an investigation\u2014commented that  incidents may involve an individual who could suffer a mental illness  (treated or untreated), or be under the influence of alcohol or drugs.  Unless the individual discloses his or her condition, or family or friends  are there to explain the condition, officers would not know the cause of  the individual\u2019s behavior. They explained that if mental health information  about a suspect is known in advance of an operation, officers can adjust  their approach; however, they told us that most of the time they do not  know if someone has a mental health condition and how it might present  itself.", "Similarly, an FBI police officer\u2014who may encounter individuals displaying  signs of mental illness if those individuals enter an FBI office\u2014told us that  it can be challenging to deal with an individual who is acting erratically,  not knowing precisely whether the behavior is attributable to a mental  illness, and there may be limited time available to address an individual  posing a safety risk. BOP corrections officers also echoed this challenge.  They said that despite having back-up mental health staff on call, their  initial reaction to an inmate exhibiting some type of erratic behavior has to  be fairly quick to secure the safety of the staff and other inmates. Officers  and agents across components and departments made clear that they  are not mental health professionals or psychologists and, as such, are  charged with responding to the behaviors that are exhibited to secure the  scene.", "Communicating with Individuals with a Mental Illness  Some of the officers and agents in our discussion groups stated that  communicating effectively with someone exhibiting signs of a mental  illness and understanding what he or she may be going through or how  he or she sees reality can be challenging. One officer told us that trying to  make individuals who may have a mental illness understand that their  reality is not everyone else\u2019s reality is particularly challenging. This was  very difficult, for example, for Secret Service Uniformed Division officers  who explained that they encounter individuals when providing security  along the White House fence and for FPS officers, who often encounter  individuals displaying signs of mental illness near or in federal buildings  that they are assigned to protect. As the Secret Service officers  explained, even if individuals exhibit delusional behavior, so long as they  have not broken any laws, then they are free to be near protected federal  venues and the officers are limited in any actions they can take.", "One officer, discussing the challenges in  speaking with someone with a mental illness  who may be experiencing delusions, stated  that the person is \u201cwholeheartedly convinced  that what he or she perceives is the true  reality.\u201d", "Officers and agents who we met with in CBP reported that they rely on  common sense to dictate appropriate action and use reasonable efforts to  protect themselves and others. They noted that additional training on  communicating effectively with individuals suffering from mental illness  could be beneficial.", "The challenges noted above in identifying causes of erratic behavior or  effectively communicating with individuals with a mental illness can make  it difficult for officers to resolve a tense situation or apprehend an  individual (if necessary) as securely or peacefully as possible. For  example, Border Patrol agents stated that ensuring that such encounters  are resolved safely for the individuals involved and other members of the  public is their biggest challenge. It might require removing someone in  distress from a group of individuals that he or she may be traveling with or  keeping him or her calm. When someone is in an extreme state of panic,  emotional distress, or anger, officers try to remove the person from the  group to prevent a potential incident from escalating quickly.", "Operating with Limited Access to Mental Health Resources  Officers and agents also stated that a limited number of mental health  professionals available within their components or through local agencies  can pose a challenge in helping persons with mental illness receive  necessary treatment. As such, they must rely on state and local entities in  the area (e.g., law enforcement, hospitals) to provide assistance for  individuals. Federal Air Marshals\u2014who provide protection at airports and  other transportation modes\u2014we spoke with explained that since they do  not have holding facilities to secure individuals with mental illness, they  are reliant on local law enforcement and mental health professionals to  manage an incident. Officers and agents highlighted the importance of  maintaining close relationships with state and local partners and added  that trained mental health professionals provide an excellent resource.", "In addition, officers and agents in some discussion groups noted there  may be training offered by state or local agencies related to  understanding and responding to individuals with mental illness that could  be leveraged by federal agencies. Officers and agents reported,  however, that it can be difficult for the components to find the time and  resources to send officers to the trainings. According to USMS officers\u2014 who provide security at federal courthouses and oversee transport of  federal prisoners\u2014this is particularly challenging in small offices where  there may be very few staff.", "Frequently Encountering the Same Individuals  Another common challenge noted in discussion groups was that officers  and agents repeatedly encounter the same individuals with mental illness.  Officers and agents explained that they can sometimes apprehend  individuals who are creating a disturbance, but these individuals often  cannot be charged with a federal crime. As such, following the  apprehension, the officers and agents release these individuals to local or  state authorities who may transport them to local providers for a mental  health evaluation. Typically, if the local providers determine a  commitment is necessary, they will hold these individuals at a hospital or  clinic for up to 72 hours. According to the officers and agents in our  discussion groups, many of these individuals return after they are  released and the officers and agents encounter them time and again, with  very little that they can do to provide these individuals with assistance.  According to the officers and agents, incidents involving frequent  encounters with the same individuals can take time away from performing  other important activities.", "Secret Service Uniformed Division officers told us they repeatedly  encounter the same individuals with mental illness and know some of  these individuals very well. For example, Secret Service officers stated  that when performing their duties in patrolling the grounds of the White  House, they have had frequent encounters with a woman who believes  she has family members living in the White House. The officers have  turned her away from the scene on multiple occasions, but she continues  to return."], "subsections": []}, {"section_title": "Components Have Some Type of Training, Policies, and Guidance Related to Mental Illness, and Reviews to Enhance Practices are Underway", "paragraphs": [], "subsections": [{"section_title": "DHS and DOJ Components Offer, Receive, or Are Developing Some Type of Training Related to Mental Illness", "paragraphs": ["All of the law enforcement components in our scope offer training directly,  receive training through FLETC, or are developing some training on  responding to incidents involving individuals with mental illness. Agency  and FLETC training includes courses on communication, de-escalation,  and suicide prevention (related to federal inmates). Since these  components have varying missions and operational needs and interact  with the public in different capacities, the nature and scope of this  training, as well as the number of courses and the duration of courses  offered varies. For example, BOP\u2019s staff\u2014including food service workers  and nurses, as well as correctional officers\u2014have daily contact with  inmates with mental illness and can act as \u201cfirst responders\u201d when  situations merit. According to BOP officials, training is offered to all staff in  all of its institutions on mental health and working with the mentally ill,  along with courses on communication, de-escalation, suicide prevention,  and use of force. As another example, ATF\u2019s agents told us they have  less routine contact with individuals with mental illness, but ATF offers a  course to its agents on de-escalation concepts and tactics, which  addresses responding to incidents involving individuals with mental  illness, as well as crisis intervention training to its cadre of crisis  negotiators. Further, some of the components\u2019 training is mandatory and  offered annually through class instruction or online portals. These courses  may be offered to new hires or available to tenured officers. In addition,  some components\u2019 training courses are delivered as stand-alone  sessions, while others may be modules within a larger course exploring  other law enforcement topics.", "Three DHS operational components in our scope, in addition to FLETC,  offered some type of training specifically for their officers and agents.", "Another one (TSA) has training in development as of October 2017, on  topics related to responding to incidents involving individuals with mental  illness.", "FLETC explained that it provides basic training to all DHS law  enforcement officers through one of three basic program categories\u2014 Center Basic, Center Integrated Basic, and Agency Specific Basic\u2014which  vary in length. Two Center Basic training programs include a 2-hour  module titled Managing Abnormal Behavior, which covers how to identify  common signs of mental disorders (among other things) and how to  handle people exhibiting abnormal behavior. Specifically, this module  examines basic human behavior that may be classified as abnormal,  differentiates between mental disorders, and also covers physical and  organic causes that may be related to abnormal behavior with the  appropriate officer responses. In addition, FLETC informed us that it has  developed scenario-based training in these programs, allowing the  officers or agents to develop decision-making skills in situations involving  people exhibiting abnormal behavior. See appendix II for more  information on FLETC\u2019s training programs.", "U.S. Secret Service Training  We observed Secret Service training on  Protective Intelligence Questioning for First  Line Officers, which is offered to Uniformed  Division Officers. The course instructor played  the role of three different individuals with  schizophrenia, bipolar disorder, and  sociopathic personality disorder and trained  agents on interacting and interviewing  subjects who attempt to breach the White  House fence.", "In addition to this module provided to all DHS agents and officers, the  components in our review also offer or are preparing component-specific  training courses. Table 2 lists illustrative examples of DHS training.", "In addition, TSA has developed a mandatory course entitled Awareness  Training on Mental Health Conditions to be delivered in the classroom  and through scenarios and exercises during fiscal year 2018. This course  is designed to introduce Federal Air Marshals to the fundamentals of  predominant mental disorders, such as schizophrenia or psychosis.", "All of the DOJ components in our review provide some type of training to  their officers on topics related to responding to incidents involving  individuals with mental illness\u2014as illustrated in Table 3."], "subsections": []}, {"section_title": "DHS and DOJ Components Have Existing Policies or Guidance That Addresses Responding to Individuals with Mental Illness", "paragraphs": ["The law enforcement components within our scope at DHS and DOJ  have policies or guidance in place that addresses responding to incidents  involving individuals with mental illness. Some components\u2019 policies or  guidance specifically addresses mental illness, while others touch on the  issue as part of larger policies on other topics (such as use of force)\u2014as  illustrated in Table 4."], "subsections": []}, {"section_title": "All DHS and DOJ Components Are Reviewing Policies, Guidance, and Training to Align with Departmental Guidance", "paragraphs": ["DHS Efforts to Review Policies, Guidance, and Training  DHS has guidance in place to help ensure that its components have  policies and training that ensure their alignment with section 504 of the  Rehabilitation Act. In 2013 and 2015, respectively, DHS issued a  directive and implementing instruction to its components intended to  strengthen compliance with section 504. These documents required DHS  components to conduct a self-evaluation and prepare a component plan  identifying any policies or practices that may result in a qualified individual  with a disability being excluded from participation in, or being denied the  benefits of, a program or activity.", "Department of Homeland Security (DHS)  Component Self-Evaluation Tool  The self-evaluation tool that DHS\u2019s Office of  Civil Rights and Civil Liberties developed  requires components to\u2014among other  things\u2014describe whether there is an  established policy ensuring equal treatment  for individuals with disabilities, how the  component\u2019s personnel and procedures  ensure that individuals with disabilities are  treated in a nondiscriminatory manner, and  the component\u2019s process for providing  auxiliary aids and services to ensure effective  communication. The tool also provides  examples of interactions in the areas of  customer service, security, and custody  activities that would likely be compliant, or  possibly noncompliant, with section 504 of the  Rehabilitation Act.", "In 2016, DHS\u2019s CRCL office issued guidance and a self-evaluation tool to  DHS components on the steps to take in performing the self-evaluation of  their facilities, programs, policies, and practices (to include training). The  guidance also addresses the development and execution of the  components\u2019 plans intended to remedy any areas deemed insufficient in  permitting individuals with disabilities\u2014including mental illness\u2014to  participate fully in the components\u2019 programs and activities.", "Disability Access Coordinators, who are representatives from each  component charged with overseeing their components\u2019 responses to DHS  Rehabilitation Act guidance, are leading the components\u2019 efforts in  conducting the self-evaluations. CRCL set a deadline for components to  submit all self-evaluations to CRCL for review by the end of August 2017.  As of September 2017, all five components had submitted self- evaluations. CRCL officials explained that as they review self- evaluations, they are looking to see if policies or training for law  enforcement officers\u2019 and agents\u2019 responses to individuals with mental  illness have been identified or otherwise addressed. If not, the officials  indicated that they will request the components identify and address this  topic in their plans for aligning with Rehabilitation Act guidance. The  remaining steps in CRCL\u2019s effort to review and comment on component  plans as of September follow:", "December 31, 2017: CRCL provides comments to components on the  content of their self-evaluations.", "February 28, 2018: the components develop and submit their draft  plans for aligning with the Rehabilitation Act guidance.", "April 30, 2018: CRCL reviews and provides comments on the  components\u2019 draft plans.", "May 31, 2018: the components address CRCL\u2019s comments and  submit their final plans for alignment with Rehabilitation Act guidance  for approval.", "DOJ Efforts to Review Policies, Guidance, and Training  DOJ has directed components to review and implement guidance on  addressing individuals with disabilities\u2014including mental illness\u2014and  obligations under section 504. Specifically, in January 2017, DOJ\u2019s then- Deputy Attorney General issued a memo with attached guidance directing  components to review their policies and training and, where necessary,  modify or develop policies and training to implement legal requirements  and principles related to section 504. This guidance identified, among  other things, DOJ\u2019s law enforcement components\u2019 legal obligations under  section 504 as well as the policies and procedures that components must  have so that officers and agents can anticipate and plan for encounters  with members of the public with disabilities. For example, the guidance  states that law enforcement components must train officers and agents  on different types of commonly encountered disabilities; how to identify,  without medical or psychological training, analysis, or diagnosis, common  characteristics and behaviors most often associated with disabilities; and  appropriate responses to the challenges that an encounter with a member  of the public with a disability may present. Training for officers and agents  in effective communication with members of the public with a mental  illness is explicitly referenced in the guidance as well.", "To date, officials from DOJ\u2019s Office of the Deputy Attorney General  (ODAG)\u2014who are overseeing the components\u2019 efforts\u2014have maintained  communication with the components to confirm that they have begun  reviewing their policies and training to identify any deficiencies or  necessary enhancements pursuant to the January 2017 guidance. During  the course of our review and in part due to our inquiries, in the fall of  2017, ODAG notified the components that they should complete their  reviews by December 2017. ODAG also notified the components that  they should begin implementing any new policies or training identified by  September 2018.", "In addition, a provision of the 21st Century Cures Act\u2014section 14025\u2014 requires DOJ to provide direction and guidance to federal law  enforcement agencies and federal criminal justice agencies on training  programs and improved technologies related to responding to individuals  with mental illness, by December 13, 2017. ODAG officials told us that  the January 2017 guidance addresses the requirement to provide  direction and guidance on training for the DOJ components, but  acknowledged that it does not respond to all of the requirements for the  Attorney General under section 14025 of the 21st Century Cures Act. In  particular, section 14025 requires the Attorney General to provide  direction and guidance to federal law enforcement agencies and federal  criminal justice agencies beyond DOJ in the areas of specialized and  comprehensive training programs to identify and respond to individuals  with mental illness. Section 14025 also calls for direction and guidance on  the establishment and improvement of computerized information systems  to provide timely information related to situations involving individuals with  mental illness.", "As a result of our questions about whether such efforts would be  developed, on December 7, 2017, DOJ sent a letter from the Principal  Deputy Assistant Attorney General for the Office of Justice Programs to  federal law enforcement partners outlining resources available for federal  law enforcement when considering training or procedures appropriate for  their missions. Specifically, DOJ sent the letter to executive officers within  DOJ, DHS, the Administrative Office of the United States Courts, and  other executive departments that DOJ deemed appropriate. Some  examples of resources that the letter highlights include (1) the Police- Mental Health Collaboration Toolkit, which provides resources to assist  law enforcement agencies in partnering with mental health providers (and  is discussed later in this report) and (2) a forthcoming \u201croadmap\u201d planned  for release in 2018 that the Office of Justice Programs and BJA are  developing that will help law enforcement agencies as they plan for  engagement with mental health entities."], "subsections": []}]}, {"section_title": "Stakeholders Cited Leading Practices and Tools for Effective Law Enforcement Responses, and Components Have Generally Leveraged Information from Other Knowledgeable Parties", "paragraphs": [], "subsections": [{"section_title": "Two Leading Practices and Four Tools Can Enhance Officer Responses to Individuals with Mental Illness", "paragraphs": ["Of the six stakeholders in the field of law enforcement-mental health we  interviewed, all six considered the Crisis Intervention Team Model to be a  leading practice and five considered the Co-responder Model to be a  leading practice\u2014see Figure 2. These practices are typically  implemented at local and state law enforcement agencies. Nevertheless,  certain aspects and associated benefits could be considered in other  settings, such as federal law enforcement operations.", "In addition, stakeholders cited four key tools that may assist law  enforcement agencies in responding to individuals with mental illness.  These tools can include training guides, summary reports, or model  policies, among other things, as shown in table 5."], "subsections": []}, {"section_title": "Components Have Generally Leveraged Information from Other Knowledgeable Parties, and BJA Is Standing Up a Training and Technical Assistance Center", "paragraphs": ["DHS and DOJ law enforcement components generally leveraged  information from knowledgeable parties within their departments on  efforts to respond to incidents involving individuals with mental illness. To  enhance information sharing among DHS components, CRCL has  implemented an interagency collaboration mechanism. Specifically,  CRCL officials reported that since June 2016 they have led monthly  coordination conference calls with component Disability Access  Coordinators to collaborate on their respective efforts to complete their  self-evaluations. According to the Disability Access Coordinators, these  sessions have provided a forum to share ideas and lessons learned  across the DHS components. In addition, according to CRCL officials,  once their office receives the components\u2019 self-evaluations and plans, it  aims to disseminate information on lessons learned and effective  practices to all the components.", "Coordination efforts to leverage information also exist within DOJ.  Specifically, through the efforts to review policies and training under the  January 2017 guidance and provisions of the 21st Century Cures Act  discussed earlier, DOJ\u2019s components have reported taking efforts to  collaborate with one another and share information on training, best  practices and lessons learned. For example, officials from ATF reported  holding meetings with other components to discuss their efforts to  implement the January 2017 guidance.", "Additionally, BJA officials told us they took part in the ODAG\u2019s working  group in early 2016 when the then-Deputy Attorney General\u2019s January  2017 guidance was in development. Along with BJA, this ODAG working  group included DOJ\u2019s law enforcement components and other offices  within the department. The working group provided a forum to advise  ODAG in developing the January 2017 guidance and discuss issues  surrounding disabilities, which involved responses to individuals with  mental illness. BJA officials told us that they provided to components a  compendium of all its resources available to assist law enforcement\u2019s  response to incidents involving individuals with mental illness. BJA  officials said they later took the most promising of these and folded them  into its Police-Mental Health Collaboration Toolkit. Further, BJA officials  told us that they make all of the resources it develops, including the  Toolkit, publicly available on the BJA website. According to the officials,  these resources are available for all law enforcement agencies, including  federal entities, to review and consider implementing as they deem  appropriate.", "In addition to these online resources, which facilitate information sharing,  BJA is also planning to release a national CIT curriculum in 2018 that will  serve as a resource that can be tailored to reflect mental health training  and collaboration under development or underway at the local level. The  Office of Justice Programs is supporting a partnership between the IACP  and a research organization to deliver the curriculum to law enforcement  agencies. In addition, BJA\u2014as one of DOJ\u2019s grant-making entities\u2014is  standing up the National Training and Technical Assistance Center to  Improve Law Enforcement Responses to Individuals with Mental Health  Disorders and Intellectual and Developmental Disabilities. BJA officials  reported that in September 2017, BJA selected the awardee to design  and operate the center. Once the center is operational, it will benefit state,  local, and tribal law enforcement entities. In addition, BJA envisions that  the center will facilitate better collaboration between law enforcement  agencies and their mental health partners. A BJA official also  acknowledged that the center could serve as an additional resource for  federal law enforcement agencies to consult as they review their  trainings, policies, and guidance relevant to responding to incidents  involving individuals with mental illness."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOJ and DHS for their review and  comment. The departments did not provide us with formal written  comments, but did provide technical comments, which we incorporated as  appropriate.", "We are also sending this report to the appropriate congressional  committees and members. In addition, this report is available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions, please contact Diana Maurer at  (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made significant contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report addresses the following key questions: (1) What challenges, if  any, do federal law enforcement officers at selected Department of  Homeland Security (DHS) and Department of Justice (DOJ) components  face when responding to incidents involving individuals with mental  illness? (2) What type of training, policies, and guidance, if any, are in  place at selected DHS and DOJ components to prepare federal law  enforcement officers for responding to incidents involving individuals with  mental illness? (3) What leading practices or tools have relevant  stakeholders cited for effective responses to incidents involving  individuals with mental illness, and how have DHS and DOJ components  leveraged information from other knowledgeable parties?", "We focused our review on the training, policies, and guidance put forth by  the DHS and DOJ components listed in table 6 below because they  comprise nearly all of the federal law enforcement officers in these  agencies.", "To identify challenges that federal law enforcement officers and agents at  our selected DHS and DOJ components face when responding to  incidents involving individuals with mental illness, we held discussion  groups of six to eleven agents or officers within each component in our  scope. We worked with officials at each component to identify officers and  agents with varied tenures and experiences. We held semi-structured in- person and telephone discussion groups using a script and set of  questions. Discussion groups are not designed to provide generalizable  or statistically reliable results; they are instead intended to generate in- depth information about the reasons for the discussion group participants\u2019  attitudes on specific topics and to offer insight into their concerns. During  the discussion groups, we asked officers and agents what challenges  they face when responding to incidents involving individuals with mental  illness, among other topics. We moderated each discussion to keep  participants focused on the specified issues within discussion time  frames. Participants identified challenges when we explicitly asked them  to do so, or during the course of the discussion. We took detailed notes  on each discussion and documented the perspectives participants raised  in each discussion group. We then summarized the information collected  and identified common themes. Because our questions were open-ended  and designed to allow participants to discuss any challenges they may  have experienced, we cannot determine whether the absence of a  particular concern or challenge by a group of officers or agents is an  indication that they did not experience the concern or that they did not  raise it when asked broadly about the topic.", "While these participants\u2019 perspectives cannot be generalized to their  entire component or all law enforcement components, their views  provided insights into the challenges federal law enforcement officers and  agents face when responding to incidents involving individuals with  mental illness. We have relied on the observations gathered during these  discussion groups to answer this reporting objective as the officers and  agents are uniquely positioned to speak to their experiences, and any  challenges they face, responding to incidents involving individuals with  mental illness.", "To identify the training, policies, and guidance in place, we reviewed  documents from each of our selected law enforcement components,  when available, to examine their nature and scope. We further reviewed  information on the duration, requirements, and delivery mechanism of the  training. We then summarized and verified this training information with  each component through email documentation. For the policies, we  reviewed the documentation to determine whether it was specific to  responding to incidents involving individuals with mental illness or  whether mental illness was contained within a larger directive. We also  reviewed 2018 budget justification documents for each component in  order to identify changes in staffing levels or training plans that might be  related to officers\u2019 and agents\u2019 response to incidents involving individuals  with mental illness. We also interviewed officials responsible for the  development or delivery of training, policies, or guidance from the  components in our scope to gather additional information that could help  prepare federal law enforcement officers and agents to respond to  incidents involving individuals with mental illness. In addition, since  section 504 of the Rehabilitation Act of 1973, as amended, prohibits  discrimination on the basis of disability, which includes mental illness, in  federally funded and federally conducted programs and activities, we  took steps to understand the section\u2019s applicability to federal law  enforcement operations. Specifically, we reviewed departmental  guidance related to section 504 and reviewed the selected components\u2019  documentation of efforts to review their training, policies, and procedures  in accordance with that guidance. We also interviewed officials from the  departmental offices overseeing these component efforts\u2014DHS\u2019s Office  of Civil Rights and Civil Liberties (CRCL) and DOJ\u2019s Office of the Deputy  Attorney General (ODAG).", "To identify leading practices or tools stakeholders cited for effective law  enforcement responses to incidents involving individuals with mental  illness, we used a multi-stage process Specifically, we:  1.  conducted a search of databases, such as ProQuest and Scopus, and  organizational websites, such as those from the Council of State  Governments, Justice Center (CSG JC) and Police Executive  Research Forum (PERF), to identify published work related to law  enforcement responses to individuals with mental illness that had  been published on or after January 1, 2007 (the last 10 years).  2.  reviewed the 96 published research papers and articles that our initial  search yielded and then refined our selection criteria to include only  those that were literature reviews, meta-analyses, or summary papers  published by academics, think tanks and advocacy groups, or  government agencies. We reviewed summary articles rather than all  the primary research articles to balance breadth, depth, and  efficiency. After refining our search, there were 16 documents that  met our selection criteria.  3.  reviewed the 16 to identify any potential leading practices. We  determined that a practice was potentially leading if it was found in at  least one of the remaining 16 articles and was a law enforcement \u2013  mental health program. Using these criteria, we identified two  potential leading practices.  4.  asked individual and organizational stakeholders to validate whether  these were leading practices and to identify any additional leading  practices that we might have missed. In order for us to consider an  independent researcher as a stakeholder, the individual needed to  have (a) authored or co-authored at least 2 of the 16 documents that  met our search criteria as outlined earlier and (b) been recommended  by another stakeholder. These criteria yielded two independent  researchers from whom to solicit views. In order for us to consider an  organization as a stakeholder, the organizations needed to have  either (a) conducted research on law enforcement responses to  individuals with mental illness; (b) administered law enforcement- mental health collaborative programs; or (c) launched a national  campaign on law enforcement responses to individuals with mental  illness. After reviewing the websites of organizations that potentially  met these criteria, we selected four organizations from which to solicit  views. In addition, we selected individuals within the organizations as  knowledgeable stakeholders if they were either (1) recommended by  another stakeholder; or (2) managed a law enforcement-mental health  program or national campaign. As a result of these steps, we  identified and interviewed six stakeholders (two independent  researchers and four organizations) to gather their broad views of the  dynamic between law enforcement and individuals with mental illness;  to obtain their observations of any practices or tools, such as training  guides or reports that have been used to enhance officer response;  and to provide feedback on leading practices. The six selected  stakeholders were:  Amy Watson, Ph.D.: Professor at the Jane Addams College of  Social Work, University of Illinois at Chicago.", "Melissa Reuland, M.S.: Research Fellow at the Police Foundation  and Senior Research Program Manager at Johns Hopkins School  of Medicine, Department of Psychiatry.", "Council of State Governments, Justice Center (CSG JC): a  national nonprofit organization that serves policymakers at the  local, state, and federal levels from all branches of government. It  aims to provide practical, nonpartisan advice and consensus- driven strategies, informed by available evidence, to increase  public safety and strengthen communities.", "International Association of Chiefs of Police (IACP): a professional  association for law enforcement, representing more than 30,000  members in more than 150 countries. IACP aims to advance the  law enforcement profession through advocacy, outreach,  education, and programs.", "National Alliance on Mental Illness: a national grassroots mental  health organization dedicated to building better lives for the  millions of Americans affected by mental illness.", "Police Executive Research Forum (PERF): an independent  research organization that seeks to identify best practices on  issues such as reducing police use of force; developing  community and problem-oriented policing; and evaluating crime  reduction strategies.", "After reaching out to each researcher and organization, we then sent a  follow up written request to each of them to attempt to achieve consensus  on whether or not the two practices we identified through our search\u2014the  Crisis Intervention Team (CIT) Model and the Co-responder Model\u2014 should be considered leading. We also took note of any tools they  mentioned and probed further to understand their origins and intent. We  confirmed with all six of the selected stakeholders that the CIT Model met  our definition of leading practice and confirmed with five out of the six  stakeholders that the Co-responder Model met our definition. Some  stakeholders also identified other practices as leading; however, none of  those practices had at least two other stakeholders confirm it as a leading  practice.", "In addition, to determine how DOJ and DHS components leverage  information from other knowledgeable parties, such as experts,  associations, or colleagues in other components, we reviewed relevant  documentation on these efforts, as available. We also interviewed agency  officials from the components in our scope who are responsible for the  development or delivery of training or policies.", "We conducted this performance audit from February 2017 through  February 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform an  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."], "subsections": []}, {"section_title": "Appendix II: Description of the Federal Law Enforcement Training Centers (FLETC) Basic Training Programs", "paragraphs": ["FLETC provides basic training to all Department of Homeland Security  (DHS) law enforcement officers through one of three basic program  categories, which vary in length, described as follows:", "Center Basic is a FLETC training program category in which  personnel from various agencies are provided with the critical  competencies of a specific job, job series, or a group of closely related  job series. FLETC provides all instruction. Training is offered in three  basic training programs: Criminal Investigator Training Program,  Uniformed Police Training Program and the Land Management Police  Training Program.", "Center Integrated Basic is a FLETC training program category that  provides entry-level law enforcement officers or direct law  enforcement support personnel from a single partner organization with  the core competencies of a specific job series or a group of closely  related job series. FLETC provides all common and basic core  foundational instruction (i.e., firearms, physical techniques, etc.). This  category of training includes eight specific programs.", "Agency-Specific Basic is a training program category designed to  provide entry-level law enforcement officers or direct law enforcement  support personnel with instruction necessary to meet a single  agency\u2019s mission-specific basic training needs. Generally, Agency- Specific Basic courses precede or follow a Center Basic training  program, with partner organizations providing the majority of the  instruction. Agency-Specific Basic covers an additional 59 training  programs."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Joy A. Booth (Assistant Director)  and Adam Couvillion (Analyst-in-Charge) managed this assignment.  Kisha Clark, Eric Hauswirth, Gina Hoover, Susan Hsu, Candace Silva- Martin, Michael Silver, Janet Temko-Blinder, and Adam Vogt made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-58", "url": "https://www.gao.gov/products/GAO-19-58", "title": "Cloud Computing: Agencies Have Increased Usage and Realized Benefits, but Cost and Savings Data Need to Be Better Tracked", "published_date": "2019-04-04T00:00:00", "released_date": "2019-05-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Cloud computing enables on-demand access to shared computing resources providing services more quickly and at a lower cost than having agencies maintain these resources themselves. In 2012, OMB began requiring agencies to assess all IT investments for cloud services.", "GAO was asked to review agencies' reported use of cloud services. This report discusses selected agencies' progress in implementing cloud services, the extent to which those agencies increased cloud service spending and achieved savings or cost avoidances, and examples of agency-reported cloud investments with notable benefits. GAO selected 16 agencies to review based on their fiscal year 2017 IT budgets and analyzed their use of cloud services, associated spending and savings data, and guidance for assessing investments for these services. GAO interviewed agency officials in charge of cloud services and reviewed pertinent documents to identify acquisitions with notable benefits. GAO also interviewed OMB staff about their agency's role in federal cloud computing and related OMB guidance."]}, {"section_title": "What GAO Found", "paragraphs": ["The 16 agencies GAO reviewed made progress in implementing cloud computing services (cloud services)\u2014namely, they established assessment guidance, performed assessments, and implemented these services\u2014but the extent of their progress varied. To encourage cloud service acquisition, the Office of Management and Budget (OMB) began requiring agencies to assess all information technology (IT) investments for cloud services. However, only 10 of the 16 agencies reviewed had established assessment guidance. In addition, while the agencies assessed the majority of their planned fiscal year 2019 IT investments for cloud services, 12 agencies had not completed an assessment of 10 or more investments. Nevertheless, 10 of the agencies reported increasing their use of cloud services between fiscal years 2016 through 2019 (see figure). Six agencies noted that inconsistent reporting of cloud investments and investment consolidation impacted their reported percentage.", "Further, the 16 agencies reported that they had increased their cloud service spending since 2015 and 13 of the 16 agencies had saved $291 million to date from these services. However, these agencies identified issues in tracking and reporting cloud spending and savings data, including not having consistent processes in place to do so. Agencies also noted that OMB guidance did not require them to explicitly report savings from cloud implementations and, therefore, they had to specifically collect this data to meet GAO's request. As a result of these identified issues, it is likely that agency-reported cloud spending and savings figures were underreported.", "Officials from 15 of the 16 agencies reported that they had identified significant benefits from acquiring cloud services, including improved customer service and the acquisition of more cost-effective options for managing IT services. In addition, these agencies identified nine cloud investments that, among other things, enhanced the availability of weather-related information, facilitated collaboration and information sharing among federal, state, and local agencies related to homeland security, and provided benefits information to veterans, as examples of systems that realized these benefits. One agency reported that it had not realized benefits because it did not have any completed migration efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making one recommendation to OMB on cloud savings reporting, and 34 recommendations to the 16 agencies on cloud assessments and savings. Fourteen agencies agreed with all recommendations, OMB and one agency neither agreed nor disagreed, and one (Defense) agreed with one recommendation but not the other. GAO continues to believe its recommendation to the department is appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Over the past 2 decades, the federal government\u2019s increasing demand for  information technology (IT) has led to a dramatic rise in operational costs  to develop, implement, and maintain its computer systems and services.  Furthermore, while federal agencies\u2019 IT use provides essential services  affecting the health, economy, and defense of the nation, this use has  also led to a reliance on custom IT systems that can be costly to maintain.  Accordingly, as a result of these costs, the federal government invests  approximately $90 billion annually in IT.", "As part of a comprehensive effort to transform IT within the federal  government, in 2010, the Office of Management and Budget (OMB)  began requiring agencies to shift their IT services to a cloud computing  option when feasible. As defined by the National Institute of Standards  and Technology (NIST), cloud computing is a means for enabling on- demand access to shared pools of configurable computing resources  (e.g., networks, servers, storage applications, and services) that can be  rapidly provisioned and released. This approach offers federal agencies a  means to buy services more quickly and possibly at a lower cost than  building, operating, and maintaining these computing resources  themselves.", "To encourage federal agencies to begin taking advantage of cloud  computing services (cloud services), in February 2011, OMB issued a  Cloud First policy that required each agency\u2019s chief information officer  (CIO) to implement a cloud service whenever there was a secure,  reliable, cost-effective option. Since 2012, we have issued several  reports on agencies\u2019 use of cloud services, as detailed later in this report.", "You asked us to conduct a further review of agencies\u2019 reported use of  cloud services. Specifically, our objectives were to: (1) evaluate selected  agencies\u2019 progress in implementing cloud services, (2) review the extent  to which selected agencies have increased spending on cloud services  and achieved cost savings or avoidances, and (3) describe examples of  cloud investments with significant or notable benefits that have been  identified by selected agencies.", "To address these objectives, we selected a sample of agencies based on  the size of their total IT budget for fiscal year 2017. Specifically, we  categorized each of the 24 Chief Financial Officers Act agencies by the  size of its IT budget: large (more than $3 billion), medium ($1 billion to $3  billion), and small (less than $1 billion), as reported on OMB\u2019s IT  Dashboard for 2017. We then selected up to six agencies with the  largest budgets from each budget category.", "Using these criteria, we selected 16 agencies, including 7 agencies from  our prior work on cloud services conducted in 2012 and 2014. These  agencies were the Department of Agriculture (Agriculture), Department of  Commerce (Commerce), Department of Defense (Defense), Department  of Education (Education), Department of Energy (Energy), Department of  Health and Human Services (HHS), Department of Homeland Security  (DHS), Department of Justice (Justice), Department of Labor (Labor),  Department of State (State), Department of Transportation  (Transportation), Department of the Treasury (Treasury), Department of  Veterans Affairs (VA), General Services Administration (GSA), Small  Business Administration (SBA), and Social Security Administration (SSA).", "For our first objective, we obtained and analyzed IT Dashboard data  related to the 16 selected agencies\u2019 use of cloud services for fiscal years  2016 through 2018 and projected use in 2019. We chose to begin with  fiscal year 2016 because we had previously reported on federal agencies\u2019  use of cloud services through fiscal year 2014 and fiscal year 2015 data  was not available. We reviewed agency responses that were submitted  for fiscal years 2016 through 2019 as part of the annual budget  submission process in order to determine whether a specific investment  was using cloud services.", "To ensure the accuracy and completeness of the selected agencies\u2019 data  on the use of cloud services, we downloaded data from the IT Dashboard  on October 3, 2017, March 7, 2018, and October 9, 2018. We took this  step because agencies may update their data on a quarterly basis  throughout the fiscal year. In addition, we presented the results of our  analysis to officials in charge of cloud services within the Office of the CIO  at each selected agency. We asked these officials to verify the  completeness and accuracy of this data and provide any updates as  appropriate. Officials at all 16 agencies confirmed the total number of  investments using cloud services for fiscal years 2016 through 2018 and  their projected use for fiscal year 2019. Based on these steps, we  determined that these data were sufficiently reliable to report on agencies\u2019  progress in using cloud services.", "In addition, we compared each selected agency\u2019s cloud guidance to  OMB\u2019s Cloud First guidance and interviewed officials in charge of cloud  services within the Office of the CIO at each agency regarding their cloud  data and guidance. We also interviewed OMB staff in the Office of E- Government and Information Technology regarding its guidance.", "For our second objective, we obtained and analyzed IT Dashboard data  related to the 16 agencies\u2019 spending on cloud services for fiscal years  2015 through 2018. We chose to begin with fiscal year 2015 because we  had previously reported on federal agencies\u2019 spending on cloud services  through fiscal year 2014. In order to determine actual cloud spending  costs for each fiscal year, we used agency spending data reported each  subsequent fiscal year (from fiscal years 2017 through 2018), as of  October 5, 2018.", "We also administered a data collection instrument to obtain and analyze  spending and savings by the 16 selected agencies for fiscal years 2014  through 2018, as well as future planned costs. We requested that these  agencies provide spending and savings data broken down by investment,  as OMB only requires federal agencies to report total spending by cloud  deployment model on the IT Dashboard, and agencies were not required  to identify whether any reported savings were cloud-related.", "We took steps to help ensure the reliability of the data we collected. First,  to minimize errors that might occur from respondents interpreting our  instrument differently from our intended purpose, we reviewed the data  collection instrument with agency officials who would be completing the  instrument during meetings in October and November 2017. Second, we  reviewed the completed spreadsheets to identify missing data or other  errors, and consulted with a GAO data quality expert about these issues  as appropriate. We also reviewed the associated notes regarding  agencies\u2019 qualifications of the provided data and followed up with agency  officials to clarify the responses as appropriate.", "Lastly, we presented the results of our analysis of IT Dashboard data and  the data obtained from the data collection instrument to each of the  selected agencies between June and August 2018. We asked the  agencies to verify the completeness and accuracy of these data and  provide any updates as appropriate. Each of the selected agencies  provided updated information related to our data collection instrument,  which we incorporated as appropriate. Based on the measures we took to  ensure the reliability of the data reported by the agencies to us and on the  IT Dashboard, we determined that the data were sufficiently reliable for  the purpose of this report.", "For the third objective, we obtained and reviewed available  documentation discussing examples of cloud computing investments  identified by the selected agencies as having produced significant or  notable benefits and key practices that helped ensure the effort was  successful, and interviewed officials from the Office of CIO or other  components in charge of cloud services regarding these benefits. As part  of this work, we asked officials within the Office of the CIO at each  selected agency to identify up to three examples of investments that  benefited from the acquisition of cloud services.", "Fifteen of the sixteen agencies in our review identified at least one  example, while one agency\u2014HHS\u2014reported that it did not have any  examples of cloud investments that had produced significant or notable  benefits because it did not have any completed migration efforts.  Because of the open-ended nature of the 15 agencies\u2019 responses to our  questions, we conducted a content analysis of the information we  received in order to identify and summarize the benefits and key practices  that were identified by the 15 agencies. In addition, to select systems or  investments to profile, we reviewed the 34 examples provided by the 15  agencies and narrowed the list to 11 examples. In doing so, we sought to  have a mix of systems that provided mission critical services to the  agency or the public, illustrated a range of cloud computing benefits, and  included detailed information on the benefits achieved from using cloud  services.", "In technical comments received on a draft of this report, two agencies  provided new information regarding the use of cloud services for their  systems that were profiled in appendix VI of the draft report. Based on the  additional information provided by the two agencies, we determined there  was no longer sufficient detail regarding what benefits were realized for  these systems. Therefore, we removed the two agencies\u2019 profiled  examples from the report in order to be consistent with our methodology  for reporting examples of systems that had realized benefits from the  acquisition of cloud services. We then notified both agencies of this  decision. Further details on our objectives, scope, and methodology are  included in appendix I.", "We conducted this performance audit from September 2017 to April 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Investments in federal IT have the potential to make agencies more  efficient in fulfilling their missions by reducing costs and improving  operational efficiencies. Each year, the federal government invests  approximately $90 billion in IT, with about 75 percent reportedly spent on  operating and maintaining existing systems. However, as we have  previously testified, federal IT investments have too frequently failed or  incurred cost overruns and schedule slippages while contributing little to  mission-related outcomes. As a result, the federal government has spent  billions of dollars on failed and poorly performing IT investments. These  investments have often suffered from ineffective management of project  planning, requirements definition, and program oversight and governance  tasks.", "Accordingly, in February 2015, we added improving the management of  IT acquisitions and operations to our high-risk list\u2014a list of agencies and  program areas that have a higher potential for fraud, waste, abuse, and  mismanagement, or are in need of transformation. In introducing this  high risk area, we specifically noted that agencies spend a significant  portion of their budgets on the operations and maintenance of IT systems  and need to effectively manage these investments in order to ensure they  continue to meet agencies\u2019 needs and deliver value. We issued an update  to our high-risk report in February 2017 and noted that, while progress  has been made in addressing the IT acquisitions and operations high-risk  area, significant work remains to be completed, including establishing  action plans to modernize or replace obsolete investments.", "In addition, over the last 3 decades, Congress has enacted several laws  to assist agencies and the federal government in managing IT  investments. For example, Congress enacted the Clinger-Cohen Act of  1996 to assist agencies in managing their investments. This act requires  OMB to establish processes to analyze, track, and evaluate the risks and  results of major capital investments in information systems made by  federal agencies and report to Congress on the net program performance  benefits achieved as a result of these investments.", "Further, in December 2014, Congress enacted Federal Information  Technology Acquisition Reform provisions (commonly referred to as  FITARA) as a part of the Carl Levin and Howard P. \u2018Buck\u2019 McKeon  National Defense Authorization Act for Fiscal Year 2015. The act  requires OMB, among other things, to develop standardized performance  metrics, including for cost savings and cost avoidances, and to submit  quarterly reports to Congress on cost savings and reductions in  duplicative information technology investments.", "More recently, recognizing the challenges in modernizing government IT  systems, in December 2017, Congress enacted the Modernizing  Government Technology Act as part of the National Defense  Authorization Act for Fiscal Year 2018. This law authorizes all covered  agencies to establish an IT system modernization and working capital  fund to, among other things, transition legacy systems to commercial  cloud computing and other innovative commercial platforms and  technologies using agency reprogrammed funds. The act also establishes  a Technology Modernization Fund administered by the Administrator of  General Services, in consultation with the CIO Council, which will provide  funds to federal agencies for modernization efforts.", "As of March 2019, the board that oversees the Technology Modernization  Fund had awarded $60.87 million to four projects that plan to migrate or  deploy systems to cloud services. Specifically,", "GSA\u2019s project, which received an award of $20.65 million, is intended  to expedite the completion of a new software as a service solution for  the agency\u2019s payroll and work schedule and leave management within  2 years.", "The Department of Housing and Urban Development\u2019s project, which  received an award of $20 million, is expected to accelerate the  migration of five of the agency\u2019s most critical business systems from  an on-premise mainframe database to the cloud within the next 2  years.", "Energy\u2019s project, which received an award of $15.2 million, is  intended to help the agency move 45 separate on-premise email  systems to the cloud within the next 3 years.", "Agriculture\u2019s project, which received an award of $5 million, is  intended to help the agency migrate 10 applications to a shared  services cloud platform model."], "subsections": [{"section_title": "Overview of Cloud Services", "paragraphs": ["One approach to improving the government\u2019s management of IT services  is through cloud computing. As mentioned previously, cloud computing is  a means for enabling on-demand access to shared pools of configurable  computing resources (e.g., networks, servers, storage applications, and  services) that can be rapidly provisioned. More specifically, purchasing IT  services through a cloud service provider enables agencies to avoid paying for all the computing resources that would typically be needed to  provide such services. This approach offers federal agencies a means to  buy services more quickly and possibly at a lower cost than building,  operating, and maintaining these computing resources themselves.", "According to NIST, cloud computing offers federal agencies a number of  benefits:", "On-demand self-service. Agencies can, as needed, provision  computing capabilities, such as server time and network storage, from  the service provider automatically and without human interaction.", "Broad network access. Agencies can access needed capabilities  over the network through workstations, laptops, or other mobile  devices.", "Resource pooling. Agencies can use pooled resources from the  cloud provider, including storage, processing, memory, and network  bandwidth.", "Rapid elasticity. Agencies can provision the resources that are  allocated to match what actual resources are needed according to  demand. This is done by scaling resources up or down by adding or  removing processing or memory capacity, or both, according to  demand.", "Measured service. Agencies can pay for services based on usage.", "This allows agencies to monitor, control, and generate reports,  providing greater transparency into the agency\u2019s use of cloud  services.", "As noted in NIST guidance, cloud service providers have established  three types of service models that are offered to consumers:  Infrastructure as a service. The service provider delivers and  manages the basic computing infrastructure of servers, software,  storage, and network equipment. The consumer provides the  operating system, programming tools and services, and applications.", "Platform as a service. The service provider delivers and manages  the infrastructure, operating system and programming tools and  services, which the consumer can use to create applications.", "Software as a service. The service provider delivers one or more  applications and all the resources (operating system and  programming tools) and underlying infrastructure to run them for use  on demand.", "NIST has also defined four types of cloud deployment models, including:", "Private cloud. Service is set up specifically for one organization,  although there may be multiple customers within that organization and  the cloud may exist on or off the customer\u2019s premises.", "Community cloud. Service is set up for organizations with similar  requirements. The cloud may be managed by the organizations or a  third party and may exist on or off the organization\u2019s premises.", "Public cloud. Service is available to the general public and is owned  and operated by the service provider.", "Hybrid cloud. Service is a composite of two or more of the three  deployment models (private, community, or public) that are bound  together by technology that enables data and application portability.", "According to NIST guidance, these deployment models impact the  number of consumers and the nature of other consumers\u2019 data that may  be present in the cloud environment. A public cloud should not allow a  consumer to know or control other consumers of a cloud service  provider\u2019s environment. However, a private cloud can allow for ultimate  control in selecting who has access to a cloud environment. Community  clouds and hybrid clouds allow for a mixed degree of control and  knowledge of other consumers. Additionally, the cost for cloud services  typically increases as control over other consumers and knowledge of  these consumers increase."], "subsections": []}, {"section_title": "OMB and Past and Current Administrations Have Undertaken Efforts to Increase Use of Cloud Services", "paragraphs": ["In December 2010, OMB made cloud computing an integral part of its 25  Point Implementation Plan to Reform Federal Information Technology  Management. The plan called for the development of a government- wide strategy to hasten the adoption of cloud services. To accelerate the  shift, OMB required agencies to identify three systems to migrate to cloud  services, create a project plan for migration, and migrate all three  systems by June 2012.", "In February 2011, OMB issued the Federal Cloud Computing Strategy,  as called for in its 25-point plan. The strategy provided definitions of cloud  services; benefits of cloud services, such as accelerating data center consolidations; a decision framework for migrating services to a cloud  environment; case studies to support agencies\u2019 migration to cloud  services; and roles and responsibilities for federal agencies. For example,  the strategy states that NIST\u2019s role is to lead and collaborate with federal,  state, and local government agency CIOs, private sector experts, and  international bodies to identify standards and guidance and prioritize the  adoption of cloud services.", "Subsequently, in December 2011, OMB established the Federal Risk and  Authorization Management Program (FedRAMP), a government-wide  program to provide joint authorizations and continuous security  monitoring services for cloud services for all federal agencies. GSA  initiated FedRAMP operations, which the agency referred to as initial  operational capabilities, in June 2012.", "In 2012, OMB began requiring agencies to evaluate each investment, or  components or systems within the investment, for cloud services,  regardless of the overall life-cycle stage of the investment. Agencies  were required to report the status of each investment\u2019s evaluation as part  of the annual budget submission, as noted in OMB\u2019s annual capital  planning guidance. Specifically, OMB required agencies to select an  option regarding whether they had evaluated a cloud alternative and  chosen a cloud alternative with a particular cloud deployment model or  indicate that they had not yet evaluated the investment for cloud services.  Starting in fiscal year 2018, OMB revised the options that agencies were  to select from and required agencies to select an option regarding  whether the investment, or a portion of the investment, was leveraging  cloud computing, or indicate that cloud computing had not been  considered for the investment.", "In 2012, OMB began requiring agencies to report associated cloud  spending, as called for in its annual capital planning guidance. For fiscal  years 2015 through 2018, OMB\u2019s capital planning guidance required  agencies to report their total cloud spending at the agency level based on  the cloud deployment model, rather than by individual investment.", "Starting in fiscal year 2019, OMB will require agencies to report total  cloud spending by investment and use the Technology Business  Management Framework. The Framework provides a cost taxonomy for  agencies to use to manage the cost, quality, and value of their IT  services. Specifically, agencies will be required to use a standard set of  cost categories to group IT spending, including cloud-related spending.  This new model is intended to increase the granularity in reporting of  agency IT budget and spending data.", "In addition, in May 2017, the administration established the American  Technology Council to help transform and modernize federal IT and how  the government uses and delivers digital services. The President is the  chairman of this council, and the Federal CIO and the United States  Digital Service Administrator are among its members.", "Subsequently, in December 2017, the American Technology Council  issued a Report to the President on Federal IT Modernization and made  eight cloud computing-related recommendations that are relevant to the  focus of our review. For example, the report recommended that OMB  issue two data calls to agencies in order to: (1) obtain a list of agency in- progress and pending projects for cloud migration; and (2) have agencies identify systems that have not yet migrated due to perceived or  encountered difficulties. Based on the information provided, OMB would  then assist agencies in making transition plans and work to remove  obstacles in order to accelerate cloud adoption. In addition, the report  recommended that OMB take action to update its guidance related to  cloud computing and revise the Federal Cloud Computing Strategy that  was previously issued in 2011.", "According to staff in OMB\u2019s Office of E-Government and Information  Technology, OMB has taken action to address these recommendations.  For example, the staff reported that the two data calls were issued in  December 2017 and staff are currently reviewing the information provided  by agencies in response. In addition, OMB issued its draft strategy  revision, the 2018 Federal Cloud Computing Strategy, for comment on  September 24, 2018. This proposed Cloud Smart policy outlines a  strategy for agencies to adopt cloud solutions that streamline  transformation and embrace modern capabilities.", "According to the draft strategy, Cloud Smart focuses on equipping  agencies with the tools needed to make informative technology decisions  in accordance with their mission needs. In addition, the draft strategy  indicates that OMB intends to leverage private-sector solutions to provide  the best services to the American people. The strategy also notes that the  CIO Council and Chief Financial Officer Council are to work with OMB,  GSA, DHS, and other federal entities to develop a work plan of actions  and targeted policy updates that are to be delivered over the next 18  months. For more information about the current status of each of these  eight cloud recommendations, as reported by OMB, please see appendix  II."], "subsections": []}, {"section_title": "Prior GAO Reports on Efforts to Implement Cloud Services", "paragraphs": ["During the past several years, we reported on federal agencies\u2019 efforts to  implement cloud services, and on the progress that oversight agencies  have made to help federal agencies in those efforts. For example, in July  2012, we reported that the seven federal agencies we reviewed had  made progress in meeting OMB\u2019s requirement to implement three cloud  services by June 2012. Specifically, the seven agencies had implemented 21 cloud services and spent a total of $307 million for cloud  computing in fiscal year 2012\u2014about 1 percent of their total IT budgets.  In addition, while all seven agencies had submitted plans to OMB for  implementing cloud solutions, all but one plan were missing key required  elements. We made 14 recommendations to the seven agencies to  develop planning information, such as estimated costs and legacy IT  systems\u2019 retirement plans for existing and planned services. The  agencies generally agreed with, and implemented, 13 out of 14 of our  recommendations.", "In September 2014, we reviewed the efforts of the same seven federal  agencies again and found that each of them had implemented additional  cloud services subsequent to our July 2012 report. In particular, the total  number of cloud services implemented by the seven agencies had  increased by 80 services, from 21 to 101. The seven agencies\u2019 reported  spending on cloud services had also increased by $222 million, from  $307 million in 2012 to $529 million in 2014. However, this relatively small  increase in cloud spending was attributed, in part, to the fact that these  agencies had not considered cloud services for 67 percent of their  investments. Accordingly, we recommended that the seven agencies  assess their IT investments for suitability for cloud services. The agencies  generally agreed with our recommendations and 6 of the agencies  (Agriculture, DHS, GSA, HHS, SBA, and State) implemented all of our  recommendations.", "Further, in April 2016, we identified 10 key practices that federal and  private-sector guidance noted should be included in service-level  agreements in a contract when acquiring IT services though a cloud  services provider. However, our review of five agencies\u2019 (Defense, DHS,  HHS, Treasury, and VA) cloud service contracts found that not all 10 key  practices were included in these contracts. We therefore made  recommendations to OMB to include all 10 key practices in future  guidance to agencies. We also recommended that the five agencies  incorporate these key practices as their contract and service level  agreements expire. The agencies generally agreed with our  recommendations and, to date, Defense and DHS have taken action to  implement the recommendations.", "More recently, in April 2017, we highlighted the results of a forum,  convened by the Comptroller General on September 14, 2016, to explore  challenges and opportunities for CIOs to improve federal IT acquisitions  and operations\u2014with the goal of better informing policymakers and  government leadership. Thirteen current and former federal agency  CIOs, members of Congress, and private-sector IT executives who  participated in the forum noted challenges with agency operations that  could be addressed by migrating more services to the cloud. In their view,  this approach would offer agencies a means to buy the services faster  and possibly at a lower cost than through the traditional methods of  building and maintaining systems.", "In addition, forum participants noted the importance of federal agencies\u2019  IT procurement offices and processes evolving to align with new  technologies, as agencies are not always set up to take advantage of  cloud services. Lastly, forum participants said that, as the federal  government is expected to increase its purchase of IT as a service with  the move toward cloud computing, more oversight is needed to ensure  that appropriate contracts are in place and appropriate oversight of  performance occurs."], "subsections": []}]}, {"section_title": "Most of the Selected Agencies Reported Making Progress in Implementing Cloud Services", "paragraphs": ["The16 selected agencies reported making progress in implementing  cloud services\u2014namely, they established guidance for assessing  investments for cloud services, performed those assessments, and  implemented cloud services for their investments. However, the extent of  these agencies\u2019 progress varied. Specifically, 10 of the 16 agencies  established guidance for assessing all new and existing investments for  cloud services, while six agencies did not. In addition, while these  agencies had assessed the majority of their investments for cloud  services planned for fiscal year 2019, 12 agencies had not completed an  assessment of 10 or more IT investments for cloud services. Lastly, 10 of  the agencies reported a percentage increase in the use of cloud services  from fiscal year 2016 through fiscal year 2019, while two agencies  reported no percentage change and four agencies reported a decrease  during this 4-year period."], "subsections": [{"section_title": "About Two-thirds of the Selected Agencies Had Established Guidance for Assessing Investments for Cloud Services Suitability", "paragraphs": ["OMB\u2019s Cloud First policy, issued in February 2011, requires each  agency\u2019s CIO to implement a cloud service whenever there is a secure,  reliable, cost-effective option to do so. Further, subsequent OMB capital  planning guidance, issued in 2014, requires agencies to evaluate each  investment, or components or systems within the investment, for cloud  services, regardless of the overall life-cycle stage of the investment.", "While OMB\u2019s guidance is not specific on how agencies should conduct  these evaluations, GAO\u2019s Information Technology Investment  Management framework notes that organizations should have  documented policies and procedures for the management oversight of IT  investments, including the selection of investments and the evaluation of  information technologies that have the potential to improve the  organization\u2019s business.", "Ten of the 16 agencies we reviewed had established guidance in  accordance with OMB\u2019s requirement to assess new and existing IT  investments for suitability for cloud services, as of August 2018. In  particular, all 10 agencies\u2019 guidance required assessments of cloud  service suitability for both new and existing IT investments.", "However, the remaining six agencies did not have such comprehensive  guidance in place. Rather, the guidance either required assessments of  new or existing systems for cloud services but not both, or the guidance  had not yet been established. Specifically, Labor\u2019s and SSA\u2019s guidance  required assessments of new investments for cloud services but did not  address assessments of existing investments. In addition, Energy\u2019s  guidance required assessments of existing systems but not new  acquisitions. Further, three agencies (Education, HHS, and  Transportation) had not established guidance for assessing investments  for cloud services.", "The results of our analysis of agencies\u2019 guidance on assessing IT  investments for cloud services are shown in figure 1.", "Agency officials in the Office of the CIO at the six agencies provided a  variety of reasons for why they did not have guidance for assessing all  investments for cloud services. Specifically, Labor officials reported that  they had not included legacy applications in their guidance because not  all applications should or could be migrated to the cloud. In addition, SSA  officials reported that they were planning to assess all existing systems  for cloud services, but had not determined a time frame for this review.  Further, Energy officials reported that, while the agency was following  OMB\u2019s Cloud First policy, it would need to establish guidance for  assessing new investments for cloud services; however, a date for doing  so had not been determined.", "Transportation officials reported that they believed their guidance on  managing cloud computing efforts was consistent with OMB\u2019s Cloud First  policy and stated that they had no plans to develop additional guidance.  However, our review of the agency\u2019s guidance found that it did not include  any information regarding the assessment of investments for cloud  services. Instead, the guidance only required that investments intending  to use cloud services provide procurement and other cost information as  part of the business case and use specified language in contracts with  cloud service providers. Therefore, we believe that the guidance is not  consistent with OMB\u2019s guidance requiring agencies to assess  investments for cloud services.", "Education officials reported that they were in the process of finalizing a  policy and hoped to have it completed by the end of the year. In addition,  HHS officials reported that they had explored developing some guidance  regarding cloud services, but had not established any plans to do so.", "As previously discussed, assessing all new and existing IT investments to  determine whether they are suitable for cloud services is an important  component of OMB\u2019s Cloud First policy. Until the six identified agencies  update or establish guidance for assessing both new and existing  investments for cloud services, they will not be positioned to ensure  adequate implementation of OMB\u2019s Cloud First policy. Further, these  agencies increase the risk that they will not be able to take advantage of  cloud services to improve operational efficiencies and minimize costs."], "subsections": []}, {"section_title": "Selected Agencies Assessed the Majority of Their IT Investments for Cloud Services", "paragraphs": ["As noted previously, OMB\u2019s fiscal year 2016 IT capital planning guidance  requires agencies to evaluate each investment for cloud services and  report the status of this evaluation as part of the annual budget  submission. Specifically, agencies were to respond to a question  regarding whether they had selected cloud services for the investment, or  components or systems within the investment, or, for example, report that  the investment had not yet been assessed for cloud services. OMB  publicly reports agencies\u2019 responses to this question on the IT  Dashboard.", "As of October 9, 2018, the 16 agencies in our review reported on the IT  Dashboard that they had completed cloud assessments for 84 percent of  their IT investments (5,180 out of a total of 6,157) planned for fiscal year  2019. Of these, two agencies (GSA and State) had completed an  assessment of all investments. However, 12 agencies had not completed  an assessment of 10 or more IT investments for cloud services.", "Table 1 lists the number of IT investments at the 16 selected agencies for  fiscal year 2019 that had been assessed for cloud services. The table  also shows the number and percentage of investments that remained to  be assessed.", "Officials in the Office of the CIO at the 12 agencies provided a variety of  reasons for why they had not assessed all investments for cloud services.  For example, Agriculture officials reported that 21 of their 53 investments  did not need assessments because the investments were not suitable for  cloud services. The officials said they intended to update the IT  Dashboard to reflect this change. Further, these officials stated that they  planned to assess the remaining 32 investments by April 30, 2019.", "Defense officials reported that the agency was in the process of adjusting  its cloud strategy that was issued in January 2018 and intends to address  investments that have not yet been evaluated. However, the officials  stated that they had not established time frames for the evaluations. In  addition, DHS officials reported that they were in the process of  implementing their guidance and putting in place a new process for  identifying planned acquisitions based on the phase in the acquisition life  cycle. However, the officials had not identified a time frame for when the  new process would be finalized or when all assessments of the  investments would be completed.", "Justice officials reported that, as they began the budget process, the  agency planned to look at performing additional assessments of  investments for cloud services. However, the officials provided no time  frames for when these assessments would be completed. In addition,  SSA officials stated that the agency planned to perform an assessment of  current investments for cloud services. However, the officials reported  that they had not established a time frame for completing these  assessments.", "Further, Treasury officials reported that, while the agency had established  a process for assessing investments for cloud services, it did not set  specific dates for when the assessments were to be conducted. These  officials reported that they only conducted a cloud assessment if the  agency determined that it would replace, redevelop, or retire an  investment. However, Treasury\u2019s guidance is not consistent with OMB\u2019s  requirement that agencies conduct an annual assessment of all  investments, regardless of the overall life-cycle stage of the investment.", "Many of the 16 agencies in our review have made progress in  implementing cloud services by establishing guidance for assessing  investments for cloud services and performing assessments. Even  agencies that lacked formal guidance for performing an assessment have  made progress in increasing the use of cloud services when the  assessment was completed. Nevertheless, 12 agencies still need to  assess a large number of their investments. Until these agencies assess  their investments that have yet to be evaluated for cloud services, they  may not know which investments are likely candidates for migration to  cloud services. Moreover, these agencies will not be positioned to take  advantage of operational efficiencies, cost savings, and other benefits  from the use of cloud services."], "subsections": []}, {"section_title": "Selected Agencies Have Increased Their Use of Cloud Services", "paragraphs": ["As of October 9, 2018, the 16 agencies in our review reported on the IT  Dashboard that 11 percent of their IT investments were projected to use  cloud services for fiscal year 2019\u2014an increase of 3 percentage points  from fiscal year 2016 to fiscal year 2019. In addition, 13 out of the 16  agencies reported that they planned to increase their use of cloud  services, in some cases, by as much as 20 percentage points or more,  between fiscal years 2018 and 2019.", "Table 2 lists the percentage of the selected agency IT investments that  used cloud services for fiscal years 2016 through 2018 and are projected  for 2019. (For additional details on the number of cloud investments and  the total investments reported by each of the selected agencies for fiscal  years 2016 through 2019, see appendix III.)", "In addition, while the majority of agencies made progress in implementing  cloud services between fiscal years 2016 and 2019, the extent of  agencies\u2019 progress varied. Specifically, 10 of the 16 agencies reported an  increase in the use of cloud services, with the percentage of increase  varying from up to 10 percentage points to 20 or more percentage points.", "For the remaining six agencies, two reported no change in the percentage  of investments using cloud services and four reported a decrease in the  overall percentage of cloud usage. Figure 2 shows the breakdown in the  range of percentage point changes in the use of cloud services for  agency investments for fiscal years 2016 through 2019, as reported on  the IT Dashboard.", "Officials in the Offices of the CIO, and Office of Information Technology,  at the six agencies that reported no change or a decrease in their cloud  investment percentages during this 4-year period provided a variety of  reasons for why this was the case, or had no comments regarding the  lack of change in their cloud investment percentages. Specifically, Energy  officials reported that the agency had not shown an increase in the  percentage of its cloud investments due to an IT portfolio optimization  effort designed to consolidate the agency\u2019s cloud investments. According  to the officials, this optimization effort was designed to reduce the total  number of these investments during the 4-year period. As a result, this  optimization effort affected the overall percentage of cloud investments.  As for Labor, its officials did not offer any comments regarding the lack of  an increase in cloud use during this period.", "In addition, Defense, DHS, and Education officials reported that staff in  their agencies had inconsistently applied the definition of cloud  computing, which had led to differences in identifying and reporting the  number of cloud investments within their agencies during this period.  Further, DHS officials noted that the ongoing addition, combination,  completion, and cancellation of investments had contributed to the  fluctuation in the number of cloud investments within their agency. Finally,  VA officials reported that their cloud identification processes were  maturing during this period and, as such, had resulted in different cloud  investment counts.", "Some of the inconsistencies reported by agencies regarding the types of  investments that they identified as being cloud investments may also be a  result of OMB\u2019s changes to its guidance during this 4-year period.  Specifically, OMB changed how agencies were required to report their  use of cloud services in fiscal year 2018, and revised the options that  agencies were to select from in order to identify and report the use of  cloud services for each investment.", "Going forward, several agencies reported that they intended to continue  making progress in their implementation of cloud services beyond fiscal  year 2019. For example:", "Education officials reported that the agency expected to increase  cloud use significantly in 2019 and beyond due to an IT services  contract award that is to support the migration of the agency\u2019s primary  hosting infrastructure to the cloud.", "DHS officials reported that the agency had set aggressive goals for  acquiring cloud services. Toward this end, the agency had initiated a  cloud steering group and created a team with staff from all  components. In addition, the officials reported that they planned to  consolidate space in one data center and eliminate another data  center, which would allow the agency to accelerate its migration to the  cloud.", "Justice officials reported that they expected to increase spending on  cloud services as the agency completed ongoing initiatives in 2019. In  addition, the officials reported that they anticipated migrating the  majority of the agency\u2019s unclassified data to the cloud in the next few  years.", "VA officials reported that the agency planned to migrate at least 350  applications to the cloud by 2024.", "Agencies\u2019 efforts to acquire additional cloud services and take advantage  of improved efficiencies and cost savings should help to further improve  their management of IT acquisitions and operations."], "subsections": []}]}, {"section_title": "Agencies Have Increased Spending and Realized Savings from Using Cloud Services, but Spending and Savings Figures Are Underreported", "paragraphs": ["The 16 agencies in our review made progress in implementing cloud  services. Specifically, the 16 agencies reported that their spending on  cloud investments had increased by over $1 billion between fiscal years  2015 and 2018 for investments with total life-cycle costs of $1 million or  more. Nevertheless, the agencies reported that factors such as  inconsistent tracking of spending data, along with confusion in interpreting  OMB guidance, impacted the accuracy of their reported cloud spending  data. In addition, 13 of the 16 agencies provided savings data indicating  that they had saved hundreds of millions of dollars on cloud services, but  agencies reported that they had problems with tracking this data. Further,  six agencies reported that they had reinvested cloud savings into other IT  modernization efforts or other improvements to IT services."], "subsections": [{"section_title": "Selected Agencies Are Spending More on Cloud Services, but Do Not Have Complete Spending Data", "paragraphs": ["OMB requires agencies to report spending on cloud services. Specifically,  OMB\u2019s annual capital planning guidance for fiscal years 2015 through  2018 required agencies to report their total cloud spending on the IT  Dashboard, although it did not require the information to be reported by  investment.", "While the selected agencies\u2019 reporting on the IT Dashboard indicated that  their percentage of total spending on cloud services generally remained  constant during fiscal years 2015 through 2017. Specifically, the 16  agencies reported on the IT Dashboard that approximately 3 percent of  their total IT spending each fiscal year during this period was spent on  cloud services. For fiscal year 2018, agency-reported cloud spending  through March 2018 was at 2 percent. Table 3 identifies the percentage  of the selected agency spending on cloud services for fiscal years 2015  through 2018, as reported on the IT Dashboard. (For additional details on  total agency cloud spending and total IT spending reported by each of the  selected agencies for fiscal years 2015 through 2018, see appendix IV.)", "However, the breakdown in spending by investment for cloud services  with $1 million or more in life-cycle costs that the 16 agencies provided to  us, showed that their spending on cloud investments had increased  during fiscal years 2015 through 2018, and beyond (agencies generally  submitted data on planned spending for one or more fiscal years beyond  2018). Specifically, the agencies\u2019 provided data showed that total cloud  spending for these investments was approximately $1.38 billion in fiscal  year 2017\u2014an increase of over $1 billion since fiscal year 2015. In  addition, the 16 agencies\u2019 data indicated that they plan to spend over $3.2  billion on cloud services in fiscal year 2018 and beyond for these  investments.", "Table 4 summarizes the information provided to us on a breakdown of the  16 selected agencies\u2019 total spending for investments with $1 million or  more in life-cycle costs for cloud services, from fiscal years 2015 through  2018 and beyond through fiscal year 2024, that was submitted to us. (For  a list of the investments that have spent $1 million or more in life-cycle  costs for cloud services, provided by each of the 16 selected agencies for  fiscal year 2018, see appendix V.)", "Officials in the Office of the CIO at all of the agencies in our review  identified three factors that could affect the completeness of the cloud  spending data provided to us and on the IT Dashboard: (1) spending data  were not consistently tracked; (2) different methods were used to  calculate cloud spending costs; and (3) interpreting changes in OMB and  related guidance created confusion regarding what spending data should  be tracked.", "Spending data were not consistently tracked. Defense officials  reported, for example, that the agency had only begun tracking cloud  spending in fiscal year 2016 and, therefore, spending data were not  available for fiscal year 2015. In addition, VA officials reported that  they were in the process of maturing their tracking of cloud spending  data and, therefore, the agency did not have spending data available  for the majority of their investments prior to fiscal year 2019. Further,  Justice officials reported that the agency had been challenged to track  cloud costs because the costs are based on fluctuating usage, rather  than a flat rate.", "Different methods were used to calculate cloud spending costs.", "Some agencies reported that the data they provided to us included  costs for items such as power usage and staff full-time equivalents,  while other agencies told us that they only provided contract costs. In  addition, some agency officials noted that they included in the  provided spending figure, the additional costs for migrating the  application to cloud services, while other officials said that these costs  had not been included in their spending totals.", "Interpreting changes in OMB and related guidance created  confusion regarding what spending data should be tracked.  Agencies noted that OMB made changes to its guidance since 2015,  including clarifications to the definition of cloud computing, changes to  the definition and scope of cloud services and cloud spending, and  changes to the guidance regarding what applicable costs should be  included in spending totals\u2014all of which created confusion regarding  what investments and what costs should be tracked for cloud  services. Defense officials also reported that the agency  misinterpreted the NIST definition of cloud computing, and, as a  result, Defense misreported that certain IT investments were using  cloud services, when these investments were not using these  services. Defense officials reported that the agency had corrected this  issue but it affected the total cloud spending reported during this  period and led to the decrease in spending noted.", "Based on our review of these factors reported by the 16 selected  agencies, we identified issues with the completeness of the reported  cloud spending data. Specifically, these factors increase the likelihood  that all costs associated with spending on cloud services may have been  incompletely captured by the 16 selected agencies in our review. As a  result, agencies\u2019 reported total cloud spending on the IT Dashboard and  the data provided to us is likely underreported.", "Staff in OMB\u2019s Office of E-Government and Information Technology  stated that agencies have previously reported challenges in breaking out  cloud costs, particularly when the cloud acquisition is part of a larger  contract. Given these challenges, the staff acknowledged that agency- reported cloud spending data are underreported and stated that the IT  Dashboard reflects only a fraction of actual federal spending on cloud  services. However, the staff stated that OMB\u2019s changes to its guidance,  beginning in fiscal year 2019, should help to improve the reporting of  cloud spending data. Specifically, beginning in fiscal year 2019, agencies  will be required to report total cloud costs by investment, per OMB\u2019s IT  capital planning guidance, and use the Technology Business  Management framework.", "Having complete data on spending for cloud services is critical in order to  ensure that agencies can provide effective management and oversight of  their cloud use, and that OMB and lawmakers can hold CIOs accountable  for the performance of these cloud investments. The changes to OMB\u2019s  guidance for fiscal year 2019 provide a key improvement for ensuring that  agencies establish more consistent processes for reporting on cloud- spending and should help agencies improve the completeness of the  cloud-spending data that they report to OMB."], "subsections": []}, {"section_title": "Selected Agencies Report Saving Approximately $291 Million from the Use of Cloud Services but Acknowledge Data Are Incomplete", "paragraphs": ["Since 2013, OMB has required agencies to report quarterly on their total  savings and cost avoidances from implementing OMB\u2019s IT reform  initiatives, including savings realized from the migration to cloud  services. Specifically, agencies are required to report actual and  planned savings from implementing these initiatives in a quarterly  submission and identify which implementation of an OMB initiative  resulted in the reported savings. Despite this, in the reporting mechanism,  agencies can only associate specific savings with certain OMB initiatives,  a list that does not include the migration to cloud services. Standards for  Internal Control in the Federal Government emphasizes that management  should track the actual performance of key initiatives in order to ensure  that these activities are meeting plans, goals, and objectives, and in doing  so, management should use quality information.", "Thirteen of the 16 agencies in our review provided savings data to us for  at least one cloud investment with life-cycle costs of $1 million or more for  cloud services during fiscal years 2014 through 2018. In total, the 13  agencies\u2019 provided data showed that they had accrued approximately  $291 million in savings or cost avoidances using cloud services since  2014. In addition, the agencies\u2019 data indicated that they planned to save  at least $150 million in fiscal year 2018 and beyond (agencies generally  submitted data on planned savings for one or more fiscal years beyond  2018).", "However, agency officials from the 13 agencies stated that, while they  were able to provide some savings data, these data are only tracked on  an ad hoc basis for certain cloud investments. In addition, officials from  three agencies (Defense, State, and SSA) stated that they could not  provide savings data for any of their cloud investments. As a result, the  16 agencies were unable to provide savings or avoidance data for 411  out of 488 investments (84 percent) that we reviewed.", "Table 5 shows, for the selected agencies in our review, the breakdown in  total agency savings and cost avoidances for fiscal years 2014 through  2018 and beyond for investments with $1 million or more in life-cycle  costs for cloud services.", "Officials in the Office of the CIO at the 16 agencies identified three factors  that impacted their efforts to provide data on savings or cost avoidances  for cloud computing investments: (1) savings data were not systematically  tracked or were hard to track; (2) deploying or migrating systems to the  cloud had resulted in no cost savings; and (3) OMB does not require  agencies to identify savings associated with cloud services as part of  reported savings.", "Savings data were not systematically tracked or were hard to  track. Defense, Treasury, and VA officials reported that their  investment management systems did not have the capability to track  cloud savings or avoidance data. In addition, GSA officials reported  that, while their system had the capability to track cost savings data,  the agency did not capture and track realized cloud savings in a  consistent format. GSA officials stated that they were in the process of  implementing the Technology Business Management Framework,  which they expected would improve the collection of these data.  However, the officials did not identify a time frame for when this  framework was to be implemented.", "Education officials reported that the agency did not provide cost  savings data for those investments where cost savings targets had  not been established or anticipated. SBA officials reported that  investments with two cloud providers had only been recently made so  the agency could not yet make a reasonable assessment of savings.  Further, Agriculture officials reported that the agency had a hard time  tracking the savings from certain investments because the process for  formulating the overall agency budget was different than the process  for determining savings from cloud implementation.", "State officials reported that they were in the process of developing the  capability to collect and track savings data from using cloud services  but did not have any reliable data to provide during our review. In  addition, Energy officials reported that their agency intended to  establish review processes in the coming year to ensure that costs,  cost savings, and cost avoidances were tracked for all cloud  investments. As part of this process, the agency intended to work  closely with its components to ensure that there was a consistent  application of definitions for cloud spending and savings. However,  the officials did not identify a specific time frame for when the agency  expected the new process to be completed.", "Lastly, HHS officials reported that the agency did not expect to track  cost savings beyond the FITARA requirements. FITARA requires the  reporting of savings associated with two OMB initiatives\u2014data center  consolidation and PortfolioStat. However, per M-13-09, OMB requires  agencies to report savings associated with all of its initiatives. As  such, HHS\u2019s tracking of savings is not consistent with OMB\u2019s  guidance.", "Deploying or migrating systems to the cloud resulted in no cost  savings. Treasury officials reported that their agency had not realized  any cost savings from the migration of certain investments because  the acquisition of cloud services either had allowed the agency to  purchase additional capabilities that the previous system did not have,  or the agency had continued to operate the previous system at the  same time as the new cloud system for a period of time. In addition,  Commerce officials reported that their agency had not realized any  cost savings for some investments because acquiring cloud services  required that new business and performance requirements be put in  place, which resulted in no overall savings for these investments.  Further, DHS and SSA officials reported that a number of their  investments were new applications that were developed and deployed  in the cloud. As such, there were no costs from a prior system that  could be compared with the costs to maintain the new system using  cloud services; thus, there were no associated cost savings or  avoidances.", "OMB does not require agencies to identify savings associated  with cloud services as part of reported savings. Officials from  Agriculture, Justice and Transportation noted that, while OMB  requires agencies to report savings, current reporting instructions do  not specifically require the identification and reporting of cloud savings  as a separate category of cost savings and avoidance. In this regard,  OMB\u2019s guidance requires agencies to identify which OMB initiative  resulted in the reported savings, but the available options for agencies  to choose from do not include cloud services. Accordingly, officials  from these agencies stated that they either reached out to their  components to try and collect this information or had to review their  investments to determine whether there were any cloud savings, to be  able to provide this information to us.", "Based on our review of the factors that impacted the selected agencies\u2019  efforts to provide savings data, we identified issues with the  completeness of the savings data. Specifically, challenges identified by  the selected agencies in systematically tracking savings data, and the  lack of a specific OMB requirement to report savings associated with  cloud services, increase the likelihood that all savings associated with  cloud services may have been incompletely captured by the agencies that  provided these data. As a result, agencies\u2019 reported cloud savings data  on the IT Dashboard and the data provided to us is likely underreported.", "Staff in the Office of E-Government and Information Technology stated  that, while agencies are required to report total savings related to OMB  initiatives, the format is left to agency discretion. In addition, OMB staff  confirmed that agencies do not have to specifically identify savings  related to cloud computing unless they choose to do so. OMB staff further  said that they do not require a specific format for reporting savings in  order to minimize the burden on agencies in reporting this information.", "While OMB\u2019s effort to minimize the reporting burden on agencies is  appropriate, the lack of an explicit requirement to identify reported  savings associated with cloud services has contributed to agencies not  consistently tracking these savings. In addition, while OMB has taken  steps to ensure more accuracy and granularity in agency reporting of  cloud investment spending data in fiscal year 2019, there has not been a  corresponding effort to ensure better reporting of cloud savings data. As a  result, OMB and Congress may not have sufficient data to see the results  of key initiatives, like Cloud Smart, and understand whether agencies are  achieving savings using cloud services.", "Since 2013, OMB has required agencies to report on the savings  resulting from implementation of its key IT reform initiatives. Although  OMB does not provide the means for agencies to explicitly identify cloud- related savings, it is nevertheless important for agencies to take steps to  fully track savings and cost avoidances from cloud computing acquisitions  in order to ensure effective oversight and management of these  initiatives. However, until OMB establishes a specific cloud savings  reporting requirement, and until these agencies establish a consistent and  repeatable mechanism to track these savings and cost avoidances, the  agencies may lack sufficient information on the results of cloud  acquisitions to date and the data necessary to make decisions regarding  future cloud acquisitions."], "subsections": []}, {"section_title": "Agencies Reported Reinvesting Cloud Implementation Savings into IT Modernization or Other Improvement Efforts", "paragraphs": ["In 2017, Congress enacted what is known as the Modernizing  Government Technology Act, which authorized covered agencies to  establish an IT system modernization and working capital fund. This fund  was to be used to, among other things, transition legacy IT systems to  commercial cloud computing and other innovative commercial platforms  and technologies using agency reprogrammed funds or amounts made  available to the IT working capital fund through discretionary  appropriations.", "Regardless of the extent of agencies\u2019 processes for tracking savings  obtained from using cloud services, officials in the Office of the CIO at six  agencies in our review (Education, GSA, Labor, SBA, SSA, and Treasury)  reported that they have reinvested these savings into other IT  modernization efforts or other improvements to IT services. For example:", "Education officials reported that $498,000 in fiscal year 2018 cloud  savings was used to modernize the agency\u2019s network infrastructure in  order to provide increased multipath bandwidth and software that  automatically routes traffic if network issues occur.", "GSA officials reported that the agency used the savings from  replacing the agency\u2019s legacy on-premises email program with a  cloud-based email system to implement a modern enterprise  collaboration platform, email, and document storage system.  According to the officials, the move to the cloud helped improve the  agency\u2019s flexibility (the new system is accessible from any device, at  any time, and from any location), productivity, and cost-effectiveness.  As part of this effort, the officials reported that the savings were  managed using the agency\u2019s working capital fund.", "Labor officials reported that their agency is using savings and cost  avoidances to partially fund an initiative to consolidate cloud services  within the agency in order to provide future secure cloud services and  establish an enterprise contract vehicle to obtain cloud services. The  officials noted that this investment is intended to allow the agency\u2019s  components to leverage a cloud authority to operate, obtain  competitive pricing for, and establish communications to cloud service  providers. In addition, Labor officials reported that the agency has  established a working capital fund that is to be used to manage the  savings from cloud and shared services.", "SBA\u2019s CIO reported that the agency reinvested $7.8 million in savings  from efforts to consolidate data centers to the cloud toward the  implementation of other enterprise-wide modernization efforts. In  addition, the agency had used the savings for the deployment and  migration of additional applications to cloud services. Specifically, the  CIO reported that the savings were used to design and architect cloud  services, roll out the agency\u2019s update of key operating system and  office applications, decommission obsolete data center assets, reduce  overlapping technologies, and enhance security and compliance  capabilities with new enterprise tools and network monitoring. In  addition, the CIO stated that, by using the savings from the data  center consolidation, SBA has been able to undertake all of the  agency\u2019s cloud modernization efforts with no additional budgeted  funding.", "We have previously reported that significant work remains to ensure  that agencies improve their management of IT acquisitions and  operations, including modernizing or replacing obsolete IT investments. It  is encouraging that several agencies have reinvested savings from cloud  initiatives into other IT modernization efforts and, in some cases, have  taken advantage of working capital funds authorized by Congress to do  so. Having complete information on the savings or avoidances that result  from cloud initiatives and using those savings to further IT modernization  efforts is critical to ensuring the transformation of IT services across the  federal government in the future."], "subsections": []}]}, {"section_title": "Selected Agencies Have Realized Benefits from Cloud Services", "paragraphs": ["Officials from 15 of the 16 agencies in our review reported that they had  realized several significant benefits from the adoption of cloud services,  ranging from improvements in the delivery of IT services to increasing the  efficiency of operations and systems. In addition, the 15 agencies noted  that certain key practices enabled them to realize these benefits through  the successful implementation of cloud services. These practices  included establishing new governance planning activities and policies,  reorganizing the management of agency IT resources, and having  executive leadership involved to help drive acquisition efforts."], "subsections": [{"section_title": "Cloud Services Aid with IT Efficiency, Cost Savings, and System Modernization", "paragraphs": ["Officials in charge of cloud services at 15 of the 16 agencies in our review  reported that they had identified five significant or notable benefits as a  result of acquiring cloud services. Specifically, the 13 agencies reported  that they had improved customer experiences through better design and  performance of business systems and customer websites. In addition, all  15 agencies reported that they were able to procure more flexible and  scalable IT resources, and reduce the cost of provisioning infrastructure  and managing services. Table 6 lists the five significant or notable  benefits reported by the 15 agencies and the number of agencies that  reported each benefit. The discussion that follows the table provides  examples of each of the five agency-reported benefits from the  acquisition of cloud services.", "Officials in the Office of the CIO at the 15 agencies reported that  acquiring cloud services had allowed them to procure IT resources that  were more flexible and scalable than the prior legacy infrastructure. For  example, officials in Labor\u2019s Office of the CIO reported that they had  acquired cloud services to address seasonal demands for system  processing. By eliminating the need to purchase additional servers and  other equipment that would go unused during the rest of the year, Labor  officials reported that cloud services allow the agency to scale resources  up during these periods of increased processing and then scale the  resources back down when the excess capacity is no longer needed.", "In addition, officials in DHS\u2019s Office of the CIO reported that, in 2012, they  had acquired software as a service for the agency\u2019s virtual desktop  solution. This new service provided six agency components access to  virtual secure desktop operating systems and applications. By eliminating  the need for users to be physically present in a specified location in order  to perform work activities, DHS officials reported that cloud services had  improved the ability to quickly respond to the agency\u2019s mission needs and  provided teleworking capabilities. In addition, the officials reported that  the solution streamlined the process of provisioning network access  between agency components and other external agencies."], "subsections": [{"section_title": "Acquiring Cloud Services Helped Agencies Reduce the Cost of IT Services", "paragraphs": ["Officials in the Office of the CIO at the 15 agencies reported that  acquiring cloud services had allowed them to procure more cost-effective  options for provisioning IT infrastructure and managing IT services. For  example, officials in Education\u2019s Office of the CIO reported that, by  migrating the Institute of Education Sciences\u2019 data center to the cloud in  2014, the agency had saved approximately $3.3 million in cost  avoidances annually for the last 3 years from not having to pay prior data  center hosting charges. In addition, Education officials reported that the  agency had saved $11.6 million between fiscal years 2013 and 2018 by  eliminating contractor website hosting.", "In addition, officials in Energy\u2019s Office of the CIO reported that the agency  saved $900,000 in fiscal years 2013 to 2014 by transitioning to a cloud- based platform for managing IT services, such as asset management.  Acquiring the software and platform as a service reduced or eliminated  the costs of administering the agency\u2019s on-premise legacy infrastructure  and associated software licensing fees."], "subsections": []}, {"section_title": "Using Cloud Services Increased the Efficiency of Agency Operations and Systems", "paragraphs": ["Officials in the 15 agencies\u2019 Offices of the CIO reported that acquiring  cloud services had allowed them to streamline or improve systems and  automate business processes and other functions. For example, officials  in State\u2019s Office of the CIO reported that the agency had previously relied  on paper-based and manual processes for completing employee requests  for, among other things, leave, training, personal identification cards, and  other general services. By acquiring software and platform as a service,  State implemented an electronic application that replaced over 800 paper  forms used to make these requests, without the time and cost of  developing an application themselves. As a result, the officials reported  that they estimate the application has saved more than 50,000 hours of  staff time since its deployment by streamlining the request process,  automatically populating common data fields, and improving support  options.", "In addition, officials in Treasury\u2019s Community Development Financial  Institutions Fund reported that their office acquired software as a  service, which will enable them to reduce the number of legacy systems  related to awards management from 17 to 2. These legacy systems had  required staff to enter the same data in different systems and manually  complete certification work tasks. By automating many of the manual  review and compliance processes, the officials reported that the office  saved approximately 650 staff hours in 2017."], "subsections": []}, {"section_title": "Cloud Services Helped Agencies Enhance Their Customer Service", "paragraphs": ["Officials in the Office of the CIO at 13 agencies reported that acquiring  cloud services had allowed their agencies to improve system design and  usability, which helped to enhance their customer service. For example,  VA officials reported that they had deployed a website in the cloud,  Access to Care, which included detailed data on the wait times and  quality-care metrics at local hospitals. Doing so enabled veterans to be  able to make better decisions about their health care options. By  acquiring cloud services, VA officials reported that they had developed  and deployed the new Access to Care website in approximately 30 days,  incorporating information from 130 components of VA\u2019s electronic health  records system that were previously available on disparate legacy  websites into one website. Further, the officials reported that the new  website increased the transparency of health care information for the  veteran community, empowered veterans, and promoted competition for  health care services.", "In addition, a Defense official from the Army\u2019s Total Ammunition  Management Information System reported that the office had acquired  infrastructure as a service in order to improve the processing and  reporting of ammunition requests that the Army receives from users  worldwide. Defense staff reported that, previously, they had received  complaints from customers regarding system pauses and delays when  entering requests for ammunition and generating reports due to legacy  infrastructure. Defense officials stated that using infrastructure as a  service improved system processing and reporting times\u2014from minutes  to seconds\u2014by providing scalable technology resources that can meet  worldwide performance demands. As a result, customers can more  quickly enter their orders into the system."], "subsections": []}, {"section_title": "Acquiring Cloud Services Strengthened Mission Assurance", "paragraphs": ["Officials in the Office of the CIO at nine agencies reported that acquiring  cloud services had allowed them to achieve greater levels of mission  assurance by streamlining security resources and improving backup  capabilities that were not available previously. For example, officials at  Defense\u2019s North American Aerospace Defense Command and U.S.  Northern Command reported that they had acquired cloud services for the  Situational Awareness Geospatial Enterprise system in order to improve  mission assurance and address Defense cybersecurity requirements.", "According to the officials, cloud services improved mission assurance by  allowing them to more quickly correct problems such as malware and the  loss of network connectivity in order to ensure the near continuous  availability of data from different access points. In addition, the system  required extensive storage and backup capabilities due to the need to  ensure the system\u2019s data were available continuously from different  access points. The officials reported that the acquisition of cloud services  has reduced the costs required to maintain continuous backup and  storage capabilities. They added that the system also complies with  Defense requirements that investments use an approved cloud service provider. In addition, the officials said acquiring cloud services has  provided the capability to scale resources, as needed, to meet demands  during special events, such as the State of the Union address and the  World Series, which require additional security.", "Further, Federal Transit Administration officials reported that migrating  two systems to the cloud had allowed the agency to enhance system  security by managing access to the systems through a single portal rather  than managing access to each system individually. As a result, the  officials reported that they were able to shift some responsibilities of  systems security management to the cloud vendor, which reduced the  number of security risks and consolidated the number of security tools  used. Further, according to the officials, an additional benefit is that users  are required to only remember a single password rather than different  passwords required for the multiple systems.", "Separately, from information provided by the 15 selected agencies, we  identified nine cloud computing investments that illustrate the variety of  examples of benefits that had been realized by these agencies from the  acquisition of cloud services. Table 7 identifies these investments and  additional details regarding the nature and sources of the benefits  achieved from them are profiled in appendix VI."], "subsections": []}]}, {"section_title": "Selected Agencies Identified Key Practices That Enabled Cloud Services", "paragraphs": ["In addition to the examples of significant benefits reported from acquiring  cloud services, officials at the 15 agencies reported that six key practices  had enabled them to realize these benefits through the successful  implementation of cloud services. For example, 12 agencies reported that  they implemented new governance planning activities, policies, or  processes in order to help ensure that cloud acquisition efforts were  managed enterprisewide. In addition, 12 agencies reported that they had  reorganized the management of agency IT resources to help increase  operational efficiency. Further, six agencies reported that having  executive leadership involved in driving the acquisition or sponsoring  efforts to use cloud services was critical for the successful adoption of  cloud services across the agency. Table 8 lists these key practices and  the number of agencies that reported each key practice, ranked by the  number of agencies reporting the practice.", "In addition, many of these six key practice areas identified by agencies  are consistent with requirements outlined in FITARA and  recommendations from our prior work made to agencies to address  longstanding issues with the management of IT acquisitions and  operations. Specifically, we previously have noted the importance of  strengthening the authority of CIOs, improving the portfolio review  process and the transparency of major investment data, ensuring the use  of incremental development methodologies, and updating human capital  plans."], "subsections": [{"section_title": "Selected Agencies Implemented New Policies and Processes to Guide Governance of Cloud Acquisition", "paragraphs": ["Officials in the Office of the CIO at 12 agencies reported that they had  implemented new governance activities or drafted new policies and  processes to help ensure the successful implementation of cloud  services. For example, SSA officials reported that they had drafted  several new policies to simplify the management of cloud resources and  provide better oversight for new cloud service acquisitions. Specifically,  the officials reported that the new policies established a request-and- approval governance process to address which staff can initiate cloud  solutions and what types of projects can receive funding.", "In addition, Energy officials reported that they had formalized policies and  governance processes on how to perform cloud migrations, including  establishing a documented, repeatable process to help offices migrate to  cloud services more efficiently. Further, Treasury officials reported that  they had focused on strengthening cloud-governance activities, including  planning and identifying requirements, because changes to enterprise  cloud systems may impact multiple programs. As a result, these officials  reported that they had implemented a cross-cutting steering committee to  help better plan and assess the impact of changes to enterprise cloud  systems that support multiple programs."], "subsections": []}, {"section_title": "Selected Agencies Modified Procurement and Contract Oversight Practices to Strengthen Cloud Acquisition Processes", "paragraphs": ["Officials in the Office of the CIO at 12 agencies reported that they had  modified their procurement and contract oversight practices in order to  accommodate the differences in how cloud services are acquired from  traditional acquisitions. For example, Commerce officials emphasized the  importance of developing standardized requirements to ensure that when  bureaus award contracts, they use standardized language. The officials  stated that these requirements help to ensure that contracts with cloud  service providers are comprehensive, legally adequate, and include  specific details regarding all of the activities the agency will need the  contractor to perform.", "In addition, officials of the U.S. Trustee Program at Justice reported that  they had used existing project and financial management resources to  monitor the use of cloud services and associated spending to help control  costs and ensure the accuracy of cloud vendor charges. For example, the  officials reported that the program used the cloud vendor\u2019s administrative  and business intelligence tools to create reports to verify cloud charges.  Also, Labor officials reported that they had worked with the agency\u2019s  acquisition team to ensure the agency is only billed for its actual cloud  usage. This required the agency to transition from a fixed-price contract  model to a time and materials-based contract model, which included a  clause that limited the maximum costs the agency would have to pay for  cloud services."], "subsections": []}, {"section_title": "Selected Agencies Addressed Changes in Workforce Needs for Managing Cloud Services", "paragraphs": ["Officials in the Office of the CIO at 12 agencies reported that they had  taken several steps to address changes in workforce needs for managing  cloud services. Specifically, these officials reported that they had  conducted inventories of staff skills, transitioned staff into new roles, and  ensured that staff acquired training. For example, VA officials reported  that they had conducted a staff skills inventory to identify future IT  workforce training needs and transition staff from managing legacy  technologies to managing cloud services. In addition, Energy officials  reported that they were preparing staff to transition from managing data  center resources to managing the agency\u2019s service level agreements with  cloud providers. The officials reported that moving to cloud services  allowed staff to spend more time improving existing applications and  identifying other efforts to innovate IT services rather than managing on- premise infrastructure. Further, a Defense official lead for cloud  computing in the Navy\u2019s Office of the CIO reported that the Navy had  developed an enterprise cloud working group consisting of key members  from major offices and security groups to help determine the appropriate  training and certification needs for staff and to conduct training seminars.  In addition, SBA officials said that the agency took advantage of a  contract option offered by the cloud vendor to acquire free cloud classes  and training, thereby avoiding the need to spend approximately $380,000  on training."], "subsections": []}, {"section_title": "Selected Agencies Reorganized the Management of IT Resources to Increase Operational Efficiency", "paragraphs": ["Office of the CIO officials at 12 agencies reported that acquiring cloud  services had led them to change how they organized and managed the  agency\u2019s IT resources. For example, GSA officials reported that they had  transitioned from letting individual components within the agency acquire  their own application to using an enterprise approach in which software  as a service applications are acquired and made available to the entire  agency. As a result, the officials reported that this approach allows the  agency to further optimize their software purchases and improve their  monitoring and tracking of software application usage enterprise-wide.", "In addition, officials at the Agricultural Research Service reported that  acquiring software as a service had promoted opportunities to share  customizations of the acquired software between Agriculture\u2019s  components rather than having each component develop a separate  customization. Specifically, these officials reported that they were able to  take a software feature developed by another Agriculture component and  implement it for their customer service portal, rather than having to  develop it themselves.", "Lastly, Education officials reported that they were in the process of  beginning an assessment to consolidate the agency\u2019s existing cloud  services across federal and commercial environments. The officials said  that they hoped to reduce the number of commercial cloud providers used  from twenty-five to eight, and to consolidate two of the agency\u2019s cloud  environments into a single environment within the next 3 years."], "subsections": []}, {"section_title": "Selected Agencies Streamlined Cloud Services to Address Security Needs in a More Efficient Manner", "paragraphs": ["Office of the CIO officials at eight agencies reported that they were able  to streamline the management of IT security by leveraging cloud services.  For example, SBA officials reported that they used security tools from  their cloud vendor in order to meet DHS\u2019s requirements for continuous  diagnostics and mitigation and improve the agency\u2019s security posture.  The officials reported that they had performed a requirements analysis  and found that, compared to acquiring costly hardware solutions to  manage this capability internally, their existing cloud vendor provided  security capabilities that actually exceeded DHS\u2019s recommended  continuous diagnostics and mitigation requirements. As a result, SBA  adopted the cloud vendor\u2019s security tools and avoided $300,000 in initial  hardware purchases, as well as subsequent hardware technology  refreshes every 3 years.", "In addition, GSA officials reported that choosing a FedRAMP-approved  cloud service provider had expedited the agency\u2019s adoption of cloud  services. Specifically, the agency did not have to visit and review each  vendor\u2019s facility as part of the vendor approval process, which shortened  the time frame needed to approve a system for use. The officials also  reported that using cloud services streamlined the deployment process  for new systems because using a cloud platform that had previously been  granted the authority to operate allowed the agency to avoid  undertaking a separate authorization process, which saved time and  resources."], "subsections": []}, {"section_title": "Selected Agencies Engaged Executive Leadership Support during Cloud Acquisition to Help Ensure Successful Implementation", "paragraphs": ["Officials in the Office of the CIO at six agencies reported that having  executive leadership involved in driving acquisitions or sponsoring efforts  to use cloud services was critical to the successful adoption of cloud  services across the agency. For example, SBA officials reported that their  agency CIO\u2019s commitment to acquiring cloud services and the deputy  CIO\u2019s attendance at daily cloud meetings were critical for the successful  adoption of cloud services at the agency. Similarly, Energy officials  reported that the agency had established a team with representatives  from offices of the CIO, chief financial officer, and chief acquisition officer,  to coordinate IT expenditures, including cloud investments, across the  agency.", "Further, Defense officials from the U.S. Transportation Command  reported that establishing a cloud center of excellence team that reported  directly to the Commander of U.S. Transportation Command had  empowered the team to engage directly with users to help break down  barriers that might impact the migration to cloud services. In addition, the  officials said that the team helped streamline the processes\u2014specifically,  the design, contracting, funding, transition planning, and implementation  processes\u2014necessary for the successful migration of all of the  command\u2019s systems to the cloud."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Since 2011, when OMB began requiring agencies to adopt a Cloud First  strategy, agencies have made progress in implementing cloud services  and, in doing so, have saved hundreds of millions of dollars and realized  notable benefits. However, six agencies still lack guidance for assessing  IT investments for cloud services and 12 agencies still have not  performed assessments for a number of their IT investments. In addition,  all of the agencies in our review do not have sufficient mechanisms or  approaches to track and report the savings data associated with these  cloud initiatives.", "Although agencies have reported spending $1 billion or more on cloud  services in just the past 2 years, and identified hundreds of millions of  dollars in related savings, these figures are not consistently reported. To  its credit, beginning in fiscal year 2019, OMB will require more accuracy  and granularity in how agencies report cloud investment spending data.  However, there has not been a corresponding effort to improve the  reporting of cloud savings data. An important aspect to the success of key  OMB cloud initiatives, like Cloud Smart and the associated drive for  greater agency adoption of cloud services, will be the ability for key  stakeholders to access complete information on the savings that agencies  are achieving under these efforts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 35 recommendations\u20141 recommendation to  OMB and 34 recommendations to the 16 agencies in our review.", "The Director of the Office of Management and Budget should require  agencies to explicitly report, at least on a quarterly basis, the savings and  cost avoidance associated with cloud computing investments.  (Recommendation 1)", "The Secretary of Agriculture should ensure that the CIO of Agriculture  completes an assessment of all IT investments for suitability for migration  to a cloud computing service, in accordance with OMB guidance.  (Recommendation 2)", "The Secretary of Agriculture should ensure that the CIO of Agriculture  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 3)", "The Secretary of Commerce should ensure that the CIO of Commerce  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 4)", "The Secretary of Defense should ensure that the CIO of Defense  completes an assessment of all IT investments for suitability for migration  to a cloud computing service, in accordance with OMB guidance.  (Recommendation 5)", "The Secretary of Defense should ensure that the CIO of Defense  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 6)", "The Secretary of Education should ensure that the CIO of Education  establishes guidance on assessing new and existing IT investments for  suitability for cloud computing services, in accordance with OMB  guidance. (Recommendation 7)", "The Secretary of Education should ensure that the CIO of Education  completes an assessment of all IT investments for suitability for migration  to a cloud computing service, in accordance with OMB guidance.  (Recommendation 8)", "The Secretary of Education should ensure that the CIO of Education  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 9)", "The Secretary of Energy should ensure that the CIO of Energy updates  the agency\u2019s guidance on assessing IT investments for suitability for  cloud computing services to include a requirement to assess new  acquisitions for these services. (Recommendation 10)", "The Secretary of Energy should ensure that the CIO of Energy completes  an assessment of all IT investments for suitability for migration to a cloud  computing service, in accordance with OMB guidance. (Recommendation  11)", "The Secretary of Energy should ensure that the CIO of Energy  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 12)", "The Secretary of Health and Human Services should ensure that the CIO  of HHS establishes guidance on assessing new and existing IT  investments for suitability for cloud computing services, in accordance  with OMB guidance. (Recommendation 13)", "The Secretary of Health and Human Services should ensure that the CIO  of HHS completes an assessment of all IT investments for suitability for  migration to a cloud computing service, in accordance with OMB  guidance. (Recommendation 14)", "The Secretary of Health and Human Services should ensure that the CIO  of HHS establishes a consistent and repeatable mechanism to track  savings and cost avoidances from the migration and deployment of cloud  services. (Recommendation 15)", "The Secretary of Homeland Security should ensure that the CIO of DHS  completes an assessment of all IT investments for suitability for migration  to a cloud computing service, in accordance with OMB guidance.  (Recommendation 16)", "The Secretary of Homeland Security should ensure that the CIO of DHS  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 17)", "The Attorney General of the United States should ensure that the CIO of  Justice completes an assessment of all IT investments for suitability for  migration to a cloud computing service, in accordance with OMB  guidance. (Recommendation 18)", "The Attorney General of the United States should ensure that the CIO of  Justice establishes a consistent and repeatable mechanism to track  savings and cost avoidances from the migration and deployment of cloud  services. (Recommendation 19)", "The Secretary of Labor should ensure that the CIO of Labor updates the  agency\u2019s guidance on assessing IT investments for suitability for cloud  computing services to include a requirement to assess existing  investments for these services. (Recommendation 20)", "The Secretary of Labor should ensure that the CIO of Labor completes an  assessment of all IT investments for suitability for migration to a cloud  computing service, in accordance with OMB guidance. (Recommendation  21)", "The Secretary of Labor should ensure that the CIO of Labor establishes a  consistent and repeatable mechanism to track savings and cost  avoidances from the migration and deployment of cloud services.  (Recommendation 22)", "The Secretary of State should ensure that the CIO of State establishes a  consistent and repeatable mechanism to track savings and cost  avoidances from the migration and deployment of cloud services.  (Recommendation 23)", "The Secretary of the Treasury should ensure that the CIO of Treasury  completes an assessment of all IT investments for suitability for migration  to a cloud computing service, in accordance with OMB guidance.  (Recommendation 24)", "The Secretary of the Treasury should ensure that the CIO of Treasury  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 25)", "The Secretary of Transportation should ensure that the CIO of  Transportation establishes guidance on assessing new and existing IT  investments for suitability for cloud computing services.  (Recommendation 26)", "The Secretary of Transportation should ensure that the CIO of  Transportation completes an assessment of all IT investments for  suitability for migration to a cloud computing service, in accordance with  OMB guidance. (Recommendation 27)", "The Secretary of Transportation should ensure that the CIO of  Transportation establishes a consistent and repeatable mechanism to  track savings and cost avoidances from the migration and deployment of  cloud services. (Recommendation 28)", "The Secretary of Veterans Affairs should ensure that the CIO of VA  completes an assessment of all IT investments for suitability for migration  to a cloud computing service, in accordance with OMB guidance.  (Recommendation 29)", "The Secretary of Veterans Affairs should ensure that the CIO of VA  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 30)", "The Administrator of General Services should ensure that the CIO of GSA  establishes a consistent and repeatable mechanism to track savings and  cost avoidances from the migration and deployment of cloud services.  (Recommendation 31)", "The Administrator of the Small Business Administration should ensure  that the CIO of SBA establishes a consistent and repeatable mechanism  to track savings and cost avoidances from the migration and deployment  of cloud services. (Recommendation 32)", "The Commissioner of the Social Security Administration should ensure  that the CIO of SSA updates the agency\u2019s guidance on assessing IT  investments for suitability for cloud computing services to include a  requirement to assess existing investments for these services.  (Recommendation 33)", "The Commissioner of the Social Security Administration should ensure  that the CIO of SSA completes an assessment of all IT investments for  suitability for migration to a cloud computing service, in accordance with  OMB guidance. (Recommendation 34)", "The Commissioner of the Social Security Administration should ensure  that the CIO of SSA establishes a consistent and repeatable mechanism  to track savings and cost avoidances from the migration and deployment  of cloud services. (Recommendation 35)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OMB and the 16 agencies for their  review and comment. In response, 14 agencies provided comments  stating that they agreed with our recommendations; one agency stated  that it agreed with one recommendation but disagreed with another; and  two agencies did not state whether they agreed or disagreed with the  recommendations. In addition, multiple agencies provided technical  comments, which we incorporated into the report, as appropriate.", "The following 14 agencies agreed with our recommendations:  In written comments from Commerce, Education, Energy, HHS, DHS,  State, Transportation, VA, and GSA, these agencies stated that they  agreed with the recommendations directed to them. In addition, each  of the agencies indicated that it planned, or already had begun taking  actions, to address the recommendations. The agencies\u2019 comments  are reprinted in appendixes VII through XV, respectively.", "In emails received from Agriculture\u2019s Director of Strategic Planning,  Policy, Egovernment and Audits in the Office of the CIO on February  11, 2019, and from Justice\u2019s Audit Liaison Specialist in the Internal  Review and Evaluation Office on February 15, 2019, both of these  departments stated that they agreed with our recommendations.", "In written comments from Labor, the department stated that it agreed  with our recommendations. The department also described actions  taken to address our recommendation that it update its guidance on  assessing IT investments for suitability for cloud computing services  to include a requirement to assess existing investments for these  services. Specifically, Labor stated that it had taken steps to ensure  that its agencies included an assessment of cloud computing  suitability as they moved forward with their investments and that this  process had been integrated into Labor\u2019s budget process. We  followed up with the department and obtained a copy of Labor\u2019s  guidance.", "However, in examining this guidance, we found it to be the same as  what Labor had previously provided to us during the course of our  audit. Further, as we mentioned earlier regarding our analysis of the  department\u2019s guidance for assessing investments for suitability for  cloud services, Labor had required existing investments that were  already using cloud services to migrate to the department\u2019s new  consolidated cloud environment; however, it did not require existing  systems not using cloud services to be assessed for these services.  Without receiving any additional information from the department that  supported its actions to address our recommendation prior to this  report\u2019s issuance, we believe our recommendation to Labor is still  appropriate. The department\u2019s comments are reprinted in appendix  XVI.", "In written comments from SBA, the agency agreed with our  recommendation. Also, in additional comments sent by a GAO liaison  in the Office of Congressional and Legislative Affairs via email on  March 11, 2019, SBA provided updated information regarding the  benefits that the agency had realized from using cloud services for its  system that was profiled in appendix VI of the draft report.  Specifically, SBA officials in charge of the system provided a revised  list of realized benefits from the cloud services. However, the officials  did not provide any supporting documentation regarding the revised  benefits; therefore, we were not able to validate the revised list of  benefits prior to the issuance of this report. As a result, we removed  the profile from the report in order to be consistent with our  methodology for reporting examples of systems that had realized  benefits from the acquisition of cloud services, and notified SBA of  this decision. SBA\u2019s comments are reprinted in appendix XVII.", "I) Application and  Service Migration to DOL Cloud, version 1.5 (March 2018). report. However, during further discussion with SSA officials in charge  of the system on January 17, 2019, the officials confirmed that the  agency had not yet identified all of the potential benefits related to the  use of cloud services as a result of a change in their vendor solution.  Thus, we removed the profile from our report in order to be consistent  with our methodology for reporting examples of systems that had  realized benefits from the acquisition of cloud services, and notified  SSA of this decision. SSA\u2019s comments are reprinted in appendix  XVIII.", "One agency agreed with one recommendation and disagreed with a  second recommendation:", "Defense provided written comments in which it agreed with our  recommendation to complete an assessment of all IT investments for  suitability for migration to a cloud computing service. However, the  agency did not agree with our recommendation that it establish a  mechanism to track savings and cost avoidances from the migration  and deployment of cloud services. Specifically, Defense stated that it  did not agree with our recommendation because there was no  standard, consistent way to capture such savings or cost avoidance.  The department stated that it would work with OMB on whether or  how to collect such information, and, if practical, report such  information in accordance with OMB guidance.", "However, as we noted in our report, for the past 6 years, OMB has  required agencies to report on savings and cost avoidances from  implementing IT reform initiatives, including savings realized from the  migration to cloud services. Tracking savings and cost avoidances for  cloud initiatives is important in order to ensure that Defense is  effectively managing and overseeing its cloud initiatives. In addition, it  is essential that OMB and Congress have sufficient data to see the  results of Defense\u2019s cloud initiatives and understand whether the  department is achieving savings using cloud services. Consequently,  we believe our recommendation to track savings and cost avoidances  from the migration and deployment of cloud services is still warranted.  The department\u2019s comments are reprinted in appendix XIX.", "Finally, we received comments via email from Treasury\u2019s Supervisory IT  Specialist in the Office of the CIO on February 22, 2019, and OMB\u2019s  Liaison to GAO on February 25, 2019. In these comments these two  agencies did not state whether they agreed or disagreed with the  recommendations that we directed to them.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the Director  of the Office of Management and Budget, the Secretaries and agency  heads of the departments and agencies in this report, and other  interested parties. This report will also be available at no charge on our  website at http://www.gao.gov.", "If you or your staffs have any questions on matters discussed in this  report, please contact me at (202) 512-4456 or harriscc@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix XX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives for this engagement were to (1) evaluate selected  agencies\u2019 progress in implementing cloud services, (2) review the extent  to which selected agencies have increased spending on cloud services  and achieved cost savings or avoidances, and (3) describe examples of  cloud investments with significant or notable benefits that have been  identified by selected agencies.", "For this review, we selected a sample of agencies based on the size of  their total information technology (IT) budget for fiscal year 2017.  Specifically, we categorized each of the 24 Chief Financial Officers Act  agencies by the size of its IT budget: large (more than $3 billion),  medium ($1 billion to $3 billion), and small (less than $1 billion), as  reported on the Office of Management and Budget\u2019s (OMB) IT  Dashboard  These agencies were the Department of Agriculture (Agriculture),  Department of Commerce (Commerce), Department of Defense  (Defense), Department of Education (Education), Department of Energy  (Energy), Department of Health and Human Services (HHS), Department  of Homeland Security (DHS), Department of Justice (Justice),  Department of Labor (Labor), Department of State (State), Department of  Transportation (Transportation), Department of the Treasury (Treasury),  Department of Veterans Affairs (VA), General Services Administration  (GSA), Small Business Administration (SBA), and Social Security  Administration (SSA).", "OMB, IT Dashboard, 2017 (https://itdashboard.gov).", "To address the first objective, we obtained and analyzed IT Dashboard  data related to the 16 selected agencies\u2019 use of cloud services for fiscal  years 2016 through 2018, and their projected use in 2019. We chose to  begin with fiscal year 2016 because we had previously reported on  federal agencies\u2019 use of cloud services through fiscal year 2014 and fiscal  year 2015 data was not available. Specifically, the Dashboard includes  agency responses to a cloud-related question from OMB\u2019s capital  planning guidance. The question asks whether a cloud alternative was  evaluated for the investment, or components or systems within the  investment. We reviewed agency responses that were submitted for fiscal  years 2016 through 2019 as part of the annual budget submission  process in order to determine whether a specific investment was using  cloud services.", "During this 4-year period, OMB made changes to the options that  agencies were required to choose from which indicated whether an  investment was using cloud services. For OMB\u2019s capital planning  guidance for fiscal years 2016 and 2017, we selected responses that  indicated that the agency \u201chad evaluated a cloud alternative and chose a  cloud alternative\u201d with a particular cloud deployment model. In addition,  for OMB\u2019s capital planning guidance for fiscal years 2018 and 2019, we  selected responses that indicated the \u201cinvestment or a portion of the  investment is leveraging cloud computing\u201d. We then determined the total number of investments using cloud services and calculated the  percentage of investments using these services based on the total  number of reported investments by each agency for each fiscal year.", "To ensure the accuracy and completeness of the selected agencies\u2019 data  on the use of cloud services, we downloaded this data from the IT  Dashboard on October 3, 2017, March 7, 2018, and October 9, 2018. We  took this step because agencies may update their data on a quarterly  basis throughout the fiscal year. In addition, we presented the results of  our analysis to officials in charge of cloud services within the Office of the  Chief Information Officer (CIO) at each selected agency. We asked these  officials to verify the completeness and accuracy of this data and provide  any updates as appropriate. Officials at all 16 agencies confirmed the  total number of investments using cloud services for fiscal years 2016  through 2018 and their projected use for fiscal year 2019. Based on these  steps, we determined that these data were sufficiently reliable to report on  agencies\u2019 progress in using cloud services.", "In addition, we compared each selected agency\u2019s cloud guidance to  OMB\u2019s Cloud First guidance. We interviewed Office of the CIO officials in  charge of cloud services at each agency regarding their guidance. In  addition, we interviewed OMB staff from the Office of E-Government and  Information Technology regarding its guidance. Because of the wide  variety of responses and documents we received from the agencies  related to their guidance for assessing investments for cloud computing  services, we conducted a content analysis of the information in order to  determine compliance with OMB\u2019s guidance. In doing so, team members  individually reviewed agencies\u2019 responses and documents and assigned  them to various categories and subcategories. Team members then  compared their categorization schemes, discussed the differences, and  reached agreement on the final characterization of compliance with OMB  guidance. In cases where agencies provided multiple policies or  documents, we followed up to clarify which portions were considered by  the agency to support the requirement to assess all investments for cloud  services.", "In analyzing whether the agencies\u2019 guidance on assessing investments  for cloud services met OMB criteria, we assessed whether the guidance  clearly identified a requirement for evaluating both new and existing  investments for cloud services. Agencies found to not have guidance  which clearly defined the assessment process were evaluated as such for  one of two reasons: either the agency\u2019s formal guidance did not  completely address our assessment criteria or the agency\u2019s guidance had  not yet been established or finalized.", "In analyzing whether agencies had met OMB\u2019s requirement to evaluate  each investment for cloud services, we assessed the number of  investments that had completed assessments based on the fiscal year  2019 budget submission. Agencies found not to have met the  requirement were evaluated as such if the agency had 10 or more  investments that had not yet been evaluated for cloud services. We set  this threshold based on a reasonable interpretation of the intent of OMB\u2019s  guidance requiring assessments of all investments.", "For our second objective, we obtained and analyzed IT Dashboard data  related to the 16 agencies\u2019 spending on cloud services for fiscal years  2015 through 2018. We chose to begin with fiscal year 2015 because we  had previously reported on federal agencies\u2019 spending on cloud services  through fiscal year 2014. Agencies report actual spending costs by fiscal  year on the IT Dashboard as part of the next fiscal year reporting. To  determine actual cloud spending costs for each fiscal year, we used  agency spending data reported each subsequent fiscal year (from fiscal  years 2017 through 2018) as of October 5, 2018.", "In addition, we administered a data collection instrument to each of the 16  agencies to obtain and analyze spending and savings data by the 16  selected agencies for fiscal years 2014 through 2018 and plans for future  planned costs. We requested that these agencies provide spending and  savings data broken down by investment, as OMB only requires federal  agencies to report total spending by cloud deployment model on the IT  Dashboard, and agencies were not required to identify whether any  reported savings were cloud-related. This instrument was administered  from November 2017 to January 2018.", "In the data collection instrument, we asked the selected agencies to  complete information on each of their cloud investments, including the  title of the application or system leveraging cloud, the cloud deployment  and service models, and the associated cloud spending and net cloud  savings or avoidances from fiscal year 2014 through fiscal year 2018 and  beyond, as agencies generally submitted data on planned spending for  one or more fiscal years beyond 2018. Due to the varied scale of cloud  implementation efforts ongoing at these agencies, we asked agencies to  only provide all applications, systems, or investments leveraging cloud  with total life-cycle costs of $1 million or more. We also asked agencies to  provide spending and savings or cost avoidances figures in whole  numbers in order to avoid errors in rounding numbers when we calculated  the reported figures in millions.", "We took the following steps to help ensure the reliability of the data we  collected. First, to minimize errors that might occur from respondents  interpreting our instrument differently from our intended purpose, we  reviewed the data collection instrument with agency officials who would  be completing the instrument during meetings in October and November  2017. Second, we reviewed the completed spreadsheets to identify  missing data or other errors, and consulted with our data quality expert  about these issues as appropriate.", "All agencies completed the data collection instrument by May 2018. For  those agencies that provided rounded (rather than exact) spending or  savings figures, we recalculated the data into whole numbers and  confirmed our calculations with the agencies. In addition, one agency  broke down its savings data into savings and cost avoidances; we  combined these reported figures for each investment and, after  consultation with a GAO data subject matter expert, confirmed with all the  other agencies in our review that their information on savings also  included cost avoidances.", "We also reviewed the associated notes regarding agencies\u2019 qualifications  of the provided data and followed up with agency officials to clarify the  responses as appropriate. These notes included information on whether  certain spending or savings data were unavailable, whether certain costs  were excluded from the spending information provided to us or whether  there were other qualifications of the provided data.", "Lastly, we presented the results of our analysis of IT Dashboard data and  the data obtained from the data collection instrument to each of the  selected agencies between June and August 2018. We asked the  agencies to verify the completeness and accuracy of these data and  provide any updates as appropriate. All 16 agencies provided updated  information regarding the list of investments using cloud services with life- cycle costs of $1 million or more and six agencies (Agriculture,  Commerce, Justice, Transportation, Treasury, and VA) provided updated  information related to spending and savings for these investments, which  we have incorporated as appropriate. Based on the measures we took to  ensure the reliability of the data provided by the agencies and reported on  the IT Dashboard, we determined that the data were sufficiently reliable  for the purpose of this report.", "For the third objective, we obtained and reviewed available  documentation discussing examples of cloud computing investments  reported by the selected agencies as having produced notable benefits  and key practices that ensure the effort was successful. We also  interviewed officials from the Office of the CIO and other components in  charge of cloud services regarding these benefits.", "In order to develop our list of questions for these meetings, we first  conducted research to identify the range of benefits that could be  achieved from acquiring cloud services. We reviewed OMB, GSA, and  CIO Council cloud guidance; our prior work; and key leading cloud  practices from GSA\u2019s Federal Cloud Computing Center of Excellence.  Based on this work, we developed a list of seven key areas of benefits:  (1) improving efficiency and operations; (2) promoting agility and  responsiveness; (3) achieving business growth; (4) reducing cost; (5)  meeting regulatory requirements; (6) enhancing customer experience;  and (7) ensuring mission outcomes. During meetings with agency officials  in the Office of the CIO and other components in charge of cloud  services, we asked officials whether they had identified any significant or  notable benefits in these seven areas. As these seven areas might not  represent all potential benefits, we also asked officials to describe any  additional benefits not included in these areas.", "In addition, as part of these meetings, we asked officials from the Office  of the CIO at each selected agency to identify up to three examples of  investments that benefited from the acquisition of cloud services. We  asked agencies to exclude examples of email deployments to the cloud to  ensure a wider variety of examples of investments with benefits. Fifteen  of the 16 agencies in our review identified at least one or more examples  of cloud investments that had produced significant or notable benefits,  while one agency\u2014HHS\u2014reported that it did not have any such  examples because it did not have any completed migration efforts.  Because of the open-ended nature of the 15 agencies\u2019 responses to our  questions, we conducted a content analysis of the information we  received in order to identify and summarize the benefits and key practices  that were identified by the 15 agencies. We reviewed the benefits and key  practices reported by the agencies and grouped them using the seven  key benefit areas that our prior research had identified. We discussed the  groupings of the reported benefits, and reached agreement on these  categories. We grouped the benefit categories together based on  commonalities such as purpose, impact, and capabilities, and  summarized the benefits reported. Based on discussion, we confirmed a  list of benefits and key practices and totaled the number of agencies that  reported each of these.", "In addition, to select systems or investments to profile, we reviewed the  34 examples provided by the 15 agencies and narrowed the list to 11  examples. We selected these examples using the following factors: the  type of system, whether the system supported the mission or business  operations of the agency or component, and the availability of information  related to the benefits achieved from acquiring cloud services. In doing  so, we sought to have a mix of systems that provided mission critical  services to the agency or the public, illustrated a range of cloud  computing benefits, and included detailed information on the benefits  achieved from using cloud services.", "In technical comments received on a draft of this report, two agencies  provided new information regarding the use of cloud services for their  systems that were profiled in appendix VI of the draft report. Based on the  additional information provided by the two agencies, we determined there  was no longer sufficient detail regarding what benefits were realized for  these systems. Therefore, we removed the two agencies\u2019 profiled  examples from the report in order to be consistent with our methodology  for reporting examples of systems that had realized benefits from the  acquisition of cloud services. We then notified both agencies of this  decision.", "We conducted this performance audit from September 2017 to April 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."], "subsections": []}, {"section_title": "Appendix II: Status of Cloud-related Recommendations in the 2017 American Technology Council Report", "paragraphs": ["In May 2017, the Administration established the American Technology  Council to help transform and modernize federal IT and how the  government uses and delivers digital services. Subsequently, in  December 2017, the American Technology Council issued a Report to the  President on Federal IT Modernization and made eight cloud computing- related recommendations that are relevant to the focus of our review.  Table 9 outlines the cloud-related recommendations contained in the  report and the current status of these recommendations as of July 2018,  according to Office of Management and Budget (OMB) staff from the  Office of E-Government and Information Technology."], "subsections": []}, {"section_title": "Appendix III: Selected Agency Cloud Investments for Fiscal Years 2016 through 2019", "paragraphs": ["The Office of Management and Budget (OMB) requires federal agencies  to evaluate each investment, or components or systems within the  investment, for cloud services, regardless of the overall life cycle stage of  the investment. Agencies are required to report the status of each  investment\u2019s evaluation as part of the annual budget submission, as  noted in OMB\u2019s annual capital planning guidance. Table 10 lists the total  number of investments using cloud services and the total number of all IT  investments for fiscal years 2016 through 2019 for 16 selected agencies,  as reported on the IT Dashboard as of October 9, 2018."], "subsections": []}, {"section_title": "Appendix IV: Selected Agency Cloud Spending for Fiscal Years 2015 through 2018", "paragraphs": ["The Office of Management and Budget (OMB) requires federal agencies  to report total cloud spending based on the cloud deployment model as  part of the annual budget submission, as noted in OMB\u2019s annual capital  planning guidance for fiscal years 2015 through 2018. Table 11 lists the  total agency-reported cloud spending and total IT spending for fiscal  years 2015 through 2018 for the 16 agencies in our review, as reported  on the IT Dashboard as of October 5, 2018."], "subsections": []}, {"section_title": "Appendix V: Description of Cloud Computing Investments Provided by Selected Agencies for Fiscal Year 2018", "paragraphs": ["Sixteen selected agencies provided us with information on their  investments related to spending on cloud services of at least $1 million or  more in life-cycle costs. Table 12 identifies the investments for fiscal year  2018 that these agencies submitted to GAO as of October 2018. This list  includes the name of the investment, the cloud deployment model, and  the cloud service model."], "subsections": []}, {"section_title": "Appendix VI: Profiles of Selected Cloud Computing Acquisitions", "paragraphs": ["The following nine cloud investment profiles illustrate the variety of  benefits that the selected agencies in our review had realized from the  acquisition of cloud services. These profiles describe the cloud  investment, costs, key benefits, and the savings or avoidances  associated with implementation of cloud services. In addition, the profiles  detail how, among other things, the acquisition of cloud services enabled  the agency to overcome previous challenges with legacy systems and  acquire more cost-effective, efficient, and responsive IT resources in  order to meet mission needs."], "subsections": [{"section_title": "Treasury\u2019s Cloud Acquisition Supports Enterprise Resource Planning", "paragraphs": ["Each year, the Department of the Treasury\u2019s (Treasury) Bureau of  Engraving and Printing prints billions of dollars\u2014referred to as Federal  Reserve notes\u2014for delivery to the Federal Reserve System. According to  the Chief of the Bureau of Engraving and Printing\u2019s Office of Enterprise  Solutions, in October 2012, the bureau\u2019s CIO deployed an enterprise  resource planning system to the cloud to improve efficiency and  operations, and enhance the availability, security, and performance of its  systems that manage the daily business activities of the bureau.", "Previously, the bureau had used 16 separate IT legacy systems that were  facing technological obsolescence and required heavy customization  using old programming languages. Officials in the bureau reported that  they spent time updating and maintaining the hardware and software for  these systems to minimize downtime that led to the need for staff to work  overtime and decreased customer satisfaction with the system. In  addition, the legacy systems were not integrated and certain tasks were  performed manually, including data entry, aggregation, and product  quality checks. Further, the legacy systems lacked robust data validation  features; thus, database administrators had to spend time making  corrections to data submitted by users.", "By moving to the cloud, the bureau replaced the 16 systems with software  as a service that required no customization. As a result, officials in the  bureau reported that the bureau was able to significantly improve its  operations and decision making. Further, officials stated that the bureau\u2019s  use of software as a service enabled it to procure cloud services which  helped to ensure that the new system had increased availability,  performance, and security to prevent delays and downtime in operations.", "The bureau also implemented features to improve data entry to reduce  user errors. Figure 3 provides a summary of Treasury\u2019s cloud acquisition.", "Acquiring software as a service improved operations and  production decisions. According to Bureau of Engraving and Printing  officials, by consolidating the bureau\u2019s 16 legacy systems with a single  system in the cloud, the bureau made significant improvements to its  operations through automation, improved data quality, and increased  availability, performance, and security. Specifically, acquiring software as  a service enabled the bureau to purchase capabilities that its previous  systems did not have. By doing so, this eliminated some manual data  entry and improved the bureau\u2019s ability to, among other things, automate  production decisions which allowed users to focus on more critical tasks.", "For example, bureau staff reported that now they enter data from monthly  Federal Reserve Bank orders into the Manufacturing Support Suite to  determine the denominations and quantities of currency to produce, along  with what banks will receive it. In addition, the new system uses current  production times and data to determine when to replenish existing  inventory and supplies, such as ink and paper, in order to prevent  operational delays and downtime. Furthermore, staff stated that they now  make compliance decisions using automated alerts and triggers, which  help to prevent the release of products that do not meet bureau  standards.", "According to bureau officials, the bureau has also improved data quality  and reduced the amount of time that database administrators have to  spend correcting errors. For example, when users enter data into the  system, real-time data validation checks prevent common errors and  prompt users to make corrections before submission. In addition, staff  stated that the bureau implemented bureau-specific data checks,  including which accounts could be associated with item categories and  cost centers, which has reduced user errors and improved the reliability of  the data.", "Finally, the bureau has improved system availability, security, and  performance by acquiring software as a service. For example, bureau  officials stated that they selected a FedRAMP-approved provider and  established service level agreements with the provider to help ensure  system availability, security, and performance, including disaster recovery  capabilities that were not available for the legacy systems. In addition,  bureau staff said that they no longer need to update and maintain IT  software and hardware, which has saved time and resources, and  decreased system downtime."], "subsections": []}, {"section_title": "Transportation\u2019s Cloud Acquisition Stores Public Transit Data", "paragraphs": ["The Department of Transportation\u2019s (Transportation) Federal Transit  Administration provides financial and technical assistance to local public  transit systems, including buses, subways, light rail, commuter rail,  trolleys and ferries. According to the Federal Transit Administration IT  Director, in October 2014, the National Transit Database was migrated to  the cloud in order to improve customer experience, mission assurance,  agility and responsiveness. Previously, the legacy database had several  challenges, including the use of obsolete technology, poor usability, and  problems with data accuracy. In addition, developing new functionality for  the legacy system was a lengthy process, which decreased the ability of  developers to respond to other user needs.", "By transitioning to the cloud, the Federal Transit Administration  established a centralized access portal for users, which consolidated  systems, eliminating the need to remember multiple passwords for  external users, and added a single sign on feature for internal users. Staff  in the Federal Transit Administration also reported that they improved the  database\u2019s user interface by implementing improved system validation  functionality for transit data. In addition, the cloud provided software  developers with tools to develop functionality quicker to help improve the  database\u2019s responsiveness to user needs. Figure 4 provides a summary  of Transportation\u2019s cloud acquisition.", "Automating validation features improved customer experience.  According to Federal Transit Administration officials, by moving to the  cloud, developers established automated validation features which use  historical data to identify outliers and prevent potential user data entry  errors. Officials reported that analysts previously performed manual data  validation to ensure the accuracy of customer-entered data. The new  cloud version of the National Transit Database uses historical data to  identify errors and leverages cross-form data validation for the current  reporting year, which has reduced the time it takes to validate the data.", "Faster development methods improved the responsiveness to user  needs. According to Federal Transit Administration officials, with the  deployment to the cloud, the agency adopted faster development  processes, which led to more frequent releases of functionality. For  example, the database\u2019s developers regularly receive requests from  transit customers for enhancements that would traditionally take longer to  implement in the prior legacy environment. By leveraging the cloud  framework and improved Agile development procedures, officials reported  that developers can now engage users earlier to make adjustments  based on their feedback, thereby focusing more directly on meeting  business needs."], "subsections": []}, {"section_title": "GSA\u2019s Cloud Acquisition Enhances Federal Data Analytics", "paragraphs": ["The General Services Administration (GSA) helps federal agencies build  and acquire office space, products and other workspace services, and  oversees the preservation of historic federal properties. According to  GSA\u2019s Chief Data Officer, in 2015, GSA began developing an enterprise  platform pilot program, Data to Decisions, in order to improve the agility,  responsiveness, efficiency, and operations of the agency\u2019s data analytics  capabilities. Previously, GSA\u2019s data analytics operations had redundancy  and overlap, including similar contracts and data sources, negatively  affecting data sharing efforts across the agency.", "Subsequently, in October 2015, GSA\u2019s CIO, Chief Data Officer, and Chief  Technology Officer moved the program to the cloud while consolidating  existing contracts to create a centralized web portal. GSA officials  reported that the new portal provides new data analytics capabilities for  staff to use in generating analyses to advise decision makers at the  agency and across other federal agencies, while also saving staff time in  producing these analyses. For example, the centralized web portal allows  the agency\u2019s 400 data practitioners to, among other things, build data  models, understand business operations through analytics and  visualizations, and publish dashboards and reporting. Figure 5 provides a  summary of GSA\u2019s cloud acquisition.", "Providing analytical capabilities and tools to the federal government  improved the management of resources. According to GSA officials in  the Office of the CIO, cloud deployment has enabled the sharing of data  and other analytical tools across the federal government to help agencies  better manage their resources and create efficiencies in data  management. For example, previously, agencies did not have access to  detailed data regarding agency-owned and GSA-managed property in  their asset portfolios. By moving to the cloud, GSA officials reported that  they developed two tools called the Real Property Management Tool and  the Asset Consolidation Tool. These tools were deployed to between 30  and 40 federal agencies, which enabled these agencies to identify  potential opportunities to consolidate their building properties or co-locate  office spaces to help save resources. Specifically, the tools provided  dashboards that showed expiring leases and occupancy agreements, as  well as excess and underutilized space. Further, the program provided  data to federal agencies that were not previously available. By doing so,  officials said that smaller agencies did not have to invest in their own data  analytics capabilities or acquire additional staff resources for data  analytics.", "Flexible and scalable technology addressed an increased demand  for data services. According to GSA officials in the Office of the CIO, as  the program has expanded its data analytics capabilities, program usage  has grown over time. In particular, in 2018, of the program\u2019s 7,200 users,  more than 80 percent were from federal agencies other than GSA. Cloud  deployment has allowed GSA to easily scale resources to manage  changes in user traffic and enabled agency personnel to focus on the  mission rather than managing a data center to respond to these changes  in demand. For example, in 2017, GSA officials said that they sent out a  notice to approximately 1 million federal employees who had completed  its annual tenant satisfaction survey notifying them that the survey\u2019s  results were available. As a result, several thousand users tried to access  the report on the program\u2019s portal, affecting the program\u2019s operations.  Officials said that the agency was able to scale up the portal\u2019s resources  and capabilities to handle the demand and then scale the resources back  once user traffic returned to normal levels."], "subsections": []}, {"section_title": "VA\u2019s Cloud Acquisition Improves Veteran Benefits and Services", "paragraphs": ["The Department of Veterans Affairs (VA), among other duties,  administers a variety of benefits and services that provide financial and  other forms of assistance to veterans, their dependents, and survivors.  According to the Deputy Assistant Secretary for Enterprise Program  Management, in March 2016, the VA CIO deployed the Vets.gov web  portal to the cloud in order to improve veterans\u2019 customer experience and  scale resources to meet demand. Previously, VA officials reported that  they had experienced challenges with its legacy websites. Specifically,  the websites were not designed using federal government web standards,  including browser compatibility and accommodations for the needs of  individuals with disabilities. In addition, the websites required users to  remember several sets of login information to access many features on  approximately 500 websites.", "By moving to the cloud, VA officials stated that the agency has been able  to better address veterans\u2019 needs by consolidating access to over 500 of  the agency\u2019s websites for benefits and services. The new easier, mobile- friendly web portal requires only one login for all 500 websites, and  incorporates features for users with disabilities, such as blind veterans.", "Further, the program was able to scale up the portal\u2019s resources to meet  the increased demand for online benefits and services, while adopting a  design approach that better incorporated the needs of veterans and  delivered functionality more quickly. In November 2018, the Vets.gov  cloud platform became the building block for the agency\u2019s new homepage  at VA.gov. Figure 6 provides a summary of VA\u2019s cloud acquisition.", "Consolidating website access to benefits and services and  incorporating veterans\u2019 feedback improved customer service to  veterans and reduced costs. According to VA officials in the Office of  the CIO, by moving to the cloud, VA has worked to improve veterans\u2019  access to benefits and services through its websites in several key areas.  For example, Vets.gov is intended to be mobile-friendly and work on any  computing device with a compliant web browser, avoiding the need to  install separate software to apply for benefits. In addition, officials stated  that the agency intends the portal to be easier for veterans to search for  services. For instance, VA had previously developed an application to  help veterans schedule medical appointments but VA officials reported  that veterans could not easily locate the application after searching  across multiple VA websites.", "In addition, VA officials stated that the agency was also able to reduce  costs because, in moving to the cloud, Vets.gov cost the agency 85  percent less than it would have cost to build a traditionally hosted service  with the same features. VA also retired a legacy application, which saved  an estimated $1 million in annual contract costs.", "Scalable technology and a faster veteran-centered development  approach increased agility and responsiveness. According to VA  officials in the Office of the CIO, moving to the cloud allowed VA to  acquire more flexible and scalable technologies in order to scale  resources up and down to meet demand, while incorporating a faster,  more user-friendly design approach. For example, after its launch,  officials said that Vets.gov received a spike in the number of veterans that  chose to submit online applications for healthcare, which the agency was  able to handle by scaling up resources to meet the spike in demand.", "In addition, VA officials reported that the agency adopted a design  approach in the cloud that, among other things, allowed it to adopt Agile  methods to more quickly deliver releases. For example, based on  feedback, VA incorporated mobile friendly design features\u201440 percent of  Vets.gov users access benefits and services through a mobile device.  Officials said that the agency has made efforts to focus on the needs of  veterans first by using an iterative design approach that incorporates user  feedback into the design process so that no features in the portal are  deployed without a final usability test with a veteran. VA officials also  reported that using the cloud has allowed the agency to deploy new  features as soon as they are ready, in small incremental daily releases.  Further, the officials noted that VA developers have worked with veterans  on the portal\u2019s healthcare claims status tracker. Specifically, veterans can  access the status of their healthcare claims that may be experiencing a  backlog in processing, along with an estimated decision date. Lastly,  officials reported that by incorporating an online application, Vets.gov  reduced the number of paper-based healthcare applications submitted by  veterans. In fiscal year 2018, users submitted over 750,000 digital forms  for benefits through Vets.gov."], "subsections": []}, {"section_title": "Justice\u2019s Cloud Acquisition Hosts Data Center", "paragraphs": ["The Department of Justice\u2019s (Justice) U.S. Trustee Program (USTP) is  responsible for overseeing the administration of bankruptcy cases and  private trustees within the United States. According to USTP\u2019s Chief  Technology Officer, in June 2016, executives in the Program, including  the CIO, decided to migrate USTP\u2019s operations to the cloud to meet  regulatory requirements, reduce costs, and improve agility, efficiency, and  responsiveness. Officials said that their office had conducted an  evaluation and determined that, in order to fulfill OMB\u2019s mandate to  consolidate agency data centers, USTP would have to spend at least $1  million for an on-premise consolidation. Officials reported that USTP also  faced challenges with having adequate backup capabilities and  implementing new technological solutions due to its legacy computing  environment and the time it took to purchase and install new hardware  and software. Subsequently, in March 2017, the Program moved its  operations to the cloud and avoided the cost of consolidating its data  centers. In addition, officials in USTP said that the move to the cloud  helped them address backup issues, and speed up the development and  testing of new applications. Figure 7 provides a summary of Justice\u2019s  cloud acquisition.", "Avoiding an on-premise data center consolidation and streamlining  IT operations reduced costs. According to USTP officials, by moving to  the cloud, their office avoided at least $1 million in costs, while resolving  internal performance issues, and streamlining the management of its  contracts. Specifically, officials said that USTP shut down 1 of its 2 data  centers and reduced its server inventory from 140 to 75 and the number  of vendors from 21 to 9. In addition, the office eliminated an estimated 50- 70 monthly IT staff hours dedicated to resolving backup issues.", "Flexible technology resources sped up the development of  functionality. According to USTP officials, acquisitions of new  technology previously took several months because of the time needed to  estimate requirements and wait for officials to purchase and install  hardware and software. By moving to the cloud, USTP officials stated that  the intention is to be able to develop and test new applications faster, and  determine their viability, with minimal time and costs. Specifically, officials  reported that they have set up a cloud test lab to better understand  system requirements by scaling up and down resources as needed and  experimenting with new capabilities. In addition, while USTP\u2019s legacy  monitoring solution required consulting assistance and took months to  implement, officials noted that they were able to set up a similar solution  in the cloud within 1 week."], "subsections": []}, {"section_title": "DHS\u2019s Cloud Acquisition Supports Information Sharing and Collaboration", "paragraphs": ["The Department of Homeland Security (DHS) collaborates with a variety  of agencies and organizations to share information related to homeland  security. According to the program\u2019s Service Operations Manager, DHS\u2019s  CIO migrated the Homeland Security Information Network to the cloud in  July 2017 in order to improve the system\u2019s availability and operational  efficiency, while reducing costs. Officials stated that, previously, the  agency had faced challenges in ensuring the system\u2019s redundancy and  deploying new network enhancements quickly. This was due to the costs  and time frames associated with acquiring new infrastructure and  maintaining and upgrading current infrastructure. In addition, the agency  was not able to quickly develop and deploy new capabilities to meet user  needs.", "By moving to the cloud, officials stated that the agency was able to  implement a disaster response capability and improve the system\u2019s  operational efficiency, while also establishing more efficient environments  for software development and testing. In addition, the agency was able to  shut down an existing data center, which achieved cost savings of at least  30 percent from hosting the network in the data center. Figure 8 provides  a summary of DHS\u2019s cloud acquisition.", "Acquiring infrastructure as a service improved system availability  and operational efficiency. According to DHS officials in the Office of  the CIO, migrating to the cloud has improved the system\u2019s availability and  operational efficiency, which cost less money than the prior hosting  solution. For example, acquiring infrastructure as a service provided  increased redundancy over the old solution and has helped to ensure the  network remains continuously available for daily operations and  emergency response. The officials stated that, previously, the agency had  not been able to implement a disaster recovery capability because it  would cost over $1.5 million to build and maintain a second active  network environment. Moving to the cloud enabled the agency to  implement this capability for significantly less cost.", "In addition, officials in the CIO\u2019s office said that the acquisition of  infrastructure as a service has enabled the agency to improve the  operational efficiency of the system. For example, network managers can  easily stand up new virtual hardware, networking, and storage  capabilities, or make changes to existing infrastructure, in less than a day.  Officials said that, previously, it used to take staff several months to make  these changes manually. This allows network managers to respond very  rapidly to changes in user demand, particularly if there are emergencies  or natural disasters, and then scale down resources during non-use  periods. For example, officials said that managers scaled up resources to  support first responders from federal, state, and local governments to  share weather, response and recovery information during Hurricanes  Harvey, Irma, and Jose, and the West Coast wildfires. In addition, the  officials noted that network managers now have access to the latest  virtual hardware and the agency does not have to pay for hardware  refreshments.", "Flexible technology resources strengthened the development of  functionality. According to DHS officials in the Office of the CIO, moving  to the cloud enabled the agency to very inexpensively build multiple  environments in the system for software development, testing, and  production, which has improved the development and deployment of new  services. Software developers now have consistent and standardized  environments, which helps to reduce the risk of errors and security  vulnerabilities, as well as configuration issues. DHS officials stated that all  of these issues would previously require staff time and funding to resolve.  The developers can also now use automation tools to deploy new code  from development into production more quickly to help meet user needs  for new functionality. In addition, officials noted that cloud providers are  constantly adding new services that users can leverage to do their work  more efficiently, without the time and cost of the agency having to  develop or procure this capability separately."], "subsections": []}, {"section_title": "Agriculture\u2019s Cloud Acquisition Improves Enterprise Content and Electronic Records Management", "paragraphs": ["The Department of Agriculture\u2019s (Agriculture) U.S. Forest Service  manages 193 million acres of federal land in order to sustain the health,  diversity, and productivity of the nation\u2019s forests and grasslands for  present and future generations. According to the Acting Assistant Forest  Service CIO for Natural Resources and Environment, in August 2017, the  Forest Service began deploying a new enterprise content management  and electronic records management system, called Pinyon, to the cloud  to help improve operations and the management of electronic records.  The move also addressed federal requirements related to electronic  records management. Officials stated that, previously, the Forest Service  relied on a shared storage drive for enterprise content management.  Officials reported that this drive was highly proprietary, slow, unreliable,  and a security vulnerability because it could not be easily maintained. In  addition, officials reported that the shared storage drive was on the verge  of failure because the vendor no longer supported and upgraded the  system.", "By acquiring two software as a service solutions for enterprise content  and electronic records management, officials said that the Forest Service  was able to quickly deploy a new system with only some limited software  customization for the integration of the two solutions. The Forest Service  completed this in two phases; officials deployed the enterprise content  management solution in August 2017 and the electronic records  management solution began deployment in August 2018. Officials  reported that they plan to fully deploy the system by December 2018.  Figure 9 provides a summary of Agriculture\u2019s cloud acquisition.", "Acquisition of software as a service improved operations. According  to Forest Service officials in the Office of the CIO, by acquiring software  as a service, the Forest Service was able to implement new enterprise  content management capabilities and collaboration tools quickly without  the costs and risks associated with software development. Officials said  that, previously, users did not have capabilities for managing their own  content such as setting permissions, granting access privileges to  documents, or easily managing different document versions. In addition,  officials noted that users relied heavily on email to collaborate on daily  work activities as other collaboration tools were not available. By  acquiring software as a service, officials said that the Forest Service was  able to quickly implement enhanced workflow and document  management capabilities and add new tools for collaboration, which has  increased staff productivity. Furthermore, acquiring software as a service  allowed the Forest Service to integrate their new system with Agriculture\u2019s  electronic authentication system, which the agency could not previously  accomplish with the legacy system. By integrating these systems, Forest  Service officials said that the agency has increased the accessibility of  the Forest Service\u2019s information by allowing staff to securely access files  regardless of physical location.", "Going forward, officials in the Forest Service said that they are exploring  other features and capabilities offered by the cloud vendor to help better  meet mission needs. For example, the Forest Service regularly  collaborates with a variety of other agencies, state and local  governments, educational institutions and other organizations on issues  related to managing federal lands and responding to natural disasters,  such as wildfires. Officials noted that the Forest Service hopes to use  shared virtual workspaces and other collaboration tools to engage these  partners.", "In addition, by acquiring software as a service, Forest Service officials  said that they have ensured that there is a system in place that the  vendor will automatically upgrade with new enhancements, capabilities,  and the latest technology. For example, in order to meet new federal  cybersecurity requirements, Forest Service officials said that they have  been able to work with the cloud vendor to ensure the vendor  incorporates software changes to meet these requirements.", "Flexible and scalable technology enhanced the management and  storage of electronic records. According to Forest Service officials in  the Office of the CIO, by moving to the cloud, the Forest Service was able  to acquire new storage capabilities that are easily scalable as its volume  of electronic records grows over time. Officials said that, previously, the  Forest Service used both paper-based records and a shared storage  drive for storing work documents and other operational records. Paper- based records were stored in file cabinets and warehouses while the  shared storage drive maintained approximately 320 million files and 250  terabytes of data. In addition, the agency previously used tape backups  for the shared storage drive. By moving to the cloud, officials in the Forest  Service said that they gained unlimited storage and electronic backup  capabilities. Further, Forest Service officials said the new system is  intended to be able to easily scale up storage resources as needed for  the digitization of its paper-based records and handle the future volumes  of electronic records.", "In addition, by acquiring software as a service, officials in the CIO\u2019s office  reported that the Forest Service was able to meet the federal requirement  for electronic records management more than a year before the  December 2019 deadline, which the prior shared drive could not meet."], "subsections": []}, {"section_title": "Commerce\u2019s Cloud Acquisition Enhances Access to Weather Data", "paragraphs": ["The Department of Commerce\u2019s (Commerce) National Oceanic and  Atmospheric Administration works to understand and predict changes in  climate, weather, oceans, and coasts, and shares that knowledge and  information with others. According to Commerce\u2019s Acting Chief  Information Officer, in September 2017, the National Oceanic and  Atmospheric Administration\u2019s CIO and National Weather Service  leadership decided to deploy its public weather websites to the cloud in  order to improve the agility and responsiveness of these websites in a  cost-effective manner. Officials stated that, previously, in 2016, as a result  of Hurricane Matthew, hundreds of millions of web requests led to failures  with the program\u2019s on-premise infrastructure, causing websites to become  unavailable to the public for a period of time. Subsequently, in September  2017, prior to the landfall of Hurricane Irma, officials stated that the  agency launched its weather cloud content delivery network. This new  network is intended to ensure the availability of weather-related  information, while avoiding the additional expenses for infrastructure that  would likely go unused during normal business operations. Figure 10  provides a summary of Commerce\u2019s cloud acquisition.", "Increased service availability ensured the public\u2019s timely access to  extreme weather-related information. According to National Oceanic  and Atmospheric Administration officials, the deployment of the weather  cloud content delivery network in September 2017 helped websites  handle the web requests for data on Hurricanes Irma and Maria by  scaling up the resources needed to handle the increased requests.  Normally, the weather websites receive approximately 26 million daily  web requests from the public. However, officials noted that the number of  requests increases dramatically during adverse weather events, such as  hurricanes. For example, officials said that in August 2017, the websites  began experiencing delays because of the high volume of hurricane- related requests from Hurricane Harvey\u2014including approximately 218  million web requests on August 31, 2017 alone. After deployment to the  cloud in September 2017, officials reported that over the course of two  days, the weather cloud content delivery network successfully scaled up  its resources and handled approximately two billion web requests  received through the administration websites.", "On-demand capabilities decreased costs. According to National  Oceanic and Atmospheric Administration officials, by acquiring software  as a service, it avoided the cost of expanding existing on-premise  infrastructure to handle sudden surges in demand that only last a short  period of time, as well as associated maintenance costs. Officials said  that the program can now scale up the resources supporting the weather  cloud content delivery network whenever it anticipates an adverse  weather event that would lead to greater demand for website information."], "subsections": []}, {"section_title": "Defense\u2019s Cloud Acquisition Enhances Transportation Command Systems", "paragraphs": ["The Department of Defense\u2019s (Defense) U.S. Transportation Command  (USTRANSCOM) provides common user and commercial air, land, and  sea transportation, as well as terminal management and air refueling, in  support of the military\u2019s deployment, employment, sustainment, and re- deployment efforts. USTRANSCOM\u2019s Chief of Cyber Operations and  Readiness Division reported that in January 2017, the USTRANSCOM  Commander made the decision to migrate all of the command\u2019s systems  to the cloud in order to improve mission assurance, agility,  responsiveness, efficiency, and operations. Officials reported that,  previously, the command had experienced a massive power outage  affecting the availability of approximately 25 legacy systems that lacked  the capability to quickly recover from network failures. In addition, officials  noted that the command\u2019s system, used to manage world-wide moves of  Defense personnel property, was not user-friendly, and was difficult to  maintain because the agency built the system using waterfall software  development methods. Lastly, officials said that the command had largely  relied on manual reporting activities that took numerous staff hours to  produce to make financial, operational, planning, and support decisions.", "By beginning to transition to the cloud in January 2018, USTRANSCOM  officials said that the command is in the process of ensuring its systems  are secure and continuously available, and is developing capabilities to  improve the usability of its legacy systems. In addition, officials reported  that the command is streamlining its tracking and reporting mechanisms  to allow users to automatically generate key reports, which will give  decision makers access to more current and accurate information to help  improve program operations. USTRANSCOM officials said that executive  sponsorship is absolutely critical for migrating to the cloud to overcome  culture change by bringing together people throughout the enterprise. In  addition, the command\u2019s cloud center of excellence team facilitates the  command\u2019s adoption of cloud by, among other things, training users and  addressing governance issues. Figure 11 provides a summary of  Defense\u2019s cloud acquisition.", "Incorporating automated recovery from network failures and  streamlining security increased mission assurance. According to  USTRANSCOM officials, by moving the command\u2019s network to the cloud,  the command has been able to design and build its new network with  higher levels of availability. For example, officials said that if a network  segment becomes unavailable, the cloud technology has the capability to  automatically reroute traffic to help reduce the amount of delay that users  experience. In addition, officials reported that developers have been  working to automate several hundred security checks that are part of  Defense\u2019s security technical implementation guides by implementing a  repeatable, automated process instead of doing manual checks. Officials  noted that, previously, manually checking of the status of configurations  would take hundreds of man hours to complete. Eventually, the command  anticipates that automation will save these hours of manual checks. The  command plans to implement the new capability in May 2019.", "Replacing a legacy system with a cloud-based system developed  using Agile software development methodologies will enhance the  shipment of personnel property. According to USTRANSCOM officials,  moving to the cloud has assisted the command by replacing the legacy  system that manages moves of Defense personnel property, like  household goods, with a mobile prototype built in the cloud. Officials  reported that the legacy system currently uses a variety of commercial  products that are difficult to maintain and do not efficiently address the  command\u2019s complex business processes for personnel property moves,  all of which affects the usability of the system. Currently, the command is  using Agile software development methodologies to reengineer its  business processes to develop a solution that is mobile and user-friendly.  The new mobile prototype is intended to allow personnel to request  access in order to manage the moves of certain household goods.  Officials reported that the command initially planned to deploy the  prototype in June 2018 but deployment was delayed and a new date had  not yet been identified.", "Automating reporting and tracking mechanisms will help eliminate  manual processes. According to USTRANSCOM officials, the command  is in the process of automating its processes for reporting and tracking  cargo shipments utilizing cloud technologies. Currently, the command  employs manual processes to track and monitor a variety of its cargo  shipments. For example, officials reported that five analysts typically  spend one day compiling a status report that details delays with food  shipments for Defense military exercises and operations. In addition,  analysts currently have to query up to 11 Defense and commercial carrier  systems to compile a report on high-priority shipments across the  combatant commands. Officials noted that these analysts often  experience delays getting access to timely information and must also  resolve conflicting information in various transportation systems.  However, with the transition to cloud services, officials in USTRANSCOM  reported that analysts will have the capability to automatically generate  reports based on defined criteria, such as shipment method or  destination, and use data feeds that officials can continuously update. By  developing phase one of the system in the cloud in fiscal year 2018,  officials reported that they will be able to monitor delays in a shipment  and immediately take action to change the mode of transportation or  source shipments from alternate suppliers. The command plans to  release the full operational capability in fiscal year 2020, which, officials  noted, will give authorized users near real-time access to shipment  information, including estimates of whether a shipment will arrive on time."], "subsections": []}]}, {"section_title": "Appendix VII: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIV: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XV: Comments from the General Services Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVI: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVII: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVIII: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIX: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, the following staff made key  contributions to this report: Dave Powner (Director), Dave Hinchman  (Assistant Director), Chris Businsky, Nancy Glover, Valerie Hopkins  (Analyst-in-Charge), Sandra Kerr, James MacAulay, Jamelyn Payan, and  Priscilla Smith."], "subsections": []}]}], "fastfact": ["Each year, federal agencies spend $90 billion on IT. Cloud computing services\u2014on-demand access to shared resources such as networks, servers, and data storage\u2014can help agencies deliver better IT services for less money.", "For example, the Department of Homeland Security migrated its network for information sharing and collaboration to the cloud, ensuring it remains continuously available for law enforcement and emergency response.", "However, agencies don't consistently track cloud-related savings, making it hard for them to make informed decisions on whether to use cloud services. We recommended that agencies improve their savings tracking."]}
{"id": "GAO-18-278", "url": "https://www.gao.gov/products/GAO-18-278", "title": "Department of Energy: New Process to Review Financial Assistance for Research Projects Created Uncertainty", "published_date": "2018-02-28T00:00:00", "released_date": "2018-02-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["ARPA-E provides funding for research to overcome long-term and high-risk technological barriers in developing energy technologies. Since 2009, ARPA-E has awarded approximately $1.3 billion to universities, public and private companies, and national laboratories to fund energy research projects. Starting in May 2017, DOE began reviewing its financial assistance department-wide, including ARPA-E's, to determine if it met the administration's priorities.", "GAO was asked to examine this review process as it pertained to ARPA-E. This report describes (1) how DOE implemented the financial assistance review process; and (2) the perspectives of ARPA-E selectees on the impacts of the review process.", "GAO reviewed documents and interviewed officials at ARPA-E and DOE's Office of Management, which coordinated the review. GAO also interviewed a nonprobability sample of 10 of the 68 ARPA-E award selectees whose financial assistance was evaluated under the review. GAO identified selectees to interview based on representation across ARPA-E's recipient types, including universities, private companies, and national laboratories, among other criteria. While the views of selectees GAO interviewed cannot be generalized to all affected ARPA-E selectees, they provide illustrative examples of the effects of DOE's review."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy (DOE) developed and implemented a new process to review its financial assistance to ensure that all new work funded by the department\u2014including by DOE's Advanced Research Projects Agency-Energy (ARPA-E)\u2014was consistent with the current administration's priorities. The review process covered funding opportunity announcements as well as certain other types of financial assistance. New awards were delayed until the review of the underlying financial assistance opportunity was completed. DOE reviewed and approved ARPA-E's financial assistance on a rolling basis from May through September 2017, and nearly all ARPA-E financial assistance was approved. DOE Office of Management officials met with ARPA-E officials on several occasions to discuss their review of ARPA-E financial assistance. DOE officials GAO interviewed said they wanted to complete the review as quickly as possible to minimize effects on DOE programs. GAO determined that the delay was not reportable under the Impoundment Control Act. The Impoundment Control Act requires the President to notify Congress if an agency wants to withhold the obligation of funds. GAO has separately informed Congress of an impoundment of $91 million in funds that were not allocated to any financial assistance awards, and was not related to DOE's review process.", "According to the 10 ARPA-E project selectees GAO interviewed, DOE's financial assistance review process created uncertainty, which led to a variety of project impacts. The impacts most commonly cited by selectees included potentially delayed project timelines, as well as difficulties in staffing their project teams, among other impacts as shown below.", "DOE officials GAO interviewed said that they are reviewing DOE financial assistance in fiscal year 2018. DOE officials said that a key benefit of the fiscal year 2017 review process was an opportunity to better identify and coordinate future financial assistance department-wide on crosscutting issues. However, DOE plans to review fiscal year 2018 financial assistance prior to issuing funding opportunity announcements to the public, and thus before any recipients apply or are selected. As a result, DOE officials said, the uncertainty that ARPA-E selectees experienced during the fiscal year 2017 review process should be reduced."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations. DOE provided technical comments, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2007, the Advanced Research Projects Agency-Energy (ARPA-E) was  established within the Department of Energy (DOE) to overcome the long- term and high-risk technological barriers to developing energy  technologies, such as advanced biofuel crops and improved batteries for  plug-in hybrid vehicles, among others. As specified in statute, ARPA-E\u2019s  program goals are to enhance the nation\u2019s economic and energy security  through technological development and ensure that the United States  maintains a technological lead in developing and deploying advanced  energy technologies. From the time ARPA-E first received an  appropriation in the American Recovery and Reinvestment Act of 2009,  through December 2015, ARPA-E awarded approximately $1.3 billion to  universities, public and private companies, and national laboratories for  projects intended to make transformational\u2014rather than incremental\u2014 advances to a variety of energy technologies.", "Typically, ARPA-E develops funding opportunity announcements to  address an identified energy technology gap. After publishing a funding  opportunity announcement, ARPA-E follows a multi-stage application  review and award funding process that involves the selection of  applicants and an award negotiation period, among other steps.  Beginning in May 2017, DOE\u2019s Chief of Staff initiated a review of all  financial assistance for new work across the department, including ARPA- E, to determine whether the financial assistance aligned with the new  administration\u2019s priorities. The review was coordinated and facilitated by  DOE\u2019s Office of Management. As part of the review process, DOE  delayed new award agreements, as well as other types of financial  assistance for new work until the review of the underlying financial  assistance opportunity was completed. While the review took place,  concerns were raised about the impact that the suspension might have on  the continued viability of research projects conducted by selected ARPA- E applicants\u2014referred to in this report as ARPA-E selectees\u2014as well as  applicants for other DOE financial assistance.", "You asked us to examine issues related to DOE\u2019s financial assistance  review process, specifically as it pertained to ARPA-E. This report  describes (1) how DOE implemented the financial assistance review  process; and (2) the perspectives of selected ARPA-E selectees  regarding the impacts of this review process.", "To describe how DOE implemented its financial assistance review  process, we interviewed ARPA-E and DOE Office of Management  officials to obtain their views on the implementation of the review process.  We also examined documentation provided by these offices about DOE\u2019s  financial assistance review process and, more broadly, the ARPA-E  financial assistance process. Additionally, we analyzed ARPA-E data to  describe the timeline of DOE\u2019s review of ARPA-E financial assistance and  the amount of funding approved over the course of the review process.  We discussed how the data were compiled with DOE officials and found  that the data were sufficiently reliable for our purposes.", "To ascertain ARPA-E selectees\u2019 perspectives on the impacts of DOE\u2019s  financial assistance review process on their projects, we conducted  interviews using a standard set of questions with a nonprobability sample  of 10 of the 68 ARPA-E selectees whose financial assistance was  evaluated under the review to obtain information on how they were  affected by the review, among other related topics. To identify selectees  for these interviews, we requested that ARPA-E provide us with a list of  projects that had received funds from or had been selected for award  negotiation from ARPA-E and whose financial assistance had been  evaluated by the review process, which included both competitively  selected awards and determinations of noncompetitive financial  assistance. We chose selectees to interview based on a variety of  characteristics, including (1) whether they were a university, a private  business, or a national laboratory; (2) whether the project was  competitively selected from a new funding announcement or was new  work funded on a noncompetitive basis; and (3) whether the project was  under review at the time of the interview, or its review had already been  completed. Wherever possible, we tried to choose selectees whose work  was funded under different ARPA-E funding opportunity announcements.  Because the ARPA-E selectees we chose to interview were based on a  nonprobability sample, the views we obtained are not generalizable to all  ARPA-E selectees affected by the review process. However, they provide  illustrative examples of the effects of DOE\u2019s financial assistance review.", "We conducted this performance audit from May 2017 to February 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["ARPA-E\u2019s typical funding announcement and award selection process  begins with the agency hiring a program director responsible for  identifying a gap in energy technology research and developing a  program to fill that gap. ARPA-E is required by statute to achieve its  goals through energy technology projects that, among other things,  accelerate transformational technological advances in areas that industry  on its own is not likely to undertake because of technical and financial  uncertainty, while also ensuring that its activities are coordinated with,  and do not duplicate the efforts of, programs and laboratories within DOE  and other relevant research agencies. ARPA-E\u2019s efforts to identify  existing energy technology research gaps and to design a program to  address those gaps involve research; consultation with scientific experts,  including a workshop with outside experts; and internal discussions within  ARPA-E. From this process, program directors develop funding  opportunity announcements that describe the technical requirements  specific to each program\u2019s technology area that applicants have to meet,  as well as the four standard criteria that ARPA-E uses to guide its merit  selection process. Following the issuance of a funding opportunity  announcement, ARPA-E employs the following multi-stage process to  merit review applications, make funding award decisions, and monitor  projects:", "Concept paper. Applicants initially submit a 4- to 7-page abstract of  their projects. Scientific experts from government, industry, and  academia serve as reviewers.", "Full application. After reviewing concept papers, ARPA-E  encourages some applicants to submit full applications. Full  applications are generally quite extensive, requesting information on  the technical and financial aspects of the proposed project, among  other things. ARPA-E officials we interviewed noted that these  applications are frequently more than 100 pages and can take 30 to  45 days for the applicant to develop. Full applications are reviewed  against the selection criteria by leading scientific experts in the  relevant field and assigned numerical scores.", "Reply to reviewer comments. After reviewing a full application,  reviewers provide comments and questions to the applicants, who  then have the opportunity to respond.", "Selection. A three- to four-person panel, chaired by the relevant  ARPA-E program director, considers the reviewers\u2019 comments and  numerical scores and recommends applications for an award. The  final decisions on which applicants to select for award negotiations  are made by the selecting official, usually the Director of ARPA-E.", "Award negotiations. Once selections are made, ARPA-E program  directors work closely with selectees to negotiate the terms and  conditions of their award. These negotiations include, among other  things, developing a project plan with technical milestones that are to  be met during the 2 to 3 years that the award is being funded, a  budget and management plan, and an intellectual property and data  management plan. Funds are awarded once negotiations regarding  the terms and conditions of the award are concluded. ARPA-E seeks  to complete negotiations regarding the terms and conditions of an  award within approximately 100 days of sending a letter notifying an  applicant that they have been selected for award negotiations.", "Selectees may be allowed to begin spending money to start work on  their projects up to 90 days prior to the completion of award  negotiations. However, these expenditures are made with the risk that  applicants may not be reimbursed if award negotiations are  unsuccessful and ARPA-E does not fund the award.", "Monitoring. ARPA-E monitors and supports the projects it funds  through quarterly reviews and site visits. At any point during the  award, ARPA-E may decide whether to continue or terminate the  project based on whether agreed-upon project milestones are being  met."], "subsections": []}, {"section_title": "DOE Developed and Implemented a New Process to Assess the Department\u2019s Financial Assistance against the Administration\u2019s Priorities", "paragraphs": ["In 2017, DOE developed and implemented a new review process to  assess DOE financial assistance for new work against the current  administration\u2019s priorities, including financial assistance for which ARPA- E had already made award selections. DOE reviewed and approved  ARPA-E\u2019s opportunities for financial assistance on a rolling basis from  May to September 2017, and nearly all were approved to proceed.", "The formal review of DOE financial assistance officially began on May 4,  2017, when DOE\u2019s Chief of Staff issued a memorandum stating that  funding opportunity announcements and determinations of non- competitive financial assistance would be reviewed to ensure consistency  with the administration\u2019s priorities. According to the memorandum, DOE  agencies that award financial assistance\u2014referred to in this report as  funding organizations\u2014were to provide information about each  competitively selected funding announcement and determination of non- competitive financial assistance by May 15, 2017. This information  included, for example, a brief description of the financial assistance, the  number and amount of planned awards, and the technology readiness  level of the projects being funded. DOE Office of Management officials  told us that the agency\u2019s financial assistance review lasted through  September 2017, as some DOE organizations continued to submit new  financial assistance for review, but that the review was largely completed  by August 10, 2017. However, while the formal review of DOE financial  assistance began in May, award negotiations for ARPA-E-funded projects  were suspended nearly 1 month earlier. Specifically, according to ARPA- E officials, DOE\u2019s Deputy Chief of Staff verbally directed ARPA-E on April  6, 2017 to stop all ongoing award negotiations. Figure 1 shows the  timeline of DOE\u2019s review of ARPA-E financial assistance.", "Pursuant to the DOE Chief of Staff\u2019s May 4th memorandum, ARPA-E and  other DOE funding organizations submitted the requested information to  the DOE review team, which was coordinated and facilitated by the  Director of DOE\u2019s Office of Management. Other members of the financial  assistance review team included DOE\u2019s acting Chief Financial Officer;  deputy assistant secretaries, chiefs of staff, and senior advisors at several  DOE funding organizations; and members of the department\u2019s  congressional affairs and public affairs staff.", "According to DOE Office of Management officials we interviewed, the  review team assessed the department\u2019s financial assistance against five  criteria:", "Whether the financial assistance was statutorily mandated;", "Whether the financial assistance was described in congressional", "Whether the financial assistance was consistent with administration  priorities, as identified in budget documents and other statements  from the President and Secretary of Energy, among other things;", "What technology readiness level the financial assistance was  intended to fund; and", "Whether the technology encompassed by the project was already  being funded by the private sector or others.", "DOE Office of Management officials stated that the review team did not  use the above criteria to assign quantitative scores to evaluate the  department\u2019s financial assistance; instead, the team collaboratively  discussed each opportunity for assistance. In most cases, the review  team was able to reach consensus on whether the financial assistance  aligned with the administration\u2019s priorities. DOE Office of Management  officials also noted that they met with ARPA-E leadership to obtain  additional information about ARPA-E financial assistance on three  occasions during the course of the review. ARPA-E officials said that, in  addition to those three meetings, they provided written information to  address questions received from the review team and to provide  additional context regarding ARPA-E financial assistance.", "In total, DOE\u2019s review team assessed 6 ARPA-E fiscal year 2017 or prior- year funding opportunity announcements for which applicants had been  selected for award negotiation, 7 fiscal year 2017 announcements in the  earlier stages of the merit review and selection process, 2 fiscal year  2017 announcements that had not yet been released, and 17  opportunities for financial assistance where ARPA-E funded renewals or  new work under a determination of noncompetitive financial assistance.  According to DOE Office of Management officials, the review team  worked as quickly as possible to review all of DOE\u2019s financial assistance  to minimize potential disruptions for recipients and DOE\u2019s funding  organizations. Once the review team approved an opportunity for financial  assistance, DOE funding organizations were allowed to resume work,  DOE Office of Management officials told us. Figure 2 shows the total  cumulative funds for ARPA-E financial assistance approved by the review  committee at various stages in the review. For example, as shown in  Figure 2, the review team approved roughly $158.3 million (55.6 percent)  of ARPA-E\u2019s proposed financial assistance on May 18, 2017, 3 days after  the deadline for DOE funding organizations to submit information to the  review team. The remaining proposed financial assistance was approved  in several stages from June through August 2017. As of August 25, 2017,  all of ARPA-E\u2019s competitively selected funding opportunity  announcements, renewals, and determinations for noncompetitive  financial assistance, where selectees had been selected for negotiation,  were approved by the review team, representing roughly $265 million, or  93.1 percent, of all ARPA-E funding reviewed by the team.", "DOE Office of Management officials also stated that the financial  assistance review team made a decision early in the course of the review  to honor all existing DOE commitments to fund new work. These officials  said that this extended to commitments made to entities that had been  selected for award negotiations, even though the department does not  officially commit to providing funds until such negotiations are completed  and the award is finalized. However, according to ARPA-E selectees we  interviewed, this message was generally not communicated to them,  which led to uncertainty about whether their projects would be funded. In  contrast, the review team recommended that the DOE Chief of Staff  cancel ARPA-E\u2019s Facsimile Appearance to Create Energy Savings  funding announcement, which had accepted full applications but had not  selected any applicants for award negotiation. This opportunity would  have funded the development of advanced information technology that  could allow for three-dimensional digital representation of a person in a  room nearly indistinguishable from the person being there in real life,  which might allow for increased telecommuting. DOE Office of  Management officials told us that the review team reached this  recommendation in part because this technology was already being  funded by the private sector. As of November 2017, DOE Office of  Management officials said the review team had cancelled 3 other DOE  funding announcements as a result of the review.", "According to information we collected, DOE\u2019s review of ARPA-E financial  assistance, as part of the DOE-wide review process, did not require the  President to send a special message under the Impoundment Control  Act. Specifically, the delay in obligating ARPA-E funds for financial  assistance examined through DOE\u2019s review process was for  programmatic reasons. DOE officials explained that the purpose of the  review was to ensure that the agency\u2019s financial assistance aligned with  the priorities of the current administration."], "subsections": []}, {"section_title": "DOE\u2019s Financial Assistance Review Created Uncertainty for ARPA-E Selectees, Which Led to Delayed Project Timelines and Staffing Difficulties, among Other Impacts", "paragraphs": ["According to the 10 ARPA-E selectees we interviewed, DOE\u2019s financial  assistance review process created uncertainty, which led to a variety of  impacts\u2014the most frequently cited of which were potentially delayed  project timelines and difficulties staffing project teams. Selectees told us  that they received little communication from ARPA-E during the review  process, and they indicated that additional information about review  timelines and potential effects on their awards would have helped them  manage some of the uncertainty they experienced during the review  process. DOE Office of Management officials said the fiscal year 2017  review process helped to better identify and coordinate future financial  assistance department-wide on crosscutting issues. DOE is conducting  the fiscal year 2018 review process prior to publicly issuing funding  announcements. As a result, DOE Office of Management officials said,  the delays and uncertainty that selectees experienced in fiscal year 2017  should be reduced.", "In our structured interviews with ARPA-E selectees, the most frequently  cited impact of the uncertainty caused by DOE\u2019s financial assistance  review was the potential need to delay project timelines. All of the ARPA- E selectees we interviewed told us that they might need to extend their  project timelines because of uncertainty caused by DOE\u2019s review. Four of  these selectees noted that the delay caused by DOE\u2019s review could  cause additional, cascading delays in their timelines. For example, 1  selectee we interviewed said that it would need to re-issue a hiring  announcement it had publicized prior to the review because the review  prevented it from hiring someone. In addition, the selectee would need to  resubmit the hiring announcement to the university and state human  resources departments for approval, which could take months to process.  Another selectee said that it missed 2 months of a 3-month planting  season because it could not start project work, and had the delay lasted  any longer, the selectee would have missed an entire year of data  collection on the project.", "Selectees also cited challenges to staffing project teams as a result of the  uncertainty caused by the review. Selectees stated that delays caused by  the review affected their ability to hire team members they had planned to  hire based on their original schedule, as potential members moved on to  other projects or took different jobs. For example, 9 selectees told us that  they delayed hiring new project team members while DOE\u2019s review was  occurring. Four selectees we interviewed said that they had difficulty  retaining staff during the review process. For example, 1 selectee had to  lay off 2 of the company\u2019s 15 staff members because of the delay in  receiving funding, and several other staff members left voluntarily.  Furthermore, the selectee said laying off these staff members resulted in  an increase in the company\u2019s unemployment taxes, which was expensive  for a small-sized company. Four other selectees that we interviewed said  they had to assign existing project team members to other funded work or  general activities because they could not begin work on their ARPA-E  project until they received funding.", "Selectees we interviewed cited additional impacts associated with the  uncertainty caused by DOE\u2019s financial assistance review. These impacts  included:", "Delaying equipment purchases. Four selectees reported that they  had to delay purchasing important equipment needed to execute their  project. One selectee noted that the delay caused by the review was  long enough that price quotes it had received from equipment sellers  expired, and that prices could increase in later quotes.", "Changes to project scope. Two selectees told us that they might  need to limit the planned scope of their projects to be able to complete  them in the proposed timeline. For example, 1 selectee said its project  involves helping to scale up three to four different technologies a year,  which it might not be able to do if it has to adhere to its initial  timeframes.", "Loss of advantage against potential competitors. Four of the  selectees we interviewed said that the delay may have caused their  technology to fall behind their potential competitors in some way. For  example, 1 selectee noted that it was working in a competitive  environment for its technology, with ongoing efforts in multiple  countries, and reported that its project might have fallen behind  others\u2019 efforts as a result of delays associated with DOE\u2019s review.  However, 4 other selectees said that the review was not likely to  cause any loss of competitiveness.", "Impacts on external project partners. Three selectees noted that  DOE\u2019s review caused uncertainty for partners on their projects,  including partners that provide external funding. For example, 1  selectee told us that private investors in its technology area are most  active in the fall and that its project team might not be able to seek a  second round of funding if it could not demonstrate the necessary  technical results of the project by then.", "Impacts on pre-award spending reimbursements. One selectee  reported that it had to cease certain pre-award spending. The  selectee said that it spent roughly $10,000 on equipment and 150  hours of labor prior to DOE\u2019s financial assistance review, but it could  not submit invoices for these expenditures to ARPA-E while the  review was ongoing and would not be able to if its project was  ultimately not approved. Furthermore, the selectee said that even if  the award was approved, the delay might result in expenditures falling  outside the 90-day window of allowable pre-award expenditures,  which would require obtaining approval from ARPA-E to be  reimbursed.", "Selectees we interviewed also stated that they received little  communication from ARPA-E during the review, which contributed to the  uncertainty about the status of their projects. Specifically, 6 of the  selectees said that they would have liked additional information from  ARPA-E on a variety of topics related to the review. For example, 4  selectees said they would have liked additional information about the  review timeline and when it was planned to be completed. One of these  selectees told us that a written document from ARPA-E indicating a rough  time frame and next steps would have helped facilitate better planning for  their project team. Two selectees we interviewed wanted additional  information about whether they could renegotiate their timelines once the  review was completed. Three selectees told us that they would have liked  additional information about whether the review would cause them to lose  their funding. ARPA-E officials we interviewed told us that they made  three separate requests to DOE\u2019s Deputy Chief of Staff to learn what they  could communicate to selectees about the April 6, 2017, verbal order and  the review process. ARPA-E officials told us that they were directed by  the Deputy Chief of Staff not to communicate with selectees about the  verbal order until receiving guidance from his office. ARPA-E developed  proposed language to share with selectees but did not receive approval  from the Deputy Chief of Staff to distribute it. DOE Office of Management  officials we interviewed told us that they did not issue guidance to ARPA- E or other DOE funding organizations about how the organizations should  communicate with selectees during the review.", "In contrast to its fiscal year 2017 review, DOE began its 2018 financial  assistance review in August 2017, prior to publicly issuing funding  announcements. On August 10, 2017, DOE\u2019s Office of Management sent  an email to DOE funding organizations directing them to submit  descriptions of their proposed financial assistance by September 8, 2017.  Because the review will occur prior to publicly issuing funding opportunity  announcements, and thus before any recipients apply or are selected,  DOE Office of Management officials said the delays and uncertainty that  selectees experienced in fiscal year 2017 should be reduced.", "DOE Office of Management officials told us that\u2014aside from changing  the timing of its 2018 financial assistance review\u2014the review team\u2019s  membership and evaluation criteria will be largely the same as for the  fiscal year 2017 review. The officials said that they discussed the review  process with senior leaders in DOE\u2019s funding organizations to help  ensure that they understood the priorities, expectations, and steps of the  review process. The officials also told us that the review team developed  additional guidance to clarify certain issues that arose during the fiscal  year 2017 review. This additional guidance included:", "On August 17, 2017, funding organization managers were informed  that continuation awards\u2014those where the activity is presently being  funded\u2014would be exempt from submission to the review team and  can continue to move forward.", "On August 29, 2017, funding organizations were informed that they  should identify financial assistance that falls under one of seven  crosscutting research issue areas. According to DOE Office of  Management officials we interviewed, a key benefit of the fiscal year  2017 review process was that the review team noticed that DOE had  several funding announcements at multiple funding organizations  related to these areas. DOE\u2019s funding organizations may be able to  coordinate to issue a consolidated funding announcement in these  crosscutting research issue areas, to ensure efforts are  complementary and not duplicative. Furthermore, DOE Office of  Management officials we interviewed said that knowing which funding  organizations are funding work in these areas will support DOE  meetings on crosscutting issues."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to the  Secretary of Energy. DOE provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@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 I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Chris Murray (Assistant  Director), Perry Lusk (Analyst-in-Charge), Antoinette C. Capaccio, John  Delicath, Justin Fisher, Kimberly McGatlin, Dan Royer, Tind Shepper  Ryen, Lauren G. Sherman, and McKenna Storey made key contributions  to the report."], "subsections": []}]}], "fastfact": ["Since 2009, DOE's Advanced Research Projects Agency-Energy (ARPA-E) has awarded about $1.3 billion to universities, companies, and national laboratories to fund energy research.", "In May 2017, DOE began a review of all its new financial assistance awards\u2014including those from ARPA-E. During the review, DOE delayed new ARPA-E awards and provided limited information to those who had been selected but were still negotiating the terms of their awards.", "While nearly all ARPA-E financial assistance was eventually approved, the delay created uncertainty for 10 project teams we interviewed, which affected their project timelines and hiring."]}
{"id": "GAO-18-675T", "url": "https://www.gao.gov/products/GAO-18-675T", "title": "Strategic Petroleum Reserve: Observations on the Emergency Stockpile", "published_date": "2018-07-24T00:00:00", "released_date": "2018-07-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Over 4 decades ago, Congress authorized the SPR\u2014the world's largest government-owned stockpile of emergency crude oil\u2014to reduce the impact of disruptions in supplies of petroleum products. Since 2015, Congress has also mandated sales of SPR oil to fund the modernization of SPR facilities and other national priorities. DOE manages the SPR, whose storage and related infrastructure is aging, and has plans to modernize its facilities. As a member of the International Energy Agency, the United States is obligated to maintain reserves equivalent to at least 90 days of the previous year's net imports (imports minus exports). As of March 2018, the SPR held about 665 million barrels of crude oil, about 138 days of net imports.", "This testimony highlights GAO's May 2018 report on the SPR, including the extent to which (1) DOE has identified the optimal size of the SPR, and (2) DOE's plans for modernizing the SPR take into account the effects of congressionally mandated crude oil sales. GAO reviewed DOE's documents and studies and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy (DOE) has not identified the optimal size of the Strategic Petroleum Reserve (SPR). In 2016, DOE completed a long-term strategic review of the SPR after its last comprehensive examination was conducted in 2005. The 2016 review examined the benefits of several SPR sizes, but it did not identify an optimal size and was limited in several ways. In particular, in the review, DOE did not fully consider recent and expected future changes in market conditions, such as the implications of projected fluctuations in net imports or the role of the private sector in responding to supply disruptions. These changes have contributed to SPR and private reserves reaching historically high levels on a net imports basis. These changes are expected to continue to evolve, and according to government projections, the United States will become a net exporter in the late 2020s before again becoming a net importer between 2040 and 2050. GAO has found that agencies should reexamine their programs if conditions change. GAO recommended that DOE supplement its 2016 review by conducting an additional analysis, and take actions to ensure the agency periodically conducts a strategic review of the SPR. DOE generally agreed with these recommendations.", "DOE has taken steps to account for congressionally mandated sales of SPR crude oil in its $1.4 billion modernization plans for SPR's infrastructure and facilities. However, DOE's current plans, developed in 2016, are based on information largely developed prior to recent congressionally mandated sales of an additional 117 million barrels of oil. According to DOE officials, the agency began a study in March 2018 to assess the effects of these sales on the SPR's modernization. However, GAO reported that this study was not examining a full range of options for handling any excess SPR assets that may be created by currently mandated sales or any additional sales that may be mandated in the future, inconsistent with an agency order on real property asset management that calls for identifying excess assets. For example, according to officials, DOE does not currently have the authority to lease unused storage capacity to the private sector, and DOE was not planning to examine this option. If authorized, leasing unused SPR storage capacity could generate revenues that could help offset the costs of modernization. GAO recommended that DOE should consider a full range of options for handling potentially excess assets and, if needed, request congressional authority for the disposition of these assets. DOE agreed with this recommendation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made four recommendations, including that DOE (1) supplement the 2016 review by conducting an additional analysis, (2) ensure it periodically reexamines the SPR, and (3) consider a full range of options for handling potentially excess assets. DOE partially agreed with the first recommendation and agreed with the other two recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent report on the  Department of Energy\u2019s (DOE) Strategic Petroleum Reserve (SPR).  More than 4 decades ago, Congress authorized the creation of the  SPR\u2014currently the world\u2019s largest government-owned stockpile of  emergency crude oil\u2014to reduce the impact of disruptions in supplies of  petroleum products. DOE manages the SPR. As of March 2018, the  SPR held 665.5 million barrels of crude oil, worth about $42 billion. In the  decades since its creation, the structure of the SPR generally has not  changed\u2014it has always held crude oil in salt caverns along the Gulf  Coast\u2014though markets for crude oil and petroleum products\u2014products  such as gasoline and diesel that are refined from crude oil for final  consumption\u2014have changed in important ways.", "Throughout most of the SPR\u2019s history, domestic crude oil production was  generally in decline, while consumption of petroleum products was  generally increasing, causing the United States to rely increasingly on  imported crude oil and petroleum products. However, the SPR now  operates in a context of increasing U.S. crude oil production (the United  States is now one of the world\u2019s largest crude oil producers), relatively  stable consumption, and shrinking net crude oil and petroleum product  imports. Moreover, whereas the Arab oil embargo of 1973 to1974 led to  shortages and long lines at gas pumps around the country, prices now  change to accommodate supply and demand, so that physical crude oil  shortages are less of a concern than they were in the 1970s when the  SPR was created.", "The SPR also helps the United States meet its obligations as a member  of the International Energy Agency (IEA)\u2014an international energy forum  of 30 member countries established in 1974 to help members respond  collectively to major energy supply disruptions. To become a member of  the IEA, a country must have, among other things, crude oil or petroleum  product reserves equivalent to 90 days of the previous year\u2019s net imports,  and measures in place to ensure that it is able to contribute its share of a  collective action initiated in response to a significant global oil supply  disruption. As of March 2018, according to IEA data, the SPR held the  equivalent of 138 days of net imports. The IEA counts both public and  private reserves toward meeting the 90-day reserve obligation, although  the United States has recently met this obligation solely through publicly  owned reserves in the SPR, as shown in figure 1.", "Since 2015, six laws mandated sales of crude oil from the SPR to fund  the modernization of SPR facilities and other national priorities. Total  planned sales are projected to reduce the amount of crude oil held in the  SPR from 665.5 million barrels in March 2018 to 405 million barrels by the  end of fiscal year 2027. These sales have an estimated value of almost  $16 billion, according to Congressional Budget Office documents. Of the  total estimated value, sales of up to $2 billion were specifically authorized  for the SPR\u2019s modernization program. The SPR\u2019s infrastructure of  facilities, pipelines, pumps, and other equipment is aging and much of it  needs replacement, according to DOE documents. Since 2014, DOE has  developed plans for modernizing the SPR to address these needs,  among other things.", "My testimony today discusses findings from our May 2018 report on the  SPR and focuses on (1) how the United States and other IEA members  meet their IEA obligations, (2) the extent to which DOE has identified the  optimal size and the potential need for additional petroleum product  reserves for the SPR, and (3) the extent to which DOE\u2019s plans for  modernizing the SPR take into account the effects of current and potential  future congressionally mandated oil sales.", "To conduct this work, we reviewed documents, reports, and studies that  we identified through DOE officials, recommendations from experts and  stakeholders, and sources referenced in DOE publications as well as our  prior work on the SPR. We also interviewed DOE officials and  representatives of energy consulting groups and a state agency, among  others. Our May 2018 report includes a detailed discussion of the  objectives, scope, and methodology used to conduct this work. We  conducted the work on which this testimony is based in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform audits to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions.  We believe that the evidence obtained provided a reasonable basis for  our findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Unlike the United States, Most IEA Members Rely on Private Reserves to Meet Reserve Obligations and Hold Significant Proportions of Their Reserves as Petroleum Products", "paragraphs": ["As we found in our May 2018 report, in terms of how they meet their IEA  90-day reserve obligations, most other IEA members differ from the  United States in two basic ways. First, as of December 2017, most other  IEA members rely at least in part on private rather than public reserves to  meet their obligations. As of December 2017, 18 of the 25 IEA members  that met their 90-day reserve obligation and had a formal process for  holding and releasing reserves relied entirely or in part on private  reserves to meet their obligations. Specifically, based on IEA data as of  December 2017, these 18 countries met their 90-day reserve obligations  through private reserves and either had no public reserves or had public  reserves of less than 90 days. Unlike the 18 countries that rely at least in  part on private reserves, as of December 2017, the United States and 6  other IEA members met the 90-day reserve obligation exclusively through  public reserves. The second way other IEA members differ from the  United States is that most hold at least a third of their reserves as  petroleum products, according to a 2014 IEA report. Holding petroleum  products can be advantageous during certain disruptions because such  reserves can be directly distributed to consumers, whereas crude oil must  first be refined and turned into products, adding response time. In  contrast, more than 99 percent of the SPR (665.5 million barrels as of  March 2018) is held as crude oil. Because of the large U.S. refining  sector, crude oil from the SPR can be domestically refined into petroleum  products to meet demand."], "subsections": []}, {"section_title": "DOE Has Not Identified the Optimal Size for the SPR or the Potential Need for Regional Product Reserves", "paragraphs": ["As we found in our May 2018 report, DOE has not identified the optimal  size or the potential need for additional petroleum product reserves for  the SPR. In 2016, DOE completed a long-term strategic review of the  SPR after its last comprehensive examination had been conducted in  2005. The 2016 review examined the expected benefits of several SPR  sizes, but it did not identify an optimal size and was limited in several  ways. In particular, in the review, DOE did not fully consider recent and  expected future changes in market conditions, such as the implications of  projected fluctuations in net imports or the role of the private sector in  responding to supply disruptions. Recent changes have contributed to  SPR and private reserves reaching historically high levels on a net  imports basis. These changes are expected to continue to evolve\u2014 according to government projections, the United States will become a net  exporter in the late 2020s before again becoming a net importer between  2040 and 2050. In February 2005, we found that agencies should  reexamine their programs if conditions change. Without addressing the  limitations of its 2016 review and periodically performing reexaminations  in the future, DOE cannot be assured that the SPR will be sized  appropriately into the future. In May 2018, we recommended that DOE (1)  supplement its 2016 review by conducting an additional analysis that  takes into account, among other things, the costs and benefits of a wide  range of different SPR sizes and (2) take actions to ensure that it  periodically conducts and provides to Congress a strategic review of the  SPR. DOE partially agreed with the first recommendation and stated that  it will conduct an additional analysis to assess the purpose, goals, and  objectives of the SPR, taking into account private sector response, oil  market projections, and any other relevant factors, that will lead to an  evaluation of possible optimal sizes of the SPR in the future. DOE agreed  with the second recommendation.", "DOE has also not fully identified whether additional regional petroleum  product reserves should be part of the SPR. The Quadrennial Energy  Review of 2015 recommended that DOE analyze the need for additional  or expanded regional product reserves by undertaking updated cost- benefit analyses for all of the regions of the United States that have been  identified as vulnerable to fuel supply disruptions. In response, DOE  studied the costs and benefits of regional petroleum product reserves in  the West Coast and Southeast Coast, though it did not finalize or publicly  release these studies. Nevertheless, the draft studies concluded that a  product reserve in the Southeast would provide significant net economic  benefits to the region and the United States, particularly in the event of a  major hurricane, while further analyses are needed to determine the  potential benefits of a reserve on the West Coast. According to DOE  officials, the agency has no plans to conduct additional studies. Without  completing studies on the costs and benefits of regional petroleum  product reserves, DOE cannot ensure that it and Congress have the  information they need to make decisions about whether additional  regional product reserves are needed. In our May 2018 report, we  recommended that DOE conduct or complete such studies. DOE  disagreed with this recommendation, though we continue to believe that  conducting these analyses will provide Congress with needed  information."], "subsections": []}, {"section_title": "DOE Has Taken Steps to Update Its Modernization Plans but Is Hindered by Uncertainty Regarding the SPR\u2019s Long-term Size", "paragraphs": ["As we found in our May 2018 report, DOE has taken steps to account  for the effects of congressionally mandated oil sales in its plans for  modernizing the SPR, though DOE\u2019s current plans, developed in 2016,  are based on information largely developed prior to recent  congressionally mandated sales of an additional 117 million barrels of oil.  According to DOE documents, the SPR modernization program is  focused on a life extension project to modernize aging infrastructure to  ensure that the SPR will be able to meet its mission requirements for the  next several decades. The project\u2019s scope of work has undergone several  revisions since its inception in response to changing conditions and  requirements, according to the agency. DOE has estimated that the  SPR\u2019s modernization will cost up to $1.4 billion, and according to officials,  the agency had spent $22 million as of the end of February 2018.  According to DOE officials, in March 2018, DOE commenced a study\u2014 the SPR post-sale configuration study targeted for completion in October  2018\u2014to examine potential future reserve configurations and to account  for the effects of congressionally mandated sales on the reserve and its  modernization. Information from the study will inform DOE\u2019s updates to  the SPR\u2019s modernization plans, according to DOE officials.", "Although the SPR had a design capacity to hold 713.5 million barrels of  oil, in January 2017, the SPR held 695 million barrels. As shown in figure  2, congressionally mandated sales will cause excess storage capacity to  grow to 308 million barrels or more by the end of fiscal year 2027\u2014 meaning that about 43 percent of the SPR\u2019s total design capacity to store  oil would be unused.", "In its ongoing SPR post-sale configuration study, DOE plans to explore  some options to use potentially excess SPR assets, such as spare  storage capacity. In withdrawing oil to meet congressionally mandated oil  sales currently in place (290 million barrels through fiscal year 2027),  DOE could close at least one SPR site based on our analysis of projected  excess storage capacity. For example, if DOE were to close the smallest  SPR site, Bayou Choctaw in Louisiana, the agency could also explore  selling the connected pipeline and marine terminal, which are currently  being leased to a private company. DOE could also consider leasing  excess storage capacity to other countries so that they could store oil at  the SPR. DOE had not entered into any such leases with other  countries and had not considered such leases as of May 2018 because,  according to DOE, the SPR has historically lacked capacity to store  additional oil. DOE had not proposed any of these options or explored the  revenue the agency could generate by selling or leasing these assets.  However, according to DOE officials, the agency will examine the  feasibility of such options in the ongoing SPR post-sale configuration  study.", "In the course of our work, we also identified other options for handling  potentially excess SPR assets that DOE was not planning on examining  as of May 2018, largely because DOE did not have the authority to  pursue them, according to agency officials. First, DOE could explore  leasing storage capacity to private industry. U.S. oil production has  generally increased over the last decade. As a result, the private sector  may want to lease excess SPR capacity, which may be cheaper than  above-ground storage, according to a representative of a private  company we interviewed. Fees for doing so could help defray SPR  storage or maintenance costs. However, agency officials told us that the  Energy Policy and Conservation Act gave DOE authority to lease  underutilized storage to other countries but not to the private sector.  Second, if Congress determines that the SPR holds oil in excess of that  needed domestically, DOE could explore selling contingent contracts for  the excess oil rather than selling the oil outright. Australian and New  Zealand officials told us that such contracts would help their countries  meet their IEA 90-day reserve obligations.", "Australian officials told us that they have discussed this option with DOE.  Currently the United States and Australia have agreed, through an  arrangement, to allow Australia to contract for petroleum stocks located in  the United States and controlled by commercial entities. While the  arrangement does not cover government-owned oil in the SPR, if it did,  based on our analysis, DOE could generate up to approximately $15  million if Australia purchased the maximum allowable amount of oil  specified in an arrangement through contracts for excess SPR oil in  2018. However, although the Energy Policy and Conservation Act  allows DOE to lease underutilized storage to other countries, DOE lacks  the authority to sell contracts for the oil and does not plan to seek this  authority, according to DOE officials. DOE officials told us that they did  not plan to examine these options.", "According to DOE\u2019s real property asset management order, the agency is  to identify real property assets that are no longer needed to meet the  program\u2019s mission needs and that may be candidates for reuse or  disposal. Once identified, the agency is to undertake certain actions,  including determining whether to dispose of these assets by sale or lease.  As part of its SPR post-sale configuration study, DOE plans to determine  whether it is appropriate to close SPR facilities, and the relative benefit of  any closures would be informed by potential lease revenues from  maintaining sites so they could be leased, according to agency officials.  However, as mentioned previously, we identified other options for  handling potentially excess SPR assets that DOE was not planning to  examine in its study. Although DOE does not currently have the authority  to implement these options, according to officials, examining their  potential use, including possible revenue enhancement, could inform  Congress as it examines whether it should grant such authority. Without  examining a full range of options in the SPR post-sale configuration  study, DOE risks missing beneficial ways to modernize the SPR while  saving taxpayer resources. In May 2018, we recommended that in  completing its ongoing SPR post-sale configuration study, DOE should  consider a full range of options for handling potentially excess assets and,  if needed, request congressional authority for the disposition of these  assets. DOE agreed with this recommendation.", "Finally, as DOE takes steps to plan for the SPR\u2019s modernization, ongoing  uncertainty regarding the SPR\u2019s long-term size and configuration have  complicated DOE\u2019s efforts. Congress has generally set the SPR\u2019s size by  mandating purchases or sales of oil. DOE officials told us they do not  know whether Congress will mandate additional sales over the next 10  years or whether other changes may be required to the configuration of  the reserve. Any additional congressionally mandated sales would require  DOE to again revisit its modernization plans and assessments of the  potential uses of any excess SPR assets. Oil market projections also  have implications for the future of the SPR. The United States is projected  to become a net exporter by the late 2020s and would then no longer  have a 90-day reserve obligation, but it is projected to return to being a  net importer between 2040 and 2050. These projected fluctuations could  affect the desired size of the SPR in the future. Such uncertainties create  risks for DOE\u2019s modernization plans, as DOE may end up spending funds  on facilities that later turn out to be unnecessary should Congress  ultimately decide on a larger- or smaller-sized SPR than DOE anticipates.  In May 2018, we suggested that Congress may wish to consider setting a  long-range target for the size and configuration of the SPR that takes into  account projections for future oil production, oil consumption, the efficacy  of the existing SPR to respond to domestic supply disruptions, and U.S.  IEA obligations.", "In conclusion, we found that given the constrained budget environment  and the evolving nature of energy markets and their vulnerabilities, it is  important that DOE endeavor to ensure that the SPR is an efficient and  effective use of federal resources.", "Chairman Upton, Ranking Member Rush, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to answer any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions about this testimony,  please contact Frank Rusco, Director, Natural Resources and  Environment, at (202) 512-3841 or ruscof@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. Key contributors to this testimony  included Quindi Franco (Assistant Director), Nkenge Gibson (Analyst-in- Charge), Philip Farah, Ellen Fried, Cindy Gilbert, Gregory Marchand,  Celia Mendive, Patricia Moye, Camille Pease, Oliver Richard, Dan Royer,  Rachel Stoiko, and Marie Suding.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The Strategic Petroleum Reserve, managed by the Department of Energy, is the nation's stockpile of emergency oil stored in salt caverns along the Gulf Coast.", "This testimony covers our May 2018 report, which found that DOE may need less of the reserve's storage space by 2027, after congressionally mandated oil sales.", "While DOE planned to explore some options for the excess capacity\u2014i.e., closing sites or leasing them to other countries\u2014we identified other options. For example, DOE could consider leasing storage facilities to private industry.", "In the report, we recommended that DOE examine a full range of options, among other things."]}
{"id": "GAO-18-233", "url": "https://www.gao.gov/products/GAO-18-233", "title": "Emergency Management: Federal Agencies Could Improve Dissemination of Resources to Colleges", "published_date": "2018-01-23T00:00:00", "released_date": "2018-02-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Colleges and other postsecondary schools must plan for various potential emergencies, ranging from natural disasters to violence. A number of federal agencies, including DHS, DOJ, and Education, offer resources to support these efforts. GAO was asked to review colleges' awareness of these resources.", "This report examines how (1) selected colleges prepare for emergencies, and (2) federal agencies support college emergency preparedness efforts, including the extent to which selected colleges reported awareness of federal resources.", "To answer these questions, GAO interviewed officials from a non-generalizable sample of 18 colleges selected for diversity in size, type, and location. GAO also interviewed officials from three states (Colorado, Kansas, and Virginia) in which some of these schools operated. The states were selected to represent varied approaches to supporting colleges' emergency preparedness efforts. GAO also reviewed federal emergency preparedness resources, agency written responses, applicable federal laws, and federal internal control standards, and interviewed federal officials and representatives from several associations recommended by agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Emergency managers at 18 colleges across the country told GAO that their efforts to prepare for emergencies involved working with the campus community to develop, communicate, and practice plans, as well as working with state and local partners. Campus community members who are involved often include personnel from offices such as public safety, student affairs, or facilities. Officials at all 18 colleges reported developing emergency plans addressing a range of potential events\u2014an approach consistent with federal emergency management principles. To publicize plans, officials often reported using websites, text messages, or presentations to the campus community. Colleges also reported practicing plans through drills. College officials noted that buy-in from the college president and other top campus leaders was critical to their efforts; several officials reported struggling to obtain such support. Most officials also said they coordinate with local or state partners such as police and relied on these partners for advice or to obtain emergency preparedness resources.", "The Departments of Homeland Security (DHS), Justice (DOJ), and Education (Education) offer a variety of emergency preparedness resources to colleges (see figure). However, officials GAO interviewed at 18 colleges described mixed awareness of federal resources, especially those specifically tailored to colleges, despite federal efforts to publicize these resources in a variety of ways. Federal officials and other stakeholders acknowledged this mixed awareness and identified potential causes, such as college emergency managers having networks comprised of local officials who are more likely to know about federal resources for local agencies versus those for colleges, or some college officials devoting limited time to researching federal resources for various reasons.", "DHS, DOJ, and Education all publicize their resources through electronic mailing lists, websites, or other methods, but GAO identified missed opportunities in their dissemination approaches. For example, the electronic mailing list for one key resource may reach the approximately 1,000 officials from colleges subscribed, but may miss at least 3,000 additional schools. GAO also found two federal agency websites that did not include key resources from other federal agencies. Federal internal control standards state that agencies should consider the most appropriate methods for communicating with their external audiences. By identifying opportunities to improve dissemination, federal agencies may increase their ability to effectively communicate important information to colleges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DHS, DOJ, and Education work together to identify opportunities to more effectively publicize emergency preparedness resources to colleges. All three agencies concurred with the recommendations or described actions to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Colleges and other postsecondary schools must plan for a variety of  potential emergencies. Recent events such as Hurricanes Harvey and  Irma, active shooters, and violent rallies, underscore the importance of  such preparations. Preparedness efforts involve developing plans and  systems to prevent certain manmade events from occurring, protecting  members of the campus community when natural or manmade  emergencies do occur and minimizing the impact of such events, as well  as ensuring the community\u2019s safety and maintaining or restoring  operations in an event\u2019s aftermath. Adequately preparing and responding  to emergencies can be complicated by the diverse needs of campus  facilities that range from classrooms and dormitories to sports venues,  laboratories, and medical buildings.", "College emergency preparedness efforts may be influenced by  requirements of and resources from local, state, and federal agencies. At  the federal level, three agencies\u2014the Departments of Homeland Security  (DHS), Justice (DOJ), and Education (Education)\u2014play a key part in  providing emergency preparedness resources to colleges. Education also  oversees compliance with the Jeanne Clery Disclosure of Campus  Security Policy and Campus Crime Statistics Act (Clery Act), which  includes requirements related to emergency preparedness and  notification. You asked us to explore colleges\u2019 emergency preparedness  efforts, as well as their awareness of related federal resources.", "This report examines how: 1) selected colleges prepare for emergencies,  and 2) federal agencies support colleges\u2019 emergency preparedness  efforts, including the extent to which selected colleges report awareness  of federal resources.", "To obtain information about how selected colleges plan and prepare for  emergencies, we conducted semi-structured interviews with officials at a  nongeneralizable sample of 18 colleges. Prior to these interviews, we  sent the 18 schools a pre-interview questionnaire to gather details on  their emergency preparedness efforts and their awareness of available  federal resources. In our interviews we asked follow-up questions, as  appropriate, about their responses. In selecting these schools, we  considered diversity in sector (public and private), size, 2-year and 4-year  degree offerings, residential and non-residential campuses, and  population density (i.e., rural versus urban). To obtain additional  information about how colleges prepare for emergencies, we reviewed  documents and interviewed officials from three states (Colorado, Kansas,  and Virginia) in which some of these schools operated. The states were  selected for their varied approaches to supporting college emergency  preparedness. We also interviewed representatives from several college  emergency preparedness associations that support colleges\u2019 emergency  preparedness efforts and which were identified by federal agency  officials. To obtain information about federal resources for college  emergency preparedness, we reviewed federal resources and  interviewed officials from DHS, DOJ, and Education. We also asked  officials from these agencies to provide written descriptions of the  resources they offer to colleges regarding emergency preparedness. We  focused on these three agencies based on their central role in developing  the 2013 Guide for Developing High-Quality Emergency Operations Plans  for Institutions of Higher Education (an interagency effort) and our  subsequent interviews and document review. We also asked officials at  our 18 selected colleges about their awareness of federal resources. We  reviewed relevant federal laws, regulations, and agency guidance and  compared federal efforts to internal control standards for the federal  government.", "We conducted this performance audit from October 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Colleges are a unique and diverse sector, varying from small, private  schools in rural environments to large public schools in major cities. As of  the 2015-2016 school year (the most recent available data), there were  approximately 4,000 degree-granting colleges in the United States. In  addition to educating students in classrooms, many colleges also manage  a number of related business operations, such as dormitories, scientific  research facilities, hospitals, performing arts centers, athletic venues,  child care facilities, transportation systems, and agricultural facilities.  These various roles and responsibilities increase the complexity of  emergency preparedness efforts.", "DHS has developed a national approach to emergency preparedness by  setting a national preparedness goal and outlining activities for achieving  it. This approach is designed to apply across all levels of government and  sectors of the economy\u2014including colleges, as well as local, state, and  federal governments\u2014and to prioritize collaboration among these entities.  The National Preparedness Goal identifies activities to prevent, protect  against, mitigate, respond to, and recover from threats and hazards and  recognizes that preparedness is a shared responsibility of the whole  community. The National Incident Management System (NIMS), which  was developed by DHS\u2019 Federal Emergency Management Agency  (FEMA), operationalizes the goal by providing a guide with advice for  government and nongovernmental entities for managing emergencies,  including identifying a common vocabulary and processes for responding  to emergencies. For example, NIMS establishes a standardized  approach for communicating information during emergencies and outlines  a leadership structure for managing emergencies, called an \u201cIncident  Command System,\u201d so that the various entities responding to an  emergency can operate seamlessly.", "DHS, DOJ, and Education all develop and disseminate emergency  preparedness resources in line with their respective missions. Other  agencies, such as the Department of Health and Human Services and the  National Weather Service, also produce information that can help with  colleges\u2019 emergency preparedness efforts."], "subsections": []}, {"section_title": "Selected Colleges Prepare for Emergencies by Involving the Campus Community, Developing and Publicizing Plans, and Partnering with Local and State Agencies", "paragraphs": [], "subsections": [{"section_title": "Selected Colleges Varied in Organizational Structures for Emergency Preparedness and Involvement of Campus Community", "paragraphs": ["College offices responsible for emergency preparedness efforts and the  number of staff assigned to such efforts varied among the 18 selected  colleges we interviewed and generally received some input from other  members of the campus community. According to guidance for  emergency planning from DHS\u2019 Federal Emergency Management Agency  (FEMA), emergency preparedness staff are generally responsible for  tasks such as developing emergency plans, communicating and updating  those plans, and taking a lead role during an actual event. College  officials we spoke with said that their schools generally designated a lead  office for emergency preparedness efforts. This lead office ranged from a  dedicated emergency preparedness office at some colleges to offices that  had non-emergency preparedness responsibilities as well, such as offices  of public safety, student affairs, or facilities. About half of the officials  responsible for emergency preparedness efforts at the 18 selected  colleges we interviewed also spent time on other types of responsibilities  that were not specific to emergency preparedness, such as health and  safety issues. State agency officials and representatives from a college  emergency preparedness association we spoke with also noted that  emergency managers at colleges often \u201cwear many hats,\u201d or have limited  time to devote to emergency planning, which makes their jobs more  difficult. College officials often said balancing competing priorities was  challenging. For example, an official at one college told us that if his  school had more staff it could expand outreach efforts to students and  faculty and design specific actions for a wider range of emergencies.", "In addition to having a lead office, most of the 18 colleges reported  convening advisory committees or teams from the campus community to  help develop or revise emergency preparedness plans. For example, one  official at a large public university with over 36,000 students told us  emergency plans are reviewed by an emergency response committee  comprised of representatives from the business office, student housing,  faculty, and the provost, among others. An official from another college  reported that, while some campus community members played a less  active part in developing the emergency plan, they were still responsible  for understanding their roles and responsibilities in the event of an  emergency. According to FEMA\u2019s guidance for emergency plans, there  are benefits to using a team approach. For example, the campus  community is more likely to follow a plan if members have been involved  in developing it because of a sense of shared ownership (see text box.)", "Two College Emergency Managers\u2019 Descriptions of Emergency  Preparedness Efforts   On the day a campus police officer was shot and killed, several of the  members of the campus leadership, including myself (the emergency  manager) and chief of police, were off campus. Fortunately, many  people on campus have been trained to manage a significant event  because college leadership had placed a strong emphasis on  emergency preparedness, including succession planning. When  something occurs it is important to have a team that has practiced  together and can provide leadership even if some key individuals are  not on campus at the time.", "Hurricane Irma was 340 miles across, wider than the states of Florida  and Georgia in some places. We were on the \u201cdirty side\u201d of the  hurricane, just to the east of the eye. We were relieved that the  damage on our campuses was not worse. Because of our actions  before the storm\u2014such as removing loose items like traffic cones and  signage and tying down large equipment\u2014 we minimized the damage."], "subsections": []}, {"section_title": "Selected Colleges Reported Preparing for a Range of Emergencies and Varied in How They Communicated and Practiced their Plans", "paragraphs": ["College officials we interviewed described preparations for a range of  emergencies and used a variety of tools to communicate and practice  their plans (see text box). Officials we interviewed at all 18 colleges said  their school developed \u201call hazards\u201d emergency plans, which means the  plans are designed to address a range of emergencies while prioritizing  those that are most likely to affect their campus. This \u201call hazards\u201d  approach is supported by federal emergency preparedness principles as  outlined in NIMS. Most college officials we spoke with said they prioritize   at least one type of natural disaster that could occur in their geographical  area, as well as manmade threats like active shooters. Most of the  college officials reported talking with state or local partners or using some  type of risk assessment tool or similar analysis to prioritize specific types  of emergencies. College officials sometimes described this process as  prioritizing emergencies that either occur more frequently, or are likely to  have a significant effect on the college if they were to occur. For example,  several officials at selected colleges said their schools prioritized active  shooter events\u2014even though they occur relatively rarely\u2014because of  incidents at other colleges or the potential effects on the community if  such an event were to occur. A college\u2019s specific characteristics can also  inform its emergency plan. For example, officials from two colleges said  their schools serve as research institutions and may need to take extra  steps to secure scientific infrastructure in an emergency. Two officials  described emergency preparedness efforts related to the physical  location of their campus, such as bordering a body of water or being  adjacent to an airport.", "Two College Emergency Managers\u2019 Descriptions of Responding  to Emergencies   We knew that the hurricane was likely to hit other parts of our state  badly, but we were not overly concerned that the hurricane would hit  us directly. I came to work that morning and there were 20 buses on  campus by our football field. We are an evacuation center but  someone had forgotten to tell us that they were sending us 1,100  evacuees. Where were we going to put 1,100 people? These are the  types of events that you plan for and hopefully you never have to  implement those plans, but that day we had to do it. It took us about 4  or 5 hours between the time the buses showed up to when we had  prepared the gymnasium with cots that were provided by the American  Red Cross and food for the evacuees. The evacuees were here for 3  days. Our administrative staff slept on cots in our offices so that we  were on campus the whole time the evacuees were here.", "Prior to the rally, we set up cameras in the area and arranged for  additional security through mutual aid agreements with other police  departments. We also convened in a nearby meeting room to monitor  the situation. The situation turned violent very suddenly. At first, a  couple hundred students and other individuals were in the area  peacefully. Then a more rowdy group convened and within 15 minutes  of their arrival, bottles were flying through the air and windows were  being broken. I looked down for just a moment, then looked up again  and a generator was on fire. We tried very hard to continue with the  event because we believe in free speech, but safety became a  concern and we had to cancel. It was very stressful and hard to watch.  We were worried about the safety of our students.", "College officials we interviewed also outlined a variety of methods to  communicate with the community in the event of an emergency and to  conduct emergency drills.", "Officials we interviewed at the 18 selected colleges most commonly  described using college websites, text messages, or mass email alerts to  communicate emergency preparedness information to the campus  community (see text box). Officials at several colleges also said they  developed more detailed applications that students and faculty could  download to their electronic devices for up-to-date emergency  preparedness information.", "Two College Emergency Managers\u2019 Descriptions of Emergency  Communications   Within minutes of the shooting, an alert was sent utilizing multiple  channels including texts, email, message boards, web, desktop and  voice messages. This serves two functions; it provides redundancy of  delivery and also considers the different information receiving  preferences of the community. Emergency messages, at a minimum,  provide what happened, where it happened, and what action needs to  be taken. Updates are sent when there is new information. It is  recommended that during an emergency you communicate at least  every 30 minutes. It is also important to ensure that correct up to date  information is available, since inaccurate rumors can spread quickly  through social media.", "Twitter helped us amplify our messages. We wrote these messages  quickly, while doing many other things, so that the community could  have information as soon as possible including about areas to avoid  for safety reasons. After the fact, the messages also provided a time- stamped record of the events and the campus response to those  events.", "About half of the colleges also told us that they offer training to  communicate emergency preparedness information to specific groups  such as students, faculty, and administrators. For example, an official at  one college told us the college has targeted outreach to faculty by  developing specific trainings that cover specific issues, such as what to  do when classes are disrupted or a building is no longer accessible, for  example, as the result of a weather event. Officials from several colleges  also said they communicate emergency preparedness information during  new student orientation. Several college officials acknowledged that  engaging students can be challenging, and some officials said they  address this challenge by making presentations or printed and online  materials as engaging as possible.", "Emergency Preparedness Drills and Exercises  College officials we interviewed also said their colleges practice and test  emergency preparedness plans by conducting drills and exercises at  least once a year. Most officials from the 18 selected colleges said they  conducted evacuation drills, such as fire drills; a few officials said they  conducted more time-intensive activities such as \u201ctabletop exercises\u201d (i.e.,  sessions in which officials meet to discuss their roles during a specific  type of emergency). For example, a large public college conducted a  tabletop exercise to simulate a hypothetical weather event that damaged  a dormitory. One official at a large university also described how the  college uses emergency preparedness principles to manage non- emergency events such as sports events in order to practice their plans.", "College emergency managers said that buy-in from a college\u2019s top  leadership was very important for promoting emergency preparedness  efforts and increasing campus involvement. For example, one official  described top leadership buy-in as the \u201cguiding light\u201d for the campus  community. Another official said the president of his college made it  mandatory for all executive staff to attend emergency preparedness  trainings, which demonstrated his commitment to emergency planning  and preparedness. When such support is lacking, officials said it is often  difficult to engage students and faculty. For example, one college official  told us that his college\u2019s previous president viewed emergency  preparedness as bothersome and a burden. The lack of support limited  the type of drills that could be conducted on campus, the official said.  Another official at a private 4-year school explained that his college could  not participate in the \u201cThe Great ShakeOut\u201d program because the drill fell  outside of the allowable hours when drills were permitted to occur to  avoid any conflicts with classroom instruction time."], "subsections": []}, {"section_title": "Selected Colleges Often Coordinated with Local Partners or State Agencies", "paragraphs": ["Officials at most of the 18 selected colleges stated that they relied on  either their local or state partners, or both, for advice, questions, or to  obtain resources for emergency preparedness. These partners were also  the first responders for colleges experiencing emergencies and may  include local and state police and fire departments, hospitals, and  emergency management offices. Coordinating with partners is a key  component of the federal emergency preparedness principles, as outlined  in the National Preparedness Goal and NIMS.", "Most of the officials we spoke with at our selected colleges said they work  with partners in their local community, such as police, fire, and  emergency management departments or local public health agencies, in  preparing for emergencies. For example, one official at a large public  university described a mutual aid agreement with its local emergency  management department, which allows his school access to the county\u2019s  radio communication system in the event of an emergency. The specific  nature of local partnerships often varied based on factors such as the size  of the college and the surrounding community. For example, we heard  from some state, college, and association representatives that some  smaller colleges did not have very extensive police or security  departments, and therefore, relied heavily on local police departments  when emergencies occurred. While coordination often involved planning  for how a community could help a college in the event of an emergency,  college and emergency preparedness association officials also described  instances in which large universities in small towns had more emergency  preparedness resources than the town and were therefore the ones  offering help. For example, one large university in a part of the country  prone to tornadoes offers shelter to town residents and employs  emergency response coordinators to help individuals quickly find shelter.", "Officials also said interpersonal relationships play a big part in deciding to  whom they reach out. Most of the college officials with whom we spoke  highlighted the importance of their interpersonal relationships with local  and/or state law enforcement or emergency management officials and in  some cases, attributed these relationships to having previously worked in  local or state law enforcement or emergency management. For example,  one college official told us that his former role as a local police chief has  made it easy to identify and maintain contacts with local police, fire, and  emergency medical services and to include them in all campus drills and  exercises.", "College officials also described partnering with state agencies to develop  their emergency plan and identify roles in the event of an emergency,  adhere to state requirements, or obtain resources (see text box). Officials  at about half of the 18 selected colleges described working with state law  enforcement entities to, for example, obtain information about emerging  threats, or involve state officials in drills and exercises to practice their  colleges\u2019 emergency plans. About half of the college officials also  described cases in which they were required by state law or regulation to  complete certain college-specific emergency preparedness activities,  such as developing an emergency operations plan, although officials from  a college emergency preparedness association noted that state  requirements related to college emergency preparedness vary widely. In  addition to describing requirements from state emergency management  agencies, officials from several public colleges described emergency  preparedness requirements from the head office of their state\u2019s college  system. Other officials said that their state did not have any requirements  specific to emergency preparedness at colleges.", "States sometimes also provided resources for colleges\u2019 preparedness  efforts. Officials at most of the 18 colleges we contacted said that they  received some state written guidance, training, or technical assistance  that was either specifically tailored to colleges, or was designed for  various entities including colleges. For example, Colorado has an online  school safety center that disseminates emergency preparedness  resources and offers technical assistance. An official from the Kansas  Board of Regents told us the Board\u2019s staff helps to facilitate a new  emergency preparedness community of practice led by colleges, and an  official from the state\u2019s Division of Emergency Management said they  hold general emergency preparedness trainings in which colleges may  participate.", "In addition to supports from local and state government, officials at most  of the selected colleges reported that they received support or assistance  from college emergency preparedness associations. For example, these  associations host conferences and conduct studies on emergency  preparedness.", "Three College Emergency Managers\u2019 Descriptions of Working  with Community Partners  Informal networks were essential. People who know each other will  help each other. I have a friend in the state police department and  requested his assistance with security for the evacuation center. The  state police provided approximately 10 troopers to assist the campus  police officers. Some evacuees brought their pets with them, so the  county office of emergency management activated its animal shelter  resources and positioned an animal shelter on campus. Someone  brought a 4-foot iguana. What do you do with an iguana?", "The group that was being destructive moved back and forth between  campus and the city, so we communicated and coordinated a lot with  community partners. We work together on a daily basis, so the  communication that night was seamless. We also had a member of the  local police department in our emergency management headquarters  during the event, which was very helpful.", "In the days leading up to Hurricane Irma, statewide briefings were held  twice a day with a variety of emergency personnel in the room,  including local police and fire chiefs, mayors, power companies,  communications personnel, and the state emergency management  department. Everyone had already discussed how we would work  together in the event of an emergency, so the conversation focused on  coordinating specific actions. For example, we are a state system of  technical colleges with many tractor-trailer drivers on campus. We  were asked to deploy those drivers to deliver supplies to various state  and FEMA locations around the state.", "In addition to managing emergencies for the college, I am also the  mayor of one of the local towns and those responsibilities dovetail  nicely. Responding to emergencies never becomes second nature, but  it\u2019s nice to know that when something natural or manmade strikes,  there are systems, people, and assets in place. One of the reasons  that the system works so well now is because frameworks like NIMS  were put in place after Hurricane Katrina."], "subsections": []}]}, {"section_title": "Several Federal Agencies Offer Emergency Preparedness Resources Although Selected Colleges Reported Mixed Awareness", "paragraphs": [], "subsections": [{"section_title": "Federal Agencies Provide Guidance, Training, Technical Assistance, and Other Resources to Help Colleges Prepare for Emergencies", "paragraphs": ["Various sub-agencies within DHS, DOJ, and Education are involved in  developing and providing emergency preparedness resources for  colleges (see fig. 1).", "These three agencies use a variety of methods to provide resources,  such as written guidance, webinars, and individual technical assistance  (see fig. 2). The content of these resources ranges from general  emergency management information to guidance specifically tailored to  schools (see text box). Agency officials we interviewed said federal  agencies have specific areas of expertise as it relates to college  emergency preparedness. For example, DHS\u2019 FEMA provides broad  emergency preparedness information and tools and DOJ approaches  emergency preparedness through a law enforcement and public safety  perspective. Education\u2019s role includes the work of its Federal Student Aid  office, which approaches emergency preparedness by issuing relevant  guidance, providing technical assistance, and enforcing compliance with  the Clery Act.", "Federal officials noted that colleges can have differing needs when it  comes to emergency preparedness, based on their size, funding, and  current threats. As a result, agency officials said they strive to provide  tailored resources when possible. For example, DHS officials said that the  Campus Resilience Program is building a website portal that will include a  menu of FEMA resources tailored to colleges\u2019 needs, including a  downloadable self-assessment of risk and vulnerability. This new program  is meant to expand on a similar pilot program that operated from 2013 to  2016; officials expect it to be accessible to schools midway through fiscal  year 2018. Education and DOJ officials said that college officials have  recently been requesting information and assistance with demonstrations  and large events on campus. Specifically, the DOJ-funded National  Center for Campus Public Safety (NCCPS) publicized a \u201cFor Official Use  Only\u201d report on maintaining safety and order on campuses during protests  and demonstrations, which was produced by DHS and DOJ. According to  NCCPS tracking records, 325 colleges and other parties requested this  guidance from January through August 2017. Additionally, agencies have  developed resources based on current events, including webinars in  response to a series of severe hurricanes in fall 2017.", "Examples of Federal Resources for Colleges\u2019 Emergency  Preparedness Efforts", "National Incident Management System: The Department of  Homeland Security\u2019s (DHS) Federal Emergency Management Agency  (FEMA) provides general emergency management resources through  its National Incident Management System (NIMS) and Incident  Command System (ICS). FEMA officials have also helped produce  some college-specific resources within NIMS and ICS, such as a  guide for NIMS implementation for colleges, and courses tailored to  college officials, including a course titled \u201cMulti-Hazard Emergency  Management for Higher Education.\u201d", "National Center for Campus Public Safety (NCCPS): Funded by  the Department of Justice (DOJ), NCCPS maintains a website with a  library of resources and training for colleges, and distributes a weekly  electronic newsletter to officials who request to be on the distribution  list. NCCPS also staffs research associates who answer email  requests from college officials.", "Readiness and Emergency Management for Schools (REMS)", "Technical Assistance Center: Administered by the Department of  Education (Education), the center includes a community of practice,  and links to federal resources and training. The REMS Center  addresses emergency preparedness for both K-12 schools and  colleges; according to officials, the center devotes approximately 20  percent of its resources to emergency preparedness for colleges.", "2013 Guide for Developing High-Quality Emergency Operations  Plans for Institutions of Higher Education: Developed by  Education, DOJ, DHS, and other agencies, this is an overall guide for  colleges as they develop their emergency plans.", "Assistance related to Clery Act components on emergency  preparedness: Offices within Education provide guidance (such as  the Handbook for Campus Safety and Security Reporting) and  assistance with calls to the Campus Safety and Security Help Desk.", "Examples of Federal Resources for Colleges\u2019 Emergency  Preparedness Efforts", "Campus Resilience Program: As part of this program, the Office of  Academic Engagement, within DHS, leads the National Seminar and  Tabletop Exercise Series for Institutions of Higher Education, a  series of campus-based events where college officials discuss their  roles during a simulated emergency situation. DHS officials  collaborate with officials from DOJ and other agencies to conduct  these events. In 2016, the tabletop exercise focused on responding  to campus violence.", "Campus Liaison Program: Federal Bureau of Investigation (FBI)", "Campus Liaison Agents, comprised of both Special Agents and Task  Force Officers on the Joint Terrorism Task Forces in FBI field  offices, provide information, training, exercises, and response  capabilities to campus public safety officials.", "Research and reports on manmade threats: Agencies have  published reports on manmade threats applicable to higher  education settings, such as the 2010 report \u201cCampus Attacks:  Targeted Violence Affecting Institutions of Higher Education,\u201d which  was a collaborative among the FBI, Education, and Secret Service.", "Most of the federal agency officials we interviewed said they were  generally aware of resources produced by other federal agencies and  reported that collaboration is based on relationships formed through prior  collaborative efforts, such as the White House-initiated effort to produce  emergency preparedness guidance for colleges in 2013. For example,  Education officials described being contacted by their colleagues at other  agencies with questions or requests, and DHS and DOJ officials said they  frequently cross-promote each other\u2019s resources. Further, various  agencies have advisory boards and committees to inform their agency- specific initiatives, such as the DHS Homeland Security Academic  Advisory Council, which includes officials from other agencies. However,  some agency officials shared potential issues with information sharing.  For example, one official said he continues to encounter federal offices  that have emergency preparedness resources of which he was unaware,  indicating there are continued opportunities for increased collaboration.", "There is currently no systemic way for federal agencies to share  information about resources for college emergency preparedness.  Federal officials have established an interagency working group, \u201cFederal  Partners in School Emergency Management and Preparedness\u201d that  currently focuses on resources for K-12 schools, and Education officials  said it plans to expand its focus to include colleges, perhaps by fall  2018. Most federal agency officials we spoke with said having an  interagency working group focused on colleges would be useful, for  example, to ensure that officials are aware of all available resources  across the federal government."], "subsections": []}, {"section_title": "Selected Colleges and Stakeholders Cited Schools\u2019 Mixed Awareness of Federal Resources Despite Agency Efforts to Publicize Them", "paragraphs": ["Officials from the selected 18 colleges cited mixed levels of awareness  regarding federal resources on emergency preparedness developed  specifically for them. For example, officials at all 18 colleges said they  were aware of FEMA resources focused on general emergency  preparedness, such as NIMS. However, we found that college emergency  managers were less frequently aware of college-specific resources  produced or funded by Education, DOJ, and others. Specifically, college  emergency managers at almost half of the selected schools said that they  were unaware of each of the following key resources: the 2013 Guide for  Developing High-Quality Emergency Operations Plans, the NCCPS  website, or Education\u2019s Readiness and Emergency Management for  Schools (REMS) Technical Assistance Center website. In addition, the  college officials with whom we spoke sometimes requested the federal  government develop specific resources without realizing these resources  already exist. For example, one college official described wanting  resources on how to manage active shooter and weather-related  emergencies, although several agencies currently fund or provide such  resources. Additionally, another college official who generally accessed  federal resources through DHS suggested that the agency develop  tailored guidance for colleges beyond NIMS, without realizing that a NIMS  guide for colleges exists on Education\u2019s REMS website.", "Federal officials and representatives from college emergency  preparedness associations have also observed gaps in awareness of  federal resources among college officials and have acknowledged it as a  challenge. For example, one agency official said that every time she goes  to a conference, she finds more college officials who have not heard of  key federal resources, signaling a continued need for more outreach. A  needs assessment funded by DOJ also found that awareness of federal  resources may be an issue. Further, NCCPS staff conducted a survey  among colleges to assess the level of engagement these schools have  with entities such as FBI Campus Liaison Agents, and told us they found  about half of colleges\u2014especially private colleges\u2014are unaware of the  federal entities included in the survey.", "This limited awareness among some schools is occurring despite federal  agencies\u2019 efforts to disseminate resources and engage with the higher  education community. Agencies publicize resources through electronic  mailing lists (i.e., listservs), social media, conferences, websites, direct  outreach, and college emergency preparedness associations. For  example, Education\u2019s Office of Safe and Healthy Students, which  publishes its resources on its REMS website, publicizes these resources  through social media. DHS publicizes its Campus Resilience Program at  conferences. Other agency officials we spoke with said they also use  conferences as opportunities to increase school officials\u2019 awareness of  federal resources, and they partner with college emergency preparedness  associations to publicize their resources. NCCPS includes information on  various resources in its weekly e-newsletter. Additionally, following up on  the results of the NCCPS survey on colleges\u2019 engagement with FBI  Campus Liaison Agents discussed above, NCCPS staff have discussed  the results with the FBI Program Manager of the Campus Liaison  Program so the FBI can improve engagement with colleges.", "Officials from colleges, college emergency preparedness associations,  and federal agencies we interviewed identified several factors, such as  colleges\u2019 staffing resources dedicated to emergency preparedness and  the nature of the professional networks used by their emergency  managers, that may lead officials to be less familiar with college-specific  federal resources on emergency preparedness:", "Without full-time emergency preparedness staff, colleges, particularly  small colleges, must prioritize the most urgent tasks, and thus,  officials reported not having enough time to research available federal  resources. Representatives from college emergency preparedness  associations also said that, in their experience, larger schools were  more likely to be aware of federal resources than private and smaller  colleges.", "College emergency managers we spoke with often have backgrounds  in local or state emergency preparedness or law enforcement or have  networks comprised of local or state officials. These managers often  said they learned about federal resources through their more general  local and state emergency preparedness networks. As a result, they  were more frequently aware of general FEMA resources applicable to  these localities versus resources specifically designed for colleges. In  particular, college officials we contacted were more likely to report  seeking information from DHS than from Education or DOJ.", "Some college officials may be uninterested in learning about  additional resources provided by the federal government, especially if  they receive resources from states, localities, or college emergency  preparedness associations or potentially in cases where campus  leadership does not prioritize emergency preparedness.", "While agency officials and representatives from college emergency  preparedness associations said that federal agencies have made strides  in publicizing their resources to a population of college officials that can  be challenging to reach, and expressed desire to increase awareness, we  identified potential gaps or missed opportunities in their dissemination  approaches, including:", "Agencies commonly publicize new resources through their existing  listservs and social media accounts. While these dissemination  strategies are effective for alerting colleges already connected to  federal agencies, they are less likely to reach additional colleges not  already subscribed to these distribution lists. For example, a REMS  official reported that the REMS listserv includes approximately 1,000  officials from colleges and related associations. Given that  approximately 4,000 colleges were operating in the 2015-2016 school  year, according to Education data, most colleges do not receive these  electronic communications. In addition, DHS officials told us that  one of their college emergency preparedness distribution lists  includes representatives from college emergency preparedness  associations and state college and university systems, but is not  designed to include individual colleges unless they request to be  included.", "Agencies also often publicize their efforts at conferences, but these  conferences may miss some colleges, especially some smaller  colleges with fewer resources with which to send college officials,  according to several agency and college emergency preparedness  association officials. As a result, colleges that can afford to send  officials to these conferences may already be more informed than  colleges not in attendance.", "In reviewing various federal websites, we found some lists of  resources that did not include key federal resources, or included web  links that directed visitors to other agencies\u2019 resources that were out  of date. For example, one federal website included a list of resources  related to emergency planning for colleges, but did not list the NCCPS  website among these resources, even though it is a key resource  focused on the topic. Another federal website for college emergency  preparedness did not include a link to Education\u2019s REMS website,  which was specifically developed for school emergency  preparedness. Further, this same resource included a link to another  Education webpage that was empty of content and had not been  updated since 2015. When federal emergency preparedness websites  are out of date or incomplete, federal agencies miss opportunities to  provide accurate, up-to-date information about their resources and  initiatives and those of their partner agencies, and may contribute to  colleges\u2019 gaps in awareness about these resources.", "We heard from several college officials that they would like direct  outreach from the federal government. Agencies do not generally  distribute information directly to all colleges, especially those not  previously signed up for listservs or other distribution services.  However, Education has email contact information for the official at  every college who reports campus crime statistics to the agency,  which may be a natural entry point for federal agencies to disseminate  information on emergency preparedness to all colleges.", "As discussed above, agency officials do not have a systematic  method for notifying each other about their resources for colleges.  This could limit officials\u2019 ability to cross-publicize each other\u2019s  resources; an important activity given that some colleges we  contacted only seek information from one agency or website and were  unaware of resources from others.", "According to federal standards for internal control, in communicating  information to achieve their objectives, agencies should consider  appropriate methods of communication with their external audience (in  this case, college emergency managers). Relatedly, these standards  also state that agencies should communicate with each other on  necessary information for achieving their objectives. Limited awareness  of federal resources may result in colleges unnecessarily focusing their  limited time and resources on developing strategies or information that  federal agencies have already addressed, or advancing preparedness  efforts that are not fully informed by federal agencies\u2019 expertise."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Emergency preparedness is a vital and challenging task for the higher  education community. Various sub-agencies within three key federal  agencies\u2014DHS, DOJ, and Education\u2014provide a number of resources for  colleges, but over the course of our review, we found that colleges were  sometimes unaware of key federal resources that could assist them in  meeting their important emergency preparedness needs. The breadth of  many colleges\u2019 responsibilities beyond education\u2014such as housing  students, running research facilities, and operating hospitals\u2014increases  their exposure to risks. Being underprepared in the face of an emergency  could dramatically increase both human and economic consequences,  not only for the colleges themselves, but also for the larger communities  to which they are connected.", "Emergency preparedness is a shared responsibility and colleges bear  some responsibility for learning about federal resources that can assist  them in protecting their students and staff. However, striking an  appropriate balance between meeting colleges\u2019 main mission\u2014educating  students\u2014and other equally important responsibilities, such as  emergency preparedness, can be difficult, especially given resource  constraints. While federal agencies also face resource constraints,  supporting the safety of college community members is an important part  of the missions of DHS, DOJ, and Education. These agencies have  developed a variety of resources intended to support colleges in their  emergency preparedness efforts, but colleges are not always aware of  these resources. This problem is exacerbated by federal agencies\u2019 choice  of dissemination methods, which could miss a large portion of college  emergency managers, and because federal agencies have missed  opportunities to cross-promote each other\u2019s resources. Unless federal  agencies address these issues, they will continue to miss opportunities to  more effectively communicate important information to colleges,  particularly those that may be harder to reach, such as smaller schools.  The planned interagency working group on emergency preparedness for  colleges may offer an opportunity to systematically explore areas in which  communication and connection between colleges and federal agencies  can be improved, while leveraging and improving existing agency  relationships."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making a total of three recommendations\u2014one to each of the  three agencies in our review\u2014to improve awareness of federal resources  for emergency preparedness among colleges. Specifically:  The Secretary of Education, in collaboration with other agencies through  the planned interagency working group or another mechanism, should  identify further opportunities to more effectively publicize resources to  reach additional colleges. (Recommendation 1)", "The Secretary of Homeland Security, in collaboration with other agencies,  through the planned interagency working group or another mechanism,  should identify further opportunities to more effectively publicize  resources to reach additional colleges. (Recommendation 2)", "The Attorney General, in collaboration with other agencies through the  planned interagency working group or another mechanism, should  identify further opportunities to more effectively publicize resources to  reach additional colleges. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education, DHS, and DOJ for each  agency\u2019s review and comment. All three agencies agreed with our  recommendations or described steps they would take to implement them.  Education\u2019s written comments are reproduced in appendix I and DHS\u2019  written comments are reproduced in appendix II. DOJ did not provide  written comments. DHS and DOJ provided technical comments. We  incorporated changes based on their comments into the report, as  appropriate.", "Education stated that the agency is always interested in increasing  utilization by colleges of the emergency management resources that the  Department and other federal agencies develop. It also stated that the  planned interagency working group would be a very appropriate and  effective vehicle for increasing utilization of these resources, and that it  will consider that group or other mechanisms to identify further  opportunities to publicize resources to colleges.", "DHS concurred with our recommendation to the agency and said that it  would continue to collaborate with its partners to further publicize  resources available to colleges. It also highlighted several of the  Department\u2019s current and planned resources for its related Campus  Resilience Program.", "DOJ did not provide written comments, but stated that it agreed with our  recommendation to the agency. Officials stated that they would outline  steps for addressing the recommendation in future communications.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Attorney General of the United States, the  Secretary of Education, and the Secretary of Homeland Security. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Janet Mascia (Assistant  Director), Barbara Steel-Lowney (Analyst-in-Charge), Shilpa Grover, and  Vernette Shaw made key contributions to this report. Also contributing to  this report were: Susan Aschoff, Rachael Chamberlin, Jessica  Moscovitch, Jessica Orr, Mimi Nguyen, Deborah Bland, Benjamin Sinoff,  Sheila McCoy, Jean McSween, Lori Rectanus, and Sarah Veale."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-559", "url": "https://www.gao.gov/products/GAO-18-559", "title": "Data Protection: Actions Taken by Equifax and Federal Agencies in Response to the 2017 Breach", "published_date": "2018-08-30T00:00:00", "released_date": "2018-09-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CRAs such as Equifax assemble information about consumers to produce credit reports and may provide other services, such as identity verification to federal agencies and other organizations. Data breaches at Equifax and other large organizations have highlighted the need to better protect sensitive personal information.", "GAO was asked to report on the major breach that occurred at Equifax in 2017. This report (1) summarizes the events regarding the breach and the steps taken by Equifax to assess, respond to, and recover from the incident and (2) describes actions by federal agencies to respond to the breach. To do so, GAO reviewed documents from Equifax and its cybersecurity consultant related to the breach and visited the Equifax data center in Alpharetta, Georgia, to interview officials and observe physical security measures. GAO also reviewed relevant public statements filed by Equifax. Further, GAO analyzed documents from the IRS, SSA, and USPS, which are Equifax's largest federal customers for identity-proofing services, and interviewed federal officials related to their oversight activities and response to the breach."]}, {"section_title": "What GAO Found", "paragraphs": ["In July 2017, Equifax system administrators discovered that attackers had gained unauthorized access via the Internet to the online dispute portal that maintained documents used to resolve consumer disputes (see fig.). The Equifax breach resulted in the attackers accessing personal information of at least 145.5 million individuals. Equifax's investigation of the breach identified four major factors including identification, detection, segmenting of access to databases, and data governance that allowed the attacker to successfully gain access to its network and extract information from databases containing personally identifiable information. Equifax reported that it took steps to mitigate these factors and attempted to identify and notify individuals whose information was accessed. The company's public filings since the breach occurred reiterate that the company took steps to improve security and notify affected individuals.", "The Internal Revenue Service (IRS), Social Security Administration (SSA), and U.S. Postal Service (USPS)\u2014three of the major federal customer agencies that use Equifax's identity verification services\u2014conducted assessments of the company's security controls, which identified a number of lower-level technical concerns that Equifax was directed to address. The agencies also made adjustments to their contracts with Equifax, such as modifying notification requirements for future data breaches. In the case of IRS, one of its contracts with Equifax was terminated. The Department of Homeland Security offered assistance in responding to the breach; however, Equifax reportedly declined the assistance because it had already retained professional services from an external cybersecurity consultant. In addition, the Bureau of Consumer Financial Protection and the Federal Trade Commission, which have regulatory and enforcement authority over consumer reporting agencies (CRAs) such as Equifax, initiated an investigation into the breach and Equifax's response in September 2017. The investigation is ongoing."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report. GAO plans to issue separate reports on federal oversight of CRAs and consumer rights regarding the protection of personally identifiable information collected by such entities. A number of federal agencies and Equifax provided technical comments which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Recent data breaches at federal agencies, retailers, hospitals, insurance  companies, consumer reporting agencies (CRA), and other large  organizations have resulted in the potential compromise of millions of  Americans\u2019 personally identifiable information (PII), which could lead to  identity theft and other serious consequences. Such incidents highlight  the importance of ensuring the security and privacy of PII collected and  maintained by those entities.", "As one example, the breach of an Equifax online dispute portal from May  to July 2017 resulted in the compromise of records containing the PII of at  least 145.5 million consumers in the U.S. and nearly 1 million consumers  outside of the U.S. Among others, the customers of Equifax\u2019s services  include federal agencies, such as the Internal Revenue Service (IRS);  Social Security Administration (SSA); and U.S. Postal Service (USPS). In  addition, the Bureau of Consumer Financial Protection (BCFP) and  Federal Trade Commission (FTC) have roles in providing oversight of  Equifax and other CRAs.", "You requested that we review aspects of the 2017 Equifax breach and  the federal response. Our specific objectives were to (1) summarize the  events regarding the 2017 Equifax breach and the steps taken by the  company to assess, respond to, and recover from the incident and (2)  describe the actions that federal customers and oversight agencies took  in response to the breach.", "To address the first objective, we analyzed documentation generated by  Equifax and its cybersecurity consultant in response to the breach, such  as the report summarizing the results of the consultant\u2019s forensic analysis  of Equifax systems. In addition, we conducted a site visit at the Equifax  data center in Alpharetta, Georgia, where we interviewed relevant  company officials and observed the organization\u2019s physical security  measures. We did not independently verify or assess Equifax\u2019s security  controls or the steps the company took to address factors related to the  breach. We also reviewed Equifax\u2019s relevant public filings it provided to  the public and shareholders, which included information about the data  breach and the company\u2019s efforts for remediation.", "For the second objective, we analyzed documentation that described key  actions taken by federal customers and oversight agencies following the  breach. This included documentation that discussed the responses to the  breach by IRS, SSA, and USPS, as key federal customers of Equifax. In  addition, we analyzed documentation related to the oversight of Equifax  (and other CRAs) by BCFP and FTC. We also conducted interviews with  officials of these selected customer and oversight agencies to further  understand the actions they took. Appendix I discusses our objectives,  scope, and methodology in greater detail.", "We conducted this performance audit from November 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["A consumer reporting agency is a person or entity that assembles or  evaluates consumer credit information or other consumer information for  the purpose of furnishing consumer reports to others. This includes  companies that compile and store electronic files of consumer  information, which they then sell to other businesses and organizations  that use the information to assess or evaluate creditworthiness.", "Furnishing of information by creditors and others to CRAs is voluntary, as  federal law generally does not require such reporting, and information  compiled on individual consumers can vary among the CRAs. A lender  uses the information provided to determine whether to offer credit to an  individual, the rate of interest to be assigned to the loan, and other terms  of the contract. In addition, a growing number of entities use information  provided by CRAs to help make decisions about individuals\u2019 credit  worthiness when determining eligibility for insurance, housing, or  employment, among other things. Information from CRAs can also be  used for other purposes, such as to identify potential customers with  specific characteristics for new credit card accounts.", "CRAs may provide a variety of verification services to government and  private sector organizations. For example, Equifax provides income and  employment verification services using information collected from  employers.", "Equifax, TransUnion, and Experian\u2014the three major CRAs\u2014also  leverage information they collect from organizations, such as financial  institutions, utilities, cell phone service providers, public records, and  government sources, to offer identity verification services. Other entities,  including federal agencies, use identity verification when they enroll new  applicants for benefits and services. In addition, the IRS uses identity  verification to ensure that individuals who want to access prior year tax  returns are the legitimate filers of those returns.", "With regard to identity verification, CRAs typically use information they  collect to generate questions that federal agencies and other entities can  use to test applicants\u2019 knowledge of information in their credit file. These  questions and answers are typically the basis for identity proofing\u2014the  process of comparing evidence from an individual with a trusted source of  data to verify that the individual is who they claim to be. The evidence  generally consists of information or documentation that only the legitimate  individual should know or have access to. For example, a driver\u2019s license,  passport, knowledge of recent financial transactions, and biometric  information are all considered relatively strong evidence that the  individual is who they say they are."], "subsections": [{"section_title": "A Data Breach Can Have Harmful Results", "paragraphs": ["Although there is no commonly agreed-upon definition, the term \u201cdata  breach\u201d generally refers to an unauthorized or unintentional exposure,  disclosure, or loss of an organization\u2019s sensitive information. This  information can include PII, such as Social Security numbers, or financial  information, such as credit card numbers.", "A data breach can occur under many circumstances and for many  reasons. It can be inadvertent, such as from the loss of an electronic  device, or deliberate, such as from the theft of a device. A breach can  also occur as a result of a cyber-based attack by a malicious individual or  group, agency insiders, foreign nation, terrorist, or other adversary. Data  breaches have occurred at all types of organizations, including private,  nonprofit, and federal and state entities.", "The loss or unauthorized disclosure of information in a data breach can  lead to serious consequences and can result in substantial harm to  individuals, private sector organizations, and the federal government.  Examples of harmful results include:  loss or theft of resources, including money and intellectual property,  and identity theft;  inappropriate access to and disclosure, modification, or destruction of  sensitive information; harm to national security; use of computer services for unauthorized purposes or to launch an  attack on other computer systems; damage to networks and equipment;  loss of privacy, emotional distress, or reputational harm;  loss of public confidence; and high costs to remediate the effects of the breach."], "subsections": []}, {"section_title": "Attackers Use a Variety of Tools and Techniques", "paragraphs": ["Cyber criminals seeking access to sensitive information, such as PII,  typically use a variety of readily available software tools to carry out  attacks. These tools can be used to intercept and capture data as they  are transmitted, exploit known vulnerabilities in commercially available  software, and facilitate e-mail phishing techniques for gaining  unauthorized access to systems and information.", "Attackers often use similar techniques and tools, making it difficult to  distinguish one attacker from another. When custom-built tools are used,  an attacker may rely on unique methods or display other telltale signs that  can be used for identification; such tools are usually used when a target\u2019s  defenses justify them. Off-the-shelf tools are usually enough to conduct a  successful attack that allows an attacker to steal data, bring systems  down, or gain further access to systems and resources.", "Attackers often begin with network-scanning programs, which are used to  map the layout of a targeted network and determine the location of data  repositories that may contain information of interest. Some scanners are  designed to scan only a single networked computer, extracting as much  data about that system as possible. Others can scan Internet addresses  across the web to identify potential targets by determining whether they  are using a version of software that is vulnerable to an attack.", "Once a target has been identified, the attacker will generally attempt to  gain access to the system or network without leaving any indication of  who they are or from where they launched their attack. This is commonly  accomplished using tools that mask the attacker\u2019s origin by using the  Internet address of another computer from another location. While an  investigator can sometimes use forensic tools to trace the original Internet  address, often this leads to misleading information.", "Attackers use additional tools and techniques to gain unauthorized  access to systems and data on the target network and to transfer stolen  data back to the attacker\u2019s own computer system. One such technique is  to leverage the access rights gained on the originally compromised  system to get further access into other servers on the network. To do this,  an attacker can use standard, off-the-shelf tools for navigating systems  and managing information that blend in with normal network activity. For  example, encryption can be used to hide the transfer of sensitive  information from one server to another or out of the network entirely. This  enables the attacker to continue probing for more repositories of  information and stealing copies of that information without being detected  by the targeted network\u2019s system administrators."], "subsections": []}, {"section_title": "Federal Agencies Oversee CRA Activities, Including Protection of Personally Identifiable Information", "paragraphs": ["CRAs have been subject to federal regulation since the passage of the  Fair Credit Reporting Act in 1970. Currently, FTC and BCFP are the two  federal agencies with primary oversight responsibilities for CRAs. FTC  was given responsibility for administratively enforcing CRAs\u2019 compliance  with the Fair Credit Reporting Act at the time of enactment. As part of the  Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act), BCFP was given authority to enforce a number of federal  consumer financial laws, including the Fair Credit Reporting Act. BCFP  also has begun exercising supervisory authority over certain larger  participants in the credit reporting market."], "subsections": [{"section_title": "FTC Has Enforcement Authority over CRAs", "paragraphs": ["FTC has authority, subject to certain exceptions, to investigate any  organization that maintains consumer data and to bring enforcement  actions for violations of laws that concern the protection of consumer  information. FTC also exercises enforcement authority over CRAs  through the Gramm-Leach-Bliley Act and the related \u201cSafeguards\u201d and  \u201cPrivacy Rules.\u201d", "The Fair Credit Reporting Act promotes the accuracy, fairness, and  privacy of information collected or used to help make decisions about  individuals\u2019 eligibility for credit, insurance, employment, housing, or  other benefits. CRAs that compile credit histories and other personal  information into consumer reports must adhere to the act\u2019s provisions  for ensuring the accuracy and permissible uses of such information.", "The Gramm-Leach-Bliley Act requires that federal financial regulators  and FTC establish standards and protections to ensure the security  and confidentiality of customer information. These standards and  protections must be implemented by companies of all sizes that are  engaged in financial activities, including Equifax and all other CRAs.  Further, the act requires financial institutions to protect the security of  customers\u2019 personal information.", "As part of its implementation of the Gramm-Leach-Bliley Act, FTC  issued the \u201cSafeguards Rule\u201d, which requires financial institutions  develop, implement, and maintain a comprehensive information  security program to keep information about a customer of a financial  institution secure and confidential. In addition to developing their own  safeguards, companies covered by the rule are responsible for  requiring their affiliates and service providers to implement and  maintain safeguards to protect customer information in their care.", "In determining whether it should take enforcement action against a  company for a violation of data security provisions, FTC considers a  number of factors, including whether a company\u2019s data security measures  are commensurate with the company\u2019s size. FTC does not have  supervisory authority to examine CRAs for compliance with the Federal  Trade Commission Act; therefore, the agency typically must rely on its  enforcement authority after an incident has occurred.", "Finally, FTC enforces Section 5 of the Federal Trade Commission Act,  which prohibits \u201cunfair or deceptive acts or practices in or affecting  commerce.\u201d FTC officials told us that failing to properly protect  consumer data can be considered an unfair or deceptive act or practice."], "subsections": []}, {"section_title": "BCFP Has Enforcement and Supervisory Authorities over CRAs", "paragraphs": ["In 2010, the Dodd-Frank Act gave BCFP enforcement authority over all  CRAs and certain other persons for violations of most provisions of the  Fair Credit Reporting Act; certain provisions of the Gramm-Leach-Bliley  Act; and for unfair, deceptive, or abusive acts or practices under sections  1031 and 1036 of the Dodd-Frank Act. BCFP has taken enforcement  actions against CRAs for violations of the Fair Credit Reporting Act and  for deceptive practices.", "In 2012, BCFP also extended its supervisory authority to include larger  CRAs\u2014that is, those with more than $7 million in annual receipts from  consumer reporting activities. BCFP staff review certain of these larger  CRAs on an ongoing basis, and BCFP staff said that their recent  examinations of CRAs have focused on compliance with Fair Credit  Reporting Act requirements related to accuracy and resolving consumer  disputes. BCFP has also examined CRAs subject to the BCFP\u2019s  supervisory authority for compliance with other Fair Credit Reporting Act  requirements, including those related to ensuring the accuracy of  information in consumer reports, furnishing information only to those with  a permissible purpose, and compliance with the consumer dispute  process.", "BCFP also has supervisory authority over some aspects of the Gramm- Leach-Bliley Act. For example, BCFP examines larger CRAs for whether  they restrict the sharing and disclosure of nonpublic personal information  to third parties. BCFP does not have supervisory or enforcement authority  over the \u201cSafeguards Rule\u201d enacted by FTC as part of the agency\u2019s  implementation of the Gramm-Leach-Bliley Act.", "Finally, BCFP has authority to examine larger CRAs for any unfair,  deceptive, or abusive acts or practices and to bring enforcement actions  against CRAs of all sizes for such acts or practices. According to BCFP  staff, in some cases, a CRA could commit an unfair, deceptive, or abusive  act or practice or violation of other applicable law in connection with its  data security practices."], "subsections": []}]}, {"section_title": "GAO Has Previously Reported on Data Protection Issues", "paragraphs": ["We have previously made recommendations to agencies regarding the  protection of PII, and proposed Matters for Congressional Consideration  in areas where laws could be enhanced. For example, in our recent report  on data oversight at the Centers for Medicare and Medicaid Services  (CMS), we recommended that the agency ensure that all third parties  that receive CMS data have clear requirements for the protection of that  data, that CMS properly oversee the implementation of those  requirements, and that the agency ensure identified issues are  remediated. Additionally, our recent report on the oversight of students\u2019  PII at the Department of Education included seven recommendations for  better protection of student PII and for improving department policies to  meet federal privacy guidelines. All of these recommendations currently  remain open while the agencies take actions to address them.", "In addition to recommendations for agencies, we have proposed two  Matters for Congressional Consideration related to data protection. In  2008, we reported that the Privacy Act and E-Government Act of 2002 may not adequately ensure that consumers are notified in the event of a  breach by federal agencies and that existing laws could better ensure that  consumers are aware of what PII federal agencies collect and how they  use it. Based on this finding, we suggested that Congress consider  amending applicable laws to ensure that all PII collected by federal  agencies is protected and that its use is limited to the stated purpose of  the collection.", "With regard to data collected by private entities, in 2013, we reported that  existing federal laws provide consumers with only limited protection for  data that is collected and used for marketing purposes. Consequently,  we asked Congress to consider strengthening the current consumer  privacy framework to reflect the effects of changes in technology and the  marketplace while also ensuring that any limitations on data collection  and sharing do not unduly inhibit the economic and other benefits to  industry and consumers that data sharing can accord."], "subsections": []}]}, {"section_title": "Attackers Exploited Vulnerabilities That Equifax Subsequently Reported Taking Actions to Address", "paragraphs": ["In March 2017, unidentified individuals discovered the presence of a  known vulnerability in software running on Equifax\u2019s online dispute portal  that could be used to obtain access to the system. In May of that year,  attackers exploited the vulnerability and began to extract data containing  PII from Equifax\u2019s information systems. According to Equifax, the  attackers used a number of techniques to disguise their exploit of the  Equifax systems and the database queries they conducted. On July 29,  2017, Equifax discovered the breach and reported that it took actions to  address the factors that allowed the attackers to successfully gain access  to its network. Further, the company reported that it took steps to identify,  notify, and provide support to individuals who were potentially impacted  by the breach."], "subsections": [{"section_title": "Attackers Identified and Exploited Vulnerabilities to Steal Data", "paragraphs": ["Equifax has stated that, on March 10, 2017, unidentified individuals  scanned the company\u2019s systems to determine if the systems were  susceptible to a specific vulnerability that the United States Computer  Emergency Readiness Team had publicly identified just 2 days earlier.  The vulnerability involved the Apache Struts Web Framework and would  allow an attacker to execute commands on affected systems.", "Equifax officials stated that, as a result of this scanning, the unidentified  individuals discovered a server housing Equifax\u2019s online dispute portal  that was running a version of the software that contained the vulnerability.  Using software they obtained from an unknown source and that was  designed to exploit the vulnerability, the unidentified individuals  subsequently gained unauthorized access to the Equifax portal and  confirmed that they could run commands. No data was taken at this time.", "According to Equifax officials, beginning on May 13, 2017, in a separate  incident following the initial unauthorized access, attackers gained access  to the online dispute portal and used a number of techniques to disguise  their activity. For example, the attackers leveraged existing encrypted  communication channels connected to the online dispute portal to send  queries and commands to other systems and to retrieve the PII residing  on the systems. The use of encryption allowed the attackers to blend in  their malicious actions with regular activity on the Equifax network and,  thus, secretly maintain a presence on that network as they launched  further attacks without being detected by Equifax\u2019s scanning software.", "Equifax officials added that, after gaining the ability to issue system-level  commands on the online dispute portal that was originally compromised,  the attackers issued queries to other databases to search for sensitive  data. This search led to a data repository containing PII, as well as  unencrypted usernames and passwords that could provide the attackers  access to several other Equifax databases. According to Equifax\u2019s interim  Chief Security Officer, the attackers were able to leverage these  credentials to expand their access beyond the 3 databases associated  with the online dispute portal, to include an additional 48 unrelated  databases.", "After reviewing system log files that recorded the attackers\u2019 actions,  Equifax officials determined that the attackers then ran a series of queries  in an effort to try to extract PII from the databases they had located.  Altogether, the attackers ran approximately 9,000 queries, a portion of  which successfully returned data containing PII. As before, Equifax  officials stated that the attackers were able to disguise their presence by  blending in with regular activity on the network.", "After successfully extracting PII from Equifax databases, the attackers  removed the data in small increments, using standard encrypted web  protocols to disguise the exchanges as normal network traffic. The attack  lasted for about 76 days before it was discovered. Figure 1 depicts an  analysis of how the attackers gained access into Equifax\u2019s systems and  exploited vulnerabilities."], "subsections": []}, {"section_title": "After Becoming Aware of the Attack, Equifax Took Steps to Block the Attackers", "paragraphs": ["Equifax\u2019s assessment of the data breach began with actions it took to  identify that it was being attacked as well as subsequent actions to block  the intrusion. Equifax officials stated that, on July 29, 2017\u2014 approximately 2.5 months after the attackers began extracting sensitive  information on May 13, 2017\u2014security personnel conducting routine  checks of the operating status and configuration of IT systems detected  the intrusion on the online dispute portal.", "As reported by Equifax, a network administrator conducting routine  checks of the operating status and configuration of IT systems discovered  that a misconfigured piece of equipment allowed attackers to  communicate with compromised servers and steal data without detection.  Specifically, while Equifax had installed a device to inspect network traffic  for evidence of malicious activity, a misconfiguration allowed encrypted  traffic to pass through the network without being inspected. According to  Equifax officials, the misconfiguration was due to an expired digital  certificate. The certificate had expired about 10 months before the  breach occurred, meaning that encrypted traffic was not being inspected  throughout that period. As a result, during that period, the attacker was  able to run commands and remove stolen data over an encrypted  connection without detection.", "Equifax officials stated that, after the misconfiguration was corrected by  updating the expired digital certificate and the inspection of network traffic  had restarted, the administrator recognized signs of an intrusion, such as  system commands being executed in ways that were not part of normal  operations. Equifax then blocked several Internet addresses from which  the requests were being executed to try to stop the attack.", "Equifax reported that, on July 30, 2017, after its information security  department observed additional suspicious activity continuing to occur,  the online dispute portal was taken offline. The next day, the Chief  Security Officer, in coordination with internal stakeholders, informed the  Chief Executive Officer of the attack on the portal."], "subsections": []}, {"section_title": "Equifax Identified Several Factors That the Attacker Exploited During the Breach", "paragraphs": ["To further assess the scope of the breach and identify its causes, Equifax  began an investigation to identify the vulnerabilities that had been  exploited to steal PII from its systems. Concurrent with this effort,  company officials stated that they also began examining the data  repositories that had been accessed to try to determine how much data  had been taken and how many individuals were potentially impacted.  According to Equifax officials, the investigation took place between  August 2 and October 2, 2017, with the help of an external cybersecurity  consultant.", "Equifax officials stated that the company\u2019s investigation was facilitated by  the use of electronic logs that had not been damaged or erased by the  attackers on the affected systems. These logs recorded commands that  were issued by the attackers throughout the attack, such as commands to  retrieve or display the contents of data repositories. By examining the  logs, Equifax worked to reconstruct the sequence of specific actions that  the attackers had taken and, consequently, determine what specific data  had been compromised. In addition to initiating its internal investigation,  on August 2, 2017, the company notified the Federal Bureau of  Investigation of the breach.", "Based on its cybersecurity consultant\u2019s analysis and recommendations  following the breach, Equifax determined that several major factors had  facilitated the attackers\u2019 ability to successfully gain access to its network  and extract information from databases containing PII. Specifically,  Equifax officials told us that key factors that led to the breach were in the  areas of identification, detection, segmentation, and data governance:  Identification. According to Equifax officials, the Apache Struts  vulnerability was not properly identified as being present on the online  dispute portal when patches for the vulnerability were being installed  throughout the company. After receiving a notice of the vulnerability  from the United States Computer Emergency Readiness Team in  March 2017, Equifax officials stated that they circulated the notice  among their systems administrators. However, the recipient list for the  notice was out-of-date and, as a result, the notice was not received by  the individuals who would have been responsible for installing the  necessary patch. In addition, Equifax officials stated that although the  company scanned the network a week after the Apache Struts  vulnerability was identified, the scan did not detect the vulnerability on  the online dispute portal.", "Detection. As reported by Equifax officials, an expired digital  certificate contributed to the attackers\u2019 ability to communicate with  compromised servers and steal data without detection. Specifically,  while Equifax had installed a tool to inspect network traffic for  evidence of malicious activity, the expired certificate prevented that  tool from performing its intended function of detecting malicious traffic.", "The certificate had expired before May 2017, meaning that traffic was  not being inspected throughout the breach.", "Segmentation. Because individual databases were not isolated or  \u201csegmented\u201d from each other, the attackers were able to access  additional databases beyond the ones related to the online dispute  portal, according to Equifax officials. The lack of segmentation  allowed the attackers to gain access to additional databases  containing PII, and, in addition to an expired certificate, allowed the  attackers to successfully remove large amounts of PII without  triggering an alarm.", "Data Governance. Data governance includes setting limits on access  to sensitive information, including credentials such as usernames and  passwords. According to Equifax officials, the attackers gained access  to a database that contained unencrypted credentials for accessing  additional databases, such as usernames and passwords. This  enabled the intruders to run queries on those additional databases.", "In addition to these four broad categories, Equifax officials noted one  other factor that also facilitated the breach. Specifically, the lack of  restrictions on the frequency of database queries allowed the attackers to  execute approximately 9,000 such queries\u2014many more than would be  needed for normal operations."], "subsections": []}, {"section_title": "Equifax Reported Taking Steps to Strengthen its Cybersecurity Controls", "paragraphs": ["According to Equifax\u2019s public filings, including its annual 10-K filing  submitted to the Securities and Exchange Commission in March 2018  and its notice of 2018 annual meeting and proxy statement, following the  2017 incident, Equifax undertook a variety of remediation efforts to  address the factors identified in their investigation. Equifax officials  responsible for coordinating the response to the incident stated that, once  the company identified how the attackers were able to gain unauthorized  access to company systems and remove sensitive data, it took measures  to address the internal factors that led to the breach. The measures were  intended to better protect the company\u2019s infrastructure from future  disruptions, compromises, or failures. We did not independently assess  Equifax\u2019s efforts to address the identified factors.", "Specifically, Equifax officials stated that system-level remediation  measures were implemented to address the factors that led to the breach.  For example, to work toward addressing concerns about identifying  vulnerable servers, Equifax reportedly is implementing a new  management process to identify and patch software vulnerabilities and  confirm that vulnerabilities have been addressed. Also, to help ensure  that detection of malicious activity is not hindered in the future, Equifax  officials said they have developed new policies to protect data and  applications and implemented new tools for continuous monitoring of  network traffic. Further, in an effort to improve segmentation between  devices that do not need to communicate, Equifax officials stated that  they have implemented additional controls to monitor communications at  the external boundary of the company\u2019s networks and added restrictions  on traffic between internal servers. Finally, to help address data  governance issues, the officials said they were implementing a new  security controls framework and tighter controls for accessing specific  systems, applications, and networks.", "In addition to these measures, Equifax stated that they implemented a  new endpoint security tool to detect misconfigurations, evaluate potential  indications of compromise, and automatically notify system administrators  of identified vulnerabilities. Further, Equifax officials reported that the  company has implemented a new governance structure to regularly  communicate risk awareness to Equifax\u2019s board of directors and senior  management. The new structure requires the company\u2019s Chief  Information Security Officer to report directly to the Chief Executive  Officer. Officials said this should allow for greater visibility of  cybersecurity risks at top management levels."], "subsections": []}, {"section_title": "Equifax Reported Taking Steps to Identify Affected Individuals", "paragraphs": ["Following the shutdown of its online dispute portal, Equifax took steps to  identify what data had been lost and the number of individuals affected so  that it could fulfill its responsibility to notify affected individuals. To  develop its estimate of the number of individuals affected by the data  breach, Equifax stated that it recreated the attackers\u2019 database queries  on a separate system that could run the queries at high speed, allowing  Equifax to generate its estimate in a relatively short period of time.  Equifax staff then worked to reconstruct queries against the data tables to  identify which queries had successfully extracted data and which  individuals were associated with that data.", "However, as is commonly experienced with large breaches, Equifax faced  challenges in determining exactly how many individuals were affected.  According to Equifax officials, much of the stolen data consisted of  incomplete records without full sets of identifying information. Some data  sets included information that could be matched to more than one known  individual. Subsequently, Equifax officials stated that they compared  these data sets with information in the company\u2019s internal databases that  were not impacted by the data breach to make matches with known  identities.", "For example, Equifax took partial records that did not include all fields  and ran an analysis to determine whether Social Security numbers and  names included in the records could be matched with those in Equifax\u2019s  core credit reporting databases. In addition, Equifax performed analyses  to remove duplicates and to determine whether a person could be linked  to incomplete records based on Social Security numbers. After Equifax  completed its initial analysis of the datasets, it estimated that  approximately 143 million U.S. consumers had been affected by the  breach.", "Moreover, Equifax\u2019s initial analysis, reported on September 7, 2017,  indicated that multiple types of PII had been compromised, including  individuals\u2019 names, Social Security numbers, birth dates, addresses, and  driver\u2019s license numbers. Because many of the records were incomplete, not all of the types of PII had been compromised for all affected  individuals.", "In addition, Equifax determined that credit card numbers for  approximately 209,000 consumers and certain dispute documents, which  had included PII for approximately 182,000 consumers, had been  accessed. These documents contained PII associated with specific items  from dispute cases that were submitted to Equifax as evidence supporting  disputes they filed about the accuracy of their credit reports, such as  utility bills.", "Equifax made two revisions over time to its estimate of affected  individuals. First, in late September 2017, Equifax determined that it had  incorrectly concluded that one of the attackers\u2019 queries had not returned  any data. After additional analysis, including a determination that the  query had, in fact, allowed the attackers to access PII from approximately  2.5 million additional U.S. consumers, Equifax revised the number of  affected individuals from 143 million to 145.5 million on October 2, 2017.", "Second, on March 1, 2018, Equifax stated that it had identified  approximately 2.4 million U.S. consumers whose names and partial  driver\u2019s license information were stolen. The newly identified individuals  were based on names and partial driver\u2019s license information contained in  a data table that Equifax had not previously identified as including  individuals compromised in the breach. According to Equifax officials,  Equifax\u2019s original investigation had not identified these individuals  because their names and partial driver\u2019s license information were not  stolen together with their Social Security numbers.", "To identify as many potentially affected individuals as possible, Equifax  contracted with a third-party data source that had access to a driver\u2019s  license database and mapped the partial driver\u2019s licenses to an Equifax  database containing Social Security numbers. According to Equifax  officials, some of the individuals within this group of 2.4 million were  already included in the previous total of 145.5 million affected individuals,  while others were not. As of August 2018, Equifax had not determined  exactly how many of the 2.4 million individuals were included in the  previous total of 145.5 million."], "subsections": []}, {"section_title": "Equifax Notified Affected Individuals and Offered Monitoring Services", "paragraphs": ["On September 7, 2017, after Equifax had determined the extent of the  breach and developed a remediation plan for potentially impacted  consumers, the company provided written notification to all U.S. state  attorneys general regarding the approximate number of potentially  affected residents in each state and its plans for consumer remediation.  The notification included steps individuals could take to determine if they  were affected by the breach and to help protect against misuse of their  personal information. The company also issued a press release to the  public providing information about the breach and the types of PII that  had been compromised.", "Further, the press release issued on September 7, 2017, stated that the  company had set up a dedicated website to help individuals determine if  their information might have been stolen in the breach. In addition,  Equifax improved the search tool it had developed to help U.S.  consumers determine if they were impacted and expanded its call center  operations. However, the website experienced several technical issues,  including excessive downtime and inaccurate data. Equifax officials  acknowledged these shortcomings and said they took measures to  address them, including improving the stability of the website and  accuracy of the information it provided.", "Additionally, Equifax reported that it would provide several services to all  U.S. consumers, regardless of whether their information had been  compromised, free of charge for one year. Those services included credit  monitoring, individual copies of Equifax credit reports, notification of  changes to credit reports, a credit \u201clock\u201d allowing individuals to prevent  third-parties from accessing their Equifax credit report, identity theft  insurance covering certain expenses related to the process of recovering  from identity theft, and a Social Security number monitoring service that  would scan suspicious websites for an individual\u2019s Social Security  number.", "These services were offered to consumers from September 7, 2017, until  January 31, 2018, when Equifax announced a new service called \u201cLock &  Alert.\u201d This new service allows consumers to use their smartphone or  computer to lock and unlock their Equifax credit report. Equifax  announced that it was making this service available to all consumers at  no cost."], "subsections": []}]}, {"section_title": "Federal Agencies Took a Variety of Actions in Response to the Equifax Breach", "paragraphs": ["After Equifax announced the data breach, federal customer agencies took  a variety of actions based on their responsibilities and how the breach  affected their operations. Specifically, the agencies that were customers  of the company\u2019s services conducted independent assessments of the  company\u2019s security controls, revised their own identity proofing  processes, and made changes to their contracts with Equifax, among  other activities. Equifax did not ask the Department of Homeland Security  (DHS), which is the central agency that responds to cyber incidents  across the federal government, to assist in responding to the breach.  Nevertheless, the department took the step of reminding federal agencies  of the importance of correcting the software vulnerability that led to the  breach. In addition, the oversight agencies, BCFP and FTC, began taking  actions to investigate the breach and inform the public."], "subsections": [{"section_title": "Major Federal Customers of Equifax Took Steps to Ensure Their Activities Were Not Adversely Affected by the Breach", "paragraphs": ["IRS, SSA, and USPS\u2014large agencies that were major customers of  Equifax at the time of the breach\u2014assessed the potential impact of the  breach to their own operations as well as to the operations of their  consumers. For example, these agencies assessed the technical impact  of the breach on their own systems that rely on Equifax services to  determine whether the breach could have compromised the integrity of  their identity proofing processes. While there was no breach of agency  systems or information, they also sought to determine which of their  customers were directly affected by the breach, recognizing that those  individuals could be at heightened risk of identity fraud. Information  security officials we spoke to at IRS, SSA, USPS, and DHS expressed  concern about how the breached data could be used to compromise  sensitive information or fraudulently procure government services, even  from agencies that are not direct customers of Equifax.", "Representatives of IRS, SSA, and USPS noted that they responded to  the breach independently of other agencies, because they said it was  unclear whether any single federal agency had responsibility for  coordinating government actions in response to a breach of this type in  the private sector. According to the three agencies, their actions included  the following:  Identified affected individuals. Due to concerns about the potential  for fraud using the stolen data, IRS and SSA both obtained from  Equifax a list of the individuals affected by the Equifax breach. The  agencies then used these lists to identify which of their own  customers were affected and to look for potential instances of identity  fraud affecting those customers.", "Performed independent assessments of Equifax security  controls. According to information security officials at IRS, SSA, and  USPS, the agencies independently conducted site visits at Equifax\u2019s  data center in Alpharetta, Georgia, where they reviewed the  company\u2019s security controls. According to SSA officials, their agency\u2019s  review assessed compliance with the baseline set of controls required  by the National Institute of Standards and Technology for systems  determined to pose a moderate level of risk. SSA officials stated that  they shared the results of their assessment with IRS, the Office of  Management and Budget, House Ways and Means Social Security  Subcommittee, and the Senate Committee on Finance. USPS officials  said they reviewed both physical security and cybersecurity controls  at Equifax\u2019s data centers in Alpharetta, Georgia and St. Louis,  Missouri locations. IRS officials said they also conducted a security  assessment at Equifax\u2019s Alpharetta data center, as well as a separate  review of physical security and cybersecurity controls at the  company\u2019s St. Louis, Missouri site. The officials of all three agencies  said that their reviews did not uncover any major new problems, but  did identify a number of lower-level technical concerns that they  required Equifax to address.", "Modified contracts with Equifax. IRS and SSA made changes to  contracts they had with Equifax to require prompt notification of any  future breach, among other things. According to officials from both  agencies, Equifax did not directly notify major federal customers of the  2017 breach prior to its public announcement because its contracts  with these agencies required notification only of breaches directly  involving the systems that provided services to the federal  government. SSA officials stated that it was important to update the  agency\u2019s contract to require Equifax to promptly notify SSA of any  data breach, regardless of which of the company\u2019s systems it may  affect. IRS officials stated that a similar change was made to their  contract with Equifax for credit reporting services. The contract  change also required the company to notify IRS within one hour after  a breach is discovered, rather than within the previous time frame of  24 hours. In addition, according to the officials, cybersecurity  language in the IRS\u2019s contract was modified to ensure better  implementation and oversight of technical security controls.", "Communicated with the public and affected individuals. IRS  made public announcements about the impact of the breach, noting  that the agency did not expect the breach to have any impact on  taxpayers\u2019 ability to securely file tax returns. SSA issued a public blog  post reminding consumers about steps they could take to protect their  Social Security numbers.", "Made changes to agency identity-proofing procedures. Following  its assessment, IRS updated its internal cybersecurity contractor  requirements and controls related to incident handling. Further, upon  completing its assessment, USPS initiated discussions with the  National Institute of Standards and Technology to determine risks  associated with the knowledge-based verification questions it had  been using with Equifax\u2019s identity-proofing service. USPS  subsequently changed its process, removing certain knowledge- based verification questions and adding a procedure whereby  customers receive a code in the mail that they can use to verify their  mailing addresses.", "Canceled a short-term contract with Equifax. Before the Equifax  breach, Equifax was the incumbent contractor at IRS for taxpayer  identity and verification services. In June 2017, prior to the discovery  of the breach, IRS began a new acquisition for these services by  issuing a request for quotations to three CRA vendors (including  Equifax and Experian) holding contracts under the federal supply  schedule. IRS selected Experian as offering the lowest-priced,  technically acceptable quotation, for issuance of a fixed-price task  order and establishment of a blanket purchase agreement. Equifax  filed a bid protest on July 5, 2017 with GAO challenging the IRS\u2019s  evaluation of Experian\u2019s quotation. As described elsewhere in this  report, Equifax discovered the breach on July 29 and, after  investigating it, announced the breach on September 7. On  September 29, during GAO\u2019s consideration of the protest, IRS  awarded Equifax a short-term, sole-source contract for $7.25 million  to cover its need for the identity and verification services during the  time frame needed to resolve the protest. IRS considered these  services \u201ccritical\u201d that \u201ccannot lapse.\u201d However, following the  completion of its breach-related security assessments, IRS issued  Equifax a stop-work order to suspend its performance under the short- term, sole-source order. GAO denied Equifax\u2019s protest on October 16,  2017 and IRS proceeded with the task order issued to Experian for  the taxpayer identity and verification services."], "subsections": []}, {"section_title": "DHS Offered Breach Response Services to Equifax", "paragraphs": ["In its role as the center for federal information security incident prevention  and response, DHS offers services to assist federal agencies in preparing  for potential cyber incidents, maintaining awareness of the current threat  environment, and dealing with ongoing breaches. Under a Presidential  directive, DHS is also responsible for assisting public- and private- sector critical infrastructure owners and operators in preparing for,  preventing, protecting against, mitigating, responding to, and recovering  from a cyber incident.", "In September 2017, shortly after the Equifax breach was publicly  announced, DHS contacted the company to offer its professional services  related to forensic analysis and breach response. However, according to  officials at both organizations, Equifax notified DHS officials that the  company had already retained professional services from a private  cybersecurity consultant and, thus, declined assistance from DHS."], "subsections": []}, {"section_title": "Oversight Agencies Opened Investigations and Provided Information and General Advice to Consumers", "paragraphs": ["According to Equifax officials, the company informed regulators about the  data breach on September 7, 2017\u2014when the general public was  notified. FTC announced that it was investigating the Equifax breach, and  Equifax stated in its annual report that several governmental agencies,  including FTC and BCFP, were continuing to investigate events related to  the breach.", "BCFP staff told us that, immediately following notification of the breach,  they participated in conference calls with Equifax to learn more about the  breach. According to the officials, their calls with Equifax focused on  ensuring consumers were provided with accurate information about the  breach and what they could do to protect themselves. Equifax officials  told us that they also informed FTC, the Securities and Exchange  Commission, various states\u2019 attorneys\u2019 general, and the Financial  Services Information Sharing and Analysis Center, that it had suffered a  breach.", "Shortly after Equifax\u2019s public announcement of the breach, BCFP  released a blog post on the top 10 ways that consumers could protect  themselves in the wake of the breach. Suggestions included regularly  reviewing credit reports, checking credit card statements, and changing  passwords for all financial accounts. In addition, BCFP posted on its  website actions consumers could take to protect themselves against fraud  or identity theft, including freezing credit and placing fraud alerts.", "BCFP staff told us that, while the agency posts information to its website,  it does not provide individual legal assistance to consumers.  Nevertheless, the staff said that consumers can file a complaint with  BCFP if they are experiencing issues related to a CRA. BCFP staff added  that they received a large volume of consumer complaints following the  Equifax breach. BCFP staff said they use such complaints as one factor  to prioritize future supervisory examinations, as well as investigations and  enforcement actions.", "In October 2017, BCFP also began conducting targeted data security and  cybersecurity examinations. Specifically, in addition to assessing whether  the CRAs\u2019 data security practices and policies constitute violations of  federal consumer financial law, BCFP began assessing risks to  consumers posed by potential cybersecurity lapses and to markets for  consumer financial products and services. BCFP staff said that whether  BCFP continues to conduct CRA cybersecurity examinations will depend  on whether they identify the issue as a priority through future examination  prioritization processes.", "Similarly, FTC released a statement to consumers with information about  the breach, such as when it occurred and the types of data  compromised. The statement also included guidance on steps  consumers could take to help protect their information from being  misused. For example, FTC encouraged individuals to visit Equifax\u2019s  website to find out whether their information may have been exposed,  provided links to obtain a free credit report, and offered other information  about credit freezes and fraud alerts.", "On June 25, 2018, eight state banking regulators issued a consent order  requiring Equifax to address various data security issues. The order  included several areas of concern, including general information security,  internal audits, and board and management oversight. More specifically,  the order required Equifax, the board, or its audit committee to, among  other things: provide a written risk assessment that identifies foreseeable threats  and vulnerabilities to the confidentiality of PII; establish a formal and documented internal audit program that is  capable of effectively evaluating information technology controls;  improve the oversight of its information security program;  improve oversight and documentation of its critical vendors;  improve standards and controls for supporting the patch management  function; and enhance oversight of IT operations as it relates to disaster recovery  and business continuity functions.", "Under the consent order, Equifax was required to submit a list of all  remediation projects planned, in process, or implemented to the state  regulatory agencies by July 31, 2018."], "subsections": []}]}, {"section_title": "Agency Comments and Third-Party Views", "paragraphs": ["We provided a draft of this report to BCFP, DHS, FTC, IRS, SSA, USPS,  and Equifax for comment. SSA and USPS provided written responses  expressing appreciation for the opportunity to review the draft report. The  SSA and USPS responses are reprinted in appendices II and III,  respectively. In addition, BCFP, DHS, FTC, IRS, SSA, USPS, and  Equifax provided technical comments orally and via email, which we have  incorporated, as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 29 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, Equifax, and to the Acting Director of the  Bureau of Consumer Financial Protection; the Chairman of the Federal  Trade Commission; the Secretary of the Department of Homeland  Security; the Commissioners of the Internal Revenue Service and Social  Security Administration; and the Postmaster General of the United States.  In addition, the report will be available at no charge on the GAO website  at http://www.gao.gov.We are sending copies of this report to 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  Nick Marinos at (202) 512-9342 or marinosn@gao.gov, or Michael  Clements at (202) 512-8678 or clementsm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) summarize the events regarding the 2017  Equifax breach and the steps taken by the company to assess, respond  to, and recover from the incident and (2) describe the actions that federal  customers and oversight agencies took in response to the breach.", "To address the first objective, we obtained and assessed documentation  generated in response to the breach. Specifically, we analyzed the results  of security assessments conducted by Equifax and its cybersecurity  consultant following the breach, which included information about how the  attacker gained access to Equifax\u2019s systems and the specific  vulnerabilities that were exploited. This documentation included the report  summarizing the results of the consultant\u2019s forensic analysis of Equifax  systems and the consultant\u2019s recommendations to Equifax to address the  factors that led to the breach. We also reviewed Equifax\u2019s relevant public  filings to the Securities and Exchange Commission and statements it  provided to the public and shareholders, which included information about  the data breach and the company\u2019s efforts for remediation.", "Further, we conducted a site visit to the Equifax data center in Alpharetta,  Georgia, to interview knowledgeable officials, such as the interim Chief  Security Officer and other officials knowledgeable about how Equifax  stores and processes data, and observed physical security measures. In  addition, to clarify details of the breach and the steps that Equifax took,  we interviewed officials at Equifax who were responsible for coordinating  reviews conducted following the breach. Specifically, we interviewed the  interim Chief Security Officer and government relations employees, who  were responsible for coordinating Equifax\u2019s interaction with federal  agencies in response to the incident.", "We did not independently assess Equifax\u2019s information security controls  or the steps the company took to address identified factors that  contributed to the ineffective implementation of those controls.  Specifically, the scope of our report was to report on actions taken by  Equifax and agencies in response to the breach. Consequently, the  information in this report is based on public filings and announcements as  well as information provided to us by the company. We did not reach  conclusions regarding the adequacy or efficacy of Equifax\u2019s security  measures.", "To address the second objective, we selected three major federal  agencies, Internal Revenue Service (IRS), Social Security Administration  (SSA), and United States Postal Service (USPS), which were Equifax\u2019s  largest federal customers at the time of the breach. We initially identified  these customer agencies by reviewing public reports following the breach  that identified federal agencies that were major Equifax customers at the  time. We also interviewed Equifax officials responsible for managing  government accounts to confirm that these three agencies were the only  large-scale federal customer agencies that interacted with Equifax  following the breach. Other federal agencies also have contracts with  Equifax for a variety of services; we did not conduct audit work for this  engagement at any other agencies because we narrowed our selection  criteria to the largest federal agencies that used Equifax\u2019s services to  conduct their identity-proofing processes.", "Subsequently, we analyzed documentation from IRS, SSA, and USPS to  describe the relevant actions these agencies took in response to the  breach, as well as documentation regarding oversight by BCFP and FTC,  which are the federal agencies with primary oversight responsibilities over  CRAs. Specifically, we reviewed relevant laws and BCFP guidance on  data security examinations. In addition, we spoke with BCFP and FTC  officials about their actions in response to the data breach and reviewed  their websites for information provided to consumers.", "We also selected and reviewed contracts between Equifax and each of  the three selected agencies\u2014IRS, SSA, and USPS\u2014to determine what  changes were made to services, such as identity-proofing solutions,  provided by Equifax to federal agencies as a result of the breach. The  contracts we reviewed were the ones identified by IRS, SSA, and USPS  as contracts with Equifax for credit reporting or identity-proofing services.", "Further, we conducted interviews with agency officials at BCFP, FTC,  DHS, IRS, SSA, and USPS to determine what actions customer and  oversight agencies took in response to the breach. The officials we  interviewed were responsible for conducting their agencies\u2019 security  assessment of Equifax at the time of the data breach. These included  officials at each agency that had a role in responding to the Equifax  breach, such as investigators at the oversight agencies and information  security officials at the federal customer agencies.", "To address both objectives, and to identify how federal requirements  apply to credit reporting agencies, we analyzed relevant federal laws to  determine the responsibilities of agencies and their contractors.  Specifically, we reviewed the following laws:", "Dodd-Frank Wall Street Reform and Consumer Protection Act;", "Fair Credit Reporting Act;", "Privacy Act of 1974; and", "E-Government Act of 2002.", "We conducted this performance audit from November 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the United States Postal Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individuals named above, John de Ferrari and John  Forrester (assistant directors); Tina Torabi (analyst-in-charge); Bethany  Benitez, Chris Businsky, Kavita Daitnarayan, Nancy Glover, Andrea  Harvey, Thomas Johnson, David Plocher, Tovah Rom, Rachel Siegel,  and Winnie Tsen made key contributions to this report."], "subsections": []}]}], "fastfact": ["Hackers stole the personal data of nearly 150 million people from Equifax databases in 2017.", "How did Equifax, a consumer reporting agency, respond to that event? Equifax said that it investigated factors that led to the breach and tried to identify and notify people whose personal information was compromised.", "In addition, three federal agencies that use Equifax services made their own security assessments and modified contracts with Equifax. Moreover, other federal agencies that oversee consumer reporting agencies started investigating Equifax and gave further advice to consumers on how to protect themselves against security breaches."]}
{"id": "GAO-19-147T", "url": "https://www.gao.gov/products/GAO-19-147T", "title": "Coast Guard Acquisitions: Lessons Learned to Inform Coast Guard and NOAA Shipbuilding Efforts", "published_date": "2018-10-11T00:00:00", "released_date": "2018-10-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Both the Coast Guard\u2014a component of the Department of Homeland Security (DHS)\u2014and the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) are investing significant resources to recapitalize their aging fleets of ships. Ensuring that the Coast Guard and NOAA maintain their ships and address potential capability gaps is vital for protecting national security and scientific interests.", "This statement summarizes lessons that GAO has identified from its prior reviews of Coast Guard and Navy acquisitions, which can be applied to the Coast Guard's and NOAA's shipbuilding efforts. Specifically, this testimony provides information on, among other things, (1) long-term strategic planning for acquisitions, (2) the need for a sound business case, and (3) the leveraging of the Navy's acquisition resources and shipbuilding expertise. In its prior work, GAO reviewed Coast Guard and Navy programs and interviewed officials. For this testimony, GAO obtained publicly available information on NOAA's ship acquisition efforts."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO has found that acquisition programs can benefit from long-term strategic planning that identifies how tradeoff decisions would affect the future of the acquisition portfolio. In July 2018, GAO found the Coast Guard continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan. As a result of this planning process, the Coast Guard has continued to defer planned acquisitions to future years and left a number of operational capability gaps unaddressed. Incorporating the use of a long-term strategic plan and additional tradeoff discussion into the Capital Investment Plan could lead to more informed choices before irreversible commitments are made.", "GAO's prior work has also found that acquisition programs should start with solid business cases before setting program baselines and committing resources. At the heart of a business case is a knowledge-based approach\u2014successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made (see figure).", "In September 2018, GAO found the Coast Guard did not have this type of sound business case when it established the program baselines for its polar icebreaker program in March 2018 due to risks in technology, design, cost, and schedule. For example, the Coast Guard's planned delivery dates were not informed by a realistic assessment of shipbuilding activities, but rather were primarily driven by the potential gap in icebreaking capabilities once the Coast Guard's only operating heavy polar icebreaker reaches the end of its service life.", "Agencies have partnered with the Navy to take advantage of its resources and shipbuilding expertise, including the Coast Guard when acquiring the polar icebreakers. For example, in September 2018, GAO found that the Coast Guard and the Navy had established an integrated program office and a ship design team. These teams provided input to Navy cost estimators, who developed the polar icebreaker program's cost estimate."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has previously recommended that the Coast Guard develop a 20-year fleet modernization plan, reflect acquisition trade-off decisions in its annual Capital Investment Plans, and address risks to establish a sound business case for its polar icebreakers acquisition. DHS concurred with these recommendations and is taking steps to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss key lessons and insights we  have identified from our prior work in Coast Guard and Navy acquisitions  that may be useful in informing the Coast Guard\u2019s and the National  Oceanic and Atmospheric Administration\u2019s (NOAA) current efforts to  recapitalize their aging fleets of ships. The Coast Guard\u2019s multi-billion  dollar ship acquisition portfolio includes the National Security Cutters,  Offshore Patrol Cutters, Fast Response Cutters, and heavy polar  icebreakers, which collectively perform critical missions such as search  and rescue, law enforcement, and icebreaking. NOAA\u2019s research and  survey ships comprise the largest fleet of federal research ships in the  United States. Ensuring that the Coast Guard and NOAA maintain their  ship fleets and address potential capability gaps is vital for protecting  national security and scientific interests.", "My statement today provides information on: (1) long-term strategic  planning for acquisitions (2) the need for a sound business case when  acquiring new ships (3) leveraging of the Navy\u2019s acquisition expertise and  resources and (4) considerations when selecting contracting  mechanisms. This statement is based on our extensive body of work  examining the Coast Guard\u2019s and Navy\u2019s acquisition efforts, including our  September 2018 report on the Coast Guard\u2019s polar icebreaker acquisition  and July 2018 report on Coast Guard recapitalization. For the reports  cited in this statement, among other methodologies, we analyzed Coast  Guard and Navy guidance, data, and documentation, and interviewed  Coast Guard and Navy officials. Detailed information on our scope and  methodology can be found in the reports cited in this statement. In  addition to our prior work, for this statement we obtained publicly  available information from NOAA regarding its ship acquisition and  recapitalization efforts; we did not assess its efforts.", "We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe the evidence obtained provides  a reasonable basis for our findings and conclusions based on our audit  objectives."], "subsections": [{"section_title": "Long-Term Strategic Planning in Acquisitions Enables Better Tradeoff Decisions", "paragraphs": ["Key elements of strategic planning include establishing long-term goals  and strategies for how those goals are to be achieved. Specifically for  managing Coast Guard acquisitions, we have noted that a long-term plan  that includes acquisition implications would enable tradeoffs to be  addressed in advance, which leads to better informed choices and makes  debate possible before irreversible commitments are made to individual  programs. Without this type of plan, decision makers do not have the  information they need to better understand and address an agency\u2019s  long-term outlook. Similarly, according to the Office of Management and  Budget\u2019s capital planning guidance referenced by the Coast Guard\u2019s  Major Systems Acquisition Manual, each agency is encouraged to have a  plan that justifies its long-term capital asset decisions. This plan should  include, among other things, (1) an analysis of the portfolio of assets  already owned by the agency and in procurement, (2) the performance  gap and capability necessary to bridge the old and new assets, and (3)  justification for new acquisitions proposed for funding.", "In June 2014, we found that the Coast Guard\u2014a component within the  Department of Homeland Security (DHS)\u2014did not have a long-term fleet  modernization plan that identified all acquisitions needed to meet mission  needs over the next two decades within available resources. Without  such a plan, the Coast Guard repeatedly delayed and reduced its  capabilities through its annual budget process and did not know the  extent to which it could meet mission needs and achieve desired results.  We recommended that the Coast Guard develop a 20-year fleet  modernization plan that identifies all acquisitions needed to maintain the  current level of service and the fiscal resources necessary to build the  identified assets. DHS agreed with our recommendation but it has not yet  approved a 20-year plan.", "Further, in July 2018, we found the Coast Guard continues to manage its  acquisitions through its annual budget process and the 5-year Capital  Investment Plan, which is congressionally mandated and submitted to  Congress annually. Coast Guard officials told us the Capital Investment  Plan reflects the highest priorities of the department and that trade-off  decisions are made as part of the annual budget process. However, the  effects of these trade-off decisions, such as which acquisitions would take  on more risk so others can be prioritized and adequately funded, are not  communicated in the Capital Investment Plan to key decision makers.  Over the years, this approach has left the Coast Guard with a bow wave  of near-term unfunded acquisitions, negatively affecting recapitalization  efforts, and limiting the effectiveness of long-term planning. As a result of  this planning process, the Coast Guard has continued to defer planned  acquisitions to future years and left a number of operational capability  gaps unaddressed that could affect future operations. We recommended  that the annual Capital Investment Plans reflect acquisition trade-off  decisions and their effects. DHS concurred with this recommendation and  plans to include additional information in future Capital Investment Plans  to address how trade-off decisions could affect other major acquisition  programs. According to Coast Guard officials, the Coast Guard plans to  implement this recommendation by March 2020.", "Examples of other fleet modernization plans include the Navy\u2019s annual  naval vessel construction plan (also known as the Navy\u2019s long range  shipbuilding plan), which reflects the quantity and categories of assets  that the Navy needs to buy as well as the total number of assets in  operation for each year. While we found in March 2006 that the Navy faced challenges associated with its long range shipbuilding plan, we also  observed that such a plan is beneficial in that it lays out a strategic  approach for decision making. In October 2016, NOAA\u2014which is within  the Department of Commerce\u2014approved a fleet plan that is intended to  identify an integrated strategy for long-term recapitalization, including  acquisition of up to eight new ships. In March 2017, NOAA indicated that  long-term recapitalization of the NOAA fleet requires an annual, stable  funding profile on the order of its fiscal year 2016 appropriations\u2014about  $80 million. NOAA noted that it will continue to proceed on schedule, as  laid out in its fleet plan, or make adjustments based on available funding."], "subsections": []}, {"section_title": "Successful Acquisition Programs Begin with Sound Business Cases", "paragraphs": ["Our prior work has repeatedly found that successful acquisition programs  start with solid, executable business cases before setting program  baselines and committing resources. A sound business case requires  balance between the concept selected to satisfy operator requirements  and the resources\u2014design knowledge, technologies, funding, and time\u2014 needed to transform the concept into a product, such as a ship. At the  heart of a business case is a knowledge-based approach\u2014we have  found that successful shipbuilding programs build on attaining critical  levels of knowledge at key points in the shipbuilding process before  significant investments are made (see figure 1).", "We have previously found that key enablers of a good business case  include firm, feasible requirements; plans for a stable design; mature  technologies; reliable cost estimates; and realistic schedule targets.  Without a sound business case, acquisition programs are at risk of  experiencing cost growth, schedule delays, and reduced capabilities.", "In September 2018, we found the Coast Guard did not have this type of  sound business case when it established the cost, schedule, and  performance baselines for its polar icebreaker program in March 2018.  This was primarily due to risks in four key areas:", "Technology. The Coast Guard intends to use proven technologies for  the program, but did not conduct a technology readiness assessment  to determine the maturity of key technologies\u2014which include the  integrated power plant and azimuthing propulsors\u2014 prior to setting  baselines. As a result, the Coast Guard does not have full insight  into whether these technologies, which we believe are critical  technologies and merit such an assessment, are mature. Without a  technology readiness assessment, the Coast Guard is potentially  underrepresenting technical risk and increasing design risk.", "Cost. The cost estimate that informed the program\u2019s $9.8 billion cost  baseline\u2014which includes lifecycle costs for the acquisition,  operations, and maintenance of three polar icebreakers\u2014substantially  met our best practices for being comprehensive, well-documented,  and accurate, but only partially met best practices for being credible.  The cost estimate did not quantify the range of possible costs over the  entire life of the program, such as the period of operations and  support. As a result, the cost estimate was not fully reliable and may  underestimate the total funding needed for the program.", "Schedule. The Coast Guard\u2019s planned delivery dates of 2023, 2025,  and 2026 for the three ships were not informed by a realistic  assessment of shipbuilding activities, but rather were primarily driven  by the potential gap in icebreaking capabilities once the Coast  Guard\u2019s only operating heavy polar icebreaker\u2014the Polar Star\u2014 reaches the end of its service life (see figure 2).", "The Polar Star\u2019s service life is estimated to end between fiscal years 2020  and 2023. This creates a potential heavy polar icebreaker capability gap  of about 3 years, if the Polar Star\u2019s service life were to end in 2020 and  the lead polar icebreaker were to be delivered by the end of fiscal year  2023 as planned. If the lead ship is delivered later than planned in this  scenario, the potential gap could be more than 3 years. The Coast Guard  is planning to recapitalize the Polar Star\u2019s key systems starting in 2020 to  extend the service life of the ship until the planned delivery of the second  polar icebreaker (see figure 3).", "Further, our analysis of selected lead ships for other shipbuilding  programs found the icebreaker program\u2019s estimated construction time  of 3 years is optimistic. An unrealistic schedule puts the Coast Guard  is at risk of not delivering the icebreakers when promised and the  potential gap in icebreaking capabilities could widen.", "Design. The Coast Guard set program baselines before conducting a  preliminary design review\u2014a systems engineering event that is  intended to verify that the contractor\u2019s design meets the requirement  of the ship specifications and is producible\u2014which puts the program  at risk of having an unstable design, thereby increasing the program\u2019s  cost and schedule risks. Although the Coast Guard set the program  baselines prior to gaining knowledge on the feasibility of the selected  shipbuilder\u2019s design, it has expressed a commitment to having a  stable design prior to the start of lead ship construction. This is  consistent with shipbuilding best practices we identified in 2009.", "To address these four areas and other risks, we made six  recommendations to DHS, Coast Guard, and the Navy in our September  2018 report. DHS concurred with all six recommendations and identified  actions it planned to take to address them.", "In its October 2016 fleet plan, NOAA indicated the need to construct up to  eight new ships by 2028 to maintain its capabilities for at-sea  requirements. Ensuring a sound business case for each acquisition will  be important as NOAA moves forward."], "subsections": []}, {"section_title": "Leveraging Navy\u2019s Shipbuilding Experience May Create Efficiencies", "paragraphs": ["Given the Navy\u2019s experience in shipbuilding, agencies have partnered  with the Navy to take advantage of its expertise. For example, in April and  September 2018, we found examples of how the Coast Guard had  leveraged the Navy\u2019s resources and acquisition approaches when  acquiring the polar icebreakers, including:", "Establishing an integrated program office and potentially using  funding from both organizations. In 2016, in response to a  congressional report, the Navy and the Coast Guard established an  integrated program office to acquire the icebreakers for Coast Guard  operations. This relationship was officially memorialized through three  memorandums in 2017.", "Given potential plans to fund the polar icebreaker program with both  Navy and Coast Guard appropriations, the Navy and the Coast Guard  had a memorandum of agreement with a budgeting and financial  management appendix. In September 2018, however, we found that  the Coast Guard and the Navy interpreted the meaning of \u201ccost  overruns\u201d differently in the context of their agreement. We also  found that the agreement itself did not address how the Coast Guard  and the Navy plan to handle any cost growth stemming from changes  to the scope, terms, and conditions of the detail design and  construction contract. We recommended that the Coast Guard, in  collaboration with the Navy, revise the agreement to clarify and  document how cost growth in the polar icebreaker program, including  changes in scope, will be addressed between the two organizations.  The Coast Guard concurred with this recommendation and plans to  update the agreement by March 2019.", "Establishing an integrated ship design team. The ship design team  includes Coast Guard and Navy technical experts who develop ship  specifications based on the polar icebreaker program\u2019s operational  requirements document. The ship design team is under the  supervision of a Coast Guard ship design manager, who provides all  technical oversight for development of the polar icebreaker\u2019s design.", "Leveraging Navy cost estimating and contracting functions. With  input from the integrated program office and ship design team, Navy  cost estimators developed the polar icebreaker program\u2019s cost  estimate, which informed the program\u2019s cost baselines and  affordability constraints. In addition, the Navy plans to award the polar  icebreaker\u2019s detail design and construction contract under the Navy\u2019s  contracting authority and use a tailored DHS acquisition process.", "Supplementing the DHS acquisition process with the Navy\u2019s gate  review process. Coast Guard and Navy agreed to manage the polar  icebreaker program using a tailored acquisition approach that  supplements DHS acquisition decision event reviews with additional  \u201cgate\u201d reviews that were adopted from Navy\u2019s acquisition processes.  The gate reviews allow both Coast Guard and Navy leadership to  review and approve key documents before proceeding to the  acquisition decision events. Each acquisition decision event is also  overseen by acquisition oversight board with members from both the  Coast Guard and the Navy (see figure 4).", "By collaborating with the Navy, the Coast Guard is leveraging the Navy\u2019s  experience in ship design, cost estimating, contracting, and other  shipbuilding processes. This partnership may allow the Coast Guard to  more efficiently manage the polar icebreaker program.", "In March 2017, NOAA indicated that it had partnered with the Navy  through an interagency agreement to leverage the Navy\u2019s acquisition  expertise for Auxiliary General Purpose Oceanographic Research  Vessels, which will be the basis for a new class of NOAA ships. In April  2018, the Navy released the request for proposal for the preliminary  contract design of this new class of ships."], "subsections": []}, {"section_title": "Estimated Savings and Requirements Stability Should be Considered When Selecting Contracting Mechanisms", "paragraphs": ["When acquiring multiple quantities of a product, agencies generally have  several options for contracting mechanisms. Annual contracting, which  can be considered the typical method, refers to awarding a contract for  one year\u2019s worth of requirements. Annual contracting allows for the use of  options for subsequent requirements. Options give the agency the  unilateral right to purchase additional supplies or services called for by  the contract, or to extend the term of the contract. Besides annual  contracting with options, agencies may also be able to choose among  other contracting mechanisms\u2014multiyear contracting and \u201cblock buy\u201d  contracting, which are discussed in more detail below."], "subsections": [{"section_title": "Multiyear Contracting Requirements and Considerations", "paragraphs": ["Multiyear contracting allows agencies to acquire known requirements for  up to 5 years under a single contract award, even though the total funds  ultimately to be obligated may not be available at the time of contract  award. Before DOD and Coast Guard can enter into a multiyear contract,  certain criteria must be met. Table 1 provides some of the multiyear  contracting requirements for DOD and the Coast Guard.", "Multiyear contracts are expected to achieve lower unit costs compared to  annual contracts through one or more of the following sources: (1)  purchase of parts and materials in economic order quantities, (2)  improved production processes and efficiencies, (3) better utilized  industrial facilities, (4) limited engineering changes due to design stability  during the multiyear period, and (5) cost avoidance by reducing the  burden of placing and administering annual contracts. Multiyear  procurement also offers opportunities to enhance the industrial base by  providing contractors a longer and more stable time horizon for planning  and investing in production and by attracting subcontractors, vendors,  and suppliers. However, multiyear procurement entails certain risks that  must be balanced against the potential benefits, such as the increased  costs to the government should the multiyear contract be changed or  canceled and decreased annual budget flexibility for the program and  across an agency\u2019s portfolio of acquisitions.", "In February 2008, we found that it is difficult to precisely determine the  impact of multiyear contracting on procurement costs. For example, for  three multiyear procurements (Air Force\u2019s C-17A Globemaster transport,  the Navy\u2019s F/A-18E/F Super Hornet fighter, and the Army\u2019s Apache  Longbow helicopter), we identified unit cost growth ranging from 10 to 30  percent compared to original estimates, due to changes in labor and  material costs, requirements and funding, and other factors. In some  cases, actual costs for the multiyear procurement were higher than  original estimates for annual contracts. We noted that we could not  determine how cost growth affected the level of savings achieved, if any,  because we did not know how an alternative series of annual contracts  would have fared. Although programs using annual contracts also have  unit cost growth, it is arguably more problematic when using multiyear  contracting because of the up-front investments and the government\u2019s  exposure to risk over multiple years."], "subsections": []}, {"section_title": "Block Buy Contracting Considerations", "paragraphs": ["Block buy contracting generally refers to special legislative authority that  agencies seek on an acquisition-by-acquisition basis to purchase more  than one year\u2019s worth of requirements, such as purchasing supplies in  economic order quantities. Unlike multiyear contracting, block buy  contracting does not have permanent statutory criteria and, therefore, can  be used in different ways.", "We have previously analyzed several cases where block buy contracts  were considered or used and have not found evidence of savings. For  example:  In September 2018, we found that for the polar icebreaker program,  the Navy gave offerors an opportunity to provide the estimated  savings that the government could achieve if it were to take a \u201cblock  buy\u201d approach in purchasing the ships or purchasing supplies in  economic order quantities. The Navy told us that they did not  receive any formal responses from industry on potential savings from  block buys or economic order quantities.", "In April 2017, we found that the Navy\u2019s Littoral Combat Ship contracts\u2019  block buy approach could affect Congress\u2019s funding flexibility.  Specifically, the block buy contracts provided that a failure to fully fund  a purchase in a given year would make the contract subject to  renegotiation, which provides a disincentive to the Navy or Congress  to take any action that might disrupt the program because of the  potential for the government to have to pay more for ships.", "In February 2005, we found that the Navy believed that a block-buy  contract contributed to increased material costs for the Virginia class  submarine. Under this block-buy contract, subcontracts for  submarine materials were for single ships spread over several years.  According to the Navy, this type of acquisition approach did not take  advantage of bulk-buy savings and incurred the risk that funding will  not be available in time to order the material when needed.", "Based on our prior work, it is important for agencies to consider multiple  factors such as estimated savings, the stability of the requirements,  quantities required, and potential contract terms and conditions before  committing to a contracting mechanism approach.", "In conclusion, as the Coast Guard and NOAA continue investing taxpayer  dollars to modernize their fleets, they could benefit from the lessons  learned from prior recapitalization and acquisition efforts. It is important  for agencies to develop strategic and comprehensive approaches for  managing their respective portfolios so that future requirements and  capability gaps can be addressed in a timely manner. For each  acquisition within their portfolios, agencies should ensure that they have  established a sound business case before committing significant  resources. Additionally, leveraging the Navy\u2019s resources and expertise in  shipbuilding, such as by establishing integrated teams, could be  beneficial by helping agencies be more efficient. Finally, when it comes to  contracting mechanisms, factors such as estimated savings and program  risks should be assessed before committing to a particular approach.", "Chairman Sullivan, Ranking Member Baldwin, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition,  contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Individuals who  made key contributions to this testimony include Rick Cederholm,  Assistant Director; Peter Anderson; Laurier Fish; Kurt Gurka; Claire Li;  and Roxanna Sun.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The Coast Guard and National Oceanic and Atmospheric Administration (NOAA) collectively spend billions of dollars to replace aging ships that conduct search and rescue, icebreaking, and research missions.", "We testified on how lessons learned from our extensive work on ship acquisitions could be used to inform how the Coast Guard and NOAA buy ships. These include:", "developing a long-term strategic plan", "establishing a sound business case before committing resources", "partnering with the Navy to use some of its shipbuilding resources and experience", "estimating the costs and risks of different contracting approaches before committing to one"]}
{"id": "GAO-18-208", "url": "https://www.gao.gov/products/GAO-18-208", "title": "VA Health IT Modernization: Historical Perspective on Prior Contracts and Update on Plans for New Initiative", "published_date": "2018-01-18T00:00:00", "released_date": "2018-01-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA operates the largest health care delivery system in America and VistA is essential to helping deliver the health care services and ensure the quality of health care received by the nation's veterans and their dependents. The system has been in operation for more than 30 years, is costly to maintain, and does not readily support VA's need to electronically exchange health records with the Department of Defense and private health care providers. VA has pursued initiatives to modernize VistA, using government contractors to support its efforts. In June 2017, VA announced a new effort to purchase a commercial solution to replace VistA.", "GAO was requested to review VA's prior and current efforts to modernize VistA. This review determined (1) VA's efforts to modernize VistA, including key contractors, contract costs, and expected contractor activities and (2) VA's current plans for modernizing VistA and the progress that has been achieved to date. To conduct its study, GAO reviewed VA documentation and its prior work and requested and obtained data on contracts, related obligations, and expected contractor activities for previous efforts. GAO also obtained documentation on plans for VA's current modernization efforts and progress made on the efforts, and interviewed VA officials.", "GAO has made recommendations to VA aimed at improving its prior modernization efforts. The department concurred with the recommendations and generally took responsive actions. GAO is making no recommendations at this time. VA provided technical comments on this report, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) has, since 2001, pursued four separate initiatives to modernize its health information system\u2014the Veterans Health Information Systems and Technology Architecture (VistA). These efforts\u2014HealtheVet, the integrated Electronic Health Record (iEHR), VistA Evolution, and the Electronic Health Record Modernization (EHRM)\u2014reflect varying approaches that the department has considered to achieve a modernized health system over the course of nearly two decades (see figure). This latest effort, the EHRM program, is to include the adoption of the same commercial electronic health record system that the Department of Defense is in the process of acquiring.", "VA obligated about $1.1 billion to 138 different contractors that worked on iEHR and VistA Evolution (the two efforts for which VA could provide contract data) during fiscal years 2011 through 2016. Funding for the 34 contractors that worked on both efforts totaled about $793 million of the $1.1 billion obligated for contracts on the two initiatives. The top 15 of the contractors that worked on the two efforts (key contractors) accounted for approximately $741 million\u2014$411 million for the development of new system capabilities, $256 million for project management activities, and $74 million for operations and maintenance for iEHR and VistA Evolution.", "VA has begun planning for the transition from VistA Evolution to EHRM. However, the department is still early in its efforts and has begun developing plans that are intended to guide the new EHRM program. According to the EHRM Executive Director, the department intends to complete development of its plans for EHRM within 90 days after awarding the contract for its new system, which is planned to occur in early 2018. VA has also begun to staff the EHRM program's leadership positions. The department's dedication to completing and effectively executing the planning activities that it has identified will be essential to helping minimize program risks and expeditiously guide this latest electronic health record modernization initiative to a successful outcome\u2014which VA, for almost two decades, has been unable to achieve."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) operates the largest health care  delivery system in the United States, providing health care to almost 7  million veterans and their families at more than 1,500 medical facilities.  The department\u2019s health information system\u2014the Veterans Health  Information Systems and Technology Architecture (VistA)\u2014is essential to  VA\u2019s ability to deliver health care. However, this system has been in  operation for more than 30 years, is costly to maintain, and does not  readily support VA\u2019s need to electronically exchange health records with  other organizations, such as the Department of Defense (DOD) and  private health care providers. Accordingly, the department has  undertaken various efforts to modernize the system, using government  contractors to do so.", "In 2008, and again in 2014, we reported on significant challenges in VA\u2019s  efforts to modernize VistA. Given these longstanding challenges, you  asked us to provide information on the department\u2019s VistA modernization  efforts. Our specific objectives were to (1) identify the efforts that VA has  undertaken to modernize VistA, including key contractors, contract costs,  and expected contractor activities and (2) determine the department\u2019s  current plans for, and progress to date, in modernizing VistA.", "To address our first objective, we reviewed VA documentation, including  the department\u2019s budget submissions and other information compiled  during prior GAO work that examined the department\u2019s initiatives to  modernize VistA. We also obtained documentation from the Veterans  Health Administration (VHA), the major component within the department  tasked with delivering health care services, and VA\u2019s Office of Information  and Technology (OI&T), which oversees the department\u2019s information  technology (IT) acquisitions and operations. This documentation  described contracts, related obligations, and expected contractor  activities for the department\u2019s VistA modernization efforts, from fiscal  years 2011 through 2016\u2014the time period for which data were available.", "In compiling contract data, we included data on awards of new contracts;  modifications to previously awarded contracts; and the issuance of task  orders on indefinite delivery, indefinite quantity contracts. VA was unable  to provide data on VistA modernization contracts prior to fiscal year 2011  because the department\u2019s records retention policy does not require it to  maintain such data. In addition, we did not request contract data  subsequent to fiscal year 2016 because that is the last fiscal year for  which data for a full year was available at the time that we were  performing our analysis. We analyzed the available data to determine the  number of contractors working on the modernization efforts and the  amounts of funding that were obligated to the contracts.", "To determine the key contractors, we first identified all of the contractors  that worked on both modernization efforts for which we received data. We  then ranked the identified contractors according to the total reported  dollars obligated for contracts that each contractor had been awarded.  We designated the top 15 ranked contractors, in terms of dollars  obligated, as key contractors. These 15 key contractors received  contracts that accounted for about two-thirds of the funds obligated to  VistA modernization contracts from fiscal years 2011 through 2016. We  subsequently analyzed the information that VA provided on the work  tasks to be performed by these key contractors to identify obligations  made for contracts to provide different types of work, including  development, project management, and operations and maintenance.", "We assessed the reliability of the contract data we received by reviewing  it for missing elements and outliers. We met with officials responsible for  VistA-related contracting to address questions about any missing data  and outliers, as well as to obtain additional information about how the  data were developed. We supplemented the data by using additional  information received from VA and the Federal Procurement Data  System. We determined that the data were sufficiently reliable for the  purposes of our reporting objective.", "To determine current plans for modernizing VistA, we reviewed available  documentation, which included draft program schedules, organization  charts, congressional testimonies of the VA Secretary, a White House  press conference transcript, departmental press releases, and the  department\u2019s justification for awarding a non-competitive contract for a  commercial off-the-shelf (COTS) electronic health record system. To  determine the progress achieved on the current efforts, we obtained and  reviewed documentation, such as draft schedules and organization  charts, and met with senior VA officials to obtain updated information on  the efforts. A full description of our objectives, scope, and methodology  can be found in appendix I.", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VA is responsible for providing a variety of services to veterans and their  families (i.e., spouses and children), including health care, disability  compensation, and vocational rehabilitation. Within the department, VHA  oversees the delivery of health care services, including primary care,  specialized care, and related medical and social support at its more than  1500 medical facilities located throughout the country. As of fiscal year  2016, about 9 million veterans were enrolled in the VA health care  system, with almost 7 million patients receiving services at its medical  facilities each year."], "subsections": [{"section_title": "Overview of VistA", "paragraphs": ["VHA relies on VistA\u2014its health information system\u2014to assist in the daily  operations of providing health care to patients. VistA began operation in  1983 as the Decentralized Hospital Computer Program. In 1996, the  department changed the name of the system to the Veterans Health  Information Systems and Technology Architecture\u2014VistA.", "The system is comprised of more than 200 different software applications,  including 17 pharmacy applications; 11 laboratory applications; 10  eligibility, enrollment, and registration applications; and 12 financial  management applications. Most VistA applications are based on an  architecture that links servers and personal computer workstations at VA  facilities. VistA also has interfaces with applications within other VA  systems, as well as selected systems of other federal agencies (e.g.,  DOD health information systems used to treat injured service members)  and private care providers and pharmacies.", "VistA was developed based on the collaboration of staff in the VA medical  facilities and VHA IT personnel, with the intention of providing a system  that would meet the clinicians\u2019 needs. Specifically, clinicians and IT  personnel in the various medical facilities collaborated to define the  system\u2019s requirements and, in certain cases, carried out its development  and implementation. In this regard, staff at a medical center could  develop and implement applications at the local level to facilitate the  potentially different functions at each location. This approach has resulted  in about 130 different instances, or variations, of the system being used  throughout the department\u2019s medical facilities.", "VA has made numerous enhancements to the functionality of VistA since  1983. A significant example is the release in 1996 of the Computerized  Patient Record System (CPRS), a graphical user interface that enabled  the department to provide an individual electronic health record for each  VA patient. Specifically, CPRS enables clinicians to enter, review, and  continuously update information connected with a patient. Among other  things, clinicians can order lab tests, medications, diets, radiology tests,  and procedures; record a patient\u2019s allergies or adverse reactions to  medications; request and track consults; enter progress notes, diagnoses,  and treatments for each encounter; and enter discharge summaries.", "Another example of the enhancements made to VistA was the  department\u2019s implementation of an imaging capability (VistA Imaging) at  all of the medical facilities. This capability enabled multimedia data, such  as radiology images, to be linked to a patient\u2019s electronic medical record.", "VistA contains a comprehensive, integrated, electronic health record for  each patient that is viewable by all of the department\u2019s clinicians at all of  its medical facilities, thus eliminating the need for paper medical records.  This capability has been key to the department\u2019s efforts over the last 20  years to share electronic medical records with DOD, and with its work to  achieve interoperability, which enables different information systems or  components to exchange information and to use the information that has  been exchanged.", "Nevertheless, even with the enhancements and modifications made to  VistA over time, the system is more than 30 years old and has become  increasingly difficult and costly to maintain. One reason VistA is difficult  and costly to maintain is that the system is programmed in the MUMPS  programming language, a language for which there is a continually  dwindling supply of qualified software developers, according to the  department.", "In 2015, an independent assessment of health IT at VA, conducted by the  MITRE Corporation, raised questions regarding the lack of any clear  advances made during the past decade with VistA and the increasing  amount of time needed for VA to release new capabilities. The study  also noted that the standards and terminology used by VistA do not  enable interoperability across the multiple systems within VA, or between  the department and non-VA facilities, including private sector providers  and DOD. Given the concerns identified, the study recommended that VA  assess the cost versus benefits of various alternatives for delivering  modernized capabilities, such as COTS electronic health record systems,  open source systems, and the continued development of VistA."], "subsections": []}]}, {"section_title": "VA Has Pursued Four VistA Modernization Initiatives Since 2001, with Over a Billion Dollars Obligated for Contractors\u2019 Activities During Fiscal Years 2011 through 2016", "paragraphs": ["Since 2001, VA has pursued four efforts to modernize VistA. These  efforts\u2014HealtheVet, the integrated Electronic Health Record (iEHR),  VistA Evolution, and the Electronic Health Record Modernization  (EHRM)\u2014reflect varying approaches that the department has considered  to achieve a modernized health care system over the course of nearly two  decades. The modernization efforts are described as follows.", "In 2001, VA undertook its first VistA modernization project, the  HealtheVet initiative, with the goals of standardizing the department\u2019s  health care system and eliminating the approximately 130 different  systems used by its field locations at that time. HealtheVet was scheduled  to be fully implemented by 2018 at a total estimated development and  deployment cost of about $11 billion. As part of the effort, the department  had planned to develop or enhance specific areas of system functionality  through six projects, which were to be completed between 2006 and  2012. Specifically, these projects were to provide capabilities to support  VA\u2019s Health Data Repository and Patient Financial Services System, as  well as the Laboratory, Pharmacy, Imaging, and Scheduling functions.", "In June 2008, we reported that the department had made progress on the  HealtheVet initiative, but noted issues with project planning and  governance. In June 2009, the Secretary of Veterans Affairs announced  that VA would stop financing failed projects and improve the management  of its IT development projects. Subsequently in August 2010, the  department reported that it had terminated the HealtheVet initiative.", "In February 2011, VA began its second VistA modernization initiative, the  iEHR program, in conjunction with DOD. The program was intended to  replace the two separate electronic health record systems used by the  two departments with a single, shared system. In addition, because both  departments would be using the same system, this approach was  expected to largely sidestep the challenges that had been encountered in  trying to achieve interoperability between their two separate systems.", "Initial plans called for the development of a single, joint iEHR system  consisting of 54 clinical capabilities to be delivered in six increments  between 2014 and 2017. Among the agreed-upon capabilities to be  delivered were those supporting laboratory, anatomic pathology,  pharmacy, and immunizations. According to VA and DOD, the single  system had an estimated life cycle cost of $29 billion through the end of  fiscal year 2029.", "However, in February 2013, the Secretaries of VA and DOD announced  that they would not continue with their joint development of a single  electronic health record system. This decision resulted from an  assessment of the iEHR program that the secretaries had requested in  December 2012 because of their concerns about the program facing  challenges in meeting deadlines, costing too much, and taking too long to  deliver capabilities. In 2013, the departments abandoned their plan to  develop the integrated system and stated that they would again pursue  separate modernization efforts.", "In December 2013, VA initiated its VistA Evolution program as a joint  effort of VHA and OI&T that was to be completed by the end of fiscal year  2018. The program was to be comprised of a collection of projects and  efforts focused on improving the efficiency and quality of veterans\u2019 health  care by modernizing the department\u2019s health information systems,  increasing the department\u2019s data exchange and interoperability with DOD  and private sector health care partners, and reducing the time it takes to  deploy new health information management capabilities. Further, the  program was intended to result in lower costs for system upgrades,  maintenance, and sustainment. According to the department\u2019s March  2017 cost estimate, VistA Evolution was to have a life cycle cost of about  $4 billion through fiscal year 2028.", "Since initiating VistA Evolution in December 2013, VA has completed a  number of key activities that were called for in its plans. For example, the  department delivered capabilities, such as the ability for health providers  to have an integrated, real-time view of electronic health record data  through the Joint Legacy Viewer, as well as the ability for health care  providers to view sensitive DOD notes and highlight abnormal test results  for patients. VA also initiated work to standardize VistA across the 130  VA facilities and released enhancements to its legacy scheduling,  pharmacy, and immunization systems. In addition, the department  released the enterprise Health Management Platform, which is a web- based user interface that assembles patient clinical data from all VistA  instances and DOD.", "Although VistA Evolution is ongoing, VA is currently in the process of  revising its plan for the program as a result of the department recently  announcing its pursuit of a fourth VistA modernization program  (discussed below). For example, the department determined that it would  no longer pursue additional development or deployment of the enterprise  Health Management Platform\u2014a major VistA Evolution component\u2014 because the new modernization program is envisioned to provide similar  capabilities.", "In June 2017, the VA Secretary announced a significant shift in the  department\u2019s approach to modernizing VistA. Specifically, rather than  continue to use VistA, the Secretary stated that the department plans to  acquire the same electronic health record system that DOD is  implementing. In this regard, DOD has contracted with the Cerner  Corporation to provide a new integrated electronic health record system.  According to the Secretary, VA has chosen to acquire this same product  because it would allow all of VA\u2019s and DOD\u2019s patient data to reside in one  system, thus enabling seamless care between the department and DOD  without the manual and electronic exchange and reconciliation of data  between two separate systems.", "According to the VA Secretary, this fourth VistA modernization initiative is  intended to minimize customization and system differences that currently  exist within the department\u2019s medical facilities, and ensure the  consistency of processes and practices within VA and DOD. When fully  operational, the system is intended to be the single source for patients to  access their medical history and for clinicians to use that history in real  time at any VA or DOD medical facility, which may result in improved  health care outcomes. According to VA\u2019s Chief Technology Officer,  Cerner is expected to provide integration, configuration, testing,  deployment, hosting, organizational change management, training,  sustainment, and licenses necessary to deploy the system in a manner  that meets the department\u2019s needs.", "To expedite the acquisition, in June 2017, the Secretary signed a  \u201cDetermination and Findings,\u201d for a public interest exception to the  requirement for full and open competition, and authorized VA to issue a  solicitation directly to the Cerner Corporation. According to the  Secretary, VA expects to award a contract to Cerner in early 2018, and  deployment of the new system is anticipated to begin 18 months after the  contract has been signed.", "VA\u2019s Executive Director for the Electronic Health Records Modernization  System stated that the department intends to deploy the new system  incrementally to its medical facilities. Each facility is expected to continue  using VistA until the new system has been deployed at that location. VA  expects that the new system will be implemented at all VA medical  facilities within 7 to 8 years after the first deployment.", "Figure 1 shows a timeline of the four efforts that VA has pursued to  modernize VistA since 2001."], "subsections": [{"section_title": "VA Obligated About $1.1 Billion for VistA Modernization Contracts from 2011 through 2016", "paragraphs": ["For iEHR and VistA Evolution, the two modernization initiatives for which  VA could provide contract data, VA obligated approximately $1.1 billion  for contracts with 138 different contractors during fiscal years 2011  through 2016. Specifically, the department obligated approximately  $224 million and $880 million, respectively, for contracts associated with  these efforts. Of the 138 contractors, 34 performed work supporting both,  iEHR and VistA Evolution. The remaining 104 contractors worked  exclusively on either iEHR or VistA Evolution.", "Funding for the 34 contractors that worked on both iEHR and VistA  Evolution totaled about $793 million of the $1.1 billion obligated for  contracts on the two initiatives. Obligations for contracts awarded to the  top 15 of these 34 contractors (which we designated as key contractors)  accounted for about $741 million (about 67 percent) of the total obligated  for contracts on the two initiatives. The remaining 123 contractors were  obligated about $364 million for their contracts.", "The 15 key contractors were obligated about $564 million and $177  million for VistA Evolution and iEHR contracts, respectively. Table 1  identifies the key contractors and their obligated dollar totals for the two  efforts.", "Additionally, we determined that, of the $741 million obligated to the key  contractors, $411 million (about 55 percent) was obligated for contracts  supporting the development of new system capabilities, $256 million  (about 35 percent) was obligated for contracts supporting project  management activities, and $74 million (about 10 percent) was obligated  for contracts supporting operations and maintenance for iEHR and VistA  Evolution. VA obligated funds to all 15 of the key contractors for system  development, 13 of the key contractors for project management, and 12  of the key contractors for operations and maintenance. Figure 2 shows  the amounts obligated for each of these areas.", "Further, based on the key contractors\u2019 documentation for the iEHR  program, VA obligated $102 million for development, $65 million for  project management, and $10 million for operations and maintenance.  For the VistA Evolution Program, VA obligated $309 million for  development, $191 million for project management, and $64 million for  operations and maintenance. Figure 3 shows the amounts obligated for  contracts on the VistA Evolution and iEHR programs for development,  project management, and operations and maintenance.", "In addition, table 2 shows the amounts that each of the 15 key contractors  were obligated for the three types of contract activities performed on  iEHR and VistA Evolution."], "subsections": []}]}, {"section_title": "VA Recently Announced a New VistA Modernization Initiative; Development of Plans Is in Progress", "paragraphs": ["Industry best practices and IT project management principles stress the  importance of sound planning for system modernization projects. These  plans should identify key aspects of a project, such as the scope,  responsible organizations, costs, schedules, and risks. Additionally,  planning should begin early in the project\u2019s life cycle and be updated as  the project progresses.", "Since the VA Secretary announced that the department would acquire the  same electronic health record system as DOD, VA has begun planning  for the transition from VistA Evolution to EHRM. However, the department  is still early in its efforts, pending the contract award. In this regard, the  department has begun developing plans that are intended to guide the  new EHRM program. For example, the department has developed a  preliminary description of the organizations that are to be responsible for  governing the EHRM program. Further, the VA Secretary announced in  congressional testimony in November 2017 that the Executive Director for  the Electronic Health Records Modernization System will report directly to  the department\u2019s Deputy Secretary. In addition, the department has  developed a preliminary timeline for deploying its new electronic health  record system to VA\u2019s medical facilities, and a 90-day schedule that  depicts key program activities. The department also has begun  documenting the EHRM program risks.", "Beyond the aforementioned planning activities undertaken thus far, the  Executive Director stated that the department intends to complete a full  suite of planning and acquisition management documents to guide the  program, including a life cycle cost estimate and an integrated master  schedule to establish key milestones over the life of the project. To this  end, the Executive Director told us that VA has awarded program  management contracts to support the development of these plans to  MITRE Corporation and Booz Allen Hamilton.", "According to the Executive Director, VA also has begun reviewing the  VistA Evolution Roadmap, which is the key plan that the department has  used to guide VistA Evolution since 2014. This review is expected to  result in an updated plan that is to prioritize any remaining VistA  enhancements needed to support the transition from VistA Evolution to  the new system. According to the Executive Director, the department  intends to complete the development of its plans for EHRM within 90 days  after award of the Cerner contract, which is anticipated to occur in early  2018.", "Further, beyond the development of plans, VA has begun to staff an  organizational structure for the modernization initiative, with the Under  Secretary of Health and the Assistant Secretary for Information and  Technology (VA\u2019s Chief Information Officer) designated as executive  sponsors. It has also appointed a Chief Technology Officer from OI&T,  and a Chief Medical Officer from VHA, both of whom are to report to the  Executive Director.", "VA\u2019s efforts to develop plans for EHRM and to staff an organization to  manage the program encompass key aspects of project planning that are  important to ensuring effective management of the department\u2019s latest  modernization initiative. However, the department remains early in its  modernization planning efforts, many of which are dependent on the  system acquisition contract award, which has not yet occurred. The  department\u2019s continued dedication to completing and effectively executing  the planning activities that it has identified will be essential to helping  minimize program risks and guide this latest electronic health record  modernization initiative to a successful outcome\u2014one which VA, for  almost two decades, has been unable to achieve."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to VA for comment. Via email, a  liaison in VA\u2019s Office of Congressional and Legislative Affairs stated that  the department appreciated the opportunity to comment on the draft  report and provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, the Under Secretary for  Health, the Chief Information Officer, 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 staffs have any questions on matters discussed in this  report, please contact me at (202) 512-9286 or pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives for this study were to (1) identify the efforts that the  Department of veterans Affairs (VA) has undertaken to modernize VistA,  including key contractors, contract costs, and expected contractor  activities and (2) to determine the department\u2019s current plans for, and  progress to date, in modernizing VistA.", "To address the first objective, we reviewed VA\u2019s prior budget  submissions, in addition to VistA Evolution planning documentation, such  as the VistA 4 Product Roadmap, VistA 4 Life Cycle Cost Estimate, VistA  Evolution Integrated Master Plan, and VistA Evolution Business Case.  We also reviewed meeting minutes for the VistA modernization projects  and prior GAO work on efforts to modernize VistA.", "To determine the contractors, costs, and expected contractor activities for  these efforts, we requested data from VA\u2019s Office of Information and  Technology (OI&T) and the Veterans Health Administration (VHA) on all  contracts, related obligations, and expected activities for the HealtheVet  program for fiscal years 2001 through 2010; the integrated Electronic  Health Record (iEHR) program for fiscal years 2011 through 2013; and  the VistA Evolution program for fiscal years 2014 through 2016. Neither  OI&T nor VHA was able to provide contract data related to the HealtheVet  program. The department stated that it could not verify any HealtheVet  contractors receiving payments because the time frame for the effort falls  outside the record retention required by regulations. According to the  Federal Acquisition Regulation, government agencies are required to  retain contract records for 6 years after the final payment.", "VA provided contract data for the iEHR and VistA Evolution programs,  which included contractor names, obligated amounts of funding, and  descriptions of the work that the contractors were to perform. OI&T  provided such data for fiscal years 2011 through 2016 and VHA provided  data for fiscal years 2012 through 2016. VHA program officials told us  that they were unable to provide contract data prior to 2012. In addition,  we did not request contract data subsequent to fiscal year 2016 because  that is the last fiscal year for which data for a full year were available at  the time that we performed our analysis.", "We assessed the reliability of the contract data we received by reviewing  it for missing elements and outliers. We then met with officials responsible  for VistA-related contracting to address questions about any missing data  and outliers, as well as to obtain additional information about how the  data were developed. Further, we supplemented the data by using  additional information received from VA and the Federal Procurement  Data System. We determined that the data were sufficiently reliable for  the purposes of our reporting objective.", "To determine the key contractors, we first identified all of the contractors  that worked on both the iEHR and VistA Evolution modernization efforts.  We subsequently ranked the contractors according to the total dollars  obligated for contracts that each contractor had been awarded. Further,  we designated the top 15 ranked contractors, in terms of dollars  obligated, as key contractors. These 15 key contractors received  contracts that accounted for about two-thirds of the funds obligated to  VistA modernization contracts from fiscal year 2011 through 2016. We  then analyzed the information provided from VA on the work to be  performed by these key contractors to identify obligations made for  contracts to provide different types of work supporting the two  modernization initiatives, including systems development, project  management, and operations and maintenance. We then calculated the  funds that were obligated to each of the key contractors for the types of  work performed.", "To determine current plans for modernizing VistA, we reviewed draft  program schedules, organization charts, Congressional testimonies of the  VA Secretary, a White House press conference transcript, departmental  press releases, and the department\u2019s justification for awarding a non- competitive contract for a commercial off-the-shelf electronic health  record system. To determine the progress achieved on the current efforts,  we obtained documentation, such as draft schedules and organization  charts, and met with program officials in VA\u2019s Electronic Health Record  Modernization program office to obtain updated information on the efforts.", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["David A. Powner, (202) 512-9286 or pownerd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mark Bird (assistant director),  Eric Trout (analyst in charge), Chris Businsky, Vern Cumarasegaran,  Nancy Glover, Paris Hawkins, Jacqueline Mai, Jennifer Stavros-Turner,  Christy Tyson, and Charles Youman made key contributions to this  report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-618", "url": "https://www.gao.gov/products/GAO-18-618", "title": "Central American Police Training: State and USAID Should Ensure Human Rights Content Is Included as Appropriate, and State Should Improve Data", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Several U.S. agencies train police in the Northern Triangle countries of El Salvador, Guatemala, and Honduras, where corruption and human rights abuses have traditionally plagued civilian police forces. State, the primary agency responsible for foreign police assistance, allocated about $37 million to train police in these countries from appropriations for fiscal years 2014 through 2017. Although it is not a focus of their efforts, DOD and USAID also train police in the Northern Triangle.", "Senate Report 115-125 includes a provision for GAO to report on various aspects of U.S. police training efforts in the Northern Triangle. In this report, GAO examines, among other objectives, the extent to which U.S. agencies have (1) established objectives for and delivered training to professionalize police, including promoting respect for human rights, and (2) collected data related to police training indicators. GAO analyzed agency data and project documents, including for 22 State and USAID-funded projects implemented during fiscal years 2014 through 2017 that agencies identified as including assistance for police. GAO also conducted fieldwork in El Salvador and interviewed agency officials in Honduras; Guatemala; and Washington, D.C., who oversee and conduct police training."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies have established objectives and delivered training to professionalize police in Central America's Northern Triangle but have not consistently done so to promote police respect for human rights. U.S. strategies include objectives to professionalize police, and the Departments of State (State) and Defense (DOD) and U.S. Agency for International Development (USAID) have delivered related training (see figure). These strategies also highlight the importance of police respect for human rights, but agencies have few objectives or other control mechanisms to ensure police receive related training. For instance, none of the 14 State projects and 2 of the 8 USAID projects that GAO reviewed had such objectives. Officials said this is because objectives were designed to be broader in focus. DOD also does not have objectives but has other control mechanisms to ensure its training includes human rights content. Federal standards for internal control call for managers to establish control mechanisms consistent with priorities. Without them, it may be difficult for State and USAID to ensure that training supports agencies' goals to promote police respect for human rights.", "DOD, State, and USAID collect information on police training, but State lacks readily available, reliable data on the number of police trained\u2014a key indicator in the U.S. Strategy for Central America . State's data are not readily available because, according to officials, the process to track training is decentralized and data are not consolidated. Further, GAO found State's fiscal year 2017 police training data to be unreliable because, among other reasons, the data did not include training delivered by some implementers. Officials noted that State did not have sufficient internal control mechanisms and staff in place to collect data as it expanded police training in the Northern Triangle. Without such data, State cannot accurately assess its efforts in Central America."]}, {"section_title": "What GAO Recommends", "paragraphs": ["To improve oversight of police training in the Northern Triangle, State and USAID should design control mechanisms to ensure human rights content is included as appropriate, and State should improve police training data. State and USAID concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["The three Central American countries constituting the region\u2019s \u201cNorthern  Triangle\u201d\u2014El Salvador, Guatemala, and Honduras\u2014face widespread  insecurity and violence, with homicide rates among the highest in the  world. The police forces in these countries are challenged by corruption,  inadequate resources, insufficient training, and a lack of public trust,  according to U.S. Department of State (State) documents. Supporting  the efforts of the Northern Triangle governments to professionalize and  reform police forces is a focus of U.S. policy in the Western Hemisphere.  The White House\u2019s U.S. Strategy for Central America aims to improve  governance and security in the region and emphasizes that security  assistance should address corruption, promote governmental  transparency, and protect human rights. In support of this strategy, the  United States has devoted significant resources to train police units in the  Northern Triangle. For example, State\u2019s Bureau of International  Narcotics and Law Enforcement Affairs (INL) and the U.S. Agency for  International Development (USAID) reported having allocated at least $37  million and $11 million, respectively, to train police in El Salvador,  Guatemala, and Honduras from appropriations for fiscal years 2014  through 2017.", "Congress has clearly articulated the importance of respect for human  rights in U.S. assistance to partner nations\u2019 security forces, and in Senate  Report 115-125, accompanying the National Defense Authorization Act  for Fiscal Year 2018, the Committee on Armed Services included a  provision for us to report on various aspects of U.S. police training efforts  in El Salvador, Honduras, and Guatemala. In this report, we examine, for  the Northern Triangle, (1) the extent to which U.S. agencies have  established objectives for and delivered training to professionalize police,  including promoting respect for human rights; (2) the extent to which  agencies have collected data related to police training indicators; and (3)  the actions U.S. agencies have planned and undertaken to support the  ability of partner nations to sustain police training.", "To address these objectives, we reviewed government-wide and agency  strategies, guidance documents, project work plans, and reports from  State, the Department of Defense (DOD), and USAID. We focused on  State and USAID because officials identified them as the primary funders  of police training in El Salvador, Guatemala, and Honduras. While DOD  primarily provides assistance to foreign military entities, we included DOD  in our analysis because some of the training funded by the agency  includes police participants. We included police training implemented by  the Departments of Justice (DOJ) and Homeland Security (DHS) when  their training efforts were funded by State, DOD, and USAID, but not  separate efforts funded by DOJ and DHS. In addition to reviewing  documents, we conducted fieldwork in El Salvador and interviewed  agency officials in Honduras; Guatemala; and Washington, D.C., who  oversee and conduct police training.", "To determine the extent to which U.S. agencies have established  objectives for and delivered training to professionalize police, including  promoting respect for human rights, we reviewed agency documents and  assessed them against federal standards for internal control, which state  that management should set objectives or other control mechanisms to  meet an entity\u2019s mission, strategic plan, and goals. Our analysis included  U.S. global, regional, and country-specific strategic documents such as  government-wide Integrated Country Strategies and DOD country  security assistance plans for El Salvador, Guatemala, and Honduras. We  also reviewed documents from State, USAID, and DOD about police  assistance efforts implemented during fiscal years 2014 through 2017  that included assistance for police in El Salvador, Guatemala, and  Honduras. Specifically, we reviewed 22 projects\u201414 funded by State  and 8 funded by USAID\u2014that the agencies identified as including  assistance for police. For each of these 22 police assistance projects, we  analyzed project documents\u2014work plans or reports\u2014to identify  objectives or other internal control mechanisms related to police  professionalization, including promoting respect for human rights, using  definitions determined through our analysis and discussions with agency  officials. Two analysts independently reviewed the project documents and  discussed and resolved any disagreements in their initial determinations  about the extent to which project documents included relevant objectives  or other internal control mechanisms.", "With respect to reporting on the extent to which training incorporated  content to professionalize police, including promoting respect for human  rights, we analyzed documents on police training, such as training  agendas and course catalogs, and discussed training content with  officials at implementing agencies. To analyze the content of training  courses, we defined training to promote respect for human rights as  training specifically addressing \u201chuman rights\u201d or elements of human  rights as defined in agency documents, such as the proper use of force  and minority rights, and in the United Nations Universal Declaration of  Human Rights.", "To determine the extent to which agencies have collected data on police  training indicators, we analyzed agency documents to identify indicators  related to police training and assessed related data against federal  internal control standards, which call for agencies to have readily  available, reliable data to track progress toward goals. We identified, and  agency officials confirmed, one relevant indicator in the U.S. Strategy for  Central America: the \u201cnumber and percentage of civilian police trained by  INL.\u201d That strategy assigns State responsibility for tracking that indicator.  We asked State to provide us with information related to the indicator and  compared State\u2019s data with training information from implementing  agencies to determine the extent to which State\u2019s data were reliable and  readily available. We assessed State\u2019s data on how many police were  trained by comparing similar data from different sources; reviewing  agency information regarding underlying data systems; and interviewing  cognizant agency officials. We found that the data on police trained  through INL\u2019s International Law Enforcement Academies program  (hereafter referred to as ILEA) were sufficiently reliable for reporting on  the number of police trained. However, overall, we found that State does  not have readily available, reliable data on the total number of police  trained, which we report as a finding.", "To determine the actions U.S. agencies have planned and undertaken to  support the ability of partner nations to sustain police training, we spoke  with agency officials about related activities and analyzed project planning  documents and reporting related to police assistance. Using this  information, we determined the types of actions U.S. agencies had  planned or undertaken and discussed these categories with agency  officials to confirm that the categories accurately reflected agency actions.  For more detail on our scope and methodology, see appendix I.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["According to State and USAID, the Northern Triangle countries of El  Salvador, Guatemala, and Honduras (see fig. 1) have a history of police  corruption and gross violations of human rights. For example, State\u2019s  Guatemala 2016 Human Rights Report describes human rights abuses  by the police, including arbitrary and unlawful killings, abuse, and  mistreatment. Agencies also described a number of factors that challenge  police forces in the Northern Triangle, including a culture of impunity and  limited partner nation capacity to address these challenges.", "Many U.S. agencies implement assistance to civilian police in El  Salvador, Guatemala, and Honduras, with State\u2019s INL being the primary  source of funding. Federal law generally prohibits the use of foreign  assistance funds for police training, but Congress provided several  exceptions including for training in internationally recognized standards of  human rights, the rule of law, anti-corruption, and the promotion of civilian  police roles that support democracy. Accordingly, as part of USAID\u2019s  broader security sector reform assistance efforts, the agency provides  some police training, which often includes training on community policing  practices. DOD generally is not authorized to train civilian police and  focuses on building the capacity of its military and other national security  counterparts. However, under its authority to build the capacity of foreign  security forces for various purposes, DOD has provided a limited amount  of training for civilian police and military units that provide civilian security  in El Salvador, Guatemala, and Honduras. For example, several U.S.  agencies, including DOD, have delivered training to the Joint Group  Cuscatl\u00e1n in El Salvador, an interagency task force that includes police;  and to the Special Response Intelligence and Security Group in Honduras  (commonly called TIGRES, its acronym in Spanish), which, according to  State, is an elite, vetted unit within the Honduran National Police,  specializing in high-risk tactics.", "State, USAID, and DOD deliver training in a variety of ways, including  through the agencies\u2019 own subject matter experts, interagency  agreements with other U.S. agencies, and contracts with nongovernment  implementing partners. For example, USAID has contracts and  cooperative agreements with corporations, universities, and  nongovernmental organizations to implement assistance projects that  include training of police in El Salvador, Guatemala, and Honduras.  State\u2019s INL uses contracts to procure the services of nongovernment  implementing partners and interagency agreements to partner with  several other U.S. government agencies and components, including DHS  and DOJ, to implement police assistance and training. State\u2019s ILEA  program also funds a network of police training academies, including one  located in San Salvador, El Salvador (see fig. 2)."], "subsections": []}, {"section_title": "Agencies Have Established Objectives and Delivered Training to Professionalize Police but Have Not Consistently Done So Related to Respect for Human Rights Agencies Have Established Training Objectives to Professionalize Police and Have Delivered Such Training", "paragraphs": ["Global, regional, and country-specific strategies outlining U.S. policy in El  Salvador, Guatemala, and Honduras all include objectives to  professionalize police. For example, the 2017 National Security Strategy  of the United States of America includes an objective to support local  efforts to professionalize police in the Western Hemisphere. The U.S.  Strategy for Central America\u2014a primary document outlining U.S. policy in  El Salvador, Guatemala, and Honduras\u2014also includes an objective  specifically to \u201cprofessionalize civilian police.\u201d In addition, government- wide Integrated Country Strategies outlining U.S. goals for fiscal year  2014 through 2017 efforts in El Salvador, Guatemala, and Honduras  include police professionalization objectives. For example, the  Integrated Country Strategy for Guatemala for fiscal years 2016 and 2017  includes an objective to strengthen professionalism through training for  law enforcement.", "Consistent with these objectives, DOD, State, and USAID have planned  and delivered training aimed at professionalizing police in El Salvador,  Guatemala, and Honduras. First, while DOD\u2019s primary responsibility is to  train its military counterparts, DOD country campaign plans for each of  the three Northern Triangle countries include tasks related to  professionalizing security forces, which would pertain to police they may  train. For example, the plan for Guatemala for fiscal years 2016 and 2017  includes conducting professional development courses to improve skills  to enhance partner nation security forces. During fiscal years 2014  through 2017, DOD delivered training to security forces, including a  limited number of police participants, and officials told us that all DOD  training delivered to security forces was intended to professionalize those  forces.", "Second, our analysis of project documents associated with 22 State and  USAID police assistance efforts in El Salvador, Guatemala, and  Honduras implemented during fiscal years 2014 through 2017 found that  21 of the projects included objectives to professionalize police. For  example, agreements between the DHS\u2019s U.S. Customs and Border  Protection and State\u2019s INL for each of the three Northern Triangle  countries have an objective to assist in the development of professional  border security through police training. Similarly, USAID officials noted  the police training incorporated in their broader assistance efforts  consistently includes elements to professionalize those forces, and we  found examples of such training incorporated in documents for each of  the 8 USAID projects we reviewed.", "In line with these objectives, State and USAID implementing partners  delivered training to professionalize police from all three Northern  Triangle countries. For example, DOJ\u2019s Drug Enforcement Administration  delivered tactical training on the use of firearms to police in El Salvador  (see fig. 3)."], "subsections": [{"section_title": "Agencies Have Established Few Police Training Objectives to Promote Respect for Human Rights and Vary in the Extent to Which They Have Delivered Such Training", "paragraphs": ["Agencies have established few objectives to provide human rights  training to police in El Salvador, Guatemala, and Honduras either in  government-wide strategies for the countries or in police assistance  project work plans. Federal standards for internal control state that  management should set objectives or other internal control mechanisms  to meet an entity\u2019s mission, strategic plan, and goals. In the case of  police training, global, regional, and country-specific strategies note the  importance of a professional police force that respects human rights, and  some cite risks associated with police forces lacking these attributes. For  example, U.S. national security strategies associated with fiscal years  2014 through 2017 state that respect for human rights is an important  aspect of U.S. national security strategy. At the regional level, the U.S.  Strategy for Central America states that all security cooperation will  emphasize respect for human rights. Further, the government-wide  Integrated Country Strategies for El Salvador, Guatemala, and Honduras  for fiscal years 2014 through 2017 emphasize the importance of  promoting respect for human rights. Despite the consistent, government- wide emphasis on the importance of promoting respect for human rights,  government-wide strategies and police assistance project documents  include few objectives specifically to provide human rights training to  police in El Salvador, Guatemala, and Honduras.", "First, government-wide country strategies contain few objectives to  provide human rights training to police. Of the three current government- wide Integrated Country Strategies for El Salvador, Guatemala, and  Honduras, only the document for El Salvador contains an objective to  provide human rights training to police (see table 1).", "Officials from INL, the State bureau responsible for achieving the human  rights police training objective for El Salvador, noted that efforts related to  this objective have focused on institutionalizing human rights training  through the country\u2019s police academy. State officials did not know why the  strategy for Honduras for fiscal years 2016 and 2017 lacked such an  objective while the strategy for fiscal years 2014 through 2016 included  one. Similarly, officials did not know if the officials who drafted the  Integrated Country Strategy for Guatemala for fiscal years 2016 and 2017  had considered including an objective to train police in human rights.", "Second, police assistance project documents also vary in the extent to  which they include objectives or other internal control mechanisms to  ensure human rights content is incorporated in police training. Further,  agencies also vary in the extent to which they included respect for human  rights in police training delivered during fiscal years 2014 through 2017."], "subsections": [{"section_title": "Department of Defense (DOD)", "paragraphs": ["DOD has not established specific objectives to train police on human  rights, but internal control mechanisms, such as written policies, have  helped ensure that training DOD delivers to police consistently  incorporates content on respect for human rights, according to agency  officials. As mentioned previously, DOD primarily provides training for  partner nation militaries and national security forces and does not have  strategic objectives specific to training civilian police. Nonetheless, the  U.S. Southern Command (SOUTHCOM)\u2014whose area of responsibility  includes El Salvador, Guatemala, and Honduras\u2014uses a written policy to  require that all SOUTHCOM-sponsored operational and intelligence  training provided to security forces contain a human rights component.", "Further, in fiscal year 2017, DOD\u2019s Global Train and Equip Program  consolidated some types of assistance DOD had previously used to  provide training for foreign security forces in El Salvador, Guatemala, and  Honduras. The legal authority for this program requires that projects  executed under the authority include elements that promote observance  of and respect for the law of armed conflict, human rights and  fundamental freedoms, the rule of law, and civilian control of the  military.", "DOD officials explained that based on these requirements, human rights  training was either imbedded in or provided as a component of all DOD  training delivered to security forces, which they stated generally focused  on operational or tactical topics. We reviewed agendas for training that  DOD officials identified as having included police participants, and found  such content. For example, the agenda for a 4.5-day training on the legal  aspects of combatting terrorism delivered by DOD\u2019s Defense Institute of  International Legal Studies to Salvadoran security force participants,  among whom were 12 civilian police, included at least 5 hours of training  on human rights topics such as international law and the proper use of  force."], "subsections": []}, {"section_title": "U.S. Agency for International Development (USAID)", "paragraphs": ["While USAID has established few specific objectives or other internal  control mechanisms to include human rights content in police training,  according to USAID officials, training delivered to police in El Salvador,  Guatemala, and Honduras during fiscal years 2014 through 2017  included content on respect for human rights. Our analysis of project  documents related to the eight USAID projects that officials identified as  including police assistance in fiscal years 2014 through 2017 found that  two projects included objectives to provide police training specifically on  human rights. For example, the USAID-funded Rights and Dignity Project  for El Salvador included an objective to provide human rights training to  several security sector entities, including the country\u2019s national police. For  a third project, USAID used an internal control mechanism to ensure  human rights related content was included in police training. In this  instance, the terms and conditions of USAID\u2019s cooperative agreement  included technical direction to the implementer that substantive instruction  should address issues of gender-based violence, a human rights concern  pertinent in the recipient countries. The remaining five USAID projects  included no objectives or other internal control mechanisms to ensure that  human rights content was incorporated. USAID officials explained that  project documents did not include specific objectives to provide police  training on respect for human rights because USAID projects generally  have broader goals that are not specific to training police.", "Despite having few specific objectives or other internal control  mechanisms intended to ensure that police training includes human rights  content, USAID officials told us that USAID-funded police training  delivered in fiscal years 2014 through 2017 consistently included such  content. For example, according to these officials, training on community  policing constituted a significant portion of police-related assistance in El  Salvador, Guatemala, and Honduras, and USAID\u2019s civilian policing policy  guidance identifies respect for human rights as a core component of its  community policing curriculum. Further, USAID officials posted in El  Salvador, Guatemala, and Honduras, noted that police training delivered  in each country incorporated human rights precepts. For example, in  Honduras, USAID officials said the agency\u2019s efforts included training  police on human rights issues specifically to improve police engagement  with vulnerable populations such as women and members of the lesbian,  gay, bisexual, and transgender community.", "In addition to the information provided by USAID officials we spoke with,  we reviewed reports from USAID\u2019s implementing partners that contained  information about police training delivered in fiscal years 2014 through  2017, some of which noted content related to human rights. For example,  one implementing partner reported on providing training that included  content on human rights, ethics, and the proper use of force. USAID  officials told us that the decision to include training on respect for human  rights is based on a series of factors, including USAID staff discretion,  and noted that an internal control mechanism would help ensure that  officials consistently consider the extent to which content related to  respect for human rights would be appropriate to include in police  training."], "subsections": []}, {"section_title": "Department of State (State)", "paragraphs": ["State has not established specific objectives or other internal control  mechanisms to ensure police training incorporates content promoting  respect for human rights. We reviewed documents related to 14 INL- funded projects for El Salvador, Guatemala, and Honduras that officials  identified as including assistance for police and that were implemented in  fiscal years 2014 through 2017. None of the project documents we  reviewed for the 14 INL-funded projects included police training objectives  or other internal control mechanisms related to human rights. Officials  explained that they do not have specific objectives to provide training on  respect for human rights because they have designed objectives with a  broader focus, such as to reduce insecurity and corruption. However, they  agreed that establishing internal control mechanisms specific to human  rights could help ensure training includes such content as appropriate.", "Although State has not established objectives or other internal control  mechanisms to ensure that human rights content is included in police  training, State officials told us that some INL-funded police training  includes such content. For example, the ILEA program offers training that  includes human rights content, such as its Human Rights course.  However, ILEA and other INL-funded training implementers also offer  training of a technical nature, such as first responder training and crime  scene management, which may not warrant inclusion of human rights  content. Officials also explained that because training content is  developed and maintained by INL\u2019s implementing partners, INL could not  readily provide detailed information on the content of the training  delivered to police. These officials said that the implementing partners,  such as ILEA and other U.S. agencies, could provide more specific  information on the content of INL-funded training.", "Our analysis of ILEA training delivered to police from El Salvador,  Guatemala, and Honduras during fiscal years 2015 through 2017 found  that 84 of 189 courses (or 44 percent) focused on or included content  related to human rights. For example, the ILEA Human Rights course  included content on fundamental human rights and relevant issues and  challenges in participants\u2019 countries. The ILEA Human Trafficking and  Child Exploitation course included human rights content related to  minority rights and vulnerable populations. Officials explained that some  training, such as courses on crime scene management and other courses  on topics of a technical nature, may not warrant the inclusion of content  related to human rights.", "Absent objectives from State to deliver training to promote respect for  human rights, officials from 10 key DHS and DOJ offices that implement  INL-funded police training noted various extents to which respect for  human rights is included in police training they deliver. For example,  officials from DOJ\u2019s Bureau of Alcohol, Tobacco, Firearms, and  Explosives noted that they have delivered training on topics such as post- blast investigations and the eTrace firearms tracing system that does not  warrant the inclusion of content related to respect for human rights.  Officials from DHS\u2019s U.S. Customs and Border Protection noted that  police training they deliver, such as on conducting highway checkpoints,  does not specifically address respect for human rights but contains best  practices grounded in respect for human rights. Officials from 1 of the 10  offices we contacted\u2014DOJ\u2019s International Criminal Investigative Training  Assistance Program\u2014noted that all INL-funded police training that it  delivered included a human rights component.", "While there is no requirement that all State- and USAID-funded police  training include human rights content, these agencies consistently  emphasize the importance of building police and other security forces that  respect human rights. By establishing specific objectives in government- wide strategies or project-specific work plans or other internal control  mechanisms, such as written policies, State and USAID could help  ensure that police training incorporates human rights content, or  continues to do so, as appropriate. Further, without such objectives or  internal control mechanisms, it may be difficult for these agencies to  account for the extent to which implementing partners include human  rights content or to assess progress being made with respect to partner  nation police forces\u2019 respect for human rights\u2014a key goal of U.S. strategy  in Central America."], "subsections": []}]}]}, {"section_title": "Agencies Collect Some Information on the Number of Police Trained, but State Lacks Readily Available, Reliable Data on This Indicator", "paragraphs": [], "subsections": [{"section_title": "DOD and USAID Have Collected Some Information on the Number of Police Trained", "paragraphs": ["While DOD and USAID training for recipients in the Northern Triangle  may include police participants, police training is not a primary element of  DOD and USAID assistance in El Salvador, Guatemala, and Honduras.  Neither agency collects data in relation to a specific indicator on police  training. Nonetheless, both agencies gather some information regarding  civilian police they have trained.", "DOD\u2019s primary security assistance objectives in El Salvador, Guatemala,  and Honduras pertain to partner nation militaries; thus the agency does  not collect data in relation to specific police training indicators.  Nevertheless, information on training participants from civilian institutions  such as police forces is available, according to DOD officials. For  example, DOD officials identified civilian police participants from El  Salvador and Guatemala who participated in DOD\u2019s Defense Institute of  International Legal Studies training events during fiscal year 2013.  Further, the Foreign Military Training report tracks DOD training and  includes participants\u2019 units, which can be used to identify police and other  civilian trainees. For instance, the report for fiscal years 2014 and 2015  identifies a 3-month counterdrug course delivered in fiscal year 2014 to  200 members of the elite Honduran police unit, the TIGRES. DOD also  included police participants in courses primarily attended by military  officials. For example, the report for fiscal years 2016 and 2017 indicated  3 members of the Salvadoran National Police attended a fiscal year 2016  course titled \u201cCountering Transnational Threats in the Americas,\u201d along  with at least 20 military officials.", "USAID\u2019s assistance in El Salvador, Guatemala, and Honduras consists of  broader security sector reform efforts that include, but do not focus on,  police training. Hence, USAID does not have indicators to specifically  track police training. Consequently, officials explained that the level of  detail that implementing partners reported on police training would vary  project by project and would most likely be found in project-level reporting  submitted by implementing partners. We reviewed quarterly and annual  reports for USAID projects we included in our analysis and found  examples of various levels of detail regarding the number of police  trained. For example:  In reporting on efforts to improve security in Honduras by increasing  the capacity of community members and police, the implementing  partner of USAID\u2019s Convive! project noted that they had delivered  training on community policing to 447 officers from April 2016 to June  2017.", "The implementing partner of USAID\u2019s Security and Justice Sector  Reform project in Guatemala reported holding workshops to build  investigators\u2019 capacity to gather information, write reports, and plan  operations in a way that respects human rights, but the implementing  partners\u2019 reports did not specify the number of participants in those  workshops.", "USAID\u2019s implementing partner for its Justice Sector Strengthening  project in El Salvador submitted a report on activities during October  through December 2017 noting that they had (1) trained 150 officers  in the fundamentals of community policing and (2) supported  workshops on human rights, ethics, and the proper use of force for  113 officers."], "subsections": []}, {"section_title": "State Lacks Readily Available, Reliable Data on the Total Number of Police Trained", "paragraphs": ["State is responsible for tracking progress toward a key indicator related to  training police in El Salvador, Guatemala, and Honduras. Objective 3.1 of  the U.S. Strategy for Central America is to \u201cProfessionalize Civilian  Police,\u201d and a related indicator is the \u201cnumber and percentage of civilian  police trained by INL.\u201d However, INL officials in Washington, D.C., told us  that while they collect data for certain types of police training, such as  training provided through the ILEA program, they do not have reliable  information readily available on the total number of police trained through  INL-funded projects.", "INL collects some information on the number of police trained through  efforts that it funds. For instance, officials from INL\u2019s ILEA program were  readily able to provide us with data showing that the program had  provided 252 training courses to more than 1,600 police participants from  El Salvador, Guatemala, and Honduras during fiscal years 2014 through  2017 (see table 2).", "In response to our request for information about INL\u2019s fiscal year 2014  through 2017 police training efforts delivered through implementing  partners other than ILEA, INL officials told us that they did not have  readily available data on the number of police trained in El Salvador,  Guatemala, and Honduras. They noted that they could ask INL staff at the  U.S. embassies in those countries to manually compile data related to  fiscal year 2017 training events, but that it would take officials months to  produce similar data for prior fiscal years.", "After we narrowed our data request to fiscal year 2017 training events  only, data we received in April 2018 from the embassies indicated that  about 8,400 police\u2014about 3,000 from El Salvador, 4,600 from  Guatemala, and 800 from Honduras\u2014received training from ILEA, the  Colombian National Police Training program, U.S. agency trainers, and  other INL-funded implementing partners. However, our analysis found  that the data State provided were unreliable in that they did not include  training delivered by some implementing partners or align with other  training data provided to us by implementing partners. For example:", "First, fiscal year 2017 data from INL in El Salvador included INL- funded training delivered by Colombian police and two  nongovernment implementing partners but no training delivered by  U.S. government implementing partners. However, State and DOJ  officials in Washington, D.C., told us that DOJ\u2019s Drug Enforcement  Administration and Federal Bureau of Investigation had delivered  INL-funded courses to Salvadoran police during fiscal year 2017.", "Second, INL officials at the U.S. embassy in Guatemala told us  that the training data they provided excluded training delivered by  DOJ\u2019s Federal Bureau of Investigation and the Miami-Dade Police  Department. These officials assured us that more complete data  associated with additional police training activities did exist, but  they stated that they did not include these data because doing so  would have required them to collect and compile data from several  different sources\u2014a difficult and time-consuming effort.", "Third, data from INL officials at the U.S. embassy in Honduras  were similarly unreliable in that they did not align with training data  we collected from implementing partners. For example, embassy  data indicated there were 6 police participants of a training  provided by DOJ\u2019s Drug Enforcement Administration in Honduras,  but DOJ reported that 34 Honduran police participated in the  same training.", "Fourth, data from all three embassies included information about  ILEA training that did not align with the data we received directly  from the ILEA program. Officials from the U.S. embassy in  Guatemala acknowledged that the ILEA data they had provided to  us were likely unreliable. Officials from the ILEA program noted  that they provide data on the number of police trained directly to  headquarters INL officials who may have a need for such  information.", "INL officials at the U.S. embassies in the Northern Triangle agreed the  fiscal year 2017 data they provided to us may be unreliable in that the  data are incomplete and may be inconsistent with data available from  implementing partners. Despite acknowledging the information they  provided had problems with reliability, INL officials told us that they would  use a similar process to compile data for reporting progress related to the  U.S. Strategy for Central America indicator on the number and  percentage of civilian police trained by INL.", "In May 2018, State and USAID issued the first report to Congress on  results of that strategy, which included data on the number of civilian  police from El Salvador, Guatemala, and Honduras that INL trained  during fiscal year 2017. Although INL officials told us that they used the  same process to provide data to us in April 2018 and to compile data for  the May 2018 report, we found the two sets of data differed. INL officials  explained that these discrepancies were because State included training  delivered to additional types of police and by more training implementers  in its May 2018 report than they included in the data provided to us in  April 2018. Despite identifying reasons for these discrepancies, INL  officials acknowledged their data collection process is decentralized and  agreed that improvements could be made in the availability and reliability  of the data on the number of police trained. Moreover, INL noted  challenges collecting these data. Specifically:  INL officials from U.S. embassies in the Northern Triangle  responsible for collecting police training data noted that a large  number of implementing partners deliver training, which makes  collecting data more difficult. These officials told us they are  beginning to use a smaller number of institutions, such as local  police academies, where implementing partners deliver INL- funded training. Officials believe this change has helped improve  the reliability of their data on police training because a greater  portion of the training is delivered through a small number of  institutions, making it easier for implementing partners to track  participation. However, the officials also noted that processes  such as reviewing travel orders to find U.S. trainers who had  visited the country and requesting data from individual  implementing partners are still routinely employed to compile  training data when such data are requested.", "INL officials in Washington, D.C., where police training data are  aggregated for reporting purposes, told us that it is difficult to  compile reliable information in a timely manner. This is because  embassies use unique processes and systems to collect  information on police training events and the data collected are  not systematically consolidated within the individual embassies or  centrally at INL headquarters. Further, they explained that  following the establishment of the U.S. Strategy for Central  America State received increased funding for police training  efforts, particularly in fiscal year 2016. Although they used some  of these funds to provide more training, they told us that INL was  not fully prepared to implement proper internal control  mechanisms to help ensure the collection of reliable data.  According to these officials, this shortcoming was exacerbated by  a worldwide hiring freeze for State that precluded INL from  employing additional staff at the affected embassies to assist with  data collection and analysis.", "INL officials stated that they recognize that effective data collection is a  necessary element of high quality monitoring and evaluation. For that  reason, in September 2017, the INL office for Western Hemisphere  Programs contracted a private firm to conduct data collection and develop  a data management system for INL efforts throughout the hemisphere,  including those related to police training. INL officials told us they intend  to extend the contract for the optional second year and are considering  the potential need to procure additional contractor services to continue  the effort after that. INL officials said that the contractors have made  some progress toward the goals set forth in the contract but  acknowledged that it is early in the process and that data reliability  challenges remain. For example, according to agency officials, in June  2018, contractors were still developing a broad set of indicators related to  INL efforts in the Western Hemisphere and had begun the process of  collecting data related to some of them in June 2018. Further, the  contractors reported that as of March 2018 they had yet to build a data  management system or produce training materials and reporting  templates for data collection.", "Readily available and reliable data allow managers to make informed  decisions and evaluate an entity\u2019s performance. Without such information,  INL cannot accurately assess the number of police trained in the Northern  Triangle\u2014a key indicator in the U.S. Strategy for Central America.  Further, it may be difficult to fully assess the extent to which training is  having the desired effect."], "subsections": []}]}, {"section_title": "Agencies Have Planned and Undertaken Various Actions to Support the Ability of Partner Nations to Sustain Police Training, Including for Human Rights", "paragraphs": ["State, USAID, and DOD have established plans and taken action to  support the ability of partner nations to sustain police training, including  training on promoting respect for human rights. INL\u2019s Sustainability Guide  defines sustainability as the ability of host-country partners and  beneficiaries to take complete responsibility for the foreign assistance  programming, and maintain or improve program outcomes and impacts  beyond the life of the program and U.S. government funding.", "Government-wide and funding agency guidance discusses the  importance of sustainability for police assistance. According to  Presidential Policy Directive 23 on Security Sector Assistance, a principal  goal is to help partner nations build sustainable capacity to address  common security challenges. Guidance from agencies that fund police  training\u2014including State, USAID, and DOD\u2014also stresses the  importance of sustainability in assistance for police. For example, State\u2019s  INL Guide to Police Assistance notes that police assistance projects  should emphasize sustainable, institutional capacity building to achieve  maximum effect. In line with such guidance, country-level and agency  strategic and project documents have established objectives related to  sustaining police training. For example, the Integrated Country Strategy  for Guatemala for fiscal years 2014 through 2016 has an objective to  assist the government in establishing, training, and maintaining anti-gang  investigative units. Agency police training project documents also address  sustainability. For example, the interagency agreement between INL and  DHS\u2019s U.S. Customs and Border Protection to enhance border security  and build capacity in Honduras aims to create a trained law enforcement  unit that is sustained by local resources.", "To enhance the sustainability of police training programs, agency officials  identified various activities they undertake, including the following:", "Training-the-trainer. State\u2019s INL Guide to Police Assistance  states that train-the-trainer models can create a sustainable  training program, and officials from multiple agencies told us that  they use train-the-trainer programs to sustain police training. For  example, the INL-funded Gang Resistance Education and  Training program is a regional training program that trains police  officers to teach children and young adults to resist the pressures  to join gangs or engage in other risky behaviors. According to INL,  this police training program has certified over 1,171 regional police  officers as teachers and taught more than 211,000 at-risk youth in  Central America.", "Developing policy or guidance. Officials from USAID stated that  helping partner nations develop policy or guidance for law  enforcement can help strengthen institutions and make police  training more sustainable. For example, a USAID project in El  Salvador supported the development of a new use-of-force policy  that was adopted by the national police. Further, USAID supported  the dissemination of the new policy by distributing 10,000 copies,  training police instructors who subsequently taught the policy to  other officers, and holding workshops on human rights, ethics, and  the proper use of force.", "Supporting police academies. The ability of partner nations to  incorporate and institutionalize training in their own police  academies is among the most significant determinants of  sustainability, according to U.S. officials from several agencies.  For example, State officials said they try to incorporate curriculum  from U.S. training into the law enforcement academies\u2019 training  curriculum in partner nations. They said doing so has a more  lasting effect than individual training events and leads to the host  government paying for the training going forward. In El Salvador,  USAID developed community policing training in conjunction with  the civilian national police that, according to officials, is now  administered to every new police officer in the country at the  country\u2019s National Academy of Public Security (see fig. 4). At the  same institution, INL supported the development of online training  that includes a human rights component. According to INL  officials, the Salvadoran police were planning to make the online  training a yearly continuing education requirement for the entire  police force.", "Continuing engagement. Officials from various agencies told us  that continuing engagement with participants helps sustain police  training, whether through additional training, on-the-job  mentorship, or service requirements for receiving training. For  example, the ILEA academy in San Salvador provides a list of  alumni to the U.S. Embassy San Salvador and encourages  implementing partners to follow up with these alumni, according to  officials. The San Salvador academy also plans to develop an  online alumni portal for engaging with past participants in order to  sustain training.", "Building relationships. Building relationships\u2014both within and  across countries\u2014between partners\u2019 law enforcement agencies  and rule of law institutions can help sustain police training,  according to officials from multiple agencies. For example, in  2013, DOD\u2019s Defense Institute of International Legal Studies  conducted border security training in El Salvador that included  military, police, and civilian officials. The training focused on  improving El Salvador\u2019s interagency cooperation and enhancing  respect for human rights. To build and sustain relationships across  countries, DOJ\u2019s Federal Bureau of Investigation holds an annual  training conference that brings together vetted police units from  various partner nations, according to officials.", "Developing civil society. Officials from both State and USAID  told us that police reform efforts are more sustainable if there are  parallel civil society organizations that can advocate for  accountability from police and other law enforcement institutions.  USAID works with civil society and community organizations to  track police abuses, including human rights violations. Officials  said that external monitoring can promote the transparency,  accountability, and effectiveness of the police. For example,  USAID\u2019s Justice, Human Rights, and Security Strengthening  project in Honduras seeks to build the capacity of civil society  organizations to advocate for vulnerable groups and victims of  human rights abuses."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Civilian police forces that protect human rights are essential to functioning  democracies, and U.S. agencies recognize that it is important to include  respect for human rights in training provided to partner nation security  forces, including police. The need to bolster respect for human rights  among security forces is specifically emphasized in assistance strategies  for El Salvador, Guatemala, and Honduras\u2014three countries with notable  histories of human rights violations by security forces, according to State  and USAID. However, unlike DOD, which has written policies requiring  the inclusion of human rights content in its training, State and USAID  have few such formal mechanisms to ensure human rights content is  appropriately included. Creating internal control mechanisms, such as  objectives or directives to training implementing partners, would help  ensure that State- and USAID-funded police training is consistent with  U.S. government and agency priorities in including content related to  respect for human rights as appropriate. Such control mechanisms would  also enable the agencies to better account for implementing partners\u2019  related activities. In addition, State lacks a standardized process to  readily compile reliable data on the total number of police trained through  INL-funded programs in the Northern Triangle countries. Without such  data, State cannot reliably report on progress toward the U.S. Strategy for  Central America and thus cannot accurately assess the efficacy of such  training. Addressing these two gaps\u2014establishing internal control  mechanisms related to human rights training content and improving police  training data\u2014would better position State to assess the outcomes of such  training, the results of which could inform future funding and sustainment  decisions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations, including two to State  and one to USAID:  The Secretary of State should ensure that the Bureau of International  Narcotics and Law Enforcement Affairs (INL) designs internal control  mechanisms to ensure human rights content is included in INL-funded  police training for El Salvador, Guatemala, and Honduras as appropriate.  (Recommendation 1)", "The Secretary of State should ensure that the Bureau of International  Narcotics and Law Enforcement Affairs (INL) develops and implements a  process to collect more reliable data on the number of police trained  through INL-funded efforts in El Salvador, Guatemala, and Honduras.  (Recommendation 2)", "The Administrator of USAID should design internal control mechanisms to  ensure human rights content continues to be included in USAID-funded  police training for El Salvador, Guatemala, and Honduras as appropriate.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product, which included three  recommendations, to DHS, DOD, DOJ, State, and USAID for comment.  State provided written comments, which we have reprinted in appendix II,  concurring with our two recommendations to the agency. In response to  the first recommendation, State noted that INL intends to amend  templates for relevant implementing documents to address human rights  as appropriate. In response to the second recommendation, State  commented that, partly in response to our report, INL is developing  specific indicators related to INL-funded police training. USAID also  provided written comments, which we have reprinted in appendix III,  concurring with our recommendation, and detailed two related policy  revisions it intends to implement in response. State, DHS, and DOD  provided technical comments, which we incorporated as appropriate. DOJ  reviewed the report but did not provide comments.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Defense, Homeland Security, Justice, and  State; and the USAID Administrator. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7141 or GroverJ@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["Senate Report 115-125 accompanying the National Defense  Authorization Act for Fiscal Year 2018 includes a provision for us to report  on various aspects of U.S. police training efforts in El Salvador,  Honduras, and Guatemala. In this report, we examine, for the Northern  Triangle, (1) the extent to which U.S. agencies have established  objectives for and delivered training to professionalize police, including  promoting respect for human rights; (2) the extent to which agencies have  collected data related to police training indicators; and (3) the actions U.S.  agencies have planned and undertaken to support the ability of partner  nations to sustain police training.", "To address these objectives, we reviewed government-wide and agency  strategies, guidance documents, project documents such as work plans,  and reports from the U.S. Departments of State (State) and Defense  (DOD), and the U.S. Agency for International Development (USAID). We  focused on State and USAID because officials identified them as the  primary funders of police training in El Salvador, Guatemala, and  Honduras. While DOD primarily provides assistance to military and other  national security entities, we included DOD in our analysis because some  of the training funded by the agency includes police participants. We  included police training implemented by the Departments of Justice (DOJ)  and Homeland Security (DHS) when their training efforts were funded by  State, DOD, and USAID, but not separate efforts funded by DOJ and  DHS. In addition to reviewing documents, we conducted fieldwork in El  Salvador and interviewed agency officials in Honduras; Guatemala; and  Washington, D.C., who oversee and conduct police training.", "To determine the extent to which U.S. agencies have established  objectives for and delivered training to professionalize police, including  promoting respect for human rights, we reviewed agency documents and  assessed them against federal standards for internal control, which state  that management should set objectives or other control mechanisms to  meet an entity\u2019s mission, strategic plan, and goals. Our analysis included  U.S. global, regional, and country-specific strategies such as government- wide Integrated Country Strategies and DOD country security assistance  plans for El Salvador, Guatemala, and Honduras. Officials from DOD,  State, and USAID told us that all agency-funded classroom training  delivered to police in El Salvador, Guatemala, and Honduras is done to  professionalize those forces, of which training to promote respect for  human rights may be one element. We also reviewed documents from  DOD, USAID, and State about police assistance efforts implemented  during fiscal years 2014 through 2017 that agencies identified as projects  that included assistance for police in El Salvador, Guatemala, and  Honduras. Specifically, we reviewed 22 projects\u201414 funded by State and  8 funded by USAID\u2014that the agencies identified as including assistance  for police. The projects and documents we identified for each agency are  as follows:", "We reviewed DOD strategic plans covering assistance for El  Salvador, Guatemala, and Honduras during fiscal years 2014  through 2017 and found that they did not contain objectives to  specifically train police. DOD officials confirmed that security  assistance they provide is focused on military recipients and that  they had no projects to specifically provide assistance to civilian  police. Thus, we determined that no DOD projects would be  included in our review of project documents to identify objectives  related to training to professionalize police.", "USAID provided a list of USAID-funded efforts in El Salvador,  Guatemala, and Honduras implemented during fiscal years 2014  through 2017. Among the projects were eight with funds used for  police training, which we included in our review. USAID provided  work plans for six of the eight projects. For the remaining two  projects, USAID did not identify similar project work plans, so we  identified alternative documents to use for our analysis. For one of  them, we used a progress report submitted to USAID by the  contractor that included a project work plan specifically for fiscal  year 2016. For the other, we used a final evaluation report that  included the objectives of the project.", "State identified efforts funded by its Bureau of International  Narcotics and Law Enforcement Affairs (INL) in El Salvador,  Guatemala, and Honduras implemented during fiscal years 2014  through 2017. Because INL assistance generally includes police  among target recipients of assistance, we requested project  documents for all of the efforts State identified. We worked with  State officials to identify project documents that included work  plans or other summaries that identified objectives for these State- funded efforts. Ultimately, State provided documents for 19  projects. Based on our review of those documents, we determined  5 of the projects should not be included in our review for one or  more of the following reasons: They (a) were not implemented  during fiscal years 2014 through 2017, (b) did not provide  assistance to police, or (c) did not have sufficient documentation  provided by State to conduct our analysis. Among State efforts  excluded from our scope due to insufficient documentation is  State-funded training provided through the Colombian National  Police. For the 14 projects that we included in our scope, we used  documents such as work plans for our analysis of objectives.", "For each of the 22 USAID and State police assistance projects we  reviewed, we analyzed related project documents, such as work plans or  reports, to identify objectives or other internal control mechanisms related  to police professionalization, including promoting respect for human  rights. To do so, we assessed these documents using definitions we  developed based on our analysis and discussions with agency officials,  as follows:", "We defined \u201cpolice\u201d as civilian\u2014not military\u2014police, as well as other  civilian law, customs, and maritime forces.", "We defined \u201ctraining\u201d as classroom-style training and workshops, not  including mentoring or technical assistance.", "We defined \u201cobjective\u201d as any statement containing the words goal,  objective, aim, intent, we will, or other statements with actionable  items aimed at reaching an end state.", "We defined \u201cprofessionalize\u201d in line with agency officials\u2019 descriptions  of the term, using related words such as professionalism, professional  competence, or capacity building.", "We defined \u201cpromotion of respect for human rights\u201d to specifically  include the phrase human rights or elements of human rights as  defined in agency documents, such as the proper use of force and  minority rights, and the United Nations Universal Declaration of  Human Rights.", "The project documents for the 22 projects in our scope were  independently reviewed by two analysts. The analysts discussed and  resolved any disagreements in their initial determinations about the extent  to which project documents included relevant objectives or other internal  control mechanisms.", "With respect to our reporting on the extent to which training incorporated  content to professionalize police, agencies lack a formal definition of what  types of training constitute police professionalism. To better understand  what types of training we should consider to be training to professionalize  police, we interviewed officials at U.S. agencies that fund and execute  police training in El Salvador, Guatemala, and Honduras. Officials at  agencies that fund and implement such training consistently described all  training delivered to police to be training intended to professionalize  recipients. Thus, for the purpose of this report, we defined training to  professionalize police as all training provided to police and determined  that all three agencies had delivered such training.", "With respect to reporting on the extent to which training incorporated  content related to human rights, we spoke with implementing partner  officials and analyzed documents on police training, such as training  agendas and course catalogs. To determine the extent to which training  delivered by State\u2019s International Law Enforcement Academies program  (hereafter referred to as ILEA) incorporated content related to human  rights, we requested data from the program on the courses it provided to  participants from El Salvador, Guatemala, and Honduras during fiscal  years 2014 through 2017. We then analyzed the descriptions in fiscal  years 2015, 2016, and 2017 course catalogs and embassy cables related  to 189 training courses the ILEA program reported to have delivered to  participants from El Salvador, Guatemala, and Honduras during fiscal  years 2015 through 2017. For our analysis, we defined training to  promote respect for human rights as training specifically addressing  human rights or elements of human rights as defined in agency  documents, such as the proper use of force and minority rights, and the  United Nations Universal Declaration of Human Rights. If such human  rights content was specified in the title or description of the course, we  determined that the course included content related to human rights.", "To determine the extent to which agencies have collected data on police  training indicators, we analyzed agency documents to identify indicators  related to police training and assessed related data against federal  internal control standards, which call for agencies to have readily  available, reliable data to track progress toward goals. Specifically, we  analyzed regional and country-specific strategies and the project  documents described above to identify indicators directly related to  objectives to provide police training. We identified, and agency officials  confirmed, one key indicator in the U.S. Strategy for Central America for  which State is responsible for collecting police training data. Specifically,  objective 3.1 of the strategy is to \u201cProfessionalize Civilian Police,\u201d and a  related indicator is the \u201cnumber and percentage of civilian police trained  by INL.\u201d That national strategy assigns State responsibility for tracking  that indicator. We asked State to provide us with fiscal year 2014 through  2017 information related to the indicator.", "To assess the reliability of the data on participants of ILEA training  events, we reviewed documents and interviewed cognizant officials about  the ILEA Global Network, the program\u2019s online system used to record all  courses and participants receiving training provided by ILEA. For  example, we determined that the ILEA program has (1) established and  documented a process\u2014described with clear steps in a user guide\u2014to  input accurate data and (2) periodically reviews the quality of that data.  We determined that the data on ILEA training participation are sufficiently  reliable for reporting on the number of police trained.", "Beyond the ILEA data, INL initially responded to our data request by  explaining the difficulties in providing the requested information and  suggesting they could provide a more limited set of data. We modified our  request to include only fiscal year 2017 data, which were compiled  separately for El Salvador, Guatemala, and Honduras by the responsible  INL staff at the U.S. embassy in each country. We then interviewed  cognizant officials and compared the data State provided in April 2018  with information that (a) we received from implementing partners,  including U.S. agencies, and (b) was reported in State\u2019s May 2018  progress report on results of the U.S. Strategy for Central America. We  determined that State does not have readily available, reliable data on the  total number of police trained, which we report as a finding.", "To determine actions U.S. agencies have planned and undertaken to  support the ability of partner nations to sustain police training, including  training to promote respect for human rights, we spoke with agency  officials about related activities and analyzed project planning documents  and reporting related to police assistance. Using this information, we  determined the types of actions U.S. agencies had planned or undertaken  and discussed these categories with agency officials to confirm that the  categories accurately reflected agency actions.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the U.S. Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Jennifer Grover, (202) 512-7141 or GroverJ@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Biza Repko (Assistant Director),  Drew Lindsey (Assistant Director), Kathryn Bolduc (Analyst-in-Charge),  Ashley Alley, David Dayton, Martin de Alteriis, Gretta Goodwin, Dawn  Locke, Stevenson Ramsey, James Reynolds, Cary Russell, and Brian  Wanlass made key contributions to this report. Neil Doherty also provided  technical assistance."], "subsections": []}]}], "fastfact": ["The Department of State, the U.S. Agency for International Development, and the Department of Defense train police forces in some Central American countries where corruption and human rights abuses have traditionally plagued civilian police forces.", "We found that the agencies' training programs are intended to professionalize police and highlight the importance of police respect for human rights. However, State and USAID have few controls in place to ensure that the delivered training includes human rights information.", "We made recommendations to address this and other issues we found in our review of Central American police training."]}
{"id": "GAO-19-90", "url": "https://www.gao.gov/products/GAO-19-90", "title": "Energy Employees Compensation: Labor Could Better Assist Claimants through Clearer Communication", "published_date": "2018-11-07T00:00:00", "released_date": "2018-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["For decades, Energy, its predecessor agencies, and contractors employed thousands of employees in hazardous work in nuclear weapons production, exposing many employees to toxic substances. The Energy Employees Occupational Illness Compensation Program, administered by DOL, provides compensation for illnesses linked to exposures. Since 2004, DOL has provided about $4.4 billion to eligible employees and their survivors.", "GAO was asked to review aspects of the claims process for contracted employees. GAO examined (1) the number and outcome of compensation claims for illnesses resulting from exposure to toxins that DOL has reopened since 2012, and (2) the Advisory Board's advice to DOL on the scientific soundness of its database on toxins and illnesses, and DOL's responses. GAO analyzed DOL claims data for 2012\u2014when a new data system was introduced\u2014 through 2017 and assessed their reliability. GAO reviewed relevant federal laws and DOL procedures, and Advisory Board documents and interviewed DOL officials, Advisory Board members, experts, and a claimant advocate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Labor (DOL), from 2012 through 2017, reopened more than 7,000 compensation claims by contracted workers with illnesses resulting from exposure to toxins at Department of Energy (Energy) worksites. Of these reopened claims, 69 percent were approved for compensation (see figure). Claims can be reopened for various reasons, including new information on toxic substances and associated illnesses or new evidence provided by a claimant. According to DOL's Office of the Ombudsman officials, some claims may have been denied as a result of claimants not understanding the evidence required to support their claim. Moreover, the Ombudsman's two most recent reports in 2015 and 2016 found DOL's letters to claimants requesting additional evidence or informing them of the final decision did not clearly explain the specific evidence needed or why previously submitted evidence was deemed insufficient. GAO's previous work also found deficiencies in the quality of a sample of DOL's written communication with claimants. DOL has provided training to claims examiners on how to write clearly in correspondence and plans to assess the training. The assessment is an opportunity for DOL to better understand why some claimants remain confused about needed evidence and could help DOL target its training resources more effectively.", "The Advisory Board on Toxic Substances and Worker Health (Advisory Board) recommended in 2016 and 2018 that DOL incorporate additional sources of information on toxic substances and associated illnesses into the database it uses to help determine eligibility for claims compensation. While DOL noted that certain additional data sources might be useful, it has not added all of the recommended data sources. The Advisory Board was created to provide technical advice to DOL on its database, among other things."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOL ensure any assessment of its staff training efforts considers claimants' challenges with understanding DOL's communications on evidence for claims. DOL neither agreed nor disagreed with the recommendation except to note that it plans to focus its training on such topics as quality of written communications and assess its training efforts."]}], "report": [{"section_title": "Letter", "paragraphs": ["For many decades, and as recently as the 1960s, the Department of  Energy (Energy), its predecessor agencies, and its contractors have  employed thousands of individuals in secretive and potentially dangerous  work associated with nuclear weapons production. Many workers were  unknowingly exposed to toxic substances, including radioactive and  hazardous materials, and subsequently developed serious illnesses. To  provide compensation to these workers, the Energy Employees  Occupational Illness Compensation Program Act of 2000 (EEOICPA) was  enacted. The Department of Labor\u2019s (DOL) Division of Energy  Employees Occupational Illness Compensation, within the Office of  Workers\u2019 Compensation Programs, has primary responsibility for  administering Parts B and E of this legislation, as amended, with  assistance from several other federal agencies. The Part E program,  which is the focus of this review, provides financial compensation to  employees of Energy contractors and subcontractors, as well as their  survivors, for wage loss, impairments, and medical expenses resulting  from work-related illnesses linked to exposure to toxic substances. Since  the creation of Part E in 2004, over 135,000 claims have been filed and  DOL has paid about $4.4 billion on over 54,000 claims.", "Contracted workers who believe they may have been exposed to a toxic  substance related to their employment at an Energy worksite and have  become ill may submit a claim and supporting documentation, thereby  initiating an adjudication process resulting in the claim\u2019s approval or  denial. However, even after this decision has been reached, a claimant  may request that DOL reopen his or her claim under Part E, if the  claimant can submit new evidence or identify a change in a relevant  program policy. For example, new evidence can emerge related to a  claimant\u2019s exposure to a toxic substance, or to the relationship of a  particular toxic substance to a particular illness. If a claim is reopened, the  available evidence is reviewed through the adjudication process and  results in an approval or denial of the reopened claim. Little is known  about the outcomes of reopened claims.", "To assist the claims adjudication process, DOL has developed an online  database, known as the Site Exposure Matrices (SEM), which is used as  one of several resources in adjudicating claims. The SEM is a repository  of information on worksites, toxic substances, and associated illnesses.  The SEM has come under scrutiny by claimant advocates and others  concerned about its role in supporting claims adjudication. In addition, we  have previously reported on concerns about the scientific soundness of  the SEM\u2019s data linking toxic substances with occupational illnesses. In  2010, we suggested Congress consider establishing an independent  board to review and report on the scientific soundness of the SEM.  Federal law established the Advisory Board on Toxic Substances and  Worker Health (Advisory Board) in 2014.", "You asked us to review aspects of Part E claims for contracted Energy  workers and their survivors. In this review, we examined:  1.  How many compensation claims for illnesses resulting from exposure  to toxins did DOL reopen and what was their final outcome?  2.  To what extent has an advisory board on toxic substances and worker  health reviewed and advised DOL on the scientific soundness of  DOL\u2019s database on toxins and their potential links to occupational  diseases, and how has DOL responded?", "There is no generally accepted definition of the term \u201cscientific  soundness.\u201d For the purposes of this review, we define scientific  soundness in terms of the quality of the evidence on the health effects of  specified toxic substances, as determined by a systematic and  independent process to review and validate that evidence. We arrived at  this definition after consulting members of the Advisory Board and  officials of the National Academies of Sciences, Engineering, and  Medicine who reviewed the SEM. Additionally, we consulted with DOL  officials, who agreed that scientific soundness is related to the information  in the SEM on linkages between toxins and illnesses.", "To answer our research questions, we reviewed DOL guidance and  procedures, including relevant bulletins and circulars, and the Federal  EEOICPA Procedure Manual. We also reviewed an internal DOL analysis  of reopened claims conducted in 2017; annual reports of the Office of the  Ombudsman; an independent review of the SEM conducted by the  Institute of Medicine in 2013; and the charter, minutes, and related  documents of the Advisory Board from April 2016 to January 2018. We  reviewed all recommendations of the Advisory Board and DOL\u2019s  responses to those recommendations. We also reviewed federal laws,  regulations, and executive orders. In addition, we interviewed officials  from DOL and the Office of the Ombudsman, an office within DOL that  compiles and reports on claimants\u2019 concerns; officials of the National  Academies of Sciences, Engineering, and Medicine; members of the  Advisory Board on Toxic Substances and Worker Health (Advisory  Board); and a claimant advocate.", "To identify reopened Part E claims and their outcomes, we analyzed DOL  program data for calendar years 2012 through 2017. We selected data  beginning in 2012 to avoid any potential irregularities resulting from a  transition to a new data system in 2012. Because a claim may be  reopened at any time after it has been adjudicated with no limit to the  number of reopenings, we reviewed the most recently reopened claims  and their outcomes after reopening. To assess the outcomes of these  claims, using data that DOL provided, we examined both the initial  decision and subsequent final decision following reopening. We assessed  the reliability of the program data by (1) reviewing existing information  about the data and the system that produced them, and (2) interviewing  agency officials knowledgeable about the data. We determined the data  to be sufficiently reliable for the purposes of this report. See appendix I for  more information on our scope and methodology.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["EEOICPA, as amended, generally provides compensation to employees  of Energy under Part B, and under Part E, to its contractors, involved in  the production of U.S. nuclear weapons and who developed illnesses  related to their exposure to radiation and other toxins at Energy facilities.  During and shortly after World War II, the United States sponsored the  development, production, and testing of nuclear weapons. It used a  network of facilities which eventually expanded into a complex of as many  as 365 industrial sites and research laboratories throughout the country  that employed more than 600,000 workers. Some of the production sites  were owned by Energy or its predecessor agencies, and in many  instances contractors managed operations at the facilities. Workers used  manufacturing processes that involved handling dangerous materials and  were often provided inadequate protection from exposure, although  protective measures have increased over time. Because of national  security concerns, they also worked under great secrecy, were  unknowingly exposed to toxic materials, and often given minimal  information about the materials they handled and the potential health  consequences of exposure to them. In some cases, the extent of the  potential negative effects of the toxins may not have been fully  understood at the time of workers\u2019 exposure.", "EEOICPA, as amended, consists of two compensation programs, Part B  and Part E. The Part B program generally provides for $150,000 to  eligible current or former employees or their survivors, as well as  coverage of future medical expenses associated with certain radiogenic  cancer, chronic beryllium disease, and chronic silicosis. Part E provides  compensation to current or former contractors, subcontractors, or eligible  survivors of up to $250,000 for wage loss and impairment, as well as  coverage of medical expenses. Under certain circumstances, eligible  claimants may receive compensation under both Part B and Part E."], "subsections": [{"section_title": "Claims Adjudication and Reopening Claims", "paragraphs": ["Under Part E, a contracted Energy employee or survivor can file a  compensation claim, typically with a DOL district office (see fig. 1). Once  a claim is filed, a DOL claims examiner develops the claim and ultimately  recommends its approval or denial. To recommend an approval, the  claims examiner must determine that the claimant was a current or former  employee of an Energy contractor at a given Energy facility and that they  were exposed to a toxic substance at that facility. Additionally, the  examiner must find that it is at least as likely as not that the exposure was  a significant factor in aggravating, contributing to, or causing a covered  illness, and that the exposure was related to employment at an Energy  facility. One of the resources used by the claims examiner is the Site  Exposure Matrices (SEM), an online database of information on  worksites, toxic substances, and associated illnesses. If the claims  examiner determines that a claim meets all conditions, he or she  recommends that DOL\u2019s Final Adjudication Branch approve the claim.  The Final Adjudication Branch then reviews the recommendation and  issues a final decision. If the claimant provides new evidence before a  final decision is reached, the Final Adjudication Branch may return the  claim to the district office for additional development or issue a reversal.  DOL provides some assistance to claimants as claims are adjudicated,  such as assistance that may be required to develop facts pertinent to the  claim, customer service activities, and information available in hard copy  and on DOL\u2019s website. However, it is generally the claimant\u2019s  responsibility to establish entitlement to compensation under the law.", "If a claim is denied, claimants are informed of several options, one of  which is requesting that DOL reopen the claim. Claims can be reopened  any time after the Final Adjudication Branch has issued a final decision,  either as a result of a claimant request or agency action (see fig. 2).  There is no limit to the number of times a claimant may request a  reopening, though the claimant must either submit new evidence or  identify a change in a relevant program policy when submitting such a  request. Reasons for reopening can include an update to the SEM, new  medical evidence, or new evidence of covered employment, among  others. Moreover, a claimant may request reopening for each of multiple  illnesses or conditions. When a claimant requests a reopening, DOL will  review the request and either grant or deny the reopening, depending on  DOL\u2019s assessment as to whether there is sufficient evidence to warrant  reopening. When a reopening request is granted, DOL vacates the  previous final decision and submits the claim for readjudication.", "In addition, DOL may also reopen groups of related claims. When DOL  announces new evidence linking toxins to illnesses, it can also announce  plans to reopen groups of claims potentially affected by the new  evidence. In these instances, DOL announces the criteria for reopening,  which may involve specific substances or worksites, and provides  reopening instructions for claims examiners. For example, Circular 15-04,  issued in 2014 (now superseded) informed claims examiners that the  substance trichloroethylene had been linked to kidney cancer and that  previously denied Part E kidney cancer claims could be reopened. DOL  officials previously told us that such steps are limited to instances in  which a relatively large number of claims are potentially affected."], "subsections": []}, {"section_title": "Site Exposure Matrices (SEM)", "paragraphs": ["DOL claims examiners use the SEM to help determine workers\u2019 eligibility  for Part E compensation. DOL created this web-based database which  organizes and communicates information on the toxic substances  workers were potentially exposed to at specific Energy worksites, certain  buildings at the worksites, and while doing specific jobs at the worksites.  As of May 2018, the SEM included information on 16,461 toxic  substances and 129 former and current sites. It also cross-references the  toxic substances with diseases for which there is an established link. In  general, the SEM contains only causal links that are based on  epidemiological studies, and for which there is medical and scientific  consensus. The SEM provides a basis for exposure information, but is not  the sole source of information considered by claims examiners during  adjudication (see fig. 3).", "The SEM is publically available online and continually updated as new  exposure data are obtained. According to a 2016 DOL document, there  have been at least 656 revisions to the SEM since 2013. New links are  primarily drawn from a database of hazardous toxins and associated  diseases\u2014known as Haz-Map\u2014formerly maintained by the National  Library of Medicine. According to DOL officials, as new links are added to  Haz-Map, they are also added to the SEM.", "In 2010, we reported that DOL\u2019s efforts to update the SEM were not  subjected to independent outside review to provide assurance that the  SEM is comprehensive and scientifically sound. In 2013, the Institute of  Medicine evaluated the scientific rigor of the SEM in response to a  request from DOL. Its report noted that some examples of causal links  to diseases were missing from the SEM and questioned the SEM\u2019s  exclusive dependence on Haz-Map as its source for disease and causal  information. The report also identified Haz-Map\u2019s lack of peer review as a  key limitation. Specifically, the report noted that Haz-Map lacked  adequate oversight or content review by external, independent experts;  relied heavily on sources that were not peer-reviewed, such as textbooks;  and included references that were not easily accessible and were difficult  to check, making quality assurance and technical review difficult. In  addition, the report suggested that other sources be considered for  inclusion in the SEM."], "subsections": []}, {"section_title": "Advisory Board on Toxic Substances and Worker Health", "paragraphs": ["By law, the Advisory Board is tasked with providing specific categories of  technical advice to the Secretary of Labor regarding Part E of  EEOICPA. These categories are: (1) the SEM; (2) medical guidance for  claims examiners on weighing the medical evidence of claimants; (3)  evidentiary requirements for certain claims related to lung disease; and  (4) the work of certain experts, namely, industrial hygienists and  consulting physicians and their reports. The Advisory Board has  subcommittees aligned with these categories (see fig. 4).", "The Advisory Board charter provides for 12 to15 members and for 2-year  terms for these members. Furthermore, applicable provisions of the  Federal Advisory Committee Act\u2019s implementing regulations require that  Advisory Board membership be fairly balanced. Accordingly, its  members have included representatives of the medical, scientific, and  claimant communities. The Advisory Board is authorized until 2024."], "subsections": []}, {"section_title": "Office of the Ombudsman for EEOICPA", "paragraphs": ["The Office of the Ombudsman for EEOICPA is an independent office  within DOL. It was established by the National Defense Authorization Act  of 2005, to provide information to address the concerns of claimants and  potential claimants relating to EEOICPA, among other responsibilities.  The Office of the Ombudsman submits an annual report to Congress that  summarizes the number and types of complaints, grievances, and  requests for assistance that it has received during the year. The report  also includes an assessment of the most common difficulties encountered  by claimants and potential claimants each year. The Secretary of Labor is  required to provide a written response and must agree or disagree with  specific issues raised in the report. In addition, the Office of the  Ombudsman hosts and attends outreach events to assist claimants. The  Office of the Ombudsman may not make decisions on claims nor act as  an advocate for claimants."], "subsections": []}]}, {"section_title": "DOL Reopened Thousands of Claims Since 2012 and Approved Almost 70 Percent, but Some Claimants Faced Evidentiary Challenges", "paragraphs": [], "subsections": [{"section_title": "DOL Reopened More Than 7,000 Claims by Contracted Employees for Exposure to Toxins at Energy Worksites and Approved Most", "paragraphs": ["Based on the most recently reopened claims from calendar years 2012  through 2017, DOL reopened more than 7,000 claims filed by contracted  Energy employees. DOL subsequently approved compensation for 69  percent. The remaining claims were denied (13 percent), still awaiting a  final decision (2 percent), closed (2 percent), deferred (less than 1  percent) or had some other outcome (15 percent). (See fig. 5). Claims  with other outcomes refer to claims for which at least one claimed illness  was approved while the others were denied or deferred.", "Among those more than 7,000 claims, DOL initiated most of the  reopenings (80 percent) itself, with fewer reopenings initiated by  claimants. Regardless of a claim\u2019s previous status of approved or denied,  outcomes after reopening varied by who initiated the reopening. A higher  percentage of reopenings initiated by DOL were approved (73 percent, or  4,236 of 5,831 claims) than reopenings initiated by claimants (53 percent,  or 758 of 1,432 claims). (See table 1.)", "Officials at DOL and the Office of the Ombudsman said that DOL-initiated  reopenings are more likely to be approved because, in deciding to reopen  claims, DOL had already determined there was sufficient evidence to  warrant reopening. In addition, DOL-initiated reopenings primarily involve  large groups of claims, according to DOL officials. They said that many  DOL-initiated reopenings are triggered by the establishment of cohorts of  claims for radiation-related cancer or by DOL bulletins or circulars about  new evidence linking toxins and specific illnesses at Energy worksites.  (For a list of DOL bulletins and circulars associated with reopenings, see  app. II.) In these situations, DOL officials said claims examiners  manually review all previously denied claims that could be affected.", "Of the more than 7,000 reopened claims for contracted Energy  employees from 2012 through 2017, more than 6,000 had been  previously denied versus receiving another outcome. When reopened,  whether initiated by DOL or claimants, most (70 percent, or 4,307) were  approved (see table 2). In addition, as with all claims, a higher  percentage of previously denied claims were approved (75 percent) if  reopened at DOL\u2019s initiative compared to those reopened at claimants\u2019  initiative (52 percent)."], "subsections": []}, {"section_title": "Reasons Reopened Claims Were Denied Included Missing Linkage between Toxin and Illness and Insufficient Medical Evidence", "paragraphs": ["DOL officials provided data showing that most of the claims reopened  from 2012 through 2017 that were subsequently denied compensation  had common reasons, including insufficient medical evidence, ineligible  survivors, or maximum benefits already met (see table 3)."], "subsections": []}, {"section_title": "Some Claimants Faced Challenges in Understanding What Evidence Was Required to Reopen Their Claim", "paragraphs": ["According to Office of the Ombudsman officials, some claims may have  been denied as a result of claimants not understanding the evidence  required for a reopening. These officials also said that claimants  experience ongoing challenges at different stages of the adjudication  process, including reopening, with regard to evidence required to support  their claim. In the 2015 Annual Report to Congress, the Ombudsman  noted claimants\u2019 concerns about the reopening process. In particular,  the Ombudsman found that DOL\u2019s written communication with claimants  requesting additional evidence or informing them of the final decision did  not clearly explain what specific evidence was needed or why previously  submitted evidence was deemed insufficient. In its 2016 annual report,  while the Office of the Ombudsman acknowledged DOL\u2019s efforts to  ensure that decisions on claims are adequately reasoned and  documented, and found that some recently issued decisions show  improvement, it also found some variation in decision quality among  claims examiners. Furthermore, consistent with its 2015 report, it also  found that some claimants encounter challenges during the reopening  process with written communication that is not clear on the evidence  needed to reopen a claim. Our prior work also found deficiencies in the  quality of a sample of DOL\u2019s written communication with claimants and  recommended that all claimant correspondence for Recommended and  Final Decisions receive supervisory review. In that report, we noted that  DOL\u2019s own monitoring also indicated that some of the letters were not  always clear about the evidence needed. Moreover, a recent review by  DOL\u2019s Office of the Solicitor of 77 denied reopening requests found  shortcomings in the quality of some decision letters. These included the  lack of a clear explanation for the denial, discussion of medical evidence  submitted by the claimant, and discussion of why evidence submitted by  the claimant was considered insufficient to warrant a reopening. Office of  the Ombudsman officials told us that some claimants resubmit the same  evidence they provided previously. This is due, in part, to claims  examiners not acknowledging that they received and reviewed evidence  when it was initially submitted, or to decision letters not explaining why  the evidence submitted was not sufficient, according to Ombudsman  officials. Consequently, claimants do not know what specific additional  evidence may be needed and their claims may not be reopened and/or  approved for compensation, these officials said. Failure to establish  causation between exposure and illness and insufficient medical evidence  are the two most common reasons why claimant-initiated reopenings are  denied.", "In its written response to the 2015 report by the Office of the  Ombudsman, DOL stated it was undertaking a review of its website and  printed material to improve communication with claimants. DOL also  stated that in 2015 it began providing training to claims examiners to  improve the quality of written letters to claimants, including better  explanation of what additional evidence would be needed to reopen a  claim. DOL stated that improved communication would address  claimants\u2019 confusion and would allow staff to serve claimants on specific  issues.", "As of July 2018, DOL officials said they have taken a number of steps to  assist claimants and improve communication with them. For example,  DOL conducts workshops for claimants\u2019 Authorized Representatives  covering such topics as the evidence needed to support a claim and how  to request a reopening. DOL officials also said, in 2016, program  officials visited all district offices to provide training on topics such as  writing effective letters using reader-friendly language. Officials said that  they continually review printed material and are currently updating the  website to provide more concise information on the claims process,  including how to request reopening of a claim.", "In addition, DOL officials stated that they recently hired a training analyst  to update claimant resources posted to the website and to develop  additional training for claims examiners. Officials said that the analyst will  also develop a methodology for assessing the effectiveness of the  training. Assessing the effectiveness of training represents an opportunity  for DOL to address claimants\u2019 concerns about the clarity of written  correspondence they receive on claim evidence. According to Standards  for Internal Control in the Federal Government, management should  conduct ongoing monitoring and externally communicate the necessary  quality information to achieve the entity\u2019s objectives. These standards  also require management to periodically evaluate its methods of  communication so that it has the appropriate tools to communicate quality  information. In addition, the EEOICPA Procedure Manual states that  claims examiners must ensure that written decisions are clear, concise,  and well-written with language that clearly communicates the necessary  information. An assessment of DOL\u2019s training which considers claimant  concerns could help DOL better understand why some claimants remain  confused about the reopening process and do not submit evidence key to  supporting their claim. Until then, the agency will be unable to determine  whether its training has resulted in improving communication with  claimants and to target future training resources effectively."], "subsections": []}]}, {"section_title": "DOL Has Not Fully Implemented Advisory Board Recommendation to Enhance Database Used to Support Claims", "paragraphs": ["The Advisory Board in 2016 and 2018 recommended DOL incorporate  additional, peer-reviewed data sources on the links between toxic  substances and illnesses catalogued in the SEM, but while DOL  previously agreed that doing so would be useful, it has not yet added all  the sources recommended by the Advisory Board. According to Advisory  Board members, incorporating these additional sources would enhance  the SEM by making it more comprehensive and scientifically sound.", "The Advisory Board\u2019s work on the SEM began at its first meeting in April  2016 with the creation of a subcommittee on the SEM (see fig. 6). The  subcommittee reviewed the scientific soundness of the SEM and in  October 2016 the Advisory Board provided one of two related  recommendations to DOL that addressed the scientific soundness of the  SEM\u2019s data on toxic substances and diseases.", "At its October 2016 meeting, the Advisory Board recommended DOL  incorporate 13 additional information sources created by other agencies  or entities into the SEM. This recommendation was consistent with the  Institute of Medicine\u2019s recommendation to DOL in its 2013 report on the  SEM. In September 2017, DOL responded to this recommendation,  noting that certain additional sources identified by the Institute of  Medicine might be useful. In its response, DOL asked the Advisory Board  to narrow its list of 13 databases to those that would be most relevant,  noting that DOL found that some of these sources were not relevant to  occupational exposure, were redundant, or contradicted other sources.  DOL also requested the Advisory Board\u2019s advice on how the  recommended sources could be used in the SEM. In January 2018, the  Advisory Board made its second recommendation regarding the scientific  soundness of the SEM\u2019s data on toxic substances and specific diseases  by identifying three priority information sources from the 13 originally  recommended in October 2016 (see table 4). According to DOL, the Haz- Map has included one of these three sources\u2014the monographs on  human carcinogens of the International Agency for Research on  Cancer\u2014since the Haz-Map was first published in 2002, and included in  the SEM since approximately 2006. According to DOL, the International  Agency for Research on Cancer is recognized as the world\u2019s most  authoritative resource for information on human carcinogens and an  important source of information for populating health effect data in SEM,  given its assembled expertise and the scientific veracity of its  publications. Its incorporation in the SEM has prompted reopenings of  affected claims. DOL officials said Advisory Board members may have  been unaware of this earlier incorporation of data in the SEM. In its  response to DOL, however, the Advisory Board stated that it continued to  believe that incorporation of all of the information sources originally  recommended by the Institute of Medicine would be useful.", "The Advisory Board\u2019s recommendations on incorporating additional peer- reviewed information sources in the SEM were consistent with the earlier  report of the Institute of Medicine, which found that these additional data  sources generally follow a systematic methodology, reflect peer review,  provide more information on linkages between toxic substances and  specific diseases, and could enhance the scientific soundness of the  SEM.", "The three information sources that the Advisory Board recommended for  inclusion in the SEM in January 2018 provide information on toxic  substances and their health effects, and all are peer-reviewed. The  Environmental Protection Agency\u2019s Integrated Risk Information System  contains information on 511 chemicals and provides fundamental  scientific information used to develop human health risk assessments.  The National Toxicology Program\u2019s Report on Carcinogens currently lists  248 substances, agents, and mixtures that are known or reasonably  anticipated to cause cancer in humans. The International Agency for  Research on Cancer, part of the World Health Organization, is considered  the authoritative source for information on cancer, according to officials of  the National Academies of Sciences, Engineering, and Medicine.", "In August 2018, DOL responded to the Advisory Board\u2019s recommendation  regarding these three potential additional data sources. DOL\u2019s response  noted that it uses relevant data from the International Agency for  Research on Cancer in claims adjudication, including updates to these  data. Regarding the other two data sources, however, DOL declined the  recommendation. While noting that these two sources include voluminous  and complex data, DOL also noted that the Advisory Board did not offer  its own analyses of either the credibility or the scientific reliability of the  materials in these databases, and DOL did not think it appropriate to add  the databases\u2019 information on health effects to the SEM in the absence of  any rigorous and comprehensive investigations by the Advisory Board.  DOL\u2019s response also noted that it would consider additional input should  the Advisory Board be in a position to offer more specific guidance  regarding the content of data sources that would be applicable and  appropriate to the administration of the program."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Contracted Energy employees who carried out the nation\u2019s nuclear  weapons production were often unaware of the extreme personal hazards  they faced while serving their nation and learned of the risk only when  they were later stricken by illness caused by exposure to toxins. It is  imperative their claims for compensation be given the attention and care  needed to fairly administer this compensation program. The most  scientifically up-to-date information should be used to determine the  health effects of various toxic substances, and claimants should be  assisted in their efforts to meet statutory requirements for claims. Despite  DOL efforts to improve the quality of written communication to claimants,  some claimants continue to be confused about the evidence needed to  successfully reopen and support their claim. DOL letters that clearly  communicate what evidence is needed to support a claim could provide  claimants with the opportunity to better understand the reopening process  while minimizing the frustration of having their claim repeatedly denied  and assuring a fair consideration of such claims."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making one recommendation:  The Secretary of Labor, in conducting any assessment of its staff training  designed to improve clarity of communication with claimants, should  ensure that the assessment considers claimants\u2019 challenges with  understanding DOL\u2019s written communications on the evidence needed to  successfully reopen or otherwise support a claim."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the Department of Labor (DOL) for  comment. In its comments, reproduced in appendix III, DOL neither  agreed nor disagreed with our recommendation to ensure that the  assessment of staff training considers claimants\u2019 challenges regarding the  evidence needed to successfully reopen or otherwise support a claim.  However, DOL acknowledged that it plans to focus its staff training efforts  on a variety of needed training topics, including improving the quality of  written communications. DOL further noted that its recently hired training  analyst will be responsible for, among other things, designing assessment  measures to gauge the quality of training and the effect it has improving  the overall quality of claim outcomes. We continue to encourage DOL to  design its assessment so that it considers claimants\u2019 challenges in  understanding the evidence needed.", "DOL also provided technical comments, which we incorporated as  appropriate. In addition, we provided relevant report sections to the Office  of the Ombudsman, members of the Subcommittee on the Site Exposure  Matrices of the Advisory Board on Toxic Substances and Worker Health,  and officials of the National Academies of Sciences, Engineering, and  Medicine for their technical comments and incorporated them, as  appropriate.", "As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from its  issue date. At that time, we will send copies of this report to the  appropriate congressional committees; the Secretary of Labor; and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or gurkinc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["We examined (1) the number of compensation claims for illnesses  resulting from exposure to toxins that were reopened by the Department  of Labor (DOL) and their final outcome; (2) the extent to which an  advisory board on toxic substances and worker health reviewed and  advised DOL on the scientific soundness of DOL\u2019s database on toxins  and their potential links to occupational diseases, and DOL\u2019s response.", "To address our objectives, we:  1.  Reviewed relevant federal laws, regulations and guidance;  2.  Requested summary data from 2012 to 2017 from DOL related to the  reopening process, including claims assessed for reopening, claims  actually reopened, and outcomes for reopened claims and, for claims  denied after being reopened, the reasons for denial;  3.  Reviewed DOL program documents;  4.  Reviewed recommendations of the Advisory Board on Toxic  Substances and Worker Health (Advisory Board) submitted to DOL  from October 2016 to January 2018, and DOL\u2019s responses to those  recommendations, as well as Advisory Board minutes and other  documentation;  5.  Interviewed DOL officials; members of the Advisory Board on Toxic  Substances and Worker Health; officials of the National Academies of  Sciences, Engineering, and Medicine; and a representative of an  advocacy group.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.", "Review of Federal Laws, Regulations, and Guidance  We reviewed relevant federal laws, including the Energy Employees  Occupational Illness Compensation Program Act of 2000 (EEOICPA),  the National Defense Authorization Act of 2015, National Defense  Authorization Act for Fiscal Year 2005, and the Federal Advisory  Committee Act, as well as relevant federal regulations. In addition, we  reviewed relevant guidance, including the Federal Energy Employees  Occupational Illness Compensation Program Act Procedure Manual, as  well as relevant Energy Employees Occupational Illness Compensation  Program Act Bulletins and Circulars.", "Analysis of DOL Data on Reopened Claims and Subsequent  Decisions  To address our first objective, we obtained and analyzed data from DOL\u2019s  Energy Compensation System from January 1, 2012 through December  31, 2017. We selected 2012 as the first year of our review period because  the program transitioned to a new data system that year, and 2017 as the  last year to obtain the most recent data available at the time of our  review. We obtained and analyzed data for the following types of claims:", "Claims reviewed for reopening. We analyzed the data DOL  provided on claims that it reviewed for reopening, that is, claimant  requests for reopening (claimant-initiated reopenings), and claims  identified by DOL for potential reopening (DOL-initiated reopenings).  The total claims DOL reviewed for reopening was 10,652.", "All claims actually reopened: We obtained the aggregate number of  all claims that were reopened. These claims totaled 8,234. We also  obtained data for each individual claim, including reopening request  date, reopening request type, reopening date, original final decision  type, and outcome type. The reopening request type indicates  whether the claim was claimant- or agency-initiated. The original final  decision type refers to the final decision when the claim was originally  adjudicated. The outcome type refers to the subsequent final decision  following reopening.", "Most recently reopened claims: As we did for all reopened claims,  we obtained aggregate data on all the most recently reopened claims.  These claims totaled 7,263. By using the most recently reopened  claims, we were able to examine one claim for each claimant, to  provide a consistent unit of analysis, given that claimants can have  multiple claims at one time, and there is no limit on the number of  times they can request reopening of their claims. We also obtained  data on each individual claim that included the same categories as  those listed above for all reopened claims.", "We assessed the reliability of the data obtained by (1) reviewing existing  information about the data and the system that produced them, and (2)  interviewing agency officials knowledgeable about the data. We  determined that the data were sufficiently reliable for purposes of  providing information on the number of claims for illnesses resulting from  exposure to toxins that DOL reopened since 2012 and the outcome.  However, there was one limitation to the data obtained: according to DOL  officials, the Energy Compensation System does not allow a particular  final decision to be linked to a particular reopened claim, given that claims  may be reopened multiple times and may be filed for multiple conditions.  As a result, DOL officials queried the system to match the final decision  issued most recently after the reopening as the basis of the provided  data. DOL officials explained that the data system\u2019s codes used to record  final decisions do not reflect the full complexity of a case, and reflect the  fact that claims may be filed for multiple conditions. To illustrate this,  figure 7 depicts a hypothetical example of a claimant requesting  reopening of claims for three conditions (emphysema, hearing loss, and  bladder cancer) that had been denied previously. The code assigned to  the final decision, although appropriate, does not reflect the full  complexity of the claims\u2019 history. In the example below, given that there  were three initial reopening requests for different conditions, a new  reopening request for one of these conditions (hearing loss), and two  subsequent final decisions, it is unclear from the coding in DOL\u2019s system  which final decision corresponds to which reopening request.", "We reviewed DOL summary tables on claims data to analyze the most  recently reopened claims from January 1, 2012 through December 31,  2017. To assess the outcomes of these claims, we examined both the  initial and subsequent final decisions. We first grouped DOL final  decisions into categories (see table 4). We decided to develop an \u201cOther\u201d  category so that claims with both approvals and denials would be  grouped together. Claimants can have multiple medical conditions and  when they receive a final decision, some medical conditions may be  approved while others are denied. Claims with such mixed outcomes are  coded in the Energy Compensation System as \u201cApproved and Denied  Only\u201d or \u201cApproved, Denied and Deferred Only.\u201d The code \u201cApproved,  Denied and Deferred Only\u201d refers to claims where a final decision has  been rendered on claims for some illnesses\u2014approving at least one and  denying at least one\u2014while a decision for at least one other claimed  illness is deferred for further development until it is ready for a final  decision. We then analyzed the initial and the subsequent final decisions.", "To address our first objective, we reviewed certain program documents.  Specifically, we reviewed selected Accountability Reviews, which are  conducted by the Division of Energy Employees Occupational Illness  Compensation to monitor the quality of claims adjudication. According to  program officials, these reviews serve as a quality control tool and  regularly examine whether decisions on claims were supported as well as  issues such as payment accuracy. They may also occasionally include  other issues, including issues related to the reopening process. In  addition, we reviewed a review of reopening requests that were denied  conducted by the DOL Office of the Solicitor in 2017.", "Additionally, we reviewed information related to reopened claims in the  annual reports of the Office of the Ombudsman for calendar years 2012  through 2015, and DOL\u2019s responses to the reports for calendar years  2013 through 2015.", "Review of Advisory Board Recommendations, DOL Responses, and  Other Documents  To address our second objective, we reviewed all recommendations that  the Advisory Board made to DOL about the Energy Employees  Occupational Illness Compensation Program Act of 2000, in order to  identify those recommendations related to the scientific soundness of the  Site Exposure Matrices (SEM), and DOL\u2019s responses to these  recommendations. Specifically, we reviewed the eight recommendations  made by the Advisory Board in October 2016, and DOL\u2019s response in  November 2017; the three recommendations made by the Advisory Board  in June 2017, and DOL\u2019s response in March 2018; the seven overarching  recommendations made by the Advisory Board in April 2017, and DOL\u2019s  response in September 2017; and the ten recommendations made by the  Advisory Board in January 2018, all of which referred back to previous  recommendations, in some cases revising the previous recommendation.  We also reviewed DOL\u2019s responses to these recommendations in August  2018. In addition, we reviewed the Advisory Board\u2019s charter and minutes  from selected meetings of the full Advisory Board and from the  Subcommittee on the Site Exposure Matrices.", "In addition, in order to understand the Advisory Board\u2019s recommendations  about the Site Exposure Matrices, we reviewed a report on the scientific  rigor of the SEM, Review of the Department of Labor\u2019s Site Exposure  Matrix Database (Washington, D.C.: The National Academies Press,  2013). DOL asked the Institute of Medicine to review the SEM database  and its underlying source of toxic substance\u2013occupational disease links.  To review the SEM, the Institute of Medicine formed an ad hoc committee  of experts in occupational medicine, toxicology, epidemiology, industrial  hygiene, public health, and biostatistics, who conducted an 18-month  study to review the scientific rigor of the SEM.", "To address both objectives, we interviewed DOL officials and others with  relevant knowledge or experience of the Energy Employees Occupational  Illness Compensation Program Act of 2000. Specifically, we interviewed  officials of DOL\u2019s Division of Energy Employees Occupational Illness  Compensation about topics including the reopening process, how data  about reopened claims are stored in the information system, reviews of  specific reopened claims, and DOL\u2019s response to recommendations of  the Advisory Board. We also interviewed officials of DOL\u2019s Office of the  Ombudsman for EEOICPA about topics such as claimants\u2019 concerns  about the reopening process and about the SEM.", "In addition, we interviewed officials of the National Academies of  Sciences, Engineering, and Medicine, who facilitated the work of the committee that produced the report, Review of the Department of Labor\u2019s  Site Exposure Matrix. We asked the officials about topics such as the  process used to recruit experts for the review, the report\u2019s methodology,  the report\u2019s approach to scientific rigor, and the report\u2019s  recommendations.", "Additionally, we interviewed members of the Advisory Board on Toxic  Substances and Worker Health\u2019s Subcommittee on the Site Exposure  Matrices, who represent the medical, scientific, and claimant  communities. We asked the Advisory Board members about topics such  as their review of the SEM and the priorities, if any, that they considered  in doing so; their approach to scientific rigor and scientific soundness; and  their recommendations to DOL. Finally, we interviewed a representative  of the Alliance of Nuclear Workers Advocacy Groups about topics that  included the challenges, if any, that claimants experience regarding  reopened claims and use of the SEM, and the Advisory Board\u2019s  recommendations to DOL."], "subsections": []}, {"section_title": "Appendix II: List of Department of Labor Bulletins and Circulars About Reopenings of Energy Employees Part E Claims", "paragraphs": ["Energy Employees Occupational Illness Compensation Program Act  Bulletins Associated with Part E Reopenings  1.  Department of Labor, EEOICPA Bulletin 12-01, Chronic Lymphocytic  Leukemia (CLL) as Radiogenic Cancer under the Energy Employees  Occupational Illness Compensation Program Act (EEOICPA), March  7, 2012.  2.  Department of Labor, EEOICPA Bulletin 13-02, Systematic Review of  Denied Part E Cases, February 21, 2013.  3.  Department of Labor, EEOICPA Bulletin 16-01, Criteria for  Establishing Causation for Asthma Claims Under Part E of the Energy  Employees Occupational Illness Compensation Program Act  (EEOICPA), s, October 26, 2015.  4.  Department of Labor, EEOICPA Bulletin 16-02, Presumptions  Available for Accepting Chronic Obstructive Pulmonary Disease  (COPD) Under Part E of the Energy Employees Occupational Illness  Compensation Program Act, December 28, 2015.  5.  Department of Labor, EEOICPA Bulletin 16-03, Instructions for Use of  the Direct Disease Linked Work Processes (DDLWP) in the Site  Exposure Matrices (SEM) under Part E of the Energy Employees  Occupational Illness Compensation Program Act (EEOICPA), July 11,  2016.", "Energy Employees Occupational Illness Compensation Program Act  Circulars Associated with Part E Reopenings  1.  Department of Labor, EEOICPA Circular 13-06, Review of Denied  Bladder Cancer Cases under Part E. (Superseded by Procedure  Manual Chapter 15), February 21, 2013.  2.  Department of Labor, EEOICPA Circular 13-12, Review of Denied  Ovarian Cancer Cases under Part E. (Superseded by Procedure  Manual Chapter 15), August 29, 2013.  3.  Department of Labor, EEOICPA Circular 15-04, Review of Cases  Involving Exposure to TCE and the Development of Kidney Cancer.  (Superseded by Procedure Manual Chapter 15), November 1, 2014.  4.  Department of Labor, EEOICPA Circular 15-05, Occupational  Exposure Guidance Relating to Asbestos. (Superseded by Procedure  Manual Chapter 15), December 17, 2014.  5.  Department of Labor, EEOICPA Circular 17-04, Rescind Post 1995  Toxic Exposure Guidance, February 2, 2017.  6.  Department of Labor, EEOICPA Circular 18-01, Idiopathic Disease  Diagnosis, December 6, 2017."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Meeta Engle (Assistant Director),  Chris Morehouse (Analyst-In-Charge), and LaToya King made key  contributions to this report. Also contributing to this report were Susan  Aschoff, James Bennett, Joseph Cook, Sheila R. McCoy, Jean McSween,  Alex Galuten, David Perkins, Tim Persons, Benjamin Sinoff, Almeta  Spencer, and Jerome Sandau."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Energy Employees Compensation: DOL Generally Followed Its  Procedures to Process Claims but Could Strengthen Some Internal  Controls. GAO-16-74. Washington, D.C.: March 10, 2016.", "Energy Employees Compensation: Additional Independent Oversight and  Transparency Would Improve Program\u2019s Credibility. GAO-10-302.  Washington, D.C.: March 22, 2010.", "Energy Employees Compensation: Actions to Promote Contract  Oversight, Transparency of Labor\u2019s Involvement, and Independence of  Advisory Board Could Strengthen Program. GAO-08-4. Washington,  D.C.: October 26, 2007.", "Energy Employees Compensation: Adjustments Made to Contracted  Review Process, But Additional Oversight and Planning Would Aid the  Advisory Board in Meeting Its Statutory Responsibilities. GAO-06-177.  Washington, D.C.: February 10, 2006."], "subsections": []}], "fastfact": ["For decades, many government and contract workers building nuclear weapons were exposed to toxic substances. Since 2004, a Department of Labor program has provided $4.4 billion in compensation to those claiming exposure-related illnesses.", "Earlier we found Labor's explanations of claim denials and the evidence needed to support a claim could be unclear. This could make it harder to refile denied claims.", "This report found Labor ultimately approved many denied claims. From 2012 through 2017, it reopened 7,000 claims and approved 69% of them.", "We recommended better training for claim reviewers on communicating what is needed to reopen a claim."]}
{"id": "GAO-18-642T", "url": "https://www.gao.gov/products/GAO-18-642T", "title": "Bank Secrecy Act: Further Actions Needed to Address Domestic and International Derisking Concerns", "published_date": "2018-06-26T00:00:00", "released_date": "2018-06-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In recent years, some Southwest border residents and businesses reported difficulty accessing banking services, including experiencing bank account terminations and bank branch closings in the region. In addition, the World Bank and others have reported that some money transmitters have been losing access to banking services with depository institutions.", "This statement is based on findings from GAO's February 2018 report on access to banking services along the Southwest border ( GAO-18-263 ) and March 2018 report on the effects of derisking on remittance flows to fragile countries ( GAO-18-313 ). GAO discusses (1) the extent to which banks are terminating accounts and closing branches in the Southwest border region, (2) the extent to which money transmitters serving selected fragile countries are facing banking access challenges, and (3) actions relevant U.S. agencies have taken to respond to these challenges. For those reports, GAO surveyed more than 400 banks, developed an econometric model on the drivers of branch closures, and conducted case studies on four countries to assess the effects of derisking on remittances flows."]}, {"section_title": "What GAO Found", "paragraphs": ["\u201cDerisking\u201d is the practice of depository institutions limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering or other criminal activity such as financing to terrorist groups. In its February 2018 report, GAO found that money laundering risk is high in the Southwest border region because of the high volume of cash transactions, the number of cross-border transactions, and foreign account holders. According to GAO's nationally representative survey of banks, an estimated 80 percent (+/- 11) of Southwest border banks limited or did not offer accounts to customers that are considered high risk for money laundering because the customers drew heightened Bank Secrecy Act/anti-money laundering (BSA/AML) oversight\u2014behavior that could indicate derisking. Nationally, GAO's econometric analysis suggested that counties that were urban, younger, had higher income, or had higher money laundering-related risk were more likely to lose branches.", "In March 2018, GAO found that money transmitters (businesses that facilitate global money transfers) serving Haiti, Liberia, Nepal, and especially Somalia\u2014 countries it identified as fragile\u2014all reported losing bank accounts or having restrictions placed on them during the last 10 years. As a result, 9 of the 12 money transmitters GAO interviewed, including all 4 that served Somalia, reported using channels outside the banking system (hereafter referred to as nonbanking channels), such as transporting cash to transfer funds, and that this increased their operational costs and exposure to risks. Furthermore, some banks GAO interviewed reported that they closed the accounts of money transmitters because of the high cost of due diligence actions they considered necessary to minimize the risk of fines under BSA/AML regulations. Department of the Treasury (Treasury) officials noted that despite information that some money transmitters have lost bank accounts, Treasury saw no evidence that the volume of remittances was falling or that costs of sending remittances were rising.", "To address concerns about derisking, Treasury and federal banking regulators (the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation), have taken actions including issuing guidance to banks and conducting some evaluations to assess the extent to which derisking is occurring. While agencies were engaged in BSA/AML regulatory reviews, these were limited in scope and had not evaluated how regulatory concerns may influence banks to engage in derisking or to close branches. Without assessing the full range of BSA/AML factors that may be influencing banks to derisk or close branches, Treasury, the federal banking regulators, and Congress do not have the information needed to determine if BSA/AML regulations and their implementation can be made more effective or less burdensome. Moreover, in March 2018 GAO reported that Treasury could not assess the effects of money transmitters' loss of banking access on remittance flows because existing data did not allow Treasury to identify remittances transferred through banking and nonbanking channels. Nonbanking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and terrorism financing."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made five recommendations in the two reports: to Treasury and the federal banking regulators to conduct a retrospective review of BSA/AML regulations and their implementation, and to Treasury to assess shifts in remittance flows to nonbanking channels. Banking regulators agreed with the recommendations. GAO requested comments from Treasury, but none were provided."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent work on derisking  and how it may be affecting the availability of banking services to  customers in the Southwest border region and money transmitters who  transmit money to fragile countries. Derisking is the practice of  depository institutions limiting certain services or ending their  relationships with customers to, among other things, avoid perceived  regulatory concerns about facilitating money laundering or other criminal  activity such as financing to terrorist groups. Money laundering and  terrorist financing pose threats to national security and the integrity of the  financial system and the Bank Secrecy Act (BSA) is an important tool in  federal law enforcement efforts to detect and deter the use of financial  institutions for such criminal activity. The BSA and its implementing  regulations generally require financial institutions, including banks and  money transmitters, to collect and retain various records of customer  transactions, verify customers\u2019 identities, maintain anti-money laundering  (AML) programs, and report suspicious transactions.", "However, in recent years, some Southwest border residents and  businesses reported difficulty accessing banking services, including  experiencing bank account terminations and bank branch closures in the  region. In addition, the World Bank and others have reported that some  money transmitters have been losing access to banking services with  depository institutions. Some have attributed these challenges to  derisking.", "My remarks today are based on our February 2018 report on derisking  along the Southwest border and our March 2018 report on remittances to  fragile countries. My statement will focus on the extent to which (1)  banks are terminating accounts and closing branches in the Southwest  border region and their reasons for any terminations and closures, (2)  money transmitters are facing banking access challenges in remitting  funds from the United States to selected fragile countries, and (3) relevant  U.S. agencies have taken action to assess and respond to concerns  about derisking and loss of banking access.", "For the report on derisking in the Southwest border region, we analyzed  data on Suspicious Activity Reports (SAR) and Currency Transaction  Reports (CTR) as well as data on national and Southwest border region  branch closures. We combined the data on branch closures with  demographic, economic, and money laundering-related risk data and  conducted an econometric analysis designed to examine the potential  drivers of branch closures. Despite the robustness of our results and our  efforts to control for relevant factors, our results are subject to a number  of caveats associated with this type of empirical work and as such we  interpret these results with some degree of caution. We also reviewed  agency documentation and guidance to banks related to derisking and  documentation on BSA/AML retrospective reviews that the Department of  the Treasury\u2019s (Treasury) Financial Crimes Enforcement Network  (FinCEN) and the federal banking regulators\u2014 the Board of Governors of  the Federal Reserve System (Federal Reserve), Federal Deposit  Insurance Corporation (FDIC), and the Office of the Comptroller of the  Currency (OCC)\u2014have conducted. Finally, we interviewed  representatives from 19 Southwest border banks, a variety of banking  industry groups and trade associations, and officials from FinCEN and the  federal banking regulators.", "For the report on remittances to fragile countries, we identified four case- study countries: Haiti, Liberia, Nepal, and Somalia. We interviewed 12  out of 18 money transmitters that the World Bank identified as accounting  for at least 80 percent of the market transfers from the United States to  each of our case-study countries. We also interviewed officials from the  federal banking regulators, Treasury, and eight extra-large banks. The  results of our interviews are not generalizable. In addition, we analyzed  available data on remittances sent through banks as well as cash  declarations at U.S. ports of exit.", "For both reports, we administered a web-based survey to a nationally  representative sample of 406 banks in the United States, including 115  Southwest border banks. Additional details on our scope and  methodology are available in our published reports.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "BSA/AML Regulation and Enforcement for Banks and Money Transmitters", "paragraphs": ["The BSA established reporting, recordkeeping, and other AML  requirements for financial institutions. Regulation under and enforcement  of BSA involves several federal agencies. FinCEN is responsible for  administering the BSA and has authority for enforcing compliance with its  requirements and implementing regulations, including through civil money  penalties. FinCEN issues regulations under BSA and delegated BSA/AML  examination authority for banks to the federal banking regulators. The  federal banking regulators have issued their own BSA regulations that  require banks to establish and maintain a BSA/AML compliance  program. The federal banking regulators may take enforcement actions  for violations of BSA/AML requirements. They may also assess civil  money penalties against financial institutions and individuals  independently, or concurrently with FinCEN.", "Both federal and state agencies oversee money transmitters. FinCEN has  delegated examination authority for BSA compliance for money  transmitters to the Internal Revenue Service (IRS). Money transmitters  must register with FinCEN and provide information on their structure and  ownership. According to Treasury, in all states except one, money  transmitters are required to obtain licenses from states in which they are  incorporated or conducting business.", "All banks and money transmitters are required to establish an AML  compliance program that includes policies, procedures, and processes  which, at a minimum, must provide for (1) a system of internal controls to  ensure ongoing compliance, (2) a designated individual or individuals  responsible for managing BSA compliance (BSA compliance officer), (3)  training for appropriate personnel, and (4) independent testing for  BSA/AML compliance. Additionally, as of May 11, 2018, banks and  certain other financial institutions are required to implement appropriate  risk-based procedures for conducting ongoing customer due diligence.  Banks must also have policies and procedures for opening accounts and  verifying the identity of each customer and monitoring transactions and  reporting suspicious activity. Finally, banks and money transmitters must  comply with certain reporting requirements, including the following:", "CTR: A bank must electronically file a CTR for each transaction in  currency\u2014such as a deposit or withdrawal\u2014of more than $10,000", "SAR: Banks are required to electronically file a SAR when a  transaction involves or aggregates at least $5,000 in funds or other  assets, and the institution knows, suspects, or has reason to suspect  that the transaction meets certain criteria qualifying as suspicious."], "subsections": []}, {"section_title": "Remittance Transfer Methods", "paragraphs": ["Remittances can be sent through money transmitters and banks, among  other organizations. International remittances through money transmitters  and banks may include cash-to-cash money transfers, international wire  transfers, some prepaid money card transfers, and automated  clearinghouse transactions. If a remittance sender\u2019s bank does not have a  direct relationship with the remittance recipient\u2019s bank, the bank-to-bank  transfer scenario becomes more complicated. In such cases, one or more  financial institutions may rely upon correspondent banking relationships to  complete the transaction. A typical remittance sent through a bank may  be in the thousands of dollars, while the typical remittance sent by money  transmitters is usually in the hundreds of dollars.", "Historically, many consumers have chosen to send remittances through  money transmitters due to convenience, cost, familiarity, or tradition.  Money transmitters typically work through agents\u2014separate business  entities generally authorized to, among other things, send and receive  money transfers. Money transmitters generally operate through their own  retail storefronts, or through grocery stores, financial services outlets,  convenience stores, and other retailers that serve as agents. Figure 1  shows one type of common money transmitter transaction known as  cash-to-cash transfer."], "subsections": []}, {"section_title": "Remittances to Case Study Countries", "paragraphs": ["Remittances from the United States are an important source of funds for  our case-study countries\u2014Haiti, Liberia, Nepal, and Somalia. The  Organisation for Economic Co-operation and Development identified  these countries as fragile states because of weak capacity to carry out  basic governance functions, among other things, and their vulnerability to  internal and external shocks such as economic crises or natural  disasters."], "subsections": []}]}, {"section_title": "Risks Related to Money Laundering Appeared to Be a Factor in Reduced Access to Banking Services for Southwest Border Customers", "paragraphs": ["In our February 2018 report, we found that money laundering risk is high  in the Southwest border region because of the high volume of cash  transactions, the number of cross-border transactions, and foreign  account holders. Our nationally representative survey found that many  Southwest border banks may be engaging in derisking. Nationally, our  econometric analysis suggested that counties that were urban, younger,  had higher income, or had higher money laundering-related risk were  more likely to lose branches. Money laundering-related risks were likely to  have been relatively more important drivers of branch closures in the  Southwest border region."], "subsections": [{"section_title": "Southwest Border Banks Reported Heightened BSA/AML Compliance Risks and Challenges Due to Volume of High-Risk Customers", "paragraphs": ["In February 2018, we reported that money laundering risk is high in the  Southwest border region because of the high volume of cash  transactions, the number of cross-border transactions, and foreign  account holders, according to bank representatives, federal banking  regulators, and others we spoke with. Cash transactions increase the  BSA/AML compliance risk for banks because the greater anonymity  associated with using cash results in greater risk for money laundering or  terrorist financing. Our review of data on banks\u2019 CTR filings confirmed  that bank branches that operate in Southwest border region counties handled more large cash transactions than bank branches elsewhere.  Specifically, in 2016, bank branches in Southwest border region counties  filed nearly 30 percent more CTRs, on average, than bank branches in  comparable counties elsewhere in their same state, and about 60 percent  more than those in other high-risk counties outside the region. Similar  differences occurred in 2014 and 2015.", "We also reported that cross-border transactions are at a higher risk for  money laundering because international transfers can present an  attractive method to disguise the source of funds derived from illegal  activity. Southwest border banks cited foreign account holders as  another type of high-risk customer for money laundering and terrorist  financing. These types of customers are prevalent in the Southwest  border region, examiners said, and can create challenges for banks to  verify and authenticate their identification, source of funds, and source of  wealth.", "The volume of high-risk customers and cross-border transactions can  lead to more intensive account monitoring and investigation of suspicious  transactions, Southwest border bank representatives said. Performing  effective due diligence and complying with customer identification  requirements for higher-risk customers and transactions can be more  challenging because banks might need specialized processes for higher- risk customers and transactions than for those that are lower risk.  Southwest border bank representatives we spoke with said addressing  these compliance challenges can also require more resources for  monitoring high-risk customers and investigating suspicious transactions.  For example, in 2016, bank branches in the Southwest border region  counties filed three times as many SARs, on average, as bank branches  operating in other counties within Southwest border states and about 2.5  times as many SARs, on average, as bank branches in other high-risk  financial crime or drug trafficking counties in nonborder states. These  differences in SAR filings showed a similar pattern in 2014 and 2015."], "subsections": []}, {"section_title": "Some Account Terminations and Limitations Were Consistent with BSA/AML Purposes", "paragraphs": ["In February 2018, we found that most Southwest border banks reported  terminating accounts for reasons related to BSA/AML risk. Based on our  survey results, from January 1, 2014, through December 31, 2016, we  estimated that almost 80 percent of Southwest border banks had  terminated personal or business accounts for reasons related to  BSA/AML risk. The most common reasons related to BSA/AML risk  Southwest border banks reported for terminating accounts were the filing  of SARs associated with the accounts, the failure of the customer to  respond adequately to requests for information as part of customer due  diligence processes, and the reputational risk associated with the  customer type (an estimated 93 percent, 80 percent, and 68 percent,  respectively). Of the high-risk businesses for money laundering and  terrorist financing that we identified in our survey, cash-intensive small  businesses (for example, retail stores, restaurants, and used car dealers)  were the most common type of business accounts that Southwest border  banks reported terminating accounts for reasons related to BSA/AML risk.", "Over 70 percent of Southwest border banks reported terminating these  accounts.", "A majority of Southwest border banks and banks that did not operate in  the Southwest border region (non-Southwest border banks) reported  limiting or not offering accounts to certain types of businesses considered  high risk for money laundering and terrorist financing, particularly money  services businesses and foreign businesses. The most common reason  (cited by 88 percent of Southwest border banks) for limiting, or not  offering, an account to these types of businesses was that the business  type fell outside of the bank\u2019s risk tolerance\u2014the acceptable level of risk  an organization is willing to accept around specific objectives. Similarly,  69 percent of Southwest border banks cited the inability to manage the  BSA/AML risk associated with the customer (for example, because of  resource constraints) as a factor for limiting, or not offering, accounts.  Similarly, the most common reason that non-Southwest border banks  reported limiting, or not offering accounts, to certain types of businesses  considered high risk for money laundering and terrorist financing was that  the customer type fell outside of the bank\u2019s risk tolerance."], "subsections": []}, {"section_title": "Other Account Terminations and Limitations Raised Concerns about Derisking", "paragraphs": ["Further, in February 2018 we found that the second most common  reason\u2014cited by 80 percent of Southwest border banks\u2014for limiting, or  not offering, accounts to certain types of businesses considered high risk  for money laundering and terrorist financing, was that the customer type  drew heightened BSA/AML regulatory oversight\u2014behavior that could  indicate derisking. For example, representatives from one Southwest  border bank explained that they no longer offer accounts to money  services businesses because they want to be viewed from a good  standpoint with their regulator. They added that banking for these types of  customers is very high risk for the bank with very little reward. Another  bank that operates in the Southwest border region explained that rather  than being able to focus on their own BSA/AML risk assessment and the  performance of accounts, they feel pressured to make arbitrary decisions  to close accounts based on specific concerns of their examiners.", "Several Southwest border bank representatives also described how  recent BSA/AML law enforcement and regulatory enforcement actions  have caused them to become more conservative in the types of  businesses for which they offer accounts. In addition, while banks may  terminate accounts because of SAR filings as a method to manage  money laundering and terrorist financing risk and to comply with  BSA/AML requirements, some of these terminations may be related to  derisking. For example, some Southwest border bank representatives we  spoke with for our Southwest border report, as well as other banks and  credit unions we spoke with in a February 2009 review, told us that they  have filed SARs to avoid potential criticism during examinations, not  because they thought the observed activity was suspicious. Non- Southwest border banks also commonly cited the inability to manage risk  associated with the customer type and heightened regulatory oversight as  reasons for limiting, or not offering, accounts."], "subsections": []}, {"section_title": "Southwest Border Bank Branch Closures Have Been Concentrated in a Small Number of Communities", "paragraphs": ["Counties in the Southwest border region have been losing bank branches  since 2012, similar to national and regional trends, as well as trends in  other high-risk financial crime or drug trafficking counties that are outside  the region. In February 2018, we found that most of the 32 counties (18  counties or nearly 60 percent) comprising the Southwest border region  did not lose bank branches from 2013 through 2016, but 5 counties lost  10 percent or more of their branches over this time period (see top panel  of fig. 2). Those 5 counties are Cochise, Santa Cruz, and Yuma,  Arizona; Imperial, California; and Luna, New Mexico.", "Within those counties we identified as having the largest percentage loss  of branches, sometimes those losses were concentrated in smaller  communities within the county (see bottom panel of fig. 2). For example,  Calexico in Imperial County, California, lost 5 of its 6 branches from 2013  through 2016. In Santa Cruz County in Arizona, one zip code in Nogales  accounted for all of the branch losses in the county from 2013 through  2016, losing 3 of its 9 branches. More generally, branch losses varied  substantially across different zip codes in a county (see for example  bottom panel of fig. 2). In other instances, counties that lost a relatively  small share of their branches contained communities that lost a more  substantial share\u2014for example San Ysidro in San Diego County lost 5 of  its 12 branches (about 42 percent) while the county as a whole lost only 5  percent of its branches from 2013 through 2016.", "Based on our analysis, counties losing branches in the Southwest border  region tended to have substantially higher SAR filings, on average, than  Southwest border region counties that did not lose branches. That is,  counties that lost branches from 2013 through 2016 had about 600 SAR  filings per billion dollars in deposits, on average, and counties that did not  lose branches had about 60 SAR filings per billion dollars in deposits, on  average (see fig. 3)."], "subsections": []}, {"section_title": "Empirical Evidence Suggested Demographic and Money Laundering- Related Risk Factors Are Drivers of Branch Closures", "paragraphs": ["The econometric models we developed and estimated for our February  2018 report generally found that demographic and money laundering- related risk factors were important predictors of national bank branch  closures. In general, our results suggested that counties were more  likely to lose branches, all else equal, if they were (1) urban, had a higher  per capita personal income, and had a younger population (proportion  under 45); or (2) designated as a HIFCA or HIDTA county, or had higher  SAR filings. We termed the latter three characteristics (HIFCA, HIDTA,  and SAR filings) \u201cmoney laundering-related risk factors.\u201d", "Our results were consistent with those demographic characteristics  associated with the adoption of mobile banking. As such, our results were  consistent with the hypothesis that mobile banking is among the factors  leading some banks to close branches. The most urban counties were  about 22 percentage points more likely to lose one or more branches over  the next year than the most rural counties. A county with 70 percent of the  population under 45 was about 9 percentage points more likely to lose  one or more branches over the next year than a county with half the  population under 45. A county with per capita income of $50,000 was  about 7 percentage points more likely to lose one or more branches over  the next year than a county with per capita income of $20,000.", "Money laundering-related characteristics of a county were also important  predictors of branch closures in our models. HIDTA counties were about  11 percentage points more likely to lose one or more branches over the  next year than non-HIDTA counties (the effect in HIFCA counties is less  significant statistically and smaller in magnitude). A county with 200 SARs  filed per billion dollars in bank deposits was about 8 percentage points  more likely to lose one or more bank branches over the next year than a  county where no bank branch had filed a SAR.", "Money laundering-related risk factors were likely to have been relatively  more important drivers of branch closures in the Southwest border region  because it had much higher SAR filings and a larger share of counties  designated as HIDTAs than the rest of the country. More generally, given  the characteristics of Southwest border counties and the rest of the  United States, our models suggested that while demographic factors have  been important drivers of branch closures in the United States overall,  risks associated with money laundering were likely to have been relatively  more important in the Southwest border region.", "Southwest border bank representatives we interviewed told us they  considered a range of factors when deciding whether or not to close a  branch. Nearly half of the Southwest border bank representatives we  spoke with (4 of 10), mentioned that BSA/AML compliance costs could be  among the factors considered in determining whether or not to close a  branch."], "subsections": []}]}, {"section_title": "Money Transmitters Serving Selected Fragile Countries Noted Loss of Banking Access, Although Treasury Saw No Reduction in Remittance Flows", "paragraphs": ["In March 2018, we found that money transmitters serving Haiti, Liberia,  Nepal, and especially Somalia reported losing bank accounts or having  restrictions placed on them, which some banks confirmed. As a result,  some money transmitters relied on nonbanking channels, such as cash  couriers, to transfer remittances. All of the 12 money transmitters we  interviewed at the time reported losing some banking relationships in the  last 10 years. Some money transmitters, including all 4 that served  Somalia, said they relied on nonbanking channels, such as moving cash,  to transfer funds, which increased their operational costs and exposure to  risks. Further, in our interviews some banks reported that they had closed  the accounts of money transmitters because of the high cost of due  diligence actions they considered necessary to minimize the risk of fines  under BSA/AML regulations. Treasury officials noted that despite  information that some money transmitters have lost banking accounts,  Treasury saw no evidence that the volume of remittances was falling or  that costs of sending remittances were rising."], "subsections": [{"section_title": "All Money Transmitters We Interviewed Reported They Lost Bank Accounts, Which for Many Resulted in Higher Costs and a Shift to Nonbanking Channels", "paragraphs": ["All 12 money transmitters we interviewed for our March 2018 report  stated that they or their agents had lost accounts with banks during the  last 10 years. All 4 Somali money transmitters and many agents of the 2  Haitian money transmitters we spoke with reported they had lost some  bank accounts, and 2 of the 4 Somali money transmitters reported losing  all bank accounts. Additionally, all 4 large money transmitters that  process transfers globally (including to our case-study countries of Haiti,  Liberia, and Nepal) also reported that their agents had lost accounts.  Almost all of the money transmitters said they also faced difficulties in  getting new accounts. While some money transmitters said the banks that  closed their accounts did not provide a reason, in other cases, money  transmitters said the banks told them that they had received pressure  from regulators to terminate money transmitter accounts.", "As a result of losing access to bank accounts, several money  transmitters, including all of the Somali money transmitters, reported that  they were using nonbanking channels to transfer funds. In some cases  the money transmitter was forced to conduct operations in cash, which  increased the risk of theft and forfeitures and led to increased risk for  agents and couriers. Nine of the money transmitters that we interviewed  reported they rely on couriers or armored trucks to transport cash  domestically (to the money transmitter\u2019s main offices or bank) or, in the  case of Somalia, internationally. Money transmitters reported they use  cash couriers either because the money transmitter or their agents had  lost bank accounts or because it was cheaper to use armored trucks than  banks to move funds.", "Money transmitters we interviewed reported increased costs associated  with moving cash and bank fees. Two of the money transmitters we  spoke to stated that they did not have options other than to pay any fees  the bank required due to the difficulty in finding new bank accounts.  Money transmitters with access to bank accounts reported that bank  charges for services had in some cases doubled or tripled, or were so  high that it was less expensive to use a cash courier. For example, some  money transmitters stated that their banks charged a monthly fee for  compliance-related costs that ranged from $100 a month to several  thousand dollars a month."], "subsections": []}, {"section_title": "Some Banks Reported Closing or Denying Accounts for Money Transmitters, Citing Insufficient Profit to Offset Risks and Costs", "paragraphs": ["Most of the banks we interviewed for our March 2018 report expressed  concerns about account holders who are money transmitters because  they tended to be low-profit, high-risk clients. Most of the banks we  interviewed that serve money transmitters stated that BSA/AML  compliance costs have significantly increased in the last 10 years  because they had to hire additional staff and upgrade information  systems to conduct electronic monitoring of all transactions processed  through their system. Some banks indicated in our survey and interviews  that the revenue from money transmitter accounts was at times not  sufficient to offset the costs of BSA/AML compliance, leading to  terminations and restrictions on money transmitter accounts. A few banks  we interviewed stated that they do not allow money transmitters to open  accounts because of the BSA/AML compliance resources they require.", "Banks also expressed concerns over the adequacy of money  transmitters\u2019 ability to conduct due diligence on the money transmitter\u2019s  customers. A few banks we interviewed expressed concern that they  would be held responsible if, despite the bank carrying out due diligence,  authorities detected an illicit transaction had been processed through the  bank on behalf of a money transmitter."], "subsections": []}, {"section_title": "Treasury Officials Said Remittance Flows to Fragile Countries Have Not Declined; Remittance Senders Reported No Major Difficulties", "paragraphs": ["In our March 2018 report, we found that Treasury officials reported  remittances continue to flow to fragile countries even though money  transmitters faced challenges. Through engagement with money  transmitters and banks, Treasury found some evidence of money  transmitter bank account closures. However, according to Treasury  officials, World Bank estimates of remittance flows show that the volume  of international transfers from the United States has continued to  increase. At the same time, World Bank data indicate that the global  average cost of sending remittances has continued to decrease. Citing  these trends, and anecdotal evidence from Treasury\u2019s engagement with  banks, the officials stated that there were no clear systemic impacts on  the flow of remittances from closures of money transmitter bank accounts  and correspondent banking relations.", "Treasury officials acknowledged that such closures can be a significant  challenge for money transmitters that serve certain regions or countries,  including Somalia. Further, Treasury officials said they were aware that  some Somali money transmitters resorted to nonbanking channels by  carrying cash overseas. They noted that although physically moving cash  is risky, it is not unlawful. Additionally, Treasury officials stated that the  use of cash couriers to remit funds had not been a concern for regulators  because this practice had not increased the remittance fees that money  transmitters charge their consumers.", "Remittance senders in the United States who remit to our case-study  countries reported that they frequently used money transmitters and had  not encountered major difficulties in sending remittances. Senders told us  that they generally preferred using money transmitters over other  methods because money transmitters were cheaper than banks and were  quicker in delivering the funds than other methods. In addition, money  transmitters were often more accessible for recipients collecting the  remittances because the money transmitters had more locations than  banks in recipient countries. However, some remittance senders told us  that they were unable to send large amounts of money through money  transmitters."], "subsections": []}]}, {"section_title": "Regulators Have Not Evaluated All Factors Influencing Banks to Derisk and Treasury Lacks Data Needed to Assess Possible Effects on Remittance Flows", "paragraphs": ["In February 2018 we reported that to address concerns about derisking,  FinCEN and the federal banking regulators had taken actions including  issuing guidance to banks and conducting some evaluations to assess  the extent to which derisking is occurring. However, the actions regulators  had taken to address concerns raised in their BSA/AML regulatory  reviews were limited in scope (for example, they focused primarily on the  burden resulting from the filing of CTRs and SARs) and had not evaluated  all factors that may influence banks to derisk or close branches.  Moreover, in March 2018 we found that Treasury could not assess the  effects of money transmitters\u2019 loss of banking access on remittance flows  because existing data did not allow Treasury to identify remittances  transferred through banking and nonbanking channels."], "subsections": [{"section_title": "Regulators Issued Guidance and Took Some Actions Related to Derisking", "paragraphs": ["In February 2018, we reported that FinCEN and the federal banking  regulators responded to concerns about derisking on a national level by  issuing guidance to banks and conducting some evaluations within their  agencies to understand the extent to which derisking is occurring. The  guidance issued by regulators was aimed at clarifying BSA/AML  regulatory expectations and discouraging banks from terminating  accounts without evaluating risk presented by individual customers or  banks\u2019 abilities to manage risks. The guidance generally encouraged  banks to use a risk-based approach to evaluate individual customer risks  and not to eliminate entire categories of customers. Some of the guidance  issued by regulators attempted to clarify their expectations specifically for  banks\u2019 offering of services to money services businesses, including  money transmitters. For example, in March 2005, the federal banking  regulators and FinCEN issued a joint statement on providing banking  services to money services businesses to clarify the BSA requirements  and supervisory expectations as applied to accounts opened or  maintained for this type of customer. The statement acknowledged that  money services businesses were losing access to banking services as a  result of concerns about regulatory scrutiny, the risks presented by these  types of accounts, and the costs and burdens associated with maintaining  such accounts.", "The agencies issuing these guidance documents told us they took some  steps to assess the effect of their guidance on bank behavior. For  example, Treasury officials said that Treasury periodically engaged with  banks and money transmitters on an ad hoc basis to learn their views and  gain insight into their concerns. According to Federal Reserve officials,  anecdotal information suggested that some money transmitters lost bank  accounts after FinCEN and federal banking agencies issued the joint  guidance in 2005, and that outcome was contrary to the regulators\u2019 intent.  To address concerns about the guidance, according to these officials,  Treasury held several public discussions on money transmitter account  terminations.", "In addition to issuing guidance, FDIC and OCC took some steps aimed at  trying to determine why banks may be terminating accounts because of  perceived regulatory concerns. For example, in January 2015, FDIC  issued a memorandum to examiners establishing a policy that examiners  document and report instances in which they recommend or require  banks to terminate accounts during examinations. From January 2015  through December 2017, FDIC officials stated that examiners had not  documented any recommendations or requirements for account  terminations. In 2016, OCC reviewed how the institutions it supervises  develop and implement policies and procedures for evaluating customer  risks as part of their BSA/AML programs and for making risk-based  determinations to close customer accounts. OCC focused its review on  certain large banks\u2019 evaluation of risk for foreign correspondent bank  accounts. This effort resulted in OCC issuing guidance to banks on  periodic evaluation of the risks of foreign correspondent accounts. The  federal banking regulators also met with residents and businesses in the  Southwest border region to discuss concerns about derisking in the  region.", "Treasury and the federal banking regulators also participated in a number  of international activities related to concerns about the decline in the  number of correspondent banking and money services business  accounts. For example, FDIC, OCC, and the Federal Reserve participate  in the Basel Committee on Banking Supervision\u2019s Anti-Money  Laundering/Counter Financing of Terrorism Experts Group. Recent efforts  of the group involved revising guidelines to update and clarify  correspondent banking expectations. Treasury leads the U.S.  engagement with the Financial Action Task Force\u2014an intergovernmental  body that sets standards for combating money laundering, financing of  terrorism, and other related threats to the integrity of the international  financial system\u2014which has issued guidance on correspondent banking  and money services businesses."], "subsections": []}, {"section_title": "BSA/AML Regulatory Reviews Had Not Evaluated All Factors Influencing Banks to Derisk and Close Branches", "paragraphs": ["Executive orders encourage and legislation requires FinCEN and the  federal banking regulators to review existing regulations to determine  whether they should be retained, amended, or rescinded, among other  things. Retrospective reviews of existing rules help agencies evaluate  how existing regulations are working in practice. Recent presidents have  directed agencies to evaluate or reconsider existing regulations. In  addition to the executive orders, the Economic Growth and Regulatory  Paperwork Reduction Act (EGRPRA) requires federal banking regulators  to review the regulations they prescribe not less than once every 10 years  and request comments to identify outdated, unnecessary, or unduly  burdensome statutory or regulatory requirements.", "In February 2018, we reported that FinCEN and the federal banking  regulators had all participated in retrospective reviews of different parts of  the BSA/AML regulations. For example, FinCEN officials told us that they  review each new or significantly amended regulation to assess its clarity  and effectiveness within 18 months of its effective date. As part of fulfilling  their requirements under EGRPRA, the federal banking regulators\u2014 through the Federal Financial Institutions Examination Council (FFIEC)\u2014 have also participated in retrospective reviews of BSA/AML regulations.", "As part of the 2017 EGRPRA review, FFIEC received several public  comments on BSA/AML requirements, including increasing the threshold  for filing CTRs, the SAR threshold, and the overall increasing cost and  burden of BSA compliance. FinCEN officials and the federal banking  regulators stated that the agencies are working to address the BSA- related EGRPRA comments\u2014particularly those related to CTR and SAR  filing requirements\u2014through the BSA Advisory Group (BSAAG).", "However, the actions FinCEN and the federal banking regulators took  related to derisking were not aimed at addressing and, if possible  ameliorating, the full range of factors that influence banks to engage in  derisking, in particular banks\u2019 regulatory concerns and BSA/AML  compliance efforts. Further, the actions regulators took to address  concerns raised in BSA/AML retrospective reviews focused primarily on  the burden resulting from the filing of CTRs and SARs, but these actions  did not evaluate how regulatory concerns may influence banks to engage  in derisking or close branches. Federal internal control standards call for  agencies to analyze and respond to risks to achieving their objectives.  Further, guidance implementing executive orders states that agencies  should consider conducting retrospective reviews on rules that  unanticipated circumstances have overtaken. In February 2018, we  concluded that without assessing the full range of BSA/AML factors that  may be influencing banks to derisk or close branches, FinCEN, the  federal banking regulators, and Congress would not have the information  they need to determine if adjustments are needed to ensure that the  BSA/AML regulations and their implementation are achieving their  regulatory objectives in the most effective and least burdensome way."], "subsections": []}, {"section_title": "U.S. Data on Remittances Did Not Allow Treasury to Assess the Effects of Money Transmitters\u2019 Loss of Banking Access on Remittance Flows to Fragile Countries", "paragraphs": ["In March 2018, we found that Treasury could not assess the effects of  money transmitters\u2019 loss of banking access on remittance flows because  existing data did not allow Treasury to identify remittances transferred  through banking and non-banking channels.", "Recent efforts to collect international remittance data from banks and  credit unions did not include transfers these institutions make on behalf of  money transmitters. Since these data collection efforts are designed to  protect U.S. consumers, the remittance data that banks and credit unions  report are limited to remittances individual consumers send directly  through these institutions. Additionally, as of the first quarter of 2018,  about half the states (24) adopted reports to collect remittance data from  money transmitters and of these, 12 states had made it mandatory to  report remittance data by destination country. However, these data do not  distinguish money transmitters\u2019 use of banking and nonbanking channels  to transfer funds.", "Finally, we found that while Treasury has a long-standing effort to collect  information on travelers transporting cash from U.S. ports of exit, this  information did not identify cash transported for remittances. We  concluded that without information on remittances sent through banking  and nonbanking channels, Treasury could not assess the effects of  money transmitter and foreign bank account closures on remittances,  especially shifts in remittance transfers from banking to nonbanking  channels for fragile countries. Nonbanking channels are generally less  transparent than banking channels and thus more susceptible to the risk of money laundering and other illicit financial transactions. Additionally,  while risks associated with shifts of remittances to nonbanking channels  may vary by country, these risks are likely greater for fragile countries,  such as Somalia, where the United States has concerns about terrorism  financing."], "subsections": []}]}, {"section_title": "Conclusions and Recommendations for Executive Action", "paragraphs": ["The collective findings from our work indicate that BSA/AML regulatory  concerns have played a role in banks\u2019 decisions to terminate and limit  accounts and close branches. However, the actions taken to address  derisking by the federal banking regulators and FinCEN and the  retrospective reviews conducted on BSA/AML regulations had not fully  considered or addressed these effects. As a result, in our February 2018  report, we recommended that FinCEN and the three banking regulators in  our review\u2014FDIC, the Federal Reserve, and OCC\u2014 jointly conduct a  retrospective review of BSA/AML regulations and their implementation for  banks, focusing on how banks\u2019 regulatory concerns may be influencing  their willingness to provide services. In their written responses, the  Federal Reserve, FDIC, and OCC agreed to leverage ongoing  interagency work reviewing BSA/AML regulations and their  implementation for banks to address our recommendation. GAO  requested comments from Treasury, but none were provided.", "A lack of data on remittances sent through banking and nonbanking  channels limits the ability of Treasury to assess the effects of money  transmitter and foreign bank account closures on remittances, in  particular shifts of remittances to non-banking channels for fragile  countries. Therefore, in the March 2018 report we recommended that  Treasury assess the extent to which shifts in remittance flows from  banking to non-banking channels for fragile countries may affect  Treasury\u2019s ability to monitor for money laundering and terrorist financing  and, if necessary, should identify corrective actions. GAO requested  comments from Treasury, but none were provided.", "Chairman Luetkemeyer, Ranking Member Clay, and members of the  Subcommittee, this concludes my statement. I would be pleased to  respond to any questions you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about the issues related to access  to banking services along the Southwest border in this testimony or the  related report, please contact Michael E. Clements, Director, Financial  Markets and Community Investment, at (202) 512-8678 or  clementsm@gao.gov. For questions about the issues related to  remittance flows to fragile nations in this testimony or related report,  please contact Thomas Melito, Managing Director, International Affairs  and Trade, at (202) 512-9601, or melitot@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this testimony are Lawrance Evans, Jr. (Managing Director), Stefanie  Jonkman (Assistant Director), Mona Sehgal (Assistant Director), Christine  McGinty (Analyst in Charge), Kyerion Printup, Madeline Messick, and  David Dayton. Other staff who made key contributions to the reports cited  in the testimony are identified in the source products.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["We testified that 80 percent of Southwest border banks limited or did not offer services to customers that are considered high risk for money laundering. Banks may choose to limit services because they must conduct extra account monitoring of these customers to comply with Bank Secrecy Act/anti-money laundering oversight. Money transmitters serving Haiti, Liberia, Nepal, and Somalia also reported losing bank accounts for this reason.", "We've recommended in our reports that federal regulators review the Bank Secrecy Act, and that Treasury Department assess the risks from money transmitters switching to non-banking channels to send funds."]}
{"id": "GAO-18-436T", "url": "https://www.gao.gov/products/GAO-18-436T", "title": "Federal Regulations: Opportunities to Improve the Effectiveness and Transparency of Regulatory and Guidance Practices", "published_date": "2018-03-14T00:00:00", "released_date": "2018-03-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress has often asked GAO to evaluate the implementation of procedural and analytical requirements that apply to agencies' rulemaking and guidance processes. The importance of improving the transparency of those processes, including providing public participation and sufficient oversight, is a common theme throughout GAO's body of work on federal regulation.", "Based on GAO's prior work, this testimony addresses: (1) the extent to which USDA, Education, HHS, and DOL adhered to OMB requirements and internal controls when developing regulatory guidance, and (2) agencies' compliance with the CRA for regulations promulgated during presidential transitions."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies GAO reviewed\u2014Departments of Agriculture (USDA), Education (Education), Health and Human Services (HHS), and Labor (DOL) did not consistently adhere to Office of Management and Budget (OMB) requirements and internal controls when developing regulatory guidance, as GAO reported in 2015. Unlike regulations, regulatory guidance is not generally legally binding and is subject to different requirements for regulatory oversight. Agencies weighed various factors when they determined whether to issue guidance. The agencies GAO reviewed issued different amounts of guidance for various purposes, such as explaining plans for implementing regulations. Agencies found few of their guidance documents to be \u201csignificant,\u201d guidance with a broad and substantial impact on regulated entities. USDA and Education had written procedures for the approval of significant guidance as directed by OMB; DOL's procedures needed updating and to be distributed to appropriate agency officials; HHS did not have any. GAO found that USDA, Education, and DOL consistently applied OMB's requirements for public feedback and access, for example public access to guidance through websites, while HHS did not. Agencies can better ensure consistent application of review processes and public access to significant guidance through better adherence to OMB requirements. GAO also found opportunities for agencies to improve adherence to internal controls for guidance that did not meet OMB's definition of \u201csignificant.\u201d For example, most subagencies GAO reviewed did not have written procedures for the production of guidance and about half did not regularly evaluate whether issued guidance was effective and up-to-date. Adherence to these internal controls could promote quality and consistency in guidance development processes.", "GAO found that agencies did not consistently comply with the Congressional Review Act (CRA) for regulations promulgated during the 120-day presidential transition periods (September 23 through January 20), as defined by the Presidential Transitions Improvements Act of 2015. GAO reported that during the transition from the end of one presidential administration to the next, the Clinton, Bush, and Obama administrations published on average roughly 2.5 times more economically significant regulations during transition periods than during nontransition periods; increases are typical during transition periods. For these regulations, agencies more frequently provided advanced notice to the public, thus providing the public opportunities to influence the development of these transition period regulations before they were finalized. In their published regulations, agencies generally reported complying with four of five procedural requirements for promulgating regulations during both transition and nontransition periods. Agencies are required to 1) assess the impact of regulations on small entities, 2) minimize the burden that information collections impose on the public, 3) assess the costs and benefits of regulations that include federal mandates, and 4) for certain agencies, obtain direct input from small entities during rulemaking. Also, a fifth requirement, agencies must comply with CRA, which provides Congress an opportunity to review and possibly disapprove regulations before they take effect. Agencies less often complied with CRA, during both transition and nontransition periods. The most common deficiency was agencies' failure to provide Congress the required time to review regulations, which GAO has also identified as a deficiency in previous work."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In the April 2015 report on regulatory guidance, GAO made eleven recommendations to USDA, Education, HHS, and DOL to ensure adherence to OMB requirements and applicable elements of internal controls. Three of these recommendations to HHS remain open: 1) to develop written procedures for the approval of significant guidance, 2) strengthen application of internal controls over guidance processes, and 3) improve its website.", "In the March 2018 report on rulemaking at the end of presidents' terms, GAO recommended OMB, as part of its regulatory review process, identify economically significant regulations at risk of not complying with the CRA and work with agencies to ensure compliance. OMB staff did not agree or disagree with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss federal regulatory and guidance  practices, focusing, at your request, on our 2015 report on guidance  processes at select agencies, and our recently released report on  rulemaking at the end of presidents\u2019 terms.", "Agencies use federal regulations and guidance to achieve national goals,  such as improving the economy and protecting the health and safety of  the public. Congress has often asked us to evaluate the implementation  of procedural and analytical requirements that apply to agencies\u2019  rulemaking and guidance processes. The importance of improving the  transparency of those processes is a common theme throughout our body  of work on federal regulation. Based on our work, this testimony  discusses: (1) the extent to which the Departments of Agriculture (USDA),  Education (Education), Health and Human Services (HHS), and Labor  (DOL) adhered to Office of Management and Budget (OMB) requirements  and internal controls when developing regulatory guidance and (2)  agencies\u2019 compliance with the Congressional Review Act (CRA) for  regulations promulgated during presidential transitions. We consistently  found opportunities to improve the transparency and effectiveness of  regulatory and guidance practices.", "My statement is based on work that we have issued on regulatory and  guidance processes prepared at the request of Congress. We made 12  recommendations to agencies on the topics that I plan to address today,  eight of which have been implemented to date. We conducted our work  for these reports 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. A more detailed  discussion of prior reports\u2019 objectives, scope, and methodology, including  our assessment of data reliability, is available in the reports cited in the  related products list at the end of this statement."], "subsections": [{"section_title": "Agencies Can Better Ensure Effectiveness of Guidance through Consistent Adherence with OMB Requirements and Internal Controls", "paragraphs": ["First, I will discuss our 2015 report on guidance processes at USDA,  Education, HHS, and DOL, specifically (1) how these agencies decide  whether to issue regulations or guidance and (2) the extent to which they  adhere to OMB requirements and internal controls when developing  guidance.", "Agency guidance documents, even though they are not generally legally  binding as regulations or statutes are, can have a significant effect, both  because of their volume and because of their potential to prompt changes  in the behavior of regulated parties and the general public. Guidance  generally serves different purposes than those of regulations. Agencies  also issue regulatory guidance that sets forth a policy on a statutory,  regulatory, or technical issue, or an interpretation of a statutory or  regulatory issue\u2014as illustrated in figure 1 below. The processes by which  agencies issue guidance and regulations are governed by statutes,  executive orders, and agencies\u2019 policies and procedures, with the aim of  greater transparency and public participation, enhanced oversight, and  reduced regulatory burdens."], "subsections": [{"section_title": "Agencies Weighed Various Factors When Deciding Whether to Issue Regulations or Guidance", "paragraphs": ["Agency officials considered a number of factors before deciding whether  to issue guidance or undertake rulemaking. Among these factors at the  four agencies included in our analysis, a key criterion was whether  officials intended for the document to be binding (in which case they  issued a regulation). OMB\u2019s Office of Information and Regulatory Affairs  (OIRA) staff concurred that agencies understood what types of direction  to regulated entities must go through the regulatory process. Officials from all four agencies also told us that they understood when guidance  was inappropriate and when regulation was necessary. They said that  they consulted with legal counsel when deciding whether to initiate  rulemaking or issue guidance.", "For example, HHS\u2019s Administration for Community Living officials told us  that they considered a number of factors, including whether the  instructions to be disseminated were enforceable or merely good practice.  Specifically, when Administration for Community Living officials noticed  that states were applying issued guidance related to technical assistance  and compliance for the state long-term care ombudsman program  differently, they decided it would be best to clarify program actions  through a regulation. Officials believed that a regulation would ensure  consistent application of program requirements and allow them to enforce  those actions. They issued the proposed rule in June 2013 and the final  rule in February 2015. In another example, officials at USDA\u2019s Food and  Nutrition Service told us that the decision to issue guidance or undertake  rulemaking depended on (1) the extent to which the proposed document  was anticipated to affect stakeholders and the public, and (2) what the  subagency was trying to accomplish with the issued document.", "The agencies used guidance for multiple purposes and differed in the  amount of guidance they issued. The purposes of guidance included  explaining or interpreting regulations, clarifying policies in response to  questions or compliance findings, disseminating suggested practices or  leadership priorities, and providing grant administration information.  Guidance documents provide agencies valuable flexibility to help  regulated agencies comply with agency regulations, and address new  issues and circumstances more quickly than may be possible using  rulemaking.", "Guidance documents that meet OMB\u2019s definition of \u201csignificant\u201d are  subject to the regulatory practices and requirements established by OMB.  OMB defines a significant guidance document as guidance with a broad  and substantial impact on regulated entities. An economically significant  guidance document is a significant guidance document that may  reasonably be anticipated to lead to an annual effect on the economy of  $100 million or more, among other factors. Guidance that does not fall  under the definition of \u201csignificant\u201d is not subject to the OMB Bulletin, and  those guidance procedures are left to agency discretion. The four  agencies we reviewed considered few of their guidance documents to be  significant. As of February 2015, agencies listed the following numbers of  significant guidance documents on their websites: Education, 139; DOL,  36; and USDA, 34. We were unable to determine the number of  significant guidance documents issued by HHS. All four agencies told us  that they did not issue any economically significant guidance. OIRA staff  told us they accepted departments\u2019 determinations of which types of  guidance meet the definition of significant guidance. Agencies also varied  in the amount of guidance they issued, ranging from 10 to more than 100  documents issued in a single year.", "Agency officials said that mission or the types of programs administered  can affect the number of guidance documents issued. For example,  officials from DOL\u2019s Bureau of Labor Statistics told us they rarely issue  guidance\u2014about 10 routine administrative memorandums each year  related to the operation of two cooperative agreement statistical  programs. In contrast, DOL\u2019s Occupational Safety and Health  Administration officials told us they have regularly issued guidance to  assist with regulatory compliance, and could easily produce 100 new or  updated products each year to provide guidance to regulated entities."], "subsections": []}, {"section_title": "Agencies Should Increase Adherence with OMB Requirements and Internal Controls", "paragraphs": ["We found opportunities for agencies to improve regulatory guidance  processes by strengthening compliance with OMB requirements for  significant guidance and the use of management controls for producing  their guidance documents. In 2015, we made 11 recommendations to  USDA, HHS, DOL and Education to better ensure the adherence to OMB  requirements for approval and public access of regulatory guidance, to  strengthen the use of internal controls in guidance processes, and to  improve the usability of websites with online guidance, three of which  remain open. USDA, DOL and Education have addressed  recommendations concerning strengthening the application of  management controls\u2014internal controls\u2014and improving their websites to  ensure the public can easily find, access, and comment on online  guidance. These recommendations for HHS remain open as well as an  additional recommendation concerning developing written procedures for  agency approval of written guidance. These actions would help to ensure  appropriate review and use of these documents, and both could also  facilitate opportunities for affected parties and stakeholders to provide  feedback on those documents."], "subsections": [{"section_title": "Adherence to OMB Requirements for Significant Guidance", "paragraphs": ["We found that agencies did not always adhere to OMB requirements for  significant guidance. The OMB Final Bulletin for Agency Good Guidance  Practices establishes standard elements that must be included in  significant guidance documents and directs agencies to (1) develop  written procedures for the approval of significant guidance, (2) maintain a  website to assist the public in locating significant guidance documents,  and (3) provide a means for the public to submit comments on significant  guidance through their websites. Education and USDA had written  procedures for the approval of significant guidance as directed by OMB.  While DOL had written approval procedures, they were not available to  the appropriate officials, and DOL officials noted that they required  updating. HHS did not have any written procedures. We found that  Education, USDA, and DOL consistently applied OMB\u2019s public access  and feedback requirements for significant guidance, while HHS did not.", "We also found opportunities for agencies to improve access to their  guidance. In April 2015, we found that subagencies used different  strategies to disseminate guidance and all relied primarily on posting the  guidance on their websites. USDA, DOL, and Education posted their  significant guidance on a departmental website as directed by OMB; at  that time HHS did not, but has since posted such a page on its website in  response to our recommendation. On their websites, agencies used  several approaches \u2014including organizing guidance by audience or topic  and highlighting new or outdated guidance\u2014to facilitate access.  However, we identified factors that hindered online access, including long  lists of guidance and documents dispersed among multiple web pages.", "Opportunities also exist for agencies to use the web metrics they already  collect to improve how guidance can be accessed. All agencies and their  subagencies that we studied collected web metrics, and many used them  to evaluate online guidance dissemination. However, many of these  subagencies did not use metrics to improve how they disseminated  guidance through their websites. Beyond their websites, subagencies  found other ways to disseminate and obtain feedback on issued  guidance, including focus groups, surveys, and direct feedback from the  public at conferences, webinars, and from monitoring visits."], "subsections": []}, {"section_title": "Application of Internal Controls for Guidance Processes", "paragraphs": ["For guidance that does not meet OMB\u2019s definition of significant, we found  opportunities for agencies to improve guidance development, review,  evaluation, and dissemination processes by strengthening their  adherence to internal controls. Wider adoption of these practices could  better ensure that agencies have internal controls in place to promote  quality and consistency of their guidance development processes, and to  ensure that guidance policies, processes, and practices achieve desired  results, and prevent and detect errors. We recommended that agencies  strengthen their application of internal controls to guidance practices by  adopting practices, such as:", "Determining Appropriate Level of Review to Manage Risk: Most  subagencies in our study managed risk by determining appropriate  levels of review. Agencies face multiple risks when going through the  guidance production process, such as legal challenges that issued  guidance is asserting binding requirements without having gone  through the rulemaking process. Agencies can manage risk by  involving agency management in decisions to initiate guidance,  prioritize among proposed guidance, and determine the appropriate  level of review prior to issuance.", "Maintaining Written Policies and Procedures for the Production  of Nonsignificant Guidance: Most subagencies we reviewed did not  have written procedures for the production of non-significant  guidance. Written procedures for guidance initiation, development,  and review help ensure that actions are taken to address risks and  enforce management\u2019s directives when an agency is developing  regulatory guidance. Documented procedures are an important  internal control activity to help ensure that officials understand how to  adequately review guidance before issuance.", "Ensuring Communication during the Guidance Development and  Review Process: Most subagencies we reviewed had methods to  ensure communication during the guidance development and review  process. Communication procedures provide an opportunity for  subagencies to get feedback from agency management, other federal  agencies, and the public before the guidance issues. For example,  officials told us that they conferred with other affected subagencies or  federal departments to ensure consistency of their guidance during  the development of guidance.", "Regularly Evaluating Whether Issued Guidance is Effective and  Up to Date: Almost half of the subagencies we reviewed regularly  evaluated whether issued guidance was effective and up-to-date.  Agencies benefit from procedures to continually reassess and  improve guidance processes. Without a regular review of issued  guidance, agencies can miss the opportunity to revisit whether current  guidance could be improved and thereby provide better assistance to  regulated entities and grantees."], "subsections": []}]}]}, {"section_title": "Compliance with the Congressional Review Act Could Be Strengthened", "paragraphs": ["Prior studies have indicated that agencies typically issue a larger number  of regulations during the transition from the end of one presidential  administration to the beginning of the next administration, relative to  comparable periods earlier in the administration, a phenomenon often  referred to as \u201cmidnight rulemaking.\u201d The Edward \u201cTed\u201d Kaufman and  Michael Leavitt Presidential Transitions Improvements Act of 2015  included a provision requiring us to review final significant regulations  promulgated by executive departments during the 120-day presidential  transition periods (September 23 through January 20) at the end of  Presidents Clinton, Bush, and Obama\u2019s administrations and compare  them to each other and to regulations issued during the same 120-day  period in nontransition years since 1996. Among other objectives, we  assessed the extent to which there was variation in (1) the number of  regulations and their characteristics, such as the types of rulemaking  procedures agencies used; and (2) agencies\u2019 reported compliance with  procedural requirements for promulgating the regulations, such as  requirements in the Congressional Review Act (CRA). CRA was  enacted to better ensure that Congress has an opportunity to review and  possibly disapprove regulations, in certain cases, before they take effect."], "subsections": [{"section_title": "Agencies Published More Economically Significant and Significant Final Regulations and Provided More Opportunity for Public Participation", "paragraphs": ["During the transition periods at the end of each of the three  administrations we reviewed, agencies published more economically  significant and significant final regulations relative to comparable time  periods earlier in each administration (see figures 2 and 3). In particular,  the Clinton, Bush, and Obama administrations published on average  roughly 2.5 times more economically significant regulations during  transition periods than during nontransition periods. But agencies more  often, relative to nontransition periods, provided the public an opportunity  to influence the development of the transition-period regulations by  providing advanced notice of their issuance in the Unified Agenda, and  opportunities to comment on proposed regulations before they were  finalized."], "subsections": []}, {"section_title": "Some Regulations Did Not Comply with the Congressional Review Act", "paragraphs": ["In their published regulations, agencies generally reported complying with  four of five procedural requirements for promulgating regulations during  both transition and nontransition periods\u2013the Regulatory Flexibility Act  (RFA), the Small Business Regulatory Enforcement Fairness Act  (SBREFA), the Paperwork Reduction Act (PRA), and the Unfunded  Mandates Reform Act of 1995 (UMRA). These laws require agencies to  consider the impact of regulations on small entities, impose additional  requirements on the Environmental Protection Agency and the  Occupational Safety and Health Administration to obtain input from small  entities for rulemaking efforts that are expected to have a significant  economic impact on a substantial number of small entities, require all  agencies to minimize the burden on the public of information collections,  and require agencies to prepare an assessment of the anticipated costs  and benefits for any regulation that includes a federal mandate requiring  nonfederal parties to expend resources without being provided funding to  cover the costs, respectively. Agencies reported complying for nearly all  economically significant regulations and the majority of significant  regulations with these four laws. Agencies less often complied with one or  more CRA requirements. Over 25 percent of economically significant  regulations did not comply with the CRA (see figure 4). We estimated that  15 percent of significant regulations published across all periods reviewed  failed to meet at least one of the CRA requirements we reviewed.", "The most common CRA deficiency for economically significant  regulations was agencies\u2019 failure to provide Congress the required time to  review and possibly disapprove regulations, which we had also identified  as a deficiency in previous work. Among the most active regulatory  agencies for economically significant regulations, the Departments of  Health and Human Services and Transportation had higher rates of  noncompliance than the government-wide percentages for both the  transition and nontransition periods we reviewed. However,  noncompliance was not limited to these two agencies; 17 of the 23  agencies that published economically significant regulations during the  periods we reviewed had at least one noncompliant regulation.", "Though agencies are responsible for complying with CRA, OMB is  responsible under Executive Order 12866 for oversight of agencies\u2019  rulemaking, consistent with law, and reviews regulations before  publication, which provides an opportunity to identify and help agencies  avoid potential noncompliance. Economically significant regulations for  which OMB completed its review within 3 months before the planned  effective date were at high risk of not complying with CRA, thus  increasing the risk that agencies would not provide Congress with the  required time for its reviews. We recommended that OMB, as part of its  regulatory review process, identify economically significant regulations at  potential risk of not complying with CRA and work with agencies to  ensure compliance. OMB staff did not take a position agreeing or  disagreeing with the recommendation.", "One of the common themes in our work over several decades is the need  for transparency of the regulatory review process and opportunities for  increasing public participation and congressional oversight. The potential  effects of guidance underscore the need for consistent and well- understood processes for the development, review, dissemination, and  evaluation of guidance. Further, we found that while there were increased  opportunities for public participation for regulations promulgated at the  end of Presidents\u2019 terms, there are increasing instances of  noncompliance with delay requirements under the Congressional Review  Act. Ensuring that agencies consistently provide Congress with the  required time to review, and possibly disapprove regulations, is important  throughout a President\u2019s term, and particularly following a presidential  transition when Congress typically has a larger number of regulations to  potentially review. Improvements made in transparency of the rulemaking  process benefit not only the public, but congressional oversight.", "Chairman Gowdy, Ranking Member Cummings, and Members of the  Committee, this concludes my prepared statement. Once again, I  appreciate the opportunity to testify on these important issues. I would be  pleased to address any questions you or other members of the  Committee might have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact me at (202) 512-2660  or nguyentt@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Individuals making key contributions to this testimony were  Tim Bober, Tara Carter, Colleen Corcoran, Robert Cramer, Alix Edwards,  Shirley A. Jones, Heather Krause, Barbara Lancaster, Michael O\u2019Neill,  and Andrew J. Stephens."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Federal Rulemaking: OMB Should Work with Agencies to Improve  Congressional Review Act Compliance during and at the End of  Presidents\u2019 Terms. GAO-18-183. March, 13, 2018.", "Regulatory Guidance Processes: Treasury and OMB Need to Reevaluate  Long-standing Exemptions of Tax Regulations and Guidance.  GAO-16-720. September 6, 2016.", "Regulatory Guidance Processes: Selected Departments Could  Strengthen Internal Control and Dissemination Practices. GAO-15-368.  April 16, 2015.", "Regulatory Guidance Processes: Agencies Could Benefit from Stronger  Internal Control Practices. GAO-15-834T. September 23, 2015.", "Federal Rulemaking: Agencies Could Take Additional Steps to Respond  to Public Comments. GAO-13-21. December 20, 2012.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["Federal regulations are legally binding, while guidance documents typically are not. Nonetheless, guidance can show an agency's interpretation of regulations and drive its actions.", "This testimony shares findings from 2 reports, including:", "Selected agencies generally followed guidance development standards but could improve their processes and how they disseminate guidance online", "Agencies were less likely to comply with the Congressional Review Act for regulations promulgated during presidential transitions, also called \"midnight rulemaking\"", "We found opportunities to make regulatory and guidance practices more transparent and effective."]}
{"id": "GAO-18-310", "url": "https://www.gao.gov/products/GAO-18-310", "title": "Rail Transit: Federal Transit Administration Can Strengthen Safety Oversight by Improving Guidance to States", "published_date": "2018-03-20T00:00:00", "released_date": "2018-04-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2012 and 2015, DOT was provided with additional authority to oversee the safety of rail transit. Within DOT, FTA is now implementing this authority. The DOT's Office of Inspector General has reported, though, that FTA faces challenges in carrying out its enhanced safety oversight. FRA, also in DOT, has long carried out safety oversight of freight, intercity passenger, and commuter railroads.", "GAO was asked to review various rail safety and oversight issues, including the differences between FRA's and FTA's rail safety oversight programs. This report examines (1) key characteristics of FRA's and FTA's rail safety oversight programs and (2) strengths and limitations of FRA's and FTA's rail safety oversight programs. GAO assessed FRA's and FTA's information about rail safety oversight activities against guidance from the Office of Management and Budget, leading practices developed by the transit industry, and federal standards for internal control. GAO also interviewed stakeholders, including rail operators chosen based on mode, size, and location."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Transportation's (DOT) Federal Railroad Administration (FRA) and Federal Transit Administration (FTA) carry out different approaches to rail safety oversight. FRA has a more centralized safety oversight program for railroads, while FTA's program for oversight of rail transit safety largely relies on state safety agencies to monitor and enforce rail transit safety, as established in federal statute. Key characteristics of both programs include: (1) safety regulations, (2) inspections and other oversight activities, and (3) enforcement mechanisms to ensure that safety deficiencies are addressed (see figure).", "There are strengths and limitations to FRA's and FTA's approaches to their safety oversight missions, including how the two agencies develop safety regulations, conduct inspections, and carry out enforcement. The National Transportation Safety Board has reported, and stakeholders GAO spoke with generally agreed, that strengths of FRA's rail safety oversight program include its safety regulations, its risk-based inspection program, and its enforcement authorities. FRA also has potential limitations in its oversight framework, though, such as difficulty evaluating the effectiveness of its enforcement mechanisms. FTA has made some progress implementing changes to the rail transit safety program. However, FTA has not provided all the necessary guidance and support to states' safety agencies to ensure they develop appropriate and effective rail transit safety inspection programs. In particular, FTA has not provided states with guidance on how to develop and implement risk-based inspection programs. Though FTA has said that it will develop such guidance, it does not have a plan or timeline to do so. Without guidance from FTA on how to develop and carry out risk-based inspections, state safety agencies may not allocate their limited resources efficiently, and important safety issues may go undetected. In addition, FTA has not developed a process or methodology to evaluate whether state safety agency enforcement authorities and practices are effective. Without clear evidence that state safety agencies' enforcement is effective, states and FTA may not be able to compel rail transit operators to remedy safety deficiencies. As a result, deficiencies may remain for long periods, potentially contributing to safety incidents."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FTA (1) create a plan, with timeline, for developing risk-based inspection guidance for state safety agencies, and (2) develop and communicate a method for how FTA will monitor whether state safety agencies' enforcement practices are effective. DOT agreed with our recommendations. DOT, NTSB, and WMATA provided technical comments that we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Until recent years, safety oversight of public transportation systems has  been largely the responsibility of state entities. In 2012, the Moving Ahead  for Progress in the 21st Century Act (MAP-21) provided the United States  Department of Transportation (DOT) with additional authority and  responsibilities to oversee the safety of the nation\u2019s rail public  transportation systems. Within DOT, the Federal Transit Administration  (FTA) is now implementing this authority. In 2015, the Fixing America\u2019s  Surface Transportation Act (FAST Act) further enhanced federal safety  oversight authority by, among other things, explicitly allowing FTA to  assume direct safety oversight of a state\u2019s rail transit systems. While  federal oversight authority of rail transit safety has recently been  expanded, the Federal Railroad Administration (FRA), also in DOT, has  long carried out safety oversight of freight, intercity passenger, and  commuter railroads in the U.S. that operate on what is known as the  general railroad system of transportation (general system).", "Following high-profile accidents on the Washington Metropolitan Area  Transit Authority (WMATA) Metrorail system in June 2009 and January  2015, FTA assumed temporary direct oversight of WMATA\u2019s rail system  in October 2015. As a result of its review of a January 2015 WMATA  Metrorail accident, the National Transportation Safety Board (NTSB)  recommended in that same year that DOT seek legal authority for FRA to  assume safety oversight over WMATA\u2019s rail system. According to NTSB,  which is an independent federal agency that seeks to advance  transportation safety primarily through accident investigations, FRA is  better suited to providing safety oversight for WMATA\u2019s rail system  because FRA has uniform safety regulations, an experienced inspection  staff, and the ability to assess civil penalties for safety violations. DOT  disagreed with NTSB that the most urgent and effective solution was to  transfer safety oversight of WMATA\u2019s rail system to FRA. The DOT Office  of Inspector General (OIG) also issued a report in 2016 about FTA\u2019s  challenges in carrying out its enhanced safety oversight, including  challenges addressing its safety oversight personnel and resource needs  and establishing robust safety performance criteria and enforceable  standards. We have also reported that FRA has faced its own challenges  in recent years, such as ensuring that it has enough inspectors for its  safety oversight workload.", "In light of these issues and NTSB\u2019s recommendation, you asked us to  review various safety and oversight issues at WMATA Metrorail and FTA,  as well as differences between FRA\u2019s and FTA\u2019s rail safety oversight  programs. In consultation with your office and to assist efforts to ensure  effective rail transit safety oversight of WMATA and other rail transit  providers, we focused this review on examining (1) key characteristics of  FRA\u2019s and FTA\u2019s rail safety oversight programs and (2) strengths and  limitations of FRA\u2019s and FTA\u2019s rail safety oversight programs.", "In addressing the research objectives, we focused on three  characteristics of DOT\u2019s rail safety oversight, as implemented by FRA and  FTA: (1) developing safety regulations, (2) conducting inspections and  oversight, and (3) using enforcement mechanisms. We focused on these  aspects of rail safety oversight because they are the areas highlighted by  NTSB as strengths of FRA\u2019s safety oversight program.", "To address our research objectives, we gathered information about FRA\u2019s  and FTA\u2019s rail safety oversight activities and assessed it against guidance  and leading practices. We reviewed recent statutes that establish DOT\u2019s  rail safety oversight authority as well as applicable implementing  regulations. We also reviewed FRA\u2019s and FTA\u2019s documentation regarding  safety oversight policies and practices. We also interviewed officials from  FRA and FTA about their rail safety oversight activities. We assessed the  information on safety regulations gathered from agency documents and  interviews against official federal government guidance, issued by the  Office of Management and Budget (OMB), about the development of  federal regulations. We also assessed the information gathered from  agency documents and interviews about inspections against leading  practices developed by the Organisation for Economic Co-operation and  Development (OECD)  and the Transportation Research Board\u2019s Transit  Cooperative Research Program (TCRP). For the OECD, which has  played a leading role in the international community to promote regulatory  reform and the implementation of sound regulatory practices, we  identified reports specifically about regulatory enforcement and  inspections. For the TCRP, which serves as one of the principal means  by which the transit industry can develop innovative near-term solutions,  we identified the reports specifically about rail safety and rail oversight.  We also assessed the information gathered from agency documents and  interviews about inspections and enforcement against federal internal  control standards about risk assessments as well as agency information  and communication.", "To further examine FRA and FTA rail safety oversight activities, we  identified and summarized the strengths and limitations of FRA\u2019s and  FTA\u2019s current safety oversight programs as identified in past studies.  Specifically, we assessed the findings from our past work as well as  from DOT OIG and NTSB reports.", "To further examine FRA\u2019s safety oversight activities specifically, we  assessed the statistical model used as part of FRA\u2019s National Inspection  Plan. The National Inspection Plan uses safety risk information, including  as part of a quantitative model, to help target FRA inspection resources to  areas of higher risk. We assessed the model based on FRA  documentation and interviews with FRA officials as well as findings from  our previous work.", "Finally, we interviewed a variety of stakeholders, including rail operators  and organizations, about the strengths and limitations of FRA\u2019s and FTA\u2019s  rail safety oversight activities. Specifically, we interviewed railroad  officials from Amtrak, BNSF Railway, Long Island Rail Road, Metro-North  Commuter Railroad, New Jersey Transit, Port Authority Trans Hudson,  and Union Pacific Railroad. We also interviewed rail transit officials from  Dallas Area Rapid Transit, Los Angeles County Metropolitan  Transportation Authority, New York City Transit, San Francisco Municipal  Railway, and WMATA. We selected these railroads and rail transit  operators based on their modes of operation, systems\u2019 size and age,  and geographic location. Though we believe these railroads and rail  transit operators provided relevant and diverse perspectives on rail safety  oversight, the information gathered from these entities is not  generalizable to all rail operators. To further understand and assess rail  transit safety oversight specifically, we also interviewed officials from  state safety agencies that oversee the rail transit operators interviewed.  Finally, we interviewed officials from stakeholder organizations, including  the Association of American Railroads, American Association of State  Highway and Transportation Officials, American Federation of Labor and  Congress of Industrial Organizations, American Public Transportation  Association, and National Association of Railroad Passengers.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In the United States, both FRA and FTA regulate rail transportation  safety. FRA oversees safety of railroads operating on what is known as  the general system, a network of standard gage track over which goods  may be transported and passengers may travel. This system includes  freight railroads, which typically own their own tracks and locomotives,  transporting products among states and regions. FRA also oversees  safety of intercity passenger and commuter railroads that operate over  tracks owned by freight railroads and other entities. FTA oversees safety  of rail transit systems that typically serve individual metropolitan areas,  using track not shared with freight and other passenger trains. Rail transit  includes a variety of modes, such as heavy and light rail, streetcars,  automated guideways, cable cars, and others."], "subsections": [{"section_title": "Rail Transit", "paragraphs": ["Rail transit is an important component of the nation\u2019s transportation  network, particularly in large metropolitan areas. Rail transit systems  provided over 4.4 billion passenger trips in 2016. \u201cHeavy rail\u201d systems in  large cities account for much of the total rail transit activity, including 88  percent of passenger trips in 2016. According to FTA, 61 rail transit  systems within 28 states, the District of Columbia, and Puerto Rico are  subject to safety oversight by one of the 31 agencies in FTA\u2019s state safety  oversight program (see fig. 1).", "The states have long played a central role in conducting safety oversight  of rail transit systems. The Intermodal Surface Transportation Efficiency  Act of 1991 required, among other things, that states with rail transit  operators designate an agency to oversee the safety of those systems,  known as a state safety oversight agency. In overseeing state safety  agencies, FTA designed the program as one in which FTA, states, and  rail transit operators collaborate to ensure the safety and security of rail  transit systems.", "However, limitations have been identified in the state safety oversight  program. In 2006, we reported on some state safety agency challenges in  overseeing rail transit safety. Specifically, we found many of the state  safety agencies lacked enough qualified staff and adequate levels of  training to meet their responsibilities. In a 2009 hearing before the  Subcommittee on Highways and Transit of the House Committee on  Transportation and Infrastructure, then Secretary Ray LaHood of the  Department of Transportation discussed some of the weaknesses under  the current state safety oversight program and introduced a public  transportation safety legislative proposal. In 2010, various bills were  introduced in both houses of Congress that would have provided FTA  with various enforcement mechanisms and with the authority to issue  safety regulations. Additionally, the bills would have required the  Secretary to establish a federal certification program for employees and  contractors who carry out a state public transportation safety program. In  the 112th Congress, the Senate amended a House bill to include a public  transportation safety provision, which eventually became section 20021 of  MAP-21, the federal public transportation safety program.", "MAP-21 enhanced FTA\u2019s authority to oversee the safety of rail transit,  potentially addressing some of the weaknesses identified by various  stakeholders. Specifically, MAP-21 established a comprehensive Public  Transportation Safety Program, which continues to rely on state safety  agencies to monitor rail transit systems\u2019 safety operations. MAP-21  required that, within 3 years of the effective date of a final state safety  oversight program rule, each eligible state have in place a state safety  oversight program certified by FTA. An eligible state must, among other  things, establish a state safety agency and determine, in consultation with  FTA, an appropriate staffing level for this state agency that is  commensurate with the number, size, and complexity of the rail transit  systems within the state. Additionally, a state safety agency must be  financially and legally independent from any rail transit system it oversees  and have investigative and enforcement authority with respect to the  safety for its rail transit systems, among other things. Each eligible state  has until April 15, 2019, to receive FTA approval of its state safety  oversight program, or else FTA will be prohibited from obligating certain  federal financial assistance to any entity in the state that is otherwise  eligible to receive that federal financial assistance. After that approval,  state safety agencies will be evaluated for continued compliance with FTA  regulations a minimum of once every 3 years through a triennial review  process. According to FTA, these requirements represent a dramatic  increase in federal expectations for state safety oversight and for the rail  transit industry. MAP-21 also established a state safety oversight grant  program, offering federal funding to states for their state safety activities.  FTA\u2019s Office of Transit Safety and Oversight administers the state safety  oversight program."], "subsections": []}, {"section_title": "Railroads", "paragraphs": ["Freight and passenger railroads have played a transformational role in  the development of America and continue to be an important part of the  economy. The general railroad system consists of a vast network of  operations (see fig. 2). The $60 billion freight rail industry is operated by  seven Class I, and hundreds of smaller, railroads. In addition, about 40  railroads move passengers, which carry greater than 670 million  passengers per year.", "The federal government has long provided regulatory oversight of railroad  safety, both passenger and freight, that operate on the general system.  The Interstate Commerce Commission, the first federal regulatory  commission in U.S. history, was established in 1887 to regulate interstate  commerce by rail. The Commission\u2019s safety functions were transferred  to FRA, which was created by the Department of Transportation Act in  1966. In its role as federal regulator and overseer of railroad safety, FRA  prescribes and enforces railroad safety regulations and conducts  research and development in support of improved railroad safety and rail  transportation policy. FRA utilizes safety inspectors and specialists,  primarily covering five safety disciplines, to review and enforce  compliance with these regulations. FRA\u2019s safety disciplines are track,  signal, and train control; motive power and equipment; operating  practices; and hazardous materials. Following several fatal rail accidents  between 2002 and 2008, the Rail Safety Improvement Act of 2008 was  enacted, the first authorization of FRA\u2019s safety programs since 1994. This  act directed FRA to, among other things, issue new safety regulations for  different aspects of railroad safety, such as hours of service requirements  for passenger railroad workers, positive train control implementation,  track inspection rules, and safety at highway-rail grade crossings. FRA\u2019s  Office of Railroad Safety administers the agency\u2019s safety program."], "subsections": []}, {"section_title": "Rail Accidents and Incidents", "paragraphs": ["Rail transportation is a relatively safe way to transport people and  products though serious incidents continue to occur on railroads and rail  transit. According to an analysis of DOT\u2019s Bureau of Transportation  Statistics data by the American Public Transportation Association, travel  by rail transit is far safer than automobile travel. From 2000-2014, for  instance, there were 6.53 and 0.33 fatalities per billion passenger-miles  traveled in cars or light trucks and rail transit, respectively. Within rail  travel, the fatality rates on both railroads and rail transit operators have  remained similar in recent years. Further, the rate of accidents and  incidents\u2014including collisions and derailments\u2014also do not appear to  differ substantially between railroads and rail transit in recent years.  Nevertheless, serious incidents continue to occur on railroads and rail  transit, posing safety risks to passengers, railroad employees, and the public. For example, in June 2009, two WMATA trains collided, resulting  in 52 injuries and 9 deaths. A smoke incident on WMATA\u2019s Metrorail  system in January 2015 also resulted in the death of 1 person and injured  over 90. In a 10-month period from May 2013 to March 2014, the Metro- North commuter railroad, which serves New York and Connecticut, was  involved in five accidents that resulted in the death of 6 people and 126  injured. In June 2016, two BNSF Railway freight trains collided near  Panhandle, Texas, resulting in the death of three crew members.  Incidents such as these have prompted investigations into both the  causes and contributing factors of the specific accidents as well as  broader rail safety oversight."], "subsections": []}]}, {"section_title": "FRA Has a Centralized Safety Oversight Framework While FTA Is Implementing a State- Based Approach", "paragraphs": ["FRA has a more centralized safety oversight program for railroads, while  FTA is implementing changes to the rail transit oversight program,  established in federal statute, which relies on states to monitor and  enforce safety. Key characteristics of both programs include: (1) the  establishment of safety regulations, (2) inspections and other oversight  activities, such as audits and investigations, based on those regulations,  and (3) enforcement mechanisms to ensure that safety deficiencies are  addressed (see fig. 3)."], "subsections": [{"section_title": "Safety Regulations", "paragraphs": ["FRA has developed extensive railroad safety regulations over decades.  FRA\u2019s railroad safety regulations include requirements governing track  design and inspection, grade crossings, signal and train control,  mechanical equipment including locomotives, and railroad-operating  practices including worker protection rules. For example, FRA\u2019s  regulations for track and equipment include detailed, prescriptive  minimum requirements, such as formulas that determine the maximum  allowable speeds on curved track. Many of FRA\u2019s rail safety regulations  establish minimum safety requirements, though railroads can apply for  waivers.", "As FRA updates its safety regulations, it has proposed more  performance-based regulations in recent years. Many of FRA\u2019s current  safety regulations specify the behavior or manner of compliance that  railroads must adopt, such as inspecting each locomotive at least every  92 days. Performance-based regulations, however, specify a desired  outcome rather than a behavior or manner of compliance. For example,  FRA\u2019s recent rulemaking to amend its passenger equipment safety  regulations proposes performance-based crashworthiness and occupant  protection requirements, rather than explicit targets or tolerances.  According to FRA, establishing performance requirements in these areas  would allow a more open rail market that incorporates recent  technologies.", "FTA is currently assessing the need for rail transit safety regulations,  having been provided the authority to issue safety regulations in 2012.  Since MAP-21 was enacted, FTA has finalized regulations implementing  the public transportation safety program authorized by statute. These  include regulations that establish rules for FTA\u2019s administration of a  comprehensive safety program to improve rail transit safety as well as  updated regulations governing state safety oversight of rail transit. In  addition to its public transportation safety program regulations, FTA also  has regulations governing its drug and alcohol testing program. MAP-21  also authorized FTA, for the first time, to issue rail transit safety  regulations, which would establish minimum safety performance  requirements for rail transit operators, as part of its requirement to  develop a National Public Transportation Safety Plan. FTA initiated a  regulatory development effort after the passage of MAP-21, which  included a compilation and evaluation of existing transit safety standards,  guidance, and best practices from the federal government, states,  industry, and other sources. After the evaluation, FTA issued a report that  concluded there was limited documentation or evidence of the  effectiveness of these existing rail transit safety standards. The report  included recommendations that are intended to enable FTA to undertake  further data-driven, risk-based analysis of rail transit safety performance  and the applicability and effectiveness of the identified safety standards.  FTA is also currently analyzing specific focus areas to determine any  areas that should be addressed by federal safety regulations. For  example, FTA is studying the need for regulations related to rail transit  vehicle crashworthiness.", "Since no federal rail transit safety regulations that establish minimum  safety performance requirements for rail transit operators currently exist,  rail transit operators are subject to different safety standards, depending  largely on what voluntary standards they have chosen to adopt, according  to American Public Transportation Association officials we spoke with.  The American Public Transportation Association, for instance, has issued  a variety of rail transit safety standards, addressing various aspects of the  industry including operations, training, and inspections. In addition, states  vary in the extent to which they have regulations for rail transit operators.  For example, officials from the California Public Utilities Commission  noted that it has issued a variety of safety regulations applicable to rail  transit operators within the state of California to improve safety of rail  operations.", "Both FRA and FTA have mechanisms to gather the input of  stakeholders\u2014including rail operators, labor unions, industry  associations, and others\u2014when considering development of safety  regulations. In developing most of its safety regulations, FRA seeks input  from stakeholders through its Railroad Safety Advisory Committee. In  1996, FRA established this committee to develop new regulations through  a collaborative process, with the rail community working together to  create mutually satisfactory solutions to safety issues. FTA is  collaborating with stakeholders as it assesses the need for rail transit  safety regulations. More specifically, FTA\u2019s research partner, the Center  for Urban Transportation Research, established a working group to  collaborate with industry stakeholders to inform the safety regulations  development process. FTA also solicited comments from industry  stakeholders on its compilation of existing rail transit safety standards.  More broadly, FTA also has a Transit Advisory Committee for Safety,  which provides information, advice, and recommendations to FTA on  safety matters."], "subsections": []}, {"section_title": "Oversight Activities", "paragraphs": ["FRA fulfills its mission, in part, through safety compliance audits and  inspections, and investigations. FRA ensures compliance with its safety  regulations through inspections, using a staff of railroad safety experts,  inspectors, and other professionals assigned to eight regional offices  across the nation. For example, to determine a railroad\u2019s compliance with  FRA safety regulations, inspectors examine track, equipment, signal  devices, employee actions, and procedures and review maintenance and  accident records. Additionally, 31 states have rail safety programs that  partner with FRA. Under this approach, FRA enters into agreements  with states to allow state inspectors to participate in investigative and  surveillance activities concerning federal railroad safety laws. State  inspectors who participate in this program submit inspection reports to  FRA. More broadly, FRA\u2019s inspections are guided by a risk-based  model. Under this approach, FRA focuses its inspections on locations  that, according to the data-driven model, are likely to have safety  problems. Like other operating administrations within DOT, FRA has  relatively few resources for overseeing railroads, compared with the size  of the general system. The risk-based model is designed to help FRA  target the greatest safety risks. FRA has begun utilizing automated  inspections as well. In particular, according to FRA, new imaging  technologies have the potential to better inspect track for cracks in the rail  that could lead to breakage as well as measure the track\u2019s geometry to ensure that rails are positioned to meet standards. To further promote  safety in railroad operations, FRA conducts accident investigations.  Separate from investigations conducted by NTSB, FRA investigates  select railroad accidents to determine root causation, and any contributing  factors, so that railroad properties can implement corrective actions to  prevent similar incidents in the future.", "Resources for railroad safety oversight activities have increased in recent  years. FRA was appropriated about $218 million in fiscal year 2017, an  increase over the approximately $187 million it received in fiscal year  2015, for safety and operations, which funds FRA\u2019s personnel, including  inspectors, and safety programs. According to FRA, Congress provided  FRA with increased funding in recent years for the purpose of increasing  staffing related to specific safety issues, such as trespasser prevention  and passenger rail safety. As part of this effort, FRA has hired additional  inspectors, going from 347 inspectors in fiscal year 2013 to over 360  currently, out of the nearly 930 total full-time equivalent staff. FRA officials  told us, as we have reported in the past, that it can be difficult to recruit,  train, and certify qualified inspectors in a timely manner, especially in  certain areas of expertise. Further, according to FRA, its inspectors have  the ability to inspect less than 1 percent of the general system annually.", "Though FTA now has more robust inspection authorities, states will  continue to conduct front-line rail transit safety oversight activities. MAP- 21 provided FTA with new authorities to inspect, audit, and investigate  practices at rail transit agencies, including safety practices, while also  preserving the role of state safety agencies to monitor rail transit systems\u2019  safety operations. According to FTA officials, any federal inspections of  rail transit operators are intended to supplement a state safety agency\u2019s  oversight activities, except where FTA assumes temporary, direct  oversight of a rail transit system from an inadequate state safety agency.  FTA officials told us that establishing a nationwide safety inspection  program at the federal level is inconsistent with the statutory framework of  the state safety oversight program and with congressional intent, which  contemplates preserving the primary role of state safety agencies in  providing direct safety oversight of rail transit systems. The officials also  noted that the state-based approach to rail transit safety oversight is  valuable because states are generally closer to, and more familiar with, rail transit operators. To date, FTA has utilized its new inspection  authorities only on WMATA\u2019s rail system. As part of oversight activities,  some state safety agencies have conducted inspections of the rail transit  systems they oversee, though they were not required to do so, according  to FTA officials we spoke with. To strengthen states\u2019 abilities to conduct  oversight activities, FTA has recommended that state safety agencies  develop risk-based inspection programs. Further, to ensure the  independence of state safety agencies, these agencies cannot receive  funding from the rail transit entities they oversee.", "Resources for FTA\u2019s rail transit safety oversight administrative expenses  have remained relatively stable in recent years, though more are needed,  according to FTA. Since fiscal year 2012, FTA\u2019s appropriations for  administrative expenses, which funds FTA personnel and support  activities including the Office of Transit Safety and Oversight, has  increased $14 million, to about $113 million in fiscal year 2017, according  to FTA. However, for several years, FTA has averaged about 508 total  full-time equivalent staff agency-wide, and a little over 30 safety staff in  the Office of Transit Safety and Oversight. According to FTA, the Office of  Transit Safety and Oversight has been under-resourced since it was  established in response to new safety authority provided in MAP-21. For  fiscal year 2018, FTA requested in their submission for the President\u2019s  Budget proposal funding to hire up to an additional 20 positions for  various lines of safety work.", "FRA\u2019s and FTA\u2019s oversight activities also include regular audits of, and  communication with, the rail operators under their oversight. Given finite  resources and large rail networks, FRA and FTA audit rail operators\u2019 own  inspections rather than conducting comprehensive federal inspections.  More specifically, FRA inspectors, and state safety agencies in FTA\u2019s  oversight program, regularly examine records of rail operators\u2019 internal  inspections to identify safety deficiencies. Officials from FRA, FTA, and  five rail stakeholders we spoke with told us that FRA and FTA rail safety  oversight programs also rely on collaboration and communication  between rail operators and regulators to ensure safety. For example,  regular meetings between FRA and railroad staff to discuss safety trends  and industry developments are important to ensuring safety, according to  officials we spoke with from FRA and the railroads. FRA specialists and  inspectors participate, with representatives of railroad labor and  management, in the implementation of voluntary safety programs. For  example, FRA sponsors the Confidential Close Call Reporting System, a  voluntary, confidential program allowing railroads and their employees to  report accident and incident \u201cclose calls.\u201d According to FRA officials,  voluntary programs such as this increase industry awareness of railroad  safety and engagement with it. FTA also collaborates with state safety  agencies as rail transit safety issues arise, according to FTA officials,  using federal oversight and enforcement authorities as a \u201cback-stop\u201d  against the oversight of state safety agencies. Additionally, according to  officials we spoke with from FTA and two rail transit operators, state  safety agency staff meet with rail transit operators regularly, using  knowledge of local operating conditions to help ensure safety."], "subsections": []}, {"section_title": "Enforcement Mechanisms", "paragraphs": ["FRA uses a variety of tools, including civil penalties, to resolve safety  issues. While some safety issues are resolved informally through  discussion and collaboration between FRA and railroads, as noted above,  some defects identified during inspections are classified as violations and  subject to financial penalties. More specifically, when railroads do not  resolve issues in a timely manner or identified defects are serious, FRA  has the authority to cite violations and assess civil penalties, against  either railroads or individuals. Further, as authorized by law, FRA  negotiates settlements with railroads and other entities subject to its  safety jurisdiction to resolve claims for civil penalties. In fiscal year  2016, FRA assessed over $11.8 million in civil penalties against railroads.", "According to FRA, fiscal year 2016 was the second year in a row that it  took steps to increase penalty amounts paid by railroads, as part of a  continued effort to increase consequences for violations that negatively  affect safety.", "To ensure the safety of rail transit systems, states will continue to be the  primary enforcers of safety requirements, according to FTA officials,  though FTA now has more enforcement tools. MAP-21 preserved the role  of state safety agencies as the primary enforcement body for rail transit.  FTA has now required that state safety agencies have enforcement  authorities sufficient to compel action from rail transit entities to address  safety deficiencies. Though no specific authorities are required, FTA has  suggested that a variety of mechanisms could be appropriate, such as the  ability to remove deficient equipment from service or assess fines.  According to FTA, this requirement is designed to overcome a long- standing vulnerability in state safety oversight, which allowed safety  deficiencies to remain for long periods of time. MAP-21 and the FAST Act  also provided FTA with more options for enforcement when rail transit  operators are found to be out of compliance with safety requirements. In  particular, FTA can withhold federal funding for rail transit operators or  direct a rail transit operator to use federal funding for a specific purpose.  Additionally, after FTA assumes temporary direct oversight of an  inadequate state safety agency, FTA can withhold federal funds from the  state until the state safety oversight program has been certified. To  date, FTA has utilized this authority only with the states responsible for  safety oversight of WMATA\u2019s rail system. In February 2017, FTA  announced that it would withhold 5 percent of fiscal year 2017 urbanized  area formula funds from Maryland, Virginia, and the District of Columbia  until a new state safety oversight program is certified for WMATA\u2019s rail  system. This action built upon FTA\u2019s determination that WMATA\u2019s state  safety agency was ineffective at \u201cproviding adequate oversight consistent  with prevention of substantial risk of death or personal injury.\u201d", "FRA and FTA also have the authority to directly intervene in rail  operations. In particular, both FRA and FTA can suspend the service of  rail operators in response to certain safety concerns. Additionally, FTA  can assume direct safety oversight of a rail transit operator if FTA  determines the state safety oversight program is not adequate, among  other things. In response to safety incidents on WMATA\u2019s rail system,  FTA assumed temporary and direct safety oversight of WMATA in  October 2015, as previously noted."], "subsections": []}]}, {"section_title": "FRA\u2019s and FTA\u2019s Approaches to Rail Safety Oversight Have Strengths and Limitations, and FTA Can Improve Implementation of Its New Authorities", "paragraphs": ["FRA and FTA\u2019s approaches to their rail safety oversight missions each  have strengths and limitations, including how the agencies develop safety  regulations, conduct inspections, and carry out enforcement. Compared  to FRA\u2019s long-standing role in providing safety oversight over railroads,  FTA is in the process of implementing significant changes to its program  for rail transit safety oversight after being granted new authorities in MAP- 21 and the FAST Act. With respect to regulations, FRA\u2019s extensive and  well-established safety regulations are a strength. FTA has made some  progress toward developing appropriate safety regulations, such as  identifying subjects for potential regulatory action. With respect to  inspections, FRA\u2019s use of a risk-based approach to distributing inspection  resources is a strength. FTA has sought to address previously identified  deficiencies in state safety oversight by recommending that state safety  agencies develop risk-based inspection programs. FTA, though, has not  provided states guidance for these efforts. With respect to enforcement,  FRA\u2019s use of its enforcement authorities is a strength. FTA is also  implementing new statutory requirements that state safety agencies have  enforcement authorities but does not have a process or methodology to  evaluate the effectiveness of these enforcement practices."], "subsections": [{"section_title": "Regulations: FRA and FTA Are Working to Improve Rail Safety Oversight by Considering Performance- based Regulations", "paragraphs": ["Extensive and well-established safety regulations are a strength of FRA\u2019s  safety oversight program based on studies we reviewed and discussions  with rail operators and stakeholder organizations. According to NTSB,  FRA\u2019s railroad safety regulations are an important and effective part of its  oversight program. Our previous work reported that according to  stakeholders, the Railroad Safety Advisory Committee provides a  collaborative environment where stakeholders in the rail community work  with FRA to identify issues and proposals for safety standards and  regulations that improved the quality of railroads\u2019 safety initiatives and  fostered a greater level of compliance with safety regulations. This is  consistent with views of stakeholders we spoke with, who characterized  FRA\u2019s safety regulations as a strength. An industry association told us  that FRA\u2019s regulations promote safety by helping to ensure that no  operator falls below a minimum threshold for safe operations, while a rail  operator told us that federal regulations help to standardize the operating  environment and prevent a patchwork of various state regulations. Four  stakeholders also characterized the Railroad Safety Advisory Committee,  which plays a large role in crafting FRA\u2019s railroad safety regulations, as  effective and inclusive.", "However, based on studies we reviewed and discussions with rail  operators\u2019 and stakeholders\u2019 organizations, FRA faces limitations in its  efforts to regulate safety across railroad systems that differ from one  another and sometimes change more quickly than the federal regulatory  process. Five railroad operators and an industry association told us that  some of FRA\u2019s safety regulations do not account for differences in  railroads or innovation in safety practices, with three railroad operators  stating that this approach requires the extensive use of waivers for  particular regulations. Further, two railroad operators and a rail transit  operator we spoke with stated that additional federal regulations are  needed to provide minimum baseline requirements in specific areas of  railroad safety such as medical fitness for duty. In 2014, NTSB also found  that FRA needs to do more to regulate particular safety issues including  medical fitness for duty and signal protection.", "FRA officials acknowledged that time and resources are two of the  primary challenges that the agency faces when developing safety  regulations but also noted additional ways in which the agency can  require railroads to adopt safety practices. FRA officials described the  process of creating or significantly amending a regulation as involving  years of work, even before the agency commences with the process of  drafting a rule. The officials also noted that the agency has additional  tools to compel railroads to adopt safety practices. For example, FRA  officials discussed the use of compliance agreements, in which railroads  can have fines reduced in exchange for adopting safety measures that go  beyond what FRA regulations require.", "FRA officials are considering the use of performance-based regulations  as they update their safety regulations. As noted above, FRA\u2019s  proposed regulations regarding passenger equipment safety incorporates  performance -based safety requirements, rather than explicit safety  targets or tolerances. FRA has promulgated performance-based  regulations about the implementation of positive train control, a  communications-based system designed to prevent certain types of train  accidents, as well as system safety programs that set general safety  parameters and thresholds by which successful performance is  governed.", "FRA\u2019s consideration of performance-based regulations is in line with  federal guidance. OMB\u2019s Circular A-4 states that performance standards  \u201care generally superior to engineering or design standards because  performance standards give the regulated parties the flexibility to achieve  regulatory objectives in the most cost-effective way.\u201d Additionally, under  Executive Order 12866, agencies should (to the extent permitted by law  and where applicable) identify and assess alternative forms of regulation  and specify performance objectives, rather than specifying the behavior  or manner of compliance that regulated entities must adopt.", "However, as the language of OMB\u2019s Circular A-4 and Executive Order  12866 suggest that performance-based regulations are not always  feasible, studies of performance-based regulations find that as with any  other form of regulation, performance-based standards have trade-offs.  FRA officials told us that under certain circumstances, performance- based regulations are appropriate for issues regarding design,  maintenance, operation, and technology-driven safety requirements. FRA  officials we spoke with did not think performance-based standards are  appropriate for areas that require standardization. One example is track  safety standards, where the need for different operators to use the same  equipment precludes a performance-based approach that allows railroads  to meet requirements through different means. FRA officials added that a  key aspect of the success of performance-based regulations concerns  how railroads demonstrate compliance. This concern is consistent with  other studies of performance-based regulations, which find that these  regulations are most appropriate when regulators have capacity to  measure and monitor performance.", "Though FTA has made progress assessing the state of rail transit safety  standards, a limitation of FTA\u2019s rail transit safety oversight program is the  lack of federal rail transit safety regulations, which may contribute to  inconsistent safety practices across the rail transit industry, according to  studies we reviewed and discussions with rail operators and stakeholder  organizations. NTSB reported that the structure of FTA\u2019s oversight  process leads to inconsistent practices, inadequate standards, and  marginal effectiveness. In addition, a 2016 DOT OIG report found that  because FTA\u2019s safety standards are voluntary, they are unenforceable. In  2012, FTA gained the authority to issue safety regulations, though it has  not done so yet, and NTSB and other stakeholders we spoke with  indicated that the lack of such federal safety regulations is a weakness in  federal rail transit safety oversight. Despite differences across rail transit  systems, there is value in establishing federal rail transit safety  regulations, according to stakeholders from all categories of those we  interviewed, including a state safety agency, three rail transit operators, a  railroad operator, and two industry associations. Some stakeholders  identified specific areas that would benefit from federal rail transit  regulations. For example, two rail transit agencies called for federal  regulations to address operator fatigue. Some of these officials stated that  federal rail transit safety regulations could help ensure safety by  establishing clear and consistent minimum standards. Officials from a rail  transit entity and an industry association stated that voluntary standards  are not enough to ensure that transit entities will adopt appropriate safety  measures.", "According to our analysis, a past study, and stakeholders we spoke with,  FTA\u2019s ability to develop and implement performance-based regulations is  limited by its lack of capacity to collect and analyze rail safety  performance data. In 2017, DOT OIG found that data limitations of FTA\u2019s  National Transit Database results in limited safety performance criteria in  FTA\u2019s National Public Transportation Safety Plan. Further, two rail transit  entities as well as a state safety agency we spoke with stated that they  face challenges in analyzing data due to either the size of their systems  or their capacity. FTA officials told us that they need more data to inform  their decisions regarding whether to establish rail transit safety  regulations, and also added that a limitation to their ongoing assessment  of potential areas for rail transit safety regulation is the concern about  public disclosure of safety data provided to FTA and its potential use in  private litigation. According to FTA officials, they need more information  to do a comprehensive evaluation of efficacy of current safety standards  and practices. As required by the FAST Act, FTA has entered into an  agreement with the National Academies of Sciences, Engineering, and  Medicine, to conduct a study to evaluate whether it is in the public interest  to withhold from federal or state court proceedings any information  collected by DOT through its public transportation safety program  oversight activities. The National Academies of Sciences is expected to  complete this study in 2018.", "FTA is taking positive steps toward developing safety regulations that  may address inconsistent safety practices across rail transit operators.  FTA officials stated that the agency is considering issuing rail transit  safety regulations and also employs additional tools to compel rail transit  entities to adopt safety measures. As noted above, FTA is currently  studying whether federal regulations are appropriate for specific areas of  rail transit safety. Executive Order 12866 and OMB\u2019s Circular A-4 direct  federal agencies to consider performance-based regulations when  developing regulations. Further, as the Transportation Research Board  recently reported, any decision to use performance-based regulations  \u201cmust take into account the regulator\u2019s own ability to enforce and motivate  compliance (through methods such as auditing and field inspections) as  well as the capacity of regulated entities to meet their obligations.\u201d FTA  officials noted that they are actively engaged with members of the  Transportation Research Board in reviewing and discussing these recent  findings related to safety regulations for high-hazards industries. In  January 2017, FTA issued its National Public Transportation Safety Plan,  which FTA officials noted is one component of their transit safety  standard development program. According to FTA officials, the plan  identifies a list of issue areas that the agency is currently studying to  determine whether national regulations are needed. FTA officials also  stated that the plan includes \u201cvoluntary standards,\u201d which are intended to  put the industry \u201con notice\u201d that federal safety regulations may be  proposed in those areas. FTA officials stated that they view the National  Public Transportation Safety Plan as iterative and more easily updated  compared with official regulations. Additional tools that FTA officials  stated the agency employs in its approach to safety oversight include  general directives as well as the requirements associated with FTA  grants."], "subsections": []}, {"section_title": "Inspections: FRA Utilizes a Risk-Based Model, While FTA Oversees the Development of State Safety Agencies\u2019 New Programs", "paragraphs": ["Based on our assessment and studies we reviewed, a strength of FRA\u2019s  safety oversight program is its risk-based approach to distributing  inspection resources, which may serve as an example for FTA and state  safety agencies. According to NTSB, FRA\u2019s qualified inspectors are a  strength of its oversight program. To help target these inspectors to the  areas of highest risk, FRA developed the National Inspection Plan, which  includes a quantitative model for allocating inspection resources in a way  that tries to minimize railroad accidents. This model utilizes data  including: (1) accident and incident data that railroads are required to  report, (2) data from FRA inspection activity, and (3) information on  railroad activities such as train miles and other data. Based on our  assessment of FRA\u2019s model, we believe that it can be an appropriate and  useful tool for directing its inspection resources based on risk because it  relies on statistical methods commonly used to predict the risk of a  violation for regulated entities. While we did not review FRA\u2019s entire  modeling process, nor did we validate the results it generates, we do  believe that FRA\u2019s approach to using these statistical models as a key  part of its inspection program is appropriate.", "However, a potential limitation of FRA\u2019s inspection program is the  flexibility granted to individual inspectors and whether the manner and  extent to which inspectors implement this discretion may be inconsistent  with the risk-based National Inspection Plan. FRA\u2019s National Inspection  Plan provides guidance for inspectors about how much time they should  spend inspecting individual railroads. According to FRA officials, FRA  inspectors have considerable flexibility to deviate from the National  Inspection Plan based on their judgment regarding where to more  effectively use their resources. FRA officials stated that situations arise  that call for deviations in planned inspections. For example, a particular  railroad may experience a serious accident and therefore require more  oversight from FRA. According to FRA officials, regional offices make  these decisions based on their understanding of emerging issues.  Inspectors are expected to know their region and decide which locations  to go to, and are in part evaluated based on these decisions. When a  region\u2019s record of total inspection time spent on a particular railroad  differs from the National Inspection Plan by more than 5 percent, the  region\u2019s leadership submits an explanation to FRA\u2019s Office of Railroad  Safety. This practice, if not monitored, could allow inspectors to deviate  from the data-driven model results in ways that undermine the goal of the  National Inspection Plan to deploy FRA\u2019s limited resources efficiently and  based on risk. However, FRA officials told us that flexibility for individual  inspectors is important, and that FRA is continuously monitoring the  model\u2019s performance and making changes as appropriate. Further,  OECD\u2019s Best Practice Principles for Regulatory Policy note that it is  important to ensure \u201cthat sufficient flexibility is left to enforcement and  inspection officials to adapt their response in proportion to the facts on the  ground.\u201d", "A strength of FTA\u2019s approach to rail transit safety oversight is that it is  working to overcome weaknesses in state oversight of rail transit  identified in our prior work and stakeholders we spoke with. For example,  FTA has noted that in the past some state safety agencies lacked  sufficient oversight authorities. To now be certified by FTA, state safety  agencies must demonstrate that they have authority to review, approve  and oversee the implementation of rail transit operator\u2019s safety plans.  Additionally, we have found, and FTA has also noted, that some state  safety agencies would benefit from more training and additional staff. To  now be certified by FTA, state safety agencies must be capable of directly  hiring and developing staff and contract support, as well as have a  training plan for certain staff.", "Though FTA is seeking to implement stronger safety oversight activities,  a limitation of its program is that state safety agencies have not received  the guidance and support necessary to develop effective inspection  programs. FTA does not currently plan to conduct widespread inspections  itself and recommends that state safety agencies develop risk-based  inspection programs. According to FTA, states have discretion to  establish their inspection programs in accordance with their program  standards, and are not required to actually conduct inspections as the  method of verifying rail transit operators\u2019 compliance with safety rules.  However, direct observation, audits, and performance indicator tracking  are useful methods for an oversight agency in assessing a regulated  entity\u2019s safety culture. Officials we spoke with from selected state safety  agencies say that they have received little guidance from FTA on what  their risk-based inspection programs should look like. In the materials  FTA provided to states, it said that it intends to provide guidance to states  on risk-based inspections but did not provide us with a plan or timeline for  doing so.", "Without guidance from FTA, state safety agencies may not develop  effective risk-based inspection programs and thus not use their resources  efficiently. Effective risk-based inspection programs are particularly  important given state safety agencies\u2019 limited resources. We have  reported in the past that some state safety agencies lack sufficient  resources, including training and staff. Officials from two rail transit  operators and all four industry associations we spoke with stated that  state safety agencies continue to have limited resources and capacity.  Several state safety agencies we spoke with rely on contractors or  employees with other responsibilities besides oversight of rail transit to  meet their increased oversight responsibilities and achieve certification  from FTA.", "Federal standards for internal control as well as leading practices for  regulatory inspections state that agency objectives, including those  related to inspections and enforcement, should be clearly communicated.", "Specifically, federal standards for internal control require that  management communicate the necessary quality information to achieve  the agency\u2019s objectives. Additionally, the OECD\u2019s Best Practice  Principles for Regulatory Policy recommends that governments ensure  clarity of rules and processes for enforcement and inspections and clearly  articulate rights and obligations of officials. According to OECD, the  frequency of inspections and the resources employed should be  proportional to the level of risk."], "subsections": []}, {"section_title": "Enforcement: FRA Utilizes Various Mechanisms; FTA Has No Process or Methodology to Assess the Effectiveness of State Safety Agency Enforcement", "paragraphs": ["A strength of FRA\u2019s safety oversight program is that the agency has and  utilizes clear enforcement authority, according to NTSB and stakeholders  we spoke with. As previously discussed, FRA has several enforcement  tools available when inspectors find that railroads are noncompliant with  applicable regulations, including civil penalties, individual liability,  compliance orders, and emergency orders. According to NTSB, this array  of specific enforcement tools helps ensure safety deficiencies are  addressed by railroads. FRA officials also told us that the process of  adjudicating civil penalties provides a forum for FRA and railroad officials  to meet to discuss safety issues. Four rail operators also told us that  FRA\u2019s authority to issue civil penalties is necessary to ensure railroads\u2019  compliance with regulations.", "However, a potential limitation of FRA\u2019s approach to enforcement is that it  is difficult to quantify the effectiveness of FRA\u2019s civil penalties. FRA has  reported that it cannot determine whether observable safety  improvements are directly attributable to discrete civil penalties or  whether the amount of civil penalties has any effect on safety. We have  reported in the past about the challenges of determining the effect of  penalties on compliance in tax policy, though we also noted that, despite  these challenges, some analyses likely would be useful for better  understanding the effect of penalties on compliance. FRA also reported,  though, that according to the judgments of its inspectors, issuing civil  penalties yields observable improvements in safety practices and  compliance with the law. Further, according to FRA, though it does not  quantify the impact of civil penalties, FRA monitors railroad responses to  its enforcement activity and adjusts its oversight as necessary. More  broadly, civil penalties are not meant, by themselves, to ensure railroad  safety. Instead, FRA reported that it uses its entire regulatory regime as a  whole to try and ensure safety. FRA officials also noted that the agency  has additional tools, apart from civil penalties, to compel railroads to  adopt safety practices.", "A strength of FTA\u2019s rail transit safety oversight is that it seeks to improve  historically weak state safety agency enforcement authorities, as  described in our previous report as well stakeholders we spoke with. FTA  requires state safety agencies to adopt enforcement authorities that are  sufficient to enable states to compel action from rail transit agencies to  address identified deficiencies. FTA has also communicated to states that  it is focusing its evaluation of each state\u2019s enforcement authorities in two  major areas: ensuring that the state can carry out its primary  responsibility for rail transit safety in response to (1) an imminent threat to  public safety on the rail transit system and (2) a lack of action or non- compliance from the rail transit operator in carrying out certain safety  plans. FTA has provided states with examples of the enforcement  authorities and policies state safety agencies could establish to address  these specific concerns. Authorities to address imminent safety threats  may include the authority to suspend rail transit agencies\u2019 operations,  inspect and remove deficient equipment or system infrastructure from  service, or issue an order requiring the rail transit agency to correct an  unsafe condition prior to placing equipment or infrastructure back into  passenger service. FTA has also provided state safety agencies with  examples of authorities to address a lack of action or cooperation by the  rail transit operator, including the authority to withhold or redirect funds,  levy civil or criminal fines or penalties, and a formal citation or ticketing  program.", "Though federal law requires that state safety agencies have enforcement  authorities over the safety of the rail transit entities they oversee, a  limitation of FTA\u2019s approach is that FTA has not developed a method to  evaluate the effectiveness of states\u2019 enforcement practices. Certified state  safety agencies will be evaluated for continued compliance with FTA  regulations every 3 years. This triennial review process (for rail transit  safety) seeks to ensure that states are effectively carrying out their  responsibilities. While FTA officials told us that they will evaluate state  safety agencies\u2019 enforcement during the triennial reviews, FTA has not  developed a process or methodology to evaluate whether state  enforcement authorities and practices as a whole are effective. Without a  method for determining the effectiveness of state safety agencies\u2019  enforcement, FTA may not have the information needed to identify  ineffective safety enforcement. As a result, deficiencies may remain for  long periods of time, potentially contributing to safety incidents.", "Federal standards for internal control maintain that agency managers  should perform a range of practices that would facilitate the establishment  of a system to monitor the effectiveness of agency activities, which in the  context of FTA\u2019s mission includes the effectiveness of its rail transit safety  oversight. Agency managers should define objectives clearly to enable  the identification of risks, establish activities to monitor performance  measures and indicators, and externally communicate the necessary  quality information to achieve the entity\u2019s objectives. Internal control  standards further stipulate that agency managers should perform  monitoring activities regarding their internal control system and evaluate  the results. To do so, federal standards for internal control state that  agency managers should monitor ongoing operations and effectiveness,  evaluate the results of this monitoring, and identify any changes that need  to be made to achieve improvement in agency operations.", "The effectiveness of state safety agency enforcement is especially  important because questions have been raised about the efficacy of  FTA\u2019s own enforcement mechanisms, including its ability to withhold  funds from and assume direct control over safety oversight for a rail  transit entity. Rail transit operators and industry association  representatives we spoke with stated that FTA\u2019s authority to withhold  funding from states is overly punitive, and two stakeholders said the FTA  needs more precise tools. Officials from an industry association added  that withholding funds can be counterproductive, as most state safety  agencies are already underfunded and understaffed. FTA officials pointed  to examples in which the agency successfully supported state safety  agencies in compelling action from rail transit agencies as evidence that  the state safety oversight model, in which FTA backs up state safety  agencies, is effective. Additionally, officials from numerous state safety  agencies and others questioned whether FTA has the capacity to  effectively assume direct safety oversight of rail transit operators. FTA  has not assumed direct safety oversight of any rail transit operators  outside of WMATA, and FTA officials noted that they intend to continue  supporting state safety agencies in their oversight wherever possible."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The approaches to rail safety oversight utilized by FRA and FTA each  have strengths and limitations. However, FTA\u2019s program is currently in  transition as the agency implements new authorities and responsibilities  provided in federal law. Though FTA has made progress by evaluating  existing rail transit safety standards and providing some guidance to  states as part of the certification process, limitations in FTA\u2019s approach  may still hinder the success of the state-based rail transit safety oversight  program. Given the looming 2019 deadline for state safety oversight  programs to achieve FTA certification, FTA can improve its efforts to  implement its new rail transit safety oversight program. In particular,  without guidance from FTA on how to develop and carry out risk-based  inspection programs, state safety agencies may not use limited resources  efficiently, risking that important safety issues will go undetected. Further,  without a method for how it will monitor the effectiveness of states safety  agencies\u2019 enforcement, FTA will lack the information needed to identify  ineffective state enforcement, which risks allowing safety deficiencies to  remain for long periods of time. By providing this additional guidance and  direction to the state safety agencies, FTA would help ensure that states  are able to effectively identify and resolve rail transit safety issues."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following two recommendations to FTA:", "The Office of Transit Safety and Oversight should create a plan, with  a timeline, for developing guidance for state safety agencies about  how to develop and implement a risk-based inspection program.  (Recommendation 1)", "The Office of Transit Safety and Oversight should develop and  communicate a method for how it will monitor the effectiveness of the  enforcement authorities and practices of state safety agencies.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft copy of this report to DOT, NTSB, and WMATA for  review and comment.", "In written comments, reproduced in appendix I, DOT agreed with both our  recommendations. DOT also provided technical comments, which we  incorporated as appropriate.", "In e-mails, NTSB and WMATA provided technical comments, which we  incorporated as appropriate. NTSB noted that we do not discuss the role  of system safety initiatives, such as safety management systems, in the  FRA and FTA rail safety oversight programs. We agree with NTSB that  system safety concepts are increasingly influencing the FRA and FTA  approaches to rail safety oversight but, as NTSB also noted, both FRA  and FTA lack finalized regulations codifying their approaches to system  safety initiatives. Because the extent of rail entities\u2019 implementation of  these initiatives varies and is not complete we did not include an  assessment of the strengths and limitations of those initiatives in our  scope.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of  Transportation, Chairman of NTSB, General Manager of WMATA, and  the appropriate congressional committees. In addition, the report will be  available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Individuals who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Steve Cohen (Assistant Director);  Kyle Browning (Analyst in Charge); Melissa Bodeau; Lacey Coppage;  Serena Lo; Sean Miskell; and Josh Ormond made key contributions to  this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-219", "url": "https://www.gao.gov/products/GAO-18-219", "title": "Inter-American Organizations: U.S. Agencies Support Oversight Mechanisms but Could Enhance Their Monitoring of U.S. Assistance Agreements", "published_date": "2017-12-29T00:00:00", "released_date": "2018-01-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States is a member of the OAS, PAHO, IICA, and PAIGH, which promote democracy, health care, agricultural development, and scientific exchange.", "GAO was asked to review U.S. assistance to these four organizations. In this report, GAO (1) assesses the extent to which the organizations' strategic goals align with those of U.S. agencies; (2) examines how the organizations oversee the use of their funds and the extent to which U.S. agencies have supported those efforts; (3) assesses the extent to which U.S. agencies included key monitoring provisions as part of assistance agreements; and (4) assesses the extent to which U.S. agencies had documentation of monitoring activities, including those called for by these provisions. GAO analyzed documents and interviewed officials from State, USAID, HHS, USDA, and the organizations. GAO also analyzed a nongeneralizable sample of 12 of the 60 assistance agreements that were awarded by State, USAID, HHS, and USDA to OAS, PAHO, and IICA and were active during calendar years 2014 through 2016. For each agency, GAO selected three agreements with the lowest, median, and highest dollar value."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that strategic goals of the Organization of American States (OAS), the Pan American Health Organization (PAHO), the Inter-American Institute for Cooperation on Agriculture (IICA), and the Pan-American Institute of Geography and History (PAIGH) are predominantly aligned with the strategic goals of the Department of State (State), the U.S. Agency for International Development (USAID), the Department of Health and Human Services (HHS), and the U.S. Department of Agriculture (USDA). For example, IICA's strategic goals of a productive agricultural sector, enhancing agricultural development, and food security are aligned with USDA's foreign assistance goals. State, USAID, HHS, and USDA fund activities in the form of assistance agreements (e.g., grants and cooperative agreements) with OAS, PAHO, and IICA, which in 2016 totaled $32 million. According to agency officials, the agencies employ mechanisms to ensure that these agreements align with U.S. strategic goals.", "OAS, PAHO, IICA, and PAIGH have established mechanisms for overseeing their use of funds, such as external auditors, internal audit boards, and anti-fraud and ethics policies. State and USDA have directly supported these mechanisms. For example, State engaged in the selection process for OAS's Inspector General.", "GAO's review of 12 selected assistance agreements found that USDA included no financial or performance monitoring provisions in one of its agreements and that State did not include two key monitoring provisions in one of its agreements, called for by applicable guidance. GAO found that the remaining 10 agreements it reviewed contained all key monitoring provisions and that State has since taken corrective action.", "GAO found that U.S. agencies did not have full documentation of 18 of the 42 monitoring activities required by the 12 assistance agreements GAO reviewed (see table). For example, USDA did not have full documentation, such as for financial reports, of any of its 10 required monitoring activities and USDA officials did not explain their lack of documentation. USAID officials explained that their lack of full documentation was due, in part, to grant officers not always following their document management policies. State and HHS have since taken corrective action. If an agency does not have full documentation of monitoring activities, it may lack information needed to make appropriate budgetary and programmatic decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that (1) USDA ensure inclusion of all monitoring provisions as part of agreements and (2) USAID and USDA ensure full documentation of monitoring activities. USDA and USAID concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States is a member of the Organization of American States  (OAS), the Pan American Health Organization (PAHO), the Inter- American Institute for Cooperation on Agriculture (IICA), and the Pan- American Institute of Geography and History (PAIGH). OAS, PAHO, IICA,  and PAIGH work to, among other things, promote democracy, security,  health care, agricultural development, and scientific exchange. The  United States engages with other countries in the region through its  membership in these inter-American organizations to promote U.S.  interests in the Western Hemisphere.", "The Department of State (State) provides the United States\u2019 assessed  contributions to these four organizations\u2019 regular budgets. State, the U.S.  Agency for International Development (USAID), the Department of Health  and Human Services (HHS), and the U.S. Department of Agriculture  (USDA) also provide project-specific voluntary contributions to the OAS,  PAHO, and IICA through grants and cooperative agreements (referred to  hereafter as assistance agreements or simply agreements). For calendar  year 2016, the United States\u2019 assessed contributions to these four  organizations totaled over $130 million, and voluntary contributions to the  OAS, PAHO, and IICA totaled $32 million. Together, the four  organizations oversaw over $358 million in total member-state  contributions for calendar year 2016.", "We were requested to review several issues related to U.S. support for  these four inter-American organizations. In this report, we (1) assess the  extent to which the organizations\u2019 strategic goals align with those of U.S.  agencies; (2) examine how the organizations oversee the use of their  funds and the extent to which U.S. agencies have supported those  efforts; (3) assess the extent to which U.S. agencies included key  monitoring provisions as part of their assistance agreements; and (4)  assess the extent to which U.S. agencies had documentation of  monitoring activities, including those called for by these provisions.", "To address our first objective, we compared the strategic goals articulated  by the four organizations against the U.S. strategic goals for foreign  assistance in the region. We also reviewed relevant U.S. agency  documentation of efforts to ensure goal alignment. To address our  second objective, we reviewed the organizations\u2019 internal control  documentation and interviewed officials from State, USAID, HHS, and  USDA and from the four organizations. To address the third and fourth  objectives, we identified 60 active assistance agreements that these  agencies awarded to OAS, PAHO, and IICA during calendar years 2014  through 2016 and selected a nongeneralizable sample of 12 agreements,  three each from HHS, State, USAID, and USDA. We selected the three  agreements from each agency based on the lowest, median, and highest  dollar value. For the third objective, we then assessed whether the  agencies\u2019 agreements included key monitoring provisions implementing  applicable agency guidance. We identified key monitoring provisions for  agencies to include as part of their agreements as provisions which  ensure oversight over the use of funds, such as financial and progress  reports. For the fourth objective, we assessed the extent to which the  agencies had documentation of required monitoring activities. We  examined documentation of activities called for by assistance  agreements. We also interviewed officials from the four U.S. agencies.  See appendix I for details on our scope and methodology.", "We conducted this performance audit from July 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Inter-American Organizations", "paragraphs": ["The U.S. government engages with the governments of other countries in  the Western Hemisphere through various inter-American organizations  including the OAS, PAHO, IICA, and PAIGH. According to State, the OAS  is the primary inter-American political forum through which the United  States engages with other countries in the Western Hemisphere to  promote democracy, human rights, security, and development. PAHO  serves as the Regional Office for the Americas of the World Health  Organization, the United Nations agency on health. IICA supports  agricultural development and rural well-being through technical  cooperation and the execution of agricultural projects throughout the  hemisphere. PAIGH specializes in regional cartography, geography,  history, and geophysics and has facilitated the settlement of regional  border disputes. According to U.S. agency officials, the organizations\u2019  regional knowledge and technical expertise make them effective  implementing partners for projects serving U.S. national interests and  priorities throughout the hemisphere."], "subsections": []}, {"section_title": "U.S. Contributions to Inter- American Organizations", "paragraphs": ["Member states collectively finance these organizations by providing  assessed and voluntary contributions (see table 1).", "For each organization, its member states\u2019 assessed contributions are  intended to finance the organization\u2019s regular budgets, which generally  cover the organization\u2019s day-to-day operating expenses, such as facilities  and salaries. Member states also finance certain OAS, PAHO, and IICA  activities and projects through voluntary contributions. According to U.S.  officials, the United States provides voluntary contributions to the OAS,  PAHO, and IICA primarily through assistance agreements for specific  projects from State, USAID, HHS, and USDA."], "subsections": []}, {"section_title": "Organizations\u2019 Oversight of Their Funds", "paragraphs": ["The Institute of Internal Auditors (IIA) provides the framework for  international organizations to oversee funds such as the assessed  contributions provided by member states to OAS, PAHO, IICA, and  PAIGH. The institute\u2019s authoritative guidance, International Standards for  the Professional Practice of Internal Auditing, includes mandatory  performance standards that describe the nature of internal audit activities  and provide criteria for evaluating these activities. Organizations are  required to subscribe to these IIA standards, according to PAIGH officials  and OAS, PAHO, and IICA documents."], "subsections": []}, {"section_title": "U.S. Agencies Oversee the Execution of Their Assistance Agreements", "paragraphs": ["Assistance agreements are a critical tool the U.S. government uses to  achieve important national objectives. As we have previously reported,  effective oversight and internal control are important to provide  reasonable assurance to federal managers and taxpayers that assistance  agreements are awarded properly, recipients are eligible, and federal  funds are used as intended and in accordance with applicable laws and  regulations. State, USAID, HHS, and USDA oversee funds provided to  OAS, PAHO, and IICA through assistance agreements using monitoring  activities such as financial and performance reports. Within each of these  agencies, various bureaus and offices are responsible for awarding and  managing assistance agreements to these inter-American organizations,  including State\u2019s Office of Weapons Removal and Abatement in the  Bureau of Political-Military Affairs, USAID\u2019s Office of U.S. Foreign  Disaster Assistance, HHS\u2019s Centers for Disease Control and Prevention  and its Food and Drug Administration, and USDA\u2019s Animal and Plant  Health Inspection Service. The documentation of these monitoring  activities as called for by federal standards for internal control enables the  agencies to determine the effectiveness of the agreement activity."], "subsections": []}]}, {"section_title": "The Strategic Goals of the Four Inter- American Organizations Are Predominantly Aligned with U.S. Agencies\u2019 Strategic Goals", "paragraphs": ["We found that the strategic goals of the four inter-American organizations  are predominantly aligned with the high-level strategic goals for the  Western Hemisphere documented by State, USAID, HHS, and USDA.  According to officials, the agencies all consider U.S. strategic goals when  deciding which projects to fund at OAS, PAHO, and IICA. State, USAID,  HHS, and USDA have goals for foreign assistance to the Western  Hemisphere, as shown in table 2. For example, four of the five goals in  State and USAID\u2019s Joint Strategy correspond with goals at the OAS, IICA,  and PAIGH. U.S. agencies, on an ongoing basis, evaluate each inter- American organization to ensure U.S. and organization goals are aligned.", "Officials from all four agencies provided examples of how they help to  ensure alignment of U.S. strategic goals when funding projects at OAS,  PAHO, and IICA.", "State: According to State officials, State created an Annual Performance and Budget Review process in 2014 specifically to review entities, such as the OAS, that receive voluntary contributions funded through the International Organization and Programs account.  This process examines performance of State-funded activities relative  to those activities from the previous year and the extent to which the  activities advance U.S. priorities and objectives. State officials further  noted that the Annual Performance and Budget Review helps inform  State\u2019s decision-making on what to include in the following year\u2019s  budget request. For example, during the 2016 review for the OAS  Development Assistance Program, State reported the program\u2019s  significant activities, funds expended, and achievements such as  training government officials on successful small business policies in  the United States.", "USAID: According to USAID officials, USAID\u2019s project design and  approval policies and procedures ensure that all USAID-funded  activities are linked to applicable U.S. and USAID strategies. USAID\u2019s  agency guidance requires, at a minimum, that each project or activity  must be formally approved in writing by the relevant Mission Director  or Principal Officer for a given program. Officials stated that this  approval memo and supporting documentation address a number of  planning considerations, including how the proposed activity aligns  with broader strategies. Furthermore, officials stated that USAID\u2019s  lawyers review project approval documentation prior to final approval  and verify that the activity complies with all applicable statutes,  regulations, and policies.", "HHS: According to HHS officials, HHS engages with PAHO on its  Biennial Work Plans, which are operational planning instruments that  PAHO uses to identify activities that it can implement within each of its  member states. HHS officials noted that they use PAHO\u2019s Biennial  Work Plan to strengthen U.S. approaches on issues of common  concern and to advance U.S. priorities within the region. According to  HHS officials, proposals for technical cooperation projects are  required to correspond to one of the technical priorities in PAHO\u2019s  strategic plan for 2014\u20132019 and to be aligned with the HHS global  strategy and U.S. priorities.", "USDA: USDA officials said that they compare the U.S. strategic goals  with IICA\u2019s goals and objectives when they formulate project  proposals with IICA to ensure that the projects are aligned with U.S.  priorities for the region. Additionally, USDA officials told us that USDA  helped shape and influence IICA\u2019s recent 10-year strategic plan,  ensuring that IICA\u2019s strategic objectives were closely aligned with U.S.  strategic goals."], "subsections": []}, {"section_title": "OAS, PAHO, IICA, and PAIGH Have Established Oversight Mechanisms", "paragraphs": ["OAS, PAHO, IICA, and PAIGH have established mechanisms for  overseeing their use of assessed and voluntary contributions, such as  external auditors and internal audit boards as required by IIA standards.  State and USDA have directly supported these oversight mechanisms."], "subsections": [{"section_title": "The Four Organizations Have Oversight Mechanisms as Required by the IIA", "paragraphs": ["OAS, PAHO, IICA, and PAIGH have oversight mechanisms, as shown in  table 3. The four organizations follow the internal control standards of the  IIA, codified in the International Standards for the Professional Practice of  Internal Auditing, according to PAIGH officials and OAS, PAHO, and IICA  documents. All four organizations have internal and external auditors, as  required by these standards. Furthermore, OAS, PAHO, and IICA have  additional oversight mechanisms, such as anti-fraud policies and program  evaluation processes. The officials we interviewed from State, USAID,  HHS, and USDA expressed confidence in the four organizations\u2019  management of their assessed and voluntary contributions.", "All four organizations document the status of their financial and internal  control activities in audit reports posted on their public websites. For  example, the OAS Office of the Inspector General\u2019s April 2017 Annual  Report included an update on its five ongoing audits and investigations.  The report also outlined progress made against prior recommendations."], "subsections": []}, {"section_title": "U.S. Agencies Support Oversight Mechanisms at OAS, PAHO, and IICA", "paragraphs": ["U.S. agency officials support budget and administrative subcommittees in  three of the four organizations and promote the participation of U.S.  experts on independent audit committees, as shown in table 4. For  example, according to officials, State plays a significant role in promoting  policies on oversight and accountability at the four organizations through  formal engagement in deliberations and decision-making of each  organization\u2019s governing body and through informal engagement with  other member states and the secretariat by recommending best practices  in governance, management, and oversight. State and USDA are also  directly involved in implementing some of the additional oversight  mechanisms at the organizations. For example, a USDA official serves as  a member of IICA\u2019s Audit Review Committee. Additionally, an IICA official  told us the United States was involved in defining IICA\u2019s Convention and  Rules of Procedure for its governing bodies, which established the  requirement for internal and external auditing.", "According to State officials, the United States led efforts to strengthen  oversight at several of the organizations under review in recent years,  such as advocating for the creation of an ethics officer position at PAHO,  proposing language to strengthen the authority and independence of the  OAS\u2019s Office of the Inspector General, and encouraging the creation of  audit committees at both organizations. In addition, State has played a  lead role in supporting the ongoing reform of the OAS administration,  which includes improved oversight and accountability, according to  officials from the OAS and the U.S. Mission to the OAS."], "subsections": []}]}, {"section_title": "Two of Four U.S. Agencies Did Not Include All Key Monitoring Provisions in the Agreements We Reviewed", "paragraphs": ["We reviewed 12 selected assistance agreements that the four U.S.  agencies awarded to OAS, PAHO, and IICA that were active during  calendar years 2014 through 2016, and found that two agencies did not  consistently include all key monitoring provisions in their agreements.  While HHS and USAID implemented applicable guidance by including all  key monitoring provisions in their agreements, USDA and State did not  do so. USDA and State agency officials did not explain why USDA and  State did not include these monitoring provisions in their agreements.  However, State has since taken corrective action to ensure that they are  included in future agreements, according to State officials."], "subsections": [{"section_title": "Agency Guidance Calls for Agencies to Conduct Monitoring Activities; Internal Control Standards State That Agencies Should Document These Requirements with Provisions in the Agreements", "paragraphs": ["Applicable agency guidance calls for agencies to conduct monitoring  activities as part of their oversight of their agreements. Each of the four  agencies has established agency-specific guidance that outlines the  monitoring activities for assistance agreements. In some cases, the  agency-specific guidance may mandate additional monitoring activities  beyond those called for in applicable federal regulations, such as risk  assessments. For example, State\u2019s guidance calls for the creation of a  monitoring plan. Federal standards for internal control require that  agencies include in agreements all key provisions delineating the parties\u2019  responsibilities. For the 12 agreements we reviewed, the number of total  key monitoring provisions per agreement varied\u2014including within one  agency\u2014depending on when the agency issued and updated its  guidance relative to when the agreements were approved.", "Federal standards for internal control call for agencies to document  internal controls, transactions, and significant events. Specifically,  internal control standards state that agency management should include  internal control activities (e.g., monitoring activities) in policies or  directives for transactions such as assistance agreements."], "subsections": []}, {"section_title": "HHS and USAID Included All Key Monitoring Provisions in Their Assistance Agreements, but USDA and State Did Not", "paragraphs": ["For the 12 assistance agreements we reviewed, USDA and State did not  include provisions implementing 6 of the 55 total (11 percent) applicable  monitoring activities required by applicable guidance to carry out required  monitoring activities (see table 5). State took corrective action in 2015 by  issuing a standard operating procedure.", "USDA: USDA did not include 4 of the 13 key monitoring provisions  implementing the applicable guidance for the three USDA agreements  we reviewed (see table 6). Two of the agreements and supporting  documentation each included all four key applicable monitoring  provisions. However, Agreement 2 in the table did not include 4 of the  5 monitoring provisions in the agreement or work plan, which  documents the monitoring provisions. The agreement partially  included performance goals, because it included objectives for the  agreement\u2019s activities, but did not include time frames to complete all  of the activities. The USDA grant official did not explain why the work  plan did not adhere to applicable federal regulations when it was  drafted and approved.", "State: State did not include 2 of the 21 key monitoring provisions  implementing the applicable guidance for the three State agreements  we reviewed (see table 7). Two of the agreements and supporting  documentation we reviewed included the 7 monitoring provisions  implementing the requirements in the applicable agency guidance.  However, one agreement awarded in 2012 did not include 2 of the  provisions: a risk assessment and a monitoring plan. That office that  awarded this agreement took corrective action in 2015 by issuing a  standard operating procedure requiring that risk assessments and  monitoring plans accompany its grants and cooperative agreements.", "USAID: USAID included both key monitoring provisions implementing  the applicable guidance for the three USAID agreements we reviewed  (see table 8). USAID\u2019s Automated Directives System 308, Standard  Provisions for Cost-Type Awards to Public International Organizations  contains two key monitoring provisions for agreements. USAID  incorporated the monitoring provisions nearly verbatim into the  agreements we reviewed, using templates from this guidance for  required terms and conditions.", "HHS: HHS included the 15 monitoring provisions implementing the  applicable guidance for the three HHS agreements we reviewed (see  table 9)."], "subsections": []}]}, {"section_title": "None of the U.S. Agencies Had Full Documentation of Monitoring Activities Called for by All of Their Assistance Agreements That We Reviewed", "paragraphs": ["None of the agencies provided us with full documentation to demonstrate  their adherence to the required monitoring activities called for in all of  their agreements that we reviewed, including the previously mentioned  key monitoring provisions that we reviewed. State and HHS have taken  corrective actions to address the gaps we found in documentation for the  agreements we reviewed. Agency officials told us that they use these  monitoring documents, such as financial and progress reports, to inform  future budgetary and programmatic decisions. Therefore, they may lack  information needed to make such decisions if they do not have access to  complete monitoring documentation."], "subsections": [{"section_title": "Assistance Agreements Include Requirements for Monitoring Activities; Internal Control Standards Say Agencies Should Document These Activities", "paragraphs": ["According to federal standards for internal control, each agency is to  include key monitoring provisions as part of its agreements. In the  individual assistance agreements, the agencies specify the requirements  to fulfill these activities, such as requiring financial reports on a quarterly  basis or including specific information in performance reports. Grants  officers at times, if they deem it necessary or appropriate, include  additional monitoring provisions requiring activities beyond those required  by the applicable guidance, such as site visits.", "Federal standards for internal control call for agency management to  design monitoring activities, such as financial and performance reporting,  so that all transactions are completely and accurately recorded.", "Recording these activities maintains their relevance and value to  management in controlling operations and making decisions. Without  access to complete monitoring documentation, the agencies risk  weakening the effectiveness of these controls."], "subsections": []}, {"section_title": "U.S. Agencies Did Not Have Full Documentation of Monitoring Activities for Most of the Agreements We Reviewed", "paragraphs": ["None of the four U.S. agencies had full documentation of all of the  monitoring activities required by their agreements we reviewed (see table  10). The agencies did not have full documentation of monitoring activities  for 9 of the 12 agreements we reviewed. For the 42 monitoring activities  identified across all of the individual agreements, the four agencies did  not have full documentation of 18 of the activities (43 percent). However,  State took corrective action in May 2017 to address its gaps in  documentation, and according to HHS officials, the Food and Drug  Administration addressed its gap in documentation by implementing its  agreement monitoring program in fiscal year 2018.", "USDA did not have full documentation of any of the 10 monitoring  activities we identified (see table 11). USDA demonstrated that it had  partially documented 2 of the 10 monitoring activities (20 percent) by  providing us with some, but not all, quarterly performance reports. For  one of the agreements, USDA had no documentation of the monitoring  activities for that agreement. For its other two agreements, USDA did not  have full documentation of the required monitoring activities. USDA  officials did not explain why they did not have full documentation. Without  full documentation of the required monitoring activities, USDA may not  have the information it needs to make appropriate budgetary and  programmatic decisions.", "USAID did not have full documentation of 2 of the 11 total monitoring  activities (18 percent) we identified across the three agreements we  reviewed (see table 12). USAID had partial documentation of those 2  monitoring activities. For example, USAID provided us with some, but not  all, records such as financial reports required by the terms of the  monitoring activities in the agreements.", "According to USAID officials, the agencies\u2019 lack of complete monitoring  documentation was in part due to agency officials not following some of  their agency\u2019s requirements for managing agreement documents, such as  placing all documents in a shared document management system. For  example, for one of the agreements we reviewed, USAID officials stated  that they stored some agreement documentation electronically\u2014such as  modifications, correspondence with the agreement recipient, and  quarterly financial reports\u2014but primarily maintained paper files.", "USAID officials told us they use the monitoring documents of these  agreements, such as financial and progress reports, to inform future  budgetary and programmatic decisions. For example, according to USAID  officials, USAID uses monitoring documents to identify and address  potential project delays or other \u201cred flags.\u201d For one of the agreements we  reviewed, USAID officials stated these monitoring reports also assist  them in determining whether to award additional funds and establish new  indicators in subsequent agreements. Without full documentation of the  required monitoring activities, USAID may not have the information it  needs to make appropriate budgetary and programmatic decisions."], "subsections": [{"section_title": "State", "paragraphs": ["State did not have full documentation for 5 of the 16 monitoring activities  (31 percent) we identified across the three agreements we reviewed (see  table 13). However, State had partial documentation of 4 of those 5  monitoring activities. For example, State had some, but not all, records  such as standard reporting metrics, required by the terms of the  monitoring activities in one of the agreements. State did not have  documentation of one of the monitoring activities (site visits).", "According to State officials, the agency\u2019s lack of complete monitoring  documentation was in part due to agency officials not following some of  the agency\u2019s requirements for managing agreement documents, such as  placing all documents in a shared document management system. For  example, according to State officials, for one of the agreements we  reviewed, the grants officer mistakenly had saved site visit reports and  similar documents to personal folders because the officer did not know  how to use State\u2019s grant document storage system. As a result, neither  the current grants officer nor other State officials could retrieve these  documents.", "In May 2017, after awarding the agreements we reviewed, State took  corrective action by issuing the Federal Assistance Directive to establish  internal guidance, policies, and procedures for all domestic and overseas  grant-making bureaus, offices, and posts within the department when  administering federal financial assistance. The directive notes that State  implemented a grant management system for domestic and overseas  grants to resolve its \u201csignificant deficiency in the management of Federal  financial assistance.\u201d In addition, the directive indicates that officials from  State\u2019s Bureau of Administration, Office of the Procurement Executive,  Federal Assistance Division will evaluate compliance with risk  assessment requirements and review documentation for selected  agreements each fiscal year. One of the stated purposes of these reviews  is to mitigate risk by strengthening management and oversight of awards,  including grants. According to a State Office of Inspector General report,  State should complete the full deployment of this system for overseas  grants in fiscal year 2019.", "HHS did not have full documentation of 1 of the 5 applicable monitoring  activities (20 percent) we identified across the three agreements we  reviewed (see table 14). HHS had partial documentation of the  semiannual progress report activity for one of its agreements, required by  the terms of its agreement. HHS officials did not explain why they did not  have full documentation for this monitoring activity. HHS had full  documentation of all applicable monitoring activities for the other two  agreements we reviewed.", "According to agency officials, the Food and Drug Administration, which  administered one of the HHS agreements we reviewed, has taken  corrective action to evaluate its agreement documentation and address  deficiencies. According to HHS officials, the Food and Drug  Administration developed a pilot program intended to provide an  additional layer of oversight to ensure adherence to the terms of each  agreement. Under the pilot, officials said, a grant monitoring specialist  reviews the agreement documentation and monitoring reports to identify  agreements that need additional assistance. According to HHS officials,  the Food and Drug Administration implemented this program in fiscal year  2018 and will eventually include all Food and Drug Administration  agreements."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["U.S. assistance agreements for projects with inter-American  organizations further U.S. strategic goals in the Western Hemisphere, but  State, HHS, USAID, and USDA did not consistently include all key  monitoring provisions as part of their assistance agreements or  demonstrate that they had full documentation of monitoring activities for  the agreements we reviewed. Of these four agencies, USAID and USDA  have not taken corrective actions. Monitoring the implementation of U.S.  assistance agreements and fully documenting the results of such  monitoring are key management controls to help ensure that U.S.  agreement recipients use federal funds appropriately and effectively. The  agencies risk weakening the effectiveness of these controls by not  including all key monitoring provisions called for by applicable agency  guidance. Further, if the agencies do not have full documentation of the  agreements\u2019 required monitoring activities, they may not be able to  effectively manage federally funded projects that support U.S. strategic  goals. In addition, agencies may not have all the information they need to  make budgetary and programmatic decisions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations: one to USAID and two  to USDA.", "The USAID Administrator should ensure that USAID officials have full  documentation of required monitoring activities in agreements with inter- American organizations. (Recommendation 1)", "The Secretary of Agriculture should ensure that USDA includes all key  monitoring provisions specified by applicable guidance as part of  agreements with inter-American organizations. (Recommendation 2)", "The Secretary of Agriculture should ensure that USDA officials have full  documentation of required monitoring activities in agreements with inter- American organizations. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for comment to State, USAID, HHS, and  USDA. USDA concurred with our recommendations in an e-mail. In its  written comments, reproduced in appendix IV, USAID stated that it has  policies, procedures, and training in place for the officials who manage  these agreements. In response to our recommendations, USAID stated  that it will issue an agency notice to remind all such officials of these  responsibilities, including the requirement to maintain complete files for  each agreement.", "State and HHS did not provide formal comments. They did provide  technical comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of State, the  Administrator of the U.S. Agency for International Development, the  Secretary of Health and Human Services, and the Secretary of  Agriculture. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have questions about this report, please contact me at  (202) 512-9601, or melitot@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Congressional requesters asked us to review several issues related to the  Organization of American States (OAS), the Pan American Health  Organization (PAHO), the Inter-American Institute for Cooperation on  Agriculture (IICA), and the Pan-American Institute of Geography and  History (PAIGH). In this report, we (1) assess the extent to which the  organizations\u2019 strategic goals align with those of U.S. agencies; (2)  examine how the organizations oversee the use of their funds and the  extent to which U.S. agencies have supported those efforts; (3) assess  the extent to which U.S. agencies included key monitoring provisions as  part of their assistance agreements; and (4) assess the extent to which  U.S. agencies had documentation of monitoring activities, including those  called for by these provisions.", "To address the first objective, we gathered documentation and  interviewed officials from the four U.S. agencies and the four  organizations to determine the U.S. strategic goals for foreign assistance  to the Western Hemisphere and the goals of the four organizations.  According to Department of State (State) and U.S. Agency for  International Development (USAID) officials, the strategic document that  underpins their foreign assistance priorities for the region is The  Department of State\u2019s Bureau of Western Hemisphere Affairs\u2019 and  USAID\u2019s Bureau for Latin American and Caribbean Affairs\u2019 Joint Regional  Strategy. Department of Health and Human Services (HHS) officials said  that HHS\u2019s relevant strategic document is The Global Strategy of the U.S.  Department of Health and Human Services. U.S. Department of  Agriculture\u2019s (USDA) strategic goals for foreign assistance, according to  officials, are outlined in the United States Department of Agriculture  Strategic Plan FY2015\u20132018. The OAS outlined its strategic goals in the  Comprehensive Strategic Plan of the Organization, adopted on October  31, 2016. PAHO\u2019s goals are laid out in Strategic Plan of the Pan  American Health Organization 2014\u20132019. IICA\u2019s strategic document is  the IICA 2010\u20132020 Strategic Plan, which took effect in October 2010.  PAIGH\u2019s strategic document is the Declaration and Guide for the Pan  American Agenda 2010-2020. We compared the strategic goals  articulated by the four organizations against U.S. strategic goals to  assess the extent to which the organizations\u2019 goals contribute to U.S.  interests in the region. We then interviewed officials from the four  agencies and reviewed relevant documentation on efforts they undertake  to ensure that U.S.-funded activities align with U.S. strategic goals.", "To address the second objective, we reviewed documentation of the  organizations\u2019 internal control mechanisms and confirmed our findings  with the organizations. We identified mechanisms to include policies,  directives, rules, practices, and organizational structures that can have an  oversight role in the use of the organizations\u2019 funds. We also interviewed  officials from State, USAID, HHS, and USDA to discuss their support of  these mechanisms.", "To address the third objective, we identified 60 active assistance  agreements that these agencies oversaw with OAS, PAHO, and IICA  during calendar years 2014 through 2016 and selected a  nongeneralizable sample of 12 agreements, three each from State,  USAID, HHS, and USDA. To determine which agreements we would  review for each agency, we selected the three agreements with the  lowest, median, and highest dollar value. If any of an agency\u2019s  agreements supported the same country or activity or were for one-time  projects such as seminars, we selected the next appropriate agreement  based on dollar value.", "For these selected agreements, we then identified the applicable agency  guidance for monitoring activities in the agreements, which we define as  all documents related to each agreement provided to us by the agencies,  such as monitoring reports. The number of key monitoring provisions  varied\u2014even within each agency\u2014depending on when agency guidance  was issued and updated relative to when the agreements were approved.  USDA did not have applicable internal agency-specific guidance for  monitoring of assistance agreements at the time it awarded the  agreements we reviewed; thus, with USDA\u2019s input, we used the  applicable sections of the Code of Federal Regulations, which together  have five key monitoring provisions for agreements. However, USDA  approved two of the agreements in 2012 and the third agreement in 2016,  and this third agreement was subject to an amended version of the Code  of Federal Regulations, which added an additional provision for  performance goals. State\u2019s four applicable grants policy directives have seven key monitoring provisions for agreements that were applicable at  the time the agreements we reviewed were approved. USAID\u2019s Standard  Provisions for Cost-Type Awards to Public International Organizations  (PIOs): A Mandatory Reference to ADS Chapter 308 has two key  monitoring provisions for agreements: audits and records, and the  organization\u2019s adherence to their rules. HHS\u2019s grants policy has five key  monitoring provisions for grant documentation.", "We identified key monitoring provisions for agencies to include as part of  agreements to ensure oversight of the use of funds, such as financial and  progress reports. For the 12 agreements in our sample, we analyzed the  assistance agreements from the four agencies, and then determined the  extent to which the agencies\u2019 agreements included key monitoring  provisions implementing monitoring activities called for by applicable  agency guidance. We did not include subsequent amendments to these  12 agreements in our review of key monitoring provisions. We interviewed  officials from State, USAID, HHS, and USDA (1) to confirm we were  applying the appropriate federal or agency guidance and (2) to discuss  instances in which the agreements did not include key monitoring  provisions.", "To address the fourth objective, we reviewed the 12 selected assistance  agreements and guidance to identify specific required monitoring  activities, such as financial and program reports, site visits, and other  forms of oversight. The agreements specify the requirements for these  activities such as requiring financial reports on a quarterly basis. For  these 12 agreements, we reviewed all the documentation provided to us  by the agencies, then determined the extent to which the agencies had  full documentation of key monitoring activities as specified in the  assistance agreements, including those called for by key monitoring  provisions, as well as those called for by guidance when the monitoring  provisions were absent. We did not include subsequent amendments to  these 12 agreements in our review of monitoring activities. We  interviewed officials from State, USAID, HHS, and USDA to discuss  instances in which the agency did not have full documentation of key  monitoring activities. We also discussed how State, USAID, and HHS  agency officials manage their agreement documentation and use the  information in the agreements\u2019 required monitoring documentation.", "We conducted this performance audit from July 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Financial Oversight Mechanisms of Four Inter-American Organizations", "paragraphs": ["The Organization of American States (OAS), Pan American Health  Organization (PAHO), the Inter-American Institute for Cooperation on  Agriculture (IICA), and the Pan-American Institute on Geography and  History (PAIGH) have established mechanisms for overseeing their use of  funds. Tables 15\u201318 show the mechanisms (oversight policies and  oversight committees and organizations) for each of these inter-American  organizations, as confirmed by the organizations\u2019 officials."], "subsections": []}, {"section_title": "Appendix III: Key Monitoring Provisions Implementing Federal Regulations or Agency Guidance", "paragraphs": ["To oversee the execution of their agreements, the Department of State  (State), the U.S. Agency for International Development (USAID), the  Department of Health and Human Services (HHS), and U.S. Department  of Agriculture (USDA) are to conduct monitoring activities called for by  applicable federal regulations or agency guidance and document these  provisions in assistance agreements as called for by federal standards for  internal control. We identified key monitoring provisions implementing the  applicable agency guidance for State, USAID, HHS, and the applicable  regulations for USDA, as shown in table 19. For both the agency  guidance and the federal regulations, those listed are the ones that were  in effect when the agreements in our sample were approved. Some of the  agency guidance and regulations have since been amended or  superseded."], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Pierre Toureille (Assistant  Director), Julia Jebo Grant (Analyst-in-Charge), Leslie Stubbs, and Paul  Sturm, Alana Miller, and Shirley Min made key contributions to this report.  In addition, David Dayton, Martin de Alteriis, Neil Doherty, Jeff Isaacs,  and Alex Welsh provided technical assistance."], "subsections": []}]}], "fastfact": ["The United States belongs to several organizations that promote health care, democracy, and other causes in the Americas. For example, the Organization of American States is investigating actions of the Venezuelan government against its citizens, and the Pan American Health Organization is fighting malaria in Haiti and elsewhere. U.S. assessed and voluntary contributions to four of these organizations totaled over $160 million in 2016.", "We found that agencies' agreements with the organizations further U.S. strategic goals. However, we made recommendations for agencies to improve their oversight of financial and performance monitoring."]}
{"id": "GAO-18-300", "url": "https://www.gao.gov/products/GAO-18-300", "title": "New Trauma Care System: DOD Should Fully Incorporate Leading Practices into Its Planning for Effective Implementation", "published_date": "2018-03-19T00:00:00", "released_date": "2018-03-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Traumatic injury is a major cause of death and disability in the military, but improved trauma care has the potential to improve these outcomes. DOD has worked to improve trauma care over time, such as by establishing a Joint Trauma System Defense Center of Excellence to examine trauma care and share best practices.", "To improve trauma care across DOD, the NDAA for Fiscal Year 2017 directed DOD to establish a new JTS within DOD's Defense Health Agency. The NDAA requires that the new JTS include four specified elements, and also required DOD to submit to Congress an implementation plan that included the four elements. The NDAA also included a provision for GAO to review DOD's planning for the new JTS.", "GAO assessed whether the implementation plan includes the four required elements and the extent to which DOD's planning efforts to date reflect leading practices from prior GAO work, such as identifying goals and strategies to achieve those goals. To conduct its work, GAO assessed DOD's implementation plan and other supplemental planning documents identified by DOD, and interviewed DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Joint Trauma System (JTS) implementation plan submitted to Congress by the Department of Defense (DOD) in August 2017 includes a description of the four elements required by the National Defense Authorization Act (NDAA) and an overview of implementation activities. For example, it indicates how the Army's current JTS Defense Center of Excellence will become part of DOD's new JTS.", "However, the plan and other supplemental planning documents prepared to date do not fully incorporate leading practices for planning as identified by prior GAO work. GAO has previously found that implementation plans incorporating these leading practices\u2014goals, strategies to achieve goals, risks that can affect goals, and plans to assess progress toward goals\u2014help ensure organizations achieve their objectives. For each of the four required elements, GAO found that these leading practices either were partially incorporated or had not been incorporated:", "Element 1\u2014Serve as the reference body for all trauma care provided across the military health system. DOD documents include specific goals, such as consolidating data from multiple trauma registries. They also include some strategies to achieve the goals, such as identifying lead offices and time frames to complete specific actions. However, the documents provide limited details on actions DOD plans to take, and do not indicate how DOD plans to address risks or assess its progress.", "Element 2\u2014Establish standards of care for trauma care services. DOD documents include a goal to develop, publish, and assess clinical practice guidelines that serve as standards of trauma care. These documents also describe how the new JTS will continue to produce, update, and monitor adherence to the guidelines. However, they do not fully indicate plans to address risks, such as ensuring effective dissemination.", "Element 3\u2014Coordinate the translation of research from DOD centers of excellence into standards of clinical trauma care. DOD planning documents do not incorporate any leading practices for this element. DOD officials told GAO that clinical standards incorporate relevant research and that officials responsible for trauma care standards routinely interact with officials responsible for research. Officials expect this practice to continue under the new JTS.", "Element 4\u2014Coordinate the incorporation of lessons learned from trauma education and training partnerships into clinical practice. DOD planning documents do not incorporate any leading practices for this element. According to officials, DOD must first establish a separate directorate responsible for partnerships with civilian trauma centers before determining how to incorporate lessons from partnerships into the new JTS.", "According to DOD, the JTS implementation plan is a general overview of implementation activities, and planning efforts are ongoing. By not fully incorporating leading practices in its planning documents, DOD may be missing opportunities to ensure that the JTS is effectively implemented, to provide more effective trauma care across the military, and to help reduce trauma-related deaths and disabilities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD incorporate leading practices in its planning to guide implementation efforts. DOD agreed with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Traumatic injury is a major cause of death and disability within the  military, but more effective trauma care has the potential to increase  survivability and reduce disabilities after injuries. For example,  Department of Defense (DOD) researchers found that approximately 24  percent of all servicemembers who died in combat from 2001-2011 could  have survived if improved and more timely medical care were made  available. Over the last two decades, DOD has worked to improve the  care it provides to servicemembers and others, with a goal of reducing  deaths and disabilities caused by trauma. Previous efforts included the  establishment of a Joint Trauma System, a Defense Center of Excellence  (JTS DCOE) within the U.S. Army, which has been responsible for  providing organized and coordinated capability for injury prevention, care,  and rehabilitation support of DOD trauma initiatives across the Military  Health System. A 2016 report by the National Academies of Sciences,  Engineering, and Medicine noted widespread improvements over time in  both military and civilian trauma care, but also acknowledged  inconsistencies in care that continue to result in preventable injuries and  deaths.", "To improve trauma-related care across DOD, the National Defense  Authorization Act (NDAA) directed DOD to set up a new joint trauma  system (JTS) within its Defense Health Agency (DHA) that includes  required elements such as serving as a reference body for trauma care  provided across the military health system, and establishing standards of  trauma care at military medical treatment facilities. The NDAA also  required DOD to submit an implementation plan for this effort and  included a provision for us to review this plan. In this report, we examine  the extent to which DOD\u2019s planning efforts include the required elements  and incorporate leading practices for implementation planning identified in  our prior work.", "To do our work we reviewed DOD\u2019s August 2017 implementation plan  and interviewed DOD officials about the existing JTS DCOE and the  plans and status of implementing each of the required elements.  Additionally, we reviewed and assessed the implementation plan and  supplemental planning documents identified by DOD against leading  practices for planning identified in our prior work. Specifically, we  identified four leading practices that agencies may include when planning  for program implementation: (1) goals for the program, (2) strategies to  achieve goals, (3) risks that can affect goals, and (4) plans to assess  progress toward goals. We also used Standards for Internal Control in the  Federal Government to assess DOD\u2019s efforts. (See table 1 for more detail on these leading practices.) We then determined whether DOD\u2019s  planning documents for each of the four elements required by the NDAA  fully incorporated, partially incorporated, or did not incorporate the leading  practices for planning.", "We conducted this performance audit from June 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "U.S. Army\u2019s Joint Trauma System Defense Center of Excellence", "paragraphs": ["Since the mid-2000s, DOD and the military health system have worked to  decrease trauma-related morbidity and mortality by improving trauma  care in DOD\u2019s military treatment facilities and by conducting research on  providing trauma care. As part of these efforts, the Army established the  JTS DCOE, which serves to provide advice on trauma care across the  military.", "The JTS DCOE performs several functions to improve trauma care,  including overseeing the DOD Trauma Registry (DODTR)\u2014a database that  captures trauma data from the time servicemembers are injured on  the battlefield to when they are treated by providers in the United  States. The JTS DCOE uses DODTR data to conduct performance  improvement activities and to identify gaps in medical capabilities to  direct ongoing and future combat casualty care research, trauma skills  training, and combat casualty care. The JTS DCOE also provides  data from the registry to collaborating military and civilian personnel  conducting medical research. managing the development, monitoring, and review of Clinical  Practice Guidelines (CPGs). These guidelines, developed by subject  matter experts using data from DOD\u2019s trauma registry, are created to  inform medical professionals of best practices based on medical  evidence, with a goal of minimizing inappropriate variation in medical  practice and improving care for trauma injuries, specifically when  military servicemembers are deployed. The development of CPGs is  an ongoing process that takes place during times of war and peace,  according to DOD officials. developing and providing training curriculum for first responders to  trauma-related injuries. The JTS DCOE seeks to identify lessons  learned from trauma care that can be used as part of this training, to  help improve the medical readiness of trauma care providers."], "subsections": []}, {"section_title": "NDAA Requirement for a New DOD Joint Trauma System", "paragraphs": ["To create a formalized, consistent trauma system across DOD, the NDAA  required that a new JTS be operated under the direction of DHA. DHA  officials expect to begin initial operation of the new JTS in July 2018.  Additionally, DOD plans to realign the existing JTS DCOE and its current  functions under DHA. Section 707 (a)(2) of the NDAA required DOD to  submit an implementation plan to Congress for the new JTS in June  2017, 180 days after the NDAA was enacted. The NDAA also includes a  provision for us to review DOD\u2019s plan within 180 days after DOD  submitted it to Congress, and for DOD to implement the new JTS 90 days  after we submit our review. The NDAA required that the new JTS and  DOD\u2019s implementation plan include the following four elements:  1.  serve as the reference body for all trauma care provided across the  2.  establish standards of care for trauma services provided at military  3.  coordinate the translation of research from DOD\u2019s centers of  excellence into standards of clinical trauma care, and  4.  coordinate the incorporation of lessons learned from trauma education  and training partnerships pursuant to section 708 of the NDAA into  clinical practice."], "subsections": []}]}, {"section_title": "DOD\u2019s Joint Trauma System Implementation Plan Includes the Four Elements Required by the NDAA, but Does Not Yet Fully Incorporate Leading Practices for Planning", "paragraphs": ["The implementation plan submitted by DOD to Congress on August 7,  2017 includes a description of the four elements required by the NDAA. It  also provides an overview of the implementation activities, including  realigning the U.S. Army\u2019s current Joint Trauma System Defense Center  of Excellence to become part of the new system within DHA.", "Although the implementation plan includes the four required elements,  neither it nor DOD\u2019s supplemental planning documents prepared to date  fully incorporate leading practices, which we have previously identified.  These leading practices, such as the establishment of goals and the  identification of strategies to achieve those goals, play an important role  in enabling an organization to achieve its objectives. We found that  DOD\u2019s planning documents, prepared to date, incorporate only some of  the leading practices. (See table 2).", "DOD officials acknowledged that the agency\u2019s plans are presently  incomplete because this process is ongoing. They stated that DOD is  continuing to plan for implementing all four elements of the JTS\u2014 including efforts to incorporate leading practices. DOD\u2019s planning  documents that have been prepared to date and our assessment of each  of the four elements are described below."], "subsections": [{"section_title": "Element One\u2014Serve as a Reference Body for Trauma Care", "paragraphs": ["DOD\u2019s planning documents incorporate goals associated with this  element, but only include partial information about the strategies,  associated risks, and plans to assess progress. Without including more  complete information about plans to serve as a reference body for trauma  care, it is unclear how well prepared DOD is to implement this element.", "Goals: According to a planning document, DOD has two goals for  JTS to serve as a reference body:  1) consolidating disparate trauma registries into the  DODTR. According to DOD officials, there are currently  about 70 disparate registries, some of which collect  trauma-related information for various entities across DOD.  2) developing a common trauma lexicon\u2014a dictionary of  common trauma care terminology to assist in the  assessment of trauma-related injury data.", "Strategies: In addition to defining goals, the documents also  include some strategies to achieve those goals, such as specific  actions that DOD plans to take and target dates for accomplishing  these actions. For example, the documents outline plans to take  action to define key terms such as \u201cpreventable death,\u201d \u201cnon- survivable injury,\u201d \u201cpotentially survivable injury,\u201d and others by a  target date of July 2018. The documents also identify DHA as the  lead office within DOD that is responsible for executing and  achieving this action.", "The planning documents do not yet fully reflect the strategies  needed to accomplish these goals. For example, although the  documents discuss actions and milestones associated with goals  for this element, they do not yet provide complete information on  the resources and costs needed for implementation. The  documents state that DHA will conduct an organizational analysis  to determine what organizational structure, staffing needs, and  other resources are needed for implementation at a later date.  They also state that funding levels for DHA\u2019s operation of the  DODTR will be based on the existing JTS DCOE funding levels.  However, another planning document indicates that the  infrastructure for the DODTR\u2019s existing host network\u2014operated by  the United States Army Institute of Surgical Research\u2014would be  insufficient to support the planned JTS and DODTR expansion,  and that integrating even a single additional registry or component  of a registry into the DODTR would require an adjustment to the  funding for the system. Given that the planned activities for the  new JTS would require an expansion beyond the scope of the  current JTS DCOE responsibilities and activities, additional  planning for equipment and network support costs may be  necessary to ensure that the new JTS has sufficient resources to  meet its goals.", "Risks: The planning documents identify risks that could affect the  JTS\u2019s ability to serve as a trauma reference body, but the  documents do not yet specify how DOD plans to assess or  respond to these risks. For example, although one of the planning  documents identifies potential shortfalls in the DODTR host  network\u2019s ability to support an increased number of users\u2014which  are expected as the various disparate registries are  consolidated\u2014none of the documents yet address the estimated  impact of this risk on DOD\u2019s goals or how it plans to respond to  the risk. Not planning for assessing and responding to risks could  increase the likelihood that they become problematic, and  negatively affect DOD\u2019s goal for the JTS.", "Plans to Assess Progress: The planning documents do not yet  fully indicate how DOD plans to assess progress made towards  the goals for consolidating registries or developing a lexicon of  common trauma terms, as would be consistent with leading  practices. The documents include a description of a baseline for  performance related to DOD\u2019s goal to develop a lexicon of  common trauma terms, but they do not yet include plans to  monitor the progress made towards this goal or to assess the  results of monitoring. Additionally, the documents do not yet  establish a performance baseline, a system to monitor progress,  or a plan to assess the results of monitoring for DOD\u2019s other goal  for this element\u2014to consolidate registries into the DODTR.  Without a fully-developed system for assessing the  implementation\u2019s progress\u2014practices which are consistent with  federal internal control standards for risk assessment\u2014DOD may  be unable to determine progress toward the goals it has identified  for this element."], "subsections": []}, {"section_title": "Element Two\u2014Establish Standards of Trauma Care for Military Services", "paragraphs": ["DOD\u2019s planning documents incorporate goals and plans to assess  progress, but do not yet fully incorporate leading practices related to  strategies and risks.", "Goals: According to the documents, DOD\u2019s goal for this element  is twofold:  1) to develop, publish, and assess standards of care in  DOD\u2019s CPGs.  2) to determine if the CPG development process can be  improved. DOD publishes CPGs to provide trauma care  providers with recommended practices for the provision of  care, based on available evidence. According to DOD  documents, the CPGs minimize variations from evidence- based best practices, which help to save lives.", "Strategies: DOD\u2019s planning documents describe how the new  JTS will continue to produce, update, and monitor adherence to  CPGs and designates JTS as the office that is primarily  responsible for leading these efforts. Although DOD\u2019s planning  documents include information needed for the JTS to establish  standards of care through CPGs, they do not yet fully reflect the  strategies necessary to achieve DOD\u2019s goal. DOD officials  indicated that the new JTS will develop, publish, and assess  CPGs using the same process used by the existing JTS DCOE.  DOD officials told us that CPGs are currently reviewed on an  annual basis and updated once every two years, on average.  According to DOD officials, this frequency exceeds standards  established by leading civilian organizations. Once updated,  officials disseminate CPGs by posting them on a website, sharing  them with DOD officials responsible for training trauma care  providers, and discussing them at weekly conference calls on  combat casualty care. Officials also told us that the existing JTS  lacks authority to require that trauma care providers adhere to  recommendations made in CPGs. In addition, DOD\u2019s planning  documents acknowledge that the existing process lacks sufficient  mechanisms to ensure timely updates and effective dissemination,  but do not yet indicate what plans are needed to make  improvements in these areas. Without additional planning to  improve mechanisms for CPG development and dissemination,  DOD faces uncertainty regarding the new JTS\u2019s ability to ensure  that the CPGs it produces are up to date and effectively  disseminated to military trauma care providers, which may  ultimately impact the trauma care that it provides.", "Risks: The planning documents identify risks associated with the  development and dissemination of trauma care CPGs, such as an  inconsistent process for dissemination. However, they do not yet  include information on determining the potential effects of these  risks, nor do they include how DOD expects to respond, which are  both leading practices for risk assessment and are consistent with  federal internal control standards. Without additional planning,  DOD may not be fully prepared to address risks related to  updating and disseminating CPGs.", "Plans to Assess Progress: The planning documents include  detailed information about how DOD uses performance measures  for each CPG to assess progress in provider adherence to trauma  care standards. The documents also establish a baseline for  provider performance, a system for ongoing performance  monitoring, and a process for evaluating the results of  monitoring\u2014performance measurement activities that can help  the department track progress towards the goal it has established  for this element."], "subsections": []}, {"section_title": "Element Three\u2014 Coordinate the Translation of Research into Trauma Care Standards", "paragraphs": ["One of the planning documents provides a general overview of how DOD  plans to coordinate the translation of research from its centers of  excellence\u2014including the JTS DCOE and other trauma care centers of  excellence\u2014into trauma care standards, but the planning documents  have yet to incorporate any of the four leading practices, including goals,  strategies, risks, or plans to assess progress. According to DOD officials,  the current JTS DCOE routinely translates research into trauma care  standards by creating and updating these standards to incorporate the  findings and results of relevant research. DOD officials also told us the  current JTS DCOE routinely interacts with the various DOD organizations  responsible for trauma-related research, such as by holding weekly  discussions on trauma care issues. Officials stated that they do not  expect these interactions to change as the JTS DCOE transitions to the  new JTS. However, the planning documents do not yet provide any detail  about how these interactions will inform clinical standards. Without  including detailed information in the planning documents on how DOD  expects to coordinate the translation of research into trauma care  standards, it is unclear whether the JTS will be fully prepared to ensure  that clinical standards are up-to-date and based on the most relevant  evidence from research. This is critical to ensuring the effectiveness of  the trauma care provided."], "subsections": []}, {"section_title": "Element Four\u2014 Incorporate Lessons Learned from Trauma Education and Training Partnerships", "paragraphs": ["The planning documents for this element do not yet incorporate any of the  four leading practices, including goals, strategies to achieve goals, risks,  or plans to assess progress. Officials indicated that planning for the  implementation of this element will be incomplete until DOD establishes  the new Joint Trauma Education and Training Directorate responsible for  establishing these partnerships. Section 708 of the NDAA states that  DOD may enter into partnerships with civilian trauma centers to provide  trauma care providers with maximum and continuous exposure to a high  volume of critically injured patients. According to DOD officials, planning  for incorporating lessons learned will begin after the directorate reaches  initial operating capacity, which they anticipate in 2018. DOD officials also  told us that the JTS will collaborate with the directorate for trauma  education and training partnerships, once it is established, to plan the  translation of relevant lessons learned into clinical practice. Because  planning for this element is still incomplete, it is unclear whether DOD will  be prepared to use information from these clinical partnerships to improve  the effectiveness of the trauma care it provides to injured service  members."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In an effort to reduce preventable deaths and disabilities due to trauma,  and as required by the NDAA, DOD is planning for the implementation of  its new JTS. Specifically, the department has submitted its  implementation plan to Congress as required and has developed other  supplemental planning documents that describe how it plans to address  the four required elements of the new system. Incorporating these  elements is a critical step for DOD as it works to improve trauma care  consistently across the military health system. Although the NDAA  requires that DOD begin implementation in 2018, DOD\u2019s planning is  ongoing, and its planning documents do not fully incorporate leading  practices that can help ensure the success of its efforts. As it moves  forward, DOD has the opportunity to update its efforts and planning  documents to fully incorporate these leading practices. By not doing so,  DOD may be missing an opportunity to ensure that its efforts to  implement a new JTS are effective and to help reduce trauma-related  deaths and injuries across the military."], "subsections": []}, {"section_title": "Recommendation", "paragraphs": ["To fully implement the four required elements of the new Joint Trauma  System, the Director of the Defense Health Agency should fully  incorporate leading practices\u2014including establishing goals, planning  strategies to achieve goals, identifying and addressing risks, and  assessing progress\u2014in its planning to guide implementation efforts.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. DOD provided  written comments, which are reprinted in appendix I, and technical  comments, which we incorporated as appropriate. In its written  comments, DOD concurred with our recommendation to fully incorporate  leading practices in its planning to guide JTS implementation efforts.  DOD\u2019s written comments also referred to technical concerns regarding  the timeliness of its updates to clinical practice guidelines. Specifically,  the comments indicate that DOD updates these guidelines more  frequently than standards established by leading civilian organizations.  Our report includes a description of DOD\u2019s processes for developing and  updating these guidelines, including the frequency of the updates, and we  added a statement regarding DOD officials\u2019 comparison of this frequency  to civilian standards.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Will Simerl (Assistant Director), Carolyn  Garvey (Analyst-in-Charge), Sarah Sheehan, Jennie Apter, and  Jacquelyn Hamilton made key contributions to this report."], "subsections": []}]}], "fastfact": ["DOD researchers found that about 24% of military servicemembers who died in combat from 2001-2011 could have survived if better and more timely trauma care had been available.", "To help reduce preventable deaths and disabilities, DOD is planning for a new trauma care system. However, we found that DOD's planning documents do not fully incorporate certain practices, like clear goals and strategies, that could help the department more effectively implement its new system.", "We recommended that DOD fully incorporate leading practices into its ongoing planning to help ensure the success of its efforts to improve trauma care."]}
{"id": "GAO-18-54", "url": "https://www.gao.gov/products/GAO-18-54", "title": "Agricultural Promotion Programs: USDA Could Build on Existing Efforts to Further Strengthen Its Oversight", "published_date": "2017-11-21T00:00:00", "released_date": "2017-11-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["\u201cGot milk?\u201d and \u201cPork: The Other White Meat\u201d are examples of advertising campaigns undertaken by 2 of the 22 federal agricultural research and promotion programs, commonly known as commodity check-off programs. These programs, funded by a fraction of the sale of each unit of a commodity, are led by boards consisting of industry members appointed by the Secretary of Agriculture. The programs conduct research and promotion activities to strengthen a commodity's position in the market. In 2016, check-off funds totaled over $885 million. By law, funds cannot be used for lobbying or disparaging other commodities, among other things. AMS has primary responsibility for overseeing the check-off programs.", "GAO was asked to review AMS's oversight of the check-off programs. This report examines (1) the extent to which AMS has addressed previously identified weaknesses in its oversight and (2) how the effectiveness of the programs has been evaluated and what the results have indicated. GAO selected a sample of 8 such programs\u2014selected, in part, based on total funds collected\u2014and reviewed laws, regulations, and agency guidance. GAO interviewed agency officials, check-off board executives, and economists."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) has improved its oversight of check-off programs since USDA's Office of Inspector General (OIG) made recommendations in a 2012 report. In response to two OIG recommendations, AMS developed and implemented standard operating procedures, which outline specific oversight responsibilities of AMS, and began to conduct internal reviews of its oversight functions. However, GAO found that AMS does not consistently review subcontracts\u2014a legal agreement between a contractor and third party\u2014or ensure that certain documents are shared with stakeholders on program websites.", "Subcontracts. Under AMS's 2015 guidelines for check-off programs, which cover broad oversight activities, staff are to review a sample of subcontracts during agency reviews of program operations. However, AMS did not revise its standard operating procedures to match its guidelines with this responsibility, and GAO found that AMS reviewed subcontracts for only one check-off program in its sample of eight. Without revising the standard operating procedures to include a review of subcontracts, AMS's ability to prevent misuse of funds is impaired.", "Transparency. According to leading business principles, transparency is central to stakeholders' access to regular, reliable, and comparable information. However, GAO found that four of the eight check-off programs reviewed posted all key documents, such as budget summaries and evaluations of effectiveness, to program websites. GAO found that AMS's guidelines state that budget summaries should be posted on program websites, while the other key documents are to be available on the website or otherwise made available to stakeholders. Agency officials said that boards would supply documentation if contacted by a stakeholder. Industry representatives GAO interviewed said that transparency of how funds are used and the effectiveness of programs are important to their members. Without including in its guidelines and standard operating procedures that all key documents should be posted on a check-off program's website, AMS may miss an opportunity to ensure that stakeholders have access to information on program operations and effectiveness.", "Independent economic evaluations of the effectiveness of check-off programs, required by law to be conducted every 5 years, have generally shown positive financial benefits. For the eight evaluations GAO reviewed, benefits ranged from an average of $2.14 to $17.40 for every dollar invested in the programs. However, the evaluations varied in the methods used and had certain methodological limitations. For example, some evaluations did not account for the effects of promotion from competing commodities, which could overstate the programs' benefits. AMS's standard operating procedures state that the agency should review the evaluations to ensure that there is a credible methodology, among other things; however, AMS did not consistently document reviews of the evaluations or have criteria by which to review the evaluations. Without developing criteria to assess the methodology and results of evaluations, the agency's assessments of independent economic evaluations may be inconsistent across check-off programs and misleading to stakeholders."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that USDA revise its standard operating procedures to include the review of subcontracts, include key documents on check-off program websites, and develop criteria to assess evaluations. USDA generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["\u201cGot milk?\u201d \u201cPork: The Other White Meat\u201d. \u201cThe Incredible, Edible Egg\u201d.  These are three examples of advertising campaigns for agricultural  commodities undertaken through research and promotion programs,  commonly known as commodity check-off programs. At present, there are  22 commodity check-off programs authorized by the Secretary of  Agriculture through orders issued after public notice and comment. The  Secretary issues these orders under the authority provided in legislation  addressing specific agricultural commodities or under general authority  provided in the Commodity Promotion, Research and Information Act of  1996. As stated in the general act, these programs were formed to  strengthen a commodity\u2019s position in the marketplace through the  development and implementation of promotion, research, and information  programs. The U.S. Department of Agriculture\u2019s (USDA) Agricultural  Marketing Service (AMS) has primary oversight responsibility for ensuring  that check-off boards comply with legislative and regulatory requirements.", "The term check-off refers to the way the research and promotion  programs are funded\u2014an assessment is paid by producers, handlers,  processors, importers, or others in the marketing chain for each unit of a  commodity sold, produced, or imported. The programs are principally  funded by this assessment and do not receive federal appropriations. In  2016, program assessments totaled over $885 million for these federally  authorized check-off programs.", "Each check-off program is operated by a board, such as the American  Egg Board or the Cattlemen\u2019s Beef Board, whose members, for the most  part, are appointed by the Secretary of Agriculture from nominations  submitted by industry. Check-off board staff are primarily responsible for  the operations of the board and interacts daily with AMS representatives.", "The check-off boards conduct activities to increase overall demand for the  commodities; expand markets in the United States and abroad; and  expand the commodities\u2019 uses through research, promotion, and  consumer and industry information.", "Among other things, check-off boards are explicitly prohibited from (1)  engaging in any action that could be a conflict of interest; (2) using  assessed funds to influence any legislation or governmental action or  policy; and (3) promoting any advertising that may be false, misleading, or  disparaging to another agricultural commodity. AMS has primary  oversight responsibility for ensuring that the boards follow these  prohibitions and abstain from these activities. In 2012, USDA\u2019s Office of  Inspector General (OIG) found that AMS needed to improve certain areas  of its oversight of check-off board operations.", "You asked us to review AMS\u2019s oversight of check-off programs. This  report examines (1) the extent to which AMS has taken steps to address  previously identified weaknesses in its oversight of check-off programs  and (2) how, if at all, the effectiveness of the check-off programs has  been evaluated and what the results of those evaluations have indicated.", "To perform this work, we reviewed statutes and regulations related to  check-off programs. In addition, we reviewed AMS guidance for check-off  programs, including the programs\u2019 guidelines and standard operating  procedures. We also reviewed OIG reports on check-off program  oversight. For each of the objectives, we selected a nonprobability  sample of 8 of the 22 check-off programs. We selected these programs  to get a range of information based on the following criteria: (1) AMS  commodity area, (2) amount of total assessments collected, and (3)  whether each program was created under its own stand-alone legislation  or the Commodity Promotion, Research and Information Act of 1996. We  interviewed senior agency officials from each of the four AMS commodity  areas in which the 8 programs reside as well as the marketing specialists  who oversee the 8 programs. We also interviewed executives from the  check-off boards of the 8 programs in our sample. In addition, we  interviewed representatives from five industry organizations to discuss  information that they receive related to check-off programs and their  organizations\u2019 views on any evaluations of check-off program  effectiveness. We selected organizations with members who pay check- off program assessments and who have an understanding of the check- off programs based on information found on the organization websites.", "To determine AMS\u2019s oversight activities, we reviewed relevant laws,  regulations, and agency guidance. Among the statutes we reviewed were  the Commodity Promotion, Research and Information Act of 1996 and the  various laws establishing other check-off programs along with the  regulations pertaining to the sample of 8 check-off programs. We  compiled a list of AMS\u2019s oversight activities, and obtained documentation  from AMS for the 8 programs in our sample for fiscal years 2014 and  2015 to demonstrate whether those oversight activities were completed.  Using this documentation, a first GAO reviewer determined whether the  oversight activities were completed. A second reviewer then made his or  her own determination as to whether the activities were completed. The  first and second reviewers subsequently met to reconcile any differences.  Once the reviews were complete, we shared our findings with marketing  specialists from each of the 8 check-off programs in our sample. We held  meetings with the marketing specialists and the AMS directors in each of  the four commodity areas in which the 8 programs reside to discuss the  various oversight activities and how AMS conducts those activities.", "To address the effectiveness of check-off program evaluations and their  results, a GAO economist assessed the most recent independent  economic evaluations of effectiveness for the 8 check-off programs in our  sample using GAO\u2019s guidance for assessing economic analyses. This  included an assessment of the (1) objective and scope, (2) alternatives,  (3) analyses of effects, (4) sensitivity analyses, and (5) documentation. A  second GAO economist then reviewed this assessment. This assessment  was used to determine the various methodologies used in the check-off  program evaluations, the soundness of those methods, and any  limitations. In addition to reviewing the evaluations, we also spoke with  the economists who conducted independent evaluations of effectiveness  for our sample of 8 check-off programs to learn about their methods as  well as any challenges they may have faced in conducting the  evaluations. We also interviewed three additional economists who did not  conduct evaluations of the 8 check-off programs we assessed to get the  views of external experts. We selected these economists because they  had previously published journal articles on evaluating check-off  programs. Finally, we reviewed literature on conducting evaluations of the  effectiveness of check-off programs.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Check-off programs are designed to expand the market for a given  agricultural commodity, such as eggs, pork, or highbush blueberries,  through generic promotion, research, and consumer and industry  information. A check-off program is meant to expand the demand for a  commodity rather than for any particular brand or producer. Although  some state, regional, and local check-off programs that have existed for  over 70 years may be voluntary, federal programs are mandatory. Many  commodity groups prefer mandatory programs to address the free rider  problem\u2014that is, producers, handlers, processors, importers, or others in  the marketing chain who do not pay into a check-off program but benefit  economically from voluntary programs that others have funded.", "After Congress authorized the Cotton Research and Promotion Act of  1966, the first federally mandated agricultural check-off program and  board\u2014for cotton\u2014was created. Over the next three decades, Congress  authorized the creation of an additional 11 commodity programs and their  respective boards. The 12 programs and boards created under the  authority of individual stand-alone legislation adhere to the specific  requirements as set forth in their respective authorizing legislation. The  passage of the Commodity Promotion, Research and Information Act of  1996 (generic legislation) gave USDA the authority to establish additional  commodity check-off programs and boards. Since then, 10 additional  boards were created based on this generic legislation. Those boards are  subject to the requirements set forth in the generic legislation. (See table  1 for the year established and authorizing legislation for all 22 check-off  programs.)", "To create a check-off program, industry groups first identify the need for  such a program and then negotiate among themselves to agree on a  basic program framework. The framework includes the rate of  assessment and the various program activities to be undertaken, such as  promotion, advertising, research, and providing information to consumers  and industry. Additionally, each industry proposes regulations to USDA  for the structure of the board that will carry out these activities. Because  each industry has unique characteristics, a different board structure is  appropriate for each check-off program. The boards vary in size,  geographic representation, and types of individuals who are board  members\u2014that is, producers, processors, handlers, importers, public  representatives, or others in the marketing chain. USDA, in consultation  with the industry, then develops regulations to define how the program  will be operated, how the funds will be collected, and how compliance  with the authorizing legislation will be maintained, among other things.  The check-off programs must be approved by a majority of producers\u2014 and in some cases processors, importers, and handler\u2014subject to the  assessments. To gain approval, a referendum must be held either before  check-off program operations begin within some specified time after  assessments are first collected, depending on the authorizing legislation.", "To fund a check-off program, producers, handlers, processors, importers,  or others in the marketing chain are assessed for each unit of the  commodity sold, produced, or imported. For example, for each 30-dozen  cases of eggs sold, a producer is assessed $0.10. These funds go to the  American Egg Board. The boards are to use assessments for the  research, promotion, and consumer and industry information activities as  well as for reimbursing AMS for its oversight costs. In 2016, total  assessments collected for the 22 check-off programs ranged from $0.6  million for the popcorn check-off program to $332.1 million for the dairy  check-off program (see table 2)."], "subsections": [{"section_title": "AMS\u2019s Oversight and Past Recommendations", "paragraphs": ["To facilitate oversight, AMS breaks the 22 check-off programs into four of  the agency\u2019s commodity areas: (1) Cotton and Tobacco\u2014the cotton  check-off program; (2) Dairy\u2014the dairy and fluid milk check-off programs;  (3) Livestock, Poultry, and Seed\u2014the beef, egg, lamb, pork, sorghum,  and soybean check-off programs; and (4) Specialty Crops\u2014the  Christmas tree, Hass avocado, highbush blueberry, honey, mango,  mushroom, paper and packaging, peanut, popcorn, potato, processed  raspberries, softwood lumber, and watermelon programs. AMS has a  functional committee for the check-off programs, which comprises a chair  and the deputy administrators from the four AMS commodity areas and  meets quarterly. The functional committee reports to the AMS Associate  Administrator and was established to increase coordination and promote  best practices and consistency across the 22 check-off programs.  Additionally, the four commodity area directors and other senior agency  officials meet weekly to discuss any issues that have arisen and to  discuss any necessary policy changes.", "AMS marketing specialists are responsible for the day-to-day oversight of  the check-off boards and for ensuring that board decisions and operations  are carried out in accordance with applicable legislation and regulations.  Each check-off program has a designated AMS marketing specialist  serving as the primary overseer of all check-off program activities. (Fig. 1  shows AMS\u2019s oversight structure for the check-off programs.) As part of  their oversight duties, marketing specialists review and approve board  budgets, contracts, promotional activities, board policies, and bylaws,  among other activities. Every 3 years, marketing specialists also are to  conduct management reviews that assess each of the 22 check-off  boards\u2019 internal controls intended to determine whether there is  reasonable assurance that the boards are in compliance with statutes,  regulations, and the board\u2019s and AMS\u2019s policies and procedures. AMS  management reviews are to include reviews of check registers, contract  and subcontract samples, assessments collected, and travel  reimbursements, among other items.", "AMS\u2019s Guidelines for AMS Oversight of Commodity Research and  Promotion Programs, most recently updated in September 2015, is  designed to facilitate the application of legislative and regulatory  provisions of the check-off programs and promote consistency in AMS\u2019s  oversight of the 22 check-off programs. These guidelines, which pertain  to AMS as well as board members and board staff, are not intended to  cover the daily responsibilities of board operations or AMS\u2019s oversight.  Instead, the guidelines provide broad information on AMS\u2019s expectations  for how boards should operate and how AMS will oversee the programs  in activities such as budget approval, contracts, financial accountability,  referendum, and investments, among other items.", "In March 2012, USDA OIG released a report on AMS\u2019s oversight of  check-off programs. The work was initiated by the OIG after a 2010  investigative report, conducted at the request of the AMS Administrator,  identified the possibility of weak oversight controls over the check-off  boards. The 2012 report included two recommendations for AMS to  develop and implement (1) standard operating procedures that provide  detailed instructions for performing oversight activities to address all  areas listed in the agency\u2019s guidelines and (2) guidance for conducting  periodic internal reviews of program area operations to ensure the  enforcement of AMS\u2019s guidelines. AMS agreed with the two  recommendations and planned to implement them with a variety of  actions, as discussed below."], "subsections": []}]}, {"section_title": "AMS Has Improved Its Oversight of Check-off Programs, but Some Oversight Activities Are Not Consistent across Programs", "paragraphs": ["AMS has responded to recommendations for improving oversight made in  the OIG\u2019s 2012 report, particularly by developing and implementing  standard operating procedures and conducting internal reviews of AMS  check-off program oversight. However, AMS does not provide consistent  oversight across check-off programs in some areas; specifically, it does  not routinely review check-off program subcontracts during its  management reviews, conduct follow-up on management review  recommendations, ensure that financial assurances are included in  annual audits, or ensure that check-off boards share information with  assessment payers on program websites. In conducting their oversight of  the check-off programs, senior agency officials and marketing specialists  said they face challenges because of increased use of social media, the  absence of an information system for tracking approvals, and complex  Freedom of Information Act (FOIA) requests for some programs, which  may delay the completion of some oversight priorities."], "subsections": [{"section_title": "AMS Has Made Improvements in Response to Recommendations Made by USDA\u2019s OIG", "paragraphs": ["The OIG\u2019s 2012 report included two recommendations that AMS has  since implemented: to develop and implement (1) standard operating  procedures and (2) guidance for conducting periodic internal reviews of  its oversight activities. In August 2013, AMS developed and  implemented its standard operating procedures, which provide marketing  specialists with more detailed guidance on the various oversight activities  that are outlined in the agency\u2019s program guidelines. The standard  operating procedures cover a range of oversight activities, including  budget review, contract review, advertising and promotional materials  review, and financial and internal control oversight. Included in the more  detailed guidance are various checklists that marketing specialists can  use to itemize the requirements that boards must meet in a variety of  areas. For example, the budget review checklist includes a list designed  to ensure that budgets conform to law and contain, among other items,  accurate sums and categories, as well as clearly listed administrative  expenses. According to senior agency officials and marketing specialists,  the standard operating procedures have assisted AMS in providing  consistency across the 22 commodity check-off programs, have helped  ensure that oversight responsibilities are carried out, and have provided  documentation of specific duties for new marketing specialists.", "In response to the OIG\u2019s second recommendation, AMS has developed  and implemented guidance for conducting internal reviews of its oversight  of check-off programs. Internal reviews are conducted by AMS\u2019s  Management and Analysis Program group to evaluate whether the AMS  commodity areas that oversee check-off programs employ controls that  provide reasonable assurance that the check-off programs are meeting  legislative and regulatory requirements. According to an AMS directive,  internal reviews of each of the four AMS commodity areas are to be  conducted on a rotating basis. An AMS internal review of the Cotton  commodity area was completed in November 2014, an internal review of  the Specialty Crops commodity area was completed in September 2015,  and an internal review of the Dairy commodity area was competed in May  2017. According to officials in the Management and Analysis Program,  the Livestock, Poultry, and Seed commodity area internal review began in  May 2017. The Cotton internal review found the program to provide  reasonable assurance that the boards were complying with legislative  requirements and that the oversight controls were adequate and  functioning as intended. The Specialty Crop internal review found that the  commodity area was fulfilling its oversight responsibilities but also found  opportunities to strengthen control practices, including ensuring  consistent and timely application in its use of checklists and tracking  management reviews to ensure that they are completed and issued in a  timely manner. As a result, the Specialty Crop commodity area  implemented changes to its use of checklists and agreed to complete  management reviews in a timely manner. The Dairy internal review found  opportunities to strengthen oversight, primarily with regard to  management reviews and recordkeeping. As a result, according to senior  agency officials, the Dairy commodity area has implemented changes to  its management review and recordkeeping processes."], "subsections": []}, {"section_title": "AMS Does Not Provide Consistent Oversight across Check-off Programs in Some Areas", "paragraphs": ["We identified four areas in which AMS does not provide consistency in its  oversight across its check-off programs: (1) review of subcontracts, (2)  follow-up on recommendations made to check-off boards, (3) ensuring  that independent financial audits contain statements of assurance, and  (4) ensuring that information is available on program websites for  assessment payers (i.e., transparency).", "Subcontracts. The 2012 OIG report found that AMS did not recognize in  its guidelines for check-off programs that its oversight role extended to  monitoring subcontracts. Following the release of the OIG report, AMS  updated the guidelines to respond to the OIG finding. Under the 2015  AMS guidelines, marketing specialists are to review a sample of  subcontractor expenses during their management reviews. However, we  found that AMS did not similarly update its standard operating procedures  for the check-off programs and that these reviews are not being done  consistently across programs.", "We found that the marketing specialist for one of the eight programs we  reviewed chose a sample of subcontracts for the management review and  documented this selection in the management review report. Marketing  specialists for three of the programs said they reviewed subcontracts only  if the sample of primary contracts that were part of the management  review included subcontracts. Marketing specialists for the other four  programs said they did not review subcontracts. Two marketing  specialists we interviewed said they do not select a sample of  subcontracts because check-off boards are responsible for overseeing  and monitoring subcontracts. Senior agency officials and marketing  specialists also noted that they review and approve all promotional  materials regardless of whether any material is from a contract or  subcontract. Senior agency officials also said that the contracting process  differs among the various check-off boards and may cause confusion  about what is considered a subcontract for purposes of a management  review. For example, the cotton board contracts with Cotton Inc. to carry  out the program\u2019s research and promotion activities; Cotton Inc. may, in  turn, contract with entities to carry out those research and promotion  activities\u2014considered a cotton board subcontract. This is in contrast to  processes of other boards, such as the honey board, which can directly  contract with entities to carry out research and promotion activities; those  contractors may, in turn, subcontract duties. In addition, the potential  exists for subcontract costs to total hundreds of thousands of dollars. A  2010 OIG investigative review found that a subcontractor of one check-off  board used subcontracts to pay employees unauthorized bonuses of  about $302,000. Without revising its standard operating procedures for  check-off programs to recognize that each management review is to  include a sample of subcontracts for review, AMS\u2019s ability to prevent  misuse of subcontract funds is impaired.", "Recommendation follow-up. Under AMS\u2019s guidelines and standard  operating procedures, marketing specialists are to ensure that corrective  actions are taken by the boards in a timely manner if a matter is  recommended in the management review, conducted every 3 years. For  example, the standard operating procedures state that the board has 30  calendar days from the receipt of the management review report to  respond to the findings by formal letter and that follow-up should include  appropriate documentation of the corrective actions taken. The 2012 OIG  report found that there was little consistency among AMS commodity  areas regarding the reporting of management review results and follow- up procedures. Four of the check-off programs we reviewed obtained  written confirmation from boards about how they intended to address  issues identified during management reviews consistent with the standard  operating procedures; three others did not obtain written confirmation, but  said they obtain any check-off board plans for remediation via less formal  means, such as via e-mails or during board meetings. The management  review for the eighth program did not contain any recommendations.", "According to marketing specialists we interviewed, the follow-up process  to ensure that boards have taken corrective actions is also informal\u2014a  specialist learns how management review recommendations have been  implemented by attending board and committee meetings. Senior  agency officials verified that AMS has no mechanism for tracking follow- up with check-off boards to ensure that they have taken corrective  actions. Under federal internal control standards, management should  remediate identified internal control deficiencies on a timely basis and,  with oversight from the oversight body, monitor the status of remediation  efforts so that they are completed on a timely basis. Without  establishing a mechanism for documenting and tracking follow-up with  check-off boards on the implementation of management review  recommendations, AMS has no assurance that it is consistently  monitoring the status of corrective actions. Senior agency officials said  that having a formal method to track and follow up on management  review recommendations would allow them to identify trends, best  practices, and similar emerging issues among the check-off programs.", "Independent financial audits. Each year, each check-off board is  required by law to hire an independent audit firm to conduct an audit of  the board\u2019s financial statements in accordance with generally accepted  government auditing standards. This audit helps to ensure compliance  with legislative, regulatory, and policy directives. AMS guidelines direct marketing specialists to review the annual financial audits to determine  whether the auditor identified any misuse of board funds and if the audit  adequately addressed whether (1) funds were discovered to be used for  influencing government policy or action, (2) the board adhered to the  AMS investment policy, (3) internal controls over funds met auditing  standards, (4) funds were used only for projects and other expenses  authorized in a budget approved by USDA, and (5) funds were used in  accordance with AMS guidelines. The standard operating procedures  state that AMS is to ensure that audits contain these five statements of  assurance, and they state that the audit firm is to express an opinion on  the financial statements of the board and include a report on internal  controls and compliance with applicable laws and regulations.", "The 2012 OIG report found that none of the independent audit reports  included the five statements of assurance for the 18 check-off boards  reviewed. In our sample, audit reports for four of the eight programs  included the five statements of assurance. For two of the programs in our  sample, the engagement letters, which document the agreed-upon terms  of the audit, contained all five assurances, but the audit reports did not  contain the five assurances. For the remaining two programs in our  sample, neither the engagement letters nor the audit reports contained all  five assurances, but senior agency officials said that the AMS marketing  specialists for those two programs ensured that these assurances were  adequately addressed during pre- and post-audit meetings. According to  marketing specialists we interviewed for those two programs, audits  following government auditing standards incorporate the requirements  and are fulfilled by a general statement that boards were in compliance  with laws and regulations. However, the 2012 OIG report found that an  independent auditor did not include the specific assurances because the  auditor was not asked to perform such work and only minimal  adjustments would be needed to provide for those assurances. Without  ensuring that its annual independent financial audits include the five  statements of assurance as outlined in the standard operating  procedures, AMS will have less certainty that check-off funds are not  subject to waste, fraud, or mismanagement.", "Transparency. According to the Business Roundtable and the  Organisation for Economic Cooperation and Development\u2019s principles of  corporate governance, a strong disclosure regime that promotes  transparency is central to stakeholders being able to access regular,  reliable, and comparable information. As check-off programs use  assessment money collected from stakeholders of the commodity being  promoted, AMS\u2019s guidelines state that both transparency and oversight of  the check-off funds are critical. Moreover, AMS\u2019s guidelines state that  annual budget summaries should be posted on the check-off board\u2019s  website and that three additional documents are either to be on the  website or otherwise made available: (1) the bylaws and policy  statements, (2) annual reports, and (3) the independent economic  evaluation of effectiveness. Four of the eight check-off programs in our  sample posted all four documents on the programs\u2019 websites. All eight  check-off programs posted their annual reports online. Four of the check- off programs, however, did not post to their websites at least one of the  remaining documents\u2014the budget summary, bylaws, or independent  economic evaluation. Marketing specialists we interviewed said that  boards would supply information not included on the websites if an  assessment payer requested such information, which is consistent with  AMS guidelines. Board executives we interviewed from those programs  that do not post all four documents on their websites also said that they  would supply the information to assessment payers if contacted. Senior  AMS officials also said that there are stakeholders who may not have  computers or access to the Internet and may therefore request  information via postal mail.", "Industry organization representatives we interviewed said that  transparency of how funds are used and the effectiveness of the  programs are important to their members. One industry organization  representative we interviewed said that, although some stakeholders may  not use the Internet, posting information on how assessments are being  used, such as the information provided in annual reports, is useful for  stakeholders and builds trust among check-off boards and stakeholders.  Posting information on the boards\u2019 websites could convey information to  stakeholders who have access to the Internet at a low cost. Without  including in the guidelines and standard operating procedures that all four  key check-off board documents (i.e., bylaws and policy statements,  annual reports, and independent evaluations of economic effectiveness)  should be posted on a check-off program\u2019s website, AMS may be missing  an opportunity to ensure that some assessment payers have access to  information on program operations and effectiveness."], "subsections": []}, {"section_title": "AMS Officials Identified Challenges in Their Efforts to Oversee Check-off Programs", "paragraphs": ["AMS officials identified ongoing challenges in check-off program  oversight. In particular, AMS marketing specialists and senior agency  officials identified three challenges: (1) the increase in some check-off  boards\u2019 use of social media, (2) the absence of an information system to  track approvals, and (3) complex and time-consuming FOIA requests for  some programs. Because of competing priorities, some oversight duties  may be delayed as a result.", "Increase in boards\u2019 social media efforts. According to marketing  specialists, four of the eight check-off programs have seen a significant  increase in the boards\u2019 use of social media, which has been a challenge  in terms of both workload and the need for additional AMS guidance  because the specialists must approve the social media content. Marketing  specialists for the other four programs said that the check-off programs  they oversee have not yet increased their social media presence enough  to make it a challenge for workload. Senior agency officials and marketing  specialists agreed that oversight of the check-off programs requires a  significant amount of time and effort that has been made more  complicated since some check-off programs began using social media.  For example, a marketing specialist for one check-off program approved  over 3,000 items, including social media for promotional and research  materials, in a 6-month period. According to this marketing specialist,  depending on the complexity of the item needing approval, there could  have been dozens of communications between the specialist and the  check-off board staff. In addition, marketing specialists and senior agency  officials said that because social media is constantly evolving, AMS has  needed to reevaluate its guidance to boards for social media. The senior  agency officials acknowledged that the duties of marketing specialists are  demanding and that they are working to find ways to provide support to  marketing specialists. Senior agency officials said that this is challenging  because the boards must reimburse AMS for oversight costs, so any  additional personnel would be paid for through check-off assessments.  Also, AMS established a social media committee made up of marketing  specialists who have drafted social media guidance for the boards to  follow.", "Technology. Tracking the numerous promotional and research approvals  can be a challenge for some AMS marketing specialists because of the  absence of an information system to track approvals. According to two  marketing specialists, during busy times, they may be handling more than  20 requests for approvals a day. While marketing specialists for two of the  check-off programs we reviewed said that the use of approval tracking  software, paid for by the respective check-off boards, has made their  oversight function more efficient, other marketing specialists said that  they must rely on e-mail messages to organize the status of approvals.  Marketing specialists who have tracking software said that they can  quickly see the status of any approval at any given time; further, check-off  board staff can also use the software to prioritize approvals. One  marketing specialist said that, although she had developed a system for  organizing e-mails, a tracking system used by both AMS and the board  would ensure that oversight activities would not be delayed and could  expedite the approval process. Senior agency officials said that it would  be helpful if each marketing specialist had this software but that the  check-off boards would need to pay for this expense.", "FOIA requests. Responding to complex FOIA requests about check-off  programs has been a challenge, according to senior agency officials,  marketing specialists, and board executives of four of the eight programs  we reviewed. Some requests do not take many resources to fulfill, but  others take significant time and money. For example, to respond to a  FOIA request, board staff and marketing specialists must identify  pertinent documents; review them to ensure that there is no proprietary or  sensitive information; and, as needed, involve the board\u2019s legal counsel  or third-party businesses. According to senior agency officials, in one  case, a FOIA request resulted in the check-off board and AMS providing  approximately 10,000 documents to the requester. AMS estimates that in  fiscal year 2016, for the Livestock, Poultry, and Seed commodity area  programs, it cost the agency about $182,000 and more than 2,700 hours  to fulfill FOIA requests. For the same period for the Dairy commodity  area programs, AMS estimates that it cost over $365,000 and about  6,600 hours to fulfill FOIA requests. Because AMS is reimbursed for its  oversight costs, the funds to cover FOIA-related costs come directly from  check-off assessments. These cost estimates do not include check-off  board staff resources utilized to fulfill FOIA requests. Senior agency  officials said that there are legal constraints on the types of individuals  and organizations that they can request cover fees associated with  document retrieval under FOIA."], "subsections": []}]}, {"section_title": "Check-off Evaluations Generally Indicate Positive Returns but Vary in How They Are Conducted and Reviewed", "paragraphs": ["Independent economic evaluations of the effectiveness of check-off  programs, conducted at least every 5 years, have generally shown a  positive benefit to those who pay assessments. The evaluations we  reviewed varied both in the methods used to conduct the analysis and  how information was reported and revealed certain methodological  limitations. According to senior agency officials as well as the economists  who conducted the evaluations, the variations are in part due to the  differences in check-off board resources. We found that AMS does not  consistently document its review of independent economic evaluations  and has no criteria established for determining what makes for a credible  methodology and results."], "subsections": [{"section_title": "Evaluations of Check-off Programs Were Conducted Every 5 Years and Show a Range of Positive Benefits for Assessment Payers", "paragraphs": ["The Federal Agriculture Improvement and Reform Act of 1996 requires  check-off boards to (1) fund independent economic evaluations of the  effectiveness of their promotion activities every 5 years, (2) submit the  evaluation to USDA, and (3) make the results available to the public.  Check-off boards, through a request for proposals process, contract for  independent economic evaluation to determine the effectiveness of  promotion activities. The law does not specify how an independent  economic evaluation should be completed, and AMS does not offer any  guidance on the methodologies to use, the types of information to include,  or how the results of such an evaluation are to be presented. AMS  guidelines, which are available to the check-off boards, state that  evaluations: (1) have a credible methodology, (2) articulate shareholder  returns, and (3) present the results in a non-technical manner.", "The eight independent economic evaluations of check-off programs we  reviewed focused on benefit-cost ratios (BCR) and returns on investment  (ROI). While BCRs and ROIs are slightly different, they both measure the  financial gain or loss generated from the costs of implementing a  program. In both cases, economists use economic, industry-specific  models to determine the benefits or economic gains from the check-off  programs by isolating the impacts of program promotion dollars from  other variables, such as competing products or changes in consumer  income. For example, some models include the effects of changes in the  prices of substitute food products, which may affect the demand for  commodities. The model used in the evaluation for the beef check-off  program, for instance, includes prices for both chicken and pork, as an  increase in the price of chicken or pork could lead to an increase in the  consumer demand for beef, regardless of check-off program activities.  Other variables that may affect demand include changes in (1) consumer  buying habits, (2) consumer income, and (3) government policy. These  variables can either increase or decrease the demand for commodities  despite the activities of check-off programs. Evaluation models may also  include variables that affect the supply of a commodity, such as increased  prices that send signals to farmers to increase production. Although it is  difficult to capture, some commodity evaluation models also model  increases in yields and acreage to determine how much the agricultural  research portion of a check-off program affects the supply of the  commodity. Increased supply as a result of agricultural research  expenditures can also increase producer benefits and economic gains,  but according to the sorghum and cotton evaluations, many of these  gains cannot be immediately or directly measured.", "For the eight check-off programs we reviewed, the BCRs and ROIs  ranged from 2.14 to 17.40. In other words, for every dollar invested in the  check-off programs, the programs returned from $2.14 to $17.40 in  revenue to assessment payers (see table 3). However, it is important to  note that the results of the independent economic evaluations should not  be compared across check-off programs because of differing  methodologies, differing data, and differing demands for the products,  according to economists we interviewed. Economists we interviewed and  literature we reviewed suggested that although the results of an  independent economic evaluation may appear large, the amount invested  in promotion activities is small compared to the total value of industry  sales. Therefore, the overall impact of promotion activities on the market  may be small.", "Program referenda largely show that most assessment payers approve of  check-off programs, but not all types of assessment payers may feel that  they share equally in the benefits that are found through the independent  economic evaluations, according to economists we interviewed. The  studies we reviewed report either average or marginal measures of  effectiveness, such as a BCR. Some economists we interviewed, both  those who have conducted the evaluations we reviewed and those who  did not, said that these types of studies do not address the level of ROIs  across the distribution of check-off program payers or how much more  larger-sized assessment payers receive in returns from their investment  in the check-off program as compared to smaller-sized ones. This view  was confirmed by representatives we interviewed from some of the  industry organizations, who indicated that their members would prefer to  better understand what they receive for their investment at the farm level.  In addition, one economist we interviewed said that assessment payers  may be skeptical of the results of independent economic evaluations of  program effectiveness because while the costs are tangible, the benefits  of the programs are not. That is, the producers cannot see what portion of  their revenues is directly attributable to check-off program activities."], "subsections": []}, {"section_title": "Evaluations Vary in How They Are Conducted and Reveal Certain Methodological Limitations", "paragraphs": ["The independent economic evaluations we reviewed were conducted  using different methodologies and reported different information.  According to senior agency officials, evaluations likely vary because  legislation does not include any details on how evaluations should be  completed and the amount of resources that each check-off board has  available to devote to evaluations varies. Nearly all of the economists we  interviewed said that it would be useful to have minimum standards for  information that should be included in the evaluations. Some independent  economic evaluations used different types of models and data to estimate  the benefits and costs to assessment payers. For example, for the egg  and honey check-off commodity models, the evaluation used two  separate types of methodologies to estimate increases in demand  because of the programs\u2019 promotional activities. Some other  independent economic evaluations in our sample, such as for cotton and  fluid milk, used multi-market models that incorporated components for  substitute products, the foreign sector, and the government sector. Some  independent economic evaluations, such as the beef evaluation,  measured a marginal BCR and others measured an average benefit-cost  ratio. The cotton and sorghum evaluations performed an analysis of how  increases in yields, acreage, and production because of the research  portion of the check-off programs affected the supply of the commodities.  The independent economic evaluations also examined different time  periods in their analyses, depending on the available data (see table 3).  For example, the egg evaluation covered the period of 2007 through  2010, and the fluid milk evaluation covered 1995 through 2012.", "In addition to having different methodologies to calculate benefits and  costs, information and analyses included in the independent economic  evaluation reports also varied among the eight programs we reviewed.", "For example, the beef check-off evaluation includes a section on the  optimal allocation of funds to domestic activities of the program, which is  not included in any other report. Seven of the eight evaluation reports had  a conclusions section. One of the evaluation reports included a  recommendations section, while others did not. Although the law does not  specify information required to be included in the independent economic  evaluations, representatives from one industry organization we  interviewed said that having the information in a consistent format could  help ensure that stakeholders could compare information from one  evaluation to the next for a given check-off program.", "The independent economic evaluations provided useful information to key  stakeholders and the general public, but we found that they also included  a number of caveats and limitations. Some of these limitations resulted  from the nature of a commodity or program itself and others from the  modeling procedures used. According to economists we interviewed and  senior agency officials, the law is not prescriptive about how evaluations  are to be conducted, and the boards differ in the amount of resources  available to devote to the evaluations. If, for example, a board has limited  resources available for an evaluation, there may not be funds available to  purchase a certain set of data. For the sample of eight evaluations we  reviewed, these limitations included the following:", "Data limitations: A number of the independent economic evaluations  had data limitations. For example, one independent economic  evaluation (highbush blueberry check-off program) lacked either  wholesale or retail price data for its demand model, and another  (sorghum check-off program) lacked program data as it had only been  in existence for 5 years when the evaluation was performed. All of the  economists we interviewed who had completed the eight evaluations  we reviewed said that data are a challenge when conducting the  evaluations either because such data do not exist or the check-off  boards do not have the resources to buy the data.", "Not discounting the BCR to present value: The cotton check-off  evaluation was the only one in our sample with a methodology that  discounted the BCR to present value to account for the time value of  money. Discounting a program\u2019s benefits and costs to present value  transforms gains and losses occurring in different time periods to a  common unit of measurement.", "Not accounting for spillover effects: Some independent  economic evaluations did not include the spillover effects\u2014the cross- commodity impact of promotion\u2014on related markets, though some,  such as the cotton evaluation, did account for spillover effects on  competing commodities. If spillover effects pertain to a commodity,  failure to account for these effects could overstate the benefits of a  program and cause an upward bias in computing the BCR.", "Not adjusting models for structural changes: Some independent  economic evaluations did not adjust models for structural changes in  the industry over time. While some independent economic evaluations  we reviewed, such as those for the honey and beef check-off  programs, did use data or methods that accounted for changes in  market structure over time, others did not. For example, for the pork  check-off program, some hog farms have specialized in a single  phase of production, and have encountered substantial gains in  productivity because of technology over the past several decades, but  the independent economic evaluation did not reflect this. Failure to  correct for such structural change, if applicable to a commodity, can  lead to incorrect modeling and misleading policy implications.", "AMS\u2019s standard operating procedures acknowledge that each check-off  program varies in size and scope; therefore, the amount of resources  each program can devote to an independent economic evaluation varies.  Smaller programs may have independent economic evaluations that  reflect the realities of program scope, financial capability, and data  availability. Our discussions with the economists who conducted the  evaluations that we reviewed confirmed that this is the case. They said  that the smaller programs are able to devote fewer resources to  independent economic evaluations; therefore, the economist conducting  an evaluation may not be able to complete all of the analysis that could  be completed for a larger program that is able to pay for more complex  analysis. According to senior agency officials, in some instances, a  broader evaluation is not necessary because of the emphasis and goals  of the program. In addition, the resources a board is able to devote may  vary from evaluation to evaluation. For example, one economist said that  he worked with a board that wanted a more comprehensive evaluation  than was previously done. The new evaluation model included additional  data over a longer period of time, which ultimately led to an increased  ROI."], "subsections": []}, {"section_title": "AMS Does Not Consistently Document Reviews of Check-off Evaluations", "paragraphs": ["In addition to ensuring that independent economic evaluations are  conducted every 5 years and encouraging boards to make them available  to assessment payers, AMS\u2019s standard operating procedures state that  marketing specialists should ensure that independent economic  evaluations (1) have a credible methodology and results, (2) articulate  shareholder benefits, and (3) present results in a non-technical manner.  To verify that these three directives are met, the standard operating  procedures state that marketing specialists may consult with agency  economists. They are directed to document verification in writing. Outside  of any agency review, there is no requirement that independent economic  evaluations be peer reviewed. A National Academies report states that  peer review is characterized, in part, as being a documented, critical  review of assumptions, calculations, and methodology, performed by a  person with technical expertise in the subject matter to be reviewed who  is independent and external of the work being reviewed. The report  further states that the peer, to the extent possible, should have sufficient  freedom from funding considerations to ensure that the work is impartially  reviewed. According to senior agency officials, AMS economists meet this  definition; and their review of the independent economic evaluations can  be considered peer review. Officials said that the economists on staff  critically review the evaluations; they all have PhDs in economics and are  independent as they do not work directly with the check-off programs  except for reviewing the evaluations.", "Three of the four AMS commodity areas\u2014Cotton and Tobacco, Dairy,  and Specialty Crops\u2014utilized an AMS economist to review the  independent economic evaluations and document that review. Senior  agency officials said that the Livestock, Poultry, and Seed commodity  area has an AMS economist review the independent economic  evaluations but does not document that review. According to senior  agency officials, the Livestock, Poultry, and Seed commodity area has  relied on informal reviews of the evaluations by an economist, which are  orally presented to the director of the commodity area. Further, the  economists who completed the eight independent economic evaluations  we reviewed indicated that although their preference is to have the  evaluations peer reviewed, this is not always possible because of time  constraints and other priorities. One economist said that the board he  worked with included a contractual requirement that the independent  economic evaluation be peer reviewed.", "Because the Livestock, Poultry, and Seed commodity area does not  document its reviews of independent economic evaluations, only four of  the eight check-off programs in our sample had documented reviews of  the evaluations. All four of the documented reviews ensured that the  independent economic evaluations had a credible methodology and  results and articulated shareholder benefits, as stated in the standard  operating procedures. However, only two of these four check-off  programs included in their documented review whether results were  presented in a non-technical manner, as also stated in the standard  operating procedures. Further, the internal reviews did not use standard  criteria to determine whether the independent economic evaluations had  a credible methodology or results, which is important because, as noted  earlier, the evaluations we reviewed varied in their methodology and we  found that they had certain limitations.", "Although check-off programs are not subject to the guidelines in the  Office of Management and Budget\u2019s Circular A-94, the circular provides  general guidance for conducting analyses to help federal agencies  efficiently allocate resources through well-informed decision making. For  example, Office of Management and Budget Circular A-94 establishes  key elements of an economic analysis, including (1) a statement of the  objective and scope of the analysis, (2) an identification of alternatives,  (3) an analysis of the economic effects, (4) a sensitivity analysis, and (5)  adequate documentation and transparency. Conducting and documenting  reviews of independent economic evaluations using criteria can be useful.  For example, in 2014, a senior agency official found several  inconsistencies in a check-off program independent economic evaluation.  The senior agency official assigned an AMS economist and marketing  specialist to work with the evaluator to revise econometric models to more  accurately capture the activities of the check-off program. According to  the official, if the independent economic evaluation had not been  reviewed, benefits of the program would have been understated and  would have misled those paying into the check-off program. Without  developing criteria by which AMS can assess the methodology and  results of independent evaluations and document those assessments to  ensure that the standard operating procedures are met, the agency\u2019s  assessments of independent economic evaluations may be inconsistent  across check-off programs and misleading to agency officials, check-off  boards, and assessment payers."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["AMS oversees commodity check-off programs that conduct research and  promotion activities to strengthen 22 commodities\u2019 position in the  marketplace. The agency has taken steps to improve oversight activities  based on recommendations in USDA OIG\u2019s 2012 report, but it continues  to face challenges in other oversight activities. For example, AMS has not  consistently reviewed subcontracts during its management reviews.  Without revising its standard operating procedures for check-off programs  to recognize that management reviews should include a sample of  subcontracts for review, AMS\u2019s ability to prevent misuse of subcontract  funds is impaired.", "In addition, AMS has not consistently followed up on recommendations  made to check-off boards, although its guidelines and standard operating  procedures state that marketing specialists are to ensure that corrective  actions are taken by the boards in a timely manner if a matter is  recommended in a management review. Without establishing a  mechanism for documenting and tracking follow-up with checkoff boards  on the implementation of management review recommendations, AMS  has no assurance that it is consistently monitoring the status of corrective  actions. Moreover, AMS has not ensured that independent financial  audits contain statements of assurance as called for in the agency\u2019s  program guidelines or standard operating procedures. Without ensuring  that its annual independent financial audits include the five statements of  assurance outlined in the standard operating procedures, AMS will have  less certainty that check-off funds are not subject to waste, fraud, or  mismanagement.", "Further, although principles of corporate governance state the importance  of transparency for stakeholders, AMS has not ensured that certain  information, such as budget summaries and program evaluations, are  presented on check-off program websites and has not included in its  guidelines or standard operating procedures that certain information  should be included on program websites, although the agency\u2019s program  guidelines recognize that transparency of check-off funds is critical.  Without including in the guidelines and standard operating procedures  that key check-off board documents are to be posted on the check-off  program\u2019s website, AMS may miss the opportunity to ensure that some  assessment payers have access to information on program operations  and effectiveness.", "Finally, check-off boards are meeting legislative deadlines by completing  independent economic evaluations of effectiveness every 5 years;  however, the evaluations vary and have certain methodological  limitations. Without developing criteria by which AMS can assess whether  evaluations have a credible methodology and results and documenting  those assessments, the assessments may be inconsistent across check- off programs and misleading to agency officials, check-off boards, and  assessment payers."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to the Administrator of  the Agricultural Marketing Service:  The Administrator of AMS should revise the standard operating  procedures for AMS\u2019s check-off programs to state that management  reviews include a sample of subcontracts for review. (Recommendation  1)", "The Administrator of AMS should establish a mechanism for documenting  and tracking follow-up with check-off boards on the implementation of  management review recommendations. (Recommendation 2)", "The Administrator of AMS should ensure that annual independent audits  include the five statements of assurance as outlined in the standard  operating procedures. (Recommendation 3)", "The Administrator of AMS should include in the guidelines and standard  operating procedures that key check-off board documents, such as  bylaws and policy statements, annual reports, and independent  evaluations of economic effectiveness are posted on the check-off  programs\u2019 websites. (Recommendation 4)", "The Administrator of AMS should develop criteria by which to assess the  methodology and results of independent evaluations and document those  reviews to ensure that the standard operating procedures are met.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to USDA. An  auditor with AMS\u2019s Management and Analysis Program responded via e- mail on October 24, 2017, that the agency generally agreed with our  findings and recommendations.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or morriss@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, key contributors to this report  included Thomas M. Cook (Assistant Director), Rose Almoguera, Kevin S.  Bray, Barbara El Osta, Cindy Gilbert, Holly Halifax, Khali Hampton, Dan  Royer, Holly Sasso, Sheryl Stein, and Kiki Theodoropoulos."], "subsections": []}]}], "fastfact": ["Remember \"Got Milk?\"", "Those ads are sponsored by 1 of 22 industry-led research and promotion programs funded by producers of commodities like dairy or pork and such ads are overseen by USDA. These \"check-off\" programs have restrictions on their activities, such as being prohibited from promoting false advertising.", "We reviewed USDA's process for overseeing program activities and financial controls. We made 5 recommendations, including that it consistently review subcontracts to prevent misuse of funds, and ensure documents are on program websites to promote transparency and ensure stakeholders have access to information on program operations."]}
{"id": "GAO-18-22", "url": "https://www.gao.gov/products/GAO-18-22", "title": "Federal Regulations: Key Considerations for Agency Design and Enforcement Decisions", "published_date": "2017-10-19T00:00:00", "released_date": "2017-11-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Within the limits of their statutory authority, agencies may design their regulations in different ways to achieve intended policy outcomes. Agencies also decide how they will promote compliance with their regulations and ensure that regulated entities are informed of regulatory requirements.", "GAO was asked to review how agencies make regulatory design and enforcement decisions. This report describes how selected agencies report (1) making decisions on regulatory designs among available options, (2) making decisions to designate resources among available compliance and enforcement activities, and (3) evaluating those decisions, and also identifies (4) key considerations for decision makers related to regulatory design and enforcement. To describe how agencies make and evaluate these decisions, GAO reviewed regulatory processes and spoke with officials at six executive departments\u2014the Departments of Agriculture (USDA), Commerce, Health and Human Services (HHS), Labor (Labor), and Transportation and the Environmental Protection Agency (EPA)\u2014based on volume of significant rulemaking, and 13 subcomponents within those departments. To identify key considerations for regulatory decision makers, GAO reviewed existing criteria, including statutory and Executive requirements, conducted a literature review, and obtained input on identified considerations with subject matter specialists.", "GAO is not making any recommendations in this report. USDA, HHS, Labor, and the EPA provided technical comments that were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies have multiple available regulatory designs. Selected agency processes for choosing among them are informed by statutory and Executive requirements, regulatory objectives, and statutory discretion. Officials reported a preference for \u201cperformance\u201d designs that establish an outcome but allow flexibility in how to achieve it, but stated that in some cases their objectives could require use of more prescriptive \u201cdesign-based\u201d regulations that specify a certain required technology or action. Officials at all selected agencies stated that they discuss potential regulatory designs internally, but some agency processes also included practices such as documentation of identified design options and assessments of the options' risks and enforcement implications.", "Selected agencies used multiple tools and approaches for allocating resources to elicit compliance. Agencies generally have flexibility to use a mix of tools, including providing compliance assistance to help regulated entities understand requirements, and monitoring and enforcement through inspections. Selected agency processes to allocate compliance resources vary, and agencies reported using collected data to target enforcement resources to address risks.", "Selected agencies supplemented feedback on effectiveness of their regulatory design and enforcement approaches with evaluations, which agency officials said could prompt changes. When agencies identify noncompliance, selected agencies may update their regulation or their compliance strategy.", "GAO identified key considerations to strengthen agency decisions related to regulatory design and enforcement (see figure). These build on current directives, academic research, and the experiences of selected agencies and are intended to serve as a resource for decision makers in designing\u2014or redesigning\u2014their regulations and determining how best to elicit compliance."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal regulations are one of the many tools that agencies use to  achieve national goals, such as improving the economy and protecting  the health and safety of the public and the environment. Within the limits  of their statutory requirements and authority, agencies may design  regulations in different ways to achieve intended policy outcomes. These  regulatory designs range from designs that generally provide regulated  entities with greater flexibility and options for compliance (\u201cperformance\u201d  regulations) to prescriptive designs that specify a certain technology or  action regulated entities must adopt (\u201cdesign-based\u201d regulations). Each  regulatory design has its advantages and disadvantages. For example, a  regulation that provides flexibility on how to comply may leave regulated  entities with less certainty on whether they are in compliance.", "Agencies also decide how they will promote compliance with their  regulations and deter noncompliance. Within available resources,  agencies must tailor these efforts to encourage voluntary compliance and  to inform regulated entities of regulatory requirements. While regulations  can generate substantial benefits to society, they also have costs, and  thus decisions agencies make about their regulatory designs and the way  that they enforce those regulations are important. The Office of  Management and Budget (OMB) estimated annual benefits from major  federal regulations issued in fiscal years 2005 through 2015 to be from  $208 billion to $672 billion, and estimated annual costs from $57 billion to  $85 billion.", "You asked us to review how agencies make key decisions related to  regulatory design, compliance and enforcement, and updating of  regulations. This report describes how selected agencies report (1)  making decisions on regulatory designs among available options, (2)  making decisions to designate resources among available compliance  and enforcement activities, and (3) evaluating those decisions, and also  identifies (4) key considerations for decision makers related to regulatory  design and enforcement.", "To describe agency experiences and decisions regarding regulatory  design and compliance and how they evaluate those decisions, we  reviewed regulatory processes at six departments\u2014the United States  Departments of Agriculture (USDA), Commerce (Commerce), Health and  Human Services (HHS), Labor (Labor), and Transportation (DOT), and  the Environmental Protection Agency (EPA)\u2014and 13 subcomponents  within those departments. To illustrate a wide range of regulatory designs  and resulting compliance activities, we selected the six executive branch  departments (excluding the Department of Defense) that promulgated the  most significant regulations between September 1, 2011, and August 31,  2016.", "We used reginfo.gov data to identify the number of significant regulations.  We assessed the reliability of those data by reviewing relevant  documentation, interviewing knowledgeable agency officials, and  electronically and manually testing the data for missing values, outliers,  and invalid values, and we found the data to be sufficiently reliable for the  purpose of identifying selected departments. The experiences of these  selected executive branch departments are illustrative and  nongeneralizable.", "From these departments, we selected subcomponents for  nongeneralizable case studies based on (1) information provided by  department officials engaged in regulatory activities on their  subcomponents\u2019 use of regulatory designs and on subcomponents that  had amended or changed their regulatory design or compliance strategies  or used compliance activities other than traditional compliance assistance  and enforcement and (2) a review of past Inspector General (IG) and our  own work on types of regulatory designs and compliance strategies. We  excluded independent regulatory agencies in our scope as they are not  subject to directives from OMB. In reviewing enforcement strategies used  by agencies, we did not review federal regulatory programs for which  enforcement has been delegated to states or localities. See table 1 below  for our selected departments and subcomponents.", "To illustrate how our selected agencies make decisions regarding  regulatory design and compliance and how they evaluate those decisions,  we reviewed agency written procedures and interviewed department and  subcomponent officials on their practices for making these decisions. We  analyzed information from those documents and interviews to identify and  confirm common patterns as well as differences across selected  agencies. These experiences illustrate how the selected agencies  currently make these decisions, the outcomes of those decision-making  processes, and their evaluation practices.", "To identify key considerations for decision makers related to regulatory  design and enforcement, we reviewed existing criteria, including statutory  and Executive requirements as well as resources for managers, and  conducted a literature review to ensure that our considerations  incorporated applicable academic and government research and  findings. These considerations were also refined by the current practices  and approaches of the selected agencies we reviewed. We obtained input  on these considerations with subject matter specialists selected based on  the results of our literature review and with officials from our selected  agencies. Appendix I contains more information on our objectives, scope,  and methodology.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Statutory and Executive requirements assert broad principles and require  agencies to consider alternative ways of regulating and preferred  regulatory designs, such as performance standards rather than means- based design standards. Further, these requirements and directives urge  agencies to consider alternative approaches to eliciting compliance, such  as alternative reporting methods or delaying compliance dates.", "The Regulatory Flexibility Act (RFA) requires federal agencies to  examine the impact of proposed, final, and existing rules on small  businesses, small organizations, and small governmental jurisdictions,  and to solicit the ideas and comments of such entities for this  purpose. Among other requirements, the RFA requires that agencies  consider regulatory alternatives that accomplish the stated objectives  of a proposed rule while minimizing any significant impact on small  entities. However, the RFA does not mandate any particular outcome  in rulemaking.", "Executive Order 12866 (E.O. 12866), issued in 1993, promotes a  regulatory philosophy and set of principles that, to the extent  permitted by law and where applicable, encourages agencies to  assess costs and benefits of their proposed and final regulations. It  also directs agencies to consider available regulatory alternatives in  all regulations, including the alternative of not regulating, and  generally select those alternatives that maximize net benefits, to the  extent permitted by statute. Alternatives to direct regulation include  providing economic incentives to encourage the desired behavior  (such as user fees or marketable permits) or providing information  upon which choices can be made by the public. If an agency  determines that direct regulation is necessary, the Executive Order  directs the agency, to the extent feasible, to specify performance  objectives, rather than specifying the behavior or manner of  compliance that regulated entities must adopt. Subsequent executive  orders across administrations have reaffirmed this philosophy and  these principles.", "Circular A-4, issued by OMB in 2003, provides guidance and best  practices to federal agencies for determining the potential effects of  new regulations. A-4 directs agencies to consider a number of  regulatory alternatives, including market-oriented approaches rather  than direct controls, performance standards rather than design  standards, informational measures, and different compliance dates  and enforcement methods, among others.", "The RFA, specific statutes, and multiple executive orders have also  emphasized the importance of regulatory lookbacks, also referred to as  retrospective reviews, in which agencies evaluate how existing  regulations work in practice:", "Statutory requirements: The RFA\u2019s Section 610 requires agencies  to review all regulations that have or will have a significant impact on  small entities within 10 years of the publication of the rule to  determine whether such rules should be continued without change, or  should be amended or rescinded, consistent with the stated objectives  of applicable statutes, to minimize impacts on small entities. Congress  also established other requirements for agencies to review the effects  of regulations issued under specific statutes, such as the Clean Air  Act.", "Executive Order 13771, issued in January 2017, requires executive  agencies to identify at least two existing regulations to be repealed  whenever they publicly propose or otherwise promulgate a new  regulation, unless prohibited by law. Agencies must also annually  provide their best approximation of the total costs or savings  associated with each new regulation or repealed regulation to OMB.  Finally, the order requires that the total incremental cost of all new  regulations, including the savings for regulations that have been  repealed, be no greater than zero for fiscal year 2017, unless  otherwise required by law or consistent with advice provided in writing  by the OMB Director.", "Executive Order 13777, issued in February 2017, requires agencies  to designate an agency official as its Regulatory Reform Officer.  Regulatory Reform Officers oversee the implementation of regulatory  reform initiatives to ensure that agencies effectively carry out  regulatory reforms, consistent with applicable law. Agencies must also  establish Regulatory Reform Task Forces to evaluate existing  regulations and make recommendations regarding their repeal,  replacement, or modification, consistent with applicable law."], "subsections": []}, {"section_title": "Selected Agencies Reported Using Statutory and Executive Requirements and Regulatory Objectives in Their Decision- Making Processes", "paragraphs": [], "subsections": [{"section_title": "Agencies Have Multiple Regulatory Design Options Available to Achieve Their Objectives Depending on Statutory Discretion", "paragraphs": ["When agencies determine that they may need to regulate, they generally  have multiple regulatory designs available to achieve their objectives.  Agencies are directed by statute and Executive requirements to assess  alternatives to regulatory action\u2014including not issuing new regulations\u2014 and different ways of regulating. Available regulatory designs range from  prescriptive regulations that specify the adoption of a certain technology  or action to designs that generally provide regulated entities with more  discretion and options for compliance, and in some instances hybrid  designs that incorporate both prescriptive and less prescriptive elements.  Alternatives to prescriptive regulations provide regulated entities with  greater flexibility. For example, performance-based regulations require a  certain outcome but allow regulated entities discretion to determine how  they will achieve that outcome, while market-based regulations use  tradeable permits or fees to influence behavior.", "Table 2 highlights the regulatory designs identified through our literature  review and corroborated by subject matter specialists and agency  officials. The table includes selected examples of applicable regulations  implemented by our case study agency subcomponents.", "Statutes give agencies varying degrees of discretion to consider multiple  designs as they develop regulations to meet their objectives. In some  instances, Congress directs agencies by statute to implement specific  regulatory designs. For example, the Occupational Safety and Health Act  directs the Occupational Safety and Health Administration (OSHA), when  promulgating a standard, to either (1) adopt existing scientific and  industry consensus standards for workplace health and safety, or (2)  explain why the standard adopted by the agency better protects workers  than the national consensus standard. In addition, requirements dealing  with exposures to toxic materials must be formulated in the terms of  \u201cobjective criteria and the performance desired\u201d whenever practicable.  The Clean Air Act provides EPA\u2019s Office of Air and Radiation (OAR) with  varying degrees of discretion to consider different regulatory designs  when developing its regulatory programs. For example, the Clean Air  Act gave the office broad authority to establish a tradable emissions  allowance system\u2014commonly referred to as cap and trade\u2014with a  market-based design for its Acid Rain Program, but to promulgate specific  prescriptive regulations for the National Emission Standards for  Hazardous Pollutants program."], "subsections": []}, {"section_title": "Selected Agencies Stated a Preference for Less Prescriptive Designs to Achieve Regulatory Objectives", "paragraphs": ["Officials at selected agencies reported a general preference for less  prescriptive regulations in accordance with E.O. 12866, Circular A-4, and  other Executive requirements, which encourage agencies to consider less  prescriptive regulatory design options for achieving their objectives. For  example, DOT officials told us that, when choosing among regulatory  design options, they prefer performance-based regulations over means- based regulations. Officials from DOT\u2019s Pipeline and Hazardous Materials  Safety Administration (PHMSA) told us that performance-based  regulations\u2014as implemented for classifying and packaging hazardous  material\u2014allow them to accommodate innovations among regulated  entities, adapt to technological advances, and promote the  competitiveness of U.S. firms in global markets without having to  subsequently revise the regulations.", "The following examples illustrate how some selected subcomponents  have (1) encouraged the development of less prescriptive design options  for new regulatory programs, and (2) updated or replaced existing  regulations to incorporate more flexible designs.", "Developing trainings to encourage less prescriptive designs:  Two selected subcomponents produced training materials to promote  the consideration of all options for designing effective regulation,  including less prescriptive regulations where appropriate. EPA\u2019s Office  of Enforcement and Compliance Assurance developed a workbook  and supplemental training course that present principles and tools to  help rule drafters consider the relative effectiveness of different  designs for achieving regulatory objectives, including how the degree  of prescriptiveness can either promote or hinder compliance. The  Federal Aviation Administration\u2019s (FAA) \u201cPerformance-Based  Regulations Training\u201d course uses real world examples and team  exercises to teach rule drafters (1) the concepts that inform  performance-based designs, (2) the relationship between prescriptive  and less prescriptive regulatory approaches, and (3) considerations  for developing and assessing performance-based regulations.", "Updating or replacing existing regulations to incorporate flexible  designs: FAA\u2019s 2016 airworthiness standards for small airplanes  replaced some prescriptive design requirements with more flexible  performance-based standards. Agency officials told us that they  expect the new regulation will improve safety and cost-effectiveness  (such as by reducing compliance costs) while facilitating future  technological innovations. Animal and Plant Health Inspection Service  (APHIS) officials told us that increased international demand for cattle  exports put pressure on their inspection infrastructure and prompted  them to replace their formerly prescriptive standards with  performance-based regulations that officials described as more  flexible and easier to adapt to changing circumstances. Food Safety  and Inspection Service (FSIS) officials told us that their Hazardous  Analysis and Critical Control Points (HACCP) Rule represented a shift  from FSIS\u2019s traditional means-based regulations (which mandated  specific food production standards) to a mixed performance- and  management-based regulatory program (which monitors food safety  plans and production outcomes)."], "subsections": []}, {"section_title": "Agencies Reported that Regulatory Objectives May Require Prescriptive Designs or Use of Multiple Designs", "paragraphs": ["Despite a general preference for less prescriptive designs among  selected agencies, officials from nine selected subcomponents told us  that their regulatory objectives sometimes required a prescriptive  regulation or that in some instances regulated entities expressed a  preference for prescriptiveness.", "Mine Safety and Health Administration (MSHA) officials told us that  their regulations were often necessarily prescriptive to implement and  enforce the mine health and safety standards required by statute.  For example, based on data from the National Institute for  Occupational Safety and Health, MSHA determined that requiring  more frequent respirable dust sampling for mining occupations known  to have high dust levels and requiring the use of certain monitoring  devices to measure respirable coal dust exposure are necessary to  limit exposure to respirable coal mine dust and thus reduce  occupational lung diseases.", "Bureau of Industry and Security (BIS) officials told us that their export  licensing regulations are necessarily prescriptive to narrowly target  specific items as unacceptable for export due to national security or  commercial sanctions against certain countries.", "Food and Drug Administration (FDA) officials told us that, while they  try to achieve a balance between prescriptive and less prescriptive  regulatory designs, in some instances prescriptive regulations are the  only means of ensuring public health and safety.", "Officials from EPA\u2019s Office of Chemical Safety and Pollution  Prevention (OCSPP) told us that, when given non-prescriptive  regulatory options, small businesses generally prefer prescriptive  regulations with clear compliance requirements to minimize  uncertainty.", "An EPA OAR official told us that, during the update of a recent  regulation on refrigerants, the agency considered including a provision  allowing operators of pollutant-emitting facilities the option to either (1)  set a corporate-wide budget for leaks covering all facilities, or (2)  comply with a prescriptive regulation for individual appliances  susceptible to leakage. Based on feedback from regulated entities  and EPA enforcement officials, who voiced a need for predictability  and ease of monitoring, EPA officials said that they ultimately chose  to promulgate the more prescriptive regulation instead of the more  flexible, but challenging to implement, corporate-wide approach.", "Ten selected subcomponents incorporated multiple design elements into  their regulations\u2014what we refer to as hybrid designs\u2014that offer more  flexibility or, conversely, more clarity to meet the needs of different  regulated entities.", "PHMSA officials told us that their special permits programs for  hazardous materials and pipelines allow regulated entities the  flexibility to determine their own means of satisfying transportation  safety requirements if they achieve the same level of safety  prescribed by regulation.", "FAA officials told us that most of their safety standards are  necessarily prescriptive to ensure clarity and uniformity. However,  they said that they often encourage the use of multiple designs in their  rulemakings that allow for both performance-based and means-based  regulations\u2014as with the 2016 airworthiness standards for small  airplanes.", "OSHA officials told us that they provide employers with multiple  options for achieving regulatory compliance that incorporate both  prescriptive and less prescriptive design elements. For example,  OSHA\u2019s health standards regulating crystalline silica exposure among  construction site workers provides employers both a performance- based option (which allows regulated entities discretion in determining  how to meet permissible exposure limits), and a means-based option  (in which regulated entities implement specified exposure mitigation  measures for designated tasks).", "FDA and FSIS have both implemented voluntary programs to promote  the adoption of practices among regulated entities that align with the  agencies\u2019 regulatory objectives. FSIS encourages regulated food  facilities to develop voluntary food defense plans as a means of  mitigating potential health hazards and strengthening food safety.  FDA officials told us they issued voluntary food labeling standards for  raw fruits and vegetables to assist in establishing an industry  standard, and achieved 80 percent compliance among regulated  entities."], "subsections": []}, {"section_title": "Selected Agency Processes Included Practices for Considering and Assessing Regulatory Design Options", "paragraphs": ["All selected agencies told us their processes for drafting regulations  incorporated internal discussions to consider available regulatory design  options. For example, Employee Benefits Security Administration (EBSA)  officials told us that the agency\u2019s process encourages rule drafters to  solicit input from internal and external stakeholders to inform the  consideration of all possible regulatory design options available to  achieve statutory objectives. BIS officials told us that proposals for  broadly applicable regulations\u2014including available design options\u2014are  discussed and vetted with multiple stakeholders, including (1) BIS  subcomponent officials, (2) Office of General Counsel staff, (3) agency  engineers, and (4) external technical advisory committees.", "However, some selected subcomponents\u2019 processes for drafting  proposed regulations also included documentation of identified design  options for achieving objectives and assessments of risk or enforcement  and compliance implications of identified design options. These practices  for identifying and assessing regulatory designs are described in the  following examples.", "Documenting the assessment of design options for achieving  regulatory objectives: EPA uses an Analytical Blueprint to identify  the range of regulatory design options considered throughout the  Action Development Process (ADP)\u2014the agency\u2019s process for  developing and responding to public comments on new regulatory  proposals. FSIS officials told us that rule drafters develop an \u201coptions  paper\u201d to identify and assess alternative approaches to achieving  regulatory objectives based on multiple inputs, including (1) data  analyses, (2) subject matter expertise, and (3) stakeholder feedback.  FAA officials told us that rule-drafting groups discuss regulatory  design options when developing a Rulemaking Action Plan and  present these alternatives in briefing documents to the principal  agency managers, referred to as \u201cprincipals briefs.\u201d FDA officials told  us that rule-drafting groups generally develop a concept paper or  other summary document to determine the optimal means of  achieving a regulatory goal, including considerations of multiple  design options.", "Assessing the risk associated with identified regulatory design  options: Three selected subcomponents incorporated assessments  of risk into their rule-drafting procedures. DOT\u2019s Rulemaking  Requirements direct agency officials to \u201cconsider, to the extent  reasonable, the degree and nature of the risks posed [by agency  action]\u201d and \u201chow the agency action will reduce risks to public health,  safety, and the environment\u201d per Executive Order 12866. EPA\u2019s ADP  specifies that Analytic Blueprints identify, assess, and discuss the risk  management implications of proposed regulatory design options.  USDA\u2019s Regulatory Decisionmaking Requirements direct rule drafters  to conduct a comparison of risks for regulatory design options and  provide a description of the level of uncertainty and unknowns  associated with each design.", "Assessing the enforcement and compliance implications of  identified regulatory design options: An official from FSIS told us  that representatives from its Office of Field Operations or Office of  Investigation, Enforcement, and Audit often participate in rule-drafting  groups to provide an enforcement perspective. A BIS official told us  that rule drafters solicit informal feedback from enforcement officials to  ensure the practicability of regulatory standards during both the  development of prospective regulations and the initial implementation  of new regulations.", "EPA\u2019s procedures require that enforcement officials participate in  EPA\u2019s ADP rule-drafting groups for rules involving \u201cprecedent-setting  policy implications\u201d and \u201cextensive cross-agency participation,\u201d and  EPA officials told us that enforcement officials also are often involved  in the drafting of other rules. Further, EPA Office of Enforcement  and Compliance Assistance\u2019s training and guidance materials  encourage rule drafters to incorporate compliance principles\u2014such as  clarity, consistency, and transparency\u2014into their decision making and  consider how regulatory design choices can influence later  compliance and need for enforcement.", "Considering compliance and enforcement implications while making  regulatory design decisions is important because agency officials  stated that different design choices have implications for future  compliance and enforcement resources. For example, PHMSA  officials told us they create an implementation plan for any proposed  regulation with an expected impact on enforcement resources.  Officials from OSHA and EPA Office of Land and Emergency  Management (OLEM) told us that management-based regulations\u2014 such as OSHA\u2019s Process Safety Management requirements for oil  refineries and chemical facilities and OLEM\u2019s Risk Management  Program for facilities that use hazardous chemical substances\u2014can  be resource-intensive to enforce because of the greater technical  expertise needed to review highly individual and technical plans  among heterogeneous regulated entities to ensure compliance. An  EPA OAR official told us that the design of its cap-and-trade system\u2014 tradeable allowances that require regulated entities to monitor and  report their emissions to EPA\u2014limits the need for enforcement  resources to only those entities that do not comply with monitoring,  reporting, and allowance-holding requirements."], "subsections": []}]}, {"section_title": "Selected Agencies Reported Using Multiple Tools and Approaches for Allocating Resources to Elicit Compliance", "paragraphs": [], "subsections": [{"section_title": "To Elicit Compliance, Agencies Generally Have Flexibility to Use a Mix of Available Tools", "paragraphs": ["When regulations are promulgated, agency officials must determine how  they will promote compliance with their regulations and deter  noncompliance. Agencies generally have the flexibility to tailor their  compliance and enforcement strategies to encourage voluntary  compliance and inform regulated entities of regulatory requirements.  Agency officials decide on the appropriate mix of compliance assistance  together with monitoring and enforcement efforts to achieve regulatory  outcomes.", "Based on our review of relevant academic literature, there are multiple  tools available to agencies to elicit compliance, although agencies  traditionally use two tools to achieve their objectives. The first,  compliance assistance, helps regulated entities understand and meet  regulatory requirements. For example, an agency may consider providing  assistance through educational materials and outreach to promote  compliance among regulated entities. The second, the use of monitoring,  enforcement, and data reporting, ensures that regulations are followed  and deters noncompliance. Agencies may also supplement these  traditional approaches with options that provide more accommodating  and flexible opportunities to promote compliance among regulated  entities, such as developing cooperative programs or providing onsite  consultation services. Table 3 identifies some of the options by which  agency officials may accomplish their regulatory goals.", "As described in table 3, agencies use compliance assistance tools, such  as education and consultation, to ensure that regulated entities  understand regulatory requirements and provide examples of how to  comply. One way that agencies do this is by providing regulatory  guidance to regulated entities in the forms of Frequently Asked  Questions, tools, or factsheets. We reported in 2015 that agencies used a  wide variety of guidance to interpret new regulations and clarify policies in  response to questions or compliance findings. However, we have also  recommended that selected agencies could further help regulated entities  comply, and agencies have implemented those recommendations by  offering further clarifications and guidance. The selected  subcomponents that we reviewed employed a variety of compliance  assistance activities. For example:", "FSIS provides compliance guidance and makes training materials  available to its regulated entities, such as meat, poultry, and egg  product plants, and maintains help desks to provide technical  assistance to its regulated community.", "BIS holds domestic and international seminars, provides online and  in-person trainings, responds to inquiries submitted online, issues  industry advisory opinions, and works with other federal agencies to  provide immediate error alerts to filers using their Automated Export  System.", "FDA provides web-based, in-person, and telephone education and  outreach; hosts webinars, public meetings, and stakeholder meetings;  and posts training videos and blogs. For example, the agency  established a central source of information for questions related to its  2011 Food Safety Modernization Act rules, programs, and  implementation strategies.", "Regulatory agencies also engage in enforcement activities such as  inspections, monitoring reported data, and issuing fines when  noncompliance is identified. The selected agencies we reviewed reported  using criteria such as data, compliance history, and trends in  noncompliance to identify risks and more efficiently target enforcement  activities. For example:", "OSHA conducts two types of inspections\u2014\u201cun-programmed\u201d and  \u201cprogrammed\u201d\u2014to target resources for the 8 million workplaces it  regulates. Un-programmed inspections respond to specific complaints  or injuries, while programmed inspections target resources towards  specific high-risk industries and employers.", "FSIS officials analyze noncompliance trends for its food safety  process control regulations at meat, poultry, and egg processing  facilities and send inspection officials \u201cearly warning\u201d alerts when the  establishments they inspect reach certain noncompliance rates.", "APHIS\u2019s Animal Care program uses its Risk Based Inspection System  to conduct more frequent and in-depth inspections at facilities with a  higher risk of animal welfare concerns, and fewer at those that are  consistently compliant. The system uses criteria, such as past  compliance history and the seriousness of documented  noncompliance, to determine minimum inspection frequencies for  licensed and registered facilities.", "The selected agencies also reported supplementing traditional  compliance assistance and enforcement approaches with other tools,  including:", "Cooperative programs: OSHA uses multiple cooperative programs  to recognize employers who have introduced health and safety  initiatives at their worksites that exceed requirements. OSHA\u2019s  Voluntary Protection Program rewards employers that exceed worker  safety requirements through an exemption from routine inspections  while they maintain their status in the program. Participating  employers are reevaluated every 3 to 5 years. OSHA uses its  Challenge Program to partner successful employers as mentors for  employers who are attempting to improve their safety and health  programs. The Centers for Medicare and Medicaid Services\u2019 (CMS)  Skilled Nursing Home Facilities Value Based Purchasing Program is  authorized to use incentive payments to recognize nursing homes that  exceed minimum standards of quality.", "Onsite consultation services: OSHA works with state governments  to provide onsite consultation services to small- and medium-sized  businesses. These consultations assist employers to identify potential  hazards and improve their injury and illness prevention programs.  MSHA offers compliance assistance and outreach through \u201cwalk and  talks\u201d during which MSHA inspectors and education outreach staff  provide mine operators and miners with information on hazardous  tasks and conditions, as well as offer best practices to prevent  accidents, injuries, and fatalities.", "Voluntary disclosures: FAA implements a number of voluntary  reporting programs. For example, its Flight Operational Quality  Assurance program allows commercial airlines and their employees to  anonymously report incident information. The agency then uses this  information to monitor trends and target resources. BIS encourages  parties who believe they may have violated its export regulation to  self-disclose. Officials then review the disclosure to determine if a  violation has occurred and to identify the appropriate corrective action.  BIS views a self-disclosure as an indicator of a party\u2019s intent to  comply with its requirements. EBSA\u2019s Voluntary Fiduciary Correction  Program and Delinquent Filer Voluntary Correction Program  encourage voluntary compliance by allowing plans and plan  fiduciaries to self-correct certain violations and by offering relief from  higher civil penalty assessments.", "Third-party certification: EPA OCSPP\u2019s formaldehyde emissions  rules require foreign and domestic wood mills to receive a third party  certification that certain wood products meet defined standards. EPA  must approve the third parties that certify the products."], "subsections": []}, {"section_title": "Selected Agencies Reported Considering Multiple Factors and Take Different Approaches to Allocating Resources to a Mix of Compliance and Enforcement Tools", "paragraphs": ["Agencies generally have flexibility in making decisions on and allocating  resources for a mix of compliance assistance and enforcement strategies.  However, some selected agencies reported that statutory requirements,  programmatic constraints, and changing priorities affected how they  allocated resources for compliance and enforcement activities. For  example:", "MSHA must prioritize available resources to fund inspections because  they are required by law to inspect every underground mine four times  a year and every surface mine twice each year. Once those  resources have been allocated for inspection, any additional  resources may then be used for compliance related activities.", "FSIS\u2019 allocation of resources is similarly constrained because it is  statutorily required to be present at every meat, poultry, and egg  product facility whose product enters into commerce in order for the  facility to operate.", "APHIS is programmatically constrained in allocating resources  between enforcement and compliance assistance because another  federal department enforces some of their promulgated regulations,  and thus determines compliance resources and approaches. The  agency\u2019s Agricultural Quarantine Inspection program inspection  activities are performed by Customs and Border Protection within the  Department of Homeland Security.", "The type and behavior of regulated entities also affects selected agency  decisions on strategies to achieve compliance. The characteristics of  regulated entities\u2014such as the hetero- and homogeneity of the regulated  community and frequency of interaction with agency officials\u2014may inform  agency compliance assistance and enforcement resource decisions.  Some of the selected agencies described frequent interaction with  regulated entities that were homogeneous or easily identified. As a result,  officials said it is easier for their agencies to ensure that regulated entities  are aware of applicable requirements, and that there may be less need to  invest in compliance assistance. For example, the operators of the  pipelines PHMSA regulates are a small and well known community.  Similarly, FSIS inspectors must be present at each meat, poultry, or egg  products facility, at frequencies determined by the type of operation being  conducted, for it to function. MSHA inspects a fixed number of mines, and  its inspectors are often onsite; however, MSHA officials stated that some  mines are better at complying with health and safety standards than other  mines.", "In contrast, large and heterogeneous communities present different  needs and considerations that may inform agencies\u2019 compliance  assistance and enforcement resource decisions. When regulated entities  are less likely to engage with inspectors or other federal officials,  agencies\u2019 decisions on allocating resources to ensure all regulated  entities understand requirements and to elicit voluntary compliance are  important. As previously discussed, OSHA regulates and monitors a large  and diverse community of regulated entities. EBSA monitors  approximately 685,000 private retirement plans and 2.2 million health  plans, and similar numbers of other welfare benefit plans. CMS regulates  more than 15,000 large and small nursing home facilities across the  country. In contrast to its pipeline-related regulations, PHMSA also  regulates a broad spectrum of transportation operators and hazardous  materials, requiring a different approach to disseminating information and  providing outreach.", "At the selected agencies we reviewed, agency officials told us that the  main objective of their regulatory enforcement efforts is to achieve  compliance with regulatory requirements. The selected agencies we  reviewed took different approaches to achieve compliance, and used  compliance and enforcement tools to escalate pressure to get regulated  entities to comply. For example, FDA officials told us that when the  agency identifies noncompliance, it may not immediately sanction a  regulated entity. Rather, the agency may begin with a meeting or call with  the regulated entity to address the noncompliance, and gradually  implement more serious regulatory compliance measures (such as a  negative inspection report or warning letter) or even seek an injunction  from the relevant court(s) if it cannot resolve the noncompliance.", "APHIS also uses a range of compliance assistance activities to promote  compliance and reserves its enforcement authority for the most serious  situations and noncompliance. For example, APHIS officials told us it  offers facilities struggling to maintain compliance the opportunity to work  with trained compliance specialists to develop options and plans to  promote future compliance. PHMSA officials told us the agency uses the  Systems Integrity Safety Program as a non-adversarial tool that provides  compliance assistance to regulated entities not currently in compliance.  They said that the agency generally will not initiate enforcement actions  against regulated entities enrolled in this program, but will pursue them if  there are violations that PHMSA believes to be willful, and where a safety  violation presents an imminent hazard.", "Despite a common objective to elicit compliance, selected agency  approaches to resource allocations for compliance and enforcement  differ. While some agencies consider allocations for compliance and  enforcement to implement each individual regulation, others allocate  resources across regulations and regulatory programs. For example,  Labor allocates compliance assistance and enforcement resources for  individual regulations depending on multiple factors, such as the nature of  the regulation and underlying subject matter. In contrast, EPA allocates  resources across regulations, programs, and regions. Its Office of  Enforcement and Compliance Assurance works with each regional office  to allocate enforcement and compliance assistance resources for the  various programs across EPA.", "In addition, certain agencies we reviewed distinguish between compliance  assistance and enforcement activities, while others view these activities  as a joint effort. For example, EBSA allocates its resources between  benefits advisors, who provide compliance assistance, and their  enforcement staff. Conversely, OSHA inspectors provide compliance  assistance to regulated entities in addition to their enforcement roles,  supplementing onsite outreach and education provided by compliance  assistance specialists located in regional offices.", "To appropriately allocate their enforcement and compliance resources,  selected agencies we reviewed also collect and review data to identify  noncompliance trends. For example:", "OSHA uses collected data to identify national and local special  emphasis programs to highlight specific workplace health and safety  issues as the focus of targeted outreach and enforcement efforts.", "EBSA\u2019s national office annually establishes enforcement priorities\u2014 and shifts resources to respond with new emphases\u2014through its  guidance outlined in its Enforcement Program Operating Plan. In  preparing this guidance, EBSA assesses current enforcement  activities, identifies recent enforcement trends, analyzes available  information regarding industry activities and areas of noncompliance,  and reviews current policy considerations to identify possible areas of  potential risk within the employee benefit plan industry.", "EPA officials told us they use their National Enforcement Initiatives to  prioritize resources to compliance concerns that are particularly  entrenched or problematic. Further, EPA initiated its Next Generation  Compliance (NextGen) strategy to structure regulations and permits  with new monitoring and information technology, expanded  transparency, and innovative enforcement activities. NextGen was  designed to increase transparency and real time information made  possible by electronic reporting and advanced monitoring, and allows  the agency and its stakeholders the opportunity to experiment with  innovative approaches. Furthermore, EPA stated that it and its  stakeholders are better able to identify and solve environmental  issues, and address large regulated communities with approaches  that go beyond traditional single facility inspections and enforcement."], "subsections": []}, {"section_title": "Selected Agencies Have Made Efforts to Make Compliance Data Transparent and Accessible", "paragraphs": ["Transparency and availability of data are important to promoting  compliance and achieving regulatory objectives. The selected agencies  that we reviewed have made efforts to make compliance and  enforcement information more transparent and accessible to the public,  including:", "All the Labor subcomponents we reviewed made efforts to make data  and information more publically accessible. MSHA developed online  compliance tools that allow the public to monitor a mine\u2019s compliance  with key safety and health standards by providing a broad range of  mine safety and health data, including information about mine  inspections, accidents, injuries, illnesses, violations, employment,  production totals, and air sampling. One of these tools is the \u201cRules to  Live By Calculator,\u201d which focuses on the 49 safety standards most  often associated with fatal mining accidents and serious injuries.", "EPA\u2019s Enforcement and Compliance History Online (ECHO) database  provides integrated compliance and enforcement data for over  800,000 regulated facilities on air emissions, surface water  discharges, hazardous waste, and drinking water systems. The  database includes EPA, state, local, and tribal environmental agency  compliance and enforcement records that are reported into national  databases. ECHO also incorporates EPA environmental data sets to  provide additional context for analyses.", "CMS created a \u201cNursing Home Compare\u201d website to assist  consumers in comparing information about nursing homes. The  website contains detailed information on the quality of care and  staffing information for more than 15,000 Medicare- and Medicaid- participating nursing homes including a five-star scale of quality  ratings of overall and individual performance on health inspections,  quality measures, and hours of care provided per resident by staff  performing nursing care tasks."], "subsections": []}]}, {"section_title": "Selected Agencies Reported They Evaluated Regulatory Decisions by Collecting Feedback, and Responses to Identified Noncompliance Varied", "paragraphs": [], "subsections": [{"section_title": "Selected Agencies Supplement Feedback on Effectiveness of Regulatory Design and Enforcement Approaches with Evaluations", "paragraphs": ["While agency officials receive feedback on their regulations during  rulemaking, they also have opportunities to receive feedback during  implementation of the regulation and as part of later retrospective review  efforts. In 2007 and 2014, we reported on retrospective reviews of  individual regulations, which agencies use to evaluate how existing  regulations work in practice. As mentioned previously, two executive  orders issued in 2017 also emphasize the importance of retrospective  review, and officials from two agencies told us that they are currently  examining their regulatory evaluation processes in response to these  directives. To supplement retrospective review efforts, officials told us that  they collect feedback from both internal and external stakeholders on the  effectiveness of their regulatory design and enforcement decisions. This  feedback may occur during rulemaking or during implementation, and  might prompt changes. For example:", "EPA officials told us they provide opportunities for regulated entities to  give feedback, and that they may reconvene the initial Regulatory  Working Group for a rule if they heard complaints or concerns.", "At DOT, FAA officials told us they collect feedback about potential  needs to update or change rules through requests for exemptions and  through their various advisory committees. According to PHMSA  officials, advisory committee inputs or petitions are two ways they  evaluate the success of their regulations.", "MSHA officials told us that in response to comments received during  rulemaking, they changed their rule on proximity detection systems for  continuous mining machines, which protects miners from being struck  by such machines. MSHA initially proposed specifying certain  requirements for a technology but used a performance-based  approach in its final rule. This experience subsequently informed  MSHA\u2019s proposed design for its new rule for proximity detection  systems for mobile machines, in which the agency proposed a  performance standard from the outset of the rulemaking.", "A BIS enforcement official told us that his office requested a revision  to an existing regulation that was difficult to enforce because it did not  provide clear requirements for how companies could determine when  a government-identified \u201cred flag\u201d\u2014a party on BIS\u2019 Unverified List\u2014 could be resolved. BIS received similar feedback from advisory  committees and revised the regulation for clarity.", "According to APHIS officials, they evaluate the effectiveness of their  compliance and enforcement activities by tracking compliance rates  under the Animal Welfare Act and through feedback from their  regulated entities. USDA officials also stated that interactions with  inspectors and listening sessions provide the department\u2019s agencies  with feedback.", "Selected agency officials cited concerns about changing the design of  established regulatory programs and the resources required for the rulemaking process. Two of our selected agencies mitigated these  concerns by piloting new regulatory designs. USDA implemented an  ongoing project\u2014the HACCP Inspection Models Project\u2014to assess the  viability of applying potential performance-based regulations to ensure  food safety at hog and poultry processing facilities. After assessing  inspection findings for the poultry pilot project and in response to public  comments on the program, they ultimately determined that the regulation  should be broadened to additional facilities. FAA used feedback from  pilot studies, in which more than 30 public-use airports participated, to  inform a proposed rule for Airport Safety Management Systems.", "Agencies also typically have flexibility to continue to change and adjust  their compliance and enforcement strategies in response to feedback and  evaluation without going through the rulemaking process to amend a final  regulation. As previously mentioned, agencies assess the effectiveness of  their enforcement and compliance efforts by collecting data to target their  enforcement efforts. In addition, selected agencies identified evaluations  of their enforcement and compliance efforts, including:", "DOL\u2019s Chief Evaluation Office officials told us they work with Labor  components to (1) develop and implement research studies, (2)  address how collected information is used to assess effectiveness,  and (3) support data analysis to inform management decision making.  For example, the office worked with OSHA to pilot changes to issuing  and following up citations to increase employer responsiveness. The  study, which began in 2015, found that employers who were part of  the new citation process, which included elements such as a handout  during inspections, postcard reminders, and a follow-up call, were 3.9  percentage points more likely to engage with OSHA.", "EPA\u2019s Office of Enforcement and Compliance Assistance wrote a  guide for EPA managers and staff on their integrated strategic  approach to effectively eliciting compliance, focusing on compliance  assistance, incentives, monitoring, enforcement, and other tools.  EPA has also conducted research on what makes a regulation more  likely to be complied with and identified principles and tools to aid in  writing more effective regulations. For example, EPA directs rule  drafters to use clear and objective regulatory requirements and  applicability criteria, to structure regulations to make compliance  easier than noncompliance, and to leverage regulated entities and/or  third parties to assess compliance and prevent noncompliance. It also  encourages agency officials to leverage accountability and  transparency through e-reporting to government and public access to  data on websites.", "According to PHMSA officials, they developed formal enforcement  goals, strategies, and metrics after reviewing leading practices for  enforcement, including reviewing the compliance strategies at other  DOT subcomponents. They analyzed data to identify commonalities  between violations that are causal to incidents, as well as those that  increased the severity of incidents. They also reviewed enforcement  data to identify guidance that needs to be improved, provide feedback  to inspectors, and ultimately provide ideas for improved rulemaking  and regulatory design."], "subsections": []}, {"section_title": "Selected Agency Responses to Continued Widespread Noncompliance Varied", "paragraphs": ["Selected agencies responded differently when they identified continued  widespread noncompliance through their evaluations or monitoring of  compliance data. Some agencies told us they view a record of  noncompliance as a fault in the regulation and may update their  regulatory design, while others may change compliance strategies. FSIS  officials told us they use enforcement data to analyze the effectiveness of their regulations, and may make changes to their regulations based on  trends in noncompliance. According to PHMSA officials, they analyze  enforcement data in several ways, including identifying regulations with  the highest rates of noncompliance to understand weaknesses in  individual regulations.", "MSHA officials told us that when an Inspector General audit found that its  enforcement actions were not strong enough for repeat violators, the  agency updated its Pattern of Violations regulation to better attain  compliance. Conversely, OSHA officials told us that they view persistent  noncompliance or workplace injuries and illness as indicating a need to  revisit and readdress how compliance assistance is being provided and  enforcement applied, rather than as a reason to adjust the regulation.  EPA officials told us that they will update an existing regulation to solve  an ongoing compliance problem only as a last resort due to the large  resource investment required and disruption to regulated entities to adapt  to changes in regulatory design."], "subsections": []}]}, {"section_title": "Key Considerations Could Strengthen Agency Regulatory Design and Enforcement Decisions", "paragraphs": ["We built upon current statutory and executive requirements and selected  agencies\u2019 current practices to identify key considerations to strengthen  agency processes for regulatory design and enforcement decisions. As  agency officials craft regulations, they are guided by high-level statutory  requirements, economic principles in executive orders, and OMB  directives and resources. In accordance with those directives, our  selected agencies have implemented varied practices to facilitate their  regulatory design and enforcement decisions. Based on our review of  those directives and the selected agencies\u2019 processes, as well as  academic and practitioner research, past IG work and our own past work,  and existing criteria and resources for federal managers, we identified key  considerations for regulatory design and compliance to aid decision  makers in designing\u2014or redesigning\u2014their regulations and determining  how best to elicit compliance.", "The following key considerations for regulatory design and compliance in  figure 1 are intended to serve as a resource to supplement existing  directives and guidance. We identified these considerations to bridge the  gap between high-level directives and current agency practices. These  considerations can provide criteria for decision makers to identify, assess,  and evaluate options for achieving their regulatory objectives. Further, we  have offered elements for each consideration as concrete questions that  agencies can ask themselves as they design their regulatory approaches  to elicit compliance within statutory authority and available resources. Not  all considerations are applicable in every instance. We recognize there  are tradeoffs inherent in any choice, but we believe that these key  considerations can strengthen agency decision making, resulting in more  informed designs, plans for evaluations, and ongoing changes to  compliance and enforcement approaches.", "We provided a draft of this report to the Secretaries of Agriculture,  Commerce, Health and Human Services, Labor, and Transportation, the  Administrator of the Environmental Protection Agency and the Director of  the Office of Management and Budget for comment. The Departments of  Agriculture, Health and Human Services, and Labor and the  Environmental Protection Agency provided technical comments that were  incorporated as appropriate. The Departments of Commerce and  Transportation and the Office of Management and Budget did not provide  comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretaries of Agriculture, Commerce,  Health and Human Services, Labor, and Transportation; the Administrator  of the Environmental Protection Agency; the Director of the Office of  Management and Budget; and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or krauseh@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["You asked us to review how agencies make key decisions related to  regulatory design, compliance and enforcement, and updating of  regulations. This report describes how selected agencies report (1)  making decisions on regulatory designs among available options, (2)  making decisions to designate resources among available compliance  and enforcement activities, and (3) evaluating those decisions, and also  identifies (4) key considerations for decision makers related to regulatory  design and enforcement.", "To describe agency experiences and decisions regarding regulatory  design and compliance and how they evaluate those decisions, we  reviewed regulatory processes at 6 departments and 13 subcomponents  within those departments. To illustrate a wide range of regulatory designs  and resulting compliance activities, we selected the six executive branch  departments\u2014excluding the Department of Defense\u2014that promulgated  the most significant regulations between September 1, 2011 and August  31, 2016. These departments were the United States Departments of  Agriculture (USDA), Commerce (Commerce), Health and Human  Services (HHS), Labor (Labor), and Transportation (DOT), and the  Environmental Protection Agency (EPA). Among other inputs, the  selected departments were also among those that most often  promulgated regulations that were anticipated to affect small entities  (such as small businesses, nonprofits, and governments) during the same  time period. We used reginfo.gov to identify the number of significant  regulations. We assessed the reliability of those data by reviewing  relevant documentation, interviewing knowledgeable agency officials, and  electronically and manually testing the data for missing values, outliers,  and invalid values, and we found the data to be sufficiently reliable for the  purpose of identifying selected departments. The experiences of these  selected executive branch departments are illustrative and  nongeneralizable.", "From these departments, we selected subcomponents for  nongeneralizable case studies. These subcomponents were selected  based on information provided by department officials engaged in  regulatory activities on their departmental subcomponents\u2019 use of a  variety of regulatory designs and any experience making changes to their  regulatory design or compliance strategies based on new information  (such as evaluations) or new circumstances (such as evolving  technologies or changes in agency resources for compliance). We also  asked department officials about subcomponents\u2019 use of compliance  activities other than traditional compliance assistance and enforcement.  To further inform our selection of subcomponents, we reviewed past  Inspector General and our own work on types of regulatory designs and  compliance strategies. We did not include independent regulatory  agencies in our scope as they are not subject to directives from the Office  of Management and Budget\u2019s (OMB) Office of Information and Regulatory  Affairs. Furthermore, many independent agencies promulgate and  administrate financial regulations, which present different considerations  and have been the focus of other work we performed. In reviewing  enforcement strategies used by agencies, we did not review federal  regulatory programs for which enforcement has been delegated to states  or localities.", "To illustrate how our selected agencies make decisions regarding  regulatory design and compliance and how they evaluate those decisions,  we reviewed agency written procedures and interviewed department and  subcomponent officials on their practices for making these decisions. To develop themes and examples from our documentary and testimonial  evidence, we analyzed information from relevant documents and  interviews to identify and confirm common patterns as well as differences  across selected agencies. These experiences illustrate how the selected  agencies currently make these decisions, the outcomes of those decision- making processes, and their evaluation practices.", "To identify key considerations for decision makers related to regulatory  design and enforcement, we reviewed existing criteria documents,  including (1) elements of the Regulatory Flexibility Act; (2) applicable  executive orders and guidance such as Executive Order 12866 and OMB  Circulars A-4, A-11, and A-123; and (3) resources for federal managers,  and leading practices we had previously reported on for enterprise risk  management.", "To ensure that our considerations incorporated applicable academic and  government research and findings we conducted a literature review. Our  literature review incorporated searches of several academic, literature,  and government sources\u2014including bibliographic databases such as  ProQuest, Scopus, Academic OneFile, Public Affairs Information Service,  and LexisNexis\u2014for articles or studies published from January 2011  through August 2016. The team searched for articles using several  combinations of relevant key words such as: \u201cregulatory design,\u201d  \u201cregulatory structure,\u201d \u201cregulatory compliance,\u201d and \u201cregulatory  enforcement.\u201d We then identified the articles that were relevant to our  objectives based on the independent review of two team analysts. In  addition, we searched our own and selected federal Inspector General  websites for any reports relevant to our objectives. These searches were  not meant to be a comprehensive search of all available literature on the  topic, but rather conducted to identify relevant work to inform our  identification of key regulatory design and enforcement considerations for  decision makers.", "We developed a data collection instrument for each of the academic and  government literature search sources and our own reports. To analyze  and summarize the results of the academic literature search, two analysts  independently reviewed each relevant record in the search results to  document information that was relevant to our objectives and to identify  key themes to inform our key considerations. We reviewed all relevant  articles and reports and summarized information in the data collection  instrument that related to the following topics: regulatory design;  regulatory design principles; enforcement and compliance; enforcement  and compliance principles; regulatory or subject matter area; and general  observations that were relevant to the engagement\u2019s objectives. In  addition, we reviewed the annotated citations and references in selected  articles to identify additional articles to include in the literature review and  ensure that we were not omitting key literature related to regulatory  design and enforcement.", "After applying identified criteria\u2014including key practices and elements of  those practices\u2014to decision making about regulatory design and  compliance, we obtained input on those considerations with officials from  our selected agencies and with subject matter specialists. We initially  selected and interviewed relevant specialists based on the results of our  literature review (i.e., the authors of relevant articles or books included in  our review). Based on suggestions from those individuals, we expanded  our list of specialists and conducted a second round of interviews,  ultimately speaking with 14 specialists. These considerations were also  refined by the current practices and approaches of the selected agencies  we reviewed.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Heather Krause at (202) 512-6806 or krauseh@gao.gov."], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Tim Bober, Assistant Director, Alexandra Edwards, Danny Berg,  and Travis Hill. In addition, John Hussey, Timothy Guinane, Andrea  Levine, Kayla Robinson, Robert Robinson, and Cynthia Saunders  provided key assistance."], "subsections": []}]}], "fastfact": ["Federal agencies can design their regulations in many ways. For example, some regulatory designs establish an outcome but allow flexibility in how to achieve it, while others are more prescriptive and require certain technologies or actions.", "We looked at how some agencies choose among the regulatory designs and compliance and enforcement tools available to them, and how they evaluate those choices. We also identified key considerations and questions that can help decision makers identify, assess, and evaluate options when designing federal regulations and encouraging compliance."]}
{"id": "GAO-19-47", "url": "https://www.gao.gov/products/GAO-19-47", "title": "Renewable Fuel Standard: Information on Likely Program Effects on Gasoline Prices and Greenhouse Gas Emissions", "published_date": "2019-05-03T00:00:00", "released_date": "2019-06-03T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress established the RFS in 2005 and expanded it 2 years later. The RFS generally mandates that transportation fuels\u2014typically gasoline and diesel\u2014sold in the United States contain increasing amounts of biofuels. In addition, the RFS is designed to reduce greenhouse gas emissions by replacing petroleum-based fuels with biofuels expected to have lower associated greenhouse gas emissions. The most common biofuel currently produced in the United States is corn-starch ethanol, distilled from the sugars in corn. EPA uses RINs associated with biofuels blended with petroleum-based fuels to regulate compliance with the program.", "In 2014, GAO found that refiners' costs for complying with the RFS had increased, and in 2016, GAO found that greenhouse gas emissions are unlikely to be reduced to the extent anticipated because production of advanced biofuels\u2014which reduce greenhouse gas emissions more than corn-starch ethanol\u2014has not kept pace with the yearly increases or the target of 21 billion gallons by 2022 called for by the statute. GAO was asked to review additional issues related to the effects of the RFS.", "This report examines what is known about (1) the effect the RFS has had to date on retail gasoline prices in the United States and (2) the RFS's effect on greenhouse gas emissions and whether the RFS will meet its goals for reducing those emissions. The report also provides information about RINs.", "To address the likely effects of the RFS on gasoline prices, GAO reviewed studies and interviewed experts and industry stakeholders, and conducted a statistical analysis of state ethanol mandates that were similar to the mandates of the RFS. GAO selected the experts based on their published work and recognition in the professional community. GAO selected stakeholders representing a range of perspectives, including stakeholders from the renewable fuels, petroleum, and agricultural industries, as well as from environmental groups.", "Because the RFS was implemented on a nationwide basis at the same time that other factors, such as the global price of crude oil and domestic demand for retail gasoline, were affecting retail gasoline prices across the nation, it is not possible to directly isolate and measure the effect the RFS had on gasoline prices nationwide given data available to GAO. Instead GAO developed and extensively tested an econometric model that estimated the effects on retail gasoline prices of state ethanol mandates. These state mandates are similar to the RFS but were put in place voluntarily by states before the RFS led to widespread ethanol blending in every state. This model estimated how ethanol mandates affected gasoline prices in these five states. These estimates suggest the RFS likely had effects in states that did not have state-wide mandates. These states incrementally blended ethanol because of the increasing volumes of ethanol required to be blended nationally by the RFS.", "Regarding the RFS's effect on greenhouse gas emissions, GAO interviewed 13 experts in government and academia. GAO selected these experts based on their published work, prior GAO work, and recommendations from other experts.", "During the course of the work, GAO gathered information on the topic of RINs through interviews, a review of relevant literature, and prior GAO work.", "GAO makes no recommendations in this report. In commenting on a draft of this report, USDA disagreed with GAO's finding that the RFS has had a limited effect on greenhouse gas emissions, citing research on the effects of ethanol on reducing emissions generally. GAO reported on the specific effects of the RFS on emissions. USDA also criticized GAO's methodology using experts' views. GAO employed that method to reach consensus among those with a range of perspectives. DOE and EPA did not comment on the draft report."]}, {"section_title": "What GAO Found", "paragraphs": ["Effect on prices. Evidence from studies, interviews with experts, and GAO's analysis suggest that the nationwide Renewable Fuel Standard (RFS) was likely associated with modest gasoline price increases outside of the Midwest and that these price increases may have diminished over time. Variations in these gasoline price effects likely depended, in part, on state-by-state variation in the costs to transport and store ethanol. For example, the Midwest was already producing and blending ethanol when the RFS came into effect, so that region had lower transportation costs and had already invested in necessary storage infrastructure. Other regions began blending ethanol later to meet the RFS's requirements, thereby incurring new transportation and storage infrastructure costs that resulted in gasoline prices that were several cents per gallon higher than they otherwise would have been.", "In addition, experts told GAO that the RFS caused an initial increase in refining investment costs that, over the long term, reduced refining costs for gasoline. Specifically, once all locations had made the infrastructure investments and most gasoline blendstock produced was consistent with blending ethanol then there would be two continuing effects: (1) the transportation and blending costs of ethanol, which would tend to push retail prices higher and depend on the distance traveled and the modes of transport, and (2) the lower cost of producing lower octane blendstock. The former effect might dominate for locations far from the production source of ethanol and for which more costly modes of transport were used, while the lower blendstock costs might dominate for locations close to the production source of ethanol and/or those that have low transportation costs.", "GAO's analysis of the effect that state ethanol mandates had on gasoline prices also showed gasoline price effects that differed in the Midwest and elsewhere. Specifically, during the period GAO studied, when the ethanol mandates in Minnesota and Missouri were in effect, all else remaining equal, retail gasoline prices were lower by about 8 and 5 cents per gallon in these states, respectively, than they would have been without the mandates. In contrast, when the ethanol mandates in Hawaii, Oregon, and Washington were in effect, GAO's model showed that retail gasoline prices were higher by about 8, 2, and 6 cents per gallon, respectively, than they would have been without the ethanol mandates. These results suggest that the RFS likely had gasoline price effects in other states that did not have state-wide ethanol mandates but that incrementally began blending ethanol as a result of increasing RFS requirements that by around 2010 had led to almost all gasoline sold in the United States being blended with 10 percent ethanol.", "Effect on greenhouse gas emissions. Most of the experts GAO interviewed generally agreed that, to date, the RFS has likely had a limited effect, if any, on greenhouse gas emissions. According to the experts and GAO's prior work, the effect has likely been limited for reasons including: (1) the reliance of the RFS to date on conventional corn-starch ethanol, which has a smaller potential to reduce greenhouse gas emissions compared with advanced biofuels, and (2) that most corn-starch ethanol has been produced in plants exempt from emissions reduction requirements, likely limiting reductions early on when plants were less efficient than they are today.", "Further, the RFS is unlikely to meet the greenhouse gas emissions reduction goals envisioned for the program through 2022. Specifically, GAO reported in November 2016 that advanced biofuels, which achieve greater greenhouse gas reductions than conventional corn-starch ethanol, have been uneconomical to produce at the volumes required by the RFS statute so the Environmental Protection Agency (EPA) has waived most of these requirements (see figure).", "Renewable identification numbers. EPA uses renewable identification numbers (RINs) to regulate industry compliance with RFS requirements for blending biofuels into the nation's transportation fuel supply. In GAO's March 2014 report on petroleum refining, GAO noted that the RFS had increased compliance costs for the domestic petroleum refining industry or individual refiners. GAO reported that corn-based ethanol RIN prices had been low\u2014from 1 to 5 cents per gallon from 2006 through much of 2012\u2014but in 2013, RIN prices increased to over $1.40 per gallon in July before declining to about 20 cents per gallon as of mid-November 2013. Since the March 2014 report, corn-ethanol RIN prices have experienced more periods of volatility. Most experts and stakeholders GAO interviewed recently stated that RINs had either a small effect on prices or no effect on prices, though a few disagreed. Finally, GAO's past work, as well as EPA analysis, has identified several issues of concern with RINs, including possible fraud in the market and concerns about the effect on small refiners, price volatility, and the point of obligation."]}], "report": [{"section_title": "Letter", "paragraphs": ["As part of U.S. efforts to increase energy independence and security and  increase the production of clean, renewable fuels, Congress enacted the  Renewable Fuel Standard (RFS) as part of the Energy Policy Act of 2005  and 2 years later expanded it in the Energy Independence and Security  Act of 2007 (EISA). The RFS generally mandates that transportation  fuels\u2014typically gasoline and diesel\u2014sold in the United States contain  annually increasing amounts of biofuels\u2014fuels produced from renewable  sources such as agriculture, rather than through geological processes,  such as those involved in forming petroleum. The most common biofuel  currently produced in the United States is corn-starch ethanol, which is  distilled from the sugars in corn. The Environmental Protection Agency  (EPA), which is responsible for implementing the RFS, defines the goals  of the RFS as to (1) expand the nation\u2019s biofuel sector while reducing  reliance on imported oil and (2) reduce greenhouse gas emissions.", "The initial RFS required that a minimum of 4 billion gallons of biofuels be  blended into gasoline in 2006, rising to 7.5 billion gallons by 2012. EISA  expanded both the amounts of biofuels to be blended into gasoline and  the length of time during which those amounts are to increase,  establishing target volumes that rise from 9 billion gallons in 2008 to 36  billion gallons in 2022. In March 2014, we reported that domestic  consumption of petroleum products had fallen from 2005 through 2012,  resulting in a smaller domestic market for refined petroleum products and  an increased cost of RFS compliance for some refiners. In 2016, we  reported that the reductions in greenhouse gas emissions envisioned for  the program are unlikely to occur because production of advanced  biofuels\u2014which have a greater impact than corn-starch ethanol on  greenhouse gas emissions\u2014has not kept pace with statutory  requirements.", "EPA regulates compliance with the RFS using a tradable credit system.  Companies in the United States that refine or import transportation fuel  must submit credits\u2014called renewable identification numbers (RINs)\u2014to  EPA that equal the number of gallons of biofuel that the RFS requires  them to blend with the petroleum-based fuel. RINs may be used by the  company that generates them, may be sold to other companies, or  retained for future use.", "You asked us to review additional issues related to the effects of the RFS.  This report examines what is known about (1) the effect that the RFS has  had to date on retail gasoline prices in the United States and (2) the effect  that the RFS has had on greenhouse gas emissions, including whether  the RFS is expected to meet its goals for reducing those emissions. In  addition, we are providing information about RINs.", "To address our objectives, we reviewed relevant studies and conducted  semistructured interviews with 18 experts we identified through snowball  sampling based on expert referrals. Specifically, we identified experts  through a review of selected studies, references within the studies to  other relevant articles, prior GAO work that included discussions with a  panel convened by the National Academy of Sciences, and  recommendations from other experts identified through the studies.  Because so little empirical work has been conducted on the relationship  between prices and the RFS, especially work of a retrospective nature,  we selected some experts specifically because of the relevance of their  published work. We also selected experts who are recognized as experts  in the professional community or among their peers. In addition, we  selected individuals who have expertise or have published work relevant  to lifecycle assessment of greenhouse gas emissions of various biofuels,  or who have published work relevant to the effect of the RFS on  greenhouse gas emissions or biofuel production and use. Finally, to  obtain views from experts representing a range of perspectives, we  selected experts who represented various disciplines, including  economics, engineering, and physical sciences. Of the 18 experts we  interviewed, 7 discussed the effect that the RFS has had on retail  gasoline prices and 13 discussed the effect that the RFS has had on  greenhouse gas emissions, including 2 who also discussed the effect on  retail gasoline prices. The specific areas of expertise varied among the  experts we interviewed, so not all of the experts commented on all of our  interview topics. Appendix I includes the list of experts we interviewed  and identifies which experts we interviewed about which topics.", "We also interviewed representatives from various industry stakeholders  who have been affected by the RFS to obtain their views about how the  RFS has affected gasoline prices and greenhouse gas emissions. We  reviewed much of the literature on this subject, and used the literature,  along with referrals from other experts and recommendations from the  National Academy of Sciences for prior GAO work to identify stakeholders  to interview. We also employed snowball sampling by asking the officials  we interviewed to recommend others who have knowledge about the  effect of the RFS on gasoline prices and greenhouse gas emissions.  Industry stakeholders were selected based on the relevance of their  mission to biofuels and to the RFS. In considering industry stakeholders,  we selected those that would allow us to obtain a wide range of  perspectives on these issues. For example, we selected industry  stakeholders that represent the renewable fuels industry as well as those  that represent the petroleum industry. We also selected industry  stakeholders that represent the farmers who grow the agricultural  products frequently used for biofuels, and we selected those whose  primary focus is on the environment. The views of these stakeholders are  not generalizable to those we did not interview. A list of industry  stakeholders whose representatives we interviewed can be found in  appendix II.", "Because the RFS was implemented on a nationwide basis at the same  time that other factors, such as the global price of crude oil and domestic  demand for retail gasoline, were affecting retail gasoline prices across the  nation, it is not possible to directly isolate and measure the effect the RFS  had on gasoline prices nationwide given data available to us. Instead we  developed and extensively tested an econometric model that estimated  the effects on retail gasoline prices of state ethanol mandates that are  similar to the RFS but that states voluntarily put in place before the RFS  targets led to widespread ethanol blending in every state. This model  enabled us to estimate how ethanol mandates affected gasoline prices in  these five states, and these estimates allow us to infer the effects that the  RFS had in other states that did not have state-wide mandates but that  were incrementally forced to blend ethanol based on RFS requirements.  Specifically, the state-level analysis allowed us to isolate the effect of  ethanol mandates on retail gasoline prices in five states\u2014Hawaii,  Minnesota, Missouri, Oregon, and Washington\u2014by using other states to  control for other factors that influenced retail gasoline prices over  time. These state mandates were put into effect by 2008, at which time  the RFS was requiring relatively low levels of ethanol blending. In doing  this analysis, we used all the states identified as having met the criteria of  having state-wide ethanol blending mandates put into effect no later than  2008. Therefore, these state mandates likely accelerated ethanol  blending in those states during our study period. We conducted a  regression analysis using monthly average after-tax retail gasoline prices  from 49 states and the District of Columbia for 2001 through 2010.", "Our model required data on retail gasoline prices and biofuel policies, as  well as on other factors that might have affected gasoline prices, so that  we could control for these factors and isolate the effects of the state  ethanol mandates. We obtained the gasoline price data from the Oil Price  Information Service, a leading provider of retail fuel prices. We also  collected data from government agencies, including the Department of  Energy\u2019s Energy Information Administration, the Department of  Transportation\u2019s Federal Highway Administration, and the Nebraska  Energy Office.", "To assess the reliability of the data, we interviewed officials who maintain  the data, reviewed related academic studies, and tested the data for  missing or erroneous values. We found the data to be sufficiently reliable  for the purposes of our reporting objectives. We focused our analysis on  regular-grade gasoline, as it represented more than 80 percent of  gasoline sales in 2017. Appendix III provides a technical discussion of our  econometric model. We compared our results to expert views and related  peer-reviewed studies examining the effects of ethanol blending on fuel  prices. Also, to obtain additional information about the effect of the RFS  on gasoline prices, we interviewed officials from the Department of  Agriculture, the Department of Energy, and EPA; relevant experts as  described above; and relevant industry stakeholders as described above.", "To examine the effect of the RFS on greenhouse gas emissions, we  interviewed officials from the Department of Agriculture, the Department  of Energy, and EPA and asked them about the effect of the RFS on  emissions. We also interviewed relevant experts and industry stakeholder  representatives as described above about the effect of the RFS on  greenhouse gas emissions. The expert pool included researchers who  were well equipped to speak both to the impacts of RFS on corn prices  and agricultural commodities as well as how this then impacts land use  change and greenhouse gas emissions. This is because the RFS\u2019 effect  on gasoline prices and the effect on greenhouse gas emissions are not  distinct issues. In addition, during our interviews with experts, some  referred us to specific studies to illustrate a point, and we reference some  of these studies. We reviewed the methodology of those that we  reference and found them to be sufficiently sound.", "In the course of conducting our work to examine the effect that the RFS  has had to date on retail gasoline prices in the United States and  greenhouse gas emissions, we also collected information on the topic of  RINs. We gathered this information through interviews and a review of  relevant literature, and we supplemented it with information from our  previous work. We summarized how RINs are used to show compliance  with the RFS, historical RIN prices, how RINs affect retail fuel prices, and  steps EPA has taken to improve the functioning of the RIN market.", "We conducted this performance audit from January 2017 to May 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "RFS Greenhouse Gas Emissions Goals and Requirements", "paragraphs": ["EPA states that one goal of the RFS is to reduce greenhouse gas  emissions. Specifically, the RFS is designed to reduce these emissions  by increasingly replacing petroleum-based fuels with biofuels that have  lower associated greenhouse gas emissions released throughout their  lifecycle. Some of these greenhouse gas emissions are directly released  at each stage of a fuel\u2019s lifecycle, which, for biofuels, includes the  emissions associated with growing the feedstock, transporting it,  converting it to a biofuel, distributing the biofuel, and burning it in an  engine. Other emissions are released indirectly through broad economic  changes associated with increased biofuel use, such as changes in land  use.", "The lifecycle greenhouse gas emissions from biofuels cannot be directly  measured, so they are estimated using mathematical models that account  for greenhouse gas emissions at each stage of the lifecycle. These  models\u2014in particular, Argonne National Laboratory\u2019s Greenhouse Gases,  Regulated Emissions, and Energy Use in Transportation model\u2014have  been used by researchers for nearly 30 years. However, the complexity of  estimating the lifecycle emissions associated with biofuels and the  sensitivity of the models to assumptions limit the precision of the modeled  results.", "The RFS established statutory greenhouse gas reduction requirements  for specific types of biofuels. These types can be grouped into two broad  categories\u2014conventional biofuels and advanced biofuels\u2014defined by the  amount of reduction they are required by statute to achieve in lifecycle  greenhouse gas emissions relative to the 2005 emissions baseline for  gasoline or diesel.", "Conventional. Conventional biofuels from new facilities must achieve  greenhouse gas emissions at least 20 percent lower than traditional  petroleum-based fuels, which include gasoline and diesel. The  dominant conventional biofuel produced to date is corn-starch  ethanol.", "Advanced. Advanced biofuels must achieve lifecycle greenhouse gas  emissions at least 50 percent lower than traditional petroleum-based  fuels. Advanced biofuels may include a number of fuels, including  fuels made from algae or sugar cane, but the category excludes  ethanol derived from corn starch. This category includes the following  subcategories:", "Biomass-based diesel: biodiesel or renewable diesel that has  lifecycle greenhouse gas emissions at least 50 percent lower than  traditional petroleum-based diesel fuels.", "Cellulosic: renewable fuel derived from any cellulose,  hemicellulose, or lignin that is derived from renewable biomass  and has lifecycle greenhouse gas emissions at least 60 percent  lower than traditional petroleum-based fuels."], "subsections": []}, {"section_title": "Types and Volumes of Biofuels to Be Blended under the RFS", "paragraphs": ["The RFS established statutory requirements for the amount of biofuels  that must be blended into gasoline. These amounts increase from 9 billion  gallons in 2008 to 36 billion gallons in 2022. The RFS sets statutory  volume requirements for each type of biofuel based on the categories  described above, but EPA can waive those requirements and establish its  own, if warranted. From 2010 through 2013, EPA used its waiver  authority each year to reduce the volume requirement for cellulosic  biofuel while keeping the total volume requirement for all biofuels at the  statutory level. Starting in 2014, EPA set lower volume requirements for  all advanced biofuels and lower total biofuel blending requirements. EPA  cited, among other things, inadequate domestic supply as a reason for  the waivers. Since 2014, the gap between RFS requirements for  advanced biofuels and EPA requirements after waivers were issued has  increased. Figure 1 compares RFS statutory volumes for various types of  biofuels with volumes that EPA established using the waiver authority.", "In 2018, the biofuel used most often to comply with the RFS has been  conventional ethanol derived from corn starch. As we reported in 2016,  production of cellulosic and other advanced biofuels has not progressed  as initially expected under the RFS. Although, as we reported, advanced  biofuels are technologically well understood, current production is far  below the volume needed to meet the statutory targets for these fuels.  For example, the cellulosic biofuel blended into transportation fuel in 2015  was less than 5 percent of the statutory target of 3 billion gallons. Given  current production levels, most experts we interviewed told us that  advanced biofuel production cannot achieve the statutory targets of 21  billion gallons by 2022.", "The shortfall of advanced biofuels is the result of high production costs,  despite years of federal and private research and development (R&D)  efforts. The federal government has supported R&D related to advanced  biofuels through direct research and grants in recent years, with the focus  of this R&D shifting away from cellulosic ethanol, an advanced biofuel  that is not fully compatible with current vehicle engines and fuel  distribution infrastructure, and toward other biofuels that are compatible  with this infrastructure."], "subsections": []}, {"section_title": "Ethanol as a Fuel Additive", "paragraphs": ["Even before the establishment of the RFS, ethanol was used as an  additive in gasoline. It serves as an oxygenate, to prevent air pollution  from carbon monoxide and ozone; as an octane booster, to prevent early  ignition, or \u201cengine knock;\u201d and as an extender of gasoline stocks. In  purer forms, it can also be used as an alternative to gasoline in  automobiles specially designed for its use. Approximately 99 percent of  blended gasoline consumed in the United States is \u201cE10\u201d\u2014a blend of  gasoline with up to 10 percent ethanol.", "The use of ethanol as an oxygenate is linked to the demise of a  petroleum derivative known as methyl tertiary butyl ether, or MTBE.  MTBE had been used as an octane booster since the late 1970s, and  was used in later years to fulfill the oxygenate requirements set by  Congress in the 1990 Clean Air Act amendments. According to a report  by the Congressional Research Service, MTBE contaminated drinking  water, and about half of the states passed legislation to ban or restrict its  use. Although MTBE was not restricted by federal law, gasoline refiners  sought a substitute because of concerns over potential liability. To  replace MTBE, refiners switched to ethanol.", "Congressional Research Service, MTBE in Gasoline: Clean Air and Drinking Water  Issues (updated Apr. 14, 2006)."], "subsections": []}, {"section_title": "State Ethanol Mandates", "paragraphs": ["Five states passed and put into effect ethanol mandates similar to the  RFS\u2014Hawaii, Minnesota, Missouri, Oregon, and Washington. In  Minnesota, Missouri, and Oregon these mandates required 10 percent of  blended gasoline to be ethanol, while Washington required 2 percent  ethanol in gasoline and Hawaii required that 85 percent of fuel sold in the  state must contain 10 percent ethanol. Minnesota was the first to put an  ethanol mandate into effect\u2014in May 2003. Hawaii followed with an  effective date of April 2006. The Missouri, Oregon, and Washington  mandates were put into effect in 2008. Louisiana, Montana, and  Pennsylvania also passed laws requiring ethanol blending mandates, but  these mandates have not gone into effect because in-state ethanol  production volumes have not reached levels required to trigger them."], "subsections": []}, {"section_title": "Tax Credits", "paragraphs": ["The federal government has supported the development of a domestic  biofuels industry not only through the RFS but also through tax credits.  The Energy Tax Act of 1978, among other things, provided tax incentives  designed to stimulate the production of ethanol for blending with gasoline.  These blending incentives were restructured as part of the Volumetric  Ethanol Excise Tax Credit (VEETC) in 2004. In 2009, we found that the  VEETC and the RFS may have been duplicative with respect to their  effects on ethanol consumption. We and others found that the VEETC  was no longer stimulating additional ethanol consumption. The blending  incentives in the VEETC expired in December 2011.", "There are also federal tax incentives to promote the production and use  of advanced biofuels. These include the Biodiesel Income Tax Credit,  which provides a $1 per-gallon tax credit for producers of certain forms of  biodiesel or renewable diesel. Separately, the Second Generation  Biofuel Producer Tax Credit provided advanced biofuel producers a tax  credit of up to $1.01 per gallon of advanced biofuel produced and used  domestically."], "subsections": []}]}, {"section_title": "Available Evidence and Analysis Indicate That the RFS Was Likely Associated with Modest Gasoline Price Increases outside the Midwest and Modest Decreases within the Midwest", "paragraphs": ["Evidence from studies, interviews with experts, and our analysis suggest  that the nationwide RFS was likely associated with modest price  increases outside of the Midwest. Likely variations in these gasoline price  effects depended, in part, on state-by-state variation in the costs to  transport and store ethanol. For example, the Midwest was already  producing and blending ethanol, so it had lower transportation costs and  had already built necessary storage infrastructure. Other regions began  blending ethanol later as rising volumes of ethanol required under the  RFS forced more ethanol into the system and as states began blending  ethanol. These states incurred new transportation and storage  infrastructure costs, which likely resulted in higher gasoline prices  compared to those in the Midwest states or states that had not yet begun  to blend ethanol. Overall, it is likely that as the expanded blending  requirements of the RFS caused non-Midwestern states and localities to  begin blending ethanol, these states and localities experienced increased  gasoline prices of a few cents per gallon compared to what they  otherwise would have been."], "subsections": [{"section_title": "Experts, Stakeholders, and Studies Indicate that the RFS Likely Caused Changes in Retail Gasoline Prices that Varied by Region", "paragraphs": ["According to the experts we interviewed as well as the studies we  reviewed, the RFS likely caused small changes in retail gasoline prices  that varied by region. The experts, stakeholders, and studies identified  two main ways in which the RFS may have affected prices. Specifically,  the RFS may have (1) increased transportation and storage costs in  regions outside the Midwest, and, (2) caused an initial increase in refining  investment costs that over the long term reduced refining costs for  gasoline."], "subsections": [{"section_title": "Transportation and Storage Costs", "paragraphs": ["The RFS may have affected retail gasoline prices by increasing  transportation costs in certain regions. Retail gasoline consists of two  components\u2014ethanol and blendstock, which is the petroleum-based  gasoline that ethanol is blended with to make retail gasoline. Currently,  blendstock and ethanol are typically transported in different ways.  Blendstock can be shipped via pipeline, which is the most cost-efficient  method of transporting fuel. However, ethanol is more corrosive and  cannot be shipped in pipelines currently used for blendstock; as a result,  it must be transported using costlier methods, such as rail, barge, and  tanker truck.", "Ethanol is produced primarily in the Midwest, where most corn is  produced. According to the studies we reviewed, this means that Midwest  gasoline retailers, being closer to the supply of ethanol, may have been  able to charge consumers lower prices for retail gasoline relative to non- Midwest gasoline retailers because of their lower transportation costs for  ethanol. Similarly, higher transportation costs outside of the Midwest may  have resulted in higher prices of retail gasoline in those regions. Figure 2  illustrates U.S. ethanol production in 2005, before the RFS became  effective.", "In addition, the RFS may also have affected retail gasoline prices by  increasing storage costs in certain regions. Because ethanol is more  corrosive than blendstock, it must be stored differently. According to one  study we reviewed, ethanol was being blended into gasoline in many  locations in the Midwest prior to the establishment of the RFS. As a  result, the Midwest already had the infrastructure needed to store ethanol.  According to another study, in some places outside of the Midwest  ethanol was typically not being blended into gasoline prior to the  establishment of the RFS, and therefore costly infrastructure changes,  such as installing different seals and gaskets in tanks, were needed so  that retailers could store blended gasoline. For example, the California  Energy Commission estimated the costs of such infrastructure changes to  be approximately $60 million in California. Unlike transportation costs, the  costs of infrastructure changes were incurred just once, according to  industry stakeholders we interviewed; therefore the effect of such costs  on retail prices would be expected to have diminished over time."], "subsections": []}, {"section_title": "Production Costs", "paragraphs": ["The cost of producing retail gasoline depends in part on the costs of its  two components. The RFS may have affected the costs of blendstock and  ethanol in various ways, and according to the experts we interviewed,  past GAO work, and the studies we reviewed, these costs may have  contributed to changes in gasoline prices.", "Blendstock. The RFS may have initially increased both refiners\u2019  costs to produce blendstock compatible with ethanol blending and the  costs of shipping and storing such blendstock; however, these costs  may have decreased over time. More specifically, the RFS may have  initially increased refiners\u2019 costs because refiners had to change their  configuration to produce a lower octane blendstock to accommodate  ethanol blending. Many experts we interviewed stated that producing  blendstock with a lower octane level required costly changes to  refinery infrastructure and processes. However, according to these  experts and stakeholders, since ethanol is relatively high in octane,  blending ethanol into retail gasoline allows refiners to produce  blendstock with a lower octane level. As a result, according to many of  the experts we interviewed, after the initial investment by refineries to  switch to the lower octane blendstock, refiners could produce that  blendstock at lower cost. This would have led to higher initial costs but  lower long-term costs once infrastructure costs had been capitalized.", "The higher initial cost is consistent with our past work in which we  noted that shipping more types of blendstocks\u2014the result of a  proliferation of blendstocks adopted by states and localities to meet  Clean Air Act standards\u2014increases the costs of shipping and storing  blendstocks at terminals for distribution to retail sellers. As a result,  according to one expert familiar with our past work, as ethanol  blending spread further and further away from the production center in  the Midwest states, there were more types of blendstocks in the  pipeline and storage terminals, which would have increased costs.  This expert said that over the longer run and once ethanol blending  had expanded to encompass the majority of gasoline sold in the  United States, this effect would have disappeared because virtually all  the blendstock flowing through the pipeline and storage system would  be compatible with blending ethanol.", "Ethanol. It is unclear whether the RFS increased or decreased the  cost of ethanol. One source we reviewed indicated that the RFS may  have increased the cost of ethanol by increasing demand for corn,  which would drive up the price of corn. On the other hand, one  expert we spoke to stated that the RFS may have decreased the cost  of ethanol in the long term by providing incentives for producers to  invest in more efficient ethanol production processes, which would  lower production costs over time.", "However, it is unclear what the longer-term effects of ethanol blending on  gasoline prices have been. We believe this is because once all locations  had made the infrastructure investments and most gasoline blendstock  produced was consistent with blending ethanol then there would be two  continuing effects: (1) the transportation and blending costs of ethanol,  which would tend to push retail prices higher and depend on the distance  traveled and the modes of transport, and (2) the lower cost of producing  lower octane blendstock. The former effect might dominate for locations  far from the production source of ethanol and for which more costly  modes of transport were used while the lower blendstock costs might  dominate for locations close to the production source of ethanol, those  that have low transportation costs, or both. However, the data available to  us do not allow us to test this long-term effect."], "subsections": []}]}, {"section_title": "Our Analysis of State Ethanol Mandates Also Found Gasoline Price Decreases in the Midwest and Increases Elsewhere", "paragraphs": ["We studied the effects of ethanol blending mandates in the five states  that had such mandates prior to and including 2008; these mandates are  similar to but preceded the RFS ethanol blending mandates on retail  gasoline prices. We found that these state mandates were associated  with gasoline price decreases in the two Midwestern states we evaluated  and price increases in three non-Midwestern states. Specifically, during  the period we studied, when the ethanol mandates in Minnesota and  Missouri were in effect, our model estimates that, all else remaining  equal, retail gasoline prices were lower by approximately 8 and 5 cents  per gallon in these states, respectively, than they would have been  without the mandates. By contrast, when the ethanol mandates in Hawaii,  Oregon, and Washington were in effect, our model estimates that, all else  remaining equal, retail gasoline prices were higher by approximately 8, 2,  and 6 cents per gallon in these states, respectively, than they would have  been without the mandates. These results are consistent with what  other studies and experts found about the effects of blending ethanol with  gasoline.", "Our model provides an indicator of the types of effects that the RFS likely  had on retail gasoline prices as the increasing ethanol blending targets of  the RFS began to push ethanol into more gasoline markets. Specifically,  we can infer from the model that the RFS was associated with a modest  gasoline price decrease in Midwest states. According to one expert  familiar with our analysis and with the blendstock pipeline and storage  system, expanding the volumes of lower octane feedstocks to the  Midwest states would have the effect of reducing refining production costs  because refiners serving the Midwest could do larger runs of lower octane  blendstock and therefore benefit from economies of scale in refining runs.  In addition, this would also have the effect of reducing pipeline and  storage costs for blendstocks because larger volumes of lower octane  blendstock could be shipped northward from the refining center in the  Gulf of Mexico states to the Midwest. Larger volumes of uniform blendstock during pipeline shipping reduce costs compared to smaller  shipments because different blendstocks intermix at the point they  interface in a pipeline, and these mixed blendstocks either have to be  downgraded and sold for less or pulled out entirely and re-refined to meet  existing fuel standards. Conversely, we can infer from the model that  the RFS was associated with modest gasoline price increases in states  further from the Midwest producers as increasing ethanol targets caused  those states to begin blending ethanol for the first time and for which  more refining capacity had to convert to produce lower octane feedstock  and ship it to more locations, thereby initially raising refining, pipeline, and  storage costs as discussed previously in this report.", "The results of our analysis are also generally consistent with other work  that examined the effects of different state ethanol-blending requirements  on gasoline prices. For example, some states and localities started  blending ethanol before the RFS made it effectively mandatory when  these states and localities banned MTBE, an additive that increased the  oxygen content of the fuel. When MTBE was banned, ethanol was  typically added in its place. The one peer-reviewed study we identified  that estimated the effects of the MTBE ban on gasoline prices found that  in locations required to blend ethanol because of state MTBE bans, retail  gasoline prices increased by 3 to 6 cents per gallon in non-Midwestern  states, with larger price increases during times of high ethanol prices  relative to crude oil prices. This study also found that retail gasoline prices  in the Midwest may not have changed.", "While our own analysis, other studies we reviewed, and experts we spoke  to cannot estimate precise price effects of the RFS on retail gasoline, we  believe that collectively the evidence points to likely effects that varied by  geographic region and that as RFS blending requirements rose and more  and more non-Midwestern states and localities adopted ethanol blending,  it is likely they saw modest increases in retail gasoline prices on the order  of several cents per gallon. Conversely, as more and more states and  localities blended ethanol and more refiners began producing larger runs  of lower octane blendstock, the costs of acquiring this blendstock likely  fell, and because Midwestern states had very low transportation costs for  ethanol, their gasoline prices likely fell."], "subsections": []}]}, {"section_title": "The RFS Has Likely Had a Limited Effect on Greenhouse Gas Emissions to Date and Is Unlikely to Meet Its Future Greenhouse Gas Emissions Reduction Goals", "paragraphs": ["Most of the experts we interviewed generally agreed that to date the RFS  has likely had a limited effect, if any, on greenhouse gas emissions.  Further, the RFS is unlikely to meet the greenhouse gas emissions  reduction goals envisioned for the program through 2022. Regarding the  RFS and greenhouse gas emissions to date, experts noted that the effect  has been difficult to assess precisely and we found disagreement among  some experts about whether the effect has been positive or negative.  However, most experts agreed that the effect\u2014whether an increase or  decrease\u2014has likely been limited. Regarding meeting RFS greenhouse  gas emission reduction goals through 2022, as we reported previously,  although advanced biofuels, such as cellulosic ethanol, achieve greater  greenhouse gas reductions than conventional biofuels, such as corn- starch ethanol, the latter are likely to continue to account for most of the  biofuel blended into domestic transportation fuels under the RFS because  they are economical to produce while most advanced biofuels are not."], "subsections": [{"section_title": "The Experts We Spoke with Generally Believe the Effect of the RFS on Greenhouse Gas Emissions Has Likely Been Limited to Date", "paragraphs": ["Of the 13 experts we interviewed, 10 generally agreed that the RFS has  likely had a limited effect, if any, on greenhouse gas emissions to date.  However, these experts said that the effect is difficult to assess precisely,  and they disagreed on whether the limited effect has been positive or  negative. Specifically, the experts commenting on the topic were roughly  evenly split between increases or decreases in greenhouse gas  emissions, with some saying there were negligible effects. Experts we  interviewed said that the effect that the RFS has had on greenhouse gas  emissions is difficult to assess precisely because it involves complex  factors that are challenging to quantify, including the lifecycle emissions  associated with biofuel use.", "The RFS\u2019s reliance on corn-starch ethanol to fill biofuel mandates has  limited the ability of the RFS to reduce greenhouse gas emissions.  Specifically, as we reported in November 2016, most of the biofuel  blended to date has been conventional corn-starch ethanol, which has a  smaller potential to achieve greenhouse gas reductions compared with  advanced biofuels. Because of this, several experts we interviewed for  the November 2016 report raised concerns about the extent to which the  RFS has achieved its design of reducing greenhouse gas emissions.", "Furthermore, because the RFS has not been responsible for all of the  ethanol used in the United States since the program took effect, not all  greenhouse gas reductions associated with ethanol use have been the  result of the RFS. More specifically, most experts agreed that ethanol use  was historically driven, in part, by favorable market conditions and other  policies, including state biofuel mandates, ethanol tax credits, and the  phaseout of MTBE as an oxygenate for gasoline. Most experts we  interviewed said they believed that the RFS had some effect on biofuel  production by creating a guaranteed market for biofuels. Although  experts\u2019 views differed on the amount of ethanol that would have been  produced without the RFS, most of them said that ethanol production  capacity would likely be lower today if the RFS had not helped to  establish markets. For example, four experts and one industry  stakeholder representative that we interviewed hypothesized that if the  RFS were repealed, refiners would continue to blend ethanol into fuel,  although two experts and one stakeholder representative acknowledged  that less ethanol would probably be blended without the RFS. In contrast,  one expert indicated that the RFS provides a safety net for the ethanol  industry but that this safety net may not be needed anymore.", "In addition, according to EPA officials, the vast majority of the corn-starch  ethanol used to date has been produced by so-called grandfathered  plants\u2014plants in operation or under construction before a certain date\u2014 that have been exempt from RFS emissions reductions requirements.  The grandfathered plants have likely limited the ability of the RFS to  achieve greenhouse gas emissions reductions, but this effect has likely  changed over time. Early on, when a higher percentage of grandfathered  ethanol plants used coal as an energy source and had older technologies,  EPA estimates indicated that ethanol from such plants produced more  greenhouse gas emissions than petroleum-based gasoline. However,  most of the experts we interviewed told us that over time grandfathered  plants have upgraded technology to remain economically competitive and  have converted to natural gas as an energy source, resulting in industry- wide efficiency improvements that reduce greenhouse gas emissions.  These experts indicated that such upgraded plants do not likely have  significantly different emissions than the newer plants subject to RFS  emissions reductions requirements. Little quantitative information is  available to compare the difference between greenhouse gas emissions  associated with grandfathered plants and those associated newer plants.", "Finally, experts we interviewed disagreed on whether ethanol produced  today generally complies with the RFS statutory requirement to reduce  lifecycle greenhouse gas emissions by 20 percent relative to those of  petroleum-based gasoline, which affects the extent to which the RFS has  influenced greenhouse gas emissions. Of the 11 experts commenting on  the topic, approximately half said that ethanol produced today likely met  the 20 percent RFS greenhouse gas reduction requirement. Most of these  experts pointed to recent lifecycle analysis studies. Recent studies have  found that, relative to petroleum-based gasoline, corn-starch ethanol  could reduce lifecycle emissions by 19 to 48 percent. While there are  limitations and uncertainty associated with all lifecycle analyses, most  experts we interviewed said that the models used for lifecycle analyses  have improved over time and can provide reasonably accurate estimates  of certain components of direct lifecycle greenhouse gas emissions, such  as emissions associated with the energy used for farming and for  producing the biofuel in a plant.", "Of the roughly half of experts who said that corn-starch ethanol likely  does not meet the RFS greenhouse gas reduction requirements, almost  all pointed to the potential for indirect emissions associated with biofuel  production and use. Indirect emissions are complex to estimate and a  source of uncertainty in lifecycle estimates, but including them could  offset emissions reductions. These indirect emissions can be produced as  the result of broad economic changes associated with increased biofuel  use, including the following:  Indirect land use change. Indirect land use change occurs when  using agricultural land to grow biofuel feedstocks causes the  conversion of previously nonagricultural lands in the United States  and elsewhere in the world to maintain world agricultural production of  food, feed, and fiber.", "Fuel market effects. Though difficult to quantify, expanded biofuel  use may lead to an unintended increase in the global use of  transportation fuel and more greenhouse gas emissions, according to  most of the experts saying that corn-starch ethanol does not meet  greenhouse gas reduction requirements. For example, increasing  biofuel use in one part of the world could increase the relative supply  of petroleum in other parts of the world, thereby lowering petroleum  prices and increasing use of petroleum products there."], "subsections": []}, {"section_title": "We Previously Reported That Limited Production of Advanced Biofuels Makes the RFS Unlikely to Meet Its Greenhouse Gas Reduction Goals", "paragraphs": ["In November 2016 we reported that, with the exception of biomass-based  diesel, production of advanced biofuels was far below the volume needed  to meet the statutory targets for these fuels (see fig. 3). For example, we  reported that the cellulosic biofuel blended into transportation fuel in 2015  was less than 5 percent of the statutory target of 3 billion gallons. We  found in another November 2016 report that the shortfall was the result of  high production costs, despite years of federal and private R&D efforts.  With regard to future advanced biofuel production, most experts we  interviewed for the November 2016 report told us that such production  cannot achieve the statutory targets of 21 billion gallons by 2022 because  the investments and development required to make these fuels more  cost-effective, even in the longer run, were unlikely in the investment  climate at the time. Factors affecting this included the magnitude of  investment and the expected long time frames required to make  advanced biofuels cost competitive with petroleum-based fuels.  Because the bulk of greenhouse gas emissions reductions were to come  from such advanced biofuels, the expected emissions reductions have  also not occurred."], "subsections": []}]}, {"section_title": "Historical Prices of RINs, Concerns regarding Their Effects on Fuel Prices, and EPA\u2019s Actions to Mitigate These Concerns", "paragraphs": ["As mentioned previously, EPA uses RINs to regulate compliance with the  RFS. Refiners or importers of transportation fuel in the United States are  known as \u201cobligated parties\u201d and must submit RINs to EPA. The number  of RINs that an obligated party must submit to EPA is proportional to the  volume of gasoline and diesel fuel that it produces or imports and  depends on the volumes of biofuel that must be blended with  transportation fuels during the following calendar year as set by EPA. In  accordance with EPA guidelines, a biofuel producer or importer assigns a  unique RIN to a gallon of biofuel at the point of production or importation.  When biofuels change ownership (e.g., are sold by a producer to a  blender), the RINs generally transfer with the fuels.", "When a gallon of biofuel is blended or supplied for retail sale, the RIN is  separated from the fuel and may be used by the obligated party to  demonstrate compliance with the RFS or may be traded, sold, or held for  use in the following year. Some vertically integrated refiners own blending  operations, so they generate RINs that they can use to demonstrate  compliance because they also blend their own fuel. Other refiners do not  blend their own fuel and must purchase RINs to demonstrate compliance.  The latter are called merchant refiners. Since biofuels supply and demand  can vary over time and across regions, a market has developed for  trading RINs. If a supplier has already met its required share and has  supplied surplus biofuels for a particular biofuel category, it can sell the  extra RINs to another entity or it can hold on to the RINs for future use.  An obligated party that faces a RIN deficit can purchase RINs to meet its  obligation."], "subsections": [{"section_title": "Historical RIN Prices", "paragraphs": ["In our March 2014 report on petroleum refining, we noted that the RFS  had increased compliance costs for the domestic petroleum refining  industry or individual refiners. We reported that, according to the U.S.  Energy Information Administration, corn-based ethanol RIN prices were  low\u2014from 1 to 5 cents per gallon from 2006 through much of 2012\u2014 because it was generally economical to blend up to or above the level  that the RFS required. However, in 2013, prices for these RINs increased  to over $1.40 per gallon in July before declining to about 20 cents per  gallon as of mid-November.", "Several stakeholders told us at the time that this increase in RIN prices  was primarily due to RFS requirements exceeding the capability of the  transportation fuel infrastructure to distribute and the fleet of vehicles to  use biofuels, a situation referred to as the blend wall. EPA officials told us  at the time that high corn prices, which made ethanol more expensive  relative to gasoline, also contributed to higher RIN prices during this  period. A refiner we spoke with at the time attributed the decline in RIN  prices in the second half of 2013 to EPA\u2019s statements expressing its  desire to address the blend wall. In our report, we noted that while the  RFS applies to all refiners in the same way, the effect of the rise in RIN  prices may depend on each refiner\u2019s situation. Figure 4 shows historical  RIN prices for conventional, advanced, and biodiesel RINs.", "Since our March 2014 report, corn-starch ethanol RIN prices have  experienced periods of volatility. One expert stated that this is because  ethanol prices have become tied with biodiesel prices since the RFS has  required levels above the 10 percent blend wall. EPA officials agreed that  once the 10 percent blend wall was reached, ethanol RIN prices have  often risen to the price of biodiesel RIN prices. More specifically, biodiesel  RIN prices are strongly affected by expectations about whether the  biodiesel tax credit will be allowed to expire, which has often happened.  In fact, EPA has at times explicitly taken the existence of the biodiesel tax  credit into account when making rulings related to the RFS. As a result,  both biodiesel RIN prices and ethanol RIN prices experience volatility. In  general, ethanol RIN prices have closely tracked biodiesel RIN prices for  the last 5 years.", "As we noted in our March 2014 report on petroleum refining, prices for  RINs reflect several factors, including the cost of renewable fuels  compared with the petroleum fuels they displace and the stringency of  annual blending requirements. One expert we spoke with during the  course of the audit work for this report stated that uncertainty about the  future of the RFS has also affected RIN prices."], "subsections": []}, {"section_title": "Effect of RINs on Retail Fuel Prices", "paragraphs": ["Three experts and three industry stakeholders we interviewed spoke  directly about the effect of RINs on retail fuel prices. All three experts  stated that if RINs have any effect on prices it is small, while two of those  experts also asserted that it was possible that RINs had no effect on  prices at all. These experts argued that in a perfectly competitive fuel  market, the blendstock refiners increase the price of blendstock because  they know that they will need to pay for the RINs. At the same time, the  retail gasoline blenders are able to save costs related to ethanol because  of the value they receive for selling the RINs. In practice, according to  experts, the market may not be perfectly competitive, so it is possible that  RINs add from 1 to 10 cents to the retail price of gasoline in some parts of  the country. One industry stakeholder also expressed the opinion that  RINs would have little to no effect on retail gasoline prices, citing the  same argument.", "Two industry stakeholders indicated that RINs would increase retail  gasoline prices, although they did not specify by how much. These  stakeholders argued that RINs represent the cost of producing retail  gasoline; because ethanol has historically had a higher cost per mile than  gasoline (though not per gallon), the RINs would represent this increased  cost and would be reflected in retail gasoline prices. An EPA analysis  found that RIN prices did not have a significant impact on retail fuel prices  and concluded that any expected impact would be very small. For retail  gasoline, EPA made the same argument as experts and stakeholders  cited above."], "subsections": []}, {"section_title": "Problems Identified with the RIN Market and Steps Taken by EPA to Address These Problems", "paragraphs": ["Although oil refineries and importers are the entities that are obligated to  demonstrate compliance with the RFS, not all of them produce blended  fuels. Thus, these entities cannot earn RINs themselves and need to  purchase them on the RIN market. Our past work, as well as EPA  analysis, has identified several issues of concern with RINs, including  possible fraud in the market and concerns about the effect on small  refiners, price volatility, and the point of obligation.", "Fraudulent RINs. As we reported in our November 2016 report on  the RFS, some experts we spoke with at the time identified reducing  RIN fraud and price volatility as a federal action that could  incrementally encourage investment in advanced biofuels.  Specifically, these experts said that a lack of transparency in the RIN  trading market has led to an increased risk of fraud and increased  volatility of RIN prices. Because RINs are essentially numbers in a  computerized account, there have been opportunities for fraud, such  as double counting RINs or generating RINs for biofuels that do not  exist. For example, in our March 2014 report on petroleum refining  we reported that EPA had issued several notices of violation alleging  that five companies generated invalid RINs without producing  qualifying renewable fuels. EPA officials told us that, since that time,  EPA has made additional notices of violation, although many pertain  to actions taken prior to March 2014.", "Since the start of the RFS, EPA has alleged that approximately  382,524,480 RINs are invalid. Furthermore, obligated parties that  inadvertently purchase fraudulent RINs lose the money spent to  purchase them, must purchase additional RINs to meet their  obligations, and face additional costs. This has a disproportionate  effect on small refiners, according to our November 2016 report.  Whereas large obligated parties\u2014in particular, vertically integrated  refiners that typically own blending operations\u2014can generate RINs by  blending fuel, small refiners do not blend fuel, must purchase their  RINs on the market to meet their obligations, and are therefore more  likely to be adversely affected by fraudulent RINs.", "To address concerns over these issues, EPA established an in-house  trading system called the EPA Moderated Transaction System  (EMTS). EPA officials believe that this system provides significant  capabilities over prior reporting tools used to implement the RFS,  allowing enforcement to more quickly identify potential RFS violations  versus entry errors that were common with pre-EMTS RFS reporting.  EPA officials also informed us of a voluntary quality assurance  program intended to provide obligated parties a program to ensure  that RINs entering commerce are valid. However, EPA has  maintained that verifying the authenticity of RINs is the duty of  obligated parties.", "Distribution of compliance costs. In our March 2014 report on  petroleum refining, we reported that, according to EPA, refiners  experience the same compliance costs regardless of whether they are  vertically integrated refiners or merchant refiners that purchase RINs  for compliance. However, we also reported that the views of several  stakeholders differed from EPA\u2019s. In that regard, in a 2011 study, the  Department of Energy reported that the degree to which a small  refiner can actively blend refinery production with biofuels could  contribute greatly to the economic hardship incurred from complying  with the RFS. We noted that, while the RFS applies to all refiners in  the same way, effects of rising or falling RIN prices may vary  depending on each refiner\u2019s situation. According to several  stakeholders we interviewed at the time, RFS compliance had been  most difficult for merchant refiners, because they did not blend their  own fuel and had to purchase RINs from others, increasing their costs  of compliance.", "Price volatility. Similarly, according to the experts we interviewed for  our November 2016 report on the RFS, price volatility in RIN  markets had adversely affected small refiners in particular and led to  uncertainty among investors. While most RINs are bought and sold  through private contracts registered with the EMTS, as we mentioned  previously, RINs are also traded in markets. Some experts that we  interviewed for the November 2016 report told us that price volatility  may have been due, in part, to nonobligated parties speculating in  these markets. Such price fluctuations introduced uncertainty for small  refiners about the costs of compliance with the RFS because they had  to purchase their RINs on the market.", "Placement of the point of obligation. In our November 2016 report  on the RFS, we reported that according to some experts, blenders  should be the obligated parties instead of importers and refiners.  According to some of these experts, when EPA designed the RFS, it  placed the obligation for compliance on the relatively small number of  refiners and importers rather than on the relatively large number of  downstream blenders in order to minimize the number of obligated  parties to be regulated and make the program easier to administer.", "However, these experts told us that obligating refiners and importers  has not worked to incentivize investors to expand infrastructure to  accommodate higher ethanol blends. One expert we spoke with  stated that because blenders are either retailers or sell to retailers,  blenders would be better situated to pass RIN savings along to  consumers. This in turn might encourage demand for higher ethanol  blends and incentivize infrastructure expansion. Some experts told us  at the time that EPA should make RIN market trading more open and  transparent like other commodity markets, which could reduce the  potential for fraudulent RIN activities and reduce RIN price volatility.", "EPA has taken some actions to address these issues. Specifically, EPA  officials we interviewed for this report told us that EPA publishes a variety  of aggregated information on its website each month to promote market  transparency, including RIN generation and use, available RINs, RIN  prices and trade volumes, RIN holdings, and small refinery exemption  information. According to these officials, EPA also requires all RIN trades  to be entered into EMTS from both the buy and sell sides, and only  finalizes a transaction in the system if the buy and sell sides match. EPA  officials said that transparency of aggregated RIN data helps the market  function more efficiently and minimizes price volatility; however, they  acknowledged that many factors contribute to RIN prices and RIN price  changes, and it is impossible to attribute such changes to any single  factor. Furthermore, according to EPA officials, the memorandum of  understanding on RIN market manipulation that EPA has entered into  with the Commodity Futures Trading Commission will also help make RIN  markets more open and transparent. Finally, EPA officials stated that in  response to a recent White House direction, EPA is currently drafting a  regulatory proposal to implement market reforms and additional  transparency measures to prevent price manipulation in the RIN market.", "According to EPA officials we interviewed for this report, EPA received  several petitions requesting that it consider changing the point of  obligation from refiners and fuel importers to fuel blenders. In November  2017, EPA denied the petitioners\u2019 request. In the denial, EPA said that it  does not expect a benefit of increased use of biofuels as a result of  changing the point of obligation. Furthermore, it is EPA\u2019s position that  changing the point of obligation could increase the complexity of the RFS  program and would likely disrupt both the RFS program and the fuels  market.", "By law, small refineries were exempted from the RFS through compliance  year 2010, and 24 small refineries were granted an exemption for  compliance years 2011 and 2012. Beginning with the 2013 compliance  year, small refineries have been able to petition EPA annually for an  exemption from their RFS obligations. EPA states on its website that EPA  may grant the extension of the exemption if EPA determines that the  small refinery has demonstrated disproportionate economic hardship.  According to EPA officials, the statute directs EPA to consult with the  Department of Energy, and to consider the department\u2019s Small Refinery  Study and \u201cother economic factors\u201d in evaluating small refinery exemption  petitions. EPA conducts its review of small refinery petitions on a case-by- case basis and applies these statutory criteria to its evaluations.", "According to EPA\u2019s website, EPA\u2019s decision to grant an exemption has  the effect of exempting the gasoline and diesel produced at a refinery  from the percentage standards, and the exempted refinery is not subject  to the requirements of an obligated party for fuel produced during the  compliance year for which the exemption has been granted. For the first  few years, EPA data show that EPA granted roughly half of petitions;  however, starting in compliance year 2016, the number of exemptions  granted increased significantly. In compliance year 2016, EPA received  20 petitions and granted 19, with the final petition still pending. In  compliance year 2017, EPA received 37 petitions and granted 29, with 1  declared ineligible or withdrawn and the remaining 7 still pending. The  data show that this increase in granted exemptions correlates to an  increase in estimated exempted volumes of gasoline and diesel, with the  exempted amounts increasing from 3.07 billion gallons in compliance  year 2015 (equivalent to an estimated 290 million RINs) to 13.62 billion  gallons in compliance year 2017 (equivalent to an estimated 1,460 million  RINs). To put these volumes into context, EPA data show that the total  renewable volume obligation for compliance year 2015 was 17.53 billion  gallons and for compliance year 2017 it was 18.91 billion gallons."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Agriculture and  Energy, and to the Environmental Protection Agency, for review and  comment. USDA, DOE, and EPA provided technical comments, which we  incorporated where appropriate. USDA also provided written comments,  which are reproduced in appendix IV. In summary, USDA expressed  concerns in three areas.", "First, USDA disagreed with GAO\u2019s conclusion that the RFS has had a  limited effect, if any, on reducing greenhouse gas emissions. USDA  asserts that scientific research shows significant effects on greenhouse  gas emissions from blending ethanol into the nation\u2019s fuel supply, based  on the greenhouse gas benefits of ethanol produced using current  technologies relative to gasoline. The objective of our work was to  address the effect to date on greenhouse gas emissions that has been  specifically attributable to the RFS, not whether blending ethanol into the  nation\u2019s fuel supply has effects on greenhouse gas emissions. We report  that the RFS is not the only reason that ethanol is used in the fuel supply,  and that ethanol would have been produced and used in the United  States, even without the RFS. For example, as we noted in the report,  ethanol blended into gasoline provides benefits as an oxygenate, to  prevent air pollution from carbon monoxide and ozone; as an octane  booster, to prevent early ignition, or \u201cengine knock;\u201d and as an extender  of gasoline stocks. As a result, not all greenhouse gas reductions  associated with ethanol use have been the result of the RFS. Drawing  conclusions about the broader impact of ethanol on emissions generally  was not our objective and is not appropriate for a report examining the  impact of the RFS.", "Second, USDA criticized our methodology, which reported experts\u2019 views  on the effect of the RFS on greenhouse gas emissions. USDA stated that  this methodology, by design, could not arrive at a consensus and did not  synthesize the latest research. We chose our methodology, which relied  on expert views supplemented by relevant reported research, because of  its ability to yield more extensive, informative, and supportable answers to  our objective than a narrower literature review, as suggested by USDA.  More specifically, we reviewed much of the literature on this subject, and  used the literature, along with referrals from other experts and  recommendations from the National Academy of Sciences for prior GAO  work, to assist in selecting experts whose expertise included knowledge  of the relevant and most recent research on the issue. We selected  respected experts representing all perspectives to span the disciplines  required to answer our objective and to guard against drawing biased  conclusions. Those experts were aware of all research, even that with  conclusions contrary to their own. The studies that USDA cites do not  represent a wide range of perspectives; they represent the views of a few  studies focused specifically on the lifecycle emissions of ethanol. In  addition, as we indicate, the perspectives we obtained from industry  stakeholders were not used to support our findings on the effects of the  RFS on greenhouse gas emissions, as USDA implies. Rather,  stakeholders\u2019 views were used to inform some of our examples and  corroborate some aspects of the experts\u2019 views\u2014we attribute information  to the stakeholders in these instances. The consensus we found among  experts representing diverse perspectives was that the RFS has likely  had a limited effect on greenhouse gas emissions to date and that the  program is unlikely to meet its future greenhouse gas emissions reduction  goals.", "Third, USDA commented that our conclusion that the RFS likely had  modest impacts on gasoline prices should be augmented by a discussion  of the volatility of gasoline prices. USDA\u2019s comments appear to imply that  the changes in prices we found are even smaller or less impactful on  consumers because overall gasoline prices are themselves volatile. This  is not an accurate interpretation of what we found. For example,  increased prices in non-Midwest states represent additional expenditures  on gasoline and consequent reductions in other household spending.  Because a discussion of historic gasoline price volatility does not have  bearing on the effect of the RFS on prices, we are not including it.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Secretaries of Agriculture and Energy; the  Administrator of the Environmental Protection Agency; and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@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."], "subsections": []}]}, {"section_title": "Appendix I: Lists of Experts GAO Interviewed", "paragraphs": ["To determine what is known about the effect that the Renewable Fuel  Standard (RFS) has had to date on 1) retail gasoline prices in the United  States and 2) greenhouse gas emissions, we conducted semistructured  interviews with 18 experts with expertise on these topics. Of the 18  experts we interviewed, 7 discussed the effect that the RFS has had on  retail gasoline prices. Thirteen discussed the effect that the RFS has had  on greenhouse gas emissions, though one expert declined to be  identified. Two of the experts commented on the effect of the RFS on  both prices and emissions. The specific areas of expertise varied among  the experts we interviewed, so not all of the experts commented on all of  our interview topics. The experts we interviewed for each topic are listed  below."], "subsections": [{"section_title": "Experts Interviewed about the Effect of the RFS on Retail Gasoline Prices", "paragraphs": [], "subsections": []}, {"section_title": "Experts Interviewed about the Effect of the RFS on Greenhouse Gas Emissions", "paragraphs": ["Dr. Antonio Bento, University of Southern California  Dr. John M. DeCicco, University of Michigan  Dr. Jason Hill, University of Minnesota  Dr. Stephen Kaffka, University of California, Davis  Dr. Madhu Khanna, University of Illinois  Dr. Lee Lynd, Dartmouth College  Dr. Steve McGovern, PetroTech Consultants, LLC  Dr. John Miranowski, Iowa State University  Dr. GianCarlo Moschini, Iowa State University  Dr. Richard Plevin, University of California, Berkeley  Dr. Wallace E. Tyner, Purdue University  Dr. Michael Wang, Argonne National Laboratory  One expert we interviewed declined to be identified."], "subsections": []}]}, {"section_title": "Appendix II: List of Industry Stakeholders Whose Representatives GAO Interviewed", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Technical Discussion of Econometric Model Estimating Effects of Ethanol Mandates on Retail Gasoline Prices", "paragraphs": ["This appendix describes the econometric model we developed to  estimate the effect of the state ethanol mandates on retail gasoline prices,  provides the results, and discusses limitations."], "subsections": [{"section_title": "Econometric Model", "paragraphs": ["In order to develop evidence of the likely effects of the Renewable Fuel  Standard (RFS) on the incremental adoption of ethanol blending by states  as RFS targets grew, we developed an econometric model to analyze the  effect state ethanol mandates on retail gasoline prices. Specifically, we  analyzed how state policies mandating certain levels of ethanol blending  in retail gasoline affected retail gasoline prices in those states.", "We obtained retail gasoline price data from the Oil Price Information  Service. The data identified the simple average price across each state  for each grade of fuel\u2014regular grade gasoline, midgrade gasoline,  premium gasoline, and diesel. There also exist local fuel specifications,  on top of state policies. Price data are only available at the state level,  and we are not able to identify directly the effect of local fuel policies on  prices. We therefore included controls that represent the percentage of  retail stations in the state that are affected by the local specifications.", "To reduce distortion from dissimilar regulations and outliers, we did not  include prices (1) from the state of California and (2) for products other  than regular-grade gasoline. Therefore, the data we used for our  analysis comprised prices collected from 49 states and the District of  Columbia for the period of 2001 through 2010, for a total of 6,000  observations.", "Over the period 2001 through 2010, retail gasoline prices are highly  correlated across states over time. Specifically, to illustrate, we ran a  simple regression model of retail gasoline prices on year-month (fixed- effect) controls. The results show that over 90 percent of the variation in  retail gasoline prices over time across states is explained by these simple  year-month controls. This suggests nationwide factors explain much of  the variation in retail gasoline prices across states over time. The  available data are not sufficiently rich to allow us to reliably disentangle  the separate effects on retail gasoline prices of various nationwide  factors, such as, perhaps, changes in crude oil prices, demand for  gasoline, and the roll-out of the RFS. Hence, below, we examine instead  the (incremental) effect on state-level retail gasoline prices of state  ethanol mandates that are effective at a time when the RFS was requiring  relatively low levels of ethanol blending nationwide."], "subsections": [{"section_title": "Dependent Variable", "paragraphs": ["Our dependent variable in the model was the monthly average after-tax  retail price in dollars per gallon of regular-grade gasoline."], "subsections": []}, {"section_title": "Explanatory Variables", "paragraphs": ["Our model included a variety of explanatory variables, including state  ethanol mandates, other state and local ethanol policies and fuel  specifications, and the Petroleum Administration for Defense District  (PADD)-level gasoline inventory-sales ratios and refinery capacity  utilization rates.", "State ethanol mandates. The variables of interest in the model were  indicators for state ethanol mandates; the state ethanol mandate  indicator variables take the value of one for any month in which that  state has an effective ethanol mandate and take a value of zero  otherwise. The mandates ranged in the percentage of ethanol they  required to be blended into gasoline, from approximately 10 percent in  Minnesota, Missouri, and Oregon to 2 percent in Washington, with  Hawaii having a unique requirement that 85 percent of fuel sold in the  state must contain 10 percent ethanol.", "Other state ethanol policies. We used as controls indicators for  several other state ethanol policies to shed light on how these policies  may have affected retail gasoline prices. Specifically, we controlled for  state fleet requirements to use ethanol; direct ethanol incentives that  reduce the cost of ethanol per gallon of fuel, such as tax credits or  rebates; ethanol production incentives; and ethanol consumption  incentives. Production incentives included financial incentives to  produce ethanol, such as grants or payments to build or operate an  ethanol plant or to grow ethanol feedstock. Consumption incentives  included financial incentives to sell or use ethanol, such as grants or  tax incentives to upgrade fueling infrastructure to sell ethanol or a tax  credit to stations selling ethanol. We also controlled for state methyl  tertiary butyl ether (MTBE) bans, as ethanol was the primary  substitute that could be used in place of MTBE.", "Local-level fuel specification requirements. We controlled for local- level fuel specification requirements, such as the gasoline type, RVP  levels, and oxygenated fuel requirements.", "Volume of inventory of gasoline relative to the volume of sales of  gasoline. We used as a control the ratio of finished motor gasoline  stocks to the sales of motor gasoline. This variable indicates when  supply is high relative to demand and vice versa.", "Refinery capacity utilization rate. We controlled for refinery  operable utilization rate, which represents the utilization of crude oil  distillation units. This variable represents the balance between supply  volume and costs of production. Both this variable and the inventory- sales ratio have been found to be endogenous in past work.", "State gas taxes. We control for the level of state gas taxes using data  from the Department of Transportation\u2019s Federal Highway  Administration.", "Fixed effects. We used a set of indicator variables to account for  fixed effects associated with time and individual states. Specifically,  we used a set of state fixed effects to account for persistent  differences between states, such as transportation costs of fuels to  that state. Each model also included year-month fixed effects\u2014one  for each month in the data\u2014to control for nationwide events, as well  as state-calendar month fixed effects to allow seasonality to vary by  state."], "subsections": []}, {"section_title": "The Model", "paragraphs": ["Our model can be written as follows:  \ud835\udc66\ud835\udc66\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60= \ud835\udefd\ud835\udefd0 \ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc66\ud835\udc66 \ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52\ud835\udc52 +(\ud835\udc46\ud835\udc46\ud835\udc46\ud835\udc46\ud835\udc45\ud835\udc45\ud835\udc46\ud835\udc46\ud835\udc38\ud835\udc38\ud835\udc60\ud835\udc60\u00d7\ud835\udc52\ud835\udc52\ud835\udc45\ud835\udc45\u210e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc52\ud835\udc52\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc45\ud835\udc45\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc45\ud835\udc45\ud835\udc52\ud835\udc52\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60)\u2032\ud835\udefd\ud835\udefd1  \u2032 \ud835\udefd\ud835\udefd3+\ud835\udefc\ud835\udefc\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60+ \ud835\udefe\ud835\udefe\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 \ud835\udc66\ud835\udc66\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is the dependent variable in our model; namely, the average  after-tax price per gallon of regular grade gasoline at state \ud835\udc52\ud835\udc52 in month  \ud835\udc4e\ud835\udc4e and year \ud835\udc45\ud835\udc45.", "\ud835\udc46\ud835\udc46\ud835\udc46\ud835\udc46\ud835\udc45\ud835\udc45\ud835\udc46\ud835\udc46\ud835\udc38\ud835\udc38\ud835\udc60\ud835\udc60\u00d7\ud835\udc52\ud835\udc52\ud835\udc45\ud835\udc45\u210e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc52\ud835\udc52\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc45\ud835\udc45\ud835\udc52\ud835\udc52\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is a vector of interaction terms, where  \ud835\udc46\ud835\udc46\ud835\udc46\ud835\udc46\ud835\udc45\ud835\udc45\ud835\udc46\ud835\udc46\ud835\udc38\ud835\udc38\ud835\udc60\ud835\udc60 is a vector of dummies for each state with a mandate\u2014Hawaii, Minnesota, Missouri, Oregon, or Washington\u2014and  \ud835\udc52\ud835\udc52\ud835\udc45\ud835\udc45\u210e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc52\ud835\udc52\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc4e\ud835\udc45\ud835\udc45\ud835\udc52\ud835\udc52\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 an indicator that is equal to 1 for all months that an ethanol mandate is effective for that state, and zero otherwise.", "\ud835\udc39\ud835\udc39\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\u00d7\ud835\udc39\ud835\udc39\ud835\udc39\ud835\udc39\ud835\udc38\ud835\udc38\ud835\udc39\ud835\udc39\ud835\udc45\ud835\udc45\ud835\udc38\ud835\udc38\ud835\udc39\ud835\udc39\ud835\udc46\ud835\udc46\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is a vector of interaction terms where \ud835\udc39\ud835\udc39\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc45\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60  is a measure of the proportion of gas stations in a state likely affected  by various fuel regulations in a given year, and \ud835\udc39\ud835\udc39\ud835\udc39\ud835\udc39\ud835\udc38\ud835\udc38\ud835\udc39\ud835\udc39\ud835\udc45\ud835\udc45\ud835\udc38\ud835\udc38\ud835\udc39\ud835\udc39\ud835\udc46\ud835\udc46\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is a", "\ud835\udc4b\ud835\udc4b\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is a vector of remaining control variables, including state \ud835\udefc\ud835\udefc\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is a set of state-calendar month fixed effects to account for \ud835\udefe\ud835\udefe\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is a set of month-year fixed effects to account for time-varying  vector of indicator variables equal to one in those months that a state  is subject to fuel regulations related to RVP levels, boutique fuels,  reformulated gasoline, and oxygenated fuel.  gasoline tax in cents per gallon, inventory sales-ratio, refinery  utilization rate, and indicator variables for other state ethanol policies,  including effective MTBE bans, fleet requirements, direct incentives,  production incentives, and consumption incentives.  permanent differences in a state\u2019s average gasoline prices across  months.  factors affecting average gasoline prices for all states, such as  fluctuations in crude oil prices.  \ud835\udf00\ud835\udf00\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60\ud835\udc60 is an error term that is clustered by state.", "Our model assumes that after controlling for time-variant factors, the  timing of state ethanol mandates going into effect is not correlated with  unobserved time-variant factors that affect gasoline prices. When this  assumption is satisfied, then our model may estimate the effect of state  mandates on gasoline prices. Since ethanol mandates go into effect at  different times\u2014in 2003 (Minnesota), 2006 (Hawaii), and 2008 (Missouri,  Oregon, Washington)\u2014our quasi-experiment introduces variation in  ethanol mandates across time and across states. We are able to address  many concerns about omitted variable bias by including detailed state- calendar month fixed effects and month-year fixed effects."], "subsections": []}, {"section_title": "Results", "paragraphs": ["We estimate that all else remaining equal, when the ethanol mandates in  the Midwestern states of Minnesota and Missouri were in effect, retail  gasoline prices in those states were lower by approximately 8 and 5  cents, respectively, than they would have been without the mandates. We  also estimate that all else remaining equal, when the ethanol mandates in  Hawaii, Oregon, and Washington were in effect, retail gasoline prices in  those states were higher by approximately 8, 2, and 6, cents,  respectively, than they would have been without the mandates.", "The variables used in the model to control for effects other than ethanol  mandates had the expected directional effect on price or else were not  significant (using a 5 percent significance level). Our controls for the  boutique fuel blends and the state gasoline taxes were significant and  positive, suggesting that states with more stringent fuel specifications and  higher gasoline taxes have a higher after-tax gasoline price. The  estimated effect for refinery utilization rate is negative and statistically  significant, suggesting that fuel prices decrease with refinery utilization  rates because higher supply decreases prices. Although we might expect  that fuel prices would decrease with the inventory/sales ratio because this  indicates that supply is high relative to demand, it is also possible that  when inventories are below a critical threshold, prices will rise regardless  of how high inventories are relative to sales, as has been seen in prior  work, so the positive coefficient in our model has precedent.", "See Kendix and Walls, \u201cOil industry consolidation and refined product prices: Evidence  from US wholesale gasoline terminals\u201d Energy Policy, vol. 38 (2010), pp. 3498-3507.", "Estimated coefficient  -0.0071  (0.011)   -0.0027  (0.015)   -0.0034  (0.012)   0.0072  (0.015)   (0.0085)", "Percentage of gasoline stations in the state selling fuel with less than 9 lbs.  Reid vapor pressure (RVP)", "0.070  (0.11)", "Percentage of gasoline stations in the state selling fuel with at least 9 lbs.  RVP  (0.040)", "Percentage of gasoline stations in the state selling boutique fuel  0.14***  (0.037)", "Percentage of gasoline stations in the state selling reformulated gasoline  (0.45)", "Percentage of gasoline stations in the state selling oxygenated fuel  0.0029  (0.018)   0.0028  (0.092)   (0.00050)   1.87***  (0.11)", "Legend:   * = parameter estimate significance less than 10 percent;   ** = parameter estimate significance less than 5 percent;   *** = parameter estimate significance less than 1 percent.", "We tested alternate specifications, such as the following:  Including different subsets of the explanatory control variables in the  model.", "Treating the inventory/sales ratio and the refinery utilization rate as  endogenous.", "Using pre-tax prices by subtracting state gasoline taxes from after-tax  prices rather than including taxes as a control variable.", "Our results, including the magnitude and directional impact of the various  state ethanol mandates, were not meaningfully affected across such  specification tests."], "subsections": []}]}, {"section_title": "Limitations", "paragraphs": ["Our analysis had a number of limitations as listed below.", "We did not directly estimate the effect of the RFS on prices. The  policy was nationwide and there are no reliable state-level data with  which to measure state-level ethanol gasoline blend rates as the RFS  was implemented over time. However, there is no reason to believe  that other states that incrementally adopted the blending of ethanol as  a result of increasing RFS targets would have experienced different  effects.", "There may be some endogeneity in the timing of the adoption of  the ethanol mandates. These policies are likely easier to pass  through state legislatures when corn or ethanol prices are lower than  oil or gasoline prices or when gasoline prices are high, but given that  the effective dates are usually several years after the laws are  enacted, this actual effective timing should be exogenous.", "We believe the state-level ethanol regulation data are  comprehensive, but some regulations may not appear in the  data. In our analysis, we include controls for ethanol mandates as  well as several other types of ethanol incentives and fuel specification  requirements. These variables control for the effects of related ethanol  policies as well as variations in the cost of producing retail gasoline.  We are certain that all state ethanol mandates were included in the  model. However, our model may not perfectly control for all other  regulations that could affect retail gasoline prices.", "Some control variables were not available at the state or monthly  level. For example, some controls, such as the refinery capacity  utilization rate, were available at the regional level only, so we had to  parse out the regionally aggregated observations accordingly.", "As in any model, there is the possibility of misspecification or  bias. Inappropriate assumptions about the functional form of the  model, failure to deal with endogenous variables, or exclusion of  relevant variables could also cause our estimated effects to deviate  from the true effects. Some amount of this bias is present in almost all  regression results, although the amount may not be very large."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karla Springer (Assistant  Director), Stuart Ryba (Analyst in Charge), Luqman Abdullah, Benjamin  Adrian, Jaci Evans, Ellen Fried, William Gerard, Cindy Gilbert, Anne  Hobson, Jordan Kudrna, Joe Maher, Caroline Prado, Oliver Richard,  Rachel Rhodes, Dan Royer, Barbara Timmerman, and William D. Walls  made key contributions to this report."], "subsections": []}]}], "fastfact": ["We reviewed the effects of the Renewable Fuel Standard, which requires biofuels to be blended into U.S. transportation fuels in increasing volumes.", "The standard was associated with modest gas price increases in areas outside of the Midwest. Most corn ethanol\u2014the most common U.S. biofuel\u2014is produced in the Midwest, so other regions had to pay for shipping and storage.", "The standard was intended to reduce greenhouse gas emissions, but has had little effect to date. It will likely not meet the emissions goals set for it through 2022, largely because advanced biofuels\u2014which reduce emissions more effectively\u2014haven't been produced as expected."]}
{"id": "GAO-18-692T", "url": "https://www.gao.gov/products/GAO-18-692T", "title": "Positive Train Control: Most Railroads Expect to Request an Extension, and Substantial Work Remains Beyond 2018", "published_date": "2018-09-13T00:00:00", "released_date": "2018-09-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Forty railroads including Amtrak, commuter, and freight railroads are currently required by statute to implement PTC, a communications-based system designed to slow or stop a train that is not being operated safely. PTC must be interoperable, meaning trains can operate seamlessly on the same PTC-equipped track, including \u201ctenants\u201d that operate on track owned by another \u201chost\u201d railroad. Although the deadline for PTC implementation is December 31, 2018, railroads may receive a maximum 2-year extension to December 31, 2020, if they meet certain statutory criteria.", "GAO was asked to review railroads' PTC implementation progress. This statement discusses (1) railroads' implementation progress and FRA's steps to assist them and (2) how railroads and FRA plan to approach the 2018 and 2020 deadlines. GAO analyzed railroads' most recent quarterly reports covering activities through June 30, 2018; sent a brief questionnaire to all 40 railroads; and interviewed officials from FRA and 16 railroads, selected in part based on those identified as at-risk by FRA."]}, {"section_title": "What GAO Found", "paragraphs": ["As of June 30, 2018, many railroads remained in the early stages of positive train control (PTC) implementation\u2014including equipment installation and early field testing. About half of the 40 railroads implementing PTC reported that they are still installing equipment, though many are nearing completion. However, with the exception of the largest freight railroads\u2014known as Class I\u2014and Amtrak, most railroads reported less progress in later implementation stages, especially revenue service demonstration (RSD), an advanced form of field testing that is required to fully implement PTC. Of the 28 commuter railroads required to implement PTC, 19 reported initiating field testing, but only 8 reported initiating RSD. The Federal Railroad Administration (FRA) recently clarified the criteria railroads must meet to qualify for a 2-year extension past the December 31, 2018, PTC implementation deadline. To receive an extension, railroads must meet 6 statutory criteria. For the sixth criterion, commuter and smaller freight railroads are authorized to either initiate RSD on at least one track segment or use FRA-approved substitute criteria. FRA clarified these and other requirements at three PTC symposiums hosted for railroads in summer 2018. For example, FRA officials said that for railroads eligible to use substitute criteria, initiating field testing instead of RSD was one approach that could potentially receive FRA's approval. FRA's actions are consistent with GAO's March 2018 recommendation that the agency communicate to the railroads the requirements and process for an extension.", "Most railroads anticipate needing an extension, leaving substantial work for both railroads and FRA to complete before the end of 2020. Thirty-two of 40 railroads reported to GAO that they, or the railroad which owns the track on which they operate, will apply for an extension. Sixteen commuter and smaller freight railroads reported planning to apply for an extension using substitute criteria, and of these, 12 intend to apply for substitute criteria based on early testing such as field testing. Though substitute criteria are authorized in law, this approach defers time-intensive RSD testing into 2019 and beyond. In addition, railroads expressed concerns with the time and effort involved with interoperability testing\u2014a key remaining hurdle for railroads such as Class I railroads that are further along with implementation. Further, railroads expressed concern that FRA's workload will markedly increase as railroads submit requests for extension approvals. FRA has acknowledged concerns about the pending surge of submissions and has taken recent steps to help manage the forthcoming influx of documentation, such as reallocating resources. Nonetheless, given that as of early September 2018, only 1 railroad\u2014a Class I railroad\u2014had applied for an extension, it remains unclear how many extension requests FRA will receive or what FRA's enforcement strategy will be for noncompliance with the statute, such as for railroads that fail to apply for an extension by the deadline. In addition, challenges related to PTC implementation and FRA's resources raise questions as to the extent FRA and the railroad industry are poised for full PTC implementation by December 31, 2020."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In March 2018, GAO recommended FRA take steps to systematically communicate extension information to railroads and to use a risk-based approach to prioritize agency resources and workload. FRA has taken some steps to address these recommendations, such as recently communicating and clarifying extension requirements to all railroads during three symposiums, and GAO will continue to monitor FRA's progress."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our work in reviewing railroads\u2019  and the Federal Railroad Administration\u2019s (FRA) efforts to implement  positive train control (PTC). In September 2008\u201410 years ago this  month\u2014a commuter train and freight train collided in the Chatsworth  neighborhood of Los Angeles, California, resulting in 25 deaths and over  100 injuries. In the wake of this accident, legislation was enacted  requiring certain railroads to implement PTC\u2014a communications-based  system designed to slow or stop a train that is not being operated safely.  Forty railroads are required to implement PTC. These railroads include  28 commuter railroads and Amtrak, which collectively provide over 500  million passenger trips annually. Railroads that play a key role in our  nation\u2019s freight network must also implement PTC, including the 7 largest  Class I and 4 Class II and III freight railroads.", "As we have previously reported, PTC implementation is a complex and  lengthy process, which touches almost every part of major rail lines and  almost every aspect of railroads\u2019 train operations. Each implementing  railroad must install more than 20 major components that will ultimately  communicate trains\u2019 locations, movements, and speed, and then slow or  stop a train that is not being operated safely. Full implementation of PTC  involves a number of steps, including but not limited to: planning and  system development, equipment installation, testing, system certification,  and achieving interoperability. Since U.S. railroads often operate some or  all of their trains as \u201ctenants\u201d on the track of another railroad, known as  the \u201chost,\u201d interoperability is intended to enable trains that operate on the  same track to be governed by the PTC system and to move seamlessly  across track owned by different railroads.", "When PTC implementation was mandated in 2008, the deadline for  railroads\u2019 implementation was December 31, 2015. We reported in  September 2015 that nearly all railroads did not expect to meet this  deadline. In October 2015, Congress extended the deadline to  December 31, 2018, and established criteria that would enable FRA, the  agency responsible for overseeing PTC implementation, to grant railroads  meeting certain requirements an alternative schedule up to year-end  2020. Throughout this statement we refer to the alternative schedule as  the \u201cextension.\u201d My testimony today includes work conducted at the  request of Chairman Denham and Ranking Member Capuano as well as  Chairman Bill Shuster and Ranking Member Peter DeFazio of the House  Committee on Transportation and Infrastructure. Specifically, my  testimony discusses the efforts of FRA and railroads to implement PTC  as the December 31, 2018, deadline approaches and since we last  testified on PTC in March 2018. My statement today will address (1)  railroads\u2019 implementation progress and the steps that FRA has taken to  assist them and (2) how railroads and FRA plan to approach PTC  implementation to meet the December 2018 and December 2020  deadlines.", "To describe railroads\u2019 progress, we analyzed the most recent available  quarterly PTC implementation reports that railroads submitted to FRA,  reports that reflected the progress as of June 30, 2018. We analyzed the  reports to determine the extent that each railroad has installed PTC  hardware and initiated testing. Based on our review of these data for  anomalies, outliers, or missing information and our previous assessment  of such quarterly reports for our March 2018 testimony, we determined  that these data were sufficiently reliable for our purposes of describing  railroads\u2019 progress in PTC implementation. To describe railroads\u2019 and  FRA\u2019s progress and approaches, we interviewed representatives from 16  passenger and freight railroads, including the 12 railroads (11 commuters  and 1 Class III) that FRA identified in June 2018 as at risk of not having  implemented PTC or qualifying for an extension by December 31, 2018.", "The remaining 4 railroads we interviewed were: Amtrak; 2 Class I freight  railroads, which were selected based on their relationships with tenant  railroads and substantial progress toward PTC implementation; and a  commuter railroad that received approval from FRA in March 2018 for an  exception from PTC system implementation. To describe how railroads  and FRA plan to approach PTC implementation for the December 2018  and 2020 deadlines, we sent 41 railroads a semi-structured  questionnaire. The questions we asked were based on the data  collection efforts from our March 2018 testimony. We analyzed railroads\u2019  responses and summarized their plans and challenges into common  categories. To determine the stage of PTC implementation railroads  expected to reach by December 31, 2018, we considered railroads\u2019  responses to our questionnaire, information provided in interviews, and  documents submitted to FRA regarding railroads\u2019 planned implementation  approaches, among other information. To describe railroads\u2019 progress  and FRA\u2019s actions to assist railroads, we interviewed the industry  associations for commuter (American Public Transportation Association)  and freight (Association of American Railroads) railroads, and two PTC  vendors. We also reviewed applicable laws and FRA regulations,  presentations, reports, and guidance and interviewed FRA officials.", "We conducted this performance audit from June 2018 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["PTC systems are required by law to prevent certain types of accidents or  incidents. In particular, a PTC system must be designed to prevent train- to-train collisions, derailments due to excessive speed, incursions into  work zone limits, and the movement of a train through a switch left in the  wrong position. While railroads may implement any PTC system that  meets these requirements, the majority of the railroads are implementing  one of four types of systems. PTC\u2019s intended safety benefits can be fully  achieved nationwide when all required railroads have successfully  installed PTC components, tested that these components work together  and the systems function as designed, and are interoperable with other  host and tenant railroads\u2019 PTC systems that share track. Interoperability  means the locomotives of any host railroad and tenant railroad operating  over the same track segment will communicate with and respond to the  PTC system, allowing uninterrupted movements over property  boundaries. Interoperability is critical to PTC functioning properly given  the complexity of the rail network in the United States. In much of the  country, Class I railroads function as hosts for Amtrak and commuter  railroads. For example, one of the seven major Class I railroads reports  that 24 tenant railroads operate over its PTC-equipped tracks, including  freight, Amtrak, and commuter railroads. A notable exception to this is the  Northeast Corridor, which runs from Washington, D.C., to Boston,  Massachusetts, which Amtrak predominantly owns and over which 6  freight and 7 commuter railroads operate as tenants.", "PTC implementation involves multiple stages to achieve full  implementation, including planning and system development, equipment  installation and testing, system certification, and full deployment, including  interoperability. Each railroad must develop an FRA-approved PTC  implementation plan that includes project schedules and milestones for  certain activities, such as equipment installation. The equipment  installation stage involves many components, including communication  systems; hardware on locomotives and along the side of the track (called  \u201cwayside equipment\u201d); and software in centralized office locations as well  as onboard the train and along the track. Railroads are required to  report quarterly and annually to FRA on the railroad\u2019s PTC  implementation status relative to the implementation plan. A railroad can  also revise its implementation plan to reflect changes to the project, which  then must be reviewed and approved by FRA.", "In addition, railroads must demonstrate that the PTC system is deployed  safely and meets functional requirements through multiple stages of  testing. Before initiating testing on the general rail system, railroads must  submit a formal test request for FRA approval that includes, among other  things, the specific test procedures, dates and locations for testing, and  the effect the tests will have on current operations. The multiple stages of  PTC testing include:", "Laboratory testing: locomotive and wayside equipment testing in a lab  environment to verify that individual components function as  designed.", "Field testing: includes several different tests of individual components  and the overall system, such as testing of each locomotive to verify  that it meets functional requirements and field integration testing\u2014a  key implementation milestone to verify that each PTC component is  integrated and functioning safely as designed.", "Revenue service demonstration (RSD): an advanced form of field  testing in which the railroad operates PTC-equipped trains in regular  service under specific conditions. RSD is intended to validate the  performance of the PTC system as a whole and to test the system  under normal, real-world operations.", "Interoperability testing: host and tenant railroads that operate on the  same track must work together to test interoperability to ensure each  railroad can operate seamlessly across property boundaries. Almost  all of the 40 railroads currently required to implement PTC must  demonstrate interoperability with at least one other railroad\u2019s PTC  system.", "Using results from field and RSD testing, combined with other  information, host railroads must then submit a safety plan to FRA for  approval. We have previously reported that these safety plans are about  5,000 pages in length. Once FRA approves a safety plan, the railroad  receives PTC system certification, which is required for full  implementation, and is then authorized to operate the PTC system in  revenue service. According to FRA officials, the FRA may impose  conditions to the PTC safety plan approval as necessary to ensure safety,  resulting in a conditional certification.", "Railroads may receive a maximum 2-year extension from FRA past the  December 31, 2018, deadline if they meet six criteria set forth in statute.  Specifically, railroads must demonstrate, to the satisfaction of FRA, that  they have: (1) installed all PTC system hardware consistent with the total  amounts identified in the railroad\u2019s implementation plan; (2) acquired all  necessary spectrum consistent with the implementation plan; (3)  completed required employee training; (4) included in a revised  implementation plan an alternative schedule and sequence for  implementing the PTC system as soon as practicable but no later than  December 31, 2020; (5) certified to FRA that they will be in full  compliance with PTC statutory requirements by the date provided in the  alternative schedule and sequence; and (6) for Class I railroads and  Amtrak, initiated RSD or implemented a PTC system on more than 50  percent of the track they own or control that is required to have PTC. For  commuter and Class II and III railroads, the sixth statutory criterion is to have either initiated RSD on at least one territory required to have  operations governed by a PTC system or \u201cmet any other criteria  established by the Secretary,\u201d which FRA refers to as \u201csubstitute\u201d  criteria.", "FRA is responsible for overseeing railroads\u2019 implementation of PTC, and  the agency monitors progress and provides direct assistance to railroads  implementing PTC. For example, FRA officials provide technical  assistance to railroads, address questions, and review railroad-submitted  documentation. FRA has a national PTC director, designated PTC  specialists in the eight FRA regions, and a few additional engineers and  test monitors responsible for overseeing technical and engineering  aspects of implementation and reviewing railroad submissions and  requests. In anticipation of the upcoming implementation deadline, in May  2017, FRA began to send notification letters to railroads it determined  were at risk of both not meeting the December 31, 2018, implementation  deadline and not completing the requirements necessary to qualify for an  extension. FRA identified \u201cat-risk\u201d railroads by comparing a railroad\u2019s  hardware installation status to the total hardware required for PTC  implementation, according to the railroad\u2019s implementation plan. FRA has  increased the \u201cat-risk\u201d threshold percentage over time as the deadline  approaches. See table 1.", "FRA has additional oversight tools, which include use of its general civil  penalty enforcement authority for failure to meet certain statutory PTC  requirements. FRA has used this authority in 2017 and 2018 to assess  civil penalties against railroads that failed to comply with the equipment  installation milestones, the spectrum acquisition milestones, or both, that  the railroads had established in their implementation plans for the end of  2016 and 2017.", "As part of our body of work on PTC, we found that railroads face  numerous PTC implementation challenges and made recommendations  to FRA to improve its oversight of implementation. Specifically, in 2013  and 2015 we found that many railroads were struggling to make progress  due to a number of complex and interrelated challenges, such as  developing system components and identifying and correcting issues  discovered during testing. Most recently, we found in March 2018 that  FRA had not systematically communicated information or used a risk- based approach to help railroads prepare for the 2018 deadline or to  qualify for an extension. We also found that many railroads were  concerned about FRA\u2019s ability to review submitted documentation in a  timely manner, particularly given the length of some required  documentation such as safety plans and FRA\u2019s limited resources for  document review. In March 2018, we recommended FRA identify and  adopt a method for systematically communicating information to railroads  and use a risk-based approach to prioritize its resources and workload.  FRA agreed with our recommendations."], "subsections": [{"section_title": "Many Railroads Remain in Early Stages of PTC Implementation and FRA Has Clarified Extension Requirements Railroads Continue to Install and to Test PTC Systems, and Report Previously Identified Implementation Challenges", "paragraphs": ["As of June 30, 2018, many railroads reported that they remain in the  equipment installation and field-testing stages, which are early stages of  PTC implementation. However, since we last testified in March 2018,  railroads have made progress on equipment installation. Based on our  analysis of the 40 railroads\u2019 reported status as of June 30, 2018, about  half of the railroads have completed equipment installation, and many  others are nearing completion of this stage. Specifically, three-quarters of  the 40 railroads reported being more than 90 percent complete with  locomotive equipment installation. Similarly, nearly three-quarters of  railroads that must install wayside equipment reported being more than  90 percent complete. The remaining one-quarter of railroads are among  those designated by FRA as at-risk of both not meeting the end of 2018  implementation deadline and not completing the requirements necessary  to qualify for an extension. Specifically, in August 2018, FRA identified 9  railroads\u2014all commuter railroads\u2014as at-risk, fewer than the 12 railroads  FRA had previously designated as at risk in its June 2018 letters to  railroads.", "Since we last testified, most commuter railroads reported slow progress  with testing, especially with RSD, while Class I railroads and Amtrak have  reached later stages of testing. Notably, all 7 Class I freight railroads and  Amtrak reported having initiated field testing and entering RSD as of June  30, 2018. We reported in 2013 and 2015 that Class I railroads and  Amtrak have been conducting PTC implementation activities for longer  than commuter railroads, which has likely factored into their advanced  progress. However, commuter railroads and Class II/III railroads have  progressed more slowly. For example:", "Laboratory and initial field testing: 19 of 28 commuter railroads  reported having initiated this testing as of June 30, 2018, 6 more  commuter railroads than the 13 we previously reported as having  initiated field testing as of September 30, 2017. Additionally, 2 of 4  Class II/III railroads reported having initiated testing as of June 30,  2018.", "RSD testing: 8 of 28 commuter railroads reported initiating RSD  testing as of June 30, 2018, 2 more commuter railroads than the 6 we  previously reported as having entered RSD testing as of September  30, 2017. No Class II/III railroads reported having initiated RSD. As  noted earlier, unless a commuter or Class II/III railroad receives  approval for using substitute criteria, the railroad must initiate RSD, a  final stage of PTC testing, on at least one territory by December 31,  2018, to qualify for an extension.", "Railroad representatives reported that they continue to face many of the  same challenges we have previously identified. For example, in response  to our questionnaire to all 40 railroads implementing PTC, 14 reported  challenges with PTC vendors and contractors, which we originally  reported on in 2015. One railroad noted that, because its contractor  manages PTC projects across the country with the same deadline and  requirements, it can be difficult for all railroads to get the resources they  need from their contractor. We previously reported that there are a limited  number of vendors available to design PTC systems, provide software  and hardware, and conduct testing. For example, we reported in 2015  that, according to railroad industry representatives, there were two  vendors for the onboard train management computer and three vendors  for the wayside equipment. Likewise, we previously reported that  railroads face software challenges, and noted that railroads had concerns  with the number of defects identified during software testing, since these  take time to address. In response to our questionnaire, 11 railroads  reported encountering challenges related to maturity of the PTC software  systems, such as working through software bugs or defects during  testing."], "subsections": []}, {"section_title": "FRA Has Recently Clarified Extension Requirements", "paragraphs": ["In June, July, and August 2018, FRA held three PTC symposiums that  were attended by representatives from all 40 railroads and that focused  on the extension process and substitute criteria, PTC testing, and safety  plans, respectively. FRA\u2019s June 2018 symposium covered information  consistent with our March 2018 recommendation that the agency adopt a  method for systematically communicating information related to the  requirements and process for an extension to railroads. Specifically,  FRA presented information on the procedures for requesting and  obtaining FRA\u2019s approval for an extension to implement PTC beyond the  December 2018 deadline including FRA\u2019s review process. FRA also  clarified that for railroads eligible to use substitute criteria, initiating field  testing was one approach that could potentially qualify as substitute  criteria, rather than initiating RSD.", "Representatives we interviewed from the railroads that participated in the  symposiums found them to be helpful and some railroads reported that  the information presented led them to adjust their approach to meeting  the December 2018 deadline. For example, one railroad representative  we spoke to said that until the symposium, he was unaware that using  field testing as substitute criteria was a potential option. Some railroads  we met with also told us they are re-evaluating what activities and  documentation need to be revised and submitted to FRA before the  December 2018 deadline based on the information presented at the  symposiums. For example, representatives from one railroad we met with  said that FRA officials encouraged them to update their PTC  implementation plan right away with current equipment installation totals,  to ensure consistency across all required documentation by the end of  2018. A couple of railroads noted that the information presented at the  symposiums clarified many questions and would have been beneficial to  know a year or two earlier in the implementation process.", "In addition, in recent months FRA has continued to provide assistance to  railroads and has taken a series of steps to better prepare railroads for  the 2018 deadline. These steps include meeting regularly with individual  railroads and developing approaches intended to help many railroads  meet the requirements necessary for a deadline extension. For example,  representatives from one commuter railroad said agency officials have  been willing to share lessons learned, clarify requirements, and review  draft documentation to provide informal feedback."], "subsections": []}]}, {"section_title": "Railroads and FRA Are Working toward Extensions, Leaving Substantial Work to Be Completed Beyond 2018", "paragraphs": [], "subsections": [{"section_title": "Most Railroads Anticipate Needing an Extension, and Many Plan to Start RSD Testing Beyond 2018", "paragraphs": ["More than three-quarters of railroads (32 of 40) reported to us that they  plan to apply for an extension. However, FRA officials noted that with  the exception of possibly one or two railroads, they anticipate that all  railroads will likely need an extension. As of September 2018, most  railroads have not submitted their request for an extension. A railroad  must demonstrate that it has met all of the criteria to qualify before it may  formally request an extension, and as previously discussed, many  railroads remain in the early stages of PTC implementation. Of the eight  railroads that anticipate reaching full implementation by December 31,  2018, five have conditionally certified safety plans; one has submitted its  safety plan for review; one plans to submit its safety plan to FRA in fall  2018 for certification; and one did not specify when it would submit its  safety plan for certification.", "Of the 32 railroads that intend to apply for an extension, half reported that  they plan to use substitute criteria to qualify, including 12 commuter and 4  Class II and III railroads. Moreover, three-quarters of the commuter and  Class II and III railroads that plan to use substitute criteria (12 of 16)  intend to apply to use their initiation of field testing or lab testing as  substitute criteria. Figure 1 depicts the stage of PTC implementation  railroads at least expect to reach by December 31, 2018, to be in  compliance, based on railroads\u2019 responses to our July-August 2018  questionnaire.", "Although FRA has recently made clear that it is authorized to grant  extensions based on initiating field testing or other FRA-approved  substitute criteria, this approach defers time-intensive RSD testing into  2019 and beyond. In March 2018, we testified FRA officials told us that  moving from the start of field testing to the start of RSD can take between  1 and 3 years, and has averaged about 2 years for those railroads that  have completed that stage. We also testified that FRA officials believe  that most railroads underestimate the amount of time needed for testing.  FRA officials told us that they do not consider railroads that are approved  for an extension under substitute criteria to be necessarily at a higher-risk  of not completing PTC implementation by 2020. However, in light of these  time estimates and the unknown challenges that railroads may face  during testing, railroads that are in the early field-testing stage moving  into 2019 could face challenges completing PTC implementation by the  extended December 2020 deadline.", "Railroads further behind in PTC implementation may need to apply for an  extension due to factors such as compressed implementation schedules,  as well as the time needed for FRA approvals. For example,  representatives from one commuter railroad said they hope to reach RSD  before the December 31, 2018, deadline, but that it would be difficult to  meet the extension requirements, apply for, and receive an extension  given the volume of paperwork FRA will be receiving at the end of the  year. Instead, the railroad plans to submit an extension request using  substitute criteria consisting of field testing in order to be in compliance at  the end of the year. Such an approach involves first applying for and  receiving approval for substitute criteria and then formally requesting an  extension and submitting supporting documentation to FRA before the  end of the year. Entering RSD prior to the deadline could be difficult given  that FRA officials told us they have advised railroads to allow at least a  month for FRA\u2019s review of test requests, which must be approved prior to  initiating field testing and RSD.", "Additionally, for some railroads further along in PTC implementation,  particularly Class I freight railroads, interoperability is a key remaining  hurdle for full implementation by the end of 2018, and railroads expect  this challenge to persist in the future. The two Class I railroads we  interviewed noted that ensuring all tenant railroads are PTC-equipped,  tested, and interoperable is a primary reason the railroads plan to request  an extension. One of these host railroads also reported that it has little  ability to influence its tenants\u2019 progress with PTC implementation. Across  all 40 railroads, 8 reported current or anticipated challenges working with  tenant or host railroads, or both, to plan and conduct testing to ensure  interoperability. Moreover, given that few railroads have reached the  interoperability testing stage, the challenges railroads may face in this  stage remain unclear. For example, some railroads we interviewed noted  it is unknown how much time and effort will be required to work through  interoperability issues during testing to ensure the system\u2019s reliability.  One railroad association stated that interoperability is, and will continue to  be, a substantial challenge for metropolitan areas with dense and  complex rail networks with several host-tenant relationships. For  example, according to one commuter railroad, 14 different freight and  commuter railroads will need to interoperate in the Chicago area."], "subsections": []}, {"section_title": "FRA\u2019s Substantial Workload Remains a Concern", "paragraphs": ["FRA\u2019s already substantial workload is expected to increase as railroads  continue to submit documentation necessary for extensions and continue  PTC implementation activities. FRA is focused on ensuring railroads are  in compliance through the December 2018 deadline\u2014whether via an  extension or by completing implementation. While FRA officials report  that they anticipate almost all railroads will likely request an extension,  only one\u2014a Class I railroad\u2014had submitted an application for an  extension as of early September 2018. FRA will need to review and  approve all related documentation associated with each extension  request and make a determination within 90 days, meaning if a railroad  were to submit its extension request on December 31, 2018, FRA would  have until the end of March 2019 to approve or deny the railroad\u2019s  extension request. In addition to extension requests and supporting  documentation, many railroads will also be submitting to FRA: requests  for substitute criteria, test requests to initiate field testing or RSD,  revisions to PTC implementation plans, and PTC safety plans.", "To help manage the forthcoming influx of documentation, FRA officials  have offered to review draft documentation, such as substitute criteria  requests and test requests, and have advised railroads to take FRA\u2019s  review times into account prior to submitting required documentation.  FRA officials told us that in trying to manage their workload, they initially  told railroads they did not have time to review draft submittals. However,  they found that taking the time to conduct draft reviews ultimately led to  higher quality formal submittals and accelerated the overall review  process. In addition, FRA officials said that their goal is to not delay any  railroad that is ready to move into testing, and that they advised railroads  to build 30\u201345 days for test request reviews into their project schedules.", "Despite these efforts, railroads remain concerned about the agency\u2019s  ability to manage the PTC workload in the coming months and beyond  2018. For example, 9 of the 40 railroads identified FRA\u2019s resources and  review times as a challenge leading up to the December 2018 deadline.  Based on similar concerns, in March 2018, we recommended FRA  develop an approach to prioritize the allocation of resources to address  areas of greatest risk as railroads work to complete PTC  implementation. FRA has acknowledged the railroads\u2019 concern given the surge of submissions requiring FRA approval in 2018 and has  reported the agency is reallocating existing expertise and expanding the  PTC workforce through training, expanding contracts with existing support  contractors, and initiating one additional contract to provide technical  support. For example, FRA officials told us that they reallocated  resources to shift PTC Specialists\u2019 responsibilities to focus exclusively on  testing-related activities because their involvement is critical for the  testing stage.", "Although FRA has taken steps to provide key extension information to  railroads and help ensure railroads\u2019 compliance with PTC deadlines,  uncertainty remains, particularly in regard to FRA\u2019s enforcement strategy  if railroads are noncompliant with the statute, such as if railroads were to  fail to apply for an extension by the deadline. Representatives from all  railroads implementing PTC we met with told us that FRA\u2019s planned  enforcement approach for any railroad that fails to meet the requirements  for an extension beyond 2018 is unclear. FRA officials told us they have  shared the range of applicable civil penalties with railroads for years, but  that any policy decisions about how potential fines will be levied for non- compliant railroads is a policy decision that has not yet been made. In  addition, it is also unclear how the agency would approach enforcement  for railroads that have a host or tenant operating on their tracks that has  not completed implementation or met the requirements necessary for an  extension. FRA officials said that the goal of enforcement is to help bring  all railroads into compliance and that they would have to look at the  specific circumstances for any host-tenant issues before assessing a fine.", "In conclusion, almost all railroads will likely request an extension beyond  2018, which will require FRA approval and, for many railroads, substitute  criteria requests that may result in approximately a third of railroads  remaining in the early stages of PTC implementation at the start of 2019.  However, given that almost no railroads have submitted extension  requests, it is unlikely we will know how many railroads will be granted an  extension by the December 31, 2018 deadline. Although FRA has  reported taking some actions in response to our March 2018  recommendation that they better prioritize resources, FRA resources and  review times remain a significant concern. These issues, combined with  the ongoing implementation, testing, and interoperability challenges that a  number of railroads reported to us, raise questions as to the extent FRA  and the railroad industry are poised for full PTC implementation by  December 31, 2020.", "Chairman Denham, Ranking Member Capuano, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Susan Fleming, Director, Physical Infrastructure at (202) 512- 2834 or FlemingS@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Susan Zimmerman (Assistant Director); Katherine Blair; Greg Hanna;  Delwen Jones; Emily Larson; Joanie Lofgren; SaraAnn Moessbauer;  Maria Wallace; and Crystal Wesco.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Forty railroads, including Amtrak, commuter, and freight railroads, are required to implement positive train control (PTC)\u2014a communications-based system designed to slow or stop a train that is not being operated safely. Although the deadline for PTC implementation is December 31, 2018, railroads that meet certain criteria may receive a maximum 2-year extension.", "We testified that, as of June 30, 2018, many railroads remain in the early stages of PTC implementation, such as equipment installation and early testing. Most railroads anticipate needing an extension.", "[This text was updated for clarification.]"]}
{"id": "GAO-18-538", "url": "https://www.gao.gov/products/GAO-18-538", "title": "Critical Infrastructure Protection: DHS Should Take Actions to Measure Reduction in Chemical Facility Vulnerability and Share Information with First Responders", "published_date": "2018-08-08T00:00:00", "released_date": "2018-08-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Facilities that produce, use, or store hazardous chemicals could be targeted or used by terrorists to inflict mass casualties, damage, and fear. DHS established the CFATS program to assess the risk posed by these facilities and inspect them to ensure compliance with DHS standards. DHS places high-risk facilities in risk-based tiers and is to conduct inspections after it approves their security plans. Under the CFATS Act of 2014, authorization for the CFATS program expires in January 2019.", "GAO assessed the extent to which DHS has (1) enhanced the process for identifying high-risk facilities and assigning them to tiers, (2) conducted facility inspections and measured facility security, and (3) ensured that information is shared with emergency responders to prepare them for incidents at high-risk facilities. GAO reviewed DHS reports and data on compliance inspections and interviewed DHS officials. GAO also obtained non-generalizable information from 11 trade associations representing chemical facilities regarding DHS outreach and from 15 emergency planning committees about their awareness of CFATS and the chemicals it covers."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2013, the Department of Homeland Security (DHS) has strengthened its processes for identifying high-risk chemical facilities and assigning them to tiers under its Chemical Facility Anti-Terrorism Standards (CFATS) program. Among other things, DHS implemented a quality assurance review process to verify the accuracy of facility self-reported information used to identify high-risk facilities. DHS also revised its risk assessment methodology\u2014used to assess whether chemical facilities are high-risk and, if so, assign them to a risk-based tier\u2014by incorporating changes to address prior GAO recommendations and most of the findings of a DHS-commissioned peer review. For example, the updated methodology incorporates revisions to the threat, vulnerability, and consequence scoring methods to better cover the full range of security issues regulated by CFATS. As of February 2018, a total of 29,195 facilities\u2014including all 26,828 facilities previously assessed and 2,367 facilities new to the program\u2014were assessed using DHS's revised methodology. DHS designated 3,500 of these facilities as high-risk and subject to further requirements.", "DHS has also made substantial progress conducting and completing compliance inspections and has begun to take action to measure facility security but does not evaluate vulnerability reduction resulting from the CFATS compliance inspection process. In 2013, GAO found that the backlog of chemical facility security plans awaiting review affected DHS's ability to conduct compliance inspections, which are performed after security plans are approved. Since then DHS has made progress and increased the number of completed compliance inspections. As of May 2018, DHS had conducted 3,553 compliance inspections. DHS has also begun to update its performance measure for the CFATS program to evaluate security measures implemented both when a facility submits its initial security plan and again when DHS approves its final security plan. However, GAO found that DHS's new performance measure methodology does not measure reduction in vulnerability at a facility resulting from the implementation and verification of planned security measures during the compliance inspection process. Doing so would provide DHS an opportunity to begin assessing how vulnerability is reduced\u2014and by extension, risk lowered\u2014not only for individual high-risk facilities but for the CFATS program as a whole.", "DHS shares some CFATS information, but first responders and emergency planners may not have all of the information they need to minimize the risk of injury or death when responding to incidents at high-risk facilities. Facilities are currently required to report some chemical inventory information, but GAO found that over 200 CFATS chemicals may not be covered by these requirements. To improve access to information, DHS developed a secure interface called the Infrastructure Protection (IP) Gateway that provides access to CFATS facility-specific information that may be missing from required reporting. However, GAO found that the IP Gateway is not widely used at the local level. In addition, officials from 13 of the 15 Local Emergency Planning Committees\u2014consisting of first responders and covering 373 CFATS high-risk facilities\u2014told GAO they did not have access to CFATS data in the IP Gateway. By encouraging wider use of the IP Gateway, DHS would have greater assurance that first responders have information about high-risk facilities and the specific chemicals they possess."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DHS take actions to (1) measure reduction in vulnerability of high-risk facilities and use that data to assess program performance; and (2) encourage access to and wider use of the IP Gateway among first responders and emergency planners. DHS concurred with both recommendations and outlined efforts underway or planned."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thousands of facilities that produce, use, or store hazardous chemicals  could be targeted or used by terrorists to inflict mass casualties, damage,  and fear. These chemicals could be released from a facility to cause harm  to surrounding populations; they could be stolen and used as chemical  weapons or as their precursors (the ingredients for making chemical  weapons); or they could be stolen and used to build an improvised  explosive device. Past incidents demonstrate the danger these chemicals  pose, including the 2013 ammonium nitrate explosion at a fertilizer  storage and distribution facility in West, Texas, which killed 15 people and  caused major damage to or destroyed 193 homes, and more recent high- profile international incidents such as attacks using chlorine in Syria.", "Pursuant to the Department of Homeland Security (DHS) Appropriations  Act, 2007, DHS established the Chemical Facility Anti-Terrorism  Standards (CFATS) program to, among other things, identify high-risk  chemical facilities and assess the risk posed by each; place facilities  identified as high-risk into one of four risk-based tiers; and assess,  approve, and inspect facility security measures to ensure compliance with  regulatory requirements. The Protecting and Securing Chemical  Facilities from Terrorist Attacks Act of 2014 (CFATS Act of 2014),  enacted in December 2014, in effect, reauthorized the CFATS program  for an additional 4 years while also imposing additional implementation  requirements on DHS for the program. DHS\u2019s National Protection and  Programs Directorate\u2019s Infrastructure Security Compliance Division  (ISCD) is responsible for managing the CFATS program.", "We previously reported on various aspects of the CFATS program and  identified challenges DHS was experiencing in implementing and  managing the program. We made a number of recommendations to  strengthen the program to include, among other things, that DHS verify  that certain data reported by facilities are accurate, enhance its risk  assessment approach to incorporate all elements of risk, conduct a peer  review of the program to validate and verify DHS\u2019s risk assessment  approach, document processes and procedures for managing compliance  with site security plans, and update the performance measure for the  program. DHS agreed with our recommendations and has either fully  implemented them or taken action to begin addressing them.", "Although there have been program improvements in recent years,  questions remain about the progress DHS has made implementing  changes to the program and the extent to which CFATS is ensuring that  the highest-risk chemical facilities are more secure as a result. Given that  the authorization for the CFATS program expires in January 2019, you  requested that we assess the progress DHS has made implementing and  managing the CFATS program\u2014both within the context of our prior work  and with regard to other areas\u2014to inform legislative efforts related to  reauthorization of the program. This report discusses the extent to which  the CFATS program has taken action to (1) enhance the process for  identifying high-risk chemical facilities and assigning them to risk-based  tiers, (2) conduct chemical facility inspections and implement an approach  to measure facility security, and (3) ensure that information is shared with  first responders and emergency planners to prepare them for incidents at  high-risk chemical facilities.", "To address our first objective, we reviewed our prior work and analyzed  documentation and data describing ISCD\u2019s efforts to assess, update, and  implement the program\u2019s risk assessment methodology since we first  evaluated it in fiscal year 2013. Specifically, we analyzed ISCD  documents describing the web-based tools used to collect security  information from facilities, and policies and procedures for reviewing and  validating the accuracy of this information. We also reviewed relevant  technical reports, plans, and assessments\u2014including the findings and  recommendations of an ISCD-commissioned peer review and DHS  actions taken in response\u2014describing changes made to ISCD\u2019s risk  assessment methodology. In addition, we obtained data describing the  status of ISCD\u2019s efforts to reassess chemical facilities identified as high- risk and assign them a risk-based tier using the revised risk assessment  methodology. We assessed the reliability of ISCD data by reviewing  relevant documentation and interviewing knowledgeable officials about  system controls. We concluded that these data were sufficiently reliable  for the purposes of this report. We also interviewed ISCD officials to  confirm our understanding of the documents and data provided, and  actions ISCD has taken to enhance the process for identifying high-risk  chemical facilities and assigning them risk-based tiers.", "To address our second objective, we focused on actions DHS has taken  to ensure compliance with the CFATS regulation since we first examined  this area in 2015. We reviewed laws and regulations applicable to how  DHS is to ensure compliance with the CFATS regulation and analyzed  ISCD documents and data on the implementation status of the program\u2019s  compliance inspection process. To examine the program\u2019s compliance  inspection process, we analyzed procedures and guidance\u2014such as  ISCD\u2019s Standard Operating Procedure and Inspection Handbook for  CFATS facility inspections, compliance inspection training documents,  and CFATS Risk-Based Performance Standards Guidance. We also  obtained data on the numbers of completed compliance inspections per  year and the extent to which these inspections resulted in a corrective  action. We assessed the reliability of ISCD compliance inspection data by  reviewing relevant documentation and interviewing knowledgeable  officials and concluded that these data were sufficiently reliable for the  purposes of this report. We also interviewed ISCD officials to confirm our  understanding of the changes made to the inspection process since fiscal  year 2015. In addition, we conducted two site visits to observe scheduled  compliance inspections at facility locations in Delaware and Maryland.  While information obtained from these inspections cannot be generalized  to all inspections, it provides insight and context on how ISCD officials  implement compliance inspection procedures and guidance. Lastly, we  contacted officials representing 15 trade associations with members that  include a wide range of CFATS-regulated chemical facilities and who  participated in the Chemical Sector Coordinating Council. For the 11  trade associations that responded, we conducted semistructured  interviews to obtain their perspectives on DHS\u2019s actions to communicate  lessons learned to CFATS facilities on methods to reduce risk and the  compliance inspection process. The information obtained from these 11  trade associations is not generalizable to the universe of chemical  facilities covered by CFATS; however, it does provide insights into DHS\u2019s  efforts to perform outreach and seek feedback on implementation of the  CFATS program.", "To determine actions taken to measure chemical facility security, we  reviewed the CFATS regulation and analyzed ISCD reports and  information describing efforts to update the performance measure for the  CFATS program since we first evaluated it in fiscal year 2015. We  interviewed ISCD officials to confirm our understanding of the changes  made to revise the methodology of the performance measure and  compared this new approach with criteria in the National Infrastructure  Protection Plan (NIPP) for evaluating the effectiveness of risk  management efforts by, among other things, collecting performance data  to assess progress in achieving identified outputs and outcomes.", "To address our third objective, we reviewed laws, regulations, and other  authorities applicable to how and to what extent DHS is to share CFATS  data with first responders and emergency planners. We reviewed DHS  documentation and interviewed officials to confirm our understanding of  the types of information, methods used, and extent to which the program  shares CFATS-specific information with first responders and emergency  planners and compared DHS\u2019s approach with criteria in the NIPP on how  agencies should share actionable and relevant information across the  critical infrastructure community to build awareness and enable risk- informed decision making. To determine what information first responders  and emergency planners may use to prepare for and respond to  emergencies at chemical facilities and the extent to which they are aware  of CFATS facilities in their jurisdictions, we conducted semistructured  interviews with officials representing a nonrandom sample of 15 Local  Emergency Planning Committees (LEPCs). We selected our sample of  LEPCs\u2014whose jurisdictions include 373 high-risk chemical facilities  regulated by the CFATS program\u2014to represent a range in the geographic  location and numbers of CFATS facilities covered by each. The  information obtained from these interviews is not generalizable nor  reflects the opinions of all first responders and emergency planners; however, it does provide insights into common themes and illustrative  examples across our sample on the topics and issues discussed.", "We also analyzed the list of chemicals, quantities, and concentrations  regulated by the CFATS program and the chemical inventory reporting  requirements outlined in the Emergency Planning and Community Right- to-Know Act of 1986 (EPCRA) to determine the extent to which there may  be differences in the chemicals covered and reported by facilities subject  to CFATS and EPCRA requirements. Using the results of this analysis,  we selected a generalizable random sample of 347 high-risk CFATS  facilities and analyzed ISCD data on their chemical holdings to determine  the extent to which there may be differences in the chemicals and  quantities covered by CFATS and EPCRA and what facilities may be  required to report. We assessed the reliability of ISCD data by reviewing  relevant documentation and interviewing knowledgeable officials and  concluded that these data were sufficiently reliable for the purposes of  this report.", "We conducted this performance audit from July 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["DHS\u2019s National Protection and Programs Directorate leads the country\u2019s  effort to protect and enhance the resilience of the nation\u2019s physical and  cyber infrastructure. The directorate includes the Office of Infrastructure  Protection, which leads the coordinated national effort to reduce risk to  U.S. critical infrastructure posed by acts of terrorism. Within the Office of  Infrastructure Protection, ISCD leads the nation\u2019s effort to secure high-risk  chemical facilities and prevent the use of certain chemicals in a terrorist  act on the homeland; ISCD also is responsible for implementing and  managing the CFATS program.", "The CFATS program is intended to ensure the security of the nation\u2019s  chemical infrastructure by identifying high-risk chemical facilities,  assessing the risk posed by them, and requiring the implementation of  measures to protect them. Section 550 of the DHS Appropriations Act,  2007, required DHS to issue regulations establishing risk-based  performance standards for chemical facilities that, as determined by DHS,  present high levels of risk, to include vulnerability assessments and the  development and implementation of site security plans for such  facilities. DHS published the CFATS interim final rule in April 2007 and  Appendix A to the rule, published in November 2007, lists 322 chemicals  of interest and the screening threshold quantities for each. According to  DHS, subject to certain statutory exclusions, all facilities that  manufacture, store, ship, or otherwise use chemicals of interest above  certain threshold quantities and concentrations are subject to CFATS  reporting requirements. However, only those facilities subsequently  determined to present a high level of security risk are subject to the more  substantive requirements of the CFATS regulation as described below."], "subsections": [{"section_title": "The CFATS Regulation and Process", "paragraphs": ["The CFATS regulation outlines a specific process for how ISCD is to  administer the CFATS program. A chemical facility that possesses any of  322 chemicals of interest in quantities that meet or exceed a threshold  quantity and concentration is required to complete what is called a Top- Screen survey using ISCD\u2019s Chemical Security Assessment Tool (CSAT)  system. CSAT is a web-based application through which owners and  operators of chemical facilities provide self-reported information about the  facility. The Top-Screen is an on-line survey whereby the facility is to  provide DHS various data, including the name and location of the facility  and the chemicals, quantities, and storage conditions at the site.", "ISCD uses a risk-based approach to evaluate chemical facilities of  interest that are required to report under CFATS and determine whether  these facilities are high-risk and therefore subject to further requirements  under the regulation. More specifically, ISCD\u2019s risk assessment  methodology calculates risk scores\u2014based on facility-supplied  information in the Top-Screen survey, among other sources, and taking  into account vulnerability, potential consequences, and threat of a terrorist  attack\u2014and uses these scores to determine which facilities are high-risk.  Those facilities deemed high-risk are then placed into one of four risk- based tiers (Tier 1 through Tier 4). Tier 1 represents the highest risk. A  facility not designated as high-risk is not subject to additional  requirements under the CFATS regulation.", "If ISCD determines that a facility is high-risk (Tier 1\u20134), the facility must  then complete and submit to ISCD a Security Vulnerability Assessment  and one of two types of security plans\u2014a Site Security Plan or an  Alternative Security Program\u2014which describes the existing and planned  security measures to be implemented in order to be in compliance with the applicable risk-based performance standards. Facilities determined  to be Tier 3 or 4 also have an option to submit an expedited security plan  under the CFATS Expedited Approval Program. To meet risk-based  performance standards, covered facilities may choose the security  programs or processes they deem appropriate so long as ISCD  determines that the facilities achieve the requisite level of performance on  each of the applicable areas in their existing and agreed-upon planned  measures. Prior to approving a facility\u2019s security plan, ISCD inspectors  conduct an authorization inspection at the facility to verify and validate  that the content listed in their plan is accurate and complete; that existing  and planned equipment, processes, and procedures are appropriate and  sufficient to meet the established requirements of the risk-based  performance standards; and to assist the facility in resolving any potential  gaps identified. After the facility\u2019s security plan is approved, the facility  enters into the CFATS compliance cycle, which includes regular and  recurring compliance inspections.", "ISCD inspectors conduct compliance inspections to ensure the existing  and planned security measures identified in a facility\u2019s approved security  plan continue to be implemented fully; the equipment, processes, and  procedures described in the security plan are appropriate and sufficient to  meet the established performance standards; and the required corrective  actions have been implemented and are sustainable. This compliance  inspection includes a verification of other data provided to ISCD, including  the Top-Screen. If, through a compliance inspection, ISCD determines a  facility has not fully implemented security measures as outlined in its  approved security plan, ISCD is to provide the facility with written  notification that clearly identifies the deficiencies in the plan and will work  with the facility toward achieving full compliance or, if warranted, take  enforcement action. Figure 1 illustrates the CFATS regulatory process."], "subsections": []}]}, {"section_title": "ISCD Has Strengthened Its Processes for Identifying High-Risk Chemical Facilities", "paragraphs": [], "subsections": [{"section_title": "ISCD Implemented Processes to Verify Self- Reported Information from Chemical Facilities", "paragraphs": ["In response to our prior recommendations, ISCD has taken action to  strengthen its processes for verifying the accuracy of data it uses to  identify high-risk chemical facilities. In July 2015, we found that ISCD  used self-reported and unverified data to determine the risk categorization  for facilities that held toxic chemicals that could threaten surrounding  communities if released. At the time, ISCD required that facilities self- report the Distance of Concern\u2014an area in which exposure to a toxic  chemical cloud could cause serious injury or fatalities from short-term  exposure\u2014as part of its Top-Screen methodology. In our report, we  estimated that more than 2,700 facilities with a toxic release threat  misreported the Distance of Concern and recommended that ISCD (1)  develop a plan to implement a new Top-Screen to address errors in the  Distance of Concern submitted by facilities, and (2) identify potentially  miscategorized facilities that could cause the greatest harm and verify  that the Distance of Concern these facilities reported is accurate.", "ISCD has addressed both of these recommendations. In response to the  first recommendation, ISCD implemented an updated Top-Screen survey  in October 2016 and now collects data from facilities and conducts more  accurate modeling to determine the actual area of impact (formerly called  the Distance of Concern), rather than relying on the facilities\u2019 calculation.  In response to the second recommendation, ISCD officials reported in  November 2016 that they reassessed all facility Top-Screens that  reported threshold quantities of chemicals posing a toxic release threat,  and identified 158 facilities with the potential to cause the greatest harm.  In April 2018, ISCD officials reported that all of these facilities have since  been reassessed using updated Top-Screen information and, where  appropriate, assigned a risk tier.", "In addition, in October 2016, ISCD implemented a quality assurance  review process whereby ISCD officials manually check and verify the  accuracy of facility self-reported Top-Screen information used in  identifying potential high-risk facilities. The objective of ISCD\u2019s review  process is to evaluate the information provided by a chemical facility in  order to recommend approval or rejection of a submitted Top-Screen for  accuracy prior to issuing a letter notifying the facility of its risk tier  designation. According to ISCD, all Top-Screens undergo a quality  assurance review with two exceptions: (1) a facility that registers through  CSAT for the first time and submits a Top-Screen identifying zero  chemicals of interest on site and which does not identify an exclusion; or  (2) a facility that possessed a chemical of interest in the past but  subsequently submits a follow-up Top-Screen for redetermination  identifying they no longer possess the chemical of interest and after ISCD  validates the removal of the chemical of interest. When a Top-Screen  submission is rejected, ISCD sends a letter notifying the facility of the  rejection and requesting that a revised Top-Screen be submitted. In  addition, according to ISCD, they contact facilities prior to a Top-Screen  rejection to ensure the facility understands the required updates and to discuss the potential reporting error. As of February 2018, a total of 1,956  Top-Screen submissions (across 1,799 unique facilities) were rejected as  part of this quality assurance review process since implementing the  updated Top-Screen survey in October 2016, according to ISCD data.  According to ISCD, the majority of these Top-Screens were rejected due  to common reporting errors, such as misreporting the flammability hazard  rating for a chemical of interest subject to a release security issue or not  reporting transportation packaging when a chemical of interest is  identified as being subject to a theft or diversion security issue."], "subsections": []}, {"section_title": "ISCD Has Nearly Completed Applying Its Revised Risk Assessment Methodology for Designating High-Risk Chemical Facilities", "paragraphs": ["ISCD Revised Its Risk Assessment Methodology to More Accurately  Identify and Assign Tiers to High-Risk Chemical Facilities  Since we last evaluated it in 2013, ISCD took action to enhance the  CFATS program\u2019s risk assessment methodology\u2014used to determine  whether covered chemical facilities are high-risk and, if so, assign them a  risk-based tier\u2014by incorporating changes to address prior GAO  recommendations, as well as the findings of an ISCD-commissioned peer  review conducted in 2013, among other efforts. In April 2013, we found  that DHS\u2019s risk assessment approach did not consider all of the elements  of threat, vulnerability, and consequence associated with a terrorist attack  involving certain chemicals. Our work showed that DHS\u2019s CFATS risk  assessment methodology was based primarily on consequences from  human casualties, but did not consider economic consequences, as  called for by the NIPP and the CFATS regulation. We also found that  DHS\u2019s approach was not consistent with the NIPP because it treated  every facility as equally vulnerable to a terrorist attack regardless of  location or on-site security. In addition, DHS was not using threat data for  90 percent of the tiered facilities\u2014those tiered for the risk of theft or  diversion\u2014and using 5-year-old threat data for the remaining 10 percent  of those facilities that were tiered for the risks of release or sabotage.  We recommended that ISCD (1) review and improve its risk assessment  approach to fully address each of the elements of threat, vulnerability,  and consequence, and (2) conduct an independent peer review after  enhancements to the risk assessment approach were complete.", "Partly in response to our findings and recommendations, from 2013  through 2016, ISCD conducted a multiyear effort to review and improve  the CFATS program\u2019s risk assessment approach and tiering methodology  with the primary goal of improving the identification and appropriate  tiering of high-risk chemical facilities. Among these efforts was an ISCD- commissioned peer review of the CFATS tiering methodology conducted  in 2013 by the Homeland Security Studies and Analysis Institute  (HSSAI). HSSAI\u2019s final report summarized the findings of the peer  review and included a list of 44 recommendations for ISCD to implement  in its efforts to improve and revise the CFATS risk assessment and tiering  methodology. ISCD undertook a risk assessment improvement project  to implement most of the recommendations described in the 2013 HSSAI  final report; these efforts included, for example, convening advisory board  meetings with experts drawn from across industry, academia, and  government to review and make additional recommendations on the  proposed improvements to the CFATS risk assessment methodology and  associated tools and processes.", "The result of these efforts is an updated, \u201csecond generation\u201d risk  assessment approach and tiering methodology that addresses both of our  prior recommendations and almost all of the recommendations described  in the 2013 HSSAI final report. Specifically, with regard to our  recommendation that DHS enhance its risk assessment approach to  incorporate all elements of risk, ISCD worked with Sandia National  Laboratories to develop and evaluate a model to estimate the economic  consequences of a chemical attack. In addition, among other  enhancements, the updated risk assessment methodology incorporates  revisions to the threat, vulnerability, and consequence scoring methods to  better cover the full range of chemical security issues regulated by the  CFATS program. Additionally, with regard to our recommendation that  DHS conduct a peer review after enhancing its risk assessment  approach, DHS conducted peer reviews and technical reviews with  government organizations and facility owners and operators, and worked  with Sandia National Laboratories to verify and validate the CFATS  program\u2019s revised risk assessment methodology which was completed in  January 2017. In addition, as of May 2018, ISCD has considered,  implemented, or is in the process of implementing updates that address  39 of the 44 recommendations in the HSSAI peer review of the original  CFATS risk assessment methodology. According to ISCD, DHS must  undertake a rulemaking to update the CFATS regulation and to obtain  public comment on any proposed changes to implement the remaining  recommendations. These relate to possible changes in how or to what  extent the CFATS program regulates the treatment of certain chemicals  of interest, chemical weapons and their precursors, and other fuels or fuel  mixtures.", "Implementation of the Revised Risk Assessment Methodology Is  Nearly Complete  Beginning in October 2016, ISCD notified chemical facilities that were not  new to the CFATS program\u2014that is, all facilities that had previously  submitted a Top-Screen and had reported chemicals of interest above the  threshold quantity and concentration on their most recent Top-Screen\u2014to  submit a revised Top-Screen in CSAT 2.0 so that they may be re- assessed using ISCD\u2019s revised risk assessment methodology. As of  February 2018, a total of 29,195 chemical facilities were assessed using  ISCD\u2019s revised risk assessment methodology, with 3,500 (or 12 percent)  of these facilities designated as high-risk (i.e., assigned to tiers 1 through  4). The total of 29,195 chemical facilities includes 26,828 facilities that  were previously assessed using the original risk assessment  methodology and an additional 2,367 facilities new to the CFATS  program, as shown in figure 2.", "Of the 3,500 tiered facilities, 265 were new to the CFATS program; 889  were not new to the program, but were previously not tiered and were  reassessed as high-risk and assigned a tier; and 1,345 were previously  tiered but were reassigned to a different tier. Also, 430 facilities that were  previously tiered were no longer tiered. As of May 2018, ISCD had  pending risk assessments for an additional 241 chemical facilities that  were not new to the CFATS program but were not previously tiered. ISCD  officials did not provide an estimated target completion date for these  pending risk assessments, noting that completing the assessments is  highly dependent on the facilities providing the necessary Top-Screen  information.", "According to ISCD, there are four main drivers of the changes in facility  tiering that resulted from implementing the second-generation risk  assessment methodology:  facilities placed in a lower tier due to implementation of revised  consequence scoring methods that more accurately account for the  impact of quantities of the chemicals subject to theft/diversion security  issues;  facilities placed in a higher or lower tier for chemicals of interest due  to improvements to the distribution of population in consequence  modeling for chemicals subject to release-toxic and release- flammable security issues;  increases in the number of facilities tiered for select chemical weapon  precursors due to the implementation of revised consequence scoring  methods that more accurately account for the impact of certain  chemicals of interest; and  changes in tiering due to newly reported increases, decreases, and  modifications of chemical holdings."], "subsections": []}, {"section_title": "ISCD Has Made Progress Conducting Compliance Inspections but Does Not Measure Reduction in Facility Vulnerability ISCD Has Increased the Number of Completed Compliance Inspections and Issued Two Corrective Actions for Noncompliance with Security Plans", "paragraphs": ["Since 2013, ISCD has reduced its backlog of unapproved site security  plans and increased the number of conducted compliance inspections. As  discussed earlier, in order to approve a facility\u2019s site security plan, ISCD  inspectors conduct an authorization inspection at the facility to verify and  validate that the content listed in their plan is accurate and complete; that  existing and planned equipment, processes, and procedures are  appropriate and sufficient to meet the established requirements of the  risk-based performance standards; and to assist the facility in resolving  any potential gaps identified. After the facility\u2019s security plan is approved,  the facility enters into the CFATS compliance cycle and is subject to a  compliance inspection. In 2013, we calculated that it could take from 7 to  9 years to review and approve the approximately 3,120 site security plans  submitted by facilities that had been designated as high-risk but that  ISCD had not yet begun to review. In 2015, we found that ISCD had  made improvements to its processes for reviewing and approving site  security plans and substantially reduced the time needed to approve  remaining site plans to between 9 and 12 months.", "Our analysis of ISCD data since our 2015 report showed that ISCD has  made substantial progress conducting and completing compliance  inspections. Specifically, our analysis showed that ISCD has increased  the number of compliance inspections completed per year since ISCD  began conducting compliance inspections in 2013. For the 2,466 high-risk  facilities with an approved site security plan as of May 2018, ISCD had  conducted 3,553 compliance inspections. Table 1 shows the number of  conducted compliance inspections from fiscal year 2014 to May 2018.", "ISCD officials project they will conduct fewer compliance inspections in  fiscal year 2018 than in fiscal year 2017 due to two reasons. First, ISCD  officials stated the program made progress resolving the backlog of  facilities that required compliance inspections in fiscal years 2016 and  2017 when it conducted over 2,600 compliance inspections. Second,  ISCD officials stated that the program\u2019s revised risk assessment  approach and continued outreach efforts have resulted in an increase in  the number of identified facilities with chemicals of interest. As a result,  ISCD officials stated they project an increased number of authorization  inspections and fewer compliance inspections in fiscal year 2018 and  2019 as new facilities enter the program.", "ISCD increased the number of compliance inspections conducted from  fiscal years 2014 to 2017 and less than 1 percent of compliance  inspections during this period resulted in a determination that a facility was not in compliance. During a compliance inspection, if an inspector  finds that a facility is noncompliant with its security plan, the CFATS  regulation authorizes ISCD to take enforcement action, such as issuing  an order for corrective action to the facility. Of the 3,553 compliance  inspections ISCD conducted between fiscal year 2014 and May 2018,  ISCD issued two corrective actions\u2014both to Tier 4 facilities\u2014because  these facilities were not in compliance with their approved site security  plan.", "Specifically, during the compliance inspection of one facility, which was  determined to be high-risk based on both the release and theft/diversion  security issues, ISCD found that the facility\u2019s site security plan did not  identify several existing or planned measures to secure the facility\u2019s  chemicals of interest. For example, the facility\u2019s site security plan did not  identify measures to monitor restricted areas or potentially critical targets  within the facility against a theft or release attack. In addition, while the  facility\u2019s site security plan identified a chain link fence and an alarm on a  gate to a secure cage that houses the chemicals of interest, ISCD  inspectors found no evidence of either. During the compliance inspection  of the second facility, which was determined to be high-risk based on the  theft and diversion security issue, ISCD inspectors were unable to verify if  the facility\u2019s intrusion detection system was properly functioning and that  an individual not employed by the facility may have had access to the  facility\u2019s chemicals of interest without a proper background check. Both of  these facilities took actions to implement the measures identified in their  site security plan and were later found to be in compliance with their site  security plans. ISCD officials attribute the low number of corrective  actions the program has issued to the program\u2019s collaborative approach  of working with facilities to ensure compliance. For example, of the two  facilities ISCD found to be in noncompliance, ISCD conducted a  compliance assistance visit with both facilities to provide assistance. In  addition to compliance assistance visits, ISCD officials stated that the  program has other collaborative tools, such as the CFATS Help Desk, to  help ensure facility compliance."], "subsections": []}, {"section_title": "ISCD Continues to Implement Changes to Compliance Inspections and Improve Efficiency", "paragraphs": ["ISCD continues to implement changes that are intended to enhance  compliance inspections. For example, ISCD officials stated the program  continues to conduct preinspection phone calls with facilities to help them  prepare for compliance inspections. In addition, ISCD officials stated they  developed and provided supplemental guidance in fiscal year 2017 on  steps ISCD inspectors need to take during a compliance inspection.  ISCD\u2019s supplemental guidance includes, among other things, best  practices and lessons learned for conducting inspections and reporting  items identified by the inspections. ISCD officials stated they plan to  incorporate this supplemental guidance into their compliance inspection  standard operating procedures in the third quarter of fiscal year 2018 and  to update their compliance inspection handbook in the fourth quarter of  2018.", "In addition to updating its guidance for inspectors, ISCD has taken steps  to improve the efficiency of compliance inspections. For example, ISCD  continues its outreach efforts to chemical facilities on the inspection  process. As part of these efforts, ISCD published guidance for facilities on  steps to take to prepare for the compliance inspection, including  information on the appropriate personnel and documentation that should  be made available during the inspection. Finally, ISCD increased the  number of compliance assistance visits with facilities to better prepare  them for inspections. Representatives from 9 of the 11 industry  associations we spoke with told us that ISCD\u2019s communication with  facilities had improved the efficiency of compliance inspections and  increased the ability of facilities to comply with the risk-based  performance standards.", "We accompanied inspectors on two separate compliance inspections to  observe how the inspections were carried out and how inspectors used  the risk-based performance standards to determine compliance. For  example, during the compliance inspection of a facility identified as high- risk based on the theft and diversion security issue, we observed facility  personnel and ISCD inspectors discussing the preinspection phone call  ISCD had conducted to assist the facility in preparation for their  compliance inspection. This discussion included confirmation that the  facility communicated with the local fire and police departments and had  requested their presence at the inspection. In addition, we observed the  inspectors analyzing the facility\u2019s emergency response plan to determine  whether the facility\u2019s plans were consistent with the applicable risk-based  performance standards. We also observed the inspectors subsequently  interviewing local fire and police department officials that were present  during the inspection to validate statements made by the facility and to  confirm that both entities received the facility\u2019s emergency plan. We  accompanied the inspectors and facility personnel on a tour of the facility  where inspectors observed existing measures the facility used to protect  the chemicals of interest, including the facility\u2019s fencing barrier. We also  observed inspectors testing security measures, including the facility\u2019s  access controls put in place to prevent unauthorized personnel gaining  access to the chemicals of interest.", "At the other compliance inspection we observed, the facility personnel  and ISCD inspectors confirmed a preinspection phone call to prepare the  facility for the inspection. This phone call included a discussion of the  appropriate training records and contract documentation that inspectors  needed to confirm compliance with the applicable risk-based performance  standard. During the inspection, we observed that the facility made this  documentation and the appropriate personnel available to answer ISCD  inspector questions on the security training the facility held during the  prior year. We also observed inspectors verifying that existing measures,  such as the facility\u2019s fence barrier, were still present and not  compromised with breaches. In addition, we observed the inspectors  testing key cards to the building that housed the chemicals of interest to  ensure the cards prevented unauthorized access. Finally, we observed  inspectors requesting a demonstration of how the facility\u2019s chemicals of  interest are delivered to the facility and what controls were in place to  monitor third-party contractors during delivery of chemicals of interest.", "We also discussed the compliance inspection process with  representatives from trade associations that represent facilities covered  by CFATS and considered high-risk. Representatives from 7 of the 11  trade associations that we spoke with stated that ISCD\u2019s implemented  changes have improved the compliance inspection process since the  program\u2019s inception. Specifically, representatives from three trade  associations stated that ISCD inspectors\u2019 efforts to increase  communication with facilities, including preinspection phone calls and  compliance assistance visits, have increased the ability of facilities to  ensure they are compliant with their approved site security plan.  However, representatives from 3 of the 11 trade associations we spoke  with also noted some issues with the compliance inspection process.  Specifically, officials from these 3 associations stated that ISCD  inspectors inconsistently apply the risk-based performance standards  relative to the measures the facilities implemented. Some of this  inconsistency may be due, in part, to the flexibility inherent in the risk- based performance standards which give facilities the discretion or  latitude to tailor security based on conditions and circumstances. For  example, the amount and type of chemicals of interest may vary by  facility, so some facilities may require additional security measures be put  in place to ensure protection of these chemicals. In addition, facilities vary  by geographic location, which may affect the measures the facility needs  to implement to protect the chemicals of interest from potential theft or  diversion.", "DHS officials stated that they believe any perceived inconsistency is due  to the flexibility in application of the risk-based performance standards  and the variety of facility conditions that contribute to the appropriateness  of different security measures. Officials explained that, for example,  inspectors would likely recommend that a large campus-type facility not  invest in a perimeter fence line but instead utilize asset-based barriers to  satisfy the performance standards. Officials noted that facilities can  choose to employ security measures which best fit their specific situation  and can request that inspectors provide multiple options for their  consideration."], "subsections": []}, {"section_title": "DHS\u2019s Methodology for Measuring Changes in Facility Site Security Does Not Reflect Reduction in Vulnerability", "paragraphs": ["ISCD developed its performance measure methodology for the CFATS  program in order to evaluate security changes made by high-risk  chemical facilities, but the methodology does not measure the program\u2019s  impact on reducing a facility\u2019s vulnerability to an attack. In 2015 we found  that while ISCD\u2019s performance measure for the CFATS program was  intended to reflect security measures implemented by facilities and the  overall impact of the CFATS regulation on facility security, the metric did  not solely capture security measures that are implemented by facilities  and verified by ISCD. We recommended that DHS develop a  performance measure that includes only planned security measures that  have been implemented and verified. In response to our finding and  recommendation, ISCD\u2019s performance measure requires that ISCD  officials verify that planned measures have been implemented in  accordance with the approved site security plan (or alternative security  program) by compliance inspection or other means before inclusion in the  performance measure calculation.", "ISCD has since decided to develop a new methodology and performance  measure for the CFATS program. In 2016, ISCD began development of  an approach called the guidepost-based site security plan scoring  methodology. ISCD officials stated they plan to use the methodology to  evaluate the security measures a facility implemented from initial state\u2014 when a facility submits its initial site security plan\u2014to the facility\u2019s  approved security plan, according to ISCD officials. Officials stated that  once implemented, the methodology\u2019s resulting performance measure will  be maintained internally and, if approved, may be used to satisfy the  program\u2019s reporting requirements consistent with the Government  Performance and Results Act (GPRA) and included in DHS\u2019s Annual  Performance Report.", "The methodology organizes a facility\u2019s security measures based on five  guideposts. Using the five guideposts as a framework, the security  measures a facility reports in its site security plan are evaluated by ISCD  under the applicable guidepost to determine the level of security  performance. For example, the plan contains a question on whether a  facility has a perimeter fence barrier and if so, what type, such as a chain  link fence, metal fence, or vinyl fence. ISCD uses the facility\u2019s responses  to assign a numerical value that indicates the level of security  performance for the type of fence a facility uses as a perimeter barrier.  The scores of the five guideposts are then aggregated and the resulting  score represents the site security plan score for a facility. Officials stated  that a facility\u2019s site security plan score is developed when the facility  submits its initial site security plan and again when ISCD approves its site  security plan and the facility has completed the CFATS inspection  process.", "ISCD officials stated the purpose of the methodology is to measure the  increase in security attributed to the CFATS program and stated that the  methodology is not intended to measure risk reduction. As a result, the  methodology and resulting performance metric do not reflect the  program\u2019s impact on reducing a facility\u2019s vulnerability to an attack. While  ISCD officials stated the program is exploring how to use the site security  plan scores of a facility, this methodological approach may provide ISCD  an opportunity to begin assessing how vulnerability is reduced and, by  extension, risk is lowered, not only for individual facilities but for the  program as a whole. The NIPP calls for evaluating the effectiveness of  risk management efforts by collecting performance data to assess  progress in achieving identified outputs and outcomes. The purpose of  the CFATS program is to ensure facilities have security measures in  place to reduce the risks associated with certain hazardous chemicals  and to prevent these chemicals from being exploited in a terrorist attack.  A measure that reflects risk reduction may include how the CFATS  inspection process measures the reduction of one element of risk\u2014 vulnerability\u2014of high-risk facilities to a terrorist attack. ISCD officials  stated that challenges exist with incorporating vulnerability into the  measure\u2019s methodology, such as how to accurately measure a facility\u2019s  vulnerability to an attack before the facility started the CFATS inspection  process.", "We recognize challenges ISCD might face in incorporating vulnerability  into its scoring methodology. In our prior work, we acknowledged that  assessing the benefits of a program\u2014such as reducing a high-risk  facility\u2019s vulnerability to an attack\u2014is inherently challenging because it is  often difficult to isolate the impact of an individual program on behavior  that may be affected by multiple other factors. However, ISCD could  take steps to evaluate vulnerability reduction resulting from the CFATS  compliance inspection process. For example, because facilities conduct  their own vulnerability assessments when developing their site security  plan for submission to ISCD, ISCD could establish a vulnerability baseline  score when it evaluates a facility\u2019s security measures during its initial  review of the facility\u2019s plan. ISCD could then use this baseline score as  the starting point for assessing any reduction in vulnerability that ISCD  can document that has occurred as a result of security measures  implemented by the facility during the compliance inspection process.  As the CFATS program continues to mature and ISCD begins its efforts  to assign scores to facility site security plans, incorporating assessments  of reductions in vulnerability at individual facilities and across the  spectrum of CFATS facilities as a whole would enable ISCD to better  measure the impact of the CFATS compliance inspection process on  reducing risk and increasing security nationwide."], "subsections": []}]}, {"section_title": "First Responders and Emergency Planners May Not Have Information Needed to Respond to Incidents at High-Risk Chemical Facilities", "paragraphs": ["We found over 200 chemicals covered by CFATS that may not be  included in the chemical inventory information that officials told us they  rely on to prepare for and respond to incidents at chemical facilities. ISCD  shares some CFATS information with state and local officials, including  access to CFATS facility-specific data via a secure portal; however, this  portal is not widely used at the local level by first responders and  emergency planners."], "subsections": [{"section_title": "First Responders and Emergency Planners May Not Have Sufficient Information to Prepare for and Respond to Incidents at High-Risk Chemical Facilities", "paragraphs": ["First responders and emergency planners may not have the necessary  information to prepare for and respond to incidents at high-risk chemical  facilities regulated by the CFATS program. As mentioned earlier, on April  17, 2013, about 30 tons of ammonium nitrate fertilizer\u2014containing a  CFATS chemical of interest\u2014detonated during a fire at a fertilizer storage  and distribution facility in West, Texas killing 15 people, including 12 first  responders, and injuring more than 260 others. This event, among others,  prompted the President to issue Executive Order 13650 to improve  chemical facility safety and security in coordination with owners and  operators. The Executive Order established a Chemical Facility Safety  and Security Working Group and included directives for the working group  to, among other things, improve operational coordination with state, local,  and tribal partners. The working group created a federal plan of action  consisting of actions to improve the safety and security of chemical  facilities.", "One key element of this plan focused on the Emergency Planning and  Community Right-to-Know Act of 1986 (EPCRA), which was intended to  encourage and support emergency planning efforts at the state and local  levels. In accordance with EPCRA, state and local entities, such as  Local Emergency Planning Committees (LEPCs)\u2014consisting of  representatives including local officials and planners, facility owners and  operators, first responders, and health and hospital personnel, among  others\u2014were created. These LEPCs were designed to (1) prepare for  and mitigate the effects of a chemical incident and (2) ensure that  information on chemical risks in the community is provided to first  responders and the public. The working group acknowledged there was a  need to share data with representatives of these state and local entities to  enable them to identify gaps and inconsistencies in their existing  information that could reveal previously unknown risks in their  communities. For facilities subject to EPCRA requirements, this data is to  include, among other things, information about chemicals stored or used  at the facility for which facilities are required to submit an emergency and  hazardous chemical inventory form to these state and local entities. The  working group\u2019s federal plan also included a DHS commitment to share  certain CFATS data elements with first responders, state agencies and  LEPCs to help communities identify and prioritize risks and develop a  contingency plan to address those risks while acknowledging that access  to certain sensitive portions of CFATS data will remain restricted to  officials with a \u201cneed-to-know\u201d so as to appropriately balance security  risks.", "In our interviews with 15 LEPCs\u2014whose jurisdictions include 373 high- risk chemical facilities regulated by the CFATS program\u2014we found that  officials rely on information reported on EPCRA chemical inventory forms  to prepare for and respond to incidents at CFATS facilities. These  officials may not have sufficient information to respond to emergencies at  CFATS facilities because EPCRA reporting requirements may not cover  some of the chemicals covered under the CFATS program. Specifically,  we analyzed the chemicals covered by both CFATS and EPCRA\u2019s  reporting requirements and found there are over 200 CFATS chemicals of  interest that, depending upon state reporting guidelines, may not be  covered by EPCRA reporting requirements. Several of these chemicals  may require specific response techniques to minimize the risk of injury or  death to first responders and the surrounding community. For example, in  the event of fire, aluminum powder, a chemical not subject to EPCRA  reporting requirements but regulated under CFATS, produces flammable  gases when in contact with water and requires responders to instead use  a dry chemical or sand to extinguish the fire. Based on our analysis of  tiered CFATS facilities, we estimate that about 32 percent of these high- risk facilities possess at least one chemical that may not be covered by  EPCRA reporting requirements.", "In addition, we found these LEPCs may lack information on the CFATS  facilities in their jurisdictions. Specifically, officials representing 11 of the  15 LEPCS we interviewed said they were not aware of which facilities in  their jurisdiction were regulated by the CFATS program. Of these 11  LEPCs, officials from 8 LEPCs stated it would be very helpful or critical to  know this information and officials from 2 LEPCs stated it would be  somewhat helpful. According to these officials, this information would  assist LEPCs, some of which have hundreds of facilities in their  jurisdiction, to prioritize the most significant facilities for additional  planning or scheduling of drills and exercises. Additionally, officials  representing 5 LEPCs stated they were not aware of the differences  between CFATS chemicals of interest and those chemicals subject to  EPCRA reporting requirements. These LEPC officials stated that, among  other things, it is critical to have a comprehensive understanding of all  chemicals at a facility and that this information is very important for  emergency responders to be aware of when responding to an incident."], "subsections": []}, {"section_title": "ISCD Could Take Additional Action to Share Information about High- Risk Facilities with First Responders and Emergency Planners", "paragraphs": ["Consistent with the CFATS Act of 2014, ISCD is to play a role in ensuring  that first responders and emergency planners are properly prepared for  and provided with the situational awareness needed to respond to  security incidents at high-risk chemical facilities. While the CFATS Act  of 2014 does not specifically require that information be shared directly  with first responders, ISCD has taken steps to share CFATS information  with state and local officials to help ensure that first responders are  prepared to respond to such security incidents. These steps include,  among other things, ensuring that facilities are developing and exercising  an emergency plan to respond to security incidents internally and with  assistance of local law enforcement and first responders. Planning and  training are important to ensure that facility personnel, onsite security, law  enforcement, and first responders are ready to respond to external and  internal security incidents. Additionally, these planning activities and  relationships with first responders can assist in reducing the impact of  these incidents. According to ISCD officials, to verify compliance with this  requirement, ISCD inspectors validate facility outreach to first responders,  such as local law enforcement and fire departments, through review of  facility documentation, including emails with first responders, records of  drills, and logs of meetings and tours, or through direct contact with the  local first responders by the inspection team.", "In addition, the Executive Order 13650 working group sought to, among  other things, strengthen community planning and preparedness and  ensure that first responders and emergency planners are aware of the  risks associated with hazardous chemicals in their communities. Included  was a goal to increase information-sharing with communities that are near  chemical facilities. In a May 2014 report, this working group identified  certain information, including the name and quantity of chemicals at a  facility, as the most helpful to first responders and emergency planners.  This information is intended to enable emergency planners to conduct an  analysis to identify gaps and inconsistencies in their existing information  that could reveal previously unknown risks in their communities.", "ISCD has taken action to ensure first responders and emergency  planners have access to CFATS data. For example, in response to  Executive Order 13650, ISCD shares CFATS data through the  Infrastructure Protection (IP) Gateway. This online portal contains  critical infrastructure data and analytic tools, including data on covered  CFATS facilities, for use by federal officials, state, local, tribal, and  territorial officials, and emergency response personnel. CFATS data  available in the IP Gateway includes, among other things, facility name,  location, risk tier, and chemicals on-site and is accessible to authorized  federal and other state, local, tribal, and territorial officials and responders  with an established need-to-know. The IP Gateway provides these  officials and responders access to CFATS facility-specific information that  may be unreported on EPCRA chemical inventory forms. This CFATS  facility-specific information can help ensure these groups are properly  prepared to respond to incidents at high-risk chemical facilities in their  jurisdictions.", "While the IP Gateway is a mechanism for sharing names and quantities  of chemicals at CFATS high-risk facilities with first responders and  emergency planners, we found it is not widely used by officials at the local  level. ISCD told us that in May 2018 they published three revised fact  sheets and included information on the IP Gateway in presentation  materials that officials told us was intended to increase promotion and  use of the IP Gateway. However, according to DHS, there are 14  accounts categorized at the local level whose access to the IP Gateway  layer includes the names and quantities of chemicals at CFATS facilities.  A local account indicates the individual with access is a county- or city- level employee or contractor. Additionally, while not generalizable to all  LEPCs, officials representing 7 of the 15 LEPCs we interviewed were not  aware of the IP Gateway and officials representing 13 of the 15 LEPCs  stated that they do not have access to CFATS information within the IP  Gateway. Of the 13 officials that reported they did not have access, 11  said that it would be helpful or critical to have access for several reasons.  Specifically, officials representing these LEPCs stated that this  information would assist them to better prepare and respond to incidents  and help emergency planners prioritize the most critical sites among the  thousands of facilities that they oversee.", "According to DHS officials, their outreach plan, developed in March 2015,  specifically addresses regular engagement with LEPCs, among other  groups. However, these officials acknowledged that information may not  be reaching some state and local officials due to a number of factors,  including the large number of LEPCs and first responders across the  country, and changes in the level of LEPC activity and personnel over  time. While we recognize these challenges, providing first responders and  emergency planners access to CFATS facility-specific information,  including the name and quantity of chemicals at a facility, can help ensure  these groups are properly prepared to respond to incidents at high-risk  chemical facilities in their jurisdictions. The NIPP states that agencies  should share actionable and relevant information across the critical  infrastructure community\u2014including first responders and emergency  planners\u2014to build awareness and enable risk-informed decision making  as these stakeholders are crucial consumers of risk information.  Additionally, the 2015 Emergency Services Sector-Specific Plan, an  Annex to the 2013 NIPP, further calls for engaging with local emergency  planning organizations, such as LEPCs, to enhance information-sharing  and analytical capabilities for incident planning, management, and  mitigation between stakeholders. The IP Gateway is one way through  which ISCD can share CFATS facility-specific information, including the  name and quantity of chemicals at high-risk facilities with first responders  and emergency planners. As discussed earlier, although ISCD is not  required to share CFATS facility-specific information directly with first  responders, this information is critical to prepare for and respond to  incidents at high-risk chemical facilities and to protect them and their  communities from injury or death. By exploring ways to improve  information-sharing of CFATS facility-specific data, such as promoting  wider use of the IP Gateway among first responders and emergency  planners, DHS will have greater assurances that the emergency response  community has access to timely information about high-risk chemical  facilities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DHS, through ISCD, has made improvements to the CFATS program.  ISCD has taken action to strengthen its processes for verifying the  accuracy of data it uses to identify high-risk chemical facilities, revised its  risk assessment methodology to more accurately identify and assign  high-risk chemical facilities to tiers, and has nearly completed its efforts to  apply this new methodology to facilities covered by CFATS. Furthermore,  ISCD has conducted an increased number of compliance inspections and  continues to make changes to improve the efficiency of the inspection  process. While ISCD has developed a new methodology and  performance measure for the CFATS program in order to evaluate  security changes made by high-risk chemical facilities, we found that the  methodology and metric do not reflect the program\u2019s impact on reducing a  facility\u2019s vulnerability to an attack. ISCD may have an opportunity to  explore how reductions in vulnerability at individual facilities resulting from  the CFATS compliance inspection process could be used to develop an  overall measure of the performance of the CFATS program in reducing  risk and increasing security nationwide. Such a measure would be  consistent with the NIPP, which calls for evaluating the effectiveness of  risk management efforts by collecting performance data to assess  progress in achieving identified outputs and outcomes. Moving forward,  ISCD could also take additional actions to ensure information about high- risk chemical facilities is shared with first responders and emergency  planners. During our review, we found that local emergency responders  may not have the information they need to adequately respond to  incidents at CFATS facilities; a situation that could expose them and their  communities to potentially life-threatening situations. While the IP  Gateway is a mechanism for sharing names and quantities of chemicals  at high-risk facilities with first responders and emergency planners, we  found it is not widely used by officials at the local level. The NIPP states  that agencies should share actionable and relevant information across the  critical infrastructure community\u2014including first responders and  emergency planners\u2014to build awareness and enable risk-informed  decision making, as these stakeholders are crucial consumers of risk  information. By improving information-sharing with first responders and  emergency planners, such as promoting access to and wider use of the  IP Gateway, DHS will have greater assurances that the emergency  response community has access to timely information about high-risk  chemical facilities that could help protect them from serious injury or  death."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DHS:  The Director of ISCD should incorporate vulnerability into the CFATS site  security scoring methodology to help measure the reduction in the  vulnerability of high-risk facilities to a terrorist attack, and use that data in  assessing the CFATS program\u2019s performance in lowering risk and  enhancing national security. (Recommendation 1)", "The Assistant Secretary for Infrastructure Protection, in coordination with  the Director of ISCD, should take actions to encourage access to and  wider use of the IP Gateway and explore other opportunities to improve  information-sharing with first responders and emergency planners.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS  provided written comments, which are reproduced in full in appendix I,  and technical comments, which we incorporated as appropriate. In its  comments, DHS concurred with both recommendations and outlined  efforts underway or planned to address them.", "Regarding the first recommendation that ISCD should incorporate  vulnerability into the CFATS site security scoring methodology to help  measure the reduction in the vulnerability of high-risk facilities and use  that data to further assess the CFATS program\u2019s performance in lowering  risk and enhancing national security, DHS concurred but noted that  developing a system that could numerically evaluate vulnerabilities will be  challenging. DHS stated that implementing the recommendation would  likely require, among other things, revising the regulatory language  describing CFATS vulnerability assessments and updating tools used to  gather them, potentially creating a significant burden on both industry and  government. DHS added that its new proposed performance metric,  described earlier in this report, demonstrates the enhancement to national  security resulting from the CFATS program and, by extension, the  program\u2019s impact on vulnerability and overall risk.", "As stated earlier, we recognize challenges ISCD might face in  incorporating vulnerability into its scoring methodology. In our prior work,  we acknowledged that assessing the benefits of a program\u2014such as  reducing a high-risk facility\u2019s vulnerability to an attack\u2014is inherently  challenging because it is often difficult to isolate the impact of an  individual program on behavior that may be affected by multiple other  factors. However, in order to fully implement this recommendation, ISCD  needs to consider steps it can take to evaluate vulnerability reduction  resulting from the CFATS compliance inspection process without  revisions to the regulation or by creating a significant burden on both  industry and government. We noted, for example, that ISCD could  establish a vulnerability baseline score when it evaluates a facility\u2019s  security measures during its initial review of the facility\u2019s site security  plan. ISCD could then use this baseline score as the starting point for  assessing any reduction in vulnerability that ISCD can document that has  occurred as a result of security measures implemented by the facility  during the compliance inspection process. As the CFATS program  continues to mature and ISCD begins its efforts to assign scores to facility  site security plans, incorporating assessments of reductions in  vulnerability at individual facilities and across the spectrum of CFATS  facilities as a whole would enable ISCD to better measure the impact of  the CFATS compliance inspection process on reducing risk and  increasing security nationwide.", "Regarding the second recommendation that the Office of Infrastructure  Protection and ISCD take actions to encourage access to and wider use  of the IP Gateway and explore other opportunities to improve information- sharing with first responders and emergency planners, DHS stated that it  has various outreach activities underway, among other information- sharing efforts, to either directly share or ensure that high-risk chemical  facilities are sharing CFATS information with first responders and  emergency planners. DHS added that, to continue these efforts and to  encourage better utilization of the IP Gateway, it will ensure contact is  made with LEPCs representing the top 25 percent of CFATS high-risk  chemical facilities no later than the end of the second quarter of fiscal  year 2019. While the outreach and information-sharing efforts DHS  described are a step in the right direction, in order to fully implement this  recommendation it is critical that the intent of any actions taken is to  ensure that all first responders and emergency planners with a need-to- know are provided with timely access to CFATS facility-specific  information in their jurisdictions. This information should include the name  and quantity of chemicals at a facility so as to help these groups be  properly prepared to respond to incidents at high-risk chemical facilities  and to minimize the risk of injury or death to first responders and the  surrounding community. Furthermore, it is important that these actions  are focused on ensuring that this CFATS facility-specific information is  shared with first responders and emergency planners representing the  entirety of CFATS facilities determined to be high-risk, not just those that  represent the top 25 percent of CFATS high-risk facilities.", "We are sending copies of this report to the Secretary of Homeland  Security, the Under Secretary for the National Protection Programs  Directorate, 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 questions about this report, 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. Key contributors to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, John Mortin (Assistant Director),  Hugh Paquette (Analyst in Charge), Chuck Bausell, Kristen Farole,  Michele Fejfar, Brandon Jones, Tom Lombardi, Mike Moran, Rebecca  Parkhurst, and Claire Peachey made significant contributions to this  report."], "subsections": []}]}], "fastfact": ["Facilities that handle hazardous chemicals could be targets for terrorists\u2014e.g., these chemicals could be stolen and used to build explosive devices. The Department of Homeland Security inspects such facilities to ensure they comply with security standards. DHS also shares information about these facilities with local officials so that first responders are prepared for potential security incidents.", "However, we found that first responders may not have all the information they need to safely respond to incidents at these facilities. We recommended, among other things, that DHS provide first responders with better access to this information."]}
{"id": "GAO-17-805T", "url": "https://www.gao.gov/products/GAO-17-805T", "title": "Telecommunications: Additional Action Needed to Mitigate Significant Risks in FCC's Lifeline Program", "published_date": "2017-09-14T00:00:00", "released_date": "2017-09-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Created in the mid-1980s, FCC's Lifeline program provides discounts to eligible low-income households for home or wireless telephone and, as of December 2016, broadband service. Lifeline reimburses telephone companies that offer discounts through the USF, which in turn is generally supported by consumers by means of a fee charged on their telephone bills.", "This testimony is based on GAO's May 2017 report and discusses steps FCC has taken to measure Lifeline's performance in meeting goals; steps FCC and USAC have taken to enhance controls over finances, subscribers, and providers; and any weaknesses that might remain.", "For the May 2017 report, GAO analyzed documents and interviewed officials from FCC and USAC. GAO also analyzed subscriber data from 2014 and performed undercover tests to identify potential improper payment vulnerabilities. The results of this analysis and testing are illustrative, not generalizable."]}, {"section_title": "What GAO Found", "paragraphs": ["In its May 2017 report GAO found the Federal Communications Commission (FCC) has not evaluated the Lifeline program's (Lifeline) performance in meeting its goals of increasing telephone and broadband subscribership among low-income households by providing financial support, but it has recently taken steps to begin to do so. FCC does not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service, or whether participants are using Lifeline as a secondary phone service. FCC revamped Lifeline in March 2016 to focus on broadband adoption; however, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. Without an evaluation, which GAO recommended in March 2015, FCC is limited in its ability to demonstrate whether Lifeline is efficiently and effectively meeting its program goals. In a March 2016 Order, FCC announced plans for an independent third party to evaluate Lifeline design, function, and administration by December 2020.", "FCC and the Universal Service Administrative Company (USAC)\u2014the not-for-profit organization that administers the Lifeline program\u2014have taken some steps to enhance controls over finances and subscriber enrollment. For example, FCC and USAC established some financial and management controls regarding billing, collection, and disbursement of funds for Lifeline. To enhance the program's ability to detect and prevent ineligible subscribers from enrolling, FCC oversaw completion in 2014 of an enrollment database and, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules.", "Nevertheless, in its May 2017 report, GAO found weaknesses in several areas. For example, Lifeline's structure relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility. This complex internal control environment is susceptible to risk of fraud, waste, and abuse as companies may have financial incentives to enroll as many customers as possible. On the basis of its matching of subscriber to benefit data, GAO was unable to confirm whether about 1.2 million individuals of the 3.5 million it reviewed, or 36 percent, participated in a qualifying benefit program, such as Medicaid, as stated on their Lifeline enrollment application. FCC's 2016 Order calls for the creation of a third-party national eligibility verifier by the end of 2019 to determine subscriber eligibility. Further, FCC maintains the Universal Service Fund (USF)\u2014with net assets of $9 billion, as of September 2016\u2014outside the Department of the Treasury in a private bank account. In 2005, GAO recommended that FCC reconsider this arrangement given that the USF consists of federal funds. In addition to addressing any risks associated with having the funds outside the Treasury, FCC identified potential benefits of moving the funds. For example, by having the funds in the Treasury, USAC would have better tools for fiscal management of the funds. In March 2017, FCC developed a preliminary plan to move the USF to the Treasury. Until FCC finalizes and implements its plan and actually moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its May 2017 report, GAO made seven recommendations, including that FCC ensure plans to transfer the USF from the private bank to the Treasury are finalized and implemented expeditiously. FCC generally agreed with all the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the Federal Communications  Commission\u2019s (FCC) oversight of the Lifeline program (Lifeline). Over the  past two decades, telecommunications carriers and their customers have  paid over $100 billion to support the federal policy of \u201cuniversal service.\u201d  Universal service is the principle that all Americans should have access to  communications services. FCC carries out this policy through four  programs, including Lifeline. Lifeline was created in the mid-1980s to  promote telephone subscribership among low-income households. In the  mid-2000s, such service came to include wireless communications, and,  in December 2016, FCC also began including broadband service.  Average Lifeline enrollment as of the fourth quarter of calendar year 2016  was approximately 12.3 million subscribers.", "To participate in Lifeline, households must either have an income that is  at or below 135 percent of the Federal Poverty Guidelines or participate in  one of several qualifying assistance programs, such as Medicaid or the  Supplemental Nutrition Assistance Program (SNAP). After subscribers  are enrolled in Lifeline, they receive a monthly benefit on home or  wireless phone and broadband service. The Lifeline benefit can lower or  eliminate the cost of a subscriber\u2019s monthly phone or Internet bill.", "By statute, every telecommunications carrier providing interstate  telecommunications services\u2014including Lifeline providers\u2014must  contribute to federal universal service unless exempted by FCC.  Contributions are deposited into the Universal Service Fund (USF).  Although not required to do so, carriers typically pass on the cost of USF  fees as a separate line item to their customers\u2019 phone bills. A not-for- profit, private corporation designated by FCC as the administrator of  universal service programs, the Universal Service Administrative  Company (USAC) pays Lifeline providers a subsidy from the USF for  each subscriber to offset forgone revenues. From calendar year 1998  through 2016, USAC had disbursed approximately $20.2 billion to Lifeline  providers.", "In May 2017, we published a report on FCC\u2019s oversight of Lifeline that  identified steps FCC has taken in the last few years to enhance the  integrity of the program and stated the weaknesses that remained. We  also made seven recommendations to improve FCC\u2019s oversight of the  program, which the agency agreed to implement.", "My statement today discusses key findings from our May 2017 report, as  well as steps FCC has taken and the related recommendations we made.  Specifically, this testimony discusses (1) the extent to which Lifeline  demonstrates effective performance towards program goals; (2) steps  FCC and USAC have taken to improve financial controls in place for  Lifeline and the USF, and any remaining weaknesses that might exist; (3)  steps FCC and USAC have taken to improve subscriber eligibility  verification, and any remaining weaknesses that might exist; and (4)  steps FCC and USAC have taken to improve oversight of Lifeline  providers, and any remaining weaknesses that might exist.", "For our May 2017 report, we reviewed documents and interviewed  multiple stakeholders associated with Lifeline, including FCC, FCC\u2019s  Office of Inspector General (OIG), and USAC, among others. We also  examined USAC financial data, including USF bank account statements  and payment data, and interviewed USF account managers at the bank  that holds USF funding. Further, we reviewed internal financial controls  established by FCC and USAC and performed data matching and  analysis to identify potential improper payments using Lifeline\u2019s  enrollment data from the National Lifeline Accountability Database  (NLAD) and relevant beneficiary databases. The results of the data  analysis are illustrative rather than generalizable. We also performed  undercover work to test the vulnerability for improper payments of funds  disbursed to both subscribers and Lifeline providers. For example, we  submitted 21 Lifeline applications using false information and fabricated  supporting documents to determine whether we could obtain Lifeline  benefits. These undercover tests were for illustrative purposes to highlight  any potential internal control vulnerabilities and are not generalizable to  the broader universe of subscribers and providers. Additional information  on our scope and methodology is available in our May 2017 report. Our  audit work was performed in accordance with generally accepted  government auditing standards, and our related investigative work was  done in accordance with investigative standards prescribed by the  Council of the Inspectors General on Integrity and Efficiency."], "subsections": [{"section_title": "FCC Has Not Evaluated Lifeline\u2019s Performance in Meeting Program Goals but Has Taken Recent Steps toward Evaluation", "paragraphs": ["FCC has not evaluated Lifeline\u2019s performance in meeting program goals  but, as we found in May 2017, has taken recent steps toward evaluation.  According to GAO\u2019s Cost Estimating and Assessment Guide, to use  public funds effectively the government must meet the demands of  today\u2019s changing world by employing effective management practices and  processes, including the measurement of government program  performance. In the past, FCC has called for program evaluations to  review the administration of universal service generally, including Lifeline,  but has not completed such evaluations. For example, FCC specified that  it would review USAC 1 year after USAC was appointed as the  permanent administrator to determine whether the universal service  programs were being administered effectively. This review, which was  planned to have been completed by 1999, was never done. In 2005, FCC  awarded a contract to the National Academy of Public Administration to  study the administration of the USF programs generally, examine the  tradeoffs of continuing with the current structure, and identify ways to  improve the oversight and operation of universal service programs.  However, we reported in May 2017 that FCC officials stated FCC  subsequently terminated the contract and the study was not conducted.", "In March 2015, we found that FCC had not evaluated Lifeline\u2019s  effectiveness in achieving its performance goals of ensuring the  availability of voice service for low-income Americans, while minimizing  the burden on those who contribute to the USF. We recommended, and  FCC agreed, to conduct a program evaluation to determine the extent to  which Lifeline is efficiently and effectively reaching its performance goals.", "Our May 2017 report raised additional questions about Lifeline\u2019s  effectiveness in meeting its program goals. For example, we reported  that:", "FCC did not know how many of the 12.3 million households receiving  Lifeline as of December 2016 also have non-Lifeline phone service  (for which they pay out of pocket) along with their Lifeline benefit.  Without knowing whether participants are using Lifeline as a primary  or secondary phone service, we concluded that it is difficult for FCC to  determine whether it is achieving the program\u2019s goal of increasing  telephone subscribership among low-income consumers while  minimizing the USF contribution burden.", "FCC revamped Lifeline in March 2016 to focus on broadband  adoption and generally phase out phone service, in part because FCC  recognized that most eligible consumers have phones without Lifeline  and to also close the \u201cdigital divide\u201d of broadband adoption between  low-income households and the rest of the country. However,  broadband adoption rates have steadily increased for the low-income  population absent a Lifeline subsidy for broadband. We found that at  least two companies operating in a total of at least 21 states had  begun offering in-home non-Lifeline broadband wireline support for  less than $10 per month to individuals that participate in public- assistance programs, such as SNAP or public housing. The offered  rate of these providers\u2019 own low-income broadband service of $10 per  month was less expensive than FCC\u2019s broadband reasonable- comparability cost benchmark of approximately $55 per month, which  Lifeline subscribers would be paying for a similar level of service.", "Our May 2017 report also found that FCC has recently taken some steps  toward evaluating Lifeline\u2019s performance in meeting program goals.  Specifically, in the 2016 Lifeline Modernization Order, FCC instructed  USAC to hire an outside, independent, third-party evaluator to complete a  program evaluation of Lifeline\u2019s design, function, and administration. The  order stipulated the outside evaluator must complete the evaluation and  USAC must submit the findings to FCC by December 2020. As FCC  expects Lifeline enrollment to increase as the program is expanded to  include broadband service, this expansion could carry with it increased  risks for fraud, waste, and abuse, as was the case with past expansions  of the program. Completing the program evaluation as planned, and as  we recommended in 2015, would help FCC determine whether Lifeline is  meeting its stated goals of increasing telephone and broadband  subscribership among low-income consumers, while minimizing the  burden on those who contribute to the USF."], "subsections": []}, {"section_title": "Financial Controls Exist, with Others Planned, for the Lifeline Program, but Weaknesses Remain", "paragraphs": ["In our May 2017 report we found that FCC and USAC have established  financial controls for Lifeline, including obtaining and reviewing  information about billing, collecting, and disbursing funds. They have also  developed plans to establish other controls, such as establishing a  national eligibility verifier (National Verifier) for Lifeline providers to  determine the eligibility of applicants seeking Lifeline service. However,  as discussed in our May 2017 report, we found that weaknesses remain,  including the lack of requirements to effectively control program  expenditures above approved levels, concerns about the transparency of  fees on customers\u2019 telephone bills, and a lack of FCC guidance that could  result in Lifeline and other providers paying inconsistent USF  contributions. To address these concerns, we recommended the  Chairman of FCC (1) require Commissioners to review and approve, as  appropriate, spending above the budget in a timely manner; (2) require a  review of customer bills as part of the contribution audit to include an  assessment of whether the charges, including USF fees, meet FCC  Truth-in-billing rules with regard to labeling, so customer bills are  transparent, and appropriately labeled and described, to help consumers  detect and prevent unauthorized changes; and (3) respond to USAC  requests for guidance and address pending requests concerning USF  contribution requirements to ensure the contribution factor is based on  complete information and that USF pass-through charges are equitable.  FCC generally agreed with those recommendations.", "In addition, we found that USAC\u2019s banking practices for the USF result in  oversight and accountability risks that FCC has plans to mitigate.  Specifically, FCC maintains USF funds\u2014whose net assets as of  September 2016 exceeded $9 billion\u2014outside of the U.S. Treasury  pursuant to Office of Management and Budget (OMB) advice provided in  April 2000. OMB had concluded that the USF does not constitute public  money subject to the Miscellaneous Receipts Statute, 31 U.S.C. \u00a7 3302,  a statute that requires that money received for the use of the United  States be deposited in the Treasury unless otherwise authorized by law.  As such, USF balances are held in a private bank account. However,  subsequent to this OMB advice, in February 2005 we reported that FCC  should reconsider this determination in light of the status of universal  service monies as federal funds.", "As discussed in our May report, according to correspondence we  received from the FCC Chairman\u2019s Senior Legal Counsel, as of March  2017, FCC had decided to move the funds to the Treasury. FCC identified  potential benefits of moving the funds to the Treasury. For example, FCC  explained that having the funds in the Treasury would provide USAC with  better tools for fiscal management of the funds, including access to real- time data and more accurate and transparent data. According to FCC,  until the USF is moved into the Treasury, there are also some oversight  risks associated with holding the fund in a private account. For example,  the contract governing the account does not provide FCC with authority to  direct bank activities with respect to the funds in the event USAC ceases  to be administrator of the USF. After we raised this matter with FCC  officials during the course of our review, beginning in November 2016,  FCC sought to amend the contract between USAC and the bank to  enable the bank to act on FCC instructions independently of USAC in the  event USAC ceases to be the administrator. However, as of May 2017,  the amended contract had not yet been signed.", "While FCC has put in place a preliminary plan to move the USF funds to  the Treasury, as well as plans to amend the existing contract with the  bank as an interim measure, several years have passed since this issue  was brought to FCC\u2019s attention without corrective actions being  implemented. Further, under FCC\u2019s preliminary plan, it would not be until  next year, at the earliest, that the funds would be moved to the Treasury.  In May 2017, while reviewing a draft of this report, a senior FCC official  informed us that FCC experienced some challenges associated with  moving the funds to the Treasury, such as coordinating across the  various entities involved, which raised some questions as to when and  perhaps whether the funds would be moved. Until FCC finalizes and  implements its plan and moves the USF funds, the risks that FCC  identified will persist and the benefits of having the funds in the Treasury  will not be realized. As a result, in our May 2017 report, we recommended  that the Chairman of FCC take action to ensure that the preliminary plans  to transfer the USF funds from the private bank to the Treasury are  finalized and implemented as expeditiously as possible. FCC agreed with  this recommendation."], "subsections": []}, {"section_title": "FCC and USAC Have Implemented Some Controls to Improve Subscriber Eligibility Verification, but Weaknesses Remain", "paragraphs": ["FCC and USAC have implemented controls to improve subscriber  eligibility verification, such as implementing the NLAD database in 2014,  which helps carriers identify and resolve duplicate claims for Lifeline- supported services. However, as discussed in our May 2017 report, our  analysis of data from 2014, as well as our undercover attempts to obtain  Lifeline service, revealed significant weaknesses in subscriber eligibility  verification. Lifeline providers are generally responsible for verifying the  eligibility of potential subscribers, but we found that their ability to do so is  hindered by a lack of access to, or awareness of, state eligibility  databases that can be used to confirm eligibility prior to enrollment. For  example, not all states have databases that Lifeline providers can use to  confirm eligibility and some providers with whom we spoke were unaware  of databases that were potentially available to them. These challenges  might be overcome if FCC establishes a National Verifier, as it plans to do  nationwide by the end of 2019, to remove responsibility for verifying  eligibility from the providers. Additionally, since USAC was not  maintaining and providing information to providers about these  databases, we recommended they maintain and disseminate an updated  list of state eligibility databases available to Lifeline providers that  includes the qualifying programs those databases access to confirm  eligibility, to help ensure Lifeline providers are aware of state eligibility  databases and USAC audits of Lifeline providers can verify that available  state databases are being utilized to verify subscriber eligibility. FCC  agreed with the recommendation.", "For our May 2017 report, to identify Lifeline subscribers who were  potentially ineligible to participate in the program, we tested the eligibility  of subscribers who claimed participation in Medicaid, SNAP, and  Supplemental Security Income (SSI) using NLAD data as of November  2014. We focused our analysis on these three programs because FCC  reported in 2012 that these were the three qualifying programs through  which most subscribers qualify for Lifeline. We compared approximately  3.4 million subscribers who, according to information entered in NLAD,  were eligible for Lifeline due to enrollment in one of these three programs  to eligibility data for these programs.", "On the basis of our analysis of NLAD and public-assistance data, we  could not confirm that a substantial portion of selected Lifeline  beneficiaries were enrolled in the Medicaid, SNAP, and SSI programs,  even though, according to the data, they qualified for Lifeline by stating on  their applications that they participated in one of these programs. In  total, we were unable to confirm whether 1,234,929 subscribers out of the  3,474,672 who we reviewed, or about 36 percent, participated in the  qualifying benefit programs they stated on their Lifeline enrollment  applications or were recorded as such by Lifeline providers.", "If providers claimed and received reimbursement for each of the 1.2  million subscribers, then the subsidy amount associated with these  individuals equals $11.4 million per month, or $137 million annually, at the  current subsidy rate of $9.25 per subscriber. Because Lifeline  disbursements are based on providers\u2019 reimbursement claims, not the  number of subscribers a provider has in NLAD, our analysis of NLAD data  could not confirm actual disbursements associated with these individuals.  Given that our review was limited to those enrolled in SNAP or Medicaid  in selected case-study states, and SSI in states that participated in NLAD  at the time of our analysis, our data results are likely understated  compared to the entire population of Lifeline subscribers. These results  indicate that potential improper payments have occurred and have gone  undetected. We plan to refer potentially ineligible subscribers identified  through our analysis for appropriate action as warranted.", "Our undercover testing, as discussed in our May 2017 report, also found  that Lifeline may be vulnerable to ineligible subscribers obtaining service  and the testing found examples of Lifeline providers being nonresponsive,  or providing inaccurate information. To conduct our 21 tests, we  contacted 19 separate providers to apply for Lifeline service. We applied  using documentation fictitiously stating that we were enrolled in an eligible  public-assistance program or met the Lifeline income requirements. We  were approved to receive Lifeline services by 12 of the 19 Lifeline  providers using fictitious eligibility documentation. We also experienced  instances during our undercover tests where our calls to providers were  disconnected, and where Lifeline provider representatives transmitted  erroneous information, or were unable to provide assistance on questions  about the status of our application. For example, one Lifeline provider told  us that our application was not accepted by the company because our  signature had eraser marks; however our application had been submitted  via an electronic form on the provider\u2019s website and was not physically  signed. While our tests are illustrative and not representative of all Lifeline  providers or applications submitted, these results suggest that Lifeline  providers do not always properly verify eligibility and that applicants may  potentially encounter similar difficulties when applying for Lifeline benefits.  As described above, these challenges might be overcome if FCC  establishes a National Verifier, as it plans to do nationwide by the end of  2019, to remove responsibility for verifying eligibility from the providers."], "subsections": []}, {"section_title": "FCC and USAC Have Taken Some Steps to Improve Oversight of Lifeline Providers, but Remaining Gaps Could Allow Noncompliance with Program Rules", "paragraphs": ["FCC and USAC have implemented some mechanisms to enhance  oversight of Lifeline providers, as discussed in our May 2017 report, but  we found that remaining gaps could allow noncompliance with program  rules. For example, in July 2014, FCC took additional measures to  combat fraud, waste, and abuse by creating a strike force to investigate  violations of USF program rules and laws. According to FCC, the creation  of the strike force is part of the agency\u2019s commitment to stopping fraud,  waste, and abuse and policing the integrity of USF programs and funds.  Similarly, in June 2015, FCC adopted a rule requiring Lifeline providers to  retain eligibility documentation used to qualify consumers for Lifeline  support to improve the auditability and enforcement of FCC rules.", "However, we found FCC and USAC have limited oversight of Lifeline  provider operations and the internal controls used to manage those  operations. The current structure of the program relied throughout 2015  and 2016 on over 2,000 Eligible Telecommunication Carriers (ETC) to  provide Lifeline service to eligible beneficiaries. These companies are  relied on to not only provide telephone service, but also to create Lifeline  applications, train employees and subcontractors, and make eligibility  determinations for millions of applicants. USAC\u2019s reliance on Lifeline  providers to determine eligibility and subsequently submit accurate and  factual invoices is a significant risk for allowing potentially improper  payments to occur, and under current reporting guidelines these  occurrences would likely go undetected and unreported. Federal internal  control standards state that management retains responsibility for the  performance and processes assigned to service organizations performing  operational functions. Consistent with internal control standards, FCC and  USAC would need to understand the extent to which a sample of these  internal controls are designed and implemented effectively to ensure  these controls are sufficient to address program risks and achieve the  program\u2019s objectives.", "We identified key Lifeline functions for which FCC and USAC had limited  visibility. For example, we found instances of Lifeline providers utilizing  domestic or foreign-operated call centers for Lifeline enrollment. When we  asked FCC officials about Lifeline providers that outsource program  functions to call centers, including those overseas, they told us that such  information is not tracked by FCC or USAC. With no visibility over these  call centers, FCC and USAC do not have a way to verify whether such  call centers comply with Lifeline rules. FCC and USAC have limited  knowledge about potentially adverse incentives that providers might offer  employees to enroll subscribers. For example, some Lifeline providers  pay commissions to third-party agents to enroll subscribers, creating a  financial incentive to enroll as many subscribers as possible. Companies  responsible for distributing Lifeline phones and service that use incentives  for employees to enroll subscribers for monetary benefit increase the  possibility of fictitious or ineligible individuals being enrolled into Lifeline.  Highlighting the extent of the potential risk for companies, in April 2016  FCC announced approximately $51 million in proposed fines against one  Lifeline provider, due to, among other things, its sales agents purposely  enrolling tens of thousands of ineligible and duplicate subscribers in  Lifeline using shared or improper eligibility documentation.", "To test internal controls over employees associated with Lifeline for our  May 2017 report, we sought employment with a company that enrolls  individuals to Lifeline. We were hired by a company and were allowed to  enroll individuals in Lifeline without ever meeting any company  representatives, conducting an employment interview, or completing a  background check. After we were hired, we completed two fictitious  Lifeline applications as an employee of the company, successfully  enrolled both of these fictitious subscribers into Lifeline using fabricated  eligibility documentation, and received compensation for these  enrollments. The results of these tests are illustrative and cannot be  generalized to any other Lifeline provider. We plan to refer this company  for appropriate action as warranted. As stated above, these challenges  might be overcome if FCC establishes a National Verifier, as it plans to do  nationwide by the end of 2019, to remove responsibility for verifying  eligibility from the providers. In addition, in May 2017, we made two  recommendations to help address control weaknesses and related  program-integrity risks. Specifically, we recommended that FCC establish  time frames to evaluate compliance plans and develop instructions with  criteria for FCC reviewers how to evaluate these plans to meet Lifeline\u2019s  program goals. We also recommended that FCC develop an enforcement  strategy that details what violations lead to penalties and apply this as  consistently as possible to all Lifeline providers to ensure consistent  enforcement of program violations. FCC generally agreed with these  recommendations.", "In conclusion, Lifeline\u2019s large and diffuse administrative structure creates  a complex internal control environment susceptible to significant risk of  fraud, waste, and abuse. FCC\u2019s and USAC\u2019s limited oversight of  important aspects of program operations further complicates the control  environment\u2014heightening program risk. We are encouraged by FCC\u2019s  recent steps to address weaknesses we identified, such as the 2016  order establishing a National Verifier, which, if implemented as planned,  could further help to address weaknesses in the eligibility-determination  process. We also plan to monitor the implementation status of the  recommendations we made in May 2017.", "Chairman Johnson, Ranking Member McCaskill, and Members of the  Committee, this concludes my prepared remarks. I would be happy to  answer any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information regarding this testimony, please contact Seto J.  Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov. In addition, contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Individuals who made key  contributions to this testimony are Dave Bruno (Assistant Director), Scott  Clayton (Analyst-in-Charge), and Daniel Silva.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-107", "url": "https://www.gao.gov/products/GAO-19-107", "title": "Department of Energy Contracting: Actions Needed to Strengthen Subcontract Oversight", "published_date": "2019-03-12T00:00:00", "released_date": "2019-03-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOE, including NNSA, is the largest federal civilian contracting agency, spending about 90 percent of its appropriations on contracts with companies, universities, and others for federal research and development, engineering, and production. DOE headquarters and local offices oversee contractors\u2019 activities, including their management of subcontracts.", "GAO was asked to review contracting at DOE, including the use of subcontractors. This report examines, for fiscal year 2016, (1) the parties that participated in DOE\u2019s largest prime contracts and the extent to which they subcontracted their work; (2) the extent to which DOE ensured that those contractors audited subcontractors\u2019 costs, as required; and (3) the extent to which DOE ensured that contractors met other subcontract oversight requirements. GAO reviewed DOE\u2019s fiscal year 2016 data and documents, analyzed regulations, and interviewed federal officials and contractor representatives for DOE\u2019s 24 largest fiscal year 2016 prime contracts."]}, {"section_title": "What GAO Found", "paragraphs": ["In fiscal year 2016, 28 entities participated in the Department of Energy\u2019s (DOE) and its National Nuclear Security Administration\u2019s (NNSA) 24 largest prime contracts, which totaled $23.6 billion of DOE\u2019s fiscal year 2016 obligations. The contractors awarded about $6.9 billion (nearly 30 percent) of those obligations to thousands of subcontractors. Further, multiple companies, universities, and other entities can join together to bid on a contract (i.e., become a \u201cparty to\u201d a contract). GAO\u2019s review of data about these contracts and subcontracts identified complex ownership relationships among the contractors and subcontractors. For example, GAO found that almost all of the 28 parties to the prime contracts in its review were also subcontractors to some prime contracts, holding a total of nearly 3,000 subcontracts with fiscal year 2016 obligations totaling about $927 million (see figure). GAO found that it can be difficult to track changes in the ownership of parties to the contracts and to understand the relationships between parties.", "DOE and NNSA did not always ensure that contractors audited subcontractors\u2019 incurred costs as required in their contracts. GAO\u2019s review of 43 incurred-cost assessment and audit reports identified more than $3.4 billion in subcontract costs incurred over a 10-year period that had not been audited as required, and some subcontracts remained unaudited or unassessed for more than 6 years. Completing audits in a timely manner is important because of a 6-year statute of limitations to recover unallowable costs that could be identified through such audits. DOE headquarters has not issued procedures or guidance that requires local offices to monitor contractors to ensure that required subcontract audits are completed in a timely manner, consistent with federal standards for internal control. Without such procedures or guidance, unallowable costs may go unidentified beyond the 6-year limitation period of the Contract Disputes Act, preventing DOE from recovering those costs.", "DOE and NNSA perform several reviews to ensure that contractors meet other subcontract oversight requirements. For example, DOE\u2019s local offices review proposed subcontracts to ensure they are awarded consistent with policies related to potential conflicts of interest. However, local officials do not independently review information on subcontractor ownership because doing so is not required, although such information could alert officials to potential conflicts of interest. By requiring contracting officers to independently review subcontractor ownership information, DOE and NNSA would have better assurance that contractors are adequately identifying and mitigating organizational conflicts of interest."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that DOE develop procedures that require local offices to monitor contractors to ensure timely completion of required subcontract audits, and require local DOE officials to independently review subcontractor ownership information to identify potential conflicts of interest. DOE partially concurred with five of GAO\u2019s six recommendations but did not agree to independently review subcontractor ownership information. GAO maintains that the recommended actions are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Energy (DOE) is the largest civilian contracting  agency in the federal government. DOE spends approximately 90 percent  of its annual appropriations\u2014which in fiscal year 2018 totaled about $30  billion\u2014on contracts to manage and operate its scientific laboratories,  engineering and production facilities, and environmental restoration sites,  or to construct facilities. We first designated aspects of DOE\u2019s contract  management as a high-risk area for the government in 1990 because  DOE\u2019s record of inadequate management and oversight of contractors left  the department vulnerable to fraud, waste, abuse, and mismanagement.  Additionally, in its fiscal year 2018 identification of management  challenges, DOE\u2019s Office of Inspector General (OIG) added subcontract  management as a component of its previously identified management  challenges for DOE contract oversight, in part because the OIG\u2019s  investigative work and referrals to the OIG hotline identified continued  vulnerabilities from inadequate oversight of subcontracts.", "Several recent high-profile incidents have involved fraudulent activity by  subcontractors at DOE. In the case of one prime contract, a contractor  entered into a subcontract worth hundreds of millions of dollars with a  subsidiary of a company that was a party to the prime contract. From  March 2010 through February 2012, an employee of the company  allegedly drafted false statements to DOE regarding rates charged by the  subsidiary, as well as the company\u2019s anticipated profit in providing the  subcontracted services. The employee allegedly received illegal kickback  payments from the company to improperly obtain or reward favorable  treatment in connection with the subcontract or prime contract. In August  2018, the Department of Justice announced that the employee had  agreed to pay a settlement and to cooperate with the ongoing Department  of Justice investigation. In the case of another prime contract, from June  2011 through July 2013, a subcontractor channeled payments to the son  of the president of a contractor through an elaborate system of false  invoices and cash payments while failing to identify the potential conflict  of interest to the contractor. In January 2018, the subcontractor was  sentenced to serve just over 12 months in prison for conspiring to defraud  the Internal Revenue Service and DOE.", "DOE oversees its contractors\u2019 activities, including their management of  subcontracts, through headquarters offices and local federal field and site  offices (local offices) collocated at each contractor\u2019s location. At the  headquarters level, DOE\u2019s Office of Acquisition Management is  responsible for (1) establishing procurement-related policies and  guidance for the department and (2) managing DOE\u2019s acquisition system.  In fulfilling these responsibilities, the Office of Acquisition Management  develops, issues, maintains, and interprets acquisition regulations,  policies, and guidance; provides assistance and oversight for DOE  acquisition activities exclusive of the National Nuclear Security  Administration (NNSA)\u2014a separately organized agency within DOE\u2014 and provides operational acquisition services to DOE headquarters and  staff organizations, among other responsibilities. The key official  responsible for setting direction and policy for DOE is the Director of the  Office of Acquisition Management.", "NNSA\u2019s Office of Acquisition and Project Management focuses on  construction project delivery and prime contract oversight. Its objective is  to ensure that NNSA implements DOE\u2019s acquisition and project  management policies and regulations as well as NNSA\u2019s own  supplemental directives and procedures. The key official responsible for  setting direction and policy for NNSA is the Associate Administrator for  Acquisition and Project Management. Contracting officers at DOE\u2019s and NNSA\u2019s local offices oversee contractors and seek to ensure, among  other things, that prime contract awards are appropriate, that all  requirements of law and regulation are met prior to executing a prime  contract action, and that both DOE and the contractor comply with the  terms of the prime contract. Throughout this report, references to DOE  include both DOE and NNSA. When practices differ, we may separately  discuss NNSA.", "Prime contracts can be held by a single entity, such as a company or  university, or by multiple entities that have combined to form a limited  liability corporation (LLC) or other type of business combination. The  entities that are parties to these prime contracts can change during the  life of the prime contract due to changes in ownership, such as mergers  or acquisitions.", "DOE\u2019s oversight of contractors is subject to the Federal Acquisition  Regulation (FAR), the Department of Energy Acquisition Regulation  (DEAR), and other internal DOE directives. Furthermore, provisions of  individual prime contracts may contain additional oversight requirements,  such as requirements to audit subcontractor costs. Additional  requirements are intended to, among other things, provide reasonable  assurance that the contractor is using efficient methods and effective cost  controls, ensure that the contractor\u2019s accounting and purchasing systems  are operating as intended, and that the contractor is following policies and  procedures.", "You requested that we review aspects of contracting at DOE, including  oversight of subcontracting. This report examines, for fiscal year 2016, (1)  the parties that participated in DOE\u2019s largest prime contracts, the extent  to which they subcontracted their work, and the parties and other entities  that participated in those subcontracts; (2) the extent to which DOE  ensured that those contractors audited subcontractors\u2019 incurred costs, as  required; and (3) the extent to which DOE ensured that those contractors  met other requirements for subcontract oversight.", "To identify the parties that participated in DOE\u2019s largest prime contracts,  the extent to which they subcontracted their work, and the parties and  other entities that participated in those subcontracts during fiscal year  2016, we reviewed a list of all DOE prime contracts active in that year  provided by DOE headquarters officials. That list included information  about contract type, total contract value, fiscal year 2016 obligations, and  DOE\u2019s local offices responsible for overseeing the contractors. We  selected fiscal year 2016 for review because it was the most recent fiscal  year for which complete data were available at the start of our review.  Based on our review of data on more than 5,400 contracts that comprised  the $28.2 billion in DOE\u2019s total contract obligations for fiscal year 2016,  we selected all prime contracts for which DOE obligated at least $300  million in fiscal year 2016. The selection consisted of 24 prime contracts  that, in total, represented approximately $23.6 billion, or about 84 percent,  of DOE\u2019s fiscal year 2016 contract obligations.", "To identify the parties to DOE\u2019s largest prime contracts, we reviewed  documents and statements provided by the DOE local offices about each  of the prime contracts in our selection. In some cases, we determined this  information was outdated; however, for purposes of this report, we are  providing the information that DOE provided to us. To identify the  subcontractors to the contracts in the selection, we requested and  reviewed information from the contractors on their subcontracts valued at  $10,000 or more that were active in fiscal year 2016. To assess the  reliability of the data, we took several steps, including reviewing  information from each of the contractors about the systems used to  capture the data, and we determined that the data were sufficiently  reliable to use in analyses of subcontract information from these  contractors. We analyzed data about the amount of fiscal year 2016 funds  obligated to the subcontracts, the number of subcontracts, the type of  subcontracts, and the names of the parties and other entities that were  awarded subcontracts. We summarized the results of these analyses and  identified cases in which a party to a prime contract was also a  subcontractor. We developed shortened versions of the parties\u2019 names  and compared these shortened names to prime contracts and  subcontracts to identify cases in which a party to the prime contract was  also a subcontractor. This provided us with a conservative estimate of the  number of parties to both prime contracts and subcontracts in fiscal year  2016; however, this analysis would not identify any cases in which a party  to a prime contract used a different name when party to a subcontract.", "To examine the extent to which DOE ensured that contractors in our  selection audited subcontractors\u2019 incurred costs and met other  requirements for subcontract oversight, we reviewed the FAR, DEAR,  DOE policies and guidance, the prime contracts, and Performance  Evaluation and Measurement Plans for the contractors to identify and  understand DOE and prime contract requirements and guidance for  subcontract oversight. Based on our analysis, we confirmed that the  contractors in our sample were all required to audit subcontractors\u2019  incurred costs and determined that other requirements for oversight of the  relevant subcontractors generally fell into two broad categories: (1) the  review and approval of contractor business systems, including the  accounting and purchasing systems; and (2) DOE\u2019s approval of  subcontracts through consent reviews, which are intended to assess the  contractors\u2019 adherence to subcontracting requirements and provide  assurance against conflicts of interest. We collected documentation from  DOE officials and contractor representatives on DOE\u2019s oversight of the  contractor\u2019s management of subcontracts, including the two most recent  incurred cost audits for each of the contractors, peer reviews of the  contractors, and other external audits and assessments of the  contractors. We also interviewed officials from DOE\u2019s local offices  responsible for oversight of the contractors in our selection, including  DOE contracting officers, and contractors\u2019 representatives. See appendix  I for more information about our scope and methodology.", "We conducted this performance audit from May 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section discusses DOE\u2019s use of management and operating (M&O)  and non-M&O contracts, DOE\u2019s contracting structure, and federal and  DOE requirements for oversight of contractors\u2019 subcontract management."], "subsections": [{"section_title": "DOE\u2019s Use of M&O and Non-M&O Contracts", "paragraphs": ["Since World War II, DOE and its predecessor agencies have depended  on the expertise of private firms, universities, and others to carry out  federal research and development work and to manage and operate  government-owned facilities. DOE relies on contracts to accomplish most  of its work. DOE mainly uses M&O contracts, which are agreements  under which the government contracts for the operation, maintenance, or  support, on its behalf, of a government-owned or government-controlled  research, development, special production, or testing establishment  wholly or principally devoted to one or more of the major programs of the  contracting federal agency.", "DOE and other agencies with sufficient statutory authority and the need  for contracts to manage and operate their facilities may use the M&O  form of contract; however, according to DOE, it is the only agency using  such contracts. According to the DOE Acquisition Guide, DOE generally  requires that the M&O contractors be subsidiaries of their corporate  parents, dedicated to performance at the specific location, and supported  by performance guarantees from their corporate parents. According to  DOE officials, in fiscal year 2016, DOE obligated nearly $21 billion on 22  M&O prime contracts\u2014about three-quarters of its total contract  obligations for that year.", "DOE also used non-M&O contracts for some contracts that were active in  fiscal year 2016. For example, DOE used non-M&O contracts for the  Mixed Oxide Fuel Fabrication Facility (MOX) construction project at the  Savannah River Site in South Carolina, for construction and cleanup at  the Hanford Site in Washington State, and for cleanup at the Oak Ridge  Reservation in Tennessee. Figure 1 shows the site or project, and  contract type, for the 24 largest DOE prime contracts as of fiscal year  2016, in our selection.", "DOE uses a variety of contract types for its M&O and non-M&O contracts,  including cost-reimbursement contracts, time-and-materials contracts,  and fixed-price contracts. Under cost-reimbursement contracts, the  government reimburses a contractor for allowable costs incurred, to the  extent prescribed by the contract. Cost-reimbursement contracts are  considered high risk for the government because the government agrees  to reimburse the contractors allowable costs, regardless of whether the  work is completed. The DEAR states that cost-reimbursement plus  award fee contracts are generally the appropriate contract type for M&O  contracts, but agencies can choose among a number of different contract  types for M&O contracts. A time-and-materials contract provides for  acquiring supplies or services on the basis of direct labor hours at  specified fixed hourly rates that include wages, overhead, general and  administrative expenses, profit, and actual cost for materials. According to  DOE\u2019s General Guide to Contract Types for Requirements Officials, this  type of contract can fulfill a special need that no other contract type can  serve, but it places a heavy burden on technical personnel to perform  surveillance to preclude inefficiency or waste, and there is no positive  profit incentive for a contractor to control costs. Under fixed-price  contracts, the government and contractor agree on a firm pricing  arrangement that is subject to adjustment only according to the terms of  the contract, and the contractor generally must deliver the product or  service for that price."], "subsections": []}, {"section_title": "DOE Contracting Structure", "paragraphs": ["A contractor, for purposes of this report, is a party that has signed a  contract with DOE (known as a prime contract), while a subcontractor is a  party that has signed a contract with a DOE contractor (or another  subcontractor). For example, a contractor may enter into a subcontract to  obtain access to a specific set of skills or services that it may not  possess, such as construction expertise, equipment services, or  technology support. According to the FAR and the DEAR, contractors  may subcontract with affiliates or parties to their prime contract under  certain circumstances. Subcontracts with M&O contractor affiliates for  performance of contract work itself\u2014as distinguished from the purchase  of supplies and services needed in connection with the performance of  work\u2014require DOE authorization and may involve an adjustment of the  contractor\u2019s fee. If the contractor seeks authorization to have some part of the contract work performed by a party to the contract, and the party\u2019s  performance of the work was a factor in the negotiated fee, DOE would  normally require (1) that the party perform such work without fee or profit;  or (2) an equitable downward adjustment to the M&O contractor\u2019s fee, if  any."], "subsections": []}, {"section_title": "Requirements for DOE\u2019s Oversight of Contractors\u2019 Subcontract Management", "paragraphs": ["DOE\u2019s oversight of contractors\u2019 subcontract management generally falls  into three broad categories: (1) reviewing subcontract costs, including  conducting certain subcontract audits, to ensure that subcontract costs  are appropriately charged to prime contracts; (2) reviewing and approving  contractor business systems, including contractor accounting and  purchasing systems, to ensure validity of data and sufficiency of  subcontract oversight policies and procedures; and (3) performing  subcontract consent reviews to consider, among other things, whether the  contractor is complying with contract provisions and assuring against  conflicts of interest, such as close working relationships or ownership  affiliations between the contractor and subcontractor, which may preclude  free competition or result in higher prices."], "subsections": [{"section_title": "Audits and Cost Oversight", "paragraphs": ["The DOE OIG and other federal agencies or external audit organizations  conduct periodic incurred cost audits and assessments of DOE\u2019s prime  contracts. The purpose of incurred cost audits is to determine whether  such incurred costs are reasonable; applicable to the contract;  determined under generally accepted accounting principles and cost  accounting standards applicable in the circumstances; and not prohibited  by the contract, statute, or regulation.", "For its M&O contracts, the contractors\u2019 own internal audit staff performs  incurred cost audits under a process known as the \u201ccooperative audit  strategy.\u201d Under this strategy, each M&O contractor\u2019s internal audit  organization is responsible for performing periodic operational and  financial audits, assessing the adequacy of management control systems,  and conducting an audit of its own incurred cost statements. Each year,  the DOE OIG performs an assessment of incurred costs for the 10 M&O  contractors that incurred and claimed the most costs that year, according  to the DOE OIG\u2019s audit manual. For the remaining M&O contractors, the  OIG performs assessments based on risk. These assessments do not  follow standards for independent third-party audits; rather, they follow  standards for review-level engagements, which are substantially narrower  in scope than an audit. These assessments consist of determining  whether the contractor\u2019s internal audits complied with professional  standards and could be relied upon; the contractor conducted or arranged  for audits of its subcontractors when costs incurred were a factor in  determining the amount payable to a subcontractor; and the contractor  adequately resolved any questioned costs and internal control  weaknesses affecting allowable costs that had been identified in prior  reports and reviews.", "For non-M&O prime contracts, DOE has generally relied on the Defense  Contract Audit Agency (DCAA), an independent third party, to audit  contractors\u2019 incurred costs that they invoiced to DOE. However,  resource issues at DCAA have delayed audits and led to a backlog of  prime contract audits. Further, the National Defense Authorization Act  for Fiscal Year 2016 prohibited DCAA from providing nondefense audit  support until DCAA addressed its backlog of incurred cost audits at the  Department of Defense. To try to address its audit backlog that  accumulated as a result of DCAA\u2019s delays, DOE has used independent  public accounting firms, expanded internal audit functions, and relied  more heavily on invoice reviews and OIG audits and assessments.  However, in February 2015, DOE\u2019s OIG reported that at the time of that  report, these methods were not completely effective and did not meet  audit standards in some cases. DCAA has since resumed performing  audits for civilian agencies. However, while DCAA has made some  progress in reducing its backlog of audits, it did not meet its initial goal of  eliminating the backlog by fiscal year 2016, and as we found in  September 2017, DCAA officials stated that they were unlikely to meet  the agency\u2019s revised goal by the end of fiscal year 2018.", "According to the DEAR, each of DOE\u2019s M&O contracts should include a  clause that requires the contractor to conduct or arrange for audits of its  subcontractors\u2019 incurred costs when costs incurred are a factor in  determining the amount payable to the subcontractor to ensure that  subcontract costs are allowable. This subcontract audit requirement  includes cost-reimbursement and time-and-materials type subcontracts.  This requirement is also included in some of DOE\u2019s large non-M&O  contracts, including the seven non-M&O prime contracts in our selection.  According to DOE headquarters officials, they included this requirement  in the non-M&O contracts because of the large dollar amount of the prime  contracts. The DOE OIG, DCAA, or other entities generally include  information about the status of required subcontract audits in their audits  and assessments of the prime contracts.", "In March 2017, we found that DOE generally completed audits or  assessments of contractors\u2019 incurred costs after DOE had reimbursed the  contractors for the costs for DOE\u2019s M&O and non-M&O contracts,  including those contractors\u2019 subcontract costs. If, as a result of these  audits or assessments, DOE detects fraud or other improper payments\u2014 such as reimbursements for costs determined to be unallowable under  the contract\u2014DOE will question these costs and work with the contractor  to resolve them. Sometimes, this can result in DOE recovering funds."], "subsections": []}, {"section_title": "Contractor Business System Reviews", "paragraphs": ["DOE\u2019s oversight of business systems includes oversight of accounting  systems and purchasing systems. With regard to accounting systems,  under the FAR, agency contracting officers are required to obtain  information concerning the adequacy of the contractors\u2019 accounting  systems prior to determining whether a prospective contractor is  responsible with respect to the contract. Under the FAR, the adequacy  and suitability of these systems affects the quality and validity of the  contractor data, including subcontract data, on which the government  relies to oversee the contractors\u2019 performance. DOE grants approval of  the accounting system through headquarters-level reviews, local office  reviews, or external audits of the system.", "With regard to purchasing systems, under the FAR, DOE should review  and approve contractors\u2019 purchasing systems, including their  procurement policies and procedures. If the contractor does not have an  approved purchasing system, the contracting officer is required to  approve all cost-reimbursement, time-and-materials, and labor-hour  subcontracts (among other types) above the simplified acquisition  threshold. According to DOE headquarters officials, an approved  purchasing system signifies that the contractor\u2019s purchasing policies and  practices are efficient and provide adequate protection of the  government\u2019s interests, including the contractor\u2019s ability to award some  subcontracts without the need to seek review and consent by the local  DOE contracting officers. Local contracting officials use a formal  contractor purchasing system review or a combination of other monitoring  techniques to grant or extend approval of the contractor\u2019s purchasing  system."], "subsections": []}, {"section_title": "Subcontract Consent Reviews", "paragraphs": ["DOE monitors contractors\u2019 compliance with subcontracting requirements  primarily by providing consent to the contractors to award certain  subcontracts. DOE determines the subcontracts that require consent  prior to award with criteria the agency develops for each prime contract,  such as subcontract dollar value and type of contract. Under the FAR,  agencies should consider whether a proposed subcontract is appropriate  to the risks involved and consistent with current policy when conducting a  consent review. DOE officials told us that they generally use these  reviews to ensure that the contractor\u2019s accounting and purchasing  systems are continuing to operate as intended and that the contractor is  following its policies and procedures, including policies to safeguard  against conflicts of interest, such as issues precipitated by shared  ownership interests. Under the FAR, where consent is required, the  consenting official must give particularly careful and thorough  consideration to potential conflicts of interest, such as where close  working relationships or ownership affiliations between the contractor and  subcontractor may preclude free competition or result in higher prices.  For subcontracts that are subject to a consent review, the contractor  submits a package of information to the local DOE contracting officer. The  contracting officer either provides consent or raises issues that the  contractor must address before awarding the subcontract. According to  DOE documents we reviewed, the package typically includes summary  information such as: what the contractor is buying,  the type of contract to be used (i.e., cost-reimbursement, fixed-price), who the subcontract will be awarded to, a general description of the scope of work, a summary of the basis for making the award, documentation that shows the contractor conducted a cost and price  analysis prior to award and that the contractor adhered to its internal  policies and procedures, and  conflict of interest determinations and mitigations."], "subsections": []}]}]}, {"section_title": "Eleven Entities Participated in Multiple DOE Prime Contracts, with Complex Ownership Relationships among the Contractors and Subcontractors", "paragraphs": ["In fiscal year 2016, 28 entities were party to DOE\u2019s 24 largest prime  contracts. Specifically, DOE awarded 15 prime contracts to contractors  composed of groups of two to five entities and awarded the remaining  nine of the 24 prime contracts in our selection to contractors composed of  a single entity. Our review found that 11 of the 28 participating entities  were parties to multiple prime contracts. The prime contracts in which  these 11 entities participated represented about 69 percent, or $19.3  billion, of DOE\u2019s total prime contract obligations in fiscal year 2016.  Figure 2 shows the relationships among the 11 entities that are parties to  multiple prime contracts included in our selection. For example, Battelle  Memorial Institute and Bechtel National, Inc. each were party to six prime  contracts, based on ownership information DOE provided.", "It can be difficult to track changes in the ownership of entities that are  parties to the prime contracts to understand the entities\u2019 relationships, if  any. Our review found that changes in ownership of the parties to six of  the 24 prime contracts in our selection occurred prior to fiscal year 2016  but were not reflected in the information DOE provided to us. Therefore,  our analyses do not reflect the modified ownership information. The fact  that one entity could be party to multiple prime contracts and could  acquire other entities that are parties to prime contracts complicated our  ability to understand the relationships among them.", "AECOM\u2014which was identified as a party to three prime contracts in  our selection\u2014acquired URS Corporation in 2014, and URS had  previously acquired Washington Group International in 2007. This  resulted in AECOM becoming a party to the Lawrence Livermore  National Security, LLC; Washington River Protection Solutions, LLC;  Los Alamos National Security, LLC; and Battelle Energy Alliance,  LLC, prime contracts, making AECOM a party to seven of the  contracts in our selection. However, the documents DOE provided  show it as a party to three of the contracts in our selection.", "Our review of contractor Lawrence Livermore National Security, LLC\u2019s  website showed that BWX Technologies, Inc. split from the Babcock  and Wilcox Company in 2015 and replaced it as a party to the  contract, making BWX Technologies party to four of the prime  contracts in our selection rather than the three reported in DOE\u2019s  documents. These changes in ownership occurred prior to fiscal year  2016, the time period we reviewed, but the changes were not  reflected in the ownership information DOE provided to us for these  prime contracts.", "Such acquisitions can also complicate DOE\u2019s review of contract  proposals. For example, in August 2016, NNSA awarded the contract for  the management and operation of the Nevada National Security Site to  Nevada Site Science Support and Technologies Corporation. The  contractor identified itself as a wholly owned subsidiary of Lockheed Martin. However, after awarding the contract, the NNSA contracting  officer was notified that the awardee had been acquired in its entirety by  Leidos Innovations Corporation prior to the award. According to NNSA,  the request for proposals required offerors to disclose ownership changes  that occur during the proposal process, but NNSA was not notified about  the ownership change until after the proposal had been awarded. Once  the Nevada Site Science Support and Technologies Corporation\u2019s  ownership changed from Lockheed Martin to Leidos, its proposal was not  compliant with the requirements and NNSA rescinded the award.", "The 24 contractors in our selection reported obligating funds to more than  169,000 subcontracts to about 23,000 different entities in fiscal year  2016. Contractors subcontracted more than $6.9 billion, an amount  equivalent to nearly 30 percent of DOE\u2019s obligations to its prime contracts  in fiscal year 2016. The extent to which contractors obligated funds to  subcontracts in fiscal year 2016 varied widely, from 13 percent of prime  contract obligations to 83 percent, as shown in table 1.", "The contractors in our selection reported that they awarded about 54  percent, or about $3.7 billion, of their subcontract obligations in fiscal year  2016 as fixed-price contracts and 46 percent, or about $3.2 billion, as  cost-reimbursement contracts, cost-reimbursement contracts with no fee  earned, or time-and-materials contracts. See figure 3 for the distribution  of subcontract obligations by type.", "We found that in fiscal year 2016, at least 24 of the 28 entities that were  parties to the prime contracts were also subcontractors to the prime  contracts in our selection. Specifically, these 24 entities held nearly 3,000  subcontracts with fiscal year 2016 subcontract obligations totaling about  $927 million. Table 2 shows the parties to prime contracts that also held  subcontracts in fiscal year 2016.", "Further, we found that, in some cases, entities held subcontracts on the  specific prime contracts to which they were a party. As discussed  previously, subcontracting to an entity that is also a party to the prime  contract is allowable under the FAR and DOE regulations. Figure 4 shows  the 15 contractors that obligated funds in fiscal year 2016 to subcontracts  with parties to their prime contracts. For example, UT Battelle, LLC\u2014the  contractor for the Oak Ridge National Laboratory prime contract in fiscal  year 2016\u2014had 416 active subcontracts with two parties to that prime  contract (University of Tennessee and Battelle Memorial Institute). UT  Battelle, LLC obligated more than $34 million for subcontracts to these  two entities in fiscal year 2016. In another example, Savannah River  Remediation, LLC, the liquid waste contractor for the Savannah River  Site, had 30 active subcontracts with three parties to that prime contract  (AECOM, Inc.; Bechtel National, Inc.; and CH2M Hill Constructors, Inc.).  The contractor obligated about $12 million for subcontracts to these three  entities in fiscal year 2016. For more information about the relationships  among DOE\u2019s prime contracts, parties to the prime contracts, and  subcontractors, see an interactive graphic at  https://www.gao.gov/products/GAO-19-107."], "subsections": []}, {"section_title": "DOE Did Not Always Ensure That Contractors Conducted Required Subcontract Audits, and Some Unallowable Subcontract Costs May Be Unrecoverable Because Audits Are Not Timely", "paragraphs": ["Each of the 24 prime contracts in our selection required contractors to  conduct or arrange for audits of their subcontractors\u2019 incurred costs for  certain subcontract types, including cost-reimbursement and time-and- materials contracts, among others. Contracting officers at DOE\u2019s local  offices are responsible for overseeing contractors and for ensuring,  among other things, that both DOE and the contractor comply with the  terms of the prime contract. However, officials from DOE\u2019s local offices  have not always ensured that contractors completed the required  subcontract audits.", "DOE relies on the contractors\u2019 subcontract audits to identify unallowable  subcontract costs. As previously discussed, the DOE OIG, DCAA, or third  parties complete incurred cost audits or assessments of DOE\u2019s prime  contracts, which generally report on the extent to which the contractor has  completed required audits of subcontract costs. We requested the  reports for the two most recent incurred cost audits or assessments that  the DOE OIG or third parties conducted, as of February 2018, for the  prime contracts in our selection to determine whether contractors had  conducted required subcontract audits for the period covered by the  reports. In response to our request, the 24 contractors provided a total of  43 reports, 11 of which were audit reports and 32 of which were  assessment reports:", "Twenty contractors provided both requested reports.", "Three contractors provided only one report each that had been  completed.", "One contractor did not provide the two requested reports because of  pending litigation.", "Of the 43 incurred cost assessment and audit reports we reviewed, 21  reports indicated that contractors had not audited more than $3.4 billion in  costs incurred by subcontractors over the 10-year period covered by the  reports. These reports documented various reasons that the  subcontracts had not been audited, including that a contractor did not  appropriately recognize that time-and-materials subcontracts needed to  be audited, or that a contractor relied on internal controls or a non-audit  procedure to meet subcontract audit requirements. For example, an April  2013 assessment by the DOE OIG found that subcontractor costs of  more than $12 million incurred over a 4-year period for two multi-year  time-and-materials contracts had not been audited by the contractor, as  required by its prime contract, because the local DOE office did not  submit a request to DCAA to perform the audits due to the DCAA  backlog. In another example, a March 2014 DOE OIG assessment  found that a contractor did not conduct required audits of $155 million in  subcontract costs incurred during 1 fiscal year because the contractor  believed its internal controls met the intent of the requirement to conduct  the subcontract audits.", "Some audit or assessment reports we reviewed included some  questioned subcontract costs. For example, in an assessment for fiscal  year 2013, the DOE OIG reported that an M&O contractor\u2019s internal audit  department performed audits of 78 subcontracts for 30 different  subcontractors and questioned nearly $900,000 in subcontractor costs  incurred from fiscal year 2009 through fiscal year 2013. As of June  2016, most of the questioned amount had been resolved, and the  remaining amount\u2014about $7,900\u2014was deemed unallowable and applied  against an invoice from the contractor. In another assessment of an M&O  contractor for fiscal year 2013, the DOE OIG questioned subcontract  costs identified by the contractor of more than $725,000, with about  $8,000 ultimately deemed unallowable. We have previously found that  DOE sometimes negotiates questioned costs with its contractors to settle  on an amount\u2014potentially lower than the amount initially questioned\u2014 ultimately deemed unallowable. Although the amounts of unallowable  costs in these examples are small, DOE does not know the full extent of  unallowable subcontractor costs that it has reimbursed because required  subcontract audits were not always conducted.", "For some contractors, the issue of unaudited subcontract costs is long- standing and extensive. For example, DOE documents show that, at the  time of our review, one contractor had never completed an adequate  audit of its subcontractors\u2019 incurred costs over the 16 years of the prime  contract period, although its prime contract with DOE requires such  audits. In June 2016, the contractor placed the value of its unaudited  subcontracts at more than $1.3 billion. This amount included some  subcontracts that were closed without being audited, meaning the work  had been completed and the final costs under the prime contract had  been paid. DOE has been working with the contractor since 2013 to  implement corrective actions to resolve the issue; in October 2018, DOE  officials told us they reached an agreement with the contractor to  complete current audits and address the backlog.", "We identified three key differences in how contractors and DOE\u2019s  headquarters and local office officials interpreted the subcontract audit  requirements included in the prime contracts we reviewed that contributed  to DOE not always ensuring that contractors audited their subcontractors\u2019  incurred costs. Specifically:", "Extent of subcontracts that must be audited. We identified differing  interpretations of whether the prime contract required contractors to  audit all cost-reimbursement and time-and-materials contracts.  Specifically, some contractors told us that they had developed risk- based approaches to selecting subcontracts for audit based on  thresholds, such as the amount of the subcontract. However, using  such a strategy could exclude significant subcontract costs from audit.  For example, according to an April 2012 DOE OIG audit, one  contractor increased its subcontract audit threshold from $1 million to  $15 million in annual incurred costs, thereby excluding from audit  nearly $343 million in subcontract costs incurred during fiscal years  2008 and 2009. In its report, the DOE OIG questioned whether the  contractor\u2019s subcontract audit strategy provided sufficient audit  coverage to ensure that DOE did not pay unallowable costs. In that  case, the DOE OIG found that the audit strategy, which was supposed  to be based on DCAA requirements, did not meet a key DCAA  requirement to audit incurred costs of at least one-third of all  subcontracts under $15 million at least once every 3 years.", "Definition of an audit. Some contractors used invoice reviews in  place of audits to meet the requirement. As discussed previously,  DOE documents showed that one contractor had never completed an  adequate audit of its subcontractors\u2019 incurred costs over the 16 years  of the contract. According to contractor representatives, the term  \u201caudit\u201d was not defined in their contract, and therefore they performed  detailed subcontractor invoice reviews instead of conducting  subcontract audits to meet the requirement. DOE found that these  invoice reviews did not meet generally accepted government auditing  standards.", "Responsibility for arranging for audits if DCAA is unable to  conduct audits. Some contractor representatives we interviewed  reported that their subcontracts remained unaudited as a result of the  DCAA backlog. Representatives from one contractor told us that they  believed that they were not responsible to conduct the audits if DCAA  was unable to do so, and another said that they tried to engage a  third-party auditor to conduct the audits themselves, but their  subcontractor would not allow the third-party auditor to access their  records despite specific language establishing the contractor\u2019s  responsibilities for audits.", "Differences in the interpretation of the subcontract audit requirements  have continued to occur because DOE has not clearly defined\u2014in  guidance or other documents\u2014how these contract requirements should  be met, which could eliminate confusion about which subcontracts should  be audited, how an audit is defined, and how to meet subcontract audit  requirements if DCAA is unable to conduct the audit. Federal internal  control standards state that management should externally communicate  the necessary quality information to achieve the entity\u2019s objectives so that  external parties can help the entity achieve its objectives and address  related risks. Until DOE clearly defines how contractors should meet  subcontract audit requirements, contractors may not perform subcontract  audits as intended and unallowable costs may not be identified or  recouped.", "In addition, we found that audits or assessments of a contractor are  usually not conducted immediately after the fiscal year in which funds are  spent, partly because of the availability of DCAA staff or third-party  auditors to complete the work. Our review of the 43 audit and assessment reports identified reports covering 7 fiscal years that were audited or  assessed 6 or more years after the fiscal year in which the costs were  incurred; more than $557 million in subcontract costs in those fiscal years  had not been audited as required by the prime contracts. The Contract  Disputes Act of 1978 imposes a 6-year statute of limitations for the  government to seek recovery of unallowable costs that could be identified  through subcontract audits, so it is important for audits to be completed in  a timely manner.", "We also found that local offices\u2019 efforts to monitor contractors\u2019 completion  of subcontract audits have not ensured that contractors have completed  required subcontract audits and that those audits are completed in a  timely manner. Officials from the local offices said their approaches for  overseeing whether contractors performed required subcontract audits  included reviewing and approving the contractors\u2019 internal audit plans,  reviewing monthly or quarterly reports from the contractors\u2019 internal audit  departments, or reviewing the contractors\u2019 internal audits and reviews of  subcontractors\u2019 costs. Additionally, several DOE officials from the local  offices said they relied on the DOE OIG and external auditors\u2019  assessments and audits of the contractor to monitor the status of  subcontract audits, even though these assessments and audits may be  infrequent.", "Federal internal control standards state that management should  implement control activities through policies, such as by documenting  such policies in the appropriate level of detail, to allow management to  effectively monitor the control activity. These standards state that  policies may be further defined through procedures, including the timing  of when a control activity occurs, to help personnel implement the control  activities for their assigned responsibilities. However, we found that DOE  headquarters has not issued documented procedures or guidance that  requires local offices to monitor the contractors\u2019 progress in completing  the required audits or to specify the time period during which an audit  must be completed. Without such procedures or guidance, unallowable  costs may go unidentified beyond the 6-year period set by the Contract  Disputes Act, preventing DOE from identifying and recovering  unallowable costs."], "subsections": []}, {"section_title": "DOE Did Not Always Ensure That Contractors Met Other Subcontract Oversight Requirements and Does Not Assess Subcontractor Management in Performance Evaluations", "paragraphs": ["In addition to ensuring that contractors conduct required audits of  subcontract costs, DOE must meet other requirements to ensure its  contractors are effectively overseeing subcontracts, specifically by  approving contractors\u2019 accounting and purchasing systems and  performing consent reviews to monitor subcontracting actions. With  respect to approval of contractors\u2019 accounting and purchasing systems,  DOE generally ensures that reviews and approvals of these systems  occur, but the frequency of some accounting system reviews varies. With  respect to performance of consent reviews to monitor subcontracting  actions, most subcontracts are not reviewed by DOE, and we found that  while DOE\u2019s local officials could independently review available  information on ownership to assist them with their assessment of  contractors\u2019 identification of potential conflicts of interest in the consent  review process, they generally do not. Further, DOE\u2019s thresholds for  conducting consent reviews are inconsistent and there is no requirement  to reevaluate the thresholds. In addition, DOE\u2019s annual contractor  performance evaluations do not explicitly measure its contractors\u2019  performance in managing or overseeing subcontracts."], "subsections": [{"section_title": "DOE Generally Approves Contractors\u2019 Accounting Systems, but the Frequency of Some Reviews Varies", "paragraphs": ["Under the FAR, federal agencies are to determine the adequacy and  suitability of contractors\u2019 accounting systems. The adequacy and  suitability of these accounting systems affects the quality and validity of  the contractor and subcontractor data upon which the government must  rely for its management and oversight of the contractor and contract  performance. DOE local contracting officers responsible for the prime  contracts in our selection stated that they rely on contractor accounting  system approvals to help them determine the contractor\u2019s suitability to  appropriately place and manage subcontracts. The FAR provides that the  contractor\u2019s accounting system should be adequate during the entire  period of contract performance, but does not specify a minimum  frequency for performing accounting system reviews.", "According to interviews with local DOE officials and our review of  documentation they provided, DOE may grant accounting system  approval through headquarters-level reviews, local office reviews, or  external audits of the accounting system. Headquarters-level reviews  occur at a level above the local office, such as through NNSA\u2019s Office of  Management and Budget. In addition, the contracting officers or other  subject matter experts at DOE\u2019s local offices can conduct the reviews of  the accounting systems themselves or employ an external audit  organization, such as DCAA, to conduct the reviews. DOE conducted at  least one review of the accounting systems used for each of the 24 prime  contracts in our selection: eight accounting systems were reviewed  through headquarters-level organization reviews, nine were reviewed by  local offices, and seven were reviewed through external audits. DOE  headquarters officials said that no method for review is considered more  rigorous or preferred over another, and it is left to the discretion of the  contracting officers at DOE\u2019s local offices to determine which method to  use.", "According to our review of documents from DOE\u2019s local offices and  interviews with DOE officials from the local offices, 22 of the 24 prime  contracts in our selection had approved accounting systems in fiscal year  2016. Contracting officers from the local DOE offices responsible for  oversight of the two prime contracts for which there was no approved  accounting system for fiscal year 2016 told us that they maintained  oversight of the contractors\u2019 accounting systems through mechanisms  other than the traditional review and approval process. Specifically:", "Local DOE officials responsible for oversight of one prime contract,  which was awarded in December 2000, told us that they did not have  to review or approve the contractor\u2019s accounting system at the local  level after the contract was awarded because the contractor\u2019s  corporate office was required to have an approved accounting system  to enter into its contract with DOE. The officials were not sure  whether an approval of the corporate accounting system had been  performed since 2000, but DCAA was scheduled to perform a review  of the system in late 2018. In a 2017 letter to the DOE local office,  DCAA stated that its review of the accounting system was delayed  due to staffing issues, and it was the agency\u2019s opinion that the  contractor\u2019s internal audits and reviews demonstrated that the  contractor was adhering to the criteria of an adequate accounting  system.", "A local official responsible for oversight of another prime contract  stated that they had not approved the contractor\u2019s accounting system  because it was adopted from the site\u2019s former contractor. The officials  told us the former contractor\u2019s accounting system had already been  approved and no additional review or approval was necessary.  Officials at DOE headquarters agreed that the use or transfer of an  existing DOE-approved accounting system satisfies the review  requirement. According to the officials responsible for overseeing this  prime contract, the local office annually reviews and approves the  contractor\u2019s Financial Management System Plan, which would identify  any major planned enhancements and upgrades to the current  financial management systems and subsystems, including the  accounting system.", "In addition to differences in how accounting system approvals were  conducted, local DOE officials said there are differences in the frequency  of the contractor accounting system reviews and approvals across local  offices. Some accounting systems are approved only at the time the  prime contract is awarded, while others are approved annually, on a 3- year cycle, or only if there are major changes to the accounting system.  DOE headquarters officials we interviewed said that the frequency of  reviews and approvals was determined on a contract-by-contract basis,  and for the prime contracts for which the accounting system was  approved at the time of contract award, the officials were unaware of what  might necessitate an additional review. Figure 5 shows the frequency of  accounting system approvals for the 24 prime contracts in our selection  as of fiscal year 2016.", "The DOE Acquisition Guide states that the creation and maintenance of  rigorous business, financial, and accounting systems by the contractor is  crucial to ensuring the integrity and reliability of the cost data used by  DOE officials. Further, the FAR provides that the contractor\u2019s  accounting system should be adequate during the entire period of  contractor performance. In addition, DOE headquarters officials said  that periodic reviews and approvals of the accounting systems are  important to ensuring these requirements are met. However, there is wide  variation in the frequency of these reviews, in part because DOE has not  reviewed the differences in the frequency of its accounting system  approvals and whether the basis for these differences is appropriate.", "Prime contracts can last for decades, so many years may pass without  further review of the adequacy of the accounting systems. For example,  local officials responsible for overseeing a prime contract with an accounting system that was approved at the time the contract was  awarded said that the approval occurred 12 years ago, and they had  questions about the adequacy of the system.", "DOE officials said that they do not have guidance to help contracting  officers at local offices determine the appropriate frequency for reviewing  accounting systems\u2019 adequacy. Instead, local DOE contracting officers  that oversee each prime contract have discretion to determine the  manner and frequency of reviews based on their knowledge of the  contractor. Under federal standards for internal control, management  should design control activities to achieve objectives and respond to risks,  including by clearly documenting internal control in management  directives, administrative policies, or operating manuals. When reviews  are infrequent, or it is unclear when a review should be conducted,  subsequent changes to the accounting system may not be promptly  evaluated and DOE may not have adequate assurance that contractors\u2019  accounting systems can be relied upon. By reviewing the differences in  the frequency of its accounting system reviews and approvals and  developing guidance that provides criteria to determine the appropriate  frequency of such reviews, DOE could better ensure that adequate  accounting systems are in place during the entire period of the contract."], "subsections": []}, {"section_title": "DOE Generally Reviews and Approves Contractors\u2019 Purchasing Systems and Plans More Consistent Reviews Going Forward", "paragraphs": ["Under the FAR, the federal agency should maintain a sufficient level of  surveillance to ensure that the contractor is effectively managing its  purchasing program. Each of the contractors for the 24 prime contracts  in our selection had an approved purchasing system in fiscal year 2016. If  a local DOE contracting officer determines that a contractor does not  have an approved purchasing system, under the FAR, the office should  review and decide whether to approve (i.e. consent to) all cost- reimbursement type subcontracts and unpriced actions for fixed-price  subcontracts that exceed the simplified acquisition threshold of $150,000  prior to award. Under the FAR, the contractor is to continue to seek  approval for every proposed subcontract that meets these criteria until the  issues with the purchasing system that led to the withdrawal of approval  are resolved and the system is again approved. Our review of subcontract  information provided by DOE\u2019s contractors indicates that, without an  approved purchasing system, more than 6,600 of the subcontracts that  were active in fiscal year 2016 would have required review and approval  prior to award, according to the existing simplified acquisition threshold.", "According to DOE officials at local offices and headquarters, DOE  contracting officers may use a formal contractor purchasing system  review or a combination of surveillance and other monitoring techniques  to grant or extend approval of a contractor\u2019s purchasing system. DOE  headquarters officials told us that the variation in the source and method  of purchasing system reviews is intentional to allow the local offices to  meet the requirement in a way that works best for their location and  contractor, and that the most important aspect of the purchasing system  review is the ongoing surveillance of the system.", "Contracting officers from DOE\u2019s local offices told us they had approved  the purchasing system for each of the 24 prime contracts in our selection  in a variety of ways:", "Seven local offices approved contractors\u2019 purchasing systems based  on the local contracting officer\u2019s knowledge of the contractor\u2019s work;", "Six local offices relied on the results of a peer review program;", "Five local offices considered the results from a combination of internal  and external audits and reviews (including peer reviews);", "Four local offices performed a formal purchasing system review but  did not provide specifics as to the source of information, such as  internal or external audits or peer reviews; and", "Two local offices relied on the results of external audits.", "One of the contractors in our selection of 24 prime contracts, Bechtel  National, Inc., had a DOE-approved purchasing system for the  construction of the Hanford Waste Treatment and Immobilization Plant at  the Hanford Site in Washington State, which was subsequently withdrawn  for a 3-month period in 2018. Specifically, in fiscal year 2018, the Defense  Contract Management Agency (DCMA) performed a review of the  contractor\u2019s corporate purchasing system and identified a number of  significant deficiencies\u2014such as inadequate advance notice of  subcontract awards, missing subcontractor disbarment disclosures, and  general documentation issues with the contractor\u2019s procurement files\u2014 that resulted in Bechtel National, Inc.\u2019s corporate purchasing system  being disapproved until the identified deficiencies could be resolved.  DOE officials said they lifted the restrictions on the contractor in October  2018 following DCMA\u2019s validation that Bechtel National, Inc. implemented  the required updates to its purchasing system and procedures.", "In June 2018, DOE headquarters officials told us they encouraged the  local offices to focus on the use of a peer review program to review and  approve purchasing systems. NNSA officials further explained that they  expected the peer reviews would encourage contractors to remain diligent  in the administration of their systems. As a part of this new approach,  DOE headquarters officials told us that local officials will be required to  assess the need for a purchasing system review every 3 years, and if the  local office did not conduct a review, then a peer review would be  required at least every 6 years.", "According to DOE\u2019s November 2018 updated peer review handbook and  officials responsible for the handbook, the peer review program is DOE\u2019s  preferred method for conducting purchasing system reviews and is now  mandatory for DOE\u2019s M&O contracts at least every 6 years and for non- M&O contracts, with a contract length of 5 years or less, at the 3-year  mark. NNSA headquarters officials stated that they expect all of their local  offices to use the peer review program to assess contractors\u2019 purchasing  systems going forward, regardless of the type of contract. According to  documents provided by DOE headquarters and local offices, as of July  2018, contractors for 18 of the 24 prime contracts in our selection  participated in the peer review program, and six did not participate,  including two NNSA contractors. Figure 6 shows the date of the most  recent peer review for the 24 prime contracts in our selection, as of July  2018."], "subsections": []}, {"section_title": "DOE Uses Consent Reviews to Monitor Some Contractors\u2019 Subcontract Actions but Does Not Independently Assess Potential Conflicts of Interest", "paragraphs": ["According to contracting officers and headquarters officials we  interviewed, DOE\u2019s local offices use subcontract consent reviews to  monitor contractors\u2019 compliance with subcontracting requirements. In  addition, local officials told us that they use these reviews to review and  assess any reported potential conflicts of interest on the part of the  contractor and subcontractors. However, we found that local DOE officials  generally do not request additional information on ownership to  independently ensure contractors are mitigating these conflicts, nor do  they routinely make use of various databases available to government  employees that report ownership information for many government  contractors. In addition, local offices conduct a limited number of consent  reviews for subcontracts, based on a dollar threshold that varies among  local offices, which makes it difficult for DOE to ensure that local offices  have sufficient visibility into contractors\u2019 subcontracting actions."], "subsections": [{"section_title": "DOE Uses Consent Reviews to Monitor Contractor Compliance with Subcontracting Requirements", "paragraphs": ["According to local DOE officials we interviewed, subcontract consent  reviews are the primary control method used to monitor contractors\u2019  compliance with subcontracting requirements. Under the FAR, in  conducting a consent review, agencies should consider whether a  proposed subcontract is appropriate to the risks involved and consistent  with current policy. Specifically, local DOE officials told us that they use  the consent reviews to monitor contractors\u2019 accounting and purchasing  systems between formal reviews of these systems; as well as to monitor  their compliance with policies and procedures for subcontracting,  including ensuring that subcontracts are awarded competitively, are of  appropriate types, and that the contractor adheres to requirements to  safeguard against conflicts of interest.", "According to officials we interviewed, local DOE contracting officers often  receive a notice from the contractor of its intention to solicit subcontracted  work and, if the proposed subcontract value exceeds an agreed-upon  dollar threshold, contracting officers typically will review a consent  package from the contractor before the final award of the subcontract.  The contractor is to obtain DOE\u2019s consent to the proposed action before  proceeding.", "NNSA\u2019s local offices have a standard consent checklist that directs the  contracting officer to consider certain factors before granting consent for  the contractor to issue a particular subcontract. These factors include the  contractor\u2019s past performance, whether the solicitation for subcontracted  work was appropriately competed, the type of subcontract selected, and  whether the proposed prices are reasonable for the intended work,  among other things. In comparison, individual DOE local offices generally  use consent checklists they develop. These checklists have similar review  topics to the NNSA checklist, but the specific items and formats vary.", "According to DOE officials we interviewed, subcontract consent reviews  are DOE\u2019s only opportunity to review subcontract pricing and to ensure  best value for the government before the contractor awards the  subcontract. Furthermore, because fixed-price subcontracts do not have  the same audit requirements as cost-reimbursement subcontracts, these  consent reviews may be the only opportunity for DOE to review the cost  and pricing of fixed-price subcontracts to be awarded by the contractor.  As mentioned previously, the contractors for the 24 prime contracts in our  selection awarded 54 percent of their fiscal year 2016 subcontract  obligations as fixed-price subcontracts, and these contracts may be  awarded to parties to the prime contract, subject to certain conditions.", "DOE contracting officials we interviewed noted a number of ways in which  consent reviews have helped them oversee contractors\u2019 compliance with  subcontracting requirements. For example, an official described one case  in which the contractor was proposing a cost-reimbursement subcontract  for items that could have been purchased more favorably under a fixed- price contract. The consent package did not support why the contractor  chose the more costly contract type, so the contracting officer denied  consent and asked the contractor to review and reissue the solicitation. In  another example, the contractor had to renegotiate a subcontract before  award, after the contracting officer identified inherent safety concerns in  the description of the proposed work upon review of the consent package."], "subsections": []}, {"section_title": "DOE Uses Consent Reviews to Ensure Contractors Mitigate Potential Conflicts of Interest Contractors Identify, but DOE Does Not Independently Assess Ownership Conflicts", "paragraphs": ["DOE requires certain provisions to be included in the prime contracts that  require both DOE and the contractor to safeguard against personal and  organizational conflicts of interest. Among other things, these contract  provisions include requirements from the FAR that prohibit former officials  of a federal agency from accepting compensation from a contractor within  a year of awarding a contract to that contractor; prohibit contractors from  soliciting, accepting, or attempting to accept any kickbacks; and generally  prohibit federal agencies from subcontracting with debarred entities. All of the local DOE officials we interviewed said they rely on the contractor  to identify and mitigate potential conflicts by including these requirements  in contract clauses in their subcontracts and in the contractor\u2019s internal  policies and procedures. Headquarters and local DOE officials said they  rely on the consent review process to ensure that contractors are  following these policies and procedures, and that contractors identify and  mitigate subcontract ownership conflicts, such as those that may occur in  connection with subcontracts to related parties.", "If the contractor has identified a conflict of interest in connection with a  proposed subcontract, the consent package checklists we reviewed  request the contractor to also include in the package either a simple  conflict of interest disclosure statement, which would include steps the  contractor claims to have taken to mitigate the conflict, or a conflict of  interest analysis conducted by the contractor. In both cases, the  contracting officer is expected to check that the information is included in  the package, but no additional action or assessment by local DOE  contracting officers is required. Local DOE officials performing consent  reviews told us that subcontracting with related parties is their main  concern when assessing conflicts of interest; however, they generally did  not independently assess information on subcontractor ownership during  their reviews, beyond the information that the contractor reported.  Information on subcontractor ownership could alert local contracting  officers to potential conflicts of interest, such as preferential treatment in  the awarding of subcontracts to parties of the prime contract, and could  help DOE to determine if the mitigation plan included in the consent  package is adequate to address the potential conflict of interest.  However, local DOE officials told us that they generally do not request or  review subcontractor ownership information in available databases when  reviewing proposed subcontracts because there is no requirement to do  so. (See appendix III for a description of data systems available to DOE  officials that may contain relevant ownership information about existing  contractors or entities.)", "Local DOE officials told us they have identified instances, through their  consent reviews, in which the contractors\u2019 reporting of potential conflicts  of interest was inadequate. For example, DOE officials reviewing consent  packages at a local office noticed that a number of subcontracts were  awarded to a single company. The officials subsequently determined that  the contractor\u2019s former president was currently sitting on the board of the  subcontracting company, but the contractor had not disclosed this  information during the consent review process. According to DOE  officials, this case is currently under review.", "In addition, according to a Department of Justice press release, an  employee of one contractor created an entity and then, on behalf of the  contractor, ensured that a multimillion-dollar subcontract was awarded to  the new entity, and this employee received payments under the  subcontract from May 2011 to April 2016. The subcontractor did not  disclose this conflict of interest while working for the contractor.", "As previously discussed, contractor ownership can be complicated, with  complex relationships between and among entities. Further, contractor  ownership may change over time through various mergers and  acquisitions. These relationships and changes can make it difficult for  DOE to monitor contractors\u2019 ownership, such as in the previously  discussed example in which an awardee did not notify NNSA of an  ownership change prior to contract award as required by the request for  proposals. In this case, NNSA would have been unable to identify or  mitigate potential conflicts of interest in connection with the owner, had  the contracting officer not been notified separately of the change in  ownership.", "Nevertheless, according to officials from DOE\u2019s local offices, because  DOE is not a party to the subcontracts, agency officials generally do not  maintain or request subcontractor ownership information beyond the  information that contractors provide during consent reviews. Although  DOE has the right to access information about the subcontractors\u2019 costs  and performance\u2014through contract clauses that generally allow DOE to  request and review information relevant to costs and performance under  the prime contract, including the costs and performance of subcontractors  as well as through multiple databases available to government  employees\u2014officials stated there is no requirement for contracting  officers to request or search such information during reviews. According  to DOE headquarters officials, depending on the type of prime contract,  the government may request direct access to subcontractor records as  required. For example, DOE officials from one local office told us that they  have access to the contractor\u2019s subcontract information through a direct  link to the contractor\u2019s internal restricted network, but they do not routinely  access the network to review ownership information. Like data available  through other databases, these internal data maintained by the  contractors have the potential to be useful to local officials during consent  reviews for identifying the risks imposed by potential conflicts of interest  between parties to the prime contract and potential subcontractors.", "Federal internal control standards state that management should identify,  analyze, and respond to risks related to achieving the defined objectives,  such as analyzing identified risks to estimate their significance, which  provides a basis for responding to the risks. As noted above, local  officials said that their main concern when assessing conflicts of interest  is the contractor subcontracting with related parties. However, local DOE  officials told us that they generally do not request or review subcontractor  ownership information because there is no requirement to do so. By  requiring contracting officers to independently review subcontractor  ownership information as part of consent reviews and assess potential  conflicts of interest, DOE would have better assurance that contractors  are adequately identifying and mitigating organizational conflicts of  interest."], "subsections": []}, {"section_title": "DOE Does Not Periodically Reevaluate Consent Thresholds to Ensure Sufficient Visibility into Contractors\u2019 Subcontracting Actions", "paragraphs": ["Although consent reviews have the potential to provide contracting  officers with important information on the contractor\u2019s compliance with  requirements, the number of reviews conducted by local offices each year  varies due to different thresholds at each location. DOE headquarters and  local officials told us the numbers of consent reviews conducted by local  offices are based on dollar-amount thresholds or other criteria established  by the local DOE offices, and these criteria vary among DOE locations.  According to DOE officials, consent review thresholds vary for a number  of different reasons. For example, a senior agency official and some local  DOE officials said that small staff sizes and other oversight  responsibilities may limit the number of consent reviews that contracting  officers conduct. DOE guidance recommends that when establishing the  threshold for consent reviews, the contracting officer should aim to review  enough subcontracts annually to provide the local office with sufficient  visibility into subcontracting actions without being overly burdensome on  either the contractor or the federal staff.", "The consent review thresholds for the 24 prime contracts in our selection  varied widely, and contracting officers performed few reviews for some  prime contracts. For example, as shown in table 3, one local office set its  subcontract consent threshold at $250,000, which led the local  contracting officer to review about 175 consent packages in a year, and  another set the threshold at $25 million, which led the local office to  review 1 consent package in a year. Local DOE officials told us that most  subcontracts are not subject to consent reviews because they fall below  the consent threshold. One of the prime contracts with a $25 million  consent threshold is held by Bechtel National, Inc., the contractor  constructing the Hanford Waste Treatment and Immobilization Plant. As  previously discussed, Bechtel National, Inc.\u2019s purchasing system was  disapproved for a 3-month period in fiscal year 2018 and, during that  time, the contracting officer was required to review and consent to all  subcontracts above $250,000. A DOE official told us that the local office  reviewed 48 subcontract consent packages during this time period, and  the office would not have reviewed any if the purchasing system had not  been disapproved.", "In some cases, DOE contracting officers have adjusted the consent  review thresholds during the contract period based on concerns they  have identified with subcontracts that the contractor awarded. For  example, one local office had concerns that the subcontractor was not  disclosing potential conflicts of interest to the contractor and, therefore,  the contractor did not mitigate these conflicts of interest. As a result, the  contracting officers reduced the consent threshold to increase the number  of consent packages they reviewed until they could be certain the  contractor was managing subcontracting risks adequately. According to  the local DOE officials, part of the reason they did not identify the  deficiencies sooner was that high thresholds resulted in the local officials  conducting few consent reviews. In another example, a DOE contracting  officer from a different local office lowered the consent review threshold in  2017 due to documentation issues\u2014such as files with inadequate  documentation to explain or justify proposed prices\u2014as well as the  contractor not sending a subcontract to the local office for approval, as  required. Local DOE officials told us they requested a peer review of the  contractor to see if this was a systemic issue, and they reduced the  consent threshold to send a message to the contractor that DOE  expected the contractor to improve its subcontracting practices.", "For more than half of the contracts in our selection, thresholds for  required consent reviews have not been reevaluated since the contracts  were awarded because, according to DOE officials, there has not been a  requirement to do so. Federal internal control standards state that  management should design control activities to achieve objectives and  respond to risks. As discussed in the examples above, without an  appropriate number of subcontract reviews, deficiencies, such as  inadequate documentation, have persisted. By requiring contracting  officers to periodically reevaluate the thresholds for consent reviews,  DOE may be able to better ensure that local offices have sufficient  visibility into contractors\u2019 subcontracting actions to ensure that proposed  subcontracts are appropriate to the risks involved and consistent with  current policy and sound business judgment.", "After we provided our preliminary results from our review of the consent  review process to DOE headquarters officials, the officials told us they  planned to reevaluate consent thresholds as part of the peer review  process described above, with respect to purchasing system reviews.  NNSA headquarters officials stated that they would implement a similar  change to its process, based on DOE\u2019s guidance, once DOE implements  its changes in the November 2018 update. However, we reviewed the  November 2018 update and found that it did not include a requirement to  reevaluate consent thresholds as part of the peer review process."], "subsections": []}]}, {"section_title": "DOE Does Not Explicitly Evaluate Its Contractors\u2019 Performance on Subcontract Management", "paragraphs": ["According to local DOE officials and documents provided, DOE develops  Performance Evaluation and Measurement Plans at the beginning of  each fiscal year to establish expectations for contractor performance and  to describe how the local office will evaluate the contractors\u2019 performance  against those expectations. According to DOE guidance, the plans  provide a standard to assess whether the contractors are meeting the  mission requirements and performance expectations for goals stipulated  within the contracts. In addition, according to DOE guidance, the plans  should describe the incentives available, such as award fees, and the  methodology for determining the amount of incentives earned by the  contractor for the year, based on the evaluation of the contractor\u2019s  performance. In general, Performance Evaluation and Measurement  Plans we reviewed included goals and performance criteria. Goals are the  broad, high-level categories and benchmarks that local DOE officials use  to assess the contractor\u2019s annual performance and reflect what local  officials consider most important in the contractor\u2019s performance.  Performance criteria, also included in the plans we reviewed, refer to the  elements officials should consider when reviewing to determine whether  the contractor has met the goals. Not all performance criteria need to be  met for a contractor to show adequate performance toward a goal.", "None of the fiscal year 2016 Performance Evaluation and Measurement  Plans for the 24 prime contracts we reviewed included goals explicitly  related to subcontractor management, and only 3 of the 24 plans included  performance criteria that were related to the contractor\u2019s management of  subcontractors. According to DOE officials, there is no requirement to  include specific goals or performance criteria related to subcontractor  management in these plans because the contractor is responsible for  completing the scope of work in the prime contract, regardless of whether  it was performed by the contractor or a subcontractor. The fiscal year  2016 Performance Evaluation and Measurement Plans we reviewed for  18 of the 24 prime contracts in our selection included a goal for effective  and efficient business operations, which includes the contractor\u2019s  accounting and purchasing systems. DOE headquarters officials stated  that they would expect any subcontract management issues that affected  the scope, schedule, or cost of the contract to be identified and  addressed within this goal. However, of the three plans that included  performance criteria on subcontract management, none of the criteria  were included under the business operations goal, as DOE officials said  they would have expected. Rather, these performance criteria were  included under goals such as \u201cproject performance and technical issue  resolution\u201d or a \u201cspecial emphasis area.\u201d", "The fiscal year 2016 Performance Evaluation and Measurement Plans we  reviewed did not reflect the expectations DOE headquarters officials  described to us that subcontract management would be reflected in the  business operations goal of contractor evaluations, and the plans do not  acknowledge the importance of subcontract management and oversight,  particularly in light of the high percentage of contract obligations\u2014 frequently for cost-reimbursement contracts\u2014that subcontractors  ultimately execute. As we mentioned above, contractors in our selection  subcontracted out nearly 30 percent of their fiscal year 2016 obligated  funds, making subcontract management a key part of the contractors\u2019  work.", "According to DOE guidance, DOE should use performance-based  management as a strategic contract management tool to plan for,  manage, and evaluate contractor performance under the prime contract  and to align performance with costs. A March 2018 study of NNSA\u2019s  M&O contractors and a February 2019 GAO report on DOE performance  measures found that performance evaluations tend to be subjective and  do not focus on potentially important areas, such as the contractors\u2019 cost  performance. The Deputy Secretary of Energy also issued a statement  in September 2018 noting the importance of properly incentivizing  performance as part of contract management to ensure that the most  important performance measures are identified and that incentives are  appropriately aligned to those measures. However, the plans we  reviewed do not reflect the importance of subcontract management  because there is no requirement to include assessments of the  contractors\u2019 management of its subcontractors in the plans. By requiring  that explicit performance criteria that assess the contractors\u2019  management of subcontractors be included as part of the annual  Performance Evaluation and Measurement Plans, DOE would have more  reasonable assurance that the agency is emphasizing the importance of  subcontract management and providing contractors an additional  incentive to properly manage their subcontractors."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Contracting officers at DOE\u2019s local offices are responsible for, among  other things, ensuring that contractors complete required subcontract  audits. DOE\u2019s headquarters and local offices have taken some steps to  ensure that contractors comply with their subcontracting requirements.  However, differences in how contractors, local DOE offices, and DOE  headquarters offices interpret subcontract audit requirements and perform  subcontract audits persist because DOE has not clearly defined\u2014in  guidance or other documents\u2014how these requirements should be met.  Until DOE clarifies which subcontracts should be audited, how an audit is  defined, and how to meet subcontract audit requirements if DCAA is  unable to conduct the audit, contractors may not perform subcontract  audits as intended and unallowable costs may not be identified or  recouped. Additionally, DOE\u2019s local offices did not always ensure that  contractors audited their subcontractors\u2019 incurred costs for cost- reimbursement and time-and-materials subcontracts as required because  DOE headquarters has not issued documented procedures or guidance  that requires local offices to monitor contractors\u2019 progress in completing  the required subcontract audits in a timely manner. Without such  procedures or guidance, unallowable costs may go unidentified beyond  the 6-year limitation period of the Contract Disputes Act, preventing DOE  from recovering those costs.", "In addition, the timing of contractor accounting system reviews differs  among DOE\u2019s local offices. DOE has not reviewed the differences in the  frequency of the reviews and whether the basis for these differences is  appropriate, nor provided guidance that includes criteria to determine the  frequency of reviews. By reviewing the differences in the frequency of its  accounting system reviews and approvals and developing guidance that  includes criteria to determine the appropriate frequency of such reviews,  DOE acquisition officials could better ensure that adequate accounting  systems are in place during the entire period of the contract.", "DOE uses consent reviews to ensure that other subcontracting  requirements are met, including that subcontracts are appropriate to the  risks involved and that there are appropriate safeguards related to  personal and organizational conflicts of interest. Nevertheless, DOE  generally does not independently request or review subcontractor  ownership information or assess potential conflicts of interest related to  ownership between contractors and subcontractors as part of their  consent reviews\u2014beyond information disclosed by the contractor\u2014 because there is no requirement to do so. Recent criminal investigations  into conflicts of interest, local offices\u2019 own findings of unreported conflicts,  and the complex ownership relationships among contractors and  subcontractors that we identified emphasize the need for oversight in this  area. By establishing such a requirement, DOE would have better  assurance that contractors are adequately identifying and mitigating  conflicts of interest.", "DOE\u2019s local offices set thresholds to determine which subcontracts to  review. The thresholds often are set at the beginning of the contract and  are not reevaluated because there is no requirement to do so. We  observed a small number of instances in which DOE local offices  decreased thresholds after identifying concerns during consent reviews.  We were encouraged that DOE intended to incorporate evaluation of  consent review thresholds in their peer review process as part of their  planned update to their guidance, but upon subsequent review, the  guidance did not contain the requirement. By requiring local offices to  periodically reevaluate consent review thresholds, DOE and NNSA  acquisition officials may be able to better ensure that local offices have  sufficient visibility into contractors\u2019 subcontracting actions to ensure that  proposed subcontracts are appropriate and consistent with current policy.", "Finally, DOE uses Performance Evaluation and Measurement Plans to  establish expectations for contractor performance, including performance  criteria, used to evaluate contractor performance. However, few of the  plans we reviewed included explicit goals or performance criteria related  to subcontract management because there is no requirement to do so. By  requiring inclusion of explicit performance criteria for assessing the  contractors\u2019 management of subcontractors in these plans, DOE and  NNSA acquisition officials would have more reasonable assurance that  the agency is emphasizing the importance of subcontract management  and providing contractors an additional incentive to properly manage their  subcontractors."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to DOE:  The Director of the DOE Office of Acquisition Management should clearly  define\u2014in guidance or other documents\u2014which subcontracts should be  audited, how an audit is defined, and how to meet subcontract audit  requirements if DCAA is unable to conduct the audit.(Recommendation 1)", "The Director of the DOE Office of Acquisition Management should  develop documented procedures or guidance that requires DOE\u2019s local  offices to monitor the contractors\u2019 progress in completing required  subcontract audits in a manner that ensures unallowable costs can be  recovered within the 6-year limitation period in the Contract Disputes Act.  (Recommendation 2)", "The Director of the DOE Office of Acquisition Management should review  the differences in the frequency of DOE\u2019s accounting system reviews and  approvals and develop guidance that includes criteria to determine the  appropriate frequency of such reviews for prime contracts.  (Recommendation 3)", "The Director of the DOE Office of Acquisition Management should require  local officials to independently review subcontractor ownership  information as part of DOE consent reviews and assess potential conflicts  of interest to ensure contractors are mitigating them. (Recommendation  4)", "The Director of the DOE Office of Acquisition Management should require  local offices to periodically reevaluate consent review thresholds.  (Recommendation 5)", "The Director of the DOE Office of Acquisition Management should require  contracting officers to include assessments of the contractors\u2019  management of subcontractors as part of annual Performance Evaluation  and Measurement Plans, as appropriate. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOE for comment. In our draft report,  we made twelve recommendations\u2014each of our six current  recommendations was made to both DOE and NNSA. In response to  DOE\u2019s comments, we consolidated our original twelve recommendations  into six recommendations addressed to DOE. We did so with the  understanding that NNSA follows DOE guidance and would develop  supplemental guidance, as needed, to implement these  recommendations. With regard to the remaining six current  recommendations, DOE partially concurred with five of the  recommendations and did not concur with one of the recommendations.  DOE\u2019s written response is reproduced in appendix IV. In addition, DOE  provided technical comments which we incorporated as appropriate.", "DOE did not concur with our fourth recommendation to require local  officials to independently review subcontract ownership information as  part of DOE consent reviews and assess potential conflicts of interest to  ensure contractors are mitigating them. In response to the  recommendation, DOE said that it plans to issue guidance emphasizing  the importance of contracting officers\u2019 reviewing contractors\u2019 disclosure  and mitigation of issues created by potential conflicts of interest or  ownership affiliations between contractors and subcontractors, and NNSA  plans to evaluate the need for additional action upon issuance of the  guidance. DOE officials said they rely on the consent review process to  ensure that contractors identify and mitigate subcontract ownership  conflicts as required, such as those that may occur in connection with  subcontracts to related parties. Local DOE officials told us they have  identified instances, through their consent reviews, in which the  contractors\u2019 reporting of potential conflicts of interest was inadequate.  Furthermore, we have identified several recent high-profile incidents that  have involved fraudulent activity by subcontractors related to conflicts of  interest that were not disclosed to DOE. DOE officials\u2014including those in  local offices\u2014have access to several databases and other sources of  information that would allow them to independently verify ownership  information that could allow the local offices to identify potential conflicts  of interest that were not disclosed. We continue to believe that requiring  local officials to independently review subcontractor ownership  information as part of consent reviews and assess potential conflicts of  interest could provide DOE with greater assurance that the contractors  are identifying and mitigating conflicts of interest.", "In response to our other five recommendations, DOE stated that it  partially concurred with each. For each recommendation, DOE said that it  would review existing regulations, procedures, guidance, or contract  provisions and assess the need for supplemental guidance. We believe  that DOE\u2019s plans to further examine the issues raised in our report is a  positive step toward resolving the issues; however, we believe that the  actions called for in our recommendations remain valid and that DOE  could more efficiently resolve the issues by proceeding to implement  those actions.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Administrator of the National  Nuclear Security Administration, and other interested parties. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To address our objectives, we reviewed relevant laws, regulations, and  guidance, including the Federal Acquisition Regulation (FAR); the  Department of Energy Acquisition Regulation (DEAR); Department of  Energy (DOE) policies and guidance on contract management and  subcontract oversight; and individual prime contracts to identify  requirements that explicitly apply to subcontracting, including DOE\u2019s roles  and responsibilities and requirements for the contractor. We also  reviewed relevant documentation and interviewed officials from DOE and  the National Nuclear Security Administration (NNSA), as well as  representatives of DOE\u2019s largest prime contracts and officials from the  local DOE offices that oversee these prime contracts.", "To identify the entities that participated in DOE\u2019s largest prime contracts,  the extent to which they subcontracted their work, and the entities that  participated in those subcontracts during fiscal year 2016, we reviewed a  list of all DOE prime contracts active in that year provided by DOE  headquarters officials. That list included information about prime contract  type, total prime contract value, fiscal year 2016 obligations, and DOE\u2019s  local offices responsible for overseeing the contractors. We selected  fiscal year 2016 for review because it was the most recent fiscal year for  which complete data were available at the start of our review. DOE\u2019s total  prime contract obligations for fiscal year 2016 were $28.2 billion. We  determined that an appropriate threshold for establishing our selection  would be all single prime contracts for which DOE obligated at least $300  million (about 1% of all contract obligations) in fiscal year 2016, and this  resulted in a list of 24 prime contracts that represented about $23.6 billion  in obligations, or about 84 percent of DOE\u2019s fiscal year 2016 prime  contract obligations. The resulting selection of 24 prime contracts  consisted of both management and operating (M&O) and non-M&O prime  contracts from the three major program offices within DOE: NNSA, Office  of Science, and Office of Environmental Management. We took several  steps to determine the reliability of the prime contract data provided by  DOE, including interviewing agency officials and reviewing individual  prime contract documents, as well as verifying, through contractor and  local office interviews, the amount of funds obligated to the prime contract in fiscal year 2016. We determined that the data provided by DOE on the  prime contracts, in terms of prime contract obligations in fiscal year 2016,  were sufficiently reliable for identifying DOE\u2019s largest prime contracts.", "To identify the parties to DOE\u2019s largest prime contracts, we reviewed  documents and statements the DOE local offices provided about the  parties to each of the 24 prime contracts in our selection. For consistency,  we used only the information local DOE officials provided about prime  contract ownership, either from their direct statements or from the prime  contract documents they provided as our source for the information,  although we observed that in some cases more recent ownership  information was available through the contractors\u2019 websites. In addition to  the documents and statements officials from DOE\u2019s local offices provided,  we also reviewed contractors\u2019 websites and information from the parties\u2019  websites about acquisitions and mergers to better understand the  complicated relationships among all of the contractors and the parties to  the prime contracts. Because of changes in entity ownership or the  structure of these prime contracts, more entities than we identified in our  analysis may be parties to these prime contracts.", "To identify the subcontractors to the 24 prime contracts in our selection,  we requested and reviewed data from the 24 contractors about their  active subcontracts in fiscal year 2016. Each contractor provided data on  their subcontracts that were $10,000 or more and that were active in  fiscal year 2016, including: the subcontractor\u2019s name, Dun & Bradstreet\u2019s  Data Universal Numbering System (DUNS) number, location of  subcontractor\u2019s office, total award amount, total obligated amount for  fiscal year 2016, type of subcontract, contract award date, and contract  term. There were some cases in which the contractors did not provide all  of the requested subcontract data, or the data provided were not clear,  such as the meaning of the type of subcontract. To resolve these issues,  we conducted contractor-specific follow-up requests to either collect the  missing information, identify the reasons that information was not  available, or to clarify data they provided. We were able to collect missing  information and clarify the data with two exceptions. First, many  contractors did not have DUNS numbers for all of their subcontractors  and therefore we did not use this identifier in our analyses. Second,  contractor Brookhaven Science Associates, LLC did not track the obligated dollar amount for fiscal year 2016 for its active subcontracts. As  a result, we were not able to include it in our analysis of the dollar amount  of subcontracted funds, and we indicated that this analysis was therefore  based on 23 of the 24 prime contracts in our selection.", "We took several steps to determine the reliability of the subcontract data  provided by the contractors, including requesting and reviewing  information from each of the contractors about the systems used to  capture the data, and we determined that the information was sufficiently  reliable to use in analyses of subcontract information from these 24  contractors in fiscal year 2016. We identified the amount of funds  subcontracted, the number of subcontracts, and the number of unique  entities subcontracted to during fiscal year 2016. We also identified the  amount subcontracted for each contractor by type of subcontract, as  defined in the FAR: (1) fixed-price; (2) cost-reimbursement; (3) cost- reimbursement, no-fee; and (4) time-and-materials. In addition, we used  the names of the subcontractors to identify any cases in which a party to  the prime contract was also a subcontractor to any of the prime contracts  in our selection. We used shortened versions of the parties\u2019 names to  perform the matching between parties to the prime contract and  subcontractors. For example, the party to the Battelle Energy Alliance,  LLC prime contract\u2014Battelle Memorial Institute\u2014was shortened to  \u201cBattelle,\u201d and we included any subcontract that included the word  \u201cBattelle\u201d in its name in our match list. This allowed us to identify a  conservative estimate of the number of parties who were also  subcontractors in fiscal year 2016. However, this analysis would not have  identified any cases in which the subcontractor was a party to the prime  contract but had a different name.", "To develop graphical representations of (1) figure 2, Entities That Were  Party to More than One of the 24 Largest Department of Energy Prime  Contracts, Fiscal Year 2016 (which explores ownership relationships  between parties and prime contracts) and (2) figure 4, Selected  Department of Energy Contractors That Awarded Subcontracts to Parties  to Their Prime Contract, Fiscal Year 2016 (which explores contracting  relationships between prime contracts and subcontractors that were also  parties), we performed the name-matching exercise described in the  previous paragraph to first structure the data and then develop graphical  prototypes using the UCINet network analysis tool, including its NetDraw  graphics tool, which were then further refined for GAO publication. For  each of the static representations, the graphics juxtaposed two sets of  entities in columnar format: (1) for the party-prime contract graphic, we  arrayed parties to two or more prime contracts in the first column of  entities and the prime contracts in which these parties had ownership in a  second column, and (2) for the prime contract-party as subcontractor  representation, we arrayed the prime contracts in the first column and the  subcontractors who were also parties to their prime contract in the second  column. Lines between parties and prime contracts in the first graphic  represented the presence of an ownership relationship. The parties were  sized according to the number of contracts that the entity was a party to,  and the contracts were sized according to the number of parties to that  contract. Lines between prime contracts and parties as subcontractors in  the second graphic represented the value of subcontracts between the  two, with the lines taking on one of four weights corresponding to dollar  value ranges.", "To examine the extent to which DOE ensured that the 24 contractors in  our selection audited subcontractors\u2019 incurred costs and met other  requirements for subcontract oversight, we developed a structured  interview and a request for data and documents, which we administered  to representatives of the 24 prime contracts in our selection and to DOE  officials at local offices who were responsible for the oversight of the  contractors. To develop the list of requested documents and structured  interview questions, we reviewed the FAR, DEAR, DOE policies and  guidance, and individual prime contracts to identify both DOE\u2019s roles and  responsibilities and requirements for the contractor regarding  subcontracting. From these sources, we confirmed that the review of  subcontract costs, including subcontract audits and DOE access to  subcontractor records, was a key requirement and identified two other  broad categories that covered the requirements we identified for DOE and  the contractor related to subcontracting: (1) the review and approval of  contractor business systems, including the accounting and purchasing  systems; and (2) DOE\u2019s approval of subcontracts through consent  reviews, which are intended to assess the contractors\u2019 adherence to  subcontracting requirements and provide assurance against conflicts of  interest, including personal and organizational conflicts, and issues with  kickbacks, foreign influence, and disbarment.", "We designed the structured interview questions and document requests  to identify how DOE officials met subcontract oversight requirements. We  pretested the structured interview questions and document requests at  three of DOE\u2019s local offices that included both M&O and non-M&O prime  contracts from three major program offices\u2014the Hanford Site in  Washington State, Lawrence Livermore National Laboratory, and Pacific  Northwest National Laboratory\u2014and made changes to the request for  documents and the interview guide as appropriate. We then conducted  the structured interviews with DOE\u2019s local officials responsible for  oversight of the 24 contractors in our selection, including contracting  officers, and with representatives from the 24 contractors during  February, March, and April 2018. We also collected documents that  addressed DOE\u2019s oversight of the contractors\u2019 management of  subcontracts, including, as of February 2018, the two most recent  incurred cost audits or assessments of the prime contract\u2014which  spanned the 10-year period from 2007 to 2016\u2014the contract  management plans, annual contractor performance reviews, peer  reviews, and information about the subcontractors and entities that were  parties to the prime contracts. We conducted a content analysis of DOE  and contractor officials\u2019 responses provided through the structured  interview process and on the data and documentation we received, and  we summarized the extent to which DOE ensures that contractors were  auditing subcontractors\u2019 incurred costs and meeting other requirements  for subcontract oversight.", "We conducted this performance audit from May 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: The Department of Energy\u2019s 24 Largest Prime Contracts in Fiscal Year 2016", "paragraphs": ["Table 4 provides information on the Department of Energy\u2019s (DOE) 24  largest prime contracts in fiscal year 2016, including the name of the site  or project, the name of the contractor, entities that were party to the prime  contract, and the amount obligated on the contract in fiscal year 2016.  Local DOE officials provided information on parties to the prime contract,  either from direct statements or from the prime contract documents. We  used information DOE provided as our source for the information in the  table, although we observed that in some cases more recent information  was available through the contractors\u2019 websites or other sources."], "subsections": []}, {"section_title": "Appendix III: Summary of Key Data Systems Used to Collect Data on Department of Energy Contractors", "paragraphs": ["There are several key federal data systems that include information on  Department of Energy (DOE) contractors. Additionally, DOE has internal  systems that include information on contractors. These data systems are  available to federal employees and can be used to differing extents to  identify information about contractor ownership."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Hilary Benedict (Assistant  Director), Kathy Pedalino (Analyst in Charge), Caitlin Dardenne, and  Jeffrey (Chris) Wickham made key contributions to this report. Also  contributing to this report were Enyinnaya David Aja, David Dornisch,  Farrah Graham, Richard P. Johnson, Cynthia Norris, Dan Royer, and  Tatiana Winger."], "subsections": []}]}], "fastfact": ["Almost the entire $30 billion Department of Energy budget goes to contracts, most of which have subcontracts.", "What sort of scrutiny do these subcontracts get?", "In a 10-year look back, we found more than $3.4 billion in subcontract costs that had not been audited as required\u2014some of which was already past the 6-year statute of limitations to recover unallowable costs.", "Yet Energy has not clarified which subcontracts should be audited and what an audit should entail.", "We made 6 recommendations to address these and other issues we found with Energy's subcontract oversight."]}
{"id": "GAO-19-123", "url": "https://www.gao.gov/products/GAO-19-123", "title": "Superfund: EPA Should Improve the Reliability of Data on National Priorities List Sites Affecting Indian Tribes", "published_date": "2019-01-23T00:00:00", "released_date": "2019-02-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Superfund is EPA's principal program to address sites with hazardous substances, and some of the most seriously contaminated of these sites are listed on the NPL. Many of these sites can affect Indian tribes or their land. EPA has a policy to consult with tribes when EPA actions or decisions may affect tribal interests, including on cleanup of NPL sites that are on tribal property or that affect tribes.", "GAO was asked to analyze NPL sites that are on tribal property or that affect tribes and EPA's consultation with tribes at these sites. This report: (1) examines the extent to which EPA has reliable data identifying NPL sites that are located on tribal property or that affect tribes, (2) examines the extent to which EPA has reliable data on the agency's consultation with tribes regarding NPL sites, and (3) describes the actions EPA has taken to address the unique needs of tribes when making decisions about cleanup actions at Superfund sites. GAO reviewed laws and policies, assessed EPA data on NPL sites, and interviewed EPA and tribal officials about cleanup actions and consultations at six non-generalizable NPL sites selected in part for their geographic diversity."]}, {"section_title": "What GAO Found", "paragraphs": ["The Environmental Protection Agency (EPA) does not have reliable data identifying National Priorities List (NPL) sites that are located on tribal property or that affect tribes. Specifically, EPA collects data on whether sites are on tribal property or have Native American Interest (a data variable indicating sites where tribal members or tribal land would be directly affected by the release of hazardous substances), as well as which tribes are associated with NPL sites. However, EPA's data are not always accurate or complete for a number of reasons. For example, EPA can have difficulty identifying some tribal property boundaries, and NPL site boundaries may evolve as the site is investigated and remediated. EPA does not have a regular review process for its data on whether an NPL site is on tribal property. In addition, EPA's guidance for determining whether a site has Native American Interest is unclear, and regions may not interpret it consistently. Without improving its review process and clarifying its guidance, EPA will not have reasonable assurance that its data on tribes that are affected by NPL sites are accurate or complete.", "EPA consults with tribes when actions at an NPL site may affect tribal interests, but the agency does not have reliable data on its consultations with tribes. Data from EPA's system for tracking consultation did not include documentation of some consultations that GAO confirmed had occurred. One possible reason that EPA data are incomplete is that the agency's policy is unclear on which interactions are considered consultation and are therefore to be documented in EPA's system of record, which is not consistent with federal standards for internal control. EPA's policy provides a broad definition of consultation and specifies which staff are responsible for determining when consultation may be appropriate. However, the policy does not provide further guidance on the circumstances under which consultation should be considered. For example, it does not specify any specific points in the hazardous substance cleanup process at which consultation should be considered or provide further detail on which tribal interests should be considered when determining if tribal interests on NPL sites are affected. Without clarifying guidance to clearly define circumstances under which consultation with tribes should be considered, EPA cannot have reasonable assurance that it is applying its consultation policy consistently.", "EPA has taken various actions to address the unique needs of tribes when making decisions about cleanup actions. These actions include minimizing tribal members' exposure to contaminants because of tribal lifestyle (e.g., greater consumption of local fish and game) and limiting potential damage to culturally important sites. For example, EPA officials said that at one site, they altered the design and route of the roads used to remove contaminated materials to minimize the impact of cleanup activities' on cultural resources. EPA also published a memorandum in 2017 with recommendations on considering tribes' traditional ecological knowledge in the cleanup process if tribes offer it."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to EPA, including that it take actions to improve the data it collects and to clearly define circumstances under which consultation with tribes should be considered. EPA generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Releases of hazardous substances into the environment can create  significant risks to human health and the environment, and Indian tribes  can face unique challenges associated with exposure to such  substances. According to the Environmental Protection Agency (EPA),  more than 300,000 Indians\u2014roughly 12 percent of the approximate total  Indian population of the United States\u2014live within 3 miles of a site that  has released or may release a hazardous substance. For example, in  upstate New York, elevated levels of polychlorinated biphenyls, which  were released into the St. Lawrence and Grasse Rivers by an aluminum  manufacturing facility and an aluminum die casting plant, have posed a  threat to the health and traditional cultural practices of members of the  Saint Regis Mohawk Tribe since at least 1954, according to officials from  the tribe. According to these officials, fish consumption restrictions  associated with the contamination in the St. Lawrence and Grasse Rivers  disrupted the tribe\u2019s subsistence lifestyle and the role that fishing plays in  tribal members\u2019 lives. In addition, in 2014, we reported that for more than  30 years, the Navajo people have lived with the environmental and health  effects of uranium contamination resulting from the extraction of millions  of tons of uranium ore from mines on the Navajo reservation to support  the development of the U.S. nuclear weapons stockpile.", "The federal government\u2019s principal program to address sites with  hazardous substances\u2014the Superfund program\u2014was established by the  Comprehensive Environmental Response, Compensation, and Liability  Act (CERCLA) of 1980 and is administered by EPA. EPA assesses  contaminated sites using a Hazard Ranking System that considers  several factors, such as exposure pathways, to determine a site\u2019s relative  threat to human health or the environment. Sites with sufficiently high  scores under this system are eligible to be proposed for listing on the  National Priorities List (NPL), which includes some of the most seriously  contaminated sites that EPA identifies for long-term cleanup. After a site  is listed on the NPL, or a release or threatened release of a hazardous  substance is identified, EPA or a potentially responsible party can begin  the multi-phase remedial cleanup process, which we refer to as cleanup  actions. Potentially responsible parties are liable for conducting or paying  for the cleanup of hazardous substances.", "In certain circumstances involving Superfund sites, EPA is required or  directed to consult with federally recognized Indian tribes. Specifically, for  Superfund sites on land where a tribe has jurisdiction, CERCLA requires  EPA to give tribes \u201csubstantially the same treatment as a state\u201d for, among other things, consultation on remedial actions. In addition, in 2011,  EPA issued a general, agency-wide policy for consultation and  coordination with tribes when EPA actions and decisions may affect tribal  interests. The policy outlines a four-phase consultation process that  includes EPA notifying tribes sufficiently early in the process to allow for  meaningful input by tribes and providing formal, written feedback  explaining how EPA considered tribes\u2019 input in its final action.", "You asked us to examine Superfund sites that are located on tribal  property or that affect tribes, and EPA\u2019s consultation with tribes regarding  cleanup actions at these sites. This report (1) examines the extent to  which EPA has reliable data identifying NPL sites that are located on  tribal property or that affect tribes, (2) examines the extent to which EPA  has reliable data on the agency\u2019s consultation with tribes regarding NPL  sites, and (3) describes what actions, if any, EPA has taken to address  the unique needs of tribes when making decisions about cleanup actions  at NPL sites.", "To examine the extent to which EPA has reliable data identifying NPL  sites that are located on tribal property or that affect tribes, we obtained  EPA data on NPL sites currently proposed, final, or deleted, that (1) EPA  data indicate are associated with Indian tribes, (2) the agency has  determined to have Native American Interest (NAI), and (3) EPA officials  told us may be within 10 miles of tribal property. We limited our review  to NPL remedial cleanup sites\u2014proposed, final, and deleted\u2014because  they represent sites with the highest national priority due to the  significance of releases, or threatened releases, of hazardous  substances. To assess the reliability of EPA\u2019s data, we worked with  officials from EPA headquarters and each of its 10 regional offices to  perform data quality checks and identify any errors or omissions. We also  interviewed EPA officials about selected sites of interest that, according to  EPA, may be located within 1 mile of tribal property, but that EPA had not  identified as having NAI. Additionally, we reviewed documents and  interviewed officials from EPA headquarters and regional offices to better  understand the agency\u2019s management and use of the database of record  for collecting and maintaining data on all Superfund sites, the Superfund  Enterprise Management System (SEMS). We worked with agency  officials to correct errors in order for us to report on the number of NPL  sites known to be on tribal property or that affect tribes as of December  2017, and we identified 87 sites of the total 1,785 NPL sites that were  proposed, final, or deleted at that time. In addition, in their comments on a  draft of this report, the Confederated Salish and Kootenai Tribes of the  Flathead Reservation identified an additional site that was not included in  EPA\u2019s data, bringing the total to 88 NPL sites known to be on tribal  property or affect tribes. We recognize there may be additional sites that  may be of interest to tribes; however, we determined that the data were  sufficiently reliable for the purpose of providing information on NPL sites  known to affect tribes or to be located on tribal property. Appendix I  provides information on and cleanup status for these 88 sites.", "To examine whether EPA has reliable data regarding its consultation with  tribes about NPL sites, we reviewed data from EPA\u2019s Tribal Consultation  Opportunity Tracking System (TCOTS) regarding consultations that had  taken place since 2011 and related agency documentation, interviewed  knowledgeable agency officials, and compared TCOTS data with other  data EPA provided on tribal consultation in support of our first objective.  We worked with agency officials to correct errors and omissions to reach  a final set of data that were sufficiently reliable to report, as of May 2018.  These data provide the total number of consultations that EPA officials  have had with tribes regarding NPL site cleanup decisions since 2011.  We also interviewed EPA headquarters and regional officials to obtain  their perspectives on how and when EPA consults with tribes.", "In addition, using the number of NPL sites known to be on tribal property  or affecting tribes that we developed for objective one, we selected a  nonprobability sample of six final or proposed NPL sites to use as case  studies. We selected these sites to reflect different EPA regions, listings  on the NPL before and after EPA\u2019s 2011 consultation and coordination  policy went into effect, and sites that have had at least two assessments  or inspections performed, according to EPA data. While we selected six  NPL sites EPA has identified as affecting tribes or located on tribal  property, our interviews with tribal and EPA officials covered a broader  spectrum of sites and included officials\u2019 views regarding any Superfund  program activities in which they had been involved. For each case study,  we requested information about EPA\u2019s consultation with tribes as well as  any documentation that demonstrated whether and how EPA took into  account unique tribal needs associated with the site when making  cleanup decisions. We also interviewed officials from the tribe or tribes  involved with the cleanup at each of our six selected NPL sites, as well as  EPA regional officials for the region in which the site is located. We  analyzed EPA and tribal officials\u2019 experiences with consultation and  coordination at the six selected NPL sites based on EPA\u2019s consultation  policy.", "To describe what actions EPA has taken to address the unique needs of  tribes when making cleanup decisions, we interviewed EPA officials from  the regional offices associated with the six selected NPL sites. We also  interviewed officials from the tribe or tribes with interests at each of the  selected sites in our review. Our interviews with EPA and tribal officials  covered a broader spectrum of sites and included officials\u2019 views about  other Superfund activities in which they had been involved. Appendix II  provides a more detailed description of the objectives, scope, and methodology for this report. Appendix III provides additional information  about our six selected case study sites and the EPA regions in which they  are located.", "We conducted this performance audit from May 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": ["This section presents information on the Superfund program and the  stages of the cleanup process, the relationship between federally  recognized tribes and the federal government, the laws and policies that  govern EPA\u2019s consultation with federally recognized tribes regarding  Superfund cleanup actions, and EPA\u2019s administration of the Superfund  program."], "subsections": [{"section_title": "The Superfund Program and Remedial Cleanup Process", "paragraphs": ["CERCLA established the Superfund program to clean up contaminated  sites to protect human health and the environment from the effects of  hazardous substances. Under CERCLA, potentially responsible parties  are liable for conducting or paying for the cleanup of hazardous  substances at contaminated sites. Under the Superfund program, EPA  and potentially responsible parties can undertake two types of cleanup  actions: removal actions and remedial actions. Removal actions are  usually short-term cleanups for sites that pose immediate threats to  human health or the environment. Remedial actions are generally long- term cleanups\u2014consisting of one or more remedial action projects\u2014that  aim to permanently and significantly reduce contamination; these actions  can take a considerable amount of time and money, depending on the  nature of the contamination and other site-specific factors.", "The Superfund process begins with the discovery of a potentially  hazardous site or notifications to EPA regarding the possible release of  hazardous substances that may threaten human health or the  environment. EPA delineates the Superfund remedial cleanup process in  nine phases:  1.  Preliminary Assessment and Site Investigation. EPA\u2019s regional  offices may discover sites with releases of hazardous substances or  potential for releases of hazardous substances, or such sites may  come to EPA\u2019s attention through notifications\u2014either reports from  state agencies or citizens. As part of this first phase of the process,  EPA\u2019s regional offices use a screening system called the Hazard  Ranking System to guide decision making and, as needed, to  numerically assess the site\u2019s relative potential to pose a threat to  human health or the environment.  2.  NPL Site Listing Process. EPA may propose sites that score at or  above an established level for listing on the NPL. EPA regions  submit sites to EPA headquarters for possible listing on the NPL  based on a variety of factors, including the availability of alternative  state or federal programs that may be used to clean up the site.  Sites that EPA proposes to list on the NPL are published in the  Federal Register. After a period of public comment, EPA reviews the  comments and makes final decisions on whether to list the sites on  the NPL.  3.  Remedial Investigation and Feasibility Study. EPA or a potentially  responsible party will generally begin the remedial cleanup process  for an NPL site by conducting a two-part study of the site: (1) a  remedial investigation to characterize site conditions and assess the  risks to human health and the environment, among other actions and  (2) a feasibility study to evaluate various options to address the  problems identified through the remedial investigation.  4.  Record of Decision. At the culmination of the remedial investigation  and feasibility study, EPA issues a record of decision that identifies  EPA\u2019s selected remedy for addressing the contamination. A record of  decision typically lays out the planned cleanup activities for each  operable unit of the site.  5.  Remedial Design and Remedial Action. EPA or a potentially  responsible party plans the implementation of the selected remedy  during the remedial design phase, and then, in the remedial action  phase, EPA or a potentially responsible party carries out one or more  remedial action projects.  6.  Construction Completion. EPA generally considers the construction  to be complete for a site when all physical construction at a site is  complete, including actions to address all immediate threats and to  bring all long-term threats under control.  7.  Post-Construction Completion. The potentially responsible party or  the state generally conducts operation and maintenance to maintain  the remedy, such as operating a groundwater extraction and  treatment system. EPA generally performs reviews of the remedy at  least every five years to evaluate whether it continues to protect  human health and the environment.  8.  NPL Deletion. EPA may delete a site, or part of a site, from the NPL  when the agency and the relevant state authority determine that no  further site response is needed.  9.  Site Reuse and Redevelopment. EPA works with communities to  ensure that site cleanups are consistent with the site\u2019s future use and  to make sure sites or portions of sites are used safely."], "subsections": []}, {"section_title": "Relationship between Federally Recognized Tribes and the Federal Government", "paragraphs": ["The federal government recognizes Indian tribes as distinct, independent  political communities that possess certain powers of self-government and  sovereignty. As of January 9, 2019, there were 573 federally recognized  Indian tribes. The federal government has a government-to-government  relationship with Indian tribes, so EPA works directly with tribes. The  federal government also has a trust responsibility to Indian tribes and  their members based on treaties, federal laws, and court decisions. In  addition, treaties between tribes and the federal government may reserve  rights to a tribe that could be affected by a proposed EPA action. For  example, an NPL site may contaminate fish or wildlife that a tribe has a  treaty right to fish or hunt. EPA guidance notes that certain types of EPA  actions, namely those that are focused on a specific geographic area, are  more likely than others to have potential implications for treaty-protected  natural resources."], "subsections": []}, {"section_title": "Laws and Policies Governing EPA Consultation with Tribes Regarding Superfund Cleanup Actions", "paragraphs": ["CERCLA includes a requirement for EPA to consult with Indian tribes in  certain circumstances regarding cleanup actions at Superfund sites.  Specifically, under CERCLA, EPA is required to treat tribes substantially  the same as states with regard to consultation on remedial actions on  lands for which an Indian tribe has jurisdiction, among other things. In  addition to this CERCLA requirement, the following government-wide and  agency policies apply when EPA consults with tribes regarding cleanup  actions at Superfund sites:", "Executive Order 13175 (2000). Directs agencies to have an  accountable process to ensure meaningful and timely input by tribal  officials in the development of regulatory policies that have tribal  implications.", "EPA policies and guidance", "EPA Policy for the Administration of Environmental Programs  on Indian Reservations (1984). Sets forth principles to guide  EPA in dealing with tribal governments and responding to the  problems of environmental management on reservations in order  to protect human health and the environment.", "EPA Policy on Consultation and Coordination with Indian  Tribes (2011). Provides a general, agency-wide policy for  consultation and coordination with tribes in cases in which EPA  actions and decisions may affect tribal interests. EPA developed  this policy in response to Executive Order 13175 and a 2009  presidential memorandum on tribal consultation. The policy  notes that EPA submits annual progress reports to the Office of  Management and Budget (OMB) on the status of its consultation  actions pursuant to this 2009 presidential memorandum. This  policy provides guiding principles for consultation, outlines a four- phase process for conducting consultation, and establishes the  roles and responsibilities for specific EPA officials. Some EPA  regional offices have their own specific guidance for consulting  with tribes that include the elements of EPA\u2019s agency-wide  consultation policy, but may include more specific guidelines. For  example, Region 2\u2019s consultation guidance includes a list of  specific subjects to include in notification letters to tribes.", "EPA Policy on Environmental Justice for Working with  Federally Recognized Tribes and Indigenous Peoples (2014).  Affirms EPA\u2019s commitment to provide federally recognized tribes  and indigenous peoples in the United States fair treatment and  meaningful involvement in EPA decisions that may affect their  health or environment.", "EPA Guidance for Discussing Tribal Treaty Rights (2016). The  guidance states that it is intended to enhance EPA\u2019s consultations  in situations where tribal treaty rights may be affected by a  proposed EPA action.", "EPA Memorandum on Considering Traditional Ecological  Knowledge During the Cleanup Process (2017). Provides  direction to improve the Superfund decision-making process to  ensure EPA considers a tribe\u2019s traditional ecological knowledge  when tribes willingly provide such information.", "EPA Memorandum on Consideration of Tribal Treaty Rights  and Traditional Ecological Knowledge in the Superfund  Remedial Program (2017). Provides recommendations for  regional Superfund Remedial Program staff to consider when (1)  evaluating tribal treaty rights and treaty-protected resources in  program implementation and (2) considering traditional ecological  knowledge during the cleanup process when the information is  freely provided by the tribe or tribes with interests at the site."], "subsections": []}, {"section_title": "EPA\u2019s Administration of the Superfund Program", "paragraphs": ["EPA\u2019s 10 regional offices are responsible for carrying out many of the  implementation and management responsibilities for NPL sites, and are  guided by the Superfund Program Implementation Manual, as well as  CERCLA, CERCLA\u2019s implementing regulations, supplementary guidance,  and agency policy. The Superfund Program Implementation Manual  states that its purpose is to provide overarching program management  priorities, procedures, and practices for EPA\u2019s Superfund remedial and  removal programs, providing a link between EPA\u2019s strategic plan and  Superfund program internal processes, among other things. Further, the  manual includes definitions for Superfund program accomplishments and  outlines processes for planning and tracking accomplishments through  milestones, including site-wide milestones specific to how the agency  manages the release of hazardous substances (e.g., human exposure  under control).", "Using its SEMS and TCOTS data systems, EPA tracks NPL sites that are  on tribal property or that affect federally recognized Indian tribes, as well  as the agency\u2019s efforts to consult with Indian tribes regarding cleanup  decisions at NPL sites. SEMS is EPA\u2019s primary database to track  Superfund program accomplishments and milestones and to answer  Superfund-related questions from Congress, federal and state agencies,  and the public. SEMS is EPA\u2019s primary system for Superfund data  collection, reporting, and tracking and serves as the Superfund program\u2019s  data management system for accomplishment planning and tracking.  According to the Superfund Program Implementation Manual, EPA  regional staff are to input data into SEMS regarding planned or actual  accomplishments, and EPA headquarters staff are to use SEMS data as  the basis for tracking, managing, and reporting on the performance of the  Superfund program.", "SEMS is the system of record for NPL site data, including information on  tribes that have an interest in the site. We looked at three of the variables  SEMS uses for tracking sites that are located on tribal property or that  affect tribes:", "On tribal property. This variable indicates whether the release of  hazardous materials is on Indian country and any other land owned by  an Indian tribe or an Alaska Native entity.", "NAI. This variable identifies sites that may be of interest to one or  more Native American entities whose members or land would be  directly affected by the release of hazardous materials.", "Associated tribe. This variable identifies the specific Indian entity or  entities associated with a site with NAI.", "TCOTS tracks information about potential future tribal consultation  opportunities and serves as a repository for consultation-related  documents for active consultations for all EPA programs, including  Superfund. EPA uses TCOTS to (1) track current and forecasted  consultation, (2) publicize current EPA consultation opportunities for tribal  governments, and (3) provide reports to OMB, as called for in the 2009  presidential memorandum on tribal consultation."], "subsections": []}]}, {"section_title": "EPA Does Not Have Reliable Data Identifying NPL Sites Located on Tribal Property or That Affect Tribes EPA Data Identifying NPL Sites Located on Tribal Property Are Not Accurate", "paragraphs": ["EPA data identifying NPL sites that are located on tribal property or that  affect tribes are not reliable. Specifically, EPA data identifying sites that  are on tribal property, sites that have NAI, and the tribes that have  interest in NAI sites are not accurate or complete based on our reviews of  agency data and interviews with EPA officials.", "EPA data identifying NPL sites that are on tribal property are not  accurate. EPA headquarters officials told us that the SEMS data variable  for identifying sites \u201con tribal property\u201d may not always accurately identify  whether NPL sites are located on tribal property. Because EPA officials  told us that the agency\u2019s data regarding NPL sites on tribal property may  not be accurate and provided explanations for why these data are  unreliable, we did not evaluate these data to determine the total number  of inaccuracies.", "EPA officials we interviewed provided a number of reasons why the  agency\u2019s data regarding NPL sites located on tribal property may not be  accurate:", "First, EPA officials told us that some site location information was  inaccurately transposed during maintenance of the former database of  record used prior to adopting SEMS, and that these errors, in some  cases, carried over to SEMS. According to these officials, the  transposed information resulted in some sites appearing in the  incorrect geographic hemisphere (i.e., sites located in the western  hemisphere appeared to be located in the eastern hemisphere in the  incorrectly transposed data). These officials told us that they have  worked over the past year to correct these errors and to verify the  accuracy of site coordinates.", "Second, EPA officials told us that accurately documenting which sites  are on tribal property can be complicated due to difficulties identifying  tribal property boundaries and evolving site boundaries. For example,  tribal property boundaries may be difficult to establish without  reviewing land titles and other documents. Further, EPA officials told  us they use the best available data to identify tribal property but there  are limitations in that data. In addition, EPA officials we interviewed  told us that site boundaries can be difficult to define or change over  time. For example, an agency official told us NPL sites may not have  clearly delineated boundaries until after the remedial investigation is  complete and the full extent of contamination has been determined.  Further, the official said that site boundaries may change during the  cleanup process or during post-cleanup reviews if EPA discovers new  or more widespread contamination. According to EPA headquarters  officials, EPA regional officials are responsible for tracking changes to  site boundaries in their respective regions, but specific information on  the location of site boundaries is not documented in SEMS.  Additionally, for one site\u2014the Tar Creek site in Oklahoma (Region  6)\u2014EPA\u2019s publicly-available information states that there are no clear  site boundaries. One EPA regional official we interviewed told us that  he was not aware of guidance for regions regarding changing tribal  property information in circumstances in which site boundaries  change to include land that is tribal property. Additionally, EPA  officials told us that regional offices may be inconsistent in how they  determine site boundaries. EPA released recommended practices for  collecting geospatial data for Superfund sites in 2017 that included  guidance for determining and documenting NPL site boundaries.  Further, in May 2018, EPA provided national standards intended to  provide a uniform method for collecting, documenting, and managing  geospatial information for Superfund sites, including information  identifying site boundaries.", "Third, EPA headquarters officials stated that EPA checks the  accuracy of these data infrequently. Headquarters officials told us  there are several standardized automated reports that officials at the  headquarters and regional levels can use to review SEMS data and  identify quality issues, including quality issues in the variables for NAI  and the associated tribes. However, these reports do not contain the  on tribal property variable, and SEMS currently does not have the  ability to run automated checks of site proximity to tribal property  based on location data. Officials told us that they review the on tribal  property data periodically outside of these reports; however, EPA  currently lacks a regular review process for these data.", "Under federal standards for internal control, management should use  quality information to achieve the entity\u2019s objectives. Quality information is  appropriate, current, complete, accurate, accessible, and provided on a  timely basis. In addition, under federal standards for internal control,  management should design control activities to achieve objectives and  respond to risks, such as by conducting reviews at the functional or  activity level. According to EPA officials, data identifying NPL sites that  are on tribal property may not be accurate for a number of reasons.  Because SEMS automated reports do not contain the on tribal property  variable, EPA regions cannot regularly conduct quality reviews of  information in SEMS on tribal property using those reports. Without a  regular review process to ensure the quality of SEMS data identifying  sites on tribal property and the ability to use automated reports to check  the accuracy of on tribal property data in SEMS, EPA does not have  reasonable assurance that regional officials have accurately identified  sites on tribal property."], "subsections": [{"section_title": "EPA Data Identifying Sites as Having NAI Are Not Accurate or Complete", "paragraphs": ["EPA data identifying which sites have NAI are inaccurate and incomplete,  based on our reviews of the data. We found three types of errors in these  data. First, we found that SEMS did not include some sites with known  tribal interest as having NAI. Second, we found some sites that EPA  identified in SEMS as having NAI when there was no tribal interest. Third,  we found that EPA regional officials inconsistently used the NAI variable  in SEMS when there was no longer tribal interest in a site.", "SEMS does not include some NPL sites with known tribal  interests as having NAI. We found nine sites with tribal interest that  EPA did not identify as having NAI in SEMS. For six of these sites,  EPA regional officials told us that they knew the sites were of interest  to one or more tribes, even though they were not identified as having  NAI in SEMS. For example, we found that EPA Region 10 had invited  the Cow Creek Band of Umpqua Tribe of Indians to consult regarding  the Black Butte Mine site, but the site was not identified as having NAI  in SEMS. For two additional sites, following our request to review the  SEMS data, officials from Region 4 contacted tribal officials in their  region to inquire about their potential interest in NPL sites and found  that the Eastern Band of Cherokee Indians had interest in two sites in  North Carolina not previously identified as having NAI: Barber  Orchard and Benefield Industries. EPA designated both sites as ready  for their intended use\u2014meaning that construction of the remedy had  been completed\u2014in 2011 and 2014, respectively. For the remaining  site, EPA officials in Region 5 stated that they learned of tribal interest  in the Petoskey Manufacturing Company Groundwater site when the  Little Traverse Bay Bands of Odawa Indians contacted them in  December 2017, after coverage of the site\u2019s contamination hazards  on the local news.", "SEMS incorrectly includes some sites as having NAI when no  tribal interest exists. When responding to our request to verify the  accuracy of data in SEMS, EPA regional officials identified 10 sites  that were incorrectly included in SEMS as having NAI when there was  no actual tribal interest. For example, officials from Region 4 stated  that they removed the NAI designation from three sites because the  sites are situated more than 100 miles from the nearest federally  recognized tribe\u2019s property and the officials were not aware of any  tribal interest in the sites. Similarly, EPA regional officials determined  that two other sites\u2014Eielson Air Force Base in Region 10 and Seneca  Army Depot in Region 2\u2014were incorrectly identified as having NAI.  These officials told us that these sites should not have been  designated as NAI because no tribes had expressed interest in either  site.", "EPA inconsistently identified sites with prior NAI in SEMS. We  found that EPA regional officials inconsistently used the NAI variable  in SEMS when tribes were no longer interested in a site. For example,  Region 2 officials stated that they maintained the NAI designation for  the Hooker Hyde Park site in order to preserve the historical record  after EPA identified that the Seneca Nation of Indians no longer had  an interest in the site. Conversely, Region 8 officials indicated that  they removed the NAI designation for the Arsenic Trioxide site when it  was determined that the relevant tribe no longer had interest in the  site.", "Based on our review of EPA guidance and data provided by EPA officials,  we identified several possible reasons that the agency\u2019s data for  identifying tribal interests are not accurate or complete. One possible  reason that NAI data in EPA\u2019s SEMS may be inaccurate and incomplete  is because EPA\u2019s guidance for making NAI determinations is unclear,  resulting in EPA regional officials inconsistently determining and  documenting sites with NAI. EPA\u2019s Superfund Program Implementation  Manual, which provides guidance to EPA regional officials for identifying  sites as having NAI, contains one sentence regarding how EPA regional  officials are to determine when to designate a site as having NAI. The  manual states that EPA regional officials should designate NAI in SEMS  when a site \u201cmay be of interest to tribes whose members or land are  directly affected\u201d by the release of hazardous materials from the site, but  the manual does not specify criteria EPA regional officials should  consider for determining what constitutes NAI. For example, the manual  does not specify whether ancestral lands, areas where tribes have treaty  rights, or areas otherwise of interest to a tribe but that are not tribal  property should be considered in making this determination. It also does  not specify what types of tribal interests to consider. However, officials  from tribes we interviewed for our case studies told us that tribal interests  in NPL sites may be related to a variety of factors, including  contamination potentially affecting tribal members living in or around the  contaminated area or land where the tribe has treaty hunting or fishing  rights. Furthermore, EPA\u2019s Superfund Program Implementation Manual  does not specify whether officials should remove the NAI designation if  officials determine tribes no longer have interest in a site. In the case of  the Petoskey Manufacturing Company Groundwater site in Michigan,  EPA Region 5 officials we interviewed told us that they were uncertain as  to whether they should identify the site as having NAI, because they were  unsure if the level of the tribe\u2019s interest was significant enough.", "EPA officials we interviewed provided additional reasons for the lack of  accuracy and completeness in the agency\u2019s data regarding sites with NAI.  EPA headquarters officials told us they periodically, but infrequently,  review SEMS data on Superfund sites identified as having NAI. In  addition, EPA officials told us that, in some cases, they did not identify  sites as having NAI where there was tribal interest or incorrectly identified  sites as having NAI when no tribal interests were involved due to errors.  Additionally, some regional officials expressed that identifying NAI can be  complicated by the fact that tribes may have interest in sites not located  near their current property due to historical interest or treaty rights.", "Under federal standards for internal control, management should design  control activities to achieve objectives and respond to risks, such as by  clearly documenting internal control in management directives,  administrative policies, or operating manuals. Although EPA has  documented guidance, it is not clear about how EPA officials should  make determinations about designating sites as having NAI. Without clear  guidance to regional offices on how to determine whether sites have  NAI\u2014including criteria to assist regions in determining when a site should  be designated as having NAI in the SEMS database and how, if at all, to  adjust the NAI data for sites that no longer have tribal interest\u2014EPA does  not have reasonable assurance that its data on tribes that may be  affected by hazardous releases at NPL sites are accurate or complete."], "subsections": []}, {"section_title": "EPA Data on Tribes with Interest in Sites That Have NAI Are Not Accurate or Complete", "paragraphs": ["EPA data do not accurately or completely identify the tribes that have  interest in the sites that EPA identified as having NAI. Specifically,  through reviewing EPA\u2019s data with officials in each region, we found  examples of sites that EPA indicated as having NAI but that (1) did not  identify any tribes with an interest in the sites, (2) did not identify all tribes  with an interest in the sites, and (3) incorrectly identified tribes associated  with a site.", "SEMS does not include tribes for all sites. We found eight sites  with NAI for which EPA did not identify an interested tribe in SEMS.  For these eight sites, EPA officials added the tribes\u2019 names prior to  sending us the data.", "SEMS does not include all tribes that have an interest in some  sites. We identified eight sites for which EPA did not identify in SEMS  all the tribes that had interest in the site. For example, for the Smurfit  Stone Mill Frenchtown site in Missoula, Montana, EPA data listed the  Confederated Salish and Kootenai Tribes of the Flathead Reservation  as having an interest in the site. However, after speaking with EPA  Region 8 officials, we learned that the Kalispel Indian Community of  the Kalispel Reservation also has an interest in the site but could not  be included in SEMS because the tribe resides in the state of  Washington, and the site is located in Montana. In providing technical  comments on a draft of this report, EPA identified a ninth site, the St.  Louis River site, for which an additional tribe should be added to the  data in SEMS.", "SEMS incorrectly identified an interested tribe associated with  one site determined to have NAI. For the Velsicol Chemical  Corporation site in Michigan, EPA identified in SEMS the interested  tribe as the Sault Ste. Marie Tribe of Chippewa Indians, when the  actual interested tribe was the Saginaw Chippewa Indian Tribe of  Michigan. Additionally, in providing technical comments on a draft of  our report, EPA also made corrections to the tribes originally listed for  the Tar Lake site and clarified the tribe originally listed for the St.  Louis River site.", "EPA officials we interviewed told us that a possible reason for the  inaccuracies in the data regarding the tribe or tribes interested in NPL  sites that have NAI is that, until recently, regional officials could not enter  the names of additional tribes to a SEMS site record that was created in  the agency\u2019s previous database of record. In addition, officials from two  EPA regions told us that they could not record tribes as having an interest  in a site when the tribe is headquartered in a state other than the state  address on file for the site. EPA headquarters officials told us they  submitted a request in August of 2017 to have the issue resolved and  that, as of April 2018, the issue had been corrected and that regions can  now add additional tribes, or tribes from other states outside of the state  where the site is headquartered. Officials told us that prior to the  correction in SEMS, officials at the headquarters level could manually  enter data to record the names of additional tribes with NAI in a site or  identify tribes interested in a site that reside in states other than the state  in which the site is located."], "subsections": []}]}, {"section_title": "EPA Does Not Have Reliable Data about the Agency\u2019s Consultation with Tribes Regarding NPL Sites", "paragraphs": ["EPA does not have reliable data on the agency\u2019s consultation with tribes  regarding NPL sites. Additionally, based on our analysis of EPA data and  related documentation, as well as discussions with officials from EPA and  Indian tribes, we found that EPA officials more frequently coordinated  informally with tribes than conducted consultation."], "subsections": [{"section_title": "EPA Does Not Have Reliable Data on Consultation with Tribes Regarding NPL Sites", "paragraphs": ["EPA does not have reliable data on the NPL sites at which it has  conducted tribal consultation. According to data in TCOTS, consultation  had occurred or was projected to occur at 18 sites since EPA\u2019s  consultation and coordination policy went into effect in 2011. However,  TCOTS data are incomplete and did not include records for 7 NPL sites  where, based on our interviews with EPA regional officials and a review of  agency documents, we determined that consultation had occurred since  2011.", "One possible reason that EPA data on consultation with tribes are  incomplete is that the agency\u2019s guidance regarding what constitutes  consultation, and therefore is to be recorded in TCOTS, is unclear. EPA  officials told us they consider consultation a specific, formal interaction  that involves government-to-government interaction between tribal  governments and senior EPA officials, such as Regional Administrators,  and generally happens at major decision points or at the request of a  tribe. Several EPA officials we interviewed clarified that the majority of  day-to-day interaction with tribes do not require consultation and are less  formal coordination efforts. EPA\u2019s 2011 consultation policy provides a  broad definition of consultation and makes specified program and  regional officials responsible for determining when consultation may be  appropriate, but the policy does not provide specific criteria for regions to  use to determine if consultation with a tribe should be considered. The  policy initially states that it is EPA\u2019s policy to \u201cconsult on a government-to- government basis with federally recognized tribal governments when EPA  actions or decisions may affect tribal interests.\u201d According to the policy,  the broad scope of consultation contemplated by the policy creates \u201ca  large number of actions that may be appropriate for consultation.\u201d To  provide \u201ca general framework from which to begin the determination of  whether any particular action or decision is appropriate for consultation,\u201d  the policy provides a list of general EPA activity categories, including  Superfund response actions. However, the policy does not provide any  further guidance on the circumstances under which consultation should  be considered. For example, it does not specify any particular points in  the Superfund process at which consultation should be considered or any  further detail on what tribal interests should be considered when  determining if tribal interests are affected.", "Under federal standards for internal control, management should design  control activities to achieve objectives and respond to risks, such as by  clearly documenting internal control in management directives,  administrative policies, or operating manuals. Although EPA has  documented guidance about consulting with tribes, it does not provide  clear direction to regions about the circumstances under which the  agency should consider consulting with tribes during the Superfund  process. Without clarifying guidance on tribal consultation to clearly  identify the circumstances under which the agency should consider  consulting with tribes, EPA does not have reasonable assurance that  regions are applying the consultation policy consistently and uniformly.", "In addition, EPA regional officials do not consistently document invitations  to consult with tribes in TCOTS, which could result in incomplete or  inaccurate data on EPA consultation with tribes. EPA headquarters  officials told us that invitations to consult should be entered in TCOTS,  because the database has a specific field for this information. Officials we  interviewed from EPA Regions 6 and 10, the two regional offices that  combined manage nearly half of Superfund sites that EPA identified as  having NAI, told us that they do not document all invitations to consult in  TCOTS. Specifically, an official we interviewed from Region 6 told us that  consultation invitations that were not made in writing are generally not  entered into TCOTS, and an official from Region 10 told us that officials in  the region would not document invitations to consult that did not lead to  actual consultation. In providing technical comments on our draft report,  EPA noted that Region 10 now documents all invitations to consult with  tribes in the TCOTS database.", "Although EPA headquarters officials told us that invitations to consult  should be entered in TCOTS, agency guidance does not direct officials to  do so. EPA has developed guidance on key points in the Superfund  process at which regional officials should document consultation if it  occurs, but this guidance does not direct regional officials to document  invitations to consult in TCOTS. Moreover, officials we interviewed from 6  of EPA\u2019s 10 regional offices were unaware of this guidance. An EPA  headquarters official we interviewed told us that EPA regional officials  may be unaware of this guidance because EPA has not conducted  annual training regarding documenting tribal consultation and has  decided to offer the training on an as-needed basis. This guidance  identifies five decision points in the Superfund process at which EPA  regional officials should, at a minimum, document any associated  consultation with tribes in TCOTS, outlined in figure 1 below.", "Under federal standards for internal control, management should design  control activities to achieve objectives and respond to risks, such as by  clearly documenting internal control in management directives,  administrative policies, or operating manuals. By developing or revising  guidance to clearly direct regional officials to document all invitations to  consult with tribes in the TCOTS database and providing the guidance to  those officials, EPA would have greater assurance that its regional offices  are accurately and consistently documenting invitations to consult and  that the data that EPA provides to OMB regarding agency consultations  with tribes are accurate and complete."], "subsections": []}, {"section_title": "Consultation Is Relatively Infrequent Compared to Coordination", "paragraphs": ["Based on our analysis of EPA data and documentation, as well as  interviews with EPA and tribal officials, we found that EPA more  frequently coordinated informally with tribes regarding cleanup decisions  at NPL sites than conducted consultation with tribes. Consultation  between EPA and tribes, as defined in EPA\u2019s 2011 tribal consultation  policy, is relatively infrequent compared to less-formal coordination  efforts. For example, officials from the Kalispel Indian Community told us  that consultation is reserved for instances in which regular communication  and coordination is not working. Additionally, EPA officials in Region 8  told us that most of their day-to-day interactions with tribes are  considered coordination, and that consultation only occurs at key decision  points in the Superfund process. Most EPA regional officials we  interviewed as part of our case studies stated that consultation was  relatively infrequent. At the same time, these officials stated that they  frequently coordinate with tribes during the Superfund cleanup process.  Additionally, EPA\u2019s policy says that tribal officials may request  consultation with the agency.", "Tribal officials we interviewed as part of our case studies expressed  varying levels of satisfaction with EPA\u2019s coordination and consultation  efforts, as well as with EPA\u2019s cleanup decisions overall. In the case of the  General Motors Central Foundry site in Massena, New York, officials we  interviewed from the Saint Regis Mohawk Tribe told us that they were  dissatisfied with the consultation and the remedy at the General Motors  Central Foundry site. Specifically, tribal officials stated that they were  dissatisfied with EPA\u2019s decision to install a permanent cap over an  industrial landfill at the site, rather than removing all of the waste, to  address the contamination at the site. Officials from the tribe told us that  they felt EPA was disregarding the tribe\u2019s health and safety concerns at  the site. EPA acknowledged in its amended record of decision for the site  that the tribe only partially agreed with the remedy; however, EPA notes  that they took some steps to revise the remedy to address the tribe\u2019s  concerns. For example, the amended record of decision was created in  part, due to tribal opposition, and includes a contingency remedy that  expands the scope of the amended decision to include removal of  contaminated soil located on the tribe\u2019s property rather than on-site  treatment. In other cases, officials of some tribes told us that the working  relationship with their local EPA region was good and that coordination  had been effective. For example, officials from the Pueblo of Laguna  reported that communication and coordination with EPA region 6  regarding the cleanup of the Jackpile-Paguate Superfund site in Laguna  Pueblo, New Mexico, was effective, and that the EPA remedial project  manager for the site had been responsive to the tribe\u2019s needs."], "subsections": []}]}, {"section_title": "EPA Has Taken Various Actions to Address Unique Tribal Needs When Making NPL Site Cleanup Decisions", "paragraphs": ["EPA has taken various actions to address the unique needs of tribes  when making cleanup decisions at NPL sites. These actions include  efforts to minimize tribal members\u2019 exposure to contaminants and limit  potential damage to tribal archeological sites. For example:", "EPA Regions 1 and 10 took steps to protect tribal cultural  resources at NPL sites. EPA officials we interviewed from Region 1  told us that at one site, regional officials rerouted and improved roads  used to remove contaminated materials to minimize the impact of  cleanup activities\u2019 on historically significant cultural resources. In  addition, EPA officials we interviewed from Region 10 told us that they  coordinated with tribal cultural resource program officials to ensure  that tribal officials were present during excavation work at the Midnite  Mine site in Wellpinit, Washington, to observe and ensure that EPA  was taking appropriate measures to protect sites that are culturally  important to the tribe.", "EPA Region 2 officials revised risk assessments at an NPL site.  Because of concerns about the potential health impacts to the Saint  Regis Mohawk Tribe, EPA Region 2 officials revised the risk  assessment for a site with polychlorinated biphenyl contamination to  more accurately reflect the typical exposure of tribal members. EPA\u2019s  revised hazard exposure assessment for the General Motors Central  Foundry site assumed a higher rate of exposure to contaminants for  tribal members, given that they, on average, live on the reservation  longer than an adult non-tribal member may live in the same place for  most of his or her life. Specifically, EPA\u2019s exposure estimate was  based on an exposure duration of 64 years for an adult tribal member  and an exposure duration of 30 years for adult non-tribal member.", "EPA Region 9 incorporated tribal information into risk  assessments for some NPL sites. EPA officials we interviewed from  EPA\u2019s Region 9 office told us about several sites where they had  considered tribal members\u2019 heightened exposure to contamination.  For example, at one site, officials told us they worked closely with  tribal officials to gather data on tribal members\u2019 uses of vegetation and  tribal game consumption. These EPA officials stated that they used  these data to develop risk assessment plans that were sensitive to  unique tribal needs.", "EPA officials we interviewed also provided examples of the use of  traditional ecological knowledge at some NPL sites. Traditional  ecological knowledge sometimes represents unique tribal needs. For  example, EPA officials we interviewed described instances in which a  tribe provided EPA with selected information about their traditional  hunting sites and their traditional use of plants, and EPA was able to use  this information when developing risk assessments and standards for  safe consumption of fish and wildlife. For example, officials in EPA  Region 9 told us that a tribe shared information with them about how tribal  members hold reeds in their mouths as part of traditional basket making  practices. These officials reported that after learning of the tribe\u2019s use of  such reeds, the agency considered this information when determining  how to evaluate contamination in the area where the reeds grow. EPA  and tribal officials told us that, for confidentiality reasons, some tribes may  be reluctant to share some traditional ecological knowledge; however,  headquarters and EPA regional officials told us that this was relatively  infrequent and that, in these situations, EPA was able to work with the  tribe to find ways to use more general information to inform decisions  regarding Superfund cleanups."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["EPA has policies and procedures for consulting with tribes when its  actions and decisions at NPL Superfund sites may affect tribal interests.  To carry out these policies and procedures, EPA must be able to identify  when its actions and decisions may affect a tribe. The agency has  developed two systems\u2014SEMS and TCOTS\u2014that it uses to identify and  track sites that are on tribal property or that affect tribes, and the agency\u2019s  efforts to consult with affected tribes, respectively. However, based on our  analysis of some of the data in these systems, these data are not reliable.  Data on sites that are on tribal property are not accurate, and there is no  regular, standardized review process officials can use to review the  quality of these data. Without developing such a review process, EPA will  not have reasonable assurance that regional officials have accurately  identified the sites that are on tribal property. Additionally, data on sites  that have NAI are not accurate or complete due, in part, to unclear  guidance for how regions should determine whether a site has NAI.", "Clarifying guidance to regional offices on how to determine whether sites  have NAI can help provide EPA reasonable assurance that its data on  tribes that are directly affected by hazardous releases at NPL sites are  accurate and complete. Moreover, we found that the data tracking  consultation with tribes at NPL sites were unreliable, and may not contain  all invitations to consult. Clarifying guidance to clearly identify the  circumstances under which the agency should consider consulting with  tribes could improve the quality of EPA\u2019s data on consultation, and could  help ensure EPA regions are applying the consultation policy consistently  and uniformly. In addition, explicitly directing regional officials to  document all invitations to consult with tribes, regardless of whether  further consultation results after the invitation, would provide EPA greater  assurance that its regional offices are accurately and consistently  documenting invitations to consult, and that the data that EPA provides to  OMB regarding tribal consultations are accurate and complete."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to EPA:  The Director of EPA\u2019s Office of Superfund Remediation and Technology  Innovation should develop a regular review process to ensure the quality  of SEMS data identifying NPL sites on tribal property and revise  automated reports used to check the accuracy of SEMS data to include  on tribal property data. (Recommendation 1)", "The Assistant Administrator of EPA\u2019s Office of Land and Emergency  Management should clarify guidance to regional offices on how to  determine whether sites have NAI, including by adding criteria for when a  site should be designated as having NAI in the SEMS database and how,  if at all, to adjust SEMS data if a tribe is no longer interested in a site.  (Recommendation 2)", "The Director of EPA\u2019s Office of Superfund Remediation and Technology  Innovation should clarify agency guidance regarding tribal consultation for  the Superfund program to clearly identify the circumstances under which  the agency should consider consulting with tribes. (Recommendation 3)", "The Assistant Administrator of EPA\u2019s Office of International and Tribal  Affairs should develop or revise existing guidance to clearly direct  regional officials to document all invitations to consult with tribes in the  TCOTS database and provide the guidance to those officials.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Third-Party Views", "paragraphs": ["We provided a copy of this report to EPA, the Confederated Salish and  Kootenai Tribes of the Flathead Reservation, the Kalispel Indian  Community of the Kalispel Reservation, the Little Traverse Bay Bands of  Odawa Indians, the Mashpee Wampanoag Tribe, the Pueblo of Laguna,  the Saint Regis Mohawk Tribe, the Spokane Tribe of the Spokane  Reservation, and the Wampanoag Tribe of Gay Head (Aquinnah) for  review and comment. EPA generally agreed with our recommendations,  and their comments are reproduced in appendix IV. EPA also provided  technical comments, which we incorporated as appropriate. The  Confederated Salish and Kootenai Tribes of the Flathead Reservation  and the Pueblo of Laguna also provided written comments (reproduced in  appendixes V and VI) and technical comments, which we incorporated as  appropriate. The Kalispel Indian Community of the Kalispel Reservation,  the Little Traverse Bay Bands of Odawa Indians, the Mashpee  Wampanoag Tribe, the Saint Regis Mohawk Tribe, the Spokane Tribe of  the Spokane Reservation, and the Wampanoag Tribe of Gay Head  (Aquinnah) did not comment on our report.", "EPA concurred with our recommendation to develop a regular review  process to ensure the quality of SEMS data identifying NPL sites on tribal  property and revise automated reports used to check the accuracy of  these data. EPA stated that during the course of our work on this report,  SEMS tribal data was reviewed for quality control and corrections were  made to the existing data. In addition, EPA\u2019s Office of Superfund  Remediation and Technology Innovation plans to create a schedule to  review tribal data in SEMS and disseminate tribal data to Superfund  regional coordinators annually for their quality assurance review starting  in March 2019.", "EPA generally agreed with our recommendation to clarify guidance to  regional offices on how to determine whether sites have NAI, including by  adding criteria for when a site should be designated as having NAI in  SEMS and how, if at all, to adjust SEMS data if a tribe is no longer  interested in a site. EPA noted that there are a variety of circumstances  under which a tribe may have interest in a site, and the agency plans to  identify relevant criteria in the Superfund Program Implementation Manual  that may be used to support the decision of whether or not to apply the  NAI indicator. Additionally, the agency plans to create a headquarters and  regional workgroup to review and update tribal data collected in SEMS.  The workgroup will provide guidance to clarify the NAI determination,  including identifying criteria for designating a site NAI, and identifying a  process to update SEMS when a tribe is no longer interested in a site, as  needed. EPA plans to complete this no later than October 2019.", "EPA concurred with our recommendation to clarify agency guidance  regarding tribal consultation on Superfund sites to clearly identify the  circumstances under which the agency should consider consulting tribes.  In its letter, EPA pointed out that our original recommendation did not  specify that the recommendation was about guidance regarding tribal  consultation on Superfund sites, so we adjusted the language of the  recommendation accordingly. EPA plans to issue a memo to the regions  that clarifies circumstances under which regions may consider tribal  consultation for the Superfund program no later than March 2020.", "EPA concurred with our recommendation that it should develop or revise  existing guidance to clearly direct regional officials to document all  invitations to consult with tribes in the TCOTS database and provide the  guidance to those officials. EPA is planning four actions to respond to this  recommendation: (1) issuing a memorandum from the Office of  International and Tribal Affairs to EPA Regional Administrators on the  importance of following EPA\u2019s Tribal Consultation and Coordination Policy  and documenting consultation actions into TCOTS, estimated to occur in  January 2019; (2) issuing a monthly TCOTS report to Deputy Assistant  Administrators and Regional Assistant Administrators on the status of  consultations recorded in TCOTS, starting in January 2019; (3) initiating  trainings specifically targeted to EPA's Regional Superfund staff on when  and how to document consultation actions in TCOTS, estimated to begin  in February or March 2019; and (4) conducting training on tribal  consultation topics, with a specific emphasis on entering consultation  information into TCOTS, beginning in March or April 2019.", "In their comments on our report, the Confederated Salish and Kootenai  Tribes of the Flathead Reservation noted that our report is thorough and  provides valuable insight into EPA\u2019s policies and procedures for tribal  consultation at NPL sites. The tribe provided some additional detail on the  Smurfit Stone Mill Frenchtown case study which we incorporated as  appropriate. The tribe also noted that they had interest in a site not  identified by EPA as having NAI, the Anaconda Aluminum Co. Columbia  Falls Reduction Plant site. In response, we added this site to our list of  NPL sites known to be on or affecting tribal land, shown in appendix I.", "The Pueblo of Laguna commented that while the scope of the report was  limited, the Pueblo appreciated GAO\u2019s efforts to study EPA\u2019s tribal  consultation practices. The Pueblo emphasized their belief that EPA\u2019s  duty to consult with tribes should be an active one, not a passive one, and  presented three associated comments. First, the Pueblo believes EPA  should affirmatively consider offering consultation at each stage of the  Superfund process beginning with preliminary investigation and site  assessment. Second, the Pueblo believes EPA should continue to  contact potentially interested tribes throughout the life of an NPL site,  even if the tribe had not expressed interest at a previous stage of the  process to ensure that newly interested tribes are identified. Finally, the  Pueblo believes EPA should document all offers to consult, including  ones made orally. The Pueblo provided comments and edits on the  Jackpile-Paguate Mine case study in their letter, which we incorporated.  The Pueblo also provided technical comments on the report, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Administrator of the  Environmental Protection Agency, the Chairman of the Confederated  Salish and Kootenai Tribes of the Flathead Reservation, the Chairman of  the Kalispel Indian Community of the Kalispel Reservation, the Chairman  of the Little Traverse Bay Bands of Odawa Indians, the Chairman of the  Mashpee Wampanoag Tribe, the Governor of the Pueblo of Laguna, the  Chiefs of the Saint Regis Mohawk Tribe, the Chairwoman of the Spokane  Tribe of the Spokane Reservation, the Chairwoman of the Wampanoag  Tribe of Gay Head (Aquinnah), and other interested parties. In addition,  the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made key contributions to the  report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Site-wide Cleanup Status of National Priorities List Sites with Known Native American Interest", "paragraphs": ["This appendix provides information on the site-wide cleanup status of  National Priorities List (NPL) sites with known Native American Interest  (NAI), as of December 2017. We worked with the Environmental  Protection Agency (EPA) to correct inaccuracies in the Superfund  Enterprise Management System (SEMS) data identifying sites as having  NAI, and we identified 87 NPL sites\u201474 sites on the NPL, 8 deleted from  the NPL, and 5 proposed for addition\u2014known to have NAI. In addition, in  providing technical comments on the draft of this report, the Confederated  Salish and Kootenai Tribes of the Flathead Reservation identified one  additional site, bringing the total to 88 NPL sites known to have NAI. Of  these 88 sites known to have NAI out of the total 1,785 NPL sites that  were proposed, final, or deleted as of December 2017, many have  reached site-wide milestones that EPA uses to track the cleanup status of  NPL sites. EPA measures four site-wide milestones, including one that  measures the progress in the Superfund process and three that describe  the management of the release, such as human exposure under control:  1.  Construction completion. Indicates that the physical construction of  the remedy EPA has selected to address the contamination is  complete.  2.  Human exposure under control. Measures the incremental progress  EPA achieved in controlling unacceptable exposures to people at a  site. A site may achieve this measure by reducing the level of  contamination, preventing people from contacting the contaminants  in-place, or controlling activities near the site (e.g., by reducing the  potential frequency or duration of exposure of people to  contaminants).  3.  Groundwater migration under control. Assesses whether  groundwater contamination is below protective, risk-based levels or, if  not, whether the migration of contaminated groundwater is stabilized  and there is not unacceptable discharge to surface water and  monitoring will be conducted to confirm that affected groundwater  remains in the original area of contamination. EPA only uses this in  sites with known past or present groundwater contamination.  4.  Site-Wide Ready for Anticipated Use. All cleanup goals that may  affect current and reasonably anticipated future land uses of the site  have been achieved, so that there are no unacceptable risks and all  institutional or other controls have been put in place.", "Table 1 below shows the site-wide cleanup status, according to EPA, of  the 83 sites on or deleted from the NPL with known NAI.  This table  provides data on site-wide milestones obtained from EPA\u2019s SEMS  database, as well as a brief overview of each site using information from  publicly available EPA documents, the EPA website, and additional  information provided by EPA officials. Table 2 below lists the 5 sites with  known NAI that EPA has proposed for the NPL.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Salt Chuck Mine site is an inactive former gold,  silver, copper, and palladium mine on Prince of Wales  Island in southeast Alaska. Operations at the site were  suspended in 1941. The site includes abandoned mine  workings and mine mill equipment. Contaminants include  polychlorinated biphenyls (PCBs), copper, lead, and  arsenic. In 2011, EPA started a remedial investigation of  the upland and adjacent marine areas to evaluate  potential risk to human health and the environment.  The  investigation was completed in March 2018, and EPA  determined that there are currently no unacceptable  human health risks identified for the site and that  ecological risks are limited to copper in marine sediment  in areas used for tailings disposal.", "The Tucson International Airport Area site comprises a  10-square-mile area in and next to Tucson, Arizona. The  site includes the Tucson International Airport, portions of  the Tohono O'Odham Indian Reservation, residential  areas of Tucson and South Tucson, and the Air Force  Plant #44 Raytheon Missile Systems Company. Former  aircraft and electronics manufacturing activities, fire drill  training activities, and unlined landfills have  contaminated groundwater and soil with volatile organic  compounds, metals and PCBs. Remedial activities  include: groundwater pumping and treatment, soil  removal, and soil vapor extraction.  Groundwater cleanup  actions, operation and maintenance activities, and site  monitoring are ongoing. As of July 2018, EPA reports  that water treatment systems have significantly reduced  the groundwater plume size and chemical concentrations  in groundwater.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 4,400-acre Iron Mountain Mine site near Redding,  California produced iron, silver, gold, copper, zinc and  pyrite. Though mining operations were discontinued,  underground mine workings, waste rock dumps, piles of  mine tailings, and an open mine pit remain at the site.  Much of the acidic mine drainage is channeled into the  Spring Creek Reservoir. About 70,000 people use  surface water within 3 miles of the mine as their source  of drinking water. The installation and operation of a full- scale neutralization system, capping of areas of the  mine, and the construction and operation of a retention  reservoir to collect contaminated runoff for treatment  have significantly reduced acid and metal contamination  in surface water at the site. Site investigations and  cleanup are ongoing.", "The 3.2-acre Celtor Chemical Works site, located on the  Hoopa Valley Indian Reservation, is the location of a  former ore concentrating facility that processed sulfide  ore. Wastes from the operations and processed ore  generated acidic runoff and elevated metal  concentrations in the soils throughout the site. The Trinity  River flows along the site boundary and is the only local  fish source for the Hoopa Indians. Cleanup included off- site disposal of contaminated materials; backfilling and  contouring land; and revegetation and diversion of  springs away from contaminated areas. After cleanup,  EPA took the site off the NPL in 2003. According to EPA  officials, in 2016, additional waste was discovered at the  site, resulting in additional remedial investigation to  determine the nature and extent of contamination.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Leviathan Mine is an abandoned open-pit mine near  Markleeville, California, on the eastern slope of the  Sierra Nevada Mountains at an elevation of 7,000 feet.  The site is drained by Leviathan and Aspen Creeks,  which are tributaries to the East Fork of the Carson  River, a major western Nevada water supply source. The  mine operated intermittently between 1863 and 1962. In  the early days of mining, copper sulfate was mined from  the property and utilized for processing silver ore at the  Comstock Mines in Virginia City, Nevada. According to  EPA officials, mine operations were originally  underground, but surface mining of sulfur ore began in  the 1950s. These officials told us that, mining operations  disturbed and exposed existing mineral-rich rock and  soil, which produced residual mine waste rock. Surface  runoff from snowmelt and precipitation become  contaminated by contact with the mineral-rich rock and  associated waste rock. Officials told us that water  capture and treatment plants at the site have improved  the quality of downstream surface water and watershed  health. These officials also noted that site assessment  and cleanup is ongoing.   The 150-acre Sulphur Bank Mercury Mine site near  Clearlake Oaks, California, is an abandoned open pit  mercury mine located on the shoreline of Clear Lake.  This mine operated intermittently between  1865 and 1957 and mined sulphur and mercury. Former  mining activities at the site contaminated soils, sediment,  and surface water with mercury and arsenic.  Approximately 2 million cubic yards of mine wastes and  tailings remain on the mine site. Mercury contaminates  lake sediment and is bio-concentrated in the food web of  Clear Lake. The levels of mercury in fish from the lake  led the State to issue an advisory to limit consumption of  local fish. Clear Lake is also a drinking water source for  4,700 people. Cleanup has included erosion control, soil  removal from residential yards, and surface water  diversion. After immediate actions to protect human  health and the environment, site investigations and long- term cleanup planning are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Bonita Peak Mining District site consists of 48  historic mines or mining-related sources of contamination  in unincorporated parts of Colorado. Historic mining  operations have contaminated soil, groundwater, and  surface water with heavy metals. Additionally, ongoing  releases of metal-contaminated water and sediment are  occurring within the Mineral Creek, Cement Creek, and  Upper Animas River drainages in San Juan County,  Colorado. EPA and other stakeholders conducted a  remedial investigation and feasibility study in 2017.  Ongoing cleanup activity includes an interim water  treatment plant to treat acid mine drainage and  management of non-hazardous sludge. EPA plans to use  the remedial investigation to determine further cleanup  options at the site.", "The 890-square-mile Idaho National Engineering  Laboratory site is located near Idaho Falls, Idaho. The  site consists of a number of major facilities that  contribute contaminants to and draw water from the  Snake River Plain Aquifer. One of these facilities is a  National Reactor Testing Station built by the Atomic  Energy Commission in 1949 to build, test, and operate  various nuclear reactors, fuel processing plants, and  support facilities. Site activities also led to the discharge  of liquid wastes to several unlined ponds and an earthen  ditch. The site includes contaminated soil, sludge, and  groundwater that contain hazardous chemicals, heavy  metals, and radioactive constituents. The site is divided  into several cleanup areas to better address site cleanup.  Remedy construction has been completed in several of  these areas, and remedial design and construction are  underway at the remaining areas.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Also known as the Coeur d\u2019Alene Basin Cleanup, the  Bunker Hill Mining and Metallurgical Complex site is  located in northern Idaho and eastern Washington, in  one of the largest historical mining districts in the world.  The site spans 1,500 square miles and includes 166  miles of rivers. Mining operations began in the area in  1883 and continue today. Historical mining and milling  methods led to disposal of tailings in rivers and streams,  which resulted in the spread of contaminants throughout  the floodplain of the South Fork Coeur d\u2019Alene River.  Smelter operations also resulted in emissions and piles  of waste rock. Soil, sediment, groundwater, and surface  water are contaminated with heavy metals such as lead,  which pose serious risks to people and the environment.  Since 1983, EPA and its partners have made progress in  cleaning up contamination, including cleaning some mine  and mill sites, and establishing waste repositories to  securely contain contaminated soil to reduce impacts to  people and the environment. Site remediation is ongoing.  The 2,530-acre Eastern Michaud Flats Contamination  site near Pocatello, Idaho, consists of two phosphate ore  processing facilities that began operations in the 1940s.  One facility continues to produce solid and liquid  fertilizers using phosphate ore, sulfur, air, and natural  gas. The other produced elemental phosphorus for use  in a variety of products from cleaning compounds to  foods. Cleanup at this facility is largely located within Fort  Hall Indian Reservation boundaries. Operations at both  plants contaminated groundwater and soil with metals  including arsenic, lead, and cadmium. Cleanup includes  capping contaminated soils, extraction and containment  of contaminated groundwater, and groundwater  monitoring. Site cleanup began in 2010 and is ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Cherokee County Superfund site is a former mining  area in southeast Kansas covering about 115 square  miles. It is part of a larger regional mining area known as  the Tri-State Mining District, where more than 100 years  of mining for lead and zinc created piles of mine tailings  covering more than 4,000 acres. The mine tailings  contaminated groundwater with lead, zinc, and cadmium.  Millions of cubic yards of mine tailings are present at the  surface, in addition to impacted soils, surface water,  sediment, and groundwater. Several cleanup activities  have been completed and others are underway. Site- wide, nearly 3 million cubic yards of mining wastes have  been remediated on nearly 2,000 acres, more than 700  residential yards have been remediated, and more than  500 homes have been supplied with a clean, permanent  source of drinking water.   Otis Air National Guard Base and Camp Edwards  together form Joint Base Cape Cod, a 22,000-acre  property used for military training activities since 1911. It  is the sole source aquifer for 200,000 year-round and  500,000 seasonal residents of Cape Cod. Parts of the  aquifer have been contaminated by fuel spills, training  activities, waste disposal, and other past activities at the  base. Cleanup of a portion of the site is managed by the  U.S. Air Force, which is addressing the sources of and  groundwater contamination primarily on Otis Air National  Guard under the authority of Superfund. Contaminated  areas were the result of chemical and fuel spills, fire  training activities, landfills, and drainage structures.  Since 1984, when contaminants were first detected in  monitoring wells, numerous investigations and cleanups  have been undertaken and completed. Currently, nine  groundwater plumes are undergoing extraction and  treatment. The Air Force\u2019s land use control program  ensures that groundwater remedies are protective until  cleanup levels are met.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Creese and Cook Tannery site is located in  Danvers, Massachusetts. Leather tanning operations  took place on-site from about 1903 through the 1980s.  Solid tanning wastes were disposed of in two landfills at  the site. Liquid waste was discharged to the Crane River  until 1975 and later to sewers, while sludge waste was  deposited in an on-site lagoon system. Operations led to  contamination of surface and subsurface soils with  tannery wastes, and contaminants, particularly arsenic,  exceed state health-based standards in multiple  locations. In 2012 EPA conducted a removal of  contaminated surface soil and disposed of this soil off- site. EPA issued a proposed cleanup plan for the site in  October 2018.", "The New Bedford harbor is an 18,000-acre urban estuary  with sediment highly contaminated with PCBs and heavy  metals. From the 1940s until EPA banned the production  of PCBs in the 1970s, two manufacturing facilities  improperly disposed of industrial wastes containing  PCBs, contaminating the harbor bottom for about 6 miles  from the Acushnet River into Buzzards Bay. After  extensive testing of water quality, harbor sediment, air  quality, and locally caught fish and shellfish, EPA  concluded that the PCBs in the sediment posed a  serious risk to human health and the environment. EPA  has placed restrictions on fishing, shellfishing and  lobstering in and around the harbor. EPA has addressed  approximately 450,000 cubic yards of contaminated  sediment in the upper harbor as of April 2017 and plans  to dredge and dispose of over 200,000 cubic yards of  contamination from the lower harbor. According to EPA,  the site cleanup will require an additional 5 to 7 years  and significant funding to finish.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Loring Air Force Base site is located in Limestone,  Maine. Loring Air Force Base was one of the first to be  designed and built to accommodate high-speed aircraft,  and construction ended in 1953. Activities at the site,  including maintenance of jet engines, generated waste  oils, recoverable fuels, spent solvents and cleaners.  These wastes contaminated soil, groundwater, surface  water, and sediment at a number of areas across the  former base. Cleanup activities include relocation of  contaminated soil, bioremediation of groundwater, and  capping of disposal areas. The Air Force is leading the  site cleanup until goals have been achieved. The Air  Force is conducting operation and maintenance and  long-term monitoring activities.", "The 25-acre Eastland Woolen Mill Superfund site is  located in the Town of Corinna, Maine. Prior to closing in  1996, the mill manufactured dyed wool and blended  woven fabric. The dyeing operation utilized various  chemicals, including dyes and dye-aids that reportedly  contained biphenyl and chlorinated benzene compounds.  Liquid wastes were discharged to the ground beneath  mill buildings until 1977. As a result, soil and bedrock  underlying the mill were contaminated with chlorinated  benzene compounds. Long-term cleanup and  environmental monitoring are ongoing. In 2012, EPA  completed a partial deletion action to remove 80% of the  land area from NPL designation and facilitate reuse. EPA  completed the second Five-Year Review in 2015.", "The Eastern Surplus site is a 5 acre area in  Meddybemps, Maine. From 1946 through the early  1980s, the Eastern Surplus Company, a retailer of army  surplus and salvage items, operated on the site. Facility  operations contaminated soil and groundwater with  hazardous chemicals, including volatile organic  compounds and calcium carbide. After immediate actions  to protect human health and the environment,  remediation activities included excavating soils,  extracting and treating contaminated groundwater, and  disposing of gas cylinders. Operation and maintenance  activities and monitoring are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Velsicol Chemical Corporation produced various  chemical compounds and products at its 54-acre plant in  St. Louis, Michigan, from 1936 through 1978. Products  included the fire retardant polybrominated biphenyl and  the pesticide DDT. To address contamination on-site,  Velsicol agreed to construct a slurry wall around the  former plant and put a clay cap over it. The Pine River,  which borders the former main plant site on three sides,  was significantly contaminated. In response, the state of  Michigan issued a no-consumption advisory for all fish  species. Over 670,000 cubic yards of DDT-contaminated  sediment were removed and disposed of off-site in an  approved landfill. DDT levels in fish have been reduced  by more than 98 percent. In the early 2000s, studies  showed the slurry wall and clay cap at the main plant site  were failing to keep contamination out of the river. In  response, EPA and Michigan's Department of  Environmental Quality (MDEQ) launched a remedial  investigation and feasibility study at the main plant site  and concluded that soil and groundwater were  contaminated. In June 2006, EPA selected a remedy that  included a comprehensive cleanup of the main plant site  and a residential soil cleanup. During the residential  cleanup, EPA excavated and disposed of 50,000 tons of  contaminated soil at an off-site landfill. Currently, EPA  and MDEQ are completing a remedial investigation in the  Pine River downstream of the former chemical plant  property.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Allied Paper, Incorporated/Portage  Creek/Kalamazoo River site affects Kalamazoo,  Michigan, 80 miles of the Kalamazoo River (from Morrow  Dam to Lake Michigan), and 3-mile stretch of Portage  Creek. Paper mill properties, riverbanks and floodplains  have been contaminated with PCBs. EPA has removed  contaminated materials from the site, cleaned and  restored 7 miles of the Kalamazoo River and banks and  capped 82 acres worth of contaminated materials. In the  portions of the site where cleanup has concluded, EPA  conducts maintenance activities and monitors  groundwater. For two areas contaminating the river that  have not yet been cleaned up, EPA has decided on  cleanup plans and has taken actions to prevent migration  of contamination to the Kalamazoo River or Portage  Creek. EPA has decided on cleanup plans for  approximately a portion of the 80 mile stretch of the  Kalamazoo River and Portage Creek that require  remediation.   The Petoskey Manufacturing Company, or PMC,  contained a die casting plant from the 1940s and a  painting operation from the mid- to late-1960s. Disposal  of spent solvents and paint sludge onto the ground  outside the PMC building contaminated soil and  groundwater at the site with volatile organic compounds.  Contaminated groundwater reached a nearby municipal  well that provided drinking water to city residents. The  city replaced the contaminated well with a new  groundwater source. Currently, EPA and Michigan  Department of Environmental Quality are evaluating the  site for potential vapor intrusion issues into  condominiums built on top of the former PMC source  area.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Grand Traverse Overall Supply was a commercial  laundering and dry cleaning facility opened in 1953.  Activities at the site between 1955 and 1968 included  construction of a dry well and seepage lagoons to collect  waste. In 1977 the facility began discharging waste to the  sewer. A year later, the Michigan Department of  Environmental Quality discovered groundwater  contaminated with volatile organic compounds such as  trichloroethylene and perchloroethlyene that impacted at  least 10 wells, including one that supplied water to an  adjacent elementary school. Contaminated wells were  abandoned and new wells drilled. Waste lagoons were  drained and filled with gravel, and the contaminated soils  around the dry well and on-site barrels of waste sludge  were removed in the 1970s.  In providing technical  comments on a draft of this report, EPA officials told us  that remedial actions at the site began with soil removal  activities around 2009, and that a groundwater pump and  treat system was installed in 2012 and improved in 2015.  These officials told us the site is expected to reach  cleanup goals within approximately 5 years.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Northwestern Leather Company operated a tannery on  the 75-acre Cannelton Industries Incorporated site in  Sault Sainte Marie, Michigan from 1900 to 1958. A  portion of the site is located within the 100-year  floodplain of the St. Mary's River. Waste disposal  operations contaminated soils, sediment and the river  with heavy metals, including chromium, lead, cadmium,  arsenic and mercury. EPA\u2019s initial long-term remedy for  the site included the excavation and consolidation of  contaminated waste material, soils, and river sediment  into an on-site landfill, collection and treatment of  groundwater, groundwater monitoring, and land use  restrictions for the landfilled area. In commenting on a  draft of our report, EPA officials told us the remedy was  amended to include excavation and removal of  contaminated soil and tannery waste and other waste  materials from portions of the site, Construction of these  remedies took place in 1999. In 2006 and 2007,  additional dredging operations removed 40,000 cubic  yards of contaminated sediment, about 500,000 pounds  of chromium and 25 pounds of mercury from Tannery  Bay and nearby wetlands. Subsequent sampling in 2014  showed mercury or chromium in Tannery Bay and an  adjacent wetland. In providing technical comments on a  draft of this report, officials noted that 2016 sampling also  showed mercury in Tannery Bay surface water and  adjacent wetland. EPA is reviewing the current  monitoring requirements and protocols, as well as the  cleanup goals. The monitoring portion of the operations  and maintenance plan will be revised based on EPA's  findings. EPA officials told us that the agency has  initiated a partial deletion of the site from the NPL to  enable reuse of some remediated site areas.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 200-acre Tar Lake site in Mancelona Township,  Michigan was an iron works facility from 1882 through  1945. Disposal of tar waste contaminated soil and  groundwater with hazardous chemicals, including tar  waste and creosote. Cleanup activities included  excavation and disposal of tar and contaminated soils,  and groundwater extraction and treatment. After initial  cleanup, operation and maintenance activities are  ongoing. EPA has conducted several 5-year reviews of  the site\u2019s remedy. EPA did additional sampling at the site  in 2011 and 2012 and identified the need for additional  soil excavation and expansion of the groundwater  treatment system. In providing technical comments on a  draft of this report, EPA officials told us that additional  cleanup will begin in 2020 and last several years. EPA  has deleted part of the site from the NPL.  The Torch Lake site is located on the Keweenaw  Peninsula in Michigan. The site includes several areas  ranging in size from about 10 acres to more than 200  acres. Copper mining activities in the area from the  1890s through 1969 produced mill tailings that  contaminated lake sediment and the shoreline. Cleanup  included covering 800 acres of slag piles and tailings  with soil and vegetation, and long-term monitoring of  Torch Lake. After cleanup, operation and maintenance  activities are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Minnesota  Chippewa Tribe,  Minnesota  (Grand Portage  Band and Fond  du Lac Band);  Lac du  Flambeau Band  of Lake Superior  Chippewa  Indians;  Sokaogon  Chippewa  Community,  Wisconsin.", "The St. Louis River site is located at the west end of  Duluth, Minnesota, and includes several areas of land  next to the St. Louis River, several boat slips, and a wide  section of the river known as Spirit Lake. The site overall  has been divided into two smaller sites, both managed  by the state of Minnesota. The first area, known as the  St. Louis River/Interlake/Duluth Tar (SLRIDT) site  includes 255 acres of land, boat launch ramps and bays  of the St. Louis River. From the 1890s through 1962, a  variety of industrial plants operated at the site, including  a coking plant, and tar and chemical plants. The second  site, U.S. Steel comprises 500 acres of land and 200  acres of the St. Louis River.  The area was contaminated  by a steel mill that operated on-site between 1916 and  1981. Operations at both sites contaminated soil and  underwater sediment with hazardous chemicals,  including solid wastes, PCB liquids and drums. The sites  are currently in different phases of cleanup. Cleanup of  the land portion of the SLRIDT was substantially  completed by 2001, and cleanup of the contaminated  sediment by 2010. However, in its most recent 5-year  review, the Minnesota Pollution Control Agency noted  several smaller areas of contaminated materials that will  require additional cleanup. U.S. Steel conducted multiple  cleanups at their site since the 1990s and many of the  actions required by EPA\u2019s record of decision have been  completed. However, in its most recent 5-year review,  the Minnesota Pollution Control Agency concluded that  while some cleaned-up areas continue to be protective of  human health and the environment, some areas of the  site are not protective. EPA officials also told us that the  U.S. Steel site has also contaminated a part of the St.  Louis River known as Spirit Lake. According to these  officials, the cleanup of Spirit Lake, including associated  tribal consultation, is planned through a partnership led  by EPA\u2019s Great Lakes National Program Office.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Minnesota  Chippewa Tribe,  Minnesota  (Leech Lake  Band)", "The 125-acre St. Regis Paper Company site is located  within the external boundaries of the Leech Lake Band of  Ojibwe Indian Reservation in Cass Lake, Minnesota. The  wood-treatment facility operated from the 1950s through  the 1980s using creosote and pentachlorophenol (PCP).  The facility\u2019s operations contaminated soil and  groundwater with hazardous chemicals, including PCP,  dioxin and polycyclic aromatic hydrocarbons (PAH).  Remedies put in place include water treatment and soil  containment. Subsequent assessment demonstrated  unacceptable potential risks from groundwater and  surface soil contamination. EPA proposed a cleanup plan  in March 2016 to address soil contamination in  residential areas. EPA has determined there are no  current unacceptable human risks.", "The 300-square-mile Anaconda Company Smelter site is  near Anaconda, Montana. Anaconda operated a large  copper concentrating and smelting operation on the north  side of Warm Springs Creek until about 1901. Around  1902, ore processing and smelting operations began at a  separate facility that is included in the site. Operations at  the Anaconda Smelter ceased in 1980 and the smelter  facilities were dismantled soon thereafter. More than a  century of milling and smelting operations resulted in  high concentrations of arsenic, lead, copper, cadmium,  and zinc in groundwater and surface water. Cleanup  included testing and remediation of domestic wells,  removal of waste from the nearby community,  construction of nearly 1,000 acres of wetland, and  30,000 feet of stream restoration. Operation and  maintenance activities are ongoing in areas where  cleanup is complete. In other areas, cleanup is still in  progress. EPA has determined that remedies that have  been completed are protective of human health and the  environment. Where remedies are not complete, access  is controlled to prevent human exposure to waste.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Anaconda Aluminum Co. Columbia Falls Reduction  Plant site is located two miles northeast of Columbia  Falls in Flathead County, Montana. The site includes  approximately 960 acres north of the Flathead River, a  fishery that includes the federally designated, threatened  bull trout and the federally sensitive westslope cutthroat  trout. From 1955 through 2009, an aluminum smelting  plant operated at the site, and produced significant  quantities of hazardous wastes as a byproduct of the  aluminum smelting process. The types of hazardous  wastes produced at the site are known to contain  cyanide compounds that can leach into groundwater. In  1988, EPA requested a site investigation that revealed  that there were high concentrations of polycyclic  aromatic hydrocarbons at the site, primarily in soils and  sediments, and that there had been a release of cyanide  to groundwater and surface water; both of these findings  were attributed to activities at the former smelting plant.  The remedial investigation and feasibility study of the site  is in progress, and the results of the investigation will  determine cleanup needs and identify potential cleanup  options at the site.  The Silver Bow Creek and Butte Area site is in Butte,  Montana, and includes 26 miles of stream and  streamside habitat. Since the late 1800s, mining wastes  have been dumped into streams and wetlands near  mining operations. These activities contaminated soil,  groundwater, and surface water with heavy metals. From  1988 to 2005, EPA completed several removal actions to  clean up areas around former smelter sites, mine waste  dumps, railroad beds, stream banks and channels, and  residential yards to address immediate human health  and environmental risks. Operation and maintenance,  sampling, and monitoring actions are ongoing. EPA  agreed to future cleanup work at the site in January  2018, including removal of contaminated soils, removal  of sediment and floodplain waste, and construction of  stormwater basins and sedimentation bays.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Milltown Reservoir Sediments site near Missoula,  Montana includes about 540 acres in the Clark Fork  River and Blackfoot River floodplain and 120 miles of the  Clark Fork River upstream of the Milltown Dam and  Reservoir, which are located at the confluence of the  Clark Fork and Blackfoot Rivers. From the 1860s until  well into the 20th century, mineral- and arsenic-laden  waste from mining activities in the region flowed into the  Clark Fork River. As contaminated sediment and mine- mill waste moved downstream, about 6.6 million cubic  yards of sediment accumulated behind the Milltown Dam.  Mining activities and the downstream transport of mining- related wastes contaminated sediment, surface water,  and groundwater with heavy metals. Remedy  construction began in 2006, much of the site has been  cleaned up, and remedy construction is underway to  address remaining contamination. The site\u2019s long-term  remedy includes construction of a bypass channel at the  reservoir; removal of contaminated reservoir sediment;  off-site disposal and use of contaminated sediment as  vegetative cap material; removal of the Milltown Dam;  continuation of a replacement water supply program and  implementation of temporary groundwater controls until  the Milltown aquifer recovers; and long-term monitoring  of surface and groundwater. Remedy construction is  ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 438-acre Barber Orchard site in Haywood County,  North Carolina, includes the area where Barber Apple  Orchard operated from 1908 through 1988. Facility  operations resulted in contaminated groundwater and  soil. Contaminants include arsenic, lead, and pesticides  such as DDT, aldrin, and dieldrin that can be found in  groundwater or soils on residential properties built on the  former orchard. EPA removed soil in contaminated areas  and, in a 2011 proposed cleanup plan proposed long- term monitoring of contaminated groundwater with the  expectation that soil remediation will positively affect  groundwater contamination.  EPA has determined that  the contaminated groundwater does not currently  threaten people living and working near or on the site.   EPA officials told us that in 2004, the town of  Waynesville extended its municipal water system  throughout the Orchard, and since the completion of the  soil cleanup in 2011, new homes have been constructed  within the boundaries of the Orchard.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 3.5-acre Benfield Industries site in Waynesville,  North Carolina, includes the area where Benfield  Industries mixed and packaged materials bought in bulk  for resale in smaller amounts from 1971 through 1983.  The facility handled and stored paint thinners, solvents,  sealants, cleaners, de-icing solutions and wood  preservatives. Between 1990 and 1992, EPA conducted  the remedial investigation and feasibility study using  federal funding. The cleanup included excavating and  washing contaminated soil, biotreating contaminated  slurries, and placing the cleaned soil and slurry in  excavated areas. Following soil treatment, EPA graded  and planted seed. According to EPA officials, a  groundwater extraction system was installed and was  operated between 2001 and 2007. However, a 2007  report concluded that it was no longer an effective  groundwater remedy, and that monitored natural  attenuation may be a more effective remedy.  Consequently, EPA shut down the system in June 2007.  Agency officials told us the agency recently completed a  pilot scale treatability study in which chemicals were  injected into the subsurface to destroy residual wood  preservatives that were adversely impacting groundwater  quality. According to EPA, the agency will be using the  information gained from this treatability study in the  forthcoming remedial design.", "The Homestake Mining Company site in Cibola County,  New Mexico includes a former uranium mill demolished  from 1993 through 1995 and the impacted portions of the  underlying groundwater aquifers. Uranium milling  operations began at the site in 1958 under a license  issued by the Atomic Energy Commission. Site  operations and seepage from two tailings impoundments  contaminated soil and groundwater with hazardous  chemicals including uranium, selenium, radium-226,  radium-228, thorium-230 and nitrate. Nearly 4.5 billion  gallons of contaminated water have been removed and  540 million gallons of treated water have been injected  into the aquifer. An average of 2 feet of contaminated soil  was removed from the mill area and placed in the tailings  impoundments. Cleanup is ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 125-acre United Nuclear Corporation site near  Gallup, New Mexico, includes a former uranium ore  tailings disposal area and processing mill that operated  from 1977 through 1982. The facility processed uranium  ore using a combination of crushing, grinding and acid- leach solvent extraction methods. Milling produced acidic  slurry of ground rock and fluid tailings. Disposal of about  3.5 million tons of tailings took place in on-site  impoundments. Facility operations contaminated soil and  groundwater. Surface reclamation stabilized the mill  tailings and protected the Rio Puerco from contamination  spills. However, EPA notes that groundwater treatment  has been difficult due to low groundwater recharge rates  and extraction wells proved to accelerate movement of  contaminated water rather than contain it. Consequently,  EPA installed additional extraction wells in 2010.  Cleanup activities and monitoring are ongoing.", "The 70-acre Prewitt Abandoned Refinery site is located  near Prewitt, New Mexico. The refinery operated  between 1938 and 1957. Refinery operations  contaminated soil and groundwater with hazardous  chemicals including asbestos and lead. Potentially  responsible parties removed the refinery and other site  structures; however, scattered demolished structures,  foundations and exposed fill remained on-site. The  remedy for surface soil is complete. The remedy for  subsurface soil and water continues to be protective in  the short term; however, EPA could not determine if the  remedy is protective of human health and the  environment in the long term, and the agency  recommends new evaluations to characterize the  quantity, composition and extent of various contaminants  and exposure pathways at the site. EPA further  recommends the evaluation of an alternative cleanup  plan to enhance protectiveness at the site.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 58-acre North Railroad Avenue Plume site is a  contaminated groundwater plume in Espa\u00f1ola, New  Mexico. The Norge Town laundromat and dry cleaning  operation contaminated groundwater with  tetrachloroethylene, trichloroethylene, cis-1,2- dichloroethylene and trans-1,2- dichloroethylene. The  contaminated groundwater aquifer is the sole-source  drinking water aquifer for the residents of City of  Espanola and, the Pueblo of Santa Clara, as well as  individual water supply wells near the site. The remedy  consists of enhanced on-site bioremediation. The areas  targeted for cleanup are the source area, soils with high  contaminant levels, and contaminated shallow  groundwater. EPA indicated that the remedy has  reduced contamination in shallow groundwater but has  not been effective in the deep aquifer; consequently,  EPA initiated additional analysis in 2015.", "The Jackpile-Paguate Uranium Mine site is located on  the Pueblo of Laguna, New Mexico, reservation and  consists of three former leases. The former leaseholder,  Anaconda Minerals Company, mined and operated a  uranium mine at the site from 1952 through 1982. Out of  a total of 7,868 leased acres, 2,656 acres were disturbed  by mining.  This disturbance originally included  three open pits, 32 waste dumps and 23 sub-grade ore  stockpiles, 4 topsoil stockpiles, and 66 acres of buildings  and roads. Mining operations detrimentally affected  surface water with hazardous chemicals in quantities  sufficient to support listing onto the EPA National  Priorities List for Superfund cleanup. Atlantic Richfield is  currently undertaking the remedial investigation and  feasibility study at the site.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "EPA officials told us that the Carson River Mercury site  extends over more than a 130-mile length of the Carson  River, beginning near Carson City, Nevada, and  extending downstream to the Lahontan Valley.  Contamination at the site is a legacy of the Comstock  mining era of the late 1800s, when mercury was  imported to the area for processing of gold and silver ore.  The site includes mercury-contaminated soils at former  mill sites; mercury contamination in fish and wildlife; and  mercury contamination in waterways adjacent to the mill  sites, including the water, sediment, and adjacent  floodplain of the Carson River, Lahontan Reservoir,  Carson Lake, Stillwater Wildlife Refuge, and Indian  Lakes. Following excavation and removal of mercury- contaminated tailings and soils from the site to protect  human health and the environment, site investigations  and cleanup planning are ongoing.", "The Hooker (Hyde Park) site is located in Niagara Falls,  New York. The 15-acre area was used for the disposal of  about 80,000 tons of waste, some of it hazardous  material, from 1953 through 1975, resulting in sediment  and groundwater contamination with hazardous  chemicals, including Aroclor 1248, chloroform, phenol,  benzoic acid and chlorendic acid. Cleanup included  establishment of a drain system around the landfill;  treatment of liquids leaching from the landfill; capping of  the landfill; and removal of contaminated soils and  sediment. Site construction finished in 2003. EPA has  determined that, since cleanup, the site no longer poses  a threat to nearby residents or the environment. Long- term groundwater treatment and monitoring are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The General Motors (Central Foundry Division) site is  located near Massena, New York. General Motors  operated an aluminum diecasting plant on the site  beginning in1959 and used PCBs in the manufacturing  process through 1980. Contamination resulted from  General Motors\u2019 waste disposal practices. Completed  cleanup actions include the installation of a cap on an  industrial landfill to prevent the surface flow of  contaminants and reduce potential air exposure from  contaminants; dredging of the St. Lawrence River and  placement of a cap on remaining sediment; remediation  of two inactive lagoons; and creation of a 150-foot landfill  setback along the border with the Saint Regis Mohawk  reservation. The final significant cleanup is a 10-million- gallon industrial lagoon. EPA has conducted three 5-year  reviews at the site and the owner is actively marketing  the property for re-use or redevelopment.", "The Peter Cooper site in Gowanda, New York, was the  location of an animal glue and industrial adhesive  manufacturing factory. Contamination was caused by the  improper disposal of wastes derived from chrome-tanned  hides. The waste material has been shown to contain  elevated levels of chromium, arsenic, zinc, and several  organic compounds. Remedial activity for the landfill  contained more than 8 million tons of waste and included  capping the landfill, putting in a gas venting system, and  controlling leachate. A retaining wall prevents  contaminants from reaching Cattaraugus Creek. Site  investigations and cleanup are complete, and monitoring  is ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Onondaga Lake site includes a 4.6-square-mile lake  bordering the City of Syracuse, New York, and four  nearby towns and villages. The site also includes seven  major and minor tributaries and upland sources of  contamination from a 285-square-mile drainage basin.  Onondaga Lake has been the recipient of industrial and  municipal sewage discharges from the site for more than  100 years. Contaminants include chlorinated benzenes,  mercury, and PCBs. Between 1998 and 2018 EPA  selected cleanup remedies for several areas within the  site. Cleanup activities include removing chlorobenzene  from existing wells, cleaning storm drainage systems,  construction of a lakeshore barrier wall, and groundwater  collection and treatment systems. Site investigations and  cleanup activities are ongoing in several areas of the  site, including the Lower Ley Creek and Willis Avenue  areas.", "The Cayuga Groundwater Contamination site covers  about 4.8 square miles extending from Auburn to Union  Springs, New York. The site is the former location of a  facility where General Electric Company and its partners  manufactured semiconductors. The site includes  residential properties mixed with farmland, woodlands,  and commercial areas. Contaminated groundwater at the  site contains volatile organic compounds that are  potentially harmful contaminants that easily evaporate in  the air. EPA conducted a remedial investigation and  feasibility study to determine the sources, nature, and  extent of site contamination and to evaluate remedial  alternatives. Remediation will depend on the  characteristics identified, but will include bioremediation  for the most contaminated area as well as natural  processes to reduce the level of contamination to meet  groundwater standards. EPA is requiring periodic  collection and analyses of groundwater samples to verify  that the level and extent of contaminants is declining.  EPA is deferring a decision on how to clean up the  groundwater in Area 3, and intends to further investigate  that area prior to issuing a final cleanup decision.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Eighteen Mile Creek site consists of contaminated  sediment, soil, and groundwater along approximately 15  miles of creek in Niagara County, New York. The site has  a long history of industrial use dating to the 19th century.   Contamination, including PCBs and heavy metals, spans  two areas: Eighteen Mile Creek corridor and the creek  sediment to Lake Ontario. Possible sources of the  contamination include releases from hazardous waste  sites, industrial or municipal wastewater discharges, and  disposal practices of manufacturers around the creek.  EPA has demolished five contaminated residential  properties and relocated the residents, completed the  remedial investigation and issued a record of decision for  the creek corridor in 2017, and is currently conducting  the remedial investigation in the length of the river to  Lake Ontario.    The approximately 145-acre Wilcox Oil Company site in  Bristow, Oklahoma includes the inactive and abandoned  Lorraine and Wilcox Oil Refineries, which operated from  approximately 1915 through 1963. The main components  of the refinery included a skimming plant, cracking unit,  and redistillation battery with a vapor recovery system  and continuous treating equipment. Refinery operations  contaminated soil and sediment and left behind refinery  waste material such as oil waste and sediment skimmed  from crude oil, and potentially lead. Planning and  implementation of the site\u2019s remedial investigation and  feasibility study is ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 200-acre Hudson Refinery site housed an oil refinery  from 1922 until 1982. The site included aboveground  storage tanks, wastewater treatment impoundments,  separators, stained soils, a land treatment unit, and loose  and friable asbestos-containing material. Refinery  operations contaminated soil, groundwater, surface  water, and sediment. The site\u2019s long-term remedy,  selected in 2007 and amended in 2010, included removal  of asbestos-containing materials, coke tar, and scrap  metal; soil and waste excavation with off-site disposal;  excavation, stabilization, and off-site disposal of  sediment from waste ponds and sumps; treatment of  surface water from ponds with contaminated sediment;  groundwater monitoring; and institutional controls,  among others. Cleanup construction started in early  2010 and finished in October 2010. Operation and  maintenance activities and monitoring are ongoing.", "The 160-acre Oklahoma Refining Company site in Cyril,  Oklahoma contained an oil refinery operated by several  different owners until 1984. Site operations contaminated  soil, sediment, surface water, and groundwater with  PAHs, volatile organic compounds, and metals. Long- term remedies included bioremediation; stabilization;  neutralization, containment, and treatment of surface  water and groundwater; and on-site disposal of  excavated materials in a hazardous waste landfill.  Remediation was completed in 2001 on the southern part  of the site.  Removal of hazardous waste was completed  in 2006. EPA is currently evaluating long-term cleanup  activities on the northern portion of the site.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Tar Creek site is located in Ottawa County,  Oklahoma. According to EPA, the site itself has no  clearly defined boundaries, but consists of areas within  Ottawa County impacted by historical mining wastes.  The site is part of the larger Tri-State Mining District that  consists of historical lead and zinc mining areas in  northeast Oklahoma, southeast Kansas, and southwest  Missouri. The site first came to the attention of the State  of Oklahoma and EPA in 1979, when water began  flowing to the surface near Commerce, Oklahoma from  underground mine areas, through abandoned boreholes.  This surface discharge flowed into Tar Creek, and soon  other discharge locations were observed near Tar Creek  and the abandoned mining town of Douthat and Quapaw.  As a result, Tar Creek and Beaver Creek were  significantly impacted. EPA has defined five areas to  focus on: surface water and groundwater; waste in  residential areas that causes high blood lead levels in  children; chemicals found in an office and laboratory  complex; piles of mine and milling waste and smelter  waste; and sediment and surface waters in seven  watersheds within three states and nine tribal areas.  Remedial efforts include plugging abandoned wells to  prevent contamination of aquifers, cleanup of public  areas and residences, removal of mining chemicals, and  relocating mining waste on the surface. The Quapaw  Tribe has led remedial efforts on portions of tribally  owned properties located within Tar Creek. Cleanup is  ongoing.", "The 61-acre Tulsa Fuel And Manufacturing site in  Collinsville, Oklahoma, is the location of a former zinc  smelter and lead roaster that operated from 1914  through 1925. Historical operations contaminated soil,  sediment, and surface water with hazardous materials  including zinc and lead. EPA selected a cleanup plan for  the site that included on-site consolidation and capping  of soil, sediment and waste material. Construction of the  remedy began in August 2014 and is now completed.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The McCormick and Baxter Creosoting Company site is  a former creosote wood treating facility located on the  east bank of the Willamette River in Portland, Oregon.  The company was founded in 1944 and continued  operations until October 1991.This site is located within  the Portland Harbor Superfund site, but was not included  in the January 2017 Portland Harbor record of decision.  The site encompasses approximately 41 acres of land  and an additional 23 acres of contaminated river  sediment. Site investigations confirm releases of wood- treating chemical compounds to soils, groundwater, and  sediment. Remedial investigations identified three  plumes of contaminated groundwater migrating toward  surface waters. Completed cleanup activities include  demolition of the McCormick and Baxter plant; soil  excavation, treatment, and disposal; upland soil capping;  installation of a subsurface barrier wall; contaminant  recovery; construction of a multi-layer sediment cap in  the Willamette River; monitoring and engineering; and  institutional controls. Construction of site remedies  finished in September 2005.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Taylor Lumber and Treating operated a wood-treating  plant at the site near Sheridan, Oregon, from about 1946  until 2001. EPA found that wood-treating chemical spills,  including creosote and pentachlorophenol, contaminated  soil, roadside ditches, and groundwater at the site. In  response, EPA constructed an underground slurry wall  as part of the remedy beneath the wood-treating area to  contain and extract the most contaminated groundwater  to maintain hydraulic control within the barrier wall. The  final cleanup included excavation of contaminated soils  from 5 upland acres and from adjacent ditches flowing to  the South Yamhill River; replacement of an existing  asphalt cap in the wood-treating area with a new low  permeability asphalt cap overlaying the underground  slurry wall; disposal of material from stockpiled soil  storage cells off-site; and upgrades to the storm water  conveyance systems. EPA completed final cleanup in  2008. The property is now owned and operated by a  private company, which has ongoing obligations related  to property use restrictions, operations, and maintenance  on the property. EPA conducted its second 5-year review  in 2017.  The 4.2-acre Harbor Oil Incorporated site is located in  Portland, Oregon, in an industrial area adjacent to Force  Lake. A waste oil recycling facility currently operates on  the site. Past site operations included a tank truck  cleaning business, which was destroyed by a fire in 1979  that ruptured five 20,000-gallon aboveground used oil  tanks. Site activities, the fire, and a large oil spill in 1974  contaminated soil, sediment and groundwater with  metals, oil, pesticides, and PCBs. EPA ordered a  previous operator to empty, clean, and dismantle a tank  containing petroleum wastes. Remedial investigations  determined that contamination does not pose an  unacceptable risk to human health or the environment;  therefore, no further cleanup is required.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 10-acre Gould, Incorporated site in Portland, Oregon  housed a lead smelter and lead oxide production facility  from 1949 until 1981. Site activities included on-site  disposal of about 87,000 tons of battery casings and  discharge of about 6 million gallons of acid into a nearby  lake, which resulted in contaminated soils and lake  sediment. EPA transferred the contaminated soils and  sediment into a lined containment area at the site as part  of the cleanup. EPA monitored groundwater at the site to  determine if historic wastes adversely impacted shallow  groundwater at the site. Based on this data, in 2000,  EPA determined that no further groundwater cleanup  actions were necessary. Groundwater monitoring near  the containment area continues to ensure that the  containment area has no adverse impact.", "The North Ridge Estates site is a residential subdivision  3 miles north of Klamath Falls, Oregon that is  contaminated with asbestos as a result of the improper  demolition of approximately 80 1940s-era military  barracks buildings. Asbestos-containing materials and  soil are being removed from the old military barracks site  during three seasons of cleanup from 2016 through  2018. Additional contamination at the nearby Kingsley  Firing Range, also part of the site, will be investigated  and completed at a later time. According to EPA, cleanup  and restoration will be completed by the end of 2018.", "The 76-acre Formosa Mine site is located on Silver Butte  in Douglas County, Oregon. The site was originally  mined for copper and silver from about 1910  through1937.  The abandoned mine discharges millions  of gallons of acid rock drainage and toxic metals into the  upper reaches of Middle Creek and South Fork Middle  Creek every year. These discharges have contaminated  surface water, groundwater, soil, and sediment with  heavy metals. EPA is currently designing the remedy for  all mine-impacted material on the surface and will  address risks to surface and groundwater separately.  The remedy for surface contamination consists of  excavating, contouring, or capping various areas to  prevent leaching during precipitation events.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Portland Harbor site includes portions in the  Willamette River and about 12 river miles upstream of  the Willamette River in and around Portland, Oregon,  that have been contaminated from decades of industrial  use. Areas of the site housed manufactured gas plants, a  pesticide manufacturing facility, and boat maintenance  facilities, among other industrial uses. Water and  sediment at the site are contaminated with many  hazardous substances, including PCBs, PAHs,  dioxins/furans, pesticides, and heavy metals. The harbor  is an international portal for commerce, and dozens of  industries within the site provide economic sustainability  to the community. The Lower Willamette is also a  popular area for recreation, including fishing and boating.  The river provides a critical migratory corridor and  rearing habitat for salmon and steelhead, including  endangered runs of steelhead and chinook. The area  also holds great importance to several tribes as a natural  and cultural resource. EPA issued its record of decision  in January 2017 and finished its baseline sampling plan  in December 2017. The record of decision specifies the  remedy selected, which is designed to reduce risks to  human health and the environment to acceptable levels  and actively remediate (using dredging, capping,  enhanced natural recovery, and monitored natural  recovery) on 394 acres of contaminated sediment and  23,305 lineal feet of river bank. This final remedy is  estimated to cost approximately $1.05 billion and take  about 13 years to complete.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Black Butte Mine site is located near Cottage Grove,  Oregon. Mercury mining from the late 1880s through the  late 1960s included extracting ore from the mine,  crushing it on-site, roasting it in kilns to volatilize the  mercury, and bottling and shipping the mercury. Mining  operations, tailings piles left at the site, and erosion from  Furnace Creek contaminated soil, sediment, surface  water, and groundwater with mercury and other toxic  metals. EPA and its contractors are working in the  Furnace Creek area of the site to excavate mine tailings  and contaminated soils/sediment for safe disposal in an  off-site repository. Removing the mine tailings will reduce  mercury leaking into Furnace Creek and reduce the  potential for mercury leaching into groundwater. Site  investigations for the long-term cleanup are under way.", "The Newport Naval Education/Training Center site was  used by the U.S. Navy as a refueling depot from 1900  through the mid-1970s. The site encompasses 1,063  acres on the west coast of Aquidneck Island in  Portsmouth, Middletown, and Newport, Rhode Island.  The site includes multiple areas of contamination,  including a landfill, a fire training area, a former shipyard,  and five tank farms. The areas contain varying degrees  of groundwater contamination. The Navy is the lead  agency for site investigation and cleanup. Site cleanup  has included installation of a soil cover, use of a  groundwater pump and treat system, and removal of  contaminated debris.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Centredale Manor Restoration Project site is located  in North Providence, Rhode Island, where the main  \u201csource area\u201d consists of about 9 acres down the  Woonasquatucket River, south to the Lyman Mill Dam,  and includes the restored Allendale Dam. The site was a  chemical production and drum reconditioning facility from  the 1940s to the 1970s that resulted in the release of  dioxin and other contamination.  Past site operations led  to chemicals released directly to the ground, buried and  emptied directly into the river. This resulted in  contamination of soil, groundwater, surface water and  sediment in the adjacent river and downstream ponds. A  major fire in 1972 destroyed most structures at the site.  Residential apartments were constructed at the site in  the late 1970s and early 1980s and still occupy the site.  To address immediate risks, EPA conducted several  activities including fencing the site, capping  contaminated soil, and reconstructing Allendale Dam.  EPA developed the cleanup plan, with amendments, in  2012. EPA, the state of Rhode Island, and potentially  responsible parties agreed in July 2018 on a plan to  clean up contamination at the site.   The Whitewood Creek site covers an 18-mile stretch of  Whitewood Creek in Lawrence, Meade, and Butte  counties in South Dakota. Since the 1870s, gold mining  operations in the area included the discharge of millions  of tons of mine tailings into the creek. These mine  tailings settled along the Whitewood Creek floodplain,  contaminating soil, groundwater, and surface water with  heavy metals. EPA excavated 4,500 cubic yards of  contaminated soil from residential yards, disposed of  contaminated soil, and established institutional controls  and surface water monitoring. EPA took the site off the  Superfund program\u2019s National Priorities List in 1996  when cleanup finished and affected counties restricted  future development in impacted areas. Surface water  monitoring is ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 360-acre Gilt Edge Mine site is located about 6.5  miles east of Lead, South Dakota. The primary mine  disturbance area encompasses a former open pit and a  cyanide heap-leach gold mine, as well as prior mine  exploration activities from various companies. Mining and  mineral processing at the site began in 1876 and early  gold miners developed extensive underground workings  that wind through the central portion of the site. There  was also some surface mining. Historical operations at  the site contaminated surface water and groundwater  with acidic heavy-metal-laden water. In 1986, mine  owners commenced development of a large-scale open  pit, cyanide heap leach gold mine operation. In the late  1990s, site owners abandoned the site and their  responsibilities to address acidic heavy-metal-laden  water  generated from the exposed highwalls of the three  open mine pits and from the millions of cubic yards of  acid-generating spent ore and waste rock. Investigation  and cleanup activities at the site are ongoing. Interim  remedies are currently in place for the water treatment,  Lower Strawberry Creek, and Ruby Gulch Waste Rock  Dump; and remedial action construction is in progress for  the primary mine disturbance area.", "The Lower Duwamish Waterway site is a 5-mile segment  of the Duwamish, Seattle, Washington\u2019s only river. The  river flows between residential areas as well as through  the industrial core of Seattle into Elliott Bay. The  waterway has served as Seattle\u2019s major industrial  corridor since the early 1900s, resulting in sediment  contaminated with toxic chemicals from industrial  practices, stormwater runoff, and wastewater. EPA has  also found contamination in fish and shellfish, including  PCBs, arsenic, polycyclic PAHs, dioxins, and furans. As  a result, consumption of resident fish and shellfish, and  contact with contaminated sediment pose a risk to  human health. EPA signed the record of decision in 2014  that includes plans to clean up about 177 acres in the  waterway, including dredging, capping, and natural  sedimentation. By the end of 2015, 50 percent of PCB  contamination in the river bottom was removed through  these early action cleanups. Cleanup and monitoring  activities are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 340-acre Naval Undersea Warfare Engineering  Station site is located on a peninsula 15 miles west of  Seattle. Site activities included torpedo maintenance, fuel  storage, welding, painting, carpentry, plating, and sheet  metal work. Site activities and waste disposal practices  contaminated soil, sediment and groundwater with  hazardous chemicals, including 1,4-Dioxane, chromium,  and vinyl chloride. The site\u2019s long-term cleanup remedy  included demolition of the plating shop building; removal  and disposal of contaminated soil and sediment; removal  of underground storage tanks; long-term monitoring of  groundwater, sediment and shellfish; institutional  controls; and phytoremediation to treat contaminated  landfill soil. Remedy construction took place between  1995 and 2000. Site operation and maintenance  activities, and site monitoring, are ongoing.  Four sites on the NPL are part of the 586-square-mile  Hanford Nuclear Reservation near Richland,  Washington, where waste was created as a by-product  of producing plutonium from 1943 through1987. The 25- square-mile Hanford 100-Area site, also referred to as  the River Corridor, is focused on cleanup of  contamination that originated from nine nuclear reactors.  Cooling water contaminated with radioactive and  hazardous chemicals was discharged into both the  adjacent Columbia River and on-site infiltration cribs and  trenches. Site operations also included burying  contaminated solid wastes on-site. These activities  contaminated soil and groundwater with radioactive  constituents, heavy metals, and other hazardous  chemicals. Contaminants have been addressed by  demolishing buildings, removing contaminated soil, and  employing pump and treat systems for contaminated  groundwater, among others. EPA has selected eight  interim remedies for the 100-Area and remedial  investigations are under way to support selection of final  cleanup remedies.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Four sites on the NPL are part of the 586-square-mile  Hanford Nuclear Reservation near Richland, Washington  where waste was created as a by-product of producing  plutonium and other nuclear materials for nuclear  weapons from 1943 through 1987. The 79-square-mile  200-Area site is located 17 miles north-northwest of  Richland, Washington. The 200-Area site is located in  the center portion of the Hanford site, known as the  Central Plateau, and contains former chemical  processing plants and waste management facilities.  During processing activities, massive quantities of  carbon tetrachloride were discharged into the ground.  Site activities also included processing, finishing and  managing nuclear materials, including plutonium. About  1 billion cubic yards of solid and diluted liquid wastes  (radioactive, mixed, and hazardous substances) were  disposed in trenches, ditches, and in an on-site landfill.  About 1,000 facilities and structures were built to support  processing activities which contaminated soil,  groundwater and surface water with hazardous  chemicals and radioactive constituents. Thousands of  containers and drums holding radioactive waste were  placed in burial grounds. Remedial investigations,  removal actions, and remedy design and construction  are under way for more than 800 waste areas at the site.  Cleanup actions included decontamination and  demolition of contaminated structures; treatment of  contaminated soil; excavation and off-site disposal of  drummed wastes; institutional controls; and natural  attenuation of groundwater contaminants. According to  EPA, a remedy for one of the large canyon-type buildings  is about halfway complete and is awaiting investigation  and remediation of surrounding waste sites before it can  be completed.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Four sites on the NPL are part of the 586-square-mile  Hanford Nuclear Reservation near Richland, Washington  where waste was created as a by-product of producing  plutonium and other nuclear materials for nuclear  weapons from 1943 through 1987. The 56 square mile  Hanford 300 Area site was home to fuel manufacturing  operations at Hanford as well as experimental and  laboratory facilities. The 300-Area site includes an  unlined liquid disposal area north of the on-site industrial  complex area, landfills, and miscellaneous disposal sites  associated with operations at the industrial complex. The  300-Area site contains about 27 million cubic yards of  solid and diluted liquid wastes mixed with radioactive and  hazardous wastes in ponds, trenches, and landfills. The  areas used for liquid discharges had no outlets;  therefore, liquids percolated through the soil into the  groundwater and the Columbia River. Cleanup actions  completed to date include decontamination and  demolition of contaminated structures; natural  attenuation of groundwater contaminants; and disposal  of building rubble, contaminated soil, and debris.  Remedy construction has been completed in several  areas of the site and remedial investigations, removal  actions, and remedy design and construction are under  way at the remaining areas.  Four sites on the NPL are part of the 586-square-mile  Hanford Nuclear Reservation near Richland, Washington  where waste was created as a by-product of producing  plutonium and other nuclear materials for nuclear  weapons from 1943 through 1987. Waste areas in the  120-square-mile Hanford 1100-Area site include a  landfill, drains, underground tanks and a sand pit where  as many as 15,000 gallons of waste battery fluids may  have been disposed. Past site activities and waste  disposal practices contaminated soil and groundwater  with heavy metals and hazardous chemicals such as  PCBs and trichloroethene. Remedial activities include  off-site disposal of PCB-contaminated soils, capping of  the landfill, and establishing continuing institutional  controls to prevent future exposure and contamination  from buried asbestos.Following cleanup, EPA deleted  the site from the NPL in 1996.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 300-acre Jackson Park Housing Complex site is  located in eastern Kitsap County, about 2 miles  northwest of Bremerton, Washington. From 1904 through  1959, the facility operated as a Navy ammunition depot  and included ordnance, manufacturing, processing, and  disassembly. Residual ordnance powders were disposed  of by open burning. Hazardous dust deposited on floors  during ordnance handling was washed into floor drains  that led into Ostrich Bay. The site also included  incinerators; paint, battery, and machine shops; and a  boiler plant. Site activities contaminated surface water  and soil with hazardous chemicals and heavy metals.  The site\u2019s long-term remedy included installation of a soil  and vegetation cover over contaminated soil, shoreline  stabilization, implementation of a shellfish sampling  program, and signs along the shoreline to notify local  residents of any harvest restrictions. Site cleanup also  included the removal and off-site disposal of wooden  pilings from abandoned Navy structures, excavation and  disposal of contaminated soil, establishment of an  environmental monitoring program, and subsurface  placement of oxygen-releasing chemicals. Remedy  construction began in 2000 and is ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 53-acre Old Navy Dump/Manchester Laboratory site  is located north of Manchester, Washington, along the  western shore of Clam Bay in Puget Sound. Federal  ownership of this site started in 1898 with the U.S. Army.  In 1924, the entire site was transferred to the U.S. Navy.  From the 1940s through the 1960s, the Navy used the  site primarily for construction, repair, maintenance, and  storage of submarine nets and boats, but also used the  site for firefighter training and as a dump for wastes  generated at the site. Former firefighter training activities  contaminated soil with dioxins and petroleum  hydrocarbons. The Navy also dumped demolition debris  and industrial waste, including asbestos, into a former  tidal lagoon, contaminating soil, sediment, seep water,  and shellfish in Clam Bay with PCBs and metals. Clam  Bay has been used primarily for recreational shellfishing  and is a known habitat for the bald eagle and chinook  salmon, a threatened species under the Endangered  Species Act. In the early 1970s, EPA and the National  Oceanic and Atmospheric Administration (NOAA)  acquired portions of the property. The site is currently  occupied by an EPA analytical laboratory and a NOAA  fisheries research laboratory. The Army Corps of  Engineers established in the third 5-year review in 2014  that the remedy at this site is protective of human health  and the environment. Operation and maintenance  activities and monitoring are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 83-acre Pacific Sound Resources site, formerly  known as the Wyckoff West Seattle Wood Treating  facility, is located on the south shore of Elliott Bay on  Puget Sound in Seattle, Washington. A wood-treating  facility operated at the site between 1909 and 1994.  Wood-preserving operations used creosote,  pentachlorophenol, and various metal-based solutions of  copper, arsenic, and zinc. Daily operations, as well as  spills, leaks and storage of treated wood products  resulted in soil and groundwater contamination. Direct  discharge or disposal of process wastes and waste  transport were the most likely sources of contamination  to marine sediment. Over half of the site is located in  either intertidal or subtidal lands. Cleanup actions  included the placement of subtidal and intertidal caps  over the 58-acre marine sediment area, including  placement of at least 5 feet of cap material in the  intertidal zone; dredging and removal of contaminated  sediment for off-site disposal; and removal of marine  pilings for off-site disposal. Construction of long-term  cleanup remedies concluded in 2005 and, following  cleanup, operation and maintenance activities, including  periodic groundwater monitoring, are ongoing.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Wyckoff Company / Eagle Harbor Superfund site is  on the east side of Bainbridge Island in Central Puget  Sound, Washington. The site was used for creosote  wood treatment for more than 85 years, according to the  Washington Department of Ecology. Environmental  investigations revealed extensive contamination\u2014 including creosote, mercury, and other metals\u2014in soils,  groundwater, and in the sediment on the bottom of Eagle  Harbor. EPA reports that extensive cleanup actions have  been completed at the site, including operating a  groundwater extraction and treatment system since  2012, capping sediment on more than 70 acres of Eagle  Harbor, and hauling away contaminated soils and debris.  Further cleanup actions are needed in the soil and  groundwater at the former wood treatment facility and in  adjacent beach sediment. In 2016 EPA released a  proposed plan for additional cleanup actions at the site  and, after a public comment period, divided the work into  two cleanup decisions. The first was issued in May 2018  and the second is planned for issue near the end of  2018.  The 10-acre Pesticide Lab site is an active agricultural  research laboratory located at the Yakima Agricultural  Research Laboratory in Yakima, Washington, and has  been in operation since 1961.The site is leased by the  U.S. Department of Agriculture (USDA). Wastes from the  formulation, mixing, and storage of pesticide were  discharged into a septic tank disposal system at the site  from 1965 through 1985. USDA addressed cleanup  under the Resource Conservation and Recovery Act.  The site has been cleaned up and is no longer a threat to  human health. Long-term monitoring is not required  because cleanup left no contaminants of concern on the  site. EPA deleted the site from the NPL in 1993.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The 92-acre Hidden Valley Landfill site is located in  Puyallup, Washington. The site contains a former landfill  and gravel pit that operated from 1967 through 1985.  The landfill accepted liquids, solids, industrial wastes,  and heavy metal sludge. Waste disposal activities  contaminated groundwater with hazardous chemicals  and heavy metals. The site\u2019s long-term remedy included  covering the waste with an impermeable barrier,  collecting landfill gases, controlling surface water and soil  erosion, and minimizing the lateral and vertical  movement of contaminated groundwater. Remedy  construction took place in 2000. Landfill gas and  groundwater monitoring are ongoing.", "The Tulalip Landfill site, located within the boundaries of  the Tulalip Indian reservation, is a former landfill located  between Marysville and Everett, Washington. The site  consists of a 147-acre landfill and 160 acres of wetlands.  The Seattle Disposal Company operated the landfill from  1964 until 1979. The landfill received an estimated 3  million to 4 million tons of commercial and industrial  waste. In 1979, landfill operators closed the landfill,  added a soil cover, and constructed a perimeter barrier  berm. However, insufficient grading of the soil cover  resulted in poor drainage and allowed precipitation to  collect and eventually infiltrate the landfill surface. As a  result, the landfill contaminated groundwater, surface  water and sediment with metals, pesticides, PCBs and  polycyclic aromatic hydrocarbons. EPA\u2019s interim remedy  for the landfill included capping the landfill and installing  a landfill gas collection and treatment system, among  other actions. EPA continued the interim remedy for the  landfill and included institutional controls for the  wetlands, such as placing and maintaining signs to warn  of potential risk from harvest and consumption of  resident fish and shellfish. The tribe is responsible for  maintenance of the remedy, inspections, and sampling at  the site.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Harbor Island is a 420-acre manmade island in Elliott  Bay in Seattle Washington. The site includes the entire  island and associated sediment. Built in the early 1900s,  the island housed businesses that conduct commercial  and industrial activities, including oil terminals, shipyards,  rail transfer terminals, cold storage, and lumberyards.  Site operations contaminated groundwater, sediment and  soil with lead, PCBs, arsenic, mercury, and other  contaminants. Remedial activities include removal and  treatment of contaminated soil, treatment of  groundwater, removal of approximately 6,000 creosote  treated piles, and dredging sediment. Most portions of  the site have been cleaned up and are undergoing long- term monitoring.", "The Commencement Bay, Near Shore/Tide Flats site is  located in the City of Tacoma and the Town of Ruston at  the southern end of Puget Sound in Washington. The  site encompasses an active commercial seaport and  includes 12 square miles of shallow water, shoreline, and  adjacent land, most of which is highly developed and  industrialized. EPA found widespread contamination of  the water, sediment, and upland areas at the site and  has divided the site into seven areas being managed as  distinct cleanup sites. As part of this cleanup, EPA has  remediated 2,436 properties with the worst  contamination, restored 11 acres of shallow marine  habitat, and restored 70 acres of estuarine habitat. The  site\u2019s long-term remedy includes demolishing remaining  buildings and structures, excavating soil and slag from  the five most contaminated source areas on the site,  depositing demolition debris in an on-site containment  facility, and monitoring the impacts of cleanup on  groundwater and off-shore marine sediment.  Investigations and remedy construction are ongoing at  the site.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Midnite Mine is an inactive former uranium mine in the  Selkirk Mountains of eastern Washington. Located within  the reservation of the Spokane Tribe of Indians, the mine  was operated from 1955 until 1981. The site includes two  open pits, backfilled pits, a number of waste rock piles,  and several ore/protore stockpiles. The site  contamination has resulted in elevated levels of  radioactivity and heavy metals mobilized in acid mine  drainage, both of which pose a potential threat to human  health and the environment. The site drains to Blue  Creek, which enters the Spokane Arm of Franklin D.  Roosevelt Lake. Contaminated water emerging below  the waste rock and ore piles is currently captured for  treatment in an on-site treatment system. Cleanup  includes consolidation of mine waste rock, protore, and  contaminated soils; backfilling these materials in lined  pits; covering these pits to prevent water infiltration; and  ongoing water treatment. According to EPA, significant  cleanup is planned to occur between 2017 and 2024.   The 40-acre Lockheed West Seattle site is located in  Elliott Bay near the mouth of the West Waterway in  Seattle, Washington. The site includes about 7 acres of  aquatic tidelands owned by the Port of Seattle and 33  acres of state-owned aquatic lands. Historic industrial  practices at the former shipyard contaminated sediment  with hazardous chemicals, including PCBs, dioxins, and  furans. Industrial activities generated considerable  quantities of sandblast grit and other industrial waste that  discharged to sediment and accumulated beneath dry  docks and shipways. The Lockheed Martin Corporation,  as the potentially responsible party for the cleanup, will  remove contamination from a 40-acre area in the  northwest corner of the mouth of the West Waterway and  north of the Port of Seattle\u2019s Terminal 5. An estimated  total of 167,000 cubic yards of contaminated material will  be removed over the course of the cleanup. According to  EPA, the cleanup was to begin in 2018 and is anticipated  to be completed in the spring of 2019.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Makah Reservation Warmhouse Beach Dump is located  within the Makah Indian Reservation at the northwest tip  of the Olympic Peninsula in Washington. The site  includes a former open dump on top of a ridge about 3  miles northwest of Neah Bay and two streams that  originate within the dump and flow to East Beach and  Warmhouse Beach. Municipal and household solid and  hazardous wastes were disposed of at the dump from  the 1970s until 2012. Elevated levels of metals,  perchlorate and PCBs have been found in soil at the  dump and in the sediment of both creeks.  Mussels at the  beach also contain elevated concentrations of lead;  however, EPA has not determined whether this is from  the dump or creeks. EPA is in the remedial investigation  stage of the cleanup.", "Bremerton Gas Works is a former manufactured gas  plant located about a mile and a half north of downtown  Bremerton, Washington. It occupies about 2.8 acres of  property along the Port Washington Narrows in Puget  Sound. Two species of fish that are listed as threatened  under the Endangered Species Act (steelhead trout and  chinook salmon) live near the site. This portion of Puget  Sound is used as a sport and commercial fishery, as well  as for subsistence fishing by the Suquamish Indian Tribe.  EPA is in the early stages of the cleanup process,  conducting the remedial investigation and feasibility  study, which EPA expects to complete in spring 2019.", "The Hamilton/Labree Roads Groundwater Contamination  site is located about 2 miles southwest of Chehalis,  Washington. According to EPA, past site activities  included spilling and dumping tetrachoroethene in  Berwick Creek and burying drums and other containers  of assorted hazardous chemicals on-site. The release at  the site has contaminated soil, sediment, groundwater,  and surface water. EPA\u2019s selected interim remedy  includes rerouting Berwick Creek around contaminated  areas, thermally treating tetrachoroethene-contaminated  soil and sediment, and treating contaminated  groundwater. Remedial design is under way.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "Penta Wood Products site is located in the town of Siren  in Burnett County, Wisconsin. A wood treatment facility  operated at the site from 1953 until 1992, and used  pentachlorophenol (PCP) to treat wood posts and  telephone poles. Facility operations contaminated soil  and groundwater with PCP and arsenic. During cleanup,  EPA removed about 28 storage tanks containing liquid  and sludge. Also, 43,000 gallons of a PCP/oil mixture  and sludge were disposed of off-site. The treatment  building was demolished and contaminated soil was  cleaned on-site or disposed of off-site. Cleanup was  completed in 2000, and operation and maintenance  activities and monitoring are ongoing. In September  2014, the State of Wisconsin took over operations and  maintenance activities at the site.", "Tribe or tribes  with known  interest in   the site  (CC) (HEUC) control (GWMUC) use (SWRAU)", "The Ashland/Northern States Power Lakefront site is  located on the shore of Chequamegon Bay, which is part  of Lake Superior, in northern Wisconsin. The site  consists of several properties, including those owned by  Northern States Power Co. of Wisconsin, Canadian  National Railroad and the city of Ashland. 16 acres of  contaminated lake sediment just off-shore are also part  of the site.  The near-shore portion of the site was  formed by the placement of fill consisting of sawdust,  wood, and wood waste; demolition debris; and other  waste materials. Contaminants including tar, oil, PAHs,  volatile organic compounds, and metals have been found  in sediment, groundwater, and soil. Contamination has  also been found in an adjacent residential area. Because  groundwater is contaminated at levels of health concern,  two artesian wells have been closed as a precautionary  measure. Access to a portion of the bay and shore is  restricted for boats and swimmers because when  sediment is agitated, oil and tar can be released causing  a slick to form. Cleanup at the site is ongoing and is  being overseen by the Wisconsin Department of Natural  Resources and EPA. Phase 1,soil and groundwater  cleanup under portions of the site was completed in  2016.  This entailed removing contaminated soil,  covering the area with clean material, and installing  barriers to stop groundwater from migrating.  Phase 2,  the full-scale wet dredge in the Chequamegon Bay, was  completed in 2018. EPA is conducting the first five-year  review of the site.", "In providing technical comments on a draft of this report, the Confederated Salish and Kootenai Tribes of the Flathead Reservation  identified this additional site."], "subsections": [{"section_title": "State ID", "paragraphs": ["Site Overview  Blackbird Mine is located 25 miles west of the town of  Salmon in the Salmon-Challis National Forest in east- central Idaho. Cobalt, silver, and copper ore were  extracted from underground and open-pit mining  operations. Contaminated soil, sediment and tailings  were released from the mine site during high water flows  from thunderstorms and snowmelt. Acid rock drainage  and leachate from the mining tunnels, waste piles, and  tailings contaminated soil, sediment, surface water, and  groundwater with heavy metals such as copper, cobalt,  and arsenic. Affected surface waters include Blackbird  Creek, the South Fork of the Big Deer Creek, Big Deer  Creek, and Panther Creek. Since 1995, cleanup actions  have collected contaminated runoff water in the mine  area and treated it for copper and cobalt. Cleanup  actions have also stabilized waste-rock piles at the mine.  Remedy construction is complete except for determining  whether to divert Bucktail Creek. Post-construction  monitoring of these cleanup activities is ongoing.", "Since the early 1900s, General Electric operated a large- scale industrial facility that manufactured and serviced  power transformers, defense and aerospace materials,  and plastics, and used numerous industrial chemicals at  its Pittsfield facility. Years of PCB and industrial chemical  use, and improper disposal, led to extensive  contamination around Pittsfield, Massachusetts as well  as down the entire length of the Housatonic River, which  is approximately 150 miles from its source on the East  Branch in Hinsdale, Massachusetts and flows through  Connecticut into Long Island Sound. After testing  groundwater, river sediment, soil, and wildlife, EPA  determined that the contamination needed to be  addressed and that the greatest concern in the area is  the possibility of direct contact or ingestion of PCB  contamination. Since 1977, there has been a ban on  fishing and consumption of fish from areas of the  Housatonic River. These restrictions will remain in place  until PCB levels decrease. Data are collected to ensure  that the current restrictions protect human health. EPA  collects information regarding PCBs in fish and shellfish.  In addition to PCBs, other industrial compounds present  at the site pose an unacceptable risk to people and the  environment.", "Site Overview  The Smurfit-Stone Mill Frenchtown site is located 11  miles northwest of Missoula, Montana. The 3,200-acre  site formerly housed a pulp mill that operated from 1957  through 2010. The core industrial footprint of the mill site  covers about 100 acres, and there are more than 900  additional acres containing a series of unlined ponds  used to store treated and untreated wastewater from the  mill, as well as sludge recovered from untreated  wastewater. The site also includes landfills used to  dispose of solid wastes, including general mill refuse and  asbestos. Various hazardous substances were used or  produced on-site, including bleaching chemicals that  produced dioxins and furans that may have been  released into the environment. A screening investigation  by EPA determined that the site\u2019s primary contamination  sources include four sludge ponds, an emergency spill  pond, an exposed soil pile adjacent to a landfill, a  wastewater storage pond, and a soil land farming area.  The results of the investigation will determine cleanup  needs and identify potential cleanup options at the site.", "The Anaconda Copper Mine site covers more than 3,400  acres of the Mason Valley, near the city of Yerington,  Nevada. Portions of the site are owned by a company,  while other areas are public lands managed by the U.S.  Bureau of Land Management. Nevada Department of  Environmental Protection and EPA have conducted  several emergency removal actions at the site to address  immediate concerns. Remedial investigations and  feasibility studies will be conducted to determine the  extent of contamination and potential cleanup options for  other areas at the site.", "Site Overview  The Lower Fox River, located in northeastern Wisconsin,  begins at the Menasha and Neenah channels leading  from Lake Winnebago and flows northeast for 39 miles to  where it discharges into Green Bay and Lake Michigan.  The Fox River Natural Resource Damage Assessment /  Polychlorinated Bisphenyls Releases site addresses  releases caused by operations of several pulp and paper  mills that, during the 1950s and 1960s, routinely used  PCBs in their operations that resulted in contamination of  the river. Samples from the site also indicate the  presence of polycyclic aromatic hydrocarbons resulting  from manufactured gas plant processes co-mingled or  underneath the PCB contamination.  Approximately  270,000 people live in the communities along the river.  2018 is the 10th year of dredging in the Lower Fox River,  and EPA estimates 450,000 cubic yards of PCB- contaminated sediment will be removed before the end  of the year. In addition, about 2.1 acres of sediment will  be capped and 179 acres will be covered with sand. EPA  plans to oversee a second 5 year review in 2019."], "subsections": []}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) examines the extent to which the U.S. Environmental  Protection Agency (EPA) has reliable data identifying National Priorities  List (NPL) sites that are located on tribal property or that affect tribes, (2)  examines the extent to which EPA has reliable data on the agency\u2019s  consultation with tribes and (3) describes what actions, if any, EPA has  taken to address the unique needs of tribes when making decisions about  cleanup actions at NPL sites.", "To examine the extent to which EPA has reliable data identifying NPL  sites that are located on tribal property or that affect tribes, we reviewed  relevant provisions of the Comprehensive Environmental Response,  Compensation, and Liability Act (CERCLA) of 1980 as amended and  policies and guidance regarding EPA\u2019s identification and clean-up of NPL  sites. We obtained and evaluated EPA data from the Superfund  Enterprise Management System (SEMS) on proposed, final, and deleted  NPL remedial sites that have tribes associated with them or that EPA has  designated as having Native American Interest (NAI). We limited our  review to examining proposed, final, and deleted NPL sites because they  represent sites with the highest national priority due to the significance of  releases, or threatened releases, of hazardous substances. EPA also  indicated whether such sites may be located within 10 miles of known  tribal property by comparing the sites\u2019 coordinates to the tribal geographic  location as recorded in publicly available EPA data. We also obtained  information about whether a site was considered a federal facility  because other federal agencies may have different consultation policies  than EPA. We did not determine whether EPA has information about  consultation with tribes for sites considered federal facilities.", "EPA initially identified 265 NPL Superfund sites that were on tribal  property, had NAI, had a tribe or tribes with potential interest in the site, or  may have been within 10 miles of tribal property. We then worked with  EPA headquarters officials and each regional office to perform data  quality checks and identify any errors or omissions, in order to develop a  revised list of a total of 87 NPL sites\u2014of which 11 were federal facilities\u2014 known to affect tribes or to be located on tribal property. As an example of  the data quality checks, officials from each EPA regional office reviewed  the list of sites for their respective regions and made corrections to the  sites\u2019 designation as having NAI or tribes with interest in the sites. As  another example, we compared data from EPA\u2019s Tribal Consultation  Opportunity Tracking System (TCOTS) database with the list of sites EPA  provided us and determined that a tribal consultation had occurred for a  site that EPA had not identified as having NAI. We checked with officials  from the appropriate EPA regional office and they told us that the site  should have been designated as having NAI, so we added it to our list.  We also interviewed officials from EPA\u2019s headquarters and regional  offices to better understand the agency\u2019s management, use, and the  reliability of these data. In providing comments on a draft of this report,  the Confederated Salish and Kootenai Tribes of the Flathead Reservation  identified an additional site that was not included in EPA\u2019s data, which we  reviewed with EPA and added to our list of NPL sites known to be on  tribal property or that affect tribes, bringing the total to 88 sites. We  recognize that there may be additional sites at which there is tribal  interest but determined that the data were sufficiently reliable to provide  information on NPL sites known to be on tribal property or that affect  tribes, and to select six sites for nongeneralizable case studies for our  work. We did not select case studies from sites located on federal  facilities because federal agencies may have different tribal consultation  policies. For the case studies, we selected sites based on geographic  diversity, and in order to represent sites that have been listed since the  publication of EPA\u2019s tribal consultation policy in 2011. We also selected  sites that had at least two assessments or inspections performed  according to EPA data so the tribes would have sufficient information to  share with us about their experiences. In one of the case studies, we had  to change to a different site from the same region when the tribe  associated with the site we had initially selected did not wish to  participate. We chose a replacement site in the same EPA region that  was at a similar point in the cleanup process as the site we originally  selected.", "To examine whether EPA has reliable data regarding its consultation with  tribes about NPL sites, we reviewed EPA-specific guidance that applies to  tribal consultation on NPL sites. We evaluated data from EPA\u2019s TCOTS,  reviewed related agency documentation, interviewed knowledgeable  agency officials, and compared TCOTS data with other information EPA  provided. Specifically, we compared data from TCOTS with information  that officials from EPA headquarters and each EPA region provided to us  regarding consultation for each of the nonfederal sites that had NAI. In  order to determine the frequency with which EPA consults with tribes on  cleanup actions of NPL sites, we examined and compared available data  on consultation from the TCOTS system with other information provided  by EPA in light of EPA\u2019s consultation guidance. We also interviewed  officials from EPA and selected tribes from our six nongeneralizable case  studies regarding consultation. While we selected case studies based on  nonfederal NPL sites EPA has identified as being on tribal property or  affecting tribes, our interviews with tribal and EPA officials covered a  broader range of sites and included officials\u2019 views about any Superfund  activities in which they had been involved. For each case study, we  requested information documenting EPA\u2019s consultation with tribes as well  as any materials that demonstrated whether and how agency decisions  took into account unique tribal needs associated with the site. We also  conducted semi-structured interviews with officials from the tribe or tribes  involved at each of our case study sites, as well as EPA regional officials  for the region in which the site is located. We visited the Jackpile-Paguate  Uranium Mine site and conducted interviews with tribal officials in person.  We evaluated EPA and tribal officials\u2019 experiences with consultation at  our selected case study sites based on EPA\u2019s consultation policies.", "To describe what actions EPA has taken to address the unique needs of  tribes when making decisions about cleanup actions at NPL sites, we  interviewed EPA officials from the regional offices associated with our  selected case study sites about consultation regarding our case study  sites, as well as at other NPL sites that affect tribes in their region. We  also conducted semi-structured interviews with tribal officials who had  consulted or coordinated with EPA regarding each of the selected sites in  our review. We asked the tribes to describe the effects of the site on any  unique needs such as subsistence fishing and gathering, and whether  EPA has explored or addressed these needs during the agency\u2019s cleanup  actions.", "We conducted this performance audit from May 2017 to January 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."], "subsections": []}, {"section_title": "Appendix III: Description of Case Study Sites", "paragraphs": ["To analyze examples of consultation and better understand the tribal  perspective on consultation with the Environmental Protection Agency  (EPA), we conducted six nongeneralizable case studies of final or  proposed National Priorities List (NPL) sites with Native American Interest  (NAI). We selected these case studies on the basis of geographic  diversity and in order to represent sites that have been listed since the  publication of EPA\u2019s tribal consultation policy in 2011. For each of these  case studies, we collected documentation and interviewed the relevant  tribal and EPA regional officials. Figure 2 provides an overview of these  case studies."], "subsections": [{"section_title": "Case Study 1: Creese and Cook Tannery (Former)\u2014EPA Region 1", "paragraphs": [], "subsections": [{"section_title": "General Information on the Site", "paragraphs": ["According to EPA, the Creese and Cook Tannery site is located on the  Crane River in Danvers, Massachusetts. According to an October 2018  proposed cleanup plan, several businesses operated at the site, including  leather tanneries that operated from the late 1800s until the early 1980s  and a former railroad station. Use of arsenic and chromium at tanneries  resulted in these chemicals contaminating soil at the site. Other soil  contaminants include dioxins, furans, and polycyclic aromatic  hydrocarbons from railroad operations, combustion, and use of asphalt  pavement. In the mid-1980s, the Massachusetts Department of  Environmental Protection conducted an initial investigation to determine  the nature and extent of contamination and evaluate the potential  remedial options under state law. The department then reviewed and  approved, pursuant to state law, a plan for excavation of the waste and its  placement in a containment cell. EPA began investigations in 2010 and  found arsenic in surface soils. As a result, in 2012 EPA removed 450 tons  of contaminated soil from the site. EPA conducted six site assessments,  including an archaeological assessment, and placed the site on the NPL  in 2013."], "subsections": []}, {"section_title": "Site Status in Cleanup Process", "paragraphs": ["The site is in the early stages of the cleanup process. The feasibility study  for the site was completed in September 2018, and EPA issued a cleanup  proposal for comment in October 2018. According to information provided  by EPA, the site has not yet reached any Superfund site-wide milestones  because the remedial action has not begun."], "subsections": []}, {"section_title": "Tribal Interest in the Site", "paragraphs": ["EPA officials stated that both the Mashpee Wampanoag Tribe and  Wampanoag Tribe of Gay Head (Aquinnah) have expressed interest in  the site due to possible adverse impacts on significant cultural resources  in the contaminated area. EPA officials told us they notified both tribes of  the site concurrently with notification to the Massachusetts Historical  Commission in August 2014. In a consultation response form dated  September 2014, the Mashpee Wampanoag Tribe indicated that the  cleanup has the potential to have adverse effects on historical or cultural  resources important to the tribe and requested that the tribe be notified  prior to any archaeological activity on-site, and that they be provided any  archaeological assessment documents."], "subsections": []}, {"section_title": "EPA\u2019s Consultation and Coordination with the Tribes for the Site", "paragraphs": ["The National Historic Preservation Act requires federal agencies to take  into account the effects of their undertakings on historic properties,  including properties to which Indian tribes attach religious and cultural  significance. According to EPA Region 1 officials, they are consulting  with both tribes under the act. EPA sent an archaeological survey to the  tribes in June 2017. Officials from the Mashpee Wampanoag Tribe  indicated that they agree with the survey\u2019s findings and required that  consultation continue. EPA officials told us that the Wampanoag Tribe of  Gay Head (Aquinnah) did not comment on the assessment. Both tribes  have asked EPA to inform them of cleanup status for the site and share  any reports."], "subsections": []}, {"section_title": "Perspectives of Tribal and EPA Officials on Consultation and Coordination for the Site", "paragraphs": ["EPA officials told us they were consulting with both tribes under section  106 of the National Historic Preservation Act. Officials also told us that  EPA will negotiate a memorandum of understanding with both tribes once  the final cleanup is selected, if it is determined that the selected remedy  will have an adverse effect on any resources that are eligible for the  National Register of Historic Places. With regard to coordination, both  tribes noted that resource constraints prevent their further involvement  with the site cleanup process. Officials from the Wampanoag of Gay  Head (Aquinnah) tribe indicated that EPA has been available for  discussions if the tribe raises an issue."], "subsections": []}]}, {"section_title": "Case Study 2: General Motors (Central Foundry Division)\u2014EPA Region 2", "paragraphs": [], "subsections": [{"section_title": "General Information on the Site", "paragraphs": ["The General Motors (Central Foundry Division) site is located on the St.  Lawrence River in Massena, New York, adjacent to the Saint Regis  Mohawk Tribe\u2019s reservation. According to an EPA document, General  Motors operated an aluminum die casting plant on the site beginning in  1959 and used polychlorinated biphenyls (PCB) in the manufacturing  process through 1980. EPA found contamination in soils and industrial  lagoons on the General Motors site property, in groundwater, in the St.  Lawrence and Raquette Rivers, in Turtle Cove, and in soils and sediment  within the Saint Regis Mohawk reservation. After General Motors\u2019  bankruptcy, ownership of the site was transferred to a trust. This General  Motors site was placed on the Superfund NPL in September 1983."], "subsections": []}, {"section_title": "Site Status in Cleanup Process", "paragraphs": ["According to information provided by EPA, the cleanup of the General  Motors site is ongoing, with the last substantial cleanup of the Remedial  Design and Remedial Action phase focused on a 10-million-gallon  industrial lagoon. To date, contractors have dredged sediment in the St.  Lawrence River, Turtle Cove, and Raquette River systems. EPA officials  told us that, in addition to these dredging activities, they have completed  other significant cleanup work, including installation of a groundwater  collection system, installation of a multi-layer cap on the industrial landfill  on-site, and demolition of the 1-million-square-foot factory building, EPA  officials stated that consultation with the tribe led to excavating a portion  of the industrial landfill in order to establish a 150-foot buffer between a  landfill on the site and the tribe\u2019s reservation. EPA declared human  exposure to contaminants at the site under control in 2008. EPA officials  told us there is no requirement to consult with tribes to determine that  site-wide milestones have been reached, and that the Saint Regis  Mohawk Tribe was not consulted regarding the designation of human  exposure under control. Tribal officials do not agree with this  determination and stated that EPA has not asked the tribe for any input  on this measure. EPA officials responded that while EPA did not consult  with the tribe on the human exposure under control environmental  indicator, they coordinated extensively with the tribe with respect to  cleanup status, strategy, and site-wide milestones prior to making the  designation."], "subsections": []}, {"section_title": "Tribal Interest in the Site", "paragraphs": ["Tribal officials noted concern regarding contamination of tribal property  and the effect on subsistence fishing in the St. Lawrence River and tribal  member health. The Saint Regis Mohawk Tribe is concerned that PCB  contamination from the site is airborne and affecting the health of tribal  members. Further, the tribe is concerned that PCB accumulation in fish  tissue results in fish that are unsafe to eat in the quantities typically  consumed by tribal members who rely on subsistence fishing. See figure  3 below for a fish consumption advisory issued by the tribe because of  PCB contamination concerns. Tribal officials also told us the tribe is  concerned that PCBs may be transferred through breast milk, exposing  future generations to the contamination. Tribal officials told us that tribal  members also complain of a strong odor emanating from the site, and  have advocated for the tribe to take a more active role in the site cleanup."], "subsections": []}, {"section_title": "EPA\u2019s Consultation and Coordination with the Tribe for the Site", "paragraphs": ["According to EPA, the agency sent an official consultation letter to the  tribe in 2011, as directed by EPA\u2019s 2011 Policy on Consultation and  Coordination with Indian Tribes. Consultations with the tribe focused on  the tribal role in the cleanup process at the General Motors (Central  Foundry Division) site, as well as the Alcoa Aggregation and Reynolds  Metals sites, which also affect the tribe. EPA officials told us they have  responded to tribal concerns, in part, by agreeing to a stricter treatment  threshold for maximum allowable PCB contamination (10 parts per million  instead of 500 parts per million), based on the tribe\u2019s objection to the  originally-proposed plan. EPA officials also told us that they have  responded to tribal concerns by adopting practices to mitigate air  contamination during response activities, such as minimizing the size of  excavation areas to reduce potential exposure and wetting contaminated  soils before removal. EPA officials told us that coordination with the tribe  began in the 1980s, and that the region coordinates extensively with the  Saint Regis Mohawk Tribe. Additionally, these officials told us that,  through annual meetings with tribes in the region and periodic visits to  individual tribes, they coordinate with all tribes in the region, including the  Saint Regis Mohawk Tribe, at least once a year. In technical comments  provided in response to the draft of this report, EPA officials told us that  the Saint Regis Mohawk Tribe has been treated as a support agency,  equivalent to the state of New York, since 1995, and that the tribe has  been asked to concur on all records of decision for the site as early as  1990, though they have not always concurred."], "subsections": []}, {"section_title": "Perspectives of Tribal and EPA Officials on Consultation and Coordination for the Site", "paragraphs": ["Tribal and EPA officials have differing perspectives on the effectiveness  or utility of consultation. Saint Regis Mohawk Tribe officials noted that  they have met repeatedly with EPA over the years but the consultation  has felt perfunctory and like a \u201cbox checking exercise.\u201d Tribal officials  stated that EPA did not consider their input as seriously as General  Motors\u2019 input, and they believe that EPA is over-reliant on the initial  research conducted by scientists from the company, and has not  sufficiently considered updated and independent research. Saint Regis  Mohawk tribal officials noted that EPA did not recognize tribal members\u2019  stronger reliance on the environment and exposure to contamination. The  tribe also provided us with examples of less formal coordination with EPA,  including a letter from EPA responding to tribal officials\u2019 requests for  additional air monitoring at the site.", "EPA Region 2 officials stated that consultation with the Saint Regis  Mohawk Tribe has become more extensive and sophisticated since the  issuance of the 2011 tribal consultation policy. The region held a  consultation with the tribe in 2011 to address coordination with the tribe  about three Superfund sites. In a summary of that consultation, EPA  noted that they will take steps to further the tribe\u2019s partnership role with  respect to the three sites by providing as much time and opportunity as  feasible for consultation, consistent with the mutual desire to move the  cleanups forward expeditiously; continuing to share, for advance review,  drafts of pertinent documents; consulting with the tribe prior to taking  actions or implementing decisions that may affect the tribe\u2019s interests;  inviting tribal officials to technical meetings where potentially responsible  parties and other trustees are present; and informing the tribe of the  results of meetings or substantive decisions with any potentially  responsible party. Further, EPA officials noted that they cannot fulfill  some requests made by the Saint Regis Mohawk Tribe; however, EPA  officials stated that tribal activism led to a more stringent 10 parts-per- million treatment threshold for PCBs on the site, rather than the originally  proposed 500 parts-per-million standard. EPA also provided  documentation of less-formal coordination with the tribe, including  correspondence regarding approaches to addressing the tribe\u2019s concerns  of PCB air impacts during cleanup."], "subsections": []}]}, {"section_title": "Case Study 3: Petoskey Manufacturing Company (PMC) Groundwater\u2014EPA Region 5 General Information on the Site", "paragraphs": ["According to information provided by EPA, the PMC Groundwater site is  located in a former industrial area on the shores of Lake Michigan\u2019s Little  Traverse Bay in Petoskey, Michigan. PMC was established in 1946 as a  small fabricating and painting business that later produced parts for the  automotive industry until 2000. During this period PMC improperly  disposed of solvents used in plant operations, contaminating groundwater  and Petoskey\u2019s municipal well with volatile organic compounds and  inorganic contaminants."], "subsections": [{"section_title": "Site Status in Cleanup Process", "paragraphs": ["According to EPA officials, the agency has gone through several rounds  of cleanups at PMC Groundwater. EPA initially listed the PMC  Groundwater site on the NPL in 1983. The City of Petoskey completed  construction of a new municipal water source in 1996. EPA began  cleanup in 1999 and declared the site as ready for anticipated use in  2007; the site was subsequently redeveloped with condominiums. In the  site\u2019s 2014 5-year review, EPA noted that the remedies they had put in  place, including excavation and off-site disposal of contaminated soil,  installation and operation of a system to remove volatile organic  compounds from subsurface soil, and a groundwater monitoring plan,  were protective of human health and the environment in the short term,  but that an effective long-term remedy would require additional steps.  According to EPA officials, EPA is conducting a remedial investigation  and feasibility study to determine the nature and extent of soil and  groundwater contamination, which is expected to be completed in 2019.  According to EPA officials, in 2016, EPA fieldwork indicated that  trichloroethene concentrations exceeded acceptable levels under some  condominiums\u2019 slab foundations, and in 2017, EPA conducted an  emergency removal action to address the intrusion of the vapors."], "subsections": []}, {"section_title": "Tribal Interest in the Site", "paragraphs": ["Little Traverse Bay Bands of Odawa Indians officials told us the tribe\u2019s  interest in the site is due to potential exposure of tribal members and the  effects on nearby surface waters. Tribal members rely on subsistence  fishing in the Bear River in close proximity to the site. These officials also  told us the tribe also conducts commercial fishing in Lake Michigan. Tribal  members residing in Petoskey relied on the contaminated municipal well.  Additionally, tribal officials told us that they want to understand the status  of the site because they may be interested in future land acquisitions in  the area and the U.S. Department of the Interior may not be willing to take  contaminated land into trust for the tribe."], "subsections": []}, {"section_title": "EPA\u2019s Consultation and Coordination with the Tribe for the Site", "paragraphs": ["According to tribal officials, the tribe contacted EPA officials in 2017 when  local news reported vapor intrusion issues into condominiums built on the  site. Neither tribal officials nor EPA have found any indication of previous  consultation or coordination for the site. Since the tribe\u2019s initial contact,  EPA officials have shared relevant information and spoken with the tribe  regarding the site. EPA officials told us that representatives from the tribe  attended a public meeting about the site in June 2018 and that EPA is in  close contact with an official from the tribe and will provide him with  reports as appropriate."], "subsections": []}, {"section_title": "Perspectives of Tribal and EPA Officials on Consultation and Coordination for the Site", "paragraphs": ["According to EPA and tribal officials, EPA has not consulted with the tribe  about the site. With respect to coordination, tribal officials told us that they  were satisfied with EPA\u2019s response following the tribe\u2019s initial contact.  EPA officials told us that the tribe is aware that consultation is available if  the tribe desires it, and officials will coordinate with the tribe. EPA officials  stated that the relationship with tribes in the region has evolved  considerably since the 1990s and that coordination with tribes in the  region has improved."], "subsections": []}]}, {"section_title": "Case Study 4: Jackpile-Paguate Uranium Mine\u2014 Region 6 General Information on the Site", "paragraphs": ["According to information provided by EPA, the Jackpile-Paguate Uranium  mine is a 2,656-acre site located on the Pueblo of Laguna, New Mexico,  about 40 miles west of Albuquerque. Anaconda Copper Mining and The  Anaconda Company, predecessors to the Atlantic Richfield Company,  moved more than 400 million tons of rock within the mine between 1952  and 1982 area in addition to 25 million tons of uranium ore off-site for  additional processing. Mining operations contaminated surface water with  hazardous substances. Additionally, according to a report by the U.S.  Department of Health and Human Services, people living in villages near  the site could be exposed to contamination through radioactive materials  from the site being used in home construction, or through contact with  mine contaminants suspended in air or present in dust blown or tracked  from the mine. Reclamation of the mine began in 1990 and was closed  out in June 1995; however, EPA was not involved in the initial reclamation  prior to the site being listed on the NPL. Figure 5 is a photograph of  Gavalon Mesa, one of the major mining areas at the site, and erosion  typical to a previously reclaimed area."], "subsections": [{"section_title": "Site Status in Cleanup Process", "paragraphs": ["EPA listed the site on the NPL in 2013. EPA officials conducted four  assessments at the site. The site is currently in its remedial investigation  and feasibility study stage, and the site has not met any site-wide  milestones."], "subsections": []}, {"section_title": "Tribal Interest in the Site", "paragraphs": ["The site is located within the boundaries of the Pueblo of Laguna\u2019s  reservation. Pueblo of Laguna officials stated that the site impacted the  Pueblo in several ways, including radon contamination in homes due to  use of contaminated mining debris in home construction, contamination of  water sources, and dust from mining operations reaching homes and  gardens."], "subsections": []}, {"section_title": "EPA\u2019s Consultation and Coordination with the Pueblo for the Site", "paragraphs": ["EPA officials stated that neither EPA nor the Pueblo of Laguna have  initiated consultation for the Jackpile-Paguate Uranium Mine under the  2011 consultation policy. EPA consulted with the tribe for the site in 2009,  which resulted in a memorandum of understanding (MOU) to facilitate  coordination in performing removals and site assessments for the site.  According to EPA officials, once the remedial investigation and feasibility  study is complete, they will seek to consult with the tribe before making a  decision about cleanup goals. EPA officials noted that the agency has  consistently coordinated with the tribe, including regular briefings to the  tribe and working closely with the tribe\u2019s Environmental and Natural  Resources Department since EPA became involved at the site. In  addition, the tribe is a support agency for the site\u2014which means EPA  must provide the tribe substantial and meaningful involvement in the  initiation, development, and selection of the remedial action at the site.  The Pueblo has a Superfund support contract with EPA to facilitate its  support agency work helping EPA perform oversight of the response  work, and reviewing and commenting on EPA documents, according to  EPA officials."], "subsections": []}, {"section_title": "Perspectives of Pueblo and EPA Officials on Consultation and Coordination for the Site", "paragraphs": ["Pueblo officials told us that they have been satisfied with the coordination  for the site, and they prefer that coordination be face-to-face when  possible. Officials told us that consultation requires a senior EPA official  to present in person to the Pueblo Council, and all other interactions are  considered coordination. According to the Pueblo, coordination with EPA  has been effective, in part, because EPA acknowledges that site  contamination extends beyond the mine lease boundaries.", "EPA officials told us that they are in frequent communication with the  Pueblo. EPA officials noted that they hold regular briefings with tribal  officials, as well as through routine electronic and phone communication.  EPA officials noted that coordination with the tribe early in the Superfund  cleanup process facilitates their work. For example, since the site is on  tribal property, EPA worked with the Pueblo to gain site access to  investigate the extent of the contamination."], "subsections": []}]}, {"section_title": "Case Study 5: Smurfit-Stone Mill Frenchtown\u2014Region 8", "paragraphs": [], "subsections": [{"section_title": "General Information on the Site", "paragraphs": ["According to information provided by EPA, the Smurfit Stone Mill- Frenchtown site is a 3,200-acre area located northwest of Missoula,  Montana. The site was originally a pulp mill operated from 1957 through  2010. It includes more than 900 acres of unlined ponds that were used to  store wastewater effluent from the mill, as well as sludge recovered from  untreated wastewater. Contamination includes dioxins and furans  produced through bleaching of pulp, as well as PCBs."], "subsections": []}, {"section_title": "Site Status in Cleanup Process", "paragraphs": ["EPA proposed to add the site to the NPL in 2013 and is evaluating public  comments on the proposal before making a final decision. EPA  negotiated an administrative settlement agreement and order on consent  in 2015 with three potentially responsible parties to conduct a remedial  investigation and feasibility study at the site. EPA officials told us that  these parties have completed several site tasks contributing to the  remedial investigation and feasibility study for the site."], "subsections": []}, {"section_title": "Tribal Interest in the Site", "paragraphs": ["Both the Confederated Salish and Kootenai Tribes of the Flathead  Reservation and the Kalispel Indian Community of the Kalispel  Reservation (hereafter Kalispel or Kalispel Indian Community) have  interest in the site. Officials from the Confederated Salish and Kootenai  Tribes of the Flathead Reservation stated that their interest in the site is  drawn from the Hellgate Treaty of 1855. According to these officials, the  site is located on land where the tribes retain treaty hunting, fishing, and  gathering rights in portions of the Clark Fork River that are potentially  contaminated by the site. The two tribes are concerned about adverse  health impacts on tribal members due to exposure through consumption  of fish from near and downstream from the site and ensuring that tribal  cultural and historical resources are protected during cleanup activities.  Officials from the Kalispel Indian Community believe that contaminants  from the site and throughout the watershed have reached its reservation  in Northeast Washington. These contaminants may affect tribal members\u2019  nutrition and exercise of their culture. The tribe would like EPA to sample  for contamination from Smurfit Stone Mill further down the Clark Fork  River to the areas where the Kalispel have interest."], "subsections": []}, {"section_title": "EPA\u2019s Consultation and Coordination with the Tribes for the Site", "paragraphs": ["According to EPA officials, EPA has not consulted with the tribes but has  coordinated with the natural resource trustees, which include the  Confederated Salish and Kootenai Tribes, and told us they have also  coordinated with the Kalispel Indian Community. EPA officials told us that  coordination with the Kalispel Indian Community differs from coordination  with the Confederated Salish and Kootenai Tribes because the Kalispel  do not have treaty rights at the site. Region 8 notified the Confederated  Salish and Kootenai Tribes about the site in 2014, but told us they did not  send corresponding notification to the Kalispel Indian Community  because they had not been identified as having tribal interest during the  preliminary assessment and site investigation. EPA officials told us the  reason they have not yet consulted with the tribes under the 2011 policy  is that the site is still being characterized. According to officials from the  Confederated Salish and Kootenai Tribes, they were first informed of the  site by the Missoula County Water Quality district in 2012. Officials from  this tribe told us that in December 2012, they sent a letter to the state  Governor supporting NPL listing for the site, and also indicated their  support of NPL listing to EPA when responding to a Federal Register  notification indicating EPA\u2019s intent to add the site to the NPL. EPA  officials told us that the agency wants to improve communication with the  tribes by scheduling quarterly calls, site visits, and offering opportunities  to review and comment on documents produced during the remedial  investigation process."], "subsections": []}, {"section_title": "Perspectives of Tribal and EPA Officials on Consultation and Coordination for the Site", "paragraphs": ["Officials from the Confederated Salish and Kootenai Tribes have been  dissatisfied with the extent of coordination with EPA. Specifically, they  told us that EPA has not provided the tribes with sufficient information to  engage in the cleanup process in a meaningful way. For example,  officials stated EPA did not involve them when EPA entered into the  administrative settlement agreement and order on consent to conduct the  remedial investigation and feasibility study. Tribal officials told us that this  experience is inconsistent with other Superfund sites where EPA has  given the tribes greater opportunity for meaningful input.", "EPA officials told us they coordinated with the interested tribes through  communications with the natural resources trustees in the region as a  whole. EPA officials told us that they officially notified the tribes about the  site after the preliminary assessment and site investigation, and that they  typically do not issue a trustee notification letter or invite tribes to consult  until after EPA completes a preliminary assessment. Officials told us that  the Confederated Salish and Kootenai Tribes was notified at the same  point as other natural resource trustees, and that this was sufficiently  early to allow for meaningful input because it occurred prior to any major  decisions.", "According to Kalispel tribal officials, coordination with EPA has been  limited. Kalispel tribal officials told us that they have faced some  difficulties coordinating with EPA about the site because they are located  in EPA Region 10, while the site is managed by EPA Region 8. One tribal  official we spoke with expressed that he felt EPA may be trying to exclude  the Kalispel Indian Community from cleanup decisions at the site. For  example, this official told us that the tribe had requested that EPA Region  8 extend their water sampling area further downstream on the Clark Fork  River to determine the extent of releases from the site, but that EPA  issued its sampling plan without taking the tribe\u2019s concerns into account.  However, these officials told us that they are developing their relationship  with EPA region 8. They also told us that coordination with EPA is  valuable, and that they consider consultation as a tool to be employed  when coordination is insufficient.", "Region 8 officials acknowledged the letter from the natural resource  trustees requesting a stronger role in decision-making and highlighted  improvements EPA has made to communication. Further, officials cited  several actions to demonstrate their commitment to working with the  tribes: evaluating the berms at the site, as the Confederated Salish and  Kootenai Tribes requested; evaluating contamination\u2019s impact on tribal  health through fish consumption patterns; and responding in writing to  natural resource trustee letters. However, EPA considers the role of the  Kalispel Indian Community in the cleanup to be different because that  tribe does not have treaty rights within the site boundaries. EPA officials  stated that they keep the tribe informed of meetings and invite them to  site visits. Figure 6 shows the berms during a high-water event in 2011  and a portion of a berm indicated to be in poor condition by the work plan  for the remedial investigation and feasibility study in 2017."], "subsections": []}]}, {"section_title": "Case Study 6: Midnite Mine\u2014Region 10", "paragraphs": [], "subsections": [{"section_title": "General Information on the Site", "paragraphs": ["The Midnite Mine site is a former open-pit uranium mine located in  eastern Washington state on the Spokane Indian Reservation, near  Wellpinit, Washington. According to information from EPA, Dawn Mining  Company and Newmont USA Limited operated an open-pit uranium mine  intermittently between 1955 and 1981. During mining operations, over 33  million tons of rock was blasted and excavated to access uranium ore.  The waste was dumped in piles, used to fill mine pits, or spread on the  surface. About 2.4 million tons of ore and near ore-grade rocks were also  stockpiled at the mine in anticipation of later processing. The former mine  site includes approximately 350 acres directly affected by mine  operations, as well as affected groundwater, surface water, and sediment.  Hazardous substances released at the site as a result of mining include  numerous metals and radio-nuclides. Key contaminants of concern that  EPA identified in the human health risk assessment for the site include  uranium, radium, lead, and manganese."], "subsections": []}, {"section_title": "Site Status in Cleanup Process", "paragraphs": ["According to EPA, construction of the remedies is currently under way for  the site. EPA listed the site on the NPL in 2000 and performed the  remedial investigation and feasibility study from 1998 through 2006. In  2012, the potentially responsible parties and the United States agreed to  a consent decree that required the potentially responsible parties to  develop a design for and implement the remedial action at the site. No  site-wide milestones have been met."], "subsections": []}, {"section_title": "Tribal Interest in the Site", "paragraphs": ["According to tribal officials, the Spokane Tribe of Indians is interested in  the effect of contamination from the site on subsistence hunting and  fishing, particularly elk and rainbow trout, respectively. Tribal officials  stated that contamination from the mine flows into Blue Creek, which  impacts the tribe\u2019s ability to conduct traditional practices such as sweat  lodges. Tribal officials stated their ultimate goal would be for the site to be  sufficiently clean for wildlife to safely live on the site, for fish to thrive in  water adjacent to the site, and for the tribe to resume its traditional  hunting and gathering activities in the area."], "subsections": []}, {"section_title": "EPA\u2019s Consultation and Coordination with the Tribe for the Site", "paragraphs": ["EPA consulted with the Spokane Tribe of Indians in June 2013 regarding  a potential change to water treatment practices. Tribal officials stated the  tribe is pleased that the new water treatment plant will operate year-round  and will discharge treated water via a pipe into Lake Roosevelt, which is a  larger body of water with less direct impact on the tribe\u2019s natural  resources. In addition, tribal officials stated that EPA invited the tribe to  consult at other times but the tribe did not think it was necessary."], "subsections": []}, {"section_title": "Perspectives of Tribal and EPA Officials on Consultation and Coordination for the Site", "paragraphs": ["Tribal officials told us that their coordination with EPA has resulted in  more consideration of the natural resources and hopefully a fuller  remediation of the site. For example, EPA applied the tribe\u2019s more  stringent water quality standards to discharge from the site, which EPA  supported by providing technical assistance to the tribe during the  development and approval processes. Spokane tribal officials stated that  during the Remedial Investigation and Feasibility Study phase, EPA\u2019s  program manager offered to consult with the tribe at various points, which  the tribe declined because the tribe felt they had sufficient interactions  with EPA. The Superfund cleanup process has been a learning process  for tribal officials but, overall, the tribe is pleased with the result and the  open exchange of information with EPA.", "Speaking generally, EPA officials noted that the 2011 consultation policy  has had a positive effect on the frequency of consultation with tribes in  the region. The policy has led Superfund remedial project managers to  more routinely invite tribes to consult."], "subsections": []}]}]}, {"section_title": "Appendix IV: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Confederated Salish and Kootenai Tribes of the Flathead Reservation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Pueblo of Laguna", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff acknowledgements", "paragraphs": ["In addition to the individual named above, Barbara Patterson (Assistant  Director), Emily Norman (Analyst-in-Charge), Matthew Bond, John  Delicath, Justin Fisher, Andrew Furillo, Jeanette Soares, Ruth Solomon,  Sara Sullivan, and Kiki Theodoropoulos made significant contributions to  this report."], "subsections": []}]}], "fastfact": ["EPA's National Priorities List sites are some of the most contaminated places in the country. They may pose unique challenges for Indian tribes. For example, toxic substances in 2 New York rivers pose a threat to one tribe\u2019s health and its subsistence lifestyle, which includes fishing.", "EPA has a policy to consult with tribes if its efforts to deal with these sites may affect them. In some cases, consultation is a legal mandate. However, we found the databases EPA uses to track sites and tribal consultations are sometimes inaccurate.", "We made 4 recommendations, including that EPA improve its data and clarify its guidance on consultations."]}
{"id": "GAO-19-36", "url": "https://www.gao.gov/products/GAO-19-36", "title": "Federal Budget: Government-Wide Inventory of Accounts with Spending Authority and Permanent Appropriations, Fiscal Years 1995 to 2015", "published_date": "2018-11-29T00:00:00", "released_date": "2018-12-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress can provide budget authority to federal agencies and programs through the annual appropriations process. It can also provide budget authority through laws other than annual appropriations acts, or through permanent appropriations that permit the agency to obligate budget authority without further congressional action. Analysis of these authorities helps provide Congress with visibility into spending authority that is not considered during the annual appropriations process.", "GAO was asked to update its 1996 report that had provided an inventory of accounts with spending authority and permanent appropriations for fiscal years 1985 through 1994. This report discusses (1) federal budget accounts with spending authority and permanent appropriations, including the statutory references for the authorities, changes in the number of accounts and dollar amounts since fiscal year 1994, and other relevant information; and (2) whether the identified accounts are subject to or exempt from sequestration, or subject to any special sequestration rules or limitations. GAO also is providing an online dataset of the inventory of accounts with spending authority and permanent appropriations on GAO's public website at https://www.gao.gov/products/GAO-19-36 .", "GAO analyzed Office of Management and Budget (OMB) budget data to identify accounts with spending authority and permanent appropriations. GAO reviewed data through fiscal year 2015 because that was the most recent data available when GAO began its work. GAO reviewed agency information to confirm data and statutory authority. Agencies also reviewed and verified the final data for their accounts. For the sequestration designation, GAO analyzed OMB data for fiscal years 2013 and 2015--the most recently completed years for which sequestration occurred and OMB identified designations when GAO began its work.", "GAO provided a draft of this report and the online dataset to the Director of OMB for review and comment. OMB staff provided technical comments, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["A total of $3.2 trillion in spending authority and permanent appropriations was reported in fiscal year 2015; an increase of 88 percent from fiscal year 1994 adjusted for inflation in fiscal year 2015 dollars. Fiscal year 1994 was the last year included in GAO's prior work. For the purposes of this report, spending authority and permanent appropriations is budget authority provided to agencies through laws other than annual appropriations acts or available permanently by law without further legislation. These authorities include permanent appropriations, contract authority, borrowing authority, offsetting collections, and monetary credits or bartering. Permanent appropriations were the primary driver of the increase in spending authority and permanent appropriations. Offsetting collections authority--which includes certain fees, fines, and penalties--also grew. Agencies reported no use of monetary credits or bartering.", "a", "Permanent appropriations fund federal entitlement programs, such as Medicare, administered by the Department of Health and Human Services (HHS), and the Social Security Administration's (SSA) Old-Age, Survivors, and Disability Insurance program. These programs are a significant proportion of reported budget authority in GAO's inventory of accounts in fiscal year 2015. These programs continue to show spending increases largely as a result of the aging population and rising health care costs and are projected to continue to increase in the future. In fiscal year 2015, 7 of the 10 accounts reporting the largest dollar amounts of spending authority and permanent appropriations funded entitlement programs.", "Three agencies comprised three quarters of the total government-wide spending authority and permanent appropriations in fiscal year 2015.", "HHS reported the largest amount of spending authority and permanent appropriations with $979 billion, or about 30 percent--mainly from Medicare. HHS overtook SSA and reported the highest dollar amounts of permanent appropriations for the first time in fiscal year 2006.", "SSA reported $920 billion, or about 28 percent of total spending authority and permanent appropriations--mainly from its Old-Age and Survivor's Insurance program and the Disability Insurance program.", "The Department of the Treasury reported the third largest amount--$542 billion, or about 17 percent--the majority of which is for interest on debt held by the public and intragovernmental debt. This interest dropped as a percentage of permanent appropriations since fiscal year 1994, due to lower interest rates that allow the government to borrow money more cheaply. However, interest rates are predicted to rise in the long term, which would increase the net interest costs on the debt.", "The second largest reported budget authority type was offsetting collections--a total of $421 billion in fiscal year 2015, more than double the fiscal year 1994 amount, adjusted for inflation. The Postal Service reported the largest use of offsetting collections authority in fiscal year 2015 in its Postal Service Fund, which includes revenue from mail services.", "Sequestration--cancellation of budgetary resources under a presidential order--is a process established in statute which helps to enforce spending limits and thereby control the deficit. In fiscal year 2015, 57 percent of spending authority and permanent appropriations authorities were exempt from sequestration, up from 37 percent in fiscal year 1994. This means that fewer of these authorities were subject to this budgetary enforcement mechanism in fiscal year 2015."]}], "report": [{"section_title": "Letter", "paragraphs": ["Congress exercises its constitutional power, in part, by appropriating  funds and prescribing the conditions governing their use. Budget authority  refers to the authority provided by federal law to enter into financial  obligations that result in immediate or future outlays involving government  funds. Although Congress can provide budget authority to federal  agencies and programs through the annual appropriations process, it also  can provide budget authority to agencies and programs through laws  other than annual appropriations acts, or through permanent  appropriations that permit the agency to obligate budget authority without  further congressional action. For the purpose of this report, we refer to  the types of budget authority in these cases as spending authority and  permanent appropriations. These include permanent appropriations,  contract authority, borrowing authority, offsetting collections, and  monetary credits or bartering. These types of budget authority provide  some flexibility for agencies because they do not have to await  congressional action to incur obligations and make payments. Although  Congress does not review these authorities annually as part of the annual  appropriations process, they are still subject to congressional oversight at  any point in time. Also, Congress can place limitations on the authorities  in any given year.", "You asked us to update our 1996 report on spending authority and  permanent appropriations to help provide Congress with visibility into  spending authorities that are not considered in the annual appropriations  process. For the 1996 report, we examined federal budget accounts\u2014 that is, accounts used to record resources for obligation and outlay. This  report discusses (1) federal budget accounts with spending authority and  permanent appropriations, including the statutory references for the  authorities, changes in the number of accounts and dollar amounts since  fiscal year 1994, and other relevant information; and (2) whether the  identified accounts are subject to or exempt from sequestration, or  subject to any special sequestration rules or limitations. In addition to this  report, we are providing an online dataset of our inventory (list) of  accounts with spending authority and permanent appropriations, which  can be accessed on our public website at  https://www.gao.gov/products/GAO-19-36.", "For our first objective, we analyzed budget data from fiscal years 1995  through 2015. We selected these years to cover the period from our prior  work, which had analyzed budget data through fiscal year 1994, through  the most recent year for which data were available when we began our  work, which was fiscal year 2015. To identify and analyze budget  accounts that used spending authority and permanent appropriations  during this time frame, we used the Office of Management and Budget\u2019s  (OMB) MAX A-11 Data Entry system (MAX). We used the Program and  Financing Schedule\u2019s Budgetary Resources line number descriptions in  OMB Circular A-11\u2014OMB\u2019s guidance to agencies for preparing and  submitting budget information\u2014to select line numbers in MAX that align  with our definition of spending authority and permanent appropriations.  We worked with OMB staff to ensure that the line numbers used were  correct. We used our 1996 report as our initial source of data on  monetary credits or bartering. Using these line numbers, we pulled the  data by account and asked agencies to confirm the data and to confirm or  provide statutory references for each account. We reviewed the  information and, as needed, discussed the accounts with the agencies. In  some cases, we compared the fiscal year 2015 data to the fiscal year  1994 data from our prior report in discussing changes over time.", "To determine whether the identified accounts are subject to or exempt  from sequestration, or subject to any special rules or limitations, we used  datasets provided by OMB to identify the sequestration designation for  accounts in our final inventory. The data were from fiscal years 2013 and  2015, since 2013 was the most recent year for which sequestration  occurred for discretionary spending and fiscal year 2015 matches the end  year of our inventory data. We compared the designations with those in  our 1996 report for fiscal year 1994. We then provided those data to  agencies for their review. Based on reviews of the databases and  discussions with OMB staff, we determined the MAX and OMB  sequestration data were sufficiently reliable for the purposes of our report.  For more information on our objectives, scope, and methodology, see  appendix I. See appendix II for a detailed explanation of the types of  budget authority included in our definition, and those authority types that  do not meet our definition and therefore are excluded.", "We conducted this performance audit from March 2016 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Spending Authority and Permanent Appropriations", "paragraphs": ["\u201cBackdoor Authority\u201d or \u201cBackdoor  Spending\u201d  These are similar but not identical terms for  spending authority and permanent  appropriations. Backdoor authority and  backdoor spending are colloquial phrases for  budget authority that Congress has provided  in laws other than appropriations acts. This  includes contract authority and borrowing  authority, as well as entitlement authority.  Entitlement authority is a type of permanent  appropriation. It refers to the authority to make  payments for which budget authority is not  provided in advance by appropriation acts to  any person or government if, under the  provisions of law containing such authority,  the U.S. government is legally required to  make such payments. The terms backdoor  authority and backdoor spending refer to the  process by which federal money \u201cgoes out the  door.\u201d Annual appropriations are said to go  out the \u201cfront door\u201d as the annual  appropriations cycle provides a regularly- scheduled forum where Congress may  exercise oversight over spending. Other  appropriations are said to go out the \u201cback  door\u201d as they do not go through the annual  appropriations process.", "For the purposes of this report, our definition of spending authority and  permanent appropriations includes the five types of budget authority  described in figure 1. We are defining spending authority as budget   authority made available through laws other than annual appropriation  acts. Also, we are defining a permanent appropriation as budget authority  to incur obligations and make payments that is available permanently by  law without further legislative action. A permanent appropriation may  have been made available through an annual appropriations act or  through laws other than the annual appropriations acts. We are including  both in our inventory based on the intent of the request for developing our  inventory.", "For some accounts, Congress provides spending authority and  permanent appropriations to allow agencies the flexibility to spend fee  revenue without further legislative action. Specifically, Congress has  authorized some agencies to establish working capital funds\u2014a type of  intragovernmental revolving fund\u2014in which an agency may deposit fees  from federal, and sometimes nonfederal, customers for performing  administrative services, or the sale of government products, within their  statutory authority. For example, in addition to appropriations and  reimbursements from federal agencies, the Department of Energy (DOE)  has a working capital fund with the authority to collect funds. Those  collections are then made available for DOE expenses necessary for the  maintenance and operation of common administrative services for  economy and efficiency, such as office space and communication  services. This and other working capital funds operate as a self- supporting entity conducting business-like activities for the agency.", "Spending authority and permanent appropriations may be subject to  further restrictions from Congress. For example, in one or more annual  appropriations acts, Congress could restrict the use of some or all of the  budget authority, thereby using the annual appropriations process to  control the use of spending authority and permanent appropriations. For  example, the U.S. Department of Agriculture (USDA) has a permanent  appropriation which states that 10 percent of all receipts from the use and  occupancy of national forest system lands during each fiscal year are  available for maintaining roads and trails within the national forests. In  past annual appropriations acts, Congress has limited that permanent  appropriation by transferring all funds made available for that fiscal year  to the General Fund of the Treasury. Those funds are then unavailable for  obligation unless appropriated once again."], "subsections": []}, {"section_title": "Trends in Federal Spending", "paragraphs": ["In fiscal year 2017, the federal government\u2019s total outlays were almost $4  trillion of which about $2.5 trillion was in outlays for mandatory spending.  Mandatory spending, also known as direct spending, refers to budget  authority provided in laws other than appropriations acts and the outlays  that result from such budget authority. Medicare is an example of a  program that is funded by mandatory spending. Discretionary spending,  on the other hand, refers to budget authority that is provided in and  controlled by appropriations acts. During the annual appropriations  process, Congress may choose to appropriate the amount in the  President\u2019s budget request, increase or decrease those levels, eliminate  proposals, or add other programs. For example, most defense and  education programs are funded with discretionary spending. As shown in  figure 2, mandatory spending as a share of all federal spending grew from  about 51 percent in fiscal year 1997 to about 63 percent in fiscal year  2017. Another form of federal spending is net interest, which is primarily  interest paid on debt held by the public.", "While the majority of the accounts in our inventory have mandatory  budget authority, not all mandatory spending fits our definition of  spending authority and permanent appropriations. For example, while  annually appropriated entitlement programs\u2014such as the Supplemental  Nutrition Assistance Program\u2014are provided for in annual appropriations  acts, they are treated as mandatory spending because the authorizing  legislation entitles beneficiaries to receive payment or otherwise obligates  the government to make a payment. As annually appropriated  entitlements are subject to the annual appropriations process, they did  not meet our definition of spending authority and permanent  appropriations. Conversely, not all spending authority and permanent  appropriations are mandatory spending. For example, our inventory  includes permanent appropriations made available in annual  appropriations acts.", "The increase in mandatory spending, and corresponding increase in  spending authority and permanent appropriations, has long-term  implications for the nation\u2019s fiscal outlook overall, including the growing  federal debt. The growth in mandatory spending drove federal spending  that outpaced revenue growth in fiscal year 2017 and, absent policy  change, is projected to continue to do so in the future given the aging  population and rising health care costs and their relation to large federal  budget accounts funding programs, such as Social Security and  Medicare."], "subsections": []}, {"section_title": "Spending Limits and Sequestration", "paragraphs": ["Sequestration\u2014cancellation of budgetary resources under a presidential  order\u2014was first established in the Balanced Budget and Emergency  Deficit Control Act of 1985 (BBEDCA) to control the deficit. BBEDCA, as  amended, requires OMB to calculate the reduction to budgetary  resources required each year to reduce the deficit by at least an  additional $1.2 trillion, over a 10 year period. A percentage reduction, or  sequestration rate (calculated by OMB), is applied to nonexempt (subject  to sequestration) accounts to achieve the total reduction amount required  for the fiscal year. The sequestration rate varies from year to year based  on a formula outlined in BBEDCA. The annual reduction amount OMB  calculates is split evenly between the defense and nondefense  functions. The calculated amount is then allocated between  discretionary appropriations and mandatory spending in each function in  proportion to the share of total spending within the function.", "Prior to BBEDCA, the Congressional Budget and Impoundment Control  Act of 1974 (CBA) attempted to limit the creation of new contract authority  and authority to borrow. In 1990, Congress further sought to limit  spending authority by establishing controls over discretionary spending  and a system of controls over legislative changes in mandatory spending.  The Budget Enforcement Act of 1990 (BEA) amended both CBA and  BBEDCA. In addition to establishing dollar limits for total annual  appropriations, BEA contained a \u201cpay-as-you-go\u201d provision requiring that  any legislation that reduced taxes or expanded mandatory spending  programs be offset by mandatory spending cuts or revenue increases.  This provision was to be enforced through sequestration of nonexempt  mandatory spending programs at the end of the congressional session.  Both the discretionary limit and \u201cpay-as-you-go\u201d rules were extended  through fiscal year 2002 and were not subsequently reauthorized. In  2010, the Statutory Pay-As-You-Go Act of 2010 reinstated a version of  the \u201cpay-as-you-go\u201d requirement. The act provided that if the net effect of  mandatory spending and revenue legislation enacted in a year increases  the deficit, then a sequestration of nonexempt mandatory spending will  occur to eliminate the increase.", "The Budget Control Act of 2011 (BCA) further amended BBEDCA and  revived sequestration as a budgetary enforcement mechanism to reduce  the deficit. BCA established the Joint Select Committee on Deficit  Reduction (Joint Committee). The Joint Committee was tasked with  proposing legislation to reduce the deficit. Such legislation was not  proposed or enacted, which triggered the sequestration process provided  in section 251A of BBEDCA, known as the Joint Committee  sequestration. BBEDCA currently requires a sequestration of mandatory  spending in each year through fiscal year 2027 and a reduction of  discretionary spending limits in fiscal years 2020 and 2021. A  sequestration of discretionary spending could still occur in any year  through fiscal year 2021 if Congress and the President enact  appropriations that exceed discretionary spending limits established by  BBEDCA. As of September 2018, the President has ordered the  sequestration of mandatory spending in each year since fiscal year 2013,  and the sequestration of discretionary appropriations in fiscal year 2013."], "subsections": []}]}, {"section_title": "Reported Use of Spending Authority and Permanent Appropriations Has Increased Government-Wide, and Agencies Using the Authorities Have Changed Reported Budget Authority Amount Was Higher for Three of the Five Authority Types in Fiscal Year 2015, as Compared to Fiscal Year 1994", "paragraphs": ["The amount of spending authority and permanent appropriations reported  government-wide grew 88 percent, from fiscal years 1994 through 2015  adjusted for inflation. Specifically, in fiscal year 2015, approximately $3.2  trillion was reported, compared with approximately $1.2 trillion in fiscal  year 1994 ($1.7 trillion in fiscal year 2015 dollars, see figure 3).", "Although the total reported amount of spending authority and permanent  appropriations increased over time, the changes for each authority type  varied when comparing fiscal years 1994 to 2015 (see figure 4). Reported  budget authority grew for three of the five authority types\u2014permanent  appropriations, offsetting collections, and contract authority\u2014in fiscal year  2015, as compared to fiscal year 1994. For example, about $2.6 trillion  permanent appropriations were reported in fiscal year 2015, up from  approximately $982.5 billion in fiscal year 1994 ($1.5 trillion adjusted for  inflation to 2015 dollars). Generally, the reported amount of permanent  appropriations increased gradually, with the biggest growth occurring in  fiscal year 2008. Borrowing authority decreased, and agencies reported  no use of monetary credits or bartering at any time during fiscal years  1995 through 2015.", "Table 1 provides comparisons between reported budget authority in fiscal  years 1994 and 2015 for all authority types.", "The amount of budget authority is not necessarily indicative of the  prevalence of spending authority and permanent appropriations since the  amount of budget authority in different accounts can vary by billions of  dollars. From fiscal years 1995 through 2015, agencies had 1,089  authorities in 902 budget accounts. We previously reported on the use  of 670 authorities in 540 budget accounts in fiscal year 1994. In  comparing fiscal years 1994 to 2015, we found that the number of  accounts with permanent appropriations and offsetting collections increased while contract and borrowing authority decreased. Figure 5  summarizes the number of accounts with each type of authority over the  years.", "The overall growth in spending authority and permanent appropriations is  driven primarily by permanent appropriations growth. Entitlement  programs, such as Medicare and the Social Security Administration\u2019s  (SSA) Old-Age and Survivors Insurance and Disability Insurance  programs, are funded through permanent appropriations, and are a  significant proportion of budget authority in our inventory, as discussed  below. Since many spending authorities and permanent appropriations  provide agencies budget authority based on program use and eligibility,  demographic and program demand changes can affect the amount of  budget authority. For example, since the Old-Age and Survivors  Insurance and Disability Insurance programs administer benefits based  on eligibility requirements and statutory formulas, the amount of budget  authority used for the programs increases as more people become  entitled. Higher income levels result in higher average benefit amounts  and cost of living adjustments increase monthly benefit amounts for  current beneficiaries.", "Other factors affected the growth in the use of spending authority and  permanent appropriations to a lesser extent.", "Enactment of new authorities. From 1995 to 2015, 329 new  authorities for spending authority and permanent appropriations were  enacted. For example, the Housing and Economic Recovery Act of  2008 granted the Department of the Treasury (Treasury) the authority  to purchase any obligations and other securities issued by  government-sponsored enterprises, such as Fannie Mae. According  to the act, Treasury was authorized to use this authority until  December 31, 2009, with certain actions permitted after that date.  This authority resulted in $200 billion in permanent appropriations  reported in both fiscal years 2008 and 2009, and another $46 billion in  fiscal year 2013.", "Amendment of existing authorities. Some existing authorities were  amended to allow for increased use\u2014permanently or temporarily.  Some authorities have amounts specified by statute\u2014such as  maximum amounts the agency can use or set amounts that the  agency can charge users. For these authorities, increases in the use  of an authority may be attributed to enacted increases in the specified  amounts. For example, the National Flood Insurance Fund reported  an increase of $878 million in offsetting collections in 2012 after  legislation increased the annual limitation on premium increases for  certain insurance premiums.", "Increased use of spending authority and permanent  appropriations, at agency\u2019s discretion. Other authorities did not  experience statutory changes, but agencies increased the use of the  authorities at their discretion to meet program needs. When no  maximum amount is specified as a limit on the agency\u2019s authority,  variation in use is due to agency discretion in response to  circumstances. For example, the Federal Deposit Insurance  Corporation\u2019s (FDIC) Deposit Insurance Fund account began  reporting increased offsetting collections for amounts assessed  against depository institutions insured by FDIC, in fiscal years 2009  and 2010. The reported collections increased to highs of $26.5  billion in fiscal year 2009 and $57.3 billion in fiscal year 2010, after  reported budget authority levels of $2.2 billion in fiscal year 2006.  According to an agency official and as stated in the FDIC\u2019s 2009  Annual Report, this increase primarily resulted from its adoption of the  Deposit Insurance Fund Restoration Plan and the prepayment of  future risk-based deposit insurance assessments by depository  institutions to provide FDIC with the necessary liquidity to resolve  failed depository institutions during the financial crisis. A FDIC official  stated that the Deposit Insurance Fund Restoration Plan addressed  the need to return the Deposit Insurance Fund to its mandated  minimum reserve ratio of 1.15 percent of estimated insured  deposits.", "Events other than legislative or agency actions. Programs may  experience increased fee revenue, penalty payment, or use of the  authority for circumstances that do not involve legislative or agency  action. For example, the United States Coast Guard\u2019s Maritime Oil  Spill Programs account reported $743 million in permanent  appropriations in fiscal year 2010 after receiving transfers from the Oil  Spill Liability Trust Fund to assist with cleanup after the 2010  Deepwater Horizon oil spill. Amounts from the Oil Spill Liability Trust  Fund are available to fund federal response activities in the event of  an oil spill or imminent threat of an oil spill on navigable waters of the  United States. In the case of the 2010 Deepwater Horizon oil spill, the  Coast Guard was authorized to obtain one or more advances from the  Oil Spill Liability Trust Fund, as needed to address costs associated  with federal activities in response to the oil spill, with up to a maximum  of $100 million for each advance.", "As a result of the growth of spending authority and permanent  appropriations from fiscal years 1994 through 2015, more budget  authority is available to agencies that does not require them to await  congressional action to incur obligations. For example, USDA has the  authority to use its portion of the fee for Agricultural Quarantine Inspection  without congressional action."], "subsections": [{"section_title": "Agencies Reporting the Largest Amount of Spending Authority and Permanent Appropriations in Fiscal Year 2015 Have Changed, as Compared to Fiscal Year 1994", "paragraphs": ["The majority of spending authority and permanent appropriations reported  in fiscal year 2015 was concentrated in large agencies and budget  accounts that fund entitlement programs such as Social Security and  Medicare. The Department of Health and Human Services (HHS)  reported the highest use of spending authority and permanent  appropriations. HHS also had the most accounts in the list of top 10  accounts in fiscal year 2015. This is a change since fiscal year 1994  when SSA reported using the most spending authority and permanent  appropriations. Together, in fiscal year 2015, the top three agencies\u2014 HHS, SSA, and Treasury\u2014comprised three quarters of the total  government-wide spending authority and permanent appropriations (see  figure 6).", "HHS reported the largest amount of spending authority and permanent  appropriations in fiscal year 2015 with about $979 billion, or about 30  percent. (See appendix III for a list of budget authority use by agency for  fiscal year 2015.) HHS\u2019s largest three accounts in our inventory all fund  Medicare. SSA, which oversees the Old-Age and Survivors Insurance  program, the Disability Insurance and Supplemental Security Income  programs, as well as the Special Benefits for Certain World War II  Veterans program, reported about $920 billion or about 28 percent of total  spending authority and permanent appropriations. Programs  administered by HHS and SSA continue to show spending increases  largely as a result of the aging of the population and increasing health  care costs. Treasury reported the third highest amount of spending  authority and permanent appropriations, about $542 billion, the majority of  which is for interest on debt held by the public and intragovernmental  debt.", "These agency usage patterns are echoed when analyzing spending  authority and permanent appropriations by account. The 10 largest  accounts represented about 72 percent of spending authority and  permanent appropriations in fiscal year 2015, as shown in table 2. All of  these are permanent appropriations, except for the Postal Service\u2019s  Postal Service Fund account which is an offsetting collection that includes  revenue for mail services. Seven of the 10 accounts fund entitlement  programs.", "Similar to the fiscal year 2015 data for all spending authority and  permanent appropriations, HHS, SSA, and Treasury reported the greatest  use of permanent appropriations in fiscal years 2015, 2005, and 1994   (see figure 7). HHS reported the highest dollar amount of permanent  appropriations for the first time in fiscal year 2006, likely due to rising  health care costs.", "Permanent Appropriations  Budget authority to incur obligations and  make payments that is available permanently  by law without further legislative action.", "Contract authority is concentrated, with only five agencies having this  authority from fiscal years 1995 through 2015. Four of these agencies  used the authority, while one agency\u2014the Judicial Branch; Courts of   Appeals, District Courts, and Other Judicial Services\u2014has the authority,  but did not use it. The Department of Defense (DOD) and the Department  of Transportation (DOT) were the two agencies that reported the largest  percentages of dollar amounts of contract authority in fiscal years 1994  and 2015, as well as 2005 (see figure 8). This figure shows three of the  four agencies that reported contract authority in our timeframe. One other  agency, the Department of Housing and Urban Development, used  contract authority in fiscal year 2007.", "Contract Authority  Authority to incur obligations in advance of  appropriations, including collections sufficient  to liquidate the obligation or receipts. It is  unfunded, and a subsequent appropriation or  offsetting collection is needed to liquidate the  obligations.", "From fiscal years 1994 through 2015, 15 agencies reported the use of  borrowing authority of varying amounts and an additional two agencies  had unused borrowing authority. Since 1995, seven accounts reported   receiving new borrowing authority across five different agencies including   the Department of Commerce and DOT. USDA reported the largest  dollar amount of borrowing authority in most years, including fiscal years  1994, 2005, and 2015, which represented 73 percent, 82 percent, and 60  percent of each fiscal years\u2019 total borrowing authority, respectively (see  figure 9).", "USDA\u2019s large share of the total borrowing authority, and most of the  overall variability in our borrowing authority data throughout our  timeframe, is for the Commodity Credit Corporation Fund. The fund  reported about $7.8 billion or 60 percent of government-wide borrowing  authority in fiscal year 2015. The Commodity Credit Corporation has  authority to borrow funds to carry out its programs, which include  providing income and price support to agricultural producers, payments  for conservation practices on farms, assistance in the development of  international agricultural markets, and international feeding programs.  Some of the primary drivers of its borrowing authority variability are  legislation, changes in commodity yields and price, weather disasters,  and market conditions, according to a USDA official.", "The Railroad Retirement Board (RRB)\u2014which administers a retirement  benefit program similar to Social Security for railroad workers and their  families\u2014began reporting borrowing authority in fiscal year 1996 and  reported the second largest borrowing authority amount in fiscal year  2015. The Railroad Social Security Equivalent Benefit account reported  between about $3 billion and $4 billion per year through 2015. The  Tennessee Valley Authority reported borrowing authority periodically  during our time frame, reporting a high of $3.1 billion in fiscal year 2003.  For more information on the top five accounts for the use of borrowing  authority, see appendix IV. The text box below provides additional  information on the Tennessee Valley Authority account and a Department  of Commerce account.", "Examples of Different Accounts with and Uses of Borrowing Authority  Tennessee Valley Authority, Tennessee Valley Authority Fund. The Tennessee  Valley Authority is a corporate agency that provides electricity for business  customers and local power companies in parts of seven southeastern states. The  agency is authorized to issue and sell up to $30 billion of bonds, notes, and other  debt instruments at any one time to assist in financing its power program. The  proceeds from these bonds are authorized for the construction, acquisition,  enlargement, improvement, or replacement of electrical power facilities and other  purposes authorized by the Tennessee Valley Authority Act of 1933.  Department of Commerce, Public Safety Trust Fund. The Middle Class Tax Relief  and Job Creation Act of 2012 (the Act) created the First Responder Network  Authority (FirstNet), an independent authority within the Department of  Commerce\u2019s National Telecommunications and Information Administration (NTIA)  and required it to establish a nationwide, interoperable public-safety broadband  network. In order to provide initial funding for FirstNet, NTIA was authorized to  borrow up to $2 billion from the Treasury to implement the program. The Act  required NTIA to reimburse Treasury, without interest, from funds deposited into  the Public Safety Trust Fund.47 U.S.C. \u00a7 1427.", "A couple of accounts had temporary spikes in the use of borrowing  authority from fiscal years 1994 through 2015. Specifically, the  Department of Labor\u2019s Unemployment Trust Fund had several years of  increased use of borrowing authority, with a high of $26.2 billion in fiscal  year 2010. As we have reported, the recession that occurred during 2007  through 2009 sharply increased the number and duration of claims for  unemployment benefits. The National Credit Union Administration\u2019s  Central Liquidity Facility, which was created to improve the general financial stability of credit unions by serving as a liquidity lender to credit  unions experiencing unusual or unexpected liquidity shortfalls, reported  borrowing authority for the first time in our inventory in the amount of  $19.4 billion in fiscal year 2009. The Central Liquidity Facility is  authorized by statute to borrow, from any source, an amount not to  exceed 12 times its subscribed capital stock and surplus."], "subsections": [{"section_title": "Offsetting Collections Authority is Widespread among Agencies", "paragraphs": ["The majority of agencies had offsetting collections authority. Offsetting  collections authority generally authorizes agencies to collect fines, charge  fees, or charge for permits among other uses. These functions have a  number of applications across the government. Since fiscal year 1995,   129 accounts received new offsetting collections authority. We did not  rank the top agencies that used offsetting collections because we, and  the agencies when asked, were unable to reliably subtract collections  from federal sources or refunds of prior paid obligations. The text box  below provides examples of accounts with offsetting collections authority.", "Examples of Different Accounts with and Uses of Offsetting Collections  Department of Transportation (DOT), Motor Carrier Safety Operations and  Programs. The Unified Carrier Registration Act of 2005 tasked DOT with  establishing and implementing the Unified Carrier Registration System to serve as  a repository of information on, and identification of, all foreign and domestic motor  carriers, motor private carriers, brokers, freight forwarders, and others required to  register with DOT. DOT is authorized to collect fees associated with the system,  including registration and filing fees, and may use collected funds for these  activities without further appropriation.  Environmental Protection Agency, Damage Assessment and Restoration Revolving  Fund. Under the Oil Pollution Act, responsible parties for a vessel or a facility from  which oil is discharged are liable for, among other things, damages for injury to,  destruction of, loss of, or loss of use of, natural resources. The Oil Pollution Act  authorizes certain departments and agencies, such as the Department of the  Interior, designated by executive order as a \u201ctrustee for natural resource damages\u201d  to recover such damages, and retain and use the funds without further  appropriation to reimburse or pay costs incurred by the trustee with respect to the  damaged natural resources. For the limited purpose of the Deepwater Horizon Oil  Spill, the Environmental Protection Agency was also designated a trustee. The premiums are  placed into a revolving fund, which is available without further appropriation, to pay  claims.  Department of Defense (DOD), Working Capital Fund, Defense Wide. DOD\u2019s  working capital fund is used to charge for goods and services provided to the  military services and other customers. In addition to any funds appropriated to the  working capital fund, the working capital fund may also collect funds from providing  services or procuring supplies, or through the sale and disposal of DOD property.  Funds are available without further appropriation.  33 U.S.C. \u00a7 2706(f); see also, 33 U.S.C. \u00a7 2702; 40 C.F.R. \u00a7 300.600."], "subsections": []}, {"section_title": "Six Agencies with Authority for Monetary Credits or Bartering Did Not Report Using It", "paragraphs": ["Six agencies have the authority to use monetary credits or bartering, but  none of these agencies reported using this authority from fiscal years  1995 through 2015. These are the same agencies that we reported in  1996\u2014the Departments of the Interior and State, DOE, DOD, USDA, and   the Tennessee Valley Authority. OMB staff said that monetary credits are  used infrequently government-wide, and that agencies are not required to  record this type of authority separately in the budget. When we asked, no  other agencies reported having monetary credits or bartering authority.  The text box below provides examples of accounts that are authorized to  use monetary credits or bartering.", "Monetary Credits or Bartering  Monetary credits or bartering are used by  agencies having the authority to make  purchases by giving the seller credits or  something other than money in dollar  amounts reflecting the purchase price. The  holder of credits may apply them later to  reduce an amount owed to the government in  other transactions.", "Examples of Different Accounts with Monetary Credits or Bartering  Authority  Department of State, Embassy Security, Construction, and Maintenance. The  Department of State is authorized to exchange property or property interest for the  use of diplomatic and consular establishments in foreign countries or in the United  States. The Department of State is authorized to receive payment in any form, or  in kind, to cover damage to or destruction of diplomatic or consular property  abroad.  Department of Defense (DOD), Operations and Maintenance, Army National  Guard. DOD is authorized to acquire logistic support, supplies and services for the  armed forces deployed outside the United States from specified governments and  international organizations. Supplies or services of equal value may be  exchanged to facilitate these transactions.  10 U.S.C. \u00a7 2344; see also 10 U.S.C. \u00a7 2341."], "subsections": []}]}]}, {"section_title": "The Percentage of Spending Authority and Permanent Appropriations Authorities Subject to Sequestration in Fiscal Year 2015 Decreased Compared to Fiscal Year 1994", "paragraphs": ["The majority of spending authority and permanent appropriations  authorities were exempt from sequestration in fiscal year 2015. This is a  reversal from fiscal year 1994, when the majority of spending authority  and permanent appropriations authorities were subject to sequestration.  Congress first established exemptions to sequestration in the 1980s when  BBEDCA was enacted and has amended them since then.", "To determine the requisite percentage reduction to nonexempt budgetary  resources pursuant to BBEDCA, OMB must define the sequestrable  base, which is the total of nonexempt budgetary resources within each  function. BBEDCA directs OMB to calculate a sequestration consistent  with special rules and exemptions described by law. OMB provides  guidance to agencies for implementing sequestration, and is also required  under BBEDCA to report to Congress its calculations and other estimates  at various stages. We worked with OMB to classify by OMB\u2019s  sequestration designation the agencies\u2019 spending authority and  permanent appropriations authorities that were in our inventory, as shown  in table 3. Each authority in our inventory is assigned a designation,  which defines how the authority is treated when sequestration is in effect.", "As shown in table 4, in fiscal year 2015, 57 percent of spending authority  and permanent appropriations authorities were exempt from  sequestration, and therefore were not subject to this budgetary  enforcement mechanism for helping to control the deficit. This is a 20  percentage point increase since fiscal year 1994. Correspondingly, the  proportion of spending authority and permanent appropriations authorities  that were subject to sequestration decreased 35 percentage points from  fiscal year 1994 to fiscal year 2015. The proportion of authorities that was  partially subject to sequestration increased from 4 percent in fiscal year  1994 to 11 percent in 2015. Designations were not available for 11  percent of the authorities in our inventory, due to methodological  differences with OMB data explained in appendix I. None of the  authorities in our inventory were classified as optionally sequestrable and  two were classified as sequestrable/906.", "The sequestration procedures established under BBEDCA were designed  to serve as a budget enforcement mechanism and thereby reduce the  federal budget deficit. Under current law, sequestration applies to  mandatory spending through fiscal year 2027. Our finding that the  majority of the agencies\u2019 spending authority and permanent  appropriations authorities in our inventory are exempt from sequestration  is consistent with our prior work on mandatory sequestration. In 2016, we  reported that the majority of mandatory spending authority was exempt  from sequestration. Since spending authority and permanent  appropriations permit agencies to obligate budget authority without further  congressional action, when these authorities are exempt from  sequestration, agencies can continue to use these authorities without  reductions when sequestration is in effect."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report and the online dataset to the Director of  OMB for review and comment. OMB staff provided technical comments,  which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to interested congressional  committees, the Director of the Office of Management and Budget, the  secretaries and agency heads of the departments and agencies in our  review, and other interested parties. In addition, the report is available at  no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Tranchau (Kris) T. Nguyen at (202) 512-6806 or nguyentt@gao.gov, or  Julia C. Matta at (202) 512-4023 or mattaj@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) identify and analyze federal budget accounts  with spending authority and permanent appropriations, including the  statutory references for the authorities, changes in the number of  accounts and dollar amounts since fiscal year 1994, and other relevant  information; and (2) describe whether the identified accounts are subject  to or exempt from sequestration or subject to any special sequestration  rules or limitations.", "This report is an update to our previous report that covered spending  authority and permanent appropriations using financial data from fiscal  years 1985 through 1994. For this report, we analyzed data from fiscal  years 1995 through 2015, the most recent year for which data were  available when we began our work. We are also providing an online  dataset of our inventory of accounts with spending authority and  permanent appropriations on our public website at  https://www.gao.gov/products/GAO-19-36.", "For the purposes of this report, we are defining spending authority as  budget authority made available through laws other than annual  appropriations acts. We are defining a permanent appropriation as budget  authority to incur obligations and make payments that is available  permanently by law without further legislative action. A permanent  appropriation may have been made available through an annual  appropriations act or through laws other than the annual appropriations  acts. A similar but not identical term for spending authority and permanent  appropriations is \u201cbackdoor authority\u201d\u2014a colloquial phrase for budget  authority that Congress provided in laws other than annual appropriations  acts. This includes contract authority and borrowing authority, as well as  entitlement authority and the outlays that result from that budget  authority. The term \u201cspending authority and permanent appropriations\u201d  indicates the authority to make obligations and expenditures without  further action from Congress. For purposes of this report, spending  authority and permanent appropriations include five types of budget  authority: contract authority, authority to borrow, monetary credits or  bartering, permanent appropriations, and offsetting collections. For more  detail on the definitions and the inclusions and exclusions for our  inventory of accounts and our reasoning, see appendix II."], "subsections": [{"section_title": "Data Sources", "paragraphs": ["To identify and analyze accounts that used spending authority and  permanent appropriations during this time frame, we used the Office of  Management and Budget\u2019s (OMB) MAX A-11 Data Entry system (MAX).  MAX is a computer system used to collect and process most of the  information required for preparing the President\u2019s budget for the federal  government. Agencies develop their budget information and enter the  data into MAX. The data undergo rigorous review by OMB. MAX contains  numerous edit checks to help ensure data consistency. Thus, we found  the data to be sufficiently reliable for our purposes of identifying our initial  inventory of accounts.", "We used the Program and Financing Schedule\u2019s Budgetary Resources  line number descriptions in OMB Circular A-11\u2014OMB\u2019s guidance to  agencies for preparing and submitting budget information\u2014to select line  numbers in MAX that align with our definition of spending authority and  permanent appropriations.", "We reviewed each line number\u2019s description to confirm it met the  definition of spending authority and permanent appropriations. We also  confirmed with OMB staff our understanding of changes to the line  numbers over the years, as well as our approach to implementing  exclusions. MAX does not have specific line numbers for monetary credits  or bartering\u2014agencies report use of monetary credits as cash  equivalents in the budget. This is a broader category than just monetary  credits. OMB staff said that agencies are not required to report monetary  credits elsewhere. Therefore, we are unable to identify agencies\u2019 use of  monetary credits in MAX data.", "The table below summarizes the line numbers we analyzed while building  our inventory of accounts by authority type. To avoid double counting, we  did not include lines that represent totals. For example, line 6300 was not  in our scope for fiscal years 1995 through 1998 because it represented  total appropriations. However, line 6300 is in our scope for years when it  represented reappropriations, which is a form of permanent  appropriations that would be included in our scope.", "For offsetting collections, we included line numbers labeled in MAX as  discretionary or mandatory. Although discretionary spending generally  refers to outlays from budget authority that is provided in and controlled  by appropriations acts\u2014which would not be spending authority and  permanent appropriations\u2014OMB staff said this distinction does not  always apply in MAX data. This is partly because, prior to fiscal year  1999, the Program and Financing Schedule did not distinguish between  mandatory and discretionary offsetting collections. Although distinct line  numbers for mandatory and discretionary collections were added, the  designation in MAX is not always correct, according to OMB staff.", "For fiscal years 1995 through 1998, lines 6800 to 6885 could represent  discretionary or mandatory offsetting collections. Starting with fiscal year  1999, OMB reported discretionary and mandatory collections separately  in the Program and Financing Schedule. Discretionary collections were  reported on lines 6800 to 6885, and mandatory collections on lines 6900  to 6985. In later years, the numbers changed but the distinction between  the two remained.", "If any dollar amount was reported in MAX on any of the selected lines for  any year from fiscal years 1995 through 2015, we included the account in  our initial inventory. Many accounts reported budget authority amounts  for more than one line number. In other words, they used different types  of spending authority and permanent appropriations, or had multiple uses  of the same authority. To the extent possible, we implemented the  exclusions described in appendix II into the data, resulting in our initial  inventory of accounts.", "We compared the accounts and authorities identified in our 1996 report  with our MAX data for our initial inventory of accounts. We found five  accounts that were in the 1996 report but not the MAX data, which still  had active budget authority reported in the fiscal years 2013, 2014, or  2015 budgets. We reviewed these for potential inclusion in our inventory  and included three authorities."], "subsections": []}, {"section_title": "Data Collection and Confirmation with Agencies", "paragraphs": ["To learn more about the accounts in our initial inventory, we developed a  data collection instrument (or worksheet) to send to the agencies. After  our review and final agency verification, the results from the worksheets  became our final inventory of accounts as shown in our online dataset.  We took the following steps for collecting and reviewing agency  information.", "We asked that the agencies review the data for accounts for which  they have responsibility. We asked them to confirm or correct  account information that we obtained from MAX and, if applicable,  from the 1996 report. If information was unavailable from the 1996  report, we asked agencies to provide it. We asked agencies to review  the basic account descriptors (e.g., account names and numbers),  MAX line number(s), budget authority type (which we determined  based on the line number description), source of offsetting collections  (if applicable), and a statutory reference and enactment year for each  authority.", "We used our 1996 report to identify accounts that may have authority  to use monetary credits or bartering, and asked those agencies to  confirm this information. We asked agencies to identify any accounts  that have authority to use monetary credits or bartering, and to include  the source of the monetary credits or bartered items, and identify their  value in dollars.", "We asked agencies to identify any additional accounts that have  spending authority and permanent appropriations that were not  presented in the worksheet because they were not identified through  MAX.", "We confirmed or corrected information in each agency\u2019s completed  worksheet and updated our inventory accordingly. We excluded  accounts from our inventory if we determined that the authority for the  account did not meet the definition of spending authority and  permanent appropriations. When possible, we reviewed the  President\u2019s Budget Appendix to confirm corrections from the  agencies. For some authorities, such as certain offsetting collections,  we relied on the agency\u2019s description of whether the account included  nonfederal sources to make our decision about inclusion in our  inventory.", "We had discussions with agencies, as needed, to agree on the  presentation of the account information and statutory references.", "As described above, to compile our inventory and provide statutory  references providing the authorities, we primarily relied on the MAX  database and information agencies provided to us. While we made every  attempt to confirm the information provided by agencies and provided  agencies opportunities to review the information on their accounts, in  some cases we included authorities for which neither we nor the agency  could determine a statutory reference because we could not rule out the  use of spending authority and permanent appropriations. We note that  authorities and the statutes providing them can change over time. Our  inventory of accounts should therefore not be used as a substitute for  original legal research.", "For some accounts, agencies identified errors in the MAX budget  authority or other fields. We updated our inventory if the agency provided  documentation, such as a SF-133, Report on Budget Execution and  Budgetary Resources. We did not make changes to the budget authority  classifications. For some authorities, we reported no budget authority in  certain fiscal years, but MAX contained a budget authority amount. If an  account had spending authority and permanent appropriations in only  certain years, but reported other budget authority on the same lines that  did not meet our definition, we only reported dollar amounts for the  spending authority and permanent appropriations, when possible. The  changes described above were only applied to our inventory data and not  to the MAX database.", "From our final inventory, we selected examples of accounts to highlight in  the text boxes in our report. We made these selections based on the  following criteria: variety of size of agencies, the authority was used  sometime from fiscal years 2013 to 2015 (with exception of monetary  credit or bartering authority), different examples of how the budget  authority was used, and large or easy to understand programs."], "subsections": []}, {"section_title": "Factors that Affect Our Totals for Spending Authority and Permanent Appropriations", "paragraphs": ["There are several factors that affect our reported total spending authority  and permanent appropriations. In working with agencies, we were unable  to parse out the amounts of budget authority that do not meet our  definition. Therefore, our reported budget authority amounts likely  overstate the amount of spending authority and permanent appropriations  used during the time period of our analysis.", "Although some agencies informed us that certain offsetting collections  contained collections from federal sources\u2014which would not be  considered spending authority and permanent appropriations\u2014we  could not reliably subtract the federal sources from all accounts  covered in our inventory. While we excluded any account lines that  the agencies reported consisted only of collections from federal  sources, we did not exclude account lines for which we and the  agencies could not reliably separate collections from federal sources  from offsetting collections amounts that meet our definition of  spending authority and permanent appropriations. As a result, our  total budget authority amount for offsetting collections (and our overall  totals) contains budget authority which does not meet our definition of  spending authority and permanent appropriations.", "The budget authority amounts for offsetting collections may also  include some amounts that consist of refunds of prior paid obligations.  While we excluded any account lines that the agencies reported  consisted only of refunds of prior paid obligations, we did not exclude  account lines for which we and the agencies could not reliably  separate refund amounts from offsetting collections amounts that  meet our definition of spending authority and permanent  appropriations.", "Additionally, our budget authority amounts include sequestered and  rescinded amounts, which are usually negative in the MAX  database. Sequestered and rescinded funds are not generally  available to agencies, and therefore do not represent spending  authority and permanent appropriations. Some agencies may have  reported sequestered amounts in various budget authority lines in  MAX, which we cannot reliably identify. Therefore to consistently  include these amounts, we retained all sequestration-related lines. As  a result of this inclusion, our totals are decreased by the negative  sequestered amounts. Further, when budget authority amounts were  totaled for each agency, some agency totals were negative. These  negative values were generally small enough that they did not affect  the overall percentages, so we removed them from our rankings of top  agency users of permanent appropriations and borrowing authority.", "Our inventory includes authorities that may have expired or been  repealed during the time period of our analysis, even if the account is  still active. We also did not examine whether Congress subsequently  restricted or rescinded the agency\u2019s ability to use all or a portion of its  spending authority and permanent appropriations. We did not review  annual appropriations acts or other legislation to identify the extent to  which authorities in our inventory were restricted or rescinded."], "subsections": []}, {"section_title": "Identification of Statutes Providing the Authorities", "paragraphs": ["To note the statutes providing spending authority and permanent  appropriations for the identified accounts, we used the worksheets\u2014 described above that were provided or corrected by the agencies\u2014to  collect and review the statutory references and enactment years for each  account and type of authority. We reported only the earliest identifiable  year of enactment for the statute providing the authority. There are some  instances where budget authority data are reported for years prior to the  enactment year for an account\u2019s authority in our data. This may be  stemming from a variety of factors, including repeal of earlier enacted  authorities coupled with newly enacted authorities, and challenges  identifying original enactment dates when sections of the U.S. Code were  recodified. In other instances, neither we nor the agency could determine  a statutory reference because of the age of the data, because the  account or agency no longer exist, or other reasons. These authorities  are included in our inventory because we could not rule out the use of  spending authority and permanent appropriations. These accounts are  categorized in our online dataset as either (1) the agency could not  provide this information\u2014we identified a potentially applicable statutory  reference\u2014or (2) the statutory reference could not be determined."], "subsections": []}, {"section_title": "Sequestration Designation", "paragraphs": ["To determine whether the identified accounts are subject to or exempt  from sequestration, or subject to any special sequestration rules or  limitations, we used datasets provided by OMB to identify the  sequestration designation for accounts in our final inventory.  Sequestration designations include sequestrable, partially sequestrable,  exempt, optionally sequestrable, and sequestrable/906.", "OMB generates the data annually through a government-wide data  collection exercise to calculate the sequestration percentage and  reductions by account as part of a report required under the Joint  Committee process. For authorities that did not have a sequestration  designation in OMB\u2019s data but did report actual budget authority in fiscal  years 2013, 2014, or 2015, we asked OMB to provide additional  sequestration designation information. Authorities that OMB did not  classify, or for which it could not provide additional information, have  \u201cNone\u201d listed as the sequestration status in our final inventory. The  primary dataset we used includes accounts with mandatory budget  authority in fiscal year 2015 and the corresponding sequestration  designation. However, to identify the sequestration designation for  accounts in our final inventory with offsetting collections authority that  OMB categorized as discretionary spending, we used the fiscal year 2013  sequestration dataset. The fiscal year 2013 dataset was the most recent  available for which sequestration occurred for discretionary spending  when we began our work, and we used fiscal year 2015 data to match the  end year of our inventory data.", "We assessed the reliability of the sequestration datasets based on  interviews with OMB staff. OMB staff told us that the data must pass a  series of automated checks, and are reviewed at several points by OMB  staff. Thus, we found the data to be sufficiently reliable for the purpose of  identifying the sequestration status of the accounts in our final inventory.  We confirmed the definition of each sequestration designation with OMB.  In some cases, because of differences in the scope of the data that OMB  collected for Joint Committee reports, a sequestration designation was  not available. For some of those authorities, OMB provided a designation  based on information collected from agencies. We compared the  sequestration designation data from our 1996 report to the designations  in fiscal year 2015 or 2013, as applicable to analyze changes over time."], "subsections": []}, {"section_title": "Combining Data to Develop Our Inventory Dataset", "paragraphs": ["We combined data from the worksheets confirmed by the agency into a  single dataset to create our final inventory of accounts. We also added  the dollar amounts from MAX to create the final dataset we used for  analysis in the report. To combine our data, we had to make several  decisions to help eliminate double-counting and to simplify the  supplemental data that accompanies this report.", "We have provided a final inventory dataset\u2014which includes the agency  accounts and related budget information, statutory references, enactment  years, and sequestration designation\u2014online as a supplement to this  report. Table 6 lists the variables and definitions used in our online data.", "We analyzed the final combined dataset for trends and compared it with  the 1996 report. In some cases, we adjusted the fiscal year 1994 dollars  for inflation. Once the inventory of accounts was finalized and we  completed our review, each agency received a statement of facts to  review, which summarized the final inventory information for their agency.  Agencies that have examples of accounts highlighted in our report  received those excerpted examples that are specific to their agencies for  review and comment. We provided OMB the draft report and online data  for review and comment.", "We conducted this performance audit from March 2016 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Additional Description of Spending Authority and Permanent Appropriations", "paragraphs": ["This appendix provides additional details on how we defined spending  authority and permanent appropriations for the purpose of this report and  how we applied the definition to decide which accounts to include or  exclude from our inventory. We are defining spending authority as budget  authority made available through laws other than annual appropriation  acts. Also, we are defining a permanent appropriation as budget authority  to incur obligations and make payments that is available permanently by  law without further legislative action. A permanent appropriation may  have been made available through an annual appropriations act or  through laws other than the annual appropriations acts. We are including  both in our inventory based on the intent of the request for developing our  inventory. Spending authority and permanent appropriations permit  obligation and expenditures without further action from Congress. These  include permanent appropriations, contract authority, borrowing authority,  offsetting collections, and monetary credits or bartering, all of which are  defined in table 7.", "In building our inventory of accounts with spending authority and  permanent appropriations authority, we made categorical decisions on  what to include and exclude. We included authorities that met our  definition of spending authority and permanent appropriations, as  described above in table 7. A particular type of offsetting collections\u2014 collections from nonfederal sources that were enacted for the first time in  an appropriations act\u2014does not meet our definition, but nonetheless  permits obligation and expenditure without further action from Congress,  and therefore falls within the purview of this request. We included these  authorities in our inventory and included a variable to identify them in our  online dataset. Certain types of budget authority do not meet our  definition of spending authority and permanent appropriations, as  described in table 8."], "subsections": []}, {"section_title": "Appendix III: Spending Authority and Permanent Appropriations Use by Agency and Authority Type, Fiscal Year 2015", "paragraphs": ["Table 9 lists total spending authority and permanent appropriations  reported by agency in fiscal year 2015. We listed the 24 agencies in the  Chief Financial Officers Act of 1990 as amended, Legislative Branch and  Judicial Branch entities, and Executive Office of the President and other  entities. We did not include monetary credits or bartering in this table  given no agencies reported use of this authority in fiscal year 2015."], "subsections": []}, {"section_title": "Appendix IV: Five Largest Permanent Appropriations, Contract, and Borrowing Authority Accounts, Fiscal Year 2015", "paragraphs": ["The tables below list the accounts reporting the largest amounts of  budget authority for permanent appropriations, contract authority, and  borrowing authority in fiscal year 2015. We did not rank the agencies that  reported the largest amounts of offsetting collections because we, and the  agencies, when asked, were unable to reliably subtract collections from  federal sources or refunds of prior paid obligations. Agencies did not  report using monetary credits or bartering in fiscal year 2015."], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Janice Latimer (Assistant  Director), Lisa Motley (Assistant General Counsel), Lindsay Swenson  (Analyst-in-Charge), Michael Bechetti, Shari Brewster, Charles  Culverwell, Ann Marie Cortez, Erika Huber, Susan J. Irving, John Mingus  Jr., Katherine D. Morris, Cynthia Saunders, Albert Sim, and Stewart Small  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Not all federal funding is reviewed each year as part of the annual appropriations process. For example, Congress can make a law that allows an agency to collect fees for services, such as copyright registration fees, and use that money without further congressional action.", "This report updates our inventory of this type of federal funding and helps provide visibility into spending authority that is not from the annual appropriations process. We found $3.2 trillion in such funding from fiscal year 1995 through fiscal year 2015 (the most recent data at the start of our work). This is an increase of 88% from fiscal year 1994 (our last update)."]}
{"id": "GAO-18-47", "url": "https://www.gao.gov/products/GAO-18-47", "title": "Defense Civil Support: DOD Needs to Address Cyber Incident Training Requirements", "published_date": "2017-11-30T00:00:00", "released_date": "2017-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Presidential Policy Directive on United States Cyber Incident Coordination states that significant cyber incidents are occurring with increasing frequency impacting public and private infrastructure in the United States. Section 1648 of the National Defense Authorization Act for Fiscal Year 2016 included a provision that DOD develop a comprehensive plan for CYBERCOM to support civil authorities in responding to cyberattacks by foreign powers against the United States. Section 1648 also included a provision that GAO review DOD's plan.", "This review assesses the extent to which DOD's Section 1648 report addressed the statutorily required submission elements. To conduct this work, GAO assessed DOD's Section 1648 report against the elements outlined in the statute. GAO also discussed the Section 1648 report with DOD policy, Joint Chiefs of Staff, combatant commands, and military service officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) did not develop a comprehensive plan for U.S. Cyber Command (CYBERCOM); instead, the department submitted a report consisting of a collection of documents that fully addressed two of the six statutorily required elements; partially addressed three elements; and did not address the sixth element on DOD training activities.", "Legend:", "\u25cb Did not address: Submission does not include required element.", "GAO also found that, in addition to not addressing the training element in the report, DOD had not ensured that staff are trained as required by the Presidential Policy Directive on United States Cyber Incident Coordination or DOD's Significant Cyber Incident Coordination Procedures, which were included DOD's Section 1648 report. Taking action to improve these areas should help DOD sustain progress it has already made. With the President's decision to elevate CYBERCOM to a unified combatant command, such actions will also help as DOD continues to plan to support civil authorities in response to a cyber incident and where CYBERCOM has a significant role."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has previously recommended that DOD take actions on elements of the Section 1648 report that were partially addressed. GAO is making two new recommendations that DOD update cyber incident coordination training and maintain a list of officials trained in the National Incident Management System. DOD concurred with maintaining a list of trained officials and partially concurred on updating cyber training. GAO continues to believe the updating recommendation is warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Presidential Policy Directive on United States Cyber Incident  Coordination states that significant cyber incidents are occurring with  increasing frequency, impacting public and private infrastructure in the  United States. The Department of Defense (DOD) recognizes that a  disruptive, manipulative, or destructive cyberattack could present a  significant risk to U.S. economic and national security if lives are lost;  property, destroyed; policy objectives, harmed; or economic interests,  affected and that the department must be prepared to support civil  authorities in all domains\u2014including in cyberspace. Generally, DOD  supports civil authorities through its Defense Support of Civil Authorities  (DSCA) mission.", "We previously reported on DOD\u2019s preparation efforts for providing support  to civil authorities in response to cyber incidents. In April 2016, we  reported that DOD\u2019s guidance\u2014such as DOD Directive 3025.18, Defense  Support of Civil Authorities\u2014did not clearly define the roles and  responsibilities of key DOD entities for domestic cyber incidents. For  example, U.S. Northern Command\u2019s (NORTHCOM) Defense Support of  Civil Authorities Response concept plan states that NORTHCOM would  be the supported command for a mission to support civil authorities in  responding to a domestic cyber incident. However, we found that other guidance directs and DOD officials confirmed that a different command,  U.S. Cyber Command (CYBERCOM), would be responsible for  supporting civil authorities in the event of a domestic cyber incident.  Therefore, we recommended that DOD issue or update guidance that  clarifies roles and responsibilities to support civil authorities in a domestic  cyber incident. DOD concurred with this recommendation.", "In September 2016, we reported that DOD did not have visibility over all  National Guard units\u2019 cyber capabilities that could be used to support civil  authorities in a cyber incident. We also reported that DOD had not  identified and conducted a \u201ctier 1\u201d exercise\u2014an exercise involving  national-level organizations, combatant commanders, and staff in highly  complex environments. Therefore, we recommended that DOD maintain  a database that identifies the National Guard units\u2019 cyber-related  emergency response capabilities and conduct a tier 1 exercise to prepare  its forces in the event of a disaster with cyber effects. DOD partially  concurred with these recommendations and stated that its current  mechanisms and exercises were sufficient to address the issues  highlighted in the report. See appendix I for the status of DOD\u2019s  implementation of these recommendations.", "Section 1648 of the National Defense Authorization Act for Fiscal Year  2016 included a provision that DOD develop a comprehensive plan for  CYBERCOM to support civil authorities in responding to cyberattacks by  foreign powers against the United States. Among the elements required  in the plan is a description of the roles, responsibilities, and expectations  of active and reserve components of the armed forces. See appendix II  for the full text of the statutory reporting requirements. DOD was required  to develop its plan by May 2016 (180 days after the National Defense  Authorization Act was signed into law); however, the department did not  complete its plan until April 2017.", "Section 1648 also included a provision that we review DOD\u2019s plan. This  review assesses the extent to which DOD\u2019s Section 1648 report  submission addressed the statutorily required elements. We reviewed the  required elements outlined in Section 1648 of the National Defense  Authorization Act for Fiscal Year 2016 and analyzed DOD\u2019s submission to  determine whether it addressed those elements. Additionally, we  interviewed officials from the Office of the Assistant Secretary of Defense  for Homeland Defense and Global Security\u2014specifically, the Office of the  Deputy Assistant Secretary of Defense (ODASD) for Homeland Defense  Integration and Defense Support of Civil Authorities (HDI/DSCA) and the  ODASD for Cyber Policy, as well as other DOD components to obtain  clarifying and supporting information from relevant DOD components on  the process by which the department plans and prepares for a cyber  incident requiring civil support. A more detailed description of our  objective, scope, and methodology is provided in appendix III.", "We conducted this performance audit from May 2017 to November 2017,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Defense Support of Civil Authorities", "paragraphs": ["Under the Robert T. Stafford Disaster Relief and Emergency Assistance  Act (the Stafford Act), when state capabilities and resources are  overwhelmed and the President of the United States declares an  emergency or disaster, the governor of an affected state can request  assistance from the federal government for major disasters or  emergencies. The Stafford Act aims to provide a means of assistance by  the federal government to state and local governments in responding to a  presidentially declared major disaster or emergency. A governor\u2019s request  for the President to declare a major disaster or emergency is required to  be based on a finding that the situation is of such severity and magnitude  that effective response is beyond the capabilities of the state and the  affected local governments and that federal assistance is necessary.  Additionally, under the Economy Act, a federal agency may request the  support of another federal agency, including DOD, without a presidential  declaration of a major disaster or an emergency. This act permits one  federal agency to request goods and services from another federal  agency provided that, among other things, the service is available and  cannot be obtained more cheaply or conveniently by contract.", "In July 2016, the White House issued the Presidential Policy Directive on  United States Cyber Incident Coordination (hereafter referred to as PPD- 41) to establish principles governing the federal government\u2019s response  to cyber incidents involving government or private sector entities.  Subsequently, in December 2016, the Department of Homeland Security  issued an updated National Cyber Incident Response Plan that outlines  domestic cyber-incident response coordination and execution among  federal; state, territorial, and local governments; and the private sector.  Overall coordination of federal incident-management activities is generally  the responsibility of the Department of Homeland Security. DOD supports  the lead federal agency in the federal response to a major disaster or  emergency. When authorized to provide support to civil authorities for  domestic emergencies, DOD may provide capabilities and resources\u2014 such as military forces (including the National Guard under Title 10 and  Title 32, U.S. Code), DOD civilians, and DOD contractors\u2014through  DSCA. DOD components can also provide support to civil authorities  under separate authority. For example, under Executive Order 12333, the  National Security Agency, as an element of the intelligence community, is  authorized to provide technical assistance and cooperation to law  enforcement and other civil authorities not precluded by applicable law."], "subsections": []}, {"section_title": "DOD Components with DSCA Responsibilities", "paragraphs": ["In an effort to facilitate DSCA across the nation and at all organizational  levels, DOD has assigned responsibilities within the Office of the  Secretary of Defense (such as the Assistant Secretary of Defense for  Homeland Defense and Global Security); the Chairman of the Joint  Chiefs of Staff; various combatant commanders, such as the  NORTHCOM and the U.S. Pacific Command (PACOM) Commanders;  and the Chief of the National Guard Bureau, among others. A combatant  command is a unified or specified command with a broad continuing  mission under a single commander established and designated by the  President, through the Secretary of Defense and with the advice and  assistance of the Chairman of the Joint Chiefs of Staff. DOD\u2019s Assistant  Secretary of Defense for Homeland Defense and Global Security is the  principal civilian advisor responsible for homeland defense, DSCA, and  cyber for the department. This official is to develop policies, conduct  analysis, provide advice, and make recommendations on homeland  defense, DSCA, emergency preparedness, and cyberspace operations  within the department.", "The Chairman of the Joint Chiefs of Staff advises the Secretary of  Defense on the effects of requests for DSCA on national security and  identifies available resources for support in response to DSCA requests.  NORTHCOM and PACOM provide support to civil authorities at the  federal, state, and local levels, as directed. Further, CYBERCOM  synchronizes the planning for cyberspace operations in coordination with  other combatant commands, the military services, and other appropriate  federal agencies. In August 2017, DOD initiated the process to elevate  CYBERCOM from a subunified command to a unified combatant  command. According to DOD, this elevation \u201cwill help to streamline  command and control of time-sensitive cyberspace operations by  consolidating them under a single commander with authorities  commensurate with the importance of those operations and will ensure  that critical cyberspace operations are adequately funded.\u201d Additionally, a  dual-status commander could serve as an intermediate link between the  separate chains of command for state and federal forces and is intended  to promote unity of effort between federal and state forces to facilitate a  rapid response during major disasters and emergencies."], "subsections": []}]}, {"section_title": "DOD\u2019s Section 1648 Report Addressed Some of the Statutorily Required Elements", "paragraphs": ["DOD did not develop a comprehensive plan; instead, the department  submitted a collection of separate documents that addressed some, but  not all six statutorily required elements (hereafter referred to as DOD\u2019s  Section 1648 report). Table 1 lists each of the required elements and  shows our determination of the extent to which the elements were  addressed in DOD\u2019s Section 1648 report.", "DOD officials agreed that their submission was not a comprehensive  plan. These officials told us they developed a report that they believed  would address the required elements of the legislation and articulate the  department\u2019s comprehensive work to prepare for supporting civil  authorities in response to a cyber incident with plans, policies, guidance,  among other things. Specifically, DOD\u2019s Section 1648 report is a  collection of separate documents that, according to DOD, outline core  federal, state, local, and private sector roles and responsibilities;  summarize plans for coordination at all levels of government and across  sectors in the event of a cyber incident; and prescribe the roles and  responsibilities of the active and reserve components."], "subsections": [{"section_title": "DOD\u2019s Report Fully Addressed Two of the Six Elements Required by the Statute", "paragraphs": ["As noted in the table above, DOD\u2019s Section 1648 report addressed two of  the six elements required by the statute\u2013to provide (1) descriptions of the  roles, responsibilities, and expectations of federal, state, and local  authorities and (2) a description of legislative and administrative actions  necessary to carry out its plan to support domestic cyber incident  response efforts. Specifically, DOD\u2019s Section 1648 included copies of the  PPD-41 and the Department of Homeland Security\u2019s National Cyber  Incident Response Plan. Both of these documents provide general  descriptions of the roles, responsibilities, and expectations of federal,  state, and local authorities. For example, the National Cyber Incident  Response Plan was developed to articulate the roles and responsibilities,  capabilities, and coordinating structures that support how the nation  responds to and recovers from significant cyber incidents posing risks to  critical infrastructure.", "DOD\u2019s Section 1648 report also included a description of administrative  actions that the department believed were necessary to carry out its plan  to support domestic cyber incident response efforts. Specifically,  according to the report, DOD had drafted a directive type memorandum to  provide supplementary policy guidance, assign responsibilities, and  detailed procedures for providing defense support for cyber incident  response. This memorandum was signed and issued by DOD subsequent  to the department submitting its Section 1648 report to Congress. DOD  officials also acknowledged that there were incorporating cyber into all  aspects of policy, doctrine, and guidance. In the report, DOD stated that  the department believed current authorities were sufficient and did not  recommend any legislative actions."], "subsections": []}, {"section_title": "DOD\u2019s Report Partially Addressed Three of Six Elements Required by the Statute but the Information Provided Was Incomplete", "paragraphs": ["DOD partially addressed three of the six elements required by the  statute\u2014to provide (1) descriptions of the roles, responsibilities, and  expectations of the active and reserve components of the armed forces;  (2) the department\u2019s plans for coordination with heads of other federal  agencies and state and local governments; and (3) a list of exercises  previously conducted that are used in the formulation of the plan.", "DOD\u2019s Section 1648 report includes a copy of DOD Directive 3025.18,  Defense Support of Civil Authorities, which establishes DSCA policy and  provides guidance for the execution and oversight of DSCA, as an  appendix. This directive includes a section that identifies roles and  responsibilities of DOD components such as the Joint Staff, the  combatant commands, and the military departments, among others.", "However, we have previously reported that DOD\u2019s guidance does not  clearly define the department\u2019s roles and responsibilities. For example,  we found inconsistency on which combatant command would be  designated the supported command and have the primary responsibility  for providing support to civil authorities during a cyber incident.  Consequently, as noted in appendix I, we recommended that DOD issue  or update guidance that clarifies roles and responsibilities for relevant  entities and officials to support civil authorities in a domestic cyber  incident. However, key DOD documents such as DOD Directive 3025.18,  DOD\u2019s Section 1648 report, and the Directive Type Memorandum issued  in June 2017 do not clarify roles and responsibilities of DOD components,  liaisons, and personnel who DOD had previously assigned coordination  roles and responsibilities for supporting civil authorities. As a result,  there is still uncertainty about these roles and responsibilities within the  department. For example, disagreement still exists among officials in the  department regarding whether NORTHCOM and PACOM (as the  geographic combatant commands) or CYBERCOM, which according to  command officials maintains the department\u2019s existing inventory of  cyberspace command and control capabilities, is the supported command  in a cyber incident requiring civil support. DOD officials acknowledged to  us that there are a number of planning and guidance documents that  need to be updated to clarify roles and responsibilities. Until DOD clarifies  the roles and responsibilities of its key entities for cyber incidents, as we  recommended, department leaders and components will continue to  experience uncertainty about the roles and responsibilities of different  components and commands in providing support to civil authorities in the  event of a significant cyber incident.", "In an effort to describe the department\u2019s plans for coordination with heads  of other federal agencies and state and local governments, DOD\u2019s  Section 1648 report provided information on the department\u2019s role in  supporting a whole-of-government approach during a significant cyber  incident. Specifically, DOD included copies of PPD-41, the Department of  Homeland Security\u2019s National Cyber Incident Response Plan, and DOD\u2019s  Department of Defense (DOD) Significant Cyber Incident Coordination  Procedures. These documents recognize that the department coordinates  with other federal agencies (and state and local governments, as  appropriate) through the Cyber Response Group and the Cyber Unified  Coordination Group that were consistent with PPD-41. According to  PPD-41, the Cyber Unified Coordination Group is the primary method for  coordinating between and among federal agencies responding to a  significant cyber incident, as well as for integrating private sector partners  into incident response efforts.", "While DOD\u2019s Section 1648 report recognizes the role and value of these  two groups, these groups have limited coordination opportunities with  state and local governments. For example, the Cyber Response Group is  a national-level policy coordination group composed of federal  department and agencies (i.e., does not include state and local  governments). Also, the Cyber Unified Coordination Group is an ad-hoc  group that is convened in response to a significant cyber incident and will  not include state and local governments unless it is required by the  scope, nature, and facts of a particular significant cyber incident.", "In addition, the report did not identify any plans for coordinating with  heads of other federal agencies and state and local governments, as  required by the statute. DOD guidance and joint doctrine state that,  among the defense coordinating officers\u2019 multiple responsibilities, they  are supposed to develop and promote relationships with federal, state,  tribal, and local governmental and non-governmental organizations, and  with private sector entities in the assigned Federal Emergency  Management Agency (FEMA) region. However, DOD\u2019s Section 1648  report did not identify how the defense coordinating officers, their  supporting elements, or other DOD components that coordinate with civil  authorities\u2014including state and local governments\u2014plan to coordinate in  preparation to provide support of DSCA activities.", "We are not making a recommendation on this issue because we  previously recommended that DOD issue or update guidance that clarifies  roles and responsibilities for DOD components\u2014such as for the defense  coordinating officers and their supporting elements\u2014to support civil  authorities in response to a domestic cyber incident.", "DOD\u2019s Section 1648 report also includes a list of cyber civil support  exercises that DOD conducted over the last 3 years. However, this list  was incomplete because DOD did not include all exercises where DOD  components provided support to civil authorities in a cyber incident. For  example, the report did not include NORTHCOM\u2019s 2015 exercises\u2014Vista  Host and Vista Code. These two exercises examined planning  assumptions, potential resource requirements, and roles and  responsibilities associated with cyber-related defense support to civil  authorities operations. By not including this information in this one-time  report, DOD missed an opportunity to provide Congress more complete  information about exercises that the department is conducting to prepare  itself and commands to support civil authorities for a cyber incident within  the United States.", "During our review of DOD\u2019s Section 1648 report, we also found that the  department had yet to conduct a command and control (i.e., operational- level) exercise focused on providing support to civil authorities in a cyber  incident\u2014a gap acknowledged by officials from NORTHCOM, PACOM,  and CYBERCOM. According to these officials, the exercises identified in  the Section 1648 report focused on strategic\u2013level decisions (e.g., Cyber  Guard 16 Legal and Policy table top exercises) or tactical-level actions  (e.g., Cyber Guard 16). CYBERCOM officials told us that they believe that  Cyber Guard is a tier 1 exercise. However, a 2015 DOD Cyber Strategy  implementation document stated that while Cyber Guard is a valuable  \u201cwhole-of-nation\u201d scenario, its focus is much more tactical in nature and  that the department needed another tier 1-level exercise. Similarly,  officials from both DHS and DOD acknowledged that Cyber Guard was a  tactical-level exercise.", "As previously discussed and identified in appendix I, we previously  recommended that DOD conduct a tier 1 exercise to prepare its forces in  the event of a disaster with cyber effects. CYBERCOM officials told us the  command is currently planning an internal staff exercise to address our  recommendation to exercise its forces at the operational-level of  leadership. However, an internal staff exercise (i.e., an exercise that does  not exercise command-and-control relationships with other combatant  commanders) will not be consistent with DOD guidance that states tier 1  exercises are designed to prepare national-level organizations and  combatant commanders and staff at the strategic and operational levels  to integrate a diverse audience in highly complex environments. We  maintain our position that Cyber Guard in its current form is not a tier 1  exercise that would enable the department to achieve its DOD Cyber  Strategy goal of exercising its DSCA capabilities in support of the  Department of Homeland Security (DHS) and other agencies, including  state and local authorities. We continue to believe that DOD should  conduct a tier 1 exercise to improve the department\u2019s planning efforts to  support civil authorities in a cyber incident."], "subsections": []}, {"section_title": "DOD\u2019s Report Did Not Address One of the Elements Required by the Statute and DOD Has Not Ensured That Staff Are Trained", "paragraphs": ["DOD\u2019s Section 1648 report did not address one of the six required  elements\u2014to provide a plan for internal DOD collective training activities  that are integrated with exercises conducted with other agencies and  state and local governments. Instead, the department provided a  classified list of planned exercises for 2017 that, according to officials,  have training value for cyber incident response. Officials from ODASD  (HDI/ DSCA) and ODASD (Cyber Policy) told us that DOD does not train  for DSCA. Rather, the department trains and exercises its forces to  conduct military missions and can apply the knowledge and experience  from these activities to support civil authorities when requested and  approved. The officials emphasized that, while exercises generally test  whether DOD forces have learned training, in the case of DSCA  exercises are a key training tool.", "While exercises may have training value, DOD did not provide information  on existing DSCA-related training efforts within the department\u2014such as  on NORTHCOM\u2019s DSCA course offered to officials from DOD and other  federal agencies. Specifically, according to NORTHCOM officials, the command\u2019s DSCA course focuses on training senior military officers,  DOD civilians, and their staff to ensure DOD\u2019s readiness to support its  homeland defense and civil support missions. The officials explained that  this course introduces participants to national, state, local, and DOD  statutes, directives, plans, command and control relationships, and  capabilities with regard to disaster and emergency response. By not  including this information in this one-time report, DOD missed an  opportunity to provide Congress more complete information about training  that the department is conducting to prepare itself and commands to  support civil authorities for a cyber incident within the United States.", "In addition, during our review, we found that DOD had not met the training  requirements outlined in PPD-41, which was included in DOD\u2019s Section  1648 report. Specifically, the policy directive requires federal agencies,  including DOD, to update cyber incident coordination training to  incorporate the tenets of PPD-41 by December 2016 and to identify and  maintain a cadre of personnel qualified and trained in the National  Incident Management System and unified coordination to manage and  respond to a significant cyber incident. According to the PPD-41, the  overarching document guiding DOD\u2019s Section 1648 report, these  personnel would provide necessary expertise to support tasking and  decision making by a Cyber Unified Coordination Group.", "In addition, DOD\u2019s Significant Cyber Incident Coordination Procedures  require the Chairman of the Joint Chiefs of Staff, through the National  Military Command Center, to maintain a list of senior DOD officials from  specified organizations that could represent DOD during a Cyber Unified  Coordination Group and who are trained in the National Incident  Management System.", "As of August 2017, DOD officials acknowledged the department had not  updated its cyber incident coordination training to incorporate the tenets  of PPD-41. Joint Staff officials told us they have staff qualified and trained  in the National Incident Management System; however, the officials were  unable to provide us a list of senior officials from DOD organizations that  could participate in a Cyber Unified Coordination Group that had been  trained in the National Incident Management System.", "An official from the Office of DOD Principal Cyber Advisor acknowledged  the Joint Staff is not tracking personnel who have been qualified and  trained in the National Incident Management System, as required by the  DOD Significant Cyber Incident Coordination Procedures. Consequently,  it is unclear whether senior DOD officials who may be asked to participate  in a Cyber Unified Coordination Group will be trained in the National  Incident Management System. Until DOD updates its cyber incident  response training and maintains a list of senior DOD officials from  organizations who could represent DOD during a Cyber Unified  Coordination Group and who are trained in the National Incident  Management System, the department will not be in compliance with PPD- 41 and may not have the personnel with expertise to manage and  respond to a significant cyber incident."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD recognizes that a disruptive, manipulative, or destructive  cyberattack could present a significant risk to U.S. economic and national  security and that the department must be prepared to support civil  authorities in all domains\u2014including in cyberspace. While DOD  addressed some of the required elements set forth in Section 1648, the  report submitted does not highlight the full scope of the department\u2019s  planning and preparation efforts to support civil authorities in response to  a cyber incident. We are not making recommendations on these issues  because we have previously made recommendations in areas where the  Section 1648 report did not contain complete information. However,  without complying with the training requirements outlined in PPD-41 and  the DOD Significant Cyber Incident Coordination Procedures, the  department cannot reasonably ensure it has the personnel with expertise  to manage and respond to a significant cyber incident. Taking action to  improve the areas we have highlighted should help DOD sustain the  progress it has already made. With the President\u2019s decision to elevate  CYBERCOM to a unified combatant command, such actions will also help  as DOD continues to plan to support civil authorities in response to a  cyber incident and where CYBERCOM has a significant role."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  The Assistant Secretary of Defense for Homeland Defense and Global  Security, in coordination with the Chairman of the Joint Chiefs of Staff and  other appropriate DOD components, should update the department\u2019s  cyber incident coordination training to incorporate the tenets of PPD-41.", "The Chairman of the Joint Chiefs of Staff should maintain a list of senior  DOD officials from organizations that could represent DOD during a  Cyber Unified Coordination Group and that are trained in the National  Incident Management System."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of our report to DOD for review and comment. In its  written comments, DOD partially concurred with our first recommendation  and concurred with the second. DOD\u2019s written comments are reprinted in  their entirety in appendix IV.", "DOD partially concurred with our recommendation to update the  department's cyber incident coordination training to incorporate the tenets  of PPD-41. In its response, DOD acknowledged the need to continue its  emphasis on cyber incident coordination training and states that the  department is wholly committed to updating the appropriate training as  part of its formal after action reviews during each exercise and training  event. DOD stated that it prepares for cyber incidents by exercising  interagency roles and responsibilities, and command and control within a  cyber threat scenario. While these exercises emphasize the development  of comprehensive cyber incident response plans and seek to foster cyber  incident coordination, DOD did not identify any specific exercise or  training event in which the department will incorporate the tenets of PPD- 41. Accordingly, we continue to believe that our recommendation is  warranted. As we reported and DOD acknowledged, Cyber Guard is a  tactical-level exercise that would not fully incorporate all DOD  components that would participate in a unified cyber response consistent  with PPD-41. DOD would meet the intent of our recommendation by  conducting one or more cyber incident exercises that incorporate the  tenets of PPD-41 into command and control (i.e., operational-level)  relationships across all relevant commands and not just across  CYBERCOM.", "DOD concurred with our recommendation that the Joint Staff maintain a  list of senior DOD officials from organizations who could represent DOD  during a Cyber Unified Coordination Group and who are trained in the  National Incident Management System. DOD stated that the Joint Staff  will ensure that senior DOD personnel are familiar with the National  Incident Management System, or advised by personnel that are, prior to  representing the department during a Cyber Unified Coordination Group.  The department also plans to re-emphasize these efforts as part of its  onboarding process for newly assigned senior leaders, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Assistant Secretary of Defense  for Homeland Defense and Global Security, the Chairman of the Joint  Chiefs of Staff, and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9971 or kirschbaumj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Status of Three Recommendations from Our Recent Reports on Defense Cyber Civil Support", "paragraphs": ["During our review of the Department of Defense\u2019s (DOD) Section 1648  report, we followed up on three recommendations from our recent reports  that could improve the department\u2019s planning and processes for  supporting civil authorities in a cyber incident. Table 2 summarizes the  status of these recommendations."], "subsections": []}, {"section_title": "Appendix II: Section 1648 (a) of the National Defense Authorization Act for Fiscal Year 2016", "paragraphs": ["SEC. 1648. COMPREHENSIVE PLAN AND BIENNIAL EXERCISES ON  RESPONDING TO CYBER ATTACKS.  (a) COMPREHENSIVE PLAN OF DEPARTMENT OF DEFENSE TO  SUPPORT CIVIL AUTHORITIES IN RESPONSE TO CYBER ATTACKS  BY FOREIGN POWERS.\u2014  (1) PLAN REQUIRED.\u2014  (A) IN GENERAL.\u2014Not later than 180 days after the date  of the enactment of this Act, the Secretary of Defense shall  develop a comprehensive plan for the United States Cyber  Command to support civil authorities in responding to cyber  attacks by foreign powers (as defined in section 101 of the  Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1801))  against the United States or a United States person.  (B) ELEMENTS.\u2014The plan required by subparagraph (A) shall include the following:  (i) A plan for internal Department of Defense  collective training activities that are integrated with  exercises conducted with other agencies and State and  local governments.  (ii) Plans for coordination with the heads of other  Federal agencies and State and local governments  pursuant to the exercises required under clause (i).  (iii) A list of any other exercises previously  conducted that are used in the formulation of the plan  required by subparagraph (A), such as Operation Noble  Eagle.  (iv) Descriptions of the roles, responsibilities, and  expectations of Federal, State, and local authorities as the  Secretary understands them.  (v) Descriptions of the roles, responsibilities, and  expectations of the active components and reserve  components of the Armed Forces.  (vi) A description of such legislative and  administrative action as may be necessary to carry out the  plan required by subparagraph (A).  (2) COMPTROLLER GENERAL OF THE UNITED STATES  REVIEW OF PLAN.\u2014The Comptroller General of the United States shall  review the plan developed under paragraph (1)(A)."], "subsections": []}, {"section_title": "Appendix III: Objective, Scope, and Methodology", "paragraphs": ["Our objective was to determine the extent to which the Department of  Defense\u2019s (DOD) Section 1648 report submission addressed the  statutorily required elements.", "To determine the extent to which DOD\u2019s Section 1648 report addressed  the statutorily required elements, we analyzed the text of DOD\u2019s Section  1648 report. To conduct our analysis of DOD\u2019s Section 1648 report, two  of our analysts analyzed the text of the Section 1648 report and assessed  the extent to which the report addressed the six elements required by the  statute. The analysts assessed each element in the report as \u201cfully  addressed,\u201d \u201cpartially addressed,\u201d or \u201cnot addressed.\u201d If the Section 1648  report addressed all aspects of the required element, the analysts  determined that DOD had \u201cfully addressed\u201d the element. If the report  addressed some aspects of a required element, but not all, the analysts  determined that DOD had \u201cpartially addressed\u201d the element. If the report  did not address any aspects of a required element, the analysts  determined that DOD \u201cdid not address\u201d the element. A third independent  analyst reviewed the initial determinations and assessed whether they  were accurate.", "For further information, we met with relevant officials from DOD  components\u2014such as from the Office of the Assistant Secretary of  Defense for Homeland Defense and Global Security, including the Office  of the Deputy Assistant Secretary of Defense for Homeland Defense  Integration and Defense Support of Civil Authorities and the Office of the  Deputy Assistant Secretary of Defense for Cyber Policy; the Joint Staff;  U.S. Northern Command (NORTHCOM); U.S. Pacific Command  (PACOM); U.S. Cyber Command (CYBERCOM); and the National Guard  Bureau. We also interviewed Department of Homeland Security officials  to obtain clarifying and supporting information on the process by which  the department plans and prepares for a cyber incident requiring civil  support. In the cases in which the analysts determined that the plan did  not address some aspects of a required element, they discussed their  preliminary analyses with officials from the Office of the Assistant  Secretary of Defense for Homeland Defense and Global Security to seek  additional information. Additionally, DOD officials offered clarification  regarding the Defense Support of Civil Authorities process, DOD roles  and responsibilities in civil support, and information on ongoing initiatives.", "We conducted this performance audit from May 2017 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Tommy Baril (Assistant  Director), Tracy Barnes, David Beardwood, Pamela Davidson, Ashley  Houston, Gabrielle Matuzsan, and Spencer Tacktill made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Civil Support: DOD Needs to Identify National Guard\u2019s Cyber  Capabilities and Address Challenges in Its Exercises. GAO-16-574.  Washington, D.C.: September 6, 2016.", "Civil Support: DOD Needs to Clarify Its Roles and Responsibilities for  Defense Support of Civil Authorities during Cyber Incidents. GAO-16-332.  Washington, D.C.: April 4, 2016.", "Civil Support: DOD Is Taking Action to Strengthen Support of Civil  Authorities. GAO-15-686T. Washington, D.C.: June 10, 2015.", "Homeland Defense: DOD Needs to Address Gaps in Homeland Defense  and Civil Support Guidance. GAO-13-128. Washington, D.C.: October 24,  2012.", "Homeland Defense: DOD Can Enhance Efforts to Identify Capabilities to  Support Civil Authorities during Disasters. GAO-10-386. Washington,  D.C.: March 30, 2010.", "Homeland Defense: DOD Needs to Take Actions to Enhance Interagency  Coordination for Its Homeland Defense and Civil Support Missions.  GAO-10-364. Washington, D.C.: March 30, 2010."], "subsections": []}], "fastfact": []}
{"id": "GAO-17-794", "url": "https://www.gao.gov/products/GAO-17-794", "title": "Aviation Security: Actions Needed to Systematically Evaluate Cost and Effectiveness Across Security Countermeasures", "published_date": "2017-09-11T00:00:00", "released_date": "2017-09-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since the attacks of September 11, 2001, TSA has spent billions of dollars on aviation security programs. However, recent attacks involving aircraft and airports in other countries underscore the continued threat to aviation and the need for an effective aviation security program.", "GAO was asked to review TSA's passenger aviation security countermeasures. This report examines the extent to which TSA has (1) information on the effectiveness of selected passenger aviation security countermeasures and (2) systematically analyzed the cost and effectiveness tradeoffs among countermeasures.", "GAO reviewed TSA documentation on the effectiveness of six passenger aviation security countermeasures in fiscal year 2015\u2014the most recent year for which data were available. GAO selected these countermeasures because they involve direct interaction with passengers, their belongings, or their personal information, and are largely operated and funded by TSA. GAO also reviewed TSA documents and interviewed TSA officials regarding efforts to systematically analyze cost and effectiveness tradeoffs across countermeasures."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration (TSA) has data on the effectiveness of some, but not all of its passenger aviation security countermeasures. Specifically, TSA has data on passenger prescreening, checkpoint and checked baggage screening, and explosives detection canines. Further, TSA is taking steps to improve the quality of this information. However, it does not have effectiveness data for its Behavior Detection and Analysis (BDA) program and the U.S. Federal Air Marshal Service (FAMS). For BDA\u2014a program to identify potential threats by observing passengers for behaviors indicative of stress, fear, or deception\u2014in July 2017, GAO reported that (1) TSA does not have valid evidence supporting most of its behavioral indicators, and (2) TSA should continue to limit future funding for its behavior detection activities until it can provide such evidence. For FAMS\u2014a program that deploys armed law enforcement officers on certain flights at an annual cost of about $800 million for fiscal year 2015\u2014officials reported that one of the primary security contributions is to deter attacks. However, TSA does not have information on its effectiveness in doing so, nor does it have data on the deterrent effect resulting from any of its other aviation security countermeasures. While officials stated that deterrence is difficult to measure, the Government Performance and Results Act of 1993, as updated, provides that agencies are to assess the effectiveness of their programs. Further, the Office of Management and Budget and GAO have suggested approaches for measuring deterrence. Developing such methods for TSA countermeasures, especially for an effort such as FAMS in which the primary goal is deterrence, would enable TSA to determine whether its substantial investment is yielding results.", "TSA has a tool to compare the security effectiveness of some aviation security countermeasures, but has no efforts underway to systematically evaluate potential cost and effectiveness tradeoffs across all countermeasures. In 2014, the agency developed a tool to analyze the security effectiveness of alternate combinations of some countermeasures for the purpose of informing acquisition and deployment decisions, but does not have a tool to assess such tradeoffs across the entire system of countermeasures. TSA officials explained that the aviation security system is constantly evolving, and assessing a system in flux is challenging. However, DHS policy and TSA's strategic plan call for the systematic evaluation of costs and effectiveness of TSA's chosen mix of aviation security countermeasures. Without such an analysis, TSA is not well positioned to strike an appropriate balance of costs, effectiveness, and risk.", "This is a public version of a classified report that GAO issued in August 2017. Information that TSA deemed classified or sensitive security information, such as the results of TSA's covert testing and details about TSA's screening procedures, have been omitted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that TSA (1) explore and pursue methods to assess the deterrent effect of TSA's passenger aviation security countermeasures, with FAMS as a top priority to address, and (2) systematically evaluate the potential cost and effectiveness tradeoffs across aviation security countermeasures. DHS concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["It has been 16 years since the attacks of September 11, 2001, exposed  vulnerabilities in the U.S. aviation system. Since then, the Department of  Homeland Security\u2019s (DHS) Transportation Security Administration  (TSA)\u2014the primary federal agency with responsibility for securing the  nation\u2019s civil aviation system\u2014has spent billions of dollars on a wide  range of programs designed to enhance aviation security. However,  achieving TSA\u2019s stated mission to protect the nation\u2019s transportation  systems remains a daunting task. Senior DHS officials have stated that  terrorist organizations continue to regard civil aviation as an attractive  target for attacks. Further, recent attacks involving aircraft and airports in  Egypt, Somalia, Belgium, and Turkey have underscored the continued  threat to aviation and the need for an effective aviation security program.", "Over the past 5 fiscal years, funding made available to TSA for aviation  security has remained relatively steady\u2014ranging from a high of nearly  $7.7 billion in fiscal year 2012 to a low of nearly $7.0 billion in fiscal year  2013\u2014but fiscal pressures facing the government continue. In this  environment of high threat and limited resources, it is essential that TSA  identify how to allocate its resources to obtain the greatest risk mitigation  value for each dollar spent.", "You requested that we review what TSA knows about the costs and  effectiveness of its passenger aviation security countermeasures. In this  report, we examine  1.  the extent that TSA has information on the effectiveness of selected  passenger aviation security countermeasures, and what these data  indicate, and  2.  the extent that TSA has systematically analyzed the cost and  effectiveness tradeoffs of alternate combinations of countermeasures  within its aviation security system.", "This report also presents fiscal year 2015 cost and effectiveness  information for selected aviation security countermeasures in appendixes  I and II, respectively.", "This report is a public version of a classified report that we issued in  August 2017. TSA deemed some of the information in our August report  to be classified or sensitive security information, which must be protected  from loss, compromise, or inadvertent disclosure. Therefore, this report  omits classified and sensitive security information about the effectiveness  of certain aviation security countermeasures and some specifics about  TSA\u2019s screening procedures. Although the information provided in this  report is more limited, the report addresses the same objectives as the  classified report and uses the same methodology.", "To determine the extent of TSA\u2019s information on the effectiveness of its  passenger aviation security countermeasures in fiscal year 2015, we  reviewed past reports and findings from GAO, TSA, and DHS\u2019s Office of  Inspector General (OIG) related to the effectiveness of TSA aviation  security programs and evidence of steps TSA has taken to address the  issues identified. We also asked TSA to provide us with their evidence of  the security effectiveness of six selected aviation security  countermeasures\u2014passenger prescreening (Secure Flight), checkpoint  screening, checked baggage screening, explosives detection canines, the  Behavior Detection and Analysis (BDA) program, and the U.S. Federal Air  Marshal Service (FAMS)\u2014in detecting, disrupting, and deterring threats  to the nation\u2019s aviation system. We selected these six passenger aviation  security countermeasures because they involve direct interaction with  passengers, their belongings, or their personal information and are largely  operated and funded by TSA. We analyzed TSA\u2019s performance and  testing data to determine the extent of TSA\u2019s effectiveness information for  these six selected countermeasures and what these data indicate about  their security effectiveness during fiscal year 2015\u2014the most recent full  year for which data were available. We also reviewed TSA documents  related to countermeasure effectiveness such as the results of routine  TSA tests of screening technologies deployed at airports.", "To obtain TSA perspectives on the extent and reliability of TSA\u2019s  effectiveness information as well as the effect of any data limitations, we also interviewed senior TSA officials in (1) the Office of Requirements and  Capabilities Analysis (ORCA), which is responsible for assessing TSA\u2019s  operational capability gaps and developing future requirements; (2) the  Chief Performance and Enterprise Risk Office (CPER), which is  responsible for the overall leadership, vision, and direction for risk  management across TSA; (3) the Office of Inspections (OOI), which  conducts covert testing of several aviation security countermeasures; and  (4) individual program offices associated with each of the six  countermeasures. We also interviewed officials with the National Center  for Risk and Economic Analysis of Terrorism Events (CREATE)\u2014a DHS- funded research center\u2014to obtain their perspective on the challenges  TSA faces in measuring the effectiveness of some countermeasures. We  compared TSA\u2019s efforts to measure effectiveness to requirements in the  Government Performance and Results Act of 1993 (GPRA), as updated  by the GPRA Modernization Act of 2010, and leading practices  established in GAO\u2019s prior work on using performance information to  inform management decision making. We assessed the reliability of  TSA\u2019s effectiveness data by (1) reviewing TSA documentation of  procedures for recording effectiveness data, (2) manually testing for  obvious errors and discrepancies in select results, and (3) interviewing  knowledgeable TSA officials about procedures for collecting and  recording these data. We discuss our findings about the reliability of these  data later in this report.", "To determine the extent that TSA officials have systematically analyzed  the cost and effectiveness tradeoffs of alternate combinations of  countermeasures, we reviewed TSA documentation of their efforts to do  so. Specifically, we reviewed technical papers on TSA\u2019s Risk and Trade  Space Portfolio Analysis tool (RTSPA)\u2014a tool the agency developed to  analyze security effectiveness tradeoffs among checkpoint screening and  checked baggage screening countermeasures. To learn more about  TSA\u2019s efforts to analyze cost and effectiveness tradeoffs, we interviewed  senior ORCA officials about RTSPA, and observed a demonstration of  RTSPA\u2019s analytical capabilities. We also met with senior TSA officials  including the prior Chief of Staff, and officials in CPER and the Office of  Finance and Administration to discuss the agency\u2019s efforts to analyze the  cost and effectiveness tradeoffs of alternate combinations of  countermeasures. We then compared the extent of this analysis to DHS\u2019s  Policy for Integrated Risk Management memorandum, which describes  how DHS components, including TSA, should use risk management to  inform strategies, processes and decisions to enhance security. We also  compared the extent of this analysis to TSA\u2019s strategic plan.", "The performance audit upon which this report is based was conducted  from February 2016 to August 2017 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate, evidence  to provide a reasonable basis for our findings and conclusions based on  our audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We worked with DHS from July 2017 to September 2017 to  prepare this unclassified version of the original classified report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": [{"section_title": "Background", "paragraphs": ["Enacted in November 2001, the Aviation and Transportation Security Act  (ATSA) established TSA as the primary federal agency responsible for  implementing and overseeing the security of the nation\u2019s civil aviation  system. In accordance with ATSA, TSA is to ensure that all passengers  and property transported by commercial passenger aircraft to, from, or  within the United States are adequately screened. Among other things,  TSA is responsible for ensuring that for all flights and flight segments  originating in the United States, such screening takes place before  boarding and is carried out by a federal government employee except as  otherwise permitted in statute. Pursuant to TSA-established policies and  procedures in effect at about 440 airports at which TSA performs, or  oversees the performance of screening operations (i.e., TSA-regulated  airports), all passengers, their accessible property, and their checked  baggage are to be screened prior to entering the sterile area of the airport  or boarding the aircraft. Among other things, these procedures generally  provide that passengers pass through security checkpoints where their  person, identification documents, and accessible property are screened  by Transportation Security Officers (TSO)."], "subsections": [{"section_title": "Overview of Selected Aviation Security Countermeasures", "paragraphs": ["In this report, we examine six countermeasures specific to aviation  security\u2014passenger prescreening (Secure Flight), checkpoint screening,  checked baggage screening, explosives detection canines, BDA, and  FAMS. An overview of these countermeasures is provided below and  figure 1 depicts an illustrative example of the process by which an  aviation passenger may encounter these selected countermeasures.", "Passenger Prescreening (Secure Flight): TSA uses its Secure Flight  prescreening program to match passenger information against federal  government watch lists and other information to assign each passenger to  one of three risk categories\u2014high risk, low risk, or unknown risk\u2014that  either corresponds to the level of screening they will experience at the  checkpoint or may deny them an opportunity to board the aircraft. The  program requires U.S.- and foreign-flagged commercial aircraft operators  traveling to, from, within, or overflying the United States, as well as U.S.  commercial aircraft operators with international point-to-point flights, to  collect certain information from passengers\u2014such as full name, gender,  and date of birth\u2014and transmit that information electronically to TSA.  The Secure Flight program then identifies passengers\u2019 risk levels by  matching them against federal government watch lists\u2014for example, the  No Fly List, comprised of individuals who should be precluded from  boarding an aircraft, and the Selectee List, comprised of individuals who  should receive enhanced screening at the passenger security  checkpoint. Passengers identified as matching the No Fly List, for  example, are precluded from obtaining a boarding pass and proceeding  through the screening checkpoint. For passengers matching the Selectee  List, air carriers must mark their boarding passes accordingly so TSA can  identify them for enhanced screening.", "In 2010, TSA began using risk-based criteria to create additional lists for  Secure Flight screening, which are composed of high-risk passengers  who may not be in the Terrorist Screening Database but whom TSA has  determined should be subject to enhanced screening procedures. TSA  also began conducting watch list matching against an Expanded Selectee  List in order to designate more passengers who are known or suspected  terrorists as selectees for enhanced screening. In addition, as part of  TSA Pre\u2713\u2122\u2014a 2011 initiative to preapprove passengers for expedited  screening\u2014TSA uses Secure Flight to screen passengers against several  lists of preapproved low-risk travelers. Passengers determined to be  eligible for TSA Pre\u2713\u2122 are identified as such on their boarding passes.", "Checkpoint Screening: TSA screens individuals and property at airport  screening checkpoints to deter and prevent the carriage of any  unauthorized or prohibited items on board an aircraft or into the airport  sterile area. In general, passengers undergo one of three types of  checkpoint screening, based on the Secure Flight determinations shown  on boarding passes\u2014standard screening, enhanced screening for  selectees, and expedited screening for low-risk passengers. Standard  screening typically includes passing through a walk-through metal  detector or advanced imaging technology (AIT) machine, which identifies  objects or anomalies on the outside of the body. Passengers may also  be subject to a pat down if they are screened by the AIT or walk-through  metal detector and the equipment alarms. Standard screening also  typically includes X-ray screening for the passenger\u2019s accessible  property. During X-ray examination of the property, TSOs review the X- ray images, and if potential prohibited items are detected, the property will  be manually inspected and screened with an explosives trace detection  (ETD) machine to identify any traces of explosives material. Enhanced  screening generally includes, in addition to the procedures applied during  a typical standard screening experience, a pat-down and an explosives  trace detection or physical search of the interior of the passenger\u2019s  accessible property, electronics, and footwear. Expedited screening  typically includes walk-through metal detector screening and X-ray  screening of the passenger\u2019s accessible property, but unlike in standard  screening, travelers do not have to, among other things, remove their  belts, shoes, or light outerwear.", "Checked Baggage Screening: TSA inspects passengers\u2019 checked  baggage to deter, detect, and prevent the transport of any unauthorized  explosive, incendiary, or weapon onboard an aircraft. Checked baggage  screening is accomplished through the use of explosives detection  systems (EDS)\u2014which use X-rays with computed tomography technology  to automatically measure the physical characteristics of objects in  baggage and trigger an alarm when objects that exhibit the physical  characteristics of explosives are detected\u2014and ETD machines, which  use chemical analysis to manually detect traces of explosive materials\u2019  vapors and residue. At airports with EDS, EDS machines are generally  employed for primary screening of checked baggage while ETD machines  are used for secondary screening to help resolve questions raised by  EDS screening. At airports without EDS machines, ETDs are used as the  primary method for screening checked baggage.", "Explosives Detection Canines: TSA\u2019s National Explosives Detection  Canine Team Program trains, deploys, and certifies explosives detection  canine teams in order to deter and detect the introduction of explosive  devices into U.S. transportation systems. Each canine team consists of a  handler paired with a canine trained in explosives detection. The canine  handlers are generally either a state or local law enforcement officer  (LEO) or a TSA employee. Two types of LEO teams and two types of  TSA-based teams were trained to operate in the aviation environment  during fiscal year 2015. First, TSA explosives detection canine teams  patrol terminals, curbside areas, and other airport environments while  TSA passenger screening canine teams primarily search for explosives  odor on passengers in airport terminals. Second, LEO aviation teams  patrol airport terminals, curbside areas, and sterile areas while LEO  multimodal teams operate in the airport environment and screen air cargo  but also operate in mass transit and maritime environments.", "Behavior Detection and Analysis: TSA\u2019s BDA program employs  behavior detection officers (BDO) at passenger screening checkpoints to  identify potential threats by observing individuals for certain behavioral  indicators\u2014behaviors indicative of stress, fear, or deception.  These  behavioral indicators include, for example, assessing the way an  individual swallows or the degree to which an individual\u2019s eyes are open.  According to TSA, these verbal and nonverbal cues and behaviors may  indicate mal-intent, such as the intent to carry out a terrorist attack, and  provide a means for TSA to identify passengers who may pose a risk to  aviation security and refer them for additional screening. During this  referral screening, if passengers exhibit additional such behaviors, or if  other events occur, such as the discovery of a suspected fraudulent  document, BDOs are to refer these passengers to a LEO for further  investigation. In fiscal year 2015, the program deployed BDOs primarily in  teams of two at passenger screening checkpoints. However, TSA officials  reported that in the summer of 2016, the agency began taking steps to  integrate BDOs into the TSO workforce by assigning BDOs to the travel  document checker position and other positions at passenger screening  checkpoints where they are able to observe and interact with passengers  in the performance of their screening duties.", "U.S. Federal Air Marshal Service: FAMS deploys federal air marshals  on passenger flights to detect, deter, and defeat hostile acts targeting  U.S. air carriers, airports, passengers, and crews. In accordance with  ATSA, as amended, TSA is authorized to deploy federal air marshals on  every passenger flight of a U.S. air carrier and is required to deploy  federal air marshals on every such flight determined by the Secretary of  Homeland Security to present high security risks, with nonstop, long- distance flights, such as those targeted on September 11, 2001,  considered a priority. One of FAMS\u2019s top priorities is to deploy air  marshals on flights that have a known or suspected terrorist on board.  When FAMS assigns air marshals to cover such flights, it refers to these  flights as special mission coverage assignments."], "subsections": []}, {"section_title": "TSA\u2019s System of Aviation Security Countermeasures", "paragraphs": ["TSA uses a risk management strategy\u2014referred to as \u201clayers of  security\u201d\u2014whereby TSA simultaneously deploys a mix of screening and  other security countermeasures to deter and detect threats. TSA deploys  countermeasures in varying combinations at each airport based on  available resources, specific security concerns, and the airport\u2019s risk  category, among other things. Since the terrorist attacks of September  11, 2001, TSA has implemented and added countermeasures, and  refined security procedures in response to specific attacks or threats\u2014 such as the liquid explosives plot in 2006. Figure 2 depicts examples of  this progression, illustrating the addition or enhancement of certain TSA  countermeasures over the years."], "subsections": []}]}, {"section_title": "TSA Has Effectiveness Data on Some Countermeasures That Show Mixed Results, But Does Not Measure Deterrence", "paragraphs": [], "subsections": [{"section_title": "Data on the Effectiveness of Selected Countermeasures in Detecting and Disrupting Threats to Aviation Security Vary in Extent and Reliability", "paragraphs": ["TSA collected fiscal year 2015 data on the effectiveness of four of the six  countermeasures we selected\u2014passenger prescreening, checkpoint  screening, checked baggage screening, and explosives detection  canines\u2014in detecting or disrupting threats to passenger aviation  security. TSA assesses this effectiveness differently for each of these  four countermeasures. For example, TSA assessed the effectiveness of  its passenger prescreening countermeasure in detecting passengers that  may pose a threat to aviation security by measuring the percentage of  airline passenger records vetted through its Secure Flight system and the  number of high-risk passengers identified. In contrast, TSA assessed the  effectiveness of its canine program in detecting and disrupting potential  security threats by measuring canine-handler team performance during  their annual certification tests as well as covert scenario-based tests  called short notice assessments (SNA).", "Some of the effectiveness data TSA has for fiscal year 2015 are of limited  reliability and TSA is taking steps to improve this information. For  instance, we reported in September 2016 that checkpoint and checked  baggage screening effectiveness data from TSA\u2019s Aviation Screening  Assessment Program (ASAP) Advantage covert tests conducted in fiscal  year 2015 were not reliable. Specifically, TSA found that TSOs  performed more poorly in ASAP tests conducted by an independent  contractor than in the same tests conducted by local TSA personnel at  the same airports. This raised questions about the validity of ASAP tests  conducted by local TSA personnel and indicated that TSA\u2019s fiscal year  2015 ASAP pass rates likely showed a higher level of TSO performance  in screening for prohibited items than was actually the case. In response  to this issue, and to provide ongoing quality assurance for field-based  covert testing results, in April 2016, TSA began deploying headquarters- based covert testing teams in both the checkpoint and checked baggage  screening environments. TSA officials stated that comparing the results  of field- and headquarters-based tests provides TSA with a useful  indication of whether or not the field-based covert testing results are  valid.", "In another example, we determined that fiscal year 2015 SNA data were  not reliable for the purpose of reporting explosives detection canine  teams\u2019 covert testing pass rates. Specifically, in the course of our review  we found that these data included duplicate entries and errors, and TSA  officials stated that the results of an unknown number of SNAs may not  have been recorded. Further, we found that TSA\u2019s data collection process  for SNA results that were recorded lacked procedures to ensure that  manually entered data were accurate and complete. To address these  data limitations, canine program officials stated that a new process was  implemented in October 2016 to incorporate SNA results directly into the  Canine Website System\u2014a central electronic management database for  various canine program data. According to these officials, this new  process will better ensure that SNA data are complete, accurate, and  reliable for use by program officials and TSA leadership in evaluating the  effectiveness of the program. Appendix II presents specific fiscal year  2015 effectiveness data for the four selected countermeasures for which  TSA had effectiveness information.", "During fiscal year 2015, TSA did not collect data on the effectiveness of  two of the six countermeasures we selected\u2014FAMS and the BDA  program\u2014in detecting and disrupting threats to aviation security. For  FAMS, TSA officials explained that it is very difficult to empirically  measure the effectiveness of federal air marshals and the program has  no efforts underway to collect such data. We discuss this issue later in  this report.", "For the BDA Program, we reported in November 2013 that TSA had not  demonstrated that BDOs could consistently identify the behavioral  indicators and, further, that decades of peer-reviewed, published research  on the complexities associated with detecting deception through human  observation also called into question the scientific basis for TSA\u2019s  behavior detection activities. As a result, we recommended that TSA  limit future funding for the agency\u2019s behavior detection activities until TSA  can provide scientifically validated evidence that demonstrates that  behavioral indicators can be used to identify passengers who may pose a  threat to aviation security. DHS did not concur with the recommendation  but has since reduced funding for the BDA Program and taken steps to  begin to assess program effectiveness. For example, in 2014 TSA  revised its list of behavioral indicators and contracted for a literature  review to identify additional sources of evidence supporting these  indicators. However, in July 2017, we reported that in our review of all  178 sources TSA cited in support of its revised list, we found that 98  percent (175 of 178) did not provide valid evidence applicable to the  specific indicators TSA identified them as supporting. Based on our  findings, we continue to believe that TSA should limit future funding for  the agency\u2019s behavior detection activities until TSA can provide valid  evidence that demonstrates that behavioral indicators can be used to  identify passengers who may pose a threat to aviation security, as we  recommended in our November 2013 report.", "Table 1 identifies whether TSA has information on the effectiveness of the  six selected countermeasures in detecting and disrupting threats to  aviation security during fiscal year 2015, the data limitations we identified,  and steps TSA officials have taken to improve this effectiveness  information."], "subsections": []}, {"section_title": "TSA Effectiveness Data on Selected Countermeasures Indicate Mixed Results", "paragraphs": ["Some of TSA\u2019s fiscal year 2015 data indicate countermeasure  effectiveness while other data highlight vulnerabilities in the agency\u2019s  ability to detect and disrupt threats to aviation security. For example, for  the passenger prescreening countermeasure, TSA officials reported that  in fiscal year 2015, TSA\u2019s Secure Flight program vetted 100 percent of  the more than 816 million records of passengers who flew into, out of,  over, or within the United States, and on U.S.-flagged aircraft operating  internationally point-to-point. In addition, for the checkpoint and checked  baggage countermeasures, TSA uses Annual Proficiency Reviews (APR)  to evaluate TSOs\u2019 skill in performing various checkpoint and checked  baggage screening functions, such as pat downs of passengers, bag  searches, and use of explosives detection equipment. In 2015, the  average rate at which TSOs passed all APR component tests on the first  try was nearly 95 percent.", "On the other hand, some fiscal year 2015 effectiveness data indicate  vulnerabilities. For example, results from covert testing conducted by  TSA\u2019s OOI during fiscal year 2015 indicate vulnerabilities in the  checkpoint and checked baggage screening systems. Specific details  about OOI\u2019s test results are omitted because the information is classified."], "subsections": []}, {"section_title": "TSA Does Not Measure Deterrence for Any of Its Aviation Security Countermeasures", "paragraphs": ["While TSA has methods to measure its effectiveness in detecting and  disrupting threats, the agency has no such methods to measure progress  toward its goal of deterring attacks on the U.S. aviation system. TSA  officials have cited the deterrent effect of various countermeasures\u2014 including FAMS, canine teams, BDOs, and AIT machines\u2014but does not  have information on the deterrent effect of any of these countermeasures.  For example, TSA officials explained that canine teams that patrol  airports\u2014searching unattended bags and unattended vehicles, among  other activities\u2014provide a deterrent presence at airports, but officials  noted that they do not have any data on these canines\u2019 deterrent effect.  Most notably, with regard to FAMS, TSA officials explained that one of the  primary security contributions and a key aspect of the FAMS\u2019s mission is  to deter attacks. However, FAMS officials explained that they do not have  information on FAMS\u2019s deterrent effect because it is difficult to model,  measure, and quantify. TSA officials in multiple offices explained that this  difficulty applies not just to FAMS, but also to other TSA countermeasures  with an intended deterrent effect.", "OMB and GAO have acknowledged the difficulty in measuring the effect  of deterrence programs, but have identified options to overcome these  challenges. OMB guidance recognizes that programs with a deterrence or  prevention focus can be difficult to measure and suggests that proxy  measures that are closely tied to the outcome can be used to determine  how well a deterrence process is functioning. We have similarly  acknowledged such methodological challenges and identified alternate  evaluation methods that could be helpful to agencies, such as using  simulations. TSA could, for example, develop theoretical game  scenarios and have testers simulate would-be attackers\u2019 decisions when  attempting to carry out an attack on the aviation system. Officials with  CREATE\u2014a DHS-funded research center\u2014told us that they have  conducted some conceptual research on the value of deterrence and  believe it would be possible to assess TSA\u2019s deterrent effect by, for  example, allowing covert testers to choose their method of attack. Such  an assessment could provide TSA with insights regarding which  countermeasures a would-be attacker might choose to avoid in various  scenarios.", "In a March 2016 report prepared for TSA, CREATE analyzed a  prospective risk-based security initiative TSA had begun developing and  highlighted the need for further research into deterrence including the  need to model the economic value of deterrence. CREATE officials  explained that they highlighted this issue because in a resource  constrained environment, optimizing TSA\u2019s deterrent effect may be a  more cost effective solution to aviation security threats than focusing  solely on detection and interdiction. A senior official with CPER stated  that the office believes there is value in pursuing further research  regarding deterrence and noted that the office had included a request for  funding to study deterrence in its fiscal year 2017 expenditure plan, but  the request was on hold due to limited funding.", "In accordance with GPRA, as updated by the GPRA Modernization Act,  agencies are to establish performance measures to assess progress  toward goals. Measuring performance allows organizations to track the  progress they are making toward their goals and gives managers critical  information on which to base decisions for improving their progress. For example, they can use performance information when developing  strategies, allocating resources, identifying problems, and taking  corrective action.", "TSA officials told us that developing a means to assess TSA\u2019s deterrent  effect would be difficult and require a multi-year effort but having such a  means would be helpful. For example, TSA\u2019s prior Chief Risk Officer told  us that TSA\u2019s countermeasures deter nefarious actors from attempting an  attack on an aircraft, but better understanding this concept will be critical  to TSA in its transition into a more holistic, system-wide approach to  aviation security. Additionally, a senior ORCA official explained that a  better understanding of the deterrent effect of TSA countermeasures  could help TSA optimize use of its resources. For example, this official  noted that there may be a point at which adding additional federal air  marshals has diminishing returns in terms of deterrence and better  understanding FAMS\u2019s deterrent effect could help TSA identify that point.  This official further stated that developing a method to assess deterrence  for this purpose would be challenging but feasible.", "In the absence of any systematic or methodological approach to  assessing TSA\u2019s deterrent value, TSA officials have relied on theories of  causality and limited evidence available from U.S. intelligence sources.  For example, FAMS officials cited the fact that there has not been a  hijacking on a U.S. carrier since 2002 as evidence of FAMS\u2019s deterrent  effect, but had no specific evidence to support FAMS\u2019s contribution to this  outcome. In another example, ORCA officials noted that a 2014 article in  an online magazine published by al-Qaeda encouraging would-be- attackers to avoid airports with a certain countermeasure provided  evidence of its deterrent value. These observations may provide limited  insight into TSA\u2019s deterrent effect, but developing a method to  systematically assess the deterrent effect of TSA\u2019s security efforts would  better position TSA to improve progress toward its goal\u2014deterring  attacks on the U.S. aviation system."], "subsections": []}]}, {"section_title": "TSA Can Compare the Effectiveness of Certain Combinations of Aviation Security Countermeasures, but Does Not Systematically Analyze Cost and Effectiveness Tradeoffs Across All Countermeasures TSA Has a Tool to Assess the Security Effectiveness of Alternate Combinations of Some Countermeasures", "paragraphs": ["In 2014, TSA\u2019s ORCA began using a Risk and Trade Space Portfolio  Analysis Tool (RTSPA) to analyze the security effectiveness of alternate  combinations of some aviation security countermeasures for the purpose  of informing TSA acquisition and deployment decisions. RTSPA provides  a means for TSA to model its security effectiveness in different scenarios.  For example, the tool could be used to compare the security effectiveness  of a theoretical airport screening checkpoint with canines to that of a  checkpoint modeled without canines.", "According to ORCA officials, they developed RTSPA to assess security  effectiveness tradeoffs among countermeasures that they believed would  most benefit from the detailed quantitative analyses that the tool provides,  rather than across TSA\u2019s entire system of aviation security  countermeasures. Specifically, TSA officials explained that RTSPA is  designed to analyze tradeoffs among checkpoint screening  countermeasures\u2014including canine teams and BDOs\u2014and checked  baggage screening, but was not developed to analyze tradeoffs among  other countermeasures TSA deploys. For example, ORCA officials told us  that the tool was not developed to analyze crew vetting or FAMS because  understanding the security tradeoffs of these countermeasures, while  important, does not require the use of such a resource intensive tool like  RTSPA. In addition, RTSPA does not account for the full system of  aviation security countermeasures, including countermeasures such as  hardened cockpit doors and Federal Flight Deck Officers\u2014flight crew  members authorized and trained to use firearms. ORCA officials further  explained that in 2014, when initially developing the tool, they also  developed comparable countermeasure cost data to allow for cost- effectiveness comparisons among countermeasures. However, ORCA  officials report that they subsequently stopped analyzing cost tradeoffs  because they believed other TSA offices could conduct such analysis.", "In the last two years, TSA officials have used the results of RTSPA  analyses to inform some resource tradeoff decisions. For example, ORCA  officials told us that in 2015, TSA leadership used the results of a RTSPA  analysis when considering options for improving overall security  effectiveness at airports that did not have AIT machines. Specifically, TSA  used RTSPA to consider the level of risk and potential risk mitigation  value of alternative security measures at these airports. TSA officials  report that this RTSPA analysis contributed to TSA\u2019s decision to deploy  146 additional AIT machines to such airports. In another example, ORCA  officials noted that in early 2017, they used RTSPA to analyze options for  resolving checked baggage alarms, taking into consideration the relative  risks of military-grade explosive materials and homemade explosive  devices.", "TSA officials stated that their use of RTSPA has been limited to date  because it is still a relatively new tool. However, ORCA officials told us  that they expect use of the tool\u2019s analysis to grow as the agency  increasingly seeks to use analytic tools to inform acquisition and  deployment decisions. As such, ORCA officials plan to update RTSPA  and expand its analytical capabilities."], "subsections": [{"section_title": "TSA Has Not Systematically Analyzed Potential Cost and Effectiveness Tradeoffs Across the Entire System of Aviation Security Countermeasures", "paragraphs": ["TSA does not have any efforts underway to systematically evaluate the  potential cost and effectiveness tradeoffs across the full aviation security  system. Although TSA\u2019s use of RTSPA to identify effectiveness tradeoffs  among selected countermeasures provides some such information, the  tool\u2019s analyses are limited and the tool is not designed to offer a system- wide view of effectiveness. When we asked TSA\u2019s prior Chief of Staff  about any such efforts, he stated that TSA had not systematically  evaluated cost and effectiveness tradeoffs because TSA\u2019s aviation  security system is constantly evolving to meet emerging threats, and  assessing a system in flux is challenging. However, he told us that such  an analysis would be helpful.", "DHS policy and TSA\u2019s strategic plan call for the systematic evaluation of  the costs and effectiveness of TSA\u2019s chosen mix of aviation security  countermeasures. Specifically, DHS\u2019s 2010 Policy for Integrated Risk  Management calls on components, including TSA, to evaluate the  performance of risk management strategies it decides to implement. In  the case of TSA, TSA\u2019s chosen mix of aviation security countermeasures  represents TSA\u2019s current risk management strategy. The policy further  establishes that components should develop and analyze alternative  strategies to manage risks by considering the projected costs, benefits,  and ramifications of each alternative. In addition, TSA\u2019s current Strategic  Plan establishes the goal of increasing efficiency and operational  effectiveness through disciplined processes and dynamic resource  management. One of the stated outcomes associated with this goal is  the ability to effectively optimize resource allocation to strike a balance of  costs, benefits, and risk. In addition, it was the stated objective of ORCA\u2019s  predecessor\u2014the Office of Security Capabilities (OSC)\u2014to develop and  implement a comprehensive tradeoff analysis across the security system  to inform investment decisions. OSC\u2019s strategic plan further states that  such an analysis would include a full set of strategic choices TSA should  consider when determining how to respond to a threat or making an  investment decision, helping to determine which alternatives provide the  greatest risk mitigation value for each dollar spent.", "A senior ORCA official explained that while there is a need for a system- wide tradeoff analyses, RTSPA alone may not be the right tool for this.  This official explained that TSA may not require detailed quantitative  analyses from a resource-intensive tool such as RTSPA to understand  the effectiveness tradeoffs among all aviation security countermeasures,  and a portfolio of tools of varying precision and depth could be used to  obtain a system-wide view. This official noted that developing TSA\u2019s  capability for system-wide tradeoff analysis would be challenging and  require a multi-year effort. However, RTSPA could serve as a useful  starting place for a more comprehensive system-wide analysis. For  example, TSA could build upon ORCA\u2019s past efforts to analyze the  comparative cost effectiveness of countermeasures and its experience  isolating the security effectiveness contributions of individual  countermeasures.", "Without a systematic analysis of the cost and effectiveness tradeoffs  across aviation security countermeasures TSA is limited in its ability to  achieve its stated goal of optimizing resource allocation and striking a  balance of costs, effectiveness, and risk across the system. In an  environment of constrained resources and continuing threats to aviation  security, producing such analysis could assist TSA leadership in targeting  its limited resources to achieve the greatest system-wide risk mitigation  value for each dollar spent."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since the terrorist attacks of September 11, 2001, TSA has spent billions  of dollars on a range of aviation security programs with the goal of  detecting, disrupting, and deterring threats. However, TSA does not have  a complete understanding of the contributions these programs are making  to this goal. Specifically, TSA has some information on how well it can  detect and disrupt threats and is taking steps to improve this information,  but does not have information on its ability to deter attacks\u2014a key  component of TSA\u2019s goal. For example, in fiscal year 2015, TSA spent  approximately $800 million on FAMS\u2014a program with a focus on  deterring attacks on aircraft\u2014yet the agency has no information on its  effectiveness in doing so. While we and OMB have acknowledged the  difficulty in measuring deterrence, we have also suggested options to  overcome these challenges. Further, in accordance with GPRA, as  updated by the GPRA Modernization Act, agencies are to assess the  effectiveness of their programs and leading practices established in  GAO\u2019s prior work stress the importance of agencies tracking progress  toward goals. Developing a method to assess the deterrent effect of  aviation security countermeasures would better position TSA to improve  progress toward a key goal\u2014deterring attacks on the U.S. aviation  system.", "Since September 11, 2001, TSA has added countermeasures and refined  security procedures in response to specific attacks or threats, but has not  systematically evaluated its chosen combination of aviation security  countermeasures as called for in DHS policy and TSA\u2019s strategic plan.  Specifically, TSA does not have any efforts underway to evaluate the  potential cost and effectiveness tradeoffs across the full aviation security  system because, according to a senior TSA official, the aviation security  system is constantly evolving in response to emerging threats, and  assessing a system in flux is challenging. However, it is using a model\u2014 known as RTSPA\u2014that could serve as a useful starting place for a more  comprehensive system-wide analysis. Developing and implementing a  means to systematically evaluate the potential cost and effectiveness  tradeoffs across aviation security countermeasures would better position  TSA to achieve its stated goal of optimizing resource allocation and  striking a balance of costs, effectiveness, and risk. In an environment of  constrained resources and continuing threats to aviation security,  producing such an analysis could assist TSA leadership in targeting its  limited resources to achieve the greatest system-wide risk mitigation  value for each dollar spent.", "We recognize that developing these analytical methods will be a difficult  undertaking that may take years to achieve. Nonetheless, as TSA  improves the reliability and extent of its countermeasure effectiveness  data, the agency will also improve its ability to perform system-wide cost  and effectiveness tradeoff analyses. In this high threat environment, it is  essential that TSA determine how to allocate its finite resources to best  position the agency to detect, disrupt and deter threats to aviation  security."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to TSA:   1.  The Administrator of TSA should explore and pursue methods to  assess the deterrent effect of TSA\u2019s passenger aviation security  countermeasures; such an effort should identify FAMS\u2014a  countermeasure with a focus on deterring threats\u2014as a top priority to  address. (Recommendation 1)  2.  The Administrator of TSA should systematically evaluate the potential  cost and effectiveness tradeoffs across countermeasures, as TSA  improves the reliability and extent of its information on the  effectiveness of aviation security countermeasures.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. The  department\u2019s letter is included in appendix III. In its comments, DHS  generally concurred. DHS also provided technical comments, which we  incorporated as appropriate.", "With regard to our first recommendation that TSA explore and pursue  methods to assess the deterrent effect of its passenger aviation security  countermeasures, DHS concurred, noting that this may require proxy or  output measures and assumptions about potential adversary choices.  DHS also concurred with our second recommendation that TSA  systematically evaluate the potential cost and effectiveness tradeoffs  across countermeasures. In its comments, DHS stated that TSA will  continue efforts to improve both its analysis of information related to  security effectiveness and its cost information, leading to better informed  cost-benefit decisions for individual countermeasures. To address the  intent of our recommendation, TSA will need to evaluate the costs and  effectiveness of individual aviation security countermeasures and then  use this information to systematically evaluate the potential cost and  effectiveness tradeoffs across countermeasures. We will continue to  monitor TSA\u2019s efforts in addressing these recommendations.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Homeland Security, 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) 512-7141 or GroverJ@gao.gov. GAO staff who made key  contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Transportation Security Administration (TSA) Information on the Direct Costs of Selected Countermeasures", "paragraphs": ["As part of this review, we analyzed TSA\u2019s fiscal year 2015 cost data for  six selected aviation security countermeasures\u2014passenger prescreening  (Secure Flight), checkpoint screening, checked baggage screening,  explosives detection canines, the Behavior Detection and Analysis (BDA)  program, and the U.S. Federal Air Marshal Service (FAMS). We selected  these six passenger aviation security countermeasures because they  involved direct interaction with passengers, their belongings, or their  personal information and are largely operated and funded by TSA. We  determined that TSA can generally identify the fiscal year 2015 direct  costs to TSA of the six passenger aviation security countermeasures that  we reviewed, as shown in Table 2. TSA generally does not budget or  track costs by countermeasure, but is able to identify most direct costs  from their financial management system. For those passenger aviation  security countermeasures that align with TSA\u2019s budget categories, such  as FAMS and passenger prescreening, TSA can run a single report to  obtain the direct cost information. However, for those countermeasures  that do not align with TSA\u2019s budget categories, such as checkpoint  screening and checked baggage screening, TSA is able to run multiple  reports and use estimation based on their staffing model to estimate the  direct costs."], "subsections": []}, {"section_title": "Appendix II: Fiscal Year 2015 Effectiveness Data for Selected Passenger Aviation Security Countermeasures", "paragraphs": ["The Transportation Security Administration (TSA) collected fiscal year  2015 data on the effectiveness of four of the six countermeasures we  selected\u2014passenger prescreening, checkpoint screening, checked  baggage screening, and explosives detection canines. These data show  mixed results with some data indicating TSA countermeasure  effectiveness and other data highlighting vulnerabilities. Below, we  describe what TSA knows about the fiscal year 2015 effectiveness of  these four countermeasures in detecting or disrupting threats to  passenger aviation security."], "subsections": [{"section_title": "Overview of Passenger Prescreening", "paragraphs": ["TSA uses its Secure Flight prescreening program to match passenger  information against federal government watch lists and other information  to assign each passenger to one of three risk categories\u2014high risk, low  risk, or unknown risk\u2014that either corresponds to the level of screening  they will experience at the checkpoint or may deny them an opportunity to  board the aircraft. Since TSA began implementing Secure Flight in 2009,  the passenger prescreening program has changed from a program that  identifies passengers as high risk solely by matching them against federal  government watch lists\u2014for example, the No Fly List, comprised of  individuals who should be precluded from boarding an aircraft, and the  Selectee List, comprised of individuals who should receive enhanced  screening at the passenger security checkpoint\u2014to one that uses  additional lists and risk-based criteria to assign passengers to a risk  category. Specifically, Secure Flight now identifies passengers as high  risk if they are matched to watch lists of known or suspected terrorists or  other lists developed using certain high-risk criteria and as low risk if they  are deemed eligible for expedited screening through TSA Pre\u2713\u2122\u2014a  2011 initiative to preapprove passengers for expedited screening\u2014or  through the application of low-risk rules. Secure Flight identifies  passengers as unknown risk if they do not fall within the other two risk  categories.", "To separate passengers into these risk categories, TSA utilizes lists in  addition to the No Fly and Selectee Lists, and TSA has adapted the  Secure Flight system to perform risk assessments, a system functionality  that is distinct from both watch list matching and matching against lists of  known travelers. At airport checkpoints, those passengers identified as  high risk receive enhanced screening, passengers identified as low risk  are eligible for expedited screening, and passengers identified as  unknown risk generally receive standard screening. Passengers matched  to the No Fly List or the Centers for Disease Control and Prevention\u2019s Do  Not Board List\u2014a list which includes individuals who pose a significant  health risk to other travelers and are not allowed to fly\u2014are considered  highest risk, and thus are not to receive boarding passes, and should not  be allowed entry into the sterile area. Figure 3 illustrates this passenger  prescreening process."], "subsections": []}, {"section_title": "The Effectiveness of Passenger Prescreening in Fiscal Year 2015", "paragraphs": ["TSA officials reported that the percentage of passengers vetted and the  number of high-risk passengers identified by Secure Flight demonstrate  the effectiveness of this passenger prescreening program. Specifically,  TSA data indicate that in fiscal year 2015, Secure Flight vetted 100  percent of the over 816 million records submitted for passengers who flew  into, out of, over, or within the United States, and on U.S.-flagged aircraft  operating internationally point-to-point. Of these, TSA identified 15,383  (0.002 percent of passenger records vetted) as confirmed matches to  watch lists. Specifically, in fiscal year 2015, TSA identified 9,639  passengers as expanded selectees, 5,019 passengers on the Selectee  List, and 725 passengers on the No Fly List.", "In September 2014, we reported that TSA collects and regularly reviews  data on the number of passengers identified by the Secure Flight system  as potential matches to the No Fly, Selectee, and Expanded Selectee  Lists. However, we found that TSA did not measure the extent to which  Secure Flight was missing passengers who were actual matches to these  lists\u2014false negatives. We recommended that TSA establish such  measures. In response, in August 2016, TSA contracted with a third party  to conduct an independent assessment of the effectiveness of the Secure  Flight automated vetting system including whether Secure Flight identifies  the matches it should (i.e., how well the system minimizes false  negatives). TSA officials expect this assessment to be complete at the  end of calendar year 2017."], "subsections": []}, {"section_title": "Overview of Checkpoint Screening", "paragraphs": ["TSA ensures that all individuals and accessible property are screened as  part of its checkpoint screening process to deter and prevent the carriage  of any unauthorized explosive, incendiary, weapon, or other prohibited  items on board an aircraft or into the airport sterile area\u2014in general, an  area of an airport that provides passengers access to boarding aircraft  and to which access is controlled through the screening of persons and  property. Ordinarily, screening of accessible property at the screening  checkpoint begins when an individual places accessible property on the X-ray conveyor belt or hands accessible property to a Transportation  Security Officer (TSO). As shown in figure 4, TSOs then review images  of the property running through the X-ray machine and look for signs of  prohibited items. If a TSO identifies a potential prohibited item, the  accessible property will be manually inspected and screened with an  explosives trace detection (ETD) machine to identify any traces of  explosives material. The passengers themselves are typically screened  via a walk-through metal detector or an advanced imaging technology  (AIT) machine\u2014often referred to as a full-body scanner\u2014and passengers  generally have the option to request screening by a pat down if they do  not wish to be screened by these technologies. Passengers will also be  subject to a pat down if they are screened by a walk through metal  detector or the AIT and the equipment alarms (in order to resolve the  alarm).", "TSOs use several screening technologies in order to screen passengers  and carry-on bags for prohibited items. For more information on the  specific screening technologies deployed at the checkpoint in fiscal year  2015, see Table 3."], "subsections": []}, {"section_title": "The Effectiveness of Checkpoint Screening in Fiscal Year 2015", "paragraphs": ["In fiscal year 2015, TSA collected data on the effectiveness of checkpoint  screening by testing TSOs, screening technology (e.g., the AIT and X- ray), and the checkpoint screening system as a whole (i.e., the  combination of TSOs and technology)."], "subsections": [{"section_title": "Checkpoint Screening TSOs", "paragraphs": ["TSA collected fiscal year 2015 data on the effectiveness of its TSO  workforce in detecting or disrupting threats to aviation security at the  checkpoint in three ways: (1) annual proficiency review (APR) of TSOs,  (2) threat-image projection (TIP) testing, and (3) Aviation Screening  Assessment Program (ASAP) Advantage covert tests.", "Annual Proficiency Reviews. APRs evaluate TSOs\u2019 skill in performing  the various checkpoint and checked baggage screening functions and all  TSOs must successfully complete the required APR component tests  related to their job function on an annual basis as a condition of  employment with TSA in their capacity as a screener. Components of  the APR focused on checkpoint screening specifically included tests that  evaluate TSOs\u2019 ability to identify prohibited items on an X-ray machine  and tests that evaluate whether TSOs can perform various practical skills  such as pat downs, bag searches, and use of explosive trace detection  technology.", "In calendar year 2015, TSA conducted roughly 150,000 APR component  tests focused on checkpoint screening. Table 4 provides descriptions of  these component tests.", "Threat Image Projection (TIP) Testing. TSA\u2019s TIP testing system  displays fictional threat items, such as guns or explosives, onto X-ray  images of actual passengers\u2019 carry-on bags to test TSOs\u2019 ability to  identify prohibited items in a live operational environment. TSOs  operating the X-ray machine at the checkpoint are monitored to see if  they positively identify the threat image and call for the bag to be  searched. TSA officials report that they use TIP images on a daily basis  to monitor TSOs\u2019 ability to identify prohibited items, aid in keeping them  focused and attentive, and keep their skills sharp in identifying items they  do not routinely see. TSA requires airport personnel to conduct TIP  tests and upload monthly results data into TSA\u2019s national database.", "In September 2016, we reported that TSA\u2019s TIP data from fiscal year  2009 through 2014 was incomplete as TSA could not provide TIP scores  for every airport during this period. Specifically, during fiscal year 2013,  nearly 14 percent of airports failed to report any TIP data. TSA officials  also acknowledged that, in addition to the airports that did not report any  TIP data for a year or more at a time, other airports may have reported  only partial TIP results data during this same time frame. We  recommended that TSA officials at individual airports submit complete  TIP results to the TSA national database as required and, further, that  TSA analyze national TIP data for trends that could inform training needs  and improve future training and TSO performance assessments. TSA  concurred with our recommendations and is taking steps to address  them. Specifically, a new TIP Operations Directive was implemented in  October 2016 to disseminate procedures for performance data collection  and submission to improve TIP data. According to agency officials, the  number of non-compliant airports decreased during fiscal year 2016.  However, since these improvements occurred during fiscal years 2016  and 2017, fiscal year 2015 TIP data remained incomplete and unreliable  for the purposes of assessing TSO\u2019s effectiveness at identifying TIP  images. Therefore, we do not present fiscal year 2015 TIP test results in  this report.", "Aviation Screening Assessment Program (ASAP) Advantage  Testing. To measure TSO performance nationwide in fiscal year 2015,  TSA used standardized ASAP covert tests conducted by local TSA  testers at each airport. ASAP tests focused on checkpoint screening were  designed to assess the operational effectiveness of TSOs in identifying  and preventing prohibited items, such as knives, guns, or simulated  improvised explosive devices, from being taken through the checkpoint by  testers. In fiscal year 2015, TSA conducted 5,213 ASAP covert tests on  checkpoint screening at 170 airports.", "TSA hired a contractor in fiscal year 2015 to independently conduct ASAP  standard scenario tests at 40 airports to assess the validity of TSA testing  results at those airports. When comparing the contractor\u2019s results to the  local TSA testers\u2019 results, TSA found moderate to significant differences  in the two sets of test results for most of the 40 airports. According to TSA  officials, TSOs generally performed more poorly in the ASAP tests  conducted by the independent contractor personnel when compared to  the ASAP testing conducted by the local TSA personnel\u2014indicating that  pass rates for tests conducted by local TSA personnel were likely  showing a higher level of TSO performance than was actually the case.  TSA officials reported that the differences in test results have led them to  question the extent to which the ASAP tests accurately measure TSO  performance. As a result, we do not present the fiscal year 2015 ASAP  test results in this report.", "To address this validity issue, in April 2016, TSA officials reported that  they began using both headquarters-based covert testing teams  composed of headquarters-based TSA employees and field-based covert  testing teams composed of local testers in both the checkpoint and  checked baggage screening environments at all airports. Both  headquarters-based and field-based teams conduct the same scenario- based covert tests that were previously conducted as part of ASAP  testing. TSA officials stated that comparing the results of these separate  tests has provided TSA with a way to gauge the validity of its test  results."], "subsections": []}, {"section_title": "Checkpoint Screening Technology", "paragraphs": ["TSA officials reported that the effectiveness of checkpoint screening  technology in fiscal year 2015 is best described by each type of  machine\u2019s detection standard\u2014the specified rate of detection each  technology is required to achieve in identifying explosives or prohibited  items. Specific details about TSA\u2019s detection standards are omitted  because the information is classified. Prior to acquiring and deploying a  potential new screening technology, TSA conducts testing to evaluate  whether potential technologies can effectively achieve the detection  standards required by TSA, among other things.", "Once technology is deployed in the airport environment, TSA policy  requires at least daily calibration testing of each individual piece of  technology deployed at the checkpoint\u2014AIT machines, walk through  metal detectors, ETDs, and X-ray machines, among others\u2014to ensure  the technology is functioning properly and able to achieve the required  detection standards. For example, each day when the screening  checkpoint opens, TSOs must ensure that AIT machines successfully  complete an image quality verification, a calibration test, and an  operational test process before they are cleared for screening  operations. TSA policy requires that TSOs record the results of these  tests in logbooks and, further, that any screening equipment that does not  pass daily testing be immediately taken out of service."], "subsections": []}, {"section_title": "TSA\u2019s Checkpoint Screening System as a Whole", "paragraphs": ["In fiscal year 2015, TSA collected data on the effectiveness of its  checkpoint screening system as a whole\u2014including both screening  technology and TSO performance\u2014through Red Team covert testing  conducted by TSA\u2019s Office of Inspection (OOI). In fiscal year 2015, TSA  conducted numerous Red Team covert tests on checkpoint screening at a  random sample of U.S. airports. During passenger checkpoint testing,  each team of inspectors carries threat items, such as simulated explosive  devices, through the passenger checkpoint. If the TSO identifies the  threat item during screening, the inspector identifies him or herself to the  TSO and the test is considered a pass. If the TSO does not identify the  threat item, the inspector proceeds to the sterile area of the airport and  the test is considered a failure. According to TSA, these tests are  designed to approximate techniques that terrorists may use in order to  identify vulnerabilities in the people, processes, and technologies that  comprise the aviation security system. In addition to OOI\u2019s Red Team  testing, in fiscal year 2015 the Department of Homeland Security (DHS)  Office of Inspector General (OIG) also conducted covert tests of certain  TSA checkpoint operations at 8 U.S. airports that use AIT machines to  screen passengers. According to the DHS OIG, the objective of the tests  was to determine the effectiveness of TSA\u2019s AIT, automated target  recognition software (which displays a box around anomalies on a  generic outline of a body), and checkpoint screener performance in  identifying and resolving anomalies and potential security threats at  airport checkpoints. The results of both the OOI Red Team and the DHS  OIG\u2019s covert tests are omitted because the information is classified."], "subsections": []}]}, {"section_title": "Overview of Checked Baggage Screening", "paragraphs": ["TSA inspects passengers\u2019 checked baggage to deter, detect, and prevent  the transport of any unauthorized explosive, incendiary, or weapon  onboard an aircraft. Checked baggage screening is accomplished  through the use of explosives detection systems (EDS)\u2014which use X- rays with computed tomography technology to automatically measure the  physical characteristics of objects in baggage and automatically trigger an  alarm when objects that exhibit the physical characteristics of explosives  are detected\u2014and explosives trace detection (ETD) machines, in which  TSOs swab baggage and use chemical analysis to manually detect traces  of explosive materials\u2019 vapors and residue.", "Generally, a checked baggage screening system at airports with EDS  includes a three-level screening process. First, EDS machines perform  automated screening. If the EDS machine determines that a checked bag  requires additional screening, it sends an alarm to a TSO who performs a  secondary inspection known as On-Screen Resolution by reviewing an  image of the contents of the bag on a computer monitor. If the TSO  cannot resolve the alarm using on-screen resolution tools and determines  a physical bag search is necessary, the bag goes to the Checked  Baggage Resolution Area where a TSO performs a manual inspection of  the bag assisted by an ETD machine.", "At the end of fiscal year 2015, TSA had 1,717 EDS machines deployed at  263 airports. At airports without EDS, which are typically smaller airports,  ETD machines are the primary method for manually screening checked  baggage. At the end of fiscal year 2015, TSA had 2,291 ETD machines  deployed at all 437 commercial (i.e., TSA-regulated) airports for primary  or secondary screening of checked baggage.", "TSA officials estimate that 25 percent of total TSO time is spent on  checked baggage screening, and in fiscal year 2015, this would be the  full-time equivalent of approximately 11,000 of TSA\u2019s roughly 45,000  TSOs conducting checked baggage screening."], "subsections": []}, {"section_title": "The Effectiveness of Checked Baggage Screening in Fiscal Year 2015", "paragraphs": ["In fiscal year 2015, TSA collected data on the effectiveness of its checked  baggage screening by testing screening personnel (i.e., TSOs), screening  technology (EDS and ETD machines), and the checked baggage  screening system as a whole (i.e., the combination of TSOs and  technology)."], "subsections": [{"section_title": "Checked Baggage Screening TSOs", "paragraphs": ["In fiscal year 2015, TSA collected data on the effectiveness of its TSO  workforce in detecting or disrupting threats to aviation security in the  checked baggage environment through its APR evaluations and ASAP  Advantage covert tests.", "Annual Proficiency Reviews (APR). As discussed above, APRs  evaluate TSOs\u2019 skill in performing the various checkpoint and checked  baggage screening functions. Components of the APR focused on  checked baggage screening include tests that evaluate TSOs\u2019 ability to  resolve EDS machine alarms using the appropriate tools and practical  skills such as bag searches and the use of ETD technology.", "In calendar year 2015, TSA conducted nearly 35,000 APR component  tests specific to the checked baggage screening environment. Table 5  provides descriptions of these component tests.", "Aviation Screening Assessment Program (ASAP) Advantage. In fiscal  year 2015, TSA used standardized ASAP covert tests conducted by local  TSA testers at each airport to measure TSO performance in both the  checkpoint and checked baggage environments. Tests focused on  checked baggage screening were designed to assess the operational  effectiveness of TSOs in identifying and preventing a threat object  concealed in a checked bag from being cleared for loading onto a  passenger aircraft. In fiscal year 2015, TSA conducted 1,859 ASAP  covert tests on checked baggage screening at 225 airports.", "TSA began deploying headquarters-based covert testing teams in fiscal  year 2016 to provide a means to validate the results of covert tests  conducted by local TSA testers for both checkpoint and checked baggage  screening. However, unlike in the checkpoint environment, the  contractor did not perform ASAP covert testing on checked baggage  screening during fiscal year 2015. When we compared fiscal year 2016  headquarters-based and field-based pass rates for covert testing of  checked baggage screening, we found discrepancies that indicate covert  tests conducted by local field-based TSA testers on checked baggage  may not be reliable in accurately portraying TSO performance.  Additionally, TSA officials stated that they cannot be certain these data  are reliable. As a result, we do not present ASAP Advantage data in this  report."], "subsections": []}, {"section_title": "Checked Baggage Screening Technology and TSA\u2019s Checked Baggage Screening System as a Whole", "paragraphs": ["As with checkpoint screening technology discussed above, TSA officials  reported that in fiscal year 2015, technology deployed at airports for  checked baggage screening was calibrated and tested daily to ensure  that it was operating as intended. According to TSA officials, these daily  tests help to ensure that its screening technologies are meeting the  detection standards they were designed to achieve. TSA officials  reported that any equipment found not to meet required detection  standards was immediately taken out of service. As described above,  OOI also conducted Red Team covert testing on checked baggage  screening at airports with EDS machines in fiscal year 2015. Specific  details about TSA\u2019s detection standards and the results of OOI\u2019s covert  tests are omitted because the information is classified."], "subsections": []}]}, {"section_title": "Explosives Detection Canines", "paragraphs": ["Through its National Explosives Detection Canine Team Program, TSA  trains, deploys, and certifies explosives detection canine teams in order to  deter and detect the introduction of explosive devices into U.S.  transportation systems. Each canine team consists of a handler\u2014 generally either a state or local law enforcement officer (LEO) or TSA  employee\u2014paired with a canine trained in explosives detection.", "As of September 2015, TSA had 692 canine teams deployed to 88  airports across the United States. These teams were composed of four  types of canine teams trained to operate in the airport environment: TSA  explosives detection canine (EDC) and Passenger Screening Canine  (PSC) teams as well as LEO aviation and multimodal teams. Table 6  shows the number of canine teams by type deployed in the airport  environment as of September 2015 and describes their roles and  responsibilities."], "subsections": []}, {"section_title": "The Effectiveness of Explosives Detection Canines in Fiscal Year 2015", "paragraphs": ["In fiscal year 2015, TSA collected data on the effectiveness of its canine  teams in detecting or disrupting threats to aviation security through its  annual certification evaluation process and short notice assessments  (SNA)\u2014covert tests conducted to assess canine teams\u2019 operational  effectiveness in detecting and responding to possible explosives.", "Annual Certification Evaluations. TSA\u2019s annual evaluations assess  whether canine teams meet the explosives detection certification  standards established by the program. Following initial training, new  canine teams must demonstrate certain critical skills in order to be  certified to work in their home operating environment. After initial  certification, all TSA canine teams are evaluated on an annual basis to  maintain certification. Canine teams that fail their annual evaluation are  decertified and limited to training and operating as a visible deterrent until  they successfully complete the annual evaluation and are recertified to  conduct screening.", "To achieve EDC certification, canine teams must demonstrate their ability  to detect hidden explosive training aids across a specified number of  areas, a certain percent of the time. After passing this conventional  evaluation, PSC teams undergo further testing in different locations within  the sterile area of an airport. To achieve PSC certification, canine teams  must successfully identify an explosives-carrying target/decoy in a  specified number of search areas.", "In fiscal year 2015, TSA conducted 673 EDC annual certification  evaluations and 116 PSC evaluations. The fiscal year 2015 first-time pass  rates for EDC and PSC canine teams has been designated as sensitive  security information and thus cannot be included in a public report.", "Short Notice Assessments. TSA conducts covert testing of canine  teams to measure their effectiveness in detecting and responding to  explosives odor during normal operations. These covert tests, known as  SNAs, are conducted using one of four scenarios chosen to match a  canine team\u2019s primary area of operations\u2014an unattended bag,  unattended vehicle, cargo screening, and passenger screening. Field  Canine Coordinators\u2014TSA officials that administer SNAs\u2014are  responsible for debriefing participants after the assessment, determining  if corrective actions are necessary, and officially documenting outcomes.", "We assessed the reliability of SNA results in fiscal year 2015 and  determined that the data were not reliable for the purpose of reporting  overall pass rates. Specifically, we found duplicate entries and errors in  the data. In addition, we found that fiscal year 2015 data on pass rates  may be incomplete since the results of some SNAs may not have been  subsequently recorded in TSA\u2019s system. Further, TSA\u2019s process of  manually recording SNA results in fiscal year 2015 lacked procedures to  ensure that data entered into TSA\u2019s system were accurate and complete.", "To address these data limitations, canine program officials stated that a  new process was implemented in October 2016 to incorporate SNA  results directly into the Canine Website System\u2014a central electronic management database for various canine program data. According to  these officials, this new process will better ensure that SNA data are  complete, accurate, and reliable for use by program officials and TSA  leadership in evaluating the effectiveness of the program."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Maria Strudwick (Assistant  Director), Chuck Bausell, Claudia Becker, Bryan Bourgault, Bruce Crise,  Dominick Dale, Brianna Dieter, Michele Fejfar, Eric Hauswirth, Susan  Hsu, James Kernen, and Tom Lombardi made key contributions to this  report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-189T", "url": "https://www.gao.gov/products/GAO-18-189T", "title": "VA Real Property: Realignment May Benefit from Adopting Elements of Defense Base Realignment and Closure Process, Provided Process Challenges Are Addressed", "published_date": "2017-10-12T00:00:00", "released_date": "2017-10-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA operates one of the largest health care systems in the United States, utilizing more than 6,000 federally owned and 1,500 leased buildings. DOD has repeatedly applied the BRAC process to reduce the amount of unneeded property that it owns and leases and to save billions of dollars that could be applied to higher priority defense needs.", "This statement is based on GAO's April 2017 report related to VA facility alignment ( GAO-17-349 ) and numerous GAO reports related to the BRAC process as summarized in a June 2011 testimony ( GAO-11-704T ) and a March 2012 testimony ( GAO-12-513T ). This statement addresses (1) the factors that affect VA's facility alignment and the extent to which VA's capital-planning process facilitates the alignment of facilities with the veterans' population, and (2) the key elements and challenges affecting DOD and the Commission in BRAC 2005. Detailed information on our scope and methodologies for this work can be found in these published products, cited throughout this testimony."]}, {"section_title": "What GAO Found", "paragraphs": ["Geographic shifts in the veterans' population, changes in health care delivery, aging infrastructure, and limited stakeholder involvement affect the Department of Veterans Affairs' (VA) efforts to align its services and real property portfolio to meet the needs of veterans. For example, a shift over time from inpatient to outpatient care will likely result in underutilized space once used for inpatient care. Further, the historic status of some VA facilities adds to the complexity of converting or disposing of them. In such instances, it is often difficult and costly for VA to modernize, renovate, and retrofit these older facilities.", "GAO reported that two of the planning processes VA uses to align its facilities\u2014VA's Strategic Capital Investment Planning (SCIP) and the VA Integrated Planning (VAIP)\u2014have limitations that undermine VA's efforts to achieve its goals. Specifically:", "VA relies on the SCIP process to plan and prioritize capital projects, but VA routinely asks its facility planners to submit their next year's planned project narratives before knowing if their previous submissions have been funded. The overlapping budget cycle, which is outside of VA's control, combined with other SCIP limitations\u2014including subjective narratives, long time frames, and restricted access to information\u2014make it difficult for VA to rely on SCIP to accurately identify the capital necessary to address its service and infrastructure gaps. VA concurred that it needs to address SCIP limitations that are within its control, as GAO recommended; VA has made some progress in implementing the recommendation has made some progress in implementing the recommendation.\\", "The VAIP process is estimated to cost $108 million and to produce market-level service delivery plans and facility master plans. However, the VAIP master plans incorrectly assume that all future growth in services will be provided directly through VA facilities without considering alternatives, such as purchasing care from the community. GAO recommended that VA consider discontinuing the VAIP facility master plans pending an assessment of their value as a facility-planning tool. VA agreed with the recommendation and is implementing it while pursuing a national realignment strategy..", "Key elements of the Department of Defense's (DOD) 2005 Base Realignment and Closure (BRAC) process could benefit VA's asset and infrastructure review. The key elements included: (1) establishing goals for the process, (2) developing criteria for evaluating closures and realignments, and (3) establishing an organizational structure to develop closure and realignment options. GAO identified key challenges that affected DOD's implementation of BRAC 2005 and the results achieved; these challenges would need to be addressed if VA is to successfully apply the process. These challenges included: (1) large, complex recommendations required sustained senior leadership's attention and a high level of coordination among many stakeholders, and (2) the large number of actions that depend on each other for successful implementation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In the April 2017 report, GAO made recommendations related to capital planning and stakeholder involvement. VA concurred with the recommendations to the extent that they were within its control and has started making improvements."]}], "report": [{"section_title": "Letter", "paragraphs": ["We are pleased to be here today to discuss our work related to the  Department of Veterans Affairs\u2019 (VA) efforts to align its medical facilities  and services, as well as our work on the Department of Defense\u2019s (DOD)  military Base Realignment and Closure (BRAC) process. These efforts  are both relevant to challenges the federal government faces in real  property management.", "VA operates one of the largest health care systems in the United States,  providing care to more than 8.9 million veterans each year. VA is also one  of the largest federal property-holding agencies. In September 2014, VA\u2019s  reported inventory included 6,091 federally owned buildings and 1,586  leased buildings. However, in recent decades, the veteran population and  preferences have shifted. VA has recognized this shift and the need to  modernize its aging infrastructure and align its real property assets to  provide accessible, high-quality, and cost-effective services to veterans.  Aligning VA facilities to improve veteran access to services integrates two  of GAO\u2019s high risk areas: veterans\u2019 health care and federal real property.  In 2015, GAO placed veterans\u2019 health care on its High Risk List due to  persistent weaknesses and systemic problems with timeliness, cost- effectiveness, quality, and safety of the care provided to veterans. In  2003, GAO placed federal real property management\u2014including  management of VA real property\u2014on its High Risk List due to long- standing challenges, such as effectively disposing of excess and  underutilized federal property.", "DOD has repeatedly applied the BRAC process to reduce the amount of  unneeded property that it owns and leases. DOD has undergone five  BRAC rounds since 1988 as a means of reducing excess infrastructure  and realigning bases to meet changing force structure needs. The most  recent BRAC round in 2005 also provided opportunities for furthering  transformation and fostering jointness. As a result of these rounds, DOD  reported that it had reduced its domestic infrastructure and transferred  hundreds of thousands of acres of unneeded property to other federal  and nonfederal entities. DOD data show that the department generated  an estimated $28.9 billion in net savings or cost avoidances from the prior  four BRAC rounds through fiscal year 2003 and expects to save about $7  billion each year thereafter. Regarding the 2005 BRAC round, we  estimated that DOD saved about $15.2 billion from fiscal years 2006  through 2011 with an annual recurring savings of $3.8 billion beginning in  fiscal year 2012. These savings reflect money that could be applied to  other higher priority defense needs as well as savings from what DOD  estimated it would likely have spent to operate military installations had  they remained open.", "Our testimony today is based on our April 2017 report examining VA\u2019s  efforts to align its facilities with veterans\u2019 needs, and on numerous GAO  reports related to the BRAC process as summarized in June 2011 and  March 2012 testimonies. Today\u2019s testimony addresses (1) the factors  that affect VA\u2019s facility alignment and the extent to which VA\u2019s capital- planning process facilitates the alignment of facilities with the veterans\u2019  population, and (2) the key elements and challenges affecting DOD and  the Commission in BRAC 2005. For our April 2017 report, we reviewed  VA\u2019s facility-planning documents and data and interviewed VA officials in  headquarters and at seven medical facilities selected for their geographic  location, veteran population, and past alignment efforts. Additional  information on our scope and methodology is available in our April report.  Detailed information on our scope and methodologies for our BRAC work  can be found in the published products, which are cited throughout this  testimony. The work on which this testimony is based was conducted 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."], "subsections": [{"section_title": "VA\u2019s Efforts to Align its Facilities Are Affected by Several Factors and Are Impeded by Limitations in Its Capital-planning Processes", "paragraphs": [], "subsections": [{"section_title": "Facility Alignment Is Challenged by Shifting Veterans\u2019 Populations, Evolving Care Standards, Aging Infrastructure, and Limited Stakeholder Involvement", "paragraphs": ["Geographic shifts in the veterans\u2019 population, changes in health care  delivery, an aging infrastructure, and limited stakeholder involvement  affect VA\u2019s efforts to align its services and real property portfolio to meet  the needs of veterans. For example, there has been a shift over time from  inpatient to outpatient care. This shift will likely result in underutilized  space once used for inpatient care. In such instances, it is often difficult  and costly for VA to modernize, renovate, and retrofit these older  facilities. In June 2017, VA reported that its facility inventory includes 430  vacant or mostly vacant buildings that are, on average, more than 60  years old, and an additional 784 buildings that are underutilized.", "The historic status of some VA facilities adds to the complexity of  converting or disposing of them. In 2014, VA reported holding 2,957  historic buildings, structures, or land parcels\u2014the third most in the federal  government after DOD and the Department of the Interior. In some  instances, it may be more expensive to renovate than to demolish and  rebuild outdated facilities. In other cases, however, there may not be an  option to demolish if these buildings are designated as historic. For  example, planning officials at four medical facilities in our review told us  that state historic preservation efforts prevented the VA from demolishing  vacant buildings, even though these buildings require upkeep costs and  pose potential safety hazards. (See fig. 1.)", "VA has also encountered challenges to its facility alignment efforts, in  part, because it has not consistently followed best practices for effectively  engaging stakeholders. VA may align its facilities to meet veterans\u2019 needs  by expanding or consolidating facilities or services. Stakeholders\u2014 including veterans; local, state, and federal officials; Veterans Service  Organizations; historic preservation groups; VA staff; and Congress\u2014 often view changes as working against their interests or those of their  constituents, especially when services are eliminated or shifted from one  location to another. We found that VA has not consistently engaged with  stakeholders, and, in some cases, this inconsistency resulted in  adversarial relationships that reduced VA\u2019s ability to better align facilities  with the needs of the veteran population.", "In our April 2017 report, we recommended that VA improve stakeholder  communication guidance and evaluate its efforts. VA agreed with our  recommendations and outlined a plan to implement them."], "subsections": []}, {"section_title": "Limitations in VA\u2019s Capital- planning Processes Impede Its Alignment of Facilities SCIP Process", "paragraphs": ["Two of the planning processes VA uses to align its facilities\u2014VA\u2019s  Strategic Capital Investment Planning (SCIP) and the VA Integrated  Planning (VAIP)\u2014have limitations.", "VA relies on the SCIP process to plan and prioritize capital projects  system-wide, but SCIP\u2019s limitations\u2014including subjective narratives, long  timeframes, and restricted access to information\u2014undermine VA\u2019s ability  to achieve its goals. For example, the time between when planning  officials at VA medical facilities begin developing the SCIP narratives and  when they are notified that a project is funded has taken between 17 and  23 months over the past 6 fiscal-year\u2019s SCIP submissions. (See fig. 2.)  As such, VA routinely asks its facility planners to submit their next year\u2019s  planned project narratives before knowing if their project submissions  from the previous year have been funded.", "An official from the office that oversees SCIP told us that the timing of the  budgeting process, which is outside VA\u2019s control, contributes to these  delays. While these aspects are outside of VA\u2019s control, VA has chosen  to wait about 6 to 10 months to report the results of the SCIP scoring  process to the medical facilities. This situation makes it difficult for local  officials to understand the likelihood that their projects will receive  funding. A VA official said that for future SCIP cycles, VA plans to release  the scoring results for minor construction and non-recurring maintenance  projects to local officials earlier in the process. At the time of our review,  however, the official did not have a time frame for when VA would do this.  Although VA acknowledges many of these limitations, it has taken little  action in response. Federal standards for internal control state that  agencies should evaluate and determine appropriate corrective action for  identified limitations on a timely basis. If VA does not address known  limitations with the SCIP process, it will not have reasonable assurance  that SCIP can be used to accurately identify the capital necessary to  address VA\u2019s service and infrastructure gaps.", "In our April 2017 report, we recommended that VA address identified  limitations to the SCIP process, including limitations to scoring and  approval, and access to information. VA concurred with the  recommendation to the extent the limitations were within its control. While  VA has taken some actions, the recommendation remains open."], "subsections": [{"section_title": "VAIP Process", "paragraphs": ["The VAIP process produces a market-level health services delivery plan  for each Veterans Integrated Service Network (VISN) and a facility master  plan for each medical facility. VA has estimated the entire process to  create plans for VISNs and facilities to cost $108 million when fully  complete. However, the VAIP process\u2019s facility master plans assume all  future growth in services will be provided directly through VA facilities.  This assumption is not accurate given that (1) VA obligated about $10.1  billion to purchase care from non-VA providers in fiscal year 2015 and (2)  VA can provide care directly through its medical facilities or purchase  health care services from non-VA providers through both the Non-VA  Medical Care Program (referred to as \u201ccare in the community\u201d by VA) and  clinical contracts. The Office of Management and Budget\u2019s acquisition  guidance notes that investments in major capital assets should be made  only if no alternative private sector source can support the function at a  lower cost.", "In our April 2017 report, we recommended that VA assess the value of  the VAIP\u2019s facility master plans as a facility-planning tool, and based on  conclusions from the review, to either (1) discontinue the development of  VAIP\u2019s facility master plans or (2) address the limitations of VAIP\u2019s facility  master plans. VA concurred with the recommendation, and in August  2017, VA noted that it has discontinued its VAIP facility master plans  while VA pursues a national realignment strategy, after which it plans to  adjust its future facility master plans to incorporate pertinent information,  including care in the community realignment opportunities."], "subsections": []}]}]}, {"section_title": "Key Elements and Challenges Affecting DOD and the Commission in BRAC 2005", "paragraphs": [], "subsections": [{"section_title": "Key Elements That DOD Used to Develop Its 2005 BRAC Recommendations That Could Benefit VA Asset and Infrastructure Review", "paragraphs": ["As Congress evaluates proposed legislation for disposing of or realigning  VA property, it may wish to consider seven elements DOD relied on as it  developed its recommendations for the BRAC Commission.", "Establish goals for the process. The Secretary of Defense  emphasized the importance of transforming the military to make it  more efficient as part of the 2005 BRAC round. Other goals for the  2005 BRAC process included fostering jointness among the four  military services, reducing excess infrastructure, and producing  savings. Prior rounds focused more on reducing excess infrastructure  and producing savings.", "Develop criteria for evaluating closures and realignments. DOD  proposed selection criteria, which were made available for public  comment via the Federal Register. Ultimately, Congress enacted the  final BRAC selection criteria in law with minor modification and  specified that four selection criteria, known as the \u201cmilitary value  criteria,\u201d were to be given priority in developing closure and  realignment recommendations. Further, Congress required that the  Secretary of Defense develop and submit to Congress a force  structure plan that described the estimated size of major military units  needed to address probable threats to national security for the 20- year period beginning in 2005, along with a comprehensive inventory  of global military installations. In authorizing the 2005 BRAC round,  Congress specified that the Secretary of Defense publish a list of  recommendations for the closure and realignment of military  installations inside the United States based on the statutorily-required  20-year force structure plan and infrastructure inventory, and on the  final selection criteria.", "Estimate costs and savings to implement closure and  realignment recommendations. To address the cost and savings  criteria, DOD developed and used the Cost of Base Realignment  Actions (COBRA) model, a quantitative tool that DOD has used since  the 1988 BRAC round to provide consistency in potential cost,  savings, and return-on-investment estimates for closure and  realignment options. We found the COBRA model to be a generally  reasonable estimator for comparing potential costs and savings  among alternatives. (See fig. 3.)", "As with any model, the quality of the output from COBRA was a direct  function of the data DOD included in the model. Also, DOD\u2019s COBRA  model relied to a large extent on standard factors and averages and  did not represent budget quality estimates that were developed once  BRAC decisions were made and detailed implementation plans were  developed. Nonetheless, the financial information provided important  input into the selection process as decision makers weighed the  financial implications\u2014along with military value criteria and other  considerations\u2014in arriving at final decisions about the suitability of  various closure and realignment options.", "Establish an organizational structure. The Office of the Secretary  of Defense emphasized the need for joint cross-service groups to  analyze common business-oriented functions. For the 2005 BRAC  round, as for the 1993 and 1995 rounds, these joint cross-service  groups performed analyses and developed closure and realignment  options in addition to those developed by the military departments.  Our evaluation of DOD\u2019s 1995 BRAC round found that few cross- service recommendations were made, in part because of the lack of  high-level leadership to encourage consolidations across the  departments\u2019 functions. In the 1995 BRAC round, the joint cross- service groups submitted options through the military services for  approval, but few were approved. The number of approved  recommendations that the joint cross-service groups developed  significantly increased in the 2005 BRAC round. This increase was, in  part, because high-level leadership ensured that the options were  approved not by the military departments but rather by a DOD senior- level group, known as the Infrastructure Steering Group. As shown in  figure 4, the Infrastructure Steering Group was placed organizationally  on par with the military departments.", "Establish a common analytical framework. To ensure that the  selection criteria were consistently applied, the Office of the Secretary  of Defense, the military departments, and the seven joint cross- service groups first performed a capacity analysis of facilities and  functions. Before developing the candidate recommendations, DOD\u2019s  capacity analysis relied on data calls to hundreds of locations to  obtain certified data to assess such factors as maximum potential  capacity, current capacity, current usage, and excess capacity. Then,  the military departments and joint cross-service groups performed a  military value analysis for the facilities and functions based on primary  military value criteria, which included a facility\u2019s or function\u2019s current  and future mission capabilities, physical condition, ability to  accommodate future needs, and cost of operations.", "Develop BRAC oversight mechanisms to improve accountability  for implementation. In the 2005 BRAC round, the Office of the  Secretary of Defense for the first time required the military  departments to develop business plans to better inform the Office of  the Secretary of Defense of the status of implementation and financial  details for each of the BRAC 2005 recommendations. These business  plans included: (1) information such as a listing of all actions needed  to implement each recommendation; (2) schedules for personnel  relocations between installations; and (3) updated cost and savings  estimates by DOD based on current information. This approach  permitted senior-level intervention if warranted to ensure completion  of the BRAC recommendations by the statutory completion date.", "Involve the audit community to better ensure data accuracy. The  DOD Inspector General and military department audit agencies  played key roles in identifying data limitations, pointing out needed  corrections, and improving the accuracy of the data used in the  process. In their oversight roles, the audit organizations, which had  access to relevant information and officials as the process evolved,  helped to improve the accuracy of the data used in the BRAC process  and thus strengthened the quality and integrity of the data used to  develop closure and realignment recommendations. For example, the  auditors worked to ensure certified information was used for BRAC  analysis and reviewed other facets of the process, including the  various internal control plans, the COBRA model, and other modeling  and analytical tools that were used in the development of  recommendations."], "subsections": []}, {"section_title": "Key Challenges Affecting DOD and the Commission in BRAC 2005", "paragraphs": ["We identified two key challenges that affected DOD\u2019s implementation of  BRAC 2005 and would need to be addressed for VA to adopt a BRAC- like process for its asset and infrastructure review.", "Some transformational-type BRAC recommendations required  sustained senior leadership attention and a high level of  coordination among many stakeholders to complete by the  required date. Implementation of some transformational BRAC  recommendations\u2014especially those where a multitude of  organizations had roles to play to ensure the achievement of the goals  of the recommendation\u2014illustrated the need to involve key  stakeholders and effective planning. For example, the Defense  Logistics Agency committed sustained high-level leadership and  included relevant stakeholders to address implementation challenges  faced with the potential for disruptions to depot operations during  implementation of the BRAC consolidation recommendation. To  implement the BRAC recommendations, the agency had to develop  strategic agreements with the services that ensured that all  stakeholders agreed on its plans for implementation, and had to  address certain human capital and information technology challenges.", "Large number of actions and interdependent recommendations  complicated the implementation process. The large number and  variety of BRAC actions presented challenges during implementation.  The BRAC 2005 round had more individual actions (813) than the four  prior rounds combined (387). The executive staff of the Commission  told us that it was more difficult to assess the costs and the amount of  time for the savings to offset the implementation costs since many of  the recommendations contained multiple interdependent actions, all of  which needed to be reviewed. Specifically, many of the BRAC 2005  recommendations were interdependent and had to be completed in a  sequential fashion within the statutory implementation period. In cases  where interdependent recommendations required multiple relocations  of large numbers of personnel, delays in completing one BRAC  recommendation had a cascading effect on the implementation of  other recommendations. Specifically, DOD had to synchronize the  relocations of over 123,000 people with about $24.7 billion in new  construction or renovation. Commission officials told us that in prior  BRAC rounds each base was handled by a single integrated  recommendation. However, in BRAC 2005, many installations were  simultaneously affected by multiple interconnected BRAC  recommendations. Given the complexity of interdependent  recommendations, the Office of the Secretary of Defense required the  military departments and defense agencies to provide periodic  updates on implementation challenges and progress.", "Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes our prepared statement. We are happy to answer any  questions related to our work on VA\u2019s efforts to align its medical facilities  and services or on DOD\u2019s BRAC process."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact David Wise at (202) 512-2834 or  wised@gao.gov regarding federal real property, or Brian Lepore at (202)  512-4523 or leporeb@gao.gov regarding the BRAC process. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Other individuals who made  key contributions to this testimony include Keith Cunningham, Assistant  Director; Gina Hoffman, Assistant Director; Tracy Barnes; Jeff Mayhew;  Kevin Newak; Richard Powelson; Malika Rice; Jodie Sandel; Eric  Schwab; Amelia M. Weathers; and Crystal Wesco.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-365", "url": "https://www.gao.gov/products/GAO-18-365", "title": "Freedom of Information Act: Agencies Are Implementing Requirements but Additional Actions Are Needed", "published_date": "2018-06-25T00:00:00", "released_date": "2018-06-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FOIA requires federal agencies to provide the public with access to government records and information based on the principles of openness and accountability in government. Each year, individuals and entities file hundreds of thousands of FOIA requests. In the last 9 fiscal years, federal agencies subject to FOIA have received about 6 million requests.", "GAO was asked to review federal agencies' compliance with FOIA requirements. Our objectives, among others, were to (1) determine the extent to which agencies have implemented selected FOIA requirements; (2) describe the methods established by agencies to reduce backlogged requests and the effectiveness of those methods; and (3) identify any statutory exemptions that have been used by agencies as the basis for withholding (redacting) information from requesters.", "To do so, GAO selected 18 agencies based on their size and other factors and assessed their policies against six FOIA requirements. GAO also reviewed the agencies' backlog reduction plans and developed a catalog of statutes that agencies have used to withhold information."]}, {"section_title": "What GAO Found", "paragraphs": ["All 18 selected agencies had implemented three of six Freedom of Information Act (FOIA) requirements reviewed. Specifically, all agencies had updated response letters to inform requesters of the right to seek assistance from FOIA public liaisons, implemented request tracking systems, and provided training to FOIA personnel. For the three additional requirements, 15 agencies had provided online access to government information, such as frequently requested records, 12 agencies had designated chief FOIA officers, and 12 agencies had published and updated their FOIA regulations on time to inform the public of their operations. Until these agencies address all of the requirements, they increase the risk that the public will lack information that ensures transparency and accountability in government operations.", "The 18 selected agencies had backlogs of varying sizes, with 4 agencies having backlogs of 1,000 or more requests during fiscal years 2012 through 2016. These 4 agencies reported using best practices identified by the Department of Justice, such as routinely reviewing metrics, as well as other methods, to help reduce their backlogs. Nevertheless, these agencies' backlogs fluctuated over the 5-year period (see figure). The 4 agencies with the largest backlogs attributed challenges in reducing their backlogs to factors such as increases in the number and complexity of FOIA requests. However, these agencies lacked plans that described how they intend to implement best practices to reduce backlogs. Until agencies develop such plans, they will likely continue to struggle to reduce backlogs to a manageable level.", "Agencies used various types of statutory exemptions to withhold information when processing FOIA requests during fiscal years 2010 to 2016. The majority of these fell into the following categories: personally identifiable information, national security, law enforcement and investigations, and confidential and commercial business information."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making recommendations to 16 agencies to post records online, designate chief FOIA officers, update regulations, and develop plans to reduce backlogs. Nine agencies agreed with the recommendations, 1 both agreed and disagreed, 2 disagreed, and 4 neither agreed nor disagreed. GAO continues to believe the recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Freedom of Information Act (FOIA), which was enacted into law more  than 50 years ago, requires federal agencies to provide the public with  access to government records and information based on the principles of  openness and accountability in government. Each year, individuals and  entities file hundreds of thousands of FOIA requests for information on  numerous topics that contribute to the understanding of government  actions. These topics have included, among others, the disclosure of  waste, fraud, and abuse; conditions such as unsafe consumer products  and harmful drugs; as well as information related to the government\u2019s  assistance to corporations during the U.S. financial crisis of 2008. In the  last 9 fiscal years, agencies subject to FOIA have reported receiving  about 6 million requests.", "Given the significance of FOIA, Congress has had a longstanding interest  in the manner in which the act is being implemented, including the extent  to which federal agencies respond to FOIA requests, the timeliness of the  responses, and the number and nature of exemptions claimed by  agencies in withholding requested information. Since 1978, we have  issued a number of reports that have addressed various aspects of  federal agencies\u2019 efforts to implement the act.", "At your request, we reviewed federal agencies\u2019 compliance with FOIA  requirements, backlogs, use of exemptions, and FOIA requests related to  the 2008 financial crisis. Our specific objectives were to (1) determine the  extent to which agencies have implemented selected FOIA requirements;  (2) describe the methods established by agencies to reduce backlogged  requests and the effectiveness of those methods; (3) identify any  statutory (b)(3) exemptions that have been used by agencies as the basis  for withholding (redacting) information; and (4) determine what FOIA  requests, if any, agencies received and processed that related to entities  that received government assistance amounting to 50 percent or more  ownership by the federal government during the 2008 financial crisis.", "To address the first and second objectives, we reviewed the FOIA-related  actions of a nonprobability sample of 18 federal agencies. We identified  these agencies by considering: the number of FOIA requests received,  the sizes of FOIA backlogs, and the average time for processing FOIA  requests for fiscal years 2012 through 2016. We also chose the agencies  to represent a range of sizes (by number of employees)\u2014large (10,000 or  more), medium (1,000 to 9,999), and small (999 or fewer). Table 1 lists  the selected agencies by size.", "For the first objective, we reviewed six FOIA requirements outlined in the  FOIA Improvement Act of 2016 and the OPEN Government Act of 2007.  These specific requirements call for agencies to (1) update response  letters, (2) implement tracking systems, (3) provide FOIA training, (4),  provide records online, (5) designate chief FOIA officers, and (6) update  and publish timely and comprehensive regulations.", "We then obtained and reviewed available documentation from the 18  selected agencies describing their decisions and actions related to the  requirements. This documentation included policies pertaining to the  processing and tracking of FOIA requests and appeals, the methods used  to communicate with requesters, and any related training offered to  personnel involved in processing FOIA requests. We compared the  agencies\u2019 documentation to FOIA implementation guidance issued by the  Department of Justice (Justice). We also interviewed relevant officials at  each selected agency.", "In addition, we interviewed officials of the Office of Management and  Budget (OMB) and Justice\u2019s Office of Information Policy (OIP) to discuss  the status of efforts to develop a government-wide FOIA request portal,  as required by the 2016 amendments to FOIA. We also met with  members of the Chief FOIA Officers Council, as well as officials in  Justice\u2019s OIP and the National Archives and Records Administration\u2019s  (NARA) Office of Government Information Services (OGIS) to determine  what, if any, actions these agencies have taken to assist FOIA-reporting  agencies with complying with the requirements of the 2016 amendments  to FOIA. The findings related to our first objective are not generalizable to  the 117 FOIA reporting agencies.", "For the second objective, we first reviewed requirements for agencies to  produce backlog reduction plans, as outlined in Justice\u2019s annual chief  FOIA officer report guidance and OMB\u2019s Open Government Directive of  2009. We then determined whether agencies had developed such plans  as required, by interviewing relevant agency personnel and reviewing  existing plans. Further, we analyzed data on Justice\u2019s FOIA.gov website  to identify any instances of a reported reduction in an agency\u2019s FOIA  backlog when the agency had a backlog reduction plan in place.", "To assess the reliability of the data we retrieved from FOIA.gov, we  interviewed knowledgeable officials in Justice\u2019s OIP and electronically  tested the data for outliers, missing values, and syntactical discrepancies.  We found the data to be sufficiently reliable for the purposes of reporting  agencies\u2019 total FOIA requests and FOIA backlogs in fiscal years 2012  through 2016  We also compared best practices for reducing backlogs, as identified by  Justice\u2019s OIP, with each agency\u2019s procedures to determine the extent to  which the practices were being used. In addition, we interviewed relevant  officials at each selected agency to determine the reasons for any  changes in the number of backlogged requests at the agency and what  actions the agency was taking to reduce its backlog or implement  reduction plans. The findings from our second objective are not  generalizable to the 117 FOIA reporting agencies.", "To address the third objective, determining the exemptions that have  been used by agencies as the basis for withholding (redacting)  information, we developed a catalog of (b)(3) statutes that agencies  previously have used, or reasonably could have used, to withhold  information in FOIA records under the (b)(3) exemption. To develop the  catalog, we compiled a list of (b)(3) exemptions, along with the number of  times each exemption was used by at least 1 of 117 agencies for which  annual FOIA report data covering fiscal years 2010 through 2016 were  available on Justice\u2019s FOIA.gov website. We refined our list of agencies  that used (b)(3) exemptions by standardizing the statutes\u2019 citations to  ensure they consistently referred to existing U.S. Code sections.", "Further, to create our catalog we (1) categorized each (b)(3) statute  based on the general subject matter (2) identified the number of times  each exemption was used by agencies, and (3) determined the date of  the most recent legislative action for each statute to identify which  statutes were subject to a 2009 amendment to the (b)(3) exemption. To  assess the reliability of the data we retrieved from FOIA.gov, we  electronically tested the data for outliers, missing values, and syntactical  discrepancies. We also interviewed relevant agency officials at Justice to  discuss their actions to ensure the consistency of the data presented in  FOIA.gov on agencies\u2019 uses of FOIA (b)(3) exemptions. We found the  data to be sufficiently reliable for the purposes of this objective.", "For the fourth objective, we reviewed reports that discussed entities that  received Troubled Asset Relief Program (TARP) assistance during the  2008 financial crisis, such as the Department of Treasury\u2019s (Treasury)  Monthly Reports to Congress (dated October 2008 and November  2014), and relevant prior GAO reports. Our work focused on identifying  those entities in which Treasury held 50 percent or more of the entity\u2019s  common stock and the dates during which Treasury held that stock. As a  result of this review, we identified three corporations in which Treasury  held 50 percent or more of the entities\u2019 common stock during certain  periods between 2008 through 2014. These three corporations were the  American International Group (AIG), General Motors (GM), and General  Motors Acceptance Corporation (Ally). We also interviewed cognizant  agency officials at the Department of the Treasury.", "In addition to Treasury, we identified three other agencies that received  FOIA requests related to the identified entities\u2014the Federal Deposit  Insurance Corporation (FDIC), Federal Reserve Board, and the Office of  the Comptroller of Currency and reviewed their handling of FOIA requests  relating to AIG, Ally, and GM during the calendar years that Treasury  held 50 percent or more common stock (2008 through 2014). In this  regard, we reviewed the requests to determine (1) the number of requests  received, (2) the resolution of the requests, and (3) the length of time it  took the agency to respond. Lastly, we interviewed relevant agency  officials at each of the four selected agencies to better understand if and  how FOIA requests were received and processed.", "We conducted this performance audit from January 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. A more detailed discussion of  our objectives, scope, and methodology is provided in appendix I."], "subsections": [{"section_title": "Background", "paragraphs": ["The Freedom of Information Act establishes a legal right of access to  government information on the basis of the principles of openness and  accountability in government. Before FOIA\u2019s enactment in 1966, an  individual seeking access to federal records faced the burden of establishing a \u201cneed to know\u201d before being granted the right to examine a  federal record. FOIA established a \u201cright to know\u201d standard, under which  an organization or person could receive access to information held by a  federal agency without demonstrating a need or reason. The \u201cright to  know\u201d standard shifted the burden of proof from the individual to a  government agency and required the agency to provide proper  justification when denying a request for access to a record.", "Any person, defined broadly to include attorneys filing on behalf of an  individual, corporations, or organizations, can file a FOIA request. For  example, an attorney can request labor-related workers\u2019 compensation  files on behalf of his or her client, and a commercial requester, such as a  data broker who files a request on behalf of another person, may request  a copy of a government contract. In response, an agency is required to  provide the relevant record(s) in any readily producible form or format  specified by the requester, unless the record falls within a permitted  exemption that provides limitations on the disclosure of information.  Appendix II includes a table describing the nine specific exemptions that  can be applied to withhold information that, for example, is classified,  confidential commercial, privileged, privacy, or falls into one or several  law enforcement categories."], "subsections": [{"section_title": "FOIA Amendments and Guidance Call for Improvements in How Agencies Process Requests", "paragraphs": ["Various amendments have been enacted and guidance issued to help  improve agencies\u2019 processing of FOIA requests, including:", "The Electronic Freedom of Information Act Amendments of 1996 (e- FOIA amendments) strengthened the requirement that federal  agencies respond to a request in a timely manner and reduce their  backlogged requests. The amendments, among other things, made  a number of procedural changes, including allowing a requester to  limit the scope of a request so that it could be processed more quickly  and requiring agencies to determine within 20 working days whether a  request would be fulfilled. This was an increase from the previously  established time frame of 10 business days.", "The amendments also authorized agencies to multi-track requests\u2014 that is, to process simple and complex requests concurrently on  separate tracks to facilitate responding to a relatively simple request  more quickly. In addition, the amendment encouraged online, public  access to government information by requiring agencies to make  specific types of records available in electronic form.", "Executive Order 13392, issued by the President in 2005, directed  each agency to designate a senior official as its chief FOIA officer.  This official was to be responsible for ensuring agency-wide  compliance with the act by monitoring implementation throughout the  agency and recommending changes in policies, practices, staffing,  and funding, as needed. The chief FOIA officer was directed to review  and report on the agency\u2019s performance in implementing FOIA to  agency heads and to Justice in such times and formats established by  the Attorney General. (These are referred to as chief FOIA officer  reports.)", "The OPEN Government Act, which was enacted in 2007, made the  2005 executive order\u2019s requirement for agencies to have a chief FOIA  officer a statutory requirement. It also required agencies to include  additional statistics in their annual FOIA reports, such as more details  on processing times and the agency\u2019s 10 oldest pending requests,  appeals, and consultations.", "The FOIA Improvement Act of 2016 addressed procedural issues,  including requiring that agencies: (1) make records available in an  electronic format if they have been requested three or more times; (2)  notify requesters that they have a maximum of 90 days to file an  administrative appeal, and (3) provide dispute resolution services at  various times throughout the FOIA process. This act also created  more duties for chief FOIA officers, including requiring them to offer  training to agency staff regarding FOIA responsibilities. The act also  revised and added new obligations for OGIS, and created the Chief  FOIA Officers Council to assist in compliance and efficiency. Further,  the act required OMB, in consultation with Justice, to create a  consolidated online FOIA request portal that allows the public to  submit a request to any agency through a single website."], "subsections": []}, {"section_title": "FOIA Authorizes Agencies to Use Other Federal Statutes to Withhold Information Prohibited from Disclosure", "paragraphs": ["In responding to requests, FOIA authorizes agencies to utilize one of nine  exemptions to withhold portions of records, or the entire record. Agencies  may use an exemption when it has been determined that disclosure of the  requested information would harm an interest related to certain protected  areas. These nine exemptions (described in appendix II) can be applied  by agencies to withhold various types of information, such as information  concerning foreign relations, trade secrets, and matters of personal  privacy.", "One such exemption, the statutory (b)(3) exemption, specifically  authorizes withholding information under FOIA on the basis of a law  which:  requires that matters be withheld from the public in such a manner as  to leave no discretion on the issue; or establishes particular criteria for withholding or refers to particular  types of matters to be withheld; and  if enacted after October 28, 2009, specifically refers to section  552(b)(3) of title 5, United States Code.", "To account for agencies use of the statutory (b)(3) exemptions, FOIA  requires each agency to submit, in its annual report to Justice, a complete  listing of all statutes that the agency relied on to withhold information  under exemption (b)(3). The act also requires that the agency describe for  each statute identified in its report (1) the number of occasions on which  each statute was relied upon; (2) a description of whether a court has  upheld the decision of the agency to withhold information under each  such statute; and (3) a concise description of any information withheld.", "Further, to provide an overall summary of the statutory (b)(3) exemptions  used by agencies in a fiscal year, Justice produces consolidated annual  reports that list the statutes used by agencies in conjunction with (b)(3)."], "subsections": []}, {"section_title": "FOIA Request Process", "paragraphs": ["As previously noted, agencies are generally required by the e-FOIA  amendments of 1996 to respond to a FOIA request within 20 working  days. Once received, the request is to be processed through multiple  phases, which include assigning a tracking number, searching for  responsive records, and releasing the records response to the requester.", "Also, FOIA allows a requester to challenge an agency\u2019s final decision on  a request through an administrative appeal or a lawsuit. Agencies  generally have 20 working days to respond to an administrative appeal.", "Figure 1 provides a simplified overview of the FOIA request and appeals  process.", "In a typical agency, as indicated, during the intake phase, a request is  logged into the agency\u2019s FOIA tracking system, and a tracking number is  assigned. The request is then reviewed by FOIA staff to determine its  scope and level of complexity. The agency then sends a letter or email  to the requester acknowledging receipt of the request, with a unique tracking number that the requester can use to check the status of the  request.", "Next, FOIA staff (noncustodian) begin the search to retrieve the  responsive records. They conduct a search if the agency\u2019s records are  centralized or route the request to the appropriate program office(s), or do  both, as warranted. This step may include requesting that the custodian  (owner) of the record search and review paper and electronic records  from multiple locations and program offices.", "Agency staff then process the responsive records, which includes  determining whether a portion or all of any record should be withheld  based on FOIA\u2019s exemptions. If a portion or all of any record is the  responsibility of another agency, FOIA staff may consult with the other  agency or may send (\u201crefer\u201d) the document(s) to that other agency for  processing. After processing and redaction, a request is reviewed for  errors and to ensure quality. The documents are then released to the  requester, either electronically or by regular mail."], "subsections": []}, {"section_title": "FOIA Oversight and Implementation", "paragraphs": ["Responsibility for the oversight of FOIA implementation is spread across  several federal offices and other entities. These include Justice\u2019s OIP,  NARA\u2019s OGIS, and the Chief FOIA Officers Council. These oversight  offices and the council have taken steps to assist agencies to address the  FOIA provisions.", "Justice\u2019s OIP is responsible for encouraging agencies\u2019 compliance with  FOIA and overseeing their implementation of the act. In this regard, the  office, among other things, provides guidance, compiles information on  FOIA compliance, provides FOIA training, and prepares annual summary  reports on agencies\u2019 FOIA processing and litigation activities. The office  also offers FOIA counseling services to government staff and the public.", "Issuing guidance. OIP has developed guidance, available on its  website, to assist federal agencies by instructing them in how to  ensure timely determinations on requests, expedite the processing of  requests, and reduce backlogs. The guidance also informs agencies  on what should be contained in their annual FOIA reports to Justice\u2019s  Attorney General.", "The office also has documented ways for federal agencies to address  backlog requests. In March 2009 the Attorney General issued  guidance and related policies to encourage agencies to reduce their  backlogs of FOIA requests. In addition, in December 2009, OMB  issued a memorandum on the OPEN Government Act, which called  for a reduction in backlogs and the publishing of plans to reduce  backlogs. Further, in August 2014 and December 2015, OIP held best  practices workshops and issued guidance to agencies on reducing  FOIA backlogs and improving timeliness of agencies\u2019 responses to  FOIA requests. The OIP guidance instructed agencies to obtain  leadership support, routinely review FOIA processing metrics, and set  up staff training on FOIA.", "Overseeing agencies\u2019 compliance. OIP collects information on  compliance with the act by reviewing agencies\u2019 annual FOIA reports  and chief FOIA officer reports. These reports describe the number of  FOIA requests received and processed in a fiscal year, as well as the  total costs associated with processing and litigating requests.", "Providing training. OIP provides a full suite of FOIA training for  agency FOIA professionals. This training gives instruction on all  aspects of FOIA and is designed for all levels of professionals. For  example, the office offers an annual training class that provides a  basic overview of the act, as well as hands-on courses about the  procedural requirements involved in processing a request from start to  finish. In addition, it offers a seminar outlining successful litigation  strategies for attorneys who handle FOIA cases. OIP also provides  agencies customized training upon request.", "Preparing annual reports. Every year, OIP prepares three major  reports for the public, the President, and/or Congress. The first report,  Summary of Annual FOIA Reports, is a summary of the information  contained in the annual FOIA reports that are prepared by each of the  federal agencies subject to the FOIA. The report also provide a  statistical breakdown of the government\u2019s overall FOIA administration.  The second report, Summary of Agency Chief FOIA Officer Reports,  is a summary of the annual chief FOIA officer reports and an  assessment of agencies\u2019 progress in administering FOIA. This report  summarizes government-wide efforts to improve FOIA in five key  areas of FOIA administration, and it individually scores each agency  on several milestones tied to these efforts. The third report, the  Justice FOIA Litigation and Compliance Report, which is directed to  Congress and the President, describes Justice\u2019s efforts to oversee  and encourage government-wide compliance with FOIA, and includes  a list of, and information about, FOIA matters in litigation.", "NARA\u2019s OGIS was established by the OPEN Government Act of 2007 as  the federal FOIA ombudsman tasked with resolving federal FOIA disputes  through mediation as a nonexclusive alternative to litigation. OGIS\u2019s  responsibilities include reviewing agencies\u2019 policies, procedures, and  compliance with the statute; identifying methods to improve compliance;  and educating its stakeholders about the FOIA process.", "The 2016 FOIA amendments required agencies to update response  letters to FOIA requesters to include information concerning the roles of  OGIS and agency\u2019s FOIA public liaisons. As such, OGIS and Justice  worked together to develop a response letter template that includes the  required language for agency letters. In addition, OGIS, charged with  reviewing agency\u2019s compliance with FOIA, launched a FOIA compliance  program in 2014. OGIS also developed a FOIA compliance self- assessment program, which is intended to help OGIS look for potential  compliance issues across federal agencies.", "The Chief FOIA Officers Council is co-chaired by the Director of OIP  and the Director of OGIS. Council members include senior  representatives from OMB, OIP, and OGIS, together with the chief FOIA  officers of each agency, among others. The council\u2019s FOIA-related  responsibilities include: developing recommendations for increasing FOIA compliance and disseminating information about agency experiences, ideas, best  practices, and innovative approaches;  identifying, developing, and coordinating initiatives to increase  transparency and compliance; and promoting the development and use of common performance  measures for agency compliance."], "subsections": []}, {"section_title": "Selected Agencies Collect and Maintain Records That Can Be Subject to FOIA Requests", "paragraphs": ["The 18 agencies selected for our review are charged with a variety of  operations that affect many aspects of federal service to the public. Thus,  by the nature of their missions and operations, the agencies have  responsibility for vast and varied amounts of information that can be  subject to a FOIA request. For example, the Department of Homeland  Security\u2019s (DHS) mission is to protect the American people and the  United States homeland. As such, the department maintains information  covering, among other things, immigration, border crossings, and law  enforcement. As another example, the Department of the Interior\u2019s (DOI)  mission includes protecting and managing the nation\u2019s natural resources  and, thus, providing scientific information about those resources. Table 2  provides details on each of the 18 selected agencies\u2019 missions and the  types of information they maintain.", "The 18 selected agencies reported that they received and processed  more than 2 million FOIA requests from fiscal years 2012 through 2016.  Over this 5-year period, the number of reported requests received  fluctuated among the agencies. In this regard, some agencies saw a  continual rise in the number of requests, while other agencies  experienced an increase or decrease from year to year. For example,  from fiscal years 2012 through 2014, DHS saw an increase in the number  of requests received (from 190,589 to 291,242), but in fiscal year 2015,  saw the number of requests received decrease to 281,138. Subsequently,  in fiscal year 2016, the department experienced an increase to 325,780  requests received.", "In addition, from fiscal years 2012 through 2015, the reported numbers of  requests processed by the selected agencies showed a relatively steady  increase. However, in fiscal year 2016, the reported number of requests  processed by these agencies declined. Further, figure 2 provides a  comparison of the total number of requests received and processed in  this 5-year period."], "subsections": []}]}, {"section_title": "Selected Agencies Implemented the Majority of FOIA Requirements Reviewed", "paragraphs": ["Among other things, the FOIA Improvement Act of 2016 and the OPEN  Government Act of 2007 call for agencies to (1) update response letters,  (2) implement tracking systems, (3) provide FOIA training, (4), provide  records online, (5) designate chief FOIA officers, and (6) update and  publish timely and comprehensive regulations. The 18 agencies that we  included in our review had implemented the majority of the 6 selected  FOIA requirements. Specifically,", "18 agencies updated response letters,", "16 agencies implemented tracking that was compliant with  requirements for people with disabilities", "18 agencies provided FOIA training for agency staff", "15 agencies provided records online,", "13 agencies designated chief FOIA officers, and", "5 agencies published their updated FOIA regulations by the required  due date, and 8 agencies did so after the due date.", "Figure 3 summarizes the extent to which the 18 agencies implemented  the selected FOIA requirements.", "Beyond these selected agencies, Justice\u2019s OIP and OMB also had taken  steps to develop a government-wide FOIA request portal that is intended  to allow the public to submit a request to any agency from a single  website."], "subsections": [{"section_title": "Selected Agencies Had Updated Their FOIA Response Letters", "paragraphs": ["The 2016 amendments to FOIA required agencies to include specific  information in their responses when making their determinations on  requests. If part of a request is denied, for example, agencies must inform  requesters that they may seek assistance from the FOIA public liaison of the agency or OGIS,   file an appeal to an adverse determination within a period of time that  is not less than 90 days after the date of such adverse determination;  and seek dispute resolution services from the FOIA public liaison of the  agency or OGIS.", "Among the 18 selected agencies, all had updated their FOIA response  letters to include this required information."], "subsections": []}, {"section_title": "All Selected Agencies Had Implemented FOIA Tracking Systems and Most Were Compliant with Requirements for People with Disabilities", "paragraphs": ["Various FOIA amendments and guidance call for agencies to use  automated systems to improve the processing and management of  requests. In particular, the OPEN Government Act of 2007 amended  FOIA to require that federal agencies establish a system to provide  individualized tracking numbers for requests that will take longer than 10  days to process and establish telephone or Internet service to allow  requesters to track the status of their requests.", "Further, the President\u2019s January 2009 Freedom of Information Act  memorandum instructed agencies to use modern technology to inform  citizens about what is known and done by their government. In addition,  FOIA processing systems, like all automated information technology  systems, are to comply with the requirements of Section 508 of the  Rehabilitation Act of 1973 (Rehabilitation act (as amended)). This act  requires federal agencies to make their electronic information accessible  to people with disabilities.", "Each of the 18 selected agencies had implemented a system that  provides capabilities for tracking requests received and processed,  including an individualized number for tracking the status of a request.  Specifically,", "Ten agencies used commercial automated systems, (DHS, EEOC,  FDIC, FTC, Justice, NARA, NASA, NTSB, Pension Benefit Guaranty  Corporation, and USAID).", "Three agencies developed their own agency systems (State, DOI, and  TVA).", "Five agencies used Microsoft Excel or Word to track requests  (Administrative Conference of the United States, American Battle  Monuments Commission, Broadcasting Board of Governors, OMB,  and U.S. African Development Foundation).", "Further, all of the agencies had established telephone or Internet services  to assist requesters in tracking the status of requests; and they used  modern technology (e.g., mobile applications) to inform citizens about  FOIA. For example, the commercial systems allow requesters to submit a  request and track the status of that request online. In addition, DHS  developed a mobile application that allows FOIA requesters to submit  requests and check the status of existing requests.", "However, while 16 agencies FOIA tracking systems were compliant with  requirements of Section 508 of the Rehabilitation Act (as amended), two  agencies\u2014TVA and DOI\u2014had systems that were not compliant.  According to TVA officials, the agency does not have a 508 compliance  certification. DOI officials stated that its FOIA system will undergo 508  compliance testing but did provide a date for completion of the testing.  Having systems that are compliant with Section 508 of the Rehabilitation  Act (as amended) is essential to ensure that the department\u2019s electronic  information is accessible to all individuals, including those with disabilities."], "subsections": []}, {"section_title": "Agencies\u2019 Chief FOIA Officers Have Offered FOIA Training", "paragraphs": ["The 2016 FOIA amendments require agencies\u2019 chief FOIA officers to offer  training to agency staff regarding their responsibilities under FOIA. In  addition, Justice\u2019s OIP has advised every agency to make such training  available to all of their FOIA staff at least once each year. The office has  also encouraged agencies to take advantage of FOIA training  opportunities available throughout the government.", "The 18 selected agencies\u2019 chief FOIA officers offered FOIA training  opportunities to staff in fiscal years 2016 and 2017. For example:", "Twelve agencies provided training that gave an introduction and  overview of FOIA (the American Battle Monuments Commission,  Broadcasting Board of Governors, EEOC, Justice, FDIC, FTC, NARA,  Pension Benefit Guaranty Corporation, State, TVA, U.S. African  Development Foundation, and USAID).", "Four agencies offered training for their agencies\u2019 online FOIA tracking  and processing systems (DOI, EEOC, NTSB, and Pension Benefit  Guaranty Corporation).", "Five agencies provided training on responding to, handling, and  processing FOIA requests (DHS, DOI, EEOC, Justice, and State).", "Seven agencies offered training on understanding and applying the  exemptions under FOIA (the Broadcasting Board of Governors,  EEOC, FDIC, FTC, Justice, State, and U.S. African Development  Foundation).", "Four agencies offered training on the processing of costs and fees  (EEOC, Justice, NASA and TVA)."], "subsections": []}, {"section_title": "The Majority of Selected Agencies Posted Required Records Online", "paragraphs": ["Memorandums from both the President and the Attorney General in 2009  highlighted the importance of online disclosure of information and further  directed agencies to make information available without a specific FOIA  request. Further, FOIA required online access to government  information and required agencies to make information available to the  public in electronic form for four categories: agency final opinions and orders, administrative staff manuals and staff instructions that affect the  frequently requested records.", "While all 18 agencies that we reviewed posted records online, only 15 of  them had posted all categories of information, as required by the FOIA.  Specifically, 7 agencies\u2014the American Battle Monuments Commission,  the Pension Benefit Guaranty Corporation, and EEOC, FDIC, FTC,  Justice, and State\u2014had, as required, made records in all four categories  publicly available online. In addition, 5 agencies that were only required to  publish online records in 3 categories\u2014the Administrative Conference of  the United States, Broadcasting Board of Governors, DHS, OMB, and  USAID\u2014 had done so. Further, 3 agencies that were only required to  publish online records in two of the categories\u2014U.S. African  Development Foundation, NARA, and TVA\u2014had done so. The remaining  3 agencies\u2014DOI, NASA, and NTSB\u2014had posted records online for three  of four required categories.", "Regarding why the three agencies did not post all of their four required  categories of online records, DOI officials stated that the agency does not  make publicly available all FOIA records that have been requested three  or more times, as it does not have the time to post all such records that  have been requested. NASA officials explained that, while the agency  issues final opinions, it does not post them online. NTSB officials said  they try to post information that is frequently requested, but they do not  post the information on a consistent basis.", "Making the four required categories of information available in electronic  form is an important step in allowing the public to easily access to  government documents. Until these agencies make all required  categories of information available in electronic form, they cannot ensure  that they are providing the required openness in government."], "subsections": []}, {"section_title": "Most Agencies Designated a Senior Official as a Chief FOIA Officer", "paragraphs": ["In 2005, the President issued an executive order that established the role  of a chief FOIA officer. In 2007, amendments to FOIA required each  agency to designate a chief FOIA officer who shall be a senior official at  the assistant secretary or equivalent level.", "Of the 18 selected agencies, 13 agencies have chief FOIA officers who  are senior officials at the assistant secretary or equivalent level. The  assistant secretary level is comparable to senior executive level positions  at levels III, IV, and V. Specifically,", "State has designated its Assistant Secretary of Administration, Bureau", "DOI and NTSB had designated their Chief Information Officers;", "Administrative Conference of the United States, Broadcasting Board  of Governors, FDIC, NARA, and U.S. African Development  Foundation have designated their general counsels;   Justice, NASA, TVA, and USAID designated their Associate Attorney  General, Associate Administrator for Communications, the Vice  President for Communications, and the Assistant Administrator for the  Bureau of Management, respectively; and", "DHS designated its Chief Privacy Officer.", "However, 5 agencies\u2014American Battle Monuments Commission, EEOC,  Pension Benefit Guaranty Corporation, FTC, and OMB\u2014do not have  chief FOIA officers who are senior officials at the assistant secretary or  equivalent level. According to officials from 4 of these agencies, the  agencies all have chief FOIA officers and officials believed they had  designated the appropriate officials. Officials at FTC acknowledged that  the chief FOIA officer position is not designated at a level equivalent to an  assistant secretary but a senior position within the agency. However,  while there are chief FOIA officers at these agencies, until the chief FOIA  officers are designated at the Assistant Secretary or equivalent level, they  will lack assurance regarding the necessary authority to make decisions  about agency practices, personnel, and funding."], "subsections": []}, {"section_title": "Most Selected Agencies Updated Regulations as Required to Inform the Public of Their FOIA Operations", "paragraphs": ["FOIA requires federal agencies to publish regulations in the Federal  Register that inform the public of their FOIA operations. Specifically, in  2016, FOIA was amended to require agencies to update their regulations  regarding their FOIA operations. To assist agencies in meeting this  requirement, OIP created a FOIA regulation template. Among other  things, OIP\u2019s guidance encouraged agencies to: describe their dispute resolution process, describe their administrative appeals process for response letters of  denied requests, notify requesters that they have a minimum of 90 days to file an  include a description of what happens when there are unusual  circumstances, as well as restriction on agencies\u2019 abilities to charge  certain fees when FOIA's times limits are not met;  and update the regulations in a timely manner (i.e., update regulations by  180 days after the enactment of the 2016 FOIA amendment).", "Five agencies in our review\u2014DHS, DOI, FDIC, FTC, and USAID\u2014 addressed all five requirements in updating their regulations. In addition,  seven agencies addressed four of the five requirements: the  Administrative Conference of the United States, EEOC, Justice, NARA,  NTSB, Pension Benefit Guaranty Corporation, and TVA did not update  their regulations in a timely manner.", "Further, four agencies addressed three or fewer requirements (U.S.  African Development Foundation, State, NASA, and Broadcasting Board  of Governors) and two agencies (American Battle Monuments  Commission and OMB) did not address any of the requirements. Figure 4  indicates the extent to which the 18 agencies had addressed the five  selected requirements.", "Agencies that did not address all five requirements provided several  explanations as to why their regulations were not updated as required:", "American Battle Monuments Commission officials stated that while  they updated their draft regulation in August 2017, it is currently  unpublished due to internal reviews with the commission\u2019s General  Counsel in preparation for submission to the Federal Register. No  new posting date has been established. American Battle Monuments  Commission last updated its regulation in February 26, 2003.", "State officials noted that their regulation was updated 2 months prior  to the new regulation requirements but did not provide a specific  reason for not reissuing their regulation. As such, they explained that  they have a working group reviewing their regulation for updates, with  no timeline identified. State last updated its regulation on April 6,  2016.", "NASA officials did not provide a reason for not updating their  regulation as required. Officials did, however, state that their draft  regulation is with NASA\u2019s Office of General Counsel for review. NASA  last updated its regulations on August 11, 2017.", "Broadcasting Board of Governors officials did not provide a reason for  not updating their regulation as required. Officials did, however, note  that the agency is in the process of updating its regulation and  anticipates it will complete this update by the end of 2018. The  Broadcasting Board of Governors last updated its regulation on  February 2, 2002.", "OMB officials did not provide a reason for not updating the agency\u2019s  regulation as required. Officials did, however, state that due to a  change in leadership they do not have a time frame for updating their  regulation. OMB last updated its regulation on May 27, 1998.", "The chief FOIA officer at the U.S. African Development Foundation  stated that, while the agency had updated and submitted its regulation  to be published in December 2016, the regulation was unpublished  due to an error that occurred with the acknowledgement needed to  publish the regulation in the Federal Register. The regulation was  subsequently published on February 3, 2017. The official further noted  that when the agency responds to FOIA requests, it has not charged a  fee for unusual circumstances, and, therefore, agency officials did not  believe they had to disclose information regarding fees in their  regulation.", "Until these six agencies publish updated regulations that address the  necessary requirements, as called for in FOIA and OIP guidance, they  likely will be unable to provide the public with required regulatory and  procedural information to ensure transparency and accountability in the  government."], "subsections": []}, {"section_title": "Justice and OMB Have Taken Steps to Develop an Online FOIA Request Portal", "paragraphs": ["The 2016 FOIA amendments required OMB to work with Justice to build a  consolidated online FOIA request portal. This portal is intended to allow  the public to submit a request to any agency from a single website and  include other tools to improve the public\u2019s access to the benefits of FOIA.  Further, the act required OMB to establish standards for interoperability  between the consolidated portal and agency FOIA systems. The 2016  FOIA amendments did not provide a time frame to develop the portal and  standards.", "With OMB's support, Justice has developed an online portal. In this  regard, Justice\u2019s OIP officials stated that the National FOIA Portal  provides the functionality required by FOIA, including the ability to make a  request to any agency and the technical framework for interoperability.  According to OIP officials, in partnership with OMB, OIP was able to  identify a dedicated funding source to operate and maintain the portal to  ensure its success in the long term, with major agencies sharing in the  costs to operate, maintain, and fund any future enhancements designed  to improve FOIA processes. The first iteration of the National FOIA Portal  launched on Justice\u2019s FOIA.gov website on March 8, 2018."], "subsections": []}]}, {"section_title": "Agencies Have Methods to Reduce Backlogged Requests, but Their Efforts Have Shown Mixed Results", "paragraphs": ["The 18 selected agencies in our review had FOIA request backlogs of  varying sizes, ranging from no backlogged requests at some agencies to  45,000 or more of requests at other agencies. Generally, the agencies  with the largest backlogs had received the most requests. In an effort to  aid agencies in reducing their backlogs, Justice\u2019s OIP identified key  practices that agencies can use. However, while the agencies reported  using these practices and other methods, few of them managed to reduce  their backlogs during the period from fiscal year 2012 through 2016. In  particular, of the four agencies with the largest backlogs, only one\u2014 NARA\u2014reduced its backlog. Agencies attributed their inability to  decrease backlogs to the increased number and complexity of requests,  among other factors. However, agencies also lack comprehensive plans  to implement practices on an ongoing basis."], "subsections": [{"section_title": "Agencies Have FOIA Request Backlogs of Varying Sizes, and Most Increased from Fiscal Year 2012 through 2016", "paragraphs": ["The selected agencies in our review varied considerably in the size of  their FOIA request backlogs. Specifically, from fiscal year 2012 through  2016, of the 18 selected agencies", "10 reported a backlog of 60 or fewer requests, and of these 10  agencies, 6 reported having no backlog in at least 1 year.", "4 agencies had backlog numbers between 61 and 1,000 per year; and", "4 agencies had backlogs of over 1,000 requests per year.", "The four agencies with backlogs of more than 1,000 requests for each  year we examined were Justice, NARA, State and DHS. Table 3 shows  the number of requests and the number of backlogged request for the 18  selected agencies during the 5-year period.", "Over the 5-year period, 14 of the 18 selected agencies experienced an  increase in their backlogs in at least 1 year. By contrast, 2 agencies  (Administrative Conference of the United States and the U.S. African  Development Foundation) reported no backlogs, and 3 agencies  (American Battle Monument Commission, NASA and NARA) reported  reducing their backlogs. Further, of the 4 agencies with the largest  backlogs (DHS, State, Justice, and NARA) only NARA reported a backlog  lower in fiscal year 2016 than in fiscal year 2012. Figure 5 shows the  trends for the 4 agencies with the largest backlogs, compared with the  rest of the 18 agencies.", "In most cases, agencies with small or no backlogs (60 or fewer) also  received relatively few requests. For example, the Administrative  Conference of the United States and the U.S. African Development  Foundation reported no backlogged requests during any year but also  received fewer than 30 FOIA requests a year. The American Battle  Monuments Commission also received fewer than 30 requests a year and  only reported 1 backlogged request per year in 2 of the 5 years  examined. However, the Pension Benefit Guaranty Corporation and FDIC  received thousands of requests over the 5-year period, but maintained  zero backlogs in a majority of the years examined. PBGC received a total  of 19,120 requests during the 5-year period and only reported a backlog  of 8 requests during 1 year, fiscal year 2013. FDIC received a total of  3,405 requests during the 5-year period and reported a backlog of 13  requests in fiscal year 2015 and 4 in fiscal year 2016.", "The four agencies with backlogs of 1,000 or more (Justice, NARA, State,  and DHS) received significantly more requests each year. For example,  NARA received between about 12,000 and 50,000 requests each year,  while DHS received from about 190,000 to 325,000 requests. In addition,  the number of requests NARA received in fiscal year 2016 was more than  double the number received in fiscal year 2012. DHS received the most  requests of any agency\u2014a total of 1,320,283 FOIA requests over the 5- year period."], "subsections": []}, {"section_title": "Agencies Identified a Variety of Methods to Reduce Backlogs, but Few Saw Reductions", "paragraphs": ["The Attorney General\u2019s March 2009 memorandum called on agency chief  FOIA officers to review all aspects of their agencies\u2019 FOIA administration  and report to Justice on steps that have been taken to improve FOIA  operations and disclosure. Subsequent Justice guidance required  agencies to include in their chief FOIA officer reports information on their  FOIA request backlogs, including whether the agency experienced a  backlog of requests; whether that backlog decreased from the previous  year; and, if not, reasons the backlog did not decrease. In addition,  agencies that had more than 1,000 backlogged requests in a given year  were required to describe their plans to reduce their backlogs. Beginning  in calendar year 2015, these agencies were to describe how they  implemented their plans from the previous year and whether that resulted  in a backlog reduction.", "In addition, Justice\u2019s OIP identified best practices for reducing FOIA  backlogs. The office held a best practices workshop on reducing backlogs  and improving timeliness. The office then issued guidance in August 2014  that highlighted key practices to improve the quality of a FOIA program.  OIP identified the following methods in its best practices guidance.", "Utilize resources effectively. Agencies should allocate their  resources effectively by using multi-track processing, making use of  available technology, and shifting priorities and staff assignments to  address needs and effectively manage workloads.", "Routinely review metrics. Agencies should regularly review their  FOIA data and processes to identify challenges or barriers.", "Additionally, agencies should identify trends to effectively allocate  resources, set goals for staff, and ensure needs are addressed.", "Emphasize staff training. Agencies should ensure FOIA staff are  properly trained so they can process requests more effectively and  with more autonomy. Training and engagement of staff can also  solidify the importance of the FOIA office\u2019s mission.", "Obtain leadership support. Agencies should ensure that senior  management is involved in and supports the FOIA function in order to  increase awareness and accountability, as well as make it easier to  obtain necessary resources or personnel.", "Agencies identified a variety of methods that they used to address their  backlogs. These included both the practices identified by Justice, as well  as additional methods.", "Ten agencies maintained relatively small backlogs of 60 or fewer  requests and were thus not required to develop plans for reducing  backlogs. However, 2 of these 10 agencies, who both received significant  numbers of requests, described various methods used to maintain a  small backlog:", "PBGC officials credit their success to training, not only for FOIA staff,  but all Incoming personnel, while also awarding staff for going above  and beyond in facilitating FOIA processing. Pension Benefit Guaranty  Corporation has incorporated all the best practices identified by OIP,  including senior leadership involvement that supports FOIA initiatives  and program goals, routine review of metrics to optimize workflows,  effective utilization of resources and staff training.", "According to FDIC officials, their overall low backlog numbers are  attributed to a trained and experienced FOIA staff, senior  management involvement, and coordination among FDIC divisions.  However, FDIC stated the reason for the increase in backlogs in fiscal  year 2015 was due to increased complexity of requests.", "The 4 agencies with backlogs greater than 60 but fewer than 1,000  (EEOC, DOI, NTSB, and USAID) reported using various methods to  reduce their backlogs. However, all 4 showed an increase over the 5-year  period.", "EEOC officials stated that they had adopted practices recommended  by OIP, such as multi-track processing, reviewing workloads to ensure  sufficient staff, and using temporary assignments to address needs.  However, EEOC has seen a large increase in its backlog numbers,  going from 131 in fiscal year 2012 to 792 in fiscal year 2016. EEOC  attributed the rise in backlogs to an increase in requests received,  loss of staff, and the complex and voluminous nature of requests.", "DOI, according to agency officials, has also tried to incorporate  reduction methods and best practices, including proactively releasing  information that may be of interest to the public, thus avoiding the  need for a FOIA request; enhanced training for its new online FOIA  tracking and processing system; improved interoffice collaboration;  production of monthly reports on backlogs and of weekly charts on  incoming requests, to heighten awareness among leadership; and  monitoring trends. Yet DOI has seen an increase in its backlog, from  449 in fiscal year 2012 to 677 in fiscal year 2016, an increase of 51  percent. DOI attributed the increase to the loss of FOIA personnel, an  increase in the complexity of requests, an increase in FOIA-related  litigation, an increase in incoming requests, and the fact that staff  have additional duties.", "Officials at NTSB stated that the board utilized contractors and  temporary staff assignments to augment staffing and address  backlogs. Despite the effort, NTSB saw a large increase in backlogs,  from 62 in fiscal year 2012 to 602 in fiscal year 2016. Officials stated  that the reason for the increase was an increased complexity of  requests, including requests for \u201cany and all\u201d documentation related to  a specific subject, often involving hundreds to thousands of pages per  request.", "According to USAID officials, the agency conducts and reviews  inventories of its backlog and requests to remove duplicates and  closed cases; groups and classifies requests by necessary actions  and responsive offices; and initiates immediate action. In addition,  USAID seeks to identify tools and solutions to streamline records for  review and processing. However, its backlog numbers have  continually increased, from 201 in fiscal year 2012 to 318 in fiscal year  2016. USAID attributes that increase to an increase in the number of  requests, the loss of FOIA staff, an increased complexity and volume  of requests, competing priorities, and world events that may drive  surges in requests.", "Of the four agencies with the largest backlogs, all reported taking steps  that, in some cases, included best practices identified by OIP; however,  only NARA successfully reduced its backlog by the end of the 5-year  period.", "Justice officials noted that the department made efforts to reduce its  backlog by incorporating best practices. Specifically, OIP worked with  components within Justice through the Component Improvement  Initiative to identify causes contributing to a backlog and assist  components in finding efficiencies and overcoming challenges. The  chief FOIA officer continued to provide top-level support to reduction  efforts by convening the department\u2019s FOIA Council to manage  overall FOIA administration. In addition, many of the components  created their own reduction plans, which included hiring staff, utilizing  technology, and providing more training, requester outreach, and  multitrack processing.", "However, despite these efforts, the number of backlogs steadily  increased during the 5-year period, from 5,196 in fiscal year 2012 to  10,644 in fiscal year 2016, an overall increase of 105 percent. Justice  attributes the increase in backlogs to several challenges, including an  increase in incoming requests and an increase in the complexity of  those requests. Other challenges that Justice noted were staff  shortages and turnover, reorganization of personnel roles, time to  train incoming staff, and the ability to fill positions previously held by  highly qualified professionals.", "NARA officials stated that one key step NARA took was to make  corrections in its Performance Measurement and Reporting System.  They noted that this system previously comingled backlogged  requests with the number of pending FOIA requests, skewing the  backlog numbers higher. The improvements included better  accounting for pending and backlogged cases, distinguishing between  simple and complex requests, and no longer counting as \u201copen\u201d cases  that were closed within 20 days, but not until the beginning of the  following fiscal year. In addition, officials also stated that the FOIA  program offices have been successful at working with requesters to  narrow the scope of requests.", "NARA also stated that it was conducting an analysis of FOIA across  the agency to identify any barriers in the process. Officials also  identified other methods, including using multi-track processing,  shifting priorities to address needs, improved communication with  agencies, proactive disclosures, and the use of mediation services.", "NARA has shown significant progress in reducing its backlog. In fiscal  year 2012 it had a backlog of 7,610 requests, which spiked to 9,361 in  fiscal year 2014. However, by fiscal year 2016, the number of  backlogged requests had dropped to 2,932, even though the number  of requests received more than doubled for that fiscal year. However,  NARA did note challenges to reducing its backlog numbers, namely,  the increase in the number of requests received.", "State developed and implemented a plan to reduce its backlog in  fiscal year 2016. The plan incorporated two best practices by focusing  on identifying the extent of the backlog problem and developing ways  to address the backlog with available resources. According to State  officials, the effort was dedicated to improve how FOIA data were  organized and reported. Expedited and ligation cases were top  priorities, whereas in other cases a \u201cfirst in, first out\u201d method was  employed.", "Even with these efforts, however, State experienced a 117 percent  increase in its backlog over the 5-year period. State\u2019s backlog doubled  from 10,045 in fiscal year 2014 to 22,664 in fiscal year 2016. Among  the challenges to managing its backlog, State reported an increase in  incoming requests, a high number of litigation cases, and competing  priorities. Specifically, the number of incoming requests for State  increase by 51 percent during the 5-year period. State has also  reported that it has allocated 80 percent of its FOIA resources to meet  court-ordered productions associated with litigation cases, resulting in  fewer staff to work on processing routine requests. This included,  among other efforts, a significant allocation of resources in fiscal year  2015 to meet court-imposed deadlines to process emails associated  with the former Secretary of State, resulting in a surge of backlogs.", "In 2017 State began an initiative to actively address its backlogs. The  Secretary of State issued an agency-wide memorandum stating the  department\u2019s renewed efforts by committing more resources and  workforce to backlog reduction. The memo states new processes are  to be implemented for both the short- and long-term, and the FOIA  office has plans to work with the various bureaus to outline the tasks,  resources, and workforce necessary to ensure success and  compliance. With renewed leadership support, State has reported  significant progress in its backlog reduction efforts.", "DHS, in its chief FOIA officer reports, reported that it implemented  several plans to reduce backlogs. The DHS Privacy Office, which is  responsible for oversight of the department\u2019s FOIA program, worked  with components to help eliminate the backlog. The Privacy Office  sent monthly emails to component FOIA officers on FOIA backlog  statistics, convened management meetings, conducted oversight, and  reviewed workloads. Leadership met weekly to discuss the oldest  pending requests, appeals, and consultations, and determined  needed steps to process those requests.", "In addition, several other DHS components implemented actions to  reduce backlogs. Customs and Border Protection hired and trained  additional staff, encouraged requesters to file requests online,  established productivity goals, updated guidance, and utilized better  technology. U.S. Citizenship and Immigration Services, National  Protection and Programs Directorate, and Immigration and Customs  Enforcement increased staffing or developed methods to better  forecast future workloads ensure adequate staffing. Immigration and  Customs Enforcement also implemented a commercial off-the-shelf  web application, awarded a multimillion-dollar contract for backlog  reduction, and detailed employees from various other offices to assist  in the backlog reduction effort.", "Due to efforts by the Privacy Office and other components, the  backlog dropped 66 percent in fiscal year 2015, decreasing to 35,374.  Yet, despite the continued efforts in fiscal year 2016, the backlog  numbers increased again, to 46,788. DHS attributes the increases in  backlogs to several factors, including an increase in the number of  requests received, increased complexity and volume of responsive  records for those requests, loss of staff and active litigation with  demanding production schedules.", "One reason the eight agencies with significant backlogs may be  struggling to consistently reduce their backlogs is that they lack  documented, comprehensive plans that would provide a more reliable,  sustainable approach to addressing backlogs. In particular, they do not  have documented plans that describe how they will implement best  practices for reducing backlogs over time, including specifying how they  will use metrics to assess the effectiveness of their backlog reduction  efforts and ensure that senior leadership supports backlog reduction  efforts, among other best practices identified by OIP.", "While agencies with backlogs of 1,000 or more FOIA requests are  required to describe backlog reduction efforts in their chief FOIA officer  reports, these consist of a high-level narrative and do not include a  specific discussion of how the agencies will implement best practices over  time to reduce their backlog. In addition, agencies with backlogs of fewer  than 1,000 requests are not required to report on backlog reduction  efforts; however, the selected agencies in our review with backlogs in the  hundreds still experienced an increase over the 5-year period.", "Without a more consistent approach, agencies will continue to struggle to  reduce their backlogs to a manageable level, particularly as the number  and complexity of requests increase over time. As a result, their FOIA  processing may not respond effectively to the needs of requesters and  the public."], "subsections": []}]}, {"section_title": "Various Types of Statutory Exemptions Exist and Many Have Been Used by Agencies", "paragraphs": ["FOIA requires agencies to report annually to Justice on their use of  statutory (b)(3) exemptions. This includes specifying which statutes they  relied on to exempt information from disclosure and the number of times  they did so. To assist agencies in asserting and accounting for their use  of these statutes, Justice instructs agencies to consult a running list of all  the statutes that have been found to qualify as proper (b)(3) statutes by  the courts.", "However, agencies may also use a statute not included in the Justice list,  because many statutes that appear to meet the requirements of (b)(3)  have not been identified by a court as qualifying statutes. If the agency  uses a (b)(3) statute that is not identified in the qualifying list, Justice  guidance instructs the agency to include information about that statute in  its annual report submission. Justice reviews the statute and provides  advice to the agency, but does not make a determination on the  appropriateness of using that statute under the (b)(3) exemption.", "Based on data agencies reported to Justice, during fiscal years 2010 to  2016, agencies claimed 237 statutes as the basis for withholding  information. Of these statutes, 75 were included on Justice\u2019s list of  qualifying statutes under the (b)(3) exemption (see appendix III for a list of  these statutes). Further, we identified 140 additional statutes that were  not identified in our 237 statutes claimed by agencies during fiscal years  2010 to 2016, but have similar provisions to other (b)(3) statutes  authorizing an agency to withhold information from the public (see  appendix IV for a list of these additional statutes).", "We found that the 237 statutes cited as the basis for (b)(3) exemptions  during the period from fiscal years 2010 to 2016 fell into 8 general  categories of information. These categories were (1) personally  identifying information, (2) national security, (3) commercial, (4) law  enforcement and investigations, (5) internal agency, (6) financial  regulation, (7) international affairs, and (8) environmental. Figure 6  identifies the eight categories and the number of agency-claimed (b)(3)  statutes in each of the categories.", "Of the 237 (b)(3) statutes cited by agencies, the majority\u2014178\u2014fell into 4  of the 8 categories:", "Forty-nine of these statutes related to withholding personally  identifiable information including, for example, a statute related to  withholding death certificate information provided to the Social  Security Administration.", "Forty-five statutes related to the national security category. For  example, one statute exempted files of foreign intelligence or  counterintelligence operations of the National Security Agency.", "Forty-two statutes were in the law enforcement and investigations  category, including a statute that exempts from disclosure information  provided to Justice pursuant to civil investigative demands pertaining  to antitrust investigations.", "Forty-two statutes fell into the commercial category. For example, one  statute in this category related to withholding trade secrets and other  confidential information related to consumer product safety.", "The remaining 59 statutes were in four categories: internal agency  functions and practices, financial regulation, international affairs, and  environmental. The environmental category contained the fewest number  of statutes and included, for example, a statute related to withholding  certain air pollution analysis information.", "As required by FOIA, agencies also reported the number of times they  used each (b)(3) statute. In this regard, 33 FOIA-reporting agencies  indicated that they had used 10 of the 237 (b)(3) statutes more than  200,000 times. Of these 10 most-commonly used statutes, the single  most-used statute (8 U.S.C \u00a7 1202(f)) related to withholding records  pertaining to the issuance or refusal of visas to enter the United States. It  was used by 4 agencies over 58,000 times.", "Further, of the 10 most-commonly used statutes, the statute used by the  greatest number of agencies (26 U.S.C \u00a7 6103) related to the withholding  of certain tax return information; it was used by 24 FOIA-reporting  agencies about 30,000 times. By contrast, some statutes were only  used by a single agency. Specifically, the Department of Veterans Affairs  used a statute related to withholding certain confidential veteran medical  records (38 U.S.C. \u00a7 7332) more than 16,000 times. Similarly, EEOC  used a statute related to employment discrimination on the basis of  disability (42 U.S.C. \u00a7 12117) more than 10,000 times.", "Table 4 shows the 10 most-used statutes under the (b)(3) exemption, the  agency that used each one most frequently, and the number of times they  were used by that agency for the period covering fiscal years 2010  through 2016."], "subsections": [{"section_title": "The OPEN FOIA Act of 2009 Limitation on (b)(3) Exemptions Has Had an Uneven Impact on Subsequent Legislation", "paragraphs": ["The OPEN FOIA Act of 2009 amended FOIA to require that any federal  statute subsequently enacted must specifically cite paragraph (b)(3) of  FOIA to qualify as a (b)(3) exemption statute. Prior to 2009, a federal  statute qualified as a statutory (b)(3) exemption if it (1) required that the  matters be withheld from the public in such a manner as to leave no  discretion on the issue, or (2) established particular criteria for withholding  or referred to particular types of matters to be withheld. According to  statements by the sponsor of the legislation during the Senate debate,  (b)(3) statutory exemptions should be clear and unambiguous, and  vigorously debated by Congress before they are enacted into law.", "In response to the amendment, in 2010, Justice released guidance to  agencies stating that any statute enacted after 2009 must specifically cite  to the (b)(3) exemption to qualify as a withholding statute under FOIA.  Further, the guidance encouraged agencies to contact Justice with  questions regarding the implementation of the amendment.", "In our review of the 237 (b)(3) statutes claimed by agencies during fiscal  years 2010 through 2016, 21 of these statutes were initially enacted and  82 were amended after 2009. Of the 21 statutes initially enacted after  2009, 9 cited (b)(3). Further, of the 82 statutes amended, 9 cited (b)(3).", "While reflecting provisions of law authorizing or requiring the withholding  of agency information from the public, the number of these statutes not  having a reference to the (b)(3) exemption is evidence of the OPEN FOIA  Act\u2019s uneven impact on the establishment of statutory FOIA exemptions."], "subsections": []}]}, {"section_title": "Agencies Received and Processed FOIA Requests for Information Related to the Trouble Asset Relief Program", "paragraphs": ["As previously noted, FOIA requires federal agencies to provide the public  with access to various types of information that can contribute to the  understanding of government operations. One of these areas has related  to the 2008 financial crisis, in which the Emergency Economic  Stabilization Act of 2008 played a significant role in stabilizing the federal  financial system. The act initially authorized $700 billion to assist financial  institutions and markets, businesses, and homeowners through TARP,  although that authorization was later reduced to $475 billion.", "Treasury, which was given authority under the act, established the Office  of Financial Stability to carry out the program\u2019s activities. These activities  included injecting capital into key financial institutions, implementing  programs to address problems in the securitization markets, providing  assistance to the automobile industry, and offering incentives for  modifying residential mortgages. In addition, federal financial regulators\u2014 FDIC, the Federal Reserve Board, and the Office of the Comptroller of the  Currency\u2014each played a key role in regulating and monitoring financial  institutions.", "Following the law\u2019s enactment, in certain periods from 2008 through  2014, three corporations\u2014AIG, GM, and Ally\u2014received federal financial  assistance that amounted to 50 percent or more ownership by the federal  government. The actions with regard to TARP subsequently led to the  Treasury and the three financial regulatory agencies receiving FOIA  requests for government records related to the three corporations.  Specifically, the Federal Reserve Board, FDIC, the Office of the  Comptroller of the Currency, and Treasury received 166 FOIA requests  for information about these three corporations from September 2008  through January 2014.", "The requests asked for various agency records related to the  corporations, for example,  records related to Treasury\u2019s stewardship and oversight of AIG and its  subsidiaries;  records related to the Federal Reserve Board and Ally specific to the  individual submitting the FOIA request\u2019s review;  records concerning GM\u2019s contract with the Stillwater Mining Company;  and all communications between the Office of the Comptroller of the  Currency and AIG from June 2007 through March 2009.", "Of the 166 requests, 88 were processed as full grant, partial grant, or full  denial; 34 were withdrawn by the requester; 24 were closed because the  agency responded that it had no records regarding the requests; and 20  fell into other disposition categories. Table 5 summarizes the  disposition/resolution of the FOIA requests that each of the four federal  agencies received relating to information on AIG, GM and Ally for certain  periods from September 2008 to January 2014 (the time frame for which  the government held 50 percent or more of the corporations\u2019 common  stock), and the type of disposition used most often to close the requests."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The 18 agencies we reviewed had fully implemented half of the six key  FOIA requirements and the vast majority of agencies implemented two  additional requirements. However, 5 agencies published and updated  their FOIA regulations in a timely and comprehensive manner. Fully  implementing FOIA requirements will better position agencies to provide  the public with necessary access to government records and ensure  openness in government.", "Selected agencies varied considerably in the size of their backlogs. While  10 reported a backlog of 60 or fewer requests, 4 had backlogs of over  1,000 per year. Agencies identified a variety of methods that they used to  address their backlogs, including practices identified by Justice, as well  as additional methods. However, the selected agencies varied in the  success achieved for reducing their backlogs. This was due, in part, to a  lack of plans that describes how the agencies will implement best  practices for reducing backlogs over time. Until agencies develop plans to  reduce backlogs, they will be limited in their ability to respond effectively  to the needs of requesters and the public."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 24 recommendations to 16 agencies in our  review. Specifically:  The Secretary of the American Battle Monuments Commission should  designate a chief FOIA officer at the assistant secretary level or  equivalent. (Recommendation 1)", "The Secretary of the American Battle Monuments Commission should  update and publish comprehensive FOIA regulations that include  requirements established by law and Justice guidance.  (Recommendation 2)", "The Chief Executive Officer and Director of the Broadcasting Board of  Governors should update and publish comprehensive FOIA regulations  that include requirements established by law and Justice guidance.  (Recommendation 3)", "The Secretary of DHS should take steps to develop and document a plan  that fully addresses best practices with regards to reduction of  backlogged FOIA requests. (Recommendation 4)", "The Secretary of DOI should ensure its FOIA tracking system is compliant  with Section 508 requirements. (Recommendation 5)", "The Secretary of DOI should provide frequently requested records online.  (Recommendation 6)", "The Secretary of DOI should take steps to develop and document a plan  that fully addresses best practices with regards to reduction of  backlogged FOIA requests. (Recommendation 7)", "The Chair of EEOC should designate a chief FOIA officer at the assistant  secretary level or equivalent. (Recommendation 8)", "The Chair of EEOC should take steps to develop and document a plan  that fully addresses best practices with regards to reduction of  backlogged FOIA requests. (Recommendation 9)", "The Chairman of the FTC should designate a chief FOIA officer at the  assistant secretary level or equivalent. (Recommendation 10)", "The Attorney General of the United States should take steps to develop  and document a plan that fully addresses best practices with regards to  reduction of backlogged FOIA requests. (Recommendation 11)", "The Archivist of the United States should take steps to develop and  document a plan that fully addresses best practices with regards to  reduction of backlogged FOIA requests. (Recommendation 12)", "The Administrator of NASA should update and publish comprehensive  FOIA regulations that describe dispute resolution services, and notifies  requesters of the 90 days for appeals. (Recommendation 13)", "The Administrator of NASA should provide agency records of final  opinions online. (Recommendation 14)", "The Chairman of NTSB should provide frequently requested records  online. (Recommendation 15)", "The Chairman of NTSB should take steps to develop and document a  plan that fully addresses best practices with regards to reduction of  backlogged FOIA requests. (Recommendation 16)", "The Director of OMB should update and publish comprehensive FOIA  regulations that include requirements established by law and Justice  guidance. (Recommendation 17)", "The Director of OMB should designate a chief FOIA officer at the  assistant secretary level or equivalent. (Recommendation 18)", "The Director of Pension Benefit Guaranty Corporation should designate a  chief FOIA officer at the assistant secretary level or equivalent.  (Recommendation 19)", "The Secretary of State should update and publish comprehensive FOIA  regulations that describe dispute resolution services, and notifies  requesters of the 90 days for appeals. (Recommendation 20)", "The Secretary of State should take steps to develop and document a plan  that fully addresses best practices with regards to reduction of  backlogged FOIA requests. (Recommendation 21)", "The President of TVA should ensure its FOIA tracking system is  compliant with section 508 requirements. (Recommendation 22)", "The Administrator of USAID should take steps to develop and document  a plan that fully addresses best practices with regards to reduction of  backlogged FOIA requests. (Recommendation 23)", "The President of the U.S. African Development Foundation should update  and publish comprehensive FOIA regulations that inform a requester of  limited unusual circumstances fees. (Recommendation 24)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We requested comments on a draft of this report from the 21 agencies  included in our review. Of the 16 agencies to which we made  recommendations, 9 agencies agreed with all of the recommendations  directed to them; 1 agency agreed with two and disagreed with one  recommendation; 2 agencies disagreed with all of the recommendations;  and 4 agencies did not state whether they agreed or disagreed with our  recommendations. In addition, 5 agencies to which we did not make  recommendations stated that they had no comments on the report.  Multiple agencies also provided technical comments, which we have  incorporated, as appropriate.", "The following 9 agencies agreed with our recommendations:  In emails received from the American Battle Monuments Commission  and the Broadcasting Board of Governors, the two agencies stated  that they agreed with the recommendations in our report.", "In written comments, reprinted in appendix V, DHS stated that it  concurred with our recommendations. Regarding the recommendation  to designate a chief FOIA Officer, the department stated that it had  delegated the full authority and responsibility of DHS\u2019s FOIA  operations and programs to the chief privacy officer. The department  asserted that its chief privacy officer is the equivalent of an assistant  secretary, as required, because the official is appointed by the  Secretary under 6 U.S.C \u00a7 142 without Senate confirmation in  accordance with the Appointments Clause to the U.S. Constitution.  Further, the department stated that the chief privacy officer position  meets the senior executive service standard under 5 U.S.C \u00a7  3132(a)(2) and, accordingly, is comparable to a senior executive level  position. Thus, the department believes it is already in compliance  with the requirement to designate a chief FOIA officer at the assistant  secretary level or equivalent.", "For the reasons that it cited, DHS requested that GAO consider this  recommendation to be resolved and closed. Based on our analysis of  the additional information that the department provided to explain the  senior executive level position of the chief privacy officer, we are in  agreement with DHS regarding the position\u2019s equivalency to an  assistant secretary within the department. Accordingly, we have  removed this recommendation from our report.", "Concerning the second recommendation, to develop and document a  plan that fully addresses practices with regard to the reduction of  backlogged requests, DHS stated that it plans to initiate a department- wide compliance assessment of FOIA operations to identify the  components with the most significant backlog problems and the \u201croot  causes\u201d for these problems. The department said it then intends to  develop a proposed plan for backlog reduction.", "In written comments, reprinted in appendix VI, Justice stated that it  agreed with our recommendation and will develop a plan to address  its backlog of FOIA requests to the fullest extent possible. Justice  added that, in fiscal year 2017, it was able to improve all of its  processing times and close all 10 of the department\u2019s oldest requests,  appeals, and consultations, thus, reducing the overall age of its  backlog.", "In written comments, reprinted in appendix VII, NARA stated that it is  currently working to develop and document a plan that is intended to  fully address best practices to reduce its backlog of FOIA requests, as  we recommended. The agency said it expects to complete its plan by  the end of December 2018.", "In written comments, reprinted in appendix VIII, NASA said that it  concurred with our two recommendations. With regard to the first  recommendation, the agency stated that it is currently working to  update its FOIA regulations, and that the revisions are to include the  90-day appeal rights, as well as describe requesters\u2019 rights to obtain  dispute resolution services from NASA\u2019s FOIA public liaisons and  OGIS.", "With regard to the second recommendation, the agency stated that it  is currently working to identity subject matter areas on which the  department can reach final opinions as interpreted under FOIA. The  agency added that, upon identification, it will begin posting final  opinions online.", "In written comments, reprinted in appendix IX, State concurred with  our two recommendations and, accordingly, noted that it is currently  working to update its FOIA regulations and evaluate methods to  improve its backlog reduction efforts.", "In written comments, reprinted in appendix X, USAID stated that it  concurred with our recommendation and will develop a formal plan  that delineates currently employed best practices to reduce its FOIA  backlog.", "In comments provided via email, the United States African  Development Foundation\u2019s General Counsel concurred with our  recommendation. The foundation stated that it will take steps to  update its FOIA regulations. This is to include, informing requesters  about limited unusual circumstances fees, and publishing the updated  regulation in the Federal Register.", "One agency agreed with two recommendations, and disagreed with one  other recommendation:  In written comments, reprinted in appendix XI, DOI concurred with the  recommendation to make its FOIA tracking system Section 508- compliant and stated that it is currently testing its system for  compliance. The department also concurred with the recommendation  that it provide frequently requested records online.", "However, the department did not concur with our recommendation to  develop and document a plan that fully addresses best practices for  the reduction of backlogged FOIA requests. The department stated  that, in Justice\u2019s OIP guidance, the creation of a formal backlog  reduction plan only applies to agencies with more than 1,000  backlogged requests in a given year. The department said that DOI  did not fall into this category and, therefore, was not required to  develop such a plan.", "Although DOI\u2019s existing backlog of FOA requests did not meet the  threshold identified in Justice\u2019s guidance, the department,  nonetheless, experienced a 51 percent increase in backlogged FOIA  requests from fiscal years 2012 to 2016. Thus, having a plan and  practices for reducing backlogged requests could help the department  ensure that its backlog remains manageable, and that DOI is  effectively positioned to respond to the needs of requesters and the  public. Accordingly, we believe that our recommendation to develop a  plan that addresses best practices to reduce the backlog is still  warranted.", "In addition, 2 agencies disagreed with our recommendations:  In written comments, reprinted in appendix XII, the Pension Benefit  Guaranty Corporation disagreed with our recommendation that it  designate a chief FOIA officer at the assistant secretary level or  equivalent. The agency said it does not have assistant secretary  positions. The agency added that it believes its current chief FOIA  officer\u2019s position is equivalent to the assistant secretary level and that  this official is an appropriate designee.", "We disagree that the current chief FOIA officer\u2019s position is equivalent  to the assistant secretary level. However, the Pension Benefit  Guaranty Corporation\u2019s General Counsel position is at a level that is  equivalent to an assistant secretary. As such, assigning the position to  the General Counsel could help ensure that the chief FOIA officer has  the necessary authority to make decisions about agency practices,  personnel, and funding. As such, we believe our recommendation is  still warranted.", "In written comments, reprinted in appendix XIII, TVA disagreed with  our recommendation to ensure that its FOIA tracking system is  compliant with Section 508 of the Rehabilitation Act. The agency  stated that, based on the January 18, 2017, revised Section 508  standards, its current FOIA tracking system meets the standard  related to having a user interface, but does not meet the criteria for  accessibility of electronic content. The agency added that, the current  single user of its system does not require accessibility  accommodations; thus, it would be an undue burden for the agency to  make the system comply with the Section 508 requirements.", "While TVA\u2019s current FOIA system does not require accessibility  accommodations and, in the agency\u2019s view, would be unduly  burdensome to modify, as the agency undertakes further  modernization of its IT systems and software, it should ensure that its  FOIA system is compliant with Section 508 requirements. Accordingly,  we stand by our recommendation to the agency.", "Further, 4 agencies did not state whether they agreed or disagreed with  the report, although 2 of them offered other comments:  In emails received from EEOC and NTSB, the agencies did not agree  or disagree with the draft report. EEOC offered technical comments,  which we incorporated, as appropriate, while NTSB said it had no  comment.", "In written comments, reprinted in appendix XIV, FTC acknowledged  that its chief FOIA officer is not at the assistant secretary level. FTC  also noted that it is a small agency in which there are no position titles  of assistant secretary-level or equivalent. Further, the agency stated  that it believes its chief FOIA officer holds a sufficiently senior position  (associate general counsel) with the necessary authority to fulfill the  functions of the chief FOIA officer. Nevertheless, FTC stated that it  would take our recommendation (to designate a chief FOIA officer at  the assistant secretary level or equivalent) under advisement.", "Although FTC is a small agency and does not have positions at the  assistant secretary level, we disagree that the current chief FOIA  officer\u2019s position is sufficiently senior to fulfill the functions required of  this position. However, assigning the chief FOIA officer position to the  General Counsel, or an equivalent level position, could help ensure  that the chief FOIA officer will have the necessary authority to make  decisions about the agency\u2019s practices, personnel, and funding for the  implementation of FOIA. As such, we believe our recommendation is  still warranted.", "In comments provided via email from its GAO liaison, OMB stated that  it does not have a position in its organization with the specific title of  assistant secretary. However, the agency noted that, on March 7,  2018, the OMB Director designated the OMB General Counsel to  serve as the agency\u2019s chief FOIA officer. According to OMB, the chief  FOIA officer reports to the Director. Based on the documentation  received, we are in agreement with OMB that the position of General  Counsel is equivalent to an assistant secretary within the department.  Accordingly, we consider this recommendation to be closed.", "The remaining 5 agencies to which we did not make recommendations  stated that they did not have any comments on our report. These  agencies were: the Administrative Conference of the United States, FDIC,  the Federal Reserve Board, OCC, and Treasury.", "We are sending copies of this report to the Secretaries of the American  Battle Monuments Commission, Homeland Security, Interior, State, and  the Treasury; the Attorney General of the United States; the Archivist of  the United States; the Comptroller of the Currency; Administrators of the  National Aeronautics Space Administration and United States Agency for  International Development; Board of Governors of the Federal Reserve  System; Chairmen of the Administrative Conference of the United States,  Equal Employment Opportunity Commission, Federal Deposit Insurance  Corporation, and National Transportation Safety Board; Chief Executive  Officer and Director of the Broadcasting Board of Governors; Directors of  the Office of Management and Budget and Pension Benefit Guaranty  Corporation; the Presidents of the Tennessee Valley Authority, and  United States African Development Foundation, and the Acting General  Counsel for the Federal Trade Commission. In addition, this report is  available at no charge on the GAO website at http://www.gao.gov  If you or your staff have questions about this report, please contact me at  (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix XV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine (1) determine the extent to which  agencies have implemented selected Freedom of Information Act (FOIA)  requirements; (2) describe the methods established by agencies to  reduce backlogged requests and the effectiveness of those methods; (3)  identify any statutory (b)(3) exemptions that have been used by agencies  as the basis for withholding (redacting) information; and (4) determine  what FOIA requests, if any, agencies received and processed that related  to entities that received government assistance during the 2008 financial  crisis.", "To address the first and second objectives, we selected 18 agencies to  review based on the number of FOIA requests received, the sizes of  FOIA backlogs, and the average time of processing FOIA requests for  fiscal years 2012 through 2016. We also chose the agencies to represent  a range of sizes (by number of employees)\u2014large (10,000 or more),  medium (1,000 to 9,999), and small (999 or fewer). Large agencies  selected were the Departments of Homeland Security, Justice, State, and  the Interior; the National Aeronautics and Space Administration, and the  Tennessee Valley Authority. Medium agencies were the National  Archives and Records Administration, the Federal Deposit Insurance  Corporation, the Equal Employment Opportunity Commission, the  Broadcasting Board of Governors, the U.S. Agency for International  Development, and the Federal Trade Commission. Small agencies were  the National Transportation Safety Board, the American Battle  Monuments Commission, the Pension Benefit Guaranty Corporation, the  U.S. African Development Foundation, the Office of Management and  Budget, and the Administrative Conference of the United States.", "For our first objective, to determine the extent to which agencies had  implemented FOIA requirements, we examined six FOIA requirements  outlined in the FOIA Improvement Act of 2016 and the OPEN  Government Act of 2007. These requirements were for agencies to (1)  update response letters, (2) implement tracking systems, (3) provide  FOIA training, (4), provide records online, (5) designate chief FOIA  officers, and (6) update and publish timely and comprehensive  regulations. For these six requirements, we reviewed (1) agencies\u2019 FOIA  regulations to determine if they included updates from the 2016 FOIA  amendments and 2007 OPEN Government Act; and if they were updated  by the required deadline; (2) agencies\u2019 FOIA systems to determine if the  systems provided individualized tracking numbers for requests that will  take longer than 10 days to process, if agencies\u2019 established telephone or  Internet service to allow requesters to track the status of their requests;  (3) if agencies\u2019 had designated a chief FOIA officer and what position they  held within the agency; (4) if agencies chief FOIA officers provided annual  FOIA training opportunities to agency staff; (5) if agencies had  appropriately updated response letters in compliance with the 2016 FOIA  amendments; and (6) if agencies were providing electronic documents  publicly available online and posting frequently requested documents as  required by the 2016 FOIA amendments. Since we selected a  nonprobability sample of FOIA reporting agencies, the results of this  analysis are not generalizable to all FOIA reporting agencies.", "In addition, we also reviewed the requirement for the development of a  government-wide FOIA request portal and met with Office of  Management and Budget (OMB) officials, and Department of Justice  (Justice) officials in the Office of Information Policy (OIP) to the discuss  the status of development. Further, we met the Chief FOIA Officers  Council, OIP, and National Archives and Records Administration\u2019s  (NARA) Office of Government Information Services (OGIS) to determine  what, if any, actions they have taken to assist agencies with not violating  the provisions of FOIA.", "For our second objective, to determine the methods established by  agencies to reduce backlogged requests and the effect of those methods,  we reviewed agency documentation to evaluate if the selected agencies  had developed methods for reducing backlogged FOIA requests. We  identified requirements for agencies to produce backlog reduction plans  and determined if agencies developed such plans as required. We  analyzed agencies\u2019 FOIA.gov data to determine if there was a correlation  between the presence of a backlog reduction plan and a reduction in  backlog numbers. We compared a set of identified best practices for  reducing backlogs with agency procedures to determine the extent to  which the best practices are used. In addition, we interviewed agency  officials to determine the reasons for changes in agency backlog numbers  and what actions they are taking to reduce backlogs or implement  reduction plans. The results of this analysis are not generalizable to all  FOIA reporting agencies.", "For our third objective, to identify statutory (b)(3) exemptions that have  been used by agencies as the basis for withholding information, we  developed a catalog of (b)(3) statutes that agencies previously have used  to withhold information in FOIA records. To do that, we retrieved all data  on agency use of (b)(3) statutes that were readily accessible on Justice\u2019s  FOIA.gov website. The data on FOIA.gov are for fiscal years 2008 to  2016; however, Justice acknowledged that data prior to 2010 were not  available on FOIA.gov for all agencies. Therefore, we reviewed data for  fiscal years 2010 to 2016. In total, there were 117 distinct agencies that  provided annual report data for at least 1 fiscal year, and that were  represented in fiscal years 2010 through 2016. We developed a catalog  by extracting information from the aggregate of agency annual FOIA  reports that report, among other things, usage of (b)(3) statute, including  the statute\u2019s citation and the number of times the statute was to used  withhold information in a fiscal year.", "To assess the reliability of the data we retrieved from FOIA.gov, we  supplemented our analysis with interviews of FOIA officials in Justice\u2019s  OIP on steps they have taken to ensure the consistency of data in  FOIA.gov on agencies\u2019 use of (b)(3) statutes. Our analysis did not include  assessing the reliability of (b)(3) statute data submitted by agencies\u2014 Justice guidance states it is the responsibility of each agency to ensure  quality data in their reports. We also electronically tested the data by  identifying outliers, missing values, and syntactical discrepancies. We  found the data to be sufficiently reliable for purposes of our reporting  objective.", "To facilitate our analysis, we refined our catalog listing of agencies\u2019 use of  (b)(3) statutes by developing a standardized statute notation assigned to  each agency-used statute in our list. Specifically, our standardization of  agency-used statutes consisted of removing any typographical errors,  ensuring statutes were noted in a consistent U.S. Code format and  referred to existing U.S. Code section, and verifying the existence of  each statute through legal research, as well as standardizing any current  notations of the statute such as those transferred within the U.S. Code by  later legislation. If no current notation existed, then that statute was listed  as is, such as \u201c15 U.S.C. \u00a7 80a-30(c)\u201d, which was used by an agency,  and repealed during our review period. No replacement notation could be  found.", "For some U.S. Code statutes, we standardized statutes to an entire  section or subsection to reference nondisclosure provisions that contain a  description of the type of information withheld by that statute. Further, for  some U.S. Code statutes that agencies used as a range of statutes, such  as 7 U.S.C. \u00a7\u00a7 7411-7425, we determined whether the range contained a  single or multiple (b)(3) statute section(s) and developed a standardized  statute for each (b)(3) section to assign the original agency statute. In  some cases, where agencies used a smaller ranger of statutes, such as  21 U.S.C. \u00a7\u00a7 1903-1905, we retained the notation and assigned a  standardized version of the range to the original agency-used statute  range. Additionally, for some U.S. Code statutes that agencies used that  contained two (b)(3) statutes, such as 26 U.S.C. \u00a7\u00a7 6103 and 6105, we  developed a standardized statute for each (b)(3) section to assign the  original agency statute.", "For those agency-used statutes that could not be immediately  standardized or seemed to be noted in error, we either assigned that  statute to a related section (or sections) containing a nondisclosure  provision, retained the notation and assigned a standardized version of  the statute to the original agency-used statute, or removed that statute  from our catalog. For example, an agency claimed 15 U.S.C. \u00a7 7301 as a  (b)(3) statue; however, the statute was a purpose section and 15 U.S.C. \u00a7  7306 was the only related nondisclosure provision in that chapter or  subchapter of the Code. Therefore, \u00a7 7301 was assigned to the  standardized citation \u00a7 7306. Each standardized statute was counted as  one single statute, regardless of the number of sections it represented,  resulting in a total of 237 statutes.", "Following our standardization exercise, we developed descriptions of  each statute\u2019s subject matter. We also compared our standardized  statutes list to Justice\u2019s list of qualified statutes to identify those statutes  that qualified if a court has approved of the statute as being a (b)(3)  statute. Next, we classified these statutes into 10 general categories  based on their descriptions.", "To determine usage of (b)(3) statutes by agencies, we calculated the  number of times an agency used original agency-used statutes and  assigned those numbers to its associated standardized statute in our  catalog. In cases where an agency appeared to cite multiple statutes,  such as 26 U.S.C. \u00a7\u00a7 6103 and 6105, we counted the statutes separately  if we determined they were different. For example, if an agency used 26  U.S.C. \u00a7\u00a7 6103 and 6105 500 times during fiscal years 2010 to 2016, we  would assign that number to each standardized statute in our catalog to  ensure that 26 U.S.C. \u00a7 6103 and 26 U.S.C. \u00a7 6105 each received 500 as  the number of times used. We compiled and sorted these data to obtain  information on which agencies were using the statute, which agency used  it the most, and the approximate number of times the statute was used by  an agency.", "To identify which statutes qualified as a (b)(3) exemption under the OPEN  FOIA Act of 2009, we determined the date of the most recent legislative  action for each standardized statute by identifying the dates of enactment  and the most recent amendments of the statutes. We then identified  those statutes enacted or amended after 2009 and we determined if they  cited FOIA\u2019s paragraph (b)(3) by including a citation to 5 U.S.C. 552(b)(3)  or \u201cparagraph (b)(3) of section 552 of title 5, United States Code,\u201d or a  similar citation that includes a reference to paragraph (b)(3).", "To identify any additional statutes that the reviewed agencies did not  claim during fiscal years 2010 to 2016, we developed another catalog of  statutes that have similar provisions as other (b)(3) statutes that authorize  an agency to withhold information from the public. Specifically, we utilized  various sources to compile our list of statutes, including annual Justice  reports on statutes determined by courts to constitute a (b)(3) statute, the  National Institute of Standards and Technology\u2019s Guide for Mapping  Types of Information and Information Systems to Security Categories,  and two external nongovernmental organizations (American University  Washington College of Law and ProPublica). In addition, we separately  searched the U.S. Code for the keyword \u201c552(b)(3)\u201d using Lexis Nexis, to  identify any additional statutes for our catalog. However, this additional  catalog does not serve as an definitive or comprehensive list of (b)(3)  statutes available for agencies to claim. Specifically, FOIA gives agencies  broad discretion in deciding whether they can withhold information on the  basis of a statute. For example, FOIA allows for agencies to assert a  federal statute under the (b)(3) exemption if that statute establishes  particular criteria or refers to particular types of matters to be withheld.  Therefore, the statutes we identified may undercount the total number of  exemptions available to agencies.", "For our fourth objective, to determine the number and types of FOIA  requests related to private corporations that received funds under the  Troubled Assess Relief program (TARP), we reviewed the Department of  Treasury\u2019s (Treasury) Monthly Reports to Congress (October 2008 and  November 2014) and prior GAO reports relating to TARP. We  identified the corporations that received TARP funds and the federal  agencies that received FOIA requests related to these corporations by  reviewing Treasury\u2019s monthly reports for the time period in which  Treasury held 50 percent or more common stock in corporations that  were under the TARP agreement. We also reviewed prior GAO reports on  TARP to verify the corporations and time period. In addition, we met with  Treasury officials to verify the entities and time period.", "The three corporations that received TARP funds were American  International Group, General Motors, and Ally. The agencies that received  FOIA requests about these corporations were Treasury, the Federal  Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and  the Office of the Comptroller of the Currency. We met with these agencies  to identify their involvement in providing assistance to companies related  to TARP.", "Next, we reviewed FOIA requests received by these four agencies during  the period in which Treasury owned at least 50 percent or more common  shares in the corporations. We reviewed the FOIA requests to determine  the resolution of the request and the length of time it took the agency to  respond. Lastly, we interviewed agency officials to better understand if  and how FOIA requests were received and processed.", "We conducted this performance audit from January 2017 through June  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Freedom of Information Act Exemptions", "paragraphs": ["The Freedom of Information Act (FOIA) prescribes nine specific  categories of information that are exempt from disclosure. These  exemptions are described in the table below."], "subsections": []}, {"section_title": "Appendix III: Catalog of (b)(3) Exemption Statutes Agencies Claimed during Fiscal Years 2010 through 2016", "paragraphs": ["Table 7 describes 237 (b)(3) exemption statutes used by FOIA reporting  agencies during fiscal years 2010 through 2016 and indicates whether  that statute has been found by a court to qualify as a (b)(3) exemption.  Specifically, the Department of Justice, in its oversight role, identified 78  statutes that courts have ruled qualify as a (b)(3) statute. During fiscal  years 2010 through 2016, when responding to FOIA requests, agencies  used 75 of these statutes as the basis for withholding information."], "subsections": []}, {"section_title": "Appendix IV: Catalog of Statutes Authorizing the Withholding of Information but Not Used by Agencies under the (b)(3) Exemption during Fiscal Years 2010 through 2016", "paragraphs": ["Table 8 identifies 140 additional statutes outside of our agency used  catalog that we did not identify as used by agencies during our fiscal year  2010 through 2016 review period. These statutes have similar provisions  to other (b)(3) exemption statutes, authorizing an agency to withhold  information from the public."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Justice", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the National Archives and Records Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: Comments from the Pension Benefit Guaranty Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: Comments from the Tennessee Valley Authority", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIV: Comments from the Federal Trade Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Anjalique Lawrence (assistant  director), Lori Martinez (analyst in charge), Gerard Aflague, Melina  Asencio, David Blanding, Kami Brown, Christopher Businsky, Caitlin  Cusati, Haley Dunn, Elena Epps, Rebecca Eyler, Nancy Glover, James  Andrew Howard, Saida Hussain, Robert Letzler, Lee McCracken, Carlo  Mozo, Brian Palmer, David Plocher, Di\u2019Mond Spencer, Sukhjoot Singh,  Henry Sutanto, and Priscilla Smith made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-358", "url": "https://www.gao.gov/products/GAO-18-358", "title": "Defense Health Care: TRICARE Select Implementation Plan Included Mandated Elements, but Access Standards Should Be Clarified", "published_date": "2018-04-13T00:00:00", "released_date": "2018-04-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD offers health care services to approximately 9.4 million eligible beneficiaries through TRICARE, DOD's regionally structured health care program. In each of its regions, DOD uses contractors to manage health care delivery through civilian provider networks, among other tasks.", "The NDAA 2017 made several changes to the TRICARE program, including the establishment of a new preferred provider network health plan option called TRICARE Select. The NDAA 2017 also required DOD to develop an implementation plan for TRICARE Select that addresses seven specific mandated elements on access to care, beneficiary complaints, and quality metrics for network providers.", "The NDAA 2017 included a provision for GAO to review the implementation plan. This report examines the extent to which DOD's implementation plan addressed the mandated elements. GAO evaluated DOD's implementation plan using leading planning practices identified in GAO's prior work and standards for internal control. GAO examined program policies, procedures, and contracts and interviewed DOD officials and TRICARE regional contractors."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) TRICARE Select Implementation Plan addressed the seven specific elements mandated by the National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017). These elements are", "Element A: ensuring that at least 85 percent of the TRICARE Select beneficiary population is covered by the network by January 1, 2018;", "Element B: ensuring access standards for health care appointments;", "Element C: establishing mechanisms for monitoring compliance with standards for access to care;", "Element D: establishing health care provider-to-beneficiary ratios;", "Element E: monitoring complaints by beneficiaries with respect to network adequacy and health care provider availability;", "Element F: establishing requirements for mechanisms to monitor the responses to complaints by beneficiaries; and", "Element G: establishing mechanisms to evaluate the quality metrics of the network providers.", "GAO also assessed the implementation plan against leading practices for sound strategic management planning and found that it incorporated many of the practices, such as establishing goals, strategies to achieve goals, and plans to assess progress. However, a few of the leading practices were only partially incorporated or not incorporated at all. For example, the implementation plan did not always fully address the leading practice that planning documents include strategies to achieve goals and plans to assess progress. DOD officials explained that some of the details of their approach to the elements had not been finalized when they were completing the implementation plan. These officials added that their approach to the implementation plan was to create a strategic overview, and that some of the details are contained in contract documents and monitored through their oversight responsibilities.", "Furthermore, GAO's assessment of the plan's elements found that the approach outlined in the implementation plan for ensuring access standards for health care appointments (Element B) is different from the approach DOD intends to use. The plan noted that DOD will use the access standards for TRICARE Prime\u2014a managed care option\u2014for TRICARE Select. However, DOD officials told GAO that the contractors are responsible for developing their own access standards, which DOD must approve. These officials added that DOD did not include information about the contractors proposing their own access standards because DOD was still developing its approach to this element when the plan was submitted. Because the implementation plan does not reflect DOD's current approach, Congress may not have the information it needs about the contractors' responsibilities for providing access to care, impeding its ability to provide oversight."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD provide written documentation of its approach for developing and approving the TRICARE Select access standards, as well as the final access standards, to Congress. DOD agreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the Department of Defense (DOD) offered health care  services to over 9 million beneficiaries in the United States and abroad  through TRICARE, DOD\u2019s regionally structured health care program. In  the past, beneficiaries had their choice of coverage among TRICARE\u2019s  three basic health plan options\u2014TRICARE Prime, a managed care  option; TRICARE Standard, a fee-for service option; and TRICARE Extra,  a preferred provider organization option. The National Defense  Authorization Act for Fiscal Year 2017 (NDAA 2017) required DOD to  terminate two of these options, TRICARE Standard and Extra, and  establish a new self-managed preferred provider option called TRICARE  Select no later than January 1, 2018. According to DOD, this change will  modernize the TRICARE benefit\u2014specifically by introducing a  progressive health plan model with enrollment requirements for  beneficiaries. It is also intended to improve beneficiaries\u2019 access to  care\u2014an issue we have previously reported on for beneficiaries who  used the TRICARE Standard and Extra options.", "The NDAA 2017 also required DOD to develop an implementation plan  for TRICARE Select that includes seven specifically defined elements on  access to care, including elements related to TRICARE Select\u2019s network  coverage, access standards for health care appointments, beneficiary  complaints about network coverage and access, and quality metrics for  providers. DOD submitted this plan to Congress on August 7, 2017. The  NDAA 2017 included a provision for us to review the adequacy of the plan  in addressing the mandated elements. In this report, we examine the  extent to which DOD\u2019s implementation plan for TRICARE Select  addressed these elements.", "To conduct this assessment, we reviewed DOD\u2019s implementation plan,  TRICARE program policies and procedures, and contract documents that  require specific access-related plans and data reports from the  contractors. We compared this information with the plan elements  mandated by the NDAA 2017, leading practices for strategic management  planning identified by our prior work, and standards for internal controls in  the federal government. (See app. I.) We also interviewed DOD officials, including officials from the Defense Health Agency (DHA), which  oversees the TRICARE program, and the TRICARE Regional Offices,  which oversee health care delivery in each TRICARE region, to  understand the development and function of the plan, as well as the  planned approach to addressing each element. We also interviewed  representatives of the managed care support contractors, which manage  health care delivery through civilian provider networks in each region,  among other tasks, to understand any challenges related to  implementation of the mandated elements.", "We conducted this performance audit from July 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "TRICARE Regional Structure and Contracts", "paragraphs": ["Under TRICARE, beneficiaries may obtain health care through DOD\u2019s  system of military hospitals and clinics, referred to as military treatment  facilities (MTF), or from civilian providers. DHA uses managed care  support contractors to develop networks of civilian providers, referred to  as network providers, to serve all TRICARE beneficiaries in geographic  areas called Prime Service Areas. The contractors also perform other  customer service functions, such as processing claims and assisting  beneficiaries with finding providers. Each TRICARE region within the  United States has a managed care support contractor. In July 2016, DOD  awarded its fourth generation of TRICARE managed care support  contracts. The new contracts reduced the number of TRICARE regions  from three (North, South, and West) to two (East and West). On January  1, 2018, the TRICARE program began health care delivery under these  contracts."], "subsections": []}, {"section_title": "TRICARE\u2019s Health Plan Options", "paragraphs": ["Prior to January 1, 2018, TRICARE\u2019s non-Medicare-eligible beneficiary  population could obtain care through three basic health plan options\u2014 TRICARE Prime (managed care), TRICARE Standard (fee-for-service),  and TRICARE Extra (preferred provider organization)\u2014that varied by  enrollment requirements, choices in civilian providers, and whether there  were established access standards. Beginning January 1, 2018, the  TRICARE Standard and Extra options were terminated and TRICARE  Select, a self-managed, preferred provider option, was established. (See  table 1.)", "Beneficiaries using the TRICARE Standard and Extra options as of  December 31, 2017, were automatically enrolled in TRICARE Select on  January 1, 2018. Beneficiaries are allowed to change their plan at any  time prior to January 1, 2019, after which they will only be able to change  plans during an annual open enrollment season or within a certain time  period following a qualifying life event. In August 2017, DOD estimated  that over 2 million beneficiaries will be enrolled in TRICARE Select, which  is approximately the same number of beneficiaries who used the  TRICARE Standard option. According to DOD, approximately 66 percent  of these beneficiaries resided in a Prime Service Area\u2014where networks  of civilian providers have been established."], "subsections": []}, {"section_title": "TRICARE Select Implementation Plan", "paragraphs": ["In addition to establishing the TRICARE Select option and making other  TRICARE program changes, the NDAA 2017 required DOD to develop an  implementation plan for TRICARE Select that includes seven specific  elements. These elements are, in part, intended to ensure beneficiaries\u2019  access to care under the TRICARE Select option, and they require DOD  to ensure that at least 85 percent of the beneficiary population under  TRICARE Select is covered by the network by January 1, 2018  (Element A); ensure access standards for appointments for health care that meet  or exceed those of high-performing health care systems in the United  States, as determined by the Secretary (Element B); establish mechanisms for monitoring compliance with access  standards (Element C); establish health care provider-to-beneficiary ratios (Element D); monitor on a monthly basis complaints by beneficiaries with respect to  network adequacy and the availability of health care providers  (Element E); establish requirements for mechanisms to monitor the responses to  complaints by beneficiaries (Element F); and establish mechanisms to evaluate the quality metrics of the network  providers established under section 728 (of the NDAA 2017) (Element  G)."], "subsections": []}]}, {"section_title": "DOD\u2019s TRICARE Select Implementation Plan Included the Mandated Elements and Addressed Most Leading Planning Practices, but Does Not Reflect Current Approach for Access Standards", "paragraphs": [], "subsections": [{"section_title": "DOD\u2019s Implementation Plan Included the Mandated Elements and Addressed Most Leading Practices for Strategic Management Planning", "paragraphs": ["The TRICARE Select implementation plan DOD submitted to Congress  included the seven specific elements mandated by the NDAA 2017.  Specifically, the implementation plan described the upcoming changes to  the TRICARE benefit and included individual sections outlining DOD\u2019s  approach for implementing each of the required elements. For example,  for element A\u2014ensure that at least 85 percent of the beneficiary  population under TRICARE Select is covered by the network by January  1, 2018\u2014DOD described, among other things, how the regional  contractors will identify geographic areas with concentrations of TRICARE  Select beneficiaries and how they will establish a sufficient provider  network to serve that population.", "We also found that the implementation plan reflected most of the leading  practices for sound strategic management planning as identified by our  prior work. (See table 2.) These leading practices suggest that strategic  planning documents include the following: (1) a mission statement, (2)  goals, (3) strategies to achieve goals, (4) plans to assess progress, and  (5) identification of challenges and risks. For example, DOD\u2019s  implementation plan clearly articulated a mission statement, which is \u201cto  ensure beneficiaries receive the right level of care, at the right time,  delivered by the right provider.\u201d Additionally, for six of the mandated  elements, DOD\u2019s implementation plan outlined the goal, strategies to  achieve the goal, and how DOD will assess progress. (See elements A,  B, C, D, E, and F in table 2.) This information is supplemented by contract  documents that require specific plans and data reports from the managed  care support contractors. For example, for element A\u2014ensure that at  least 85 percent of the beneficiary population is covered by the network\u2014 each managed care support contractor is required to submit monthly  performance reports that show that a sufficient number of providers in  primary and specialty care are available to meet access requirements.  While DOD\u2019s implementation plan addressed many of our leading  practices, there were instances where some of the leading practices were  only partially addressed or not addressed at all. For example, none of the  mandated elements incorporated the leading practice related to  identifying the challenges and risks that could affect the success of the  element.", "Element G, Evaluation of Quality Metrics, Remains under  Development  We also found that the implementation plan partially addressed or did not  address the leading practices related to strategies or plans to assess  progress for element G\u2014establish mechanisms to evaluate the quality  metrics of the network providers. The plan stated that DOD is reviewing  the required set of core quality performance metrics and will implement a  subset of these performance measures that can be used in future  contracts. However, the plan did not include several strategic details such  as (1) the process that DOD will use to determine the metrics, (2) the  criteria and resources that are needed to select the subset of these  performance measures, and (3) how DOD will assess progress and  evaluate future metrics. DOD officials told us that a workgroup of  departmental officials\u2014including those from DHA and the TRICARE  Regional Offices and representatives of the military service branches\u2014 with expertise in health care quality are evaluating the metrics for inclusion in the subset of measures based  on criteria such as availability of data, the size of the population  affected, and resources needed; developing a work plan and time frames to analyze the metrics that  are (1) already being reported, (2) not being reported but data are  available, and (3) not being reported and require data solutions in  order to track information; and making preliminary recommendations on which measures to adopt  and which to consider for future adoption.", "DOD officials explained that some of the details of their approach to the  mandated elements had not been finalized when they were completing  the implementation plan, including some of the details for element G,  which continues to be a work in progress. They added that they were  under tight time constraints with competing priorities. They explained that  they had to plan for the implementation of TRICARE Select while  concurrently transitioning to new managed care support contracts, which  had to be modified to incorporate this new health plan option. Therefore,  while DOD officials were developing the TRICARE Select implementation  plan, they had to determine the specific program requirements for this  option and modify the contracts to account for these changes.", "Leading Practice on Challenges and Risks May Be Captured through  Contract Oversight Mechanisms  We also found that DOD\u2019s implementation plan did not address the  leading practice related to recognizing the challenges or risks to success  for any of the seven elements. This practice ensures that an organization  considers any external factors that could significantly affect the  achievement of its goal. For example, for element A\u2014ensure that at least  85 percent of the beneficiary population is covered by the network\u2014the  implementation plan did not address what challenges and risks the  contractors might experience in establishing this network. For example,  one of the two managed care support contractors stated that it did not  have data on the beneficiaries who had sought coverage under TRICARE  Standard and Extra as these beneficiaries did not have to enroll in these  health plan options. Thus, the contractor explained that it was difficult to  establish a baseline for calculating the 85 percent network coverage  required for TRICARE Select. The other managed care support contractor  told us that specific challenges included negotiating provider discounts in  certain areas, identifying which providers participated in the past, and  balancing the composition of the network between primary and specialty  care. However, DOD officials told us that they considered and planned for  the challenges and risks associated with certain elements\u2014including  establishing a monitoring and remediation process to help ensure  contractors meet the 85 percent network coverage requirement\u2014even  though this was not described in the plan.", "DOD officials explained that their approach to the implementation plan  was to create a strategic overview rather than a detailed work plan. These  officials also told us that details and time frames related to the mandated  elements are captured in contract documents, such as those that  establish the managed care support contractors\u2019 reporting and planning  requirements. Although these contract documents do not specifically  address challenges and risks for each element, officials stated that they  have oversight mechanisms in place that allow them to address any  challenges faced by these contractors, thereby mitigating any potential  risks. For example, DHA officials told us that the managed care support  contractors provide status updates on their network expansion progress  at weekly transition meetings with DHA and at biweekly meetings with the  TRICARE Regional Offices. DHA officials told us that the TRICARE  contracts have specific expansion goals and deadlines, such as requiring  that 50 percent of network providers are in the system 120 days prior to  the start of health care delivery. Given that both TRICARE Select and the  new TRICARE contracts were implemented on January 1, 2018, it is too  early to determine whether this approach will be sufficient to deal with any  upcoming challenges and risks."], "subsections": []}, {"section_title": "Implementation Plan Does Not Reflect Current Approach for Establishing Access Standards", "paragraphs": ["Our review of element B\u2014ensure access standards for appointments for  health care that meet or exceed those of high-performing health care  systems in the United States, as determined by the Secretary\u2014noted that  the approach described in the implementation plan differs from the  approach that DOD intends to use. The implementation plan states that  the access standards for TRICARE Select will mirror those of TRICARE  Prime, DOD\u2019s managed care option, and that DOD will continue to  compare these standards with those of high-performing U.S. health care  systems. However, DOD officials told us in interviews that the access  standards for TRICARE Select will be developed by each managed care  support contractor and approved by DOD. This approach is outlined in  contract documents, which state that the contractors are required to  develop access-to-care plans that detail how they will ensure access  standards that meet or exceed those of high-performing health care  systems in the United States.", "DOD officials told us that they did not intend to suggest in the plan that  the TRICARE Prime access standards would be applied to TRICARE  Select. Instead, these officials explained that they meant that the access  standards for TRICARE Select would be evaluated with the same tools as  the access standards for TRICARE Prime. DOD officials further stated  that they did not include information about the managed care support  contractors proposing their own access standards because they were still  developing the approach to this element when the implementation plan  was submitted. DOD officials told us they decided on this approach  because there is no national model for preferred provider organization  access standards, and therefore they did not want to be prescriptive  about the access standards for this option. However, as a result of this  approach, there is the potential that the managed care support  contractors for the East and West regions could be using two different  sets of access standards for TRICARE Select.", "Standards for internal control in the federal government state that  management should externally communicate the necessary information to  achieve the entity\u2019s objectives. Because the implementation plan does  not reflect DOD\u2019s current approach, Congress may be lacking important  information, including what responsibilities the contractors have in terms  of providing access to care, impeding its ability to provide oversight."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["On January 1, 2018, DOD implemented significant changes to the  TRICARE program, which provides health care to millions of beneficiaries  worldwide. One of these changes is the establishment of a new preferred  provider option\u2014TRICARE Select\u2014intended to modernize the TRICARE  benefit and improve beneficiaries\u2019 access to care. While DOD\u2019s  implementation plan for this new option addressed all of the elements that  were required, time constraints along with competing priorities impeded  DOD\u2019s ability to fully develop its approach for some elements, which are  being addressed through other oversight efforts. Furthermore, although  one of TRICARE Select\u2019s primary goals is to improve access to care,  DOD\u2019s implementation plan does not reflect how access standards will be  established. Without the most current information, it will be difficult for  Congress to determine whether the department is achieving its mission of  ensuring that beneficiaries receive the right level of care, at the right time,  delivered by the right provider."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Secretary of Defense direct the Assistant  Secretary of Defense (Health Affairs) to provide written documentation of  DOD\u2019s approach to developing and approving the TRICARE Select  access standards, as well as the final access standards, to Congress.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. In its written  comments, which are reproduced in Appendix II, DOD concurred with our  recommendation. DOD stated that it will provide written documentation  about the TRICARE Select access standards to Congress by June 30,  2018. DOD did not provide technical comments.", "We are sending copies of this report to the Secretary of Defense and  appropriate congressional committees. In addition, the report will be  available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or at draperd@gao.gov. Contact points for our  Office of Congressional Relations and Office of Public Affairs can be  found on the last page of this report. Other major contributors to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Leading Practices for Strategic Management Planning as Identified by GAO\u2019s Prior Work", "paragraphs": ["This appendix provides additional information regarding six elements  identified by our prior work as leading practices for strategic management  planning to establish a comprehensive, results-oriented framework. (See  table 3.)"], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Bonnie Anderson (Assistant  Director), Daniel Klabunde (Analyst-in-Charge), and Karen Belli made key  contributions to this report. Also contributing were Jacquelyn Hamilton  and Elizabeth T. Morrison."], "subsections": []}]}], "fastfact": ["DOD offers health care services to over 9 million people through its TRICARE program. The National Defense Authorization Act of 2017 made several changes to TRICARE, including establishing a new preferred provider network option called TRICARE Select. The act also required DOD to develop an implementation plan for Select that addresses specific issues, such as access to care and beneficiary complaints.", "We found that while DOD's implementation plan addressed all required issues, it doesn't reflect DOD's current approach for establishing access standards. We recommended that DOD provide written documentation of its current approach to Congress."]}
{"id": "GAO-19-115", "url": "https://www.gao.gov/products/GAO-19-115", "title": "Supplemental Nutrition Assistance Program: Disseminating Information on Successful Use of Data Analytics Could Help States Manage Fraud Risks", "published_date": "2018-10-02T00:00:00", "released_date": "2018-11-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government provided $64 billion in SNAP benefits in fiscal year 2017 to help approximately 42 million low-income individuals purchase food. SNAP is administered by FNS in partnership with states. To help reduce the risk of improper receipt or use of SNAP benefits, states use data analytics, including data matching and data mining, to identify patterns or trends indicative of potential fraud in SNAP purchases. Based on concerns about potential SNAP benefit trafficking across state lines, GAO was asked to review out-of-state transactions and states' efforts to combat such fraud.", "This report examines (1) the extent to which SNAP households in selected states made out-of-state purchases that may indicate potential fraud, (2) the advantages and challenges selected states have experienced in using data analytics to identify potential fraud, and (3) how FNS has assisted states in implementing leading practices for data analytics. GAO analyzed fiscal year 2017 data on SNAP purchases for North Dakota, Washington, and the District of Columbia, which had large percentages of non-border out-of-state purchases and interviewed FNS officials and officials in these states as well as in Massachusetts, Mississippi, New Mexico, and Wisconsin about their use of data analytics compared with leading practices."]}, {"section_title": "What GAO Found", "paragraphs": ["Supplemental Nutrition Assistance Program (SNAP) recipients are allowed to spend their benefits outside their state of residence, and GAO's analysis of fiscal year 2017 SNAP data in three selected states found that overall about 2 percent of households made purchases, both in state and out-of-state, potentially indicative of trafficking\u2014the prohibited exchange of benefits for cash or nonfood goods or services. Also, GAO found little difference in potential trafficking behaviors between households that made one or more purchases out-of-state and those that shopped only in their home state.", "Officials in all seven states GAO reviewed said they conducted data matching. Officials in five of these states stated that they use more sophisticated data analytics including data mining to help identify potential fraud (see figure). These officials cited advantages to using more sophisticated analytics to automate fraud detection and prioritize cases, allowing them to focus investigative resources on cases most likely to involve fraud. For example, officials in Mississippi reported that overpayment collections increased $2 million since the state incorporated more data techniques into its fraud detection efforts. However, officials in all seven selected states cited factors such as high cost, resource demands, data limitations and organizational support as challenges that affect their ability to use or maintain more advanced data-analytics techniques.", "The U. S. Department of Agriculture's Food and Nutrition Service (FNS) has helped some states adopt certain leading practices for data analytics, but its current outreach is limited. FNS has provided assistance to some states through pilot projects, grants, and training, but, beyond a recently issued guide, FNS has done little to disseminate information more broadly about successful efforts to adopt data analytics. FNS officials said they are in the early stages of promoting data analytics for SNAP fraud prevention and detection, and their efforts have focused on assessing the current capability of states to use data analytics and determining analytic practices that are effective. State officials GAO interviewed said that training provided was helpful but expressed concern about their access to information on successful data analytic approaches. Disseminating information to states on successful strategies could help states address challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FNS more widely disseminate information to states about successful strategies used by states to adopt data analytics. FNS agreed with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the federal government provided almost $64 billion in  benefits to help approximately 42 million low-income people purchase  food through the Supplemental Nutrition Assistance Program (SNAP). In  recent years, the size and costs of the program have raised questions  about the extent of the controls in place to combat fraud. Program officials  have long-standing concerns that some recipients falsify information  about their household circumstances to improperly receive benefits or  misuse their benefits to solicit or obtain non-food goods, services, and  cash\u2014a practice known as trafficking. For example, according to a press  release from the Department of Justice, in 2018, an individual operating  as a retailer in Maryland was convicted in federal district court for food  stamp and wire fraud relating to the exchange of benefits for cash. The  retailer redeemed over $1.5 million in SNAP benefits for transactions in  which he paid recipients approximately half the value of the benefits in  cash and kept the rest of the proceeds.", "The U.S. Department of Agriculture\u2019s (USDA) Food and Nutrition Service  (FNS), in partnership with the states, administers SNAP. FNS and states  share the role of combating fraud and abuse in the program. State  agencies are directly responsible for detecting, investigating, and  prosecuting recipient fraud, while FNS is responsible for providing  guidance and monitoring this state activity.", "Federal law allows recipients to use their benefits at any authorized  SNAP retailer nationwide, including those outside recipients\u2019 state of  residence. Out-of-state purchases occur for varied reasons, such as  temporary travel or employment in another state. Those who live near  state borders may spend their benefits in the neighboring state if retailers  are more conveniently located or food prices are lower. However, long- term out-of-state purchases, particularly in states that do not border the  state where the recipient is enrolled in SNAP, may raise questions about  a recipient\u2019s actual residence and how the benefits are being used.", "You asked us to examine the out-of-state use of SNAP benefits. In this  report, we answer the following questions:  1.  To what extent are SNAP households in selected states making out- of-state purchases that may indicate potential recipient fraud?  2.  How are selected states using data analytics\u2014including analyses of  out-of-state transactions\u2014to identify potential SNAP recipient fraud,  and what advantages and challenges, if any, have they experienced?  3.  How has FNS assisted states in implementing leading practices for  data analytics?", "For all three objectives, we reviewed relevant federal laws, regulations,  program guidance, and reports. For objective 1, we analyzed all out-of- state SNAP transactions for fiscal year 2017 using data provided by FNS.  We selected the District of Columbia and two states\u2014North Dakota and  Washington\u2014with large amounts of non-border out-of-state transactions  (compared to all SNAP benefits issued in the state) for further review.  For these states, we reviewed fiscal year 2017 transaction data for  households that spent all their benefits in a non-border state in that year.  We also analyzed all transaction data for households in these states for  indicators of potential trafficking.", "For objective 2, we selected these three states as well as Massachusetts,  Mississippi, New Mexico, and Wisconsin for our review. We selected  these seven states to reflect a range of individual state experiences  based on the percentage of non-border state transactions, receipt of  related technical assistance, and FNS\u2019s reports on their capacity to  conduct data analysis. We interviewed knowledgeable officials from the  seven state SNAP agencies about their efforts to use data analytics to  detect potential recipient fraud and the advantages and challenges states  face in doing so. We obtained related documentation when possible.  While information from these seven state SNAP agencies is non- generalizable, it provides illustrative examples of state agencies\u2019 efforts to  use data analytics.", "For objective 3, we obtained documentation of FNS\u2019s efforts to assist  states in implementing data analytics and interviewed FNS officials in  headquarters and all seven regional offices as well as officials from the  seven states and others representing state associations. We compared  these efforts to leading practices for data analytics described in GAO\u2019s  Fraud Risk Framework. We focused primarily on FNS\u2019s efforts to assist  states beginning in fiscal year 2015, which follows our 2014 report on  SNAP recipient fraud. Our 2014 report included recommendations for  FNS in assisting states with recipient anti-fraud efforts. All of the data  included in this report were assessed and determined to be sufficiently  reliable for our purposes. More information on our methodology can be  found in appendix I.", "We conducted this performance audit from May 2017 through October  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence we obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal and State Roles in Addressing SNAP Fraud", "paragraphs": ["The goal of SNAP, formerly known as the federal Food Stamp Program,  is to help low-income individuals and households obtain a more nutritious  diet by supplementing their income with benefits to purchase allowed food  items. The federal government pays the full cost of the benefits and  shares the responsibility and costs of administering the program with the  states. The overarching rules governing SNAP are set at the federal level.  Accordingly, FNS is responsible for promulgating program regulations  and ensuring that state officials administer the program in compliance  with program rules. FNS officials in seven regional offices assist  headquarters officials in this oversight work. FNS also determines which  retailers are eligible to accept SNAP benefits for food purchases and  investigates and resolves cases of retailer fraud. The states, or in some  cases counties, administer the program by determining whether  households meet the program\u2019s eligibility requirements, calculating  monthly benefits for qualified households, and issuing benefits to  participants on an electronic benefit transfer (EBT) card. States are also  responsible for investigating possible violations by benefit recipients and  pursuing and acting on those violations that are deemed intentional."], "subsections": []}, {"section_title": "Types of SNAP Fraud and State Anti-Fraud Mitigation Strategies", "paragraphs": ["Intentional program violations include acts of fraud, which involve  obtaining something of value through willful misrepresentation. Eligibility  fraud involves individuals making false or misleading statements in order  to obtain benefits, including statements about household composition,  household expenses, and income. Failing to report changes to household  circumstances that may affect benefits can also result in eligibility fraud  under certain circumstances. When recipients are certified for SNAP,  state agencies assign them to a reporting system for notifying the state of  certain changes.  These changes include when they have a change of  address, both in-state or out-of-state. Some systems require recipients to  report within a certain period of time of the change occurring, often within  10 days.  Other reporting systems\u2013 including simplified reporting \u2013 require  recipients to submit reports periodically.  Households subject to reporting  on a periodic basis must generally submit reports not less often than once  every 6 months.   One type of eligibility fraud is dual participation, in  which a recipient receives benefits in more than one state in the same  month.", "Another type of SNAP fraud is trafficking, in which benefits are  exchanged for cash or non-food goods and services. Trafficking may  occur when recipients collaborate with retailers who pay cash for SNAP  benefits. For example, a retailer might allow a recipient to charge $100 on  his or her EBT card and then pay the recipient $50 instead of providing  food. Trafficking also occurs when a recipient exchanges an EBT card  and the corresponding Personal Identification Number (PIN) for cash or  non-food goods or services (e.g., rent or transportation) from another  individual.", "According to a September 2012 USDA Office of Inspector General (OIG)  report, the magnitude of program abuse due to recipient fraud is unknown  because states do not have uniform ways of compiling such data. OIG  recommended that FNS determine the feasibility of creating a uniform  methodology for states to calculate their recipient fraud rate. In 2014,  FNS responded that it would be infeasible to implement the  recommendation as it would require legislative authority mandating  significant state investment of time and resources in investigating,  prosecuting, and reporting fraud beyond current requirements.", "States must adhere to various federal requirements for detecting SNAP  recipient fraud, conducting investigations, and providing due process prior  to disqualifying recipients from participating in the program. The  household is responsible for repaying ill-gotten or misused benefits.  States may generally retain 35 percent of the fraudulent benefits they  recover, and the rest are returned to the federal government."], "subsections": []}, {"section_title": "Data Analytics", "paragraphs": ["The use of data analytics enables the discovery and communication of  meaningful patterns in data so that states can determine which potential  SNAP fraud cases to review in detail. States have access to various types  of data in their case management systems, including recipient-provided  information and benefits data collected throughout the SNAP eligibility  determination process. Other information sources available to states  include transaction data collected by EBT processors, data from previous  fraud investigations, and third-party data from other government agencies  or commercial vendors (see fig. 1).", "Data-analytics activities can include a variety of techniques to prevent  and detect fraud, including data matching and data mining. Data matching  is the large scale comparison of records and files to detect errors or  incorrect information. It can be used to verify information provided by  recipients or detect unreported changes. Data mining is the use of  automated computer algorithms to detect otherwise hidden patterns,  correlations, or anomalies within large data sets indicative of potential  fraud, thus assisting programs in recovering these dollars (see fig. 2).", "Federal laws and regulations require states to conduct certain data  matches when an application for benefits is submitted and other times to  verify an individual\u2019s reported employment and immigration status, as well  as to ensure the information provided is not for an individual who is  incarcerated, deceased, or disqualified from the program (see table 1).", "GAO\u2019s Fraud Risk Framework identifies the following leading practices to  help managers effectively use data to mitigate the likelihood and impact  of fraud (see table 2).", "While these leading practices can help managers design and implement  effective data-analytic tools and techniques to prevent and detect  potential fraud, as discussed in the Fraud Risk Framework, these  techniques alone may not be sufficient to ensure that ineligible individuals  do not fraudulently enroll in a program or receive benefits. As a result,  managers may need to combine data-analytics activities with additional  controls as part of their efforts to combat fraud, in a strategic, risk-based  manner."], "subsections": []}]}, {"section_title": "SNAP Transaction Data from Selected States Show Relatively Few Households with Out- of-State Purchases Indicating Potential Fraud", "paragraphs": [], "subsections": [{"section_title": "Out-of-State Purchases Are Allowed by SNAP Rules and Their Dollar Value Represents a Small Percentage of Purchases", "paragraphs": ["A relatively large number of SNAP households made purchases outside  their home state, as allowed under the SNAP statute, but the total dollar  value of out-of-state purchases was small compared to SNAP purchases  overall, according to our analysis of FNS SNAP transaction data. We  identified approximately 5.5 million households that made out-of-state  SNAP purchases in fiscal year 2017. In comparison, FNS reported that  the monthly average number of SNAP households was approximately 21  million in fiscal year 2017. Out-of-state purchases made up approximately  3 percent of all SNAP benefits in fiscal year 2017, with a total dollar value  of about $2 billion (see fig. 3).", "Out-of-state purchases may occur for different reasons, one of which may  be because a recipient lives on or near a state border, and regularly  shops across the state line. For example, District of Columbia recipients  spent about half of their SNAP benefits out of state in fiscal year 2017. All  District of Columbia residents are in close proximity to both Maryland and  Virginia, which are no more than approximately 7 miles from any point in  the District. In general, about a third (34 percent) of households  nationwide with out-of-state purchases spent $50 or less on those  purchases in fiscal year 2017. See Appendix II for a detailed listing of out- of-state purchases by state. Out-of-state purchases may also indicate  potential program violations, including eligibility fraud or trafficking.  However, because out-of-state purchases are permitted, analysis of  additional household and transaction information is generally needed to  identify potential fraud, as discussed below.", "Of out-of-state transactions, purchases in a state that did not border the  recipient\u2019s home state (non-border state) made up approximately 1  percent of all SNAP benefits in fiscal year 2017, as shown in figure 3  above. There were 2.2 million SNAP households that made at least one  purchase in a non-border state in fiscal year 2017, and the percent of  SNAP benefits spent in a non-border state in that year ranged between  approximately 0.6 percent and 1.9 percent. In fiscal year 2017, states  whose SNAP recipients spent the highest percentage of their SNAP  benefits in non-border states included Colorado, Hawaii, Montana, North  Dakota, and Rhode Island."], "subsections": []}, {"section_title": "SNAP Purchases in Non- Border States Raise Questions of Residency for a Relatively Small Percentage of Households in Selected States", "paragraphs": ["Overall, we found that for fiscal year 2017, less than 0.5 percent of  households in our three selected states spent all their SNAP benefits for  the entire fiscal year in a non-border state (see table 3). Use of benefits  in stores that are a long distance from a recipient\u2019s residence for  extended periods of time, such as purchases exclusively in non-border  states over multiple months, could be an indicator of program violations,  including eligibility fraud. The total value of SNAP transactions by  households in our three selected states that made all purchases in non- border states in fiscal year 2017 was approximately $1.9 million. These  purchases represent about 0.1 percent of all SNAP benefits for fiscal year  2017 in the three selected states.", "When SNAP benefits are used in a non-border state over an extended  period of time, this could indicate possible intentional program violations  such as an unreported move and other household changes that could  impact eligibility. SNAP officials we interviewed said that in some cases a  recipient may delay reporting a move if they are enrolled in SNAP in a  state with a lower barrier to entry to the program. At the same time, the  rules around reporting a move and residency may make it difficult to  determine when a recipient has violated program rules. Recipients are not  required to immediately report a move in some cases due to simplified  reporting rules that allow a recipient to report household changes only  periodically, generally every 6 months. Also, officials we interviewed in  the three selected states told us that there are no set time limits for a  SNAP recipient to reside in a new state before the former state revokes  the recipient\u2019s residency. For example, a recipient may be out of state for  an extended period of time for personal reasons, such as helping a  relative, but still intend to reside in the state where they are enrolled in  SNAP. In that case, according to state officials, the recipient would not  necessarily need to report a move and may not be violating program  rules.", "In addition to the program violations related to an unreported move, use  of SNAP benefits in a non-border state over extended periods of time  could bring into question whether a recipient is also enrolled in SNAP in  another state (i.e., dual participation). Also, it may indicate changes in the  household that could impact eligibility, including questions about whether  a recipient is earning unreported income in the state where they are using  their benefits. While state SNAP agencies stated that they conduct data  matching meant to detect dual participation and unreported income,  states also noted challenges with these matches. State agencies told us  that they use the PARIS system to detect possible dual participation, and  both NDNH and the Work Number to identify recipient income.  However, challenges officials cited in using these systems included lags  in the data provided, and additional work required to confirm data. The  use of data analytics to review recipient transaction data may help states  identify suspicious household activity more easily than with data matching  alone given the challenges associated with these systems. In addition,  data analytics may be another tool to help states identify suspicious  activities in a timely manner. Given the possibility for eligibility fraud or  other program violations, we plan to refer the households that our data  analysis identified as spending all benefits in a non-border state to their  respective state SNAP agencies for further investigation."], "subsections": []}, {"section_title": "Selected Households\u2019 Out- of-State and In-State SNAP Purchases Had Similar Levels of Potential Trafficking", "paragraphs": ["Based on our analysis of fiscal year 2017 transaction data in the three  selected states, we found that SNAP households without out-of-state  purchases were generally just as likely to have made the types of  purchases that may indicate trafficking of benefits as households with out- of-state purchases. Overall, we found that approximately 2 percent of all  households in the three selected states, including both households that  shopped out-of-state and those that shopped in state only, had a high  number of purchases potentially indicative of SNAP trafficking. However,  for two selected states, there was little to no difference in the percentage  of households with this activity when we compared households that only  shopped in their home state and households that shopped out-of-state.  For one state, a greater percentage of households that shopped out-of- state had purchases indicative of SNAP trafficking, but households in this  state also had different shopping patterns in general, as discussed below.  In addition, for households that shopped out-of-state, few of the  transactions we flagged as indicators of potential trafficking occurred  outside the home state. Although we found that rates of trafficking  indicators were generally similar between households that shopped out- of-state and those that only shopped in their state of residence, the  analysis of transaction data for other factors may allow states to identify  households at risk of trafficking and make them a higher priority for  investigation. Our prior work reported on the benefits of SNAP transaction  data analysis for this purpose.", "Specifically, we found that for North Dakota and Washington, households  that made one or more purchases out of state had similar rates of  purchases flagged for potential trafficking compared to households that  shopped only in their home state. This held true both for households that  only shopped in border states, as well as for households that shopped in  non-border states (see table 4). For example, 1.4 percent of Washington  SNAP households that only shopped in their home state had purchases  resulting in 20 or more trafficking flags in fiscal year 2017, and 1.8  percent of Washington households that also shopped in border states had  20 or more trafficking flags. For Washington households that also  shopped in non-border states, 1.5 percent made purchases resulting in  20 or more flags.", "Our analysis of District of Columbia households identified higher rates of  potential trafficking indicators for households that shopped out-of-state,  compared to the other two selected states. Specifically, 1.4 percent of  District of Columbia SNAP households that only shopped in their home  state had purchases resulting in 20 or more trafficking flags in fiscal year  2017, and 5.7 percent of households that also shopped in border states  had 20 or more trafficking flags. For District of Columbia households that  also shopped in non-border states, 8 percent made purchases resulting in  20 or more flags. However, the difference in rates for District of Columbia  trafficking indicators may reflect the different shopping patterns of its  households when compared to other states. As stated previously, District  of Columbia households made about half of their SNAP purchases out-of- state, which is a significantly higher amount compared to any other state.  And all District of Columbia households are in close proximity to the  bordering states of Maryland and Virginia, approximately 7 miles or less.  Also, a small percentage of District of Columbia households shopped only  in their home state in fiscal year 2017\u2014approximately 7 percent of all  households reviewed. In comparison, approximately 62 percent of North  Dakota households, and 76 percent of Washington households made all  purchases in their home state.", "For the households in North Dakota and Washington that shopped out-of- state in fiscal year 2017, we found that most transactions indicating  potential trafficking occurred in the recipient\u2019s home state rather than out- of-state (see fig. 4). District of Columbia households were the exception  and most transactions indicating potential trafficking occurred in the  recipient\u2019s home state or in a border state. However, the pattern of  trafficking flags also aligns with where District of Columbia SNAP  recipients tend to shop, given that approximately half of their SNAP  purchases were made in border states in fiscal year 2017.", "While we identified households in selected states with out-of-state  purchases that indicated potential trafficking, identifying such households  required additional data analysis of factors beyond purchase location.  Analysis of additional data elements may allow states to better identify  potential trafficking requiring investigation. We found out-of-state  purchase information alone is of limited benefit to identify SNAP  households that may be engaged in trafficking."], "subsections": []}]}, {"section_title": "Some Selected States Reported Using Data Analytics Beyond Required Data Matching and Cited Advantages As Well As Organizational and Resource Challenges", "paragraphs": [], "subsections": [{"section_title": "Selected States Reported Doing Required Data Matching, and Some Reported Conducting Additional Data Analytics", "paragraphs": ["Officials we interviewed in all seven of the states we selected for review  of use of data analytics reported conducting federally required data  matching to verify information provided by households when they initially  apply or recertify for SNAP benefits. Federal law and regulations require  states to conduct certain data matches when determining SNAP eligibility,  including matches that provide information on people who may be  incarcerated, deceased, or disqualified from receiving SNAP benefits due  to intentional program violations. The five databases that state SNAP  agencies are required to conduct matches against when determining  SNAP eligibility are the Department of Health and Human Services\u2019  (HHS) National Directory of New Hires, the Social Security  Administration\u2019s (SSA) Prisoner Verification System, SSA\u2019s Death Master  File, U.S. Citizenship and Immigration Services\u2019 Systematic Alien  Verification for Entitlements and FNS\u2019s Electronic Disqualified Recipient  System (eDRS). As we previously reported, state SNAP agencies use  data matching to obtain information about households\u2019 income, verify  information provided by households, or identify potential discrepancies.  Specifically, agencies are required to verify household data electronically  by matching their data with specific government sources and have the  option to match against additional data sources.", "In addition to the required data matching, officials we interviewed in all  seven selected states also reported conducting other data matching with  a range of internal and external data sources. These matches used  information from federal, state, and commercial data sources on earned  income from employment or self-employment or unearned income from  other government benefit programs. According to state officials, these  sources included Unemployment Insurance information from state  workforce agencies, the PARIS file from HHS, and The Work Number, a  commercial verification service. Other sources that could be used include  Old-Age, Survivors, and Disability Insurance income information and  Supplemental Security Income information from multiple data matches  with the SSA. In addition to verifying applicants\u2019 initial eligibility, data  matching can identify changes in key information that could affect  continued eligibility.", "Beyond data matching, officials in all seven selected states said that they  had access to EBT reports notifying them of suspicious transactions,  although the type and frequency of use of these reports varied. For  example, while some state officials said that they manually generated  reports on an ad hoc basis, other state officials said that they had  automated reports that they received and reviewed on a weekly or  monthly basis. As we previously reported, automating data analytics tests  can allow agencies to monitor large amounts of data more efficiently than  with manual tests. Furthermore, officials in all seven selected states  reported that they had examined out-of-state transactions to some extent.  Some states had access to out-of-state reports as part of their suite of  EBT reports but did not review them often, while other states  automatically received alerts if households consistently used benefits out  of state over a certain extended period of time, such as 70 or 90 days.  For example, officials from Massachusetts told us that they flag certain  transactions to help ensure recipients comply with the state\u2019s residency  requirements for eligibility. Specifically, after a client spends their benefits  out of state for 70 days or more, the state agency will send a letter asking  the client to prove they are still a Massachusetts resident. Officials  generally reported that tracking out-of-state transactions was most useful  for finding potential dual participation\u2014a household receiving benefits in  two or more states.", "Officials we interviewed in five of seven selected states reported  conducting further, more sophisticated data analytics involving data  mining\u2014the active and recurring monitoring of EBT transactions using  algorithms to detect and flag transactions that indicate potential recipient  fraud, often on a real-time or near real-time basis. For example, officials  told us that these states\u2014the District of Columbia, Massachusetts,  Mississippi, Washington, and Wisconsin\u2014examined a range of indicators  of potential recipient fraud. Some of the five selected states automated  their data mining to monitor data for potential fraud indicators on a  continuous, real-time basis.", "In addition to data mining, some of these five states reported using other  more advanced data analytics techniques, including mapping analysis  and a form of predictive analysis to identify SNAP purchases that could  indicate trafficking. For example, officials in the District of Columbia  reported using location mapping to identify households that spent their  benefits long distances from home. Officials we interviewed in Wisconsin  reported developing an automated check intended to flag particular types  of case characteristics indicative of potential fraud. According to the  Wisconsin officials, if a particular case is flagged, a caseworker must  follow up and provide extra scrutiny before the case can move forward in  the eligibility process. As we previously reported, certain types of  predictive data analytics can increase the effectiveness of anti-fraud  programs by identifying particular types of potentially fraudulent  behavior."], "subsections": []}, {"section_title": "Selected States That Reported Conducting Additional Data Analytics Also Employed More Leading Practices and Cited Advantages in Using Data Analytics", "paragraphs": ["Officials we interviewed in the five selected states that reported  conducting additional data analytics\u2014the District of Columbia,  Massachusetts, Mississippi, Washington, and Wisconsin\u2014 employed  more of GAO\u2019s leading practices for data analytics than the two states  that used data matching alone\u2014New Mexico and North Dakota.", "Organizational and leadership support. The five states with more  sophisticated data analytics techniques all reported to us that they  had organizational and leadership support for those activities. GAO\u2019s  leading practices state that to be effective, data-analytics initiatives  need support across the program and, in particular, from program  managers. Officials in these states cited support from executive and  legislative state leadership for the use of data analytics to combat  SNAP recipient fraud. For example, officials in Wisconsin reported  that the governor\u2019s office worked to centralize the agency\u2019s data- analytics activities and support infrastructure to improve business  processes. Officials in Mississippi told us that the state\u2019s executive  leadership fully supports the use of data to combat SNAP recipient  fraud and that the state legislature in 2017 passed a law to assist in  the identification of waste, fraud, and abuse.", "Pursue external data. These states also reported to us that they  were able to obtain external data necessary for their data analytics  activities. For example, officials in Mississippi told us that they  interface with an array of data sources, including the National  Accuracy Clearinghouse, the state Department of Employment  Security, and the state Department of Education, among others.  GAO\u2019s leading practices state that using data from other federal  agencies or third-party sources can help managers identify potential  instances of fraud. As we mentioned previously, the states that  reported conducting additional matching beyond that required by  federal law and regulation also reported using an array of federal,  state, and third-party sources for these data matches.", "Consider program rules or previously encountered schemes.", "These five states also reported that they considered program rules  and known or previously encountered fraud schemes to help design  their data analytics practices, another of GAO\u2019s leading practices for  data analytics. These leading practices note that by using information  on previously encountered fraud schemes or known fraud risks,  managers can identify signs of fraud (i.e., red flags) that may exist  within their data. For example, two states reported that they change  their data analytics techniques in response to changing patterns of  fraud.", "All five selected states that reported conducting additional data analytics  practices beyond data matching cited a number of associated  advantages, including increased efficiency and effectiveness of their anti- fraud efforts.", "Automating fraud detection. All five states reported that data  analytics provided the advantage of automating the detection of  potentially fraudulent activity. For example, officials in Mississippi  noted that a new investigation management system implemented in  their state would use algorithms to detect potential fraud and  automatically generate flags, whereas in the past they had to examine  transactions manually.", "Financial savings. Four states reported that data analytics had the  advantage of financial savings through the collection of overpayments  and the closure of cases. For example, officials in Washington said  that its data matching activities saved millions of dollars through the  closure of cases. Officials in Mississippi reported that its overpayment  collections increased $2 million since moving to a new investigation  management system a few years ago that incorporates more data  analytics techniques.", "Prioritizing and enhancing investigations. Four states reported that  data analytics helped them prioritize and enhance fraud  investigations. For example, officials in Washington said that they had  a system in place that used an algorithm to rank each fraud referral  based on a number of factors and moved higher-risk referrals to the  top of the list of investigations. Officials in Wisconsin said that they  combined eligibility, transaction, and retailer data and analyzed it to  produce a prioritized list of individuals who appeared most likely to  have trafficked at a specific retailer, allowing them to focus their  investigative resources on cases most likely to be fraud.", "Preventing fraud. Finally, two states reported that data analytics had  the advantage of improving the return on investment of anti-fraud  activities through the prevention of fraud before it occurs. For  example, officials in Wisconsin estimated that data analytics has  helped them prevent a large proportion of fraud before it occurs,  thereby improving the cost-benefit of their anti-fraud practices.  Officials in Mississippi noted that data analytics can be an effective  deterrent."], "subsections": []}, {"section_title": "Selected States Reported Organizational and Resource Challenges in Effectively Using Data Analytics", "paragraphs": ["Officials we interviewed in all seven selected states reported a range of  organizational and resource challenges that either prevented them from  using more advanced data analytics techniques or made their current  data analytics practices difficult to implement.", "Quantifying benefits of data analytics. Officials we interviewed in  two states said it was challenging to quantify the benefits of data  analytics, therefore resulting in a lack of sound evidence for  supporting the utility of this type of work. For example, officials in  Washington reported that it was difficult to conduct a cost-benefit  analysis of data analytics because of the challenge of quantifying how  often fraud is prevented before it occurs. Officials in Wisconsin  reported that it attempted to measure future savings from fraud  prevention but that there is no guidance for how to determine these  savings.", "Obtaining organizational support. Officials in two states reported  that it was challenging to obtain sufficient organizational support for  conducting data analytics. For example, officials in North Dakota  reported that they could not say how much support exists in the state  government to pursue additional resources for data analytics. Those  in the District of Columbia noted that it is sometimes difficult to  convince certain employees of the need for data analytics to detect  fraud.", "Appearing to criminalize legitimate use. Officials in three states  said that a challenge to using more advanced data analytics was that  it could appear to profile recipients or make it appear to the general  public and to policy-makers that certain legitimate uses of SNAP  benefits, such as using benefits out-of-state, were not allowed. For  example, Washington tracked the number of replacement EBT cards  as a possible indicator of fraud, but officials said that there were many  cases in which the client had legitimate reasons for needing a high  number of replacement cards, such as mental health issues or  homelessness. Washington officials further noted the challenge of  using demographic data in a predictive model, reporting that it puts  them at risk of profiling even though it can be helpful. For example,  when they examined recipients with high balances on their EBT cards,  demographic information provided an explanation. In particular,  elderly individuals were being frugal with their benefits.", "Dealing with changing patterns of fraud. Officials we interviewed in  three states said that a challenge to using data analytics was dealing  with changing patterns of fraud. They said that the characteristics of  transactions that may indicate potential fraud are constantly changing  as fraudulent actors change their tactics in response to state  enforcement. For example, officials in Mississippi said that recipients  committing fraud might change from high-dollar to low-dollar  transactions, in which case the state would need to adjust its  monitoring accordingly.", "Obtaining necessary data. Officials we interviewed also reported  challenges with obtaining data needed to conduct data analytics.  Officials in three states said that simplified reporting presents a  challenge to using data analytics to detect potential recipient fraud.  Specifically, simplified reporting made it challenging to use certain  information as potentially indicative of fraud because recipients are  not required to report certain changes\u2014for example, a move out of  state\u2014until it is time for them to recertify for benefits. In addition,  officials in three states reported a challenge in verifying necessary  data in order for them to be considered reliable for use. For example,  Massachusetts reported that one of the biggest challenges of  developing investigative leads through data analytics is that not all  data are considered equally reliable. For SNAP, FNS guidance  defines some data matches as \u201cverified upon receipt\u201d if the match is  with a primary or original source of the data (such as information on a  government benefit provided by the administering agency, such as  SSA). Eligibility workers can use this information without taking  additional steps to verify that the data are accurate, according to FNS  guidance. In contrast, data from a secondary source, defined in the  guidance as not being verified upon receipt, require additional  verification before the state agency can take action on an eligibility  determination.", "High costs and resource demands. Officials in six selected states  cited the high costs and resource demands of using advanced data  analytics techniques. For example, officials we interviewed in North  Dakota, which conducted only data matching, said that they lacked  the funding and staff resources to use more advanced techniques.  Officials we interviewed in New Mexico noted that they lacked the  staff resources to use data analytics. Officials from North Dakota said  that they had the option to procure a data analytics tool, but said that  the costs were prohibitively high. Officials in Wisconsin, which was  employing more data analytics, said that they were not able to  purchase access to a third-party data source using SNAP funding  alone, and that they had to seek funding from another federal program  in order to afford these efforts."], "subsections": []}]}, {"section_title": "FNS Supported Certain States in Adopting Leading Practices for Data Analytics, but Assistance and Information Sharing Has Been Limited", "paragraphs": [], "subsections": [{"section_title": "FNS Helped Some States Adopt Certain Leading Practices for Data Analytics", "paragraphs": ["FNS provided individualized assistance and training to several states  across the country to build their capacity for data analytics on SNAP,  consistent with several of GAO\u2019s leading practices. FNS provided  assistance through grants, pilot projects, and training at conferences. The  pilot projects also informed FNS\u2019s early efforts to help states improve their  fraud prevention, detection, and investigation processes using data  analytics. Specifically, in recent years, FNS\u2019s assistance to states has  aligned with 4 of the 10 leading practices for data analytics identified by  GAO in its Fraud Risk Framework."], "subsections": [{"section_title": "Ensure Employees Have Sufficient Knowledge, Skills, and Training", "paragraphs": ["In fiscal years 2014 through 2017, FNS conducted a 10-state pilot project  to identify and test promising practices in state fraud prevention and  detection. As part of the project, each participating state received training  and technical assistance in the use of data analytics, in addition to a  review of its business processes. For example, officials from Utah, who  participated in the pilot, said that FNS provided training to them on mining  social media data. The officials added that the timing of the training was excellent because the state was beginning to build its capability for data  analytics on its own. They said that their data analytics team has  incorporated what they learned during the pilot and use various data  analytic techniques every month. As a result, according to officials, the  state\u2019s overpayment collections increased.", "In fiscal years 2014 and 2015, FNS awarded nine Recipient Trafficking  Prevention Grants and five Recipient Integrity Information Technology  Grants to a total of 13 states, some of which funded training and staff to  perform SNAP data analytics. For example, in fiscal year 2014,  Kentucky received a grant to purchase and receive training on an analytic  tool with the ability to analyze data and capture posts coming from  various social media sites. In fiscal year 2015, Alaska received a grant  that included 3 months of training related to the installation of the state\u2019s  new fraud case management system that, among other things, would  provide real-time data and automate manual processes to detect fraud  and track cases. According to Alaska\u2019s grant application, this would allow  the state to devote more time to investigations, prosecutions,  recoupment, and analysis and increase the number of completed  investigations.", "State officials we interviewed said that they also gained data analytics  knowledge and skills from other states at conference workshops. For  example, officials from North Dakota told us that they attended a  conference presentation in which officials from another state discussed a  performance measure that is designed to assess the savings associated  with detecting SNAP fraud."], "subsections": []}, {"section_title": "Combine Data Across Programs Within the Agency", "paragraphs": ["FNS has provided grant funding and training to some states to help them  combine data from different databases within the state to facilitate SNAP  data analytics. For example, FNS\u2019s fiscal year 2015 information  technology grants helped five states develop centralized data systems  and consolidate data from multiple outdated systems. Nevada received a  grant to fund the acquisition of a new data system that, according to its  grant application, would combine the state\u2019s data on known SNAP fraud  cases with transaction data and third-party data sets. The data on known  fraud cases would be used to continuously refine data analyses to identify  similar anomalies and patterns in the transaction data. Maine used its  grant to acquire a new investigation case management system that  consolidates data from multiple systems in a centralized repository.  Similarly, New Jersey received a grant to acquire new computer systems  that, according to its grant application, will integrate SNAP case  management system data with data from several of the state\u2019s data  systems, allowing investigators to perform analyses in real time. In  addition to the grants, in fiscal year 2016, FNS sponsored a 5-day course  on fraud detection that demonstrated how states could combine eligibility  data with transaction and other data to identify potential fraud. Officials  from six states participated."], "subsections": []}, {"section_title": "Pursue Access to External Data and Conduct Data Matching", "paragraphs": ["FNS has provided grants to assist some states in accessing and using  external sources for data matching. For example, in fiscal year 2014, FNS  provided recipient trafficking prevention grants to three states\u2014Florida,  Nevada, and Ohio\u2014to update the systems that they use to match their  SNAP recipients and those that have been disqualified in the state with  FNS\u2019s national database of disqualified recipients. According to FNS,  each grantee state planned to use the funds to link its system with FNS\u2019s  database through the web rather than using a \u201cbatch\u201d processing system,  which will allow them to match data on applicants at the time of  application or recertification rather than at specific intervals after eligibility  is determined. Florida officials mentioned in the related grant proposal  that using the state\u2019s current batch processing system meant that other  states did not have real-time access to information about the state\u2019s  disqualified recipients, thereby potentially increasing the chance of an  ineligible individual receiving benefits.", "In addition, FNS  administered a grant on behalf of OMB, which funded a  pilot program for five southeastern states to develop the National  Accuracy Clearinghouse (NAC), a data sharing system that allows  participating states to identify applicants who are receiving benefits in the  partnering states in near-real time. According to one state official, a  primary benefit of the NAC is that it enables each participating state to  match data on individual beneficiaries across five states without having to  connect to five different states\u2019 computer systems. One member of the  NAC consortium from Florida said that the ability to match in near-real  time is helpful because the data available in the PARIS system is older  and would only identify individuals potentially receiving benefits in multiple  states months after they have occurred, rather than at the time of  application. As we have previously reported, data on benefit receipts is  updated quarterly in PARIS."], "subsections": []}, {"section_title": "Conduct Data Mining", "paragraphs": ["FNS has funded pilot projects, training, and grants to assist some states  in developing their capacity for data mining to identify potential fraud.  FNS\u2019s 10-state pilot to test advanced data analytics techniques included  the use of data mining, among other data analytic techniques. One of the  techniques involved mining recipient transaction data for households that  had shopped at disqualified retailers to develop a prioritized list of  retailers and recipients to investigate. According to state officials we  interviewed in Wisconsin, the technique automated a time and labor  intensive process that state analysts had previously performed manually.  The pilot project also used other data mining techniques to develop  profiles of recipients who commit fraud. For instance, in Utah, the data  analysis showed that they are more likely to have multiple replacement  EBT cards and make more purchases from small stores than other  recipients. At the end of the pilot, FNS sponsored a training course that  included detailed instruction on data mining.", "Although past efforts by FNS have been limited to some states and  encouraged some leading practices, more recently, in May 2018, FNS  released a SNAP Fraud Framework that provides more comprehensive  guidance to help states adopt all of GAO\u2019s 10 leading practices for data  analytics. Specifically, FNS\u2019s SNAP Fraud Framework provides a  collection of examples, promising practices, and procedures to help state  agencies with the prevention and detection of SNAP fraud that  encompass all 10 data analytics leading practices from GAO\u2019s Fraud Risk  Framework. (For a comparison of the practices in the two frameworks,  see appendix III.) According to FNS officials, the SNAP Fraud Framework  is meant to take a holistic, integrated approach to fraud, including data  analytics, but they recognize that states differ in their readiness to adopt  analytics. The framework\u2019s data analytics section provides a range of  approaches, examples, case studies, and methods that allow all states to  begin embedding analytics into their processes. FNS officials reported  that they began conducting outreach to state officials about the  framework in the summer of 2018. FNS officials said that they are also  considering using grant funds to assist states with the implementation of  components of the framework. Furthermore, FNS officials said that some  of the potential technical assistance may include showing states how to  develop their own analytic tools.", "FNS has also developed a maturity assessment to evaluate each state\u2019s  capacity to implement the various components of the fraud framework. It  includes a state\u2019s use of data analytics for fraud detection and  investigations, and its learning and development opportunities for  stakeholders who use the results of data analytics, such as investigators,  hearing officials, and court officials. According to FNS officials, FNS\u2019s  regional offices will conduct maturity assessments as part of management  reviews by the end of fiscal year 2018."], "subsections": []}]}, {"section_title": "FNS\u2019s Assistance on Developing Data Analytics Capabilities Has Reached a Limited Number of States", "paragraphs": ["Although FNS has assisted some states in developing their data analytic  capabilities, the methods it has used to do so were meant to reach only a  limited number of states. Specifically, much of FNS\u2019s direct assistance to  states came in the form of pilot projects, competitive grants, or  conferences. According to officials, FNS is in the early stages of  promoting states\u2019 use of data analytics for SNAP fraud prevention and  detection, and its efforts have focused on assessing the current capacity  of states to use data analytics and determining analytic practices that are  effective. Furthermore, FNS\u2019s efforts generally had specific end dates and  did not provide ongoing assistance to reach a broader group of states and  provide them with the knowledge and tools to develop and maintain their  data analytics efforts. (See table 5 for more information on the reach of  FNS\u2019s direct assistance efforts.)", "Although FNS provided some training on using data analytics, it was not  conducted on a recurring basis, and state officials we interviewed  expressed concerns about their access to information on successful data  analytics approaches. Officials we interviewed in five of our seven  selected states said that they attended FNS conferences that provided  training in data analytics and participated in regional discussions on the  topic; however, these events were provided occasionally and limited to  states within the region. State officials said that participating in  conferences in which they could learn from other states\u2019 experiences was  particularly helpful, and they wanted more opportunities to do so. State  officials also told us that it would be beneficial if FNS took a more active  role in disseminating states\u2019 successful practices, particularly with regard  to data analytics. Further communications about data analytics would be  consistent with federal internal control standards that call for agencies to  communicate necessary quality information to external parties in order to  achieve the agency\u2019s objectives. Federal agencies can support external  parties, such as state agencies, in achieving the federal agency\u2019s  objectives by sharing information on effective practices used by the  program or other external parties.", "Furthermore, officials we interviewed in selected states most frequently  cited high costs and resource demands as a challenge to using advanced  data analytics techniques. Although FNS has provided some financial  support to state efforts, officials in two states that we reviewed told us that  they were not always able to sustain efforts beyond the life of the FNS  pilot or grant. For example, officials we interviewed from Wisconsin said  that FNS\u2019s contractor for the 10-state pilot, in an effort separate from the  contract, developed a tool that identified SNAP purchases made from  disqualified SNAP retailers. Although the state officials found the tool to  be highly efficient because it could sift through large amounts of data, the  tool was only available to the state for a fee, which they said it could not  afford. Similarly, officials from Washington told us that as part of a  recipient trafficking prevention grant, the state was able to hire two  investigators to detect potential SNAP fraud that may be occurring via  social media. However, according to state officials, the state was unable  to maintain the effort after the grant ended.", "In our prior work on establishing data analytic programs to address fraud,  we noted that one way to handle resource challenges is to identify  opportunities that leverage a program\u2019s existing capabilities. In  September 2016, GAO convened a forum of data-analysis experts to  discuss considerations for entities establishing and refining data analytics  programs, during which the costs of such programs were raised.  Panelists, which included officials from FNS, noted that in developing a  data analytics program, an entity should consider ways of leveraging  resources throughout the entity. For example, panelists suggested that an  entity could improve its data analytics group by combining a data  warehouse from one department with existing statistical software from  another and incorporating it with its current fraud-prevention system. The  forum also suggested that a data analytics group should look across the  agency to find staff that may have an interest or experience in working  with data. Panelists noted that such efforts may be improved by seeking  staff from a diverse set of positions and perspectives, including auditors,  evaluators, investigators, and attorneys.", "Similarly, some state officials we interviewed shared creative ways to  leverage existing resources. For example, officials from Florida and  Wisconsin stated that they were able to leverage recovered funds from  other programs to purchase access to a commercial database that  matches eligibility data for individuals across related programs. In  Mississippi, officials said that they used SNAP transaction data to identify  individuals living out of state and then determine whether those  individuals were ineligible for both SNAP and other assistance programs.  By combining data and analyses across two programs, the state officials  said that they were able to close more cases and significantly increase  cost savings.", "However, other state officials noted that leveraging resources, especially  data, poses challenges that states will need to learn how to resolve.  Specifically, some states reported facing problems sharing data across  different systems and with restrictions on sharing sensitive personal  information. For example, officials representing four states from the  American Association of SNAP Directors (AASD) told us that, for states to  leverage data, SNAP states\u2019 data systems need to be integrated across  states. However, in their view, the cost of integration may exceed the  benefits from integrating the data. In addition, state officials said that in  order to leverage personal data, some states as well as programs in the  same state will need to reach agreements that define how data will be  extracted and used while protecting privacy. For example, a Wisconsin  official told us that its data analytics group has difficulty acquiring data  across programs within the state because of confidentiality and privacy  rules as well as the difficulty of reaching data-sharing agreements with  other programs.", "Moving forward, FNS\u2019s SNAP Fraud Framework, combined with its  maturity assessment, will form the core of FNS\u2019s efforts to assist states  with data analytics in a broad-based, systematic manner. According to  FNS officials, the agency will be conducting outreach to states about the  fraud framework and assessing both states\u2019 capacities in data analytics  and barriers to gaining the necessary knowledge and tools for developing  and maintaining those efforts."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["To ensure that SNAP funds are used for the purposes for which they  were intended, both the federal government and state agencies should  have appropriate controls for detecting and addressing fraud. The use of  data analytics, such as mapping and predictive analysis, may help SNAP  agencies increase program integrity and improve administrative  efficiency. Data mining and data matching techniques can help identify  potential SNAP fraud, and predictive models can help identify  characteristics of SNAP traffickers. Our use of analytics on SNAP out-of- state transaction data from three selected states identified only slight  differences between those households who shopped out of state and  those who did not, suggesting that analyses of other data elements that  have been shown to be indicative of potential trafficking may allow states  to better identify potential trafficking and, thereby, better target resources.", "Although FNS has efforts underway to promote the use of data analytics  to improve SNAP fraud detection through its fraud framework and  maturity assessment, officials in our selected states cited challenges with  accessing and maintaining needed resources such as staff, technology,  and tools. While these challenges may limit states\u2019 ability to implement  data analytics, some of our selected states have successfully overcome  such challenges to implement or enhance data analytics programs. For  example, two states described leveraging recovered funds and  reinvesting them to combat fraud. Another state leveraged transaction  data across two programs, resulting in financial savings and enhanced  collections, which could be reinvested to combat fraud. As FNS conducts  outreach to help states implement its fraud framework and uses its  maturity assessment to assess states\u2019 anti-fraud capabilities, it has an  opportunity to regularly assist states with adopting advanced data analytic  techniques. Based on the experiences described by state officials, finding  ways that states can leverage existing resources to improve their data  analytic capabilities may be an important part of any solution. In its role as  the federal oversight agency, FNS is in a position to collect and widely  disseminate information about those states that have built support for  data analytics and leveraged existing resources to implement or expand  their data analytics programs to states seeking such examples. With  wider dissemination of these examples of state successes, all state SNAP  agencies could be better positioned to enhance their own efforts to  identify and address SNAP fraud."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["Building on ongoing efforts, the Administrator of FNS should develop and  implement additional methods to widely distribute information to state  agencies on an ongoing basis about successful efforts to adopt data  analytics and strategies to leverage existing data, technology, and staff  resources to enhance data analytics. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to the U.S. Department of Agriculture  for comment. In oral comments on September 14, 2018, FNS officials  from SNAP\u2019s Program Accountability and Administration Division and the  Deputy Associate Administrator for SNAP agreed with our  recommendation. They noted that they have been moving in the general  direction of this recommendation and would build on current efforts to  address it but noted that state readiness and technical capabilities are  limiting factors in the adoption of data analytics. FNS also provided  technical comments, which were incorporated into the report as  appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to relevant congressional  committees, the Secretary of Agriculture, the FNS Administrator, and  other relevant parties. In addition, the report will be available at no charge  on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  us at (202) 512-7215 or LarinK@gao.gov or (202) 512-6722 or  BagdoyanS@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff that made key contributions to the report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to review the following: (1) the extent to  which SNAP households in selected states are making out-of-state  purchases that may indicate potential recipient fraud; (2) the extent to  which selected states are using data analytics\u2014including those applied to  out-of-state transactions\u2014to find potential SNAP recipient fraud, and  what advantages and challenges, if any, have they experienced doing so,  and (3) how FNS has assisted states in implementing leading practices  for data analytics for fraud detection. To address these objectives, we  primarily focused on federal and state SNAP recipient anti-fraud work  since the beginning of fiscal year 2015\u2014the period which follows our  August 2014 report on SNAP recipient fraud. We reviewed relevant  federal laws, regulations, program guidance, and reports, and we  interviewed FNS officials in headquarters and all seven regional offices to  address all three objectives and obtained relevant documentation.", "To assess the extent that SNAP households in selected states made out- of-state purchases that may indicate potential recipient fraud, we  analyzed all out-of-state purchase data nationwide and we analyzed  transaction data for SNAP households in the District of Columbia and two  states\u2013North Dakota and Washington. We selected these states as they  were among the top states for out-of-state spending in a non-border state  in fiscal years 2015 and 2016, the two most recent years\u2019 of SNAP data  available when we started this review. We obtained SNAP transaction  data from FNS for all participating households in the three selected  states, and analyzed fiscal year 2017 data for households that spent all  their benefits in a non-border state in that year. We also analyzed fiscal  year 2017 data for all households in these three states for purchases that  may indicate trafficking, based on common suspicious transaction types.  We tested the transaction data for ten different suspicious transaction  types that have been used by FNS and state SNAP officials to identify  potential trafficking. While the transactions we flagged for potential  trafficking in our three selected states are generally deemed potential  indicators of fraud by SNAP officials, there could also be legitimate  reasons for these purchases and they do not prove trafficking. For that  reason, our analysis focused on households with a greater frequency of  questionable purchases in fiscal year 2017 indicating potential  trafficking\u2014specifically purchases that resulted in 20 or more trafficking  flags. We assessed the reliability of SNAP transaction data used in  analyses through review of related documentation, interviews with  knowledgeable officials, and electronic testing of the data, and found  them to be sufficiently reliable for our purposes.", "To determine how selected state agencies are using data analytics to  identify potential SNAP recipient fraud, we interviewed officials from  seven state SNAP agencies about their efforts. We obtained related  documentation when available. We selected the District of Columbia,  Massachusetts, Mississippi, New Mexico, North Dakota, Washington, and  Wisconsin to reflect a range of experiences based on the percentage of  non-border state transactions, receipt of related technical assistance,  geographic region, and FNS\u2019s reports on their capacity to conduct data  analysis. We interviewed state SNAP agency officials who oversee anti- fraud practices in each of our seven selected states. During each  interview, we collected information on each state\u2019s data analytics  activities and whether they have implemented leading practices for data  analytics from GAO\u2019s Fraud Risk Framework. We also discussed the  advantages and challenges of using data analytics. While information  from these seven state SNAP agencies is non-generalizable, it provided  illustrative examples of agencies\u2019 efforts to use data analytics.", "To determine the degree to which FNS has assisted states in developing  the use of data analytics, we reviewed grant documentation FNS awarded  to states to help prevent recipient trafficking or improve technology used  to improve program integrity. We also reviewed the terms of work for a  contract FNS awarded to a private consulting firm to conduct a pilot  project with 10 states during fiscal years 2014-2017, as well as reports  delivered by the contractor detailing the results of the work. In addition,  we reviewed a guide to data analytics that FNS developed for a 5-day  training session in August 2016, as well as the data analytics \u201cmaturity  assessment\u201d questionnaire that is intended for FNS regions to use to  assess the capacity of the states. We also obtained and reviewed FNS\u2019s  SNAP Fraud Framework and Supplementary Materials that was released  in May 2018. After developing an inventory of how FNS has assisted  states in assessing and developing its data analytic capacity, we  analyzed FNS\u2019s actions with respect to GAO\u2019s set of leading practices for  data analytics from GAO\u2019s Fraud Risk Framework and GAO\u2019s standards  for internal control. We also analyzed FNS\u2019s SNAP Fraud Framework to  assess the degree to which it addressed GAO\u2019s leading practices on how  to use data analytics to detect, prevent, and investigate SNAP fraud.  Unless specified, we reviewed only data analytic activities that occurred  since the beginning of fiscal year 2015, which marks the end of our  previous analysis of FNS\u2019 anti-fraud activities concerning the SNAP  program. To obtain FNS\u2019 views, we interviewed SNAP program officials at  both headquarters and at each of SNAP\u2019s seven regional offices. To  obtain a broader perspective on the use of data analytics across states,  we interviewed officials representing the American Association of SNAP  Directors (AASD) and the United Council on Welfare Fraud (UCOWF).  AASD representatives included officials from the SNAP anti-fraud units  for California, New York, Tennessee, and Texas. UCOWF  representatives included officials from Florida, Louisiana, and Utah. In  addition, we interviewed the Deputy Executive Director of American  Public Human Services Association, AASD\u2019s parent organization, and  officials representing USDA\u2019s Office of Inspector General.", "We conducted this performance audit from May 2017 through October  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence we obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Out-of-state SNAP Spending By State, Fiscal Year 2017", "paragraphs": ["In fiscal year 2017, the share of SNAP benefits spent out of state varied  by state from approximately 1 percent to 13 percent, with most out-of- state purchases made in a border state. States whose SNAP recipients  had the highest percent of out-of-state purchases included Delaware,  District of Columbia, Idaho, Nebraska, New Mexico, Rhode Island, South  Dakota, Tennessee, Vermont, and West Virginia. All of these states made  at least 5 percent of total purchases out of state. The states with the  lowest percent of out-of-state spending by SNAP recipients included  Alaska, California, Florida, Hawaii, Michigan, and Texas (see fig. 5).  Detailed information on out-of-state spending by SNAP recipients, by  state, is also provided in table 6 below."], "subsections": []}, {"section_title": "Appendix III: Leading Practices for Data Analytics and FNS\u2019s 2018 SNAP Fraud Framework Comparison", "paragraphs": ["In May 2018, FNS released a fraud framework that provides guidance to  help states adopt all of GAO\u2019s leading practices for data analytics. The  table below compares guidance in FNS\u2019s SNAP Fraud Framework to the  leading practices in GAO\u2019s Fraud Risk Framework."], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, the following staff members  made key contributions to this report: Danielle Giese and Philip Reiff,  Assistant Directors; Celina Davidson and Lara Laufer, Analysts-in- Charge; Camille A. Keith; Kelly Snow; and Daren Sweeney. Also  contributing to this report were Susan Aschoff, James Bennett, Alexander  Galuten, James Murphy, Almeta Spencer, and Shana Wallace."], "subsections": []}]}], "fastfact": ["The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, helps 42 million low-income families buy food.", "States analyze data to try to spot fraudulent use of SNAP, such as when recipients sell benefits for cash or provide false information so they can collect benefits. Five of the states we examined reported using sophisticated data mining techniques to look for unusual spending patterns and flag the cases most likely to involve fraud.", "We recommended that the federal administrator of SNAP more widely distribute information to states about successful state data analysis strategies."]}
{"id": "GAO-18-451T", "url": "https://www.gao.gov/products/GAO-18-451T", "title": "U.S. Patent and Trademark Office: Observations on the Covered Business Method Patent Review Program", "published_date": "2018-03-20T00:00:00", "released_date": "2018-03-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's March 2018 report, entitled U.S. Patent and Trademark Office: Assessment of the Covered Business Method Patent Review Program ( GAO-18-320 )."]}, {"section_title": "What GAO Found", "paragraphs": ["From September 2012 through September 2017, entities facing patent infringement lawsuits filed 524 petitions challenging the validity of 359 patents under the U.S. Patent and Trademark Office's (USPTO) covered business method (CBM) program, resulting in decisions against about one-third of these patents. The CBM program provides entities facing infringement lawsuits an opportunity to challenge the validity of a business method patent by demonstrating that it did not meet requirements for patentability. Business method patents focus on ways of doing business in areas such as banking or e-commerce. The rate of filing petitions over this period has fluctuated but has generally declined since 2015, and none were filed in August or September 2017.", "USPTO has taken several steps to ensure the timeliness of trial decisions, review past decisions, and engage with stakeholders to improve proceedings under the program:", "Timeliness: USPTO regularly informs relevant parties about paperwork requirements and due dates throughout trials. According to program data, as of September 2017, all 181 completed trials were completed within statutorily required time frames.", "Decision review: USPTO has taken several steps to review its decisions and has monitored the rate at which the Court of Appeals for the Federal Circuit affirms or reverses them. However, USPTO does not have guidance, such as documented procedures, for reviewing trial decisions, or the processes leading to decisions, for consistency. Without guidance, such as documented procedures, USPTO cannot fully ensure that it is meeting its objective of ensuring consistency of decisions.", "Stakeholder engagement: USPTO judges have engaged with stakeholders by participating in public roundtables and webinars, and attending judicial conferences, among other things.", "Stakeholders GAO interviewed generally agreed that the CBM program has reduced lawsuits involving business method patents in the federal courts. While many stakeholders favored maintaining aspects of the program, there was not strong consensus among stakeholders for how future trials should be designed."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent report on the Patent  Trial and Appeal Board\u2019s Transitional Program for Covered Business  Method Patents (CBM program).", "As you know, to promote the progress of science and the useful arts,  inventors are granted exclusive rights to their inventions\u2014in the form of  patents\u2014for a limited time. Patent owners can bring infringement lawsuits  against anyone who uses, makes, sells, offers to sell, or imports a  patented invention without authorization. By restricting competition,  patents allow their owners to earn greater profits on inventions than if the  inventions could be freely imitated. In the late 2000s, however, legal  commentators, technology companies, and others began raising  questions about whether the patent system was working well to promote  innovation. By law, before granting a patent, the U.S. Patent and  Trademark Office (USPTO) must determine whether a patent application  meets patentability requirements for subject matter, novelty, non- obviousness, and clarity and specificity. Questions were raised about an  increase in the number of patents granted that did not meet these  requirements and about the increase in patent infringement litigation,  especially in the software and technology sectors. As we have previously  reported, patent infringement lawsuits can take years and cost several  million dollars.", "In 2011, Congress passed the Leahy-Smith America Invents Act (AIA),  which authorized three administrative proceedings for challenging a  patent\u2019s validity, including the CBM program. A \u201ccovered\u201d business  method patent is a patent that claims a method or corresponding  apparatus for performing data processing or other operations used in the  practice, administration, or management of a financial product or service.  The CBM program provides entities facing infringement lawsuits an  opportunity to challenge a patent\u2019s validity before administrative patent  judges at USPTO\u2019s board. As reported by the House of Representatives  Committee on the Judiciary, the program is intended to provide a more  efficient and less costly alternative to district court for deciding patent  validity. The CBM program began in September 2012 and is slated to  sunset in September 2020.", "My testimony today summarizes the findings and recommendation from  our report. Accordingly, this testimony addresses  1.  the extent to which the CBM program has been used to challenge  patents and the results of those challenges,  2.  the extent to which USPTO ensures timeliness of trial decisions,  reviews decisions for consistency, and engages with stakeholders to  improve its administrative proceedings for the program, and  3.  stakeholder views on the effects of the CBM program and whether it  should be extended past its scheduled September 2020 sunset date.", "To conduct this work, we obtained and analyzed data on board  proceedings from September 2012 through September 2017, reviewed  the AIA and USPTO documents, and interviewed USPTO officials. We  also assessed USPTO\u2019s efforts to review decisions for consistency  against federal standards for internal control and USPTO\u2019s current  strategic plan, and we interviewed a nongeneralizable sample of 38  stakeholders knowledgeable about the CBM program, who provided a  broad spectrum of opinions on the CBM program. Additional information on our scope and methodology is available in our report. The work on  which this testimony is based was conducted 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."], "subsections": [{"section_title": "More Than 350 Patents Have Been Challenged under the CBM Program, and About One-Third of These Patents Were Ruled Unpatentable", "paragraphs": ["We found in our March 2018 report that, from September 2012 through  September 2017, parties accused of patent infringement filed 524  petitions with the Patent Trial and Appeal Board challenging the validity of  359 distinct patents under the CBM program, resulting in rulings against  about one-third of these patents. The average monthly number of CBM  petitions fluctuated during this period and tapered off over time (see fig.  1). Specifically, during this 5-year period, an average of more than 9  petitions per month were filed under the CBM program, but this average  rate declined to fewer than 5 per month in the last fiscal year, with no  petitions filed in August or September 2017.", "Stakeholders we interviewed suggested several possible reasons for the  decline in CBM petitions, including recent decisions from the U.S. Court  of Appeals for the Federal Circuit and U.S. Supreme Court that clarified  which patents are eligible for CBM review;  that CBM petitioners  successfully targeted the lowest-quality business method patents\u2014 patents that should not have been issued because they did not meet the  patentability requirements\u2014in the early years of the program, and now  those patents have been eliminated; and that owners of business method  patents are more wary of asserting their intellectual property through  infringement lawsuits and risking its invalidation.", "Some stakeholders expressed concern about multiple petitions being filed  against the same patent. Specifically, stakeholders have suggested that  petitioners are, in some cases, using the CBM program and the inter  partes review program as tools to increase costs borne by patent  owners, and in the case of the CBM program, as a tool to delay district  court proceedings. In addition, some stakeholders asserted that this  manner of use of the administrative proceedings authorized by the AIA  amounts to harassment. However, our analysis of petition data showed  that the vast majority of patents challenged under the CBM program were  challenged once or twice. Stakeholders we interviewed outlined several  reasons why petitioners may file more than one petition against a single  patent. For example, the board limits the number of pages that a  petitioner may use to submit prior art and arguments for invalidity and  therefore some petitioners might file more than one petition so they can  present all of their art and arguments at once.", "Overall, through September 2017, the Patent Trial and Appeal Board had  completed reviews of 329 of the 359 patents challenged under the  program, and for about one-third of these patents the board ruled at least  some challenged patent claims unpatentable. Data on petition outcomes  are open to different interpretations depending on how they are  presented. For example, under the CBM program, board judges ruled  some or all of the patent claims considered at trial unpatentable in 96.7  percent of the petitions for which they issued a final written decision from  September 2012 through September 2017. On the basis of this statistic,  the board could seem to invalidate the majority of the patents it reviews,  as noted by some stakeholders. However, this outcome is predictable  given the criteria for accepting, or instituting, a CBM trial\u2014a judge panel  will institute a petition to the trial phase if it is \u201cmore likely than not\u201d that at  least one of the claims challenged in a petition is unpatentable\u2014which  tips outcomes for instituted petitions toward rulings of unpatentability. In  addition, board judges do not issue final written decisions for all petitions  that enter the trial phase because the parties often reach a settlement  before the final written decision. When taking into account all of the CBM  petitions that had an outcome as of September 30, 2017, board judges  ruled some or all of the claims considered at trial unpatentable in 35.6  percent of the cases."], "subsections": []}, {"section_title": "The Board Met Timeliness Requirements and Took Steps to Analyze Decisions and Improve Proceedings but Does Not Have Guidance to Ensure Decision Consistency", "paragraphs": ["We found in our March 2018 report that the Patent Trial and Appeal  Board has completed all trials under AIA-authorized proceedings within  statutorily directed time frames, according to board data, and the board  has taken steps to review issues that could affect the consistency of its  trial proceedings and decisions and to engage with stakeholders to  improve its proceedings. Board officials we interviewed told us the  timeliness of decisions to institute a trial and of final written decisions has  not been a concern in the 5 years that the board has operated. According  to board officials, as of November 2017, two AIA trials\u2014one under the  inter partes review program and one under the CBM program\u2014have  been extended, for good cause, past the typical 1-year time limit between  the institution decision and the final written decision, as allowed by  statute.", "The Patent Trial and Appeal Board has decision review processes that  help ensure trial decisions are reviewed as appropriate, but the board  cannot ensure the consistency of its trial decisions because it does not  have guidance for reviewing the decisions or the processes that lead to  them. For trials still in progress, board officials told us there are several  ways management gets involved in reviews\u2014including reviews of  ongoing trials if and when a paneled judge raises any issue deserving of  management attention. Such issues are brought to the attention of the  chief judge or other members of the board\u2019s management team and are  acted upon at their discretion. Board officials also told us that a separate  internal review process has evolved over time, whereby a small group of  board judges, in consultation with board management, seeks to ensure  decision quality and consistency by reading a large number of draft AIA  trial decisions and giving feedback or suggestions to authoring judges  prior to issuance. In addition, the board reviews any AIA trial decisions  that are appealed to the U.S. Court of Appeals for the Federal Circuit and  the appeals court subsequently reverses or remands. Finally, board  officials told us that the board has begun to increase the number of trial  decisions considered for precedential and informative designations as  part of its efforts to ensure the consistency of trial decisions.", "Taken together, the board\u2019s review processes help ensure that board trial  decisions are reviewed in some manner. However, because the board  does not have documented procedures for how to review decisions for  consistency, the board cannot fully ensure the consistency of the  decisions or the processes that lead to them. Under federal standards for  internal control, management should design control activities to achieve  objectives and respond to risks. Such control activities include clearly  documenting internal control in a manner that allows the documentation  to be readily available for examination. The documentation may appear in  management directives, administrative policies, or operating manuals. We  recommended that the Director of USPTO develop guidance, such as  documented procedures, for judges reviewing the Patent Trial and Appeal  Board\u2019s decisions and the processes that lead to the decisions. USPTO  agreed with our recommendation and stated that it has begun taking  actions to address it.", "In addition, to improve various aspects of its trial proceedings, the board  has taken several steps to engage with stakeholders. USPTO\u2019s strategic  plan states that the board should expand outreach to stakeholders by  providing opportunities for interaction and updates on board operations  and other important issues. The board has done so through several types  of public outreach efforts, including participating in roundtables, webinars, and judicial conferences, among other activities. The board has made  several changes to policies and procedures based on stakeholder  feedback gathered through these mechanisms."], "subsections": []}, {"section_title": "Stakeholders Agree the CBM Program Has Reduced Litigation, and Many See Value in Maintaining Aspects of the Program", "paragraphs": ["Stakeholders we interviewed for our March 2018 report generally agreed  the CBM program has reduced litigation involving business method  patents because the CBM program allows these patents to be more  easily challenged than in district courts, and many stakeholders said there  is value in maintaining some aspects of the program. Stakeholders told us  that fewer business method patent lawsuits are filed and that existing  lawsuits are often dropped after patents have been through the CBM  program. However, stakeholders also noted that the Supreme Court\u2019s  2014 decision in Alice Corp. Pty. Ltd. v. CLS Bank Int\u2019l has contributed to  the reduced number of business method patent lawsuits. Stakeholders  told us that the CBM program has made it riskier to assert business  method patents because, compared with district court, the program offers  a cheaper and more efficient way for alleged infringers to challenge a  patent\u2019s validity. In addition, according to stakeholders, patent owners are  more focused on asserting business method patents that are higher  quality and less vulnerable to challenge either under the CBM program or  based on the Supreme Court\u2019s decision in Alice; these are patents that  describe a technological invention that is not abstract and implemented  on a generic computer.", "Stakeholders we interviewed generally agreed the effects of the CBM  program on innovation and investment have been minimal or mostly  positive. More specifically, stakeholders told us that the CBM program is  good for overall innovation and investment in financial technologies in that  the program eliminates overly broad (non-specific), low-quality patents.  Stakeholders told us they believe the existence and assertion of overly  broad patents is bad for innovation, in part because defending against  alleged infringement is expensive and time-consuming, even under the  CBM program. Assertion of overly broad, unclear, or otherwise low-quality  patents acts much like a tax on investment, according to stakeholders.", "Stakeholders also told us that removing such patents from the  marketplace promotes innovation because it prevents these patents from  blocking new innovation. According to stakeholders, innovation is  represented by the quality of the patents issued rather than the quantity.  A large number of patents in a technology space, according to  stakeholders, can make it difficult to innovate within that crowded space.", "Most stakeholders told us there was value in maintaining aspects of the  CBM program, including the ability to challenge patents at the Patent Trial  and Appeal Board on all four patentability requirements\u2014subject matter;  novelty; non-obviousness; and clarity and specificity. Stakeholders we  interviewed pointed to inconsistencies in how federal courts interpret  subject matter eligibility and clarity requirements, in particular.  Stakeholders said that the federal courts and jurors do not necessarily  have the expertise to interpret requirements for subject matter eligibility  and clarity, and that the technically trained Patent Trial and Appeal Board  judges were better suited to make patentability determinations on these  grounds.", "Stakeholders generally agreed that the ability to challenge a patent\u2019s  validity on subject matter eligibility grounds remains important, although  there was not broad agreement among stakeholders regarding how far  that ability should extend beyond business method patents. Some  stakeholders said subject matter eligibility challenges were important for a  wider scope of patents than just business methods because concerns  about subject matter eligibility that apply to business method patents  extend to software-related patents in general. Similarly, stakeholders told  us that patent clarity problems exist beyond business method patents.", "Chairman Issa, Ranking Member Johnson, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact John Neumann, Director, Natural Resources and Environment at  (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Rob Marek (Assistant Director), Michael Krafve, and Cynthia Norris.  Additional staff who made key contributions to the report cited in this  testimony are identified in the source product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Entities facing lawsuits for infringing on a certain type of patent can challenge the validity of the patent through a U.S. Patent and Trademark Office program. This can be done for a fraction of the time and money that would be spent in court.", "Under the program, the Patent Trial and Appeal Board decides whether patents are valid. In the report on which this testimony is based, we recommended that the Patent Office develop guidance for reviewing its decisions.", "The program is set to expire in September 2020, but stakeholders say it has reduced lawsuits and that aspects of the program should be included in other Patent Office programs."]}
{"id": "GAO-18-102", "url": "https://www.gao.gov/products/GAO-18-102", "title": "Water and Wastewater Workforce: Recruiting Approaches Helped Industry Hire Operators, but Additional EPA Guidance Could Help Identify Future Needs", "published_date": "2018-01-26T00:00:00", "released_date": "2018-01-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Safe operation of the nation's water utilities depends on access to a qualified workforce, particularly certified water operators. Industry reports have cited high rates of retirement eligibility and raised concerns about the water industry's ability to fill job openings.", "GAO was asked to review workforce needs within the drinking water and wastewater industry. This report describes (1) what is known about workforce needs at water utilities compared with workforce needs nationwide and effects of potential unmet workforce needs on the utilities' compliance with the Safe Drinking Water Act and Clean Water Act; (2) approaches used by selected utilities to manage their workforce needs and challenges they have faced in managing those needs; and (3) ways in which federal programs can assist water utilities with workforce needs.", "GAO reviewed workforce projections, relevant laws and regulations, agency documents, and industry studies and interviewed federal, local, and industry officials. GAO also conducted semi-structured interviews with a nongeneralizable sample of 11 water utilities, selected by size, location, and indications of workforce needs."]}, {"section_title": "What GAO Found", "paragraphs": ["Projections from the Department of Labor's Bureau of Labor Statistics (BLS) suggest that workforce replacement needs for water operators are roughly similar to workforce needs nationwide across all occupations; however, little is known about the effects of any unmet needs on compliance with the Safe Drinking Water Act and the Clean Water Act. BLS has projected that 8.2 percent of existing water operators will need to be replaced annually between 2016 and 2026. Although BLS projections are intended to capture long-run trends, rather than to forecast precise outcomes in specific years, this predicted replacement rate is roughly similar to the predicted rate of 10.9 percent for all workers across the U.S. economy. Limited information is available to determine whether retirements, or other workforce needs, are affecting drinking water and wastewater utilities' ability to comply with the Safe Drinking Water and Clean Water acts. At a national level, neither the water utilities' industry associations nor the Environmental Protection Agency (EPA) has analyzed whether there is a relationship between unmet workforce needs and compliance problems. EPA relies on states to inspect utilities to ensure compliance with the acts. EPA's inspection guidance documents, for both drinking water and wastewater, advise states to examine the quality and quantity of staff operating and maintaining water utilities. However, the guidance does not advise states to examine future workforce needs. GAO has found that future workforce needs can be identified through strategic workforce planning, which involves developing long-term strategies for acquiring, developing, and retaining staff to achieve program goals. By adding questions to EPA's inspection guidance on strategic workforce planning, such as the number of positions needed in the future, EPA could help make this information available for states to assess future workforce needs. Information on future workforce needs could help states and utilities identity potential workforce issues and take action as needed.", "Representatives from 11 selected water utilities reported that by using various approaches, they were generally able to meet their current workforce needs but faced some challenges in doing so. Representatives from the selected utilities said that they recruit operators using word of mouth, websites, newspapers, and partnering with local technical schools. However, representatives from small utilities said that even with these approaches, they had difficulty hiring certified operators and instead hired and trained entry-level employees. Additionally, representatives from large utilities said they face difficulties in recruiting skilled workers, such as electricians and mechanics, part of a larger national pattern.", "Five federal agencies that GAO reviewed\u2014EPA and the Departments of Agriculture (USDA), Labor (DOL), Education, and Veterans Affairs (VA)\u2014have programs or activities that can assist utilities with their workforce needs in several ways, including through guidance, funding, and training. EPA has worked with DOL and industry groups to develop a water-sector competency model to support industry training and with VA to help place disabled veterans in water industry jobs. In addition, USDA funds personnel who travel to rural utilities to provide hands-on assistance through its Circuit Rider program. Four of five small utilities GAO interviewed said they used this program and other USDA technical assistance for training operators."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that EPA add strategic workforce planning questions, such as the positions and skills needed in the future, to its inspection guidance documents. EPA generally agreed with GAO's recommendation as it related to drinking water, but neither agreed nor disagreed regarding wastewater. GAO believes the entire recommendation should be implemented."]}], "report": [{"section_title": "Letter", "paragraphs": ["Safe operation of the nation\u2019s drinking water and wastewater utilities  (water utilities) depends partly on continuous access to a qualified  workforce, particularly sufficient numbers of certified water operators\u2014 workers who run the equipment and control the treatment processes for  drinking water and wastewater. According to the 2016 Environmental  Protection Agency (EPA) Drinking Water Action Plan, a well-trained and  knowledgeable workforce that implements proper assessment and  management of water utility assets is vital to providing safe drinking water  and ensuring the long-term sustainability of public water systems. Yet  some reports from industry groups have cited high rates of retirement  eligibility and raised concerns about the potential rate of worker loss and  water utilities\u2019 future ability to fill job openings.", "Staffing is largely a responsibility of the utilities themselves, but EPA and  other agencies offer support for workforce development. EPA regulates  drinking water and wastewater quality through the implementation of the  Safe Drinking Water Act and the Clean Water Act, respectively, and both  acts authorize EPA and the states to provide technical assistance to  water utilities, which can be used to increase the technical knowledge and  abilities of water operators. The U.S. Department of Agriculture (USDA)  provides technical assistance to rural utilities through its Rural Utilities  Service Water and Environmental Programs. Other federal agencies,  including the Departments of Education, Labor (DOL), and Veterans  Affairs (VA), have programs that offer support to employers and workers  in a number of industries, and those programs are available to water  utilities. DOL also measures labor market activity and working conditions  in the overall U.S economy through its Bureau of Labor Statistics (BLS).  BLS collects, analyzes, and disseminates economic information, including  nationwide employment projections for 10 years in the future.", "You asked us to review workforce replacement needs\u2014that is, the  number of job openings for which employers replace workers who leave  their current occupation\u2014within the drinking water and wastewater  industry. This report (1) examines what is known about workforce needs  at water utilities compared with workforce needs nationwide and any  effects of potential unmet workforce needs on the utilities\u2019 abilities to  comply with the Safe Drinking Water Act and the Clean Water Act; (2)  describes approaches selected water utilities have used to manage their  workforce needs and challenges they have faced in managing those  needs; and (3) describes ways key federal programs can assist water  utilities with their workforce needs.", "To examine what is known about workforce needs at water utilities  compared with workforce needs nationwide, we assessed and  summarized data on workforce replacement rates provided by BLS and  examined projected retirement rates provided by industry studies. We  focused on projections of workforce turnover from 2016 to 2026 and  estimates of employee retirement eligibility published from 2008 to 2016,  the most recent data available to us. To assess the reliability of BLS data,  we reviewed relevant documentation and information from BLS staff for  the most recent data available for the two relevant BLS survey  programs\u2014one that collects data on wage and salary workers in about  800 occupations and one surveying households about labor force  participation\u2014and for BLS employment projections for 2016-2026. We  determined that the BLS survey and projection data were sufficiently  reliable for purposes of our objective. We identified a number of relevant  industry studies including three surveys published by the American Water  Works Association between 2015 and 2017. To assess the reliability of  the industry studies, we reviewed their scope and methodology. Although  the industry estimates were not generalizable, the studies were  sufficiently reliable for illustrating the industry\u2019s perspectives on workforce  planning.", "To examine the effects of potential unmet workforce needs on water  utilities\u2019 abilities to comply with the Safe Drinking Water Act and the Clean  Water Act, we selected a sample of 11 water utilities\u20146 large and 5  small\u2014based on geography, size, and indications of hiring challenges in  the past. We included both large and small utilities in our selection based  on our initial interviews with industry representatives that suggested that  large utilities and small utilities have experienced different challenges. We  asked officials of the selected utilities whether workforce challenges had  affected their abilities to comply with the Safe Drinking Water Act and the  Clean Water Act at their utilities and whether they anticipated effects on  utility operations in the future. The information from those interviews is not  generalizable to the national population of water utilities; it is intended to  provide illustrative examples of difficulties selected water utilities have  experienced in complying with the Safe Drinking Water Act and the Clean  Water Act that they attributed to workforce challenges. We also obtained  EPA data on compliance with the Safe Drinking Water Act and the Clean  Water Act for the selected utilities. We have previously reviewed the  quality of EPA compliance data. We determined that although the data  were incomplete, they were useful to provide a rough indication of  compliance; however, the violations may be underreported and, therefore,  we cannot use the data to provide a precise indication of compliance.", "To describe the approaches that selected water utilities have used to  manage their workforce needs and the challenges they have faced in  managing those needs over the past 5 years (from 2012 to 2016), we  spoke with utility officials, during the interviews described above, to learn  about their hiring and retirement numbers, challenges in managing  workforce needs, and approaches for hiring staff.", "To describe how key federal programs can assist water utilities with their  workforce needs, we conducted background research and initial  interviews with federal officials. We identified five federal agencies that  conduct activities or provide funding related to the water utility workforce:  EPA, USDA, Education, DOL, and VA. We interviewed officials with these  agencies about current or past federal programs and policies related to  water utilities\u2019 workforce needs. We did not attempt to identify all  programs that can provide assistance to water utilities for workforce  planning or recruitment, but we determined based on interviews at the  five agencies that we had identified the programs for which providing  such assistance was a primary purpose or likely use. Additionally, we  interviewed representatives from the selected utilities we contacted to  determine whether and how they had used various federal programs or  assistance to augment other planning and recruitment strategies and  what problems, if any, they had in using the programs. A more detailed  description of the scope and methodology of our review is presented in  appendix I.", "We conducted this performance audit from September 2016 to January  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The section presents information on (1) water utilities and water  operators, (2) federal and state roles in overseeing and assisting water  utilities, and (3) federal and state roles in workforce development."], "subsections": [{"section_title": "Water Utilities and Water Operators", "paragraphs": ["Water utilities provide drinking water and wastewater services, including  drinking water treatment and distribution and wastewater collection,  treatment, and discharge. Figure 1 shows the processes for treating and  distributing drinking water and for collecting, treating, and discharging  wastewater, which are overseen by water operators. Fresh water is  pumped from wells, rivers, streams, or reservoirs to water treatment  plants, where it is treated and distributed to customers. Wastewater  travels through sewer pipes to wastewater treatment plants where it is  treated and returned to streams, rivers, and oceans.", "Water utilities are organized differently depending on the city or  community they serve. For example, drinking water service may be  provided by one utility, and wastewater service may be provided by a  separate utility, or a single utility may provide both services. Regardless  of the configuration, a utility can be owned and managed by a  municipality, county, independent district or authority, private company, or  not-for-profit water association, among others. Utilities may serve a city  and neighboring area, a county, or multiple counties. As of January 2016,  there were about 52,000 drinking water and 16,000 wastewater utilities in  the United States. These water utilities vary widely in the number of  people they serve, but the majority of water utilities in the United States  serve fewer than 10,000 people.", "Water utilities employ a broad range of workers, including water  operators; engineers; customer service representatives; accountants;  legal support; and skilled technical occupations, such as electricians,  machinists, and instrument technicians. It is difficult to find an estimate of  total workforce at water utilities, but BLS reported that as of December  2016 employment in industries related to water utilities\u2014including local  government utilities (both water and energy utilities); water, sewage, and  other systems; and water and sewer system construction\u2014totaled  478,700. A study commissioned by the American Water Works  Association estimated that 55 percent of water utility employees are water  operators; of the remainder, 20 percent work in customer service and  metering, and 25 percent work in administration of various kinds. The  number of water operators at individual water utilities depends partly on  the size of the population the utility serves. Large utilities may have  dozens of water operators supported by a staff of customer service  representatives, electricians, instrument technicians, machinists, and  plumbers. In contrast, utilities in rural communities may have a single  water operator who is sometimes tasked with additional duties.", "Water operators at drinking water utilities run the equipment, control the  processes, and monitor the plants that treat water to make it safe to drink.  Water operators at wastewater utilities do similar work to remove  pollutants from domestic and industrial wastewater before it is reused or  released into a receiving body of water. Many duties of water operators  are technical and water operators need knowledge, skills, and abilities in  science, technology, engineering, and mathematics (STEM). The list of  academic competencies described in the DOL Water and Wastewater  Competency Model for employment in the drinking water and wastewater  industry includes calculating averages, ratios, proportions, and rates;  translating practical problems into useful mathematical expressions; and  understanding biology, chemistry, and physics. Water operators need to  be able to prepare chemicals and confirm chemical strength, adjust  chemical feed rates and flows, and understand software and equipment  used for industrial process control, such as supervisory control and data  acquisition software and systems. (See fig. 2). Industry representatives  we interviewed told us that as drinking and wastewater treatment  processes become more technologically advanced, water operators  increasingly will need to have more advanced technical skills.", "Water operators must meet specialized certification requirements, which  are overseen by state regulators. A number of 2-year and 4-year colleges  offer programs across the country that provide training for individuals  seeking certification as water operators. For drinking water operators,  regulations under the Safe Drinking Water Act establish minimum  standards for certifications. Each state must implement a water operator  certification program that meets the requirements of these guidelines or  that is substantially equivalent to these guidelines. The Clean Water Act  does not have similar minimum requirements for wastewater operators,  and certification standards are established by the states. Accordingly,  there is no single standard national certification. Even though there has  been an industry effort to harmonize the certification requirements across  states for both drinking water and wastewater operators, reciprocity of  certification between different states remains limited."], "subsections": []}, {"section_title": "Federal and State Roles in Overseeing and Assisting Utilities", "paragraphs": ["EPA regulates water utilities under the Safe Drinking Water Act and the  Clean Water Act. Under the Safe Drinking Water Act, EPA establishes  and enforces standards for public water systems, including drinking water  utilities, that generally limit the levels of specific contaminants in drinking  water that can adversely affect public health; attaining and maintaining  these levels typically requires water treatment. Under the Clean Water  Act, EPA regulates discharge of pollutants from point sources such as  municipal and industrial wastewater treatment plants, and stormwater  discharges from industrial facilities and municipal sewer systems. EPA\u2019s  Office of Enforcement and Compliance has established national  enforcement goals and works with state and tribal governments and other  federal agencies to enforce the nation\u2019s environmental laws, including the  Safe Drinking Water Act and Clean Water Act.", "EPA authorizes most states to have primary enforcement responsibility\u2014  \u201cprimacy\u201d\u2014for the Safe Drinking Water Act, if the state meets certain  requirements. Similarly, EPA authorizes most states to operate their  own clean water discharge permitting program (also called primacy) in  lieu of the federal program if the state program meets certain  requirements. EPA regulations require states to have inspection  programs for drinking water utilities\u2014called sanitary surveys\u2014to maintain  their primacy. EPA regulations also require states to conduct periodic compliance inspections of wastewater utilities. These inspections support  EPA\u2019s monitoring of compliance with the Safe Drinking Water Act and  Clean Water Act. EPA provides states with guidance for evaluating the  utilities. Inspections of drinking water utilities include eight areas of  review: water sources, treatment plants, distributions systems, finished  water storage, pumping facilities, monitoring plans and treatment records,  management and operations, and water operator compliance with  certification requirements. The inspections also function as an opportunity  for state agencies to educate drinking water operators about proper  monitoring and sampling procedures and to provide technical assistance.  The goal of the inspections is to ensure that the utility can supply safe  drinking water. For wastewater utilities, the inspections are more narrowly  focused on monitoring the utilities\u2019 compliance with their Clean Water Act  obligations. The goals of the wastewater utility inspections include  identifying and documenting noncompliance and gathering evidence to  support enforcement actions.", "States receive federal funding for infrastructure projects and technical  assistance under the Clean Water Act and Safe Drinking Water Act. EPA  provides annual funding to states through its Drinking Water and Clean  Water State Revolving Fund programs. States use this funding to support  water infrastructure projects and to provide assistance to communities.  Specifically, portions of a state\u2019s annual EPA funding may be used for  implementation of, among other things, capacity development and water  operator certification programs. Under the Safe Drinking Water Act, states  are required to implement water operator certification programs, and EPA  is required to withhold 20 percent of a state\u2019s Drinking Water State  Revolving Funds if the state fails to do so. Under the Clean Water Act,  states may use their Clean Water State Revolving Funds to provide  assistance to any qualified nonprofit entity, to provide technical  assistance to owners and operators of small- and medium-sized publicly  owned wastewater treatment utilities to, among other things, help them  achieve compliance with the act.", "Water utilities in rural communities also receive funding and technical  assistance provided by USDA\u2019s Rural Utilities Service. The Rural Utilities  Service provides funding for drinking water and wastewater infrastructure  projects in rural communities. The Rural Utilities Service is one of three  agencies under Rural Development\u2014a USDA mission area focused on  improving the economy and quality of life in rural America by providing  financial programs to support essential public facilities and services such  as drinking water and sewer systems, housing, health care, emergency  service facilities, and electric and telephone service. The Rural Utilities  Service\u2019s Water and Environmental Programs provide loans, grants, and  loan guarantees for drinking water, sanitary sewer, solid waste, and storm  drainage facilities in rural areas. The Rural Utilities Service also provides  funding for technical assistance to rural water utilities through a contract  with the National Rural Water Association and grants to other nonprofit  organizations."], "subsections": []}, {"section_title": "Federal and State Roles in Workforce Development", "paragraphs": ["Workforce development in the United States is driven by a variety of  private and public investments in workforce education and development.  Under the Workforce Innovation and Opportunity Act, the federal  government has programs, administered primarily by DOL and Education,  that provide a combination of education and training services to help job  seekers obtain employment. Through these programs, DOL provides  grants to states to provide funding for employment and training programs.  Although the public workforce system receives federal funds, states may  choose to add their own funding, and most of the system\u2019s services for  businesses and job seekers are delivered at the state and local levels. In  implementing the Workforce Innovation and Opportunity Act, enacted in  2014, each state is to have a state-level workforce development board  that develops strategies for providing outreach to individuals and  employers and identifies in-demand industries.", "Helping ensure that the workforce system focuses on regional and local  economies, each state is divided into one or more workforce areas, led by  a local workforce development board. The local boards are responsible  for, among other things, analyzing the employment needs of employers  and the workforce development activities (including education and  training) in the region. According to DOL, workforce boards are also  responsible for determining how many American Job Centers are  needed in their area, where these centers will be located, and how they  will be operated. There are about 2,500 American Job Centers across the  United States that offer many resources under one roof. The typical  center serves individuals seeking employment. Centers also work with  employers to assess hiring needs; find qualified candidates, including  veterans; connect to training options for new and current employees; and  provide other workforce-related assistance."], "subsections": []}]}, {"section_title": "Data Suggest Need for Water Operators Resembles Workforce Needs across All Occupations, but Little Is Known about Effects of Any Unmet Needs on Compliance", "paragraphs": ["Data available from BLS suggest that the workforce replacement needs  for water operators are similar to workforce replacement needs  nationwide across all occupations. However, little information is available  about the current and future effects of any unmet workforce needs on  utilities\u2019 abilities to comply with the Safe Drinking Water Act and Clean  Water Act."], "subsections": [{"section_title": "BLS Projections Indicate That the Replacement Needs for Water Operators Resemble the National Average for All Occupations", "paragraphs": ["BLS projections suggest that the workforce replacement needs for water  operators are similar to workforce replacement needs nationwide across  all occupations. BLS uses survey estimates and economic models to  project future employment in specific occupations; the latest such  projections are for the 10-year period from 2016 through 2026. BLS  intends its projections to capture the long-run trend, direction, and growth  of the labor force rather than to predict precise outcomes in specific  years. As of October 2017, the most recent projections indicate that the  replacement needs for water operators\u2014resulting from retirement or  other separations\u2014are relatively similar to the projected national annual  average of replacement needs across all occupations (8.2 percent versus  10.9 percent, respectively). BLS projects that there will be an annual  average of 9,200 job openings for water operators between 2016 and  2026. It also projects a slight decline in overall employment for water  operators because of increasing automation at water utilities; this  decline contrasts with total employment across all occupations, which is  projected to increase by an annual average of 1,151,850 jobs. On  average, for years during this the 10-year period, BLS projects that about  8 percent of water operator jobs will be filled by workers replacing those  who are separating from the occupation, and about 92 percent will be  filled by workers staying in the water operator occupation. In comparison,  over the same period for workers across all occupations, a projected  annual average of about 1 percent of jobs will filled because of growth,  about 11 percent by workers replacing those separating from their  occupation, and about 88 percent by workers staying in their occupation  from the previous year. (See fig. 3.)", "BLS tracks growth and workforce replacement projections for the water  operator occupation, but not for water utilities; however, the water  operator position is concentrated at publicly and privately owned drinking  water and wastewater utilities. BLS estimates from May 2016 (the latest  data set with data by type of employer) show that about 77 percent of  water operators were employed by local governments\u2014this percentage  represents those employed at water utilities owned by cities and  municipalities. Water, sewage, and other systems employed about  another estimated 12 percent of water operators, which are primarily in  privately owned drinking water and wastewater utilities. The remaining  water operators (about 11 percent) were employed in state government or  in various other private industries, such as waste treatment and disposal  (e.g., solid waste, among other things).", "BLS data indicate that the median age of water operators in 2016 was  slightly older than the national median age of the workforce across all  occupations. BLS does not collect information on tenure, retirement age,  or retirement eligibility of workers; however, the 2016 Current Population  Survey shows that 24.7 percent of water operators were age 55 or older,  compared with 22.7 percent of the total U.S. workforce. The data also  show that in 2016, the median age for water operators was 46.4,  compared with the median age across all occupations of 42.2.", "Industry reports from 2008 to 2010 included retirement eligibility  estimates of as high as 30 to 50 percent of the water utility workforce.  However, industry representatives we interviewed told us that many  workers postponed retirement during the recession that began in  December 2007, thus reducing the industry\u2019s hiring needs. The  representatives added that retirements may increase as the overall U.S.  economy continues to expand. In addition, industry representatives said  that workers in the water industry tend to have a long tenure in their jobs,  often working several years past the earliest age at which they meet the  requirements for full retirement.", "In addition to water operators, larger water utilities employ a broad range  of workers, including skilled workers, such as electricians and machinists,  as described above. While BLS does not provide employment projections  specific to water utilities for these occupations, it does provide national  employment projections for these occupations that can be illustrative. The  future demand for such workers\u2014as represented by projected job growth  and occupational separations rates\u2014is shown in table 1. BLS defines  the growth rate as the estimated percentage change in the projected  number of jobs added or lost in a U.S. occupation or industry over a given  period. The occupational separations rate is the sum of the projected  percentage of workers exiting the labor force because of retirements or  other reasons (\u201clabor force exit rate\u201d) and the projected percentage of  workers transferring to different occupations (\u201coccupational transfer rate\u201d).  Higher than average growth rates for the electrical and plumbing  occupations, as well as higher occupational separations rates than the  water operator occupation, suggest that the water industry will need to  compete with other employers in faster-growing sectors, such as  construction, for workers in these high-demand occupations."], "subsections": []}, {"section_title": "Limited Information Is Available on Unmet Workforce Needs and Their Effects on Compliance, and EPA Has Not Prompted States to Collect Information on Future Needs", "paragraphs": ["Little is known about whether unmet workforce needs are affecting water  utilities\u2019 overall abilities to comply with the Safe Drinking Water Act and  Clean Water Act. At a national level, neither the water utilities\u2019 industry  associations nor EPA has analyzed whether there is a relationship  between unmet workforce needs and compliance problems. Some water  utility industry associations have analyzed projected employee retirement  eligibility and employee turnover, but these studies did not analyze the  potential effect of these retirements on utilities\u2019 operations. The 2010  Water Sector Workforce Sustainability Initiative study sponsored by the  Water Research Foundation and the American Water Works Association  provides the most recent, broad industry evaluation of workforce  challenges at water utilities. That study outlined projected workforce  challenges caused by impending retirements and shifting demographics  in the U.S. labor market, but it did not address specific operational  impacts related to those retirements. Similarly, the American Water  Works Association\u2019s annual benchmarking surveys collect data on  utilities\u2019 water and wastewater regulatory compliance rates; however, the  association does not analyze whether there is a relationship between  retirement eligibility and regulatory compliance.", "Water utilities and industry associations have some planned and ongoing  work to learn more about workforce needs at water utilities. For example,  representatives from one of the selected large utilities that we interviewed  told us that a group of 16 large water utilities are informally working  together to address workforce challenges and have proposed a major  applied research project with the objectives of (1) exploring in greater  depth the specific occupations, skills, and career pathways that can  bridge the water sector\u2019s looming employment gap; (2) clarifying the  range of water jobs available at a regional level; (3) identifying the  potential pools of labor to fill these positions; and (4) exploring new  development strategies to equip workers with the skills they need.  Additionally, the Water Environment and Reuse Foundation is  participating in an international Workforce Skills of the Future project to  analyze future work scenarios and their impact on the water sector and  develop recommendations for how the sector can prepare for and  accommodate new capabilities and future skills in the water sector.", "The utilities we interviewed had experienced compliance problems with  the Safe Drinking Water and Clean Water acts and some difficulties in  hiring certified water operators and other skilled workers. In our interviews  with representatives of selected water utilities, the representatives  reported that they had experienced some difficulties in hiring operators  but that those difficulties had not had an effect on their utilities\u2019  compliance with the Safe Drinking Water Act or Clean Water Act to date.  However, the representatives from 6 of the 11 selected utilities reported  that their difficulties in replacing workers had resulted in a greater use of  overtime to meet workload demands.", "We reviewed EPA compliance violation data for the selected utilities and  found that all of the utilities had at least one violation of either the Safe  Drinking Water Act or Clean Water Act within the last 10 years; however,  it was not possible to determine whether workforce challenges  contributed to these violations. The violations represented a range of  issues including exceeding the maximum contaminant levels in drinking  water; failing to conduct regular monitoring of drinking water quality or to  submit monitoring results in a timely fashion to the state agency or EPA;  violating public notification requirements, which require systems to alert  consumers if there is a serious problem with their drinking water; and  failing to issue annual Consumer Confidence Reports. According to  EPA officials, utilities may have violations for a number of reasons,  including equipment breakdowns or impaired quality of source water,  which makes water treatment more difficult. Because the compliance data  is not specific enough to indicate the source of the problem, it was not  possible for us to independently verify whether the compliance violations  were linked to utilities\u2019 difficulties in replacing workers.", "EPA relies on states to inspect utilities and ensure compliance with  requirements under the Safe Drinking Water and Clean Water acts.  EPA\u2019s inspection guidance\u2014for both drinking water sanitary surveys and  wastewater compliance inspections\u2014advises states to examine the  adequacy of water utilities\u2019 workforces\u2014that is, the quality and quantity of  staff operating and maintaining drinking water and wastewater facilities.  EPA requires states to report some inspection information, including  whether there are management issues at a utility. EPA officials told us that, on the basis of their conversations with state regulators, they believe  states are collecting information about workforce adequacy during state  inspections of drinking water utilities. For wastewater utilities, EPA  officials stated that in the course of conducting an on-site inspection,  inspectors will ask plant managers and staff questions about staffing and  should note concerns in their inspection reports. EPA officials said that  collecting workforce information at the state level is beneficial for the  states and the drinking water utilities so that they can take steps to  implement strategies to address the utilities\u2019 workforce needs. The  officials said state regulators can find patterns in utilities\u2019 compliance  reporting data that alert them to the likelihood that a utility is experiencing  operational issues, such as losing a certified water operator. In those  instances, an EPA official told us, state regulators work with the utility to  help identify solutions, such as locating a nearby water operator who can  contract with the utility on a part-time basis until it can hire a permanent  water operator. EPA officials further stated that they believe state  regulators are using the workforce information to help build capacity at  drinking water utilities and prioritize training.", "However, the EPA inspection guidance that states currently use in  conducting sanitary surveys for drinking water utilities and compliance  inspections of wastewater utilities outlines criteria for evaluating existing  workforce issues but does not address workforce issues that could affect  utility operations, and potentially compliance, in the future. The guidance  contains suggested assessment criteria that focus on whether there is an  adequate number of qualified staff in the existing workforce to perform the  work required. For example, the guidance for drinking water utilities states  that the utility should have enough personnel to enable continuous  operation of the treatment plant at all times and that staff should be able  to perform operations and maintenance tasks regularly with little or no  overtime hours. The inspection guidance does not contain similar  questions that focus on whether there will be an adequate number of  qualified staff in the future workforce to perform the work required.  According to our December 2003 report, strategic workforce planning  focuses on developing of long-term strategies for acquiring, developing,  and retaining an organization\u2019s total workforce to meet the needs of the  future. In that report, we stated that while agencies\u2019 approaches to  workforce planning will vary, there are five key principles that strategic  workforce planning should address irrespective of the context in which the  planning is done. These principles include: determining the critical skills and competencies that will be needed to  achieve current and future programmatic results, and developing strategies that are tailored to address gaps in number,  deployment, and alignment of human capital approaches for enabling  and sustaining the contributions of all critical skills and competencies.", "According to our interviews with selected utilities, five of the six large  utilities had conducted workforce planning, while none of the small utilities  had conducted such planning. By amending its inspection guidance with  questions on strategic workforce planning\u2014such as any potential gaps in  critical skills and strategies to address any gaps in the number of water  operator positions to meet the needs of the future\u2014EPA could ensure  that such information is available for states to assess future water utility  workforce needs. Information on future workforce needs could help the  states and water utilities identity potential workforce issues and take  action as needed. According to EPA officials, they have not considered  amending inspection questions but have heard that future workforce  issues are a concern to the states and the industry and said that making  such changes could be helpful to develop workforce strategies that  address the specific needs of a state or regional area."], "subsections": []}]}, {"section_title": "Selected Utilities Managed Their Workforce Needs Using a Mix of Approaches but Reported Ongoing Challenges Hiring Water Operators and Other Skilled Workers", "paragraphs": ["Representatives from selected utilities that we interviewed reported using  a mix of various approaches to meet their workforce needs. However, the  selected large utilities reported ongoing hiring challenges with skilled  technical workers such as machinists, electricians, and pipefitters."], "subsections": [{"section_title": "Selected Utilities Used a Mix of Approaches to Manage their Workforce Needs", "paragraphs": ["The representatives from the selected utilities reported that by using  various approaches, they were generally able to hire water operators, but  they faced some challenges in doing so. The number of water operator  vacancies at each of the six selected large utilities in the spring of 2017,  as reported by the utilities\u2019 representatives, ranged from 2 to 60,  representing a range of about 2 to 15 percent of the utilities\u2019 water  operator workforces. Only one of the five selected small utilities had a  water operator vacancy in the spring of 2017. That utility had 1 vacancy  among its workforce of 44 water operator positions. When we asked  representatives of selected large utilities for their top three recruitment  approaches for water operators, their responses included advertisements  on their own websites, \u201cword of mouth,\u201d advertising with professional  water organizations, partnering with a local technical college, and use of  general-purpose websites (not owned by the utility or a professional water  organization). Similarly, responses from representatives of selected small  utilities included \u201cword of mouth,\u201d local newspapers, advertisements  through professional water organizations, advertisements on general- purpose employment websites, and outreach to the local veterans\u2019 office.", "We also asked the representatives of the selected large and small utilities  about various water operator recruitment approaches described to us by  association representatives or noted in industry publications. These  approaches included recruiting from other states, working with local  workforce boards and American Job Centers, establishing formal  apprenticeships, reaching out to recruit veterans, and partnering with  local technical and postsecondary schools. The representatives of large  utilities reported that they used some of the approaches to varying  degrees, but none of these representatives reported using all of them.  The two most commonly used approaches of the selected large utilities (4  of the 6) were a partnership with one or more local community colleges to  offer water treatment education, followed by reaching out to recruit  veterans (3 of the 6). Representatives of one of the large utilities said they  also had a partnership with a high school. Representatives of another  large utility indicated that although they had access to local trade schools,  the schools did not provide good candidates for the utility\u2019s jobs.", "Representatives of one large utility said that the utility recruits out of state  to find water operators with at least a minimum set of qualifications and a  license because it lacks a local pool of water operators from which it can  recruit. However, representatives of another large utility indicated that  many water operators do not like to move from one state to another, and  therefore it is difficult to recruit in other states. Representatives of the  selected large utilities were divided about whether a national standard  certification for water operators would help with worker availability or  recruiting. For example, one utility\u2019s representatives said that a national  standard certification would not help in recruitment, while representatives  of another indicated that a uniform, transferable skill set, as represented  by a national certification, would be helpful.", "Representatives of the five selected small utilities reported that they  generally had not used the various recruiting approaches about which we  inquired. For example, according to their representatives, none of the  small utilities recruited out-of-state water operators, in part because they  preferred to recruit locally or they would not be able to attract such water  operators with the relatively low compensation they could offer. In  contrast to larger utilities, representatives of four of the selected small  utilities told us they did not have a partnership with a trade school or a  community college to offer water treatment education for various reasons,  including filling key needs elsewhere and a lack of focus on water  education at the technical college."], "subsections": []}, {"section_title": "Selected Utilities Reported Ongoing Challenges Hiring Water Operators and Other Skilled Workers", "paragraphs": ["Selected utilities reported ongoing challenges hiring water operators and  other skilled workers. Representatives of all six selected large utilities told  us that they had attempted to hire water operators during the past 5 years  and, with one exception, they described hiring water operators as  \u201csomewhat difficult.\u201d Reasons they described for this difficulty included a  lack of candidates with a STEM background, a distaste for shift work  among younger employees, the lack of a local pool of candidates, and  low pay. Representatives of three of the selected large utilities said hiring  to replace departing water operators had been a problem in the past, but  there was no consensus among the three on whether the problem was  increasing, decreasing, or staying about the same. The utility that  indicated the problem was decreasing cited two steps it had taken to  address it: expanding its geographical search and improving its internal  training program. Five of the selected large utilities reported that replacing  retiring water operators was currently a problem, and three of them  indicated that it could become one over the next 5 years for reasons such  as water operators having to perform rotating shift work and fewer  qualified candidates than in the past. The percentage of water operators  eligible to retire over the next 5 years, compared to the total number of  water operator positions in the six large utilities, ranged from a low of 100  out of 507 (about 20 percent) to 68 out of 136 (50 percent), the  representatives told us.", "Representatives of selected small utilities generally reported challenges  recruiting and hiring certified water operators. Representatives of four of  the five selected small utilities noted that replacing retiring water  operators could become a problem over the next 5 years; these  representatives often cited an inability to compete with larger utilities on  compensation for certified water operators, in particular. Some  representatives told us that, although they would have preferred to hire  certified water operators for some of their vacancies, they often decided  to hire and train an entry-level person, for whom there was less  competition regarding compensation. Small utilities were roughly split  regarding whether retirements had increased or remained about the  same. Representatives of two small utilities told us that, over the past 5  years, the number of water operators retiring each year increased, but  representatives of the other three reported that the number remained  about the same. Representatives of two small utilities told us they have  no water operators eligible for retirement during the next 5 years, and  representatives of the other three small utilities reported that the number  of water operators eligible to retire compared to the total number of water  operator positions was, respectively, 2 of 6, 3 of 8, and 4 of 44. A  representative of only one of the five small utilities reported difficulties  recruiting skilled workers in professions other than water operators, and  those professions are administrative and bookkeeping.", "Skilled Technical Occupations  Considerable attention has been given in  recent years to the question of whether the  U.S. economy has a shortage of workers in  skilled technical occupations\u2014occupations  that require a high level of knowledge in a  technical area but do not require a 4-year  college degree. The National Academies of  Sciences, Engineering, and Medicine  convened a committee to examine the  coverage, effectiveness, flexibility, and  coordination of the policies and programs that  prepare Americans for skilled technical jobs.  The committee organized a national  symposium, held in June 2015, bringing  together researchers, industry  representatives, policymakers, and other  stakeholders involved in technical workforce  education and training. The committee\u2019s  report, issued in 2017, contained many  findings including: (1) the United States is  experiencing, and will continue to experience,  imbalances in the supply of and demand for  skilled technical workers in certain  occupations, industry sectors, and locations;  (2) the nature of the problem differs across  sectors and locations; (3) these imbalances  arise from multiple sources; (4) the evidence  suggests that, as a nation, the United States  is not adequately developing and sustaining a  workforce with the skills needed to compete in  the 21st century.", "Representatives of the selected large utilities reported that, outside of  water operators, the positions most difficult to fill are for other skilled  workers such as machinists; electricians; pipefitters (also called  \u201csteamfitters\u201d); and heating, ventilating, and air conditioning mechanics.  The representatives of those utilities said that, in their experience, the  number of young adults interested in the skilled technical occupations is  decreasing. A representative of one small utility noted that it is difficult for  trade schools and community colleges to offer courses in occupations for  which student interest is declining. Because of projected reductions in the  supply of such workers as the \u201cbaby boom\u201d generation continues to retire  over the next decade, the drinking water and wastewater industry has  been one of many that have cited the \u201cskills gap\u201d and the need for a  \u201cpipeline\u201d of future workers as developing problems as they attempt to fill  vacancies caused by retirements. Representatives of some of the large  utilities and industry associations we interviewed said that there are  difficulties in filling certain skilled worker positions, particularly when local  economic factors\u2014including competition from other sectors such as  construction\u2014make it difficult to hire skilled technical workers if the local  economy is near or at full employment."], "subsections": []}]}, {"section_title": "Key Federal Programs Have Several Ways to Assist Utilities with Workforce Needs, and Selected Utilities Accessed Some of Those Programs", "paragraphs": ["The five federal agencies we reviewed\u2014EPA, USDA, Education, DOL,  and VA\u2014have programs that can assist utilities with their workforce  needs in several ways, including through guidance, funding, and training.  The selected utilities that we interviewed accessed federal programs to  help meet their workforce needs in some instances."], "subsections": [{"section_title": "Five Federal Agencies Have Key Programs That Can Provide Utilities with Guidance, Funding, and Training to Help Meet Workforce Needs", "paragraphs": ["Key programs in EPA, USDA, Education, DOL, and VA can assist utilities  with workforce needs in the ways described below.", "EPA has several programs that can provide funding, through the states,  for technical assistance to help water utilities meet their workforce needs.  For example, EPA\u2019s national Training and Technical Assistance for Small  Systems competitive grant provides, on average, $12 million per year to  give managerial and financial training to utilities, particularly small utilities.  Additionally, officials stated that between 1997 and 2012, EPA provided  $134 million to help utilities train their water operator workforce and  enable their water operators to gain certification through the Operator  Certification Expense Reimbursement Grants program; however, this  program ended in 2012. EPA\u2019s Public Water System Supervision Grant  program provides grants to states for activities to implement drinking  water regulations\u2014activities that have included providing technical  assistance to utilities, such as training to operators to ensure they are  knowledgeable about the best operation and treatment practices. In  addition, states may use up to 10 percent of the funding they receive for  the Drinking Water State Revolving Fund allotment for specified program  management activities, including the development and implementation of  water operator certification programs.", "In addition to funding technical assistance, EPA has assisted in efforts to  attract new employees to the drinking water and wastewater industry. For  example, in 2010 EPA partnered with the American Water Works  Association and the Water Environment Federation to highlight the need  for qualified professionals to enter the drinking water and wastewater  industry. As part of those efforts, EPA produced a set of videos called  \u201cWater You Waiting For?\u201d to encourage high school and vocational  technical school students to consider employment in the industry. EPA  officials also told us that based on industry requests, EPA has taken the  lead in coordinating with other federal agencies to help develop a pool of  potential certified water operators. EPA has also collaborated with DOL,  USDA, and VA to assist drinking water and wastewater utilities in meeting  their workforce replacement needs. For example, in 2009, EPA worked  with DOL and industry groups to develop a competency model for the  water sector, which was updated in 2016. The model defines the  necessary knowledge, skills, and abilities for prospective water  professionals and can be used by educational institutions and industries  to encourage prospective job seekers to consider a career in the water  and wastewater industry by helping job seekers develop a career  pathway and associated training and career advancement strategies that  meet industry skill needs. EPA has also entered into memorandums of  understanding with USDA and VA, as discussed below.", "In 2011, USDA and EPA signed a memorandum of agreement to support  a series of activities to help small water and wastewater systems face the  challenges of aging infrastructure, increased regulatory requirements,  workforce shortages, increasing costs, and declining rate bases. Part of  that agreement focused on the water industry workforce. Among other  things, USDA and EPA agreed to develop strategies for overcoming  challenges specific to recruitment and retention of small utility water  operators and to promote the use of contract water operators to fill  workforce gaps in rural communities. As part of this effort, USDA and  EPA also agreed to focus on the sustainability of rural utilities by  coordinating activities and financial assistance resources to increase the  technical, managerial, and financial capacity of rural drinking water and  wastewater systems nationwide. This resulted in the development of a  training workshop, the Sustainable Rural and Small Utility Management  Initiative\u2014\u201dWorkshop in a Box\u201d\u2014that covers a variety of topics, including  some related to evaluating workforce needs. USDA reported that in  fiscal year 2016, the technical assistance providers conducted more than  100 workshops, with at least one in each of the 50 states and Puerto  Rico.", "USDA\u2019s Rural Utilities Service provides technical assistance to small rural  utilities through two programs: Technical Assistance and Training grants  and the Circuit Rider program. The Technical Assistance and Training  grants provide funds to private nonprofit organizations to help  communities with water or wastewater systems by providing free  technical assistance and training for rural water operators, other water  utility staff and managers, and water utility board members. In fiscal year  2016, 24 nonprofit organizations received funding totaling about $20  million to provide technical assistance to rural water utilities. In addition,  under the Circuit Rider program, the Rural Utilities Service contracts with  the National Rural Water Association to provide staff in each of the 50  states who offer technical assistance on day-to-day operational,  managerial, and financial issues. Specifically, according to the National  Rural Water Association, staff known as \u201ccircuit riders\u201d work on site with  rural water utility personnel to troubleshoot problems, evaluate alternative  technological solutions, recommend operational improvements, assist  with leak detection, respond to natural disasters and other emergencies,  and provide hands-on training, among other things. In fiscal year 2016,  USDA provided about $16 million for the Circuit Rider program.", "DOL provides funding to states to operate the public workforce system  under the Workforce Innovation and Opportunity Act. Under this act, DOL  funds American Job Centers, where potential employees can seek  information on job openings. Employers, such as industries or utilities,  can notify the centers of the need for applicants, and the centers can then  refer potential applicants to the industry.  In addition, if requested to do so  by industry associations or companies, DOL can work with them to  develop registered apprenticeship programs through DOL\u2019s Office of  Apprenticeship. As of September 2017, 24 water utilities across the  country were training new employees through registered apprenticeships  that combined structured learning with on-the-job training with an  assigned mentor. (See app. II for a list of apprenticeships in the water  industry that are registered with DOL\u2019s Office of Apprenticeship.) In  addition, the National Rural Water Association recently developed a  registered apprenticeship program for rural utilities. According to DOL  officials, the program began in Indiana on August 10, 2017, and as of  September 7, 2017 two additional states\u2014California and Colorado\u2014were  expected to join the apprenticeship program.", "In addition to funding under the Workforce Innovation and Opportunity  Act, between 2011 and 2014, DOL awarded $1.9 billion in capacity- building grants to community colleges through the Trade Adjustment  Assistance Community College and Career Training grant program.  Grantees identified in-demand industries and sectors in their proposals  and were required to partner with workforce boards. At least seven  grantee colleges proposed to develop or upgrade programs of study  related to water and wastewater utilities. For example, Salina Area  Technical College (Kansas) developed an environmental technology  associate\u2019s degree program focusing on water quality and wastewater  treatment management."], "subsections": [{"section_title": "Education", "paragraphs": ["Through multiple grant programs, Education provides funding for states  and community and technical colleges, including a number of community  and technical colleges that offer programs to prepare individuals for  careers in the drinking water and wastewater industry. Examples of  such colleges include Kirkwood Community College (Iowa), Moraine Park  Technical College (Wisconsin), and Bay College (Michigan). According to  agency documentation, three funding mechanisms can be used to fill the  training and employment needs of the water and wastewater industry:", "Funding under the Perkins Act is available for state agencies and  eligible local educational agencies and postsecondary education  providers.", "Funding under the Adult Education and Family Literacy Act is  available to state agencies and eligible providers for, among other  things, integrated education and training, which is a service approach  that provides adult education and literacy activities concurrently and  contextually with workforce preparation activities and workforce  training for a specific occupations.", "The Rehabilitation Act of 1973 provides funding for training and job  placement services for individuals with disabilities through state  vocational rehabilitation agencies. According to agency  documentation, from fiscal years 2013 through 2016, nationwide in  this program, 40 to 50 program participants per year obtained  employment as operators in the drinking water and wastewater  industry. secondary and postsecondary education students who elect to enroll in career and  technical education programs. The Adult Education and Family Literacy Act provides  funds to states, which grant these funds to eligible providers to assist adults in, among  other things, becoming literate or achieving proficiency in English, obtaining the  knowledge and skills necessary for employment and self-sufficiency, and completing a  secondary school education. The Rehabilitation Act of 1973 provides funding to states for  vocational rehabilitation services, such as counseling, job training, and job search  assistance to eligible individuals with disabilities, with emphasis on individuals with  significant disabilities. These programs are delivered through American Job Centers. improve employment opportunities for veterans with disabilities.  According to the memorandum of understanding, veterans represent a  major recruiting opportunity for water utilities. According to the EPA and  VA memorandum of understanding, prior military experience gives  veterans an understanding of teamwork, discipline, and personal  accountability that can make them excellent employees in these fields. In  addition, many veterans already have technical skills and training that are  directly transferrable to careers in the drinking water and wastewater  industry. EPA also worked with VA to create Military Occupational  Specialty equivalent job descriptions for water-related military jobs to  show how they equate to civilian water utility jobs. Under the  memorandum with EPA, VA receives referrals of open positions from the  water and wastewater industry and disseminates the information to  disabled veterans who are looking for jobs. According to a VA official,  over the past 5 years, the VA estimated sharing nearly 5,500 water utility  job leads with its 56 regional offices and the National Capital Region  Benefits Office. VA tracks the number of disabled veterans who have  been rehabilitated to employment, but it does not track the number of  disabled veterans who take jobs at water utilities."], "subsections": []}]}, {"section_title": "Selected Water Utilities Accessed Some Federal Programs to Help Meet Workforce Needs", "paragraphs": ["Strategies under the Workforce Innovation  and Opportunity Act  In implementing the Workforce Innovation and  Opportunity Act, states are required to  incorporate specified strategies in their state  plans, including the following:  Career pathways strategies help job  seekers obtain education and job experience  leading to a career. Career pathways  strategies align and integrate education, job  training, counseling, and support services to  help individuals obtain postsecondary  education credentials and employment in in- demand occupations.   Sector partnership strategies engage  related groups of stakeholders (including  employers) in the workforce system. Such  strategies organize multiple employers and  key stakeholders, such as education and  training programs, in a particular industry into  a working group that focuses on the shared  goals and human resources needs of that  industry. working with DOL to identify standard workforce competencies and working with workforce investment boards in each state to integrate  and fund training initiatives for the water utility industry; and working with Education to develop training requirements for the water  utility industry.", "Representatives of the American Water Works Association told us that  they had not provided tools or outreach to utilities to help them act on  some of these recommendations, such as working with local workforce  investment boards. In our interviews with selected utilities, we heard that  there is variation in whether the utilities have accessed federal programs  to help meet their workforce needs."], "subsections": [{"section_title": "Programs for Rural Utilities (USDA)", "paragraphs": ["Representatives from four of the selected small utilities we interviewed  said they use training programs offered by the National Rural Water  Association to train the water operators they hire. A representative from  one small utility stated that his utility needed the National Rural Water  Association to provide ongoing training for new operators. The  representative also stated that the National Rural Water Association\u2019s  circuit riders helped the utility resolve problems that arose, which  precluded the need for the utility to pay for expensive private services.  Circuit riders can help small utilities resolve a range of problems,  including assisting with leak detection and responding to natural disasters  and other emergencies."], "subsections": []}, {"section_title": "American Job Centers (DOL)", "paragraphs": ["Representatives from two of the selected large utilities and two of the  selected small utilities told us that they had used the American Job  Centers to recruit potential workers. Representatives of those utilities  described differing experiences in using their local job centers, with  representatives from one large utility stating that the job center was a  good resource for them while representatives from another large utility  stated that they were not able find the type of candidates they wanted  (such as those with a STEM background). Representatives of other  selected utilities stated that they have not used the centers either  because they were not familiar with the centers\u2019 services or they did not  believe that using the job centers would be beneficial for them."], "subsections": []}, {"section_title": "Sector Partnership Strategy (DOL)", "paragraphs": ["Get Into Water!  The Colorado Department of Labor and  Employment and the Colorado Workforce  Development Council jointly awarded funding  to plan a sector partnership strategy for the  drinking water and wastewater industry. The  funding provided by Colorado was part of  federal Workforce Investment Act funds  provided to the state for sector partnership  strategies. The initiative, called \u201cGet Into  Water!\u201d involved four counties in the Denver  metro region. Although the drinking water and  wastewater industry was not among the top  three industries in those counties, a study of  the region\u2019s drinking water and wastewater  utilities identified workforce challenges and  opportunities in the region. The initiative,  which was active between 2009 and 2011,  developed entry-level training courses to  introduce high school students and adults to  career opportunities in the drinking water and  wastewater industry. One of the programs that  was developed\u2014at Emily Griffith Technical  College\u2014remains active after the conclusion  of the initiative.", "One of the selected large utilities that we interviewed was involved in a  sector partnership strategy called \u201cGet Into Water!\u201d funded by the  Colorado Department of Labor and Employment and the Colorado  Workforce Development Council. The funding provided by Colorado was  a part of federal Workforce Investment Act funds provided to the state for  sector partnership strategies. None of the other selected large or small  utilities reported taking part in a federally funded sector partnership  strategy."], "subsections": []}, {"section_title": "Registered Apprenticeships (DOL)", "paragraphs": ["One of the selected large utilities we interviewed used DOL\u2019s registered  apprenticeship program as a way to recruit and hire water operators. It  also used the apprenticeship to cover plumbers. None of the other  selected large utilities had registered apprenticeship programs for water  operators. Representatives from some of the selected large utilities stated  that they did not use registered apprenticeships because of the expense  of meeting the apprenticeship rules\u2014particularly having to pay almost the  market rate to an apprentice, who may not be fully productive for the first  few years on the job. Representatives from some of the selected small  utilities stated that they did not need an apprenticeship program because  of their small size or lack of openings."], "subsections": []}, {"section_title": "Initiatives to Employ Veterans (VA, DOL)", "paragraphs": ["The selected utilities used various methods to recruit veterans, including  working with state and local veterans offices, job fairs, and coordinating  with local military installations. Four of the selected large and small  utilities we interviewed sought to hire veterans, but none of them sought  employees through the VA\u2019s disabled veterans program. DOL noted that  American Job Centers offer additional ways to recruit and hire veterans,  including the Jobs for Veterans State Grants program, which funds  Disabled Veteran Outreach Program specialists and Local Veterans\u2019  Employment Representatives. Representatives from one of the large  utilities stated that although it did not have a program specifically for  recruiting veterans, it periodically sent its employees to talk to groups of  veterans about the nature of its work and how to navigate the civil service  hiring process."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Having an adequate number of trained and qualified employees,  particularly water operators, is key to the safe operation of the nation\u2019s  water utilities. Water utilities face an upcoming wave of retiring baby  boomers, similar to other industries in the economy. Federal programs  offer many resources that, if accessed, have the capability to support and  supplement\u2014but not replace\u2014utilities\u2019 individual and collective efforts to  recruit for difficult-to-fill positions. EPA has coordinated efforts with DOL  and other federal agencies that can help utilities and industry groups  identify ways for utilities to access federal programs. EPA\u2019s inspection  guidance documents recognize the importance of utilities having an  adequate number of capable and qualified staff, and state regulators  appear to be capturing some information on utilities\u2019 existing workforce  capacity and using this information to target technical assistance to  utilities in need. However, EPA\u2019s inspection guidance to states does not  address future workforce issues that may affect utility operations. By  adding questions to its inspection guidance documents on strategic  workforce planning\u2014such as the number of positions needed in the  future, skills needed in the future, and any potential gaps in water  operator positions\u2014EPA could help ensure this information is available  for states to assess future workforce needs. Information on future  workforce needs could help states and utilities identity potential workforce  issues and take action as needed."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Assistant Administrator for Water should direct EPA\u2019s Office of Water  to amend its Safe Drinking Water Act and Clean Water Act inspection  guidance documents to add questions on strategic workforce planning  topics\u2014such as the number of positions needed in the future, skills  needed in the future, and any potential gaps in water operator positions.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to EPA, USDA, Education, DOL, and  VA for comment. Education, DOL, and VA provided technical comments,  which we incorporated as appropriate. In a written response, USDA  indicated that it did not have comments and generally agreed with the  report findings and content.", "EPA provided written comments, reproduced in appendix III, in which it  generally agreed with our findings and provided comments regarding the  conclusions and recommendation. While EPA generally agreed with our  findings, the agency stated that the report does not highlight some factors  that differentiate water and wastewater sector workforce needs from the  workforce needs of all occupations. EPA stated that, for example, the  location of the drinking water system or wastewater treatment plant can  significantly impact the owner\u2019s ability to recruit and retain certified  operators. We examined workforce needs in terms of projected growth  and occupational separations rates as reported by BLS. We did not  specifically assess the impact of geographic location. However, in our  discussion of responses from selected small utilities, we outline some of  the particular challenges facing small water utilities, which are typically  located in more rural areas. We describe, for example, that  representatives of small utilities often cited an inability to compete with  larger utilities on compensation for certified water operators.", "With regard to our recommendation, EPA stated that it generally agrees  with the recommendation with respect to sanitary surveys of public water  systems. It further stated that EPA\u2019s Office of Ground Water and Drinking  Water is in the process of updating the sanitary survey guidance manual  How to Conduct a Sanitary Survey of Drinking Water Systems \u2013 A  Learner\u2019s Guide. EPA noted that they will add questions related to  workforce needs to the \u201cUtility Management\u201d section and anticipates  finalizing the update by the summer of 2018. For compliance monitoring  inspections under the Clean Water Act National Pollutant Discharge  Elimination System (NPDES) program, EPA did not agree or disagree  with the recommendation, but stated that inspectors may be limited in the  information related to workforce planning they can assess and provide  because there is no corollary to the Water System Management and  Operation element of sanitary surveys in the NPDES compliance  inspections. EPA stated that where the agency identifies studies or  documents on adequate staffing of wastewater facilities, its Office of  Enforcement and Compliance Assistance will incorporate that information  into its existing guidance documents for inspectors. While we recognize  that the sanitary surveys and NPDES compliance inspections have  different goals, as we noted in the report, inspectors currently ask plant  managers and staff questions about staffing, and we believe that there is  an opportunity to ask additional questions about future staffing needs. In  addition, we note that EPA already highlights the need for adequate staff  in its compliance inspection guidance. By amending the compliance  inspection guidance to instruct inspectors to also ask about future  workforce issues, EPA would be emphasizing the fact that ensuring a  trained workforce and continuity of operations is important for complying  with NPDES permits.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of EPA, the Secretary of Agriculture, the  Secretary of Education, the Secretary of Labor, the Secretary of Veterans  Affairs, 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  us at (202) 512-3841, gomezj@gao.gov or (202) 512-7215,  brownbarnesc@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what is known about workforce needs at water  utilities compared with workforce needs nationwide and any effects of  potential unmet workforce needs on the utilities\u2019 abilities to comply with  the Safe Drinking Water Act and the Clean Water Act; (2) what  approaches selected water utilities have used to manage their workforce  needs and challenges they have faced in managing those needs; and (3)  in what ways, if any, key federal programs can assist water utilities with  their workforce needs.", "To examine what is known about workforce needs at water utilities  compared with workforce needs nationwide, we assessed and  summarized data on workforce replacement rates provided by the  Department of Labor\u2019s Bureau of Labor Statistics (BLS) and examined  projected retirement rates provided by industry studies. We focused on  projections of workforce turnover from 2016 to 2026 and estimates of  employee retirement eligibility published from 2008 to 2016, the most  recent data available to us. Because BLS estimates of workforce  replacement needs do not distinguish between workers who retire and  workers who permanently leave an occupation for other reasons, it was  not possible to isolate retirements from other separations.", "We identified two relevant BLS survey programs\u2014the Occupational  Employment Statistics program (May 2016) and the Current Population  Survey (2016)\u2014and one BLS projection program, the Employment Projection Program (2016-2026). To assess the reliability of BLS survey  data, we reviewed relevant documentation and information from BLS staff  for the most recent data available for the two relevant BLS survey  programs. Through the Occupational Employment Statistics program,  BLS conducts a mail survey in May and November of each year to collect  data on wage and salary workers in nonfarm establishments. It uses  these data to produce employment and wage estimates for about 800  occupations. BLS publishes relative standard errors to account for  sampling errors in Occupational Employment Statistics survey estimates.  All Occupational Employment Statistics estimates in this report are  presented along with their 95 percent confidence level.", "The Current Population Survey is a monthly survey of households  conducted by the U.S. Census Bureau for BLS. It is a sample survey of  60,000 eligible households representing the civilian noninstitutional  population ages 16 and older in the 50 states and the District of  Columbia. The basic monthly survey gathers demographic characteristics  of people in each sampled household and information to determine  whether they are employed, unemployed, or not in the labor force. The  survey collects information on workers\u2019 occupations and ages. The  Current Population Survey estimates presented in this report are subject  to sampling error. To account for this error, we present all Current  Population Survey estimates in this report along with their 95 percent  confidence intervals. Data that would allow us to calculate true sampling  errors were not specifically provided by the Current Population Survey.  Instead, we followed Current Population Survey guidance to estimate  sampling errors. We used generalized variance functions, parameters,  and factors published by the Current Population Survey to calculate  approximate standard errors and confidence intervals. As a result, the  confidence intervals presented in this report provide a general order of  magnitude and are approximations of the true sampling errors.", "To assess the reliability of BLS projections, we reviewed relevant  documentation and information from BLS staff for the most recent  projections available and reviewed the BLS employment projections in the  Occupational Outlook Handbook. The Handbook includes employment  projections developed by BLS\u2019 Employment Projections program; BLS  develops its projections from statistical and econometric models,  combined with subjective analysis, and designs these projections to  provide a focused analysis of long-term trends based on a set of  assumptions. The models and analyses BLS uses to develop the  projections assume historical relationships and behavior will continue to  hold over the projection period; however, there is inherent uncertainty  about whether historical trends will continue into the future. BLS  employment projections rely on assumptions about demographics, fiscal  policy (including tax policies and government spending), and  macroeconomic conditions over the 10-year projection period. For  example, the BLS projections assume that the economy will be at full  employment in the last year of the period (e.g., 2026). BLS notes,  however, that fluctuations in the business cycle are not foreseeable over  a decade. Therefore, BLS employment projections should be considered  as likely outcomes, but subject to the accuracy of the underlying  assumptions. We determined that the BLS survey and projection data  were sufficiently reliable for purposes of our objective.", "To determine what data and information were available on workforce  needs from industry, we reviewed reports and interviewed officials from  industry associations, including the American Water Works Association,  the Water Environment Federation, the National Rural Water Association,  the Rural Community Assistance Partnership, the National Association of  Clean Water Agencies, and the National Association of Water  Companies. We identified a number of relevant industry studies, including  three surveys published by the American Water Works Association  between 2015 and 2017: the 2016 State of the Water Industry Report,  Benchmarking Performance Indicators Water and Wastewater: 2015  Survey Data and Analyses Report, and Benchmarking Performance  Indicators Water and Wastewater: 2013 Survey Data and Analyses  Report. To assess the reliability of the industry studies, we reviewed their  scope and methodology. We determined that although the industry  estimates were not generalizable, the studies were sufficiently reliable for  illustrating industry perspectives on workforce planning.", "To review the effects of potential unmet workforce needs on water  utilities\u2019 abilities to comply with the Safe Drinking Water Act and the Clean  Water Act, we selected a sample of 11 water utilities\u20146 large and 5  small\u2014based on geography, size, and indications of hiring challenges in  the past. We included both large and small utilities in our selection based  on our initial interviews with industry representatives that suggested that  large utilities and small utilities experienced different challenges.", "To select the large utilities, we compiled a list of cities that were  mentioned in interviews and other communications with industry groups,  and in EPA documents, as experiencing difficulty replacing retiring  workers or having put in place programs to train and recruit new workers.  We then divided the list of cities geographically among the four Census  regions\u2014West, Midwest, Northeast, and South\u2014and tallied the number  of times each city was mentioned. In the West and South regions, we  selected the city with the greatest number of mentions. In the Midwest  and Northeast regions, each of the cities had only one mention, so we  selected the largest city within each region. For each of these four cities  we then identified the drinking water and wastewater utilities for the city.  One of the cities had separate drinking water and wastewater utilities,  while the other three cities had one utility that provided both drinking  water and wastewater services. We also included the water utility for a  fifth city because early in our research we conducted a site visit to that  city and conducted an interview with the local water utility.", "To select the small utilities, we reached out to the National Rural Water  Association and the Rural Community Assistance Partnership for  suggestions on utilities to interview. The National Rural Water Association  provided us with a list of 10 small water and wastewater utilities from 6  states. We divided the list of cities among the four Census regions. In the  West region, one utility was recommended. For the Midwest, Northeast,  and South regions, we selected utilities from cities with populations less  than 10,000. In the South region, we selected a second city in order to  bring the total number of small utilities up to five. One of the small utilities  that we contacted was not able to participate in an interview with us but  instead referred us to a nearby utility. That utility served a population less  than 30,000, which for the purposes of this report we included in the  category of small water utilities. Table 2 shows the locations and sizes of  the 11 utilities we interviewed.", "We asked officials of the selected utilities whether workforce challenges  had affected their abilities to comply with the Safe Drinking Water Act and  the Clean Water Act at their utilities or whether they anticipated such  effects in the future. The information from those interviews is not  generalizable to the national population of water utilities; it was intended  to provide illustrative examples of any difficulties water utilities were  experiencing in complying with the Safe Drinking Water Act and the Clean  Water Act that they attributed to workforce challenges. We also obtained  EPA data on compliance with the Safe Drinking Water Act and the Clean  Water Act for the selected utilities. We have previously reviewed the  quality of EPA compliance data for the Safe Drinking Water Act.  Specifically, we have interviewed EPA officials and reviewed EPA data  reliability assessments, a 2017 OIG report on the reliability of data in  EPA\u2019s Safe Drinking Water Information System (SDWIS), data verification  reports, and our past reports on the reliability of the data in SDWIS.  According to these recent EPA assessments, the EPA OIG report, and  our January 2006 and June 2011 reports, some of the data in SDWIS  are not complete. We also interviewed an EPA official and reviewed  documentation on compliance data for the Clean Water Act. We  determined that although the data are incomplete, they were useful to  provide a rough indication of whether selected water utilities had any Safe  Drinking Water Act or Clean Water Act compliance violations over the  past 10 years (between 2007 and 2016).", "To describe the approaches that selected water utilities have used to  manage their workforce needs and the challenges they have faced in  managing those needs over the past 5 years (from 2012 through 2016),  we spoke with utility officials, during the interviews described above, to  learn about their hiring and retirement numbers, challenges in managing  workforce needs, and approaches for hiring staff. The information from  those interviews is not generalizable to the national population of water  utilities; it was intended to provide illustrative examples of any difficulties  water utilities were experiencing in complying with the Safe Drinking  Water Act and the Clean Water Act that they attributed to workforce  challenges.", "To describe how key federal programs can assist water utilities with their  workforce needs, we conducted background research and initial  interviews with federal officials. We identified five federal agencies that  conduct activities or provide funding related to the water utility workforce:  EPA, USDA, Education, DOL, and VA. We interviewed officials with these  agencies about current or past federal programs and policies related to  water utilities\u2019 workforce needs. We did not attempt to identify all  programs that can provide assistance to water utilities for workforce  planning or recruitment, but we determined based on interviews at the  five federal agencies that we had identified the programs for which these  activities were a primary purpose or likely use. Additionally, we  interviewed representatives from the selected utilities we contacted to  determine whether and how they had used various federal programs or  assistance to augment other planning and recruitment strategies and  what problems, if any, they had in using the programs. The information  from those interviews is not generalizable to the national population of  water utilities but provides illustrative examples of how, if at all, water  utilities are using federal programs to help with workforce planning and  recruitment.", "We conducted this performance audit from September 2016 to January  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: List of Federally Registered Apprenticeships at Drinking Water and Wastewater Utilities", "paragraphs": ["Table 3 provides a list of apprenticeships in the water industry that are  registered with the Department of Labor\u2019s (DOL) Office of Apprenticeship.  As of September 7, 2017, DOL reported that 24 utilities across the  country were training new employees through registered apprenticeships  that combined structured learning with on-the-job training with an  assigned mentor."], "subsections": []}, {"section_title": "Appendix III: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Susan Iott (Assistant Director),  Betty Ward-Zukerman (Assistant Director), Darnita Akers, Mark Braza,  Caitlin Cusati, Alex Galuten, Tom Gilbert, Gina Hoover, Rich Johnson,  Cynthia Norris, Rhiannon Patterson, Sarah Sullivan, and Paul Wright  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Water utilities need qualified employees to safely maintain the nation's drinking water and wastewater facilities, and some utilities are having difficulty hiring certified operators\u2014key to running the plants\u2014as well as other skilled workers. Utilities also face an upcoming wave of retiring baby boomers. Federal agencies offer utilities help addressing hiring needs.", "EPA provides guidance for state regulators and plant managers to use in evaluating utility operations. It obtains information on the current workforce, but we recommended that EPA add strategic workforce planning questions to its evaluations that would help identify future needs."]}
{"id": "GAO-19-200", "url": "https://www.gao.gov/products/GAO-19-200", "title": "Employment and Training Programs: Department of Labor Should Assess Efforts to Coordinate Services Across Programs", "published_date": "2019-03-28T00:00:00", "released_date": "2019-03-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federally funded employment and training (E&T) programs help job seekers enhance their job skills, identify job opportunities, and obtain employment. In 2011, GAO identified overlap and fragmentation among E&T programs administered by nine federal agencies. The Workforce Innovation and Opportunity Act (WIOA) was enacted in 2014, in part, to improve coordination and integration among these programs.", "This report examines (1) how the number of and obligations for federal E&T programs have changed since GAO's 2011 review, (2) the extent to which E&T programs continue to provide similar services to similar populations and examples of potential effects, and (3) the extent to which agencies have taken actions to address previously identified fragmentation and overlap among E&T programs and what agencies have learned about the results. To address these objectives, GAO surveyed E&T program administrators, reviewed relevant reports and studies, and interviewed federal agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The number of federal employment and training (E&T) programs and program obligations have declined since GAO's 2011 report. In that review, GAO identified 47 E&T programs and found that 44 had overlap with at least one other program in that they provided similar services to a similar population. In fiscal year 2017, the most recent year data are available, GAO identified 43 E&T programs, or 4 fewer than in 2011 (see figure). From fiscal year 2009 to 2017, federal agencies' annual obligations for E&T programs decreased from about $20 billion to $14 billion. GAO analysis of survey data found the decrease in obligations was largely due to the expiration of funding from the American Recovery and Reinvestment Act of 2009, which had provided additional funding for selected E&T programs during and after the Great Recession.", "Survey results from federal administrators of the 43 E&T programs show that the programs continue to span nine agencies and generally overlap by providing similar services, such as employment counseling and assessment services (39 of 43) and job readiness training (38 of 43). Further, programs targeting a specific population, such as Native Americans, veterans, or youth, also provided similar services. In some cases, such overlap may be appropriate or beneficial, but it may also suggest opportunities for greater efficiency.", "Almost all (38 of 43) E&T programs reported at least one action to manage fragmentation or overlap, such as co-locating services and sharing information. However, the agencies were not able to consistently provide information on the results of these actions and few evaluations encompassed multiple programs. Among studies GAO identified, six examined more than one E&T program, but only one assessed how any coordinated activities benefited the population served. None of the six studies focused on Native Americans, youth, or refugees. The Workforce Innovation and Opportunity Act (WIOA) encourages agencies to conduct evaluations, and specifically requires the Department of Labor (DOL) to publish a 5-year plan describing certain E&T priorities, consistent with the purpose of aligning and coordinating certain programs. While DOL reported it took some steps, it continues to lack a strategic plan for E&T evaluations over a multi-year period. As a result, DOL does not know whether actions to manage overlap are successful."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOL, in consultation with other federal agencies, develop and publish a multi-year strategic plan for its evaluations of employment and training that includes assessing the completeness and results of efforts to coordinate among E&T programs. DOL agreed with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federally funded employment and training (E&T) programs help job  seekers enhance their job skills, identify job opportunities, and obtain  employment. Since the 1990s, GAO has periodically reported on the  number of and funding for programs that are specifically designed to  provide E&T services and has identified areas of fragmentation and  overlap among them. The most recent report, issued in January 2011,  identified 47 programs administered by nine federal agencies. We found  then that these agencies obligated about $20 billion on E&T activities in  fiscal year 2009, adjusting for inflation, and reported serving more than  24 million individuals.", "Since our 2011 review, the unemployment rate in the country has  improved and statutory changes have been made to improve the  structure of the workforce development system and coordination among  workforce development programs. For example, the Workforce Innovation  and Opportunity Act (WIOA) was enacted, which sought in part to  improve the quality and accessibility of services that job seekers and  employers receive at their local American Jobs Center, which are  intended as a \u201cone-stop\u201d location for receipt of employment services. In  addition, WIOA directed federal agencies to take certain actions to better  align and integrate service delivery across multiple E&T programs.", "Given these recent changes, you asked us to update the status of  fragmentation and overlap among federal E&T programs. This report  examines (1) how the number of and obligations for federal employment  and training programs have changed since our 2011 report, (2) the extent  to which employment and training programs continue to provide similar  services to similar populations, and examples of potential effects, and (3)  the extent to which agencies have taken actions to address previously  identified fragmentation and overlap among the programs and what  agencies have learned about the results.", "To address all of our objectives, we identified programs specifically  designed to provide E&T services based on the definition used in our  2011 review. This generally consists of programs for which objectives  cited in the Catalog of Federal Domestic Assistance (CFDA) included: enhancing the specific job skills of individuals in order to increase their  identifying job opportunities, and/or helping job seekers obtain employment.", "To address all three research objectives, we administered a survey to  program officials that included questions to verify information listed in the  CFDA on program objectives, eligibility, and beneficiary requirements. To  answer our first research objective, we included questions about  budgetary information and participants served. To answer our second  research objective, we asked questions about services provided by each  program. To answer our third research objective, we also included  questions about agencies\u2019 actions to manage previously identified overlap  and fragmentation. We reviewed survey responses for completeness and  apparent inconsistencies and clarified information with agency officials, as  needed. However, we did not review agencies\u2019 financial reporting  systems or audit the figures provided to us. To address limitations this  may have created, we asked agencies to identify the data source of  reported budgetary information and to list any data limitations. We did not  conduct a legal analysis to confirm the various characterizations of the  programs in this report, such as services provided, target population,  eligibility criteria, or program goals. Instead, such program information in  this report is generally based on our survey results as confirmed by  agency officials.", "To address the first objective, we compiled a list of E&T programs by  starting with the 47 programs administered by nine federal agencies that  were identified in our 2011 review. We updated that list by (1)  interviewing federal agency officials; (2) searching program objectives in  the CFDA to confirm that programs previously identified still met our  criteria for inclusion and to identify any additional programs that met our  criteria; and (3) reviewing other GAO reports published since 2011 that  provided a more in-depth review of specific types of E&T programs. In  any such analysis, the number of programs identified is likely to vary with  the definition used, and applying any definition can require subjective  judgment.", "To address our second objective, to identify areas of overlap among E&T  programs, we reviewed beneficiary eligibility requirements listed in the  CFDA and confirmed by agencies to categorize programs by targeted  population served, and compared the categories of services the programs  reported providing in our survey. We had not identified duplication in prior  reports on E&T programs; we asked in our survey about programs\u2019 efforts  to detect and prevent it.", "To address our second and third objectives, we also reviewed GAO  reports and agency-funded studies published since 2011. We used these  sources, in part, to illustrate effects of overlap and fragmentation among  E&T programs and provide examples of actions agencies have taken to  address our prior findings or recommendations. In addition, to address  the third objective, we analyzed survey results regarding agencies\u2019 efforts  to address previously identified overlap and fragmentation and to detect  and prevent duplication. For selected efforts, we contacted agency and  program officials regarding their knowledge of the results. We also  reviewed the impact or effectiveness studies agencies performed on the  programs identified for our review. For more details on our scope and  methodology, see appendix I.", "We conducted this performance audit from September 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Program Fragmentation, Overlap, and Duplication", "paragraphs": ["Over the years, we have issued several reports on fragmentation,  overlap, and potential for duplication among federally funded employment  and training (E&T) programs and identified areas where inefficiencies  might result. This report, like our prior work, uses the following definitions:", "Fragmentation refers to circumstances in which more than one  federal agency (or more than one organization within an agency) is  involved in the same broad area of national need and opportunities  exist to improve service delivery.", "Overlap occurs when multiple agencies or programs have similar  goals, engage in similar activities or strategies to achieve their goals,  or target similar beneficiaries.", "Duplication occurs when two or more agencies or programs are  engaged in the same activities or provide the same services to the  same beneficiaries.", "During the 1990s, we issued a series of reports that documented program  overlap among federally funded E&T programs and identified areas  where inefficiencies might result. For example, we found that program  overlap might hinder people from seeking assistance and frustrate  employers and program administrators. In 2000 and 2003, we identified  federally funded E&T programs for which a key program goal was  providing E&T assistance. In our most recent report in 2011, we  identified 47 E&T programs and found that 44 of them overlapped with at  least one other program in that they provided similar services to a similar  population. We also found that due to the American Recovery and  Reinvestment Act of 2009 (Recovery Act), both the number of\u2014and  funding for\u2014federal E&T programs had increased since our 2003 report,  but little was known about the effectiveness of most programs because  only five programs had conducted impact evaluations.", "Our guide on identifying and reducing fragmentation, overlap, and  duplication notes that determining whether fragmentation and overlap  exist among programs is a key step in identifying opportunities to improve  efficiency and effectiveness of programs. In some cases, it may be  appropriate or beneficial for multiple agencies and programs to be  involved in the same programmatic or policy area due to the complex  nature or magnitude of the federal effort. However, our guide states that it  is also important to use the results of existing or new evaluations of  identified programs to assess options to reduce or better manage  negative effects of fragmentation, overlap, and duplication, such as  inefficient use of program funds."], "subsections": []}, {"section_title": "Key Changes Since Our 2011 Review of Employment and Training Programs", "paragraphs": [], "subsections": [{"section_title": "Workforce Innovation and Opportunity Act (WIOA)", "paragraphs": ["Enacted in July 2014, WIOA repealed and replaced the Workforce  Investment Act of 1998 (WIA). WIOA placed greater emphasis on  aligning and integrating workforce programs, which are administered  primarily by the Departments of Labor (DOL) and Education (Education),  with support from the Department of Health and Human Services (HHS)  and other agencies. For example, under WIOA, DOL and Education  review and approve 4-year strategic plans for states\u2019 workforce  development systems. WIOA also requires certain programs and  encourages other programs to be available through centralized service  delivery points referred to as American Job Centers. In addition, WIOA  requires that DOL and Education collaborate to implement a common  performance accountability system for six core programs, which presents  agencies with an opportunity to align definitions, streamline performance  indicators, and integrate reporting across these programs."], "subsections": []}, {"section_title": "Economic Conditions", "paragraphs": ["Since our 2011 inventory of federal E&T programs, which focused on  fiscal year 2009, both the Great Recession and one-time funding made  available under the Recovery Act have ended. Recovery Act funds were  provided to help preserve and create jobs and promote economic  recovery, among other purposes.", "With the end of the recession, the unemployment rate has substantially  declined. The rate increased from 4.6 in 2007 to a peak of 9.6 in 2010  before declining to 4.4 in 2017 (see fig.1)."], "subsections": []}]}, {"section_title": "Evaluation Plans", "paragraphs": ["WIOA encourages DOL, Education, HHS, and other relevant federal  agencies to conduct program research and evaluation. For example,  WIOA requires DOL to publish a plan every 2 years that describes the  research, studies, and multistate project priorities of DOL concerning  employment and training for the following 5-year period. This includes a  provision that the plan be consistent with certain purposes, including the  purpose of aligning and coordinating core programs with other partner  programs provided through American Job Centers.", "In addition to WIOA requirements, we have also previously reported that  each federal agency should require its major program components to  prepare annual and multiyear evaluation plans and to update these plans  annually. The planning should take into account the need for evaluation  results to inform program budgeting, reauthorization, agency strategic  plans, program management, and responses to critical issues concerning  program effectiveness. These plans should include an appropriate mix of  short- and long-term studies to produce results for short- or long-term  policy or management decisions. To the extent practical, the plans should  be developed in consultation with program stakeholders. Furthermore,  leading organizations, including the American Evaluation Association and  the National Academy of Sciences, emphasize the need for research  programs to establish specific policies and procedures to guide research  activities. In addition to planning for formal evaluation, Standards for  Internal Control in the Federal Government emphasize the importance of  managers routinely assessing the results of their actions, for which  evaluation is a potential tool."], "subsections": []}]}, {"section_title": "Since 2011, Employment and Training Services Are Delivered through Fewer Federal Programs and with Reduced Obligations", "paragraphs": [], "subsections": [{"section_title": "Number of Employment and Training Programs Declined, Due in Part to Eliminations", "paragraphs": ["The number of federal E&T programs has decreased since our last report  on them in 2011. For fiscal year 2017, we identified 43 programs, four  fewer than we reported in 2011. The number decreased because more  programs were eliminated or defunded (6) than added (2). For example,  in 2014, the Workforce Innovation and Opportunity Act (WIOA) eliminated  at least four of our identified E&T programs. This included 1) DOL\u2019s  Veterans\u2019 Workforce Investment Program, 2) Education\u2019s Grants to  States for Workplace and Community Transition Training for Incarcerated  Individuals, 3) Education\u2019s Migrant and Seasonal Farmworkers Program,  and 4) Education\u2019s Projects with Industry program. In addition, Congress  did not appropriate funds for Education\u2019s Tech Prep Education State  Grants in fiscal year 2011 and DOL\u2019s Community Based Job Training  Grants programs in fiscal year 2010, according to agencies\u2019 budget  documents.", "We also identified two additional E&T programs through interviews with  agency officials and a related GAO report: 1) Department of Veterans  Affairs\u2019 (VA) Compensated Work Therapy, and 2) Department of  Defense\u2019s (DOD) Job Training, Employment Skills Training,  Apprenticeships, and Internships.", "For changes in the program list from our 2011 review to our current  review, see appendix II.", "The 43 programs we identified in fiscal year 2017 are fragmented across  nine federal agencies, as programs were in 2011 (see fig. 2)."], "subsections": []}, {"section_title": "Federal Obligations for Employment and Training Programs Decreased, Due in Part to the End of Recovery Act Funding", "paragraphs": ["Our survey results showed that the federal government obligated nearly  $14 billion to the E&T components of its programs in fiscal year 2017, a  decrease of about $5.4 billion or 30 percent, adjusting for inflation, from  the amount in our 2011 review (which reported fiscal year 2009  obligations). According to our analysis of survey data, much of the  decrease in E&T obligations can be explained by the expiration of  Recovery Act funding. For example, two-thirds of the Recovery Act  funding designated for E&T programs went to four DOL programs that  received a combined $3.8 billion in Recovery Act appropriations. From  fiscal year 2009 to fiscal year 2017, the combined E&T obligations for  these four programs decreased by $4.7 billion, or 58 percent.", "Of the 31 E&T programs that reported E&T obligations in our survey,  eight programs were responsible for more than $11 billion, or 82 percent  of the total in fiscal year 2017. Their shares of 2017 E&T obligations  ranged from 5 percent for DOL\u2019s Wagner-Peyser Act Employment  Service to 21 percent for Education\u2019s State Vocational Rehabilitation  Services Program (see fig. 3). Among these eight programs responsible  for the vast majority of E&T obligations, all must be included in state plans  required under WIOA, except for DOL\u2019s Job Corps, VA\u2019s Vocational  Rehabilitation and Employment, and HHS\u2019 Temporary Assistance for  Needy Families (TANF). In addition, all but DOL\u2019s Job Corps and VA\u2019s  Vocational Rehabilitation and Employment are state-administered.", "For complete data on reported changes in E&T obligations between fiscal  years 2009 and 2017, for the 29 programs that provided estimates in both  years, see appendix III for numbers adjusted for inflation and appendix IV  for unadjusted numbers.", "The number of people served by E&T programs also declined, from 24  million to 11 million individuals in the most recent year for which data  were available, or a 56 percent decrease from the number reported in the  2011 report. Two of DOL\u2019s E&T programs\u2014the Wagner-Peyser Act  Employment Service and the WIOA Adult Program\u2014accounted for the  majority of this decrease, dropping by 8 million and 4 million, respectively.  Participation in certain programs, for example, Wagner-Peyser Act  Employment Service and WIOA Adult Program, changed markedly as the  economy improved, suggesting that enrollment is highly sensitive to  economic conditions. Since we last reviewed these programs in 2011, the  U.S. economy has improved and the unemployment rate dropped by 53  percent (see fig. 4).", "DOL officials said these factors could have reduced the demand for  certain E&T services. Unemployment is an important driver of demand for  some, but not all, E&T programs. For example, demand for certain  employment and training services, such as vocational rehabilitation, may  be relatively insensitive to economic conditions. In addition, technology  has the potential to change workforce needs in certain industries, leading  to workers who need retraining. In addition, DOL officials told us that  under WIOA a new definition of program participant, effective in 2016,  that primarily impacted the number of participants reported for Wagner- Peyser Act Employment Service, WIOA Adult Program, and WIOA  National Dislocated Worker Grants."], "subsections": []}]}, {"section_title": "Employment and Training Programs Administered by Various Agencies Generally Overlap, but Effects of Overlap May Vary", "paragraphs": ["The 43 E&T programs generally overlap in that they provide similar  services to similar populations, according to our survey analysis (see  table 1). In our survey, almost all of the 43 programs reported providing  employment counseling and assessment services as well as job search  or job placement activities (39), job readiness training (38), and job  referrals (37). The least commonly provided service selected from our  list of service categories\u2013high school completion or equivalency  assistance\u2013was provided by over half (26) of the programs.", "Through our survey, eight of the 43 programs reported serving the  general population (that is, a relatively broad target) and the remaining 35  reported serving a narrower target population, such as Native Americans  (8), veterans and transitioning servicemembers (7), or youth (5).,  Our survey analysis shows overlap in services exists among programs  serving the general population as well as among those serving each  specific target population. Specifically, a majority of programs targeting  the general population, Native Americans, and youth reported providing  many of the same services. For example, all of the five youth programs  reported providing similar E&T services, such as employment counseling  and assessment and job readiness training (see fig. 5). For more  information on services provided by programs serving selected target  populations, see appendix VI.", "Many of the E&T programs targeting specific populations are fragmented  across multiple agencies. For example, four agencies administer the eight  Native American E&T programs and three administer the seven programs  for veterans (see table 2).", "Other includes older workers, women, and unemployed and underemployed residents of solid and  hazardous waste-impacted neighborhoods.  According to VA officials, VA\u2019s Vocational Rehabilitation and Employment program serves individuals  with a service connected disability and VA\u2019s Compensated Work Therapy program serves individuals  enrolled in Veterans Health Care and does not require a service connected disability.", "Overlap among program services may have benefits, but it may also  suggest opportunities for coordination or efficiencies in service delivery.  Overlap may be beneficial in 1) helping program participants with specific  needs better access E&T services, 2) providing more tailored or intensive  support services, or 3) achieving higher quality outcomes for specific  populations than would be achievable from their use of a more broadly  targeted program. For example:", "A 2015 study funded by DOL on services provided to veterans  through the public workforce system in Texas found that veterans who  received intensive services from DOL\u2019s Disabled Veterans\u2019 Outreach  Program Specialist or Local Veterans\u2019 Employment Representative  staff subsequently had higher earnings than veterans who did not,  although these same veterans may have been eligible for similar  services provided by other programs to the general population.", "A 2017 study funded by the U.S. Department of Agriculture (USDA)  on its Supplemental Nutrition Assistance Program (SNAP) E&T\u2014 which helps participants who are eligible to receive nutrition  assistance from the federal government better access E&T services  \u2014found that program participants also received support services,  such as child care vouchers and transportation assistance.  Participants said these services were important to their participation in  the E&T program and helped those with specific needs better access  E&T services.", "However, when multiple programs overlap or are fragmented, there is  also a risk that program administrators may not make efficient use of  available resources if they do not coordinate their efforts. Without careful  coordination, programs may not fully leverage mutual benefits or  participants may find administrative requirements burdensome or  redundant. For example:", "A 2018 GAO report on USDA\u2019s SNAP E&T program found that 20  states\u2019 SNAP E&T programs did not partner with workforce agencies  to provide E&T services. States that do not fully leverage resources  available through the workforce development system may miss  opportunities to serve a greater number of SNAP E&T participants  and provide a wider variety of services. GAO recommended the  administrator of the Food and Nutrition Service take additional steps  to assist states in leveraging available workforce development system  resources.", "A 2017 study funded by DOL on American Job Centers found that  customers became frustrated filling out applications in what they  viewed as redundant paperwork requirements for multiple programs  with varying eligibility criteria."], "subsections": []}, {"section_title": "Almost All Agencies Reported Actions to Address Program Fragmentation and Overlap, but Effectiveness of these Actions Remains Uncertain", "paragraphs": [], "subsections": [{"section_title": "Employment and Training Program Officials Reported Taking Actions to Address Fragmentation and Overlap", "paragraphs": ["In response to our survey of agency officials for the 43 E&T programs,  almost all (38) reported taking at least one action to manage  fragmentation, overlap, and/or potential duplication. Common actions  included providing program guidance and technical assistance,  coordinating participant services (e.g., co-locating services or co-enrolling  participants), and effectively managing grants (see table 3).", "Our survey analysis showed that of 43 E&T programs, 31 across eight  agencies reported taking at least one action to manage fragmentation. In  addition, 38 programs across all nine agencies reported taking at least  one action to manage overlap. For example, to address fragmentation  and overlap, officials representing seven programs within DOL and  Education reported in our survey that they participated in interagency  workgroups to share information and to facilitate cross-agency  communication to coordinate services. Likewise, VA reported that the  agency and DOL updated their interagency technical assistance guide to  better align the agencies\u2019 veteran E&T programs. (See table 4.)", "Program officials reported that their actions were motivated by a variety of  factors, including their own assessments, legal requirements such as  those in WIOA, and audit recommendations. They attributed some of their  actions to their assessment of the potential for duplicative services, or to  promote streamlined administration. For example:  In 2014, DOL released updated guidance to administrators of its  Disabled Veterans\u2019 Outreach Program to encourage coordination with  its Wagner-Peyser Act Employment Service program to help ensure  that the two programs were not providing similar services to  veterans.", "Education reported that its data collection and reporting system  integrates data from the State Vocational Rehabilitation Services  Program and State Supported Employment Services Programs.  Likewise, Education reported that its monitoring and technical  assistance guide addresses both the State Vocational Rehabilitation  Services Program and the State Supported Employment Services  Program.", "In addition, DOL and other agencies reported taking actions that are  either required or encouraged by federal law in order to manage  fragmentation and overlap. For example:", "DOL officials reported that since WIOA was enacted in 2014, DOL,  Education, and HHS have jointly issued directives and guidance to  help states implement and administer WIOA, such as guidance on  developing their required state strategic plans. Also under WIOA, DOL  and Education have issued joint regulations and established common  data definitions and joint data collection instruments to align  performance reporting for WIOA six core programs.", "Agencies with E&T programs targeted toward Native Americans  reported that tribes\u2019 use of authorized plans to integrate employment,  training, and related services programs can help manage  fragmentation and overlap. The potential scope of such plans  (referred to as 477 plans), which had been originally authorized in  1992, was increased via legislation in 2017 to include programs with  more purposes. With an authorized plan in place, tribes can integrate  certain federal funds received by the tribe and coordinate  employment, training, and related services across multiple programs  that serve the tribe. In December 2018, 12 agencies signed a  memorandum of agreement intended to set forth the basic functions  and relationships of those agencies in the funding and oversight of  tribal 477 plans and to facilitate coordination and collaboration  between the agencies.", "Agencies have also taken actions to improve collaboration across multiple  E&T programs based on our recommendations or on internal audits. For  example:  In 2011, we recommended that the Secretaries of DOL and HHS work  together to develop and disseminate information that could facilitate  further progress by states and localities in increasing administrative  efficiencies in E&T programs, such as state initiatives to consolidate  program administrative structures and state and local efforts to co- locate E&T programs at one-stop centers. In response, DOL and  HHS took a number of steps, including issuing a January 2015 study  focused on identifying and documenting potentially promising  practices in coordinating Temporary Assistance for Needy Families  (TANF) and WIA services at the state and local levels.", "In 2012, we found that the interagency handbook used by DOL and  VA to coordinate E&T services for veterans did not include, for  example, incorporating labor market information into rehabilitation  plans. In 2015, as GAO recommended, these agencies revised the  interagency handbook by outlining how VA and DOL staff should  coordinate efforts to provide veterans with labor market information  when developing employment and training objectives and assist them  in selecting training and credentialing opportunities as a part of their  rehabilitation plans.", "In 2012, EPA\u2019s Office of Inspector General conducted an audit of its  Environmental Workforce Development and Job Training Cooperative  Agreements program which concluded that, absent internal controls,  the program was at risk for duplication with other E&T programs. To  mitigate that risk, the lead program administrator now provides other  federal agencies a list of program applicants to ensure that no  applicant is receiving funds for the same purposes outlined in the  Environmental Workforce Development and Job Training program  application.", "While most programs reported taking action to manage fragmentation or  overlap, officials from five programs reported in our survey that they had  taken no action. Officials from four of these programs reported that no  action was necessary because their program offered a unique service or  served a specialized population. While we did not further review the  need for coordination among these programs and others, they  nonetheless reported one or more services in common with others  serving the same population. In addition, while unique aspects may be  protective to some extent against the risk of duplication, unique features  may not necessarily reduce the risk of overlap or need for coordination.  For example, DOD officials stated that apart from its Job Training,  Employment Skills Training, Apprenticeships, and Internships program,  they were not aware of any other federal program that allows  servicemembers to participate in job training, including apprenticeships  and internships, beginning up to 6 months before their service obligation  is completed. DOL officials confirmed that its Transition Assistance Program does not offer job training to service members, but it does, like  the DOD program, offer pre-separation employment services and  counseling. VA also noted in its technical comments that  servicemembers who meet Vocational Rehabilitation and Employment  eligibility criteria may, with DOD permission, receive these job training  services as part of their rehabilitative program and that it partners with  DOD to train transitioning servicemembers as veterans\u2019 services  representatives. We did not further review the need for coordination  among these or other programs that reported no action, but absent a  more complete evaluation, it is not possible to assess whether these  programs have taken sufficient steps to address overlap. Regarding  duplication, 14 programs reported no action either to detect it or to  prevent it."], "subsections": []}, {"section_title": "Agencies Did Not Consistently Assess the Effectiveness of their Actions to Manage Overlap and Fragmentation", "paragraphs": ["Agencies administering E&T programs did not consistently have  information on results to know how well their actions to manage program  fragmentation and overlap were working. DOL officials told us that they  generally had not assessed the actions they reported in our survey to  manage overlap, fragmentation, and potential for duplication, but noted  that the agency has begun an implementation study of WIOA that will  include examining state and local efforts to increase program coordination  and collaboration. DOL expects the final report will be completed in fall  2019, and agency officials said it is coordinating with other agency  partners.", "Asked about efforts made by specific programs to manage overlap and  fragmentation, other agency officials said they had assessed results of  these efforts in some cases, but not others. For example, VA officials told  us that in 2016 they started tracking referrals between its Vocational  Rehabilitation and Employment Program and DOL\u2019s programs targeted to  veterans to help ensure participants were obtaining labor market  information from DOL programs. In contrast, in the case of integrating  multiple E&T programs targeted toward Native Americans, HHS officials  reported that the agency has not made specific efforts to assess the  effectiveness of plans first provided for in 1992 which might reduce  administrative burden by allowing tribes more flexibility to combine E&T  services funded by multiple federal agencies.", "GAO\u2019s guide on fragmentation and overlap states it is important to use  the results of existing or new evaluations of identified programs to assess  options to reduce or better manage negative effects of fragmentation,  overlap, and duplication, such as inefficient use of program funds. For  example, evaluation and other periodic reviews could help identify ways  to address (1) gaps in information on how multiple programs are serving  the employment and training needs of specific populations, such as  Native Americans, youth, and refugees, or (2) the extent to which they  have implemented practices to manage unwanted effects of  fragmentation and overlap and improve coordination and efficiency.", "Agencies reported completing additional impact studies since our 2011  review, but evaluations examining their programs\u2019 effects have generally  been confined to a single program and/or specific target populations. Four  of the nine agencies in our review reported that they had completed at  least 13 impact studies since 2011 of individual programs that measured  effectiveness in terms of outputs and outcomes. (See appendix VII for a  list of these studies.) DOL officials told us that programs tend to be  evaluated individually for their effectiveness in achieving individual goals  and objectives rather than for collective effects or performance. DOL  officials said that they perform some research covering multiple programs  in preparation for conducting program impact or effectiveness studies, but  that the related findings tend to be more descriptive in nature. They also  cited plans to use common measures developed under WIOA to look at  outcomes across the core programs.", "Some agencies have sponsored studies that focus on populations served  by multiple programs, including customer experience with receiving  services from multiple programs, and an early snapshot of the extent of  state-level coordination in implementing WIOA. Specific examples of  studies that reviewed issues related to implementing multiple programs  include:", "A 2015 Mathematica study funded by HHS of WIOA-funded programs  that included numerous efforts state level administrators could  undertake to improve coordination among the programs, including  exchanging more information on strategies and methods used by  each program to address obstacles that impede coordination.", "A 2015 Rand Corporation study funded by DOD that examined  employment support programs for reservists and recommended  assessing the costs and benefits of streamlining the current program  line-up to reduce any redundancies.", "A 2017 study by IMPAQ International funded by DOL that identified  areas where customer service in WIOA job centers could be  improved, such as streamlining enrollment and registration  procedures and providing more information about the full array of  services at the centers.", "However, of the six completed studies we identified that examined more  than one E&T program, only one study assessed how any coordinated or  integrated activities benefited the population served. We found no  similar studies conducted on the effects of multiple programs targeted  toward other populations, such as Native Americans, youth, or refugees.  VA officials told us that it is important that reviews of E&T programs for  specific population take into account the complex needs of that population  to understand when there is a need for involvement of multiple programs.  For example, officials said that special populations such as homeless  veterans require a breadth of unique services that may not available  through a single program or by programs serving the general population.  Further, as programs more commonly work together, learning about the  programs\u2019 collective impact may be as important as studying the  programs\u2019 individual results.", "DOL officials told us that DOL, HHS, and Education tend to independently  create their evaluation plans for employment and training services. After  WIOA was enacted, these agencies formed the WIOA Evaluation  Workgroup with the intent of establishing greater collaboration among federal agencies on E&T program evaluation. DOL E&T programs make  up over a third of all federal E&T programs, and some of these programs  under WIOA coordinate or align their services with programs  administered by other agencies. DOL officials told us WIOA Evaluation  Workgroup members interacted with staff from other agencies, such as  USDA, who administered E&T programs to encourage their participation.  The workgroup met for the first time in September 2017. After the initial  meeting, according to DOL officials, the agencies dissolved the group  because they concluded that the topic of WIOA-related evaluation could  be covered through existing periodic interagency meetings. However,  DOL officials told us that these efforts do not focus on evaluation across  programs. In addition, the DOL agency-wide evaluation plan for fiscal  year 2018\u2014issued in September 2018\u2014does not list evaluations focused  primarily on cross-program coordination or collaboration, nor does it  address potential overlap and fragmentation among its E&T services.", "Since 2013, DOL has not published a 5-year strategic research plan for  E&T programs. In our 2011 review of DOL\u2019s research and evaluation  program for its E&T programs, we recommended that DOL develop a  mechanism to enhance the transparency and accountability of its E&T  research by consulting other key federal agencies and involving advisory  bodies or other entities outside DOL. In 2010, the Employment and  Training Administration (ETA), the division with lead responsibility for  DOL\u2019s E&T programs, began a series of meetings with a panel of outside  experts to develop a 5-year research plan. This strategic research plan  set the research agenda for E&T programs by identifying and prioritizing  what research and evaluations would be initiated over the following 5  years. Before finalizing its research agenda, DOL obtained broad input  from federal officials at Education and HHS and a range of other key  stakeholders, such as officials in local and state government and  academics from the workforce community. In May 2013, DOL submitted  to Congress and posted on its website a 5-year strategic research plan  for its E&T programs which covered program years 2012 to 2017.", "In contrast to the broad consultation and public exposure that  characterized past strategic planning for E&T research, in recent years  DOL has instead relied on an internal process to set its research and  evaluation priorities for its E&T programs and publishes only an agency- wide evaluation plan that is shorter-term and developed for a different  purpose. Specifically, ETA develops an annual learning agenda that  officials indicated highlights its research priorities, ideas, and proposed  studies. Officials stated that the E&T learning agenda is provided for  consideration with other agency-wide agendas in developing an annual  evaluation plan for all of DOL. While DOL\u2019s annual evaluation plan and  the results of its evaluations are posted publicly through its website and  submitted to the relevant congressional committees, the learning  agendas, including those for E&T programs, are internal documents, and  DOL does not release them to the public.", "The DOL-wide evaluation plan that is published presents neither a  strategy for E&T evaluation nor plans for any evaluation to be initiated  more than a year in the future. The fiscal year 2018 DOL-wide evaluation  plan discusses only research to be initiated during the next year (fiscal  year 2019) and lists studies that remain in progress from previous years.  Rather than project longer-term research needs, the plan\u2019s main purpose,  according to DOL officials, is to comply with specific appropriations  language. DOL officials told us that the list of proposed studies in the  learning agendas may not ultimately appear in the annual evaluation plan because they are not near-term priorities for the agency-wide plan. DOL\u2019s  fiscal year 2018 agency-wide plan describes initiation of four studies\u2014two  on apprenticeship, one on strategies to prevent improper unemployment  insurance payments, and another on potential effects of application fees  for certain ETA programs.", "WIOA requires that DOL publish a plan every 2 years that describes \u201cthe  research, studies, and multistate project priorities of the Department of  Labor concerning employment and training for the 5-year period following  the submission of the plan.\u201d DOL officials told us that it is complying with  this requirement by providing ETA\u2019s annual learning agendas to be  included in DOL\u2019s overall evaluation plan. However, the resulting agency- wide plan falls short of meeting best practices for robust strategic  planning. As we have previously reported, these practices include:", "Preparing annual and multiyear evaluation plans and updating these  plans annually to take into account the need for evaluation results to  inform program budgeting, reauthorization, agency strategic plans,  program management, and responses to critical issues concerning  program effectiveness.", "Including an appropriate mix of short- and long-term studies to  produce results for short- or long-term policy or management  decisions.", "Developing plans in consultation with program stakeholders to help  agencies ensure that their efforts and resources are targeted at the  highest priorities and to create a basic understanding among the  stakeholders of the competing demands that confront most  agencies.", "A 2010 internal DOL memo stated that such a plan can guide the  development of research and evaluation projects and be a valuable tool  for the broader workforce research community. Furthermore, leading  organizations, including the American Evaluation Association and the  National Academy of Sciences, emphasize the need for research  programs to establish specific policies and procedures to guide research  activities. For example, a 2016 American Evaluation Association guide  stated that having annual and multi-year evaluation plans is useful in  guiding program decision-making in such areas as program management  and budgeting, and responding to issues concerning program  effectiveness. Finally, Standards for Internal Control in the Federal  Government state more broadly that program managers may need to  conduct periodic assessments to evaluate the effectiveness of their  actions. These may include but are not limited to formal evaluations.  However, without a long-term evaluation plan developed in consultation  with key stakeholders, DOL may not learn whether its actions to improve  E&T program coordination and integration are working, and thus may  continue undertaking activities that are not leading to desired results."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["With the enactment of WIOA in 2014, steps were taken toward aligning  employment and training programs and ensuring greater cross-agency  coordination. Since then, agencies and programs have reported taking a  range of actions to increase coordination among E&T programs and  manage fragmentation and overlap. However, without knowing whether  these actions are working to improve program coordination and  integration, agencies may persist in activities that are ineffective, fail to  expand those that work, or ignore unintended consequences. Further, the  lack of evaluation focused on program coordination has resulted in a void  of information on programs\u2019 collective impact. Without strategically  planning the use of evaluation resources, DOL and other agencies will not  learn efficiently about whether their efforts to coordinate the programs  have been successful and what impact the newly coordinated programs  are having, collectively, on their shared objectives."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to DOL:  The Secretary of DOL should develop and publish a multi-year strategic  research plan for evaluation of its employment and training programs that  includes assessing the completeness and results of efforts to coordinate  among E&T programs to address overlap and fragmentation. In  developing this plan, DOL should also consult with other federal agencies  and key stakeholders on ways to address gaps in information on how  multiple programs are serving the employment and training needs of  specific populations, such as Native Americans, youth, and refugees.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to the  Departments of Agriculture, Defense, Education, Health and Human  Services, Interior, Justice, Labor, and Veterans Affairs, and to the  Environmental Protection Agency.", "We received formal written comments from DOL and VA that are  reproduced in appendix VIII and IX. In addition, DOL, Education, HHS,  Interior, USDA and VA provided technical comments which we  incorporated into the report as appropriate. EPA, DOD, and DOJ did not  have any comments.", "DOL agreed with our recommendation that it develop and publish a multi- year strategic research plan for evaluation of its E&T programs consistent  with the purpose of aligning and coordinating these programs. DOL stated  that it actively plans and makes public the research and evaluation topics  for these evaluations, but it did not identify a timeline or measures it  would take to augment these basic steps.", "We recommended that DOL consult with other federal agencies and key  stakeholders in developing a strategic research plan that assesses the  completeness and results of efforts to coordinate among E&T programs  to address overlap and fragmentation. Consultation should include ways  to address gaps in information on how multiple programs are serving the  employment and training needs of specific populations, such as Native  Americans, youth, and refugees. DOL stated that it will consult with  stakeholders regarding the employment and training needs of specific  populations. VA commented that such reviews of E&T programs for  specific populations should take into account the complex needs of the  population being served and the breadth of needed services.  We agree  that any such reviews should address how the collection of programs is  serving each population\u2019s needs.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff that made key contributions to this  report are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This appendix discusses our scope and methodology for our three  research objectives examining (1) how participation in and obligations for  federal employment and training programs have changed since our 2011  report, (2) the extent to which employment and training programs  continue to provide similar services to similar populations, and examples  of potential effects, and (3) the extent to which agencies have taken  actions to address previously identified fragmentation and overlap among  the programs and lessons learned.", "The sections below discuss the methods we used to address each of the  three objectives. In addition to these methods, we reviewed relevant  federal guidance and other program documents; and interviewed federal  agency officials at headquarters offices. The focus of this review was how  employment and training services are coordinated among programs  specifically designed to deliver such services. As such, our scope  excluded some programs that offer or finance employment and training  services, but for which this is not a program objective (for example,  student loan programs, which focus primarily on enhancing access to  postsecondary education). Similarly, we focused on programs that deliver  direct service rather than tax expenditures, which may finance or  incentivize similar services through tax benefits."], "subsections": [{"section_title": "Program Selection", "paragraphs": ["To address all of our objectives, we compiled a list of employment and  training programs by starting with the 47 programs administered by nine  federal agencies that were identified in our prior work. We updated the  original list by asking federal agency officials to provide the current status  of previously identified programs and identify any new ones that might  meet our criteria. As in our 2011 review, we included programs for which  objectives cited in the Catalog of Federal Domestic Assistance (CFDA)  covered: enhancing the specific job skills of individuals in order to increase their  identifying job opportunities, and/or helping job seekers obtain employment.", "We also searched the CFDA electronically in February 2018 to identify  any additional programs that met our inclusion criteria. To conduct an  electronic text search of the CFDA database, we used 12 search terms  used in GAO-11-92. These included:  We excluded any programs that met one or more of the following criteria:", "Program objectives do not explicitly include helping job seekers  enhance their job skills, find job opportunities, or obtain employment.", "Program does not provide employment and training services itself  (e.g., it provides financial support to other employment and training  programs, or subsidizes the cost of employment through tax credits).", "Program is small or is a component of a larger employment and  training program, such as a pilot or demonstration program.", "Programs that are economic development programs that aim to  increase job opportunities but do not provide services to individuals to  enhance their job skills, identify job opportunities, or find employment.", "Programs that aim to achieve broad workforce-related goals, such as  increasing educational opportunities for minority individuals in  particular fields or improving the status of and working conditions for  wage-earning women, but do not provide employment or training  services themselves.", "Education programs that fund student loans for educational expenses,  initiatives for student recruitment and retention, or other student  support services.", "Programs that support training for training providers, such as  vocational rehabilitation specialists, or other programs that support  job-specific training for individuals who are already employed.", "Two analysts independently reviewed the list of 211 programs identified in  the list generated from the 2018 CFDA search against the inclusion and  exclusion criteria described above. To reach concurrence on the  programs list, the analysts compared their lists and reached agreement  on which to include. If the analysts were undecided about including a  program, another analyst was consulted.", "We also reviewed other GAO reports published since 2011 that provided  a more in-depth review of employment and training programs to identify  any additional programs that met our three inclusion criteria. As a result  of that process, we identified three programs that met our criteria and  added them to our list. It is important to note that the number of programs  identified will vary with the definition used, and applying any definition can  require subjective judgment.", "After evaluating all identified potential programs, we determined that 46  employment and training (E&T) programs met all criteria to be included in  our audit. Once our determinations were made, we sent emails to agency  liaisons asking them to confirm the list of programs to be included in and  excluded from our review, and to provide the names and contact  information for the officials who would be responsible for completing our  planned survey. Agencies confirmed our final inclusion and exclusion  decisions. After administering our survey, we excluded DOD\u2019s Troops to  Teachers Program because the program generally focused on teacher  quality rather than E&T services. We also excluded DOD\u2019s Hiring Heroes  Program because DOD officials told us the program does not receive a  specific appropriation and is a small program that is part of DOD\u2019s larger  effort to encourage the employment of servicemembers and veterans.  After we administered our survey, DOL officials clarified that the Women  in Apprenticeship and Nontraditional Occupations (WANTO) program was  not a sub-program under the Registered Apprenticeship Program, but  rather a discrete program. We sent a survey to WANTO program officials.  At the end of this process, we confirmed that 43 programs met our  definition and should be included in our review. We generally maintained  consistency with decisions made in our 2011 review."], "subsections": []}, {"section_title": "Survey", "paragraphs": ["To address all of our objectives, we administered a survey to program  officials that included questions about services provided, budgetary  information, and participants served. In addition, we included questions  asking agency officials to confirm or correct program objectives and  eligibility and beneficiary requirements listed in the CFDA. We also  included questions about agencies\u2019 actions to manage overlap and  fragmentation. We conducted two pretests with VA to ensure (1) our  questions were clear and unambiguous, (2) terminology was used  correctly, (3) the survey did not place an undue burden on agency  officials, (4) the information could feasibly be obtained, and (5) the survey  was comprehensive and unbiased.", "To assess the reliability of the data provided by agencies, we asked  officials to identify the databases and information sources they used to  respond to our survey questions and any limitations of the data they  provided. We then discussed with agency officials any identified data  limitations and, if unresolved issues remained, annotated the data, as  appropriate. We also identified responses that appeared to be  inconsistent or outliers, such as instances in which participants increased  as funds declined, and submitted them to agencies for verification.", "From April to August 2018, we emailed the surveys to agency officials as  an attached Microsoft Excel form that they could return electronically. All  of the 45 surveys were completed and returned.", "Because this was not a sample survey, it has no sampling errors.  However, the practical difficulties of conducting any survey may introduce  errors, commonly referred to as nonsampling errors. For example,  difficulties in interpreting a particular question, sources of information  available to respondents, or entering data into a database or analyzing  them can introduce unwanted variability into the survey results. We took  steps in developing the surveys, collecting the data, and analyzing them  to minimize such nonsampling error. For example, to minimize difficulties  interpreting a particular survey question, we incorporated the suggestions  from an independent reviewer to add explicit instructions for how to use  the pull-down menus and consistently phrased requests for information.", "We reviewed the completed surveys and clarified information with agency  officials, as needed. We further reviewed the survey to ensure the  ordering of survey sections was appropriate and that the questions within  each section were clearly stated and easy to comprehend. To reduce  nonresponse, another source of nonsampling error, we sent out email  reminder messages to encourage officials to complete the survey. In  reviewing the survey data, we performed automated checks to identify  inappropriate answers. We further reviewed the data for missing or  ambiguous responses and followed up with agency officials when  necessary to clarify their responses. On the basis of our application of  recognized survey design practices and follow-up procedures, we  determined that the data were of sufficient quality for our purposes.", "In terms of agency actions to manage overlap and fragmentation and to  detect/prevent duplication, we followed up with select agencies to better  understand what prompted the actions they took and the lessons they  learned from evaluating those efforts.", "We did not conduct a legal analysis to confirm the various  characterizations of the programs in this report, such as information on  their budgetary obligations, services provided, target population, eligibility  criteria, or program goals. Instead, all such program information in this  report is based on our survey results, as confirmed by agency officials.  Further, we did not review agencies\u2019 financial reporting systems or audit  the figures provided to us. We reviewed fiscal year 2019 budget  documents to determine if they could be used to verify data provided by  the agencies, but they did not consistently contain the program-level  details needed. Instead, to help mitigate reliability limitations that might  have accompanied agency reports, we asked agencies to identify the  data source of reported budgetary information and to list any data  limitations."], "subsections": []}, {"section_title": "Overlap", "paragraphs": ["To address our second objective to identify areas of overlap among E&T  programs, we reviewed information reported by federal agency officials in  our survey. We used the definition of overlap established in GAO\u2019s prior  work: overlap occurs when two or more programs provide at least one  similar service to a similar population. After reviewing survey responses  regarding the primary population groups served by the 43 programs and  the services they provided, we categorized programs according to the  primary population group served and identified programs within each  category that provided similar services. We did not focus on the effects of  potential duplication, which occurs when two or more agencies or  programs are engaged in the same activities or provide the same  services to the same beneficiaries. GAO has not previously identified  duplication in federal E&T programs, and our objectives in this  engagement focused on overlap and fragmentation previously identified  in these programs.", "We categorized programs based on the type of program participant  served according to program objectives and program eligibility criteria  listed in the CFDA. Then, we verified these categorizations with agency  officials. In categorizing programs by target population, we used the  following categories: 1) general population, 2) dislocated workers or  trade-impacted workers, 3) migrant and seasonal farm workers, 4) Native  Americans (in this report, the term Native Americans refers to American  Indians and Native Hawaiians), 5) people with physical or mental  disabilities, 6) prisoners or ex-offenders, 7) refugees, 8) veterans or  transitioning servicemembers, 9) youth, and 10) older workers, women,  and unemployed and underemployed residents of solid and hazardous  waste-impacted neighborhoods (collectively, other). We also categorized  the VA\u2019s Vocational Rehabilitation and Employment program with other  programs that target veterans, but noted that the program serves  veterans with a service-connected disability."], "subsections": []}, {"section_title": "Review of Prior GAO Reports and Agency Funded Research", "paragraphs": ["To address our second and third objectives, we also reviewed GAO  reports and agency funded research published since 2011. We used  these sources, in part, to illustrate effects of overlap and fragmentation  among E&T programs and provide examples of actions agencies have  taken to address our prior findings or recommendations. To address our  second research objective, we reviewed this literature to identify  examples of documented effects of overlap and fragmentation among  these programs, including positive effects (e.g., to fill a gap or  complement an existing program) and negative effects (e.g., inefficient  use of resources or confusion among individuals). To address our third  research objective, we conducted a literature search of agency- sponsored research on E&T programs and ultimately determined that six  of these studies were sufficiently rigorous and appropriately scoped to  include in our review. To identify studies on coordination and  collaboration of federally-funded programs, we conducted a literature  search through ProQuest. Our initial search terms included \u201cfederal  employment and training\u201d and \u201ccoordination\u201d or \u201ccollaboration,\u201d \u201coverlap,\u201d  and \u201cfragmentation\u201d. We also reviewed these studies to assess the extent  to which agencies had evaluated actions to manage overlap and  fragmentation.", "In addition, our survey asked program officials about whether an impact  study had been completed since 2011 to evaluate program performance  with regard to E&T activities and, if so, to provide a citation for at least  one of these studies. An impact study assesses the net effect of a  program by comparing program outcomes with an estimate of what would  have happened in the absence of the program. This type of study is  conducted when external factors are known to influence the program  outcomes, in order to isolate the program\u2019s contribution to the  achievement of its objectives. Program officials provided 16 citations of  what they believed to be impact studies. Of the 16 cited studies, we  determined that 13 can accurately be described as impact studies. To  make this assessment, we reviewed the methodology section of each  study.", "We conducted this performance audit from September 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Update on the List of Federal Employment and Training Programs since GAO 2011 Review", "paragraphs": ["The following table is a list of federal employment and training programs  using as a baseline programs identified in our most recent prior report  (GAO, Multiple Employment and Training Programs: Providing  Information on Colocating Services and Consolidating Administrative  Structures Could Promote Efficiencies, GAO-11-92 (Washington, D.C.:  Jan. 13, 2011)). We also reviewed the Catalog of Federal Domestic  Assistance (CFDA) to ensure that programs met our selection criteria and  to identify new programs. We did not conduct an independent legal  analysis to verify the information provided about the programs described  in this appendix, such as information on their status. For a description of  our methodology, see appendix I."], "subsections": []}, {"section_title": "Appendix III: Change in Federal Employment and Training Program Obligations, Adjusted for Inflation in 2017 Dollars", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Change in Federal Employment and Training Obligations in Nominal Values", "paragraphs": ["Appendix IV: Change in Federal Employment  and Training Obligations in Nominal Values *Program name from 2011 review was updated based on information confirmed by agency officials."], "subsections": []}, {"section_title": "Appendix V: Estimated Number of Program Participants Who Received Federal Employment and Training Services", "paragraphs": ["Appendix V: Estimated Number of Program  Participants Who Received Federal  Employment and Training Services *Program name from 2011 review was updated based on information confirmed by agency officials."], "subsections": []}, {"section_title": "Appendix VI: Employment and Training Services Provided by Federal Programs Serving Selected Target Populations", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Agency-Funded Studies Examining Employment and Training Programs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Betty Ward-Zukerman (Assistant  Director), Sheranda Campbell (Analyst-in-Charge), Camille Henley, Joel  Marus, David Perkins, and Jill Yost made key contributions to this report.  Also contributing to this report were Amy Anderson, Stephen Betsock,  Caitlin Croake, Alex Galuten, Kristen Jones, Benjamin Licht, Mimi  Nguyen, James Bennett, David Blanding, Elizabeth Mixon, Steven  Putansu, Monica Savoy, Paul Schearf, Ardith Spence, Almeta Spencer,  Kathleen van Gelder, and John Yee."], "subsections": []}]}], "fastfact": ["Federal agencies administer employment and training programs to help job seekers find and get work. While we identified 47 such programs in 2011, there are 43 now. Spending for these programs has decreased as well.", "Multiple programs provide similar services, often to similar groups of people. While agencies have tried to manage this overlap by trying to coordinate their programs, they generally don't know whether their efforts are working.", "We recommended that the Department of Labor develop a strategic plan for evaluating these programs that includes assessing what federal agencies are doing to coordinate them."]}
{"id": "GAO-18-19", "url": "https://www.gao.gov/products/GAO-18-19", "title": "Workplace Retirement Accounts: Better Guidance and Information Could Help Plan Participants at Home and Abroad Manage Their Retirement Savings", "published_date": "2018-01-31T00:00:00", "released_date": "2018-03-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Saving for retirement can be difficult. However, when participants lose their workplace retirement accounts when they change employers or participate in a workplace retirement plan abroad they can encounter additional challenges in securing adequate retirement savings. GAO was asked to review steps federal agencies might take to assist participants with these challenges.", "This report examines key challenges U.S. participants face with: (1) unclaimed retirement accounts in the United States, and (2) complying with U.S. tax reporting requirements on their foreign retirement savings. GAO reviewed relevant federal laws and regulations, and reviewed selected tax treaties. GAO interviewed stakeholders in the United States and in Australia, Canada, Hong Kong, Switzerland, and the United Kingdom\u2014chosen because these locations host relatively large populations of U.S. individuals and have well-developed workplace retirement systems."]}, {"section_title": "What GAO Found", "paragraphs": ["Plan participants in the United States face challenges after they change jobs, including not receiving communications from their plan sponsor and being vulnerable to unforeseen tax consequences that can result in a loss of retirement savings. GAO previously reported that when participants leave savings in a plan after separating from a job, the onus is on them to update former employers with their new address and to respond to their former employer's communications. GAO found that although an employer may incur costs searching for separated participants, there are no standard practices for the frequency or method of conducting searches. GAO reported that from 2004 through 2013, over 25 million participants in workplace plans separated from an employer and left at least one retirement account behind, despite efforts of sponsors and regulators to help participants manage their accounts. Department of Labor (DOL) officials told GAO that some sponsors do not search for participants when disclosures are returned as undeliverable. DOL has issued guidance on searching for missing participants for some plans that are terminating, but guidance does not exist on what actions DOL expects ongoing plan sponsors to take to keep track of separated participants. A key element of DOL's mission is to protect the benefits of workers and families. However, without guidance on how to search for separated participants who leave behind retirement accounts, sponsors may choose to do little more than remove unclaimed accounts from the plan when possible, and workers may never recover these savings.", "Stakeholders told GAO that U.S. individuals who participate in foreign workplace retirement plans face challenges reporting their retirement savings for tax purposes because of complex federal requirements governing the taxation of foreign retirement accounts and a lack of clear guidance on how to report these savings. For example, stakeholders told GAO it is not always clear to U.S individuals or their tax preparers how foreign workplace retirement plans should be reported to the Internal Revenue Service (IRS) and the process for determining this can be complex, time-consuming, and costly. In the absence of clear guidance on how to correctly report these savings, U.S. individuals who participate in these plans may continue to run the risk of filing incorrect returns. Further, U.S. individuals in foreign retirement plans also face problems transferring retirement savings when they switch jobs. In the United States, transfers of retirement savings from one qualified plan to another are exempt from U.S. tax. However, foreign plans are generally not tax-qualified under the Internal Revenue Code, according to IRS officials, and such transfers could have tax consequences for U.S. individuals participating in foreign retirement plans. Officials from the Department of the Treasury (Treasury) told GAO that a change to the U.S. tax code could improve the tax treatment of transfers between foreign retirement plans that Treasury has already examined. Without action to address this issue, U.S. individuals may not consolidate their foreign retirement accounts or may have to pay higher U.S. taxes on transfers than taxpayers participating in qualified plans in the United States, threatening the ability of U.S. individuals to save for retirement abroad."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends Congress consider addressing taxation issues affecting the transfer of retirement assets between plans within the same foreign country. GAO is making seven recommendations, including that DOL issue guidance to help ongoing plan sponsors search for separated participants, and that IRS issue guidance to clarify how U.S. individuals should report foreign retirement savings to the IRS. The agencies generally agreed with GAO's recommendations. IRS disagreed with two of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Saving for retirement through workplace plans can be difficult for U.S.  citizens, whether they are participants in U.S workplace plans or  participants in foreign workplace plans. Regardless of whether the plan  is a U.S. or a foreign workplace retirement plan, participants encounter  challenges that go beyond finding ways to save enough for retirement.  For example, workers can accumulate multiple workplace retirement  accounts as they change jobs over the course of their careers. Former  employers may merge causing the retirement plan to change names and  administrators, making it more difficult for plan participants to locate their  original plan accounts. In the United States, plan participants are  responsible for keeping track of their unclaimed accounts by continuing  to communicate with their previous employers by updating contact details  to receive important information about their accounts. In addition, plan  sponsors also generally have a responsibility to act solely in the interest  of the participants, which includes an obligation to attempt to locate  separated participants in some circumstances. Despite the efforts of plan  participants, plan sponsors, and regulators to manage unclaimed  accounts in the U.S. workplace retirement plan system, accounts can  remain unclaimed for multiple reasons, which may eventually affect the  retirement security of plan participants.", "As we previously reported, other countries have made it easier for U.S.  individuals who work abroad and save for retirement through workplace  retirement plans to manage their accounts by providing mechanisms to  track and consolidate them. However, U.S. individuals who participate in  foreign workplace plans face different challenges than their counterparts  in U.S. workplace retirement plans. For example, foreign plans may not  be eligible for preferential tax treatment under U.S. law, and U.S.  participants in those plans may be subject to additional reporting  requirements. As of April 2015, the U.S. Department of State (State)  estimated that 8.7 million U.S. citizens lived abroad, more than the  populations of 39 individual U.S. states. Given the issues facing  participants managing workplace retirement accounts in the United States  and abroad, you asked us to review steps federal agencies might take to  assist them. This report examines key challenges U.S. participants face  1.  with unclaimed workplace retirement accounts in the United States,  2.  complying with U.S. tax reporting requirements on their foreign  workplace retirement savings.", "To understand the key challenges U.S. participants face with unclaimed  workplace retirement accounts in the United States, we interviewed  officials from the Department of Labor (DOL), the Pension Benefit  Guaranty Corporation (PBGC), the Internal Revenue Service (IRS), and  record keepers and third-party administrators (TPA) that provide search  and other services to plan sponsors. We also reviewed relevant federal  laws and regulations, as well as guidance and other related documents  from DOL and IRS. We also reviewed reports from the 2013 ERISA  Advisory Council on Missing or Lost Participants.", "To understand the challenges faced by U.S. individuals who participate in  foreign workplace retirement plans to comply with U.S. tax reporting  requirements on their foreign workplace retirement savings, we selected  five international case study locations with well-developed workplace  retirement systems to examine. Each of the case study locations have  relatively large populations of U.S. workers and high total amounts of  foreign earned income reported by U.S. taxpayers living in that location.  We deliberately included case study locations with and without a bilateral  tax treaty with the United States, based on Department of the Treasury (Treasury) information. Our case study locations were Australia, Canada,  Hong Kong, Switzerland, and the United Kingdom. For each case study  we reviewed documentation related to the tax treatment of workplace  retirement accounts accumulated in that location by U.S. individuals, such  as tax treaties and Intergovernmental Agreements (IGAs) related to the  Foreign Account Tax Compliance Act (FATCA). We also reviewed  publicly available research and reports about each case study location\u2019s  retirement system, and interviewed relevant stakeholders. For each case  study we interviewed government officials, plan sponsors, and service  providers. Where available, we reviewed relevant data provided to us by  relevant government officials. We did not conduct an independent legal  analysis to verify the information provided about the laws or regulations in  the locations we selected for this study. Instead, we relied on appropriate  secondary sources and interviews with relevant officials to support our  work. We also interviewed IRS and Treasury officials, including those in  the Office of Chief Counsel, the Office of Tax Policy, the Tax Exempt and  Government Entities Division, and the Taxpayer Advocate Service. We  also spoke with organizations representing U.S. expatriates, foreign and  domestic retirement experts, tax advisors, and tax preparers who  specialize in assisting individuals with foreign income and assets when  filing their U.S. tax returns. We also reviewed transcripts of testimonies  the National Taxpayer Advocate gave before Congress pertaining to  international tax issues and FATCA, as well as IRS and Treasury  documentation on foreign workplace retirement plans and reporting  foreign income and assets.", "GAO conducted this performance audit from July 2015 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that GAO 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. GAO believes  that the evidence obtained provides a reasonable basis for the report\u2019s  findings and conclusions based on the report\u2019s audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC)", "paragraphs": ["The Employee Retirement Income Security Act of 1974 (ERISA) contains  various provisions intended to protect the interests of plan participants  and beneficiaries in workplace retirement plans. These protections  include requirements related to reporting and disclosure, participation,  vesting, and benefit accrual, as well as plan funding. For example, ERISA  requires plans to provide plan participants with a summary plan  description, including information on their rights under ERISA, periodic  benefit statements, and upon request, a copy of the annual report  including a financial statement, according to DOL. ERISA sets fiduciary  standards that generally require workplace retirement plan funds to be  handled prudently and in the sole interest of participants. ERISA also  establishes certain requirements related to plan termination. ERISA  does not require employers to provide workplace retirement plans, but  those that do must comply with applicable requirements and standards.", "The Internal Revenue Code (IRC) provides favorable tax treatment for  workplace retirement plans that meet certain qualification requirements  set out in the IRC. For example, employees are generally not taxed on  contributions made on their behalf but instead are taxed on benefits  received."], "subsections": []}, {"section_title": "Federal Agencies\u2019 Roles with Respect to U.S. Workplace Retirement Plans Department of Labor\u2019s Employee Benefits Security Administration (EBSA)", "paragraphs": ["Several federal agencies play a role with respect to U.S. workplace  retirement plans. Responsibility for enforcing ERISA is shared by DOL,  Treasury, and PBGC. Treasury, through IRS, is primarily responsible for  enforcing the IRC.", "The mission of DOL\u2019s Employee Benefits Security Administration (EBSA)  is to assure the security of retirement, health, and other workplace-related  benefits of U.S. workers and their families. DOL administers Title I of  ERISA, which includes the fiduciary standards and disclosure and  reporting requirements. To carry out its responsibilities, EBSA issues  regulations in these and other areas, and conducts programs and  initiatives to assist and educate workers, plan sponsors, fiduciaries, and  service providers on their rights and obligations under ERISA. EBSA also  issues guidance and field assistance bulletins to assist plan sponsors and  plan fiduciaries with managing retirement plans. For instance, in 2014,  EBSA issued Field Assistance Bulletin (FAB) 2014-01 to assist fiduciaries  of terminating DC plans in fulfilling their obligations under ERISA to locate  missing participants and properly distribute their account balances.  EBSA also maintains an outreach program employing approximately 100  benefits advisors throughout the country in 13 field offices. The program  offers services to educate U.S. workers, beneficiaries, and plan sponsors  about their rights and obligations under federal employee benefit laws,  and helps individuals obtain retirement benefits that have been improperly  denied."], "subsections": [{"section_title": "Internal Revenue Service (IRS)", "paragraphs": ["Under Title II of ERISA and subsequent amendments to the IRC, IRS  issues and enforces rules that plans must meet to be qualified for  preferential tax treatment. IRS also enforces certain provisions in Title I of  ERISA regarding participation, vesting, benefit accrual, and minimum  funding. IRS\u2019 mission is to help U.S. taxpayers understand and meet their  tax responsibilities and to enforce the law with integrity and fairness. To  help achieve its mission, IRS issues tax regulations and other guidance to  help taxpayers comply with the IRC. IRS guidance provides detailed  and technical explanations of tax laws for professional tax preparers as  well as taxpayers. IRS also manages a number of initiatives, programs, and systems to enforce federal tax law and assist taxpayers that are  related to our review of unclaimed retirement accounts. For example, to  assist taxpayers, IRS adopted a Taxpayer Bill of Rights in 2014 to provide  a better understanding of taxpayers\u2019 rights under the IRC. IRS also  periodically publishes a strategic plan for a given period that outlines how  it will improve service to taxpayers and enforce the law. To help ensure  that taxpayers are paying the correct amount of tax due and to identify  discrepancies, IRS\u2019 Automated Underreporter Program matches taxpayer  income and deductions submitted on information returns by third parties  against amounts reported by taxpayers on their individual income tax  returns. IRS also assists taxpayers and payors with information about  federal tax withholding obligations. To assist taxpayers with foreign  accounts, since 2003 IRS has offered an Offshore Voluntary Disclosure  Program. This program provides a way for taxpayers with previously  undisclosed income and undisclosed offshore accounts that need to be  reported to contact IRS and resolve their tax matters.", "IRS also assists sponsors that administer qualified retirement plans  through a number of systems and programs. For example, IRS offers  assistance to plan sponsors through the Employee Plans Compliance  Resolution System, which helps sponsors of qualified plans remedy  operational and form mistakes made in the course of administering a  retirement plan and avoid plan disqualification. IRS also forwards letters  to missing individuals on behalf of private individuals or government  agencies for a \u201chumane purpose\u201d when there is no other way to relay the  information to the individual. Between 1994 and 2012, IRS forwarded  letters through a letter forwarding program on behalf of entities that  control assets that may be due a taxpayer, such as from sponsors of  qualified plans that are attempting to locate missing participants."], "subsections": []}, {"section_title": "Pension Benefit Guaranty Corporation (PBGC)", "paragraphs": ["Title IV of ERISA created PBGC as a U.S. government corporation to  provide plan termination insurance for certain DB plans that are unable to  pay promised benefits. For example, when a PBGC-insured single- employer DB plan fails, PBGC trustees the plan and pays benefits up to  statutory limits. PBGC also oversees the voluntary (\u201cstandard\u201d)  termination of fully funded PBGC-insured single-employer DB plans to  ensure participants will receive the benefits to which they are entitled. As  part of the standard termination process, PBGC\u2019s Missing Participants  Program connects participants\u2014missing when the plan closes out\u2014to  their retirement benefits, in part by maintaining a centralized, online  database the public can use to find lost retirement benefits."], "subsections": []}, {"section_title": "Social Security Administration (SSA)", "paragraphs": ["SSA provides retirement benefits to eligible individuals under the federal  Social Security Old Age and Survivors\u2019 Insurance program (Social  Security). Although SSA does not oversee workplace retirement plans,  SSA maintains data that are reported to IRS by plans using Form 8955- SSA on separated participants with vested but undistributed benefits.  When individuals claim Social Security benefits, SSA may provide them  with a \u201cPotential Private Pension Benefit Information\u201d notice that indicates  they may be entitled to a retirement benefit through a past employer."], "subsections": []}]}, {"section_title": "Ongoing and Terminated Workplace Retirement Plans", "paragraphs": ["DOL reported that in 2014 there were just over 639,000 DC plans and  nearly 43,500 DB plans in the United States. These plans were  sponsored by individual employers (i.e., private single-employer plans)  and provided benefits to nearly 118 million participants. When a  qualified plan terminates\u2014whether it is a DB or DC plan\u2014federal law  requires plan participants to immediately be 100 percent vested in all  accrued benefits (to the extent funded in the case of a DB plan)  regardless of the vesting schedule in the plan document, according to  IRS. A plan sponsor is required to distribute assets from a terminated  plan as soon as administratively feasible, but generally within 1 year after  plan termination. For terminated DC plans, such as 401(k) plans,  participants generally receive the full amount of their vested account  balance upon plan termination, according to IRS."], "subsections": []}, {"section_title": "Transferring Savings of Missing Participants in U.S. Defined Contribution Retirement Plans", "paragraphs": ["When an employee separates from an employer but still has vested  savings in a qualified defined contribution retirement plan, the plan can,  under certain conditions and without the participant\u2019s consent, transfer  accounts out of the plan\u2014commonly referred to as a \u201cforced transfer.\u201d  Before the Economic Growth and Tax Relief Reconciliation Act of 2001  was enacted, ongoing DC plans could, in the absence of participant  instructions, distribute balances of $5,000 or less by paying them directly  to the participant, referred to as a \u201ccash-out.\u201d This law sought to protect  participants\u2019 retirement savings by requiring ongoing plans that have a  cash-out limit that exceeds $1,000 (up to $5,000), in the absence of  participant instructions and subject to certain notice requirements, to  transfer balances that exceed $1,000 (up to $5,000) to an individual  retirement account (IRA), preserving their tax-preferred status.", "Terminating plans are subject to different requirements. Fiduciaries of  terminating plans are obligated to search for missing participants, to notify  them of the termination and pending distribution of benefits before  transferring participants\u2019 unclaimed accounts to an IRA or elsewhere,  according to DOL guidance. The guidance further provides that  fiduciaries of terminating plans who are unable to locate missing  participants may also be permitted to transfer accounts belonging to  missing participants, without consent, to a federally-insured bank account  or to a state\u2019s unclaimed property fund. This occurs if the plan fiduciary  cannot find an IRA provider to accept a direct rollover distribution for a  missing participant or otherwise determines not to roll over the distribution  to an IRA, for some other compelling reason. For tax reporting purposes,  transfers made to a bank or a state unclaimed property fund are generally  subject to income taxation, according to the guidance. This contrasts with  rollovers to IRAs in which transferred retirement savings remain tax- favored. Plan sponsors are generally required to withhold 20 percent of  the account balance on transfers to a bank or state unclaimed property  fund and will send the withheld amount to Treasury to be used toward any  potential taxes due on the distribution."], "subsections": []}, {"section_title": "Tax Treatment of U.S. and Foreign Workplace Retirement Plans in which U.S. Individuals Participate", "paragraphs": ["In the United States, employee and employer contributions and  investment earnings in a qualified retirement plan are generally not taxed  as income until the employee receives the benefit. For example,  employees participating in a 401(k) plan can generally elect to have their  employer contribute a portion of their compensation to their account on a  pretax basis. This deferred compensation (commonly referred to as a pre- tax elective contribution by IRS) is not subject to income tax withholding,  and employees are not required to report it as wages on their individual  U.S. tax returns at the time of the contribution. In addition, employers can  provide matching or non-elective contributions to an employee\u2019s 401(k)  account; these matching or non-elective contributions are generally tax- deductible by the employer and employees also are not required to report  these contributions as wages on their U.S. tax returns or pay income tax  on these contributions at the time the contributions are made.  Distributions from a qualified DC plan in the United States made to  participants, including those who have separated from their employer,  may be treated differently for tax purposes, depending on the nature and  timing of the distribution. For example, a direct rollover, in which money is  transferred directly from one qualified workplace retirement plan or IRA to  another eligible retirement plan or IRA, is not taxable at the time of the  rollover but should be reported on the participant\u2019s federal tax return. By  contrast, a distribution that is not rolled over is generally taxable income  in the year in which it is received by the participant, according to IRS.", "Foreign workplace retirement plans are generally not tax-qualified under  the IRC or covered by ERISA, according to IRS officials and tax experts  with whom we spoke. They are, however, generally subject to the  regulatory structure in place in the country where the retirement plan  exists. Foreign workplace retirement plans that cover U.S. individuals  may be subject to certain provisions of the IRC and other federal laws  governing reporting and taxation of these retirement assets, as well as  any applicable income tax treaties between the United States and the  foreign country (see more about these treaties below). The extent to  which U.S. individuals are subject to U.S. income tax on the contributions  and earnings accruing in their foreign workplace retirement account  depends on the specific characteristics of the plan. For example,  according to tax experts with whom we spoke, many foreign workplace  retirement plans qualify as employees\u2019 trusts, and the taxation of  contributions and earnings from these plans are governed by section  402(b) of the IRC. According to IRS, as long as the foreign retirement  plan is determined to be an employees\u2019 trust, the U.S. individual must  include on their U.S. tax return contributions to the trust if the  contributions are not subject to a substantial risk of forfeiture (vested). In  addition, IRS officials said contributions that become vested after the year  of contribution are taxable in the year of vesting, and earnings are taxable  when distributed. Some foreign workplace retirement plans may include  investments in a Passive Foreign Investment Company (PFIC), which,  according to one tax preparer with whom we spoke, are investments in  foreign mutual funds, hedge funds, or other kinds of pooled investments  not incorporated in the United States. A U.S. individual who is a  shareholder of a PFIC may be subject to annual reporting requirements  and a high income tax rate on certain distributions.", "U.S. individuals who participate in a foreign workplace retirement plan  also may be subject to income tax on any distribution they receive from  their plan during the current tax year. Depending on the circumstances,  U.S. individuals also may be subject to income tax on certain distributions  they have not actually received, such as transfers of assets between or  within foreign workplace retirement plans, if they are in \u201cconstructive  receipt\u201d of (or otherwise have income inclusion with respect to) the  funds. In addition, U.S. individuals who pay foreign income taxes on  distributions from their foreign workplace retirement plans may be eligible  to claim a foreign tax credit on their U.S. tax return."], "subsections": []}, {"section_title": "Income Tax Treaties", "paragraphs": ["U.S. Income Tax Treaties with Other  Countries  One objective of tax treaties is to provide  taxpayers some relief from having to pay  taxes in both the United States and a foreign  country on the same income\u2014referred to as  \u201cdouble taxation\u201d\u2014without creating  opportunities for tax evasion or avoidance.  Treaty provisions generally apply to both  countries that have signed the treaty. A U.S.  resident who receives income from a treaty  country may be entitled to certain treaty  benefits\u2014credits, deductions, exemptions, or  reductions in the rate of tax\u2014on the taxes  owed to that foreign country. Similarly,  residents of the foreign country may be  entitled to treaty benefits on their U.S. taxes  on income from U.S. sources. However, with  certain exceptions, tax treaties generally do  not reduce the U.S. tax liability of U.S.  residents.", "As of October 2017, the United States had a network of 57  comprehensive income tax treaties covering 66 countries, according to  Treasury. U.S. individuals are subject to U.S. income tax on their  worldwide income, and this could include contributions and earnings  within and distributions from a foreign workplace retirement plan.  However, tax treaty provisions may reduce foreign income taxes owed by  U.S. individuals who receive income sourced from a treaty country; for  example, through the use of credits, deductions, exemptions, or tax rate  reductions. (See appendix I for more information on how IRS  recommends taxpayers review tax treaties.)", "According to IRS and Treasury, almost all U.S. tax treaties also contain  what is known as a \u201csaving clause,\u201d which IRS describes as a way to  preserve or \u201csave\u201d the right of each country to tax its own residents (and  in the case of the United States, its citizens) as if no tax treaty were in  effect. As a result, these treaties do not generally reduce the U.S.  income tax for U.S. individuals, unless an exception applies. In February  2016, Treasury issued a revised U.S. Model Income Tax Convention (i.e.,  model treaty), which is the baseline text the agency uses when it  negotiates tax treaties. Depending on the outcome of the treaty  negotiations, the final treaty with a particular foreign country may or may  not include language from the model treaty."], "subsections": []}, {"section_title": "Reporting Foreign Accounts and Foreign Financial Assets", "paragraphs": ["According to IRS, the Foreign Account Tax Compliance Act (FATCA) and  IRC section 6038D are important developments in U.S. efforts to combat  tax evasion by U.S. individuals holding accounts and other financial  assets offshore, which may have implications for U.S. individuals who  have foreign retirement accounts. FATCA generally requires foreign  financial institutions to provide information to IRS regarding foreign  financial accounts held by U.S. taxpayers. IRC section 6038D generally  requires U.S. individuals to report to IRS their foreign financial assets that  exceed a certain threshold. Beginning in July 2014, U.S. entities were  required to withhold 30 percent on certain payments to a foreign financial  institution unless the institution has entered into an agreement with IRS  regarding FATCA reporting or is in a jurisdiction that is treated as having  an Intergovernmental Agreement (IGA) in effect. However, FATCA  regulations exempt foreign financial institutions from reporting on  retirement accounts that meet certain requirements. Treasury has entered  into IGAs with other countries to assist with implementing FATCA that  may also provide an exemption for foreign financial institutions reporting  of certain retirement accounts. This exemption does not exist under IRC  section 6038D, which requires individuals, including U.S. citizens, to  report their foreign retirement accounts on IRS Form 8938 if they meet  certain regulatory thresholds. For example, unmarried U.S. individuals  living abroad must file if the total value of their specified foreign financial  assets is more than $200,000 on the last day of the tax year or more than  $300,000 at any time during the tax year."], "subsections": []}, {"section_title": "Estimated Number and Financial Profile of U.S. Citizens Living and Working Abroad", "paragraphs": ["The U.S. Department of State (State) estimates that as of April 2015, 8.7  million U.S. citizens lived abroad. (See appendix II for other estimates.)  Income data published by IRS for 2011 suggest that a majority of U.S.  taxpayers who earned income from foreign sources likely owed little  federal income tax because their reported adjusted gross income was  relatively low due to tax credits and exemptions available to taxpayers on  foreign-earned income. IRS estimated that in 2011 over 449,000 returns  were filed by taxpayers reporting foreign-earned income and just over  445,000 of these returns reported using the foreign-earned income  exclusion. We previously reported that for tax year 2011, taxpayers  claiming the foreign-earned income exclusion had higher average income  ($163,450) than the average Form 1040 filer ($58,706), and about 45  percent of those taxpayers had an adjusted gross income of less than  $10,000. These data reflect that some taxpayers were able to exclude  all or most of their foreign-earned income in calculating their adjusted  gross income. We also reported that taxpayers claiming the foreign- earned income exclusion had lower average U.S. tax rates than all Form  1040 filers."], "subsections": []}]}, {"section_title": "Participants Face Challenges Managing Unclaimed Retirement Accounts and Agencies Have Not Provided Sufficient Guidance and Information to Assist Them or Plan Sponsors Participants Have Challenges Managing Unclaimed Retirement Accounts", "paragraphs": ["Participants in U.S. workplace retirement plans face challenges managing  unclaimed accounts accumulated over the course of their careers. We  previously reported that some 401(k) plan participants find it difficult to  keep track of their savings, particularly when they change jobs, because  of challenges with consolidation, communication, and information. First,  we found that individuals who accrue multiple accounts over the course of  a career may be unable to consolidate their accounts by rolling over  savings from one employer\u2019s plan to the next. Second, maintaining  communication with a former employer\u2019s plan can be challenging if  companies are restructured and plans are terminated or merged and  renamed. Third, key information on lost accounts may be held by different  plans, service providers, or government agencies, and participants may  not know where to turn for assistance. As one witness testified to the  ERISA Advisory Council in 2013, it is not uncommon for former  employees to have difficulty locating a previous employer.", "Existing reporting and disclosure requirements directed at plan sponsors  can provide participants who separate from their employer information  about their accounts via multiple disclosures. However, plan sponsors  have no automatic way to keep participants\u2019 contact information up to  date, nor do they have ways to ensure that separated participants will  respond to their communications. Many participants rarely read the  notices they receive. We conducted a review of private sector pension  plan notices in 2013, and found that participants were interested in  information about their individual benefits, which could reasonably include  information about a pending distribution of their unclaimed account. Due  to the large number of participant notices, we found participants struggled  with what they must or should read.", "When participant notices are ineffective, accounts can become lost or  unclaimed and eventually shrink or disappear entirely, diminishing a  source of income in retirement. For example, accounts with a balance of  $1,000 or less can be cashed out of a plan without participant consent;  account balances can be reduced by tax withholding and early distribution  taxes, or conditionally forfeited by the plan sponsor until the participant  emerges to make a claim. Accounts with balances under $5,000, and  sometimes those with larger balances, can be forcibly transferred to an  IRA, where the account balances may decrease over time as the fees  outpace low investment returns, as we reported in our prior work. In 13 of  the 19 forced-transfer IRA scenarios we considered in 2014, a $1,000  account balance was reduced to zero within 30 years. DOL has also  uncovered tens of thousands of participants of retirement age with  unclaimed accounts that remained in their plans who were not receiving  the retirement income they were due."], "subsections": [{"section_title": "DOL Has Not Provided Guidance to Ongoing Plan Sponsors for Locating Missing Participants", "paragraphs": ["Although DOL has provided guidance to plan sponsors of terminated DC  plans about locating missing participants and unclaimed accounts, DOL  has not provided similar guidance to ongoing plans. DOL officials told us  that they are conducting investigations of steps taken by ongoing plans to  find missing participants under their authority to oversee compliance with  ERISA\u2019s fiduciary requirement that plans be administered for the  exclusive purpose of providing benefits. Plan sponsors are required to  send notices to participants in a variety of circumstances, such as to  obtain direction before making a distribution. However, the  communication is not always successful, and may result in a mailing to an  out-of-date address.", "With the absence of guidance, it is not clear to sponsors of ongoing DC  plans how they should satisfy requirements to notify participants when  participant addresses are out of date. Undeliverable mail is the main  indicator for identifying a participant as missing, according to third-party  administrators (TPA), who help manage missing participant issues for  plan sponsors. However, DOL officials told us a recent pilot investigation  found that some ongoing plans send notices that were returned  undeliverable but then fail to follow-up with any search process. In  contrast, if participants in a terminated plan do not respond to a notice,  plan sponsors need to take certain steps, at a minimum, to locate the  participant or a beneficiary. According to our analysis of stakeholder  interviews, in some circumstances plan sponsors may be considering a  participant to have been \u201cnotified,\u201d even when the mail used to notify  them was returned undeliverable. Executives at one firm that conducts  missing participant searches told us that for an average client, 7 to 10  percent of mail will be returned undeliverable, which means  communication was unsuccessful, potentially leaving participants without  notification of changes to the plan or potential distributions or transfers.", "It also is not clear how ongoing plan sponsors should arrange for paying  to obtain updated addresses of participants with unclaimed accounts.  Because search costs are not all paid from plan assets, finding missing  participants can be an additional business expense for plan sponsors.  Once an account is force-transferred out of the plan to an IRA, the  account may be charged a $65 annual search fee by the IRA provider, as  we reported one provider did in 2014. Plan sponsors are permitted to  pay only reasonable plan administration expenses, although they may  charge expenses associated with a specific participant to that  participant\u2019s account. To reduce costs for its plan sponsor clients,  representatives at one TPA told us that it will generally try to cash out  accounts in ongoing plans under $1,000 immediately, before an address  becomes obsolete.", "DOL audit findings also show that ongoing plans have challenges staying  in touch with missing participants and paying them their benefits when  due. DOL officials told us that in a recent DOL pilot investigation of 50  large DB plans, they found tens of thousands of separated participants  who were entitled to benefits but were not receiving them. They told us  that between 1 and 7 percent of all participants could be missing and not  receiving letters from the plan, depending on the industry. They said their  investigations found databases with missing names, addresses, and  Social Security Numbers, and data they suspected were unreliable, such  as participants named \u201cJane Doe\u201d or with birth dates listed as \u201c1/1/1900.\u201d", "DOL enforces the fiduciary standards of ERISA, which require plan  fiduciaries to act solely in the interest of plan participants and their  beneficiaries, for the exclusive purpose of providing benefits to them,  among other things. After plan termination, plan fiduciaries must distribute  all plan assets as soon as administratively feasible, which could create an  urgent need for plan sponsors to find participants. DOL officials said that  part of their enforcement role is examining how plans are maintaining  good records and what plans are doing to find and communicate with  participants\u2014officials are aware that additional guidance indicating what  is expected of plan fiduciaries would be helpful.", "PBGC has recently published a final rule which expands its Missing  Participants Program to cover most terminated DC plans, and DOL  intends to revisit its guidance within that context. At that time, DOL will  have an opportunity to also provide guidance to ongoing DC plan  sponsors on their obligations under ERISA to prevent, search for, and pay  costs associated with missing participants. By doing so, DOL can provide  plan sponsors with better tools to manage unclaimed accounts and help  ensure that future DOL investigations do not also uncover ongoing DC  plans with substantial numbers of participants not receiving benefits to  which they are entitled."], "subsections": []}, {"section_title": "IRS Has Not Issued Guidance Clarifying Tax Withholding Requirements for Cashed-Out Unclaimed Retirement Accounts", "paragraphs": ["Based in part on our discussions with IRS and our review of ERISA  Advisory Council documentation, when a plan sponsor cashes out an  unclaimed account and sends the money to the participant address it has  on file, the address may be obsolete. As a result, the participant may not  include the distribution in his or her taxable income for the year because  the participant may not have received the payment from the plan sponsor  or be aware of the transfer. According to an IRS publication on tax  withholding for plan sponsors, a 20 percent income tax withholding  generally is mandatory on amounts distributed from the plan that are not  rolled over directly into another qualified plan or an IRA. However, our  findings that some participants may not actually receive these  distributions raise questions about whether withholding should be  required in situations when it is reasonable to believe distributions will not  be received by the participants.", "Misconceptions exist regarding how and when IRS will credit tax  withholding toward a taxpayer\u2019s tax liability. For example, two TPAs told  us they believed that IRS will credit tax withholding on cashed-out  accounts to the tax liabilities of missing participants. One industry  representative we interviewed in 2013 told us that he withheld taxes when  he could not find a participant because he believed the withholding would  cause IRS to make the participant aware of the account. According to  DOL bulletins issued in 2004 and 2014, some plan sponsors were using  100 percent withholding\u2014in effect transferring the entire account to IRS\u2014 under the assumption that the withheld amounts would be matched and  applied to a participant\u2019s tax liabilities. DOL bulletins clarified it was not  an appropriate distribution option for plan sponsors. Table 1 shows a  variety of approaches to tax withholding. However, according to IRS,  none of the tax withholding strategies automatically reduces the tax  liability of the account holder. IRS officials told us that the agency does  not routinely credit federal tax withholding to a taxpayer\u2019s current federal  tax liability unless the taxpayer has made a claim.", "Retirement accounts with small balances are most vulnerable to the tax  consequences of tax withholding by plan sponsors. We previously  reported that in the absence of participant instructions, accounts with a  balance of $1,000 or less can be cashed out of the tax-deferred plan  environment by plan fiduciaries without the separated participant\u2019s  consent. From 2004 to 2013, separated participants left more than 13  million accounts of $1,000 or less in workplace retirement plans with an  aggregate value of $1.2 billion, according to SSA.", "Withholding taxes on balances of $1,000 or less at the time of distribution  may result in participants paying taxes twice on the account. IRS told us  that missing participants generally have up to 3 years to become aware of  and claim the withheld amounts for them to be credited towards their tax  liability. However, missing participants who claim their account after 3  years may again pay federal income tax on the account balance, although  IRS officials said they thought such a scenario would be rare. (See fig. 1).", "IRS has not issued specific guidance clarifying the withholding  requirements that apply to distributions from unclaimed accounts in  situations in which the participant may be unlikely to receive the  distribution. By reviewing the issue of distributions to participants with  unclaimed accounts, including reviewing the IRC in this context, IRS may  be able to issue guidance on applicable tax withholding and other tax  requirements with respect to such accounts. The Taxpayer Bill of Rights  states that taxpayers are entitled to clear explanations of the tax laws in  IRS publications and notices, and federal internal control standards  require agencies to communicate effectively with external stakeholders to  help achieve agency goals. U.S. participants already facing the  challenge of finding a small account transferred without their consent may  discover, when the account is located, 20 percent of their account  eliminated by taxes. Without an IRS review of this issue and subsequent  guidance, questions may remain about withholding from distributions in  situations where the participant may be missing."], "subsections": []}, {"section_title": "Plan Sponsors Can No Longer Use IRS\u2019 Letter Forwarding Program to Locate Missing Participants", "paragraphs": ["Under IRS\u2019 letter forwarding program, between 1994 and 2012 plan  sponsors could ask IRS to use IRS\u2019 most current address on file to  forward a letter with information about an account to a missing plan  participant. However, in 2012 IRS modified the service and no longer  forwards letters on behalf of qualified retirement plan sponsors attempting  to locate plan participants. According to the 2013 Report of the ERISA  Advisory Council on Locating Missing and Lost Participants, the letter  forwarding program was a popular alternative for plan sponsors when  email and U.S. mail proved ineffective at contacting separated  participants. Executives at one large record keeper told us the letter  forwarding program provided very important assistance for locating  missing participants, noting that few individuals are going to ignore  correspondence from IRS. Although the letter forwarding program never  notified the plan sponsor as to whether or not the letter reached the  intended recipient, executives at one TPA characterized the program as  effective. In addition, they said the fact that it was sponsored by IRS and  sanctioned by DOL gave plan fiduciaries confidence that they were acting  prudently.", "Missing participant search services and their value vary widely today,  based on industry representatives we interviewed. For example,  representatives of one search firm told us they charged $1.25 for a  search. However, an executive at a TPA firm told us another firm charged  $35 for a Social Security Number-based search, which reliably connected  with participants. PBGC estimates the cost of a commercial locator  service to be $40 per search. Industry stakeholders told us that the  steps currently required by existing guidance do not provide a  straightforward way to send a letter about an unclaimed account to a  missing plan participant. They described benefits that only IRS can  provide through this service, such as the likelihood recipients will open a  letter from IRS and the confidence fiduciaries have using an IRS- sponsored program. We discussed with IRS officials the commensurate  fees charged in the private sector for missing participant searches and we  discussed the variety of services and associated costs currently available.", "According to OMB Circular A-123, agencies and individual federal  managers must take systematic and proactive measures to develop and  implement appropriate, cost-effective management controls for results- oriented management. IRS has always charged a user fee for the letter  forwarding program, and the fee has not changed since 1994. IRS  officials told us resource constraints led them to revise the letter  forwarding program. While IRS management controls will need to ensure  that a program expansion is cost-effective, by reinstating the letter  forwarding program for plan participants in a cost-effective manner, IRS  can help support the retirement security of separated plan participants  and plan sponsor efforts to meet their obligations under the IRC and  ERISA."], "subsections": []}, {"section_title": "Information Provided to U.S. Workers on Unclaimed Retirement Accounts Is Often Outdated and Incorrect", "paragraphs": ["Certain information U.S. workers receive on unclaimed workplace  retirement accounts based on data reported to IRS by plan sponsors is  not reliable because plan sponsors are not updating the data over time as  required. SSA maintains data on vested, unpaid retirement benefits left  behind in workplace retirement plans by separated participants in its  pension benefit record database. The information, including the name of  the plan, the value of the benefit, and the contact information of the plan  administrator, is reported by plan administrators to IRS, and IRS provides  it to SSA. When an individual retires and claims Social Security benefits,  SSA sends the individual a Notice of Potential Private Pension Benefit  Information. The notice informs the recipient that they may have an  unclaimed retirement account from a former employer and suggests that  they may want to make an effort to determine whether or not the benefit  actually does exist. SSA mails about 90,000 notices to new Social  Security claimants each month. Separated participants can often find that  no benefit exists, according to DOL and SSA documentation and  stakeholders we interviewed. A TPA executive also told us separated  participants are not always able to determine what happened to their  accounts.", "IRS and SSA have a memorandum of understanding (MOU) in place  establishing their agreements for collecting and managing these data. In  the MOU, IRS and SSA agree to pursue improvements to the reporting  process. The MOU states that, where appropriate and consistent with IRS  directives, IRS will assess penalties under the IRC on plan sponsors who  fail to file Form 8955-SSA according to instructions. The agencies have  also agreed to contact and receive information from filers as necessary  and appropriate to follow up regarding missing, incomplete, or incorrect  information requested on the form.", "According to the Form 8955-SSA instructions, plan sponsors are required  to report when benefits previously reported are paid, and therefore no  longer due, to plan participants. Such updates allow the pension benefit  record database at SSA, used to generate the Notice of Potential Private  Pension Benefit Information, to reflect the fact that those benefits are no  longer due. IRS officials said the data can be inaccurate because plan  sponsors are not consistently reporting distributions, resulting in  erroneous records of accounts accumulating in the database (see fig. 2).", "An executive at one TPA told us that plan sponsors generally remember  to put participant names on Form 8955-SSA, but often fail to take the  names off after benefits are paid. According to the TPA executive, if there  are 1,000 names on the list of separated participants with vested benefits  in the plan, 999 will have been paid by the time they receive the notice  from SSA. Nonetheless, participants will generally inquire about a benefit  when they receive the SSA notice because it is from the government, and  they trust the notice and think the money is there, according to one TPA  with whom we spoke.", "IRS officials told us that enforceable penalties can be imposed on plan  sponsors for not including all required information on the form. The IRS  website lists four possible actions related to incorrectly filing Form 8955- SSA that are subject to a penalty; however, a failure to report  distributions is not on the list. IRS officials said if the agency were to add  the failure to report distributions to the list the penalty would likely  encourage some sponsors to update the data as required.", "IRS officials told us they do not currently know which plans are not  reporting distributions. The Notice of Potential Private Pension Benefit  Information leaves the responsibility for determining whether a benefit  exists up to the participant and the agencies do not ask the participant for  the results of their inquiries. SSA includes a note at the bottom of the  notice encouraging new retirees to contact DOL with complaints, but the  participant is not asked to follow up with IRS or SSA to identify plans  associated with inaccurate data. Having this information would help IRS  select plans to audit in order to update and improve the quality of data in  SSA\u2019s pension benefit record database. SSA could modify the notice  participants receive to encourage them to inform IRS if they determine the  information on the notice to be erroneous. DOL benefits advisers, who  field calls from inquiring individuals after they receive a notice about a  potential benefit that no longer exists, also have information on plans that  may not be reporting distributions to separated participants on Form  8955-SSA as required. DOL officials told us they would need a formal  MOU in place to facilitate such information sharing. Figure 3 illustrates  these possible options for identifying plans not reporting distributions as  required.", "Standards for internal control in the federal government state that  agencies should communicate quality information externally so that  external parties can help agencies achieve their objectives. Although  IRS and SSA have agreed in the MOU to work together to promote efforts  to improve internal controls, they are not collaborating to improve the  likelihood that the Notice of Potential Private Pension Benefit Information  will correspond to an actual benefit in the future. While IRS has authority  over implementing and enforcing the Form 8955-SSA reporting  requirements, IRS officials do not have access to SSA\u2019s pension benefit  record database to update records. IRS officials told us at one point  they discussed with SSA a possible project that would allow plan  sponsors to update all the records associated with their plan at once. SSA  officials told us they could collaborate with IRS to update the data in the  pension benefit record database. By working together, IRS and SSA can  increase the likelihood that the Notice of Potential Private Pension Benefit  Information corresponds to actual workplace retirement benefits in the  future."], "subsections": []}]}, {"section_title": "Complex Tax Requirements and a Lack of Guidance Can Hinder U.S. Individuals\u2019 Ability to Correctly Report Foreign Retirement Accounts", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Told GAO that U.S. Individuals Who Participate in Foreign Workplace Retirement Plans Face Multiple Challenges", "paragraphs": ["U.S. individuals who participate in foreign retirement plans can face a  number of challenges with tax reporting requirements on their retirement  savings. According to IRS officials and tax preparers with whom we  spoke, these challenges are greater for U.S. individuals who live and  work abroad full time than for corporate executives on temporary  assignment in a foreign country. Individuals sent abroad for limited times  by their employer often remain as participants in their employer\u2019s U.S.  workplace retirement plan and do not need to participate in a foreign  workplace plan. According to IRS officials and tax professionals with  whom we spoke, many of these executives may have tax filing assistance  made available to them by their company, further reducing their reporting  burden. Individuals who work in a foreign country may be forced to  participate in a mandatory foreign retirement plan, depending on the  country and the rules governing residency, according to officials with  whom we spoke in our case study locations. In these instances,  according to IRS officials, the individuals have no choice but to comply  with U.S. tax reporting rules on their foreign retirement accounts. Those  who live abroad long-term due to family or personal ties naturally  accumulate foreign assets and savings, such as foreign retirement  accounts.", "Tax preparers in all five case study locations we reviewed, as well as IRS  officials, indicated that preparing a U.S. tax return for a participant in a  foreign retirement plan is more complex than preparing a comparable  U.S. tax return that does not include foreign assets. We were told that  attempting to categorize a foreign retirement account for tax reporting  under the IRC can be challenging because such accounts may be  reported as one of several different designations that may or may not be  eligible for tax-deferral in the United States. This contrasts with U.S.  individuals participating in U.S. retirement plans that meet the criteria for  tax-qualified status under the IRC, who generally receive a Form W-2  Wage and Tax Statement that automatically deducts retirement account  contributions from gross wages. In addition, participating in a foreign  retirement plan can initiate a complex set of U.S. reporting requirements  on retirement assets, such as participants having to report contributions  and earnings or having to file additional forms and schedules for their  retirement account, which is typically not required of taxpayers with U.S.- based retirement plans. IRS officials told us that the onus is on U.S.  individuals who participate in foreign retirement plans to comply with  these complex reporting requirements. As a result, these participants  often need to turn to expert tax preparers to prepare their U.S. tax return  even if they ultimately do not have to pay taxes.", "Statutory changes on reporting foreign assets have further affected U.S.  individuals who participate in foreign retirement plans. Stakeholders told  us that reporting requirements under the Foreign Account Tax  Compliance Act (FATCA) can increase the cost of tax preparation for U.S.  individuals who participate in foreign retirement plans. For example,  according to IRS guidance, these participants in foreign retirement plans  must gather and examine monthly retirement account statements, convert  the account balance to U.S. dollars, and determine if the total value of the  account at the end of the year or anytime during the year caused the  individual\u2019s total asset value to exceed the reporting threshold. If the total  assets meet the reporting threshold, the participant must report the value  of their retirement account even if they are no longer contributing to the  account. In contrast, participants in U.S. plans generally are not required  to report the value of their U.S. workplace retirement accounts under  FATCA or IRC section 6038D, according to IRS. We were also told of  other consequences of FATCA for U.S. individuals abroad, such as a  reduction in available financial services, as some banks refuse to do  business with U.S. individuals because of FATCA\u2019s reporting  requirements.", "Lastly, once an individual decides to change jobs in a foreign country,  transferring foreign retirement savings can be difficult. For example, in  several of the case study locations we reviewed foreign officials and tax  preparers told us that plans automatically transfer a retirement account to  a different account within the plan or to a location outside the plan when  an employee separates from their employer, which can have U.S. tax  implications. Stakeholders said that existing U.S. tax law does not provide  these participants with tax-deferral if they transfer their foreign retirement  savings from one foreign workplace retirement plan to another\u2014a benefit  granted to U.S. participants in qualified U.S. retirement plans who make  such transfers. This condition may act as a disincentive for U.S.  individuals abroad to consolidate foreign retirement accounts and can  cause challenges when individuals change jobs or are required by their  retirement plan or employer to transfer their account."], "subsections": []}, {"section_title": "IRS Guidance Is Unclear Regarding How to Report Foreign Retirement Accounts", "paragraphs": ["While IRS has issued guidance providing information regarding foreign  assets and pensions, IRS officials told us that the guidance is not specific  on how foreign workplace retirement plans should be treated under the  IRC, nor does it provide guidance for specific countries. One source of  guidance is Publication 54, Tax Guide for U.S. Citizens and Resident  Aliens Abroad, which discusses special tax rules for U.S. citizens and  resident aliens who work abroad or who have income earned in foreign  countries. Another source of guidance in the International Tax Gap Series  describes how foreign pensions and annuity distributions are taxed. While  both guidance sources provide taxpayers with some information on how  to report foreign assets, neither describes in detail how taxpayers are to  determine if their foreign workplace retirement plan is eligible for tax  deferred status, or how to account for contributions, earnings, or  distributions on their annual U.S. tax return, particularly whether and  when contributions and earnings should be taxed as income.", "IRS also directs taxpayers to review tax treaties, if applicable, for  provisions related to pensions, but IRS officials told us these treaties can  vary from country to country and said that they can be difficult for non- experts to understand.", "For example, Treasury officials told GAO that the tax treaties for two of  the five case study locations we selected have pension clauses and  certain provisions that apply to U.S. residents of those countries saving  for retirement that afford some tax protection. However, Treasury officials  said that two of our other case study locations have treaties that do not  provide tax protections for U.S. individuals on their foreign retirement  accounts (one of our case study locations does not have an income tax  treaty with the United States.) Tax preparers and IRS officials we spoke  with indicated that it is difficult for U.S. individuals to know how to  correctly apply tax treaty provisions to their foreign workplace retirement  savings. In addition, these IRS officials and other retirement experts said  a U.S. individual abroad without expertise in the IRC and tax treaties  would have difficulty reporting their foreign retirement account correctly.  Existing IRS guidance does not alleviate the confusion faced by U.S.  individuals who participate in foreign retirement plans. Confusion  regarding how to report foreign retirement accounts to IRS on a U.S. tax  return or elsewhere is inconsistent with U.S. taxpayers\u2019 rights, as  described in the Taxpayer Bill of Rights, to pay no more than the correct  amount of tax and to know what they need to do to comply with tax laws. (Government Service and Social Security),  pensions and other similar remuneration  beneficially derived by a resident of a  Contracting State in consideration of past  employment shall be taxable only in that  State.  (Government Service and Social Security),  annuities derived and beneficially owned  by a resident of a Contracting State shall  be taxable only in that State. The term  \u201cannuities\u201d as used in this paragraph  means a stated sum paid periodically at  stated times during a specified number of  years or for life, under an obligation to  make the payments in return for adequate  and full consideration (other than services  rendered).\u201d", "Disagreement exists among the professional tax preparers with whom we  spoke about the correct method for reporting foreign retirement accounts  on a U.S. tax return. IRS officials told us that U.S. tax law generally does  not recognize foreign retirement plans as tax-qualified and IRS does not  recognize any retirement accounts outside the United States as having  tax-qualified status. IRS officials we spoke to said that only plans meeting  the specific requirements of 401(k) or other requirements describing  retirement plan qualification may achieve tax-qualified status in the United  States. As a result, according to IRS guidance, U.S. individuals  participating in foreign workplace retirement plans generally cannot  deduct contributions to their account from their income on their U.S. tax  return. This is true even if the retirement account is considered a tax- deferred retirement account in the country where the individual works,  and even if the account is similar in nature to those found in a U.S.-type  retirement plan, such as a 401(k) plan. IRS officials told us that it should  generally be unnecessary to file a foreign retirement account as a  Passive Foreign Investment Company (PFIC) if the foreign retirement  plan is covered by a tax treaty with the United States, but acknowledged  that some tax advisors in foreign countries advise their U.S. clients to  consider their interest in such plans as an investment in a PFIC. For  example, in one of the case study locations we reviewed, a tax preparer  said that he advises U.S. individuals who participate in such plans to  report their foreign retirement account as a PFIC in their U.S. tax filing,  and that contributions and earnings are subject to be taxed at the higher  tax rate generally applicable to PFICs. Other tax preparers we spoke to  in that location said that this is a matter of some discussion among tax  preparers and that they reported retirement plans as an employees\u2019 trust.  The National Taxpayer Advocate told us that receiving incorrect tax  advice from a foreign tax preparer may not be a sufficient mitigating  circumstance to avoid penalties for reporting a foreign retirement account  incorrectly on a tax return. While reasonable reliance on a tax  professional with respect to the details of a return is generally a mitigating  circumstance for errors on a return, according to the National Taxpayer  Advocate, tax preparers in other countries are usually not considered  qualified preparers by IRS. U.S. taxpayers who file an incorrect tax  return can lose money by accruing penalties.", "IRS officials told us that individual taxpayers are responsible for  understanding their filing requirements and for determining how to  correctly file their tax returns, regardless of whether they live in a foreign  country or the United States. In its mission to help taxpayers meet their  tax responsibilities, IRS could issue guidance concerning how U.S.  individuals are to correctly report their foreign retirement assets. The  Taxpayer Bill of Rights states that as part of the right to a fair and just tax  system, taxpayers have a right to expect that system to consider  circumstances that affect their ability to provide timely information. IRS  officials told us they had been considering issuing improved guidance in  some areas pertaining to the taxation of foreign retirement accounts.  However, without clearer specific guidance from IRS describing how to  correctly report foreign retirement assets on a U.S. tax return, U.S.  individuals who participate in foreign workplace retirement plans continue  to run the risk of filing incorrect returns due to confusion over how to  properly classify and report their accounts. Clarifying how U.S. individuals  who participate in foreign workplace retirement plans should report their  retirement assets on their annual U.S. tax return will help ensure these  taxpayers can meet their tax reporting obligations."], "subsections": []}, {"section_title": "Complying with Reporting Requirements Can Be Costly for U.S. Individuals Who Participate in Foreign Workplace Retirement Plans", "paragraphs": ["Federal law requires U.S. individuals to report specified foreign financial  assets, including any applicable retirement and pension accounts they  own, if these assets, in the aggregate, are above the regulatory  threshold. Similarly, the Report of Foreign Bank and Financial Accounts  (FBAR) requires information with respect to foreign accounts above a  certain amount. As a result, U.S. individuals who participate in foreign   retirement plans may need to hire tax preparers to prepare returns in  compliance with these U.S. laws, and, according to tax preparers with  whom we spoke, the cost for having a complete tax return professionally  prepared for an individual holding a foreign retirement account ranges  from $1,800 to as high as $16,000.", "Determining how a foreign retirement account should be reported is time  consuming even for experts. Tax preparers must prepare multiple items,  including the tax return itself, and additional schedules and forms  pertaining to the retirement account, according to the preparers with  whom we spoke. For example, Form 3520 may be required if the account  is being reported as a foreign trust. In addition to preparing tax forms, one  tax preparer we spoke to said that preparers may have to spend time  trying to obtain other documents necessary to prepare a U.S. tax return,  for example, detailed retirement account statements.", "Since the implementation of IRC section 6038D, individuals have  increased exposure to penalties, and failure to report a foreign retirement  account when required may bring significant financial penalties, even if no  taxes were due on the retirement account in question. For example,  according to the IRS website, failure to report foreign financial assets on  Form 8938 as required may result in a penalty of $10,000 and an  additional penalty of up to $50,000 for continued failure to report after IRS  sends the individual a notification of failure to report. As a result of this  reporting requirement, U.S. individuals who participate in workplace  retirement plans abroad may incur substantial costs to correctly file their  returns and risk diminishing their retirement security if they fail to correctly  report their foreign retirement assets.", "Even in cases where the individual owes no U.S. tax, tax preparation can  costs thousands of dollars. Three tax preparers and representatives of  one investment firm that provides pension advice with whom we spoke  noted that even if a U.S. individual who participates in a foreign workplace  retirement plan did not ultimately owe any taxes, they are required to  report their foreign retirement assets under both FATCA and FBAR.  Tax preparers in four of our case study locations as well as in the  United States mentioned FATCA\u2019s requirements as an added challenge  when reporting foreign retirement accounts on U.S. tax returns.  Additionally, one investment industry association representative we  interviewed said that FATCA casts a wide net and that many \u201caccidental  Americans\u201d and U.S. individuals abroad were challenged to comply  with its requirements. Some of the tax preparers we spoke with said  many individuals taking steps to come into tax compliance as a result of  FATCA may happen to have U.S. citizenship but may never have lived or  worked in the United States as adults.", "The National Taxpayer Advocate told us that the high cost of tax  preparation amounted to an \u201cadvanced penalty\u201d for U.S. individuals who  live abroad. In a written testimony to Congress in 2015, she stated that  FATCA has created unique challenges for U.S. taxpayers abroad and  presented evidence in Volume 1 of the Taxpayer Advocate Service Fiscal  Year 2016 Objectives Report to Congress that there was little evidence  that foreign filers are any more likely to be non-compliant than taxpayers  in the general taxpayer population. The National Taxpayer Advocate  specifically identified concerns with FATCA as an area of focus in the  Fiscal Year 2016 Objectives Report to Congress, and stated that  taxpayers\u2019 rights to a fair and just tax system, and to pay no more than  the correct amount of tax, are being adversely affected by FATCA.", "IRS officials we spoke with indicated they are aware of the difficulties  some taxpayers are experiencing with these reporting requirements, but  said the agency is required to implement the law. They also said that  retirement accounts are usually the primary asset for individuals abroad  and that from an individual enforcement perspective, these reporting  requirements help to ensure a \u201cline of sight\u201d year over year on  participants\u2019 foreign pension arrangements. IRS officials expressed  concern that unless U.S. individuals are required to report foreign  retirement accounts via Form 8938, they will seek to avoid proper  reporting on their tax returns when distributions are made.", "IRS officials told us they have had extensive conversations about  providing a possible exemption from reporting requirements under IRC  section 6038D for certain U.S. individuals in foreign countries. IRS  decided the ability to review a taxpayer\u2019s foreign retirement data each  year through filing a Form 8938 would allow regulators to evaluate  whether contributions, earnings, and distributions were being identified  and reported accurately. IRS officials stated that the agency\u2019s goal is to  build a database with Form 8938 information on individual taxpayers with  foreign assets.", "IRS officials told us that, unlike individuals, foreign financial institutions in  many countries are exempt from reporting retirement accounts under  FATCA. IRS officials said this is because such foreign retirement  accounts are typically at low risk for tax evasion and Treasury officials  told us that the exemption for foreign financial institutions was provided to  reduce burden on such institutions. This sentiment was echoed by foreign  government officials and retirement experts abroad, who said a retirement  account is generally at low-risk for tax evasion both because  governments regulate retirement accounts and individuals attempting to  evade taxes through a retirement account would have to wait many years  before seeing any benefit. With respect to IRC section 6038D, according  to IRS officials and Form 8938 instructions, if a fair market value is not  readily available for a foreign workplace DB plan, it does not have to be  included in the taxpayer\u2019s calculation of the aggregate foreign assets  used to determine whether the taxpayer meets the threshold to file Form  8938. If other foreign financial assets, in the aggregate, exceed the  threshold, IRS officials said an individual must list their DB plan on Form  8938, but may list a zero balance if no distributions have been made.  Given that IRS does not always require reporting of foreign retirement  plans on Form 8938 if the plans cannot be readily valued, providing a  broader exemption for other types of workplace plans or for other  appropriate circumstances from the calculation of the foreign asset  threshold could help ease the reporting burden on U.S. individuals. This  would assist those individuals who hold most of their wealth in the form of  foreign retirement savings in other types of workplace retirement plans, to  avoid potentially high penalties that could diminish their retirement  savings.", "IRS has not systematically analyzed data from Form 8938 on foreign  retirement accounts owned by U.S. individuals. As a result, they may not  have evidence showing the effect of these reporting requirements on U.S.  individuals who participate in foreign workplace retirement plans, for  instance, how many enforcement actions related to retirement accounts  resulted from filing Form 8938. Without IRS systematically analyzing  Form 8938 data on foreign retirement accounts owned by U.S.  individuals, the agency will continue to lack an understanding of how  these accounts change over time and if they are definitively low-risk for  tax evasion. Understanding the effects of these reporting requirements  can provide IRS with information to consider whether IRS could offer  individuals some form of exemption from reporting on their foreign  retirement accounts. Currently, there is no way for IRS to clearly  distinguish different types of accounts being reported on Form 8938. To  do so would require the Form 8938 to be revised in order to allow  taxpayers to clearly specify that the account being reported is a foreign  retirement account or pension. In addition, U.S. individuals participating  in foreign workplace retirement plans, many of whom count their  retirement savings as their primary financial asset, according to IRS  officials, will continue to be caught up in IRS\u2019 enforcement efforts aimed  at catching tax evaders. These U.S. individuals may continue to face  potentially high tax preparation fees to complete the filing of Form 8938  and may be liable for penalties for failure to report foreign retirement  accounts that may pose little or no risk for tax evasion."], "subsections": []}, {"section_title": "Absent Specific Treaty Provisions, Current U.S. Tax Law Does Not Exempt from Taxation Transfers in Foreign Workplace Retirement Plans", "paragraphs": ["IRS officials told us that U.S. individuals who participate in foreign  workplace retirement plans may not realize that a routine transfer of their  foreign retirement assets within plans or from one plan to another  should be reported as a taxable event, resulting in an incorrect filing  and/or potential penalties. Changing jobs and transferring, or \u201crolling over\u201d  retirement savings to another qualified retirement plan is generally a tax- protected transaction for participants in U.S.-based retirement plans.  However, IRS officials told us that a U.S. individual who participates in a  foreign retirement plan may owe U.S. taxes for similar transfers within or  between foreign workplace retirement plans. Retirement plans in some  countries routinely initiate administrative transfers of a participant\u2019s  retirement savings between accounts within the plan, to the employee\u2019s  new plan, or to a designated institution outside the plan when the  participant separates from their employer, according to officials in several  of our case study locations. However, IRS officials told us the IRC does  not recognize foreign retirement plans as tax-qualified plans, and  because these plans are not able to meet the criteria for qualification,  tax-deferred transfers or rollovers may not be possible unless a tax treaty  provides otherwise. IRS generally considers routine administrative  transfers of retirement assets that occur between or within foreign  retirement plans to be distributions to the participant and therefore taxable  income.", "According to IRS officials with whom we spoke, the transfer of retirement  assets within or between plans implies that the participant has some  access to and control over their retirement funds. Tax preparers and  regulators in three of our case study locations told us that such transfers  routinely take place (see appendix III). In these situations, IRS officials  told us that deferring taxes on retirement contributions and earnings  under IRC section 402(b) pertaining to foreign trusts would no longer be  applicable because that section of the IRC does not cover transfers\u2014only  contributions and earnings within a given foreign trust. Instead, according  to IRS officials, the transfer would generally constitute a \u201cconstructive  receipt of funds\u201d by the participant and would be reportable and  taxable. As a result, a U.S. individual who participates in a foreign  retirement plan could owe U.S. tax on the entire amount of their  retirement savings when they separate from their employer and their  account is transferred to another account within the plan or to a different  workplace retirement plan (see fig. 4).", "Treasury officials said they have been aware of this issue for some years,  having discussed it in multiple negotiations with other countries, and have  taken steps to incorporate a solution in U.S. model income tax  conventions dating as far back as 1996.Treasury officials told us that the  2016 U.S. Model Income Tax Convention includes a clause that would  generally exempt from U.S. income tax such transfers if they qualify as  tax-deferred transfers under the laws of the other country. According to  Treasury officials, few of the treaties currently in force address this issue  and many countries do not have tax treaties with the United States.", "2016 U. S. Model Income Tax Convention  Language Would Exempt Certain Transfers  of Foreign Retirement Assets from  Taxation   The Department of the Treasury developed  the U. S. Model Income Tax Convention to be  the starting point for negotiating tax treaties  with other countries. Language in an actual  treaty results from that negotiation and  therefore may not include this language.  According to Department of the Treasury  officials, few treaties currently contain this  language.  \u201c2016 United States Model Income Tax  Convention, Article 17, Paragraph 2(b)  Where a citizen of the United States who is a  resident of ______ is a member or beneficiary  of, or participant in, a pension fund  established in _____, the United States may  not tax the income earned by the pension  fund as income of the individual unless, and  then only to the extent that, it is paid to, or for  the benefit of, that individual from the pension  fund (and not transferred to another pension  fund established in _______ in a transfer that  qualifies as a tax-deferred transfer under the  laws of _______).\u201d", "IRS officials told us that if no treaty exists between the United States and  the country where the U.S. individual is participating in a foreign  workplace retirement plan, or the treaty does not specify how to treat  these transfers, there is generally no form of transfer that will receive U.S.  income tax-deferral. In these situations, IRS officials said, there is no way  that the plan can structure the transfer to prevent the U.S. individual who  is transferring assets within or between foreign plans from receiving a  distribution and being subject to tax liability. Even in cases where a tax  treaty is in place, the treaty may not provide special treatment for the  transfer of retirement assets. This would be the case in at least two of the  five case study locations we examined, where despite a tax treaty in  place, we were unable to identify any provisions that address these types  of transfers. In these cases, according to IRS, the U.S. individual must fall  back on the IRC, which does not provide tax-deferral on such transfers.  As a result, a U.S. individual who participates in a foreign workplace plan  would lose any tax-deferrals on the transfer.", "IRS officials and tax preparers told us that the transfer issue can cause  tax consequences for holders of foreign retirement assets, but one tax  preparer we spoke with noted that U.S. tax laws were not written with  foreign retirement plans in mind. As a result, tax preparers said it can be  difficult to determine how to report foreign workplace retirement assets  under the IRC, making routine administrative transactions costly for  U.S. individuals who participate in these plans. They said this is because  some or all of the account balance may be subject to tax and retirement  account asset growth would be lower due to the loss of tax-deferral. Each  time retirement assets are transferred, the transfer may be viewed as a  distribution, and new contributions and growth could be subject to tax and  a loss of tax-deferral. IRS officials also told us that the potential taxation  of transfers between foreign plans may cause some individuals to avoid  consolidating foreign retirement accounts.", "Renegotiating a tax treaty can be time consuming and, according to  Treasury officials, is unlikely to happen based on one issue, such as the  transfer of retirement savings abroad. Treasury officials in the Office of  Tax Policy said that the agency\u2019s approach to address these transfers  would be to evaluate the issue on a treaty-by-treaty basis. However, this  approach may not provide relief because there is no guarantee the country negotiating a treaty with the United States will agree to include  provisions for transferring retirement savings on a tax-deferred basis. In  order to provide more immediate relief, these Treasury officials said  Congress could pass legislation that would allow routine account  transfers between two foreign workplace retirement plans in the same  country to be free from U.S. tax if that country has a tax treaty with the  United States. However, they cautioned that such efforts should be  focused on foreign retirement plans that have already been examined by  Treasury, for example, through the process of negotiating a tax treaty or  as defined in FATCA IGAs, in order to avoid creating a tax evasion  loophole. For example, foreign workplace retirement plans could be  defined as those recognized by an existing tax treaty or other plans as  deemed appropriate by Treasury\u2019s Office of Tax Policy. According to  Treasury officials, transfers within or between such plans in the same  country could be protected from unnecessary taxation by, for example,  modifying Section 402(b) or other provisions of the IRC. Officials said that  without legislation, U.S. individuals who participate in foreign workplace  retirement plans must follow current law, which does not provide tax- deferral for transfers within or between foreign plans, even those that may  be eligible for tax-deferred contributions and earnings in the foreign  jurisdiction. However, by changing the IRC, Congress can ensure that  U.S. individuals who participate in foreign workplace retirement plans can  consolidate their accounts in a tax-deferred manner without being taxed  on the entire balance when their account is transferred."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Plan participants in the current workplace retirement plan environment  can accumulate multiple retirement accounts and possibly lose track of  them over their careers. The shift to DC plans and the mobility of the  American workforce have led to an increase in the number of workplace  retirement accounts, with many workers having multiple accounts over  the course of their careers. Yet currently, with millions of small retirement  accounts left behind by participants with previous employers, plan  sponsors are experiencing challenges locating missing participants. DOL  has agreed to evaluate the possibility of convening a taskforce to  consider the establishment of a national pension registry, in part to  address the difficulty of linking missing participants to their former  accounts. However, until this effort brings results or another  comprehensive solution to unclaimed accounts emerges, there are a  variety of improvements federal agencies may make in the short term to  help eliminate the inefficiencies in the current system that may reduce  participants\u2019 retirement savings. Since DOL audit findings show that  ongoing plans have challenges staying in touch with missing participants,  and DOL has provided guidance on missing participants for terminating  DC plans, providing such guidance for ongoing DC plans will help ensure  that separated participants will receive information about their benefits.", "In addition, IRS guidance on tax withholding does not address  distributions of small unclaimed accounts sent to nonresponsive  participants that are not always received by those participants. Some  stakeholders mistakenly believe that IRS automatically credits all taxes  withheld from such distributions toward taxes due. Following IRS  guidance, plans generally withhold taxes on cash-outs from such  accounts that the participant may not receive. By reviewing the issue of  distributions made to participants who are unlikely to receive them, IRS  has an opportunity to issue guidance clarifying the applicable tax  withholding requirements in those situations.", "IRS also has the potential to offer a service that delivers letters that  participants are likely to open, is trusted by plan fiduciaries, and can help  connect missing participants with their benefits. IRS was forwarding fewer  than 50 letters at a time for plan sponsors at no charge, but decided to  stop forwarding letters about unclaimed accounts in 2012. IRS can  consider again helping connect participants with unclaimed accounts  using the letter forwarding program. Lastly, IRS and SSA can take steps  to address situations in which sponsors fail to update data to reflect  payment of retirement accounts, rendering the data unreliable. Under the  existing agreement between IRS and SSA with respect to the Form 8955- SSA data, the agencies can take steps to ensure participants have a  more reliable source of information on their benefits in the future.", "U.S. individuals who work abroad and participate in a foreign workplace  retirement plan face challenges with reporting their accounts. Managing  such accounts can be costly as individuals use expensive tax preparers  for reporting their foreign retirement savings to IRS. These U.S.  individuals are required to pay taxes on their worldwide income, but can  become caught in a web of complex U.S. tax requirements governing how  they report their foreign workplace retirement savings. By providing  guidance on how to appropriately report foreign workplace retirement  accounts, IRS can help U.S. individuals comply with these requirements  and minimize their reporting burden.", "IRS can also initiate a systematic analysis of Form 8938 data on foreign  retirement accounts owned by U.S. individuals. Such data would help IRS  gain a better understanding of how these accounts change over time, and  to determine if they pose a low-risk for tax evasion. The outcome of this  analysis could allow IRS to consider offering these individuals an  exemption from reporting requirements on their foreign retirement  accounts, further easing the burden U.S. individuals face reporting their  foreign retirement assets. Lastly, transferring accounts between foreign  retirement plans can have negative tax consequences that threaten the  ability of U.S. individuals abroad to save for retirement. Congress may  wish to consider whether it can assist U.S. individuals who participate in  foreign workplace retirement plans by permitting these individuals to  transfer their retirement savings to a different account within the plan or to  another foreign workplace retirement plan on a tax-deferred basis when  they change jobs or separate from their foreign employer. Doing so would  permit these U.S. individuals in foreign workplace retirement plans to  receive the tax-deferred benefits available to other U.S. plan participants  who reside in the United States and who participate in qualified retirement  plans."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration.", "Congress should consider legislation modifying the Internal Revenue  Code to allow routine account transfers within the same foreign workplace  retirement plan or between two foreign workplace retirement plans in the  same country to be free from U.S. tax in countries covered by an existing  income tax treaty that provides for favorable U.S. tax treatment of foreign  workplace retirement plan contributions."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making a total of seven recommendations, including one to DOL,  five to IRS, and one to SSA.  a.  The Secretary of Labor should issue guidance on the obligations  under ERISA of sponsors of ongoing plans to prevent, search for, and  pay costs associated with locating missing participants.  (Recommendation 1)  b.  The IRS Commissioner should review taxation issues relating to  distributions involving incorrect participant addresses and uncashed  benefit checks and clarify for the public the Internal Revenue Code\u2019s  requirements in these circumstances. (Recommendation 2)  c.  The IRS Commissioner should consider revising the letter forwarding  program in a cost-effective manner to again provide information on  behalf of plan sponsors on unclaimed retirement accounts to  participants. (Recommendation 3)  d.  The IRS Commissioner should clarify how U.S. individuals are to  report their foreign retirement accounts. The clarification could include  addressing how these accounts should be designated and how the  taxpayer should report contributions, earnings, and distributions made  from the account. (Recommendation 4)  e.  The IRS Commissioner should systematically analyze data reported  through Form 8938 filings on foreign retirement accounts owned by  U.S. individuals with the goal of developing an evidence-based  understanding of how these accounts change over time and what  level of risk these accounts pose for tax evasion. To assist with this  analysis, IRS should consider revising Form 8938 to more clearly  distinguish between retirement accounts and other types of accounts  or assets being reported by taxpayers under current reporting  requirements. (Recommendation 5)  f.  The IRS Commissioner should take steps to improve the likelihood  that the Notice of Potential Private Pension Benefit Information  corresponds to actual retirement benefits in the future, for example, by  working with the Social Security Administration as necessary.  (Recommendation 6)  g.  The Social Security Administration Commissioner should take steps to  improve the likelihood that the Notice of Potential Private Pension  Benefit Information corresponds to actual retirement benefits in the  future, for example, by working with IRS as necessary.  (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Labor, the  Department of the Treasury, the Internal Revenue Service, the Social  Security Administration, the Pension Benefit Guaranty Corporation, and  the U.S. Department of State. DOL, Treasury and IRS, and PBGC  provided technical comments, which we have incorporated where  appropriate. DOL, IRS, SSA, and PBGC also provided formal comments,  which are reproduced in appendices IV, V, VI, and VII, respectively. State  did not have any comments. DOL agreed with our recommendation that  additional guidance may be helpful to aid plan sponsors and plan  fiduciaries of ongoing plans in meeting their existing fiduciary obligations  to search for missing participants and to pay benefits. SSA agreed with  our recommendation to take steps to improve the likelihood that the  Notice of Potential Private Pension Benefit Information corresponds to  actual retirement benefits in the future, for example, by working with IRS  as necessary.", "In its written comments, IRS stated that it generally agreed with the report  and its findings. IRS specifically cited that the report identifies several  challenges for participants to manage their retirement savings, such as  updating former employers with address changes to continue receiving  information about retirement plan accounts with former employers and  responding to former employers regarding retirement plan accounts. IRS  also stated that U.S. individuals participating in foreign retirement plans  often do not know how to correctly report foreign retirement accounts and  associated income due to complex federal requirements and treaty  provisions governing the taxation of foreign retirement accounts. This  recognition by IRS of the complex federal requirements and treaty  provisions governing the taxation of foreign retirement accounts is in line  with GAO\u2019s concerns about U.S. individuals with foreign workplace  retirement accounts having trouble with routine account transfers within  the same foreign workplace retirement plan or between two such plans in  the same country. We have asked Congress to consider modifying the  Internal Revenue Code to allow routine account transfers within the same  foreign workplace retirement plan or between two foreign workplace  retirement plans in the same country to be free from U.S. tax in countries  covered by an existing income tax treaty that provides for favorable U.S.  tax treatment of foreign workplace retirement plan contributions.  Congress\u2019 ability to modify the Internal Revenue Code in such a way can  help U.S. individuals participating in foreign workplace plans to better  save for retirement by allowing them to consolidate accounts in a tax- deferred manner without being taxed on the entire balance when their  account is transferred.", "IRS agreed with two of our recommendations to improve the  management of retirement savings. Specifically, IRS agreed to review  taxation issues relating to distributions involving incorrect participant  addresses and uncashed benefit checks and to clarify for the public the  Internal Revenue Code\u2019s requirements in these circumstances. We  believe that IRS\u2019 consideration of this recommendation and any  subsequent actions the agency takes to clarify the issue will help to  address questions about tax withholding from distributions in situations  where the participant may be missing or where a distribution check  remains uncashed after a period of time. IRS also agreed to work to  improve the likelihood that the Notice of Potential Private Pension Benefit  Information corresponds to actual retirement benefits in the future, and  agreed to take steps to ensure that the data reported on Form 8955-SSA  are accurate and to advise plan sponsors of any changes to reporting  these data. We commend IRS for recognizing the importance of  addressing this issue for taxpayers and for its willingness to take steps to  ensure the accuracy of data reported by plans in the United States on  vested benefits belonging to separated employees.", "Lastly, IRS agreed with our recommendation to clarify how U.S.  individuals are to report their foreign retirement accounts, which could  include how the taxpayer should report contributions, earnings, and  distributions made from the account. We encourage IRS to take the  necessary steps to dispel any confusion U.S. individuals may have over  how to properly classify and report their foreign retirement accounts on a  U.S. tax return\u2014such clarification should help ensure that these  taxpayers can meet their tax reporting obligations.", "IRS disagreed with two of our recommendations, citing the limited number  of IRS staff and resources needed for the agency to implement these  recommendations. First, IRS disagreed with our recommendation to  consider revising the letter forwarding program in a cost-effective manner  to again provide information on behalf of U.S. plan sponsors on  unclaimed retirement accounts to participants. IRS commented that the  IRS address of record for a participant would likely be of no greater value  than addresses available through alternatives such as commercial locator  services. However, our report does not cite the accuracy of IRS  addresses, but rather other benefits that make a program revision worth  considering, specifically the likelihood that individuals will open IRS  correspondence, and the trust DOL places in the service as way for plan  fiduciaries to meet their obligations. IRS also stated that the limited  number of IRS staff and resources impact the feasibility of reinstating this  program for plan participants. GAO continues to believe that expanding  the letter forwarding program would be beneficial, and we encourage IRS  to consider cost-effective ways to do so.", "IRS also disagreed with our recommendation to analyze data provided  through Form 8938 filings on foreign retirement accounts owned by U.S.  individuals with the goal of developing an evidence-based understanding  of how these accounts change over time and what level of risk these  accounts pose for tax evasion. Our recommendation further stated that  IRS should consider revising Form 8938 to assist with this analysis. In its  comments, IRS did not disagree with this recommendation on its merits;  IRS only cited a lack of resources to implement the recommendation.  Specifically, IRS noted that although the modification to the Form 8938  suggested in this recommendation may seem minor, systemically  collecting and analyzing the data would require resources beyond those  currently available to IRS. However, as we describe in the report, IRS  indicated to us that they already collect foreign account filing data through  the Form 8938 and that the current reporting requirements help the  agency to \u201ckeep a line of sight\u201d on U.S. individuals\u2019 foreign pension  arrangements. IRS told us that without such data being reported, U.S.  individuals with foreign retirement accounts may seek to avoid proper  reporting on their tax returns when distributions are made. However,  without agreeing to take steps to analyze these data reported by  taxpayers, the question remains why IRS continues to collect such  information\u2014which we show in the report to present a substantial  reporting burden on taxpayers\u2014if the agency has no plan to analyze the  data in order to make an informed decision about the risk for tax evasion  that such accounts present. It is also unclear to us how IRS would  maintain a line of sight on foreign retirement accounts belonging to U.S.  individuals without analyzing the data reported by taxpayers on such  accounts. While we recognize that resource limits can impede an agency  from taking on additional work and projects, we continue to believe that  when staff and resources become available, IRS should modify the form  and conduct a systematic analysis of these data\u2014data that current law  requires taxpayers to report\u2014in order to assess the risk of tax evasion  that foreign retirement accounts pose. Without such an analysis, IRS will  have no basis to reach an evidence-based understanding of how these  accounts change over time and what level of risk they pose for tax  evasion. Further, as we have shown in the report, this reporting can be  costly for U.S. individuals and could potentially lead to a decrease in their  retirement savings. Without such an analysis by IRS, U.S. individuals who  own foreign retirement accounts will continue to face these substantial  reporting burdens without the knowledge that the data they are required  to provide will be put to good use by the federal government.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Labor,  Secretary of the Treasury, Commissioner of Internal Revenue, Director of  the Pension Benefit Guaranty Corporation, Acting Commissioner of the  Social Security Administration, the Secretary of State, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or jeszeckc@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 VIII."], "subsections": []}]}, {"section_title": "Appendix I: IRS Instructions on Reviewing Tax Treaty Provisions Related to Foreign Retirement Accounts", "paragraphs": ["IRS advises U.S. taxpayers to review tax treaty provisions carefully to  better understand how to report their foreign income, including the  distribution of savings from foreign retirement accounts. IRS specifically  advises taxpayers to read the residency article in a tax treaty to find any  special rules pertaining to reporting and taxing foreign income, including  distributions from foreign workplace retirement plans. When deciding  whether a tax treaty applies to a taxpayer, the taxpayer should first  identify their tax residency (Article 4 under most treaties). According to  IRS, a taxpayer\u2019s residency determines how treaty articles on pensions  and annuities will be applied and taxpayers should use the domestic laws  of each country to identify residency. If, after applying the domestic law of  each country, the taxpayer determines they are a resident of both  countries, the tiebreaker rules of the applicable treaty are applied to  determine residency based on the country in which the taxpayer has  closer personal and economic relations, the country of habitual abode for  the taxpayer, or the country in which the taxpayer is a national, according  to IRS. If none of the above tiebreaker rules apply, the treaty generally  provides that residency will be decided by the competent authorities of  each country upon request by the taxpayer. Taxpayers are also advised  to read all the protocols of the treaty to see if the residency rules have  been amended by a later protocol. As a general rule, according to IRS,  the pension/annuity articles of most tax treaties allow the country of  residence (as determined by the residency article) to tax the pension  distribution or annuity under its domestic laws, unless the tax treaty  provides an exception to that rule. According to IRS, some treaties, for  example, provide that the country of residence may not tax amounts that  would not have been taxable by the other country if the individual was a  resident of that country. There also may be special rules for lump-sum  distributions. If the taxpayer is a U.S. citizen, IRS guidance provides that  they also may need to refer to the \u201csaving clause\u201d (typically found in  Article 1) for special rules that allow the United States to tax income in  some cases as if the treaty had not entered into force."], "subsections": []}, {"section_title": "Appendix II: Estimated Number of U.S. Citizens Living Abroad", "paragraphs": ["Researchers and federal officials have identified a range of estimates for  U.S. citizens living outside the United States. (See fig. 5).", "The U.S. Department of State (State) estimates that as of April 2015, 8.7  million U.S. citizens live abroad. Table 2 shows estimates of the number  of U.S. citizens living abroad by geographic area that State\u2019s Bureau of  Consular Affairs recently released to the Federal Voting Assistance  Program."], "subsections": []}, {"section_title": "Appendix III: Efforts to Link Participants to Dormant or Unclaimed Retirement Accounts in Case Study Locations", "paragraphs": ["We gathered the information in this appendix for each case study location  by reviewing relevant documentation, publicly available research and  reports, and interviewing relevant stakeholders, including government  officials, plan sponsors, and service providers. We did not conduct an  independent legal analysis to verify the information provided about the  laws or regulations in the locations we selected for this study. Instead, we  relied on appropriate secondary sources and interviews with relevant  officials to support our work. We provided this information to appropriate  officials in each case study location for their confirmation.", "In the five case study locations we reviewed, participants, including U.S.  individuals working in those locations, stay connected to their foreign  workplace retirement savings through centralized institutions, direct  contact with plans or government agencies, or through public pension  registries. The low prevalence of unclaimed retirement accounts that we  found in these locations is likely due, in part, to participants using these  mechanisms to stay connected to their retirement savings."], "subsections": [{"section_title": "Unclaimed Retirement Accounts Are Maintained Within Centralized Institutions or a Participant\u2019s Former Employer\u2019s Plan", "paragraphs": ["In two of the five locations we reviewed, Australia and Switzerland, plans  transfer dormant accounts belonging to separated employees to a  centralized institution that is actively monitored by regulators. These  accounts generally remain within these institutions until claims for benefits  are made by the participant. For example, Swiss officials told us that in  the event of a change of employment, the pension scheme (i.e., plan) of  an insured person (i.e., participant) transfers the accumulated assets on  behalf of that person to the pension scheme of the new employer. Vested  benefits institutions are used to hold the assets when a person ceases to  be subject to occupational benefits (workplace retirement) plans owing to  termination of employment, e.g. in connection with a career break or  being laid off. In these cases, the pension scheme mandatorily transfers  the assets to a vested benefits institution. This procedure ensures that the  accumulated assets remain blocked in the pension cycle until the insured  person joins a new pension scheme or an insured event occurs (old age,  disability, or death). Once the person recommences employment and  thus becomes subject to mandatory occupational benefits plans again,  the termination benefits must be transferred by the vested benefits  institution to the new pension scheme. If the pension scheme member or  insured person does not become re-employed, the vested benefits institution keeps the assets until an insured event occurs (retirement,  disability, or death). Further, if a separated employee fails to inform their  former plan that they have a new employer, the participant\u2019s former plan  automatically transfers the account after 6 months and within 2 years to  the Substitute Occupational Benefit Institution. This institution is a non- profit entity that the Swiss federal government commissioned in 1985; it  works closely with the Swiss federal government to maintain Swiss  retirement assets for participants and is charged with certain  governmental responsibilities. For retirement assets transferred to the  Substitute Occupational Benefit Institution, account balances are not  merely preserved until claimed or transferred, but grow according to  returns on Switzerland\u2019s central fund investments. Figure 6 describes how  accounts of separated employees in Switzerland are transferred to  designated locations when they become dormant or unclaimed.", "Swiss plans also transfer accounts belonging to separated employees to  the employee\u2019s new plan once they receive instruction from the  employee. This transfer along with account transfers to the Substitute  Occupational Benefit Institution or a vested benefits institution, such as a  bank or insurance company, contributes to the low prevalence of lost  retirement accounts in Switzerland because participants do not  accumulate multiple retirement accounts with different plans when  changing jobs throughout their career.", "In Australia, plans (also referred to as schemes or super funds) transfer  unclaimed super accounts belonging to lost members (e.g., separated  employees) to a centralized government institution, the Australian  Taxation Office (ATO). These accounts generally remain within the ATO  until claims for benefits are made by the member. While their money is  being held by the ATO it earns interest at the consumer price index rate.", "In three of the five locations GAO reviewed\u2014Canada, Hong Kong, and  the UK\u2014the participant\u2019s former employer\u2019s plan maintains dormant  accounts until claimed or transferred to a new plan. For example, in Hong  Kong, according to its retirement schemes (plan) regulator, the Mandatory  Provident Fund Schemes Authority (MPFA), whenever employees,  including U.S. individuals working in Hong Kong, change to a new  employer, they need to open a new Mandatory Provident Fund (MPF)  \u201ccontribution account\u201d under the MPF scheme in which the new employer  participates to accumulate MPF contributions in respect of the new  employment. If an employee who has ceased employment with an  employer does not take action to transfer the benefits accrued from the  previous employment to the new \u201ccontribution account\u201d with their new  employer\u2019s scheme (i.e., plan) or a \u201cpersonal account\u201d in an MPF scheme  of the employee\u2019s choice, their former employer\u2019s scheme will  automatically transfer their accumulated MPF benefits from the  contribution account to a personal account within the original scheme for  continuous investment. Government officials told us that MPF schemes  keep the benefits of the scheme members (i.e., plan participants) within  the scheme until the scheme member returns to make a claim or to issue  instructions to transfer benefits in the account to another MPF scheme.  The MPFA advises scheme members that failing to consolidate the MPF  benefits accumulated from previous employments can result in  accumulating multiple MPF accounts that can be difficult to manage\u2014this  can result in accounts becoming lost over time. To address this  challenge, the MPFA conducts regular publicity programs and publishes  pamphlets reminding scheme members that when they change  employers they should consolidate the benefits under the previous  employment to any existing personal accounts or to the new contribution  account under the MPF scheme of their new employer.", "In two of the five locations we reviewed\u2014Australia and Switzerland\u2014 plans are required to regularly report to regulators on unclaimed  accounts, missing participants, and account transfers made for separated  employees, including those made on behalf of U.S. individuals. For  example, in Australia, plans are required to communicate information on  unclaimed accounts to the ATO. Specifically, every 6 months plans are  required to identify and report members who meet the definition of \u201clost\u201d  and unclaimed accounts considered \u201cuncontactable or inactive\u201d to the  ATO. Further, plans are also required to transfer unclaimed accounts to  the ATO when certain unclaimed super money criteria are met. In  Switzerland, before the end of January each year, occupational benefits  institutions and institutions that manage vested benefits accounts or  policies are required to report to the 2nd Pillar Central Office all persons  for whom assets were held in December of the previous year.", "Plans in two of the locations we reviewed provide separated participants  information on account transfers that can help them stay connected to  their retirement savings. For example, in Hong Kong, MPF schemes  (plans) provide a transfer statement to members once the transfer of  benefits to another MPF scheme is completed. The MPF scheme that  receives the transfer must, as soon as practicable after receiving the  transferred benefits, provide the member written notice confirming the  transfer and stating the monetary value of those benefits. In Switzerland  plans must regularly contact their participants and if unable to do so, must  inform the 2nd Pillar Central Office, who will try to reestablish contact  between the plan and their participants."], "subsections": []}, {"section_title": "Unclaimed Retirement Accounts Are Accessed Through Contact with Government Agencies or Through Public Pension Registries", "paragraphs": ["Participants in three of the five locations we reviewed can access  information on their retirement accounts by contacting a government  agency. According to government and retirement plan officials in  Australia, participants can access their retirement account details by  logging onto the myGov platform, which is a secure way to access  government online services. Participants, including U.S. individuals, who  have registered online via myGov and have their personal accounts  linked to ATO online services can view their retirement accounts online and can claim their money at any time. For those that choose not to  register for myGov, they can use the Departing Australia Superannuation  Payment online service to claim their super funds once they have  departed Australia and their visa has ceased to be in effect. In Hong  Kong, MPFA officials told us that scheme members seeking information  on their personal accounts or on unclaimed retirement benefits with any  MPF scheme (plan) can approach MPFA to request a search of the  Personal Accounts Register or Unclaimed Benefits Register,  respectively. The MPFA\u2019s website includes instructions for initiating these  inquiries. In Switzerland, government officials told us that participants,  including U.S. individuals, can directly contact the 2nd Pillar Central  Office, which can locate all the institutions holding vested benefits on the  participant\u2019s behalf.", "In two of the five case study locations, Australia and the UK, participants  can access information on their retirement accounts by using pension  registries or other government supported services. For example, in the  UK, the government provides all participants, including U.S. individuals  with a UK retirement account, access to the Pension Tracing Service to  help them locate their lost retirement accounts. The UK government has  also established other organizations and services to help participants  locate their lost retirement accounts. The Pensions Advisory Service is an  independent organization that is funded by the UK government. Officials  told us that the service was implemented because retirement accounts  and pensions in the UK had become excessively complicated. The  service sometimes receives questions from participants living abroad,  such as in the United States, or from U.S. individuals living in the UK.  Service officials told us that it is particularly challenging for these foreign  participants to know how to repatriate their retirement benefits and to  locate missing retirement accounts. Government officials told us that the  UK government is committed to ensuring that members of the public can  access good-quality, free-to-client, impartial financial guidance and debt  advice which is currently provided by three different organizations. These  officials said that a bill was introduced in June 2017 that would set up a  new single financial guidance body to provide guidance and information  on all matters relating to occupational and personal pensions. Officials  said they expect that this single financial guidance body to go live no  earlier than October 2018.", "The UK government is also currently developing a new pension online  tool, the Pensions Dashboard. The dashboard is being developed as a  joint project between the UK government and the country\u2019s retirement  industry; 17 of the UK\u2019s largest pension firms developed a prototype  demonstrating that the technology for the dashboard works. The goal of  the dashboard is to allow participants to log into one portal to locate all of  their pension data, including information on the value and the location of  different retirement savings accumulated throughout their career.  Currently, a UK ID verification system is available to UK residents to  review their tax bills and other financial information online, and officials  are considering permitting participants to use this system with proper  credentials to access the dashboard. In time, UK government officials  said that the dashboard may replace the UK\u2019s Pension Tracing Service,  but not for many years. Other officials added that they are uncertain  whether the dashboard will include all plans. One concern is that many  lost accounts may be with old defined benefit plans or small defined  contribution plans that do not have online systems that can be integrated  into the dashboard. As a result, some of the plans most likely to have lost  participants may also be the least likely to participate in the dashboard."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Pension Benefit Guaranty Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Charles Jeszeck, (202) 512-7215 or jeszeckc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tamara Cross (Assistant  Director), Ted Burik (Analyst-in-Charge), Ted Leslie, and Jessica Rider  made key contributions to this report. Also contributing to this report were  Susan Aschoff, James Bennett, Amy Bowser, Sherwin Chapman, Sarah  Cornetto, Brian James, Kristy Kennedy, Jonathan McMurray, Sheila  McCoy, Jennifer Lutzy McDonald, Dan Meyer, Mimi Nguyen, Amrita Sen,  Deborah Signer, Andrew Stephens, Walter Vance, Kathleen Van Gelder,  Adam Wendel, and Seyda Wentworth."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-169", "url": "https://www.gao.gov/products/GAO-18-169", "title": "Federal Health-Insurance Marketplace: Analysis of Plan Year 2015 Application, Enrollment, and Eligibility-Verification Process", "published_date": "2017-12-21T00:00:00", "released_date": "2018-01-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Patient Protection and Affordable Care Act (PPACA) offers subsidized health-care coverage for qualifying applicants. States may operate their own health-care marketplaces or rely on the FFM, maintained by CMS. In PY 2015, 37 states relied on the FFM and over 8 million plan selections were made through the FFM. PPACA represents a significant fiscal commitment for the federal government, which pays subsidies to issuers on participants' behalf.", "GAO was asked to examine enrollment into the FFM for PY 2015, the most current data available at the time of GAO's review. This report examines the extent to which indications of potentially improper or fraudulent enrollments existed in the FFM's application, enrollment, and eligibility-verification process for the 2015 enrollment period.", "GAO reviewed relevant federal statutes, regulations, and policies for PY 2015 and interviewed CMS officials. GAO analyzed eligibility and enrollment data for about 8.04 million applicants in PY 2015 to identify applicants (1) who had a citizenship, status as a national, or lawful presence inconsistency; (2) whose information did not match SSA records; or (3) who were reportedly deceased. GAO also reviewed a nongeneralizable sample of 45 applicants to more fully understand verification processes."]}, {"section_title": "What GAO Found", "paragraphs": ["A small percentage\u2014about 1 percent\u2014of plan year (PY) 2015 enrollments were potentially improper or fraudulent. These applicants had unresolved inconsistencies related to citizenship, status as a national, lawful presence, or Social Security number (SSN), or received coverage while reportedly deceased, according to GAO's analysis of federally facilitated marketplace (FFM) eligibility and enrollment data. To verify applicant information, such as citizenship, status as a national, or lawful presence, and SSNs, the FFM uses data from the Department of Homeland Security (DHS) and Social Security Administration (SSA), among other sources. When an applicant's information does not match the available data sources, the FFM generates an inconsistency, and the FFM should take steps, such as requesting applicant documentation, to resolve it. Having an SSN is not a condition of eligibility; however, unresolved inconsistencies could indicate that an enrollment is potentially improper or fraudulent. The FFM did not actively resolve SSN inconsistencies for PY 2015, but the Centers for Medicare & Medicaid Services (CMS) has since completed system upgrades and established procedures for verifying SSNs with applicant-provided documentation, according to CMS officials.", "Note: Some applicants may be included in more than one category.", "GAO found that applicants or enrollees may have received or maintained coverage with an associated subsidy after their reported death because the FFM did not always identify individuals as deceased in a timely manner, such as prior to automatic reenrollment. CMS relied on third parties, such as family members, to report the death of an enrollee to the FFM, but did not always receive adequate notification to verify the death. According to CMS officials, CMS is exploring approaches to identify enrollees who may be deceased and should therefore be unenrolled from coverage. The FFM checks applicants' information against death information from SSA before initial enrollment but does not recheck death information prior to reenrollment. According to CMS officials, the FFM does not reverify information, other than income, when automatically reenrolling applicants to help encourage individuals to maintain enrollment in coverage from one year to the next. Without rechecking SSA death information prior to automatic reenrollment, the FFM remains at risk of providing subsidized coverage to deceased individuals with related costs to the federal government."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS assess and document the feasibility of approaches to identify the deaths of individuals prior to automatic reenrollment. HHS concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Patient Protection and Affordable Care Act (PPACA), signed into law  on March 23, 2010, offers subsidized health-care coverage for qualifying  applicants, expands the availability of Medicaid, and provides for the  establishment of health-insurance exchanges, or marketplaces, to assist  consumers in comparing and selecting among insurance plans offered by  participating private issuers of health-care coverage. Under PPACA,  states and the District of Columbia may elect to operate their own health- care marketplaces, or may rely on the federally facilitated marketplace  (FFM), known to the public as HealthCare.gov. The Centers for Medicare  & Medicaid Services (CMS), a unit of the Department of Health and  Human Services (HHS), is responsible for overseeing the establishment  of these online marketplaces, and the agency maintains the FFM.", "Under PPACA, heath-care marketplaces are the mechanisms through  which applicants enroll in qualified health plans. To help pay the cost of  insurance premiums for taxpayers and their dependents, PPACA  provides a premium tax credit (PTC) to individuals who meet certain  income and other requirements. Individuals can have the federal  government pay PTC to their issuers in advance on their behalf, known  as advance premium tax credit (APTC), which lowers their monthly  premium payments. APTC is based on estimates of household income.  Subsidies and other costs to eligible individuals under PPACA represent  a significant fiscal commitment for the federal government. As of January  2017, the Congressional Budget Office projected that the cost of  coverage provisions to the federal government will increase to $51 billion  for fiscal year 2017 for the FFM and state-based marketplaces. Subsidy  costs are contingent on eligibility for coverage. Therefore, enrollment  controls that help ensure only qualified applicants are approved for  subsidized coverage are a key factor in determining federal expenditures  under the act.", "To enroll in health-insurance coverage offered through a marketplace  created by PPACA, individuals must complete an application and meet  certain eligibility requirements. For example, an individual must be a U.S.  citizen or national, or be otherwise lawfully present in the United States.  The marketplaces are required by law to take several steps to verify the  information in individuals\u2019 applications to determine their eligibility to enroll  in coverage and, if applicable, qualify for federal subsidies. Verification  steps include validating an applicant\u2019s Social Security number (SSN), if  one is provided; verifying citizenship, status as a U.S. national, or lawful  presence; and verifying household income and family size.", "In light of findings in our recent reports related to the FFM\u2019s application,  enrollment, and eligibility-verification process, you asked that we examine  PPACA enrollment into the FFM for plan year 2015 (the most current data  available at the time of our review). This report examines the extent to  which indications of potentially improper or fraudulent enrollments existed  in the FFM\u2019s application, enrollment, and eligibility-verification process for  the 2015 enrollment period.", "To identify indications of potentially improper or fraudulent enrollments in  the FFM\u2019s application, enrollment, and eligibility-verification process, we  reviewed relevant federal statutes, HHS regulations, and CMS policies for  plan year 2015; interviewed CMS officials; and analyzed eligibility and  enrollment data for about 8.04 million applicants with effectuated  enrollments in plan year 2015 with an associated APTC or Cost Sharing  Reduction (CSR). We focused our analyses on three areas based on the  eligibility and verification requirements marketplaces must use to  determine whether individuals are eligible to enroll and maintain  coverage. Specifically, we identified and analyzed data for applicants  receiving coverage with an associated subsidy (1) with inconsistencies  related to citizenship, status as a national, or lawful presence; (2) whose  information, including SSN, did not match the Social Security  Administration\u2019s (SSA) records; or (3) who were reportedly deceased. For  the purposes of this report, we define applicants receiving coverage with  an associated subsidy as applicants receiving coverage in plan year 2015  with an associated APTC or CSR. Because APTC is based on, among  other things, estimates of household income, and taxpayers must  reconcile the amount of APTC paid by the federal government to issuers  on their behalf with the PTC they are eligible for on their tax returns, the  number of applicants receiving coverage with an associated subsidy and  the amount of associated subsidies identified through our analysis may  differ from the number of applicants who ultimately received subsidized  coverage and the amount of subsidies paid to issuers on their behalf.", "To complete our analysis of these three areas, we compared about 8.04  million applicants that received coverage with an associated subsidy for  plan year 2015 to the Department of Homeland Security\u2019s (DHS)  Systematic Alien Verification for Entitlements (SAVE) system from  November 15, 2014, through December 31, 2015, to identify applicants  with unresolved inconsistencies related to citizenship, status as a  national, or lawful presence; SSA\u2019s Enumeration Verification System  (EVS) from November 16, 2016, through December 29, 2016, and SSA\u2019s  Affordable Care Act (ACA) batch file output from March 2017, to identify  potentially invalid personal information; and SSA\u2019s full death file from  June 2016, to identify reportedly deceased individuals. For reporting  purposes, we present the results of our data-matching analyses as  approximate whole numbers. Additionally, we selected a  nongeneralizable sample of 45 applicants from our results to more fully  understand the verification and inconsistency-resolution process.", "To determine the reliability of the data used in our analysis, we performed  electronic testing to determine the validity of specific data elements in the  FFM and other federal data files that we used to perform our work. We  also interviewed officials responsible for their respective databases, and  reviewed documentation related to the databases and literature related to  the quality of the data. On the basis of our own testing and our  discussions with agency officials, we concluded that the data elements  used for this report were sufficiently reliable for the purposes of our  reporting objectives.", "As discussed above, we focused our analyses on three areas. We did not  perform analyses using independent data sources to verify other types of  information required for applicants to enroll in qualified health plans and  qualify for subsidies, which we have discussed in previous GAO reports.  Specifically, we did not perform analysis on the following:  Income. Internal Revenue Service (IRS) household income  information is necessary in determining subsidy amounts, but can be  up to 2 years old. Due to the age of the data, there may be  discrepancies between applicants\u2019 attested information and what the  marketplace obtains through the federal data services hub (data  hub). According to HHS regulations and CMS guidance, if electronic  data are unavailable or an applicant\u2019s attestation of projected annual  household income is more than 10 percent below the annual  household income as computed using available data sources, the  marketplace must follow inconsistency-resolution procedures. These  procedures will accept differences of up to 20 percent of an  applicant\u2019s attested income from what CMS is able to recalculate  using supporting documentation.", "Residency. Individuals must intend to reside in the state in which they  are applying for coverage and are not required to have a fixed  address in the state. The marketplace can accept self-attestation  unless the information provided by the applicant is not reasonably  compatible with other information provided by the applicant or in the  records of the marketplace. HHS has recently stated that its previous  assessments of available sources did not identify any comprehensive  data source for verifying residency. However, we previously reported  that CMS did not document an evaluation of available external  sources to determine the quality, relevance, and reliability of the data,  and we recommended that it do so.", "Incarceration. Individuals must not be incarcerated (unless  incarcerated while awaiting disposition of charges). We have  previously reported that there are many challenges associated with  using incarceration data, including the risk of false positives.", "For more detailed information on our scope and methodology, see  appendix I.", "We conducted this performance audit from November 2015 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CMS operates the FFM consistent with PPACA and relevant HHS  regulations. In plan year 2015, 37 states relied on the FFM. The  remaining 14 states, including the District of Columbia, operated their own  state-based marketplaces. According to published HHS figures, the FFM  accounted for about 76 percent, or approximately 8.8 million, of plan  selections made via marketplaces from November 15, 2014, through  February 22, 2015. Overall, we found that about 8.04 million applicants  selected a plan, effectuated enrollment, and received coverage with an  associated subsidy for plan year 2015. We discuss these 8.04 million  applicants later in this report. More than half of the 8.8 million plans in  plan year 2015 were applicants who did not have a plan via the FFM in  plan year 2014, which was the FFM\u2019s first year. Of the 8.8 million total  plans, 87 percent qualified for an APTC with an average APTC of $263  per application per month.", "All marketplaces, including the FFM, are required by PPACA to verify  applicant information to determine eligibility for enrollment and income- based subsidies, if applicable. Marketplaces, among other things, must  check for Medicaid eligibility before determining eligibility for qualified  health plans;  validate an applicant\u2019s SSN, if one is provided, by comparing with  SSA records;  verify citizenship, status as a U.S. national, or lawful presence by  comparing with SSA or DHS records, respectively; and  verify household income and family size by comparing with tax-return  data from the IRS, as well as data on Social Security benefits from  SSA.", "If the information the applicant provided on the application does not  match the information contained in the data source, or if a data source is  not available to verify the information, the FFM generates an  inconsistency. The FFM then sends a notification to the applicant, who  generally has 90 days to present satisfactory documentary evidence to  resolve the inconsistency, and grants the applicant conditional eligibility if  the applicant is otherwise qualified. While waiting for supporting  documentation, the FFM attempts to review and resolve the  inconsistency, which can include looking for obvious errors on the  application. The FFM will generally categorize inconsistencies as expired  if the applicant was not able to provide the supporting documentation to  resolve the inconsistency within the allotted time frame and the FFM was  not able to resolve the inconsistency. Depending on the type of  inconsistency and availability of data sources, an applicant with an  expired inconsistency may have his or her coverage terminated, or the  applicant\u2019s subsidy amount may be recalculated based on the trusted  source information or eliminated. In other circumstances, the applicant\u2019s  situation may change such that no additional action is required by the  FFM to address the inconsistency. These inconsistencies are categorized  as overcome by events (OBE) and can include situations where the  application changes to a non-financial-assistance application or another  inconsistency has expired. Inconsistencies that the FFM cannot resolve,  expire, or categorize as OBE remain open.", "We previously made recommendations to improve the FFM\u2019s enrollment  and eligibility-verification process. Specifically, in 2016, we made eight  recommendations, including that CMS consider analyzing outcomes of  the verification system, take steps to resolve inconsistencies related to  SSNs, and conduct a risk assessment of the potential for fraud in  marketplace applications. HHS concurred with our recommendations. In  2017, we made 10 recommendations to HHS involving the annual  reporting of APTC improper-payments estimates, improving control  activities related to eligibility determinations, and calculations of APTC  based on incomes and family sizes. HHS concurred with 7 of the  recommendations and neither agreed nor disagreed with the remaining 3  recommendations, which related to improving control activities for  verifying identities of individuals, preventing duplicate coverage of  individuals receiving minimum essential coverage through their  employers, and verifying household incomes and family sizes. As of  November 2017, HHS has not provided us with documentation to support  the implementation of recommendations made in 2016 or 2017. As a  result, the 18 recommendations remain open."], "subsections": []}, {"section_title": "Analyses Identified about 1 Percent of Enrollments during Plan Year 2015 as Potentially Improper or Fraudulent, with Challenges Remaining in the Identification and Reenrollment of Reportedly Deceased Individuals", "paragraphs": [], "subsections": [{"section_title": "About 1 Percent of Enrollments for Plan Year 2015 Were Identified as Potentially Improper or Fraudulent", "paragraphs": ["Our analysis of plan year 2015 FFM enrollment and eligibility data  identified a small percentage\u2014about 1 percent\u2014of enrollments that were  potentially improper or fraudulent because they had an unresolved issue  related to citizenship, status as a national, or lawful presence, or to SSN,  or were reportedly deceased. The presence of an unresolved data- matching inconsistency could indicate that an enrollment is potentially  improper or fraudulent because an unresolved inconsistency indicates  that the FFM could not verify information provided by the applicant. When  a data-matching inconsistency is generated, HHS regulations require that  the applicant provide supporting documentation generally within 90 days  to resolve the inconsistency. If the applicant does not provide requested  documentation within the time frame and the FFM cannot otherwise verify  the information provided by the applicant, the inconsistency may be  expired, which could lead to termination from coverage or a recalculation  or elimination of subsidy amounts based on the trusted data source  information, depending on the type of inconsistency. In addition, in our  prior undercover work, we were able to obtain and maintain coverage for  fictitious applicants by submitting fictitious or no documents to resolve a  data-matching inconsistency. Our undercover work has also previously  shown that the FFM did not verify the authenticity or accuracy of the  documents we submitted to resolve inconsistencies. As part of our current  analyses, we did not independently verify the instances where the FFM  resolved inconsistencies when applicants provided the requested  documentation during this engagement. However, if the FFM did not  corroborate information on applicant-provided documentation with the  appropriate agency, some applicants with resolved data-matching  inconsistencies may have received coverage with an associated subsidy  potentially improperly or fraudulently."], "subsections": [{"section_title": "Verification of Citizenship, Status as a National, or Lawful Presence Status", "paragraphs": ["Most of the about 8.04 million applicants who received coverage with an  associated subsidy in plan year 2015 provided information that allowed  the FFM to verify an applicant\u2019s status as a U.S. citizen or national, or  lawfully present in the United States. Nevertheless, the FFM did identify  some inconsistencies related to citizenship, status as a national, or lawful  presence. The FFM flags applicants as having an inconsistency if they  attested to being a citizen but their status as a citizen could not be  verified\u2014for example, because their SSN and other information does not  match SSA records\u2014or they attest to an eligible immigration status but  their lawful presence could not be immediately verified. Specifically,  based on our analysis of enrollment data provided by CMS, the FFM  initially identified approximately 88 percent of about 8.04 million  applicants as a U.S. citizen or national, or lawfully present in the United  States. The FFM identified the remaining approximately 961,000  applicants (12 percent), as having inconsistencies related to citizenship,  status as a national, or lawful presence.", "The FFM was able to obtain information from the DHS SAVE program to  address some inconsistencies related to citizenship, status as a national,  or lawful presence, but issues with applicant-provided information  precluded the FFM from querying all of the inconsistencies. The FFM  queried DHS SAVE records for about 242,000 of the 961,000 applicants  with inconsistencies (25 percent), but we were not able to identify queries  for about 719,000 (75 percent). See figure 1 below for a comparison of  FFM inconsistencies related to citizenship, status as a national, or lawful  presence to DHS SAVE records.", "We found that the FFM could not query these 719,000 applicants mostly  because of the quality of information submitted by applicants. Specifically,  many of the applicants the FFM could not query were missing information  such as immigration numbers that the DHS SAVE program requires. For  example, we found applicants who provided their name and date of birth  but did not provide an immigration number, which prevented the FFM  from using the DHS SAVE program to verify citizenship or lawful  presence status. Such cases required the FFM to request supporting  documentation from the applicant.", "After the initial comparison to the DHS SAVE program, the FFM attempts  to resolve remaining inconsistencies by first looking for obvious errors  and then by using additional documentation requested from the applicant.  See figure 2 below for an overview of inconsistencies related to  citizenship, status as a national, or lawful presence that remained  unresolved (i.e., open), as of December 31, 2015.", "As shown in figure 2, CMS addressed some, but not all, inconsistencies.  Specifically, about 43,000 inconsistencies related to citizenship, status as  a national, or lawful presence (less than 1 percent of total applicants)  remained in an open status as of December 31, 2015. An open status  indicates that CMS was unable to resolve or obtain documentation to  clarify the issues that led to the inconsistency. In some cases, an  inconsistency generated late in the year may have remained open but,  according to CMS officials, would have carried forward and generated a  new inconsistency for plan year 2016. Inconsistencies that remained  open because they were not resolved within the required time frame  represent potentially improper or fraudulent applicants who retained  coverage without providing sufficient supporting documentation to resolve  their inconsistency. However, the number of potentially improper or  fraudulent applicants may be understated since we only took into  consideration those with inconsistencies in an open status and not  applicants with expired inconsistencies who may have continued to  receive coverage and had subsidies paid to issuers on their behalf before  CMS was able to terminate their coverage and subsidies.", "To examine steps taken by the FFM when processing inconsistencies  related to citizenship, status as a national or lawful presence, we selected  a nongeneralizable sample of 15 of the 961,000 applicants that the FFM  identified. For 13 out of the 15, the FFM verified the applicant\u2019s  information through supporting documentation or DHS SAVE and  resolved or expired the inconsistency in accordance with its standard  operating procedures, or the FFM categorized the applicant as OBE  because of an application update that made the inconsistency no longer  relevant. We did note that in 2 of the 13 cases, the FFM did not perform a  DHS SAVE program query to corroborate the supporting documentation.  However, this was not required at the time the applicants enrolled, which  was prior to June 2015 when CMS established that procedure.", "In the remaining cases, the FFM did not verify the applicants\u2019 information  in plan year 2015, but the applicants received coverage beyond the 95- day inconsistency-resolution period. For example, in one case we found  that the applicant obtained multiple policies for different periods during the  year without ever providing sufficient information to verify his or her status  as a U.S. citizen or national, or being lawfully present in the United  States. As a result, the applicant was able to obtain coverage for two- thirds of the coverage year. According to CMS, this inconsistency was  carried over to plan year 2016, when the inconsistency was expired and  the applicant\u2019s coverage was terminated."], "subsections": []}, {"section_title": "Verification of Social Security Numbers", "paragraphs": ["Most applicants for plan year 2015 who received coverage with an  associated subsidy submitted SSNs and other information that matched  SSA records, and the FFM identified SSN inconsistencies for most of the  applicants whose information did not match SSA records. As shown in  figure 3, our analysis found that over 96 percent of applicants (7.74  million out of about 8.04 million) submitted information that was consistent  with SSA records, but about 139,000 (1.7 percent of total applicants) did  not. The other 166,000 applicants (2.1 percent) did not provide an SSN  on their application.", "Of the approximately 139,000 applicants (1.7 percent) whose information  did not match SSA records in our analysis, we found that the FFM  identified an SSN inconsistency for about 109,000 (1.4 percent of total  applicants). The FFM did not designate the remaining applicants whose  information did not match SSA records in our analysis (about 31,000 of  139,000 applicants) as having an SSN inconsistency for plan year 2015,  indicating that the FFM did not flag the applicant\u2019s information as not  matching SSA records. The FFM may not have flagged an applicant\u2019s  information for plan year 2015 as not matching SSA records if the  applicant\u2019s information matched SSA records at the time of enrollment but  the applicant later changed his or her name with SSA.", "The FFM did not address all SSN inconsistencies for plan year 2015.  Specifically, about 33,000 of the 109,000 applicants for whom the FFM  identified an SSN inconsistency for plan year 2015 (less than 1 percent of  total applicants) had an open SSN inconsistency only (see fig. 4).", "An open SSN inconsistency may indicate a potentially improper or  fraudulent enrollment because it indicates that the FFM did not verify the  applicant\u2019s identity information but the applicant retained coverage.  Applicants may have had open SSN inconsistencies in plan year 2015  because the FFM did not take steps to actively resolve SSN  inconsistencies at that time. In some cases, an inconsistency generated  late in the year may have remained open but, according to CMS officials,  would have carried forward and generated a new inconsistency for plan  year 2016. According to CMS officials, the FFM did not actively take steps  to resolve SSN inconsistencies in plan year 2015 primarily because the  FFM could not update SSNs in the data system at the time, as discussed  in more detail later in this section. We previously reported that open SSN  inconsistencies are indicators of potentially fraudulent applications.  Specifically, we reported that we had successfully enrolled and received  coverage with an associated subsidy in plan year 2015 for eight  undercover identities that either did not provide an SSN or had an invalid  Social Security identity. Further, HHS regulations state that the FFM  must follow its standard inconsistency procedures if it is unable to validate  an individual\u2019s SSN through SSA. To address this issue we  recommended that CMS design and implement procedures to resolve  SSN inconsistencies. In May 2017, CMS established written procedures  for verifying SSNs with documents submitted by applicants, as discussed  in more detail later in this report.", "The remaining applicants with an SSN inconsistency for plan year 2015  had either a resolved SSN inconsistency (14,000 applicants) or an SSN  inconsistency that was expired or OBE (62,000 applicants). Although the  FFM was not actively resolving SSN inconsistencies in plan year 2015,  according to CMS officials, most applicants with an SSN inconsistency  also had an inconsistency related to citizenship, status as a national, or  lawful presence, and documentation submitted to resolve those  inconsistencies may also resolve SSN inconsistencies. For example,  according to CMS officials, if an applicant submitted a Social Security  card to the FFM, an SSN inconsistency could be resolved based on that  documentation. If an inconsistency related to citizenship, status as a  national, or lawful presence expired, the FFM automatically expired the  SSN inconsistency, according to CMS procedures. According to CMS  officials, the FFM closed SSN inconsistencies as OBE if no action needed  to be taken on the inconsistency because it was no longer relevant to the  application, such as in cases where the applicant corrected his or her  SSN on the application.", "To examine steps taken to verify SSNs and process SSN inconsistencies,  we reviewed a nongeneralizable sample of 15 applicants of the 139,000  applicants who received coverage with an associated subsidy in plan year  2015 whose information did not match SSA records in our analysis. In 3  of the 15 cases, additional information provided by CMS indicates that the  FFM verified that the SSN on the application was correct. Specifically, in  two of the cases, our analysis found that the applicant\u2019s information did  not match SSA records but the FFM verified the applicant\u2019s information  and did not generate an SSN inconsistency. As previously discussed, the  FFM may not have identified an SSN inconsistency if the applicant\u2019s  information matched SSA records at the time of enrollment but the  applicant later changed his or her name with SSA. In both of these cases,  we found that the applicant\u2019s date of birth matched SSA records but the  name did not, indicating that the applicant may have changed his or her  name. In the third case, the FFM resolved the SSN inconsistency in plan  year 2015 when the applicant submitted a Social Security card showing  the same name and SSN as the application.", "In 5 of the 15 cases, the applicant had an SSN inconsistency in plan year  2015 that was not resolved. Specifically, in two of the five cases, the SSN  inconsistency expired when an inconsistency related to citizenship, status  as a national, or lawful presence was expired, in accordance with CMS  procedures. In one case, the SSN inconsistency remained open because,  as previously noted, the FFM did not take direct action to resolve SSN  inconsistencies in plan year 2015, according to CMS officials. In two  cases, the SSN inconsistency was OBE. According to CMS officials, an  inconsistency status may be changed to OBE when the inconsistency no  longer needs to be addressed as a result of changes to the application,  such as when an applicant updates information on his or her application  or the application changes to a non-financial-assistance application. CMS  officials did not specify what circumstances resulted in the status of these  two SSN inconsistencies being changed to OBE; however, one of the  applicants had a subsequent health-insurance policy that did not provide  financial assistance.", "We found that in 5 of the 15 cases, the FFM either resolved an SSN  inconsistency in plan year 2015 when the applicant submitted a Social  Security card or did not generate an SSN inconsistency for plan year  2015 because the applicant had provided a Social Security card in plan  year 2014, but information on the applicant-provided Social Security card  did not match information in CMS\u2019s data system. CMS officials did not  indicate that the FFM had verified the name and SSN on the applicant- provided Social Security cards in these five cases with SSA records. The  SSN on applicant-provided documentation may not have matched the  SSN in CMS\u2019s data because, as discussed previously, system limitations  existed prior to March 2017. Specifically, even if the FFM received a  Social Security card to resolve an inconsistency, the FFM did not reflect  this change in CMS\u2019s data system because the system did not have the  capability to modify or update SSN information at the time, according to  CMS officials. For example, if an applicant mistyped his or her SSN, the  inconsistency may have been subsequently resolved if the applicant  submitted a Social Security card, but CMS\u2019s data system would continue  to reflect the incorrect SSN that had been originally submitted.", "Finally, we found that in 2 of the 15 cases, the FFM resolved the SSN  inconsistency in plan year 2015 or the FFM did not generate an SSN  inconsistency in 2015 because it resolved an SSN inconsistency in plan  year 2014, but information provided by CMS did not support the  resolution of the SSN inconsistency. Specifically, in one case in which the  FFM resolved an SSN inconsistency for plan year 2015, we could not  determine how the SSN inconsistency was resolved because, according  to CMS officials, the applicant did not provide documentation of his or her  SSN. In another case, the FFM automatically reenrolled an applicant for  plan year 2015 without an SSN inconsistency after identifying an SSN  inconsistency in plan year 2014 because, according to CMS officials, the  applicant submitted a passport to resolve a citizenship inconsistency.  While submission of a U.S. passport can be used to verify citizenship,  CMS procedures do not permit using a passport to resolve an SSN  inconsistency, and the applicant\u2019s passport did not contain an SSN.  Because the applicant did not provide any other documentation to resolve  the SSN inconsistency in plan year 2014 and the FFM did not generate  an SSN inconsistency in plan year 2015, even though the applicant\u2019s  information did not match SSA records, we could not determine whether  CMS\u2019s data system reflects the correct SSN for this applicant.", "According to CMS officials, having an incorrect SSN on the application  does not affect eligibility, since having an SSN is not a requirement for  eligibility. However, as previously discussed, resolving data-matching  inconsistencies without corroborating information with the appropriate  agency puts the FFM at risk of approving potentially fraudulent or  improper applications for subsidized coverage. We identified  approximately $59 million in APTC for plan year 2015 associated with the  applications of the 14,000 applicants who provided SSNs and other  information that did not match SSA records and had a resolved SSN  inconsistency. The $59 million may include APTC associated with  applicants whose SSN inconsistencies were resolved without sufficient  documentation, applicants who had SSN inconsistencies that were  resolved based on applicant-submitted documentation that does not  match the SSN in CMS\u2019s data system, and applicants whose SSN  inconsistencies were resolved appropriately. We identified $112 million  in APTC associated with the applications of applicants who did not have  an SSN inconsistency flagged in plan year 2015, although some  information did not match SSA records in our analysis. We could not  associate APTC subsidies with individual applicants because applications  may include more than one person.", "Further, inaccurate SSNs in CMS\u2019s system potentially impede the IRS\u2019s  ability to reconcile APTC. The IRS is responsible for processing tax  returns to determine the final amount of PTC to which taxpayers are  entitled and for recovering APTC overpayments. To enable the IRS to  reconcile APTC, PPACA requires marketplaces to report certain  information on individuals with marketplace coverage, including the name,  address, and taxpayer-identification number\u2014an SSN in cases where the  individual has one\u2014to the IRS. The IRS compares information provided by the marketplace on the APTC paid to issuers on taxpayers\u2019 behalf to  the amount for which taxpayers qualify based on actual household  income and family size reported on their tax returns.", "In March 2017, system functionality upgrades were completed and  deployed to enable the FFM to modify or update SSNs, according to CMS  officials. In addition, as noted previously, CMS established procedures in  May 2017 for verifying SSNs with documents submitted by applicants.  These procedures require the FFM to take steps to update and verify  SSNs by (1) obtaining documentation of the SSN or processing  previously received SSN documents, (2) entering the SSN shown on  documentation into CMS\u2019s data system, and (3) trying to verify the newly  entered or corrected SSN with SSA records. Further, the procedures  direct the FFM to escalate cases for CMS review if the SSN cannot be  verified, or documentation submitted to verify the SSN matches the  information originally provided by the applicant that could not be verified  with SSA records, as this may indicate potential fraud. We did not  independently verify that the procedures have been implemented  because the changes occurred outside the scope of our review; however,  if properly implemented, these changes may help reduce the risk that  potentially improper or fraudulent applicants could obtain subsidized  coverage by helping to ensure that SSNs are appropriately verified and  corrected in CMS\u2019s data system."], "subsections": []}]}, {"section_title": "Relatively Few Reportedly Deceased Individuals Received Coverage with an Associated Subsidy, but Challenges Remain with Identifying Deceased Individuals before Automatic Reenrollment", "paragraphs": ["We found relatively few indicators that reportedly deceased individuals  received coverage with an associated subsidy during plan year 2015.  Specifically, we identified about 19,000 out of the approximately 7.74  million applicants who provided SSNs and other information that matched  SSA records (about 0.24 percent) who received coverage with an  associated subsidy on or after the date listed in the full death file as their  date of death. HHS regulations state that in the case of termination of  coverage due to death, the last day of enrollment in a qualified health  plan through the FFM is the date of death. However, the FFM did not  always terminate the enrollment of individuals through the exchange as of  the date reported in the full death file as their date of death. Specifically,  we found that the coverage for about 2,000 of the 19,000 reportedly  deceased individuals ended on their reported date of death, but the  remaining approximately 17,000 received or maintained coverage with an  associated subsidy\u2014APTC or CSR, which the federal government pays  to issuers on behalf of enrollees\u2014after their reported date of death (see  fig. 5).", "Most insurance policies associated with reportedly deceased applicants  began when they were alive and continued after their deaths, but in some  cases the date of submission of the application for coverage occurred  after the individual\u2019s reported date of death. Specifically, through our  analysis, we found about 14,000 (82 percent) of the 17,000 policies that  continued beyond the applicant\u2019s reported date of death began while the  individual was alive (see fig. 6). However, the remaining policies began  after the applicant\u2019s reported date of death, including about 1,000 policies  (5 percent) for which the applicant reportedly died after the application  was submitted but before coverage started and about 2,000 policies (13  percent) in which the applicant died before the application was submitted.", "We identified about $23.0 million in APTC\u2014which the federal government  pays to issuers on behalf of enrollees\u2014after the date of death of the  applicant associated with the 17,000 policies that started or continued  after the applicant\u2019s reported date of death, of which about a fifth (about  $4.7 million) was associated with the 2,000 policies of applicants who  were reported as deceased before their application was submitted. We  could not determine the portion of APTC associated with each individual  on a policy or the extent to which the total APTC amount would have  changed if the policy had been terminated as of the reportedly deceased  individual\u2019s date of death. As previously discussed, taxpayers who  choose to have APTC must reconcile the amount of APTC paid to issuers  on their behalf with PTC they are eligible for on their income-tax returns.  Therefore, the final PTC amount may differ from the amount of APTC  paid to issuers because changes in circumstances, such as the death of  an enrollee, may affect the amount of PTC for which an enrollee is  eligible. We did not determine the extent to which APTC paid on behalf of  reportedly deceased individuals was reconciled with PTC for which these  individuals were ultimately eligible as the reconciliation process was  outside the scope of our review. However, we previously found that not all  individuals correctly filed their federal income-tax returns, as required,  and the federal government is missing opportunities to recover  overpayments of APTC as part of the reconciliation process. As a result,  APTC overpayments that the federal government improperly provides to  issuers on behalf of deceased enrollees may not be fully recovered  through the reconciliation process.", "In the majority of cases in which the applicant reportedly died before the  application was submitted (about 1,700 out of 2,000 policies), we found  that the FFM had automatically submitted the application to reenroll the  applicant. We reviewed five sample cases in which the date of the  application submission occurred after the individual\u2019s reported date of  death. For all five cases, the individual had received coverage with an  associated subsidy in plan year 2014 and the FFM automatically  reenrolled the individual for plan year 2015 after the reported date of  death. According to additional information provided by CMS officials, the  federal government paid APTC to issuers on behalf of all five of these  individuals in plan year 2015 after their reported date of death.", "Deceased individuals may receive coverage with an associated subsidy  beyond their reported date of death\u2014or the FFM may automatically  reenroll deceased individuals after their reported date of death\u2014because  the FFM does not always identify applicants as deceased after their initial  enrollment in a qualified health plan. The FFM checks applicants\u2019  information against SSA\u2019s full death file to identify reportedly deceased  individuals before enrolling them for coverage and subsidies. However,  we previously found that the FFM does not conduct periodic checks  during the year to determine whether any individuals have subsequently  died. Further, according to CMS officials, the FFM does not recheck the  full death file before automatically reenrolling applicants for subsequent  plan years or reverify information, but rather only rechecks income, to  help encourage individuals to maintain enrollment in coverage from one  year to the next and align with the process for individuals with employer- sponsored health insurance. HHS regulations require marketplaces to  periodically examine certain available data sources to identify changes\u2014 such as the enrollee\u2019s death\u2014to determine whether individuals receiving  coverage with an associated subsidy remain eligible.", "CMS does not always identify deaths of enrollees in time to terminate  enrollment through the exchange as of the date of death or to prevent  automatic reenrollment, because CMS relies on third parties, such as  family members, to report the death of an enrollee to the FFM. The FFM  has procedures in place for individuals to report an enrollee\u2019s death in  order to remove the enrollee from coverage. We reviewed a  nongeneralizable sample of 15 of the 17,000 reportedly deceased  individuals who received coverage with an associated subsidy after the  date reported in the full death file as their date of death, including the five  cases we reviewed in which the FFM automatically reenrolled the  individuals after their reported date of death. In 8 of the 15 sample cases  we reviewed, a family member or other individual contacted the FFM and  reported the enrollee\u2019s death. In two of these cases, the individual  reporting the death did not provide sufficient documentation of the death,  as required by CMS. In three cases, the FFM received notification and a  death certificate to verify the death, but did not terminate the policy as of  the date of death. The FFM did not receive the death certificates for two  of the three cases until 2016\u2014after the 2015 plan year had ended. In the  other case, the deceased individual received coverage and subsidies for  3 months in 2015 after the reported date of death but the FFM did not  receive the death certificate to verify the death until almost 2 months after  the coverage was terminated. We could not determine the reason the  individual\u2019s coverage had been terminated. According to CMS officials, in  plan year 2015, the FFM received notification of policy termination and  policy end dates from plan issuers but did not always receive information  on the reason coverage was terminated.", "When the FFM does not receive sufficient notification of a death, the  policy may be terminated by the issuer for nonpayment, according to  CMS officials. According to HHS regulations, when individuals stop  paying their premiums, such as in the case of death, there is a 3-month  grace period, after which the individuals\u2019 policies would be terminated for  failure to pay premiums retroactively to the last day of the first month of  the grace period. For example, as shown in figure 7, if an individual dies  on February 15 and the premium for the policy is not paid for months after  the individual\u2019s death, the individual would enter a 3-month grace period  covering March, April, and May. The issuer would terminate the policy for  nonpayment on May 31, with a policy end date set retroactively to March  31\u2014the last day of the first month of the grace period. As a result, in  cases in which the policy for a deceased individual is not paid for months  occurring after the individual\u2019s date of death, the deceased individual may  still receive subsidized coverage for 1 full month after the month of death.", "However, deceased individuals may receive subsidized coverage beyond  the end of the first month after their date of death if the policy is not  terminated by the issuer for nonpayment of premium. According to CMS  officials, the plan issuer may continue to report a deceased individual as  covered if the premium continues to be paid. For example, another  individual may be authorized to make payments on the policy, such as a  spouse who is also covered by the policy. We identified instances in  which policies continued beyond the end of the first month after the date  of death reported in the full death file, with some policies continuing until  the end of the plan year. In 7 of our 15 sample cases\u2014including one case  in which the applicant was automatically reenrolled for plan year 2015  after his reported date of death in October 2014\u2014the policy continued for  more than 1 complete month in 2015 after the individual\u2019s reported date  of death. In four of the seven sample cases in which coverage  continued beyond the end of the first month after the individual\u2019s death,  the policy also covered the deceased individual\u2019s spouse. In other  instances, an individual may have set up payments covering future  months prior to death. For example, in the case in which the applicant  had been receiving coverage with an associated subsidy in 2014 and was  then automatically reenrolled for plan year 2015 after his reported date of  death in October 2014, the individual received subsidized coverage for  the entirety of plan year 2015. According to CMS officials, the individual  may have set up automated payments to pay the premium.", "We recommended in July 2017 that CMS assess and document the  feasibility of approaches for periodically verifying individuals\u2019 continued  eligibility by working with other government agencies to identify changes  in life circumstances that affect APTC eligibility, such as death, that may  occur during the plan year and, if appropriate, design and implement  these verification processes. The agency agreed with the  recommendation and stated that it was exploring approaches to identify  enrollees who may be deceased and should therefore be unenrolled from  coverage. Effectively addressing this recommendation is necessary to  help ensure that the FFM does not provide coverage with associated  subsidies to deceased individuals. However, as of September 2017, CMS  officials could not confirm whether the approaches CMS was exploring  would include rechecking the full death file prior to automatically  reenrolling individuals. Without rechecking the full death file prior to  automatic reenrollment to identify individuals who died during the plan  year, the FFM remains at risk of providing coverage to deceased  individuals, potentially for prolonged periods of time following their deaths,  and of paying APTC to issuers on their behalf that may not be fully  recovered through the reconciliation process."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Effective implementation of PPACA eligibility and enrollment provisions is  a complex undertaking. As subsidies for insurance coverage through the  FFM cost billions of dollars to the federal government annually, effective  controls to ensure that only qualified applicants receive subsidized  coverage under the act are especially important. For plan year 2015, the  FFM generally verified citizenship, status as a national, or lawful presence  and SSN information appropriately, with few indications that individuals  received coverage with an associated subsidy fraudulently or improperly.  However, in some instances, applicant-submitted documentation used to  verify applicant information did not match CMS data. CMS has taken  steps since 2015 to improve verification of applicant information, including  taking steps to improve verification of SSNs using documentation  submitted by applicants and adding capability to modify or update SSNs  in its data system. These procedures and system upgrades, if properly  implemented, should help improve verification of applicant SSNs that  initially did not match SSA records.", "Further, while relatively few enrollees reportedly died prior to or during  plan year 2015, some individuals received or maintained coverage with  an associated subsidy after their reported deaths and some individuals  were automatically reenrolled for the 2015 plan year after their reported  death. The FFM checks the full death file prior to initial enrollment, but  does not recheck the full death file to identify enrollee deaths during the  plan year or prior to reenrolling individuals for the following plan year.  Without processes to identify the deaths of enrollees in a timely manner,  including prior to reenrollment for the following plan year, CMS is at risk of  providing additional months of subsidized coverage improperly with  related costs to the federal government. In 2017, we recommended that  CMS assess the feasibility of approaches for periodically verifying  changes, such as death, that affect eligibility for subsidies. Implementing  our 2017 recommendation, and taking the additional step of assessing  whether to check the full death file prior to automatically reenrolling  individuals for the following plan year, could help ensure the FFM is not  paying APTC on behalf of deceased individuals, especially for prolonged  periods following their deaths."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["As part of its efforts to assess and document the feasibility of approaches  to identify the deaths of enrollees that may occur during the plan year, the  Administrator of CMS should specifically assess and document the  feasibility of approaches\u2014including rechecking the full death file\u2014to  identify the deaths of individuals prior to automatic reenrollment for  subsequent plan years and, if appropriate, design and implement these  verification processes. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to HHS for comment. In its written  comments, which are reprinted in appendix II, HHS concurred with our  recommendation. HHS also provided technical comments, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, the Administrator of CMS, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objective of this review was to examine the extent to which  indications of potentially improper or fraudulent enrollments exist in the  federally facilitated marketplace\u2019s (FFM) application, enrollment, and  eligibility-verification process for the 2015 enrollment period.", "To identify indications of potentially improper or fraudulent enrollments in  the FFM\u2019s application, enrollment, and eligibility-verification process, we  reviewed relevant federal statutes, Department of Health and Human  Services (HHS) regulations, and Centers for Medicare & Medicaid  Services (CMS) policies for plan year 2015. We also met with CMS  officials that oversee enrollment into the FFM.", "In addition, we obtained and analyzed eligibility and enrollment data for  applicants enrolled from November 15, 2014, through December 31,  2015, and identified about 8.04 million applicants with an associated  subsidy who effectuated enrollments in plan year 2015. For the purposes  of this report, we define applicants receiving coverage with an associated  subsidy as applicants receiving coverage in plan year 2015 with an  associated advance premium tax credit (APTC) or Cost Sharing  Reduction (CSR). The number of applicants receiving coverage with an  associated subsidy and the amount of associated subsidies identified through our analysis may differ from the number of applicants who  ultimately received subsidized coverage and the amount of subsidies  received. In addition, we obtained and analyzed information on  inconsistencies associated with these applicants as of December 31,  2015.", "We focused our analyses on three areas based on the eligibility and  verification requirements the FFM must use to determine whether  individuals are eligible to enroll and maintain coverage. Specifically, we  identified and analyzed data for applicants receiving coverage with an  associated subsidy (1) with inconsistencies related to citizenship, status  as a national, or lawful presence; (2) whose information, including Social  Security number (SSN), did not match the Social Security  Administration\u2019s (SSA) records, and (3) who were reportedly deceased.", "Applicants who had inconsistencies related to citizenship, status  as a national, or lawful presence. To review applicants with  inconsistencies, we used data from the Department of Homeland  Security\u2019s (DHS) Systematic Alien Verification for Entitlements  (SAVE) system. Specifically, we obtained queries made by the FFM  from November 15, 2014, through December 31, 2015, and compared  them to approximately 961,000 applicants the FFM identified as  having inconsistencies related to citizenship, status as a national, or  lawful presence. For the purposes of this report, we considered  applicants with open inconsistencies related to citizenship, status as a  national, or lawful presence, or SSN, to be potentially improper or  fraudulent. However, the number of potentially improper or fraudulent  applicants may be understated since we did not take into  consideration applicants with expired inconsistencies who may have  continued to receive coverage and had subsidies paid to issuers on  their behalf before CMS was able to terminate their coverage and  subsidies.", "Applicants whose information, including SSN, did not match  SSA\u2019s records. To identify applicants whose personal information\u2014 name, date of birth, or SSN\u2014did not match SSA\u2019s records, we used  the SSA Enumeration Verification System (EVS) from November 16,  2016, through December 29, 2016, and SSA\u2019s Affordable Care Act  (ACA) batch file from March 2017. Specifically, we processed the  approximately 7.9 million applicants who provided an SSN of the  about 8.04 million total applicants through SSA EVS and the SSA  ACA batch file and analyzed the output codes to determine whether  the information matched SSA\u2019s records. To determine whether the  FFM had also identified an SSN-related inconsistency, we compared  the SSA EVS analysis results to the FFM eligibility information.  Although having an SSN is not a condition of eligibility, we consider  applicants with open SSN inconsistencies to be potentially improper  or fraudulent because open SSN inconsistencies indicate that the  FFM was not able to verify the applicant\u2019s identity information, but the  applicant retained coverage.", "Applicants who were reportedly deceased. To identify applicants  who were reportedly deceased prior to or during plan year 2015, we  compared the approximately 7.74 million applicants whose  information matched SSA records of the about 8.04 million total  applicants in the eligibility and enrollment data to the SSA full death  file from June 2016. We matched records using the SSN, name, and  date of birth. We limited our review to those applicants already verified  through SSA EVS. We considered applicants to be potentially  improper or fraudulent if they received or maintained coverage with an  associated subsidy after the date reported in SSA\u2019s full death file as  their date of death.", "To determine the reliability of the data used in our analysis, we performed  electronic testing to determine the validity of specific data elements in the  FFM and other federal data files that we used to perform our work. We  also interviewed officials responsible for their respective databases, and  reviewed documentation related to the databases and literature related to  the quality of the data. On the basis of our own testing and our  discussions with agency officials, we concluded that the data elements  used for this report were sufficiently reliable for our purposes. For  reporting purposes, we present the results of our data-matching analyses  as approximate whole numbers.", "To review the results of our matches, we selected a nongeneralizable  sample of 45 applicants that contained", "15 cases with inconsistencies related to citizenship, status as a  national, or lawful presence;", "15 cases where the applicant SSN information did not match SSA", "15 cases where the applicant\u2019s information matched the SSA full  death file.", "For all 45 cases, we requested and reviewed copies of available  supporting documentation from CMS. Our review of applicant cases  provides illustrative examples, and the results are not projectable to the  entire population of applicants to the FFM.", "As discussed above, we focused our analyses on three areas. We did not  perform analyses using independent data sources to verify other types of  information required for applicants to enroll in qualified health plans and  qualify for subsidies, which we have discussed in previous GAO reports.  Specifically, we did not perform analysis on the following:  Income. Internal Revenue Service (IRS) household income  information is necessary in determining subsidy amounts, but can be  up to 2 years old. Due to the age of the data, there may be  discrepancies between applicants\u2019 attested information and what the  marketplace obtains through the federal data services hub (data  hub). According to HHS regulations and CMS guidance, if electronic  data are unavailable or an applicant\u2019s attestation of projected annual  household income is more than 10 percent below the annual  household income as computed using available data sources, the  marketplace must follow inconsistency-resolution procedures. These  procedures will accept differences of up to 20 percent of an  applicant\u2019s attested income from what CMS is able to recalculate  using supporting documentation.", "Residency. Individuals must intend to reside in the state in which they  are applying for coverage and are not required to have a fixed  address in the state. The marketplace can accept self-attestation  unless the information provided by the applicant is not reasonably  compatible with other information provided by the applicant or in the  records of the marketplace. HHS has recently stated that its previous  assessments of available sources did not identify any comprehensive  data source for verifying residency. However, we previously reported  that CMS did not document an evaluation of available external  sources to determine the quality, relevance, and reliability of the data,  and recommended that it do so.", "Incarceration. Individuals must not be incarcerated (unless  incarcerated while awaiting disposition of charges). We have  previously reported that there are many challenges associated with  using incarceration data, including the risk of false positives.", "We conducted this performance audit from November 2015 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following staff members  made key contributions to this report: Philip Reiff, Assistant Director; Colin  Fallon; Suellen Foth; Kristen Juskiewicz; Maria McMullen; Madeline  Messick; James Murphy; Ariel Vega; Erin McLaughlin Villas; and  Elizabeth Wood."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Stated Health-Insurance Marketplaces: Three States Used Varied Data  Sources for Eligibility and Had Few Indications of Potentially Improper  Enrollments. GAO-17-694. Washington, D.C.: September 7, 2017.", "Improper Payments: Improvements Needed in CMS and IRS Controls  over Health Insurance Premium Tax Credit. GAO-17-467. Washington,  D.C.: July 13, 2017.", "Patient Protection and Affordable Care Act: Results of Enrollment Testing  for the 2016 Special Enrollment Period. GAO-17-78. Washington, D.C.:  November 17, 2016.", "Patient Protection and Affordable Care Act: Results of Undercover  Enrollment Testing for the Federal Marketplace and a Selected State  Marketplace for the 2016 Coverage Year. GAO-16-784. Washington,  D.C.: September 12, 2016.", "Patient Protection and Affordable Care Act: Most Enrollees Reported  Satisfaction with Their Health Plans, Although Some Concerns Exist.  GAO-16-761. Washington, D.C.: September 12, 2016.", "Patient Protection and Affordable Care Act: Final Results of Undercover  Testing of the Federal Marketplace and Selected State Marketplaces for  Coverage Year 2015. GAO-16-792. Washington, D.C.: September 9,  2016.", "Patient Protection and Affordable Care Act: CMS Should Act to  Strengthen Enrollment Controls and Manage Fraud Risk. GAO-16-29.  Washington, D.C.: February 23, 2016.", "Patient Protection and Affordable Care Act: Preliminary Results of  Undercover Testing of the Federal Marketplace and Selected State  Marketplaces for Coverage Year 2015. GAO-16-159T. Washington, D.C.:  October 23, 2015.", "Patient Protection and Affordable Care Act: IRS Needs to Strengthen  Oversight of Tax Provisions for Individuals. GAO-15-540. Washington,  D.C.: July 29, 2015.", "Patient Protection and Affordable Care Act: Observations on 18  Undercover Tests of Enrollment Controls for Health-Care Coverage and  Consumer Subsidies Provided under the Act. GAO-15-702T. Washington,  D.C.: July 16, 2015.", "Patient Protection and Affordable Care Act: Status of CMS Efforts to  Establish Federally Facilitated Health Insurance Exchanges.  GAO-13-601. Washington, D.C.: June 19, 2013."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-378", "url": "https://www.gao.gov/products/GAO-18-378", "title": "DOD Health Care: Defense Health Agency Should Improve Tracking of Serious Adverse Medical Events and Monitoring of Required Follow-up", "published_date": "2018-04-26T00:00:00", "released_date": "2018-04-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Adverse medical events are unintended incidents that may harm a patient. Serious adverse medical events, called sentinel events, have specific follow-up requirements. The National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017) requires DHA to assume the military services' administrative responsibilities, such as adverse medical event reporting, for all MTFs beginning October 1, 2018.", "The NDAA 2017 included a provision for GAO to examine the reporting and resolving of adverse medical events in the military health system. Among other objectives, this report reviews (1) the extent to which sentinel events and RCA reports are tracked and DHA ensures it has received complete information, and (2) the extent to which DHA ensures it has received MOS reports. GAO examined relevant policies; analyzed the most current available data on sentinel events from 2013 through 2016; and interviewed officials with DHA, the military services, and four MTFs selected for variety in military service, size, and geographic location."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the process for tracking the most serious adverse medical events, called sentinel events, and their root cause analysis (RCA) reports are fragmented, impeding the Defense Health Agency's (DHA) ability to ensure that it has received complete information. Unlike other adverse medical events, sentinel events\u2014which may result in severe harm or death\u2014have additional reporting requirements that must be met within specified time frames. For example, military treatment facility (MTF) officials must develop RCA reports, which identify causal factors and corrective actions for sentinel events. However, because the database that DHA uses to collect information on adverse medical events does not currently have the capability to track this information, the military services (Army, Navy, and Air Force) and DHA each maintain their own tracking records for sentinel events and RCA reports. Due to these fragmented tracking efforts, DHA reconciles its information on sentinel events and RCA reports through monthly emails to the military services\u2014a time-consuming, inefficient process. DHA officials emphasized that this process relies on the military services' cooperation because DHA does not currently have the authority to compel their responses. Moreover, despite DHA's reconciliation efforts, GAO identified discrepancies and missing information in DHA's tracking record. As a result, DHA lacks critical information about why a sentinel event may have occurred and what actions, if any, MTFs should take to prevent similar incidents in the future. Recently, DHA replaced its previous system of emails with a new tracker tool that can be accessed on the military health system website. However, the new tracker does not allow the military services to make edits, and as a result, any corrections or additional information must be submitted to DHA via email, which may perpetuate previous inefficiencies.", "GAO found that DHA cannot ensure that it is receiving all reports on the implementation of corrective actions identified in RCA reports as required by a March 2015 memo. DHA officials stated that MTFs could meet this requirement by submitting copies of their measures of success (MOS) reports, which may be required by the Joint Commission, a hospital accrediting organization. As of September 2017, DHA had received 27 MOS reports for the 319 sentinel events that were reported in 2016. However, DHA does not know how many reports it is missing because MOS reports are not required for every sentinel event, and DHA did not began reconciling its information for these reports until January 2018, when it implemented its new tracker tool. Furthermore, GAO found that the new tracker tool documents the aggregate number of MOS reports received and does not indicate whether individual sentinel events have an MOS report, impeding DHA's ability to identify which reports are missing. This issue is compounded by the fact that the military services either track MOS reports in different ways or not at all, and military service officials said that DHA's requirement for MOS report submission is not clear. DHA officials stated that they expect to clarify this requirement in their update to the patient safety policy. Because it is unable to ensure it has received all reports on the implementation of corrective actions, DHA could be missing important information that could be used to help inform broader, system-wide patient safety improvement efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Assistant Secretary of Defense (Health Affairs) ensure DHA (1) improve tracking of sentinel events and RCA reports, and (2) clarify its requirements for submitting reports on the implementation of corrective actions and consistently track and reconcile individual reports. DOD agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["One of the key patient safety responsibilities within the Department of  Defense\u2019s (DOD) Military Health System (MHS) is the reporting and  tracking of adverse medical events\u2014unintended health care incidents,  such as administering incorrect medication or treatment to a patient, that  may or may not result in harm. DOD\u2019s Assistant Secretary of Defense for  Health Affairs sets policies\u2014including patient safety policies\u2014for the  MHS, and the Defense Health Agency (DHA) oversees the  implementation of these policies. The military services (Army, Navy, and  Air Force) and the National Capital Region (NCR) currently manage their  own hospitals and clinics, referred to as military treatment facilities (MTF).  In doing so, they develop policies that must align with DOD\u2019s policies,  including policies for reporting adverse medical events that occur in their  facilities. However, the National Defense Authorization Act for Fiscal  Year 2017 (NDAA 2017) requires the transfer of administrative control of  MTFs, including the reporting of adverse medical events, to DHA,  beginning October 1, 2018.", "Information gleaned from the reporting and tracking of adverse medical  events provides the military services, NCR, and DHA with critical  information that can be used to make improvements in the way health  care is delivered across the MHS. MTF officials are required to report all  adverse medical events in DHA\u2019s Joint Patient Safety Reporting (JPSR)  system, which captures information on the factors\u2014such as medication or  equipment\u2014that may have contributed to the event. The most serious  type of adverse medical event is called a sentinel event, which can result  in unexpected death or serious physical or psychological harm to the  patient. For every sentinel event, MTF officials are required to prepare a  root cause analysis (RCA) report, which is intended to identify the factors  that caused or contributed to the sentinel event, as well as corrective  actions needed to prevent future incidents. For most sentinel events, an  additional report\u2014a Measures of Success (MOS) report\u2014 may be  required by the Joint Commission, a hospital accrediting organization that  reviews sentinel events and assigns follow-up activities to accredited  MTFs for these events. This MOS report includes the determination of  whether the implementation of identified corrective actions was  successful.", "In 2014, news articles highlighted concerns about medical errors and  lapses in patient safety at MTFs, including staff\u2019s reluctance to report  these errors. In August 2014, DOD released a review of the MHS that  addressed patient safety, among other issues. While DOD\u2019s review  found that the culture of safety within the system was comparable to that  found in the civilian sector, the report made a number of  recommendations that included the clarification of policy on the definitions  for sentinel events to reduce variation in interpretation. In December  2017, the DOD Inspector General released a follow-up report focused on  patient safety, which found that DOD had established courses of action to  resolve all relevant patient safety findings identified in the 2014 review.", "The NDAA 2017 included a provision for us to examine several issues  related to DOD\u2019s delivery of health care, such as reporting and resolving  adverse medical events. In this report, we examine  1.  the extent to which the military services\u2019 and NCR\u2019s policies align with  DOD\u2019s policies for reporting adverse medical events;  2.  the extent to which the military services, NCR, and DHA track sentinel  events and RCA reports, and the extent to which DHA ensures it has  received complete information;  3.  the extent to which DHA ensures it has received MOS reports; and  4.  how DHA uses information about adverse medical events to make  improvements in its health care system.", "To examine the extent to which the military services and NCR have  policies that align with DHA\u2019s policies for reporting adverse medical  events, we reviewed and compared the military services\u2019 and NCR\u2019s  policies with DHA\u2019s policies. We also reviewed relevant documents  related to these policies, including updated memorandums. In addition,  we interviewed officials from the military services\u2019 medical commands and  NCR\u2019s medical directorate to determine how they manage patient safety  efforts pertaining to reporting adverse medical events throughout their  MTFs and how the future transfer of this authority to DHA may affect  these efforts. We also conducted site visits to a non-generalizable  sample of four MTFs\u2014Dwight. D. Eisenhower Army Medical Center (Fort  Gordon, Ga.), Robert E. Bush Naval Hospital (Twentynine Palms, Calif.),  Mike O\u2019Callaghan Federal Medical Center (Nellis AFB, Nev.), and Walter  Reed National Military Medical Center (Bethesda, Md.)\u2014to better  understand how the military services and NCR report adverse medical  events in their facilities. Our site selection criteria included one MTF from  each of the military services and NCR with a range of hospital sizes,  geographic diversity, and numbers of reported adverse medical events.  We also interviewed DHA officials, including officials from DHA\u2019s Patient  Safety Program and the Patient Safety Analysis Center, and reviewed  relevant documentation about their patient safety policies, their plans to  update these policies, and how the future transfer of MTF administrative  responsibilities to DHA will impact the reporting of adverse medical  events.", "To determine the extent to which the military services, NCR, and DHA  track sentinel events and RCA reports, we reviewed relevant military  service, NCR, and DHA policies to identify requirements for sentinel  events and RCA reports. We interviewed officials from the military  services, NCR, and DHA about their tracking processes for sentinel  events and RCA reports. We also interviewed officials during our site  visits to the four MTFs about how they transmit information about sentinel  events and their required RCA reports to their respective military service  or NCR. We evaluated our findings against the GAO Fragmentation,  Overlap, and Duplication: An Evaluation and Management Guide to  identify any potential fragmentation.", "To determine how DHA ensures it has complete information, we reviewed  relevant DHA policies, interviewed DHA officials, and obtained documents  outlining DHA\u2019s monitoring process. We obtained the most current data  available on reported sentinel events and RCA reports from 2013 through  2016 from tracking records maintained by each of the military services,  NCR, and DHA, and we compared the data to assess DHA\u2019s monitoring  efforts. We interviewed military service, NCR, and DHA officials about  how these data are collected and documented, as well as the steps taken  to ensure that the data are complete, and on this basis we determined  that these data were sufficiently reliable for the purposes of our audit  objective.", "To determine the extent to which DHA ensures that it has received MOS  reports, we reviewed relevant military service, NCR, and DHA policies to  identify requirements for completing and tracking these reports. We also  reviewed documentation on requirements for MOS reports from the Joint  Commission. We interviewed officials from the four MTFs we visited  about how they transmit MOS reports to their respective military services  or NCR. To determine how DHA monitors this information, we obtained  data from DHA\u2019s tracking record on total MOS reports for reported  sentinel events from 2016, the first full year that such reports were  required to be submitted to DHA. We interviewed military service, NCR,  and DHA officials about how these data are collected and documented as  well as steps to ensure that these data are complete, and we determined  that these data were sufficiently reliable for the purposes of our audit  objective. We also assessed efforts to monitor MOS reports against  federal standards for internal controls.", "To determine how DHA uses information about adverse medical events to  make improvements in its health care system, we reviewed  documentation on DHA\u2019s patient safety initiatives, relevant DHA  publications, such as the Patient Safety Annual report, and the MHS  website. We also interviewed military service, NCR, and MTF officials  about the patient safety initiatives implemented by DHA, including how  these initiatives are communicated to them and how the information is  used to make improvements in their facilities.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Adverse Medical Events", "paragraphs": ["DHA requires the military services and NCR to categorize adverse  medical events by severity, using seven categories defined by the Agency  for Healthcare Research and Quality (AHRQ), ranging from unsafe  condition to death. (See table 1.)", "MTF personnel must enter all adverse medical events in DHA\u2019s JPSR  system, which was implemented in June 2011 in response to a statutory  mandate for the MHS to establish a patient care error reporting and  management system. The JPSR system is intended to provide ways to  facilitate the self-reporting, collection, and aggregation of adverse medical  event data across the MHS. The system includes prompts for information  about factors that may have contributed to the event, such as medication  or equipment, as well as the assignment of a severity category.", "From 2013 through 2016, the total number of reported adverse medical  events in the JPSR system increased from over 76,000 to about 108,000.  When analyzing adverse medical events, DHA groups the data into three  categories\u2014near miss, no harm, and harm. The highest increase was in  the near miss category (about 36,000 to 56,000) while the other two  categories increased to a lesser extent. According to an internal DHA  publication, a higher increase in near miss events alongside a decrease  in harm and no harm events is considered a positive trend because it  shows that more potential adverse medical events are being detected  before they reach the patient. (See fig. 1.)"], "subsections": []}, {"section_title": "Sentinel Events", "paragraphs": ["The most severe types of adverse events are called sentinel events. In  March 2015, DOD issued a memo that revised its previous definition of a  sentinel event, which was an unexpected occurrence involving death or  serious physical or psychological injury or risk. The revised definition  states that a sentinel event is a patient safety event (not primarily related  to the natural course of the patient\u2019s illness or underlying condition) that  results in death, permanent harm, or severe temporary harm. The  revised definition also added a list of events outlined by the Joint  Commission and the National Quality Forum that go beyond those that  result in unexpected death or serious physical or psychological harm to  the patient. (See app. I for the revised definition of sentinel events.)", "From 2013 through 2016, DHA\u2019s data showed an increase in the total  number of reported sentinel events\u2014both medical and dental\u2014from 121  to 319. Medical sentinel events approximately doubled from 101 to 206,  while dental sentinel events increased more than fivefold from 20 to 113.  (See fig. 2.) The sharp increase in events in 2015 may have been  influenced by DHA\u2019s revised definition of sentinel events as well as the  Army\u2019s inclusion of dental events that meet sentinel event criteria. A  DHA internal publication also noted that a culture shift in patient safety  reporting could have contributed to this increase.", "As with all adverse medical events, MTF personnel must enter sentinel  events into the JPSR system; however, sentinel events have additional  reporting requirements that must be met within specified time frames. For  example, DHA policy requires MTF officials to report sentinel events to  their respective military service or NCR within 24 hours after they become  aware of the event. (See fig. 3, step 1.) MTFs also must report to and  comply with sentinel event reporting requirements established by the  Joint Commission. These requirements include the development and  submission of an RCA report for each sentinel event to identify the causal  and contributory factors associated with the event as well as the  corrective actions needed to prevent future incidents. The military  services and NCR submit copies of their RCA reports to DHA, which rates  the corrective actions included in each RCA report as stronger,  intermediate, or weaker based on an estimation of their effectiveness.  (See fig. 3, step 2.) DHA uses commercial process improvement software  called TapRooT to assist with the development of RCA reports, and DHA  requires all MTFs to use a methodology for its RCA reports that is  currently supported by this software.", "Additionally, once the Joint Commission approves an RCA report and its  associated corrective action plan, it may require the preparation of an  MOS report that assesses the corrective actions 4 months after an RCA  report is submitted to determine whether the implementation of corrective  actions and outcome measures was successful. Unlike RCA reports,  these reports are only required for selected sentinel events as determined  by the Joint Commission. DOD\u2019s March 2015 memo that revised the  definition of sentinel events contained an additional requirement for the  military services and NCR to submit copies of reports on the  implementation of corrective actions to DHA. (See fig. 3, step 3.) DHA  officials told us that MTFs could submit their MOS reports to meet this  requirement. For this report we use the term MOS report when referring  to this requirement."], "subsections": []}, {"section_title": "Transition of MTF Administrative Responsibilities to DHA", "paragraphs": ["Responsibility for the delivery of care in the MHS is shared among the  Office of the Assistant Secretary of Defense (Health Affairs), DHA, the  military service medical commands, and NCR\u2019s medical directorate.  MTFs are currently under the direction and control of the Army Medical  Command, the Navy Bureau of Medicine and Surgery, and the Air Force  Major Commands. MTFs within the NCR are under the direction and  control of the NCR medical directorate, which reports to DHA. (See fig. 4.)", "The NDAA 2017 included a provision that requires the Director of DHA to  be responsible for the administration of every MTF beginning October 1,  2018. This responsibility includes budgetary matters, patient safety  activities, information technology, and health care administration and  management, among other things. As part of the patient safety activities,  DHA officials will assume responsibility for adverse medical event  reporting. As required, DHA submitted initial plans to Congress in both  March and June 2017 about how it plans to implement its new  responsibilities. In September 2017, we reported that DHA\u2019s plans  summarize its new roles and responsibilities at a high level and that a  significant amount of work remained to complete the implementation  plan. On March 30, 2018, DOD submitted an additional implementation  plan and stated that its final implementation plan will be completed by  June 30, 2018."], "subsections": []}]}, {"section_title": "The Military Services\u2019 and NCR\u2019s Adverse Medical Event Policies Do Not Consistently Align with DOD\u2019s Policies, but Transition to DHA\u2019s Policies Is Planned", "paragraphs": ["Policies established by the military services and NCR for reporting  adverse medical events are developed to implement DOD\u2019s policies\u2014 which tend to be broad\u2014and may include additional requirements specific  to their branch of military service. However, we found that aspects of  these policies do not consistently align with DOD\u2019s policies, including the  definitions for adverse medical events and sentinel events, as well as  requirements for entering events into the JPSR system. (See table 2.)", "Definition of adverse medical event. The Navy uses DOD\u2019s  definition of an adverse medical event\u2014which includes events that  may or may not result in harm to the patient. However, the Army, Air  Force, and NCR defined this term more narrowly, to include only an  event that causes actual harm to the patient. While the difference in  these definitions could potentially result in the underreporting of  events, officials from all four of the MTFs we visited told us that the  discrepancy does not have much of an impact because the individuals  who report these events\u2014MTF personnel\u2014are unlikely to be aware of  the difference and likely follow the broader DOD definition.", "Policy on entering events in the JPSR system. Only NCR\u2019s policy  states that adverse medical events should be entered into the JPSR  system. However, Army, Navy, and Air Force officials as well as  officials from one MTF we spoke with stated that they record all  adverse medical events in the JPSR system even though their  policies do not require it.", "Policy on reviewing adverse medical events. NCR and Air Force  policies, which align with DOD\u2019s policy, require a review of an adverse  event that is based on whether there is harm to the patient. In  contrast, Army and Navy policies do not require that an adverse  medical event be reviewed on the basis of whether there is harm to  the patient, but they do require the event to be reviewed for the level  of severity and probability of recurrence. However, Navy officials  told us that reviewing an event for severity includes an assessment of  harm to the patient even though this is not clearly stated in their  policy. Additionally, all of the MTF officials we interviewed said that  the JPSR system requires them to review an adverse medical event  on the basis of whether there is harm to the patient and to assign a  harm scale category.", "Memorandum that revised the definition of a sentinel event. Only  the Army\u2019s draft policy aligned with DOD\u2019s March 2015 revised  definition of sentinel events. However, MTF officials from the other  military services and NCR told us that even though the revised  definition was not in their policies, they were aware of the memo and  were using this definition.", "Memorandum that requires the military services and NCR to  submit copies of their reports on the implementation of  corrective actions to DHA. The Army\u2019s draft policy that aligned with  DOD\u2019s revised definition of sentinel events also included a section  requiring the submission of these reports to DHA. The policies of the  other military services and NCR do not include this requirement.  However, officials from the other military services we interviewed told  us that they are aware of this requirement and are submitting MOS  reports to meet this requirement. NCR officials told us that they are  aware of this requirement but have not begun submitting these  reports.", "In March 2017, DOD\u2019s senior military medical leadership published  operating principles to guide the implementation of specific MHS  requirements outlined in the NDAA 2017. One of the operating principles  to guide the transition of MTF administrative responsibilities to DHA  requires DHA to create all health care policies for the direct care system  (the MTFs) to ensure greater consistency and eliminate duplicative  governance. As a result, the military services and NCR will no longer be  establishing their own policies. According to DHA officials, the transition  for DHA to be the single policy writer for MTFs will take time, and policies  issued by the military services and NCR will remain in place until they are  superseded by revised DHA policies. DHA officials are in the process of  updating the department\u2019s patient safety policy through the Patient Safety  Improvement Collaborative, a working group that includes patient safety  representatives from all of the military services, NCR, and DHA.  However, as of January 2018, DHA officials were uncertain as to when  this effort would be complete."], "subsections": []}, {"section_title": "Fragmented Process for Tracking Sentinel Events and RCA Reports Impedes DHA\u2019s Ability to Ensure It Has Received Complete Information", "paragraphs": [], "subsections": [{"section_title": "Process Used by the Military Services, NCR, and DHA to Track Sentinel Events and RCA Reports Is Fragmented", "paragraphs": [], "subsections": [{"section_title": "Sentinel Event Tracking", "paragraphs": ["We found that the process used by the military services, NCR, and DHA  to track sentinel events is fragmented. (See fig. 5.) Similar to all other  types of adverse events, DHA requires that sentinel events be recorded in  the JPSR system. However, DHA officials told us there are additional  follow-up reports and associated deadlines for sentinel events that go  beyond the JPSR system\u2019s current tracking capabilities, and as a result,  officials from each of the military services and NCR told us they track  sentinel events in their own tracking record outside of the JPSR system.  Officials told us the military services and NCR receive reports about  sentinel events from their MTFs via email, which are then entered in their  respective internal tracking records and reported to DHA via email. DHA  then enters and tracks the sentinel events in its own internal tracking  record. DHA officials told us that they do not believe that all sentinel  events are being entered in the JPSR system, and that the JPSR system  does not currently have the capability to pull sentinel event data for  tracking purposes. As a result, the same sentinel events are entered  and tracked in two separate tracking records\u2014DHA\u2019s tracking record and  the tracking records maintained by the military services or NCR.", "In a similarly fragmented process, MTFs email RCA reports\u2014a  requirement for sentinel events\u2014separately to their respective military  services or NCR, which then emails them to DHA. Although DHA  requires MTFs to use a methodology currently supported by the TapRooT  system to complete their RCA reports, DHA officials told us the TapRooT  software is not compatible with most MTFs\u2019 computer systems, and as a  result, MTFs do not share RCA reports through this system. Instead, they  told us MTFs use the methodology from the TapRooT system to prepare  the RCA report as a standalone document. Officials told us MTFs then  email the RCA reports to their military service or NCR, which notates the  RCAs in their respective internal tracking record. The military services  and NCR email the RCA reports to DHA, which notates the reports in its  own internal tracking record."], "subsections": []}]}, {"section_title": "Fragmented Tracking Impedes DHA\u2019s Ability to Ensure That It Has Complete Information on Sentinel Events and RCA Reports", "paragraphs": ["Because the process used by the military services, NCR, and DHA to  track sentinel events and RCA reports is fragmented, DHA officials told us  they must rely on their reconciliation process to ensure they have  complete information. Specifically, on a monthly basis, DHA officials email  separate spreadsheets of DHA\u2019s sentinel event records to each of the  military services and NCR requesting confirmation of reported sentinel  events and the status of overdue RCA reports, among other information.  DHA officials acknowledged that their reconciliation process is inefficient  and told us that their full-time employees and contractors spend an  average of 80 hours per month working on it. Additionally, officials told us  that sometimes information about sentinel events and RCA reports is lost  or not effectively communicated due to complexities related to routing the  email submissions and to turnover in the contract staff who track and  reconcile this information. The cooperation of the military services and  NCR is key to this process because officials told us that DHA currently  has no authority to compel a response from these entities, although this  may change with the transition of MTF administrative responsibilities to  DHA. DHA officials told us they sometimes do not receive a response to  their emails, and in these cases, DHA assumes concurrence.", "In an effort to improve the reconciliation process and compliance with  RCA report submission requirements, DHA officials told us that they  developed a new tool called the Comprehensive Analysis Progress  Tracker for all three military services and NCR. DHA officials told us this  tracker shows the full cycle of each sentinel event, including which RCAs  are overdue, and is available on the MHS internal website. DHA officials  told us that this tracker, launched in October 2017, replaced the previous  system of separate monthly reconciliation emails with individual  spreadsheets for each military service and NCR. In January 2018, DHA  officials told us they began using this tracker at monthly Patient Safety  Improvement Collaborative meetings and will use it during monthly check-ins with the military services and NCR to discuss delayed or missing  items. However, the military services and NCR cannot directly edit the  Comprehensive Analysis Progress Tracker. As a result, DHA officials told  us that the military services and NCR will continue to use email to submit  their sentinel events and RCA reports as well as any corrections or  additional information needed for the tracker, which may perpetuate  previous inefficiencies."], "subsections": []}, {"section_title": "Despite Reconciliation Efforts, DHA Does Not Have Complete Information on Sentinel Events and RCA Reports", "paragraphs": ["Despite DHA\u2019s efforts to reconcile its information on sentinel events and  RCA reports, we identified discrepancies and missing information in its  tracking record."], "subsections": [{"section_title": "Sentinel Event Discrepancies", "paragraphs": ["We found that the sentinel events in all of the military service and NCR  tracking records matched DHA\u2019s tracking record except for those of the  Navy. Specifically, DHA had a record of 19 sentinel events that the Navy  did not have for 2013 through 2016. DHA officials were not sure of the  reason for the discrepancy between their tracking record and the Navy\u2019s,  but told us that sometimes sentinel events are reported to DHA and later  determined to not be reportable, and DHA is not given the updated status  of the event. Navy officials told us that although they initially reported  these 19 events as sentinel, the Joint Commission informed the Navy that  it did not consider these events to be sentinel after reviewing the Navy\u2019s  submission. Navy officials told us that they determined these events also  did not meet other sentinel event criteria per DHA\u2019s revised definition,  which goes beyond the definition used by the Joint Commission. Further,  Navy officials told us they informed DHA that these events had been  deemed non-sentinel by the Joint Commission, and DHA\u2019s tracking  record subsequently noted this. However, DHA did not remove the events  from its tracking record."], "subsections": []}, {"section_title": "RCA Report Discrepancies", "paragraphs": ["We found discrepancies in the number of RCA reports when comparing  DHA\u2019s internal tracking record to the military services\u2019 and NCR\u2019s internal  tracking records. In some instances, we found that DHA had more RCA  reports in its tracking record than the military services or NCR for reported  sentinel events, and in other instances, DHA had fewer RCA reports in its  tracking record than the military services or NCR:", "DHA had more RCA reports in its internal tracker than in the Army\u2019s  internal tracker for 2015 (2 more) and 2016 (1 more).", "DHA had fewer RCA reports than the Air Force in 2013 (3 less), 2014  (2 less), 2015 (13 less), and 2016 (1 less).", "Additionally, DHA had fewer RCA reports for reported sentinel events  for NCR in 2015 (1 less) and 2016 (18 less).", "Officials with the military services and NCR told us they did not know why  there were differences between their tracking records and those of DHA.  However, Army and NCR officials offered potential reasons for these  differences.", "Army officials told us that they may have fewer RCA reports than DHA  because they recently transitioned their sentinel event and RCA  tracking record from a spreadsheet format to a database, and some  reports may not have been copied into the database.", "NCR officials told us their tracking record may not match DHA\u2019s  tracking record because an MTF may submit only one RCA report to  DHA that covers multiple similar sentinel events, so DHA may have  fewer reports documented in its internal tracking record."], "subsections": []}, {"section_title": "Missing RCA Reports", "paragraphs": ["For some reported sentinel events, we found that the required RCA  reports had not been recorded in any tracking record for the Army, NCR,  or DHA. (See table 3.)", "Army and NCR officials told us that they did not know why they did not  have a record of an RCA report for every sentinel event in their internal  tracking record. However, these officials explained that there are a  number of potential reasons that RCA reports could be missing, including  insufficient MTF staff to carry out these activities, and MTF officials\u2019  confusion about the revised definition of a sentinel event.", "DHA officials told us that they did not know the reasons for the  discrepancies between the tracking records for the military services,  NCR, and DHA or for the missing RCA reports. Specifically, DHA officials  did not know whether these reports were completed but not submitted to  DHA or were not completed at all. They told us that they rely on the  cooperation of the military services and NCR to submit these reports and  cannot enforce the requirement, although this may change with the  transition of MTF administrative responsibilities to DHA. Because of these  discrepancies and missing RCA reports, DHA lacks critical information  about why a sentinel event may have occurred and what actions, if any,  MTFs should take to prevent similar incidents in the future.", "We have previously reported that when fragmentation or overlap exists,  there may be opportunities to increase efficiency. In particular, our prior  work identified management approaches that may improve efficiency and  effectiveness, including implementing process improvement methods and  technology improvements. As MTF patient safety responsibilities are  transitioned to DHA, the fragmented tracking process may hamper DHA\u2019s  ability to efficiently and effectively monitor sentinel events and RCA  reports, potentially leading to missed opportunities for systemic  improvements."], "subsections": []}]}]}, {"section_title": "DHA\u2019s Efforts to Ensure It Receives MOS Reports Are Limited and Impeded by Inconsistent Report Tracking and Unclear Requirements about Report Submission", "paragraphs": [], "subsections": [{"section_title": "DHA\u2019s Efforts to Ensure It Receives MOS Reports Are Limited and Impeded by Inconsistent Report Tracking", "paragraphs": ["As of September 2017, DHA had received 27 MOS reports for the 319  sentinel events that were reported in 2016. However, DHA does not know  how many reports it is missing because its efforts to reconcile information  for these reports have been limited. Prior to January 2018, DHA did not  include MOS reports as part of its reconciliation process for sentinel  events and RCA reports. However, in January 2018, DHA officials told us  they added MOS reports to their new monthly reconciliation process using  the Comprehensive Analysis Progress Tracker. While this tracker  displays the total number of MOS reports DHA has received, it does not  display whether individual reported sentinel events have an associated  MOS report. Without this information, DHA may be unable to identify  which MOS reports are missing. DHA officials told us that they may revise  the Comprehensive Analysis Progress Tracker to follow up on MOS  reports associated with specific sentinel events in the future.", "DHA\u2019s efforts to identify which MOS reports are missing are further  impeded by the military services\u2019 and NCR\u2019s inconsistent tracking efforts.  Specifically, the military services and NCR have been tracking the  submission of their MOS reports in different ways or not at all.", "Army officials had told us that the completion of MOS reports was  noted in their internal tracking record for sentinel events and RCAs.  Army officials subsequently told us that as of January 2018, they  began tracking whether MOS reports were submitted to DHA in the  notes section of their internal tracking record.", "Navy officials told us they indicated the due date of the MOS report  and the date of its submission to DHA in their internal tracking record  for sentinel events and RCA reports.", "Air Force officials told us they indicated in their internal tracking record  for sentinel events and RCA reports the date that the MOS report was  sent to DHA. However, they told us the Air Force\u2019s process for  tracking and submitting MOS reports to DHA has been inconsistent,  and they plan to revise it in the future.", "NCR officials told us they did not track the completion of MOS reports  or their submission to DHA.", "Because of these issues, DHA may not be able to fully reconcile its  information for individual MOS reports or identify the reports it is missing,  impeding its ability to obtain complete information on the effectiveness of  MTFs\u2019 corrective action plans. This is inconsistent with federal internal  control standards, which require management to identify and respond to  risks to achieve its objectives, and for management to use quality  information to achieve its objectives."], "subsections": []}, {"section_title": "DOD\u2019s Requirement to Submit Reports on the Implementation of Corrective Actions Is Unclear", "paragraphs": ["The requirement in DOD\u2019s memo to submit reports on the implementation  of corrective actions is unclear, which may also impact DHA\u2019s ability to  ensure that it is receiving these reports for all sentinel events. DHA  officials told us that MTFs could meet this requirement by submitting  copies of their MOS reports. According to the Joint Commission\u2019s  guidance, the Joint Commission assigns MOS reports on an ad hoc  basis, depending on the sentinel event, RCA report, and corrective  actions, and as a result, an MOS report is not necessarily required for  each sentinel event.", "DHA officials told us that they intended to obtain a report on the  implementation of corrective actions for every sentinel event, and they  believed that an MOS report was required and thus would be reported for  every sentinel event, similar to RCAs. However, DHA officials told us that  they learned from the military services and NCR at the January 2018  Patient Safety Improvement Collaborative meeting that an MOS report  was not required for every sentinel event and that DHA\u2019s requirement for  submitting reports on the implementation of corrective actions was  unclear. Specifically, DHA officials told us the military services and NCR  told DHA that the 2015 memo did not state when the reports on the  implementation of corrective actions are required by DHA. For example,  the memo did not state whether DHA requires this report for a reported  sentinel event and RCA when the Joint Commission does not.", "DHA\u2019s unclear requirement is inconsistent with internal control standards,  which require management to review policies for continued relevance and  effectiveness in achieving the entity\u2019s objectives. Under the current  policy, DHA cannot be sure it is receiving all reports on the  implementation of corrective actions\u2014such as MOS reports\u2014as it  intended, and therefore, it may be missing important information on the  effectiveness of MTFs\u2019 implementation of their corrective actions that  could be used to help inform broader system-wide improvements. DHA  officials told us that they expect to clarify this requirement in DHA\u2019s  update to its patient safety policy."], "subsections": []}]}, {"section_title": "DHA Uses Information about Adverse Medical Events to Inform System-wide Patient Safety Improvement Initiatives", "paragraphs": ["We found that DHA has introduced several system-wide patient safety  improvement initiatives informed by data on adverse medical events from  the JPSR system and data on sentinel events from DHA\u2019s tracking  database, including the following:  DHA\u2019s Partnership for Improvement. In January 2015, DHA  established an MHS-wide information technology system called the  Partnership for Improvement. The Partnership for Improvement collects  data from MTFs and assesses MTF performance on approximately 38  health care measures that were established by a committee of MHS  officials and designed to improve readiness, population health, and  quality of care as well as control costs. Three of these measures focus on  patient safety\u2014central line-associated bloodstream infection, unintended  retained foreign object, and wrong site surgery. To track these  measures, DHA officials told us that they created an associated  performance dashboard, including acceptable ranges for each measure,  to provide visibility into MHS, military service-, and NCR-level  performance. The dashboard is available to all MHS users on the system  website and allows MTF leaders and staff to review MTF-level  performance data. DHA officials conduct quarterly system-wide  performance assessments on these measures. DHA officials told us they  use the data on this dashboard to determine what is improving and where  to make changes. Officials from each of the military services, NCR, and  each of the MTFs we visited told us they are aware of the Partnership for  Improvement and its associated dashboard and that they review the data  to assess their performance.", "Publications on Patient Safety. DHA produces several types of  publications using adverse medical event and sentinel event data that  officials told us are generally distributed to MTFs through the military  services and NCR, including the following.", "Patient Safety Data Snapshot. This monthly publication contains an  overview of adverse medical event and sentinel event data, trends  across the MHS, and short descriptions of sentinel events that have  been reported in the system in the same month. Additionally, this  publication may include reports of medical product deficiencies, or  materials that have been determined to be or are suspected of being  harmful, defective, deteriorated, or unsatisfactory because of  malfunction or design.", "Annual patient safety report. This yearly publication provides a  retrospective status update on MHS patient safety initiatives and in- depth adverse event and sentinel event trend analysis, system-wide  and by military service. Content includes trends in adverse events  reported in JPSR, sentinel events, and RCAs, including information on  weaker, intermediate, and stronger corrective actions. This report also  describes progress on Partnership for Improvement measures  system-wide and by military service and NCR, the culture of patient  safety, and collaboration across DHA, the military services, and NCR.  The report also details online resources for MHS officials.", "Focused review. According to officials, focused review publications  are produced three times a year, and the topics are related to adverse  medical events and associated follow-up data provided to DHA as  determined by data and performance trends. For example, in  September 2016, the publication included an explanation of the basic  components of an RCA, including their associated corrective actions  and factors DHA considers when determining if they are stronger,  intermediate, or weaker. This publication included 2013 through 2016  system-wide data, such as the number of RCAs submitted, the most  common root cause categories, and the proportion of RCAs with  stronger, weaker, or no corrective actions. The publication also  included an example of a decrease in occurrences of wrong-site  surgery accompanied by an improvement in RCAs with stronger  corrective actions, common pitfalls in conducting high-quality RCAs,  and recommendations to conduct better RCAs.", "Patient safety alerts. DHA uses these publications to inform the  MHS about immediate hazards, and officials told us they produce  these publications on an as-needed basis. For example, a July 2016  report was focused on unintended retained foreign objects during  surgery, specifically, pieces of gloves. The publication described  recent occurrences of retained pieces of gloves, glove selection best  practices, tips for preventing unintended retention, and corrective  actions when retention occurs.", "Global Trigger Tool. The Global Trigger Tool is a new tool for collecting  adverse medical event data by selecting a sample of medical charts that  was implemented MHS-wide as of September 2017. Unlike traditional  methods to detect adverse events, the Global Trigger Tool does not focus  on voluntary reporting and tracking of adverse medical events. Instead, a  team of three reviewers managed by DHA uses the tool methodology to  retrospectively examine a random selection of patient medical charts at a  facility over time to identify \u201ctriggers\u201d (or clues) that may lead to an  adverse medical event. The 53 triggers include events such as a patient  fall or readmission to the emergency department within 48 hours of  treatment. If a trigger is discovered, the medical chart is further reviewed  to determine if an adverse event occurred. After the Global Trigger Tool  review is complete, the contractor is able to provide facility leaders with  rates of harmful adverse events per 1,000 patient days and per 100  admissions. Results from the tool are intended to aid MTFs in  understanding the true frequency of harm events and in identifying  systemic issues that contribute to patient safety events. All inpatient  MTFs across the MHS will use the tool, and implementation began in  2017. The Global Trigger Tool has just begun to provide data to the  MTFs, and DHA officials told us that 6 to 12 months of data is  recommended before the tool can be used to make improvements.", "Sentinel Event and Root Cause Analysis (SERCA) tool. In October  2017, DHA released a dashboard called the SERCA tool, which DHA  officials told us will allow all MTF patient safety leaders to share lessons  learned in the course of sentinel event follow-up in real time. The SERCA  tool displays sentinel event and RCA data from DHA\u2019s internal tracking  record reported by the military services and NCR. It is intended to provide  quick, online access to sentinel event trends MHS-wide and at the military  service, NCR, and MTF levels. The SERCA tool is also intended to  facilitate sharing of lessons learned and best practices based on sentinel  events and RCAs in a single platform. DHA officials told us that  individuals with access to the system will be able to see a breakdown of  corrective actions submitted by other MTFs for a particular type of  sentinel event and whether these corrective actions were rated as  stronger, intermediate, or weaker by DHA. DHA officials told us that for  now, they will allow the military services and NCR to determine who has  access to the system. Officials from two military services and NCR told us  that they have access to this tool and are responsible for granting access  to their MTFs. One MTF we visited told us they have access to this tool.  However, it is too early to evaluate how the SERCA tool will be used to  make improvements."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Each year, thousands of adverse medical events are reported at MTFs.  Tracking and conducting follow-up on these events is crucial for officials  to learn from and prevent these events in the future. As DHA assumes  administrative responsibility for all MTFs, its role in ensuring that sentinel  events\u2014the most serious type of adverse medical events\u2014are reported  and tracked and that required follow-up is conducted will become  increasingly critical. However, the current fragmented and inconsistent  tracking process across the military services and NCR has impeded the  efficiency of DHA\u2019s efforts to ensure DHA has complete information about  sentinel events and RCA reports. Furthermore, DHA cannot ensure that it  is receiving all reports on the implementation of corrective actions, such  as MOS reports, and does not know how many reports it is missing for a  number of reasons, including those related to policy, tracking, and  reconciliation efforts. Collectively, all of these information gaps impair  DHA\u2019s ability to fully understand the types of sentinel events that are  occurring in its MTFs, the corrective actions that have been implemented,  and whether these actions have been effective. This information is  essential to prevent adverse medical events from occurring in the future  and to ensure that the care provided by MTFs is safe and effective."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Assistant  Secretary of Defense (Health Affairs):", "Ensure DHA improves as appropriate the systems and processes  used by the military services, NCR, and DHA to track sentinel events  and RCA reports and require the military services and NCR to  communicate with DHA the reasons RCA reports are not completed  for reported sentinel events. (Recommendation 1)", "Ensure DHA clarifies its requirement that reports on the  implementation of corrective actions, such as MOS reports, should be  completed and submitted to DHA, and to work with the military  services and NCR to develop a standard system to help DHA  consistently track and reconcile information about individual reports.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["DOD provided written comments on a draft of this report, including  technical comments, which we incorporated as appropriate. In its written  comments, which are reprinted in appendix II, DOD concurred with both  of our recommendations. In response to our first recommendation, DOD  acknowledged that its current tracking efforts for sentinel events and  RCAs are fragmented, inefficient, and unreliable. DOD stated that in the  future, it envisions a single system to track and monitor sentinel events,  RCAs, and corrective action implementation plan reports.  A single  system would eliminate the fragmentation associated with tracking these  reports and the need for a cumbersome reconciliation process, potentially  improving the completeness and reliability of DHA\u2019s patient safety data as  well as its ability to identify and implement system-wide improvements.", "In response to our second recommendation, DOD stated that it will clarify  the difference between an MOS report, which may be required by the  Joint Commission, and a corrective action implementation plan report,  which will always be required by DOD for reported sentinel events. DOD  explained that when an MOS report is required by the Joint Commission,  this report will satisfy DOD\u2019s requirement.  However, when the Joint  Commission does not require an MOS report for a sentinel event, DOD  will require a corrective action implementation plan report.  DOD stated  that it expects the revised policy to be signed in late summer 2018 and in  effect by October 1, 2018\u2014the date that DHA is to assume responsibility  for the administration of all MTFs.", "We are sending copies of this report to the Secretary of Defense and  appropriate congressional committees. In addition, the report will be  available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or at draperd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs can be found on the  last page of this report. Other major contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Department of Defense\u2019s (DOD) Revised Definition of a Sentinel Event", "paragraphs": ["In a March 2015, the Assistant Secretary of Defense for Health Affairs  issued a memorandum about improving the sentinel event and root cause  analysis (RCA) reporting processes. This memorandum also revised  DOD\u2019s definition of sentinel events, which previously stated that a sentinel  event is an unexpected occurrence involving death or serious physical or  psychological injury or risk. The revised sentinel event definition is a  patient safety event (not primarily related to the natural course of the  patient\u2019s illness or underlying condition) that reaches a patient and results  in death, permanent harm, or severe temporary harm. This revised  definition also includes additional types of events outlined by the Joint  Commission and the National Quality Forum. (See table 4.)", "DOD described the following sentinel events that are outlined by the Joint  Commission:", "Suicide of any patient receiving care, treatment, and services in a  staffed around-the clock care setting or within 72 hours of discharge,  including from the hospital\u2019s emergency department.", "Unanticipated death of a full-term infant or discharge of an infant to  the wrong family.", "Abduction of any patient receiving care, treatment, and services.", "Any elopement (unauthorized departure) of a patient from a staffed  around-the-clock care setting (including the emergency department),  leading to death, permanent harm, or severe temporary harm to the  patient.", "Destruction of red blood cells transfusion reaction involving  administration of blood or blood products that have major blood group  incompatibilities.", "Rape, assault (leading to death, permanent harm, or severe  temporary harm), or homicide of any patient receiving care, treatment,  and services while on site at the hospital.", "Invasive procedure, including surgery, on the wrong patient, at the  wrong site, or that is the wrong (unintended) procedure.", "Unintended retention of a foreign object in a patient after an invasive  procedure.", "Severe neonatal excess of bilirubin (bilirubin >30 milligrams/deciliter).", "Prolonged fluoroscopy with cumulative dose >1,500 rads to a single  field or any delivery of radiotherapy to the wrong body region or >25  percent above the planned radiotherapy dose.", "Fire, flame, or unanticipated smoke, heat, or flashes occurring during  an episode of patient care.", "Any maternal death or severe maternal or morbidity occurring during  or after birth (24 hours)."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to those named above, key contributors to this report were:  Bonnie Anderson, Assistant Director; Danielle Bernstein, Analyst-in- charge; Jacquelyn Hamilton; Elizabeth T. Morrison; Vikki Porter; and  Helen Sauer."], "subsections": []}]}], "fastfact": ["Medical errors, system vulnerabilities, or process failures can permanently or temporarily harm\u2014or kill\u2014patients. In military health facilities, it's critical to track and analyze these \"sentinel events\" to help prevent them in the future.", "The military services and the Defense Health Agency both track such events. Agency officials told us they spend 80 hours a month reconciling their records with the military services, but in some instances, the records don't match. The agency may be missing opportunities to make military health care safer. We recommended improving the tracking of sentinel events and follow-up requirements."]}
{"id": "GAO-18-471", "url": "https://www.gao.gov/products/GAO-18-471", "title": "2018 Tax Filing: IRS Managed Processing Challenges and Enhanced Its Management of Tax Law Changes", "published_date": "2018-09-10T00:00:00", "released_date": "2018-09-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["During the tax filing season, generally from January to mid-April, IRS processes over 100 million individual tax returns and provides telephone, correspondence, online, and in-person service to tens of millions of taxpayers. In 2018, IRS had to begin taking steps to implement major tax law changes passed in what is commonly referred to as the Tax Cuts and Jobs Act that affect both individuals and businesses.", "GAO was asked to review IRS's performance during the 2018 filing season and its efforts to implement the Tax Cuts and Jobs Act. GAO assessed IRS's (1) performance providing service to taxpayers and processing individual tax returns and (2) early efforts to implement the Tax Cuts and Jobs Act.", "GAO analyzed IRS documents and data and interviewed IRS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) generally improved its customer service during the 2018 filing season compared to prior years and managed multiple return processing challenges. For the third year in a row, IRS improved its telephone service by answering 80 percent of calls seeking live assistance and reducing wait times to about 5 minutes, as of the end of the 2018 filing season. This compares to 37.5 percent of calls answered with an average wait time of about 23 minutes during the 2015 filing season. Taxpayer use of online services also increased, including irs.gov and its online account tool for taxpayers to view their balances due. However, answering taxpayer correspondence remains a challenge\u2014IRS was late responding to about 37 percent of correspondence as of the end of the 2018 filing season compared to about 26 percent at the same time in 2017. In 2015, GAO recommended that the Department of the Treasury (Treasury) include timeliness in handling taxpayer correspondence as part of its performance goals, but as of June 2018 Treasury had not done so. Overall, despite multiple challenges including mid-filing season changes to tax law and a computer system failure, IRS met its processing targets for individual tax returns.", "In 2018, IRS began taking steps to implement significant tax law changes from Public Law 115-97\u2014commonly referred to by the President and many administrative documents as the Tax Cuts and Jobs Act. To implement the changes, IRS established a centralized office to coordinate implementation across IRS offices and divisions. IRS officials cited the broad scope and complexity of the changes\u2014which will require extensive changes to tax forms, publications, and computer systems\u2014along with the 1 year time frame as key implementation challenges. Although IRS has taken steps to address these challenges, such as developing a project planning tool, GAO found that the new coordination office did not initially fully include the Human Capital Office (HCO), the division responsible for managing the agency's workforce. Based on GAO's discussions with IRS officials, representatives from HCO now attend weekly coordination meetings discussing and planning the tax law changes. Involving HCO in these discussions will better position IRS to hire new employees and train them and the existing workforce. It will also help HCO better understand training requirements and staffing needs ahead of the 2019 filing season."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Because HCO is now attending the weekly meetings, GAO is not making a related recommendation. In addition, GAO believes that its 2015 recommendation to Treasury to include timeliness in handling correspondence as part of its performance goals, which Treasury neither agreed or disagreed with, is still valid. IRS generally concurred with GAO's findings but noted concerns with interpreting the percentage of correspondence considered \u201coverage\u201d (more than 45 days old). GAO clarified its report but notes that while the open inventory of overage correspondence at the end of the fiscal year is not representative of total overage items for the year, the overage rates are relatively consistent throughout the year."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Internal Revenue Service (IRS) enforces tax laws, provides service  to tens of millions of taxpayers, and processes over 100 million individual  tax returns during the filing season. High-quality customer service is  important for taxpayers to fulfill their tax obligations accurately and timely.  Meanwhile, IRS continues to face the ongoing threat of identity theft (IDT)  refund fraud and other forms of noncompliance with the Internal Revenue  Code. IRS estimates that at least $1.68 billion in IDT refund fraud was  paid in 2016. In addition, in 2016, IRS estimated the average gross tax  gap\u2014the difference between the amount that taxpayers owe and the  amount they actually pay\u2014was $458 billion each year from 2008 to 2010.  Of that amount, IRS estimated $406 billion will never be collected through  late payments or enforcement activities\u2014this amount is the net tax gap.  We have previously found that more could be done to reduce the net tax  gap and help taxpayers voluntarily comply with tax requirements.", "In 2017, IRS implemented provisions of the Protecting Americans from  Tax Hikes Act of 2015 (the act) to help combat fraud and other forms of  noncompliance. The act allowed IRS earlier access to Wage and Tax  Statement forms (W-2) that IRS uses in a process called systemic  verification, which helps IRS verify return information against employer- provided information on W-2s before issuing refunds to combat fraud and  noncompliance. The act also required IRS to hold a subset of returns\u2014 those that claimed the Earned Income Tax Credit (EITC) or Additional  Child Tax Credit (ACTC)\u2014until February 15 to increase the number of  returns that could be verified before issuing refunds. To improve fraud  prevention, the act required IRS to assess and make changes to its  management of individual taxpayer identification numbers (ITIN), used by  taxpayers who are required to file but who are ineligible for Social  Security numbers (SSN), such as certain non-U.S. citizens who have tax  liabilities.", "Along with these responsibilities, during the 2018 filing season, IRS had  to begin preparations for implementing significant changes to the tax law.  In December 2017, Public Law 115-97\u2014commonly referred to by the  President and many administrative documents as the Tax Cuts and Jobs  Act\u2014was enacted. The law included significant changes to corporate and  individual tax law.", "You asked us to review IRS\u2019s performance during the 2018 tax filing  season. In this report, we assess (1) IRS\u2019s performance in providing  customer service and processing individual income tax returns, including  addressing tax law changes, detecting fraud and noncompliance, and  processing ITINs, in the 2018 filing season compared to prior filing  seasons, and (2) IRS\u2019s early efforts to implement the Tax Cuts and Jobs  Act prior to the 2019 filing season.", "To assess IRS\u2019s performance providing customer service and processing  tax returns, we reviewed IRS performance data for the 2013 through 2018  filing seasons (January through mid-April) for telephone, correspondence,  online, and in-person services to identify any differences among years.  We interviewed IRS officials to obtain their views on the reasons for any  differences in IRS\u2019s service and processing performance. We reviewed  changes in tax law resulting from the Disaster Tax Relief and Airport and  Airway Extension Act of 2017, the Bipartisan Budget Act of 2018, and the  Tax Cuts and Jobs Act that affected taxpayers filing during the 2018 filing  season, and we assessed IRS\u2019s performance processing tax returns  affected by these provisions. Regarding systemic verification (IRS\u2019s  process for verifying tax return information against employer-provided W- 2 information to identify fraud and noncompliance), we reviewed IRS data  and documents to compare 2017 and 2018 results, and we interviewed  IRS officials about their efforts to improve and expand systemic  verification\u2019s application to other areas. Regarding implementation of the  ITIN provisions, we reviewed the Protecting Americans from Tax Hikes  Act of 2015 and IRS policies and data on ITIN issuance, renewal, and  deactivation for 2017 and 2018 to describe IRS\u2019s ITIN renewal  processing. We also interviewed IRS officials about their efforts to  manage ITIN renewals.", "To assess IRS\u2019s efforts to implement tax law changes, we reviewed  provisions of the Tax Cuts and Jobs Act and other recently passed laws  with tax law implications. We interviewed IRS officials to identify key  implementation steps, including challenges and risk mitigation efforts.", "To assess the reliability of data used in this report, we reviewed IRS data  to identify unexpected values, interviewed IRS officials, and assessed  documentation for any data limitations, which we note, as applicable,  within the report. We compared those results to our data reliability  standards and determined that the data presented in this report are  sufficiently reliable for our purposes.", "We conducted this performance audit from January 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "IRS Budget", "paragraphs": ["IRS\u2019s budget declined by about $658 million (5.5 percent) between fiscal  years 2013 and 2018 (see fig. 1). Furthermore, full-time equivalents  funded with annual appropriations declined by 10,876 (12.7 percent)  between fiscal years 2013 and 2018. The President\u2019s fiscal year 2019  budget request was $11.135 billion. This amount is less than the fiscal  year 2000 level for IRS, after adjusting for inflation. IRS requested an  additional $397 million to cover implementation expenses for the Tax  Cuts and Jobs Act over the next 2 years and received $320 million for  implementation pending submission of a spend plan, which IRS provided  in June 2018. IRS officials said the majority of the money would be  directed toward technological updates."], "subsections": []}, {"section_title": "IRS Customer Service", "paragraphs": ["IRS uses multiple channels to provide customer service to taxpayers, as  follows:  Telephone service. Taxpayers can contact IRS assistors via telephone  to obtain information about their accounts throughout the year or to ask  basic tax law questions during the filing season. Taxpayers can also listen  to recorded tax information or use automated services to obtain  information on the status of refund processing as well as account  information such as balances due. During fiscal years 2013 through 2017,  IRS received an average of about 107 million calls from taxpayers each  year, according to IRS data.", "Correspondence. Taxpayers may also use paper correspondence to  communicate with IRS, which includes responding to IRS requests for  information or data, providing additional information, or disputing a notice.  IRS assistors respond to taxpayer inquiries on a variety of tax law and  procedural questions and handle complex account adjustments, such as  amended returns and duplicate filings. IRS tries to respond to paper  correspondence within 45 days of receipt; otherwise, such  correspondence is considered overage. In fiscal year 2017, about 35  percent of the nearly 17.5 million pieces of correspondence IRS received  was overage, down from approximately 47 percent of 20.8 million pieces  of correspondence in fiscal year 2013. Minimizing overage  correspondence is important because delayed responses may prompt  taxpayers to write again, call, or visit IRS Taxpayer Assistance Centers  (TAC); each of which lead to additional costs. Additionally, IRS is required  to pay interest on refunds owed to taxpayers if it did not process  amended returns within 45 days.", "Online services. IRS\u2019s website is a low-cost method for providing  taxpayers with basic interactive tools to check their refund status or  balance due, make payments, and apply for plans to pay taxes due in  scheduled payments (installment agreements). Taxpayers can use the  website to print forms, publications, and instructions and can use IRS\u2019s  interactive tools to get answers to tax law questions without calling or  writing to IRS. IRS data show that total visits to IRS\u2019s website in fiscal  year 2017 were about 500 million.", "In-person services. Face-to-face assistance remains an important part  of IRS\u2019s service efforts, particularly for low-income taxpayers. Taxpayers  can receive face-to-face assistance at one of about 370 IRS TACs or at  thousands of sites staffed by volunteer partners during the filing season.  At TACs, IRS representatives provide services including answering basic  tax law questions, reviewing and adjusting taxpayer accounts, taking  payments, authenticating ITIN applicants, and assisting IDT victims.  Based on IRS data, nearly 3.3 million taxpayers visited an IRS TAC in  fiscal year 2017. At sites staffed by volunteers, taxpayers can receive free  return preparation assistance as well as financial literacy information. In  fiscal year 2017, nearly 3.6 million taxpayers had their returns prepared at  volunteer sites, according to IRS data."], "subsections": []}, {"section_title": "Systemic Verification", "paragraphs": ["Systemic verification is one element of IRS\u2019s Return Review Program, its  primary system to detect fraud and noncompliance. The Return Review  Program is a platform that runs individual tax returns through a set of  rules and models to detect potential taxpayer fraud and other  noncompliance. During systemic verification, IRS checks information that  taxpayers report on their returns against W-2 data in order to verify wage  and withholding information and identify discrepancies.", "We previously reported that the wage information that employers report  on the W-2 had not been available to IRS until after it issued most  refunds. In an effort to address issues such as refund fraud and  improper EITC payments, Congress enacted the Protecting Americans  from Tax Hikes Act of 2015, which included provisions that took effect in  2017. The act required employers to submit W-2s to the Social Security  Administration (SSA) by January 31, which is about 1 to 2 months earlier  than in prior years. SSA then provides W-2 data to IRS for verifying  employee wage and withholding data on tax returns. The act also  required IRS to hold refunds for all taxpayers claiming the EITC or ACTC  until February 15. Now that IRS has earlier access to W-2 information,  IRS is using it to conduct additional verification checks before issuing  billions of dollars in potentially fraudulent refunds.", "IRS issues individual taxpayer identification numbers (ITIN) to certain  non-U.S. citizens who have federal tax reporting or filing requirements  and do not qualify for SSNs. The Protecting Americans from Tax Hikes  Act required taxpayers that filed a U.S. federal tax return containing an  ITIN to renew the number if the ITIN was not used on at least one tax  return in the past 3 years or it was issued prior to 2013 and contained  certain middle digits. IRS reported that it deactivated approximately 12.4 million ITINs in 2017 and notified affected taxpayers via mail and public  notices. If affected taxpayers did not renew their ITINs either before filing  or in conjunction with filing, their refunds may have been delayed."], "subsections": []}, {"section_title": "Tax Cuts and Jobs Act", "paragraphs": ["The Tax Cuts and Jobs Act made a number of significant changes to the  tax law affecting both individuals and corporations. For example, for  individual taxpayers, for tax years 2018 through 2025, tax rates were  lowered for nearly all income levels, some deductions from taxable  income were changed (personal exemptions were eliminated while the  standard deduction was increased), and certain credits, such as the  child tax credit, were expanded. For individuals with business income  reported on their tax return (pass-through entities), effective tax rates can  be reduced with a 20 percent deduction of qualified business income.  For corporate filers, the tax rate was changed from a range between 15  and 35 percent to a flat rate of 21 percent, and the corporate alternative  minimum tax was eliminated. IRS must take action to make the  necessary changes to process tax returns in 2019 and to help taxpayers  understand the new law and its effect on their tax obligations. For  example, IRS has planned and begun conducting outreach to employees,  employers, and industry associations encouraging employees to reassess  their withholdings in light of changes the law made to deductions and  credits that may affect tax liability and withholding for a large number of  taxpayers."], "subsections": []}]}, {"section_title": "IRS Improved Customer Service, Managed Multiple Challenges Processing Returns, and Identified More Potential Fraud and Noncompliance Compared to Last Year", "paragraphs": [], "subsections": [{"section_title": "Customer Service Generally Improved During the 2018 Filing Season", "paragraphs": ["IRS\u2019s telephone, online, and in-person services generally improved during  the 2018 filing season compared to prior years. However, timeliness in  responding to written correspondence declined from last year. Our prior  recommendations could help IRS better manage its correspondence  performance and develop a comprehensive customer service strategy to  improve its efforts."], "subsections": [{"section_title": "Telephone Service", "paragraphs": ["During the 2018 filing season, IRS slightly improved its telephone level of  service\u2014the percentage of callers seeking and receiving live  assistance\u2014and reduced wait times (see fig. 2). From January 1 through  April 21, 2018, IRS estimated that it answered 80 percent of calls seeking live assistance, which is a slight  increase from about 79 percent for the same period last year, and  reduced the average caller\u2019s wait time to speak to an assistor from 6.5  to 5.1 minutes.", "This marks the third year of measured improvements since IRS reached a  low of 37.5 percent level of service in 2015 with a 23.1-minute average  wait time. IRS officials attributed the improvements to decreased telephone call volume and sufficient staff levels to meet the demand for  service. IRS expected its level of service for the entire fiscal year 2018 to  be 75 percent, which is similar to fiscal year 2017 when IRS achieved a  77.1 percent level of service.", "Total call volume to IRS taxpayer service lines has declined by about 43  percent since 2013 (see fig. 3). IRS officials attributed the decline in call  volume to several factors, including  targeted media campaigns to ensure taxpayers had the information  they needed to prepare and file their tax returns prior to the filing  season,  fewer attempts by callers to re-dial multiple times after receiving busy  signals or disconnects or abandoning the call after long wait times,  and moving calls inquiring about balances due and installment payments  to the compliance division, which, according to IRS data, accounted  for approximately 2 million calls in the 2018 filing season.", "The percentage of calls that IRS assistors have answered since 2013 has  generally increased, while calls answered by automated services has  generally decreased. IRS officials attributed the decrease in automated  calls answered to discontinuation of the e-file personal identification  number (PIN) automated retrieval service in June 2016, along with a  decrease in callers using the Where\u2019s My Refund automated service.", "In December 2014, we recommended that IRS systematically and  periodically compare its telephone service to the best in business to  identify gaps between actual and desired telephone performance. In  response, IRS benchmarked its telephone service, measures, and goals  to comparable agencies and companies in an internal 2016 study. IRS  projected that achieving an 83 percent level of service would optimize its  balance between wait-time, disconnects, and assistor availability.  However, officials told us in June 2018 that they are adjusting this  projection based on new services and procedures introduced since the  2016 study.", "The study also recommended exploring using new technology, including  email, online chat, and telephone call-back features as well as  establishing regularly scheduled follow-up benchmarking. In March 2018,  IRS officials told us they are implementing some of the recommendations  from the study, including requesting funding to implement a customer call- back feature. IRS is also developing new methods of monitoring and  reporting service performance across telephone, online, and in-person  channels to identify changes in taxpayer behavior and better adapt to  their needs.", "IRS telephone performance data for 2018 were unavailable from  November 2017 until March 2018. IRS officials explained that IRS was  upgrading the Enterprise Telephone Data System\u2014IRS\u2019s official source  for all data related to its toll-free telephone performance measures\u2014to a  more current version. Before IRS completed the upgrade, the system  crashed. Due to the system outage, IRS was unable to publish its reports  on telephone performance. IRS officials told us that while the system  remained offline, they could still monitor daily call demand and staff  resources, which they used to develop an estimated level of service to  monitor telephone performance. Once the system was operational, IRS  recovered and validated the data, confirming that the data they used  while the system was offline were sufficiently accurate.", "In addition, IRS replaced the approximately 15-year-old telephone  equipment it uses for answering taxpayer calls because of ongoing  failures that contributed to poor service. For example, at times the  assistor could hear the customer speaking, but the customer could not  hear the assistor. The new equipment will enable future service  improvements such as a call-back feature so customers will not have to  wait on the line for a response. IRS completed the upgrades as planned  in June 2018."], "subsections": []}, {"section_title": "Correspondence", "paragraphs": ["Because the same staff answer telephone calls and respond to  correspondence, IRS has continued to struggle to balance competing  demands for maintaining quality telephone level of service with timely  responses to written correspondence. Between October 1, 2017 and April  21, 2018, IRS received over 9 million pieces of correspondence. IRS staff  focus on answering the telephones during the filing season, so they have  less time to respond to correspondence, resulting in inventory and  processing time increases. As it had in prior years, IRS directed staff to  focus on correspondence early in December 2017 and January 2018 to  reduce the inventory before the filing season. However, through April 21,  2018, the overage rate of correspondence\u2014the percentage of cases  generally not processed within 45 days of receipt by IRS\u2014was 36.8  percent compared to 26.4 percent at the same time last year.", "To improve the management of taxpayer services, in 2015 we  recommended that the Secretary of the Treasury update the Department  of the Treasury\u2019s (Treasury) performance plan to include overage rates  for handling taxpayer correspondence as a part of Treasury\u2019s  performance goals. To implement this recommendation, we suggested  that Treasury include this performance measure as part of a  comprehensive customer service strategy. Treasury neither agreed nor  disagreed with our recommendation, and as of June 2018, it had not  included correspondence overage rates as a performance goal in its  performance plan. We continue to believe that this recommendation is  valid.", "IRS established its new online account service in November 2016 and  taxpayer use of this service has increased since then. The online account  service was unavailable to new users between mid-October and early  December 2017 because of a security breach at Equifax, the service IRS  used to verify users\u2019 identities. In September 2017, Equifax announced  that criminals had exploited a vulnerability in its systems and obtained  personally identifiable information on 145.5 million individuals, including  names, SSNs, birth dates, addresses, and in some cases, driver\u2019s license  information. IRS suspended its online account service, eventually re- activating it when it replaced Equifax\u2019s identity verification service with  another provider. IRS\u2019s online account allows taxpayers to view their IRS  account balance (including the amount they owe for tax, penalties, and  interest), take advantage of various online payment options, and access  the Get Transcript application where taxpayers can obtain copies of their  prior tax returns.", "Despite these challenges, use of IRS\u2019s online account has increased  since its launch. Between January 1, 2018 and April 30, 2018, total  unique users of the online account reached over 1 million compared to  327,000 for the same period in 2017 when the service was newly  launched. In addition, taxpayers increasingly used the online account to  access payment options, including payment agreements. For example,  taxpayers made four times as many payments using the online account to  access Direct Pay, IRS\u2019s online payment option, between January 1 and  April 30, 2018 compared to the same period last year.", "IRS experienced a separate online service disruption prior to the 2018  filing season. Tax professionals could not access e-services between  September and October 2017 because of an IRS delay in a scheduled  upgrade to the system and improvement to the security of the application.  This service is used by tax professionals to conduct transactions,  including applying for authorization as an e-file provider. As a result of this  delay, tax professionals were unable to use this key service during a  critical planning period prior to the filing season, shortening the amount of  time available to complete the necessary actions before filing season.  Despite this delay, IRS officials told us that more than 60,000 tax  professionals were able to complete their transactions in preparation for  the 2018 filing season.", "Finally, IRS launched a redesigned website in August 2017 to make it  easier to use and find information. Website use during the 2018 filing  season showed the greatest year-to-year increase over the past 5 years  (see fig. 4). From January 1 through April 21, 2018, visits to irs.gov  increased by about 24.2 percent compared to the same period last year  (from 311.4 million to 386.9 million). During that same period, total page  views increased by about 50.4 percent (from 1.27 billion to 1.91 billion).", "In-person visits to IRS\u2019s Taxpayer Assistance Centers (TAC) have  declined since IRS began requiring appointments for in-person service in  2016. During the 2018 filing season (January 1 through April 21, 2018),  IRS served 1 million taxpayers at the TAC locations compared to about  1.3 million during the same period in 2017. However, IRS officials  reported that, between January 1 and April 30, 2018, over half of the  approximately 1.6 million taxpayers requesting an appointment had their  questions resolved on the telephone and did not need an appointment.", "IRS policy mandates that, under special circumstances, taxpayers who  arrive at a TAC without an appointment receive service if staff members  are available, even when the assistors do not have appointment  openings. Officials acknowledged that not all taxpayers receive service if  they walk in because there are not always assistors available. As of April  30, 2018, IRS served nearly 63,000 taxpayers during the 2018 filing  season under an exception to the required appointment process. IRS  officials noted that the lines at TACs have shortened in recent years,  which they attribute to the appointment system and services available  through the telephone. Nationwide, 5.8 percent of taxpayers waited over  30 minutes for assistance between January 1 and April 21, 2018,  compared to 5.6 percent during the same period in 2017, according to  IRS data. Service improved compared to the same period for 2013 to  2016 when between 27 and 33 percent of taxpayers waited over 30  minutes for assistance.", "To improve the appointment process, in 2018 IRS developed the Field  Assistance Scheduling Tool, which helps IRS manage appointments at  the TACs and monitor availability and demand. IRS expects to add to this  tool by developing reporting capabilities for managing staff availability and  appointments, including the capability to measure the time lapse between  when a taxpayer calls to schedule an appointment and the actual  appointment. According to IRS officials, by using the tool\u2019s current  capabilities, they identified the need to recruit and train nearly 100  employees from other areas of IRS to support increased demand at 27  TAC locations near the end of the filing season.", "IRS also provided alternative options for in-person taxpayer services. In  January 2017, IRS opened four co-locations with the Social Security  Administration (SSA). During the 2018 filing season, 708 taxpayers  received in-person service at these co-locations as of April 21, 2018. In  May 2018, IRS officials said they were working to open an additional co- location with SSA. In addition, IRS added six virtual assistants\u2014kiosks  that provide video calling to an IRS assistor\u2014to the 31 existing terminals  across the United States."], "subsections": []}, {"section_title": "Customer Service Strategy", "paragraphs": ["We have made several recommendations for IRS to improve its customer  service. In December 2012, we recommended IRS develop a strategy to  improve telephone and correspondence service. While IRS has taken  steps toward implementing related recommendations, including the  telephone benchmarking study mentioned earlier, IRS has not completed  the actions we recommended, including (1) outlining a comprehensive  strategy that defines appropriate levels of correspondence service and  wait time and (2) listing specific steps to manage service based on an  assessment of time frames, demand, capabilities, and resources.  However, IRS officials told us in June 2018 that they had begun drafting a  customer service strategy that they expected to complete by September  2018. We will assess this strategy once it is issued.", "Additionally, in December 2011 and April 2013 we made  recommendations that call for IRS to develop a long-term strategy for  providing and improving web-based services to taxpayers. In June  2018, officials in the Office of Online Services stated that they do not  have a specific strategy that outlines their long-term vision for increasing  online services and web offerings. Rather, they rely on IRS\u2019s fiscal year  2018\u20132022 Strategic Plan to provide that vision. The fiscal year 2018\u2013 2022 Strategic Plan includes objectives related to expanding digital  options for taxpayers and professionals to interact efficiently with IRS,  and developing additional self-assistance and correction tools for  enhanced online account capabilities. However, this plan is at a high level  and does not include business cases for new online services that  describe the potential benefits and costs of the projects, timelines and a  prioritization of proposed projects. In July 2018, IRS officials provided  additional documentation that we are reviewing to assess the steps being  taken to develop a long-term strategy to improve web services for  taxpayers."], "subsections": []}]}, {"section_title": "IRS Managed Multiple Processing Challenges During the 2018 Filing Season Including Changes in Tax Law and Issues with Hiring and Redistributing Work Responsibilities", "paragraphs": ["IRS started the filing season on January 29, 2018, approximately 1 week  later than it has in recent years to ensure the security and readiness of  processing systems and to assess the potential impact of recently passed  tax laws on 2017 tax returns. IRS also extended the filing deadline by 1  day after a system outage occurred on tax day, April 17, 2018, that  prevented IRS from processing electronically filed returns. Taxpayers  were able to prepare and submit returns electronically during the day; but  a flaw in the mainframe prevented data from being accepted and released  for processing. IRS officials said the problem was caused by a hardware  issue in a 1.5 year old mainframe subcomponent and was not related to  IRS applications or any of the agency\u2019s legacy computer systems. The  system failure affected a number of electronic applications, including  Direct Pay and the online account service, and delayed return processing  until the end of the day. IRS officials said that the agency recovered the  system without data loss and worked with software companies to  coordinate their transmission of returns that were held earlier in the day.  These officials said the agency was able to process all returns submitted  electronically by the end of the day.", "Neither the system issue nor the later start had a significant effect on  returns processing during the filing season. As of April 20, 2018, IRS had  processed 130.48 million returns, compared to 128.85 million by the  same time last year.", "IRS experienced several additional challenges during the 2018 filing  season, including multiple pieces of legislation affecting individual tax  returns that passed soon before the beginning of the filing season or after  it had begun, as well as issues hiring and redistributing work  responsibilities in some IRS processing facilities."], "subsections": [{"section_title": "Changes in Tax Law", "paragraphs": ["Disaster relief. On September 29, 2017, Congress passed a law which  provided tax relief related to retirement plan distributions and casualty  losses for people affected by Hurricanes Harvey, Irma and Maria. The  law allowed storm victims to deduct disaster losses on their 2017 returns  or on amended 2016 returns. On February 9, 2018, Congress extended  these benefits to certain taxpayers affected by wildfires in California.  The President also issued major disaster declarations for many areas  affected by the hurricanes and wildfires, allowing IRS to use its authority  to postpone certain tax-related deadlines under the Robert T. Stafford  Disaster Relief and Emergency Act. The laws also offered other forms  of tax-relief\u2014such as hardship distributions from employer-sponsored  retirement plans. To address issues resulting from disaster-related legal  changes, IRS  issued press releases and public notices informing taxpayers of tax- relief options; postponed various filing and payment deadlines for individuals and  businesses affected by disasters; ensured that sites offering in-person taxpayer assistance in Puerto  Rico, Florida, and Texas were open and developed special products  to support these sites in dealing with affected taxpayers; and adapted procedures to accommodate disaster-relief efforts.", "IRS officials also said they corresponded with taxpayers they thought  were eligible for new disaster relief benefits as a result of legal changes  put in place. The officials told us that as of May 26, 2018, the agency had  assisted 37,000 taxpayers seeking live telephone assistance and worked  or closed 6,196 amended returns and 8,847 correspondences related to  Hurricanes Harvey, Irma, and Maria.", "Tax Cuts and Jobs Act. While many of the provisions included in the  Tax Cuts and Jobs Act will not affect filing until the 2019 filing season, a  few changes affected filing in 2018. For example, the threshold to claim  the medical expense deduction was temporarily lowered, allowing  individuals to claim deductions for medical expenses totaling more than  7.5 percent of their adjusted gross income for tax years 2016 and 2017.  Also, provisions similar to those described above were implemented for  certain qualified federally declared disasters that occurred in 2016. The  law passed shortly before the start of the filing season and IRS had to  recall, revise, and re-issue more than 100 products that had already been  published.", "In addition, several provisions affecting business filers presented  processing challenges during the 2018 filing season. For example, IRS  made changes to its forms to address fiscal year filers whose earnings  will be taxed at different rates for 2017 and 2018 (referred to as blended  rate) and developed forms and instructions for filers whose returns  involve the foreign earnings of foreign subsidiaries of U.S. companies.  Officials told us they processed returns subject to the blended rate  provision manually and held returns affected by the foreign earnings  provision until they completed necessary programming changes for the  systems to process them in accordance with the new law. As of May 18,  2018, the agency was holding 2,265 affected individual and business  returns. IRS officials said they completed the programming required to  process all of these returns automatically by July 2, 2018. However,  depending on when IRS completes processing these returns, it may need  to pay interest on some refunds. IRS officials said they do not expect  many of the held returns affected by the foreign earnings provision to  claim refunds.", "Extension of expired tax provisions. On February 9, 2018, after some  taxpayers had already filed their 2017 taxes, Congress extended to 2017  a number of temporary tax provisions that expired at the end of 2016.  These provisions include deductions for qualified tuition and related  expenses and the ability to deduct premiums for mortgage insurance as  interest. Testifying before Congress, the Acting Commissioner of IRS  described the extensions as a major processing challenge and said this is  the only time the agency has been required to implement retroactive tax  extensions after the beginning of a filing season. To address the  extensions, IRS officials told us they  reprogrammed systems to accept taxpayer claims related to these  retroactively extended provisions;  recalled, revised, and re-released more than 50 already published  products; and held 5,624 individual returns while necessary programming changes  were made to ensure proper processing."], "subsections": []}, {"section_title": "Issues Hiring and Redistributing Work Responsibilities", "paragraphs": ["IRS faced challenges in two of its five paper processing centers related to  hiring and redistributing work responsibilities. The center in Ogden, UT  experienced issues related to changes in work assigned to the site while  the center in Austin, TX experienced ongoing hiring difficulties. Despite  these challenges, IRS officials reported that the agency was able to meet  all of its target dates for processing returns and issuing refunds.", "Ogden. To realize cost savings from the decrease in paper filing as a  result of increased electronic filing, IRS began to consolidate its paper  processing centers in 2018. As part of this plan, IRS moved some  individual paper return processing to its facility in Ogden. This facility had  not processed individual returns since 2000 and IRS officials told us that  the lack of recent experience with this kind of work caused processing to  fall behind targets. For example, as of March 2, 2018, Ogden had missed  IRS targets for return processing time by between 14 and 15 days,  depending on the form type.", "Officials told us the agency had reintroduced Ogden to the work  gradually, by assigning fewer returns to the site in the first year;  nevertheless, the site still experienced delays. For example, as of March  2, Ogden had processed 10.6 percent of the 202,000 returns expected,  while the processing centers in Fresno, CA and Kansas City, MO had  processed 98.5 percent (723,000 out of 734,000) and 98.2 percent  (545,000 out of 555,000) of their expected returns respectively on the  same date.", "IRS minimized the effects of these delays on overall processing by  transferring returns initially sent to Ogden to the Kansas City location,  which enabled IRS to meet its overall processing goals. Later in the filing  season, processing at Ogden had improved, but still had not reached  IRS\u2019s goal for the site. For example, as of May 11, 2018, Ogden was at  approximately 73 percent of schedule, having processed 716,000 out of  977,000 scheduled returns. IRS officials said that responding to changes  in work flows is a normal aspect of processing across all locations, but  noted that the agency continued to monitor the situation in Ogden and  learn from the experience to guide future consolidation efforts.", "Austin. This processing facility, slated for closure in 2024, also  experienced processing delays. As we reported in 2017, and as IRS  officials told us again this year, IRS was unable to hire enough personnel  to process paper tax returns at this site, which may be due to low  unemployment rates in the area. IRS officials told us Austin planned to  hire 567 employees by early March to transfer data from paper returns to  an electronic format, but had only been able to hire 142 people, or 25  percent of that target. IRS officials told us the position was perceived as  undesirable in a low-unemployment environment. The officials said they  had addressed the issue by (1) moving resources as needed within the  service center and (2) transferring returns to the Kansas City facility for  processing."], "subsections": []}]}, {"section_title": "IRS Identified More Potential Fraud and Noncompliance by Verifying Wage Information Than It Did at the Same Point in the 2017 Filing Season", "paragraphs": ["IRS identified more potential fraud and noncompliance through February  15, 2018, than it had by the same time last year. In its second year of  receiving earlier W-2 data from SSA to match against returns, IRS  identified a larger number of potentially fraudulent or noncompliant  returns claiming the EITC or ACTC prior to issuing refunds\u2014340,000  compared to 162,000 at the same point in 2017. IRS also reduced the  percentage of returns for which it was unable to verify wage information to  13 percent, compared to 58 percent in 2017. IRS officials told us this was,  in part, a result of receiving 224 million W-2s by February 15 compared to  214 million by the same time in 2017. Having more W-2 data available  earlier also allowed IRS to better target its selection of returns for review,  helping to reduce taxpayer burden and IRS workload. For example, IRS  had excluded 10,000 returns from review as of February 15, 2018,  compared to 3,000 during the same time in 2017.", "In addition, IRS improved its ability to identify potentially false and  fraudulent returns for returns with EITC or ACTC\u2014including those for  which it did not have W-2 data at the time of identification\u2014by developing  two new filters that automated some aspects of the manual review  process used in 2017. IRS developed the new filters based on cases of  confirmed fraud identified through systemic verification in 2017 and  selected returns with characteristics that are more likely to be fraudulent  or noncompliant. The filters select returns for review among those  reporting information that does not match corresponding W-2 data and  that IRS could not verify because it did not have W-2 data at the time of  selection. Last year, IRS identified 12,000 cases of confirmed fraud from  the 162,000 cases it selected for review. IRS officials told us that they do  not have final data at this time, but that they anticipate they will confirm  more cases of fraud and noncompliance in 2018 as a result of these  filters.", "Returns with refunds not claiming EITC or ACTC benefits are also subject  to systemic verification as well as additional fraud filters. However, for  returns not claiming these benefits, IRS does not hold refunds when it is  unable to verify wages reported by the taxpayer unless the returns are  selected by other fraud filters for review. As we reported in January 2018,  IRS cannot verify information reported for more than half of returns  submitted early in the filing season prior to issuing refunds because it  receives W-2 information throughout the filing season. In 2017 and  2018, IRS received and processed the majority of W-2s by mid- to late- February. In addition, IRS verified most wage information on returns  submitted in mid-February as being accurate. IRS verified that accurate  wage information was reported on 77 percent of returns not claiming the  EITC or ACTC submitted between February 9 and 15, 2018, representing  $10.91 billion in refunds.", "However, IRS does not have data available early in the filing season that  would help it better identify which returns are potentially fraudulent or  noncompliant. As a result, IRS issues refunds for a large percentage of  returns without the EITC or ACTC that cannot be verified against W-2  data prior to February 15. For example, among 2017 returns without EITC  or ACTC, IRS was unable to verify", "91 percent of returns submitted before January 25, 2018\u2014 representing $4.27 billion in refunds; and", "60 percent of returns submitted prior to February 15\u2014representing  $29.27 billion in refunds.", "IRS has the authority to hold refunds for these returns (as it does for  returns that do claim the EITC or ACTC) until any date deemed  necessary to make inquiries, determinations, and assessments in  conjunction with those determinations. However, IRS officials told us that  IRS has not held those refunds because of the volume of existing cases,  challenges of processing large numbers of refunds on a single day, and  other costs to the agency, such as inquiries from taxpayers about their  refunds.", "In January 2018, we recommended that IRS study the benefits and costs  of the refund hold and consider modifying it based on the study results.  For example, IRS could hold refunds for taxpayers not claiming EITC or  ACTC and release the refunds once it has the W-2 data available and has  verified the wage information. IRS officials reiterated that the potential of  verification to detect more fraud and noncompliance is limited by delays  caused by filing extensions and use of paper W-2s\u2014which are  transcribed at SSA before being transmitted to IRS. For example, IRS  had not received any paper W-2 data for tax year 2017 by the February  15 refund hold date. IRS is continuing to study systemic verification\u2019s  potential, and is working to identify additional fraud and noncompliance by  beginning to match non-wage income reported by taxpayers against data  reported on Forms 1099-MISC by companies or individuals that paid the  taxpayer miscellaneous income."], "subsections": []}, {"section_title": "IRS Continued to Deactivate and Renew ITINs", "paragraphs": ["The Protecting Americans from Tax Hikes Act also contained a number of  provisions relating to individual taxpayer identification numbers (ITIN).  The provisions required IRS to deactivate (1) all ITINs issued prior to  2013 and (2) all ITINs not used at least once during the 3 most recent  consecutive tax years. As of February 26, 2018, IRS said it had  deactivated 14.7 million ITINs, approximately 12.4 million of those in 2017  and an additional 2.3 million in 2018.", "Following this initial round of deactivations, ITIN renewal requests have  been significantly lower than IRS anticipated. IRS expected it would  receive 1.3 million renewal applications by the end of 2018 for ITINs that  expired in 2017. However, by April 21, 2018, IRS had only received 23  percent (297,825 of 1.3 million) of the expected renewals.", "IRS officials said they based their renewal projections on a computation  assuming that all ITINs with middle digits 78 and 79\u2014which were issued  16 or more years prior to their deactivation and were the first set of older  ITINs to be deactivated\u2014would be renewed. However, the actual  renewal rate in 2017 was only 60 percent for these ITINs. IRS officials  said the agency used actual renewal data to revise its renewal estimate  for the remaining ITINs issued prior to 2013 and containing certain middle  digits that will be deactivated. Based on these new estimates, IRS will  accelerate the completion date for deactivation of older ITINs."], "subsections": []}]}, {"section_title": "IRS Developed a Management Structure to Implement the Tax Cuts and Jobs Act and Address Associated Challenges and Took Steps to More Fully Involve Human Capital Decision Makers", "paragraphs": [], "subsections": [{"section_title": "IRS Developed a Management Structure to Implement the Tax Cuts and Jobs Act and Took Steps to More Fully Involve Its Human Capital Decision Makers", "paragraphs": ["To address the changes included in the Tax Cuts and Jobs Act, in  January 2018 IRS established the Tax Reform Implementation Office  (TRIO), a central office that coordinates implementation efforts. IRS  officials said that the 2017 tax law will affect all IRS divisions and  responsibilities. Each of the 119 provisions in the Tax Cuts and Jobs Act  that fall under IRS responsibility has been assigned to one of IRS\u2019s four  business divisions\u2014Wage and Investment, Large Business and  International, Small Business/Self-Employed, and Tax-Exempt and  Government Entities\u2014each of which will be responsible for planning and  executing the assigned provisions. In addition to TRIO, IRS also  established the Tax Reform Executive Steering Committee and the Tax  Reform Implementation Council (TRIC), described below:", "Tax Reform Implementation Office (TRIO). TRIO principally  consists of executive-level IRS employees and coordinates efforts by  each business operating division to revise and develop forms,  instructions, tools, and guidance and to execute programming  changes, communications, and training initiatives required to  implement the individual provisions of the Tax Cuts and Jobs Act. The  office is intended to monitor the implementation action plans of each  business division and ensure risks associated with implementation  efforts are captured and addressed. TRIO has developed an  integrated project plan to track critical implementation activities  identified by the business divisions and discussed by TRIC (described  below). Personnel can access the project plan and update it with  accomplishments and milestones.", "Tax Reform Executive Steering Committee. TRIO reports to the  Executive Steering Committee, which includes IRS\u2019s Acting  Commissioner, Deputy Commissioners, Treasury officials, and heads  of offices. The steering committee serves as a forum to provide  leadership guidance, direction, and advice on implementation  activities for the Tax Cuts and Jobs Act.", "Tax Reform Implementation Council (TRIC). TRIC consists of  representatives from business divisions and functional units\u2014such as  Information Technology (IT) and Communication and Liaison\u2014that  are performing implementation activities. The group first met on  February 8, 2018, and meets weekly to discuss activities, concerns,  and needs that might involve other IRS divisions. The meetings are  also a forum to discuss accomplishments and deadlines.", "Figure 5 illustrates TRIO\u2019s role in coordinating the various changes IRS  expects to make.", "To implement the Tax Cuts and Jobs Act, IRS\u2019s Human Capital Office  (HCO) estimated that the agency will need to hire and train staff to fill  approximately 1,100 positions requiring a variety of competencies and  provide additional training on tax law changes for current employees.  HCO will be responsible for recruiting and hiring these new employees  and ensuring they have the needed skills and HCO will play a key role in  training them. It is HCO\u2019s mission to provide human capital strategies and  tools for recruiting, hiring, developing, retaining, and transitioning a highly  skilled and high-performing workforce to support IRS\u2019s mission. TRIO and  other senior IRS officials acknowledged that HCO\u2019s role in implementing  the new tax law is as valuable as other supporting stakeholders, such as  IT. Nevertheless, HCO did not initially have representation in TRIC, as did  IT and other essential operational support units. TRIC meetings provide a  forum not only for the business operating divisions directly implementing  the provisions of the Tax Cuts and Jobs Act to discuss and coordinate  needs and activities, but for supporting stakeholders to understand the  status of implementation efforts as well as future expectations and needs.", "HCO officials said that when the formation of TRIO was first announced,  they contacted TRIO leadership to request that HCO have representation.  However, they were told that the purpose of the group was to discuss the  tax law itself, not hiring or other human resources matters affected by the  law. In our discussions with IRS officials, they told us that HCO has an  informal liaison to TRIO, participates in the executive steering committee,  and has existing human resource partners in the business operating  divisions, and that additional HCO representation in tax law  implementation\u2014including the weekly TRIC calls\u2014was not necessary.", "However, a senior HCO official told us that it would be beneficial for HCO  to participate in the weekly TRIC meetings to stay abreast of current  developments and future plans and share relevant timelines and  processes related to hiring and training. Participation will help HCO to  manage its operations more strategically, for example, by planning for  training required ahead of the 2019 filing season.", "Based on our discussions with IRS officials about HCO\u2019s role in tax law  implementation, in June 2018, HCO began participating in the weekly  TRIC calls. HCO\u2019s participation will likely help IRS make more informed  decisions concerning implementation of major tax law changes. It will also  position HCO to proactively understand human capital needs and  timelines across the agency and to hire and train personnel at the  appropriate times. At the same time, IRS will also be better positioned to  improve its management and strategy for executing implementation plans  while also fulfilling the agency\u2019s mission."], "subsections": []}, {"section_title": "IRS Identified the Scope, Nature, and Time Frame of the Tax Cuts and Jobs Act as Implementation Challenges", "paragraphs": ["IRS officials identified a number of challenges associated with  implementing the Tax Cuts and Jobs Act:", "Scope of changes. To implement 119 provisions of the Tax Cuts and  Jobs Act, IRS will need to (1) interpret the law; (2) create or revise  nearly 500 tax forms, publications, and instructions; (3) publish  guidance and additional materials; (4) reprogram 140 interrelated  return processing systems; (5) hire additional staff and train its  workforce to help taxpayers understand the law and how it applies to  them; and (6) conduct extensive taxpayer outreach. IRS officials  stated that these provisions will require extensive changes relevant to  both individual and business filers and affect all areas of IRS.", "Complex and extensive nature of changes. According to IRS  officials, many of the revisions are complex and interrelated and  require central coordination and oversight. While IRS has to make  changes to its products every year, many of the changes needed to  implement the Tax Cuts and Jobs Act are more extensive than usual  and affect some of the forms with which taxpayers are most familiar.  For example, all Form 1040 products\u2014the forms and instructions for  individual tax return filing\u2014will be changed in accordance with the  law.", "One-year time frame. IRS officials told us that implementing the Tax  Cuts and Jobs Act in 1 year will be challenging. Officials said the  agency is using implementation of the Patient Protection and  Affordable Care Act as a general guide for its current efforts, but  noted this earlier legislation was less expansive. IRS was responsible  for 47 provisions of the Patient Protection and Affordable Care Act  and had multiple years to implement some of its provisions, including  those officials identified at the time as the most challenging.  Implementing individual provisions of the Tax Cuts and Jobs Act  involves multiple, dependent actions. For example, IRS cannot  determine the changes it will need to make to various tax forms until it  has interpreted the law and cannot reprogram its return processing  systems until those forms are changed.", "To complete necessary changes in time for the 2019 filing season,  IRS has used overtime and compensatory hours. For example,  according to IRS officials, as of May 26, 2018, IRS had used 1,749  overtime hours to make changes to forms and publications, between  two and three times as many overtime hours as it did in the entirety of  fiscal years 2016 or 2017. In addition, the agency delegated authority  to approve requests for work to a larger group of managerial staff and  temporarily reassigned existing staff to assist with time-sensitive  changes to tax forms and publications. In March 2018, IRS also made  a request for direct hiring authority, which would allow the agency to  hire IT staff more quickly. While this authority could be helpful to fill  specific positions more timely, IRS officials explained that these staff  will require training on tax processing procedures. According to a  senior IRS official, as of June 2018 the Office of Personnel  Management had not yet authorized this request.", "IRS has taken a number of steps to implement time-sensitive provisions  of the new law. IRS officials noted that while some provisions of the Tax  Cuts and Jobs Act are retroactive or relevant to the 2018 filing season,  most will not take effect until the 2019 filing season. As part of the  planning process, IRS determined when various provisions of the law  would become relevant and acted to release information on the provisions  with the earliest relevance first. For example, IRS  released new withholding tables and associated guidance;  revised the form and online withholding calculator that taxpayers use  to provide information to employers about the amount of tax that  employers should withhold from their wages; and provided guidance on the transition tax on untaxed foreign earnings of  foreign subsidiaries of U.S. companies, a new section of the Tax Cuts  and Jobs Act that changes how business income is calculated and tax  is paid for the 2018 filing season.", "IRS is continuing to revise its forms and issue guidance in advance of the  2019 filing season."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Internal Revenue Service for  review and comment. IRS provided written comments, which are  reproduced in appendix I. In its written comments, IRS generally  concurred with our findings and noted a concern regarding interpretation  of correspondence overage data. IRS said that the overage rate we report  is based upon the open inventory at the end of the fiscal year. We  clarified the basis of the overage rate in our report. However, we believe  the total that IRS cites in its letter could also be misinterpreted in that it  does not represent the total overage inventory; rather it is a total for the  last week of the fiscal year. IRS tracks the overage correspondence rate  on a weekly basis, which can vary somewhat during the year given  fluctuations in correspondence receipts and staff availability to respond,  but is relatively consistent throughout the year. Therefore, the overage  rate at the end of the fiscal year provides a basis for assessing IRS\u2019s  annual performance in responding to written correspondence.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Treasury, the Acting Commissioner of  Internal Revenue, 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) 512-9110 or lucasjudyj@gao.gov. Contact points for our  offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff members who made major  contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tom Gilbert (Assistant Director);  Erin Saunders Rath (Analyst-in-Charge); Shea Bader; Jacqueline Chapin;  Jehan Chase; Kirsten B. Lauber; Regina Morrison; Robert Robinson; and  Sarah Wilson made significant contributions to this report."], "subsections": []}]}], "fastfact": ["IRS had multiple challenges during the 2018 tax filing season, yet it improved its customer service and met target dates for processing returns and issuing refunds. This happened despite a system outage on tax filing day. IRS also took steps to handle changes, such as tax rate revisions, under the 2017 Tax Cuts and Jobs Act.", "Before the 2019 filing season begins, IRS needs to reprogram its computer systems to process tax returns, revise nearly 500 forms and instructions, hire and train employees, and help taxpayers understand the changes when filing taxes in 2019. To do this, IRS set up a central office to coordinate efforts across the agency."]}
{"id": "GAO-19-199", "url": "https://www.gao.gov/products/GAO-19-199", "title": "Defense Business Operations: DOD Should Take Steps to Fully Institutionalize the Chief Management Officer Position", "published_date": "2019-03-14T00:00:00", "released_date": "2019-03-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD spends billions of dollars each year to maintain key enterprise business operations intended to support the warfighter, including systems and processes related to the management of contracts, finances, the supply chain, and support infrastructure. The 2018 National Defense Strategy identified reform of DOD's business practices as one of DOD's three strategic goals. GAO has previously reported that weaknesses in these business operations have resulted in inefficiencies and billions of dollars wasted. GAO has also identified the need for a CMO with significant authority and experience to focus concerted attention on DOD's long-term business transformation efforts. Congress initially established such a position in the National Defense Authorization Act for Fiscal Year 2017.", "This report evaluates the extent to which DOD has implemented its CMO position and issued guidance to communicate within the department the authorities and responsibilities of the position. GAO analyzed the statutory authorities and responsibilities assigned to the CMO position and evaluated DOD's actions to implement them."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has taken steps to implement its Chief Management Officer (CMO) position which has been given the responsibility for managing DOD's business operations; however, unresolved issues remain for DOD to fully institutionalize the CMO's authorities and responsibilities. DOD has restructured the Office of the CMO (OCMO) to more closely align with the CMO's statutory authorities and responsibilities. Further, the OCMO is working to strengthen its data capabilities and has hired a Chief Data Officer and formed a Data Management and Analytics Steering Committee. Additionally, OCMO officials told us they are establishing cost baselines for each of DOD's major business functions.", "However, DOD has not fully addressed three key issues related to the CMO's authorities and responsibilities:", "The CMO's authority to direct the military departments on business reform issues . The law gave the CMO authority to direct the secretaries of the military departments on matters over which the CMO has responsibility. However, DOD has not determined how the CMO will exercise this authority, particularly when there is disagreement between the departments and the CMO.", "The CMO's oversight responsibilities of the Defense Agencies and DOD Field Activities (DAFAs) . The CMO is responsible for exercising authority, direction, and control over the designated DAFAs that provide shared business services\u2014those business functions, such as supply chain and logistics and human resources operations, that are provided across more than one DOD organization. However, DOD has not determined how the CMO will exercise this authority, such as which DAFAs will submit their proposed budgets for CMO review.", "Transfer of responsibilities from the Chief Information Officer to the CMO. Under the law, the CMO will exercise responsibilities relating to business systems and management that previously belonged to the Chief Information Officer. However, DOD has not determined which, if any, responsibilities will transition from the Chief Information Officer to the CMO or assessed the impact of such a transition on associated resources.", "In part because these issues remain unresolved, DOD agreed that it does not have department-wide guidance that fully and clearly articulates how the CMO's authorities and responsibilities should be operationalized. Making determinations on the three unresolved issues and issuing guidance would help ensure a shared understanding throughout the department of the CMO's role in leading DOD's enterprise-wide business reform efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that DOD should address each of the three unresolved issues that impede its progress in institutionalizing statutory authorities and responsibilities, and issue guidance, such as a chartering directive that addresses how the CMO's authorities should be operationalized. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) faces several key challenges that  significantly affect its ability to accomplish its mission, including achieving  greater efficiencies in defense business operations. DOD spends billions  of dollars each year to maintain key business operations intended to  support the warfighter, including systems and processes related to the  management of contracts, finances, the supply chain, and support  infrastructure. However, we have previously reported that weaknesses in  these business operations result in billions of dollars being wasted,  reduced efficiencies, ineffective performance, inadequate accountability,  and lack of transparency. The 2018 National Defense Strategy also  highlighted this issue, identifying reform of the department\u2019s business  practices for greater performance and affordability as one of DOD\u2019s three  strategic goals.", "Given the complexity and magnitude of the challenges facing DOD in  improving its business operations, in 2005 we identified the need for a  Chief Management Officer (CMO) with significant authority and  experience to sustain progress on these issues. We recommended that  Congress consider enacting legislation to establish a separate, full-time  CMO position at DOD with significant authority and experience and a  sufficient term of office to provide focused and sustained leadership over  business transformation efforts. DOD first took steps to establish a CMO  role in May 2007, when it designated the Deputy Secretary of Defense as  the department\u2019s CMO. Subsequently, Congress included a provision in  the National Defense Authorization Act (NDAA) for Fiscal Year 2008 to  codify the Deputy Secretary of Defense as the DOD CMO, and to  establish a new position known as the Deputy Chief Management Officer  (DCMO) to assist the Deputy Secretary. In 2007, we highlighted the  importance of a full-time CMO position separate and distinct from that of  the Deputy Secretary to help elevate, integrate, and institutionalize  responsibility for key management functions and focus concerted  attention on long-term business transformation efforts.", "In 2016, Congress included a provision in the NDAA for Fiscal Year 2017  to create a CMO position effective February 1, 2018 that would be distinct  from the Deputy Secretary of Defense and provided a number of key  responsibilities. In December 2017, Congress repealed and replaced this  provision in the NDAA for Fiscal Year 2018 and later added additional  responsibilities and functions in the John S. McCain NDAA for Fiscal Year  2019.  The CMO\u2019s current responsibilities are codified in section 132a of  title 10, United States Code. Section 132a provides that the CMO is  responsible for, among other things, managing DOD\u2019s enterprise  business operations and shared services and exercising authority,  direction, and control over the designated defense agencies and DOD  field activities (DAFA) that provide shared business services for the  department. Furthermore, in the NDAA for Fiscal Year 2018, effective on  Jan. 1, 2019, the CMO exercises any responsibilities, duties and powers  relating to business systems or management that are exercisable by a  Chief Information Officer (CIO) for the department. In an August 2017  report to Congress, DOD announced its plans to establish a CMO  position separate from the Deputy Secretary of Defense in order to  improve the quality and productivity of the business operations of the  department, thereby reducing the costs of those operations. The report  stated that DOD would use the establishment of the CMO organization as  an opportunity to renew its focus on business operations reform and to  shift its business operations to enterprise services in order to reduce the cost of business operations. On February 1, 2018, the Secretary of  Defense announced the establishment of a CMO position with  responsibility for directing all enterprise business operations of the  department and other duties as set forth in section 132a of title 10, United  States Code. With the resignation of DOD\u2019s first CMO in November 2018,  the DCMO assumed the role of the Acting CMO in December 2018.", "We performed our work under the authority of the Comptroller General to  conduct evaluations to assist Congress with its oversight responsibilities.  In this report, we evaluate the extent to which DOD has implemented its  CMO position and issued guidance communicating within the department  the authorities and responsibilities of the position.", "To evaluate the extent to which DOD has implemented its CMO position  and issued guidance, we reviewed relevant laws, such as the NDAAs for  Fiscal Years 2017 through 2019, to understand the authorities and  responsibilities that Congress assigned to this position. We also reviewed  DOD\u2019s August 2017 report to Congress and its April 2018 National  Defense Business Operations Plan, as well as memorandums issued by  the Secretary of Defense that outline the CMO\u2019s authorities and  responsibilities.", "We interviewed DOD\u2019s CMO, who served from February to November  2018, as well as the current Acting CMO. Additionally, we interviewed the  individuals who were chiefs of the five directorates within the Office of the  CMO (OCMO) as of July 2018, in order to understand the responsibilities  of these directorates. To understand how the CMO collaborates with  other DOD entities to lead business operation reform and how the  responsibilities of the CMO and the CIO may change, we met with the  CMO, officials from the Office of the CIO, and an official from DOD\u2019s Cost  Assessment and Program Evaluation (CAPE) Office. To learn how the  CMO is interacting with and influencing the military departments\u2019 business  operations, we met with officials from the Army, Air Force, and Navy CMO  and CIO offices. More details on our objectives, scope, and methodology  can be found in appendix I.", "We conducted this performance audit from February 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "History of the CMO Position", "paragraphs": ["DOD first took steps to establish a CMO role in May 2007, when it  designated the Deputy Secretary of Defense as the department\u2019s CMO.  Subsequently, Congress included a provision in the NDAA for Fiscal Year  2008 to codify the Deputy Secretary of Defense as the DOD CMO,  establish a new position known as the Deputy Chief Management Officer  (DCMO) to assist the Deputy Secretary, and name the Under Secretaries  of the military departments as CMOs of their respective organizations.  The military departments also established DCMO positions to assist the  CMOs with overseeing their business operations. In addition, the NDAA  for Fiscal Year 2009 required the secretary of each military department to  establish an office of business transformation and develop business  transformation plans, with measurable performance goals and objectives,  to achieve an integrated management system for the business operations  of each military department. Further, DOD\u2019s guidance states that the  DOD DCMO should coordinate with the military department CMOs to  identify and exchange information necessary to facilitate the execution of  the Deputy Secretary of Defense\u2019s responsibilities in his role as the DOD  CMO.", "In October 2008, DOD issued Department of Defense Directive 5105.82  to assign the authorities and responsibilities of the DCMO. Among other  duties, the DCMO was responsible for recommending methodologies and  measurement criteria to better synchronize, integrate, and coordinate the  business operations of the department and advising the Secretary of  Defense on performance goals and measures and assessing progress  against those goals. For a full list of the DCMO authorities and  responsibilities identified in DOD Directive 5105.82, see appendix II."], "subsections": []}, {"section_title": "CMO Statutory Authorities and Responsibilities", "paragraphs": ["In December 2016, Congress initially established the standalone CMO  position to be effective on February 1, 2018 in section 901(c) of the NDAA  for Fiscal Year 2017. In December 2017, Congress repealed and  replaced this provision in the NDAA for Fiscal Year 2018 and later added  additional responsibilities and functions in the John S. McCain NDAA for  Fiscal Year 2019. Table 1 summarizes key CMO statutory authorities  and responsibilities, and appendix II provides a more detailed comparison  of these authorities and responsibilities."], "subsections": []}, {"section_title": "Key Strategies for Implementing CMO Positions", "paragraphs": ["In November 2007, we reported on key strategies for implementing CMO  positions. We developed these strategies based on our work, in which  we (1) gathered information on the experiences and views of officials at  four organizations that rely on chief management officials and (2)  convened a forum to gather insights from individuals with experience and  expertise in business transformation, federal and private sector  management, and change management. The forum brought together  former and current government executives and officials from private  business and nonprofit organizations to discuss when and how a CMO or  similar position might effectively provide the continuing, focused attention  essential for integrating key management functions and undertaking  multiyear organizational transformations.", "Our work identified the following six key strategies:", "Define the specific roles and responsibilities of the CMO position.", "Ensure that the CMO has a high level of authority and clearly  delineated reporting relationships.", "Foster good executive-level working relationships for maximum  effectiveness.", "Establish integration and transformation structures and processes in  addition to the CMO position.", "Promote individual accountability and performance through specific  job qualifications and effective performance management.", "Provide for continuity of leadership in the CMO position."], "subsections": []}]}, {"section_title": "DOD Has Taken Some Steps to Implement the CMO Position, but Key Issues Related to Authorities and Responsibilities Remain Unresolved DOD Has Begun to Implement Its CMO Position and Restructure the OCMO, with a Focus on Data Responsibilities", "paragraphs": ["In February 2018, DOD formally established the position of the CMO and  an office in support of the CMO (OCMO). In establishing the office, the  Secretary of Defense stated that all resources and personnel (military,  civilian, and contractor) assigned within the existing DCMO office were to  transfer to the OCMO. Generally, the department has been focused on  updating organizational structures and strengthening the OCMO\u2019s data  capabilities, as described below."], "subsections": [{"section_title": "DOD Has Not Resolved Three Key Issues Related to the CMO\u2019s Authorities and Responsibilities", "paragraphs": ["Despite its efforts to establish and restructure the OCMO, DOD has not  fully addressed three key issues related to the CMO\u2019s statutory authorities  and responsibilities, including: (1) how the CMO will exercise the authority  to direct the military departments; (2) how the CMO will exercise oversight  of the DAFAs; and (3) which responsibilities, if any, will transfer from the  CIO to the CMO."], "subsections": []}]}, {"section_title": "Unresolved Issue #1: The CMO\u2019s Authority to Direct the Military Departments on Business Reform Issues", "paragraphs": ["The Secretary of Defense has charged the CMO with leading DOD\u2019s  enterprise business operations and with unifying business management  efforts across the department and other responsibilities as set forth in  section 132a of title 10, United States Code. Moreover, the NDAA for  Fiscal Year 2019 directed the Secretary of Defense, acting through the  CMO, to reform DOD\u2019s enterprise business operations across all  organizations and elements of the department with respect to any activity  relating to civilian resources management, logistics management,  services contracting, or real estate management. Fulfilling these  responsibilities depends, in part, on the CMO\u2019s visibility into the business  operations of all components of the department, including the military  departments, as well as the ability to identify and execute DOD-wide  business reforms, including those that may affect the military  departments.", "Congress addressed the issue of the CMO\u2019s relationship to the military  departments in section 132a, which authorizes the CMO, subject to the  authority, direction, and control of the Secretary of Defense and Deputy  Secretary of Defense, to direct the secretaries of the military departments  and the heads of all other elements of DOD on matters for which the  CMO has responsibility under the statute. DOD leadership has provided  some guidance regarding the CMO\u2019s responsibilities for efforts that are  department-wide and therefore involve the military departments. For  example:  In a May 2017 memorandum, the Deputy Secretary of Defense  directed all DOD components to conduct a thorough review of  business operations throughout the department and to propose  initiatives that drive increased effectiveness in pursuit of greater  efficiency. The memorandum identified the DCMO as the lead for this  effort and tasked the DCMO with integrating all initiatives. All  responsibilities and authorities assigned to the DCMO were  transferred to the CMO on February 1, 2018.", "More recently, in May 2018, DOD issued its FY 2018-FY 2020  National Defense Business Operations Plan (Plan), which states that  the CMO is personally responsible for overseeing implementation of  business reforms. The Plan further establishes, and gives the CMO  responsibility for carrying out, a strategic objective to improve and  strengthen business operations through a move to DOD-enterprise or  shared services and reduce administrative and regulatory burden.", "However, DOD leadership has not determined how the CMO will exercise  this authority in instances where the military departments have concerns  or disagree with decisions that the CMO makes. In our discussions with  the Army, Navy, and Air Force\u2019s CMO offices, officials from each military  department explained that they frequently met with the CMO and were  involved in discussing business operation initiatives with potential for  implementation across multiple military departments. According to these  officials, these discussions were collaborative and the CMO did not have  to exercise his authority to direct the services. However, we found two  instances in which the lack of a determination as to how the CMO is to  direct the business-related activities of the military departments led to  questions about the respective roles and authorities of the CMO and the  military departments as they relate to business reform. In one case,  officials from the military departments questioned the CMO\u2019s authority to  make binding decisions; in the other, the military departments sought to  pursue reform activities without CMO involvement and oversight, even  though the CMO has responsibility for leading DOD\u2019s enterprise business  reform efforts.", "First, officials told us that in a July 2018 meeting of the Reform  Management Group (RMG) the CMO approved a decision to consolidate  DOD\u2019s contract writing systems into a single system. According to  OCMO officials, the effort to move to a single contract writing system  would increase data visibility, lessen or eliminate redundant contracting  needs, provide for greater management insight, and increase the buying  power of the department. However, officials told us the military  departments, which had voiced concerns about moving to one  consolidated system in a previous RMG meeting, expressed reservations.  Specifically, a DOD official who participated in the RMG meetings told us  the military departments cited a concern about loss of individual  authorities and requirements, among other issues. Several DOD officials  we spoke with described the RMG meeting as the first time the question  of the CMO\u2019s authority to make decisions for enterprise-wide business  reform and to direct the military departments had been raised at an RMG  meeting. According to officials who were present at the meeting,  participants discussed whether the RMG is a voting body and what  authority the CMO has to make unilateral decisions for the RMG. When  we spoke with officials about this matter in January 2019, they said this  question was still unresolved.", "Second, the Secretaries of the Army, Navy, and Air Force, in a December  10, 2018 memorandum to the Secretary of Defense, requested the  Secretary direct the military departments to jointly review organizations,  activities, processes, and procedures that might be reformed or  restructured to enhance lethality and readiness or reduce cost. While the  departments asked for support the Secretary deemed appropriate from  the Joint Staff, the Office of the Secretary of Defense, and others, it did  not request support or involvement from the CMO. Further, the  memorandum stated that the military department secretaries envision a  process where they would make recommendations directly to the  Secretary. However, the memorandum made no mention of CMO  involvement in the review, notwithstanding Congressional, Secretary of  Defense, and Deputy Secretary of Defense direction that calls for the  CMO to oversee DOD\u2019s business reform efforts.", "Without a determination by the Secretary or Deputy Secretary of Defense  about how the CMO is to direct the business-related activities of the  military departments, the CMO\u2019s ability to lead DOD\u2019s reform of its  enterprise business operations and to direct the military departments may  be limited, potentially leading to fragmented business reform efforts."], "subsections": []}, {"section_title": "Unresolved Issue #2: The CMO\u2019s Oversight Responsibilities for the Defense Agencies and DOD Field Activities (DAFA)", "paragraphs": ["DOD\u2019s 19 defense agencies and eight DOD field activities are intended to  perform many of DOD\u2019s business operations, including consolidated  supply and service functions such as human resources services, on a  department-wide basis. We have previously identified numerous  instances of fragmentation, overlap, and duplication and have  recommended actions to increase coordination or consolidation to  address related inefficiencies that affect the DAFAs. For example, in  September 2018, we reported that there is fragmentation and overlap  within the DAFAs that provide human resources services to other defense  agencies or organizations within DOD. Our September 2018 report on  the DAFAs also found that DOD does not comprehensively or routinely  assess the continuing need for its DAFAs.", "GAO-18-592. DOD was statutorily required to periodically review the services and  supplies each DAFA provides to ensure there is a continuing need for each, and that the  provision of services and supplies by each DAFA, rather than by the military departments,  is more effective, economical, or efficient (See 10 U.S.C. \u00a7 192 (c)). Since 2012, DOD has  relied on existing processes, such as its annual budget process, to fulfill this review  requirement. However, DOD did not provide sufficient evidence that these processes  satisfy the statute. For example, while DOD reviews the DAFAs during the budget  process, it does not specifically review the provision of services by the DAFAs rather than  the military departments. that provide shared business services for the department, as designated  by the Secretary or Deputy Secretary of Defense. In January 2018, the  Deputy Secretary reported to Congress that the Secretary of Defense  formally identified the Pentagon Force Protection Agency and  Washington Headquarters Services (WHS) as the DAFAs that provide  shared business services, and directed that they would fall under the  authority, direction, and control of the CMO. However, both of these  organizations had already been identified as providing shared business  services and aligned under the previous DCMO. In addition, the Deputy  Secretary\u2019s January 2018 report to Congress did not explain why these  two DAFAs, but not others, were designated as providing shared  business services.", "In the January 2018 report to Congress, the Deputy Secretary of Defense  also stated that, under his direction, the DCMO and Director of CAPE  were leading defense reform work that would result in recommendations  on, among other things, any required organizational changes. According  to DOD\u2019s report, such changes would include the designation of, and  oversight arrangements for, other DAFAs providing shared business  services that require CMO oversight. The recommendations were  expected in late summer 2018. However, when we asked OCMO officials  for a status update in November 2018, they acknowledged that they had  not yet conducted the review.", "In November 2018, OCMO officials told us they had recently begun a  review of the DAFAs but had not designated any additional DAFAs as  providing shared business services. OCMO officials explained that the  DAFAs were prioritized for review, with WHS being selected to be the first  reviewed. The review will assess what role WHS performs and how  efficiently it is performing that role, and will compare WHS performance to  commercial benchmarks, according to OCMO officials. As of January  2019, officials said they expected to complete the review of WHS on  February 16, 2019. According to officials, the next DAFAs to be reviewed  will be DLA, the Defense Finance and Accounting Service, and the  Defense Information Systems Agency. In addition, OCMO officials said  that they plan to conduct a review of business functions performed in  multiple DAFAs to identify opportunities to consolidate shared services for  greater efficiency. For example, because WHS performs some human  resource functions, as do certain other DAFAs, the OCMO is assessing  how human resources management can be improved across the  department. OCMO officials indicated they expect additional DAFAs to be  identified as shared business services as a result of this review.  Additionally, officials said they expect that the review will be completed in  January 2020, but have not determined when or how the Secretary of  Defense will designate additional DAFAs as providing shared business  services. They have also not determined what those decisions would  mean for the OCMO\u2019s management of its responsibility to provide direct  authority, control, and direction over those DAFAs.", "In section 921 of the John S. McCain NDAA for Fiscal Year 2019,  Congress also expanded and codified the CMO\u2019s authority over the  DAFAs by requiring the Secretary of Defense, acting through the Under  Secretary of Defense, Comptroller, to direct the head of each DAFA  specified by the Secretary for the purpose of section 921, to transmit its  proposed budget for enterprise business operations for a fiscal year to the  CMO for review, beginning in fiscal year 2020. Section 921 further  provides that the CMO shall submit a report to the Secretary containing  the CMO\u2019s comments and certification of whether each proposed budget  achieves a required level of efficiency and effectiveness for enterprise  business operations, consistent with guidance for budget review  established by the CMO. Under section 921, the Secretary of Defense  has discretion to determine which DAFAs\u2019 proposed budgets are subject  to CMO review. In November 2018, OCMO officials told us that the  Secretary of Defense had not yet designated any DAFAs as required to  submit their budgets for review. However, they stated that the OCMO is  working with the DOD Comptroller to determine how the DAFA budget  review will be conducted. They also said that they have hired consultants  under an existing blanket purchase agreement contract to assist with  developing a methodology for this review. OCMO officials told us they  believed they would be ready to conduct the required review by fiscal  year 2020, as required by the statute. However, it is unclear whether this  review will result in a determination of which DAFAs are required to  submit their proposed budgets for review.", "Until the Secretary of Defense makes a determination regarding the  CMO\u2019s relationship to the DAFAs, including whether additional DAFAs  should be identified as providing shared business services and which  DAFAs will be required to submit their proposed budgets for CMO review,  the CMO\u2019s ability to effectively oversee and streamline the DAFAs\u2019  business operations may be limited."], "subsections": []}, {"section_title": "Unresolved Issue #3: The Transfer of Responsibilities from the Chief Information Officer to the CMO", "paragraphs": ["As described in table 1 of this report, section 910 of the NDAA for Fiscal  Year 2018 provided that, effective January 1, 2019, the CMO would  assume certain responsibilities for business systems and management  that were formerly performed by the CIO. Section 903 of the John S.  McCain NDAA for Fiscal Year 2019 clarified this provision by amending  the statute (10 U.S.C. \u00a7 142) which established and provides  responsibilities for the DOD CIO. However, in July 2018, DOD officials  told us no formal action had been taken to determine which, if any,  responsibilities would transition or to assess the resource impact this  would have on both offices because they had concerns about the  statutory requirement and how it would affect IT management at the  department. For example, CMO officials expressed the belief that all IT  roles and responsibilities should be consolidated under one position. We  have previously found that having department-level CIO responsibilities  performed by multiple officials could make the integration of various  information and technology management areas, as envisioned by law,  more difficult to achieve.", "The CMO told us in July 2018 that he had begun engaging informally with  Congress to discuss the department\u2019s concerns about the transition of  certain responsibilities from the CIO to the CMO, and that he would  engage further once the newly confirmed CIO felt prepared to join those  discussions. However, in November 2018, the Acting CMO told us that  the OCMO was still exploring all of the authorities that Congress had  provided, and, as such, felt that further engagement with Congress was  premature at this point. The Acting CMO added that she and the CIO had  worked out an informal agreement regarding which areas they would  each manage, but did not identify specific tasks that would transfer to the  CMO or provide any details of this agreement. At the same time, OCMO  officials acknowledged in November 2018 that the OCMO had not  conducted an analysis to determine which responsibilities should formally  transfer or what resource ramifications, if any, this transfer would have on  both offices. Without an analysis to help DOD determine which duties  should transfer from the CIO to the CMO, including identifying any  associated resource impacts, DOD will remain reliant on this informal  agreement. Such reliance could cause confusion within the department  about who is responsible for key IT functions. Moreover, section 3506 of  title 44, United States Code states that in similar circumstances, where a  CIO is designated for DOD and for each military department, the  respective duties of the CIOs shall be clearly delineated."], "subsections": [{"section_title": "DOD Lacks Guidance That Institutionalizes All of the CMO\u2019s Authorities and Responsibilities", "paragraphs": ["In part because the issues identified above have not been resolved, DOD  agreed that it does not have department-wide guidance, such as a  chartering directive, that fully and clearly institutionalizes the CMO  position by articulating how all of the CMO\u2019s authorities and  responsibilities are to be operationalized. The department has issued  several documents that refer to some of the CMO\u2019s authorities and  responsibilities, but these documents were issued as the CMO\u2019s role  under the statute was evolving, and none of them, either individually or  collectively, encompass all of the CMO\u2019s current authorities and  responsibilities. For example:", "DOD Directive 5105.82 (Oct. 17, 2008) established the  responsibilities and authorities of the DCMO. These responsibilities  included, among others, advising the Secretary of Defense on  performance goals and measures and assessing progress against  those goals; and ensuring that strategic plans, performance goals,  and measures were aligned with, and assured accountability to, DOD  strategic goals. However, this document is now outdated\u2014for  example, it assigns the DCMO responsibilities related to the Defense  Business Transformation Agency, which an OCMO official agreed no  longer exists. Moreover, the directive does not reflect the additional  authorities and responsibilities for the CMO position that are  delineated in section 132a of title 10, United States Code, as  amended. Table 3 at appendix II summarizes all authorities and  responsibilities included in this directive.", "Secretary of Defense Memorandum (Feb. 1, 2018) established the  CMO position and outlined its authorities and responsibilities  consistent with section 132a of title 10, United States Code. The  authorities and responsibilities outlined in this memorandum align  closely with those specified for the CMO in the statute, but the  memorandum does not explain how these authorities and  responsibilities are to be operationalized. For example, this  memorandum does not address how the CMO will interact with other  DOD organizations, such as the military departments, as DOD  traditionally has done through its chartering directives. Table 4 at  appendix II summarizes authorities and responsibilities included in  Secretary of Defense memorandums.", "Secretary of Defense Memorandum (July 12, 2018) addressed the  CMO\u2019s role in supporting the Deputy Secretary of Defense on  enterprise management and performance accountability. According to  this memorandum, the CMO supports the Chief Operating Officer to  ensure all DOD leaders are unified and aligned across all assigned  responsibilities and functions, through strong management practices,  integrated processes, and best value business investments, and to  support the Deputy Secretary of Defense in his capacity as the  department\u2019s Chief Operating Officer. However, the CMO\u2019s  responsibilities in supporting the Deputy Secretary of Defense as the  Chief Operating Officer outlined in this memorandum are not specified  by any other relevant guidance documents.", "CMO Action Memorandum (July 27, 2018) responded to the  Secretary\u2019s February 1, 2018 memorandum and restated several of  the CMO\u2019s authorities and responsibilities, consistent with 132a of title  10, United States Code, and provided information on the plans to  restructure the OCMO and to establish the CMO Action Group.", "The Secretary of Defense\u2019s July 12, 2018 Memorandum directed the  Deputy Secretary of Defense to provide amplifying guidance on CMO  responsibilities and authorities emanating from statute as well as  delegating additional discretionary authorities or responsibilities to the  CMO. Issuance of this amplifying guidance would be consistent with one  of the key strategies we identified for implementation of a CMO position\u2014 clearly defining roles and responsibilities of the position and communicating them throughout the organization. In November 2018,  however, officials told us that they expected the CMO vacancy to delay  progress on codifying any decisions on the CMO\u2019s statutory and  discretionary authorities in a chartering directive. Additionally, in  November 2018, a senior OCMO official stated that the office needed to  complete its reorganization prior to the department issuing updated  guidance.", "Until the Deputy Secretary of Defense resolves the issues previously  discussed and issues guidance (such as a chartering directive) to codify  the CMO\u2019s authorities and responsibilities and specify how those are to  be operationalized, questions regarding the extent of the CMO\u2019s authority  and responsibility are likely to persist, preventing a shared understanding  across the department of the CMO\u2019s role. Further, the lack of guidance  could affect the ability of the department to make progress in conducting  necessary business reforms\u2014one of three key priorities identified in the  2018 National Defense Strategy."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["DOD has made progress in implementing some of the authorities and  responsibilities Congress has provided the CMO. However, DOD has not  resolved several key issues that limit its ability to implement all statutory  authorities and responsibilities. Specifically, DOD has yet to resolve key  issues, such as how the CMO will exercise authority to direct the military  departments and exercise direction and control over DAFAs that provide  shared business services. Additionally, without analyzing the authorities  and responsibilities that will transfer from the CIO to the CMO and the  resource impact, if any, those new responsibilities will have on the  OCMO, DOD risks creating confusion within the department about which  official is responsible for key information technology functions. While DOD  has issued several documents delineating some of the CMO\u2019s authorities  and responsibilities, the department does not currently have formal and  current guidance, such as a DOD chartering directive, that  institutionalizes all the CMO\u2019s authorities and responsibilities. Considering  the evolution of the CMO\u2019s authorities and responsibilities since the  position was created, guidance that fully encompasses all CMO  authorities and responsibilities and explains how they are to be  operationalized could help to institutionalize and sustain the position  beyond the tenure of the current acting CMO."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to the Secretary of  Defense:  The Secretary of Defense should ensure that the Deputy Secretary of  Defense makes a determination as to how the CMO is to direct the  business-related activities of the military departments. (Recommendation  1)", "The Secretary of Defense should ensure that the Deputy Secretary of  Defense makes a determination regarding the CMO\u2019s relationship with  the DAFAs, including whether additional DAFAs should be identified as  providing shared business services and which DAFAs will be required to  submit their proposed budgets for enterprise business operations to the  CMO for review. (Recommendation 2)", "The Secretary of Defense should ensure that the CMO and CIO conduct  an analysis to determine which responsibilities should transfer from the  CIO to the CMO, including identifying any associated resource impacts,  and share the results of that analysis with the Congress.  (Recommendation 3)", "The Secretary of Defense should ensure that the Deputy Secretary of  Defense, on the basis of the determinations regarding the CMO\u2019s  statutory and discretionary authorities, codify those authorities and how  they are to be operationalized in formal department-wide guidance.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, which are reproduced in Appendix III, DOD concurred  with our recommendations and described ongoing and planned actions to  address them.", "We are sending copies of this report to the Acting Secretary and Acting  Deputy Secretary of Defense, the Acting DOD Chief Management Officer,  the DOD Chief Information Officer, the Director, Cost Assessment and  Program Evaluation, and appropriate congressional committees. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To examine the extent to which DOD has implemented the authorities  and responsibilities of its Chief Management Officer (CMO) position and  issued guidance communicating within the department the authorities and  responsibilities of the position, we reviewed related laws and key  documents such as memorandums issued by the Secretary of Defense  that outline some of the CMO\u2019s authorities and responsibilities. To  understand the authorities and responsibilities that Congress and DOD  have assigned to this position, we reviewed section 901 of the National  Defense Authorization Act (NDAA) for Fiscal Year 2017, which initially  created the CMO position effective February 1, 2018; section 910 of the  NDAA for Fiscal Year 2018, which codified and expanded the CMO\u2019s  authorities and responsibilities; and section 921 of the John S. McCain  NDAA for Fiscal Year 2019, which further expanded the CMO\u2019s  authorities and responsibilities. We reviewed DOD\u2019s August 2017 Report  to Congress and its April 2018 National Defense Business Operations  Plan. We also reviewed our November 2007 report on key strategies for  implementing CMO positions.", "To understand ongoing actions to implement the authorities and  responsibilities given to the CMO position, we interviewed DOD\u2019s former  CMO, who served from February to November 2018, as well as the  current acting CMO and the chiefs of the five directorates or their  representatives within the Office of the CMO (OCMO) in July 2018, to  understand the responsibilities of these directorates. We also met with the  nine reform teams charged with implementing initiatives to, among other  things, move DOD toward an enterprise-wide, shared-service model.  Additionally, we reviewed documentation from the reform teams to  understand what business operation reform initiatives the CMO has  prioritized and what progress has been made to implement and monitor  these initiatives. To understand key initiatives DOD is pursuing to improve  its business operations and how it monitors implementation of those  initiatives, we attended demonstrations of DOD\u2019s cost management  framework and its reform team portal. We also met with an official from  DOD\u2019s Cost Assessment and Program Evaluation (CAPE) Office to gain  additional insights on oversight of the reform teams from one of the co- chairs on the Reform Management Group. Additionally, we reviewed  documentation from the OCMO containing personnel numbers and  funding levels to determine the level and type of resources available to  the CMO to assist in carrying out his responsibilities. To understand how  the CMO collaborates with other DOD entities to lead business operation  reform and how the responsibilities of the CMO and Chief Information  Officer (CIO) may change, we met with officials from the Office of the  DOD CIO. To understand how the CMO is interacting with and influencing  the military departments\u2019 business operations, we met with officials from  the Army, Air Force, and Navy CMO and CIO offices.", "We performed our work under the authority of the Comptroller General to  conduct evaluations to assist Congress with its oversight responsibilities.  We conducted this performance audit from February 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."], "subsections": []}, {"section_title": "Appendix II: Summary of Key Authorities and Responsibilities for the Department of Defense Chief Management Officer", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Elizabeth A. Field, (202) 512-2775 or fielde1@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sally Newman (Assistant  Director), Tracy Barnes, Margaret Best, Arkelga Braxton, William Carpluk,  Timothy DiNapoli, Michael Holland, Chad Johnson, Kristi Karls, William  Lamping, Ned Malone, Jared Sippel, Susan Tindall, Sarah Veale, and  Lillian Yob made key contributions to this report."], "subsections": []}]}], "fastfact": ["We made a previous recommendation that DOD should have a chief management officer (CMO) with significant authority to help reduce inefficiencies and save billions of dollars.", "Congress established the position. However, DOD has not developed guidance that explains how the CMO's authorities and responsibilities should be put into practice. For example, it has not determined how the CMO will exercise authority when there is a disagreement with a military department on business reform issues.", "We made 4 recommendations, including that DOD decide how the CMO will direct military department business activities."]}
{"id": "GAO-19-89", "url": "https://www.gao.gov/products/GAO-19-89", "title": "Depot Maintenance: DOD Has Improved the Completeness of Its Biennial Core Report", "published_date": "2018-11-14T00:00:00", "released_date": "2018-11-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD uses both military depots and contractors to maintain its complex weapon systems and equipment. Recognizing the depots' key role and the risk of overreliance on contractors, section 2464 of title 10 of the U.S. Code requires DOD to maintain a core logistics capability that is government-owned and operated, involving a combination of personnel, facilities, equipment, processes, and technology. Section 2464 requires DOD to provide a Biennial Core Report to Congress that addresses 10 reporting elements, including information on its core capability requirements and projected workload for the next fiscal year.", "Section 2464 includes a provision that GAO review DOD's Biennial Core Reports for compliance and completeness. In reviewing the 2018 Biennial Core Report, GAO assessed the extent to which DOD's report (1) addressed the 10 reporting elements required by section 2464(d), and (2) is complete. GAO reviewed and analyzed relevant legislation, DOD guidance, and the 2018 Biennial Core Report, and met with DOD and military service officials to discuss the processes used to develop the information in DOD's 2018 Biennial Core Report."]}, {"section_title": "What GAO Found", "paragraphs": ["In its 2018 Biennial Core Report, the Department of Defense (DOD) addressed 8 of 10 reporting elements. Specifically, DOD reported, by military service, its:", "depot maintenance workload required to sustain core maintenance capability requirements, based on contingency planning scenarios;", "projected fiscal year 2019 depot maintenance workloads; and", "projected fiscal year 2019 shortfalls (i.e., insufficient workload to sustain the required level of capability) and rationales and mitigations for those shortfalls.", "The Army reported a projected workload for fiscal year 2019 that would meet about 84 percent of its identified core capability\u2014a shortfall of 2.9 million direct labor hours (see figure). The Army identified numerous reasons\u2014such as newly established software depot maintenance requirements\u2014for its shortfalls. Furthermore, the Army presented mitigation plans for its shortfalls, such as moving software-related work from contractor to military sources.", "The other services did not report overall shortfalls, but some services reported shortfalls associated with specific types of work. For example, the Air Force reported a shortage associated with the repair of tactical missiles. As a mitigation plan, the Air Force stated that it plans to use workload associated with repairing strategic missiles to maintain this capability, since the electronics on the two types of missiles are very similar and require the same maintenance skill set.", "DOD did not address two required reporting elements\u2014progress in implementing mitigation plans from the 2016 biennial core report, and the degree to which projected workload reported in the 2016 biennial core report was executed. According to DOD officials, changes in its guidance and processes for developing the 2018 report resulted in the 2016 and 2018 reports not being directly comparable. However, DOD officials stated that they plan to address these two elements in the 2020 Biennial Core Report.", "DOD's 2018 Biennial Core Report is generally complete, in that it lacks obvious errors and aligns with supporting information provided by the services. DOD's concerted efforts to implement better guidance and procedures\u2014in part, according to DOD officials, by implementing GAO's prior recommendations from 2012, 2014, and 2016\u2014assisted in improving the completeness of the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) has many complex weapon systems  and equipment that require regular and emergency maintenance to  continue meeting national security goals. Maintaining the capability to  sustain these systems and equipment is critical for DOD. DOD uses its  military depots\u2014public-sector facilities that are government-owned and- operated\u2014and its personnel to sustain its complex weapon systems and  equipment, both in peacetime and in support of operations. DOD also  uses private-sector contractors to help sustain these systems and  equipment.", "To ensure that this capability to sustain weapon systems and equipment  is preserved within the government, section 2464 of title 10 of the United  States Code requires DOD to maintain a core depot-level maintenance  and repair capability that is government-owned and -operated.  Maintaining this capability provides a ready and controlled source of  technical competence and resources to enable effective and timely  response to mobilizations, contingencies, or other emergencies.  Additionally, DOD must assign these government-owned and -operated  facilities (the depots) sufficient workload to ensure cost efficiency and  technical competence during peacetime, while preserving the surge  capacity and reconstitution capabilities necessary to fully support the  strategic and contingency plans prepared by the Chairman of the Joint  Chiefs of Staff.", "Section 2464 also requires DOD, among other things, to submit to  Congress a biennial report providing information on its core depot-level  maintenance and repair capability requirements and workload.  Specifically, subsection (d) of section 2464 identifies 10 elements that  DOD must address for each of the armed services in its biennial report  concerning depot-maintenance requirements and workload. Section 2464 also requires us to review DOD\u2019s report for compliance with section  2464, and to assess the completeness of the report. DOD submitted its  most recent biennial core report to Congress on May 23, 2018.", "In this report, we assessed the extent to which DOD\u2019s 2018 Biennial Core  Report (1) addressed the 10 reporting elements required by section  2464(d), and (2) is complete. We provided a briefing to your staff on July  19, 2018 of our preliminary observations on the extent to which DOD  addressed the 10 reporting elements required by section 2464(d). This  report provides the final results of our analysis.", "For objective one, we analyzed the report, compared the content of the  report with the elements required by the statute, and obtained information  on the process by which DOD identified its core capability requirements  and the projected workload needed to sustain its core maintenance  capability for fiscal year 2019. When the report explicitly included all  parts of the required reporting element, we determined that DOD  \u201caddressed\u201d the element. When the report did not explicitly include any  part of the element, we determined that DOD \u201cdid not address\u201d the  element. If the report included some aspects of an element, but not all,  then we determined that DOD \u201cpartially addressed\u201d the element. We also  discussed our assessment of each element with department and military  service officials to gain additional insight into their analysis and efforts to  address the statutory requirements.", "For objective two, we obtained and analyzed the fiscal year 2019 data  used in compiling DOD\u2019s 2018 Biennial Core Report, including core  capability requirements and projected sustaining workload. We also  reviewed other information, such as projected workload shortfall data  (that is, the amount by which core capability requirements exceed  projected workload for fiscal year 2019) and reasons for it, which the  Office of the Secretary of Defense (OSD) required the military service  headquarters to submit in support of the report. In order to determine  whether these data and information were complete, we performed a  number of data check steps to identify transposition inconsistencies or  errors, and we discussed our analyses with OSD and military service  officials. We also discussed the department\u2019s guidance and the  processes used to collect the data for the report with department and  military service officials. As in our previous reviews of DOD\u2019s biennial  core reports, we did not assess the reliability of the underlying data  provided by the military services for the 2018 DOD Biennial Core Report.  Lastly, we reviewed DOD\u2019s actions to address our prior recommendations  that were targeted at improving the completeness of DOD\u2019s biennial  reports. We discuss our scope and methodology in more detail in  appendix III.", "We conducted this performance audit from May 2018 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Determining and Reporting on Core Capability Requirements", "paragraphs": ["DOD Instruction 4151.20, Depot Maintenance Core Capabilities  Determination Process, requires the military services to apply a  methodology to determine their core capability requirements\u2014that is, to  identify what core capabilities are required and what workload would be  necessary to enable them to sustain these core capabilities at the depots.  DOD\u2019s instruction also requires the military services to determine the  estimated cost of workloads to sustain the core capability requirement.", "The instruction describes a series of mathematical computations and  adjustments that the military services are required to use to compute their  core capability requirements, and to identify the projected workload  needed to support these requirements. Specifically, the instruction  requires that the military services identify the weapon systems required to  execute the Chairman of the Joint Chiefs of Staff\u2019s strategic and  contingency plans, which, among other things, guide the use and  employment of the military forces across all geographic regions and  sustain military efforts over different durations of time. After the systems  are identified, the military services compute annual depot maintenance  capability requirements for peacetime, in direct labor hours, to represent  the amount of time they will regularly take to execute required  maintenance. A military service may adjust calculated direct labor hours  to address redundant capability requirements that are so similar to one  another that they share common base repair processes.", "DOD tracks core capability requirements using the following two metrics: direct labor hours, each of which represents 1 hour of effort directly  allocated to a category of work; and work breakdown structure categories, which bundle types of work  according to weapon systems and equipment.", "DOD uses work breakdown structure categories to organize data on its  various core capability requirements and workloads, as well as to manage  and report on its core capabilities. There are 10 first-level work  breakdown structure categories, and these in turn are broken down into  second-level subcategories, which are the major elements that make up  the system or equipment in the first-level category. Figure 1 shows the 10  first-level categories of DOD\u2019s work breakdown structure. For the full work  breakdown structure, see appendix IV.", "Finally, the instruction requires the military services to provide a reason  for all projected shortfalls, strategies to mitigate the effects of each  projected shortfall, and actions taken by the services to rectify any  projected workload or capability shortfall. A projected shortfall exists if a  military service does not expect to have sufficient workload to sustain the  required level of capability that has been identified. For example, an  armed service may have identified 10,000 direct labor hours of core  capability requirements for ground vehicles, but have only 4,000 hours of  projected depot maintenance work for ground vehicles\u2014resulting in a  projected workload shortfall of 6,000 hours."], "subsections": []}, {"section_title": "DOD\u2019s Biennial Core Reports and Our Prior Reviews", "paragraphs": ["In 2012 DOD submitted its first biennial core report to Congress, and we  found that DOD did not provide sufficient explanations when reporting on  the military services\u2019 shortfalls in core capability requirements. In 2014  DOD submitted its second biennial core report to Congress, and we found  that DOD did not have accurate and complete data in the report. In 2016  DOD submitted its third biennial core report to Congress, and we found  (1) data errors; (2) inaccurate inter-service workload across the military  services due to lack of coordination in reporting this information; (3)  inconsistent calculations or display of workload shortfalls across the  military services; and (4) inconsistent calculations of the estimated cost of  planned workload across the military services. We made  recommendations to address each issue. Further, we identified  additional information that could increase the report\u2019s transparency, and  we suggested that Congress consider amending section 2464 to include  additional elements to increase the transparency of future biennial core  reports. Consistent with our recommendations, Congress amended  section 2464 and added additional reporting requirements. We discuss  DOD\u2019s actions to address our specific recommendations to improve the  completeness of its 2018 Biennial Core Report later in this report."], "subsections": []}]}, {"section_title": "DOD Addressed Eight of the Ten Reporting Elements and Plans to Address the Remaining Two in the 2020 Biennial Report", "paragraphs": ["In the 2018 Biennial Core Report, DOD and the military services  addressed 8 of 10 required reporting elements, as shown in table 1 and  discussed in more detail below. According to department officials, the  department did not address two of the elements because changes to its  guidance and processes for developing the 2018 report resulted in the  2016 and 2018 reports not being directly comparable. DOD officials  stated that they plan to address these two elements in the 2020 Biennial  Core Report."], "subsections": [{"section_title": "Military Services Identified Core Capability Requirements and Projected Workloads", "paragraphs": ["To address reporting elements 1 and 2, the military services presented  their respective requirements and projected workloads in direct labor  hours and associated costs, using the work breakdown structure. Table 2  shows DOD\u2019s reported direct labor hours for the depots\u2019 core  requirements, as well as projected maintenance workloads and costs of  workloads to sustain core requirements by military service."], "subsections": []}, {"section_title": "Military Services Identified Key Information by Work Breakdown Structure", "paragraphs": ["The military services presented core requirements and workloads, down  to the second-level subcategories, to address reporting element 7. This  structure represents all of the sub-specialties required to maintain core  depot-level capabilities across the 10 categories of the work breakdown  structure. For example, the aircraft category is broken down into 7  second-level subcategories: rotary, vertical/short take-off and landing,  cargo/tanker, fighter/attack, bomber, unmanned systems, and aircraft  engines.", "The Army, Navy, and Air Force also identified the items they placed into  the \u201cOther\u201d category to address reporting element 9. The Marine Corps  did not place any core requirements in the \u201cOther\u201d category in the 2018  Biennial Core Report and therefore was not required to address this  reporting element. Specifically:", "The Army identified requirements associated with items such as air  conditioners, food service hygiene equipment, chemical defense  equipment, and water purification;", "The Navy identified requirements associated with specialty aircraft  and aircraft components that are common across multiple platforms;  and", "The Air Force identified requirements associated with specialty items  such as surveillance aircraft, missile components, and  communications/electronic equipment that do not fall under other  distinct work breakdown structure subcategories."], "subsections": []}, {"section_title": "Military Services Identified Projected Shortfalls and Mitigation Plans", "paragraphs": ["The military services each identified projected shortfalls at the first- and  second-levels of the work breakdown structure (elements 3 and 4),  reasons for those shortfalls (element 3), and mitigation plans for the  projected shortfalls (element 3). This includes\u2014in some cases\u2014 leveraging excess core capabilities in one workload category to mitigate  projected shortfalls in another category (elements 5 and 8). Specifically:  Army: The Army reported a total projected shortfall of about 2.9 million  direct labor hours, as shown in table 3. It identified projected shortfalls in  5 of the 10 first-level work breakdown structure categories, and in 13 of  the 33 second-level categories.", "The Army identified a number of reasons for these projected shortfalls.  Army officials stated that these reasons generally contributed to shortfalls  across the various work breakdown categories. They also noted the  challenge of calculating shortfalls based on comparing current workloads  with predicted workloads that were based on potential future Army  strategies. The Army identified the following specific reasons for  shortfalls:", "DOD\u2019s updated defense planning scenarios increased the Army\u2019s  equipment requirements. These additional requirements resulted in a  greater total core depot requirement for the Army, which in turn  contributed to projected shortfalls.", "The Army noted that DOD\u2019s most recent Future Years Defense  Program lacked sufficient depot maintenance funding (that is, money  to pay for direct labor hours) to meet core capability requirements.", "The Army cited newly established software depot maintenance  requirements as one of the reasons for its shortfall. Specifically, DOD  updated requirements for reporting depot resources associated with  upgrading and maintaining software in weapon systems. According to  the Army\u2019s 2018 core report submission, the Army previously  determined this requirement based on the number of people assigned  to the Army\u2019s software sustainment activities. However, the Army  revised its methodology for calculating its software sustainment  workload to reflect actual workload, not just the number of people  conducting the work.", "After identifying projected shortfalls, officials used that information to  determine how best to close gaps and mitigate risks in future  implementation. Specifically, the Army is currently working to move  software-related direct labor hours from contractor to military sources,  which will help the Army mitigate\u2014that is, shrink\u2014its projected shortfall  by fiscal year 2020. The Army reported that it plans to mitigate many of its  projected core shortfalls by using skill sets similar to those required for maintaining a core capability in repairing equipment for foreign militaries.  Officials stated that the Army plans to hire and train maintenance  personnel to conduct maintenance work associated with the foreign  military sales program. This workload will also assist the Army in meeting  its core capability requirements for Army systems, increasing the total  projected workload, and decreasing estimated shortfalls. Additionally, the  Army identified mitigations for specific shortfalls\u2014for example, replacing  old generators with a new system by fiscal year 2025 will mitigate its  shortfall in support equipment.", "Navy: The Navy reported that it did not project an overall shortfall, nor did  it project any shortfalls at the first- or second-level of the work breakdown  structure, and therefore it did not provide mitigation plans. Navy and OSD  officials noted that the Navy and the department differ regarding the  definition of software sustainment. Specifically, a Navy official stated that  the service views software sustainment as an engineering function, not a  depot maintenance function. This official observed that while the Navy  believes software sustainment to be critical to maintaining its weapon  systems, it believes that managing software sustainment as depot  maintenance is not the most effective approach for the Navy. As a result,  the Navy did not report any software core capability requirement or  projected workload for fiscal year 2019. OSD defined software  maintenance and reporting requirements in its guidance requesting data  from the military services for the biennial core report. In spite of differing  perspectives between OSD and the Navy, OSD accepted the Navy\u2019s core  report submission, in which the Navy reported no core software  maintenance capability requirements.", "Marine Corps: The Marine Corps reported that it did not project a total  shortfall, but did project a shortfall of 82,971 direct labor hours in one  second-level subcategory\u2014that is, construction equipment\u2014that falls in  the ground vehicle first-level category. The Marine Corps identified a  rationale and mitigation plan for its projected shortfall in construction  equipment. The Marine Corps reported that general factors affecting  maintenance workload and funding contributed to the shortfall, including:  (1) After drawdowns from Iraq and Afghanistan, the Marine Corps  repaired equipment to a desired level of combat effectiveness in line with  current mission requirements and available resources. This led to fewer  current maintenance needs and therefore reduced core maintenance  workloads, creating projected shortfalls in some skill sets; and (2) The  Marine Corps made changes to its force structure, which led to having  more equipment in inventory, less equipment in use, and therefore less  required maintenance. This created a shortfall in the skill set for  construction equipment. To address this shortfall, the Marine Corps plans  to use the excess workload in amphibious vehicles to mitigate the  projected shortfall in construction equipment. Marine Corps officials  stated that these second-level subcategories involve similar, tracked  vehicles, which can be maintained using the same skill set.", "Air Force: The Air Force reported that it did not project a total shortfall, but  did project shortfalls within the work breakdown structure, as shown in  table 4. The Air Force identified projected overall shortfalls in 1 of the 10  first-level work breakdown structure categories, and in 7 of the 33  second-level work breakdown structure categories.", "The Air Force identified reasons and provided detailed explanations, as  well as mitigation plans, for each projected shortfall. For example, it  projected a shortfall in rotary workload according to Air Force officials  because of staffing and supply issues with HH-60 Pave Hawk  maintenance at Corpus Christi Army Depot. According to these officials,  these maintenance issues have resulted in the Air Force\u2019s using more  contracted depot maintenance work on the HH-60 Pave Hawk in order to  meet demand. As a result of the more extensive contracting of  maintenance, planned workload at Corpus Christi Army Depot has been  reduced, thereby creating a projected shortfall. The Air Force, Army, and  Navy formed a team to address this projected shortfall. Air Force officials  stated that contracts are being reduced and that they expect to resolve  the maintenance issues before the 2020 Biennial Core Report. To  address its projected shortfall in tactical missiles, the Air Force plans to  identify Letterkenny Army Depot as the Technology Repair Center for this  requirement, as the workloads are small in volume and the Letterkenny  Army Depot can meet this requirement. In addition, the Air Force  projected an overage of about 176,000 direct labor hours in strategic  missiles. The Air Force believes that its projected workload in strategic  missiles will allow it to maintain capability to repair tactical missiles\u2014an  area in which it projects a shortfall of about 42,000 direct labor hours.  According to Air Force officials, the electronics on these two types of  missiles are very similar and require the same skill set."], "subsections": []}, {"section_title": "DOD Did Not Address the Two Elements Concerning Progress in Implementing Mitigation Plans and Executing Reported Workloads", "paragraphs": ["DOD in the 2018 Biennial Core Report did not address progress made in  implementing mitigation plans from the prior core report (element 6), nor  did they address the degree to which projected workload reported in the  prior core report was executed (element 10). According to Office of the  Assistant Secretary of Defense for Logistics and Materiel Readiness  (OASD L&MR) officials, they did not address these elements because the  elements require DOD to compare information in the 2018 Biennial Core  Report with information in the 2016 Biennial Core Report. Since DOD  updated its guidance and processes for developing the 2018 Biennial  Depot Core Report\u2014in response to new statutory requirements and our  prior recommendations\u2014a meaningful comparison was not possible in  the 2018 Biennial Core Report, according to OSD and military service  officials. Additionally, DOD did not fully provide mitigation plans in its  2016 Biennial Core Report, as we reported in 2016. Therefore, DOD  was unable to provide progress reports on 2016 mitigation plans.", "DOD officials told us that they plan to use the 2018 Biennial Core Report  as a baseline for future biennial core reports, which will allow them to  address elements 6 and 10. Specifically, they stated that they plan to  provide progress reports on the mitigation plans they identified in the  2018 Biennial Core Report. Additionally, officials stated their intent to  provide a comparison of the fiscal year 2019 projected workload reported  in the 2018 Biennial Core Report with the actual workload for fiscal year  2019 contained in the 2020 Biennial Core Report."], "subsections": []}]}, {"section_title": "DOD\u2019s 2018 Biennial Core Report Is Generally Complete", "paragraphs": ["DOD\u2019s 2018 Biennial Core Report is generally complete in that it lacks  any obvious errors and aligns with supporting information provided by the  military services. Specifically, unlike previous biennial core reports, data  submissions provided to DOD by the military services are identical to the  data in the 2018 Biennial Core Report, and there are no transposition  errors. Further, based on our review of the services\u2019 submissions to  OSD, data and other information provided by the military services were  accurately and appropriately included in DOD\u2019s 2018 Biennial Core  Report. Finally, our analysis of the report and the military services\u2019  submissions did not identify errors in the summation of the data.", "DOD\u2019s focused efforts in 2017 and 2018 to develop better guidance and  procedures assisted in improving the completeness of DOD\u2019s 2018  Biennial Core Report\u2014in part, according to DOD officials, due to our prior  recommendations. Specifically, in 2017 the OASD L&MR began drafting  new guidance to identify required depot maintenance core capabilities  and the associated workloads needed to sustain those capabilities. This  guidance was finalized and issued by the Office of the Under Secretary of  Defense for Acquisition and Sustainment in May 2018. Officials from  OASD L&MR and the military services told us that they used the  methodology in this new guidance to complete the 2018 Biennial Core  Report in late 2017 and early 2018.", "Officials told us that our prior recommendations, based on our reviews of  the 2012, 2014, and 2016 biennial core reports, served to guide DOD\u2019s  update of its guidance and procedures. The changes made by Congress  to section 2464 were also incorporated into DOD\u2019s new guidance to  ensure compliance with the 10 reporting elements, as we previously  discussed. During the course of our review, we found that DOD had  addressed all of the recommendations from our prior reports on the 2012,  2014, and 2016 Biennial Core Reports.", "First, in our review of the 2012 Biennial Core Report, we found that DOD  did not include explanations for each identified projected shortfall. We  recommended that DOD include in its biennial core report to Congress  detailed explanations for why the military services did not have the  workloads to meet core maintenance requirements for each projected  shortfall identified in the report. Officials with OASD L&MR said that the  May 2018 updated version of DOD Instruction 4151.20 was revised to  require the submission of a detailed rationale for any and all shortfalls,  and a plan to either correct or mitigate the effects of the shortfalls. The  instruction states further that the detailed rationale and plan will identify  the reason for the shortfall; contain a strategy to mitigate the effects of the  shortfall (for example, specific transferrable workload, transfer of private- sector workload); and include actions to rectify any capability or workload  shortfalls, including a description of planned capital investment, timing,  and planned workarounds until the new capabilities or workloads are  available. DOD\u2019s 2018 Biennial Core Report as previously discussed  provided rationales for shortfalls.", "Second, in our review of the 2014 Biennial Core Report, we found that  some data were incomplete. We recommended that DOD review its  processes and implement needed improvements to help ensure accuracy  and completeness. In response to this and our other prior  recommendations, DOD updated DOD Instruction 4151.20 to include  additional steps and more controls that ensure more complete and  accurate data submissions. According to OSD officials, changes to the  guidance included deleting data fields unrelated to core requirements;  streamlining and clarifying reporting instructions; ensuring that service  submissions be reviewed and approved by general, flag, or senior  executive service officials; determining the weapon systems or other platforms that are in the Chairman of the Joint Chiefs of Staff strategic  and contingency plans; addressing inter-service workloads; having the  worksheet automatically calculate shortfalls; and defining \u201csoftware\u201d and  \u201csoftware maintenance.\u201d", "Most recently, in our review of the 2016 Biennial Core Report, we found  (1) data errors; (2) inconsistent capture of inter-service workloads across  the military services; (3) inconsistent calculations or transpositions of  projected workload shortfalls across the military services; and (4)  inconsistent calculations of the estimated cost of projected workloads  across the military services. We recommended that DOD update its  guidance\u2014in particular DOD Instruction 4151.20\u2014to require future  biennial core reports to include instructions to the reporting agencies on  how to (1) report additional depot workloads performed that have not  been identified as core requirements; (2) accurately capture inter-service  workloads; (3) calculate projected shortfalls; and (4) estimate the cost of  projected workloads. DOD took steps to address each of these issues.  Specifically, DOD did the following:  Issued guidance stating that the total adjusted core capability  requirements and the total projected public-sector depot maintenance  workloads both reflect core workloads, as well as workloads that have  not been identified as sustaining core.", "Developed and provided to each of the military services a worksheet  on which to submit their projected inter-service workloads. OSD also  held a meeting with all of the military services to resolve any  discrepancies between their respective submissions.", "Created worksheets with formulas to automatically calculate the  projected shortfalls at the subcategory level of the work breakdown  structure for each service.", "Issued updated guidance to indicate that the estimated costs of the  projected workloads to sustain the core capability requirements were  to be included. According to OSD officials, these estimates are  developed in accordance with financial management regulations and  then applied to the estimated core sustaining workloads for each work  breakdown structure, thereby providing a common baseline and  process.", "In meetings with OSD and the military services, officials offered ideas for  possible changes in future reports, such as including additional  information on inter-service workloads to increase congressional visibility  regarding coordination on depot maintenance across the military services.  Additionally, OSD officials noted that they were considering the inclusion  of additional information in future reports on how costs of projected  workloads are calculated. Information on this is provided in DOD  Instruction 4151.20, but not in its biennial core report. According to OSD  officials, the department plans to consider these and other proposed  changes from the military services and other stakeholders to its biennial  core reporting process and supporting guidance. Given that DOD has  made considerable progress by improving both the completeness of the  2018 Biennial Core Report and its guidance on the development of the  report, we are not making recommendations at this time."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. DOD provided  technical comments, which we included as appropriate.", "We are sending copies of this report to appropriate congressional  committees, the Secretary of Defense, and the Secretaries of the Military  Departments. 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  Diana Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for  our Office of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Complete Text of 10 U.S.C. \u00a7 2464(d)", "paragraphs": ["Appendix I: Complete Text of 10 U.S.C. \u00a7  2464(d) (d) Biennial core report. Not later than April 1 of each even-numbered  year, the Secretary of Defense shall submit to Congress a report  identifying, for each of the armed forces (except for the Coast Guard), for  the fiscal year after the fiscal year during which the report is submitted,  each of the following:  1.  The core depot-level maintenance and repair capability requirements  and sustaining workloads, organized by work breakdown structure,  expressed in direct labor hours.  2.  The corresponding workloads necessary to sustain core depot-level  maintenance and repair capability requirements, expressed in direct  labor hours and cost.  3.  In any case where core depot-level maintenance and repair capability  requirements exceed or are expected to exceed sustaining workloads,  a detailed rationale for any and all shortfalls and a plan either to  correct or mitigate the effects of the shortfalls.  4.  Any workload shortfalls at any work breakdown structure category  designated as a lower-level category pursuant to Department of  Defense Instruction 4151.20, or any successor instruction.  5.  A description of any workload executed at a category designated as a  first-level category pursuant to such Instruction, or any successor  instruction, that could be used to mitigate shortfalls in similar  categories.  6.  A description of any progress made on implementing mitigation plans  developed pursuant to paragraph (3).  7.  A description of core capability requirements and corresponding  workloads at the first level category.  8.  In the case of any shortfall that is identified, a description of the  shortfall and an identification of the subcategory of the work  breakdown structure in which the shortfall occurred.  9.  In the case of any work breakdown structure category designated as a  special interest item or other pursuant to such Instruction, or any  successor instruction, an explanation for such designation.  10. Whether the core depot-level maintenance and repair capability  requirements described in the report submitted under this subsection  for the preceding fiscal year have been executed."], "subsections": []}, {"section_title": "Appendix II: Timeline of 10 U.S.C. \u00a7 2464 and Related GAO Reports", "paragraphs": ["In 1984 Congress passed legislation limiting the private contracting of  certain core logistics functions. This law required the Department of  Defense (DOD) to maintain a logistics capability to ensure a ready and  controlled source of technical competence and resources. In 1988  Congress codified this law, as amended, at section 2464 of title 10 of the  U.S. Code. While section 2464 has been amended multiple times since  then, the requirement for DOD to maintain a core logistics capability that  is government-owned and government-operated has persisted. In 2011  Congress added a requirement for DOD to provide a biennial core report.  Most recently, in fiscal year 2018 Congress added additional elements  that DOD is required to address in its biennial core reports. Among other  things, changes to the statute are illustrated in figure 2 below."], "subsections": []}, {"section_title": "Appendix III: Scope and Methodology", "paragraphs": ["Section 2464(d) of Title 10 of the United States Code requires the  Department of Defense (DOD), among other things, to submit to  Congress a biennial report providing information on its core depot-level  maintenance and repair capability requirements and workload.  Specifically, section 2464(d) identifies 10 elements that DOD must  address for each of the armed services (except for the Coast Guard) in its  biennial report concerning depot-maintenance requirements and  workload. Section 2464 also requires us to review DOD\u2019s report for  compliance with section 2464 and assess the completeness of the  report. DOD submitted its most recent biennial core report to Congress  on May 23, 2018.", "To determine the extent to which the DOD 2018 Biennial Core Report  complies with section 2464(d), we analyzed the text of the report and  obtained supporting information on DOD\u2019s process to determine its core  maintenance capability for fiscal year 2019. Two GAO analysts  independently reviewed DOD\u2019s report to determine the extent to which it  addressed each element required by the statute. All initial disagreements  between the two GAO analysts were discussed and resolved through  consensus. For the military services, when the report explicitly included  all parts of the required reporting element, we determined that DOD  \u201caddressed\u201d the element. When the report did not explicitly include any  part of the element, we determined that DOD \u201cdid not address\u201d the  element. If the report included some aspects of an element, but not all,  then we determined that DOD \u201cpartially addressed\u201d the element. We  compared the types of information and data provided by each of the  military services with the data that the Office of the Secretary of Defense  (OSD) included in the 2018 Biennial Core Report, to assess consistency.  We also discussed our preliminary analyses with OSD and military  service officials to gain additional insight into their analysis and efforts to  address the statutory requirements.", "To assess the report\u2019s completeness, we obtained and analyzed the fiscal  year 2019 data used in compiling DOD\u2019s 2018 Biennial Core Report,  including core capability requirements and projected sustaining workload  expressed in direct labor hours and cost and other information, such as  workload shortfall explanations. We compared the reporting agencies\u2019  submissions with the reporting template in DOD Instruction 4151.20 in  order to determine the extent to which the reporting agencies submitted  the information required by DOD\u2019s instruction, and we identified any  inconsistencies or errors. In order to determine whether these data and  information were complete, we performed a number of data check steps  to identify transposition inconsistencies or errors, and we discussed our  analyses with OSD and military service officials. These steps included (1)  reviewing each military service\u2019s submission to verify that it had  consistently calculated and reported the direct labor hours identified as  the total adjusted requirements and the workload needed to sustain depot  maintenance core capability requirements; and (2) reconciling the  information in the report against each military service\u2019s submission, for  accuracy. However, as in the past reviews of DOD\u2019s biennial core reports,  we did not assess the reliability of the underlying data provided by the  military services for the 2018 DOD Biennial Core Report. The team also  met with OSD and reporting agency officials responsible for overseeing  the data collection and preparing the data submissions, to obtain  clarification and understanding of the content of the submissions, as well  as to discuss the department\u2019s guidance and processes used to collect  the data for the report. Lastly, we reviewed DOD\u2019s actions to address our  prior recommendations that were targeted at improving the completeness  of DOD\u2019s biennial report.", "We conducted this performance audit from May 2018 to November 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: Category Levels from the Department of Defense\u2019s (DOD) Depot Maintenance Core Capability Worksheet", "paragraphs": ["Appendix IV: Category Levels from the  Department of Defense\u2019s (DOD) Depot  Maintenance Core Capability Worksheet Work Breakdown Structure Category  1.  Aircraft  1.2 Vertical/Short Takeoff and Landing  2."], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": ["Diana Maurer, (202) 512-9627 or maurerd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the named contact above, John Bumgarner, Assistant  Director; Thomas Gosling, Assistant Director; Pat Donahue, Amie Lesser,  Shahrzad Nikoo, Bethann E. Ritter Snyder, Walter Vance, Cheryl  Weissman, and Melissa Wohlgemuth contributed to this report."], "subsections": []}]}], "fastfact": ["Defense Department personnel and contractors work in depots to keep weapons and equipment ready for use. These depots must have the ability to meet surges in demand in emergencies. They also must be able to maintain a core of capabilities without overreliance on contractors.", "DOD reports to Congress every 2 years on the status of depot capabilities, including projected shortfalls. In past reviews, we found inaccuracies and other weaknesses in the reports and made recommendations for improving them.", "We found considerable improvements in the 2018 report, which included a more complete accounting of capability gaps and the plans to fill them."]}
{"id": "GAO-18-53", "url": "https://www.gao.gov/products/GAO-18-53", "title": "Housing Choice Voucher Program: Limited Indications of Potential Fraud against Participants Identified", "published_date": "2017-12-04T00:00:00", "released_date": "2017-12-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["With the goal of providing safe, decent, affordable housing, HUD provides rental assistance to low-income households through its HCV program, administered locally by approximately 2,200 PHAs around the country. In fiscal year 2016, the HCV program received approximately $20 billion in funding and provided rental assistance to approximately 2.4 million households. Local demand in the program may exceed voucher supply, and individuals may wait years before receiving a voucher. After receiving a voucher, participants have a limited amount of time to secure a rental. Accordingly, PHAs have issued alerts about criminals targeting program participants with fraud schemes, such as by claiming to offer admission to the program for a fee.", "This report describes (1) the types of reported fraud schemes against HCV participants, including older adults, PHAs' awareness of such schemes and their frequency, and indicators of such schemes online; and (2) HUD's and PHAs' antifraud regulations, guidance, and information related to fraud risks affecting program participants. GAO reviewed online fraud alerts and consumer complaint data from calendar years 2011 to 2016; conducted a generalizable survey of PHA officials about their awareness of fraud against participants; interviewed agency officials and experts; and conducted online covert tests of 350 rental ads and 26 commercial websites. GAO visited eight PHAs, selected based on size and location, among other factors.", "GAO is not making recommendations in this report. HUD had no comments on a draft of this report."]}, {"section_title": "What GAO Found", "paragraphs": ["Public Housing Agencies (PHA) have reported various types of fraud schemes against Housing Choice Voucher (HCV) participants, including older adults, but were aware of limited instances of such schemes. Similarly, GAO identified few potential indicators of these schemes in online covert testing of rental ads and websites. According to GAO's analysis of fraud alerts and complaint data, the type of fraud participants may encounter\u2014such as waiting-list, rental, and side-payment fraud\u2014depends on where they are in the HCV process and whether they are applicants, voucher holders, or landlords, as shown in the figure below. For example, side-payment fraud involves agreements\u2014mutual or compelled\u2014in which the voucher holder pays additional rent or other payments to the landlord for benefits, for example to secure a rental or avoid eviction.", "According to GAO's survey of PHAs representing approximately 1.9 million households, PHAs reported few incidents of the various fraud types, although side-payment fraud, a program violation, was noted most frequently. Specifically, GAO estimates that while 41 percent of PHAs were aware of instances of side-payment fraud in the prior year, most reported 2 to 5 incidents in the prior year. In addition, 3 to 10 percent of PHAs were aware of instances of the other types of fraud GAO identified. GAO's online covert testing also found few indicators of potential fraud. For example, some websites requested payment for information about the HCV application process, but none explicitly offered to do something prohibited by program rules, such as placing someone on a waiting list for a fee.", "The Department of Housing and Urban Development's (HUD) and PHAs' antifraud regulations, guidance, and information largely focus on efforts to protect the HCV program. For example, PHAs are required by HUD to inform families of program-related fraud and abuse, including the prohibition against side payments. In addition, GAO found that several PHAs voluntarily provide targeted messages to participants about fraud schemes by outside parties. Through industry associations, PHAs have mechanisms through which they share best practices that could include these and other issues."]}], "report": [{"section_title": "Letter", "paragraphs": ["With the goal of providing safe, decent, and affordable housing to low- income families, the elderly, and the disabled, the U.S. Department of  Housing and Urban Development (HUD) supplements tenants\u2019 rental  payments in privately owned housing chosen by tenants through its  Housing Choice Voucher (HCV) program. This program is administered  locally by approximately 2,200 Public Housing Agencies (PHA) around  the country. In fiscal year 2016, HUD received approximately $20 billion  for the HCV program, providing rental assistance to approximately 2.4  million households. Local demand in the program may exceed voucher  supply, and households may be on waiting lists for years before they  receive a voucher. In addition, after receiving a voucher, participants have  a limited amount of time to secure a rental. PHAs and others have issued  alerts about criminals targeting HCV program participants (including  applicants, voucher holders, and landlords) in potentially fraudulent  schemes, such as individuals who fraudulently claim to offer vouchers for  a fee.", "You asked that we investigate possible fraud against HCV program  participants and examine applicable federal oversight, including any  preventive and educational measures taken to help identify and limit such  fraudulent activity affecting HCV participants\u2014including older adults and  other vulnerable populations\u2014and to provide information about fraudulent  activity identified to date. In this report, we describe (1) the types of  reported fraud schemes committed against HCV participants (including  older adults), awareness by PHAs and other relevant organizations of  fraud incidents and how often they occur, and indicators of such schemes  online; and (2) antifraud regulations, guidance, and informational  materials, if any, that HUD and PHAs have in place to identify and  mitigate fraud against program participants.", "For our first objective, we employed a number of methodologies.  Specifically, to describe the types of fraud schemes reported as being  committed against HCV participants in 2016 and 2017, we searched for  fraud alerts that a nongeneralizable sample of 60 PHAs publicly posted  on the Internet and reviewed the 22 alerts (posted by 20 separate PHAs)  that we found. We also reviewed complaints from the Federal Trade  Commission\u2019s (FTC) Consumer Sentinel database for calendar years  2011 through 2016. We reviewed complaint data to identify examples of  housing and HCV-specific fraud, including schemes affecting older adults.  We assessed the reliability of the data by interviewing officials and  reviewing related documentation, and found the data sufficiently reliable  for the purposes of our reporting objectives. We also interviewed PHA  officials about fraud schemes against HCV participants. Finally, we  identified key academic research that classified online rental fraud, and  interviewed one of the authors of the research.", "To determine awareness of incidents of fraud schemes among PHAs and  other relevant organizations, we surveyed PHA officials and conducted  site visits to interview PHAs and other relevant organizations and experts.  In our survey of a nationally representative, random sample of executive  directors of 278 PHAs, we asked about their awareness of fraud against  participants, in the last year (spring 2016\u2013spring 2017), within the  jurisdiction to which they provide oversight. If the executive directors  responded that they were aware of these schemes, we asked that they  provide information on the number of incidents, within their jurisdiction,  that they were aware of in the prior year. Examples of fraud types  included in the survey were promising placement or a higher place on a  voucher waiting list, selling fake vouchers, theft of security deposits,  requiring side payments and favors, and offering suspect credit-report  services. We surveyed executive directors from all 83 PHAs that  administered 5,000 or more vouchers as of the fourth quarter of 2015,  and a probability sample of 195 executive directors of PHAs with 1,000 to  4,999 vouchers. The survey had a response rate of 84 percent and is  generalizable to the full population of PHAs that administer at least 1,000  vouchers. In addition, we interviewed eight PHAs in total, from locations  in the Midwest, Northeast, and West Coast regions of the United States.  These PHAs were selected using criteria to provide a range of PHAs  across geographical locations and PHA size, among other factors.  Moreover, we also interviewed an HCV voucher holder about the holder\u2019s  knowledge of fraud against participants. We also interviewed industry  experts\u2014selected based on their expertise and experience with legal and  financial issues affecting older adults and low-income individuals\u2014about  fraud affecting older adults, and about identity theft affecting low-income  individuals. Finally, we interviewed officials from the HUD Office of  Inspector General (OIG).", "To identify indicators of fraud schemes online, we used covert testing to  investigate (1) a nongeneralizable sample of 350 rental advertisements in  a selection of U.S. cities across several rental websites, and (2) a  nongeneralizable sample of 26 commercial websites advertising  information on, or assistance with, the HCV program. For our sample of  rental advertisements, we counted any communications with online  advertisers as having an indicator of fraud if they contained requests such  as asking for a wire transfer of a security deposit or first month rent  without first offering to show the property. For commercial websites, we  used multiple search terms across two search engines to produce a list of  target websites. Using undercover identities, we visited each website and  input any requested information, including a name and e-mail address,  and made a payment if the website requested payment for a service. We  also asked website operators whether they could place us on a waiting  list. Because covert testing of advertisements and websites was carried  out on a nongeneralizable sample, results of this effort are also  nongeneralizable.", "To describe antifraud regulations, guidance, and informational materials,  we reviewed relevant HUD regulations and policy documentation, as well  as informational materials developed by the eight PHAs we interviewed,  designed to educate HCV participants about the program. We interviewed  PHA officials about the HCV program and about the information they  provide to participants. We also interviewed officials from FTC, the  Consumer Financial Protection Bureau, the HUD OIG, the U.S. Postal  Inspection Service, and the Department of Health and Human Services  about practices used by federal agencies to inform the public about fraud- related issues. For additional details on our scope and methodology, see  appendix I.", "We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from January 2017 to July 2017 in accordance with  investigative standards prescribed by the Council of the Inspectors  General on Integrity and Efficiency."], "subsections": [{"section_title": "Background", "paragraphs": ["The HCV program, administered by HUD, subsidizes housing costs for  low-income households in the private rental market. Because HUD  provides HCV assistance directly to the household, participants are able  to find their own housing, including single-family homes, townhouses, and  apartments. If the household moves out of the unit, it can move with  continued assistance to another private rental unit.", "PHAs administer the HCV program at the local level, while HUD  administers funding and furnishes technical and professional assistance  to PHAs in planning, developing, and managing the program.  Approximately 2,200 PHAs across the country administer the voucher  program on HUD\u2019s behalf, managing day-to-day operations in the HCV  program, including the application and voucher distribution processes, as  well as housing inspection and approval. PHAs are responsible for  ensuring that rents are reasonable, determining households\u2019 eligibility,  calculating and periodically redetermining households\u2019 incomes and rental  payments, and making subsidy payments to landlords. In addition, PHAs  perform basic program functions, such as establishing and maintaining a  waiting list, processing tenant moves, conducting landlord and tenant  outreach, and reporting to HUD.", "Local PHAs determine the eligibility of households, approve applications,  and distribute vouchers. In general, to be eligible to participate in the HCV  program, households must have very low incomes\u2014that is, incomes not  exceeding 50 percent of the area median income. Moreover, at least 75  percent of new voucher program participants must have extremely low  incomes, not exceeding 30 percent of the area median income. Once a  household is approved by a PHA to participate in the program and finds a  rental unit, that household pays 30 percent of its monthly income, after  certain adjustments, toward rent. The remaining portion of the rent is paid  through the HUD-subsidized voucher. PHAs can pay subsidies to cover  between 90 percent and 110 percent of the fair market rent for their  areas.", "The HCV application and rental process is displayed in figure 1.", "The following applies in the HCV application process:", "Households seeking to enter the HCV program may wait years for  their local PHA to announce an open application period. PHAs may  establish waiting lists if the number of applicants to the program  exceeds available vouchers, and may close the waiting list if it  contains more households than the PHA can assist in the near future.  Therefore, prospective applicants in some locations can wait years for  a local PHA to determine the eligibility of those already on the waiting  list\u2014and provide vouchers to eligible individuals\u2014before reopening  waiting lists to new applicants.", "During open application periods, applicant households may encounter  processes and requirements that vary amongst PHAs. Applying for a  voucher from a local PHA may take place in person or online, while  PHAs may determine an applicant\u2019s priority to receive a voucher by  varying methods, such as a random lottery amongst all applicants, or  on a first-come-first-serve ordering of when applicants applied.  Moreover, PHAs can establish local preferences for selecting  applicants from their waiting lists. For example, PHAs may give  preference to a household that (1) is homeless or living in  substandard housing, (2) is paying more than 50 percent of its income  for rent, or (3) has an older-adult household member. Regardless of  methods to determine eligibility, apply for, and obtain a voucher within  the HCV program, it is free to participants.", "When an open application period ends and before determining  household eligibility, PHAs may initially put applicant households on a  waiting list. Because the demand for vouchers may exceed the supply  available to the local PHA, households that have already waited to  apply to the program may also wait years to receive a determination  of eligibility and receive a voucher.", "After receiving a voucher, households must find eligible private- market rental housing within a limited time frame. A PHA will make  contact with and issue a voucher to a household that is determined to  be eligible and is subsequently selected from the waiting list.  Households receiving vouchers use them to subsidize their rents in  private apartments or houses available in the rental market.  Households must find housing quickly\u2014generally within 60 days\u2014 unless the PHA grants an extension. In some cases, PHAs direct  voucher holders to websites dedicated to rentals in the HCV program,  where private landlords list available units.", "When a voucher-holding household finds a unit that it wishes to  occupy\u2014and reaches an agreement with the landlord over the lease  terms\u2014the PHA inspects the dwelling and determines whether the  rent requested is reasonable. To be eligible, a rental unit must meet  HUD minimum housing-quality standards, and must provide an  acceptable level of health and safety. After the unit is inspected and  deemed eligible, the household signs a contract with HUD, and both  HUD and the household sign contracts with the landlord. The contract  stipulates that the PHA will make the housing-assistance payment to  the landlord and the household will pay the difference between the  housing-assistance payment and the rent. Landlord participation in  the HCV program is free, and landlords do not pay to maintain  compliance with the program. Moreover, the HCV program provides  for the use of vouchers across locations. Once a household receives  a voucher, it may use the voucher in any location in which a PHA  administers the voucher program, as long as it remains eligible."], "subsections": []}, {"section_title": "Various Reported Fraud Schemes against Housing Choice Voucher Participants Can Occur, but PHAs Reported Limited Incidents, and GAO Covert Testing Found Limited Online Indicators of Fraud", "paragraphs": [], "subsections": [{"section_title": "Waiting-List, Rental, and Side-Payment Fraud Are among the Reported Types of Schemes That Can Affect Voucher Participants", "paragraphs": ["Reported fraud schemes against program participants\u2014including  prospective applicants, individuals on waiting lists, current voucher  holders, and landlords providing rental units\u2014can occur at each point in  the HCV application and rental process, according to program officials  and our analysis of FTC complaint data. On the basis of our reviews of  fraud alerts issued by PHAs and complaints submitted to the FTC, the  type of fraud that participants, including older adults, may encounter  depends on where they are in the process and whether they are landlords  or renters. Fraudsters perpetrate reported schemes in a variety of ways,  such as through in-person impersonation of PHA staff or by manipulating  telephone numbers to convince landlords to make unnecessary  payments. Reported types of fraud schemes and when they could  potentially occur in the HCV application and rental process are displayed  in figure 2.", "As shown in figure 2, various reported fraud types can be carried out  against HCV participants. While some fraud types are specific to the HCV  program, participants may also be victims of general rental-housing fraud.  The reported fraud types, which we identified through interviews with  PHAs and others and through an analysis of PHA fraud alerts and  Consumer Sentinel complaints, include the following:", "Waiting-List Placement Fraud. In online or in-person settings,  fraudsters may claim they can provide a voucher, place applicants  onto a waiting list, or move individuals to a higher position on the  waiting list. In exchange, fraudsters may request a payment, or may  request information (such as name, credit-card number, and e-mail  address) that may put participants at risk of credit-card fraud or  identity theft. Waiting lists maintained by PHAs may open  infrequently, and program application processes and requirements  vary from location to location. Reported fraud schemes may take  advantage of applicant unfamiliarity with program rules, and target  those seeking to enter the program or awaiting a voucher.", "Rental-Advertisement Fraud. Because they rent in the private market,  voucher holders are susceptible to online rental-fraud schemes.  Those who place online rental advertisements may request wire  transfers from prospective renters to secure fake rentals, or steer  potential renters to suspect credit-reporting services that offer  commissions to the scammers or realtor services that charge users a  onetime or recurring monthly fee.", "Side-Payment Fraud. Officials from PHAs and other organizations  characterized side payments as two distinct activities\u2014alternatively,  as landlord fraud against tenants on one hand, and mutually beneficial  agreements between tenants and landlords on the other. In exchange  for property rental or successful inspection, landlords or building  inspectors may fraudulently request additional payments or pressure  participants for other favors from voucher holders. Landlords may ask  tenants for a monthly payment above the agreed rent, or may require  HCV participants to pay for utilities when not required to in their rental  agreement. For example, a Midwest PHA we interviewed reported  being aware of coercive demands by landlords for side payments or  sexual favors in exchange for a rental unit. Side payments may also  be a mutual arrangement between landlord and voucher holders. For  example, voucher holders may make a payment above their monthly  rent\u2014in violation of program rules\u2014and in exchange the landlord  agrees not to report that there are unauthorized occupants living in  the unit, again in violation of program rules. A West Coast PHA we  interviewed characterized most side payments it is aware of as mutual  agreements of this type.", "Security-Deposit Fraud. Because they rent in the private market,  voucher holders may encounter fraudsters advertising a rental and  requiring a security deposit from one or several prospective renters  even if there is no rental unit available or only one of the prospective  renters will ultimately obtain the rental.", "Program-Compliance Fraud against Landlords. Fraudsters may take  advantage of landlord unfamiliarity with HCV program rules. In calls to  HCV program landlords, fraudsters mask their phone number with that  of the local PHA, and direct the landlords to make a credit-card  payment over the phone to purchase materials or to make a payment  in order to remain in compliance with program rules."], "subsections": []}, {"section_title": "PHAs Are Aware of Limited Instances of Fraud Affecting Voucher Participants in Their Jurisdictions, with Side- Payment Fraud Reported Most Often", "paragraphs": ["An overwhelming majority of surveyed PHAs did not report awareness of  any occurrences of most fraud types that could affect HCV program  participants, while those that were aware of fraud against participants  reported few instances, according to our survey results and interviews.  We surveyed a nationally representative sample of PHAs representing  approximately 1.9 million households. We inquired about incidents  occurring within their area of jurisdiction from spring 2016 through spring  2017. We asked about fraudsters promising placement onto or a higher  place on a waiting list, selling vouchers, stealing security deposits, or  offering suspect credit-report services; voucher holders and landlords  engaging in side payments; and landlords and building inspectors illegally  soliciting favors. Apart from incidents of side payments (discussed in  detail below), on the basis of PHA responses to our survey we estimate  that between 3 and 10 percent of all PHAs with 1,000 or more vouchers  were aware of any occurrences of the types of fraud schemes included in  our survey (see fig. 3). Further, when PHAs were aware of such fraud  schemes, most reported between 2 to 5 cases in their local area of  jurisdiction from spring 2016 through spring 2017. Our other sources of  evidence were consistent with our survey results. For example, we  interviewed officials with two PHA associations\u2014representing  approximately 1,900 total PHAs\u2014about fraud against HCV participants  (other than side payments). The associations reported that they were  unaware of widespread instances of these types of fraud against  participants.", "PHAs were much more likely to report awareness of incidents of side  payments than the other types of fraud included in our survey, according  to our analysis of survey responses. As noted above, side-payment fraud  involves agreements\u2014mutual or compelled\u2014in which the voucher holder  pays additional rent or other payments to the landlord in return for  benefits, to secure a rental, or to avoid eviction. On the basis of survey  responses, we estimate that 41 percent of all PHAs with 1,000 or more  vouchers were aware of incidents of side payments in the prior year, as  shown in figure 3 above. Of PHAs reporting side payments, we estimate  that the vast majority (93 percent) were aware of 1 to 10 instances of side  payments in the prior year (spring 2016\u2013spring 2017), with most reporting  between 2 and 5 incidents in the past year. Further, we estimate that 7  percent were aware of 11 or more instances in the prior year.", "Officials from all eight PHAs we interviewed similarly told us that they  were aware of side payments, but some said that participants rarely  report cases of side payments to them. Because violation of HVC rules  could result in termination of a lease or loss of voucher for the recipient, it  is possible that side payments are not always reported to PHAs. Two  experts providing legal services to low-income individuals said that, in  regard to fraud affecting HCV participants, landlord requests for side  payments is relatively more common than other types of fraud. In  addition, a current voucher holder told us about personal experiences  involving requests for such payments by landlords, but also said that he  or she had not experienced any other types of fraud.", "In response to our open-ended survey question on other fraud not  specifically mentioned in the survey, three PHAs in two regions reported  variations of a type of fraud that intends to convince landlords that they  are not in compliance with HCV rules, and that they must make a  payment over the phone. Although this type of fraud was not included  explicitly in our survey and is therefore not included in figure 3 above, in  survey comments one West Coast PHA and two PHAs in the Southeast  reported instances of this type of fraud. In open-ended survey comments,  a West Coast PHA reported being aware of two attempts of similar fraud,  in which fraudsters called landlords and asked them to make a credit-card  payment over the phone to maintain program compliance. Similarly, two  southeastern PHAs also reported being aware of instances of similar  fraud schemes in the last year, although neither provided the number of  cases reported to them. Furthermore, another West Coast PHA that was  not included in our survey issued an online alert about scammers calling  landlords, masking their actual phone number with the PHA\u2019s phone  number, and stating that in order for the landlord to maintain program  compliance, the landlord must make a credit-card payment over the  phone to purchase a program manual. In an interview, officials from this  PHA reported being aware of 36 attempts of this fraud type against  landlords from September 2015 to April 2017.", "According to PHA officials, fraud schemes generally have not targeted  older-adult HCV participants. In survey responses, a limited number of  PHAs reported fraud against older adults. For example, we estimate that  of PHAs reporting awareness of side-payment schemes, very few PHAs  (about 8 percent) were aware of instances in which landlords targeted  older adults in side-payment requests. Moreover, an official from one  PHA we interviewed stated that because older adults are likely to have  advocates helping them to find housing, they are less likely than other  HCV participants to be victims of fraud. Similarly, one expert providing  legal services to older adults in the HCV program indicated that project- based participants\u2014who rent units only in specific buildings\u2014are more  likely than HCV participants to be targets of in-person fraud because they  are located in identifiable properties.", "Several PHAs issued fraud alerts about schemes against participants, but  officials at PHAs we interviewed about some of the alerts told us that  incidents of these fraud types were limited. Specifically:", "A Midwestern PHA issued an alert about an individual promising a  voucher for a fee and meeting victims in person to receive payment.  In a follow-up interview, PHA officials stated that, in total, they  received five to seven reports about this fraud. Each of these cases  occurred while the PHA\u2019s waiting list was open in 2015. A nearby PHA  also reported that when its waiting list was open in 2011, an individual  with fake PHA credentials fraudulently took payment from individuals  and promised to move them to the top of the waiting list. The PHA  was aware of 10 individuals who were victims of the fraud, and  estimated that they each paid about $200 to the perpetrator.", "A West Coast PHA issued an alert about a website charging  applicants to submit a program application. However, in an interview  the PHA reported awareness of only one case over the last 3 years of  fraud committed by outside parties against voucher participants.", "Although instances of fraud against HCV participants reported to PHAs  appear relatively rare, participants who provide personal information to  unknown individuals are still at risk for identity theft, according to some  experts we interviewed. Two identity-theft experts stated that credit-card  fraud is likely if individuals enter payment information in unverified sites.  Furthermore, one expert stated that low-income individuals can be targets  for identity theft because fraudsters can use stolen identities with low  credit scores to obtain high-interest loans that they do not intend to pay  off."], "subsections": []}, {"section_title": "Few Indicators of Potential Fraud Found in Online Covert Testing", "paragraphs": ["In covert testing using undercover tools and techniques, we found no  indicators of fraud in rental advertisements posted online, and few  indicators of fraud in commercial websites offering information to  participants about the HCV program.", "Through our online covert testing, we found no indicators of potential  fraud in 350 advertisements\u2014selected using a random-selection  methodology\u2014posted in online marketplaces across six cities. On the  basis of an academic study of online fraud schemes on rental  marketplaces and information provided by PHAs, we developed a list of  indicators of potential fraud. These indicators include requests for a wire  transfer of security deposit or first month rent without offering to provide  an in-person viewing of the property, or requesting an up-front or monthly  side-payment agreement as a condition of rental. In searches of one  rental website, we came across a small number of advertisements that  initially appeared to contain an indicator of potential fraud\u2014specifically,  links to a website for specialized realtor services; covert testing of that link  did not find further indicators of potential fraud.", "None of the 26 commercial websites we covertly tested contained text  explicitly stating that they would place or move someone up a waiting list  for a fee. Further, in e-mail correspondence with every website, we asked  whether they could help place us on a waiting list. Some website  operators never replied and some stated they could not do so, with none  agreeing to place us on a list. However, some websites used HUD\u2019s  Equal Housing Opportunity logo, which might make them appear to be  associated with official government programs, while others requested  payment for suspect services and products. For example:", "One PHA fraud alert specifically named one of the websites we tested  covertly, and indicated that the website fraudulently offered to submit  an application for the HCV program for a onetime registration fee. Our  covert testing found that this website displayed HUD\u2019s Equal Housing  Opportunity logo, and charges a fee for a \u201cguide\u201d about the voucher  program, but at the time of our testing the website did not offer to  submit an application for a fee. Payment to the website resulted in  access to a guide and online forum containing a list of open PHA  waiting lists for the HCV program and links to publicly available PHA  websites.", "One website we covertly tested requested payment for an e-book  guide to assist with the HCV application process. We made payment  but never received the e-book.", "One website subject to covert testing stated that landlords in the HCV  program may deny or refuse to rent to a potential tenant based on his  or her credit-report information, and referred us to a suspect website  offering credit reports. The website claimed to offer a \u201cfree credit  report\u201d and requested personal information including a Social Security  number and credit-card number. As part of our covert testing, we  provided a credit-card number. We also entered all zeroes as a Social  Security number on the site, prompting the site to state that it could  not provide us with a credit report, as we had not provided a valid  Social Security number. Despite that fact, the site charged our credit  card a recurring payment. In a phone call, a representative of the  website stated that, in the terms-of-use for the website, users are  informed that they must explicitly request that recurring payments be  terminated or that those payments would continue."], "subsections": []}]}, {"section_title": "HUD and PHA Antifraud Efforts Focus Mainly on Fraud against the HCV Program; Some PHAs Voluntarily Provide Information about Fraud against Participants", "paragraphs": ["HUD regulations and guidance and PHA informational materials pertinent  to fraud primarily focus on protecting the HCV program rather than  protecting participants from fraud committed by external parties. For  example, where the regulations mention fraud explicitly, it is generally in  relation to mitigating program violations by owners and voucher program  participants, recovering program losses from fraud, and assessing  participants, applicants, and owners for participation or continued  participation in the program.", "Apart from requiring that PHAs inform participants about a prohibition  against side payments to landlords (a program rule violation), HUD\u2019s  antifraud guidance, as outlined in the Housing Choice Voucher Program  Guidebook, generally focuses on preventing fraud against the program,  as opposed to fraud against participants. For example, an applicant  misrepresenting income and assets to obtain an HCV voucher and a  landlord bribing a PHA employee to approve substandard rental housing  are types of program fraud. See figure 4 for examples of HCV program- related fraud listed in the guidebook.", "Education and outreach requirements for PHAs specified in the HCV  guidebook largely focus on providing adequate public notice of waiting-list  openings; an oral briefing when the PHA selects a family to participate in  the program; and a written briefing packet for participants, which must  include a variety of subjects related to program administration, leasing a  unit, and family obligations. Consistent with the guidebook, written or  online briefing materials from the eight PHAs we interviewed mention  various types of program violations. All but one specifically state that side- payment agreements between landlords and tenants are prohibited,  which, as discussed above, can be viewed as both fraud affecting the  participant and against the program. HUD directs PHAs to inform  participants that landlord\u2013participant side payments are prohibited.", "HUD provides guidance on how a PHA should handle a situation in which  the landlord is collecting side payments. If the PHA finds that the landlord  is collecting side payments, the PHA must notify the landlord to  immediately cease collecting these payments and require repayment to  the tenant of the full amount collected. The PHA must determine whether  the landlord also collected side payments from other participants and  follow up to require repayment. The amount can be repaid by offsetting  the amount due against future housing-assistance payments. At its  discretion, the PHA may terminate the housing-assistance payments  contract with the landlord immediately, even if the landlord has repaid  amounts due the tenant, but the PHA must cancel the contract if the  landlord fails to repay.", "Although not required, several PHAs we visited or contacted voluntarily  provided informational materials to program participants that included  targeted messages and alerts notifying them of certain housing- assistance fraud by outside parties, such as voucher-sale fraud, or fraud  involving being placed on or moved up a waiting list. For example, in  program briefing documents given to participants, a northeastern PHA warns participants of housing-assistance scams,  and specifically advises participants not to pay to, among other things,  (1) be placed on or be moved up a waiting list or (2) receive an HCV  voucher or voucher extension; a different northeastern PHA advises HCV participants not to give  their voucher to anyone, including the apartment owner, agent, or  property manager; and not to give any money to the apartment  broker, owner, or agent until the PHA approves the selected  apartment; and a West Coast PHA advises HCV applicants and participants to be  aware of fraud, particularly schemes that require a payment to file an  application or to move up a waiting list.", "In addition, PHAs share best practices that could include these and other  issues. For example, two industry associations representing  approximately 1,900 PHAs provide mechanisms for PHAs to share  information and best practices about HCV administration and issues  affecting HCV program participants and their communities. Both regularly  hold conferences, meetings, and other events that provide a venue for  members to discuss relevant issues. In addition, one of these  associations has published reports on issues affecting older adults and  connecting housing and community services, among other issues, while  the other published a report on issues related to rental reform proposals."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to HUD, FTC,  the Consumer Financial Protection Bureau, the Department of Health and  Human Services, and the U.S. Postal Service. We received e-mails from  HUD, the Consumer Financial Protection Bureau, and the Department of  Health and Human Services in which liaisons to GAO for those agencies  stated they had no comments on the report. We received technical  comments from FTC and the U.S. Postal Service, which we incorporated  in the report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Housing and Urban Development, the  Federal Trade Commission, the Director of the Consumer Financial  Protection Bureau, the Secretary of Health and Human Services, and the  Postmaster General of the U.S. Postal Service. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-6722 or shear@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we describe (1) the types of reported fraud schemes  committed against Housing Choice Voucher (HCV) participants (including  older adults), awareness by Public Housing Agencies (PHA) and other  relevant organizations of fraud incidents and how often they occur, and  indicators of such schemes online; and (2) antifraud regulations,  guidance, and informational materials, if any, that the Department of  Housing and Urban Development (HUD) and PHAs have in place to  identify and mitigate fraud against program participants.", "To address our first objective we used a variety of methods (see fig. 5).  Details on our use of these methodologies are described below."], "subsections": [{"section_title": "First Objective", "paragraphs": [], "subsections": [{"section_title": "Types of Reported Fraud", "paragraphs": [], "subsections": [{"section_title": "Fraud Alerts", "paragraphs": ["Some PHAs issue online alerts and post these on their websites to inform  HCV applicants and participants about potential fraud schemes. We  initially identified PHA fraud alerts by performing online searches about  fraud in the HCV program. We then developed a structured search  method for identifying additional fraud alerts. To do this, in 2016 and  2017, we searched fraud alerts issued by a nongeneralizable sample of  60 PHAs; in total, 20 PHAs published 22 alerts about fraud affecting HCV  applicants and participants on their websites.", "We identified our nongeneralizable sample of 60 PHAs using 2015 fourth- quarter Picture of Subsidized Households data from HUD, which contain  information on subsidized housing units by several types of programs  including the HCV program. The initial population contained PHAs  ordered by total number of HCV program vouchers available. We  selected our sample of PHAs based on those with the most vouchers."], "subsections": []}, {"section_title": "Consumer Complaint Data", "paragraphs": ["We reviewed consumer complaint data from the Federal Trade  Commission\u2019s (FTC) Consumer Sentinel database from calendar years  2011 through 2016. The date range of the data represents the most- recent years available at the time of our request. Our review of the data  focused on complaints related to the HCV program and companies that  offer rental housing services. We assessed the reliability of the data by  interviewing officials and reviewing related documentation and found the  data sufficiently reliable for the purposes of our reporting objectives.", "We developed several categories for reviewing complaints based on  criteria on fraud schemes affecting HCV program applicants and  participants. To develop an initial list of categories, we selected a  subsample of the first entries in the data and independently created  categories that could be used to categorize the complaints in the  subsample. On the basis of this methodology, we identified a set of  defined coding categories, which were as follows:  1.  HCV-specific fraud,  2.  housing-related fraud (HCV not mentioned),  3.  housing-related fraud involving the purchase of foreclosed property,  4.  housing-related credit-report fraud,  5.  housing-related fraud requesting electronic wire transfer of funds,  6.  HCV-specific complaints where fraud is not mentioned or the nature of  7.  housing-related complaints where fraud is not mentioned or the nature  of fraud is unclear, and  8.  complaints not related to the scope of the engagement.", "We also separately coded whether the subject matter of each complaint  specifically affected an older adult.", "We applied a two-person data-coding process to ensure  intercategorization reliability. FTC delivered the data to us in batches  organized along search terms we provided. For several of the initial  batches we received, as a first step in the coding process, a coder  categorized each complaint into one of the categories above, and  simultaneously identified any complaints that contained relevant housing- related or HCV-related fraud types that we had not already discovered.  As a second step, a reviewer assessed a nonrandomized sample of the  data to determine whether coding was correct, and whether the coder had  identified any previously unknown fraud types in the batch. We repeated  this process for three of the five batches that we received, and reviewed  over 600 total complaints. Upon finding no new fraud types in the coded  data, we ceased analysis and did not code the remaining two batches we  received, which we deemed to contain complaint categories unlikely to  reveal new types of fraud.", "We also interviewed PHA officials from eight PHAs (selected using a  methodology discussed below). Additionally, we reviewed an academic  study describing fraud against prospective renters in online marketplaces,  which allowed us to identify several fraud types that could be used  against HCV participants searching for rental units. The study used  crawling and automated interaction to identify fraud types. We  interviewed an author of the study to clarify research techniques. We  assessed that the individual was sufficiently independent. Our  methodological specialist assessed the study, and found its conclusions  to be sufficiently valid and reliable for our purposes."], "subsections": []}]}, {"section_title": "Awareness of Fraud Incidents", "paragraphs": [], "subsections": [{"section_title": "Survey", "paragraphs": ["We conducted a web-based survey with a nationally representative  stratified random sample of executive directors overseeing PHAs. In the  survey, we asked PHA executive directors and their staffs to provide  information on known fraudulent activities by fraudsters or impersonators,  fraudulent activities by landlords and building inspectors, and any other  information on fraudulent activities adversely affecting HCV program  applicants and participants from spring 2016 through spring 2017. We  administered our survey from April to May 2017. Estimated percentages  of the responses for all closed-ended questions from the survey are  included in appendix II.", "We identified the population of PHA executive directors using 2015  fourth-quarter Picture of Subsidized Households data from HUD, which  contain information on subsidized housing units by several types of  programs including the HCV program. The Picture of Subsidized  Households data also contain the percentage of households using these  programs by factors such as age, income, and disability. We assessed  the reliability of the data for use as our sampling frame by reviewing  technical documentation, conducting electronic testing, and interviewing  officials who oversee the data system; we found the data sufficiently  reliable for our purposes.", "Our initial population list contained a total of 2,243 PHA executive  directors, and our sample contained 278 PHA executive directors. We  stratified the population by size of PHAs as follows: We drew (1) a  certainty sample of 83 executive directors who oversaw at least one PHA  with 5,000+ vouchers (\u201clarge\u201d PHAs) and (2) a probability sample of 195  executive directors who oversaw at least one PHA with 1,000\u20134,999  vouchers (\u201cmedium\u201d PHAs). For purposes of discussion, we refer to the  experiences of PHAs in our analysis, although our sampling unit was the  executive directors of the PHAs.", "To formulate our survey questionnaire on the types of fraud potentially  adversely affecting HCV program applicants and participants, we  conducted research on the topic of fraud by interviewing PHA officials,  reviewing fraud alerts publicly posted on the Internet by large PHAs, and  reviewing consumer complaint data. On the basis of the results of our  research, we developed our survey questionnaire to include questions on  external fraud such as (1) fraudsters or impersonators promising  placement on a voucher waiting list, (2) fraud offering higher placement  on voucher waiting lists, (3) fraud offering fake vouchers, (4) fraud  offering suspect credit-report services, (5) landlords requiring prohibited  side payments, (6) illegal solicitation of favors by landlords and building  inspectors, and (7) illegal solicitation of rental-unit security deposits by  landlords. We pretested our survey instrument with four PHAs located in  Maryland, Michigan, Ohio, and Virginia. We revised our questionnaire  language and format based on input received by officials in these four  PHAs in order to improve the clarity of the questions. An independent  survey specialist within GAO also reviewed a draft of the questionnaire  prior to its administration; it is available in appendix II.", "We administered a web-based questionnaire accessible through a secure  server. When we completed the final survey questions and format, we  sent an e-mail announcement of the survey to 278 PHAs in April 2017.  The PHA points of contact were notified that the questionnaire was  available online and were given unique passwords and usernames. We  sent follow-up e-mail messages twice in May 2017 to those who had not  yet responded. We contacted remaining nonrespondents by telephone,  beginning in May 2017. The questionnaire was available online until mid- May 2017.", "We obtained a weighted overall response rate of 84 percent, and the  response rate by stratum was 86 percent for our first stratum (\u201clarge\u201d  PHAs) and 83 percent for our second stratum (\u201cmedium\u201d PHAs). Because  we followed a probability procedure on random selections, our sample is  only one of a large number of samples that we might have drawn. Since  each sample could have provided different estimates, we express our  confidence in the precision of our particular sample\u2019s results as a 95  percent confidence interval (e.g., plus or minus 10 percentage points).  This interval would contain the actual population value for 95 percent of  the samples we could have drawn. Confidence intervals are provided  along with each sample estimate in the report. All survey estimates  presented in this report are generalizable to the population of large and  medium PHAs, or to either the population of large PHAs or medium PHAs  analyzed separately. Unless otherwise noted, estimates for the full  population of large and medium PHAs have a margin of error for a 95  percent confidence interval within +/-4.5 percentage points or less. Unless  otherwise noted, estimates for the medium PHAs analyzed separately  have a maximum margin of error for a 95 percent confidence interval of  +/-5.4 percentage points or less. Unless otherwise noted, estimates for  the large PHAs analyzed separately have a maximum margin of error for  a 95 percent confidence interval of +/-4.5 percentage points or less.  Some questions had too few respondents to generate reliable estimates.  In these cases, we report the raw frequencies of respondents to our  survey.", "To minimize nonsampling errors, and to enhance data quality, we  employed recognized survey design practices in the development of our  survey questionnaire and in the collection, processing, and analysis of the  survey data. To minimize errors arising from differences in how survey  questions might be interpreted and to reduce variability in responses that  should be qualitatively the same, we conducted pretesting of our survey  questionnaire; see discussion on pretesting above. To reduce  nonresponse, a source of nonsampling error, as mentioned above we  followed up by e-mail and by telephone with PHAs who had not  responded to the survey to encourage them to complete it.", "To analyze open-ended comments provided by those responding to the  survey, we conducted a content analysis for the purpose of identifying  fraudulent activities against HCV program participants not addressed in  our survey questionnaire. We analyzed open-ended responses to identify  fraud types not directly addressed in our survey. We identified two  additional types of fraud. One type of fraud involved fraudsters posing as  PHA officials, calling landlords to convince them to make unnecessary  payments. This type of fraud against landlords is discussed in the report.  The other type of fraud identified was not related to participation in the  HCV program, and so is not discussed in the report."], "subsections": []}, {"section_title": "Interviews of Government Officials, Nongovernment Officials, and Others", "paragraphs": ["As part of our site visits, we interviewed officials from eight PHAs located  in three U.S. regions. On the East Coast, we interviewed officials with the  New York City Department of Housing Preservation and Development,  the New York City Housing Authority, and New York State Homes and  Community Renewal. In the Midwest, we interviewed officials with the  Cuyahoga Metropolitan Housing Authority, the Detroit Housing  Commission, and the Flint Housing Commission. On the West Coast, we  interviewed officials with the Housing Authority of the County of San  Bernardino and the Housing Authority of the City of Los Angeles. We  identified our interviewee selection on the basis of ensuring geographical  representation, budgetary considerations, metropolitan cities with a large  population, PHAs\u2019 issuance of fraud alerts, PHA size\u2014large, medium,  and small, PHA in states with a large number of older adults, and  consideration for overlap of other GAO ongoing work in the area of the  HCV program. Our sample of PHA interviewees is nongeneralizable.  Moreover, we interviewed an HCV voucher holder about the voucher  holder\u2019s knowledge of fraud against participants.", "We also interviewed government and nongovernment officials and others  based on their knowledge and expertise on the topic of fraud in general;  fraud education campaigns; fraud adversely affecting HCV program  applicants and participants; fraud affecting older adults; or identity theft.  Specifically in reference to government agencies, we interviewed officials  from the U.S. Federal Trade Commission (FTC), the Consumer Financial  Protection Bureau, the U.S. Postal Inspection Service, and the  Department of Health and Human Services about fraud types and about  practices used by federal agencies to inform the public about fraud- related issues. We also interviewed officials from the HUD Office of  Inspector General (OIG) about any past or ongoing work related to the  scope of our reporting objectives. For our interviewee selection, we  considered recommendations from other organizations such as PHAs and  legal-assistance organizations and reviewed prior GAO work on the issue  of older-adult financial exploitation. We also considered organizations\u2019  characteristics in terms of fraud prevention or work performed in assisting  potential fraud victims. These characteristics include whether the  organization has an investigative unit that may have data on fraud schemes, posts fraud alerts on its Internet websites, has data on fraud cases,  collaborates with other groups on fraud awareness, has a fraud or complaint hotline, works on fraud prevention and provides support to victims of fraud, or works with vulnerable populations including low-income individuals or  the older-adult population on social or legal issues."], "subsections": []}]}, {"section_title": "Indications of Potential Fraud Online", "paragraphs": [], "subsections": [{"section_title": "Covert Testing", "paragraphs": ["On the basis of an academic study about fraud in online rental  marketplaces (discussed above) and PHA-provided information, we  developed a list of indicators of potential fraud that might appear in online  advertisements. We used covert tools and techniques to test a  nongeneralizable sample of advertisements posted on commercial  websites commonly used by HCV voucher holders and landlords for  rental property listings, counting advertisements as potentially fraudulent  if the originator of the advertisement did any of the following:", "Requested a wire transfer of security deposit or first month\u2019s rent, or  both, without offering to provide an in-person viewing of the property.  For example, the person who posted the advertisement might state  that the rental is available, but that the person is currently not in the  country.", "Provided a link to a suspect credit-report site within the advertisement  or subsequent correspondence. While requiring a credit report is a  normal part of the rental process, fraudsters may post a fake rental  advertisement and redirect victims to a credit-score company. If the  victim pays for the credit score, the credit-score company will pay the  fraudster a commission.", "Stated in correspondence that the rental unit is no longer available,  but recommended a suspect site providing rental search, broker  services, or monthly payments toward purchase of a foreclosed  property.", "Requested an up-front or monthly side-payment agreement as a  condition of rental.", "Included an e-mail address directly in the text of the ad. According to  one academic expert on fraud, it was rare to see a legitimate  advertisement poster embed an e-mail address in a post, because  most people do not want to expose that information on the Internet.", "Advertisements or correspondence containing an indicator of fraud do not  necessarily reveal the presence of a fraud scheme. For example, the  presence of an e-mail address directly in the text of an advertisement  may also indicate that the advertisement was posted by a realtor service.", "We selected 6 geographically diverse cities nationwide for covert testing  of online rental advertisements. To generate a list of cities for possible  selection, we identified cities containing the 20 PHAs with the largest  number of HCV vouchers. We identified one commonly used online  housing-rental marketplace for the general public and another online  rental marketplace specifically dedicated to HCV rentals. We then  determined the total number of advertisements available across the two  rental websites in those cities. We used the following criteria to select  cities for covert testing:", "From the 20 cities described above, we selected 3 cities with the most  available advertisements across the two online rental marketplaces.", "From the 20 cities described above, we selected 2 cities where a  nearby PHA had closed its HCV waiting lists in the last half of 2016.", "Outside of the 20 cities described above, we also selected 1 city with  a large number of available advertisements where we had previously  completed a site visit.", "In each metropolitan area selected for covert testing, we identified  relevant online rental marketplaces operating in the area. We then used a  random-selection methodology to identify advertisements for testing from  amongst all current advertisements on each marketplace. In total, we  responded to 350 advertisements. On sites specifically dedicated to HCV  rentals, we generally sampled from among all current ads. On sites  featuring a mix of private rental ads, we developed a list of search  keywords and sampled only among ads that explicitly stated that they  would accept an HCV voucher. By e-mail, we contacted the originator of  each of the 350 advertisements we covertly tested and engaged in  correspondence.", "To determine the extent of detected potential fraud in online sites, we  covertly tested websites identified as offering information or assistance  with the HCV program; note that this methodology is distinct from that  described above to covertly test advertisements. To discover sites for  investigation, we performed web searches with a variety of relevant  search terms using two popular search engines. We clicked through the  first few pages of each set of search results, and collected the names of  commercial sites that appeared either within search results or in ads  accompanying the results. Finally, we entered the address of each of the  websites we found into a separate search portal. This search portal  suggests possible competitor and similar websites for the target website;  we added websites discovered through this method to our list of websites  for investigation. In total, we tested 26 websites. If the website requested  a payment of any kind, we made the payment. We also corresponded  with each website, asking explicitly whether it could place us on an HCV  waiting list."], "subsections": []}]}]}, {"section_title": "Second Objective", "paragraphs": ["To address our objective regarding antifraud regulations, guidance, and  informational material, if any, that HUD and PHAs have in place to identify  and mitigate potential fraud against program participants, we reviewed  HUD regulations on the HCV Program and the Section 8 Management  Assessment Program. These regulations outline the requirements for  PHAs to perform education and outreach on the HCV program. We also  reviewed HUD\u2019s HCV Program Guidebook. This guidebook provides  direction to PHAs administering the HCV Program on informing applicants  about program-related fraud.", "We also reviewed written or online briefing materials for participants  developed by the eight PHAs we interviewed. These briefing materials  must include a variety of subjects, related to program administration,  leasing a unit, and family obligations.", "We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from January 2017 to July 2017 in accordance with  investigative standards prescribed by the Council of the Inspectors  General on Integrity and Efficiency."], "subsections": []}]}, {"section_title": "Appendix II: Results of GAO\u2019s Survey of Public Housing Agencies", "paragraphs": ["To determine awareness of incidents of fraud schemes among PHAs, we  conducted a web-based survey to a nationally representative sample of  executive directors overseeing Public Housing Agencies (PHA) from April  2017 to May 2017. We solicited input on executive directors\u2019 familiarity  with and awareness of fraud schemes against U.S. Housing and Urban  Development (HUD) Housing Choice Voucher (HCV) Program applicants  and participants. We distributed the survey to 278 PHAs, of which 233 (84  percent) responded. We stratified the population by size of PHA as  follows: (1) a certainty sample of 83 executive directors who oversaw at  least one PHA with 5,000+ vouchers (\u201clarge\u201d PHAs); and (2) a probability  sample of 195 executive directors who oversaw at least one PHA with  1,000\u20134,999 vouchers (\u201cmedium\u201d PHAs). Results of our survey are  generalizable to the entire population of large and medium PHAs. For a  more-detailed discussion of our survey methodology, see appendix I.", "The results of our survey provide the input of PHA executive directors and  their staffs at the time they completed the survey in April and May 2017.  The questions we asked in our survey are presented below. Our survey  comprises seven top-level, fixed-choice questions; three subquestions for  each \u201cyes\u201d response to top-level questions; and one open-ended  question. In this appendix, we include all survey questions, and the  estimated percentages for the responses to the top-level questions.  Because of the limited number of respondents answering \u201cyes\u201d to the top- level survey questions, we could not generate reliable estimates for the  survey subquestions; therefore we present only raw frequency counts for  all subquestions except those corresponding to survey question 5 where  we present both estimated percentages and raw frequency counts for  those responses.", "In our survey open-ended question, we asked PHA executive directors to  provide information on fraudulent activities affecting HCV program  participants other than those covered by the seven fixed-choice  questions. This element was our attempt at identifying fraud types not  directly addressed in our survey. While we are not providing the  responses to the open-ended question, our analysis of those responses  identified two additional types of fraud. One type of fraud involved  fraudsters posing as PHA officials, calling landlords to convince them to  make unnecessary payments. The other type of fraud identified was not  related to participation in the HCV program, and so is not discussed in the  report."], "subsections": [{"section_title": "Fraudulent Activities by Fraudsters or Impersonators", "paragraphs": [], "subsections": []}, {"section_title": "Fraudulent Activities by Landlords and Building Inspectors", "paragraphs": [], "subsections": [{"section_title": "Survey Question 5 Responses", "paragraphs": ["Tables 17\u201323 below present results for PHAs that responded \u201cyes\u201d to  question 5. Because of the number of respondents answering \u201cyes\u201d to  question 5, we were able to generate reliable estimates for question 5  subquestions and present both estimates and raw frequency counts."], "subsections": []}]}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kathy Larin (Director), Tonita  Gillich (Assistant Director), Scott Hiromoto (Analyst-in-Charge), Maurice  Belding, Yue Pui Chin, Colin Fallon, Dennis Fauber, Maksim Glikman,  Ronald La Due Lake, Jill Lacey, Won Lee, Robert Letzler, Barbara Lewis,  Olivia Lopez, Maria McMullen, Anna Maria Ortiz, Sabrina Streagle, Adam  Windram, and Helina Wong made key contributions to this report.", "Also contributing were Marcus Corbin, Cory Marzullo, Wayne McElrath,  Josephine Perez, Samuel Portnow, and Paul Schmidt."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-634", "url": "https://www.gao.gov/products/GAO-18-634", "title": "Rural Hospital Closures: Number and Characteristics of Affected Hospitals and Contributing Factors", "published_date": "2018-08-29T00:00:00", "released_date": "2018-09-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Research has shown that hospital closures can affect rural residents' access to health care services and that certain rural residents\u2014particularly those who are elderly and low income\u2014may be especially affected by rural hospital closures.", "This report describes (1) how HHS supports and monitors rural hospitals' financial viability and rural residents' access to hospital services and (2) the number and characteristics of rural hospitals that have closed in recent years and what is known about the factors that have contributed to those closures.", "GAO reviewed documents and interviewed officials from HHS and HHS-funded research centers; analyzed data compiled by HHS and an HHS-funded research center, with a focus on 2013 through 2017\u2014the most recent year with complete data; reviewed relevant literature; and interviewed experts and stakeholders. GAO identified hospitals as rural if they met the Federal Office of Rural Health Policy's definition of rural.", "GAO provided a draft of this report to HHS for comment. The Department provided technical comments, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Health and Human Services (HHS) administers multiple payment policies and programs that provide financial support for rural hospitals and funds research centers to monitor closures and study access. Among the payment policies administered by HHS are special payment designations for rural hospitals in which rural hospitals that meet certain criteria receive higher reimbursements for hospital services than they otherwise would receive under Medicare's standard payment methodology. HHS-funded research centers monitor rural hospitals' profitability and other financial indicators, and study access to facilities and specific services. HHS uses the results of monitoring activities to inform future areas of research and disseminate information.", "GAO's analysis of data from HHS and an HHS-funded research center shows that 64 rural hospitals closed from 2013 through 2017. This represents approximately 3 percent of all the rural hospitals in 2013 and more than twice the number of closures of the prior 5-year period. GAO's analysis further shows that rural hospital closures disproportionately occurred in the South, among for-profit hospitals, and among hospitals that received the Medicare Dependent Hospital payment designation, one of the special Medicare payment designations for rural hospitals.", "According to literature GAO reviewed and stakeholders GAO interviewed, rural hospital closures were generally preceded and caused by financial distress. In particular, rural hospitals that closed typically had negative margins that made it difficult to cover their fixed costs. According to these sources, financial distress has been exacerbated in recent years by multiple factors, including the decrease in patients seeking inpatient care and across-the-board Medicare payment reductions. In contrast, according to the literature GAO reviewed and stakeholders GAO interviewed, rural hospitals located in states that increased Medicaid eligibility and enrollment experienced fewer closures."]}], "report": [{"section_title": "Letter", "paragraphs": ["Research has shown that hospital closures can affect rural residents\u2019  access to services. For example, a 2018 study found that, of the rural  hospitals that closed from 2005 through 2017, 43 percent were more than  15 miles away from the next closest hospital. In addition, a 2016 study  found that rural residents\u2014particularly those who are elderly and low- income\u2014were more likely to delay or forgo care after a rural hospital  closed if they had to travel longer distances to access hospital services.", "In 1987, the Federal Office of Rural Health Policy (FORHP)\u2014an office  overseen by the Department of Health and Human Services (HHS)\u2014was  established to advise HHS on the effects that federal health care policies  and regulations have on the financial viability of small rural hospitals and  access to health care in rural areas, among other things. Both FORHP  and another agency within HHS, the Centers for Medicare & Medicaid  Services (CMS), administer payment policies and programs that support  rural hospitals.", "To better understand and respond to challenges facing rural hospitals,  you asked us to describe HHS payment policies and programs focused  on ensuring rural residents have access to necessary hospital services  and what is known about recent rural hospital closures. This report  describes  1.  How HHS supports and monitors rural hospitals\u2019 financial viability and  rural residents\u2019 access to hospital services; and  2.  The number and characteristics of rural hospitals that have closed in  recent years and what is known about the factors that contributed to  those closures.", "To identify how HHS supports and monitors rural hospitals\u2019 financial  viability and rural residents\u2019 access to hospital services, we reviewed  documents and interviewed officials from HHS and HHS-funded research  centers, including the University of North Carolina\u2019s and the University of  Iowa\u2019s rural health research centers. HHS officials identified HHS  payment policies and programs that provide key support to rural  hospitals, and we reviewed laws, regulations, and HHS documents  related to those policies and programs.", "To identify the number and characteristics of rural hospitals that closed in  recent years, we analyzed data on rural hospital closures compiled by the  North Carolina rural health research center, and hospital-level data from  CMS. We also used these data to analyze and compare the  characteristics of all rural hospitals, as of 2013, and rural hospitals that  closed during the 5-year period from calendar years 2013 through 2017\u2014 the most recent years with complete data. To assess the reliability of  these data, we reviewed relevant documentation, interviewed knowledgeable officials from FORHP and the North Carolina rural health  research center, and performed electronic data tests to check for missing  data and consistency with other published data. We determined the data  were reliable for the purposes of our report. To identify additional  information on the characteristics of the rural hospitals that closed and  what is known about the factors that have contributed to those closures,  we conducted a literature review. We identified literature through  searching several bibliographic databases, including EconLit, MEDLINE,  Scopus, and Social SciSearch. We identified additional literature through,  for example, citations included in the literature we reviewed. We focused  our review on literature published between 2013 and 2018, but also  included some earlier literature for additional contextual information.  Additionally, our literature review included research based on analysis of  primary data sources, systematically summarized interviews, and case  studies. In total, we identified and reviewed 17 relevant publications that  met our standard for methodological rigor. We reviewed the degree of  rigor across these studies and interpreted their findings based on this  review. We also identified 17 additional publications that discussed  contextual information related to rural hospitals that closed. For additional  viewpoints on the characteristics of the rural hospitals that closed and the  factors that contributed to those closures, we interviewed several  stakeholders and experts: officials from FORHP and CMS and  representatives from the American Hospital Association, the National  Advisory Committee on Rural Health & Human Services, the National  Rural Health Association, and the University of North Carolina\u2019s and  University of Iowa\u2019s rural health research centers.", "We conducted this performance audit from December 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Rural Hospitals and Areas", "paragraphs": ["In 2017, about 2,250 general acute care hospitals in the United States  were located in areas that met FORHP\u2019s definition of rural; these rural  hospitals represented approximately 48 percent of hospitals nationwide  and 16 percent of inpatient beds. These hospitals were spread across the  84 percent of the United States land area that FORHP classified as rural,  and served the 18 percent of the United States population that lived in  these areas.", "While there are significant differences across rural areas and populations,  as a whole they differ from their urban counterparts in several ways. For  example, rural areas have the following characteristics:", "Higher percentage of elderly residents. In 2014, 18 percent of the  population was aged 65 or older in rural counties, compared with 14  percent in urban counties.", "Higher percentage of residents with limitations in activities  caused by chronic conditions. In 2010-2011, 18 percent of adults in  rural counties had limitations in activities caused by chronic health  conditions, compared with 13 percent in large, central urban  counties.", "Lower median household income. In 2014, the median household  income in rural counties was approximately $44,000, compared to  $58,000 in urban counties.", "Rural areas have also experienced several changes in recent years that  have exacerbated these differences. For example, according to research  by the United States Department of Agriculture, rural areas have  experienced the following changes:", "Decreasing population. From 2010 through 2015, the population in  rural areas declined, on average, by 0.07 percent per year, while the  population in urban areas increased, on average, by 0.9 percent per  year.", "Slow employment growth. From 2010 through 2015, rural  employment grew at 0.8 percent per year, less than half that of urban  areas (1.9 percent per year)."], "subsections": []}, {"section_title": "Federal Response to Rural Hospital Closures in the 1980s", "paragraphs": ["Rural hospital closures are not a recent phenomenon. For example, we  previously reported that between 1985 and 1988, 140 rural hospitals  closed\u2014approximately 5 percent of the rural hospitals in 1985. The  large number of closures in the 1980s was preceded by a change in how  Medicare paid hospitals. Specifically, in 1983, Medicare\u2019s inpatient  prospective payment system was created, whereby predetermined rates  were set for each Medicare hospital discharge. The intent was to control  Medicare costs by giving hospitals financial incentives to deliver services  more efficiently and reduce unnecessary use of inpatient services by  paying a hospital a predetermined amount. However, one consequence  of the new payment system was that some small, rural hospitals  experienced large Medicare losses and increased financial distress.", "Partially in response to the number of rural hospital closures, FORHP was  established in 1987 to, among other things, advise the Secretary of HHS on the effects of current and proposed  policies on the financial viability of small rural hospitals and on access  to and quality of health care in rural areas; establish and maintain a clearinghouse for information on rural health  coordinate rural health activities within HHS; and administer grants and other instruments to fund activities to improve  health care in rural areas."], "subsections": []}]}, {"section_title": "HHS Administers Multiple Payment Policies and Programs That Support Rural Hospitals and Funds Research Centers to Monitor Closures and Access", "paragraphs": [], "subsections": [{"section_title": "HHS Administers Payment Polices and Programs That Provide Financial Support to Rural Hospitals, Including Medicare Rural Hospital Payment Designations", "paragraphs": ["HHS officials identified several rural-specific HHS payment policies and  programs as providing key financial support to rural hospitals, and in turn,  rural residents\u2019 access to hospital services. These key HHS payment  policies and programs may be placed into three categories: (1) Medicare  rural hospital payment designations; (2) rural grants, cooperative  agreements, and contracts, and (3) new approaches in rural health care  delivery and payment (see table 1).", "Medicare rural hospital payment designations. CMS administers  five rural hospital payment designations, in which rural or isolated  hospitals that meet specified eligibility criteria receive higher  reimbursement for hospital services than they otherwise would have  received under Medicare\u2019s standard payment methodology. A rural  hospital may qualify as a Critical Access Hospital, Sole Community  Hospital, or Medicare Dependent Hospital\u2014each of which has  different eligibility criteria and payment methodologies. With the  exception of Critical Access Hospitals, rural hospitals may also qualify  as Low Volume Hospitals and Rural Referral Centers, in which eligible  hospitals receive additional payments or exemptions. The largest of  the five designations is the Critical Access Hospital program, which  represented 56 percent of rural hospitals in 2017 and pays eligible  small, rural hospitals based on their reported costs (instead of the  standard rates under the inpatient prospective payment system). (See  app. I, table 2, for a description of each of the five Medicare rural  hospital payment designations.) CMS was unable to provide  estimates of the additional Medicare payments rural hospitals  received from each designation in 2017. According to CMS officials,  CMS generally does not model the amount of additional Medicare  payments resulting from rural hospital payment designations, except  in years when there is a related payment policy change going through  rulemaking.", "Rural grants, cooperative agreements, and contracts. FORHP  administers multiple grant programs, cooperative agreements, and  contracts that provide funding and technical assistance to rural  hospitals. The largest of these is the Medicare Rural Hospital  Flexibility grant program, in which FORHP provides funds to states to  support Critical Access Hospitals to stabilize their finances, foster  innovative models of care, and support other improvement activities.  In 2017, 45 states received $25 million in Flex grants. FORHP officials  noted that they can provide information to help states determine how  to best target Flex grant funds, as there is not enough funding to  financially assist all Critical Access Hospitals that are at risk of  closing. (See app. I, table 3, for a description of the rural grants, and  cooperative agreements and contracts identified by HHS officials.)", "New approaches in rural health care delivery and payment.", "CMS\u2019s Center for Medicare & Medicaid Innovation (Innovation Center)  tests new ways to deliver and pay for health care\u2014including some  focused on rural areas\u2014with the goal of reducing spending and  preserving or enhancing the quality of care for beneficiaries enrolled  in Medicare, Medicaid, and the Children\u2019s Health Insurance  Program. As of June 2018, the largest of these rural models and  demonstrations was Medicare\u2019s Accountable Care Organization  Investment Model. Groups of providers in rural and underserved  areas participating in this model, potentially including small hospitals,  agree to be held accountable for the cost and quality of care to their  Medicare patients. The model tests providing pre-paid shared savings  as an incentive for providers in rural and underserved areas to form  Accountable Care Organizations and for these organizations to  transition to arrangements with greater accountability for financial  performance. For fiscal years 2012 through 2018, $96 million had  been obligated to organizations participating in the model. Forty-five  Accountable Care Organizations were participating in this model as of  2018. (See app. I, table 4, for a description of the new approaches  in rural health care delivery and payment identified by HHS officials.)", "In addition to the HHS payment policies and programs specifically  targeting rural areas, HHS officials also identified broader payment  policies and programs that they stated can provide key support to rural  hospitals and rural residents\u2019 access to hospital services. These HHS  payment policies and programs may be placed in four categories:", "Medicare and Medicaid base payments. These consist of the  standard payments for hospitals services.", "Medicare and Medicaid uncompensated care payments. Both  Medicare and Medicaid provide multiple types of additional payments  to support hospitals that incur costs for services provided to uninsured  and other low-income individuals for which the hospitals are not fully  compensated. Medicare also provides bad debt payments to hospitals to reimburse them for a portion of Medicare\u2019s beneficiaries\u2019 unpaid  deductibles and coinsurance, as long as the hospital makes a  reasonable effort to collect the unpaid amounts.", "Other targeted HHS payment policies and programs. HHS  administers other targeted payment policies and programs that  support specific types of providers and areas, including, but not  limited to, rural hospitals and areas. In particular, the Health  Resources & Services Administration, an HHS agency, administers a  drug discount program targeted at certain hospitals and other safety  net providers. In addition, CMS administers bonus payments for  certain physician services provided to Medicare beneficiaries in areas  with a shortage of health professionals.", "State Innovation Models Initiative. The Center for Medicare &  Medicaid Innovation\u2019s State Innovation Models aim to achieve better  quality of care, lower costs, and improve health for the population of  the participating states or territory. Some states\u2019 plans include testing  new delivery and payment models specifically targeting rural areas."], "subsections": []}, {"section_title": "HHS Funds Research Centers That Monitor Rural Hospital Closures and Study Access", "paragraphs": ["HHS monitors rural hospitals\u2019 financial viability and rural residents\u2019 access  to hospital services, primarily by funding rural health research centers that  track rural hospital closures and study rural residents\u2019 access to hospital  services.", "To monitor rural hospitals\u2019 financial viability, HHS funds and conducts  several activities:", "Tracking rural hospital closures and monitoring profitability. The  North Carolina rural health research center, a FORHP-funded rural  health research center, tracks rural hospital closures and monitors  rural hospitals\u2019 profitability and other financial indicators. North  Carolina\u2019s researchers identify rural hospital closures through a multi- party agreement with FORHP, the American Hospital Association, and  the National Rural Health Association, each of which alerts the  research center once one learns about a closure. Research center  staff then confirm the closure and ascertain whether the hospital  converted to another facility type by searching the hospital website  and calling a community leader, such as the mayor. The North  Carolina rural health research center publishes a list of rural hospital  closures since 2010 on its website. It also publishes reports on rural  hospitals\u2019 profitability, including the extent to which profitability varies  by rural hospitals\u2019 characteristics, and how rural hospitals\u2019 profitability  compares to the profitability of their urban counterparts.", "Monitoring Critical Access Hospitals\u2019 financial indicators. The  North Carolina rural health research center, through its role as part of  the Flex Monitoring Team, develops and monitors various financial  indicators for Critical Access Hospitals. Using the hospitals\u2019  Medicare cost reports, the research center currently monitors 22  financial indicators under 6 domains\u2014profitability, liquidity, capital  structure, revenue, cost, and utilization. These financial indicator data  are available to every Critical Access Hospital through an online tool  that also helps those hospitals compare their financial performance to  peer hospitals. The Flex Monitoring Team also publishes state-level  summary data on Critical Access Hospitals\u2019 finances that are available  on its website.", "HHS also reviews and estimates the financial effect of policy changes on  rural hospitals. In particular, FORHP officials review proposed and final  rules for Medicare, Medicaid, and the Affordable Care Act\u2019s health  insurance exchanges to identify concerns from a rural health perspective.  Drawing on the research it funds, FORHP officials may suggest policy  modifications to CMS, such as exempting certain Medicare rural hospital  designations from a proposed policy change. In addition to FORHP  officials\u2019 review, as required by statute, CMS conducts regulatory impact  assessments that estimate the effect of policy changes on payments to  hospitals, including small rural hospitals, and publishes key results as part  of proposed and final rules. For example, as part of the fiscal year 2018  final rule on Medicare payment for hospital inpatient services, CMS  estimated that the expiration of the Medicare Dependent Hospital  designation would have decreased the payments to rural hospitals with  that designation by 0.9 percent, or approximately $119 million.  Subsequent to the final rule, the Medicare Dependent Hospital and Low  Volume Hospital designations were both extended.", "To monitor rural residents\u2019 access to hospital services, HHS relies on  research conducted by the FORHP-funded research centers. Examples  of recent research on rural residents\u2019 access to hospital services  conducted by FORHP-funded research centers include the following:", "Research on rural residents\u2019 access to hospitals. In 2018 the  North Carolina rural health research center published an analysis of  populations in rural counties without access to an acute care hospital  or other types of primary care facilities. North Carolina\u2019s researchers  estimated that about 4.4 million rural residents currently live in a  county without an acute care hospital.", "Research on access to specific hospital services. The Minnesota  rural health research center conducted a body of research on  declining access to obstetric services in rural counties. These  researchers found that between 2004 and 2014, the percent of rural  counties without hospital obstetric services increased from 45 to 54  percent, through a combination of hospital and obstetric-unit  closures.", "Research on options for ensuring rural residents\u2019 access after a  hospital closure. The Iowa rural health research center published a  summary of currently available options for ensuring rural residents\u2019  access to hospital services after a hospital closure, and additional  policy options under consideration. The National Advisory  Committee on Rural Health and Human Services, a 21-member  citizens\u2019 panel of nationally recognized rural health experts that  advises HHS, also examined this topic, with a focus on alternative  models to preserve rural residents\u2019 access to emergency care in light  of the recent surge in rural hospital closures. The committee noted  that payments and grants to support rural hospitals were largely  effective and stabilized rural hospital financial operations until 2013,  when a new wave of rural hospital closures began. The report  included recommendations regarding the design of alternative  models, including that HHS seek public comments on the use of a   combination of geographic distance and demographic or social  determinants of health when setting eligibility criteria.", "To supplement the monitoring by FORHP-funded research centers,  FORHP officials also track recent rural developments and reports from  rural health stakeholders. FORHP officials said this monitoring adds a  qualitative component to the quantitative research conducted by research  centers. In particular, these activities often provide the first notice of a  rural hospital closure or pending closure, and also help track changes to  the status of former hospitals over time."], "subsections": []}, {"section_title": "HHS Uses the Results of Its Monitoring Activities to Inform Future Research and Grant Awards, and Disseminates This Information", "paragraphs": ["HHS uses the results of its monitoring activities on rural hospitals\u2019  financial viability and rural residents\u2019 access to inform related research,  primarily conducted by HHS-funded research centers, and to determine  future areas of research. For example, the North Carolina rural health  research center has used the list of rural hospital closures it compiles and  its monitoring of profitability to conduct research on predictors of rural  hospitals\u2019 financial distress. In addition, FORHP officials stated that,  based on this monitoring, they have added topics to research centers\u2019  agendas for subsequent years to gather more information on regulatory  changes identified in its review of policy changes. Each year, specific  research projects for the rural health research center are selected jointly  by the center directors and FORHP. Topics are selected to have a timely  impact on policy debates and decisions at both federal and state levels.  Examples of added topics include North Carolina\u2019s research on the  financial importance of the Sole Community Hospital and Low Volume  Hospital designations and Iowa\u2019s research on the engagement of rural  providers in Accountable Care Organizations.", "HHS has also used the results of its monitoring activities to update the  types of services offered by certain grants and create new cooperative  agreements for technical assistance. Specifically, for fiscal year 2016,  FORHP officials updated the list of activities that Rural Health Network  Development Planning grantees can spend funds on to include  implementing innovative solutions to alleviate the loss of local services  and enhance access to care in communities that have or are at risk of  losing their local hospital. According to FORHP officials, the addition of  this activity to the scope of the grant led to 11 of the 47 applicants from  fiscal years 2016 and 2017 to come from rural communities with a recent  rural hospital closure or perceived risk of closure. As another example, in  response to increased funding, in 2018 FORHP announced a new  cooperative agreement to provide targeted in-depth assistance to  vulnerable rural hospitals within communities struggling to maintain health  care services. The awardee of the Vulnerable Rural Hospitals Assistance  Program must work with vulnerable hospitals and their communities on  ways to ensure hospitals and communities can keep needed care locally,  whether it is with a more limited set of services provided by the hospital,  or by exploring other mechanisms for meeting community health care  needs.", "FORHP disseminates the results of this research and successful rural  health grants and other projects by funding cooperative agreements to  maintain clearinghouses of information about rural health issues. These  clearinghouses were originally designed to efficiently disseminate  research findings from rural health research centers to the public and to  help rural communities identify opportunities and information to provide  better healthcare to their residents. According to one of these  clearinghouses, since then, the focus has grown to developing evidence- based resources on rural health to share what works in rural  communities, including toolkits and case studies."], "subsections": []}]}, {"section_title": "Recent Increases in Rural Hospital Closures Have Disproportionately Occurred in the South, With Multiple Factors Likely Contributing to These Closures", "paragraphs": [], "subsections": [{"section_title": "From 2013 through 2017, More than Twice as Many Rural Hospitals Closed than in the Prior 5 Years", "paragraphs": ["Our analysis of data from the North Carolina rural health research center  and CMS shows that, from 2013 through 2017, 64 of the approximately  2400 rural hospitals in the United States closed. These 64 rural hospital  closures represented the following:", "More than twice the number of rural hospitals that closed during  the prior 5-year period. From 2008 through 2012, 31 rural hospitals  closed (see fig. 1).", "More than the share of urban hospitals that closed. The 64 rural  hospital closures from 2013 through 2017\u2014approximately 3 percent  of all rural hospitals in 2013\u2014exceeded the 49 urban hospital  closures during the same time period\u2014approximately 2 percent of all  urban hospitals in 2013.", "More than the number of rural hospitals that opened. The 42 rural  hospitals closed from 2014 through 2016 exceeded the 3 rural  hospitals opened during the same time period.", "Approximately half of the rural hospitals that closed from 2013 through  2017\u201447 percent\u2014ceased to provide any type of services. The  remaining hospitals that closed during this period converted to other  facility types, providing more limited or different services, such as urgent  care, emergency care, outpatient care, or primary care."], "subsections": []}, {"section_title": "Rural Hospitals with Certain Characteristics\u2014 Including Those Located in the South\u2014Accounted for a Disproportionate Share of Closures from 2013 through 2017", "paragraphs": ["Our analysis of data from the North Carolina rural health research center  and CMS shows that rural hospitals with certain characteristics\u2014including  those located in the South\u2014accounted for a disproportionate share of the  64 closures that occurred from 2013 through 2017.", "Geography. Rural hospitals located in the South represented 38  percent of the rural hospitals in 2013, but accounted for 77 percent of  the rural hospital closures from 2013 through 2017 (see fig. 2). Texas,  one southern state, represented 7 percent of the rural hospitals in  2013, but accounted for 22 percent of the rural hospitals closures from  2013 through 2017.", "Medicare rural hospital payment designations. Medicare  Dependent Hospitals \u2013 one of three Medicare rural hospital payment  designations in which hospitals were eligible to receive a payment  rate other than standard Medicare inpatient payment rate \u2013 were  disproportionately represented among hospital closures. Specifically,  Medicare Dependent Hospitals represented 9 percent of the rural  hospitals in 2013, but accounted for 25 percent of the rural hospital  closures from 2013 through 2017. Rural hospitals that did not receive  one of these three Medicare rural hospital payment designations also  represented a disproportionate share of the closures (see fig. 3). In  addition, hospitals designated as Low Volume Hospitals had a  disproportionate share of the rural hospital closures.", "Ownership. For-profit rural hospitals represented 11 percent of the  rural hospitals in 2013, but accounted for 36 percent of the rural  hospital closures from 2013 through 2017 (see fig. 4). According to  literature we reviewed, hospitals with for-profit status had a higher  probability of financial distress and were more likely to close. For  example, a 2017 study found that for-profit hospitals were more than  twice as likely to experience financial distress relative to government- owned and non-profit hospitals from 2000 through 2013.", "Bed size. Rural hospitals with between 26 and 49 inpatient beds  represented 11 percent of the rural hospitals in 2013, but accounted  for 23 percent of the rural hospital closures from 2013 through 2017.  Critical Access Hospitals have 25 acute inpatient beds or less and  make up a majority of the rural hospitals, but were less likely than  other rural hospitals to close. FORHP officials identified the Critical  Access Hospital payment designation \u2013 in which Medicare pays  designated hospitals based on their costs \u2013 paired with the related  Medicare Rural Hospital Flexibility grant program as the most effective  HHS payment policy and program to support rural hospitals\u2019 financial  viability and rural residents\u2019 access to hospital services."], "subsections": []}, {"section_title": "Fewer Patients Seeking Inpatient Care and Reductions in Medicare Payments Have Likely Contributed to Rural Hospital Closures", "paragraphs": ["According to literature we reviewed and stakeholders we interviewed,  rural hospital closures were generally preceded and caused by financial  distress. In particular, rural hospitals that closed typically had negative  margins which made it difficult to cover their fixed costs. For example,  one 2016 study found that rural hospitals that closed from 2010 through  2014 had a median operating margin of -7.41 percent in 2009. In contrast,  rural hospitals that remained open during the same time period had a  median operating margin of 2.00 percent in 2009. In addition, there is  evidence that for-profit hospitals have been more sensitive to changes in  profitability and more likely to experience financial distress, which could  explain the disproportionate number of closures among rural hospitals  with for-profit ownership type.", "The literature we reviewed and stakeholders we interviewed identified  multiple factors that likely contributed to increased financial distress and  closures among rural hospitals. One such factor was a decrease in  patients seeking inpatient care at rural hospitals due to the following:  Increased competition for the small volume of rural residents.  Rural residents may choose to obtain services from other health care  providers separate from the local rural hospital, for example from an  increasing number of federally qualified health centers or newer  hospital systems outside of the area. The competition for the small  volume of rural residents between rural hospitals and other health  care providers potentially increased due to the shift to paying for value  instead of volume, and technology changes. This increased  competition for a small volume of rural residents could explain  disproportionate closures among hospitals receiving the Low Volume  Hospital Medicare payment designation, hospitals that by definition  have a low Medicare volume and that research has found have lower  margins than other rural hospitals. In addition, representatives from  the American Hospital Association told us that technological advances  have allowed more services to be provided in outpatient settings.  For example, changes in health care technology have expanded the  provision of outpatient surgical procedures.", "Declining rural population. The years 2010 through 2016 marked  the first recorded period of rural population decline. According to  literature we reviewed and stakeholders we interviewed, the recent  population decline in rural areas was likely associated with the recent  decline in rural residents seeking inpatient services.", "Another factor highlighted by literature we reviewed and stakeholders we  interviewed as contributing to rural hospitals\u2019 increased financial distress  was across-the-board Medicare payment reductions. Rural hospitals are  sensitive to changes to Medicare payments because, on average,  Medicare accounted for approximately 46 percent of their gross patient  revenues in 2016. A 2016 study found that Medicare Dependent  Hospitals\u2019 operating margins decreased each year from 2012 through  2014, which could explain the disproportionate number of closures among  the Medicare Dependent Hospital payment designation. The literature  we reviewed and stakeholders we interviewed highlighted the recent  Medicare payments cuts as contributing to rural hospital closures, which  included the following:", "Reductions in nearly all Medicare reimbursements. Under  sequestration \u2013 the cancellation of budgetary resources under  presidential order implemented pursuant to the Balanced Budget and  Emergency Deficit Control Act of 1985, as amended \u2013 each fiscal year  since 2013, nearly all Medicare\u2019s budget authority is subject to a  reduction not exceeding 2 percent, which is implemented through  reductions in payment amounts. According to stakeholders we  interviewed, these payment reductions have contributed to negative  margins for rural hospitals.", "Reductions in Medicare bad debt payments. Under the Middle  Class Tax Relief and Job Creation Act of 2012, Medicare bad debt  reimbursements for hospitals were reduced beginning in fiscal year  2013. According to stakeholders, Medicare bad debt cuts have been  one of the most important factors contributing to the recent increase in  rural hospital closures.", "The literature we reviewed and stakeholders we interviewed also  identified factors that likely strengthened the financial viability of rural  hospitals. Chief among these factors was the increased Medicaid  eligibility and enrollment under the Patient Protection and Affordable Care  Act. A 2018 study found that Medicaid expansion was associated with  improved hospital financial performance and substantially lower likelihood  of closure, especially in rural markets and counties with large numbers of  uninsured adults before Medicaid expansion. Another 2017 study found  that from 2008-2009 and 2014-2015 the drop in uninsured rates  corresponded with states\u2019 decisions to expand Medicaid on or before  January 1, 2014. The increase in Medicaid coverage and decline in  uninsured were both largest in the small towns and rural areas of those  expansion states. Additionally, our analysis of data from the North  Carolina rural health research center and CMS shows that from 2013  through 2017, rural hospitals in states that had expanded Medicaid as of  April 2018 were less likely to close compared with rural hospitals in states  that had not expanded Medicaid (see fig. 5)."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for comment. The Department  provided technical comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Health and  Human Services, the Administrator of Health Resources & Services  Administration, the Administrator of CMS, 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 staffs have any questions about this report, please contact  me at (202) 512-7114 or cosgrovej@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."], "subsections": []}]}, {"section_title": "Appendix I: Rural-Specific Payment Policies and Programs That Provide Key Support to Rural Hospitals", "paragraphs": ["Officials from the Department of Health and Human Services (HHS)  identified several rural-specific HHS payment policies and programs as  providing key support to rural hospitals, and in turn, rural residents\u2019  access to hospital services. These key HHS payment policies and  programs may be placed into three categories:", "Medicare rural hospital payment designations (table 2);", "Rural grants, cooperative agreements and contracts (table 3); and", "New approaches in rural health care delivery and payment (table 4)."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Greg Giusto (Assistant Director),  Alison Binkowski (Analyst-in-Charge), George Bogart, Zhi Boon, Leia  Dickerson, Krister Friday, Mike Hoffman, Peter Mann-King, Beth  Morrison, Vikki Porter, Merrile Sing, and Chris Woika made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Has there been an increase in U.S. rural hospital closures?", "Yes. From 2013 to 2017, 64 rural hospitals closed, more than twice as many as during the previous 5-year period.", "What types of rural hospitals closed?", "Rural hospital closures disproportionately occurred in the South, among for-profit hospitals, and among Medicare Dependent Hospitals\u2014small rural hospitals with Medicare beneficiaries accounting for a certain percentage of their business.", "Why have rural hospitals closed?", "Financial distress. Multiple factors have exacerbated this, including a decrease in patients seeking inpatient care and across-the-board Medicare payment reductions."]}
{"id": "GAO-19-226", "url": "https://www.gao.gov/products/GAO-19-226", "title": "Public School Choice: Limited Options Available for Many American Indian and Alaska Native Students", "published_date": "2019-01-24T00:00:00", "released_date": "2019-02-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Education refers to school choice as the opportunity for students and their families to create high-quality, personalized paths for learning that best meet the students' needs. For Indian students, school choice can be a means of accessing instructional programs that reflect and preserve their languages, cultures, and histories. For many years, studies have shown that Indian students have struggled academically and the nation's K-12 schools have not consistently provided Indian students with high-quality and culturally-relevant educational opportunities.", "GAO was asked to review K-12 school choice options for Indian students. This report examines the public school options located in areas with large Indian student populations. GAO used Education's Common Core of Data for school year 2015-16 (most recent available) to analyze public school choice in (1) school districts in which Indian students accounted for 25 percent or more of all students (i.e., high percentages of Indian students) and (2) the 100 school districts with the largest number of Indian students. GAO also interviewed federal officials, relevant stakeholder groups, and tribal leaders to better understand school choice options for Indian students."]}, {"section_title": "What GAO Found", "paragraphs": ["Few areas provide American Indian and Alaska Native students (Indian students) school choice options other than traditional public schools. According to GAO's analysis of 2015-16 Department of Education (Education) data, most of the school districts with Indian student enrollment of at least 25 percent had only traditional public schools (378 of 451 districts, or 84 percent). The remaining 73 districts had at least one choice, such as a Bureau of Indian Education, charter, magnet, or career and technical education school (see figure). Most of these 451 districts were in rural areas near tribal lands. Rural districts may offer few school choice options because, for example, they do not have enough students to justify additional schools or they may face difficulties recruiting and retaining teachers, among other challenges.", "Some of the 100 school districts with the largest number of Indian students were located in large urban areas, such as New York City, and the majority (62) offered at least one option other than a traditional public school, according to GAO's analysis. The most common option was a charter school. However, because Indian students often account for a small percentage of all students in these districts, Indian education experts GAO interviewed said that the schools are less likely to have curricula that reflect Indian students' cultural identity or provide instruction on Native languages\u2014things that tribes and experts consider crucial to strengthening, rebuilding, and sustaining Indian cultures and communities. Also, even when Indian students had more options, no consistent enrollment patterns were evident. Whether Indian students enrolled in different types of schools could be a function, in part, of differences in state school choice laws and the extent to which these schools offered curricula that reflect Indian languages, cultures, or histories, according to Indian education experts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["For many years, studies have shown that American Indian and Alaska  Native students (collectively referred to as Indian students) have  struggled academically, and the nation\u2019s K-12 schools have not  consistently provided these students with high-quality, culturally-relevant  educational opportunities to encourage their success. As a result, lower  academic outcomes have consequences for Indian students\u2019 future  educational and economic opportunities, and also can affect a tribe\u2019s  ability to build a competitive tribal economy. The Department of Education  (Education) generally refers to school choice as the opportunity for  students and their families to create high-quality, personalized paths for  learning that best meet the student\u2019s needs through public, private, or  home-based educational programs or courses. Such opportunities can  also be a means for Indian students to access instructional programs that  reflect and preserve Indian languages, cultures, and histories.", "You asked us to review K-12 school choice options for Indian students.  This report examines the public school choice options located in areas  with large populations of Indian students.", "We focused our analyses on two subsets of public school districts with  large Indian student populations that collectively represented nearly  260,000 students, or more than half of all Indian students in K-12 public  schools, according to Education\u2019s Common Core of Data (CCD). The  subsets are:  1.  Public school districts in which Indian students accounted for 25  percent or more of all students in the district. We refer to school  districts that met this threshold as having a \u201chigh percentage\u201d of  Indian students. It is consistent with Education\u2019s definition of a \u201chigh- density\u201d school for Indian students which the agency uses in its  National Indian Education Study.  2.  The top 100 public school districts by number of Indian students  enrolled. We refer to school districts that met this threshold as having  the \u201clargest number\u201d of Indian students. This threshold allowed us to  examine school choice in areas where many Indian students live, but  may not represent a high percentage of all students (e.g., some large  cities). Education has similarly reported CCD data for the 100 public  school districts with the largest number of students enrolled.", "To conduct our work, we analyzed Education\u2019s national data on K-12  public schools from the CCD for school year 2015-16 (the most recent  available). We analyzed data on four types of K-12 public schools: (1)  traditional, (2) charter, (3) magnet, and (4) career and technical education  (CTE). We added data from Bureau of Indian Education (BIE) schools to  our analysis because these schools can provide an additional, unique  choice for Indian students and their families in some areas. (See text  box.) We also examined the options that were available based on a  school district\u2019s location in an urban or rural area, and mapped the  specific locations of schools within those districts. We determined these  data were sufficiently reliable for the purposes of this report by reviewing  documentation, conducting electronic testing, and interviewing Education  officials.", "Traditional school: A public elementary or secondary school providing regular  instruction and education services.   Charter school: A public elementary or secondary school providing education to  eligible students under a specific charter granted by the state legislature or other  appropriate authority, and it is designated by such authority to be a charter school.  Magnet school: A public elementary or secondary school designed to attract students  of different racial or ethnic backgrounds for the purpose of reducing, preventing, or  eliminating racial isolation; and/or to provide an academic or social focus on a particular  theme, such as science and math, performing arts, gifted and talented, or foreign  language.  Career and technical education (CTE) school: A public elementary or secondary  school that focuses on providing formal preparation for semiskilled, skilled, technical, or  professional occupations for high school-age students who have opted to develop or  expand their employment opportunities, often in lieu of preparing for college entry.  Bureau of Indian Education (BIE) school: BIE oversees 185 elementary and  secondary schools, which are designed to provide education to members of federally- recognized tribes who reside on or near federal Indian reservations. Unlike public  schools, BIE schools receive almost all of their funding from federal sources.", "We did not consider private schools in our analysis. Education collects  biennial data on private schools through its Private School Universe  Survey, which we determined was a reliable dataset for describing  aggregate data on the total number of Indian students that attended  private schools in school year 2015-16. However, we determined the data  were not sufficiently reliable to map the specific locations of private  schools.", "To better understand the public school options available for Indian  students, we interviewed or received input from a number of experts on  Indian education. For example, we spoke with federal officials from  Education, BIE, and the White House Initiative on American Indian and  Alaska Native Education; received input from representatives from  national organizations that advocate on behalf of Indian students and  tribes, such as the National Indian Education Association, the National  Advisory Council on Indian Education, and the National Congress of  American Indians; and met with academic subject matter experts on  Indian education. In addition to these experts, we heard from some tribal  leaders about their perspectives on Indian education, school choice, and  academic achievement. Appendix I contains detailed information about  the scope and methodology for this report.", "We conducted this performance audit from March 2018 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "K-12 Public School Choice", "paragraphs": ["Public school choices typically include charter schools and magnet  schools, as well as local-level options to transfer or choose among  traditional public schools. CTE schools may provide an additional option  for students seeking to develop or expand their employment  opportunities, often in lieu of preparing for post-secondary education.  Education, as well as national organizations that advocate on behalf of  tribes, has noted that the flexibility associated with these options can also  allow for increased tribal control and oversight of education for Indian  students, and create opportunities to integrate knowledge, language,  culture, and other aspects of Indian identity into the classroom, regardless  of the type of school.", "Charter schools accounted for 6 percent of all public schools in school  year 2015-16 (the school year with the most recent enrollment data  available). As of that year, 43 states and the District of Columbia had  enacted legislation to permit public charter schools, according to  Education. The availability of magnet schools also differs across states  and districts given that, in some cases, these schools are intended to  eliminate, reduce, or prevent racial isolation in areas with substantial  numbers of minority group students, according to Education\u2019s Magnet  Schools Assistance Program. In school year 2015-16, magnet schools  accounted for 3 percent of all public schools. CTE schools are less  common, representing 1 percent of all public schools in 2015-16."], "subsections": []}, {"section_title": "Indian Student Enrollment in K-12 Schools", "paragraphs": ["Approximately 505,000 Indian students attended K-12 public schools in  school year 2015-16, representing 1 percent of all public school students,  according to CCD data. The majority attended traditional public schools  (see fig. 1).", "In addition to the half a million Indian students attending public schools,  approximately 45,000 attended BIE schools in school year 2015-16,  according to BIE enrollment data. BIE administers 185 schools on or near  Indian reservations in 23 states. BIE schools are predominantly in rural  communities, serve mostly low-income students, and receive almost all of  their funding from federal sources. Students attending BIE schools generally must be members of federally recognized tribes, or  descendants of members of such tribes, and reside on or near federal  reservations.", "Indian students attend public schools in settings ranging from large urban  areas to remote rural areas. According to CCD data, in school year 2015- 16, 58 percent of Indian students attended public schools in rural areas,  while 42 percent attended public schools in urban areas (see fig. 2)."], "subsections": []}, {"section_title": "Indian Student Academic Achievement", "paragraphs": ["Every 4 years, Education conducts the National Indian Education Study to  provide in-depth information on the educational experiences and  academic performance of Indian students in 4th and 8th grade. The study  differentiates between public schools in which 25 percent or more of the  students are Indian, public schools in which less than 25 percent of the  students are Indian, and BIE schools. Data from the 2015 iteration, most  recent available, showed that Indian students attending BIE schools  consistently had the lowest math and reading scores in 8th grade, while  Indian students attending public schools with lower percentages of Indian  students consistently performed the best in these subjects (see fig. 3)."], "subsections": []}]}, {"section_title": "Few School Districts with Large American Indian and Alaska Native Student Populations Offered Public School Choice Options", "paragraphs": [], "subsections": [{"section_title": "Traditional Public Schools Were the Only Options in Most School Districts with High Percentages of American Indian and Alaska Native Students", "paragraphs": ["Few areas with high percentages of Indian students had options other  than traditional public schools, according to our analysis of Education  data for school year 2015-16. Of the 451 school districts with high  percentages of Indian students in our analysis, 84 percent (378 districts)  had only traditional public schools. The remaining 16 percent (73 districts)  had at least one BIE school, charter school, magnet school, or CTE  school. The most common option was a BIE school (see fig. 4). Among  districts that had only traditional public schools, about three-quarters of  them had more than one school. The presence of a school choice option  or more than one traditional school in a given location does not mean that  a given school is necessarily available to all Indian students in the area.", "This may be because of school-level factors such as enrollment caps,  eligibility requirements, or grade levels offered, and environmental  factors, such as limited transportation options.", "Indian students attend school in both urban and rural areas, though  nearly all school districts with high percentages of Indian students were  located in rural areas\u201499 percent compared to 1 percent located in  urban areas. In addition, as shown in figure 5, school districts with high  percentages of Indian students were generally located near tribal lands,  and half of the 451 districts were located in Oklahoma. In these districts,  there were a total of 119 BIE schools, 28 charter schools, 6 magnet  schools, and 24 CTE schools. Most of the districts that had at least one  charter, magnet, or CTE school were located in Arizona and New Mexico.  See appendix II for detailed maps of the options available in school  districts with high percentages of Indian students in select regions of the  country.", "There are several reasons why there may be few public school options in  districts with high percentages of Indian students. As previously noted,  nearly all of these districts are in rural areas. Experts said there are often  not enough students in rural areas to justify adding schools beyond the  traditional public schools or BIE schools that already exist, and rural  school districts can face challenges recruiting and retaining qualified  teachers. We have also reported on how limited broadband internet  access and poor road conditions on tribal lands can affect educational  opportunities for Indian students in rural areas regardless of the type of  school they attend."], "subsections": []}, {"section_title": "Districts with the Largest Number of American Indian and Alaska Native Students Had More Public School Options", "paragraphs": ["As previously noted, we also analyzed Education data from the 100  school districts with the largest number of Indian students. Some of these  districts were located in large urban areas and a majority had at least one  other option in addition to traditional public schools (see fig. 6).", "Of these 100 districts, 62 offered at least one option other than a  traditional public school, with the most common option being charter  schools (see fig. 7).", "With regard to the individual schools within the 100 districts with the  largest number of Indian students, we found that 75 percent of the  schools were concentrated in just 15 school districts. These 15 districts  had the largest overall student enrollments and were in urban areas such  as New York City, Los Angeles, and Albuquerque. As shown in figure 8,  the majority of charter, magnet, and CTE schools were located in these  15 largest districts. In contrast, nearly all BIE schools were located in the  85 other districts. As noted previously, BIE schools are predominantly in  rural areas, and serve students who reside on or near Indian  reservations.", "Though school districts in urban areas offered more school choice options  than school districts in non-urban areas, experts said Indian students in  urban areas sometimes feel isolated in their schools and communities.  They noted that Indian students often account for a small percentage of  all students in large urban districts and their schools are less likely to  have curricula that reflect their cultural identity or provide instruction on  Native languages. In the 15 largest of the 100 districts in our analysis,  Indian students represented less than 5 percent of all students in each  district and in some cases represented as few as 0.2 percent. In the 46  urban school districts in the 100 districts with the largest number of Indian  students, just 3 districts had an Indian student enrollment greater than 25  percent."], "subsections": []}, {"section_title": "American Indian and Alaska Native Student Enrollment in Public School Options Varied by School District", "paragraphs": ["Even when Indian students had more school choice options, there was no  consistent enrollment pattern across districts with large numbers of Indian  students. In about a quarter of the districts that had at least one charter  school, Indian students enrolled in charter schools in similar percentages  as non-Indian students. In the remaining districts, enrollment patterns  varied. For example, in one school district near Boise, Idaho and another  near Fairbanks, Alaska, Indian students attended charter schools at  higher percentages than their peers by 60 percentage points and 6  percentage points, respectively. Whereas, in other districts, such as one  district near Flagstaff, Arizona and another near Salt Lake City, Utah,  Indian student enrollment in charter schools was lower than their peers by  18 percentage points and 6 percentage points, respectively.", "Similarly, Indian student enrollment in magnet schools varied across the  17 districts with those schools. In 10 of these districts, Indian students  attended magnet schools at lower percentages than non-Indian students.  For example, in one district near Sault Ste. Marie, Michigan and another  district near Broward County, Florida, Indian student enrollment in magnet  schools was lower than their peers by 12 percentage points and 3  percentage points, respectively. In the other 7 districts, Indian students  attended magnet schools at higher percentages than non-Indian students.  For example, in one district near Stockton, California and another near  Minneapolis, Minnesota, Indian student enrollment in magnet schools was  higher than their peers by 17 and 9 percentage points, respectively.", "Whether Indian students enrolled in different types of schools could be a  function of local differences in school choice and could be influenced by  the extent to which these schools offered curricula that reflect Indian  languages, cultures, or histories. Experts with whom we spoke said that in  some areas, tribes have more control over education for Indian students,  which can increase the tribe\u2019s ability to influence curricula and  accountability metrics to help meet Indian students\u2019 academic and non- academic needs. Experts further noted that many districts with high  percentages of Indian students are located near tribal lands, which can  offer Indian students living there greater access to culturally-relevant  curricula and instruction in Native languages than their peers in urban  locations. In 2015, the National Indian Education Study reported that in  schools where Indian students represented at least one-quarter of the  students, a higher percentage of Indian students reported knowledge of  their heritage or reported they received instruction in Native languages  compared to peers attending schools with lower percentages of Indian  students. Several tribal leaders and experts in Indian education said that  access to culturally-relevant curricula and language instruction is crucial  to strengthening, rebuilding, and sustaining Indian cultures and  communities.", "In addition, experts noted that tribes sometimes seek to operate or  oversee schools for Indian youth. For example, Oklahoma allows  federally recognized tribes to authorize charter schools. In other states  with charter school legislation, experts told us that tribes often must work  through state charter school authorizers if they wish to open charter  schools. BIE officials and Indian education experts also said that areas  with BIE schools offer opportunities for tribes to exercise more control  over education by converting the school from BIE-operated to tribally- operated. One tribal leader said the tribe was exploring this option in  order to increase the tribe\u2019s autonomy over its students\u2019 education.  Education has federal-level program offices that provide support to states  and school districts related to school choice generally and Indian  education specifically. Education recently finalized changes to its Charter  Schools Program that will give priority to grantees seeking funding  opportunities that would specifically serve the educational needs of Indian  students.", "Finally, some urban school districts with large numbers of Indian students  have district-level offices designed to work directly with Indian students  and their families and to liaise between the school district and nearby  tribes. Access to these resources, among other things, may help Indian  students and families select a school that will best meet the student\u2019s  academic and non-academic needs, according to Indian education  experts we interviewed."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Education  (Education) for review and comment. We also provided a copy to the  Department of the Interior\u2019s Bureau of Indian Education (BIE).", "Education\u2019s comments are reproduced in appendix III. Education also  provided technical comments, which we incorporated as appropriate. In  its written comments, Education suggested that, given the eligibility  requirements to attend BIE schools, it is possible for Indian students to  have greater access to educational choice than their non-Indian peers in  some areas. This observation is consistent with the findings of our report,  which showed that in school districts with high percentages of Indian  students and school options, the most common option was a BIE school  (see fig. 4). However, 84 percent of these districts offered only traditional  public schools. Nearly all of these districts were located in rural areas  and, as we reported, have few school options.", "Education expressed concern that our analysis does not appropriately  reflect the full spectrum of education choice options available to Indian  students, particularly private schools. They stated it would be helpful to  understand how we determined that Education\u2019s Private School Universe  Survey (PSS) was not reliable for the purposes of mapping specific  locations of private schools. We clarified our rationale in appendix I.  Specifically, according to Education\u2019s PSS survey documentation, the  PSS was based on a sample of private schools, not the universe. The  official in Education\u2019s National Center for Education Statistics (NCES)  who is responsible for the PSS told us that the PSS sample contained  only about half of the private schools in the nation, which would not allow  for comprehensive mapping of private schools.", "We further explored using the broader list of private schools from which  Education draws the PSS sample. The PSS documentation shows that  about 30 percent of this list (more than 10,000 entities) were not private  schools. We confirmed this information with the same NCES official, who  explained that entities that are not private schools are filtered out through  NCES\u2019s survey process. Based on our review of the PSS survey  documentation and methods and our interviews with cognizant NCES  officials, we determined that it would not be possible to use PSS data to  comprehensively and accurately map the locations of these private  schools nationally or in specific areas with large Indian student  populations. However, as we indicated in the draft report on which  Education commented, the PSS contains information on a large number  of private schools and we determined that it can provide reliable data for  some variables other than the specific locations of private schools,  including the total number of students attending private schools  disaggregated by race and ethnicity. As discussed, we used the PSS for  such purposes in this report.", "In its comments, Education also encouraged us to further explore specific  examples of school options that have a mission to address the unique  educational needs of Indian students. We reviewed several relevant  studies as part of our work, including some related to the sources  Education suggested. However, an in-depth review of specific examples  was outside the scope of our work.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Education, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices   of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the public school choice options located in areas  with large populations of American Indian and Alaska Native students,  collectively referred to as Indian students.", "To conduct this work, we analyzed the Department of Education\u2019s  (Education) national data on K-12 public schools from the Common Core  of Data (CCD) for school year 2015-16 (the most recent available).  Education\u2019s National Center for Education Statistics administers the CCD  survey annually to collect a range of data from all public schools and  districts in the nation, including student demographics (e.g., race or  ethnicity) and school characteristics (e.g., school type, such as a charter  or magnet school). State educational agencies supply these data for their  schools and school districts. We determined the data we analyzed were  sufficiently reliable for the purposes of this report by reviewing  documentation, conducting electronic testing, and interviewing officials  from Education\u2019s National Center for Education Statistics.", "To inform all aspects of our work, we interviewed federal officials from  Education, the Bureau of Indian Education (BIE), and the White House  Initiative on American Indian and Alaska Native Education. We  interviewed or received input from representatives from several  organizations that represent or advocate on behalf of Indian students and  tribes, such as the National Indian Education Association, the National  Advisory Council on Indian Education, the National Congress of American  Indians, and the Tribal Education Departments National Assembly. We  also heard from some tribal leaders who provided non-generalizable  perspectives on Indian education, school choice, and academic  achievement. We met with academic subject matter experts, as well as  other relevant nonfederal organizations, such as ExcelinEd, the National  Alliance for Public Charter Schools, and the U.S. Conference of Catholic  Bishops, to discuss issues related to school choice for Indian students."], "subsections": [{"section_title": "Defining Areas with Large Populations of Indian Students", "paragraphs": ["We focused our analyses on two subsets of public school districts with  large Indian student populations, as follows:  1.  Public school districts in which Indian students accounted for 25  percent or more of all students in the district. We refer to school  districts that met this threshold as having a \u201chigh percentage\u201d of  Indian students. It is consistent with Education\u2019s definition of a \u201chigh- density\u201d school for Indian students which the agency uses in its  National Indian Education Study.  2.  The top 100 public school districts by number of Indian students  enrolled. We refer to school districts that met this threshold as having  the \u201clargest number\u201d of Indian students. This threshold allowed us to  examine school choice in areas where large numbers of Indian  students live, but may not represent a high percentage of all students.  Education has similarly reported CCD data for the 100 public school  districts with the largest number of students enrolled."], "subsections": []}, {"section_title": "School Types in Our Analysis", "paragraphs": ["The CCD collects data on public school type in two ways:  1.  Schools are categorized as regular public schools, special education  schools, career and technical education schools, or alternative/other  schools based on the school\u2019s curriculum or population served. See  table 1 for definitions for each of these categories.  2.  In addition to the above categories, schools can have additional  statuses, which are not mutually exclusive. These statuses include  magnet school, charter school, and virtual school. See table 2 for  definitions for each of these school statuses.", "Because the CCD collects public school type data in two ways, we sorted  schools based on the combination of school types and statuses to  develop distinct categories for our analysis. Table 3 outlines the  combinations of CCD school type and status, along with the  corresponding category we used in our analysis. For reporting purposes,  we used the term \u201ctraditional school\u201d in place of \u201cregular school\u201d to be  consistent with our prior reports on K-12 education issues that analyzed  the CCD and other Education datasets.", "In addition to the school types listed above, we included BIE schools in  our analysis because they may provide a unique school option in some  areas with large populations of Indian students. Data on the location of  BIE schools were captured in the 2015-16 CCD. BIE also provided us  with enrollment data for its schools, which we reviewed to determine that  the presence of BIE schools did not affect our analysis of Indian student  enrollment in other types of schools.", "We focused our analysis on (1) traditional public schools, (2) charter  schools, (3) magnet schools, (4) career and technical education schools,  and (5) BIE schools. Traditional public schools provided a baseline from  which to compare other school choices in a given school district. We  referred to the other four school types as \u201cschool choice options\u201d  collectively. We considered a school district as having school choice  options if the district included at least two schools in total, and offered at  least two of the five school types in our analysis. We compared school  districts with school choice options to school districts that had only  traditional public schools.", "In school districts with high percentages of Indian students, there were no  schools that reported having both charter and magnet school status. In  the 100 school districts with the largest number of Indian students, there  were 6 school districts that reported a total of 17 schools as having both  charter and magnet status. This did not affect our analysis of school  districts with school choice options because each of those 6 districts had  at least one additional school that had only charter status and at least one  additional school that had only magnet status in school year 2015-16.", "We excluded special education schools, alternative/other schools, and  schools flagged as state-operated juvenile justice facilities from our data  analysis because those schools limited enrollment and could not be  classified as a choice. We did not consider virtual schools in our analysis  because, as defined in the CCD, these schools generally do not have a  physical facility, which limits the ability to ascribe a virtual school to a  specific location or school district. Similar limitations would apply to  studying homeschooling or non-public online educational options, which  are not captured in the CCD. We also excluded schools that were  reported closed, inactive, or not yet opened in 2015-16.", "As noted previously, we focused our analyses on (1) school districts with  high percentages of Indian students and (2) the 100 school districts with  the largest number of Indian students. In school year 2015-16, there were  453 school districts with high percentages of Indian students. However, in  our analysis we found one school district with a high percentage of Indian  students that did not offer any traditional, charter, magnet, career and  technical education, or Bureau of Indian Education schools, and one  school district that offered one magnet school, but no other schools. We  excluded these two districts from our analysis because they did not offer  any choice as described above. After excluding these two districts, there  were 451 school districts with high percentages of Indian students in our  analysis. In total, and after accounting for overlap among school districts  that had both high percentages and large numbers of Indian students, our  analysis included 259,033 students\u201451 percent of all Indian students  attending public schools in school year 2015-16\u2014across 504 school  districts.", "We did not consider private schools in our analysis. Education collects  biennial data on private schools through its Private School Universe  Survey (PSS), which we determined was a reliable dataset for describing  aggregate data on the total number of Indian students that attended  private schools in school year 2015-16. However, we determined the data  were not sufficiently reliable for analysis of the specific locations of private  schools. Unlike the CCD which captures data on the universe of public  schools, the PSS is based on a sample of private schools, according to  Education\u2019s PSS survey documentation. The official in Education\u2019s  National Center for Education Statistics (NCES) who is responsible for  the PSS told us that the PSS sample captured only about half of the  private schools in the nation. We further explored using the broader list of  private schools from which Education draws the PSS sample, however  the PSS documentation showed that this list contained more than 10,000  entities\u2014or 30 percent of the entire list\u2014that were not private schools.  We confirmed this information with the same NCES official. Based on our  review of the PSS documentation, as well as our discussions with  cognizant NCES officials, we determined that it would not be possible to  use the PSS data to comprehensively and accurately map the locations of  these private schools nationally or in specific areas with large Indian  student populations.", "To analyze school choice options in school districts with large Indian  student populations, we analyzed all relevant schools within the public  school district\u2019s geographic boundary regardless of the administrative  school district it was assigned to in the CCD. This allowed us to account  for all public schools and BIE schools in a given area that could be an  option for Indian students. It was necessary because, for example,  charter schools or BIE schools are sometimes recorded in the CCD as  their \u201cown district,\u201d i.e., separate from the public school district for a given  area because of the local public school administrative structure.", "We further examined school choice based on a school district\u2019s location in  urban and rural areas. The CCD collects location data using  classifications ranging from large cities to remote rural areas. For  analysis, we collapsed these classifications into two categories,  consistent with Education\u2019s analyses: (1) urban areas, i.e., locations  classified as cities or suburbs, and (2) rural areas, i.e., locations classified  as towns or rural."], "subsections": []}]}, {"section_title": "Appendix II: Additional Maps", "paragraphs": ["This appendix contains maps of selected regions of the country to provide  a more in-depth view of the school choice options available in school  districts in which American Indian and Alaska Native students accounted  for 25 percent or more of all students in the district."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Bill Keller (Assistant Director),  David Watsula (Analyst-in-Charge), Susan Aschoff, James Bennett,  Deborah Bland, Connor Kincaid, Jean McSween, John Mingus, James  Rebbe, and Leanne Violette made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Private School Choice: Requirements for Students and Donors  Participating in State Tax Credit Scholarship Programs. GAO-18-679.  (Washington, D.C.: September 18, 2018).", "Broadband Internet: FCC\u2019s Data Overstate Access on Tribal Lands.  GAO-18-630. (Washington, D.C.: September 7, 2018).", "Native American Youth: Involvement in Justice Systems and Information  on Grants to Help Address Juvenile Delinquency. GAO-18-591.  (Washington, D.C.: September 5, 2018).", "High Risk: Agencies Need to Continue Efforts to Address Management  Weaknesses of Federal Programs Serving Indian Tribes. GAO-18-616T.  (Washington, D.C.: June 13, 2018).", "Private School Choice: Federal Actions Needed to Ensure Parents are  Notified about Changes in Rights for Students with Disabilities.  GAO-18-94. (Washington, D.C.: November 16, 2017).", "Tribal Transportation: Better Data Could Improve Road Management and  Inform Indian Student Attendance Strategies. GAO-17-423. (Washington,  D.C.: May 22, 2017).", "School Choice: Private School Choice Programs Are Growing and Can  Complicate Providing Certain Federally Funded Services to Eligible  Students. GAO-16-712. (Washington, D.C.: August 11, 2016).", "Indian Affairs: Bureau of Indian Education Needs to Improve Oversight of  School Spending. GAO-15-121. (Washington, D.C.: November 13, 2014).", "Indian Affairs: Better Management and Accountability Needed to Improve  Indian Education. GAO-13-774. (Washington, D.C.: September 24, 2013)."], "subsections": []}], "fastfact": ["American Indian and Alaska Native communities are looking for high-quality educational opportunities that also reflect their languages and cultures. Different types of public schools (e.g., charter, magnet, and career and technical education schools) may provide more choices.", "We found that many Indian students have limited public school options. Most school districts with at least 25% Indian students only offered traditional public schools. Many of these districts are in rural areas, where there may not be enough total students to justify additional schools. Districts in large urban areas often had more choices."]}
{"id": "GAO-18-16", "url": "https://www.gao.gov/products/GAO-18-16", "title": "Commercial Fishing Vessels: More Information Needed to Improve Classification Implementation", "published_date": "2017-12-14T00:00:00", "released_date": "2017-12-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Commercial fishing has one of the highest death rates of any industry in the United States. Fishing vessels that are at least 50 feet long and were built after 2013 are required by law to be built and maintained to rules developed by a classification society, a process known as classing. Congress created an alternative-to-class approach in 2016, allowing certain size vessels to be designed and built to equivalent standards in lieu of classing.", "The Coast Guard Authorization Act of 2015 included a provision for GAO to review the costs and benefits of classing commercial fishing vessels. This report assesses (1) known numbers and rates of commercial fishing vessel accidents, injuries, and fatalities; (2) what is known about the costs, effects, and benefits of constructing and maintaining classed vessels; and (3) how the alternative-to-class approach compares with classing. GAO collected data on vessel accidents, injuries, and fatalities; interviewed vessel owners, builders, classification societies, Coast Guard, and other agencies; and studied classing costs."]}, {"section_title": "What GAO Found", "paragraphs": ["The Coast Guard, the only military service within the Department of Homeland Security (DHS), investigated 2,101 commercial fishing vessel accidents between 2006 and 2015 that occurred in federal waters; however, because there are no reliable data on the total number of commercial fishing vessels that are actively fishing, rates of accidents, injuries, and fatalities cannot be determined. Agencies, such as the Coast Guard, keep records of accidents, but without reliable data on active vessels, trend information cannot be determined. The Coast Guard and the National Marine Fisheries Service have separate efforts to collect data that could be used to develop an estimate of active commercial fishing vessels, but each agency is taking a different approach to do so. These and other agencies agreed that it is important to calculate rates to assess commercial fishing vessel accidents, injuries, and fatalities. Establishing a mechanism\u2014such as a working group\u2014to coordinate efforts and collect reliable data on the number of active vessels and key characteristics, such as vessel age and length, would allow the agencies to do so in an efficient manner.", "While data on the costs to design, construct, and maintain classed vessels are limited, vessel owners, builders, and classification societies agree that classification increases costs and told GAO that the perceived costs of classing may affect vessel owners' decisions to purchase new vessels to avoid classification requirements. However, they also agree that classification is one of many factors that contribute to safety.", "The alternative-to-class approach is more flexible than classing\u2014for example, in its use of marine surveyors to verify vessel construction. Industry stakeholders and GAO's analysis, however, identified numerous questions and uncertainties regarding implementation of the approach, including licensing requirements for naval engineers and architects. The Coast Guard has not issued regulations or guidance to address these issues on the alternative-to-class approach due, in part, to its ongoing efforts to issue regulations to implement safety-related legislation enacted in 2010 and 2012. However, without specific written procedures\u2014either in the form of regulations or guidance\u2014the Coast Guard cannot ensure consistent implementation of the alternative-to-class approach."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Among GAO's recommendations, the Coast Guard and other agencies should form a working group to collect reliable data on the number of active fishing vessels. The Coast Guard should also issue regulations or guidance to address questions about the alternative-to-class approach. The agencies generally concurred with the recommendations, but DHS did not concur that the Coast Guard assess vessel accident rates. GAO revised this recommendation to allow the Coast Guard or another appropriate agency to do the assessment."]}], "report": [{"section_title": "Letter", "paragraphs": ["Commercial fishing has one of the highest death rates of any industry in  the United States and vessel disasters are the leading cause of fatalities  among fishers, according to the National Institute for Occupational Safety  and Health (NIOSH). Commercial fishing is a diverse, highly fragmented  industry in the United States that includes federal management of 474  fish stocks and stock complexes. The vessels used in commercial  fishing\u2014including catcher, processing, and tender vessels\u2014are similarly  diverse, and can vary in size, type, and style due to differences in  fisheries and the regions in which the vessels operate.", "The International Maritime Organization\u2014a specialized agency of the  United Nations that is responsible for regulating vessels and ships at  sea\u2014establishes requirements through international conventions. Among  other things, these conventions are intended to ensure maritime safety  and security through, for example, the requirement for load lines,  meaning where the waterline should reach when a vessel is properly  loaded. International requirements also stipulate that vessels be  designed, constructed, and maintained in accordance with the rules of a  recognized classification society or with national standards that provide  an equivalent level of safety. However, commercial fishing vessels have  generally been exempted from these requirements.", "Since 1988, U.S. law has required one type of commercial fishing  vessel\u2014processing vessels\u2014to be built and maintained to rules  developed by a classification society, a process known as classing. In  2010 and 2012, Congress expanded classing requirements to the  remaining two types of vessels\u2014catcher and fish tender vessels\u2014that  are at least 50 feet long and built after July 1, 2013. Congress amended  these requirements in 2016, creating an alternative-to-class approach,  which allows 50-79 foot catcher or tender vessels built after February 8,  2016, to be designed and built to equivalent standards and overseen by a  marine surveyor in lieu of classing.", "The Coast Guard Authorization Act of 2015 included a provision for GAO  to review commercial fishing vessel safety, including the costs and  benefits of classing commercial fishing vessels. This report assesses (1)  what is known about the numbers and rates of commercial fishing vessel  accidents, injuries, and fatalities; (2) what is known about the costs to  construct and maintain classed commercial fishing vessels built since July  2013 (after expanded classification requirements took effect) and the  effects of classing on vessel builders and owners; (3) the benefits  associated with classing commercial fishing vessels; and (4) how the  alternative-to-class approach compares with building and maintaining  commercial fishing vessels to classification society standards.", "To assess what is known about the number and rates of commercial  fishing vessel accidents, injuries and fatalities, we collected and analyzed  data from the Coast Guard\u2019s Marine Information for Safety and Law  Enforcement database on commercial fishing vessel investigations to  identify the number of commercial fishing vessel accidents, injuries, and  fatalities that occurred in federal waters for calendar years 2006 through  2015. To assess the reliability of the data, we reviewed relevant  documentation, spoke with knowledgeable agency officials, and  performed electronic testing for obvious errors in accuracy and  completeness. We determined that the data were sufficiently reliable for  reporting the overall number of accidents, injuries, and fatalities from  2006 through 2015. Using latitudinal and longitudinal information  collected during the Coast Guard\u2019s investigation of each accident, we  limited our analysis to those accidents that involved U.S. vessels and  occurred between 3 nautical miles and 200 nautical miles from shore, an  area generally referred to as U.S. federal waters. For 243 observations,  we found errors in the longitudinal and latitudinal data and could not  match these accidents to an accurate location; we excluded these  observations from our analysis. We attempted to analyze the number of  commercial fishing vessel accidents, injuries, and fatalities by fishery\u2014 meaning the area in which a certain type of fish (e.g., shrimp, salmon,  crab) is caught\u2014but we found that the geographic area in which each  accident occurred is not sufficiently reliable for determining the fishery in  which a commercial fishing vessel operates.", "We requested data from the Coast Guard, NIOSH, and the National  Oceanic and Atmospheric Administration\u2019s (NOAA) National Marine  Fisheries Service on the population of commercial fishing vessels that  actively fished over this period, but although the Coast Guard and the  National Marine Fisheries Service collect data on commercial fishing  vessels and fishing permits, respectively, the data are not reliable for  determining the number of vessels that were actively fishing, landing, and  selling their catch each year. These data reliability problems precluded us  from calculating rates of accidents, injuries, or fatalities. We collected and  analyzed data from NIOSH\u2019s Commercial Fishing Incident Database on  commercial fishing fatalities for 2006 through 2015, and examined reports  from the National Transportation Safety Board\u2019s (NTSB) investigations of  commercial fishing vessel accidents over this period. We interviewed  Coast Guard, NIOSH, and NTSB officials regarding the investigations and  analyses they have conducted on commercial fishing vessel accidents  and recommendations they have made to improve safety on board these  vessels.", "To assess what is known about the costs to construct and maintain  classed commercial fishing vessels built since July 2013 and the effects  of classing on vessel builders and owners, we collected data on the costs  associated with constructing and maintaining classed commercial fishing  vessels from vessel builders and owners willing to share this information.  Specifically, we analyzed (1) classification society fees quoted to two  vessel builders located in the Gulf of Mexico and Pacific regions and  other documentation these builders provided, including a construction bid;  (2) another vessel builder\u2019s cost estimate for constructing a 90 foot long  classed commercial fishing vessel to be used in the Gulf of Mexico shrimp  industry; and (3) documentation provided by one vessel owner and  another individual with extensive experience in the commercial fishing  industry that reflected the cost differential between certain class and non- class certified equipment. The findings based on these data are not  generalizable, but they do provide some insight into the additional costs  associated with constructing a classed commercial fishing vessel.", "We interviewed three marine underwriters who insure commercial fishing  vessels off the coast of the Gulf of Mexico, Pacific Ocean, and the Atlantic  Ocean to discuss how classification affects insurance premiums. We  conducted three discussion sessions with stakeholders in the commercial  fishing industry and interviewed 36 commercial fishing vessel owners  and/or operators, representatives from 4 commercial fishing trade  organizations, 13 vessel builders, and 3 recognized classification  societies in the United States, as well as marine safety experts, naval  architects, and academics who study commercial fishing vessel safety.", "To assess the benefits associated with classing commercial fishing  vessels, we obtained the perspectives of vessel owners and/or operators,  vessel builders, commercial fishing trade organizations, and classification  societies during the interviews and discussion sessions described above.  We reviewed Coast Guard and NIOSH studies related to improving  commercial fishing vessel safety and the benefits each found with respect  to classing commercial fishing vessels or improved accident outcomes.  We also collected data on the number of insurance claims submitted by  commercial fishing vessel owners from 2013 through 2016 to two of the  three marine underwriters we interviewed and who were willing to share  this information to determine the number of hull and machinery claims  and the number of protection and indemnity claims that these companies  processed over the period.", "To compare the alternative-to-class approach to building and maintaining  commercial fishing vessels to classification society standards, we  compared the design, construction, and maintenance processes of each  approach to identify similarities and differences between the two  approaches. We interviewed Coast Guard officials to discuss the current  policies and regulations in place to address commercial fishing vessels  and how an alternative-to-class approach will be implemented. We also  collected information on commercial fishing vessel classification  requirements from a non-generalizable sample of four comparison  countries\u2014Canada, Denmark, Spain, and the United Kingdom\u2014that are,  along with the United States, members of the Organization for Economic  Cooperation and Development and have fishing industries similar to those  of the United States. We examined the classification requirements for  commercial fishing vessels, including vessel length at which requirements  apply, for the selected countries and discussed the requirements with  officials from the selected countries. We present this analysis in   appendix I.", "Appendix II provides additional information on our scope and  methodology.", "We conducted this performance audit from June 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["There are three main types of U.S. commercial fishing vessels: catcher vessels that catch fish and deliver them to shore for  processing;  tender vessels that purchase and transport fish from catcher vessels  and resupply fishers with food, fuel, and other necessities; and  fish processing vessels that both catch and process fish at sea.", "Commercial fishing vessels are also characterized by the type of fishing  gear used, such as trawl nets, seine nets, gill nets, traps and pots,  dredges, and hook and line. The targeted fish species determines the  type of vessel and gear that fishers use in their operations. A commercial  fishing vessel may participate in multiple fisheries, using various fishing  gear, as needed.", "The Magnuson-Stevens Fishery Conservation and Management Act, as  amended, provides for the conservation and management of fishery  resources within the federal waters of the United States. The act defines  \u201ccommercial fishing\u201d to mean fishing in which the fish harvested, either in  whole or in part, are intended to enter commerce or enter commerce  through sale, barter, or trade. This act also created eight regional fishery  management councils, which are responsible for preparing fishery  management plans and setting annual catch limits for the fisheries within  their areas of authority. NOAA\u2019s National Marine Fisheries Service, under  authority delegated from the Secretary of Commerce, provides support for  regional fishery management councils and approves and implements  fishery management plans and plan amendments. Figure 1 illustrates the  eight fishery management councils."], "subsections": [{"section_title": "U.S. Commercial Fishing Vessel Classification and Safety Requirements", "paragraphs": ["Under federal statute, commercial fishing vessels are categorized as  uninspected vessels and the Coast Guard generally does not have the  authority to inspect the vessels during construction or regular  maintenance. However, the Coast Guard is authorized to inspect all other  commercial vessels such as freight, offshore supply, passenger, tank,  and towing vessels. Through the inspection process, the Coast Guard  ensures that a vessel\u2019s structure is suitable, that equipment and  accommodations are maintained in an operating condition consistent with  safety of life and property conventions, and that the vessel complies with  applicable marine safety laws and regulations.", "Safety issues aboard commercial fishing vessels have been a long- standing concern. Various studies identified the problems and considered  possible solutions to improve commercial fishing safety, but implementing  improved safety recommendations were largely left to the vessel owner\u2019s  discretion. Following the loss of entire commercial fishing vessel crews  during the mid-1980s, Congress passed the Commercial Fishing Industry  Vessel Safety Act of 1988, which required safety improvements and  examination of commercial fishing vessels for safety equipment.", "The act also instructed the Secretary of Transportation to conduct a study  of the safety problems on fishing industry vessels and make  recommendations on whether a vessel inspection program should be  implemented. In 1991, the National Research Council conducted this  study, which included a comprehensive assessment of commercial fishing  vessel safety and identified a range of issues, including vessel fitness,  and safety and survival equipment, among other things. The Council  found that developing casualty rates was hampered by the absence of  reliable data on the number of fishing vessels, vessel material condition,  exposure variables, and other factors. The Council recommended a  holistic approach to fishing vessel safety, including establishing vessel  and equipment standards as well as the development of a database to  evaluate alternatives and monitor results. The Council stressed, however,  the importance of balancing the anticipated benefits of a safety program  with any costs that might be imposed through implementation. The  Council also noted that classification costs would be borne principally by  vessel owners and that the costs could be significant for individual vessel  owners.", "Congress established classification requirements to address the  construction and maintenance of fish processing vessels in 1988, and  applied classification requirements to all types of commercial fishing  vessels more broadly in 2010 and 2012 under the Coast Guard  Authorization Act of 2010 and the Coast Guard and Maritime  Transportation Act of 2012. In addition to classification requirements,  Congress also established other requirements to improve vessel safety.  For example, commercial fishing vessels that are 79 feet or longer, built  after July 1, 2013, are required to have an assigned load line. A load  line indicates the point where the waterline should reach when a vessel is  properly loaded. Assignment of a load line, and issuance of a load line  certificate, is conditional on the structural efficiency and satisfactory  stability of the vessel, and on provisions provided for protection of the  vessel and crew. As part of a load line certification, a vessel\u2019s  seaworthiness is assessed by evaluating a vessel\u2019s watertight integrity,  stability, and loading capacity. A vessel\u2019s stability booklet, prepared as  part of a stability assessment, instructs operators on how to distribute  weight across a vessel to prevent capsizing under different operating  conditions. Figure 2 illustrates legislation and policy that addresses  commercial fishing vessel construction and maintenance from 1988 to  2016.", "Classification requirements differ by commercial fishing vessel type and  length and are only applicable to vessels built after certain dates, as seen  in table 1.", "To address safety on older commercial fishing vessels, the 2010 and  2012 acts also directed the Secretary of Homeland Security to develop an  alternate safety compliance program for commercial fishing vessels that  are at least 50 feet in length, built before July 1, 2013, and are 25 years  or older. The Coast Guard drafted requirements for the program but,  according to the Coast Guard, this program would have required a new  rulemaking effort, and it suspended the effort in July 2016. At that time,  the Coast Guard developed an Enhanced Oversight Program\u2014through  policy and its existing authorities\u2014that focuses on older, non-classed  commercial fishing vessels that may pose a greater risk of vessel and  crew member loss. In addition, in January 2017, the Coast Guard issued  a list of voluntary safety initiatives and good marine practices and  encouraged vessel owners to implement these initiatives on all non- classed vessels where possible and reasonable. The Coast Guard is also  currently working on aligning its existing regulations on commercial  fishing vessels with the classification requirements introduced in the 2010  and 2012 acts."], "subsections": []}, {"section_title": "Vessel Classification Process and Procedures", "paragraphs": ["Through the classing process, classification societies, such as the  American Bureau of Shipping (ABS), Det Norske Veritas Germanischer  Lloyd (DNV GL), and RINA, address aspects of the vessel\u2019s design,  structural integrity, reliability and function of major systems, and accident  prevention. Classification societies (1) establish and maintain standards  for the construction and classification of vessels and offshore structures;  (2) supervise construction in accordance with these standards; and (3)  carry out regular surveys of vessels in service to ensure the compliance  with these standards. Once a vessel is \u201cclassed\u201d with a certificate  indicating that it meets a minimum level of safety and quality, the vessel is  subject to periodic inspection to verify that it continues to meet the  applicable rules of the issuing classification society, or risks losing its  classification certificate, which could prevent the vessel from operating  legally. Figure 3 illustrates the classification process for vessel design,  construction, and maintenance.", "Of the 39 U.S. fishing vessels classed by three societies, as shown in  table 2, at least 29 are fish processing vessels.", "Although commercial fish processing vessels built or converted after July  27, 1990, are required by U.S. law to be classed, the law permits a vessel  to be exempted from this and other statutory requirements under certain  conditions. Few commercial fish processing vessels have an active class  certificate. Older U.S. fish processing vessels\u2014most of which operate off  of the coast of Alaska\u2014generally fall under the Coast Guard\u2019s Alternative  Compliance and Safety Agreement Program, which is implemented  pursuant to exemption authority provided under law. Under this program,  vessel owners apply with the Coast Guard for an exemption from classing  and load line requirements so long as the vessel meets improved safety  standards provided for under the program."], "subsections": []}, {"section_title": "Federal Agencies Involved in Commercial Fishing Vessel Safety", "paragraphs": ["Several different federal agencies play a role in overseeing and promoting  commercial fishing vessel safety:", "Coast Guard: The only military service within the Department of  Homeland Security (DHS), search and rescue activities and marine  safety activities number among the Coast Guard\u2019s primary missions.  As part of the safety activities, the Coast Guard performs mandatory  safety inspections, conducts accident investigations, and promotes  accident prevention involving vessels at sea. In 2015, the Coast  Guard also began performing mandatory examinations of safety  equipment onboard commercial fishing vessels. The Coast Guard  records all interactions with vessels, including commercial fishing  vessel accidents, in the Marine Information for Safety and Law  Enforcement database. Coast Guard regulations require vessel  operators to report a marine casualty involving damage to the vessel  or other property; injury or loss of life; or harm to the environment.  The Coast Guard is also responsible for enforcing fishery  management laws and regulations.", "National Institute for Occupational Safety and Health (NIOSH): As  part of the Department of Health and Human Services\u2019 Centers for  Disease Control and Prevention, NIOSH is responsible for conducting  research and making recommendations for new or improved work- related safety and health standards. For example, it has  recommended that all fishing vessel operators conduct monthly safety  drills as required by federal regulation; heed weather forecasts and  avoid fishing in severe sea conditions; and maintain watertight  integrity by examining and monitoring the hulls of their vessels.  NIOSH maintains a Commercial Fishing Incident Database, which  mostly is comprised of data on fishing industry fatalities abstracted  and coded from reports of Coast Guard investigations of marine  casualties.", "National Transportation Safety Board (NTSB): NTSB investigates  commercial fishing vessel accidents that involve the most significant  damage and loss of life. NTSB conducts investigations (sometimes  in parallel with the Coast Guard) to determine the probable cause of  vessel accidents and issues safety recommendations aimed at  preventing future accidents. For example, with regard to commercial  fishing vessels NTSB recommends regularly conducting safety drills  as well as proper training in stability and firefighting, and wearing a  flotation aid at all times while working on deck.", "National Marine Fisheries Service: National Marine Fisheries  Service uses fishery observers and at-sea monitors to collect data  from U.S. commercial fishing vessels to monitor federal fisheries,  assess fish populations, set fishing quotas, and inform fishery  management practices. Under federal regulations, fishing vessels that  may carry a fishery observer as part of a required or voluntary  observer program generally must pass a Coast Guard commercial  fishing vessel safety examination and be issued a safety decal.  Further, under federal regulations, fishery conservation and  management measures must, to the extent practicable, promote the  safety of human life at sea, and should minimize or mitigate safety  impacts where practicable."], "subsections": []}]}, {"section_title": "Number of Commercial Fishing Vessel Accidents, Injuries, and Fatalities Varied from 2006- 2015, but Rates Cannot Be Determined", "paragraphs": ["The Coast Guard investigated 2,101 commercial fishing vessel accidents  between 2006 and 2015 that were identified as occurring in federal  waters. While the number of accidents in 2015 was greater than the  number reported in 2006, the number of injuries and fatalities declined  over the same 10-year period. We could not assess the number of  accidents, injuries, and fatalities by fishery due to limitations with the  Coast Guard\u2019s data. In addition, we were unable to calculate the rates of  commercial fishing vessel accidents, injuries, and fatalities because  reliable data on certain information needed to do so\u2014including the total  number of vessels that are actively fishing and the fishery or region in  which the vessel operates\u2014are either not maintained or are not collected  by the Coast Guard or other federal agencies."], "subsections": [{"section_title": "Number of Commercial Fishing Vessel Accidents in Federal Waters Varied from 2006-2015 and Instances of Injuries and Fatalities Have Declined", "paragraphs": ["Between 2006 and 2015, the Coast Guard investigated 2,101 commercial  fishing vessel accidents that occurred in federal waters. Coast Guard data  indicates that the numbers of accidents generally increased through 2013  before falling slightly over the next two years, but remains above the level  experienced in 2006. Of those, the Coast Guard investigated 193 serious  marine incidents\u2014those resulting in death, injury, or significant property  damage, or involving environmental damage in federal waters. Figure 4  shows the number of commercial fishing vessel accidents and serious  marine incidents that occurred in federal waters for 2006 through 2015.", "From 2006 through 2015, 598 of 2,101 commercial fishing vessel  accidents in federal waters resulted in an injury and/or fatality. These  accidents resulted in a total of 507 injuries and 182 fatalities over this  period. Coast Guard data indicate that the number of injuries and  fatalities have been declining since 2012, and 2015 figures are  substantially below the levels reported in 2006, as seen in figure 5.", "Due to limitations with the Coast Guard\u2019s data, we were unable to portray  numbers of accidents, injuries, or fatalities by fishery located in a specific  geographic location. Although we identified the area in which each  commercial fishing vessel accident occurred, using latitudinal and  longitudinal information included in the Coast Guard\u2019s database, we could  not reliably assign each accident, injury, or fatality to a fishery managed  by interstate marine fisheries commissions or fishery management  councils\u2014entities which manage fishery resources in state and federal  waters, respectively. National Marine Fisheries Service officials stated  that even though an accident that occurred in an area of federal waters  that falls within a jurisdiction of a particular council, the vessel may not  have been participating in a fishery managed, either solely or in part, by  that council. Data on a vessel\u2019s intended fishery on the day of the  accident provides accurate information on the intended area in which a  vessel should be operating. Assigning a commercial fishing vessel  accident to a specific fishery management council on a solely geographic  basis\u2014without consideration of the vessel\u2019s targeted fishery\u2014could  overestimate the prevalence of accidents in a council jurisdiction. While  the Coast Guard\u2019s database includes a field for a vessel\u2019s fishery, these  data were not collected for the majority of commercial fishing vessel  accidents between 2006 and 2015. An official in the Coast Guard\u2019s Office  of Investigations and Analysis stated that data on a vessel\u2019s fishery is not  required in order to complete an accident investigation and, therefore,  may not be collected.", "Federal internal control standards establish that management should  obtain relevant, accurate data from reliable sources in a timely manner,  and recommend that agencies\u2019 management use quality information to  make informed decisions and evaluate the entity\u2019s performance in  achieving key objectives and addressing risks. The lack of complete and  reliable data on the vessel\u2019s fishery in the Coast Guard\u2019s database  hinders efforts to assess whether particular fisheries experience higher  numbers of accidents, injuries or fatalities than others. Such information  would benefit the Coast Guard\u2019s analysis of commercial fishing vessel  accidents, injuries, and fatalities because information on a vessel\u2019s fishery  can be used for a regional analysis of these events."], "subsections": []}, {"section_title": "Relevant Federal Agencies Do Not Collect Reliable Information on the Active Fleet to Enable Calculation of Rates", "paragraphs": ["The Coast Guard and other federal agencies do not collect data on the  total number of vessels that are actively fishing\u2014those that are operating,  landing, and selling catch\u2014and we found that existing data on the  population of commercial fishing vessels are not sufficiently reliable to  calculate rates of commercial fishing vessel accidents, injuries, and  fatalities. Data on the total number of commercial fishing vessels actively  catching and processing fish are necessary to determine rates\u2014the ratio  of the number of accidents, injuries, and fatalities that occurred compared  to the total number of active commercial fishing vessels. These rates, if  based on reliable data, would establish trend information on the number  of accidents involving commercial fishing vessels.", "While the Coast Guard collects some data on commercial fishing vessels  that operate in federal waters\u2014including a vessel\u2019s length and  construction date\u2014data on the population of the active U.S. commercial  fishing vessel fleet are not reliably known. The Coast Guard\u2019s National  Vessel Documentation Center maintains a registry of valid certificates of  documentation\u2014that indicate that a vessel is registered with the Coast  Guard and is greater than 5 net tons\u2014for commercial fishing vessels that  operate in federal waters. However, even when the Coast Guard could  identify the number of documented vessels, we found the data they  provided were unreliable for determining the total number of commercial  fishing vessels that are actively fishing. For example, a senior Coast  Guard official estimated that more than 20 percent of the vessels  documented in 2015 were not actively fishing and may not be operational  or otherwise not in use. As part of vessel registration, the Coast Guard  collects information on a vessel\u2019s length and date of construction. Other  data, however, such as the fishery located in a specific geographic  location in which a vessel operates, are not collected. Data on key  characteristics of the total number of commercial fishing vessels actively  fishing\u2014including vessel length, age, and fishery or region of operation\u2014 would provide additional information when analyzing rates of commercial  fishing vessel accidents, injuries, and fatalities.", "Other federal agencies involved in the commercial fishing vessel industry  also do not collect data on the total number of active U.S. commercial  fishing vessels. Having a national count of federally-permitted commercial  fishing vessels can be used, in part, to help determine the number of  commercial fishing vessels that are actively fishing. Federal permits are  required for commercial fishing vessels that fish in certain fisheries and,  according to officials from the National Marine Fisheries Service, these  fishing permits are issued by NOAA\u2019s regional offices and each regional  office manages its own data. National Marine Fisheries Service officials  stated that they are developing a national count of federally-permitted  commercial fishing vessels, but a competing priority delayed this effort  and noted it will recommence in the coming year. However, just because  a vessel has a permit, it does not mean it is an active vessel, and  additional data on vessel activity\u2014such as information from log books,  fish tickets, and fishery observers\u2014is needed to identify vessels that are  actively fishing.", "Similarly, a statistician from NIOSH\u2014the federal agency that maintains  data on commercial fishing fatalities and is responsible for conducting  research and making recommendations for the prevention of work-related  injury and illness\u2014stated that he has encountered challenges estimating  the total size of the active U.S. commercial fishing fleet because the  majority of commercial fishing vessels are state-registered, and  comprehensive data on the number of state-registered vessels are not  available. Coast Guard officials acknowledged that they do not collect  data on a state-registered vessel, unless the Coast Guard has been in  contact with the vessel.", "Officials from the Coast Guard and the National Marine Fisheries Service  agreed that it is important to calculate rates to assess the number of  commercial fishing vessel accidents, injuries, and fatalities. At present,  however, no particular federal agency has collected or calculated the  national number of active commercial fishing vessels\u2014those that are  fishing and selling their catch\u2014or the region and fishery in which these  vessels operate. Once a reliable count of the number of active  commercial fishing vessels is established, rates can be calculated by  other characteristics such as the fishery or fisheries in which a vessel  operates or vessel length. These rates would provide further insight into  commercial fishing vessel accidents, injuries, and fatalities, including the  percentage of vessels that are involved in an accident in a specific region  or the percentage of accidents that involve vessels of a certain length  such as, for example, vessels greater than 79 feet in length.", "Federal internal control standards establish that management should  obtain relevant data from reliable sources in a timely manner, and  recommend that agencies\u2019 management use quality information to make  informed decisions. The Coast Guard and the National Marine Fisheries  Service are collecting data that could be used to develop an estimate of  the total number of commercial fishing vessels that are actively fishing,  however, each agency is taking a different approach, in part, because  they are doing so for different purposes. Specifically, the Coast Guard  collects data on commercial fishing vessels and the National Marine  Fisheries Service collects data on permits for federally-managed  fisheries, as well as other data on fishing activities. These data can be  used, in part, to help determine the number of commercial fishing vessels  that are actively fishing. In addition to the Coast Guard and the National  Marine Fisheries Service, an agency, such as NIOSH\u2014that is involved in  commercial fishing vessel safety\u2014could benefit from information derived  from these ongoing efforts. Without such information, Congress and the  agencies will lack important data needed to accurately assess the factors  that contribute to commercial fishing vessel accidents, injuries, and  fatalities. Establishing a mechanism\u2014such as a working group\u2014to  coordinate efforts and collect reliable data on the number of active  vessels and key characteristics, such as vessel age and length, would  allow the agencies to do so in an efficient manner."], "subsections": []}]}, {"section_title": "While Data on the Costs of Classing Are Limited, Stakeholders Believe Classing Will Increase Ownership Costs", "paragraphs": ["We were able to obtain limited data on the costs of classification because  only a total of six classed vessels have been built and builders and  owners were reluctant to provide data on costs which they consider to be  proprietary. Classification society representatives, vessel owners, and  builders we interviewed agreed, however, that constructing and  maintaining classed commercial fishing vessels will increase ownership  costs, due, in part, to the fees charged by classification societies, the  requirement to use certified materials and equipment, and annual  maintenance surveys, among other costs. Despite the uncertainty as to  how much classification will increase total ownership costs, vessel  builders and owners stated that the potential costs associated with  classing have contributed to reduced orders for new vessels and other  changes."], "subsections": [{"section_title": "Extent to Which Classing Increases Design, Construction, and Maintenance Costs Is Uncertain", "paragraphs": ["All stakeholders we interviewed\u2014classification society representatives,  vessel owners, and builders\u2014stated that classing will increase ownership  costs. These stakeholders identified the following additional costs  associated with constructing a classed commercial fishing vessel: naval architect fees for vessel design; additional builder engineering costs associated with finalizing classed  classification society review of key equipment drawings and  certification of equipment manufacturing;  increased builder costs to construct vessel to classification society- approved design; additional supervision and testing during vessel construction; additional classification society design reviews and surveys, as  needed, during vessel design and construction; and  stability assessments and load line assignment.", "However, we were able to obtain only limited data on these costs as (1)  few vessels have been constructed and classed by the societies included  in our review and (2) the owners/operators and builders of these classed  vessels are reluctant to share the associated cost documentation,  considering it proprietary. Only six vessels have been constructed and  classed since July 2013, when expanded classification requirements took  effect. Two of these vessels\u2014one tender and one catcher\u2014were  classed because they were subject to the July 2013 expanded  classification requirements; the remaining four vessels were factory  processors, which have been required to meet classification society  standards since July 1990. All of the classed vessels constructed since  July 2013 are greater than 130 feet in length and are owned by  companies that own and operate multiple fishing vessels, with the  exception of the tender vessel which is 67 feet long and owned and  operated by a non-profit organization.", "Commercial Fishing Vessel  Vessel type: Trawler (catcher or  catcher/processor)  Fleet length: 40-500 feet or longer  Trawlers fish for pollock, cod, sole, rockfish,  shrimp, and other species by towing funnel- shaped nets behind them in which the catch is  trapped by the forward movement of the boat.  Depending on the desired catch, trawlers tow  the nets in very shallow waters up to a depth  of about 6,500 feet along the seafloor. Large,  offshore factory trawlers can also process  their catch on board. Freezer trawlers are  outfitted with a refrigerating plant and freezing  equipment.", "Two builders, located in the Gulf of Mexico and Pacific regions, provided  quotes on classification society fees and a construction bid; another  builder provided an estimate of the costs associated with designing and  constructing a classed vessel approximately 90 feet in length.  Collectively, this information indicates that the additional costs could  range from approximately $300,000 to $1.2 million above the total  construction cost of a vessel not built to these standards.", "In general, vessel builders, owners, naval architects, marine safety  experts, academics, and other experts we spoke with provided widely  varying estimates on the impact that classification may have on vessel  construction costs, though many suggested a range of 10 to 30 percent.  In contrast, representatives from one classification society stated that  shipbuilders who currently build other ships to classification requirements  have stated estimates of 2.5 to 5 percent in overall construction costs  would be needed to construct a classed fishing vessel. We could not,  however, independently assess the accuracy of these claims.", "With regard to classification society fees, classification society  representatives stated that the fees they charge for vessel design  approval and surveys conducted during the construction of a classed  commercial fishing vessel vary depending on the complexity of the  vessel\u2019s design, as well as the builder\u2019s level of expertise in constructing  classed vessels. These fees typically account for 1.0 to 1.5 percent of the  costs to design and construct a classed vessel. A builder on the West  Coast provided us a quote from one of the classification societies of  approximately $136,000 for design reviews and construction surveys for a  $2 million, 58-foot commercial fishing vessel, or about 7 percent of the  vessel\u2019s total construction costs. Another builder in the Gulf of Mexico  stated that constructing a 90-foot commercial fishing vessel generally  costs him approximately $2.3 million, but constructing the same vessel  with classification requirements would incur approximately $195,000 in  additional classification fees, about 8 percent of construction costs. A  vessel owner who owns and operates two catcher vessels off the coast of  Alaska and is currently constructing a 300-foot factory processing vessel  estimated that classification fees for vessel design and construction would  likely amount to $300,000\u2014approximately 0.4 percent\u2014of the vessel\u2019s  $70 million total purchase price.", "These fees included an initial review of the vessel\u2019s design and,  generally, the review of one set of drawing revisions. If a builder needs to  resubmit the vessel\u2019s design to the classification society for another  review, each submission could be subject to additional fees.", "Representatives from both ABS and DNV GL explained that the fees they  charge do not account for additional design and oversight services that  might be necessary during the construction process, especially if this is  the first time that the vessel builder has constructed a classed vessel.", "Vessel owners and builders told us that other costs associated with  constructing a classed commercial fishing vessel include the use of  certain materials, such as steel, and key equipment, such as generators  and the engine, which may be more costly to purchase from the  manufacturer since the items must be certified by the classification  society. As part of classing, surveyors from classification societies are  required to certify the fabrication and/or assembly of certain materials and  key equipment prior to installation on the vessel. For example, two  individuals\u2014a vessel owner and someone with years of experience  working in the commercial fishing industry\u2014provided documentation that  showed that two types of class certified equipment\u2014generators and  engines\u2014cost approximately 6 to 16 percent more than the same, non- certified equipment. DNV GL representatives estimated that, in total, the  class-certified materials and key equipment can cost an additional  $20,000-$30,000 more than the cost of non-certified equipment.", "Vessel owners we interviewed stated that they may incur additional costs  to maintain a classed commercial fishing vessel over the vessel\u2019s lifetime.  These costs include fees paid to classification society surveyors to  conduct annual surveys\u2014required as part of regular class maintenance\u2014 as well as periodic surveys\u2014more extensive surveys generally required  every 5 years\u2014on the vessels. Representatives from one classification  society estimated that, depending on size, age, and condition, the fees for  fishing vessel annual surveys can range between $1,500 and $5,000,  while the fees for periodic surveys can range between $6,000 and  $25,000. Classification society representatives stated that the high end of  the fees for periodic surveys are influenced by the fact that many owners  choose to perform major maintenance, upgrades, and modifications at the  same time, which increases the overall survey items and, therefore, the  cost. Owners we interviewed stated that in addition to these annual  survey fees, they are required to pay for the surveyor\u2019s travel costs as  well as any necessary repairs the surveyor identifies. Those vessel  owners we interviewed estimated that the annual maintenance costs for a  classed commercial fishing vessel\u2014including fees, travel costs, and  repairs\u2014could range from $28,000 to as much as $150,000. For  example, an invoice we received from one vessel owner totaled over  $70,000. More than one-third of the total cost was due to fees for  periodic, annual, and equipment surveys. The majority of the remaining  costs were associated with the purchase and installation of new  machinery and repairs made to the vessel, as well as travel expenses  paid to the classification society.", "Vessel owners we interviewed, or received correspondence from,  provided examples of potential challenges that arise when maintaining  classed vessels, such as annual surveys being scheduled at a time or  location that interferes with fishing operations; the unavailability of  classification surveyors at a convenient location; and the time to obtain  classed materials or equipment to be delivered before an emergency  repair can be completed. One owner noted that he once waited 2 weeks  and paid three times more to replace three square feet of classification  society-certified steel. However, ABS representatives stated that vessel  owners have a 6-month window to meet their annual survey requirement,  and stated that ABS generally has two surveyors working in Alaska at any  given time and the society is open to adding more surveyors in Alaska as  needed. Similarly, DNV GL representatives stated that to mitigate the cost  and time associated with surveyors\u2019 travel, the society has begun to use  networked or stand-alone electronic devices to record certain non-major  classing inspections.", "Several industry representatives noted that some of the additional costs  associated with constructing and maintaining classed vessels may be  partially offset by decreased insurance premium costs and improved  vessel resale value for vessel owners. Coast Guard officials we  interviewed similarly noted that classed vessels may command a higher  resale price. However, marine insurance underwriters we interviewed  stated that prior claim history\u2014not classification\u2014is the key factor that  influences insurance premiums for commercial fishing vessels. One of the  underwriters added that owners of classed commercial fishing vessels  might actually pay higher insurance premiums than owners of non- classed vessels because hull and machinery claims for classed vessels  would likely be more expensive to repair. With regard to whether a  classed commercial fishing vessel has a higher resale value, we spoke to  some vessel owners who stated that the maintenance costs associated  with owning a classed vessel would actually deter them from purchasing  an existing classed vessel."], "subsections": []}, {"section_title": "Commercial Fishing Stakeholders\u2019 Views on the Potential Impact of Classing", "paragraphs": ["Many of the stakeholders we spoke with told us that classing and its  associated costs have and will continue to change aspects of the  commercial fishing business, including profitability and construction of  new vessels. Several stakeholders stated that their ability to absorb the  additional costs due to classing is dependent on the relative health of the  fishing businesses involved. Vessel owners we interviewed in less  profitable regions and fisheries, such as the shrimp fishery in the Gulf of  Mexico and the groundfish fishery in the North Atlantic, believed that their  businesses will be adversely impacted by the increased construction  costs associated with classing. One vessel owner, whose small-scale  commercial fishing operation in the Gulf of Mexico employs approximately  40 individuals and operates 3 vessels, estimated that constructing a  vessel to meet classification society standards would increase overall  construction costs by 30 percent, an amount she believes that she cannot  absorb as shrimp prices are sensitive to the international market.", "While vessel owners in more profitable regions and fisheries believed that  their businesses could absorb the increased construction costs  associated with classing, one owner whose family has fishing operations  in 10 different fisheries, some of which are profitable and some that are  less so, noted that the addition of a newly constructed classed vessel to  his fleet\u2014which he estimated cost about 35 percent more due to classing  requirements\u2014was still a sound business decision on his part since the  vessel will operate in the more profitable North Pacific fishery. However,  he added that his family would not incur similar costs to construct a new  classed vessel to operate in the scallop industry, in which they also have  business operations.", "Another issue that arose in our discussions with stakeholders was that  the perception of the increased cost associated with constructing a  classed commercial fishing vessel\u2014regardless of what the actual cost  increase may be\u2014appears to be affecting vessel owners\u2019 decisions to  purchase new vessels. Among the 13 vessel builders we interviewed, 9  builders stated that classification requirements and their perceived costs  have contributed to a significant reduction in orders for new commercial  fishing vessels, regardless of vessel length. One builder noted that he  reduced the number of employees from nearly 100 to less than 50  workers and began constructing other vessels, such as tug boats, in  addition to commercial fishing vessels to keep his remaining employees  employed.", "One industry representative stated that owners, especially those with  smaller operations in less profitable fisheries, may find it cost prohibitive  to recapitalize their vessel or fleet. Similarly, vessel owners stated that  they will likely choose to continue operating their aging vessels or choose  to close their business in lieu of purchasing new classed vessels.", "Other vessel owners stated that they would either consider, or already  have chosen, to purchase and update an older commercial fishing vessel  instead of constructing a new classed vessel. For example, one vessel  owner we interviewed, whose family has fished commercially along the  Gulf of Mexico for 150 years, stated that the new classing requirements  for commercial fishing vessels have resulted in several businesses  rebuilding older vessels, where a new vessel is constructed around the  original keel of an older vessel that is not subject to classing  requirements. Another vessel owner we interviewed, whose family also  has a history in commercial fishing, told us that he and other members of  his family would like to build several new vessels to add to their already  sizable fleet, but have decided not to do so because of the perceived  costs associated with the classing process. Instead, this vessel owner  commented that some members of his family recently purchased two  wrecked commercial fishing vessels and intend to construct a new vessel  using the wrecked vessel\u2019s 40-year-old keel.", "Industry trade representatives also voiced concerns that when owners  choose to recapitalize their vessels, classing requirements could  encourage owners to purchase smaller vessels to avoid classification  requirements. For example, one builder we interviewed offers a design for  a 45 to 49 foot crab vessel, which, because of its size, would not be  subject to classification requirements. The builder explained that the  vessel would be shorter than other vessels operating in the Bering Sea  and could be less safe for the crew onboard in the event of an accident.  Further, naval architects we interviewed stated that they know of vessel  owners who have begun to seek new commercial fishing vessels less  than 50 feet in length."], "subsections": []}]}, {"section_title": "Classification Can Contribute Safety Benefits, but Other Factors and Measures Also Play a Significant Role", "paragraphs": ["Federal agency officials tasked with overseeing the commercial fishing  industry, as well as industry representatives, academics, builders, and  owners we interviewed, agreed that classing provides some benefits and  could contribute to overall vessel safety by providing independent and  ongoing oversight to ensure quality and seaworthiness during the design  and construction of the vessel, as well as through annual maintenance  surveys. At the same time, however, vessel owners we interviewed noted  that overall vessel safety can also be improved by instituting other safety  measures or design approaches. As shown in figure 6, classification  addresses vessel design, construction, and maintenance, but training,  safety and lifesaving equipment, environmental, and other factors also  contribute to commercial fishing vessel safety.", "As one industry trade representative explained, classing commercial  fishing vessels is another approach for improving industry safety by  ensuring key systems aboard the vessel are in good, working order,  thereby potentially breaking the chain of events leading to a major  catastrophe at sea, such as a vessel sinking. According to a  representative for a larger commercial fishing company, vessel owners  benefit from the oversight provided by classification society surveyors  during the construction process. Classification society surveyors provide  another set of eyes and the perspective of a third party. An owner of a  large commercial fishing business stated that vessel owners who do not  maintain their classed vessels, and thereby jeopardize the lives of their  crew, risk losing their vessel\u2019s classification certificate, which, in turn, will  prevent them from operating the vessel legally.", "Overall, commercial fishing industry representatives supported the  requirement that commercial fishing vessels with factory processors  onboard be classed because of the risks these vessel owners face with  such a large number of factory workers\u2014who are not mariners\u2014working  onboard. Most vessel owners that we interviewed or received written  documentation from, however, did not support classification for smaller  commercial fishing vessels\u2014especially those operated by individual  owners with small crews.", "To illustrate that different factors contribute to commercial fishing vessel  safety, we collected data on fishing vessel accident claims from two U.S.- based marine insurance underwriters that insure commercial fishing  vessels. While our findings are not generalizable to all insurance claims  made between 2013 and 2016, we found that protection and indemnity  claims, which cover liability for bodily injury and third-party damage\u2014 accounted for nearly two-thirds of insurance claims for these two  underwriting companies. Hull and material claims also comprised a  significant number of overall insurance claims over the period. These  claims can be made as a result of physical loss of or damage to the  vessel, including equipment, engines, and machinery. Figure 7 shows the  number and types of claims for 2013 through 2016 from two marine  underwriting companies we interviewed.", "One vessel owner we interviewed stressed the importance of safety  training so crew members are capable of using lifesaving equipment  when it is needed. She referred us to a Coast Guard analysis of fishing  vessel casualties occurring from 1992 to 2010 that found fatalities from  water exposure might have been prevented if personal floatation devices  or survival suits had been used. In its analysis, the Coast Guard found  that 32 percent of all fatalities between 1992 and 2010 resulted from crew  falling overboard, being pulled overboard by equipment, or diving from the  vessel.", "Other vessel owners who operate in the Gulf of Mexico stressed several  safety measures, such as:  requiring vessel crew members to undergo routine drug testing;  requiring vessel crew members to wear personal floatation devices  when working on deck;  requiring all commercial fishing vessels that use a winch to hoist catch  from the ocean to install either a guard or emergency shut-off  mechanism; and mandating skills-based training and testing of safety procedures for  each vessel crewmember, not just the individual in charge of the  vessel, as the law currently requires.", "Commercial fishing industry representatives and vessel owners we  interviewed also stated that stability assessments and load line  assignments\u2014which are required for fishing vessels built after July 1,  2013, that are 79 feet or longer\u2014may provide safety benefits comparable  to classification. A load line indicates the point where the waterline should  reach when a vessel is properly loaded. As part of a load-line certification,  a vessel\u2019s seaworthiness is assessed, which involves the completion of  stability documentation, providing the operator with instructions for safely  loading and operating the vessel. Load line requirements cover some of  the same items as classification rules, such as pre-construction review  and approval of plans by the assigning authority, weathertight and  watertight integrity, and periodic inspections to verify proper maintenance  and ensure that modifications to the vessel do not compromise  seaworthiness."], "subsections": []}, {"section_title": "Alternative-to-Class Approach Offers Benefits Relative to Classification, but Key Elements Remain Open to Interpretation", "paragraphs": ["The alternative-to-class approach provides some flexibility and potential  cost savings to vessel owners compared to classification, but we did not  identify a builder who has constructed a vessel using this approach. The  Coast Guard has not issued regulations or guidance to clarify how the  alternative-to-class approach will be implemented, which increases  uncertainty on how key steps in the process should be conducted.", "The Coast Guard Authorization Act of 2015 created an alternative-to- class approach for vessels at least 50 feet and not more than 79 feet in  length built after February 8, 2016. Under the alternative-to-class  approach, a commercial fishing vessel is designed to standards  equivalent to classification society standards. For example, the  alternative-to-class approach requires a stability assessment and an  assigned loading mark (or load line) certification that construction is in  accordance with design, and written stability and loading instructions that  are provided to the owner or operator to ensure a robust hull and  weathertight and watertight integrity. As such, the structural strength of  the vessel\u2019s hull, reliability and function of major systems\u2014including  propulsion and steering\u2014and watertight integrity of the vessel are  expected to be comparable to a classed vessel. However, the alternative- to-class approach provides some flexibility to builders and owners in how  to do so, as shown in figure 8.", "The alternative-to-class approach provides additional flexibilities to  builders and owners and potentially reduces compliance costs compared  to classing a new vessel. Examples of the flexibilities and potential  drawbacks the alternative-to-class approach offers include the following.", "It enables a marine surveyor of an organization accepted by the  Secretary of Homeland Security, rather than a classification society  representative, to verify that the vessel\u2019s construction meets design  requirements and to conduct inspections. Coast Guard officials told us  that such individuals need to be licensed by an organization, such as  the Society of Accredited Marine Surveyors or the National  Association of Marine Surveyors, to be deemed qualified by the Coast  Guard.", "It reduces inspection requirement from annually to at least twice every  5 years, and according to Coast Guard officials, the alternative-to- class approach does not impose requirements for disassembly and  inspection of propulsion machinery, generators, electrical systems,  pumps, and piping.", "It requires owners to maintain records to demonstrate compliance with  the alternative-to-class approach, which may be burdensome for  some vessel owners.", "However, our interviews with commercial fishing stakeholders and our  analysis raised several questions as to how certain aspects of the  alternative-to-class approach will be implemented. For example,  stakeholders raised a number of questions about state licensing  requirements for naval engineers and architects, including whether  licenses issued in one state would be recognized by other states. One  naval engineer in the North Pacific told us that he had to secure an  engineering license to do work for a client in another state, despite  holding the same license in his home state. Coast Guard officials did not  believe that differences in state licensing requirements should be an  issue. Coast Guard officials explained that although each state may have  different licensing requirements, one professional society sets the  technical standards for professional engineers and that these common  standards apply across all states. Despite this, it is not certain if individual  states will recognize other states\u2019 engineering licenses. Table 3 highlights  our analysis of the key issues raised by industry stakeholders during the  course of our review.", "Although Coast Guard officials believe that the legislation clearly outlined  the requirements for this approach, numerous open questions exist  regarding implementation of the alternative-to-class approach, as  depicted in table 3. The Coast Guard has not yet issued regulations or  guidance concerning the alternative-to-class approach. Coast Guard  officials noted they are still in the process of developing a final rule to  implement earlier legislation, including the Coast Guard Authorization Act  of 2010, as amended by the Coast Guard and Maritime Transportation  Act of 2012. At the time of our review, Coast Guard officials  acknowledged they were uncertain when this rule would be finalized.  These officials stated that any effort to promulgate rules for the 2016  alternative-to-class approach will not start until after the final rule  regarding the 2010 and 2012 acts is issued. However, Coast Guard  officials noted they were considering developing a policy letter to provide  some additional guidance on implementing the alternative-to-class  approach, but provided no timeframe for doing so.", "The Coast Guard is responsible for implementing the alternative-to-class  statute, but questions remain regarding how this implementation will be  achieved. While the 2016 legislation did not require the Coast Guard to  promulgate guidance or regulations for the alternative-to-class approach,  regulations are one of the primary tools federal agencies use to  implement law and policy. The general process by which federal agencies  develop and issue regulations allows the public an opportunity to provide  information to agencies on the potential effects of a rule or to suggest  alternatives for agencies to consider prior to publication of the final rule.  Federal internal control standards recommend that agency management  communicate with both internal and external stakeholders the necessary  quality information, such as regulations describing procedures to be  followed to comply with the alternative-to-class legislation, to achieve  objectives. Without specific written procedures\u2014either in the form of  regulations or guidance\u2014the Coast Guard cannot ensure consistent  implementation of the alternative-to-class approach."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Since the late 1980s, Congress had undertaken efforts to improve  commercial fishing vessel safety, including establishing classification  requirements for all three types of commercial fishing vessels\u2014catchers,  tenders, and processors\u2014and, most recently, establishing an alternative- to-class approach as a less-prescriptive option for smaller vessels.  Accurate data collected by the Coast Guard during incident  investigations\u2014such as the fishery in which the vessels operate\u2014 is  necessary to understand which fishing vessels are involved in accidents.  In addition, reliable data on the total number of commercial fishing  vessels that are actively fishing and information on key vessel  characteristics\u2014including vessel age, length, and its fishery\u2014is  necessary to calculate rates and establish trend information for  commercial fishing vessels involved in accidents. Without such  information, Congress, the Coast Guard, and other federal agencies\u2014 such as NIOSH\u2014will not be able to assess the factors that contribute to  commercial fishing vessel accidents, injuries, and fatalities.", "While the costs of classification cannot be reliably measured, industry  stakeholders perceive the potential costs associated with classing\u2014 regardless of what the actual costs are\u2014as impacting the commercial  fishing industry, including reduced orders for new vessels, and the  continued operation of aging vessels, and the loss of income for  commercial fishers. The alternative-to-class approach provides greater  flexibility and potential cost savings to owners of smaller commercial  fishing vessels. While not required to do so, the Coast Guard has not  issued guidance or promulgated regulations to clarify aspects of the  alternative-to-class approach. However, the absence of timely regulations  or guidance has contributed to confusion among the commercial fishing  industry and increases the risk of potentially inconsistent implementation  of the alternative-to-class approach."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of six recommendations, including four to the  Commandant of the Coast Guard, one to the Director of NIOSH, and one  to the Assistant Administrator for Fisheries for the National Marine  Fisheries Service:", "The Coast Guard should ensure that the data it collects during  commercial fishing vessel incident investigations, including the fishery  in which the commercial fishing vessel is involved, is accurately  captured. (Recommendation 1)", "The Coast Guard should form a working group with NIOSH and the  National Marine Fisheries Service to determine an efficient means to  establish a reliable estimate of the population of commercial fishing  vessels actively fishing, landing, and selling their catch; the fishery in  which a vessel operates; and key vessel characteristics including, but  not limited to, vessel age and length. (Recommendation 2)", "Once reliable data are available, the Coast Guard, or another agency  identified by the working group, should assess the rates of  commercial fishing vessel accidents, injuries, and fatalities to  determine whether certain factors\u2014including vessel length and region  of operation, among other things\u2014affect these rates.  (Recommendation 3)", "The Coast Guard should issue regulations or guidance to clarify and  implement the alternative-to-class approach. (Recommendation 4)", "NIOSH should form a working group with the Coast Guard and the  National Marine Fisheries Service to determine an efficient means to  establish a reliable estimate of the population of commercial fishing  vessels actively fishing, landing, and selling their catch; the fishery in  which a vessel operates; and key vessel characteristics including, but  not limited to, vessel age and length. (Recommendation 5)", "The National Marine Fisheries Service should form a working group  with the Coast Guard and NIOSH to determine an efficient means to  establish a reliable estimate of the population of commercial fishing  vessels actively fishing, landing, and selling their catch; the fishery in  which a vessel operates; and key vessel characteristics including, but  not limited to, vessel age and length. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Response", "paragraphs": ["We provided a draft of this product to the Departments of Homeland  Security; Health and Human Services; and Commerce to respond on  behalf of the Coast Guard, NIOSH, and NOAA, respectively for review  and comment. The Departments of Health and Human Services and  Commerce concurred with the recommendation directed to their  components. The Department of Homeland Security concurred with three  of the four recommendations. The departments\u2019 written comments are  reprinted in appendixes III-V, respectively, and summarized below. We  also sent a draft of this product to NTSB for their review and comment.  The departments and NTSB also provided technical comments, which we  incorporated as appropriate.", "The Department of Homeland Security concurred with our  recommendation to ensure that the data the Coast Guard collects during  commercial fishing incident investigations, including the fishery in which  the vessel is involved, is accurately captured. It noted that the Coast  Guard will reemphasize the need to collect fishery data as part of its  training programs and qualification requirements of its investigators.  Additionally, it stated that the Coast Guard will consider adding additional  data fields within its Marine Information for Safety and Law Enforcement  database to improve the accuracy of the data collected.", "The Departments of Homeland Security, Health and Human Services,  and Commerce concurred with our recommendations directed to them to  form a working group to establish a reliable estimate of the population of  commercial fishing vessels, the fishery in which the vessel operates, and  key vessel characteristics. The Department of Homeland Security noted  that neither the Coast Guard nor the National Marine Fisheries Service  have access to data for fisheries within economic zones managed by the  states. As such, the Department of Homeland Security recommended that  the (1) working group be established at the regional level and (2) regional  fisheries management councils coordinate with individual states to collect  needed data and, in turn, provide that data to the Coast Guard and the  National Marine Fisheries Service. Additionally, the Department of Health  and Human Services stated that NIOSH will assist in identifying ways to  establish comprehensive vessel counts, which could include engaging  state agencies.", "The agencies\u2019 comments reflect the complexity of and need to capture  reliable data of the size and characteristics of the commercial fishing  vessel fleet. Determining the working group\u2019s membership, structure,  roles and responsibilities is an essential first step to doing so. Regardless  of the working group\u2019s structure, it will be important to ensure that the  data collected is done in a manner that allows it to be aggregated and  analyzed in various ways, including at the national level.", "The Department of Homeland Security did not concur with our  recommendation that the Coast Guard assess the rates of commercial  fishing vessel accidents, injuries, and fatalities to determine whether  certain factors\u2014such as vessel length and region of operation\u2014affect  these rates. The Coast Guard stated that it had limited resources and  capabilities to conduct such assessments and noted that NIOSH studies  marine incidents to identify causal factors in fishing vessel casualties,  which could more effectively determine casualty rates.", "We agree that NIOSH has, and can, play an important role in identifying  commercial fishing fatalities and regional risk factors, but such  assessments typically focus on fatalities in specific fisheries, and  generally did not consider such factors as vessel length or whether the  vessel has been classed. Further, the Coast Guard is the agency  responsible for developing and enforcing regulations related to  commercial fishing vessel safety, including classification requirements  and the alternative-to-class approach. As such, the Coast Guard\u2019s office  of Investigations and Casualty Analysis leads the agency\u2019s investigation  program to promote safety, protect the environment, and prevent future  accidents. As part of its efforts, this office has previously analyzed data  on commercial fishing vessel accidents. While we continue to believe that  our recommendation is appropriately targeted to the Coast Guard, we  acknowledge that the working group could determine that another  appropriate agency other than the Coast Guard is better positioned to  conduct this analysis. As such, we have revised our recommendation to  provide more flexibility to the agencies in determining how best to meet  the intent of our recommendation.", "The Department of Homeland Security concurred with our  recommendation that the Coast Guard issue regulations or guidance to  clarify and implement the alternative-to-class approach. It noted that the  Coast Guard is in the process of developing a more formal policy on best  practices and expectations of the industry and implementing guidelines  consistent with the intent of the legislation, which it hopes to complete by  December 31, 2018.", "We also provided a draft of this report to the three classification societies  we included in our review\u2014ABS, DNV GL, and RINA\u2014for their review  and comment. ABS and DNV GL provided technical comments, which we  incorporated as appropriate.", "We are sending copies of the report to the appropriate congressional  committees. We are also sending a copy to the Secretary of Homeland  Security, the Secretary of Health and Human Services, the Chairman of  the National Transportation Safety Board, the Secretary of Commerce,  and other interested parties. In addition, this report is available at no  charge on the GAO website at http://www.gao.gov.", "Should you or your staff have questions, please contact me at (202) 512- 4841 or dinapolit@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Selected Countries Have Varying Requirements for Classing Commercial Fishing Vessels", "paragraphs": ["Other selected countries that, like the United States, are members of the  Organization for Economic Cooperation and Development and have  sizeable commercial fishing industries have established requirements for  designing, constructing, and\u2014in some instances\u2014maintaining  commercial fishing vessels to classification society standards, as  described in table 4."], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report evaluates the costs and benefits of classing commercial  fishing vessels. Specifically, we assessed (1) what is known about the  numbers and rates of commercial fishing vessel accidents, injuries, and  fatalities; (2) what is known about the costs to construct and maintain  classed commercial fishing vessels built since July 2013 and the effects  of classing on vessel builders and owners; (3) the benefits associated  with classing commercial fishing vessels; and (4) how the alternative-to- class approach compares with building and maintaining commercial  fishing vessels to classification society standards.", "To assess what is known about the numbers of commercial fishing vessel  accidents, injuries, and fatalities, we collected and analyzed data from the  Coast Guard\u2019s Marine Information for Safety and Law Enforcement  database on commercial fishing vessel investigations for calendar years  2006 through 2015 to identify the number of vessel accidents and/or  injuries or fatalities. We also collected relevant Coast Guard data on  enforcement actions and boardings. To assess the reliability of the data,  we reviewed related documentation, spoke with knowledgeable agency  officials, and performed electronic testing for obvious errors in accuracy  and completeness. Using latitudinal and longitudinal information collected  during the Coast Guard\u2019s investigation of each commercial fishing vessel  accident, we determined where the accident occurred and limited our  analysis to those accidents that involved U.S. vessels and occurred  between 3 nautical miles and 200 nautical miles from shore, an area that  is generally referred to as U.S. federal waters. In the instances of Texas,  Puerto Rico, and the Gulf coast of Florida, we used the area between 9  nautical miles and 200 nautical miles from shore, which is consistent with  federal waters for those states. We found errors in the longitudinal and  latitudinal data and could not match commercial fishing vessel accidents  to an accurate location for 243 observations; we excluded these  observations from our analysis. Overall, we determined that the data were  sufficiently reliable for reporting the overall number of accidents, injuries,  and fatalities over this time period.", "We attempted to separate the data by fishery management council region  and interstate marine fisheries commission\u2014regional partners of the  National Oceanic and Atmospheric Administration (NOAA) that ensure  sustainable fishery management throughout the United States\u2014using the  longitudinal and latitudinal boundaries of each region and commission.  However, we found that the geographic location in which each accident  occurred is not sufficiently reliable for determining the region or fishery in  which a commercial fishing vessel operates. For example, the  geographic location of an accident does not necessarily signify that the  commercial fishing vessel was engaged in one of the fisheries managed  by the regional council. In addition, according to National Marine  Fisheries Service officials, the three interstate commissions work almost  entirely on issues pertaining to shared fishery resources within the  boundaries of their respective states and generally do not manage fishing  activity in federal waters, so we could not reasonably assign an accident  in federal waters to a region managed by one of these interstate  commissions.", "We also collected and analyzed data from the National Institute for  Occupational Safety and Health\u2019s (NIOSH) Commercial Fishing Incident  Database on commercial fishing fatalities for calendar years 2006 through  2015 to identify causes of commercial fishing vessel fatalities over this  period. To assess the reliability of the data, we reviewed related  documentation, spoke with knowledgeable NIOSH officials, and  performed electronic testing for obvious errors in accuracy and  completeness. We determined that the data were sufficiently reliable for  the purposes of reporting the number of fatalities over time. We also  examined reports from the National Transportation Safety Board (NTSB)  investigations of commercial fishing vessel accidents for calendar years  2006 through 2015, which include some of the most serious accidents, to  describe what NTSB identified as the probable causes of these accidents.", "To identify rates of commercial fishing vessel accidents over time, we  requested data from the Coast Guard on the population of commercial  fishing vessels that were actively catching, landing, and selling their  catch. We collected Coast Guard data on the number of commercial  fishing vessels from 2006 to 2015 with a valid certificate of  documentation, which indicates that the vessel is registered with the  Coast Guard and is greater than 5 net tons. We also contacted NIOSH  and NOAA to discuss the ways, if any, that these agencies have  estimated the size of the active commercial fishing vessel fleet for their  studies or programs. After contacting the Coast Guard, NIOSH, and  NOAA for the purpose of collecting data on the total number of active  U.S. commercial fishing vessels, we determined that we could not identify  sufficiently reliable data about the size of the active U.S. commercial  fishing vessel fleet for 2006 through 2015 for the purposes of our  analysis. These data reliability problems precluded us from calculating  rates of accidents, injuries, or fatalities over this period.", "We interviewed officials from the Coast Guard, NIOSH, and NSTB  regarding the investigations and analyses they have conducted on  commercial fishing vessel accidents and recommendations they have  made to improve safety on board these vessels. We also interviewed  officials from NOAA\u2019s National Marine Fisheries Service to discuss the  roles and responsibilities of the regional fishery management councils  and interstate marine fisheries commissions.", "To assess what is known about the costs to construct and maintain  classed commercial fishing vessels built since July 2013 and the effects  of classing on vessel builders and owners, we collected data on the costs  associated with constructing and maintaining classed commercial fishing  vessels from vessel builders and owners willing to share this information.  Specifically, we analyzed (1) classification society design review fees  quoted to two vessel builders located in the Gulf of Mexico and Pacific  regions and other documentation these builders provided, including a  construction bid; (2) another vessel builder\u2019s cost estimate for  constructing a 90 foot long classed commercial fishing vessel to be used  in the Gulf of Mexico shrimp industry; and (3) documentation provided by  one vessel owner and another individual with extensive experience in the  commercial fishing industry including the cost of various engines and  generators\u2014class and non-class certified\u2014that could be installed during  the construction process. We compared the quotes for these generators  and engines to determine the cost differential between class and non- class certified equipment. The findings based on these data are not  generalizable, but they do provide insight into the additional costs  associated with constructing a classed commercial fishing vessel.", "In addition, we conducted interviews and discussion sessions with  stakeholders in the commercial fishing industry to obtain the perspectives  of vessel owners and/or operators, vessel builders, and commercial  fishing organizations. Specifically, we interviewed 13 vessel builders, and  36 vessel owners and/or operators from across the United States,  including both those with large and small businesses. We also  interviewed representatives from 4 commercial fishing trade organizations  that represent fisheries in Alaska and the Bering Sea, the Gulf of Mexico,  the Pacific Ocean, and the Mid and North Atlantic Ocean.", "To ensure we captured many different perspectives, we held three  discussion sessions with stakeholders in the commercial fishing industry,  inviting interested parties to attend, including vessel owners and builders;  trade organization representatives; and naval architects, at locations  across the country, including Garden Grove, California; New Orleans,  Louisiana; and Seattle, Washington. In total, 39 individuals involved in the  commercial fishing industry attended one or more of these discussion  sessions. From the testimonial information we collected through these  interviews and discussion sessions, we identified common themes,  including the impact of classing on vessel builders and owners. We also  interviewed representatives from the three predominant classification  societies in the United States\u2014American Bureau of Shipping (ABS), Det  Norske Veritas Germanischer Lloyd (DNV GL), and RINA to discuss fees  they charge as part of the classification process.  We interviewed three  marine underwriters who insure commercial fishing vessels off the coast  of the Gulf of Mexico, Pacific Ocean, and the Atlantic Ocean to discuss  how classification affects insurance premiums.", "To assess the benefits associated with classing commercial fishing  vessels, we obtained the perspectives of vessel owners and/or operators,  vessel builders, and commercial fishing trade organizations, and  classification societies during the interviews and discussion sessions  described above. The information obtained from interviews and  discussion sessions cannot be generalized to all vessel builders, owners,  or operators; however, the information provides important insights on the  experiences of these groups. We also spoke with representatives from  ABS, DNV GL, and RINA, as well as marine safety experts, naval  architects, academics who study commercial fishing vessel safety, and  marine underwriters in fishing industries off the coast of the Gulf of  Mexico, the Pacific Ocean, and the Atlantic Ocean. From these interviews  and discussion sessions, we identified common themes.", "We also reviewed Coast Guard and NIOSH studies related to improving  commercial fishing vessel safety and the benefits each found with respect  to classing commercial fishing vessels or improved accident outcomes.  We collected data on the number of insurance claims submitted by  commercial fishing vessel owners from 2013 through 2016 to two of the  three marine underwriting companies we interviewed\u2014who were willing  to share this information\u2014to determine the number of hull and machinery  claims and the number of protection and indemnity claims that these  companies processed over the period. The findings based on these data  are not generalizable, but they illustrate the types of insurance claims  made by commercial fishing vessel owners.", "To evaluate how the alternative-to-class approach compares with building  and maintaining commercial fishing vessels to classification society  standards, we collected and reviewed relevant statutes, documentation of  Coast Guard rulemaking efforts, regulations, policies and guidance, as  well as classification society rules and standards. We compared the  requirements of the alternative-to-class approach with the steps  associated with classification to determine the similarities of both  approaches. We interviewed cognizant officials from the Coast Guard to  discuss the current policies and regulations in place to address  commercial fishing vessels and how an alternative-to-class approach will  be implemented. We also interviewed representatives from classification  societies\u2014including DNV GL, ABS, and RINA\u2014and commercial fishing  vessel owners and operators, naval architects, builders and marine  underwriters to discuss both approaches. We also collected information  on commercial fishing vessel classification requirements from a non- generalizable sample of comparison countries that, like the United States,  are members of the Organization for Economic Cooperation and  Development and have sizeable fishing industries. Specifically, we  selected Canada, Denmark, Spain, and the United Kingdom, represented  among countries with the largest fishing harvests over 2010-2014,  according to country data reported by the United Nations\u2019 Food and  Agriculture Organization. We collected and reviewed documentation of  relevant requirements for the United States and each selected country  and discussed the requirements with officials from the selected countries.  We present this analysis in appendix I.", "We conducted this performance audit from June 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Diana Moldafsky, Assistant Director;  Laura Jezewski; Pedro Almoguera; Deanna Burns; Lorraine Ettaro;  Danielle Giese; Laura Greifner; Kristine Hassinger; Ramzi Nemo; LeAnna  Parkey; Erin Stockdale; Robin Wilson; and Ellen Wolfe made key  contributions to this report."], "subsections": []}]}], "fastfact": ["To improve safety in commercial fishing, many boats are required to be built and maintained under rules set by organizations that certify them in a process called \"classing.\" Another certification process, called \"alternative-to-class,\" was introduced in 2016.", "We examined costs and effectiveness of classing. Stakeholders agreed that classing increases costs, but there is limited data to quantify this or its effectiveness. They also said they were unclear about implementing the alternative approach.", "We recommended that the Coast Guard, with others, gather reliable data and clarify the alternative approach."]}
{"id": "GAO-18-143", "url": "https://www.gao.gov/products/GAO-18-143", "title": "Disaster Recovery: Additional Actions Would Improve Data Quality and Timeliness of FEMA's Public Assistance Appeals Processing", "published_date": "2017-12-15T00:00:00", "released_date": "2018-01-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In both 2016 and 2017, 15 separate U.S. disasters resulted in losses exceeding $1 billion each. FEMA provides PA grants to state and local governments to help communities recover from such disasters. If applicants disagree with FEMA's decision on their PA grant application, they have two chances to appeal: a first-level appeal to be decided by the relevant FEMA regional office and, if denied, a second-level appeal to be decided within FEMA's Recovery Directorate. Each is subject to a 90-day statutory processing timeframe.", "GAO was asked to review FEMA's appeals process. This report examines: (1) the extent to which FEMA ensures the quality of its appeals data and what these data show about PA appeals inventory and timeliness; (2) what steps FEMA has taken to improve its management of the appeals process and what challenges, if any, remain; and (3) the extent to which FEMA developed goals and measures to assess program performance. GAO analyzed FEMA policies, procedures, and data on appeals and interviewed officials from headquarters and from regional offices with the highest number of pending appeals. GAO also spoke to state officials from the two states within each of the three regions with the highest number of pending appeals."]}, {"section_title": "What GAO Found", "paragraphs": ["Weaknesses in the quality of Federal Emergency Management Agency's (FEMA) Public Assistance (PA) appeals data limit its ability to oversee the appeals process. For example, FEMA's data are inaccurate and incomplete because regional offices do not consistently track first-level appeals and FEMA does not have processes to ensure data quality. When GAO discussed these weaknesses with FEMA officials, they acknowledged them and provided GAO with corrected data for January 2014 through July 2017. GAO's analyses of the corrected data show fluctuations in the appeal inventory from year to year depending on the number of disasters declared and delays in processing. For example, as shown in the figure, only 9 percent of first-level and 11 percent of second-level appeals were processed within the 90-day statutory timeframe.", "FEMA has taken steps to improve its management of the appeals process\u2014including issues that GAO and the Department of Homeland Security's Office of Inspector General identified in 2008 and 2011. For example, FEMA increased its appeal staffing levels and developed standard operating procedures. Despite these efforts, FEMA continued to face a number of workforce challenges that contributed to processing delays, such as staff vacancies, staff turnover, and delays in training. FEMA has not developed a workforce staffing plan to identify hiring, training, and retention needs across its headquarters and regional offices, though FEMA officials acknowledge the potential benefits of having such a plan and stated that they are focused on filling vacancies. In the absence of a workforce plan, FEMA will continue to experience workforce challenges that could further contribute to delays in processing appeals.", "FEMA has not established goals and measures for assessing first-level appeals processing performance, but has done so for second-level appeals. FEMA views establishing these first-level goals and measures as the responsibility of its regional offices. Without goals and measures, FEMA is limited in its ability to assess the efficiency and effectiveness of its overall appeals process and identify and address weaknesses that may lead to delays in making appeal decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that FEMA implement a consistent approach for tracking appeals and ensuring data quality, develop a workforce plan, and develop measurable goals for processing first-level appeals. FEMA concurred with all four recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In both 2016 and 2017, 15 separate U.S. disasters resulted in losses  exceeding $1 billion each, and 2017 has tied the record pace for  frequency of billion-dollar disasters occurring in the calendar year. For the  communities that have been affected by these disasters, critical aspects  of response and recovery, such as removing debris, and rebuilding the  infrastructure of state and local schools, roads, and utilities, may take  years. The damage from such disasters points to the strains on state and  local resources in both response and recovery, especially in the event of  back-to-back catastrophic disasters, such as those witnessed during the  2017 hurricane season.", "Each year, the federal government obligates billions of dollars through  programs and activities that provide assistance to state, local, territorial,  and tribal governments; individuals; and certain nonprofit organizations  that have suffered injury or damages from major disasters or emergency  incidents, such as hurricanes, tornados, and fires. We recently reported  that, from fiscal years 2005 through 2014, the federal government  obligated at least $277.6 billion in disaster assistance through a range of  programs. One such program, Public Assistance (PA), provides grants to  state, local, territorial, and tribal governments and certain nonprofit  organizations following a disaster. Administered through the Federal  Emergency Management Agency (FEMA), a component of the  Department of Homeland Security (DHS), PA provides financial  assistance for debris removal; emergency protective measures; and the  repair, replacement, or restoration of disaster-damaged, publicly owned  facilities, and the facilities of certain private nonprofit organizations. From fiscal years 2009 through 2016, FEMA obligated more than $36 billion in  grants for such projects.", "As in the case of many federal grant programs, FEMA provides PA funds  to a state recipient which, in turn, passes these funds along to a local  entity, based on an application for assistance. Applicants who request  disaster assistance through the PA program are entitled to appeal any  decision regarding how FEMA determined their eligibility for PA grant  funds, including obligated amounts of PA funding. FEMA can also  deobligate PA funding when it finds, for example, that ineligible work was  performed, incurred costs were later deemed unreasonable, or improper  procurement methods were used. Applicants can also appeal decisions  resulting from FEMA audits of PA projects, even after a project has been  completed and closed as long as the appeal is filed in a timely manner.", "To appeal a decision, applicants are afforded two opportunities: (1) a first- level appeal to the relevant FEMA regional office to be decided by the  Regional Administrator and (2) a second-level appeal to be decided at  FEMA headquarters by the Assistant Administrator for the Recovery  Directorate or the PA Division Director through a delegation of authority.  FEMA regulations implement the statutory time frames for applicants to  file an appeal, for the state to transmit the appeal to FEMA, and for FEMA  to respond to the appeal.", "We and the DHS Office of the Inspector General (OIG) have identified a  number of issues related to FEMA\u2019s PA program, including its PA appeals  process. For example, in 2008, as part of our review of FEMA\u2019s  administration of the PA program, we found that, following Hurricanes  Katrina and Rita, FEMA often did not make decisions on applicant  appeals within statutorily required time frames. In 2011, the DHS OIG  also identified areas for improvement in the PA appeals process,  including the timeliness of processing an appeal and communicating with  applicants about the status of their appeals. In 2013, FEMA stood up the  Public Assistance Appeals Branch (PAAB) within the Office of the  Recovery Directorate in an effort to respond to these concerns, adding an  auditing component to the Branch in 2014.", "You asked us to review aspects of FEMA\u2019s management of the PA  appeals process. This review examines: (1) the extent to which FEMA  ensures quality in its data on appeals and what FEMA data show about  its appeals inventory and timeliness for appeals decisions; (2) what steps  FEMA has taken to improve its management of the appeals process and  what challenges, if any, remain; and (3) the extent to which FEMA has  developed goals and measures to assess the PA appeal program\u2019s  performance.", "To address the first objective, we obtained and analyzed data from FEMA  on all first- and second-level appeals that the agency received between  January 2014 and July 2017. We focused on this time frame because it  contained the most complete and available data at the time of our review.  We identified various discrepancies in the first-level appeal data, which  we discussed with knowledgeable FEMA staff and present later in this  report. In response to our discussions, FEMA provided us with corrected  data to address the identified discrepancies. After obtaining the corrected  data and making adjustments to our analysis based on our discussions  with FEMA officials, we determined that the appeals data from FEMA  were sufficiently reliable to provide information on PA appeals, including  appeals inventories, outcomes, amounts in dispute, and processing times  that we present in this report. We also obtained and analyzed FEMA  policies and procedures related to tracking appeals data, including those  related to regional offices, and evaluated them using Standards for  Internal Control in the Federal Government.", "To address the first and second objectives, we also administered  semistructured interviews to officials from 3 of FEMA\u2019s 10 regional offices  (Regions II, IV, and VI) with the highest number of first- and second-level  pending appeals. We asked these officials about their efforts to process  and track appeals, what improvements had been made regarding how PA  appeals are processed, as well as any challenges they have faced in  processing PA appeals since 2013.To select these offices, we obtained  data from FEMA on first- and second-level appeals that were pending a  decision, as of October 31, 2016. Collectively, appeals from these 3  regional offices represented 69 percent of all pending first-and second- level appeals FEMA had received as of October 31, 2016. We focused on  this time frame because it contained the most recent data for our  selection of FEMA regional offices at the time we began our review. To  obtain additional perspective on what, if any, challenges remain in  FEMA\u2019s management of the appeals process, we also interviewed state  emergency management officials in six states (two states in each of the  corresponding 3 FEMA regional offices.) (See figure 1.)", "To additionally address the second objective, we reviewed FEMA  documentation, such as standard operating procedures (SOP) and  policies, directives, internal staffing requests, appeals analyst position  descriptions, and other internal memoranda. We used these sources to  identify what steps FEMA had taken to improve its management of the  appeals process since 2013. We also used this information to supplement  our understanding of the challenges FEMA, including its regional officials,  raised during our interviews discussed above.", "To address the third objective, we obtained FEMA internal reports\u2014 including briefs and newsletters\u2014and performance plans to identify goals  and measures FEMA had developed to assess the appeals program. We  assessed that information against federal internal control standards and  leading practices we have identified in our prior work for managing for  results to determine the extent to which FEMA had developed goals and  measures to assess program performance.", "For all three objectives, we reviewed relevant legislation and interviewed  officials in PAAB and FEMA\u2019s Recovery Directorate. See appendix I for a  more detailed description of our scope and methodology.", "We conducted this performance audit from July 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FEMA\u2019s Public Assistance Process", "paragraphs": ["The Robert T. Stafford Disaster Relief and Emergency Assistance Act  (Stafford Act), as amended, defines FEMA\u2019s role during disaster response  and recovery. One of the principal programs that FEMA operates to  fulfill its role is the PA program. PA is a complex and multistep grant  program administered through a partnership between FEMA and states,  which pass these funds along to eligible local grant applicants. Thus, PA  entails an extensive paperwork and review process between FEMA and  the state based on specific eligibility rules that outline the types of  damage that can be reimbursed by the federal government and steps that  federal, state, local, territorial, and tribal governments as well as certain  nonprofit organizations must take in order to document eligibility. The  complexity of the process led FEMA to re-engineer the PA program,  which FEMA has referred to as its \u201cnew delivery model.\u201d FEMA began  testing the new delivery model at select disaster locations in 2015, in  preparation for implementing it nationwide for all new disasters. On  September 12, 2017, FEMA announced that the new delivery model  would be used in all future disasters unless determined infeasible in a  particular instance.", "The process begins after FEMA determines that the applicant meets  eligibility requirements. FEMA then works with the state and the applicant  to develop a project worksheet describing the scope of work and  estimated cost. Once FEMA and the applicant agree on the damage  assessment, scope of work, and estimated costs, the PA grant obligation  is determined. After FEMA approves a project, funds are obligated\u2014that  is, they are made available\u2014to the state recipient, which, in turn, passes  the funds along to applicants.", "Applicants may appeal project decisions if they disagree with FEMA\u2019s  decisions on project eligibility, scope of damage, or cost estimates.  Appealable decisions can occur at various times during the PA grant  process, including during project closeout as long as they meet applicable  time limits."], "subsections": []}, {"section_title": "FEMA\u2019s PA Appeals Process", "paragraphs": ["Figure 2 summarizes the first- and second-level appeals process under  FEMA\u2019s PA program. The first-level appeals process begins after FEMA  makes its determination on a project for PA grant assistance. Within 60  days of receiving FEMA\u2019s initial determination, the applicant must file an  appeal through the state to the relevant FEMA regional office.", "The state must forward the appeal and a written recommendation to the  relevant FEMA regional office within 60 days. In reviewing the first-level  appeal before forwarding it to FEMA, the state has discretion to support  or oppose all or part of the applicant\u2019s position in the appeal.", "Under the Stafford Act, the FEMA regional office shall render a decision  within 90 days from the date it received the first-level appeal from the  state. The PA appeals process can take longer if regional officials issue  a request for information (RFI) to the applicant or request technical advice  from subject-matter experts. According to a senior PAAB official, a  regional office may issue an RFI or seek technical advice when an  applicant\u2019s appeal is incomplete, lacks referenced documentation, or  raises additional eligibility concerns. The regional office may issue  multiple RFIs prior to rendering a final decision on an appeal. Within 90  days following the receipt of the requested additional information or  following expiration of the period for providing the information, FEMA is to  notify the state in writing of the disposition of the appeal.", "Regional Administrators are responsible for authorizing a final decision on  a first-level appeal. A decision may result in an appeal being granted,  partially granted, or denied. An appeal is considered granted when FEMA  has approved the relief requested by the applicant as part of the appeal.  An appeal is considered partially granted when FEMA has approved a  portion of the relief requested by the applicant. An appeal is considered  denied when FEMA has decided not to approve the relief requested by  the applicant. If the regional office is considering denying or partially  granting a first appeal, it must issue an RFI to provide applicants with a  final opportunity to supplement the administrative record (i.e., the  documents and materials considered in processing a first-level appeal),  which closes upon issuing a first-level appeal decision. According to a  senior PAAB official, this process adds additional time to first-level appeal  processing, but ensures that FEMA has considered all relevant and  applicable documentation. The applicant may file a second-level appeal  through the state within 60 days of receiving a first-level appeal decision.  The second-level appeal must explain why the applicant believes the  original determination is inconsistent with law or policy and the monetary  amount in dispute. The state then has 60 days to provide a written  recommendation to FEMA. In reviewing the second-level appeal, just as  with the first-level appeal, the state has discretion to support or oppose all  or part of the applicant\u2019s position in the appeal.", "The FEMA Assistant Administrator for Recovery or the PA Division  Director through a delegation of authority shall render a decision within 90  days of receipt of the second-level appeal from the state. All second-level  appeal decisions are posted to FEMA\u2019s website, so applicants can review  the previous decisions. As is the case with first-level appeals, the PA  appeals process can take longer if PAAB officials request additional  information or technical advice on an appeal. These requests must also  include a date by which the information must be provided. According to a  senior PAAB official, RFIs are seldom issued for second-level appeals  because the administrative record is closed after a decision is rendered  on a first-level appeal. Similarly, this official told us that technical advice is  rarely sought for second-level appeals because such issues are typically  explored during the first-level appeal process. Within 90 days following  the receipt of the requested additional information or following expiration  of the period for providing the information, FEMA is to notify the state in  writing of the disposition of the appeal. FEMA\u2019s response to a second- level appeal is the last and final agency decision in the appeals process."], "subsections": []}, {"section_title": "Organization of FEMA\u2019s PA Appeals Program", "paragraphs": ["Located within the Recovery Directorate, PAAB maintains overall  responsibility for administering and overseeing FEMA\u2019s PA appeals  program. Among other things, PAAB is responsible for ensuring that all  appeal decisions are issued within regulatory timelines by developing and  maintaining SOPs; arranging for supplemental staff support as needed;  providing regular updates for both first- and second-level appeal  decisions through a range of communications; and providing training to  certify PA program staff on appeals processing.", "PA program appeals staff in each of FEMA\u2019s 10 regional offices are  responsible for processing first-level appeals, while PAAB staff in FEMA\u2019s  Headquarters office are responsible for processing second-level appeals.  Accordingly, each regional office is required to follow FEMA\u2019s Directive,  Manual, and Regional SOP for processing first-level appeals, consistent  with those established for second-level appeals. FEMA regional offices  are also required to forward all incoming second-level appeals to PAAB.  In addition, regional office staff must, within 3 business days of receiving  a first-level appeal from a state, provide an electronic copy of the appeal  to the PAAB via FEMA\u2019s shared workspace SharePoint site. As noted in  FEMA\u2019s Recovery Directorate Appeals Manual, this step enables PAAB  staff to identify and track appeals issues and trends in development  across all FEMA regions.", "The roles and responsibilities for both first-and second-level appeals are  defined in FEMA\u2019s SOPs. For example, certified appeals analysts are  responsible for reviewing incoming appeals for completeness,  researching and drafting appeal decisions, and generating RFIs. Lead  appeals analysts are the first-line reviewers of appeal decisions and RFIs,  and provide guidance on PA program and policy issues, coordinate  appeals assignments, and review work of appeals analysts. Further,  appeals coordinators are responsible for receiving incoming appeals,  tracking the processing of those appeals, updating the appeal status, and  processing other appeals-related correspondence and reports."], "subsections": []}, {"section_title": "Prior Reviews Examining the PA Appeals Process", "paragraphs": ["We have identified a number of issues related to FEMA\u2019s management of  the PA appeals program in our prior audit work, as has DHS\u2019s OIG. In our  2008 review of FEMA\u2019s administration of the PA program following Gulf  Coast Hurricanes Katrina and Rita, we identified challenges related to  applicants\u2019 experience with appeal processing delays and that FEMA  often did not make decisions on appeals within the 90-day statutory time  frame. Other challenges identified were that FEMA did not inform some  applicants of the status of their appeal, or, in some cases, assure them of  the independence of the FEMA officials making appeal decisions.  Specifically, some applicants perceived there to be a conflict of interest  because the PA program staff responsible for reviewing appeals was the  same staff that had made the PA project decision that was being  appealed. We did not make recommendations to FEMA to address these  challenges in our 2008 review, but rather described the challenges as  part of the status of overall Gulf Coast hurricane recovery efforts.", "In 2011, DHS\u2019s OIG conducted a review of FEMA\u2019s PA appeals process  and made a number of recommendations aimed at improving aspects of  the process, including the timeliness of appeals processing, appeals  staffing, and the accuracy of appeals data. As in our 2008 review, the  OIG identified appeal processing delays occurring at both FEMA regional  offices and at headquarters. For example, the report found that appeals  were left open for long periods of time and that some regional offices as  well as FEMA headquarters took more than 90 days to issue a decision  on first- and second-level appeals. Further, the OIG review found that  staffing approaches employed by individual regional offices contributed to  processing delays and varying processing timeframes. For example, the  management and processing of first-level appeals varied by FEMA  regional office in that some regional offices assigned staff specifically to  review appeals, while other offices assigned staff to appeals processing  as part of their other responsibilities within the PA Program, such as  determining eligibility for PA assistance. Further, second-level appeals  were processed by various offices within FEMA headquarters, and FEMA  had not established guidelines to complete work within a specific  timeframe.", "Moreover, the OIG review found inaccuracies with FEMA\u2019s system for  tracking appeal processing times for second-level appeals, resulting in  unreliable information being reported to FEMA management regarding  compliance with the 90-day statutory time frame. Lastly, the OIG reported  that some applicants had been unable to obtain information on the status  of their appeals and that FEMA did not provide meaningful feedback to  resolve applicants\u2019 inquiries."], "subsections": []}]}, {"section_title": "Weaknesses Exist in FEMA\u2019s Oversight of Data Quality, but Corrected FEMA Data Showed Fluctuations in Appeal Inventory and Delays in Processing", "paragraphs": ["Our review of FEMA data that track first- and second-level appeals  showed weaknesses in the agency\u2019s data quality practices that affect  program oversight. For example, we found that FEMA regional offices do  not track first-level appeals data consistently or update this data regularly,  resulting in missing data entries. Further, we found that FEMA\u2019s appeal  tracking process does not ensure data quality, limiting FEMA\u2019s ability to  use the data for making decisions on and improvements to the PA  appeals process. During our review, we discussed with FEMA officials the  discrepancies we found with these appeals data. FEMA officials  acknowledged these data quality issues and provided us with corrected  data to address these discrepancies for our analysis in this report. Our  analysis of the corrected FEMA data showed that, between January 2014  and July 2017, FEMA received over 1,400 first- and second-level appeals  with amounts in dispute totaling about $1.5 billion. Across all years, first- level appeals accounted for the majority of appeals, though the number of  appeals fluctuated widely each year. Over the same period, only a small  percentage of first-and second-level appeals were processed within the  90-day statutory time frame."], "subsections": [{"section_title": "Weaknesses in FEMA\u2019s Tracking and Data Quality Practices Affect Program Oversight", "paragraphs": ["To administer and oversee the PA appeals program, FEMA collects and  tracks information on first- and second-level appeals. Based on FEMA\u2019s  SOP, the agency uses this information to identify trends throughout the  appeals process and identify areas in need of improvement. Specifically,  PAAB uses two Excel spreadsheets for collecting and analyzing first- and  second-level appeals data. The spreadsheet for collecting second-level  appeals data is updated and maintained by PAAB, while the spreadsheet  for first-level appeals is based on input from FEMA\u2019s 10 regional offices.", "Based on our detailed review of the spreadsheets, they contain numerous  data fields on the status and outcomes of first-level appeals, such as the  date the regional office received the appeal, the date an RFI was issued,  the date the Regional Administrator signed the decision, the amounts  being disputed by the applicant, and keyword information regarding the  subject of the appeal.", "PAAB requests that regional offices update appeal information in the first- level appeal spreadsheet as changes occur on an appeal. PAAB then  uses this data to assess trends in regional office appeals processing,  which it includes in various performance and other internal reports that  are shared with FEMA management and used to monitor the program.  According to PAAB officials, such information provides valuable support  to PAAB as well as the PA program by sharing information about filings,  progress, and PA program decision making. However, while PAAB\u2019s  tracking efforts help maintain visibility over and provide some monitoring  of the appeals processing, we found that data fields for first-level appeals  were not consistently reported or updated and that PAAB has no  processes to ensure the quality of these data. As a result, data on first- level appeals may not have the accuracy needed for effective reporting  and oversight efforts."], "subsections": [{"section_title": "FEMA Regional Offices Do Not Track Appeals Information Consistently or Update First- Level Appeal Information Regularly", "paragraphs": ["Our review of first-level appeals data showed that, between January 2014  and July 2017, regional offices did not consistently report first-level  appeal information for a number of the key data fields in the PAAB first- level appeal tracking spreadsheet. Specifically, we found missing entries  for the majority of the spreadsheet\u2019s 50 data fields. For example, we  found that about one-third of the time, regional offices had not completed  the data field for amounts being disputed by the applicant for pending  appeals or indicated whether or not money was in dispute in the appeal.  We also found that the regional offices had generally not entered the date  that the regional appeal staff had completed an initial review of the  appeal\u201499 percent of entries were missing for this field. In another  example, the data field that captures keywords was missing in over 33  percent of data entries. PAAB officials told us that keywords are an  important tool for understanding the root causes of an appeal.", "Further, we found a number of missing data entries for key dates for one  regional office in particular. Specifically, this office had not recorded  entries for any of the data fields related to key dates in the appeal  process, such as the date the first-level appeal was assigned to an  appeals analyst, the date the appeal was reviewed by the Regional  Administrator, and the date the first-level appeal decision was sent to and  received by the applicant. PAAB officials told us that PAAB uses these  dates to calculate appeal processing times as part of its effort to evaluate  trends in appeal information and identify potential areas for improvement,  including timeliness. However, officials from this regional office told us the  office does not consistently update information in the PAAB first-level  appeal tracking spreadsheet and does not consider it a priority. Rather,  the office considers the actual processing of first-level appeals a priority.", "In addition, our analysis of first-level appeals data also showed that there  was limited standardization of recording entries within fields. For example,  officials in one of the three regional offices in our review told us that, in  some instances, they combine first-level appeals that involve direct  administrative costs and record them as a single appeal. However, the  other two regional offices in our review told us they do not combine  individual appeals that involve direct administrative costs. Rather, they  count each as a separate appeal. The lack of standardization in the way  appeals are counted could result in some types of appeals being over- or  under-reported. More specifically, these inconsistencies may affect  PAAB\u2019s ability to compare appeal processing capacity between regional  offices and accurately report the regions\u2019 performance."], "subsections": []}, {"section_title": "FEMA\u2019s Appeal Tracking Process Does Not Ensure Data Quality", "paragraphs": ["PAAB officials acknowledged inconsistencies in first-level appeals  reporting, but noted that under FEMA\u2019s SOP, the regional offices are  responsible for entering first-level appeal information. According to PAAB  officials, this responsibility is emphasized during training sessions with  appeal staff. However, we found that FEMA has no automated data entry  checks for information the regions enter into PAAB\u2019s first-level appeal  tracking spreadsheet and does not monitor data fields for missing or  conflicting data. Regional offices do not have a means for electronically  uploading first-level appeal information to PAAB and must manually input  data into the spreadsheet. PAAB\u2019s process then simply confirms receipt  of the information through an email exchange with the regional office staff  who manually input the information.", "PAAB officials told us that they rely on regional office appeal staff to  confirm and validate the first-level appeals data that are provided to  PAAB for internal reporting. However, PAAB has no independent and  consistent method of verifying the accuracy of the appeals data reported  to it by the regional offices. PAAB officials also noted that there is no  systematic process or method to identify these errors and generate an  error report.", "Moreover, another limitation that we identified in the spreadsheet used by  the regional offices is that it is not clear what blank data fields represent\u2014 that is, whether data does not exist or whether data that exists were not  recorded. PAAB officials acknowledged that blank data fields in the first- level appeal tracking spreadsheet created reporting challenges, such as  whether the data field was not applicable to a particular appeal, the  appeal staff for a particular region did not collect this information, or  existing information was not recorded. We also identified a number of  other data entries that were erroneously recorded as first-level appeals.  Specifically, the information entered related to requests for adjustments to  PA project funding and should not have been entered into the tracking  spreadsheets as appeals.", "Standards for Internal Control in the Federal Government advises  management to process data into quality information that is appropriate,  current, complete, accurate, accessible, and provided on a timely basis.  Additionally, management should evaluate processed information, make  revisions when necessary so that the information is quality information,  and use the information to make informed decisions. By developing and  implementing processes and procedures to ensure a uniform and  consistent approach for tracking first-level appeals data and better  integrating regional trackers with PAAB\u2019s own first-level appeals tracker,  PAAB will have greater assurance that it is collecting the comprehensive  and complete appeals processing performance information it needs from  the regional offices. Further, by identifying data discrepancies and other  anomalies in its data queries and the resulting datasets, PAAB may be  able to identify overall weaknesses in its data recording process, thereby  allowing it to more accurately report on first-level appeals information.  Without obtaining quality appeals data, FEMA will not be able to identify  existing gaps in its appeals information and address areas in need of  improvement, such as meeting statutory timeframes."], "subsections": []}]}, {"section_title": "Corrected FEMA Data Showed Fluctuations in Appeal Inventory", "paragraphs": ["After we shared our concerns about the appeals data with FEMA officials,  they corrected the errors in their data and provided us a corrected data  set to use for our analysis in this report. Based on our analysis of this  corrected data we determined that, from January 2014 to July 2017,  FEMA received over 1,445 first- and second-level appeals with amounts  in dispute totaling about $1.5 billion. Across all years, first-level appeals  accounted for the majority of appeals, though the number of appeals  fluctuated widely between years. (See figure 3.) FEMA officials told us  that the number of appeals they received has varied year to year and that  increases or decreases in appeals are largely a function of the number of  and severity of disaster events. That is, the greater the number of  disasters declared and the more extensive the damage, the greater the  number of PA program grants FEMA may issue to applicants, which in  turn, may affect the likelihood that an applicant will appeal a FEMA  decision regarding a grant.", "FEMA issued a decision on 953 of the appeals it received between  January 2014 and July 2017. As shown in table 1, another 349 appeals  were pending and awaiting a decision as of July 2017. The remaining 143  appeals were withdrawn by the applicant during the appeals process.", "Our analysis of the corrected FEMA data also found that, for appeals  received between January 2014 and July 2017, total first- and second- level pending and decided appeals involved amounts in dispute totaling  over $1.3 billion (excluding the 143 appeals that were withdrawn by the  applicant during the appeals process). As shown in figure 4, at least a  third of both first-and second-level pending and decided appeals (35  percent and 44 percent, respectively) involved amounts in dispute that  ranged from $1 to $99,999. Less than 10 percent of both first- and  second-level pending and decided appeals (9 percent and 8 percent,  respectively) did not involve monetary amounts in dispute.", "In rendering a final decision on an appeal, FEMA can grant, partially  grant, or deny the appeal. Our analysis showed that FEMA granted  nearly a third of the 779 first-level appeals filed, awarding applicants over  $85 million. As shown in figure 5, FEMA also partially granted about 19  percent of first-level appeals filed, which involved amounts in dispute  totaling over $63 million. Further, figure 5 shows that over one-third of the  174 second-level appeals were either granted or partially granted.  Specifically, FEMA granted about 26 percent of second-level appeals  filed, awarding over $43 million, while the agency partially granted about  7 percent of second-level appeals filed, involving amounts in dispute  totaling almost $19 million."], "subsections": []}, {"section_title": "FEMA Exceeded Statutory Processing Times", "paragraphs": ["Our analysis of the corrected FEMA appeal data showed that, on  average, FEMA took more than three times the 90-day statutory time  frame to process an appeal, which includes rendering a decision.", "Specifically, for first- and second-level appeals that FEMA received  between January 2014 and July 2017 and that FEMA decided during the  same period, FEMA\u2019s average processing time was 297 days. The  processing time for decided first-level appeals averaged 293 days, while  the processing time for decided second-level appeals averaged 313 days.  Further, as shown in figure 6, only a small percentage of decided first-and  second-level appeals (9 and 11 percent, respectively) were processed  within the 90-day statutory time frame.", "For pending appeals, we found that, at the time of our analysis in July  2017, FEMA had taken on average, more than three times the 90-day  statutory time frame for rendering decisions. Specifically, as of July 2017,  FEMA had not rendered a decision on 349 appeals, which had an  average processing time of 299 days. As of July 2017, the processing  time for pending first-level appeals averaged 306 days, while the  processing time for pending second-level appeals averaged 267 days.  Figure 7 shows the ranges of processing times as of July 2017 for both  first-and second level pending appeals.", "Officials from PAAB and the three regional offices in our review  acknowledged that they experienced challenges processing appeals  within the 90-day statutory time frame. They told us that issuing RFIs to  the applicant can contribute to lengthy processing delays. According to  PAAB officials, issuing an RFI may contribute to long processing periods  if the information relates to a complex appeal\u2014for example, an appeal  involving multiple engineering issues. An appeal decision can also be  delayed if FEMA issues an RFI because an applicant submitted  incomplete documentation to support an appeal. Under FEMA regulation,  these requests do not count against processing times and the 90-day  time frame in which FEMA can render a decision on an appeal.", "However, our analysis of the corrected FEMA data showed that FEMA  exceeded its statutory time frames even when it did not issue an RFI.", "Specifically, between January 2014 and July 2017, FEMA issued an RFI  in about 59 percent\u2014or 560\u2014of the 953 first- and second-level appeals  for which it rendered a decision. In 48 percent (267) of those decided  appeals, FEMA had issued the RFI after the 90-day time frame had  elapsed. FEMA did not issue RFIs for about 41 percent (393) of decided  first- and second-level appeals. In 78 percent (305) of those appeals,  FEMA\u2019s processing time still exceeded the 90-day statutory time frame.", "State emergency management officials from five of our six selected states  told us that they experienced long wait times for first- and second-level  appeal decisions and that FEMA rarely processed appeals within the 90- day time frame required by statute. State emergency management  officials further told us that such delays adversely affect applicants, such  as municipalities and localities, which may wait prolonged periods to  resolve project eligibility and costs related to rebuilding efforts. Delays in  FEMA\u2019s decision making may also result in additional costs to both the  state and the applicant, according to these officials. For example, the  state may pursue funding from an applicant if FEMA decides to  deobligate funds from the applicant for PA projects that have already  been completed. As discussed earlier in this report with respect to the  PA process, FEMA may do this if it finds that the applicant did not meet  certain PA project requirements. In these instances, the applicant may  appeal FEMA\u2019s decision, but the state may need to begin administrative  proceedings against the applicant to recover or offset the deobligated  funds. One state emergency manager told us that some applicants  withdrew their appeals because of the prolonged delays in receiving a  final decision.", "According to state emergency management officials, delays in FEMA\u2019s  appeal decisions can create significant challenges for local government  entities, such as counties and school districts. Officials from one state  provided an example of a rural school district that sought PA funding to  bus displaced children who had been left homeless from damage caused  by Hurricane Irene. According to relevant federal and state documents  these officials provided us, these children had been moved to shelters  outside of their school district and needed transportation to be able to  attend school. The school district applied to FEMA for transportation  costs associated with hiring an additional bus driver to bus the children to  the schools in the district. FEMA denied the school district\u2019s request,  based on its interpretation of the Stafford Act and the eligibility of costs  related to emergency public transportation. The district subsequently filed  a first-level appeal in November 2015. FEMA took over a year to issue a  decision and, in December 2016, denied the district\u2019s first-level appeal.  State management officials told us that incurring these unanticipated  transportation costs while waiting for FEMA to decide the appeal has a  major effect on the school district and the community as a whole, and can  lead to the elimination of school programs or staff. The school district  subsequently filed a second-level appeal in February 2017. FEMA denied  the appeal in August 2017.", "State emergency management officials we interviewed provided an  additional example wherein a small town had applied for PA grant funding  to rebuild a retaining wall and roadway following damage caused by  Hurricane Irene. According to relevant federal and state documents  officials provided us, the overflowing banks of a tributary caused a  retaining wall, which protected a nearby roadway, to wash away. The  roadway, which provided access to residential properties near the  tributary, was significantly damaged, due to the overflow. The town  requested funding to repair the roadway and to replace and extend the  retaining wall another 250 feet beyond the original wall in order to protect  the roadway from future flood events. FEMA approved the PA funding to  repair the roadway. However, FEMA denied the town\u2019s application for PA  assistance to extend the wall beyond its original length. In doing so,  FEMA concluded that the proposed work was ineligible for assistance  because it significantly changed the retaining wall\u2019s predisaster  configuration and that such a change constituted an improved project,  making it ineligible under FEMA regulations and policy. The town then  filed a first-level appeal in April 2014. More than 2 years later\u2014in June  2016\u2014FEMA denied the town\u2019s first-level appeal, upholding FEMA\u2019s  original determination. The town subsequently filed a second-level appeal  in September 2016. Over a year later, PAAB was still reviewing the  appeal."], "subsections": []}]}, {"section_title": "FEMA Has Taken Steps to Improve Appeals Processing, but Faces Challenges with Its Appeals Workforce", "paragraphs": ["FEMA has taken a number of steps to improve its management of the  appeals process and respond to issues raised by us and the DHS OIG  related to processing delays. As we presented earlier in this report, our  2008 review, and DHS\u2019s subsequent 2011 OIG review, identified a  number of organizational and procedural issues related to processing  delays, staff independence, and communications with applicants.  Responding to these issues, FEMA created the PAAB within the  Recovery Directorate at FEMA Headquarters in late 2013, adding an  auditing component to the Branch in 2014. PAAB then established a  core of full-time staff at FEMA headquarters that were specifically  assigned to process second-level appeals. At the same time, through the  Recovery Directorate, each of FEMA\u2019s 10 regional offices was assigned  full-time staff for processing first-level appeals. Prior to PAAB, second- level appeals were processed by various offices within FEMA  headquarters, while the management and processing of first-level  appeals varied by FEMA regional office. Some regional offices assigned  staff specifically to review appeals, while other offices assigned staff to  appeal processing as part of their other responsibilities within the PA  Program, such as determining eligibility for PA assistance.", "In standing up PAAB, FEMA also established an SOP that describes the  organizational structure of PAAB, as well as its responsibilities and the  roles of its staff. The SOP also addresses procedures related to PAAB\u2019s  responsibility for managing the entire PA appeals program. These  responsibilities include reporting on appeal processing performance,  providing training to appeals staff, and identifying PA appeal process and  policy improvements. FEMA later issued a regional SOP that included  procedures to help regional offices reduce the number of appeals that  exceeded statutory time frames. These procedures reflected an ongoing  effort to leverage internal resources when regional offices exceed processing capacity. Specifically, a regional office can submit a request to  PAAB for assistance from analyst staff from other regions or from PAAB  to assist with processing first-level appeals. PAAB may then temporarily  assign an appeals analyst from PAAB or from another regional office to  assist the regional office making the request. For example, one regional  office official told us his office had requested assistance with 10 first-level  appeals and PAAB was able to accommodate the request by assigning 8  of the 10 appeals to another region for processing. According to a senior  PAAB official, this procedure allows FEMA to maximize use of its national  appeal processing capacity. As of October 2017, PAAB had transferred  77 appeals from overwhelmed regional offices to those with capacity to  process additional appeals.", "Further, FEMA procedures now require that a conflict check be performed  to determine whether the analyst was involved with a PA project  determination that is substantively related to the appeal. If a conflict is  identified, options include disqualifying the appeals analyst from working  on the appeal, or requesting the appeal be transferred to another regional  office or PAAB for processing. State emergency management officials  from five of the six states in our review told us that they believed that  issues related to the independence of appeals staff had been addressed  and were no longer an issue.", "PAAB also took steps to improve communication with applicants by  creating an online second-level appeal tracking spreadsheet\u2014accessible  through the Internet\u2014intended to provide applicants with information on  the status of second-level appeals. The spreadsheet includes, among  other things, the date the appeal was received by FEMA headquarters,  the date that an RFI was sent to the applicant, whether the appeal was  \u201cunder review,\u201d whether a final decision had been granted, and the date  any final decision was signed.", "FEMA also took steps to increase its staffing levels. In January 2015,  FEMA\u2019s Recovery Directorate completed a workforce analysis and  determined that additional appeals analysts were needed to address  capacity issues that were resulting in growing inventories of first-level  appeals. At the time, FEMA concluded that, in addition to its 23 on-board  appeals analysts, an additional 29 appeals analysts were needed to  support the existing, as well as anticipated, appeal inventory increases  across FEMA\u2019s 10 regional offices. The Recovery Directorate requested  and was subsequently authorized the additional appeals analyst  positions, which, when filled, would provide the PA appeal program with a  total of 52 first-level appeals analysts. With the exception of Region I,  FEMA planned to provide each of the remaining 9 regional offices with at  least 1 additional appeals analyst. Regional offices with the heaviest  workloads, such as Region II and Region IV, would be allocated more  appeals analysts. FEMA took steps to fill these positions over the next 2  years, and by June 2017, FEMA had filled 47 of the 52 positions.", "Despite efforts to improve its management of the appeals process, FEMA  faces a backlog of both first- and second-level appeals among the three  selected FEMA regional offices as well as PAAB. According to officials in  PAAB and the three regional offices in our review, workforce challenges  contribute to delays in processing PA appeals, even with the  improvements described above.", "PAAB and the three regional offices in our review identified the following  workforce challenges that contributed to PA appeal processing delays.", "Staff vacancies, inexperience, and turnover: Despite FEMA\u2019s  efforts to increase its appeals analyst staffing level\u2014an effort that  began in 2015\u2014two of the three regional offices in our review had  a number of vacancies for these positions through June 2017.  PAAB and regional officials told us that such vacancies, which  occurred over a prolonged period, contributed to appeal  processing delays.", "FEMA data on appeals analyst staffing show that FEMA took  nearly 2 years to fill the additional appeals analyst positions  across its 10 regional offices. For example, in 1 of the regional  offices in our review, 3 of the 8 appeals analyst positions were  vacant through 2016 and were not filled until July 2017. Further,  officials in this regional office told us that the current staffing level  of 8 appeals analysts was inadequate to keep pace with the  region\u2019s increasing appeal inventory. Similarly, 6 of PAAB\u2019s 11  appeals analyst positions were vacant from August 2015 to  October 2016. By July 2017, PAAB had filled all but 2 appeals  analyst positions. PAAB officials told us the appeals analyst  staffing level consisting of 52 positions was a preliminary estimate  and that this staffing level has not been adequate in regions with  heavy workloads and appeal inventories. PAAB officials also  acknowledged the potential benefits of having an appeals analyst  staffing plan, but stated that they are not yet prepared to update  the workforce assessment for PAAB and the regional offices, nor  do they have plans to do so until full staffing is achieved. These  officials also told us that they are still working to achieve the  staffing levels developed in 2015 and are taking steps to address  staffing challenges through more targeted hiring and use of career  ladder positions.", "Further, PAAB staffing data showed that almost half of PAAB\u2019s  staff had less than 1 year of experience. PAAB officials told us  that prior vacancies and a large number of inexperienced staff  have contributed to processing delays and second-level appeal  backlogs. PAAB officials also told us that retaining trained appeals  analysts has been challenging due to limited career advancement  opportunities within the appeals analyst position. These officials  told us that although not required, individuals who typically apply  for an appeals analyst position possess a law degree, and that  once hired, some of them apply for attorney positions within PAAB  or in various offices within FEMA or DHS. For example, PAAB  staffing data showed that within 18 months of being hired by  PAAB, four PAAB appeals analysts applied for and were  subsequently hired as attorney-advisors within PAAB or other  FEMA departments. Then those appeals analyst positions were  vacant until the next round of hiring.", "Regional officials told us it has been challenging to find qualified  applicants with the specialized skillset of an analyst position. They  told us that, ideally, an appeals analyst should be an expert in the  PA program and possess a nuanced understanding of the legal  issues associated with the program\u2019s requirements. Regional  officials told us that, because of this specialized skillset, they look  to recruit PA appeals analysts from other FEMA regional offices  who may have an interest in relocating or are seeking a  promotion. However, while recruiting appeals analysts from other  regions may assist individual offices, it does not address FEMA\u2019s  goal of achieving its staffing levels.", "Delays in training appeals staff: FEMA requires that PA appeals  analysts undergo a certification course that includes 3 days of  training on processing appeals. The appeals analyst certification  course, delivered through PAAB, covers both procedural steps of  processing appeals as well as the policy and legal issues raised  by the PA program, and ensures that trainees can prepare a well- written appeal response. After completing the course, an analyst  in training must pass a test to demonstrate proficiency in  reviewing and analyzing appeals and preparing appeal decisions.  To this end, the analyst must analyze a mock appeal\u2014based on  facts similar to those presented in a previously decided appeal\u2014 and draft an appeal decision.", "FEMA policy states that only certified staff can serve as appeals  analysts and must be recertified every 2 years. However, some  appeals analysts in the regional offices in our review had not yet  undergone the certification process, but were nonetheless working  in an appeals analyst capacity under the supervision of certified  analysts. PAAB procedures also state that a trainee analyst  cannot assume work on an appeal without being supervised by a  certified analyst. For example, in one regional office, four of the  office\u2019s nine appeals analysts had been working in their positions  for between 6 months to a year before they received appeals  analyst certification training. According to regional officials, this  increased the supervisory workload on the remaining five appeals  analysts within the region and the lack of timely training and  certification of appeals analysts affect the efficient processing of  appeals and can lead to delays in FEMA issuing appeal decisions.", "Deployment of appeals staff to disaster response: According  to PAAB officials, while PA appeals analysts are considered  \u201cdedicated\u201d positions, these analysts can be deployed at any time  to provide assistance on a disaster, such as working with grant  applicants to document damages or assisting applicants in  developing project proposals to request PA grants. Officials from  two of the three FEMA regional offices in our review told us that  these deployments contributed to processing delays because,  given limited resources, assigning staff to continue work on the  appeal is not always possible. In one regional office, five of the  nine PA appeals analysts were deployed in late 2016 to do  recovery work related to damage from Hurricane Matthew. These  deployments lasted approximately 30 to 90 days and left the  regional office understaffed. Further, one regional office official  told us that maintaining continuity in processing an appeal can be  difficult for those analysts who are deployed because they must  pick up where they left off on their assigned appeals upon their  return.", "A senior PAAB official told us that regional appeals analyst staff  have been deployed to assist with response and recovery efforts  as a result of the catastrophic damage from Hurricanes Harvey,  Irma, and Maria. As a result, these analysts have not been  available to process first-level appeals. This official further told us  that PAAB staff, including analyst staff\u2014while not deployed\u2014have  been assigned to support disaster operations. For example, one  staff member was assigned to support site inspector training,  while two others were assigned to stand National Response  Coordination Center watch. Further, one staff member was  assigned to support training and contract review functions and the  remaining staff members were assigned as call takers for the PA  Grants Manager and Grants Portal hotline.", "To help overcome staffing shortages, according to FEMA  documents, all three regional offices in our review staffed  assistance from PAAB at various times during the past 2 years.  However, officials from two of the three regional offices in our  review told us that, based on their experiences, requesting staff  from PAAB or other offices had a number of limitations.  Specifically, because the originating regional office is ultimately  responsible for the appeal, its staff must continue to oversee the  appeal, including such responsibilities as tracking the appeal,  corresponding with the applicant and the state as needed, and  reviewing and approving the appeal decision. One regional office  official told us that this arrangement was not helpful and only  added an additional layer of complexity that delayed processing.  Another regional official told us that the quality of the borrowed  staff\u2019s work was not consistent. This official further stated that,  because offices are not able to select the analysts that would be  assigned to work on their appeals, he was reluctant to use staff  from other regional offices.", "According to leading human capital practices, the key to an agency\u2019s  success in managing its programs is sustaining a workforce with the  necessary knowledge, skills, and abilities to execute a range of  management functions that support the agency\u2019s mission and goals.  Achieving such a workforce depends on having effective human capital  management through developing human capital strategies. Such strategic  workforce planning includes the agency assessing current and future  critical skill needs by, for example, analyzing the gaps between current  skills and future needs, and developing strategies for filling the gaps  identified in workforce skills or competencies. Standards for Internal  Control in the Federal Government also states that agencies should  continually assess their needs so that they are able to obtain a workforce  that has the required knowledge, skills, and abilities to achieve their  organization\u2019s goals. Further, as we have previously reported in our  work on strategic workforce planning, such staffing assessments should  be based on valid and reliable data.", "However, FEMA has not developed a workforce staffing plan to identify  hiring, training, and retention needs of appeals staff across PAAB and the  regional offices. PAAB officials told us that they are still working to  achieve the staffing levels developed in 2015 and are taking steps to  address staffing challenges related to retention through more targeted  hiring and use of career ladder positions. In the absence of a workforce  plan for the PA appeals staff, FEMA will likely continue to experience  workforce challenges including vacancies in key appeals analyst  positions, appeals staff turnover, training delays, and understaffing due to  disaster deployment. These challenges will likely continue to contribute to  delays in FEMA\u2019s processing and issuing first- and second-level PA  appeals decisions."], "subsections": []}, {"section_title": "FEMA Established Goals and Measures to Assess Second- Level Appeal Processing, but Did Not Do So for First- Level Appeals", "paragraphs": ["FEMA officials have acknowledged the importance of establishing goals  and measures to assess the performance of the PA appeals program. In  particular, for fiscal year 2016, FEMA\u2019s Recovery Directorate established  two performance goals for PAAB\u2019s processing of second-level appeals.  The first goal was aimed at reducing the inventory of second-level  appeals by 20 percent. The second goal was aimed at processing at least  30 percent of second-level appeals received in 2016 within 90 days of  receiving the appeal, in order to comply with FEMA statutory time  frames. FEMA internal documents showed that these two performance  goals were intended to reduce the second-level appeal inventory, and, at  the same time, promote a standard of timely second-level appeal  processing for PAAB.", "According to PAAB officials, various factors beyond PAAB\u2019s control  prevented PAAB from meeting these performance goals. These factors  included an unanticipated surge in the number of second-level appeals in  2016, as well as increased vacancies due to staff turnover in PAAB  analyst positions in 2016. Recognizing these factors, PAAB developed a  revised goal that focused on the number of appeals an analyst could  process per month. According to PAAB officials, focusing the revised  goal on analyst production controlled for external factors that tended to  affect overall processing, such as surges in appeal submissions and staff  turnover. PAAB officials told us that their proposed production goal was  not accepted by the Recovery Directorate for 2016, but that PAAB  adopted the revised goal for individual performance plans for PAAB  appeals analyst staff.", "In contrast, although first-level appeals represent the majority of FEMA\u2019s  appeal inventory, FEMA has not developed goals and measures to  assess the performance of first-level appeals processing across regional  offices. PAAB collects various data from all 10 regional offices on first- level appeals, such as the number of first-level appeals being processed,  as well as processing timeliness (i.e., appeals that exceeded time limits)  and key words that can help identify various appeal subject-matter  categories. PAAB then aggregates this data, which it publishes on a  quarterly and weekly basis in internal reports that it shares with FEMA  management. However, FEMA has not established goals to assess  performance against the information that PAAB collects. According to  FEMA officials, while the Recovery Directorate established goals and  measures for second-level appeals, it is not responsible for developing  goals and measures to assess performance within the regional offices.  These officials told us further that some Regional Administrators have  established goals and measures for first-level appeals within their  regional offices, while others have not.", "For management to effectively monitor a program, Standards for Internal  Control in the Federal Government state that it should create goals and  measures to determine if a program is being implemented as intended. In  addition, the quality of the program\u2019s performance should be assessed  over time and monitoring efforts should be evaluated to assure they help  meet goals. Further, Congress enacted the GPRA Modernization Act of  2010 (GPRAMA) to focus and sustain attention on agency performance  and improvement by requiring that federal agencies establish outcome- oriented goals and measures to assess progress towards those goals.  Specifically, agencies, like DHS, are required to monitor progress towards  the achievement of goals, report on that progress, and address issues  identified. Without consistent performance measures across FEMA  regional offices to help assess progress and identify deficiencies in  appeals processing, DHS and its subcomponent agencies like FEMA may  have difficulty providing accurate reporting on the effectiveness of current  efforts to process first-level appeals and on the factors that contribute to  ongoing appeal processing delays."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Although FEMA has made efforts to improve its management of the PA  appeals process, these efforts have been hampered by a number of  issues including weaknesses in FEMA\u2019s appeals tracking data and its  ability to ensure the quality of this data. FEMA corrected its appeals data  for purposes of this report once we pointed out data discrepancies, but  FEMA does not have a process to ensure data quality issues are  permanently addressed. As a result, these weaknesses will persist. By  implementing procedures to consistently track appeals data and ensure  the quality of these data, FEMA will be in a better position to accurately  report on appeal processing performance and make informed decisions  about the appeals process.", "FEMA also faces a variety of workforce challenges that have contributed  to appeals processing delays. These challenges include staffing  vacancies, lack of experienced staff, high rates of staff turnover, delays in  training appeals staff, and the deployment of appeals analysts for disaster  response, all of which have contributed to processing delays. Addressing  these challenges by identifying the hiring, training, and retention needs of  its appeals offices through strategic workforce planning could help FEMA  better position itself to reduce its appeals backlog and better respond to  PA appeals.", "Further, although FEMA has established goals and measures for its  second-level appeals processing, it has not done so for first-level  appeals. By establishing goals and measures to assess the performance  of its first-level appeals process, DHS and FEMA will be able to better  evaluate the efficiency and effectiveness of its efforts to reduce the PA  appeal backlog and improve appeal processing times."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to FEMA:  The Assistant Administrator for Recovery should design and implement  the necessary processes and procedures to ensure a uniform and  consistent approach for tracking first-level appeals data to better integrate  regional trackers with PAAB\u2019s own first-level appeals tracker.  (Recommendation 1)", "The Assistant Administrator for Recovery should design and implement  the necessary controls to ensure the quality of the first-level appeals data  collected at and reported from the regional offices to PAAB.  (Recommendation 2)", "The Assistant Administrator for Recovery should develop a detailed  workforce plan that documents steps for hiring, training, and retaining key  appeals staff. The plan should also address staff transitions resulting from  deployments to disasters.   (Recommendation 3)", "The Assistant Administrator for Recovery should work with Regional  Administrators in all 10 regional offices, to establish and use goals and  measures for processing first-level PA appeals to monitor performance  and report on progress.   (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretary of the Department of  Homeland Security and the Administrator of the Federal Emergency  Management Agency for review and comment. DHS provided written  comments, which are reproduced in appendix II. In its comments, DHS  concurred with our recommendations and described actions planned to  address them. FEMA also provided technical comments, which we  incorporated as appropriate. Additionally, we provided excerpts of the  draft report to state emergency management officials in the selected six  states we included in our review. We incorporated their technical  comments as appropriate.", "Regarding our first recommendation, that FEMA design and implement  the necessary processes and procedures to ensure a uniform and  consistent approach for tracking first level-appeal data, DHS stated that  FEMA\u2019s PAAB will develop guides and checklists for the regions to  ensure data uniformity and consistency and that PAAB will update its data  review process, and develop additional content highlighting the  importance of data integrity and accuracy. DHS estimated that this effort  would be completed by July 31, 2018.", "Regarding our second recommendation, that FEMA design and  implement the necessary controls to ensure first-level appeal data quality,  DHS stated that PAAB will include content within the certified appeal  analyst training highlighting the importance of data integrity and that first- level appeal data will be reviewed by PAAB on a quarterly basis. DHS  estimated that this effort would be completed by February 28, 2019.", "Regarding our third recommendation, that FEMA develop a detailed  workforce plan for hiring, training and retaining key appeals staff, DHS  stated that by December 31, 2018, PAAB will produce a workload flow  assessment on second-level appeals staffing and determine whether  appeal timeliness issues still exist. If PAAB determines that significant  response timeliness issues on second-level appeals still exist after most  PAAB appeal analyst staff have at least one year of experience, a  detailed PAAB workforce plan will be completed and finalized by  December 31, 2019. PAAB will also complete an assessment of first-level  appeal inventory and timeliness issues. If PAAB determines that  significant regional response inventory and timeliness issues on first-level  appeals still exist, FEMA will create a working group to prepare a detailed  regional workforce plan. DHS estimated that this effort would be  completed by December 31, 2019.", "Regarding our fourth recommendation that FEMA work with Regional  Administrators to establish and use performance goals and measures for  processing first-level appeals, DHS stated that PAAB has begun  developing a methodology for establishing, measuring, and reporting on  first-level appeals processing goals and performance progress, and that  PAAB would work with the regions to complete and finalize this  methodology. DHS estimated that this effort would be completed by  August 31, 2018.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we are sending copies of this report to the  Secretary of Homeland Security and interested congressional  committees.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or bawdena@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report reviews aspects of the Federal Emergency Management  Agency\u2019s (FEMA) management of the Public Assistance (PA) appeals  process. The objectives of this review were to determine: (1) the extent to  which FEMA ensures quality in its data on appeals and what FEMA data  show about its appeals inventory and timeliness for appeals decisions; (2)  what steps FEMA has taken to improve its management of the appeals  process and what challenges, if any, remain; and (3) the extent to which  FEMA has developed goals and measures to assess the appeal  program\u2019s performance.", "To address the first objective, we obtained and analyzed data from FEMA  on all first- and second-level appeals that the agency received between  January 2014 and July 2017. For first-level appeals, FEMA provided us  data on appeals received between January 1, 2014, and July 12, 2017,  while FEMA provided us data on second-level appeals received between  January 1, 2014, and July 6, 2017. We focused on this time frame  because it contained the most complete and available data on each type  of appeal at the time of our review. We identified various discrepancies in  the first-level appeals data, which we discussed with knowledgeable  FEMA staff. Examples of these discrepancies, which we present in this  report, included missing data, erroneous data entries, and inconsistent  recording of data. In response to our discussions, FEMA provided us with  corrected data to address the identified discrepancies. After obtaining the  corrected data, we concluded the appeals data from FEMA were  sufficiently reliable to provide information on PA appeals that we present  in this report. We also obtained and analyzed FEMA policies and  procedures related to tracking appeals data, such as FEMA\u2019s policies and  procedures related to regional offices, and evaluated them using  Standards for Internal Control in the Federal Government.", "We analyzed the corrected data to determine FEMA\u2019s appeal inventory\u2014 that is, the number of first-and second-level appeals that were pending  and decided, including any amounts in dispute or amounts awarded, and  appeal outcomes for appeals that FEMA decided. From the total number  of appeals received, we excluded four second-level appeals that had  been remanded or rescinded. We determined the processing times for  first- and second-level decided appeals by calculating, for each appeal,  the number of calendar days between the date that FEMA received the  appeal and the date that FEMA rendered a decision on the appeal.", "We then calculated the average number of calendar days to determine  average processing times for first- and second-level decided appeals. We  determined the processing time for pending first-level appeals by  calculating, for each appeal, the number of calendar days between the  date FEMA received the appeal and July 12, 2017. Similarly, we  determined the processing time for pending second-level appeals by  calculating, for each appeal, the number of calendar days between the  date FEMA received the appeal and July 6, 2017. We then calculated the  average number of calendar days to determine average processing times  for pending first-and second-level appeals. We compared processing  times for first- and second-level appeals against FEMA\u2019s 90-day statutory  time frame to determine the number of calendar days by which FEMA  exceeded the time frame. We also determined the number of first- and  second-level appeals in which FEMA issued an RFI and those in which  FEMA did not issue an RFI. For the first- and second-level appeals in  which FEMA issued an RFI, we compared the date the appeal was  received to the date that FEMA issued the RFI. We used the first RFI in  cases where FEMA issued multiple RFIs. We then determined whether  FEMA had issued the RFI within 90 calendar days. For the first- and  second-level appeals in which FEMA did not issue an RFI, we compared  the date the appeal was received to the date that FEMA issued a  decision. We then determined whether FEMA had issued a decision after  90 calendar days. We also obtained and analyzed FEMA policies and  procedures and program directives governing appeal data collection and  evaluated them against Standards for Internal Control in the Federal  Government.", "To address the first and second objectives, we also administered  semistructured interviews to officials from 3 of FEMA\u2019s 10 regional offices  (Regions II, IV, and VI) with the highest number of first- and second-level  pending appeals. We asked these officials about their efforts to process and track appeals, what improvements had been made regarding how PA  appeals are processed, as well as what challenges they believed  remained in processing PA appeals since 2013.To select these offices,  we obtained data from FEMA on first- and second-level appeals that were  pending a decision, as of October 31, 2016. Collectively, these appeals  represented 69 percent of all pending first- and second-level appeals  FEMA had received as of October 31, 2016. We focused on this time  frame because it contained the most recent data for selecting FEMA  regional offices at the time of our review. To obtain additional perspective  on what, if any, challenges remain in FEMA\u2019s management of the appeals  process, we also interviewed state emergency management officials in  six states (two states in each of the corresponding 3 FEMA regional  offices). (See table 2.)", "The information obtained from the FEMA regional offices and the state  emergency management offices cannot be generalized nationwide.  However, the information obtained from these officials provides insight  into the issues FEMA encountered during the appeal process.", "To additionally address the second objective, we reviewed our past report  and Department of Homeland Security Inspector General reports on the  PA appeals program. We also reviewed FEMA documentation, such as  policy directives, internal staffing requests, appeals analyst position  descriptions, and other internal memoranda. We used these sources to  identify what steps FEMA had taken to improve its management of the  appeals process since 2013. We also used this information to supplement  our understanding of the challenges the Public Assistance Appeals Board  (PAAB) and regional officials raised during our interviews discussed  above.", "To address the third objective, we analyzed a series of FEMA internal  performance reports issued between November 29, 2013, and February  15, 2017. Developed by PAAB and provided to FEMA management on a  quarterly basis, these reports included aggregate information on PA  appeals inventory, such as the number of first- and second-level pending  appeals, the number of appeals processed within statutory timeframes,  the number of pending appeals that are beyond the statutory timeframe,  and common appeal issues based on keywords entered by analysts  responsible for processing appeals. We also analyzed internal  documents, such as briefs and newsletters, which provided detail on  specific appeal decisions as well as the status of the appeals inventory.  Further, we analyzed FEMA\u2019s Strategic Plans for fiscal years 2008 to  2013 and fiscal years 2014 to 2018 to identify objectives, measures, and  overall agency-wide goals. We assessed the information in these  documents against leading practices in measuring agency performance  and against federal standards for internal control.", "For all three objectives, we reviewed relevant legislation and FEMA  standard operating procedures that govern both FEMA headquarters and  regional offices. We also interviewed officials in PAAB and FEMA\u2019s  Recovery Directorate."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Brenda Rabinowitz (Assistant  Director), Anthony Bova (Analyst-in-Charge), Joseph Fread, and Sherrice  Kerns made key contributions to this report. Jehan Chase, Chris Currie,  Robert Gebhart, Chris Keisling, Donna Miller, Kathleen Padulchick,  Amanda Parker, Erik Shive, and Walter Vance also provided assistance."], "subsections": []}]}], "fastfact": ["In both 2016 and 2017, 15 U.S. disasters resulted in losses exceeding $1 billion each. To help recover, state and local governments may apply to FEMA for grants for debris removal, public facility repairs, and similar activities.", "Applicants have two chances to appeal grant decisions. However, we found that, from 2014 to July 2017, FEMA processed only 9% of first-level and 11% of second-level appeals within its 90-day limit.", "Although FEMA has improved management of the appeals process in the last few years, it still faces challenges. Among other things, we recommended measures to more accurately track appeals and to develop FEMA's workforce."]}
{"id": "GAO-18-37", "url": "https://www.gao.gov/products/GAO-18-37", "title": "Social Security Disability: Additional Measures and Evaluation Needed to Enhance Accuracy and Consistency of Hearings Decisions", "published_date": "2017-12-07T00:00:00", "released_date": "2018-01-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Individuals who do not agree with the initial decision on a claim for Social Security disability benefits can ultimately appeal the decision by requesting a hearing before one of SSA's approximately 1,500 administrative law judges. However, the rate at which these judges have allowed benefits has varied, raising questions about the reasons for this variation. GAO was asked to review aspects of SSA's oversight of judges' decisions.", "This report examines (1) to what extent allowance rates vary across administrative law judges, and factors associated with this variation; and (2) the extent to which SSA has processes to monitor the accuracy and consistency of hearings decisions.", "GAO developed a statistical model to analyze SSA data on adult disability decisions made by administrative law judges from fiscal years 2007 through 2015, the most current data available at the time of GAO's analysis; reviewed relevant federal laws, regulations, and agency documents; and interviewed SSA officials and chief judges in SSA's 10 regions, as well as officials from organizations representing judges, disability claimants, and claimant representatives."]}, {"section_title": "What GAO Found", "paragraphs": ["Allowance rates\u2014the rate at which Social Security Administration (SSA) administrative law judges allowed disability benefits to be paid when claimants appealed\u2014varied across judges, even after holding constant certain characteristics of claimants, judges, hearing offices, and other factors that could otherwise explain differences in allowance rates. Specifically, GAO estimated that the allowance rate could vary by as much as 46 percentage points if different judges heard a typical claim (one that was average in all other factors GAO analyzed). SSA officials said that this level of variation is not surprising, given the complexity of appeals and judicial discretion. Nonetheless, the variation declined by 5 percentage points between fiscal years 2007 and 2015 (see figure), a change officials attributed to enhanced quality assurance efforts and training for judges. GAO also identified various factors that were associated with a greater chance that a claimant would be allowed benefits. In addition to characteristics related to disability criteria, such as the claimant's impairment and age, GAO found that claimants who had representatives, such as an attorney or family member, were allowed benefits at a rate nearly 3 times higher than those without representatives. Other factors did not appear related to allowance rates, such as the percentage of backlogged claims in a hearing office.", "SSA has various reviews to monitor the accuracy and consistency of hearings decisions by administrative law judges, but some of these reviews may overlap and SSA has not systematically evaluated them. Specifically, SSA conducts five types of quality assurance reviews of hearings decisions, several of which have similar goals and may look at similar claims. SSA has not evaluated the efficiency or effectiveness of these reviews, despite spending at least $11 million on them in fiscal year 2016. Moreover, the agency has struggled to sustain all of its quality reviews due to competing priorities\u2014two of the five reviews were curtailed in 2016 because SSA reassigned staff to help expedite claims decisions. By evaluating which quality assurance reviews are most effective and efficient in improving accuracy and consistency, SSA would be better positioned to meet its goals within its resources."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, including that SSA systematically evaluate its quality assurance reviews and take steps to reduce or better manage any unnecessary overlap among them. SSA concurred and plans to address them through a comprehensive assessment of its oversight."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Social Security Administration (SSA) manages two disability benefit  programs\u2014Disability Insurance (DI) and Supplemental Security Income  (SSI)\u2014that together provide about 16 million Americans with about $200  billion in benefits annually. Overall, more than 6 percent of the U.S.  working-age population receives disability benefits from one or both of  these programs, although the rate varies by state (ranging from about 4  percent to more than 12 percent), according to SSA. A claimant who is  dissatisfied with the initial decision on his or her application can ultimately  appeal at a hearing, where an administrative law judge (ALJ) reviews the  case and any new evidence submitted by the claimant. About 30 percent  of the claimants who are ultimately allowed benefits are granted benefits  at the hearings level or beyond.", "For more than 15 years, the number of people applying for disability  benefits has generally increased, along with the number of appeals. At  the same time, the percentage of appealed claims that have been allowed  benefits has declined. However, these rates\u2014known as allowance  rates\u2014can vary widely across judges and hearings offices, raising  questions about the reasons for this variation.", "Moreover, reports of improper decisions made by certain judges and a  scheme between a judge and an attorney in one state to commit fraud,  have raised questions about SSA\u2019s oversight of ALJs. You asked us to  examine allowance rates and SSA\u2019s oversight of ALJs. This report  examines (1) the extent to which allowance rates vary across  administrative law judges, and any factors that are associated with this  variation, and (2) the extent to which SSA has processes to monitor the  accuracy and consistency of hearings decisions.", "To address these objectives, we conducted a statistical analysis of data  on adult disability decisions made by administrative law judges from fiscal  years 2007 through 2015 and the factors that may be associated with  variation in allowance rates. Specifically, we considered the following  factors:", "Claimant characteristics relevant to the disability determination  process (e.g., age and primary impairment),", "Participants in the process other than claimants (e.g., claimant  representatives and medical and vocational experts),  Judge characteristics (e.g., year of appointment as a judge, and any  prior related SSA experience),", "SSA administrative characteristics (e.g., hearing office where the case  was decided and whether the hearing was conducted by  videoconference), and", "Economic characteristics (unemployment and poverty rates in the  claimant\u2019s state).  (Appendix I provides more detail on our statistical analysis, including a  complete list of the factors we analyzed.)", "We assessed the reliability of SSA\u2019s administrative data on disability  decisions and judge characteristics by (1) performing electronic testing of  required data elements, (2) reviewing existing information about the data  and the system that produced them, and (3) interviewing agency officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for the purposes of this report. (Appendix I describes  our data in more detail.)", "We reviewed relevant federal laws, regulations, and documentation and  collected testimonial evidence from SSA officials to describe and evaluate  the processes SSA uses to monitor hearings decisions, detect variation,  and improve accuracy. We assessed these monitoring efforts against  federal internal control standards and our management and evaluation  guide for assessing fragmentation, overlap, and duplication in  government programs. We also reviewed SSA\u2019s annual performance  plans from fiscal years 2006 through 2017 to describe the performance  measures the agency has established to improve the accuracy and  consistency of its hearings decisions. We evaluated the current  performance measures using key attributes of performance measures  identified in prior GAO work and federal internal control standards.", "We conducted this performance audit from December 2015 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Social Security Administration\u2019s (SSA) Disability Insurance (DI) and  Supplemental Security Income (SSI) programs are the two largest federal  programs providing cash assistance to people with disabilities.", "The DI program, established in 1956, provides monthly payments to  working-age adults (and their dependents or survivors) who are  unable to work due to a long-term disability.", "The SSI program, established in 1972, is a means-tested income  assistance program that provides monthly payments to adults or  children who are aged, blind, or have other disabilities and whose  income and assets fall below a certain level.", "Individuals with low incomes and assets who also have a sufficient  work history may qualify for the DI and SSI programs concurrently. In  this case, the individual\u2019s SSI payment is generally offset by the  amount of the DI payment.", "In fiscal year 2016, according to SSA, about 10.8 million disabled workers  and their family members received about $143 billion in DI benefits, and  an estimated 8.2 million individuals received almost $59 billion in SSI  benefits (of those, 2.6 million received SSI in addition to DI or Old-Age  and Survivors benefits)."], "subsections": [{"section_title": "Disability Criteria", "paragraphs": ["Although DI and SSI have different purposes and target populations, the  disability criteria for adults are the same for both programs. To be  considered eligible for either program as an adult, a person must have a  medically determinable physical or mental impairment that (1) has lasted  or is expected to last for at least a continuous period of 1 year or result in  death, and (2) prevents them from engaging in any substantial gainful  activity (SGA).", "The disability decision-making process includes five sequential steps (see  fig. 1). First, SSA determines if a claimant is working and screens out  (denies) claimants who earn over a specified amount. Second, SSA  determines whether the claimant has an impairment severe enough to  significantly limit his or her ability to do basic work activities and expected  to last more than 12 months or result in death, and denies claimants who  do not meet these criteria. At the third step, SSA determines whether a  claimant\u2019s impairment meets or is equivalent to an impairment listed in  SSA\u2019s Listings of Impairments. If a claimant \u201cmeets\u201d or \u201cequals\u201d one of the  listed impairments, they are allowed benefits. If not, SSA proceeds to the  last two steps and assesses whether a claimant, given their impairment,  can do their past work (step four) or other work that exists in significant  numbers in the national economy (step five).", "Over time, more of SSA\u2019s disability decisions have been made at the last  two steps in the process, which require more judicial discretion than  decisions made at steps 1 through 3, according to SSA. In 2000, 29  percent of decisions were made at steps 4 and 5, according to an SSA  report. By 2014, nearly half\u201449 percent\u2014of all decisions were made at  these steps."], "subsections": []}, {"section_title": "Disability Application and Appeals Process", "paragraphs": ["To apply for benefits, a claimant must file an application online, by  telephone, or mail, or in person at a local Social Security office. If field  office staff determine that the claimant meets the nonmedical eligibility  criteria, they forward the claim to the appropriate state Disability  Determination Services (DDS) office. DDS staff\u2014generally a team  comprised of disability examiners and medical consultants\u2014review  medical and other evidence provided by the claimant, obtaining additional  evidence as needed, and make the initial disability determination. In fiscal  year 2016, SSA received more than 2.5 million disability claims.", "If the claimant is not satisfied with this determination, in most states he or  she may request a reconsideration of the decision within the same DDS  office. If the claimant is dissatisfied with the reconsideration, he or she  may request a hearing before an administrative law judge (ALJ). In one of  several initiatives to improve the disability determination process, SSA  has eliminated the reconsideration step of the process in 10 states,  allowing the claimant to appeal the initial decision directly to an ALJ. In  fiscal year 2016, claimants appealed more than 698,000 decisions to the  hearings level, and SSA issued more than 637,000 dispositions (including  allowances, denials, and dismissals). (See fig. 2).", "Within SSA\u2019s Office of Disability Adjudication and Review (ODAR), there  are approximately 1,500 ALJs who are located in 166 hearing offices  across the country, as well as at five National Hearing Centers. In  general, cases are randomly assigned to ALJs within the area each  hearing office serves, in the order in which the requests for a hearing are  received. The ALJ reviews the claimant\u2019s file, including any additional  evidence the claimant submitted after the initial determination, and  generally conducts a hearing. At the hearing, the ALJ may hear testimony  from the claimant, medical experts on the claimant\u2019s medical condition,  and vocational experts regarding the claimant\u2019s past work and jobs  currently available in significant numbers in the national economy. The  majority of claimants are represented at these hearings by an attorney or  nonattorney representative, such as a professional disability  representative, relative, or social worker.", "If the claimant is not satisfied with the ALJ decision, he or she may  request a review by SSA\u2019s Appeals Council, which is the final  administrative appeal within SSA. The Appeals Council may grant,  deny, or dismiss a request for review. If it agrees to review the case, the  Appeals Council may uphold, modify, or reverse the ALJ\u2019s decision, or it  may remand the case back to the ALJ to hold another hearing and issue  a new decision. In fiscal year 2016, the Appeals Council reviewed more  than 154,000 ALJ decisions and remanded 13 percent of them."], "subsections": []}, {"section_title": "Hearings Backlogs and Processing Times in Recent Years", "paragraphs": ["Hearings-level backlogs and processing times have increased between  fiscal years 2010 and 2016. The number of annual requests for a  hearing before an ALJ peaked in fiscal 2011, and declined in each  subsequent year, through fiscal year 2016. Despite this decline, SSA has  not been able to keep pace with the demand, in terms of dispositions\u2014 the number of cases the agency decided or dismissed\u2014in each of those  years after 2010 (see figure 3). By the end of fiscal year 2016, SSA  reported there were about 1.1 million pending cases. Average processing  times for hearings-level decisions also increased during this same time  period, from 426 days to 543 days.", "During these years, the number of ALJs declined, along with the number  of case dispositions per month. For example, SSA reported it employed  1,356 ALJs in fiscal year 2013, and these judges had an average of 48  case dispositions per month. In fiscal year 2015, 1,265 judges had an  average of 44 case dispositions per month. Also during this time period,  SSA reduced its reliance on senior attorney adjudicators (SAA) to make  fully-favorable, on-the-record decisions (that is, decisions in which a  hearing is not necessary because the documentary evidence alone  supports a decision that is fully favorable to the claimant).", "According to SSA, its backlog will be eliminated when the national  average processing time for a hearing decision is 270 days. In January  2016, SSA issued a plan to achieve this goal by the end of fiscal year  2020. However, in its fiscal year 2018 performance plan, SSA set a goal  for processing hearings decisions in 600 days (up from a target of 485  days in fiscal year 2010). SSA reported that the increase in average  processing times is due to the increase in the number of pending cases.  Since SSA generally processes cases in the order in which they are  received, they focus on the oldest cases first, which increases the  average processing time for closed cases."], "subsections": []}, {"section_title": "Requirements for Hiring, Overseeing, and Disciplining SSA Administrative Law Judges", "paragraphs": ["The role of ALJ was created by the Administrative Procedure Act, which  was enacted in 1946 to ensure fairness and due process in federal  agency proceedings involving rulemaking and adjudications. ALJs serve  in a number of executive branch agencies, although SSA employs the  vast majority. ALJs preside and make decisions at formal adjudicatory  proceedings.", "One of the primary goals behind the creation of the ALJ position is to  ensure that judges can conduct hearings free from influence or coercion  from the agency. Although ALJs are hired by and serve as employees of  executive branch agencies like SSA, the Office of Personnel  Management (OPM) is responsible for the initial examination, certification  for selection, and implementation of the three levels of basic pay of ALJs.  As part of its responsibilities, OPM sets the minimum qualifications for  ALJs, which are that they generally must be licensed attorneys with a  minimum of 7 years of experience in litigation and/or administrative law  and pass the competitive examination.", "The Administrative Procedure Act gave ALJs qualified decisional  independence, with some oversight from agencies. Decisional  independence means that ALJs can make decisions independently.  Federal law also excludes ALJs from performance evaluations and  generally requires that disciplinary actions against ALJs be for good  cause established and determined by the Merit Systems Protection Board  (MSPB). While ALJs have qualified decisional independence, they must  follow their agency\u2019s policies and procedures when making decisions.  The Administrative Procedure Act also authorized agencies to review ALJ  decisions. If SSA determines that an ALJ has not followed its policies and  procedures, it can issue a directive to the ALJ to comply and, if that is  unsuccessful, bring a disciplinary action before the MSPB."], "subsections": []}]}, {"section_title": "Allowance Rates Vary Across Judges, Even for Typical Claims", "paragraphs": [], "subsections": [{"section_title": "Allowance Rates Have Varied Across Judges and Hearing Offices in Recent Years, Even After Holding Constant a Range of Factors Relevant to the Appeals Process", "paragraphs": ["Allowance rates varied across administrative law judges from fiscal years  2007 through 2015. We defined the \u201callowance rate\u201d for each judge as the  number of claims in which a judge granted the claimant Disability  Insurance (DI) and/or Supplemental Security Income (SSI) benefits  divided by the total number of decisions issued by the judge (excluding  claims that were dismissed). We analyzed about 3.3 million decisions  made by administrative law judges on adult Social Security disability  appeals over this period.", "The average allowance rate across judges fell 15 percentage points over  this period\u2014from a peak of 70 percent in 2008 to 55 percent in 2015\u2014but  the range in allowance rates across judges remained fairly constant (see  fig. 4). Specifically, the range\u2014the difference between judges with high  allowance rates (those at the 95th percentile) and judges with low  allowance rates (at the 5th percentile)\u2014was 55 percentage points over  this period.", "This variation in allowance rates persisted, but fell modestly over time,  even when we used multivariate statistical methods to hold constant a  variety of factors related to the disability appeals process. These factors  included characteristics of claimants, judges, and hearing offices, as well  as other factors such as the unemployment rates in a claimant\u2019s state,  that could otherwise explain differences in allowance rates. Specifically,  for the years 2007 through 2015 combined, our analysis estimated that  the allowance rate would vary by 46 percentage points for a typical  claim, depending on the judge who heard the case. For example, we  estimated that the allowance rate for a typical claim heard by a judge with  low allowance rates would be 42 percent, compared to 88 percent for a  judge with high allowance rates. This estimated range fell from 50  percentage points in 2007 to 45 percentage points in 2015 (see fig. 5).  (Appendix I describes this statistical analysis in more detail.)", "Allowance rates also varied across hearing offices during the same time  period, but this variation was considerably smaller than the variation  across judges in every year. The estimated range across the entire period  was 19 percentage points across hearing offices (see fig. 6), compared  to a 46 percentage-point estimated range across judges. Accounting for  differences in allowance rates across offices ensured that the variation  across judges did not reflect characteristics of their offices (such as the  types or severity of disability claims received by their offices).", "SSA officials noted that the variation in allowance rates we observed  across judges was not surprising, nor was the modest narrowing in this  range over time. Administrative law judges usually hear complex appeals  that may not be clear-cut allowances or denials. As a result, according to  SSA officials, given judges\u2019 decisional independence, different judges  could look at cases with similar fact patterns and circumstances and  come to different conclusions. At the same time, officials also pointed to  several factors potentially related to the modest narrowing in the range of  allowance rates. First, they noted that SSA started conducting quality  assurance reviews of a random sample of allowances in 2011\u2014 previously, such cases were not reviewed. In addition, they said that  Social Security\u2019s disability programs and administrative law judges were  under increased public and Congressional scrutiny following a high-profile  fraud case in 2011 involving a judge and an attorney representative.  Further, officials said that the expanding use of electronic case files and  data analytics within SSA made it possible for the agency to enhance  monitoring of decision-making and share this information with judges.  Finally, while SSA cannot direct judges to decide cases in a particular  way, officials suggested that some judges may have \u201cself-corrected\u201d their  approach to decision-making, given all of these factors.", "Our multivariate analyses had some limitations, but it provides more  information than simple comparisons in allowance rates across judges.  For example, the SSA data we used for this analysis do not include a  measure of the severity of a claimant\u2019s impairment or their remaining  ability to work, which could help explain why one claim with a particular  impairment was allowed while another was denied. The data also do not  include a standardized measure for the nature of claimants\u2019 prior work  (such as the skill level or extent of physical labor), which is also relevant  for the disability decision. Nevertheless, our multivariate analysis enabled  us to compare allowance rates across judges and hearing offices for  typical claims. In addition, SSA\u2019s practice of assigning cases randomly  to judges makes it more likely that the remaining variation we found  across judges reflects the unique effect of having a particular judge hear  a case, rather than other factors. As a result, even though we could not  account for all factors that could explain differences in allowance rates,  random assignment increases the chances that such factors were similar  across all of the cases heard by individual judges."], "subsections": []}, {"section_title": "Numerous Factors, Particularly Those Representing SSA\u2019s Disability Criteria, Are Associated with Variation in Allowance Rates", "paragraphs": ["Although variation in allowance rates persisted across judges, even after  controlling for certain factors, many of the factors we identified had  meaningful associations with the chance that a claimant was allowed  benefits. These factors represent criteria in SSA\u2019s disability decision- making process, such as the claimant\u2019s age, impairment, prior work, and  education. We also identified factors that did not have such  associations.", "Certain claimant characteristics\u2014such as older ages or certain  impairments\u2014were associated with higher allowance rates.", "Age: Claimants\u2019 chances of being allowed benefits increased with  age, even holding constant other factors. For example, a 55-year-old  claimant was allowed benefits at a rate 4.3 times higher than a typical  35-year-old claimant. This association is consistent with Social  Security\u2019s vocational guidelines, which are generally more lenient for  older claimants. As part of SSA\u2019s five-step process to determine  eligibility for adult disability benefits, SSA uses a set of rules to  evaluate how a claimant\u2019s age, education, and work experience affect  their remaining capacity for work. SSA\u2019s criteria vary across four  primary age groups\u201445-49, 50-54, 55-59, and 60 and older. The  criteria are less stringent for claimants in older age groups than they  are for younger claimants, because the rules assume that individuals  at older ages may be less able to transition to other work.", "Impairment: Certain impairments were also strongly associated with  the chance of being allowed benefits (see fig. 7). For example,  claimants with primary impairments recorded in SSA\u2019s data of heart  failure or multiple sclerosis were allowed benefits at rates 4.2 and 5  times higher, respectively, than typical claimants with asthma. From  fiscal years 2007 through 2015, the allowance rates for claimants with  heart failure or multiple sclerosis were 78 and 80 percent,  respectively, compared to 44 percent for asthma.", "Critical or terminal case: Claimants with critical or terminal cases  were allowed benefits at a rate 1.4 times higher than a typical  claimant without a critical or terminal case. Critical and terminal cases  are cases that require special processing, such as a terminal illness or  a veteran with a 100-percent permanent and total disability  compensation rating.", "Prior work: Claimants reporting shorter work histories (4 years or  less in the last 15 years before applying for disability benefits) were  allowed at a rate 0.8 times as high as a typical claimant with 10 or  more years of work history. As expected, given the nature of the work  requirements for the DI program, the association with prior work  history was stronger for that program than for the SSI program.", "College education: Claimants who reported having a college-level  education or higher were approved at a slightly higher rate (1.1 times  higher) than a typical claimant with a high-school education. SSA  officials suggested that this association could be an indirect measure  of the severity of a claimant\u2019s impairment, a factor for which we did  not have data. They said that individuals with higher levels of  education often have higher incomes and, therefore, may be less  likely to forego their income to apply for disability benefits, were it not  for the severity of their disability.", "Claim type: DI claimants were allowed at a rate 1.7 times higher than  a typical SSI claimant. Across judges, the average allowance rate for  DI claimants (67 percent) was higher than for SSI claimants (52  percent) from fiscal years 2007 through 2015, with the allowance rate  for claimants applying concurrently for DI and SSI benefits falling in  between (58 percent).", "Other Participants in the Disability Appeals Process  Claimants who had appointed a representative to present their case, or  had a medical expert testify at their hearing, were associated with a  greater chance of being allowed benefits, but the presence of a vocational  expert had the opposite association.", "Claimant representative: Similar to findings in our prior work,  claimants who had a representative\u2014either an attorney or a  nonattorney representative\u2014were allowed at a rate 2.9 times higher  than a typical claimant with no representative. SSA officials stated  that representatives may have a screening process for potential  clients, and under SSA\u2019s fee structure, representatives are paid only if  the claimant is awarded benefits. As a result, representatives may  tend to take cases they believe will be successful. Officials also stated  that a representative can help the claimant by ensuring that the  medical evidence and other records are fully developed and help the  claimant present their case at a hearing. From fiscal years 2007  through 2015, most claimants (77 percent) had an attorney  representative, and 12 percent had a nonattorney representative.", "Expert testimony: Claimants whose hearings involved testimony  from a medical expert were allowed at a rate 1.6 times higher than a  typical claimant without a medical expert present. Medical experts  include physicians, psychologists, and other types of medical  professionals who provide impartial, expert opinion evidence for an  ALJ to consider when making a decision about disability. SSA officials  said that the association of medical experts with an increased chance  of allowance is expected, given that judges are required to seek the  testimony of a medical expert in certain cases, for example, when the  judge is considering allowing benefits because the claimant\u2019s  impairment may be medically equivalent to one in SSA\u2019s Listing of  Impairments. In other cases, involving a medical expert is generally at  the judge\u2019s discretion. From fiscal years 2007 through 2015, 12  percent of decisions involved a medical expert.", "The presence of a vocational expert had the opposite effect\u2014 claimants with a vocational expert testifying were allowed at a rate 0.8  times as high as claimants without a vocational expert testifying.  Vocational experts provide objective, expert opinion evidence to the  ALJ, primarily at the last two steps of the disability decision-making  process where SSA considers whether claimants can do their prior  work or transition to other work available in the national economy.  Although involving a vocational expert is generally at a judge\u2019s  discretion, SSA officials said that they were not surprised by this  result, because vocational experts are usually called upon at the final  two steps in the disability decision-making process. At that point,  claimants had already not been allowed benefits at an earlier step  because their impairment(s) did not meet or were not equivalent to an  impairment in SSA\u2019s listings. From fiscal years 2007 through 2015,  most hearings (85 percent) involved a vocational expert.", "Judges with certain characteristics, such as those appointed in earlier  years, were associated with a greater chance of allowing benefits.", "Appointment cohort: A claimant whose claim was heard by a judge  appointed between 1995 and 1999 was allowed at a rate 1.5 times  higher than a typical claim heard by a judge appointed after 2010.  SSA officials said that, since 2010, they have changed the way they  train and mentor new judges, and introduced new tools to help  provide a standardized decision-making template. As a result, SSA  officials said, more recently hired ALJs may be more aware of agency  policies and procedures.", "Certain characteristics of hearing offices and other factors also were  associated with higher chances of allowance. For example:", "Hearing type: Claimants whose hearings were held in person were  allowed at a slightly higher rate (1.1 times higher) than a typical  claimant with a hearing conducted remotely using videoconference  technology. This is equivalent to a 2.8 percentage-point higher  probability of being allowed benefits for a claimant whose hearing was  held in person, compared to an otherwise typical claimant whose  hearing was conducted by videoconference. However, we did not  seek to estimate the causal impact of videoconferences on allowance  rates, and so did not design our analysis to account for all factors that  could affect this relationship. Rather, we accounted for the use of  videoconferences solely to further ensure that circumstances were  similar across the judges and offices we analyzed. Expanding video  service delivery is a key goal for SSA, including plans to partner with  other agencies, such as the Department of Veterans Affairs, to  increase the number of available video hearing sites beyond those  already available at hearing offices and the five National Hearing  Centers.", "Year of decision: Claimants whose appeals were decided in earlier  years were associated with a greater chance of being allowed  benefits. While this trend is similar to the raw change over time shown  in figure 4, our multivariate analysis showed that this change held  even for claimants in similar circumstances. For example, claimants  who received decisions in 2007 were allowed at a rate 2.0 times  higher than a typical claim in 2015. This is consistent with other  studies that have found trends of lower allowance rates in recent  years.", "Factors Not Associated with Differences in Allowance Rates  Some factors were not meaningfully associated with allowance rates  when holding other factors constant.", "Workload measures: Workload and productivity measures at the  hearing office and judge level were not meaningfully associated with  allowance rates. This includes the annual percentage of cases that  were backlogged (that is, awaiting a judge\u2019s decision for more than  270 days) at each hearing office, as well as the annual number of  dispositions (decisions plus dismissals) each judge issued. This may  suggest that judges\u2019 decisions to allow or deny cases are not  significantly influenced by the number of cases before them, similar to  findings in prior research.", "Hearing office type: We found no meaningful differences in  allowance rates between similar claims heard at one of SSA\u2019s  National Hearing Centers or a traditional hearing office, after holding  constant other factors (including whether the hearing was held by  videoconference). SSA has five National Hearing Centers, which hear  cases from across the country by videoconference in order to reduce  backlogs in certain hearing offices.", "Economic characteristics: The unemployment and poverty rates in  the claimant\u2019s state at the time of the ALJ decision were not  associated with allowance rates. Higher unemployment rates can  result in increased applications for Social Security disability benefits  because workers with impairments that could qualify them for the  program who experience job loss may find it more difficult to become  re-employed during periods of high unemployment and apply for  benefits. However, the impact on allowance rates in the research we  reviewed is mixed."], "subsections": []}]}, {"section_title": "SSA\u2019s Efforts to Monitor Accuracy and Consistency of Hearings-Level Decisions Lack Performance Measures and Have Not Been Evaluated", "paragraphs": [], "subsections": [{"section_title": "SSA Has Timeliness Measures, but Lacks Public Performance Measures for Accuracy and Consistency", "paragraphs": ["SSA has employed a range of efforts to monitor the accuracy and  consistency of hearings decisions, but it lacks performance measures to  report publicly on these efforts. SSA\u2019s current strategic plan includes an  objective to \u201cimprove the quality, consistency, and timeliness\u201d of its  disability decisions; however, all of the hearings-level measures  supporting this objective are related to timeliness. In a previous report, we  developed nine attributes of performance goals and measures based on  previously established GAO criteria, as well as relevant federal laws and  performance management literature. One key attribute states that an  agency\u2019s suite of performance measures should be balanced to cover  various priorities. In addition, each measure should cover a priority such  as quality, timeliness, and cost of service. However, because SSA\u2019s  performance measures do not fully reflect its goals, the overall success of  SSA\u2019s efforts in this area may be limited.", "SSA previously had performance measures related to hearings-level  accuracy, which used data from ALJ peer reviews. These measures were  discontinued in fiscal year 2009, when the ALJs conducting the reviews  were reassigned to hearing cases. By comparison, SSA continues to  have a measure for accuracy at the initial decision-making level (see  table 1).", "SSA officials stated that they have no plans to add new performance  measures related to the accuracy and consistency of hearings decisions  to the strategic plan. They said that while they collect and monitor a wide  variety of workload and performance measures for day-to-day operations,  they have to select a few, representative measures that are meaningful to  stakeholders and represent agency-wide efforts to achieve its goals. They  stated that the current performance measures meet these requirements.", "Although SSA officials said the agency does not publicly report  performance measures related to the accuracy and consistency of  hearings decisions, they said that SSA uses internal performance  measures related to hearings decisions. However, these internal  measures to monitor quality and consistency of hearings decisions have  limitations and are not shared with the public. Regional chief judges\u2014who  oversee the hearing offices and judges within each of SSA\u2019s 10 regions\u2014 and others told us that they use a measure known as the \u201cagree rate\u201d to  help monitor the quality of a judge\u2019s decisions. This measure is based on  the number of cases that have been appealed to the Appeals Council by  the claimant or representative as a request for review. The agree rate  reflects the percentage of cases in which the Appeals Council\u2014the final  level of appeals within SSA\u2014concluded that the ALJ\u2019s decisions were  supported by substantial evidence and contained no error of law or abuse  of discretion. However, the agree rate has some limitations. For example,  as noted earlier, it does not reflect the accuracy of ALJ decisions that the  claimant did not appeal. SSA\u2019s Office of the Inspector General (OIG)  found that this measure provided information on less than one-quarter of  all ALJ dispositions and it is not representative of the ALJ\u2019s entire  workload because it is based only on Appeals Council reviews of  appealed cases. In addition, a March 2017 SSA OIG report found that  SSA has not maintained historical data on agree rates, limiting the  agency\u2019s ability to analyze agree rate trends.", "SSA uses other internal measures to track consistency. For example,  SSA developed an internal early monitoring system that tracks 22 metrics  of ALJ performance to identify outliers. For example, three of these  metrics (average number of dispositions a judge issues per day, agree  rate, and allowance rate) have \u201calarm thresholds\u201d to indicate when an  ALJ\u2019s metrics fall outside of a given threshold. Based on these findings,  SSA may conduct a focused quality review (a type of quality assurance  review) to ensure the judge\u2019s decisions complied with SSA policies, or  follow up with the regional chief judge to determine if additional policy  guidance or training is needed.", "Although these internal measures are helpful for management to monitor  and improve accuracy and consistency, without sharing this or similar  information publicly, SSA lacks accountability for improving the quality of  hearings-level decisions. In addition, federal internal control standards  state that management should externally communicate the necessary  quality information to achieve objectives, including to external  stakeholders such as Congress and the public. Further, given the  persistent variation in allowance rates, SSA may be missing an  opportunity to provide the public with information on the results of its  efforts to improve the accuracy and consistency of disability decisions."], "subsections": []}, {"section_title": "SSA Has Efforts to Monitor and Improve Accuracy and Consistency of Hearings- Level Decisions, but Quality Reviews May Overlap and Have Not Been Systematically Evaluated", "paragraphs": ["SSA provides training and tools to all ALJs and initiates disciplinary  actions where needed, as part of its efforts to monitor and improve  accuracy and consistency. SSA also conducts multiple quality assurance  reviews, but some of these reviews may overlap and SSA has not  evaluated them.", "Training, Tools, and Policy Guidance  ALJs receive ongoing training and guidance from several sources,  including through judicial trainings, mentoring, and policy memorandums.  In 2006, SSA implemented a three-phase training program for new ALJs,  which includes training on core competencies as well as a formal  mentoring program in which new ALJs are paired with experienced ALJs  for regular sessions over a nine-month period. Regional managers,  judges, and stakeholders we spoke with had positive feedback on the  training SSA provides to judges. For example, officials from one  stakeholder group told us that they believe training had created more  consistency in allowance rates. SSA\u2019s chief judge also issues guidance  memorandums to clarify policies related to the hearings process. For  example, in July 2013, SSA issued a memorandum establishing  expectations for the instructions judges provide to decision writers, who  are SSA staff who prepare the draft decisions. SSA officials said that they  issued the memorandum in response to an ALJ who was providing low- quality instructions to decision writers and SSA realized it had not  provided formal guidance on the topic. In addition, ALJs also receive  quarterly continuing education training and have a library of reference  materials and on-demand video courses to use as needed.", "SSA also uses internal metrics and provides electronic tools to judges to  monitor and improve accuracy and consistency. Regional chief judges  regularly review management information (MI) reports and develop  strategies, such as recommending training, to address identified issues.  Beginning in 2011, SSA established an electronic tool called \u201cHow MI  Doing?\u201d, which allows ALJs to compare their productivity and timeliness  metrics to hearing office, regional, or national metrics. The tool also  provides data on the agree rate for each judge as well as the hearing  office, regional, and national agree rates. Using this tool, judges can also  learn the reasons any prior decisions have been remanded, and access  on-demand training pertaining to that reason. Regional chief judges we  spoke with generally found \u201cHow MI Doing?\u201d to be a helpful tool, although  SSA does not track judges\u2019 usage and has not formally evaluated its  effectiveness. In addition, SSA established the electronic Bench Book  (eBB), which is designed to assist users with documenting, analyzing,  and making consistent and accurate decisions on hearings-level adult  disability cases. However, the SSA OIG recently recommended that SSA  evaluate eBB and determine whether to continue it. Regional chief judges  we spoke with provided mixed feedback on the use of eBB and its  usefulness for ALJs. In fiscal year 2016, nearly 500 ALJs (about one- third) used eBB. In June 2017, SSA officials said that while no formal  evaluation of eBB was conducted, they recently received approval to  proceed with plans to replace eBB with a similar tool as part of updates to  SSA\u2019s case management system.", "SSA also addresses identified issues with the accuracy and consistency  of hearings decisions by taking disciplinary actions, as needed. SSA can  take non-disciplinary or disciplinary action to address performance  concerns. Non-disciplinary actions include training and counseling (known  as \u201ccollegial conversations\u201d). Another non-disciplinary action is a written  directive, which SSA can issue to individual judges to improve  performance on workload, scheduling or policy compliance. From 2007  through 2016, SSA issued about 1,330 such directives. Nearly all (95  percent) were issued to improve timeliness, while about 2 percent were  issued to improve policy compliance. If an ALJ\u2019s conduct or performance  does not change or becomes more egregious, SSA continues with  progressive discipline including reprimand or seeking disciplinary action  from the Merit Systems Protection Board, such as short- or long-term  suspension or removal. From 2007 through 2016, there were 98  reprimands, 34 proposed suspensions, and 16 proposed removals,  according to SSA.", "SSA conducts various quality assurance reviews to improve accuracy and  consistency. SSA officials stated that the agency has been enhancing its  quality review efforts since 2009. Since then, it has added five types of  quality assurance reviews that are conducted by three additional offices  within SSA (see fig. 8).", "SSA added quality assurance reviews for various reasons. For example,  in 2009, SSA\u2019s regional staff under the Office of the Chief Administrative  Law Judge began conducting regional inline quality reviews, which  involve assessing the extent to which hearing office staff are processing  cases and preparing them for hearings in accordance with SSA policy, as  well as the policy compliance and legal sufficiency of the draft decision.  SSA added this review to enhance its reviews of decisions before they  are issued, in an effort to reduce remands. Also in 2009, SSA\u2019s Office of  Quality Review began conducting disability case reviews to provide  feedback on decision-making accuracy to ALJs. In addition, in 2010, SSA  created the Division of Quality under the Appeals Council, a unit focused  on conducting reviews on a regular basis of decisions that claimants did  not appeal. Prior to 2010, SSA generally only reviewed decisions that  claimants appealed through the Appeals Council.", "While these quality assurance reviews have somewhat different  focuses\u2014for example, some assess aspects of how a case was  processed while others review the accuracy of the decisions\u2014they  overlap in two key ways. According to prior GAO work, overlap occurs  when multiple agencies or programs have similar goals, engage in similar  activities or strategies to achieve them, or target similar beneficiaries.  Some of SSA\u2019s quality review efforts fit the description of overlap in that  they have similar goals and review similar cases. For example:", "Similar goals: Several of the reviews have similar goals (see table 2).  For example, two of the four entities conducting reviews\u2014the Appeals  Council\u2019s Division of Quality and staff in SSA\u2019s 10 regional offices\u2014 both review decisions for policy compliance before those decisions go  into effect (known as pre-effectuation reviews). While one review  looks at the judge\u2019s decision and the other looks at the draft decision  prior to the judge\u2019s review and approval, according to officials and  documents we reviewed, these reviews share similar goals: to guide  training and provide feedback to judges. In addition, all the reviews  are designed to assess compliance with SSA policy.", "Similar cases: SSA\u2019s five quality assurance reviews look at similar  cases, and could potentially include the same cases (see table 3).  SSA takes some steps to prevent assessing the same claim in  multiple quality assurance reviews. Officials told us that, in conducting  focused quality reviews (conducted after the decision is final), they  exclude cases that were reviewed in a pre-effectuation review.  However, they said that the Division of Quality does not know whether  cases it has selected were also subject to a regional inline quality  review. They said that additional efforts to prevent multiple reviews of  a case are manual in nature, and thus there is still the potential for  claims to be reviewed more than once. Further, SSA officials said they  did not see a need to prevent multiple reviews of a case, in particular,  because some reviews are conducted before the decision is final and  others are conducted after the decision is final.", "SSA officials stated that opportunities exist to improve coordination  across offices conducting quality assurance reviews. We found that  several offices coordinated their work in some cases. For example, SSA\u2019s  Division of Quality and Office of Quality Review participate in a multi- office workgroup that addresses such issues as policy compliance across  the initial and hearings levels of the disability process. In addition, they  have also worked together on several studies, including a one-time  quality review of 454 claims that were denied at the initial determination  level, but were allowed as fully favorable at the hearings level. The Office  of Quality Review also reviews the content of selected training for judges.  In addition, the Division of Quality provided some initial input when the  regional inline review effort was being designed. Prior GAO work has  found that enhanced coordination can help to reduce overlap and improve  efficiency. Effective October 1, 2017, SSA created a new deputy  commissioner-level component, the Office of Analytics, Review and  Oversight. This agency reorganization moved six oversight offices into the  new component, including the Division of Quality and Office of Quality  Review. Officials said the new component will create opportunities for  improved coordination between these six offices. While this  reorganization creates the opportunity for SSA to assess many of its  quality assurance reviews, the regional quality review staff will not be  included in the new office, and it is too early to tell how this reorganization  will help manage the overlap between SSA\u2019s various quality assurance  reviews.", "In addition, SSA has struggled to sustain all of its quality assurance  reviews due to competing demands for the staff who perform them. For  example, SSA placed regional inline quality reviews on hold in September  2016 and again in December 2016, because officials said that the agency  needed staff to complete pending decisions before a change in the  medical listings for mental impairments took effect in January 2017.  Decisions not completed before the new listings took effect would have to  be redone. Also, the Office of Quality Review curtailed its Disability Case  Reviews in fiscal year 2016 to help prepare the oldest cases for hearings.  As a result, only the Appeals Council\u2019s review of appealed ALJ decisions  (requests for review) and the Division of Quality\u2019s quality assurance  reviews were active in 2016.", "Even as SSA has added quality assurance reviews, it has not  systematically evaluated the efficiency and effectiveness of all the  reviews to determine the extent to which they may be overlapping or  complementary. We found that reviews conducted by the four entities  have resulted in similar findings, raising questions about the efficiency of  these reviews. For example, during the same 3-year period (fiscal years  2013 through 2015), quality reviews conducted by all four entities found  problems with judges\u2019 assessment of a claimant\u2019s ability to perform work- related tasks, known as a residual functional capacity assessment. In  addition, all four entities found problems with the evaluation of medical  opinion evidence.", "Moreover, SSA has not conducted a cost-benefit analysis of the five  reviews. Officials said that there are no definite plans to do so, although  they may consider conducting such an analysis in the future. We found  that costs for the quality assurance reviews conducted in fiscal year 2015  were at least $23.7 million, and in fiscal year 2016 were at least $11.7  million (see table 4). By evaluating the quality assurance reviews to  determine the extent to which each is needed to monitor and improve  accuracy and consistency, SSA would be better positioned to meet its  goals within its resources.", "In addition, SSA continues to develop and implement initiatives aimed at  improving hearing decisions, without evaluating the potential for overlap  with existing quality assurance reviews. For example, as part of its  backlog reduction plan known as the Compassionate And Responsive  Services (CARES) plan, SSA is using computer algorithms for natural  language processing to analyze the text of disability decisions and flag  potential errors. Although the agency is piloting this effort in the Appeals  Council before expanding it to hearing offices, it did not conduct a cost- benefit analysis. SSA officials said that natural language processing could  be used to identify cases for further review, similar to its current selective  reviews, and that decision writers could use the tool to conduct their own  reviews of their draft decisions. SSA officials said that they do not  anticipate much overlap between the use of natural language processing  and OAO\u2019s pre-effectuation reviews. However, there could be potential for  overlap with regional inline reviews, which also review decisions drafted  by decision writers. Federal internal control standards state that  management should implement control activities through policies.  Periodically reviewing policies, procedures, and related control activities  for continued relevance and effectiveness in achieving objectives and  addressing related risks can help agencies meet this standard."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["SSA\u2019s disability programs provide more than $200 billion in benefits for  tens of millions of Americans annually, making it one of the largest  components of the nation\u2019s social safety net. The hearings and appeals  level of the disability decision-making process is particularly important  because about one in three people receiving Social Security disability  benefits are granted benefits at this level. Given the number of people  and the dollars at stake, it is crucial that claimants are treated fairly and  their applications are evaluated accurately and consistently across the  country, at all levels of the program.", "Some of the variation in allowance rates that we found across judges may  be expected, given the complexity of the cases and judges\u2019 decisional  independence. However, the persistent variation we observed over time,  even after accounting for various factors that could otherwise explain  allowance rates, might warrant additional attention. SSA is rightly  focusing on oversight of judges, but our work suggests that the agency\u2019s  emphasis on timeliness over accuracy in its public metrics and the  potential overlap in its quality assurance efforts may offer opportunities for  improving the accuracy and consistency of hearing decisions.", "First, this amount of variation in allowance rates underscores the need for  SSA to measure and hold itself accountable for accuracy and  consistency. However, without sharing performance information on the  accuracy and consistency of its hearings-level decisions, such as the rate  at which the Appeals Council agrees with a judge\u2019s decisions, SSA may  not be providing the public with adequate information on progress toward  its objective to improve the quality, consistency, and timeliness of its  disability decisions. Developing a set of performance measures that  includes the accuracy and consistency of hearings decisions will help  ensure the overall success of the program.", "Second, SSA has not systematically considered how each of its quality  assurance reviews helps the agency meet its objective to improve the  quality of hearings-level decisions. Although the planned consolidation of  multiple oversight and quality review offices is a positive step, it will be  important for SSA to consider the usefulness of the information yielded by  each quality assurance effort, as well as the costs associated with  conducting the effort. Evaluating the efficiency and effectiveness of  quality assurance activities can help ensure that SSA is using its  resources for maximum benefit toward its objective to improve the quality,  consistency, and timeliness of its disability decisions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to SSA:  The Commissioner of SSA should develop a set of public performance  measures, to include accuracy and consistency, as well as timeliness, of  administrative law judges\u2019 (ALJ) disability decisions. SSA could consider  whether existing quality review or monitoring efforts could provide suitable  data for such measures. (Recommendation 1)", "The Commissioner of SSA should systematically evaluate the efficiency  and effectiveness of its quality assurance reviews and take steps to  reduce or better manage any unnecessary overlap among them to ensure  strategic use of resources. Such steps could include enhancing  collaboration where reviews overlap or only conducting the reviews that  are most efficient and effective in achieving agency goals for improving  accuracy and consistency of ALJ disability decisions. (Recommendation  2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["In commenting on a draft of this report, SSA agreed with our two  recommendations to (1) establish public performance measures for the  accuracy and consistency of administrative law judges\u2019 decisions, and (2)  systematically evaluate its various quality assurance reviews and take  steps to reduce or better manage any unnecessary overlap among them.  SSA stated that it would address both recommendations as part of a  comprehensive assessment and refinement of its oversight roles and  processes. SSA made several other comments about one of our  conclusions and our analysis of variation in administrative law judge  allowance rates, which we discuss below. SSA also provided technical  comments, which we incorporated into the report as appropriate.", "In its comments, SSA described its evolving oversight activities at the  hearings level, including providing policy guidance and training for judges,  capturing and utilizing data to gain a better understanding of trends and  challenges, and implementing additional oversight review processes, all  of which we discussed in our report. SSA\u2019s comments acknowledged that  our report describes the steps that the agency has taken to improve  oversight, but disagreed with our conclusion that SSA emphasizes  timeliness over accuracy. Our final report clarifies that we came to this  conclusion based on a review of the performance measures the agency  shares with the public in its annual strategic plan and performance  reports. As we state in the report, SSA has employed a range of efforts to  monitor the accuracy and consistency of hearings decisions, but it lacks  performance measures to report publicly on these efforts.", "Regarding our analysis of variation in ALJ allowance rates, SSA raised a  concern about our finding (on page 26 of the final report) that claimants  whose hearings were held in person were slightly more likely (by about  2.8 percentage points) to be allowed benefits than a typical claimant with  a hearing held by videoconference. SSA cited its own internal analysis,  which found a small (0.6 percentage-point) difference in allowance rates  between in-person and videoconference hearings after controlling for a  number of factors. It is not surprising, however, that our estimates are  somewhat different, since SSA\u2019s internal analysis differs from ours in  several ways. The primary purpose of our statistical analysis was to  isolate variation in allowance rates due to the unique judge or hearing  office assigned to each claim. To do this, we developed a multilevel  model using 9 years of data that controls for judge, hearing office, and  claimant-level factors associated with allowance rates. On the other hand,  SSA\u2019s analysis was specifically designed to look at the difference in  allowance rates between in-person and video hearings. SSA\u2019s analysis  also covered a shorter, more recent period of time (part of fiscal year  2015, fiscal year 2016, and part of fiscal year 2017), than our study (fiscal  years 2007 through 2015). Additionally, the version of the model SSA  cited in its comments included hearings held in person or by  videoconference only in regular hearing offices, whereas our analysis  included hearings held in National Hearing Centers as well as regular  hearing offices and controlled for the type of hearing office. These  differences notwithstanding, we agree with SSA that the estimated model- adjusted difference in allowance rates between in-person and  videoconference hearings in both GAO\u2019s and SSA\u2019s analyses could  potentially be explained by unmeasurable factors.", "In addition, SSA noted that our measure of variation in judge decisions  focused on allowance rates at the extremes of the distribution. Given that  our charge was to explore the extent of variation in allowance rates  across judges, we believe it was appropriate and important to measure  the range of allowance rates between judges with high allowance rates  (at the 95th percentile) and those with low allowance rates (at the 5th   percentile). This would be more conservative than an approach that looks  at allowance rates across all judges, including potential extreme values;  and more nuanced than an approach that looks at the number of judges  whose allowance rates are higher or lower than a given threshold.  Further, our analysis shows that unadjusted allowance rates at the 95th  percentile declined over the period of our analysis, from a high of 96  percent in fiscal year 2008 to 82 percent in fiscal year 2015. We saw a  comparable decline in allowance rates after applying our multivariate  model. To provide additional context, our report figures also show the  middle of the distribution (the 25th and 75th percentiles), as well as the  average allowance rates. We have also added information to our report  further describing this middle range.", "Finally, SSA noted that our analysis was not weighted by the number of  determinations a judge made, suggesting that judges who decided very  few claims, for example, could affect the range in allowance rates or the  trends. As we show in Appendix I, Table 7, only 2.3 percent of the judges  in our study population heard fewer than 250 claims per year. This group  of judges had an unadjusted allowance rate of 61.9 percent, very similar  to the allowance rate among judges who heard 500-699 claims per year  (61.6 percent). Furthermore, the statistical methods we used to estimate  the distributions of allowance rates (multilevel models) adjust the  estimates for judges with fewer claims by weighting them more heavily  toward the overall approval rate. This mitigates against judges with  smaller caseloads, and therefore higher sampling variation, from  contributing overestimated allowance rates that might have inflated our  estimated variation across judges.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Commissioner of Social Security, and  other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to assess (1) the extent to which allowance rates  vary across administrative law judges, and any factors that are associated  with this variation, and (2) the extent to which the Social Security  Administration (SSA) has processes to monitor the accuracy and  consistency of hearings decisions.", "To answer these objectives, we reviewed SSA policies and procedures  related to administrative law judge (ALJ) disability hearings and decisions;  manuals and documents describing SSA\u2019s case processing systems for  each level of SSA\u2019s disability decision-making process, and guidance  and training provided to judges for making disability decisions. We  interviewed SSA officials in several offices within the Office of Disability  Adjudication and Review (ODAR), including the Office of the Chief  Administrative Law Judge and the Office of Appellate Operations, as well  as conducted semi-structured interviews with Regional Chief  Administrative Law Judges in each of SSA\u2019s 10 regions. We also  observed administrative law judge hearings in one of SSA\u2019s five National  Hearing Centers, in Falls Church, Virginia, (hearings in these offices are  conducted by videoconference), as well as in two of SSA\u2019s regular  hearings offices, in Washington, D.C., and Seattle, Washington. The  purpose of these observations was to gain a better understanding of the  hearings process in practice, and to inform our scope and methodology  for this study. We selected these sites, which are not generalizable to the  population of all hearing offices, for a number of reasons, primarily: (1) to  observe hearing offices in different geographic locations and observe  both in-person and video teleconference hearings, and (2) to select sites  at which a cross-section of cases with different types of disabilities and  impairments were available. We attended hearings involving both adult  and child claimants with a mix of physical and mental impairments.", "This appendix is divided into three parts. The first describes our data  sources and analysis of allowance rates across judges and associated  factors, the second describes our multivariate statistical model, and the  third describes our work related to our second research objective on  SSA\u2019s processes to monitor the accuracy and consistency of hearings  decisions."], "subsections": [{"section_title": "Analysis of Variation in Allowance Rates across Judges and Associated Factors", "paragraphs": ["For this objective, we analyzed data from two primary sources from fiscal  years 2007 through 2015: SSA\u2019s administrative data systems for the initial  and hearings levels of the disability decision-making process, and the  agency\u2019s personnel data system. We also obtained other SSA  administrative data on staffing levels and numbers of pending cases in  each hearing office. Finally, we obtained data on state poverty and  unemployment rates from the U.S. Census Bureau and the Bureau of  Labor Statistics, respectively."], "subsections": [{"section_title": "SSA Administrative Data Systems", "paragraphs": ["To analyze information on all adult disability decisions made by  administrative law judges from fiscal years 2007 through 2015\u2014the most  current data available at the time of our analysis\u2014we compiled claims  data from several SSA administrative data systems. These data  contained information on the outcomes of the disability decisions and the  characteristics of claims associated with each decision. Specifically, the  information was drawn from the following systems:", "831 File and Structured Data Repository: The 831 File pertains to  the initial and reconsideration level of the disability determination  process, within the state Disability Determination Services (DDS).  Data on claimant characteristics we used from this system include the  date of the claimant\u2019s initial application for benefits and the claimant\u2019s  self-reported years of education. We also received a limited set of  data captured from the claimant\u2019s disability application in SSA\u2019s  electronic case folder system (Structured Data Repository), including  the number of years a claimant reported being employed out of the 15  years before becoming disabled.", "Case Processing and Management System (CPMS): This system  pertains to the hearings level and was our primary source of  information on hearing outcomes, claim, and claimant characteristics.  Specifically, this system provided information on claim type (i.e.,  Disability Insurance, DI; Supplemental Security Income, SSI; or  concurrent claim); the outcome of the claim (i.e., dismissed, allowed,  or denied) and the date the decision was made; the unique  identification number of the administrative law judge (ALJ) who made  the decision; whether a medical expert or vocational expert attended  the hearing; whether the claimant was represented; the hearing office  where the claim was decided and the type of hearing office (i.e.,  hearing office or National Hearing Center); the claimant\u2019s date of birth;  the primary impairment at the time of the hearing level; the presence  of a secondary impairment; and whether the case was classified as  being a critical case\u2014that is, a case requiring special processing,  such as a terminal illness.", "We used case identifiers to link the information from each of these  databases that pertained to each disability decision we analyzed."], "subsections": []}, {"section_title": "Federal Personnel and Payroll System", "paragraphs": ["We obtained data from SSA\u2019s Federal Personnel and Payroll System  (FPPS) database on all administrative law judges who were employed by  the agency at any time during the period from January 1, 2005, through  December 31, 2015. We obtained information on each judge, such as  their date of appointment as an ALJ and the type of appointment (regular  career appointment or non-permanent); service computation date; and  prior position titles within SSA, if any."], "subsections": []}, {"section_title": "Other SSA Administrative Data", "paragraphs": ["We obtained summary-level data, as of January 2017, from SSA on  staffing levels (numbers of ALJs, decision writers, and other support staff)  at each hearing office for each fiscal year in our study period (fiscal years  2007 through 2015) from SSA\u2019s Payroll Operational Data Store system.  We also obtained data on the numbers of cases left pending at the end of  each fiscal year (including the number of cases pending for more than  270 days). SSA provided those data from a management information  report that uses CPMS data."], "subsections": []}, {"section_title": "Economic Conditions Data", "paragraphs": ["We used publically available estimates of state poverty rates for each  year in our analysis (calendar years 2007 through 2015) from the U.S.", "Census Bureau\u2019s American Community Survey (ACS). We considered  using estimates at the county level but that approach had limitations.  First, we would have been limited to using 3-year or 5-year estimates for  all counties, because 1-year ACS estimates are only available for areas  with populations of 65,000 or more. Second, the Census Bureau cautions  against using estimates for particular time periods that do not align with  the periods of its estimates. Although using state-level estimates reduced  the geographic precision of the estimates, we gained precision by having  annual estimates and the ability to measure potential variation in poverty  rates over narrower time intervals.", "We also used publically available estimates of state unemployment rates  in calendar years 2007 through 2015 from the Bureau of Labor Statistics\u2019  Local Area Unemployment Statistics data. This variable allowed us to  control for labor market conditions over time."], "subsections": []}, {"section_title": "Data Reliability", "paragraphs": ["SSA constructed custom files for GAO from several SSA datasets in  response to our data requests. We assessed the reliability of the data  used in our analyses through electronic testing, analyzing related  database documentation, examining the SAS code used by SSA to  construct the custom files, and working with agency officials to reconcile  discrepancies between the data and documentation that we received. We  determined that the 831, Structured Data Repository, and CPMS data on  ALJ decisions and claimant characteristics and the FPPS data on ALJ  appointments were sufficiently reliable for the purposes of describing the  extent of variation in the outcomes of ALJ decisions. We also determined  that SSA\u2019s data on pending caseloads and ALJ and decision writer  staffing, by year and hearing office, were sufficiently reliable for the  purpose of describing hearing office characteristics. Finally, we  determined that ACS data on state poverty rates and BLS data on state  unemployment rates were sufficiently reliable for the purposes of  describing these state economic characteristics."], "subsections": []}, {"section_title": "Scope of Analysis", "paragraphs": ["Our analyses of ALJ decisions excluded various types of decisions from  the CPMS data because they were out of scope for our research  objectives (e.g., child cases, non-disability cases, or cases that were  decided by SSA staff who were not ALJs) or were not typically randomly  assigned to judges. We selected cases that should have been assigned  randomly to judges, according to SSA policy, because that random  assignment made it more likely that variation in allowance rates across  judges in our multivariate analysis reflects the unique causal effect of  having a particular judge hear a case, rather than other factors that also  vary across judges. Our exclusion criteria were similar to those used by  an internal SSA study of ALJ allowance rates, conducted in 2017. We  excluded cases that were:", "Dismissed. Cases can be dismissed for reasons not related to the  merits of the case and that are usually beyond the ALJ\u2019s control\u2014for  example, the claimant\u2019s failure to file a timely request or to appear at  the scheduled hearing (without good cause), or the claimant\u2019s death  before the hearing. In addition, data on key factors for these cases,  such as the claimant\u2019s impairment, were missing. From fiscal years  2007 through 2015, 1,007,526 claims (16 percent of all claims) were  dismissed.", "Made \u201con the record\u201d and not randomly assigned to judges.  While most appeals are decided after an ALJ hearing, ALJs and  senior attorney adjudicators (SAA) have the authority to issue on-the- record decisions. These are decisions where a hearing is not  necessary because the documentary evidence alone supported a fully  favorable decision. SSA has created screening criteria, such as the  claimant\u2019s age (50 and older) and specific impairments, to help  identify possible on-the-record decisions earlier in the process. ALJs  and SAAs can also issue on-the-record decisions for cases involving  critical need, and claimants and their representatives can request that  the ALJ or SAA issue an on-the-record decision. These cases are not  assigned randomly to judges. From fiscal years 2007 through 2015,  716,574 claims (11 percent of all claims) were on-the-record  decisions, although SSA has issued fewer on-the-record decisions in  more recent years.", "Issued for children. We excluded claimants younger than 18 at the  date of the initial application. We also excluded claimants with missing  or invalid age values. From fiscal years 2007 through 2015, 492,158  claims (8 percent of all claims) were for people under 18 or with  missing or invalid age values. We excluded child cases from our  analysis because they involve different evaluation criteria.", "Remanded back to a judge from SSA\u2019s Appeals Council (or  federal court). These cases represent decisions that were corrected  after an order from the Appeals Council or a federal court after the  original ALJ\u2019s decision. In these cases, judges are often addressing a  narrow set of issues identified in the remand order. Remanded cases  are also not assigned randomly to judges, since the Appeals Council  generally sends them back to the judge who originally issued the  decision. However, SSA\u2019s Office of the Inspector General (OIG) in  2017 found that about half of the remanded cases in its sample were  assigned to a different ALJ than the original ALJ. From fiscal years  2007 through 2015, 293,971 claims (less than 5 percent of all claims)  were remands.", "Made by senior attorney adjudicators who were not  administrative law judges. We excluded decisions made by SAAs.  SSA implemented a program in 2007 whereby SAAs located in  hearing offices across the country could issue fully favorable on-the- record decisions. According to SSA, this allowed ALJs to focus on  cases that are more complex or require a hearing. From fiscal years  2007 through 2015, 227,133 claims (4 percent of all claims) were  decided by SAAs.", "Appeals of continuing disability reviews (CDR). These cases  represent decisions about whether or not to continue benefits for  claimants who were previously found eligible for the program. As  such, they involve different evaluation criteria. From fiscal years 2007  through 2015, 245,862 claims (4 percent of all claims) were appeals  of CDRs.", "Non-disability cases. These cases include Social Security retirement  and survivor benefit decisions. We excluded such cases because they  involve different evaluation criteria from disability claims and represent  a small minority of decisions at the hearings level. From fiscal years  2007 through 2015, 25,293 claims (less than 0.5 percent of all claims)  were for non-disability cases.", "Decided by judges with limited experience. We excluded cases  decided by judges within the first year (365 days) after their  appointment as an ALJ, as calculated by the difference between their  date of appointment and the date of the decision on each claim. We  excluded these decisions to help ensure that variation we identified in  allowance rates was not due to the judges\u2019 more limited experience  deciding Social Security disability claims. From fiscal years 2007  through 2015, 574,307 claims (approximately 9 percent of all claims)  were decided by judges with limited experience.", "In total, our exclusion criteria reduced the number of records analyzed by  about half. Specifically, out of a universe of about 6.3 million records, our  study population included about 3.3 million decisions. Nevertheless, the  overall allowance rate for our study population over fiscal years 2007  through 2015 was 62 percent, very close to the overall allowance rate for  the entire population of claims during this period, which was 64 percent."], "subsections": []}, {"section_title": "Calculation of Allowance Rates", "paragraphs": ["We calculated allowance rates by dividing the number of favorable  decisions by the total number of decisions (both unfavorable and  favorable). We calculated allowance rates for different units of analysis:", "Overall, by program type (Disability Insurance, Supplemental Security  Income, and concurrent) and by year and for all years and program  types pooled together,", "At the judge level, by year and for all years pooled together, and", "At the hearing office level, by year and for all years pooled together.", "When analyzing our data at the case level, we identified whether the case  was favorable or unfavorable to the claimant (that is, whether the claimant  was allowed benefits or not). We did not include cases that were  dismissed in our study population for two reasons. First, as discussed  above, these cases can be dismissed for reasons not related to the merits  of the case, and without a review of the medical evidence. Second, SSA\u2019s  data on dismissed cases are limited, partially because cases are  dismissed without a review of medical evidence. For example, the  impairment code from the hearings-level decision was missing for virtually  100 percent of dismissed cases.", "For concurrent claims\u2014those in which an individual is applying for  Disability Insurance (DI) and Supplemental Security Income (SSI)  benefits\u2014we considered a case an allowance if the claimant was  approved for either or both programs. Our classification of allowances for  concurrent cases differs from SSA\u2019s usual practice (although a 2017  internal study of ALJ allowance rates used the same method as ours).  SSA officials said they usually allow the SSI decision to \u201ccontrol\u201d the  overall outcome of the case. That is, SSA classifies a concurrent claim as  an allowance if the SSI decision is an allowance, regardless of the  outcome for the DI claim. Officials said that they chose this method  primarily for convenience. This results in a different classification of some  cases in which the SSI claim was denied but the DI claim was allowed. In  such cases, the claimant is receiving a benefit as a result of their  concurrent disability claim but would be classified in SSA\u2019s data as a  denial. However, the resulting differences in the number of allowances is  very small\u2014less than 4,000 claims over fiscal years 2007 through 2015\u2014 and the different definitions did not substantively affect allowance rates in  any year."], "subsections": []}, {"section_title": "Random Assignment of Cases to Judges", "paragraphs": ["SSA policy states that cases are generally assigned on a \u201cfirst in, first out\u201d  basis, meaning that cases are assigned to judges in the order in which  they are received. Administrative law judges are assigned cases on a  rotational basis, with the oldest case in the backlog given to a judge who  most recently decided a case. Therefore, as noted in prior research, the  initial assignment of cases to judges is random (conditional on applying at  a given hearing office at a given time). Judges do not select their cases,  nor are claimants able to request another judge after one is assigned.  Claimants are generally assigned to hearing offices based on their ZIP  code, although some claimants in hearing offices with higher numbers of  pending claims may be transferred to one of SSA\u2019s five National Hearing  Centers. In those cases, hearings are conducted by videoconference  rather than in person, as is traditionally done in SSA\u2019s regular hearing  offices. However, the claimant may opt out of a video conference hearing  within 30 days of receiving a written notice acknowledging the request for  a hearing.", "There are some exceptions to the \u201cfirst in, first out\u201d rule, such as cases  that are likely to be dismissed or decided on the record (without a  hearing) and critical cases (including terminal illness cases and veterans  who have a 100-percent permanent and total disability compensation  rating). However, as discussed previously, we have excluded all major  categories of exceptions but critical cases from our analyses, and  included a variable to identify critical cases in our analyses."], "subsections": []}, {"section_title": "Assignment of Claims to Steps in SSA\u2019s Sequential Disability Decision-Making Process", "paragraphs": ["SSA\u2019s disability decision-making process includes five sequential steps,  and one part of our analysis was to determine the step at which each  decision was made. In consultation with SSA officials, we used a code in  CPMS\u2014called the regulation basis code\u2014to assign each claim to a  particular step.", "Each claim in CPMS has between one and four regulation basis codes,  depending on whether the claim was for a single program (DI or SSI), or a  concurrent claim for both. We assigned each claim to one of the five  steps in SSA\u2019s disability decision-making process, based on its regulation  basis code. Each regulation basis code is associated with one of five  steps. Therefore, if a claim had just one regulation basis code, we  assigned it to the corresponding step. If a claim had more than one  regulation basis code, we used a series of decision rules to select the  most appropriate step. Specifically, claims for a single program have up  to two regulation basis codes listed, and we used the code that matched  the outcome of the case and/or the latest step. We used a similar  method for concurrent claims.", "We found that approximately 19 percent of all allowances occur at step 3,  when SSA determines whether a claimant\u2019s impairment meets or is  equivalent to an impairment listed in SSA\u2019s Listing of Impairments. Most  (80 percent) of all allowances are made at the final step (step 5), when  SSA determines whether the claimant can do any work in the national  economy, given the limitations of their impairment and their age,  education, and work experience.", "Nearly a third (28 percent) of denials are made at step 4, where SSA  determines whether the claimant can do their past work, and 62 percent  of denials are made at step 5. There are some differences between DI  claims and SSI claims in the distribution of allowances and denials over  the five steps. SSI allowances occur at step 3 to a greater extent than DI  allowances, while SSI denials occur at step 5 to a greater extent than DI  denials (see table 5 below)."], "subsections": []}]}, {"section_title": "Statistical Model of Variation in Allowance Rates across Judges and Associated Factors", "paragraphs": ["We developed our multivariate statistical analyses in consultation with  GAO statisticians, economists, and social scientists and SSA officials and  experts. Our analysis was also informed by a comprehensive review of  the literature pertaining to judicial decision-making and, in particular,  adjudication for SSA\u2019s disability programs. Specifically, we reviewed more  than 90 potentially relevant peer-reviewed academic journal articles,  government reports, and nonprofit association and think tank white  papers. We selected 39 of these studies or reports for a detailed review of  the scope and methodology, key factors or variables used in any  empirical analyses, and other relevant findings. We also reviewed  relevant SSA Office of the Inspector General (OIG) reports and consulted  with SSA and OIG officials, and reviewed prior GAO reports that modelled  judicial outcomes. Our statistical model included variables that are  either direct or approximate measures for: (1) claimant characteristics that  represent criteria used in the disability decision-making process, (2) judge  characteristics, (3) other participants in the decision-making process, (4)  SSA administrative characteristics, and (5) economic characteristics of  the claimant\u2019s state.", "Our analysis was purely statistical, in that we did not conduct the legal  analysis needed to reach conclusions about what legal factors might have  affected a judge\u2019s decision or whether the decision that was reached in  any particular case was correct. Similarly, we are not making any  predictions about the likely or correct outcome of future individual  decisions. Each case is unique in both its facts and circumstances and  must be examined on its own merits.", "We included factors that represent criteria used in decision-making  process, such as the type of claim (DI, SSI, or concurrent) and the  claimant\u2019s age, years of education (grouped into equivalent levels:  less than high school, high school, some college, and college or  higher), and primary impairment.", "We included factors related to the judge\u2019s employment as an ALJ,  such as the year appointed as a judge, the type of appointment  (whether they had a career or temporary, non-permanent  assignment), and any prior work history at SSA (specifically, whether  they were an attorney or held another position prior to being  appointed as an ALJ).", "Other participants in the decision-making process", "We included factors that represent other participants in the decision- making process, such as the claimant\u2019s use of an attorney or non- attorney representative, or the testimony of a medical or vocational  expert at the hearing. Our prior work has shown, for example, that  claimants who were represented by an attorney or a person who is  not an attorney (such as a relative or professional disability  representative) were more likely to be allowed disability benefits than  claimants who had no representative.", "We included factors related to SSA\u2019s administration of its disability  programs, such as the hearing office in which the claim was decided,  whether the claim was heard in one of 10 states that do not have a  reconsideration step between the initial state-level Disability  Determination Service decision and a hearing before an ALJ, and  the percentage of pending cases at the hearing office that were  pending for more than 270 days (SSA\u2019s definition of a \u201cbacklogged\u201d  case).", "Finally, we assessed economic characteristics of the state in which  the claimant resided because some prior research suggests that such  factors may be associated with disability application and allowance  rates. Specifically, we analyzed:", "The unemployment rate in the claimant\u2019s state as of the year of  each decision in our analysis, from the Bureau of Labor Statistics\u2019  Local Area Unemployment Statistics data. We selected this factor  in order to account for the labor market conditions where  claimants live.", "The poverty rate in the claimant\u2019s state as of the year of each  decision in our analysis, from the Census Bureau\u2019s American  Community Survey (ACS)."], "subsections": [{"section_title": "Goals of Analysis", "paragraphs": ["The primary goal of our analysis was to isolate variation in allowance  rates due to the unique judge or hearing office assigned to each claim by  controlling for multiple factors that could otherwise affect this variation.  Some variation in allowance rates across judges and hearing offices  could reflect the distribution of other factors that are correlated with  allowances. For example, judges who hear disability cases in regions of  the country with higher obesity rates\u2014a known risk factor for disability\u2014 may appear to have higher allowance rates than those in regions with low  obesity rates. Because judges\u2019 decisions to allow benefits may be related  to this or other factors, simple univariate comparisons of allowance rates  across judges may reflect characteristics of the cases that judges hear.", "To help isolate the potential unique effects of judges, we used multilevel,  multivariate statistical models that held constant various factors that could  have been associated with allowance rates. We held constant variables  available in SSA and other public data sources that were relevant to the  claim appeals process, in order to estimate the amount of potential  residual variation across judges."], "subsections": []}, {"section_title": "Statistical Model", "paragraphs": ["The data we assembled had a multilevel structure, with applications for  disability benefits clustered within the same judges and hearing offices.  Judges were associated with multiple hearing offices, because judges  sometimes decided cases in multiple hearing offices during the period of  our analysis. For example, judges could travel to more remote sites to  hear cases on a part-time basis.", "The data and outcome of interest suggested that a multilevel or mixed  logistic regression model would adequately reflect the data generation  process. We developed a mixed model that represented the grouping  variables\u2014judge, hearing office, and primary diagnosis code\u2014with  random intercepts, similar to prior research. We modeled group variation with random effects primarily for parsimony. Modeling group  variation with fixed effects would have required estimating several  thousand explicit parameters, one for each group level, which would have  consumed many degrees of freedom. Estimating the amount of variation  across groups then would have required interpreting many contrasts  between pairs of fixed effect estimates. In contrast, modeling group  variation using random effects allowed us to represent the variation with  probability distributions and a small number of summary (hyper)  parameters, such as the standard deviation of the judge random effect.", "Substantively, random effects accurately represented the SSA policy of  randomly assigning judges to cases in our study population, using a \u201cfirst  in, first out\u201d method. Moreover, we modeled variation across judges and  hearing offices as random, which implies that we seek to make inferences  about a larger, hypothetical population of judges and hearing offices that  could exist if we replicated the study in the future. This seems  appropriate, because the application review process could be repeated  across many new judges and hearing offices in the future. We do not  seek to make inferences limited to the judges and hearing offices at the  particular time we assembled data.", "We held constant case, judge, and hearing office characteristics using  covariates with fixed parameters. The smaller number of parameters  associated with these covariates made a fixed effects approach easier to  apply and interpret. We assumed that the covariate effects did not vary  across groups, so that only the model\u2019s intercept varied randomly. We  had no prior expectation that specific covariate effects should have varied  across groups. Moreover, increasing the number of random effects would  have increased the complexity of the model and could have made it hard  to estimate computationally.", "We viewed the covariates primarily as controls for isolating variation  across judges and offices. We did not attempt to build a comprehensive  model that correctly specified how all of the covariates were causally  ordered and related to each other and the probability of an allowance. As  a result, our estimates of these parameters may not be consistent with  those obtained from a more comprehensive modeling effort, or from  analyses designed to estimate the causal effects of particular variables,  such as the use of videoconferences. In the body of the report, we  present alternative explanations and provide context to avoid interpreting  the covariate effects as with a high degree of causal certainty. For  example, we note that claims with legal representation may have higher  approval rates if representatives accept claims with greater merit and,  therefore, a greater chance of compensation. Below, we test alternative  model specifications for covariates where the causal ordering may be  ambiguous, in order to avoid biasing estimates of the judge and office  parameters of primary interest.", "Certain variables and parameters were applied across multiple versions  of the model (described below). Let Y denote the allowance or denial  decision for claimant i at any step of the appeals process, with Y = 1 if the  ALJ allowed the claim and 0 otherwise. Each model took a typical  hierarchical generalized linear form for a binary outcome:  The probability of allowance, \u03c0, was a function of covariate vectors  measuring characteristics of claims, Xijo, characteristics of the ALJs  assessing those claims, Xjo, and characteristics of the hearing offices  where the decision occurred, X. Claimants were clustered in j = {1, 2, \u2026 ,  J} judges, and judges were clustered in o = {1, 2, \u2026, O} offices. g is the  inverse logistic link function.", "We included normally distributed random effects, \u03b5(.), for each judge,  office, and the claimant\u2019s primary diagnosis, indexed by diagnosis codes  d = {1, \u2026 , D}. Random effects allowed the intercept for each group, \u03b1(.) =  \u03b1 + \u03b5(.), to vary around the population average intercept, \u03b1, as a function  of the group\u2019s variance, \u03c3(.):  To make interpretation and computation easier, we classified all  continuous covariates into substantively meaningful categories, and set  the omitted reference categories to the sample modes. This  transformation implied that the random effect variance, \u03c3(.), described  variation across judges and offices for a claim that had the modal value of  all other covariates in the model and sample. The reference claim  remained constant across models fitted to different subsamples, in order  to make inferences about a claim that was typical for the study  population.", "The center of the data at the modes, \u03b1, may not necessarily correspond  to an actual claim. For example, all judges do not practice at the modal  hearing office, and the modal age for the study population may not be  typical for claims made in the modal office. Nevertheless, rescaling  facilitates estimation and interpretation of the model, because all  inference can be done on \u03b1 and \u03b1(.) directly, using the random effect  variance, \u03c3(.), without transformation. This allowed us to concisely  describe variation in allowance rates for a hypothetical, typical claim in  the joint covariate distribution.", "In the body of this report, we summarized variation across judges and  offices, holding constant other covariates at their sample means, using  the estimated distribution of group intercepts scaled in logits:  To describe variation across groups on the probability scale, we  estimated the quantiles bounding the middle 50 and 90 percent of the  group density on the logit scale and then transformed them using the  inverse logistic function, g. This reference case does not represent a  feasible claim, because the means of the categorical covariates are just  the sample proportions. However, this approach complements the  centering of the sample, which allows the group variance parameters,  \u03c3(.), to represent variation across groups for a feasible reference case at  the sample modes."], "subsections": []}]}, {"section_title": "Covariates and Subsamples", "paragraphs": ["We fit a sequence of models using different covariates and subsamples,  listed below. Fitting several models allowed us to assess how simplifying  assumptions, such as ignoring the step at which ALJs made allowance  decisions, affected our results. This approach also assessed the stability  of estimates across multiple runs of the computational model estimation  methods. We describe the substantive meaning of the covariates above,  and give their exact measurement when reporting results in table 7 below.", "Model 1: Intercepts Only", "Model 2: Add Covariates  (Unemployment and poverty vary at the state level, not at the office level,  but we include them with the office covariates for simplicity.)", "Model 3: Claims Decided at Steps 4 or 5  We estimated Model 2 for only those claims decided at steps 4 or 5,  according to each claim\u2019s Regulation Basis Code. In these last two steps  of the sequential disability decision-making process, the judge determines  whether claimants retain the ability to perform their past work or other  work in the national economy, given the limitations of their impairment  and their age, education, and work experience. SSA officials provided  methods to map these codes to steps of the appeals process. Estimating  the model for decisions at steps 4 or 5 allowed all parameters to vary at  these steps versus all steps in the pooled sample. For example, diagnosis  may be less strongly associated with allowances at step 5 than at step 3,  while the claimant\u2019s age may be more strongly associated.", "Models 4-6: Stratify by Year of Decision and Claim Type  To assess how the amount of variation across judges and offices has  changed over time, we estimated Model 2 separately for each year of  decision, claim type, and the cross-classification of these variables.  Stratified models allowed all parameters to vary across claim types and  years.", "Model 7: Exclude Potentially Endogenous Covariates  We excluded covariates from Model 2 that may not be exogenous to the  probability of approval. These include representation by an attorney or  other person and the presence of a medical or vocational expert. Claims  with legal representation may have higher approval rates if  representatives tend to accept claims with greater merit and, therefore, a  greater chance of compensation. (Representatives typically receive a  share of their client\u2019s benefits as compensation.) According to SSA  officials, medical and vocational experts may be more likely to testify at a  hearing, depending on the judge\u2019s expected ruling on the case. Although  judges generally have discretion about whether to involve medical and  vocational experts, judges are required to seek the opinion of a medical  expert in certain cases. For example, a judge must have a medical expert  provide an opinion if the judge is considering allowing benefits because  the claimant\u2019s impairment may be medically equivalent to one in SSA\u2019s  Listing of Impairments. Excluding these covariates avoids potentially  biasing estimates of the judge and office parameters of primary interest."], "subsections": []}, {"section_title": "Results", "paragraphs": ["We provide the estimated distributions of allowance rates across judges,  hearing offices, and primary diagnoses, holding all other covariates at  their means, in table 6 below. Each row in the table lists results for one  specification of the model described above. We derived quantiles of the  distributions across groups with the data and estimated model  parameters, using the methods above. The standard deviations of the  allowance rates on the logit scale are explicit parameters in the model  and were directly estimated with the fixed coefficients. We used these  distributions to describe variation across judges, offices, and diagnoses in  the body of this report and in figures, where we interpret the results in  more detail.", "Table 7 below provides estimated odds-ratios of allowances for the  factors other than judge, hearing office, and diagnosis in our primary  model of ALJ allowance rates (Model 2 above), along with sample  distributions and raw allowance rates. We used the primary model to  support our findings in the body of this report, where we interpret the  results below in more detail. Our model included variables that are  measures or approximate measures for (1) claimant characteristics that  represent criteria used in the disability decision-making process, (2) judge  characteristics, (3) other participants in the decision-making process, (4)  SSA administrative characteristics, and (5) economic characteristics of  the claimant\u2019s state. The interpretation of the odds ratio for a particular  variable depends on whether the variable is a dummy variable or a  categorical variable. For dummy variables, a statistically significant odds  ratio that is greater/less than 1.00 indicates that claimants with that  characteristic are more/less likely to be allowed than claimants without it.  For categorical variables, a statistically significant odds ratio that is  greater/less than 1.00 indicates that claimants in that category are  more/less likely to be allowed than the claimants in the reference  category."], "subsections": []}, {"section_title": "Evaluation of SSA\u2019s Processes to Monitor Accuracy and Consistency in Hearings Decisions", "paragraphs": ["For objective 2, we reviewed relevant federal laws, regulations, and  documentation, and collected testimonial evidence from SSA officials to  describe and evaluate the processes that SSA uses to monitor hearing  decisions, detect variation, and improve accuracy and consistency. We  interviewed SSA officials at different levels, including officials at  headquarters, regional, DDS, and field office levels. We reviewed  documents such as SSA\u2019s Hearings, Appeals, and Litigation Law  (HALLEX) manual, policy memoranda issued by the Chief Administrative  Law Judge, monitoring and quality assurance reports, user manuals and  guides for electronic tools, SSA OIG reports, and descriptions of  processes that are under development. We assessed these monitoring  efforts against federal internal control standards and our management  and evaluation guide for assessing fragmentation, overlap, and  duplication in government programs. We also reviewed SSA\u2019s annual performance plans from fiscal year 2006 through fiscal year 2017 to  identify performance measures the agency has established to improve  the accuracy and consistency of its hearings decisions. We evaluated the  current performance measures using key attributes of performance  measures used in prior GAO work and federal internal control  standards. In addition to interviews with agency officials, as described  above, we also interviewed officials from organizations representing  judges, disability claimants, and representatives to obtain their  perspectives on SSA\u2019s efforts to monitor and improve accuracy and  consistency."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Erin M. Godtland, Assistant  Director; Rachael Chamberlin, Analyst-in-Charge; Dana Hopings, LaToya  King, Stephen Komadina, Rhiannon Patterson, and Jeff Tessin made  significant contributions to the report. In addition, Daniel Bertoni, Deborah  Bland, David Chrisinger, Melinda Cordero, Holly Dye, Bill Egar, Alex  Galuten, Benjamin Licht, Serena Lo, Mimi Nguyen, Samuel Portnow,  Sheila McCoy, and Shana Wallace made valuable contributions."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-698", "url": "https://www.gao.gov/products/GAO-18-698", "title": "Whistleblower Program: IRS Needs to Improve Data Controls for Some Award Determinations", "published_date": "2018-09-28T00:00:00", "released_date": "2018-10-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect $3.6 billion since 2007, according to IRS. IRS pays qualifying whistleblowers between 15 and 30 percent of the proceeds it collects as a result of their information. However, until February 9, 2018, IRS did not pay whistleblowers for information that led to the collection of FBAR penalties.", "GAO was asked to review how often and to what extent whistleblower claims involve cases where FBAR penalties were also assessed. Among other objectives, this report (1) describes the extent to which FBAR penalties were included in whistleblower awards prior to the statutory change in definition of proceeds; (2) examines how IRS used whistleblower information on FBAR noncompliance, and how IRS responded to the statutory change in definition of proceeds; and (3) describes the purposes for which IRS collects and uses FBAR penalty data, and assesses controls for ensuring data reliability. GAO reviewed the files of 132 claims closed between January 1, 2012, and July 24, 2017, that likely included FBAR allegations; analyzed IRS data; reviewed relevant laws and regulations, and IRS policies, procedures and publications; and interviewed IRS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Prior to February 9, 2018, when Congress enacted a statutory change requiring the Internal Revenue Service (IRS) to include penalties for Report of Foreign Bank and Financial Accounts (FBAR) violations in calculating whistleblower awards, IRS interpreted the whistleblower law to exclude these penalties from awards. However, GAO found that some whistleblowers provided information about FBAR noncompliance to IRS. In a sample of 132 whistleblower claims closed between January 2012 and July 2017, GAO found that IRS assessed FBAR penalties in 28 cases. It is unknown whether the whistleblower's information led IRS to take action in all of these cases. These penalties totaled approximately $10.7 million. Had they been included in whistleblower awards, total awards could have increased up to $3.2 million. Over 97 percent of the FBAR penalties collected from these 28 claims came from 10 cases with willful FBAR noncompliance, for which higher penalties apply.", "IRS forwards whistleblower allegations of FBAR noncompliance to its operating divisions for further examination. However, IRS Form 11369, a key form used for making award determinations, does not require examiners to include information about the usefulness of a whistleblower's information FBAR and other non-tax issues. After Congress enacted the statutory change, IRS suspended award determinations for 1 week, but resumed the program before updating the form or its instructions, or issuing internal guidance on new information required on the Form. As of June 28, 2018, IRS had not begun updating the Form 11369 or its instructions. The lack of clear instructions on the form for examiners to include information on FBAR and other non-tax enforcement collections may result in relevant information being excluded from whistleblower award decisions.", "IRS maintains FBAR penalty data in a standalone database. It uses these data for internal and external reporting and to make management decisions. Because of the change in statute, IRS will need these data for determining whistleblower awards. GAO found that IRS does not have sufficient quality controls to ensure the reliability of FBAR penalty data. For example, IRS staff enter data into the database manually but there are no secondary checks to make sure the data entered are accurate. Without additional controls for data reliability, IRS risks making decisions, including award determinations, with incomplete or inaccurate data.", "This is a public version of a sensitive report issued in August 2018. Information on the FBAR Database that IRS deemed to be sensitive has been omitted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends IRS update IRS Form 11369 and improve controls for the reliability of FBAR penalty data. IRS agreed with all of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Tax whistleblowers\u2014individuals who report the underpayment of taxes or  the violation of tax laws by others\u2014could help the Internal Revenue  Service (IRS) collect potentially billions of dollars in revenue that may  otherwise go uncollected. According to IRS, whistleblower information  has assisted IRS in collecting almost $3.6 billion since 2007. This  information can help reduce the tax gap\u2014the difference between the  amount of taxes owed by taxpayers and the amount voluntarily paid on  time. The Tax Relief and Health Care Act of 2006 included an expansion  of IRS\u2019s whistleblower program by establishing the IRS Whistleblower  Office and requiring IRS to pay qualifying whistleblowers between 15 and  30 percent of the proceeds IRS collects as a result of the whistleblower\u2019s  information.", "The Bank Secrecy Act and its implementing regulations require certain  individuals with offshore bank accounts to file an annual Report of  Foreign Bank and Financial Accounts (FBAR). FBARs help the  government identify and prevent tax evasion, money laundering, terrorist  financing, and other crimes. IRS enforces FBAR filing requirements.  Individuals who fail to disclose these accounts and pay appropriate taxes  on them contribute to the tax gap. If IRS identifies these unreported  accounts and income, it can assess taxes, interest, and penalties. For  each FBAR violation, the penalty for willful violations can be as high as  the larger of $100,000 (adjusted for inflation) or half of the value of the  unreported account at the time of the violation. Some estimates put the  value of offshore accounts in the hundreds of billions to over a trillion  dollars.", "In an August 2014 regulation, IRS interpreted the tax whistleblower law  as applying only to collections made under Title 26, the U.S. Tax Code.  Because penalties assessed and collected by IRS for FBAR violations are  collected under Title 31, the Bank Secrecy Act, IRS did not include these  penalties in whistleblower award calculations. Similarly, criminal fines,  which are collected under Title 18, were excluded from whistleblower  award calculations.", "Some whistleblowers have challenged these exclusions in the courts.  Also, in 2015, the IRS Taxpayer Advocate Service included a legislative  recommendation in its annual report that Congress amend the tax  whistleblower law to specifically include FBAR penalties in proceeds. On  February 9, 2018, Congress passed legislation that replaced the term  \u201ccollected proceeds\u201d with the word \u201cproceeds\u201d and defined proceeds as  \u201cpenalties, interest, additions to tax, and additional amounts provided  under the internal revenue laws and any proceeds arising from laws for  which the Internal Revenue Service is authorized to administer, enforce,  or investigate, including criminal fines and civil forfeitures, and violations  of reporting requirements.\u201d", "Prior to the statutory change in the definition of proceeds, you asked us to  review how often and to what extent whistleblower claims involve cases  where FBAR penalties were also assessed. This report (1) describes the  extent to which the Whistleblower Office included FBAR penalties in  whistleblower awards prior to the change in the definition of proceeds; (2)  examines how IRS used whistleblower information on FBAR noncompliance and how IRS responded to the statutory change in the  definition of proceeds; (3) describes the purposes for which IRS collects  and uses data from the FBAR Database and assesses the controls for  ensuring data reliability; and (4) summarizes what is known about the  potential effect that exclusions from whistleblower awards, including  FBAR penalties, may have had on whistleblowers bringing claims to IRS.", "This report is a public version of a sensitive report that we issued in  August 2018. IRS deemed some of the information in our August report to  be sensitive, which must be protected from public disclosure. Therefore,  this report omits sensitive information about the information security  safeguards of IRS\u2019s FBAR Database as well as an associated  recommendation. Although the information provided in this report is more  limited, the report addresses the same objectives as the sensitive report  and uses the same methodology.", "To address our first objective, we reviewed a generalizable stratified  sample of 132 whistleblower claim files closed between January 1, 2012,  and July 24, 2017, (the time of our analysis) to identify how often these  claims included allegations related to offshore accounts and FBAR  violations and how often these claims led to IRS assessing FBAR  penalties. The sample included (1) all 92 claims where the taxpayer  identified by the whistleblower was also included in IRS\u2019s FBAR  Database, IRS\u2019s database of FBAR enforcement actions; (2) all 10 claims  that the Whistleblower Office closed as having no Title 26 collected  proceeds; and (3) a sample of 30 claims randomly selected from 299  claims identified as having one or more key words indicating offshore  account activity in E-TRAK, the Whistleblower Office\u2019s electronic claims  management information system. We compared information gathered  from our file review with data on FBAR enforcement actions from the  FBAR Database. We also interviewed IRS officials.", "We assessed the reliability of the FBAR Database and E-TRAK to use  limited data from these databases for our own analysis. We reviewed  agency documents, electronically tested data for missing data and  outliers, and interviewed IRS officials about these databases. These two  databases are the only sources of data within IRS for whistleblower  claims information and FBAR enforcement actions and outcomes. We  used data from E-TRAK to identify whistleblower claims that were likely to  involve allegations of FBAR noncompliance. We compared data from E- TRAK and the FBAR Database to identify individuals that were named by  a whistleblower and also subject to FBAR enforcement actions and any  related enforcement actions taken by IRS. We also reviewed data on the  amount of FBAR penalties assessed, if any, to the individuals included in  our sample. We discuss the limitations of these databases in this report,  but concluded that the elements we used in our analyses were sufficiently  reliable for our purposes.", "To address our second objective, we reviewed relevant portions of the  Internal Revenue Manual (IRM) and other IRS internal guidance. We  interviewed IRS Whistleblower Office and IRS operating division officials  about what IRS did with information received from whistleblowers about  FBAR allegations prior to the statutory change in the definition of  proceeds. In addition, we reviewed the February 2018 statutory  provisions concerning the definition of proceeds on which whistleblower  awards are based.", "To address our third objective, we evaluated IRS\u2019s FBAR Database to  identify any control deficiencies, using as criteria principles on design  activities for information systems and use of quality information from  Standards for Internal Control in the Federal Government; the Federal  Information Security Modernization Act of 2014, and National Institute of  Standards and Technology Special Publication 800-53. We electronically  tested the FBAR Database for missing data, outliers, and obvious errors,  and reviewed IRS documentation on the database. We also interviewed  IRS officials responsible for maintaining and using the database to  determine how IRS uses the data, existing controls, any known limitations  of the database, and any planned changes or improvements for the  database. While we determined that the data we used from the FBAR  Database were sufficiently reliable for the purposes of identifying  individuals also named in whistleblower claims as well as FBAR  enforcement outcomes, we identified risks to the reliability of the data, as  discussed later in the report.", "For our fourth objective, we interviewed a nonprobability sample of 11  attorneys from nine law firms that represent multiple clients who have  submitted claims to the IRS Whistleblower Office under Section 7623(b).  The views expressed in these interviews represented only those of the  attorneys who participated and are not generalizable to all whistleblower  attorneys or law firms. These attorneys also have a financial interest in  IRS\u2019s treatment of whistleblower claims; however, interviewing these  attorneys allowed us to gather broad viewpoints on how whistleblower  award exclusions may affect their professional decisions and the  decisions of their clients and prospective clients. We also analyzed FBAR  penalty data from the FBAR Database, and tax assessment data. In  addition, we interviewed IRS Whistleblower Office and operating division  officials.", "The performance audit upon which this report is based was conducted  from March 2017 to August 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with IRS from August 2018 to September 2018 to  prepare this public version of the original sensitive report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": [{"section_title": "Background", "paragraphs": ["Since 1867, the internal revenue laws have allowed the government to  pay awards to individuals who provided information that aided in detecting  and punishing those guilty of violating tax laws. In 1996, Congress  increased the scope of the program to also provide awards for detecting  underpayments of tax. It also changed the source of awards to money  IRS collects as a result of information whistleblowers provide rather than  appropriated funds. The Tax Relief and Health Care Act of 2006 created  a mandatory whistleblower award program which made fundamental  changes to IRS\u2019s existing informant awards program. The 2006 act also  established the IRS Whistleblower Office. The Whistleblower Office  processes claims that allege a tax noncompliance of more than $2 million  as potential 7623(b) claims. If these claims meet the requirements for an  award, the whistleblower receives a mandatory award of between 15 and  30 percent of collected proceeds, with the exact percentage determined  by IRS\u2019s Whistleblower Office based on the extent of the whistleblower\u2019s  contributions. Claims not meeting the criteria for a 7623(b) claim are  referred to as 7623(a) claims and are subject to procedural steps similar  to those of 7623(b) claims. However, 7623(a) claims are neither eligible  for appeals to the U.S. Tax Court nor subject to mandatory award  payments.", "For claims processed as 7623(b) claims, the whistleblower claims  process involves multiple steps, starting with a whistleblower\u2019s initial  application and ending with a rejection, a denial, or an award payment.  The process begins when a whistleblower submits a signed Form 211,  Application for Award for Original Information, to the Whistleblower Office.  The Initial Claim Evaluation unit, which is part of the Small Business/Self- Employed operating division, performs an administrative review of the  incoming applications. The Initial Claim Evaluation unit examines the  submission for completeness and logs it into E-TRAK. They may reject  claims because the tax noncompliance allegation is unclear, no taxpayer  is identified, or the whistleblower is ineligible for an award. Claims that  are not rejected are sent to classification to determine which operating  division should review the claim. Claims are then generally sent to  subject matter experts in the various operating divisions\u2014usually the  Small Business/Self-Employed or Large Business & International  division\u2014where they are reviewed to determine whether the claims merit  further consideration by the operating division, should be referred to  Criminal Investigation for investigation, or should be sent back to the  Whistleblower Office as denied. Claims can be denied if there is limited  audit potential or if there is limited time left on the statute of limitations,  among other reasons. Claims that are not denied are generally added to  the operating division\u2019s inventory for potential examination. If a claim is  selected for examination, the examiner completes and returns to the  Whistleblower Office a Form 11369, Confidential Evaluation Report on  Claim for Award, at the conclusion of the examination. The Whistleblower  Office uses the information on this form when making an award  determination. Figure 1 summarizes the full claim review process for  7623(b) claims.", "According to the fiscal year 2017 Whistleblower Office annual report, IRS  collected $191 million in fiscal year 2017 as a result of both 7623(a) and  7623(b) whistleblower claims. IRS also paid out $34 million on 367 claims  to 242 whistleblowers. The average whistleblower award for fiscal year  2017 was over $140,000. Figure 2 below shows the collection and payout  amounts for fiscal years 2012 through 2017."], "subsections": [{"section_title": "Collected Proceeds", "paragraphs": ["Prior to February 9, 2018, section 7623(b) of Title 26 required the  Whistleblower Office to calculate whistleblower award amounts as a  percent of \u201ccollected proceeds (including penalties, interest, additions to  tax, and additional amounts).\u201d On August 12, 2014, IRS issued a final  rule to implement section 7623 (the whistleblower law) that clarified that  certain penalties\u2014those collected under Title 31 for FBAR violations, and  those collected under Title 18 for criminal and civil penalties for tax law  violations\u2014do not constitute collected proceeds for calculating  whistleblower awards. IRS received comments on the proposed rule  contending that excluding money collected under Title 18 and Title 31 eliminates a whistleblower\u2019s incentive to provide information on violations  under these titles and would reduce the number of whistleblowers willing  to provide information to IRS. IRS stated in its final rule that section 7623  only authorizes awards for amounts collected under Title 26. IRS also  noted that under the Victims of Crime Act, criminal fines paid for tax law  violations must go into the Crime Victims Fund and are unavailable for  payment to whistleblowers.", "Whistleblowers challenged IRS\u2019s definition of collected proceeds in court.  In August 2016, the U.S. Tax Court issued a ruling in response to a  petition filed by a married couple who, as whistleblowers, had provided  information leading to a conviction related to a tax fraud scheme and then  disputed the award determination made by the Whistleblower Office. The  U.S. Tax Court ruled that criminal fines and civil forfeitures were collected  proceeds for purposes of an award under Section 7623(b). In its ruling,  the court held that \u201cthe term \u2018collected proceeds\u2019 means all proceeds  collected by the Government from the taxpayer\u201d and that \u201c\u2026the term is  broad and sweeping; it is not limited to amounts assessed and collected  under title 26.\u201d On April 24, 2017, IRS filed an appeal of the Tax Court\u2019s  decision with the U.S. Court of Appeals for the District of Columbia  Circuit.", "Before the U.S. Court of Appeals made a final ruling, Congress replaced  the term \u201ccollected proceeds\u201d with the term \u201cproceeds\u201d and provided a  definition of \u201cproceeds\u201d on February 9, 2018, in the Bipartisan Budget Act  of 2018. The act\u2019s definition of proceeds includes: (1) penalties, interest,  additions to tax, and additional amounts provided under the internal  revenue laws; and (2) any proceeds arising from laws for which the IRS is  authorized to administer, enforce, or investigate including criminal fines  and civil forfeitures, and violations of reporting requirements. This  includes FBAR penalties in the definition of proceeds, as well as criminal  fines and civil forfeitures. This definition of proceeds applies to cases for  which a final determination for an award was not made prior to  enactment. On March 26, 2018, IRS withdrew its appeal before the U.S.  Court of Appeals."], "subsections": []}, {"section_title": "Reporting of Foreign Bank and Financial Accounts", "paragraphs": ["Under the Bank Secrecy Act of 1970, and in particular those sections  incorporated into Title 31 of the U.S. Code, U.S. persons with a financial  interest in, or signature or other authority over a bank, securities, or other  financial account in a foreign country are required to keep records and file  reports on transactions with foreign financial institutions. Persons with a  financial interest or signature authority over one or more foreign financial  accounts with a total value of more than $10,000 must file an FBAR with  the Department of the Treasury (Treasury). If an FBAR is required, it must  be filed each year for the previous calendar year on or before April 15 (or  other date as prescribed by the IRS) to coincide with the tax filing  deadline. Administration of this statute has been delegated by Treasury to  the Financial Crimes Enforcement Network (FinCEN). In April 2003,  FinCEN delegated its authority to IRS to enforce the FBAR requirements.  These requirements include conducting examinations of FBAR  compliance and taking such enforcement actions as assessing penalties,  as appropriate.", "A person\u2019s civil penalty for each FBAR violation can be up to $500 for a  negligent FBAR violation and up to $10,000 for non-willful violation. In  addition, a person with a willful FBAR violation may be subject to a civil  monetary penalty equal to the greater of $100,000 or 50 percent of the  amount in the account at the time of the violation, and also be subject to  possible criminal sanctions. These penalties are per person, per  account, and per year. According to the Internal Revenue Manual (IRM),  FBAR penalties assessed by IRS are collected and tracked separately  from tax assessments."], "subsections": []}]}, {"section_title": "Prior to February 2018, IRS Did Not Consider Whistleblower Information That May Have Led to FBAR Enforcement Actions in Award Determinations Whistleblowers Likely Identified Millions in FBAR Noncompliance for Which They Were Not Awarded", "paragraphs": ["IRS assessed approximately $10.7 million in FBAR penalties to taxpayers  who were identified in our sample of whistleblower claims. We reviewed  92 whistleblower claims closed between January 1, 2012, and July 24,  2017, where the identified taxpayer was also subject to an IRS FBAR  examination. IRS assessed FBAR penalties in 28 of these 92 cases.  In none of these instances was the FBAR penalty included in the  collected proceeds used to calculate whistleblower awards. Our analysis  of these 28 claims suggests that if IRS had included FBAR penalties in  the awards, the whistleblowers involved could have received an additional $1.6 million to $3.2 million, assuming an award of between 15 and 30  percent.", "Examples of  Whistleblower Claims  A whistleblower claim may provide IRS  information on the undisclosed offshore  account of a single individual (such as a  business partner, former spouse, or family  member), while other whistleblowers, such as  bank insiders, may provide IRS a list of  individuals with undisclosed offshore  accounts.", "The exclusion of FBAR penalties from whistleblower awards is consistent  with IRS\u2019s August 2014 regulation outlining the whistleblower award  process. The final regulation describes the process for determining  whistleblower awards and includes a definition of collected proceeds.  Specifically, the regulation defines collected proceeds as \u201climited to  amounts collected under the provisions of Title 26, United States Code.\u201d  This definition excluded FBAR penalties assessed under Title 31 and  criminal fines assessed under Title 18. This regulation\u2019s definition of  collected proceeds, however, has been superseded by the replacement  of \u201ccollected proceeds\u201d with \u201cproceeds\u201d and a definition of \u201cproceeds\u201d in  the Bipartisan Budget Act of 2018, effective February 9, 2018. The new  law defines proceeds as including \u201cpenalties, interest, additions to tax,  and additional amounts provided under the internal revenue laws and any  proceeds arising from laws for which the Internal Revenue Service is  authorized to administer, enforce, or investigate, including criminal fines  and civil forfeitures, and violations of reporting requirements.\u201d", "While no whistleblowers were paid for any FBAR penalties collected as a  result of the information they provided to the Whistleblower Office, our  analysis found that IRS took FBAR enforcement actions against at least  10 taxpayers based on whistleblowers\u2019 information. Table 1 shows the  FBAR enforcement outcomes for the 92 claims we reviewed.", "Of these 92 whistleblower claims we reviewed where the identified  taxpayer was subject to an FBAR enforcement effort, 39 involved  taxpayers accepted into IRS\u2019s Offshore Voluntary Disclosure Programs  (OVDP). OVDP enables taxpayers with tax noncompliance from  undisclosed offshore accounts to avoid prosecution and resolve their past  noncompliance by paying limited civil penalties. As one of a number of  required actions for OVDP, IRS assesses taxpayers accepted into the  program a miscellaneous Title 26 offshore penalty in lieu of all other  penalties for undisclosed foreign accounts, including FBAR penalties.  According to IRS officials, because the OVDP penalty is a Title 26  penalty, these collections were included in collected proceeds for the  purposes of whistleblower award calculations even before the new  definition of proceeds took effect on February 9, 2018. The case files we  reviewed included some examples of whistleblowers receiving an award  based in part on the miscellaneous Title 26 OVDP penalty in addition to  tax, interest, and other penalties. If the taxpayer had not participated in  OVDP, the whistleblower would not have received an award on the part of  the collected proceeds that came from the FBAR penalty.", "FBAR Warning Letters  At the conclusion of a Report of Foreign Bank  and Financial Accounts (FBAR) examination,  an examiner can either assess a penalty or  can use a warning letter (Letter 3800,  Warning Letter Respecting Foreign Bank and  Financial Accounts Report Apparent  Violations) to notify taxpayers that they are  not in compliance with FBAR reporting  requirements. The examiner can use their  discretion to issue a warning letter if they  determine that the taxpayer would improve  their FBAR reporting compliance in the future.  A taxpayer\u2019s failure to file an FBAR after  receiving a warning letter supports a  determination of a willful FBAR violation.", "The new definition of proceeds establishes a policy of including FBAR  penalties in whistleblower awards regardless of whether the identified  taxpayer enters OVDP or is assessed an FBAR penalty as a result of an  FBAR exam. It also creates consistency with the treatment of penalties  assessed under the Foreign Account Tax Compliance Act (FATCA).  FATCA, enacted in 2010 under Title 26, assesses penalties for failure to  report foreign financial accounts and assets. Because FATCA is under  Title 26, any penalties assessed stemming from a whistleblower\u2019s  information were already eligible for inclusion in whistleblower awards.", "Of the total revenue collected from the 28 whistleblower claims we  reviewed with an FBAR penalty assessed, more than 97 percent came  from 10 cases with willful FBAR penalties. Willful FBAR penalties, which  are up to 50 percent of the value of the account, represent a small portion  (less than 0.1 percent) of all whistleblower claims closed in our time  frame, and less than half of the 28 FBAR penalty cases we reviewed.  However, we calculated that had these willful penalties been included in  awards, the whistleblower awards would have increased by up to  $3,145,754. In contrast, the 18 cases that had a non-willful or negligent  FBAR penalty would have led to an increase in whistleblower awards of  up to $78,912 based on our calculations. Table 2 shows the number of  cases and total amount of FBAR penalties collected by the type of FBAR  penalty.", "Whistleblowers may play an important role in bringing willfully  noncompliant taxpayers to the attention of IRS. These taxpayers may be  purposefully hiding their assets from IRS detection. To highlight the  difference in the magnitude of FBAR penalties between willful and non- willful or negligent taxpayers, figure 3 shows the range of potential  whistleblower awards had FBAR penalties been included in award  determinations."], "subsections": [{"section_title": "Some Whistleblower Claims Closed between January 2012 and July 2017 Included FBAR Allegations", "paragraphs": ["There is no way to estimate how many whistleblowers would have come  forward had IRS included FBAR penalties in whistleblower awards.  However, we found a small number of whistleblower claims that included  FBAR information anyway. To look for how often whistleblowers  submitted claims with allegations of FBAR noncompliance, we identified  401 of the 10,306 IRS whistleblower claims closed between January 1,  2012, and July 24, 2017, as likely to contain allegations of FBAR  noncompliance by an identified taxpayer. We identified three groups of claims as being most likely to contain allegations of FBAR  noncompliance: 92 claims where the identified taxpayer was subject to an  FBAR enforcement action (population discussed above); 299 claims that  included key terms in E-TRAK indicating offshore assets; and 10 claims  that were closed with \u201cno Title 26 collected proceeds,\u201d which could  indicate FBAR noncompliance since FBAR penalties are Title 31  penalties. Since FBAR penalties were excluded from whistleblower  proceeds, IRS did not track FBAR allegation data in E-TRAK. Therefore,  our numbers might underrepresent the total population of claims likely to  include allegations of FBAR noncompliance.", "We reviewed all 92 of the claims that included taxpayers that were also  present in IRS\u2019s FBAR Database (matched claims) and found that 85 of  them included allegations of FBAR noncompliance on IRS Form 211, the  form used to submit a claim to the Whistleblower Office. We reviewed a  random sample of 30 claims from the 299 claims we identified as being  likely to include FBAR information based on key terms in the E-TRAK  database (key terms claims)\u201411 of them included allegations of FBAR  noncompliance. We also reviewed all 10 of the claims that were closed  with \u201cno Title 26 collected proceeds\u201d and found one allegation of FBAR  noncompliance. This was not unusual because IRS uses the \u201cno Title 26  collected proceeds\u201d code for closures other than those with FBAR  penalties, such as claims with Title 18 criminal fines. Table 3 shows our  three populations and how often we found claims with allegations of  FBAR noncompliance in each.", "Based on our stratified sample of selected whistleblower claims, we  estimate that at least 1.4 percent (or at least 146 claims) of all large-dollar  (7623(b)) whistleblower claims closed between January 1, 2012, and July  24, 2017, involved allegations of FBAR noncompliance. Because the  Whistleblower Office did not require data in E-TRAK to indicate the nature  of the violation the whistleblower is reporting, the actual number of claims  that include allegations of FBAR noncompliance may be higher. While our  estimate represents a small proportion of all whistleblower claims, this  may be because of the prior policy of excluding FBAR penalties from  awards. However, the analysis suggests that despite being ineligible for  award payment, some whistleblowers provided information on FBAR  noncompliance to IRS that may have helped improve FBAR\u2019s  effectiveness as a tool for anti-money laundering and tax enforcement.  With the statutory change in award basis, IRS may see more  whistleblowers come forward with better information about FBAR  noncompliance, according to whistleblower attorneys we interviewed."], "subsections": []}]}, {"section_title": "IRS Historically Used FBAR Information from Whistleblower Claims for Enforcement Efforts, but the Statutory Change in Award Basis Increases the Importance of Reporting Full Information The Whistleblower Office Forwarded FBAR Information to Other IRS Divisions for Exam Purposes, Even Before FBAR Information Was Required to Be Included in Award Determinations", "paragraphs": ["Even though FBAR penalties were not considered for whistleblower  awards until the February 9, 2018 legislative change, the Whistleblower  Office forwarded allegations it received of FBAR noncompliance to IRS\u2019s  operating divisions for further examination. Whistleblower Office officials  told us that if a whistleblower provides information concerning offshore  accounts held by a taxpayer, including specific allegations of FBAR  noncompliance, IRS evaluates it as it does any other information. The  presence of information on possible FBAR noncompliance does not  change the process for evaluating the claim. Whistleblower Office  instructions for the initial review of a claim specify that, if the claim merits  further consideration, it will be referred to the appropriate operating  division for review.", "According to officials from the Small Business/Self-Employed and Large  Business & International operating divisions, during their review process  information dealing with offshore accounts and possible FBAR violations  is treated just as all other information provided by a whistleblower. Once a  claim is referred to an operating division, it is generally reviewed by a  subject matter expert who then determines whether the claim has  sufficient audit potential to warrant adding it to the division\u2019s inventory of  possible returns for audit. If the subject matter expert concludes that the  claim does not have sufficient audit potential, or the division later decides  not to proceed with an examination, the claim is returned to the  Whistleblower Office. If the subject matter expert forwards a  whistleblower claim for possible audit and an examination takes place,  the examiners will establish an audit file for the tax examination. If  evidence of FBAR noncompliance is found, a separate audit file is to be  created. Most often, both files are maintained and updated by the same  examiners. According to IRS officials and procedures laid out in the IRM,  the outcome of the examination is based on the quality of the evidence  and is not influenced by the presence of a whistleblower or the source of  the information.", "Information on FBAR noncompliance developed by examiners may or  may not be provided to the Whistleblower Office. At the conclusion of the  examination process, the examiner provides the Whistleblower Office with  a Form 11369, Confidential Evaluation Report on Claim for Award. On  this form, examiners are required to answer a series of detailed questions  about the whistleblower\u2019s contribution to the investigation, such as  whether the whistleblower identified specific issues or provided analysis  that saved IRS time and resources. According to the IRM, the purpose of  the Form 11369 is to inform the Whistleblower Office of the  whistleblower\u2019s contribution, if any, to an examination, investigation, or  other action.", "According to the instructions on the Form 11369 as well as the IRM, the  Whistleblower Office bases its award determinations in large part on the  form and information provided to supplement it. There is no specific  space set aside on the Form 11369 for information dealing specifically  with FBAR noncompliance. In addition, there are no instructions on or  accompanying the form to require examiners to provide documentation  relating to FBAR noncompliance.", "Prior to the legislative change in February 2018 to include FBAR  penalties in awards, the Whistleblower Office retained in its files any  FBAR-related information provided by the operating division but did not  use it for the award determination process. According to Whistleblower  Office officials, any information about FBAR noncompliance in its claim  files was there incidentally and not collected or retained for any specific  tracking purposes. These officials told us, and we found in our review,  that some claim files had information about FBAR violations or penalties  because the operating division examiner chose to include it in the Form  11369 narrative or in supplemental information, even though the  examiner was not required to do so. Because providing FBAR information  with the Form 11369 was discretionary prior to the legislative change in  February 2018, Whistleblower Office officials told us that if FBAR  information existed in the files at the time of the interview, it may not be  complete.", "While having complete information about FBAR exams on the Form  11369 was not needed when IRS did not consider FBAR noncompliance  as part of award determinations, now that it is defined as such by statute,  the Whistleblower Office will need such information on FBAR  noncompliance on Form 11369 to properly determine whistleblower  awards in accordance with the new legal requirements. As of June 28,  2018, the Whistleblower Office had not updated Form 11369 or its  accompanying instructions. Whistleblower Office officials told us they  were reviewing and commenting on draft guidance from the Office of  Chief Counsel on how to implement the new provision but had not yet  updated the Form 11369 or its instructions. IRS officials did not provide a  timeline for when IRS expects to update the form.", "Because this form asks questions specific to Title 26 tax noncompliance  examiners may not have clear guidance indicating that non-Title 26  issues should be included in these answers. According to the IRM, the  Form 11369 should assist the Whistleblower Office in making an award  determination by explaining how the whistleblower and their information  assisted IRS in taking action. By not using an updated form that reflects  the technical language distinguishing between tax issues and non-Title 26  issues that IRS also enforces, the Whistleblower Office may not be able  to ensure the information it collects for determining whistleblower awards  that includes non-Title 26 violations is complete and accurate."], "subsections": [{"section_title": "IRS Has Taken Some Steps to Communicate Change in Whistleblower Award Basis", "paragraphs": ["When enacted on February 9, 2018, the new law immediately required  information concerning FBAR violations to be included in the awards  determination process. Subsequently, the Whistleblower Office and IRS  started to make changes to policies and procedures to ensure award  determination decisions are made fairly and with full information. The day  the new statutory definition became law, IRS placed a hold on  whistleblower award determinations while the Whistleblower Office  developed new procedures. On February 15, 2018, IRS lifted the hold,  instructing Whistleblower Office analysts to check with their managers  prior to making award determinations on any claims that may include non- Title 26 proceeds. However, the Whistleblower Office did not issue any  additional specific guidance to Whistleblower Office staff on how to review  claims for any non-Title 26 issues until April 19, 2018. According to IRS  officials, the Whistleblower Office closed 2,096 whistleblower claims  between the date the law changed and April 19, 2018 when IRS issued  the internal guidance.", "In the April 19, 2018 policy alert, later reissued as a memo on May 8,  2018, Whistleblower Office staff were instructed to look over the Form  211 for indications of FBAR or criminal activity when reviewing a Form  11369 or making award determinations. The policy alert also instructs  staff to contact the FBAR Penalty Coordinator and review Special Agent\u2019s  Reports and Judgement Documents for non-Title 26 proceeds and to  document the results of these reviews in E-TRAK.", "Issuing complete and final guidance will take time; however the  Whistleblower Office did not issue any interim guidance to IRS units  outside the Whistleblower Office for more than 2 months after the  enactment of the statute redefining proceeds. On April 12, 2018, the  Director of the Whistleblower Office issued a memo to the commissioners  of the operating divisions and chief of the Criminal Investigation division.  This memo stated that those working on whistleblower claims need to  provide the Whistleblower Office with details of how whistleblower  information was used in any actions taken regardless of whether they  were Title 26 issues or not. The Whistleblower Office emailed a  communication similar to the memo to other IRS employees working on  whistleblower claims on April 18, 2018. The initial memo did not provide  specific instructions as to how to provide such information, such as  specifying to use Form 11369, but the email said additional guidance and  training would be forthcoming. According to Whistleblower Office officials,  the timing of the internal communication about the change in  whistleblower award basis was because the Whistleblower Office was  waiting on draft guidance from the IRS Office of Chief Counsel. The  Whistleblower Office received this draft guidance on April 19, 2018.", "In late April and early May, the Whistleblower Office posted information  about these changes in internal IRS media, including IRS-wide web  pages and pages for individual IRS operating divisions. The  Whistleblower Office specified information should be included with the  Form 11369 in these later communications. However, as noted above,  the Form 11369 itself and its accompanying instructions had not been  updated to reflect these new requirements.", "The current regulations on whistleblower claims, issued in August 2014,  exclude non-Title 26 proceeds from the basis for determining  whistleblower awards. According to IRS officials, as of June 20, 2018,  IRS had not yet started to take action on making the regulatory change.  IRS, however, is in the process of updating the IRM, which serves as the  primary guidance for IRS employees. Section 25.2.2 of the IRM, which  provides procedures and instructions for the whistleblower award  programs, defines collected proceeds for the purpose of awards as tax,  penalties, interest, and additions to tax limited to amounts collected only  under the provisions of Title 26. According to IRS officials, while IRM  updates take time to complete, generally the IRM can be updated quicker  than a regulation. The officials could not provide a timeline for when these  changes would be complete.", "IRS can communicate to the public about statutory changes to the  whistleblower program through its various external communication  channels, such as its website and social media accounts. Such  communications are important because whistleblowers have a limited 30- day period to appeal certain award determinations. On May 9, 2018, IRS  posted an announcement about the statutory change on the  Whistleblower Office page of its web site. The announcement noted the  enactment of the provision redefining proceeds for the purpose of  whistleblower awards and provided a link to the May 8, 2018  Whistleblower Office memorandum. This information was posted 3  months after the statutory change went into effect and a month after we  notified IRS that IRS had not yet announced the change through a press  release, its web site, or its Twitter account."], "subsections": []}]}, {"section_title": "IRS Uses Its FBAR Database for Internal and External Reporting but Lacks Sufficient Controls", "paragraphs": [], "subsections": [{"section_title": "IRS Uses Data from Its FBAR Database to Manage Workflow and for Internal and External Reporting", "paragraphs": ["IRS collects and maintains FBAR penalty data in a stand-alone database.  According to IRS officials, they use these data to carry out IRS\u2019s  delegated duties to assess and collect such penalties. For example, the  data are used for sending demand notice letters to taxpayers and tracking  cases referred to the Department of Justice. According to these officials,  IRS also uses information on FBAR penalty assessments and payments  for a variety of related purposes including reporting FBAR data to the  Financial Crimes Enforcement Network (FinCEN) and for use in annual  reports to Congress. IRS also uses the database for internal  management. Specifically, IRS officials stated that they use reports on  inventory, penalties, and appeals for decision making. Given the February  2018 legislative change to include FBAR penalties in the definition of  proceeds, the Whistleblower Office will also use FBAR penalty data for  calculating some whistleblower award determinations.", "While FinCEN retains the rule-making authority for FBAR and is the  repository of FBAR filings, IRS assesses and collects FBAR penalties  from taxpayers who violate the FBAR reporting requirements. IRS also  maintains the FBAR Database. While individuals file their FBAR forms  through FinCEN\u2019s online Bank Secrecy Act E-filing portal, IRS enforces  these filing requirements. Following procedures laid out in the IRM, IRS  examiners can access FBAR filing data from FinCEN\u2019s database during  the course of a tax examination. Information on the taxpayers\u2019 FBAR  filings is available to examiners through IRS\u2019s Integrated Data Retrieval  System, including data from filed tax and information returns.", "Data on FBAR enforcement actions, including penalties, are only housed  in the FBAR Database. The FBAR Database is a stand-alone database  maintained by the FBAR team within the Small Business/Self-Employed  operating division. The FBAR Database does not interface or connect  with any other IRS data sources or systems. Therefore, there is currently  no mechanism for any data to automatically feed into or from the FBAR  Database to cross-check with taxpayer information in other databases.  When examiners open an FBAR exam, the IRM directs them to report  exam and exam-outcome information to the FBAR team. Examiners fax,  mail, or e-mail FBAR examination and penalty assessment information to  the FBAR team which then transcribes the data into the FBAR Database  manually. Within IRS, only the FBAR team has access to the database.  Because the stand-alone FBAR Database is the only data source within  IRS that tracks FBAR penalty assessments and payments, the FBAR  team is responsible for completing all data entry as well as generating  and circulating reports on FBAR enforcement actions to others within IRS."], "subsections": []}, {"section_title": "IRS Has Insufficient Controls for the Reliability of FBAR Penalty Data", "paragraphs": ["We assessed the reliability of the FBAR Database for the purposes of  using limited data from this database for our own analysis. We  determined that the data fields we used were sufficiently reliable for our  purposes. Specifically, we matched taxpayer identification numbers in the  FBAR Database to those in E-TRAK and reported on enforcement  outcomes, including a limited number of penalty payments, as discussed  previously. These data were the only available data within IRS on FBAR  penalties and enforcement actions. Even though we found the data that  we used to be sufficiently reliable for our purpose of identifying penalty  information and selecting a sample of claims to review further, we  identified some data control deficiencies related to data input and  validation. We found certain elements of the database to have limited  reliability. Because FBAR penalty information will be used for  whistleblower award determinations, it is important for these data to be  reliable.", "A key principle of federal internal control is the use of quality information.  Agencies should have controls in their information systems to ensure the  validity, completeness, and accuracy of data. Further, these controls  should be documented. In addition, the Federal Information Security  Modernization Act of 2014 (FISMA) provides for the development and  maintenance of the minimum controls required to protect federal  information and information systems. Among other things, FISMA  requires the National Institute of Standards and Technology (NIST) to  develop standards and guidelines that include minimum information  security requirements on how agencies should design, protect, and  manage their respective data systems. NIST\u2019s guidance outlines  appropriate data safeguards for agency data systems based on a risk- based approach. NIST guidance also states an agency\u2019s information  system should have controls to check the validity of inputs. This includes  checking the valid syntax of inputs to ensure they match the specified  definitions for format and content. NIST guidance also recommends  controls to help ensure the information system behaves predictably, even  if invalid data are entered.", "While FBAR team employees transcribe data manually into the database  from emails or faxed or mailed paper forms, there are no procedures for  data testing or validation. For example, there is no secondary check by  another individual to ensure data were entered correctly and completely.  The FBAR Database procedures also lack sufficient validity checks to  ensure that the data entered are accurate. There are some basic data  entry checks in the database, such as limiting input to alphanumeric  entries and a warning if a date is more than a year from the current date.  However, these checks serve only as a reminder for the employees  entering the data to verify its accuracy; these checks do not prevent  erroneous data from being entered and retained. Without additional  controls for accuracy and validity, IRS risks relying upon inaccurate  information for some of its reporting and decision making.", "According to IRS officials, not all fields in the FBAR Database are  mandatory. In addition, some fields are new as of January 2017 and,  therefore, only contain data after this time. IRS officials also told us that  they are aware there are some data missing in the database, such as  incomplete records for some taxpayers, but they could not quantify how  often this occurs. They also told us that such missing data can contribute  to inaccurate reports of FBAR total assessments. For example, if a date  field is left blank, certain reports that pull data based on these date fields  will not pull the records with this missing field, thereby underreporting  FBAR outcomes. We found 44 records with input errors in this date field.  The officials stated that they make every effort to input complete data into  the database, but sometimes complete information is unavailable from the  exam team. Because the FBAR data lack some reliability controls, IRS  may rely on insufficient or incomplete data for reporting and decision  making, including amounts of whistleblower awards.", "IRS officials did not have any documentation showing why or how the  database was developed in November 2003. Further, IRS officials told us  the only documentation on how the database is used is the FBAR  Database desk guide. The desk guide provides instructions for data input;  however, this guide does not include any information to describe or define  the elements in the database. Standard data element definitions are  intended to ensure that all users of the system define the same data in  the same way and have a common understanding of their meaning. Such  documentation is important for providing clear instructions to users to  know what information should be input in each variable field to ensure  that the type of data in each variable field is consistent. Without it, IRS  and other users of the data may not have reasonable assurance that data  in the database are input as intended.", "IRS recognized the need to address the FBAR Database and established  an FBAR Improvement Project Team to review the FBAR Database and  records system and make recommendations for improvements. The team  was established in 2016 after reviews of database-generated reports  indicated missing data. The FBAR Improvement Project Team has made  recommendations to improve the overall function and reliability of the  dataset, including updating FBAR policies and procedures and validating  data for the report to Congress. They are also exploring automating case  building by pulling taxpayer data from other IRS data sources and  creating a report automation tool. As of April 2018, these  recommendations had not been implemented. IRS officials were  reviewing the recommendations and specific plans had not been vetted  by the leadership in the relevant operating divisions. IRS officials noted  that because of the small size and limited use of the database, it may be  a low priority for scarce information technology resources. Until IRS  develops and documents improved controls for the validity,  completeness, and accuracy of data in the FBAR Database, it risks using  incomplete and insufficient data for decision making."], "subsections": []}, {"section_title": "Award Exclusions May Have Negatively Affected Whistleblowers\u2019 Willingness to Bring Information to IRS Selected Whistleblower Attorneys in Our Review Reported They Limited or Refused to Take on Clients Who Alleged FBAR Noncompliance When Penalties Were Excluded from Awards", "paragraphs": ["Whistleblower attorneys we spoke with referred to the former exclusion  for FBAR and other non-Title 26 collections from whistleblower awards as  a significant concern for them and their clients. Their concerns are  important to the success of the whistleblower program because if  whistleblowers are discouraged from coming forward, IRS risks losing  opportunities to identify tax fraud and abuse and ultimately reduce the tax  gap. This loss of help in identifying noncompliance could be significant for  IRS. According to IRS, between 2007 and 2017, whistleblower  information helped IRS collect $3.6 billion in tax revenue that may have  otherwise gone uncollected. According to the whistleblower attorneys we  spoke with, as well as information we gathered in a search of relevant  literature, the estimated value of undisclosed offshore accounts may be in  the tens of billions of dollars, but could be as great as hundreds of billions  of dollars.", "Prior to the legislative change in the definition of collected proceeds, we  interviewed 11 whistleblower attorneys from nine law firms about their  experiences representing tax whistleblowers who submitted allegations of  FBAR noncompliance to IRS. Several of these firms also had  experience helping whistleblowers appeal IRS award determinations. Of  these nine firms, eight firms\u2019 attorneys told us they had refused or limited  the number of whistleblowers alleging FBAR noncompliance they were  willing to take on as clients when such collections were excluded from  award determinations. For example, one attorney told us that his firm  would take on whistleblower clients alleging FBAR violations only if there  was strong evidence of tax noncompliance. An attorney with another firm  reported that the firm was willing to take on such clients but advised these  clients that the inclusion of FBAR penalties in any award may have to be  litigated in court at the award determination phase. Further, attorneys with  three of the nine firms reported fewer whistleblowers either approaching  them for representation or following through on filing a claim once  informed of the exclusion of non-Title 26 collections from awards.  Attorneys with eight of the nine firms also reported that the exclusion of  criminal fines from collected proceeds was a potential reason for  whistleblowers not coming forward.", "We spoke with attorneys at eight of the nine firms again after the passage  of the statutory change in the definition of proceeds. Most said that this  was a positive step for the IRS whistleblower program and expected that  more whistleblowers will come forward with information on criminal and  FBAR violations. Attorneys with seven of the eight firms stated they would  be willing or already had started taking on clients reporting FBAR and  criminal violations. However, they cited other concerns with the program  that could continue to limit their willingness to represent tax  whistleblowers and discourage whistleblowers. These concerns included  limits on anonymity for whistleblowers appealing Whistleblower Office  decisions to the Tax Court;  restrictions on filing claims anonymously; delays in award payments during the lengthy appeals process; and  limited communication with the Whistleblower Office during the claim  review process.", "According to these attorneys, for those whistleblowers who are offered an  award that excludes FBAR penalty and criminal fine collections, many  choose to forgo appealing the decision because it would delay their  collection of any part of the award until the appeals process was  complete, which can take years. Further, the whistleblower may risk  losing their anonymity in an appeal. They added that some whistleblowers  risk their lives and livelihoods to come forward and that anonymity is  critical to their willingness to provide information to IRS. The attorneys  generally stated that these issues can discourage whistleblowers, which  then can limit the whistleblower program\u2019s effectiveness."], "subsections": []}, {"section_title": "Our Analysis Found No Evidence That Presence of Whistleblower Alters the Mix of FBAR Penalty and Tax IRS Assesses", "paragraphs": ["Some of the attorneys we interviewed indicated that whistleblowers may  have been further discouraged from bringing information on offshore  noncompliance to IRS if they believed that IRS was purposefully trying to  limit whistleblower awards by assessing higher FBAR penalties and lower  taxes when a whistleblower was involved. The IRM provides IRS  examiners with some level of discretion about when to assess tax and  FBAR penalties, subject to the facts and circumstances of each individual  case. Attorneys at seven of the nine firms we interviewed expressed  concern that IRS examiners may have used this discretion to assess  higher FBAR penalties and lower taxes as a way to reduce a  whistleblower\u2019s potential award. However, these attorneys did not provide  specific evidence of this occurring. Because of taxpayer information  privacy laws, IRS limits the amount and type of information it can share  with whistleblowers and their attorneys about their claims once submitted  to the Whistleblower Office.", "To investigate this claim, we analyzed IRS data on taxpayers that were  assessed FBAR penalties from tax years 2010 to 2015. We compared the  proportion of FBAR penalties assessed to the overall tax and FBAR  penalties assessed to a taxpayer for exams where a whistleblower was  and was not involved. Our analysis did not find any evidence of a  statistically significant difference between the taxpayers identified by a  whistleblower and taxpayers with no whistleblower involved.", "The IRM lays out the steps examiners should take when determining  whether FBAR penalties are warranted and how they should be  assessed. These steps are independent of IRM guidance on tax  examinations and assessments. IRS officials that we interviewed,  including those with oversight of examiners in Small Business/Self- Employed and Large Business & International, indicated that the Title 26  tax exams and Title 31 FBAR exams are conducted independently of  each other and neither influences the outcome of the other. Further, they  stated that the presence of a whistleblower has no bearing on the  decision of whether to assess a tax or penalty or the amount of such  assessments, as previously discussed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["For the IRS whistleblower program to be successful, whistleblowers need  to have confidence in the program\u2019s processes and outcomes, including  paying awards when a whistleblower\u2019s information is used. Despite IRS\u2019s  prior policy of not including non-Title 26 collections, we found some  whistleblowers brought such information to IRS, and IRS assessed  penalties on noncompliant taxpayers. However, according to  whistleblower attorneys we spoke with, this policy of award exclusions  may have discouraged other whistleblowers with significant information  on FBAR reporting and tax noncompliance from coming forward. With the  new statutory definition of proceeds enacted on February 9, 2018, that  includes FBAR and other non-Title 26 collections, whistleblowers may  now be more willing to submit claims.", "However, IRS has not yet fully changed some of the whistleblower  program\u2019s policies and procedures to reflect that FBAR penalties, as well  as criminal fines and civil forfeitures, are now included in whistleblower  awards. Because the change was effective for claims that had not had a  final determination made as of February 9, 2018, the Whistleblower Office  taking immediate steps to ensure it had full information from other offices  and divisions within IRS about claims reaching the award determination  phase would have helped IRS act on these determinations. While IRS  has now taken steps to communicate the need for information about non- Title 26 actions to be included with the Form 11369, updating the form  itself and its instructions will help to better ensure that complete and  accurate information about such actions is reflected on the form to be  provided to the Whistleblower Office for inclusion in award  determinations.", "The FBAR Database is the only comprehensive source of information  within IRS about the FBAR penalties assessed and paid. If this database  does not have the controls necessary to provide reasonable assurance  that the data are reliable, accurate, and complete, there is a risk that the  Whistleblower Office may make award determinations based on incorrect  data."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to IRS:  The Commissioner of Internal Revenue should ensure that the Director of  the Whistleblower Office modifies the Form 11369 and its accompanying  instructions to clarify how to document how whistleblower information was  used in any IRS actions taken, regardless of whether the laws  administered, examined, or enforced are outside of Title 26, such as  FBAR penalties. (Recommendation 1)", "The Commissioner of Internal Revenue should ensure that the Deputy  Commissioner for Services and Enforcement develops and documents  improved controls for the validity, completeness, and accuracy of data on  FBAR exams and enforcement actions. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the sensitive version of this report to IRS for review  and comment. IRS agreed with our recommendations and provided  technical comments which we incorporated as appropriate. However, IRS  deemed some of the information in their original agency comment letter  pertaining to the FBAR Database to be sensitive, which must be  protected from public disclosure. Therefore, we have omitted the sensitive  information in the comment letter, which is reproduced in part in appendix  II. These omissions did not have a material effect on the substance of  IRS\u2019s comments.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Commissioner of Internal Revenue. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or at mctiguej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to: (1) describe the extent to which the Internal  Revenue Service\u2019s (IRS) Whistleblower Office included Report of Foreign  Bank and Financial Accounts (FBAR) penalties in whistleblower awards  prior to the statutory change; (2) examine how IRS used whistleblower  information on FBAR noncompliance and how IRS responded to the  statutory change in definition of proceeds; (3) describe the purposes for  which IRS collects and uses data from the FBAR Database and assess  the controls for ensuring data reliability; and (4) summarize what is known  about the potential effect exclusions from collected proceeds, including  FBAR penalties, may have had on whistleblowers bringing claims to IRS.", "This report is a public version of a sensitive report that we issued in  August 2018. IRS deemed some of the information in our August report to  be sensitive, which must be protected from public disclosure. Therefore,  this report omits sensitive information about the information security  safeguards of IRS\u2019s FBAR Database as well as an associated  recommendation. Although the information provided in this report is more  limited, the report addresses the same objectives as the sensitive report  and uses the same methodology.", "To address the first objective, we conducted a case file review of a  generalizable stratified sample of closed 7623(b) whistleblower claims to  identify how often and to what extent whistleblower claims included  information about offshore accounts and FBAR violations. For this case  file review, we started with the population of 10,306 7623(b) claims that  had been closed by IRS between January 1, 2012 and July 24, 2017 (the  time of our analysis). We identified three subpopulations of whistleblower  claims from which we selected the claims we reviewed:  1.  All 92 claims involving taxpayers who were identified in a  whistleblower claim and who also appeared in IRS\u2019s FBAR Database  as having been subject to an FBAR examination. We designated this  subpopulation as \u201cMatched Claims.\u201d  2.  A random sample of 30 claims from a population of 299 claims that a  text search within E-TRAK had identified as likely involving  noncompliance with offshore account requirements, including FBAR,  and that were not included in other samples. We designated this  subpopulation as \u201cKey Terms.\u201d  3.  All 10 denied claims closed in E-TRAK, the IRS Whistleblower Office\u2019s  claim tracking system, with the closing code \u201cDenied - No Title 26  Collected Proceeds.\u201d We designated this subpopulation as \u201cNo Title  26 Collected Proceeds.\u201d", "Table 4 shows descriptive information about each of these  subpopulations.", "The purpose of our file review was to determine how often whistleblower  claims in each of our different subpopulations involved offshore accounts  and allegations of FBAR violations. We reviewed all claims in our first and  third subpopulations; because of the larger number of claims in the  second subpopulation, we selected a random sample for review.", "For the 132 whistleblower claims in our review, two reviewers coded the  content of each file into different categories, including: whether the Form  211, Application for Award for Original Information, included allegations of  FBAR noncompliance; whether the whistleblower received a  whistleblower award; and what collections were included in collected  proceeds for those paid whistleblowers. To the extent there were  disagreements among the reviewers\u2019 coding for a file, a third reviewer  resolved the differences. We agreed on a final coding for all of the data  elements collected, recorded them in a summary document, and used  these for our analysis. Because whistleblower files were not required to  contain information on FBAR penalty assessments or other enforcement  actions, although some of the files we reviewed did have this information,  we supplemented our file review with data on FBAR enforcement actions,  such as penalties and warning letters, from the FBAR Database.", "We assessed the reliability of the FBAR Database and E-TRAK database  for the purposes of using limited data from these databases for our own  analysis. We reviewed agency documents, electronically tested data for  missing data and outliers, and interviewed IRS officials about these  databases. These two databases are the only sources of data within IRS  for whistleblower claims information and FBAR enforcement actions and  outcomes. We compared data in both databases to identify individuals  that were both named by a whistleblower and subject to an FBAR  enforcement action. We used data from the FBAR Database for the  purpose of identifying and summarizing FBAR enforcement actions taken  by IRS, and we used data from the E-TRAK database to identify  whistleblower claims that were likely to include allegations of FBAR  noncompliance. IRS officials told us that the FBAR Database is the most  reliable data source at IRS for individuals who were subject to such FBAR  enforcement actions as penalty assessments. We discuss the limitations  of these databases in this report, but we concluded that the elements we  used in our analyses were sufficiently reliable for the purposes of  identifying a sample of whistleblower claims likely to include allegations of  FBAR noncompliance and FBAR enforcement outcomes. We also  interviewed IRS officials concerning the processing of claims and the  operation and maintenance of the E-TRAK and FBAR databases.", "For the second objective, we reviewed relevant portions of the Internal  Revenue Manual and other IRS internal guidance and documentation and  interviewed officials from IRS\u2019s Whistleblower Office and operating  divisions that handle whistleblower claims about what IRS does when it  receives information from whistleblowers that include allegations of FBAR  noncompliance. We also reviewed the recently enacted statutory  provisions concerning the definition of collected proceeds on which  whistleblower awards are based. In addition we spoke to IRS  Whistleblower Office officials concerning any changes IRS plans to make  in its policies and procedures as a result of the statutory change.", "For our third objective, we evaluated IRS\u2019s FBAR Database to identify  any control deficiencies, using as criteria Standards for Internal Control in  the Federal Government, the Federal Information Security Modernization  Act of 2014, and National Institute of Standards and Technology Special  Publication 800-53. We electronically tested the FBAR Database for  missing data, outliers, and obvious errors. We also reviewed IRS  documentation on the database. In addition, we interviewed IRS officials  responsible for maintaining and using the database to determine how IRS  uses the data, what controls are in place, and any known limitations of the  database. We also met with IRS officials and discussed the ongoing  development of plans for improvement of the database.", "For our fourth objective, we interviewed a nonprobability sample of  attorneys who have represented multiple whistleblowers who have  submitted claims to the IRS Whistleblower Office under section 7623(b).  The views expressed in these interviews represented only those of the  attorneys who participated and are not generalizable to all whistleblower  attorneys or law firms. These attorneys have a financial interest in IRS\u2019s  treatment of whistleblower claims; however, interviewing these attorneys  allowed us to gather broad viewpoints on how whistleblower award  exclusions may affect their professional decisions and the decision of  their clients and prospective clients. We began with whistleblower  attorneys whom we previously spoke with for our 2011 and 2015 reports  on the IRS Whistleblower Office and requested from those attorneys  names of other attorneys currently active in the IRS whistleblower  community who have represented clients who submitted allegations that  included FBAR noncompliance. We individually interviewed 11 attorneys  from nine firms, asking the same questions of each to obtain their  perspectives on the effect the exclusion of FBAR penalties and criminal  fines has on the nature and volume of whistleblower complaints and on  the cases they bring forward. We also attended a regularly scheduled  meeting of attorneys representing whistleblowers, including some we had  spoken with and several others. Following the enactment of statutory  provisions defining collected proceeds for the purpose of whistleblower  awards to include FBAR penalties and other non-Title 26 collections, we  contacted the 11 attorneys we had previously interviewed for their views  on the effect of the new legislation, and we received written responses  from 8 of them.", "For balance, we also analyzed data on FBAR penalty and tax  assessments for a sample of taxpayers who were assessed an FBAR  penalty in calendar years 2010 through 2015. For all taxpayers in our  sample, we identified those where a whistleblower was involved in  providing IRS information about the taxpayer and those where there was  no whistleblower presence. We analyzed whether there was a statistically  significant difference in proportion of FBAR penalty assessments  compared to tax and FBAR penalty assessments based on whether a  whistleblower was involved or not using a nonparametric Wilcoxon-Mann- Whitney test. This analysis did not control for other factors that could  affect the results, such as the taxpayer being willfully noncompliant with  FBAR reporting requirements, the total tax assessment of the taxpayer, or  the total income of the taxpayer. In addition, we interviewed IRS  Whistleblower Office officials and operating division officials to discuss  the relative complexity of claims involving and not involving FBAR and  how the exam teams use whistleblower information related to FBAR  noncompliance.", "The performance audit upon which this report is based was conducted  from March 2017 to August 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with IRS from August 2018 to September 2018 to  prepare this public version of the original sensitive report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tara Carter (Assistant Director),  Danielle N. Novak (Analyst-in-Charge), James Ashley, Steven J. Berke,  David Blanding, Amy Bowser, Andrew Emmons, Steven Flint, and Kayla  Robinson made key contributions to this report."], "subsections": []}]}], "fastfact": ["Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect $3.6 billion since 2007. Whistleblowers can claim awards of between 15 and 30 percent of the proceeds that IRS collects as a result of their information.", "However, before 2018, IRS wasn't required to pay whistleblowers for information that led to the collection of Foreign Bank and Financial Accounts penalties. Congress began to require IRS to pay whistleblowers for this information in February 2018. However, we found that IRS\u2019s data on these penalties may not be reliable. We recommended that they improve it."]}
{"id": "GAO-18-638", "url": "https://www.gao.gov/products/GAO-18-638", "title": "U.S. Postal Service: Enhancing Procedures Could Improve Product Scanning", "published_date": "2018-09-28T00:00:00", "released_date": "2018-09-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["USPS's competitive products have become increasingly important, comprising about 28 percent of USPS's total revenue. USPS scans these packages at various points throughout the postal network. When scans are inaccurate or missing, questions are raised about the veracity of USPS's data on scanning performance and can lead to customer complaints.", "GAO was asked to review USPS's scanning policies and procedures. In this report, GAO (1) describes USPS's scanning performance and (2) examines how USPS ensures accurate scanning. GAO reviewed USPS's policies and procedures and assessed them against internal control standards; interviewed officials from USPS and five high-volume mailers; and conducted site visits to six post offices in two USPS districts that represented a range of volume, number of routes, and performance."]}, {"section_title": "What GAO Found", "paragraphs": ["Mail products over which the United States Postal Service (USPS) does not exercise market dominance, such as many of its packages, are called competitive products. These items are scanned throughout the mail delivery system to track their progress (see figure). USPS data show that these products are almost always scanned. For example, USPS data showed that for the first three quarters of fiscal year 2018; all but one of USPS's 67 districts met their scanning goals. Additionally, mailers that account for a high volume of USPS's competitive products told GAO that they believed USPS was generally scanning products correctly. However, a small percentage of missed or inaccurate scans occur. For example, a report from one USPS district showed that for one week, 0.73 percent of the products delivered were missing a scan and that for the fiscal year to date almost 155,000 competitive products were missing a delivery scan.", "USPS has designed and implemented procedures and activities to help ensure accurate scanning, but some limitations could contribute to scanning errors. For example, USPS has not based its operational procedures for scanning on any internal control standards. USPS officials said the procedures were based on USPS's unique responsibilities, management experience, and sound business practices, but the officials could not identify specific standards or a framework that they followed as the basis for the procedures. USPS officials said they did not believe any internal controls standards applied to these procedures. By not basing procedures on standards, USPS may miss opportunities to improve how it achieves its mission to scan and measure the performance of competitive products. Additionally, USPS's scanning procedure documents, such as for outlining specific delivery scanning steps, are not always consistent, and USPS relies on more informal methods, such as meetings with employees to communicate changes. Thus, employees may not have accurate procedures available to them. Finally, USPS lacks procedures to help managers identify and address incorrect scans, address customer complaints or otherwise address scanning irregularities. For example, USPS's guidance for managers is limited to a list of bullet-points that do not detail the steps managers should follow to resolve scanning irregularities. In addition, this list has not been updated since 2005. Without consistent or detailed procedures, USPS's employees and managers may not scan items accurately or find information needed to resolve scanning issues\u2014a situation that could hinder USPS's ability to reduce inaccurate or missing scans for these important mail products."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that USPS: (1) identify and adopt internal control standards for its operational activities such as for scanning of competitive products; (2) improve the communication of procedures for scanning competitive products; and, (3) create procedures for supervisors on how to address inaccurate scans and resolve scanning issues. USPS agreed to explore addressing the first recommendation and agreed with the other two recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["With the growth of e-commerce, the delivery of packages has become an  increasingly important part of the U.S. Postal Service\u2019s (USPS) business.  Most of these packages are known as \u201ccompetitive products,\u201d for which  USPS competes with other companies\u2019 delivery services on pricing and  service. In fiscal year 2017, USPS delivered over 5 billion competitive  products to approximately 157 million points of delivery; this business  accounted for 3 percent of USPS\u2019s total mail volume but about 28 percent  of its total revenue. USPS expects the continued growth in e-commerce  will generate further increases in its competitive products business.  USPS\u2019s latest strategic plan stated that implementing initiatives to  significantly expand the competitive products business is critical to the  long-term financial outlook of USPS, as it has suffered financial losses  each year since 2007, in part due to declining volume in other types of  mail.", "Since consumers generally expect these products to be delivered to a  preferred address and within a specific timeframe, tracking these  shipments has become an important aspect of USPS\u2019s ability to compete  in this market. As a result, it is important for USPS to track its  competitive products accurately. To do so, USPS employees and  machines scan barcodes on these products at various points throughout  the postal network. However, USPS\u2019s Office of Inspector General (OIG)  reports and customer complaints have identified instances where the  scanning was inaccurate. For example, the USPS OIG has reported that  some items were scanned as delivered before they had left the post  office.", "You asked that we review USPS activities used to support accurate  scanning. This report (1) describes USPS\u2019s performance in the scanning  of competitive products, and (2) examines whether the design of USPS\u2019s  internal control activities helps ensure that competitive products are  accurately scanned. Our report focused on USPS\u2019s domestic competitive  products and the non-automated scanning activities that occur in its  network, such as at post offices and on delivery routes.", "To describe USPS\u2019s scanning performance, we reviewed USPS statistical  reports on scanning performance at the national and local level and  USPS OIG reports on scanning performance. We also interviewed USPS  delivery operations officials at the national level and in three postal areas  and three postal districts\u2014overseeing the post offices we planned to  visit\u2014about scanning goals and performance. We did not independently  verify USPS\u2019s scanning performance statistics or volume information for  this report. However, we reviewed relevant documentation and  interviewed appropriate agency officials, and found the data sufficiently  reliable for our reporting purposes. We interviewed representatives from  five mailers, which we refer to as \u201cmajor mailers\u201d in this report that  collectively use a high volume of USPS\u2019s competitive products in fiscal  year 2017. While responses from representatives of the major mailers are  not generalizable, they provide information and perspectives on USPS\u2019s  scanning performance.", "To examine whether the design of USPS\u2019s internal control activities helps  ensure that competitive products are accurately scanned, we reviewed  USPS\u2019s policies and procedures for scanning competitive products and  for the collection, storage, and reporting of scanning data. We reviewed  USPS\u2019s training materials, job aids, and other relevant documentation  and interviewed USPS officials to determine the key policies and  procedures used to ensure that competitive products are scanned  accurately. Based on USPS data on competitive products, we selected a  non-generalizable sample of six post offices in two USPS districts to visit  that represent a range in terms of (1) volume of competitive products, (2)  number of urban and rural carrier routes, and (3) on-time delivery  performance. At these site visits, we observed scanning procedures,  obtained documentation, and spoke with postmasters, managers, clerks,  and carriers about their scanning responsibilities and how USPS\u2019s  scanning procedures for scanning competitive products were designed  and implemented at the post office. We compared USPS\u2019s operational  policies and procedures aimed at ensuring accurate scanning to  standards on control activities and internal communications in the  Committee of Sponsoring Organizations of the Treadway Commission\u2019s  Internal Control-Integrated Framework (COSO Framework), which we  identified as reasonable and relevant internal-control criteria standards to  use in evaluating USPS\u2019s activities. The COSO Framework is recognized  as a leading framework for designing, implementing, and conducting  internal control and assessing the effectiveness of internal control. It  provides a means to apply internal control to any type of entity and  requirements for an effective system of internal control. To identify what  internal-control standards to evaluate USPS against, we interviewed  USPS officials about how they design, implement, and evaluate their  operational internal-control activities. We also assessed two relevant sets of internal-control standards and reviewed GAO and USPS OIG reports to  determine what standards have been used to evaluate other USPS\u2019s  internal-control activities.", "We conducted this performance audit from September 2017 to  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["USPS has a wide range of domestic competitive products that are a  growing sector of its business. The volume of USPS\u2019s competitive  products increased from approximately 750 million pieces in fiscal year  2008 to 4.9 billion pieces in fiscal year 2017. Revenue from these  products increased from about 10 percent of all USPS mail revenues in  fiscal year 2008 to about 28 percent in fiscal year 2017 (see fig. 1). USPS  forecasts that continued growth in e-commerce will increase the volume  of its competitive products, especially for the \u201clast-mile\u201d delivery service to  consumers\u2014which involves delivery from retail locations and fulfillment  centers (i.e., where online orders are processed, packaged, and shipped  out to USPS for delivery) to customers. USPS reported that in fiscal year  2017, revenue from competitive products exceeded USPS\u2019s expectations  by $500 million due to the growth in e-commerce and successful  marketing and sales campaigns. USPS expects increased competition,  though, in the first- and last-mile delivery services\u2014collection and  delivery of packages\u2014from other delivery providers.", "To remain competitive in the competitive product delivery market, USPS  officials have stated that information gained from scanning is leveraged to  provide customers with real-time visibility for the location of a competitive  product in USPS\u2019s delivery process as well as accurate estimates of the  delivery time of USPS\u2019s competitive products. Further, USPS\u2019s latest  strategic plan states that this information is one factor used to reduce its  own costs through optimizing its network, including processing facilities,  post offices, and numerous other facilities across the United States, and  streamlining its operations.", "USPS delivers competitive products across the nation, which it divides  into seven postal areas comprised of 67 postal districts (see fig. 2).  Managers at each level\u2014postal area, postal district, and post office\u2014are  responsible for overseeing and reporting on the performance of the level  below them. For example, each district manager is accountable to the  area vice president. Postmasters, who manage individual post offices, are  accountable to district managers and also monitor the performance of  employees at their post office.", "To track the movement of competitive products, USPS leverages  automation (i.e., scanning by postal-processing equipment) and passive  and active scan technology (i.e., scanning devices used by postal  employees) to capture barcode information. In addition, when competitive products are not able to go through all the automated scans,  USPS employees are to manually scan barcodes that have been placed  on each item. These barcodes link the item with information in USPS\u2019s  databases such as: the delivery address, the type of USPS product, and  when the item was accepted by USPS. According to USPS procedures,  competitive products could be scanned up to 13 times to generate  visibility necessary for USPS, mailers, and customers to track their  packages as they move through USPS\u2019s network (see fig. 3). For  example, the first scan of the product\u2014the \u201cAcceptance\u201d scan\u2014is made  when the item is dropped off at the post office or by a carrier if the product  is picked up at a mailbox or customer address. The last scan\u2014the  \u201cAcceptable Delivery Event\u201d scan\u2014generally means the item was  successfully delivered to the addressee or that a delivery attempt was  made (e.g., the product requires a signature but the recipient was not at  home so another attempt will need to be made or the recipient will need  to pick up the product). The interim scans reflect the product\u2019s progress  through the postal network, including through mail-processing plants and  equipment. The scan data are transmitted to USPS\u2019s data systems  throughout the day. Scan information from these systems is available to  USPS managers as well as mailers and customers who wish to track the  progress of their items.", "USPS\u2019s employees use devices to scan competitive products in postal  facilities and on delivery routes (see scans 1, 2, and 11\u201313 in fig. 3).  Carriers usually use a handheld Mobile Delivery Device (MDD) to scan a  package\u2019s barcode. MDDs contain Global Positioning System (GPS)  technology and transmit package scanning data and carrier location data  using a cellular network. USPS employees working inside post offices or  other facilities use similar scanning devices without GPS technology,  such as the handheld Intelligent Mail Device (IMD) to perform the manual  scans (see fig. 4)."], "subsections": []}, {"section_title": "USPS\u2019s Competitive Products Are Almost Always Scanned Correctly, Although Some Missed and Inaccurate Scans Occur", "paragraphs": ["USPS reports we reviewed indicate that competitive products are almost  always scanned and scanned correctly. USPS has an overall  organizational goal of accurately scanning 100 percent of all mail  pieces\u2014both competitive and other products\u2014that have a barcode. This  includes scanning each competitive product at several points from  acceptance, as described earlier. However, individual management  employee-performance goals for scanning are set slightly lower than 100  percent, as USPS officials stated that they recognize that some scanning  issues, such as for missing or damaged barcodes, may occur across post  offices. According to USPS data we reviewed for the first three quarters  of fiscal year 2018, all but one of USPS\u2019s 67 districts met USPS\u2019s  scanning goals for all five required scans for competitive products.  Additionally, in one district we visited, a USPS internal report showed that  every group of post offices in the district met its scanning goal for the  arrival-at-unit scan for the week, the preceding 4 weeks, and the year-to- date periods, and all but one group of post offices met their scanning  goals for the acceptable delivery scan for the same measurement period.", "In addition, representatives for mailers we interviewed that use USPS\u2019s  competitive products stated that they were generally satisfied with  USPS\u2019s scanning performance. Representatives of all the major mailers  we spoke with that rely on USPS\u2019s delivery network said they believed  that USPS is generally scanning competitive products accurately,  although issues still occur. Representatives of mailers told us that they  receive scanning data from USPS for their items throughout the day, with  some mailers receiving the data every 15 minutes, a rate that allows them  to track their items through USPS. Some mailers use this information to  calculate the expected time of delivery and monitor USPS\u2019s progress  against their own estimates of delivery time to measure USPS\u2019s  performance. Representatives for major mailers we spoke with said they  also get complaints from customers if items are late, lost, or inaccurately  scanned, so the customers provide another source of information on any  scanning issues. Four of the five representatives for major mailers we  interviewed that sent items via USPS competitive products told us that  they have seen improvement in USPS\u2019s scanning performance in recent  years. Additionally, all of the representatives for mailers we spoke with  stated that USPS has increased the amount of scanning and the  information provided from the scans in recent years.", "Although USPS has a high scanning rate, some missed and inaccurate  scans for competitive products do occur, errors that could potentially  affect millions of competitive products. For example, several USPS OIG  reports between 2016 and 2018 found that instances of missed or  inaccurate scans still occurred both nationwide and that in nine USPS  districts they analyzed, were due in part, to post office personnel not  always following proper scanning procedures and post office supervisors  not adequately monitoring how scanning procedures were implemented.  For example, the USPS OIG analyzed approximately 2 billion delivery  scans over a 6-month period in 2017 and found that 1.9 million delivery  scans (about 0.1 percent) occurred at the post office instead of at the  delivery address and were considered improper scans. Furthermore,  examples of USPS\u2019s internal reports we reviewed containing scanning  performance results showed that a small percentage of competitive mail  items had not been scanned. For example, one USPS internal report for a  district we visited showed that for one week, USPS employees in the  district missed about 0.73 percent of the expected delivery scans for  competitive products. Due to USPS\u2019s large volume of competitive  products, a small percentage of products not scanned can represent large  numbers of items. For example, about 155,000 competitive products were  missing a delivery scan in one district\u2019s 2018 year-to-date report we  reviewed.", "Additionally, the representatives of mailers we interviewed also reported  occasional scanning issues with USPS\u2019s competitive products. Most of  the mailers\u2019 representatives stated that when they see competitive items  missing scanning data, it is generally an isolated situation and USPS  usually fixes the issue. According to these representatives, USPS  provides them with points of contact to work with to resolve scanning  issues immediately and on a regular basis. However, one major mailer\u2019s  representative we spoke with stated that even though USPS\u2019s employees  are generally good at scanning packages, inaccurate delivery scanning is  an issue. The representative stated that about 8 to 10 percent of the  company\u2019s products sent through USPS were scanned by carriers as  delivered, but not at the customer\u2019s delivery address\u2014contrary to USPS\u2019s  standard operating procedures for scanning. The representative stated  that, although this percentage has decreased in recent years, the mailer  would like to see that number decrease further because delivery to the  destination address assures them that the item was left as close as  possible to the customer.", "USPS is taking some steps to address missed or inaccurate scans. For  example, USPS officials stated that the current electronic scanning device  carried by almost all carriers on their routes does not prevent scanning a  mail item as delivered to an address that is not the delivery address  associated with the item\u2019s barcode information. They also stated that  USPS is updating scanning devices to alert carriers when they scan items  as delivered when not physically at the correct delivery address.  According to USPS officials, as of May 2018, 80 percent of hand-held  electronic scanning devices used by USPS carriers had this functionality  and that this functionality is being fine-tuned. This capability, though, still  does not preclude all scanning errors, as it only affects the final delivery  scan. USPS officials also stated that employees may still encounter  scanning issues, such as damaged barcodes, which could lead to missed  scans."], "subsections": []}, {"section_title": "USPS Has Designed Policies and Procedures to Support Accurate Scanning of Competitive Products, but Limitations Could Contribute to Scanning Errors", "paragraphs": [], "subsections": [{"section_title": "USPS\u2019s Scanning Policies and Procedures Are Not Based on Standards for Operational Internal Controls", "paragraphs": ["USPS has not based its operational policies and procedures, such as  those that support the accurate scanning of competitive products, on any  standards for internal controls. USPS officials told us that they have not  used any specific criteria for designing, implementing, and operating an  internal control system for meeting its operational policies and internal  controls, such as those that help ensure competitive products are  accurately scanned. According to USPS officials, USPS does not follow  the COSO Framework to design, implement or evaluate its operational  internal controls as they believe that the COSO Framework standards are  traditionally related to internal controls over financial reporting. In addition,  USPS officials stated that USPS is not required to follow Standards for  Internal Control in the Federal Government, and therefore USPS does not  follow these standards as well. Instead, USPS officials stated that USPS  has designed its operational policies and internal controls over the years  based on its unique responsibilities, management experience, and sound  business practices. However, officials could not identify any specific  standards or framework they had followed.", "We have reported that standards for the design, implementation, and  operation of their internal-control system provide an overall framework for  establishing and maintaining an effective internal-control system\u2014which  is a key factor in achieving an entity\u2019s mission. Further, internal controls  help managers achieve desired results through effective stewardship of  public resources. USPS has options to choose from in selecting  standards for internal controls. Two widely used standards are the COSO  Framework and Standards for Internal Control in the Federal  Government, which was adapted for federal entities from the COSO  Framework. Both standards are designed to help an entity design,  implement, and maintain an effective internal-control system. Such a  system should encompass all aspects of an entity\u2019s objectives, including  operations, reporting, and compliance objectives, and can help an entity  adapt to shifting environments, evolving demands, changing risks, and  new priorities. Non-federal entities can adopt either of these standards in  their efforts to design, implement, and operate an effective internal control  system.", "As stated above, we found that the COSO Framework to be a reasonable  and relevant set of internal control standards to evaluate USPS\u2019s  operational internal-control activities. However, we and the USPS OIG  have applied both the COSO Framework and Standards for Internal  Control in the Federal Government in evaluating USPS\u2019s operational  internal controls in recent reports. Without standards for an effective  internal-control system for its operational policies and procedures for  scanning competitive products, USPS may miss opportunities to improve  how it achieves its mission to deliver those important products."], "subsections": []}, {"section_title": "USPS Has Standard Operating Procedures for Scanning Competitive Products, but They May Not Guarantee Accurate Scanning", "paragraphs": ["USPS management has designed standard operating procedures to  provide assurance that competitive products are scanned accurately. We  found some of these procedures to be consistent with the COSO  Framework, which states that an organization should deploy control  activities through policies that establish what is expected and procedures  that put policies into action. USPS has developed a scanning policy for  its products, stating that \u201cproperly scanning all barcodes will result in  World Class Visibility and be instrumental in retaining and growing our  shipping business and providing valuable data to drive improved  operational performance and reduce costs.\u201d USPS also has procedures  that establish the responsibilities of employees for accurately scanning  barcodes for competitive products at various points in the mail flow.  Although USPS officials stated that employees should rely on prompts  from their scanning devices to ensure scans are done correctly, USPS  communicates these procedures in three main ways: documents, such as City Carrier Handbook and Rural Carrier  Handbook, that outline scanning procedures and that explain carriers\u2019  duties, including scanning;  job aids, such as posters showing proper scanning procedures (see  fig. 5); and,  standard work steps or guidance that lists procedural steps either for  competitive products or for scanning mail in general (see fig. 6).", "Following these procedures is important to fulfill USPS\u2019s scanning goals.  As stated above, the USPS OIG found instances of missed or inaccurate  scans for competitive items in recent reports. Further, the USPS OIG  also recently found that USPS employees at all 15 postal facilities it  visited in the Los Angeles District did not follow correct scanning  procedures for USPS\u2019s competitive Parcel Return Service product,  leading to inconsistent counts for these products. Such errors can put  USPS at risk of not collecting revenue for these products. The USPS OIG  has made several recommendations in its recent reports to USPS  management to reinforce the importance of these procedures to  employees. USPS officials agreed with some of these recommendations  and stated that they are taking action to address them.", "While reinforcing these procedures can be helpful, we found that USPS\u2019s  scanning procedures may not provide the necessary assurance for  accurate scanning because they are not consistent. For example:", "The USPS\u2019s City Carrier Handbook states that mail with a barcode  should be scanned at the delivery point (or address).", "However, a standard operating procedures document for city carriers  at a post office we visited stated that carriers must scan each delivery  confirmation mail piece but did not specify that this scan had to be at  the delivery point or address. Locally developed procedures may not  be uncommon, as one district manager told us that USPS  headquarters allows managers to make a certain amount of flexibility  to adapt the standard operating procedures for each post office.", "The USPS document, SCANNING at a Glance: Delivering 100%  Visibility, states that all mail items that require delivery scanning  should be scanned at the delivery address, but this document also  provides additional scanning procedures not contained in the City  Carrier Handbook and other standard operating procedures  documents we examined. In particular, the document contained  procedures for scanning to account for mail being held for customers  on vacation; scanning items correctly to account for mail not delivered  to business that were closed; and for mail that was refused by the  addressee.", "This inconsistency in USPS\u2019s scanning procedures has likely occurred  because many of the documents have been updated at different times  and have not always reflected new operations. For city carriers, the online  version of the USPS\u2019s City Carrier Handbook was last updated in April  2001. USPS officials stated that the most recent update regarding  scanning was issued in November 2015 via a separate Postal Bulletin.  Further, a separate standard operating procedure document for city  carriers at a post office we visited was dated June 2006. For rural  carriers, the most recently updated scanning procedures we found was  dated 2013. As a result, some of these documents are not updated with  the latest information on new scanning procedures. In a related example,  the USPS OIG recently found that employees at three of the six USPS  facilities the USPS OIG visited did not have an adequate understanding  of the procedures for processing election and political mail due, in part, to  guidance that was not updated, even though the procedures were  centrally documented on an internal USPS website.", "USPS officials recognized this issue and stated that these handbooks are  not updated regularly as the content of the handbooks are subject to labor  negotiations. Therefore, new procedures are presented to USPS  employees outside of the handbooks. However, given that these efforts  rely on employees to orally communicate information, having consistent  documented procedures is even more important. In addition to stating that  the organization should deploy control activities through policies and  procedures, the COSO Framework states that senior management should  communicate objectives clearly through the organization so that other  management and personnel understand their individual roles in the  organization. By not having consistent procedures, USPS risks not  clearly communicating to its employees how they should carry out scanning procedures and therefore contributing to scanning errors. As  discussed below, USPS officials told us that management updates its  procedures typically through regular meetings with employees, which are  documented in handouts or slides. USPS officials stated that  management stresses the importance of scanning and that employees  should follow the prompts on their electronic devices when scanning  competitive products. However, employees can still scan competitive  products as delivered even if they are not, as device prompts can be  misread, misinterpreted, or ignored. Furthermore, even with current  prompts, scanning errors can and do occur.", "Consistent procedures, clearly communicated to employees, have  become increasingly important as USPS hires new employees to handle,  in part, anticipated growth in the volume of competitive packages. For  example, GAO analysis of USPS data showed that USPS\u2019s carrier  workforce increased by 6.4 percent between fiscal years 2015 and  2017. The USPS OIG has found that these new employees require  training and guidance to properly perform their roles and to reduce  turnover."], "subsections": []}, {"section_title": "USPS Holds Regular Training and Meetings to Support Accurate Scanning", "paragraphs": ["In addition to deploying policies and procedures to achieve an  organization\u2019s objectives, the COSO Framework states that an  organization should internally communicate objectives and responsibilities  that are necessary to support the functioning of internal controls. This  process can be accomplished through training and meetings. Specifically,  the COSO Framework states that training should enable individuals to  develop competencies appropriate for assigned roles and responsibilities,  among other things, and that active forms of communication such as  face-to-face meetings are often more effective than passive forms such  as broadcast e-mails and intranet postings.", "To communicate how its procedures should be correctly implemented,  USPS has developed both initial and on-going training for employees.  USPS officials stated that new employees are formally trained in scanning  procedures when they start their employment. For example, carriers are trained how to use USPS\u2019s electronic scanning devices, when to scan  competitive items, the correct codes to use for different delivery situations  (i.e., signature required, vacation holds, how to code where a package  was left at a delivery address). Any new procedures can be introduced  through presentations given by managers during meetings, as described  below. Required regular meetings may be tracked by USPS management  to ensure they are completed. Some district officials we spoke with stated  that they certify that their employees have received required training and  send that certification to area and USPS headquarters officials. Additional  training also helps USPS reinforce correct scanning procedures. When  scanning procedures are not being followed or scanning goals are not  met at a post office, USPS officials stated that reminders of the correct  procedures designed to reinforce USPS\u2019s scanning procedures are  presented to employees through presentations, posters, job aids, and  additional documents such as carriers\u2019 handbooks. For example, the  representative of the major mailer we spoke with that had 8 to 10 percent  of competitive products not scanned to the final delivery address stated  that training was needed for both new and experienced carriers to  reinforce that they should scan items at the delivery address.", "To further ensure the accurate scanning of competitive products, USPS  reported that it holds internal and external meetings. Specifically, these  meetings are designed to:", "Reinforce procedures: Post office managers can use stand-up talks\u2014 weekly meetings between management and employees at the post  office\u2014to discuss scanning issues with employees and opportunities  to address those issues. For example, the postmaster at one post  office we visited stated that this post office reinforces the standard  work procedures designed to improve the scanning performance of  employees during these meetings. Carriers and clerks can ask  questions and learn why they are asked to do something or how to do  a specific task, allowing for additional training and reinforcement of  procedures. For example, we reviewed a handout developed by  USPS headquarters to provide managers with talking points for  service talks. This handout provided information on carriers delivering  and scanning accurately and instructions on scanning at point of  delivery on rural routes.", "Introduce new procedures: USPS officials told us that post office  managers use stand-up talks to introduce new procedures and  processes with carriers and clerks. For example, postmasters stated  that they used these meetings to introduce and train carriers on new  scanning features at the post offices. USPS district and area  management develop and disseminate memos and handouts to assist  managers conducting these meetings. We reviewed handouts USPS  provided to managers for service talks. These handouts provided  information on the rollout of some of the most recent scanning  procedure changes.", "Continuously improve operations: District managers we interviewed  stated that post offices with low scanning performance scores are  placed on a district\u2019s list of underperforming post offices. USPS district  managers we interviewed told us that they meet with these post  offices to determine how each post office plans to improve its  scanning performance. District management also conducts audits of  underperforming post offices and post offices that are in need of  improvement. Our review of one district office\u2019s service review  checklist identified the key areas of audit for underperforming post  offices.", "Reassess procedures: Representatives of mailers we interviewed told  us that they meet with USPS representatives to discuss ways USPS  can share scanning information for competitive products."], "subsections": []}, {"section_title": "USPS Generates Reports for Tracking Scanning Performance, but Reports May Not Be Used Consistently by Managers to Resolve Scanning Issues", "paragraphs": ["Given that inaccurate scans can and do occur, it is important that postal  managers explore and investigate any instances of missed or inaccurate  scans. To do so, USPS managers\u2014including area vice presidents, district  managers, and postmasters\u2014use a variety of reports as tools to ensure  that the required scans are made at the appropriate place and time, and  take action to monitor the status of competitive products, track lost items,  and identify scanning issues. USPS headquarters designs reports used  by managers to review performance at the local level across the country.  Managers at each level are responsible for overseeing and reporting on  the performances of the level below them. For example, the postmaster  monitors performance of employees at the post office and is accountable  to the district manager. In turn, each district manager is held accountable  by the area vice president.", "To monitor performance of scanning of competitive products, these  managers have access to several USPS data systems to generate  reports. They can use the reports to monitor scanning performance of  carriers and clerks at each post office and to identify the causes of  scanning issues, such as missing or incorrect scans. Managers can also  use these reports to track the status of competitive products or to  investigate customer complaints of lost items. Some examples of reports  available to managers include the following:", "Report 1: USPS officials told us that each post office receives this  report from their District Office. The report identifies competitive  products that do not have all the required scans, such as scans when  the item arrives at the post office or when a delivery attempt was  made. For example, one district official sends postmasters weekly  reports on competitive products that do not have all the required  scans. The officials told us that these reports help managers  investigate the cause of incorrect scans identified in the report and  how to prevent future occurrences.", "Report 2: USPS officials told us that this report is generated by district  managers to proactively identify scanning irregularities, such as scans  that may be out of sequence or multiple competitive products that are  scanned at the same time but are for different addresses. District  management can query postmasters about these scans and ask them  to investigate the reason for the irregularities and determine if the  scan was appropriate.", "Report 3: USPS officials told us that this report is generated by  postmasters to monitor scanning status and performances for each  competitive product that has received an arrival scan but lacks a  delivery scan. While this may indicate a problem, it could also just  reflect that the final scan had not been made by the end of the day or  the scan that had not been uploaded into the USPS data systems  when the report was generated.", "While having these reports are helpful, their full potential to help USPS  managers may be limited because USPS lacks detailed and up-to-date  standard operating procedures for how managers should use these  reports or conduct other activities to efficiently investigate and resolve  scanning issues. USPS\u2019s Scanning Performance: Delivery Standard  Operating Procedures for managers are a list of bullet points outlining  managers\u2019 responsibilities to meet scanning performance target goals  and not a list of detailed procedures for managers to follow, such as how  to use Report 1 to identify items that do not have all the required scans. In  addition, USPS officials told us that this list has not been updated since  approximately October 2005. The COSO Framework states that  organizations should internally communicate information, including  objectives and responsibilities for internal control, necessary to support  the functioning of internal control. Further, it states that a process  should be in place to communicate required information to enable all  personnel to understand and carry out their internal-control  responsibilities.", "Absent such communication, managers may take different actions to  address problems or may have difficulty knowing where to find the  appropriate information to locate a missing item to resolve a customer\u2019s  complaint quickly. For example, one post office manager told us that he  will look at the scanning history in the USPS data systems to determine if  the item received an acceptable delivery event scan or what the status of  the item is on the route, while another post office manager told us he will  use GPS data to see where the scans were made to determine if the item  was delivered to the right address. If managers do not know where to find  the appropriate information, they may spend more time investigating and  be less efficient in resolving issues.", "Further, not having detailed standard operating procedures means  managers may not be aware of all the reports available to them. For  example, some post office managers told us that they use Report 3 while  other post office managers told us that this report was not available to  them. Without using Report 3, some managers told us that they look in  several sources to find the same information needed to resolve the issue,  such as locating a lost package. Some managers told us that USPS  management discontinued the report because it was being misused by  some managers. Specifically, managers told us that some managers  were manually entering scanning or service-performance information  retroactively to improve their performance scores. However, they told us  that USPS management recently made Report 3 available to managers  again but changed features to reduce any misuse.", "Additionally, USPS may miss opportunities to prevent scanning issues  from happening again by not clearly communicating how managers  should use the various reports to address specific scanning issues. For  example, the USPS OIG recently determined that instances of missed  and inaccurate scans for competitive products were a result of USPS  management not adequately monitoring the implementation of those  procedures. Without detailed procedures to guide managers in finding  and using specific information in available reports and other tools,  managers will not have consistent information to use to investigate and  resolve customer complaints quickly or accurately. In addition, new  managers may not know where to go for the most appropriate information  and how to use this information to address some issues."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As competitive products have become essential to USPS\u2019s economic  viability, it is increasingly important for USPS to accurately track them to  remain competitive in this market. While USPS may be scanning most  mail accurately, there continue to be instances where mail is not scanned  accurately or is missing scans. Given the volume and growth in these  competitive products, even a small percentage of inaccurately scanned  products could be a large number of such products. Since USPS\u2019s  procedures were developed absent standards for internal control, the  adoption of a set of internal control standards could enhance USPS\u2019s  efforts to continuously improve the design, implementation, and  evaluation of its operational internal controls for scanning of competitive  products. Further, since USPS\u2019s standard operating procedures for  scanning are located in numerous documents and are not always  consistent\u2014and given USPS\u2019s reliance on stand-up talks and meetings to  keep employees current\u2014USPS employees may not always have  accurate scanning procedures easily accessible to them. Having  consistent standard operating procedures is increasingly important to  ensure that employees are making accurate scans. Additionally, standard  procedures that guide managers to investigate and resolve scanning  issues would help managers more efficiently address these issues and  ideally prevent these issues from happening again."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To improve USPS\u2019s competitive products scanning, we recommend that  the Postmaster General take the following three actions.", "The Postmaster General should identify and adopt a set of internal control  standards that can be used as the basis for operational internal-control  activities, such as those for scanning competitive products.  (Recommendation 1)", "The Postmaster General should improve the communication of standard  operating procedures for scanning competitive products by, for example,  updating or consolidating USPS documents, job aids, and standard work  steps. (Recommendation 2)", "The Postmaster General should create standard operating procedures for  managers on how to address inaccurate scans and use available reports  to investigate and resolve scanning issues. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to USPS for its review and comment.  USPS\u2019s comments are reproduced in appendix I.", "USPS stated that it cannot agree with our recommendation to identify  and adopt a set of internal control standards for USPS\u2019s operational  internal control activities at this time. Although USPS has adopted an  internal control framework for its financial internal control activities, USPS  does not know what the benefits and costs are of adopting internal  control standards for its operational internal control activities. As a result,  USPS agreed to conduct a cost study to determine whether to commit  resources to identifying and adopting a set of internal control standards  for its operational internal control activities. We are encouraged that  USPS is planning to conduct such a study and anticipate that performing  this study will result in the implementation of an appropriate set of internal  control standards. USPS agreed with the two recommendations  regarding scanning procedures and committed to completing corrective  actions by November of 2018.", "In its general comments, USPS noted that our reference to the USPS  OIG\u2019s report, Processing Readiness for Election and Political Mail for the  2018 Midterm Elections did not appear germane to the scanning of  competitive mail. We recognize that this report was focused on a different  type of mail, but as USPS noted in its letter, we use the OIG report as a  related example of how USPS has taken efforts to improve the  communication of its scanning procedures to employees. Therefore, we  determined that our use of the report is appropriate. We have added  information from the OIG report to characterize the OIG\u2019s  recommendations and USPS\u2019s actions to address those  recommendations.", "USPS also provided technical comments, which we incorporated as  appropriate.", "We will send copies of this report to the appropriate congressional  committees, the Postmaster General, the Chairman of the Postal  Regulatory Commission, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff making key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the U.S. Postal Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Kyle Browning (Assistant  Director); Greg Hanna (Analyst-in-Charge); Michael Hansen; Thanh Lu;  John Mingus; Faye Morrison; Malika Rice; Amy Rosewarne; Crystal  Wesco; Elizabeth Wood; and Matthew Zaun made key contributions to  this report."], "subsections": []}]}], "fastfact": ["As e-commerce continues to grow, package delivery has become an increasingly important part of the U.S. Postal Service's revenues. USPS competes with private delivery companies for this business.", "To stay competitive, USPS tracks packages with barcode scans so it can offer customers accurate delivery estimates, real-time data, and more.", "USPS data show that almost all of these packages are scanned accurately, but some scans are missed or inaccurate. Considering the importance of this business to USPS's financial outlook, we recommended adopting standards to improve guidance and procedures related to scanning, and dealing with inaccurate scans."]}
{"id": "GAO-19-7", "url": "https://www.gao.gov/products/GAO-19-7", "title": "Oil and Gas Development: Actions Needed to Improve Oversight of the Inspection and Enforcement Program", "published_date": "2019-02-14T00:00:00", "released_date": "2019-03-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["BLM has primary responsibility for managing oil and gas development on federal and Indian lands. To help ensure operator compliance with laws and regulations, BLM administers the Inspection and Enforcement program. Under the program, BLM inspects operators' drilling, production, and plugging activities and can issue various enforcement actions, such as monetary assessments, for violations. GAO was asked to examine key aspects of the Inspection and Enforcement program.", "This report (1) describes the distribution of BLM's oil and gas Inspection and Enforcement program's workload and workforce among agency field offices for the most recent 5 years for which such data were available (fiscal years 2012 through 2016) and (2) examines the extent to which BLM conducted internal control reviews in accordance with its July 2012 oversight policy for fiscal years 2013 through 2018, the most recent period for which such data were available. GAO examined BLM policies, data, and documents; interviewed BLM headquarters, state and field office officials; visited six BLM field offices selected based on their level of resource development activity; and toured oil and gas drilling, production, and plugging sites at three of these six field offices."]}, {"section_title": "What GAO Found", "paragraphs": ["Based on GAO's analysis of Bureau of Land Management (BLM) data, the distribution of BLM's oil and gas Inspection and Enforcement program's workload and workforce showed an imbalance among BLM's 33 field offices in fiscal years 2012 through 2016. GAO analyzed BLM data on the overall percentage of the workload and workforce distributed at each field office (i.e., activity level) and grouped similar activity level field offices together into highest, medium and lowest activity categories. GAO found that the program distributed the majority of its workload to 6 highest activity offices and distributed the majority of the workforce to 21 medium activity offices (see fig.). Based on GAO's review of BLM documentation and interviews with agency officials, BLM took both short- and long-term actions in fiscal years 2012 through 2016 to address this imbalance, such as temporarily re-assigning inspectors from some medium activity offices to some of the highest activity offices.", "BLM has not completed all required internal control reviews of its field offices. BLM's July 2012 oversight policy instructs its state offices to periodically conduct internal control reviews of field offices, which are to, among other things, identify staffing needs. BLM state offices completed internal control reviews at 6 of 33 field offices from 2013 through 2017, and 5 more are scheduled from 2018 through 2020. Officials from BLM state offices told GAO that some human capital and workload challenges hindered their ability to complete reviews, including long-term vacancies in some state offices positions. However, a senior BLM official said that headquarters did not consistently track and monitor the extent to which state offices completed field office internal control reviews, and headquarters officials said they were not aware that so few reviews had been completed. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to expected results and analyzing significant differences. Identifying the reasons it did not complete internal control reviews, developing and implementing a plan to address those challenges, and monitoring state offices' progress toward completing required reviews will better position BLM to ensure that its state offices are completing all required internal control reviews as called for by its July 2012 oversight policy."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to BLM, including taking actions to increase monitoring of state offices' progress toward completing internal control reviews. BLM concurred with all three recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Production of oil and gas on federal and Indian lands is an important part  of the nation\u2019s energy portfolio and generates billions of dollars annually  for the federal government, tribes, and individual Indian mineral owners.  In fiscal year 2016, the Department of the Interior reported collecting  more than $2 billion associated with onshore oil and gas development on  federal and Indian lands, including royalty payments from operators for  resources extracted. Interior\u2019s Bureau of Land Management (BLM) has  primary responsibility for managing and overseeing oil and gas  development on federal lands. BLM also plays a key role in managing oil  and gas development on Indian lands. Specifically, BLM\u2019s Inspection and  Enforcement program ensures production accountability (i.e., operators  accurately measure and report production volume\u2014these volumes are a  key input into royalty payment calculations), environmental protection,  and public safety.", "Inspecting oil and gas development and production is a complicated  process that requires BLM\u2019s petroleum engineer technician (PET)  inspectors to conduct a variety of technically challenging inspections in  geographically remote areas to interact with hundreds of different  operators in the oil and gas market. At 33 BLM field offices with ongoing  oil and gas development activities, the Inspection and Enforcement  program employs a workforce of PET inspectors who carry out a  workload that includes a range of inspections that cover a well\u2019s life cycle,  from drilling and production to plugging. PET inspectors play a vital role in  helping to ensure operators employ sound and prudent industrial  practices at more than 140,000 oil and gas wells on federal and Indian  lands. In addition, changes and innovations within the oil and gas industry  can impact the bureau\u2019s PET inspector workforce and its inspection  workload. In this context, BLM oversight is essential to help ensure the  bureau\u2019s field offices have effective internal controls, which help BLM  achieve its mission and respond to changing risks.", "Past work by us, Interior\u2019s Office of Inspector General, and others has  highlighted the importance of BLM\u2019s oversight of oil and gas development  on federal and Indian lands and identified a number of weaknesses. BLM  has taken some actions to address these weaknesses. For example:  In March 2010, we found BLM was unable to consistently meet its  goals for completing production inspections. We recommended that  BLM consider an alternative inspection strategy to ensure it inspects  all wells within a reasonable time frame, given available resources.  BLM concurred with our recommendation. In response to our  recommendation, in 2011, BLM developed its risk-based production  inspection strategy, which classifies wells as either high-priority or  low-priority for inspections based on multiple factors.", "In December 2010, the Interior Inspector General identified  weaknesses with the quality of inspections conducted by Inspection  and Enforcement program personnel and made a number of  recommendations. In July 2012, BLM issued a program oversight  policy that, among other things, requires state offices to conduct  periodic internal control reviews of the Inspection and Enforcement  program at BLM field offices with ongoing oil and gas activities.", "Since 2011, we have designated Interior\u2019s management of federal oil  and gas resources as a high-risk area vulnerable to fraud, waste,  abuse, and mismanagement. In our February 2017 high-risk series  update, we reported that Interior has taken some actions to address  production verification and human capital challenges by, for example,  using special, higher salary rates to hire and retain key oil and gas  staff such as BLM inspectors. However, the agency\u2019s management of  federal oil and gas resources remains an area vulnerable to fraud,  waste, abuse, and mismanagement.", "In our 2017 high-risk series update, we added a new high-risk area on  improving management of federal programs that serve tribes and their  members. We reported that, among other things, Interior\u2019s Bureau of  Indian Affairs mismanages Indian energy resources held in trust and  thereby limits opportunities for tribes and their members to use those  resources to create economic benefits and improve the well-being of  their communities.", "You asked us to examine BLM\u2019s oil and gas Inspection and Enforcement  program. This report (1) describes the distribution of oil and gas  Inspection and Enforcement program workload and workforce among  BLM\u2019s field offices for the past 5 years and (2) examines the extent to  which BLM conducted internal control reviews in accordance with its July  2012 oversight policy.", "To describe the distribution of oil and gas inspection and enforcement  workload and workforce among BLM\u2019s 33 field offices with ongoing oil  and gas activities, we focused on the workload completed by PET  inspectors, as well as workforce data on PET inspectors. PET inspectors\u2019  workload includes inspections of drilling, production, and well plugging  operations, commonly referred to as \u201cdownhole\u201d inspections according to  the BLM Inspection and Enforcement Program Manager. We focused on  these areas because (1) BLM planning documents consistently state that  downhole inspections on high-priority drilling, high-priority well plugging,  and high-priority production wells are the program\u2019s top three work  activities, and (2) the program allocates the majority of its total inspection  work months to completing downhole inspections. We selected the past  5 years (fiscal years 2012 through 2016) for which such workload and  workforce data were available during our review.", "However, due to data reliability issues associated with priority rankings  (high or low) during fiscal years 2012 through 2016 for drilling, production,  and plugging inspections as well as issues with the number of completed  inspections\u2014the most direct measure of workload\u2014we determined that  these inspection data were not sufficiently reliable for our purposes.  Instead, we identified seven alternate workload measures for drilling,  production, and plugging inspections, which BLM officials said would  provide a representation of the size and scope of its inspection workload.  In addition, we identified two workforce measures for a total of nine  measures that covered fiscal years 2012 through 2016. The workload  measures are:  the number of wells drilled on federal and Indian lands;  the number of production cases on federal and Indian lands (a case is  either a lease or an agreement, can have from 1 to more than 1,000  wells, and is the unit of analysis for BLM\u2019s production inspection  workload);  the number of high-priority production cases on federal and Indian  lands;  the number of low-priority production cases on federal and Indian  lands;  the number of planned work months for plugging inspections on  federal and Indian lands;  the number of enforcement actions issued for all inspections on  federal and Indian lands; and  the number of major and continued noncompliance enforcement  actions\u2014major incidents of noncompliance, monetary assessments,  civil penalties, and operation shutdown\u2014issued for all inspections on  federal and Indian lands. These types of actions generally identify (1)  immediate, substantial, and adverse effects to public health and  safety, the environment, production accountability, or royalty income;  or (2) an operator\u2019s failure to correct an identified problem or violation  by the abatement date. For example, BLM can issue monetary  assessments up to $5,000 to operators who drill on federal and Indian  lands without approval.", "With respect to workforce, the measures are:  the number of PET inspectors \u201con board\u201d at each field office at the  start of each fiscal year, and  the number of PET inspection work months in each fiscal year.", "For each of the workforce and workload measures, we calculated the  percentage of the nationwide total (i.e., federal plus Indian) for each field  office during fiscal years 2012 through 2016. Our calculations, in general,  demonstrated a pattern that showed natural break points in the data for  field office activity level. Based on these natural break points, we  developed and applied decision rules. Based on these rules, we  categorized each field office, based on specific workload and workforce  measures, as \u201chigh activity\u201d if it represented 4 percent or more of the  nationwide total, \u201cmedium activity\u201d if a field office represented from 3.9  percent to 1 percent of the nationwide total, and \u201clow activity\u201d if a field  office represented 1 percent or less of the nationwide total. BLM agreed  with this approach for categorizing the 33 field offices based on their  workload and workforce activity levels, and said it was representative of  the workload and workforce. For example, we categorized the Rawlins,  Wyoming, field office as medium activity for the number of wells drilled  because the office was responsible for 1.8 percent of all wells drilled on  federal and Indian lands from fiscal years 2012 through 2016. However,  we categorized the Rawlins field office as high activity based on the  number of planned work months for plugging inspections because the  office represented 5.7 percent of planned work months for plugging  inspections on federal and Indian lands in fiscal years 2012 through 2016.", "We then compared the distribution of field offices across the workload  and workforce measures to identify the offices that most consistently fell  into the high-activity, medium-activity, or low-activity category. Once  again, our analysis demonstrated a pattern that showed natural break  points for the data, which allowed us to develop certain decision rules.  Based on these rules, we categorized a field office as an overall highest  activity office if it was rated high activity in at least six of the nine workload  and workforce measures and an overall lowest activity office if it was  rated low activity in at least six of the nine measures. Overall medium- activity offices were those that did not fall into the overall high and overall  low categories. For example, we categorized the Rawlins field office as  an overall medium-activity office because it was rated as high activity for  three measures and medium activity for six measures. BLM agreed with  this approach for grouping the field offices into three categories based on  activity.", "We obtained our workload and workforce data primarily from the annual  inspection work plan BLM develops at the start of each fiscal year. The  annual work plan provided data for production cases, planned work  months for plugging inspections, number of onboard PET inspectors, and  number of PET inspection work months. In addition, we obtained records- level data from the bureau\u2019s corporate oil and gas database for the wells  drilled and enforcement actions data. We assessed the reliability of the  work plan and records-level data by reviewing related documentation,  interviewing knowledgeable agency officials, and conducting electronic  and manual testing of the data to identify missing data or obvious errors.  We found that the data related to our seven workload and two workforce  measures were reliable for the purposes of our review.", "To determine the extent to which BLM conducted internal control reviews  of the Inspection and Enforcement program from fiscal years 2013  through 2018 in accordance with its July 2012 oversight policy, we  reviewed the oversight policy and compared its requirements to (1) the  field office internal control reviews completed by state office officials and  (2) federal standards for internal control, specifically the control activities  standard that requires management to design control activities to achieve  objectives and respond to risks. We selected this time period as it was  the most recent period for which data were available.", "For both objectives and to obtain possible reasons or explanations for the  data, we reviewed key BLM policy and guidance documents, including the  Inspection and Enforcement Handbook and the annually issued  Inspection and Enforcement Strategy and Goals. We interviewed BLM  headquarters officials, BLM officials at 7 state offices, and PET inspectors  at 13 BLM field offices. We selected this nongeneralizable sample to  provide a range of resource development, such as the primary type of  resource developed (i.e., oil or gas or both), the presence of Indian lands,  and geographic variation. We also conducted site visits to six BLM field  offices in New Mexico, Wyoming, and North Dakota; we selected these  field offices as they have historical or current high levels of resource  development activity. During those site visits, we accompanied PET  inspectors on drilling, production, and plugging inspections.", "We conducted this performance audit from December 2016 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides information on BLM\u2019s mission and organizational  structure, the process for overseeing the development of federal and  Indian oil and gas resources, and key aspects of the Inspection and  Enforcement program."], "subsections": [{"section_title": "BLM Mission and Organizational Structure", "paragraphs": ["BLM\u2019s mission is to maintain the health, diversity, and productivity of  public lands for present and future generations. As part of this mission,  BLM manages federal lands for multiple uses, including recreation;  grazing; timber; minerals; watershed; wildlife and fish; natural scenic,  scientific, and historical preservation; and the sustained yield of  renewable resources. BLM manages these responsibilities through its  headquarters office in Washington, D.C.; state offices; district offices; and  field offices. Each level\u2019s general responsibilities include the following:", "BLM\u2019s headquarters office develops guidance and regulations.", "State and field offices manage and implement the bureau\u2019s programs.  In addition to implementing programs, BLM state offices oversee field  office operations. Field offices lead BLM\u2019s oversight of oil and gas  development. They are located primarily in the Mountain West, where  much of oil and gas development on federal and Indian lands takes  place.", "Within field offices, BLM supervisory and staff PET inspectors and  tribal PET inspectors (who are contracted by BLM to inspect some  wells on Indian lands in accordance with BLM policies and  procedures) have primary responsibility for implementing the  Inspection and Enforcement Program with assistance from state office  program coordinators, according to the Inspection and Enforcement  Program Manager. Among other things, state office program  coordinators help field offices plan and prioritize their inspection  workloads in accordance with BLM policy and comply with BLM  guidance and federal regulations when conducting and documenting  inspections, according to BLM officials."], "subsections": []}, {"section_title": "Process for Development of Oil and Gas Resources on Federal and Indian Lands Including Key Aspects of the Inspection and Enforcement Program", "paragraphs": ["Development of oil and gas resources on federal and Indian lands is a  multi-stage process. First, Interior holds auctions through which entities  may secure the right to federal and Indian leases that allow them to drill  for oil and gas after meeting certain conditions. Once an operator plans to  drill a well on leased land, it must first secure a permit from Interior. After  drilling a well, an operator installs production equipment, such as pump  jacks, storage tanks, and metering equipment. This production phase  continues until the well becomes inactive, and the operator may decide to  plug the well, usually because the well is either depleted or no longer  economically viable. After plugging the well, the operator is required to  remove all production equipment and reshape and revegetate the land  around the well.", "To ensure compliance with applicable laws, regulations, and other  requirements, BLM\u2019s Inspection and Enforcement program verifies that  the operator complies with all requirements at a well or lease site during  the drilling, production, and plugging phases. Three BLM onshore  orders, issued pursuant to regulation, specify requirements that operators  are to follow on federal and Indian leases. Inspectors use these orders  to verify compliance during inspections. Onshore Oil and Gas Order  Number 3 specified requirements for the minimum standards for site  security by ensuring that oil and gas produced from federal and Indian  leases are properly handled to prevent theft and loss and enable accurate  measurement. Onshore Oil and Gas Order Number 4 specified  requirements for measurement of oil produced under the terms of federal  and Indian leases or received by federal and Indian lessees as shares of  oil produced on state or private lands. Onshore Oil and Gas Order  Number 5 specified requirements for measurement of gas produced  under the terms of federal and Indian leases or received by federal and  Indian lessees as shares of gas produced on state or private lands.", "Figure 1 shows key inspection activities that occur during the drilling,  production, and plugging stages of a well\u2019s life cycle."], "subsections": []}]}, {"section_title": "Our Analysis of BLM Data Shows the Distribution of BLM\u2019s Inspection and Enforcement Program\u2019s Workload and Workforce Was out of Balance in Fiscal Years 2012 through 2016", "paragraphs": ["In fiscal years 2012 through 2016, the distribution of the oil and gas  Inspection and Enforcement program\u2019s workload and the workforce  among the 33 BLM field offices with ongoing oil and gas development  activities showed an imbalance, based on our analysis of BLM data. BLM  took both short- and long-term actions in fiscal years 2012 through 2016  to address this imbalance, such as temporarily re-assigning inspectors  from some medium activity offices to some of the highest activity offices.  Based on our review of BLM documentation and interviews with agency  officials, two key factors affected the distribution of the program\u2019s  workload: (1) energy market changes (e.g., price fluctuations) and (2)  BLM actions to plan and prioritize inspection workload (e.g., changing risk  classification for production inspections and decreasing the number of  work months for plugging inspections)."], "subsections": [{"section_title": "The Distribution of the BLM Inspection and Enforcement Program\u2019s Workload and Workforce Was Out of Balance Based on Our Analysis of BLM\u2019s Data", "paragraphs": ["From fiscal years 2012 through 2016, the distribution of the workload and  workforce of BLM\u2019s oil and gas Inspection and Enforcement Program was  out of balance across the 33 BLM field offices with ongoing oil and gas  development activities, based on our analysis of BLM data. The majority  of the workload, about 58 percent, was located at the 6 highest-activity  field offices, which had 44 percent of the workforce. In contrast, the  majority of the workforce, 56 percent, was located in the remaining 27  medium and lowest activity offices, which had about 42 percent of the  workload. Figure 2 shows the distribution of workload and workforce  across the 33 field offices. In addition, figure 3 shows a map of our  categorization of BLM\u2019s 33 field offices by their workload and workforce  activity level.", "From fiscal years 2012 through 2016, based on our review of BLM  documentation and interviews with agency officials, BLM took both short  and long-term actions to address this imbalance, such as temporarily re- assigning inspectors from some medium activity field offices to some  highest activity offices. A specific example of how BLM addressed this  workload and workforce imbalance on a short term basis for this period  concerns two of the highest activity offices (Hobbs and Dickinson). These  offices had fewer PET inspectors on board and fewer PET inspection  work months than three medium-activity offices (Pinedale, Rawlins, and  Vernal). To address this imbalance, BLM sent short-term \u201cstrike teams\u201d of  PET inspectors to Hobbs and Dickinson on multiple occasions to help  complete inspections. For example, officials from the Hobbs field office  told us that in fiscal years 2012 and 2013, PET inspectors from the  Farmington field office helped complete drilling and plugging inspections  at Hobbs. In addition, officials from the Dickinson field office said that  during fiscal years 2012, 2013, and 2014, more than 20 PET inspectors  from five different states helped them inspect drilling, production, and  plugging operations.", "BLM officials said there were pros and cons to the strike team approach.  They said strike teams generally allow a field office to complete high- priority inspections and can provide additional training to inspectors at  that office. However, agency officials said that, at times, the inspection  documentation from strike team PET inspectors may not fully align with  the policies and practices of the office they are assisting, which can  create uncertainty about what inspection activities were completed and  what the inspection found. We previously reported that strike teams  increase costs and are not a sustainable solution.", "To address the workload and workforce imbalance on a long term basis,  BLM allocated additional funding in fiscal years 2015 and 2016 to hire  PET inspectors. The Inspection and Enforcement program manager said  that these hires were targeted to address workforce needs at certain field  offices. According to agency documentation, BLM allocated additional  funding to hire about 20 inspectors in fiscal year 2015 and 40 inspectors  in fiscal year 2016. Approximately 75 percent of these inspector positions  were in three state offices: Montana (which includes the Dickinson, North  Dakota field office), New Mexico (which includes the Tulsa, Oklahoma  field office), and Wyoming. All six of BLM\u2019s highest activity field offices are  located in these three states.", "With this additional funding in fiscal years 2015 and 2016, multiple  officials from BLM field offices reported that they were generally able to  hire inspectors and, as a result, the number of onboard inspectors  increased. For example, the number of onboard PET inspectors in the  Dickinson field office increased from 8 in fiscal year 2015 to 17 in fiscal  year 2017. In the Buffalo field office, the number of onboard PET  inspectors increased from 16 in fiscal year 2015 to 23 in fiscal year 2017.  These officials generally cited two key reasons for being able to hire  inspectors. First, BLM increased the compensation for PET inspectors  through the use of special salary rates, incentive payments, and student  loan repayments. We have previously reported that BLM faces challenges  hiring PET inspectors because BLM competes with industry for  employees, and industry offers higher salaries. Second, and as  described below, industry reduced development activity (i.e., wells drilled)  in fiscal years 2015 and 2016 as commodity prices decreased. Multiple  BLM field office officials also told us that it is easier to hire PET inspectors  when oil and gas prices are low because industry is not hiring and  applicants look to BLM for job security."], "subsections": []}, {"section_title": "Two Key Factors Affected the Distribution of the Oil and Gas Inspection and Enforcement Program\u2019s Workload", "paragraphs": ["Two key factors\u2014based on our review of BLM documentation and  interviews with agency officials\u2014affected the distribution of the program\u2019s  workload: (1) energy market changes (e.g., price fluctuations and  increased development of shale plays) and (2) BLM actions to plan and  prioritize inspection workload (e.g., changing risk classification for  production inspections and decreasing the number of work months for  plugging inspections). As we describe below, these factors affected  several aspects of the program\u2019s workload (i.e., wells drilled, production  inspection cases, planned plugging work months, and enforcement  actions)."], "subsections": [{"section_title": "Consistently Lower Gas Prices, Volatile Oil Prices, and Increased Development of Shale Plays Led to a Decrease in Wells Drilled, but Not Uniformly Across BLM Field Offices", "paragraphs": ["The number of wells drilled on federal and Indian lands from fiscal years  2012 through 2016 declined, according to BLM data. The decline was  primarily the result of consistently lower gas prices and oil prices that  dropped significantly in fiscal years 2015 and 2016 combined with  technological advancements that increased the development of resources  located in shale and other tight rock formations\u2014which are generally not  found on federal and Indian lands. Multiple BLM officials told us that  commodity prices are a key factor that impacts the number of wells drilled  on federal and Indian lands. These officials told us that, in general, when  commodity prices are higher, industry will drill more wells, whereas when  prices are lower, fewer wells are drilled. In addition, we previously  reported that the highs and lows in prices and the number of oil and gas  wells drilled largely overlapped, strongly suggesting that development  activities reacted quickly and proportionally to changes in the prices of oil  and gas. Table 1 shows the number of wells drilled on federal and  Indian lands and average monthly prices for natural gas and crude oil for  the period. While there may have been some year-to-year variability  between the number of wells drilled and commodity prices (see the fiscal  year 2013 to 2015 prices for natural gas in table 1), operators drilled  fewer wells in fiscal years 2015 and 2016, which were years of both  consistently low gas prices and significant decreases in oil prices.", "With regard to natural gas prices, a Purdue University study from March  2017 found that (1) the period of consistently lower natural gas prices  (i.e., the Henry Hub average monthly price per million British thermal unit  was generally from $2 to $4) began around 2009, which corresponds with  increased development of natural gas from shale resources, and (2) the  price increase in fiscal year 2014 was related to an extreme winter cold  spell. With regard to oil prices, a World Bank report from January 2018  identified multiple factors contributing to the significant price decease that  occurred in fiscal years 2015 and 2016. These factors included  increased oil production from U.S. shale plays\u2014sedimentary rock  formations containing significant amounts of oil and natural gas\u2014 contributing to oversupply as well as lower production costs that allowed  shale oil wells to be profitable at lower prices.", "From 2009 to 2016, there was also an increase in the development of oil  and gas plays located in shale and other tight rock formations, brought  about by advances in production technologies such as horizontal drilling  and hydraulic fracturing. According to Energy Information Administration  data, shale plays represented more than 90 percent of the growth in oil  and gas development from 2011 to 2016. As stated above, most shale  plays are not located on federal and Indian lands. However, the few  BLM field offices located in shale plays where operators focus on oil  development saw a smaller decrease in the number of wells drilled  compared to field offices located outside of shale plays. For example, the  Dickinson field office\u2014located in the Bakken shale play\u2014experienced a  15 percent decrease in the number of wells drilled from about 400 in fiscal  year 2012 to about 330 in fiscal year 2016. Similarly, the Hobbs field  office\u2014located in the Permian shale play\u2014experienced a 27 percent  decrease from about 160 in fiscal year 2012 to about 120 in fiscal year  2016. According to BLM data, almost all producing wells in the Dickinson  and Hobbs field offices are oil wells. In contrast, two field offices located  outside of shale plays experienced a more significant decrease. The  number of wells drilled in the Bakersfield field office (located in California)  declined 90 percent from 285 wells drilled in fiscal year 2012 to 30 wells  drilled in fiscal year 2016. According to BLM data, almost all of the  Bakersfield field office\u2019s producing wells are oil wells. The number of wells  drilled in the Vernal, field office (located in Utah) declined 95 percent from  725 wells drilled in fiscal year 2012 to 35 wells drilled in fiscal year 2016.  According to BLM data, about 40 percent of the Vernal field office\u2019s  producing wells are oil wells, and the remaining 60 percent are natural  gas wells."], "subsections": []}, {"section_title": "BLM Changes to Risk Classification Led to Fluctuations in the Number of High Priority Production Inspection Cases", "paragraphs": ["On multiple occasions from fiscal year 2012 through fiscal year 2016,  based on our review of agency documentation, BLM changed its  methodology to identify and classify risk, which led to fluctuations in the  number of high-priority production inspection cases in a given fiscal  year. In our review, we focused on high priority production cases  because, according to agency documents, inspecting such cases is one  of the program\u2019s top three work priorities. Based on our review of agency  documentation, BLM\u2019s risk-based strategy went through several iterations  from fiscal years 2011 through 2016, and agency officials said that it was  difficult to identify the specific reasons for year-to-year changes in the  number of their high-priority production cases. This strategy used multiple  weighted factors to develop a composite risk score to identify high- and  low-priority cases. In fiscal year 2011, BLM based the composite risk  score on seven weighted factors: four factors based on BLM data, and  three factors based on data from Interior\u2019s Office of Natural Resources  Revenue (ONRR). However, BLM officials stated that they had  challenges importing ONRR data in a format compatible with the bureau\u2019s  information technology system and have since stopped using the data.  From fiscal year 2013 through fiscal year 2016, BLM based the composite  risk score on the following four BLM-identified risk factors: (1) average  monthly production, (2) number of missing oil and gas operations reports,  (3) number of incidents of noncompliance, and (4) number of years since  last inspection. With regard to composite risk scores, in fiscal year 2011,  BLM determined that a composite risk score of 4 would be considered  high risk, meaning that cases with a score of 4 or more required an  inspection. For fiscal year 2013, BLM increased the composite risk score needed to be considered high risk and required an inspection with a score  of 5, a change intended to reduce the number of required inspections  because agency documentation stated that the workload in the preceding  years was too high for some field offices. For fiscal years 2014, 2015 and  2016, BLM lowered the composite risk score to 4 again.", "BLM averaged about 2,150 high priority production cases in fiscal years  2012 through 2016, and in each of those fiscal years, the number ranged  from about 1,700 to about 2,500. In addition, over 60 percent of such  cases were located in the 6 highest-activity field offices we identified.  Since such cases are concentrated in six field offices, seemingly minor  fluctuations in the overall number of high priority production cases can  have greater impacts to an individual field office\u2019s workload. For example,  in fiscal year 2013, BLM identified about 2,500 high priority production  cases. The Farmington field office in that year had about 170 such cases  (or about 7 percent of the total) and estimated that PET inspectors  needed about 12 work months to complete these inspections. In fiscal  year 2015, BLM identified about 1,700 high priority production cases. The  Farmington field office had about 90 such cases (or about 5 percent of  the total) and estimated that PET inspectors needed about 6 work months  to complete these inspections. In general, BLM officials told us that a  single PET inspector is assigned about 6 inspection work months in a  fiscal year once other demands on an inspector\u2019s time (i.e., sick leave,  vacation, training, and the completion of other assigned non-inspection  duties such as administering various safety programs) are considered.  Therefore, in fiscal year 2013 the Farmington field office would have had  to dedicate 2 PET inspectors (or about 10 percent of its total PET  workforce) to complete only high priority production inspections, and in  fiscal year 2015 the field office would have needed 1 PET inspector (or  about 5 percent of its total PET workforce) to complete such inspections.", "Since BLM\u2019s risk-based strategy has gone through multiple iterations  since fiscal year 2012, several BLM officials said that it was difficult to  identify the specific reasons for year-to-year changes in the number of  their high-priority production cases. Officials, however, said that their  ability to complete more high-priority production inspections increases  during times of reduced industry drilling activity. Specifically, if industry is  drilling fewer new wells, BLM can apply additional resources toward  inspecting currently producing wells because PET inspectors who would  normally conduct drilling inspections can now be deployed to high-priority  production inspections. For example, as described above, the number of  wells drilled decreased during the time frame covered in our review, with  the Vernal and Bakersfield field offices experiencing substantial  decreases in the number of wells drilled from fiscal year 2012 to fiscal  year 2016. Officials in both offices told us that when drilling activity was  low, BLM redirected resources originally planned for drilling inspections to  complete high-priority production inspections."], "subsections": []}, {"section_title": "BLM Reduced the Total Number of Estimated Well Plugging Inspection Work Months as Commodity Prices Stayed Low or Decreased", "paragraphs": ["According to agency data, BLM reduced the estimated number of  plugging inspection work months from about 200 in fiscal year 2012 to  about 155 in fiscal year 2016, or about 23 percent. Multiple agency  officials told us that due to low or falling commodity prices operators  plugged fewer wells from fiscal year 2012 through fiscal year 2016. As  discussed above, natural gas prices were consistently low during fiscal  years 2012 through 2016, while oil prices decreased significantly in fiscal  years 2015 and 2016. According to multiple BLM officials, operators  generally plug fewer wells during times of low or falling commodity prices  because operators prefer to (1) maintain the income generated from even  marginally producing wells or (2) limit the expenditures required to plug  wells. In May 2018, we reported that low oil and gas prices placed  financial stress on operators, increasing bankruptcies and the risk that  operators would not permanently plug wells, and that BLM\u2019s actual costs  and potential liabilities for reclaiming oil and gas wells likely increased for  fiscal years 2010 through 2017. In addition, we reported that BLM faced  challenges identifying and managing shut-in wells. For example, BLM  does not have time limits for how long operators can have a well in shut- in status, which may limit the agency\u2019s ability to ensure that operators  permanently plug such wells before they become orphaned.", "However, since BLM estimates the number of plugging inspection work  months at the start of each fiscal year, there can be instances where  actual industry activity is different than estimated. For example, BLM  officials at four field offices told us that during the time frame of our  review, operators in their region plugged more wells than estimated.  According to agency officials, these operators plugged more wells than  BLM estimated because the operators were either looking to reduce their  financial liability\u2014sometimes in anticipation of selling assets\u2014or looking  for work to keep crews busy. In these instances, agency officials told us  that, in general, BLM re-allocated inspection work months from low- priority production inspections to these plugging inspections. According to  agency officials and documentation, plugging inspections are a higher  priority than production inspections for multiple reasons. First, a plugging  inspection is time sensitive because it is the final stage in a well\u2019s  lifecycle. In contrast, a production inspection is an ongoing operation that  can be conducted at almost any time. Second, properly plugging a well is  essential for long-term environmental protection. For example, wells that  are not properly plugged can leak methane and contaminate surface and  groundwater. As such, multiple BLM officials told us that plugging  inspections are their field office\u2019s highest priority work task and they will  re-allocate resources, if necessary, to complete such inspections."], "subsections": []}, {"section_title": "Higher Oil Prices in Some Years and Generally Lower Gas Prices Led to an Imbalance in the Program\u2019s Enforcement Workload at Three Field Offices", "paragraphs": ["Based on our analysis of BLM data, two key market changes created an  imbalance of the program\u2019s enforcement workload: (1) increased drilling  activity at two field offices located in shale formations during times of  higher oil prices, and (2) bankruptcies of coalbed methane operators in  one field office as gas prices decreased. Combined, the Buffalo,  Carlsbad, and Dickinson field offices issued about 45 percent of all  enforcement actions, 75 percent of all monetary assessments, and about  85 percent of all civil penalties (see table 2). For purposes of this review,  we focused on the number and amount of monetary assessments and  civil penalties because, according to agency officials and BLM  documentation, these two enforcement actions are the key tools used by  BLM to address instances of serious or continued operator  noncompliance.", "Almost all of the monetary assessments that the Carlsbad and Dickinson  field offices issued were for drilling violations\u2014either drilling without  approval or failure to install a blowout preventer or other well control  equipment\u2014and occurred in fiscal years 2012 through 2014, based on  our review of BLM enforcement data. Federal regulations generally  provide for higher monetary assessment amounts for drilling violations  compared to other types of violations. Specifically, drilling violations are  subject to assessments of $500 per day (up to $5,000), whereas a  violation for failure to comply with a previously issued written notice for a  minor violation is $250. As such, even though the Carlsbad and Dickinson  field offices issued 24 percent of the number of monetary assessments,  they issued about 60 percent (about $710,000) of the total amount  assessed by all BLM field offices from fiscal years 2012 through 2016. In  contrast, even though the Buffalo field office issued more than half of the  monetary assessments, these actions accounted for 18 percent (about  $220,000) of the total amount assessed because almost all of these  assessments were minor violations for failure to comply (see table 3).", "From fiscal years 2012 through 2016, the Carlsbad and Dickinson field  offices were responsible for about 30 percent of all wells drilled on federal  and Indian lands, according to BLM data. These offices are located,  respectively, in the Permian and Bakken shale plays, where almost all  wells are oil wells. During fiscal years 2012 through 2014, for each of  these field offices, operators drilled about 435 wells each year, and the  price of oil ranged from $87 to $107 per barrel. In contrast, during fiscal  years 2015 and 2016, operators drilled about 275 wells each year while  the price of oil ranged from $45 to $86 per barrel. According to agency  officials, during fiscal years 2012 through 2014 operators attempted to  drill wells as quickly as possible in the Carlsbad and Dickinson field  offices to increase production during a time of higher oil prices.", "BLM field office officials told us that when oil prices are higher, some  operators have less financial incentive to follow federal requirements. In  the Dickinson field office, for example, almost all monetary assessments  were related to drilling without approval. Officials from that field office told  us that, in general, these violations were related to operators who applied  to BLM for a drilling permit, but the bureau did not approve the permit  before the operator started drilling. In these instances, operators decided  that the benefit of increased production at higher prices outweighed the  cost of a monetary assessment, according to agency officials. BLM  officials told us that for both types of drilling violations\u2014drilling without  approval and failure to install well control equipment\u2014BLM issues  monetary assessments immediately upon discovery due to the potential  serious harmful impacts to resource development and environmental  health and suspends drilling operations until the operator corrects the  violation and pays the assessment. The officials said operators almost  always pay these assessments in a timely manner because they wanted  to complete drilling operations and start production.", "In contrast to the monetary assessments issued during times of high oil  prices, the Buffalo field office issued hundreds of civil penalties totaling  millions of dollars during times of lower natural gas prices as some  coalbed methane operators declared bankruptcy and did not complete  required reclamation activities. Specifically, the Buffalo field office  issued over 75 percent of the number of civil penalties and almost the  entire amount penalized during fiscal years 2012 through 2016 (see table  4).", "As we reported in May 2018, low natural gas prices placed financial  stress on operators of thousands of coalbed methane wells (natural gas  extracted from coal beds). In that May 2018 report, we also found that  coalbed methane was economical to produce when natural gas prices were higher, and thousands of coalbed methane wells were drilled on  federal lands. However, coalbed methane production has declined  because the production of shale gas has kept natural gas prices low.  Officials from the Buffalo field office told us that (1) low natural gas prices  contributed to an increasing number of bankruptcies among coalbed  methane operators, and (2) in general, these bankrupt operators stopped  production activities, shut-in the wells instead of permanently plugging  them, and stopped communicating with BLM.", "For these cases, Buffalo field office documentation outlines a 20-step  process to identify a responsible party\u2014that is, the operator or the  person(s) to whom BLM issued the lease (the lessee)\u2014to either  permanently plug these wells or bring them back into production. Officials  said that they repeated this 20-step process for each operator or lessee,  as needed. Since one lease can have multiple lessees, the repetition of  this process resulted in a very large number of enforcement actions,  according to Buffalo field office officials. Under this process, BLM initially  issued thousands of written notices requiring the responsible party to  either \u201cplug or produce.\u201d When the responsible party did not take the  specified corrective action outlined in the written notices, the field office  then issued hundreds of monetary assessments for failure to comply with  the written notice and again instructed the operators to \u201cplug or produce.\u201d  When the responsible party failed to comply with the monetary  assessments, Buffalo issued hundreds of civil penalties.", "Buffalo field office officials told us that they do not know whether the  government has collected any of the issued penalties because the  responsible parties did not pay the penalties to BLM in a timely manner.  As such, BLM turned these outstanding penalties over to the Treasury  Department for collection, a process that can take up to 2 years,  according to agency documentation. Since market conditions have  remained unfavorable for coalbed methane production, BLM has taken  actions to permanently plug some wells. For example, according to  agency officials and documents, the agency has (1) worked with some  non-bankrupt lessees, including at least one major oil and gas  corporation, to plug wells, (2) re-directed funding from other BLM  programs to pay to plug wells and (3) contributed funding to the state of  Wyoming\u2019s well plugging program. We recently reported on BLM\u2019s actual  costs and potential liabilities for reclaiming oil and gas wells and have  ongoing work reviewing BLM\u2019s bonding requirements, which is the  primary mechanism to ensure that operators complete required  reclamation activities."], "subsections": []}]}]}, {"section_title": "BLM Has Not Completed All Required Internal Control Reviews of Its Field Offices and Does Not Employ a Risk-Informed Oversight Strategy", "paragraphs": ["BLM state offices did not complete internal control reviews at 27 of 33  field offices\u2014including 5 of the 6 highest activity offices we identified.  According to the July 2012 oversight policy, state offices are to  periodically conduct internal control reviews of their field offices to, among  other things, (1) review whether inspections and enforcement actions are  accurate, complete, and conducted in accordance with policy, (2) review  staffing and training needs, and (3) identify areas where program  guidance can be improved. The July 2012 oversight policy also says that  BLM state offices are responsible for overall programmatic oversight of  field office operations. For those field offices with Inspection and  Enforcement program functions, this means that state offices are  responsible for ensuring that the field offices are able to meet the goals  stated in the program\u2019s handbook, which include production accountability  (i.e., the accurate measuring and reporting of production volumes),  environmental safety, and public safety. BLM state offices completed  internal control reviews at 6 of the 33 field offices from 2013 through 2017  and scheduled reviews for 5 others from 2018 through 2020, as shown in  table 5.", "Officials from BLM state offices who completed internal control reviews  said the benefits of these reviews included obtaining data to justify  additional training or resources and providing a formal opportunity to  examine key program management practices and correct identified  deficiencies. For example, in September 2017, the Colorado state office  completed an internal control review of a field office. Prior to this review,  officials from that state office told us that they thought the field office  might be understaffed based on a variety of factors, including longer than  expected inspection times. BLM data showed that in fiscal year 2016 this  field office estimated about 60 hours to complete a production inspection,  while the other 5 Colorado field offices\u2019 average estimate was about 14  hours. The September 2017 Colorado state review identified unofficial  management policies at this field office that resulted in the underutilization  of PET inspectors and inflated inspection times, creating a perception of  understaffing. For example, one of the field office\u2019s unofficial policies  required that PET inspectors drive at least 1,000 miles a month in order to  keep their government vehicle, which resulted in some inspectors taking  longer routes and driving to locations beyond those required for the job.  This policy contributed to artificially inflating inspection times. According  to the Colorado state review, the accurate tracking of inspection times is  vital for workload planning and staffing purposes. In response to these  findings, the field office manager terminated the unofficial policy, and  officials from the Colorado state office said they will check on the  implementation of their recommendations by reviewing the inspection  data. Officials from that state office are also no longer considering hiring  additional PET inspectors. To ensure that the field office sustains these  corrective actions, Colorado state officials told us that they perform  periodic reviews of production inspection records and continue to hold  progress report meetings with the field office\u2019s management team.", "Although BLM state offices completed internal control reviews at 6 of 33  field offices, the state offices did not complete reviews at 27 field offices,  including 5 of the 6 highest-activity field offices we identified. Officials  from BLM state offices identified some key human capital and workload  reasons that hindered their ability to complete reviews, including:  long-term vacancies in multiple state offices\u2019 inspection and  enforcement coordinator positions, which BLM filled on a temporary  basis with other agency employees;  competing priorities from upper management (e.g., preparing for lease  sales); and hiring and training new PET inspectors.", "For example, according to one state office inspection and enforcement  coordinator, the coordinator position was filled on a temporary basis by  four different BLM employees from about November 2013 to November  2015 as the agency tried to find a permanent hire. This official said that  as a result of the personnel changes, the state office did not conduct field  office internal control reviews as initially scheduled. In addition, another  state office inspection and enforcement coordinator said that she spends  a lot of her time providing instruction and on-the-job training to newly  hired PET inspectors in multiple field offices that do not have a  supervisory PET inspector, which limits her ability to perform field office  internal control reviews.", "We also identified two shortcomings with BLM\u2019s control activities that may  have limited the agency\u2019s ability to compete internal control reviews as  required by the July 2012 oversight policy. First, BLM headquarters did  not design appropriate types of control activities to help management  fulfill its responsibilities. Specifically, the Inspection and Enforcement  program manager said that BLM headquarters did not consistently track  and monitor the extent to which state offices completed field office  internal control reviews. This official said that headquarters tends to rely  on state offices to track and monitor such reviews and that headquarters  focused on higher priority work tasks, such as developing and  implementing new regulations that were issued in January 2017. Within  the first 3 years following the issuance of the July 2012 policy, the agency  completed one internal control review each during fiscal years 2013 and  2015, although at least 12 reviews were to be completed. BLM  headquarters officials we spoke with were not aware that so few reviews  had been completed in fiscal years 2013 and 2015.", "Federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks, such  as by comparing actual performance to planned or expected results and  analyzing significant differences. Because it did not consistently monitor  and track state office performance, BLM headquarters (1) did not know  that state offices were not conducting field office internal control reviews  in accordance with the July 2012 oversight policy and (2) could not  analyze the reasons why actual performance did not meet expected  results. Identifying the reasons it did not complete internal control reviews  (e.g., human capital and workforce challenges), developing and  implementing a plan to address those challenges, and monitoring state  offices\u2019 progress toward completing required reviews will better position  BLM to ensure that its state offices complete all required internal control  reviews as called for by its July 2012 oversight policy.", "Second, the July 2012 oversight policy identifies specific areas (e.g., the  accuracy and completeness of inspections and staffing and training  needs) that the reviews should assess, but according to a BLM  headquarters official, the agency did not provide state offices with  implementation guidance or procedures. This official said that BLM did  not provide guidance or procedures so that state offices would have  flexibility in how they conducted such reviews. However, multiple BLM  state officials told us that such guidance or procedures would provide a  helpful framework for conducting these reviews. One state office  inspection and enforcement coordinator told us that since she had no  prior training or experience designing and implementing internal control  reviews, guidance or procedures would be especially beneficial.", "Because they did not have documented implementation guidance or  procedures to follow, the two state offices that completed internal control  reviews developed their own procedures, which varied in design,  methodology, and resources based our review of the six completed  internal control reviews as well as interviews with BLM state officials.  Specifically:", "One state office (1) developed its own review procedures based, in  part, on existing program documentation, (2) assigned a single  individual to conduct reviews because the state did not have the  resources available to provide additional staff support, and (3)  reviewed inspection and enforcement data contained in BLM\u2019s  corporate oil and gas database as well as hard copy files, and  interviewed field office PET inspectors.", "Another state office (1) developed its review procedures based on  those employed during a 2011 review of the entire Inspection and  Enforcement program at the suggestion of the Deputy State  Director; (2) assigned review teams consisting of multiple BLM  officials with different areas of expertise; and (3) reviewed database  and hard copy records, interviewed both field office PET inspectors  and field office management, and observed field office PET inspectors  as they conducted inspection activities.", "Federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks, such  as by clearly documenting internal control responsibilities in management  directives, administrative policies, or operating manuals. BLM has a  documented policy, but this policy does not clearly specify what  procedures state office officials are to follow to conduct internal control  reviews. Without developing and documenting procedures for  implementing internal control reviews under the July 2012 oversight policy, BLM does not have assurance that state offices will review all  specific areas identified in the July 2012 oversight policy in a consistent  manner.", "In addition, although BLM did not have documented procedures for  conducting periodic internal control reviews, the July 2012 oversight  policy specified a schedule for conducting such reviews (see fig. 4). The  schedule states the following:", "For state offices with four or fewer oil and gas field offices, the state  office is to complete an internal control review of each field office at  least once every 3 years. The state offices in this category are Alaska,  California, Eastern States, Montana, Nevada, and Utah.", "For state offices with five or more oil and gas field offices, the state  office is to complete an internal control review of each field office at  least once every 6 years. The state offices in this category are  Colorado, New Mexico, and Wyoming.", "According to the Inspection and Enforcement program manager, this  schedule was based on discussions with state office inspection and  enforcement coordinators to balance officials\u2019 availability to conduct  internal control reviews and other responsibilities. The program manager  said that BLM did not identify or consider risk when developing the  schedule because the agency\u2019s primary focus was to balance the new  requirement to conduct field office internal control reviews with the state  office coordinators\u2019 existing workload. However, the review schedule in  the July 2012 oversight policy generally requires more frequent internal  control reviews of low-activity offices and less frequent reviews of high  activity offices. In particular, five of the six highest activity field offices we  identified in our review are in states in which there are more than five field  offices. According to the policy, these highest activity offices would  therefore receive an internal control review at least once every 6 years. In  contrast, five of the six lowest activity field offices are in states in which  the policy requires that reviews be conducted at least once every 3 years.  Such a review schedule may not ensure that BLM has properly  established and implemented internal control reviews at the highest  activity field offices\u2014whose workforce must complete a majority of the  program\u2019s workload\u2014which may inherently pose a greater risk to the  program\u2019s goals of production accountability, environmental protection,  and personnel safety. For example, if the six highest activity field offices  have an inadequate number of PET inspectors, then there is an increased  risk to BLM\u2019s production accountability goal. Specifically, if these offices  do not have the human resources needed to fully inspect high-priority  production cases, BLM has less assurance that operators are properly  measuring and reporting production volumes, which increases the risks to  the accurate collection of royalty payments. Furthermore, those field  offices that experienced greater levels of drilling workload may present a  higher risk to BLM\u2019s environmental protection goal. Specifically, if the six  highest activity offices do not conduct accurate and complete drilling  inspections, BLM has less assurance that operators are properly  conducting drilling operations, which increases the risks of environmental  problems, such as contamination of fresh water aquifers.", "Federal internal control standards call for entities to identify, analyze, and  respond to risks related to achieving the defined objectives, such as by  estimating the significance of identified risks to assess their effect on  achieving defined objectives. Management estimates the significance of  a risk by considering the magnitude of impact, which refers to the likely  magnitude of deficiency that could result from the risk and is affected by  factors such as the size of a risk\u2019s impact. Without employing a risk- informed approach to scheduling and conducting internal control reviews  that takes into account the risks to the Inspection and Enforcement  program, such as those inherent in field offices\u2019 workload and workforce,  BLM will not have reasonable assurance that it has adequate controls in  place to address the effect of the field offices that pose the greatest risk to  the program. BLM officials said that assessing risk, including field offices\u2019  workload activity levels, could provide a useful metric to inform how BLM  conducts and prioritizes field office internal control reviews."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["On federal and Indian lands, BLM\u2019s Inspection and Enforcement program  is intended to ensure that operators developing oil and gas resources do  so in a manner that protects public safety, environmental health, and  royalty income. This is a complex undertaking that occurs within the oil  and gas market and requires BLM\u2019s PET inspectors to conduct technically  challenging drilling, production, and plugging inspections. In this context,  BLM\u2019s July 2012 oversight policy calls for its state offices to conduct  periodic internal control reviews of field offices. While BLM state offices  completed internal control reviews at 6 field offices, they did not complete  reviews at 27 field offices, including 5 of the 6 highest activity field offices  we identified. In addition, because it did not consistently monitor and track  state office performance, BLM headquarters (1) did not know that state  offices were not conducting field office internal control reviews in  accordance with the July 2012 oversight policy and (2) could not analyze  the reasons why actual performance did not meet expected results.  Identifying the reasons it did not complete internal control reviews (e.g.,  human capital and workload), developing and implementing a plan to  address those challenges, and monitoring state offices\u2019 progress toward  completing required reviews will better position BLM to ensure that its  state offices are completing all required internal control reviews as called  for by its July 2012 oversight policy.", "Additionally, although BLM\u2019s July 2012 oversight policy does identify the  specific areas that internal control reviews should assess, BLM did not  provide state offices with implementation guidance or procedures.  Because they did not have documented implementation guidance or  procedures to follow, the two state offices that completed internal control  reviews developed their own procedures, which varied in design,  methodology, and resources. Without developing and documenting  procedures for implementing internal control reviews under the July 2012  oversight policy, BLM does not have assurance that state offices will  review all specific areas identified in the July 2012 oversight policy in a  consistent manner.", "Furthermore, and inconsistent with federal internal control standards,  BLM\u2019s July 2012 oversight policy established a review schedule without  identifying or considering risk. Without employing a risk-informed  approach to scheduling and conducting internal control reviews that takes  into account the risks to the Inspection and Enforcement program, such  as those inherent in field offices\u2019 workload and workforce, BLM will not  have reasonable assurance that it has adequate controls in place to  address the effect of the field offices that pose the greatest risk to the  program."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to BLM:  The Director of BLM should identify the reasons internal control reviews  were not completed (e.g., human capital and workforce), develop and  implement a plan to address those reasons, and monitor state offices\u2019  progress toward completing required reviews. (Recommendation 1)", "The Director of BLM should develop and document procedures for  implementing internal control reviews under the July 2012 oversight  policy. (Recommendation 2)", "The Director of BLM should implement a risk-informed approach to  scheduling and conducting internal control reviews that takes into account  the risks to BLM\u2019s mission, such as those inherent in field offices\u2019  workload and workforce. (Recommendation 3)"], "subsections": [{"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the Department of Interior for  comment. In its comments, reproduced in appendix I, Interior concurred  with our three recommendations and outlined planned actions to  implement them. For example, BLM plans to issue updated guidance and  procedures for conducting internal control reviews to help ensure that  such reviews are completed in a timely manner using a consistent risk- based approach.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or ruscof@gaog.ov. 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."], "subsections": []}]}]}, {"section_title": "Appendix I: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Christine Kehr (Assistant  Director), Patrick Bernard (Analyst-in-Charge), Tara Congdon, William  Gerard, Cindy Gilbert, Jessica Lewis, Dan Royer, Kiki Theodoropoulos,  Karen Villafana, and Jack Wang made key contributions to this report."], "subsections": []}]}], "fastfact": ["Private companies operate over 140,000 oil and gas wells on federal and Indian lands. The Bureau of Land Management's (BLM) inspection program ensures that these operators are complying with laws and regulations that protect public safety and the environment. Inspectors also ensure that operators are making accurate royalty payments to the federal government.", "We reviewed BLM's inspection program and found that the agency wasn't effectively allocating its workforce. BLM's 6 busiest field offices handled 58% of the inspection workload between FYs 2012-2016\u2014but had only 44% of the inspection staff. We recommended that BLM address this issue."]}
{"id": "GAO-19-17", "url": "https://www.gao.gov/products/GAO-19-17", "title": "Buy American Act: Actions Needed to Improve Exception and Waiver Reporting and Selected Agency Guidance", "published_date": "2018-12-18T00:00:00", "released_date": "2018-12-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Buy American Act of 1933, as amended, is the main U.S. law promoting domestic purchasing. The Act permits agencies to buy foreign end products only under certain exceptions, such as when domestic items are not available at a reasonable cost. Further, U.S. trade agreements waive the Buy American restrictions for certain products.", "GAO was asked to review implementation of the Buy American Act. This report assesses the extent to which (1) the federal government procures foreign products through Buy American Act exceptions and waivers; and (2) selected agencies provide training and guidance to implement the Act.", "GAO reviewed laws, regulations, and policies related to the Buy American Act and analyzed data for fiscal year 2017 from FPDS-NG. GAO also analyzed a non-generalizable sample of 38 contracts from DOD, HHS, DHS, and VA\u2014the agencies with the most obligations for products in fiscal year 2017. The 38 awards selected include a mix of foreign and domestic products, as well as dollars obligated. Finally, GAO interviewed cognizant contracting and policy officials from the selected agencies."]}, {"section_title": "What GAO Found", "paragraphs": ["According to data reported in the Federal Procurement Data System-Next Generation (FPDS-NG) in fiscal year 2017, foreign end products accounted for less than 5 percent\u2014about $7.8 billion\u2014of federal obligations for products potentially subject to the Buy American Act. Federal agencies procured foreign products using exceptions to Buy American Act requirements, as well as through waivers or when the Buy American Act did not apply, as shown in the figure.", "The amount of foreign end products purchased could be greater than reported in FPDS-NG, however, due to reporting errors and system limitations. GAO found that 6 of the 38 contracts reviewed from the Departments of Defense (DOD), Health and Human Services (HHS), Homeland Security (DHS), and Veterans Affairs (VA) inaccurately recorded waiver or exception information. FPDS-NG system limitations compound these errors because it does not fully capture Buy American Act data. Among other things, the database does not always enable agencies to report the use of exceptions or waivers on contracts for both foreign and domestic products, reducing data accuracy. The Office of Management and Budget (OMB) is considering strategies to improve Buy American Act data.", "The four agencies GAO reviewed varied in their approaches to Buy American Act training and guidance. DOD reports that it will have trained more than 18,000 personnel by the end of 2018. DHS reports training almost 1,400 people\u2014approximately 94 percent of its contracting staff\u2014as of April 2018. Some VA courses mention the Act, but none is focused specifically on implementing its requirements. HHS does not have agency-level training or guidance on the Act. GAO found that contracting officers for the contracts it reviewed face challenges implementing Buy American Act requirements. Having specific and targeted Buy American Act guidance and training can better ensure that agencies meet the Act's requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that OMB take steps to improve Buy American Act data and that HHS, DHS, and VA improve agency guidance and training on implementing the Act. All of the agencies either concurred or generally concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year, the federal government obligates hundreds of billions of  dollars to procure goods and services\u2014reporting $508 billion in fiscal  year 2017 alone. Congress has enacted a variety of laws commonly  referred to as domestic preference laws that establish preferences or  requirements for federal agencies to purchase domestically produced  goods, products, and materials.", "The Buy American Act, enacted during the Great Depression in 1933, is  one of the most prominent domestic preference laws. The Act requires  federal procurement of domestic products, but permits federal agencies to  procure foreign products under certain exceptions, such as where  domestic end products are not reasonably available in sufficient quantities  of a satisfactory quality. The restrictions also may be waived under  international trade agreements so that the goods provided by designated  countries can compete on an equal footing with domestic products.", "Congress and the administration have undertaken efforts to increase  opportunities for domestic manufacturers. In the current Congress, bills  have been introduced related to the Buy American Act. In April 2017, the  president issued an Executive Order stating that it shall be the policy of  the executive branch to maximize the use of domestic goods in an effort  to, among other things, stimulate economic growth and create jobs in the  United States.", "You asked us to review federal agency implementation of the Buy  American Act. This report assesses the extent to which (1) the federal  government procures foreign products through Buy American Act exceptions and waivers; and (2) selected agencies provide training and  guidance to implement the Buy American Act requirements.", "To assess the extent of the federal government\u2019s procurement of foreign  end products through exceptions and waivers to the Buy American Act,  we analyzed data from the Federal Procurement Data System-Next  Generation (FPDS-NG) for fiscal year 2017, which represented the most  recent and complete data available at the time of our review. We  analyzed the fiscal year 2017 data to identify the dollars obligated. We  used the categories within the FPDS-NG \u201cPlace of Manufacture\u201d and  \u201cCountry of Product or Service Origin\u201d fields to determine whether  agencies characterized the origin of a product as either domestic or  foreign. We conducted data checks for obvious errors, such as verifying  that agencies did not use exceptions that were not applicable. We also  made some minor adjustments to mitigate potential data reliability issues.  Based on these steps, we determined that FPDS-NG data were  sufficiently reliable to allow us to calculate the approximate extent of  obligations for foreign end products and the use of Buy American Act  exceptions and the Trade Agreements Act waiver. Because of the  reporting errors and data system limitations we identified, however, as  described later in this report, we are unable to precisely determine the  amount spent on foreign end products through the use of exceptions and  waivers.", "We supplemented our analysis by reviewing documentation from a non- generalizable sample of 38 contracts from four selected agencies\u2014the  Departments of Defense (DOD), Health and Human Services (HHS),  Homeland Security (DHS), and Veterans Affairs (VA)\u2014which had the  highest obligations for the types of goods that may be subject to the Buy  American Act. The non-generalizable sample of 38 contracts and orders  were selected from among the following contracting offices in the four  agencies:", "DOD: Defense Logistics Agency, Land and Maritime", "HHS: National Institutes of Health and the Office of the Assistant  Secretary for Preparedness and Response", "DHS: United States Coast Guard", "VA: Veterans Health Administration  We selected these contracts to obtain a mix of awards that reported  foreign product acquisitions authorized by the various Buy American  exceptions or trade agreement waivers, and to ensure contracts that  reported the purchase of domestic end products were also represented.  We also interviewed cognizant contracting officials and analyzed contract  file documentation to determine how Buy American requirements were  implemented or waived.", "To assess the extent to which selected agencies provide training and  guidance to implement the Buy American Act, we reviewed training  materials and acquisition regulations, policies, and guidance from the four  selected agencies\u2014DOD, HHS, DHS, and VA\u2014and interviewed officials  responsible for acquisition policy and training. We also reviewed the  Federal Acquisition Regulation (FAR), as well as relevant work from the  DOD Inspector General regarding DOD\u2019s compliance with Buy American  Act requirements. A more detailed description of our scope and  methodology is included in appendix I.", "We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Buy American Act of 1933 was enacted during the Great Depression  when there was a need to create and preserve jobs for American  workers, and it established a preference for the federal government to  buy domestic end products. Many of the products the federal  government buys\u2014including aircraft engines and medical supplies\u2014are  end products that may be subject to the requirements of the Buy  American Act. Further, the Buy American Act does not apply to products  that are purchased for use outside the United States or   obtained through contracts under the micro-purchase threshold, which  was generally $3,500 in fiscal year 2017. end products manufactured in the United  States provided that (a) the product is a  commercially available off-the-shelf item;  or (b) the cost of the components mined,  produced, or manufactured in the United  States exceeds 50 percent of the total  cost of all components.", "End products that are not considered domestic under the Buy American  Act are treated as foreign. This characterization is based on the origin of  the end product\u2014that is, where the product is manufactured or  produced\u2014and not the vendor\u2019s location. For example, a vendor located  in Finland may supply end products manufactured in the United States, in  which case these products would be treated as domestic products.  Conversely, a vendor located in the United States may supply end  products manufactured in Finland. In this case, the end products would  be considered foreign."], "subsections": [{"section_title": "Buy American Act Exceptions and Waivers", "paragraphs": ["Although the Buy American Act establishes a preference for domestic end  products, there are situations in which agencies can procure foreign end  products through established exceptions to the Buy American  requirements. In addition, under the Trade Agreements Act of 1979, the  United States has waived domestic purchasing requirements\u2014including  the Buy American Act\u2014for certain acquisitions of foreign end products  from countries that are party to international trade agreements or are  considered designated countries by the U.S. Trade Representative."], "subsections": [{"section_title": "Exceptions to the Buy American Act", "paragraphs": ["In implementing the Buy American Act, the FAR sets forth several  exceptions that permit federal agencies to buy foreign end products.  These include situations when a domestic end product is not produced in  sufficient quantities or cases where the cost would be unreasonable to  buy a domestic end product. The steps that contracting officers must take  to determine or document an exception will vary depending on the  circumstances of the acquisition. For example, a written determination  from the Head of Contracting Activity (HCA) or a delegate may be  necessary to determine non-availability in some cases. However, a  written determination may not be required when an acquisition is  conducted through full and open competition, is synopsized, and no  domestic offer is received. Other exceptions to the Buy American Act  restrictions on the purchase of foreign products, such as the exception for  commercial information technology, are blanket exceptions that do not  require a written determination. In addition, some agencies have specified  additional considerations that must precede a determination and what  level of authority is appropriate for certain determinations. The five Buy  American Act exceptions that apply government-wide and the  corresponding determination standards in the FAR are listed in Table 1.", "Individual federal agencies may make blanket determinations of situations  in which the Act\u2019s restrictions should not apply to that agency\u2019s  procurements, when it is not in the public interest to restrict the purchase  of foreign end products. For example, over the years, DOD has entered  into reciprocal procurement agreements with 27 foreign counterparts.  DOD determined that it would be inconsistent with the public interest to  apply the Buy American Act restrictions on products from these 27  qualifying countries. Thus, if an offer includes end products from a  qualifying country, those products are not restricted by the Buy American  Act and the acquisition of qualifying country end products does not  require higher approval. This public interest exception for qualifying  countries applies only to contracts awarded by DOD."], "subsections": []}, {"section_title": "Trade Agreements Act Waivers", "paragraphs": ["Federal agencies can purchase eligible foreign end products from  designated countries when the Buy American Act\u2019s requirements are  waived because of the terms of an international trade agreement or other  criteria, such as a designation by the U.S. Trade Representative as a  least developed country. In accordance with the Trade Agreements Act  of 1979, the president has the authority to waive the Buy American Act.  For eligible products that come from countries covered by the World  Trade Organization\u2019s Government Procurement Agreement, Free Trade  Agreements, and the Israeli Trade Act, the Buy American Act has been  waived so that these items receive nondiscriminatory consideration and  are on equal footing with domestic end products. In total, these  agreements cover approximately 60 countries\u2014overlapping with all but  two of the DOD qualifying countries. Appendix II highlights the overlap.", "Unlike DOD\u2019s blanket public interest exception for qualifying countries,  the Buy American Act requirements are only waived under a trade  agreement if the acquisition is of a certain value set by the U.S. Trade  Representative. Current trade agreement thresholds, at or above which  the requirements are waived, range from $25,000 for contracts for eligible  products from Canada to $180,000 for the 45 other parties to the World  Trade Organization\u2019s Government Procurement Agreement. Table 2 lists the parties eligible for trade agreements and the associated threshold  for supply contracts.", "The FAR specifies certain conditions in which trade agreements do not  apply, even if the acquisition is above the requisite threshold value set by  the U.S. Trade Representative. In these cases, the Buy American Act  would apply. These conditions include, but are not limited to: acquisitions that do not use full and open competition, when the  limitation of competition would preclude the procedures applicable to  acquisitions covered by trade agreements;  certain sole-source acquisitions for commercial items using simplified  acquisition procedures; acquisitions set aside for small businesses; acquisition of ammunition, arms, or war materials, or for purchases  indispensable for national security or national defense purposes; and acquisitions from federal prison industries or nonprofit agencies  employing people who are blind or severely disabled.", "If the contracting officer determines that a trade agreement applies to a  particular acquisition, which waives the Buy American restrictions, that  determination does not require additional review at a higher level. This is  similar to other circumstances where Buy American Act restrictions do not  apply, such as for the acquisition of products for use outside the United  States or contracts valued below the micro-purchase threshold."], "subsections": []}]}, {"section_title": "Certifying Product Country of Origin", "paragraphs": ["The Buy American Act\u2019s applicability is based on the country of origin of  the product being supplied, rather than the country of the vendor offering  the product to the government. Vendors who propose to do business with  the U.S. government are required to certify as to where their products are  manufactured or produced\u2014whether in the United States or in a  designated country covered by the Trade Agreements Act.", "Vendors can provide an annual certification applicable to all of their  contracts through the federal government\u2019s contractor registry, known as  the System for Award Management (SAM). Through SAM, a vendor  identifies the country of origin for foreign products associated with a broad  category of products. For example, a vendor could state that it provides  aircraft components that originate in France and Mexico. Vendors also  have the option not to certify the origin of their products in SAM, but  instead provide information about foreign end products in their individual  offers for contracts. Contracting officials include the relevant clauses in solicitations and contracts in accordance with regulation to require vendor  certification. For example, the clause at FAR 52.225-2, Buy American  Certificate, requires the offeror to certify that each end product is a  domestic end product, or list any foreign end products and their country of  origin."], "subsections": []}, {"section_title": "Federal Procurement Data System-Next Generation", "paragraphs": ["Once a contract is awarded, the awarding agency must enter certain  information into FPDS-NG, a government-wide database for contract  awards and obligations. The Office of Federal Procurement Policy  (OFPP) within the Office of Management and Budget provides the overall  direction for FPDS-NG, which is managed by the General Services  Administration. FPDS-NG data can be populated through the individual  systems agencies use to develop contracts. Agencies are responsible for  the quality of the information transmitted to FPDS-NG, including data  captured on the contract value and whether the foreign product  acquisition is authorized by one of the Buy American Act exceptions or a  trade agreement. This information is recorded at the contract level, or at  the delivery order level for orders from indefinite delivery contracts. For  certain product categories\u2014essentially those that represent end  products\u2014FPDS-NG requires that contracting staff enter information in  the \u201cPlace of Manufacture\u201d drop-down data field, as shown in Figure 1.  This field must be populated for all reported manufactured end products,  including those valued under the micro-purchase threshold, which at the  time of our review was generally $3,500. Options in this field include  indicating that the product is made in the United States, or that it is made  outside the United States and qualifies under one of the Buy American  Act exceptions, or that it is subject to the requirements of a trade  agreement instead of the Buy American Act requirements.", "In 2018, FPDS-NG data on agencies\u2019 historical reporting of the use of  Buy American exceptions were added to the website on which agencies  post contracting opportunities (www.fbo.gov). According to OFPP, this  allows vendors selling domestic products to more easily see how  agencies acquire foreign goods pursuant to Buy American Act  exceptions."], "subsections": []}]}, {"section_title": "Agencies Report Applying Buy American Act Exceptions and Waivers but Data Quality Issues Exist", "paragraphs": ["In fiscal year 2017, the federal government obligated approximately $7.8  billion for the acquisition of foreign end products, which accounts for less  than 5 percent of total federal contract obligations for end products in that  year. We observed differences in how civilian agencies and DOD apply  Buy American Act exceptions and waivers. In our review of 38 contracts  and orders from four agencies\u2014DOD, HHS, DHS, and VA\u2014we found 6  instances where the place of manufacture information was misreported in  FPDS-NG. We further identified system limitations in how FPDS-NG  captures information."], "subsections": [{"section_title": "Foreign End Products Accounted for Less Than 5 Percent of Contract Obligations for Products Potentially Subject to the Buy American Act in Fiscal Year 2017", "paragraphs": ["Based on our analysis of FPDS-NG data, almost 40 percent of federal  contract obligations in fiscal year 2017\u2014totaling approximately $196  billion\u2014were for domestic and foreign end products, such as aircraft  parts, that may be subject to the Buy American Act. Less than 5 percent  of these obligations\u2014approximately $7.8 billion\u2014were reported as  foreign end products. This is consistent with the information agencies  reported in FPDS-NG in the previous 4 years, with foreign end products  accounting for approximately 3 to 8 percent of goods subject to Buy  American Act restrictions between fiscal years 2013 through 2016. The  foreign end products in fiscal year 2017 primarily came from South Korea,  the United Kingdom, Afghanistan, Canada, Mexico, and the United Arab  Emirates, which together accounted for almost half of the total foreign end  products reported. Appendix III shows the federal government\u2019s  obligations for foreign end products from various countries for fiscal year  2017.", "The procurement of foreign end products is permitted by the flexibilities  available under the Buy American Act\u2019s exceptions and waivers.  Agencies also procured foreign end products through means separate  from the exceptions allowed under the Buy American Act, primarily in  cases where the Act would not apply.", "Agencies reported obligating more than $700 million to procure  foreign end products by applying one of the five government-wide Buy  American Act exceptions\u2014such as domestic non-availability or  unreasonable cost\u2014in FPDS-NG for fiscal year 2017.", "Agencies reported obligating approximately $550 million to procure  foreign end products as permitted by the Trade Agreements Act,  which waives the Buy American Act\u2019s domestic preference  requirements for US trading partners when eligible products are  covered by trade agreements and are above certain dollar thresholds.", "DOD also obligated nearly $2.9 billion to procure foreign products  from countries with which it has reciprocal procurement agreements,  using what is referred to as the DOD qualifying country exception.  This is an exercise of the authority available to agencies under the  Buy American Act\u2019s public interest exception. DOD determined that  it is not in the public interest to restrict the purchase of foreign end  products from 27 countries. All but two of these qualifying countries  are also US trading partners, so some of these awards for eligible  products may be authorized by a trade agreement. However, the  qualifying country exception allows DOD to procure foreign end  products without regard to dollar thresholds or other trade agreement  eligibility limitations.", "Agencies also procured foreign end products, such as fuel, to be used  outside the United States, in which circumstance the Buy American  Act\u2019s requirements do not apply. For fiscal year 2017, these  obligations accounted for almost $3.7 billion\u2014about 47 percent of all  dollars obligated for foreign end products, as reported in FPDS-NG.", "Figure 2 highlights fiscal year 2017 obligations, including agencies\u2019  reported spending on foreign end products under the Buy American Act  exceptions and other means."], "subsections": []}, {"section_title": "DOD Buys Most Foreign End Products for Use Outside the United States while Civilian Agencies Report a Wide Array of Buy American Act Exceptions and Waivers", "paragraphs": ["DOD accounted for more than 80 percent\u2014roughly $6.4 billion\u2014of the  total obligations for foreign end products in fiscal year 2017. Almost all of  DOD purchases were either for use outside of the United States, so were  not subject to Buy American Act restrictions, or were reported under the  public interest exception for DOD qualifying countries. In contrast, civilian  agencies report a more varied mix of the exceptions and waivers of the  Buy American Act. The civilian agencies\u2014which are unable to apply  DOD\u2019s qualifying country exception\u2014were more likely to report buying  foreign end products based on trade agreements or another exception to  the Buy American Act requirements. Figure 3 shows how DOD and the  civilian agencies acquired foreign end products authorized by the various  exceptions and waivers of the Buy American Act.", "From our review of FPDS-NG data, the civilian agencies are more likely  to cite one of the five Buy American Act exceptions or a trade agreement  waiver when buying foreign end products, and thus take corresponding  actions to document or approve the authority cited. For example, in our  review of contracts from four agencies, VA obligated $71,000 for medical  imaging equipment from Canada, and had to consider whether a trade  agreement waiver applied. The manufacturer was determined to be the  only source available and the contracting officer determined the  acquisition was authorized by a Buy American exception based on  domestic non-availability, which can require additional review.", "In contrast, DOD may make a similar contract award for equipment from  Canada based on the qualifying countries exception. DOD acquisitions,  then, may be authorized by exceptions such as domestic non-availability  when a required item does not come from a qualifying country. For  example, we reviewed a $744,000 DOD award for vehicle equipment that  was only available from South Africa\u2014which is not one of the DOD  qualifying countries and not covered by any of the trade agreements\u2014so  the acquisition was authorized by the domestic non-availability exception.", "In addition, the civilian agencies also reported buying foreign end  products for use outside the United States but to a lesser extent than  DOD. For example, this included one of the contracts we reviewed, an  HHS award for Ebola vaccines manufactured in the Netherlands, with  $44.7 million obligated in fiscal year 2017. This contract was reported as  used outside the United States because it is primarily stored overseas."], "subsections": []}, {"section_title": "Coding Errors and System Limitations Highlight Data Reliability Issues", "paragraphs": ["FPDS-NG is the primary means for capturing procurement data regarding  the Buy American Act, but we found that agencies may not always input  reliable information on the extent to which exceptions or waivers  authorized the acquisition of foreign end products. In addition, some  aspects of how FPDS-NG is structured could lead to additional data  reporting errors.", "In the non-generalizable sample of 38 contracts and orders we examined  from DOD, HHS, DHS, and VA, we found 6 awards where information  related to the Buy American Act was incorrectly reported in FPDS-NG. In  three of the six contracts, agencies recorded the wrong exception or  waiver, most often because of an error when reporting the place of  manufacture in FPDS-NG. For example, DOD reported a $22,000  contract for vehicle equipment from South Africa as a Buy American Act  exception due to unreasonable cost. But the contract file indicated that  the exception that applied was domestic non-availability. DOD officials  acknowledged the error and corrected it in FPDS-NG during the course of  our review.", "In the three remaining contracts, agencies misreported whether an end  product came from the United States or another country. For example,  DHS incorrectly recorded that an $18 million contract was for aircraft  accessories and other parts manufactured in the United States, even  though file documentation showed the contract was for Italian-produced  spare parts from the original equipment manufacturer. The Italian- produced spare parts were available from existing inventory maintained  by the manufacturer and were needed immediately to meet a mandatory  operational requirement. Officials from DHS acknowledged the recording  oversight, attributed it to a mistake when entering information in FPDS- NG, and have since corrected the error in response to our observation.", "Additionally, FPDS-NG has system limitations that could hinder complete  and accurate reporting of Buy American Act information:", "DOD Qualifying Country Exceptions and Trade Agreement  Waivers. FPDS-NG requires that information on the type of Buy  American Act exception or waiver applied be provided when end  products are reported as foreign. But FPDS-NG does not identify  errors associated with this process. For example, we reviewed an  $8.3 million DHS contract for engines manufactured in Germany that  was recorded as a DOD qualifying country exception in FPDS-NG,  although this exception is not available to civilian agencies.  Contracting officials corrected the data in FPDS-NG during the course  of our review. Further, FPDS-NG does not prevent agencies from  reporting trade agreement waivers when the contracts are valued  below applicable thresholds or waivers do not apply, such as for small  business set asides. For example, in the fiscal year 2017 data we  reviewed, more than 5 percent of contract obligations reported for  trade agreement waivers were for awards set-aside for small  businesses, which would not be eligible under the Trade Agreements  Act. OFPP officials noted that because of the various dollar thresholds  applicable to different trade agreements, adding automatic thresholds  in FPDS-NG to guide contracting staff in reporting an applicable trade  agreement could lead to additional data errors in the procurement  database.", "Awards under the Micro-purchase Threshold. Although the Buy  American Act requirements do not apply to contract awards valued  below the micro-purchase threshold\u2014generally $3,500 in fiscal year  2017\u2014the FPDS-NG \u2018Place of Manufacture\u2019 field does not have an  option to indicate whether a contract is under the threshold. Instead,  contracting officers entering information for awards under the micro- purchase amount must still state whether the product is domestic or  foreign. If the product is foreign, the officials must select a Buy  American Act exception authorizing the purchase, even though no  exception is needed at these dollar levels. As a result, when agencies  report in FPDS-NG that a Buy American Act exception or waiver  applied for a procurement valued at less than $3,500, that information  would not be accurate. Based on our review, this may have involved  about $16 million in fiscal year 2017 obligations.", "Awards for both Foreign and Domestic Products. When reporting  data for contracts that include multiple end products from both the  United States and a foreign country, FPDS-NG only allows for one  country of origin to be identified. Contracting officers told us that they  typically will report a foreign end product in FPDS-NG when the  foreign products account for the preponderance of the contract value.  Thus, in cases where a contract includes foreign end products that do  not account for the preponderance of the contract\u2019s value, the value of  these foreign end products would not be reported in FPDS-NG. We  have previously reported that FPDS-NG has similar limitations in other  fields, such the type of product or service provided, which prevent  contracting officers from identifying more than one condition.  According to OFPP, a recent change in the FAR requiring contract  reporting at the line item level should provide greater transparency of  all products included in a contract.", "Buy American Act Exceptions and Waivers under Indefinite  Delivery Contracts. The way FPDS-NG captures data for Buy  American Act exceptions and waivers for some indefinite-delivery  contracts results in inaccurate data reporting. When an indefinite- delivery contract is initially awarded, FPDS-NG functionality does not  give contracting staff the option to enter information for the \u2018Place of  Manufacture\u2019 field. Instead, this information is typically captured once  an order is placed on the contract. In our review of FPDS-NG data  across the four agencies, however, we found that in some cases  obligations are reported on the initial indefinite delivery contract so the  Buy American Act exceptions or waivers are not recorded. This  occurred with multiple agencies, but particularly at HHS, where  information for almost 28 percent of HHS obligations for end products  in fiscal year 2017 was not captured in FPDS-NG because the  obligations were reported in the system through the initial contracts  rather than orders. As a result, the applicability of the Buy American  Act for HHS contracts totaling almost $1.9 billion in fiscal year 2017  was unreported in FPDS-NG.", "DOD, DHS, and VA officials told us they identified FPDS-NG reporting as  an area of concern. GAO Standards for Internal Controls in the Federal  Government state that management should use quality information to  support objectives, and that such data should be complete and  accurate.", "In response to the 2017 Executive Order calling for federal agencies to  assess their implementation of the Buy American Act requirement, OFPP  officials told us they are identifying potential strategies for improving the  information agencies submit to FPDS-NG. As OFPP weighs potential  options for FPDS-NG reporting, implementing enhancements to reduce  data entry errors and ensure that the data collected are complete and  accurate would help enable the system to provide the most useful  information possible. Ensuring information is correctly reported in FPDS- NG is critical because the data are used to inform procurement policy  decisions and facilitate congressional oversight."], "subsections": []}]}, {"section_title": "Agency Approaches to Training and Guidance Varied and Certain Contracting Practices Highlight Buy American Act Implementation Concerns", "paragraphs": ["The four agencies we reviewed\u2014DOD, HHS, DHS, and VA\u2014took  different approaches to provide training and guidance for the Buy  American Act requirements. Contracting officers faced challenges when  procuring products subject to the Buy American Act. For example, we  found instances in which contracting officers applied a waiver or  exception to contracts where the waiver did not apply and did not have  complete guidance for required determinations or reviews. There also  were challenges in confirming product origin information when vendors  did not provide consistent information."], "subsections": [{"section_title": "Agency Approaches to Guide Implementation of Buy American Act Requirements Varied", "paragraphs": ["The four agencies we reviewed varied in the mix of training and guidance  provided to aid contracting officers in implementing the requirements of  the Buy American Act. Three of the four agencies\u2014DOD, DHS and VA\u2014 supplemented the federal acquisition regulation, which implements the  requirements of the Buy American Act and Trade Agreements Act, with  their own acquisition regulations. In addition, DHS and DOD have  recently updated existing training or added new training and guidance. VA  issued policy memoranda in 2017, emphasizing the importance of  meeting Buy American Act requirements, but has not added training or  provided specific guidance. HHS does not provide department-level  training or guidance related to the Buy American Act. Most of the DHS  and DOD contracting officers we spoke to reported that they had attended  training and several found the guidance provided by the training to be  helpful. HHS and VA contracting officials described confusion due to the  lack of resources available at their respective agencies."], "subsections": [{"section_title": "DOD Updated Its Buy American Act Training in 2017", "paragraphs": ["In 2017, in response to a series of recommendations from the DOD  Inspector General to re-emphasize Buy American Act training and  guidance, the Defense Acquisition University introduced an updated  training course that specifically focuses on the requirements and  implementation of the Buy American Act. While not mandatory, a June  2017 memo notified all DOD services and the defense agencies that  members of their contracting workforce should complete this training as  part of their professional development. At the current pace of enrollment,  DOD officials anticipate approximately 18,000 people will have taken this  course by the end of September 2018, which is a seven-fold increase  over previous graduation rates. Incorporated into these trainings were  supplemental on-the-job tools to assist contracting officers when  awarding contracts for end products subject to the Buy American Act  requirements. One such tool is a flowchart outlining applicable solicitation  provisions or contract clauses based upon the awarded contract\u2019s total  dollar value. DOD contracting officials we interviewed from Defense  Logistics Agency\u2019s (DLA) Land and Maritime division had completed the  agency-level Buy American Act training and said it served as a good  refresher, with some noting that most of the training they had received on  the subject came when they were first hired.", "DOD provides regulations and guidance on Buy American Act  requirements through both the Defense Federal Acquisition Regulation  Supplement (DFARS) and the accompanying Procedures, Guidance and  Information. DOD contracting officers use the provisions and clauses in  DFARS to address the public interest exception for DOD qualifying  countries. In addition, as a part of the updated training, the Defense  Pricing and Contracting Office developed two documents to provide  additional Buy American Act guidance. One outlines a step-by-step  approach contracting officers can follow to determine whether the Buy  American Act applies to their particular procurement and, if so, whether  the use of an exception or waiver is appropriate. The second assists  contracting officers with evaluating all offers\u2014foreign and domestic\u2014 when price is the determining factor.", "In addition, we found that DLA supplements the available Defense  Acquisition University training and guidance with a robust level of support,  including annual training and subject matter expertise. DLA contracting  officers told us that while they found the updated training helpful, they  also appreciated the training course internal to their agency, as it  addresses the types of procurements they typically handle in their day-to- day work, such as buying spare parts. Further, DLA contracting officers  noted that they use the job aid provided through the local training."], "subsections": []}, {"section_title": "DHS Added Buy American Act Training and Revised Policy", "paragraphs": ["DHS introduced training courses in 2017 that specifically focus on the  requirements and implementation of the Buy American Act, including a  mandatory training course for DHS contracting officers. DHS reported that  94 percent of contracting staff had taken the required course as of April  2018. DHS developed these courses in response to the 2017 Executive  Order to ensure its staff was familiar with the Buy American Act  requirements. Incorporated into these training courses are supplemental  on-the-job tools to assist contracting officers when awarding contracts for  end products subject to the Buy American Act requirements, such as a  flowchart outlining applicable solicitation provisions or contract clauses  based upon contract dollar value. Contracting officials generally view the  training and tools they received as beneficial. For example, several DHS  contracting officials we interviewed said that the agency\u2019s new course  provided a helpful review on the topic, while one contracting officer  specifically noted that the course materials are useful to new staff, to help  them understand the Act\u2019s waivers and exceptions.", "DHS also revised its acquisition manual in December 2017 to add further  detail regarding the Buy American Act requirements. Specifically, DHS  updated its acquisition manual to provide contracting officers more explicit  FPDS-NG reporting instructions for procurements subject to the Buy  American Act, as well as discretion to purchase domestic end products at  or below the micro-purchase threshold. Additional changes include  increasing the documentation and level of managerial review required to  use several of the exceptions to the Buy American Act. For example, prior  to 2018\u2014which includes the time period in which the DHS contracts and  orders we reviewed were awarded\u2014the head of individual contracting  offices had the authority to approve domestic non-availability and  unreasonable cost exceptions, with a notification made to the DHS Chief  Procurement Officer. But under the new policy, the use of these  exceptions must have the concurrence of the HCA\u2014who is responsible  for contracting activities within individual DHS components\u2014and be  approved by the department\u2019s Chief Procurement Officer. Table 3 outlines  these changes.", "In September 2017, VA issued guidance to reinforce existing Buy  American Act requirements. The policy memorandum encourages the  HCAs within VA to institute reviews of awarded contracts subject to the  Buy American Act to ensure compliance. As of September 2018, policy  officials did not know how many HCAs had taken this step. Further, the  guidance emphasizes the importance of Buy American Act training for its  acquisition workforce. VA policy officials explained that the Buy American  Act is introduced in several VA training courses, but the agency does not  have a specific course on implementing the Buy American Act  requirements or provide additional instruction or tools. During the course  of our review, VA officials said that some of the HCAs had added internal  training on the Buy American Act. In addition, VA contracting staff has the  option of taking training offered outside the agency, such as the updated  Defense Acquisition University course on the Buy American Act. This  training is not required.", "Contracting officials we spoke to at VA said they struggled with the details  of awarding contracts subject to Buy American Act requirements because  they are not provided sufficient agency-specific training and guidance on  the topic. Moreover, several contracting staff noted an increased need for  training due to recent changes in VA contracting practices. Specifically, in  response to a 2016 Supreme Court decision, VA has increased  contracting efforts with veteran-owned small businesses through the  Veterans First Contracting Program. As a result, contracting officials  explained they have reduced their use of schedule contracts, in which the  determinations related to the Buy American Act requirements were made  with the initial awards. As one contracting officer explained, prior to this  change, more than 90 percent of her division\u2019s procurements were  through VA schedule contracts in which Buy American Act applicability  had already been established. However, this shift in contracting practices  means contracting officers will more frequently need to consider the  applicability of the Buy American Act, but contracting officers have not  received specific guidance or training to do so. Noting the significance of  this change, one contracting officer stated she approached VA  management to obtain Buy American Act training for her division, but  such training was not available.", "Federal internal controls state that agencies should ensure that training is  aimed at developing and retaining employee knowledge, skills, and  abilities to meet changing organizational needs. In September 2018, we  reported that VA was experiencing difficulties implementing multiple  aspects of the Veterans First policy, and we recommended that VA  provide more targeted implementation training. As VA moves forward to  implement this training, incorporating the Buy American Act requirements  will be important to provide greater assurance that staff has the  knowledge and skills needed to navigate the changing procurement  environment."], "subsections": []}, {"section_title": "HHS Does Not Provide Department-wide Buy American Act Training or Guidance", "paragraphs": ["HHS does not have agency-level Buy American training or guidance. The  HHS Acquisition Regulation Supplement does not address foreign  acquisitions. HHS officials told us that efforts to develop guidance that  would address Buy American Act requirements are underway, but they do  not know when they will be finalized and made available to contracting  officers, and could not describe the extent to which they will address Buy  American Act implementation. The HHS contracting officers we  interviewed discussed informal Buy American Act training their divisions  had developed because department-level training was not available. For  example, at HHS\u2019 National Institutes of Health, a contracting official told  us about a training course she recently developed because her office was  taking on the administration of additional contracts for which the Buy  American Act requirements would apply. Contracting officers at HHS\u2019  Office of Biomedical Advanced Research and Development Authority  described informal training on the agency\u2019s contract writing system\u2014 included as part of their weekly internal staff meetings\u2014that provides  additional guidance on how to appropriately complete certain data fields  relevant to the Buy American Act."], "subsections": []}]}, {"section_title": "Agencies Face Challenges Applying Waivers and Exceptions Where Guidance and Training Is Incomplete or Does Not Exist", "paragraphs": ["In our analysis of 38 contracts from across the four agencies, we found  that agencies faced various levels of challenge in applying the Trade  Agreements Act waivers and Buy American Act exceptions to acquire  foreign end products. This was particularly apparent in cases where  contracting officers had to determine if a trade agreement applied or  cases which required a determination that a domestic end product was  not sufficiently available, in accordance with the domestic non-availability  exception to the Buy American Act requirements. Contracting staff also  had difficulty determining the origin of products in light of incomplete or  conflicting information."], "subsections": [{"section_title": "Trade Agreements Act Incorrectly Applied", "paragraphs": ["Of the six contracts we reviewed reporting that a trade agreement applied  to the foreign end products purchased, we found two cases in which this  waiver did not apply to the contracts in question. The value of the contract  is one determining factor for whether a trade agreement waives the Buy  American Act requirements, although the FAR also states additional  factors that would affect applicability under a trade agreement. The two  contracts we found, both from VA, had total dollar values at award\u2014 $8,435 and $11,950, respectively\u2014that were less than any of the  thresholds at which trade agreement waivers of the Buy American Act are  applicable. Both contracts were for products from countries that are party  to the World Trade Organization Government Procurement Agreement,  so the value of the acquisition would have to be equal to or exceed  $191,000\u2014the threshold that was in effect at the time of award\u2014for  waivers from Buy American requirements to apply. Contracting officials in  both cases were generally unaware that the applicable threshold was not  met, making the trade agreement waiver inapplicable.", "Although VA has added Buy American Act guidance since these  contracts were awarded early in fiscal year 2017, the information currently  available does not provide sufficient detail to assist contracting officers  when awarding contracts in these situations. For example, the guidance  VA provided contracting officers in September 2017 does not emphasize  consideration of the applicable trade agreement thresholds or include  information on how contracting officers should determine the applicable  waiver or exception. When contracting officers procure foreign end  products, the type of waiver or exception used to support the purchase  matters\u2014particularly when required additional steps and review are not  completed because the wrong waiver or exception was applied. We found  that the two VA contracts with foreign end products were incorrectly  reported as the Trade Agreements Act waiver having applied. If one of  the other Buy American Act exceptions permitting purchases of foreign  end products had applied, contracting officers may have been required to  obtain higher-level review or complete a written determination.", "In addition, we reviewed contracts that show some of the complexities  contracting officers face beyond applying the dollar thresholds when  determining if an award for foreign end products is eligible under the  Trade Agreements Act waiver of the Buy American Act. Specifically, we  found instances where DHS contracting officials took different  approaches for non-competed awards for similar foreign-manufactured  products. For example, we reviewed a non-competed $58 million DHS  award for acquiring spare aircraft parts from an original equipment  manufacturer located in a foreign country that is party to the World Trade  Organization Government Procurement Agreement. DHS reported in  FPDS-NG that the procurement was waived by the Trade Agreements  Act. However, we also reviewed two other sole-source awards from DHS  for similar products\u2014spare aircraft parts from two separate  manufacturers in foreign countries that are also party to the World Trade  Organization Government Procurement Agreement\u2014that were instead  reported as subject to the Buy American Act, but excepted due to the  non-availability of domestic products.", "Contracting officers may come to different conclusions for similar  products, in part, because of the multiple factors that have to be  considered when determining whether an acquisition is subject to the Buy  American Act and whether any waivers or exceptions apply. However,  available guidance does not always address these complexities. For  example, agencies need to decide if other conditions, such as the  procurement of products deemed indispensable for national security or  national defense purposes apply to an acquisition that would make a  trade agreement inapplicable. Further, if the product\u2019s country of origin  is considered a designated country under the World Trade Organization  Government Procurement Agreement, officials need to determine that the  product is eligible under that agreement.", "DHS updated its training and guidance for the Buy American Act, which  includes a job aid outlining at what dollar values solicitation provisions  and contract clauses under a trade agreement waiver are applicable.  However, it does not address other situations in which contracts may not  be eligible under the Trade Agreements Act, such as non-eligible  products or products for national defense purposes.", "For the other agencies in our review, we found that DOD\u2019s updated Buy  American Act training and its acquisition supplement both address trade  agreement eligibility, but HHS does not yet have Buy American guidance  to address this topic. Federal internal control standards state that  agencies should communicate quality information internally to achieve  their objectives and that they should select the appropriate methods of  communication. When written guidance is not available, agencies may  miss opportunities to ensure appropriate steps are taken to meet Buy  American Act requirements."], "subsections": []}, {"section_title": "Guidance for Determining Domestic Non-Availability Exceptions Incomplete", "paragraphs": ["Our review of 38 contracts also included 8 contracts for foreign end  products pursuant to the domestic non-availability exception. In certain  situations, such as when contracts are awarded without full and open  competition, this exception requires an approved written determination.  The FAR establishes requirements for domestic non-availability  determinations, but agencies can delegate the level of review required or  specify information to be included in the determination.", "Three of the agencies we reviewed\u2014DOD, DHS, and VA\u2014provide  supplemental guidance on the process for making determinations,  including who must make the determination when applying a domestic  non-availability exception. However, DHS policy officials told us that when  the agency uses the domestic non-availability exception for a sole-source  acquisition, the written justification that the FAR requires for non- competed awards should suffice as the documentation to support the  non-availability determination as well. The practice of using sole-source  justifications to support Buy American determinations is not addressed in  DHS guidance. According to DHS policy updated in 2018, determinations  of domestic non-availability must be concurred with by the HCA and  approved by the Chief Procurement Officer. Federal and DHS acquisition  regulations, however, state that some justifications can be approved at a  lower level. In the absence of further guidance, this difference in approval  levels could result in inconsistent application within the department.", "In addition, as previously noted HHS does not yet have Buy American Act  guidance so the department does not provide information on how to make  determinations. According to federal internal control standards, agencies  should communicate quality information internally to achieve their  objectives and that they should select appropriate communication  methods. When written guidance is not available, agencies may miss  opportunities to ensure that contracting officers take the steps needed to  meet requirements when applying a domestic non-availability exception."], "subsections": []}, {"section_title": "Inconsistent Information and Guidance Limits Efforts to Accurately Determine Product Origin", "paragraphs": ["Knowing the country of origin of the products the federal government  buys is necessary to implement the Buy American Act, but contracting  officers do not always have access to accurate information on originating  countries. The FAR and the DFARS provide various clauses which, when  incorporated into contracts, require vendors to certify that the end  products they provide to the government are domestic and, if necessary,  declare the foreign countries from which they provide products. Vendors  frequently certify this information through the System for Award  Management (SAM), the government-wide system used to collect  vendors\u2019 annual representations and certifications.", "Contracting officers may rely on the information vendors provide about  their product origins, but they are generally expected to take actions to  verify incomplete or conflicting information when they have reason to  believe that a vendor will be providing a non-compliant product. We found  that SAM certifications and offers did not always include accurate  information on end products from foreign countries. In 6 of the 38  contracts that we reviewed\u2014from DHS, HHS, and VA\u2014the vendors  certified that they only provided domestic end products although the end  products provided were foreign. In all of these cases, the contracting  officers knew that the acquisitions included foreign end products. For  example, we reviewed two DHS awards for spare aircraft parts from an  Italian-based company, one of which was reported in FPDS-NG under the  domestic non-availability exception to the Buy American Act, and the  other which was incorrectly reported as being manufactured in the United  States but has since been corrected. Contracting officials said they knew  the parts were made in Italy based on extensive experience contracting  with the company and, in part, because they had visited the production  location. Contracting officials\u2014including some at HHS and VA\u2014said they  use SAM as their primary source to determine whether the vendor is  offering domestic end products. Others reported some awareness of the  limitations of SAM certifications.", "At all four agencies, contracting officials emphasized that it is important to  ask questions when end product origin information is not readily  available\u2014or if there is conflicting information\u2014but agency guidance that  we reviewed does not address this need or provide information on how to  do so. Only the local training offered by DOD\u2019s DLA addresses other  sources of information, which officials said was helpful because it is  specific to the industries with which they work. Instead, some officials  described how they rely on their experience to know how to verify  products\u2019 origins but this can be problematic, particularly with newer staff.  For example, in one contract we reviewed VA contracting officials  acknowledged that a new contracting specialist at VA did not follow-up  when the product origin certification was not provided and assumed all of  the items procured were domestic. During the course of our review, the  contracting specialist\u2019s supervisor said that she contacted the vendor and  learned that some of the items provided were in fact foreign end products.  The foreign products were not considered to account for the  preponderance of the contract so were not reported in FPDS-NG, but the  contracting officer was acting with incomplete information at the time of  award.", "Further, in 4 of the 38 contracts that we reviewed, it is not clear how  contracting staff took steps to obtain product origin information in  situations where it was not provided in SAM. In these cases\u2014which  include contracts for both domestic and foreign end products\u2014the  vendors had opted not to certify their product origins in SAM, but instead  said that they would provide the information with their individual  proposals. However, based on the information in the contract files, the  proposals did not include this information. For example:", "Three of the contracts we reviewed from HHS\u2014all reported as  purchasing end items manufactured in the United States\u2014did not  certify product origin in SAM. The supervising contracting officer for  two of the awards explained that his contracting staff regularly check  the vendor\u2019s written representations and certifications provided in the  offer, because the SAM certifications are general and do not always  apply to the specific equipment they buy. However, the three contract  files we reviewed did not include manufacturing or origin information.", "The vendor for a DHS contract that was reported as manufactured in  the United States did not certify this information in SAM. The  contracting officer said that he checks SAM for product origin  information, but in the documents we reviewed there is no evidence of  the information in the contract file.", "Federal internal control standards state that agencies should  communicate the necessary quality information needed to achieve the  agency\u2019s objectives, thereby enabling personnel to address risks.  Providing guidance regarding the situations in which contracting officers  should verify product origin information with vendors may help agencies  better meet the requirements of the Buy American Act."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Although purchases for foreign end products account for less than 5  percent of federal procurement spending in fiscal year 2017, it is  important that these purchases be consistent with the domestic- purchasing restrictions in the Buy American Act. This requires that Buy  American Act exceptions and trade agreement waivers be used only  when applicable, and that agencies report accurate data on the extent to  which they are used. However, data reporting errors by contracting staff  and FPDS-NG limitations mean that data on the use of exceptions and  waivers are not fully captured. The federal agencies all have  responsibilities to ensure Buy American Act data are accurate and  complete. The lack of good data can hinder congressional oversight of  the extent to which foreign end products are procured as authorized by  one of the exceptions or waivers of the Buy American Act.", "Agencies have taken varied approaches for providing information to  contracting officers that navigate the complexities and nuances  associated with applying the different Buy American Act exceptions or  trade agreement waivers. DOD has added such detailed information  through its revised training course and policy guidance. Adding these  types of targeted information to address challenging areas would help  contracting officers at other agencies implement the Buy American Act\u2019s  domestic preferences, as well as related exceptions and waivers. Further,  to accurately determine how exceptions and waivers apply requires  complete product origin information. Although the responsibility to certify  the origins of products supplied to the federal government rests with the  contractors, contracting officers would benefit from resources that help  them identify information that may be inconsistent, to ensure that  accurate information is available."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations, one each to the Office of  Management and Budget, DHS, VA, and HHS.", "The Director of the Office of Management and Budget should instruct the  Office of Federal Procurement Policy:", "To facilitate additional training to improve the understanding of the  contracting workforce regarding the Buy American Act requirements;  and", "To facilitate clarifying revisions to FPDS-NG, where needed, and  provide training and guidance for recording Buy American Act  information in FPDS-NG to improve the accuracy of the Buy American  data. (Recommendation 1)", "The Secretary of Homeland Security should clarify existing guidance in  the Homeland Security Acquisition Manual or update training to help  contracting officials:  Identify the factors that should be considered in order to determine the  applicability of the Trade Agreements Act and waiver of the Buy  American Act;", "Document determinations of the use of Buy American exception for  domestic non-availability and ensure the required approvals are  obtained, particularly when such determinations are evidenced  through justifications for other than full and open competition; and  Identify sources of information available for determining product origin  and the steps they should take to verify information that is  inconsistent. (Recommendation 2)", "The Secretary of Veterans Affairs should clarify existing guidance, or  provide training or other instruction, to help contracting officials:", "Address the applicability of the Buy American Act requirements and  provide instruction on how to implement the requirements, including in  any training developed to implement the Veterans First policy;  Identify the factors that should be considered in order to determine the  applicability of the Trade Agreements Act and waiver of the Buy  American Act; and  Identify sources of information available for determining products\u2019  origins and the steps they should take to verify information that is  inconsistent. (Recommendation 3)", "The Secretary of Health and Human Services should provide guidance,  training, or other instruction to help contracting officials:  Identify the factors that should be considered in order to determine the  applicability of the Trade Agreements Act and waiver of the Buy  American Act;", "Document determinations of the use of Buy American exceptions for  domestic non-availability and ensure the required approvals are  obtained; and  Identify sources of information available for determining products\u2019  origins and the steps they should take to verify information that is  inconsistent. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD, HHS, DHS, VA, and the Office  of Management and Budget for review and comment. DOD reviewed the  report, but did not offer comments. HHS, DHS, and VA provided written  responses, which are reproduced in Appendices IV, V, and VI of this  report, respectively. A senior official within the Office of Federal  Procurement Policy (OFPP) at the Office of Management and Budget  provided a response via email. In addition, HHS, DHS, and OFPP  provided technical comments, which we incorporated into the report  where appropriate.", "In their responses, HHS, DHS, VA agreed, and OFPP generally agreed,  with our findings and recommendations. The written response from HHS  and DHS included information on the steps each agency plans to take to  address the recommendations. Specifically, HHS stated that the agency  will evaluate ways to provide additional training and guidance to  contracting officials. DHS stated that it will provide guidance on the  applicability of the Buy American Act and the Trade Agreements Act in  certain situations and the documentation and approvals required when  awarding non-competed contracts that require an exception. Additionally,  DHS plans to update training regarding actions contracting officers should  take when there are discrepancies in product origin information.", "VA concurred with our three-part recommendation and described some of  the actions the agency plans to take in response. However, VA\u2019s  comments do not fully address our recommendation. Specifically, we  recommended that VA clarify guidance or provide training to identify  factors that could help contracting officers determine the applicability of  Trade Agreements Act waivers of the Buy American Act. The comments  from VA, however, only restate the existing Buy American Act exceptions  and make no mention of Trade Agreements Act waivers. Further, we  recommended that VA identify sources of information regarding product  origin and the steps to be taken to verify inconsistent product origin  information. VA\u2019s response only noted that contracting officers are  responsible for conducting market research and ensuring that all product  origin requirements are met. VA did not outline any additional steps the  agency would take to help contracting officers navigate the complexities  inherent in this area. Going forward, VA will need to develop a more  robust and responsive approach in order to fully implement our  recommendation.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of the Departments of Defense, Health and  Human Services, Homeland Security, and Veterans Affairs; the Director  of the Office of Management and Budget; and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or woodsw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["The objectives of this report are to assess the extent to which (1) the  federal government procures foreign products through Buy American Act  exceptions and waivers; and (2) selected agencies provide training and  guidance to implement the Buy American Act requirements.", "To address both of these objectives, we reviewed relevant laws and  policies, such as sections of the Federal Acquisition Regulation (FAR);  the Buy American Act as amended; the Trade Agreements Act of 1979 as  amended; federal acquisition regulation supplements from audited  agencies such as the Department of Defense Federal Acquisition  Regulation Supplement (DFARS); the Executive Order \u201cBuy American,  Hire American\u201d of 2017; the World Trade Organization\u2019s Agreement on  Government Procurement; and memorandums, policy, guidance, and  instructions related to the Buy American Act.", "To assess the federal government procurement of foreign products,  including those procured through citing exceptions and waivers of the Buy  American Act, we analyzed data from the Federal Procurement Data  System-Next Generation (FPDS-NG) for fiscal year 2017, which was the  most recent and complete data available at the time of our review. We  analyzed procurement data in FPDS-NG across the federal government  in fields relevant to the Buy American Act\u2019s domestic preference  requirements, including the product service code, country of product  origin, and place of manufacture, in addition to fields such as the contract  value and dollars obligated. We reviewed the place of manufacture field in  particular as it contains information on how the Buy American Act applies  to the contract, including whether the preponderance of the obligations is  for manufactured end products and, if so, whether they are manufactured  in or outside of the United States. When manufactured outside of the  United States, this field also captures the reason the purchase was  permissible, which we analyzed to assess the dollar obligations  associated with the various Buy American exceptions or trade agreement  waiver reported, as well as when products were used outside of the  United States. We also analyzed data from FPDS-NG to identify the  countries where foreign end products were reported to be manufactured  and the associated dollars obligated in fiscal year 2017. In addition, we  met with officials from the Office of Management and Budget, Office of  Federal Procurement Policy to better understand ongoing reviews of the  data in FPDS-NG that pertains to the Buy American Act.", "In our analysis of FPDS-NG data, we took steps to minimize issues that  might affect data reliability. Specifically, we analyzed FPDS-NG data to  identify potential errors and inconsistencies, such as non-eligible  agencies reporting the use of exceptions for DOD qualifying countries, or  reporting trade agreement waivers for contracts valued less than  minimum thresholds for trade agreements. We made minor adjustments  to minimize potential data reporting issues, including aggregating the  exceptions reported, and where appropriate, limiting our analysis to one  year of data, fiscal year 2017. Based on these steps, we determined that  FPDS-NG data were sufficiently reliable to allow us to calculate the  approximate extent of obligations for foreign end products and the use of  the Buy American Act exceptions and the Trade Agreements Act waiver.  However, we are unable to precisely determine the amount spent on  foreign end products through the use of exceptions and waivers because  of the reporting errors and data system limitations we identified in this  report.", "Using FPDS-ND data, we identified four agencies\u2014the Departments of  Defense (DOD), Health and Human Services (HHS), Homeland Security  (DHS), and Veterans Affairs (VA)\u2014that had the highest fiscal year 2017  obligations in the product codes for manufactured products, which are  potentially subject to the Buy American Act restrictions. In addition, to  identify trends and determine if there were variations in reported  obligations for foreign end products in the past, we reviewed FPDS-NG  data on the Buy American exceptions and trade agreement waivers in  fiscal years 2013 through 2017.", "To assess the extent to which selected agencies are providing training  and guidance to implement the requirements of the Buy American Act, we  reviewed training course materials and regulations, policies, and other  guidance available at the four agencies in our review\u2014DOD, HHS, DHS,  and VA\u2014to determine the extent to which they address the Buy American  Act requirements. In addition, we reviewed training materials available to  government employees through sources such as the Federal Acquisition  Institute. We interviewed policy officials from the four agencies to  understand how training and guidance had been implemented. We further  reviewed relevant inspector general reports from the DOD Inspector  General issued between 2015 and 2018, which made several  recommendations to improve compliance with the Buy American Act,  among other requirements.", "Within the four agencies, we selected contracting offices that reported  obligating fiscal year 2017 dollars for awards with foreign end products  and awards with US-manufactured end products. We specifically focused  on offices that reported a sufficient amount of foreign end product  obligations and a sufficient number of contract awards to allow us to  select multiple contracts. We also considered offices with a variety of Buy  American exceptions and waiver types reported, in order to select a mix  of contracts. The contracting offices selected were as follows:", "DOD: Defense Logistics Agency, Land and Maritime", "HHS: National Institutes of Health and the HHS Office of the Assistant  Secretary for Preparedness and Response", "DHS: United States Coast Guard", "VA: Veterans Health Administration  From these offices, we selected a non-generalizable sample of 38  contracts and delivery orders awarded in fiscal year 2017. At each  agency, we selected awards to include a mix of end items produced by  domestic and foreign manufacturers and, when products were reported  as foreign manufactured, a mix of the various exceptions and waivers  cited. We also include awards across a range of value for dollars  obligated above the micro purchase threshold\u2014ranging from  approximately $5,000 to more than $100 million\u2014to ensure we reviewed  awards both above and below the various thresholds at which the Trade  Agreements Act waiver might apply. Additionally, our sample included  awards for similar types of end products across agencies, including  aircraft parts at DOD and DHS and medical supplies at HHS and VA, to  compare practices in different agencies. We originally selected 40 awards  for review\u201410 from each agency\u2014but removed two awards from our  sample. One was an HHS award that we determined was awarded using  Other Transaction Authority and was not subject to the Buy American Act.  The second excluded contract was from DHS, which was modified after  award to reflect that it was an information technology service rather than  a product. As a service, it would not be subject to the Buy American Act.", "We reviewed the contract files for each of the 38 awards in our sample,  including documentation such as the contract and task order award,  solicitations, vendors\u2019 offers or response to proposals, determination and  finding memos, and FPDS-NG output documents. In addition, we  reviewed the certifications each vendor provided in the System for Award  Management (SAM) at the time of contract award. We interviewed  contracting officials responsible for each of the 38 contracts and task  orders to understand how they addressed the Buy American Act  requirements, including how they determined exception or waiver  applicability and product origin. We also reviewed any agency-specific or  local training and guidance, tools, or job aids available to assist  contracting officers in implementing the Act\u2019s requirements  We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on audit objectives."], "subsections": []}, {"section_title": "Appendix II: Countries with Free Trade Agreements or Reciprocal Defense Procurement Agreements with the United States", "paragraphs": ["The United States maintains trade relationships with other countries  whose specific negotiated terms results in different levels and types of  applicability for waivers and exceptions to the Buy American Act. Figure 4  depicts the range of relationships that the United States maintains with  other nations that allow for less restrictive purchasing of foreign end  products by the federal government."], "subsections": []}, {"section_title": "Appendix III: Federal Government Procurement of Foreign End Products, by Country", "paragraphs": ["The federal government purchases foreign end products from various  countries. Figure 5 highlights the different amounts of contract obligations  for foreign end products from these countries for fiscal year 2017. The  highest category, over $500 million, includes 4 countries that account for  almost 40 percent of all federal procurement of foreign end products.  Countries where the federal government obligated less than $5 million for  the procurement of foreign end products are not included."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Candice Wright, Assistant  Director; and Jennifer Dougherty, Analyst-in-Charge, managed this  review. Skip McClinton; Erin Stockdale; Adam Cowles; Stephanie  Gustafson; Julia Kennon; Anne Louise Taylor; and Robin Wilson made  key contributions to this report."], "subsections": []}]}], "fastfact": ["The law requires federal agencies to buy domestic products. But federal agencies can buy foreign products sometimes, e.g., when domestic items are not available at a reasonable cost or when international trade agreements waive the Buy American Act restrictions.", "According to the federal procurement database, foreign products comprised less than 5% of what the government bought in fiscal year 2017. The real amount could be higher than that, in part, because of data errors. For example, some agencies had inaccurately recorded waiver information.", "We recommended ways to improve reporting and compliance with the act."]}
{"id": "GAO-18-399", "url": "https://www.gao.gov/products/GAO-18-399", "title": "CIVILIAN AND CONTRACTOR WORKFORCES: DOD's Cost Comparisons Addressed Most Report Elements but Excluded Some Costs", "published_date": "2018-04-17T00:00:00", "released_date": "2018-04-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In addition to more than 2.2 million active duty and reserve personnel, DOD employs about 760,000 federal civilians and more than 560,000 contractors. In the Senate Report 114-49 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2016 included a provision for DOD to issue a report (1) assessing functions performed by federal civilian and service contractor personnel, (2) accounting for the full costs of federal civilian and service contractor personnel performing these functions, (3) comparing these costs, and (4) assessing available hiring and retention authorities for federal civilians.", "The Senate report also included a provision for GAO to assess DOD's report, which DOD submitted to Congress in April 2017. This report examines the extent to which DOD's report addressed the prescribed congressional elements.", "GAO reviewed DOD's report and compared it to the prescribed elements, examined documents relevant to DOD's cost estimating and comparison methodology, and interviewed DOD officials, including those in its Office of Cost Assessment and Program Evaluation responsible for the calculations in DOD's report."]}, {"section_title": "What GAO Found", "paragraphs": ["In response to Congressional direction, the Department of Defense (DOD) issued a report in April 2017 comparing the costs of federal civilian and service contractor personnel at select installations. The report addressed three out of four provision elements and partially addressed one, as discussed below. DOD concluded that neither federal civilians nor service contractors were predominately more or less expensive, with costs being dependent on position, location, and level of seniority. DOD noted that it used a non-probability based sample of personnel for its report, and the results are not generalizable.", "An assessment of performance of functions being performed by federal civilian and service contractor personnel at six military installations, with four being in the continental United States and two being outside the continental United States. GAO believes that DOD addressed this requirement because it developed a methodology to assess performance of functions performed by federal civilians and service contractors at 17 organizations within nine geographic regions including two locations outside the continental United States. DOD used data from the Defense Civilian Personnel Data System to identify military installations with large reported numbers of federal civilians. DOD determined that personnel need to perform at least 80 percent common tasks to be able to make a comparison.", "An accounting of the fully-burdened, or full, cost of federal civilian and service contractor personnel performing functions at the selected installations including training, benefits, reimbursable costs, and facility overhead. GAO believes that DOD partially addressed this requirement because while it calculated the labor costs of selected federal civilian and service contractor full-time equivalents performing similar functions for organizations at government-owned facilities, it excluded certain non-labor costs from its calculations.", "A comparison of the costs of performance of these functions by federal civilians and service contractor personnel at the selected installations. GAO believes that DOD addressed this requirement because it compared calculated costs for selected federal civilians and service contractors performing similar functions at selected installations and included those comparisons in its report.", "An assessment of the flexible employment authorities for the employment and retention of federal civilian employees. GAO believes that DOD addressed this requirement because it sent questionnaires to DOD hiring officials and human resource professionals to collect information on flexible employment authorities and conducted interviews with these and human resource professionals at the same 17 organizations used for the cost comparison. Based on an analysis of the information collected, DOD's report included several conclusions regarding flexible hiring authorities and made one recommendation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations; however, DOD non-concurred with GAO's assessment that DOD partially addressed the element to account for the full cost of personnel. GAO believes the assessment is correct as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) is one of the largest employers in the  federal government with approximately 1.4 million active-duty  servicemembers, 813,000 reserve component servicemembers, 762,000  federal civilian full-time equivalent employees, and approximately  561,000 contractor full-time equivalent personnel. In cases where federal  civilians or service contractors can perform similar functions, determining  whether federal civilians or service contractors are less expensive to  employ is a complicated task, particularly for an organization with a  complex mission and a workforce as large and diverse as DOD.", "Since January 2001, we have identified Strategic Human Capital  Management as a high-risk area because skills gaps within individual  federal agencies\u2014as well as across the federal workforce\u2014can lead to  costly, less-efficient government. In addition, the federal government\u2019s  fiscal challenges, which we reported on in January 2017 and in other  products, underscore the importance of DOD employing a strategic  approach to determining the appropriate mix of its military, civilian, and  contracted services to perform its mission, and determining the functions  that are critical for the department to achieve its missions. However,  workforce cost is one of several factors such as timing, durations of tasks,  productivity, economic conditions in the local labor market, and whether a  function is considered inherently governmental, that influence workforce  decisions.", "Senate Report 114-49, accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2016, included a provision for DOD to  report a comparison of the costs of functions performed by federal  civilians and service contractor personnel at selected installations, among  other things. Specifically, the provision included four elements for DOD to  report: (1) an assessment of performance of functions being performed by  federal civilians and service contractor personnel at six selected  installations, (2) an accounting of the full cost of federal civilian and  service contractor personnel at the selected installations, (3) a  comparison of the costs of performance of these functions by federal  civilians and service contractor personnel at the selected installations,  and (4) an assessment of the flexible employment authorities for the  employment and retention of federal civilian employees. DOD submitted  its report (referred to hereafter as DOD\u2019s Cost-Comparison Report) to  Congress in April 2017.", "Senate Report 114-49 also includes a provision for us to review the  sufficiency of DOD\u2019s Cost-Comparison Report. This report assesses the  extent to which DOD\u2019s Cost-Comparison Report addressed the four  elements of the provision in Senate Report 114-49.", "To assess the extent to which DOD\u2019s Cost-Comparison Report addressed  the four elements of the provision in Senate Report 114-49, we reviewed  and compared DOD\u2019s Cost-Comparison Report with the four elements in  Senate Report 114-49. DOD\u2019s Cost-Comparison Report was expected to  be issued in February 2017 according to DOD officials. However, its  issuance was delayed until April 2017. We conducted interviews with  DOD\u2019s Office of Cost Assessment and Program Evaluation (CAPE)  officials responsible for designing and conducting DOD\u2019s Cost- Comparison Report. These interviews included discussions regarding  how CAPE officials designed their methodology and gathered and  analyzed data. We discussed steps taken to ensure data reliability, but  did not assess the reliability of CAPE\u2019s data. We also obtained and  reviewed documents relevant to DOD\u2019s cost-comparison approach. In  addition, we interviewed officials with the Office of the Under Secretary of  Defense for Personnel and Readiness to discuss efforts related to  identifying federal civilians and support contractors performing similar  functions. We also interviewed officials within the Office of the Under  Secretary of Defense-Comptroller to gain perspective on cost elements  related to cost comparisons. We reviewed DOD\u2019s policies and guidance  on workforce management and estimating costs. These documents  include DOD Instruction 1100.22, Policy and Procedures for Determining  Workforce Mix (April 12, 2010) (Change 1, Dec. 1, 2017); DOD 7000.14- R, Financial Management Regulation; and DOD Instruction 7041.04,  Estimating and Comparing the Full Costs of Civilian and Active Duty  Military Manpower and Contract Support (July 3, 2013). We also reviewed  Office of Management and Budget Circular A-11 to determine relevant  federal civilian personnel costs.", "We conducted this performance audit from January 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objective. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Since 2001, DOD\u2019s total workforce has changed in size and composition.  DOD\u2019s military, civilian, and contractor workforces peaked around 2011  and have since decreased in size, as shown in figure 1. Several factors  have contributed to changes in the size of the workforces including  varying levels of U.S. involvement in the conflicts in Iraq and Afghanistan,  military to civilian and contractor conversions, contractor insourcing, and  the growth in certain workforces such as acquisition and cyber.", "DOD\u2019s management of its workforce is governed by several workforce  management statutes, including sections 129, 129a, and 2463 of Title 10  of the United States Code. Section 129 directs that DOD civilian  personnel be managed each fiscal year on the basis of, and consistent  with, total-force management policies and procedures established under  section 129a, the workload required to carry out the functions and  activities of the department, and the funds made available to the  department each fiscal year. Section 129a directs the Secretary of  Defense to establish policies and procedures for determining the most  appropriate and cost-efficient mix of military, civilian, and contracted services to perform the mission of the department. Finally, Section 2463  directs the Under Secretary of Defense for Personnel and Readiness to  devise and implement guidelines and procedures to ensure that  consideration is given to using, on a regular basis, DOD civilian  employees to perform new functions and functions performed by  contractors that could be performed by DOD civilian employees.", "DOD Instruction 1100.22, Policy and Procedures for Determining  Workforce Mix (April 12, 2010) (Change 1, Dec. 1, 2017) establishes  policy, assigns responsibilities, and prescribes procedures for determining  the appropriate workforce mix of the military, civilian, and contracted  services. The instruction provides criteria for workforce-mix decisions and  directs DOD components to conduct a cost comparison to determine the  low-cost provider for all new or expanding mission requirements and for  functions that have been contracted but could be performed by DOD  civilian employees.", "In addition, over the past 10 years DOD has taken steps to better  understand the costs associated with its workforces. For example, we  found in September 2013 that DOD had improved its methodology for  estimating and comparing the full cost of work performed by military and  civilian personnel and contractor support, but the methodology continued  to have certain limitations, such as the lack of guidance for certain cost  elements related to overhead. We made five recommendations,  including for DOD to assess the advantages and disadvantages of  allowing the continued use of different cost-estimation tools across the  department or directing department-wide application of one tool, and  revise its guidance in accordance with the findings of its assessment.  DOD implemented this recommendation but has not yet implemented the  other four recommendations although it concurred or generally concurred  with them."], "subsections": []}, {"section_title": "DOD\u2019s Cost- Comparison Report Addressed Most Elements in Senate Report 114-49", "paragraphs": ["DOD\u2019s Cost-Comparison Report addressed three elements and partially  addressed one element concerning the accounting for the fully-burdened,  or full, cost of federal civilian and service contractor personnel performing  functions at the selected installations, as shown in table 1. DOD  concluded that for the 21,000 federal civilians and service contractors  compared, neither federal civilians nor service contractors were  predominately more or less expensive, with the costs being dependent  upon the function being performed, location, and level of expertise. DOD  noted that the results were not generalizable across the department.", "Each of the elements and our assessment are discussed below."], "subsections": [{"section_title": "DOD Developed a Methodology to Assess Performance of Functions Being Performed by Federal Civilian and Service Contractor Personnel on Military Installations", "paragraphs": ["We believe that DOD addressed the reporting element to assess  performance of functions performed by civilian and contractor personnel  by developing a methodology to assess performance of functions  performed by federal civilians and service contractors at organizations  within nine geographic regions including two locations outside the  continental United States.", "Organizations included in DOD\u2019s methodology include the following:", "Fort Belvoir Community Hospital", "Defense Threat Reduction Agency", "US Army Intelligence and Security Command", "Aviation and Missile Research, Development, and Engineering Center", "Naval Medical Center San Diego", "Space and Naval Warfare Systems Command", "Ogden Air Logistics Complex", "75th Air Base Wing", "Naval Facilities Engineering Command", "Tripler Army Medical Center  DOD\u2019s methodology included the following:", "Selecting installations and organizations: DOD used data from the  Defense Civilian Personnel Data System to identify military  installations with large reported numbers of federal civilians.  According to DOD officials, they eliminated from consideration those  installations that had no reported contractors. From this subset of  installations, DOD selected organizations to represent all three  military departments and diverse geographical locations, to include  two locations outside the continental United States.", "Assessing the functions performed by civilians and contractors  to identify federal civilians and service contractors performing  similar functions: DOD assessed the performance of functions at  these selected locations to identify federal civilians and service  contractors performing similar functions as there is no direct mapping  or perfect match between existing taxonomies used to quantify federal  civilian positions and contracted services. Further, DOD reported that  the day-to-day functions performed by federal civilian employees do  not always directly correlate to the designated occupational series or  the job title for their position. For example, an individual with an  occupational series assigned as an accountant may actually perform  work more consistent with that of a financial analyst. According to  DOD\u2019s Cost-Comparison Report, DOD did not rely on occupational  series names or job titles alone to determine the actual work being  performed by federal civilians. Specifically, DOD conducted site visits  with each organization and relied on local managers\u2019 direct knowledge  of the actual tasks that their federal civilians and service contractor  personnel performed. According to DOD\u2019s Cost-Comparison Report,  DOD determined that personnel need to perform at least 80 percent  common tasks to be able to make a comparison. For the  organizations selected, DOD compared the costs of all federal  civilians and service contractors identified as performing similar  functions.", "The challenges DOD identified in DOD\u2019s Cost-Comparison Report on  determining the functions performed by contractor personnel are  similar to those we encountered in our prior work on DOD\u2019s efforts to  compile and review of an inventory of contracted services. Section  2330a of Title 10 of the U.S. Code directs the Secretary of Defense to  annually prepare an inventory of activities performed during the  preceding fiscal year pursuant to staff augmentation contracts.  Section 2330a also directs the secretary of each military department  and head of each defense agency responsible for activities in the  inventory to, within 90 days after the Secretary of Defense submits the  inventory, review the contracts and activities in the inventory for which  that secretary or agency head is responsible, in part to identify  activities that should be considered for conversion. Our prior work has  identified, among other issues, that the absence of a complete and  accurate inventory of contracted services hinders DOD\u2019s management  of these services. According to DOD officials, the Office of the Under  Secretary of Defense (Personnel and Readiness) has also recognized  the challenges associated with the various taxonomies and lexicons  associated with articulating the size and composition of federal  civilian, military, and contracted services workforces, and has efforts  underway with the goal of better aligning those to enable more holistic  total force management of all sources of labor. According to DOD  officials, by improving available workforce data, DOD can support  better-informed leadership decisions, improve accuracy of analyses,  and provide consistent explanations of the department\u2019s workforce  resources. DOD officials told us that this effort has an estimated  completion of December 2018."], "subsections": []}, {"section_title": "DOD Accounted for Labor Costs but Excluded Some Costs That Encompass Full Costs of Personnel", "paragraphs": ["We believe that DOD partially addressed the reporting element to account  for the full cost of civilian and contractor personnel by providing an  accounting of the labor costs of selected federal civilian and service  contractor full-time equivalents for personnel performing similar functions  at government-owned facilities during calendar year 2015, but excluding  certain non-labor costs from its cost calculations. According to DOD  officials, 2015 was the last year for which complete data were available."], "subsections": [{"section_title": "DOD Accounted for Federal Civilian and Contractor Labor Costs", "paragraphs": ["DOD developed a methodology for identifying labor costs associated with  federal civilian and service contractor full-time equivalents during  calendar year 2015 at government-owned facilities for its cost  comparisons. Based on reviews of applicable guidance and consultations  with the Office of the Under Secretary of Defense \u2013 Comptroller, DOD  included numerous federal civilian costs collected from several sources in  DOD\u2019s Cost Comparison Report, as shown in table 2.", "In addition, to assure data quality, DOD officials told us that they took  steps to identify data errors in the data collected including identifying  missing data fields and data entries that might indicate data errors. For example, DOD officials told us that they verified that they had pay records  for every pay period in calendar year 2015 by identifying potential errors  and outliers and sharing these with the Defense Finance and Accounting  Service and the selected DOD organizations for review. Officials also  stated that DOD sent its complete calculated data sets to each  organization for review against their own pay records and that all errors  were corrected or outliers were explained. Additionally, according to our  analysis, DOD excluded overtime from its costs related to federal civilians  in accordance with Office of Management and Budget Circular A-11.  However, DOD included overtime pay in its report separately for context  and noted that overtime pay is a significant part of civilian compensation  for some organizations. Officials noted that those funded via a working  capital fund arrangements, such as depots, use overtime to handle  surges in demand throughout the year. DOD noted in its report that  selected service contracts at government facilities and developed three  methodologies to identify labor costs associated with service contractor  full-time equivalents during calendar year 2015, as shown in table 3.", "DOD stated in its report that identifying service contractor full-time  equivalents is a significant challenge because the level of detail available  in each contract varied such that DOD could not employ a single  methodology, and unlike federal civilian pay data, there is no centralized  database on service-contractor pay. DOD reported that contracts are  rarely written to address the cost-per-contractor as a full-time equivalent,  and some contracts do not differentiate between labor and non-labor  costs. DOD noted in its report that the negotiated price of the contract  includes direct costs, including labor and non-labor costs, and indirect  costs such as overhead. Further, the contract costs include service  contractor profit.", "Based on our review of DOD\u2019s Cost-Comparison Report, DOD used non- excludable contract costs as a basis in two of its methodologies. These  costs to DOD are associated with labor, and include pay and benefits  provided to service contractor personnel, contractor profit, and overhead  the contractor included in the cost of the contract. When the number of  service contractor full-time equivalents and full costs for a contract was  known, DOD used the first method, dividing contract costs by the number  of service contractor full-time equivalents to arrive at the cost per service  contractor full-time equivalent. When the number of billable hours was  known, DOD used the second method, multiplying the ratio of contract  costs divided by billable hours by a standard number of annual billable  hours. For contracts in which the labor rate was known but costs could  not be disaggregated, DOD multiplied the labor rate by a standard 1,880  annual billable hours unless a contract specified the labor rate as a  number of annual billable hours. For example, Defense Logistics Agency  contractor-labor rates for wage grade equivalent contractor full-time  equivalents are based on 2,080 annual labor hours."], "subsections": []}, {"section_title": "DOD Excluded Certain Costs that Comprise Full Costs", "paragraphs": ["We assessed DOD\u2019s report as partially addressing the reporting element  to account for the full cost of federal civilian and contractor personnel  because DOD excluded certain non-labor costs from its costs  calculations\u2014(1) direct non-labor costs for government owned facilities  and government provided supplies, (2) indirect costs for general and  administrative and overhead for civilians, and (3) costs to manage  contracts\u2014from its costs calculations. Senate Report 114-49 stated that  DOD is to include an accounting of the full cost of DOD federal civilian  and service contractors performing similar functions, including facility  overhead. DOD stated in its report that the methodology utilized to  compare the costs of federal civilian and service contractor full-time  equivalents was consistent with DOD Instruction (DODI) 7041.04,  Estimating and Comparing the Full Costs of Civilian and Active Duty  Military Manpower and Contract Support (July 3, 2013), hereafter referred  to DODI 7041.04. However, DODI 7041.04 states that the full cost of  personnel should include direct and indirect non-labor costs, such as  those referenced previously. DOD officials stated that they considered  including non-labor costs in their calculations but did not because they  believe these costs would add approximately the same to both federal  civilian and service contractor costs. DODI 7041.04 instructs that if a  function is performed on government property, the costs of goods,  services, and benefits that are common costs may be excluded provided  the number of government and contactor personnel is equivalent. DODI  7041.04 further instructs that when the number of government and  contractor personnel differs, adjustments must be made to the cost  estimates to account for the difference in number of government and  contractor personnel.  While there were some instances where it was the  case that DOD\u2019s cost estimates involved an equal number of civilian and  contractor personnel performing functions on government property, there  were many instances in where the personnel numbers differed  and  common costs should not have been excluded. For example, in DOD\u2019s  comparisons of federal civilians and service contractors at Fort Belvoir  Community Hospital, DOD conducted comparisons of 19 functions where  2 functions had equal numbers of federal civilian and service contractors  and 17 functions had differing numbers of federal civilian and service  contractors. In one comparison, the number of contractors was over three  times the number of civilians. DOD officials also stated that they believe  their methodology is in accordance with DODI 7041.04 because DODI  7041.04 states that the cost elements in the instruction can be modified or  augmented in each specific case as necessary, but DOD components  should be prepared to support such decisions with sufficient justification.  We acknowledge that DODI 7041.04 states that the cost elements can be  modified, but by excluding non-labor costs in its cost comparisons, DOD  did not account for the full cost of federal civilians and service contractors  as requested in the mandate."], "subsections": []}]}, {"section_title": "DOD Compared Its Calculated Costs of Performance of Selected Functions by Federal Civilians and Service Contractor Personnel at Selected Installations", "paragraphs": ["We believe that DOD addressed the reporting element to compare costs  by comparing its calculated costs of selected federal civilians and service  contractors performing similar functions at selected installations. DOD  reported that its results represent selected personnel performing functions  within selected organizations and are not generalizable across the  department. DOD concluded that for the federal civilian and contractor  full-time equivalents included in the study, the costs varied by  organization, location, and function being performed. DOD presented  comparisons of federal civilian and service contractor full-time equivalents  costs and expressed these results as a cost ratio. However, it is not clear  how the results would be different if all costs that encompass full costs of  personnel would have been included in DOD\u2019s comparisons. See tables 4  and 5 below for examples of greater costs for the performance of  functions by federal civilians or service contractors at Fort Belvoir  Community Hospital in Fort Belvoir, Virginia."], "subsections": []}, {"section_title": "DOD Assessed Flexible Hiring Authorities Available for Employment and Retention of DOD Civilian Employees", "paragraphs": ["We believe that DOD addressed the reporting element by assessing the  flexible employment authorities for the employment and retention of  federal civilian employees at the same 17 organizations used for the cost  comparison. Specifically, DOD sent questionnaires to DOD hiring officials  and human resource professionals to collect information on flexible  employment authorities. DOD included a broad spectrum of  organizational missions in its query of management and human resource  officials regarding the use and availability of flexible hiring authorities.  Noting that this assessment is more subjective than the others in DOD\u2019s  Cost-Comparison Report, DOD queried senior leaders, middle managers,  front-line supervisors and human resource professionals regarding which  authorities are being used and the effectiveness of each. According to  DOD\u2019s report, in this way, DOD was able to gauge the extent to which  each type of authority was used as well as the satisfaction with and  effectiveness of each. DOD\u2019s Cost-Comparison Report made several  conclusions regarding flexible hiring authorities and made one  recommendation. The findings included that there was a variance in the  authorities used between organizations, management unfamiliarity with all  available authorities, and a belief among managers that expanded use of  some authorities is needed to produce more quality hires. DOD\u2019s Cost- Comparison Report recommended DOD and OPM should explore  opportunities to refine, consolidate, or reduce unused, inefficient, or  cumbersome hiring authorities."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In   written comments, DOD non-concurred with our assessment that DOD  partially addressed the mandated reporting element to provide an  accounting of the fully-burdened cost of federal civilian and service  contractor personnel performing functions at the selected installations to  include training, benefits, reimbursable costs, and facility overhead.  DOD\u2019s comments are reproduced in their entirely in appendix I. DOD also  provided technical comments, which we incorporated as appropriate.", "DOD stated that we presented the three reporting elements identified in  the congressional mandate absent the full context and congressional  intent. Specifically, DOD stated that in the congressional mandate, the list  of elements to be included in the report is not a stand-alone list and DOD  stated that we present the elements as a stand-alone list. DOD further  stated that the list of elements in the mandate is preceded by a paragraph  that we did not reproduce in our report, but which provides context and  congressional intent for the reporting elements.", "We do not believe that the language omitted from our report changes the  meaning of the reporting elements to be included in DOD\u2019s cost  comparison report because the paragraph omitted clearly states that the  purpose of the report is to provide the results of a study that includes a  comparison of the fully-burdened cost of the performance of functions by  DOD civilian personnel with the fully-burdened cost of the performance by  DOD contractors. The paragraph preceding the reporting elements and  the elements reads as follows:  The committee directs the Secretary of Defense to submit to  the  Committees on Armed Services of the Senate and the House of  Representatives, and to the Comptroller General of the United  States, a report setting forth the results of a study, conducted by  the Secretary for the purposes of the report, of a comparison of  the fully-burdened cost of performance of functions by Department  of Defense (DOD) civilian personnel with the fully-burdened cost  of the performance of functions by DOD contractors by no later  the February 1, 2016. The study shall include:   (1) An assessment of performance of such functions at six  DOD installations selected by the Secretary for purposes  of the study from among DOD installations at which  functions are performed by an appropriate mix of civilian  personnel and contractors, with four such installations to  be located in the continental United States and two such  installations to be located outside the continental United  States;  (2) An accounting of the fully-burdened cost of DOD  civilian personnel and contractors performing functions for  DOD (including costs associated with training, benefits,  reimbursable costs under chapter 43 of title 41, United  States Code, and facility overhead) in order to permit a  direct comparison between the cost of performance of  functions by DOD civilian personnel and the cost of the  performance of functions by contractors;  (3) A comparison of the cost of performance of the full  range of functions, required expertise, and managerial  qualities required to adequately perform the function to be  compared, including:  a. Secretarial, clerical, or administrative duties,  including data entry;  b. Mid-level managers and other personnel  possessing special expertise or professional  qualifications;  c. Managers and other leadership; and  d. Personnel responsible for producing  congressionally-directed reports.", "The committee recommends that, in conducting the study, the  Secretary should take into account the policy that inherently  governmental functions vital to the national security of the United  States may not be performed by contractor personnel. The report  required shall include an assessment of the flexible employment  authorities available to the Secretary for the employment and  retention of civilian employees of the DOD, including an  identification of such additional flexible employment authorities as  the Secretary considers appropriate to shape the civilian  personnel workforce of the DOD. Not later than 120 days after  receipt of such report, the Comptroller General shall submit to  Congress a report that includes an assessment of the adequacy  and sufficiency of the report submitted by the Secretary, including  any recommendations for policy or statutory change as the  Comptroller deems appropriate.", "As we reported, DOD noted in its cost comparison report that it identified  labor costs used in its comparisons. However, DOD did not include direct  and indirect non-labor costs and DODI 7041.04 states that the full cost of  personnel should include these non-labor costs as we discussed earlier in  the report. Therefore, DOD only partially addressed the reporting  provision.", "In addition, DOD stated that we omit relevant language related to  congressional intent for the second reporting element (i.e., an accounting  of the fully-burdened cost of DOD civilian personnel and contractors).  DOD stated that the text, \u201c. . . in order to permit a direct comparison  between the cost of performance of functions by DOD civilian personnel  and the cost of the performance of the function by contractors,\u201d conveys  the congressional intent that the study is for comparison and our  exclusion of the text in our restatement of the element omitted language  indicating relevant Congressional intent. We do not believe that the  language omitted in our report changed the meaning of the reporting  element, which is that DOD was to include an accounting of the fully- burdened costs of federal civilians and service contractors in its cost  comparisons.", "DOD further stated that we did not assess the second reporting element  (i.e., an accounting of the fully-burdened cost of DOD civilian personnel  and contractors) as it is directly stated but rather that we assessed the  element by redefining it and then asserting that DOD partially addressed  it. DOD noted that the direct language of the second reporting element is  for DOD to include an \u201caccounting\u201d of the fully burdened cost of DOD  civilian personnel and contractors. DOD asserted that we misinterpreted  the meaning of \u201caccounting\u201d when we determined that DOD partially  addressed the mandate because it did not \u201ccalculate\u201d certain non-labor  costs. We disagree. As we discuss in our report, DOD did account for the  labor costs associated with federal civilian and service contractors by  gathering labor cost data from several sources, but it did not include non- labor costs in its cost calculations. In order to account for the fully  burdened costs of federal civilians and service contractors, as directed to  do so by the preamble to the reporting elements, as well as the second  reporting element, DOD should have included all labor and non-labor  costs in the cost calculations.", "DOD also stated that our assessment incorrectly implies that to \u201caccount\u201d  for costs is equivalent to \u201ccalculating\u201d costs as evidenced by the following  quote from our draft report, \"We acknowledge that DODI 7041.04 states  that the cost elements can be modified, but by excluding non-labor costs  in its cost comparisons, DOD did not account for the full cost of federal  civilians and service contractors as requested in the mandate.\" DOD  stated that although DOD did not \u201ccalculate\u201d some non-labor costs, they  did \u201caccount\u201d for them in accordance with DODI 7041.04 and as directed  in the congressional mandate. DOD asserted that in multiple places,  DODI 7041.04 states that common costs \"are excluded\" and \"may be  excluded\" from cost comparisons. DOD provided facility costs as an  example of non-labor costs accounted for but not calculated in its cost  comparisons. DOD stated that in its report, all of the civilian positions and  contractor functions are performed at government-owned facilities. Thus,  facility costs are common costs and may be excluded. DOD stated that  their report accounted for facility costs by recognizing that such costs  exist and are common costs, thus, DOD properly excluded such costs in  accordance with DODI 7041.04, and their report satisfied the  Congressional mandate.", "We disagree. As mentioned above, the preamble to the mandated  reporting elements and the second reporting element specifically directed  that DOD account for the fully-burdened cost of DOD civilian and  contractor personnel. Because there are multiple costs associated with  civilian and contractor personnel, calculations are necessary in order to  account for the full cost of these workforces. DODI 7041.04 instructs that  if a function is performed on government property, the costs of goods,  services, and benefits that are common costs may be excluded provided  the number of government and contactor personnel is equivalent. While  there were some instances where it was the case that DOD\u2019s cost  estimates involved an equal number of civilian and contractor personnel  performing functions on government property, there were many instances  where the personnel numbers differed and common costs should not  have been excluded. For example, in DOD\u2019s comparisons of federal  civilians and service contractors at Fort Belvoir Community Hospital, DOD  conducted comparisons of 19 functions where 2 functions had equal  numbers of federal civilian and service contractors and 17 functions had  differing numbers of federal civilian and service contractors. In one  comparison, the number of contractors was over three times the number  of civilians. DODI 7041.04 further instructs that when the number of  government and contractor personnel differs, adjustments must be made  to the cost estimates to account for the difference in number of  government and contractor personnel. DOD did not make these  adjustments in is calculations and as result non-labor costs should not  have been excluded; therefore, DOD did not account for the fully- burdened costs, as directed by Congress.", "We are sending copies of this report to the appropriate congressional  committees. We are also sending copies to the Secretary of Defense, the  Director of the Office of Cost assessment and Program Evaluation and  other interested parties. This report will also be available at no charge on  our Web site at http://www.gao.gov.", "Should you or your staff have any questions concerning this report,  please contact Brenda S. Farrell at (202) 512-3604 or farrellb@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Vincent Balloon, Assistant  Director; Timothy Carr, Felicia Lopez, Clarice Ransom, Michael Silver,  and Norris \u201cTraye\u201d Smith made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Department of Defense: Actions Needed to Address Five Key Mission  Challenges, GAO-17-369 (Washington, D.C.: June 13, 2017)", "DOD Civilian and Contractor Workforces: Additional Cost Savings Data  and Efficiencies Plan Are Needed, GAO-17-128 (Washington, D.C.:  October 12, 2016)", "Federal Hiring: OPM Needs to Improve Management and Oversight of  Hiring Authorities, GAO-16-521 (Washington, D.C.: August 2, 2016)", "DOD Service Acquisition: Improved Use of Available Data Needed to  Better Manage and Forecast Service Contract Requirements,  GAO-16-119 (Washington, D.C.: February 18, 2016)", "Civilian and Contractor Workforces: Complete Information Needed to  Assess DOD\u2019s Progress for Reductions and Associated Savings,  GAO-16-172 (Washington, D.C.: December 23, 2015)", "DOD Inventory of Contracted Services: Actions Needed to Help Ensure  Inventory Data Are Complete and Accurate, GAO-16-46 (Washington,  D.C.: November 18, 2015)", "Sequestration: Comprehensive and Updated Cost Savings Would Better  Inform DOD Decision Makers if Future Civilian Furloughs Occur,  GAO-14-529 (Washington, D.C.: June 17, 2014)", "Human Capital: Opportunities Exist to Further Improve DOD\u2019s  Methodology for Estimating the Costs of Its Workforces, GAO-13-792  (Washington, D.C.: September 25, 2013)", "Human Capital: Additional Steps Needed to Help Determine the Right  Size and Composition of DOD\u2019s Total Workforce, GAO-13-470  (Washington, D.C.: May 29, 2013)", "Defense Outsourcing: Better Data Needed to Support Overhead Rates for  A-76 Studies, GAO/NSIAD-98-62 (Washington, D.C.: Feb. 27, 1998)"], "subsections": []}], "fastfact": []}
{"id": "GAO-18-224", "url": "https://www.gao.gov/products/GAO-18-224", "title": "Tax Fraud and Noncompliance: IRS Can Strengthen Pre-refund Verification and Explore More Uses", "published_date": "2018-01-30T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IRS continues to confront the ongoing problems of identity theft (IDT) refund fraud. The agency estimates that at least $1.68 billion was paid in IDT refund fraud in 2016. To help address this issue, consistent with GAO's prior reporting, the Protecting Americans from Tax Hikes Act of 2015 advanced the deadline for employers to file W-2s to SSA to January 31 (about 1 to 2 months earlier than in prior years). This change allows IRS more time to match wage information to tax returns through systemic verification, and identify any discrepancies before issuing refunds.", "GAO was asked to assess how well IRS implemented systemic verification. GAO assessed IRS's performance using systemic verification and the extent to which IRS analyzed the effectiveness of the refund hold on this process. GAO analyzed IRS and SSA data and documents, observed SSA's paper W-2 process, and interviewed IRS and SSA officials. GAO compared IRS actions to laws; IRS policies; and standards for internal control, fraud risk management, and program evaluation."]}, {"section_title": "What GAO Found", "paragraphs": ["Beginning in 2017, as required by law, the Internal Revenue Service (IRS) held all refunds for taxpayers claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until February 15. IRS also took actions to verify wage and other information reported on tax returns before issuing refunds, referred to as systemic verification, but several factors limited its success. IRS received over twice as many (over 214 million) Forms W-2, Wage and Tax Statement (W-2) by February 15 compared to the same time in 2016, and reported that W-2 data were responsible for improving fraud detection and reducing taxpayer burden. However, IRS was unable to verify over half of the returns it held until February 15 before issuing the refunds. For example, IRS received W-2s daily but its information technology systems processed them weekly. In response to GAO's review, IRS reported it is planning to assess options for processing W-2s daily. Also, some employers submit W-2s late, but IRS did not track the extent to which late W-2s are associated with fraud or noncompliance. Further, IRS has not assessed options for enforcing late W-2 penalties earlier. Additionally, about 9 percent (about 23 million) of W-2s were filed on paper, which IRS does not begin to receive from the Social Security Administration (SSA) until March. By law, employers who file 250 or more W-2s are required to file W-2s electronically, while those who file fewer than 250 W-2s may opt to file on paper or electronically. In August 2014, GAO suggested that Congress provide the Secretary of the Treasury with the authority to lower the electronic filing requirement from 250 W-2s to 5 to 10. This action could also have the benefit of reducing SSA's W-2 paper processing costs by $9.7 to $11.3 million per year. These issues reduce IRS's access to timely W-2 data, limiting its ability to prevent fraud and reduce noncompliance before issuing refunds.", "IRS's preliminary and final analyses of the February 15 refund hold both showed that IRS could have detected significantly more in potential fraud and noncompliance if it held all refunds until late February, when it had more W-2 data available. There are differences between these analyses. For example, the final analysis included more returns and estimated total revenue IRS could protect by extending the refund hold and expanding it to all taxpayers. In that analysis, IRS estimated that it could have protected $100 million in fraud and noncompliance had it held all taxpayer refunds until February 15\u2014$35 million more than it protected by holding refunds with EITC or ACTC. IRS further estimated that moving the refund hold to March 1 for all taxpayers could protect $895 million compared to $533 million if it only held refunds with EITC or ACTC until that date. However, GAO found limitations to IRS's analyses. For example, while IRS has plans to further explore holding refunds longer, it does not have an evaluation plan to assess the effectiveness of the refund hold on systemic verification. Also, IRS did not fully assess the benefits and costs, including taxpayer burden, of the refund hold, nor how its analysis informs its broader fraud risk management or compliance efforts. As a result, IRS does not have sufficient information to inform a decision on potential changes to the refund hold date and those subjected to it. Finally, IRS has not assessed the benefits and costs of expanding systemic verification to use for pre-refund compliance checks in other areas such as income underreporting and employment fraud. Therefore, IRS may be missing opportunities to maximize use of early W-2 data."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends IRS collect data to track late W-2 filing penalties and assess options for earlier enforcement; assess the benefits and costs of using existing authority to hold refunds longer, hold all refunds, or both, and expanding systemic verification to other areas; and take actions based on the assessments. IRS listed steps to respond to 5 of 6 recommendations, but said it could not enforce penalties earlier. GAO recognizes the challenges but clarified that assessing other options would provide benefits, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["In recent years, the Internal Revenue Service (IRS) has faced ongoing  problems with fraud and noncompliance. This includes identity theft (IDT)  refund fraud, which occurs when a fraudster obtains an individual\u2019s Social  Security number, date of birth, or other personally identifiable information  (PII), and uses it to file a fraudulent tax return seeking a refund. IRS  estimates that at least $12.24 billion in IDT tax refund fraud was  attempted in calendar year 2016\u2014of which it prevented at least $10.56  billion (86 percent)\u2014but at least $1.68 billion (14 percent) was paid. This  represents an improvement compared to prior years. Improper payments  have been another costly problem, which includes both fraudulent activity  and noncompliance. IRS estimates also show that the Earned Income  Tax Credit (EITC) has consistently had a high improper payment rate.  For fiscal year 2017, IRS reported that total EITC payments were $68  billion, of which $16.2 billion were estimated to be improper.", "To help address these issues, IRS implemented a process to verify wage  and related information on all tax returns with refunds for the 2016 filing  season, referred to as systemic verification. We previously reported that the information that employers report on Form W-2, Wage and Tax  Statement (W-2), had not been available to IRS until after it issued most  refunds. With earlier access to W-2 data, IRS could use this information  to verify taxpayers\u2019 returns and identify any discrepancies before  potentially issuing billions of dollars in fraudulent refunds. Such  verification could also prevent some EITC improper payments. Consistent  with our prior reporting, Congress enacted the Protecting Americans from  Tax Hikes Act of 2015 (the Act) in 2015, which required employers to  submit W-2s to the Social Security Administration (SSA) by January 31,  effective beginning in 2017.", "Compared to prior years, the new deadline is 1 month earlier if filing on  paper or 2 months earlier if filing electronically. SSA then provides W-2  data to IRS for verifying employee wage and withholding data on tax  returns. The Act also required IRS to hold refunds for all taxpayers  claiming EITC or Additional Child Tax Credit (ACTC) until February 15.  In April 2017, we testified based on our initial review that this process  holds promise for combatting IDT refund fraud and reducing improper  payments, but IRS faced some implementation challenges.", "You asked us to review the 2017 filing season to determine how well IRS  implemented systemic verification. We assessed (1) IRS\u2019s performance in  detecting fraud and noncompliance using systemic verification, and SSA\u2019s  performance providing timely W-2 data to IRS; and (2) the extent to which  IRS analyzed the effectiveness of the refund hold on systemic verification  as well as opportunities for IRS to apply systemic verification to other  efforts to detect fraud and noncompliance.", "To assess IRS\u2019s performance detecting fraud and noncompliance using  systemic verification, we reviewed preliminary 2017 filing season data  and analyses of systemic verification results. We also reviewed applicable  laws, IRS documentation, and policies, and we interviewed IRS officials.  We compared IRS\u2019s actions to IRS\u2019s Strategic Plan, which includes  objectives to strengthen refund fraud prevention by using third-party data  and analytics for timely, informed decision making, and to innovate  technology systems to support IRS\u2019s business needs. We also  compared IRS\u2019s actions to the Standards for Internal Control in the  Federal Government, which call for management to design and  implement internal controls within programs based on the related benefits  and costs. To assess SSA\u2019s performance providing timely data to IRS,  we compared IRS and SSA data to SSA\u2019s goals. We also observed paper  W-2 processing and interviewed staff and managers at SSA\u2019s paper W-2  processing facility in Wilkes-Barre, Pennsylvania.", "To assess the extent to which IRS conducted analyses on the  effectiveness of the refund hold and opportunities to improve systemic  verification and apply it to other efforts to detect fraud and  noncompliance, we assessed IRS data for 2017 and analyses of  verification outcomes under different scenarios against overarching  concepts and leading practices provided in our Fraud Risk and  Management Framework and Program Evaluation guidance. We also  determined whether IRS conducted a complete economic analysis of the  effects on taxpayer burden based on interviews with IRS and Department  of the Treasury (Treasury) officials, and three economic experts. We  identified key elements experts reported that IRS should consider. We  selected these three economists based on their expertise in the field of  tax policy and refundable tax credits, and to ensure variation in  perspectives on tax issues. The views of these experts are not  generalizable. In addition, we interviewed IRS officials on the benefits and  costs of systemic verification.", "To assess the reliability of the data we used for this report, we reviewed  IRS and SSA reports on W-2 data, and IRS reports on systemic  verification and its results. We also reviewed IRS reports on the  performance of its fraud filters. We examined systemic verification data to  identify obvious errors or outliers or potential data limitations that would  affect how we use the data, and we found no such problems. We also  interviewed IRS officials about their data quality procedures and the data  and their limitations. We determined that the data presented in this report  are sufficiently reliable for the purposes of our reporting objectives. More  information on our scope and methodology can be found in appendix I.", "We conducted this performance audit from March 2017 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "IDT Refund Fraud", "paragraphs": ["Viewed broadly, IDT refund fraud is composed of two crimes: (1) the theft  or compromise of PII, and (2) the use of stolen (or otherwise  compromised) PII to file a fraudulent tax return and collect a fraudulent  refund. Figure 1 presents an example of how fraudsters may use stolen  PII and other information, real or fictitious (e.g., sources and amounts of  income), to complete and file a fraudulent tax return and successfully  receive a refund. In this example, a taxpayer may alert IRS of IDT refund  fraud. Alternatively, IRS can detect IDT refund fraud through its  automated filters that search for specific characteristics as well as through  other reviews of taxpayer returns. IRS reported that, through September  2017, the number of taxpayers reporting that they were a victim of IDT  refund fraud had decreased by about 40 percent compared to the same  period in 2016 (from 348,650 to 208,503). IRS officials attribute this  decline to improved fraud filters."], "subsections": []}, {"section_title": "Pre-refund Compliance Checks", "paragraphs": ["We have long highlighted the importance of pre-refund compliance  checks as a means to improve compliance while minimizing taxpayer  burden. As we testified in 2011, pre-refund compliance checks help IRS  to confirm taxpayers\u2019 identity, quickly and efficiently correct some errors  with virtual certainty, and identify and audit some returns before refunds  are issued. They also have the potential to deter billions of dollars in  erroneous refunds, especially for refundable tax credits. These credits  have complex eligibility requirements and are often overclaimed. IRS\u2019s  ability to match tax returns to information provided by third parties,  including from financial institutions, can help enforce compliance with the  tax laws. Pre-refund checks benefit taxpayers directly when IRS identifies  underclaimed benefits.", "Pre-refund compliance checks can reduce the tax gap created when  taxpayers file returns that, for example, underreport their tax liability. In  2016, IRS estimated that the average annual gross tax gap was $458  billion for tax years 2008 to 2010. IRS estimated that through late  payments and enforcement actions, it would collect an additional $52  billion annually for those tax years, resulting in an average net tax gap of  $406 billion. Because of the importance of improving voluntary  compliance and addressing the tax gap, we continued to include  Enforcement of Tax Laws as a high-risk area in our 2017 High-Risk  Report."], "subsections": []}, {"section_title": "Systemic Verification", "paragraphs": ["As noted previously, beginning in 2017 the Protecting Americans from  Tax Hikes Act of 2015 requires employers to submit W-2s to SSA by  January 31 (about 1 to 2 months earlier than in prior years, depending on  the method of filing). It also requires IRS to hold refunds for all taxpayers  claiming EITC or ACTC until February 15. In October 2017, IRS reported  that, among the 13.4 million refunds subjected to this hold, it had  completed processing 10.3 million refunds totaling $51.2 billion. Although  IRS has authority to hold additional refunds until it receives more W-2  data, IRS, in consultation with Treasury, decided not to exercise this  authority in 2017. IRS officials explained that they did not do more than  required by the law because it would be a major shift in refund issuance  causing a strain on the economy, industry partners, taxpayers, and IRS  telephone and other operations. Officials said that they expect to learn  from their experience during the 2017 filing season and will continue to  consider changes for future filing seasons as they have for 2018.  However, all returns\u2014with EITC or ACTC and without EITC or ACTC\u2014 were subject to systemic verification as well as other fraud filters.", "Systemic verification is one element of IRS\u2019s Return Review Program  (RRP), its primary system to detect fraud and noncompliance. RRP is a  platform that runs individual tax returns through a comprehensive set of  rules and models to detect potential taxpayer fraud and other  noncompliance, then selects returns for various treatment options.  Systemic verification categorized taxpayer returns in one of three  outcomes to detect potentially fraudulent or noncompliant returns (see  figure 2):  1.  Wage information verified: Income and withholding on the return  matches W-2 data within the allowed threshold.  2.  False or incorrect income: Information on the return is not valid  when compared to W-2 data. This mismatch can include income,  withholding, employer identification number, or other characteristics.  3.  Unable to verify: Unable to verify income or withholding on the return  because W-2 data are unavailable or the taxpayer did not report wage  income but had other types of income such as Social Security or self- employment. IRS reprocessed (looped) all returns that reported wage  income through RRP when new third-party data became available.  For EITC or ACTC returns that IRS was required to hold until  February 15, IRS had additional time to reprocess these returns  before releasing the refund.", "After systemic verification is completed, IRS either continues processing  the refunds for release or holds the refunds for additional review. For  returns where IRS either verified or was unable to verify the wage  information, the refunds were processed (beginning February 15 for  returns with EITC or ACTC) unless selected by the fraud filters for  review. However, IRS does not have the authority to correct a  taxpayer\u2019s return based on W-2 data, so it must initiate a correspondence  audit which, as we have reported, is more costly to IRS, more  burdensome on the taxpayer, and more time consuming for both.  Therefore, for returns with false or incorrect income, IRS froze the refund  and directed it to various units for review depending on the results of  systemic verification and fraud filters. For example, if IRS suspected that  the return was IDT refund fraud, it directed it to the Taxpayer Protection  Program to verify the taxpayer. For returns where IRS suspected potential  noncompliance, it directed the return to the Integrity and Verification  Operations group."], "subsections": []}]}, {"section_title": "Systemic Verification Shows Promise but Legacy Information Technology and Issues with Employer W-2 Filing Limit Its Success", "paragraphs": [], "subsections": [{"section_title": "Early W-2 Data and the Refund Hold Helped IRS Prevent Fraud and Noncompliance for a Limited Number of Tax Returns", "paragraphs": ["By mid-February 2017, 2 weeks following the new W-2 filing deadline and  about when the refund hold expired, IRS had received more than twice as  many (over 214 million) W-2s than SSA provided at a similar time in 2016  (see figure 3). Nevertheless, IRS did not have all W-2 data in time to  conduct pre-refund checks of wages, withholding, and other information  before issuing refunds, especially early in the filing season.", "Despite not having all W-2 data, IRS was able to identify and prevent  some fraud and noncompliance before issuing refunds. IRS received and  initially processed through systemic verification a total of about 35.1  million individual tax returns through February 14, representing nearly  $200 billion in refunds.", "As shown in table 1, nearly 13.4 million (38 percent) of those returns  claiming about $115 billion in refunds were filed by taxpayers who  claimed EITC, ACTC, or both, and were subject to the refund hold. Using  systemic verification, as of February 14, 2017, IRS determined that nearly  150,000 of these 13.4 million returns (1 percent) were potentially  fraudulent because they included false or incorrect income. The returns  represented approximately $800 million in refunds. IRS also verified wage  and other information for approximately 4.72 million (35 percent) of those  returns filed and processed through February 14, representing $73.5  billion in refunds. However, IRS was unable to verify 7.79 million (58  percent) of these returns before it released refunds because W-2 data  were unavailable, as described later in this report. Finally, table 1 also  notes that, as of October 2017, IRS reported that, among those returns  filed and processed through February 14, 10.3 million had completed  processing and $51.2 billion in refunds had been issued.", "As the February 15 refund hold expiration approached, IRS continued to  reprocess (loop) returns through systemic verification as more W-2 data  became available. In doing so, IRS staff identified 12,000 more returns, in  addition to the 150,000 initially identified, that they suspected to be  fraudulent. This brought the total number of potentially fraudulent or  noncompliant returns to about 162,000 with nearly $863 million in  refunds. IRS manually held these refunds and referred the suspicious  returns for further screening to the Integrity and Verification Operations  group. IRS later cleared approximately 150,000 (93 percent) of these  returns and released about $797 million in refunds. IRS confirmed that  approximately 12,000 (7 percent) of the returns that it had not cleared  were fraudulent, eventually protecting $65 million, which included $51  million in EITC or ACTC claims.", "To reduce false positives (when legitimate tax returns are erroneously  selected for review), an IRS working group made several changes to how  IRS\u2019s fraud filters make selections based on W-2 data and other  information. For 2018, IRS plans to automatically select returns that it had  held manually in 2017. However, officials noted that while verifying wage  information is important, the complexity of determining EITC and ACTC  eligibility remains a challenge.", "We reviewed IRS\u2019s systemic verification results and found that IRS  improved its selections of potentially fraudulent returns with W-2 data  contributing to its fraud filters. As of February 15, returns selected for  review by systemic verification comprised 14,618 (6 percent) of all paper  and electronic returns selected as potential identity theft by the fraud  filters. By September 15, selections from systemic verification increased  to nearly 78,369 (about 10 percent) of all returns selected as potential  identity theft. Moreover, we found that if more W-2 data were available  earlier, IRS could have excluded more returns from review, thereby  reducing or eliminating work and reducing taxpayer burden by not  delaying legitimate taxpayers\u2019 returns. For example, systemic verification  allowed IRS to exclude about 321,000 electronically-filed tax returns out  of more than 700,000 that had been selected for review by the fraud  filters."], "subsections": []}, {"section_title": "IRS\u2019s Ability to Process W-2s Was Limited by Its Information Technology Systems and Issues with Employer W-2 Filing", "paragraphs": ["We found that IRS\u2019s ability to verify information on tax returns early in the  filing season was limited because of its Information Technology (IT)  systems and issues with employers filing W-2s on paper or after the filing  deadline.", "IT systems. IRS receives and maintains validated taxpayer data,  including W-2 and 1099-MISC forms, through the Information Return  Master File (IRMF) system. IRS received W-2 data from SSA daily but  only loads the data onto IRMF weekly due to the legacy design of this  system. This contributed to IRS\u2019s inability to verify more than half (7.79  million or 58 percent) of tax returns with EITC or ACTC claiming $38.4  billion in refunds when the February 15 refund hold expired. IRS officials  stated that due to the system\u2019s legacy design, adding new or updating  existing information return documents requires the agency to reload its  entire file, which contains billions of information returns.", "Officials reported that this process can take up to 3 days or more to  complete, depending on the file size of the incoming and existing data,  and has prevented IRMF from processing and making the W-2 data  available for use, as it is received from SSA. Consequently, while IRS had  received a total of about 210.9 million W-2s by February 13, it received an  additional 3.9 million W-2s between February 13 and 20 that IRS was  unable to use in systemic verification before the February 15 refund hold  expired.", "In October 2017, IRS officials told us several reasons why they were not  addressing IT limitations. At that time, they said they had discussed  various options to make W-2 data available faster, but they had not  assessed whether IRMF processing could occur more than once weekly.  Further, these officials said IRS developed a plan to modernize IRMF,  which would allow for faster processing, but officials told us that this effort  is on hold because of competing priorities and funding shortages. These  officials also said they had not considered the potential financial benefits  of either modifying existing procedures or continuing to pursue  modernizing IRMF to process W-2 data more frequently for use in  systemic verification.", "However, in response to our discussions, in November 2017, IRS officials  reported they had started to assess the possibility of processing W-2 data  on IRMF daily. Specifically, IRS is planning to assess daily processing for  the months of January and February during the 2019 filing season when  the number of information returns is lower and the file is less time  consuming to load. They noted they would not have time to assess their  options and make necessary changes to process W-2s daily for the 2018  filing season.", "As we reported in October 2017, IRS faces challenges with managing its  aging legacy systems, and with establishing a process for prioritizing its  modernization efforts. IRS\u2019s planned action is consistent with its  strategic plan, which includes objectives to strengthen refund fraud  prevention by using third-party data and analytics for timely, informed  decision making, and to innovate technology systems to support IRS\u2019s  business needs. It is also consistent with Standards for Internal Control  in the Federal Government, which calls for management to design and  implement internal controls within programs based on the related benefits  and costs. By taking its planned action to assess processing W-2 data  more frequently, IRS would be in a better position to make informed  decisions about the future of IRMF and its modernization efforts.", "Paper W-2 processing. Of the 253 million W-2s that SSA received by  December 1, 2017, about 23 million (9 percent) were paper. SSA  receives and processes paper W-2s at the Wilkes-Barre Direct  Operations Center (WBDOC) in Wilkes-Barre, Pennsylvania. Beginning in  October or November of each year, WBDOC programs and tests its  systems for transmitting transcribed paper W-2 data. The majority of W- 2s that WBDOC receives are in optical character recognition (OCR)  format, which SSA can scan into its systems instead of manually entering  the data. Officials stated that W-2s that are not in OCR format require  more time and effort to process. This process of developing, testing,  scanning, or entering data manually occurs between October and March  before WBDOC begins transmitting the paper W-2 data to SSA\u2019s  Baltimore facility. Beginning in March, SSA continually transmits all paper  and electronic W-2 data to IRS.", "By law, employers who file 250 or more W-2s are required to file W-2s  electronically, while those who file fewer than 250 W-2s may opt to file on  paper or electronically. This requirement has not changed since 1989  when employers filed electronically using magnetic media or other  machine-readable forms. Since then, technological advancements allow  employers to file for free using SSA\u2019s website or other software packages.  Consequently, even though not required, by July 28, 2017, SSA had  received approximately 69 million electronically filed W-2s from about 4.4  million employers who filed fewer than 250 W-2s.", "In August 2014, we reported that lowering the electronic W-2 filing  requirement would not only contribute to IRS\u2019s ability to verify  employment information on tax returns, but it could reduce administrative  costs for SSA. According to SSA estimates, the cost to transcribe and  process a total of 24.2 million paper W-2s in 2016 was about $13.3  million, or $0.55 per paper W-2. In addition to the cost savings from  lowering the electronic filing requirement, as we reported in August 2014,  there would be fewer transcription errors and fewer W-2s subject to the  longer paper W-2 processing time. In that report, we suggested that  Congress should consider providing the Secretary of Treasury with the  regulatory authority to lower the requirement for electronic filing of W-2s from 250 returns annually to between 5 to 10 returns, as appropriate. In  August 2017, SSA officials estimated that SSA can save between $9.7  and $11.3 million per year if the W-2 paper filing requirement is lowered  to 10 or fewer W-2s. These officials reported that this estimate is based  on a projected increase of 17.6 million to 20.6 million in electronically filed  W-2s and a decrease of paper W-2s by more than two-thirds.", "Late W-2 filing. IRS began publicizing the change in the W-2 deadline in  June 2016. Nevertheless, about 260,000 employers missed the January  31 filing deadline, accounting for late filing of about 7.9 million W-2s in  2017. IRS officials stated that, of the 27,764 employers who had  requested an extension for time to file W-2s, as discussed below, IRS  approved approximately 6,500 (23.4 percent), which account for  approximately 1.1 million W-2s (13.9 percent) of the 7.9 million late filed  W-2s. Because IRS has not yet started to assess penalties, it does not  yet know how many of these will be subjected to a penalty.", "Generally, an employer must pay a penalty for failing to file an information  return timely or correctly unless an exception applies, such as being  granted an extension. However, IRS has changed how it enforces late  filing penalties by not mailing some proposed penalty notices to  employers who fail to file W-2s timely. For example, IRS mailed all  penalty notices to employers who failed to timely file in 2014. However, it  did not mail all penalty notices for 2015 and 2016 to employers who failed  to file W-2s timely. IRS officials told us that, due to a lack of resources to  manage all the penalty cases, they began applying a risk-based selection  process to prioritize compliance efforts. Moreover, officials told us they  did not collect data to track how many penalty notices IRS did or did not  mail for late-filed W-2s, nor the associated penalties IRS proposed to  assess for 2015 and 2016.", "By law, there are some exceptions to the enforcement of penalties on  those who fail to file correct information on or before the required filing  date, and who fail to include all of the information required to be shown on  the return, or include incorrect information, without correction. However,  by not mailing all penalty notices, as it did in the past, IRS is not using a  tool to collect, at the least cost, the proper amount of tax revenue, is not  enhancing or promoting voluntary compliance, and it is missing an  opportunity to educate and help the employer understand his or her legal  obligations and rights. Additionally, without timely W-2 data to complete  pre-refund checks against filed returns, IRS risks releasing fraudulent and  noncompliant refunds or burdening legitimate taxpayers whose returns  could be cleared with the W-2 data. IRS officials told us that they are  monitoring the effect of not mailing all notices on the number of late  filings. However, as of November 2017, IRS did not have plans to track  and evaluate the extent to which the late W-2s are associated with  fraudulent or noncompliant refunds.", "In addition, IRS does not mail penalty notices until up to a year and a half  after the missed deadline. For example, IRS will not assess and mail  penalty notices for the approximately 260,000 employers who filed W-2s  or other information returns late in 2017 until summer 2018. In part, this is  because IRS waits to compile all late-filed information returns, not just W- 2s, some of which are not due until April. Further, late-filing penalty  amounts increase incrementally until August 1 for employers who file or  correct information returns after the filing deadline. Finally, for 2017, IRS  did not finish transcribing and processing the more than 40 million paper- filed information returns until about late September. However, IRS  officials have not assessed the options for mailing penalty notices for late  W-2s earlier or communicating with the employers earlier in the process.  These officials told us that the penalty notice process is consistent with  IRS\u2019s enforcement procedures. They further added that mailing multiple  penalty notices could increase burden and cost for both the taxpayer and  IRS. However, quickly responding to employers that filed late increases  the potential for compliance, thereby increasing the availability of W-2  data for systemic verification to detect and prevent fraud and  noncompliance. Finally, because it takes up to a year and a half for IRS to  identify the late filing and mail the penalty notice, it is possible that the  employer could have filed W-2s late two years in a row without IRS  notifying him/her of the first late filing.", "W-2 extensions. In 2017, IRS received 27,764 employer requests for an  extension of time to file W-2s, which is substantially higher compared to  prior years. IRS officials attribute the increase in extension requests to the  new early filing deadline. IRS also began requiring employers to provide  reasonable cause and only file their requests on paper. Prior to 2017,  employers could file for an automatic 30-day request for extension,  electronically or on paper. Because IRS manually processed all requests  to determine if the cause was reasonable, IRS did not complete its  processing until November 2017. Consequently, employers would not  know until after the extended deadline whether IRS granted them the  extension.", "IRS officials told us that, for 2017, they notified about 10,000 employers  who requested but were not granted an extension that they would not be  penalized this year. Officials also notified these employers that they would  be penalized next year under the same conditions. In November 2017,  IRS officials said that they are reviewing the extent to which extension  requests made in 2017 affected systemic verification. For 2018, IRS plans  to continue requiring employers to file extension requests on paper."], "subsections": []}]}, {"section_title": "IRS\u2019s Analyses of the Refund Hold Are Limited, Hampering Their Usefulness for Decision Making and IRS Has Not Explored Additional Uses of Systemic Verification", "paragraphs": [], "subsections": [{"section_title": "IRS Completed Its Analyses of Potential Changes to the Refund Hold but Did Not Fully Assess the Benefits and Costs and Taxpayer Burden", "paragraphs": ["IRS officials examined the effectiveness of the February 15 refund hold  by analyzing how systemic verification results differ under several  hypothetical scenarios. For example, IRS could extend the refund hold  date beyond February 15 when more W-2 data are available for systemic  verification before issuing refunds. While the law states that IRS cannot  release refunds with EITC or ACTC before February 15, IRS has  discretion to continue to hold all refunds until it can verify W-2 data, and  has the authority to expand the refund hold to all taxpayers, not just those  who claimed EITC or ACTC. Further, the law does not preclude IRS  from releasing refunds with EITC or ACTC on a rolling basis after  February 15, or in conjunction with an extension of the refund hold.", "In October 2017, the National Taxpayer Advocate (NTA) told us that she  supports potential modifications to the refund hold. In addition, in a June  2017 annual report to Congress, the NTA stated that holding the refunds  for all taxpayers longer so that IRS can verify W-2 data could help IRS  prevent tax refund fraud before refunds are issued. The NTA also  recommended that IRS research the benefits and costs of delaying refund  payments.", "During the 2017 filing season, IRS reviewed limited preliminary systemic  verification data to assess potential changes to the February 15 refund  hold. In October 2017, IRS completed its final analysis, which included  more data on taxpayers who filed after the February 15 refund hold and  estimated potential amounts of protected refunds. However, both  analyses have limitations.", "We assessed IRS\u2019s preliminary analysis of the 35.7 million returns filed by  all taxpayers (those who claimed EITC or ACTC and those who did not)  before February 15 and which were subjected to systemic verification.  IRS\u2019s analysis included actual results from systemic verification for these  tax returns for each week between February 15 and March 15 after  reprocessing the returns when new W-2 data became available. Our  assessment of IRS\u2019s preliminary analysis showed that by both extending  the refund hold date beyond February 15 and expanding the refund hold  to all returns:  IRS could have verified more than twice as many returns. By  March 15, IRS could have verified wage information for more than  twice as many returns before issuing refunds\u201430.5 million compared  to 14.3 million verified by February 15. By only holding returns until  February 15, IRS would be unable to verify W-2 data for 20.2 million  (56 percent) tax returns, representing $66.6 billion in refunds, before  releasing the refunds.", "IRS could have detected about $3 billion\u2014twice as much\u2013in  potential fraud and noncompliance. If IRS had held all taxpayers\u2019  refunds until late February or early March, it could have detected  about twice as much potential fraud or noncompliance before issuing  refunds, as shown in figure 4, because it had more W-2 data available  at that time compared to February 15. For example, if IRS held all  taxpayers\u2019 refunds until March 1, it could have identified $2.87 billion  compared to $1.47 billion as of February 15, about a 95 percent  increase. If IRS held all taxpayers\u2019 refunds until March 8, it could have  identified even more in potentially fraudulent or noncompliant refunds  before issuing them ($3.18 billion compared to $1.47 billion as of  February 15, an increase of about 116 percent). However, these  potential fraudulent or noncompliant refunds do not represent  potential refunds that IRS could protect. This is because IRS limits the  number of cases it selects for review due to the large volume of work  this represents and limited staff available. Further, some returns that  IRS selects for review are false positives\u2014legitimate tax returns  erroneously selected for review.", "Our Fraud Risk Framework provides a comprehensive set of overarching  concepts of fraud risk management and leading practices that serve as a  guide for agency managers to use when developing efforts to combat  fraud in a strategic, risk-based way. For example, a leading practice in  the Fraud Risk Framework emphasizes risk-based preventive activities  for strategically managing fraud risk to help avoid a costly and inefficient  \u201cpay and chase\u201d model. Additional leading practices call for federal  agencies to continuously monitor and evaluate the effectiveness of  preventive activities and to consider the benefits and costs of its control  activities. Further, key concepts in the Fraud Risk Framework highlight  the importance of measuring outcomes to adapt fraud detection and  prevention activities. Additionally, we have reported that program  evaluation provides agencies with objective information on program  effectiveness and efficiency. Program evaluation is necessary to inform  and improve IRS\u2019s fraud risk management activities.", "However, when we compared IRS\u2019s preliminary analysis to the Fraud  Risk Framework and program evaluation standards, we found that it was  limited in several areas:  IRS has not documented an evaluation plan, goals, or strategy  related to the refund hold. To ensure an evaluation\u2019s credibility,  agencies should develop evaluation plans with clearly defined  program goals and researchable evaluation questions. However, IRS  did not have documentation detailing an evaluation plan or program  goals that includes the purpose of the analysis and the research  questions it is assessing. Moreover, IRS plans to continue assessing  the effectiveness of the refund hold on systemic verification.", "In May 2016, we recommended that IRS develop an overall  compliance strategy that includes refundable credits, such as EITC  and ACTC. In February 2017, IRS reported that it is taking steps to  implement this recommendation. However, it is unclear how IRS plans  to incorporate the results of its analysis of systemic verification into its  overall compliance and fraud risk management strategy.", "IRS did not determine how many potentially fraudulent or  noncompliant refunds it issued before verifying against W-2  data. A key benefit of obtaining W-2 data early in the filing season is  to verify that the information matches before issuing the refund. In its  preliminary results, IRS reported the number and amount of refunds it  identified as potentially fraudulent or noncompliant before issuance  only for taxpayers that claimed EITC or ACTC and whose refunds IRS  held until February 15. Of the 22.1 million taxpayers who filed before  February 15 and did not claim these credits, IRS identified  approximately 196,000 returns filed by taxpayers claiming nearly $580  million in refunds as potentially fraudulent or noncompliant. IRS did  not report the number of refunds that were issued before IRS had  identified them as potentially fraudulent.", "IRS has not fully assessed the burden on the taxpayers who  were subjected to the refund hold date. We have reported that a  key concept in tax administration is reducing unnecessary taxpayer  burden, which is the direct time and money that taxpayers spend to  comply with tax laws, including costs for paid tax preparation. Three  economic experts we interviewed cited key factors that IRS could  consider in assessing the burden to taxpayers as a result of the  refund hold. For example, experts told us that IRS could examine  changes in taxpayer behavior, such as waiting to file a return later, or  shifting from using Free File to paid preparation that can offer refund- related financial products such as an advance on their refund.  These experts also indicated that IRS could compare the amount of  fraud or noncompliance that IRS prevented among taxpayers claiming  EITC or ACTC against taxpayers who do not claim these credits. All  experts we interviewed agreed that more than 1 year of data might be  needed to assess short-term and long-term effects of the refund hold  on taxpayer behavior and patterns of fraud and noncompliance.", "IRS officials told us that they have added a question to IRS\u2019s  customer satisfaction survey to determine how taxpayers got their  information about the refund hold. They have also indicated they are  analyzing taxpayer behaviors related to the timing of filing and  taxpayers\u2019 use of refund-related financial products. However, IRS has  not provided us with the revised survey or its results, nor provided  documentation of what is included in the analyses. IRS officials told us  that they have limited resources to conduct research and have not  completed the work because they are prioritizing other research  efforts.", "The limitations of IRS\u2019s preliminary analysis prevent IRS from fully  understanding the effectiveness of systemic verification and refund hold,  and hampers IRS\u2019s broader fraud risk management and compliance  efforts. IRS officials stated that they did not document an evaluation plan,  include key data, determine how many refunds were issued before  detecting potential fraud and noncompliance, nor assess taxpayer  burden. Without a documented evaluation plan that includes key data to  assess the success of preventing fraud and noncompliance before  issuing refunds, IRS risks relying on insufficient information to make  decisions on potential changes to the refund hold date and those  subjected to it. For example, by not assessing taxpayer burden, IRS does  not understand how taxpayers are affected by the current hold date or  whether extending the hold or expanding it to all taxpayers would  increase taxpayer burden.", "IRS completed its final analysis of the refund hold in October 2017 and  provided us with a draft. Based on our initial review, IRS\u2019s findings  correspond with those in the preliminary analysis discussed above in that  IRS could detect much more potential fraud and noncompliance if it held  refunds longer. However, there were key differences between the  preliminary analysis and IRS\u2019s final analysis. First, IRS assessed two  potential refund hold dates after February 15\u2014February 28 and March 1,  when IRS receives the majority of W-2s. Second, IRS included all returns  that would be affected by the two extended refund hold dates rather than  only those that filed before February 15. Third, IRS estimated the total  amount of fraud and noncompliance that it could protect under these two  extended refund hold dates. Finally, IRS based its estimates on returns  that had completed final processing rather than returns that had not  completed processing.", "In its final analysis, IRS estimated that it could detect about $7.1 billion in  potential fraud and noncompliance if it held refunds with EITC or ACTC  until March 1, of which it could protect about $533 million. This is about  $468 million more than what IRS protected by holding refunds with EITC  or ACTC until February 15. Further, IRS estimated that it could have  protected $100 million in fraud and noncompliance had it held all taxpayer  refunds until February 15\u2014$35 million more than it protected with the  current hold and verification process. IRS further estimated that by  holding all refunds until March 1, it could protect about $895 million.", "Various factors account for the differences between what IRS could  detect as potential fraud and noncompliance and what it estimated that it  could protect. First, IRS limits the number of cases it selects for review  due to the large volume of work required to review all returns flagged by  systemic verification and other fraud filters and limited staff available.  Second, some returns that IRS selects for review are false positives\u2014 legitimate tax returns erroneously selected for review\u2014so not all the  returns will be confirmed as fraud or noncompliant.", "In its final analysis, IRS had not addressed the limitations noted above for  the preliminary analysis. However, IRS expects to further explore the  possibility of holding refunds beyond February 15. IRS also plans to  complete additional analyses, including the effect of W-2 extension  requests on systemic verification and taxpayers\u2019 use of refund-related  financial products. As IRS continues analyzing the effectiveness of the  refund hold date on systemic verification, the limitations we outlined  above will continue to prevent IRS from fully understanding the  effectiveness of systemic verification and refund hold, and hamper IRS\u2019s  broader fraud risk management and compliance efforts."], "subsections": []}, {"section_title": "IRS Has Not Analyzed the Benefits and Costs of Additional Uses of Early W-2 Data and Systemic Verification", "paragraphs": ["As noted, the Fraud Risk Framework emphasizes the use of fraud  prevention activities to help federal agencies avoid the costly and  inefficient \u201cpay-and-chase\u201d model. However, IRS has not assessed the  benefits and costs of additional uses of early W-2 data to prevent fraud  and noncompliance before issuing refunds. For example, IRS has not  determined the value of using W-2 data to address employment fraud or  underreporting prior to issuing refunds. Employment fraud is a type of  identity theft refund fraud that occurs when an identity thief uses a  taxpayer\u2019s name and Social Security number to obtain a job and claims a  refund. Underreporting occurs when a taxpayer underreports income or  claims unwarranted deductions or tax credits. With its Automated  Underreporter program, which is utilized after the filing season and after  refunds have been issued, IRS electronically matches income information  reported to IRS by third parties, such as banks and employers, against  the information that taxpayers report on their tax returns.", "With earlier W-2 information, IRS can detect more possible employment  fraud or underreporting before issuing refunds. For example, if IRS has  two W-2s reporting wage income for a taxpayer, but that taxpayer did not  report both on his or her tax return, the taxpayer may have underreported  his or her income or could be a victim of employment fraud. IRS officials  stated that they are not using systemic verification to review such  instances before issuing a refund because it would require them to follow  the deficiency process. IRS typically begins this process when it has  completed all of its compliance checks later in the filing season when it  has most third-party data available for verification. IRS then sends the  taxpayer a notice that informs him or her that IRS has proposed an  adjustment to taxes owed because the third-party data IRS received does  not match what the taxpayer reported on his or her tax return. The notice  also informs the taxpayer of his or her right to challenge any resultant tax  increase with the U.S. Tax Court.", "IRS officials told us they do not want to issue the notice earlier because  that could encourage taxpayers to file in Tax Court before IRS has  completed its review. IRS officials stated that they did not see the  potential benefits of taking intermediate steps before sending a notice of  deficiency, such as holding the refunds and corresponding with the  taxpayer to resolve the discrepancy. However, while IRS had not  explored this or other potential uses of W-2 data, IRS officials  acknowledged that it would be worthwhile to consider additional  opportunities of earlier W-2 data.", "Earlier availability of W-2s and other information returns can help IRS  identify and prevent fraud and noncompliance before issuing refunds.  However, without assessing the benefits and costs, IRS does not know  the extent to which it can use earlier W-2 data for other pre-refund  compliance checks."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["During the 2017 filing season, IRS\u2019s ability to detect and prevent fraud  and noncompliance improved because it received significantly more W-2  data earlier and utilized it to verify wage, withholding, and other  information on millions of tax refunds. Based on these results, systemic  verification shows promise for preventing fraudulent refunds and reducing  noncompliance. Nevertheless, the agency faced challenges that limited  its success in implementing systemic verification.", "Similar to taking action to assess the potential for processing more W-2s  early in the filing season, IRS can take additional steps to increase the  availability of more W-2 data. By not collecting data to track late W-2  filings, IRS could not measure the extent to which late W-2 filings are  associated with fraud and noncompliance. Further, by not taking earlier  action to improve enforcement of penalties for late W-2 filings, IRS is  missing an opportunity to encourage compliance with the W-2 filing  deadline and verify more wage information before releasing refunds. As a  result, IRS risks releasing fraudulent and noncompliant refunds. We have  also previously identified action Congress could take to increase the  availability of W-2 data to IRS early in the filing season. In August 2014,  we suggested that Congress provide the Secretary of the Treasury with  the authority to lower the electronic filing requirement from 250 W-2s to 5  to 10 W-2s. This action would also have the benefit of reducing SSA\u2019s W- 2 paper processing costs by millions of dollars each year.", "In addition, the February 15 refund hold for EITC and ACTC claims  afforded IRS an opportunity to verify return information with early W-2  data before issuing refunds. IRS took steps to collect and assess  preliminary data on systemic verification and the refund hold during the  filing season. In addition, IRS completed its final analysis that considers  different scenarios for holding refunds longer and the potential revenue it  could protect. However, IRS\u2019s efforts are not guided by an evaluation plan  to assess the results of systemic verification in preventing fraud and  noncompliance before issuing refunds. Developing and implementing an  evaluation plan that fully assesses the benefits and costs of that hold date  would help IRS determine the effectiveness of systemic verification, its  fraud risks, and the effect of the refund hold on taxpayer burden. IRS  would then be in a better position to modify the refund hold under its  existing authority and balance detecting and preventing fraud and  noncompliance with taxpayer burden. Further, it is not clear how the  analysis informs IRS\u2019s broader fraud risk management efforts and other  compliance strategies. Finally, with these data, IRS has the potential to  improve tax enforcement in other areas such as for underreporting or  employment fraud. While IRS has measures in place to address these  issues after paying refunds, taking action before issuing refunds can  prevent fraud and noncompliance and save IRS time and resources."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to IRS.", "The Acting Commissioner of Internal Revenue should collect data to track  late W-2 filing penalty notices and the extent to which they are associated  with fraud and noncompliant returns. (Recommendation 1)", "The Acting Commissioner of Internal Revenue should assess options for  improving enforcement of late W-2 filing penalties, for example, by  mailing notices before the next filing deadline. (Recommendation 2)", "The Acting Commissioner of Internal Revenue should develop an  evaluation plan to fully assess the benefits and costs, including taxpayer  burden, of modifying the February 15 refund hold, and determine how this  effort informs IRS\u2019s overall compliance strategy for refundable tax credits  and fraud risk management. (Recommendation 3)", "Based on the benefits and costs assessment in Recommendation 3, the  Acting Commissioner of Internal Revenue should use IRS\u2019s existing  authority to modify the refund hold such that it minimizes the risk of  releasing fraudulent or noncompliant refunds. (Recommendation 4)", "The Acting Commissioner of Internal Revenue should assess the benefits  and costs of additional uses and applications of W-2 data for pre-refund  compliance checks, such as addressing underreporting, employment  fraud, and other fraud or noncompliance before issuing refunds.  (Recommendation 5)", "Based on the assessment in Recommendation 5, the Acting  Commissioner of Internal Revenue should implement any identified  changes to improve pre-refund compliance checks. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to Treasury and SSA for review and  comment. IRS provided written comments, which are summarized below  and reproduced in appendix II. SSA responded in writing with no  comments (see appendix III). SSA and Treasury provided technical  comments, which we incorporated as appropriate.", "In its written comments, IRS did not state whether it agreed or disagreed  with our recommendations, but outlined planned steps to address five of  the six recommendations. If implemented as planned, IRS\u2019s proposed  actions for recommendations 1, 4, 5 and 6, could meet the intent of the  recommendations. However, for the third recommendation to develop an  evaluation plan to fully assess the costs and benefits of modifying the  February 15 refund hold, it is not clear whether IRS\u2019s planned actions will  fully satisfy the recommendation. IRS stated that it would assess and  evaluate options for improvements to its refundable tax credits and fraud  risk management strategies. However, IRS did not specify whether this  evaluation would fully assess the benefits and costs, including taxpayer  burden, of modifying the February 15 refund hold. As we reported, a  documented evaluation plan that includes key data to assess the success  of preventing fraud and noncompliance before issuing refunds will help  IRS make better-informed decisions on potential changes to the refund  hold date and those subjected to it. This includes, for example, assessing  taxpayer burden to understand how taxpayers are affected by the current  hold date and whether extending the hold or expanding it to all taxpayers  would increase taxpayer burden.", "Regarding the second recommendation in our draft report to assess  options for improving enforcement of late W-2 filing penalties by mailing  notices before the next filing deadline, IRS stated that the timing of the  receipt of a W-2 account file from SSA and the overall complexity of the  process precludes notices from being issued prior to the start of the next  filing season. Specifically, IRS noted that it assesses penalties on  approximately 40 different types of information returns\u2014in addition to W- 2s\u2014and that the penalty calculation is complex. For W-2s, IRS explained  that it receives a reconciled file from SSA in December that identifies  those employers that should not be penalized. Finally, IRS noted that  issuing penalty notices on a piecemeal basis would burden the taxpayer  and potentially lead to erroneous notices. We recognize that there are  challenges to issuing penalty notices, or other communications, before  the next filing season. However, there are also benefits. As we reported,   earlier communication with the employer, whether it includes a penalty  assessment or not, increases the potential for compliance, helps  taxpayers avoid filing late in the subsequent year, and increases the  availability of W-2 data for systemic verification to detect and prevent  fraud and noncompliance. However, we continue to believe that  assessing the options for improving enforcement of late W-2 filing  penalties, such as through earlier communication, would help IRS identify  potential opportunities to encourage compliance with the W-2 filing  deadline and verify more wage information before releasing refunds. We  intended the recommendation to be inclusive of other options beyond  mailing notices earlier. As a result, we clarified the recommendation to  make mailing notices before the next filing deadline an example.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Commissioner of Internal Revenue, the Acting  Commissioner of Social Security, the Secretary of the Treasury, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives in this report were to assess  the Internal Revenue Service\u2019s (IRS) performance in detecting fraud  and noncompliance using systemic verification, and the Social  Security Administration\u2019s (SSA) performance providing timely Form  W-2, Wage and Tax Statement (W-2) data to IRS; and  the extent to which IRS analyzed the effectiveness of the refund hold  on systemic verification as well as opportunities for IRS to apply  systemic verification to other efforts to detect fraud and  noncompliance.", "To answer the first objective, we obtained and analyzed IRS documents and data, including documents  describing the implementation of IRS\u2019s systemic verification of W-2  data and preliminary systemic verification data on the 2017 filing  season, and used this information to determine how IRS used early  W-2 data;  reviewed the Protecting Americans from Tax Hikes Act of 2015 (the  Act) and related tax laws and regulations to understand IRS\u2019s  systemic verification matching W-2 data against individual income tax  returns affected by the Act (taxpayers claiming the Earned Income  Tax Credit (EITC) or the Additional Child Tax Credit (ACTC)), as well  as other returns not affected by the Act (those not claiming EITC or  ACTC), and statutory requirements for penalties, electronic filing, and  authority to hold refunds;  reviewed IRS laws, regulations, and policies on penalty assessments  for filing W-2s late, IRS data on late W-2s for 2017, and interviewed  IRS officials to understand the process for assessing penalties;  interviewed officials from IRS\u2019s Wage and Investment division (which  is responsible for managing filing season operations) on the  challenges in implementing systemic verification, as well as planned  improvements;  interviewed officials from IRS\u2019s Information Technology Applications  Development unit to understand the technological capabilities of IRS\u2019s  Information Return Master File and related systems and identify  system limitations and improvements. We compared IRS\u2019s actions to  IRS\u2019s Strategic Plan, which includes objectives to strengthen refund  fraud prevention by using third-party data and analytics for timely,  informed decision making, and to innovate technology systems to  support IRS\u2019s business needs. We also compared IRS\u2019s actions to the  Standards for Internal Control in the Federal Government, which call  for management to design and implement internal controls within  programs based on the related benefits and costs; observed and interviewed SSA employees processing and  transcribing paper W-2s at the SSA\u2019s Wilkes-Barre Direct Operations  Center in Wilkes-Barre, Pennsylvania to understand how this work is  performed and the time required for completing it;  reviewed our prior reports, including reports on the filing season, tax  credits, and identity theft, and evaluated IRS\u2019s actions to implement  selected prior recommendations; and  interviewed SSA managers and staff who oversee and process paper  Form W-2 data and transmit the data to IRS, and obtained and  analyzed SSA goals, documents, and data, including data on costs for  processing paper W-2s.", "To answer the second objective, we  reviewed IRS documents that included internal working group meeting  minutes, planning documents, and management reports; assessed IRS\u2019s data for 2017 and its preliminary and final analyses  on the systemic verification results and outcomes under different  scenarios for the 2017 filing season;  compared IRS\u2019s efforts to detect and prevent fraudulent and  noncompliant refund payments with leading practices in our A  Framework for Managing Fraud Risks in Federal Programs (Fraud  Risk Framework) and program evaluation;  interviewed officials from IRS\u2019s Wage and Investment division on the  benefits and costs of systemic verification and to determine whether  IRS conducted an economic analysis of the effects on taxpayers  burden as a result of holding all taxpayer\u2019s refunds until February 15;  interviewed three economic experts to identify factors that IRS should  consider or study following implementation of the Act. We selected  economists based on their expertise in the field of tax policy and  refundable tax credits, and to ensure variation in perspectives on tax  issues. We asked similar questions of each economist and analyzed  their comments to identify commonalities. We used these interviews  to identify factors that IRS should consider in evaluating the refund  hold date and any potential changes to it. The views of the economic  experts are not generalizable; and  interviewed officials from the Department of the Treasury\u2019s (Treasury)  Bureau of the Fiscal Service and Office of Tax Policy about their  actions to prepare for releasing a large volume of refunds on February  15 and to determine what analyses, if any, Treasury had conducted  on taxpayer burden related to the holding all taxpayer\u2019s refunds until  February 15.", "To assess the reliability of the data we used for this report, we reviewed  IRS and SSA reports on W-2 data and IRS reports on systemic  verification and its results. We also reviewed IRS reports on the  performance of its fraud filters. We examined systemic verification data to  identify obvious errors or outliers and assessed potential data limitations  that would affect use of the data for assessing performance. We also  interviewed IRS officials about their data quality procedures and the  reliability and limitations of these data. We determined that the data  presented in this report are sufficiently reliable for the purposes of our  reporting objectives.", "We conducted this performance audit from March 2017 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Joanna Stamatiades, Assistant  Director; Erin Saunders Rath, Analyst-in-Charge; Jessica Ard; Mark  Canter; Jacqueline Chapin; Jehan Chase; Felisa Garmon; Robert  Gebhart; Tom Gilbert; Andrew Howard; Kirsten B. Lauber; Japheth       McGee; Paul Middleton; Ed Nannenhorn; Sabine Paul; Bradley Roach;       and Robert Robinson made key contributions to this report."], "subsections": []}]}], "fastfact": ["Fraudsters used false identities to steal at least $1.68 billion in tax refunds in 2016.", "To help address fraud and compliance issues, Congress moved up the deadline for employers to submit W-2s and had IRS hold refunds for those claiming certain tax credits beginning in 2017. These changes gave IRS more time to work on identifying discrepancies before issuing refunds.", "We found this process helped IRS identify and prevent fraud, but IRS could do more to maximize its potential.", "We made 6 recommendations, including that IRS take steps that would allow it to review more W-2s before issuing refunds and reduce the risk of fraud and noncompliance."]}
{"id": "GAO-19-75", "url": "https://www.gao.gov/products/GAO-19-75", "title": "Tribal Broadband: FCC Should Undertake Efforts to Better Promote Tribal Access to Spectrum", "published_date": "2018-11-14T00:00:00", "released_date": "2018-11-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2018, FCC estimated that 35 percent of Americans living on tribal lands lack broadband service compared to 8 percent of Americans overall. Broadband service can be delivered through wireless technologies using radio frequency spectrum. According to FCC, increasing tribal access to spectrum would help expand broadband service on tribal lands. GAO was asked to review spectrum use by tribal entities\u2014tribal governments and tribally owned telecommunications providers.", "This report examines (1) tribal entities' ability to obtain and access spectrum to provide broadband services and the reported barriers that may exist, and (2) the extent to which FCC promotes and supports tribal efforts to obtain and access spectrum. GAO interviewed 16 tribal entities that were using wireless technologies. Selected entities varied geographically, among other characteristics. GAO analyzed FCC's license and auction data as of September 2018, reviewed FCC's rulemakings on spectrum for broadband services, and interviewed other tribal and industry stakeholders and FCC officials. The information presented is not generalizable to all tribes or industry participants."]}, {"section_title": "What GAO Found", "paragraphs": ["The tribal entities GAO contacted cited various barriers to obtaining spectrum licenses in bands that can be used to provide broadband services. According to its analysis of data from the Federal Communications Commission (FCC), GAO identified 18 tribal entities that held active spectrum licenses in such bands. For example, of these 18 tribal entities, 4 obtained licenses through secondary market transactions\u2014that is, they bought or leased the license from another provider, and 2 obtained a license through an FCC spectrum auction. Licensed spectrum is generally preferred because it offers better quality of service compared to unlicensed spectrum; however, almost all of the tribal entities GAO contacted said that they are accessing unlicensed spectrum to provide Internet service. They identified barriers to obtaining licensed spectrum through auctions and secondary market transactions, barriers such as high costs and, in the case of secondary market transactions, a lack of information on who holds licenses over tribal lands. Because most spectrum allocated for commercial use has already been assigned, the secondary market is one of very few avenues available to tribal entities that would like to access licensed spectrum.", "FCC has taken steps to promote and support tribal access to spectrum. For example, FCC issued proposed rulemakings in 2011 and 2018 that sought comment on tribal-specific proposals, such as establishing tribal-licensing priorities and initiating processes to transfer unused spectrum licenses to tribal entities. However, FCC has not finalized these rules and is in the process of responding to comments to the 2018 rulemaking. Also, while FCC has made additional spectrum available for broadband use in recent years, tribal stakeholders cited limitations with the spectrum FCC has made available. For example, FCC allows broadband providers to operate in unused television broadcast bands on an unlicensed basis. While stakeholders GAO interviewed cited some advantages of these bands, such as being useful to reach remote customers, they also noted technical and cost limitations that reduced the potential to improve tribal access to spectrum. FCC stated that it is implementing spectrum initiatives and recognizes the importance of promoting a robust secondary market to improve communications throughout the United States, including tribal lands. However, GAO found that FCC has not collected data related to tribal access to spectrum, analyzed unused licensed spectrum that exists over tribal lands, or made data available to tribal entities in an accessible and easy manner that could be beneficial in their efforts to obtain spectrum licenses from other providers. By collecting data on the extent that tribal entities are obtaining and accessing spectrum, FCC could better understand tribal spectrum issues and use this information as it implements ongoing spectrum initiatives. Further, given that the secondary market is one of few ways for tribal entities to access licensed spectrum to be able to provide Internet service, FCC could promote a more robust secondary market by analyzing unused licensed spectrum over tribal lands and using that information to inform FCC's oversight of the secondary market. Additionally, by making information available on who holds spectrum licenses over tribal lands, FCC could remove a barrier tribes may face in attempting to obtain spectrum through the secondary market."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FCC should (1) collect data on tribal access to spectrum; (2) analyze unused licensed spectrum over tribal lands; and (3) make information available in a more accessible manner that would promote tribes' ability to purchase or lease spectrum licenses over their lands from other providers. FCC agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Broadband service is viewed as vital to economic growth and improved  quality of life across the country. In 2018, the Federal Communications  Commission (FCC) reported that an estimated 35 percent of Americans  living on tribal lands lack access to broadband services, compared to 8  percent of all Americans. Furthermore, the gap in broadband access  between rural areas and rural tribal lands is even larger. In particular,  FCC reported in 2018 that nearly 60 percent of Americans living on rural  tribal lands nationwide lack broadband access, compared to about 31  percent of rural Americans overall. We have previously reported that  tribal lands can have challenging terrain and low population densities that  increase the cost and reduce business incentives for high-speed Internet  deployment. According to FCC, this lack of service on tribal lands could  impede efforts by Indian tribes to achieve self-governance and promote  economic opportunity, education, public safety, and cultural preservation.  Broadband service can be delivered through wireless technologies using  radio frequency spectrum. According to FCC, wireless technologies are  cost-effective for some remote and sparsely populated areas compared to  wireline broadband technologies, such as buried fiber optic or copper  cables, which can be costly to install where there is challenging terrain.", "According to FCC\u2019s 2010 National Broadband Plan, some tribes have  successfully used wireless technologies to deliver Internet access, and  increasing tribal access to and use of spectrum would create additional  opportunities to expand broadband service on tribal lands. Congress has  delegated responsibility for regulating commercial and other nonfederal  spectrum use to FCC, and as part of its responsibilities, FCC assigns  spectrum licenses through auctions and other mechanisms; oversees  secondary market transactions, such as leasing a spectrum license; and  promulgates regulations for the use of licensed and unlicensed  spectrum. FCC has asserted that its authority to regulate nonfederal  spectrum use applies to the spectrum over tribal lands. In FCC\u2019s 2000  policy statement on establishing its relationship with tribes, FCC stated  that it recognizes that the federal government has a fiduciary  responsibility in its dealings with tribes and has a longstanding policy of  promoting tribal self-sufficiency and economic development. As a result,  FCC has recognized its own general responsibility to tribes.", "You asked us to review issues related to spectrum use by tribal entities\u2014 tribal governments and telecommunications providers owned by tribes.  This report examines (1) tribal entities\u2019 ability to obtain and access  spectrum to provide broadband services on tribal lands and the reported  barriers that may exist, and (2) the extent to which FCC promotes and  supports tribal efforts to obtain and access spectrum for broadband  services.", "To address these objectives, we reviewed relevant statutes and  regulations, FCC documents, including FCC\u2019s Statement of Policy on  Establishing a Government-to-Government Relationship with Indian  Tribes, the National Broadband Plan, FCC\u2019s current strategic plan,  and academic and government publications identified through a literature  search of spectrum-related issues on tribal lands.", "To obtain information on tribal entities\u2019 ability to obtain and access  spectrum, we identified tribal entities that have applied to participate in  FCC\u2019s spectrum auctions or that have obtained spectrum licenses for  frequency bands that can be used for broadband services by analyzing  FCC data on (1) the participants in all relevant auctions, and (2) spectrum  license holders that were active as of September 6, 2018\u2014the date that  FCC downloaded this data for our review. To identify tribal entities in  these data, we reviewed the list of federally recognized tribes and  identified search terms related to these tribes. We then identified partial  matches between the identified search terms and the FCC data on  auction applicants and license holders, and manually reviewed these  matches based on information from interviews, Internet research, and  professional judgment. Because tribal entities may have applied to  participate in a spectrum auction or may hold spectrum licenses under  names that did not include the search terms we identified based on the  names of federally recognized tribes, there may be additional tribal  entities that we did not include in our analysis. We also analyzed FCC\u2019s  license data to determine how tribal entities obtained these licenses,  including through an FCC auction, administrative assignment, or a  secondary market transaction. To assess the reliability of FCC\u2019s data, we  manually reviewed the data and interviewed FCC officials. Based on the  results of our analysis, we determined the data to be reliable for our  purpose to describe the extent that tribal entities have participated in  auctions and obtained spectrum licenses; however, our analysis does not  capture the extent that tribal entities may have obtained a license that is  no longer active. In addition, we obtained stakeholder views on the  barriers that tribal entities may face in obtaining spectrum licenses by  interviewing 24 tribal entities, 3 tribal associations, 7 private providers that  deliver Internet services over tribal lands, 3 industry associations that  represent rural and urban telecommunications providers, 3 regional  consortia, 3 companies that work with tribal entities, and 1 academic  group. Of the 24 tribal entities we selected to interview, 16 were using  wireless technologies to provide Internet service. We selected tribal  entities to have variation in geographic location, level of broadband  deployment, population size and density, and urban or rural distinction.  We selected other stakeholders to represent a range of views and those  with experience working with Indian tribes and broadband service. The  views presented in our report are not generalizable to those of all  stakeholders.", "To determine the extent that FCC promotes and supports tribal entities\u2019  efforts to obtain and access spectrum, we reviewed relevant FCC  rulemaking proceedings. We summarized stakeholder perspectives on  these rulemakings by interviewing the tribal entities, tribal associations,  regional consortia, industry associations, and private providers noted  above, and by reviewing public comments submitted by private providers,  industry and tribal associations, and tribal governments and providers.", "We identified FCC\u2019s efforts to provide tribal entities with spectrum-related  assistance and communications by interviewing FCC officials and  reviewing documentation, such as presentations provided at FCC-led  tribal training workshops, e-mail communications with tribal entities, and  public notices related to spectrum use over tribal lands. We also  interviewed FCC officials on the information that they collect, analyze,  and report related to tribal use of spectrum and reviewed related  documentation, including the FCC Office of Native Affairs and Policy\u2019s  2012 Annual Report and FCC\u2019s license and auction data. We compared  FCC\u2019s efforts to increase tribal entities\u2019 abilities to obtain and access  spectrum against recommendations made in FCC\u2019s National Broadband  Plan, FCC\u2019s current strategic plan, and Standards for Internal Control  in the Federal Government related to using quality information.  Appendix I describes our scope and methodology in greater detail.", "We conducted this performance audit from November 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government has recognized 573 Indian tribes as distinct,  independent political communities with certain powers of sovereignty and  self-government, including some power to manage the use of their  territory and resources and control economic activity within their  jurisdiction. Some tribal lands include reservations\u2014land set aside by  treaty or other agreement with the United States, executive order, or  federal statute or administrative action for the residence or use of an Indian tribe. Some tribal lands include parcels with different ownership;  for example, parcels may be held in trust by the federal government for  the benefit of a tribe or an individual tribal citizen. Trust and restricted  lands can affect a tribe\u2019s ability to use their land as collateral to obtain a  loan. Tribal lands vary in size, demographics, and location. For example,  the smallest in size are less than one square mile, and the largest, the  Navajo Nation, is more than 24,000 square miles (the size of West  Virginia). Tribal land locations can range from extremely remote, rural  locations to urban areas. Indian tribes may form governments and  subsidiaries to help manage tribal affairs including schools, housing,  health, and economic enterprises.", "Internet access in the United States is generally privately financed.  Broadband providers build infrastructure and sell broadband services to  individual consumers. We previously reported that tribal lands can have  conditions that increase the cost of broadband deployment, such as  remote areas with challenging terrain, which increases construction costs,  as well as relatively low population densities and incomes that make it  difficult to recoup deployment costs. These conditions may make it less  likely that a service provider will build or maintain a network. Some tribal  governments provide Internet access to their members, through an  information-technology or utility department, and others have created  their own telecommunications companies to provide services. FCC has  reported that in many instances, tribal governments must build and pay  for their own communications infrastructure to ensure Internet access will  be \u201cdelivered across Indian Country.\u201d", "The term \u201cbroadband\u201d commonly refers to Internet access that is high  speed and provides an \u201calways-on\u201d connection, so users do not have to  reestablish a connection each time they access the Internet.  Telecommunications providers use a range of technologies to provide  broadband service, including cable, fiber, satellite, and wireless. Wireless  broadband connects users to the Internet using spectrum to transmit data  between the customer\u2019s location and the service provider\u2019s facility, and  can be transmitted using fixed wireless and mobile technologies, as  shown in figure 1.", "Fixed wireless broadband technologies establish an Internet connection  between fixed points, such as from a radio or antenna that may be  mounted on a tower, to a stationary wireless device located at a home.  This technology generally requires a direct line of sight, and can be  delivered two ways: (1) as a point-to-point transmission\u2014between two  fixed points\u2014or (2) as a point-to-multipoint transmission\u2014from one point  to multiple users. Mobile wireless broadband technologies also establish  a connection to the Internet that requires the installation of antennas, but  this technology provides connectivity to customers wherever they are  covered by service, including while on the move, such as with a cell  phone.", "Spectrum is the resource that makes wireless broadband connections  possible. Spectrum frequency bands each have different characteristics  that result in different levels of ability to cover distances, penetrate  physical objects, and carry large amounts of information. For example,  lower frequency bands are able to transmit signals that travel greater  distances, thus requiring the use of fewer antennas, and are able to  penetrate solid objects. Higher frequency bands are able to transmit more  data, but are more easily obstructed.", "FCC administers spectrum for nonfederal users\u2014such as state, local  government, and commercial entities\u2014through a system of frequency  allocation and assignment. Allocation involves segmenting the radio  spectrum into bands of frequencies designated for use by particular types  of radio services or classes of users, such as commercial and nonfederal  broadband services. Examples of some of the frequency bands that can  be used by commercial and nonfederal entities for broadband services  are shown in figure 2. Appendix II presents a full list of the auctioned  licensed frequency bands that FCC told us could be used to provide  broadband services.", "The frequency bands that can be used for broadband services are either  licensed or unlicensed. For licensed spectrum, FCC can assign licenses  through auctions, in which prospective users bid for the exclusive rights to  transmit on a specific frequency band within geographic areas, ensuring  that interference does not occur. License holders may sell or lease their  license, in whole or in part, to another provider, a process that is known  as a secondary market transaction, with FCC\u2019s approval. FCC requires  license holders to meet specified buildout requirements within a specified  amount of time or face penalties, typically termination of all or part of the  license. These buildout requirements are designed to ensure that  licensees put spectrum to use within a specific period rather than let it sit  idle and vary based on the type of license.", "FCC has also assigned licenses administratively in two frequency bands  that can be used for broadband services. Specifically, prior to 1996 FCC  assigned geographic licenses for exclusive use in the Educational  Broadband Service (2496-2690 megahertz (MHz)), and from 2005 to  2015, FCC assigned non-exclusive nationwide licenses in the 3650-3700  MHz band, where use of the band may be shared by other license  holders. FCC also authorizes the use of some spectrum for broadband  services without a license on a non-exclusive basis. With unlicensed  spectrum, an unlimited number of users can share frequencies using  wireless equipment certified by FCC, such as wireless microphones, baby  monitors, and garage door openers. In contrast to users of licensed  spectrum, unlicensed users have no regulatory protection from  interference by other licensed or unlicensed users in the bands. If  multiple users are operating simultaneously on the same frequency band,  the transmissions may be susceptible to interference, which reduces the  quality of service.", "FCC\u2019s rulemaking process includes multiple steps as outlined by law with  opportunities for the public to participate during each step. In general,  FCC initiates a rulemaking in response to statutes, petitions for  rulemaking, or its own initiative, and releases a Notice of Proposed  Rulemaking (NPRM) to propose new rules or to change existing rules.  Any interested person may submit comments as part of the public record  through electronic filings and meetings with FCC officials. Following  internal analysis of the public record, FCC staff may propose actions for  consideration for a vote, such as adopting final rules, amending existing  rules, or stating that there will be no changes. All of FCC\u2019s sitting  commissioners vote on these items.", "The American Recovery and Reinvestment Act of 2009 directed FCC to  develop a plan to ensure every American had access to high-speed  Internet. In March 2010, an FCC task force issued the National  Broadband Plan that included a centralized vision for achieving  affordability and maximizing use of high-speed Internet. The plan made  many recommendations to FCC, including that FCC should take into  account the unique spectrum needs of tribal communities when  implementing spectrum policies and evaluate its policies and rules to  address obstacles to spectrum access by tribal communities. With regard  to tribal lands, the plan recommended that FCC increase its commitment  to government-to-government consultation with tribal leaders and  consider increasing tribal representation in telecommunications planning.  FCC established the Office of Native Affairs and Policy (ONAP) in July  2010 to promote the deployment and adoption of communication services  and technologies to all native communities, by, among other things,  ensuring consultation with tribal governments pursuant to FCC policy."], "subsections": []}, {"section_title": "Selected Tribal Entities Reported Barriers to Obtaining Licensed Spectrum", "paragraphs": [], "subsections": [{"section_title": "Few Tribal Entities Have Obtained Spectrum Licenses, Although Representatives from Selected Tribal Entities Emphasized the Importance of Licensed Spectrum", "paragraphs": ["Through our analysis of FCC license data as of September 2018, we  identified 18 tribal entities that held active spectrum licenses in bands that  can be used to provide broadband services. Because tribal entities may  hold licenses using entity names that do not include the search terms we  identified in our review of the list of tribes in the Federal Register, there  may be additional tribal entities that we have not identified. We found that  most of the tribal entities obtained the licenses through FCC  administrative assignment rather than through an FCC spectrum auction  or secondary market transaction.", "Thirteen of the tribal entities we identified in FCC\u2019s license data held  administratively assigned licenses, and these licenses are subject to  certain limitations and were only available to applicants for limited time  periods. Eleven of these administratively assigned licenses are non- exclusive nationwide licenses in the 3.65 GHz frequency band (3550- 3700 MHz) and were available between 2005 and 2015, when FCC  issued a new rule for this band and stopped accepting new applications  for these licenses. Two of the tribal entities we identified held  administratively assigned Educational Broadband Service licenses in the  2.5 GHz frequency band (2496-2690 MHz). These licenses allow for the  transmission of educational materials by accredited educational  institutions and government organizations, including tribes, engaged in  formal education and require that licensees use the spectrum for  educational purposes for a certain amount of time each week. Both of  these tribal entities obtained these licenses after the last filing window  closed in 1996 through a waiver and special temporary authority permit.", "Four tribal entities we identified in FCC\u2019s license data held a total of 13  active licenses obtained through secondary market transactions, such as  leases and sales of portions of partitioned licenses. Of these 13  secondary market transactions, 2 involved nationwide providers.", "Two of the tribal entities we identified held active licenses in bands  available for broadband deployment that they obtained through an FCC  spectrum auction. One of these tribal entities won with a winning bid of  over $800,000 in a 2015 auction, and the other won two licenses with  winning bids of under $50,000 in a 2002 auction. This second tribal entity  also qualified for but did not win a 2003 auction. In addition to these two  tribal entities, we identified the following four tribal entities that had  applied to participate in auctions with varying results but did not hold  active licenses in frequency bands available for broadband deployment  as of September 2018:", "Two tribal entities each won a single spectrum license. The first won  its license, which has since expired, in 2000, and the second won its  license, which it has since been transferred to a nationwide provider  through a secondary market transaction, in 2003. The first tribal entity  also applied but did not qualify to participate in a 2001 auction.", "One tribal entity qualified to participate but did not win in a 2003  auction, and another tribal entity applied but did not qualify to  participate in a 2008 auction.", "In addition, representatives from 2 of the 16 tribal entities we interviewed  that were using wireless technologies told us that they use licensed  spectrum that is owned by a private provider through a partnership  relationship. We have previously reported that some tribes have formed  partnership arrangements with other entities to increase broadband  access on tribal lands.", "Most (14 of 16) of the tribal entities we contacted that were using wireless  technologies told us that they are accessing various unlicensed bands,  such as the 2.4 GHz and 5 GHz bands, to provide service.  Representatives from eight of these tribal entities reported using only  unlicensed spectrum for their fixed wireless networks. Representatives  from 13 tribal entities told us that unlicensed spectrum had the advantage  of being free, and representatives from one tribal entity told us that the  equipment needed to access these spectrum bands is less expensive  than equipment for accessing other spectrum bands. Representatives  from some tribal entities reported success in using unlicensed spectrum  in certain circumstances. For example, one tribal entity reported using  unlicensed spectrum for homes in remote areas where the only potential  signal degradation is from trees as well as to set up local hot spots that  can serve 5 to 10 users at a time. Another tribal entity reported using  primarily unlicensed spectrum to carry signals to end users together with  non-exclusive licensed spectrum (3.65 GHz band) for locations where  there is congestion in the unlicensed bands.", "However, representatives from the tribal entities we contacted that were  using wireless technologies emphasized the advantages of licensed  spectrum and discussed their experiences with the limitations of  unlicensed spectrum. As described earlier, exclusive-use spectrum  licenses protect license holders from interference from other users,  whereas unlicensed spectrum provides no protection against interference.  Representatives from 13 of 16 tribal entities identified the fact that  unlicensed spectrum is available at no cost as an advantage of this type  of spectrum. However, representatives from 15 of the 16 tribal entities  identified limitations associated with unlicensed spectrum, such as  interference, as described in table 1.", "Tribal associations, an academic group, a tribal consortium, and FCC  have all highlighted the importance of exclusive-use licensed spectrum for  tribal entities. Specifically, both a tribal association and an academic  group we contacted discussed interference and other challenges of  unlicensed spectrum. Representatives from one tribal association pointed  out that unlicensed spectrum might not be available in the future if it is  allocated for other purposes. Representatives from a tribal consortium we  contacted told us that they are already using all of the available  unlicensed spectrum for providing Internet access and that they cannot  expand service without encountering interference and capacity limitations.  Lastly, ONAP reported in 2012 that unlicensed spectrum is not an option  across all tribal lands and that tribal access to robust licensed spectrum is  a critical need.", "Representatives from the stakeholders we interviewed told us that there  are also non-technological benefits for tribal entities to obtain greater  access to licensed spectrum. For example:", "Enhanced ability to deliver additional Internet service.", "Representatives from one of the tribal associations, an academic  group, and six of the tribal entities said that increased access to  licensed spectrum would enable them to deliver their own Internet  services and bridge service gaps, thus improving Internet access to  their members. For example, representatives from three of these tribal  entities said that such access would enable them to deploy in areas  where providers that currently hold licenses were not willing to deliver  services. In addition, representatives from another tribal entity said  that having access to licensed spectrum is one factor that would  enable the tribe to establish its own telecommunications company.", "Ability to sell or lease spectrum for profit. Representatives from  one tribal association, an academic group, and two tribal entities told  us that holding spectrum licenses would enable tribal governments to  sell or lease their licenses. For example, we heard from one of these  tribal entities that it was able to sell portions of its license that did not  cover tribal lands and to use the profits from the sale to invest in its  own network infrastructure.", "Opportunities for federal funding. Access to licensed spectrum may  also provide tribal entities with more opportunity to obtain federal  funding, specifically through two Universal Service Fund programs\u2014 the Mobility Fund and the Tribal Mobility Fund. These programs  provide funding to broadband service providers to expand service in  areas where it is not available, including tribal lands. However, service  providers must hold, lease, or show they have access to licensed  spectrum to participate in these programs, among other  requirements. For example, the National Congress of American  Indians stated that two tribal entities submitted applications to  participate in the Mobility Fund program but were not eligible to  participate in part because they did not hold a spectrum license.  Moreover, representatives from two of the tribal entities we  interviewed told us that they considered applying for one of these  programs but realized they were ineligible because they did not have  access to licensed spectrum.", "Furthermore, representatives from one of the tribal associations, an  academic group, and seven of the tribal entities told us that having  access to licensed spectrum would enable tribes to exercise their rights to  sovereignty and self-determination. Representatives from three of the  tribal entities we contacted said that they view spectrum as a natural  resource that should be managed by the tribe. FCC officials, however,  told us that spectrum is not considered a reserved right under treaties  with Indian tribes, as it is not explicitly stated. In addition, representatives  from four of the tribal entities told us that having access to licensed  spectrum would ensure that spectrum is being used in a way that aligns  with tribal goals and community needs, further supporting their rights to  self-determination."], "subsections": []}, {"section_title": "Representatives from Selected Tribal Entities Reported Cost and Other Barriers to Accessing Licensed Spectrum", "paragraphs": ["Representatives from the tribal entities we contacted identified several  barriers to accessing licensed spectrum through spectrum auctions and  secondary market transactions. Regarding spectrum auctions,  representatives from tribal entities that provide wireless Internet service  most frequently (13 of 16) indicated that spectrum licenses are too  expensive for tribal entities. For example, over 60 percent (983 of 1,611)  of the winning bids from a 2015 spectrum auction, including bids for  spectrum over non-tribal lands, were over $1 million. Representatives  from one tribal entity explained that auction licenses are often too  expensive for tribal entities because these licenses cover large  geographic areas that may include non-tribal urban areas as well as rural  tribal areas. Moreover, representatives from eight tribal entities stated that  they are unable to obtain financing to participate in auctions because  tribal governments cannot use tribal lands as collateral to obtain loans. In  addition, representatives from eight tribal entities mentioned that  participating in spectrum auctions requires auction-specific expertise that  tribal entities may not have.", "Tribal entities also face barriers obtaining spectrum through secondary  market transactions. Most of the spectrum allocated for commercial use  has already been assigned through spectrum auctions and other  mechanisms to private providers, including licensees that may not be  providing service on tribal lands. In a single geographic area, several frequency bands could be used to deploy broadband services, as shown  in figure 2, and licenses for these various frequency bands may be held  by different providers. There may be tribal areas where providers hold  licenses for bands but are not using the spectrum to provide Internet  access. In other tribal areas, services may be offered using one or two of  the spectrum licenses with the other licenses in the area remaining fallow  and inaccessible to tribal entities. All three of the tribal associations we  contacted confirmed that there are unused spectrum licenses over tribal  lands, and representatives from a nationwide provider indicated that they  only deploy services if there is a business case to support doing so.  Accordingly, the secondary market is one of few avenues available to  tribal entities that would like to access licensed spectrum. However,  representatives from tribal entities we contacted identified the following  challenges related to participating in the secondary market:", "Lack of willing sellers. Representatives from eight of the tribal  entities, one of the tribal representative groups, and an industry  association we contacted indicated that spectrum license holders are  often unwilling to participate in secondary market transactions, citing a  variety of reasons. For example, representatives from one tribal entity  stated that large carriers have no business incentive to negotiate  secondary market agreements with tribal entities and that tribal  entities do not have the resources to make such transactions  sufficiently lucrative for license holders. Representatives from another  tribal entity stated that license holders may lack knowledge about the  areas covered by their licenses, including tribal areas, and therefore  may be unwilling to consider secondary market transactions.  Representatives from a tribal representative group told us that license  holders may be unwilling to consider secondary market transactions  with tribal entities because spectrum is a valuable resource that may  become even more valuable over time, and a representative from an  industry association indicated that transaction costs such as legal fees  outweigh any potential income from such transactions. None of the  private providers we contacted reported entering into a secondary  market transaction with tribal entities, but one of these providers  stated that it had never been approached by a tribal entity interested  in a secondary market transaction and was unaware of challenges  that are unique to tribal entities.", "License holders unknown. Representatives from eight of the tribal  entities we contacted stated that it is difficult to determine who holds  spectrum licenses. For example, two tribal entities had to hire  consultants to identify who held licenses for spectrum over the tribes\u2019  lands, and another tribal entity relied on the expertise of its non-tribal  partner to identify the license holders.", "Unaware of secondary market transactions. Representatives from  six of the tribal entities we contacted were unaware of the possibility  of accessing licensed spectrum through a secondary market  transaction prior to our contacting them.", "Accordingly, secondary market transactions involving tribal entities are  rare. As discussed above, our analysis of FCC license data identified four  tribal entities that have successfully accessed licensed spectrum in this  manner. Regarding one of these tribal entities\u2019 experiences with the  secondary market, the tribal representative we contacted stated that an  Indian-owned telecommunications consulting company was pivotal in  identifying the license holder and facilitating the transaction and that the  transaction would not have happened without the consulting company.  Representatives from this company told us that they conducted an  analysis to identify unused spectrum licenses over the tribe\u2019s land. The  company identified three providers holding such licenses, but only one of  those providers was willing to participate in a secondary market  transaction. Representatives from another of the tribal entities that  accessed licensed spectrum through the secondary market told us that  they relied on the expertise of their non-tribal partner to facilitate these  transactions."], "subsections": []}]}, {"section_title": "FCC Has Some Efforts to Enhance Tribal Access to Spectrum, but FCC Does Not Collect or Communicate Key Information to Tribal Entities", "paragraphs": [], "subsections": [{"section_title": "FCC Has Taken Steps to Promote and Support Tribal Entities\u2019 Ability to Obtain Spectrum, However These Efforts Are Not Likely to Address Tribal Spectrum Needs", "paragraphs": ["We found that FCC has taken the following actions to increase tribal  access to and use of spectrum: (1) initiated proposed rulemakings on  promoting tribal access to spectrum, (2) adopted rules to increase  spectrum available for broadband use, and (3) conducted outreach and  training for tribal entities on spectrum-related issues."], "subsections": [{"section_title": "Initiated Proposed Rulemakings on Promoting Tribal Access to Spectrum", "paragraphs": ["FCC issued two NPRMs\u2014one in March 2011 and one in May 2018\u2014that  included policy options intended to enhance tribal access to spectrum. At  the time of our report, FCC had not adopted new rules or taken further  action on the 2011 rulemaking, and FCC had not taken further actions  since the comments period ended on September 7, 2018, on the May  2018 rulemaking. According to FCC officials, the 2011 NPRM  addressed several recommendations made in the National Broadband  Plan to promote the greater use of spectrum over tribal lands. Among  other things, the 2011 NPRM sought comments on three proposals to  create new spectrum access opportunities for tribal entities (see fig. 3).  FCC officials told us that they have reviewed public comments to the  proposed rulemaking, but have no current plans to take further actions.", "We reviewed the public comments FCC received that pertained to the  three proposals, which included comments from tribal associations, tribal  governments, rural and nationwide industry associations, and tribal and  private providers. Based on our analysis of the comments that included  positions on the proposal for a tribal licensing priority, eight  stakeholders\u2014including industry associations, private providers, and a  tribal government\u2014were supportive of this proposal. However, we found  that stakeholder views differed on implementing good faith negotiations and on the build-or-divest processes. In general, the tribal stakeholders  indicated that they were supportive of these proposals, while the industry  associations and private providers were not. In addition to reviewing the  public comments, we asked representatives from the tribal and industry  associations and private providers that we interviewed about their views  of these proposals. Representatives from the three tribal associations  and two rural industry associations were generally supportive of all three  of the proposals, while representatives from one of the private providers  that we interviewed told us they did not support any of the three  proposals, because, for example, they said that there are more effective  ways to increase broadband service over tribal lands. Representatives  from another private provider said that they supported the tribal priority  process but did not indicate their views on the other two proposals.  Representatives from six tribal entities and a representative from a tribal  consortium told us that these types of proposals would help them obtain  spectrum.", "In May 2018, FCC issued an NPRM that sought comments on  establishing a tribal priority window for tribal nations located in rural areas  as part of a process to re-license the Educational Broadband Service  spectrum band. As described above, FCC originally allocated this band  to qualifying educational institutions and government organizations for the  transmission of educational materials. While FCC permitted licensees to  lease their excess capacity to commercial providers, FCC reported that  significant portions of this band were not being used, primarily in rural  areas. In an effort to make additional spectrum available for broadband  use, FCC issued this NPRM seeking comments on options to promote the  use of this spectrum over tribal lands. One of the options included  implementing a local priority filing window so that tribal entities could get  access to unassigned spectrum prior to an FCC auction. In a June 2018  order, FCC extended the comment deadline for the NPRM to August 8,  2018, partly in response to a request for a deadline extension. As a result,  FCC also extended the deadline to respond to those comments to  September 7, 2018. Because FCC was in the process of responding to  these comments at the time of our review, we did not analyze these  comments."], "subsections": []}, {"section_title": "Adopted Rules to Allocate Additional Spectrum for Broadband Use", "paragraphs": ["FCC has made additional unlicensed and licensed spectrum available for  broadband use and has implemented rules that according to FCC, may  make it easier for rural providers to obtain licenses. However, these  efforts were not targeted to tribal entities, and according to ONAP\u2019s 2012  report, allocating additional unlicensed spectrum may not be a technically  feasible solution for all tribal entities, and such spectrum may not have  the necessary capacity to handle an increase in users. In addition,  representatives from the tribal associations and entities we contacted told  us that there are limitations to the extent that these efforts can address  the spectrum needs of tribal entities. In particular, they discussed the  effect of FCC\u2019s changes to the rules on the use of TV white space  spectrum and the Citizens Broadband Radio Service spectrum:", "TV white space spectrum: In 2010, FCC made additional unlicensed  spectrum available for broadband use by allowing providers to  operate in the TV bands at locations where those frequencies were  not in use, known as TV white space, but none of the tribal entities  we interviewed was using this spectrum. A representative from a tribal  consortium said that it used TV white space spectrum, and  representatives from three of the tribal entities said that they were  considering using it in the future because TV white space spectrum  can better pass through some environmental barriers, such as trees,  reaching more remote customers. However, representatives from five  tribal entities, one tribal consortium, one academic group, and three  companies that we interviewed told us about several limitations to the  use of TV white space spectrum. For example:  limited bandwidth capacity, which causes lower speeds, high  latency, and limits the number of households that can be served; equipment needed to access TV whitespace spectrum is  expensive and less available;  the spectrum may not always be available; and  similar to other unlicensed frequency bands, as described above,  there is potential for interference and difficulty to pass through  extreme terrain.", "Citizens Broadband Radio Service (CBRS) Spectrum: In 2015, FCC  made additional licensed spectrum available for broadband use when  it issued a new rule for the 3.65 GHz frequency band (3550-3700  MHz). However the tribal entities who held licenses in this band  indicated there are limitations to their ability to use this band and their  future use of this spectrum remains unknown. As described earlier,  FCC had allocated non-exclusive nationwide licenses in this band. In  the 2015 rule, FCC created the CBRS, increased the amount of  spectrum allocated for commercial broadband use, and implemented  a new licensing scheme. This three-tier priority licensing scheme for  spectrum sharing included auctioning exclusive-use geographic  licenses and allowing non-exclusive use of the band where a license  holder is not operating, an approach that is intended to provide a low- cost entry point for users, but will have no protections from  interference. Representatives from four of the five tribal entities that  we contacted that held licenses in this band said that there were  technical advantages to using it, such as the ability for a signal to  pass through dense forests. However, representatives from two tribal  entities said that the high cost of the equipment needed to access this  spectrum prevented them from either using the frequency band  extensively or at all. In addition, representatives from two tribal entities  said that they were not sure about their ability to access this band in  the future given the changes made in FCC\u2019s 2015 rulemaking.  FCC\u2019s 2015 rule also created small-sized and shorter-termed  licenses, which FCC stated would decrease the costs of obtaining a  license and help rural providers access it. However, FCC issued an  NPRM in 2017 that sought comments on suggested changes to  CBRS, including increasing the geographic area covered by licenses  and lengthening the license term. In October 2018, FCC adopted  rules that, among other changes, increased the license area from  census tracks to counties and extended the license term from 3 to 10  years, which FCC officials told us were modest changes made to  accomplish FCC\u2019s goals of creating incentives for investment,  including in urban and rural areas, encouraging efficient spectrum  use, and promoting robust network deployments."], "subsections": []}, {"section_title": "Conducted Outreach and Training for Tribal Entities on Spectrum-Related Issues", "paragraphs": ["FCC\u2019s ONAP conducts training, consultation, and outreach to tribal  entities on spectrum-related issues. For example, ONAP officials told us  that they have conducted 21 training and consultation workshops for tribal  entities on broadband and telecom since 2012, where spectrum has been  discussed in general in the introduction and has been addressed  specifically in separate sessions in some of the workshops. These  officials also told us that they communicate with tribal entities prior to  when FCC holds auctions or when implementing regulatory actions or  policies that will affect tribal governments and spectrum over their lands.  While representatives from 9 of the 16 tribal entities using wireless  technologies told us that they had received some outreach on spectrum- related issues from FCC, representatives from 2 of these entities said that  they had not. In addition, ONAP issued a report in 2012 to provide FCC  with a review of its work with tribal governments and organizations,  including information on its tribal broadband efforts, priorities, and tribal  consultations. Among other things, the report included case-study  information on tribal entities\u2019 efforts to access spectrum. Although the  report stated that this would be the first of such annual reporting, this is  the only report that ONAP has issued on tribal issues. According to ONAP  officials, ONAP has not published subsequent reports because it provides  FCC with information on its work with tribal governments and  organizations, including spectrum-related matters, through more frequent  informal briefings and regular updates."], "subsections": []}]}, {"section_title": "FCC Does Not Collect Key Information Related to Spectrum over Tribal Lands or Communicate It to Tribal Entities", "paragraphs": ["FCC has not consistently collected information related to tribal access to  spectrum. For example, FCC does not collect data on whether holders of  spectrum licenses or auction applicants are tribal entities even though it  collects self-reported data on licensee type, such as corporation and  government entity. To obtain this information, FCC could include an  option for the licensee type, along with the other options, in applications  for future licenses and auctions that allows an applicant to identify as a  tribal government or tribally owned entity. FCC officials told us that they  use information on licensee type to determine eligibility for a license.  Because eligibility is not based on whether the applicant is a tribal entity,  FCC officials said this information is not needed. However, without this  information, FCC does not have a comprehensive understanding of the  extent that tribal entities are attempting to obtain or access licensed  spectrum or have been successful at obtaining and accessing it.", "Additionally, FCC does not analyze information on unused licensed  spectrum that exists over tribal lands, even though FCC has  information\u2014broadband availability data from providers and information  on geographic areas covered by spectrum licenses\u2014that could be used  for such analysis. As we described earlier, representatives from all three  of the tribal associations we contacted reported that there are unused  spectrum licenses over tribal lands that could present opportunities  through the secondary market for tribal entities to obtain spectrum. When  we asked FCC officials why they do not analyze the extent that unused  spectrum licenses exists over tribal lands, they told us that the spectrum  data noted above is not specific enough to allow for a license by license  analysis of unused spectrum. For example, they said that broadband  availability data from providers is aggregated across wide spectrum  bands to minimize reporting burdens on the wireless industry, and the  data are not sufficiently detailed to identify which spectrum blocks and  licenses are being used in particular areas. However, FCC could use this  data to conduct, at a minimum, high-level analysis that would result in  useful information on the extent to which unused spectrum exists over  tribal lands. In addition, FCC officials told us that they evaluate the  effectiveness of FCC\u2019s secondary markets policies, which FCC views as  a mechanism to promote the increased use of unused spectrum licenses,  but this approach does not include an analysis of unused spectrum  licenses as part of these efforts. As a result, FCC\u2019s evaluations of the  secondary market may not accurately reflect how these policies affect  tribal access to spectrum. Because the secondary market is one of few  ways for tribal entities to access licensed spectrum, an analysis of unused  licensed spectrum that exists over tribal lands would enable FCC to better  promote a robust secondary market that provides additional opportunities  for tribes to access spectrum.", "FCC\u2019s 2010 National Broadband Plan stated that ongoing measurement  of spectrum utilization should be developed to better understand how  spectrum resources are being used because some studies indicated that  spectrum goes unused in many places much of the time. The plan also  stated that any spectrum utilization studies that FCC conducts should  identify tribal lands as distinct entities. In FCC\u2019s February 2018 strategic  plan, FCC stated that it will implement ongoing initiatives that will assist in  spectrum policy planning and decision making, promote a robust  secondary market in spectrum, and improve communications services in  all areas of the United States, including tribal areas. Additionally,  Standards for Internal Control in the Federal Government state that  agencies should use quality information, including information that is  complete, to inform the decision-making processes.", "FCC also does not make information on spectrum-license holders  available in an easy or accessible manner; such information could be  beneficial to the tribes in their efforts to obtain spectrum in the secondary  market. As described earlier, the secondary market is a significant  mechanism for tribal entities to obtain spectrum licenses, but  representatives from the tribal entities we interviewed reported challenges  related to participating in the secondary market, such as not knowing  whom to contact should they wish to engage in a secondary market  transaction to obtain a spectrum license. In July 2014, FCC stopped  updating its spectrum dashboard, which provided the public with a way to  identify who holds licenses in what areas, including features that allowed  users to identify spectrum allocated and assigned in tribal lands. ONAP  stated in its 2012 report that this feature represented the first step for  individual tribal entities to reach out to licensees and seek leasing,  partnership, or other arrangements that could ultimately result in the  provision of service over tribal lands. FCC officials told us that the public  may view electronic records of all wireless spectrum licenses in FCC\u2019s  Universal Licensing System, using a wide range of license and  geographic parameters, such as licensee names, radio services,  spectrum bands, and geographic locations. However, we attempted to  navigate the Universal Licensing System to determine spectrum-license  holders for specific tribal lands using geographic parameters, but we were  unable to successfully do so because the system is so difficult to use.  Furthermore, as described above, representatives from eight of the tribal  entities that we contacted stated that it is difficult to determine who holds  spectrum licenses. When we asked FCC officials why they do not  communicate information to tribes about spectrum-related transactions  over tribal lands, FCC officials also told us that they issue public notices  on applications for all proposed spectrum transactions and on the winning  bidders of all auctions, but they have not made it a practice to reach out  directly to tribes to make them aware of when providers have obtained  spectrum licenses that cover tribal lands.", "The National Broadband Plan stated that FCC should make data  available that would promote a robust secondary market for spectrum  licenses, such as information on how and to whom spectrum is allocated  on tribal lands. Additionally, Standards for Internal Control in the Federal  Government state the need for federal agencies to communicate with  external entities and to enable these entities to provide quality information  to the agency that will help it achieve its objectives. Tribal governments  are an example of such external entities. The ability of tribal governments to make informed spectrum planning decisions and to participate in  secondary market transactions is diminished without information from  FCC on the spectrum transactions that occur over tribal lands. Providing  this information in a manner that is accessible and easy for tribal entities  to obtain could enable them to enter into leasing, partnership, or other  arrangements to obtain spectrum."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Broadband service on tribal lands continues to lag behind the rest of the  country, especially on rural tribal lands, which could hinder tribal efforts to  promote self-governance, economic opportunity, education, public safety,  and cultural preservation. FCC has reported that wireless technologies  that access spectrum to deliver broadband services are cost-effective for  remote and sparsely populated areas, such as tribal lands. However,  FCC\u2019s efforts to promote and support tribal entities\u2019 access to spectrum  have done little to increase tribal use of spectrum, as only very few tribes  are accessing spectrum to be able to provide Internet service.  Additionally, FCC lacks information that could help inform its decision- making processes related to spectrum policy planning, which is intended  to improve communications services in all areas of the United States,  including tribal lands. By collecting data on the extent that tribal entities  are obtaining and accessing spectrum, FCC could better understand tribal  spectrum issues and use this information as it implements ongoing  spectrum initiatives. Furthermore, the secondary market is one of few  ways for tribal entities to access licensed spectrum to be able to provide  Internet service, and FCC has recognized the importance of promoting a  robust secondary market. FCC could promote a more robust secondary  market by analyzing data to better understand how much unused licensed  spectrum exists over tribal lands and using that information to promulgate  regulations and to evaluate how FCC policies affect tribal participation in  the secondary market. Additionally, by making information on who holds  spectrum licenses over tribal lands more accessible and easy to  understand, FCC could remove a barrier tribes may face in attempting to  obtain spectrum through the secondary market."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the Chairman of  FCC.", "The Chairman of FCC should collect data on the extent that tribal  entities are obtaining and accessing spectrum and use this  information as FCC implements ongoing spectrum initiatives.  (Recommendation 1)", "The Chairman of FCC should analyze data to better understand the  extent that unused spectrum licenses exist over tribal lands, such as  by analyzing the data for a sample of tribal lands, and as appropriate  use this information to inform its oversight of the secondary market.  (Recommendation 2)", "The Chairman of FCC should make information on spectrum-license  holders more accessible and easy to understand for interested  parties, including tribal entities, to promote their ability to purchase or  lease spectrum licenses from other providers. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FCC for comment. In its comments,  reproduced in appendix III, FCC agreed with the recommendations. FCC  also provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Chairman of FCC, 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) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what is known about the ability of tribal entities  to obtain and access spectrum to provide broadband services on tribal  lands and the reported barriers that may exist; and (2) the extent to which  the Federal Communications Commission (FCC) promotes and supports  tribal entities\u2019 ability to obtain and access spectrum for broadband  services.", "To address both objectives, we reviewed relevant statutes and  regulations and FCC documents, including FCC\u2019s Statement of Policy on  Establishing a Government-to-Government Relationship with Indian  Tribes, the National Broadband Plan, and FCC\u2019s current strategic plan.  We interviewed FCC officials and representatives from 3 tribal  associations, 7 private providers that deliver Internet services over tribal  lands, 3 industry associations that represent rural and urban  telecommunications providers, 3 regional consortia, 3 companies that  work with tribal entities, and 1 academic group. In addition, we selected  24 tribal entities\u201413 Indian tribes and nations and 11 tribally owned  providers\u2014to interview.", "To identify tribal entities that were using wireless technologies, we  obtained recommendations from stakeholders, reviewed data on relevant  federal grants, such as the Broadband Technology Opportunities  Program, and conducted Internet research. We then selected 16 tribal  entities considering (1) stakeholder suggestions, (2) population, (3)  population density, and (4) urban or rural designation. We visited 7 of  these tribes in Idaho, New Mexico, and Washington State. The views  represented in our report are not generalizable to those of all  stakeholders. See table 2 for a complete listing of the entities we  interviewed. We also conducted a literature review to identify relevant  academic, government, and media publications that were published  between January 1, 2013, and January 11, 2018, that discuss the  importance of and options to enhance tribal access to spectrum.", "To identify tribal entities that applied to participate in spectrum auctions or  that held active spectrum licenses in bands that can be used to provide  broadband service, we analyzed (1) FCC data on entities that applied to  participate in auctions for spectrum in these bands and (2) FCC data on  spectrum licenses in these bands that were active as of September 6,  2018. We also analyzed FCC license data, together with license  information publicly available through FCC\u2019s Universal Licensing System,  to determine whether the tribal entities that held active licenses obtained  those licenses through an FCC spectrum auction, administrative  assignment, or the secondary market. We then reviewed the list of  federally recognized tribes in the Federal Register and identified search  terms related to these tribes. For example, we identified the following  search terms based on the federally recognized tribe, Yurok Tribe of the  Yurok Reservation, California, \u201cReservation, Tribe, and Yurok.\u201d We then  used the identified search terms to search for tribal entities in FCC\u2019s data  on auction participants and spectrum license holders. We manually  reviewed these matches to identify tribal entities based on information  from interviews, Internet research, and professional judgment. Because  tribal entities may have applied to participate in spectrum auctions or may  hold spectrum licenses under names not associated with their tribes,  there may be additional tribal entities that we were unable to identify.  Through interviews with FCC officials and review of related  documentation, we determined that the license and auction participant  data are sufficiently reliable for our purpose of identifying some tribal  entities that have applied to participate in a spectrum auction or held  active spectrum licenses as of September 2018. However, our analysis  does not capture the extent that tribal entities may have obtained a  license that is no longer active. To identify tribal entities that used  unlicensed spectrum to deliver unlicensed service, we interviewed the  tribal entities identified above. In addition, we obtained stakeholder views  on the advantages and disadvantages of using unlicensed and licensed  frequency bands and any barriers that tribal entities face in obtaining  spectrum licenses by interviewing the selected stakeholders noted above.", "To determine the extent to which FCC promotes and supports tribal  entities\u2019 efforts to obtain and access spectrum, first, we reviewed FCC\u2019s  proposals in its ongoing 2011 Notice of Proposed Rulemaking In the  Matter of Improving Communications Services for Native Nations by  Promoting Greater Utilization of Spectrum over Tribal Lands and its  ongoing 2018 Notice of Proposed Rulemaking In the Matter of  Transforming the 2.5 GHz Band. We summarized public comments  submitted, as of August 2018, by private and tribal providers, rural and  nationwide industry associations, tribal associations, and tribal  governments on FCC\u2019s 2011 proposed rulemaking. We did not analyze  comments on FCC\u2019s 2018 Notice of Proposed Rulemaking because FCC  was in the process of responding to these comments at the time of our  review. Second, we reviewed rules that FCC officials identified that  increased the availability of unlicensed and licensed frequency bands for  broadband use and that may be particularly useful for tribal entities.  These rules included FCC\u2019s 2010 and 2012 rules related to TV white  space spectrum and its 2015 rule and 2017 Notice of Proposed  Rulemaking related to the Citizens Broadband Radio Services (CBRS)  spectrum. We identified tribal entities that had been using CBRS  frequency bands by reviewing FCC licensed data and TV white space  frequency bands through interviews with tribal entities and regional  consortia. Third, we identified FCC\u2019s outreach activities to provide tribal  entities with assistance on spectrum-related issues by interviewing FCC  officials and reviewing documentation on the content of FCC-led trainings  and workshops, e-mail correspondences, and related publications, such as public notices. Lastly, we interviewed FCC officials on the information  that they collect, analyze, and report related to tribal use of spectrum and  reviewed related documentation, including FCC\u2019s Office of Native Affairs  and Policy 2012 Annual Report and FCC\u2019s license and auction data. We  interviewed stakeholders, as noted above, and summarized their views of  FCC efforts. We also compared FCC\u2019s efforts against FCC\u2019s 2018-2022  strategic plan, recommendations made in FCC\u2019s National Broadband  Plan, and Standards for Internal Control in the Federal Government  related to using quality information.", "We conducted this performance audit from November 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Auctioned Licensed Spectrum Available for Commercial Broadband Services", "paragraphs": ["We identified the spectrum frequency bands that the Federal  Communications Commission (FCC) has made available for commercial  broadband services and that FCC assigns licenses through auctions.  Table 3 describes these licenses, including the number and date of  related auctions."], "subsections": []}, {"section_title": "Appendix III: Comments from the Federal Communications Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sally Moino (Assistant Director),  Anne Dor\u00e9 (Analyst in Charge), Enyinnaya David Aja, Katherine Blair,  Stephen Brown, Camilo Flores, Georgeann Higgins, John Mingus, Josh  Ormond, Frank Rusco, Rebecca Rygg, Jay Spaan, Andrew Stavisky,  James Sweetman, Jr., Hai Tran, and Michelle Weathers made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Broadband Internet service is essential to many aspects of modern life, so it's important to make sure everyone has access. Yet tribal lands, especially in rural areas, are still underserved.", "In such areas, wireless broadband can help keep people connected. However, the Federal Communications Commission has done little to promote and support tribes' access to radio frequency spectrum that can be used for such wireless service.", "We made 3 recommendations to the FCC to help improve tribes' access."]}
{"id": "GAO-18-676T", "url": "https://www.gao.gov/products/GAO-18-676T", "title": "Grants Management: Observations on Challenges and Opportunities for Reform", "published_date": "2018-07-25T00:00:00", "released_date": "2018-07-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal outlays for grants to state and local governments totaled more than $674 billion in fiscal year 2017, equivalent to 3.5 percent of the gross domestic product in that year. GAO's previous work has found that growth in both the number of grant programs and level of funding has increased the diversity of federal grants to state and local governments.", "GAO's work has also found that designing and implementing grants management policies that strike an appropriate balance between ensuring accountability for the proper use of federal funds without increasing the complexity and cost of grants administration for agencies and grantees presents a governance challenge. At the same time, several government-wide initiatives hold promise for advancing the transparency, efficiency, and effectiveness of federal grants.", "This statement is based on GAO's prior reports on federal grants management and crosscutting issues related to managing for results across the federal government issued between 2005 and 2018. It addresses: (1) GAO's observations on long-standing challenges for federal grants management, and (2) opportunities to effectively advance current grant modernization initiatives."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO has identified challenges to federal grants management in its work spanning several decades. These challenges include:", "Streamlining: Grants management requirements that are duplicative, unnecessarily burdensome, and conflicting require agencies to direct resources toward meeting them and can burden recipients of federal grants. GAO has reported on initiatives to streamline these requirements and address challenges grantees encounter throughout the grants lifecycle.", "Transparency: The Digital Accountability and Transparency Act of 2014 (DATA Act) required the Office of Management and Budget, the Department of the Treasury, and other federal agencies to increase the types of information available on federal spending, including grants. GAO has reported on progress in standardizing and expanding reported data, but has found inconsistencies with the completeness and quality of the reported information.", "Collaboration and consultation: Collaboration, particularly information sharing, is an important factor in effective grants management. GAO's work on interagency grants management reform initiatives found that inadequate ongoing communication with grantees sometimes resulted in poor implementation and prioritization of initiatives.", "Duplication, overlap, and fragmentation : Agencies' grants management practices, such as requirements to avoid duplication and overlap among grants before awarding them, can help agencies achieve cost savings and result in greater efficiencies in grant programs.", "Internal controls and oversight : GAO's work has identified weaknesses in grants oversight and accountability. For example, GAO has identified opportunities for agencies to more consistently close out grants when the grantee's period of performance has ended to ensure that grantees have met all requirements and identified opportunities to redirect or return unused funds.", "Recent and proposed initiatives aimed at grants management reform present opportunities to improve the efficiency, effectiveness, and transparency of federal grants. GAO's work on federal grants management and managing for results has highlighted a number of key features for effectively implementing such crosscutting initiatives, which include: (1) establishing implementation goals and tracking progress, (2) identifying and agreeing on leadership roles and responsibilities, and (3) developing an effective communication strategy.", "Further, given the number and diversity of grantor agencies and grant programs, it is important that any grant reform initiative integrate with other government-wide reform efforts on related issues across government, such as the grants-related Cross-Agency Priority goal, implementation of the DATA Act, and initiatives related to evidence-based policy. These efforts can be effective if they complement each other rather than run the risk of operating independently and potentially duplicating effort or working at cross-purposes."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to join you today to discuss issues related  to federal grants management. GAO\u2019s previous work has found that  growth in both the number of grant programs and level of funding has  increased the diversity of federal grants to state and local governments  and complexity in federal grants management processes. At the same  time, several government-wide initiatives hold great promise for  advancing the transparency, efficiency, and effectiveness of federal  grants. These are important and challenging issues and I am pleased to  have the opportunity to share observations from our large body of work  on federal grants management as well as suggestions for moving forward  with grant reform initiatives.", "As we have previously reported, federal grants to state and local  governments are an important tool of government. This policy tool  provides funding for national priorities in many areas including health  care, transportation, education, and social services. Federal outlays for  grants to state and local governments totaled more than $674 billion in  fiscal year 2017, equivalent to 3.5 percent of the gross domestic product  (GDP) in that year. Grants vary greatly in numerous ways including size,  the nature of their recipients, and the type of programs they fund. In  addition, substantial variation in the way federal agencies administer  these programs has further increased their complexity. This diversity and  complexity contributes to the challenge of government-wide efforts to  address crosscutting grants management reforms.", "Recent initiatives\u2014including the administration\u2019s establishment of the  Results-Oriented Accountability for Grants Cross-Agency Priority (CAP)  goal through the President\u2019s Management Agenda (PMA)\u2014present an  opportunity for the federal government to help address long-standing  grants management challenges. Congress has often asked us to evaluate  grants management issues to inform efforts that focus on accountability,  while maximizing the investment of billions of dollars in federal grant  funding. Our work also reflects the intergovernmental perspectives  inherent in the administration of these grants and includes insights from  reviews of federal government agencies as grantors as well as the  perspectives of grantees in their role as implementers of these grants.", "Drawing on our prior federal grants management work as well as our  work on managing for results across the federal government, my remarks  today address: (1) observations on long-standing challenges for federal  grants management and (2) opportunities to effectively advance current  grant modernization initiatives. My testimony is based on our prior reports  and testimonies on federal grants management, fiscal controls, and grant  reporting as well as crosscutting work on government performance and  transparency issued between 2005 and 2018. We used multiple  methodologies to develop the findings, conclusions, and  recommendations for the prior products serving as the foundation for this  statement. A more detailed discussion of the prior reports\u2019 objectives,  scope, and methodologies, including our assessment of data reliability, is  available in the reports cited throughout this statement.", "The work upon which this testimony is based was conducted 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."], "subsections": [{"section_title": "Observations on Grants Management Challenges", "paragraphs": [], "subsections": [{"section_title": "Streamlined Grants Management is Critical to Effective Use of Federal Funds", "paragraphs": ["Our work has shown that when grants management requirements are  duplicative, unnecessarily burdensome, and conflicting, agencies must  direct resources toward meeting them\u2014which can make the agency\u2019s  programs and services less cost effective and increase burden for grant  recipients. For example, in 2016, we reviewed administrative  requirements for federal research grants. Officials from universities and  stakeholder organizations we interviewed identified common factors that  added to their administrative workload and costs for complying with  selected requirements. These factors included:  variation in agencies\u2019 implementation of requirements, pre-award requirements for applicants to develop and submit detailed  documentation for grant proposals, and  increased prescriptiveness of certain requirements.", "We have also reported on a number of initiatives intended to address the  challenges grantees encounter throughout the grants lifecycle. These  initiatives include consolidating and revising grants management  circulars, simplifying the pre-award phase, promoting shared information  technology solutions for grants management, and improving the  timeliness of grant closeout and reducing undisbursed balances. Our  work includes reviews of efforts to submit the Consolidated Federal  Financial Report through a single system and to standardize notices of  award to reduce reporting burden. In addition, the Digital Accountability  and Transparency Act of 2014 (DATA Act) required the Office of  Management and Budget (OMB) to establish a pilot program to develop  recommendations for reducing reporting burden for recipients of federal  awards. In 2016 and 2017, we reported on the design and  implementation of the OMB pilot program, known as the Section 5 Pilot,  aimed at developing recommendations for reducing reporting burden for  grant recipients and contractors. We made a number of  recommendations to improve the design of the Section 5 Pilot to ensure  its consistency with leading practices for pilot design, which OMB has  implemented. We continue to monitor implementation of the Section 5  Pilot through ongoing work and look forward to keeping the subcommittee  informed about our findings."], "subsections": []}, {"section_title": "Transparency of Grant Spending Can Inform Decision Making", "paragraphs": ["To provide increased transparency to agencies, Congress, and the public,  the DATA Act required OMB, the Department of the Treasury (Treasury),  and other federal agencies to increase the types of information available  on the more than $3.7 trillion in annual federal spending, including federal  spending on grants. The law requires OMB and Treasury to establish  data standards to enable the reporting and tracking of agency spending at  multiple points in the spending lifecycle. Since enactment, OMB,  Treasury, and federal agencies have addressed many of the policy and  technical challenges presented by the act\u2019s requirements, including  standardizing data elements across the federal government, linking data  contained in agencies\u2019 financial and award systems, and expanding the  types of data reported. However, in a 2017 report, we found  inconsistencies in key award data elements and issues with the  completeness and quality of the information reported. We made a number  of recommendations to OMB and Treasury to clarify guidance to help  agencies fully comply with DATA Act requirements and report accurate  data and to disclose known data quality issues. OMB and Treasury  generally agreed with our recommendations. Once the accuracy of these  data are improved, federal managers should be better able to make data  driven decisions to address ongoing government management challenges  and improve the effectiveness and efficiency of government programs."], "subsections": []}, {"section_title": "Effective Grants Management Benefits from Collaboration and Consultation", "paragraphs": ["The process of distributing federal assistance through grants is  complicated and involves many different parties\u2014both public and  private\u2014with different organizational structures, sizes, and missions. A  lack of collaboration among and between federal agencies, state and  local governments, and nongovernmental grant participants presents a  challenge to effective grants implementation. Given the complexity of  managing intergovernmental grants, collaboration among the grant  participants, particularly with regard to information sharing, is an  important factor in effective grants management. For example, one of the  lessons learned in our work on the American Recovery and Reinvestment  Act of 2009 (Recovery Act) is that increased accountability requirements  and aggressive timelines require coordination\u2014both vertically among  levels of government and horizontally within the same level of  government\u2014to share information and work toward common goals during  implementation. Intra- and intergovernmental networks facilitated efforts  to achieve the purposes of the act in an effort to efficiently and effectively  spend the grant funds.", "Our work on interagency grants management reform initiatives also found  that inadequate ongoing communication with grantees sometimes  resulted in poor implementation and prioritization of initiatives. Our 2014  work on the Recovery Act illustrated how agencies can effectively  approach ongoing communication. For example, the developers of  Recovery.gov used input from user forums, focus groups, and usability  testing with interested citizens to collect feedback and  recommendations. This information then informed the development of  the website from its initial stages. More recently, in our 2014 work on the  DATA Act, we have noted OMB and Treasury efforts to allow the public to  share their views and comment on the development of federal data  standards."], "subsections": []}, {"section_title": "Identifying Fragmentation, Overlap and Duplication Could Result in Greater Efficiencies", "paragraphs": ["Our prior work has shown that numerous federal grant programs created  over time without coordinated purposes and scope can result in grants  management challenges. Addressing these challenges may achieve cost  savings and result in greater efficiencies in grant programs. Our work has  underscored the importance of identifying fragmentation, overlap, or  duplication in a number of federal programs, including grants  management practices. For example, in January 2017, we found that  the National Park Service, Fish and Wildlife Service, Food and Nutrition  Service, and Centers for Disease Control and Prevention had not  established guidance and formal processes to avoid duplication and  overlap among grants in their agencies before awarding grants. We  recommended that these agencies do so, and they agreed. In response,  these agencies have taken a number of actions to address the  recommendation. For example, the Department of the Interior provided us  documentation showing that the Fish and Wildlife Service now requires  that discretionary grant applicants provide a statement that addresses  whether there is any overlap or duplication of proposed projects or  activities to be funded by the grant. The Fish and Wildlife Service also  updated its guidance to grant awarding offices instructing them to perform  a potential overlap and duplication review of all selected applicants prior  to making grant awards."], "subsections": []}, {"section_title": "Strong Internal Controls and Oversight Facilitate Effective Use of Grant Funds", "paragraphs": ["Our prior work has shown that when awarding and managing federal  grants, effective oversight and internal control is important to provide  reasonable assurance to federal managers and taxpayers that grants are  awarded properly, recipients are eligible, and federal grant funds are used  as intended and in accordance with applicable laws and regulations.  Internal control comprises the plans, methods, and procedures agencies  use to be reasonably assured that their missions, goals, and objectives  can be met. In numerous reviews, we and agency inspectors general  identified weaknesses in agencies\u2019 internal controls for managing and  overseeing grants. Specifically, we found that when such controls are  weak, federal grant-making agencies face challenges in achieving grant  program goals and assuring the proper and effective use of federal funds  to help avoid improper payments. Our work has identified weaknesses in  grants oversight and accountability issues that span the government  including undisbursed grant award balances, single audit submissions  that are late, and significant levels of improper payments in grant  programs. Key grants management challenges related to internal controls  and oversight that we have identified include:", "Timeliness of grant closeouts. Federal grant-making agencies must  close out grants when the grantee\u2019s period of performance has ended  in order to ensure that grantees have met all financial requirements  and provide final reports as required. Closing out grants also allows  agencies to identify and redirect unused funds to other projects and  priorities as authorized or to return unspent balances to the Treasury.  These accounts, and, in some cases, the undisbursed balances  associated with them, persisted as an issue for agencies, as we  reported in 2008, 2012, and 2016. In January 2016, the Grants  Oversight and New Efficiency Act (GONE Act) was signed into law.", "The act, passed in part in response to our work, required government- wide reporting of undisbursed balances in expired grant accounts.", "The GONE Act requires that agencies report on the grants for which  the grantee\u2019s period of performance had expired for more than 2  years, including those with undisbursed balances and with zero dollar  balances remaining in the accounts. In the fall of 2017, many  agencies included in their annual Agency Financial Reports an  appendix providing information required by the GONE Act. For  example, the Department of Health and Human Services (HHS)  reported almost $2 billion in undisbursed funds remaining in 16,603  grant accounts that were two years or more past their periods of  performance and 6,512 grant accounts that had no funds remaining in  them. HHS grant officials told us that they intend to close as many of  these grant accounts as possible during this fiscal year.", "Timely submission of single audits. As we have previously  reported, one key way that federal agencies oversee nonfederal  grantees is through an audit of their expenditures of federal awards,  referred to as a single audit. The single audit is an audit of the award  recipient\u2019s expenditure of federal awards and of its financial  statements. A single audit can identify deficiencies in the award  recipient\u2019s compliance with the provisions of laws, regulations,  contracts, or grant agreements and in its financial management and  internal control systems. Correcting such deficiencies can help  reasonably assure the effective use of federal funds and reduce  federal improper payments. In 2017, we reported that of the five  departments we reviewed\u2014the Departments of Agriculture,  Education, HHS, Housing and Urban Development, and  Transportation\u2014some of the departments\u2019 subagencies did not  effectively design policies and procedures to reasonably assure the  timely submission of single audit reports by award recipients. In this  report, we made 21 recommendations to these departments. Some  action has been taken to date in response to these recommendations.", "Avoiding improper payments of federal grants. As we have  previously reported, improper payments\u2014payments that should not  have been made or that were made in an incorrect amount\u2014have  consistently been a government-wide issue. Since fiscal year 2003\u2014 when certain agencies were required by statute to begin reporting  estimated improper payments for certain programs and activities\u2014 cumulative improper payment estimates have totaled about $1.4  trillion. Our reviews of Medicaid, a joint federal-state health care  program and significant source of federal grant funding to state  governments, have shown that the program is particularly vulnerable  to improper payments, given its size, diversity, and complexity. For  example, Medicaid accounted for more than 26 percent ($36.7 billion)  of the nearly $141 billion government-wide improper payment  estimate in fiscal year 2017. We have also reported that federal  spending for Medicaid is expected to significantly increase, so it is  especially critical that appropriate measures be taken to reduce  improper payments in this program."], "subsections": []}]}, {"section_title": "Opportunities to Effectively Advance Current Grants Management Initiatives", "paragraphs": ["Recent and proposed legislative- and executive-sponsored initiatives  aimed at grants management reform, present opportunities to improve the  efficiency, effectiveness, and transparency of federal grants. Our work on  the design and implementation of merit-based grant award selection and  initiatives to manage for results across the federal government has  highlighted a number of key features necessary to effectively implement  such crosscutting initiatives. Those features include:", "Establishing implementation goals and tracking progress. Our  work highlighted the importance of establishing an implementation  schedule and tracking progress toward priorities to help pinpoint  performance shortfalls and suggest midcourse corrections, including  any needed adjustments to future priorities and milestones.", "Identifying and agreeing on leadership roles and responsibilities.  Our work has shown that when interagency councils clarify who will  do what, identify how to organize their joint and individual efforts, and  articulate steps for decision making, they enhance their ability to work  together and achieve results.", "Developing an effective communication strategy. We reported on  the importance of two-way communication that allows for feedback  from relevant stakeholders. For example, our work showed that  grantees felt that a lack of opportunities to provide timely feedback  resulted in poor implementation and prioritization of streamlining  initiatives and limited grantees\u2019 use and understanding of new  functionality of electronic systems.", "In addition, given the number and diversity of grantor agencies and  grantmaking programs, we believe it is important that any grant reform  initiative integrate with other government-wide reform efforts on related  issues. One such reform initiative is the PMA, which lays out a long-term  vision for modernizing the federal government and improving the ability of  agencies to achieve results. The PMA identified a set of CAP goals to  target areas where multiple agencies must collaborate to effect change  and report progress in a manner the public can easily track. According  to the PMA, one of the goals included in the agenda\u2014the Results- Oriented Accountability for Grants CAP goal\u2014is intended to maximize the  value of grant funding by applying a risk-based data-driven framework  that balances compliance requirements with demonstrating successful  results for taxpayers. The PMA further states that this CAP goal seeks to  standardize grant reporting data and improve data collection in ways that  will increase efficiency, promote evaluation, and reduce reporting burden.  Effectively advancing results-oriented accountability for grants will require  that implementation of this CAP goal moves forward in tandem with  related efforts to implement the DATA Act and advance the use of  evidence to inform grant policy, highlighted below:", "DATA Act implementation. As our work has shown, the DATA Act  will continue to be a critical driver of grants management change and  reform. When fully implemented, the act will improve the  accountability and transparency of federal spending data by (1)  establishing government-wide financial data standards so that data  are comparable across agencies and (2) holding federal agencies  more accountable for the quality of the information disclosed. Such  increased transparency provides opportunities for improving the  efficiency and effectiveness of federal spending; increasing the  accessibility of data to benefit the public and the business community;  and improving oversight to prevent and detect fraud, waste, and  abuse of federal funds. As efforts to implement the DATA Act move  forward, we will continue to monitor implementation efforts and  coordinate our efforts with agency inspectors general.", "Evidence-based policy. To better integrate evidence and rigorous  evaluation in budget, management, operational, and policy decisions,  OMB has encouraged federal agencies to expand or improve the use  of grant program designs that focus federal dollars on effective  practices while encouraging innovation in service delivery. For  example, OMB\u2019s efforts to foster a culture of evidence-based policy  resulted in several federal agencies\u2019 implementation of tiered  evidence grant programs. Under this approach, agencies establish  tiers of grant funding based on the level of evidence of effectiveness  provided for a grantee\u2019s service model. Agencies award smaller  amounts to promising service models with a smaller evidence base,  while providing larger amounts to those with more supporting  evidence. In our 2016 report, we recommended that OMB establish a  formal means for federal agencies to collaborate on tiered evidence  grants. In response, in 2017, OMB launched the Tiered Evidence  Grants Working Group to collaborate and share lessons learned, for  example, on the use and dissemination of evaluation results.", "These efforts should complement each other. A lack of integration could  result in duplication of effort or run the risk of working at cross-purposes.  For example, the integration of the Results-Oriented Accountability for  Grants CAP goal with ongoing DATA Act implementation and efforts to  advance evidence-based approaches to federal grant funding and  administration presents a complex governance challenge.", "In conclusion, designing and implementing grants management policies  that strike an appropriate balance between ensuring accountability for the  proper use of federal funds without increasing the complexity and cost of  grants administration for agencies and grantees is a longstanding  governance challenge. As the initiatives above demonstrate, meeting this  challenge and successfully implementing grants management reforms will  require intragovernmental coordination at the federal level,  intergovernmental collaboration with state and local governments and  other partners, and ongoing integration to ensure that grants  management reforms and related DATA Act and evidence-based policy  implementation efforts are complementary and do not exist in separate  silos.", "We look forward to continuing our ongoing work to review implementation  of the CAP goals, the DATA Act, and the infusion of evidence-based  policy in federal grant programs. We also look forward to working with this  and other committees as we assist Congress in identifying additional  opportunities to advance grants management reform through reviews of  individual grant programs and crosscutting analysis of grant  implementation and grants management reform efforts.", "Chairman Palmer, Ranking Member Raskin, and members of the  Subcommittee, this concludes my prepared remarks. I look forward to  answering any questions you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact me at (202) 512-6806  or sagerm@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Individuals making key contributions to this testimony were  Brenda Rabinowitz and Tom James, Assistant Directors, Alexandra  Edwards, Julie Miller, Andrew J. Stephens, and Walter Vance."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["The Nation\u2019s Fiscal Health: Action Is Needed to Address the Federal  Government\u2019s Fiscal Future. GAO-18-299SP. Washington, D.C.: June 21,  2018.", "Improper Payments: Actions and Guidance Could Help Address Issues  and Inconsistencies in Estimation Processes. GAO-18-377. Washington,  D.C.: May 31, 2018.  2018 Annual Report: Additional Opportunities to Reduce Fragmentation,  Overlap, and Duplication and Achieve Other Financial Benefits.  GAO-18-371SP. Washington, D.C.: Apr. 26, 2018.", "DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness  and Accuracy of Spending Data and Disclose Limitations. GAO-18-138.  Washington, D.C.: Nov. 8, 2017.", "Managing for Results: Further Progress Made in Implementing the GPRA  Modernization Act, but Additional Actions Needed to Address Pressing  Governance Challenges. GAO-17-775 Washington, D.C.: Sept. 29, 2017.", "Single Audits: Improvements Needed in Selected Agencies\u2019 Oversight of  Federal Awards. GAO-17-159. Washington, D.C.: Feb. 16, 2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: Feb. 15,  2017.", "Grants Management: Selected Agencies Should Clarify Merit-Based  Award Criteria and Provide Guidance for Reviewing Potentially  Duplicative Awards. GAO-17-113. Washington, D.C.: Jan. 12, 2017.", "Tiered Evidence Grants: Opportunities Exist to Share Lessons from Early  Implementation and Inform Future Federal Efforts. GAO-16-818.  Washington, D.C.: Sept. 21, 2016.", "Federal Research Grants: Opportunities Remain for Agencies to  Streamline Administrative Requirements. GAO-16-573. Washington,  D.C.: June 22, 2016.", "Managing for Results: OMB Improved Implementation of Cross-Agency  Priority Goals, But Could Be More Transparent about Measuring  Progress. GAO-16-509. Washington, D.C.: May 20, 2016.", "DATA Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet  Goal of Reducing Recipient Reporting Burden. GAO-16-438. Washington,  D.C.: Apr. 19, 2016.", "Grants Management: Actions Needed to Address Persistent Grant  Closeout Timeliness and Undisbursed Balance Issues. GAO-16-362.  Washington, D.C.: Apr. 14, 2016.", "Federal Data Transparency: Effective Implementation of the DATA Act  Would Help Address Government-wide Management Challenges and  Improve Oversight. GAO-15-241T. Washington, D.C.: Dec. 3, 2014.", "Managing for Results: Implementation Approaches Used to Enhance  Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.:  Feb, 14, 2014.", "Recovery Act: Grant Implementation Experiences Offer Lessons for  Accountability and Transparency. GAO-14-219. Washington, D.C.: Jan.  24, 2014.", "Grant Workforce: Agency Training Practices Should Inform Future  Government-wide Efforts. GAO-13-591. Washington, D.C.: June 28,  2013).", "Grants Management: Oversight of Selected States\u2019 Disbursement of  Federal Funds Addresses Timeliness and Administrative Allowances.  GAO-13-392. Washington, D.C.: Apr. 16, 2013.", "Grants Management: Improved Planning, Coordination, and  Communication Needed to Strengthen Reform Efforts. GAO-13-383.  Washington, D.C.: May 23, 2013.", "Grants to State and Local Governments: An Overview of Federal Funding  Levels and Selected Challenges. GAO-12-1016. Washington, D.C.: Sept.  25, 2012.", "Grants Management: Action Needed to Improve the Timeliness of Grant  Closeouts by Federal Agencies. GAO-12-360. Washington, D.C.: Apr. 16,  2012.", "Grants Management: Attention Needed to Address Undisbursed  Balances in Expired Grant Accounts. GAO-08-432. Washington, D.C:  Aug. 29, 2008.", "Grants Management: Grantees\u2019 Concerns with Efforts to Streamline and  Simplify Processes. GAO-06-566. Washington, D.C.: July 28, 2006.", "Grants Management: Additional Actions Needed to Streamline and  Simplify Processes. GAO-05-335. Washington, D.C.: Apr. 18, 2005.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["Federal grants to state and local governments totaled over $674 billion in FY 2017. The number of grant programs across federal agencies has increased in recent years, as has the level of funding, which has led to a more complex federal grant management process.", "We testified about a number of grants management suggestions we have made in recent years, including:", "Streamlining grant requirements so that they aren't duplicative or unnecessarily burdensome", "Encouraging greater collaboration among grant participants to ensure effective grant implementation", "Increasing the completeness and quality of publicly available data on federal grant spending"]}
{"id": "GAO-18-330", "url": "https://www.gao.gov/products/GAO-18-330", "title": "DOD Contracted Services: Long-Standing Issues Remain about Using Inventory for Management Decisions", "published_date": "2018-03-29T00:00:00", "released_date": "2018-03-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD obligated about $150 billion on contracted services\u2014such as information technology support and maintenance of defense facilities\u2014in fiscal year 2016. DOD has faced long-standing challenges in effectively managing its service acquisitions.", "The National Defense Authorization Act for Fiscal Year 2017 amended existing requirements for DOD to annually collect data on contracted services and to compile and review an inventory of the functions performed by contractor personnel. The Act also contained a provision for GAO to report on the status of this data collection and to assess DOD's use of the inventory. This report addresses how DOD (1) collected data to create an inventory of fiscal year 2016 contracted services and (2) used the inventory to inform workforce planning, workforce mix, and budget decisions. GAO has reported on DOD's inventory of contracted services since 2010.", "GAO reviewed OSD and the military departments' guidance, as well as the military departments' inventory submissions to OSD. GAO also analyzed contracted services data and interviewed OSD and military department officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the Department of Defense (DOD) used the same sources as it did in prior years to collect data and create an inventory of fiscal year 2016 contracted services, which is intended, in part, to help DOD make more strategic workforce decisions and better align resources. Office of the Secretary of Defense (OSD) guidance, issued in September 2017 to implement congressional direction, required the military departments to include in their submissions, at a minimum, purchases of services with a total contract value of $3 million or more, and in four services acquisition portfolio groups\u2014logistics management, equipment-related, knowledge-based, and electronics and communications.", "As permitted under OSD's inventory guidance, the military departments varied somewhat in how they reported their contracted services data to OSD. For example, the Army and Air Force included purchases both over and under $3 million and the Air Force also identified purchases by the four portfolio groups. The Navy submitted summary data of contracted services but did not provide a list of purchases in time to be included in an inventory summary for Congress. An OSD official said, however, that the information provided was sufficient to prepare the inventory summary, which OSD submitted to Congress in February 2018. The Navy subsequently provided a list of its fiscal year 2016 service purchases to OSD in March 2018.", "Military departments generally have not developed plans to use the inventory for workforce and budget decisions, as statutorily required. This is consistent with what GAO found in November 2014 and October 2016. GAO's analysis found that the military departments' guidance generally does not require using the inventory in workforce and budget decisions (see table).", "Army manpower officials told GAO that inventory information such as the number of contractor full-time equivalents and the functions performed can be used to inform workforce mix decisions. However, workforce and budget officials at the Army, Navy, and Air Force stated they make limited use of the inventory to inform decision-making, in part because by the time the inventory is available, the data reflected are often too outdated to inform strategic decisions. GAO has previously recommended ways to improve use of the inventory. In November 2014, for example, GAO found that a lack of officials at the military departments who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the legislative requirement to use the inventory to support management decisions. This issue persists, as the military departments have not made final designations for accountable officials responsible for developing plans and enforcement mechanisms to use the inventory."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making new recommendations in this report. Seven of 18 prior GAO recommendations related to the inventory remain open, including a recommendation for DOD to identify officials at the military departments responsible for developing plans and enforcement mechanisms to use the inventory. In its comments, DOD stated it is committed to improving its inventory processes."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) is the federal government\u2019s largest  purchaser of contractor-provided services, which obligated about $150  billion on contracted services in fiscal year 2016. DOD relies on  contractors to provide a wide array of services, including support for  management, information technology, and weapon systems. There are  benefits to using contractors to perform services for the government, but  the government can become overly reliant on contractors and risk  contractors performing inherently governmental functions. This risk is  increased for certain types of services, including program evaluation,  systems engineering, and information technology support services, as the  Office of Federal Procurement Policy and our prior work has found.", "Beginning in 2001, Congress enacted legislation to improve DOD\u2019s ability  to manage its acquisitions of contracted services, to make more strategic  decisions about the appropriate workforce mix, and to better align  resource needs through the budget process to achieve that mix. As part  of these efforts, section 2330a of title 10 of the U.S. Code requires DOD  to conduct certain activities, including: establishing a data collection system to provide management  information with regard to service purchases by the military  departments and defense agencies; and annually compiling an inventory of services contracted for or on behalf  of DOD during the preceding fiscal year. This inventory is intended, in  part, to help provide better insight into the number of contractor full- time equivalents (FTE) providing services to the department and the  functions they are performing.", "Further, this section requires the military departments and defense  agencies to undertake certain actions using the inventory, including:  reviewing the contracts and activities in the inventory for which the  secretary or agency head is responsible to ensure that personal  services contracts in the inventory are performed under applicable  statutes and regulations and to identify contracted functions that DOD  should consider for conversion to government performance, also  known as insourcing; and developing a plan, including an enforcement mechanism and approval  process, to use the inventory for strategic workforce planning,  workforce mix determinations, and budget decisions.", "Section 812 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 amended these requirements by changing the scope of the  data to be collected and the type of activities to be reported to Congress.  Specifically, section 812 increased the minimum value of service  purchases for which information is to be collected from those in excess of  $150,000 to those in excess of $3 million, reduced the types of services  included, and changed DOD\u2019s reporting requirements. Section 812 also  contained a provision for us to report on the status of data collection and  assess DOD\u2019s efforts to develop a plan and enforcement mechanism to  use the inventory. This report addresses how DOD (1) collected data on  its service purchases to create an inventory of fiscal year 2016 contracted  services and (2) used the inventory to inform workforce planning,  workforce mix, and budget decisions.", "To determine how DOD collected data to create an inventory of fiscal  year 2016 contracted services (fiscal year 2016 inventory), we reviewed  relevant legislation and the Office of the Secretary of Defense\u2019s (OSD)  Fiscal Year 2016 Guidance Related to the Inventory and Tracking of  Contracted Services (OSD\u2019s inventory guidance), issued in September  2017. We focused on the fiscal year 2016 inventory because it was the  most recent inventory at the time of our review and is the inventory to  which the September 2017 guidance pertains. We interviewed officials at  the Under Secretary of Defense offices for Personnel and Readiness  (USD(P&R)); Acquisition, Technology, and Logistics (USD(AT&L)); and  the Under Secretary of Defense (Comptroller) about their roles in  establishing OSD\u2019s inventory guidance for fiscal year 2016 and other  aspects of the inventory process. We focused our review of the process  for compiling data for the inventory on the military departments because  they represented about 79 percent of overall service contract obligations  in fiscal year 2016, though other DOD components, such as combatant  commands and defense agencies, are also responsible for creating  inventories under OSD\u2019s inventory guidance. We interviewed officials at  the military departments\u2014Army, Navy, and Air Force\u2014to understand  their approach to collecting contracted services data, including their use  of data systems, and compiling their inventories.", "To understand the potential impact on data collection of the recent  statutory changes, as implemented in OSD\u2019s inventory guidance, we  reviewed and analyzed information from USD(AT&L)\u2019s Defense  Procurement and Acquisition Policy (DPAP) office. Specifically, we  analyzed the contracted services data from the Federal Procurement  Data System-Next Generation (FPDS-NG) that DPAP posted on its  website in sets showing fiscal year 2016 service purchases before and  after scope changes were applied. To ascertain the reliability of the  data, we replicated USD(AT&L)\u2019s process for extracting data from FPDS- NG based on officials\u2019 descriptions of that process and compared the  results with the data on USD(AT&L)\u2019s website. We found minimal  differences (0.4 percent or less) in the number of and amounts of fiscal  year 2016 obligations for service purchases between the two data sets  and determined the data were reliable for estimating the potential  changes in the amount of data reported. We also reviewed the military  departments\u2019 inventory submissions to OSD to determine how they  incorporated key aspects of OSD\u2019s inventory guidance, such as the dollar  value and types of contracts included.", "To determine how DOD used the inventory for workforce planning,  workforce mix, and budget decisions, we updated the information we  collected for our October 2016 report on this issue to establish the extent  to which each military department\u2019s strategic workforce planning,  workforce mix, and budgeting guidance and processes required or cited  the use of the inventory of contracted services, as of February 2018. To  do so, we interviewed and obtained information from manpower and  budget officials at the military departments about the status of their efforts  to develop plans and to use the inventory, confirmed whether the  guidance identified in our October 2016 report remained current as of  February 2018, and, as appropriate, obtained and reviewed any new or  revised guidance issued after our October 2016 report. In responding to  our draft report, the Navy provided additional information about its  guidance in March 2018. In addition, we interviewed USD(P&R),  USD(AT&L), and Comptroller officials regarding their department-wide  perspectives on the utility of the inventory to inform management  decisions.", "We conducted this performance audit from June 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Contracted Services Data Collection and Inventory Requirements and Process", "paragraphs": ["In part to improve the information available and management of DOD\u2019s  acquisition of services, Congress enacted section 2330a of title 10 of the  U.S. Code in 2001, which required the Secretary of Defense to establish  a data collection system to provide management information on each  purchase of services by a military department or defense agency.  Congress amended section 2330a in 2008 to add a requirement for the  Secretary of Defense to submit an annual inventory of the activities  performed pursuant to contracts for services on behalf of DOD during the  preceding fiscal year.", "The inventory is to include a number of specific data elements for each  identified activity, including:  the function and missions performed by the contractor;  the contracting organization, the military department or defense  agency administering the contract, and the organization whose  requirements are being met through contractor performance of the  function;  the funding source for the contract by appropriation and operating  agency;  the fiscal year the activity first appeared on an inventory;  the number of contractor employees (expressed as FTEs) for direct  labor hours and associated cost data collected from contractors; a determination of whether the contract pursuant to which the activity  is performed is a personal services contract; and a summary of the contracted services data required to be collected in  subsection 2330a(a) of title 10 of the U.S. Code.", "The secretaries of the military departments and heads of the defense  agencies are required to review the contracts and activities in the  inventory for which they are responsible to ensure that personal services  contracts were performed appropriately and that the activities listed do  not include inherently governmental functions, among other factors. In  addition, in 2011 Congress amended section 2330a to add a requirement  that the secretaries of the military departments and heads of the defense  agencies develop a plan, including an enforcement mechanism and  approval process, to provide for the use of the inventory by the military department or  defense agency to implement requirements of section 129a of title 10,  U.S. Code (section 129a requires policies and procedures for  determining the appropriate mix of military, civilian, and contractor  personnel to perform DOD\u2019s mission);  facilitate the use of the inventory for compliance with section 235 of  title 10, U.S. Code (section 235 requires budget justification materials  to include the amount requested for procurement of contract services  and the number of full-time contractor employees projected); provide for appropriate consideration of the conversion of activities  identified under section 2463 of title 10, U.S. Code (section 2463  requires procedures to ensure civilian employees are considered for  performing critical functions); and ensure that the inventory is used to inform strategic workforce  planning.", "In section 812 of the National Defense Authorization Act for Fiscal Year  2017, enacted in December 2016, Congress further amended section  2330a by reducing the scope of the required data collection, specifying  the type of contracted services to be included in an inventory summary  submitted to Congress, and calling for particular attention to the military  departments\u2019 review of certain high-risk contracts (see table 1).", "To address the requirements of section 2330a of title 10, U.S. Code, DOD  is to conduct several key steps for each fiscal year (see table 2).", "DOD has submitted to Congress annual, department-wide inventories for  fiscal years 2008 through 2015. As shown in table 2, each inventory is  required to be submitted to Congress by June 30, and is to reflect  activities performed during the preceding fiscal year. DOD has not always  submitted the inventory to Congress on time. For example, DOD was  required to submit the fiscal year 2015 inventory to Congress on June 30,  2016, but did not do so until September 20, 2016. For the inventory of  fiscal year 2016 contracted services, the department submitted its  summary of the inventory to Congress in February 2018."], "subsections": []}, {"section_title": "Prior GAO Work", "paragraphs": ["Over the past 8 years, we have issued several reports on DOD\u2019s efforts to  compile and review its inventory of contracted services. We have made  18 recommendations, 7 of which are still open, on a variety of issues  related to the inventory. Key findings and recommendations in our prior  work that pertain to this review are included below.", "In November 2014, we found the military departments generally had  not developed plans to use the inventory to facilitate DOD\u2019s workforce  planning, workforce mix, and budget decision-making processes, and  that numerous offices were responsible for the various decision- making processes at the military departments. This, in turn, left the  department at risk of not complying with legislative requirements. We  recommended that secretaries of the military departments identify an  accountable official within their departments with responsibility for  leading and coordinating efforts across their manpower, budgeting,  and acquisition functional communities, and, as appropriate, revise  guidance, develop plans and enforcement mechanisms, and establish  processes. DOD concurred with the recommendation, but as of  January 2018, the Army and Navy still had not identified accountable  officials. The Air Force has identified an interim accountable official in  its Program Executive Office for Combat and Mission Support,  according to an Air Force official.", "In November 2015, we found that DOD\u2019s effort to establish an office to  implement and support a common, enterprise-wide contractor  manpower data system had encountered a number of challenges and  lacked clearly defined roles and responsibilities for the office. DOD  had not outlined the relationships between the support office, military  departments, and other stakeholders in exploring the longer-term  solution to collect contractor manpower data and integrate inventory  data within the military departments\u2019 decision-making processes. We  recommended DOD clearly identify the longer-term relationships  between the support office, military departments, and other  stakeholders. DOD concurred and has since stood up the support  office (now called the Total Force Management Support Division) and  implemented the Enterprise-wide Contractor Manpower Reporting  Application (ECMRA) department-wide. However, DOD has not yet  fully identified longer-term relationships. By doing so, DOD would help  ensure that efforts to integrate contracted services data into decision- making processes will meet user needs and expectations.", "Most recently, in October 2016, we found that DOD components  (which include the military departments) continued to improve their  reviews of the inventory compared to prior years, but that they may  continue to underreport contractors providing services that are closely  associated with inherently governmental functions. Specifically, our  analysis found that in fiscal year 2014 DOD obligated about $28 billion  for contracts in the product service codes that the Office of Federal  Procurement Policy and GAO identified as more likely to include  closely associated with inherently governmental functions. In  comparison, the components identified a total of $10.8 billion in  obligations or dollars invoiced for contracts that included such work.  We also found that the military departments had not yet developed  plans to use the inventory to inform workforce mix, strategic workforce  planning, and budget decision-making. We did not make new  recommendations in that report."], "subsections": []}]}, {"section_title": "DOD Collected Data for the Inventory of Fiscal Year 2016 Contracted Services Using the Same Sources as in Prior Years", "paragraphs": ["To facilitate DOD\u2019s submission of an inventory summary to Congress,  OSD\u2019s inventory guidance required each military department to submit to  the offices of the USD(AT&L) and USD(P&R) a list of all services  provided under contract consistent with the guidance and within the  scope of section 2330a of title 10, U.S. Code, as amended by section 812  of the fiscal year 2017 NDAA. The military departments collected data for  the fiscal year 2016 inventory using the same data sources\u2014FPDS-NG  and ECMRA\u2014as they had in prior years, though each department used  slightly different processes from one another.", "OSD\u2019s inventory guidance provided for flexibility in how the military  departments compiled and submitted data. For example, the guidance  required that the inventory submissions include, at a minimum, all  purchases of services with a total contract value of $3 million or more and  in the following service acquisition portfolio groups: logistics management  services; equipment-related services; knowledge-based services; and  electronics and communications services. It did not, however, preclude  the military departments from submitting additional information beyond  the minimum threshold. In addition, under the guidance, military  departments were encouraged to augment FPDS-NG data with data from  ECMRA, as has been the process in the past. We analyzed the effect of  the recent statutory changes, as implemented in OSD\u2019s inventory  guidance, on fiscal year 2016 contracted services data reported in FPDS- NG and compiled by USD(AT&L). We found that the number of service  purchases reported under the inventories across the department would  be reduced to about 2 percent of the total service purchases if the  components reported only the minimum information required under  OSD\u2019s guidance. This approach would capture about 30 percent of the  total service contract dollars.", "Officials responsible for overseeing the data collection effort within each  of the three military departments stated that for fiscal year 2016 they  collected data captured in FPDS-NG and ECMRA, as they have done for  previous inventories. The military departments varied somewhat in how  they collected and reported their data, which is permitted under OSD\u2019s  guidance. The following is a description of the military departments\u2019  processes for collecting data and key aspects of their inventories:", "Army officials stated that they extracted their inventory data for fiscal  year 2016 primarily from ECMRA and used FPDS-NG data to fill gaps  in data not collected in ECMRA, such as data on aspects of contract  competition (e.g., number of offers and small business  considerations). Army officials estimated that the total invoices in  ECMRA represented approximately 80 percent of contracted services  obligations for fiscal year 2016. In its inventory, submitted to OSD in  January 2018, the Army reported services purchased under contract  actions with fiscal year 2016 invoiced amounts both above and below  $3 million. The Army reported that its fiscal year 2016 inventory  accounts for $31 billion in invoiced amounts and 157,000 contractor  FTEs.", "Navy officials stated that they captured nearly all of their inventory  data for fiscal year 2016 from FPDS-NG and combined it with ECMRA  data. Navy officials estimated that approximately 75 percent of the  Navy services contracts that it believed should have been reported in  ECMRA were reported during fiscal year 2016. The Navy submitted  summary data, including fiscal year 2016 obligations and contractor  FTEs by command and in total, to OSD in December 2017. The Navy  did not provide a list of its fiscal year 2016 service purchases in time  to be included in the inventory summary for Congress, but a  USD(AT&L) official said the information provided was sufficient to  allow OSD to prepare the summary. The Navy subsequently  submitted its full inventory of fiscal year 2016 contracted services to  OSD in March 2018 and reported over $6.5 billion in obligations and  over 45,000 contractor FTEs.", "Air Force officials stated that they drew approximately 75 percent of  the data elements required for the inventory for fiscal year 2016 from  FPDS-NG. Air Force officials stated that they also extracted data from  the Air Force financial management system, such as total contracted  dollar amounts, and manpower data from ECMRA. Air Force officials  did not have an estimate of the percentage of service contracts that  were reported in ECMRA in fiscal year 2016. The Air Force submitted  its inventory to OSD in December 2017 and included services  purchased under contract actions with fiscal year 2016 invoiced  amounts or obligations both above and below $3 million. In addition,  the Air Force specifically identified purchases within each of the four  service acquisition portfolio groups specified in OSD\u2019s inventory  guidance. The Air Force reported approximately $14.6 billion in  obligations with an estimated 73,400 contractor FTEs in its fiscal year  2016 inventory.", "A USD(AT&L) official stated that he used the information provided by the  military departments and defense components to help create the  inventory summary required by section 812 of the fiscal year 2017 NDAA.  OSD submitted this inventory summary to Congress in February 2018.  This official added that OSD will discuss whether changes in its guidance  for the next inventory are needed to clarify what information the military  departments and defense components should submit."], "subsections": []}, {"section_title": "Military Departments Have Not Developed Statutorily Required Plans and Continue to Make Limited Use of the Inventory to Inform Management Decisions", "paragraphs": ["The military departments generally have not developed plans to use the  inventory to inform management decisions as required by subsection  2330a(e) of title 10 of the U.S. Code and OSD\u2019s inventory guidance.  Further, manpower and budget officials said they make limited use of the  inventory to inform strategic workforce planning, workforce mix, and  budget decisions. This situation is similar to what we have found in our  past work. Manpower and budget officials we spoke with stated the  inventory is often too outdated to inform their decision-making, though the  inventory provides a single source of certain types of information that are  not readily available elsewhere. This limited use may also reflect, in part,  the lack of accountable officials responsible for developing plans and  enforcement mechanisms to use the inventory, as we recommended in  November 2014."], "subsections": [{"section_title": "Military Departments Generally Have Not Developed Plans to Use the Inventory for Decision- Making", "paragraphs": ["Subsection 2330a(e) of title 10 of the U.S. Code, DOD Instruction  5000.74, and OSD\u2019s inventory guidance direct the military departments  and defense agencies to use the inventory to inform workforce and  budget decisions. When we last reported on this issue in October 2016,  we identified 12 guidance documents from the military departments  related to strategic workforce planning, workforce mix, and budget  decisions. Our current work found that 14 documents, some of which are  the same as what we reported in October 2016, make up the current set  of military departments\u2019 guidance in these areas. Further, we found the  degree to which these guidance documents require the use of the  inventory in these areas is still minimal\u20143 of the 14 documents include  requirements related to the inventory (see table 3).", "Two documents, the Army\u2019s July 2009 memorandum on civilian workforce  management and the Army\u2019s March 2010 concept plan guidance, require  the use of the inventory for insourcing plans to convert contracted  activities to performance by government personnel. Air Force Instruction  38-201 on management of manpower requirements directs the Air Force  manpower division to support the review of the inventory, but does not  require its use for workforce mix decisions.", "As noted previously, in November 2014 we found that no single office or  individual at the military departments was responsible for leading or  coordinating efforts between the various functional areas to develop a  plan to use the inventory to inform management decisions. As a result  we recommended that the secretaries of the military departments identify  accountable officials to do so. As of January 2018, the Army and Navy  still had not named accountable officials responsible for developing plans  and enforcement mechanisms to use the inventory for workforce and  budget decisions, according to officials at those departments. Navy  officials said they have not reached agreement on the appropriate  managerial level of an accountable official. According to an Air Force  official, the Air Force has named an official from the Program Executive  Office for Combat and Mission Support to serve on an interim basis. We  continue to believe this recommendation is valid and should be fully  implemented."], "subsections": []}, {"section_title": "Military Departments Make Limited Use of the Inventory for Decision- Making", "paragraphs": ["Army manpower officials we interviewed stated that the inventory  provided information that was not readily available elsewhere and the  information collected in the inventory process may be useful for making  workforce mix decisions. For example, Army manpower officials said the  inventory provides a single source for information like the number of  contractor FTEs, contractor labor hours and costs, the location of work  performance, and the functions performed. Army officials said they can  use this information to analyze cost factors and contract expenditures and  compare them to in-house costs. In addition, Army officials noted the  inventory provides information to address questions from Congress,  DOD, and Army leadership about the number and cost of contractors, and  that it is the only source of detailed data that supports analysis of the  contractor workforce mix that is statutorily required. Comptroller, Navy,  and Air Force officials added that they use information from the inventory  to estimate the average number of contractor FTEs that are reported in  DOD\u2019s annual budget request.", "However, representatives from the workforce and budgeting offices within  the military departments we interviewed also noted that the inventory has  limitations that hinder its use. These officials noted that the data reflected  in the inventory are often too outdated to help inform strategic decisions  that are usually made at the local level\u2014such as a specific military  installation\u2014based on real-time data. For example, Air Force officials said  that under the program objective memorandum (POM) process, the Air  Force identifies future budget requests and workforce needs 2 years  before the beginning of a fiscal year, whereas the most recent inventory  data available may already be 2 years old when that process starts. To  illustrate the issue, the officials noted that they were already planning for  the 2020 POM in early fiscal year 2018, although the fiscal year 2016  inventory was not yet available. As a result, if the Air Force were to use  inventory data to plan for the 2020 POM, they would have to rely on fiscal  year 2015 inventory data.", "Air Force officials also said certain types of information that are useful for  strategic planning, such as planned contracts for services and the scope  and duration of the existing contracts, are not captured in the inventory  process. Army officials had a similar perspective and said they do not use  the inventory to plan for the POM because collecting data on past  contracted services is not as relevant to estimating future requirements  and funding needs.", "As part of Congress\u2019s efforts to inform DOD\u2019s management of its  acquisition of contracted services, it enacted the inventory legislation. We  concluded in January 2011 that the real benefit of the inventory process  would ultimately be measured by its ability to inform management\u2019s  decision-making. As noted above, we have made recommendations to  help improve this decision-making, which we continue to believe should  be fully implemented. DOD officials have also identified ways in which the  inventory can be useful.", "Recent legislation and our prior work in other related areas have identified  additional means through which DOD can manage its acquisitions of  contracted services.", "In December 2017, the National Defense Authorization Act for Fiscal  Year 2018 was enacted. Section 851 requires DOD to regularly  analyze past spending patterns and anticipated future requirements  for its procurement of services and use these analyses to inform  decisions on the award of and funding for such service contracts.", "In August 2017, we found DOD had not fully implemented three key  leadership positions that were intended to enable DOD to more  strategically manage service acquisitions. We recommended the  USD(AT&L) reassess the roles, responsibilities, authorities, and  organizational placement of key leadership positions to help foster  strategic decision-making and improvements in the acquisition of  services. DOD concurred with our recommendation. In December  2017, the Deputy Secretary of Defense appointed a reform leader for  service contracts and category management\u2014an approach intended  to manage entire categories of spending across government for  commonly purchased goods and services\u2014and established related  reform teams to help ensure department-wide efficiency in contract  spending.", "In February 2016, we found that DOD\u2019s and Congress\u2019s insight into  future spending on contracted services was limited because DOD did  not identify service contract spending needs beyond the current  budget year. Although program offices generally kept track of their  future service contract needs and estimated costs for 5 years out,  they were not required to identify planned service contract spending  beyond the budget year. We recommended that the military  departments revise their programming guidance to collect information  on how contracted services will be used to meet requirements beyond  the budget year. DOD partially concurred with our recommendation,  but noted that the volatility of requirements and each budget cycle  constrain the department\u2019s ability to accurately quantify service  contract requirements beyond the budget year. We agreed that  requirements and budgets change over time, but our work showed  that the needed data already exists and is not captured in such a way  to inform senior leadership on future service contract spending. We  continue to believe that implementing this recommendation will assist  the department in gaining better insight into contracted service  requirements and enable more strategic decisions about the volume  and type of services it plans to acquire."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We are not making new recommendations in this report. We provided a  draft of this report to DOD for comment. In its written comments, which  are reprinted in appendix I, DOD stated that it remains committed to  improving its processes for collecting, analyzing, and reporting contracted  services data. DOD also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, Navy,  and Air Force; the Under Secretary of Defense for Personnel and  Readiness; the Under Secretary of Defense for Acquisition and  Sustainment; and the Under Secretary of Defense (Comptroller). In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Katherine Trimble (Assistant  Director); Brenna Derritt (Analyst-in-Charge); Pete Anderson; Dennis  Antonio; Vincent Balloon; Lorraine Ettaro; Gina Flacco; Kristine  Hassinger; and Julia Kennon made significant contributions to this review."], "subsections": []}]}], "fastfact": ["DOD spends billions of dollars on contracted services for tasks such as IT support, but it has struggled for years to effectively manage the range of services DOD buys. To build a full picture of purchases and make strategic decisions about them, it's required to compile an ongoing inventory of these purchases.", "We found that DOD continues to make limited use of the inventory. We have made 18 recommendations in the past on how to improve or better use the inventory, most of which have been implemented. However, military departments generally have not developed plans to use the inventory for workforce and budget decisions."]}
{"id": "GAO-18-127", "url": "https://www.gao.gov/products/GAO-18-127", "title": "Auto Recalls: NHTSA Should Take Steps to Further Improve the Usability of Its Website", "published_date": "2017-12-04T00:00:00", "released_date": "2017-12-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The number of vehicles affected by safety defect recalls increased sharply in recent years\u2014from nearly 13 million in 2011 to over 51 million in 2016. Once a defect is identified, auto manufacturers are required to send written notification to vehicle owners by mail. NHTSA also aims to enhance awareness of auto recalls by providing information on its website, NHTSA.gov .", "The Fixing America's Surface Transportation Act includes a provision requiring GAO to study the use of publicly available safety recall information. This report addresses: (1) how consumers and industry stakeholders use such information and (2) how easy to use do consumers find the auto recall areas of NHTSA.gov, among other objectives. To understand consumers' use of auto recall information and to test website usability, GAO conducted 12 focus groups with 94 consumers who had a recall. Focus groups were held in six locations selected for population and geographic variation. GAO identified key website usability practices and requested an evaluation by website usability professionals. GAO reviewed statutes, regulations, and NHTSA documents, and interviewed industry stakeholders\u2014including 10 manufacturers selected based on sales market share and other factors."]}, {"section_title": "What GAO Found", "paragraphs": ["Consumers, manufacturers, and auto dealers use publicly available auto recall information differently. For example, the 94 consumers in 12 focus groups that GAO conducted used this information to decide whether to repair their vehicles. These consumers overwhelmingly cited safety risk and convenience as the two most influential factors they considered. Most consumers reported a preference for receiving recall notification by at least one electronic means, such as by e-mail or text message, in addition to mail. However, only 7 of 94 consumers reported receiving electronic notifications, suggesting a gap between the industry's auto recall notification practices and consumers' preferences. (See fig.). In response to a mandate in law, in September 2016, the National Highway Traffic Safety Administration (NHTSA) issued a proposed rule that, if finalized, would require manufacturers to notify consumers about auto recalls by electronic means in addition to mail.", "Most consumers in GAO's focus group website usability tests found the auto recall areas of NHTSA's website\u2014NHTSA.gov\u2014easy to use; however, some consumers experienced difficulties when asked to complete auto recall related tasks. For example, when consumers attempted to search for recalls affecting their specific vehicles, some found the search results confusing, leading them to question the accuracy of the results. Similarly, some consumers were hampered in searching for recalls by their vehicles' year, make, and model because the website did not always display model options using plain language. GAO found that the auto recall areas of NHTSA.gov do not always reflect federal and industry key website usability practices, and that an independent evaluation conducted by website usability professionals at GAO's request identified similar issues. NHTSA is in the process of consolidating its websites and plans to conduct a website usability study of NHTSA.gov with consumers after the consolidation is complete. However, the agency has not determined a completion date for the consolidation effort\u2014an essential step for organizations to effectively guide their information technology efforts. Without establishing a completion date and taking interim steps to improve the usability of NHTSA.gov, consumers will likely continue to experience difficulties, which may limit the effectiveness of the website's primary means of providing consumers with information about recalls affecting their vehicles."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that NHTSA determine a completion date for its website consolidation effort and take interim steps to improve the usability of NHTSA.gov by addressing the website usability difficulties GAO identified. The Department of Transportation concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The number of vehicles affected by safety defect vehicle recalls (auto  recalls) has increased dramatically in recent years\u2014rising from nearly 13  million in 2011 to over 51 million in 2016. This increase is driven in part by  several large-scale recalls, such as the ongoing recall of 34 million  vehicles with defective Takata air bag inflators that have caused at least  13 deaths and more than 220 injuries in the United States.", "Auto recalls seek to address a wide variety of safety risks, such as wiring  system problems that may result in vehicle fires or windshield wiper  assemblies that fail to operate properly. When safety defects are  identified, auto manufacturers are required to notify consumers and  remedy (repair) the problem without charge. The National Highway Traffic  Safety Administration (NHTSA) monitors the percentage of defective  vehicles that manufacturers ultimately remedy (completion rates).  However, according to NHTSA\u2019s Strategic Plan 2016\u20132020, auto recall  completion rates are unacceptably low, leaving vehicles with potentially  deadly safety defects on the road. In calendar year 2014\u2014the latest year  for which data are complete\u201467 percent of recalled light vehicles had  been remedied. NHTSA aims to enhance the public\u2019s awareness of auto  recalls and improve completion rates by, for example, providing  information on its website, NHTSA.gov  The Fixing America\u2019s Surface Transportation Act (FAST Act) requires  GAO to study the use of publicly available safety recall information. This  report addresses the following objectives: (1) How do consumers and  industry stakeholders use publicly available auto recall information? (2)  How easy or difficult to use do consumers find the auto recall areas of  NHTSA.gov? (3) What steps, if any, has NHTSA taken to raise consumer  awareness about auto recalls and how has NHTSA evaluated the  effectiveness of these steps?", "For purposes of this report we define publicly available auto recall  information to include information on the auto recall areas of NHTSA.gov,  such as examples of notification letters that manufacturers mail to  consumers. This report focuses on safety defect vehicle recalls affecting  passenger vehicles that are initiated when a defect in a vehicle or vehicle  equipment creates an unreasonable safety risk, as determined by NHTSA  or a manufacturer.", "To inform the first two objectives, we conducted 12 focus groups with new  and used vehicle owners who had experienced an auto recall in the last  24 months. Each focus group was split into two sessions: (1) a discussion  session to explore participants\u2019 thoughts, experiences, and preferences  about auto recall information and (2) a session to test the usability of the  auto recall areas of NHTSA.gov. We conducted focus groups at six  locations across the country to provide population and geographic  dispersion, with each group including 7 or 8 consumers for a total of 94  participants. Half of the focus groups were comprised of consumers who  had completed the repair and the remaining half included consumers who  had not completed the repair. We selected focus group participants based  on age, income, gender, education level, race, and ethnicity to ensure we  collected a range of perspectives.", "We evaluated transcripts of each focus group session using  systematic content analysis to identify how consumers used auto  recall information and to evaluate how easy or difficult consumers  found the auto recall areas of NHTSA.gov to use.", "We also analyzed participants\u2019 responses to the questionnaires we  administered for each session to quantify responses regarding how  consumers used auto recall information\u2014including how they received  and preferred to receive auto recall notifications\u2014and participants\u2019  assessments of NHTSA.gov\u2019s usability while performing certain auto  recall tasks on the website.", "Since we did not select a representative sample of participants, the  results of our focus group analyses are not generalizable to all vehicle  owners.", "To determine how industry stakeholders use auto recall information, we  interviewed representatives from 10 auto manufacturers, selected based  on each manufacturer\u2019s sales market share, place of ownership, and  experience with auto recalls, collecting a range of perspectives on how  manufacturers use auto recall information. We also interviewed four  franchised dealerships and three independent auto dealerships across  the country. The results of these interviews are not generalizable to all  auto manufacturers and dealerships, but provide insights about how  some industry stakeholders use auto recall information. To understand  NHTSA\u2019s role in the auto recall process as well as that of other  stakeholders, we also interviewed NHTSA program officials, industry  groups, and consumer associations, among others.", "To evaluate how easy or difficult consumers find the auto recall areas of  NHTSA.gov to use, we first analyzed guidance documents from NHTSA  and other federal agencies to identify key website usability practices. For  example, we analyzed the General Services Administration\u2019s (GSA) and  the Department of Health and Human Services\u2019 Research-Based Web  Design & Usability Guidelines, which includes quantified, peer-reviewed  guidelines intended to help federal agencies improve the design and  usability of their information-based websites. In addition, we reviewed  federal standards for internal control related to communicating quality  information externally. During our usability testing sessions, we asked  consumers to attempt to complete auto recall tasks\u2014the primary means  NHTSA.gov provides for consumers to access information about auto  recalls affecting their vehicles\u2014and discuss their experiences. We then  compared consumers\u2019 experiences with the usability of the website  against these practices. To corroborate the results of our usability testing  sessions, we also requested that five website usability professionals from  GSA\u2019s Federal User Experience Community conduct an independent  evaluation of the auto recall areas of NHTSA.gov.", "To determine any steps NHTSA has taken to raise consumer awareness  about auto recalls and how NHTSA evaluates the effectiveness of any  steps, we reviewed relevant statutes, regulations, and agency  documents, such as NHTSA\u2019s strategic planning and performance  reports. We reviewed performance management practices as provided in  the Government Performance and Results Act of 1993 (GPRA), the  GPRA Modernization Act of 2010, and standards for internal control in the  federal government to identify any opportunities for improvement. We  also interviewed responsible agency officials and discussed NHTSA\u2019s  public awareness efforts during interviews with industry stakeholders  (described above). We analyzed the results of these interviews along with  the focus group discussions to identify perspectives on the effectiveness  of NHTSA\u2019s public awareness steps. See appendix I for more information  on our objectives, scope, and methodology, including the organizations  we interviewed for this engagement.", "We conducted this performance audit from October 2016 to December  2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Safety defect vehicle recalls (auto recalls) are initiated when a defect in a  vehicle or vehicle equipment creates an unreasonable safety risk, as  determined by NHTSA or a manufacturer. After a recall is initiated,  manufacturers are required to provide written notification to vehicle  owners via First-Class Mail within 60 days and remedy the defect.  Franchised dealers\u2014which sell or lease an auto manufacturer\u2019s new  vehicles\u2014perform the recall remedy.", "Before manufacturers send recall notification letters to affected vehicle  owners, NHTSA reviews draft letters and envelopes to ensure they  include required information about the safety defect. Required information  includes, among other things, a clear description of the safety defect, an  evaluation of the risk to vehicle safety, and a statement that the  manufacturer will remedy the defect without charge. See appendix II for  an example of a notification letter.", "The number of vehicles affected by safety defect vehicle recalls has  increased dramatically since 2011 (see fig. 1). The increase reflects, in  part, several large-scale recalls. For example, in 2014, General Motors  initiated a recall of over 8 million vehicles with faulty ignition switches.  Similarly, according to NHTSA in 2014 and 2015, some passenger  vehicle manufacturers began recalling Takata air bag inflators, recalls that  have grown to include approximately 34 million vehicles and 19 auto  manufacturers. For the Takata recall, NHTSA issued various orders and  established a Coordinated Remedy Program under which the agency  oversees the supply of remedy parts and risk-based prioritization of  vehicles for repair, and manages related recalls with the assistance of an  Independent Monitor. The Independent Monitor assesses compliance  with the applicable orders issued by NHTSA and makes  recommendations aimed at enhancing the remedy program.", "According to NHTSA\u2019s Strategic Plan 2016\u20132020, this unprecedented  recall activity encouraged the agency to improve its system for identifying  and addressing defective vehicles. For example, the plan states that  NHTSA\u2019s \u201cvision is to achieve a 100-percent completion rate for every  recall by improving communication at every level, at every step of the  way.\u201d Thus, according to the plan, NHTSA and the auto industry have  committed to identifying and implementing effective strategies to inform  consumers of safety defects and envision that their coordination will  bolster recall efforts to improve completion rates.", "NHTSA reported that annual completion rates for passenger vehicle  recalls have remained relatively flat, ranging from 63 to 67 percent  between calendar year 2011 and calendar year 2014. See appendix III  for completion rates by vehicle component and vehicle type. In part, to  improve communication and encourage consumers to complete repairs,  NHTSA and manufacturers provide auto recall information to the public  on their websites. For example, certain motor vehicle manufacturers are  required to allow consumers to search a vehicle\u2019s recall remedy status on  the Internet using the vehicle identification number (VIN). NHTSA also  provides publicly available auto recall information on its website, including  examples of recall notification letters.", "In December 2016, NHTSA began consolidating its websites into  NHTSA.gov to provide a single access point for its auto recall content.  One of these websites, safercar.gov, was once NHTSA\u2019s primary method  of communicating auto recall information to consumers; however, the  agency is in the process of moving this information to NHTSA.gov.  NHTSA\u2019s Strategic Plan 2016\u20132020 states that the agency wants  NHTSA.gov to be a comprehensive user-friendly platform that serves as  the premier source of vehicle safety information by, for example,  improving the website\u2019s search capabilities. NHTSA also aims to  encourage consumers to use its website\u2019s auto recall information through  its communications program.", "NHTSA\u2019s Office of Communications and Consumer Information (OCCI) is  the primary office responsible for implementing the agency\u2019s public  communication efforts. OCCI intends to increase public engagement with  the agency\u2019s information through its social media channels, such as  Instagram, Twitter, and Facebook. The amount OCCI obligated to support  the agency\u2019s auto recall efforts has increased from nearly $.5 million in  fiscal year 2011 to about $2.5 million in fiscal year 2016. According to  NHTSA officials, these obligations supported various efforts, including  public awareness campaigns, an auto recall hotline, advertising agencies,  exhibits at auto shows, and NHTSA\u2019s mobile application."], "subsections": []}, {"section_title": "Auto Recall Information Use Varies, and Most Consumers in Focus Groups Preferred Electronic Recall Notifications in Addition to Mail", "paragraphs": [], "subsections": [{"section_title": "Consumers in Our Focus Groups Primarily Considered Safety Risk and Convenience when Using Auto Recall Information to Make Repair Decisions", "paragraphs": ["As part of our focus group discussion sessions, consumers selected  safety risk and convenience as the two most influential factors they  considered when using auto recall information to decide whether to  complete repairs.", "All factors considered: During each session, we first asked consumers  to describe all the factors they considered. Across the sessions,  consumers shared a wide variety of factors including availability of a  loaner vehicle, time to schedule and complete the repair, safety risk,  and other factors. For example, some consumers had not yet repaired  their vehicles because they were \u201cjust waiting\u201d for parts to become  available. Other consumers considered their previous customer  service experiences at the franchised dealership or the distance they  would need to travel to complete the repair. For example, one  consumer at our rural focus group location told us it would take  roughly 2 hours to reach the dealership\u2019s repair shop.", "Most influential factors considered: After the discussion of all factors,  we then asked each consumer to select the single most influential  factor they considered. Consumers in the sessions overwhelmingly  selected safety risk and convenience as the two most influential  factors (see table 1).", "More than half of consumers in our focus group discussion sessions  selected safety risk as the most influential factor they considered when  making repair decisions. They told us that their perception of the risk  influenced whether or not they repaired their vehicle. For instance, some  consumers stated that they completed repairs immediately, because the  risks \u201csounded serious\u201d or that they considered the defect a \u201csafety  concern.\u201d Conversely, some consumers said they did not complete the  repairs because the defect \u201cdidn\u2019t sound very urgent.\u201d", "While each recall notification letter is required to include an evaluation of  the risk to vehicle safety reasonably related to the defect, consumers in  our focus group sessions shared mixed opinions about the quality and  clarity of safety risk information included in the notification letter they  received. For example, some consumers told us the letter\u2019s safety risk  information seemed vague. For instance, one consumer told us the  letter\u2019s description of the safety defect did not clearly state the chances of  an increased risk of injury and so he \u201chad to figure out  on his  own.\u201d In addition, some consumers commented that the safety risk  information could be more prominent in the notification letter, that the  letter could emphasize the severity of the risk, or that the letter could  describe the risk in simpler language. However, other consumers stated  the notification letter they received adequately described the recall\u2019s  safety risk. In June 2011, we recommended that NHTSA modify the  requirements for defect notification letters to include additional information  to obtain readers\u2019 attention. In 2013, NHTSA responded to our  recommendation by requiring manufacturers to include the statement  \u201cIMPORTANT SAFETY RECALL\u201d at the top of auto recall notification  letters.", "Focus Group Participant\u2019s Comment  \u201cI don't want to be without a car for half the  day or stay  with my kids all  day.\u201d", "Consumers in our focus group discussion sessions selected convenience  as the second most influential factor they considered in making repair  decisions. While some consumers described the \u201chassle\u201d of the repair  and being \u201ctoo busy\u201d to schedule and fix the defect, other consumers told  us they repaired their vehicles more easily because, for example, they  could take advantage of previously scheduled service appointments to  also repair the defect. Also, some consumers in our sessions stated that  the letter or notification they received could better address the  inconvenience of the recall, for example by including better estimates of  how long repairs might take. In addition, some consumers recommended  the letter include options for scheduling needed repairs.", "As we discuss later in the report, NHTSA officials told us they continue to  work with auto manufacturers to identify ways to encourage consumers to  complete needed repairs, while representatives from some manufacturers  we met with described specific steps they have taken to address some of  the inconveniences consumers may experience in completing repairs. For  example, one manufacturer facilitated a pilot program for a third-party service provider in conjunction with dealers to repair vehicles at the  owner\u2019s home or place of work, while another manufacturer told us they  work with individual dealers to hold events specifically for recall repairs  when consumers can come in to have repairs performed after normal  business hours."], "subsections": []}, {"section_title": "Industry Stakeholders\u2019 Use of Publicly Available Auto Recall Information Varies", "paragraphs": ["Industry stakeholders\u2019 use of auto recall information varies because these  stakeholders play different roles in the auto recall process. Auto  manufacturers are primarily responsible for providing auto recall  information to the public and others, including NHTSA and auto dealers.  Franchised dealers are responsible for performing the recall remedy for  manufacturers and therefore use manufacturer-provided information for  that purpose. Specifically, all of the franchised dealers we interviewed told  us they identify recalls on new vehicles in their inventory primarily by  accessing auto recall information through internal manufacturer  databases. These franchised dealers may also use information from  third-party providers or publicly available auto recall information on  NHTSA\u2019s website to identify recalls affecting used vehicles.", "Independent dealers\u2014which are not generally authorized by  manufacturers to perform recall remedies\u2014may use publicly available  auto recall information to identify open recalls. Specifically, 2 of the 3  independent dealers we met with told us they use NHTSA\u2019s VIN look-up  tool to search for open recalls affecting vehicles in their inventory before  selling them to consumers. However, these dealers told us that the  current design of the tool takes too much time to use, because it requires  users to search each VIN individually. For example, one dealer told us  each search took about 15 seconds to perform, resulting in significant  time and cost because the dealership has tens of thousands of vehicles in  its inventory. These dealers told us being able to search multiple VINs in  a single search (i.e., VIN-batch search) could save them time or money.", "Representatives from the Alliance of Automobile Manufacturers stated  they\u2014in coordination with other industry stakeholders\u2014are working with  a third-party provider to develop a search tool that would address this  concern by enabling VIN-batch searches for use by government  agencies, such as state departments of motor vehicles, and commercial  entities. The group anticipates the tool will be available in the first half of  2018."], "subsections": []}, {"section_title": "Most Consumers in Our Focus Groups Prefer to Receive Recall Notification by Electronic Means in Addition to Mail", "paragraphs": ["Although the vast majority of consumers who participated in our focus  group discussion sessions reported a preference to receive auto recall  notification by mail, most preferred to receive notifications by at least one  additional electronic means such as e-mail, phone calls, and text  messages. Eighty of the 94 consumers in our sessions reported a  preference for receiving notification by mail, and all but 4 reported actually  receiving mailed notification (see fig. 2). However, 69 of the 94  consumers in our sessions also reported a preference for receiving recall  notification by electronic means, but only 7 reported actually receiving at  least one type of electronic notification. This result suggests a gap  between industry recall notification practices and notification preferences  for most consumers in our focus groups, especially for younger  consumers who were more likely to report a preference for notification by  electronic means. For complete results of the questionnaire we  administered to consumers for the discussion session, see appendix IV.  As we discuss later in this report, in September 2016, NHTSA issued a  Notice of Proposed Rulemaking (NPRM) that proposes to require auto  manufacturers to notify consumers about auto recalls by electronic means  in addition to First-Class Mail. NHTSA officials told us the agency is   working with the administration on NHTSA\u2019s regulatory portfolio and  priorities, including this rulemaking.", "Some manufacturers told us they use additional methods to reach  consumers, including notifying consumers by electronic means and  translating recall information into Spanish. For example, representatives  from one manufacturer told us they always notify consumers by e-mail  before sending out the required First-Class Mail letter notification. These  representatives told us using multiple recall notification means resulted in  higher recall completion rates. In addition, eight of the remaining nine  manufacturers told us they use supplemental electronic means  notification on a case-by-case basis\u2014generally using additional means to  improve recall completion rates\u2014while four manufacturers stated they  consider safety risk severity when deciding when or how to use additional  notification means for individual recalls. Also, representatives from 3 of  the 10 manufacturers we spoke with told us they translate the entire  mailed notification letter into Spanish."], "subsections": []}]}, {"section_title": "Most Consumers in Focus Groups Found the Auto Recall Areas of NHTSA.gov Generally Easy to Use, but Some Experienced Difficulties", "paragraphs": [], "subsections": [{"section_title": "Usability Testing with Consumers Found the Auto Recall Areas of NHTSA\u2019s Website Generally Easy to Use", "paragraphs": ["In late 2016, NHTSA launched its redesigned NHTSA.gov website,  including the auto recall areas consumers assessed during our testing  sessions. According to responses to a questionnaire we administered  during our testing sessions, 78 of the 94 consumers found the auto recall  areas of NHTSA.gov either \u201csomewhat\u201d or \u201cvery easy\u201d to use (see fig. 3).  See appendix V for complete participant responses to the questionnaire  we administered to each consumer.", "To inform the development of the redesigned website, NHTSA worked  with a contractor to conduct a usability study in 2015 to evaluate users\u2019  reactions to the agency\u2019s websites, including NHTSA.gov. According to  agency officials, NHTSA implemented several changes based on the  findings from the usability study, including:  the creation of a dedicated \u201crecalls\u201d area of NHTSA.gov, and  the ability for users to access the VIN look-up tool in three different  ways\u2014on the homepage, in the \u201crecalls\u201d area, and through direct links  either in a NHTSA e-mail for subscribers or from an external website.", "In addition, NHTSA officials told us that Department of Transportation  (DOT) and NHTSA staff meet as needed to discuss the website and  consider improvements. For example, the officials said they monitor user  searches for the relevance and accuracy of results and adjust the search  software to better assist users in finding auto recall information. Officials  also told us the agency collects a variety of other information about how  visitors use NHTSA.gov, including how visitors access the website, and  makes adjustments accordingly. For instance, NHTSA incorporated  responsive web design as part of the agency\u2019s ongoing consolidation  effort\u2014meaning the site is optimized for viewing on desktop, tablet, and  mobile devices. In addition to monitoring searches and how visitors  access NHTSA.gov, NHTSA officials told us they collect and consider  online survey data to make website improvements and use web-analytic  software to monitor, for example, where visitors choose to exit the  website. Officials stated that such monitoring activities have allowed  NHTSA to identify and correct problems with NHTSA.gov.", "We did not directly evaluate the accessibility of the auto recall areas of  NHTSA.gov to ensure the ability of people with physical or mental  disabilities to use the website. However, NHTSA officials provided us  with an overview of several steps the agency takes to ensure NHTSA.gov  complies with website accessibility requirements. For example, according  to officials, NHTSA subscribes to a service that provides monthly  accessibility scans of the agency\u2019s websites."], "subsections": []}, {"section_title": "Consumers in Our Focus Groups Identified Opportunities to Improve the Usability of Certain Auto Recall Tasks on NHTSA\u2019s Website", "paragraphs": ["While most consumers in our usability testing sessions generally found  the auto recall areas of NHTSA\u2019s website easy to use, some consumers  experienced difficulties completing tasks we asked them to perform (see  table 2). Specifically, during each testing session we asked participants to  perform tasks using the primary means NHTSA.gov provides for  consumers to access information about auto recalls affecting their  vehicles:  searching for auto recalls using their vehicle\u2019s VIN;  searching for auto recalls using their vehicle\u2019s year, make, and model;  and  locating NHTSA\u2019s auto recall notification e-mail subscription service.", "In addition, an evaluation we requested to corroborate the results of our  consumer usability testing, identified similar issues. As discussed below,  consumers experienced these difficulties because the auto recall areas of  NHTSA.gov do not always reflect federal and industry key website  usability practices, which describe standards and guidelines for making  websites easy to use. Following such practices can assist agencies in  creating quality websites while providing the flexibility necessary to meet  organizational needs. Website usability is particularly important for  agencies, such as NHTSA, that are responsible for conveying safety  information to the public. Federal standards for internal control state that  agencies should communicate quality information externally and select  appropriate methods for communicating with the public.", "While most consumers in our usability testing sessions found searching  for recalls by VIN somewhat or very easy, some consumers found the  search results did not provide the information they were seeking. When  we asked consumers to perform VIN searches, they generally found the  VIN look-up tool easy to use\u201488 of 94 consumers found searching with a  VIN either somewhat or very easy. But some consumers experienced  difficulties performing this task. Specifically, some consumers who had  had their vehicles repaired expected to find the completed recall on the  search results page. However, they were confused because the page is  designed to display only open (i.e., unrepaired) recalls, not completed  (i.e., repaired) recalls\u2014leading these consumers to question the accuracy  of the results. In addition, the evaluation conducted by website usability  professionals found that, when an error occurred during a VIN search, the  error message was too difficult to locate on the search results page. The  evaluation recommended the error message have greater weight and  more prominence on the page.", "Federal key website usability practices state that agencies should ensure  that results of user searches provide the precise information being  sought, and in a format matching users\u2019 expectations. When users are  confused by search results, or do not immediately find what they are  searching for, they become frustrated and may abandon the search or the  website entirely. Since NHTSA launched the VIN look-up tool in August  2014, the number of VIN searches performed has increased (see fig. 4).  According to NHTSA officials, major increases occurred in mid-2015\u2014 when the Takata air bag inflator recalls were announced\u2014and in early  2017, when NHTSA made the VIN look-up tool search function available  on NHTSA.gov and displayed it prominently on the website. Ensuring the  usability of NHTSA\u2019s VIN look-up tool is particularly important because it  is the only way on NHTSA.gov for a consumer to determine whether their  specific vehicle has an open safety recall.", "Recall Search Using Vehicle Year, Make, and Model  Some consumers\u2019 vehicle year, make, and model searches were  hampered by the information required to conduct an accurate search, as  the content on the website is not always in plain language. We asked  consumers to perform a recall search using their vehicles\u2019 year, make,  and model, and 78 of 94 consumers found the task to be either somewhat  or very easy. However, some consumers found that they did not know  enough information about their specific vehicles to feel confident that they  were searching for the correct vehicle. For example, a year, make, and  model search for a 2009 Toyota Tacoma may ask the consumer to  choose among vehicle options, including \u201c2009 TOYOTA TACOMA  REGULAR CAB W/SAB RWD/AWD.\u201d Acronyms such as \u201cW/SAB\u201d\u2014 which stands for \u201cwith side air bags\u201d\u2014may be confusing to consumers.", "Federal key website usability practices state that federal agencies should  write website content using plain language, so website visitors can easily  find and use what they need.", "Focus Group Participant\u2019s Comment  \u201cI think [the Recall Notification E-mail System  Sign-Up is] poorly placed. I had to scroll to  find it. I had to search for it. You want  at  the top .\u201d", "Recall Notification E-mail System Sign-Up  Some consumers suggested improvements to make the Recall  Notification E-mail System Sign-Up easier to locate on the homepage.  NHTSA first made its Recall Notification E-mail System Sign-Up available  in March 2008. Of the 94 consumers in our testing sessions, 66 found it  either \u201csomewhat\u201d or \u201cvery easy\u201d to find the Recall Notification E-mail  System Sign-Up\u2014making this the least easy of the three tasks we asked  consumers to perform. Specifically, several consumers said the Recall  Notification E-mail System Sign-Up should include a clearer description,  be easier to find, and be located at the top of the homepage (see fig. 5).  These improvements are particularly important because some consumers  in our focus group sessions told us that the ability to sign up for auto  recall e-mail notifications was the most useful part of the auto recall areas  of NHTSA.gov.", "The website evaluation conducted by website usability professionals  recommended that NHTSA streamline its homepage with more of a focus  on primary website tasks. The evaluation also found that users must  move through too many pages to sign up for recall e-mails.", "Federal key website design and usability practices state that agencies  should put important items closer to the top of the page, where users can  better locate the information. Key practices also state that agencies  should design their websites so users can successfully complete the most  common tasks in the fewest number of steps.", "The website usability difficulties that consumers in our focus groups  experienced may be due to the fact that NHTSA has not studied the  website\u2019s usability since the agency redesigned NHTSA.gov in late 2016  and, therefore, may have been unaware of these difficulties prior to our  review. NHTSA plans to conduct a website usability study with consumers  after the consolidation effort, discussed above, is complete. However,  NHTSA could not provide a general time frame for conducting the study  because it has not yet determined when the consolidation effort will be  complete. We have previously reported that it is essential for  organizations to effectively guide their information technology efforts by  establishing timelines to complete them, among other strategic planning  best practices. Without establishing a completion date for its website  consolidation effort, the website usability difficulties we identified may  persist and limit the effectiveness of NHTSA\u2019s primary means of providing  consumers with safety recall information about their vehicles on  NHTSA.gov."], "subsections": []}]}, {"section_title": "NHTSA Has Initiated Activities to Raise Consumer Awareness about Recalls, but It Is Too Early to Evaluate the Agency\u2019s Efforts Public Awareness Campaign", "paragraphs": ["In January 2016, NHTSA launched a national advertising campaign  encouraging consumers to check for open recalls using the agency\u2019s VIN  and year, make, and model look-up tools. Through March 2017, NHTSA  spent about $1 million on its Safe Cars Save Lives campaign, which  sponsors advertisements on Google, Facebook, and other media platforms. For example, Google might place NHTSA\u2019s advertisement  above other search results, when a consumer typed certain keywords\u2014 such as \u201crecall,\u201d \u201cairbag recalls,\u201d or \u201csafercar.gov\u201d\u2014into the search.", "NHTSA evaluated the campaign\u2019s effectiveness by monitoring website  traffic performance reports to determine how frequently consumers  clicked on NHTSA-sponsored advertisements and ultimately searched for  open recalls using the agency\u2019s look-up tools. NHTSA also compared  results across media platforms and adjusted the campaign\u2019s strategy to  improve performance. For example, NHTSA optimized advertisements on  mobile devices, since mobile-device users performed more recall  searches than other users. According to NHTSA data, the awareness  campaign resulted in consumers performing 1.1 million recall searches  through March 2017\u2014a cost of about $0.90 per search. Agency data  indicate that this cost generally decreased as NHTSA improved the  campaign\u2019s strategy. Agency officials told us NHTSA plans to spend  another approximately $1.8 million on Safe Cars Save Lives from  September 2017 through September 2018 due to the campaign\u2019s  effectiveness in raising the public\u2019s awareness about auto recalls."], "subsections": [{"section_title": "Pilot Program with States", "paragraphs": ["NHTSA began implementing a mandated 2-year pilot grant program  intended to evaluate the feasibility and effectiveness of informing  consumers about open auto recalls during state vehicle registration. In  September 2016, NHTSA solicited applications to participate in the  program, wherein selected states would inform consumers\u2014at no  charge\u2014about open recalls using all means that permit consumers to  register vehicles within the state (e.g., in person, Internet, and mail).", "According to NHTSA, only one state applied for the grant. In September  2017, NHTSA awarded the sole applicant $223,000.", "Under the program, the grantee needs to collect and report program  performance data, including the extent to which open recalls have been  identified and repaired. In addition, the grantee must report whether  certain notification means were more effective than others and what could  be done to improve the program. Upon completion of the pilot program,  NHTSA is required to evaluate the extent to which open recalls identified  have been remedied. Auto manufacturers we met with were generally  supportive of the program. Specifically, representatives from 9 of the 10  manufacturers told us that notifying consumers about open recalls during  vehicle registration can raise consumer awareness or improve recall  completion rates."], "subsections": []}, {"section_title": "Proposed Rulemaking", "paragraphs": ["In September 2016, NHTSA issued a Notice of Proposed Rulemaking  (NPRM), which proposes to require auto manufacturers to notify  consumers about open recalls by electronic means\u2014such as e-mails,  phone calls, and text messages, in addition to First-Class Mail. As we  described earlier, auto manufacturers are currently required to notify  consumers about safety recalls affecting their vehicles via First-Class  Mail. According to NHTSA, the NPRM aims to aid in efficiently and  effectively improving recall completion rates, by proposing that  manufacturers provide notification using electronic means in addition to  First-Class Mail.", "Consumers in our focus groups as well as auto manufacturers and  consumer associations we interviewed generally supported additional  notification using electronic means.", "Consumers in our focus groups: As we discussed earlier, 69 of the  consumers in our focus group discussion sessions reported they  would prefer to receive additional notification by at least one type of  electronic means. However, only 7 consumers actually received such  notifications\u2014suggesting a gap between industry notification practices  and notification preferences for these consumers.", "Auto manufacturers: Representatives from 9 of 10 manufacturers we  interviewed told us they generally support providing notification using  electronic means. Although the NPRM proposes a broad definition of  electronic means to give manufacturers flexibility to determine the  most effective means, these representatives also shared  implementation concerns. For example, representatives from 1 of  the 9 manufacturers told us that\u2014although the company collects e- mail addresses from some customers for other purposes\u2014not all  customers provide e-mail addresses, and those collected are not  always accurate. As we discussed previously, most manufacturers we  met with currently use supplemental electronic means notification on a  case-by-case basis.", "Consumer associations: Similarly, both consumer associations we  interviewed told us additional electronic notification can help reach  consumers who do not complete repairs after receiving initial mailed  notification.", "NHTSA\u2019s proposal would maintain manufacturer reporting requirements,  though it may result in additional reporting. This additional information  could help the agency evaluate the effectiveness of various means of  consumer notification. We previously found that NHTSA may be able to  use manufacturers\u2019 data to identify what factors make some recalls more  or less successful than others. We recommended that NHTSA use the  recall data it collects to analyze particular patterns or trends that may  characterize successful recalls and determine whether these factors  represent best practices.", "If the NPRM is finalized, manufacturers would provide NHTSA with  representative copies of the newly required electronic notifications, in  addition to mailed notifications, and would specify the electronic means  used, such as e-mail or text message. According to NHTSA officials, this  information could allow the agency to track and evaluate the effectiveness  of various notification means used by manufacturers by, for example,  comparing completion rates across means\u2014a key step in identifying best  practices that could encourage consumers to complete repairs. However,  it is too early for NHTSA to conduct such an evaluation, because the  agency has not issued a final rule. NHTSA officials told us the agency is  working with the administration on NHTSA\u2019s regulatory portfolio and  priorities, including this rulemaking."], "subsections": []}, {"section_title": "Collaboration with Stakeholders", "paragraphs": ["NHTSA has also taken steps to collaborate with industry stakeholders  and explore consumer education best practices. For example, in April  2015 NHTSA hosted a day-long workshop that brought together auto  industry stakeholders to examine public education of the recall process.  During the workshop, participants identified current barriers to the public\u2019s  awareness of auto recalls and discussed potential solutions to address  them, such as using text messages and social media to communicate with younger consumers and using different delivery methods for recall  notices. Similarly, in January 2016 NHTSA and 18 auto manufacturers  adopted a set of Proactive Safety Principles to explore and employ new  ways to increase safety recall participation rates. For example, NHTSA  and auto manufacturers agreed to share industry best practices and  policies based on lessons learned from ongoing safety recalls.", "The Independent Monitor of Takata in conjunction with NHTSA has also  issued a set of coordinated communications recommendations based on  consumer research, best practices observed during the Takata recall, and  discussions with manufacturers. For example, the recommendations  encourage manufacturers to: pursue a \u201cmulti-touch\u201d communications strategy that employs non- traditional means, such as e-mail and text messages;  convey risk in clear, accurate and urgent terms; and  include a clear \u201ccall to action\u201d designed to facilitate prompt and  efficient scheduling of repairs.", "According to NHTSA officials, the agency relies on auto manufacturers to  evaluate the effectiveness of these efforts. However, agency officials  told us NHTSA reviews manufacturers communication plans as part of  the Takata recall\u2019s Coordinated Remedy Program and provides ongoing  recommendations on manufacturers\u2019 communication language, approach,  and strategies."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["With the recent steep increase in safety defect vehicle recalls and  continued low recall completion rates, it is vital for consumers to be able  to easily access and use publicly available auto recall information.", "NHTSA has taken important steps to improve its website\u2014which provides  safety recall information to consumers\u2014resulting in most consumers in  our focus groups finding the website easy to use. However, the difficulties  some experienced in attempting to complete essential auto recall tasks  demonstrated that NHTSA.gov does not always reflect key website  usability practices for website design. Although NHTSA plans to conduct  a website usability study with consumers after consolidating its websites,  it has not determined a completion date for this effort\u2014an essential step  for organizations to effectively guide their information technology efforts.  Without such a date, the website usability difficulties may persist and limit  the effectiveness of NHTSA.gov in providing consumers with recall  information about their vehicles. By addressing these difficulties in the  interim, NHTSA can better assure that consumers obtain this information,  which can be vital to their safety."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to NHTSA:  The Administrator of NHTSA should determine a completion date for the  agency\u2019s website consolidation effort. (Recommendation 1)", "The Administrator of NHTSA should, while the agency continues its  website consolidation effort, take interim steps to improve the usability of  the auto recall areas of NHTSA.gov by addressing the website usability  difficulties we identified. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOT for review and comment. In its  written comments, reproduced in appendix VI, DOT stated that it  concurred with our recommendations.  The department also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to relevant congressional  committees, the Secretary of Transportation, and the Administrator of  NHTSA. 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) 512-2834 or flemings@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the use of publicly available auto recall information  for safety defects affecting passenger vehicles. The report addresses the  following objectives: (1) How do consumers and industry stakeholders  use publicly available auto recall information? (2) How easy or difficult to  use do consumers find the auto recall areas of NHTSA.gov? (3) What  steps, if any, has the National Highway Traffic Safety Administration  (NHTSA) taken to raise consumer awareness about auto recalls and how  has NHTSA evaluated the effectiveness of these steps?", "We define publicly available auto recall information to include information  on the auto recall areas of NHTSA.gov, such as examples of notification  letters that manufacturers mail to consumers. This report focuses on  safety defect vehicle recalls affecting passenger vehicles that are initiated  when a defect in a vehicle or vehicle equipment creates an unreasonable  safety risk, as determined by NHTSA or a manufacturer.", "To determine how consumers use publicly available auto recall  information, we conducted and analyzed transcripts and questionnaires  from 12 consumer focus groups we conducted with used and new vehicle  owners who had experienced an auto recall in the last 24 months. Each  focus group was split into two sessions: (1) a discussion session to  explore participants\u2019 thoughts, experiences, and preferences about auto  recall information and (2) a website usability testing session. Also, we  administered a questionnaire as part of each of these sessions. For the  discussion session, we asked consumers about the recall notification  process and how they used the recall information, and for the website  usability testing session, we asked consumers to fill in a questionnaire  during the session itself as they assessed the usability of the auto recall  areas of NHTSA\u2019s website. We conducted the 12 focus groups at six  locations across the country, with each group including 7 or 8 consumers  for a total of 94 participants. Half of the focus groups were comprised of  consumers who had completed the repair and the remaining half included  consumers who had not completed the repair.", "We selected the six focus group locations to provide population and  geographic dispersion. To ensure geographic dispersion, we selected at  least one location in each U.S. Census region (see table 3). To ensure  population dispersion, we selected Metropolitan Statistical Areas  representing a range of population sizes based on 2015 U.S. Census  estimates. To ensure our selection included the perspectives of vehicle  owners in geographically distant or isolated communities, we also  selected a rural location, which we defined as a city or town that has a  population of less than 50,000 inhabitants and is not an urbanized area  contiguous and adjacent to a city or town that has a population of greater  than 50,000 inhabitants.", "Using information provided by the participants, we selected focus group  participants based on age, income, gender, education level, race, and  ethnicity to ensure we collected a range of perspectives on auto recall  information use. However, since we did not select a representative  sample of participants, focus group results are not generalizable to all  vehicle owners.", "During focus group discussion sessions, we asked participants to discuss  factors they considered when deciding whether to repair their recalled  vehicle and then to select the single most influential factor. Each of the 12  focus group sessions was audio recorded and transcriptions were  created; transcripts served as the record for each group. We then  evaluated those transcripts using systematic content analysis to identify  the factors consumers considered when deciding whether to complete  repairs and any suggested improvements to the auto recall  communication process. The analysis was conducted in three steps. First,  two analysts independently developed a code framework and then  worked together to resolve any discrepancies. Second, each transcript  was coded independently by analysts using the framework and any  discrepancies were resolved by both analysts agreeing on the coding of  the associated statement by a participant. Third, if needed, another  analyst adjudicated any continued disagreement between coders.", "Because the transcripts did not include a unique identifier for each focus  group participant, we conducted our analysis of focus group session  discussions at the group level (i.e., of the 12 focus groups we conducted).  We also administered and analyzed a questionnaire as part of each  discussion session to quantify responses regarding consumers\u2019 use of  auto recall information, including how they received and preferred to  receive auto recall notifications. Our analysis of the questionnaire  responses was conducted at the individual consumer level (i.e., of the 94  consumers who participated).", "These focus group sessions were structured, guided by a moderator who  used a standardized list of questions to encourage participants to share  their thoughts, experiences, and preferences. We also conducted two  pretest focus groups at our headquarters and made some revisions to the  focus group guide prior to beginning the sessions with consumers.  Methodologically, focus groups are not designed to demonstrate the  extent of a problem or to generalize results to a larger population or  provide statistically representative samples or reliable quantitative  estimates. Instead, they are intended to generate in-depth information  about the reasons for the focus group participants\u2019 thoughts, experiences,  and preferences on specific topics.", "The projectability of the information produced by our focus group  sessions is limited. For example, the information includes only the  responses from the vehicle owners from the 12 selected groups and their  individual responses to questions we asked. The experiences and  preferences expressed may not reflect other vehicle owners\u2019 thoughts  and preferences. In addition, while the composition of the groups was  designed to ensure a range of age and education levels, among the other  criteria mentioned previously, the groups were not constructed using a  random sampling method.", "To determine how industry stakeholders use auto recall information, we  interviewed selected auto manufacturers, selected franchised and  independent auto dealerships, NHTSA program officials, and other  industry stakeholders. Specifically, we interviewed representatives from  the following 10 auto manufacturers, selected based on each  manufacturer\u2019s sales market share (small, medium, and large), place of  ownership (foreign and domestic), and experience with auto recalls (lower  to higher based on the average annual number of auto recall campaigns  and average market share of each manufacturer from 2010 to 2014) to  collect a range of perspectives on how manufacturers use auto recall  information:", "Tesla Motors, Inc.", "To understand the perspective of auto dealers, we interviewed four  franchised dealerships, one in each of the four U.S. Census regions  where we conducted focus groups with consumers. We also interviewed  three independent auto dealerships in two U.S. Census regions. The  results of these interviews are not generalizable to all auto manufacturers  and dealerships, but provide insights about how some industry  stakeholders use auto recall information.", "We conducted interviews with NHTSA program officials to understand  NHTSA\u2019s role in the auto recall process. In addition, we interviewed other  stakeholders, including the Independent Monitor of Takata, which assists  NHTSA in overseeing the Takata recall, as well as officials from  consumer associations and other industry groups (see table 4).", "To evaluate how easy or difficult consumers find the auto recall areas of  NHTSA.gov to use, we reviewed various website usability resources to  understand federal and industry key website usability practices for making  websites easy to use, such as focusing on design and how easily users  can find information. In addition, we reviewed federal standards for  internal control related to communicating quality information externally.  During our usability testing sessions, we asked consumers to attempt to  complete auto recall tasks\u2014the primary means NHTSA.gov provides for  consumers to access information about auto recalls affecting their  vehicles\u2014and discuss their experiences. We then compared consumers\u2019  experiences with the usability of the website against these practices.", "To identify key website usability practices, we analyzed guidance  documents from NHTSA and other federal agencies. For example, we  analyzed the General Services Administration\u2019s (GSA) and the  Department of Health and Human Services\u2019 Research-Based Web  Design & Usability Guidelines, which includes quantified, peer-reviewed  guidelines intended to help federal agencies improve the design and  usability of their information-based websites. We also analyzed GSA\u2019s  Requirements for Federal Websites and Digital Services, and the U.S.  Digital Services Playbook to identify key practices for making websites  easy to use. Identified key practices are: (1) design and content\u2014 focusing on the layout, headers, and design; (2) navigation\u2014how easily  users can find information; (3) clarity\u2014the ability to read and digest content; (4) identity and purpose\u2014whether the site clearly presents its  purpose; and (5) accessibility\u2014the ability of people with physical or  mental disabilities to use the site.", "To analyze the results of focus group website testing sessions, we  performed a systematic content analysis of the session transcripts using  the same content analysis methods described above and an analysis of  the questionnaire we administered to each participant during the website  usability sessions. Specifically, we analyzed the transcripts from the  website usability testing sessions to account for consumers\u2019 experiences,  including their initial impressions of the website and any suggested  usability improvements. We also analyzed the results of the questionnaire  that each participant completed where participants were asked to mark  responses regarding their experience including an assessment of the  usability of the auto recall areas of NHTSA.gov. Our analysis of the  results from the questionnaire responses was conducted at the individual  consumer level (i.e., of the 94 consumers who participated) while our  analysis of focus group session discussions was conducted at the group  level (i.e., of the 12 focus groups we conducted).", "To corroborate the results of usability testing sessions we conducted with  the consumers in our focus groups, we requested that five website  usability professionals from GSA\u2019s Federal User Experience Community  conduct an independent evaluation of the auto recall areas of NHTSA.gov  against federal and industry key website usability practices (described  above). The website usability professionals developed a website  usability evaluation form, which they used to individually evaluate the auto  recall areas of NHTSA\u2019s website. The website usability professionals then  met to form a consensus and provided us with one final group evaluation  of the website usability of the auto recall areas of NHTSA.gov. Also,  although neither our usability testing nor the website usability evaluation  conducted by website usability professionals directly addressed  accessibility, we interviewed responsible agency officials about how the  agency assesses the accessibility of NHTSA.gov.", "We also requested and analyzed website data provided by NHTSA to  understand how consumers access and use NHTSA.gov. Requested data  included the number of subscribers to NHTSA\u2019s Recall Notification E-mail  System Sign-up; the number of weekly vehicle identification number (VIN)  searches performed on NHTSA.gov from August 2014 through May 2017;  and NHTSA.gov usage data by device (i.e., usage by mobile devices,  tablets, and desktop computers). We assessed the reliability of these data  by reviewing any supporting documents provided by the agency and  interviewing responsible NHTSA officials, and concluded the data were  sufficiently reliable for our reporting purposes.", "While we did not independently review the usability of auto  manufacturers\u2019 auto recall websites, we requested and reviewed the  results of any audits that NHTSA performed of these websites, including  whether the websites met statutory and regulatory requirements for  providing auto recall information to the public. We then corroborated any  audit findings by reviewing the auto recall websites of the selected auto  manufacturers that we interviewed.", "To determine any steps NHTSA has taken to raise consumer awareness  about auto recalls and how NHTSA evaluates the effectiveness of any  steps, we reviewed relevant statutes, regulations, and proposed rules,  including the Fixing America\u2019s Surface Transportation Act and a Notice of  Proposed Rulemaking related to recall notification methods. We also  reviewed agency and other documents that describe or evaluate  NHTSA\u2019s public awareness activities. For example, we analyzed  NHTSA\u2019s strategic planning documents\u2014such as NHTSA\u2019s Strategic  Plan 2016\u20132020\u2014to identify ongoing public awareness activities along  with their related goals, objectives, or performance metrics. Similarly, we  requested and analyzed any documents NHTSA uses to evaluate the  effectiveness of its public awareness activities, including performance  reports for NHTSA\u2019s ongoing Safe Cars Save Lives campaign.", "To assess the reliability of data included in these performance reports\u2014 such as VIN searches performed\u2014we reviewed agency documentation  and interviewed agency officials about the reliability, accuracy, and  completeness of the data and determined the data were sufficiently  reliable for our reporting purposes. We reviewed performance  management practices as provided in the Government Performance and  Results Act of 1993 (GPRA), the GPRA Modernization Act of 2010, and  standards for internal control in the federal government to identify any  opportunities for improvement. We also performed a literature review to  identify any related published articles and research studies.", "To understand how NHTSA implements and evaluates any public  awareness activities, we also interviewed responsible agency officials  from NHTSA\u2019s Office of Communications and Consumer Information and  other offices. In addition, we discussed NHTSA\u2019s public awareness efforts  during interviews with industry stakeholders, including selected auto  manufacturers, selected franchised and independent auto dealerships,  and other industry stakeholders. We analyzed the results of these  interviews along with the focus group discussions we conducted with  consumers (discussed above) to identify perspectives on the  effectiveness of NHTSA\u2019s public awareness steps.", "We conducted this performance audit from October 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Example of an Auto Manufacturer\u2019s Recall Notification Letter", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Annual Recall Completion Rates by Vehicle Component and Vehicle Type", "paragraphs": ["The National Highway Traffic Safety Administration (NHTSA) is required  to conduct a biennial analysis of vehicle safety recall completion rates  and submit the results of its analysis in a report to certain congressional  committees. The report must include, among other things, the annual  recall completion rate by vehicle type and vehicle component (such as  brakes, fuel systems, and air bags) for each of the 5 years preceding the  year the report is submitted. According to NHTSA\u2019s May 2017 report,  completion rates for all vehicles combined ranged between 63 percent  and 67 percent between calendar year 2011 and calendar year 2014 (see  table 5). However, NHTSA reported wider variation when the recall  completion rates are broken down by vehicle type. Similarly, the report  found that completion rates for most component categories fall within a  range of 60 percent to 75 percent (see table 6).", "The annual completion rate is a volume-based, weighted metric, such that  the more vehicles affected by the recall, the more weight or influence it  has on the computed rate."], "subsections": []}, {"section_title": "Appendix IV: Focus Group Participants\u2019 Responses to Recall Notification Questionnaire", "paragraphs": ["Focus group participants responded to a questionnaire we administered  to collect information on consumers\u2019 auto recall notification preferences  during our discussion sessions. Table 7 shows participants\u2019 responses to  the administered questionnaire, by age group. We present these  responses by age group, because consumers\u2019 notification preferences  may vary according to their ages."], "subsections": []}, {"section_title": "Appendix V: Focus Group Participants\u2019 Responses to Website Usability Questionnaire", "paragraphs": ["Focus group participants responded to a questionnaire we administered  to collect information on the usability of NHTSA.gov during our usability  testing sessions. Table 8 shows focus group participants\u2019 responses to  the administered questionnaire, by age group. We present these  responses by age group, because consumers\u2019 website usability needs or  preferences may vary according to their ages."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, H. Brandon Haller (Assistant  Director); Katherine Blair; Jason Blake; Melissa Bodeau; Alicia Cackley;  William Colwell (Analyst in Charge); Lacey Coppage; Elizabeth Dretsch;  Jaci Evans; Marcia Fernandez; Sarah Kaczmarek; Malika Rice; Todd  Schartung; and Andrew Stavisky made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-50", "url": "https://www.gao.gov/products/GAO-19-50", "title": "Military Personnel: DOD Needs to Improve Dental Clinic Staffing Models and Evaluate Recruitment and Retention Programs", "published_date": "2018-12-13T00:00:00", "released_date": "2018-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD has taken steps to modernize its Military Health System to ensure that it operates efficiently. For example, in September 2013, the Defense Health Agency was created, in part, to implement common clinical and business processes across the services. Essential to this effort are the services' ability to effectively staff their medical facilities, including the processes used for staffing dental clinics and the services' ability to recruit and retain military dentists.", "Senate Report 115-125 included a provision for GAO to review the services' processes for determining requirements for dentists and its programs for recruiting and retaining military dentists, among other things. GAO assessed the extent to which the services (1) use validated dental clinic staffing models that also incorporate cross-service staffing standards, and (2) have recruited and retained military dentists and measured the effectiveness of their recruitment and retention programs. GAO assessed service dental clinic models, analyzed recruitment and retention data from fiscal year 2012 through 2016, and interviewed DOD and service officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Army and the Air Force use validated staffing models for their respective dental clinics, and the Navy has developed a model that is under review. The Army and the Air Force's models are based on service-specific staffing standards. For example, the Army's model generally projects dental clinic staffing based on historical facility data and, according to officials, the Air Force model is largely a population-based model that requires one dentist for every 650 servicemembers. In contrast, in the absence of a validated model, officials stated that, the Navy uses a general ratio of one dentist for every 1,000 servicemembers to staff its dental clinics. The Navy has developed a model that is under review, and if approved, according to officials, will be subject to the Navy's validation processes.", "While the services have developed and implemented cross-service staffing standards for 42 medical specialties, according to a key official involved in developing these standards, they currently do not plan to develop a similar set of standards for dental care. Cross-service staffing standards help the services standardize clinic staffing to address the common day-to-day health needs of patients. Service officials maintain that they must operate their respective dental clinics autonomously and in a manner that best supports their service-specific needs and unique command structures. However, as oral health requirements for servicemembers are standardized across the Department of Defense (DOD), it is unclear why dental care has been excluded from the staffing standardization effort\u2014especially because the services have implemented cross-service staffing standards for 42 other medical specialties.", "The Army, the Navy, and the Air Force meet their needs for military dentists by recruiting both dental students and fully qualified dentists. The services generally met their recruitment goals for dental students between fiscal years 2012 and 2016, but faced challenges recruiting and retaining fully qualified dentists during that period. For example, the Army missed its recruitment goals for fully qualified dentists in all 5 years, the Navy missed its goals in 2 out of 5 years, and the Air Force missed its goals in 3 out of 5 years. These challenges are most pronounced for certain specialties. For example, service data indicate that the Army and the Navy were unable to recruit any oral surgeons, while the Air Force recruited 50 percent of the oral surgeons it needed. Service officials cited various reasons for not meeting recruitment goals, including the availability of more lucrative careers in the private sector and quality of life concerns associated with military service.", "The services rely on various programs, including scholarships and special pay and incentives, to attract and retain military dentists, and service officials stated that they monitor their programs by reviewing their goals, among other actions. However, GAO found that some services continue to provide incentive bonuses for positions that are overstaffed and have met or exceeded recruitment goals, but they do not know whether this is necessary because they have not evaluated the effectiveness of their programs. Without evaluating their programs, the services lack the information necessary to ensure that they are using recruitment and retention incentives effectively and efficiently for attracting and retaining dentists."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that each of the services develop cross-service staffing standards to be incorporated into their staffing models, and evaluate the effectiveness of their recruitment and retention programs. DOD did not provide comments on a draft of this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["In recent years, the Department of Defense (DOD) has taken steps to  modernize its Military Health System to ensure that it operates as  efficiently as possible in the delivery of health services, while fully  supporting its mission and maintaining medical readiness. Key to this  modernization is ensuring that the Military Health System has the right  number of medical providers, including dentists, with the requisite skill set  and competencies to staff its Military Treatment Facilities (MTF). Military  dentists practice across all major dental specialties with the primary  mission of ensuring the dental readiness of all active duty  servicemembers.", "According to a February 2015 U.S. Department of Health and Human  Services report, projected future nationwide shortages of dentists are  anticipated through 2025 as the demand for dental care in the United  States exceeds supply. Projected nationwide shortages of dentists  emphasize the importance for DOD to ensure its dental clinics are  adequately staffed and the services are able to recruit and retain certain  dental specialists. In 2010, we found that DOD\u2019s processes for  determining MTF personnel requirements could be improved, and we  made recommendations aimed at enhanced collaboration across the  services. Specifically, we recommended that by identifying shared  medical capabilities, the services would benefit from the development of  cross-service standards for determining the amount of personnel needed  to meet the day-to-day health needs of the patient population. We also  made recommendations aimed at ensuring the validity and verifiability of  their MTF staffing models. DOD generally concurred with these  recommendations and took actions to implement them. These  recommendations and DOD\u2019s actions are discussed in more detail in  subsequent sections of this report.", "Senate Report 115-125, accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018, included a provision for us to  review the services\u2019 processes for determining requirements for dentists  and DOD\u2019s programs for recruiting and retaining military dentists, among  other things. This report assesses the extent to which the services (1)  use validated dental clinic staffing models that also incorporate cross- service staffing standards, (2) have recruited and retained military  dentists, and are measuring the effectiveness of their recruitment and  retention programs.", "To address our first objective, we reviewed DOD, Army, Navy, and Air  Force policy and guidance for reviewing and validating workforce  models. We described the processes the services use for reviewing and  validating their dental clinic staffing models as it pertains to this guidance.  We interviewed officials with the Army Medical Command, the Navy  Bureau of Medicine and Surgery, and the Air Force Medical Service, as  well as officials from each service\u2019s dental corps and other service  organizations who are responsible for the development, operation, and  implementation of these models. We reviewed the models and  interviewed service officials to determine similarities and differences  within the methodologies used in the models and processes, and  assessed the extent to which the services collaborated in the  development of their models and based their models on common  standards.", "To address our second objective, we analyzed the extent to which the  services have met their recruitment goals for military dentists during fiscal  years 2012 through 2016, the most recent year for which data were  available at the time of our review. We assessed the reliability of these  data by obtaining and reviewing information from the services regarding  the processes and internal controls that are in place to ensure the  reliability and quality of the data. Based on our review, we believe these  data are sufficiently reliable for the purposes of this report. Additionally,  we used data from DOD\u2019s Health Manpower and Personnel Data System  (HMPDS) and service-level data for fiscal years 2012 through 2016 to  assess the extent to which the Army, the Navy, and the Air Force (1) have  met authorized end-strengths for dentists, (2) are retaining dentists, and  (3) have gaps in dental specialties. We selected this timeframe to enable  us to evaluate trends over time, and fiscal year 2016 was the most recent  year of HMPDS and service-level data available at the time of our review.  We assessed the reliability of the HMPDS and service-level data by  collecting information and interviewing officials to determine how the  services and the Defense Manpower Data Center compile the data and  what internal controls are in place to ensure their reliability. We found  these data to be sufficiently reliable for the purposes of this report.", "Additionally, we reviewed DOD\u2019s special and incentive pay plan and other  DOD policies and guidance related to DOD recruitment and retention  programs. We interviewed officials and received written responses from  the services regarding their identified gaps, the programs they use to  address gaps in dental specialties, and any challenges they experience in  recruiting and retaining dentists. We also interviewed officials with the  Office of the Assistant Secretary of Defense for Health Affairs as well as  each service\u2019s dental corps regarding the programs used and the  measures in place to evaluate the effectiveness of any such programs.  We reviewed our prior work on effective strategic workforce planning,  which state agencies should periodically measure their progress toward  meeting human capital goals and the extent that human capital activities  contributed to achieving programmatic goals and provide information for  effective oversight by identifying performance shortfalls and appropriate  corrective actions. Further, we reviewed Standards for Internal Control  in the Federal Government, including requirements for monitoring internal  control systems and evaluating results.", "We conducted this performance audit from August 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Military Health System is responsible for, among other things,  assuring the overall oral health of all uniformed DOD personnel. As part  of this health system, each service\u2019s dental corps provides dental care for  its servicemembers. The Army, the Navy, and the Air Force Dental Corps  include approximately 3,000 active duty dentists and approximately 247  (200 in the United States) dental clinics to serve over 1.3 million  servicemembers.", "Unlike their medical counterparts, the services\u2019 dental corps rarely  provide beneficiary care, according to service officials. The primary role  of military dentists is to ensure the oral health and readiness of  servicemembers. Servicemembers\u2019 oral health is evaluated using  standardized measures to determine the extent to which they are  deployable. Generally, servicemembers with identified urgent, emergent,  or unknown dental treatment needs are not considered to be worldwide  deployable until their oral health is adequately addressed."], "subsections": [{"section_title": "Becoming a Military Dentist", "paragraphs": ["Most military dentists enter service through the Armed Forces\u2019 Health  Professions Scholarship Program (AFHPSP), a scholarship program  available to students enrolled in or accepted to dental school. Under the  services\u2019 AFHPSP program, DOD pays for tuition, books, and fees, and  provides a monthly stipend. In return, the students incur an obligation to  serve 6 months of active duty service for each 6 months of benefits  received, with a 2-year minimum obligation. AFHPSP dental students  can pursue either a Doctor of Dental Surgery or Doctor of Dental  Medicine degree to become a general dentist.", "In addition to the AFHPSP program, the services recruit fully qualified  licensed dentists. For example, individuals may become military dentists  through direct accessions, either by entering the service as a fully trained,  licensed dentist or through the Financial Assistance Program, which  provides stipends for dentists accepted or enrolled in a residency  program. For additional information on these and other recruitment  programs, see appendix I.", "Regardless of the recruitment program, dentists may begin to practice  after obtaining a degree and completing licensure requirements. Military  dentists may pursue postgraduate training through a general dentistry  program, such as the Advanced Education in General Dentistry Program,  a general practice residency, or a specialty dental program offered  through the Uniformed Services University of the Health Sciences  Postgraduate Dental College. Postgraduate dental college includes  training and/or residency within a specific specialty and typically requires  between 1 to 6 years of additional training. While in a postgraduate dental  college program, participants incur an additional 6 months of active duty  service obligation for each 6 months in training, with a minimum of 2  years active duty service obligation. However, this obligation can be  served concurrently with obligations already incurred through AFHPSP if  incurred through sponsored postgraduate education in a military or  affiliated program. Figure 1 portrays the path to becoming a military  dentist and the active duty obligation incurred for AFHPSP dental  students.", "Each service takes steps to validate whether the military dentist has the  appropriate professional qualifications and clinical abilities. Validation  includes ensuring the dentist is credentialed and privileged to practice.", "See appendix II for more details on service processes for monitoring  qualification and performance of dentists."], "subsections": []}, {"section_title": "Roles and Responsibilities for the Recruitment and Retention of Military Dentists", "paragraphs": ["The Assistant Secretary of Defense for Health Affairs (ASD(HA)) serves  as the principal advisor for all DOD health policies and programs. The  ASD(HA) issues DOD instructions, publications, and memorandums that  implement policy approved by the Secretary of Defense or the Under  Secretary of Defense for Personnel and Readiness and governs the  management of DOD medical programs. The ASD(HA) also exercises  authority, direction, and control over the President of the Uniformed  Services University of the Health Sciences (USUHS). Further, ASD(HA)  sets the special and incentive pay amounts for all military dentists. The  ASD(HA) reports to the Under Secretary of Defense for Personnel and  Readiness, who in turn reports to the Secretary of Defense.", "The Army, the Navy, and the Air Force medical commands and agencies  report through their service chiefs to their respective military department  secretaries and then to the Secretary of Defense. The Army, the Navy,  and the Air Force have the authority to recruit, train, and retain dentists.  Each military service has its own organizational structure and  responsibilities. See figure 2.", "In September 2013, the Defense Health Agency was established to  support greater integration of clinical and business processes across the  Military Health System. The Defense Health Agency, among other things,  manages the execution of policies issued by the ASD(HA) and manages  and executes the Defense Health Program appropriation, which funds the  services medical departments. By no later than September 30, 2021, the  Director of the Defense Health Agency will assume responsibility for the  administration of each military treatment facility, to include budgetary  matters, information technology, and health care administration and  management, among other things. Although military treatment facilities include dental clinics, DOD initially intended to exclude dental care  (except oral and maxillofacial surgery), from the transfer to the Defense  Health Agency. However, as of September 2018, DOD stated it is  assessing the extent to which dental care will fall under the Defense  Health Agency\u2019s administration."], "subsections": []}, {"section_title": "GAO\u2019s Prior Work on Military Treatment Facility Staffing Models and Tools", "paragraphs": ["In July 2010, we found that the services\u2019 collaborative planning efforts to  determine staffing of medical personnel working in fixed military treatment  facilities, including dentists, were limited, and that their staffing models  and tools had not been validated and verified in all cases as DOD policy  requires. Specifically, we found that some Army specialty modules  contained outdated assumptions, and that only a portion of the models  had been completely validated. We also found that the Navy did not have  a model, but instead employed a staffing tool that used current manning  as a baseline and adjusted its requirements based on emerging needs or  major changes to its mission. However, the Navy\u2019s tool was not validated  or verified in accordance with DOD policy. Further, we found that the Air  Force may not know its true medical requirements because the model it  relied on also was not validated or verified.", "We made several recommendations in our 2010 report, two of which were  aimed at improving staffing of MTFs. Specifically, we recommended that  the services identify common medical capabilities shared across military  treatment facilities and develop and implement cross-service medical  staffing standards for these capabilities as appropriate. We also  recommended that each service update or develop medical personnel  requirements determination tools as needed to ensure that they use  validated and verifiable processes.", "The Army, the Navy, and the Air Force have implemented our  recommendation related to the development and implementation of validated and verifiable tools for developing medical personnel  requirements. Additionally, they identified and developed standardized  cross-service staffing standards for over 40 medical specialties and  incorporated them into their individual MTF staffing tools."], "subsections": []}]}, {"section_title": "Two of Three Services Use Validated Dental Clinic Staffing Models, and None of the Models Incorporate Cross- Service Standards", "paragraphs": [], "subsections": [{"section_title": "The Army and the Air Force Use Validated Dental Clinic Staffing Models, and the Navy\u2019s Proposed Model Is under Review", "paragraphs": ["The Army and the Air Force have validated the dental clinic staffing  models that they use, and the Navy\u2019s draft model is under review. In the  absence of a validated model, the Navy uses a general ratio to staff its  dental clinics. See table 1 for a description of each of the services\u2019  methodology for staffing dental clinics.", "The Army and the Air Force models, which were developed in  accordance with DOD guidance and service-specific requirements,  are subject to the following validation processes:", "Army. Since 2011, the Army has used the Army Dental Clinic Model,  which, according to officials, is intended to determine the minimum  number of dentists necessary, by location, to ensure the medical  readiness of soldiers. Army staffing models are subject to validation  by the U.S. Army Manpower Analysis Agency, which validated the  Army\u2019s Dental Clinic Model when it was developed in 2011.  According to an Army official, the model\u2019s validation expired in 2014,  and was not re-validated until May 2018 due to limited resources.  Additionally, Army officials stated that the data used in the model are  updated on an annual basis and that the model is subject to  revalidation every 5 years.", "Air Force. Since 2014, according to Air Force officials, the Air Force  has used its Dental Manpower Model to determine the minimum  number of dentists required, by clinic, to ensure the medical readiness  of servicemembers served by Air Force dental clinics. According to Air  Force officials, the Air Force Dental Manpower Model is subject to  review and validation that includes input from the Air Force Medical  Service; Surgeon General\u2019s Manpower, Personnel, and Resources  office; Air Force Personnel Center; and consultants. Officials told us  the model is reviewed and validated annually and presented to the  Dental Operations Panel and Air Force\u2019s medical service corporate  structure. The model was most recently validated in April 2018.", "According to Navy Bureau of Medicine and Surgery (BUMED) officials,  the Navy does not yet have a model and therefore instead uses a general  ratio of one dentist for every 1,000 sailors as a baseline to initially  determine the staffing requirements of its dental clinics. This ratio is  adjusted based upon emerging needs or major changes to mission. In  2013, according to Navy officials, BUMED began developing a Dental  Services Model that could be used to determine dental clinic staffing  needs. In November 2016, BUMED internally released a draft report recommending that the dental corps approve and implement the Dental  Services Model as the staffing standard for dental clinics. According to a  Navy official, this report was provided to dental corps leadership for  review in July 2018 and they are expected to complete their review in  October 2018. According to BUMED officials, if the dental corps  leadership approves the model for use as an official staffing standard, the  model would be subject to official Navy validation processes which, in  accordance with DOD policy, would entail verification and validation  throughout the model\u2019s lifecycle. Conversely, if the dental corps decides  to use the model as an informal staffing tool to supplement its current  processes, a BUMED official stated that it will be subject to an ad-hoc  internal review every 3 years that mirrors the Navy\u2019s review of its  validation process."], "subsections": []}, {"section_title": "The Services Have Not Developed Cross-Service Staffing Standards for Dental Care", "paragraphs": ["Currently, the Army, the Navy and the Air Force each use different  service-specific standards and other factors to determine the number of  dentists needed at their respective dental clinics. As previously  discussed, the services have developed and are in the process of  implementing cross-service staffing standards\u2014that is, a standardized  approach to staffing the common day-to-day health needs of the patient  population\u2014for certain medical specialties. In response to DOD policy  and our 2010 recommendation, the services established a working group  to identify and develop common cross-service staffing standards, and in  2017, the tri-service working group established such standards for 42  different medical specialties. These standards are based on actual  workload data for common capabilities within selected medical specialties  and were incorporated into each service\u2019s staffing tools to provide  consistent values for the minimum number of staff required to meet  patient needs. However, according to an official involved in the  development of the standards, the services have not collaborated to  develop a plan to establish a similar set of standards for dental care.", "DOD guidance directs modeling and simulation management to develop  plans and procedures and to pursue common and cross-cutting modeling  tools and data across the services. Also, the ASD(HA) has supported  the effort to establish consistent workload drivers across services for  determining personnel requirements for MTFs.", "According to a tri-service working group co-chair, they did not develop  cross-service staffing standards for dental care because at the time, the  quality of available data on dental procedure frequency and duration  varied across the services. The same official stated that these data have  been improved, but they still do not have plans to develop cross-service  staffing standards for dental care. Additionally, service officials  maintained that they must operate their respective dental clinics  autonomously and in a manner that best supports their service-specific  needs and unique command structures. Specifically, officials from each  service\u2019s dental corps stated that their primary mission is focused on the  medical readiness of servicemembers and generally does not involve  beneficiary care. As such, they have not collaborated on staffing efforts  with the other services.", "While we recognize that each service operates under a different  command structure, readiness requirements for oral health are  standardized across DOD, and all servicemembers are required to meet  the same level of oral health in order to be deployable. Additionally, since  DOD is currently assessing whether it will consolidate the services\u2019 dental  corps staff under the Defense Health Agency\u2019s administration, it  remains unclear to us why dental care has been excluded from cross- service efforts to develop a common set of standards for staffing military  dental clinics\u2014especially because the services have developed common  staffing standards for42 other medical specialties."], "subsections": []}]}, {"section_title": "The Services Generally Have Met Goals for Recruiting Dental Students, but Not for Fully Qualified Dentists and Do Not Know the Extent to Which Certain Programs Are Effective at Helping Recruit and Retain Dentists", "paragraphs": ["The Army, the Navy, and the Air Force have generally met their  recruitment goals for dental students, but generally have not met their  recruitment goals for fully qualified dentists to address oral health needs  of the services. Overall, we found that the services maintained their  staffing levels for military dentists during fiscal years 2012 through 2016,  but experienced gaps within certain specialties. Further, the services  rely on various programs and special pays and incentives, to recruit and  retain military dentists, but they do not know the extent to which some of  these programs are effective at helping them to do so."], "subsections": [{"section_title": "The Services Generally Met Recruitment Goals for Dental Students, but Faced Challenges Recruiting Fully Qualified Dentists", "paragraphs": ["Our analysis of Army, Navy, and Air Force data found that in fiscal years  2012 through 2016, the services generally met their goals for dental  students recruited through the Armed Forces Health Professions  Scholarship Program (AFHPSP). From fiscal year 2012 through fiscal  year 2016, the Army met 94 percent of its goals, the Navy met 100  percent of its goals, and the Air Force met 97 percent of its goals. Figure  3 shows the AFHPSP recruitment goals and achievements, by service for  fiscal years 2012 through 2016.", "To address their immediate need for dental providers, the services also  recruit fully qualified general dentists or specialists. However, the services  have experienced challenges meeting their recruitment goals for fully  qualified dentists. Figure 4 below shows the recruitment goals and  achievements for fully qualified dentists from fiscal years 2012 through  2016. As shown in the figure, the Army did not meet its recruitment goals  for 5 consecutive years, the Navy did not meet its goals for 2 of these 5  years, and the Air Force did not meets its goals for 3 of these 5 years.", "While the services have experienced challenges in recruiting fully  qualified dentists, the challenges are most pronounced in certain  specialties. For example, based on our analysis of service data from fiscal  years 2012 through 2016, the Army and the Navy were unable to recruit  any oral surgeons and the Air Force recruited 50 percent of the oral  surgeons it needed. Service officials cited various reasons for not being  able to meet their recruitment goals for certain specialties, including the  availability of more lucrative careers in the private sector and quality of life  concerns associated with military service, such as frequent moves.  Additionally, Air Force officials stated that they are not always able to  offer accession bonuses consistently, which has caused challenges in  recruiting. Table 2 shows the recruitment goals and percentage  achieved for fully qualified dentists, by specialty, from fiscal years 2012  through 2016."], "subsections": []}, {"section_title": "The Services Have Maintained Overall Staffing Levels for Military Dentists, but Have Experienced Challenges Retaining Certain Specialties", "paragraphs": ["While the services maintained overall staffing levels for military dentists,  they have experienced some challenges retaining certain specialties.  Overall, military dentist end strengths\u2014the actual number of dentists on  board at the end of the fiscal year\u2014have generally met or exceeded  dental authorizations. Specifically, between fiscal years 2012 and 2016,  the Army\u2019s dental authorizations were filled, on average, at about 109  percent, the Navy\u2019s at about 101 percent, and the Air Force\u2019s at about 97  percent. Further, DOD data show that average overall gain rates are  equal to average overall loss rates for the services\u2019 dental corps in fiscal  years 2012 through 2015 at approximately 10 percent for the Army, 9  percent for the Navy, and 11 percent for the Air Force. Additionally,  according to our analysis of Army and Navy data, on average,  approximately 73 percent of Army dentists continue on active duty after 5  years of service, and approximately 63 percent of Navy dentists continue  on active duty after 5 years of service. According to Air Force officials, the  Air Force does not routinely track data on the number of dentists that  continue on active duty after 5 years of service.", "Although the services have been able to maintain their overall numbers  for the total number of dentists in their respective dental corps, we found,  based on the data the services provided us, that each service  experienced gaps in certain dental specialties, including critically short  wartime specialties. For example, all of the services experienced gaps  in comprehensive dentistry from fiscal years 2012 through fiscal year  2016. In addition, for the same time period, all of the services  experienced gaps in prosthodontists and oral surgeons. Officials from all  three services cited family concerns, frequent moves, and competition  from the private sector as reasons why these and other dentists choose  to leave the military. Additionally, Army and Navy officials cited limited  training and education opportunities and limited scope of practice as  reasons why specialists such as oral surgeons leave the military."], "subsections": []}, {"section_title": "The Services Monitor Their Recruitment and Retention Programs, but Do Not Know Whether The Programs Are Effective", "paragraphs": ["The services rely on programs, such as AFHPSP, the Critical Wartime  Skills Accession Bonus (CWSAB), and special pay and incentives, to  attract and retain military dentists, but they do not know the extent to  which some of these programs are effective at helping them meet their  recruiting and retention goals. Our prior work on effective strategic  workforce planning principles concluded that agencies should periodically  measure their progress toward meeting human capital goals. These  principles state that measuring the extent that human capital activities  contribute to achieving programmatic goals provides information for  effective oversight by identifying performance shortfalls and appropriate  corrective actions. Further, according to these principles, agencies  should develop use of flexibilities and other human capital strategies that  can be implemented with the resources that can be reasonably expected  to be available, and should consider how these strategies can be aligned  to eliminate gaps. Additionally, Standards for Internal Control in the  Federal Government states that management should monitor internal  control systems, through ongoing monitoring and evaluations. According  to these standards, evaluations should be used to provide feedback on  the effectiveness of ongoing monitoring and should be used to help  design systems and determine effectiveness. The standards also provide  that management should determine the appropriate corrective actions to  address any identified deficiencies upon completing its evaluation.", "According to Army, Navy, and Air Force officials, the services have taken  various actions to monitor their recruitment and retention programs. For  example, officials told us that they review recruitment goals,  achievements, and retention rates; conduct workforce planning and  modeling; and participate in recruitment and retention working groups.  Specifically, Army officials stated that they use forecasts from a 5-year  management plan to determine the Army\u2019s recruiting mission and review  its continuation rates to assess retention of dentists. Navy officials told  us that they review annual recruitment goals and track whether they are  meeting those goals on a weekly basis. Air Force officials stated that they  participate in the Medical Accessions Working Group three times per year  to assess ongoing recruitment activities. While the services monitor their  progress toward recruitment and retention goals, they do not know the  extent to which the programs designed to help them meet their goals  affect their ability to recruit and retain dentists because they have not  evaluated their effectiveness.", "For example, DOD Directive 1304.21 allows the services to use  accession bonuses to meet their personnel requirements and specifies  that bonuses are intended to influence personnel inventories in specific  situations in which less costly methods have proven inadequate or  impractical. The services have the discretion to issue up to $20,000 as an accession bonus under the AFHPSP\u2014in addition to paying full tuition,  education expenses, and a monthly stipend. In fiscal years 2012  through 2016, the Army and the Navy offered the accession bonus and  generally met their recruitment goals\u2014an achievement that Army officials  credit, in part, to their use of the incentive. Specifically, Army officials told  us that prior to using the bonus in 2009, they were not meeting their  recruitments goals. They also expressed concern that, if they were to  discontinue use of the bonus, they would not be able to meet their current  goals. Conversely, Air Force officials told us that they stopped offering the  bonus in 2012 because the number of AFHPSP applicants had exceeded  the number of AFHPSP positions; the Air Force has continued to meet its  recruiting goals without the use of the bonus. An Air Force official  acknowledged that not offering the bonus could result in their losing  potential applicants to the services that do offer the bonus, but Air Force  officials also recognized that money is not always a deciding factor for  those who choose to serve as a dentist in the military. The uncertainty  described by the Army and Air Force officials demonstrates their lack of  information about what factors motivate individuals to join the military.  Moreover, the differing use of the accession bonus by the two services  with similar outcomes indicates that the services do not know when it is  necessary to use the recruiting tool because they have not evaluated the  effectiveness of this program.", "Another bonus the services can offer is the CWSAB, which ranges from  $150,000 for general dentists to $300,000 for comprehensive dentists,  endodontists, prosthodontists, and oral maxillofacial surgeons, to  individuals entering the military as a dentist in a critically short wartime  specialty. While a bonus can be offered to any dental specialty  designated as a critically short wartime specialty, data that we analyzed  indicate that the bonus may be disproportionately effective in recruiting for  these specialties. For example, from fiscal years 2012 through 2016, the  Navy used this type of bonus and was able to meet or exceeded its  recruitment goals for critically short wartime specialty general dentists and  staffed this specialty at between 108 and 122 percent. However, our  analysis of the Navy\u2019s data also found that, even after offering this bonus,  the Navy was unable to recruit any oral surgeons during the same time  period. However, like with the accession bonus, service officials do not  know the extent to which the CWSAB bonus is an effective recruitment  incentive for some or all of the critically short wartime specialties because  they have not evaluated the effectiveness of this program.", "In addition, the services offer special pay and incentives, which vary by  specialty, to qualified dentists. Special pay and incentives include  incentive pay, retention bonuses, and board certification pay. Each bonus  and incentive, except board certification pay, requires an additional  service obligation, thus creating a retention tool for the services. The  services and officials from the Office of the ASD(HA) participate in the  Health Professions Incentives Working Group to review recruitment and  retention special pay and incentives and recommends adjustment to  amounts offered as necessary. Service and officials from the Office of the  ASD(HA) told us that there are no ways to evaluate the effectiveness of  these incentives because they cannot account for the emotional or non- monetary decisions that contribute to whether servicemembers stay in the  military, and money is not always an effective incentive for getting people  to train in certain specialties or to continue their service. However, in our  recent review of DOD\u2019s special pay and incentive programs in 2017, we  recommended that DOD take steps to improve the effectiveness of its  special pay and incentive programs. Additionally, in February 2018,  through our review of gaps in DOD\u2019s physician specialties, we  recommended that the services develop targeted and coordinated  strategies to alleviate military physician gaps. An official from the Office  of the ASD(HA) stated that they have started discussing measures with  the services to evaluate the effectiveness of DOD\u2019s medical and dental  recruitment and retention programs, including special pay and incentives.  Additionally, Office of ASD(HA) and service officials stated that they will  begin reviewing the dental special pays and incentives in fiscal year 2019.  Because these reviews are in the early stages, it is too soon to know how  effective they will be in evaluating pay and incentive programs.", "Although service officials also told us that they believe their recruitment  and retention programs are effective because they have generally met  their overall recruiting and retention goals, until the services evaluate the  effectiveness of their recruitment and retention efforts, they will not have  the information to know which programs are the most efficient and cost- effective."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD continues to implement several major initiatives to support the  mission of its health system maintaining the medical readiness of  servicemembers while operating as efficiently as possible. The dental  corps plays a critical role in these efforts by ensuring the oral health and  dental readiness of all servicemembers. Ensuring dental readiness  requires, in part, that the services are able to staff dentists adequately  and consistently across DOD\u2019s dental clinics. However, the Army, the  Navy, and the Air Force have not collaborated in their approaches to  staffing dental clinics, and have not developed cross-service staffing  standards for dental clinic staffing. As DOD progresses in its efforts to  implement efficiencies across its Medical Health System and assesses  the scope of medical care to be transferred to the Defense Health  Agency, it could be of benefit to the dental corps to develop cross-service  standards that could result in improvements to the consistency and  efficiency of dental clinic staffing.", "In addition to ensuring the appropriate number of dentists at each clinic to  support the dental corps\u2019 mission, recruiting and retaining fully qualified  dentists has been an ongoing challenge for the services. However, the  services have not evaluated whether their existing programs have been  effective at helping them recruit and retain dentists, and therefore do not  know whether they are effectively targeting their resources to address the  most significant recruitment and retention challenges."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of six recommendations, including two to the Army,  two to the Navy, and two to the Air Force. Specifically:  The Secretary of the Army should ensure that the Surgeon General of the  Army Medical Command (1) collaborate with the Navy Bureau of  Medicine and Surgery and the Air Force Medical Service to develop a  common set of planning standards to be used to help determine dental  clinic staffing needs, and (2) incorporate these standards into the Army\u2019s  dental corps staffing model. (Recommendation 1)", "The Secretary of the Navy should ensure that the Surgeon General of the  Navy Bureau of Medicine and Surgery (1) collaborate with the Army  Medical Command and the Air Force Medical Service to develop and  implement a common set of planning standards to be used to help  determine dental clinic staffing needs, and (2) incorporate these  standards into the Navy\u2019s dental corps staffing model. (Recommendation  2)", "The Secretary of the Air Force should ensure that the Surgeon General of  the Air Force Medical Service (1) collaborate with the Army Medical  Command and the Navy Bureau of Medicine and Surgery to develop and  implement a common set of planning standards to be used to help  determine dental clinic staffing needs, and (2) incorporate these  standards into the Air Force\u2019s dental corps staffing model.  (Recommendation 3)", "The Secretary of the Army should ensure that the Surgeon General of the  Army Medical Command evaluates the effectiveness of its recruitment  and retention programs for military dentists, including the need for and  effectiveness of the recruitment and retention incentives currently offered.  (Recommendation 4)", "The Secretary of the Navy should ensure that the Surgeon General of the  Navy Bureau of Medicine and Surgery evaluates the effectiveness of its  recruitment and retention programs for military dentists, including the  need for and effectiveness of the recruitment and retention incentives  currently offered. (Recommendation 5)", "The Secretary of the Air Force should ensure that the Surgeon General of  the Air Force Medical Service evaluates the effectiveness of its  recruitment and retention programs for military dentists, including the  need for and effectiveness of the recruitment and retention incentives  currently offered. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. DOD  did not provide comments. DOD did provide us with technical comments,  which we have incorporated, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Personnel and Readiness, the Office of the Assistant Secretary of  Health Affairs, the Secretaries of the Army, the Navy, the Air Force, and  the President of the Uniformed Services University of the Health  Sciences. 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) 512-3604 or FarrellB@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Military Dentist Accession Programs and Incentives", "paragraphs": ["In addition to the Department of Defense\u2019s (DOD) Armed Forces Health  Professions Scholarship Program, DOD uses several other programs and  incentives to recruit military dentists. Table 3 includes a selection of  DOD\u2019s military dentist accession programs and incentives."], "subsections": []}, {"section_title": "Appendix II: The Services\u2019 Mechanisms to Monitor Qualifications and Performance of Military Dentists", "paragraphs": ["DOD policy requires that all military dentists must be credentialed and  privileged to practice dentistry. Credentialing is the process of inspecting  and authenticating the documentation to ensure appropriate education,  training, licensure, and experience. Privileging is the corresponding  process that defines the scope and limits of practice for health care  professionals based on their relevant training and experience, current  competence, peer recommendations, and the capabilities of the facility  where they are practicing.", "According to officials, the services have developed and implemented  processes to continuously monitor dentist performance in accordance  with DOD policy. According to officials, the services monitor military  dentist performance through On-Going Professional Practice Evaluations  (OPPE) and Focused Professional Practice Evaluations (FPPE). The  OPPE is a continuous evaluation of dentist performance that reviews six  dimensions of performance: (1) patient care, (2) medical knowledge, (3)  professionalism, (4) practice-based learning and improvement, (5)  interpersonal and communication skills, and (6) systems-based practice.  The FPPE is a process of periodic evaluation by the dental clinic of the  specific competence of a dentist performing procedures and  administering care. FPPEs are conducted during a dentist\u2019s initial  appointment, when granting new privileges, or if a question arises about a  dentist\u2019s ability to provide, safe, high quality patient care.", "In addition to the performance monitoring required by DOD, according to  officials, the Army and the Air Force have instituted their own  mechanisms for monitoring the quality and performance of their dentists.", "Army: According to officials, the Army monitors dental quality through  its quarterly Continuous Quality Management Program. This program  includes the review of data related to records audits, infection control,  radiation protection, utilization management, implant reports, drug  utilization reports, patient safety events, and risk management.  According to officials, these reviews are intended to identify and  address any errors or trends in dental care.", "Air Force: According to officials, annually, Air Force dentists must  document that they have reviewed and will follow the Air Force  Medical Service Dental Clinical Practice Guidelines. According to  officials, this ensures that all dentists are following the same standard  of care for dental treatment. Additionally, according to officials, Air  Force dentists participate in a peer review process known as Clinical  Performance Assessment and Improvement. According to officials, in  this process, a licensed peer dentist preferably of the same specialty  reviews the dentist\u2019s practice and procedures. Further, according to  officials, depending on the nature of issues found during the review,  corrective actions\u2014ranging from refresher courses to a loss of license  and credentials\u2014may be taken."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Kimberly Mayo, Assistant  Director; Nicole Collier; Alexandra Gonzalez; Amie Lesser; Tida Barakat  Reveley; Rachel Stoiko; John Van Schaik; Lillian Yob; and Elisa Yoshiara  made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Health Care: Additional Assessments Needed to Better Ensure  an Efficient Total Workforce. GAO-18-102, Washington, D.C.: Nov. 27,  2018.", "Defense Health Care: DOD Should Demonstrate How Its Plan to Transfer  the Administration of Military Treatment Facilities Will Improve Efficiency.  GAO-19-53, Washington, D.C.: Oct. 30, 2018.", "Defense Health Care: Expanded Use of Quality Measures Could  Enhance Oversight of Provider Performance. GAO-18-574, Washington,  D.C.: Sept. 17, 2018.", "Military Personnel: Additional Actions Needed to Address Gaps in Military  Physician Specialties. GAO-18-77. Washington, D.C.: Feb. 28, 2018.", "Defense Health Reform: Steps Taken to Plan the Transfer of the  Administration of the Military Treatment Facilities to the Defense Health  Agency, but Work Remains to Finalize the Plan, GAO-17-791R.  Washington, D.C.: Sept. 29, 2017.", "Military Compensation: Additional Actions Are Needed to Better Manage  Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.:  Feb. 3, 2017.", "Defense Health Care Reform: DOD Needs Further Analysis of the Size,  Readiness, and Efficiency of the Medical Force. GAO-16-820.  Washington, D.C.: Sept. 21, 2016.", "Defense Health Care: Additional Information Needed about Mental Health  Provider Staffing Needs. GAO-15-184. Washington, D.C.: Jan. 30, 2015.", "Human Capital: Additional Steps Needed to Help Determine the Right  Size and Composition of DOD\u2019s Total Workforce. GAO-13-470.  Washington, D.C.: May 29, 2013  Defense Health Care: Actions Needed to Help Ensure Full Compliance  and Complete Documentation for Physician Credentialing and Privileging.  GAO-12-31. Washington, D.C.: Dec. 15, 2011.", "Military Cash Incentives: DOD Should Coordinate and Monitor Its Efforts  to Achieve Cost-Effective Bonuses and Special Pays. GAO-11-631.  Washington, D.C.: June 21, 2011.", "Military Personnel: Enhanced Collaboration and Process Improvements  Needed for Determining Military Treatment Facility Medical Personnel  Requirements. GAO-10-696. Washington, D.C.: Jul. 29, 2010.", "Military Personnel: Status of Accession, Retention, and End Strength for  Military Medical Officers and Preliminary Observations Regarding  Accession and Retention Challenges. GAO-09-469R. Washington, D.C.:  Apr. 16, 2009.", "Military Personnel: Better Debt Management Procedures and Resolution  of Stipend Recoupment Issues Are Needed for Improved Collection of  Medical Education Debts, GAO-08-612R. Washington, D.C.: Apr. 1, 2008.", "Primary Care Professionals: Recent Supply Trends, Projections, and  Valuation of Services. GAO-08-472T. Washington, D.C.: Feb. 12, 2008.", "Military Physicians: DOD\u2019s Medical School and Scholarship Program.  GAO/HEHS-95-244. Washington, D.C.: Sept. 29, 1995.", "Defense Health Care: Military Physicians\u2019 Views on Military Medicine.  GAO/HRD-90-1. Washington, D.C.: Mar. 22, 1990."], "subsections": []}], "fastfact": ["The Army, Navy, and Air Force have implemented common standards for how they determine necessary staffing levels at their health clinics for a number of medical specialties\u2014but haven\u2019t done so for their dental clinics. As a result, DOD dental clinics may not be staffed as efficiently as possible to provide dental care across the military services.", "The military services have also struggled to recruit and retain certain types of dental specialists, such as oral surgeons. We recommended that the services develop a common set of dental staffing standards and a process to evaluate recruitment and retention efforts."]}
{"id": "GAO-18-325", "url": "https://www.gao.gov/products/GAO-18-325", "title": "Veterans Affairs Research: Actions Needed to Help Better Identify Agency Inventions", "published_date": "2018-04-25T00:00:00", "released_date": "2018-05-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA manages a $1.9 billion research program that has produced numerous healthcare inventions, such as the pacemaker. In 2000, VA created a program to help transfer VA inventions to the private sector so that they can be commercialized and used by veterans and the public, while VA retains ownership and collects royalties. Many of VA's 3,000 researchers also hold positions at universities, which take the lead in commercializing inventions developed by these researchers. Researchers and universities are required to disclose such inventions to VA, and universities are to report on commercialization activities according to their agreements with VA.", "GAO was asked to examine VA's ability to ensure its ownership of inventions made with VA resources. This report examines, among other things, the extent to which VA has taken steps to ensure that (1) researchers disclose inventions and (2) universities report on commercialization activities for joint inventions. GAO reviewed laws; policies; a nongeneralizable sample of university agreements based on backlogs of disclosures, among other factors; and interviews with officials and researchers from VA medical centers and their affiliated universities."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) has taken steps to educate agency researchers about its requirements to disclose inventions to VA, but officials reported that researchers have not consistently done so. VA policy requires researchers to disclose inventions to both VA and the university they work for even when they do not use VA resources. GAO found, through discussions with VA officials and researchers, that several factors contribute to researchers not consistently disclosing their inventions, including that VA researchers may have:", "disclosed inventions to their university, assuming the university would then disclose them to VA;", "not been familiar with VA's invention disclosure process, because they may not have frequently developed inventions; or", "thought that invention disclosure was unnecessary when they did not use VA resources to develop their invention.", "In 2017, VA staff visited universities and VA medical centers 26 times to meet with researchers about invention disclosure. Also, VA created an online training course to educate researchers on the need to disclose inventions, but the training is not mandatory, and about 4 percent of researchers took it. Without mandatory training to communicate invention disclosure requirements\u2014consistent with federal internal control standards for internally communicating quality information\u2014VA researchers may not be fully informed about those requirements, which can result in lost technology transfer opportunities and royalties for VA.", "VA has improved communication with universities but has not ensured that they are consistently reporting information on commercialization activities for joint inventions. VA reported that about three-quarters of VA's 79 university partners did not submit the annual reports required by VA in 2017. GAO reviewed a nongeneralizable sample of agreements VA has with universities and found that reporting requirements about timing and content of reports were unclear. Without providing a standardized method that clearly guides universities in fulfilling VA's reporting requirements, consistent with federal standards for internal control, VA cannot ensure that it has adequate information to account for its licenses and royalties."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VA (1) make training about invention disclosure mandatory and (2) provide universities with a standardized method for annual reporting. VA concurred with GAO\u2019s recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For more than 90 years, the Department of Veterans Affairs (VA) has  managed a research program that has led to healthcare breakthroughs  that improve the lives of veterans and the public. According to VA, the  department has been instrumental in medical advancements such as  therapies for tuberculosis following World War II, the implantable cardiac  pacemaker, concepts for computerized axial tomography scans  (commonly referred to as CAT scans), the first successful liver  transplants, and the first powered ankle-foot prosthesis.", "In 2000, VA created a technology transfer program to help transfer the  use of inventions to the private sector so that the inventions could be  commercialized and used by veterans and the public at large, while VA  would retain ownership and collect royalties for its inventions. Today VA  oversees a research program that spends $1.9 billion annually and  employs more than 3,000 researchers focused on health issues such as  cancer, diabetes, traumatic brain injury, and other conditions affecting  veterans. In fiscal year 2016, VA patents from such research resulted in  45 licenses providing the agency about $316,000 in royalties, according  to VA officials.", "VA\u2019s research program is unique in that the majority of VA\u2019s researchers  are dually appointed\u2014they work at VA and at another research institution, such as a university or medical college. VA\u2019s dually appointed  researchers\u2019 inventions are subject to agreements between VA and the  university and are considered joint inventions. In most cases, the  affiliated university is responsible for the bulk of technology transfer  activities, including filing patents, finding licensees to further develop the  technology, and collecting and distributing royalties. The process, from  disclosure of the invention to VA to commercialization of the invention,  requires coordination between researchers and administrators at VA  medical centers and staff at VA\u2019s technology transfer office, as well as  between VA\u2019s technology transfer office and the affiliated universities.", "Congress has raised questions about the extent to which VA is  consistently asserting ownership of inventions developed with its  resources. You asked us to examine the VA technology transfer program  to ensure VA was not missing opportunities to obtain rights to inventions  developed using VA resources. This report examines the extent to which  VA has taken steps to ensure that (1) researchers and universities  disclose inventions and (2) universities have reported information to VA  about commercialization activities for joint inventions.", "For both objectives, we reviewed documents provided by VA, affiliated  universities, and a VA advisory committee. These included documents on  the history of VA\u2019s technology transfer program; technology transfer  policies and procedures; and documents outlining challenges faced in  implementing the program and recent efforts to address these challenges.  We also examined relevant statutes and regulations. We compared VA\u2019s  procedures, policies, and internal and external communications to federal  internal control standards for control activities and information and  communication. We also interviewed officials from the VA technology  transfer office and the VA Office of the General Counsel; officials selected  through a nonprobability sample of six VA medical centers and their  affiliated universities; and two of the three members of a subcommittee of  the National Research Advisory Council that submitted a report to VA on  the department\u2019s technology transfer program in fiscal year 2017. We  conducted site visits at five of the six VA medical centers\u2014Atlanta,  Georgia; Baltimore, Maryland; Palo Alto and San Francisco, California;  and Salt Lake City, Utah\u2014for interviews with researchers who were  inventors and with the Associate Chiefs of Staff for Research at each  medical center, to whom we refer as the research administrators. We also  met with officials of each of the universities affiliated with the respective  medical centers\u2014Emory University; the University of Maryland at  Baltimore; Stanford University; the University of California, particularly the  University of California at San Francisco; and the University of Utah. In  addition, we conducted telephone interviews with researchers and the  research administrator at the sixth VA medical center in Cleveland, Ohio,  and officials of the university affiliated with it, Case Western Reserve  University. We selected the medical centers and their respective  university affiliates based on high levels of license activity or backlogs of  disclosures, among other factors. The results of these interviews are not  generalizable to all VA medical centers and their affiliated universities but  provide illustrative examples.", "The VA technology transfer program is affiliated with 79 universities and  has agreements in place with all but three of these. VA began negotiating  these, which we refer to as original agreements, soon after the creation of  the VA technology transfer program in 2000. Beginning in fiscal year  2015, VA initiated a new type of agreement establishing new provisions  for VA, which we will refer to as new agreements. We reviewed original  agreements for five of the six universities in our sample. One of the  universities in our sample, Emory University, did not have an agreement  with VA as of January 2018. We also reviewed a nonprobability sample  of an additional three original agreements with other universities based on  their licensing and commercialization activities, for a total of eight original  agreements. In addition to the original agreements, we also reviewed the  first eight new agreements that VA negotiated with universities. In total,  we reviewed 16 agreements\u2014the 8 original agreements and 8 new ones  to determine whether they contained requirements for disclosure and  reporting to VA.", "For objective two, we requested and reviewed annual reports from VA for  the eight universities whose original technology transfer agreements we  reviewed. The annual reports VA provided were those the eight  universities submitted to VA in 2016 and 2017, covering technology  transfer activities, for a total of 12 reports. Not every university submitted  an annual report to VA for each year; instead, at least one university  provided an annual report that was late from a prior year, going back as  far as 2011. We reviewed at least one annual report from each of the  eight universities.", "We conducted this performance audit from October 2016 to April 2018, in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Just after World War II, VA developed affiliations with medical schools to  improve acute care and physical and mental rehabilitation for veterans.  As part of the relationship, VA medical centers have contributed to the  education of medical students and residents. Besides medical students  and residents, other dual appointees\u2014clinicians and researchers\u2014spend  either a full 40-hour week or a fraction of the work week at VA and other  time at the affiliated university.", "On January 23, 1950, Executive Order 10,096 established that the  government shall obtain the entire right, title, and interest in and to all  inventions made by government employees during working hours; with a  contribution by the government of facilities, equipment, materials, funds,  or information, or time and services of other government employees on  official duty; or which bear a direct relation to or are made as a  consequence of the employee\u2019s duties. Since the early 1980s, the  federal government has taken several actions related to technology  transfer from federal laboratories.", "Technology transfer is the process of transferring scientific findings from  one organization to another for the purpose of further development and  commercialization. In this regard, federal agencies are authorized to issue  licenses to outside entities granting rights to make, use, or sell  government owned inventions. One of the first technology transfer laws,  the Stevenson-Wydler Technology Innovation Act of 1980, articulated the  need for a strong national policy supporting domestic technology transfer.  The law requires federal laboratories to establish an office of research  and technology applications and devote budget and personnel resources  to promoting technology cooperation and the transfer of technologies to  private industry and state and local governments. In addition, the act  requires federal agencies that operate or direct federal laboratories to  report information on technology transfer performance annually to the  Office of Management and Budget, as part of their annual budget  submission. Copies of those reports should be transmitted to the  Secretary of Commerce who must submit a summary report to Congress  and the President.", "For many years after the Stevenson-Wydler Technology Innovation Act of  1980, VA waived ownership rights to inventions generated by its  researchers, leaving the responsibilities for patenting, marketing, and  licensing with the inventor and the VA medical center\u2019s university partner.  As a result of this practice, according to former VA officials, some VA  research was not commercialized because VA did not have a technology  transfer program or other means to promote commercialization.", "In 2000, VA created the VA Technology Transfer Program to facilitate the  commercialization of VA inventions to benefit veterans and the American  public. VA developed technology transfer agreements with universities to  help facilitate technology transfer. Under the terms of the agreements, the  universities can take the lead on patenting and commercialization, and  VA can retain joint ownership of inventions. Among other things, the  original agreements gave the universities the right of first refusal to apply  for and manage patents, market the technologies, negotiate licenses, and  collect royalties to be shared with VA.", "As of November 2017, the VA Technology Transfer Office, located in  Washington, D.C., employed five technology transfer specialists  responsible for all technology transfer activities for VA\u2019s solely owned  inventions. These inventions may come from more than 3,000 VA  researchers at over 100 VA medical centers, as well as from VA  employees at other VA locations. In addition, the technology transfer  specialists are responsible for coordinating with universities on inventions  made by dually appointed researchers. According to VA officials, VA  relies on affiliated universities for most of the technology transfer efforts  connected with such inventions, since the universities have their own  offices with expertise in technology transfer and are usually willing to take  the lead.", "Under a Veterans Health Administration 2002 policy on invention  disclosures, which was revised in January 2017, VA employees who  invent something are directed to disclose those inventions to VA using a  disclosure form and complete a certification form to certify whether VA  resources were used. VA employees are to disclose inventions to VA  even if they were not created with VA resources. Affiliated universities  may also require dually appointed researchers to disclose inventions to  the university. Under agreements between the universities and VA,  universities are required to disclose a dually appointed researcher\u2019s  invention to VA, as an additional assurance to aid VA in capturing  relevant inventions. Similarly, VA is to notify the university when a dually  appointed researcher\u2019s invention comes to its attention.", "According to VA policy, researchers\u2019 supervisors or research  administrators at VA medical centers are to review the disclosure forms  and send them to the VA Technology Transfer Office. The office  evaluates the information and provides a recommendation to VA\u2019s  General Counsel on whether VA should assert ownership. If General  Counsel\u2019s review finds that VA should assert ownership, the General  Counsel notifies the VA researcher\u2019s and the VA medical center\u2019s  research and development office of the determination. The Technology  Transfer Office then notifies the researcher\u2019s university about VA\u2019s  ownership of the invention. At this point the department expects the  university to include VA as an owner during the patenting process,  according to VA officials. Figure 1 shows VA\u2019s process for determining  ownership of inventions created by dually appointed researchers,  according to VA policies.", "If the university takes the lead on an invention of a dually appointed  researcher, original VA agreements require universities to provide annual  reports to update VA on commercialization activities, such as progress in  licensing inventions or collecting royalties from licensees. While less  commonly used, alternative processes for commercialization are shown in  appendix I.", "We and others have identified a number of challenges associated with  technology transfer from federal research facilities. For example, we  found that technology transfer is often not a priority for laboratory  managers; researchers may not understand the potential commercial  applicability of their innovations; or the technologies are often not  developed enough for use in market-ready products and may require  investment of additional time and money to develop. We also have  reported that pharmaceutical inventions in particular may take a relatively  long time to develop. For example, the entire discovery, development,  and review process of a new drug can take up to 15 years."], "subsections": []}, {"section_title": "VA Has Taken Steps to Educate Researchers and Universities about Requirements but Could Enhance Researchers\u2019 Training", "paragraphs": [], "subsections": [{"section_title": "VA Has Taken Steps to Educate Researchers but Reported that Researchers Have Not Always Disclosed Their Inventions", "paragraphs": ["Although VA has taken steps to educate researchers about disclosure of  inventions, VA officials reported that the researchers have not  consistently disclosed inventions to the department because they did not  always fully understand VA\u2019s disclosure policy. Officials from VA\u2019s  technology transfer office told us on multiple occasions that they believed  researchers did not consistently disclose inventions. For example, in  December 2016, VA officials said that once the technology transfer office  began sending researchers e-mail notices about the need to disclose  inventions, the number of disclosures increased, which they said  suggested underreporting had been occurring. In March 2017, the  officials told us that many of the inventions from more than 50  researchers during a 5-year period at one university had not been  disclosed until VA checked with the university and discovered the error.  By November 2017, VA technology transfer officials thought disclosure  had improved throughout VA, but they were still not able to describe the  extent of the problem.", "The researchers we interviewed at the six medical centers in our sample  generally believed that they had properly disclosed inventions. However,  according to VA officials, a university official, and two VA researchers,  there could be several reasons that contributed to researchers not  consistently disclosing their inventions to VA, including the following:", "Researchers may have disclosed inventions to their university,  assuming the university would disclose them to VA on their behalf.", "Researchers may have disclosed their inventions to the university  because it was more convenient than disclosing to VA, as the  university\u2019s technology transfer officials were more accessible to  answer questions.", "Researchers were not familiar with VA\u2019s invention disclosure process  because the process was not routine to them.", "Researchers may have believed they did not use VA resources and  did not realize they were still required to disclose to VA.", "VA research administrators may not always have reminded  researchers of the need to disclose inventions, as they did not  consider this requirement a priority.", "VA made efforts since fiscal year 2016 to inform researchers about its  disclosure policy. For example, according to VA officials, the department  has increased its in-person communication with VA researchers. In the  first 8 months of fiscal year 2017, VA staff made 26 visits to universities  and VA medical centers to meet with researchers to encourage the  disclosure of inventions. However, VA officials said participation rates  among researchers at these voluntary meetings were low in some cases.  At one medical center, only the research administrator and one other  researcher attended the meeting, according to the administrator.", "In addition, VA established an online training program in 2017 covering  the invention disclosure process, but the training is not mandatory. VA  provided us with a report from October 2017 indicating that out of over  3,000 eligible researchers, 130 had taken the training (about 4 percent).  One VA research administrator said that mandatory training would be  helpful. Under federal internal control standards, management is to  internally communicate the necessary quality information to achieve the  entity\u2019s objectives, such as by communicating that information down and  across reporting lines to enable personnel to perform key roles in  achieving those objectives. Given that VA has not made the meetings or  online training on disclosure policy mandatory, its importance may not be  clear to all researchers. Also, because researchers do not make  discoveries every year, and the process is not routine, taking such  training once may not be sufficient to educate users. Without requiring  researchers to take online training on the invention disclosure process  annually, researchers may not be fully informed about the requirement to  disclose inventions, which can result in lost technology transfer  opportunities and lost royalties for VA if the inventions are not disclosed."], "subsections": []}, {"section_title": "VA Has Taken Steps to Make Universities Aware of VA Researchers and Disclosure Requirements", "paragraphs": ["Based on our interviews with VA and university officials in our sample,  since fiscal year 2016, the department took steps to make universities  aware of VA researchers and their disclosure requirements in an effort to  improve university disclosures to VA. We reviewed 16 agreements  between VA and affiliated universities, including the five universities with  agreements in our sample, and all of the universities agreed to disclose  joint inventions to the department. However, VA officials we interviewed  said that universities may not always disclose all inventions to VA.  Although they said they could not identify the extent of the problem, the  officials highlighted one university in our sample that had not disclosed  inventions to VA for at least 5 years. This university did not disclose  inventions to VA, as agreed, until prompted by VA\u2019s technology transfer  office late in fiscal year 2016. Responsible university officials said they  had assumed the dually appointed researchers were disclosing the  inventions to VA. According to VA officials, when the VA technology  transfer office received a report from the university in fiscal year 2017 that  covered 5 years of disclosures, VA learned it had not received 80 percent  of the disclosures from that university for that period. VA officials said  they had not contacted the university sooner because their technology  transfer office had been understaffed until early in calendar year 2016. VA  officials from the technology transfer office had not identified a similar  problem of this magnitude with the other universities, including those in  our sample.", "According to our interviews with VA and university officials, some of VA\u2019s  university partners may not have been aware of which researchers were  also VA employees because the universities\u2019 lists of VA researchers were  not current and universities generally relied on the researchers to disclose  whether they were VA employees. Furthermore, in some cases, the  university disclosure forms did not specifically ask whether the researcher  also worked at VA. For example, two of the six forms used by universities  in our sample did not specifically ask the researcher to indicate whether  they were VA employees. Upon recognizing some shortcomings in  universities\u2019 disclosures to VA, the department provided current lists of  VA researchers at affiliated VA medical centers to their respective  universities in fiscal year 2017, and VA technology transfer officials said  they intend to provide such updated lists to the universities semi-annually.  VA officials said that universities may not be using these lists, but they will  not know until time has elapsed. VA technology transfer officials said their  site visits to VA medical centers\u2014they conducted 26 visits in fiscal year  2017\u2014along with other communications with their counterparts at the  universities should help the disclosure process."], "subsections": []}]}, {"section_title": "VA Increased Communication with Universities about Reporting Commercialization Activities but Has Not Ensured that Such Activities Are Consistently Reported", "paragraphs": ["VA has increased communication with universities since 2016 to help  ensure that universities report information about commercialization  activities for joint inventions, but universities\u2019 reporting remained  inconsistent as of January 2018, according to VA. Under the original  agreements, such as the ones in our sample of eight agreements,  universities have the exclusive right to license and commercialize joint  inventions. VA\u2019s awareness of the commercialization of such inventions  depends on universities providing this information through annual reports,  as required by the agreements. However, according to VA officials, prior  to 2011, only about 20 percent of the 79 universities with which VA has  agreements submitted annual reports. According to VA officials, VA made  an effort to increase annual reporting, and by 2013 it was up to 80  percent. The officials said, however, that the percentage of universities  submitting annual reports dropped again after losing staff in the  technology transfer office\u2014the office retained only three staff in  subsequent years until fiscal year 2017 when there were 11 staff,  including 5 technology transfer specialists.", "In addition, VA officials we interviewed said that there was some  confusion among universities regarding when they needed to submit  annual reports. For example, they said that some universities may not  have understood whether they needed to provide annual reports during  years when there was no new patenting or licensing activity. The officials  said that this was at least part of the reason some universities did not  submit annual reports. VA officials told us that they expect universities to  provide annual reports even when there is no new patenting or licensing  activity, and in fiscal year 2016 technology transfer officials e-mailed  universities to clarify this expectation. The officials also said that in  October 2016 they sent a letter to each of the 79 universities with which  the department has agreements to remind universities to submit the  required annual reports. Further, as stated earlier, VA staff made 26 visits  to VA medical centers and universities in the first 8 months of fiscal year  2017 to discuss reporting and disclosure requirements. However, VA  reported that 24 percent of the 79 affiliated universities provided annual  reports in fiscal year 2017 even after VA\u2019s outreach. Because they did not  always receive annual reports, VA officials said they were often not aware  of a joint license until the university sent VA the first royalty check for a  joint invention. VA officials said they plan to conduct audits to check the  accuracy of university information.", "Beginning in fiscal year 2015, VA began creating new agreements with  universities to give VA enhanced responsibility in licensing and  commercialization of joint inventions. By the end of fiscal year 2017, VA  had new agreements in place with 11 of the 79 universities. Based on our  review of 8 of the new agreements, VA will now, for the first time, have  the option to take the lead in licensing joint inventions. For inventions for  which VA does not take the lead role, under the new agreements, it will  have the right to review and provide input on all joint licenses. This new  provision improves VA\u2019s awareness of any joint licenses created in the  future. However, because original agreements did not include this  provision, VA will still need to rely on accurate and updated annual  reports from universities for information on licenses negotiated under  those agreements.", "In addition, the new agreements do not improve or clarify language from  the original agreements about what details need to be included in the  annual reports. According to our analysis, these eight new agreements,  similar to the original eight agreements we reviewed, do not contain  details on the specific information and format in which to present the  annual report. For example, both the original and four of the new  agreements we reviewed require universities to provide an annual  report, but four other new agreements state that the universities will  provide annual reports upon request. The original agreements as well as  all eight of the new agreements indicate that reports should include the  status of all patent prosecution, commercial development, and licensing  activity on joint inventions but do not explain whether an annual report is  needed if there has been no commercialization activity. As noted above,  VA officials said universities were confused about whether they were  required to report to VA if they had no new activity in a given period;  however, VA officials told us they still need reports in these situations.", "Furthermore, based on our analysis of 12 annual reports from eight  universities, the format and content of the reports has been inconsistent.  Four universities submitted reports in a spreadsheet format; two  universities submitted reports in portable document format (PDF); one  university submitted a report in a Word format; and one submitted five  different documents, including both PDF and spreadsheet. In addition to  differences in format, the annual reports differed considerably in the  content they provided\u2014the more detailed annual reports included patent  application numbers, patent expenses, the status of patent applications,  and information about whether the patent had been licensed. In contrast,  the less detailed annual reports did not provide any of this information on  patents for the joint inventions. Moreover, one university only included  active license agreements in its annual report, while other universities  also included license agreements that were terminated. VA officials we  interviewed agreed that the reports are not very detailed or standardized  but said they would like to eventually standardize the annual report format  and content so they can use the reports to track and audit joint inventions  The differences in annual reports exist because VA has not provided the  universities with a standardized method for reporting, including the format  that should be used for the annual reports and the content to include in  them. Under federal standards for internal control, management should  design control activities to achieve objectives and respond to risks. Such  control activities include providing a standardized method that guides  universities in fulfilling VA\u2019s reporting requirements to ensure the  objectives of the program are being achieved. Without providing a  standardized method that clearly guides universities in fulfilling VA\u2019s  reporting requirements for these annual reports, including their format and  content, the department will not be able to ensure detailed and  standardized annual reports that include details about licenses and  royalties. VA officials said that they were working on a template for  universities to use in reporting on commercialization activities for joint  inventions. However it is not clear whether the template would inform  universities of VA\u2019s requirements to submit an annual report even if they  had no new commercialization activity in a given period."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["VA manages a research program unique within the federal government in  that most of its researchers are dually appointed to universities, and their  inventions are jointly owned by VA and the universities, which typically  take the lead on commercialization activities. While VA has taken steps to  educate researchers about requirements for researchers and universities  to disclose inventions to VA, VA officials reported that researchers have  not consistently done so, because they did not always fully understand  the policy. Given that VA has not made its online training on disclosure  policy mandatory, the policy\u2019s importance may not be clear to  researchers. Also, because researchers do not make discoveries every  year, and the process of disclosure is not routine, taking such training  once may not be sufficient. Without requiring researchers to take online  training on the invention disclosure process annually, researchers may  not be fully informed about the requirement to disclose inventions, which  can result in lost technology transfer opportunities as well as lost royalties  for VA if the inventions are not disclosed.", "VA has also taken steps to improve communication with universities to  increase reporting of commercialization activities, but said that such  reporting by universities is inconsistent, and VA may not have adequate  information to account for all of its licenses and royalties. Without  providing a standardized method that clearly guides universities in  fulfilling VA\u2019s reporting requirements for these annual reports, including  their format and content, the department will not be able to ensure  detailed and standardized annual reports."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to VA:  The Under Secretary of Health should make VA\u2019s online training on  invention disclosure mandatory for researchers and require that it be  completed annually. (Recommendation 1)", "The Under Secretary of Health should provide a standardized method  that guides universities in fulfilling VA\u2019s reporting requirements for these  annual reports, including their format and content. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  for review and comment. In written comments reproduced in appendix II,  VA agreed with our recommendations. Specifically, for our first  recommendation, VA said it will develop a plan to ensure its researchers  complete online technology transfer training on invention disclosure  annually. Furthermore, the plan will contain contingencies for those who  do not meet the requirements. The department expects to issue a training  requirement, train staff, and also demonstrate training is done by  September 2019. In addition, for our second recommendation, VA said it  will develop a standardized method that guides universities in fulfilling  VA\u2019s reporting requirements for the university technology transfer annual  reports. VA has a target completion date of December 2018. VA also  provided technical comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At this time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Veterans Affairs,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@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  the report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Department of Veterans Affairs Commercialization Process, Revenue, and Total Joint Patents with Universities", "paragraphs": ["The process for commercializing a Department of Veterans Affairs (VA)  invention can take several avenues. Generally a university takes the lead  on inventions of dual appointees who work for VA and a university, and  VA researchers who are not dually appointed rely on VA to patent and  license their inventions. Also, VA can take the lead on joint inventions, for  example, if the university is not interested in ownership. (see fig. 2).", "VA received about $316,000 in royalties from 45 licenses for its  inventions in fiscal year 2016 (see table 1). VA has U.S. and foreign  patents. From calendar years 2000 through November 2017, the U.S.  Patent and Trademark Office has granted VA 82 patents for which VA is  the sole assignee, according to VA officials. Also, table 2 shows by  university the breakdown of the 206 patents for which VA shares  ownership with an affiliate."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["John Neumann, (202) 512-3841 or neumannj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rob Marek (Assistant Director),  Daniel Semick (Analyst in Charge), Ivelisse Aviles, Navaiyoti Barkakati,  Kevin Bray, Ellen Fried, Matthew Hunter, Cynthia Saunders, Dan C.  Royer, Ardith Spence, and Kiki Theodoropoulos made key contributions  to this report."], "subsections": []}]}], "fastfact": ["Did you know that the Department of Veterans Affairs employed researchers who helped develop the pacemaker in 1960? Since 2000, VA research has resulted in VA-owned patents. VA can grant licenses to private sector firms to make its medical technologies commercially available while VA collects the royalties.", "To ensure this happens, VA requires its researchers and the universities that employ them to disclose their inventions.", "We found inconsistent disclosures from researchers and low turnout in VA's training on disclosures. We also found that VA\u2019s reporting requirements for universities were unclear\u2014and recommended ways to address these issues."]}
{"id": "GAO-18-397T", "url": "https://www.gao.gov/products/GAO-18-397T", "title": "Border Security: Progress and Challenges with the Use of Technology, Tactical Infrastructure, and Personnel to Secure the Southwest Border", "published_date": "2018-03-15T00:00:00", "released_date": "2018-03-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DHS has employed a variety of technology, tactical infrastructure, and personnel assets to help secure the nearly 2,000 mile long southwest border. Since 2009, GAO has issued over 35 products on the progress and challenges DHS has faced in using technology, infrastructure, and other resources to secure the border. GAO has made over 50 recommendations to help improve DHS's efforts, and DHS has implemented more than half of them.", "This statement addresses (1) DHS efforts to deploy and measure the effectiveness of surveillance technologies, (2) DHS efforts to maintain and assess the effectiveness of existing tactical infrastructure and to deploy new physical barriers, and (3) staffing challenges the Border Patrol has faced. This statement is based on three GAO reports issued in 2017, selected updates conducted in 2017, and ongoing work related to DHS acquisitions and the construction of physical barriers. For ongoing work GAO analyzed DHS and CBP documents, interviewed officials within DHS, and visited border areas in California."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Border Patrol, within the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP), has made progress deploying surveillance technology\u2014a mix of radars, sensors, and cameras\u2014along the southwest U.S. border. As of October 2017, the Border Patrol had completed the planned deployment of select technologies to several states along the southwest border. The Border Patrol has also made progress toward assessing performance of surveillance technologies, but additional actions are needed to fully implement GAO's 2011 and 2014 recommendations in this area. For example, the Border Patrol has not yet used available data to determine the contribution of surveillance technologies to border security efforts.", "CBP spent about $2.3 billion to deploy fencing from fiscal years 2007 through 2015 and constructed 654 miles of fencing by 2015. The Border Patrol has reported that border fencing supports agents' ability to respond to illicit cross-border activities by slowing the progress of illegal entrants. GAO reported in February 2017 that CBP was taking a number of steps in sustaining tactical infrastructure\u2014such as fencing, roads, and lighting\u2014along the southwest border. However, CBP has not developed metrics that systematically use data it collects to assess the contributions of border fencing to its mission, as GAO has recommended. CBP concurred with the recommendation and plans to develop metrics by January 2019. Further, CBP established the Border Wall System Program in response to a January 2017 executive order that called for the immediate construction of a southwest border wall. This program is intended to replace and add to existing barriers along the southwest border. In April 2017, DHS leadership gave CBP approval to procure barrier prototypes, which are intended to help inform new design standards for the border wall system.", "Physical Barriers in San Diego, California, April 2016", "The Border Patrol has faced challenges in achieving a staffing level of 21,370 agents, the statutorily-established minimum from fiscal years 2011 through 2016. As of September 2017, the Border Patrol reported it had about 19,400 agents. GAO reported in November 2017 that Border Patrol officials cited staffing shortages as a challenge for optimal deployment. As a result, officials had to make decisions about how to prioritize activities for deployment given the number of agents available."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In recent reports, GAO made or reiterated recommendations for DHS to, among other things, assess the contributions of technology and fencing to border security. DHS generally agreed, and has actions planned or underway to address these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss GAO\u2019s work reviewing the  Department of Homeland Security\u2019s (DHS) efforts to deploy surveillance  technology, tactical infrastructure, and personnel resources to the  southwest border. This area continues to be vulnerable to illegal cross- border activity. The U.S. Border Patrol reported apprehending almost  304,000 illegal entrants and making over 11,600 drug seizures along the  southwest border in fiscal year 2017. In January 2017, an executive order  called for, among other things, the immediate construction of a southwest  border wall and the hiring of 5,000 additional Border Patrol agents,  subject to available appropriations.", "The Border Patrol, within DHS\u2019s U.S. Customs and Border Protection  (CBP), is the federal agency responsible for securing the national borders  between U.S. ports of entry. The Border Patrol divides responsibility for  southwest border security operations geographically among nine sectors,  and each sector is further divided into varying numbers of stations. To  respond to cross-border threats, DHS has employed a combination of key  resources, including surveillance technology, tactical infrastructure (which  includes fencing, roads, and lighting), and Border Patrol agents. For  example, DHS has deployed a variety of land-based surveillance  technologies, such as cameras and sensors, which the Border Patrol  uses to assist its efforts to secure the border and to apprehend individuals  attempting to cross the border illegally. In addition, CBP spent  approximately $2.4 billion from fiscal years 2007 through 2015 to deploy  tactical infrastructure, including about $2.3 billion on fencing, at locations  along the nearly 2,000 mile long southwest border. The Border Patrol  deploys agents along the immediate border and in areas up to 100 miles  from the border as part of a layered approach the agency refers to as the  defense in depth strategy, and the Border Patrol reported it had 16,605  agents staffed at southwest border sectors at the end of fiscal year 2017.", "Since 2009 we have issued over 35 products on the progress DHS and  its components have made and challenges it faces in using surveillance  technology, tactical infrastructure, personnel, and other resources to  secure the southwest border. As a result of this work, we have made  over 50 recommendations to help improve DHS oversight over efforts to  secure the southwest border, and DHS has implemented more than half  of them. My statement describes (1) DHS efforts to deploy and measure  the effectiveness of surveillance technologies, (2) DHS efforts to maintain  and assess the effectiveness of existing tactical infrastructure and deploy  new physical barriers, and (3) staffing challenges the Border Patrol has  faced.", "This statement is based on three reports we issued in 2017, and on  selected updates we conducted in November and December 2017 on the  Border Patrol\u2019s efforts to address some of our previous  recommendations. This statement also includes preliminary observations  and analyses from ongoing work related to the construction of new and  replacement physical barriers along the southwest border and our fourth  annual assessment of select DHS major acquisition programs. Our  reports and testimonies, along with selected updates, incorporated  information we obtained and analyzed from officials at various DHS  components, and during site visits along the southwest border. More  detailed information about our scope and methodology can be found in  our published reports and testimonies. For ongoing work, we reviewed  acquisition documents, such as CBP\u2019s Concept of Operations for  Impedance and Denial, the Wall System Operational Requirements  Document, and the Border Wall Prototype Test Plan. We also met with  officials from DHS components, including CBP\u2019s Office of Facilities and  Management and the Border Patrol, from September 2017 to January  2018. Further, in December 2017 we conducted a site visit to California to  view existing tactical infrastructure and border wall prototypes that will  inform the design of future physical barriers along the southwest border.  All of our work was conducted 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."], "subsections": [{"section_title": "CBP Has Made Progress Deploying Surveillance Technology along the Southwest Border, but Has Not Fully Assessed Effectiveness", "paragraphs": ["On multiple occasions since 2011, we have reported on the progress the  Border Patrol has made deploying technologies along the southwest  border. Figure 1 shows the land-based surveillance technology systems  used by the Border Patrol.", "In November 2017, we reported on the progress the Border Patrol made  deploying technology along the southwest border in accordance with its  2011 Arizona Technology Plan and 2014 Southwest Border Technology  Plan. For example, we reported that, according to officials, the Border  Patrol had completed deployments of all planned Remote Video  Surveillance Systems (RVSS), Mobile Surveillance Capability systems,  and Unattended Ground Sensors, as well as 15 of 53 Integrated Fixed  Tower systems to Arizona. The Border Patrol had also completed  deployments of select technologies to Texas and California, including  deploying 32 Mobile Surveillance Capability systems. In addition, the  Border Patrol had efforts underway to deploy other technology programs,  but at the time of our report, some of those programs had not yet begun  deployment or were not yet under contract. For example, we reported  that, according to the Border Patrol officials responsible for the RVSS  program, the Border Patrol had begun planning the designs of the  command and control centers and towers for the Rio Grande Valley  sector in Texas. Further, we reported that the Border Patrol had not yet  initiated deployments of RVSS to Texas because, according to Border  Patrol officials, the program had only recently completed contract  negotiations for procuring those systems. Additionally, the Border Patrol  initially awarded the contract to procure and deploy Mobile Video  Surveillance System units to Texas in 2014, but did not award the  contract until 2015 because of bid and size protests, and the vendor that  was awarded the contract did not begin work until March 2016. Our  November 2017 report includes more detailed information about the  deployment status of surveillance technology along the southwest border  as of October 2017.", "We also reported in November 2017 that the Border Patrol had made  progress identifying performance metrics for the technologies deployed  along the Southwest Border, but additional actions are needed to fully  implement our prior recommendations in this area. For example, in  November 2011, we found that CBP did not have the information needed  to fully support and implement the Arizona Technology Plan and  recommended that CBP (1) determine the mission benefits to be derived  from implementation of the Arizona Technology Plan and (2) develop and  apply key attributes for metrics to assess program implementation. CBP  concurred with our recommendations and has implemented one of them.  Specifically, in March 2014, we reported that CBP had identified mission  benefits of its surveillance technologies to be deployed along the  southwest border, such as improved situational awareness and agent  safety. However, the agency had not developed key attributes for  performance metrics for all surveillance technologies to be deployed.", "Further, we reported in March 2014 that CBP did not capture complete  data on the contributions of these technologies. When used in  combination with other relevant performance metrics or indicators, these  data could be used to better determine the impact of CBP\u2019s surveillance  technologies on CBP\u2019s border security efforts and inform resource  allocation decisions. Therefore, we recommended that CBP (1) require  data on technology contributions to apprehensions or seizures to be  tracked and recorded within its database and (2) subsequently analyze  available data on apprehensions and technological assists\u2014in  combination with other relevant performance metrics or indicators, as  appropriate\u2014to determine the contribution of surveillance technologies.  CBP concurred with our recommendations and has implemented one of  them. Specifically, in June 2014, the Border Patrol issued guidance  informing agents that the asset assist data field\u2014which records assisting  technology or other assets (canine teams)\u2014in its database had become a  mandatory data field.", "While the Border Patrol has taken action to collect data on technology, it  has not taken additional steps to determine the contribution of  surveillance technologies to CBP\u2019s border security efforts. In April 2017,  we reported that the Border Patrol had provided us a case study that  assessed technology assist data, along with other measures, to  determine the contributions of surveillance technologies to its mission.  We reported that this was a helpful step in developing and applying  performance metrics; however, the case study was limited to one border  location and the analysis was limited to select technologies. In November  2017, we reported that Border Patrol officials demonstrated the agency\u2019s  new Tracking, Sign Cutting, and Modeling (TSM) system, which they said  is intended to connect between agents\u2019 actions (such as identification of a  subject through the use of a camera) and results (such as an  apprehension) and allow for more comprehensive analysis of the  contributions of surveillance technologies to the Border Patrol\u2019s mission.  One official said that data from the TSM will have the potential to provide  decision makers with performance indicators, such as changes in  apprehensions or traffic before and after technology deployments.  However, at the time of our review, TSM was still early in its use and  officials confirmed that it was not yet used to support such analytic efforts.  We continue to believe that it is important for the Border Patrol to assess  technologies\u2019 contributions to border security and will continue to monitor  the progress of the TSM and other Border Patrol efforts to meet our 2011  and 2014 recommendations."], "subsections": []}, {"section_title": "CBP Is Planning to Construct New Physical Barriers, but Has Not Yet Assessed the Impact of Existing Fencing", "paragraphs": [], "subsections": [{"section_title": "Fencing Is Intended to Assist Agents in Performing Their Duties, but Its Contributions to Border Security Operations Have Not Been Assessed", "paragraphs": ["We have reported on the significant investments CBP has made in  tactical infrastructure along the southwest border. The Illegal Immigration  Reform and Immigrant Responsibility Act of 1996 (IIRIRA), as amended,  provides that the Secretary of Homeland Security shall take actions, as  necessary, to install physical barriers and roads in the vicinity of the  border to deter illegal crossings in areas of high illegal entry. The  Secure Fence Act of 2006, in amending IIRIRA, required DHS to  construct at least two layers of reinforced fencing as well as physical  barriers, roads, lighting, cameras, and sensors on certain segments of the  southwest border. From fiscal years 2005 through 2015, CBP increased  the total miles of primary border fencing on the southwest border from  119 miles to 654 miles\u2014including 354 miles of primary pedestrian fencing  and 300 miles of primary vehicle fencing. In addition, CBP has deployed  additional layers of pedestrian fencing behind the primary border fencing,  including 37 miles of secondary fencing. From fiscal years 2007 through  2015, CBP spent approximately $2.4 billion on tactical infrastructure on  the southwestern border\u2014and about 95 percent, or around $2.3 billion,  was spent on constructing pedestrian and vehicle fencing. CBP officials  reported it will need to spend additional amounts to sustain these  investments over their lifetimes. In 2009, CBP estimated that maintaining  fencing would cost more than $1 billion over 20 years. CBP used  various fencing designs to construct the 654 miles of primary pedestrian  and vehicle border fencing. Figure 2 shows examples of existing  pedestrian fencing deployed along the border.", "In February 2017, we reported that border fencing had benefited border  security operations in various ways, according to the Border Patrol. For  example, according to officials, border fencing improved agent safety,  helped reduce vehicle incursions, and supported Border Patrol agents\u2019  ability to respond to illicit cross-border activities by slowing the progress  of illegal entrants. However, we also found that, despite its investments  over the years, CBP could not measure the contribution of fencing to  border security operations along the southwest border because it had not  developed metrics for this assessment. We reported that CBP collected  data that could help provide insight into how border fencing contributes to  border security operations. For example, we found that CBP collected  data on the location of illegal entries that could provide insight into where  these illegal activities occurred in relation to the location of various  designs of pedestrian and vehicle fencing. We reported that CBP could  potentially use these data to compare the occurrence and location of  illegal entries before and after fence construction, as well as to help  determine the extent to which border fencing contributes to diverting  illegal entrants into more rural and remote environments, and border  fencing\u2019s impact, if any, on apprehension rates over time. Therefore, we  recommended in February 2017 that the Border Patrol develop metrics to  assess the contributions of pedestrian and vehicle fencing to border  security along the southwest border using the data the Border Patrol  already collects and apply this information, as appropriate, when making  investment and resource allocation decisions. The agency concurred with  our recommendation. As of December 2017, officials reported that CBP  plans to establish initial metrics by March 2018 and finalize them in  January 2019."], "subsections": []}, {"section_title": "CBP Faces Challenges in Sustaining Tactical Infrastructure and Has Not Provided Guidance on Its Process for Identifying and Deploying Tactical Infrastructure", "paragraphs": ["In February 2017, we also reported that CBP was taking a number of  steps to sustain tactical infrastructure along the southwest border;  however, it continued to face certain challenges in maintaining this  infrastructure. For example, CBP had funding allocated for tactical  infrastructure sustainment requirements, but had not prioritized its  requirements to make the best use of available funding, since CBP also  required contractors to address urgent repair requirements. According to  Border Patrol officials, CBP classifies breaches to fencing, grates, or  gates as urgent and requiring immediate repair because breaches  increase illegal entrants\u2019 ability to enter the country unimpeded. At the  time of our February 2017 review, the majority of urgent tactical  infrastructure repairs on the southwest border were fence breaches,  according to Border Patrol officials. From fiscal years 2010 through 2015,  CBP recorded a total of 9,287 breaches in pedestrian fencing, and repair  costs averaged $784 per breach.", "While contractors provide routine maintenance and address urgent  repairs on tactical infrastructure, certain tactical infrastructure assets used  by the Border Patrol\u2014such as border fencing\u2014become degraded beyond  repair and must be replaced. For example, in February 2017 we reported  that CBP had provided routine maintenance and repair services to the  primary legacy pedestrian fencing in Sunland Park, New Mexico.  However, significant weather events had eroded the foundation of the  fencing, according to the Border Patrol officials in the El Paso sector, and  in 2015 CBP began to replace 1.4 miles of primary pedestrian fence in  this area. We also reported on several additional CBP projects to replace  degraded, legacy pedestrian fencing with more modern, bollard style  fencing. For example, in fiscal year 2016, CBP began removing and  replacing an estimated 7.5 miles of legacy primary pedestrian fencing  with modern bollard style fencing within the Tucson sector. In addition,  from fiscal years 2011 through 2016, CBP completed four fence  replacement projects that replaced 14.1 miles of primary pedestrian  legacy fencing in the Tucson and Yuma sectors at a total cost of  approximately $68.26 million and an average cost of $4.84 million per  mile of replacement fencing. We plan to provide information on additional  fence replacement projects in a forthcoming report.", "In 2014, the Border Patrol began implementing the Requirements  Management Process that is designed to facilitate planning for funding  and deploying tactical infrastructure and other requirements, according to  Border Patrol officials. At the time of our February 2017 review, Border  Patrol headquarters and sector officials told us that the Border Patrol  lacked adequate guidance for identifying, funding, and deploying tactical  infrastructure needs as part of this process. In addition, officials reported  experiencing some confusion about their roles and responsibilities in this  process. We reported that developing guidance on this process would  provide more reasonable assurance that the process is consistently  followed across the Border Patrol. We therefore recommended that the  Border Patrol develop and implement written guidance to include roles  and responsibilities for the steps within its requirements process for  identifying, funding, and deploying tactical infrastructure assets for border  security operations. The agency concurred with this recommendation and  stated that it planned to update the Requirements Management Process  and, as part of that update, planned to add communication and training  methods and tools to better implement the process. As of December  2017, DHS plans to complete these efforts by September 2019."], "subsections": []}, {"section_title": "CBP Has Tested Barrier Prototypes and Plans to Construct New Barriers in San Diego and Rio Grande Valley Sectors", "paragraphs": ["In response to the January 2017 Executive Order, CBP established the  Border Wall System Program to replace and add to existing barriers along  the southwest border. In April 2017, DHS leadership authorized CBP to  procure barrier prototypes, which are intended to help refine requirements  and inform new or updated design standards for the border wall system.  CBP subsequently awarded eight contracts with a total value of $5 million  for the construction, development, and testing of the prototypes. From  October to December 2017, CBP tested eight prototypes\u2014four  constructed from concrete and four from other materials\u2014and evaluated  them in five areas: breachability, scalability, constructability, design, and  aesthetics. CBP officials said the prototype evaluation results are  expected by March 2018.", "CBP has selected the San Diego and Rio Grande Valley sectors for the  first two segments of the border wall system. In the San Diego sector,  CBP plans to replace 14 miles of existing primary and secondary barriers.  The primary barriers will be rebuilt to existing design standards, but the  secondary barriers will be rebuilt to new design standards once  established. In the Rio Grande Valley sector, CBP plans to extend an  existing barrier by 60 miles using existing design standards. CBP intends  to prioritize construction of new or replacement physical barriers based on  threat levels, land ownership, and geography, among other things. We  have ongoing work reviewing the Border Wall System Program, and we  plan to report on the results of that work later this year."], "subsections": []}]}, {"section_title": "The Border Patrol Has Continued to Face Staffing Challenges", "paragraphs": ["In November 2017 we reported that, in fiscal years 2011 through 2016,  the Border Patrol had statutorily-established minimum staffing levels of  21,370 full-time equivalent agent positions, but the Border Patrol has  faced challenges in staffing to that level. Border Patrol headquarters,  with input from the sectors, determines how many authorized agent  positions are allocated to each of the sectors. According to Border Patrol  officials, these decisions take into account the relative needs of the  sectors, based on threats, intelligence, and the flow of illegal activity.  Each sector\u2019s leadership determines how many of the authorized agent  positions will be allocated to each station within their sector.", "At the end of fiscal year 2017, the Border Patrol reported it had over  19,400 agents on board nationwide, and that over 16,600 of the agents  were staffed to sectors along the southwest border. As mentioned earlier,  the January 2017 executive order called for the hiring of 5,000 additional  Border Patrol agents, subject to available appropriations, and as of  November 2017 we reported that the Border Patrol planned to have  26,370 agents by the end of fiscal year 2021. The Acting Commissioner  of CBP reported in a February 2017 memo to the Deputy Secretary for  Homeland Security that from fiscal year 2013 to fiscal year 2016, the  Border Patrol hired an average of 523 agents per year while experiencing  a loss of an average of 904 agents per year. The memo cited  challenges such as competing with other federal, state, and local law  enforcement organizations for applicants. In particular, the memo noted  that CBP faces hiring and retention challenges compared to DHS\u2019s U.S.  Immigration and Customs Enforcement (which is also planning to hire  additional law enforcement personnel) because CBP\u2019s hiring process  requires applicants to take a polygraph examination, Border Patrol agents  are deployed to less desirable duty locations, and Border Patrol agents  generally receive lower compensation.", "In November 2017, we reported that the availability of agents is one key  factor that affects the Border Patrol\u2019s deployment strategy. In particular,  officials from all nine southwest border sectors cited current staffing levels  and the availability of agents as a challenge for optimal deployment. We  reported that, as of May 2017, the Border Patrol had 17,971 authorized  agent positions in southwest border sectors, but only 16,522 of those  positions were filled\u2014a deficit of 1,449 agents\u2014and eight of the nine  southwest border sectors had fewer agents than the number of  authorized positions. As a result of these staffing shortages, resources  were constrained and station officials had to make decisions about how to  prioritize activities for deployment given the number of agents available.", "We also reported in November 2017 that within sectors, some stations  may be comparatively more understaffed than others because of  recruitment and retention challenges, according to officials. Generally,  sector officials said that the recruitment and retention challenges  associated with particular stations were related to quality of life factors in  the area near the station\u2014for example, agents may not want to live with  their families in an area without a hospital, with low-performing schools, or  with relatively long commutes from their homes to their duty station. This  can affect retention of existing agents, but it may also affect whether a  new agent accepts a position in that location. For example, officials in one  sector said that new agent assignments are not based solely on agency  need, but rather also take into consideration agent preferences. These  officials added that there is the potential that new agents may decline  offers for stations that are perceived as undesirable, or they may resign  their position earlier than they otherwise would to pursue employment in a  more desirable location. We have ongoing work reviewing CBP\u2019s efforts  to recruit, hire, and retain its law enforcement officers, including Border  Patrol agents.", "Chairwoman McSally, Ranking Member Vela, and Members of the  Subcommittee, this concludes my prepared statement. I will be happy to  answer any questions you may have."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact Rebecca Gambler at  (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  are Jeanette Henriquez (Assistant Director), Leslie Sarapu (Analyst-in- Charge), Ashley Davis, Alana Finley, Tom Lombardi, Marycella Mierez,  and Claire Peachey."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Southwest Border Security: Border Patrol Is Deploying Surveillance  Technologies but Needs to Improve Data Quality and Assess  Effectiveness. GAO-18-119. Washington, D.C.: November 30, 2017.", "Border Patrol: Issues Related to Agent Deployment Strategy and  Immigration Checkpoints. GAO-18-50. Washington, D.C.: November 8,  2017.  2017 Annual Report: Additional Opportunities to Reduce Fragmentation,  Overlap, and Duplication and Achieve Other Financial Benefits. GAO-17- 491SP. Washington, D.C.: April 26, 2017.", "Homeland Security Acquisitions: Earlier Requirements Definition and  Clear Documentation of Key Decisions Could Facilitate Ongoing  Progress. GAO-17-346SP. Washington, D.C.: April 6, 2017.", "Southwest Border Security: Additional Actions Needed to Better Assess  Fencing\u2019s Contributions to Operations and Provide Guidance for  Identifying Capability Gaps. GAO-17-331. Washington, D.C.: February  16, 2017.", "Southwest Border Security: Additional Actions Needed to Better Assess  Fencing\u2019s Contributions to Operations and Provide Guidance for  Identifying Capability Gaps. GAO-17-167SU. Washington, D.C.:  December 22, 2016.", "Border Security: DHS Surveillance Technology, Unmanned Aerial  Systems and Other Assets. GAO-16-671T. Washington, D.C.: May 24,  2016.  2016 Annual Report: Additional Opportunities to Reduce Fragmentation,  Overlap, and Duplication and Achieve Other Financial Benefits. GAO-16- 375SP. Washington, D.C.: April 13, 2016.", "Homeland Security Acquisitions: DHS Has Strengthened Management,  but Execution and Affordability Concerns Endure. GAO-16-338SP.  Washington, D.C.: March 31, 2016.", "Southwest Border Security: Additional Actions Needed to Assess  Resource Deployment and Progress. GAO-16-465T. Washington, D.C.:  March 1, 2016.", "Border Security: Progress and Challenges in DHS\u2019s Efforts to Implement  and Assess Infrastructure and Technology. GAO-15-595T. Washington,  D.C.: May 13, 2015.", "Homeland Security Acquisitions: Addressing Gaps in Oversight and  Information is Key to Improving Program Outcomes. GAO-15-541T.  Washington, D.C.: April 22, 2015.", "Homeland Security Acquisitions: Major Program Assessments Reveal  Actions Needed to Improve Accountability. GAO-15-171SP. Washington,  D.C.: April 22, 2015.   2015 Annual Report: Additional Opportunities to Reduce Fragmentation,  Overlap, and Duplication and Achieve Other Financial Benefits. GAO-15- 404SP. Washington, D.C.: April 14, 2015.", "Arizona Border Surveillance Technology Plan: Additional Actions Needed  to Strengthen Management and Assess Effectiveness. GAO-14-411T.  Washington, D.C.: March 12, 2014.", "Arizona Border Surveillance Technology Plan: Additional Actions Needed  to Strengthen Management and Assess Effectiveness. GAO-14-368.  Washington, D.C.: March 3, 2014.", "Border Security: Progress and Challenges in DHS Implementation and  Assessment Efforts. GAO-13-653T. Washington, D.C.: June 27, 2013.", "Border Security: DHS\u2019s Progress and Challenges in Securing U.S.  Borders. GAO-13-414T. Washington, D.C.: March 14, 2013.", "Border Patrol: Key Elements of New Strategic Plan Not Yet in Place to  Inform Border Security Status and Resource Needs. GAO-13-25.  Washington, D.C.: December 10, 2012.", "U.S. Customs and Border Protection\u2019s Border Security Fencing,  Infrastructure and Technology Fiscal Year 2011 Expenditure Plan. GAO- 12-106R. Washington, D.C.: November 17, 2011.", "Arizona Border Surveillance Technology: More Information on Plans and  Costs Is Needed before Proceeding. GAO-12-22. Washington, D.C.:  November 4, 2011.", "Homeland Security: DHS Could Strengthen Acquisitions and  Development of New Technologies. GAO-11-829T. Washington, D.C.:  July 15, 2011.", "Border Security: DHS Progress and Challenges in Securing the U.S.  Southwest and Northern Borders. GAO-11-508T. Washington, D.C.:  March 30, 2011.", "Border Security Preliminary Observations on the Status of Key Southwest  Border Technology Programs. GAO-11-448T. Washington, D.C.: March  15, 2011.", "Secure Border Initiative: DHS Needs to Strengthen Management and  Oversight of Its Prime Contractor. GAO-11-6. Washington, D.C.: October  18, 2010.", "U.S. Customs and Border Protection\u2019s Border Security Fencing,  Infrastructure and Technology Fiscal Year 2010 Expenditure Plan. GAO- 10-877R. Washington, D.C.: July 30, 2010.", "Department of Homeland Security: Assessments of Selected Complex  Acquisitions, GAO-10-588SP. Washington, D.C.: June 30, 2010.", "Secure Border Initiative: DHS Needs to Reconsider Its Proposed  Investment in Key Technology Program. GAO-10-340. Washington, D.C.:  May, 5, 2010.", "Secure Border Initiative: DHS Has Faced Challenges Deploying  Technology and Fencing Along the Southwest Border, GAO-10-651T.  Washington, D.C.: May 4, 2010.", "Secure Border Initiative: Testing and Problem Resolution Challenges Put  Delivery of Technology Program at Risk. GAO-10-511T. Washington,  D.C.: March 18, 2010.", "Secure Border Initiative: DHS Needs to Address Testing and  Performance Limitations That Place Key Technology Program at Risk.  GAO-10-158. Washington, D.C.: January 29, 2010.", "Secure Border Initiative: Technology Deployment Delays Persist and the  Impact of Border Fencing Has Not Been Assessed. GAO-09-1013T.  Washington, D.C.: September 17, 2009.", "Secure Border Initiative: Technology Deployment Delays Persist and the  Impact of Border Fencing Has Not Been Assessed. GAO-09-896.  Washington, D.C.: September 9, 2009.", "Border Patrol: Checkpoints Contribute to Border Patrol\u2019s Mission, but  More Consistent Data Collection and Performance Measurement Could  Improve Effectiveness. GAO-09-824. Washington, D.C.: August 31, 2009.", "Customs and Border Protection\u2019s Secure Border Initiative Fiscal Year  2009 Expenditure Plan. GAO-09-274R. Washington, D.C.: April 30, 2009.", "Secure Border Initiative Fence Construction Costs. GAO-09-244R.  Washington, D.C.: January 29, 2009.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-17-790T", "url": "https://www.gao.gov/products/GAO-17-790T", "title": "High Risk: Status of Prior Recommendations on Federal Management of Programs Serving Indian Tribes", "published_date": "2017-09-13T00:00:00", "released_date": "2017-09-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GAO's High-Risk Series identifies federal program areas needing attention from Congress and the executive branch. GAO added federal management of programs that serve Indian tribes and their members to its February 2017 biennial update of high-risk areas in response to serious problems with management and oversight by Interior and HHS.", "This testimony identifies GAO's recommendations to Interior and HHS from prior GAO reports on the federal management and oversight of Indian education, energy resources, and health care that remain unimplemented. It also examines agencies' recent actions to address the recommendations and the extent to which these actions address GAO's recommendations. To conduct this work, GAO reviewed and analyzed agency documentation on actions taken to implement the recommendations and conducted interviews with agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["As discussed in the 2017 High Risk report, GAO has identified numerous weaknesses in how the Department of the Interior (Interior) and the Department of Health and Human Services (HHS) manage programs serving Indian tribes. Specifically, these weaknesses were related to Interior's Bureau of Indian Education (BIE) and Bureau of Indian Affairs (BIA)\u2014under the Office of the Assistant Secretary-Indian Affairs (Indian Affairs)\u2014in overseeing education services and managing Indian energy resources, and HHS's Indian Health Service (IHS) in administering health care services. GAO cited nearly 40 recommendations in its 2017 High Risk report that were not implemented, and has since made an additional 12 recommendations in two new reports on BIE school safety and construction published in late May of this year. Interior and HHS have taken some steps to address these recommendations but only one has been fully implemented.", "Education. GAO has found serious weaknesses in Indian Affairs' oversight of Indian education. For example, in 2016, GAO found that the agency's lack of oversight of BIE school safety contributed to deteriorating facilities and equipment in school facilities. At one school, GAO found seven boilers that failed inspection because of safety hazards, such as elevated levels of carbon monoxide and a natural gas leak. In 2017, GAO found key weaknesses in the way Indian Affairs oversees personnel responsible for inspecting BIE school facilities for safety and manages BIE school construction projects. Of GAO's 23 recommendations on Indian education\u2014including recommendations cited in GAO's 2017 High Risk report and in two late May reports\u2014none have been fully implemented.", "Energy resource management. In three prior reports on Indian energy, GAO found that BIA inefficiently managed Indian energy resources and the development process, thereby limiting opportunities for tribes and their members to use those resources to create economic benefits and improve the well-being of their communities. GAO categorized concerns associated with BIA management of energy resources and the development process into four broad areas, including oversight of BIA activities, collaboration, and BIA workforce planning. GAO made 14 recommendations to BIA to address its management weaknesses, which were cited in the 2017 High Risk report. However, none have been fully implemented.", "Health care. GAO has found that IHS provides inadequate oversight of its federally operated health care facilities and of its Purchased/Referred Care program. For example, in 2016 and 2017, GAO found that IHS provided limited and inconsistent oversight of the timeliness and quality of care provided in its facilities and that inconsistencies in quality oversight were exacerbated by significant turnover in area leadership. GAO also found that IHS did not equitably allocate funds to meet the health care needs of Indians. Of GAO's 13 recommendations on Indian health care cited in GAO's 2017 High Risk report, one has been fully implemented."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO cited nearly 40 unimplemented recommendations in its February 2017 High Risk report on federal programs for Indian tribes in education, energy development, and health care, and added 12 recommendations in two new reports on BIE school safety and construction in late May of this year. Sustained focus by Interior and HHS in fully implementing these recommendations and continued oversight by Congress are essential to achieving progress in these areas."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the status of our  recommendations to the Departments of the Interior (Interior) and Health  and Human Services (HHS) on programs that serve tribes and their  members. As you know, we added this area to our High Risk list in  February 2017 in response to serious problems in these agencies\u2019  management and oversight of Indian education, health care programs,  and energy resources, which were highlighted in various prior reports.", "In particular, we have found numerous weaknesses in how Interior\u2019s  Bureau of Indian Education (BIE) and Bureau of Indian Affairs (BIA) and  HHS\u2019s Indian Health Service (IHS) have administered education and  health care services, which has put the health and safety of American  Indians served by these programs at risk. These weaknesses included  poor conditions at BIE school facilities that endangered students, and  inadequate oversight of health care that hindered IHS\u2019s ability to ensure  quality care to Indian communities. In addition, we have reported that BIA  has mismanaged Indian energy resources and thereby limited  opportunities for tribes and their members to use those resources to  create economic benefits and improve the well-being of their  communities. As a result of these weaknesses, we cited nearly 40  recommendations we made in prior reports in our February 2017 High  Risk report that were not implemented. We also made an additional 12  recommendations in two new reports on BIE school safety and  construction in late May of this year. As I will discuss, Interior and HHS  have taken some steps to address these recommendations, but only one  has been fully implemented.", "In 2016, Congress found in the Indian Trust Asset Reform Act that  \u201cthrough treaties, statutes, and historical relations with Indian tribes, the  United States has undertaken a unique trust responsibility to protect and  support Indian tribes and Indians.\u201d As further stated in that act, the  fiduciary responsibilities of the United States to Indians arise in part from  commitments made in treaties and agreements, in exchange for which  Indians surrendered claims to vast tracts of land, and this history of  federal-tribal relations and understandings has benefitted the people of  the United States and established \u201cenduring and enforceable ederal  obligations to which the national honor has been committed.\u201d Through  improvements to federal management of programs that serve tribes and  their members, agencies can improve the efficiency of federal programs  under which services are provided to tribes and their members. This  would be consistent with the expressed view of Congress as to the  federal government\u2019s trust responsibilities, and would strengthen  confidence in the performance and accountability of our federal  government. In light of this unique trust responsibility and concern about  the federal government ineffectively administering Indian education and  health care programs and mismanaging Indian energy resources, we  added these programs as a high-risk area because they uniquely affect  tribal nations and their members.", "The focus of our high risk issue area is on management weaknesses  within federal agencies that administer programs that serve tribes and  their members. However, not all federal programs are administered by  federal agencies. In accordance with federal Indian policy that recognizes  the right of Indian tribes to self-government and supports tribal self- determination, a number of tribes have elected to take over administration  of certain federal programs and services from BIA, BIE, and IHS. Our  recommendations identified in the high risk issue area do not necessarily  reflect on the performance of programs administered by tribes.", "My testimony today will discuss our recommendations to Interior and HHS  on these issues. We will also describe the actions that these agencies  have taken to implement our recommendations, as well as our evaluation  of the extent to which these actions address our recommendations.", "This testimony draws on recent updates we have received from Interior  and HHS on our prior recommendations summarized in our High Risk  report in February 2017 and recommendations in two reports on BIE  school safety and construction published in late May of this year. To  conduct our prior issued work, we reviewed relevant federal laws,  regulations, and policies; reviewed and analyzed federal data; and  interviewed tribal, federal, and industry officials, among others. More  detailed information on our scope and methodology can be found in each  of the cited reports.", "We conducted the work on which this testimony is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["In 1990, GAO began a program to report on government operations that  we identified as \u201chigh risk.\u201d Since then, generally coinciding with the start  of each new Congress, we have reported on the status of progress  addressing previously identified high-risk areas and have updated the  High-Risk List to add new high-risk areas. Our most recent high-risk  update in February 2017 identified 34 high-risk areas.", "Overall, our high-risk program has served to identify and help resolve  serious weaknesses in areas that involve substantial resources and  provide critical services to the public. Since the program began, the  federal government has taken high-risk problems seriously and has made  long-needed progress toward correcting them. In a number of cases,  progress has been sufficient for us to remove the high-risk designation.", "To determine which federal government programs and functions should  be designated high risk, we use our guidance document, Determining  Performance and Accountability Challenges and High Risks. In making  this determination, we consider whether the program or function is of  national significance or is key to the performance and accountability of  the federal government, among other things.", "Our experience has shown that the key elements needed to make  progress in high-risk areas are top-level attention by the administration  and agency leaders grounded in the five criteria for removal from the  High-Risk List, as well as any needed congressional action. The five  criteria for removal that we identified in November 2000 are listed in table  1 below.", "In each of our high-risk updates, we have assessed agencies\u2019 progress to  address the five criteria for removing a high-risk area from the list using  the following definitions:", "Met. Actions have been taken that meet the criterion. There are no  significant actions that need to be taken to further address this  criterion.", "Partially Met. Some, but not all, actions necessary to meet the  criterion have been taken.", "Not Met. Few, if any, actions towards meeting the criterion have been  taken.", "Figure 1, which is based on a general example, shows a visual  representation of varying degrees of progress in each of the five criteria  for a high-risk area. We use this system to assess and track the progress  of all agencies with areas on our High Risk list. When we rate Interior and  HHS\u2019s progress on Improving Federal Management of Programs that  Serve Tribes and Their Members for the first time in our 2019 High Risk  report, we will provide similar information."], "subsections": []}, {"section_title": "Status of GAO\u2019s Recommendations on Indian Education", "paragraphs": ["As we have previously reported, the Office of the Assistant Secretary- Indian Affairs (Indian Affairs), through BIE, is responsible for providing  quality education opportunities to Indian students and oversees 185  elementary and secondary schools that serve approximately 41,000  students on or near Indian reservations in 23 states, often in rural areas  and small towns. About two-thirds of BIE schools are operated by tribes,  primarily through federal grants, and about one-third are operated directly  by BIE. BIE\u2019s Indian education programs originate from the federal  government\u2019s trust responsibility to Indian tribes. It is the policy of the  United States to fulfill this trust responsibility for educating Indian children  by working with tribes to ensure that education programs are of the  highest quality and, in accordance with this policy, Interior is responsible  for providing children a safe and healthy environment in which to learn.", "All BIE schools\u2014both tribally- and BIE-operated\u2014receive almost all of  their operational funding from federal sources\u2014namely, Interior and the  Department of Education (Education)\u2014totaling about $1.2 billion in 2016.  Indian Affairs considers many BIE schools to be in poor condition.", "BIE is primarily responsible for its schools\u2019 educational functions, while  their administrative functions\u2014such as safety, facilities, and property  management\u2014are divided mainly between two other Indian Affairs\u2019  offices: BIA and the Office of the Deputy Assistant Secretary of  Management.", "As discussed below, we have made 23 recommendations to Interior on  Indian education\u2014including recommendations cited in GAO\u2019s 2017 High  Risk report and included in two late May reports. Interior generally agreed  with our recommendations. However, none have been fully implemented."], "subsections": [{"section_title": "Indian Affairs\u2019 Management and Accountability for BIE Schools", "paragraphs": ["In our 2017 High Risk report, we cited 3 recommendations from a 2013  report on management challenges facing Indian Affairs, with which  Interior agreed, and these recommendations remain unimplemented as of  late August 2017. These recommendations were based on our findings  of Indian Affairs\u2019 poor management and lack of accountability for BIE  schools. In particular, we found that BIE did not have procedures in place  specifying who should be involved in making key decisions, resulting in  inaccurate guidance provided to some BIE schools about the appropriate  academic assessments required by federal law. We also found that Indian  Affairs had not developed a strategic plan with specific goals and  measures for itself or BIE or conducted workforce analysis to ensure it  has the right people in place with the right skills to effectively meet the  needs of BIE schools. Further, we found that fragmented administrative  services for BIE schools and a lack of clear roles for BIE and Indian  Affairs\u2019 Office of the Deputy Assistant Secretary for Management  contributed to delays in BIE schools acquiring needed materials, such as  textbooks. As a result, we recommended that Indian Affairs develop  decision-making procedures and a strategic plan for BIE and revise its  workforce plan, among other areas.", "Of the 3 unimplemented recommendations we made to Interior on Indian  Affairs\u2019 management and accountability for BIE schools, agency officials  reported that they have taken several actions to address them, including  drafting written procedures for BIE decision-making; starting to develop a  strategic plan for BIE; and conducting workforce planning. Indian Affairs\u2019  actions to implement our recommendations to develop decision-making  procedures and a strategic plan for BIE had not been completed as of late  August. Indian Affairs officials told us they believed they had fully  implemented our recommendation on strategic workforce planning.  However, in reviewing their supporting documentation, we determined  that their actions did not address our recommendation to ensure that the  staff who are responsible for providing administrative support to BIE  schools have the requisite skills and knowledge and are placed in the  appropriate offices. For a full description of the agency\u2019s actions and our  evaluation of these actions, see recommendations in table 2 in appendix  I."], "subsections": []}, {"section_title": "Oversight of BIE School Spending", "paragraphs": ["We made 4 recommendations in a 2014 report on BIE\u2019s oversight of  school spending, none of which have been implemented. These  recommendations were based on our findings of key weaknesses in  Indian Affairs\u2019 oversight of BIE school spending. In particular, we found  that BIE lacked sufficient staff with expertise to oversee school  expenditures, and as a result, these staff told us they lacked the  knowledge and skills to understand the audits they needed to review. We  also found that some staff did not have access to some of these audits. In  addition, we found that BIE lacked written procedures and a risk-based  approach to overseeing school spending\u2014both integral to federal internal  control standards\u2014which resulted in schools\u2019 misuse of federal funds. For  example, external auditors identified $13.8 million in unallowable  spending at 24 schools. Auditors also found that one school lost about  $1.7 million in federal funds that were improperly transferred to off-shore  accounts. As a result, we recommended that Indian Affairs take several  actions to address these oversight weaknesses, including developing  written procedures and a risk-based approach to monitor school spending  and a process to share relevant information, such as audit reports, with all  BIE staff responsible for overseeing BIE school spending, among other  areas.", "Of the 4 unimplemented recommendations we made to Interior on the  oversight of BIE school spending, agency officials reported taking several  actions, including providing their auditors with needed access to schools\u2019  audit reports. Officials also said they would put in place written  procedures and a risk-based approach to improve the financial monitoring  of BIE schools. As of late August 2017, officials had not provided us with  documentation of any steps they have taken to improve oversight of  school spending. For a full description of the agency\u2019s actions and our  evaluation of these actions, see recommendations in table 2 in appendix  I."], "subsections": []}, {"section_title": "Safety and Health at Indian School Facilities", "paragraphs": ["We made 4 recommendations in a 2016 report on the safety and health of  BIE school facilities, none of which have been implemented. These  recommendations were based on our findings that Indian Affairs was not  annually inspecting all BIE schools, as required by Indian Affairs\u2019 policy.  We also found that the agency did not have a plan to monitor safety  inspections across its regions to ensure that inspection practices were  consistent and supported the collection of complete and accurate  inspection information. Further, we found the agency had not taken steps  to assist BIE schools to build their capacity to address identified safety  deficiencies. Some school officials we spoke to reported lacking staff with  the knowledge and skills necessary to understand and address safety  issues. Further, at one school we visited, we found seven boilers that  failed inspection because of multiple high-risk safety deficiencies,  including elevated levels of carbon monoxide and a natural gas leak. Four  of the boilers were located in a student dormitory, and three were located  in classroom buildings. All but one of the boilers were about 50 years old.  Although the poor condition of the boilers posed an imminent danger to  the safety of students and staff, most of them were not repaired until  about 8 months after failing their inspection, prolonging safety risks to  students and staff. As a result of these findings, we recommended that  Indian Affairs take several actions, including developing a plan to build  BIE schools\u2019 capacity to address safety hazards identified by BIA  inspectors, among other areas.", "Of the 4 unimplemented recommendations we made to Interior on  ensuring safety and health at BIE schools, Indian Affairs completed safety  inspections at all BIE schools in 2016, among other actions. However,  based on our review of the agency\u2019s actions, we determined that several  steps remain for these recommendations to be fully implemented. For  example, as of late August 2017 the agency had not provided us with  documentation that it has developed a plan for monitoring safety  inspections across its regions to ensure that inspection practices are  consistent. Further, Indian Affairs did not provide documentation that it  had taken any actions to develop a plan to build BIE schools\u2019 capacity to  address safety and health problems identified with their facilities. For a full  description of the agency\u2019s actions and our evaluation of these actions,  see recommendations in table 2 in appendix I.", "We also made 6 recommendations in a May 2017 report on oversight and  accountability for BIE school safety inspections, none of which have been  implemented. These recommendations were based on our findings of  key weaknesses in Indian Affairs\u2019 oversight of school safety inspections.  In particular, we found that Interior and Indian Affairs had not taken  actions to address identified weaknesses in BIA\u2019s safety program, despite  internal evaluations since 2011 that consistently found it to be failing. For  example, no Indian Affairs office routinely monitored the quality or  timeliness of inspection reports, and BIA employees were not held  accountable for late reports despite a new employee performance  standard on timely report submission. We found that 28 of 50 inspection  reports we reviewed were incomplete, inaccurate, or unclear, including  reports in which inspectors did not include all school facilities or  incorrectly gave schools a year to fix broken fire alarms instead of the  required 24 hours. We concluded that unless steps are taken to address  safety program weaknesses, the safety and health of BIE students and  staff may be at risk. As a result, we recommended that Indian Affairs take  steps to address weaknesses in BIA\u2019s safety program, including  establishing processes to monitor the quality and timeliness of BIE school  inspection reports, among other areas.", "Of these 6 unimplemented recommendations we made to Interior to  improve its oversight of school safety inspections, Indian Affairs reported  taking several actions. In particular, Indian Affairs reported that its safety  office had established a procedure to monitor the timeliness of inspection  report submissions to schools, and that BIA is currently developing a  corrective action plan to address findings and recommendations from a  2016 Interior review of BIA\u2019s safety program. However, as of late August  2017, Indian Affairs had not provided us with any documentation on these  two actions. For a full description of the agency\u2019s actions and our  evaluation of these actions, see recommendations in table 2 in appendix  I."], "subsections": []}, {"section_title": "Indian Affairs\u2019 Oversight of School Construction Projects", "paragraphs": ["We made 6 recommendations in a May 2017 report on school  construction projects, none of which have been implemented. These  recommendations were based on our findings of key weaknesses in  Indian Affairs\u2019 oversight of school construction projects. In particular, we  found that Indian Affairs did not have a comprehensive capital asset plan  to guide the allocation of funding for school construction projects. We  concluded that until Indian Affairs develops such a plan, it risks using  federal funds inefficiently and not prioritizing funds to schools with the  most pressing needs. Additionally, we found that Indian Affairs has not  consistently used accountability measures or conducted sufficient  oversight to ensure that BIE school construction projects are completed  on time, within budget, and meet schools\u2019 needs. For instance, Indian  Affairs has not always used accountability measures, such as warranties,  to have builders replace defective parts or repair poor workmanship, and  project managers do not always understand how to use accountability  measures because Indian Affairs had not provided them guidance. We  concluded that until Indian Affairs develops and implements guidance to  ensure accountability throughout the school construction process and  improves its oversight of construction projects, it will have little assurance  they are completed satisfactorily and meet the needs of students and  staff. As a result, we recommended that Indian Affairs take several  actions, including developing a comprehensive capital asset plan and  guidance on the effective use of accountability measures for managing  BIE school construction projects, among other areas.", "Of these 6 unimplemented recommendations that we made to Interior to  improve its oversight of BIE school construction projects, Indian Affairs  reported taking several actions. For example, Indian Affairs reported that  to support the effective use of accountability measures, it established new  oversight mechanisms, hired staff with expertise in construction  contracting, and administered training for contracting staff. As of late  August 2017, however, Indian Affairs had not provided us any  documentation of these steps, so we cannot verify that the actions were  responsive to our recommendations. Further, Indian Affairs did not report  taking any actions to develop guidance on the effective use of  accountability measures, which our recommendation specifies. Indian  Affairs also reported that it is currently in the process of establishing a  new work group to focus on asset management and will continue working  to develop a capital asset management plan. Finally, the agency reported  it was planning to take several other actions to address our  recommendations. For a full description of the agency\u2019s actions and our  evaluation of these actions, see recommendations in table 2 in appendix  I."], "subsections": []}]}, {"section_title": "Status of GAO\u2019s Recommendations on Indian Energy", "paragraphs": ["As we have previously reported, some tribes and their members hold  abundant energy resources and have decided to develop these resources  to meet the needs of their community, in part because energy  development provides opportunities to improve poor living conditions,  decrease high levels of poverty, and fund public services for tribal  members. While tribes and their members determine how to use their  energy resources, if the resources are held in trust or restricted status,  BIA\u2014through its 12 regional offices, 85 agency offices, and other  supporting offices\u2014generally must review and approve leases, permits,  and other documents required for the development of these resources.", "In the past 2 years, we have reported that BIA has mismanaged Indian  energy resources held in trust, thereby limiting opportunities for tribes and  their members to use those resources to create economic benefits and  improve the well-being of their communities. Specifically, we issued 3  reports that identified concerns associated with BIA management of  energy resources and categorized those concerns into the following four  areas: (1) BIA\u2019s data and technology; (2) oversight of BIA activities; (3)  collaboration and communication; and (4) BIA\u2019s workforce planning.", "As discussed below, we made 14 recommendations to BIA to help  address BIA management weaknesses that were cited in our 2017 High  Risk report. BIA generally agreed with these recommendations. However,  none have been fully implemented."], "subsections": [{"section_title": "BIA\u2019s Data and Technology", "paragraphs": ["We made 2 recommendations related to data and technology for which  BIA has taken some actions and made some progress to implement.  However, neither of these recommendations has been fully  implemented. We made these recommendations based on our June  2015 findings that BIA did not have the necessary geographic information  systems (GIS) mapping data and that BIA\u2019s federal cadastral surveys  cannot be found or are outdated. According to Interior guidance, GIS  mapping technology allows managers to easily identify resources  available for lease and where leases are in effect. However, we found  that BIA did not have the necessary GIS mapping data for identifying who  owns and uses resources, such as existing leases. We also found that  BIA could not verify who owned some Indian resources or identify where  leases were in effect in a timely manner because, in part, federal  cadastral surveys could not be found or were outdated. In addition, we  found the extent of this deficiency was unknown because BIA did not  maintain an inventory of Indian cadastral survey needs, as called for in  Interior guidance.", "Of the 2 unimplemented recommendations to help ensure that BIA can  verify ownership in a timely manner and identify resources available for  development, BIA has taken several actions. Regarding GIS data, BIA  officials told us that the agency has integrated and deployed data viewing  and map creation capabilities into its database for recording and  maintaining historical and current data on ownership and leasing of Indian  land and mineral resources\u2014the Trust Asset and Accounting  Management System (TAAMS)\u2014on August 31, 2017. We will work with  BIA to obtain the documentation needed to determine if the deployed GIS  capability has the functionality for us to consider this recommendation as  fully implemented. Regarding cadastral surveys, according to a BIA  official, the agency requested that each of its 12 regions review and  identify historic survey requests from a data system that has not been  fully maintained or consistently used since 2011 to determine if the  requests are still valid. BIA officials told us the next step is to create a  new database that will track cadastral survey needs and a reporting  mechanism for each BIA region to use when making new survey  requests. According to BIA officials, the agency anticipates the new  database and reporting mechanism will be deployed by September 30,  2017. For a full description of the agency\u2019s actions and our evaluation of  these actions, see table 3 in appendix II."], "subsections": []}, {"section_title": "BIA\u2019s Oversight of Its Review Process for Energy Development", "paragraphs": ["We made 5 recommendations to BIA related to its review process for  energy development, none of which have been fully implemented. In June  2015 and June 2016, we found that BIA did not have a documented  process or the data needed to track its review and response times  throughout the development process, including the approval of leases,  rights-of-way (ROW) agreements, and communitization agreements  (CA). The ability to track and monitor the review of permits and  applications is a best practice to improve the federal review process.", "Of the 5 unimplemented recommendations we made to help ensure that  BIA fulfills its responsibilities concerning the review and approval of  documents related to energy development in an efficient and transparent manner, BIA has taken some actions and identified other actions it plans  to take. For example, on May 17, 2017, the Acting Assistant Secretary-  Indian Affairs testified before this committee that a group of BIA subject  matter experts have been working to modify TAAMS, incorporating the  key identifiers and data fields needed to track and monitor review and  response times for oil and gas leases and agreements. The Acting  Assistant Secretary also stated that BIA is in the process of evaluating  and reviewing the current realty tracking system and TAAMS to improve  efficiencies and timeliness in processing workloads. BIA identified actions  to track and monitor review and response times for oil and gas leases and  agreements; however, BIA did not indicate whether it intends to track and  monitor its review of other energy-related documents, such as ROW  agreements, that must be approved before tribes can develop resources.", "In another example, on May 17, 2017, the Acting Assistant Secretary-  Indian Affairs testified before this committee that a National Policy  Memorandum has been developed that establishes time frames for  review and approval of Indian CAs. The Acting Assistant Secretary also  stated that such time frames will also be incorporated into the BIA Fluid  Mineral Estate Procedural Handbook and the Onshore Energy and  Mineral Lease Management Interagency Standard Operating Procedures.  However, in our review of the National Policy Memorandum we did not  find that it establishes time frames for review and approval of Indian CAs.  In response to our request for clarification, a BIA official told us the  agency is in the process of drafting suggested time frames. For a full  description of the agency\u2019s actions and our evaluation of these actions,  see table 3 in appendix II."], "subsections": []}, {"section_title": "BIA\u2019s Collaboration and Communication", "paragraphs": ["We made 5 recommendations related to collaboration and communication  in our June 2015 and November 2016 reports. BIA has taken some  actions, but the actions are generally limited in scope and none of these  recommendations have been fully implemented. We found in our  November 2016 report that BIA has taken steps to form an Indian Energy  Service Center that is intended to, among other things, help expedite the  permitting process associated with Indian energy development.  However, we found several weaknesses in BIA\u2019s collaboration processes  and structure. For example, in November 2016, we reported that BIA did  not coordinate with other key regulatory agencies that can have a role in  the development of Indian energy resources, including Interior\u2019s Fish and  Wildlife Service (FWS), the Army Corps of Engineers (Corps), and the  Environmental Protection Agency (EPA). As a result, the Service Center  was neither established as the central point for collaborating with all  federal regulatory partners generally involved in energy development, nor  did it serve as a single point of contact for permitting requirements.", "In addition, BIA did not include the Department of Energy (DOE) in a  participatory, advisory, or oversight role in the development of the Service  Center. Further, although Interior\u2019s Office of Indian Energy and  Economic Development (IEED) developed the initial concept and  proposal for the Service Center and has special expertise regarding the  development of Indian energy resources, BIA did not include IEED in the  memorandum of understanding (MOU) establishing the Service Center.  BIA also did not document the rationale for key management decisions or  the alternatives considered in forming the Service Center\u2014a leading  practice for effective organizational change. In addition, several tribal  leaders and tribal organizations made suggestions that were not currently  reflected in BIA\u2019s Service Center. Without documentation on alternatives  considered, it was unclear whether these requests were appropriately  considered.", "Of the 5 unimplemented recommendations to help improve efficiencies in  the federal regulatory process, BIA reported that it has taken some  actions. For example:", "According to a BIA official, the agency has initiated discussions with  FWS, EPA, and the Corps in an effort to establish formal agreements.  BIA has a target of December 31, 2017, to establish these  agreements. However, in its current structure, the Service Center is  not serving as a lead agency or single point of contact to coordinate  and navigate the regulatory process. Without additional information, it  is unclear if the formal agreements alone will allow the Service Center  to serve this role. We will continue to work with BIA officials to  understand how the formal agreements with other regulatory agencies  will help to transform the Service Center into a central point of contact  for Indian energy development.", "According to a BIA official, the agency developed and is currently  reviewing an addendum to expand an existing MOU between DOE  and IEED to include the Service Center. However, the existing MOU  between DOE and IEED does not identify the role for these agencies  as related to the Service Center. As such, the addendum, as currently  described to us by a BIA official, will not fully implement our  recommendation.", "On May 17, 2017, the Acting Assistant Secretary- Indian Affairs  testified before this committee that Interior considers this  recommendation implemented because (1) the development of the  Service Center was the result of a concept paper produced by a multi- agency team and (2) a multi-agency team held a tribal listening  session, received written comments, and conducted conference calls  in an effort to gather input from relevant stakeholders. We do not  agree that these actions meet the intent of the recommendation. BIA\u2019s  actions have not resulted in documentation on the alternatives  considered, whether tribal input and requests were considered, and  the rationale for not incorporating key suggestions.", "In addition, in 2005, Congress provided an option for tribes to enter into a  tribal energy resource agreement (TERA) with the Secretary of the  Interior that allows the tribe, at its discretion, to enter into leases,  business agreements, and rights-of-way agreements for energy resource  development on tribal lands without review and approval by the  Secretary. However, in a June 2015 report, we found that uncertainties  about Interior\u2019s regulations for implementing this option have contributed  to deter tribes from pursuing agreements. We recommended that  Interior provide clarifying guidance. On May 17, 2017, the Acting  Assistant Secretary- Indian Affairs testified before this committee that  Interior is working to provide additional energy development-specific  guidance on provisions of TERA regulations that tribes have identified to  the department as unclear. As part of this effort, the Acting Assistant  Secretary reported that IEED continues to perform training and technical  assistance on the TERA regulations, and plans to issue guidance on  those provisions of TERA that have been identified as unclear. As of  September 6, 2017, Interior has not issued additional guidance and  several Interior officials told us it is unlikely any new guidance will clarify  \u201cinherently federal functions\u201d\u2014one provision of Interior\u2019s regulations tribes  have identified as unclear. For a full description of the agency\u2019s actions  and our evaluation of these actions, see table 3 in appendix II."], "subsections": []}, {"section_title": "BIA\u2019s Workforce Planning", "paragraphs": ["We made 2 recommendations on workforce planning to BIA in November  2016, neither of which has been fully implemented. In our November  2016 report we found BIA had high vacancy rates at some agency offices  and that the agency had not conducted key workforce planning activities  consistent with Office of Personnel Management standards and leading  practices identified in our prior work.", "Of the 2 unimplemented recommendations to help ensure that it has a  workforce with the right skills, appropriately aligned to meet the agency\u2019s  goals and tribal priorities, BIA has reported several actions it plans to  take. On May 17, 2017, the Acting Assistant Secretary- Indian Affairs  testified before this committee that BIA is in the process of identifying and  implementing a workforce plan regarding positions associated with the  development of Indian energy and minerals. Specifically, the Acting  Assistant Secretary stated that the Service Center will collect data directly  from BIA, Bureau of Land Management (BLM), the Office of Natural  Resources Revenue (ONRR), and the Office of Special Trustee (OST)  employees in an effort to identify workload and necessary technical  competencies. Then, the Service Center will work with partner bureaus to  assess skills and competencies needed for energy and mineral workforce  standards. BIA\u2019s target for completion of the activities is the end of 2017.  BIA stated it is taking steps to identify workload and technical  competencies, but without additional information, it is unclear if these  actions will identify potential gaps in its workforce or result in the  establishment of a documented process for assessing BIA\u2019s workforce  composition at agency offices. For a full description of the agency\u2019s  actions and our evaluation of these actions, see table 3 in appendix II."], "subsections": []}]}, {"section_title": "Status of GAO\u2019s Recommendations on Indian Health Care", "paragraphs": ["As we have previously reported, the Indian Health Service (IHS), an  agency within the Department of Health and Human Services (HHS), is  charged with providing health care to approximately 2.2 million Indians.  IHS oversees its health care facilities through a decentralized system of  area offices, which are led by area directors and located in 12 geographic  areas. In fiscal year 2016, IHS allocated about $1.9 billion for health  services provided by federally and tribally operated hospitals, health  centers, and health stations. Federally operated facilities\u2014including 26  hospitals, 56 health centers, and 32 health stations\u2014provide mostly  primary and emergency care, in addition to some ancillary or specialty  services.", "When services are not available at federally operated or tribally operated  facilities, IHS may, in some cases, pay for services provided through  external providers through its Purchased/Referred Care (PRC) program\u2014 previously referred to as the Contract Health Services program. The PRC  program is funded through annual appropriations and must operate within  the limits of available appropriated funds. To be eligible for PRC services,  recipients must generally meet several criteria, including being a member  or descendant of a federally recognized tribe or having close social and  economic ties with the tribe, and living within a designated PRC area.  Although funding available for the PRC program has recently increased,  we have reported that the program is unable to pay for all eligible  services, and that these gaps in services sometimes delay diagnoses and  treatments, which can exacerbate the severity of a patient\u2019s condition and  necessitate more intensive treatment.", "As discussed below, we made 13 recommendations to IHS that were  unimplemented when we issued our 2017 High Risk report, with which  HHS generally agreed. One has been fully implemented."], "subsections": [{"section_title": "Estimating PRC Program Needs", "paragraphs": ["In our February 2017 High Risk report, we cited 2 recommendations from  a 2011 report on the accuracy of data used for estimating PRC needs,  with which HHS agreed.  These recommendations remain  unimplemented as of late August 2017. We based these  recommendations on our finding that IHS\u2019s estimates of the extent to  which unmet needs exist in the PRC program were not reliable because  of deficiencies in the agency\u2019s oversight of the collection of data on  deferred and denied PRC program services. As a result, we made several  recommendations for IHS to develop more accurate data for making  these estimates and improving agency oversight.", "Of the 2 recommendations not yet fully implemented that we made to IHS  on estimating PRC program needs, HHS officials reported that updated  policy and procedural guidance will be issued to all IHS sites by  September 30, 2017. We will evaluate the policy and procedural guidance  when it is issued. For a full description of the agency\u2019s actions and our  evaluation for these unimplemented recommendations, see table 4 in  appendix III."], "subsections": []}, {"section_title": "Ensuring Equitable Allocation of PRC Program Funds", "paragraphs": ["We made 3 recommendations to IHS to help make its allocation of PRC  program funds more equitable, none of which have been implemented.  We also raised a matter for Congress to consider requiring IHS to  develop and use a new PRC funding allocation methodology. These  recommendations and matter for Congress to consider were based on  our findings of wide variations in PRC funding across the 12 IHS areas,  that these variations were largely maintained by IHS\u2019s long-standing use  of its base funding methodology, that variation in PRC funding was  sometimes not related to the availability of IHS-funded hospitals, that  IHS\u2019s estimate of PRC service users was imprecise, and that IHS allowed  area offices to distribute program increase funds to local PRC programs  using different criteria than the PRC allocation formula without informing  IHS. As a result, we suggested that Congress consider requiring IHS to develop and use a new method to allocate all PRC program funds to  account for variations across areas, and recommended that IHS use  actual counts of PRC users and variations in levels of available hospital  services in allocation formulas, and develop written policies and  procedures to require area offices to notify IHS when changes are made  to the allocations of funds to PRC programs.", "In response to our matter for Congress to consider, a bill that would have  addressed this matter was introduced in the House and reported out of  committee in 2016, but the bill did not become law. In response to our  recommendations, HHS officials told us that a tribal/federal workgroup is  currently discussing the PRC fund allocation issues. In July 2017, we  requested additional information about the workgroup and any discussion  that has occurred or decisions that have been made about PRC funding  allocation since we made the recommendation 5 years ago, but as of late  August 2017, we have not received any information. As the workgroup  continues to discuss the PRC fund allocation issues, we will evaluate any  decisions that are made to determine if they address this  recommendation. For a full description of the agency\u2019s actions and our  evaluation for these recommendations, see table 4 in appendix III."], "subsections": []}, {"section_title": "Revising IHS Payment Rates for Nonhospital Services", "paragraphs": ["We made 1 recommendation to IHS in a 2013 report on IHS payment  rates for nonhospital services through the PRC program, which has not  been fully implemented, as well as a matter for Congress to consider.  The recommendation and matter for Congress to consider were based on  our finding that IHS primarily paid nonhospital providers, including  physicians, at their billed charges, despite an IHS policy\u2014in place since  1986\u2014that stated that area offices should attempt to negotiate with  providers at rates that are no higher than Medicare rates. As a result, we  suggested that Congress consider imposing a cap on payments for  physician and other nonhospital services made through IHS\u2019s PRC  program that is consistent with the rates paid by other federal agencies.  We also recommended that IHS monitor PRC program patient access to  physician and other nonhospital care in order to assess how any new  payment rates may benefit or impede the availability of care.", "In response to our recommendation, HHS officials told us that the agency  has developed an online PRC rates provider tracking tool that enables  PRC programs to document providers that refuse to contract for their  most favored customer rate or accept the Medicare-like rate. We have  requested documentation of this provider tracking tool, but as of late  August 2017, we have not yet received information sufficient to consider  the recommendation implemented. For a full description of the agency\u2019s  actions and our evaluation for these recommendations, see table 4 in  appendix III."], "subsections": []}, {"section_title": "Ensuring Successful Outreach to Increase Enrollment in Expanded Coverage Options", "paragraphs": ["In our February 2017 High Risk report, we cited 1 recommendation from a  2013 report on the eligibility and enrollment of American Indians in  expanded health care programs, with which HHS neither agreed nor  disagreed. This recommendation remains unimplemented as of late  August 2017. We reported that the expansion of Medicaid and new  coverage options under the Patient Protection and Affordable Care Act  (PPACA) may allow many American Indians to obtain additional health  care benefits for which they were not previously eligible, resulting in IHS  facilities receiving increased reimbursements from third-party payers and  an increased workload for IHS facility staff responsible for processing  these payments. We also found that IHS did not have an effective plan  in place to ensure that a sufficient number of facility staff were prepared  to assist with enrollment and to process increased third-party payments.  As a result, we recommended that IHS realign its resources and  personnel to increase its capacity to assist with increased enrollment and  third-party billing.", "IHS has not reported taking any new action to implement the remaining  recommendation. In response to our request for an update, IHS again  provided a copy of a planning template it developed for facility Chief  Executive Officers (CEO) that encourages them to assess the need for  staffing changes in light of new and expanded coverage options available  under PPACA. IHS previously explained, during the course of our review,  that its planning template is a document that facility CEOs have been  directed to use. We agree that developing a template to aid facilities in  their planning for PPACA implementation is a good step. However,  considering the large, system-wide growth in eligibility for new and  expanded coverage options described in our report, we expect to see a  system-wide response. Under its current approach, preparing for  increased eligibility is dependent on the discretion of facility CEOs. IHS  has not provided any evidence that this approach has resulted in the  realignment of personnel needed to address an increased need for  application assistance and third party billing. For a full description of the  agency\u2019s actions and our evaluation for these recommendations, see  table 4 in appendix III."], "subsections": []}, {"section_title": "Improving IHS\u2019s PRC Program", "paragraphs": ["We made 2 recommendations in a 2013 report on opportunities for IHS to  improve the PRC program, neither of which has been fully implemented.  Our recommendations were based on our finding that determining  eligibility for PRC funding\u2014including the need to ascertain each time a  referral is received whether the patient met residency requirements and  the service met medical priorities\u2014is inherently complex. As a result, we  recommended that IHS take steps to improve the PRC program, including  separately tracking IHS referrals and self-referrals, and revising its  practices to allow available funds to be used to pay for PRC program  staff.", "HHS agreed with our recommendation to separately track IHS referrals  and self-referrals, but not to revise its practices to allow available funds to  be used to pay for PRC program staff. HHS agreed to our  recommendation to proactively develop potential options to streamline  program eligibility requirements. IHS has not yet fully implemented these  recommendations. HHS officials told us that IHS is developing 2 new  measures that will track and measure PRC authorized referrals and self- referrals to time of payment for each type of referral. We will review the  proposed changes when they are available. For a full description of the  agency\u2019s actions and our evaluation for these recommendations, see  table 4 in appendix III."], "subsections": []}, {"section_title": "Improving IHS Oversight of Patient Wait Times", "paragraphs": ["We made 2 recommendations in a 2016 report on IHS oversight of patient  wait times, one of which was implemented in August 2017. These  recommendations were based on our finding that IHS had not set any  agency-wide standards for patient wait times at IHS federally operated  facilities. We found that, while individual facilities had taken steps to help  improve patient wait times, IHS had not monitored the timeliness of  patient care on an agency-wide scale. As a result, we recommended that  IHS 1) develop specific agency-wide standards for patient wait times, and  2) monitor patient wait times in its federally operated facilities and ensure  corrective actions are taken when standards are not met.", "In response to our first recommendation, IHS developed specific  standards for patient wait times and published them to the IHS Indian  Health Manual website in August 2017. As a result of this action, we  consider this recommendation to be fully implemented. In response to our  second recommendation, in early September 2017 HHS officials told us  that data collection tools for monitoring are under development. We will  review IHS\u2019s monitoring of facility performance, as well as any corrective  actions, when these steps have been completed. For a full description of  the agency\u2019s actions on the unimplemented recommendation and our  evaluation, see table 4 in appendix III."], "subsections": []}, {"section_title": "Improving IHS Oversight of Quality of Care", "paragraphs": ["We made 2 recommendations in a 2017 report on IHS\u2019s oversight of  quality of care in its federally operated facilities, neither of which has been  fully implemented. These recommendations were based on our finding  that IHS\u2019s oversight of the quality of care provided in its federally operated  facilities has been limited and inconsistent, due in part to a lack of  agency-wide quality of care standards. We found that these  inconsistencies were exacerbated by significant turnover in area  leadership and that the agency had not defined contingency or  succession plans for the replacement of key personnel, including area  directors. As a result, we recommended that IHS develop agency-wide  standards for quality of care, systematically monitor facility performance  in meeting these standards, enhance its adverse event reporting system,  and develop contingency and succession plans for the replacement of  key personnel.", "HHS agreed with our recommendations, and officials reported that the  development of agency-wide measures, goals, and benchmarks are  nearing completion. According to HHS, it is also developing a system- wide dashboard of performance accountability metrics for use at the  enterprise, area, and facility levels. HHS officials told us that the  enhancements to their adverse event reporting system are delayed  because key personnel on the project became unavailable due to  deployment. Finally, HHS officials told us that all IHS headquarters offices  and area offices established a succession plan that identified staff and  development needs to prepare for future leadership opportunities. We  requested documentation of these succession plans, but as of late August  2017, we have not received any. For a full description of the agency\u2019s  actions and our evaluation for these recommendations, see table 4 in  appendix III.", "In conclusion, although Interior and HHS have taken some actions to  address our recommendations related to federal programs serving Indian  tribes, 49 recommendations discussed in this testimony have not yet  been fully implemented. We plan to continue monitoring the agencies\u2019  efforts to address these unimplemented recommendations.", "In order for the Federal Management of Programs that Serve Tribes and  Their Members to be removed from our High-Risk List, Interior and HHS  need to show improvement on the five key elements described earlier:  leadership commitment, capacity, action plan, monitoring, and  demonstrated progress. These five criteria form a road map for agencies\u2019  efforts to improve and ultimately address high-risk issues.", "We look forward to continuing our work with this committee in overseeing  Interior and IHS to ensure that they are operating programs for tribes in  the most effective and efficient manner, consistent with the federal  government\u2019s trust responsibilities, and working toward improving  services for tribes and their members.", "Chairman Hoeven, Vice Chairman Udall, and Members of the Committee,  this completes my prepared statement. My colleagues and I would be  pleased to respond to any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about education issues in this  testimony or the related reports, please contact Melissa Emrey-Arras at  (617) 788-0534 or emreyarrasm@gao.gov. For questions about energy  resource development, please contact Frank Rusco at (202) 512-3841 or  ruscof@gao.gov. For questions about health care, please contact  Kathleen King at (202) 512-7114 or kingk@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. Key contributors to this statement  include Elizabeth Sirois (Assistant Director), Edward Bodine (Analyst-in- Charge), James Bennett, Richard Burkard, Kelly DeMots, Christine Kehr,  Liam O\u2019Laughlin, William Reinsberg, James Rebbe, Jay Spaan, Ann  Tynan, and Emily Wilson."], "subsections": []}]}, {"section_title": "Appendix I: Status of Unimplemented Recommendations to the Department of the Interior on Indian Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Status of Unimplemented Recommendations to the Department of the Interior on Indian Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Status of Unimplemented Recommendations to the DHHS on the Indian Health Service", "paragraphs": ["Appendix III: Status of Unimplemented  Recommendations to the DHHS on the Indian  Health Service This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-279", "url": "https://www.gao.gov/products/GAO-18-279", "title": "Combating Wildlife Trafficking: Opportunities Exist to Improve the Use of Financial Rewards", "published_date": "2018-04-23T00:00:00", "released_date": "2018-05-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Wildlife trafficking\u2014the poaching and illegal trade of plants, fish, and wildlife\u2014is a multibillion-dollar, global criminal activity that imperils thousands of species. FWS and NOAA enforce laws prohibiting wildlife trafficking that authorize the agencies to pay financial rewards for information about such illegal activities.", "GAO was asked to review FWS's and NOAA's use of financial rewards to combat wildlife trafficking. This report examines (1) laws that authorize FWS and NOAA to pay rewards for information on wildlife trafficking and the extent to which the agencies paid such rewards from fiscal years 2007 through 2017, (2) the agencies' reward policies, (3) information available to the public on rewards, and (4) the extent to which the agencies reviewed the effectiveness of their use of rewards.", "GAO reviewed laws, examined FWS and NOAA policies and public communications on rewards, analyzed agency reward data for fiscal years 2007 through 2017 and assessed their reliability, interviewed FWS and NOAA officials, and compared agency policies and public communications on rewards to federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["Multiple laws\u2014such as the Endangered Species Act and Lacey Act\u2014authorize the Departments of the Interior's U.S. Fish and Wildlife Service (FWS) and Commerce's National Oceanic and Atmospheric Administration (NOAA) to pay rewards for information on wildlife trafficking. FWS and NOAA reported paying few rewards from fiscal years 2007 through 2017. Specifically, the agencies collectively reported paying 27 rewards, totaling $205,500. Agency officials said that the information was complete to the best of their knowledge but could not sufficiently assure that this information represented all of their reward payments.", "FWS and NOAA have reward policies that outline the general process for preparing reward proposals, but FWS's policy does not specify factors for its agents to consider when developing proposed reward amounts. Some FWS agents GAO interviewed said that in developing proposals, they did not know whether their proposed reward amounts were enough, too little, or too much. By augmenting its policy to specify factors for agents to consider, FWS can better ensure that its agents have the necessary quality information to prepare proposed reward amounts, consistent with federal internal control standards.", "FWS and NOAA communicate little information to the public on rewards. For example, most agency websites did not indicate that providing information on wildlife trafficking could qualify for a reward. This is inconsistent with federal standards that call for management to communicate quality information so that external parties can help achieve agency objectives. FWS and NOAA officials said they have not communicated general reward information because of workload concerns, but they said it may be reasonable to provide more information in some instances. By developing plans to communicate more reward information to the public, the agencies can improve their chances of obtaining information on wildlife trafficking that they otherwise might not receive.", "FWS and NOAA have not reviewed the effectiveness of their use of rewards. The agencies have not done so because using rewards has generally not been a priority. FWS and NOAA officials agreed that such a review would be worthwhile but provided no plans for doing so. By reviewing the effectiveness of their use of rewards, FWS and NOAA can identify opportunities to improve the usefulness of rewards as a tool for combating wildlife trafficking."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that FWS and NOAA track reward information, FWS augment its reward policy to specify factors for agents to consider when developing proposed reward amounts, FWS and NOAA develop plans to communicate more reward information to the public, and FWS and NOAA review the effectiveness of their reward use. Both agencies concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the Department of State, wildlife trafficking\u2014the poaching  and illegal trade of plants, fish, and wildlife\u2014is a growing, multibillion- dollar, transnational criminal activity that imperils the continued viability of  thousands of plant and animal species worldwide, threatens global  security, and harms legitimate businesses. Estimates place wildlife  trafficking among the top-ranked illicit types of trade alongside trafficking  in drugs, weapons, and humans; in 2016, a United Nations report  estimated the illegal trade in wildlife to be worth from $7 billion to $23  billion annually. The United States is one of the world\u2019s largest trafficking  markets and is increasingly becoming a source for illegal wildlife and  wildlife products, according to a Department of the Interior document. It  also serves as a transit point for wildlife that are illegally trafficked from  their source countries to other countries for sale.", "Wildlife trafficking undermines conservation efforts and continues to push  some protected and endangered species to the brink of extinction,  according to Department of State documents. As we have previously  found, the capture and slaughter of animals are devastating wild  populations of elephants, rhinoceroses, tigers, pangolins, turtles, exotic  birds, and many other species. Moreover, wildlife trafficking threatens  global security by fueling corruption and violence and destabilizing  communities that depend on wildlife for biodiversity and ecotourism  revenues. Wildlife trafficking can also have adverse economic impacts.  For example, the trafficking of illegally harvested timber can harm  legitimate businesses by causing products made with legally harvested  timber to be less competitive with similar products made using illegally  harvested timber.", "In recent years, the federal government has emphasized strengthening  law enforcement efforts to combat the escalating scope and scale of  wildlife trafficking. For example, in 2014, the White House released a  national strategy for combating wildlife trafficking that identified  strengthening enforcement\u2014including federal interdiction and  investigative efforts\u2014as one of three strategic priorities for the United  States. In addition, in 2017, an executive order made it executive branch  policy to strengthen enforcement of federal law to thwart the illegal  smuggling and trafficking of wildlife, among other things.", "Paying rewards to people who provide critical information about illegal  trafficking activities that leads to results, such as fines or criminal  convictions, is one of many tools that law enforcement agents can use to  help them investigate and enforce wildlife trafficking laws. Certain laws that prohibit wildlife trafficking authorize federal agencies to pay financial  rewards to people who provide information on such illegal activities. For  example, the Endangered Species Act and the Lacey Act authorize the  Secretaries of Commerce and the Interior to pay financial rewards to  people who provide information that leads to arrests, criminal convictions,  civil penalties, or property forfeitures for violations of those laws. The law  enforcement offices for the Department of the Interior\u2019s U.S. Fish and  Wildlife Service (FWS) and the Department of Commerce\u2019s National  Oceanic and Atmospheric Administration (NOAA) are responsible for  enforcing certain federal laws prohibiting wildlife trafficking. Specifically,  FWS generally enforces federal laws that prohibit trafficking of terrestrial  wildlife, freshwater fish and other species, and birds, and NOAA generally  enforces federal laws that prohibit trafficking of marine wildlife and  anadromous fish.", "You asked us to review FWS\u2019s and NOAA\u2019s use of financial rewards to  combat wildlife trafficking. This report examines (1) laws that authorize  FWS and NOAA to pay financial rewards for information on wildlife  trafficking and the extent to which these agencies paid such rewards from  fiscal years 2007 through 2017, (2) the agencies\u2019 policies on financial  rewards, (3) information available to the public on financial rewards, and  (4) the extent to which the agencies reviewed the effectiveness of their  use of financial rewards in combating wildlife trafficking.", "To identify laws that authorize FWS and NOAA to pay financial rewards  for information on wildlife trafficking, we asked FWS and NOAA attorneys  to compile a list of laws each of their agencies implements or enforces that prohibit wildlife trafficking and authorize the agency to pay rewards  for providing information about wildlife trafficking. We then compared the  list provided to the results of our search of the United States Code for  such laws. To identify the extent to which FWS and NOAA have paid  financial rewards for information on wildlife trafficking, we analyzed FWS  and NOAA data on financial rewards the agencies reported paying from  fiscal years 2007 through 2017. We took steps to assess the reliability of  these data, such as interviewing agency officials knowledgeable about  the data and comparing the data to case records. Specifically, FWS and  NOAA officials said they track all expenditures, including reward  payments, in their financial databases, but they are not able to readily  identify reward payments because their financial systems do not include a  unique identifier for such payments and their reward information is  located in multiple databases and formats. As a result, FWS and NOAA  officials said they identified the rewards they reported to us by manually  reviewing their financial and law enforcement records, and officials said  the information was complete to the best of their knowledge. Based on  these steps, we found the data the agencies provided to be sufficiently  reliable for reporting information on the rewards the agencies reported  paying. However, as we discuss in the report, FWS and NOAA officials  could not provide sufficient assurance that the data included all the  financial rewards they had paid from fiscal years 2007 through 2017. To  obtain additional detail about cases where financial rewards were paid,  we reviewed a nongeneralizable sample of 10 wildlife trafficking cases.  We selected these cases based on several factors, including amount of  the reward payment. While the findings from our review cannot be  generalized to cases we did not select and review, they illustrate how  FWS and NOAA have used financial rewards in wildlife trafficking cases.", "To evaluate FWS and NOAA policies on financial rewards, information  available to the public, and the extent to which FWS and NOAA reviewed  the effectiveness of their use of financial rewards in combating wildlife  trafficking, we reviewed relevant agency policies, publications, websites,  and examples of public communications on rewards for specific cases.  We also interviewed agency officials and requested any reviews the  agencies conducted regarding their use of financial rewards. We  compared available FWS and NOAA policies, public communications,  and reviews on their use of financial rewards with federal internal control  standards.", "Additionally, for all four objectives, we interviewed a nongeneralizable  sample of 20 stakeholders whom we selected using factors such as the  individuals\u2019 experience investigating wildlife trafficking cases or their  expertise in the use of financial rewards as a law enforcement tool. Our  sample included", "FWS and NOAA law enforcement agents,  federal officials responsible for programs that use financial rewards to  combat illegal activities in contexts outside of wildlife trafficking, academics with expertise in the use of financial rewards as a law members of the federal Advisory Council on Wildlife Trafficking, and  representatives of nongovernmental organizations that investigate  wildlife trafficking.", "Views from these stakeholders cannot be generalized to those whom we  did not select and interview. Appendix I presents a more detailed  description of our objectives, scope, and methodology.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["As reported by the United Nations, the International Criminal Police  Organization, and other organizations, wildlife trafficking networks span  the globe. These organizations have attempted to measure the value of  illegally traded wildlife, but available estimates are subject to uncertainty.  In 2016, for example, the United Nations Environment Programme  (UNEP) reported that various sources estimated the global scale of illegal  wildlife trade to be from $7 billion to $23 billion annually. UNEP also  estimated that the scale of wildlife crime has increased in recent years in  part based on a rise in environmental crime.", "U.S. trade in wildlife and related products includes a variety of species,  such as live reptiles, birds, and mammals, as well as elephant ivory,  according to law enforcement reports and government and  nongovernmental officials. FWS and NOAA data on wildlife products  seized at U.S. ports provide examples of the diversity of illegally traded  plants, fish, and wildlife imported into or exported from the United States.  For example, from 2007 to 2016, the top 10 plant, fish, and wildlife  shipments seized nationally by FWS were coral, crocodiles, conchs, deer,  pythons, sea turtles, mollusks, ginseng, clams, and seahorses. During  that time, FWS reported that more than one-third of the wildlife shipments  it seized were confiscated while being imported from or exported to  Mexico (14 percent), China (13 percent), or Canada (9 percent).", "FWS and NOAA law enforcement offices are responsible for enforcing  certain laws and treaties prohibiting wildlife trafficking.", "FWS Office of Law Enforcement. This office enforces certain U.S.  laws and regulations as well as treaties prohibiting the trafficking of  terrestrial wildlife, freshwater species, and birds. Among other  things, the office aims to prevent the unlawful import, export, and  interstate commerce of foreign fish and wildlife, as well as to protect  U.S. plants, fish, and wildlife from unlawful exploitation. As of fiscal  year 2016, the office had a budget of $74.7 million and employed 205  special agents to investigate wildlife crime, including international and  domestic wildlife trafficking rings. Most of these special agents  report to one of eight regional offices, which receive national  oversight, support, training, and policy guidance from the FWS Office  of Law Enforcement headquarters. The office\u2019s headquarters houses  a special investigative unit focused on conducting complex, large- scale criminal investigations of wildlife traffickers. In addition, the FWS  Office of Law Enforcement has deployed special agents to serve as  international attach\u00e9s at seven U.S. embassies. These attach\u00e9s  provide countertrafficking expertise to embassy staff, work with host  government officials to build law enforcement capacity, and contribute  directly to casework or criminal investigations of wildlife traffickers.", "According to FWS data, the FWS Office of Law Enforcement opened  more than 7,000 investigations on wildlife trafficking and other illegal  activities in fiscal year 2016, including nearly 5,000 cases involving  Endangered Species Act violations and nearly 1,500 cases involving  Lacey Act violations. FWS Office of Law Enforcement investigations  have disrupted wildlife trafficking operations. For example, Operation  Crash\u2014an ongoing rhino horn and elephant ivory-trafficking  investigation launched in 2011\u2014has led to over 30 convictions and  more than $2 million in fines.", "NOAA Office of Law Enforcement. This office enforces certain U.S.  laws and regulations as well as treaties prohibiting the trafficking of  marine wildlife, including fish, as well as anadromous fish. Among  other things, the office aims to prevent the illegal, unregulated, and  unreported harvesting and trade of fish as well as the trafficking of  protected marine wildlife. As of fiscal year 2016, the office had a  budget of $68.6 million and employed 77 special agents to investigate  wildlife crimes within its jurisdiction. These agents report to one of  five regional offices, and those offices receive national oversight,  support, and policy guidance from the NOAA Office of Law  Enforcement headquarters.", "According to NOAA data, the NOAA Office of Law Enforcement  initiated more than 5,000 investigations in fiscal year 2016. About half  of those investigations involved violations of the Magnuson-Stevens  Fishery Conservation and Management Act, as amended, and some  of the 5,000 investigations involved violations of the Endangered  Species Act or the Lacey Act. NOAA Office of Law Enforcement  investigations have disrupted wildlife trafficking operations. For  example, in fiscal year 2016, a NOAA Office of Law Enforcement  investigation led to the conviction of a company and five individuals  for illegally trafficking whale bone carvings, walrus ivory carvings,  black coral carvings, and other products derived from protected  species into the United States.", "The FWS and NOAA law enforcement offices collaborate with other  government agencies and organizations to combat wildlife trafficking.  Both agencies work with other federal, state, and tribal law enforcement  officers as well as their international counterparts as needed during  wildlife trafficking investigations. For example, FWS and NOAA work with  U.S. Customs and Border Protection, U.S. Immigration and Customs  Enforcement, and the U.S. Department of Agriculture to maintain import  and export controls and interdict smuggled wildlife and related products at  U.S. ports of entry. In addition, FWS and NOAA collaborate with  Department of Justice prosecutors on criminal cases that result from  agency investigations.", "Both agencies also collaborate with nongovernmental organizations to  combat wildlife trafficking. For example, FWS and NOAA officials said  that nongovernmental organizations have, in some cases, offered  financial rewards (in addition to rewards offered by FWS and NOAA) for  information on a wildlife crime. In addition, some nongovernmental  organizations proactively provide information to FWS and NOAA on  wildlife trafficking activities in the United States or foreign countries that  violate U.S. laws. For example, in 2017, a nongovernmental  organization created a website to collect tips on wildlife crime and to  connect the sources of those tips with relevant U.S. authorities for  potential financial rewards.", "FWS may pay financial rewards from moneys in two accounts.", "Law Enforcement Reward Account. FWS may pay rewards under  the Endangered Species Act, the Lacey Act, and the Rhinoceros and  Tiger Conservation Act from moneys in the agency\u2019s Law  Enforcement Reward Account. The moneys in this account come from  fines, penalties, and proceeds from forfeited property for violations of  these three laws. According to FWS officials, these moneys are  available until expended. These moneys can be used to (1) pay  financial rewards to those who provide information that leads to an  arrest, criminal conviction, civil penalty assessment, or forfeiture of  property for any violation of the Endangered Species Act, the Lacey  Act, or the Rhinoceros and Tiger Conservation Act or (2) provide  temporary care for plants, fish, or wildlife that are the subject of a civil  or criminal proceeding under the Endangered Species Act, Lacey Act,  or the Rhinoceros and Tiger Conservation Act. As of the beginning  of fiscal year 2017, the balance of the Law Enforcement Reward  Account was about $7 million.", "Law Enforcement Special Funds Account. FWS may also pay  rewards from moneys in its law enforcement office\u2019s Special Funds  Account. The moneys in this account come from an annual line item  appropriation and are available until expended. Since fiscal year  1988, this appropriation has provided FWS up to $400,000 each year  to pay for information, rewards, or evidence concerning violations of  laws FWS administers, as well as miscellaneous and emergency  expenses of enforcement activity that the Secretary of the Interior  authorized or approved.", "NOAA generally pays rewards from moneys available in the Fisheries  Enforcement Asset Forfeiture Fund. The moneys in this account come  from fines, penalties, and proceeds from forfeited property for violations of  marine resource laws that NOAA enforces, including the Magnuson- Stevens Fishery Conservation and Management Act, the Endangered  Species Act, and the Lacey Act. According to NOAA officials, moneys are  available until expended and can be used to pay certain enforcement- related expenses, including travel expenses, equipment purchases, and  the payment of financial rewards. As of the beginning of fiscal year 2017,  the Fisheries Enforcement Asset Forfeiture Fund had a balance of about  $18 million.", "Academic literature on the use of financial rewards to combat illegal  activities and stakeholders we interviewed identified several advantages  and disadvantages of using financial rewards to obtain information on  wildlife trafficking. Potential advantages of using financial rewards include  the following:", "Providing incentives. The potential for a financial reward can  motivate people with information to come forward when they  otherwise might not do so.", "Increasing public awareness. Financial rewards may bring greater  public attention to the problem of wildlife trafficking, including federal  efforts to combat wildlife trafficking.", "Saving resources. Using financial rewards may save agency  resources by enabling agents to get information sooner and at a lower  cost than they could have through their own efforts.", "Potential disadvantages of using financial rewards include the following:", "Eliciting false or unproductive leads. Financial rewards may  generate false or unproductive leads.", "Affecting witness credibility. Financial rewards may lead to a  source\u2019s credibility being challenged at trial by defense attorneys  since sources receive compensation for the information they provide.", "Consuming resources. The potential for a financial reward may  create a flood of tips that take agency time and resources to follow up  on or corroborate.", "Outside of wildlife trafficking, multiple federal agencies and federal courts  are authorized to pay financial rewards for information on illegal activities  under certain circumstances. For example, U.S. Customs and Border  Protection\u2014which controls, regulates, and facilitates the import and  export of goods through U.S. ports of entry\u2014is authorized, under certain  circumstances, to pay rewards for original information about violations of  any laws that it enforces. The Department of State may also pay  rewards under certain circumstances, including for information leading to  the disruption of financial mechanisms of a transnational criminal group.  Similarly, the U.S. Securities and Exchange Commission (SEC) and  Internal Revenue Service (IRS) may pay rewards for information about  violations of federal securities laws and the underpayment of taxes,  respectively, if certain conditions are met. Federal judges may award money to persons who give information leading to convictions for violating  treaties, laws, and regulations that prohibit certain pollution from ships,  including oil and garbage discharges."], "subsections": []}, {"section_title": "Multiple Laws Authorize FWS and NOAA to Pay Rewards for Wildlife Trafficking Information, but the Agencies Reported Paying Few Rewards from Fiscal Years 2007 through 2017", "paragraphs": ["FWS and NOAA officials identified multiple laws, such as the Endangered  Species Act and the Lacey Act, that authorize the payment of financial  rewards to people who provide information on wildlife trafficking. FWS  and NOAA reported paying few financial rewards under these laws from  fiscal years 2007 through 2017. However, agency officials could not  provide sufficient assurance that the reward information they provided to  us represented all of their reward payments for this period."], "subsections": [{"section_title": "The Endangered Species Act, Lacey Act, and Other Laws Authorize the Payment of Financial Rewards", "paragraphs": ["FWS and NOAA officials identified over 10 laws prohibiting wildlife  trafficking\u2014including the Endangered Species Act, Lacey Act, and Bald  and Golden Eagle Protection Act\u2014that specifically authorize the  payment of financial rewards in certain circumstances to people who  provide information on violations of the law (see app. II for a complete list  of the laws). These laws provide discretion to the agencies to choose  whether to pay rewards but have varying requirements for who is eligible  to receive a reward and the payment amounts. For example, the Bald  and Golden Eagle Protection Act caps rewards at $2,500 for information  that leads to a conviction. In contrast, the Endangered Species Act does  not cap reward amounts and authorizes rewards for information that leads  to a conviction as well as to an arrest, civil penalty, or forfeiture of  property. Table 1 identifies the laws that FWS and NOAA officials  indicated they have used to pay financial rewards for information on  wildlife trafficking from fiscal years 2007 through 2017, along with  information on these laws\u2019 requirements for payment of rewards."], "subsections": []}, {"section_title": "FWS and NOAA Reported Paying Few Rewards for Information on Wildlife Trafficking but Could Not Assure the Completeness of the Information", "paragraphs": ["FWS and NOAA reported paying few financial rewards for information on  wildlife trafficking from fiscal years 2007 through 2017, but agency  officials could not provide sufficient assurance that this information was  complete. Officials from both agencies said that their agencies have not  prioritized the use of rewards, and they believed that the reward  information they identified\u2014such as the number, dollar amount, and year  that rewards were paid\u2014appropriately captured the few reward payments  they made during this time frame. Based on the agencies\u2019 reviews of their  records, FWS reported paying 25 rewards for a total of $184,500 from  fiscal years 2007 through 2017, and NOAA reported paying 2 rewards for  a total of $21,000 during that same period (see table 2). See appendix III  for additional details on the cases where financial rewards were paid.", "FWS reported paying rewards in trafficking cases involving a variety of  wildlife species, such as eagles, bears, reptiles, and mollusks, across the  11-year period. FWS officials said they generally paid rewards to thank  sources who proactively provided information. For example, based on our  review of a reward case, FWS paid a reward in 2010 because the source  provided information that was crucial in uncovering an attempt to illegally  traffic leopards into the United States from South Africa. FWS would not  have known about this illegal activity if the source had not come forward  with the information. In several cases we reviewed, FWS officials said  that the sources did not know about the possibility of receiving a reward  when they contacted the agency with information.", "The two rewards NOAA reported paying from fiscal years 2007 through  2017 involved the illegal trafficking of sea scallops and a green sea turtle.  NOAA officials said that in both cases they paid a reward to thank the  source who proactively provided information to law enforcement agents.  For example, the agent who investigated the sea scallop case reported  requesting the reward because the information the source proactively  provided was timely, credible, and led to the criminal conviction of several  individuals.", "FWS and NOAA officials could not provide sufficient assurance that the  reward information they reported to us represented all of the rewards their  agencies had paid from fiscal years 2007 through 2017, but they said the  information was complete to the best of their knowledge. Specifically,  FWS and NOAA officials said they track all their expenditures, including  reward payments, in their financial databases. However, they are not able  to readily identify reward payments because their financial systems do not  include a unique identifier for such payments and their reward information  is located in multiple databases and formats. As a result, FWS and NOAA  officials said they identified the rewards they reported to us by manually  reviewing their financial and law enforcement records. In particular, FWS  officials said they reviewed their paper records to identify instances when  the agency paid rewards and then retrieved additional information from  their financial and law enforcement databases, such as final payment  amounts. NOAA officials said they identified instances when the agency  paid rewards by using a combination of paper and electronic records  located at NOAA\u2019s headquarters office. NOAA officials also contacted  their regions to obtain additional information located at the regional offices  to confirm information about the rewards NOAA had paid.", "Seventeen stakeholders we interviewed who had experience investigating  wildlife trafficking or expertise in using financial rewards as a law   enforcement tool said that it would be useful for FWS and NOAA to  maintain comprehensive information on the rewards they paid. For  example, two stakeholders said that maintaining comprehensive  information and making that information available to law enforcement  agents could motivate agents to make greater use of rewards as a law  enforcement tool. Two other stakeholders said that maintaining  information on and monitoring reward use would allow the agencies to  make ongoing adjustments, such as adjusting payment amounts, to make  the most effective use of rewards in combating wildlife trafficking.", "Federal internal control standards say that management should clearly  document internal control and all transactions and other significant events  in a manner that allows the documentation to be readily available for  examination. Control activities can be implemented in either an  automated or a manual manner, but automated control activities tend to  be more reliable because they are less susceptible to human error and  are typically more efficient.", "FWS and NOAA officials agreed that maintaining reward information so  that complete information is easily retrievable may be beneficial. FWS  officials said having clearly documented and readily available reward  information could improve how they manage rewards and enable them to  monitor and examine their use of rewards more holistically. The officials  said they may analyze options for creating a single repository for reward  information but did not commit to doing so. They said that creating a  single repository for reward information may involve some drawbacks,  such as duplicating some data entry in separate databases. Similarly,  NOAA officials said having clearly documented and readily available  reward information would provide agency management with easier and  more consistent access to that information. As a result, they said that they  are exploring modifications to their financial and law enforcement  databases to better identify and track rewards. For example, NOAA  officials said they may be able to create a unique identifier to flag  payments that are for rewards in their financial system to enable them to  identify payment amounts more easily. NOAA officials did not provide a  time frame for completing modifications to their financial system. By  tracking reward information so that it is clearly documented and readily  available for examination, FWS and NOAA can better ensure that they have complete information on the rewards they have paid to help manage  their use of rewards as a law enforcement tool."], "subsections": []}]}, {"section_title": "FWS and NOAA Have Policies for Administering Reward Payments, but FWS\u2019s Policy Does Not Specify Factors to Consider When Developing Reward Amounts", "paragraphs": ["FWS and NOAA have policies to guide their law enforcement agents on  the process for preparing and submitting a request to pay a financial  reward. Specifically, both agencies\u2019 policies call for agents to include a  description of the case, the nature of the information that the source  provided, a justification for providing a reward, and an explanation of how  a proposed reward amount was developed. These policies also outline  the general review and approval process, how payments are to be made  upon approval of a request, and eligibility criteria to receive a reward. For  example, FWS and NOAA policies prohibit paying rewards to foreign  government officials as well as paying rewards to any person whose  receipt of a reward would create a conflict of interest or the appearance of  impropriety.", "NOAA\u2019s policy explicitly states that the NOAA Office of Law Enforcement  is to use statutorily authorized rewards as a tool to obtain information  from the public on resource violations and that rewards can help promote  compliance with marine resource laws. NOAA\u2019s policy suggests that  agents consider advertising reward offers to assist investigations,  encourages press releases, and describes the process agents should  follow to do so. Moreover, NOAA\u2019s policy specifies factors that agents  might include in their reward requests to support the proposed reward,  such as (1) the benefit to the marine resources that was furthered by the  information provided; (2) the risk, if any, the individual took in collecting  and providing the information; (3) the probability that the investigation  would have been successfully concluded without the information  provided; and (4) the relationship between any fines or other collections  and the information provided.", "FWS\u2019s policy specifies that rewards may be provided in situations in  which an individual furnishes essential information leading to an arrest,  conviction, civil penalty, or forfeiture of property. However, it does not  discuss the usefulness of financial rewards as a law enforcement tool or  the types of circumstances when rewards should be used or advertised to  the public. Further, FWS\u2019s policy does not communicate necessary  quality information internally that agents may need when deciding to  request the payment of rewards. In particular, it does not specify factors  for agents to consider when developing proposed reward amounts.  Instead, the policy leaves it to the discretion of field and regional agents  to develop proposed reward amounts within any limitations specified in  law. Some FWS agents we interviewed said that they developed  proposed reward amounts on a case-by-case basis and did not know  whether their proposed amounts were enough, too little, or too much. In  addition, some agents said that because FWS\u2019s policy does not specify  factors for agents to consider, the reward approval process is subjective  and unclear and this has made it challenging for the agents to develop  proposed reward amounts. For example, one agent we interviewed said  he submitted a request to his supervisor to pay a $10,000 reward to a  source who provided information on a major wildlife trafficker. But, for  reasons unknown to the agent, his supervisor reduced the amount to  $1,000. FWS headquarters officials said field agents submit reward  requests to headquarters for approval, and these officials were not aware  of instances of proposed reward amounts being changed or denied during  the review process.", "Seven of the 20 stakeholders we interviewed suggested that FWS  augment its reward policy to specify factors for agents to consider when  developing proposed reward amounts. For example, helpful factors to  consider when developing a proposed reward amount may include (1) the  number of hours the source dedicated to the case, (2) the risk the source  took in providing the information, (3) the significance of the information  provided by the source, and (4) the amount of fines or other penalties  collected as a result of the information. Two stakeholders expressed  concern that some of FWS\u2019s reward payments were insufficient,  especially when comparing the amount of time and effort or the risk a  source faced in providing the information. A couple of stakeholders also  said that without a policy that specifies factors for agents to consider,  reward amounts may be subjective and could vary depending on which  agent develops the reward proposal. Another stakeholder said that it was  important to specify factors for agents to consider when developing  proposed reward amounts so that the agency has a reasonable and  defensible basis for the reward amounts it pays across cases.", "According to federal standards for internal control, management should  internally communicate the necessary quality information to achieve an  agency\u2019s objectives. For example, management communicates quality  information down and across reporting lines to enable personnel to make  key decisions. FWS officials said they believe that their reward policy is  sound, indicating they believe that law enforcement agents have the  information they need to develop proposals for reward amounts in cases  where rewards are warranted. However, they also agreed that it may be  helpful to review their policy but did not commit to doing so. By  augmenting its policy to specify factors for agents to consider when  developing proposed reward amounts, FWS can better ensure that its  agents have the necessary quality information to prepare defensible  reward proposals."], "subsections": []}, {"section_title": "FWS and NOAA Communicate Little Information to the Public on Financial Rewards", "paragraphs": ["Based on our review of the agencies\u2019 websites and other  communications, we found that FWS and NOAA communicate little  information to the public on financial rewards for reporting information on  wildlife trafficking, such as the potential availability of rewards and  eligibility criteria. Specifically, some FWS and NOAA law enforcement  websites provided information to the public on ways to report violations of  the laws that the agencies are responsible for enforcing, such as via tip  lines. Some of the websites also provided examples of the types of  information the public can report, such as photos or other documentation  of illegal activities. However, most of the agencies\u2019 websites did not  indicate that providing information on illegal activities could result in a  reward. In contrast, the FWS Alaska regional office\u2019s website provided  information on the potential availability of rewards and ways the public  may submit information for a potential reward. For example, this website  provided phone numbers and an e-mail address for the public to use  when submitting information. Figure 1 shows the information available on  FWS\u2019s and NOAA\u2019s national and regional websites relevant to reporting  violations of the laws the agencies enforce in general and on receiving  rewards in particular.", "In addition, FWS and NOAA headquarters officials said their field agents  have used other means to communicate the potential availability of  rewards in specific cases when the agents had no other information that  could help solve those cases. For example, a FWS field official said that  the agency advertised a reward offer for information on a case of bald  eagle killings by distributing reward posters and posting news releases in  the vicinity where the killings occurred. Similarly, NOAA officials said they  have advertised reward offers through various means, including  circulating reward posters in specific geographic areas after an illegal  activity has occurred. Figure 2 shows a reward poster that NOAA  distributed in Guam in 2017 advertising a $1,000 reward for information  leading to the arrest and conviction of sea turtle poachers.", "Instead of having a plan for communicating general information to the  public on rewards, FWS and NOAA grant discretion to their regional  offices and law enforcement agents to determine the type and level of  communication to provide, according to FWS and NOAA policies. FWS  officials explained that because they typically use financial rewards to  thank individuals who come forward on their own accord\u2014rather than  using rewards to incentivize individuals with information to come  forward\u2014they have not seen the need to communicate more information  to the public on the potential availability of rewards. NOAA officials said  they have targeted their communications on rewards by publicizing  reward offers for specific cases where they do not have leads. They  added that they want to receive quality information and already receive a  substantial amount of information from sources who reach out to them  proactively, so NOAA has not seen the need to communicate more  information to the public on the potential availability of rewards.", "Sixteen of the 20 stakeholders we interviewed said that it would be useful  for FWS and NOAA to advertise the potential availability of financial  rewards. Several stakeholders said that if the public does not know about  the possibility for rewards, then some people with information may not be  incentivized to come forward. Two stakeholders added that agencies  should carefully consider how and which reward information to  communicate to the public so that people who are most likely to have  information on illegal wildlife trafficking learn about the potential for  rewards. For example, one stakeholder suggested advertising rewards at  ports where international shipments are offloaded or placing  advertisements at wildlife trafficking nodes, such as entrances to African  wildlife refuges. This stakeholder suggested advertising rewards along  with wildlife trafficking awareness-raising posters that nongovernment  organizations place in some airports.", "In addition, 14 stakeholders suggested that it would be useful for FWS  and NOAA to provide information to the public on the process for  submitting information to potentially receive rewards. Several other  stakeholders said that it is important for the public to understand whether  they may be eligible for a reward, how to submit information, and whether  or to what extent their confidentiality will be protected. Another  stakeholder provided examples of how other agencies provide information  about their reward programs on their websites. SEC and IRS, for  instance, use their websites to communicate information to the public on  the process for reporting illegal activity for financial rewards. This  information includes the types of information to report, confidentiality  rules, eligibility criteria, and the process for submitting information to  obtain a reward. In addition, the Department of State posts instructions on  its websites on how to submit information on an illegal activity and  potentially receive a reward.", "Federal internal control standards say that management should externally  communicate the necessary quality information to achieve an agency\u2019s  objectives. For example, using appropriate methods to communicate,  management communicates quality information so that external parties,  such as the public, can help the agency achieve its objectives. This could  include communicating information to the public on the types of  information and eligibility requirements for potentially receiving rewards  for reporting information on wildlife trafficking.", "FWS officials said that making more reward information available could  lead to a significant increase in the amount of information the agency  receives, which, in turn, could strain FWS\u2019s resources in following up on  that information. However, FWS officials also agreed that it was  reasonable to consider making more reward information available to  relevant members of the public, particularly in targeted circumstances, but  did not commit to doing so. Similarly, NOAA officials said they had some  concerns about the additional resources it might take to investigate  potentially unreliable or false tips that may result if they make reward  information broadly available to the public, but they agreed that it would  be reasonable for the agency to consider doing so. NOAA officials also  said they may consider making more reward information publicly available  at the conclusion of our audit but provided no plans for doing so. By  determining the types of additional information to communicate to the  public on rewards\u2014such as providing information on the agency\u2019s  website on the potential availability of rewards\u2014and then developing and  implementing plans to do so, FWS and NOAA can improve their chances  of obtaining information on wildlife trafficking activities that they otherwise  might not receive."], "subsections": []}, {"section_title": "FWS and NOAA Have Not Reviewed the Effectiveness of Their Use of Financial Rewards", "paragraphs": ["FWS and NOAA have not reviewed the effectiveness of their use of  financial rewards or considered whether any changes might improve the  usefulness of rewards as a tool for combating wildlife trafficking. FWS  officials said their agency has not reviewed or considered changes to its  use of rewards because the agency has not prioritized the use of  rewards. NOAA officials said their agency has not focused on using  rewards or identified the need to review its use of this tool, particularly in  light of other, higher mission priorities.", "Nine of the 20 stakeholders we interviewed said that FWS and NOAA  should review the effectiveness of their use of rewards and consider  potential improvements. Several stakeholders said that it would be useful  for FWS and NOAA to compare their respective approaches to those of  federal agencies that use rewards in contexts outside of wildlife trafficking  to identify best practices or lessons learned that might be applicable in  the context of combating wildlife trafficking. For example, one stakeholder  said that SEC has an effective whistleblower program and may have  lessons learned that are relevant for FWS and NOAA to consider.  Another stakeholder we interviewed separately indicated that in 2010,  before SEC had a whistleblower program that publicized rewards and  provided detailed instructions on how members of the public could report  information on illegal activities, SEC received few tips. Once SEC  implemented a whistleblower program that publicized rewards and  provided detailed instructions on its public website, the agency\u2019s use of  the program grew substantially, according to the stakeholder. Other  stakeholders said it would be useful for the agencies to consider potential  improvements to their use of rewards, such as making a standing reward  offer for information on wildlife trafficking targeted at high-priority  endangered species or particular criminal networks. Two of these  stakeholders said such an offer might improve FWS\u2019s and NOAA\u2019s use of  rewards by generating more tips than reward offers focused on individual  cases. At the same time, they said such an offer would likely filter out  some of the false or unproductive tips that the agencies might receive if  they made an untargeted standing reward offer.", "Federal internal control standards state that management should design  control activities to achieve objectives and respond to risks by, for  example, conducting reviews at the functional or activity level by  comparing actual performance to planned or expected results and  analyzing significant differences. Further, under the standards,  management should periodically review policies, procedures, and related  control activities for continued relevance and effectiveness in achieving  an agency\u2019s objectives or addressing related risks. FWS and NOAA  officials agreed that reviewing the effectiveness of their use of rewards  would be worthwhile. Specifically, FWS officials said that it would be  useful to compare their approach to those of other federal agencies that  use rewards in investigating crimes that involve interstate and foreign  smuggling of goods. Similarly, NOAA officials said that reviewing the  agency\u2019s use of financial rewards would be worthwhile but cautioned that  such a review would need to be balanced against the agency\u2019s  constrained resources and many mission requirements. FWS and NOAA  officials said they may consider conducting such a review at the  conclusion of our audit but provided no plans for doing so. By reviewing  the effectiveness of their use of rewards, FWS and NOAA can identify  opportunities to improve the usefulness of rewards as a tool for  combating wildlife trafficking."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Wildlife trafficking is a large and growing transnational criminal activity,  with global environmental, security, and economic consequences. The  federal government has emphasized strengthening law enforcement  efforts to combat wildlife trafficking, and using financial rewards to obtain  information on illegal activities is one tool that some federal agencies  have used. However, to date, FWS and NOAA have not prioritized the  use of rewards and were unable to provide sufficient assurance that the  27 rewards they paid during fiscal years 2007 through 2017 represented  all of the rewards they provided during that period. By tracking reward  information so that it is clearly documented and readily available for  examination, FWS and NOAA can better ensure that they have complete  information on the rewards they have paid to help manage their use of  rewards as a law enforcement tool.", "Additionally, FWS and NOAA have policies outlining the processes their  law enforcement agents are to use in making reward payments, and  NOAA\u2019s policy specifies factors for its agents to consider in developing  proposed reward amounts, such as the risk the individual took in  collecting the information. FWS\u2019s policy does not specify such factors that  could inform agents in achieving the agency\u2019s objectives, which is not  consistent with federal internal control standards. By augmenting its  policy to specify factors for its agents to consider when developing  proposed reward amounts, FWS can better ensure that its agents have  the necessary quality information to prepare defensible reward proposals.", "Both agencies have also advertised the potential for rewards in specific  cases when agents had no other information, but FWS and NOAA have  otherwise communicated little information to the public on the potential  availability of rewards. If the public does not know about the possibility of  rewards, then some people with information may not be incentivized to  come forward. By determining the types of additional information to  communicate to the public on rewards\u2014such as providing information on  the agency\u2019s website about the potential availability of rewards\u2014and then  developing and implementing plans to do so, FWS and NOAA can  improve their chances of obtaining information on wildlife trafficking  activities that they otherwise might not receive.", "Finally, FWS and NOAA have not reviewed the effectiveness of their use  of financial rewards or considered whether any changes might improve  the usefulness of rewards as a law enforcement tool. By undertaking such  reviews, the agencies can identify opportunities to improve the usefulness  of rewards as a tool for combating wildlife trafficking."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of seven recommendations, including four to FWS  and three to NOAA. Specifically:", "The Assistant Director of the FWS Office of Law Enforcement should  track financial reward information so that it is clearly documented and  readily available for examination. (Recommendation 1)", "The Director of the NOAA Office of Law Enforcement should track  financial reward information so that it is clearly documented and  readily available for examination. (Recommendation 2)", "The Assistant Director of the FWS Office of Law Enforcement should  augment FWS\u2019s financial reward policy to specify factors law  enforcement agents are to consider when developing proposed  reward amounts. (Recommendation 3)", "The Assistant Director of the FWS Office of Law Enforcement should  determine the types of additional information to communicate to the  public on financial rewards and then develop and implement a plan for  communicating that information. (Recommendation 4)", "The Director of the NOAA Office of Law Enforcement should  determine the types of additional information to communicate to the  public on financial rewards and then develop and implement a plan for  communicating that information. (Recommendation 5)", "The Assistant Director of the FWS Office of Law Enforcement should  review the effectiveness of the agency\u2019s use of financial rewards and  implement any changes that the agency determines would improve  the usefulness of financial rewards as a law enforcement tool.  (Recommendation 6)", "The Director of the NOAA Office of Law Enforcement should review  the effectiveness of the agency\u2019s use of financial rewards and  implement any changes that the agency determines would improve  the usefulness of financial rewards as a law enforcement tool.  (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to the  Departments of Commerce and the Interior. The departments transmitted  written comments, which are reproduced in appendixes IV and V of this  report. The Department of Commerce concurred with the three  recommendations directed to NOAA and stated that NOAA is developing  procedures to ensure that its rewards are closely tracked, clearly  documented, and better communicated. In written comments from NOAA,  NOAA stated the report fairly and thoroughly reviews NOAA\u2019s use of  financial rewards. NOAA outlined the steps it plans to take in response to  our recommendations, including developing a procedure to track financial  reward information, reviewing information currently disseminated to the  public and evaluating whether additional information may be useful, and  reviewing the agency\u2019s reward policy to determine whether changes are  needed to enhance reward effectiveness.", "In its written comments, the Department of the Interior concurred with the  four recommendations directed to FWS. Interior stated that it appreciated  our review of the challenges faced by FWS\u2019s Office of Law Enforcement  in combating wildlife trafficking and identifying areas where FWS and  NOAA can improve the use of financial rewards as a tool for combating  wildlife trafficking. Interior also provided technical comments, which we  incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretaries of Commerce and the Interior,  and other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices  of Congressional Relations and of Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to (1) identify laws that authorize the  U.S. Fish and Wildlife Service (FWS) and the National Oceanic and  Atmospheric Administration (NOAA) to pay financial rewards for  information on wildlife trafficking and the extent to which these agencies  paid such rewards from fiscal years 2007 through 2017, (2) evaluate  FWS\u2019s and NOAA\u2019s policies on financial rewards, (3) evaluate the  information available to the public on financial rewards, and (4) determine  the extent to which FWS and NOAA reviewed the effectiveness of their  use of financial rewards in combating wildlife trafficking.", "To address these objectives, we reviewed academic literature on the use  of financial rewards to combat illegal activities and United Nations  Environment Programme reports on the scope and scale of wildlife  trafficking. We also interviewed officials from federal agencies that play a  role in combating wildlife trafficking or manage programs that pay  financial rewards for information on illegal activities. Specifically, we  interviewed officials from the Departments of Agriculture, Commerce,  Homeland Security, the Interior, Justice, and State, as well as officials  from the Internal Revenue Service, the U.S. Securities and Exchange  Commission, and the U.S. Agency for International Development. In  addition, we reviewed documentation that the Department of the Treasury  provided on its role in paying financial rewards. We did not compare  FWS\u2019s and NOAA\u2019s use of financial rewards in combating wildlife  trafficking to federal agencies\u2019 use of financial rewards in other contexts  because the different contexts are not directly comparable. However, we  reviewed information on other federal agencies\u2019 use of financial rewards  as examples of how financial rewards are used in contexts outside of  wildlife trafficking. In addition, we interviewed representatives of six  nongovernmental organizations that we selected based on those  organizations\u2019 knowledge or experience in combating wildlife trafficking.", "Specifically, we interviewed representatives from the Elephant Action  League, the Environmental Investigation Agency, the National  Association of Conservation Law Enforcement Chiefs, the National  Whistleblower Center, TRAFFIC, and the World Wildlife Fund.", "To identify laws that authorize FWS and NOAA to pay financial rewards  for information on wildlife trafficking, we asked FWS and NOAA attorneys  to compile a list of laws that each of their agencies implements or  enforces that prohibit wildlife trafficking and authorize the agency to pay  rewards for providing information about trafficking. We then compared  that list to the results of our search of the United States Code for such  laws. We also reviewed FWS and NOAA documentation for accounts  where the fines, penalties, and proceeds from forfeited property that are  used to pay rewards are deposited as well as the accounts where  appropriations available to pay rewards were deposited. To identify the  extent to which FWS and NOAA have paid financial rewards for  information on wildlife trafficking, we analyzed FWS and NOAA data on  financial rewards the agencies reported paying from fiscal years 2007  through 2017. The data included information on, among other things,  the fiscal years in which rewards were paid,  laws under which rewards were paid,  types of wildlife involved in those cases,  the amounts of civil penalties or criminal fines imposed in those  cases,  the numbers of arrests and convictions as a result of those cases, and whether reward recipients were individuals or groups and U.S. or  foreign citizens.", "To assess the reliability of the data FWS and NOAA provided on financial  rewards, we interviewed agency officials knowledgeable about the data  and compared the data to case records the agencies provided.", "Specifically, FWS and NOAA officials said they track all expenditures,  including reward payments, in their financial databases, but they are not  able to readily identify reward payments because their financial systems  do not include a unique identifier for such payments and their reward  information is located in multiple databases and formats. As a result,  FWS and NOAA officials said they identified the rewards that they  reported to us by manually reviewing their financial and law enforcement  records, and officials said the information was complete to the best of  their knowledge. Based on these steps, we found the data that the  agencies provided to us to be sufficiently reliable for reporting information  on the rewards the agencies reported paying. However, as we discuss in  the report, FWS and NOAA officials could not provide sufficient  assurance that the data included all the financial rewards that they had  paid from fiscal years 2007 through 2017.", "To obtain additional detail about cases where financial rewards were  paid, we reviewed a nongeneralizable sample of 10 wildlife trafficking  cases. We selected these cases based on  the agency that investigated the case (to include both FWS and  NOAA cases),  the amount of the reward paid in the case (to reflect both low and high  amounts),  the year in which the reward was paid (to include rewards paid more  recently), and  the type of wildlife trafficked in the case (to include both fish and  wildlife cases\u2014there were no plant trafficking cases to select).", "While the findings from our review cannot be generalized to cases we did  not select and review, they illustrate how FWS and NOAA have used  financial rewards in wildlife trafficking cases.", "To evaluate FWS and NOAA policies on financial rewards, we reviewed  relevant FWS and NOAA policies and compared them to each other;  interviewed FWS and NOAA officials about those policies; and compared  the information in the policies with federal internal control standards on  information and communication. To evaluate information available to the  public on rewards, we reviewed relevant FWS and NOAA publications  and examples of communications to the public on the availability of  rewards in specific cases and interviewed FWS and NOAA officials. We  also reviewed information available on FWS\u2019s and NOAA\u2019s national and  regional websites as of December 2017 and January 2018, respectively,  relevant to reporting violations of the laws that the agencies enforce in  general and on receiving rewards in particular. We compared the  agencies\u2019 public communications on rewards with federal internal control  standards on information and communication. To evaluate the extent to  which FWS and NOAA reviewed the effectiveness of their use of financial  rewards in combating wildlife trafficking, we interviewed FWS and NOAA  officials and requested any reviews the agencies had conducted  regarding their use of financial rewards to compare with federal internal  control standards on control activities. FWS and NOAA did not have any  such reviews to provide.", "In addition, for all four objectives, we interviewed a nongeneralizable  sample of 20 stakeholders who had experience investigating wildlife  trafficking or expertise in the use of financial rewards as a law  enforcement tool. To select stakeholders to interview, we first identified a  list of stakeholders by reviewing (1) FWS and NOAA data on law  enforcement agents with at least 5 years of experience who had  investigated wildlife trafficking cases and used financial rewards, (2)  Department of Justice data on federal prosecutors who had prosecuted  wildlife trafficking cases since fiscal year 2014, (3) literature search  results identifying academics with expertise in the use of financial rewards  as a law enforcement tool and federal programs that use financial  rewards to combat illegal activities in contexts outside of wildlife  trafficking, (4) the biographies of members of the federal Advisory Council  on Wildlife Trafficking, and (5) recommendations from stakeholders we  interviewed. From this list, we then used a multistep process to select the  20 stakeholders to interview. To ensure coverage and a range of  perspectives, we selected stakeholders from the following groups:", "FWS and NOAA law enforcement agents, including field and  federal prosecutors responsible for prosecuting wildlife trafficking  cases;  federal officials responsible for programs that use financial rewards to  combat illegal activities in contexts outside of wildlife trafficking; academics with expertise in the use of financial rewards as a law members of the federal Advisory Council on Wildlife Trafficking; and  representatives of nongovernmental organizations that investigate  wildlife trafficking.", "We conducted semistructured interviews with the 20 selected  stakeholders using a standard set of questions. We asked questions  about stakeholder views on the usefulness of financial rewards in  combating wildlife trafficking; the strength and weaknesses of the  statutory provisions that authorize federal agencies to pay financial  rewards for information on wildlife trafficking; FWS\u2019s and NOAA\u2019s use of  financial rewards to combat wildlife trafficking; and how, if at all, the two  agencies could improve their use of financial rewards to combat wildlife  trafficking. We analyzed the stakeholders\u2019 responses to our questions,  grouping the responses into overall themes. We summarized the results  of our analysis and then shared the summary with relevant FWS and  NOAA officials to obtain their views. Views from these stakeholders  cannot be generalized to those whom we did not select and interview.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Laws Implemented or Enforced by FWS and NOAA That Prohibit Wildlife Trafficking and Authorize Financial Rewards", "paragraphs": ["The Department of the Interior\u2019s U.S. Fish and Wildlife Service (FWS) and  the Department of Commerce\u2019s National Oceanic and Atmospheric  Administration (NOAA) implement or enforce multiple laws that  specifically authorize the payment, under specified circumstances, of  financial rewards to persons for information about violations of laws that  prohibit wildlife trafficking. The laws that FWS officials identified are  listed and summarized in table 3, and the laws that NOAA officials  identified are listed and summarized in table 4.", "In addition, as noted above, the reward provisions in the Magnuson- Stevens Fishery Conservation and Management Act as amended and the  Fish and Wildlife Improvement Act as amended authorize the payment of  rewards for information about violations of multiple laws. Specifically, the  Magnuson-Stevens Fishery Conservation and Management Act as  amended authorizes the payment of rewards for information about  violations of the act as well as any other marine resource law that the  Secretary of Commerce enforces. Further, the Fish and Wildlife  Improvement Act as amended authorizes the payment of rewards for  information about violations of any law administered by NOAA\u2019s National  Marine Fisheries Service relating to plants, fish, or wildlife. NOAA officials  identified 14 such laws that prohibit wildlife trafficking (see table 5). If a  violation of the laws listed in table 5 occurs, NOAA officials said they  could use the Magnuson-Stevens Fishery Conservation and Management  Act or Fish and Wildlife Improvement Act reward provision to pay a  reward for information on the violation. None of the laws listed in table 5  specifically authorize the payment of financial rewards."], "subsections": []}, {"section_title": "Appendix III: FWS and NOAA Cases in Which the Agencies Reported Paying Rewards, Fiscal Years 2007 through 2017", "paragraphs": ["Table 6 provides information on U.S. Fish and Wildlife Service and  National Oceanic and Atmospheric Administration cases where these  agencies reported paying rewards for information on wildlife trafficking  from fiscal years 2007 through 2017."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Alyssa M. Hundrup (Assistant  Director), David Marroni (Analyst-in-Charge), Cindy Gilbert, Keesha  Luebke, Jeanette Soares, Sheryl Stein, Sara Sullivan, and Judith Williams  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Wildlife trafficking is a multibillion-dollar, global criminal activity that imperils thousands of species. To help combat it, the U.S. Fish and Wildlife Service and the National Oceanic and Atmospheric Administration can offer rewards in certain circumstances for information on wildlife trafficking activities.", "We found that these agencies have not prioritized offering rewards, and they have paid few of them\u201427 rewards in 11 fiscal years, totaling about $205,000.", "We made seven recommendations to these agencies, including telling the public about the possibility of rewards and reviewing how effectively the agencies are using rewards."]}
{"id": "GAO-18-593", "url": "https://www.gao.gov/products/GAO-18-593", "title": "Federal Timber Sales: Forest Service and BLM Should Review Their Regulations and Policies Related to Timber Export and Substitution", "published_date": "2018-08-15T00:00:00", "released_date": "2018-09-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year, the federal government sells millions of dollars of timber from federal forests. Federal law generally prohibits the export of unprocessed logs harvested from federal lands in the western United States. It also prohibits substitution of federal logs for privately sourced timber in domestic mills when the privately sourced timber is exported without processing.", "GAO was asked to examine the issue of illegal federal timber export and substitution. This report (1) describes the extent to which the Forest Service and BLM identified violations of the timber export and substitution ban that occurred from 2007 through 2017 and the likelihood of violations and (2) examines the agencies' regulations, policies, and practices to help prevent, detect, and respond to illegal timber export and substitution.", "GAO reviewed laws, regulations, and policies regarding illegal timber export and substitution; compared agency regulations with laws, and agency policies with federal internal control standards; and interviewed agency officials and stakeholders\u2014such as trade groups and state officials\u2014 selected to provide a range of perspectives."]}, {"section_title": "What GAO Found", "paragraphs": ["The Forest Service, within the Department of Agriculture, and the Bureau of Land Management (BLM), within the Department of the Interior, found no violations of the ban on federal timber export and substitution from 2007 through 2017, according to agency documents and officials. All agency officials and stakeholders GAO interviewed said the likelihood of illegal timber export and substitution is low, citing several reasons, including economic factors associated with log markets, which have changed over the years. For example, many officials and stakeholders said the timber harvested from federal lands is smaller and of lower quality compared to what was harvested in the 1990s, making it less likely to be exported.", "The Forest Service and BLM did not issue new regulations related to illegal federal timber export and substitution, and some agency policies related to export and substitution are outdated or unclear. The agencies did not issue regulations to implement the Forest Resources Conservation and Shortage Relief Act of 1997, as required by the act. Without issuing new regulations or obtaining legislative relief from this requirement, the agencies will continue to be out of compliance with the act. The agencies have policies to help prevent, detect, and respond to illegal timber export and substitution, such as policies that require the marking of logs to identify them as coming from federal lands. However, the agencies have not reviewed their policies for continued relevance and effectiveness as called for by federal standards for internal control, and some policies are outdated or unclear. For example, Forest Service policy calls for the collection of a certification form to help determine whether timber purchasers are engaged in export or substitution, but the form expired in 1999. Also, it is unclear what BLM considers a violation of the export ban because agency policy does not define what constitutes a violation. Forest Service officials said the agency has not reviewed its policies since 1997, largely due to competing priorities, but agreed it would be beneficial to do so. BLM officials said they reviewed the agency's export regulations in 2010, but this effort did not include a review of timber export policies. By reviewing agency policies and making changes as necessary, the agencies will have better assurance that their policies are relevant and effective for addressing the risk of illegal timber export and substitution."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Forest Service and BLM issue new regulations or seek legislative relief from the requirement to do so, and review their policies for relevance and effectiveness and issue new policies as necessary. The agencies generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year, the federal government sells millions of dollars of timber from  federally managed forests. In fiscal year 2017, about $253 million of  timber was sold from these lands, according to agency documents.  Federal law generally prohibits the export of unprocessed logs\u2014that is,  logs not processed into end products such as lumber\u2014harvested from  federal lands in the western United States. The law also prohibits  purchasers from using timber harvested from federal lands in their  processing facilities while exporting nonfederal unprocessed timber that  could have been used in those facilities\u2014known as substitution.", "Restrictions on federal timber export and substitution were put in place  decades ago to help sustain the domestic timber-processing industry at a  time when large volumes of timber were being exported from the United  States. For example, the Foreign Assistance Act of 1968 restricted the  volume of timber that could be harvested and exported in unprocessed  form from federal lands. The Forest Resources Conservation and  Shortage Relief Act of 1997 updated the export restrictions and currently  governs federal log exports. The Forest Service, within the Department  of Agriculture, and the Bureau of Land Management (BLM), within the  Department of the Interior, implement and enforce the restrictions. We  last reported on the federal timber export and substitution ban in 1998.", "You asked us to examine the issue of illegal federal timber export and  substitution. This report (1) describes the extent to which the Forest  Service and BLM identified violations of the timber export and substitution  ban that occurred from 2007 through 2017 and the likelihood of violations,  and (2) examines the agencies\u2019 regulations, policies, and practices to  help prevent, detect, and respond to illegal timber export and substitution.", "To address our first objective, we requested documentation about timber  export and substitution violations for calendar years 2007 through 2017  from the Forest Service and BLM. The agencies reported that they had no  documentation of violations. The Forest Service provided documentation  about potential violations it had investigated but not substantiated, which  we reviewed. To obtain background information and corroborate agency  information, we searched various databases, such as ProQuest, to  identify articles on illegal timber export and substitution. Based on our  review of these articles, we did not identify violations of the ban that had  occurred during this time period. We performed these searches from June  2017 to August 2017.", "In addition, we interviewed Forest Service and BLM officials about the  number of timber export and substitution violations or potential violations  during calendar years 2007 through 2017, agency actions taken in  response, and officials\u2019 views about the likelihood of illegal timber export  and substitution. Specifically, we interviewed Forest Service and BLM  headquarters officials, regional officials in the six Forest Service regions  with forests subject to the 1997 act, and officials at one national forest in  each region. We selected these forests after discussions with regional  officials about the forests they viewed as having the greatest potential risk  of export or substitution because of proximity to export facilities, the  amount of timber sold, or other factors. We also interviewed officials from  the BLM Oregon/Washington State Office and the five western Oregon  BLM districts where most of BLM\u2019s timber program is concentrated.  Table 1 provides a list of Forest Service and BLM offices included in our  review.", "To gain a broader perspective about the likelihood of illegal timber export  and substitution, we also interviewed nonfederal stakeholders, including  state forestry officials, academic researchers, and representatives of  trade associations representing federal timber purchasers, loggers, and  mill owners. We selected these stakeholders to provide a range of  perspectives on the issue of timber export and substitution. Table 2 lists  the stakeholder organizations we interviewed.", "To address our second objective, we reviewed federal laws to identify  relevant legal provisions regarding the prohibition on the export and  substitution of unprocessed federal timber. We also reviewed agency  regulations and policies related to illegal federal timber export and  substitution. We interviewed agency officials described above to identify  key policies and practices to help prevent, detect, and respond to illegal  timber export and substitution.", "In addition, we reviewed each agency\u2019s implementation of those policies  that require the agency to collect forms or conduct inspections. To  determine the extent to which BLM collected required contract forms  certifying that purchasers had not illegally exported or substituted federal  timber, we requested contract forms for a random sample of timber sale  contracts that closed in fiscal year 2017 from each of the five western  Oregon BLM districts included in our review, for a total of 22 contracts.  We reviewed contract forms included in each timber sale contract to  determine whether each district collected and maintained the required  forms. Because the Forest Service does not collect certification forms, we  did not perform a similar review of Forest Service contracts.", "To determine the extent to which the agencies conducted surveillance at  log export facilities, we requested agency inspection reports for  surveillance conducted in 2017 for the 14 log export facilities in California,  Oregon, and Washington that were identified as operational at the time of  our review. Forest Service regional officials identified and provided  reports for 6 facilities in California. For Oregon and Washington  combined, Forest Service regional officials identified 6 log export facilities  and provided reports for 1 facility. BLM officials identified and provided  reports for 2 facilities in Oregon. We reviewed the inspection reports for  each facility to determine the number of inspections that were conducted,  and, where applicable, to determine whether the number of inspections  conformed with agency policy.", "To gain a broader perspective about agency implementation of timber  sale program activities, we reviewed Forest Service \u201cTimber and Log  Accountability Audits\u201d\u2014internal evaluations of regional and forest-level  timber sale activities. We reviewed the most recent evaluation of each  of the six regions with forests subject to the federal timber export and  substitution ban and the most recent evaluation of at least one national  forest in five of these regions, selected as described above. We also  reviewed the agencies\u2019 general timber sale administration policies to gain  a better understanding of the extent to which these policies address the  issue of export and substitution. We compared agency policies and  practices with relevant portions of the Standards for Internal Control in the  Federal Government to assess the extent to which agency policies and  practices aligned with the standards.", "In addition, to address both objectives, we conducted a site visit to Coos  Bay, Oregon in September 2017. We selected this location due to its  proximity to a BLM field office, active logging sites on federal lands, and  log export facilities. During this site visit, we met with agency officials at  BLM\u2019s Coos Bay district; traveled to an active logging site where we  observed a timber harvesting operation and met with logging operators;  and visited a log export facility, where we observed logs being prepared  for export and met with the export facility manager and a timber company  official.", "We also reviewed reports and studies related to timber export and  substitution, including reports from the Forest Service\u2019s Pacific Northwest  Research Station, the Department of Agriculture\u2019s Foreign Agricultural  Service, and Oregon State University. We reviewed these studies\u2019  methodologies, assumptions, and limitations and determined them to be  sufficiently credible for our purposes.", "We conducted this performance audit from June 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes agency responsibilities, the history of the federal  timber export and substitution ban, and changes to the timber economy  since restrictions on timber export and substitution were first  implemented."], "subsections": [{"section_title": "Federal Land Management Agency Responsibilities", "paragraphs": ["Under the National Forest Management Act and the Federal Land Policy  and Management Act of 1976, respectively, the Forest Service and BLM  manage federal lands under their jurisdiction for various uses such as  protection of fish and wildlife habitat, recreation, mineral production, and  timber harvesting. As part of the agencies\u2019 management of timber  harvesting on public lands, both the Forest Service and BLM conduct  timber sales. Timber sale activities include identifying the sale area,  conducting the required environmental analyses, soliciting bids, preparing  the timber sale contract, marking the sale boundary and the trees to be  cut or left, and monitoring the harvest operations and reforestation  activities. The agencies monitor harvest operations to help ensure that,  for example, the trees are harvested from the agreed-upon area and the  logs are hauled on the route agreed upon in the timber sale contract. The  agencies have developed policies for general timber sale activities, as  well as policies specific to preventing, detecting, and responding to illegal  federal timber export and substitution."], "subsections": []}, {"section_title": "History of the Federal Timber Export and Substitution Ban", "paragraphs": ["Since the late 1960s, four primary laws have been enacted prohibiting  federal timber export and substitution: the Foreign Assistance Act of  1968, the Interior and Related Agencies Appropriations Act of 1974, the  Forest Resources Conservation and Shortage Relief Act of 1990, and the  Forest Resources Conservation and Shortage Relief Act of 1997.", "In 1968, an amendment to the Foreign Assistance Act of 1968\u2014 commonly referred to as the \u201cMorse Amendment\u201d\u2014restricted the volume  of timber that could be harvested and exported from federal lands in  unprocessed form. This legislation was enacted after the Secretaries of  Agriculture and the Interior issued joint orders calling for this restriction,  deeming it necessary to maintain a viable domestic wood-processing  industry. As we previously found, in the early 1960s, export of federal  timber was generally not viewed as a concern, but as exports of federal,  private, and other timber increased, public and private concerns grew  about the effect of unrestricted log exports on the domestic wood- processing industry. For example, the percentage of timber harvested in  Oregon and Washington that was exported grew from approximately 6  percent in 1965 to about 18 percent in 1972.", "In 1973, a provision was included in the Interior and Related Agencies  Appropriations Act of 1974 that, in effect, prohibited the export of  unprocessed timber harvested from federal lands west of the 100th  meridian in the contiguous 48 states. (Figure 1 shows the location of the  100th meridian and Forest Service- and BLM-managed lands.) The 1973  provision also prohibited purchasers from using timber harvested from  federal lands in their processing facilities while exporting nonfederal  unprocessed timber that could have been used in those facilities, an  activity referred to as substitution. The provision also stated that the  limitation on export and substitution did not apply to species of timber the  agencies have determined to be surplus to domestic lumber and plywood  manufacturing needs.", "In 1990, the Forest Resources Conservation and Shortage Relief Act of  1990 made permanent the ban on exporting unprocessed logs from  western federal lands and provided for greater restrictions on  substitution. Under the 1990 act, however, it is not considered  substitution if a company purchases federal timber from within a particular  \u201csourcing area\u201d and exports nonfederal timber harvested from areas  outside the sourcing area. For example, firms with timber operations in  both Oregon and Washington could purchase federal timber from a  sourcing area in eastern Oregon for manufacture while also purchasing  private timber in Washington for export. The 1990 act required the Forest  Service and Interior to issue, in consultation with each other, coordinated  and consistent regulations implementing the act on the lands under their  respective jurisdictions.", "The Forest Service issued a series of regulations to implement the 1990  act, the most comprehensive of which was issued September 8, 1995.  In a provision contained in the act providing appropriations to the Forest  Service for fiscal year 1996, Congress effectively suspended  implementation of the 1995 regulation to allow the administration,  Congress, and affected parties more time to address policy issues with  respect to the 1990 act. The Forest Service\u2019s fiscal year 1997  appropriation act contained a similar provision. BLM did not issue  regulations implementing the 1990 act.", "In 1997, Congress amended the 1990 act. Among other things, the  Forest Resources Conservation and Shortage Relief Act of 1997 relaxed  substitution restrictions in Washington State and allowed the Forest  Service and BLM to reduce the penalties imposed for violating the act by  taking into account \u201call relevant mitigating factors, including mistake,  inadvertence, and error.\u201d The 1997 act also suspended the Forest  Service\u2019s 1995 regulations implementing the 1990 act and directed the  agencies to issue new coordinated and consistent regulations  implementing the act by June 1998. The law requires the agencies to  implement their regulations in effect prior to September 8, 1995, until new  regulations are issued."], "subsections": []}, {"section_title": "Changes to the Timber Economy since the 1960s", "paragraphs": ["Since restrictions on timber export and substitution were first  implemented in the late 1960s, the timber economy has continued to  change. Domestically, the volume of timber harvested from Forest  Service lands each year has declined from about 12.4 billion board feet in  1973 to 2.6 billion board feet in 2017. The number of domestic mills  along the Pacific Coast has also decreased, mostly through mill closures.  For example, from 1996 to 2016, the number of mills in Washington State  declined from 186 to 88. In addition, since the 1990s, the structure of  the corporate timber industry has changed. For example, many of the  corporate timber companies that once owned both mills and the private  lands to supply those mills have divested some or all of their private  timberlands. Additionally, the value of U.S. softwood log exports has  grown since 2007, with China, Japan, and Canada the three largest  importers of these logs. According to information from the Foreign  Agricultural Service, the value of U.S. softwood log exports grew from  approximately $949 million in 2007 to approximately $1.4 billion in 2017  (in constant 2017 dollars)."], "subsections": []}]}, {"section_title": "Forest Service and BLM Found No Violations of the Export and Substitution Ban from 2007 through 2017, and Officials and Stakeholders Said the Likelihood of Violations is Low", "paragraphs": ["According to Forest Service and BLM officials, the agencies found no  violations of the ban on federal timber export and substitution from 2007  through 2017. Forest Service officials described instances in which the  agency responded to reports of potential violations, but the reports were  not substantiated. All agency officials and stakeholders we interviewed  said that the likelihood of illegal timber export and substitution is low.  However, several officials acknowledged that some risk of violations  exists under certain circumstances.", "From 2007 through 2017, the Forest Service and BLM found no violations  of the federal timber export and substitution ban. Forest Service officials  identified four instances in which the agency investigated potential  violations. For example, in one instance, the Forest Service\u2019s Pacific  Southwest region investigated an incident in 2017 at the Port of  Richmond near Oakland, California. According to the associated  investigation report, an employee at the port\u2019s export facility noticed four  logs were marked as coming from a federal timber sale and reported it to  the Forest Service. Forest Service law enforcement officials conducted an  investigation and determined that the logs came from the Sierra National  Forest and were placed at the facility in error. The purchaser  subsequently delivered the logs to the intended recipient and the agency  took no further action. Forest Service officials said that because the logs  had not been exported, but had been placed at the facility in error with no  intent to export them, the agency determined that there was no violation  of the export ban. In another instance, officials from the agency\u2019s  Southwestern Region said that, in 2010, they identified a case in which a  purchaser cut federal logs, removed the bark, and then exported the logs  to Mexico for use as telephone poles. The officials investigated to  determine whether that type of exporting was legal. The Forest Service  concluded that the purchaser\u2019s activities constituted processing the logs  into end products and therefore the logs were being legally exported.  BLM officials we interviewed did not describe any instances in which they  identified, or were made aware of, potential violations.", "All Forest Service and BLM officials and stakeholders we interviewed said  the likelihood of timber export and substitution violations is low due to a  combination of several factors, including economic factors associated  with log markets and changes in the organizational structure of timber  companies. However, several officials acknowledged that some risk of  violations exists under certain circumstances.", "Economic factors within log markets. Several agency officials and  stakeholders said smaller trees of a lower quality are being harvested  from federal lands compared to the trees harvested in the 1990s.  Several of these officials and stakeholders said there is less demand  and lower value in overseas markets for logs with such  characteristics. A senior official from the Klamath National Forest in  California, for example, said that trees harvested from the forest in the  1980s had log diameters of 35 to 42 inches, but by 2017 the diameter  had decreased to 14 to 18 inches. Additionally, according to statistics  from the State of California, old-growth trees\u2014generally, trees more  than 150 years old\u2014represented nearly 70 percent of timber  harvested in California in 1979, but by 1999 the proportion had fallen  to less than 10 percent. As we have found, old-growth trees can  have more attractive grain characteristics and can be used for higher- value products compared to young-growth trees, which may make the  former more attractive for export. Several officials and stakeholders  also said that the decrease over time in the amount of federal timber  available for sale has made violations less likely. For example,  Oregon Department of Forestry information shows that the volume of  timber harvested on BLM-managed lands in Oregon declined from  about 1.5 billion board feet in 1973 to 182 million board feet in 2016.  Some of these officials and stakeholders said that federal timber is an  important part of domestic sawmill operators\u2019 timber supply, and,  given the reduced amount of federal timber available, sawmill  operators would have little incentive to export logs because doing so  would further reduce their own timber supply.", "Changes in timber company organizational structure. Several  officials and stakeholders said that changes in timber company  organizational structure have also made substitution less likely.  Several officials and stakeholders noted that many Pacific Northwest  timber companies once owned both sawmills and timberland from  which they harvested timber to supply their mills. According to some  officials, under those conditions, the likelihood of substitution was  greater because these companies could have benefitted by exporting  logs from their own lands for a high price while supplying their sawmill  operation with federal timber purchased at a lower price. However,  many timber companies have sold or reorganized over the past 2  decades, resulting in few companies now owning both sawmills and  timberlands, according to some agency officials. In 2009, Oregon  State University reported on this change, noting that \u201calmost all large,  publicly traded forest product companies have shed their timber lands  in the past 20 years, a reflection of global economic pressures, new  tax laws, and other forces.\u201d A 2014 report from the Department of  Agriculture likewise noted this change. Some agency officials said  that, as a result, sawmills generally must buy all of their timber\u2014 whether privately sourced or federal\u2014on the open market, which  provides less incentive for substitution than if these sawmills were  using timber they already owned.", "Several officials also said, however, that some risk of violations remains,  particularly under certain circumstances. For example, some Forest  Service regional officials said that some national forests could be  vulnerable to illegal timber export if log prices or demand for certain tree  species increase in the future. Additionally, several Forest Service  officials expressed concern about having sufficient staff to monitor timber  sales for compliance with relevant requirements, including the ban on  export and substitution, especially in light of potential increases in timber  sales. In particular, officials from four of the six national forests included in  our review said the Forest Service increased the volume of timber their  national forest is expected to offer for sale beginning in fiscal year 2018.  For example, a Boise National Forest official said the forest\u2019s timber sale  target increased from 50 million board feet per year, which has been  consistent over the last decade, to 74 million board feet in fiscal year  2018, with a goal of 96 million board feet per year by fiscal year 2021.  According to some Forest Service officials, higher timber sale targets could reduce the ability of agency staff to carry out timber sale  responsibilities, including monitoring, that help guard against illegal timber  export and substitution. Several Forest Service \u201cTimber and Log  Accountability Audits\u201d\u2014internal evaluations of regional and forest-level  timber sale activities\u2014also noted that reduced staffing levels and  experience were areas of concern in carrying out forests\u2019 timber sale  programs."], "subsections": []}, {"section_title": "The Forest Service and BLM Did Not Issue New Regulations Required by Law and Some Policies are Outdated or Unclear", "paragraphs": ["The Forest Service and BLM neither issued new regulations as required  by the Forest Resources Conservation and Shortage Relief Act of 1997  nor obtained legislative relief from the requirement. The agencies have  policies and practices to help prevent, detect, and respond to illegal  timber export and substitution. However, some policies are outdated or  unclear, and the agencies have not reviewed their policies for continued  relevance and effectiveness."], "subsections": [{"section_title": "The Agencies Did Not Issue New Regulations As Required by the 1997 Act", "paragraphs": ["As noted previously, in 1997, Congress amended the Forest Resources  Conservation and Shortage Relief Act of 1990 to, among other things,  relax substitution restrictions in Washington State. The 1997 act included  other provisions such as allowing the agencies to reduce the penalties  imposed for violating the ban. The act also states that the agencies \u201cshall,  in consultation, each prescribe new coordinated and consistent  regulations to implement the act\u201d and required the agencies to issue  these regulations by June 1, 1998. The act also states that, until new  regulations are issued, regulations that were in effect prior to September  8, 1995, are to remain in effect. However, because neither agency issued  regulations as required by the act, their regulations currently in use do not  reflect changes made by the 1997 act.", "Forest Service. The Forest Service drafted regulations to implement  the 1997 act, but as of June 2018, the agency had not finalized them.", "According to Forest Service headquarters officials, the agency did not  finalize the draft regulations because of competing priorities. The  officials did not provide an estimate as to when the draft regulations  would be made final. Because the draft regulations have not been  made final, Forest Service regulations from the early 1990s remain in  effect but do not reflect the changes made by the 1997 act.", "BLM. According to BLM headquarters officials, BLM began drafting  regulations in 2010 to implement the 1997 act, but did not complete  that effort because of insufficient resources and competing priorities.  Because BLM did not issue new regulations, BLM is required by law  to rely on its regulations issued prior to September 8, 1995. BLM  regulations reflect timber export and substitution laws from the 1970s  because BLM did not issue regulations implementing the 1990 act  because of competing priorities at that time, according to officials.  Consequently, BLM regulations currently in use do not reflect the  changes made by the 1997 act.", "Forest Service officials said their agency did not seek legislative relief  from the requirement to issue new regulations, and BLM officials said  they have no record that their agency sought legislative relief but could  not be certain that the agency had not done so. Without issuing new  coordinated and consistent regulations as required by the 1997 act, or  obtaining legislative relief, the agencies will continue to be out of  compliance with this provision of the act."], "subsections": []}, {"section_title": "Some Agency Policies Related to Illegal Export and Substitution are Outdated or Unclear, and the Agencies Have Not Reviewed Their Policies for Relevance and Effectiveness", "paragraphs": ["We identified several areas in which either the Forest Service or BLM or  both have policies to help prevent, detect, and respond to illegal federal  timber export and substitution. For example:", "Timber sale contract provisions. Both agencies have policies that  require timber sale contracts to include a statement about the  prohibition on federal timber export and substitution, which can help  ensure timber purchasers are aware of the prohibition. We reviewed  the standard timber sale contract forms used by both agencies at the  time of our review and found that the forms include provisions with  this statement.", "Marking of unprocessed logs. Both agencies generally require  purchasers to mark unprocessed logs originating from federal lands  subject to the ban with a spot of yellow paint and an identifying mark  known as a hammer brand before the logs are removed from the  timber sale area. According to the agencies\u2019 policies, marking the logs  is intended to help identify them as being prohibited from export.  Figure 2 shows an example of marked federal logs.", "Forest Service regulations generally require that both ends of each  unprocessed log be marked, but agency policy allows agency officials  to waive the requirement under certain circumstances if officials  determine that the risk of export or substitution is low. For example,  for certain timber sales the Pacific Southwest Region does not require  that logs smaller than 10 inches in diameter be painted and branded.", "BLM policy directs that one end of most unprocessed logs be painted  and branded. Specifically, it calls for painting and branding one end of  each log with a diameter of more than 10 inches. Likewise, when a  log truck carries 10 or fewer logs (regardless of the logs\u2019 diameter), all  logs on the truck are to be painted and branded. For truckloads of 11  logs or more, a minimum of 10 logs must be painted and branded on  one end, regardless of the logs\u2019 diameter. BLM policy allows  contracting officers to implement more stringent requirements, such  as requiring purchasers to paint and brand all logs harvested on an  individual timber sale regardless of size or number, but it does not  allow contracting officers to waive the marking requirement.", "Penalizing violators. Both agencies have penalties for violating the  export and substitution ban. Forest Service penalties are described in  agency policy and in agency contract provisions, and include  imposing penalties, cancelling contracts, and debarring purchasers  from bidding on future Forest Service timber sales. BLM penalties  are described in agency contract provisions only, and include contract  cancellation and recovery of damages.", "In addition, many Forest Service and BLM officials said that general  timber sale administration policies\u2014those aimed at managing timber  sales generally, regardless of export issues\u2014help address the risk of  illegal federal timber export and substitution. Both agencies\u2019 policies for  timber sale administration include mechanisms for monitoring various  activities associated with federal timber sales, including periodically  inspecting timber harvest operations at active logging sites and observing  log trucks carrying cut timber from logging sites to ensure they follow  designated haul routes. Many officials we spoke with from both agencies  said that such periodic inspections and consistent contact with logging  operators help prevent and detect illegal export or substitution of federal  timber.", "However, Forest Service and BLM policies related to three areas\u2014 surveillance, certification requirements, and investigating potential  violations\u2014are outdated or unclear, or in some cases have not been fully  implemented. The agencies also have not reviewed their policies for  continued relevance and effectiveness as called for by federal internal  control standards.", "Surveillance. Forest Service policy directs each Forest Service  region with forests subject to the export ban to conduct surveillance  and establish procedures, training, and other controls for the  surveillance program in the region\u2014stating that, at a minimum,  regional standards must include monthly surveillance. However,  three of the six regions subject to the ban have not established  surveillance procedures because, according to regional officials, they  have no access to ports and therefore the policy is not relevant to  them. However, Forest Service headquarters officials said the  requirement is relevant to all regions having forests subject to the ban,  because federal logs originating from regions without ports could be  transported across regions and exported from another region. These  headquarters officials said that more clarity in the agency\u2019s policy  about establishing regional surveillance procedures may be helpful to  the regions.", "The remaining Forest Service regions subject to the ban\u2014the Pacific  Southwest, Pacific Northwest, and Northern regions, each of which  contains log export facilities\u2014established procedures as called for by  national policy but do not conduct surveillance on a monthly basis.  The Pacific Southwest Region\u2019s procedures call for monthly  surveillance of export facilities in accordance with national policy.  However, the Pacific Northwest Region\u2019s procedures call for quarterly  surveillance rather than monthly surveillance. The Northern Region  delegates responsibility for surveillance to a national forest in the  Pacific Northwest Region. We reviewed surveillance inspection  reports from calendar year 2017 and found that, during that year, the  Pacific Southwest Region conducted from one to nine inspections of  each of the six facilities regional officials identified as exporting logs\u2014 less than the monthly surveillance called for by regional and national  policy. Officials from the Pacific Northwest Region provided us  calendar year 2017 surveillance information for one of the region\u2019s six  facilities that exported logs that year. For that facility, Forest Service  officials conducted surveillance seven times in 2017, including at least  one inspection per quarter, which is in accordance with regional policy  but not national policy. Officials from both regions said they view the  frequency with which they conduct surveillance to be appropriate. For  example, officials from the Pacific Southwest Region said that when a  port is actively exporting timber, they conduct surveillance at least  once per month, as required by policy. Officials from the Pacific  Northwest Region said they view their frequency of surveillance to be  appropriate, since they view the likelihood of export violations to be  low and they have competing agency priorities.", "BLM policy does not call for surveillance of log export facilities.  However, officials from BLM\u2019s Coos Bay District, which has two log  export facilities, have conducted surveillance since the 1970s as a  way to help detect illegal timber export, according to BLM documents  and officials. Based on our review of 2017 surveillance inspection  reports, BLM officials inspected one export facility twice and the other  facility seven times during that year. Figure 3 shows an example of  unprocessed logs at one of the export facilities in Coos Bay, Oregon.", "Some officials from both agencies said they may in some cases be  unable to conduct surveillance within export facilities because they do  not have clear authority to enter these facilities. BLM headquarters  officials said BLM did not develop a policy calling for surveillance  because the agency did not know whether it had the authority to enter  log export facilities and therefore was not confident that such a policy  could be carried out. Some officials from both agencies said they  generally have been granted access but noted that this is subject to  the willingness of the facility owners. Forest Service and BLM  headquarters officials similarly said the agencies generally do not  have legal authority to board ships or to inspect closed shipping  containers to look for federal logs.", "Certification Requirements. Both agencies\u2019 policies direct the  agencies to collect certification forms to help them determine whether  timber purchasers are engaged in export or substitution. However, the  agencies\u2019 forms are outdated\u2014the Forest Service\u2019s certification form  expired, and some BLM forms reflect legal requirements that are no  longer in effect. Nevertheless, the agencies have not updated their  forms or changed their policies requiring collection of these forms.", "Forest Service policy states that \u201cPrior to award, during the life of the  contract, and for a period of 3 years from the termination date, the  purchaser must furnish, upon request, the volume and geographic  origin of unprocessed timber from private lands that was exported or  sold for export.\u201d The purchaser may submit the information on a  specified Forest Service certification form or \u201cother appropriate  forms.\u201d Forest Service regional officials from three of the six regions  subject to the ban said they do not collect this information because  the certification form, approved by the Office of Management and  Budget, expired in 1999. Some Forest Service officials said updating  and collecting the form could help prevent and detect illegal timber  export and substitution by providing agency officials with information  about purchasers\u2019 activities. One senior headquarters official,  however, noted that the information provided on the form relies on the  purchaser\u2019s self-certification, making it difficult for agency officials to  verify.", "BLM policy requires agency staff to collect a minimum of two  certification forms for each timber sale. One is to be collected before  the sale is approved, to determine whether the timber sale purchaser  has substituted federal timber for exported unprocessed private timber  within a specified time frame. The other is to be collected after the  harvest is completed and before the contract is terminated, to  determine whether purchasers are exporting BLM timber. Two  additional certification forms may be collected when applicable\u2014one  prior to the sale and the other after the harvest is completed\u2014but are  not required for all sales. We reviewed documentation from a sample  of 22 BLM timber sale contracts that closed in 2017 in the five western  Oregon BLM districts and found that BLM collected the required  certification forms for 21 of the 22 contracts. The remaining contract  file was missing a required form. BLM officials said the missing form  could not be located.", "However, the two certification forms BLM can collect before approving  a timber sale reflect legal requirements that are no longer in effect.  According to the 1997 act, a purchaser may not purchase  unprocessed federal timber if \u201csuch person has, during the preceding  24-month period, exported unprocessed timber originating from  private lands.\u201d However, the two BLM certification forms instruct the  purchaser to provide this information for the preceding 12-month  period. Senior BLM officials acknowledged the inconsistency between  these forms and the current legal requirement. They said that the 12- month time frame specified in the certification forms reflects the BLM  regulations issued to implement the appropriations act export  restrictions in the 1970s.", "Investigating Potential Violations. Both agencies have policies for  investigating potential export violations. The Forest Service\u2019s policy  for investigating export violations states that, upon finding a violation,  the contracting officer should contact law enforcement and prepare a  report about the violation, including any planned follow-up actions.  Forest Service headquarters officials said that it is unclear whether  this policy applies only in cases where export violations have been  substantiated or is to be used in instances where violations are  suspected but not confirmed. BLM headquarters officials said that  their personnel are to use policies detailed in the agency\u2019s standard  contract administration procedures, which cover all timber sale  administration violations, to investigate potential and substantiated  export violations. These procedures provide officials discretion in the  actions they take. For example, the procedures state that \u201cmany such  violations may simply be corrected with good verbal communications  between the BLM and purchaser representatives. Other violations  require more forceful action and complete documentation of such  actions.\u201d", "The agencies differ in the extent to which they define what conduct  constitutes an export violation. Forest Service policies do not define  export; however, its regulations do, stating that export can occur at  any of several points\u2014when a person enters into an agreement to  convey logs to another country, when logs are placed in an export  facility in preparation for shipment outside the United States, or when  logs are placed on a ship, train, or other transport destined for a  foreign country. BLM policies and regulations do not define the term  export or state what constitutes an export violation. Officials from both  agencies said that determining whether a violation has occurred  requires judgment on the part of agency staff. For example, according  to these officials, finding logs in an export facility may constitute a  violation, but would require the agency to determine whether the logs  were being prepared for shipment outside the United States. Officials  from both agencies said they would benefit from a clear definition of  export violation.", "In addition, the agencies do not have up-to-date information about  sourcing areas, which is used to determine substitution violations.  Under the 1997 act, manufacturers may not engage in substitution\u2014 that is, exporting timber from private lands while purchasing federal  timber to supply their mills. However, it is not considered substitution if  a company purchases federal timber from within a particular \u201csourcing  area\u201d and exports nonfederal timber harvested from areas outside the  sourcing area. Sourcing areas outside Washington State are subject  to Forest Service or BLM approval, and the agencies are required by  law to review them at least every 5 years. Forest Service  headquarters officials said they had not reviewed sourcing areas for at  least 20 years, and said that over this time, many timber companies  with approved sourcing areas have gone out of business or no longer  purchase national forest timber. Forest Service headquarters officials  said that they did not maintain lists of sourcing areas, and none of the  six Forest Service regions subject to the ban had information about  sourcing areas. BLM provided us a list of sourcing areas identified by  the Forest Service, but the list dates to 1992. Moreover, many Forest  Service and BLM officials we interviewed said they were unfamiliar  with the concept of substitution and sourcing areas. A few officials  said identifying sourcing areas may no longer be relevant given the  changes in the organizational structure of timber companies and the  resulting lower likelihood of substitution.", "According to the Standards for Internal Control in the Federal  Government, management should implement control activities through  policies, including by periodically reviewing policies, procedures, and  related control activities for continued relevance and effectiveness in  achieving an entity\u2019s objectives or addressing related risks. Forest  Service officials said the agency has not reviewed its policies specific to  export and substitution since the enactment of the 1997 act, largely  because of competing priorities and the officials\u2019 view that the likelihood  of illegal export or substitution is low. Nevertheless, these officials agreed  that it would be beneficial for the Forest Service to review and update its  policies, especially in light of the significant changes to the timber  economy in the past 2 decades. BLM officials said they reviewed the  agency\u2019s export regulations in 2010, but this effort did not include a  review of log export policies. They said they did not believe such a review  would be useful until new regulations are issued, since it is important that  policies conform with regulations. These officials noted that BLM\u2019s  Oregon/Washington State Office updated some of its policies in 2016, but  the officials did not indicate the extent to which the policies were reviewed  for relevance and effectiveness\u2014and, as noted, some BLM policies  appear unclear or are inconsistent with the 1997 act. By reviewing agency  policies and making changes to them as necessary, in accordance with  applicable regulations, the Forest Service and BLM will have better  assurance that their policies are relevant and effective for addressing the  risk of illegal timber export and substitution."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["For 50 years, Congress has restricted the export and substitution of  federal timber from the western United States. Since the restrictions were  put in place, substantial changes to the timber economy have occurred,  and agency officials and stakeholders view the likelihood of illegal timber  export and substitution as low. The Forest Service and BLM have various  regulations, policies, and procedures to carry out the ban. However, the  agencies did not issue new regulations as required by the Forest  Resources Conservation and Shortage Relief Act of 1997 and have not  obtained legislative relief from this requirement. As a result, the agencies  are relying on regulations issued before 1995. Without issuing new  coordinated and consistent regulations or obtaining legislative relief, the  Forest Service and BLM will continue to be out of compliance with the  regulation provisions of the 1997 act.", "Further, some agency policies are outdated or unclear. For example,  Forest Service policy calls for collecting a certification form that expired in  1999, and BLM policy does not clearly define what constitutes a violation  of the export ban. The Forest Service and BLM have not reviewed their  policies for continued relevance and effectiveness, consistent with federal  internal control standards. By reviewing agency policies and making  changes to them as necessary, the Forest Service and BLM will have  better assurance that their policies are relevant and effective for  addressing the risk of illegal timber export and substitution."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations, including two to the Forest  Service and two to the BLM:", "The Chief of the Forest Service should determine whether new  regulations governing timber export and substitution are appropriate.  If the agency determines new regulations are appropriate, it should  issue them in accordance with the 1997 act, in consultation with BLM.  Otherwise, the agency should seek legislative relief from the act\u2019s  requirement. (Recommendation 1)", "The Director of the BLM should determine whether new regulations  governing timber export and substitution are appropriate. If the  agency determines new regulations are appropriate, it should issue  them in accordance with the 1997 act, in consultation with the Forest  Service. Otherwise, the agency should seek legislative relief from the  act\u2019s requirement. (Recommendation 2)", "The Chief of the Forest Service should review agency policies for  continued relevance and effectiveness in addressing the risk of illegal  timber export and substitution, and based on that review\u2014and in  accordance with applicable regulations\u2014should issue new policies as  necessary. (Recommendation 3)", "The Director of the BLM should review agency policies for continued  relevance and effectiveness in addressing the risk of illegal timber  export and substitution, and based on that review\u2014and in accordance  with applicable regulations\u2014should issue new policies as necessary.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to the  Departments of Agriculture and the Interior. The departments provided  written comments, which are reproduced in appendixes I and II of this  report. The Forest Service, responding on behalf of the Department of  Agriculture, stated in its written comments, and in a subsequent e-mail  from the Forest Service audit liaison, that it generally concurred with our  findings and recommendations. The Forest Service stated that it will  coordinate with BLM to determine the next best steps in moving ahead in  administering the export law.", "In its written comments, the Department of the Interior concurred with the  recommendations we directed to BLM. Regarding our recommendation  related to regulations, Interior stated that BLM will review its regulations to  identify inconsistencies with the 1997 act, and if it determines new  regulations are appropriate, will begin consultation with the Forest Service  to maximize consistency between the agencies to minimize the impact to  federal timber purchasers. Regarding our recommendation related to  policies, Interior stated that BLM will review its export and substitution  policies as well as its relevant contracts and forms for any immediate  updates needed to conform with the 1997 act, and will ensure the policies  are updated in conjunction with any new regulations.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretaries of Agriculture and the Interior,  the Chief of the Forest Service, the Director of the BLM, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact me at (202) 512-3841 or fennella@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Steve Gaty (Assistant  Director), Ulana M. Bihun (Analyst-In-Charge), Mark Braza, Justin Fisher,  Richard P. Johnson, and Kyle Stetler made key contributions to this  report. Important contributions were also made by Tara Congdon, Barb El  Osta, Kimberly Gianopoulos, and Dan Royer."], "subsections": []}]}], "fastfact": ["The Forest Service and Bureau of Land Management sell millions of dollars of timber from federal forests each year. Federal law bans buyers from exporting unprocessed timber from western federal lands, along with related practices. Some agency policies to implement the ban are outdated or unclear. The agencies have also not issued required regulations.", "While the agencies found no violations of the ban in the past decade, several officials said there might be a risk of future violations if, for example, log prices go up or demand increases.", "We recommended that the agencies review their regulations and policies related to timber export."]}
{"id": "GAO-18-477", "url": "https://www.gao.gov/products/GAO-18-477", "title": "Strategic Petroleum Reserve: DOE Needs to Strengthen Its Approach to Planning the Future of the Emergency Stockpile", "published_date": "2018-05-30T00:00:00", "released_date": "2018-06-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["More than 4 decades ago, Congress authorized the creation of the SPR to reduce the impact of disruptions in supplies of petroleum products. DOE manages the SPR. As a member of the International Energy Agency, the United States is obligated to maintain reserves equivalent to at least 90 days of the previous year's net imports (imports minus exports). The SPR's storage and related infrastructure is aging, and DOE has plans to modernize these facilities. Since 2015, Congress has mandated crude oil sales. As of March 2018, the SPR held about 665 million barrels of crude oil.", "GAO was asked to examine the SPR's ability to meet U.S. energy security needs. This report examines, among other things, the extent to which (1) DOE has identified the optimal size of the SPR, and (2) DOE's plans for modernizing the SPR take into account the effects of congressionally mandated crude oil sales. GAO reviewed DOE's plans and studies, and interviewed agency officials and nine experts selected based on prior work, referrals, and a literature review."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy (DOE) has not identified the optimal size of the Strategic Petroleum Reserve (SPR). In 2016, DOE completed a long-term strategic review of the SPR after its last comprehensive examination conducted in 2005. The 2016 review examined the benefits of several SPR sizes, but it did not identify an optimal size and its review was limited in several ways. In particular, DOE did not fully consider recent and expected future changes in market conditions, such as the implications of falling net imports, or the role that increased levels of private reserves (reserves held by private companies for their own purposes) may play in responding to supply disruptions. These changes have contributed to SPR and private reserves reaching historically high levels on a net imports basis (see figure). These changes are expected to continue to evolve\u2014according to government projections, the United States will become a net exporter in the late 2020s before again becoming a net importer between 2040 and 2050. GAO has found that agencies should reexamine their programs if conditions change. Without addressing the limitations of its 2016 review and periodically performing reexaminations in the future, DOE cannot be assured that the SPR will be sized appropriately into the future.", "DOE has taken steps to take into account congressionally mandated sales of SPR crude oil in its $1.4 billion modernization plans for SPR's infrastructure and facilities. The SPR is projected to hold 405 million barrels of oil by the end of fiscal year 2027. However, DOE's current plans are based on information analyzed prior to recently mandated sales. According to DOE officials, the agency began a study in March 2018 to assess the effects of these sales on the SPR's modernization. However, this study is not examining all options for handling any excess SPR assets that may be created by currently mandated sales or any additional sales that may be mandated in the future, inconsistent with an agency order on real property asset management that calls for identifying excess assets. For example, DOE does not plan to examine the potential to lease unused SPR storage capacity to the private sector because DOE is not currently authorized to enter into such leases, according to agency officials. If authorized, leasing capacity could generate revenues that could help offset the costs of modernization. By not examining a full range of options, DOE risks missing beneficial ways to modernize the SPR while saving taxpayer resources."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that DOE (1) supplement the 2016 review by conducting an additional analysis, (2) ensure that the agency periodically reexamines the size of the SPR, and (3) consider a full range of options for handling potentially excess assets as it conducts its study, among other things. DOE agreed with two, partially agreed with one, and disagreed with another recommendation on refined product reserve studies. GAO maintains that the recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["More than 4 decades ago, Congress authorized the creation of the  Strategic Petroleum Reserve (SPR)\u2014currently the world\u2019s largest  government-owned stockpile of emergency crude oil\u2014to reduce the  impact of disruptions in supplies of petroleum products. The reserve is  managed by the Department of Energy (DOE) and as of March 2018 held  665.5 million barrels of crude oil, worth about $42 billion. In the decades  since its creation, the structure of the SPR generally has not changed\u2014it  has always held crude oil in salt caverns along the Gulf Coast\u2014though  markets for crude oil and petroleum products\u2014products such as gasoline  and diesel that are refined from crude oil for final consumption\u2014have changed significantly. Throughout most of the SPR\u2019s history, domestic  crude oil production was generally in decline while consumption of  petroleum products was generally increasing, causing the United States  to rely increasingly on imported crude oil and petroleum products.  However, the SPR now operates in a context of increasing U.S. crude oil  production (the United States is now one of the world\u2019s largest crude oil  producers), relatively stable consumption, and shrinking net crude oil and  petroleum product imports. Moreover, whereas the Arab oil embargo of  1973-1974 led to shortages and long lines at gas pumps around the  country, prices now change to accommodate supply and demand so that  physical crude oil shortages are less of a concern than they were in the  1970s when the SPR was created. Meanwhile, as we reported in 2017,  the SPR has primarily been used in response to domestic supply  disruptions, such as those caused by hurricanes. However, the SPR has  been limited in this role because it is almost entirely composed of crude  oil and not petroleum products such as gasoline. As a result, the SPR  may not be effective at mitigating the effects of petroleum product  disruptions such as those that have occurred when hurricanes knocked  out petroleum product refineries or distribution infrastructure. Members of  Congress and others have raised questions about the appropriate size of  the SPR as well as the effectiveness of its current storage and delivery  infrastructure in meeting the nation\u2019s evolving energy security needs.", "According to DOE\u2019s 2014-2018 strategic plan, the SPR benefits the  nation by providing an insurance policy against actual and potential  interruptions in crude oil or petroleum product supplies caused by  international turmoil, hurricanes, accidents, or terrorist activities.  Releasing SPR crude oil during a supply disruption is intended to mitigate  damage to the economy by replacing disrupted crude oil supplies, thereby  reducing price increases that can result in economic damage.", "In addition to helping the United States meet its domestic energy security  needs, the SPR also helps the United States meet its obligations as a  member of the International Energy Agency (IEA)\u2014an international  energy forum of 30 member countries established in 1974 to help  members respond collectively to major energy supply disruptions. Crude  oil and petroleum product markets are global. Therefore, while a release  of crude oil or petroleum products from any country during a supply  disruption can have global benefits, the ability of any individual country to  significantly affect these global markets is limited. To become a member  of the IEA, a country must have, among other things, crude oil or  petroleum product reserves equivalent to 90 days of the previous year\u2019s  net imports and measures in place to ensure it is able to contribute its  share of a collective action initiated in response to a significant global oil  supply disruption. The IEA first established this 90-day minimum reserve  obligation in 1974. The IEA counts both public and private reserves  towards meeting the 90-day reserve obligation, although the United  States has recently met this obligation solely through publicly owned  reserves in the SPR.", "Since 2015, six laws required sales of crude oil from the SPR to fund the  modernization of SPR facilities and other national priorities. Total planned sales are projected to reduce the SPR from 665.5 million barrels  of crude oil in March 2018 to 405 million barrels by the end of fiscal year  2027. These sales have an estimated value of almost $16 billion,  according to Congressional Budget Office documents. Of this estimated  value, sales of up to $2 billion were specifically authorized for the SPR\u2019s  modernization program. The SPR\u2019s infrastructure of facilities, pipelines,  pumps, and other equipment is aging and much of it needs replacement,  according to DOE documents. Since 2014, DOE has developed plans for  modernizing the SPR to address these needs, among other things.", "You asked us to examine the SPR\u2019s ability to meet U.S. energy security  needs and IEA obligations. This report examines (1) how the United  States and other IEA members meet their IEA 90-day reserve obligation  and their obligation to release those reserves in response to a supply  disruption, (2) the extent to which DOE has identified the optimal size and  the potential need for additional petroleum product reserves for the SPR  to meet the United States\u2019 international obligations and energy security  needs, and (3) the extent to which DOE\u2019s plans for modernizing the SPR  take into account the effects of current and potential future  congressionally mandated oil sales.", "To conduct this work, we reviewed reports and studies that we identified  through DOE officials, recommendations by experts and stakeholders,  and sources referenced in DOE publications. We also identified studies  through searching literature databases, including ProQuest, Web of  Science, and SciSearch. Our review included studies by DOE, the U.S.  Energy Information Administration (EIA), and IEA. We interviewed DOE  officials and reviewed our prior work on the SPR. We also interviewed  nine experts and four stakeholders. We identified potential experts and  stakeholders through related GAO reports, recommendations from  government agency officials and other experts, and a literature review.  We selected experts who represent sectors and areas of expertise  including academia, government, energy economics, energy security, and  energy policy. We selected stakeholders who represent a for-profit oil  company, energy consulting groups, and a state agency. Generally, we  asked experts and stakeholders for opinions on the size and configuration  of the SPR, the SPR\u2019s mission, and other options to provide U.S. energy  security. We conducted an analysis to identify areas of agreement and  disagreement. Results are not generalizable but provide examples of a  range of views.", "To compare how the United States and other countries meet their IEA  obligations, we interviewed IEA officials about reserve systems and IEA  obligations. To provide examples, we examined reserve structures in six  countries\u2014Czech Republic, France, Germany, Ireland, Japan, and the  United Kingdom. We selected these countries to ensure representation of  the different types of reserve structures used by IEA members. We  reviewed documents from each country and interviewed officials involved  with the administration of their countries\u2019 reserves. Findings from these  countries are not generalizable to those we did not review. To examine  how the United States historically has met its IEA 90-day reserve  obligation, we analyzed EIA data.", "To examine the extent to which DOE has identified the optimal size and  potential need for additional petroleum product reserves for the SPR, we  reviewed DOE studies and interviewed some of the authors of these  studies. Specifically, we reviewed DOE\u2019s 2016 long-term strategic review  of the SPR, as well as studies and analyses conducted as part of the  2016 review. We also estimated days of U.S. net import protection for  2017 and 2027 using DOE\u2019s estimates of the SPR\u2019s size, IEA data on  days of net import protection, and EIA\u2019s 2017 Annual Energy Outlook forecast data on net oil imports. We compared those estimates to the IEA  90-day reserve obligation. To assess the reliability of these data, we  reviewed relevant documentation, interviewed officials, and compared the  data with similar data published in other sources. We determined these  data to be sufficiently reliable for the purposes of our reporting objectives.", "To examine the extent to which DOE\u2019s modernization plans for the SPR  have taken into account the effects of congressionally mandated oil sales,  we reviewed documentation on the SPR\u2019s modernization, including plans  and analysis of alternatives. We also reviewed our best practices for  analysis of alternatives, when we examined DOE\u2019s analysis of  alternatives for the SPR\u2019s modernization. We reviewed the Energy Policy  and Conservation Act that authorizes the SPR, DOE annual reports on  SPR activities, and DOE budget justifications for fiscal years 2017, 2018,  and 2019. We interviewed DOE\u2019s contractor that maintains SPR sites to  obtain views on any challenges in moving forward with modernization  plans and meeting congressionally mandated sales. We also interviewed  representatives from a private salt cavern company, government officials  from two IEA member countries, and a representative from a private  company that leases oil (an oil broker) to identify potential alternatives,  and views on these alternatives, for using potential excess SPR assets  after congressionally mandated sales. We compared DOE\u2019s plans for  the SPR, including supporting documentation, to the agency\u2019s real  property asset management order.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Changing Petroleum Markets", "paragraphs": ["Oil and petroleum products markets have changed substantially in the  years since the establishment of the SPR. Specifically, U.S. domestic  crude oil production has generally been increasing, consumption has  been relatively stable, and crude oil and petroleum products markets  have become increasingly global. Additionally, U.S. crude oil production is  projected to rise further in the future, according to EIA and IEA  projections, further reversing a decades-long decline. Recent  technological improvements have made onshore production from shale  formations economically viable, and domestic crude oil production began  to rise in about 2008. The combination of increasing production and  relatively stable consumption has resulted in declining net crude oil and  petroleum products imports, from a high of about 12 million barrels per  day in 2005 to fewer than 4 million barrels per day in 2017.", "Since these trends are expected to continue, the IEA and EIA both project  net U.S. crude oil and petroleum products imports will decline to zero  sometime in the late 2020s and the United States will become a net  exporter shortly thereafter. Since the IEA 90-day reserve obligation is  based on a country\u2019s net imports, there is no such obligation for net  exporters; therefore, the United States would have no 90-day reserve  obligation as long as it is a net exporter, though it would still be obligated  to release reserves in response to supply disruptions. Over the longer  term, EIA\u2019s projections show U.S. net exports peaking in 2037 and the  United States again becoming a net importer between 2040 and 2050.", "At the time of the Arab oil embargo, price controls in the United States  prevented the prices of oil and petroleum products from increasing as  much as they otherwise might have, contributing to a physical oil shortage  that caused long lines at gasoline stations throughout the United States.  In addition, in the 1970s, oil prices were often set in long-term contracts,  which meant that prices would not automatically rise in the face of greater  scarcity. This generally reduced incentives for producers to expand  production and sales as well as for consumers to reduce consumption in  the face of greater scarcity caused by a supply disruption. Now that crude  oil and petroleum product markets are global, the prices of these  commodities are determined in the world market, primarily on the basis of  supply and demand. In the absence of long-term contracted prices or  price controls, scarcity from a supply disruption is generally expressed in  the form of higher prices, as purchasers are free to bid as high as they  are willing to pay to secure oil supply. In a global market, a large enough  supply disruption anywhere in the world raises prices everywhere. This  creates incentives for producers unaffected by the disruption to increase  their production and release existing inventories and for consumers  everywhere to reduce consumption in the ways they find most efficient  and least disruptive. While it can take time for some of these actions to  affect crude oil and petroleum product markets\u2014according to DOE  officials, it can take approximately 6 months from when a producer drills  an oil well until oil production comes on line\u2014all these actions tend to  mitigate the effects of supply disruptions."], "subsections": []}, {"section_title": "Strategic Petroleum Reserve", "paragraphs": ["The Energy Policy and Conservation Act of 1975 authorized the creation  of the SPR, partly in response to the Arab oil embargo of 1973-1974 that  caused a shortfall in the international oil market. The purposes of the  SPR are, among other things, to reduce the impact of disruptions in  supplies of petroleum products and to carry out obligations of the United  States under the international energy program. Specifically, the 1974  International Energy Program Agreement, a joint strategy and treaty,  established the IEA to address oil security issues on an international  scale. The SPR is owned by the federal government, managed by  DOE\u2019s Office of Petroleum Reserves, and maintained by Fluor Federal  Petroleum Operations LLC. The SPR stores crude oil in underground  salt caverns along the Gulf Coast in Louisiana and Texas. The SPR  currently maintains four storage sites\u2014Bayou Choctaw, Big Hill, Bryan  Mound, and West Hackberry\u2014with a design capacity of 713.5 million  barrels.", "Under conditions prescribed by the Energy Policy and Conservation Act,  as amended, the President has discretion to authorize the release of  petroleum products from the SPR to minimize significant supply  disruptions. When oil is released from the SPR, it is distributed through  commercial pipelines or on waterborne vessels to refineries, where it is  converted into gasoline and other petroleum products, and then  transported to distribution centers for sale to the public.", "According to DOE documents, well-functioning infrastructure is  fundamental to the SPR\u2019s ability to maintain operational readiness and  meet mission requirements. However, most of the critical infrastructure for  moving SPR oil has exceeded its serviceable life, which has led to  increasing maintenance costs and decreasing system reliability.  Specifically, the reserve relies on a complex system of salt caverns,  pipelines, wells, and pumps, with other infrastructure and equipment. Any  failures, such as ruptured pipelines, could affect the readiness of a site for  an oil release. According to DOE officials, a growing backlog of major  maintenance needs raises concerns about the ability of the system to  operate as designed. In addition, there have been equipment failures that  have rendered parts of the system temporarily inoperable. For example,  the SPR has experienced at least five major equipment failures since  fiscal year 2013, including the Big Hill site pipe failure shown in figure 1."], "subsections": []}, {"section_title": "Regional Petroleum Product Reserves", "paragraphs": ["The United States has two regional petroleum product reserves\u2014the  Northeast Home Heating Oil Reserve and the Northeast Gasoline Supply  Reserve.", "The Northeast Home Heating Oil Reserve, which is not part of the  SPR, holds 1 million barrels of ultra low sulfur distillate, a petroleum  product essentially equivalent to diesel fuel but that is also used for  heating oil. The Northeast United States is heavily dependent on the  use of heating oil in winter months. The distillate is stored in leased  commercial tank storage in terminals in Connecticut, Massachusetts,  and New Jersey. In 2000, the President directed the creation of the  reserve to hold approximately 10 days of inventory, the time required  for ships to carry additional heating oil from the Gulf of Mexico to New  York Harbor.", "The Northeast Gasoline Supply Reserve, a part of the SPR, holds 1  million barrels of gasoline for consumers in the northeastern United  States. According to DOE\u2019s website, this region is particularly  vulnerable to gasoline disruptions as a result of hurricanes and other  natural events. For example, Hurricane Sandy caused widespread  gasoline shortages in the region in 2012. DOE conducted a test sale  of the SPR in 2014 and used a portion of the proceeds from the sale  to create the reserve. The gasoline is stored in leased commercial  tank storage in terminals in Maine, Massachusetts, and New Jersey."], "subsections": []}, {"section_title": "IEA Obligations", "paragraphs": ["The SPR helps the United States meet its IEA obligation to hold the  equivalent of 90 days of net imports of crude oil and petroleum products.  In order to meet the IEA 90-day reserve obligation, countries, including  the United States, can count existing private reserves of crude oil and  petroleum products in addition to public reserves (in the United States,  the SPR). In most years, the United States has met its 90-day reserve  obligation with a combination of SPR and private reserves. The days of  import protection may vary based on actual net U.S. crude oil and  petroleum products imports as well as the inventory levels of the SPR and  private reserves. As discussed previously, because the IEA 90-day  reserve obligation is based on a country\u2019s net imports, there is no such  reserve obligation for countries that are net exporters of crude oil and  petroleum products.", "The United States also relies on the SPR to meet its IEA obligation to  release reserves in the event of a collective action to respond to a supply  disruption. Countries contribute to an IEA collective action based on their  share of IEA oil consumption, and they can meet their obligation by  whatever measure they choose, including release of public or private reserves, or demand restraint. IEA collective actions are designed to  mitigate the negative effects of sudden supply shortages by making  additional crude oil and petroleum products available to the global market  through a combination of emergency response measures, which include  increasing supply and reducing demand. In the event of a global market  disruption, IEA member countries can call for a collective action after  reaching consensus on whether a response is needed. DOE stated that  the collective action IEA obligation is more relevant to the SPR\u2019s mission  of protecting the U.S. economy from severe petroleum supply  interruptions than the 90-day reserve obligation. The United States has  participated in each of the three IEA collective actions. In 1991, with the  commencement of Operation Desert Storm, DOE released 17.3 million  barrels of SPR crude oil. After Hurricane Katrina in 2005, DOE released  11 million barrels of SPR crude oil. Most recently, in June 2011, in  response to crude oil supply disruptions driven by hostilities in Libya,  DOE released 30.6 million barrels of crude oil from the SPR. The Libya  collective action is an example of how, in practice, member countries  participate according to national circumstances. After consultations with  IEA member countries, all IEA member countries agreed to the Libya  collective action, under which 12 of the 28 members at that time  contributed to the action. In addition to the three IEA collective actions,  the SPR has been used 10 times in response to U.S. domestic supply  disturbances that were not IEA collective actions, most notably in  response to severe weather events."], "subsections": []}]}, {"section_title": "In Contrast with the United States, Most IEA Members Rely on Private Reserves to Meet Reserve Obligations and Hold Significant Proportions of Their Reserves as Petroleum Products", "paragraphs": ["In terms of how they meet their IEA obligations, most other IEA members  differ from the United States in two basic ways. Specifically, as of  December 2017, most IEA members rely at least in part on private rather  than public reserves to meet their obligations, and most hold significant  proportions of these reserves as petroleum products rather than as crude  oil.", "In December 2017, before Mexico joined the IEA in early 2018, there  were 29 member countries. Of these 29 countries, 25 IEA members had  two common attributes: (1) as net importers, they had a 90-day reserve  obligation and met that obligation, and (2) they had formal processes for  holding and releasing these reserves. As of December 2017, 18 of these  25 members relied entirely or in part on private reserves to meet their  reserve obligations. Specifically, based on IEA data as of December  2017, these 18 countries met their 90-day reserve obligation through  private reserves and either had no public reserves or had public reserves  of less than 90 days. According to a 2014 IEA report, some of these  countries require industry to hold reserves and, when needed, release  them. For example, according to a 2014 IEA report and documentation  provided by government officials, the United Kingdom meets its entire  obligation by requiring private industry to hold reserves. In contrast,  New Zealand had publicly held reserves amounting to 26 days of net  imports, according to IEA data as of December 2017. According to a 2014  IEA report, New Zealand relied on industry reserves held for commercial  purposes to meet the rest of its 90-day reserve obligation, although New  Zealand does not formally require industry to hold reserves specifically for  this purpose.", "Unlike the 18 countries that rely at least in part on private reserves, as of  December 2017, the United States and 6 other IEA members met the 90- day reserve obligation exclusively through public reserves. Specifically,  according to IEA data on member reserves, Estonia, Finland, Germany, Hungary, Ireland, Japan, and the United States held public reserves  equal to 90 days or more of net imports. Although the United States  currently meets its IEA 90-day reserve obligation solely with public  reserves, for most of the SPR\u2019s existence, public reserves were  insufficient to meet this obligation, so the United States also had to rely  on private reserves. Specifically, according to EIA data, the United States  has relied, at least in part, on private reserves together with the SPR to  meet the 90-day reserve obligation with the exception of two time periods  (1984-1987 and 2012-present), when the United States has relied solely  on the SPR. The United States does not require industry to hold reserves  for the purposes of meeting IEA obligations. Figure 2 compares the  United States\u2019 reserves in days of net imports to the IEA\u2019s 90-day reserve  obligation.", "According to a 2014 IEA report, most IEA members hold at least a third of  their reserves as petroleum products, such as gasoline and diesel fuel,  rather than as crude oil. Holding petroleum products can be  advantageous during certain disruptions because such reserves can be  directly distributed to consumers, whereas crude oil must first be refined  and turned into products, adding response time. According to the IEA\u2019s  2014 report, Germany\u2019s stockholding agency holds 55 percent of its  reserve as petroleum products. Similarly, France holds only petroleum  products that are distributed geographically across the country so that the  reserves can be used quickly in the event of a supply disruption. In  contrast, more than 99 percent of the SPR (665.5 million barrels as of  March 2018) is held as crude oil, all of which is stored at the four storage  sites in Louisiana and Texas. The exception is the Northeast Gasoline  Supply Reserve, which, as mentioned previously, is a 1 million barrel  gasoline reserve in terminals in Maine, Massachusetts, and New Jersey  that was established in 2014 after Hurricane Sandy and that is considered  part of the SPR. According to DOE officials, there are several reasons the  SPR holds predominantly crude oil, including that it is more costly to store  petroleum products than crude oil and that the United States has the  largest refining capacity of any IEA member country. Because of the large  U.S. refining sector, crude oil from the SPR can be domestically refined  into petroleum products to meet demand.", "Some IEA member countries store some of their reserves abroad, though  the United States does not. According to a 2014 IEA report, some IEA  member countries allow part of their reserves to be stored abroad to  leverage spare storage capacity or more cost-effective storage by utilizing  available storage space or excess private reserves in other countries.  For example, approximately 30 percent of Ireland\u2019s reserves are held in  other European Union countries. In some of these cases, countries use  short-term contracts, also known as tickets, instead of directly acquiring  and storing oil and petroleum products. For example, according to  documents provided by government officials, since 1995 the United  Kingdom has increased its reserves held under ticket agreements outside  of the country from around 10 percent of its total reserves to more than 25  percent.", "In addition, unlike the United States, some IEA countries specify the size  of their public or private reserves in terms of net imports or consumption,  rather than a specific volume. In the United States, the total volume of  crude oil and petroleum products held in the SPR is the result of amounts  historically purchased to fill the reserve and subsequent sales as  mandated by Congress or released in response to a supply disruption.  According to DOE, it cannot otherwise reduce or increase volumes held in  reserve without congressional action\u2014either through requirements to  purchase additional oil or laws authorizing or mandating sales. On the  other hand, some IEA countries have tied their reserves\u2019 volumes of  crude oil and petroleum products to a metric such as days of net imports  or a percent of consumption. For example, according to documentation  provided by government officials, in 2015 Japan changed how it specifies  its target reserves from a specified amount to days of net imports. In  specifying the size of reserves in this way, the amount held is adjusted as  market conditions change\u2014for example, if net imports change and  require more or fewer reserves to meet the IEA 90-day reserve obligation,  or when other underlying factors affecting a nation\u2019s energy security  needs change."], "subsections": []}, {"section_title": "DOE Has Not Identified the Optimal Size for the SPR or the Potential Need for Regional Product Reserves", "paragraphs": ["While DOE has examined a range of sizes for the SPR, it has not  identified the optimal size for the SPR to meet U.S. energy security needs  and IEA obligations, and DOE\u2019s analysis of SPR sizes was limited in  three ways. DOE also has not identified whether additional regional  petroleum product reserves should be part of the SPR in U.S. regions  identified as vulnerable to fuel supply disruptions."], "subsections": [{"section_title": "DOE Examined a Range of Sizes for the SPR but Has Not Identified the Optimal Size for SPR and the Agency\u2019s Analysis Was Limited in Three Ways", "paragraphs": ["DOE has not identified the optimal size for the SPR and though the  agency examined a range of SPR sizes, its analysis was limited in at  least three ways. In response to direction from Congress and  recommendations from GAO and the DOE Inspector General, DOE  developed and published a long-term strategic review of the SPR in  August 2016. In DOE\u2019s 2016 review, the agency examined the expected  economic benefits of SPR sizes ranging from 430 million to 695 million  barrels of oil over a 25-year time horizon (2016 through 2040), but it did  not recommend an optimal size for the reserve.", "DOE\u2019s review did not identify the optimal size for the SPR because of  three limitations:", "DOE did not fully evaluate implications of market fluctuations  and estimate needs. DOE did not fully evaluate the implications of  falling net imports of crude oil and petroleum products with respect to  meeting IEA obligations to hold the equivalent of 90 days of net  imports and to respond to collective actions. As mentioned previously,  the United States is expected to become a net exporter of crude oil  and petroleum products by the late 2020s. Since the IEA 90-day  reserve obligation is based on a country\u2019s net imports, this means that  at that point the United States would not have a 90-day reserve  obligation. However, even as a net exporter, the United States would  still have to meet the IEA obligation to respond to a collective action.  Yet, DOE\u2019s analysis did not evaluate the SPR\u2019s configuration as it  relates to projected fluctuations in net imports or estimate the minimal  amount of reserves needed to meet potential future collective actions.  Without considering projected fluctuations in net imports or providing  an analysis of how much oil is estimated to be needed to meet IEA  collective actions, DOE cannot fully advise Congress on the optimal  size of the SPR.", "DOE did not consider private-sector response. DOE\u2019s analyses in  its 2016 review focused on the publicly held reserves in the SPR as  the only means to respond to oil supply disruptions and did not  consider a response from the private sector or through consumers  reducing demand. According to DOE\u2019s 2016 review, the underlying  analysis for the benefits of the SPR did not consider a response from  the private sector for three reasons: (1) while U.S. commercial stocks  could conceivably address part of a supply disruption, private industry  could also hold oil inventories in a crisis instead of releasing them; (2)  unlike most other IEA member countries, the United States does not  require private-sector response; and (3) research on the exact nature  of private-sector response during a disruption is needed. DOE officials  told us the agency has not studied the extent to which SPR releases  of crude oil displace what would otherwise have been private releases  of inventories.", "As we reported in September 2014, changing market conditions\u2014 most importantly the significant increase in domestic production of  oil\u2014have implications for the SPR\u2019s size because increased  production has led to increasing private reserves. According to IEA  data as of December 2017, U.S. private reserves held the equivalent  of 194 days of net import protection coverage, up from about 59 days  in 2006. Further, private reserves in the United States consist of both  crude oil and petroleum products with more than half in the latter  category. For example, as of January 2018, total private reserves of  crude oil and petroleum products were about 1.215 billion barrels, of  which about 420 million barrels were in the form of crude oil and 795  million barrels were petroleum products, according to the EIA. As of  2013, these private reserves were distributed across the entire  country in more than 1,400 terminals, according to the EIA.", "As we reported in December 2007, international trade in oil and  petroleum products has expanded significantly over the past 2  decades, making markets for gasoline and other petroleum products  increasingly global in nature. In such a global oil market, higher  levels of private reserves can benefit the United States and the rest of  the world by helping mitigate a supply disruption. Most experts and  stakeholders we interviewed generally agreed that the private sector  is in a better position to respond to supply disruptions than they were  when the SPR was created. With regard to demand response, DOE  officials told us they do not consider this because there is no  mechanism to require industry to respond to supply disruptions or  consumers to reduce demand in response to a supply disruption.  However, DOE has not studied how voluntary response to changes in  petroleum product prices affects the need for or efficacy of strategic  releases. Without conducting an analysis of how private parties  respond to supply disruptions, DOE cannot advise Congress on the  optimal size of the SPR because it cannot know how effective such  private responses could be in mitigating supply disruptions.", "DOE did not fully examine costs of differently sized reserves.", "DOE\u2019s review of the expected economic benefits of differently sized  reserves did not fully examine the corresponding costs of those sizes.  According to DOE officials, there was no requirement or need to  conduct a formal cost benefit analysis of the SPR because the SPR\u2019s  oil acquisition and initial capital costs to create the reserve are sunk  costs and the ongoing operational costs to maintain the reserve are  minimal in comparison. However, this does not take into account the  opportunity cost to the government that holding reserves represents;  as Congress has mandated several times recently, crude oil from the  reserve can be sold to fund other federal priorities. Without additional  analysis, such as of the costs and benefits of SPR\u2019s size, DOE cannot  fully advise Congress on the optimal size of the SPR.", "When we reviewed the SPR in 2006 and 2014, we found that DOE had  not periodically re-examined the strategic reserves. In 2006, we  recommended that the Secretary of Energy reexamine the appropriate  size of the SPR. In its response to our recommendation, DOE stated that  its reexamination had taken the form of more \u201cactionable items,\u201d including  not requesting expansion funding in its 2011 budget and canceling and  redirecting the prior year\u2019s expansion funding to general operations of the  SPR, based on the Administration\u2019s decision that the SPR\u2019s current size  at the time was adequate. Similarly, as previously mentioned, in 2014 we  found that changing market conditions have implications for the size,  location, and composition of the SPR, but DOE had not reexamined the  SPR\u2019s size since 2005. Accordingly, we recommended that the Secretary  of Energy undertake a comprehensive reexamination of the appropriate  size of the SPR. In response to our recommendation, the 2014 DOE  Inspector General recommendation mentioned previously, and the  Bipartisan Budget Act of 2015, DOE published its 2016 review.", "As previously mentioned and reported, crude oil and petroleum markets  are constantly changing, but DOE conducted its full evaluations of the  SPR more than a decade apart. According to DOE officials, there is no  formal policy to periodically reevaluate the SPR. We previously found that  federal programs should be reexamined if there have been significant  changes in the country or the world that relate to the reason for initiating  the program. In that report, we found that many federal programs and  policies were designed decades ago to respond to trends and challenges  that existed at the time of their creation. Moreover, the Office of  Management and Budget Circular A-94 for benefit-cost analysis of federal  programs includes guidelines that apply to any analysis used to support  government decisions to initiate, renew, or expand programs or projects  that would result in a series of measurable benefits or costs extending for  3 or more years into the future. Given changing market conditions and  future projections, without conducting additional analysis to supplement  its 2016 review and thereafter periodically reexamining the SPR to take  into account changes in market conditions and include a thorough  consideration of the costs and benefits of a wide range of SPR sizes,  DOE cannot provide information to Congress to inform decisions about  the appropriate size of the SPR and risks holding too much or too little in  the SPR to meet the United States\u2019 evolving energy security needs and  IEA obligations."], "subsections": []}, {"section_title": "DOE Has Not Identified Whether Additional Regional Petroleum Product Reserves Should Be Part of the SPR", "paragraphs": ["DOE has also not fully identified whether additional regional petroleum  product reserves should be part of the SPR. Because the SPR stores oil  nearly exclusively along the Gulf Coast, the SPR is configured primarily to  respond to global oil supply disruptions. However, as we reported in  November 2017, the SPR has primarily been used in response to  domestic disruptions. The SPR is limited in its ability to respond to  domestic disruptions because reserves are almost entirely composed of  crude oil and not refined petroleum products, which may not be effective  in responding to disruptions that affect the refining sector. For example,  as we reported in November 2017, Hurricanes Harvey, Irma, and Maria  damaged infrastructure and property, caused the loss of life, and  disrupted the operations of refineries representing at least 15 percent of  the nation\u2019s refining capacity. DOE has identified regions subject to  product supply vulnerabilities as shown in Figure 3.", "The Quadrennial Energy Review of 2015 recommended that the agency  analyze the need for additional or expanded regional product reserves by  undertaking updated cost-benefit analyses for all of the regions of the  United States that have been identified as vulnerable to fuel supply  disruptions. In response to this recommendation, DOE studied the costs  and benefits of regional petroleum product reserves in the West Coast  and Southeast Coast. According to DOE officials, weather events in the  Southeast Coast are of higher probability but lower consequence, and  events in the West Coast are of lower probability but higher consequence.  DOE did not finalize its 2015 studies on regional petroleum product  reserves and make them publicly available. However, the draft 2015  studies concluded that a product reserve in the Southeast would provide  significant net economic benefits to the region and the United States,  particularly in the event of a major hurricane, while further analyses are  needed to determine the potential benefits of a reserve on the West  Coast. A prior DOE study also suggests that petroleum product  reserves merit consideration\u2014in 2011, DOE carried out a cost-benefit  study of the establishment of a refined product reserve in the Southeast  and estimated that such a reserve would reduce the average gasoline  price rise by 50 percent to 70 percent in the weeks immediately after a  hurricane landfall, resulting in consumer cost savings, according to the  Quadrennial Energy Review of 2015. According to DOE officials, the  agency has no plans to conduct additional studies. DOE\u2019s 2016 review of  the SPR did not fully assess whether there is a need for additional  regional product reserves in other U.S. regions identified as vulnerable to  fuel supply disruptions, as recommended by DOE\u2019s studies and the 2015  Quadrennial Energy Review. Without completing studies on the costs and  benefits of regional petroleum product reserves for all the vulnerable U.S.  regions and publicly releasing the results, DOE cannot ensure that it and  Congress have the information they need to make decisions about  whether additional regional product reserves are needed."], "subsections": []}]}, {"section_title": "DOE Has Taken Steps to Update Its Modernization Plans, But Is Hindered by Uncertainty Regarding the SPR\u2019s Long-term Size DOE Has Taken Steps to Update Its Modernization Plans for Currently Mandated Sales", "paragraphs": ["DOE has taken steps to take into account the effects of congressionally  mandated oil sales in its plans for modernizing the SPR, though DOE\u2019s  current plans are based on information largely developed prior to the  most recent congressionally mandated oil sales. According to DOE, the  SPR modernization program is focused on a life extension project to  modernize aging infrastructure to ensure the SPR will be able to meet its  mission requirements for the next several decades. The project\u2019s scope of  work has undergone several revisions since its inception in response to  changing conditions and requirements, according to the agency. DOE  has estimated the total cost for the SPR\u2019s modernization at up to $1.4  billion. DOE raised about $323 million for modernization through the sale  of SPR oil in fiscal year 2017, and the Consolidated Appropriations Act of  2018 provided that DOE is to draw down and sell an amount of crude oil  not to exceed $350 million for modernization in fiscal year 2018. As of  the end of February 2018, DOE has spent $22 million on modernization  efforts and the additional funds will allow DOE to continue moving forward  with the project, according to agency officials. According to DOE\u2019s  modernization plans, the first major construction is scheduled for fiscal  year 2019. However, these plans are largely based on information DOE  analyzed before recent congressionally mandated sales of an additional  117 million barrels of oil.", "Since the most recent mandated sales, DOE has taken steps to update  its modernization plans and has changed its assumptions for SPR\u2019s  modernization. For example, DOE now assumes that the reserve will hold  about 405 million barrels of oil and that one of the four SPR sites may  close after congressionally mandated sales are completed at the end of  fiscal year 2027, according to agency officials. However, DOE has not  fully updated the SPR\u2019s modernization plans based on these  assumptions. According to DOE officials, in March 2018, DOE  commenced a study\u2014the SPR post-sale configuration study\u2014to examine  potential future reserve configurations. This study is to take into account  the effects of congressionally mandated sales on the reserve and its  modernization, and is targeted for completion in October 2018, according  to agency officials. Information from the study will inform DOE\u2019s updates  to the SPR\u2019s modernization plans, according to DOE officials.", "As part of its post-sale configuration study, DOE plans to examine how  the agency may handle the potentially excess SPR facilities created by  the mandated sales. In January 2017, the SPR had a design capacity to  hold 713.5 million barrels of oil and actually held 695 million barrels. As  shown in figure 4, without action by DOE to reduce the SPR\u2019s design  capacity or otherwise use SPR facilities, congressionally mandated sales  will cause excess storage capacity to grow to 308 million barrels or more  by the end of fiscal year 2027\u2014meaning that about 43 percent of the  SPR\u2019s total design capacity to store oil would be unused.", "DOE plans to explore some options to use these potentially excess SPR  assets in its ongoing post-sale configuration study. In withdrawing oil to  meet congressionally mandated oil sales currently in place (290 million  barrels through fiscal year 2027), DOE could close at least one SPR site  based on our analysis of projected excess storage capacity. For example,  if DOE were to close the smallest SPR site, Bayou Choctaw, the agency  could also explore selling the connected pipeline and marine terminal,  which are currently being leased to a private company. DOE could also  consider leasing excess storage capacity to other countries so that they  could store oil at the SPR. DOE has not entered into any such leases  with other countries and has not considered such leases because,  according to DOE, the SPR has historically lacked capacity to store  additional oil. DOE has not proposed any of these options or explored the  revenue the agency could generate by selling or leasing these assets.  According to DOE officials, the agency will examine the feasibility of such  options in the ongoing SPR post-sale configuration study."], "subsections": [{"section_title": "Uncertainty Has Hampered DOE\u2019s Efforts to Account for Potential Future Mandated Sales", "paragraphs": ["As DOE takes steps to plan for the SPR\u2019s modernization, ongoing  uncertainty regarding the SPR\u2019s long-term size and configuration have  complicated DOE\u2019s efforts. According to DOE officials, this uncertainty  makes it extremely difficult to effectively perform any mid-to long-range  planning efforts for the SPR\u2019s modernization project, including the  execution of major maintenance projects. Congress has generally set the  SPR\u2019s size by mandating purchases or sales of oil, and has established  and amended the minimum size of the SPR as it pertains to the release of  oil for emergency protection. Since 2015, Congress has, across six  pieces of legislation, mandated 290 million barrels in additional oil sales.  However, DOE developed its modernization plans in 2016. DOE officials  told us they do not know whether additional sales will be mandated over  the next 10 years or whether other changes may be required to the  configuration of the reserve. Any additional congressionally mandated  sales or direction to pursue additional petroleum product reserves would  require DOE to again revisit its modernization plans and assessments of  the potential uses of any excess SPR assets. Oil market projections also  have implications for the future of the SPR. Under current projections, the  United States may fluctuate between being a net importer and net  exporter over the next several decades. Specifically, the United States is  projected to become a net exporter by the late 2020s and would then no  longer have a 90-day reserve obligation, but it is projected to return to  being a net importer between 2040 and 2050. These projected  fluctuations could affect the desired size of the SPR in the future. This  uncertainty creates risks for DOE\u2019s modernization plans, as DOE may  end up spending funds on facilities that later turn out to be unnecessary  should Congress ultimately decide on a larger- or smaller-sized SPR than  DOE anticipates.", "Having a long-term target for the size and configuration of reserves helps  other IEA member countries manage their reserves. For example, as  previously discussed, unlike the United States, some other IEA members  have specified in dynamic terms the amount of reserves to be held, such  as days of net import protection or days of consumption, rather than  specifying a specific static volume amount. Under such approaches, the  amount held varies over time as entities managing the reserve acquire or  sell reserves in order to meet the target. Setting a long-term target for the  size and configuration of the SPR\u2014taking into account projections for oil  production, consumption, and IEA obligations\u2014could better position DOE  to ensure that funds spent on the SPR\u2019s modernization do not modernize  a system that is no longer needed and that DOE is able to adequately  plan for potentially excess SPR assets.", "In the course of our work, we also identified other options for handling  potentially excess SPR assets that DOE is not planning on examining,  largely because DOE does not currently have the authority to pursue  them, according to agency officials. First, DOE could explore leasing  storage capacity to private industry. U.S. oil production has generally  increased over the last decade. As a result, the private sector may want  to lease excess SPR capacity, which may be cheaper than above-ground  storage, according to a representative of a private company we spoke  with. Fees for doing so could help defray public reserve storage costs.  However, officials told us that the Energy Policy and Conservation Act  gives DOE authority to lease underutilized storage to other countries, but  not to the private sector. Second, if Congress determines that the SPR  holds oil in excess of that needed domestically, DOE could explore selling  contracts or tickets for the excess oil rather than selling the oil outright.  Australian and New Zealand officials told us that if DOE were to sell  tickets for SPR oil, tickets would help these countries meet their IEA 90- day reserve obligations. Australian officials told us they have discussed  this option with DOE. Currently the United States and Australia have  agreed, through an arrangement, to allow Australia to contract for  petroleum stocks located in the United States and controlled by  commercial entities. According to DOE officials, the arrangement would  permit Australia to receive credit from the IEA for tickets it purchases from  the U.S. private sector. While the arrangement does not cover  government-owned oil in the SPR, if it did, based on our analysis, DOE  could generate up to approximately $15 million annually if Australia  purchased the maximum allowable amount of oil specified in an  arrangement through tickets for excess SPR oil. However, although the  Energy Policy and Conservation Act allows DOE to lease underutilized  storage to other countries, DOE lacks the authority to sell tickets and  does not plan to seek this authority, according to DOE officials. DOE  officials told us that they do not plan to examine these options.", "According to DOE\u2019s real property asset management order, the agency is  to identify real property assets that are no longer needed to meet the  program\u2019s mission needs and that may be candidates for reuse or  disposal. Once identified, the agency is to undertake certain actions,  including determining whether to dispose of these assets by sale or lease.  As part of its SPR post-sale configuration study, DOE plans to determine  whether it is appropriate to close SPR facilities, and the relative benefit of  any closures would be informed by potential lease revenues from  maintaining sites so they could be leased, according to officials. However,  without examining a full range of options in the post-sale configuration  study, DOE risks missing beneficial ways to modernize the SPR while  saving taxpayer resources."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given changing crude oil and petroleum product market conditions and  the constrained budget environment, it is important that DOE ensures the  SPR is effective at meeting U.S. energy security needs and IEA  obligations while being managed and maintained in an efficient manner.  In response to congressional direction and recommendations from GAO  and DOE Inspector General, DOE conducted a long-term strategic review  of the SPR in 2016 after its last comprehensive examination in 2005. In  its review, DOE did not determine an optimal size for the SPR, and its  analysis was limited in several ways. In particular, DOE did not fully  consider recent and expected future changes in crude oil and petroleum  market conditions such as the implications of projected fluctuations in  U.S. net imports or the role that increased levels of private reserves could  play in responding to supply disruptions. DOE also did not perform a full  cost-benefit analysis of holding different volumes of reserves. Without  supplementing its 2016 strategic review by conducting additional analysis, and periodically conducting such analyses going forward, DOE cannot  provide information to Congress to inform decisions about the appropriate  amounts of crude oil and petroleum products to hold in the SPR and risks  holding too much or too little in the SPR to meet the United States\u2019 energy  security needs and international obligations. Such information is needed  on a timely basis, to reflect the pace of change in oil and petroleum  markets and other relevant factors that affect the optimal size of the SPR.", "Though the SPR has primarily been used in response to domestic supply  disruptions, such as hurricanes, the reserve is limited in this role because  it is almost entirely composed of crude oil, and not petroleum products. In  this regard, the Quadrennial Energy Review of 2015 recommended that  DOE analyze the need for additional regional product reserves for U.S.  regions that have been identified as vulnerable to fuel supply disruptions.  DOE has not identified whether additional regional product reserves  should be part of the SPR or completed studies of all vulnerable U.S.  regions, and it has no plans to do so, according to DOE officials. Without  conducting or completing studies for all the vulnerable U.S. regions and  releasing the results, DOE cannot ensure it and Congress have the  information they need to make decisions about potential additional  regional product reserves.", "In the face of declining net U.S. imports, Congress has taken repeated  steps to reduce the size of the reserve. Given that net imports are  projected to continue to decline through the late 2020s and fluctuate in  the future, there may be additional congressionally mandated SPR oil  sales. This has created long-term uncertainty regarding the future size  and configuration of the SPR. Congress could address this uncertainty by  identifying a long-term target for the size of the SPR\u2014either by volume or  in terms tied to factors, such as consumption or net import protection, that  affect the country\u2019s energy security needs and IEA obligations. Setting  such a long-term target could better position DOE to ensure the efficiency  and efficacy of federal funds spent on the reserve.", "DOE has recently begun to study the potential effects of congressionally  mandated sales on its modernization plans. As part of its SPR post-sale  configuration study, DOE plans to determine whether it is appropriate to  close SPR facilities, and the relative benefit of any closures would be  informed by potential lease revenues from maintaining sites so they could  be leased, according to officials. However, we identified other options for  handling potentially excess SPR assets that DOE is not planning to  examine in its study, inconsistent with the agency\u2019s order on real property  asset management. Although DOE does not currently have the authority  to implement these options, according to officials, examining their  potential use, including possible revenue enhancement, could inform  Congress as it examines whether it should grant such authority. Without  examining a full range of options in the post-sale configuration study for  handling potentially excess SPR assets, DOE risks missing beneficial  ways to modernize the SPR while saving taxpayer resources."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration:  Congress may wish to consider setting a long-range target for the size  and configuration of the SPR that takes into account projections for future  oil production, oil consumption, the efficacy of the existing SPR to  respond to domestic supply disruptions, and U.S. IEA obligations. (Matter  1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations to DOE:  The Secretary of Energy should supplement the agency\u2019s 2016 long-term  strategic review by conducting an additional analysis that takes into  account private-sector response, oil market projections, and costs and  benefits of a wide range of different SPR sizes. (Recommendation 1)", "The Secretary of Energy should take actions to ensure that the agency  periodically conducts and provides to Congress a strategic review of the  SPR that, among other things, takes into account changes in crude oil  and petroleum product market conditions and contains additional  analysis, such as the costs and benefits of a wide range of different SPR  sizes. (Recommendation 2)", "The Secretary of Energy should conduct or complete studies on the costs  and benefits of regional petroleum product reserves for all U.S. regions  that have been identified as vulnerable to fuel supply disruptions, and the  Secretary should report the results to Congress. (Recommendation 3)", "The Secretary of Energy, in completing DOE\u2019s ongoing study on the  effects of congressionally mandated sales, should consider a full range of  options for handling potentially excess assets and, if needed, request  congressional authority for the disposition of these assets.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOE for review and comment. DOE  provided written comments, which are reproduced in appendix I. Of the  four recommendations, DOE agreed with two, partially agreed with one,  and disagreed with one.", "Regarding our recommendation that DOE supplement its 2016 long- term strategic review with an additional analysis that takes into  account private sector response, oil market projections, and costs and  benefits of a wide range of different SPR sizes, the agency partially  agreed with the recommendation. DOE agreed to conduct an  additional analysis to assess the purpose, goals, and objectives of the  SPR, taking into account private sector response, oil market  projections, and any other relevant factors, that will lead to an  evaluation of possible optimal sizes of the SPR in the future. In  response to taking into account the costs and benefits of a wide range  of different SPR sizes, DOE stated that the agency determined the  projected benefits of a wide range of different SPR sizes ranging from  430 million barrels of oil to 695 million barrels of oil in its 2016 review.  However, the minimum SPR size considered by DOE is greater than  the projected SPR size after congressionally mandated sales have  occurred. Further, the SPR size after congressionally mandated sales  is projected to be far in excess of the IEA obligation to hold a  minimum of 90 days of net imports. DOE must also consider the  minimum size needed to meet its IEA obligations in the event of a  collective action. In conducting additional analysis, DOE should  consider a smaller lower bound, in line with congressionally mandated  sales, for the size of the SPR, and more fully consider the size  needed to meet the IEA 90-day net import and collective action  obligations.", "Regarding our recommendation that DOE conduct periodic reviews of  the SPR, the agency agreed with the recommendation. DOE stated  that a 5-year time interval between reviews would strike an  appropriate balance between the need to periodically conduct a  strategic assessment and evaluation of the SPR and the limitations on  resources to plan and conduct such a review.", "Regarding our recommendation that DOE conduct or complete  studies on the costs and benefits of regional petroleum product  reserves, the agency disagreed. DOE stated that it is the agency's  position that government owned and operated regional petroleum  product reserves are an inefficient and expensive solution to respond  to regional fuel supply disruptions. DOE further stated, based on  studies done in 2015 that DOE officials told us were pre-decisional  and therefore could not be reported, that there are additional concerns  associated with government-owned and operated regional refined  petroleum product reserves, including little to no storage capacity for  lease in commercial terminals and high costs for government owned  and operated regional product reserves. However, these same  studies took these concerns into account, and concluded that a  product reserve in the Southeast would provide significant net  economic benefits (benefits minus costs) to the region and the United  States in the event of a major hurricane. These studies also  concluded that additional analyses are required to inform decisions  regarding the potential benefits of a similar reserve on the West  Coast. Further, the Quadrennial Energy Review of 2015  recommended that similar analyses be completed for other areas  deemed by DOE to be vulnerable to fuel supply disruptions.  Therefore, we continue to believe that conducting these analyses, as  recommended in the Quadrennial Energy Review of 2015, will provide  Congress with information needed to make decisions about regional  product reserves.", "Regarding our recommendation that DOE consider a full range of  options for handling potentially excess assets, DOE agreed with the  recommendation. DOE stated that in its ongoing study, the agency will  include an assessment of disposition options for any potential excess  or underutilized SPR assets, to include the need for new legislative  authority, as necessary, for the disposition of assets. DOE expects  this study to be completed in October 2018.", "DOE also provided technical comments, which we incorporated, as  appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Energy, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Quindi Franco (Assistant  Director), Nkenge Gibson (Analyst-in-Charge), Philip Farah, Ellen Fried,  Cindy Gilbert, Greg Marchand, Celia Mendive, Patricia Moye, Camille  Pease, Oliver Richard, Dan Royer, Rachel Stoiko, and Marie Suding  made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Strategic Petroleum Reserve, managed by the Department of Energy, exists to minimize the effects of disruptions in the supply of petroleum products. As of March 2018, it held about 665 million barrels of crude oil.", "How big should the reserve be? A review by the Department didn't determine an optimal size and did not fully consider factors including", "Changes in current and future market conditions, such as increasing U.S. crude oil production", "The role of reserves held by private companies", "We recommended that the Department periodically reexamine the size of the reserve, among other things."]}
{"id": "GAO-18-338", "url": "https://www.gao.gov/products/GAO-18-338", "title": "Bureau of Engraving and Printing: Options for and Costs of a Future Currency Production Facility", "published_date": "2018-04-05T00:00:00", "released_date": "2018-05-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["BEP, within Treasury, designs and produces U.S. currency notes at BEP's facilities in Washington, D.C., and Fort Worth, Texas. The Federal Reserve pays for BEP's operational expenses, including currency production. BEP is requesting legal authority to purchase land and construct a new production facility in the D.C. area. BEP officials told GAO that, if it does not receive the necessary legal authority for a new production facility, it will renovate the D.C. facility.", "GAO was asked to review BEP's facility planning process. This report: (1) describes the results of facility studies that BEP has funded and factors that led BEP to propose a new production facility, (2) examines the extent to which BEP's actions align with leading capital planning and cost estimating practices, and (3) describes other factors that could affect total federal costs of BEP's actions.", "GAO analyzed BEP documents and data from 2010-2017 on currency note production, visited both BEP production facilities, assessed BEP's actions against leading capital planning and cost estimating practices, and interviewed officials from BEP, GSA, the Federal Reserve, and Treasury.", "GAO provided the draft report to BEP, GSA, the Federal Reserve, and Treasury for review. BEP coordinated with Treasury in its comments. In the comments, reproduced in Appendix I, BEP emphasized the factors that led BEP to determine that a new facility is the preferred alternative. BEP and the Federal Reserve also provided technical comments, which we incorporated as appropriate. GSA did not provide comments."]}, {"section_title": "What GAO Found", "paragraphs": ["The Bureau of Engraving and Printing's (BEP) studies and research determined that a new production facility would be less expensive and better address BEP's need for secure, efficient, and flexible currency production than a renovation of its Washington, D.C. facility. According to 2017 cost estimates, BEP's preferred option\u2014a new production facility in the Washington, D.C., area and some renovated administrative space in its current D.C. facility\u2014would cost approximately $1.4 billion, while a renovation of its current facility for both production and administrative functions would cost approximately $2.0 billion. A new facility similar to BEP's Texas facility could have a secure perimeter that meets federal building security standards. Such a perimeter is not possible with the current facility. A new facility could also house production on a single production floor to allow for a more efficient production process.", "BEP generally followed leading capital-planning practices, and its 2017 cost estimate of a new production facility partially met the characteristics of a reliable cost estimate. BEP's capital planning followed leading practices, for example, by including a needs assessment, a link to BEP's strategic plan, and a long-term capital plan. BEP's cost estimate partially followed leading practices, for example, by including most life-cycle cost components and documentation of the data used for the estimate. However, it did not include sufficient sensitivity analyses, which identify a range of costs-based on varying assumptions. BEP officials stated that they plan to follow the updated GSA guidance that includes GAO's cost-estimating leading practices when updating this early stage estimate.", "The ability to sell or repurpose any part of the current D.C. facility could affect the total federal costs of BEP's actions. According to officials from the Department of the Treasury (Treasury) and the General Services Administration (GSA), there could be savings if Treasury could consolidate staff or operations into the vacated facility. There could also be savings if the unneeded facility could be sold to a private buyer. However there would be costs to prepare the facility for use by other entities or if the unneeded facility does not sell. Agency officials said that it is too early to determine specific costs and savings."]}], "report": [{"section_title": "Letter", "paragraphs": ["For over 150 years, the Bureau of Engraving and Printing (BEP) within  the U.S. Department of the Treasury (Treasury) has been responsible for  designing and producing U.S. currency notes. BEP prints the notes for  the Federal Reserve System (Federal Reserve), which is BEP\u2019s primary  client. BEP reported that in fiscal year 2018, it plans to produce 7.4  billion notes worth about $233 billion at its facilities in Washington, D.C.,  and Fort Worth, Texas. The D.C. facility is over 100 years old, and  currency production primarily takes place on different floors in one of its  two multi-wing, multi-level buildings. The Fort Worth facility is less than 30  years old and includes a large, one-level open space for producing  currency.", "BEP has explored renovating the D.C. facility or replacing it with a new  facility in the D.C. area to bring its currency production up to 21st -century  production standards. BEP has proposed building a new currency  production facility in the D.C. area and repurposing one of its current D.C.  buildings for administrative functions. According to Treasury officials,  while BEP has the legal authority to use its revolving fund to renovate an  existing facility, it does not have legal authority to purchase land and  construct a new facility, nor the authority to use the revolving fund to pay  for such a project. As a result, BEP is seeking the necessary legal  authority to purchase land and construct a new building in the D.C. area,  as part of the fiscal year 2018 President\u2019s budget proposal. BEP officials  have stated that if BEP does not receive this legal authority and funding, it  will begin a renovation of the current D.C. facility. According to BEP, it  would be designed to address the facility\u2019s deficiencies and to  accommodate new, larger printing equipment that BEP anticipates needing over the next few years for security features being developed for  new currency notes.", "You asked us to review BEP\u2019s proposal to build a new production facility  in the Washington, D.C., area. This report: describes the results of the facility studies that BEP has funded and  factors that led BEP to propose a new production building; examines the extent to which BEP\u2019s actions align with leading capital- planning and cost-estimating practices; and describes other factors that could affect total federal costs if BEP were  to construct a new production facility or renovate its existing D.C.  facility.", "To describe the results of the facility studies that BEP has funded and the  factors BEP considered in proposing a new currency production facility,  we reviewed studies and cost estimates BEP undertook between 2010  and 2017, its strategic plans, and pertinent BEP operations and  production data. Specifically, we reviewed workers\u2019 compensation claims  and manufacturing costs from fiscal years 2013 through 2016. We also  reviewed employee staffing levels as of September 2017. While we did  not independently assess the validity of these data, we reviewed the data  for outliers and obvious errors. We found the data to be sufficiently  reliable for our purposes. We conducted a literature review of research on  currency demand. We reviewed the President\u2019s 2017 and 2018 budget  proposals as well as relevant statutes and regulations. We visited BEP\u2019s  facilities in Washington, D.C., and Fort Worth, Texas, to examine the  production process at both facilities. We interviewed officials from BEP,  the Federal Reserve, and Treasury. We also interviewed officials from the  General Services Administration (GSA), which is responsible for helping  federal agencies acquire and dispose of office space, among other things.", "To determine the extent to which BEP\u2019s actions aligned with leading  capital-planning and cost-estimating practices, we first identified leading  capital-planning and cost-estimating practices from a variety of federal  sources. In particular, we reviewed the leading capital investment  decision-making practices identified by GAO and OMB in their respective  guides, as well as leading cost-estimating practices identified in GAO\u2019s  Cost Estimating and Assessment Guide. We focused on the capital- planning processes that would be most applicable to BEP, which has  limited real property. The applicable processes include:  conducting an assessment of current and future needs; evaluating alternatives to determine how to best bridge performance  strategically linking capital investments to a strategic-planning  process; and documenting the agency\u2019s goals and objectives, among other things,  in a long-term capital plan.", "We compared these leading practices against actions BEP took since  2010 that led BEP to conclude that the agency would be best served by a  new production facility. Specifically, we reviewed BEP\u2019s 2010 and 2013  feasibility studies, BEP and Treasury strategic and long-term capital  plans, and other relevant documents. Regarding cost estimating, we  focused on four broad characteristics of high quality, reliable cost  estimates identified in the Cost Estimating and Assessment Guide. These  characteristics include that the estimates are comprehensive, well- documented, accurate, and credible. We compared BEP\u2019s 2017 estimate  for the cost of BEP\u2019s proposal for a new facility to these practices  because it was BEP\u2019s most recent cost estimate for constructing a new  facility. As part of our work, we reviewed the cost information that BEP  used to develop its 2017 cost estimate and interviewed senior BEP  officials on the estimates.", "To describe other factors that could affect the overall cost to the federal  government if BEP were to construct a new production facility or renovate  its existing D.C. facility, we reviewed BEP studies and discussed potential  uses of BEP\u2019s current buildings with BEP, Treasury, and GSA officials.  We reviewed GSA documentation and previous GAO work on the building  disposal process, and interviewed officials at BEP, Treasury, and GSA on  their plans for the use of each BEP building depending on the selected  alternative.", "We conducted this performance audit from April 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["BEP produces notes at the request of the Federal Reserve. Each year,  the Federal Reserve determines how many currency notes are needed to  meet the demand for currency. Federal Reserve and BEP officials then  agree on a payment amount for note production, including costs  associated with maintaining BEP\u2019s facilities. The Federal Reserve\u2019s  payments are deposited into BEP\u2019s revolving fund; the revolving fund is  used for BEP\u2019s operational expenses, including note production.  According to Treasury officials, the revolving fund can pay for renovations  and retrofitting of a production facility, but not for land purchase or new  building construction. In 2016, the Federal Reserve paid around $660  million for note production.", "In order to cover all expenses associated with the Federal Reserve\u2019s  needs, including currency production, the Federal Reserve generates  income primarily from the interest on their holdings of U.S. government  securities, agency mortgage-backed securities, and agency debt acquired  through open market operations. The Federal Reserve is required to  transfer any surplus funds over $7.5 billion to the General Fund of the  U.S. Treasury. Increases or decreases in operating costs or BEP\u2019s  currency production could affect these surpluses and subsequent  transfers to the General Fund. Historically, the Federal Reserve has had  significant surpluses. In 2016, the Federal Reserve transferred $92 billion  to the General Fund.", "BEP\u2019s Washington, D.C., facility consists of a 104-year old, multi-story,  multi-wing Main Building and an 80-year old multi-story, multi-wing Annex  Building (see fig. 1). The Main Building is the primary production building,  and the Annex Building is used primarily for administrative functions. Both  buildings qualify for historic designation and thus any alterations would be  subject to certain requirements under the National Historic Preservation  Act of 1966, as amended. In addition to these buildings, BEP leases a  warehouse in Landover, Maryland, to store production supplies in part  because the two Washington, D.C., buildings do not have the necessary  infrastructure to accommodate shipments carried by large commercial  trucks.", "BEP\u2019s Fort Worth facility was built in order to ensure reliable currency  production in the event of any disruption of operations at the D.C. facility.  BEP was able to obtain donated land and a building in Fort Worth and  therefore did not need to purchase land or construct a new facility.  Specifically, in 1986, BEP accepted a proposal from the City of Fort  Worth that included 100 acres of donated land and a donated building  shell to be built to BEP\u2019s specifications. BEP then used its revolving fund  to pay for the building\u2019s interior retrofitting, including a central energy  plant and installation of currency presses. The Fort Worth facility began  producing notes in December 1990 and was intended to produce around  25 percent of U.S. notes. According to BEP officials, as a result of  increased demand for U.S. notes and production limitations associated  with the D.C. facility, the Fort Worth facility has produced an increasingly  large share of notes. In fiscal year 2016 the Fort Worth facility produced  nearly 60 percent of notes, while the D.C. facility produced the remaining  40 percent."], "subsections": []}, {"section_title": "BEP\u2019s Proposal for a New Production Facility Considered Project Costs and Feasibility, Security, Efficiency, Safety, and Future Flexibility BEP Studies from 2010 to 2017 Determined the Cost and Feasibility of Multiple Alternatives", "paragraphs": ["From 2010 through 2017, BEP contracted for various studies to  investigate alternatives, costs, potential sites, and program requirements  to ensure future currency production in the D.C. area (see table 1 for  details of the studies). In BEP\u2019s 2013 study and since then, the agency  has focused on three alternatives:  \u201cRenovation\u201d\u2014a major renovation of the current facility  \u201cNew build\u201d\u2014a new building in a different location that would house  currency production and all administrative functions  \u201cHybrid\u201d\u2014a new building in a different location that would house  currency production, but having administrative functions in one of its  current buildings  According to BEP officials, the cost estimates in the 2013 study were an  important factor in their preference for a new facility instead of a  renovation.", "The 2013 study concluded that BEP should pursue the new build  alternative because it was estimated to be the least costly option, could  be completed in the shortest time frame, and promised the greatest  efficiencies. The study found that the renovation alternative would be the  most costly option and take the longest time to complete because it would  require BEP to produce currency at its current location while it was being  renovated. BEP officials told us this would require moving production  equipment from the Main Building to the Annex during the renovation and  back to the Main Building once it was renovated. According to GSA  officials, renovations are often more costly than new construction.  According to Federal Reserve officials, moving large, complex printing  presses and machines from one building to another and then back again  significantly expands the renovation\u2019s timeframe, as time would be  needed to test the machines to get them back into specification. The  Federal Reserve further noted that some modern presses will not fit into  the Main Building without significant structural alterations, which would  add cost and time to a renovation.", "Following the release of the 2013 study, BEP proposed to the Secretary  of Treasury, with the support of Treasury officials, that Treasury and BEP  pursue the hybrid alternative as their first choice (see table 2 for details  on BEP\u2019s proposal). BEP officials told us that they, along with Treasury, selected the hybrid alternative even though the hybrid was more  expensive than the new build alternative. According to BEP officials, the  cost difference between the hybrid and new build was outweighed by the  value of maintaining administrative functions in Washington, D.C., to  facilitate the day-to-day decision-making process among BEP, Treasury,  and Federal Reserve officials. According to Treasury officials, the ability  for other Treasury employees to co-locate in the Main Building after the  repurposing is completed would also provide long-term cost benefits to  Treasury because Treasury could save on expensive lease agreements  in downtown Washington, D.C. Further, Treasury officials noted that it is  important that the Treasury Department maintain the Main Building as an  asset because of its location and history, and Treasury officials prefer that  BEP maintain some functions in the building. The 2017 study provided  cost estimates of BEP\u2019s and Treasury\u2019s preferred hybrid option, as well as  the renovation option that BEP officials said they would pursue if BEP  does not receive the necessary legal authority to construct a new facility.  The study estimated that the hybrid option would cost approximately  $1.389 billion and that the renovation option would cost approximately  $1.957 billion.", "Federal Reserve officials told us they concur with the 2013 study that a  new facility is warranted, that a renovation of the existing facility would be  more costly than a new facility, and a renovation would not provide the  same degree of efficiency. Federal Reserve officials said that they prefer  the new build alternative because the 2013 study identified this alternative  as the least expensive option, and would provide a modern, efficient  manufacturing process. These officials also told us that, whatever  alternative BEP pursues, the Federal Reserve will be financially  responsible \u2014whether it is for a new building, a renovated building, or  the continuation of the currency production process in the D.C. facility.", "BEP officials stated that they support a new building over a renovation  because the new build would both be less expensive and have greater  benefits than a renovation. Furthermore, BEP officials told us that while  they prefer to remain in the D.C. area, they would approve of the  construction of a new facility in a different location if necessary. However,  BEP officials also told us that if BEP does not get the legal authority  necessary to use its revolving fund to purchase land and build a new  facility in 2018, BEP will pursue a renovation of the existing D.C. facility  beginning at the end of 2018."], "subsections": [{"section_title": "BEP Considered Other Factors in Deciding to Propose a New Production Facility", "paragraphs": [], "subsections": [{"section_title": "Security", "paragraphs": ["As a federal facility, BEP must meet physical security standards  established by the Interagency Security Committee (ISC). According to  an assessment conducted by BEP\u2019s Office of Security, the D.C. facility  does not meet many of the necessary requirements for a facility of its  security level. While certain security improvements, such as blast  resistant windows or vehicle barriers, could be installed if the facility is  renovated, other standards could only be addressed with a new facility.  Specifically, the current buildings are located in an urban center  surrounded by buildings (see fig. 1 above). As a result, according to the  assessment, the facility does not have a secure perimeter because it  lacks the required setback between the building and any point where an  unscreened vehicle can travel or park. BEP officials said that even after a  renovation, the facility would continue to have inadequate setback  distance. According to the assessment, the facility\u2019s designation as a  historic building also limits BEP\u2019s ability to make changes to the current  facility to meet the necessary level of protection. For example, the  facility\u2019s placement on the historic registry limits BEP\u2019s ability to make  certain structural changes that could mitigate the building\u2019s chances of  progressively collapsing in the event of certain types of destructive  attacks or actions. BEP\u2019s Office of Security attributed certain security  deficiencies to the facility\u2019s limited setback distance and the buildings\u2019  structure, and determined that the D.C. facility is at relatively high risk to  threats such as an externally-placed portable explosive device."], "subsections": []}, {"section_title": "Efficiency", "paragraphs": ["BEP aims to provide quality banknotes in an efficient, cost effective  manner. However, BEP officials concluded that the layout of the D.C.  facility makes production less efficient than the Fort Worth facility.  According to BEP production data, from 2013 to 2016, manufacturing  costs were higher at the D.C. facility for all comparable denominations.  For example, in 2016, production costs of $1 and $20 notes were 23  percent and 7 percent higher, respectively, at the D.C. facility compared  to the Fort Worth facility. Additionally, the D.C. facility employs more  manufacturing personnel than Fort Worth, even though it produces fewer  notes (see table 3). BEP officials attributed the difference in the costs to  the D.C. facility\u2019s multi-floor, multi-wing production layout. Specifically, in  D.C., after notes are printed on one side, they are moved to another floor  to dry for at least 72 hours, brought back to the original floor to be printed  on the opposite side, and again moved to the other floor to dry. In Fort  Worth, because the production occurs in one large room on one floor,  these processes occur in adjacent spaces on the same floor. As a result,  according to BEP, notes travel more than twice as far during production in  the D.C. facility.", "According to BEP, Treasury, and Federal Reserve officials, a new  production facility would offer greater efficiency gains than a renovated  facility. According to BEP officials, maintaining production on one floor in  an open space improves production efficiency. They added that a  renovation of the D.C. facility could include tearing down some walls and  raising ceilings, steps that could improve some production processes.  However, they also noted that because the D.C. facility qualifies for a  historic designation, according to BEP officials, a renovation could not  alter the building\u2019s shape. As a result, production would still occur on  multiple levels and in separate wings if the facility were renovated. We  have reported in the past that agencies faced challenges in rehabilitating  and modernizing historic buildings for contemporary use because of their  age, specific design characteristics, and their particular historical  features."], "subsections": []}, {"section_title": "Safety", "paragraphs": ["According to its Strategic Plan, BEP is committed to providing a safe and  positive work environment for its employees. However, BEP officials said  that manufacturing employees at the D.C. facility face greater injury risk  than at the Fort Worth facility. According to BEP workers\u2019 compensation  claim data, approved workers\u2019 compensation claims at the D.C. facility  accounted for approximately 67 percent of BEP\u2019s approved claims from  fiscal year 2013 through fiscal year 2016, or 200 of 297 approved claims.  BEP officials attributed the higher number of workers\u2019 compensation  claims in the D.C. facility to the relatively high number of employees  needed to produce fewer notes (see table 3) and the increased  opportunity for employee injury because production material must be  transported farther and between floors. BEP officials estimated that  approximately 65 to 70 percent of all worker injuries are related to  materials handling.", "BEP officials noted that there is an estimated $196-million deferred- maintenance backlog at the D.C. facility. This backlog includes  maintenance to the facility\u2019s electrical and architectural systems. Even if  BEP had taken care of these maintenance issues in the past, it would not  negate the need for a renovation or a new facility. BEP officials noted that  a renovation would reduce some safety concerns, such as upgrading the  facility\u2019s electrical systems and adding more fire-rated exits as required by  Occupational Safety and Health Administration regulations; however, a  renovation would not be able to address the multi-floor production  process that BEP officials attributed to employee injuries."], "subsections": []}, {"section_title": "Flexibility", "paragraphs": ["According to BEP officials, it is important for BEP to maintain flexible  currency production to respond to production needs that may change  over time. Specifically, BEP officials said that a production facility should  have the ability to adapt to changes in production equipment. Both BEP  and Federal Reserve officials told us that the new equipment likely will be  larger than current machinery. According to a representative from a  leading currency printing equipment manufacturer from which BEP buys  its printing equipment, future equipment is unlikely to decrease in size.  BEP officials said that, while the D.C. facility could be renovated to  accommodate larger equipment, it would not be possible to replicate the  large, open production floor of the Fort Worth facility, which allows for  simple installation of equipment. BEP officials told us that, unlike the  current D.C. facility, a new production facility would be able to easily  accommodate the printing equipment necessary for security features that  BEP is currently developing for the next currency redesign.", "Flexibility is also an important factor when considering the future demand  for currency. The demand for currency fluctuates, and recent changes in  how the public makes purchases could affect the demand for currency.  Some observers have noted that the increased use of new payment  technologies\u2014such as online banking and phone applications\u2014as well  as the rise in online purchases may lead to a substantially reduced  demand for currency. In a few countries, such as Sweden, noncash  transactions have become common and the demand for currency has  fallen substantially.", "In the United States, there are several indications that currency demand  will not substantially decline within the next decade. For example, the  yearly number of U.S. currency notes in circulation increased by 43  percent from 2008 to 2016. In addition, the number of ATMs in the United  States continues to grow, and a 2016 Federal Reserve study of consumer  payment choice found that cash still accounted for 32 percent of all  transactions, and more than 50 percent of transactions under $25. This  continued strength in the demand of cash has several sources. Cash  can be seen as a hedge against uncertainties, such as natural disasters  or political or economic turmoil, and also has advantages related to  privacy, anonymity, and personal data security. Moreover, according to  the Federal Deposit Insurance Corporation, approximately 25 percent of  U.S. households have limited access to the products and services of the  banking industry, and therefore, these \u201cunbanked\u201d and \u201cunderbanked\u201d  populations, who may not have many alternative means of payment, rely  largely on cash.", "Federal Reserve and Treasury officials we spoke with do not believe that  the use of cash in the U.S. will decline in any significant way over the next  decade. In particular, the Federal Reserve predicts a continued rise in  demand for cash over the next 10 years, despite the increased availability  of noncash payment options, indicating that a new or renovated facility  will still be required for currency production. According to BEP officials, a  new production facility would better manage the ebbs and flows in the  future demand for currency than a renovation of the current facility.  Specifically, should production demand increase, a new production facility  could be designed to easily scale to meet new production requirements.  Conversely, should the demand for currency decline in the coming years  or substantially decline in the future, unused space in a new facility could  be partitioned off and be used for other purposes or by another Treasury  agency."], "subsections": []}]}]}, {"section_title": "BEP Generally Followed Leading Capital-Planning Practices, and Its 2017 Cost Estimate Partially Met the Characteristics of a Reliable Cost Estimate", "paragraphs": [], "subsections": [{"section_title": "BEP Generally Followed Applicable Leading Capital-Planning Practices", "paragraphs": ["Capital investments in infrastructure can require significant resources to  construct, operate, and maintain over the course of their life-cycle.  Leading capital-planning practices can help agencies determine the  resources needed to meet their mission, goals, and objectives and how to  efficiently and effectively satisfy those needs throughout the capital  decision-making process. As shown in table 4, we found that BEP\u2019s  capital investment decision-making process that resulted in its decision to  pursue a new currency-production facility (as part of the previously  described hybrid option) followed three applicable capital-planning  leading practices and substantially followed the fourth.", "Needs assessment: BEP followed this leading practice, which calls for  comprehensively assessing the resources needed as a basis for  investment decisions. BEP conducted a facility condition assessment in  2004 that contributed to BEP\u2019s effort to seek a new production facility,  resulting in the studies from 2010-2017 discussed above. The  assessment identified the current condition of the facility and the facility\u2019s  capabilities, including production inefficiencies that led BEP to begin a  multi-year effort to determine its immediate and future infrastructure  needs. BEP also determined in 2004 that the agency had almost $200  million in deferred maintenance needs. BEP officials told us that they  consulted with Federal Reserve officials and concluded that it would not  be prudent to spend substantial funds to address this deferred  maintenance. For example, officials determined that it would not be  prudent to replace the heating and plumbing systems while pursuing a  new production facility. As a result, BEP deferred some maintenance  items, such as replacing heating systems, which would not compromise  safety and production. However, BEP officials said that they prioritized  and maintained critical items, such as its cleaning and recycling systems,  and implemented energy conservation initiatives to help reduce costs. As  of October 2017, BEP\u2019s deferred maintenance backlog was about $196  million.", "Alternatives evaluation: BEP substantially followed this leading practice,  which calls for a determination of how best to bridge performance gaps by  identifying and evaluating alternative approaches. As noted above, BEP  first considered multiple alternatives on how to achieve its mission to  efficiently produce banknotes. Further, BEP considered different methods  to fund and obtain land and a shell for a new production facility (see table  5). To evaluate alternatives for the location of a new facility, a contractor  identified, in 2015, potential construction sites in the D.C. area and  compared each site to a set of criteria. However, BEP officials told us that  they discounted locations outside the metropolitan D.C. area because  they believed it would be costly to relocate employees or hire and train  new manufacturing personnel to replace employees who do not relocate.  BEP officials said that the few employees who relocated from the D.C.  facility to the Fort Worth facility when it first opened were paid $50,000  each for their move. Based on these factors, BEP focused on a D.C-area  location and did not conduct an analysis of the financial implications of  building a new facility outside the D.C. area, where construction or other  costs could be less expensive.", "Strategic linkage: BEP followed this leading practice, which stresses the  importance of linking plans for capital asset investments both to an  organization\u2019s overall mission and to its strategic goals. In the 2014-2018  Strategic Plan, BEP noted that it would seek approval to proceed with the  2013 study\u2019s recommendation to construct a new production facility.  According to the strategic plan, a new production facility would help  achieve BEP\u2019s long-articulated strategic goal of being a printer of world- class currency notes, providing its customers and the public with superior  products through excellence in manufacturing and technological  innovation. Furthermore, Treasury concurred with BEP\u2019s assessment and  added its request for legal authority to purchase land and build a new  facility in the fiscal year 2018 President\u2019s Budget proposal.", "Long-term capital plan: BEP followed this leading practice, which calls for  a capital plan that documents an agency\u2019s decisions and describes its  mission, planning process, and risk management, among other things.  BEP completed all of the key activities associated with this practice. For  example, in its fiscal year 2018 capital investment plan, BEP lays out the  purpose, goals, and benefits of a new currency production facility. It also  notes the implications of exposing currency production to vulnerabilities  relating to potential facility systems failures and inefficiencies."], "subsections": []}, {"section_title": "BEP\u2019s 2017 Cost Estimate Partially Met the Four Characteristics of a High- Quality, Reliable Estimate", "paragraphs": ["A reliable cost estimate\u2014a summation of individual cost elements\u2014is  critical to support the capital planning process by providing the basis for  informed investment decision-making, realistic budget formulation and  program resourcing, and accountability for results. BEP\u2019s 2017 cost  estimate includes a contractor-developed estimate of the cost for the  construction of a new production plant and the repurposing of the Main  Building for BEP\u2019s administrative offices (the hybrid alternative) and a  BEP-developed estimate of additional project costs, such as additional  production equipment and real estate acquisition. We found this estimate  partially met the four characteristics of a high-quality, reliable cost  estimate (see table 6). In developing this estimate, BEP relied on GSA  guidance that was available at the time. That guidance did not refer to  leading practices for cost estimates that are identified in GAO\u2019s Cost  Guide. GSA has recently updated its guidance to refer to the leading  practices in GAO\u2019s Cost Guide, and BEP officials told us that they will  follow this updated GSA guidance when developing any future cost  estimates.", "Comprehensive: BEP\u2019s 2017 cost estimate substantially met the  comprehensive characteristic. For example, the estimate included most  life-cycle cost components, defined the program and its current schedule  and included a consistent work breakdown structure. However, the  estimate did not include operating and sustainment costs or information  regarding the ground rules and assumptions used to develop the costs.", "Well documented: BEP\u2019s 2017 cost estimate partially met the well- documented characteristic. For example, the estimate documented the  source data and the technical assumptions used for the construction  costs, which were reviewed by GSA and BEP personnel. However,  documentation for the contractor\u2019s estimate and its sources for the factors  used in the estimate did not include details to enable an outside cost  analyst to replicate the work. According to BEP officials, the cost data are  the contractor\u2019s proprietary data. BEP officials also told us that sources  for the factors used were based on subject matter expert opinion.", "Accurate: BEP\u2019s cost estimate partially met the accurate characteristic.  While we found minor rounding errors and no errors in the model build-up  calculations and did not find any calculation or adjustment errors in the  estimate, the estimate nonetheless did not provide information regarding  the bias of the costs and the appropriateness of the estimating technique  used. However, BEP did follow industry standards to develop contingency  costs for a pre-design estimate for a program that has not yet been  authorized. We also found that $515 million of the internal estimate (37  percent of the program\u2019s total cost estimate) was based on  undocumented subject matter opinion or escalated incorrectly from the  2013 study estimate. Further, BEP\u2019s estimate did not use the same  construction year mid-point as its contractor for the inflation assumptions.  According to BEP officials, that lack is because BEP\u2019s costs were  projected based upon the contractor\u2019s estimate of fiscal year 2022, while  the production equipment was escalated to fiscal year 2021 because this  is the projected year for purchasing equipment. The officials also  acknowledged that this rationale, however, was not documented in the  cost estimate. BEP clarified that the estimates did not explicitly state a  confidence level because the estimate is in the pre-planning stage. They  added that it is common in the design and construction industry that  contingencies are applied to the estimate based on the completeness of  design, and as the design progresses, these contingencies are reduced  as more becomes known about the project. As there have not been actual  costs yet, variances between planned and actual costs have not been  documented, explained, and reviewed.", "Credible: BEP\u2019s 2017 cost estimate partially met the credible  characteristic. For example, BEP provided documentation showing that  both BEP and GSA reviewed the contractor\u2019s construction estimate and  its technical assumptions. However, the estimate did not include a  sensitivity analysis for the construction costs, a risk and uncertainty  analysis, or cross-checks to see whether similar results could be  obtained. A cross-check could include an independent cost estimate  conducted by an outside group to determine whether other estimating  methods would produce similar results, but BEP officials told us that no  independent cost estimate was developed because this was too early in  the project to do such a comparison and that the construction estimate  was developed in response to a government contract statement of work  to prepare a preliminary budget forecast for BEP. Rather, BEP relied on  what it characterized as an extensive review by BEP management and  GSA officials."], "subsections": []}]}, {"section_title": "Ability to Sell or Repurpose Potentially Vacant Space Could Affect the Total Cost to the Federal Government", "paragraphs": ["The alternative that BEP pursues could have a financial effect on the  federal government and ultimately taxpayers. Below, we discuss potential  costs and potential savings associated with the disposition of the three  buildings under the different scenarios based on our review of BEP  documents and interviews with Treasury and GSA officials (see fig. 2).  For example, Treasury, which has custody and control over the Main  Building and the Annex, could experience costs if it needs to spend  money to upgrade these buildings, but could also experience savings if it  can repurpose the buildings or consolidate its employees into fewer  buildings. GSA, which serves as the federal government\u2019s primary real  property and disposal agent, could incur costs for the marketing and  disposal process, but could create savings for the government if it could  repurpose or sell any vacated buildings. Proceeds from sales of Treasury- controlled facilities would benefit the federal government.", "While it is possible to identify some potential costs and benefits, it is too  early to determine which costs or benefits may be realized or to attempt  to quantify them. GSA and Treasury officials told us that the actions of  other agencies or interested third parties (e.g., those potentially interested  in purchasing the Annex) would affect the costs and cost-savings of any  alternative. In addition, there are factors outside of the government\u2019s  control, such as timing and market conditions, that could affect costs and  cost-savings. For example, changes in the Washington, D.C., real estate  market could affect the opportunity to sell the Annex. Based on interviews  with officials at GSA, Treasury, the Federal Reserve, and BEP, we have  identified the following potential costs and savings for each building.", "Potential costs and savings associated with the Main Building: Both BEP  and Treasury officials told us that the Main Building will remain under  Treasury\u2019s custody and control, regardless of which alternative BEP  undertakes.", "Renovation: BEP would use its revolving fund to replace existing  heating/cooling systems and windows in the Main Building with higher  efficiency ones. Ideally, there would be some long-term cost savings  because the new systems would be less costly to operate. However,  BEP officials told us that a renovation may be more expensive than  currently estimated because the Main Building is over 100 years old  and there could be unforeseen expenses depending on what is found  once walls and ceilings are removed.", "New build: Treasury would likely pay to renovate the Main Building  once BEP vacates it because the Main building would remain under  Treasury\u2019s custody and control. The cost of this renovation could be  partially offset by savings associated with co-locating other Treasury  offices in the Main Building after the renovation is complete. For  example, Treasury bureaus currently have 15 leased facilities with  about 1.9-million square feet in the downtown D.C. area. The annual  cost of these facilities is $91.7 million. While, not all of the employees  currently in leased space could move into a renovated Main Building,  the Main Building\u2019s 530,000 square feet could provide opportunities to  reduce leasing costs. However, because these potential renovations  and staff moves are not likely to occur for several years, Treasury  officials told us that they are not able to determine either the costs or  benefits of moving Treasury staff to the Main Building.", "Hybrid: BEP\u2019s revolving fund would pay for the renovation of one- third of the Main Building that would serve as BEP\u2019s administrative  office and a future visitors\u2019 center. This step would leave the  remaining two-thirds to be renovated to a \u201cwarm lit shell\u201d to allow  others to occupy the building. At this time, Treasury does not know  what entity or account would pay for the renovation of the remaining  two-thirds because, according to Treasury officials, they have not  determined what the use of the balance of the Main Building would  be, including what entity would fund any modifications needed for new  occupants. If Treasury decided to use the Main Building for its own  staff, then Treasury could fund the cost to convert to offices for other  Treasury agencies. Under this scenario, there is both a cost to  Treasury to renovate the space it plans to use as well as a savings in  having Treasury staff vacate other leased space and move to a  Treasury-controlled building.", "Potential costs and savings associated with Treasury\u2019s Annex: The Annex  could either remain for BEP\u2019s administrative offices or could be declared  excess and transferred to GSA for disposal.", "Renovation: BEP\u2019s revolving fund would cover the cost of renovating  the entire Annex as a \u201cwarm lit shell\u201d and a more extensive renovation  of the portion of the Annex that BEP would use first as temporary  space for its currency printing equipment and then permanently for its  administrative office. According to BEP officials, the Annex would be  renovated to accommodate currency-printing lines that would be  relocated from the Main Building in order for the Main Building to be  renovated. Once the Main Building is renovated, the Annex would  then be renovated to become administrative space for BEP. This  process could be quite costly and take more time as the Annex would  be renovated twice for different purposes. However, if the unused part  of the Annex could be used by Treasury for other Treasury offices,  there could be some cost savings to Treasury. According to BEP  officials, while BEP would use its revolving fund to renovate the Annex  to a \u201cwarm lit shell,\u201d the agency that ultimately occupies the unused  space would be responsible for the costs associated with repurposing  that space for its own purposes.", "New build and Hybrid: BEP\u2019s revolving fund would pay for any  necessary environmental clean-up needed in order for the Annex to  be declared as excess and transferred to GSA for disposal. GSA, as  part of its mission, would incur costs such as marketing, conducting  the disposition process, and concluding the property transfer. GSA\u2019s  disposal process can result in the building being transferred for use by  another Federal agency, being sold to a local or state government via  a negotiated sale, being conveyed to a public entity or eligible non- profit for public uses (e.g. homeless use), or being sold to a private  party via a public sale. As the Annex is centrally located in  Washington, D.C., the building could be attractive to potential  developers. GSA recently sold another federal building near the  Annex for over $30 million. GSA officials believe that there would be  significant market interest in the Annex due to the Annex\u2019s location  and recent private development in the area. Treasury and GSA  officials stated that proceeds from the sale of the Annex would be  deposited into the Land and Water Conservation Fund to benefit the  federal government.", "On the other hand, there is no guarantee that GSA would be able to  sell the Annex: our previous work found that the most frequent  method of disposal for federal buildings from fiscal years 2011  through 2015 was demolition (57 percent) rather than sale (14  percent). Federal buildings identified for disposal may not be suitable  for sale for reasons such as their age, location, and condition, factors  that often make demolition the preferred disposal method. The unique  configuration of the Annex with its five wings, its age and condition,  and historic-designation eligibility could deter some potential buyers.  The future demand for the building, interest from private-sector  buyers, and the general economic and real estate market are  uncertain and can change quickly. If the Annex is not sold and  remains on the government\u2019s real property inventory, generally BEP  or Treasury would be responsible for any annual maintenance costs  for the building. Alternatively, the unsold Annex could be donated to  a state or local government that would then be responsible for  maintenance costs.", "Potential costs and savings associated with the leased warehouse: The  warehouse is a GSA-leased property.", "Renovation: BEP would continue its annual leasing of the  warehouse, which would still be needed to accommodate large trucks  that cannot access the D.C. facility. The current lease costs  approximately $3.4 million each year, and BEP recovers about  $500,000 per year of these costs by permitting other Treasury  components to use the building through interagency agreements.", "New build and Hybrid: If BEP discontinued its lease after a new  facility is completed, it would save approximately $2.9 million per year.  If BEP ended its lease prior to the end of the lease term, GSA would  need to find another entity to occupy the warehouse for the remainder  of the lease term."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided copies of the draft report to the BEP, GSA, the Federal  Reserve, and Treasury for review and comment. BEP coordinated with  Treasury in providing comments. In these comments, reproduced in  Appendix I, BEP emphasized the factors that led BEP to determine that a  new facility is the preferred alternative for its currency production process  and acknowledged our findings on those factors. BEP and the Federal  Reserve also provided technical comments, which we incorporated as  appropriate. GSA did not provide comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Director of the Bureau  of Engraving and Printing, the Secretary of the Treasury, the Chair of the  Federal Reserve Board, and the Administrator of the General Services  Administration. In addition, the report will be available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or RectanusL@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, John W. Shumann (Assistant  Director); Martha Chow (Analyst in Charge); Amy Abramowitz; Lacey  Coppage; Delwen Jones; Jennifer Leotta; Josh Ormond; and Tomas  Wind made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Bureau of Engraving and Printing produces U.S. currency in Washington, D.C., and Fort Worth, Texas. It wants to build a new production facility in the D.C. area, which it estimates would cost $1.4 billion. This facility would include a secure perimeter and meet new security standards, something the current D.C. facility cannot do.", "If the Bureau can't build a new facility, it plans to renovate the D.C. facility, which it estimates would cost $2 billion.", "We found the Bureau's planning efforts generally followed leading practices and included some sound cost estimating practices. However, the overall cost to the government is unknown."]}
{"id": "GAO-18-210", "url": "https://www.gao.gov/products/GAO-18-210", "title": "Electronic Health Information: CMS Oversight of Medicare Beneficiary Data Security Needs Improvement", "published_date": "2018-03-06T00:00:00", "released_date": "2018-04-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Recent data breaches have highlighted the importance of ensuring the security of health information, including Medicare beneficiary data. Such data are created, stored, and used by a wide variety of entities, such as health care providers, insurance companies, financial institutions, researchers, and others.", "GAO was asked to conduct a study of CMS efforts to protect Medicare beneficiary data accessed by external entities. GAO's objectives were to (1) identify the major external entities that collect, store, and process Medicare fee-for-service beneficiary data; (2) determine whether requirements for the protection of Medicare beneficiary data align with federal guidance; and (3) assess CMS oversight of the implementation of those requirements. GAO analyzed information about how external entities access data, reviewed CMS documentation on who they share data with, compared federal standards with CMS security requirements for external entities, and analyzed results of independent security reviews. GAO also interviewed CMS officials about their oversight activities."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare and Medicaid Services (CMS) shares Medicare beneficiary data with three major types of external entities: (1) Medicare Administrative Contractors (MAC) that perform processing and distribution functions that support the payment of Medicare benefits; (2) research organizations (researchers) that use Medicare beneficiary data to study how health care services are provided to beneficiaries; and (3) qualified public or private entities that use claims data to evaluate the performance of Medicare service providers and equipment suppliers.", "CMS has developed requirements for implementing security controls that align with federal guidance for two of the three types of external entities that access Medicare beneficiary data. While CMS has developed guidance for MACs and qualified entities, it has not developed equivalent guidance for researchers. Researchers must adhere to broad governmentwide standards, but are not given guidance on which specific controls to implement. According to CMS, the lack of specific guidance gives the researchers more flexibility to independently assess their security risks and determine which controls are appropriate to implement; however, without providing comprehensive, risk-based security guidance to researchers, CMS increases the risk that external entities possessing agency data may not have applied security controls that meet CMS standards.", "Additionally, CMS has established an oversight program for the security of MAC data, but has not established a corresponding program to oversee security implementation by researchers and qualified entities. Without effective oversight measures in place for researchers and qualified entities, CMS cannot fully ensure that the security of Medicare beneficiary data is being adequately protected. Regarding MACs, although they are subject to two types of independent annual assessments, which have regularly identified weaknesses in their implementation of security controls, the weaknesses that have been assessed as low-risk have not been consistently tracked in the CMS finding tracking system. Without more consistent tracking of these low-risk weaknesses, it may be difficult for CMS to determine if all weaknesses are being addressed in a timely manner. Examples of categories of recurring weaknesses that have been identified during annual assessments are listed in the table."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS develop additional guidance for researchers on implementing security controls required by CMS, consistently track results of independent assessments, and provide oversight of researchers and qualified entities. CMS concurred with GAO's three recommendations and described actions it has planned or taken to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Recent data breaches at hospitals, insurance companies, and other  entities in the health care industry have highlighted the importance of  ensuring the security of health information, including personally  identifiable information (PII), about Medicare beneficiaries. The Centers  for Medicare & Medicaid Services (CMS) within the Department of Health  and Human Services (HHS) is the agency responsible for overseeing the  Medicare program, which covers nearly 58 million aged and disabled  Americans, who represent approximately 18 percent of the total U.S.  population. Federal program spending for Medicare benefits totaled  approximately $696 billion for fiscal year 2016.", "Medicare beneficiary data are created, stored, and used by a wide variety  of entities, such as health care providers, insurance companies, financial  institutions, academic researchers, and other federal/state agencies for a  wide variety of purposes. These include researching and monitoring the  efficacy of health care treatments, payments, and analyzing the cost of  health care treatments. The extent of beneficiary data that is collected  and maintained by CMS and its partners makes the data especially useful  for these and other purposes. However, the distributed nature of  Medicare systems and networks, along with the fact that so many entities  external to CMS are connected to them, increases the potential that  unauthorized individuals could gain access to these systems and the  extensive amount of Medicare beneficiary data they contain.", "You requested that we conduct a study of current CMS efforts to protect  Medicare fee-for-service beneficiary data. Our objectives were to (1)  identify the major entities that collect, store, and process Medicare  beneficiary data and that connect with CMS systems and networks; (2)  determine whether requirements for the protection of Medicare  beneficiary data align with federal guidance; and (3) assess the programs  CMS has in place to oversee the implementation of security protections  for Medicare beneficiary data.", "To address our first objective, we analyzed prior GAO reports and CMS  documentation, such as CMS data maps and system documentation.  Additionally, we interviewed CMS officials to identify major external  entities with which CMS shares Medicare beneficiary data and how those  entities access that data. We analyzed the information from CMS to  describe the type of Medicare data each major external entity has access  to and the purpose for which such access is provided. Further, we  analyzed the agency agreement template between CMS and major  external entities to describe the processes for managing and monitoring  the sharing of beneficiary data.", "For our second objective, we reviewed relevant information security and  privacy laws and National Institute of Standards and Technology (NIST)  standards and guidance to identify federal requirements for implementing  security and privacy. We compared the NIST standards and guidance  with requirements established by CMS for entities that access Medicare  fee-for-service beneficiary data to identify any inconsistencies.  Additionally, we analyzed key documentation, such as information  security contract clauses for each of the MACs and the standard data use  agreement form used for all individuals and organizations that are either  qualified entities or researchers, to determine how fully they reflect federal  requirements.", "Regarding our third objective, we analyzed results from information  security assessments performed by CMS and conducted interviews with  CMS officials responsible for overseeing the security of Medicare fee-for- service beneficiary data provided to external entities. Specifically, we  analyzed the information security assessments for contractor systems  handling Medicare fee-for-service beneficiary data to determine the  nature and extent of reported findings, the disposition of assessment  recommendations, and whether assessment results were being  addressed in a timely fashion. Appendix I discusses our objectives,  scope, and methodology in greater detail.", "We conducted this performance audit from October 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Information security is a critical consideration for any organization that  depends on information systems and computer networks to carry out its  mission or business, and is especially important for government agencies,  where maintaining the public\u2019s trust is essential. Concerns about cyber  threats to government systems and networks are well-founded, due to the  dramatic increase in reports of security incidents, the ease of obtaining  and using hacking tools, and advances in the sophistication and  effectiveness of cyberattack technology, among other reasons. Without  proper safeguards, systems are vulnerable to individuals and groups with  malicious intent who can intrude and use their access to obtain or  manipulate sensitive information, commit fraud, disrupt operations, or  launch attacks against other computer systems and networks.", "We and federal inspectors general have reported extensively on  information security deficiencies that place federal agencies at risk of  disruption, fraud, or inappropriate disclosure of sensitive information.  Accordingly, since 1997, we have designated federal information security  as a government-wide high-risk area. This area was expanded to include  the protection of critical cyber infrastructure in 2003 and protecting the  privacy of personally identifiable information in 2015."], "subsections": [{"section_title": "Federal Law Establishes Security Requirements to Protect Federal Information and Systems", "paragraphs": ["The Federal Information Security Modernization Act of 2014 (FISMA) is  intended to provide a comprehensive framework for ensuring the  effectiveness of security controls over information resources that support  federal operations and assets as well as the effective oversight of  information security risks. FISMA assigns responsibility to the head of  each agency to provide information security protections commensurate  with the risk and magnitude of the harm resulting from unauthorized  access, use, disclosure, disruption, modification, or destruction of  information systems used or operated by an agency or on behalf of an  agency. The law also delegates to the agency\u2019s Chief Information Officer  (or comparable official) the authority to ensure compliance with FISMA  requirements.", "FISMA requires each agency to develop, document, and implement an  agency-wide information security program to provide risk-based  protections for the information and information systems that support the  operations and assets of the agency, including those provided or  managed by another entity. Such a program includes assessing risk;  developing and implementing cost-effective security plans, policies, and  procedures; developing plans for providing adequate information security  for networks, facilities, and systems; providing security awareness and  specialized training; testing and evaluating the effectiveness of controls;  planning, implementing, evaluating, and documenting remedial actions to  address information security deficiencies; developing and implementing  procedures for detecting, reporting, and responding to security incidents;  and ensuring continuity of operations. In addition, FISMA requires  agencies to comply with NIST standards."], "subsections": []}, {"section_title": "Office of Management and Budget Provides Guidance to Agencies on Implementing FISMA", "paragraphs": ["In accordance with FISMA, the Office of Management and Budget (OMB)  is responsible for the oversight of agencies\u2019 information security policies  and practices. OMB establishes requirements for federal information  security programs and assigns agency responsibilities to fulfill the  requirements of statutes such as FISMA. OMB requires agencies to  oversee the implementation of security and privacy controls by  contractors that collect, use, process, store, maintain, and disseminate  federal information on behalf of a federal agency. For specific technical  direction, OMB requires agencies to implement standards and guidelines  established by NIST."], "subsections": []}, {"section_title": "NIST\u2019s Framework for Critical Infrastructure Cybersecurity Establishes a Baseline for Protecting Critical Information Assets", "paragraphs": ["NIST has issued a suite of information security standards and guidelines,  including Recommended Security Controls for Federal Information  Systems and Organizations and the Framework for Improving Critical  Infrastructure Cybersecurity. These documents collectively provide  comprehensive guidance on developing and implementing information  security programs to agencies and entities that perform work on their  behalf.", "The framework serves as a baseline for protecting critical information  assets. In response to Executive Order 13636, NIST issued the  framework in February 2014. It is intended to help organizations apply the  principles and best practices of risk management to improve the security  and resilience of critical infrastructure. The framework outlines a risk- based approach to managing cybersecurity that is composed of three  major parts: a framework core, profile, and implementation tiers.", "The framework core includes a list of functions, categories,  subcategories, and informative references that describe specific  cybersecurity activities identified as being in common across all critical  infrastructure sectors. Additionally, the framework contains  implementation tiers that provide context on how an organization views  cybersecurity risk and the processes in place to manage that risk.  Further, the framework provides guidance on documenting individual  organizational profiles that describe how the functions, categories, and  subcategories align with the business requirements, risk tolerance, and  resources of the organization. According to NIST, the framework core  represents a common set of activities for managing cybersecurity risk.  The framework also states that, while it is not exhaustive, it is extensible,  allowing organizations, sectors, and other entities to use subcategories  and informative references that are cost-effective and efficient and that  enable them to manage their cybersecurity risk. Table 1 lists the five  functions and 22 categories of the framework core.", "Subsequent to the issuance of the Cybersecurity Framework, a May 2017  executive order required agencies to use the framework to manage  cybersecurity risks. It outlined actions to enhance cybersecurity across  federal agencies and critical infrastructure to improve the nation\u2019s cyber  posture and capabilities against cybersecurity threats to digital and  physical security. In addition, the order directed agencies to develop  plans to implement the framework within 90 days. The order required  agencies to include in their plans:  the status of planning, organizing, and submitting IT budget materials,  as directed in the Fiscal Year 2018 IT Budget Capital Planning  Guidance, that are aligned with the framework,  the proposed internal management of cybersecurity risk using the  updated metrics aligned to the framework, a timeline to map existing and planned capabilities with the framework  the proposed use of the terminology and concepts in the framework to  organize and communicate cybersecurity activities and outcomes."], "subsections": []}]}, {"section_title": "CMS Shares Medicare Fee-for- Service Beneficiary Data with Three Major Types of External Entities", "paragraphs": ["CMS shares Medicare beneficiary data with three major types of external  entities: (1) Medicare Administrative Contractors (MACs), the contractors  that provide the core processing and distribution functions that support  the payment of Medicare Part A, Part B, and Durable Medical  Equipment (DME) beneficiary claims on behalf of CMS, (2) research  organizations (researchers), academic and non-profit entities that use  Medicare beneficiary data to assist CMS in monitoring, managing, and  improving Medicare programs or the services provided to beneficiaries,  and (3) qualified public or private entities that use claims data on behalf of  CMS to evaluate the performance of Medicare service providers and  equipment suppliers."], "subsections": [{"section_title": "Medicare Administrative Contractors Access Fee- for-Service Beneficiary Data to Process Claims", "paragraphs": ["MACs process more than 1.2 billion claims for Medicare Fee-for-Service  beneficiaries annually. To do so, they interact with more than 1.5 million  health care providers enrolled in the Medicare Fee-for-Service program.  In addition to claims processing, some of the specific functions that the  MACs perform include customer service for beneficiaries and providers,  financial and debt management, audit and appeals functions, and medical  reviews.", "Each MAC contract covers a specific geographic area and a specific type  of processing\u2014either (1) Medicare Parts A and B claims or (2) DME  claims for beneficiaries. Some MACs may hold multiple contracts and,  thus, process multiple types of claims. In total, a network of eight MACs  covers 16 multi-state jurisdictions, serving as the primary operational  connection between the Medicare Fee-for-Service program and health  care providers enrolled in the program. The geographic jurisdictions of the  MACs that support Parts A and B and DME beneficiary claims are shown  in figures 1 and 2, respectively.", "In order to collect, store, and process information needed to process  claims and make benefits payments on behalf of CMS, MACs connect  directly to CMS systems. Specifically, MACs connect to CMS\u2019s Virtual  Data Centers (VDCs) through its CMSNet telecommunications network.", "MACs process Medicare Fee-for-Service claims, which include  beneficiaries\u2019 PII and protected health information, through the VDCs.  The VDCs consists of two large datacenters that are operated and  managed by CMS that collectively serve as a platform for Medicare  claims processing software systems. MACs use a combination of four  CMS systems that operate within the VDCs to process claims. These  systems and their functions are described in table 2.", "Health care providers submit Medicare fee-for-service claims to the  MACs. The claims are reviewed to check if the claim is in a valid format, if  the requestor is valid, and whether it is a duplicate. In addition, MACs  process claims in the Fiscal Intermediary Shared Systems, Multi-Carrier  System, VIPS Medicare System, and Common Working File. Processing  includes adjudicating claims, checking whether the services are covered  by Medicare, and determining the price that should be paid to the provider  for the service.", "The links between external entities and CMS systems can take several  different paths. Figure 3 shows how these entities are connected to CMS  systems in order to obtain and use Medicare beneficiary data."], "subsections": []}, {"section_title": "Researchers Access Fee- for-Service Beneficiary Data to Assist CMS in Monitoring, Managing, and Improving Medicare Programs and Services", "paragraphs": ["Researchers use Medicare beneficiary data to study how healthcare  services are provided to beneficiaries. Examples of research entities  include universities and colleges, non-profit research institutes, and policy  research organizations. CMS offers researchers a broad range of data on  the Medicare program to support research on current and future  spending, past and present enrollment, and claims, which can benefit the  public through improved delivery of healthcare services. Research  performed using this data may also assist CMS in monitoring, managing,  and improving Medicare programs and services to beneficiaries.", "To obtain Medicare data from CMS, researchers must apply for access to  a specific dataset, such as the Carrier file which includes claims for  services provided by physicians and other non-institutional providers. In  the application, the researcher provides information explaining how the  data are to be used and stored, and CMS reviews and approves (or  denies) the application. The researcher then enters a data use agreement  with CMS for access to specific sets of Medicare beneficiary data, which  are to be used only for stated research objectives. The data use  agreement specifies which beneficiary data can be accessed, for what  purpose, the duration of access, and data protection and confidentiality  requirements. Unless the agreement authorizes the release of the data in  accordance with CMS policy, it is not to be released by the researcher. As  of October 2017, 195 research entities had received Medicare data.", "Researchers access Medicare beneficiary data in one of two ways. To  gain access from their computers, they connect to CMS\u2019s Chronic  Conditions Warehouse/Virtual Research Data Center (CCW/VRDC)  through a CMS-provided secure network connection. Within the  CCW/VRDC, researchers are given access to an individually tailored  computing environment containing only copies of the specific sets of  beneficiary data they have been authorized to use. Researchers can then  conduct their analysis on the data using software tools provided by CMS  within this secure environment.", "Researchers can also access data by having it shipped to them in  encrypted form through the U.S. mail. Once it has been received,  researchers decrypt the data and load it into their own information  systems for analysis. The data use agreements specify requirements for  protecting beneficiary data obtained in this fashion."], "subsections": []}, {"section_title": "Qualified Entities Access Medicare Fee-for-Service Beneficiary Data to Evaluate the Performance of Service Providers and Equipment Suppliers", "paragraphs": ["Qualified entities use CMS claims data to assess the effectiveness of  Medicare service providers and equipment suppliers. The Medicare Data  Sharing for Performance Measurement Program, originally established to  comply with the Patient Protection and Affordable Care Act, requires  qualified entities to combine the Medicare data with claims data from  sources other than Medicare to produce and publicly disseminate CMS- approved reports on provider and supplier performance with regard to  measures of quality, efficiency, effectiveness, and resource use.", "Like researchers, after they have been approved to access data by  CMS, qualified entities must enter into a data use agreement with CMS.  The agreement specifies which beneficiary data can be accessed, for  what purpose, the duration of access, and data protection and  confidentiality requirements. A separate agreement is required for each  qualified entity\u2019s activity. The Medicare beneficiary data to be accessed  are encrypted and can either be shipped to the qualified entity on an  external hard drive or saved within the CCW/VRDC to be accessed  through a Secure File Transfer System connection. Once it has received  the electronic files, the qualified entity decrypts the files and analyzes the  data on its own system(s).", "As of October 2017, ten organizations had received Medicare data as a  qualified entity. Each entity is responsible for analyzing and reporting on  provider performance for one or more specific geographic area."], "subsections": []}]}, {"section_title": "CMS Established Information Security Requirements that Align with Federal Guidance for Some, but Not All, External Entities", "paragraphs": ["CMS has developed requirements for implementing security controls that  align with federal guidance for two of the three types of external entities  that access Medicare Fee-for-Service data. Specifically, adherence to the  requirements, which CMS defined using a risk-based process, is  mandatory for MACs and qualified entities. However, CMS does not  consider the requirements to be applicable to researchers because they  are not CMS contractors. Without providing comprehensive, risk-based  requirements for implementing security controls to all external entities that  have access to Medicare beneficiary data, CMS increases the risk that  external entities possessing CMS data may not have applied security  controls that meet CMS standards."], "subsections": [{"section_title": "CMS Requirements for MACs and Qualified Entities Reflect a Risk- Based Assessment and Generally Align with the NIST Cybersecurity Framework", "paragraphs": ["To assist agencies in the selection of appropriate security controls, NIST  developed the Cybersecurity Framework, which specifies controls that  support the core security functions of identifying, detecting, preventing,  responding to, and recovering from security incidents. Further, to ensure  that controls are selected that achieve the security goals of the  organization, NIST recommends that organizations use risk-based  methods to tailor the selection of controls within this framework for  implementation. According to NIST risk management guidance, the  tailoring process includes identifying a baseline of security controls,  assigning specific values to organization-defined security control  parameters, such as password complexity, and supplementing baselines  with additional controls and control enhancements.", "Once an agency has assessed security risks and identified appropriate  controls to mitigate them, NIST recommends that the agency establish  specific requirements for implementing those controls to ensure  consistency both internally and externally to the agency. This is important  in meeting the requirements of FISMA, which requires that a federal  agency\u2019s security efforts include information and systems provided or  managed by another agency, contractor, or other source. Additionally, the  Cybersecurity Framework recommends that contracts or other formal  agreements abide by NIST guidance to provide a means to ensure privacy and security controls; it also states that contractors are to protect  PII in the same manner as their customers.", "CMS developed minimum security requirements based on applicable  federal guidance, for its own internal systems and for the systems  operated by its contractors, such as MACs and qualified entities. These  requirements are documented primarily in CMS\u2019s Acceptable Risk  Safeguards (ARS).", "CMS designed the ARS as a tailored selection of NIST controls reflecting  FISMA requirements as well as the agency\u2019s own policies, procedures,  and guidance; other federal and non-federal guidance; and industry  leading practices. According to the agency, the requirements in the ARS  are intended to ensure that systems meet a minimum level of information  security and privacy assurance and reflect the agency\u2019s information  systems security policy. CMS requires all employees, contractors, sub- contractors, and their respective facilities supporting agency business  missions and performing work on behalf of the agency to observe this  policy.", "Because MACs are CMS contractors, the agency requires them to align  their security practices with the ARS as well as with broader federal  guidance, including NIST\u2019s catalog of recommended security controls,  its minimum security standard for federal information systems, and  OMB\u2019s guidance on information management. Additionally, as part of  the Qualified Entity Certification Program and consistent with NIST  guidance, CMS requirements state that systems used by qualified entities to process Medicare beneficiary data have been assessed at a moderate  impact level and accordingly are held to the ARS implementation  guidance using the minimum controls specified for moderate risk  systems.", "According to agency officials responsible for developing and maintaining  the ARS, CMS used a risk-based process to select security controls to  include in the requirements, thus ensuring that the ARS appropriately  reflected agency needs and priorities. The process began with a review of  baseline control requirements outlined in NIST guidance to ensure that all  of those controls were reflected in the requirements. Then, the agency  reviewed the rest of the NIST information security controls that were not  included in the baseline and determined whether to include them in the  ARS as \u201coptional\u201d controls. For example, the officials stated that certain  controls appeared to apply primarily to national security systems and  would not be needed for CMS applications. In all, the agency decided not  to include 13 of the 165 controls specified in the NIST Cybersecurity  Framework, none of which were designated by NIST as mandatory  baseline controls.", "By undertaking this process of assessing the risk associated with each of  the information security controls, the agency helped to ensure that its  ARS reflects security requirements that are necessary and appropriate for  its own systems and for systems operated by contractors on its behalf. A  complete description of the NIST Cybersecurity Framework controls and  how the ARS aligns with them can be found in appendix II."], "subsections": []}, {"section_title": "CMS Does Not Provide Security Guidance for Researchers", "paragraphs": ["While CMS requires MACs and qualified entities to implement security  controls consistent with NIST guidance and provides additional guidance  to ensure that those controls are consistent with CMS standards, it does  not provide supplemental guidance tailored for researchers. Specifically,  as part of its data use agreements with researchers, CMS includes a  broad requirement to implement security and privacy protections that are  consistent with NIST and OMB guidance. However, the agency has not  provided risk-based guidance defining the minimum acceptable security  controls that researchers should implement to protect Medicare  beneficiary data. Nor has CMS provided guidance to researchers on how  to select and implement specific security controls.", "According to CMS officials who oversee researcher access to CMS data,  all researchers are required to prepare data management plans that  outline their planned safeguards for protecting Medicare beneficiary data  in their custody. In determining what controls to implement, however, they  have only broad federal guidance, such as NIST\u2019s catalog of controls, to  use as a reference. The officials stated that CMS has not developed  specific requirements based on an assessment of the risks associated  with researcher functions that would define a minimum set of required  safeguards. This is in contrast with the MACs and qualified entities, which  have specific requirements based on the ARS that they are to implement  to adequately protect data received from CMS.", "The lack of specific requirements does not affect all data that researchers  access on behalf of CMS. In many cases, researchers access and  process Medicare beneficiary data on systems operated by CMS and are  not responsible for implementing the security controls for those systems.  In such cases, the researchers access beneficiary data within a  virtualized environment, called the CCW/VRDC, which allows CMS to  monitor data retrieval and use.", "However, in other cases, CMS provides beneficiary data to researchers  on external hard drives or other physical media that are outside of the  Chronic Conditions Warehouse. In those cases, researchers receive  Medicare beneficiary data that they transfer to and process on their own  systems. These systems are secured according to individual researchers\u2019  own policies and procedures, which may or may not be consistent with  CMS requirements applied to other entities.", "CMS requirements tailored specifically for researchers could address  topics such as password complexity, patch management, and encryption  of sensitive data, all of which otherwise may be implemented  inconsistently by different researchers. According to CMS officials  responsible for overseeing researcher access to data, CMS does not  require researchers to adhere to its Information Systems Security and  Privacy Policy or to implement the controls specified in the ARS  because researchers are not agency contractors. The CMS officials said  it was not necessary for the agency to set specific security requirements  for entities that do not have a contractual relationship with the agency.  Additionally, these officials stated that they believe the lack of specific  guidance gives the researchers more flexibility to independently assess  their security risks and determine which controls to implement based on  that assessment.", "However, by not providing guidance to researchers that includes security  implementation requirements tailored to CMS-authorized uses of  Medicare data, CMS cannot ensure that researchers implement security  measures that are commensurate with the sensitivity of the data that is  provided to them. As a result, there is an increased risk that sensitive PII  and protected health information may be at risk of compromise."], "subsections": []}]}, {"section_title": "CMS Has Not Consistently Overseen the Implementation of Security Controls by External Entities", "paragraphs": ["CMS has established a program to oversee the MACs\u2019 implementation of  security and privacy protections over Medicare beneficiary data, but it  does not consistently track low-risk weaknesses in the CMS FISMA  Controls Tracking System. MACs are subject to two types of independent  annual assessments that regularly identify weaknesses in their  implementation of security controls. The assessments have identified  several recurring categories of weaknesses; however, the agency does  not track low-risk weaknesses that could be related to these recurring  categories. Additionally, CMS has not established a corresponding  program for overseeing the implementation of security controls by  researchers and qualified entities. Without more consistently tracking  identified issues at MACs and establishing effective oversight measures  for researchers and qualified entities, CMS cannot fully ensure that the  security of Medicare beneficiary data is being adequately protected."], "subsections": [{"section_title": "CMS Has Overseen Independent Assessments at the MACs, but Has Not Consistently Tracked Issues Identified by Those Assessments", "paragraphs": ["Requirements for agencies to oversee the implementation of security  protections are established in law and federal guidance. For example, the  NIST Cybersecurity Framework specifies that organizations should  assess security controls to determine the extent to which the controls are  implemented correctly, operating as intended, and producing the desired  outcome. The framework states that, as part of the process for conducting  security control assessments, organizations should track and monitor  weaknesses and develop remedial actions. Further, according to the  framework, the security assessment process is intended to provide  feedback to organizations that can use the information to make risk- based adjustments to protections for their systems and networks.", "In addition, both FISMA and the Medicare Prescription Drug,  Improvement, and Modernization Act (MMA) of 2003 set specific  requirements for CMS oversight of the implementation of information  security controls by the MACs. FISMA requires an annual independent  evaluation of an agency\u2019s information systems, including those provided  or managed by contractors, to ensure compliance with NIST  requirements. Further, OMB\u2019s FISMA guidance specifies regular testing  of all security controls with an agency-determined, risk-based subset to  be tested annually. The MMA likewise requires the MACs to undergo an  independent evaluation of their information security program on an annual  basis. Specifically, an independent assessor is to annually test an  appropriate subset of a contractor\u2019s systems and assess compliance with  federal requirements for information security policies, procedures,  standards, and guidelines, as defined by OMB."], "subsections": [{"section_title": "MACs Undergo Two Types of Annual Assessments", "paragraphs": ["In order to meet the requirements of the MMA and FISMA, CMS  established two separate annual information security assessment  processes for the MACs. Specifically, to comply with MMA, CMS has  overseen independent annual evaluations of these contractors since the  law was enacted in 2003. CMS selected an independent assessor to  perform all of the MMA assessments. The assessor first reviews  documentation of the implementation of security controls by the  contractor and then reviews technical security controls onsite at each  MAC. In 2010, CMS expanded the MMA assessments into more technical  areas and has included penetration testing as part of the assessments.", "In addition, agency officials that oversee the MMA assessments stated  that CMS reviews contractor policies and procedures for configuration  management twice a year and conducts an on-site review of the  implementation of selected technical controls every June. In 2016, the  independent assessor performed tests in nine categories of security  controls at eight MAC datacenters. In total, these assessments reported  168 weaknesses, of which 53 were categorized as high or moderate risk  and 115 were low-risk.", "Further, to comply with FISMA requirements that all controls are tested  regularly, CMS requires MACs to test one-third of their system security  controls annually. CMS determines the control families to be tested in any  given year and rotates the selection each year so that all controls are  tested by the end of the 3-year testing cycle. For the 2016 FISMA  assessment, CMS selected 121 security requirements within 8 control  families.", "The independent assessor is responsible for assessing the security  controls and making recommendations on how to correct weaknesses  and address identified vulnerabilities. To determine compliance with CMS  requirements, controls are assessed against the minimum security  requirements defined in the CMS ARS.", "According to CMS officials from the Medicare Contractor Management  Group, the two annual assessment processes together ensure that  sufficient testing is being conducted each year. For example, in any given  year, the MMA assessments may cover different security controls than  the FISMA assessments. In addition, the FISMA assessors may identify  outstanding recommendations that were made from the prior year\u2019s MMA  assessment and provide a status update on progress made to address  open recommendations."], "subsections": []}]}, {"section_title": "Corrective Actions and Milestones Have Not Always Been Tracked Consistently", "paragraphs": ["Tracking and remediation are key parts of an organization\u2019s security  program that help to ensure that identified issues are addressed promptly  and effectively. CMS requires the MACs to develop corrective action  plans to remediate most of the weaknesses identified by the MMA and  FISMA assessments. CMS requires that these weaknesses, along with  plans of action and milestones for correcting them, be captured and  tracked in its CMS FISMA Controls Tracking System, which is an agency- wide system for tracking the remediation of identified weaknesses. The  tracking system maintains the certification and accreditation documents  for all MAC systems and manages plans of action and milestones, their  remediation activities, and completion. CMS monitors the disposition of all  issues captured in the CMS FISMA Controls Tracking System, which  helps to ensure that the MACs take steps to address weaknesses within  required time frames.", "However, because CMS does not routinely track low-risk weaknesses, it  may not be ensuring that all weaknesses consistently receive appropriate  management attention and timely remediation. Specifically, with regard to  the MMA assessments, CMS requires MACs to develop a corrective  action plan to remediate only high and medium-risk weaknesses, which  are tracked using plans of action and milestones. CMS does not require  the tracking of low-risk weaknesses, which are shown in the assessment  reports as recommended improvements rather than weaknesses in need  of correction. In certain cases, MMA assessments have classified  weaknesses as low-risk, and they have not been tracked in the CMS  FISMA Controls Tracking System, even though similar weaknesses were  classified by other assessments as medium- or high-risk, and were  tracked. In contrast to the MMA assessments, CMS requires that MACs  track all weaknesses identified in FISMA assessments in the CMS FISMA  Controls Tracking System.", "Examples of inconsistently classified weaknesses reported in the 2016  MMA assessments include (1) maintaining complete and up-to-date  inventories of information system components and (2) ensuring that  protections against malicious software are installed and kept up-to-date.  Of the six assessments that reported that MACs did not have a complete  and accurate listing of systems and devices supporting Medicare claims  processing, three classified this weakness as medium-risk and created a  plan of action and milestones, while the other three assessed a low-risk  level and did not create a plan of action and milestones. Similarly, eight  assessments reported that MACs either did not have malicious software  protections installed or they were not up-to-date. Of these eight, CMS  officials stated that three were classified as medium-risk and were tracked  by CMS, while the other five were assigned a low-risk level and not  tracked.", "The inventory and malicious software protection weaknesses that were  tracked inconsistently are related to categories of weaknesses that have  posed recurring challenges for the MACs in recent years. Since 2009,  both the MMA and FISMA assessments have reported incomplete  implementation of several types of high-risk security requirements across  all the MACs. The weaknesses identified during these assessments\u2014 which generally involved configuration management, system security  plans, and system inventories\u2014have yet to be fully resolved. Table 3  describes these key categories of weaknesses.", "According to CMS officials, weaknesses identified in the annual MMA  assessments may be ranked at different risk levels because the specific  circumstances of each finding can vary. However, documentation of the  specific weaknesses identified in the 2016 MMA assessment reports does  not make clear why findings that are characterized in similar terms or  have the same name may have been assigned different risk levels.", "CMS officials who oversee the information security testing at MACs  stated that they are aware of the recurring areas of weaknesses identified  in the annual assessments and have been taking actions to address  them. For example, in 2009, CMS began requiring MACs to submit  evidence that their configuration management programs complied with  CMS requirements. According to the officials, since this program has  been put into place, configuration management processes at the MACs  have become more consistent and more thoroughly documented.", "Nevertheless, the 2016 FISMA assessments concluded that a MAC\u2019s  system security plan did not include procedures for testing changes made  to their production environments, and the MAC was not tracking changes  made to the production environments. According to the CMS officials, the  fact that recurring issues such as these have not yet been fully resolved  may be due to the root causes of the deficiencies not yet being  addressed.", "Without more consistent tracking of identified issues through plans of  action and milestones, it may be difficult for CMS to fully determine the  extent to which security weaknesses identified during assessments of the  MACs are remediated. Weaknesses that appear to be low-risk may be  indicators of more significant underlying issues and, thus, may not be  receiving appropriate management attention or prompt remediation,  unnecessarily exposing Medicare beneficiary data to security risks."], "subsections": []}, {"section_title": "CMS Does Not Have Effective Oversight Processes and Procedures for Researchers and Qualified Entities", "paragraphs": ["While CMS has established assessment programs for MACs, the agency  has much more limited security oversight mechanisms in place to ensure  that qualified entities and researchers with access to Medicare beneficiary  data implement appropriate security controls. CMS oversight processes  and procedures for qualified entities and researchers consists primarily of  reviewing the data protections that researchers and qualified entities  describe in the data management plans they submit when requesting  access to Medicare beneficiary data.", "According to CMS officials who review these plans, they may ask follow- up questions to obtain more information or make recommendations on  how to better implement security safeguards in accordance with CMS  requirements. However, no further reviews are conducted for any  qualified entities or researchers. For example, CMS does not conduct on- site reviews of the implementation of security controls and does not  collect or review evidence of whether the controls have been  appropriately implemented. Further, it does not conduct or require any  independent testing of security controls.", "As an additional check for qualified entities, instead of assessing their  security controls, CMS assesses their responses to questions relating to  213 moderate-level data security controls from 26 control families set  forth in the ARS. However, once the initial document review has been  completed, CMS does not perform any in-person or document reviews of  security controls that are in place unless the qualified entity reports a  major change in its data security environment after initial approval.", "According to officials of the Office of Enterprise Data Analytics, which is  responsible for overseeing access to Medicare data by researchers and  qualified entities, CMS has, in the past, conducted remote and on-site  reviews as a pilot project. These reviews examined selected researchers\u2019  security controls, based on factors such as the use of data described in  the researchers\u2019 data management plans. According to these officials, the  pilot project is no longer being conducted because funding for the  program has stopped.", "The need to ensure that these entities have effectively implemented  information security controls is demonstrated by data breaches that these  organizations have reported. Of the 195 research entities that CMS has  data use agreements with, six have suffered data breaches involving the  loss of over 500 records containing PII covered under the Health  Insurance Portability and Accountability Act of 1996, which they  reported to the HHS Office of Civil Rights. These breaches included  Internet-based intrusions into researcher systems as well as other IT- related incidents.", "According to CMS officials who oversee access to Medicare data for  researchers and qualified entities, the data use agreement requires  organizations to report any breach of PII or personal health information  from the CMS data files to the agency. These officials also stated that the  six organizations did not report any breaches to CMS and that they were  unaware that the organizations had reported compromises. The officials  noted that if the breaches did not involve PII or personal health  information from CMS data files provided under a data use agreement,  the organizations were not required to report this information to CMS.  Further, these officials stated that the agency is currently revising its data  management plan to include a requirement for organizations to fully  disclose all breaches to the agency, which may impact whether or not to  grant access to Medicare data for organizations that were breached.", "Given that, in the past, researchers\u2019 systems have been successfully  attacked, effective implementation of security controls is critical to  reducing threats of compromise. However, without more robust oversight  processes and procedures, CMS cannot determine whether qualified  entities or researchers have implemented security controls appropriately  and, thus, cannot ensure that the risks associated with their use of  Medicare beneficiary data have been adequately mitigated."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["CMS shares Medicare beneficiary data with external entities primarily for  processing Medicare claims, supporting medical research, and evaluating  the performance of Medicare service and equipment providers. CMS has  set basic requirements for protecting the security of Medicare beneficiary  data that it shares with MACs, qualified entities, and researchers.  However, CMS has not required the documentation of low-risk  weaknesses in the CMS FISMA Controls Tracking system so that CMS  can track the MACs\u2019 remediation of weaknesses that have been identified  in recurring annual assessments. In addition, MACs and qualified entities  are given guidance that generally aligns with federal guidance and is  based on an assessment of risks specific to CMS to ensure that  appropriate controls have been included. However, CMS has not  provided guidance to researchers on how to select and implement  specific security controls. Until CMS provides more comprehensive, risk- based guidance on implementing security controls to all of its external  partners, there is an increased risk that researchers will not fully  implement appropriate protections for Medicare beneficiary data.", "CMS has developed and implemented an oversight program for the  MACs\u2019 implementation of security controls based on two types of annual  independent assessments, which together help ensure that sufficient  testing is being conducted each year. However, CMS has not ensured  that the MACs track and remediate identified weaknesses consistently,  including weaknesses that have been identified in recurring annual  assessments. Further, CMS has not established an oversight program for  qualified entities and researchers to assess whether they are  implementing security controls as they are required. Without more  effective oversight programs in place, CMS lacks full assurance that  external entities are appropriately implementing security protections for  Medicare beneficiary data."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making three recommendations to the Administrator of the  Centers for Medicare and Medicaid Services:", "Develop and distribute guidance for researchers defining minimum  security controls and implementation guidance for those controls that  is consistent with NIST guidance. (Recommendation 1)", "Develop processes and procedures to ensure that findings from all  MAC assessments are classified consistently and tracked  appropriately. (Recommendation 2)", "Develop processes and procedures to ensure that qualified entities  and researchers have implemented information security controls  effectively throughout their agreements with CMS. (Recommendation  3)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We received written comments on a draft of this report from HHS. In the  comments (reprinted in appendix III), the department concurred with our  three recommendations and discussed actions that the department has  planned or taken. If fully and effectively implemented, the intended  actions should help HHS to address weaknesses in processes and  procedures for ensuring the protection of Medicare beneficiary data used  by the department\u2019s contractors. The department also provided technical  comments, which we have incorporated in the report, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, 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) 512-9342 or marinosn@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) identify the major entities that collect, store,  and process Medicare beneficiary data and that connect with Centers for  Medicare and Medicaid Services (CMS) systems and networks; (2)  determine whether requirements for the protection of Medicare  beneficiary data align with federal guidance; and (3) assess the programs  CMS has in place to oversee the implementation of security protections  for Medicare beneficiary data.", "To address our first objective, we analyzed prior GAO reports and CMS  documentation, such as CMS data maps and system documentation.  Additionally, we conducted interviews with agency officials to identify  major external entities that access Medicare beneficiary data, including  with Medicare Administrative Contractors (MAC) and researchers. We  analyzed the information obtained from CMS to describe the type of  Medicare data each entity has access to and purposes for which such  access is provided. Further, we analyzed agency agreements with  external entities to describe external uses for the data CMS collects and  distributes.", "Regarding our second objective, we analyzed CMS guidance, specifically  its Acceptable Risk Safeguards (ARS), to determine baseline  requirements for the protection of Medicare beneficiary data that have  been established by CMS. To assess the completeness of this guidance,  we compared the ARS to the National Institute of Standards and  Technology\u2019s (NIST) Cybersecurity Framework\u2019s controls included in the  \u201cidentify,\u201d \u201cprotect,\u201d \u201cdetect,\u201d and \u201crespond\u201d categories. We did not  include the \u201crecover\u201d category because it is more focused on data  recovery than on the identification, protection, and detection capabilities  necessary to prevent incidents. We compared the controls referenced by  NIST to the controls that were documented in the ARS to identify controls  that had not been included. We also interviewed CMS officials  responsible for developing the ARS to determine the process that the  agency uses to select controls.", "Additionally, to determine how CMS required external entities to  implement security measures, we reviewed formal agreements that were  entered into with those organizations. For the MACs, we analyzed  contracts to determine CMS security requirements. For researchers and  qualified entities, we reviewed the data use agreement templates to  determine what requirements CMS specified for selecting and  implementing security measures.", "To address our third objective, we analyzed system assessments  performed by CMS and conducted interviews with CMS officials  responsible for overseeing the security of Medicare beneficiary data  provided to external entities. Specifically, we analyzed information  security assessments to determine the nature and extent of reported  findings, the disposition of assessment recommendations, and whether  assessment results were being addressed in a timely fashion over the  span of time that they have been conducted.", "For the MACs, we reviewed assessments performed in accordance with  the Federal Information Security Management Act and the Medicare  Prescription Drug, Improvement, and Modernization Act of 2003. For  researchers and qualified entities, we obtained information from CMS  about ongoing and previously performed assessment programs. Through  interviews with relevant CMS officials, we obtained and analyzed  information about the findings that were not resolved in a timely fashion  and about the constraints that prevented the ongoing assessment of  researchers and qualified entities.", "We conducted this performance audit from October 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Analysis of CMS Acceptable Risk Safeguards", "paragraphs": ["We compared the Centers for Medicaid and Medicare Services (CMS)  Acceptable Risk Safeguards (ARS) with the National Institute of  Standards and Technology (NIST) Cybersecurity Framework to determine  the extent to which the ARS aligns with the framework. To do this, we  compared the controls noted as informative references by the framework  to the controls documented in the ARS. We did not assess the \u201cRecover\u201d  category because it is more focused on data recovery than on the  identification, protection, and detection capabilities necessary to prevent  incidents."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, John De Ferrari (assistant  director); Thomas Johnson (analyst-in-charge); Chris Businsky, Kavita  Daitnarayan, Nancy Glover, Charles Hubbard III, Monica Perez-Nelson,  and Richard Sayoc made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-29", "url": "https://www.gao.gov/products/GAO-19-29", "title": "Defense Nuclear Enterprise: DOD Continues to Address Challenges but Needs to Better Define Roles and Responsibilities and Approaches to Collaboration", "published_date": "2018-11-01T00:00:00", "released_date": "2018-11-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2014, the Secretary of Defense directed two reviews of DOD's nuclear enterprise. These reviews identified problems with leadership, organization, investment, morale, policy, and procedures, as well as other shortcomings that adversely affected the nuclear deterrence mission. The reviews also made recommendations to address these problems. In 2015, DOD conducted a review focused on NC3 systems, which resulted in additional recommendations.", "The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to review DOD's processes for addressing these recommendations. This report addresses the extent to which DOD and the military services have (1) made progress in the implementation, tracking, and evaluation\u2014including identifying and documenting risk\u2014of the recommendations of the 2014 nuclear enterprise reviews and the 2015 NC3 report and (2) improved oversight of the defense nuclear enterprise and managed roles, responsibilities, and collaboration among various organizations. GAO reviewed relevant documents and interviewed agency officials from DOD and the military services."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has made progress in implementing the recommendations from the 2014 nuclear enterprise reviews and a 2015 nuclear command, control, and communications (NC3) review and has improved its tracking and evaluation of this progress. For example, since GAO last reported\u2014in October 2017\u2014an additional 74 of the 247 sub-recommendations from the 2014 reviews have been closed; 96 remain open. In January 2018, in response to a GAO recommendation, the Office of Cost Assessment and Program Evaluation (CAPE) issued guidance to aid the military services in identifying, assessing, and documenting risks associated with the 2014 recommendations, such as unintended consequences from their implementation. The guidance calls on them to update their risk assessments periodically as new data become available. The Air Force and Navy have begun to provide risk information in CAPE's and their own tracking tools. In July 2018, in response to a GAO recommendation, DOD's Chief Information Officer issued guidance to improve tracking and evaluation of progress in implementing the 2015 recommendations.", "DOD and the military services have taken steps to improve oversight of the nuclear enterprise in response to the 2014 reviews but lack clear roles and responsibilities and methods for collaboration. The Secretary of Defense created the Nuclear Deterrent Enterprise Review Group (NDERG) in 2014 to ensure the long-term health of the nuclear enterprise by addressing resourcing, personnel, organizational, and enterprise policy issues. However, DOD guidance has not clearly defined roles and responsibilities for the NDERG or provided methods for the NDERG to communicate and collaborate with other nuclear oversight organizations, including those shown in the figure. Nor has NC3 oversight guidance been updated to reflect changes in roles and responsibilities and to include methods for communication and collaboration among NC3 oversight groups. In the absence of defined roles and responsibilities for the NDERG and NC3 oversight bodies and methods for how the NDERG and NC3 oversight groups are to communicate and collaborate, senior leaders may not be in a position to effectively manage resourcing and risk across the department."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes four recommendations for DOD to clarify roles, responsibilities, and methods of communication and collaboration for both the NDERG and NC3 oversight bodies. DOD concurred with all four recommendations and provided information about planned actions to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2014, as a response to incidents involving the nation\u2019s nuclear forces  and their senior leadership, the Secretary of Defense directed an internal  review and an independent review of the Department of Defense (DOD)  nuclear enterprise. Together, the two reports and a memorandum from  the U.S. Strategic Command Commander with additional areas for  improvement (hereafter referred to collectively as the 2014 nuclear  enterprise reviews) identified problems with leadership, organization,  investment, morale, policy, and procedures, as well as other  shortcomings that adversely affected the nuclear deterrence mission. In  2015, DOD conducted a review focused on nuclear command, control,  and communications (NC3) systems, which resulted in a report (hereafter  referred to as the 2015 NC3 report) with recommendations to address  diffused responsibility, accountability, and authority for the NC3  enterprise; ineffective life-cycle management programs; and a lack of  institutional training and personnel management programs.", "The National Defense Authorization Act (NDAA) for Fiscal Year 2017  includes a provision for us to review\u2014during each of fiscal years 2017  through 2021\u2014DOD\u2019s processes for addressing the recommendations of  the nuclear enterprise reviews. We are also to review DOD\u2019s process for  implementing recommendations from other assessments of the nuclear  enterprise, including the 2015 NC3 report, and to provide a briefing to the  congressional defense committees on the results of our review. In July  2016, we reported that the process DOD had developed for tracking the  2014 review recommendations generally appeared consistent with  relevant criteria from Standards for Internal Control in the Federal  Government\u2014including using and effectively communicating quality  information and performing monitoring activities. In October 2017, we  recommended that the Office of Cost Assessment and Program  Evaluation (CAPE) develop additional guidance on the identification of  risks and the documentation of these risks in DOD\u2019s centralized tracking  tool for the recommendations of the 2014 nuclear enterprise reviews. We  also recommended that the DOD Chief Information Officer (CIO) develop  guidance to improve the tracking and evaluation of DOD\u2019s progress in  implementing the recommendations of the 2015 NC3 report. DOD  concurred with these recommendations, and we discuss its efforts to  address them later in this report.", "This report addresses the extent to which  1.  DOD and the military services have made progress in the  implementation, tracking, and evaluation\u2014including identifying and  documenting risk\u2014of the recommendations of the 2014 nuclear  enterprise reviews and the 2015 NC3 report and  2.  DOD and the military services have improved oversight of the defense  nuclear enterprise and managed roles, responsibilities, and  collaboration among various organizations.", "For objective one, we reviewed key documents, including the centralized  DOD tracking tool for 2014 recommendations, the military services\u2019  internal tracking tools for the 2014 recommendations, and the DOD CIO\u2019s  tracking tool for the 2015 recommendations. We also interviewed officials  responsible for implementing the recommendations, to verify that the  content captured in the tracking mechanisms reflected progress accurately. We determined that the information in the tracking tools was  reliable for our purposes by reviewing the contents of the tracking tools  and comparing this information with source documents\u2014including the  internal and independent nuclear enterprise reviews, U.S. Strategic  Command\u2019s action plan, and the 2015 NC3 report\u2014and documentation of  actions taken by the military services and other organizations to  implement the recommendations. We also reviewed applicable guidance,  such as the Secretary of Defense\u2019s 2014 memorandum (Nuclear  Enterprise Review Corrective Action Implementation), the 2016 Deputy  Secretary of Defense memorandum (Transition of Nuclear Enterprise  Review Tracking Responsibilities, which includes CAPE\u2019s Nuclear  Enterprise Review Tracking Analytic Guidance Overview), and CAPE\u2019s  January 2018 updated guidance on risk (Additional Guidance for Nuclear  Enterprise Review Recommendation Tracking).", "For objective two, we reviewed key documents\u2014including the  independent and internal nuclear enterprise reviews\u2014and guidance such  as the Secretary of Defense\u2019s memorandum (Nuclear Enterprise Review  Corrective Action Implementation). We also reviewed the statutes  establishing roles and responsibilities for the Nuclear Weapons Council  and the Council on Oversight of the National Leadership Command,  Control, and Communications System (NLC3S Council). We obtained  and analyzed lists of attendees at meetings of the Nuclear Deterrent  Enterprise Review Group (NDERG), the Nuclear Weapons Council, and  the NLC3S Council that were held from January 2014 through March  2018 to identify offices and senior DOD leaders that participated in more  than one of these organizations. Finally, we interviewed cognizant DOD  officials about their participation in defense nuclear enterprise oversight  organizations. We compared the roles and responsibilities of these  oversight organizations with relevant criteria from Standards for Internal  Control in the Federal Government and with our selected leading  practices for collaboration.", "To conduct our work on both objectives, we interviewed officials from the  following offices to discuss progress in implementing the  recommendations to improve the nuclear enterprise:", "Office of the Assistant Secretary of Defense for Nuclear,  Chemical, and Biological Defense Programs (Nuclear Matters)", "Office of the Deputy Assistant Secretary of Defense for Nuclear", "Defense Threat Reduction Agency", "Secretary of the Air Force, Office of the Inspector General", "Air Force Headquarters: Strategic Deterrence and Nuclear  Integration (A10)", "Air Force Global Strike Command", "Chief of Naval Operations: Nuclear Policy (N514) and Undersea  Warfare (N97)", "U.S. Army Nuclear and Countering-Weapons of Mass Destruction  We conducted this performance audit from October 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Oversight of 2014 Nuclear Enterprise Reviews\u2019 Recommendations", "paragraphs": ["In November 2014, the Secretary of Defense directed DOD to address  the recommendations from the 2014 nuclear enterprise reviews and  directed CAPE to track and assess these implementation efforts. The  Joint Staff, the Navy, the Air Force, offices within the Office of the  Secretary of Defense, and U.S. Strategic Command have supported  CAPE\u2019s efforts. CAPE compiled the recommendations from the 2014  nuclear enterprise reviews. In total, CAPE identified 175 distinct  recommendations from the three documents. CAPE then identified 247  sub-recommendations within those recommendations, which were  directed to multiple military services or other DOD components. For  example, if a recommendation was directed to the Air Force and the  Navy, then one sub-recommendation was made to the Air Force and one  to the Navy.", "CAPE then worked with the military services to identify offices of primary  responsibility for implementing actions to address the recommendations,  any offices with coordinating responsibility, and any resources necessary  to implement each recommendation. CAPE has developed a centralized  tracking tool to collect information on progress in meeting milestones and  metrics. As shown in figure 1, the tracking tool includes fields for the  underlying problem statement, or root cause, for the recommendation;  time frames with milestones for implementing the recommendation; and  performance measures (referred to as metrics in the tracking tool) to  assess the effectiveness of the actions taken.", "The tracking tool currently contains hundreds of unique milestones and  metrics and, according to CAPE officials, additional milestones and  metrics are added as they are identified. The Air Force and the Navy also  have developed their own methods of tracking their service-specific  recommendations. In December 2016, the Deputy Secretary of Defense  issued a memorandum that directed the transition of the tracking and  analysis responsibilities related to implementing the recommendations of  the 2014 nuclear enterprise reviews from CAPE to the military  departments and other DOD components. However, CAPE remains  responsible for providing guidance to inform the analyses conducted by  other DOD entities, overseeing these analyses, and assessing  recommendations for closure. The aim of these changes was to enhance  ownership and embed the principles of robust analysis, continuous  monitoring, and responsibility throughout the department."], "subsections": []}, {"section_title": "NC3 Systems", "paragraphs": ["NC3 is a large and complex system comprised of numerous land-, air-,  and space-based components used to ensure connectivity between the  President and nuclear forces. NC3 is managed by the military  departments, nuclear force commanders, and the defense agencies; it  provides the President with the means to authorize the use of nuclear  weapons in a crisis.", "NC3 systems support five important functions:", "Force management: assignment, training, deployment,  maintenance, and logistics support of nuclear forces before,  during, and after any crisis.", "Planning: development and modification of plans for the  employment of nuclear weapons and other options.", "Situation monitoring: collection, maintenance, assessment, and  dissemination of information on friendly forces, adversary forces  and possible targets, emerging nuclear powers, and worldwide  events of interest.", "Decision making: assessment, review, and consultation that  occur when the employment or movement of nuclear weapons is  considered.", "Force direction: implementation of decisions regarding the  execution, termination, destruction, and disablement of nuclear  weapons."], "subsections": []}, {"section_title": "Oversight of the 2015 NC3 Report Recommendations", "paragraphs": ["As recommended in the 2015 NC3 report, the NLC3S Council has taken  a lead role in providing oversight and making the final determination on  the implementation status of that report\u2019s 13 recommendations. The  NLC3S Council is co-chaired by the Under Secretary of Defense for  Acquisition and Sustainment and the Vice Chairman of the Joint Chiefs of  Staff. Members of the council include the Under Secretary of Defense  for Policy; the Commander, U.S. Strategic Command; the Commander,  North American Aerospace Defense Command/U.S. Northern Command;  the Director, National Security Agency; and the DOD CIO. The DOD CIO  also serves as the Secretariat for the NLC3S Council and tracks the  implementation of recommendations from the 2015 NC3 report, among  other activities. Additional organizations, such as the Office of the Under  Secretary of Defense for Intelligence, may participate in the NLC3S  Council\u2019s meetings to provide subject matter expertise. Regular  participants in the NLC3S Council include the Office of the Under  Secretary of Defense (Comptroller); senior leaders from the Army, the  Navy, and the Air Force; the Defense Information Systems Agency; the  White House Military Office; and CAPE."], "subsections": []}, {"section_title": "Key Nuclear Oversight Organizations", "paragraphs": ["DOD has established or participated in a number of oversight  organizations that aid in the management of the defense nuclear  enterprise. These organizations include the following:", "NDERG: Established in 2014 by the Secretary of Defense to  ensure the long-term health of the nuclear enterprise by  addressing resourcing, personnel, organizational, and enterprise  policy issues identified in the 2014 nuclear enterprise reviews. The  NDERG consists of a group of senior officials chaired by the  Deputy Secretary of Defense, including the Vice Chairman of the  Joint Chiefs of Staff. The NDERG is supported by a Nuclear  Deterrent Working Group, which meets biweekly and reviews the  status of the recommendations of the nuclear enterprise reviews,  and a Nuclear Deterrent Senior Oversight Group, which meets  quarterly and reviews any recommendations that the Working  Group believes are ready for the NDERG to close. The Nuclear  Deterrent Senior Oversight Group also receives annual briefings  on component assessments, reviews organizational changes, and  discusses other cross-service issues. The Deputy Secretary of  Defense updates the Secretary of Defense on the NDERG\u2019s  progress as requested.", "NLC3S Council: A DOD council established by statute that is  responsible for the oversight of the command, control, and  communications system for the national leadership of the United  States. Additionally, as recommended in the 2015 NC3 report,  the NLC3S Council reviews the recommendations from the report  and assesses them for closure. The NLC3S Council is supported  by the National Leadership Command Capabilities Executive  Management Board, which comprises a Senior Steering Group  and four working groups\u2014Stakeholders, Resources,  Assessments, and Nuclear Command and Control Issues. The  Executive Management Board ensures that the Council is  informed of and presents issues that need principal-level  decisions.", "Nuclear Weapons Council: A joint DOD and Department of  Energy council established by statute that is responsible for  managing aspects of the U.S. nuclear weapons stockpile and  programs. The Under Secretary of Defense for Acquisition and  Sustainment is designated as the chair of the Nuclear Weapons  Council, and the Assistant Secretary of Defense for Nuclear,  Chemical, and Biological Defense Programs serves as the staff  director of the Council. The Nuclear Weapons Council is  supported by a senior executive-level Standing and Safety  Committee and a subordinate, working-level Action Officers  Group. The Action Officers Group performs detailed analyses of  issues and provides those analyses to the Standing and Safety  Committee, which reviews them and formulates decision  packages for final Council review and decision.", "Nuclear Matters: An office under the Assistant Secretary of  Defense for Nuclear, Chemical, and Biological Defense Programs;  it is headed by the Deputy Assistant Secretary of Defense for  Nuclear Matters and serves as a focal point for DOD activities and  initiatives to sustain a safe, secure, and effective nuclear deterrent  and counter the threat from nuclear terrorism and nuclear  proliferation.", "Nuclear and Missile Defense Policy: An office supporting the  Under Secretary of Defense for Policy and the Assistant Secretary  of Defense for Strategy, Plans, and Capabilities. Nuclear and  Missile Defense Policy participates in the development of  strategies, creation of policies, and conduct of oversight of  national nuclear policy, treaty negotiations, and missile defense  policy.", "U.S. Strategic Command: DOD functional combatant command  responsible for planning for and employment of U.S. nuclear  weapons and for certain matters related to NC3."], "subsections": []}]}, {"section_title": "DOD Has Made Progress in Implementing and Tracking Recommendations, Including Evaluating and Documenting Key Risks", "paragraphs": ["DOD continues to make progress in implementing the recommendations  from the 2014 nuclear enterprise reviews and has made improvements in  tracking and evaluating this progress. Specifically, the military services  and other DOD components have begun identifying and documenting  risks associated with implementing recommendations from the 2014  reviews, based on guidance that was issued by CAPE in January 2018.  DOD has also made progress in implementing the recommendations from  the 2015 NC3 report. For example, the DOD CIO issued guidance in July  2018 to improve the tracking and evaluation of DOD\u2019s progress in  implementing the recommendations of the NC3 report."], "subsections": [{"section_title": "DOD Has Made Progress Implementing Recommendations from the 2014 Nuclear Enterprise Reviews", "paragraphs": ["DOD continues to make progress in implementing the recommendations  of the 2014 nuclear enterprise reviews. As of our last report, in October  2017, DOD had closed 77 sub-recommendations. Based on our review of  CAPE\u2019s centralized tracking tool, the NDERG has closed 74 additional  sub-recommendations since then. As a result, according to the CAPE  tracking tool, the NDERG has closed 151 of the 247 sub- recommendations as of September 2018 (see fig. 2).", "Since October 2017, DOD has closed sub-recommendations related to a  number of issues identified in the 2014 nuclear enterprise reviews. For  example, in January 2018, the NDERG closed a sub-recommendation  originating from the Internal Assessment of the Department of Defense  Nuclear Enterprise that the Air Force should ensure its nuclear inspection  teams are properly sized and that inspection efforts are coordinated. In  response to the recommendation, the Air Force worked to reduce the  footprint of inspectors, to the extent possible, and improve consolidation  of inspections to avoid redundancy. Meanwhile, in January 2018, the  NDERG also closed a sub-recommendation that originated from the  Independent Review of the Department of Defense Nuclear Enterprise  that the Navy improve its readiness reporting system to provide better  information about manning and personnel costs. In response to the  recommendation, the Navy has made improvements in its readiness  reporting by having ballistic missile submarine fleet commanders report  additional readiness information about manning and personnel costs  through the Navy\u2019s readiness reporting.", "The Air Force, the Navy, and CAPE have described some of the  remaining open recommendations as enduring issues for the enterprise,  and tracking progress toward these recommendations will aid in  monitoring the overall health of the defense nuclear enterprise. These  recommendations include ongoing sustainment and maintenance efforts  and improving the morale of the nuclear forces. As we have previously  reported, CAPE officials stated that it would take years to implement the  great majority of these recommendations and measure whether they have  had their intended effect. For example, CAPE and military service  officials have noted that it would take years for some of the recommended  cultural changes to manifest."], "subsections": []}, {"section_title": "Military Services Have Begun to Track and Evaluate the Risks Associated with Open 2014 Recommendations", "paragraphs": ["The military departments and other DOD components are responsible for  tracking and evaluating the implementation status of the 2014 nuclear  enterprise reviews\u2019 recommendations; CAPE is providing guidance to aid  these efforts. As we previously reported, CAPE had been responsible for  tracking this progress until, in December 2016, the Deputy Secretary of  Defense issued a memorandum that transitioned this responsibility from  CAPE to the military departments and other DOD components. However,  CAPE remains responsible for providing guidance to inform the analyses  conducted by other DOD entities, overseeing the analyses, and  assessing recommendations for closure. In January 2018, in response to  our 2017 recommendation, CAPE issued additional guidance to improve  the identification, assessment, and documentation of risks related to  implementing the 2014 nuclear enterprise reviews\u2019 recommendations.", "CAPE\u2019s January 2018 guidance includes specific instructions that military  departments and other DOD components should follow when identifying,  assessing, and documenting risks. Specifically, the guidance instructs the  responsible components to identify any key risks associated with the  open recommendations and to document those key risks. The January  2018 guidance defines key risks as those that require mitigation by the  leadership of the DOD component (e.g., a risk that requires mitigation by  senior Air Force or Navy leadership) or those that cannot be mitigated  within a component\u2019s existing authorities and resources (e.g., a risk that  cannot be mitigated within the Air Force or Navy that must be raised to a  higher authority). Additionally, the guidance indicates that risks that do not  rise to the level of being key risks should also be tracked according to the  component\u2019s own assessment methodology and, if a component\u2019s  approach to a recommendation does not carry any key risks, this should  be documented.", "The guidance identifies some risk assessment tools for components to  use, as appropriate, but specifically states that components should  consider the following questions:", "What are the risks if the recommendation is not implemented?", "What are the risks in the approach to implementing the  recommendation?", "What flexibility does the approach have to respond to unintended  consequences?", "What are the controls and actions needed to mitigate risk to an  acceptable level?", "The guidance also notes that components should update risk  assessments periodically as progress is made and new data become  available.", "According to the CAPE tracking tool, as of September 2018, key risks\u2014or  the absence of key risks\u2014are documented for 85 of the 96 open sub- recommendations in the centralized tracking tool. Of the 85 sub- recommendations for which risk information is identified in the centralized  tracking tool\u2019s \u201cKey Risks and Issues\u201d field, key risks are identified for 50.  For the remaining 35, no risks are identified as rising to the level of being  a key risk. Based on information in the tracking tool, the Air Force and the  Navy have lead responsibility for the 85 sub-recommendations for which  risk information is identified in the tracking tool. U.S. Strategic Command,  Joint Staff, and the Office of the Secretary of Defense have not yet  included any risk information for the remaining 11 open sub- recommendations for which they have lead responsibility.", "In addition to updated risk information in CAPE\u2019s central tracking tool, the  Air Force has updated its internal tracking tool. According to Air Force  officials, the Air Force tracking tool includes both key risks\u2014risks that  require Air Force leadership to mitigate them\u2014and low-level risks\u2014risks  that do not rise to the level where Air Force leadership should mitigate  them\u2014for each of the 60 remaining sub-recommendations for which it  has the lead. For example, for the recommendation concerning Air Force  nuclear personnel shortages, the Air Force\u2019s internal tracker notes the  risk that over-prioritizing the nuclear enterprise could affect the Air Force\u2019s  ability to conduct conventional operations. Additionally, the Air Force has  identified areas where there is no key risk. For example, for the  recommendation concerning intercontinental ballistic missile sustainment,  the Air Force\u2019s internal tracker noted that there was no key risk but that  there was a low-level risk that using limited resources to support legacy  systems could lead to underfunding modernization efforts.", "The Navy, in addition to documenting risk information in CAPE\u2019s  centralized tracking tool, has documented risks for many of its open sub- recommendations in an internal document called the Navy Nuclear  Deterrent Review Plan of Actions and Milestones, which tracks the Navy  recommendations by categories that the Navy created. For example,  when discussing risks for maintaining Navy NC3 systems, the Navy  Nuclear Deterrent Review Plan of Actions and Milestones states that the  Navy monitors availability across several levels, including sustainment  and modernization efforts. Additionally, controls are in place at various  levels to manage risks to the availability of NC3 assets. The Navy Nuclear  Deterrent Review Plan of Actions and Milestones acknowledges that if the  Navy does not continue to use these controls, the risk to the NC3 mission  may be unacceptable. According to Navy officials, risk is also examined  during the Navy\u2019s internal process for closing recommendations through a  review by the Navy Nuclear Deterrent Mission Oversight Council. For  example, the Council was briefed on actions to mitigate the risk that  insufficient personnel strength at some maintenance facilities poses to the  operational availability of Ohio-class submarines."], "subsections": []}, {"section_title": "DOD Has Made Progress in Implementing Recommendations from the 2015 NC3 Report", "paragraphs": ["DOD continues to make progress in implementing the recommendations  of the 2015 NC3 report. Since we last reported, in October 2017, DOD  has closed 3 additional recommendations. In total, as of August 2018, the  NLC3S Council has closed 5 of the 13 recommendations from the NC3  report (see fig. 3).", "According to tracking information from the DOD CIO, the Navy has  completed its portion of two of the open recommendations, but the Air  Force still has tasks it needs to complete before each recommendation  can be reviewed and closed by the NLC3S Council. As a result, these two  recommendations will remain \u201cin progress\u201d until the Air Force also  completes its portion of the implementation. In addition, a DOD  component has recommended that an additional 2 of the 13  recommendations be closed; however, these have not yet been reviewed  by the NLC3S Council.", "In July 2018, in response to our October 2017 recommendation, the DOD  CIO issued guidance to improve the tracking and evaluation of DOD\u2019s  progress in implementing the recommendations of the 2015 NC3 report.", "This guidance provides instructions to the military departments and DOD  components with responsibility for implementation of the 2015 NC3 report  recommendations to identify and provide key milestones, metrics utilized  to track progress, and information about recent progress\u2014including an  assessment of progress, required decisions and guidance, and key risks  and other issues.", "Information on the status of the 2015 NC3 report\u2019s recommendations is  collected in a layout similar to that developed by CAPE for the 2014  recommendations. The responsible organizations are in the process of  updating the information they have provided to the DOD CIO to respond  to the new guidance. The guidance directs the responsible organizations  to provide quarterly updates on the remaining, open recommendations  beginning in August 2018. According to a DOD CIO official, these regular  updates will continue until the recommendations are closed."], "subsections": []}]}, {"section_title": "DOD Has Taken Steps to Improve Oversight of the Nuclear Enterprise, but Key Oversight Groups Lack Clearly Defined Roles and Responsibilities and Methods for Communication and Collaboration Military Services Have Taken Steps to Improve Oversight of the Nuclear Enterprise", "paragraphs": ["DOD and the military services have taken steps to improve oversight of  the defense nuclear enterprise, in part in response to recommendations  from the 2014 nuclear enterprise reviews. DOD plans to use the NDERG  to oversee long-term and enduring issues affecting the nuclear enterprise.  However, the NDERG does not have formally defined roles and  responsibilities, and DOD has not established methods for how the  NDERG will communicate and collaborate with the other nuclear  enterprise oversight organizations. Further, DOD NC3 oversight guidance  has not been updated to reflect evolving NC3 oversight roles and  responsibilities and to include methods for communicating and  collaborating with other nuclear enterprise oversight groups.", "The military services have taken steps to improve oversight of the nuclear  enterprise in response to the concerns raised by the 2014 nuclear  enterprise reviews. The reviews noted a lack of comprehensive oversight  of the defense nuclear enterprise and a need for increased visibility for  senior leaders. Specifically,", "Since 2014, the Air Force has realigned responsibilities,  authorities, and accountability for its nuclear forces to  improve oversight of the nuclear enterprise. For example, the  Air Force implemented two recommendations from the Internal  Assessment of the Department of Defense Nuclear Enterprise to  elevate senior Air Force leadership positions in the nuclear  enterprise. Air Force Global Strike Command was upgraded from  a three-star to a four-star major command. According to officials  from Air Force Global Strike Command, the elevation of the  command to a four-star major command has helped ensure  support from the Air Force for funding and management of the  nuclear enterprise. In 2016, Air Force Global Strike Command  created the Air Force NC3 Center to manage portions of the Air  Force NC3 weapon system that are owned by the command  and\u2014according to Air Force NC3 Center officials\u2014to provide  oversight of the organize, train, and equip function for all of the Air  Force\u2019s NC3 missions. The Air Force also upgraded the position  of Deputy Chief of Staff for Strategic Deterrence and Nuclear  Integration, Headquarters Air Force, from a two-star to a three-star  position. The elevation of both the Air Force Global Strike  Command and A10 leadership was authorized by the Secretary of  Defense to ensure that their rank is commensurate with the  importance of the nuclear mission.", "The Navy oversees its leg of the nuclear triad using the Navy  Nuclear Deterrent Mission Oversight Council. The Council is a  senior Department of the Navy forum that is responsible for  coordinating the Navy\u2019s nuclear weapon activities (safety, security,  reliability, and nuclear weapons incident response), operations,  personnel, policy, material support, and oversight functions.  According to Navy officials, the Navy Nuclear Deterrent Mission  Oversight Council addresses long-term issues affecting the Navy\u2019s  nuclear enterprise and identifies and monitors risks associated  with those issues, including the actions taken in response to the  2014 nuclear enterprise reviews."], "subsections": [{"section_title": "The NDERG Lacks Clearly Defined Roles and Responsibilities and Approaches for Communicating and Collaborating with Other Nuclear Oversight Groups", "paragraphs": ["While the Deputy Secretary of Defense was designated as chairman of  the NDERG, DOD guidance does not define the membership, roles, and  responsibilities of the NDERG or identify methods for how the NDERG  and its working and oversight groups should communicate and  collaborate with other nuclear enterprise oversight groups. In July 2018,  the Deputy Secretary of Defense issued a memorandum directing a  series of changes intended to make the NDERG an enduring, principal- level forum to track risks, issues, and opportunities associated with the  health of the defense nuclear enterprise. The memorandum directed the  Assistant Secretary of Defense for Nuclear, Chemical, and Biological  Defense Programs to serve as the NDERG secretariat and, with the  Director of CAPE, co-chair the Nuclear Deterrent Senior Oversight Group.  In addition, within 60 days of the issuance of the memorandum, the  Assistant Secretary of Defense for Nuclear, Chemical, and Biological  Defense Programs is to provide a draft NDERG charter for coordination.  The charter will serve as an interim step while the Assistant Secretary of  Defense for Nuclear, Chemical, and Biological Defense Programs  prepares a DOD directive; it will also specify the NDERG\u2019s functions,  organization, and responsibilities. The new role as secretariat of the  NDERG and co-chair of the Nuclear Deterrent Senior Oversight Group  will expand the current responsibilities of the Office of the Assistant  Secretary of Defense for Nuclear, Chemical, and Biological Defense  Programs with regard to nuclear enterprise oversight.", "However, it is not clear whether the charter under consideration will  adequately incorporate the roles and responsibilities of the entities on the  NDERG, particularly given the new long-term role of the NDERG.  According to DOD officials, they have not determined to what extent  NDERG roles and responsibilities will be articulated in the charter.  Further, prior to issuance of the July 2018 memorandum, officials stated  that they had not created a charter for the NDERG because senior  leaders within the department were still deciding what ongoing role the  NDERG should take in monitoring the health of the nuclear enterprise.  The July memorandum helps to clarify this role, but it does not make clear  all of the associated roles and responsibilities of the NDERG and its  participants. For example, DOD has not determined whether the charter  will identify the NDERG\u2019s responsibilities for issues that are not directly  related to the 2014 nuclear enterprise reviews or what the NDERG\u2019s long- term role will be once most or all of the recommendations from the 2014  nuclear enterprise reviews are implemented. The July memorandum does  indicate that the charter will include a plan to confirm that NDERG- approved actions have the expected effects and do not result in  unintended consequences or recurrence of the initial issue. However, the  memorandum does not specify how or when the NDERG should address  new issues and does not indicate that the charter or DOD directive will do  so either.", "Standards for Internal Control in the Federal Government states that  management should establish an organizational structure, assign  responsibility, and delegate authority to achieve an entity\u2019s objectives.  Specifically, the standards call for management to develop an  organizational structure with an understanding of the organization\u2019s  overall responsibilities and assign these responsibilities to enable the  organization to operate in an efficient and effective manner, comply with  applicable laws and regulations, and reliably report quality information.  In the 2014 nuclear enterprise reviews, DOD identified a lack of  comprehensive oversight of the defense nuclear enterprise. To ensure  greater awareness among senior DOD leaders, the internal review  recommended that DOD create a single, senior-level position to oversee  the nuclear enterprise, provide the Secretary of Defense with additional  routine visibility into the nuclear enterprise, and marshal the authority of  the Secretary to resolve identified issues. DOD did not implement the  internal review team\u2019s recommendation to establish a senior oversight  position for the nuclear enterprise because, according to CAPE officials,  the Secretary of Defense considered the NDERG to be sufficient to  address the recommendation. However, four years after it was  established, the roles and responsibilities of the NDERG have not been  clearly articulated. DOD now plans to develop a charter and subsequent  DOD directive for the NDERG, but it remains unclear whether these  documents will provide clear roles and responsibilities for the NDERG to  effectively function as the comprehensive oversight body for the  enterprise\u2014in part because, according to officials, they are in the early  stages of development.", "In addition, DOD has not clearly defined how the NDERG will  communicate and collaborate with the other oversight groups. DOD uses  other groups, such as the Nuclear Weapons Council and the NLC3S  Council, to oversee portions of the nuclear enterprise and coordinate  among various DOD entities and with the Department of Energy. Many of  the same individuals and organizations are represented in two or all three  of the oversight organizations. For example, four DOD senior leaders\u2014 the Vice Chairman of the Joint Chiefs of Staff; the Under Secretary of  Defense for Acquisition and Sustainment; the Under Secretary of Defense  for Policy; and the Commander, U.S. Strategic Command\u2014participate in  both the Nuclear Weapons Council and the NLC3S Council, which are  statutorily responsible for oversight of aspects of the defense nuclear  enterprise. Figure 4 shows the roles and responsibilities of some of the  nuclear enterprise oversight groups and DOD components.", "The NDERG, the Nuclear Weapons Council, and the NLC3S Council  have lower-level management and working groups that include  participants from many of the same organizations. For example, the Air  Force\u2019s Office of Strategic Deterrence and Nuclear Integration is  represented in the NDERG\u2019s Nuclear Deterrent Senior Oversight Group  and on the Nuclear Weapons Council\u2019s Standing and Safety Committee.  The Army, Navy, and Air Force also participate in all three oversight  groups\u2019 working groups. Unlike the NDERG\u2014which will have no formally  defined roles and responsibilities until its charter and the eventual  directive are finalized\u2014the Nuclear Weapons Council and the NLC3S  Council are statutorily responsible for overseeing specific aspects of the  nuclear enterprise.", "According to officials from the Office of the Deputy Assistant Secretary of  Defense for Nuclear Matters, in response to updated presidential  guidance, a charter is being drafted for a new nuclear enterprise oversight  group\u2014the Security Incident Response Council. According to these  officials, the council will be an interagency group that will have oversight  of plans for responding to potential security incidents involving nuclear  weapons and will bring together officials from across all relevant  departments and agencies.", "The Deputy Secretary of Defense\u2019s July 2018 memorandum, previously  discussed, does not address how the NDERG should collaborate with  other nuclear enterprise oversight groups with overlapping  responsibilities. According to the memorandum, issues falling under the  purview of other existing nuclear enterprise oversight groups will be  addressed by those groups, but the memorandum acknowledges that the  groups may interact. Specifically, the memorandum states that the  Nuclear Weapons Council, the NLC3S Council, the Nuclear Posture  Review Implementation group, and the Security Incident Response  Council may recommend issues for the NDERG. However, the  memorandum does not describe how the NDERG should communicate  the necessary quality information with other oversight groups, including  criteria for determining which issues should be recommended or  otherwise communicated to the NDERG or when those groups should go  about recommending issues for consideration to the NDERG. Further, the  other oversight groups will not fall under the authority of the NDERG  charter, so stating that the groups may recommend issues for the  NDERG does not ensure that they will do so. As previously stated, it is  not clear whether these issues will be addressed in either the NDERG\u2019s  charter or the subsequent DOD directive.", "As we have previously reported, leading practices for enhancing  interagency collaboration include agreeing on roles and responsibilities  and having written guidance and agreements. Specifically, collaborating  agencies should work together to define and agree on their respective  roles and responsibilities. In doing so, agencies can clarify who will do  what, organize their joint and individual efforts, and facilitate decision  making. Additionally, Standards for Internal Control in the Federal  Government states that management should use quality information to  achieve an entity\u2019s objectives and internally and externally communicate  the necessary quality information to achieve the objectives. These  standards call for management to communicate quality information with  appropriate methods of communication and consider a variety of factors  in selecting an appropriate method of communication, such as the  audience and the nature of the information.", "The 2014 independent nuclear enterprise review found that the difficulty  of defining the defense nuclear enterprise complicates senior DOD  leaders\u2019 ability to take ownership of the enterprise. Specifically, the  independent review noted that senior leaders within the Office of the  Secretary of Defense and the military services referred to the \u201cnuclear  enterprise\u201d as if there were a coherent, integrated structure and set of  activities supporting the nuclear forces. However, the review team did not  find a coherent, integrated structure and synchronized set of activities that  could be characterized as a DOD \u201cnuclear enterprise.\u201d Further, the  independent review team found that there was a loose federation of  separate nuclear activities scattered across multiple organizations with no  clearly defined responsibility or accountability.", "In response to the challenges the independent review identified in 2014,  the review recommended that the loosely federated nuclear activities  within OSD and the Air Force be brought together into a coherent and  synchronized structure that focuses on direction and support for the  nuclear forces. In addition, the internal review noted as one of its most  important findings that the problems of the nuclear enterprise did not exist  in isolation and would require a coordinated, holistic approach to resolve.  In particular, the internal review team concluded that, because the issues  they identified in each of the military services were interdependent, the  ultimate solutions in many instances would have to be cultural, structural,  and sustained over the long term. Identifying oversight groups\u2019 roles and  responsibilities and identifying and establishing methods for  communicating and collaborating among groups could help mitigate the  problems identified in the 2014 reviews.", "In the absence of defined roles and responsibilities or methods for how  the NDERG is to communicate and collaborate with other existing  oversight organizations, the NDERG may be unable to effectively oversee  the defense nuclear enterprise in a coordinated, holistic manner that  would address problems identified by the 2014 nuclear enterprise reviews  or other issues it may need to address in the future. Additionally, clear  roles and responsibilities and methods for communication and  collaboration could better position senior leaders to effectively manage  resourcing and risk across the department. Officials from CAPE; the  Office of the Assistant Secretary of Defense for Nuclear, Chemical, and  Biological Defense Programs; and the military services agreed that  clarifying roles and responsibilities and identifying methods for  communication would be helpful in addressing long-standing issues and  guiding the NDERG in the future.", "Additionally, with increased funding and prioritization of the nuclear  enterprise, as called for in the 2018 Nuclear Posture Review, there is an  increased need for the kind of coordinated, holistic oversight of the  nuclear enterprise that was recommended in the 2014 Internal  Assessment of the Department of Defense Nuclear Enterprise. For  example, the Nuclear Posture Review\u2019s goal of replacing legacy nuclear  systems beginning in the mid-2020s will require senior leaders from  across the defense nuclear enterprise to make decisions regarding  resource allocation and prioritization\u2014for both the new systems and the  existing systems that are not being replaced. Collaboration among the  various nuclear enterprise oversight groups can help to make this  resource allocation and prioritization effective."], "subsections": []}, {"section_title": "DOD Guidance Does Not Reflect Evolving NC3 Oversight Roles and Responsibilities and Methods for Communicating and Collaborating with Other Nuclear Oversight Groups", "paragraphs": ["As a result of the 2018 Nuclear Posture Review, NC3 roles,  responsibilities, and authorities are evolving as DOD is in the process of  making changes to the NC3 governance construct. The Nuclear Posture  Review directed the Chairman of the Joint Chiefs of Staff to develop a  plan to reform NC3 governance to ensure its effective functioning and  modernization. The following key documents outline the proposed  changes to NC3 roles, responsibilities, and authorities:", "2018 Nuclear Posture Review, February 2018: To improve NC3  governance, the Nuclear Posture Review directed the Chairman of  the Joint Chiefs of Staff, in consultation with key DOD  stakeholders, to deliver to the Secretary of Defense, no later than  May 1, 2018, a plan to reform NC3 governance to ensure its  effective functioning and modernization.", "NC3 Governance Reform Initiative, February \u2013 May 2018: In  response to the Nuclear Posture Review, the Joint Staff  conducted a review of NC3 governance identifying problems with  the current NC3 enterprise governance construct and suggested  changes to address these problems.", "Chairman of the Joint Chiefs of Staff memorandum, May  2018: Following the NC3 Governance Reform Initiative review, the  Chairman of the Joint Chiefs of Staff provided the Secretary of  Defense a memorandum recommending a new NC3 governance  construct that would make the Commander of U.S. Strategic  Command the operational commander of the NC3 enterprise.  Under this new construct, specifically, the Commander of  Strategic Command would be designated as the NC3 enterprise  lead and would have increased responsibilities for operations,  requirements, and systems engineering and integration. In  addition, to support the new role of the Commander of U.S.  Strategic Command, the Office of the Under Secretary of Defense  for Acquisition and Sustainment would be designated as the NC3  enterprise capability portfolio manager and given increased  responsibilities for resources and acquisition. The memorandum  also proposes that the Chairman and the Deputy Secretary of  Defense would provide leadership and oversight, which would  include providing enterprise-level guidance to the department.", "U.S. Strategic Command Commander\u2019s Estimate, May 2018:  At the direction of the Chairman of the Joint Chiefs of Staff, U.S.  Strategic Command developed the NC3 Governance Reform \u2013  Commander\u2019s Estimate (Commander\u2019s Estimate) with a  recommended course of action to implement the new NC3  governance roles, responsibilities, and authorities. This  Commander\u2019s Estimate was provided to the Secretary of Defense  along with the Chairman\u2019s May memorandum. Concurrently, U.S.  Strategic Command is developing an implementation plan.", "U.S. Strategic Command NC3 implementation plan, expected  fall 2018: According to a Strategic Command official, an NC3  implementation plan is currently being drafted to implement the  proposed changes to NC3 governance. Initial operating capability  for the new roles, responsibilities, and authorities is expected to  occur within six months of the approval of U.S. Strategic  Command\u2019s implementation plan.", "If the changes to NC3 governance are approved, as proposed in the  Commander\u2019s Estimate, the Commander of U.S. Strategic Command  would have the operational lead for NC3 and would be delegated the  authorities and assigned the resources necessary to perform the following  functions: operating the NC3 enterprise assessing and managing NC3 enterprise operational performance defining NC3 enterprise requirements and prioritization  conducting systems engineering and analysis to integrate current  and future NC3 enterprise architectures approving NC3 enterprise developmental tests and operations overseeing NC3 enterprise acquisition and service/national  programs  leading NC3 enterprise advocacy across DOD\u2019s processes and  governance forums, such as the NLC3S  Changes to NC3 roles, responsibilities, and authorities would necessitate  changing existing NC3-related guidance documents. The current NC3  oversight structure is documented in statutes and presidential and  departmental guidance. For example, the NLC3S Council\u2019s roles and  responsibilities are defined in statute and in charters for the Council and  its National Leadership Command Capability Executive Management  Board. DOD issuances also establish policy and assign responsibilities  for matters related to the NC3 system to organizations throughout DOD,  including U.S. Strategic Command. The changes proposed in the  Commander\u2019s Estimate, if implemented, would result in DOD having to  update its own guidance and determine whether there is a need to  request a change in the statutory language or presidential guidance.  According to a U.S. Strategic Command official, work still needs to be  done to help align authorities within the NC3 enterprise. The  Commander\u2019s Estimate states that any changes to NC3 oversight  authorities that may result from implementing the suggested changes in  the Commander\u2019s Estimate will be annotated in existing applicable policy  and guidance documents.", "As we have previously reported and as we have noted in this report,  leading practices for enhancing interagency collaboration include  agreeing on roles and responsibilities and having written guidance and  agreements. Additionally, Standards for Internal Control in the Federal  Government calls for management to develop an organizational structure  with an understanding of the organization\u2019s overall responsibilities, and  assign these responsibilities to enable the organization to operate in an  efficient and effective manner, comply with applicable laws and  regulations, and reliably report quality information. To achieve this,  management should assign responsibility and delegate authority to key  roles throughout the organization. Further, federal internal control  standards call for identifying appropriate methods for communicating both  internally and externally. However, DOD has not clearly defined roles and  responsibilities. Additionally, DOD has not developed written guidance  and agreements that establish how the NLC3S Council, U.S. Strategic  Command, and other organizations responsible for NC3 governance will  collaborate with each other, or identified methods of communication.  Further, DOD has not determined how these entities will collaborate with  other oversight groups that need to have visibility over any problems or  resourcing decisions related to the NC3 enterprise, such as the NDERG  and other entities with responsibility for the nuclear enterprise as a whole.", "The 2015 NC3 report made recommendations to address diffused  responsibility in the NC3 enterprise; however, based our interviews with  officials, these issues still persist. According to DOD officials, 3 years later  there continues to be a problem with the management of the NC3  enterprise that resulted in the Secretary of Defense including the need to  reform NC3 governance in the 2018 Nuclear Posture Review.  Specifically, the 2018 Nuclear Posture Review recognized the broad  diffusion of NC3 system governance authority and responsibility within  DOD as an area of particular concern. To address these concerns, the  department is increasing the oversight roles of a number of organizations.  However, these changes may further complicate long-standing issues  associated with the governance of the NC3 enterprise unless the  department clearly articulates how all of the NC3 oversight bodies are to  collaborate.", "As DOD identifies changes that must be made to guidance for  implementing the new NC3 governance construct, it has an opportunity to  make improvements to enhance collaboration and communication among  NC3 oversight groups and other nuclear enterprise groups. Updating its  guidance to clarify changes to the roles and responsibilities of the many  entities involved in the oversight and governance of NC3\u2014and  establishing methods for how those entities should communicate and  collaborate\u2014would better position senior leaders to effectively manage  resourcing and risk across the NC3 enterprise. The NC3 enterprise is a  large and complex system, and without clearly identified roles and  responsibilities for an effective oversight structure, problems similar to  those identified in 2014 as negatively affecting the management of the  entirety of the defense nuclear enterprise may continue to limit effective  management of the NC3 enterprise."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD has continued to take steps to improve the defense nuclear  enterprise in response to the 2014 nuclear enterprise reviews and the  2015 NC3 report. By including risk identification, assessment, and  documentation, CAPE has strengthened its framework for monitoring the  department\u2019s efforts to address the many issues identified in 2014\u2014 including those enduring issues that must be watched for years to come.  The DOD CIO\u2019s adoption of a similar framework to monitor the  implementation of recommendations from the 2015 NC3 report has also  set up a structure to track and evaluate progress. The responsible military  services and DOD components\u2019 use of these structures should aid them  in assessing their efforts, including providing means to reassess and re- evaluate individual efforts and their relationship to the health of the  defense nuclear enterprise as a whole. The efforts the department has  taken and has under way should improve senior leaders\u2019 visibility into  these issues and better position them to ensure that progress continues  to be made, underlying problems are addressed, and risks mitigated or  accepted after considering the predictable and desirable results.  However, for these changes to be effective, the department must clearly  articulate the roles and responsibilities for a comprehensive oversight  structure. Unless DOD is able to align the roles and responsibilities of the  many entities now charged with oversight functions, the department\u2019s  leadership may not be in a position to be informed of issues affecting the  nuclear enterprise or the NC3 enterprise and may be unable to make  effective resourcing decisions. The creation of both a charter and DOD  directive for the NDERG as well as DOD\u2019s efforts to reform NC3  governance provide DOD with opportunities to create comprehensive  oversight structures\u2014with defined roles and responsibilities and methods  for communication among oversight groups\u2014for the defense enterprise to  address enduring leadership problems and help the department to move  forward in its governance of the nuclear enterprise. Further, by  establishing methods for communication and collaboration among these  organizations, the department could better avoid unnecessary overlap  and duplication of effort, important issues falling through the seams  between organizations, or enterprise-wide risks not being identified or  addressed through a holistic approach."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations to the Secretary of Defense:  The Secretary of Defense should ensure that the Deputy Secretary of  Defense\u2014in coordination with the military departments; U.S. Strategic  Command; the Assistant Secretary of Defense for Nuclear, Chemical, and  Biological Defense Programs; CAPE; and other relevant components of  DOD\u2014identify in the planned charter and DOD directive clear roles and  responsibilities for the members of the NDERG. (Recommendation 1)", "The Secretary of Defense should ensure that the Deputy Secretary of  Defense\u2014in coordination with the military departments; U.S. Strategic  Command; the Assistant Secretary of Defense for Nuclear, Chemical, and  Biological Defense Programs; CAPE; and other relevant components of  DOD\u2014establish in the planned charter and DOD directive methods for  the NDERG to communicate and collaborate with other organizations that  have oversight responsibilities for portions of the nuclear enterprise.  (Recommendation 2)", "The Secretary of Defense should ensure that the Deputy Secretary of  Defense and Chairman of the Joint Chiefs of Staff\u2014in coordination with  the Vice Chairman of the Joint Chiefs of Staff, the Under Secretary of  Defense for Acquisition and Sustainment (as NLC3S Council co-chairs),  and U.S. Strategic Command\u2014update the applicable DOD guidance  (such as the NLC3S Council\u2019s and Executive Management Board\u2019s  charters) and identify whether there is a need to request changes to  statutory or presidential guidance in order to clarify changes to roles and  responsibilities for NC3 oversight. (Recommendation 3)", "The Secretary of Defense should ensure that the Deputy Secretary of  Defense and Chairman of the Joint Chiefs of Staff\u2014in coordination with  the Vice Chairman of the Joint Chiefs of Staff, the Under Secretary of  Defense for Acquisition and Sustainment (as NLC3S Council co- chairs),and U.S. Strategic Command\u2014update the applicable guidance to  establish methods for communication and collaboration among  organizations that have oversight responsibilities for portions of the  nuclear enterprise as changes are considered for charters, guidance, and  laws to reflect the changes to NC3 oversight. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for comment. In its comments,  reproduced in appendix I, DOD concurred with all four of our  recommendations. DOD also provided technical comments, which we  incorporated as appropriate.", "In concurring with our first and second recommendations, DOD stated  that it will clearly identify roles and responsibilities in the NDERG charter  and stated that the charter will also direct NDERG stakeholders to  coordinate on the prioritization of issues that involve other organizations  that have oversight responsibilities for portions of the nuclear enterprise.", "In concurring with our third and fourth recommendations, DOD stated that  U.S. Strategic Command, in coordination with other DOD components,  has developed an NC3 Governance Improvement Implementation Plan  that outlines the required updates and revisions that need to be requested  for statutory guidance as well as implemented for NC3 governance body  charters, DOD issuances, and Chairman of the Joint Chiefs of Staff  issuances to clarify the new roles and responsibilities for NC3 oversight.  Further, DOD noted that these updates and revisions will establish  methods and provide direction for communication and collaboration  among organizations that have nuclear enterprise oversight roles and  responsibilities.", "We are encouraged that DOD is planning to take these actions to address  all four of our recommendations. We believe that, once DOD implements  our recommendations, the department\u2019s leadership will be better  positioned to be informed of issues affecting the nuclear enterprise or the  NC3 enterprise and better organized to make effective resourcing  decisions.", "We are providing copies of this report to the appropriate congressional  committees, and to the Secretary of Defense; the Under Secretary of  Defense for Acquisition and Sustainment; the Chairman of the Joint  Chiefs of Staff; the Secretaries of the Army, of the Navy, and of the Air  Force; the Commandant of the Marine Corps; the Commander, U.S.  Strategic Command; the Department of Defense Chief Information  Officer; and the Director of the Office of Cost Assessment and Program  Evaluation.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9971 or KirschbaumJ@gao.gov.Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Penney Harwell Caramia, Assistant Director; R. Scott Fletcher;  Jonathan Gill; Susannah Hawthorne; Brent Helt; Joanne Landesman;  Amie Lesser; K. Ryan Lester; Ned Malone; and Michael Shaughnessy."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Nuclear Enterprise: Processes to Monitor Progress on  Implementing Recommendations and Managing Risks Could Be  Improved. GAO-18-144. Washington, D.C.: Oct. 5, 2017.", "Nuclear Weapons Sustainment: Budget Estimates Report Contains More  Information than in Prior Fiscal Years, but Transparency Can Be  Improved. GAO-17-557. Washington, D.C.: July 20, 2017.", "Nuclear Weapons: DOD Assessed the Need for Each Leg of the Strategic  Triad and Considered Other Reductions to Nuclear Force. GAO-16-740.  Washington, D.C.: Sept. 22, 2016.", "Defense Nuclear Enterprise: DOD Has Established Processes for  Implementing and Tracking Recommendations to Improve Leadership,  Morale, and Operations. GAO-16-597R. Washington, D.C.: July 14, 2016.", "Nuclear Weapons Council: Enhancing Interagency Collaboration Could  Help with Implementation of Expanded Responsibilities. GAO-15-446.  Washington, D.C.: May 21, 2015."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-198", "url": "https://www.gao.gov/products/GAO-18-198", "title": "Telecommunications: FCC Should Improve Monitoring of Industry Efforts to Strengthen Wireless Network Resiliency", "published_date": "2017-12-12T00:00:00", "released_date": "2018-01-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Americans increasingly rely on mobile wireless communications for safety-related communications like calling 911 and receiving weather alerts. Mobile wireless networks face risks from physical incidents including extreme weather events and intentional and accidental damage. For example, in 2017 several major hurricanes damaged wireless network infrastructure, leaving many U.S. citizens without reliable access to wireless communications.", "GAO was asked to review federal efforts to improve the resiliency of wireless networks following natural disasters and other physical incidents. This report examines: (1) trends in mobile wireless outages reported to FCC since 2009 and (2) actions federal agencies and industry have taken since 2013 (after Hurricane Sandy) to improve wireless network resiliency, among other objectives. GAO analyzed wireless outage data from 2009 to 2016 (4 years before and after Hurricane Sandy); reviewed FCC, DHS, and industry documents; and interviewed stakeholders who represented a variety of perspectives, such as industry, public safety, and consumer groups. GAO assessed FCC's efforts to monitor an industry initiative to improve wireless network resiliency against federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["The number of wireless outages attributed to a physical incident\u2014a natural disaster, accident, or other manmade event, such as vandalism\u2014increased from 2009 to 2016, as reported to the Federal Communications Commission (FCC). During this time, the number of outages substantially increased from 189 to 1,079 outages, with most of the increase occurring from 2009 to 2011. FCC officials said this increase was due in part to growth in wireless customers and wireless infrastructure. Almost all outages attributed to a physical incident were due to an accident, such as damage to a cable due to a digging error (74 percent) or a natural disaster (25 percent). However, outages due to a natural disaster had a longer median duration (ranging from 19 to 36 hours), which was more than twice as long as outages caused by an accident. Power failures and failures in other providers' networks also play a role in wireless outages attributed to physical incidents. For instance, carriers reported that 87 percent of wireless outages attributed to a physical incident were due to a failure in another provider's network on which they rely.", "Since 2013, federal agencies and industry have taken actions to improve the resiliency of wireless networks. For example, the Department of Homeland Security (DHS) and FCC charter federal advisory committees that have examined resiliency issues and potential solutions, such as sharing infrastructure during emergencies. FCC also proposed a rule that would disclose how individual wireless carriers' networks performed during emergency events. In response, an industry coalition announced an initiative\u2014the Wireless Network Resiliency Cooperative Framework\u2014whereby carriers agreed to allow roaming on each other's networks and aggregated statistics to be published on how networks performed during emergency events. This initiative prompted FCC to not adopt its proposed rule. FCC said it would engage with industry about the framework's implementation and use, but FCC has limited formal plans to oversee or spread knowledge of the framework:", "FCC developed a plan to track the completion of initial implementation tasks outlined in the framework, but this plan does not include steps to track or evaluate any outputs or outcomes from the framework.", "FCC and industry documents describe broad goals for the framework, such as advancing information sharing during and after emergency events, but neither FCC nor industry has set any specific measures to help determine whether the framework achieves these broad goals.", "Although some public safety officials and other stakeholders GAO contacted were not aware of the framework, FCC did not have plans to actively communicate information about the framework to these audiences.", "More robust measures and a better plan to monitor the framework would help FCC collect information on the framework and evaluate its effectiveness. Such steps could help FCC address any challenges or decide whether further action is needed. Also, by promoting awareness about the framework, FCC would help public safety officials and other industry participants to be well positioned to use the framework to help them prepare for or respond to emergency events."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FCC should work with industry to develop specific performance measures for the Wireless Network Resiliency Cooperative Framework, monitor the framework's outcomes, and promote awareness of it. FCC agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Americans are increasingly reliant on mobile wireless communications in  their day-to-day lives to make phone calls and share information through  the Internet, including for safety-related communications, such as making  911 calls and receiving weather alerts. The nation\u2019s mobile wireless  networks face risks from a variety of physical incidents including extreme  weather events and accidents, such as backhoe cuts to cables  connecting cell towers to the broader network. In recent years, major  storms have caused outages in mobile wireless networks, severely  impairing safety communications when they were most needed. For  example, several major hurricanes made landfall in the United States in  August and September 2017, damaging wireless network infrastructure  and causing power outages that led to localized wireless outages. This  included Hurricane Irma\u2014which caused extreme damage in the U.S.  Virgin Islands, Puerto Rico, and Florida, among other states\u2014and  Hurricane Maria that severely affected infrastructure including wireless  networks in Puerto Rico and the U.S. Virgin Islands. As a result of  Hurricane Maria, a majority of all cell sites were knocked out of service for  months, leaving residents without reliable and continuous access to voice  and data communications.", "As citizens and public safety officials\u2014such as police officers, firefighters,  and emergency medical-services personnel\u2014are increasingly dependent  on wireless communications, federal agencies and the communications  sector have stressed the importance of resilient mobile wireless  communications during times of emergency. As of 2016, over 65 percent  of households in the United States relied solely or mostly on wireless  phones to make and receive phone calls. Further, according to the  Federal Communications Commission (FCC), about 70 percent of calls to  911 are made from wireless devices. The private sector owns and  operates the nation\u2019s wireless networks as well as other communication  networks and is primarily responsible for managing and protecting these  assets. However, the federal government plays a role in promoting  wireless network resiliency\u2014that is, the ability to prepare for and adapt to  changing conditions and withstand and recover rapidly from disruptions.  FCC is the federal regulatory agency for communications and its mission  includes promoting the safety of life and property through the use of radio  communications. The Department of Homeland Security (DHS) is  responsible for coordinating the federal effort to promote the security and  resilience of the nation\u2019s critical infrastructure, which includes the  communications sector, and also serves as the lead agency for  coordinating and prioritizing security and resiliency activities in the  communications sector. Further, communications networks are especially  important due to the enabling functions they provide across all critical  infrastructure sectors; the loss of communications facilities could have  cascading effects on other critical infrastructures due to  interdependencies among sectors.", "You asked us to review efforts that have been taken since Hurricane  Sandy in late 2012 to improve the resiliency of mobile wireless networks  as well as options that federal agencies could take to enhance wireless  resiliency following natural disasters and other physical incidents. This  report examines: (1) trends in mobile wireless outages attributed to  physical incidents since 2009 as reported to FCC, (2) the actions federal  agencies and industry have taken since 2013 to improve wireless network  resiliency, and (3) options that federal agencies could take to improve  network resiliency and their advantages and disadvantages. This report  focuses on the physical risks facing wireless networks; in other words, the  potential for an unwanted effect from an incident on a network\u2019s  infrastructure such as towers, antennas, and switches. Therefore, we did  not examine cyber risks facing wireless networks.", "To address these objectives, we analyzed data submitted by wireless  carriers to FCC\u2019s Network Outage Reporting System (NORS) on wireless  outages that occurred from 2009 through 2016 (that is, to cover 4 years of  data before and after Hurricane Sandy). In particular, we determined the  total number and causes of wireless outages that were reported as  having occurred during that time period and identified the share of all  wireless outages attributed to a physical incident. We analyzed other  characteristics of wireless outages such as location, duration, and  whether the failure occurred in another company\u2019s network. We took  several steps to assess the reliability of NORS data, such as reviewing  FCC documentation and interviewing agency officials responsible for  collecting and analyzing NORS data, and found the data were sufficiently  reliable for the purposes of describing trends in wireless outages.", "We also reviewed reports and documents from FCC, DHS, and the  National Institute of Standards and Technology (NIST); federal advisory  committees and partnership councils that cover wireless network  resiliency; and industry. We interviewed officials from FCC, NIST, and  several DHS component agencies responsible for protecting and securing  the communications infrastructure, as well as representatives from 24  stakeholders, selected to ensure we covered different perspectives.  Stakeholders included five wireless carriers and two owners of other  wireless network infrastructure, seven industry associations, three  consumer groups, five state and local government officials, one  partnership council, and one representative from academia. We selected  wireless carriers and owners of other wireless network infrastructure to  ensure variety in company size and industry role. We selected state  agencies to include states directly affected by two events in 2016\u2014 flooding in Louisiana and Hurricane Matthew\u2014for which industry had  implemented elements of the framework at the time we began our review.  However, the views presented in our report are not generalizable to those  of all stakeholders.", "We assessed FCC\u2019s efforts to monitor an industry initiative to improve  wireless network resiliency against federal standards for internal control  and FCC\u2019s current strategic plan. We identified options for improving  wireless network resiliency by examining federal agency reports,  literature, and other sources. We obtained stakeholder views on the  advantages, disadvantages, and feasibility of the identified options by  using open-ended questions to solicit input. Appendix I describes our  scope and methodology in greater detail.", "We conducted this performance audit from January 2017 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Mobile devices use wireless networks to enable voice and data  communications. Mobile wireless networks comprise several components  and provide coverage based on dividing a large geographic area into  smaller areas of coverage known as \u201ccells.\u201d Each cell contains a cell  site\u2014a base station equipped with an antenna\u2014to receive and transmit  radio signals to mobile devices within its coverage area. (See fig. 1.) The  cell sites are often located on a tower, rooftop, or other structure to  provide coverage to a wide area. For a mobile device to transmit and  receive signals, it must be within range of a cell site antenna. In many  areas, a mobile device is able to transmit and receive signals from  multiple cell sites. Each cell site is linked to a base station controller that  manages communications between the cell site and the mobile switching  center (e.g., routes and hands over calls). The mobile switching center  then directs voice and data traffic to landline phones, other cell phones  via a carrier\u2019s network, or the Internet. Backhaul facilities provide  transport for this voice and data traffic, and backhaul can be provided  over fiber optic or copper cables or wirelessly via microwave facilities.", "According to FCC, there are four \u201cnationwide\u201d mobile wireless carriers\u2014 AT&T, Verizon, T-Mobile, and Sprint\u2014with networks that cover most of  the United States. The industry also includes dozens of other carriers,  many of which provide service in a specific, sometimes rural, geographic  area. According to an FCC report on the wireless industry, most  consumers in the United States have the ability to choose among multiple  carriers with wireless network coverage in their area, and wireless  carriers typically compete on price, network quality, and the availability of  mobile devices with innovative features. Federal law states that FCC  must take into account whether its actions will encourage competition in  mobile wireless networks. Some wireless carriers own a portion or all of  the structures that host cell sites, but wireless carriers mostly lease space  from independent companies that own or operate a majority of the towers  and other structures that host cell sites.", "Mobile wireless networks face several kinds of risks that could affect the  network\u2019s physical components, resulting in disrupted service or an  outage. Government reports generally identify three types of physical  risks facing wireless networks:", "Natural disasters, such as hurricanes, tornados, wildfires, and  earthquakes.", "Manmade events, such as terrorist attacks and damage associated  with theft or another malicious act.", "Accidents, such as cable damage due to digging or locating errors  and damage associated with a vehicle accident.", "The potential effects related to these physical risks include damage to  wireless network components that requires wireless carriers and other  providers to make repairs or replace equipment to restore service. For  example, flooding, which can occur with a hurricane or heavy rain, could  damage the cable or other equipment submerged in water. Wildfires can  damage network components like antennas and backhaul facilities  (including fiber optic and copper lines and microwave towers) as well as  equipment in buildings if the buildings are damaged or destroyed.", "In addition to physical risks, wireless networks face risks stemming from  their dependence on other sectors and providers. One key dependency  identified by several government and industry reports is the reliance on  commercially provided electricity, referred to in this report as commercial  power. Several components\u2014including the mobile switching center,  antennas at cell sites, and consumer devices\u2014may rely on commercial  power. Therefore, loss of electric power may result in a loss of wireless  communications. Another key dependency for wireless networks is  backhaul used to get data from an end user to a major network. Wireless carriers can provide backhaul but typically obtain it from another  communications provider, such as a local telephone company or cable  company. An outage in the backhaul network can cause an outage that  affects one or more cell sites or a portion of the wireless network. FCC  has reported that the loss of backhaul service is a major cause of a cell  site\u2019s unavailability, which can lead to wireless outages. Also important is  having clear roads and highways, as wireless carriers\u2019 personnel or  contractors need to be able to access cell sites to repair or replace  equipment, or deliver fuel for generators that are sometimes located at  cell sites.", "Resilience is the ability to prepare for and adapt to changing conditions  and withstand and recover rapidly from disruptions, according to  Presidential Policy Directive 21. Owners and operators of wireless  networks can take a variety of actions to manage different risks, including  various physical risks, according to the Communications Sector-Specific  Plan. These actions can be designed to achieve different aims,  including to prepare for incidents, like creating and exercising disaster recovery  reduce a specific vulnerability, like elevating or moving a mobile  switching center in a flood-prone area to a higher location; mitigate the consequences of an incident, like installing backup  power\u2014using batteries with a limited supply of power or generators  that run on diesel or other fuel sources\u2014to support continued wireless  service during a commercial power outage; or enable efficient response and restoration following an incident, such  as deploying portable cell sites on trucks and other equipment after an  incident to provide wireless communications when the network  experiences an outage or a significant disruption.", "FCC, pursuant to the Communications Act of 1934, as amended, is  charged with regulating interstate and international communications  throughout the United States, which means that FCC regulates wireless  networks and carriers, among other responsibilities. It develops and  administers policies and rules to advance the security and reliability of the  nation\u2019s communications infrastructure; this responsibility includes,  among other topics, network resiliency, public safety communications,  and communications infrastructure protection. FCC administers two  web-based outage-reporting systems to help it oversee network reliability  and resiliency:", "NORS: Carriers are required to report details about service  disruptions or outages (e.g., cause, location, and duration) to their  communications systems that meet specified thresholds set forth in  regulation. FCC uses NORS data to monitor trends in  communications outages and to try to identify and address any  shortcomings or issues going forward.", "Disaster Information Reporting System (DIRS): Carriers can  voluntarily report on the status of communications infrastructure  during an emergency event in DIRS. For example, wireless carriers  report daily on the number of cell sites, by county, that are out of  service by reason (e.g., power outage, physical damage). FCC  activates DIRS in response to an event and then uses these data to  track network restoration during and after an emergency event.", "DHS also plays a role in wireless network resiliency as the lead agency  for coordinating and prioritizing security and resilience activities for the  communications sector. Presidential Policy Directive 21 establishes  national policy to strengthen the security and resilience of critical  infrastructure and states that the federal government shall work with  critical infrastructure owners and operators to do so. DHS\u2019s Office of  Cybersecurity and Communications, within the National Protection and  Programs Directorate, leads this coordination for the communications  sector as the sector-specific agency, and this office works with the  Communications Sector Coordinating Council and the Communications  Government Coordinating Council to set goals, objectives, and activities  for the sector. During a national emergency or disaster, DHS also  coordinates response efforts for communications systems in its role as  the coordinator for Emergency Support Function #2 \u2013 Communications  (ESF-2). Specifically, two DHS components\u2014the Federal Emergency  Management Agency (FEMA) and Office of Cybersecurity and  Communications\u2014lead the federal government\u2019s work to support the  restoration of communications infrastructure, coordinate response efforts,  and facilitate the delivery of information to emergency-management  decision makers. DHS has direct access to FCC\u2019s NORS and DIRS  data to support its work. Other DHS components also have  responsibilities related to wireless network resiliency. For example, the  Science & Technology Directorate conducts research in the area of  wireless and other communications network resiliency, although its focus  is on communications for the public-safety community.", "Within the Department of Commerce, NIST also plays a role in promoting  network resiliency by sponsoring the Community Resilience Panel.  According to NIST, the Community Resilience Panel is sponsored by  NIST and co-sponsored by other federal agencies to promote  collaboration among stakeholders to strengthen the resiliency of  infrastructure that communities rely on, including communications  infrastructure. As part of this mission, the panel seeks to identify policy  and standards-related impediments to community resiliency, raise  awareness of sector dependencies and of the cascading effects of  disasters, and identify potential resiliency metrics."], "subsections": []}, {"section_title": "Wireless Outages Caused by Physical Incidents Have Increased since 2009, and Outages due to Natural Disasters Lasted Longest", "paragraphs": [], "subsections": [{"section_title": "Trends in Number and Reported Causes of Wireless Outages", "paragraphs": ["The number of wireless outages attributed to a physical incident  increased from 2009 to 2016 (see fig. 2). Specifically, the number of  outages with a physical incident reported as a root cause increased from  189 outages in 2009 to 1,079 in 2016. The number of outages  increased substantially during the first few years of this period and then  was relatively stable, which mirrored the trend for all wireless outages.  According to FCC officials, the increase in reported outages was due to  increases in both the number of wireless customers and wireless  infrastructure over this period, as well as due to FCC\u2019s outreach to  wireless companies to clarify the thresholds for which carriers are  required to report wireless outages to help ensure that carriers were  consistently and fully reporting outages. From 2009 to 2016, about one- third of all wireless outages reported to FCC (6,002 of 18,325) were  attributed to physical incidents.", "Of wireless outages reported to FCC that were attributed to physical  incidents, most were due to accidents, described below:", "Accidents\u2014which include cable damage due to a backhoe cut, among  other causes\u2014were the root cause for 74 percent of wireless outages  attributed to a physical event.", "Natural disasters\u2014including tornados and wildfires\u2014were the root  cause for 25 percent of wireless outages attributed to a physical  incident.", "Manmade events\u2014which include damage associated with theft or  other intentional damage to facilities\u2014were the root cause for the  remaining 1 percent of these outages.", "FCC typically suspends NORS reporting requirements in areas where  FCC activates DIRS reporting for an emergency event, generally a  natural disaster. For example, when FCC activated DIRS reporting for all  counties in Puerto Rico and the U.S. Virgin Islands in response to  Hurricane Maria in September 2017, FCC suspended NORS reporting  requirements for those counties. As a result, FCC officials said that  NORS data can undercount the number of wireless outages due to  natural disasters. For a large natural disaster, however, FCC still can  receive NORS reports for wireless outages outside the DIRS reporting  area that are due to the natural disaster.", "Hurricane Irma   In September 2017, Hurricane Irma made  landfall as a Category 3 hurricane in Florida,  having previously tracked near Puerto Rico  and the U.S. Virgin Islands. The hurricane  produced sustained winds of nearly 115 miles  per hour as it made landfall in Florida. In the  days that followed, the hurricane\u2019s impact was  felt over the southeastern United States, with  nearly 16 inches of rain falling over portions of  Florida and high winds observed in five states.  The President issued disaster declarations  covering portions of Puerto Rico, the U.S.  Virgin Islands, Florida, and Georgia.   The damage from Hurricane Irma\u2014both  damage to wireless network infrastructure and  damage resulting in power outages\u2014created  wireless service disruptions and outages in  certain impacted areas. In particular, over half  of cell sites were out of service for 3 or more  consecutive days in five counties in Puerto  Rico and in two counties in the U.S. Virgin  Islands, according to data from wireless  carriers reported to FCC. Within a week, only  6 percent of cell sites were out of service in  reporting counties in Puerto Rico, but a  majority of cell sites remained non-operational  in the U.S. Virgin Islands; in one county, St.  John, 90 percent of cell sites remained out of  service a week and a half after landfall. In  southern Florida, three counties had more  than half of cell sites out of service for 4  straight days. The number of out-of-service  cell sites decreased over time, so that less  than 20 percent of cell sites were out of  service in these counties within a week.  Looking more broadly across all counties for  which FCC collected data in Florida, Georgia,  and Alabama, about 13 percent, 2 percent,  and 1 percent of cell sites in the reporting  area were out of service 4 days after  Hurricane Irma\u2019s landfall, respectively. cause and contributing factor fields. Looking across cause fields,  wireless outages citing an accident were most common, particularly from  2010 to 2016, as shown in figure 3. Wireless outages citing a natural  disaster were less common, although there were several spikes in the  number of outages citing a natural disaster. Some of these spikes  correspond with major natural disasters like the derecho affecting  Midwest and Mid-Atlantic states in 2012 or Hurricane Matthew in 2016.  Manmade events were rarely reported as the cause or contributing factor."], "subsections": []}, {"section_title": "Duration of Wireless Outages Attributed to Physical Incidents", "paragraphs": ["While less common than accidents, wireless outages attributed to natural  disasters lasted much longer than outages attributed to other physical  incidents. Specifically, figure 4 shows that outages where a natural  disaster was cited as the root cause were often twice as long as outages  attributed to an accident or manmade event. From 2009 to 2016, the  annual median duration of wireless outages attributed to accidents  ranged from 8 hours to 16 hours, compared to natural disasters, which  ranged from 19 to 36 hours. Due to this longer duration, wireless  outages attributed to natural disasters have a greater impact on the public  as it is left without key means of communication for longer periods of time. In addition, an industry association told us that even though public  safety officials primarily use dedicated communication networks, like land  mobile radio networks, to carry out their work, they also rely on their  mobile devices that use commercial wireless networks for maps and other  applications.", "Ten of 24 stakeholders we interviewed said that natural disasters pose  the greatest risk to wireless networks as they have the most intense  consequences. Natural disasters can result in physical damage to or  flooding of critical network components, and fallen trees and debris can  temporarily block transportation routes, keeping repair crews from  inoperable cell sites and other network components, as described in the  Community Resilience Planning Guide for Buildings and Infrastructure  Systems. Further, the failure of other systems like commercial power  upon which wireless networks depend can lead to cascading failures in  communications networks. One industry association we spoke with said  that natural disasters are the primary risk to wireless network resiliency as  these events usually create the largest outages with the longest  durations."], "subsections": []}, {"section_title": "Location of Wireless Outages Attributed to Physical Incidents", "paragraphs": ["By location, the number of wireless outages attributed to physical  incidents increased from 2009 to 2016 in some states, including several  of the most populous states such as California and Texas (see fig. 5).  Most of the recent expansion of wireless networks has tended to be in the  most populous states, as those states contain the most customers and  the highest densities of customers, according to FCC officials. In addition,  the thresholds for which carriers are required to report wireless outages in  NORS are such that many outages that affect primarily rural areas will not  accumulate enough user minutes to be reportable. However, the number  of wireless outages with a physical incident as the root cause was  relatively steady in many states or had spikes that generally  corresponded with major natural disasters like the 2012 derecho.", "For more detailed information on the location of all reported wireless  outages that occurred from 2009 through 2016, including the cause and  number of users associated with these outages, see an interactive  graphic which can be viewed at http://www.gao.gov/products/gao-18-198."], "subsections": []}, {"section_title": "Wireless Network Dependencies", "paragraphs": ["Power failures and failures in other providers\u2019 networks (e.g., backhaul)  played a role in the majority of wireless outages attributed to physical  incidents. When an accident, natural disaster, or manmade event was the  root cause for an outage, we found that wireless carriers often also  reported a failure in one of these two key dependencies for wireless  networks:", "Regarding power, 8 percent of wireless outages with a physical  incident as the root cause (465 of 6,002 outages) cited power failure  as the direct cause of the outage. Nearly all these outages were  attributed to a natural disaster.", "Regarding failures in other providers\u2019 networks, 87 percent of outages  attributed to a physical incident (5,206 of 6,002 outages) were due to  a failure in another provider\u2019s network, which includes backhaul  connecting cell sites to mobile switching centers and onto the broader  network. Most of these outages\u20144,111\u2014cited an accident (i.e., a  digging error resulting in cable damage) as the root cause. In 2014, a  working group from an FCC-chartered federal advisory committee  concluded that there is little to no shared, last-mile transport  infrastructure for backhaul that wireless carriers (or other providers)  could share dynamically to mitigate the effect of a backhaul failure.  Thus, a backhaul outage will often result in a wireless outage.  However, the working group identified existing best practices that  providers can employ to help reduce or lessen the impact of failure in  last-mile backhaul."], "subsections": []}]}, {"section_title": "Federal Agencies and Industry Have Taken Some Actions to Improve Wireless Network Resiliency, but FCC\u2019s Oversight of Industry Actions Is Limited", "paragraphs": [], "subsections": [{"section_title": "Federal Agencies Largely Continue to Use Existing Mechanisms to Improve Resiliency", "paragraphs": ["Since 2013, FCC and DHS have both continued to take action using a  range of existing mechanisms to improve wireless network resiliency.  These mechanisms include leading communications-specific planning  activities and topic-specific research to develop and to share best  practices. While these mechanisms are not new, FCC and DHS report  updating and adapting these activities based on emerging needs and  lessons learned from exercises and emergency events. FCC and DHS  actions include the following:", "Chartering advisory committees that examine resilience: DHS and  FCC charter federal advisory committees that have studied how  agencies and industry could improve resiliency. For example, one  such committee is FCC\u2019s Communications Security, Reliability, and  Interoperability Council (CSRIC), whose members include  representatives from wireless carriers and other communications  companies, industry associations, and federal, state, and local  agencies. CSRIC working groups often develop best practices for  industry and make recommendations to wireless carriers, FCC, and  others to improve network resiliency. One example is a working group  that studied how industry could share backup power resources in  2014. FCC maintains a database of best practices and publicizes  these through presentations at conferences and in public reports, as it  did in a report on communications outages caused by the 2012  derecho. Six stakeholders we interviewed said best practices  represent a valuable means to improve resiliency, as for example,  best practices are flexible and enable providers to adapt practices as  communications networks evolve. One stakeholder attributed  CSRIC\u2019s effectiveness in issuing and promoting best practices and  information in part to its affiliation with the industry\u2019s regulator, FCC.", "Other advisory committees that examined resiliency include DHS\u2019s  National Security Telecommunications Advisory Committee and  FCC\u2019s Technological Advisory Council.", "Developing and implementing procedures to respond to physical  incidents: DHS leads emergency communications response and  recovery efforts, as coordinator for ESF-2. For example, within DHS,  the National Coordinating Center for Communications (NCC) holds  weekly calls with government and industry partners to exchange  information as part of NCC\u2019s work to continuously monitor events that  may affect communications. These weekly calls sustain  relationships and promote readiness that can be leveraged to  coordinate a response to an emergency incident, according to DHS  and FCC officials and members of the Communications Sector  Coordinating Council. During an incident, NCC reports that it holds  these calls on a daily basis to understand the status of wireless and  other networks\u2014along with FCC outage data and other information  collected from carriers\u2014and to support industry response efforts. For  instance, NCC officials said that during an incident they can help  carriers find available generators or work with local governments to  enable carriers to enter disaster areas to make repairs if carriers are  denied access. Two carriers we interviewed said the NCC works well  to support industry response to and recovery from incidents, as NCC  has established response processes to help the communications  sector to coordinate with the power industry. According to DHS, NCC  participates in the Energy Priority Restoration Group that is dedicated  to determining power restoration priority following an incident. While  this group includes many sectors, it enables communications  providers to help prioritize power restoration for critical  communications components, like mobile switching centers.", "Analyzing wireless outage data to identify trends and areas for further  study: As noted above, FCC collects and regularly analyzes data on  wireless outages during the regular course of business and during  emergency events. FCC meets with each nationwide wireless carrier  annually to discuss trends in the carrier\u2019s outages and any issues  related to how the carrier completes NORS reports, according to FCC  officials and an industry association we interviewed. FCC also  analyzes and shares its analysis of NORS data with industry at  quarterly meetings of the Alliance for Telecommunications Industry  Solutions\u2019 Network Reliability Steering Committee. Specifically, FCC  presents trends in NORS outage data for the last 3 years for different  types of outages. Such data include trends in the total number and  duration of wireless outages. The Network Reliability Steering  Committee, at FCC\u2019s request or its own initiative, establishes teams to  examine NORS trends and to make recommendations that may  increase network reliability and reduce network outages. Based on  this work, the team may identify relevant best practices that carriers  could use to reduce or eliminate outages or suggest refining or  creating a new best practice. Representatives from two industry  associations said that FCC meets with industry to discuss outage data  and is receptive to feedback on how to improve data-reporting  processes and data quality.", "In addition to these existing mechanisms, federal agencies have initiated  some new activities to enhance wireless network resiliency since 2013.", "Community Resilience Panel: NIST issued the Community Resilience  Planning Guide for Buildings and Infrastructure Systems in October  2015 and sponsors the Community Resilience Panel, which aims to  reduce barriers to achieving community resilience by promoting  collaboration among stakeholders to strengthen the resilience of  buildings, infrastructure, and social systems upon which communities  rely. The panel held its first meeting in November 2015. The  planning guide provides a process that communities can use to  improve their resilience by setting priorities and allocating resources  to manage risks based on their prevailing hazards. The guide also  devotes sections to key infrastructures; the communications section  describes components of communications networks, the regulatory  environment, and industry standards that can help inform community  planning. The Community Resilience Panel also has a  Communication Standing Committee comprised of industry and  government members. This committee is currently creating additional  resources to support communities, including a methodology that  communities could use to involve wireless carriers and other  communications providers in resilience planning activities. While  communities have started to use the guide, NIST officials said it is too  soon to measure or point to specific outcomes attributable to the  Community Resilience Panel\u2019s work.", "Post Hurricane Sandy hearings and proposed rule: In 2013, FCC held  field hearings on network reliability and continuity. The goals of the  hearings were to improve network resiliency, improve restoration,  empower the public, and unleash technological solutions. The two  hearings included a wide range of panelists including representatives  from FCC and FEMA, state and local agencies, consumer groups,  wireless carriers, and other communications providers. Following the  hearings, FCC issued a notice of proposed rulemaking to promote  transparency to the public on how wireless carriers compare in  keeping their networks operational during emergency events.  Specifically, FCC\u2019s proposed rule would publicly report the number  and percentage of each carrier\u2019s cell sites that remained operational  during an emergency event to enable consumers to compare wireless  carriers when purchasing service. Based on our review of  comments, public safety and consumer groups tended to support the  proposed rule while industry expressed concerns, in particular, that  the public reporting in the proposed rule would not accurately portray  the service available during an emergency or be a useful measure to  help consumers choose among wireless carriers. FCC decided not to  issue a final rule, stating in December 2016 that a voluntary industry  approach, described below, provided a more appropriate path to  improve network resiliency.", "We asked stakeholders about the results of the actions taken by FCC and  DHS, and across the 24 stakeholders we interviewed, there was no  consensus regarding needed improvements in DHS and FCC guidance,  coordination, or research on wireless resiliency. Seven stakeholders  said they did not think there were any gaps or needed improvements from  FCC, and six stakeholders said they did not think there were any gaps or  needed improvements from DHS. Although most stakeholders identified a  need for further federal agency action, they tended to identify dissimilar  actions. However, the three state and two local agencies we interviewed  noted that more real-time data on wireless outages would help aid their  efforts to respond to an incident, which we discuss further below."], "subsections": []}, {"section_title": "Voluntary Industry Framework Aims to Improve Wireless Network Resiliency, but FCC Has Limited Plans to Monitor This Framework", "paragraphs": ["In April 2016, an industry coalition consisting of CTIA, a wireless industry  association, and five wireless carriers announced the Wireless Network  Resiliency Cooperative Framework (framework) in response to FCC\u2019s  2013 notice of proposed rulemaking on wireless network resiliency. The  framework is a voluntary initiative designed to advance wireless service  continuity and information sharing during and after emergencies by  enhancing coordination and communication, both among carriers and  between carriers and government.", "The framework has five elements; some elements are specific to disaster  response while other elements focus on preparedness and education.  Industry has taken steps related to all five elements of the framework, as  described in table 1. Furthermore, CTIA representatives told us they have  ongoing meetings with representatives from the public-safety community,  the outcome of which they expected to be a series of best practices  concerning planning before disasters, addressing coordination during and  after emergencies, and developing education and awareness strategies in  fall 2017. The threshold to trigger the response elements is when DHS  activates ESF-2 and FCC activates DIRS. At the time of our review, four  events\u2014Hurricane Matthew in October 2016 and hurricanes Harvey,  Irma, and Maria in late 2017\u2014had met the threshold to trigger the  response elements. Prior to the three events in 2017, FCC officials and  three stakeholders we interviewed told us it was too soon to know the  effectiveness or results of the framework.", "FCC is responsible for administering policies to improve resiliency, which  include monitoring actions taken by industry, and federal standards for  internal control state that management should establish and operate  monitoring activities, evaluate and document the results of ongoing  monitoring, and then identify changes that either have occurred or are  needed. Federal standards for internal control also state that agencies  should define objectives clearly and that objectives should be in specific  and measurable terms that allow for the assessment of performance.", "In December 2016, FCC said it would continue to engage with industry on  the implementation and use of the framework, and FCC has taken some  steps to monitor the framework\u2019s implementation. Specifically, FCC  developed a plan to track certain tasks related to the framework in August  2017. This plan  tracks the completion of initial tasks related to the framework, such as  tracking industry\u2019s publication of best practices to enhance municipal  preparedness and resiliency, and confirming the five signatory  wireless carriers\u2019 commitment to the framework, and notes that FCC will update its emergency response documents to  ensure that the documents reflect the framework and include  checklists to validate that carriers take these actions during  emergency events (e.g. instituting roaming, providing mutual  assistance).", "In August 2017, FCC also issued a public notice inviting carriers beyond  the five signatory wireless carriers to sign on to the framework.", "However, we found FCC\u2019s plan does not include any steps to document  and assess the effect of the framework on the resiliency of wireless  networks. In particular, FCC\u2019s plan does not track any outputs or  outcomes over time that speak to the results of the framework, such as  the number of roaming requests made and fulfilled during an emergency  event. FCC\u2019s plan to monitor the framework is still new. According to  FCC officials, FCC did not decide what division would lead its monitoring  of the framework until August 2017 because it needed to determine which  division should have responsibility for the framework. Since the plan  was created, FCC has met with industry groups and individual carriers to  gather additional information and has updated its plan with this  information to track implementation tasks.", "Overall, by monitoring the outputs and outcomes of the framework, FCC  could determine where further changes are needed to help ensure that  wireless networks are resilient. In 2016, FCC reported that the framework  could produce benefits such as bolstering FCC\u2019s situational awareness  and providing consumers with a means to hold carriers accountable for  service continuity during emergency events. Yet, seven stakeholders we  interviewed, including wireless carriers, said the framework largely  codified actions that carriers already generally take to prepare for and  respond to an emergency event. In addition, comments submitted to FCC  in 2016 were split on whether the framework represented a sufficient path  forward, and some stakeholders noted specific issues that they believed  could limit the effectiveness of the framework, for example:", "Four stakeholders we interviewed\u2014an industry association, local  agency, state agency, and consumer group\u2014cited the lack of federal  agency enforcement or monitoring.", "Two industry associations stated in joint comments that there was no  assurance that all carriers would conduct adequate testing to enable  roaming under disasters.", "A local agency said in comments that the threshold to trigger the  response elements was too high; as such, carriers would not be-  obligated to implement the elements for more local events.", "Therefore, monitoring the outputs and outcomes of the framework would  help FCC understand the effect of industry formalizing these actions in  the framework.", "Furthermore, although FCC and industry documents that describe and  endorse the voluntary framework include broad goal statements, there  are no specific measures for what the framework hopes to achieve. As a  result, FCC lacks specific and measurable terms to monitor the effect of  the framework. The CTIA- and carrier-released public summary of the  framework said it aims to advance wireless service continuity and  information sharing during and after emergencies and disasters, as well  as help consumers be better prepared for future disasters. FCC, when  endorsing the framework, said it was a reasonable approach to achieve  FCC\u2019s stated goals for the 2013 proposed rule, including promoting  availability of wireless mobile services in the event of natural disasters  and increasing provider transparency around wireless resiliency. FCC  officials told us they have not discussed possible measures to monitor the  effect of the framework with industry participants. As the creators of the  framework, industry participants could provide insight into such  measures. However, FCC officials acknowledged that it will be important  to determine what the results of the framework have been in light of the  2017 hurricanes, and that developing measures to assess industry\u2019s  efforts under the framework would be beneficial.", "In addition, FCC has not communicated the framework to all state and  local public-safety officials and wireless carriers, potentially limiting its  effectiveness. At the time of our review, CTIA and the signatory wireless  carriers had released a high-level summary of the framework but no  additional documentation on the scope of wireless carriers\u2019 obligations  under the framework. Based on our interviews, we found that  knowledge of the framework was not widespread. Six stakeholders we  interviewed, including representatives of state agencies we interviewed  and a non-signatory wireless carrier, were either unaware of the  framework or unaware of whether industry had taken actions on any  elements of the framework since its announcement. For example, a state  emergency manager in one state affected by Hurricane Matthew was  unaware of the framework and that FCC, based on one element of the  framework, had posted daily status updates on wireless service following  the hurricane. This manager noted that those updates would be useful for  response efforts.", "Federal standards for internal control state that federal agencies should  externally communicate necessary, quality information to achieve the  agency\u2019s objectives and that open communication can also help enable a  federal agency to obtain information from external parties. Among the stated objectives of FCC is to advise and assist public safety entities on  wireless communications issues and to develop and administer policy  goals and plans to promote reliable communications for public safety and  disaster management. Moreover, one of FCC\u2019s current strategic  objectives is to promote access to effective public-safety communications  services used by government as well as all consumers in need. To  address this and other objectives, FCC stated that it will facilitate  discussions and share information among key constituencies. FCC uses  several mechanisms and standing forums to share information and  educate constituencies. For example, FCC gives presentations about  FCC activities at conferences on public safety communications that  include state and local officials. In addition, FCC participates in the  regular conference calls hosted by DHS\u2019s NCC through which  government and industry exchange information and the Network  Reliability Steering Committee\u2019s public quarterly meetings, as noted  above.", "Without greater awareness of the framework, state and local public safety  officials may continue to be unaware of tools or other improvements  available through the framework that could help them prepare for or  respond to an emergency, such as the posting of daily updates on the  number of out-of-service cell sites or best practices that could aid  resilience. Also, smaller and rural (non-signatory) wireless carriers might  be unaware of commitments made by the signatory carriers, such as  committing to roaming under disasters that could benefit them and the  citizens they serve during an emergency event but may require entering  into and testing a roaming arrangement. By actively communicating  information about the framework, FCC could also increase the likelihood  of receiving information from industry or state and local public-safety  officials about any implementation issues or positive results from the  framework. In August 2017, FCC created a website that summarized the  framework and, as noted above, issued a public notice inviting additional  carriers to sign on to the framework. Only two carriers, as of October  2017, beyond the carriers involved in creating the framework publicly  informed FCC of their intent to participate in the framework. As of October  2017, FCC officials told us they did not have additional plans to promote  awareness of the framework, but noted that it would be important to  inform relevant stakeholder groups about the framework, especially those  who might remain unaware of it."], "subsections": []}]}, {"section_title": "Stakeholders Cited Advantages and Disadvantages for Options Aimed at Improving Wireless Network Resiliency", "paragraphs": ["We identified options that federal agencies could take to further improve  wireless network resiliency based on agency reports, federal advisory  committee recommendations, peer-reviewed literature, and other reports.  The options we identified could be implemented either alone or in  combination and are not meant to be exhaustive. We categorized them by  their aim\u2014preparedness, response, and awareness. FCC, as the  regulator for wireless communications, would be the likely agency to  implement many of the options, although DHS or other federal agencies  could play a role in implementing some of the options. We asked  stakeholders to comment on the advantages and disadvantages,  including the feasibility\u2014technical, legal, or other\u2014of each option. The  tables below describe identified options by category, along with the most  frequently cited advantages and disadvantages.", "FCC has previously suggested and discussed some of these options,  most recently during its notice of proposed rulemaking in 2013. FCC  noted that its proposed rule sought to comply with guidance from the  Office of Management and Budget to use disclosure requirements or  transparency measures where possible in place of prescriptive  regulations. However, as noted above, FCC declined to issue a final rule,  stating that the proposed rule was problematic in light of substantial  concerns raised about proposed metrics and disclosure requirements."], "subsections": [{"section_title": "Preparedness", "paragraphs": ["Two options identified in agency reports and literature intend to improve  resiliency by focusing on actions to be taken ahead of an emergency or  disaster, as described in table 2.", "Twelve stakeholders we interviewed raised concerns about the feasibility  of the option to require a minimum level of backup power at cell sites due  to technical or legal issues. In 2007, FCC adopted a requirement for  wireless carriers to provide 8 hours of backup power at cell sites. That  requirement was vacated after the Office of Management and Budget  disapproved the rule\u2019s information collection requirements. In contrast,  nine stakeholders we interviewed were more positive about the feasibility  of guidance. Further, FCC created the Broadband Deployment Advisory  Committee in January 2017 to provide recommendations on how to  accelerate broadband deployment. Two of the committee\u2019s five working  groups focus on state and local regulatory barriers and model language  for state and municipal code, both of which could provide a model for  wireless network infrastructure."], "subsections": []}, {"section_title": "Response", "paragraphs": ["As shown in table 3, agency reports and literature also included options  related to response activities during and after an emergency event.", "For the first option, FCC officials and six stakeholders we interviewed  noted that wireless carriers have on occasion opened up their networks in  prior emergency situations, which indicates that the option is technically  feasible. For the second option, every state and local agency we spoke  with noted the value of having real-time information on wireless outages  during an emergency event. FCC collects DIRS data, and these data are  confidential when provided to FCC. According to FCC, if outage data  were shared with a state or local agency, it may be subject to open  records laws that provide a means for the public to gain access to  government documents."], "subsections": []}, {"section_title": "Awareness", "paragraphs": ["Other options are intended to improve wireless network resiliency by  fostering transparency, as described in table 4. For some options below,  transparency would involve making information publicly available so  consumers could use this information when choosing a wireless carrier.  Such transparency could give industry an incentive to improve the  resiliency of their networks. For example, by setting performance  standards or requiring wireless carriers to disclose their efforts to improve  resiliency, consumers could compare the performance or practices of  wireless carriers. However, some of these options would require defining  specific parameters, whether a metric or the specific information to  disclose, and seven stakeholders we interviewed noted this could be  difficult given factors such as the variation in carriers\u2019 wireless networks  and the pace of technological change. For other options below,  transparency would involve more selectively sharing information with  other public safety agencies to improve coordination and aid planning for  possible disruptions to wireless networks during emergencies."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["During natural disasters and other emergencies, wireless network  outages can make emergency communications, such as making 911  calls, nearly impossible for the vast number of people who rely solely on  wireless communications. The wireless industry sought to enhance  resiliency by improving the continuity of wireless service and information  sharing during and after emergency events by introducing a voluntary  framework. Although FCC stated that this voluntary framework would  have many benefits, neither industry nor FCC has identified any specific,  measurable objectives that could be used to determine whether the  framework meets its broad goals, and FCC has limited plans to monitor  the framework\u2019s implementation and use. Absent sufficient monitoring,  including identifying specific, objective measures for the framework, FCC  lacks information on the framework\u2019s outcomes and overall effectiveness;  such information could help FCC identify whether it needs to take steps to  address challenges or take other action to further promote wireless  network resiliency. Furthermore, FCC does not have any plans to actively  communicate information about the framework to public safety officials  and industry representatives. A concerted effort by FCC to promote  awareness of the framework could help more public safety officials and  other industry participants use the framework to prepare for or help  mitigate the risks to wireless networks posed by natural disasters and  other emergencies."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to FCC:  The Chairman of FCC should work with industry, to the extent practical, to  develop specific and measurable objectives for the Wireless Network  Resiliency Cooperative Framework, such as outputs to measure the  extent of the framework\u2019s use. (Recommendation 1)", "The Chairman of FCC should develop a plan to monitor the outputs and  outcomes of the Wireless Network Resiliency Cooperative Framework  and document the results of its monitoring to evaluate its effectiveness  and identify whether changes are needed. (Recommendation 2)", "The Chairman of FCC should promote awareness about the elements of  and any outcomes from the Wireless Network Resiliency Cooperative  Framework among state and local public safety officials and other  industry stakeholders, such as through existing outreach mechanisms  and government-industry forums. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to FCC, DHS, and the Department of  Commerce for comment. In its comments, reproduced in appendix III,  FCC agreed with the recommendations. FCC also provided technical  comments, which we incorporated as appropriate. DHS and the  Department of Commerce had no comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Chairman of FCC, the Secretary of  Homeland Security, and the Secretary of Commerce. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines federal agency and industry efforts to improve the  resiliency of mobile wireless networks in response to natural disasters  and other physical incidents since Hurricane Sandy, a natural disaster  that caused significant communications outages across several states in  late 2012. Specifically, this report examines: (1) trends in mobile wireless  outages attributed to physical incidents since 2009 as reported to the  Federal Communications Commission (FCC), (2) the actions federal  agencies and industry have taken since 2013 to improve wireless network  resiliency, and (3) options that federal agencies could take to improve  network resiliency and their advantages and disadvantages. This report  focuses on the physical risks facing wireless networks; that is, the  potential for an unwanted effect from an incident on a network\u2019s  infrastructure like towers, antennas, and switches. Therefore, we did not  examine cyber risks facing wireless networks.", "To determine the trends in wireless outages, we analyzed data from  FCC\u2019s Network Outage Reporting System (NORS) on wireless outages  that occurred from 2009 through 2016. We chose this timeframe to cover  4 years of data before and after Hurricane Sandy. Communications  providers, including wireless carriers, are required in regulation to submit  outage reports in NORS for network service disruptions that reach certain  thresholds. Given our focus on wireless outages, we examined reports in  NORS for outages (1) that were reported by wireless companies that  identified themselves as either a wireless carrier or Voice over Internet  Protocol (VoIP) provider and (2) that were cited, as the reason the  outage was reportable, a reporting requirement applicable to a wireless  carrier or VoIP provider in 47 C.F.R. Part 4.", "We analyzed NORS data for wireless outages to determine the total  number and the causes of wireless outages that occurred from 2009  through 2016. FCC provides carriers a list of 19 main categories from  which a carrier selects a root cause, direct cause, and contributing  factor(s) for an outage. We examined the root cause and direct cause for each wireless outage reported to FCC. We collapsed several of the FCC  categories to create 9 categories for ease of presentation. Table 5 shows  the crosswalk between the 19 FCC categories and our 9 collapsed  categories.", "We also analyzed the data to identify the share of all wireless outages  attributed to a physical incident\u2014that is, a natural disaster (e.g., flooding,  earthquake, wildfire); accident (e.g., backhoe cut); or manmade event  (e.g., theft, malicious act). FCC provides carriers a list of categories from  which they select a root cause, direct cause, and contributing factor(s) for  an outage. Using these FCC categories, we created three new categories  for natural disasters, accidents, and manmade events (see table 6). We  based these three new categories on the description and categorization  of physical risks in FCC and DHS reports, including the Communications  Sector-Specific Plan.", "To understand the distribution of causes across all wireless outages in  our time frame, we focused primarily on the root cause for each wireless  outage. However, we also examined the root and direct cause reported  for each outage to better understand the multiple factors that may have  led to an outage and to understand wireless network dependencies (e.g.,  power, backhaul). Finally, we examined the number of outages, by month  and by year, for which a wireless carrier reported a physical event as the  root cause, direct cause, or contributing factor to better understand the  total number of outages related to a physical incident during our time  period.", "We also analyzed other characteristics of wireless outages such as  location, duration, and whether the failure occurred in another company\u2019s  network. To examine location, we focused on three NORS fields\u2014city,  state, and description of location\u2014to identify a city(ies) and state for each  outage, and then we determined the latitude and longitude for each  outage. We also examined NORS data in conjunction with two other data  sets. First, data on events for which FCC activated its Disaster  Information Reporting System (DIRS) or \u201cDIRS-lite\u201d to understand any  correlation between wireless outages and major physical incidents.  Second, data from CTIA\u2019s annual wireless survey on the number of  wireless subscribers and other measures of wireless networks\u2019 size to  understand any correlation between wireless outages and the size of the  wireless industry.", "To assess the reliability of NORS data, we reviewed FCC\u2019s data glossary  and other FCC documentation on the NORS data system and data  elements. We interviewed agency officials responsible for collecting and  analyzing NORS data to understand the manual and automated controls  used to review carrier-reported outage information and any potential  limitations in the data. We also reviewed relevant data elements for  missing data, outliers, and errors. We found the data were sufficiently  reliable for the purpose of describing the number and type of wireless  outages reported to FCC that were attributed to a physical incident.", "To determine the actions federal agencies have taken since 2013 to  improve the resiliency of mobile wireless networks, we reviewed reports  and documents from FCC, the Department of Homeland Security (DHS),  and the National Institute of Standards and Technology (NIST) within the  Department of Commerce. Specifically, we reviewed transcripts and  papers from hearings and a workshop FCC held in 2013 on  communications reliability and continuity. We also analyzed agency  orders and comments submitted in FCC\u2019s 2013 proceeding on wireless  resiliency. In addition, we reviewed communications sector planning  reports, such as the 2015 Communications Sector-Specific Plan and  2013 National Infrastructure Protection Plan, and other DHS  communications sector-specific documents, as well as the NIST  Community Resilience Planning Guide for Buildings and Infrastructure  Systems and related documents. We also examined reports from  federal advisory committees and partnership councils that cover wireless  network resiliency, including reports from the Technological Advisory  Council; Communications, Security, Reliability, and Interoperability  Council; National Security Telecommunications Advisory Committee; and  the Communications Sector Coordinating Council.", "To ensure we covered relevant agency actions and to seek any  information on the results of these actions, we interviewed officials from  DHS\u2019s Office of Cybersecurity and Communications within the National  Protection and Programs Directorate, including officials from the  Stakeholder Engagement and Cyber Infrastructure Resilience division\u2014 the sector-specific agency that leads federal efforts to protect and secure  the communications critical infrastructure\u2014and National Cybersecurity  and Communications Integration Center\u2014the center that continuously  monitors incidents that may impact communications. We also interviewed  officials from DHS\u2019s Federal Emergency Management Agency and  Science and Technology Directorate, FCC, and NIST.", "Beyond federal agency officials, we interviewed 24 stakeholders to further  understand federal agency and related industry actions to improve  wireless network resiliency since 2013 and any results from these  actions. Stakeholders included wireless carriers and other owners of  wireless network infrastructure, industry associations, consumer groups,  and state and local government officials. We selected stakeholders to  ensure we covered different perspectives (e.g., industry and consumer  groups, associations that represent state and local public safety officials).  In particular, we selected industry associations and individual companies  to cover both wireless carriers\u2014which operate networks and own some  network infrastructure\u2014and communications tower companies\u2014which  own and operate towers and sites and then lease space to wireless  carriers. We selected wireless carriers to include both nationwide and  regional carriers. We selected state agencies to include states directly  affected by two events\u2014flooding in Louisiana and Hurricane Matthew\u2014 for which industry had implemented elements of the framework at the  time we began our review. The views presented in our report are not  generalizable to those of all stakeholders. See table 7 for a list of  interviewed stakeholders.", "We reviewed documents describing the Wireless Network Resiliency  Cooperative Framework (framework)\u2014a voluntary, industry initiative  announced in April 2016. We interviewed CTIA and three of the five  wireless carriers that collectively proposed the framework to learn about  the impetus for, status of, and any outcomes or lessons learned from use  of the framework to date. We also interviewed FCC and DHS about each  agency\u2019s awareness of and role monitoring industry use of the framework,  and we reviewed FCC plans to monitor and share information about the  framework. Finally, we asked stakeholders we interviewed, as described  above, about their knowledge of and experience with the framework,  including any observed outcomes from its use to date. We assessed  FCC\u2019s efforts to monitor implementation of the framework against  Standards for Internal Control and FCC\u2019s current strategic plan.", "To determine what options exist for federal agencies to improve wireless  network resiliency, we examined federal agency reports, literature, and other sources. First, we reviewed filings in FCC\u2019s 2013 proceeding  examining wireless resiliency, including FCC\u2019s orders and comments filed  by various parties, for proposed options that federal agencies could  take. Second, we conducted a literature review of peer-reviewed  articles, government reports, industry publications, and think tank  publications from the last 5 years to identify additional options. Third, we  examined reports from the aforementioned federal advisory committees  on wireless network resiliency, the NIST Community Resilience Planning  Guide for Buildings and Infrastructure Systems, and the Hurricane Sandy  Rebuilding Task Force for recommendations made to federal agencies to  enhance wireless network resiliency. From these sources, we identified  11 proposed options that federal agencies could take to improve wireless  network resiliency. We eliminated one option\u2014requiring wireless carriers  to disclose outage information to the public\u2014as this was the only option  that FCC specifically proposed as a new rule in its 2013 proceeding, but  ultimately FCC decided not to move forward on this proposal when it  decided to not issue a final rule. The identified options were primarily  those that FCC could implement, as FCC is the regulatory agency for  wireless communications, although DHS or NIST could implement several  of the options.", "We interviewed a variety of stakeholders, described above, to obtain their  views on the advantages, disadvantages, and feasibility of each of the  identified options. We used open-ended questions to solicit input on each  option rather than provide a list of advantages and disadvantages to  stakeholders. We also asked stakeholders if there were additional options  for federal agencies to ensure we had a thorough list of options for federal  agencies. Based on interviews with stakeholders and federal agencies,  we decided not to present two options in our report\u2014establish more  formal, ongoing collaboration between wireless carriers and power  companies and create a program to facilitate collaborative restoration  between wireless carriers and power companies\u2014as federal agencies  told us they were already taking actions on these fronts. Therefore, we  included federal agencies\u2019 actions related to these two options while  describing actions taken by federal agencies since 2013. We analyzed  information collected through the interviews with stakeholders to identify  the most commonly cited advantages and disadvantages, and to  determine the number of stakeholders that supported or did not support  each option. The information collected from stakeholder interviews is not  generalizable to all industry stakeholders."], "subsections": []}, {"section_title": "Appendix II: Analysis of FCC Data on Wireless Outages", "paragraphs": ["The figures below provide results from our analysis of Federal  Communications Commission (FCC) data on wireless outages from 2009  through 2016. The data is from the Network Outage Reporting System  (NORS), the system that wireless carriers and other communications  providers use to report information on outages meeting certain threshold  as required by regulation. The figures below present information on the  number, cause, and duration of all wireless outages reported to FCC for  this period.", "To describe wireless outages by cause, we use nine categories that  collapse several of the FCC categories from which wireless carriers select  the root cause, direct cause, and contributing factor(s) when reporting an  outage. The following provides a brief description of these nine  categories. Appendix I contains information on the scope and  methodology for this analysis, including these nine collapsed categories.", "Cable damage/failure includes outages caused by an error locating or  digging that resulted in cable damage, by an aerial cable that was  damaged or ceased to function, and by loss of transmission in a cable  due to aging, among other causes. FCC categories: cable damage,  cable damage/malfunction.", "Equipment failure contains outages caused by the failure of a  hardware component (e.g., circuit pack or card in a processor) or by a  problem with the design of firmware, hardware, or software (e.g.,  failure for firmware to reset or restore after initialization, logical errors  in software). FCC categories: design-firmware, design-hardware,  design-software, hardware failure.", "Network robustness includes outages caused by, for example, a  failure to provide or maintain diversity, thus preventing single points of  failure. FCC categories: diversity failure, simplex condition.", "Maintenance includes outages caused by a needed spare part not  being on hand or available, a vendor or contractor lacking updated  procedures for its work, a service provider not providing adequate or  up-to-date training, and scheduled maintenance to upgrade a network  component or fix a known problem, among other causes. FCC  categories: spare, procedural-other vendor/contractor, procedural- service provider, procedural-system vendor, planned maintenance.", "External environmental contains outages caused by earthquakes,  wildfires, flooding, and other natural disasters as well as vandalism,  theft, vehicle accidents that impair or destroy a component, and  animal damage. FCC category: environment (external).", "Internal environmental contains outages caused by contamination due  to dirt or dust that leads to overheating, by water entering manholes or  vaults that destroys or impairs a component, and by other damage  related to the condition of buildings and structures housing network  equipment. FCC category: environment (internal).", "Other/Insufficient data includes outages for which there is not enough  information for a failure report or investigation to determine the cause  of the failure, service was restored before the cause could be  determined, and the cause cannot be determined or proven. FCC  categories: insufficient data, other/unknown.", "Power failure includes outages due to a commercial power failure  (including power failures that extend beyond any backup power  capabilities), a generator running out of fuel, a power system that was  insufficiently sized for its purpose, and batteries not functioning as  designed. FCC category: power failure (commercial and/or backup).", "Traffic/System overload contains outages where a network is  overloaded or congested because of an unplanned, external event, or  because of under-engineering the network due to changing demand  or technologies. FCC category: traffic/system overload."], "subsections": []}, {"section_title": "Appendix III: Comments from the Federal Communications Commission", "paragraphs": ["."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Sally Moino (Assistant Director);  Joanie Lofgren (Analyst in Charge); Enyinnaya David Aja; Stephen  Brown; David Hooper; Richard Hung; Joshua Ormond; Amy Rosewarne;  Andrew Stavisky; and Timothy Young made key contributions to this  report. Jon Ludwigson, John Mortin, Mark Pross, Pam Snedden, James R  Sweetman, Jr., and Joe Thompson also made contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-617", "url": "https://www.gao.gov/products/GAO-18-617", "title": "Nuclear Nonproliferation: The Administration's 2018 Plan for Verification and Monitoring Met Most Reporting Requirements but Did Not Include Future Costs and Funding Needs", "published_date": "2018-09-14T00:00:00", "released_date": "2018-09-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Countering the proliferation of nuclear weapons is a national security priority that is challenged by weapons advances from existing nuclear states and other actors possessing or attempting to possess nuclear weapons. To help address these issues, Congress directed the Administration in 2015 and 2017 to develop a plan for verification and monitoring relating to the potential proliferation of nuclear weapons, components of such weapons, and fissile material. GAO reviewed the first plan submitted to Congress in 2015, and an update submitted in 2017. GAO reported in March 2018 that this plan and update generally did not address the congressionally mandated reporting requirements.", "In the fiscal year 2018 NDAA, Congress directed the Administration to develop another plan and included a provision for GAO to review the plan. This report assesses whether the Administration's new plan provided details on the reporting requirements included in the NDAA.", "To determine whether the plan provided details on the reporting requirements, GAO reviewed the fiscal year 2018 plan and assessed whether the plan included details for each of the elements as required by the NDAA."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the 2018 plan provided details on most of the reporting requirements in the National Defense Authorization Act (NDAA) for Fiscal Year 2018, but did not include information on future costs and funding needs (see table below). In the NDAA, Congress directed the President to produce a plan that would address four reporting requirements: (1) a plan and roadmap on verification, detection and monitoring efforts, including details on costs and funding needs over 10 years, (2) an international engagement plan, (3) a research and development plan, and (4) a description of interagency engagement. The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy, developed the plan and submitted it to Congress in April 2018.", "According to NNSA officials, NNSA did not include long-term costs and funding needs in the plan because identifying these needs is unrealistic for several reasons, including because agencies have little influence over the spending priorities of other departments outside of the President's budget process. However, NNSA and other agencies already develop plans with long-term funding priorities and cost estimates for other programs. Because the plan does not include any estimates on future costs and funding needs, it limits congressional understanding of the long-term affordability of the nation's verification and monitoring efforts and its ability to make necessary funding and policy decisions. GAO has previously reported that providing estimates of future costs and funding needs can help congressional decisionmakers prioritize projects and identify long-term funding needs. By including in its plan estimates of future costs and funding needed to support the activities in the plan, NNSA could help provide assurance that agencies are allocating appropriate resources to the verification and monitoring effort and that these resources are aligned with future activities and processes."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Administrator of NNSA should include in its plan estimates of future costs and funding needed to support the activities in the plan. NNSA neither agreed nor disagreed with the recommendation, but said it planned no further action. GAO maintains that the recommendation is valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["In the National Defense Authorization Act (NDAA) for Fiscal Year 2018,  Congress included a provision directing the President to develop and  submit to Congress a plan for verification and monitoring relating to the  potential proliferation of nuclear weapons, components of such weapons,  and fissile material. This provision came out of issues that were  highlighted in a 2014 report from the Department of Defense\u2019s Defense  Science Board (DSB) on nonproliferation verification and monitoring  technologies. As a result of the DSB report, in the fiscal year 2015 and  fiscal year 2017 NDAAs, Congress directed the Administration to submit  interagency plans for verification and monitoring. The Administrations  submitted a classified plan in October 2015 and a classified update to the  plan in May 2017 in response to these mandates. We assessed the 2015  plan and 2017 update in March 2018 and found that they generally did  not address the reporting requirements.", "In the fiscal year 2018 NDAA, Congress indicated that the 2015 plan and  2017 update failed to answer congressional requirements and did not  reflect the high priority of this issue. Further, the NDAA reiterated the  DSB report\u2019s finding that \u201cThe nuclear future will not be a linear  extrapolation of the past\u2026and the technologies and processes designed  for current treaty verification and inspections are inadequate to future  monitoring realities.\u201d To address these issues, in the fiscal year 2018  NDAA Congress directed the President to produce a new plan that would  address four reporting requirements: (1) a plan and roadmap on  verification, detection, and monitoring efforts, including details on future  costs and funding needs over 10 years; (2) an international engagement  plan; (3) a research and development (R&D) plan to describe current and  planned efforts; and (4) a description of interagency engagement. On  behalf of the Administration, the National Nuclear Security Administration  (NNSA) prepared, and the Department of Energy submitted, a classified  plan to congressional committees in April 2018.", "The conference report accompanying the fiscal year 2018 NDAA includes  a provision for GAO to review the plan and provide its assessment to  congressional committees 90 days after submission of the plan. The  objective of this report is to assess whether the Administration\u2019s plan  provided detail on the reporting requirements in the fiscal year 2018  NDAA.", "To address this objective, we reviewed the 2018 plan. We assessed the  content of the plan against the reporting requirements and rated the  extent to which it provided detail on those requirements in one of three  ways: (1) addressed the reporting requirement with detail, (2) addressed  the reporting requirement without detail, or (3) did not address the  reporting requirement. In assessing the level of detail, we considered key  factors identified in our previous work on national strategies, federal  planning, and interagency collaboration. For example, we considered  the extent to which the plan provided information regarding specific goals  or objectives; strategies to achieve those goals or objectives and how  they would be implemented; which agency or agencies would implement  the strategies; and other measurable information, such as timelines and  the resources required. We also interviewed officials at NNSA who led the  development of the plan and coordinated with other contributing  interagency partners.", "We conducted this performance audit from May 2018 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objective."], "subsections": [{"section_title": "Background", "paragraphs": ["Countering the proliferation of nuclear weapons and other weapons of  mass destruction (WMD) remains a U.S. national security priority.  According to the 2017 National Security Strategy, terrorist groups  continue to pursue WMD-related materials, which pose a grave danger to  the United States. As also stated in the 2017 National Security Strategy,  Russia\u2019s nuclear arsenal remains the most existential threat to the United  States, China\u2019s nuclear arsenal is growing and diversifying, Iran has the  potential of renewing its nuclear program and North Korea has pursued  nuclear weapons despite international commitments. As the DSB report  noted, U.S. monitoring abilities are increasingly challenged by evolving  risks in 1) the capability of existing nuclear states and 2) the number of  state and nonstate actors possessing or attempting to possess nuclear  weapons. U.S. nonproliferation activities are conducted and coordinated  across multiple government agencies and organizations, as well as the  intelligence community. In addition, these efforts are coordinated with  international entities, national laboratories, industry, and academia.", "U.S. nuclear nonproliferation verification and monitoring efforts are guided  by, among other things, U.S. obligations under the Treaty on the Non- Proliferation of Nuclear Weapons (NPT) and U.S. support for the  Preparatory Commission for the Comprehensive Nuclear Test-Ban Treaty  Organization (CTBTO). The NPT lays out the respective responsibilities  of nuclear-weapon and nonnuclear-weapon states with regard to the  transfer, acquisition, possession, control, and manufacture of nuclear  weapons. All nonnuclear-weapon states are required to have a  comprehensive safeguards agreement with the International Atomic  Energy Agency (IAEA) to facilitate IAEA\u2019s safeguards activities. IAEA  safeguards are a set of technical measures and activities by which IAEA  seeks to verify that nuclear material subject to safeguards is not diverted  to nuclear weapons or other proscribed purposes. Under the  Comprehensive Nuclear Test-Ban Treaty (CTBT), which has yet to enter  into force, parties agree not to carry out any nuclear explosions. The  United States supports the work of the CTBTO to build up a verification  regime in preparation for the treaty\u2019s entry into force.", "The Administration\u2019s fiscal year 2018 plan for verification and monitoring  described ongoing interagency efforts to support nuclear proliferation  verification and monitoring and includes information about relevant  national priorities, capability gaps, R&D initiatives, and roles and  responsibilities. The 2018 plan (40 pages) is longer and more detailed  than the 2015 plan (2 pages) or the 2017 update (4 pages). The bulk of  the 2018 plan is contained in two chapters\u2014one chapter broadly  describes U.S. and international efforts and roles and responsibilities, and  the other chapter describes ongoing U.S. R&D efforts."], "subsections": []}, {"section_title": "The Administration\u2019s 2018 Plan Generally Addressed the Reporting Requirements but Did Not Identify Costs and Funding Needs", "paragraphs": ["We found the Administration\u2019s 2018 plan provided details on each of the  four major reporting requirements called for in the fiscal year 2018 NDAA  with the exception of future costs and funding needs (see table 1)."], "subsections": [{"section_title": "Plan and Roadmap", "paragraphs": ["The first reporting requirement called for a plan and roadmap for  verification, detection, and monitoring with respect to policy, operations,  and research, development, testing, and evaluation, including\u2014  Identifying requirements for verification, detection, and monitoring;  Identifying and integrating roles, responsibilities, and planning for  verification, detection, and monitoring activities; and", "The costs and funding requirements over 10 years for these activities.", "We found that the 2018 plan provided detail on verification, detection, and  monitoring requirements and roles and responsibilities, but did not  provide details on future costs and funding needed to support the  activities in the plan.", "We found that the plan identified requirements for verification, detection,  and monitoring as required. To identify these requirements, the plan  notes that interagency partners first identified a set of verification and  monitoring priorities. From these priorities they identified a number of  technical gaps. The plan then described dozens of examples of R&D  efforts and non-technical activities to address those technical gaps. For  example, for one gap the plan identifies eight current efforts to address  this gap, including continued Department of Energy and NNSA  investment in sensor capabilities that are small, light, and can operate in  low power.", "We found that the plan provided details on the requirement to identify and  integrate roles and responsibilities and planning. The plan includes details  of the roles and responsibilities of interagency partners and international  bodies that cooperate in the nonproliferation realm. For example, the plan  describes how the Department of Defense is to support U.S. verification  activities under the CTBT, including the installation, operation, and  maintenance of U.S. International Monitoring Systems.", "We found that the plan did not identify costs and funding needs over a 10- year period. NNSA officials stated that they believed providing funding  information over a 10-year period is unrealistic for several reasons. First,  according to NNSA officials, it is not feasible to achieve agreement on  actual or implied budgets outside of the existing President\u2019s budget  process. Second, according to NNSA officials, agencies have little  influence over the funding priorities of other departments outside of  existing budget efforts. Third, according to NNSA officials, long-term  funding estimates are infeasible because the President\u2019s budget only  identifies funding levels five years into the future. However, the 2018  NDAA did not ask for budget information. Instead, the NDAA reporting  requirement called for long-term costs and funding information necessary  to support the verification and monitoring activities in the plan. Finally,  NNSA officials told us that they and officials from other agencies briefed  the appropriate congressional committees prior to the release of the 2018  plan, and discussed the challenges with providing cost and funding data.", "According to NNSA officials, they verified with the congressional  committees that providing such information in the plan would be  impractical.", "We have previously reported that providing estimates of future costs and  funding needs can help congressional decisionmakers prioritize projects  and identify long-term funding needs. NNSA as well as other agencies  within the federal government already develop plans with long-term  funding priorities and cost estimates. For example, in June 2014, we  reported on 10-year estimates for sustaining and modernizing U.S.  nuclear weapons capabilities. As we found in this and other reports,  even when budgets are preliminary or not yet known, plans that include a  range of potential estimates help Congress prioritize projects and  funding. Because the plan does not include any information on  interagency costs and funding needs, it limits 1) congressional  understanding of the long-term affordability of the nation\u2019s verification and  monitoring efforts and 2) Congress\u2019s ability to make necessary funding  and policy decisions. By including in its plan estimates of future costs and  funding needed to support the activities in the plan, NNSA could help  provide assurance that agencies are allocating appropriate resources to  the verification and monitoring effort.", "In addition, including estimates of future costs and funding needs in the  plan can help ensure that interagency partners understand the amount of  resources necessary to support verification and monitoring efforts, and  determine if these resources align with agency activities. We have  previously reported on the importance of identifying resources among  collaborating agencies; we noted that without information on resource  contributions from partners in a collaborative effort, there is less  assurance that agency contributions are appropriate to successfully  sustain the effort. Similarly, providing information on future costs and  funding needs is important to help interagency partners coordinate and  develop long-term strategic plans that align with future interagency  efforts. We have found that for strategic planning to be done well, plans  should demonstrate alignment between activities, core processes, and  resources that support mission outcome. By including in its plan  estimates of future costs and funding needed to support the activities in  the plan, NNSA could help provide assurance that agencies are allocating  appropriate resources for interagency efforts and that these resources are  aligned with future activities and processes."], "subsections": []}, {"section_title": "International Engagement Plan", "paragraphs": ["The second reporting requirement called for an international engagement  plan for building cooperation and transparency\u2014including bilateral and  multilateral efforts\u2014to improve inspections, detection, and monitoring  activities. We found that the 2018 plan provided detail on this  requirement. The 2018 plan reiterates the nation\u2019s commitment to the  NPT and includes information on IAEA\u2019s safeguards programs and U.S  support for those programs. For example, under the plan, interagency  partners are to continue to encourage countries through diplomatic  outreach to conclude Additional Protocol agreements with IAEA."], "subsections": []}, {"section_title": "Research and Development Plan", "paragraphs": ["The third reporting requirement called for the plan to describe current and  planned R&D efforts toward improving monitoring, detection, and in-field  inspection and analysis capabilities, including persistent surveillance, remote monitoring, and rapid analysis of large data sets; and measures to  coordinate technical and operational requirements early in the process.  We found that the 2018 plan provided detail on this requirement. The plan  includes detail on a wide range of R&D efforts and non-technical efforts  that agencies are pursuing. For example, the plan reports that the  Defense Advanced Research Projects Agency is starting a program that  models millions of nodes and billions of connections to support the  detection of WMD proliferation activities. In addition, the plan describes  interagency groups involved in coordinating R&D requirements, such as  the National Science and Technology Council Subcommittee on Nuclear  Defense Research and Development."], "subsections": []}, {"section_title": "Interagency Engagement", "paragraphs": ["The fourth reporting requirement called for the plan to describe the  engagement of relevant federal departments and agencies; the military  departments; national laboratories; industry; and academia. We found  that the 2018 plan provided detail on this requirement. The plan includes  detail on the roles and responsibilities for interagency partners, as well as  information on interagency organizations and working groups to  coordinate efforts and reduce duplication. For example, the plan  discusses the Department of State\u2019s efforts to lead the interagency policy  process on nonproliferation and manage global U.S. security policy, and  the Department of Defense\u2019s support of U.S. diplomatic efforts, including  agreements with other defense departments, R&D cooperation, and  multinational exercises."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["This 2018 plan represents the third effort by Administrations to address  the nation\u2019s nuclear proliferation verification and monitoring efforts. The  2018 plan provides more detail on these efforts than the 2015 plan and  2017 update. However, the plan does not include estimates of future  costs and funding needs as required by the fiscal year 2018 NDAA. Costs  and funding information can help congressional decisionmakers prioritize  projects and identify potential long-term funding needs. Similarly, costs  and funding information helps interagency partners understand what  resources they are expected to contribute in the future and helps to  ensure long-term strategic plans reflect an alignment between resources  and interagency activities. By including in its plan estimates of future  costs and funding needed to support the activities in the plan, NNSA  could help provide assurance that agencies are allocating appropriate  resources to the verification and monitoring effort and interagency  activities, and that these resources are aligned with future activities and  processes."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to NNSA:  The Administrator of NNSA should include in its plan for verification and  monitoring estimates of future costs and funding needed to support the  activities in the plan. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided NNSA with a draft of this report for review and comment.  NNSA provided written comments, which are summarized below and  reproduced in appendix I; the agency neither agreed nor disagreed with  our recommendation to include estimates of future costs and funding  needed to support the activities in its plan for nuclear proliferation  verification and monitoring. However, NNSA stated that it planned no  further action with regard to costs and funding data. NNSA also provided  technical comments, which we incorporated as appropriate.", "NNSA stated that it appreciated our recognition of improvements in the  2018 plan for verification and monitoring over the 2015 plan and the 2017  update. In its written comments, NNSA acknowledged that it did not  include interagency cost and funding requirements in the 2018 plan over  10 years as required in the NDAA. The agency stated that it briefed the  appropriate congressional committees before the release of the plan  about the challenges and feasibility of providing the cost and funding data  and received no objections on the omission of the data from the plan.  NNSA also stated that it informed us of the briefings. We have added  clarification in our report that NNSA officials believed they received  agreement from congressional staff to exclude funding and cost estimates  from its plan.", "NNSA stated that the NDAA did not prioritize the relative importance of  the reporting requirements, and that we disproportionately weighted the  one omission in our assessment, effectively overstating the importance of  providing cost and funding information. In addition, NNSA identified  challenges to the feasibility of providing interagency out-year cost and  funding estimates, including the difficulty to quantify the level of R&D and  associated funding required to achieve specific outcomes and that  departments and agencies are unable to commit to aligning 10 year  funding estimates with individual agencies\u2019 timelines and internal  processes for planning, programming, budgeting, and execution.", "NNSA\u2019s statement suggests that it views nuclear proliferation verification  and monitoring programs as being unique and different from other federal  programs and that they should therefore be exempt from estimating their  potential long-term resource burden on the federal budget. We disagree.  Developing future cost and funding estimates for programs is central to  effective interagency planning efforts. The efforts described in NNSA\u2019s  2018 nuclear verification and monitoring plan span a diverse range of  activities that are implemented across multiple agencies. The absence of  cost and funding estimates for these efforts in NNSA\u2019s plan raises  questions as to whether there is an effective interagency process to  coordinate these efforts and if the process is taking adequate account of  resource constraints and making realistic assessments of program  resource needs. In addition, information on future cost and funding  estimates of federal programs provides Congress with a better  understanding of the potential long-term funding needs and costs of the  diverse efforts supporting the proliferation verification and monitoring  mission. We believe this big picture view is important given the multiple  congressional committees of jurisdiction\u2014including appropriations,  authorization, and oversight committees\u2014for the efforts identified in  NNSA\u2019s plan.", "Regarding the feasibility of providing 10-year cost and funding estimates,  we recognize the difficulty and uncertainty agencies face in estimating  future funding needs. However, we do not believe developing such  estimates is impossible. As we reported, the Department of Defense  (DOD) and the Department of Energy (DOE) prepare an annual plan with  10 year cost and funding estimates for their ongoing nuclear sustainment  and modernization efforts, including R&D efforts.", "NNSA also provided general technical comments addressing our findings  on the cost and funding estimates that were not included in the plan,  including comments on NNSA\u2019s authority to obtain 10-year estimates  from other agencies, and on the examples we cited of other interagency  plans that include similar estimates.", "NNSA stated that it did not have authority to require other agencies to  submit 10-year budget estimates for their efforts that are included in the  plan. We noted in our report that Congress directed the President to  include this element in the nuclear proliferation verification and monitoring  plan. However, responsibility to prepare and submit the plan was  delegated by the President to DOE.", "NNSA commented that the joint DOD-DOE annual nuclear sustainment  and modernization plan is not comparable to the NNSA plan because the  former primarily addresses capital projects and other material products,  while the latter primarily addresses R&D activities. The reporting  requirements for NNSA\u2019s nuclear proliferation verification and monitoring  plan were not limited to R&D efforts, but included cost and funding  estimates for related activities and capabilities, including policy,  operations, testing, and evaluation. NNSA\u2019s comment focuses only on the  difficulty of addressing cost and funding estimates for only one aspect  (R&D) of nuclear proliferation verification and monitoring and ignores the  possibility that estimates for non-R&D efforts may be more feasible and  less difficult to report. Moreover, we have reported that the joint DOD- DOE plan on nuclear modernization includes 10-year DOD and DOE  estimates for R&D, as well as estimates for related modernization efforts,  including infrastructure, nuclear weapon life extension programs, delivery  systems, nuclear command, control, and communications systems, and  other related activities.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of NNSA, and other interested parties. In  addition, this report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made significant contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments:", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, William Hoehn (Assistant  Director), Dave Messman (Analyst-in-Charge), Alisa Carrigan, Antoinette  Capaccio, Ben Licht, Steven Putansu, and Gwen Kirby."], "subsections": []}]}], "fastfact": ["In 2015 and 2017, federal law directed the President to submit a plan to Congress for monitoring the potential spread of nuclear weapons and materials. In earlier reports, we found those plans did not address required areas.", "A 2018 law again directed the President to produce a plan, which the National Nuclear Security Administration prepared. Most required subjects were included, such as plans for research and development and international engagement. However, the plan did not include information on its cost over the next 10 years.", "We recommended the NNSA provide estimates of the funding needed to support the activities in the plan."]}
{"id": "GAO-18-57", "url": "https://www.gao.gov/products/GAO-18-57", "title": "Commercial Space Launch Insurance: FAA Needs to Fully Address Mandated Requirements", "published_date": "2018-01-16T00:00:00", "released_date": "2018-01-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government shares liability risks with the commercial space launch industry for accidents that result in damages to third parties or federal property. This arrangement requires space launch companies to have a specific amount of insurance to cover these damages. The government is potentially liable for damages above that amount, up to a cap GAO estimated to be $3.1 billion in 2017, subject to appropriations in advance.", "CSLCA, enacted in 2015, directed the Department of Transportation, of which FAA is a part, to evaluate its MPL methodology and, if necessary, develop a plan to update that methodology. The act also included a provision requiring GAO to assess FAA's evaluation and any actions needed to update the methodology.", "This report discusses the extent to which (1) FAA's evaluation report addresses the requirements in CSLCA and (2) FAA has addressed previously identified weaknesses in the MPL methodology. GAO reviewed documents and interviewed FAA on its loss methodology evaluation and actions to address weaknesses."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Aviation Administration's (FAA) report evaluating its maximum probable loss (MPL) methodology did not fully address the evaluation and consultation requirements specified by the U.S. Commercial Space Launch Competitiveness Act (CSLCA).", "Balance of Risk. CSLCA required FAA to include ensuring that the federal government is not exposed to greater indemnification costs and that launch companies are not required to purchase more insurance coverage than necessary as a result of FAA's MPL methodology. FAA said that it ensured this balance by improving its methodology, but it did not reevaluate its probability thresholds after revising its methodology. These thresholds are used to divide the risk of loss between launch companies and the government.", "Impact on Costs. The act required FAA to consider the costs to both the industry and the federal government of implementing an updated methodology. FAA's report discussed the impact on indirect costs, such as data collection, but did not discuss direct costs: insurance premiums for launch companies and indemnification liability for the federal government.", "Consultation. The act also required FAA to consult with the commercial space sector and insurance providers in evaluating its MPL methodology in accordance with the preceding requirements. While the agency consulted with some stakeholders, these consultations were limited in scope.", "FAA officials said they have not been able to take the actions needed to fully satisfy the mandated elements because of issues such as resource limitations and the lack of available data. However, by not resolving these issues, FAA lacks assurance that launch companies are not purchasing more insurance than needed or that the federal government is not being exposed to greater indemnification costs than expected.", "FAA has addressed two of three previously identified weaknesses in its MPL methodology but has not yet dealt with the remaining weakness. Specifically, the agency has revised its methodology for estimating the number of potential casualties for a launch and changed the factor it uses to derive estimated property damage from estimated casualties. However, FAA has not updated the amount used for the cost of an individual casualty. GAO recommended in a March 2017 report (GAO-17-366) that FAA update this amount. Not doing so could understate the amount of insurance launch companies are required to purchase, exposing the federal government to excess risk.", "GAO also determined that while FAA has two tools and methods it can use in making its MPL estimates, it does not have guidance on determining which are most appropriate for a given launch scenario. For example, one tool is more comprehensive but also labor intensive to use, while the other is inappropriate for certain launch scenarios and could result in misleading MPL amounts. Officials said they have begun to create such guidance but do not have an estimated completion date. Without such guidance, FAA cannot ensure that the most appropriate MPL methodology is used for each launch."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FAA should fully address mandated requirements in evaluating its MPL\u2014probability thresholds, direct costs, and stakeholder consultations\u2014 and establish an estimated completion date for developing guidance on tools and methods to use for specific launch scenarios. The Department of Transportation concurred with the recommendations, and provided technical comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 1988, the federal government has sought to assist in the  development of the commercial space launch industry by sharing liability  risks for accidents leading to damages to third parties or federal property  and personnel. This risk-sharing arrangement requires that space launch  companies\u2014firms that launch satellites or other payloads into space or  reenter vehicles from space\u2014purchase insurance against claims by third  parties and for loss or damage to federal property and personnel up to a  maximum probable loss (MPL) amount. This amount is to be determined  by the Federal Aviation Administration\u2019s (FAA) Office of Commercial  Space Transportation. For claims that exceed the MPL threshold, the  federal government is potentially liable for damages, subject to  appropriation, up to $3.1 billion in 2017 (the equivalent to $1.5 billion in  1988).", "In November 2015, Congress passed the U.S. Commercial Space  Launch Competitiveness Act, (CSLCA) which required FAA to evaluate its  MPL methodology and report the results of that evaluation to Congress.  In addition, it required the agency, as part of its evaluation, to consult with  the commercial space sector and insurance providers and, if necessary,  develop a plan to update that methodology so the federal government is  not exposed to greater costs than intended and launch companies are not  required to purchase more insurance than necessary. Although FAA was  required to submit its report on updating its methodology to Congress by  May 2016, it did not do so until April 2017, citing an internal agency  review process for the delay.", "CSLCA also includes a provision for us to assess, among other things,  the analyses conducted and conclusions made in FAA\u2019s MPL evaluation  report to Congress. This report examines (1) the extent to which FAA\u2019s  mandated report addresses the requirements in CSLCA and (2) the  extent to which the agency has addressed previously identified  weaknesses in the MPL methodology.", "To address the first objective, we analyzed the CSLCA requirements for  FAA\u2019s report and evaluated the information included in FAA\u2019s report, as  well as additional information provided by officials from FAA\u2019s Office of  Commercial Space Transportation. Specifically, we analyzed supporting  documentation, including contractor reports and meeting minutes;  interviewed FAA officials; and compared this evidence to federal internal  control standards and GAO guidance on conducting an economic  assessment.", "To address the second objective, we reviewed prior GAO  recommendations, and weaknesses in the MPL methodology identified by  us and other entities. We assessed FAA\u2019s efforts to address these  recommendations and weaknesses using documentation from and  interviews with Office of Commercial Space Transportation officials about  the steps that FAA has taken or plans to take. We also interviewed these  officials, and reviewed documentation on guidance on determining the  most appropriate analytical tool to use calculate MPL values for a given  launch scenario. We also assessed the reasonableness of FAA\u2019s actions  and plans using federal internal control standards where appropriate.", "For both objectives, we reviewed information collected for our March  2017 report on the agency\u2019s revisions to its MPL methodology, including  the actions the agency has taken to address the weaknesses we and  others had previously identified. For the purposes of this current report,  we are updating the information collected for the March 2017 report as  appropriate.", "We conducted this performance audit from May 2017 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Commercial Space Launch Act Amendments of 1988 established the  foundation for the current U.S. policy to potentially provide federal  payment for a portion of claims by third parties for injury, damage, or loss  that results from a commercial launch or reentry accident. A stated goal  of the act was to provide a competitive environment for the U.S.  commercial space launch industry. The act also provided for, among  other things, government protection against some losses\u2014referred to as  indemnification\u2014while still minimizing the cost to taxpayers. All FAA- licensed commercial launches and reentries by U.S. companies, whether  unmanned or manned and from the United States or overseas, are  covered by federal indemnification for third-party damages that result  from the launch or reentry. According to agency officials, in 2016 FAA  issued five active licenses, which had an average third-party MPL of  about $51 million and ranged from $10 million to $99 million.", "The amount of insurance coverage that FAA requires launch companies  to purchase\u2014the MPL value\u2014is intended to reflect the greatest dollar  amount of loss to third parties and the federal government for bodily injury  and property damage that can be reasonably expected to result from a  launch or reentry accident. FAA calculates separate MPL values for  potential damages to third parties and the federal government. For each  launch license that it issues, FAA determines MPL values for third parties  with the intent of estimating the greatest dollar amount of losses that  reasonably could be expected from a launch or reentry accident, which  have no less than a 1 in 10 million chance of occurring. For damages to  the federal government, FAA determines MPL values with the intent of  estimating the greatest dollar amount of losses that reasonably could be  expected from a launch or reentry accident, which have no less than a 1  in 100,000 chance of occurring. According to FAA, the agency defines  these probability thresholds to estimate the federal government\u2019s  exposure to losses above the MPL. Agency officials said that the current  probability thresholds are set such that losses are very unlikely to exceed  launch companies\u2019 private insurance and become potential costs for the  government under CSLCA.", "FAA\u2019s process for determining the MPL value for a launch or reentry  license generally includes three elements:  1.  Number of casualties. Estimating the number of third-party  casualties involves adding the number of direct and secondary  casualties that could result from a launch accident. Direct casualty  estimates include serious injuries and deaths. Secondary casualties  include those resulting from fires and collapsing buildings.  2.  Cost of casualties. FAA uses $3 million as an estimate of the  average loss per casualty, which is multiplied by the number of  estimated casualties.  3.  Property damage. FAA applies a predetermined factor\u2014which it  recently changed from 50 percent to 25 percent\u2014to the estimated  cost of casualties to derive estimated losses from property damage.", "The total MPL is equal to the estimated cost of casualties plus property  damage.", "FAA has revised two components of its MPL methodology since our 2012  report. For example, in April 2016, the agency adopted a new method for  estimating the number of casualties, known as the risk profile method.  This method uses different tools to simulate a range of possible scenarios  to create a distribution of potential casualty numbers and the simulated  probability of different levels of casualty numbers. The risk profile method  replaced FAA\u2019s \u201coverlay method,\u201d which was a method it had used since  the early 1990s which the agency said did not work well for launches of  small launch vehicles in remote areas, or for reentries. In addition, FAA  reduced the factor it uses to estimate losses due to property damage,  based on tests of a new process for estimating such losses that showed  the previous factor was too high."], "subsections": [{"section_title": "GAO Previously Reviewed FAA\u2019s MPL Methodology", "paragraphs": ["We have previously reviewed FAA\u2019s MPL methodology in 2012 and 2017.  In 2012 we examined the U.S. government\u2019s indemnification policy, the  federal government\u2019s potential costs for indemnification, and the effects of  ending indemnification on the competitiveness of U.S. launch companies,  among other aspects of FAA\u2019s MPL methodology. In 2017 we examined  the extent to which FAA had revised its MPL methodology since our 2012  report to address previously cited weaknesses and the potential effect of  any changes to that methodology on financial liabilities for the federal  government. The findings and recommendations of those reports,  including any unaddressed weaknesses, are discussed later in this report."], "subsections": []}]}, {"section_title": "FAA Did Not Fully Address the CSLCA\u2019s Three Mandated Requirements", "paragraphs": ["CSLCA required FAA to evaluate its MPL methodology incorporating  three requirements, but the agency\u2019s report did not fully address these  requirements.", "First, the act required FAA to ensure a balance of risk between launch  companies and the federal government. However, agency officials  told us that they did not re-evaluate the probability thresholds\u2014which  are used to divide the risk of loss between launch companies and the  federal government\u2014as part of evaluating its MPL methodology when  implementing the risk profile method due to resource constraints.", "Second, the act required FAA to consider the cost impact of  implementing an updated MPL methodology, but the agency did not  evaluate the impact of implementing its revised methodology on the  direct costs to launch companies (insurance premiums) and to the  federal government (indemnification liability).", "Third, the act required FAA to consult with the commercial space  sector and insurance providers in evaluating its MPL, but they did not  consult such parties in response to the act.", "Without fully addressing CSLCA\u2019s mandated requirements, FAA cannot  ensure that the federal government is not exposed to greater liability  costs than intended or that launch companies are not required to  purchase more insurance coverage than necessary."], "subsections": [{"section_title": "FAA Has Not Fully Evaluated the Balance between Government Liability Exposure and Industry Insurance Costs", "paragraphs": ["In its report, FAA states that implementing an updated MPL methodology  in April 2016\u2014the risk profile method\u2014helps ensure that the federal  government is not exposed to greater liability costs than intended and that  launch companies are not required to purchase more insurance coverage  than necessary, as required under CSLCA. Further, agency officials told  us that their updated methodology is technically more valid and improves  their ability to avoid overestimating MPL values (which can cause launch  companies to purchase more insurance coverage than necessary) or  significantly underestimating MPL values (which can expose the federal  government to greater costs than intended).", "While an improved model may provide a more realistic calculation of the  MPL, by changing the resulting estimates it can also change the balance  between the federal government\u2019s exposure to liability costs and the  amount of insurance launch companies are required to purchase. For  example, if the more realistic results produced by the revised  methodology increased the MPL estimates, this would increase insurance  costs for the launch companies and reduce the federal government\u2019s  exposure, thereby shifting the balance of costs between the two and  suggesting a reevaluation of the thresholds.", "In addition, FAA officials told us that they had not reevaluated the  probability thresholds upon implementing the revised MPL methodology,  although defining these thresholds is their primary mechanism for  adjusting the balance of risk between launch companies and the federal  government. Agency officials acknowledged that an examination of the  thresholds\u2019 continued appropriateness would be warranted in the future.", "However, they told us that changing the probability thresholds would  require significant effort because it would require them to change federal  regulations and that resources are currently allocated to other rulemaking  priorities. Nevertheless, without evaluating the appropriateness of the  probability threshold as part of the mandated evaluation of the MPL  methodology, FAA cannot ensure that the federal government is not  exposed to greater liability costs than intended or that launch companies  are not required to purchase more insurance coverage than necessary."], "subsections": []}, {"section_title": "FAA Evaluated Only Indirect Costs to Industry and Government of Implementing a New Methodology", "paragraphs": ["CSLCA also required FAA to consider the cost impact on both the  commercial space launch industry and the federal government of  implementing an updated MPL methodology. In its report to Congress,  the agency discussed indirect costs to launch applicants and the federal  government. For example, FAA discussed indirect data burden costs on  launch company applicants and FAA analysts associated with the  agency\u2019s risk profile method implementation. The report states that the  risk profile method requires more data from a launch applicant than the  previous method, but that the added burden is minimal because the  information is similar to the type of information required by FAA for a risk  analysis. Agency officials also said that the risk profile method requires  more of an FAA analyst\u2019s time than the overlay method, but that the  added burden is minimal because the work done by FAA on risk analysis  provides much of the foundation for an MPL analysis.", "However, FAA\u2019s report did not include an evaluation of the direct costs to  launch companies and the federal government of implementing an  updated MPL methodology. The report identifies the direct cost to the  launch industry as insurance premiums, and the direct cost to the federal  government include potential indemnification payments. Agency officials  also told us that the agency does not track commercial space launch  insurance costs, and that they do not have meaningful insights on  insurance premiums paid by commercial launch companies. FAA officials  told us that they only have a general notion of insurance premiums  because the industry is reluctant to share such information. FAA officials  also told us that, outside of the work done for the report, they have not  evaluated the economic implications for launch companies of  implementing an updated MPL methodology. Without evaluating direct  costs to both the launch companies and the federal government, FAA will  be limited in its ability to consider the impact of the cost to both the  industry and the federal government of implementing an updated  methodology."], "subsections": []}, {"section_title": "FAA Obtained Limited Input from the Commercial Space Sector and Insurance Providers", "paragraphs": ["Although CSLCA required FAA to consult with the commercial space  sector and insurance providers in evaluating its MPL methodology for the  mandated report, it obtained limited input. For example, FAA officials told  us that they obtained input from their Commercial Space Transportation  Advisory Committee (COMSTAC) in April 2016 about what to include in  their report to Congress, but did not consult with the commercial space  sector and insurance providers to evaluate their MPL methodology in  response to CSLCA.", "FAA officials also said that, to respond to CSLCA\u2019s consultation  requirement, they did not think they needed to repeat the consultations  they took in 2013. In January 2013, the agency solicited input from  COMSTAC\u2019s Business/Legal Working Group about how to best conduct a  review of FAA\u2019s methodology for calculating MPL, in response to our July  2012 report. FAA also briefed the Business/Legal Working Group in  May 2013 to solicit input on MPL methodologies, including the risk profile  method. In the January 2013 meeting, a COMSTAC member suggested  several contractors for a study by outside experts of the complete MPL  methodology, and FAA subsequently hired one of these contractors to  develop the risk profile method that it implemented in April 2016.  However, the agency did not solicit input from COMSTAC about its risk  profile methodology prior to its April 2016 implementation or following  CSLCA\u2019s November 2015 mandated evaluation. As a result, FAA lacks  input on the effect of its revised MPL methodology on launch companies  and the federal government, making it difficult to evaluate the balance of  risk between the two."], "subsections": []}]}, {"section_title": "FAA\u2019s Revised MPL Methodology Does Not Fully Address Certain Previously Identified Weaknesses", "paragraphs": ["Our 2012 report identified concerns with all three components of FAA\u2019s  MPL methodology: estimating the number of casualties, estimating the  cost of casualties, and deriving estimated property damage costs from  estimated casualty costs. In that report we recommended that the agency  reassess its methodology, including the reasonableness of several key  elements. As noted in our 2017 report, FAA has since made  improvements to its methodology. However, it still has not yet updated the  cost of a casualty. In addition, in our 2017 report we also noted that there  are instances where deriving estimated property damage from estimated  casualty costs is inappropriate. As of November 2017, FAA does not have  guidance to identify such instances or to guide decisions on which tools to  use in developing the MPL estimate."], "subsections": [{"section_title": "FAA Has Made Improvements to Its MPL Methodology but Has Not Updated the Cost-of- Casualty Amount", "paragraphs": ["FAA has taken steps designed to improve two of three elements of its  MPL methodology, including revising its methodology for estimating the  number of potential casualties for a given launch and changing the factor  it uses to derive estimated property damage from estimated casualties.  However, the agency has not updated the third element, the amount it  uses for the cost of an individual casualty, leaving a previously identified  weakness unaddressed.", "Our 2012 report raised concerns with each of the three components of  FAA\u2019s MPL calculation methodology.", "First, we found that FAA\u2019s method for estimating the number of  casualties involved use of a single loss scenario instead of applying  the insurance industry\u2019s standard practice of catastrophe modeling,  and that the agency\u2019s method might significantly understate the  number of potential casualties. Catastrophe modeling, unlike the  single-loss approach, generally estimates losses by using various  tools to simulate tens of thousands of scenarios to create a  distribution of potential losses and the simulated probability of  different levels of loss.", "Second, we reported that FAA had been using an outdated and likely  understated figure of $3 million to estimate the cost of a single  casualty\u2014including injury or death\u2014which Office of Commercial  Space Transportation officials said has not been updated since they  began using it in 1988.", "Third, we reported that the agency\u2019s approach of estimating potential  property damage by adding a flat 50 percent to the estimated casualty  damage could lead to estimates that were too high in some cases.", "Given these weaknesses, we recommended that FAA reassess its MPL  methodology, including assessing the reasonableness of the cost-of- casualty amount and other assumptions used. Because the agency took  actions to assess its MPL methodology, we closed the recommendation  as implemented.", "In March 2017 we reported that FAA had taken steps to address  weaknesses in two of these three areas. Specifically, we reported that  FAA\u2019s adoption of the risk profile method in April 2016 had improved its  estimates of the number of potential casualties associated with a  particular license launch. In addition, we reported that the agency had  revised the factor it uses to estimate losses from property damage in the  MPL calculation from 50 percent to 25 percent. This change has resulted  in property damage estimates that FAA officials believe are still  conservative but more realistic than previous estimates.", "However, in our March 2017 report we also determined that FAA had not  yet addressed weaknesses in the cost-of-casualty amount we had  previously identified; despite the conclusion by a contractor it had hired to  study the cost-of-casualty that it was too low. Agency officials told us that  they had not addressed this weakness because of other priorities. Given  the significance of the cost-of-casualty amount to the MPL calculations,  we recommended that FAA prioritize the development of a plan to  address the identified weakness in the cost-of-casualty amount, including  setting time frames for action, and update the amount based on current  information. In October 2017, FAA officials told us that they had not yet  updated the cost-of-casualty because they have continued to prioritize  completing other work with their limited resources, such as reviewing  launch applications and fulfilling other safety responsibilities. As a result,  our recommendation remains open.", "FAA officials told us that they have identified potential steps to update the  cost-of-casualty amount, including seeking public input on whether and  how to revise the amount, but that they do not expect to make a decision  on whether to make any changes to the cost-of-casualty amount until  June 30, 2018, at the earliest. FAA officials told us that in order to  prioritize the development of a plan to address the identified weakness in  the cost-of-casualty amount they will need to consult with both the  commercial space and insurance industries about the necessity and  implications of any potential increase in the cost-of-casualty amount.  Agency officials said that they plan to do such consultations through  COMSTAC. However, because COMSTAC was just reestablished in  June 2017 after not having been active since November 2016 and new  members had not been approved as of October 2017, the anticipated  decision date of June 2018 could be further delayed.", "As we reported in March 2017, an understated cost-of-casualty amount  can lead to an inaccurate loss calculation, which in turn understates the  amount of insurance a launch company must obtain. This could increase  the potential exposure to the federal government, as the insurance  amount would be less than the potential losses associated with the  launch activity and the property would be inadequately protected.  Because of this potential exposure, we maintain that addressing this  weakness is a priority."], "subsections": []}, {"section_title": "FAA Does Not Have Guidance for When to Estimate Property Damage Separately from the Number of Casualties and Which Analytical Tool to Use", "paragraphs": ["As noted above, in our 2012 report we raised concerns about the first  element of FAA\u2019s MPL methodology, which is estimating the number of  potential casualties. FAA officials said that they have implemented two  tools for estimating the number of potential casualties, and that each tool  requires a different level of resources and is more appropriate for different  launch scenarios. The Range Risk Analysis Tool creates physics-based  simulations of possible accidents using launch vehicle data, such as  launch trajectory and types of failures, and assigns each simulated  accident a probability of occurrence based on the failure rates of the  different elements of the launch vehicle. According to agency officials, the  Range Risk Analysis Tool is a comprehensive, high-fidelity tool and is the  most appropriate tool for coastal launch sites, which are often located in  heavily populated areas, and is labor intensive. The Risk Estimator Sub- orbital and Orbital Launch Vehicle and Entry tool, which in contrast to the  Range Risk Analysis Tool, is a medium-fidelity tool that can be used for  low-risk launches, such as launch sites located in very sparsely populated  areas and reentry operations that do not need the use of a high-fidelity  tool. According to FAA, this tool significantly reduces the time required to  estimate the risk from launch and reentry vehicle operations.", "In our 2017 report, we also reiterated that there are cases where the third  element of FAA\u2019s methodology, deriving estimated property damage from  estimated casualties, could lead to misleading MPL calculations.  Specifically, in March 2017 we reported that estimating losses from  property damage as a percentage of losses from casualties could lead to  overestimates. For example, FAA\u2019s contractor found that, if a launch  accident affected a residential area, the agency\u2019s practice of estimating  property damage based on casualties would likely overstate property  damages because residential structures have relatively low values  compared to losses from casualties. We also reported in March 2017 that  in some accidents the number of casualties may be low but property  losses could still be very large, in which case FAA\u2019s estimating property  losses based on casualties would likely understate potential property  damage. For example, a launch vehicle could strike an unoccupied  structure that is very expensive, such as a neighboring launch complex.  Agency officials said that while deriving property losses from casualty  losses is a simpler method that may be an effective use of limited FAA  resources, it could be inappropriate in scenarios where the number of  casualties might be low but property losses could still be very large.", "In October 2017, agency officials said that FAA had not developed  guidance for determining, for a given launch license, which of the  available tools would be most appropriate to estimate the number of  potential casualties, and whether it would be more appropriate to estimate  property losses separately rather than derive them from estimated  casualties. While FAA officials said they believe their current decision  process is adequate and that they do not need more formal guidance at  this time, they also told us that they were in the process of developing  internal guidance on the most appropriate tool to use for future launches.  The officials said that they did not have a projected completion date for  the guidance, primarily because the agency has other priorities and  resource limitations. As noted earlier, these priorities include reviewing  commercial space launch license applications and managing program  safety.", "Federal internal control standards state that, as part of an entity\u2019s risk  assessment component, management should identify, analyze, and  respond to risks to achieving objectives. For example, the standards  state that management should design control activities in response to the  entity\u2019s objectives and risks to achieve an effective internal control  system.", "Without such guidance, FAA could face challenges in ensuring that it is  using the most appropriate method to calculate an MPL for a given launch  and is making the most efficient use of its resources. Such guidance  could become more important as the number of commercial space  launches increases, potentially creating greater demands on its  resources. We have previously reported that the commercial space  launch industry has experienced significant growth in the number and  complexity of launches in the past half-decade. FAA has also reported  that its licensed launches have increased 60 percent and industry  revenue has increased 471 percent since 2012."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FAA\u2019s MPL methodology is critical in balancing the encouragement of the  U.S. commercial space industry with the need to manage the federal  government\u2019s risk exposure because it determines how much risk each  party will bear for third-party damages resulting from potential space  launch accidents. However, despite changes to the methodology, the  probability threshold that the agency uses to achieve this balance of risk  has been the same since the 1990s, and has not been reviewed for  appropriateness. In addition, while FAA evaluated the effect of its MPL  methodology on the indirect costs of launch companies and the federal  government, it did not similarly evaluate direct costs. Further, although  FAA has obtained input from some stakeholders on certain aspects of its  MPL methodology, it has not consulted with launch providers and  insurance companies to evaluate effects on key potential costs to launch  companies and the federal government, as required under CSLCA. FAA  officials told us that resource issues and pursuing other priorities have  prevented them from taking these actions. However, the longstanding  nature of these issues, as well as their importance in determining the  federal government\u2019s financial exposure, makes their completion a  priority.", "FAA has also begun improving other aspects of its MPL process, but  important actions remain incomplete. For example, the cost of a casualty,  a key component of the methodology, has not been updated since 1988.  While FAA has identified potential steps to update this amount, it has not  implemented these steps and our March 2017 recommendation to  prioritize the updating of this amount remains open. Further, agency  officials said they have begun to develop internal guidance on how to  determine which methodological tools should be used for a given launch,  but are not sure when this process will be completed. These are  important steps to help ensure the validity of the MPL methodology and  the results obtained for each launch, which in turn determine the balance  between the amount of insurance launch companies are required to  purchase and the potential financial exposure for the federal government."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to FAA:  The FAA Administrator should fulfill the CSLCA mandate to include  ensuring a balance of risk between the federal government and launch  companies as part of FAA\u2019s MPL methodology evaluation by reexamining  the current probability thresholds. (Recommendation 1)", "The FAA Administrator should fulfill the CSLCA mandate to analyze the  cost impact of implementing its revised MPL methodology by evaluating  the impact on the direct costs of launch companies and the federal  government. (Recommendation 2)", "The FAA Administrator should fulfill the CSLCA mandate to evaluate its  MPL methodology in consultation with the commercial space sector and  insurance providers by consulting with those entities on the cost impact of  its revised MPL methodology, including an updated cost-of-casualty  amount, on the launch industry and the federal government.  (Recommendation 3)", "The FAA Administrator should establish an estimated completion date for  developing and implementing a plan to establish guidance on the most  appropriate MPL methodologies and tools to use for each launch.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Transportation for  their review and comment. In its comments, reproduced in appendix I, the  Department of Transportation concurred with our recommendations. The  Department of Transportation also provided technical comments, which  we incorporated as appropriate.", "We are sending copies of this report to interested congressional  committees and the Secretary of the Department of Transportation. In  addition, this report will be available at no charge on GAO\u2019s website at  http://www.gao.gov.", "If you or your staff have any questions or would like to discuss this work,  please contact Alicia Puente Cackley at (202) 512-8678 or  cackleya@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  Individuals making key contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Patrick Ward (Assistant Director),  Jessica Artis, Isidro Gomez (Analyst in Charge), Courtney La Fountain,  Maureen Luna-Long, Jessica Sandler, Jennifer Schwartz, Joseph  Silvestri, and Shana Wallace made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-518", "url": "https://www.gao.gov/products/GAO-18-518", "title": "Cybersecurity: Office of Federal Student Aid Should Take Additional Steps to Oversee Non-School Partners' Protection of Borrower Information", "published_date": "2018-09-17T00:00:00", "released_date": "2018-09-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FSA administers billions of dollars in student financial aid, including loans and grants, to eligible college students. The processing of student aid is complex, and FSA relies on non-school partners to carry out various activities supporting the student aid process, such as loan repayment and collection.", "GAO was asked to review how FSA ensures the protection of PII by its non-school partners. The objectives of this review were to (1) describe the roles of non-school partners and the types of PII shared with them and (2) assess the extent to which FSA policies and procedures for overseeing the non-school partners' protection of student aid data adhere to federal requirements, guidance, and best practices.", "To address these objectives, GAO collected and reviewed FSA documentation, reports, policies, and procedures and compared FSA policies and procedures to four key practices included in federal guidance for overseeing the protection of PII by non-federal entities. GAO also interviewed FSA officials with responsibility for the oversight of non-school partners."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Education's Office of Federal Student Aid (FSA) partners with various entities (\u201cnon-school partners\u201d) that are involved primarily in supporting the repayment and collection of student loans.", "Federal loan servicers are responsible for collecting payments on loans and providing customer service to borrowers on behalf of the Department of Education through its Direct Loan program.", "Private collection agencies collect on loans that are in default and work with borrowers to help them get out of default.", "Guaranty agencies insure lenders against loss due to borrower default and carry out a variety of loan administration activities.", "Federal Family Education Loan lenders are non-federal lenders, such as banks, credit unions, or other lending institutions, that made loans to students in the past and continue to service these loans.", "FSA shares a variety of personally identifiable information (PII) on borrowers with its non-school partners. This includes names, addresses, phone numbers, email addresses, Social Security numbers, and financial information.", "Key practices for overseeing the protection of PII shared with non-federal entities include requiring (1) risk-based security and privacy controls, (2) independent assessments to ensure controls are effectively implemented, (3) corrective actions to address identified weaknesses in controls, and (4) ongoing monitoring of control status. FSA established oversight policies and procedures for loan servicers and private collection agencies that generally address these key practices. However, FSA exercises minimal oversight of lenders' protection of student data (see table).", "FSA officials maintain that the lenders are subject to other legal and regulatory requirements for protecting customer data. However, FSA does not have a process for ensuring lenders are complying with these requirements, and thus lacks assurance that appropriate risk-based safeguards are being effectively implemented, tested, and monitored."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations to FSA to ensure that its oversight of non-school partners addresses the four key practices for ensuring the protection of PII. FSA concurred with three of the recommendations, partially concurred with two, and did not concur with one. It also described actions planned or under way to implement four of the recommendations. GAO maintains that all of its recommendations are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Education\u2019s Office of Federal Student Aid (FSA) is  tasked with administering and overseeing billions of dollars in federal  student aid, including grants and loans to millions of eligible college  students each year. The processing of federal student aid is complex, and  FSA relies heavily on third parties, primarily to help manage student  loans, including loan servicers, guaranty agencies, private collection  agencies, and lenders (collectively referred to as \u201cnon-school partners\u201d).  To carry out their functions, these entities are responsible for storing and  protecting large amounts of personally identifiable information (PII) of  students and parents that apply for and receive student aid.", "You asked us to conduct a study to examine how FSA ensured  protections were placed on the PII being shared with its non-school  partners as part of the federal student aid process. The objectives of our  review were to (1) describe the roles of FSA\u2019s non-school partners in the  federal student financial aid program, including the types of PII shared  with them; and (2) assess the extent to which FSA\u2019s policies and  procedures for overseeing non-school partners\u2019 protection of federal  student aid data align with federal requirements, federal guidance, and  best practices.", "To address our first objective, we obtained and reviewed documentation  that discussed the federal student aid process and the types of  information collected, used, and shared in the process. Specifically, we  reviewed reports from the Department of Education and FSA, the Congressional Research Service, and GAO regarding the federal student  financial aid program and the roles of non-school partners in the program.  We also reviewed FSA privacy impact assessments and system  documentation to identify what PII can be accessed by, or is shared with  non-school partners, and through what methods. Lastly, we interviewed  relevant officials from FSA who were involved in administering the student  aid program.", "To address the second objective, we identified key practices for  overseeing the protection of PII by reviewing laws, including the Federal  Information Security Modernization Act of 2014 (FISMA), Office of  Management and Budget (OMB) requirements and guidance on  managing federal information, and National Institute of Standards and  Technology (NIST) information security standards and guidance. We  then reviewed and analyzed the policies, procedures, and processes FSA  has in place for overseeing non-school partners\u2019 protection of student aid  data and compared them to these practices for overseeing the protection  of PII.", "We supplemented our analyses of policies, procedures, and processes  with interviews of FSA officials with knowledge of, and responsibility for  the oversight of non-school partners, as well as a review of relevant  Department of Education inspector general reports. A more detailed  discussion of our objectives, scope, and methodology can be found in  appendix I.", "We conducted this performance audit from June 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["FSA seeks to ensure that all eligible individuals enrolled in postsecondary  education can benefit from federal financial aid for education. It is  responsible for implementing and managing programs authorized under  the Higher Education Act of 1965, as amended. Specifically, Title IV of  the act authorizes the federal student assistance programs for which FSA  is responsible. These programs (Title IV programs) provide loans,  grants, and work-study funds to students attending college or career  school. In fulfilling its program obligations, FSA is responsible for  managing and overseeing almost $1.4 trillion in outstanding loans.", "In administering Title IV programs, FSA performs a variety of functions  across the student aid life cycle. These include educating students and families about the process of obtaining processing millions of student aid applications; disbursing billions of dollars in aid; enforcing financial aid rules and regulations;  servicing millions of student loans and helping borrowers avoid  default;  securing repayment from borrowers who have defaulted on loans; partnering with schools, lenders, and guaranty agencies to prevent  fraud, waste, and abuse; and  insuring billions of dollars in guaranteed student loans previously  issued by financial institutions.", "In carrying out these functions, FSA collects, maintains, and shares a  large amount of information, including sensitive personal information from  students and their families. The office also relies on various automated  systems to assist with student aid functions. Further, FSA works with  various entities, such as loan servicers, guaranty agencies, private  collection agencies, and lenders, to carry out loan servicing and collection  activities."], "subsections": [{"section_title": "Federal Student Financial Aid Programs", "paragraphs": ["The three main categories of federal student financial aid are loans,  grants, and federal work-study. Loans are student aid funds that are  borrowed to help pay for eligible education programs and must be repaid  with interest. FSA administers loans under the William D. Ford Direct  Loan Program (Direct Loan) and the Federal Family Education Loan  (FFEL) Program, along with other programs, such as Perkins Loans, for  students demonstrating financial need.", "Direct Loans are loans for which the Department of Education is the  lender. They include subsidized loans made to undergraduate students based on  financial need, for which the government does not generally charge  interest while the student is in grace or deferment status; unsubsidized loans made to undergraduate and graduate students  for which the borrower is fully responsible for paying interest  regardless of loan status;", "PLUS loans made to graduate or professional students and parents  of dependent undergraduate students for which the borrower is fully  responsible for paying the interest regardless of the loan status; and consolidation loans, which allow the borrower to combine existing  federal student loans into a single new loan.", "FFEL loans are loans that were obtained through private lenders, with  federal subsidies ensuring that private lenders earned a certain yield on  the loans they made. Under this program, the Department of Education  entered into agreements with guaranty agencies to insure the private  lenders against losses due to a borrower\u2019s default. Federal law ended the  origination of these loans as of July 1, 2010; however, FSA, lenders, and  guaranty agencies continue to service (i.e., handle billing and other  activities related to loan repayment) and collect outstanding FFEL loans.  According to FSA, borrowers\u2019 eligibility is the same under both the Direct  Loan and FFEL programs.", "The department also administers student aid through grants, such as Pell  grants, which are student aid funds that generally do not have to be  repaid. It also administers the federal work-study program, which provides  part-time jobs for students with financial need, allowing them to earn  money to help pay educational expenses.", "In fiscal year 2017, FSA reported disbursing about $122.5 billion in aid to  students through its various programs. In addition, the portfolio of  outstanding FFEL loans totaled approximately $305.8 billion, as of  September 30, 2017. Table 1 provides details on the amounts of  financial aid disbursed to students in fiscal year 2017 across all financial  aid programs."], "subsections": []}, {"section_title": "Overview of the Financial Aid Process", "paragraphs": ["The federal financial aid process is complex and consists of four phases:  school eligibility determination, student application and eligibility  determination, disbursement of funds, and repayment and collection of  loans. Each phase of the process is supported by automated FSA  information systems that collect and process student aid information. The  information is then used by FSA, schools, and other stakeholders to  determine the type and amount of aid a student is eligible to receive, and  to support the distribution and repayment of loans. See figure 1 for an  overview of the four phases."], "subsections": []}, {"section_title": "Federal Requirements for Protecting Information and Systems", "paragraphs": ["Federal laws and guidance specify requirements for protecting federal  systems and data. This includes systems used or operated by a  contractor or other organization on behalf of a federal agency.", "FISMA is intended to provide a comprehensive framework for ensuring  the effectiveness of security controls over information resources that  support federal operations and assets, as well as the effective oversight  of information security risks. The act requires each agency to develop,  document, and implement an agency-wide information security program  to provide risk-based protections for the information and information  systems that support the operations and assets of the agency, including  those provided or managed by another entity.", "The primary laws that provide privacy protections for personal information  accessed or held by the federal government are the Privacy Act of 1974  and the E-Government Act of 2002. These laws describe, among other  things, agency responsibilities with regard to protecting PII.", "The Privacy Act places limitations on agencies\u2019 collection, disclosure, and  use of personal information maintained in systems of records. It  requires, among other things, that agencies issue system of records  notices to notify the public when the agencies establish or make changes  to a system of records. System of records notices are to identify, among  other things, the types of data collected, the types of individuals about  whom information is collected, the intended \u201croutine\u201d uses of the data,  and procedures that individuals can use to review and correct personal  information.", "In addition, the E-Government Act of 2002 requires agencies to conduct  assessments of the impact on privacy from using information systems to  collect, process, and maintain PII. A privacy impact assessment is an  analysis of how personal information is collected, stored, shared, and  managed in a federal system.", "In accordance with FISMA, OMB is responsible for the oversight of  agencies\u2019 information security policies and practices. OMB establishes  requirements for federal information security programs and assigns  agency responsibilities to fulfill the requirements of statutes such as  FISMA.", "OMB requires agencies to oversee the implementation of security and  privacy controls by contractors and other non-federal entities that collect,  use, process, store, maintain, and disseminate federal information on  behalf of a federal agency. OMB notes that agencies are ultimately  responsible for ensuring that federal information is adequately protected,  commensurate with the risk resulting from the unauthorized access, use,  disclosure, modification, or destruction of such information. Accordingly,  OMB guidance states that, when sharing PII with contractors or other  non-federal entities, agencies should establish requirements for the  protection of their data in written agreements with these entities. For  specific technical direction, OMB requires agencies to implement  standards and guidelines established by NIST.", "FISMA also assigns certain responsibilities to NIST, including to develop  standards and guidelines for systems other than national security  systems. These standards and guidelines include (1) standards for  categorizing agency information and systems to provide appropriate  levels of information security, according to a range of risk levels; (2)  guidelines for the types of information and systems to be included in each  category; and (3) minimum information security requirements for  information and systems in each category.", "Accordingly, NIST has developed a series of information security  standards and guidelines for agencies to follow in managing information  security risk. NIST guidance provides steps that agencies can take to  identify appropriate security and privacy controls and establish specific  requirements for implementing those controls to ensure consistency both  internally and externally to the agency. NIST guidance also outlines  requirements for protecting the confidentiality of controlled unclassified  information (which includes PII) when it resides in a non-federal system or  organization. Relevant publications include the following:", "Federal Information Processing Standard 199, Standards for Security  Categorization of Federal Information and Information Systems,  requires agencies to categorize their information systems as low- impact, moderate-impact, or high-impact for the security objectives of  confidentiality, integrity, and availability. The potential impact values  assigned to the respective security objectives are the highest values  from among the security categories that the agency identifies for each  type of information residing on those information systems.", "NIST Special Publication 800-53, Security and Privacy Controls for  Federal Information Systems and Organizations, provides a catalog  of security and privacy controls for federal information systems and  organizations. It also provides a process for selecting controls to  protect organizational operations, assets, individuals, other  organizations, and the nation from a diverse set of threats. These  threats include hostile cyber attacks, natural disasters, structural  failures, and human errors. The guidance includes privacy controls to  be used in conjunction with the specified security controls to achieve  comprehensive security and privacy protection. According to NIST,  the privacy controls are based on the Fair Information Practice  Principles embodied in the Privacy Act of 1974, the E-Government  Act of 2002, and OMB policies.", "NIST Special Publication 800-37, Guide for Applying the Risk  Management Framework to Federal Information Systems: A Security  Life Cycle Approach, explains how to apply a risk management  framework to federal information systems, including security  categorization, security control selection and implementation, security  control assessment, information system authorization, and security  control monitoring.", "NIST Special Publication 800-171, Protecting Controlled Unclassified  Information in Nonfederal Systems and Organizations, provides  federal agencies with recommended security guidance for protecting  the confidentiality of controlled unclassified information when it  resides in a non-federal system and organization.", "The Framework for Improving Critical Infrastructure Cybersecurity,  serves as a baseline for protecting critical information assets. It is  intended to help organizations apply the principles and best practices  of risk management to improve the security and resilience of critical  infrastructure. The framework outlines a risk-based approach to  managing cybersecurity that is composed of three major parts: a  framework core, profile, and implementation tiers.", "Subsequent to the issuance of the NIST cybersecurity framework, a May  2017 executive order required agencies to use the framework to manage  cybersecurity risks. It also outlined actions to enhance cybersecurity  across federal agencies and critical infrastructure to improve the nation\u2019s  cyber posture and capabilities against cybersecurity threats to digital and  physical security.", "In addition, the Gramm-Leach-Bliley Act requires financial institutions\u2014 companies that offer consumers financial products or services like loans,  financial or investment advice, or insurance\u2014to explain their information- sharing practices to their customers and to safeguard sensitive data. As  part of its implementation of the act, the Federal Trade Commission  (FTC) issued the Safeguards Rule, which requires financial institutions  under FTC\u2019s jurisdiction to have measures in place to keep customer  information secure.", "Specifically, the rule requires financial institutions to develop a  documented information security program that describes the  administrative, technical, or physical safeguards used to protect customer  information. The program must be appropriate to the company\u2019s size and  complexity, the nature and scope of its activities, and the sensitivity of the  customer information it handles. As part of its program, each company  must designate one or more employees to coordinate its information  identify and assess the risks to customer information in each relevant  area of the company\u2019s operation, and evaluate the effectiveness of  the current safeguards for controlling these risks; design and implement information safeguards to control risks and  regularly monitor and test their effectiveness;  select service providers that can maintain appropriate safeguards,  require them to maintain safeguards, and oversee their handling of  customer information; and evaluate and adjust the program in light of relevant circumstances,  including changes in the firm\u2019s business or operations, or the results  of security testing and monitoring."], "subsections": []}, {"section_title": "GAO Previously Highlighted the Need to Improve Policies and Procedures for the Protection of Student Aid Data", "paragraphs": ["We recently reported on aspects of FSA\u2019s protection of student aid data,  noting that weaknesses existed in key processes. Specifically, in  November 2017, we reported, among other things, that FSA needed to  improve its policies and procedures for the management and protection of  student aid data. For example, while the agency had established  policies and procedures for key privacy requirements, such as publishing  notices to describe how personal information is to be maintained, used,  and accessed, it did not always ensure that privacy impact assessments  for its information systems included an analysis of privacy risks and  mitigation steps.", "In addition, we reported that FSA\u2019s information security policies and  procedures were not always up to date. Further, we noted that the agency  needed to strengthen its oversight of schools\u2019 implementation of federal  information security requirements to help ensure student aid information  was adequately protected.", "We recommended that the Secretary of Education take seven actions to  strengthen FSA\u2019s management and protection of federal student aid  records and enhance its oversight of schools. For example, we  recommended that the agency incorporate information security program  requirements in its reviews of postsecondary schools, and that the  Department of Education update its regulation to include protections of  personal information as an element of a school\u2019s ability to demonstrate its  administrative capability. FSA concurred or generally concurred with five  of our seven recommendations, partially concurred with one  recommendation, and did not concur with another."], "subsections": []}]}, {"section_title": "Non-School Partners Play Key Roles in the Federal Student Aid Process and Have Access to Large Amounts of Personally Identifiable Information to Facilitate Their Activities", "paragraphs": ["FSA\u2019s non-school partners play key roles in the federal student financial  aid program, particularly with regard to the servicing, repayment, and  collection of student loans. These partners include FFEL lenders, Title IV  loan servicers, guaranty agencies, and private collection agencies. FSA  shares a variety of PII with the non-school partners to assist them in  carrying out their functions."], "subsections": [{"section_title": "FSA\u2019s Non-School Partners Perform Key Roles Related to Loan Servicing, Repayment, and Collection", "paragraphs": ["Non-school partners are involved primarily in the loan servicing,  repayment, and collection phases of the federal student aid process.", "FFEL lenders: During the administration of the FFEL program, these  lenders were involved primarily in the disbursement of funds. As part  of the program, students and parents obtained federal loans through  non-federal lenders, such as the borrower\u2019s school, a bank, credit  union, or other lending institution. Generally, lenders provided the loan  proceeds to a student\u2019s school, which then credited the student\u2019s  account and disbursed the residual amount, if any, to the student.", "After a loan was disbursed, lenders chose to either service the loan,  contract with an outside organization for servicing, or sell the loan.  According to FSA, the majority of lenders have third-party servicers  that perform servicing, billing, and reporting on their behalf. The  lenders also work closely with guaranty agencies, which insure FFEL  loans in case of default, and oversee certain aspects of the lenders\u2019  activities. As of June 2018, there were 1,079 lenders participating in  the FFEL program.", "Although FSA purchased a portion of the FFEL loans as a result of  disruptions in financial markets during the financial crisis of 2007 and  2008, the majority of the FFEL portfolio continues to be owned and  serviced by private lenders. These lenders are required to report  quarterly on their portfolios and are to sign participation agreements  with FSA requiring that electronic data submitted by the lenders be  accurate and conform to applicable laws, regulations, and policies.  FSA also noted that lenders are regulated by a variety of entities,  such as the FTC, Federal Deposit Insurance Corporation, Federal  Reserve, Department of the Treasury, and, in some cases, state  agencies.", "Title IV loan servicers: These organizations are primarily involved in  the repayment and collection phase of the aid process. Under the  Direct Loan program, after the loan is disbursed, the Department of  Education contracts with loan servicers to perform a variety of  administrative functions. Loan servicers are responsible for  collecting payments on a loan, advising borrowers on resources and  benefits to better manage their federal student loan obligations,  responding to customer service inquiries, and performing other  administrative tasks associated with maintaining a loan on behalf of  the Department of Education.", "In addition, once a Direct Loan becomes delinquent (i.e., the first day  after a borrower fails to make a scheduled monthly payment), loan  servicers may take several actions pending the loan entering default,  such as reaching out to past-due borrowers and entering into  repayment arrangements for loans. As of July 2018, FSA contracted  with 11 loan servicers.", "The contracts between FSA and the servicers establish the servicers\u2019  responsibilities in the aid process. The contracts lay out requirements  for servicers with regard to financial reporting, internal controls,  accounting, and other areas.", "Guaranty agencies: These agencies are state or private non-profit  entities that are primarily involved in the repayment and collection  phase of the aid process. As part of the FFEL program, they receive  federal funds to play the lead role in administering aspects of the  program. These agencies\u2019 functions include insuring private lenders  against losses due to a borrower\u2019s default or other losses (the  guaranty agencies are, in turn, reinsured by the federal  government); providing assistance in preventing delinquent  borrowers from going into default; working with defaulted student and  parent borrowers to rehabilitate their defaulted loans, restore their  credit, and provide them with a fresh start; and reporting actions to  credit bureaus.", "Prior to July 2010, when the origination of FFEL loans stopped,  guaranty agencies also were involved in verifying student eligibility for  loans and notifying lenders, who would send a promissory note to  lenders for their signature and disburse the funds. According to FSA,  guaranty agencies continue to work closely with holders of FFEL  loans, including supporting them in default aversion activities and  overseeing aspects of their operations through monitoring, auditing,  and ensuring compliance with regulations. As of July 2018, 24  guaranty agencies were administering FFEL loans.", "FSA uses participation agreements to govern the agencies\u2019  responsibilities in the aid process. The agreements lay out reporting  requirements, records retention periods, and other requirements. For  example, guaranty agencies are required to report to the Department  of Education on the loans they insure. They are also required to keep  records and have them available for inspection by the federal  government.", "Private collection agencies: Private collection agencies are also  primarily involved in the repayment and collection phase of the aid  process. If borrowers default on their loans after entering the  repayment phase, private collection agencies will attempt to enter into  voluntary repayment agreements, while ensuring that defaulted  borrowers are aware of both the consequences of their failure to  repay and the options available to help them get out of default.", "Other debt resolution functions performed by private collection  agencies include determining whether a borrower\u2019s account is eligible  for administrative resolutions, such as discharge due to death or total  and permanent disability; determining whether a borrower\u2019s account is  eligible for involuntary payment methods such as administrative wage  garnishment; preparing accounts for litigation; and returning accounts  to FSA for failure to convert the account to active repayment status.  As of July 2018, FSA had contracts with 18 private collection  agencies. These contracts describe the private collection agencies\u2019  responsibilities in the aid process."], "subsections": []}, {"section_title": "FSA Shares Extensive Amounts of Personally Identifiable Information about Borrowers with Non- School Partners", "paragraphs": ["In administering the federal student aid program, FSA shares a large  amount of PII that it collects from students and parents with its non-school  partners. This is particularly significant in that FSA directly manages or  oversees more than 203 million student loans made to approximately 43  million borrowers. PII collected when students or their parents apply for  financial aid includes, but is not limited to the following:", "Student demographics: Name, address, Social Security number,  telephone numbers, email address, marital status, driver\u2019s license  number, etc.", "Student eligibility: Citizenship status, dependency status, high  school completion status, selective service registration (if applicable),  and whether the student has a drug conviction, among other  information.", "Student finances: Tax return filing status; adjusted gross income;  cash, savings, and checking account balances; untaxed income; and  current net worth of student\u2019s assets.", "Parent demographics (if applicable): Name, Social Security  number, email address, and marital status.", "Parent finances: Tax return filing status, adjusted gross income, tax  exemptions, and asset information.", "After the borrower\u2019s eligibility is determined or the funds are disbursed,  the PII that the agency collected as part of the process is stored on  several of FSA\u2019s internal IT systems.", "FSA shares the PII stored on its systems with its non-school partners to  assist them in carrying out their respective functions. This sharing occurs  when the agency grants non-school partners access to specific systems.  According to FSA, the data that non-school partners have access to  depends on the non-school partner\u2019s relationship with the individual  holding the loan. Table 2 provides a description of the FSA systems from  which non-school partners receive student aid data, as well as the types  of PII they contain.", "To gain access to FSA systems and data, non-school partners must  submit an application to use FSA\u2019s Student Aid Internet Gateway (SAIG).  The SAIG application enables the enrolling organization (i.e., the non- school partner) to select services to receive, submit, view, and/or update  student financial aid data online, or receive or send information by batch  exchange. To gain access to services allowing them to receive, submit,  view, and update student aid data, each non-school partner must  designate a Primary Data Point Administrator, who is responsible for  determining which staff within the non-school partner\u2019s organization are to  be given access to FSA\u2019s systems and data. The primary Data Point  Administrator is also responsible for ensuring the privacy of the  information obtained or provided via the SAIG.", "According to FSA officials, enrollment for access to borrower data via the  SAIG varies based on the type of non-school partner and the functions it  performs. Further, the officials stated that non-school partners can only  access information about the borrowers with whom they are directly  involved. The services that non-school partners can access via the SAIG  include the following:", "Central Processing System data: Processed data from the Free  Application for Federal Student Aid are reported to institutions on the  Institutional Student Information Record, and corrections to data can  be made.", "Common Origination and Disbursement System data: Origination,  disbursement, and other required reporting information for the Direct  Loan program can be exchanged electronically between FSA and  non-school partners.", "National Student Loan Data System: Title IV, enrollment history  information, and federal grant information can be viewed and updated  by non-school partners.", "Financial Management System: Financial reporting information can  be sent by non-school partners to FSA."], "subsections": []}]}, {"section_title": "FSA\u2019s Oversight of Non-School Partners\u2019 Protection of Student Aid Data Is Inconsistent", "paragraphs": ["As noted previously, OMB and NIST guidance calls for agencies to  oversee third-party entities with which they share PII to ensure that  appropriate security and privacy controls are in place. This guidance  identifies key practices for overseeing the protection of data by such  entities. These practices include the following, among others:", "Require the implementation of risk-based security and privacy  controls: NIST guidance states that agencies should categorize their  information and systems based on their risk impact level and require  the implementation of security controls that include one of three  baseline sets of controls that correspond to the impact level, tailored  to the system and organization as appropriate.", "Independently assess the implementation of security controls:  Security control assessments determine the extent to which controls  are implemented correctly, operating as intended, and producing the  desired outcome. For external entities that store or process federal  information, NIST guidance states that agencies can verify that  controls have been implemented through independent, third-party  assessments or attestations.", "Develop and implement corrective actions: As part of the process  for conducting security control assessments, organizations should  develop remedial actions to address identified weaknesses and track  them to closure.", "Monitor the implementation of controls on an ongoing basis:  Ongoing monitoring includes ensuring that technical, management,  and operational security controls are tested at an organization-defined  frequency and results are provided to officials on an ongoing basis.  NIST guidance notes that agencies should monitor security control  compliance by external entities on an ongoing basis. This can be  achieved through reporting the security status of the system and  security controls on an ongoing basis.", "FSA has established policies and procedures for overseeing its non- school partners\u2019 protection of the PII that it shares with the partners.  These policies and procedures vary in the extent to which they address  the key practices for overseeing the protection of PII. For example, FSA\u2019s  policies and procedures for Title IV loan servicers and private collection  agencies fully address three of the four key practices. For guaranty  agencies, FSA\u2019s procedures require onsite assessments but do not  require monitoring controls on an ongoing basis. Finally, for FFEL  lenders, FSA has minimal oversight procedures."], "subsections": [{"section_title": "FSA Established Security Requirements for Loan Servicers and Private Collection Agencies", "paragraphs": ["FSA established policies and procedures for overseeing Title IV loan  servicers and private collection agencies that generally address the key  selected practices for overseeing the protection of data. Specifically, by  applying its standard contractor oversight processes, the agency has  addressed three of the four key practices that pertain to loan servicers  and private collection agencies. FSA partially addressed one practice  related to ensuring that the implementation and effectiveness of all  controls is monitored on an ongoing basis. Table 3 summarizes the extent  to which FSA\u2019s processes address the key practices for loan servicers  and private collection agencies.", "FSA required loan servicers and private collection agencies to  implement risk-based security and privacy controls: FSA established  security requirements and guidance for loan servicers and private  collection agencies. These requirements are communicated through  provisions in the contracts that FSA has with the loan servicers and  private collection agencies. Specifically, FSA requires loan servicers and  private collection agencies to implement security controls in accordance  with NIST\u2019s Security and Privacy Controls for Federal Information  Systems and Organizations.", "The contracts also require loan servicers and private collection agencies  to adhere to applicable Department of Education and FSA security  policies and procedures. For example, the Department of Education\u2019s  policy for security system categorization, which applies to contractor- owned systems (such as those owned by loan servicers and private  collection agencies), requires that systems containing PII be categorized  as, at a minimum, \u201cmoderate impact.\u201d This categorization reflects an  assessment of the risks associated with a compromise of the information  and determines the selection of appropriate security controls for the  information system.", "In addition, FSA developed a standard operating procedure for  implementing security requirements based on this determination, which  applies to loan servicers and private collection agencies. This process for  categorizing systems and selecting and implementing controls is based  on NIST\u2019s risk management framework, including steps for selecting,  implementing, and assessing controls, and authorizing the information  system to operate.", "FSA required independent assessments of the implementation of  security controls: To help ensure that loan servicers and private  collection agencies meet minimum security standards, FSA developed  procedures for assessing the implementation of security controls based  on applicable federal guidance. Specifically, FSA\u2019s security authorizations  process includes procedures for an independent assessor to review  security controls implemented on the loan servicers\u2019 and private collection  agencies\u2019 systems. This includes, among other things, developing a test  plan; executing the plan, to include observing security controls; running  automated scans; and collecting artifacts and evidence. The independent  assessor then is to document the issues, findings, and recommendations  for remediation.", "According to FSA\u2019s procedures, once the assessment of the loan  servicer\u2019s or private collection agency\u2019s system is completed, issues have  been identified, and a plan of action and milestones (POA&M) has been  developed, an FSA authorizing official is to review key documentation and  make a decision on whether to authorize the system to operate. This  decision is to be based on a determination as to whether the residual risk  to agency operations, agency assets, resources, or individuals resulting  from the operation of the system is acceptable. Once approved, the  authorization to operate the system is valid for 3 years, provided that the  conditions, if any, specified in the POA&M are met.", "FSA established a process for developing and implementing  corrective actions: FSA requires loan servicers and private collection  agencies to follow a standard operating procedure for documenting and  implementing corrective actions to address weaknesses identified during  security assessments. This procedure requires the owners of the systems  to work with their agencies\u2019 information system security officers and  FSA\u2019s internal independent validation and verification teams to document  deficiencies and remediation plans in the FSA\u2019s POA&M management  tool, review and document evidence to close deficiencies, and provide  monthly updates on the status of POA&Ms, along with reasons for any  overdue items. FSA officials added that they are reviewing ways to further  automate the process for flagging overdue items.", "In addition, the procedure specifies time frames for system owners to  remediate weaknesses based on their criticality. To confirm that a  weakness has been addressed, the procedure requires FSA\u2019s  independent validation and verification team to review submitted plans  and evidence and determine if they are sufficient to close the deficiency.", "FSA did not fully establish a process for monitoring all controls on  an ongoing basis: To monitor security controls between the independent  assessments supporting the authorization to operate process, FSA\u2019s  contracts with loan servicers require the servicers to have a continuous  monitoring program, as defined by NIST SP 800-37. Similarly, FSA\u2019s  contracts with private collection agencies require these agencies to enroll  their systems in FSA\u2019s Continuous Security Authorization program, which  is intended to oversee and monitor the security controls in FSA\u2019s  information systems on an ongoing basis.", "In addition, the contracts require the private collection agencies to ensure  that independent testing and monitoring of system security controls is  performed on an ongoing basis. The contracts require these tests to  cover a subset of the system security controls quarterly so that all  controls are tested at least once during a 3-year period.", "However, according to FSA Technology Office officials, neither loan  servicers nor private collection agencies have been enrolled in FSA\u2019s  Continuous Security Authorization program, as required. The officials  added that they had not established a time frame to incorporate loan  servicers and private collection agencies into the agency\u2019s continuous  monitoring program.", "According to the officials, both loan servicers and private collection  agencies rely on their own continuous monitoring programs to oversee  their systems; however, only the private collection agencies report the  results of their monitoring activities to FSA (on a quarterly basis). In  addition, FSA does not specify which controls the loan servicers and  private collection agencies are to test; rather, it leaves this determination  to the non-school partners.", "FSA policy also requires that loan servicers and private collection  agencies respond to an annual self-assessment questionnaire concerning  their implementation of NIST security and privacy controls. According to  the FSA officials, if deficiencies are noted in the agencies\u2019 responses,  FSA works with the non-school partners to create POA&Ms and track  remediation efforts through closure.", "Officials in FSA\u2019s Technology Office added that loan servicers participate  in FSA\u2019s Web Application Surveillance Program, in which FSA conducts  vulnerability scans of the servicers\u2019 systems and shares findings with the  servicers for remediation on a monthly or quarterly basis, depending on  the environment being tested.", "Nevertheless, while these processes can provide helpful information  about the loan servicers\u2019 and private collection agencies\u2019 security posture  on an ongoing basis, they do not ensure that all security controls  implemented on these partners\u2019 systems are tested on a regular basis.  For example, according to FSA policy, the Web Application Surveillance  Program is intended to simulate the scanning and probing of a web  application that might be useful to intruders. However, the program is not  intended to ensure that management, operational, and technical controls  have been implemented.", "Without fully establishing policies and procedures for ongoing monitoring  of security controls implemented by loan servicers and private collection  agencies, FSA has less assurance that these controls are effectively  implemented and operating as intended. Further, FSA has a limited ability  to ensure that risks associated with these non-school partners\u2019 use of PII  have been adequately mitigated."], "subsections": []}, {"section_title": "FSA Established Security Requirements for Guaranty Agencies, but Lacks a Process for Ongoing Monitoring of Controls", "paragraphs": ["FSA policies and procedures requires guaranty agencies to implement  security and privacy controls to protect student aid data, and the agency  has recently enhanced its processes to include independent, on-site  assessments of those controls and the development of corrective actions  for identified weaknesses. However, it lacks processes for monitoring  guaranty agencies\u2019 implementation of controls on an ongoing basis. Table  4 summarizes the extent to which FSA\u2019s processes address the four key  practices for overseeing the protection of data by guaranty agencies.", "FSA did not fully specify a required baseline of risk-based security  and privacy controls for guaranty agencies: FSA requires, through  written agreements, that guaranty agencies participating in the federal  student aid program comply with federal security requirements.  Specifically, these agreements include an amendment that requires the  guaranty agencies to ensure that any information systems that include PII  about borrowers implement security and privacy controls specified in  NIST guidance.", "In addition, when applying for access to FSA systems and information  through the SAIG, guaranty agencies agree to protect the privacy of all  information that has been provided by the Department of Education. In  particular, guaranty agencies are required to affirm that administrative,  operational, and technical security controls are in place and operating as  intended.", "FSA provides guidance to guaranty agencies on implementing security  controls, in the form of a template to be used in completing an annual  self-assessment (discussed in more detail below). This template identifies  security and privacy controls to be used in the self-assessment, based on  the NIST control baseline for moderate-impact systems. The guaranty  agencies are expected to inform FSA as to whether they have  implemented these controls.", "However, the agreements FSA has established with guaranty agencies  do not specify that information must be maintained at a specific impact  level or that guaranty agencies are to implement a particular baseline set  of security controls that correspond to an agency established risk-based  impact level. As noted previously, once agencies determine the impact  level of their information or systems, they should select one of three  baselines of security controls (low, moderate, or high) that correspond to  the impact level. This baseline can then be tailored based on risk and the  specific organizational and system environment.", "According to FSA officials, the agreements allow the guaranty agencies to  determine whether their systems are low, moderate, or high impact. The  officials also added that guidance provided to guaranty agencies, such as  self-assessment questionnaires\u2014are based on the NIST 800-53  moderate baseline.", "However, allowing guaranty agencies to determine the specific  designation could result in inconsistent implementation of security  controls if guaranty agencies choose varying impact levels for their  systems. OMB guidance states that agencies should require third parties  with whom PII is shared to maintain security at a specified impact level.  By not specifying in written agreements the impact level of the information  it shares with guaranty agencies, and a corresponding set of minimum  security requirements, FSA jeopardizes its ability to ensure that the PII it  shares with guaranty agencies will be adequately and consistently  protected.", "FSA established a process for on-site assessment of guaranty  agencies\u2019 security and privacy controls: Prior to fiscal year 2018, FSA  relied on a self-assessment process, wherein guaranty agencies  completed annual questionnaires about their implementation of security  and privacy controls. The completed questionnaires were reviewed by  FSA staff, who then met with guaranty agency staff over the telephone to  discuss any identified weaknesses. As part of this process FSA staff did  not collect or review documentation to independently verify whether  controls had been appropriately implemented, or conduct on-site reviews  to obtain first-hand evidence of the implementation of the controls.  However, according to FSA officials, they also conducted targeted, on- site visits to selected guaranty agencies in 2016 and 2017 to verify  security control implementation.", "FSA has recently enhanced its process for assessing guaranty agencies\u2019  implementation of security and privacy controls. FSA officials stated that,  in March 2018, they began a series of on-site assessments of guaranty  agencies which are to be completed by the end of September 2018. FSA  provided the guaranty agencies with a security plan template that outlines  roles and responsibilities, methodology, controls to be tested, and the test  plan approach for these assessments. In addition, the list of evidence  includes required artifacts to demonstrate compliance with NIST  requirements.", "FSA officials stated that they plan to alternate between on-site  assessments and self-assessments each year. By enhancing its  approach to assessing guaranty agencies\u2019 implementation of security  requirements, FSA should be better positioned to ensure that the data  shared with these entities are being adequately protected.", "FSA processes include monitoring of guaranty agency corrective  actions: As part of the guaranty agency self-assessment process, FSA  established procedures for documenting weaknesses identified during the  self-assessments and corrective action plans for addressing the  weaknesses. FSA Deputy Chief Information Officer officials stated that  they track the corrective action plans in a system that provides weekly  status reports that include notifications of overdue corrective actions. The  officials added that all actions to correct weaknesses identified during the  self-assessments were to be taken within 12 months of identifying the  corrective actions.", "In April 2018, FSA officials stated that they intended to follow a procedure  similar to the one used for the self-assessments to document and monitor  corrective actions for weaknesses identified during the on-site  assessments of guaranty agencies\u2019 security and privacy controls.  Specifically, the officials noted that all findings of weaknesses during the  on-site assessments are to be turned into POA&Ms, assigned an  expected completion date, and tracked to completion by FSA. This  procedure, if effectively implemented, should help FSA ensure that gaps  in security controls are remediated in a timely manner.", "FSA did not establish a process for monitoring all guaranty agency  controls on an ongoing basis: To monitor guaranty agencies\u2019  compliance between assessments, FSA officials stated that they hold  weekly teleconferences with officials from guaranty agencies during which  they discuss new security requirements or other issues. FSA Information  Technology officials stated that they follow up with guaranty agencies  after these calls to ensure that they implement new requirements. In  addition, FSA issued guidance to guaranty agencies in January 2018 on  conducting vulnerability scans of these agencies\u2019 systems. This guidance  addresses vulnerability testing guidelines and scanning requirements, as  well as guidance on security control testing.", "However, FSA does not monitor all security controls by requiring guaranty  agencies to report regularly on the status of security controls between on- site assessments. Neither the weekly teleconferences nor the  vulnerability scans include testing the implementation of all security and  privacy controls on a defined, periodic basis or reporting results to FSA.", "FSA officials stated that they rely on the on-site and self-assessments to  oversee guaranty agencies\u2019 security control implementation because FSA  does not have a contractual relationship with guaranty agencies and does  not own the guaranty agencies\u2019 systems. However, OMB and NIST note  that agencies have a responsibility for ensuring that their information is  protected at a consistent level even when such information is shared with  non-federal partners. Without fully establishing procedures for ongoing  monitoring of guaranty agencies, FSA cannot fully ensure that risks to the  student aid data containing PII that it shares with guaranty agencies have  been adequately mitigated."], "subsections": []}, {"section_title": "FSA Exercises Minimal Oversight of FFEL Lenders\u2019 Protection of Student Aid Data", "paragraphs": ["FSA established high-level requirements for FFEL lenders to protect  student aid data, but it exercises minimal oversight to ensure  implementation of security and privacy protections for these data. Table 5  summarizes the extent to which FSA\u2019s processes for overseeing lenders  address key practices for overseeing the protection of data.", "FSA did not fully specify risk-based security and privacy controls  for FFEL lenders: Like other non-school partners, lenders must complete  FSA\u2019s SAIG application when applying for access to FSA data and  systems. The SAIG application outlines general requirements for ensuring  the security and privacy of the data that FSA shares with the lenders.", "In addition, FFEL lenders enter into participation agreements with FSA  which include requirements related to data exchange, such as ensuring  that data lenders share with FSA are correct. Also, FSA officials told us  that security requirements are communicated to the lenders\u2019 staff via  \u201cdear colleague\u201d letters and the security notices that appear when users  log on to the agency\u2019s Access and Identity Management System to  access PII and other data.", "However, neither the SAIG application nor the participation agreement  requires the FFEL lenders to implement a baseline set of risk-based  security and privacy controls based on the impact level of the affected  information and systems. FSA Information Technology and Business  Operations officials said that they plan to add security and privacy  requirements to the FFEL lender participation agreements as part of their  next update during the 2018 revision cycle, but they did not specify what  requirements would be included in these revised agreements. Until FSA  establishes specific requirements for lenders\u2019 protection of data, it will  lack assurance that information it shares is being protected in a manner  consistent with FSA\u2019s determination of its sensitivity.", "FSA did not require independent assessments of FFEL lenders\u2019  implementation of controls: FSA does not have policies or procedures  for independently assessing lenders\u2019 implementation of protections for  student aid data. The SAIG application does not require an independent  assessment of the non-school partners\u2019 information security and privacy  controls to determine the extent to which the controls are implemented  correctly, operating as intended, or producing the desired outcome with  respect to security.", "According to FSA officials, by accepting the terms of use displayed when  logging on to FSA systems, users agree to comply with security and  privacy requirements. The officials added that FSA monitors activity on  the National Student Loan Data System and can remove a user\u2019s access  if a case of improper usage is identified. However, FSA\u2019s procedures for  monitoring system usage do not include an independent assessment of  lenders\u2019 implementation of security controls.", "Further, while FFEL lenders may be required to undergo various  compliance audits and program reviews, FSA has not determined the  extent to which these audits or reviews address security and privacy  protections; it also does not review the results of such reviews to gain  assurance that security and privacy protections are in place. Without  requiring evidence of such assessments, FSA does not have a basis for  ensuring that lenders are implementing adequate security and privacy  protections.", "FSA has not established a process for overseeing corrective actions  taken by FFEL lenders: Since FSA does not require independent  assessments of lenders\u2019 information security controls, it does not have a  process for identifying weaknesses in the FFEL lenders\u2019 security and  privacy controls and monitoring corrective actions. Lenders do not notify  FSA of security or privacy weaknesses that may be identified in their  systems, nor do they report on corrective actions taken to remedy such  weaknesses. In the absence of such reporting, FSA cannot ensure that  weaknesses in the security and privacy controls of the lenders\u2019 systems  are being addressed.", "FSA did not establish procedures for monitoring FFEL lenders\u2019  implementation of controls on an ongoing basis: FSA does not have  a process for ongoing monitoring of lenders\u2019 implementation of security or  privacy safeguards. FSA does not require lenders to provide periodic  reports to FSA on their security and privacy posture or to conduct any  reviews of their implementation of security and privacy controls. Without  requiring evidence that lenders are effectively implementing security and  privacy protections, FSA cannot ensure that the data accessed by lenders  are being safeguarded commensurate with risk.", "Regarding the lack of FFEL lender oversight, FSA officials noted that  lenders, as financial institutions, are subject to a number of other legal  and regulatory requirements that were not defined by FSA as part of the  FFEL program. For example, lenders are subject to requirements for  protecting customer information imposed by the Gramm-Leach-Bliley Act  and FTC\u2019s Safeguards Rule, which calls for financial institutions to  document an information security program that includes specific  elements.", "However, FSA does not have a process for ensuring that lenders are  complying with these, or other, requirements related to the protection of  student aid data. Consequently, FSA lacks assurance that risk-based  safeguards commensurate with the sensitivity of these data are being  effectively implemented, tested, and monitored. In our previous work, we  similarly found that FSA did not have assurance that schools, which are  also required to comply with the FTC Safeguards Rule, were  implementing these requirements.", "OMB noted that agencies are ultimately responsible for ensuring that their  information is adequately protected, and NIST stated that this  responsibility does not change when information is shared with non- federal partners. Accordingly, agencies should have assurance that  information they share with non-federal entities is being protected at an  appropriate level. In the case of FSA, this could include leveraging  processes already in place, such as the FTC Safeguards Rule, to gain  assurance that appropriate security and privacy controls are in place and  are being regularly monitored and tested. Without establishing a process  for gaining such assurance, FSA is not meeting its responsibility to  ensure that borrowers\u2019 data are being adequately protected."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FSA shares PII on millions of people with non-school partners (i.e., loan  servicers, private collection agencies, guaranty agencies, and FFEL  lenders) so that they can carry out key aspects of the federal student aid  program. FSA is responsible for ensuring that its non-school partners  protect this information by implementing adequate information security  and privacy safeguards.", "While FSA has taken steps to oversee the security and privacy  protections of some of its non-school partners, its policies and procedures  did not always include all key oversight practices. In particular, while FSA  established requirements for loan servicers and private collection  agencies, along with processes for ensuring their implementation that  generally adhered to the key practices, the agency had not ensured that  controls are tested and results are reported on an ongoing basis. FSA,  therefore, may lack visibility into the effectiveness of the protections  applied to student aid data.", "With respect to guaranty agencies, FSA established security and privacy  requirements and has taken steps to enhance security assessments.  Nevertheless, without ensuring that controls are monitored on an ongoing  basis, it lacks adequate assurance that security controls required by FSA  are in place and effective.", "Further, because it exercised minimal oversight over FFEL lenders, FSA  has limited assurance that they are protecting student aid data consistent  with the agency\u2019s requirements. FSA\u2019s limited oversight could result in  inconsistent or ineffective implementation of security controls, which in  turn could have serious consequences for the privacy of millions of  borrowers whose information is shared with non-school partners."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to the Department of  Education:", "The Secretary of Education should enroll loan servicers in FSA\u2019s  continuous monitoring program and, in the interim, require these  entities to report the results of security controls testing at an FSA- defined frequency.  (Recommendation 1)", "The Secretary of Education should enroll private collection agencies  in FSA\u2019s continuous monitoring program, and, in the interim, require  these entities to test all controls at an FSA-defined frequency and  regularly report the results.  (Recommendation 2)", "The Secretary of Education should modify FSA\u2019s agreements with  guaranty agencies to specify a required baseline of security controls  based on the impact level of the information shared with these  agencies, as determined by FSA.  (Recommendation 3)", "The Secretary of Education should establish a process for continuous  monitoring of guaranty agencies\u2019 implementation of security and  privacy requirements between on-site assessments, to include testing  all controls at an FSA-defined frequency and regularly reporting  results.  (Recommendation 4)", "The Secretary of Education should include specific security and  privacy requirements in agreements with FFEL lenders based on  FSA\u2019s categorization of the information shared with the lenders.  (Recommendation 5)", "The Secretary of Education should develop policies and procedures to  gain assurance that FFEL lenders have appropriate security and  privacy controls in place and that these controls are being regularly  tested and monitored.  (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We received written comments on a draft of this report from FSA. In its  comments (reprinted in appendix II), FSA concurred with three of our  recommendations, partially concurred with two recommendations, and did  not concur with one. In addition, FSA provided technical comments, which  we have incorporated as appropriate.", "FSA generally concurred with our first three recommendations and  described various actions it planned or had under way to implement them.  Specifically, regarding our recommendation to enroll loan servicers in  FSA\u2019s continuous monitoring program (recommendation 1), the agency  stated that loan servicers are scheduled to be enrolled in its ongoing  security authorization program beginning in fiscal year 2019.", "Regarding our recommendation to enroll private collection agencies in  FSA\u2019s continuous monitoring program and, in the interim, require these  entities to test all controls at an FSA-defined frequency and regularly  report the results (recommendation 2), FSA stated that it concurred,  although the actions it said it planned to take would not fully address the  recommendation. Specifically, the agency stated that it intends to work  with private collection agencies to identify specific relevant criteria to  strengthen continuous monitoring testing schedules and include these  criteria in private collection agencies\u2019 quarterly reports to FSA. This  measure, if implemented effectively, would address the interim measure  called for in our recommendation.", "However, FSA did not describe actions to address the first part of our  recommendation. Specifically, it did not state whether it intended to enroll  private collection agencies in its ongoing security authorization program,  as called for by its contracts with these agencies. Doing so would provide  enhanced oversight of their implementation of security and privacy  controls.", "The agency concurred with our recommendation to modify FSA\u2019s  agreements with guaranty agencies to specify a required baseline of  security controls (recommendation 3). In this regard, FSA stated that the  agreements it has established with guaranty agencies require them to  comply with standards in NIST Special Publication 800-53, revision 4, and  that assessments of the guaranty agencies require compliance with the  moderate-impact level control baseline under the applicable NIST  standards. Even though FSA did not describe plans to modify its  agreements with guaranty agencies to explicitly require a specific  baseline of controls, the procedures that it noted should help FSA ensure  that guaranty agencies are protecting student aid data based on the  office\u2019s determination of risk. We intend to follow up with FSA to obtain  and assess the evidence supporting its implementation of these  recommendations.", "FSA stated that it partially concurred with two other recommendations.  With respect to establishing a process for continuous monitoring of  guaranty agencies\u2019 implementation of security and privacy requirements  between on-site assessments, to include testing all controls at an FSA- defined frequency and regularly reporting results (recommendation 4),  FSA cited its process for on-site assessments or self-assessments as the  means by which it monitors guaranty agencies. Specifically, it stated that  it requires guaranty agencies to annually either complete a self- assessment or participate in an on-site assessment.", "However, FSA did not describe any additional steps it intends to take to  monitor guaranty agencies\u2019 implementation of security and privacy  controls between assessments. As noted in the report, the self- assessment process that FSA established for guaranty agencies does not  include such elements as collecting or reviewing documentation to verify  that controls have been appropriately implemented. Further, FSA does  not monitor all security controls between on-site assessments by  requiring guaranty agencies to report regularly on the status of security  controls. Regular reporting on the status of security controls, such as test  results, would provide FSA with additional assurance that guaranty  agencies have implemented adequate protections. Thus, we believe our  recommendation remains appropriate.", "FSA also stated that it partially concurred with our recommendation to  include specific security and privacy requirements in agreements with  FFEL lenders based on FSA\u2019s categorization of the information shared  with the lenders (recommendation 5). Specifically, FSA stated that it has  revised its 2019-2020 Lender Organization Participation Agreement with  FFEL lenders to include specific security and privacy responsibilities and  requirements, which is to be effective at the beginning of fiscal year 2019.  The planned actions that the agency described in its response should  fully address our recommendation, if effectively implemented. We intend  to follow up with FSA to obtain and assess the evidence supporting its  implementation of this recommendation.", "FSA did not concur with our recommendation to develop policies and  procedures to ensure that FFEL lenders have appropriate security and  privacy controls in place and that these controls are being regularly tested  and monitored (recommendation 6). According to the agency, it lacks  statutory authority under the Higher Education Act to monitor FFEL  lenders in this area. FSA noted that the lenders are already subject to  security and privacy controls that are monitored and enforced through  other legal authorities that are not administered by the Department of  Education or FSA.", "However, we continue to believe that our recommendation should be  implemented. We recognize that FSA may not have the authority to  impose additional requirements related to monitoring the adequacy of  security and privacy controls implemented by FFEL lenders. Furthermore,  the recommendation does not require FSA or the Department of  Education to exercise additional regulatory authority over FFEL lenders or  to conduct testing or other assessments of the lenders\u2019 security and  privacy programs. Rather, it seeks for FSA to review the results of other  compliance audits or program assessments, including, as appropriate,  those conducted by other federal entities, to acquire visibility into the  lenders\u2019 implementation of information security and privacy safeguards.  Leveraging such a process should help provide FSA with assurance that  the student aid data it shares with them are being adequately protected.  Accordingly, we have clarified our recommendation to better reflect its  intent.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Education, 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) 512-9342 or marinosn@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to (1) describe the roles of the Office of  Federal Student Aid\u2019s (FSA) non-school partners in the federal student  financial aid program, including the types of personally identifiable  information (PII) shared with them; and (2) assess the extent to which  FSA\u2019s policies and procedures for overseeing non-school partners\u2019  protection of federal student aid data align with federal requirements,  federal guidance, and best practices.", "To address the first objective, we obtained and reviewed various  documentation that described the federal student aid process and the  types of information collected, used, and shared in the process. To  determine the roles played by non-school partners in the federal student  aid process, we reviewed reports from the Department of Education and  FSA, including FSA\u2019s annual reports for fiscal years 2016 and 2017, and  reports from the department\u2019s Office of Inspector General; reports from  the Congressional Research Service on federal student aid programs;  and prior GAO reports on aspects of federal student aid programs. These  non-school partners included entities that FSA directly engages with to  carry out key aspects of the student aid process. These partners were non-federal lenders participating in the Federal Family Education", "Title IV loan servicers, guaranty agencies, and private collection agencies.", "Specifically, we identified key functions carried out by these partners, the  types of agreements they had with FSA, and the numbers of each type of  partner that FSA engages with.", "To determine the types of PII shared with non-school partners, we  reviewed FSA documentation on key systems used to collect, store, and  process information as part of the student aid process. This included  high-level documentation and descriptions of FSA\u2019s systems architecture,  privacy impact assessments for FSA and non-school partner systems,  and information on the process by which FSA enrolls non-school partners  to share student aid data with the agency. We also reviewed previous  GAO reports on FSA\u2019s management of student aid data, including PII  collected during the aid process. In addition, we interviewed FSA officials,  including officials from the agency\u2019s technology and business operations  offices.", "To address the second objective, we reviewed and analyzed the policies,  procedures, and processes FSA has in place for overseeing non-school  partners\u2019 protection of student aid data and compared them to federal  requirements and guidance for ensuring the protection of PII. We  identified key activities for overseeing the protection of PII by reviewing  laws, including the Federal Information Security Modernization Act of  2014; Office of Management and Budget requirements and guidance on  managing federal information; and National Institute of Standards and  Technology information security standards and guidance. Based on our  review of these requirements and guidance, we identified four key  practices for establishing security and privacy requirements for non- federal entities and overseeing the implementation of these requirements.  These practices are  require the implementation of risk-based security and privacy controls,  independently assess the implementation of security controls, develop and implement corrective actions, and monitor the implementation of controls on an ongoing basis.", "We collected and reviewed evidence provided by FSA (policy and  process documents, artifacts, written responses to questions, and verbal  responses to questions) to understand its processes for overseeing the  non-school partners\u2019 protection of student aid data. We then compared  the processes to the four key practices we identified. We determined  whether the process met, partially met, or did not meet the key practices:", "Met \u2013 the agency provided evidence of processes and procedures  that address all aspects of the key practice.", "Partially met \u2013 the agency provided evidence of processes and  procedures that address some, but not all aspects of the key practice.", "Not met \u2013 the agency did not provide evidence of processes and  procedures that addressed the key practice.", "We supplemented our review with interviews of FSA Business Operations  and Information Technology officials with knowledge of and responsibility  for the oversight of non-school partners. We also reviewed relevant  Department of Education inspector general reports.", "We conducted this performance audit from June 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Office of Federal Student Aid", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, John De Ferrari (assistant  director), Chris Businsky, Marisol Cruz, Rebecca Eyler, Lee McCracken,  David Plocher, and Bruce Rackliff made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-193", "url": "https://www.gao.gov/products/GAO-19-193", "title": "Tax Debt Collection Contracts: IRS Analysis Could Help Improve Program Results and Better Protect Taxpayers", "published_date": "2019-03-29T00:00:00", "released_date": "2019-04-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IRS attempts to collect tax debts to promote tax compliance but does not have resources to pursue all debts. A 2015 law required IRS to contract with private collection agencies for certain tax debts. However, stakeholders such as the National Taxpayer Advocate have noted that safeguards are needed to protect taxpayers from risks, such as scammers impersonating collection agencies.", "GAO was asked to review IRS's PDC program. This report assesses the extent to which IRS (1) documented program objectives and measures, (2) documented revenue collection and cost results data, (3) used data to improve the program and meet its objectives, and (4) addressed risks to prevent or address scams and other harmful effects on taxpayers. GAO analyzed IRS's documents on PDC program administration and planning; collections and costs reporting; and managing risks. GAO interviewed officials from IRS and external groups that represent taxpayer interests."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) documented objectives and proposed measures for its private debt collection (PDC) program for sending tax debt cases to private collection agencies, but the objectives are not clearly defined and their linkages with program measures are unclear. For example, one objective is to provide taxpayers an opportunity to understand and resolve their tax debts, but the proposed measure focuses on taxpayer satisfaction with collection agencies rather than taxpayers' understanding. The objectives also do not include some key program risks, such as scams. Without clearly defined objectives and measures, IRS will have limited ability to assess program results.", "IRS's reports to Congress on the PDC program have not provided complete financial information. For example, as of September 2018, IRS reported program revenue collections of about $89 million and costs of $67 million, suggesting a positive balance of $22 million for the general fund of the Treasury (the Treasury). However, the report did not clarify that about $51 million collected went to the Treasury and the remaining $38 million were retained by IRS in two special funds to pay current and future program costs. Without this information, Congress has an incomplete picture of the program's true costs and revenues.", "IRS has not analyzed PDC program results to identify the types of cases that should not be assigned to collection agencies because they do not result in collections. GAO's analysis of IRS data shows that between April 2017 and September 2018 about 73,000 of 111,000 cases closed by collection agencies had little or no revenue collected because the collection agencies were unable to contact the taxpayer or collect the debt, among other reasons. Given the costs associated with managing these cases, without such analyses, IRS may continue to use resources inefficiently and assign cases with little or no potential for revenue collection, or miss opportunities to assign other cases that could produce more revenue.", "IRS has identified and taken steps to mitigate some PDC program risks that could harm taxpayers. However, IRS has not completed the process of identifying and documenting all risks nor has it fully assessed risks to taxpayers from the program or its response to these risks. Specifically, GAO found that", "IRS identified and documented 6 taxpayer risks related to the PDC program, such as scammers impersonating collection agencies, but had not identified an additional 10 risks that GAO did, such as taxpayers agreeing to debt payments they cannot afford.", "IRS had not consistently assessed the impact or likelihood of the identified risks. As a result, IRS's responses to mitigate risks were broad in nature, and were not prioritized or aligned to address specific risks.", "IRS monitors a sample of collection agencies' telephone calls with taxpayers and reviews taxpayer complaints, but these methods do not provide information on whether IRS's responses to risks are effective.", "Without addressing these risk management issues, IRS cannot ensure it has fully identified PDC program risks and effectively responded to protect taxpayers from them."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes 12 recommendations, including that IRS improve PDC program objectives and measures, revenue and cost reporting, analysis to assign cases, and management of taxpayer risks. IRS agreed with nine recommendations, partially agreed with GAO's recommendation on improving objectives\u2014which GAO clarified in response\u2014and disagreed with two recommendations to include certain costs in reporting and analyze data to identify cases not collectible. GAO maintains the recommendations would more fully report PDC program federal costs and prevent waste."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Internal Revenue Service (IRS) attempts to collect unpaid tax debts  to promote voluntary compliance. IRS efforts are intended to give all  taxpayers confidence that everyone is paying their fair share and to also  help reduce the tax gap. The tax gap\u2014the difference between tax  amounts that taxpayers should pay and what they actually pay voluntarily  and on time\u2014was, on average, $458 billion for tax years 2008 to 2010,  according to a 2016 IRS estimate. IRS estimated that about $39 billion of  the tax gap was owed by taxpayers who filed returns on time, but paid  less than they owed, creating a tax debt. For fiscal year 2017, IRS  estimated that taxpayers had $197 billion in tax debts of which IRS  considered $52 billion (26 percent) to be collectible. IRS does not have  resources to pursue all tax debts, so it treats some debts that may be  potentially collectible as inactive. However, as required by a December  2015 law, IRS began assigning certain types of inactive tax debt cases to  contracted private collection agencies in April 2017 under its private debt  collection program (PDC) as a way to help collect these debts that IRS is  not actively pursuing.", "Some stakeholders, including the National Taxpayer Advocate (NTA),  have raised concerns about the PDC program, including potential effects  on taxpayers such as related tax collection scams. Specifically, before  the program started in April 2017, according to the Department of the  Treasury Inspector General for Tax Administration (TIGTA), from October  2013 to March 2017, more than 10,300 people were scammed out of over  $55 million by persons impersonating IRS employees. To prevent  possible confusion or scams involving impersonation of collection  agencies, stakeholders including NTA and TIGTA have recognized that  safeguards are needed to protect taxpayers.", "You asked us to review the PDC program. This report assesses the  extent to which IRS has (1) documented program objectives and  measures; (2) documented data on PDC revenue collection and cost  results, and used these data to improve the program and meet its  objectives; and (3) addressed PDC program risks to prevent or address  scams or other harmful effects on taxpayers.", "To assess the extent to which IRS documented program objectives and  measures, we compared PDC program documents on the program\u2019s  objectives and proposed measures to Standards for Internal Control in  the Federal Government. To assess IRS\u2019s documentation of PDC  revenue collection and costs, we compared IRS\u2019s reporting of such data  to federal internal control standards (e.g., use quality data to achieve  objectives). To assess the extent to which IRS is using revenue collection  and cost data, we compared IRS\u2019s analysis plans to IRS\u2019s strategic plan  and PDC program documents, and federal internal control standards on  using data to achieve objectives. To evaluate the extent to which IRS is  addressing PDC taxpayer risks, we interviewed groups that represent  taxpayer interests, including potentially vulnerable taxpayers such as  those who are older or low income, on potential taxpayer risks posed by  the PDC program. We reviewed the extent to which IRS addressed  taxpayer risks for PDC by using enterprise risk management (ERM)  criteria, which generally applies to the risks associated with achieving  programmatic outcomes. We did not assess IRS\u2019s overall approach to  ERM or PDC risks beyond those affecting taxpayers. We reviewed IRS\u2019s  contracts with the private collection agencies and PDC program  documents to determine taxpayer risks IRS had identified and the  responses to address them. We also interviewed program officials,  including the Director of Headquarters Collection and PDC Program  Manager in IRS\u2019s Small Business/Self-Employed operating division. For  details on our objectives, scope, and methodology, see appendix I.", "We conducted this performance audit from January 2018 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "IRS Collection Process", "paragraphs": ["IRS\u2019s process for collecting unpaid tax debts includes:", "Notice Phase: IRS sends the taxpayer an automatically-generated  series of letters about unpaid debts or delinquent returns to prompt  payment or response if the taxpayer disagrees with the balance due  or is unable to pay the amount owed.", "Automated Collection System: IRS attempts to have telephone  contact with the taxpayer to discuss the debt and prompt full payment  or set up a payment installment agreement. According to IRS officials,  telephone contact generally happens when taxpayers call IRS in  response to IRS enforcement notices or actions, such as filing a lien  against the taxpayer\u2019s property or levying financial assets.", "Field Collection: IRS revenue officers attempt in-person contact with  taxpayers to prompt a payment or take enforcement action such as  those described above with the Automated Collection System.", "According to IRS, its collection efforts focus on the potentially collectible  inventory. IRS attempts to prioritize the debts it believes it will most likely  be able to collect, based on an analysis of factors such as the debt  amount and the taxpayer\u2019s ability to pay it."], "subsections": []}, {"section_title": "History of Previous PDC Programs", "paragraphs": ["In 1995, Congress authorized IRS to contract with private debt collectors  to collect unpaid tax debts. In 1997 we reported IRS data showing that  the program cost about $21.1 million and collected about $3.1 million.  The program was canceled, in part, because of the net loss.", "In October 2004, Congress granted discretionary authority to IRS for  creating a PDC program to collect some portion of unpaid taxes. The  program enabled IRS to contract with private collection agencies to  collect tax debts and pay them from a revolving fund of the revenue  collected. IRS said it would study the comparative performance of private  collection agencies versus the agency in collecting unpaid taxes because  of concerns that the program might cost more than using IRS resources  to collect the debts. IRS began assigning cases to private collection  agencies in September 2006. It began the study at that time too. In March  2009, IRS released its study, which concluded that IRS was more cost  effective than collection agencies in collecting tax debts when working  similar cases. As a result, IRS announced that it would not renew  expiring contracts with the private collection agencies."], "subsections": []}, {"section_title": "Laws Covering the Current PDC Program and Related Funding", "paragraphs": ["The Fixing America\u2019s Surface Transportation (FAST) Act in 2015  mandated that IRS assign inactive tax debt cases to private collection  agencies. Inactive cases are those that IRS includes in its potentially  collectible inventory but is not actively pursuing. Congress defined three  types of inactive tax debt cases that must be assigned to the collection  agencies, which are those:  removed from active inventory due to a lack of IRS resources or  inability to contact a taxpayer; not assigned for collection to an IRS employee and more than one- third of the period of applicable statute of limitation has lapsed; and assigned for collection and more than 365 days have passed without  any interaction with the taxpayer or a third party for purposes of  furthering collection.", "The act also excluded certain taxpayer accounts from being assigned to a  collection agency. Specifically, accounts are to be excluded if the  taxpayer is deceased; under the age of 18; in designated combat zones;  a victim of tax-related identity theft; under examination, litigation, criminal  investigation or levy; subject to pending or active offers in compromise,  an installment agreement, or a right of appeal; or involved in an innocent  spouse case.", "The American Jobs Creation Act and the FAST Act together created two  funds which allow IRS to retain up to 50 percent of the amounts collected  by private collection agencies. Specifically, IRS can retain up to 25  percent of the amounts that collection agencies collect in each of these  funds:", "Cost of Services fund to pay collection agencies\u2019 commissions.", "Special Compliance Personnel Program fund to pay costs of  administering the collection agency contracts and costs of adding  collection staff."], "subsections": []}, {"section_title": "IRS\u2019s Approach for Assigning Cases to Collection Agencies under the PDC Program", "paragraphs": ["According to IRS officials, IRS\u2019s approach for implementing the PDC  program is to roll out cases over time in three major phases, moving from  simpler to more complex cases. The first phase (April 2017) included  the simplest types of cases in which individual taxpayers had agreed to  the debt owed. The second phase (March 2018) added individual tax  debts from IRS compliance activities\u2014such as auditing the accuracy of  filed tax returns\u2014where taxpayers have not agreed with the debt owed  and unfiled tax returns (i.e., from individuals who did not file tax returns as  required). The third phase (planned for March 2019) is to add business  tax debt cases and unfiled business tax returns. As shown in figure 1,  since first assigning cases to collection agencies in April 2017, IRS has  increased the number and types of tax debt cases. By the end of fiscal  year 2019, IRS plans to have assigned about 2.4 million cases that it  expects to be eligible for the PDC program."], "subsections": []}]}, {"section_title": "IRS Has Not Clearly Defined PDC Program Objectives, Measures, and Targets", "paragraphs": ["IRS has not clearly defined program objectives, measures, and targets for  the PDC program. According to federal internal control standards,  management should define objectives clearly to enable the identification  of risks and define risk tolerances. Objectives should be defined in  specific and measurable terms to enable design of internal control for  related risks. Establishing measures and related targets also allows  assessment of program performance and helps ensure that objectives are  achieved.", "Although IRS started sending cases to collection agencies under the PDC  program in April 2017, IRS did not document the program\u2019s objectives  and their links to related proposed measures until October 2018. IRS  officials explained that they wanted to get some experience with the  program before establishing its objectives and measures, so in June 2018  and August 2018, officials held working sessions to draft the program\u2019s  mission, vision, and values statements, and link performance metrics to  them. The resulting proposed mission statement was to \u201cprovide  taxpayers an opportunity to understand and resolve their tax obligations  and apply tax laws in a manner that is consistent with IRS collection  practices.\u201d The sessions also yielded the following statements under  related categories that according to IRS officials are the PDC program\u2019s  three program objectives.", "Taxpayer Protection\u2014Apply tax laws in a manner that is consistent", "Taxpayer Experience/Satisfaction\u2014Provide taxpayers an opportunity  to understand and resolve their tax obligations", "Private Collection Agency Operational Success\u2014Resolve tax  obligations by utilizing private collection agencies  According to the working sessions\u2019 documents, officials also proposed  PDC measures. However, our review found that these measures did not  clearly link to two of the three PDC objectives\u2014applying tax laws  consistently with IRS collection practices and providing taxpayers an  opportunity to understand and resolve their tax obligations. Table 1 shows  our analysis of the clarity of the links between the objectives and  proposed measures, and the lack of targets for each of the objectives and  measures.", "In addition, based on our discussions with IRS officials and review of PDC  program documents, IRS\u2019s three program objectives do not acknowledge  all key program-related risks. For example, because high costs put  previous PDC programs at risk, IRS officials said they designed program  procedures to control costs and compare these costs to revenue  collections. However, none of the objectives or measures addresses  costs compared to revenue collections. Similarly, IRS has acknowledged  the risks of scams and created risk responses but none of the three  objectives focuses on protecting taxpayers from the risks of scams.", "Our review of IRS documentation also shows that IRS has used  inconsistent terms to communicate the program\u2019s objectives. Specifically,  IRS\u2019s fiscal year 2019 communication plan for the PDC program states  different program objectives than those in the working session  documents. This document states the program\u2019s objectives as: help America\u2019s taxpayers settle their debt and come into compliance; ensure the safety and security of taxpayers and their data; and ensure that all taxpayers contacted by private collectors are treated  with fairness and respect by monitoring the program.", "These objectives do not include terms used in the objectives stated in  table 1, such as applying tax laws consistently with collection practices  while they introduce new terms such as compliance, safety and security,  and fairness and respect. Although the two sets of objectives do not  necessarily conflict, their differing, inconsistent terms contribute to the  stated program objectives being unclear.", "According to IRS officials, the objectives defined by the working sessions  are the objectives for the PDC program. They said that IRS needs more  time to finalize the program objectives and measures and develop related  targets. The officials said their efforts and resources until recently had  been directed toward implementing the PDC program. However, they do  not expect to finish refining the objectives, measures, and targets until  fiscal year 2020 or later, when they will use program data that may be  available then.", "Until program objectives are clearly defined and consistently stated, IRS  cannot ensure that appropriate controls will be in place to address risks  and achieve the desired results of the PDC program. Also, without  measures and targets that are clearly linked to the objectives, IRS will be  limited in its ability to assess and assure that the program is making  progress in achieving its objectives."], "subsections": []}, {"section_title": "IRS Reporting on PDC Program Results Is Incomplete and IRS Has Not Analyzed Ways to Improve These Results", "paragraphs": [], "subsections": [{"section_title": "IRS Reporting of PDC Program Revenue Collection and Costs Results is Not Complete", "paragraphs": ["According to federal internal control standards, management should  externally communicate complete, quality information necessary to  achieve objectives. Ways to carry this out include using and reporting  complete financial information. However, we found that IRS\u2019s reporting  on the PDC program to Congress did not provide complete, quality  financial information on some of the program\u2019s results for revenue  collected and costs.", "Specifically, IRS\u2019s reporting did not clarify how much of the collected  revenue went to the general fund of the Treasury (the Treasury) rather  than to IRS for two special funds. For example, from fiscal year 2016  when IRS started to develop the program through September 2018, IRS\u2019s  report to Congress in October 2018 showed program revenue collections  of $88.8 million and costs of $66.5 million\u2014a program balance of $22.3  million. While suggesting this positive program balance to the Treasury,  the report did not clarify that about $50.9 million of the $88.8 million went  to the Treasury and about $37.8 million went to the two IRS special  funds\u2014about $18.9 million for each\u2014to pay current and future related  IRS costs (see table 2 in appendix II). The report included the required  information on the collected revenue retained in the two special funds.", "We analyzed the status of the two funds as of September 2018 (see table  3 in appendix II). The $18.9 million that IRS retained to pay the costs for  commissions to the contracted collection agencies had a balance of $2.9  million; the $18.9 million that IRS retained to pay costs to administer the  PDC contracts and hire and train additional staff for IRS collection  activities had a balance of $14.6 million. IRS officials said IRS used this  fund to hire 100 additional collection staff in October 2018. The officials  said that information system improvements will allow IRS to track the  revenue collections and costs related to those additional staff pursuing  tax debts.", "IRS officials said in September 2018 that they plan for future reports to  include a program balance table and retained fund balance tables.  However, they said IRS does not plan to include a table on the amount of  collected revenue that went to the Treasury because IRS is not required  to include this in the report. Full reporting of revenue and costs can help  stakeholders better understand and assess program results. Without  clearly reported data, stakeholders are challenged to know how much of  the collected revenue went to the Treasury rather than to IRS\u2019s two funds.", "Nor did IRS\u2019s reporting to Congress include all PDC program costs. As  discussed above, ways for management to meet internal control  standards include using and communicating quality information on  achieving program objectives. IRS has not included the costs incurred by  the Treasury Inspector General for Tax Administration\u2019s (TIGTA) Office of  Investigation to operate the system for taxpayer complaints about  collection agencies, which is part of the PDC program (see table 4 in  appendix II for IRS\u2019s reported costs). IRS officials said that IRS did not  include TIGTA\u2019s program costs because IRS does not typically include  costs incurred by TIGTA or other agencies in its program costs. However,  by not including TIGTA\u2019s operational costs, as opposed to its audit costs,  Congress is not informed of full PDC program costs."], "subsections": []}, {"section_title": "IRS Does Not Plan to Conduct Analyses to Improve PDC Program Results", "paragraphs": ["Our work has shown that using performance data helps agencies achieve  better results. Federal internal control standards also require that  management use quality information to achieve objectives. The  standards also point out that management is responsible for an effective  internal control system that minimizes the waste of resources. In addition,  an IRS strategic goal includes analyzing data to improve decision-making  and program results. However, IRS does not have plans to analyze data  to identify ways to improve the results of the PDC program by using this  information to guide the types of cases sent to collection agencies.", "We found that IRS has not conducted any analysis of PDC results to  determine which types of cases are not potentially collectible and should  not be assigned to collection agencies because they result in little or no  collected revenue. Our analysis of IRS data showed that certain cases  assigned to collection agencies generally have had limited results.  Specifically, from April 2017 to September 2018, collection agencies had  only  collected $88.8 million of the $5.7 billion assigned\u20141.6 percent\u2014in  about 730,000 cases.  closed about 111,000 cases, of which about 38,000 were closed as  either fully paid or with an installment agreement, while about 56,000  were recalled by IRS and 17,000 were returned by collection agencies  with little or no revenue collected.", "IRS officials said that these recalled and returned cases may have  generated some revenue but did not know how much. Although revenue  amounts were not known, IRS fiscal year 2018 data showed that  collection agencies returned 288 cases (1.7 percent of about 17,000  cases returned in 2018) with a partial debt payment. In addition, our  review of IRS\u2019s data indicated that most returned cases would not have  had collected revenue. According to these fiscal year 2018 data, more  than 95 percent of the 17,000 cases\u2014involving $183 million in tax debt\u2014 were returned because the collection agencies indicated that:  they were unable to collect on the debt or contact the taxpayer, or  the taxpayer received Social Security supplemental or disability  income payments (which are to be returned because these taxpayers  have limited resources or ability to pay, according to IRS officials),  asked the collection agency to cease contact, or had died.", "When we shared our analysis with IRS officials, they said they were not  surprised by these limited PDC collection results because IRS considers  them to have low collection potential. Furthermore, many taxpayers may  not be able to pay because they have low income. In September 2018,  TIGTA reported that 54 percent of taxpayer accounts assigned to  collection agencies had a low income indicator. By pursuing such cases  that produce little or no revenue, IRS increases PDC program costs to  manage the cases being sent and returned as well as the burdens for  taxpayers who have to respond to collection agencies\u2019 contacts.  However, IRS officials said that they have not analyzed these results and  do not have data on either the costs or the burdens associated with these  cases.", "We also found that IRS does not have plans to analyze PDC program  results and inactive debt cases to identify cases that IRS will not pursue  that could be added to the PDC inventory. These cases could have higher  collection potential than many of the current PDC cases that are  collecting little or no revenue even though this potential has not been high  enough to be actively pursued by IRS. For example, IRS could use its  discretion to assign cases before they meet the FAST Act\u2019s case age  requirements criteria for collection agency assignment. Assigning such  cases earlier could improve PDC program results because of the debt  collection principle that collection success generally worsens as cases  age. Similarly, IRS does not have plans to analyze PDC results to  identify characteristics of cases with the highest collection results and use  that analysis to find other types of inactive cases with similar  characteristics that could be included in the PDC inventory. IRS officials  said they are not conducting or planning such analyses because their priority is to fully implement the program and assign the types of cases to  collection agencies that the FAST Act mandates. They said that they may  consider expanding the types of cases sent to collection agencies after  March 2019 and that they do not know whether they will do related  analyses or when any decision will occur. However, for both the debt  cases that could be excluded or added, IRS has existing discretionary  authority to revise the PDC inventory. For example, IRS has authority to  exclude cases from the PDC program if IRS determines they are not  potentially collectible. Furthermore, prior law grants IRS the discretion to  assign collection agencies cases beyond the three types of cases  specified by the FAST Act. Even so, IRS officials said that they have no  plans to analyze data on whether to revise the PDC inventory to reduce  costs or maximize revenue collection.", "By not analyzing the results of the PDC cases, IRS risks continuing to  send cases to collection agencies that collect little or no revenue and  incur costs that waste federal resources as well as burden taxpayers. If  most of the more than 2 million cases slated for collection agency  assignment into 2019 collect little or no revenue, the accumulated IRS  costs as well as burdens imposed on taxpayers could be significant.  Similarly, by not analyzing new types of cases that could be assigned to  private collection agencies, IRS could miss opportunities to assign cases  that collect more revenue than cases that these agencies currently return  with little or no revenue."], "subsections": []}]}, {"section_title": "IRS Has Established a Risk Management Process to Address PDC Risks to Taxpayers but the Process Is Not Complete", "paragraphs": [], "subsections": [{"section_title": "IRS Has Addressed Some Taxpayer Risks but Has Not Fully Implemented All Elements of Its Risk Management Process for Its PDC Program", "paragraphs": ["As shown in figure 2 and as described in greater detail below, IRS has  made progress in implementing elements of a risk management process  for its PDC program but has not completed full implementation of the  process.", "IRS has involved leadership in supporting the risk management process  but has not aligned the process with objectives for protecting taxpayers in  the PDC program. We previously reported that agency officials should  engage leadership and regularly consider risks and how they could affect  achievement of objectives. IRS\u2019s initial discussions of risk\u2014including  taxpayer risks\u2014involved PDC leadership and internal stakeholders, and  followed guidance from the Office of Chief Risk Officer, according to IRS  officials. IRS created a risk register to track the status of PDC risks. PDC  leadership and IRS stakeholders continue to update these risks biweekly,  according to IRS officials. In addition, IRS has developed a program  mission statement and draft objectives. However, IRS has not aligned its  risk management process for the PDC program with an objective for  protecting taxpayers because, as discussed earlier in this report, IRS has  not yet finalized its objectives for the PDC program."], "subsections": [{"section_title": "Identify Risks", "paragraphs": ["IRS has taken some steps to identify risks; however, we found various  weaknesses in its implementation of this risk management element.  According to our 2016 report on risk management, agencies should  assemble a comprehensive list of risks that could affect achievement of  goals and objectives. IRS\u2019s risk register includes taxpayer risks that IRS  internal stakeholders initially identified and continue to update biweekly,  according to IRS officials. IRS assigned each of these a risk category\u2014 such as taxpayer rights and protection\u2014and most risks have an IRS  official assigned to manage them. Our prior work found that clearly  documenting actions taken in a risk management process\u2014such as in a  risk register\u2014facilitates systematic risk review to help accomplish an  agency\u2019s mission.", "However, we found that IRS has not documented a comprehensive list of  specific risks to taxpayers in the risk register. IRS\u2019s risk register identified  6 taxpayer risks but we identified another 10 risks by reviewing other PDC  documentation, such as the Policy and Procedures Guide, and by  interviewing external stakeholders, as shown in figure 3. For example,  IRS did not identify in the risk register the risk that taxpayers may agree  to debt payments they cannot afford. Also, IRS has not aligned the  taxpayer risks with one or more PDC objectives because IRS has not yet  finalized the objectives, as previously discussed.", "IRS officials said they did not list all taxpayer risks in the risk register  because they covered many of these risks in other PDC program  documents. Even so, not documenting risks and aligning them with the  objectives in the risk register will make it more difficult to properly manage  all taxpayer risks.", "Furthermore, based on our review, the register identified many risks that  are broad and unclear. For example, IRS\u2019s description of a taxpayer  rights risk is broad and unclear on which rights are at risk given the 10  taxpayer rights in the Taxpayer Bill of Rights. For other risks, we found  that IRS did not clearly state the risk to taxpayers. For example, IRS  identified certain taxpayer risks with a focus on: giving taxpayers an opportunity to agree to pay their tax debts through  a series of payments rather than the effects on taxpayers if they are  unable to make all payments; and harming IRS\u2019s reputation if collection agencies do not follow IRS  standards rather than clarifying any specific risks to taxpayer rights.", "While IRS identified some taxpayer risks, the lack of completeness and  clarity in IRS\u2019s risk register limits its effectiveness as a tool for tracking  taxpayer risks. As a result, IRS does not have reasonable assurance that  it has fully identified and addressed all taxpayer risks from the PDC  program."], "subsections": []}, {"section_title": "Assess Risks", "paragraphs": ["IRS has not consistently documented its assessment of taxpayer risks  from the PDC program, making it unclear how risks will be prioritized. Our  2016 report on risk management describes the importance of assessing  the impact and likelihood of risks so risks can be prioritized. This step is  necessary to guide decisions on how to respond to risks. Before  implementing the PDC program in April 2017, IRS assessed potential  risks and developed sections in the risk register on risk impacts,  likelihood, and responses that IRS would use to address each risk.  However, IRS has not clearly documented the impacts for each risk in the  risk register. We found that the column in the risk register designated for  capturing risk impact was generally blank or contained just a date. We  also found that IRS did not fully capture information on the severity of a  risk\u2019s impact. For example, in a column for recording severity in the risk  register, we found information on the implementation status of a risk  response instead. Further, although IRS officials said they continue to  monitor \u201cclosed\u201d risks, we found that the register recorded no information  about the severity of the risk impact after IRS implemented a response.   Instead, the register recorded the risk as \u201cclosed.\u201d", "We also found that IRS had not clearly documented the likelihood of each  risk in the risk register, making it difficult to understand how likely each  risk is to occur after IRS responds to and closes a risk. For example, the  PDC program and taxpayers could be harmed if scammers find a way to  impersonate collection agencies. IRS set up a Taxpayer Authentication  Number to allow taxpayers to verify that a phone call is from a collection  agency and not a scammer, and closed the risk involving scams.  However, the risk register is unclear on how IRS estimates the likelihood  this risk could occur or on how this response would reduce the likelihood  of scams.", "IRS officials said quantifying the impacts and likelihood of some risks is  difficult. Even so, without clear documentation on the risk impacts and  likelihood, it will be difficult for IRS to prioritize the risks. Without a  reasonable measure of the impact\u2019s severity, IRS may be unable to  properly select responses to mitigate the potential impacts from the risks."], "subsections": []}, {"section_title": "Select Risk Response", "paragraphs": ["IRS has developed many responses to broadly address taxpayer risks in  the PDC program, but has not clearly documented and aligned the  responses to address specific risks. Our 2016 report on risk management  suggests as a good practice selecting risk responses based on a  prioritized list of risks. IRS established risk categories and risk  responses that broadly respond to taxpayer risks in the PDC program,  such as the quality review process to measure how well collection agency  employees properly follow IRS procedures. However, IRS has not  addressed all of the elements we described in our 2016 report for  selecting responses to risks\u2014in part because identified risks and  responses are broad\u2014as IRS has not completed all the steps for risk  identification and assessment, as previously discussed.", "In addition, we found that the risk register did not clearly document the  responses chosen to mitigate some stated risks. First, IRS did not always  clearly document in the register column for responding to risks how its  many responses aligned with a specific risk. For example, the register  aligned a response on tracking taxpayer complaints with the risk on  protecting taxpayer rights but not with the risk of scams, even though IRS  officials said that they rely on TIGTA to monitor taxpayer complaints for  PDC-related scams. Second, the register did not include some taxpayer  protection responses. Specifically, we identified taxpayer protection  responses in the collection agency contracts that were not included in the  risk register, such as 1) ensuring that collection agency employees are  not paid based on how much they collect, or 2) relying on taxpayers to  inform collection agencies if debt payments would cause a hardship.", "IRS officials acknowledged that their risk register does not align all of its  responses with specific risks, but said they created many responses to  generally protect taxpayers, although we did not find many of these  responses documented in the risk register. Without thorough risk  identification and assessment or clear documentation in the risk register  of how all risk responses align with specific risks, IRS does not have  reasonable assurance that it has properly selected risk responses for  each taxpayer risk."], "subsections": []}, {"section_title": "Monitor Risks and Risk Responses", "paragraphs": ["IRS has developed monitoring efforts for major taxpayer risk responses  for the PDC program, but lacks assurance that specific responses are  working effectively to mitigate specific risks. Our prior work encourages  agencies to monitor how risks change and how well risk responses  work. IRS monitoring includes:  reviewing the quality of a statistically reliable sample of calls between  collection agencies and taxpayers,  reviewing monthly reports from collection agencies on their  compliance and behaviors involving taxpayers, periodically visiting collection agencies to review program compliance, acting on referrals from Treasury Inspector General for Tax  Administration\u2019s (TIGTA) investigation of complaints, and  tracking taxpayer satisfaction through a customer satisfaction survey.", "However, we found that IRS\u2019s broad monitoring efforts provide limited  information on whether or how effectively the responses are addressing  taxpayer risks in the PDC program. For example:  IRS monitors calls and scores collection agencies\u2019 accuracy in  following various collection procedures, but this measure provides  little information on how well specific risks in the PDC program are  addressed to protect taxpayers. For fiscal year 2017, the quality  scores indicated that collection agencies scored at least 98 percent  accuracy. However, IRS focuses on this overall score rather than  monitoring individual components that make up the overall score,  which could serve as possible indicators of taxpayer risks, such as  unauthorized disclosures of taxpayer information. IRS documentation  showed that IRS is still identifying which components of the quality  score apply to collection agency performance on taxpayer rights  protection, but IRS officials said they do not plan to finalize the  program\u2019s performance measures until fiscal year 2020.", "IRS has not documented how it uses its customer satisfaction survey  measure to monitor specific risks to taxpayer rights. IRS reports that  taxpayers\u2019 satisfaction scores for interacting with collection agencies  exceed 93 percent overall. However, this overall score does not  provide specific information about risks to taxpayers or related risk  responses. Some survey questions\u2014such as on collection agency  professionalism\u2014could provide information about specific taxpayer  risks. IRS has plans to consider using other survey questions as  measures and, in October 2018, officials said they are planning  analysis in fiscal year 2019 to inform and implement survey changes  by fiscal year 2020.", "IRS expects taxpayers to tell the collection agency if they cannot  afford a debt payment, but does not track whether this risk response  is effective. If a taxpayer reports to a collection agency that debt  payments would cause economic hardship, that they have a medical  hardship, or that they receive Social Security Disability Insurance  (SSDI) or Supplemental Security Income (SSI), the collection agency  is required to return the case to IRS. To start such tracking, IRS  officials said they were open to possibly analyzing which types of  taxpayers pay or do not pay, as well as the voluntary payment rate on  installment agreements for PDC taxpayers.", "As of October 2018, IRS documentation showed ongoing  development of measures for monitoring taxpayer complaints that  TIGTA receives and investigates. It showed that IRS proposes to  establish thresholds for the number of actionable complaints and  unauthorized disclosures a collection agency needs to report before  IRS takes corrective action.", "In addition to TIGTA complaints, we found that IRS has other sources of  taxpayer complaints available that it was not using to monitor changes in  taxpayer risk. The Federal Trade Commission\u2019s (FTC) Consumer Sentinel  Database received a number of taxpayer complaints about collection  agencies and possible scams, but we found that IRS did not ask FTC for  these data. FTC gathers data on complaints from the public, the Better  Business Bureau, and IRS and other federal and state agencies. We  analyzed FTC data from about the first 15 months of the PDC program  and identified 20 PDC-related taxpayer complaints. More than half of the  complaints indicated taxpayer confusion after being contacted by a  collection agency; of these, seven taxpayers mistook the collection  agencies for scammers. In addition, six cases were possible scams, and  in three cases taxpayers reported harassment by the collection agency.  When we shared our analysis with IRS officials, they agreed that the FTC  data would be valuable to them and said they plan to work with TIGTA\u2019s  Office of Investigations to incorporate these data into their monitoring of  taxpayer complaints by the end of March 2019.", "Although IRS has developed methods to monitor its risk responses  involving taxpayer risks and taxpayer rights violations, IRS\u2019s monitoring  provides broad indicators rather than specific measures on how well  responses address each risk in the PDC program. Although officials are  considering changes to IRS\u2019s monitoring and have plans to conduct data  analysis in fiscal year 2019 to inform decisions about possible customer  satisfaction survey changes, until these changes are implemented, IRS  will have limited assurance that it has effective responses to address  each risk in the PDC program."], "subsections": []}, {"section_title": "Inform Stakeholders", "paragraphs": ["IRS informs internal stakeholders and Congress about taxpayer risks in  the PDC program, but has not fully engaged external stakeholder groups  that represent taxpayers\u2019 interests to learn about risks. Our 2016 report  on risk management discussed the need to inform internal and external  stakeholders about program risks and risk response performance, and to  seek feedback on risks from stakeholders.", "We found that IRS followed some of these practices and conducted  outreach to some internal and external stakeholders. For example, PDC  management engages regularly with IRS stakeholders, and produces  annual reports to Congress on PDC performance including taxpayer  protection. IRS officials said that IRS staff regularly meet with the  Taxpayer Advocate Service (TAS) staff on PDC. However, TAS has  recommended that it be involved in overseeing taxpayer protection  procedures by reviewing collection agency calls with taxpayers. IRS  officials said they also reached out to external stakeholders such as  practitioner groups and Low-Income Taxpayer Clinics through  conferences and the Office of National Public Liaison, and participated in  Nationwide Tax Forums to provide \u201climited talking points\u201d about the PDC  program. IRS provided documents showing prior outreach to these  groups as well as AARP about the PDC program. In addition, IRS  provided documents showing planned outreach to external stakeholders  for fiscal year 2019, including TAS, Congress, tax preparers, and tax  professional groups.", "IRS officials said they welcome feedback about taxpayer risks, but  documents they provided showed limited efforts to solicit feedback from  external stakeholders about the PDC program. For example, between  May 2016 and October 2018, IRS anonymously recorded 26 questions  from external stakeholders through its Stakeholder Liaison office, which is  designated to communicate with stakeholders. Ten of these questions  were recorded after April 21, 2017, when collection agencies started  contacting taxpayers directly about their tax debts. Because the identities  of stakeholders submitting questions are kept anonymous, we could not  follow up with stakeholders about IRS\u2019s responses. IRS officials said they  had not received any direct feedback from Low Income Taxpayer Clinics,  but that any such feedback would be shared through TAS.", "Our interviews with external stakeholders from practitioner groups and  groups that represent taxpayer interests indicated that IRS had not  offered them clear opportunities to provide feedback. For example,  several Low Income Taxpayer Clinic officials informed us that they did not  perceive that IRS was soliciting their feedback when the PDC topic was  discussed at conferences and meetings they attended. We received  similar comments that feedback opportunities were lacking or unclear  from representatives at AARP, the American Bar Association, and other  groups, raising questions about how fully IRS solicited feedback while  conducting its outreach on the PDC program.", "As previously mentioned, we learned about taxpayer risks IRS did not  include in its risk register and the experiences of vulnerable groups by  reaching out to stakeholders and listening to their stories (see figure 3).  For example, some stakeholders expressed concerns that using  collection agencies could increase scam risk and make it more difficult to  advise taxpayers on how to avoid scams. They also identified a range of  risks to various types of vulnerable taxpayers. For example, stakeholders  told us that low-income taxpayers can be risk averse and will try to pay,  and may be unaware they do not have to pay the debt if it will cause a  hardship. According to some of the groups we interviewed, some elderly  taxpayers are particularly vulnerable to scams and could be easier for  collection agencies to pressure into payment arrangements; other types  of taxpayers might be confused and believe that a legitimate collection  agency call is actually a scam.", "While we did not encounter clear examples of taxpayer mistreatment by  collection agencies or scammers impersonating collection agencies, the  concerns stakeholders raised suggest they can provide IRS with  feedback and insights about taxpayer risks\u2014particularly to vulnerable  groups\u2014that IRS may not identify on its own. Without ensuring that it has  fully solicited feedback and conducted outreach to stakeholders, IRS  does not have assurance that it has identified specific risks to taxpayers  and appropriately responded to them."], "subsections": []}]}, {"section_title": "IRS Has Identified Scams as a Risk, but Has Not Identified and Assessed Other Program Fraud Risks", "paragraphs": ["IRS identified scams as a risk to the PDC program and taxpayers. In  response to the scam risk, IRS established a Taxpayer Authentication  Number to help taxpayers and collection agencies verify each other\u2019s  identities, provided authentication guidance to taxpayers with cases  assigned to collection agencies, and posted scam alerts and press  releases on its website. In addition, TIGTA monitors taxpayer complaints  to identify instances of scams, according to IRS officials. Beyond this  step, IRS has not identified other fraud risks, such as those internal to the  operation of PDC.", "To help agencies better address fraud, we issued A Framework for  Managing Fraud Risks in Federal Programs (Fraud Risk Framework),  which includes a comprehensive set of leading practices to combat fraud  in a strategic, risk-based manner. These practices include:  identifying and assessing inherent fraud risks\u2014including fraud risks  within the program, examining the suitability of existing fraud controls, and documenting the program\u2019s fraud risk profile.", "IRS did not have information to demonstrate a formal fraud risk  assessment for the PDC program. IRS officials said they did not conduct  and document a formal fraud risk assessment because they considered  fraud risk as part of their risk management process for the PDC program.  However, IRS\u2019s risk register did not identify fraud types beyond scams,  and our review of other IRS risk management documents found that they  had no clear information about consideration of other external or internal  fraud risks, such as from collection agency employees. In addition, IRS  did not document responses to address fraud risks beyond the Taxpayer  Authentication Number and scam-related complaints monitoring. Without  information on IRS\u2019s assessment and responses to fraud risks it is not  clear that IRS fully considered internal and external fraud risks, or  developed appropriate responses to those risks, meaning IRS cannot  provide assurance it is effectively managing fraud risks to taxpayers and  the program."], "subsections": []}, {"section_title": "IRS Provided Inconsistent Guidance on Taxpayer Protections, Possibly Creating Confusion and Raising Risks for Some Vulnerable Taxpayers", "paragraphs": ["IRS assures taxpayers that they can expect the same level of service and  protections from collection agencies as they do from IRS collections.  However, we identified two inconsistencies in IRS guidance on taxpayer  protections for the PDC program, which could increase confusion among  taxpayers or risks to taxpayers. In response to our findings, IRS is  revising its guidance to address one of these issues but the other has not  been addressed.", "Responding to suicidal taxpayers: IRS guidance for its collection  employees requires them to take all taxpayer suicide threats  seriously, keep the taxpayer on the phone, and act quickly to report  the incident to authorities to locate and help the taxpayer. However,  IRS guidance for collection agency staff allowed debt collectors to first  use judgment to try and determine if the suicide threat was sincere  before taking steps to help the taxpayer. When we pointed out this  discrepancy to IRS officials, they acknowledged it and, in October  2018, issued revised guidance to collection agencies that removed  collector discretion to judge whether suicide threats are valid before  taking actions to help the taxpayer.", "Reporting scams to TIGTA: IRS instructs taxpayers to call TIGTA if  they suspect a scam. IRS information mailed to taxpayers and on the  main PDC program website includes contact information for TIGTA,  but does not say to call TIGTA to report a scam. This information is  found separately on IRS\u2019s website for scams\u2014which can be accessed  through the main PDC program website\u2014but this may not be clear to  all taxpayers in the PDC program. IRS officials acknowledged that  their mailed publications do not instruct taxpayers to contact TIGTA to  report scams, but said they encourage taxpayers to visit IRS.gov to  keep informed about scams. External stakeholders including AARP  and the National Center on Elder Abuse said that older Americans  generally trust and rely more upon the mail than the internet. In  addition, because older Americans are more likely to watch televised  news, they may not necessarily see IRS website scam alerts and  therefore may be less aware of these scams. They also said that not  all taxpayers\u2014in particular elderly taxpayers\u2014use the internet, and  thus rely on printed guidance or the telephone for information about  reporting scams. Without clear guidance, taxpayers will not know how  to report scams. Thus, TIGTA and IRS may be unaware of and unable  to appropriately respond to them. IRS officials said it would be  possible to update the printed guidance provided to taxpayers with  information about contacting TIGTA to report scams, but that such  revisions could take up to a year to implement."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The PDC program can contribute to IRS\u2019s enforcement efforts to assure  taxpayer compliance and help address the tax gap. However, without  program objectives that are clearly defined and consistently stated, IRS  cannot assure that appropriate controls will be in place to address risks.  Also, without measures and targets that are clearly linked to program  objectives, IRS will be limited in assessing progress and assuring that the  program achieves its objectives.", "Without complete reporting on the PDC program revenue collection  results, Congress is not fully informed on the amounts of collected  revenue sent to the general fund of the Treasury and amounts retained by IRS to pay costs. In addition, IRS\u2019s not reporting TIGTA\u2019s costs to  administer the PDC taxpayer complaint system means Congress is not  informed of full PDC program costs. Furthermore, because IRS does not  have plans to analyze data to identify ways to improve the results of the  PDC program by using its discretion to revise the types of tax debt cases  it sends to collection agencies, IRS risks continuing to send cases to  collection agencies that incur costs but collect little or no revenue. IRS  may also miss opportunities to assign cases that collect more revenue to  more efficiently and effectively address the gap between what taxpayers  owe and pay.", "IRS\u2019s incomplete documentation of how taxpayer risks align with program  objectives, identification of risks, and risk assessment make it difficult for  IRS to prioritize risks, and does not provide reasonable assurance that  IRS properly selected risk responses to address each risk. Similarly, not  fully documenting how IRS is monitoring taxpayer risks and related  responses means that IRS has limited assurance that each response is  effective in addressing the risk. Taxpayers may face increased risk if IRS  guidance to taxpayers is unclear, such as how to report scams. Lastly,  more fully soliciting feedback from external stakeholders to learn about  taxpayer risks\u2014particularly to vulnerable groups\u2014would provide  assurance that IRS has identified and appropriately responded to  taxpayer risks."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 12 recommendations to the Commissioner  of Internal Revenue:", "The Commissioner of Internal Revenue should finalize the PDC  program objectives so that they are clearly defined in consistent  terms, and assure that the key program risks, measures, and targets  are linked with the objectives. (Recommendation 1)", "The Commissioner of Internal Revenue should include TIGTA costs in  IRS\u2019s reporting of PDC program costs. (Recommendation 2)", "The Commissioner of Internal Revenue should report the amount of  collected revenue sent to the general fund of the Treasury and  amounts retained by IRS to pay its costs. (Recommendation 3)", "The Commissioner of Internal Revenue should analyze PDC program  results to identify the types of cases that are not potentially collectible  and should not be assigned to collection agencies. (Recommendation  4)", "The Commissioner of Internal Revenue should analyze PDC program  results and the cases not assigned to the PDC program to identify the  types of inactive cases IRS will not pursue that could be assigned to  collection agencies to improve PDC program results.  (Recommendation 5)", "The Commissioner of Internal Revenue should clearly document and  distinguish the complete list of identified risks to taxpayers in the PDC  program risk register, and align the risks with PDC program  objectives. (Recommendation 6)", "The Commissioner of Internal Revenue should clearly document the  severity of impacts of the taxpayer risks, as well as the likelihood of  each taxpayer risk after responding to it, in the PDC program risk  register, and use this information to prioritize risks to address and  guide selection of risk responses. (Recommendation 7)", "The Commissioner of Internal Revenue should clearly document how  each risk response aligns with specific taxpayer risks in the PDC  program risk register. (Recommendation 8)", "The Commissioner of Internal Revenue should document how IRS\u2019s  monitoring of the PDC program provides information on specific  taxpayer risks and how well specific responses are working to  address each risk, and should supplement IRS\u2019s monitoring of  taxpayer complaints with FTC complaint data. (Recommendation 9)", "The Commissioner of Internal Revenue should more fully seek and  document feedback from external stakeholders representing  vulnerable taxpayers to identify and appropriately respond to possible  PDC taxpayer risks. (Recommendation 10)", "The Commissioner of Internal Revenue should clearly document an  assessment of fraud risks related to the PDC program.  (Recommendation 11)", "The Commissioner of Internal Revenue should ensure that its printed  guidance to PDC taxpayers includes information about reporting  scams to TIGTA. (Recommendation 12)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Commissioner of Internal  Revenue for comment. IRS provided written comments, which are  reproduced in appendix III. Of our twelve recommendations, IRS partially  agreed with one and disagreed with two.  IRS agreed with the remaining  nine recommendations and outlined actions to implement them. Of these  nine recommendations, IRS said it already implemented one and planned  to implement another, even though IRS disagreed with part of the related  finding.", "IRS partially agreed with our recommendation on defining PDC program  objectives related to key risks and developing related measures and  targets (Recommendation 1). IRS said it would use consistent terms in  developing measures that link to its PDC program objectives, but did not  agree that program objectives are necessarily framed in terms of program  risks. IRS said its approach to risk management is consistent with GAO\u2019s  Standards for Internal Control in the Federal Government, which is to  identify objectives before identifying risks to achieving those objectives.", "However, IRS did not document the program\u2019s objectives until October  2018, about two years after it validated identified PDC program risks, and  did not expect to finalize the objectives and related measures and targets  until fiscal year 2020 or later. Further, as discussed in the report, IRS\u2019s  stated objectives did not acknowledge all key PDC program risks, such as  scams and high costs compared to revenue collected. We revised the  recommendation to more clearly address our intent that whenever IRS  finishes defining the PDC program objectives, IRS should ensure that  they include objectives that are linked with key program risks.", "IRS disagreed with our recommendation that IRS include TIGTA costs in  reporting program costs (Recommendation 2). IRS said that doing so  would be inconsistent with legislative requirements that define program  costs as IRS\u2019s costs and with IRS cost-accounting practices. However,  the FAST Act set minimum reporting requirements to which IRS can add  more information.  Also, the existing cost accounting standards and  practices to which IRS refers govern IRS\u2019s accounting for and reporting of  costs incurred by IRS. However, our intent is to ensure fuller reporting of  the PDC program\u2019s cost to the federal government. Therefore we stand  by our recommendation because without such reporting Congress is not  informed of full PDC program costs.", "IRS also disagreed that it should analyze PDC program results to identify  the types of cases that are not potentially collectible and therefore should  not be assigned to collection agencies (Recommendation 4). IRS said the  PDC statute requires the assignment of all inactive tax receivables to  collection agencies and therefore no collectability analysis is required or  necessary.  However, as we discuss in our report, the statute defines  \u201cinactive tax receivables\u201d as being in \u201cpotentially collectible inventory\u201d but  does not define \u201cpotentially collectible inventory.\u201d We also noted that IRS  has the discretion to define \u201cpotentially collectible inventory\u201d under its  general rulemaking authority in 26 U.S.C. \u00a7 7805 and can use this  authority to determine which cases are potentially collectible and which  are not.", "IRS also said it questioned whether the analysis we recommend would  improve efficiency and said there is very little cost associated with  assigning additional cases to collection agencies. During our review, we  asked IRS for such cost information and IRS officials said they did not  know the costs to send or to handle returned PDC cases. As we noted in  our report, IRS has incurred tens of millions of dollars in costs with little or  no revenue collected for most of the PDC cases that IRS has closed.", "IRS analysis to improve PDC case assignment could improve efficiency.   Under its general rulemaking authority, IRS is authorized to make rules it  deems necessary for the efficient administration of the tax code. We  added language in the report to emphasize IRS\u2019 management  responsibility to assure efficient program operations. Without the analysis  we recommend, IRS could continue assigning uncollectible debts to  PCAs that generate IRS costs and waste federal resources.", "IRS agreed that it should analyze PDC program results and the cases not  assigned to the PDC program to identify the types of inactive cases that  could be assigned to collection agencies to improve PDC program results  (Recommendation 5). IRS said it had already built this analysis into its  current shelving process, as the statue addresses inactive cases that are  shelved due to lack of resources. However, it is not clear that the analysis  embedded into IRS\u2019s shelving process identifies cases that IRS will not  pursue and assigns them to collection agencies before the 52-week  shelving threshold, or before the FAST Act\u2019s case age requirements, as  we discuss in the report.", "Similarly, it is not clear that IRS\u2019s shelving process includes analysis of  PDC results to identify characteristics of cases with the highest collection  results and uses that analysis to find inactive cases with similar  characteristics that could be assigned to collection agencies, as we  discuss in the report. We look forward to IRS taking actions that will  address our findings. Without such analyses, IRS could miss  opportunities to assign cases that collect more revenue than cases that  collection agencies return with little or no revenue collected.", "Finally, although IRS agreed with our recommendation that it report the  amount of collected revenue sent to the general fund of the Treasury and  amounts retained by IRS to pay its costs (Recommendation 3), IRS said it  disagreed that its reports to Congress on the PDC program have not  provided complete financial information and said such reporting followed  statutory requirements.", "As we state in our report, IRS has documented PDC revenue collections  and costs in its annual report to Congress as required by the FAST Act.  However, although not required by the Act, IRS has reported the program  balance measure\u2014program revenue less cost\u2014without clarifying how  much revenue goes to the general fund of the Treasury (the Treasury)  rather than to IRS\u2019s two funds.  We appreciate IRS\u2019s agreement with this  recommendation as well as its plans to report PDC revenue amounts  going to the Treasury and to IRS\u2019s retained funds.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of the Treasury, the  Commissioner of Internal Revenue, and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or at lucasjudyj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to assess the extent to which the  Internal Revenue Service (IRS) has (1) documented Private Debt  Collection (PDC) program objectives and measures; (2) documented data  on PDC revenue collection and cost results, and used these data to  improve the program and meet its objectives; and (3) addressed PDC  program risks to prevent or address scams or other harmful effects on  taxpayers. We limited the scope of our analysis to PDC program planning  and implementation, PDC program data on costs and revenues, and risks  to taxpayers in the PDC program.", "To assess the extent to which IRS documented PDC program objectives  and measures, we reviewed PDC program management documents and  interviewed IRS officials\u2014including the Director of Headquarters  Collection and the PDC Program Manager\u2014to identify the stated  objectives and proposed measures to support identification of program  risks and assess program performance. We compared the program  objectives and measures to criteria in federal internal control standards  for defining objectives, including standards that objectives be clearly  defined to enable risk identification in specific and measurable terms with  measures and related targets to allow assessment of program  performance. We assessed the clarity of links between the IRS\u2019s stated  PDC program objectives and proposed program performance measures.  We also interviewed IRS officials and reviewed program documents to  assess the extent to which PDC program objectives were linked to  acknowledged key program risks. Finally, we compared IRS\u2019s  documented objectives statements to assess consistency in their terms.", "To assess the extent to which IRS has documented data on PDC revenue  collections and costs, we compared IRS\u2019s reporting of PDC costs and  revenue collections data to criteria in federal internal control standards,  including standards that management should externally communicate  complete, quality information necessary to achieve objectives, including  objectives for reporting financial information. We assessed the extent to  which IRS\u2019s reporting of its program balance measure was complete in  reporting program\u2019s results for revenue collected and costs to include how  much of the collected revenue goes to the general fund of the Treasury,  and how much IRS is retains to pay for related costs. We also assessed  the completeness of IRS cost reporting to include the Treasury Inspector  General for Tax Administration costs for administering the system for  taxpayer complaints about collection agencies. To assess the extent to  which IRS is using costs and revenue collect data to improve the PDC  program and meet objectives, we compared IRS\u2019s program administration  plans to criteria in federal internal control standards that management use  quality data to achieve objectives, our work showing that using  performance data helps agencies achieve better results, and IRS  strategic goals. We also assessed the extent to which IRS had legal  authority to revise the types of cases it assigns to collection agencies,  and to what extent it had plans to analyze data to revise case  assignments to minimize costs and maximize collection revenue results.", "To assess the extent to which the PDC program addressed risks to  taxpayers, we reviewed risk management criteria from one of our  previous publications on enterprise risk management (ERM), guidance  from the Office of Management and Budget Circular A-123, the Fraud  Reduction and Data Analytics Act, and our Fraud Risk Framework. We  then applied these criteria to the PDC program risk register for the  taxpayer risks. We believe this was appropriate because IRS follows an  ERM process to manage taxpayer risks as well as other program risks  that were not part of our work. We did not assess IRS\u2019s overall approach  to applying its ERM process.", "To identify taxpayer risks and understand the program\u2019s risk responses,  we reviewed the risk register, the collection agency Policy and  Procedures Guide, collection agency contracts, and other program  documentation and analyzed data on cases collection agencies returned  to IRS. We also interviewed IRS officials involved in PDC, including the  Director of Headquarters Collection and PDC Program Manager in IRS\u2019s  Small Business/Self-Employed operating division, and solicited feedback  from external stakeholders\u2014such as Low-Income Taxpayer Clinics and  groups dealing with elder fraud and abuse issues\u2014that represent  vulnerable taxpayers to learn about risks, and analyzed FTC data on  taxpayer complaints. We also reviewed PDC program performance data  on quality reviews, taxpayer satisfaction, and taxpayer complaints to  understand how IRS monitors taxpayer risks and responses. Lastly, while  reviewing program documents, we noted inconsistencies between PDC  program guidance for collection agencies and IRS collection procedures  that arose during our review, and verified these inconsistencies with IRS  officials.", "We conducted this performance audit from January 2018 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Data on the IRS Private Debt Collection Program\u2019s Revenue Collections to Various Funds and Costs", "paragraphs": ["Table 2 shows the overall private debt collection (PDC) program\u2019s  revenue collections and cost data the Internal Revenue Service (IRS)  used to calculate and report the PDC program balance measure through  September 30, 2018, along with additional detailed information (in bold)  that IRS did not include in the program balance table it reported to  Congress. The added information shows the amounts that went to the  general fund of the Treasury and the amounts of commissionable  collections that went to IRS to pay costs to contract for PDC and hire  additional collection staff in the future.", "Table 3 shows the status of the two IRS retained funds for fiscal years  2017 and 2018; these funds had no activity during fiscal year 2016  because IRS had not yet sent any cases to the private collection agencies  to be worked.", "Table 4 shows IRS\u2019s reporting of its PDC program costs for fiscal years  2016 through 2018, including the costs that IRS incurred before IRS  started sending tax debt cases to private collection agencies in April  2017."], "subsections": []}, {"section_title": "Appendix III: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Jessica Lucas-Judy, (202) 512-9110 or lucasjudyj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Tom Short (Assistant Director),  Ronald W. Jones (Analyst-in-Charge), Carole J. Cimitile, Charles Fox,  Robert Gebhart, James Andrew Howard, Edward Nannenhorn, William M.  Reinsberg, Robert Robinson, Cynthia Saunders, Rebecca Shea, Margie  K. Shields, and Adam Windram made key contributions to this report."], "subsections": []}]}], "fastfact": ["IRS's new program pursues the tax debts that IRS's collectors aren't\u2014by contracting with private collection agencies. This program raises concerns about effectiveness and taxpayer risk, as did similar programs in the past.", "For example, IRS's private collectors recovered less than 2% of over $5 billion in debts. Analyzing these results could help IRS make the program more effective.", "IRS also hasn't fully assessed potential taxpayer risks. It has documented 6 risks, including \"imposter scams,\" in which scammers pose as private collectors. We identified 10 additional risks.", "We recommended 12 ways to improve the program and protect taxpayers."]}
{"id": "GAO-18-364", "url": "https://www.gao.gov/products/GAO-18-364", "title": "Amphibious Combat Vehicle: Program Should Take Steps to Ensure Manufacturing Readiness", "published_date": "2018-04-17T00:00:00", "released_date": "2018-04-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In June 2018, the United States Marine Corps plans to select a contractor and begin low-rate production for the ACV, a vehicle used to transport Marines from ship to shore under hostile conditions. The ACV will replace all or part of the current Assault Amphibious Vehicle fleet.", "The National Defense Authorization Act for Fiscal Year 2014 included a provision for GAO to annually review and report on the ACV program until 2018. This report, GAO's last under that provision, assesses the extent to which the Marine Corps is making progress toward (1) meeting cost and schedule goals for the ACV program and (2) demonstrating manufacturing readiness.", "GAO reviewed program cost estimates, updated schedules, and program assessments of test results and production readiness, as well as compared ACV acquisition efforts to DOD guidance and GAO-identified best practices. GAO also interviewed program and testing officials, and visited both ACV primary assembly locations."]}, {"section_title": "What GAO Found", "paragraphs": ["The first version of the Amphibious Combat Vehicle (ACV 1.1) is on track to meet development cost goals with no additional anticipated delays for major acquisition milestones. With regard to costs, the development phase of ACV 1.1 is on pace to not exceed cost goals that were established at the start of development, based on a recent Navy estimate, the ACV program office, and reporting from the contractors. For example, a September 2017 program progress review reported a Navy estimate of the cost of development at $750.7 million, less than the $810.5 million baseline established at the beginning of development. With regard to schedule, the ACV program has made no major changes to the acquisition schedule since GAO previously reported on the program in April 2017. ACV 1.1 program officials are in the process of preparing to down-select to a single contactor and enter low-rate production in June 2018, start a second round of low rate production the following year, and begin full-rate production in 2020. ACV 1.1 may be followed by the acquisition of other versions (ACV 1.2 and ACV 2.0) with advanced capabilities such as higher water speeds.", "The ACV program is preparing to start production of ACV 1.1, which includes determining that the contractors' manufacturing capabilities are sufficiently mature. However, program officials are considering entering production with a lower level of manufacturing maturity than called for in Department of Defense (DOD) guidance or GAO identified best practices. The ACV program measures manufacturing maturity with manufacturing readiness levels (MRL) for risk areas such as design, materials, process capability and control, and quality management. DOD guidance for weapons acquisition production recommends that programs achieve an MRL of 8 across all risk areas before entering low-rate production and that a program achieve an MRL of 9 at the start of full-rate production. GAO's previous reviews about manufacturing best practices found that achieving manufacturing maturity and identifying production risks early in the acquisition cycle and assessing those risks prior to key decision points, such as the decision to enter production, reduces the likelihood of quality issues, cost growth, and delays. The Marine Corps contract option for producing the first round of low-rate production for ACV 1.1 will be exercised after June 2018; the contract also contains additional options for production vehicles. Making the decisions to proceed with the second round of low-rate production and for the start of full-rate production before meeting called-for levels of manufacturing readiness criteria increases the risk that ACV 1.1 will witness delays and increased costs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends the Marine Corps (1) not enter the second year of low-rate production for ACV 1.1 until after the contractor has achieved an overall MRL of 8 and (2) not enter full-rate production until achieving an overall MRL of 9. DOD partially concurred with both recommendations, but noted that it is reasonable to proceed at lower MRL levels if steps are taken to mitigate risk. GAO made no changes to its recommendations in response to these comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States Marine Corps established the Amphibious Combat  Vehicle (ACV) program as a way to acquire an enhanced capability to  transport Marines from ship-to-shore under hostile conditions. The ACV is  envisioned to potentially replace all or part of the current Assault  Amphibious Vehicle (AAV) fleet, which has been providing this capability  since 1972. According to the Marine Corps, the AAVs fall short of  currently needed capabilities such as water and land mobility, lethality,  and force protection. Previously, the Marine Corps sought to achieve  enhanced capabilities in these areas through the Expeditionary Fighting  Vehicle (EFV) program, but due to concerns about the program\u2019s  affordability, after more than a decade in development and the  expenditure of $3.7 billion, the program was cancelled in 2011. Following  the cancellation of the EFV program, the Department of Defense (DOD)  authorized the Marine Corps to seek a new replacement for the AAVs,  emphasizing the need for cost-effectiveness, resulting in the start of the  ACV acquisition in 2011. The ACV acquisition approach calls for ACV  development in three increments with increasing amphibious capability,  referred to as ACV 1.1, 1.2 and 2.0. The program awarded contracts in  2015 to two competing contractors to each design and develop 16 ACV  1.1 prototypes for testing. The program plans to down-select by awarding  and exercising the option to one of the two contractors for production,  which is scheduled to start in 2018.", "The National Defense Authorization Act for Fiscal Year 2014 included a  provision that we annually review and report to the congressional defense  committees on the ACV program until 2018. This report\u2014our last under  that provision\u2014discusses the Marine Corps\u2019 progress toward (1) meeting  cost and schedule goals for the ACV 1.1 program and (2) demonstrating  manufacturing readiness.", "To conduct this work, we reviewed program documents such as: the  Acquisition Strategy; Test and Evaluation Master Plan; System  Engineering Plan; the ACV 1.1 engineering, manufacturing and  development contracts; and solicitation for the ACV 1.1 production. These  documents were provided primarily by the ACV program office and the  Marine Corps\u2019 Office of the Program Manager for Advanced Amphibious  Assault. We identified acquisition best practices based on our extensive  body of work, as well as the DOD acquisition guidance, to assess the  ACV acquisition approach and acquisition activities to date.", "To assess the Marine Corps\u2019 progress towards meeting cost and  schedule goals for the ACV 1.1 program, we reviewed recent cost  estimates, contractor performance reports, and updated program  schedules, and interviewed officials from the ACV program office. We  compared current program cost and schedule information to cost and  schedule goals in the acquisition program baseline established at  development and updated information reported in previous GAO reports  addressing the ACV.", "To review Marine Corps efforts to meet ACV 1.1 production readiness  goals, we analyzed results of developmental, live fire, and sustainment  reliability testing provided by the ACV program office and the Marine  Corps\u2019 Combat Development and Integration. We also interviewed testing  officials and visited testing facilities at the Aberdeen Proving Ground,  Aberdeen, Maryland. We conducted interviews with officials at Science  Applications International Corporation (SAIC) and BAE Systems Land  and Armaments L. P. (BAE)\u2014the two contractors competing for the  production down-select\u2014and visited their production and assembly  facilities at North Charleston, South Carolina and York, Pennsylvania,  respectively. We reviewed reports about contractor production readiness  and interviewed officials from the Defense Contract Management Agency  (DCMA) responsible for oversight at the contractors\u2019 respective facilities.  We also analyzed vehicle acceptance reports for all prototype ACV  vehicles delivered to the government. We then applied DOD guidance  and GAO-identified best practices to ACV program efforts to prepare for  the start of production. In addition to interviewing Marine Corps program  officials, we also interviewed officials at the DOD Office of the Director,  Operation Test and Evaluation and the Office of the Deputy Assistant  Secretary of Defense for Developmental Test and Evaluation.", "Information related to testing results, production readiness, and vehicle  quality upon delivery is competition sensitive and is restricted from being  presented in a public report. Because the ACV program has not yet  concluded the evaluation of the two competitors to determine which will  produce the ACVs to be fielded, we are unable to publicly address and  include in this report some of our findings relating to information that is  considered by DOD to be competition sensitive. However, we agreed to  brief staff of the congressional defense committees on those findings at a  later date.", "We conducted this performance audit from July 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The ACV is being developed as a partial or full replacement for the AAV,  which is a tracked (non-wheeled) vehicle with capability to launch from  ships to reach the shore carrying up to 21 Marines at a speed of up to  approximately 6 knots. This speed effectively limits its range for traveling  from ship to shore to no farther than 7.4 nautical miles. In order to  upgrade the AAV to meet current threats and establish a path toward an  enhanced platform, DOD and the Marine Corps implemented an  incremental approach. The first step was to improve the AAVs\u2019 protection  from threats such as improvised explosive devices by installing enhanced  armor and other equipment\u2014referred to as survivability upgrades\u2014efforts  which are currently underway. The second step was to establish a plan to  replace the AAV with a new vehicle, the ACV, which would develop and  enhance capabilities in three incremental steps:", "ACV 1.1 would be a wheeled vehicle that provides improved  protected land mobility but limited amphibious capability. In  operations, it is expected to be part of an amphibious assault through  the use of a surface connector craft to travel from ship to shore. This  increment would leverage prototypes, demonstration testing, and  other study results from the previously suspended Marine Personnel  Carrier program.", "ACV 1.2 would have improved amphibious capability, including the  ability to self-deploy and swim to shore. The development phase of  the second ACV increment (ACV 1.2) is scheduled to begin in  February 2019.", "ACV 2.0 would focus on exploring technologies to attain higher water  speed capability.", "The ACV 1.1 program was initiated in 2014 and development of ACV 1.1  vehicles started in November 2015. The remainder of this report is  focused on development and acquisition of the ACV 1.1, which we will  refer to as ACV. The Marine Corps acquisition of the ACV employs a two- phase strategy for selecting a contractor to produce the ACV fleet. In the  first phase, the program issued a solicitation for offerors to submit  proposals and provided for award of multiple contracts for each contractor  to design and develop 16 prototypes for performance assessment. In the  second phase, referred to as the down-select process, after testing the  prototypes, the Marine Corps intends to select a single contractor to  continue into the start of production. The Marine Corps received five initial  proposals and ultimately awarded contracts to BAE and SAIC to develop  the ACV prototypes. The Marine Corps considered the ACV to be a  substantially non-developmental item because both contractors\u2019 designs  were based on vehicles that were already in production and deployed by  other militaries.", "Figure 1 depicts the BAE and SAIC prototype vehicles. After testing the  prototypes, the Marine Corps plans to select a single contractor to  continue into the production phase.", "The first prototypes were delivered in January 2017 and have since been  undergoing developmental, operational, and live fire testing.", "Developmental testing assesses whether the system meets all technical  requirements and is used to: verify the status of technical progress,  determine that design risks are minimized, substantiate achievement of  contract technical performance, and certify readiness for initial operational  testing. ACV developmental testing includes testing for sustainability,  system survivability, and water and land mobility.", "Operational testing (assessment) is the field test, under realistic  conditions, for the purpose of determining effectiveness and suitability of  the weapons for use in combat by typical military users.", "Live fire testing is used to demonstrate vehicle capability against a  range of ballistic and non-ballistic threats expected to be encountered in  the modern battlefield, such as improvised explosive devices among  others.", "In January 2018 the Marine Corps started an operational assessment,  which was scheduled to be completed in March 2018. The assessments  consist of field tests, under realistic conditions, to inform the decision to  enter production. Ongoing test results, including the operational  assessment, will be used to inform the ACV June 2018 production  decision.", "Figure 2 is a timeline of the ACV program\u2019s progress and plans to full  capability. The ACV program plans to produce at least 208 vehicles after  exercising contract options for 2 years of low-rate production of 30  vehicles each year starting in 2018 and then exercise options for 2 years  of full-rate production for the remaining 148 or more vehicles starting in  2020.", "In addition to testing the prototype vehicles, the program is holding a  production readiness review that started in November 2017 and  according to program officials, they will keep the review open until April  2018. During this review, the program will determine whether the designs  are ready for production and whether the contractors have accomplished  adequate production planning to enter production. Officials from DCMA,  which conducts contract performance oversight, have provided support in  assessing production readiness. After receiving the proposals for the  production down-select, the program will hold a system verification review  in April 2018 to verify that the performance of the ACV prototypes meets  capability requirements and performance specifications.", "This report represents the last in the series of reports we are to issue in  response to the fiscal year 2014 National Defense Authorization Act,  which contains a provision that we review and report annually on the ACV  program until 2018. Previously,  In October 2015 we found that the Marine Corps made efforts to  adopt best practices and minimize acquisition risk, including: adopting  an incremental approach to update capabilities, using proven  technologies, increasing competition, and awarding fixed-price  incentive contracts for much of the development work.", "In April 2017, we found that DOD\u2019s life cycle cost estimate for ACV  1.1 of about $6.2 billion, fully or substantially met the criteria for the  four characteristics of a high-quality reliable cost estimate. However,  we also found that changes the Marine Corps made to the acquisition  schedule \u2014 partly in response to a stop work order following a bid  protest that was denied by GAO in March 2016 \u2014 raised acquisition  risk by increasing the overlap between development activities, such  as testing of the vehicles, with production. This is a risk we had  identified in a previous report. As a result, we recommended that the  Marine Corps delay the production decision until 2019. DOD did not  concur with that recommendation."], "subsections": []}, {"section_title": "ACV Program Is on Track to Meet Development Cost Goals with No Additional Schedule Delays", "paragraphs": ["Costs for the development phase of ACV are on track to meet cost goals  established at the start of development, based on a recent Navy estimate,  the ACV program office, and reporting from the contractors. In September  2017, the ACV program\u2019s Defense Acquisition Executive Summary  Report for ACV provided a Navy cost estimate for development of $750.7  million, less than the $810.5 million baseline established at the start of  development in November 2015. Program officials also indicated that the  ACV program was on track to meet cost goals. They noted that the  contractors have not contacted the government to negotiate an increase  in billing prices, as of December 2017. Since both of the contractors have  delivered all 16 of their required prototypes and the manufacturing of the  prototypes is the largest anticipated portion of ACV development contract  costs, most of the costs associated with the manufacturing of the  prototypes have likely been realized.", "The Marine Corps made efforts to reduce cost risk to the government by  adopting a fixed-price incentive (firm target) contract type for the  construction of the prototype vehicles. As we previously reported in  October 2015, the Marine Corps planned to award hybrid contracts to  each of the ACV development contractors, which would apply different  pricing structures for different activities. The Marine Corps awarded the  contracts in November 2015 as planned. Most critically, a fixed-price  incentive contract type is being used for items in the contract associated  with the manufacturing of the development prototypes, which was  anticipated to be the largest portion of ACV development contract costs.  Under this contract type, the government\u2019s risk is generally limited to the  contract\u2019s price ceiling. Incentive contracts are appropriate when a firm- fixed-price contract is not appropriate and the required supplies can be  acquired at lower costs by relating the amount of profit or fee to the  contractor\u2019s performance.", "According to Federal Acquisition Regulation, since it is usually to the  government\u2019s advantage for the contractor to assume substantial cost  responsibility and appropriate share of the cost risk, fixed-price incentive  contracts are preferred over cost-reimbursement incentive contracts when  contract costs and performance requirements are reasonably certain.  The fixed-price incentive (firm target) contract type provides for adjusting  profit and establishing the final contract price by application of a formula  based on the relationship of total final negotiated cost to total target cost.  The final price is subject to a price ceiling, negotiated at the outset. If  the final negotiated cost exceeds the price ceiling, the contractor absorbs  the difference. As we also previously reported, however, the Marine  Corps received a waiver to forgo the establishment of a certified Earned  Value Management System for the ACV program, which reduces the  regularly-available cost, schedule, and performance data available for the  program to review.", "The ACV program office and DOD also indicated that they anticipate  production costs will be within goals established at the start of  development, though key production costs have not yet been determined.  The program\u2019s development contracts with the two competing contractors  contain fixed-price incentive options for 4 years of production. The pricing  of the production vehicles will not occur, however, until DOD makes a  production decision in June 2018 and negotiates the final terms and  exercises the production option with one of the contractors.", "The Marine Corps has made no major changes to the ACV acquisition  schedule since we previously reported on the program in April 2017. In  that report we found that the production decision was moved from  February to June 2018 after a stop work order was issued to the  contractors in response to a bid protest from a vendor that was not  selected for one of the ACV development contracts. A senior program  official emphasized the importance of keeping the ACV acquisition on  schedule because the capability it provides is complementary to a  broader set of capability updates across multiple platforms that the  Marine Corps is in the process of procuring."], "subsections": []}, {"section_title": "ACV May Enter Production with Manufacturing Maturity That Does Not Meet Best Practices", "paragraphs": ["The ACV program office is in the process of conducting tests and  assessments to determine if the program is on track to meet the criteria to  enter production, but program officials told us the Navy\u2014which has the  authority to approve major acquisition milestone decisions for the  program\u2014may choose to start low-rate production without meeting  established best practices for manufacturing maturity. At the start of  development, DOD established criteria for entering production in areas  such as capability performance and the status of the contractors\u2019  manufacturing readiness to manufacture the ACV vehicles. Leading up to  the production decision, the program is engaged in a number of activities  such as the operational assessment and production readiness review to  inform the decision to start production. The production readiness review  has a critical role in informing the decision to enter production because it  represents an opportunity for the program to determine the maturity of the  contractor\u2019s manufacturing process and assess potential risks related to  cost, schedule, or performance. Our previous reviews about  manufacturing best practices found that identifying manufacturing risks  early in the acquisition cycle and assessing those risks prior to key  decision points, such as the decision to enter production, reduces the  likelihood of cost growth and potential delays.", "The ACV program has used the DOD Manufacturing Readiness Level  (MRL) Deskbook to identify levels of manufacturing capability and  establish targets for minimal levels of manufacturing readiness at specific  acquisition milestones. The ratings are applied to various risk areas  such as design, materials, process capability and control, and quality  management. Table 1 shows the basic MRL definitions provided by the  Joint Defense Technology Panel.", "The MRL Deskbook recommends that a program is expected to  demonstrate a MRL of 8 by the time of the low-rate production decision.  However, GAO\u2019s previously identified best practices for managing  manufacturing risks recommend programs reach a higher level\u2014MRL- 9\u2014 for the risk area of process capability and control before entering low- rate production. At MRL-9, a program is expected to have its applicable  manufacturing processes in statistical control. The MRL Deskbook recommends that a program achieve an MRL-9 at the start of full-rate  production.", "The Marine Corps has eliminated manufacturing capability as a criterion  for consideration in the down-select production decision. In the solicitation  issued to the two competing contractors for the production decision in  December 2017, the Marine Corps identified two criteria that would be  considered to determine the winner of the down-select competition for the  production decision. They are, in descending order of importance: (1)  technical performance of the prototype vehicles and (2) the contractors\u2019  submitted cost proposals. Previously, the ACV acquisition strategy and  development contracts identified five criteria for the selection process,  with manufacturing capability as the second most important factor (behind  technical performance). The development contracts stipulated that the  government reserved the right to adjust the factors and their order of  importance prior to the release of the solicitation for the production down- select decision. Program officials said that narrowing the down-select  factors to performance test results and cost was in line with the original  intent of the program to use the best value tradeoff process described in  the Federal Acquisition Regulation and that the revised criteria were  appropriate for a non-developmental item such as the ACV.", "While the program removed manufacturing capabilities from its criteria for  selecting the contractor for production, ACV program officials are still  assessing manufacturing readiness to support their production decision.  Program officials stated that they could enter production at a lower level  of manufacturing readiness than DOD guidance or GAO identified best  practices suggest. The program started a production readiness review in  November 2017 to determine the contractors\u2019 respective manufacturing  maturity. According to program officials, they will keep the review open  until April 2018, at which point the program will make a determination  about the contractors\u2019 manufacturing readiness levels. The program office  confirmed that the ACV criterion for entering production is to achieve an  MRL-8 but noted that it is possible that the program could choose to enter  into production without an overall MRL-8. Program officials stated that if  there are any specific risk areas that are assessed below that threshold,  the program office will define the risk and make a recommendation to the  Navy for entry into production based on whether or not they consider the  risk acceptable.", "To help inform its determination, program officials said that they will  review the manufacturing readiness assessments produced by the  contractors, as well as reviews by the DCMA, which is responsible for  assisting with contract oversight. Because the two contractors were still in  competition at the time of the release of this report, we are unable to  publicly report additional, more detailed, information about production  readiness or performance tests. However, we have previously found that  programs with insufficient manufacturing knowledge at the production  decision face increased risk of production quality issues, cost growth, and  schedule delays.", "Entering the production phase of the ACV acquisition with manufacturing  readiness levels lower than those recommended by DOD guidance and  GAO-identified best practices would increase the likelihood of outcomes  associated with insufficiently mature manufacturing capabilities, such as  production quality issues and schedule delays. The Marine Corps has  already been authorized funding to start production and plans to exercise  options in 2018 to produce 30 vehicles for the first year of low-rate  production. However, the Marine Corps has two upcoming decisions  that would provide opportunities to refocus on manufacturing readiness  for the ACV\u2014specifically the decision to enter into the second year of  low-rate production in 2019 for 30 vehicles, and the decision to enter the  first year of full-rate production in 2020 and acquire 56 of the remaining  148 vehicles. Acquiring additional vehicles before ensuring sufficient  manufacturing maturity could raise the risk that the contractor may not be  sufficiently prepared for continued production, which could result in delays  in delivery of acceptable vehicles or additional costs to the government."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The Marine Corps has long identified the need for the enhanced  capabilities envisioned through the ACV program and is nearing the  potential production of such a vehicle. Following the cancellation of the  EFV program after the expenditure of $3.7 billion, the ACV program  represents an opportunity to follow a better acquisition approach. It is too  early to determine whether the contractors will meet targets for production readiness by the time of the production decision, but the program office is  considering entering production without meeting the recommended  manufacturing maturity levels established by DOD or GAO-identified best  practices.", "We have already identified the ACV program as adopting an aggressive  acquisition schedule in which the amount of concurrent developmental  testing and production is more than typical acquisition programs. In fiscal  year 2018, Congress authorized funding for the program to start  production, but the decision to enter a second year of low-rate production  and the decision to start full-rate production represent opportunities for  the ACV program to verify the manufacturer has achieved a sufficient  level of readiness before commencing production of the bulk of vehicles.  If the Marine Corps does not take steps to ensure that the contractor\u2019s  manufacturing readiness is sufficiently mature, as demonstrated through  MRLs, prior to committing to additional production beyond the first year of  low-rate production, there is an increased risk for production quality  issues, cost growth, and schedule delays."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to DOD.", "The Secretary of the Navy should take steps to ensure that the Marine  Corps not enter the second year of low-rate production until after the  Marine Corps has determined that the contractor has achieved an MRL of  at least an 8 for all risk areas. (Recommendation 1)", "The Secretary of the Navy should take steps to ensure that the Marine  Corps not enter full-rate production until the Marine Corps has determined  that the contractor has achieved an MRL of at least 9 for all risk areas.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to DOD for comment. In its comments,  reproduced in appendix I, DOD partially concurred with GAO\u2019s  recommendations.", "DOD agreed that manufacturing readiness should be assessed prior  entering both the second year of low-rate production and the start of full- rate production, and plans to do so. DOD acknowledged that the MRL  Deskbook provides best practices for identifying risks, but noted that the  ACV program is not required to follow it. DOD noted that it may be  reasonable to proceed into manufacturing at lower MRLs, if steps to  mitigate identified risks are taken.  However, DOD disagreed that not  demonstrating a specified MRL for any individual risk area, in itself,  should delay the start of either production milestone. DOD expressed  concern that delaying subsequent years of production, if MRLs are not at  the levels recommended, could lead to counterproductive breaks in  production.", "We agree that adopting the MRL Deskbook is not required by DOD and  represents best practices to minimize production risk.  However, we also  believe that demonstrating the MRL levels recommended in the MRL  Deskbook for all risk areas mitigates increased risk associated with the  aggressive schedule pursued by the ACV program\u2014about which we have  previously expressed concerns. We believe our recommendation to  achieve an overall MRL-8 by the second year of low-rate production is a  reasonable goal, considering it gives the ACV program an additional year  after the point at which the MRL Deskbook recommends reaching MRL- 8\u2014the start of low-rate production. In addition, ensuring that all  manufacturing readiness risk areas are at MRL-9 for the start of full-rate  production, as recommended by best practices in the MRL Deskbook,  would help further alleviate risks associated with the program\u2019s  aggressive schedule. We appreciate the DOD concerns about delaying  subsequent years of production if MRLs have not reached those identified  in the best practices in the MRL Deskbook, but note that not doing so  increases the likelihood of production quality issues that could lead to  cost growth and schedule delays in future years. Therefore, we made no  changes to the recommendations in response to the comments.", "We are sending copies of this report to interested congressional  committees; the Secretary of Defense; the Under Secretary of Defense  for Acquisition and Sustainment; the Secretary of the Navy; and the  Commandant of the Marine Corps. This report also is available at no  charge on GAO\u2019s website at http://www.gao.gov.", "Should you or your staff have any questions on this report, please contact  me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report GAO staff who  made key contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Bruce H. Thomas (Assistant  Director), Matt Shaffer (Analyst in Charge), Pete Anderson, Alexandra  Jeszeck, Jennifer Leotta, Roxanna Sun, and Marie Ahearn made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Marine Corps is developing the Amphibious Combat Vehicle to upgrade its ability to move Marines from ship to shore under hostile conditions.", "Two contractors have produced prototypes; only one contractor will be selected to produce the vehicle.", "The program is on track to meet cost and schedule targets. However, it may start the first phase of production in 2018 before having reached a best-practices level of readiness to begin manufacturing. This could increase risk of schedule slips and cost increases.", "We recommended that the program achieve a higher level of manufacturing readiness before entering the second year of initial production."]}
{"id": "GAO-19-96", "url": "https://www.gao.gov/products/GAO-19-96", "title": "Transportation Security Acquisition Reform Act: TSA Generally Addressed Requirements, but Could Improve Reporting on Security-Related Technology", "published_date": "2019-01-17T00:00:00", "released_date": "2019-01-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Enacted in December 2014, TSARA introduced legislative reforms to promote greater transparency and accountability in TSA's SRT acquisitions.", "TSARA contains a provision that GAO submit two reports to Congress on TSA's progress in implementing TSARA. In February 2016, GAO issued the first report that found TSA had taken actions to address TSARA.", "This second report examines TSA's (1) progress in addressing TSARA requirements since 2016, (2) reporting to Congress on SRT acquisitions, and (3) internal communication of its implementation decisions. GAO examined TSARA and TSA documents and guidance; analyzed TSA contract data and reports from TSARA's enactment in December 2014 through July 2018 and September 2018, respectively; and interviewed DHS and TSA officials on actions taken to implement TSARA. GAO also conducted interviews with TSA officials on parameters for reporting on SRT acquisitions."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2016, the Transportation Security Administration (TSA) generally addressed Transportation Security Acquisition Reform Act (TSARA) requirements through its policies and procedures for acquisition justifications, baseline requirements, and management of inventory. TSA also, among other actions, submitted a technology investment plan and annual small-business contracting goals reports to Congress as required.", "Since December 2014, TSA reported limited security-related technology (SRT) acquisitions to Congress under TSARA, submitting its first report in August 2018. TSARA contains a report and certification provision pursuant to which TSA is to submit information to Congress 30 days prior to the award of a contract for an SRT acquisition exceeding $30 million. Through July 2018, TSA obligated about $1.4 billion on SRT and associated services. TSA officials explained that none of these obligations\u2014including 7 SRT orders, each in excess of $30 million\u2014invoked the report and certification provision because the obligations did not align with TSA's implementation policy, which provides that the $30 million threshold relates to the contract ceiling of the initial SRT contract and not to individual task and delivery orders. Revising TSA's policy to include contracts for services that enhance the capabilities of SRT, including any orders for SRT and associated services in excess of $30 million, would better ensure that Congress has the information it needs to effectively oversee TSA's SRT acquisitions.", "TSA has not effectively communicated internally its implementation decisions for what constitutes an SRT under TSARA. TSA officials described to GAO that SRT must be equipment that is public facing, but TSA's policy does not clearly state the parameters of what is considered an SRT. Without clear guidance, TSA staff may be unaware of these parameters and how they apply to future acquisitions under TSARA. For example, TSA acquisition program staff were initially unable to confirm for GAO whether the technologies TSA had acquired were SRTs and thus subject to TSARA. Updating TSA policy to include detailed parameters for what constitutes an SRT would better ensure consistency in applying the act."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that TSA revise its policies for the report and certification provision of TSARA to include reporting on task and delivery orders and services associated with SRT, and clarify in policy what constitutes an SRT under TSARA. DHS generally concurred with the recommendations and described steps it plans to take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Transportation Security Administration (TSA) relies on security- related screening technologies\u2013such as explosives detection systems\u2013to  deter, detect, and prevent prohibited items on board commercial aircraft.  TSA, a component of the Department of Homeland Security (DHS),  anticipates spending a significant portion of its $3.6 billion security  capability acquisition budget on these technologies by fiscal year 2020.  Such technologies are vital to TSA efforts to prevent a terrorist attack on  an aircraft using explosives or other prohibited items. In 2017, TSA was  responsible for the screening of about 2.4 million passengers, 4.4 million  carry-on bags, and 1.2 million checked bags at over 440 TSA-regulated  airports in the United States on an average day.", "In past work, we found that TSA encountered challenges in effectively  acquiring and deploying passenger and checked baggage screening  technologies and had not consistently implemented DHS policy and best  practices for procurement. Additionally, Congress has recognized that  TSA historically faced challenges in meeting key performance  requirements for several major acquisitions and procurements, resulting  in reduced security effectiveness and inefficient expenditures among  other things. Enacted in December 2014, the Transportation Security  Acquisition Reform Act (TSARA) introduced legislative reforms to  promote greater transparency and accountability with respect to TSA\u2019s  acquisitions of security-related technology (SRT).", "Under TSARA, we were directed to submit a report to Congress not later  than 1 year after enactment, and are to submit a subsequent report 3  years thereafter, evaluating TSA\u2019s progress in implementing the act. We  provided Congress with the first report in February 2016. We found that  TSA was using its existing acquisitions policies, among other actions, to  meet TSARA requirements. This second report examines (1) TSA\u2019s  progress in addressing TSARA requirements since 2016, (2) the extent to  which TSA reports to Congress on security-related technology  acquisitions under TSARA, and (3) the extent to which TSA internally  communicates its TSARA implementation decisions.", "To determine TSA\u2019s progress in addressing TSARA requirements since  2016, we reviewed any updated policy documents and interviewed  officials from DHS and TSA with responsibilities for implementing TSARA  to gain insights on the extent to which TSA\u2019s policies and procedures  have changed since our February 2016 report. In addition, to determine  the extent to which TSA addressed the requirements for the Strategic  Five-Year Technology Investment Plan (technology investment plan) and the small business contracting reports in TSARA, we reviewed TSA\u2019s  technology investment plan and TSA\u2019s fiscal years 2015 through 2017  small business contracting reports. Specifically, we (1) analyzed the  updated technology investment plan and small business reports against  TSARA\u2019s requirements and (2) interviewed agency officials to provide  insights into the procedures they used to develop the technology  investment plan and the small business report. To determine whether  TSA is able to ensure it executes its responsibilities under TSARA in a  manner consistent with and not duplicative of the Federal Acquisition  Regulation and departmental policies and directives, we reviewed TSA\u2019s  TSARA Implementation Strategy Memo and supporting documentation,  and interviewed DHS and TSA acquisition officials to verify that policies  contain such assurances. We also interviewed security industry  representatives to gain their perspective on the usefulness of TSA\u2019s  technology investment plan.", "To determine the extent that TSA reports to Congress on SRT  acquisitions under TSARA, we reviewed TSA\u2019s TSARA Implementation  Strategy Memo\u2014which recognizes awards for both indefinite-quality  contracts and blanket purchase agreements as subject to TSARA\u2014and  other supporting documentation to identify TSA\u2019s policy for reporting SRT  acquisitions under TSARA and obtained information that TSA submitted  to Congress regarding SRT acquisitions. We interviewed agency officials  to clarify information and provide insights into the rationale for TSA\u2019s  reporting policy. We also interviewed select security manufacturing  vendors for their perspective on TSARA. We reviewed congressional  committee reports to understand the legislative history behind TSARA. To  determine TSA\u2019s obligations for SRT-related acquisitions, we asked TSA  to identify its contracts used for acquisitions of SRT and services  associated with the operation of SRT. We analyzed data from Federal  Procurement Data System-Next Generation (FPDS-NG) from December  18, 2014\u2014TSARA\u2019s date of enactment\u2014through July 2018 on obligations  for SRT contracts and task and delivery orders issued under those  contracts. We obtained FPDS-NG data on obligations for the same time  period for contracts and orders that provide services associated with the  installation, operation, networking, and maintenance of SRT. Additionally,  we reviewed any of TSA\u2019s TSARA-related reporting to Congress from  December 18, 2014 through September 2018. We assessed the reliability  of the FPDS-NG data by performing electronic testing to identify missing  data or data that is out of the appropriate range and comparing it to data  from TSA\u2019s financial management and accounting system. We  determined that the FPDS-NG data are sufficiently reliable for the  purposes of this report. We interviewed TSA officials responsible for  managing TSA\u2019s security screening programs, related acquisitions, and  the implementation of TSARA to clarify information and provide insights  into the rationale for TSA\u2019s reporting policy.", "To determine the extent to which TSA internally communicates its TSARA  implementation decisions, we reviewed TSA\u2019s TSARA Implementation  Strategy Memo for consistency with the parameters TSA officials  described for what constitutes an SRT. We interviewed TSA officials to  gain insights on TSA\u2019s implementation approach\u2014including their  parameters\u2014and how TSA communicates that approach to staff and  compared the implementation approach to relevant federal internal  control standards.", "We conducted this performance audit from November 2017 to January  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."], "subsections": [{"section_title": "Background", "paragraphs": ["The Aviation and Transportation Security Act established TSA as the  federal agency with primary responsibility for securing the nation\u2019s civil  aviation system, which includes acquiring technology to screen and  secure travelers at the nation\u2019s TSA-regulated airports. TSARA defines  SRT as any technology that assists TSA in the prevention of, or defense  against, threats to United States transportation systems, including threats  to people, property, and information. As illustrated in figure 1, TSA  acquired various SRT for passenger and baggage screening, including:", "Advanced Imaging Technology (AIT)\u2014screens passengers for  metallic and nonmetallic threats;", "Explosives Trace Detection\u2014detects various types of commercial and  military explosives through chemical analysis on passengers and their  property; and", "Explosives Detection System (EDS)\u2014provides imaging, screening,  and detection capabilities to identify possible threats in checked  baggage contents."], "subsections": [{"section_title": "DHS Acquisition Process", "paragraphs": ["TSA follows DHS\u2019s policies and procedures for managing its acquisition  programs, including for acquisition management, test and evaluation, and  resource allocation of its SRT. TSA\u2019s acquisition programs and policies  are primarily set forth in DHS Acquisition Management Directive 102-01  (DHS\u2019s acquisition directive) and DHS Instruction Manual 102-01-001,  Acquisition Management Instruction/Guidebook. DHS acquisition policy  establishes that an acquisition program\u2019s decision authority should review  the program at a series of predetermined acquisition decision events to  assess whether the program is ready to proceed through the acquisition  life cycle phases. An acquisition program is established once it has  passed through the phases that establish the acquisition need and  selects an option that meets this need. Figure 2 depicts the DHS  acquisition life cycle.", "Under DHS\u2019s acquisition directive, TSA is to ensure, among other things,  that required acquisition documents are completed. Two of these key  acquisition documents are:  (1) the life cycle cost estimate, which provides an exhaustive and  structured accounting of all resources and associated cost elements  required to develop, produce, deploy, and sustain a program; and  (2) the acquisition program baseline, which establishes a program\u2019s cost,  schedule, and performance metrics.", "These documents are used throughout the process to identify instances  when an acquisition program exceeds cost, schedule, or performance  thresholds.", "TSA\u2019s acquisition policies, which supplement DHS policies, generally  designate roles and responsibilities and identify the procedures that TSA  is to use to implement the requirements in DHS policies. In December  2017, TSA reorganized its acquisition offices, which are responsible for  implementing TSARA\u2019s requirements, from two offices (Office of  Acquisition and Office of Security Capabilities) into three offices:  Requirements and Capabilities, Acquisition Program Management, and  Contracting and Procurement."], "subsections": []}, {"section_title": "TSARA Requirements", "paragraphs": ["TSARA includes a number of requirements for TSA, including developing  and submitting a biennial technology investment plan and annual small  business contracting goals reports to Congress, adhering to various  acquisition and inventory policies and procedures, and ensuring  consistency with Federal Acquisition Regulation and departmental  policies and directives. TSARA also includes requirements for justifying  acquisitions and establishing acquisition baselines, which largely codify  aspects of DHS\u2019s existing acquisition policy described in DHS\u2019s  acquisition directive. TSA fulfills these requirements through the  processes outlined in DHS\u2019s acquisition directive when establishing a new  acquisition program or modifying an existing acquisition program. See  Appendix I for the list of TSARA\u2019s requirements."], "subsections": []}]}, {"section_title": "TSA Generally Addressed TSARA Requirements", "paragraphs": ["Since 2016, TSA generally addressed TSARA requirements through its  acquisitions policies and procedures. Since our February 2016 report,  TSA has also developed and issued an updated technology investment  plan. Further, TSA has continued to submit an annual report to Congress  on TSA\u2019s performance record in meeting its published small business  contracting goals."], "subsections": [{"section_title": "TSA Policies and Procedures Continue to Address TSARA\u2019s Requirements", "paragraphs": ["TSA continues to address TSARA\u2019s requirements, including those related  to acquisition justifications, baseline requirements, managing inventory  and consistency with regulations. In addition, TSA developed an updated  technology investment plan and submitted small business contracting  goals reports to Congress in accordance with TSARA."], "subsections": [{"section_title": "Acquisition Justifications", "paragraphs": ["TSARA provides that before TSA implements any SRT acquisition, the  agency must, in accordance with DHS policies and directives, conduct an  analysis to determine whether the acquisition is justified. The analysis  must include elements such as cost effectiveness and confirmation that  there are no significant risks to human health or safety posed by the  proposed acquisition, among others. In February 2016, we reported that  DHS and TSA had policies and procedures that were in place prior to  TSARA addressed each of the elements required in the analysis. For  example, DHS\u2019s acquisition directive includes several of these elements  in its process for establishing a new acquisition program. TSARA also  includes a provision requiring TSA to submit information (i.e. report) to  Congress 30 days prior to the award of a contract for an SRT acquisition  over $30 million. TSA established procedures that address this  provision, as discussed later in this report, by developing a template for  providing justifications under this provision.", "We found that, since 2016, TSA continues to have policies in place, such  as DHS\u2019s acquisition directive, to address the analysis-related  requirements. TSA officials stated they would use these policies and  procedures to address TSARA\u2019s requirements."], "subsections": []}, {"section_title": "Baseline Requirements", "paragraphs": ["TSARA requires that before TSA implements any SRT acquisition, the  appropriate acquisition official from the department shall establish and  document a set of formal baseline requirements and subsequently review  whether acquisitions are meeting these requirements. Additionally,  TSARA provides that TSA must report a breach if results of any  assessment find that (1) actual or planned costs exceed the baseline  costs by more than 10 percent, (2) actual or planned schedule for delivery  has been delayed more than 180 days, or (3) there is a failure to meet  any performance milestone that directly impacts security effectiveness.  Pursuant to TSARA, in March 2016, TSA reported two breaches to  Congress for the Passenger Screening Program and Security Technology  Integrated Program (STIP), a data management system that connects  transportation security equipment to a single network. Further, in  February 2016, we reported that TSA had policies in place that require it  to prepare an acquisition program baseline, risk management plan, and  staffing requirements before acquiring SRT, in accordance with TSARA  requirements. We found that since our February 2016 report, TSA  continues to leverage the existing DHS acquisition directive to meet all of  TSARA\u2019s baseline requirements."], "subsections": []}, {"section_title": "Managing Inventory", "paragraphs": ["TSARA requires that TSA, among other things:  to the extent practicable, use existing units in inventory before  procuring more equipment to fulfill a mission need;  track the location, use, and quantity of security-related equipment in  inventory; and  implement internal controls to ensure accurate and up-to-date data on  SRT owned, deployed, and in use.", "In 2016, we reported that TSA\u2019s policies and procedures address TSARA  requirements for managing inventory.", "We found that since our February 2016 report, TSA continues to use  established policies and procedures to address TSARA\u2019s inventory  management requirements. For example, TSA continues to use the  Security Equipment Management Manual, which describes the policies  and procedures that require TSA to use equipment in its inventory if, for  example, an airport opens a new terminal. Additionally, TSA has  procedures to track the location, use, and quantity of security-related  equipment in inventory, regardless of whether such equipment is in use.  Specifically, TSA has procedures to track the entire life cycle of  equipment, including initial possession, any moves, and disposal. Further,  TSA continues to use standard operating procedures developed by its  Internal Control Branch, which describe TSA\u2019s system of internal controls  to conduct reviews, report, and follow-up on corrective actions."], "subsections": []}, {"section_title": "Consistency with Regulations", "paragraphs": ["TSARA provides that TSA must execute its acquisition-related  responsibilities in a manner consistent with and not duplicative of the  Federal Acquisition Regulation and DHS policies and directives. In  2016, we reported that TSA\u2019s policy documents state that TSA is required  to ensure that its policies and directives are in accordance with the  Federal Acquisition Regulation and DHS acquisition and inventory  policies and procedures. We also reported that according to TSA\u2019s  TSARA Implementation Strategy Memo (implementation strategy memo),  TSA was able to address this requirement by, among other things,  forming a working group as part of an effort to ensure that TSA  implemented TSARA in a manner consistent with the Federal Acquisition  Regulation and DHS policies and directives. We found that no changes  have been made to the implementation strategy memo since our 2016  report and TSA still has policies in place to execute the responsibilities  set forth in TSARA in a manner consistent with and not duplicative of the  Federal Acquisition Regulation and DHS policies and directives."], "subsections": []}]}, {"section_title": "TSA Developed an Updated Technology Investment Plan in Accordance with TSARA", "paragraphs": ["TSARA requires TSA to develop and submit to Congress a Strategic  Five-Year Technology Investment Plan (technology investment plan) and  update it on a biennial basis. The technology investment plan is to  include, among other things, a set of SRT acquisition needs that includes  planned technology programs and projects with defined objectives, goals,  timelines and measures, and an identification of currently deployed SRTs  that are at or near the end of their life cycles.", "In August 2015, TSA developed and submitted to Congress the first  technology investment plan and in 2016 we reported that the 2015 plan  generally addressed TSARA requirements. In December 2017, TSA  developed and submitted to Congress an updated technology investment  plan in accordance with TSARA. The updated plan details the aviation  security efforts TSA initiated, developed, or completed since the initial  plan was released. The updated plan also includes the extent to which  TSA\u2019s acquisitions were consistent with technology programs and  projects identified in the initial plan, as required by TSARA.", "TSA officials stated that a positive effect of TSARA\u2019s requirement to  develop the technology investment plan has been the establishment of  the Innovation Task Force. The task force, created in the Spring of 2016,  is tasked to identify and demonstrate emerging capabilities and facilitate  other innovative projects at select airports. TSA established the task force  based on feedback from industry representatives provided during  development of the initial plan. A TSA official who manages the task  force said that it led to efficiencies in TSA\u2019s acquisition process. The  official noted, for example, that the task force began demonstrating  Automated Screening Lanes in March 2016 and by October 2016 DHS  approved additional deployments of the technology. For a video of TSA\u2019s  Innovation Task Force demonstration of Automated Screening Lanes, see  the hyperlink in the note for figure 3."], "subsections": []}, {"section_title": "TSA Continues to Submit Required Small Business Reports to Congress", "paragraphs": ["TSARA requires TSA to submit an annual report to Congress on TSA\u2019s  performance record in meeting its published small business contracting  goals during the preceding fiscal year.", "If the preceding year\u2019s goals were not met or TSA\u2019s performance was  below the published small business contracting goals set for the  department, TSARA requires that TSA\u2019s small business report includes a  list of challenges that contributed to TSA\u2019s performance and an action  plan, with benchmarks, for addressing each of the challenges identified  that is prepared after consultation with other federal departments and  agencies. Since our last review, TSA has submitted small business  reports for fiscal years 2014 through 2017 and has reported achieving its  small business contracting goals."], "subsections": []}]}, {"section_title": "TSA\u2019s Narrow Application of TSARA Has Resulted in Limited Reporting to Congress on SRT- related Acquisitions", "paragraphs": ["Through July 2018, TSA\u2019s narrow application of TSARA\u2019s report and  certification provision resulted in no SRT acquisitions being reported to  Congress pursuant to TSARA. In August 2018, TSA provided its first  three notifications on SRT acquisitions to Congress under this provision."], "subsections": [{"section_title": "None of the Over $1 Billion TSA Obligated to Acquire SRT and Associated Services From December 18, 2014 Through July 2018 Resulted in TSA Reporting Under TSARA", "paragraphs": ["TSA did not provide any information on contract awards or task or  delivery orders for the acquisition of SRT and associated services to  Congress under TSARA\u2019s report and certification provision from  enactment through July 2018. Under the provision, TSA is to provide  Congress with a comprehensive justification and a certification that the  benefits to transportation security justify the contract cost not later than 30  days preceding the award of a contract for any SRT acquisition over $30  million.", "Our analysis of FPDS-NG data on contract obligations from December  18, 2014 through July 2018 found approximately $1.4 billion in obligations  for acquisitions of SRT and for services associated with the operation of  SRT, as shown in table 1. Specifically, TSA obligated $591 million for  SRT. For services associated with an SRT that are necessary to ensure  its continuous and effective operation, such as maintenance and  engineering support services, TSA obligated $772 million during this  timeframe."], "subsections": []}, {"section_title": "TSA\u2019s Policy for Implementing TSARA\u2019s Report and Certification Provision Reflects a Narrow Application of the Act", "paragraphs": ["TSA officials said that none of the agency\u2019s acquisition activities from  enactment through July 2018 invoked TSARA\u2019s report and certification  provision because the activities did not align with TSA\u2019s policy that  identifies SRT acquisitions subject to this provision. TSA\u2019s policy on what  constitutes an SRT and the award of a contract for an SRT acquisition  ultimately determine what acquisitions are subject to TSARA\u2019s report   and certification provision. See table 2 for TSA\u2019s policy.", "TSA\u2019s TSARA Implementation Strategy Memo states, \u201co support   and ensure Congress is receiving the necessary information  regarding critical TSA acquisitions, TSA will focus on security screening  related technologies\u201d which will ensure \u201cthe necessary actions are  implemented for those technologies the public directly interacts with (i.e.  is impacted by).\u201d According to TSA officials, security screening related  technologies, i.e. SRT, subject to TSARA must (1) be equipment or  technology and (2) interact with (or impact) the public. Specific examples  of SRT subject to TSARA, as identified by TSA officials, are the  equipment typically deployed to airports to assist in the physical  screening of passengers and their property, such as AIT, EDS, and  boarding pass scanners.", "TSA officials explained that in accordance with its policy, TSA provided its  first three notifications to Congress under TSARA\u2019s report and  certification provision in August 2018, more than 30 days prior to the  award of three new SRT contracts, each with ceiling values in excess of  $30 million."], "subsections": [{"section_title": "TSA Does Not Report SRT- Associated Services Under TSARA", "paragraphs": ["Since the enactment of TSARA through July 2018, TSA awarded multiple  indefinite-delivery/indefinite-quantity (IDIQ) contracts and entered into a  blanket purchase agreement for services associated with the operation of  SRT, each with values in excess of $30 million, and issued orders under  the contracts and agreement that exceeded $30 million. In accordance  with TSA\u2019s implementation policy, which applies to acquisitions of  physical screening equipment, TSA did not report these acquisition  actions under TSARA\u2019s report and certification provision.", "TSA officials said, consistent with its implementation policy, that services  associated with the operation of the SRT, such as engineering support,  maintenance services, and other services described in table 1, are not  SRT, as TSARA defines the term, because they are not equipment that  directly interacts with the public. Associated services, however, are  necessary to ensure the effective performance of SRT. For example,  engineering support can assist in addressing changing security needs,  such as through the development of threat detection algorithms and other  software or hardware improvements. Associated services have also been  used to extend the intended lifecycle of SRT already deployed to airport  checkpoints. TSA officials said that research and development  advancements have allowed TSA to upgrade existing equipment that had  reached the end of its initial lifecycle rather than acquire new equipment.  Further, TSA will likely need to increase spending on maintenance  services because the equipment parts may break down when used past  their intended life cycles. Consequently, through maintenance and  hardware improvements, for example, TSA has been able to offset the  need to procure new SRT by upgrading and maintaining existing SRT.", "Examples of contract actions for the associated services described in  table 1 include:", "Maintenance Services: TSA awarded three IDIQ contracts in 2015  and 2016, with ceiling values ranging from $76 million to $222 million,  and issued 10 orders under these IDIQ contracts with obligations that  each exceeded $30 million;", "System Integration: TSA awarded three IDIQ contracts in 2015, each  with a ceiling value of $450 million;", "STIP: In November 2017, TSA awarded a blanket purchase  agreement with a ceiling value of $250 million; and", "Security Technology Support Services: TSA awarded three IDIQ  contracts in 2017 with ceiling values ranging from $65 million to $169  million.", "The report of the Committee on Homeland Security of the House of  Representatives on TSARA explains that the law introduces greater  transparency and accountability for TSA spending decisions and codifies  acquisition best-practices that the committee believes will result in more  effective and efficient SRT acquisitions at TSA. As explained in the  report, TSARA is, in part, a response to historical examples where TSA  spent significant funds on SRT acquisitions that failed to meet security  performance objectives or wasted federal funds. Consistent with the  purpose of the statute expressed in the committee report, TSARA\u2019s report  and certification provision promotes greater transparency over TSA  acquisition practices.", "TSA obligates a significant amount of funds\u2014approximately $772 million  from TSARA\u2019s enactment through July 2018\u2014for services that help  ensure the effective and continuous operation of SRT. Applying TSARA\u2019s  report and certification provision to a broader range of services  associated with the operation of SRT would provide Congress with  increased transparency and improved oversight of TSA\u2019s SRT acquisition  practices."], "subsections": []}, {"section_title": "TSA Does Not Report SRT Task and Delivery Orders Under TSARA", "paragraphs": ["According to TSA\u2019s TSARA implementation policy, indefinite-quantity  contracts or blanket purchase agreements for \u201csecurity screening related  technology equipment\u201d, i.e. SRT, are subject to TSARA\u2019s report and  certification provision when the ceiling value exceeds $30 million. The  implementation policy also explains that the provision does not apply to  individual task and delivery orders placed under these contracts or  agreements. However, IDIQ contracts typically have a lengthy period of  performance\u2014for example one base year followed by four option years.  Specifically, from December 18, 2014 through July 2018, all of TSA\u2019s 14  active contracts for SRT were IDIQ contracts awarded prior to the  enactment of TSARA on December 18, 2014. Further, 8 of the 14  contracts had been in place for 5 or more years, and according to TSA  officials, the agency had extended the original period of performance for 9  of the 14 contracts. Per its implementation policy, TSA did not report to  Congress under TSARA\u2019s report and certification provision on the seven  task orders, ranging from $31 million to $70 million, to purchase and  install EDS, EDS upgrade kits, and explosives trace detection systems  issued under IDIQ contracts in place at the time of TSARA\u2019s enactment.", "See figure 4 for an example of an EDS IDIQ contract where TSA issued  orders in excess of $30 million and extended the contract\u2019s original period  of performance.", "One of TSA\u2019s most recent SRT contract awards further illustrates how  TSA\u2019s policy to only report on initial contract awards, and not orders  issued pursuant to the contract, has resulted in limited reporting under  TSARA\u2019s report and certification provision. In September 2018, TSA  awarded a new $500 million IDIQ contract for the acquisition of medium  speed explosives detection systems. TSA reported this contract award to  the requisite committees pursuant to the report and certification provision  and consistent with its implementation policy. However, under TSA\u2019s  policy, this is the only notification that Congress will receive pursuant to  TSARA over the course of the contract\u2019s period of performance. For  example, TSA also issued a $55 million order to purchase and install  medium speed EDS units under this IDIQ contract, but per its  implementation policy, TSA did not report on this order under the  provision to Congress and per its policy would not do so for any  subsequent orders during the contract\u2019s period of performance.", "TSA has developed a policy with parameters for determining which  contract actions are subject to TSARA. However, TSA\u2019s policy limits the  application of the report and certification provision only to initial contract  awards for physical security screening equipment. According to TSA  officials, TSA established this policy in order to ensure Congress is  informed as early as possible that there is potential for an award in  excess of $30 million as opposed to the point at which amounts awarded  reach $30 million. However, the implementation policy expressly excludes  orders in excess of $30 million issued under IDIQ contracts or blanket  purchase agreements for SRT.", "Due to this narrow application of TSARA to its SRT acquisitions, TSA did  not report any information to Congress pursuant to TSARA\u2019s report and  certification provision through July 2018. In addition, as currently  implemented this policy will continue to result in TSA providing Congress  with limited information in the future. As described earlier, TSARA was  enacted to introduce greater transparency and accountability for TSA  spending decisions. Because TSA\u2019s policy for the report and  certification provision excludes reporting on task and delivery orders, TSA  misses the opportunity to inform Congress of the more routine SRT  obligations that exceed TSARA\u2019s $30 million threshold. In addition,  applying TSARA\u2019s report and certification provision to services that result  in new capabilities, enhancements, or otherwise upgrade SRTs would  provide Congress with increased transparency and improved oversight of  TSA\u2019s SRT acquisition practices."], "subsections": []}]}]}, {"section_title": "TSA Has Not Effectively Communicated Internally Its TSARA Implementation Decisions", "paragraphs": ["TSA has not effectively communicated its implementation decisions  internally for what constitutes an SRT under TSARA. After the enactment  of TSARA, TSA formed a working group to evaluate the act and develop  an implementation strategy. The resulting policy is documented in TSA\u2019s  TSARA Implementation Strategy Memo, published in June 2015.  According to TSA officials, the memo is the only formal document that  describes TSA\u2019s TSARA policy. Among other things, the memo  designates roles and responsibilities for TSARA\u2019s requirements and  outlines TSA\u2019s approach to implementing each requirement.", "To explain what constitutes an SRT for the purposes of TSARA, TSA  officials described various parameters to us that guide their decision- making. However, not all of these parameters are documented in the  implementation strategy memo. Specifically, the memo states that, \u201cTo  support  and ensure Congress is receiving the necessary  information regarding critical TSA acquisitions, TSA will focus on security  screening related technologies. This ensures the necessary actions are  implemented for those technologies the public directly interacts with (i.e.  is impacted by).\u201d TSA officials clarified for us that technologies the public  does not directly interact with or that do not otherwise impact the public in  some physical manner, such as STIP and Secure Flight, are not  considered SRT and thus not subject to TSARA, but this distinction is not  clearly documented. Further, the memo does not explicitly explain which  technologies are considered SRT and which are not. For example, TSA  officials told us that SRT under TSARA excludes software such as  updates to threat detection algorithms, and other associated services  such as STIP, but this is not documented in the memo.", "TSA acquisition program staff are responsible for determining if a new  acquisition qualifies as SRT under TSARA and initiating TSA\u2019s  congressional notification process. TSA officials stated that program staff  rely upon the TSARA Implementation Strategy Memo to make these  decisions. During our review, TSA\u2019s acquisition program staff were initially  unable to confirm in all instances whether the security-related equipment  they had acquired were subject to TSARA. Over the course of our review,  TSA officials clarified the application of TSARA\u2019s SRT definition to us and  based on our inquiries, confirmed a list of existing technologies that are  considered SRT. However, this information has not been documented in  the TSARA Implementation Strategy Memo. TSA officials explained that  there was a lot of activity after TSARA was initially enacted to determine  how to comply with TSARA, but after the implementation working group  disbanded, activity subsequently faded. Consequently, the  implementation strategy memo has not been updated since its initial  distribution in June 2015. TSA officials stated that they plan to update the  implementation strategy memo by the end of calendar year 2018 to reflect  the new offices responsible for implementing TSARA\u2019s requirements due  to an internal reorganization.", "Effective information and communication are vital for an entity to achieve  its objectives. Standards for Internal Control in the Federal Government  states that management should document policies in the appropriate level  of detail and internally communicate the necessary quality information to  achieve the entity\u2019s objectives. In the absence of a policy that clearly  states what constitutes an SRT and with several large acquisitions  pending, TSA may be missing an opportunity to ensure effective and  consistent implementation of TSARA."], "subsections": []}, {"section_title": "Conclusion", "paragraphs": ["TSA spends hundreds of millions of dollars each year developing,  acquiring, deploying, and maintaining technologies in furtherance of its  mission to ensure civil aviation security. Through TSARA, Congress  sought to address challenges faced by TSA in effectively managing its  acquisitions and procurements by specifying measures for TSA to  implement that align with identified acquisition best practices and  increase the transparency and accountability of TSA\u2019s SRT acquisitions.  Overall, TSA has policies and procedures in place to accomplish many of  the reforms sought by TSARA, but more could be done to improve the  transparency of its spending on SRTs. Specifically, reporting on individual  task and delivery orders as well as associated services under TSARA\u2019s  report and certification provision would help TSA ensure that Congress  has timely information it could use to effectively oversee TSA  acquisitions. TSA took a positive step towards greater transparency on  SRT spending with its first notifications to Congress in August 2018\u2014in  accordance with its policy\u2014, but TSA\u2019s existing policy does not require  similar notification for associated services or for individual task and  delivery orders issued that exceed $30 million.", "Further, while TSA developed the TSARA Implementation Strategy  Memo, which serves as TSA\u2019s policy for implementing TSARA,  designated roles and responsibilities for TSARA\u2019s requirements, and  outlined TSA\u2019s approach to implement each requirement, TSA has not  clearly documented and internally communicated its parameters on what  constitutes an SRT under TSARA. With several large acquisitions  pending, clear guidance would better assure that staff understand how  TSARA\u2019s reporting requirements apply. In the absence of updated  internal policy to clearly communicate what is or is not an SRT, TSA will  continue to be at risk of inconsistent and incomplete implementation of  TSARA."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to TSA:  The TSA Administrator should revise TSA\u2019s policy to require that TSA  also submit information under TSARA\u2019s report and certification provision  prior to the award of contracts and blanket purchase agreements for  services associated with the operation of security-related technology,  such as maintenance and engineering services, that exceed $30 million.  (Recommendation 1)", "The TSA Administrator should revise TSA\u2019s policy to require that TSA  also submit information under TSARA\u2019s report and certification provision  prior to the issuance of individual task and delivery orders for security- related technology acquisitions that exceed $30 million.  (Recommendation 2)", "The TSA Administrator should clarify and document what constitutes an  SRT under TSARA as part of the planned update of TSA\u2019s TSARA  implementation policy. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this product to DHS for comment. In its comments,  reproduced in appendix II, DHS generally concurred with each of the  three recommendations and described steps it plans to take to implement  them. TSA also provided technical comments, which we incorporated as  appropriate.", "While DHS concurred with our recommendation to revise TSA's policy to  include reporting on contracts over $30 million for services associated  with the operation of security-related technology, in its letter, DHS stated  that not all services associated with an SRT should be subject to  TSARA's reporting requirements. Specifically, it noted that TSA will revise  policy language and instructions to ensure that the justification analysis  and certification analysis required under TSARA is submitted prior to the  award contracts and blanket purchase agreements for services that would  result in new capabilities, enhancements, or otherwise upgrade SRT. It  distinguishes these services from services that are indirectly related to the  SRT or used to keep the SRT operational, such as deployment and  system integration.", "We agree with this distinction and do not consider all of the associated  services mentioned in this report as necessary for inclusion in TSA\u2019s  revised policy. Further, we recognize that TSA, in conjunction with  feedback from Congress, is best positioned to determine the services  included in its revised policy for reporting under TSARA, consistent with  its interest in avoiding duplicative or administratively burdensome  reporting and delays in the acquisition process. We are encouraged by  DHS\u2019s plans to implement this recommendation and its recognition that  the additional information will provide Congress with increased  transparency and an opportunity for more effective oversight of TSA\u2019s  acquisitions.", "DHS also described planned actions to address our recommendation to  revise TSA\u2019s policy to include reporting on individual task and delivery  orders that exceed $30 million. DHS expects to complete the revisions by  September 30, 2019. If implemented, this action should provide Congress  with greater transparency over TSA\u2019s SRT acquisitions.", "DHS also noted that, in accordance with our recommendation to update  its implementation guidance, it plans to (1) clarify and document what  constitutes an SRT under TSARA and (2) document all offices  responsible for implementing TSARA\u2019s requirements in its TSARA  implementation strategy memo by September 30, 2019. If implemented,  guidance that is clear and documented will better assure that staff across  all DHS offices will understand how to consistently implement TSARA.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-8777 or russellw@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made significant  contributions to this report are listed in Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Transportation Security Acquisition Reform Act Requirements", "paragraphs": ["In tables three through eight, we identify the requirements of the  Transportation Security Acquisition Reform Act (TSARA), as enacted on  December 18, 2014."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Kevin Heinz (Assistant Director),  Amber Edwards (Analyst-in-Charge), Winchee Lin, Cristina Norland,  Richard Hung, Thomas Lombardi, Amanda Miller, and Richard  Cederholm made key contributions to this report."], "subsections": []}]}], "fastfact": ["Security technologies\u2014such as body scanners and explosives detection systems\u2014are a crucial and often expensive part of TSA's work.", "To help ensure that TSA's technology purchases are strategic and efficient, Congress required TSA to justify technology acquisitions costing more than $30 million at least 30 days before awarding a contract.", "This particular requirement stems from a 2014 law, but TSA did not submit its first justifications under the law until August 2018. While we found that TSA has generally been consistent with the law's requirements, we also recommended that TSA revise its policies to report more frequently under the law."]}
{"id": "GAO-18-547", "url": "https://www.gao.gov/products/GAO-18-547", "title": "Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Starting in September 2017, the first borrowers became eligible and began applying to have their loans forgiven through the PSLF program. GAO was asked to review the PSLF program.", "This report examines the (1) number of borrowers pursuing PSLF and the extent to which Education has conducted outreach to increase borrower awareness of program eligibility requirements, and (2) extent to which Education has provided key information to the PSLF servicer and borrowers. GAO analyzed data from the PSLF servicer on employment and loan certifications and loan forgiveness applications as of April 2018; reviewed Education's guidance and instructions for the PSLF servicer; assessed the information used by Education and the PSLF servicer and communicated to borrowers against federal internal control standards; and interviewed officials from Education and the four largest loan servicers, including the PSLF servicer."]}, {"section_title": "What GAO Found", "paragraphs": ["As of April 2018, over a million borrowers had taken steps to pursue Public Loan Service Forgiveness (PSLF) from the Department of Education (Education), but few borrowers have been granted loan forgiveness to date. The PSLF program, established by statute in 2007, forgives borrowers' federal student loans after they make at least 10 years of qualifying payments while working for certain public service employers and meeting other requirements. Over 890,000 borrowers have passed a first step towards potentially qualifying for PSLF by voluntarily having their employment and loans certified as eligible for PSLF as of April 2018, according to data from Education's PSLF loan servicer. While borrowers first became eligible to apply for loan forgiveness in September 2017, few applicants had met all requirements as of April 2018, with 55 borrowers having received loan forgiveness (see figure). Education has used various outreach methods to inform borrowers about PSLF, but the large number of denied borrowers suggests that many are still confused by the program requirements. A recently enacted law requires Education to conduct additional outreach to help borrowers understand how to meet program requirements.", "Education does not provide key information to the PSLF servicer and borrowers.", "Guidance and instructions: Education provides piecemeal guidance and instructions to the PSLF servicer it contracts with to process certification requests and loan forgiveness applications. This information is fragmented across the servicing contract, contract updates, and hundreds of emails. As a result, PSLF servicer officials said their staff are sometimes unaware of important policy clarifications. Education officials said they plan to create a comprehensive PSLF servicing manual but have no timeline for doing so.", "Qualifying employers: Education has not provided the PSLF servicer and borrowers with a definitive source of information for determining which employers qualify a borrower for loan forgiveness, making it difficult for the servicer to determine whether certain employers qualify and for borrowers to make informed employment decisions.", "Qualifying loan payments: Education does not ensure the PSLF servicer receives consistent information on borrowers' prior loan payments from the eight other federal loan servicers, which could increase the risk of miscounting qualifying payments. Borrowers also lack sufficiently detailed information to easily identify potential payment counting errors that could affect their eligibility for loan forgiveness.", "These weaknesses are contrary to federal internal control standards for using and communicating quality information, creating uncertainty for borrowers and raising the risk some may be improperly granted or denied loan forgiveness."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Education (1) develop a timeline for issuing a comprehensive guidance and instructions document for the PSLF servicer, (2) provide the PSLF servicer and borrowers with additional information about qualifying employers, (3) standardize payment information other loan servicers provide to the PSLF servicer, and (4) ensure borrowers receive sufficiently detailed information to help identify potential payment counting errors. Education agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Starting in September 2017, borrowers began applying to have their  federal student loans forgiven through the Public Service Loan  Forgiveness (PSLF) program. This program, established by law in 2007,  is intended to encourage individuals to enter and continue careers in  public service by forgiving borrowers\u2019 remaining federal student loan  balances after they have made at least 10 years of loan payments while  working in public service and meeting other requirements. Only loans  provided through the William D. Ford Federal Direct Loan (Direct Loan)  program qualify for forgiveness. The Department of Education  (Education) manages the PSLF program and contracts with a single loan  servicer to handle day-to-day activities associated with the program,  which include responding to borrower inquiries, making preliminary  determinations about whether borrowers\u2019 employment and loans qualify  for PSLF, and processing loan forgiveness applications.", "Although borrowers are now applying for loan forgiveness through the  program, little is known about the processes for assessing borrower  eligibility and whether these processes ensure consistent services to  borrowers and safeguard taxpayer funds. In light of these issues, you  asked us to review the PSLF program.", "This report examines (1) the number of borrowers pursuing PSLF and the  extent to which Education has conducted outreach to increase borrower  awareness of program eligibility requirements, and (2) the extent to which  Education has provided key information to the PSLF servicer and  borrowers.", "To address these questions, we conducted our review of the PSLF  program using the following approaches:", "To examine the number of borrowers pursuing PSLF, we analyzed the  most recent available data from the PSLF servicer on the volume of  borrower requests to have their employment and loans certified as  eligible and loan forgiveness applications, including approvals, going  back to when these processes were established by Education.  Specifically, we analyzed data on employment and loan certification  requests from January 2012 through April 2018, and data on loan  forgiveness applications from September 2017 through April 2018.  We also analyzed data on the reasons why borrowers were denied  certification and loan forgiveness. We assessed the reliability of these  data by reviewing data system documentation from the PSLF servicer  and interviewing knowledgeable officials, and we determined that the  data were sufficiently reliable for our reporting purposes. To assess  Education\u2019s outreach to borrowers about eligibility requirements, we  reviewed the program documents and information that Education and  the PSLF servicer provide to borrowers, and interviewed Education  officials. To identify common questions borrowers have about these  requirements, we interviewed officials from the four largest federal  student loan servicers, including officials and frontline staff from the  PSLF servicer. We examined a 2017 Consumer Financial Protection  Bureau report on borrower complaints, including those related to the  PSLF program. We assessed Education\u2019s outreach efforts against the  department\u2019s objective in its strategic plan for fiscal years 2018  through 2022 to improve the quality of service for customers across  the entire student aid life cycle.", "To examine key information Education has provided to the PSLF  servicer and borrowers, we reviewed Education\u2019s processes for  providing and sharing information and assessed them against federal  internal control standards for communicating with external parties and  using quality information. We reviewed the various methods  Education uses to provide guidance and instructions to the PSLF  servicer, including the servicing contract, contract updates, and  emails. We examined the main information sources used by the  servicer to evaluate employer eligibility and reviewed its process for  obtaining prior loan payment information from other loan servicers.  We also reviewed the information that Education and the PSLF  servicer provided to borrowers about qualifying employers and  payments. We interviewed Education officials and the PSLF loan  servicer\u2019s management and frontline staff. We reviewed Education\u2019s  monitoring reports on the PSLF servicer\u2019s operations and the PSLF  servicer\u2019s internal handbook for processing employment and loan  certifications and forgiveness applications.", "For both objectives, we also reviewed relevant federal laws and  regulations. In addition, at the time of our review, there was ongoing state  and federal litigation related to the administration of the PSLF program.  Therefore, we scoped our study to minimize overlap with issues pending  in litigation. For example, we did not assess any individual borrower  eligibility determinations or qualifying loan payment counts made by the  PSLF servicer. As a result of this approach, our findings do not draw any  conclusions about how individual borrowers or employers may have been  affected by any of the program administration issues addressed in this  report.", "We conducted this performance audit from August 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Education administers federal student aid programs, including the Direct  Loan program, through the Office of Federal Student Aid. Under the  Direct Loan program, Education issues and oversees the loans while  contractors service them. Education currently contracts with nine loan  servicers that each handle the billing and other services for a portion of  the over $1 trillion in outstanding student loans provided through the  Direct Loan program. These servicers track and manage day-to-day  servicing activities, and they report key information on the status of each  loan to Education\u2019s central student loan database. In 2011, Education  contracted with one of its existing loan servicers to become the single  servicer for borrowers pursuing PSLF. The PSLF servicer is responsible  for processing certification requests and forgiveness applications, as well  as servicing the loans of borrowers who have met basic PSLF eligibility  requirements.", "The PSLF program provides eligible borrowers with forgiveness on the  remaining balance of their Direct Loans after they have met program  requirements. To receive forgiveness for a loan, borrowers are required  to be employed by a qualifying employer when making 120 qualifying  payments, at the time they apply for forgiveness, and at the time they  receive forgiveness for their loans. Specifically, borrowers are required  to:", "Work full-time for a public service organization, such as a government organization, agency, or entity at any level (federal,  state, local, or tribal); a nonprofit, tax exempt organization (under section 501(c)(3) of  the Internal Revenue Code); or another private nonprofit organization that provides certain public  services.", "Not be in default and be repaying their loans through an income- driven repayment plan (in which borrowers\u2019 monthly payments are  based on their income and family size); the 10-year Standard  repayment plan; or another plan if the monthly payment amounts  equal or exceed the amount the borrower would have paid under the  10-year Standard repayment plan. Although the 10-year Standard  repayment plan qualifies for PSLF, borrowers in this plan will pay off  their loans before they are eligible for forgiveness unless they change  to an income-driven repayment plan that leaves them with a balance  remaining to be forgiven after 120 payments.", "Make 120 on-time monthly loan payments for the full amount due on  their bill after October 1, 2007. These monthly payments do not need  to be consecutive.", "In January 2012, Education began offering a voluntary process to certify  borrowers\u2019 public service employment and loans as eligible for PSLF.  Borrowers can request to have their employment and loans certified at  any time to make sure they are meeting basic program requirements and  are on track towards qualifying for loan forgiveness (see fig. 1). Once a  borrower submits a request, the PSLF servicer reviews the borrower\u2019s  employment and loans to determine if they qualify, and if so, counts how  many qualifying payments the borrower has made.", "In September 2017, 10 years after the PSLF program was established,  Education began accepting loan forgiveness applications from borrowers.  The application is similar to the form borrowers use to request certification  of their employment and loans for PSLF, but is intended for borrowers  that have already made 120 qualifying payments (see fig. 2). The PSLF  servicer reviews a borrower\u2019s application and incorporates information  from any previously approved certification forms to determine if the  borrower\u2019s employment and loans qualify and if they have made 120  qualifying payments. If the borrower meets all of these requirements, the  PSLF servicer forwards the application to Education for final review. If  Education determines the borrower has met all eligibility requirements, it  directs the PSLF servicer to forgive the remaining balance on the  borrower\u2019s loans."], "subsections": []}, {"section_title": "Many Borrowers Are Pursuing Public Service Loan Forgiveness, and Recent Legislation Requires Education to Conduct Additional Outreach to Borrowers", "paragraphs": [], "subsections": [{"section_title": "Over 890,000 Borrowers Took an Initial Step Towards Qualifying for PSLF by Having Their Employment and Loans Certified, and 55 Have Received Loan Forgiveness", "paragraphs": ["Over 890,000 borrowers have taken an initial step towards qualifying for  the PSLF program by voluntarily having their employment and loans  certified as eligible for PSLF, according to data from the PSLF servicer as  of April 2018. Of these, over 520,000 borrowers had recorded at least  one qualifying payment that counted towards the 120 required to be  eligible for loan forgiveness (see fig. 3). In total, almost 1.2 million  borrowers requested to have their employment and loans certified but  over 280,000 were denied, primarily due to missing information on the  form, or because they did not have qualifying federal loans or work for a  qualifying employer, according to data from the PSLF servicer.", "The number of new borrowers whose employment and loans have been  certified as eligible for PSLF has increased in each of the past 6 years,  according to PSLF servicer data (see fig. 4). Officials with the PSLF  servicer said they anticipated that the volume would continue to increase  as the program gains visibility.", "In the first 8 months that borrowers were able to apply for loan  forgiveness (September 2017 through April 2018), Education had  approved 55 borrowers and forgiven a total of almost $3.2 million in  outstanding student loan balances, an average of almost $58,000 per  borrower. The amount of loan forgiveness for individual borrowers ranged  from almost $800 to almost $290,000. Over 19,300 borrowers had  submitted loan forgiveness applications as of April 2018 (see fig. 5). Of  the almost 17,000 borrowers with applications that had been processed,  over 40 percent had qualifying loans and employment but were denied  because they had not yet made 120 qualifying payments. The other most  common reasons borrowers were denied included missing information on  the application or because the borrower did not have qualifying federal  loans. Education officials estimated that about 700 borrowers will be  approved for loan forgiveness by September 30, 2018."], "subsections": []}, {"section_title": "Borrower Confusion about PSLF Requirements Persists, and Recent Legislation Requires Education to Conduct Additional Outreach", "paragraphs": ["Although Education has conducted some outreach to communicate PSLF  program requirements to borrowers, the large number of borrowers  whose certification requests and forgiveness applications were denied  suggests that many borrowers do not understand or are not aware of  these requirements. For example, over half of borrowers that requested to  have their employment and loans certified as of April 2018 either did not  meet basic eligibility requirements or had yet to make any qualifying loan  payments. This includes over 150,000 borrowers who requested to have  their employment and loans certified despite not having qualifying federal  loans, which suggests these borrowers either did not know which types of  loans they had or which types qualified for the program. Borrowers who  had qualifying loans also may have been confused about requirements  related to making qualifying payments. Over 370,000 borrowers that had  their employment and loans certified as of April 2018 had not made any  qualifying payments at the time of certification because they were not on  qualifying repayment plans, had loans in a deferment or forbearance,  were still in the grace period before starting repayment, or had recently  consolidated their loans, among other reasons, according to PSLF  servicer data (see fig. 6). Although some of these borrowers may have  understood how prior choices they made regarding repayment of their  loans would affect their ability to make qualifying payments, other  borrowers may not have.", "Officials with the PSLF servicer said borrowers were frequently confused  by program requirements related to qualifying loans, employment,  repayment plans, and payments. For example, PSLF servicer officials  said that borrowers were sometimes unaware that they were not on a  qualifying repayment plan or that forbearance, deferment, and loan  consolidation would affect their qualifying payments. PSLF servicer  frontline customer service staff also said they frequently received calls  from borrowers who were confused about whether their loans qualified for  PSLF and other program requirements. Two other loan servicers we  spoke to identified the same general areas of confusion among borrowers  who call with questions about PSLF. In addition, borrower complaints  reported by the Consumer Financial Protection Bureau indicate confusion  with PSLF requirements related to qualifying loans and payments.", "Education uses several methods to conduct outreach to inform borrowers  about PSLF requirements, but denial data suggest and PSLF servicer  officials confirmed that borrower confusion persists. Education currently  provides information on its website about PSLF requirements and links to  an online portal where borrowers can check what types of loans they  have and identify their loan servicer. When the PSLF servicer notifies  borrowers that their certification requests or forgiveness applications were  denied, the notification letter includes information on program  requirements and explains why the borrower did not qualify for the  program. Education has also adopted other methods to raise awareness  of the program among borrowers, such as webinars and outreach to  schools, in response to a recommendation in our previous report.  Education also instructs borrowers who have additional questions about  PSLF to contact the PSLF servicer. However, officials with the PSLF  servicer said they can provide more details about the program but cannot  answer certain eligibility questions, such as whether a particular borrower  has qualifying employment or is on a qualifying repayment plan, until the  borrower submits a form to request certification. Officials with three  other loan servicers we spoke with also said it is their general policy not  to answer specific questions about an individual borrower\u2019s eligibility for  PSLF due to the complexity of program requirements, and they instead  direct the borrower to contact the PSLF servicer. Although this approach  may help avoid the risk of other servicers providing borrowers with  incorrect advice, it highlights the need for Education to provide borrowers  with clear and sufficient information about how to qualify for the program.  It is essential for borrowers to understand eligibility requirements because  the retrospective nature of the program requires borrowers to make  decisions about their loans and employment months or years before they  submit a PSLF certification request or apply for loan forgiveness. For  example, the Consumer Financial Protection Bureau reported that  borrowers have complained of spending years making payments,  believing they were making progress towards PSLF loan forgiveness, and  then learning that they were not eligible.", "Recent legislation requires Education to conduct additional outreach. The  consolidated appropriations act enacted in March 2018 appropriated $350  million to forgive the loans of borrowers who otherwise would qualify for  PSLF had they not selected a non-qualifying repayment plan. In addition  to these funds, the act directed that $2.3 million of Education\u2019s  appropriation for administering student aid be used to conduct outreach to  borrowers about PSLF, to help ensure borrowers are meeting program  requirements. The act specifically requires Education to communicate  PSLF program requirements to all Direct Loan borrowers and improve  PSLF outreach and information through calls, electronic communications,  and other methods. Once implemented, these provisions could reduce  confusion about PSLF requirements and help Education provide better  service to borrowers."], "subsections": []}]}, {"section_title": "Education Could Provide More Comprehensive Information to Improve Program Administration and Qualifying Employment and Loan Payment Determinations", "paragraphs": [], "subsections": [{"section_title": "Education\u2019s Piecemeal Guidance and Instructions to the PSLF Loan Servicer Create Challenges for Program Administration", "paragraphs": ["Education does not have a comprehensive document or manual to  provide the PSLF servicer guidance and instructions, which PSLF  servicer officials said makes it difficult to effectively administer the  program and provide consistent service to borrowers. Instead,  Education\u2019s guidance and instructions to the PSLF servicer are dispersed  in a piecemeal manner across multiple documents, including Education\u2019s  original contract with the servicer, multiple updates to the contract, and  hundreds of emails. According to PSLF servicer officials, administering  the program based on this fragmented collection of guidance and  instructions creates a risk that relevant information may be overlooked.", "Education\u2019s use of email to communicate key guidance and instructions  to the PSLF servicer is particularly problematic because this important  information is not disseminated to relevant individuals at Education and  the PSLF servicer in the same standard fashion as official changes to the  servicing contract. Various individuals at Education have sent emails with  guidance and instructions to different staff at the PSLF servicer. As a  result, all the relevant parties may not be aware of important policy  changes or clarifications provided in these emails, according to PSLF  servicer officials and Education\u2019s monitoring reports. In one instance, for  example, Education staff incorrectly identified what they thought was an  error in how the servicer was certifying borrowers that were employed  part-time because they were not aware of the most recent guidance that  other staff at Education had emailed the servicer on the topic. Similarly,  PSLF servicer officials said their staff are sometimes unaware of relevant  guidance and instructions in emails provided by Education, which creates  a risk that some policy updates will be overlooked and not consistently  implemented. Education has also used email to communicate certain  policy clarifications involving employer eligibility and payment counting  that, according to the PSLF servicer, have affected hundreds of  borrowers and set precedents for future eligibility decisions.", "Gaps in Education\u2019s guidance and instructions have also left the PSLF  servicer uncertain about how to administer key aspects of the program.  For example, PSLF servicer officials said that from 2016 to 2018 they  were awaiting additional clarifications from Education about how to  account for loan payments when borrowers pay more than the amount  due or submit a payment several weeks before the due date. How  overpayments and prepayments are accounted for can affect whether the  borrower\u2019s subsequent payments qualify for PSLF because borrowers  can only receive credit for one payment per month and only when a  payment is due. While Education provided a clarification about how to  address this issue in May 2018, current guidance from Education on other  topics is still unclear or incomplete, according to PSLF servicer officials.", "The absence of a central, authoritative source of PSLF guidance and  instructions creates a risk of differing interpretations and inconsistent  implementation. The PSLF servicer has developed its own internal  processing handbook based on Education\u2019s guidance and instructions,  which PSLF servicer officials said is useful for helping staff process  certifications and forgiveness applications. However, Education has  reviewed sections of this processing handbook and identified places  where the handbook does not accurately reflect PSLF requirements and  could result in borrowers\u2019 certification requests being improperly approved  or denied. The PSLF servicer has made updates to its processing  handbook to address certain issues that Education identified, but  Education has not conducted a comprehensive review of this handbook.  As a result, there is a risk that the PSLF servicer may still be applying  Education\u2019s guidance and instructions differently from how the agency  intended. PSLF servicer officials said it would be helpful if Education  created a centralized manual of PSLF guidance and instructions. The lack  of a central guidance document also makes it difficult to maintain program  continuity in the event of staff turnover or if Education decides to contract  with a new servicer to administer the PSLF program. Federal internal  control standards state that agencies should communicate information to  those who need it, in a form that enables them to carry out their  responsibilities. Education has recently taken some steps to provide  clearer guidance and instructions, such as holding meetings with PSLF  servicer officials every 2 weeks to discuss any administrative issues.  Education officials also told us they plan to develop a comprehensive  PSLF servicing manual, but they do not have a timeline for completing it.  They are currently drafting an initial section of the manual focusing on  payment counting. The current lack of a definitive and comprehensive  source of guidance and instructions for the PSLF servicer creates the risk  of inconsistent interpretations that could potentially result in borrowers  being improperly denied loan forgiveness since Education does not  currently review loan forgiveness applications that are denied by the  PSLF servicer."], "subsections": []}, {"section_title": "Additional Information from Education Could Improve the PSLF Servicer\u2019s and Borrowers\u2019 Ability to Determine Whether Borrowers\u2019 Employment Qualifies for Loan Forgiveness", "paragraphs": ["Education has provided the PSLF servicer and borrowers with limited  information that could help them determine which employers qualify for  PSLF, creating uncertainty for borrowers and increasing the risk that the  PSLF servicer may improperly certify or deny certification to some  borrowers. Education has not provided the PSLF servicer with a definitive  source of information for determining which employers qualify a borrower  for loan forgiveness. Instead, Education has identified some data sources  the PSLF servicer can use to determine whether borrowers are working  for qualifying employers. However, these sources are not comprehensive,  and PSLF servicer officials said they sometimes have to consult other  sources that have significant limitations. For example, Education directs  the PSLF servicer to review the Internal Revenue Service\u2019s public list of  501(c)(3) organizations to identify qualifying nonprofit employers. Since  this list does not capture all potentially qualifying nonprofits, the PSLF  servicer supplements this with other sources that have not been fully  reviewed or assessed for accuracy by Education. For example, PSLF  servicer officials told us they use an online directory of nursing home  facilities to help determine if certain nursing homes are nonprofit  employers. However, this website explicitly states that it does not  guarantee that the information it provides is accurate or current. PSLF  servicer officials also said they sometimes use state government websites  to research organizations\u2019 nonprofit status, but they only have access to  the relevant information from states that provide it for free. For assessing  government employers, Education directs the servicer to www.usa.gov,  an official federal government website that describes government  agencies and services, but this source provides limited information on  state and local government employers. In addition, PSLF servicer officials  said it is particularly difficult to assess certain types of employers, such as  quasi-governmental entities and charter schools. PSLF servicer officials  said that when they are uncertain whether an employer qualifies, they  elevate the assessment to Education, but they generally try to resolve as  many employer determinations as possible by using supplemental  sources to research employers. However, the reliability of some of these  supplemental sources is unclear.", "PSLF servicer officials said that having additional information would help  them assess employers more quickly and minimize the risk of inaccurate  decisions. One way to provide this information would be for Education to  develop an official, comprehensive list of qualifying employers, which  would help the PSLF servicer assess employers and help borrowers  determine whether they are eligible for PSLF, according to PSLF servicer  officials. Education officials said they are considering creating their own  list of qualifying employers and are investigating how to leverage  information from other federal government agencies that could be useful  for categorizing employers. In particular, Education officials said they  have reached out to the Internal Revenue Service to explore the  feasibility of obtaining relevant data on employers. Education could also  expand and improve on a database that the PSLF servicer created based  on its prior assessments of employers. Education staff that conducted a  spot check on the PSLF servicer\u2019s database expressed concerns about  using it as a sole source for assessing employers, according to an  Education monitoring report, but Education officials said it could provide a  foundation for Education to build on.", "Borrowers would also benefit from additional information about qualifying  employers, according to PSLF servicer officials. Education currently  provides borrowers with basic information on the types of employers that  qualify for PSLF, but not sufficient details to reliably determine whether  specific employers qualify. When borrowers contact their loan servicer  with questions about their employer\u2019s eligibility, officials with the PSLF  servicer and other loan servicers we spoke with said they generally do not  provide borrowers with information about whether a specific employer  qualifies, due to the complexities involved in assessing qualifying  employers. Instead, borrowers are encouraged to submit an employment  certification form once they are working for an employer in order to find  out if the employer qualifies. PSLF servicer officials said that providing  borrowers with access to additional information about qualifying  employers, such as an official list, would reduce uncertainty for borrowers  and reduce the number of borrowers who submit certification requests  and forgiveness applications despite working for non-qualifying  employers. In addition, making this information readily available to  borrowers could help them to make better informed employment  decisions rather than having to wait to submit a certification request after  they have started a job to find out if their employer qualifies.", "Federal internal control standards state that agencies should  communicate the necessary quality information to those who need it in  order to achieve the agencies\u2019 objectives. Unless Education provides  additional information to help the PSLF servicer make employer  assessments, it will remain difficult to determine whether employers  qualify for the program, raising the risk that borrowers\u2019 certification  requests will be improperly approved or denied. Moreover, without access  to sufficient information about qualifying employers, borrowers will not be  able to reliably determine whether certain employers qualify for PSLF.  This creates uncertainty for borrowers as to which jobs and careers to  pursue and leaves them to make important employment decisions without  knowing until after the fact how these decisions affect their future  eligibility for PSLF."], "subsections": []}, {"section_title": "Education Could Improve the Information Provided to the PSLF Servicer and Borrowers about Whether Borrowers\u2019 Payments Qualify for Loan Forgiveness", "paragraphs": [], "subsections": [{"section_title": "Collecting Consistent Payment Information", "paragraphs": ["Education does not ensure the PSLF servicer receives consistent  information on borrowers\u2019 prior loan payments from other loan servicers,  which could raise the risk of qualifying payments being miscounted. In  order to process certification requests and loan forgiveness applications,  the PSLF servicer has to examine the borrower\u2019s prior loan payment  information to determine which prior payments count towards the 120  needed to qualify for loan forgiveness. This is relatively easy in cases  where the PSLF servicer was servicing the borrower\u2019s loans during the  entire period he or she was pursuing PSLF because the servicer already  has the necessary information on their prior payments, according to PSLF  servicer officials. However, the PSLF servicer does not have the same  information readily available for loans that are serviced by one of  Education\u2019s eight other loan servicers. For these loans, Education  established a process for servicers to use in transferring loan and prior  payment information to the PSLF servicer. The servicers transfer most  information through standardized templates that Education developed.  However, despite the use of standardized templates, the PSLF servicer  does not receive consistent and reliable information from other servicers,  according to PSLF servicer officials. For example, PSLF servicer officials  said the lack of standard definitions and terminology among loan  servicers leads servicers to interpret some data fields differently, resulting  in inconsistencies in the data other loan servicers report to the PSLF  servicer. Comparable data and standardized terminology is particularly  important given the need for loan servicers with different systems and  practices to communicate key payment information with one another.  PSLF servicer officials said inconsistencies in the information provided by  other loan servicers make it challenging to determine whether borrowers  are on qualifying repayment plans or making qualifying payments. For  example, when a borrower has multiple loans, PSLF servicer officials said  they assess PSLF eligibility and payments separately for each individual  loan. Officials added that some servicers only report total monthly  payments for the borrower\u2019s combined loans, and not how these  payments were allocated among each loan. This makes it difficult for the  PSLF servicer to determine whether the borrower paid the full monthly  payment amount due on each loan, which it needs to know in order to  determine whether the payment qualifies for PSLF.", "Officials with Education and the PSLF servicer said that inconsistencies in  the information obtained from other loan servicers increase the risk of  miscounting qualifying payments. Education officials said they have  started to track these data consistency problems and coordinate  discussions among the PSLF servicer and the three other loan servicers  that together provide the data systems used by all nine servicers.  However, these efforts are in the early stages. Federal internal control  standards state that agencies should use quality information to achieve  their objectives. Standardizing the prior payment information transferred  among servicers could improve the PSLF servicer\u2019s ability to determine  qualifying payment counts for borrowers transferring from other servicers."], "subsections": []}, {"section_title": "Communicating Information to Borrowers", "paragraphs": ["Although Education and PSLF servicer officials acknowledge the risk of  miscounting qualifying payments, the PSLF servicer does not provide  borrowers with sufficient information to easily catch errors. In addition to  the risks caused by inconsistent prior payment information from other  loan servicers, the payment counting process is also vulnerable to errors  in instances when the PSLF servicer has to manually review payment  information from other servicers, according to PSLF servicer officials and  an Education monitoring report. Borrowers whose loans were  transferred to the PSLF servicer from other loan servicers have  complained about inaccurate qualifying payment counts, according to a  Consumer Financial Protection Bureau report. Officials with the PSLF  servicer said they rely on borrowers to catch any payment counting errors  resulting from issues with information provided by other loan servicers.  However, the PSLF servicer provides borrowers with aggregate counts of  qualifying payments, which are useful for helping borrowers track their  progress, but do not provide borrowers with enough detail to check the  servicer\u2019s counts and identify prior payments that the servicer may have  missed (see fig. 7). Borrowers have several options for disputing payment  counts or other aspects of the eligibility determination process, including  contacting the PSLF servicer or filing an official complaint with  Education\u2019s Federal Student Aid Ombudsman Group or through the  Federal Student Aid Feedback System. However, the lack of detailed  information on qualifying payment counts makes it difficult for borrowers  to determine whether the count is correct or not.", "Education officials said they have not considered requiring the PSLF  servicer to provide more detailed information to borrowers on which prior  payments were approved or denied. Officials noted that there would be a  cost associated with providing this information to borrowers, although  they have not produced a cost estimate. Also, officials said that providing  too much information may confuse borrowers, and they must consider  how to meet borrowers\u2019 need for detailed information without  overwhelming borrowers with payment counting complexities. Officials  with the PSLF servicer said providing this information to borrowers could  be helpful but would require time to confirm the information was correct  and would only be done at the direction of Education. Federal internal  control standards state that agencies should communicate necessary  quality information to external parties. While providing too much  information could prove counterproductive, borrowers could benefit from  receiving greater detail about their qualifying payments beyond the  aggregate counts of qualifying payments that they currently receive.  Without clearer and more detailed information on qualifying payments,  borrowers may not detect any errors in payment counts, which could  ultimately affect borrowers\u2019 eligibility for loan forgiveness."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Education is responsible for establishing the administrative structure  necessary to fulfill the PSLF program\u2019s goal of encouraging individuals to  enter and continue in public service employment by providing loan  forgiveness to eligible borrowers who meet program requirements.  However, Education has not provided the PSLF servicer with a  comprehensive source of guidance and instructions on how to operate  the program, raising the risk that the PSLF servicer may improperly  approve or deny borrowers\u2019 certification requests and forgiveness  applications. Education officials told us they have plans for creating a  comprehensive PSLF servicing manual, but no timeline for doing so.", "Working for a qualifying employer is one of the key requirements of the  PSLF program; however, Education has not provided the PSLF servicer  and borrowers with sufficient information for determining whether  employers qualify. This makes the PSLF servicer\u2019s employer  assessments vulnerable to inconsistencies and fosters uncertainty for  borrowers as to whether or not their employment will eventually qualify  them for loan forgiveness.", "Similarly, inconsistencies in the information used for counting borrowers\u2019  qualifying loan payments raise the risk of errors. Borrowers should be  confident that their loan payments will be accurately counted regardless  of who their servicer is. However, Education has not ensured the PSLF  servicer is receiving consistent loan payment history information from  other loan servicers, increasing the risk of inaccurate qualifying payment  counts. The chance that these and any other payment counting errors will  go undetected is compounded by the fact that Education does not require  the PSLF servicer to provide borrowers with details on which payments  qualified and which did not. This makes it difficult for borrowers to detect  erroneous counts that could ultimately affect their eligibility for loan  forgiveness. Consequently, some borrowers may be required to make  more payments than necessary before receiving loan forgiveness, while  others may be improperly approved for forgiveness."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to Education\u2019s Office  of Federal Student Aid:  The Chief Operating Officer of the Office of Federal Student Aid should  develop a timeline for issuing a comprehensive guidance and instructions  document for PSLF servicing. This could involve developing a new  servicing manual or expanding upon the PSLF servicer\u2019s existing  processing handbook. (Recommendation 1)", "The Chief Operating Officer of the Office of Federal Student Aid should  provide additional information to the PSLF servicer and borrowers to  enhance their ability to determine which employers qualify for PSLF. This  could involve Education developing an authoritative list of qualifying  employers or improving the PSLF servicer\u2019s existing database, and  making this information available to borrowers. (Recommendation 2)", "The Chief Operating Officer of the Office of Federal Student Aid should  standardize the information the PSLF servicer receives from other loan  servicers to ensure the PSLF servicer obtains more consistent and  accurate payment information for borrowers pursuing PSLF.  (Recommendation 3)", "The Chief Operating Officer of the Office of Federal Student Aid should  ensure that borrowers receive sufficiently detailed information from the  PSLF servicer to be able to identify any errors in the servicer\u2019s counts of  qualifying payments, including information on whether or not each  payment qualified toward forgiveness. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education for its review and  comment. In its comments, reproduced in appendix I, Education  concurred with each of our recommendations and identified steps it plans  to take to implement them. To improve guidance and instructions for  PSLF servicing, Education stated it is documenting PSLF requirements  and guidelines and plans to incorporate them into a comprehensive  guide. Regarding our recommendation to provide additional information  on qualifying employers to the PSLF servicer and borrowers, Education  stated that it is reviewing options for developing an online help tool that  would be expanded to incorporate qualifying employer information. To  standardize the information other loan servicers provide to the PSLF  servicer, Education stated it will continue its efforts to address data  definition issues related to the data exchanged between servicers. To  ensure borrowers receive sufficiently detailed information on counts of  qualifying payments, Education stated it will review the letters the PSLF  servicer sends to borrowers to determine how to better communicate  regarding qualifying payment counts, program requirements, and  employer eligibility. We also provided relevant report sections to the PSLF  servicer and the three other loan servicers included in our review for  technical comments. The PSLF servicer provided technical comments,  which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Education, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the U.S. Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Debra Prescott (Assistant  Director), William Colvin (Analyst-in-Charge), and Linda Collins made key  contributions to this report. Additional assistance was provided by James  Bennett, Deborah Bland, Alicia Cackley, Sarah Cornetto, Hedieh Fusfield,  Kirsten Lauber, Sheila R. McCoy, Jeffrey G. Miller, Jessica Orr, Ellen  Phelps Ranen, and Paul Wright."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-17-783T", "url": "https://www.gao.gov/products/GAO-17-783T", "title": "Federal Real Property: Status of FBI Headquarters Consolidation and Issues Related to Funding Other Future Projects", "published_date": "2017-08-02T00:00:00", "released_date": "2017-08-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GSA, which manages federal real property on behalf of other federal agencies, faces challenges in funding new construction projects due to budget constraints\u2014including obtaining upfront funding\u2014among other reasons. One type of transaction, called a swap exchange, enables GSA to apply the value of federal property to finance construction without relying on appropriated funds. Under such an exchange, GSA transfers the title of the unneeded property to a private investor after receiving the agreed upon construction services at another location. GSA proposed a swap exchange procurement for construction of a new FBI headquarters building in exchange for the Hoover Building and appropriations to compensate for the difference in value between the Hoover Building and the new building. GSA cancelled this procurement in July 2017 due to lack of funding.", "This statement addresses (1) GSA's and FBI's assessments of the Hoover Building, (2) GSA efforts to implement swap exchanges, and (3) alternative approaches to funding real property projects. It is based on GAO's body of reports on real property from 2011 to 2017, and selected updates from GSA."]}, {"section_title": "What GAO Found", "paragraphs": ["In November 2011, GAO reported that, according to General Services Administration (GSA) and Federal Bureau of Investigation (FBI) assessments, the FBI's headquarters building (Hoover Building) and its accompanying facilities in Washington, D.C., did not fully support the FBI's long-term security, space, and building condition requirements. Since GAO's report, the assessments have not materially changed, for example:", "Security: GAO's prior work noted that the dispersion of staff in annexes creates security challenges, including where some space was leased by the FBI and other space was leased by nonfederal tenants. Earlier this year, GAO reported the FBI is leasing space in D.C. from foreign owners.", "Space : In 2011, GAO reported that FBI and GSA studies showed that much of the Hoover Building is unusable. GSA noted in its fiscal year 2017 project prospectus for the FBI headquarters consolidation that the Hoover Building cannot be redeveloped to meet the FBI's current needs.", "Building Condition: In GAO's 2011 report, GAO noted that the condition of the Hoover Building was deteriorating, and GSA assessments identified significant recapitalization needs. Since GAO's report and in response to GAO's recommendation, GSA has evaluated its approach to maintaining the building and completed some repairs to ensure safety.", "GSA has limited experience in successfully completing swap exchange transactions and chose not to pursue several proposed swap exchanges, most recently the planned swap exchange for the Hoover Building. GSA has developed criteria for determining when to solicit market interest in a swap exchange, in response to recommendations in GAO's 2014 report. In addition, GSA officials told GAO that they planned to improve the swap exchange process, including the property appraisal process, outreach to stakeholders to identify potential risks associated with future projects, and to the extent possible, mitigate such risks. Nevertheless, several factors may continue to limit use of swap exchanges, including market factors, such as the availability of alternative properties and an investor's approach for valuing properties. For example, in reviewing a proposed swap exchange in Washington, D.C., GAO found in a 2016 report that the proposals from two firms valued the two federal buildings involved in the proposed swap substantially less than GSA's appraised property value.", "In a 2014 report, GAO identified a number of alternative approaches to funding real property projects. Congress has provided some agencies with specific authorities to use alternative funding mechanisms\u2014including the use of private sector funds or land swaps\u2014for the acquisition, renovation, or disposal of federal real property without full, upfront funding, though GAO has previously reported that upfront funding is the best way to ensure recognition of commitments made in budgeting decisions and maintain fiscal controls. GAO has reported that projects with alternative funding mechanisms present multiple forms of risk that are shared between the agency and any partner or stakeholder. In addition, alternative budgetary structures could be established, such as changing existing or introducing new account structures to fund real property projects."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made recommendations in the past to GSA on various real property issues, including to develop additional guidance for swap exchanges and to evaluate its approach to maintaining the Hoover Building. GSA agreed with these two recommendations and addressed them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our work on the General  Services Administration\u2019s (GSA) efforts to consolidate the Federal Bureau  of Investigation\u2019s (FBI) headquarters operations into a new location and  the broader challenges associated with funding and budgeting for  similarly large real property projects. GSA, which manages federal real  property on behalf of other federal agencies, continues to face challenges  related to funding new construction projects due to budget constraints\u2014 including obtaining upfront funding\u2014among other reasons. According to  GSA officials, funding has not kept pace with GSA\u2019s need to replace and  maintain the approximately 1,500 owned buildings under its control. Using  various available legal authorities, GSA has begun to exchange title to  some federally owned real property for other properties or construction  services.", "One type of transaction, called a \u201cswap construct\u201d exchange (or swap  exchange), enables GSA to apply the value of federal property to finance  construction needs without relying on appropriated funds. Under such an  exchange, GSA transfers the title of the unneeded property to a private  investor after receiving the agreed-upon construction services at another  location. For example, in 2012 GSA exchanged a 5-acre property in San  Antonio, Texas, for the construction of a new parking structure at a  different location. Swap exchanges can be of equal value or can include  federal appropriations to compensate for a difference in value between  the federal property and the asset or services to be received by the  federal government.", "GSA had proposed using a swap exchange for consolidation of the FBI  headquarters operations into a new location in exchange for the existing  FBI headquarters building (Hoover Building) in Washington, D.C., and its  underlying land, but cancelled that procurement in July 2017. Specifically,  GSA proposed construction of a new 2.1 million square foot consolidated  headquarters building in one of three locations\u2014Greenbelt, Maryland;  Landover, Maryland; or Springfield, Virginia. As part of a swap exchange,  the developer chosen to design and construct the new headquarters  building would, in exchange, receive the Hoover Building site and  appropriated funds to compensate for the difference in value between the  Hoover Building and the new building. However, in July 2017, GSA  cancelled the project because, according to GSA and FBI officials, they  lacked the amount of funding necessary to proceed with the  procurement.", "The cancellation of the proposed FBI swap exchange has highlighted the  continuing challenges GSA and federal agencies face for budgeting and  funding real property construction projects. My testimony will address (1)  GSA\u2019s and FBI\u2019s assessments of the status of the Hoover Building, (2)  GSA efforts to implement swap exchanges to facilitate real property  actions, and (3) alternative approaches to funding real property projects.  My testimony summarizes the results of a number of our previous reports  on real property utilization and management issued from 2011 to 2017.  Detailed information on our scope and methodologies for this work can be  found in these published products, which are cited throughout this  testimony. In addition, this testimony includes some updates based on  our follow-up with GSA on the status of our recommendations and  information posted on GSA\u2019s website on the project\u2019s status. The work on  which this statement is based was conducted in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform audits 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  provided a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": [{"section_title": "Prior GSA and FBI Assessments Showed That FBI Headquarters Facilities Did Not Fully Support the FBI\u2019s Long-Term Requirements", "paragraphs": ["In November 2011, we reported that over the previous decade, the FBI  and GSA conducted a number of studies to assess the Hoover Building  and its other headquarters facilities\u2019 strategic and mission needs.  Through these studies, they determined the condition of the FBI\u2019s current  assets and identified gaps between current and needed capabilities, as  well as studied a range of alternatives to meet the FBI\u2019s requirements.  According to these assessments, the FBI\u2019s headquarters facilities did not  fully support the FBI\u2019s long-term security, space, and building condition  requirements. Since our report, the assessment of the Hoover Building  has not materially changed. For example:", "Security: Since September 11, 2001, the FBI mission and workforce  have expanded, and the FBI has outgrown the Hoover Building. As a  result, the FBI also operates in annexes, including some located in the  National Capital Region. During our 2011 review, FBI security officials  told us that they have some security concerns\u2014to varying degrees\u2014 about the Hoover Building and some of the headquarters annexes. In  our report, we noted that the dispersion of staff in annexes created  security challenges, particularly for at least nine annexes that were  located in multitenant buildings, where some space was leased by the  FBI and other space was leased by nonfederal tenants. While this  arrangement did not automatically put FBI operations at risk, it  heightened security concerns. In addition, in January 2017, we found  that the FBI occupies space leased from foreign owners in at least six  different locations, including one in Washington, D.C. Further, federal  officials who assess foreign investments told us at that time that  leasing space in foreign-owned buildings could present security risks,  such as espionage and unauthorized cyber and physical access.", "Space: In 2011, we reported that FBI and GSA studies showed that  much of the Hoover building\u2019s approximately 2.4 million gross square  feet of space is unusable, and the remaining usable space is not  designed to meet the needs of today\u2019s FBI. Moreover, the Hoover  Building\u2019s original design is inefficient, according to GSA  assessments, making it difficult to reconfigure space to promote staff  collaboration. For example, in its fiscal year 2017 prospectus for the  proposed FBI headquarters consolidation project, GSA noted that the  Hoover Building was designed at a time when FBI operated  differently, and it cannot be redeveloped to provide the necessary  space to consolidate the FBI Headquarters components or to meet  the agency\u2019s current and projected operational requirements. As a  result, the FBI reported facing several operational and logistical  challenges. We similarly noted in our prior work in 2011 that space  constraints at the Hoover Building and the resulting dispersion of staff  sometimes prevented the FBI from physically locating certain types of  analysts and specialists together, which in turn hampered  collaboration and the performance of some classified work.", "Building condition: In our 2011 report, we noted that the condition of  the Hoover Building was deteriorating, and GSA assessments had  identified significant recapitalization needs. At that time, we found that  GSA had decided to limit investments in the Hoover Building to those  necessary to protect health and safety and keep building systems  functioning while GSA assessed the FBI\u2019s facility needs. We found  that this decision increased the potential for building system failures  and disruption to the FBI\u2019s operations. Given that the FBI would likely  remain in the building for at least several more years, we  recommended that GSA evaluate its strategy to minimize major repair  and recapitalization investments and take action to address any  facility condition issues that could put FBI operations at risk and lead  to further deterioration of the building. In 2014, in response to our  recommendation, GSA evaluated its strategy for the Hoover Building  and determined it needed to complete some repairs to ensure safety  and maintain tenancy in the building. For example, in 2014, GSA  funded contracts to waterproof portions of the building\u2019s mezzanine  level to prevent water intrusion into the building and repair the  concrete facade, small sections of which had cracked and fallen from  the building.", "In July 2017, GSA and FBI officials stated that they cancelled the  procurement for the new FBI headquarters consolidation project, noting  that the there was a lack of funding necessary to complete the  procurement. GSA added that the cancellation of the procurement did not  lessen the need for a new FBI headquarters, and that GSA and the FBI  would continue to work together to address the space requirements of the  FBI."], "subsections": []}, {"section_title": "GSA Has Limited Successes in Completing Recent Swap Exchanges, but Has Plans to Improve the Process", "paragraphs": ["In July 2014, we reported that the swap exchange approach can help  GSA address the challenges of disposing of unneeded property and  modernizing or replacing federal buildings. GSA officials told us that  swap exchanges can help GSA facilitate construction projects given a  growing need to modernize and replace federal properties, shrinking  federal budgets, and challenges obtaining funding. Specifically, GSA  officials noted that swap exchanges allow GSA to immediately apply the  value of a federal property to be used in the exchange to construction  needs, rather than attempting to obtain funds through the appropriations  process. In our 2014 report, GSA officials stated that the exchanges can  be attractive because the agency can get construction projects  accomplished without having to request full upfront funding for them from  Congress. In addition, because swap exchanges require developers or  other property recipients to complete the agreed-upon GSA construction  projects prior to the transfer of the title to the current property GSA is  exchanging, federal agencies can continue to occupy the property during  the construction process for the new project, eliminating the need for  agencies to lease or acquire other space to occupy during the  construction process.", "GSA has limited experience in successfully completing swap exchange  transactions and has cancelled several recently proposed swap  exchanges. More specifically, in 2016 we reported that GSA had only  completed transactions using the swap exchange authority for two small  (under $10-million each) swap exchanges completed in Atlanta, Georgia,  in 2001 and in San Antonio, Texas, in 2012. Furthermore, GSA has  faced a number of obstacles in its use of this authority. For example, for  our 2014 report, we reviewed five projects identified since August 2012 in  which GSA solicited market interest in exchanging almost 8-million  square feet in federal property for construction services or newly  constructed assets. However, GSA chose not to pursue swap-exchanges  in all five of these projects, including the proposed FBI headquarters consolidation project. For example, GSA officials told us that there was  little or no market interest in potential swap exchanges in Baltimore,  Maryland, and Miami, Florida, and that GSA chose to pursue different  approaches. Respondents to the solicitations for these two GSA swap  exchanges noted that GSA did not provide important details, including the  amount of investment needed in the federal properties and GSA\u2019s specific  construction needs. In addition, from 2012 to 2015, GSA pursued a larger  swap exchange potentially involving up to 5 federal properties located in  the Federal Triangle South area of Washington, D.C., to finance  construction at GSA headquarters and other federal properties. In 2013,  GSA decided to focus on exchanging two buildings, the GSA Regional  Office Building and the Cotton Annex, based on input from potential  investors. On February 18, 2016, GSA decided to end its pursuit of the  exchange, saying in a memorandum supporting this decision that private  investor valuations for the two buildings fell short of the government\u2019s  estimated values.", "After the discontinuation of the Federal Triangle swap exchange project,  we reported in 2016 that GSA officials noted they planned to improve the  swap exchange process, including the property appraisal process,  outreach to stakeholders to identify potential project risks for future  projects, and to the extent possible, mitigate such risks. However, we also  reported that several factors may continue to limit the applicability of the  agency\u2019s approach. Specifically, the viability of swap exchanges may be  affected by specific market factors, such as the availability of alternative  properties. In addition, the specific valuation approach used by appraisers  or potential investors may reduce the viability of the swap exchange. For  example, in reviewing the proposed Federal Triangle project, we found in  2016 that the proposals from two of the investment firms valued the two  federal buildings involved in the proposed swap substantially less than  GSA\u2019s appraised property value. In addition, swap exchanges can  require developers to spend large sums on GSA\u2019s construction needs  before receiving title to the federal property used in the exchanges. We  found in 2014 that GSA\u2019s solicitations have not always specified these  construction needs in sufficient detail. Consequently, developers may  be unable to provide meaningful input, and GSA could miss swap  exchange opportunities. In 2014, we recommended that GSA develop  criteria for determining when to solicit market interest in a swap  exchange. GSA agreed with the recommendation and has since updated  its guidance to include these criteria.", "In January 2017, GSA agreed to a swap exchange for the U.S.  Department of Transportation Volpe Center in Cambridge,  Massachusetts. After a competitive process, GSA selected the  Massachusetts Institute of Technology (MIT) as its exchange partner for  the existing Department of Transportation (DOT) facility. Per the  agreement, MIT will construct a new DOT facility on a portion of a 14 acre  site to which DOT has title and, in exchange, will receive title to the  remaining portion of the site that will not be used by DOT, which is  located near its main campus. GSA indicated that, once completed, the  project will provide $750 million in value to the federal government in the  form of the design and construction services and value-equalization funds  from MIT."], "subsections": []}, {"section_title": "Various Alternative Funding Mechanisms for Federal Property Exist", "paragraphs": ["Our prior work has identified a number of alternative approaches to  funding real property projects. In March 2014, we reported that upfront  funding is the best way to ensure recognition of commitments made in  budgeting decisions and to maintain fiscal controls. However, obtaining  upfront funding for large acquisitions such as the Hoover Building  replacement can be challenging. Congress has provided some agencies  with specific authorities to use alternative funding mechanisms for the  acquisition, renovation, or disposal of federal real property without full,  upfront funding. Table 1 outlines selected funding mechanisms, and  considerations for each mechanism we identified in our 2014 report.  Some of these alternative mechanisms allow selected agencies to meet  their real property needs by leveraging other authorized resources, such  as retained fees or land swaps with a private sector partner. Funding  mechanisms leverage both monetary resources, such as retained fees,  and non-monetary resources, such as property exchanged in a land swap  or space offered in an enhanced use lease. In some cases, the funding  mechanism may function as a public-private partnership intended to  further an agency\u2019s mission by working with a partner to leverage  resources. Some of these mechanisms allow the private sector to provide  the project\u2019s capital\u2014at their cost of borrowing. The U.S. federal  government\u2019s cost of borrowing is lower than the private sector\u2019s. When  the private sector provides the project capital, the federal government  later repays these higher private sector borrowing costs (e.g., in the form  of lease payments). In some cases, factors such as lower labor costs or  fewer requirements could potentially help balance the higher cost of  borrowing, making partner financing less expensive. Our 2014 report also  identifies budgetary options\u2014within the bounds of the current unified  budget\u2014to meet real property needs while helping Congress and  agencies make more prudent long-term decisions.", "In 2014, we reported that projects with alternative funding mechanisms  present multiple forms of risk that are shared between the agency and  any partner or stakeholder. Further, we noted project decisions should  reflect both the likely risk and the organization\u2019s tolerance for risk.  Incorporating risk assessment and management practices into decisions  can help organizations recognize and prepare to manage explicit risks  (e.g. financial and physical) and implicit risks (e.g. reputational). For  example, clearly defined lease terms may help agencies manage risks of  costs for unexpected building repairs. Further considerations we noted in  our 2014 report include the availability of an appropriate partner\u2014and  that partners should bring complementary resources, skills, and financial  capacities to the relationship\u2014and management of the relationship with  that partner.", "While different funding mechanisms have been used as an alternative to  obtaining upfront funding for federal real property projects, changes to the  budgetary structure itself\u2014within the bounds of the unified budget that  encompasses the full scope of federal programs and transactions\u2014may  also help agencies meet their real property needs. Such alternatives may  include changing existing or introducing new account structures to fund  real property projects. Our previous work identified options for changes  within the current discretionary budget structure and options on the  mandatory side of the budget. Alternative budgetary structures may  change budgetary incentives for agencies and therefore help Congress  and agencies make more prudent long-term fiscal decisions.", "Chairman Barrasso, Ranking Member Carper, and Members of the  Committee, this concludes my prepared statement. I am happy to answer  any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact me at (202) 512-2834 or wised@gao.gov. In  addition, contact points for our Offices of Congressional Relations and  Public Affairs may be found on the last page of this statement. Individuals  who made key contributions to this testimony are Mike Armes (Assistant  Director), Colin Ashwood, Matt Cook, Joseph Cruz, Keith Cunningham,  Alexandra Edwards, Carol Henn, Susan Irving, Hannah Laufe, Diana  Maurer, John Mortin, Monique Nasrallah, Matt Voit, Michelle Weathers,  and Elizabeth Wood.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-110", "url": "https://www.gao.gov/products/GAO-19-110", "title": "Bureau of Reclamation: Water Reuse Grant Program Supports Diverse Projects and Is Managed Consistently with Federal Regulations", "published_date": "2018-12-13T00:00:00", "released_date": "2019-01-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Population growth and drought are among the factors that have placed increasing demands on the U.S. water supply, particularly in the arid West. The reuse of wastewater can help address water management challenges by treating water that is typically unusable and then reusing it for beneficial purposes, such as irrigation, according to the Environmental Protection Agency. Reclamation's Title XVI program awards grants for the study and construction of water reuse projects in 17 western states and Hawaii. From fiscal years 1992 through 2009, Congress individually authorized some Title XVI projects. In 2016, Congress amended the Title XVI program to allow grants to be awarded to additional water reuse projects.", "GAO was asked to review the Title XVI program. This report describes, among other things, for the Title XVI program (1) grants Reclamation has awarded for projects and studies and remaining projects that are eligible for grants, (2) the types and locations of projects and studies that have received grants, and (3) Reclamation's process for selecting projects and studies and its consistency with federal grant regulations as well as how the program's evaluation criteria have changed since 2011. GAO reviewed relevant laws, regulations, and agency guidance; analyzed financial data for fiscal years 1992 through 2017; compared documents related to the project selection process against federal grant regulations; and interviewed agency officials and nonfederal project sponsors with different types of projects."]}, {"section_title": "What GAO Found", "paragraphs": ["The Bureau of Reclamation, within the Department of the Interior, awarded about $715 million in water reuse grants for 46 construction projects and 71 studies under the Title XVI Water Reclamation and Reuse Program (Title XVI) from fiscal year 1992 through fiscal year 2017, according to agency documents. Most of the Title XVI funding\u2014about $703 million\u2014has been awarded for construction projects. Some construction projects remain eligible for Title XVI grant funding. About $464 million in eligible Title XVI grant funding not yet awarded remains for projects that Congress individually authorized; for projects eligible under the 2016 amendments to the Title XVI program, about $513 million remains.", "Title XVI projects and studies cover various uses for reused water. For example, many projects GAO reviewed produce reused water for landscape and agricultural irrigation, as well as water that may later be extracted for drinking water, as shown in the figure. Title XVI projects are located in western urban and rural areas, with California accounting for 36 construction projects.", "Reclamation's process to select Title XVI projects and studies to receive grants involves announcing the funding opportunity, establishing criteria to evaluate potential projects, and reviewing applications to make award decisions, according to agency documents GAO reviewed. GAO found that Reclamation's grant award process is consistent with relevant federal regulations for awarding grants. For example, the Title XVI funding opportunity announcements GAO reviewed contained information required by the regulations, such as the criteria used to evaluate applications. In recent years, Reclamation has changed the criteria it uses to evaluate projects, eliminating or adding some criteria and changing the weighting of others. Reclamation officials said that these changes were made in part in response to statutory changes."]}], "report": [{"section_title": "Letter", "paragraphs": ["Population growth and drought are among the factors that have placed  increasing demands on our nation\u2019s water supply, particularly in the arid  West. The reuse and recycling of water helps address water management  challenges by treating wastewater or other water that is typically unusable  and then reusing it for beneficial purposes, such as irrigation, according to  the Environmental Protection Agency. The Bureau of Reclamation, within  the Department of the Interior, administers the only active federal  program focused on water reuse, reclamation, and recycling\u2014the Title  XVI Water Reclamation and Reuse Program (Title XVI). This program  helps states and communities create supplemental water supplies by  identifying opportunities for the reuse of municipal, industrial, domestic,  and agricultural wastewater and impaired ground and surface waters.", "The Title XVI program provides grants for the study and construction of  water reuse projects in the 17 western states under Reclamation\u2019s  purview and Hawaii. Reclamation is responsible for awarding and  monitoring Title XVI grants to nonfederal project sponsors, who are  involved in the planning, designing, and constructing of these projects.  Title XVI grants generally require a cost share from the project sponsor.  For example, federal funding for construction projects under the Title XVI  program is generally limited to 25 percent of total project costs\u2014up to $20  million in federal funding\u2014and requires a 75 percent nonfederal cost  share from the project sponsor. Reclamation generally awards Title XVI  grants for construction projects to project sponsors in installments over  multiple years before the federal funding maximum for each project is  reached. As a result, some projects may have remaining project costs  eligible for federal grant funding under Title XVI.", "The Title XVI program was established by the Secretary of the Interior in  response to the enactment in 1992 of the Reclamation Wastewater and  Groundwater Studies and Facilities Act, which authorized several studies  as well as the construction of 5 wastewater reuse projects\u20144 in California  and 1 in Arizona. From 1992 through 2009, Congress authorized a total  of 53 water reuse projects for construction under the Title XVI program. In  December 2016, the act was amended through Section 4009 of the Water  Infrastructure Improvements for the Nation Act (WIIN Act), which  authorized the Secretary of the Interior to provide grants for water reuse  projects with agency-approved feasibility studies. The WIIN Act  authorized Interior to award grants for projects that had not received  specific statutory authorization from Congress.", "You asked us to review the Title XVI program for water reuse construction  projects and studies. This report describes for the Title XVI program  (1) grants Reclamation has awarded for projects and studies and  remaining projects that are eligible for grants, (2) the types and locations  of projects and studies that have received grants, (3) Reclamation\u2019s  process for selecting projects and studies and its consistency with federal  grant regulations as well as how the program\u2019s evaluation criteria have  changed since 2011, and (4) Reclamation\u2019s process for monitoring grants  and its consistency with federal grant regulations.", "For the first objective, we reviewed relevant laws, budget justifications,  and financial data maintained by Reclamation from fiscal years 1992  through 2017\u2014the most recent data at the time of our review. We  selected this time period to cover funding from the inception of the  program through the most current data that were available at the time of  our review. To determine the reliability of Reclamation\u2019s financial data, we  reviewed agency documents, compared publicly available information to  Reclamation\u2019s Title XVI financial data, and interviewed agency officials.  We determined that the data were sufficiently reliable for the purpose of  our review. To determine the amount Reclamation has awarded to Title  XVI studies and projects, we analyzed the agency\u2019s financial data. To  determine remaining project costs for individually congressionally  authorized projects, we further analyzed the financial data to determine  the federal share of remaining costs. For individually authorized projects  that have not received the full federal funding share, we verified with  project sponsors the status of projects in terms of planned construction.  To determine remaining project costs for Title XVI projects eligible under  the WIIN Act, we reviewed relevant feasibility studies to calculate the  federal share of remaining costs.", "For the second objective, we reviewed documents from Reclamation and  project sponsors that describe the types of projects and studies funded  under the Title XVI program. We analyzed the information to categorize  each Title XVI project by the purpose or use of the reused water, such as  irrigation, commercial and industrial uses, and indirect-potable reuse. This  information was independently verified to confirm the categorization of  each project. To learn more about the types of Title XVI projects and  studies funded, we interviewed project sponsors from all 17 of the  individually authorized projects that Reclamation documents listed as  being ongoing at the time of our review, as well as all 3 of the WIIN Act- eligible projects that Reclamation selected for grants in fiscal year 2017.  We also interviewed a nonprobability sample (11 of 25) of project  sponsors of projects that had been completed, or had already been  awarded their full federal cost share. We selected project sponsors from  different Reclamation regions and with a variety of project sizes (i.e.  amount of water to be delivered) and types. Because this was a  nonprobability sample, the views of the sponsors we spoke with are not  representative of the views of all Title XVI project sponsors but provide  illustrative examples of the views of project sponsors for a range of Title  XVI projects. We conducted some of our interviews with project sponsors  by telephone and others in person. This included interviews conducted  during site visits to 14 Title XVI projects\u2014selected to understand different  purposes and types of projects\u2014in central and southern California in  March and April 2018. In addition to project sponsors, we also spoke with  representatives from eight nongovernmental organizations that sponsor  research, have an interest in water reuse, or represent water or  wastewater districts. We identified nongovernmental organizations to  interview through research and interviews with agency officials, project  sponsors, and other nongovernmental organizations.", "For the third objective, we reviewed relevant federal grant regulations and  agency documents related to the project selection process, including  funding opportunity announcements for fiscal years 2011 through 2018  that describe Reclamation\u2019s funding opportunities to applicants and  documentation related to Reclamation\u2019s scoring of applications and final  selections. We selected this time frame because 2011 was the year that  Reclamation introduced a competitive selection process for annual Title  XVI grants. To assess the extent to which Reclamation\u2019s process for  selecting projects is consistent with relevant federal grant regulations, we  compared the process Reclamation uses to select projects against the  Office of Management and Budget\u2019s (OMB) Uniform Administrative  Requirements, Cost Principles, and Audit Requirements for Federal  Awards (Uniform Guidance). For this comparison, we selected relevant  provisions from the Uniform Guidance that pertain to the project selection  process. To determine how evaluation criteria have changed since  2011, we analyzed the criteria listed in Reclamation\u2019s funding opportunity  announcements for fiscal years 2011 through 2018 and discussed the  reasons for changes to the criteria with Reclamation officials. To identify  project sponsors\u2019 views on the process and changes to the criteria, we  interviewed project sponsors and reviewed relevant documentation,  including letters project sponsors sent to Reclamation.", "For the fourth objective, we reviewed relevant federal grant regulations  outlined in OMB\u2019s Uniform Guidance as well as agency guidance related  to the monitoring process. To assess the extent to which the monitoring  process is consistent with relevant federal grant regulations, we  compared the process Reclamation uses to monitor grants against  relevant sections of OMB\u2019s Uniform Guidance. We analyzed financial  and performance reports related to all 56 Title XVI grants that were active  at the end of fiscal year 2017 using a standard document review tool to  determine the extent to which these reports contained information  required by the Uniform Guidance or Reclamation. For financial reports,  we determined whether project sponsors submitted required reports by  their due dates and whether they submitted these reports on the form  required by the agency. For performance reports, we determined whether  project sponsors submitted reports by their due dates and whether these  reports contained information on progress made toward constructing the  Title XVI project. We also analyzed Reclamation documentation related to  site visits conducted by agency officials and compared it against  requirements outlined in agency guidance. In our interviews with project  sponsors, we also asked for their perspectives on Reclamation\u2019s  monitoring process.", "We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Reclamation and the Title XVI Program", "paragraphs": ["As Interior\u2019s primary water management agency, Reclamation\u2019s mission  has been to manage, develop, and protect water and water-related  resources in 17 western states since 1902. Reclamation has led or  provided assistance in the construction of most of the large dams and  water diversion structures in the West for the purpose of developing water  supplies for irrigation, municipal water use, flood control, and habitat  enhancement, among others. Reclamation is organized into five  regions\u2014Great Plains, Lower Colorado, Mid-Pacific, Pacific Northwest,  and Upper Colorado\u2014and the agency\u2019s central office in Denver  provides technical and policy support. Each regional office oversees the  water projects, including Title XVI projects and studies, located within its  regional boundaries. The types of projects eligible under the Title XVI  program include, among others, construction of water treatment facilities,  pipelines to distribute reused water, and tanks and reservoirs to store  reused water.", "The Title XVI program is one of several programs under Interior\u2019s  WaterSMART (Sustain and Manage America\u2019s Resources for Tomorrow)  Program. The WaterSMART program is implemented by Reclamation and  the U.S. Geological Survey within Interior. According to an Interior  document, the WaterSMART program focuses on identifying strategies to  help ensure sufficient supplies of clean water for drinking, economic  activities, recreation, and ecosystem health. Reclamation carries out its  portion of the WaterSMART program by administering grants, including  Title XVI grants for water reuse, conducting research, and providing  technical assistance and scientific expertise. Reclamation offers three  types of grants to project sponsors under the Title XVI program:  construction projects, which are projects to plan, design, or construct  infrastructure for the treatment and distribution of reused water;  feasibility studies, which are documents that generally identify specific  water reuse opportunities, describe alternatives, and incorporate other  considerations, such as the financial capability of the project sponsor;  and  research studies, which are studies to help states, tribes, and local  communities establish or expand water reuse markets, improve  existing water reuse facilities, or streamline the implementation of new  water reuse facilities.", "Key Terms Related to Water Reuse", "Acre-foot of water: about 326,000 gallons  generally identify specific water reuse  opportunities; describe alternatives; and  incorporate other considerations, such as  the financial capability of the project  sponsor.", "Federal awards for construction projects under the Title XVI program are  generally limited to 25 percent of total project costs\u2014up to $20 million in  federal funding\u2014and require a 75 percent nonfederal cost share from the  project sponsor. Federal funding for feasibility studies under the Title XVI  program is generally limited to 50 percent of the total study costs, up to  $450,000, and federal funding for research studies is generally limited to  25 percent of the total study costs, up to $300,000. Reclamation  generally awards Title XVI grants for construction projects to project  sponsors in installments over multiple years before the federal funding  maximum for each project is reached, whereas it generally awards the full  amount for feasibility and research study grants in a single year.", "Potable: water that is suitable for drinking.", "Project sponsors: water districts,  wastewater or sanitation districts,  municipalities, tribes, and other entities  that develop projects or studies eligible for  Title XVI grants.  tribes, and local communities establish or  expand water reuse markets, improve  existing water reuse facilities, or  streamline the implementation of new  water reuse facilities.", "From fiscal year 1992, when the Title XVI program was established,  through fiscal year 2009, Congress authorized 53 Title XVI projects.  Each of these projects was subject to a cap on the federal cost share. In  fiscal years 1992 through 2010, Congress generally directed funding for  these specific authorized projects each year. Starting in fiscal year  2011, Congress began appropriating funding for the Title XVI program  without directing specific funding to individual projects. As a result,  Reclamation started using a competitive process to award Title XVI  grants to projects and studies, through which project sponsors with  authorized projects applied for Title XVI grants. Only the 53 projects  that were already authorized by Congress were eligible to apply for  grants for construction projects. Section 4009(c) of the WIIN Act,  enacted in December 2016, authorized an additional $50 million to be  appropriated for water reuse projects. To be eligible to receive Title XVI  grants under the WIIN Act, projects must submit a completed feasibility  study to Reclamation, and Reclamation must review the study to  determine whether, among other things, the project is technically and  financially feasible and provides a federal benefit in accordance with the  reclamation laws. Reclamation is then to submit a report with the results  of its review to Congress, and projects determined to be feasible are then  eligible to apply for grants under the competitive grant program  established by the WIIN Act. Each feasibility study identifies an  estimated project cost. Like most projects individually authorized prior to  the WIIN Act, the federal share of this cost is generally capped at 25  percent, up to $20 million. In addition to construction projects,  Reclamation began awarding Title XVI grants to project sponsors for  feasibility studies in fiscal year 2011 and for research studies in fiscal  year 2016. Figure 1 shows a timeline of the Title XVI program."], "subsections": []}, {"section_title": "Water Reuse", "paragraphs": ["With water reuse, water that is typically unusable, such as municipal or  industrial wastewater, undergoes additional treatment to make it suitable  for certain purposes. For example, municipal wastewater typically  undergoes primary and secondary treatment before it can be discharged  into a river, stream, or other body of water. With water reuse,  wastewater generally undergoes further (tertiary) treatment to remove  additional nutrients and suspended solids and to disinfect the water. The  treated water can then be reused for nonpotable uses, such as landscape  or agricultural irrigation or industrial uses. In some cases, wastewater  undergoes additional, advanced treatment\u2014such as microfiltration and  reverse osmosis\u2014and may then be suitable for potable uses, such as  injection into a groundwater basin or reservoir where it may later be  extracted for drinking water. Figure 2 shows some of the typical  treatment processes that may be applied to reused water, and figure 3  shows some of the typical uses of reused water.", "Several reports have shown that water reuse could offer significant  untapped water supplies, particularly in coastal areas facing water  shortages. For example, in a 2012 report on municipal wastewater reuse,  the National Research Council of the National Academies estimated that  U.S. municipalities discharged about 12 billion gallons of treated  municipal wastewater each day into coastal waters. They estimated that  reuse of these coastal discharges could directly augment available water  sources by providing the equivalent of 27 percent of the municipal supply.  Municipalities discharge another 20 billion gallons each day to inland locations. While reuse of inland discharges has the potential to affect the  water supply of downstream users by decreasing the amount of water  available to them, we previously found that at least some of this volume  could also be beneficial. Even with such potential uses, the  Environmental Protection Agency reported in 2012 that only 7 to 8  percent of municipal wastewater was being intentionally reused in the  United States."], "subsections": []}, {"section_title": "Grants Management", "paragraphs": ["In our past work, we have highlighted the importance of awarding  competitive grants in a fair and transparent way and monitoring grants.  In recent years, OMB has taken actions to help improve the effectiveness  and efficiency of grantmaking across the federal government. In  particular, in December 2014, OMB\u2019s Uniform Guidance became effective  for new grant awards after adoption by federal grantmaking agencies,  including Interior. The Uniform Guidance requires, among other things,  that federal agencies provide public notices of funding opportunities, and  these notices are to contain information, such as key dates and the merit  and other criteria that the agency will use to evaluate applications. The  Uniform Guidance also requires certain monitoring activities for federal  grants, such as generally requiring grant recipients to submit financial  reports."], "subsections": []}]}, {"section_title": "Reclamation Awarded About $715 Million for Title XVI Projects and Studies, and Some Construction Projects Remain Eligible for Title XVI Grants", "paragraphs": ["From fiscal years 1992 through 2017, Reclamation awarded about $715  million for 46 construction projects and 71 studies under the Title XVI  program, based on our review of agency documents. Most of this  funding\u2014about $703 million\u2014went toward construction projects, while  the remaining awards were for feasibility and research studies. Some  construction projects remain eligible for Title XVI grants. Specifically,  about $464 million in grant funding not yet awarded up to the federal  ceiling remains for individually congressionally authorized Title XVI  construction projects, and about $513 million remains in total estimated  projects eligible for Title XVI grants under the WIIN Act, as of August  2018."], "subsections": [{"section_title": "Most of the $715 Million Reclamation Awarded Was for Title XVI Construction Projects", "paragraphs": ["Across the three different types of grants offered under the Title XVI  program\u2014construction projects, feasibility studies, and research  studies\u2014Reclamation awarded about $715 million from fiscal years 1992  through 2017, according to agency documents. This $715 million  awarded under Title XVI leveraged more than $2.8 billion in nonfederal  cost share. Reclamation awarded most of this Title XVI funding for  construction projects, as shown in table 1.", "Overall, Reclamation awarded about $703 million under Title XVI to 46  construction projects from fiscal years 1992 through 2017. Of these 46  construction projects that received awards, 43 were individually  congressionally authorized construction projects and 3 were construction  projects that were eligible for Title XVI grants under the WIIN Act,  according to agency documents we reviewed. Additionally, Reclamation  made awards for 71 studies\u201458 feasibility study grants since fiscal year  2011 and 13 research study grants since fiscal year 2016."], "subsections": []}, {"section_title": "Some Construction Projects Remain Eligible for Title XVI Grants", "paragraphs": ["Based on our review of Reclamation financial data, some construction  projects remain eligible for Title XVI grants. Eligible project costs fell into  two categories: (1) grant funding not yet awarded up to the federal ceiling  for individually congressionally authorized Title XVI construction projects,  and (2) the federal share of estimated costs identified in feasibility studies  for projects eligible for Title XVI grants under the WIIN Act. About $464  million in not-yet-awarded funding remained for 28 individually  congressionally authorized Title XVI construction projects as of August  2018. Also, about $513 million remained in estimated project costs for the  40 construction projects that were eligible under the WIIN Act, as of  August 2018, as shown in table 2 below.", "As of August 2018, of the 53 individually congressionally authorized  construction projects, more than half\u201428 projects\u2014had remaining project  costs eligible for Title XVI grants.", "The 13 ongoing congressionally authorized projects had about $233  million in project costs that had not yet been awarded. Some project  sponsors told us that they were in the process of designing or  constructing projects. Others told us that while they were not currently  designing or constructing projects, they had plans to pursue additional  Title XVI grant awards in the future. More than one-third of the $233  million in remaining eligible project costs was for two projects\u2014 located in San Diego and San Jose, California\u2014that were two of the  projects authorized when the Title XVI program was created in 1992.", "The 15 congressionally authorized projects with no planned  construction had remaining project costs of about $231 million eligible  for Title XVI grants. Project sponsors identified several reasons why  they were not planning to apply for further grant awards. Specifically,  several project sponsors said they had faced challenges in applying  for further grants because language in the statutes authorizing the  projects limited the scope of their projects. For example, one project  sponsor told us that it was interested in expanding its water reuse  demonstration facility but that it was not eligible to apply for additional  Title XVI grants because the statute that authorized the project  specifically authorized a demonstration facility. In addition, one project  sponsor stated that its project authorization had already reached its  sunset date, which means the project can no longer apply for Title XVI  grants. Some of the project sponsors with no construction planned  said that they may consider applying for additional Title XVI grants  under their existing authorizations in the future, should they decide to  move forward with construction. However, others said that they had  decided not to move forward with authorized projects and had no  plans to apply for Title XVI grants in the future. For example, one  project sponsor said that it had determined that its project was no  longer financially feasible.", "In addition, as of August 2018, 40 projects had Reclamation-approved  feasibility studies that had been transmitted to Congress, based on our  review of agency documents, and were therefore eligible to apply for Title  XVI construction grants under the WIIN Act. A total of about $513 million  in project costs across these 40 projects remained eligible for Title XVI  grants. Of the 40 projects, 20 applied for Title XVI grants in fiscal year  2017, and Reclamation selected 3 for awards. These 20 projects had  about $269 million in project costs that remained eligible for Title XVI  grants. Twenty projects did not apply for Title XVI grants in fiscal year  2017 and had about $244 million in project costs that remained eligible for  these grants, as of August 2018."], "subsections": []}]}, {"section_title": "Title XVI Projects and Studies Vary in Their Uses of Reused Water and Include Urban and Rural Areas", "paragraphs": ["Title XVI projects and studies for fiscal years 1992 through 2017 cover  various uses for reused water and include both urban and rural areas  throughout the West, based on our review of agency data as well as  documents from and interviews with project sponsors. For example, Title  XVI construction projects produce both nonpotable and potable reused  water for a variety of purposes, such as landscape and agricultural  irrigation, habitat restoration, and extraction as drinking water. The  projects and studies funded by the Title XVI program include both urban  and rural areas throughout the West, with California accounting for 36  construction projects and about 90 percent of total Title XVI funding."], "subsections": [{"section_title": "Title XVI Projects Are Generally Large-Scale Infrastructure Projects that Produce Nonpotable and Potable Reused Water for a Variety of Purposes", "paragraphs": ["Title XVI construction projects are generally large-scale infrastructure  projects, such as water reuse treatment plants and pipelines, that  produce, store, and distribute reused water for a variety of purposes, both  nonpotable and potable. Since the inception of the Title XVI program,  Reclamation has awarded Title XVI grants to construction projects that  cumulatively provided nearly 390,000 acre-feet of reused water in 2017.  According to Reclamation data, the projects funded by Title XVI  individually delivered between 38 acre-feet of reused water and more  than 100,000 acre-feet of water in fiscal year 2017. Most of these  construction projects provided reused water for nonpotable uses across  four main categories: (1) landscape irrigation, (2) agricultural irrigation,  (3) commercial and industrial use, and (4) habitat restoration.", "Landscape irrigation. Landscape irrigation\u2014including irrigation of golf  courses, road medians, school grounds, parks, sport fields, and other  green spaces\u2014is the most common use of reused water produced by  Title XVI projects, with 29 Title XVI projects producing reused water for  this purpose, based on our analysis of documents from Reclamation and  project sponsors. The reused, nonpotable water produced by such  projects is generally distributed through purple-colored pipes, to denote  that the water is not for drinking purposes. For example, the Title XVI  program provided grants to Eastern Municipal Water District\u2014a water  district located in Southern California\u2014to help build water reuse infrastructure, including pipelines, pumping stations, and storage tanks.  With this added storage capacity, the district has the ability to store more  than 2 billion gallons of reused water, which is used to irrigate sports  fields, golf courses, parks, school grounds, and medians, according to the  project sponsor. By maximizing use of its reused water, the project  sponsor noted that the district is reducing its dependence on water piped  in from other parts of the state or region. Similarly, the Title XVI program  provided grants to help build pipelines and reservoirs to distribute and  store reused water for landscape irrigation and other purposes in other  parts of California (see fig. 4).", "Agricultural irrigation. Reused water produced by Title XVI projects is also  used to irrigate a variety of agricultural products, including fruits and  vegetables, flowers, and vineyards. For example, the North Valley  Regional Recycled Water Program is helping to provide a reliable water  source for the Del Puerto Water District, which provides water to  approximately 45,000 acres of farmland in California\u2019s San Joaquin  Valley, according to the project sponsor. The Del Puerto Water District  has encountered water shortages in recent years, which have created  economic hardships on growers in the area, according to the project  sponsor. Title XVI grants provided under WIIN Act authority helped the  district expand its reused water supply and distribution infrastructure and  ensure a reliable, drought-resistant water supply, according to the project  sponsor. In addition, reused water produced by the Watsonville Area  Water Recycling Project near Watsonville, California, is used to irrigate  strawberries and other fruits and vegetables as well as flowers. The  groundwater basin that serves the coastal region where Watsonville is  located has been overdrafted for a long time, causing groundwater  elevations to drop below sea level and leading to seawater intrusion that  makes the groundwater unusable in certain areas, according to the  project sponsor. This sponsor noted that Watsonville\u2019s Title XVI project  helps reduce demand on the overdrafted groundwater basin, which in turn  helps to protect against further seawater intrusion and also provides a  reliable, drought-tolerant water supply to help protect the region\u2019s  agricultural economy. Figure 5 shows flowers in a greenhouse that are  irrigated with reused water from Watsonville\u2019s Title XVI project.", "Commercial and industrial use. Reused water produced by Title XVI  projects is used for cooling towers at power plants and data centers, oil  production, toilet flushing in university and commercial buildings, and for  other commercial and industrial purposes, according to project sponsors.  For example, some of the reused water produced by the Southern  Nevada Title XVI project is used for power plant cooling, and reused  water from San Jose\u2019s Title XVI project is used for cooling at data centers  in California\u2019s Silicon Valley. In addition, reused water from the Long  Beach Area Reclamation Project is injected into the ground after oil is  extracted, which helps prevent the ground from sinking, according to the  project sponsor. Having access to a secure source of reused water can  attract data centers and other businesses that require large amounts of  water to areas that can guarantee access to reused water, according to a  project sponsor and representatives from a nongovernmental water reuse  organization we interviewed.", "Habitat restoration. Some Title XVI projects use reused water to restore  wetlands or supply water to recreational lakes. For example, in  California\u2019s Napa Valley, reused water from the North Bay Title XVI  project is being used to restore the Napa Sonoma Salt Marsh. Some  threatened and endangered species, such as the Chinook Salmon, have  started returning to the area since the restoration began, according to the  project sponsor. Reused water from this Title XVI project also provides  other habitat benefits. For example, wineries in the area that irrigate with  reused water do not need to divert as much water from streams, which  leaves more water for fish, according to the project sponsor. In addition,  the North Valley Regional Recycled Water Program in California\u2019s San  Joaquin Valley supplies reused water to wildlife refuges and wetlands, in  addition to agricultural lands. This area has the largest remaining  freshwater marsh in the western United States, which provides critical  habitat for migratory birds as well as other species, according to the  project sponsor (see fig. 6).", "There are also several potable projects that have been funded by Title  XVI. These projects generally fall into two categories: (1) indirect-potable  reuse and (2) desalination.", "Indirect-potable reuse. Title XVI has provided grants for indirect-potable  projects, in which wastewater undergoes advanced treatment to obtain  potable-quality water. The water is then injected into an environmental  buffer, such as a groundwater aquifer, where it is left for a certain amount  of time before it is extracted. The water is treated again before it is  distributed as drinking water. One use for highly-treated reused water is  for seawater barriers, where water is injected into the ground to prevent  the intrusion of high-salinity water into groundwater aquifers. Indirect- potable reuse has been gaining prominence, according to some project  sponsors and representatives from nongovernmental water reuse  organizations, with Title XVI grants going to several project sponsors for  both the construction of facilities as well as research into optimal  treatment methods. For example, the Groundwater Replenishment  System in Orange County, California, which was partially funded by Title  XVI, takes highly-treated wastewater that would have previously been  discharged into the Pacific Ocean and purifies it using an advanced  treatment process. The water is then injected into a groundwater aquifer  and is later extracted as drinking water that serves more than 800,000  people, according to the project sponsor. Figure 7 shows reused water at  several different points in the treatment process and reverse osmosis  treatment equipment at Orange County\u2019s Groundwater Replenishment  System.", "Desalination. Title XVI has provided grants for projects that treat brackish  groundwater\u2014water that has a salinity above freshwater but below  seawater\u2014and then feed it directly into potable water distribution systems  or into a groundwater aquifer or surface water reservoir. For example,  the Mission Basin Groundwater Purification Facility in Oceanside,  California, desalinates brackish groundwater using reverse osmosis and  other treatment methods. The reused water supplies about 15 percent of  the city\u2019s water needs, according to the project sponsor.", "In addition to Title XVI construction projects, Reclamation\u2019s feasibility and  research studies also vary in their planned uses of reused water. For  example, one feasibility study project sponsor we interviewed was  awarded a Title XVI grant to investigate the feasibility and potential  impacts of reusing produced water from oil and gas operations in  Oklahoma. The study plans to investigate possible dual benefits of  reusing produced water, including (1) providing a new source of water for  irrigation and other purposes and (2) reducing the disposal of produced  water as a possible means for addressing increased seismic activity  associated with oil and gas operations, according to the project sponsor.  Another feasibility study project sponsor we interviewed from a rural,  landlocked community in Washington State is investigating the feasibility  of creating a virtual zero discharge system that would eliminate all  wastewater disposal by reusing the wastewater. Similar to feasibility  studies, Title XVI research studies address different topics. For example,  one project sponsor we interviewed was researching how to optimize  filtration of reused water using membrane filtration, which is a critical  treatment process to reduce contaminants in water. Another project  sponsor was researching impediments and incentives to using reused  water for agricultural irrigation."], "subsections": []}, {"section_title": "Title XVI Projects and Studies Include Western Urban and Rural Areas", "paragraphs": ["Based on our review of agency documents, project sponsors in 12 of the  18 states eligible to participate in the Title XVI program were awarded at  least one type of funding under Title XVI since the inception of the  program in 1992, as shown in table 3.", "From fiscal year 1992 through fiscal year 2017, Reclamation awarded  about $640 million\u2014or about 90 percent of total awarded Title XVI  funding\u2014to projects in California, the majority of which was for  construction projects. The concentration of projects in California reflects  the early emphasis of the Title XVI program on Southern California and  reducing its reliance on water provided by the Colorado River, as well as  the high level of interest in the program in the state, according to a 2010  Congressional Research Service report. Overall, project sponsors in 9  states were awarded feasibility study grants, sponsors in 4 states were  awarded research study grants, and sponsors in 8 states were awarded  construction grants (see fig. 8).", "Title XVI projects and studies include western urban and rural areas. In  particular, many Title XVI projects are sponsored by entities in urban  areas that serve a large population base. For example, the main part of  the Los Angeles Area Water Supply Title XVI project is sponsored by the  West Basin Municipal Water District, which has a service area of nearly 1  million people in 17 cities and unincorporated areas in Los Angeles  County. This Title XVI project produces five different types of reused  water to meet the unique needs of West Basin\u2019s municipal, commercial,  and industrial reuse customers, according to the project sponsor.  Similarly, the City of San Diego, which has a population of about 1.4  million, was awarded Title XVI grants for a number of projects, including  an indirect-potable reuse project anticipated to provide one-third of San  Diego\u2019s water supply by 2035, according to the project sponsor. Other  Title XVI projects are sponsored by entities in rural areas and small cities.  For example, the Hi-Desert Water District project serves a rural and  economically disadvantaged community in the town of Yucca Valley,  California, that has a population of about 20,000. This Title XVI project  will fund facilities to collect, treat, and reuse treated wastewater, thereby  eliminating degradation of the local groundwater supply and helping  ensure a safer, reliable water supply for this community, according to the  project sponsor. Similarly, the city of Round Rock, Texas, which has a  population of about 120,000, sponsored the Williamson County Title XVI  project. This project produces reused water for landscape irrigation, most  of which is used to irrigate a 650-acre park, according to the project  sponsor.", "Some Title XVI projects are sponsored by regional partnerships  composed of different local entities. For example, in the late 1990s, 4  entities in Northern San Diego County\u2014Carlsbad Municipal Water  District, Leucadia Wastewater District, Olivenhain Municipal Water  District, and San Elijo Joint Powers Authority\u2014formed a coalition to  leverage their water reuse programs; the coalition has since grown to 10  entities. This coalition sponsored an individually congressionally  authorized Title XVI project, the North San Diego County project, and  applied for a Title XVI grant for a new project eligible under the WIIN Act  in fiscal year 2017. Similarly, in the northern part of the San Francisco  Bay Area, 10 local agencies formed a regional partnership covering 315  square miles across Sonoma, Marin, and Napa Counties to sponsor the  North Bay Water Reuse Program. According to the project sponsors  involved in this regional partnership, using a regional partnership  approach to water reuse projects provides an economy of scale;  maximizes the ability to obtain local, state, and federal funding for the  projects; and allows smaller, local entities to access funding and expertise  for projects that would be out of reach without regional collaboration. See  appendix I for more detailed information on specific Title XVI construction  projects."], "subsections": []}]}, {"section_title": "Reclamation\u2019s Project Selection Process Is Consistent with Relevant Federal Grant Regulations, and Its Evaluation Criteria Have Changed in Recent Years", "paragraphs": ["Reclamation\u2019s process for selecting projects and studies to award grants  under the Title XVI program involves announcing the funding opportunity,  establishing criteria to evaluate potential projects, and reviewing  applications to make award decisions. We found that this process is  consistent with relevant federal grant regulations outlined in OMB\u2019s  Uniform Guidance, based on our review of agency documents and federal  grant regulations. The criteria Reclamation uses to evaluate Title XVI  projects have changed in recent years, with the elimination or addition of  some criteria and changes in the weighting of others."], "subsections": [{"section_title": "Reclamation Publicly Announces Funding Opportunities and Has a Merit Review Process for Applications, which Is Consistent with Relevant Federal Grant Regulations", "paragraphs": ["To start its selection process, Reclamation announces funding  opportunities by developing annual funding opportunity announcements  (FOA), which are publicly available on its website and on  www.grants.gov. These FOAs contain information for applicants to  consider prior to applying, including the types of eligible projects and  studies, estimated funding available, information on the application review  process, the application due date, and the criteria that Reclamation will  use to score applications.", "Project sponsors submit applications for Title XVI grants to Reclamation  in response to the FOAs, according to Reclamation officials. Reclamation  officials then review the applications to ensure the projects are eligible  and that applications are complete, according to agency officials we  interviewed and documents we reviewed related to the selection process.  Next, an application review committee scores eligible applications. The  application review committee is composed of Reclamation staff  representing the five regions and other staff with technical expertise.  Committee members individually review and score each Title XVI  application based on the evaluation criteria in the FOA. After the  individual scoring, the application review committee meets collectively to  discuss the scores; this meeting is generally facilitated by Title XVI  program staff from Reclamation\u2019s central office in Denver. If there are any  outliers in the scores\u2014e.g., if a committee member scores an application  significantly higher or lower than the other members\u2014then they are to  discuss and may adjust the score to help ensure fairness and consistency  in how the applications are scored relative to the evaluation criteria,  according to agency officials. Following this discussion, Reclamation  averages the members\u2019 scores for each application and then ranks the  applications based on the average scores. Reclamation creates a list of  recommended projects and funding amounts for these projects, based on  the rankings and congressional direction on the amount of funding for the  Title XVI program in any given year.", "Reclamation\u2019s process for selecting projects and studies to fund under  the Title XVI program is consistent with relevant federal grant regulations  outlined in the Uniform Guidance. Based on our review of Title XVI FOAs  from fiscal years 2011 through 2018, all FOAs met the requirements  prescribed by the Uniform Guidance. Specifically, the Uniform Guidance  requires that grant funding opportunities be publicly announced and  contain certain information, such as the evaluation criteria, key dates, and  the process used to evaluate applications. Based on our review of  FOAs, Reclamation\u2019s FOAs were publicly announced and contained this  information.", "Many project sponsors we interviewed said that Reclamation\u2019s Title XVI  application selection process is generally clear and well-managed and  that Reclamation officials, at both the regional level and central office in  Denver, were responsive and transparent throughout the selection  process. Several project sponsors noted that Reclamation offered to  debrief with Title XVI applicants after it made its grant selections; further,  Reclamation officials provided constructive feedback to applicants to  improve their applications in future years.", "Some project sponsors raised concerns about how long it takes WIIN Act- eligible Title XVI projects to be awarded grants. In particular, the WIIN Act  provides that WIIN Act-eligible projects can only receive funding if an  enacted appropriations act designates funding by project name, after  Reclamation has recommended specific projects for funding and  transmitted its recommendations to Congress. Given the timing of  Reclamation\u2019s FOA process, WIIN Act-eligible projects selected in a given  fiscal year generally need to be included in the subsequent fiscal year\u2019s  appropriations act. For example, congressional direction in May 2017  provided that $10 million of the total Title XVI funding was to go to Title  XVI WIIN Act-eligible projects, and Reclamation sent Congress its fiscal  year 2017 selections for WIIN Act-eligible projects to fund in November  2017. However, according to Reclamation officials, Reclamation could not  begin awarding fiscal year 2017 funding to selected projects until March  2018, after enactment of the fiscal year 2018 appropriations act, which  listed the selected projects by name. One project sponsor noted that this  two-part process created challenges related to the project timeline and  budget. Reclamation officials said that project sponsors have also  expressed concerns to Reclamation about how any resulting delays may  affect the ability of projects to move forward. Reclamation officials noted  that this is a statutory requirement and that they had discussed this  process with project sponsors to make them aware of the timing for the  grants."], "subsections": []}, {"section_title": "Criteria Used to Evaluate Projects Have Changed in Recent Years", "paragraphs": ["Reclamation has changed the evaluation criteria it uses to select projects  to fund under the Title XVI program since it began using a competitive  process in fiscal year 2011. Reclamation first developed criteria for the  annual Title XVI project selection process in 2010, which it applied  starting in fiscal year 2011. Prior to that, Congress generally provided  project-specific funding direction for individually authorized Title XVI  projects. According to agency officials, Reclamation developed the initial  evaluation criteria for the annual Title XVI selection process based on  (1) the language in the Reclamation Wastewater and Groundwater  Studies and Facilities Act, as amended; (2) Reclamation goals and  priorities for the program; and (3) the criteria Reclamation used to select  projects to fund under the American Recovery and Reinvestment Act of  2009. Reclamation sought and incorporated public comments on the  criteria in 2010. After that, Reclamation\u2019s evaluation criteria for Title XVI  construction projects generally remained unchanged from fiscal years  2011 through 2016.", "In fiscal years 2017 and 2018, Reclamation eliminated some criteria in  the Title XVI FOAs for construction projects, added some new criteria,  and changed the weighting of some criteria, based on our review of FOAs  for those years. For example, in 2017, Reclamation more than doubled  the weight of the economic criterion for the fiscal year 2017 FOA for WIIN  Act-eligible projects, making it worth 35 percent of the points as  compared to the previous 13 percent. Reclamation officials told us that  these changes were made in response to the language of the WIIN Act\u2014 which listed a number of criteria for projects, including projects that  provide multiple benefits\u2014and comments they received from OMB during  the review process for the revised criteria. In March 2018, Reclamation  proposed further revisions to the evaluation criteria for the fiscal year  2018 Title XVI program and held a public comment period to solicit input  on the proposed changes. The proposed FOA contained one set of  criteria applicable to both types of eligible Title XVI construction  projects\u2014individually congressionally authorized and WIIN Act-eligible  projects. Reclamation received 21 comment letters on the criteria and,  after analyzing the comments, officials said that they made additional  changes to some of the criteria before issuing the final fiscal year 2018  FOA on May 30, 2018. For example, Reclamation added clarification to  the economic criteria. See appendix II for a more detailed description of  the final fiscal year 2018 Title XVI criteria, as well as changes to the  criteria in fiscal years 2017 and 2018.", "Several project sponsors noted that changes to the evaluation criteria  may affect which projects are more competitive in Reclamation\u2019s  application scoring and project selection process. In particular, several  project sponsors and representatives from nongovernmental  organizations we interviewed told us they believed that recent changes\u2014 particularly the increased weight on economic criteria, including cost  effectiveness\u2014may disadvantage small projects. Others said increasing  the weight on cost effectiveness may disadvantage new projects that are  just beginning construction of costly new treatment facilities versus  projects that are expanding existing facilities. Reclamation officials we  interviewed stated that the economic criteria take into account the extent  to which projects would provide multiple benefits\u2014not just cost  effectiveness. They also pointed out that they clarified in the fiscal year  2018 FOA that there are a number of ways to provide information on  project benefits in Title XVI applications, including by describing benefits  in a qualitative manner. They added that feedback from project sponsors  had been positive on the additional changes Reclamation made in  response to earlier stakeholder comments on the economic criteria for the  final fiscal year 2018 FOA. Furthermore, Reclamation\u2019s increased  emphasis on economic criteria is consistent with federal principles on  federal spending for water infrastructure projects, which states that  federal infrastructure investments are to be based on systematic analysis  of expected benefits and costs."], "subsections": []}]}, {"section_title": "Reclamation\u2019s Process for Monitoring Title XVI Grants Is Consistent with Relevant Federal Grant Regulations", "paragraphs": ["To monitor Title XVI grants, Reclamation reviews financial and  performance reports submitted by project sponsors, regularly  communicates and visits with project sponsors to obtain information on  the status of the projects, and collects information on the amount of water  Title XVI projects deliver each year, which is included in Interior\u2019s annual  performance report.", "Financial and Performance Reports. In its financial assistance  agreements for Title XVI grants, Reclamation generally requires  project sponsors to submit financial and performance reports.  Specifically, Reclamation generally requires that project sponsors  submit financial and performance reports at least once per year and  sometimes more frequently, as determined by the risk that each  project poses, according to agency officials. Based on our review of  reports, the financial reports list transactions related to Title XVI  grants, such as expenditures, and the performance reports provide  updates on the status of the Title XVI projects. Reclamation  delineates its monitoring requirements, which generally include  requirements for financial and performance reports, in the financial  assistance agreements for Title XVI grants that each project sponsor  agrees to prior to receiving funding. In our review of documents  related to Reclamation\u2019s monitoring process for Title XVI construction  grants active in fiscal year 2017, we found that project sponsors  submitted all but one financial and performance reports that  Reclamation had required, and submitted all but two by their due date  or within 2 weeks of this date. We found that Reclamation\u2019s  requirements are consistent with relevant federal grant regulations in  OMB\u2019s Uniform Guidance, which provide that federal awarding  agencies, including Reclamation, generally are to collect financial  reports from project sponsors at least annually.", "Ongoing Communication and Site Visits. To further monitor the  performance of Title XVI grants, Reclamation officials communicate  regularly with project sponsors via telephone and email and conduct  site visits to obtain information on the status of the projects, according  to Reclamation officials and project sponsors. Based on our review of  agency guidance, Reclamation generally is to conduct at least one  site visit per year for projects with significant on-the-ground activities,  such as construction projects. During the visits, agency officials  generally are to receive updates on progress made on the project and  determine if it is on schedule and meets the scope of work identified in  the financial assistance agreement. Reclamation generally requires  officials to document these visits and other monitoring activities in  project files, according to agency documents. Through the site visits  and other communication with project sponsors, agency officials may  also provide information on program requirements and respond to  project sponsors\u2019 questions about the Title XVI program. For example,  during site visits, Reclamation officials have responded to project  sponsors\u2019 questions about the status of payments and allowable  project costs and clarified requirements for financial and performance  reports, according to our review of agency documents and interviews  with project sponsors. In our review of Reclamation\u2019s Title XVI  construction grants active in fiscal year 2017, we found that  Reclamation generally conducted annual site visits for Title XVI  construction projects that year. We found that this is consistent with  federal grant regulations in OMB\u2019s Uniform Guidance, which state that  federal awarding agencies may make site visits as warranted by  program needs.", "Data Collection. Reclamation also annually collects data on the  amount of water delivered from each Title XVI construction project, as  well as projected water deliveries for the coming year. Reclamation  analyzes the water delivery data, compares projected data to actual  deliveries, and follows up with project sponsors to understand any  discrepancies, according to agency officials. For example, actual  water deliveries could be lower than projected deliveries if  communities implement water conservation measures that result in  projects having less wastewater to treat and deliver for reuse.  According to Reclamation officials, information on the amount of  reused water delivered from Title XVI projects helps them to monitor  progress on Title XVI projects and helps demonstrate the benefits and  accomplishments of the Title XVI program. These data are  consolidated and included in Interior\u2019s annual performance report to  demonstrate how the agency is meeting Interior\u2019s objective of  achieving a more sustainable and secure water supply. Collecting  data on Title XVI water deliveries is consistent with the Title XVI  program\u2019s purpose of supporting water supply sustainability by  providing financial and technical assistance to local water agencies for  the planning, design, and construction of water reuse projects."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of the Interior for  review and comment. The Department of the Interior provided technical  comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or fennella@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Information on Construction Projects Eligible under the Title XVI Water Reclamation and Reuse Program", "paragraphs": ["This appendix provides information on construction projects that are  individually congressionally authorized under the Bureau of Reclamation\u2019s  Title XVI Water Reclamation and Reuse Program (Title XVI), as well as  projects to which Reclamation awarded grants under the Water  Infrastructure Improvements for the Nation Act (WIIN Act) funding  opportunity in fiscal year 2017. Figure 9 below provides information on  the 53 construction projects that have been individually authorized by  Congress under the Title XVI program. The projects are ordered by the  total amount of Title XVI funding each was awarded from fiscal years  1992 through 2017, from highest to lowest.", "Figure 10 below provides information on the three construction projects to  which Reclamation awarded grants under the Title XVI WIIN Act funding  opportunity in fiscal year 2017. The projects are ordered by the total Title  XVI funding each was awarded in fiscal year 2017\u2014the first year that  grants were awarded under the WIIN Act\u2014from highest to lowest."], "subsections": []}, {"section_title": "Appendix II: Information on the Evaluation Criteria Used to Select Projects to Award Grants under the Title XVI Program", "paragraphs": ["This appendix provides detailed information on the evaluation criteria the  Bureau of Reclamation used to select projects to award grants under the  Title XVI Water Reclamation and Reuse Program (Title XVI). The six  evaluation criteria Reclamation used to select construction projects to  fund in fiscal year 2018 are as follows (points are out of a total of 110  points).  1.  Water Supply (35 points)  a.  Stretching Water Supplies (18 points): Points will be awarded  based on the extent to which the project is expected to secure and  stretch reliable water supplies. Consideration will be given to the  amount of water expected to be made available by the project and  the extent to which the project will reduce demands on existing  facilities and otherwise reduce water diversions.  b.  Contributions to Water Supply Reliability (17 points): Points will be  awarded for projects that contribute to a more reliable water  supply.  2.  Environment and Water Quality (12 points): Points will be awarded  based on the extent to which the project will improve surface,  groundwater, or effluent discharge quality; will restore or enhance  habitat for nonlisted species; will address problems caused by  invasive species; or will provide water or habitat for federally listed  threatened or endangered species. Indirect benefits of the project will  also be considered under this criterion.  3.  Economic Benefits (35 points)  a.  Cost Effectiveness (10 points): Points will be awarded based on  the cost per acre-foot of water expected to be delivered upon  completion of the project and how the cost of the project  compares to a nonreclaimed water alternative.  b.  Economic Analysis and Project Benefits (25 points): Points will be  awarded based on the analysis of the project\u2019s benefits relative to  the project\u2019s costs.  4.  Department of Interior Priorities (10 Points): Points will be awarded  based on the extent that the proposal demonstrates that the project  supports the Department of the Interior priorities, such as utilizing  natural resources and modernizing infrastructure.  5.  Reclamation\u2019s Obligations and Benefits to Rural or Economically  Disadvantaged Communities (8 points)  a.  Legal and Contractual Water Supply Obligations (4 Points): Points  will be awarded for projects that help to meet Reclamation\u2019s legal  and contractual obligations.  b.  Benefits to Rural or Economically Disadvantaged Communities (4  Points): Points will be awarded based on the extent to which the  project serves rural communities or economically disadvantaged  communities in rural or urban areas.  6.  Watershed Perspective (10 Points): Points will be awarded based on  the extent to which the project promotes or applies a watershed  perspective by implementing an integrated resources management  approach, implementing a regional planning effort, forming  collaborative partnerships with other entities, or conducting public  outreach.", "Reclamation changed some of its evaluation criteria in fiscal years 2017  and 2018. The fiscal year 2017 changes were made in response to  requirements in the Water Infrastructure Improvements for the Nation Act  (WIIN Act)\u2014which listed several criteria for projects, including projects  that provide multiple benefits\u2014and comments from the Office of  Management and Budget, according to Reclamation officials. The fiscal  year 2018 changes were generally made in response to comments  Reclamation received during the formal comment period it held in March  and April 2018 to solicit input on the criteria, according to Reclamation  officials. The changes to the criteria are shown in table 4."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Elizabeth Erdmann (Assistant  Director), Lesley Rinner (Analyst-in-Charge), Margaret Childs, and Sierra  Hicks made key contributions to this report. Ellen Fried, Timothy Guinane,  Thomas M. James, John Mingus, Patricia Moye, Anne Rhodes-Kline,  Sheryl Stein, and Sara Sullivan made additional contributions."], "subsections": []}]}], "fastfact": ["Population growth and drought are among the factors taxing the U.S. water supply, particularly in the West. Reuse or recycling of wastewater that is typically unusable can help boost supplies. Water can be treated and then put to work in many ways, including irrigating parks and farms, and cooling power plants.", "A Bureau of Reclamation program awards grants to water districts and other project sponsors seeking to reuse water and add to supplies. From 1992 through 2017, it awarded about $715 million for 46 construction projects and 71 studies. Nearly all of the funding\u2014about $703 million\u2014went for construction projects that recycled water."]}
{"id": "GAO-18-115", "url": "https://www.gao.gov/products/GAO-18-115", "title": "Federal Criminal Restitution: Factors to Consider for a Potential Expansion of Federal Courts' Authority to Order Restitution", "published_date": "2017-10-12T00:00:00", "released_date": "2017-10-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Victims of federal crimes may be compensated for their losses through criminal proceedings when federal courts order restitution during a defendant's sentencing. Federal law dictates the crimes for which restitution is mandatory versus discretionary and what types of losses may be compensated. Federal prosecutors and Department of Justice officials are responsible for proving and litigating issues related to victims' losses for restitution orders, enforcing orders of restitution, and collecting criminal debt, including unpaid restitution.", "The Justice for All Reauthorization Act of 2016, Pub. L. No. 114-324, contains a provision for GAO to conduct a review on the factors that should be considered when broadening restitution provisions. This report describes factors stakeholders believe should be considered for a potential expansion of federal courts' authority to award restitution.", "To gather information on factors, GAO interviewed a non-generalizable group of stakeholders knowledgeable about the restitution process, including individuals and entities representing federal judges and court officials, federal prosecutors and Department of Justice officials, victims, and defendants and their counsel. GAO also reviewed relevant federal laws, legal cases, agency documentation, summary data on orders for restitution from fiscal years 1996 through 2016, and the amount of outstanding restitution debt owed in federal cases as of the end of fiscal year 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal courts have authority to award restitution for authorized losses to eligible victims. Generally, victims are those directly and proximately harmed as a result of a defendant's offense of conviction and they may be awarded compensation for their actual or \u201cout-of-pocket\u201d losses. Provisions for the potential expansion of restitution contained in the Justice for All Reauthorization Act of 2016 that GAO reviewed could allow for courts to award restitution to additional victims and for a greater scope of losses. Stakeholders GAO interviewed identified various factors to consider related to these potential expansion provisions, for example:", "Restitution for related conduct and no proximate cause requirement . A factor stakeholders stated should be considered in potentially allowing restitution for conduct that is broader than the offense of conviction was that it could be a violation of a defendant's constitutional right to due process because restitution could be awarded for conduct for which the defendant's guilt was not established. In addition, they said it could lead to increased complexity to determine victim losses, which could create challenges for federal prosecutors and could result in less restitution being awarded. For a potential expansion of restitution to compensate harm that was not proximately caused by the defendant (i.e., harm that was not reasonably foreseeable as a result of the offense) stakeholders said factors that should be considered include that the current proximate harm requirement does not present challenges and that such an expansion could lead to additional sentencing-related hearings and litigation.", "Restitution to restore victims to their position had the offense not been committed . Stakeholders said this provision is already a goal of federal restitution, but that a potential expansion could allow judges more discretion to order restitution for victim losses not specified by statute, which could help restore the victim to his or her pre-offense condition.", "Restitution for any injury, harm, or loss, including emotional distress . A factor stakeholders identified in potentially expanding restitution to cover intangible losses, including emotional distress, included that it could increase the complexity of the restitution process because these are not easily quantified losses. Relatedly, stakeholders said that the suitability of criminal versus civil proceedings should be considered because the civil system, through which crime victims may seek compensation at their own expense, is set up to handle these issues and losses, whereas officials involved in criminal cases lack the specialized skills to determine these kinds of losses.", "Stakeholders GAO interviewed identified additional factors related to the potential broadening of courts' authority to order restitution generally; for example, they told GAO that increased restitution debt and collectability challenges should be considered. According to the Department of Justice, the amount of outstanding restitution debt owed in federal cases as of the end of fiscal year 2016 was $110.2 billion. Stakeholders stated that defendants often lack the financial resources to pay restitution and adding to the uncollected restitution debt through a potential expansion of authority could lead to further collection challenges."]}], "report": [{"section_title": "Letter", "paragraphs": ["The impact of crime on an individual victim often has significant  emotional, psychological, physical, financial, and social consequences.  The primary goal of federal criminal restitution is remedial or  compensatory and federal courts may order defendants to pay restitution  to compensate victims for their losses as authorized by statute during  sentencing. Federal law dictates the crimes for which restitution is  mandatory versus discretionary and what types of harms may be  compensated. For example, federal courts are required to order  restitution following conviction for crimes such as stalking, arson, sexual  exploitation of children, and fraud as well as all other crimes of violence  and property crimes. In addition, federal courts are permitted, but not  required, to order victim restitution related to other offenses in Title 18 of  the U.S. Code\u2014for example, conspiracies to commit tax evasion and  violate civil rights\u2014and various controlled substance offenses under Title  21, among others. Further, federal courts may also order restitution to  the extent agreed to by the parties in a plea agreement, including to  persons other than the victim. If no statutory authority for ordering  restitution is applicable to a specific offense, the court may nevertheless  order restitution to the victim, solely as a condition of probation or  supervised release. The types of compensable expenses specified in  statute include, for example, the costs of medical and other services  related to physical, psychiatric, and psychological care, and  reimbursement for lost income as a result of the offense, among other  enumerated losses.", "The Justice for All Reauthorization Act of 2016 contains a provision for us  to conduct a review and, within 180 days, report on the factors that should  be considered when broadening restitution provisions, including four  areas. The four expansion areas are as follows: (1) to apply to victims  who have suffered harm, injury, or loss that would not have occurred but  for the defendant\u2019s related conduct; (2) in the case of an offense resulting  in the victim\u2019s death, to allow the court to use its discretion to award the  income lost by the victim\u2019s surviving family members or estate as a result  of the victim\u2019s death; (3) to require that the defendant pay to the victim an  amount determined by the court to restore the victim to the position he or  she would have been in had the defendant not committed the offense;  and (4) to require the defendant compensate the victim for any injury,  harm, or loss, including emotional distress, that occurred as a result of the  offense. See appendix I for additional information on these four  expansion areas to broaden courts\u2019 authority to order restitution. To meet  the 180 day reporting requirement, we provided a briefing to your staff in  June 2017. This report transmits the final results of our review.  Specifically, this report describes the factors reported by stakeholders we  interviewed that should be considered for a potential expansion of federal  courts\u2019 authority to award restitution in these four specific areas.", "To gather information on factors related to expanding federal courts\u2019  authority to order restitution, we reviewed the process of ordering  restitution to victims in federal criminal proceedings, and identified four  key groups: federal judges and court officials (including clerks and  probation officers), prosecutors and Department of Justice (DOJ) officials,  victims, and defendants and their counsel. In order to obtain the  perspectives of representatives from each of these key groups, we  interviewed stakeholders, including officials from the federal judiciary and  DOJ, representatives from associations, and four individuals  knowledgeable about the federal restitution process referred to us by  other officials. Stakeholders we interviewed included at least two  individuals or entities representing federal judges and court officials,  prosecutors and DOJ officials, victims, and defendants and their counsel.  We provided stakeholders with a summary of their opinions in order to  ensure we correctly captured their views. Table 1 lists those that we  interviewed and their affiliation with the federal restitution process. While  the information gathered from our interviews is not generalizable to all  stakeholders in the federal restitution process, it does provide insights  into factors associated with expanding the authority of the federal courts  to order restitution from key stakeholder groups in the restitution  process.", "We also reviewed relevant federal laws and legislative history, legal  cases, agency documentation, our past work on restitution,  Congressional Research Service reports, and secondary legal sources on  restitution, including law review articles and publications. In addition, we  reviewed summary data on orders for restitution from the U.S. Sentencing  Commission (USSC) from fiscal years 1996 through 2016, a time period  starting after enactment of the Mandatory Victims Restitution Act of 1996  (MVRA) through the most recent fiscal year for which complete data  were available. We also reviewed summary data from DOJ on the total  amount of outstanding restitution debt owed in federal cases reported for  fiscal year 2016, the most recent fiscal year for which complete data are  available. To assess the reliability of the data, we reviewed agency  documents and interviewed responsible officials to understand their  methods for collecting, reporting, and validating the data. We found the  data to be sufficiently reliable for the purposes of our report.", "We conducted this performance audit from January 2017 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings based  on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Involved in the Federal Restitution Process", "paragraphs": ["Victims of federal crimes may be compensated for their losses through  criminal proceedings when a federal court orders restitution pursuant to  statute. Restitution is part of the sentencing process for federal offenders  and there are four key groups of stakeholders involved:", "Judges and court officials. The federal judiciary consists of a  system of courts that has the critical responsibility of ensuring the fair  and swift administration of justice in the United States and handles all  federal civil, criminal, and bankruptcy cases and reviews of federal  administrative agency cases throughout the country. The federal  courts have various responsibilities in the restitution process. Federal  judges are responsible for ordering the proper amount and type of  restitution, including payment schedules and modifications. Federal  probation officers are responsible for the presentence report, which  must include information for the court to use in fashioning a restitution  order, including, among other things, a complete accounting of the  losses to each victim and information about the economic  circumstances of each defendant. Following a defendant\u2019s  sentencing and the imposition of restitution, probation officers  supervise offenders to ensure compliance with orders for restitution,  including conducting ongoing financial investigations, supporting U.S.  Attorneys\u2019 Offices in the collection and enforcement of restitution  orders, notifying the federal court of an offender\u2019s failure to pay  outstanding restitution, and making recommendations to amend  orders based on changes in an offender\u2019s ability to pay. Clerks of  federal courts are responsible for receipting and disbursing restitution  payments and notifying DOJ of such. In addition, the Director of the  Administrative Office of the U.S. Courts has statutory responsibilities  related to the restitution process, including establishing procedures  and mechanisms within the judicial branch for processing fines,  restitution, forfeitures of bail bonds or collateral, and assessments.  The Judicial Conference of the United States, a body of 27 judges  over which the Chief Justice of the United States presides, is the  judiciary\u2019s principal policymaking body and operates through a  network of committees created to address and advise on a wide  variety of subjects such as budget, criminal law, and court  administration. Given the role of the judiciary in the restitution  process, the Judicial Conference has taken policy positions on various  restitution-related issues and has supported various legislative  proposals to improve the process.", "Prosecutors and DOJ officials. DOJ officials are responsible for  prosecuting federal offenses, identifying victims of crime and  informing them of restitution to which they may be entitled, identifying  victim losses and harms that are subject to restitution after consulting  with victims and providing that information to probation officers,  demonstrating the amount of loss sustained by the victim, enforcing  orders of restitution, and collecting criminal debt, including unpaid  restitution. Various entities and officials within DOJ are responsible  for these activities, including federal prosecutors in the Criminal  Division and the U.S. Attorneys\u2019 Offices, and their respective Financial  Litigation Units.", "Victims. A federal crime victim is a person directly and proximately  harmed as the result of a federal offense. Federal crime victims are  entitled to full and timely restitution as provided in law. Victims may  provide information to prosecutors, probation officers, and to the court  about their losses and have a right to be heard at sentencing, but are  not required to participate in any phase of the restitution  proceedings.", "Defendants and their counsel. Defendants who commit federal  crimes where an identifiable victim suffered a physical injury or  monetary loss are generally required to pay restitution. Defendants  are required to submit information about their financial resources and  the financial needs and earning ability of their dependents to the court  and have the burden of demonstrating these resources and needs in  any restitution proceedings. Defendants are generally represented  by counsel in criminal proceedings and according to the judiciary  approximately 90 percent qualify for court-appointed counsel under  the Criminal Justice Act because they are financially unable to retain  counsel in federal criminal proceedings. Court-appointed counsel is  provided by Federal Defender Organizations and panel attorneys. A  defendant may be convicted pursuant to plea agreement with the  government or after a trial; more than 90 percent of defendants plead  guilty rather than go to trial. A defendant is referred to as an offender  following conviction of an offense."], "subsections": []}, {"section_title": "Compensation in the Restitution Process", "paragraphs": ["Restitution is only available to victims and for harms as statutorily  authorized. Congress passed the MVRA in 1996, which substantially  revised the restitution process. The legislative history reflects the  balancing of competing interests\u2014including ensuring that the loss to  crime victims is recognized, that they receive the restitution that they are  due, and also that the offender realizes the damages caused by the  offense and pays the debt owed to the victim as well to society. As  provided in the legislative history, one of the ways that the law sought to  balance the application of mandatory restitution was by limiting it to the  instances where a named identifiable victim suffered a physical injury or  monetary loss as a direct and proximate result of the defendant\u2019s offense  of conviction. This means that the victim would not have been harmed  \u201cbut for\u201d the conduct underlying the offense of conviction and also that the  harm was proximately caused by the conduct. Proximately caused means  that the causal nexus between the conduct and the loss is not too  attenuated either factually or temporally. As such, a defendant is not held  liable for downstream effects of an act where there were additional,  intervening causes not sufficiently related to the offense. For example, a  rapist would not be held responsible for the death of a hospitalized rape  victim who died in a hospital fire. In addition, the loss caused by the  defendant\u2019s conduct underlying the offense of conviction establishes the  outer limits of the restitution order. This means that harms caused by  the defendant\u2019s conduct that were related to, but outside the scope of, the  crime of conviction cannot be compensated through restitution. For  example, a defendant who was convicted of illegally possessing a firearm  but acquitted of using the firearm to shoot someone would not be liable  for restitution for medical costs for the shooting victim.", "The restitution statutes specify the types of harm that may be  compensated, and federal case law interpreting these statutes provides  guidance to courts when ordering restitution. For example, when a crime  results in bodily injury to a victim, compensable expenses include the  costs of medical and other services related to physical, psychiatric, and  psychological care; costs for necessary physical and occupational  therapy and rehabilitation; and reimbursement for lost income as a result  of the offense, among other enumerated losses. Courts have also  ordered restitution for a victim\u2019s actual losses that were proximately  caused by the defendant\u2019s conduct even when not explicitly listed in  statute. When restitution is ordered by the court, it is to be in the full  amount of each victim\u2019s losses without consideration of the economic circumstances of the defendant. During a defendant\u2019s sentencing,  additional hearings may be held to examine losses to victims for  restitution and prosecutors are responsible for proving and litigating  issues related to victims\u2019 losses. Restitution may be imposed by the  federal courts up to 90 days after sentencing if additional time is needed  by the court to locate victims and calculate losses. In some cases,  courts can decline to order restitution, such as when the court determines  that fashioning an order of restitution would complicate or prolong the  sentencing process so much that the need to provide restitution is  outweighed by the burden on the sentencing process.", "Separate from criminal restitution, victims may seek compensation from  the offender by pursuing litigation at their own expense through a civil  proceeding in a federal, state, or local court. In the United States,  criminal and civil proceedings are separate legal systems subject to  different laws, standards, and rules of procedure. The types of harms for  which a victim may receive compensation differ in a civil proceeding. For  example, federal criminal courts may order restitution to reimburse a  victim for medical expenses, but cannot order compensation for pain and  suffering caused by a crime. However, a victim may seek compensation  for pain and suffering by filing a civil action against the defendant, as well  as for other types of damages that are not available through restitution.  Other types of civil remedies not compensable as criminal restitution  include intended harm, punitive damages, breach of contract, and  disgorgement of ill-gotten gains, among others. Figure 1 below outlines  the steps taken for compensation of victims of federal crimes through  federal criminal restitution and civil proceedings."], "subsections": []}, {"section_title": "Total Restitution Ordered Since 1996", "paragraphs": ["According to USSC data for fiscal years 1996 through 2016, the  percentage of offenders ordered to pay restitution by federal courts has  remained fairly steady. From fiscal years 1996 through 2016, an average  of 15 percent of individual offenders and 32 percent of organizational  offenders annually were ordered to pay restitution by the federal courts  (see fig. 2). For more information on the restitution imposed by the  federal courts from fiscal years 1996 through 2016, see appendix II."], "subsections": []}, {"section_title": "Collection of Restitution", "paragraphs": ["We have previously reported on issues related to the collection of federal  restitution and currently have ongoing work on DOJ\u2019s collection of  restitution pursuant to the Justice for All Reauthorization Act of 2016.  According to data DOJ provided to us, the total outstanding restitution  debt owed in federal cases as of the end of fiscal year 2016 was $110.2  billion. DOJ, through its U.S. Attorneys\u2019 Offices\u2019 Financial Litigation Units,  is responsible for collecting restitution debt from offenders. This collection  typically begins after offenders are sentenced and ordered to pay  restitution and includes enforcement actions such as filing garnishments  and liens. We noted in our 2001 and 2004 reports that collection of  outstanding restitution debt is inherently difficult due to a number of  factors, such as offenders who may be incarcerated or have minimal  earning capacity and the MVRA requirement that the assessment of  restitution be based on actual loss and not on an offender\u2019s ability to  pay. In 2005, we reported that court-ordered restitution amounts far  exceed likely collections for crime victims in selected financial fraud  cases. Specifically, we found that these offenders, who had either been  high-ranking officials of companies or operated their own businesses,  pleaded guilty to crimes for which the courts ordered restitution totaling  about $568 million to victims. As of the completion of our fieldwork, which  was up to 8 years after the offenders\u2019 sentencing, court records showed  that amounts collected for the victims in these cases totaled only about  $40 million, or about 7 percent of the ordered restitution."], "subsections": []}]}, {"section_title": "Stakeholders Identified Various Factors Related to the Potential Expansion of Federal Courts\u2019 Authority to Order Restitution", "paragraphs": ["Stakeholders we interviewed identified various factors related to the  potential expansion of federal courts\u2019 authority to order restitution in the  four areas listed in the Justice for All Reauthorization Act of 2016: (1) to  apply to victims who have suffered harm, injury, or loss that would not  have occurred but for the defendant\u2019s related conduct; (2) in the case of  an offense resulting in the victim\u2019s death, to allow the court to use its  discretion to award the income lost by the victim\u2019s surviving family  members or estate as a result of the victim\u2019s death; (3) to require that the  defendant pay to the victim an amount determined by the court to restore  the victim to the position he or she would have been in had the defendant  not committed the offense; and (4) to require the defendant compensate  the victim for any injury, harm, or loss, including emotional distress, that  occurred as a result of the offense. Stakeholders also identified additional  factors to consider, beyond the ones identified for the four provisions  above, for potential broadening of courts\u2019 authority to order restitution  generally. For a summary of the provisions and factors cited by  stakeholders, see appendix I."], "subsections": [{"section_title": "Factors to Consider in a Potential Expansion of Restitution Authority if it were to Include a Defendant\u2019s Related Conduct and Eliminate the Proximate Cause Requirement", "paragraphs": [], "subsections": [{"section_title": "Related Conduct", "paragraphs": ["Federal courts have the authority to order defendants to pay restitution for  a victim\u2019s losses that resulted from the defendant\u2019s conduct underlying  the offense of conviction. However, at times, a defendant\u2019s related  conduct can be broader than the offense of conviction and can include  criminal conduct for which the defendant\u2019s guilt was not established either  by trial or plea agreement with the government. For example, in a case  before the Fourth Circuit where restitution was not allowed for conduct  that was broader than the offense of conviction, the government asserted  that the defendant was the ringleader of a nationwide pickpocketing ring  and submitted a list of victims for restitution that included five financial  institutions and four individuals who had suffered losses. However,  because the defendant had pleaded guilty to, and was convicted for,  fraudulent use of a credit card related to one individual on one date\u2014and  the defendant\u2019s offense did not involve as an element a scheme,  conspiracy, or pattern\u2014the court determined that restitution was not  proper for the additional victims because they were not harmed by the  conduct underlying the offense of conviction. On the other hand, when a  defendant has been convicted of an offense that involves as an element a  scheme, conspiracy, or pattern, the court may order restitution for direct  harm caused by that scheme, conspiracy, or pattern. For example, in  another case involving credit card fraud, because the defendant pleaded  guilty to and was convicted of conspiracy to traffic in counterfeit credit  cards\u2014in contrast to the previous case where the defendant was  convicted of only one fraudulent use\u2014the Eleventh Circuit held that the  sentencing court could order a defendant to pay restitution for losses from  additional credit card fraud that were to advance the conspiracy.", "Stakeholders we interviewed identified the following factors to consider if  federal courts\u2019 authority were to be broadened to allow a defendant\u2019s  related conduct to be included in an order for restitution:", "Constitutional issues. Eight of 10 stakeholders we spoke with  identified potential constitutional issues if the federal courts could  order restitution for a defendant\u2019s related conduct. For example, two  stakeholders representing defendants and an association  representing federal prosecutors told us that including a defendant\u2019s  related conduct in orders for restitution could result in potential  violations of a defendant\u2019s rights under the Fifth Amendment\u2019s Due  Process Clause, which provides that no person shall be deprived of  life, liberty, or property without due process of law. This was also a  concern noted in the legislative history of the MVRA, and an  individual knowledgeable about restitution we interviewed noted that  the Supreme Court has also suggested that due process could be a  concern if the court were to order federal criminal restitution beyond  the conduct underlying the conviction.", "Increased complexity to determine losses. Four of 10 stakeholders  we spoke with stated that if the authority of federal courts to order  restitution were broadened to allow inclusion of harms for a  defendant\u2019s related conduct, there would be increased complexity to  determine losses for restitution. For example, DOJ officials told us that  inclusion of a defendant\u2019s related conduct would allow restitution to be  open to a larger pool of potential victims, and identifying and  calculating losses for all victims with a nexus to the offense of  conviction could become an impossible task. An association  representing federal prosecutors stated that this increased complexity  could have the effect of federal courts ordering less restitution through  the exception for complex cases, which would negatively impact  victims.", "DOJ\u2019s practices for plea bargaining. In contrast, two individuals we  spoke with who represent victims stated that prosecutors could more  consistently follow DOJ\u2019s guidelines to include a defendant\u2019s related  conduct in plea agreements without expanding federal courts\u2019  authority to order restitution. DOJ guidelines, which are based on  statutory direction, provide that prosecutors must consider requesting  full restitution to all victims for all charges contained in the indictment,  without regard to the counts to which the defendant actually pleaded  guilty. In other words, when DOJ and the defendant agree to certain  terms as part of a plea agreement in which the defendant pleads  guilty to one or more charged offenses, or lesser or related offenses,  prosecutors must consider requesting the defendant pay restitution for  all of the charges, not just the ones to which the defendant is pleading  guilty. As a result, federal courts may order restitution pursuant to  the plea agreement for losses sustained by crime victims for related  conduct or criminal conduct that is not part of the offense of  conviction."], "subsections": []}, {"section_title": "Proximate Cause", "paragraphs": ["Federal courts currently have the authority to order an offender to pay  restitution to victims who have suffered harms as a direct and proximate  consequence of the crime of conviction. This means that the harm must  have been not only caused by the offense, as a matter of fact, but also  that it was reasonably foreseeable as a result of the offense. For  example, courts have allowed damage caused by the escape from a  robbery\u2014such as damage to police cars hit during a car chase\u2014to be  compensable as restitution because the flight was casually related to the  bank robbery. Although 5 of 10 stakeholders stated that the proximate  harm requirement does not generally present challenges related to  federal courts\u2019 authority to order restitution, stakeholders identified  additional factors to consider if the federal courts\u2019 authority were to be  expanded to eliminate the proximate cause requirement:", "Additional sentencing-related hearings and litigation. Three of 10  stakeholders we interviewed stated that eliminating the proximate  harm requirement could result in prolonged sentencing for defendants  due to additional sentencing-related hearings and litigation. For  example, judiciary officials and an association representing federal  prosecutors stated that if federal courts\u2019 authority to order restitution  were expanded to eliminate the proximate harm requirement, more  litigation would be required during sentencing to examine harms to  victims and to determine how losses related to the offense of  conviction.", "Plea bargaining could be affected. Two of 10 stakeholders we  interviewed stated that eliminating the proximate harm requirement  would impact plea bargaining between defendants and DOJ. For  example, an individual knowledgeable about federal restitution stated  that eliminating proximate harm would hinder plea bargaining as  during plea agreement negotiations a defendant would no longer have  a sense of how much federal criminal restitution could be ordered. At  the time the MVRA was passed, Congress also recognized the central  role of plea bargaining in the federal criminal justice system with the  legislative history of the MVRA noting the intent that the legislation not  impair the role of plea bargaining."], "subsections": []}]}, {"section_title": "Factors to Consider in the Potential Expansion of Restitution to Include Income Lost by Deceased Victims and Their Family Members", "paragraphs": ["In cases involving the death of a crime victim, federal courts may order  restitution for losses to be paid to a deceased crime victim\u2019s surviving  family members or estate, including for funeral expenses, as applicable.  Further, according to 6 of 10 stakeholders we interviewed, federal courts  currently have the authority to order compensation for future lost income  of a deceased crime victim\u2019s family member or estate due to precedent  established in case law. For example, the Tenth Circuit held that  restitution for the future lost income of a three-month-old victim of  voluntary manslaughter was not precluded by the MVRA; thus a court  may exercise its discretion in declining to grant an award, or, as it did in  this case, undertake such proceedings. In a Ninth Circuit case, the court  held that \u201crestitution for future lost income may be ordered under the  MVRA so long as it is not based upon speculation, but is reasonably  calculable,\u201d and returned the case to the district court to redetermine the  amount of restitution to be awarded.", "Stakeholders we interviewed also identified the following factors to  consider if federal courts\u2019 authority were to be expanded to include  compensation for the future lost income of a deceased crime victim and to  compensate the deceased victim\u2019s surviving family members for their lost  income as a result of the victim\u2019s death:  Increased victim compensation awards. Four of 10 stakeholders  we interviewed stated that expanding federal courts\u2019 authority to  include compensation for future lost income of a deceased crime  victim could result in more compensation awarded through restitution.  For example, three stakeholders representing victims stated if this  provision were specified or made explicit in statute, it would be more  likely that federal courts would order compensation for the future lost  income of a deceased crime victim. One of the stakeholders added  that having such loss specified and enumerated in restitution statutes  would ensure it is considered during the restitution process and is less  likely to be challenged during appeal. Further, another stakeholder  representing victims stated that including the surviving family  members\u2019 lost income in a restitution order could allow for  compensation of those family members who lost income prior to a  victim\u2019s death, such as in cases where those family members  provided care to a victim prior to the victim\u2019s death.", "Complexity of calculation and need for experts. Three of 10  stakeholders we interviewed stated that determining a deceased  crime victim\u2019s future and family members\u2019 lost income would add  complexity to the restitution process. For example, an association  representing federal prosecutors stated that it would be difficult for  federal probation officers and prosecutors to determine the amount of  future lost income for deceased victims as that area of specialization  is currently in civil law. In addition, DOJ officials stated that the  complexity and need for experts to make these specialized  calculations could increase the cost of prosecution given the  government\u2019s burden to prove victim losses.", "Suitability of criminal versus civil proceedings. Three of 10  stakeholders we interviewed stated that compensation for a deceased  crime victim\u2019s future and family members\u2019 lost income is more  appropriate for litigation through civil proceedings rather than  combining or merging such litigation in a federal criminal proceeding.  For example, an association representing defendants stated that  federal criminal proceedings are not suitable venues to fairly vet and  litigate this type of victim issue. This stakeholder further stated that  issues of this type are routinely litigated vigorously in civil proceedings  and involve extensive discovery practices, such as taking of  depositions, exchanges of documents, and assessments by  competing experts. An association representing federal prosecutors  additionally noted that federal prosecutors are not well positioned to  handle typical civil losses in criminal trials.", "Sentencing of defendants could be prolonged. Two of 10  stakeholders we interviewed stated that including a deceased crime  victim\u2019s future and family members\u2019 lost income in an order for  restitution could result in a defendant\u2019s sentencing being prolonged.  For example, judiciary officials stated that the sentencing of  defendants could take more time due to the need for multiple hearings  to examine losses and calculate a deceased crime victim\u2019s future lost  income.", "Collectability of debt due to these offenders\u2019 ability to pay. Two of  10 stakeholders stated that the potential collectability of restitution  from offenders for a deceased crime victim\u2019s future and family  members\u2019 lost income should be considered. For example, an  association representing federal prosecutors stated that these  offenders are most likely to be incarcerated with the least ability to  pay. As a result, the amount of resources needed to order restitution  compared to collectability of the debt for a deceased crime victim\u2019s  future lost income should be considered. Further, according to that  stakeholder, resources\u2014such as prosecutorial expertise, money to  hire experts, judicial resources like probation officers\u2014need to be  weighed against the collectability of the debt. This issue was also  described in the legislative history of the MVRA:    significant  number  of  defendants  required  to  pay  restitution\u2026will  be  indigent  \u2026  many\u2026may  also  be  sentenced to  prison  terms  as  well,  making  it  unlikely  that  they  will  be  able  to  make  significant  payments\u2026  At  the  same time, these factors do not obviate the victim\u2019s right to  restitution  or the  need that  defendants  be  ordered  to  pay  restitution."], "subsections": []}, {"section_title": "Factors to Consider in the Potential Expansion of Restitution to Restore the Victim to His or Her Position Had the Offense Not Been Committed", "paragraphs": ["According to 6 of 10 stakeholders we interviewed, the provision \u201cto  require that the defendant pay to the victim an amount determined by the  court to restore the victim to the position he or she would have been in  had the defendant not committed the offense\u201d is already the goal of  federal restitution. These stakeholders stated that this is established in  case law and is not an expansion of federal courts\u2019 current authority.  Other stakeholders we interviewed identified the following factor to  consider if federal courts\u2019 authority were to be expanded to include the  provision \u201cto require that the defendant pay to the victim an amount  determined by the court to restore the victim to the position he or she  would have been in had the defendant not committed the offense\u201d:", "Expansion of authority to include general restitution. Three of 10  stakeholders we interviewed stated that the provision would expand  federal courts\u2019 authority to order restitution by allowing general  restitution, meaning courts would have more discretion to determine  awards for all harms that victims suffered in order to restore the victim  to his or her pre-offense condition. Further, an association  representing victims stated that federal courts\u2019 authority to order  restitution is listed as elements or categories of losses. For example,  losses such as the cost of necessary physical and occupational  therapy and rehabilitation, and necessary funeral and related  services, among others. This association explained that by including a  provision for general restitution, the courts would be able to order  restitution to victims for any losses outside of those categories, which  would function as a catchall for all victim harm."], "subsections": []}, {"section_title": "Factors to Consider in the Potential Expansion of Restitution to Include Any Injury, Harm, or Loss, Including Emotional Distress That Occurred as a Result of an Offense", "paragraphs": ["Federal courts may order restitution for actual losses\u2014in other words,  these must be tangible or \u201cout-of-pocket\u201d losses, and they must be  supported by the record. This includes, for example, reimbursement of  medical expenses for bodily injuries resulting from the victimizing offense.  However, federal courts are not authorized to order restitution for losses  such as pain and suffering and emotional distress to crime victims. For  example, in a case where the defendant was convicted of committing a  brutal hate crime against the victim, leaving him with severe physical  injuries and depression, among other harms, the sentencing court  acknowledged that it did not have authority to award restitution for pain  and suffering and noted that the victim would be allowed to pursue civil  remedies. Stakeholders we interviewed identified the following factors to  consider if federal courts\u2019 authority were expanded to allow any injury,  harm, or loss, including emotional distress, to be included in an order for  restitution:", "Suitability of criminal versus civil proceedings. Five of 10  stakeholders we interviewed stated that including compensation to  victims for any injury, harm, or loss, including emotional distress, in  restitution orders raises issues related to the types of harms that  should be compensated in civil versus criminal proceedings. For  example, a stakeholder representing defendants stated that federal  criminal law is not suited to determine injuries such as emotional  distress and pain and suffering, whereas the civil system is set up to  handle these kinds of issues and losses. Further, an association  representing federal prosecutors stated that federal prosecutors and  federal probation officers in criminal cases lack the specialized skills  to determine losses for cases involving compensation for pain,  suffering, and emotional distress. This was an issue that was  considered during passage of the MVRA as well, as the report  accompanying the MVRA provides, \u201cIt is the committee\u2019s intent that  courts order full restitution to all identifiable victims of covered  offenses, while guaranteeing that the sentencing phase of criminal  trials do not become fora for the determination of facts and issues  better suited to civil proceedings.\u201d", "Increased complexity to determine losses. Four of 10 stakeholders  we interviewed stated that determining losses such as emotional  distress and pain and suffering would add complexity to the restitution  process. For example, DOJ officials stated that pain and suffering and  emotional distress are not easily quantified and restitution hearings to  examine such losses would involve experts trying to prove these kinds  of losses."], "subsections": []}, {"section_title": "Stakeholders Identified Additional Factors to Consider Related to the Potential Expansion of Courts\u2019 Authority to Award Restitution", "paragraphs": ["Stakeholders we interviewed identified the following factors to consider  related to the potential broadening of courts\u2019 authority to order restitution  generally, in addition to the factors discussed above associated with  particular expansions of federal courts\u2019 authority to order restitution:  Increased restitution debt and collection challenges. Seven of 10  stakeholders we interviewed told us that increased restitution debt  and collectability challenges should be considered in the potential  broadening of federal courts\u2019 authority to order restitution. For  example, two stakeholders representing defendants stated that  offenders often lack the financial resources to pay restitution. Under  the MVRA, federal courts must order mandatory restitution without  consideration of a defendant\u2019s financial resources which has resulted  in large amounts of uncollected federal restitution debt. These two  stakeholders stated that by broadening federal courts\u2019 authority to  order restitution, the amount of uncollected restitution debt owed to  victims would continue to increase. One of these stakeholders further  suggested that the addition of secondary restitution (i.e., additional  victims entitled to compensation) could have the effect of reducing the  amount paid to the primary victims because all classes of victims will  be forced to compete for payment on restitution awards that will often  far exceed an offender\u2019s ability to pay. According to judiciary officials,  adding to the uncollected restitution debt would lead to further  collection challenges, including the additional DOJ efforts needed to  collect more restitution debt and additional supervision of offender  restitution payments by probation officers. These issues were also  observed during the passage of the MVRA. The report accompanying  the law states that the Chair of the Criminal Law Committee of the  Judicial Conference of the United States had testified before the  Senate Judiciary Committee that 85 percent of all federal defendants  are indigent at the time of sentencing and mandatory restitution would  not lead to an appreciable increase in victim compensation; however,  the report noted the Committee\u2019s view of the benefits of even nominal  payments to victims as well as the potential penalogical benefits of  requiring the offender to be accountable for the harm caused to the  victim.", "Suitability of criminal versus civil proceedings. Seven of 10  stakeholders we interviewed told us that the suitability of criminal  versus civil proceedings should be considered in the potential  broadening of federal courts\u2019 authority to order restitution. According  to judiciary officials, a system has been developed with rules to litigate  damages in civil proceedings which are not included within criminal  trials. Further, an association representing defendants told us that  attorneys who directly represent alleged victims in civil proceedings  are more appropriate parties to pursue this type of litigation. The  association said this is because the prosecutor represents the public  at large instead of an individual client, whereas a private attorney has  an obligation to obtain a maximum recovery for the client. Comparing  the process for the compensation of victims through restitution and  civil proceedings, a stakeholder knowledgeable about federal  restitution told us that the restitution process to compensate victims is  more efficient for victims compared to civil proceedings which can last  longer and result in victims incurring costs for ligation. Further, this  individual stated that through the federal criminal restitution process in  contrast to civil proceedings, victims receive help collecting funds  through the federal courts, prisons, and probation officers during  offender supervision. Other stakeholders did not consider the civil  forum to be a suitable alternative for victims. One stakeholder  representing victims stated that civil proceedings are inadequate for  compensating victims and should not be considered. Additionally,  another stakeholder representing victims also stated that victims may  lack access to evidence to pursue civil litigation against an offender in  cases where the conduct was not part of an offense of conviction or  listed in a plea agreement. The legislative history of the MVRA also  acknowledged the need for a balance, providing, as noted above, the  intent that courts order full restitution but also that sentencing not  become a forum for issues better suited to civil proceedings; to that  end, the MVRA restricted mandatory restitution requirements to the  specified set of crimes.", "Impacts to federal resources. Five of 10 stakeholders we  interviewed told us that impacts to judiciary and DOJ resources\u2014 including increased workloads, additional legal services, and the need  for more experts\u2014should be considered in the potential broadening of  federal courts\u2019 authority to order restitution. According to judiciary  officials, broadening federal courts\u2019 authority to order restitution could  result in increased workloads by probation officers who could have to  conduct more investigations to support additional restitution orders.  As discussed above, federal probation officers could also be required  to track and supervise more restitution payments. Officials from  Federal and Community Defenders told us that if federal courts\u2019  authority to order restitution were broadened, additional legal services  would need to be provided to offenders. For example, these officials  stated that larger restitution orders could require increased workloads  for federal defenders to work on behalf of offenders to modify  payment schedules and their level of supervision by probation  officers. Likewise, an association representing defendants stated that  increased collection efforts could be required by U.S. Attorneys\u2019  Offices\u2019 Financial Litigation Units if the number of victims eligible for  restitution increased. According to DOJ officials, prosecutors could  experience increased workloads as they would be identifying more  victims, thereby having to spend more time investigating and  determining losses. Moreover, an association representing  defendants told us that additional federal experts could be needed as  sentencing courts and probation officers lack the resources and  expertise to examine the harms that would result from broadening  restitution authority. Attention to the costs to the justice system for  mandatory restitution was considered in 1995, with the legislative  history of the MVRA noting the attempt to reduce costs by limiting  mandatory restitution to offenses in which an identifiable victim  suffered a physical injury or monetary loss.", "Concerns about offenders\u2019 reentry into society. Two of 10  stakeholders we interviewed told us that offenders\u2019 reentry into society  should be considered in the potential broadening of federal courts\u2019  authority to order restitution. These two stakeholders, an association  that represents defendants and officials from Federal and Community  Defenders, told us that if the authority of the federal courts to order  restitution were broadened to include non-monetary harms, offenders  would be further burdened in their ability to reenter society due to  excessive monetary sanctions from restitution orders. Further, these  two stakeholders stated that offenders with large restitution orders  face challenges obtaining employment, securing housing, and  satisfying other financial obligations, which could increase their risk for  recidivism and reduce their ability to pay any restitution."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to DOJ, USSC,  the Administrative Office of the U.S. Courts, and the Federal Judicial  Center. The Administrative Office of the U.S. Courts provided technical  comments that we incorporated as appropriate.", "We are sending copies of this report to the Attorney General, the Judicial  Conference of the United States, the Directors of the Administrative Office  of the U.S. Courts and the Federal Judicial Center, the Staff Director of  USSC, and other interested parties. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.", "If you and your staff have any questions about this report, please contact  me at (202) 512-8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Overview of Restitution Provisions for Potential Expansion in the Justice for All Reauthorization Act of 2016", "paragraphs": ["Table 2 summarizes and describes the provisions included in the Justice  for All Reauthorization Act of 2016 for potential expansion of federal  courts\u2019 authority to order restitution and the factors cited by stakeholders  that Congress should consider in broadening existing restitution statutes.  ."], "subsections": []}, {"section_title": "Appendix II: Restitution Imposed by the Federal Courts from Fiscal Years 1996 through 2016", "paragraphs": ["Table 3 and 4 summarize restitution imposed by the federal courts from  fiscal years 1996 through 2016 for individual and organizational  offenders."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Dawn Locke (Assistant Director);  Carl Potenzieri; Janet Temko-Blinder; David Alexander; Sasan J. \u201cJon\u201d  Najmi; Amber Edwards; Kathleen Donovan; and Emily Hutz, made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-660T", "url": "https://www.gao.gov/products/GAO-18-660T", "title": "Medicare: Actions Needed to Better Manage Fraud Risks", "published_date": "2018-07-17T00:00:00", "released_date": "2018-07-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Medicare covered over 58 million people in 2017 and has wide-ranging impact on the health-care sector and the overall U.S. economy. However, the billions of dollars in Medicare outlays as well as program complexity make it susceptible to improper payments, including fraud. Although there are no reliable estimates of fraud in Medicare, in fiscal year 2017 improper payments for Medicare were estimated at about $52 billion. Further, about $1.4 billion was returned to Medicare Trust Funds in fiscal year 2017 as a result of recoveries, fines, and asset forfeitures.", "In December 2017, GAO issued a report examining how CMS managed its fraud risks overall and particularly the extent to which its efforts in the Medicare and Medicaid programs aligned with GAO's Framework. This testimony, based on that report, discusses the extent to which CMS's management of fraud risks in Medicare aligns with the Framework. For the report, GAO reviewed CMS policies and interviewed officials and external stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["In its December 2017 report, GAO found that the Centers for Medicare & Medicaid Services' (CMS) antifraud efforts for Medicare partially align with GAO's 2015 A Framework for Managing Fraud Risks in Federal Programs (Framework). The Fraud Reduction and Data Analytics Act of 2015 required OMB to incorporate leading practices identified in this Framework in its guidance to agencies on addressing fraud risks.", "Consistent with the Framework, GAO determined that CMS had demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts; the Center for Program Integrity (CPI) serves as this entity for fraud, waste, and abuse issues in Medicare. CMS also promoted an antifraud culture by, for example, coordinating with internal stakeholders to incorporate antifraud features into new program design. To increase awareness of fraud risks in Medicare, CMS offered and required training for stakeholder groups such as providers of medical services, but it did not offer or require similar fraud-awareness training for most of its workforce.", "CMS took some steps to identify fraud risks in Medicare; however, it had not conducted a fraud risk assessment or designed and implemented a risk-based antifraud strategy for Medicare as defined in the Framework. CMS identified fraud risks through control activities that target areas the agency designated as higher risk within Medicare, including specific provider types, such as home health agencies. Building on earlier steps and conducting a fraud risk assessment, consistent with the Framework, would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy.", "CMS established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with an antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare. For example, CMS used return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities. In developing an antifraud strategy, consistent with the Framework, CMS could include plans for refining and building on existing methods such as return-on-investment, to evaluate the effectiveness of all of its antifraud efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its December 2017 report, GAO made three recommendations, namely that CMS (1) require and provide fraud-awareness training to its employees; (2) conduct fraud risk assessments; and (3) create an antifraud strategy for Medicare, including an approach for evaluation. The Department of Health and Human Services agreed with these recommendations and reportedly is evaluating options to implement them. Accordingly, the recommendations remain open."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to appear before you today to discuss ways to better  manage Medicare fraud risks that we identified in a recent report.  Although there are no reliable estimates of fraud in Medicare, in fiscal  year 2017 improper payments for Medicare were estimated at about $52  billion.", "A recent example illustrates the scope and scale of fraud risks. The  Department of Health and Human Services (HHS) Office of Inspector  General\u2019s (OIG) latest Semiannual Report to Congress highlighted the  recent activities of the Medicare Fraud Strike Force (Strike Force).  During the period from October 1, 2017, through March 31, 2018, Strike  Force efforts resulted in the filing of charges against 77 individuals or  entities, 107 criminal actions, and more than $100.3 million in  investigative receivables. In one example, a Strike Force investigation led  to the conviction of two owners of a medical billing company, who were  both found guilty of conspiracy and health-care fraud, for fraudulently  billing Medicare for services that were never provided. They also  conspired to circumvent Medicare\u2019s fraud investigation of one of the  owners by creating sham companies. The owners were sentenced to 10  years in prison, and 15 years in prison, respectively, and ordered to pay  nearly $9.2 million in restitution.", "Overall, HHS OIG and the Department of Justice report annually on  monetary and other results of their efforts against health-care fraud and  abuse: in fiscal year 2017, about $1.4 billion was returned to Medicare  Trust Funds as a result of recoveries, fines, and asset forfeitures.", "Medicare, which is administered within HHS by its Centers for Medicare &  Medicaid Services (CMS), has been on our high-risk list since 1990  because of the size and complexity of the program, and its susceptibility  to fraud, waste, and abuse. Medicare covered over 58 million people in  2017 and it has wide-ranging current and long-term effects beyond  beneficiaries, the health-care sector, and the overall U.S. economy. The  following statistics illustrate the program\u2019s impact.", "According to the Congressional Budget Office (CBO), in 2017  Medicare outlays totaled $702 billion. Under current law, the outlays  are projected to rise to $1.5 trillion in 2028, growing at about 7 percent  a year; that is, faster than the economy, as the population ages and  health-care costs rise.", "In 2017, these expenditures accounted for 3.7 percent of gross  domestic product (GDP) and 17.6 percent of federal outlays. CBO  estimates that, in 2028, under current law, Medicare will account for  5.1 percent of GDP and 21.9 percent of federal outlays.", "Over 1 million health-care providers, contractors, and suppliers from  across the health sector\u2014including private health plans, physicians,  hospitals, skilled-nursing facilities, durable medical equipment  suppliers, ambulance providers, and many others\u2014receive payments  from Medicare.", "Given the size and impact of Medicare on the health-care sector and U.S.  economy overall, we recently reported on CMS\u2019s fraud risk management  efforts relative to GAO\u2019s 2015 A Framework for Managing Fraud Risks in  Federal Programs (Fraud Risk Framework). The Fraud Risk Framework  describes key components and leading practices for agencies to  proactively and strategically manage fraud risks. Our objectives in the December 2017 report were to determine: (1) CMS\u2019s approach for  managing fraud risks across its four principal programs (including  Medicare) and (2) how CMS\u2019s efforts for managing fraud risks in  Medicare and Medicaid align with the Fraud Risk Framework.", "Drawing from the December 2017 report, my testimony today discusses  the extent to which CMS\u2019s management of fraud risks in Medicare aligned  with the Fraud Risk Framework and the actions needed to better manage  fraud risks.", "We performed our work on CMS antifraud efforts in Medicare and  Medicaid for the December 2017 report under the authority of the  Comptroller General to assist Congress with its oversight. The report  provides further detail on our scope and methodology. Because this  statement focuses on Medicare, we have omitted references to Medicaid  in some instances when discussing organizational structure and agency- wide efforts.", "We conducted the work in the December 2017 report 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Medicare is one of four principal health-insurance programs administered  by CMS; it provides health insurance for persons aged 65 and over,  certain individuals with disabilities, and individuals with end-stage renal  disease. See table 1 for information about Medicare\u2019s component  programs.", "Medicare is the largest CMS program, at $702 billion in fiscal year 2017.  As discussed earlier, according to CBO, Medicare outlays are projected  to rise to $1.5 trillion in 2028 (see fig. 1)."], "subsections": [{"section_title": "Fraud Vulnerabilities and Improper Payments in Medicare", "paragraphs": ["Fraud involves obtaining something of value through willful  misrepresentation. There are no reliable estimates of the extent of fraud  in the Medicare program, or in the health-care industry as a whole. By its  very nature, fraud is difficult to detect, as those involved are engaged in  intentional deception. Further, potential fraud cases must be identified,  investigated, prosecuted, and adjudicated\u2014resulting in a conviction\u2014 before fraud can be established.", "As I mentioned earlier, we designated Medicare as a high-risk program in  1990 because its size, scope, and complexity make it vulnerable to fraud,  waste, and abuse. Similarly, the Office of Management and Budget  (OMB) designated all parts of Medicare a \u201chigh priority\u201d program because  they each report $750 million or more in improper payments in a given  year. We also highlighted challenges associated with duplicative  payments in Medicare in our annual report on duplication and  opportunities for cost savings in federal programs.", "Improper payments are a significant risk to the Medicare program and  may include payments made as a result of fraud. However, I would note  that improper payments are not a proxy for the amount of fraud or extent  of fraud risk in a particular program as improper payment measurement  does not specifically identify or estimate such payments due to fraud.  Improper payments are those that are either made in an incorrect amount  (overpayments and underpayments) or those that should not have been  made at all."], "subsections": []}, {"section_title": "CMS\u2019s Fraud Risk Management Approach", "paragraphs": ["Our December 2017 report found that CMS manages its fraud risks as  part of a broader program-integrity approach working with a broad array  of stakeholders. CMS\u2019s program-integrity approach includes efforts to  address waste, abuse, and improper payments as well as fraud across its  four principal programs. In Medicare, CMS collaborates with contractors,  health-insurance plans, and law-enforcement and other agencies to carry  out its program-integrity responsibilities. According to CMS officials, this  broader program-integrity approach can help the agency develop control  activities to address multiple sources of improper payments, including  fraud."], "subsections": []}, {"section_title": "Fraud Risk Management Standards and Guidance", "paragraphs": ["According to federal standards and guidance, executive-branch agency  managers are responsible for managing fraud risks and implementing  practices for combating those risks. Federal internal control standards call  for agency management officials to assess the internal and external risks  their entities face as they seek to achieve their objectives. The standards  state that as part of this overall assessment, management should  consider the potential for fraud when identifying, analyzing, and  responding to risks. Risk management is a formal and disciplined  practice for addressing risk and reducing it to an acceptable level.", "In July 2015, GAO issued the Fraud Risk Framework, which provides a  comprehensive set of key components and leading practices that serve  as a guide for agency managers to use when developing efforts to  combat fraud in a strategic, risk-based way. The Fraud Risk Framework  describes leading practices in four components: commit, assess, design  and implement, and evaluate and adapt, as depicted in figure 2.", "The Fraud Reduction and Data Analytics Act of 2015, enacted in June  2016, requires OMB to establish guidelines for federal agencies to create  controls to identify and assess fraud risks and design and implement  antifraud control activities. The act further requires OMB to incorporate  the leading practices from the Fraud Risk Framework in the guidelines. In  July 2016, OMB published guidance about enterprise risk management  and internal controls in federal executive departments and agencies.  Among other things, this guidance affirms that managers should adhere  to the leading practices identified in the Fraud Risk Framework. Further,  the act requires federal agencies to submit to Congress a progress report  each year for 3 consecutive years on the implementation of the controls  established under OMB guidelines, among other things."], "subsections": []}]}, {"section_title": "CMS\u2019s Efforts Managing Fraud Risks in Medicare Were Partially Aligned with the Fraud Risk Framework", "paragraphs": ["CMS\u2019s antifraud efforts partially aligned with the Fraud Risk Framework.  Consistent with the framework, CMS has demonstrated commitment to  combating fraud by creating a dedicated entity to lead antifraud efforts. It  has also taken steps to establish a culture conducive to fraud risk  management, although it could expand its antifraud training to include all  employees. CMS has taken some steps to identify fraud risks in  Medicare; however, it has not conducted a fraud risk assessment or  developed a risk-based antifraud strategy for Medicare as defined in the  Fraud Risk Framework. CMS has established monitoring and evaluation  mechanisms for its program-integrity control activities that, if aligned with  a risk-based antifraud strategy, could enhance the effectiveness of fraud  risk management in Medicare."], "subsections": [{"section_title": "CMS\u2019s Organizational Structure Includes a Dedicated Entity for Program-Integrity and Antifraud Efforts", "paragraphs": ["The commit component of the Fraud Risk Framework calls for an agency  to commit to combating fraud by creating an organizational culture and  structure conducive to fraud risk management. This component includes  establishing a dedicated entity to lead fraud risk management activities.", "Within CMS, the Center for Program Integrity (CPI) serves as the  dedicated entity for fraud, waste, and abuse issues in Medicare, which is  consistent with the Fraud Risk Framework. CPI was established in 2010,  in response to a November 2009 Executive Order on reducing improper  payments and eliminating waste in federal programs. This formalized  role, according to CMS officials, elevated the status of program-integrity  efforts, which previously were carried out by other parts of CMS.", "As an executive-level Center\u2014on the same level with five other  executive-level Centers at CMS, such as the Center for Medicare\u2014CPI  has a direct reporting line to executive-level management at CMS. The  Fraud Risk Framework identifies a direct reporting line to senior-level  managers within the agency as a leading practice. According to CMS  officials, this elevated organizational status offers CPI heightened visibility  across CMS, attention by CMS executive leadership, and involvement in  executive-level conversations."], "subsections": []}, {"section_title": "CMS Has Taken Steps to Create a Culture Conducive to Fraud Risk Management but Could Enhance Antifraud Training for Employees", "paragraphs": ["The commit component of the Fraud Risk Framework also includes  creating an organizational culture to combat fraud at all levels of the  agency. Consistent with the Fraud Risk Framework, CMS has promoted  an antifraud culture by, for example, coordinating with internal and  external stakeholders.", "Consistent with leading practices in the Fraud Risk Framework to involve  all levels of the agency in setting an antifraud tone, CPI has worked  collaboratively with other CMS Centers. In addition to engaging  executive-level officials of other CMS Centers through the Program  Integrity Board, CPI has worked collaboratively with other Centers within  CMS to incorporate antifraud features into new program design or policy  development and established regular communication at the staff level.  For example:", "Center for Medicare and Medicaid Innovation (CMMI). When  developing the Medicare Diabetes Prevention Program, CMMI  officials told us they worked with CPI\u2019s Provider Enrollment and  Oversight Group and Governance Management Group to develop  risk-based screening procedures for entities that would enroll in  Medicare to provide diabetes-prevention services, among other  activities. The program was expanded nationally in 2016, and CMS  determined that an entity may enroll in Medicare as a program  supplier if it satisfies enrollment requirements, including that the  supplier must pass existing high categorical risk-level screening  requirements.", "Center for Medicare (CM). In addition to building safeguards into  programs and developing policies, CM officials told us that there are  several standing meetings, on monthly, biweekly, and weekly bases,  between groups within CM and CPI that discuss issues related to  provider enrollment, FFS operations, and contractor management. A  senior CM official also told us that there are ad hoc meetings taking  place between CM and CPI: \u201cWe interact multiple times daily at  different levels of the organization. Working closely is just a regular  part of our business.\u201d", "CMS has also demonstrated its commitment to addressing fraud, waste,  and abuse to its stakeholders. Representatives of CMS\u2019s extensive  stakeholder network whom we interviewed\u2014contractors and officials from  public and private entities\u2014generally recognized the agency\u2019s  commitment to combating fraud. In our interviews with stakeholders,  officials observed CMS\u2019s increased commitment over time to address  fraud, waste, and abuse and cited examples of specific CMS actions.  CMS contractors told us that CMS\u2019s commitment to combating fraud is  incorporated into contractual requirements, such as requiring (1) data  analysis for potential fraud leads and (2) fraud-awareness training for  providers. Officials from entities that are members of the Healthcare  Fraud Prevention Partnership (HFPP), specifically, a health-insurance  plan and the National Health Care Anti-Fraud Association, added that  CMS\u2019s effort to establish the HFPP and its ongoing collaboration and  information sharing reflect CMS\u2019s commitment to combat fraud in  Medicare.", "The Fraud Risk Framework identifies training as one way of  demonstrating an agency\u2019s commitment to combating fraud. Training and education intended to increase fraud awareness among stakeholders,  managers, and employees serve as a preventive measure to help create  a culture of integrity and compliance within the agency. The Fraud Risk  Framework discusses requiring all employees to attend training upon  hiring and on an ongoing basis thereafter.", "To increase awareness of fraud risks in Medicare, CMS offers and  requires training for stakeholder groups such as providers, beneficiaries,  and health-insurance plans. Specifically, through its National Training  Program and Medicare Learning Network, CMS makes available training  materials on combating Medicare fraud, waste, and abuse. These  materials help to identify and report fraud, waste, and abuse in CMS  programs and are geared toward providers, beneficiaries, as well as  trainers and other stakeholders. Separately, CMS requires health- insurance plans working with CMS to provide annual fraud, waste, and  abuse training to their employees.", "However, CMS does not offer or require similar fraud-awareness training  for the majority of its workforce. For a relatively small portion of its overall  workforce\u2014specifically, contracting officer representatives who are  responsible for certain aspects of the acquisition function\u2014CMS requires  completion of fraud and abuse prevention training every 2 years.  According to CMS, 638 of its contracting officer representatives (or about  10 percent of its overall workforce) completed such training in 2016 and  2017. Although CMS offers fraud-awareness training to others, the  agency does not require fraud-awareness training for new hires or on a  regular basis for all employees because the agency has focused on  providing process-based internal controls training for its employees.", "While fraud-awareness training for contracting officer representatives is  an important step in helping to promote fraud risk management, fraud- awareness training specific to CMS programs would be beneficial for all  employees. Such training would not only be consistent with what CMS  offers to or requires of its stakeholders and some of its employees, but  would also help to keep the agency\u2019s entire workforce continuously aware  of fraud risks and examples of known fraud schemes, such as those  identified in successful HHS OIG investigations. Such training would also  keep employees informed as they administer CMS programs or develop  agency policies and procedures. Considering the vulnerability of Medicare  and Medicaid programs to fraud, waste, and abuse, without regular  required training CMS cannot be assured that its workforce of over 6,000  employees is continuously aware of risks facing its programs.", "In our December 2017 report, we recommended that the Administrator of  CMS provide fraud-awareness training relevant to risks facing CMS  programs and require new hires to undergo such training and all  employees to undergo training on a recurring basis. In its March 2018  letter to GAO, HHS stated that CMS is in the process of developing  Fraud, Waste, and Abuse Training for all new employees, to be presented  at CMS New Employee Orientations. Additionally, CMS is also developing  training to be completed by current CMS employees on an annual basis.  As of July 2018, this recommendation remains open."], "subsections": []}, {"section_title": "CMS Has Taken Steps to Identify Fraud Risks but Has Not Conducted a Fraud Risk Assessment for Medicare", "paragraphs": ["The assess component of the Fraud Risk Framework calls for federal  managers to plan regular fraud risk assessments and to assess risks to  determine a fraud risk profile. Identifying fraud risks is one of the steps  included in the Fraud Risk Framework for assessing risks to determine a  fraud risk profile.", "In our December 2017 report, we discussed several examples of steps  CMS has taken to identify fraud risks as well as control activities that  target areas the agency has designated as higher risk within Medicare,  including specific provider types and specific geographic locations. These  examples include data analytics to assist investigations in Medicare FFS, including  Medicare\u2019s Fraud Prevention System (FPS ), prior authorization for Medicare FFS services or supplies,  revised provider screening and enrollment processes for Medicare  FFS, and  temporary provider enrollment moratoriums for certain providers and  geographic areas for Medicare FFS.", "CMS officials told us that CPI initially focused on developing control  activities for Medicare FFS and consider these activities to be the most  mature of all CPI efforts to address fraud risks.", "CMS Has Not Conducted a Fraud Risk Assessment for Medicare  The assess component of the Fraud Risk Framework calls for federal  managers to plan regular fraud risk assessments and assess risks to  determine a fraud risk profile. Furthermore, federal internal control  standards call for agency management to assess the internal and  external risks their entities face as they seek to achieve their objectives.  The standards state that, as part of this overall assessment, management  should consider the potential for fraud when identifying, analyzing, and  responding to risks.", "The Fraud Risk Framework states that, in planning the fraud risk  assessment, effective managers tailor the fraud risk assessment to the  program by, among other things, identifying appropriate tools, methods,  and sources for gathering information about fraud risks and involving  relevant stakeholders in the assessment process. Fraud risk  assessments that align with the Fraud Risk Framework involve (1)  identifying inherent fraud risks affecting the program, (2) assessing the  likelihood and impact of those fraud risks, (3) determining fraud risk  tolerance, (4) examining the suitability of existing fraud controls and  prioritizing residual fraud risks, and (5) documenting the results (see fig.  3).", "Although CMS had identified some fraud risks posed by providers in  Medicare FFS, the agency had not conducted a fraud risk assessment for  the Medicare program as a whole. Such a risk assessment would provide  the detailed information and insights needed to create a fraud risk profile,  which, in turn, is the basis for creating an antifraud strategy.", "According to CMS officials, CMS had not conducted a fraud risk  assessment for Medicare because, within CPI\u2019s broader approach of  preventing and eliminating improper payments, its focus has been on  addressing specific vulnerabilities among provider groups that have  shown themselves particularly prone to fraud, waste, and abuse. With this  approach, however, it is unlikely that CMS will be able to design and  implement the most-appropriate control activities to respond to the full  portfolio of fraud risks.", "A fraud risk assessment consists of discrete activities that build upon  each other. Specifically:  Identifying inherent fraud risks affecting the program. As  discussed earlier, CMS took steps to identify fraud risks. However,  CMS has not used a process to identify inherent fraud risks from the  universe of potential vulnerabilities facing Medicare, including threats  from various sources. According to CPI officials, most of the agency\u2019s  fraud control activities are focused on fraud risks posed by providers.  The Fraud Risk Framework discusses fully considering inherent fraud  risks from internal and external sources in light of fraud risk factors  such as incentives, opportunities, and rationalization to commit fraud.  For example, according to CMS officials, the inherent design of the  Medicare Part C program may pose fraud risks that are challenging to  detect. A fraud risk assessment would help CMS identify all sources  of fraudulent behaviors, beyond threats posed by providers, such as  those posed by health-insurance plans, contractors, or employees.", "Assessing the likelihood and impact of fraud risks and  determining fraud risk tolerance. CMS has taken steps to prioritize  fraud risks in some areas, but it had not assessed the likelihood or  impact of fraud risks or determined fraud risk tolerance across all  parts of Medicare. Assessing the likelihood and impact of inherent  fraud risks would involve consideration of the impact of fraud risks on  program finances, reputation, and compliance. Without assessing the  likelihood and impact of risks in Medicare or internally determining  which fraud risks may fall under the tolerance threshold, CMS cannot  be certain that it is aware of the most-significant fraud risks facing this  program and what risks it is willing to tolerate based on the program\u2019s  size and complexity.", "Examining the suitability of existing fraud controls and  prioritizing residual fraud risks. CMS had not assessed existing  control activities or prioritized residual fraud risks. According to the  Fraud Risk Framework, managers may consider the extent to which  existing control activities\u2014whether focused on prevention, detection,  or response\u2014mitigate the likelihood and impact of inherent risks and  whether the remaining risks exceed managers\u2019 tolerance. This  analysis would help CMS to prioritize residual risks and to determine  mitigation approaches. For example, CMS had not established  preventive fraud control activities in Medicare Part C. Using a fraud  risk assessment for Medicare Part C and closely examining existing  fraud control activities and residual risks, CMS could be better  positioned to address fraud risks facing this growing program and  develop preventive control activities. Furthermore, without assessing  existing fraud control activities and prioritizing residual fraud risks,  CMS cannot be assured that its current control activities are  addressing the most-significant risks. Such analysis would also help  CMS determine whether additional, preferably preventive, fraud  controls are needed to mitigate residual risks, make adjustments to  existing control activities, and potentially scale back or remove control  activities that are addressing tolerable fraud risks.", "Documenting the risk-assessment results in a fraud risk profile.", "CMS had not developed a fraud risk profile that documents key  findings and conclusions of the fraud risk assessment. According to  the Fraud Risk Framework, the risk profile can also help agencies  decide how to allocate resources to respond to residual fraud risks.  Given the large size and complexity of Medicare, a documented fraud  risk profile could support CMS\u2019s resource-allocation decisions as well  as facilitate the transfer of knowledge and continuity across CMS staff  and changing administrations.", "Senior CPI officials told us that the agency plans to start a fraud risk  assessment for Medicare after it completes a separate fraud risk  assessment of the federally facilitated marketplace. This fraud risk  assessment for the federally facilitated marketplace eligibility and  enrollment process is being conducted in response to a recommendation  we made in February 2016. In April 2017, CPI officials told us that this  fraud risk assessment was largely completed, although in September  2017 CPI officials told us that the assessment was undergoing agency  review. CPI officials told us that they have informed CM officials that there  will be future fraud risk assessments for Medicare; however, they could  not provide estimated timelines or plans for conducting such  assessments, such as the order or programmatic scope of the  assessments.", "Once completed, CMS could use the federally facilitated marketplace  fraud risk assessment and apply any lessons learned when planning for  and designing fraud risk assessments for Medicare. According to the  Fraud Risk Framework, factors such as size, resources, maturity of the  agency or program, and experience in managing risks can influence how  the entity plans the fraud risk assessment. Additionally, effective  managers tailor the fraud risk assessment to the program when planning  for it. The large scale and complexity of Medicare as well as time and  resources involved in conducting a fraud risk assessment underscore the  importance of a well-planned and tailored approach to identifying the  assessment\u2019s programmatic scope. Planning and tailoring may involve  decisions to conduct a fraud risk assessment for Medicare as a whole or  divided into several subassessments to reflect their various component  parts (e.g., Medicare Part C).", "CMS\u2019s existing fraud risk identification efforts as well as communication  channels with stakeholders could serve as a foundation for developing a  fraud risk assessment for Medicare. The leading practices identified in the  Fraud Risk Framework discuss the importance of identifying appropriate  tools, methods, and sources for gathering information about fraud risks  and involving relevant stakeholders in the assessment process. CMS\u2019s  fraud risk identification efforts discussed earlier could provide key  information about fraud risks and their likelihood and impact.  Furthermore, existing relationships and communication channels across  CMS and its extensive network of stakeholders could support building a  comprehensive understanding of known and potential fraud risks for the  purposes of a fraud risk assessment. For example, the fraud  vulnerabilities identified through data analysis and information sharing  with health-insurance plans, law-enforcement organizations, and  contractors could inform a fraud risk assessment. CPI\u2019s Command Center  missions\u2014facilitated collaboration sessions that bring together experts  from various disciplines to improve the processes for fraud prevention in  Medicare\u2014could bring together experts to identify potential or emerging  fraud vulnerabilities or to brainstorm approaches to mitigate residual fraud  risks.", "As CMS makes plans to move forward with a fraud risk assessment for  Medicare, it will be important to consider the frequency with which the  fraud risk assessment would need to be updated. While, according to the  Fraud Risk Framework, the time intervals between updates can vary  based on the programmatic and operating environment, assessing fraud  risks on an ongoing basis is important to ensure that control activities are  continuously addressing fraud risks. The constantly evolving fraud  schemes, the size of the programs in terms of beneficiaries and  expenditures, as well as continual changes in Medicare\u2014such as  development of innovative payment models and increasing managed- care enrollment\u2014call for constant vigilance and regular updates to the  fraud risk assessment.", "In our December 2017 report we recommended that the Administrator of  CMS conduct fraud risk assessments for Medicare and Medicaid to  include respective fraud risk profiles and plans for regularly updating the  assessments and profiles. In its March 2018 letter to GAO, HHS stated  that it is currently evaluating its options with regards to implementing this  recommendation. As of July 2018, the recommendation remains open."], "subsections": []}, {"section_title": "CMS Needs to Develop a Risk-Based Antifraud Strategy for Medicare, Which Would Include Plans for Monitoring and Evaluation", "paragraphs": ["The design and implement component of the Fraud Risk Framework calls  for federal managers to design and implement a strategy with specific  control activities to mitigate assessed fraud risks and collaborate to help  ensure effective implementation.", "According to the Fraud Risk Framework, effective managers develop and  document an antifraud strategy that describes the program\u2019s approach for  addressing the prioritized fraud risks identified during the fraud risk  assessment, also referred to as a risk-based antifraud strategy. A risk- based antifraud strategy describes existing fraud control activities as well  as any new fraud control activities a program may adopt to address  residual fraud risks. In developing a strategy and antifraud control  activities, effective managers focus on fraud prevention over detection,  develop a plan for responding to identified instances of fraud, establish  collaborative relationships with stakeholders, and create incentives to  help effectively implement the strategy. Additionally, as part of a  documented strategy, management identifies roles and responsibilities of  those involved in fraud risk management activities; describes control  activities as well as plans for monitoring and evaluation; creates timelines;  and communicates the antifraud strategy to employees and stakeholders,  among other things.", "As discussed earlier, CMS had some control activities in place to identify  fraud risk in Medicare, particularly in the FFS program. However, CMS  had not developed and documented a risk-based antifraud strategy to  guide its design and implementation of new antifraud activities and to  better align and coordinate its existing activities to ensure it is targeting  and mitigating the most-significant fraud risks.", "Antifraud strategy. CMS officials told us that CPI does not have a  documented risk-based antifraud strategy. Although CMS has developed  several documents that describe efforts to address fraud, the agency  had not developed a risk-based antifraud strategy for Medicare because,  as discussed earlier, it had not conducted a fraud risk assessment that  would serve as a foundation for such strategy.", "In 2016, CPI identified five strategic objectives for program integrity,  which include antifraud elements and an emphasis on prevention.  However, according to CMS officials, these objectives were identified  from discussions with CMS leadership and various stakeholders and not  through a fraud risk assessment process to identify inherent fraud risks  from the universe of potential vulnerabilities, as described earlier and  called for in the leading practices. These strategic objectives were  presented at an antifraud conference in 2016, but were not announced  publicly until the release of the Annual Report to Congress on the  Medicare and Medicaid Integrity Programs for Fiscal Year 2015 in June  2017.", "Stakeholder relationships and communication. CMS has established  relationships and communicated with stakeholders, but, without an  antifraud strategy, stakeholders we spoke with lacked a common  understanding of CMS\u2019s strategic approach. Prior work on practices that  can help federal agencies collaborate effectively calls for a strategy that is  shared with stakeholders to promote trust and understanding. Once an  antifraud strategy is developed, the Fraud Risk Framework calls for  managers to collaborate to ensure effective implementation. Although  some CMS stakeholders were able to describe various CMS program- integrity priorities and activities, such as home health being a fraud risk  priority, the stakeholders could not communicate, articulate, or cite a  common CMS strategic approach to address fraud risks in its programs.", "Incentives. The Fraud Risk Framework discusses creating incentives to  help ensure effective implementation of the antifraud strategy once it is  developed. Currently, some incentives within stakeholder relationships  may complicate CMS\u2019s antifraud efforts. Among contractors, CMS  encourages information sharing through conferences and workshops;  however, competition for CMS business among contractors can be a  disincentive to information sharing. CMS officials acknowledged this  concern and said that they expect contractors to share information related  to fraud schemes, outcomes of investigations, and tips for addressing  fraud, but not proprietary information such as algorithms to risk-score  providers.", "Without  developing  and  documenting  an  antifraud  strategy  based  on  a  fraud  risk  assessment,  as  called  for  in  the  design  and  implement  component of the Fraud Risk Framework, CMS cannot ensure that it has  a  coordinated  approach  to  address  the  range  of  fraud  risks  and  to  appropriately target and allocate resources for the most-significant risks.  Considering fraud risks to which Medicare is most vulnerable, in light of  the malicious intent of those who aim to exploit the programs, would help  CMS to examine its current control activities and potentially design new  ones with recognition of fraudulent behavior it aims to prevent. This focus  on fraud is distinct from a broader view of program integrity and improper  payments by considering the intentions and incentives of those who aim  to  deceive  rather  than  well-intentioned  providers  who  make  mistakes.  Also, continued growth of the program, such as growth of Medicare Part  C, calls for consideration of preventive fraud control activities across the  entire network of entities involved.", "Furthermore, considering the large size and complexity of Medicare and  the extensive stakeholder network involved in managing fraud in the  program, a strategic approach to managing fraud risks within the  programs is essential to ensure that a number of existing control activities  and numerous stakeholder relationships and incentives are being aligned  to produce desired results. Once developed, an antifraud strategy that is  clearly articulated to various CMS stakeholders would help CMS to  address fraud risks in a more coordinated and deliberate fashion.  Thinking strategically about existing control activities, resources, tools,  and information systems could help CMS to leverage resources while  continuing to integrate Medicare program-integrity efforts along functional  lines. A strategic approach grounded in a comprehensive assessment of  fraud risks could also help CMS to identify future enhancements for  existing control activities, such as new preventive capabilities for its Fraud  Prevention System (FPS) or additional fraud factors in provider  enrollment and revalidation, such as provider risk-scoring, to stay in step  with evolving fraud risks.", "CMS Has Established Monitoring and Evaluation Mechanisms That  Could Inform a Risk-Based Antifraud Strategy for Medicare  The evaluate and adapt component of the Fraud Risk Framework calls for  federal managers to evaluate outcomes using a risk-based approach and  adapt activities to improve fraud risk management. Furthermore,  according to federal internal control standards, managers should  establish and operate monitoring activities to monitor the internal control  system and evaluate the results, which may be compared against an  established baseline. Ongoing monitoring and periodic evaluations  provide assurances to managers that they are effectively preventing,  detecting, and responding to potential fraud.", "CMS has established monitoring and evaluation mechanisms for its  program-integrity activities that it could incorporate into an antifraud  strategy.", "As described in the Fraud Risk Framework, agencies can gather  information on the short-term or intermediate outcomes of some antifraud  initiatives, which may be more readily measured. For example, CMS has  developed some performance measures to provide a basis for monitoring  its progress towards meeting the program-integrity goals set in the HHS  Strategic Plan and Annual Performance Plan. Specifically, CMS  measures whether it is meeting its goal of \u201cincreasing the percentage of  Medicare FFS providers and suppliers identified as high risk that receive  an administrative action.\u201d CMS does not set specific antifraud goals for  other parts of Medicare; other CMS performance measures relate to  measuring or reducing improper payments in the various parts of  Medicare.", "CMS uses return-on-investment and savings estimates to measure the  effectiveness of its Medicare program-integrity activities and FPS. For  example, CMS uses return-on-investment to measure the effectiveness of  FPS and, in response to a recommendation we made in 2012, CMS  developed outcome-based performance targets and milestones for FPS.  CMS has also conducted individual evaluations of its program-integrity  activities, such as an interim evaluation of the prior-authorization  demonstration for power mobility devices that began in 2012 and is  currently implemented in 19 states.", "Commensurate with greater maturity of control activities in Medicare FFS  compared to other parts of Medicare and Medicaid, monitoring and  evaluation activities for Medicare Parts C and D and Medicaid are more  limited. For example, CMS calculates savings for its program-integrity  activities in Medicare Parts C and D, but not a full return-on-investment.  CMS officials told us that calculating costs for specific activities is  challenging because of overlapping activities among contractors. CMS  officials said they continue to refine methods and develop new savings  estimates for additional program-integrity activities.", "According to the Fraud Risk Framework, effective managers develop a  strategy and evaluate outcomes using a risk-based approach. In  developing an effective strategy and antifraud activities, managers  consider the benefits and costs of control activities. Ongoing monitoring  and periodic evaluations provide reasonable assurance to managers that  they are effectively preventing, detecting, and responding to potential  fraud. Monitoring and evaluation activities can also support managers\u2019  decisions about allocating resources, and help them to demonstrate their  continued commitment to effectively managing fraud risks.", "As CMS takes steps to develop an antifraud strategy, it could include  plans for refining and building on existing methods such as return-on- investment or savings measures, and setting appropriate targets to  evaluate the effectiveness of all of CMS\u2019s antifraud efforts. Such a  strategy would help CMS to efficiently allocate program-integrity  resources and to ensure that the agency is effectively preventing,  detecting, and responding to potential fraud. For example, while doing so  would involve challenges, CMS\u2019s strategy could detail plans to advance  efforts to measure a potential fraud rate through baseline and periodic  measures. Fraud-rate measurement efforts could also inform risk  assessment activities, identify currently unknown fraud risks, align  resources to priority risks, and develop effective outcome metrics for  antifraud controls. Such a strategy would also help CMS ensure that it  has effective performance measures in place to assess its antifraud  efforts beyond those related to providers in Medicare FFS, and establish  appropriate targets to measure the agency\u2019s progress in addressing fraud  risks.", "In our December 2017 report we recommended that the Administrator of  CMS should, using the results of the fraud risk assessments for Medicare,  create, document, implement, and communicate an antifraud strategy that  is aligned with and responsive to regularly assessed fraud risks. This  strategy should include an approach for monitoring and evaluation. In its  March 2018 letter to GAO, HHS stated that it is currently evaluating its  options with regards to implementing this recommendation. As of July  2018, the recommendation remains open.", "Chairman Jenkins and Ranking Member Lewis, this concludes my  prepared statement. I look forward to the subcommittee\u2019s questions."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions concerning this testimony, please  contact Seto J. Bagdoyan, who may be reached at (202) 512-6722 or  bagdoyans@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Other individuals who made key contributions to this testimony  include Tonita Gillich (Assistant Director), Irina Carnevale (Analyst-in- Charge), Colin Fallon, Scott Hiromoto, and Maria McMullen."], "subsections": []}]}, {"section_title": "Related GAO Reports", "paragraphs": ["Improper Payments: Actions and Guidance Could Help Address Issues  and Inconsistencies in Estimation Processes. GAO-18-377. Washington,  D.C.: May 31, 2018.", "Medicare: CMS Should Take Actions to Continue Prior Authorization  Efforts to Reduce Spending. GAO-18-341. Washington, D.C.: April 20,  2018.", "Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts  with the Fraud Risk Framework. GAO-18-88. Washington, D.C.:  December 5, 2017.", "Medicare: CMS Fraud Prevention System Uses Claims Analysis to  Address Fraud. GAO-17-710. Washington, D.C.: August 30, 2017.", "Medicare Advantage Program Integrity: CMS\u2019s Efforts to Ensure Proper  Payments and Identify and Recover Improper Payments. GAO-17-761T.  Washington, D.C.: July 19, 2017.", "Medicare Provider Education: Oversight of Efforts to Reduce Improper  Billing Needs Improvement. GAO-17-290. Washington, D.C.: March 10,  2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Medicare Advantage: Limited Progress Made to Validate Encounter Data  Used to Ensure Proper Payments. GAO-17-223. Washington, D.C.:  January 17, 2017.", "Medicare: Initial Results of Revised Process to Screen Providers and  Suppliers, and Need for Objectives and Performance Measures.  GAO-17-42. Washington, D.C.: November 15, 2016.", "Medicare: Claim Review Programs Could Be Improved with Additional  Prepayment Reviews and Better Data. GAO-16-394. Washington, D.C.:  April 13, 2016.", "Medicare Advantage: Fundamental Improvements Needed in CMS\u2019s  Effort to Recover Substantial Amounts of Improper Payments. GAO-16- 76. Washington, D.C.: April 8, 2016.", "Health Care Fraud: Information on Most Common Schemes and the  Likely Effect of Smart Cards. GAO-16-216. Washington, D.C.: January  22, 2016.", "A Framework for Managing Fraud Risks in Federal Programs.  GAO-15-593SP. Washington, D.C.: July 28, 2015.", "Medicare Program Integrity: Increased Oversight and Guidance Could  Improve Effectiveness and Efficiency of Postpayment Claims Reviews.  GAO-14-474. Washington, D.C.: July 18, 2014.", "Medicare Fraud Prevention: CMS Has Implemented a Predictive  Analytics System, but Needs to Define Measures to Determine Its  Effectiveness. GAO-13-104. Washington, D.C.: October 15, 2012.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["Medicare improper payments were estimated to be about $52 billion in fiscal year 2017. As program spending increases, the cost of fraud could increase as well. Are the Centers for Medicare & Medicaid Services doing enough to prevent, detect, and combat Medicare fraud?", "Our 2017 report showed that some of CMS's fraud risk management practices aligned with leading practices, while others could be improved. We recommended improving fraud awareness training, conducting risk assessments, and creating an antifraud strategy.", "As of this testimony, the recommendations are still open. We will continue to monitor the status of their implementation."]}
{"id": "GAO-18-351", "url": "https://www.gao.gov/products/GAO-18-351", "title": "Black Lung Benefits Program: Options for Improving Trust Fund Finances", "published_date": "2018-05-30T00:00:00", "released_date": "2018-06-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["With revenue of about $450 million in fiscal year 2017, the Trust Fund paid about $184 million in benefits to more than 25,000 coal miners and eligible dependents. However, the Trust Fund also borrowed about $1.3 billion from the Treasury's general fund in fiscal year 2017 to cover its debt repayment expenditures. Adding to this financial challenge, the coal tax that supports the Trust Fund is scheduled to decrease by about 55 percent beginning in 2019. GAO was asked to review the financial positon of the Trust Fund and identify options to improve it.", "This report examines (1) factors that have challenged the financial position of the Trust Fund since its inception and (2) the extent to which Trust Fund debt may change through 2050, and selected options that could improve its future financial position. GAO reviewed Trust Fund financial data from fiscal years 1979 through 2017. GAO also interviewed officials from the Departments of Labor, Treasury, Health and Human Services (HHS) and representatives of coal industry and union groups. Using assumptions, such as the about 55 percent coal tax decrease and moderately declining coal production, GAO simulated the extent to which Trust Fund debt may change through 2050. GAO also simulated how selected options, such as forgiveness of debt, could improve finances. The options simulated are not intended to be exhaustive. Further, GAO is not endorsing any particular option or combination of options.", "GAO provided a draft of this report to DOL, Treasury, and HHS. The agencies provided technical comments, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Multiple factors have challenged Black Lung Disability Trust Fund (Trust Fund) finances since it was established about 40 years ago. Its expenditures have consistently exceeded its revenues, interest payments have grown, and actions taken that were expected to improve Trust Fund finances did not completely address its debt. When necessary to make expenditures, the Trust Fund borrows with interest from the Department of the Treasury's (Treasury) general fund. Because Trust Fund expenditures have consistently exceeded revenue, it has borrowed almost every year since 1979, its first complete fiscal year, and as a result debt and interest payments increased. Legislative actions were taken over the years including (1) raising the rate of the coal tax that provides Trust Fund revenues and (2) forgiving debt. For example, the Energy Improvement and Extension Act of 2008 provided an appropriation toward Trust Fund debt forgiveness; about $6.5 billion was forgiven, according to Department of Labor (DOL) data (see figure). However, coal tax revenues were less than expected due, in part, to the 2008 recession and increased competition from other energy sources, according to DOL and Treasury officials. As a result, the Trust Fund continued to borrow from Treasury's general fund from fiscal years 2010 through 2017 to cover debt repayment expenditures.", "GAO's simulation suggests that Trust Fund borrowing will likely increase from fiscal years 2019 through 2050 due, in part, to the coal tax rate decrease of about 55 percent that will take effect in 2019 and declining coal production. The simulation estimates that Trust Fund borrowing may exceed $15 billion by 2050 (see figure). However, various options, such as adjusting the coal tax and forgiving interest or debt, could reduce future borrowing and improve the Trust Fund's financial position. For example, maintaining the current coal tax rates and forgiving debt of $2.4 billion could, under certain circumstances, balance the Trust Fund by 2050, whereby revenue would be sufficient to cover expenditures. However, a coal industry representative said that maintaining or increasing the coal tax would burden the coal industry, particularly at a time when coal production has been declining. Further, Treasury officials noted that the costs associated with forgiving Trust Fund interest or debt would be paid by taxpayers."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Black Lung Disability Trust Fund (Trust Fund), established in 1978 by  the Black Lung Benefits Revenue Act of 1977, funds benefits to certain  coal miners who have been totally disabled due to pneumoconiosis, also  known as black lung disease. Their surviving dependents may also  receive compensation. That Act authorized the Trust Fund to pay benefits  in certain circumstances including in cases where no responsible mine  operator could be identified or when the liable mine operator does not  pay. The Trust Fund is financed primarily by a tax on coal produced and  sold domestically, which we refer to in this report as the coal tax.", "The Trust Fund faces financial challenges and borrowed about $1.3  billion in fiscal year 2017 from the Department of the Treasury\u2019s  (Treasury) general fund to cover its total expenditures, according to  Department of Labor (DOL) officials who administer the Trust Fund.  Beginning in calendar year 2019, the coal tax will decrease by  approximately 55 percent which, in turn, will increase borrowing,  according to DOL projections. Additionally, coal production has been  declining as the coal industry faces challenges from increased  competition from other energy sources, which may further affect future  Trust Fund revenue. With less revenue contributed by mine operators  through the coal tax, increased federal funding may be needed because  under federal law the Trust Fund borrows from Treasury\u2019s general fund to  cover its expenditures.", "Given the potential for increased federal funding of Trust Fund  expenditures as a result of the decreasing tax rate, you asked us to  review the financial positon of the Trust Fund and to identify options that  could improve its future financial position. This report examines (1) factors  that have challenged the financial position of the Trust Fund since its  inception; and (2) the extent to which the Trust Fund\u2019s debt may change  through 2050, and selected options that could improve its future financial  position.", "To address our first objective, we reviewed relevant federal laws,  regulations, policy, and guidance as well as agency documentation. We  primarily focused on changes to the coal tax rates and other legislative  actions taken that were expected to improve the financial position of the  Trust Fund, such as debt refinancing and forgiveness provisions  contained in the Energy Improvement and Extension Act of 2008 (EIEA).  We also reviewed publicly available Trust Fund financial data obtained  from the DOL Office of Workers\u2019 Compensation Programs\u2019 Annual  Reports to Congress and annual bulletins issued by the Treasury. We  examined information on Trust Fund revenue and expenditures from 1979  (the Trust Fund\u2019s first complete fiscal year) through 2017, the most recent  year data were available at the time of our review. For example, we  reviewed the annual amounts of coal tax revenue collected and the  annual amounts paid by the Trust Fund in black lung benefits,  administrative costs, and debt servicing. We assessed the reliability of the  data by discussing it with relevant agency officials and reviewing it for  missing data, outliers, or obvious errors. We determined that the data  were sufficiently reliable for the purposes of our review. Additionally, we  interviewed officials from DOL\u2019s Office of Workers\u2019 Compensation  Programs and Mine Safety and Health Administration; the Department of  the Treasury\u2019s Offices of Federal Program Finance and Tax Analysis; the  Department of Health and Human Services\u2019 (HHS) National Institute for  Occupational Safety and Health and the Health Resources and Services  Administration, which funds black-lung-related grant programs; the  National Mining Association (an organization that represents the mining  industry); and the United Mine Workers of America (an organization that  represents coal miners).", "To address our second objective, we simulated the extent to which Trust  Fund debt may change through 2050 and how various options may affect  future Trust Fund finances. Our simulations are based on various  assumptions and simulate Trust Fund revenues and expenditures from  fiscal years 2016 through 2050. To develop these simulations, we used  actual and projection data from (1) DOL for fiscal years 2015 through  2040; (2) Treasury\u2019s Office of Tax Analysis for fiscal years 2011 through  2015; (3) the Department of Energy\u2019s Energy Information Administration  (EIA) for calendar years 2015 through 2050; and (4) the Office of  Management and Budget (OMB) for fiscal year 2017. We ran each  simulation multiple times using different sets of assumptions about the  number of future black lung beneficiaries and future coal production.  Doing so provided a range of estimates about the Trust Fund\u2019s future  borrowing needs and provided insight on the sensitivity of its overall  financial position relative to its various revenues and expenditures. In this  report, we generally present the results of a moderate set of assumptions  for each simulation. For more information on our simulation methodology  and the full range of results, see appendixes I and II. We assessed the  reliability of the data used to develop our simulations by interviewing  knowledgeable agency officials and reviewing relevant supporting  documentation describing the various inputs and assumptions used, if  applicable. We also reviewed DOL, Treasury, EIA, and OMB data for  outliers, obvious errors, or missing data. We determined that the data  were sufficiently reliable for the purposes of this report.", "To identify options that may improve future Trust Fund finances, we  interviewed officials from DOL, Treasury, HHS, the National Mining  Association, and the United Mine Workers of America. We then selected  options to simulate based, in part, on these interviews and the availability  of DOL and other data. These options included adjusting the coal tax,  forgiving interest on some or all Trust Fund debt, forgiving some or all  Trust Fund debt, or various combinations of these options. The options  we simulated are not intended to be exhaustive and we are not endorsing  any particular option or combination of options.", "We conducted this performance audit from February 2017 through May  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Black lung benefits include both cash assistance and medical benefits.  Maximum cash assistance payments generally ranged from about $650  to $1,300 per month in fiscal year 2017, depending on the number of  dependents the miner has. Miners receiving cash assistance are also  eligible for medical benefits that cover the treatment of their black-lung- related conditions, which may include hospital and nursing care,  rehabilitation services, and drug and equipment charges, according to  DOL documentation. DOL estimates that the average annual cost for  medical treatment in fiscal year 2017 was approximately $6,980 per  miner.", "There were about 25,700 total beneficiaries (primary and dependents)  receiving black lung benefits during fiscal year 2017 (see fig. 1). The  decrease in the number of beneficiaries over time has resulted from a  combination of declining coal mining employment and an aging  beneficiary population, according to DOL officials. Further, black lung  beneficiaries could increase in the near term due to the increased  occurrence of black lung disease and its most severe form, progressive  massive fibrosis, particularly among Appalachian coal miners, according  to HHS officials.", "Black lung claims are processed by DOL\u2019s Office of Workers\u2019  Compensation Programs. Contested claims are adjudicated by DOL\u2019s  Office of Administrative Law Judges, which issues decisions that can be  appealed to the Benefits Review Board. Claimants and mine operators  may further appeal these agency decisions to the federal courts. If an  award is contested, claimants can receive interim benefits, which are  generally paid from the Trust Fund according to DOL officials, while their  claims are in the appeals process. Final awards are either funded by mine  operators\u2014who are identified as the responsible employers of  claimants\u2014or the Trust Fund, when responsible employers cannot be  identified or do not pay. In fiscal year 2017, black lung claims had an  approval rate of about 29 percent, according to DOL data. Of the 19,430  primary black lung beneficiaries receiving benefits during fiscal year 2017,  64 percent (12,464) were paid from the Trust Fund, 25 percent (4,798)  were paid by liable mine operators, and 11 percent (2,168) were receiving  interim benefits, according to DOL officials.", "Black Lung Disability Trust Fund revenue is primarily obtained from mine  operators through the coal tax. The coal tax is imposed at two rates,  depending on whether the coal is extracted from underground or surface  mines. The current tax rates are $1.10 per ton of underground-mined coal  and $0.55 per ton of surface-mined coal, up to 4.4 percent of the sales  price. Therefore, if a ton of underground-mined coal is sold for less than  $25, than the tax paid would be less than $1.10. For instance, if a ton of  underground-mined coal sold for $20, than it would be taxed at 4.4  percent of the sales price, or $0.88. To a lesser extent, the Trust Fund  also receives other miscellaneous revenue from interest payments, and  various fines and penalties paid by mine operators, among other sources,  according to DOL documentation. Coal tax revenue is collected from mine  operators by Treasury\u2019s Internal Revenue Service and then transferred to  the Trust Fund where it is then used by DOL officials to pay black lung  benefits and the costs of administering the program.", "Trust Fund expenditures include, among other things, black lung benefit  payments, certain administrative costs incurred by DOL and Treasury to  administer the black lung benefits program, and debt repayments. When  necessary for the Trust Fund to make relevant expenditures under federal  law, the Trust Fund borrows from the Treasury\u2019s general fund. When this  occurs, the federal government is essentially borrowing from itself\u2014and  hence from the general taxpayer\u2014to fund its benefit payments and other  expenditures."], "subsections": []}, {"section_title": "Multiple Factors Have Challenged Trust Fund Finances Resulting in Growing Debt", "paragraphs": ["Multiple factors have challenged Trust Fund finances since it was  established about 40 years ago. Its expenditures have consistently  exceeded its revenue, interest payments have grown, and legislative  actions taken that were expected to improve Trust Fund finances did not  completely address its debt. Combined black lung benefit payments and  program administrative costs exceeded Trust Fund revenue every year  for the program\u2019s first decade (fiscal years 1979 through 1989), resulting  in the accrual of debt. During the Trust Fund\u2019s first three fiscal years in  particular, revenue covered less than 40 percent of the Trust Fund\u2019s  combined benefit payments and administrative costs. For instance, in  fiscal year 1980, the Trust Fund received about $251 million in revenue  and paid about $726 million in black lung benefits and administrative  costs.", "Beginning in 1982, revenue increased as a result of the Black Lung  Benefits Revenue Act of 1981 that doubled the coal tax rates from $0.50  to $1 per ton of underground-mined coal and from $0.25 to $0.50 per ton  of surface-mined coal, up to 4 percent of the sales price. Even with the  tax rate increase, combined benefit payments and administrative costs  continued to exceed revenue throughout the 1980s (see fig. 2). As a  result, the Trust Fund borrowed from Treasury\u2019s general fund to cover the  annual differences between its expenditures and revenues, and by fiscal  year 1989 the Trust Fund\u2019s outstanding debt to Treasury\u2019s general fund  exceeded $3 billion.", "Beginning in fiscal year 1990, Trust Fund revenue generally began to  exceed combined benefit payments and administrative costs, and, in fact,  total Trust Fund cumulative revenue collected from fiscal years 1979 through 2017 exceeded total cumulative benefit payments and  administrative costs incurred during these years. However, interest owed  from earlier years of borrowing led to more borrowing and debt. From  fiscal years 1979 through 1989, the Trust Fund borrowed\u2014primarily  through 30-year term loans according to Treasury officials\u2014from  Treasury\u2019s general fund at interest rates that varied from about 6.5  percent to about 13.9 percent. In fiscal year 1985, for instance, the Trust  Fund paid about $275 million in interest, which was equal to about half of  the total revenue collected that year. Since fiscal year 1990, revenue  has generally exceeded combined benefit payments and administrative  costs, although interest payments on the Trust Fund\u2019s outstanding debt  kept the fund in a position whereby its total expenditures continued to  exceed its total revenues. As a result, the principal amount of the Trust  Fund\u2019s total outstanding debt to Treasury\u2019s general fund increased and  exceeded $10 billion by fiscal year 2008.", "Legislation has been enacted over the years that was expected to  improve Trust Fund finances:  In 1981, the Black Lung Benefits Revenue Act of 1981 doubled the  coal tax rates from $0.50 cents to $1 per ton of underground-mined  coal, and from $0.25 cents to $0.50 cents per ton of surface-mined  coal, up to 4 percent of the sales price (as mentioned previously).", "In 1986, the Consolidated Omnibus Budget Reconciliation Act of 1985  established a 5 year moratorium on interest accrual with respect to  repayable advances to the Trust Fund (which we refer to as annual  borrowing from Treasury\u2019s general fund), and increased the coal tax  rates to $1.10 per ton of underground-mined coal, and $0.55 per ton  of surface-mined coal (up to 4.4 percent of the sales price), where  they have remained since.", "In 2008, the EIEA included provisions that were expected to eliminate  the Trust Fund\u2019s debt. Specifically, EIEA (1) generally extended the  coal tax rates at their current rates until December 31, 2018 (after  which they are scheduled to decrease to their original levels of $0.50  per ton of underground-mined coal, and $0.25 per ton of surface- mined coal, up to 2 percent of the sales price); (2) provided for a one- time federal appropriation toward Trust Fund debt forgiveness (about  $6.5 billion, according to DOL data); and (3) provided for the  refinancing of the Trust Fund\u2019s debt that was not forgiven as a result  of EIEA (which we refer to as the Trust Fund\u2019s legacy debt).  Specifically, the Trust Fund\u2019s legacy debt was refinanced with more  favorable interest rates, according to DOL data. Interest rates on the  refinanced legacy debt range from about 1.4 percent to about 4.5  percent.", "The forgiveness and refinancing of Trust Fund debt along with extending  the current coal tax rates through 2018 were expected to result in annual  tax revenue that could be used to pay down interest and principal on the  Trust Fund\u2019s legacy debt, according to DOL and Treasury officials. These  officials said that models showed that debt would be eliminated by fiscal  year 2040; however, they noted that coal tax revenue has been less than  originally projected due, in part, to the 2008 recession and increased  market competition from other energy sources. As a result, the Trust  Fund\u2019s total expenditures continued to exceed revenue and the Trust  Fund borrowed from Treasury\u2019s general fund each year from fiscal years  2010 through 2017 to cover debt repayments expenditures. In fiscal year  2017, the Trust Fund\u2019s total principal amount of outstanding debt, which  includes its legacy debt and the amount borrowed from Treasury\u2019s  general fund that year, was about $4.3 billion (see fig. 3)."], "subsections": []}, {"section_title": "Trust Fund Borrowing Will Likely Continue to Increase through 2050, and Multiple Options Could Reduce Future Debt", "paragraphs": [], "subsections": [{"section_title": "Trust Fund Borrowing Will Likely Continue to Increase through 2050", "paragraphs": ["Trust Fund borrowing will likely continue to increase from fiscal years  2019 through 2050 due, in part, to the scheduled coal tax rate decrease  of about 55 percent that will take effect in 2019 and declining coal  production, according to our moderate simulation. We simulated the  effects of the scheduled 2019 tax rate decrease on Trust Fund finances  through 2050, and in this report, we generally present the results of a  moderate case set of assumptions (see table 1). These simulations are  not predictions of what will happen, but rather models of what could  happen given certain assumptions. For more information on our  simulation methodology see appendix I. In addition to the moderate case  assumptions, we also simulated how Trust Fund debt could change  through 2050 given various other assumptions, and the full range of  results for all of our simulations are presented in appendix II.", "Our moderate case simulation suggests that Trust Fund revenue may  decrease, from about $485 million in fiscal year 2018 to about $298  million in fiscal year 2019, due, in part, to the scheduled approximate 55  percent decrease in the coal tax. Our simulation, which incorporates EIA  data on future expected coal production, also shows that annual Trust  Fund revenue will likely continue to decrease beyond fiscal year 2019  due, in part, to declining coal production. Domestic coal production has  declined from about 1.2 billion tons in 2008 to about 728 million tons in  2016, according to EIA. Based on these projections, our moderate  simulation shows that Trust Fund annual revenue may continue to  decrease from about $298 million in fiscal year 2019 to about $197 million  in fiscal year 2050 (see fig. 4).", "With the scheduled 2019 tax rate decrease, our moderate case simulation  suggests that expected revenue will likely be insufficient to cover  combined black lung benefit payments and administrative costs, as well  as debt repayment expenditures. Specifically, our moderate case  simulation suggests that revenue may not be sufficient to cover  beneficiary payments and administrative costs from fiscal years 2020  through 2050 (see fig. 5). For instance, in fiscal year 2029, simulated  benefit payments and administrative costs will likely exceed simulated  revenue by about $99 million. These annual deficits will likely decrease  over time to about $4 million by fiscal year 2050 due, in part, to the  assumed continued net decline in total black lung beneficiaries. Our  simulation also therefore suggests that Trust Fund revenue may not be  enough to also cover the debt repayment expenditures it must continue to  make through fiscal year 2040, per the payment schedule established  following the 2008 EIEA.", "Our moderate simulation suggests that the amount borrowed by the Trust  Fund will likely increase from about $1.6 billion in fiscal year 2019 to  about $15.4 billion in fiscal year 2050 (see fig. 6). Although the Trust  Fund\u2019s legacy debt decreases through fiscal year 2040, total Trust Fund  expenditures\u2014including combined benefit payments and administrative  costs as well as debt repayments\u2014will likely continue to exceed revenue  which will require continued annual borrowing from Treasury\u2019s general  fund. However, the amount borrowed by the Trust Fund could vary  depending, in part, on future coal production and the number of new  beneficiaries and could range between about $6 billion and about $27  billion in 2050, according to our simulations (see appendix II)."], "subsections": []}, {"section_title": "Adjusting Coal Tax Rates, Forgiving Interest, and Forgiving Debt Are Options That Could Improve the Trust Fund\u2019s Future Financial Position", "paragraphs": ["We simulated three options that can affect Trust Fund finances through  fiscal year 2050. Specifically, we simulated the effects of (1) adjusting the  coal tax, (2) forgiving interest, and (3) forgiving debt. In each of the  simulations, we compared the results of the option to a baseline in which  the coal tax rates will decrease by about 55 percent, which we refer to as  the scheduled 2019 tax rate decrease. We compare interest and debt  forgiveness options to a baseline which assumes the scheduled 2019 tax  rate decrease has taken effect, and that there is no interest or debt  forgiveness. The simulated options are not intended to be exhaustive and  we are not endorsing any particular option or combination of options."], "subsections": [{"section_title": "Adjust Coal Tax Rates", "paragraphs": ["Using the moderate case, we simulated four options: (1) implementing the  2019 coal tax rate reduction to $0.50 per ton of underground-mined coal  and $0.25 per ton of surface-mined coal; (2) maintaining the current coal  tax rates of $1.10 per ton for underground-mined coal and $0.55 per ton  of surface-mined coal; (3) reducing the tax rates by 25 percent (from  $1.10 and $0.55); and (4) increasing these tax rates by 25 percent (see  fig. 7). Increasing the tax rates by 25 percent was the only option that  eliminated simulated Trust Fund debt by fiscal year 2050, according to  our moderate case simulation.", "We simulated three interest forgiveness options including forgiving  interest on (1) legacy debt, (2) annual borrowing, and (3) all debt. Our  moderate case simulation suggests that forgiving interest will not  eliminate simulated debt by fiscal year 2050 (see fig. 8).", "We simulated two debt forgiveness options by forgiving principal and  interest on (1) legacy debt and (2) all debt. Our moderate case simulation  suggests that both debt forgiveness options would reduce simulated Trust  Fund borrowing by fiscal year 2050, but these options would not eliminate  debt altogether as simulated revenue will likely not be enough to cover  simulated expenditures (see fig. 9). In these cases, the Trust Fund will  need to continue borrowing from Treasury\u2019s general fund to cover annual  deficits, and thus accumulate debt.", "While adjusting coal tax rates and forgiving interest or debt could reduce  the Trust Fund\u2019s simulated borrowing by 2050, implementing them could  affect the coal industry or general taxpayers, according to stakeholders  we interviewed. For instance, a coal industry representative noted that  maintaining the coal tax at its current rate would continue to burden the  coal industry and increasing the tax would exacerbate the burden at a  time when coal production has been declining. Treasury officials noted  that the costs associated with forgiving Trust Fund interest or debt would  be borne by the general taxpayer since Treasury borrows from taxpayers  to lend to the Trust Fund as needed. These officials also said that  making a one-time federal appropriation to forgive interest or debt would  be the most transparent way to satisfy the Trust Fund\u2019s outstanding debt  to Treasury\u2019s general fund.", "In addition to the simulations, other options could affect the financial  position of the Trust Fund including reducing black lung benefits,  eliminating or adjusting the coal tax cap, or creating a variable coal tax.  Our moderate case simulation suggests that completely eliminating black  lung benefits as of fiscal year 2019 could reduce the Trust Fund\u2019s  borrowing from Treasury\u2019s general fund in fiscal year 2050 from about  $15.4 billion to about $6.4 billion. However, doing so would generally  mean that coal tax revenue would be collected solely to fund the  repayment of Trust Fund debt. Another option could be to eliminate or  adjust the coal tax cap, which currently prevents mine operators from  paying a coal tax of more than 4.4 percent of the price per ton of coal  sold. If the coal tax cap were eliminated, for instance, mine operators  would pay $1.10 per ton of underground-mined coal and $0. 55 per ton of  surface-mined coal regardless of price sold, which could increase  revenue. As an additional option, changing the structure of the coal tax  to flexible rates that change based on an annual actuarial assessment of  the Trust Fund could help to ensure that coal mine operators pay the  necessary amount of tax to cover Trust Fund expenditures, without  resulting in a Trust Fund balance or deficit."], "subsections": []}]}, {"section_title": "Multiple Options Could Reduce Future Trust Fund Debt and Would Distribute the Financial Burden Differently Among General Taxpayers and Industry", "paragraphs": ["Multiple options could reduce the Trust Fund\u2019s future debt and distribute  the financial burden among the coal industry and general taxpayers. We  simulated whether various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures. These  options were selected, in part, based on interviews with Trust Fund  stakeholders and the availability of DOL and other data. We approached  these simulations from two perspectives. First, we simulated how much  Trust Fund debt would need to be forgiven based on various coal tax  rates. Second, we simulated the average tax collected per ton needed to  balance the Trust Fund by 2050, based on certain debt forgiveness  options. The simulated options are not intended to be exhaustive and we  are not endorsing any particular combination of options.", "Our first set of options using the moderate case simulations are based on  the current coal tax rates of $1.10 per ton of underground-mined coal and  $0.55 per ton of surface-mined coal, and show the amount of debt  forgiveness in fiscal year 2019 needed to balance the Trust Fund by fiscal  year 2050 based on certain tax rates (see fig. 10). Specifically, our  moderate case simulations show the following:  Increasing current coal tax rates by 25 percent could balance the  Trust Fund by 2050 and would likely require no debt forgiveness. For  this option, the simulated coal tax revenue would likely be sufficient to  cover simulated Trust Fund expenditures, including combined benefit  payments and administrative costs, as well as debt repayments.  However, this option would place the burden solely on the coal  industry that would be paying higher taxes at a time when coal  production has been declining.", "Maintaining current coal tax rates could balance the Trust Fund by  2050 if coupled with about $2.4 billion of debt forgiveness. This option  would distribute the burden among the coal industry and general  taxpayers.", "Decreasing current coal tax rates by 25 percent could balance the  Trust Fund by 2050 if coupled with about $4.8 billion in debt  forgiveness. This option would burden the coal industry less than  maintaining the current tax rates, but would increase the burden on  general taxpayers.", "Decreasing current tax rates by 55 percent, which we refer to as the  scheduled 2019 tax rate decrease, would balance the Trust Fund by  2050 if coupled with about $7.8 billion in debt forgiveness. This figure  comprises the Trust Fund\u2019s total simulated outstanding debt in fiscal  year 2019 ($6.6 billion), and an additional about $1.2 billion that would  be required because the Trust Fund will accrue additional debt from  fiscal years 2020 through 2050, according to our moderate case  simulations. The coal industry would bear some of the financial  burden of this option, while also placing a financial burden on general  taxpayers.", "Our second set of options using moderate case simulations show the  change in average coal tax revenue collected per ton to balance the Trust  Fund by fiscal year 2050 based on certain debt forgiveness options (see  fig. 11). Specifically, our moderate simulations show the following:", "Forgiving the Trust Fund\u2019s legacy debt would allow for an average tax  collected of about $0.59 per ton to balance the Trust Fund by 2050.  Based on certain assumptions, this could be accomplished with a tax  of $0.88 per ton on underground-mined coal and $0.44 per ton on  surface-mined coal.", "Forgiving all Trust Fund debt would allow for an average tax collected  per ton of coal sold of $0.47 per ton to balance the Trust Fund by  2050. Based on certain assumptions, this could be accomplished with  a tax of $0.70 per ton on underground-mined coal and a tax of $0.35  per ton of surface-mined coal."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Labor (DOL),  Treasury, and Health and Human Services (HHS) for review and  comment. DOL, Treasury, and HHS provided technical comments, which  we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time we will send copies of this report to the  appropriate congressional committees, the Secretaries of Labor,  Treasury, and Health and Human Services, and other interested parties.  In addition, the report will be available at no charge on GAO\u2019s web site at  http://www.gao.gov.", "If you or your staff should have any questions about this report, please  contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Black Lung Disability Trust Fund Simulation Methodology", "paragraphs": ["We examined the extent to which (1) Black Lung Disability Trust Fund  (Trust Fund) debt may change through 2050 and (2) selected options to  improve its future financial position. We interviewed officials from the  Departments of Labor (DOL), Treasury, and Health and Human Services  (HHS), as well as representatives from the National Mining Association  and the United Mine Workers of America. We then selected options to  simulate based, in part, on these interviews and the availability of DOL  and other data. These options included adjusting the coal tax, forgiving  interest on some or all Trust Fund debt, forgiving some or all Trust Fund  debt, or various combinations of these options. The options we simulated  are not intended to be exhaustive and we are not endorsing any particular  option or combination of options. Our simulations are based on various  assumptions and simulate Trust Fund revenues and expenditures from  fiscal years 2016 through 2050. To develop these simulations, we used  actual and projection data from (1) DOL for fiscal years 2015 through  2040; (2) Treasury\u2019s Office of Tax Analysis for fiscal years 2011 through  2015; (3) the Department of Energy\u2019s Energy Information Administration  (EIA) for calendar years 2015 through 2050; and (4) the Office of  Management and Budget for fiscal year 2017."], "subsections": [{"section_title": "Black Lung Benefit Expenditures", "paragraphs": ["To simulate future Trust Fund benefit expenditures, we simulated the  number of beneficiaries each fiscal year, and the annual average amount  of benefits received (cash assistance and medical benefits). To simulate  the numbers of beneficiaries, we used DOL data on the (1) age  distributions of miner and widow beneficiaries for fiscal year 2015; (2)  mortality rates by age for miner and widow beneficiaries as of fiscal year  2015; and (3) numbers of beneficiaries\u2014including married miners, single  miners, widows, and miners receiving medical benefits only\u2014in fiscal  year 2015. We assumed\u2014as DOL does in its Black Lung Budget and  Liability Model\u2014that all miners are men, all widows are women, and all  spouses are 3 years younger than the miner. We also assumed that the  age distribution of single miners is the same as for married miners, and  that the age distribution of new miner and widow beneficiaries is the same  as for miner and widow beneficiaries during fiscal year 2015. We used  DOL\u2019s mortality rates to simulate the number of beneficiaries of each age  and type in each year, and used those numbers to then simulate the total  number of beneficiaries of each type each year (see table 2).", "We also assumed that there will be no new medical-benefit-only recipients.", "Formula  The number of married miner beneficiaries age a in fiscal year y is equal to the number of new  married miner beneficiaries age a in fiscal year y plus the number of married miner  beneficiaries age a-1 in fiscal year y-1 who survived and whose spouse survived. The total  number of married miner beneficiaries in fiscal year y is then the sum of the number of married  miner beneficiaries of all ages in fiscal year y. Finally, we averaged the number of married  miner beneficiaries by averaging the prior fiscal year\u2019s total and the current fiscal year\u2019s total.", "The number of single miner beneficiaries age a in fiscal year y is equal to the number of new  single miner beneficiaries age a in fiscal year y plus the number of single miner beneficiaries  age a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a-1  in fiscal year y-1 who survived but whose spouse did not survive. The total number of single  miner beneficiaries in fiscal year y is then the sum of the number of single miner beneficiaries  of all ages in fiscal year y. Finally, we averaged the number of single miner beneficiaries by  averaging the prior fiscal year\u2019s total and the current fiscal year\u2019s total.", "The number of widow beneficiaries age a in fiscal year y is equal to the number of new  beneficiaries who are widows age a in fiscal year y plus the number of widow beneficiaries age  a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a+2 in  fiscal year y-1 who did not survive but whose spouse did survive. The total number of widow  beneficiaries in fiscal year y is then the sum of the number of widow beneficiaries of all ages in  fiscal year y. Finally, we averaged the number of widow beneficiaries by averaging the prior  fiscal year\u2019s total and the current fiscal year\u2019s total.", "The number of MBO beneficiaries of age a in fiscal year y is equal to the number of MBO  beneficiaries of age a-1 in fiscal year y-1 who survived. The total number of MBO beneficiaries  only in fiscal year y is then the sum of the number of MBO beneficiaries of all ages in fiscal  year y. Finally, we averaged the number of MBO beneficiaries by averaging the prior fiscal  year\u2019s total and the current fiscal year\u2019s total."], "subsections": []}, {"section_title": "Coal Tax Revenues", "paragraphs": ["To simulate future coal tax revenue, we used Treasury and EIA data to  calculate (1) the amounts of underground and surface-mined coal taxed  at fixed dollar amounts of $1.10 and $0.55 per ton, respectively, in 2015;  (2) the amounts of underground and surface-mined coal taxed at variable  dollar amounts per ton equal to 4.4 percent of the price in 2015; and (3)  average prices of underground and surface-mined coal taxed at 4.4  percent of the price in 2015. We then used EIA data on projected  amounts of total coal production, underground-mined coal production,  lignite coal production, and coal exports, as well as projected average  coal prices, for the period from 2015 through 2050 to simulate future coal  tax revenues (see table 3).", "We simulated other Trust Fund expenditures and revenues, including  administrative costs and debt repayments (see table 4). For our  simulations, total Trust Fund expenditures are the sum of black lung  benefits (cash assistance and medical benefits), total administrative  costs, repayment of interest and principal on outstanding debt to  Treasury\u2019s general fund, and other expenditures. Total Trust Fund  revenues are the sum of coal tax revenue and other miscellaneous  revenue, and exclude annual borrowing from Treasury\u2019s general fund.  Annual borrowing from Treasury\u2019s general fund is the difference between  total Trust Fund expenditures and revenues and is assumed to be repaid  with interest the following year. If total revenues are greater than total  expenditures, then the Trust Fund has a balance and would not have to  borrow that year. In this case, we assumed that the Trust Fund will earn  interest on that balance at the same rate on which interest would accrue  on annual borrowing.", "We simulated how the scheduled 2019 tax rate decrease and various  options including adjusting the coal tax, forgiving debt interest, and  forgiving debt principal and interest may affect Trust Fund finances  through fiscal year 2050 (see table 5). The options listed are not intended  to be exhaustive and we are not endorsing any particular option or  combination of options.", "We simulated option combinations for coal tax rates, interest forgiveness,  and debt forgiveness to demonstrate how potential financial adjustments  could affect future Trust Fund borrowing from Treasury\u2019s general fund  through fiscal year 2050. For options that involve adjusting coal tax rates,  we estimated the amount of debt that would need to be forgiven in fiscal  year 2019 for the Trust Fund\u2019s revenues to be sufficient to cover its  expenditures through fiscal year 2050, assuming the Trust Fund does not  borrow from Treasury\u2019s general fund after fiscal year 2018. To do so, we  first calculated the real discounted present value of Trust Fund  expenditures for fiscal years 2019 through 2050, including benefit  payments, administrative costs, legacy debt repayments, and repayment  of annual borrowing from Treasury\u2019s general fund. Second, we calculated  the real discounted present value of Trust Fund revenue for the same  period, including coal tax revenue and other miscellaneous revenue.  Third, we calculated debt forgiveness as the difference between the real  discounted present value of Trust Fund expenditures from the first  calculation and the real discounted present value of Trust Fund revenues  from the second calculation. When the amount of debt forgiveness is  greater than the amount of debt outstanding, the Trust Fund would need  an additional cash inflow in addition to forgiveness of all outstanding debt.  Amounts of debt forgiveness less than zero suggest that no debt  forgiveness is required.", "For options involving forgiving debt (interest or principal), we estimated  the average tax per ton of coal that, if implemented in fiscal year 2019,  would provide the Trust Fund sufficient revenue to cover its expenditures  through fiscal year 2050, assuming the Trust Fund does not receive any  advances from Treasury\u2019s general fund after fiscal year 2018. To do so,  we first calculated the real discounted present value of Trust Fund  expenditures for the period from fiscal year 2019 through fiscal year 2050,  again including benefit payments, administrative costs, legacy debt  repayments, and repayment of annual borrowing from Treasury\u2019s general  fund, minus the real discounted present value of miscellaneous revenues  for the same period. Second, we calculated the real discounted present  value of coal production for the same period. Third, we calculated the  average tax per ton of coal as the first amount divided by the second  amount.", "To assess the sensitivity of each option, we ran each simulation 36 times  using four different sets of assumptions about the numbers of future  beneficiaries and nine different sets of assumptions about future coal production and prices (see table 6). Doing so provided a range of  estimates about the Trust Fund\u2019s future borrowing needs and provided  insight on the sensitivity of its overall financial position relative to its  various expenditures and revenues. The analysis also provided a range  of estimates of the amount of debt forgiveness needed to bring the Trust  Fund into balance by fiscal year 2050, assuming various coal tax rates,  and the average tax collection per ton needed to do the same, and  assuming various amounts of debt forgiveness.", "From the range of estimates that resulted from our sensitivity analysis, we  selected cases with moderate expectations related to future Trust Fund  expenditures and revenue. Specifically, for future expenditures, we  assumed an average growth rate of new black lung beneficiaries for fiscal  years 2003 through 2015 as a moderate case that reflects historical  experience. For future revenue, we used a moderate coal production  outlook based on EIA\u2019s reference case, which reflects moderate  expectations about future coal production based on various assumptions  about economic growth, oil prices, technological innovation, and energy  policy."], "subsections": []}]}, {"section_title": "Appendix II: Results of GAO\u2019s Black Lung Disability Trust Fund Simulations", "paragraphs": ["We summarized the results of our simulations by showing the extent to  which the Black Lung Disability Trust Fund\u2019s (Trust Fund) balance\u2014the  sum of tax revenue and miscellaneous revenue less expenditures\u2014may  change in fiscal year 2050 for each option simulated. For example, with  the scheduled 2019 tax rate decrease, our moderate case simulations  suggest that the Trust Fund would likely have a deficit in fiscal year 2050  of about $15.4 billion.", "Multiple options could reduce the Trust Fund\u2019s future debt and distribute  the financial burden among the coal industry and general taxpayers. We  simulated how various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures. We  approached these simulations from two perspectives. First, we simulated  how much Trust Fund debt would need to be forgiven based on various  coal tax rates. Second, we simulated the average tax collected per ton  needed to balance the Trust Fund by 2050, based on certain debt  forgiveness options.", "For our first set of simulations, we calculated the amount of debt  outstanding in fiscal year 2019 and the amount that would likely need to  be forgiven in fiscal year 2019 for the Trust Fund to have sufficient  revenues to cover its expenditures by fiscal year 2050, assuming that it  does not borrow from Treasury\u2019s general fund after fiscal year 2018. For  example, before any options are implemented, our moderate case  simulations suggest that the Trust Fund\u2019s outstanding debt in fiscal year  2019\u2014including both legacy debt and annual borrowing from Treasury\u2019s  general fund\u2014would likely be about $6.6 billion (after discounting and  adjusting for inflation). Therefore, with implementation of the coal tax rate  decrease of about 55 percent as scheduled in calendar year 2019, about  117.7 percent of that debt would need to be forgiven to balance the Trust  Fund. In other words, balancing the Trust Fund would require forgiveness  of $6.6 billion and an additional cash inflow of about $1.2 billion because  the Trust Fund will accrue additional debt from fiscal years 2020 through  2050, according to our moderate case simulations (see table 8).", "For our second set of simulations, we estimated the average tax per ton  of coal that, if implemented in fiscal year 2019, would likely provide the  Trust Fund sufficient revenues to cover its expenditures in fiscal year  2050, assuming that it does not borrow from Treasury\u2019s general fund after  fiscal year 2018. For example, if all principal and interest on Trust Fund  legacy debt is forgiven, as of 2019, the estimated average tax that  balances the Trust Fund is about $0.59 per ton (see table 9). Based on  certain assumptions, this could be accomplished with a tax of $0.88 per  ton on underground-mined coal and $0.44 per ton on surface-mined  coal."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Blake Ainsworth (Assistant  Director), Justin Dunleavy (analyst-in-charge), Angeline Bickner,  Courtney LaFountain, and Rosemary Torres Lerma made key  contributions to this report. Also contributing to this report were James  Bennett, Melinda Bowman, Lilia Chaidez, Caitlin Cusati, Holly Dye, Alex  Galuten, Carol Henn, John Lack, Emei Li, Almeta Spencer, Kate van  Gelder, and Shana Wallace."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-125", "url": "https://www.gao.gov/products/GAO-19-125", "title": "Electronic Health Records: VA Needs to Identify and Report System Costs", "published_date": "2019-07-25T00:00:00", "released_date": "2019-07-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA provides health care services to approximately 9 million veterans and their families and relies on its health information system\u2014VistA\u2014to do so. However, the system is more than 30 years old, is costly to maintain, and does not fully support exchanging health data with DOD and private health care providers. Over nearly 2 decades, VA has pursued multiple efforts to modernize the system. In June 2017, the department announced plans to acquire the same system\u2014the Cerner system\u2014that DOD is implementing. VA plans to continue using VistA during the decade-long transition to the Cerner system.", "GAO was asked to review key aspects of VistA and VA's plans for the new acquisition of the Cerner system. The objectives of the review were to (1) determine the extent to which VA has defined VistA, (2) evaluate VA's annual costs to develop and sustain VistA, and (3) describe the actions VA has taken to transition from VistA to the Cerner system.", "GAO analyzed documentation that defines aspects of VistA and identifies components to be replaced; evaluated the reliability of cost data, including obligations associated with the development and sustainment of VistA for fiscal years 2015, 2016, and 2017; and reviewed program documentation related to VA's program, governance, and plans to transition to Cerner."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) has various documents and a database that describe parts of the Veterans Health Information Systems and Technology Architecture (VistA); however, the department does not have a comprehensive definition for the system. For example, VA has identified components that comprise VistA, identified interfaces related to the system, and collected system user guides and installation manuals. VA has also conducted analyses to better understand customization of VistA components at various medical facilities. Nevertheless, the existing information and analyses do not provide a thorough understanding of the local customizations reflected in about 130 versions of VistA that support health care delivery at more than 1,500 sites. Program officials stated that they have not been able to fully define VistA due to the decentralization of the development of the system for more than 30 years. Cerner's contract to provide a new electronic health record system to VA calls for the company to conduct comprehensive assessments to identify site-specific requirements where its system is planned to be deployed. Three site assessments have been completed and additional assessments are planned. If these assessments provide a thorough understanding of the 130 VistA versions, the department should be able to define VistA and be better positioned to transition to the new system.", "VA identified costs for VistA and its related activities adding up to approximately $913.7 million, $664.3 million, and $711.1 million in fiscal years 2015, 2016, and 2017, respectively\u2014for a total of about $2.3 billion over the 3 years. However, of the $2.3 billion, the department was only able to demonstrate that approximately $1 billion of these costs were sufficiently reliable. In addition, the department omitted VistA-related costs from the total. The lack of a sufficiently reliable and comprehensive total cost for VistA is due in part to not following a well-documented methodology that describes how the department determined the costs for the system. As a result of incomplete cost data and data that could not be determined to be sufficiently reliable, the department, legislators, and the public do not have a complete understanding of how much it has cost to develop and maintain VistA. Further, VA lacks the information needed to make decisions on sustaining the many versions of the system.", "VA has initiated a number of actions to prepare for the transition from VistA to the Cerner system. These actions include taking steps to establish and begin to staff a program office, forming a governance structure, conducting assessments at the initial sites, preparing program plans to guide the initial system implementation, and setting a program baseline to help guide implementation at the initial sites. The department's actions in these important areas are ongoing. Additional actions are in progress to address GAO's September 2018 recommendation that VA clearly define the role and responsibilities of the joint Department of Defense (DOD) and VA Interagency Program Office in the department's governance plans for the new electronic health record system. VA intends to continue maturing and fully establishing a program management organization and a program governance structure to track program progress."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that VA develop and implement a methodology for reliably identifying and reporting the total costs of VistA. VA agreed with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) manages one of the largest  health care delivery systems in the United States, providing a continuum  of health care services to more than 9 million veterans at sites throughout  the United States, the Virgin Islands, Puerto Rico, American Samoa,  Guam, and the Philippines. VA\u2019s health information system\u2014the Veterans  Health Information Systems and Technology Architecture (VistA)\u2014has  been essential to the department\u2019s ability to deliver health care to  veterans. However, this technically complex system has been in  operation for more than 30 years, is costly to maintain, and does not fully  support VA\u2019s need to electronically exchange health records with other  organizations, such as the Department of Defense (DOD) and private  health care providers.", "VA has been challenged in the past by its various attempts to modernize  VistA, and its efforts have fallen short of completion at a high cost to the  department. In June 2017, VA\u2019s former Secretary announced that the  department would redirect its modernization efforts to replace the VistA  electronic health record (EHR). In doing so, VA planned to adopt the  same system that DOD is currently acquiring\u2014Cerner Millennium\u2014a  commercial-off-the-shelf (COTS) product.", "You asked us to review key aspects of VistA and VA\u2019s plans for acquiring  the new Cerner system. Our specific objectives for this engagement were  to: (1) determine the extent to which VA has defined VistA, (2) evaluate  VA\u2019s annual costs to develop and sustain VistA, and (3) describe the  actions VA has taken to transition from VistA to the Cerner system.", "To address the first objective, we examined VA documentation, which  officials familiar with VistA have cited as sources that define the system.  These documents included the VA Monograph, reports from the VA  Systems Inventory, and documents listed in the VA Software Document  Library. We also examined the VistA Product Roadmap, which described  modernization plans and achievements related to VistA.", "Further, we reviewed the results of additional efforts undertaken by the  department to define VistA. For example, we reviewed analyses that the  department undertook to identify VistA components to be replaced by the  Cerner System and the department\u2019s visual mapping of VistA. We then  compared the extent to which VA has defined VistA with elements for  defining information technology (IT) systems described in GAO\u2019s  Standards for Internal Control in the Federal Government and our Cost  Estimating and Assessment Guide. In addition, we reviewed Electronic  Health Records Modernization (EHRM) Program documentation related  to site visits that the department and Cerner have conducted at initial  operating capability sites and planned for future sites. Finally, we  supplemented our work with interviews of officials in VA\u2019s Office of  Information and Technology (OIT), Veterans Health Administration (VHA),  and the EHRM program office.", "To address the second objective, we examined cost data provided by OIT  and VHA that was associated with the development and sustainment  (operation and maintenance) of VistA for fiscal years 2015, 2016, and  2017. The scope of our work focused on these 3 prior fiscal years  because development and sustainment cost information for full fiscal  years should have been available during the time period in which we  conducted our evaluation.", "Specifically, we examined documentation of the total costs for these 3  years, including source data provided by the department for each  category of cost identified, to assess the reliability of the supporting data  consistent with best practices described in GAO\u2019s Cost Estimating and  Assessment Guide. We also examined the documentation and controls  related to the IT systems that VA identified as the sources of these cost data. The systems included OIT\u2019s Budget Tracking Tool and VA\u2019s  Financial Management System.", "Further, we discussed with knowledgeable EHRM program officials the  nature of the cost data, the rationale for why each cost line item was  included, and any anomalies (e.g., missing data and calculation errors)  found during our analysis. In addition, we interviewed OIT and VHA  subject matter experts and vendors identified by VA to further understand  the methodology that the department used to identify or estimate VistA  costs.", "This report includes specific VistA-related cost totals for which OIT and  VHA were able to sufficiently demonstrate the reliability of the program  data. For other costs in which we were not able to make a reliability  determination, we have summarized and reported those to provide  context for the magnitude of the total costs.", "To address the third objective, we examined the department\u2019s decision  memorandums and charters establishing the Office of Electronic Health  Record Modernization and the EHRM program to manage VA\u2019s transition  from VistA to Cerner. We also examined VA\u2019s plans to establish a  structure for governing technical and functional issues and joint decisions  that arise with DOD. To understand how the office intended to manage  the transition from VistA to the commercial system, we reviewed the site  assessment reports to understand how the reports were used to refine  the scope of work. We reviewed the EHRM Program Management Plan  and subordinate plans used to guide the program. We also examined  documentation supporting establishment of the initial program baseline.  We supplemented our documentation reviews with information obtained  through interviews with VA officials including the Executive Director and  Chief Technology and Integration Officer for the EHRM program.  Appendix I provides a more detailed discussion of our objectives, scope,  and methodology.", "We conducted this performance audit from August 2017 through July  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."], "subsections": [{"section_title": "Background", "paragraphs": ["VA\u2019s mission is to promote the health, welfare, and dignity of all veterans  in recognition of their service to the nation by ensuring that they receive  medical care, benefits, social support, and lasting memorials. In carrying  out this mission, the department manages one of the largest health care  delivery systems in the United States that provides enrolled veterans with  a full range of services. These services may include primary care; mental  health care; and outpatient, inpatient, and residential treatment. VHA,  one of the department\u2019s three major components, is responsible for  overseeing the provision of health care at all VA medical facilities.", "IT is widely used and critically important to supporting the department in  delivering health care to veterans. As such, VA operates and maintains  an IT infrastructure that is intended to provide the backbone necessary to  meet the day-to-day operational needs of its medical centers and other  critical systems supporting the department\u2019s mission. The infrastructure is  to provide for data storage, transmission, and communications  requirements necessary to ensure the delivery of reliable, available, and  responsive support to all VA staff offices and administration customers,  as well as veterans."], "subsections": [{"section_title": "VA Has Begun to Acquire a New System after a Long History of Efforts to Modernize VistA", "paragraphs": ["Over nearly 2 decades, VA pursued multiple efforts to modernize VistA.  However, these efforts were abandoned due to expectations of high costs  and challenges to ensuring interoperability of health data.", "Beginning in December 2013, the department initiated VistA Evolution, a  joint program between OIT and VHA that focused on implementing a  collection of projects to improve the efficiency and quality of veterans\u2019  health care. Specifically, it focused on modernizing the VistA system,  increasing the department\u2019s data exchange and interoperability with DOD  and private sector health care partners, and reducing the time it takes to  deploy new health information management capabilities. The VistA 4  Roadmap was the key plan that the department used to guide VistA  Evolution. According to this plan, VistA Evolution was intended to result in  lower costs for system upgrades, maintenance, and sustainment.", "As part of VistA Evolution, the department initiated work to, among other  things, standardize VistA instances; expand the use and functionality of  the Joint Legacy Viewer; and release enhancements to legacy  scheduling, pharmacy, and immunization systems. For example, one  focus of the VistA Evolution program over the last several years was to  standardize a core set of the system\u2019s modules which, according to the  department, account for about 60 percent of VistA.", "As part of these efforts, the department implemented a process to assess  variances in the system at individual sites. According to OIT officials, this  process led to more standardization of the code, where possible, and also  allowed sites to apply for a waiver if there was a need to continue to  operate a nonstandardized VistA instance.", "Although VistA Evolution was intended to modernize aspects of the  system through December 2018, the planned scope of work was reduced  as VA redirected the department\u2019s efforts. Specifically, in June 2017, the  former VA Secretary announced a significant shift in the department\u2019s  approach to modernizing VistA. Rather than continue to use the system,  the Secretary stated that the department planned to acquire the same  EHR system that DOD is acquiring\u2014Cerner Millennium. According to  the department, it has chosen to acquire this product because Cerner  Millennium should allow the entire department\u2019s and DOD\u2019s patient data  to reside in one system, thus, potentially reducing or eliminating the  manual and electronic exchange and reconciliation of data between two  separate systems.", "Accordingly, the department awarded an indefinite delivery, indefinite  quantity contract to Cerner in May 2018 for a maximum amount of $10  billion over 10 years. Cerner is to replace the 130 instances of VistA with  a standard COTS system to be implemented across VA. This new system  is to support a broad range of health care functions including acute care,  clinical decision support, dental care, and emergency medicine. When  implemented, the new system will be expected to become the  authoritative source of clinical data to support improved health, patient  safety, and quality of care provided by VA.", "The EHRM program is responsible for managing the Cerner contract  implementation. As of June 2019, the department had issued eight task  orders to Cerner to: provide project management and planning support services,  conduct site assessments at the initial operating capability sites, host the Cerner system and supporting data, perform data migration and enterprise interface development, develop a functional baseline, deploy the Cerner system at the initial operating capability sites, analyze, design, and develop a technical baseline, and provide additional interface development.", "For fiscal year 2019, the program was appropriated about $1.1 billion for  planning and managing the transition from VistA to Cerner. VA\u2019s Office  of the Deputy Secretary approves spending on EHRM activities according  to the appropriation. Further, according to the department, funds are  tracked as a major IT investment on the Office of Management and  Budget\u2019s Federal IT Dashboard.", "According to VA documentation, the EHRM program is to provide  management support and the infrastructure modernization required to  install and operate the new system. Further, the department has  estimated that an additional $6.1 billion in funding, above the Cerner  contract amount, will be needed to fund additional project management  support supplied by outside contractors, government labor costs, and  infrastructure improvements over the 10-year contract period. Each VA  medical facility is expected to continue using VistA until the new system  has been deployed.", "VA plans to deploy the new EHR system at three initial operating  capability sites within 18 months of October 1, 2018, with a phased  implementation of the remaining sites over the next decade. The three  initial deployment sites, located in the Pacific Northwest, are the Mann- Grandstaff, American Lake, and Seattle VA Medical Centers and related  clinical facilities that operate the same instances of VistA. These are the  first locations where the system is expected to \u201cgo live.\u201d", "The task order to deploy the Cerner system at the three initial sites  provides a detailed description of the steps Cerner needs to take in order  to reach initial operating capability at the Mann-Grandstaff site in March  2020, and at the Seattle and American Lake sites in April 2020. According  to the schedule, the initial operating capability sites are expected to be  operational by July 2020."], "subsections": []}, {"section_title": "GAO Has Previously Reported on VA\u2019s Challenges in Managing Health IT and VistA Modernization", "paragraphs": ["In 2015, we designated VA health care as a high-risk area for the federal  government, and we continue to be concerned about the department\u2019s  ability to ensure that its resources are being used cost-effectively and  efficiently to improve veterans\u2019 timely access to health care. In part, we  identified limitations in the capacity of VA\u2019s existing IT systems, including  the outdated, inefficient nature of key systems and a lack of system  interoperability, as contributors to the department\u2019s challenges related to  health care. In our 2019 update to the high-risk series, we stressed that  VA should demonstrate commitment to addressing its IT challenges by  stabilizing senior leadership, building capacity, and finalizing its action  plan for addressing our recommendations and establishing metrics and  mechanisms for assessing and reporting progress.", "We have also issued numerous reports over the last decade that  highlighted the challenges facing VA in modernizing VistA and improving  EHR interoperability with DOD. For example,", "Between July 2008 and January 2010, we issued a series of reports  related to provisions included in the National Defense Authorization  Act for Fiscal Year 2008 that required VA and DOD to, among other  things, jointly develop and implement fully interoperable EHR systems  or capabilities and establish an Interagency Program Office to be a  single point of accountability for their efforts. These reports  summarized progress made over time to set up the program office,  but also noted that the office was not positioned to function as a single  point of accountability for the delivery of the future interoperable  capabilities that the departments were planning.", "In March 2011, the Secretaries of VA and DOD committed the two  departments to the development of a new common integrated  electronic health record (iEHR) system and, in May 2012, announced  their goal of implementing it across the departments by 2017.  However, in February 2014, we reported on the departments\u2019 decision  to abandon their plans for the iEHR. Specifically, we reported that  the Secretaries of VA and DOD, citing challenges in the cost and  schedule for developing the iEHR, had announced that they would not  continue with the new system and would, instead, pursue separate  efforts to modernize or replace their existing systems and work to  ensure interoperability between them.", "Further, we reported that the departments had not addressed  management barriers to effectively collaborate on their joint health IT  efforts. We made recommendations regarding, among other things,  developing a plan to describe the schedule, cost, and roles and  responsibilities for the organizations within VA and DOD involved in  acquiring, developing, and implementing the EHR systems. The  departments agreed with these recommendations and took steps to  address them.", "We reported in August 2015 that VA and DOD, with guidance from the  Interagency Program Office, had taken actions to increase  interoperability between their EHR systems. However, the office had  not yet specified outcome-oriented metrics and established related  goals that are important to gauging the impact that interoperability  capabilities have on improving health care services for shared  patients. As a result, we made several recommendations to VA and  DOD to address these deficiencies and the departments agreed with  them. VA, DOD, and the Interagency Program Office subsequently  took actions that addressed the recommendations.", "In a June 2018 testimony, we noted that VA had undertaken important  analyses to better understand the scope of VistA and identify  capabilities that can be provided by the Cerner system. The  department also had other key activities underway, such as  establishing program governance and EHRM program planning. We  noted that critical success factors could serve as a model of best  practices that VA could apply to enhance the likelihood that the  acquisition of the new system would be successfully achieved.", "Further, in a September 2018 testimony, we summarized our  previously reported findings on the establishment and evolution of the  DOD/VA Interagency Program Office, which has been involved in  various approaches to increase health information interoperability  between the departments. We noted that the office had not been  effectively positioned to function as the single point of accountability  for the departments\u2019 EHR system interoperability efforts as called for  in the National Defense Authorization Act for Fiscal Year 2008.", "As a result of these findings, we recommended that VA clearly define  the role and responsibilities of the Interagency Program Office within  the governance plans for acquisition of the department\u2019s new EHR  system. The department agreed with the recommendation and stated  that the Joint Executive Council, a joint governance body comprised  of leadership for both VA and DOD, had approved a role for the office.  However, as of June 2019, additional work was ongoing to clarify the  role of the Interagency Program Office in VA\u2019s EHR acquisition."], "subsections": []}]}, {"section_title": "VA Has Undertaken Efforts to Define VistA, but Additional Work Remains", "paragraphs": ["In order to maintain internal control activities over an IT system and its  related infrastructure, organizations should be able to define physical and  performance characteristics of the system, including descriptions of the  components and the interfaces. Further, consistent with GAO\u2019s Cost  Estimating and Assessment Guide, a comprehensive system definition  should identify customization and the environment in which the system  operates. While defining a complex IT system can be challenging,  having an adequate understanding of its characteristics will better position  the organization to comprehensively project and account for costs over  the life of a system or program as well as identify specific technical and  program risks. Definition of VistA remains important because VA plans to  continue using the system during the department\u2019s decade-long transition  to the Cerner system.", "VA maintains multiple documents and a database that describe parts of  VistA, including various components and interfaces. However, despite  these existing sources, OIT officials acknowledged that there is no  comprehensive definition of the VistA system. Consequently, VA has  completed a number of efforts to better define VistA and understand the  environment in which it operates and additional work is planned in the  future.", "Specifically, VA has documented descriptions of the system, including the  components that comprise it. These descriptions are documented in  multiple sources: the VA Monograph, VA Systems Inventory, and VA  Document Library.", "The VA Monograph is a document maintained by OIT that provides  an overview of VistA and non-VistA applications used by VHA.  According to VHA officials, the VA Monograph is the primary  document that describes the components of the system. The  Monograph describes VistA in terms of modules. For modules  identified, including VistA modules, information such as the  associated business functions, VA Systems Inventory identification  number, and a link to the VA Document Library for additional technical  information are provided.", "The VA Systems Inventory is a database maintained by OIT that  identifies current IT systems at the department, including systems and  interfaces related to VistA. For systems identified, the database  includes information such as the system name, the system status (i.e.,  active, in development, or inactive), and related system interfaces.", "The VA Document Library is an online resource for accessing  documentation (i.e., user guides and installation manuals) on the  department\u2019s nationally released software applications, including  VistA.", "VA has also taken steps to further define the system in its efforts to  understand VistA and the environment in which it operates. For example,  EHRM program officials recognized the need to further understand the  customization of VistA components at the various medical facilities and  have conducted analyses to do so. These analyses include:", "Variance analysis: As part of its VistA Evolution program, which has  focused on standardizing a core set of VistA functionality, the  department implemented a process to compare the instances of VistA  installed at sites to the Enterprise Standard version. The results of  this analysis allowed the department to assess the criticality of each  variance, which is expected to help with VA\u2019s transition to the Cerner  system.", "Module analysis: EHRM program subject matter experts undertook  an analysis that involved reviewing and assessing capabilities  provided by VistA modules. This analysis enabled department officials  to determine whether the capability provided by a VistA module could  be provided by the Cerner system, or whether another COTS solution  would be required to support this function going forward.", "Visual mapping: EHRM program officials also directed an analysis  that involved developing a notional visual mapping of VA\u2019s health care  applications, components, and supporting systems within the health  delivery environment. The results of this analysis provided a  description of the current state of one instance of VistA and the VA  health environment, which is intended to inform the department of  possible opportunities for business process and IT improvements as it  proceeds with the Cerner acquisition.", "Nevertheless, even with these analyses, VA has not yet fully defined  VistA, including, for example, identifying performance characteristics of  the system and describing the environment in which it operates. The  department\u2019s three sources that describe VistA and the additional  analyses undertaken do not provide insight into site specific  customizations of the system. For example, the VA Monograph does not  include information on module customization at local facilities. In addition,  according to OIT officials, the systems inventory does not reflect  differences among the 130 different instances of VistA and does not take  into consideration regional and local customizations of related  components. Further, the visual mapping analysis noted that there was  not full insight of the intertwined structure of data and applications or the  various local customizations of VistA.", "EHRM program officials stated that they have not been able to fully define  VistA and understand all local customizations due to the decentralization  of the development of the system and its evolution over more than 30  years. They explained that VistA\u2019s complexity is partly due to the various  instances of the system, compounded by local customizations, which  have resulted in differences in VistA instances operating at various  facilities.", "According to EHRM program documentation, Cerner\u2019s contract calls for  the company to conduct comprehensive assessments to capture the  current state of technical and clinical operations at specific facilities, as  well as identify site-specific requirements where the Cerner system is  planned to be deployed. As of June 2019, Cerner had completed site  assessments for the three initial operating capability sites in the Pacific  Northwest and had planned additional assessments at future deployment  sites. The initial site assessments included, among other things, an  assessment of the unique VistA instances and the environment in which  the system operates. The continuation of planned site assessments  should provide a thorough understanding of the 130 VistA versions, help  the department better define VistA, and position it for transitioning from  VistA to Cerner\u2019s COTS solution."], "subsections": []}, {"section_title": "VA Identified Total VistA Costs of about $2.3 Billion between 2015 and 2017, but Could Not Sufficiently Demonstrate the Reliability of All Data and Omitted Other Costs", "paragraphs": ["When using public funds, an agency must employ effective management  practices in order to let legislators, management, and the public know the  costs of programs and whether they are achieving their goals. To make  those evaluations for a program or for a system as large and complex as  VistA, a complete understanding of the system and reliable cost  information is required. By following a methodology and utilizing reliable  data, an agency can ensure that all costs are fully accounted for, which in  turn, better informs management decisions, establishes a cost baseline,  and enhances understanding of a system\u2019s performance and return on  investment.", "Fundamental characteristics of reliable costs are that they should be  accurate (unbiased, not overly conservative or optimistic), well- documented (supportable with source data, clearly detailed calculations,  and explanations for choosing a particular calculation method), credible  (identifying any uncertainty or biases surrounding data or related  assumptions), and comprehensive (costs are neither omitted nor double  counted). Identification of VistA\u2019s costs remains important because VA  plans to continue using the system during the department\u2019s transition to  the Cerner system over the next decade.", "VA identified costs for VistA and its related activities adding up to  approximately $913.7 million, $664.3 million, and $711.1 million in fiscal  years 2015, 2016, and 2017, respectively\u2014for a total of about $2.3 billion  over the 3 years. However, of the $2.3 billion, the department was only  able to demonstrate that approximately $1 billion of these costs were  reliable. The department could not sufficiently demonstrate the reliability  of the remaining approximately $1.3 billion of VistA costs that it identified.  In addition, VA identified other categories of VistA-related costs, but  omitted these costs from the total."], "subsections": [{"section_title": "VA Did Not Sufficiently Demonstrate the Reliability of Data for All VistA Costs", "paragraphs": ["Of the $2.3 billion total costs for VistA, VA demonstrated that only  approximately $1 billion of these costs were reliable. Specifically, OIT  officials identified VistA-related costs within seven categories. The  officials were able to sufficiently explain why these categories were  included in the development and sustainment costs for VistA and how  they were documented by the department; the officials also presented  detailed source data for our examination. As a result of our review, we  determined that the cost data for these seven categories were accurate,  well-documented, credible, and comprehensive and, thus, sufficiently  reliable.", "Table 1 provides a summary of the program costs identified for VistA by  OIT and VHA for fiscal years 2015 through 2017 that we determined to be  reliable.", "As shown in the table, VA identified costs for the following seven  categories for fiscal years 2015 through 2017:", "VistA Evolution \u2013 The VistA Evolution program costs were  associated with VistA strategy, system design, product development,  and program management. These costs totaled approximately $549.6  million.", "Interoperability \u2013 The Interoperability program focused on sharing  electronic health data between VA and non-VA facilities, including  private sector providers and DOD. For example, interoperability  costs were associated with architecture, strategy, the Interagency  Program Office, product development, and program management.  These VistA-related costs totaled approximately $140.2 million.", "Virtual Lifetime Electronic Record (VLER) Health \u2013 This program  focused on streamlining the transition of electronic medical  information between VA and DOD. These VistA-related costs were  associated with product development and program management and  totaled approximately $81.2 million.", "Contracts \u2013 Contract costs for VistA Evolution included VHA\u2019s  obligations associated with workload management, change  management, clinical requirements, and clinical interoperability.  These VistA-related costs totaled approximately $202.8 million.", "Intergovernmental personnel acts \u2013 Intergovernmental personnel  acts are agreements for the temporary assignment of personnel  between the federal, state, and local governments; colleges and  universities; Indian tribal governments; federally funded research and  development centers; and other eligible organizations. These costs  accounted for VHA\u2019s need to use outside experts from approved  entities for limited periods of time to work on VistA Evolution  assignments. The total VistA-related costs were approximately $2.4  million.", "Memorandums of understanding \u2013 According to VHA,  memorandums of understanding are agreements used by the  administration to obtain the services of personnel between VA entities  for VistA-related activities. These agreements accounted for  approximately $2.3 million.", "Pay \u2013 Costs in this category included salaries for VHA staff who  worked on VistA-related projects as well as travel, training, and supply  costs associated with employment. These costs totaled approximately  $34.1 million.", "However, VA was not able to sufficiently demonstrate the reliability of  approximately $1.3 billion in costs related to VistA. Specifically, OIT  officials identified the additional legacy VistA costs of $1.3 billion that  generally fell into three categories:", "Legacy VistA: Infrastructure, hosting, and system sustainment \u2013  Legacy VistA costs are generally related to the maintenance of fully  operational items, such as VistA Imaging and Fileman\u2014two key  components related to VistA\u2019s operation. The costs also included  obligations for costs related to hosting health data in both VA and  non-VA facilities. The OIT officials and subject matter experts  estimated these total costs to be approximately $343 million during  fiscal years 2015 through 2017.", "However, we were not able to determine the reliability of these costs  because, for example, source data were not well documented;  changes in the cost information provided to us during our review  indicated that the cost data may not be credible; and subject matter  experts were unclear about how to separate VistA costs from non- VistA costs.", "Related software \u2013 Related software costs are associated with the  software supporting or closely integrated with VistA that were  identified by EHRM officials, yet not tracked directly for one of the  VistA-related programs. Both OIT and VHA identified software  licensing costs as VistA-related obligations. The EHRM program  reported these costs to be approximately $389 million in total during  fiscal years 2015 through 2017.", "However, we were not able to determine the reliability of the costs in  this category for a variety of reasons, including that source data were  not well documented. In addition, VA officials were not clear regarding  how the total amounts in each category should be divided between  OIT and VHA. Given this confusion, we were not able to determine if  the costs were fully accurate or credible.", "OIT personnel (pay and administrative) \u2013 According to EHRM  officials, OIT does not track labor costs by program. Instead, the  department provided estimations of the amount of salaries paid to OIT  government staff working on activities such as VistA Evolution,  program management, and overall support of VistA and related  applications. OIT personnel costs were estimated by the EHRM  program office to be approximately $544 million total during fiscal  years 2015 through 2017.", "However, we were not able to determine the reliability of costs in this  category because assumptions made for estimating the personnel  and salary costs were not well documented and could not be verified."], "subsections": []}, {"section_title": "VA Omitted Certain Costs from the Total Cost of VistA", "paragraphs": ["In addition, VA omitted certain VistA costs from the total costs identified  for fiscal years 2015, 2016, and 2017. Specifically, VA omitted the  following costs:", "Additional hosting \u2013 OIT officials stated that additional costs related  to hosting health data by an outside vendor, as well as hosting backup  VistA instances at each of the medical center sites, should also be  included in the total costs for VistA; however, VA omitted these costs  from the total for fiscal years 2015 through 2017. Specifically,  according to the officials, calculating costs for these hosting activities  requires subject matter experts to identify equipment, space, utilities,  and maintenance costs for resources allocated specifically for VistA.  However, the department has not yet developed a methodology to  calculate the costs. The officials said they were working on identifying  a reliable approach for calculating these costs in the future.", "Data standardization and testing \u2013 OIT officials stated that  additional costs related to work on clinical terminology mapping and  functional testing were not included in the total costs for VistA for  fiscal years 2015 through 2017. This work related to mapping existing  clinical data to national standards and making updates to VistA or the  Joint Legacy Viewer and included mapping data and building test  scripts and reports. OIT officials noted that this work had been critical  to the VistA Evolution program, but they did not provide actual cost  data in this category.", "The lack of sufficiently reliable and comprehensive costs indicates that  the department is not positioned to accurately report the annual costs to  develop and sustain VistA. This is due, in part, to the fact that VA has not  followed a well-documented methodology that describes how the  department determined the total costs for the system. In lieu of a  methodology, OIT officials said that leadership and staff from the program  took efforts to identify and track the cost components and contracts  associated with the system. However, they noted that costs associated  with VistA were not all clearly labeled as VistA in an IT system and it was  necessary to estimate other costs. The officials were also unable to verify  how VistA-related costs were separated from other department costs in  all areas and subject matter experts were not consistently familiar with the  estimation methods employed and how VistA was defined for the  purposes of calculating costs. Further, VA officials noted that they were  still working on the best approach to identifying and calculating omitted  costs.", "Without documenting the methodology for what costs are to be included  and how they were identified and calculated, VA\u2019s total does not  accurately reflect the development and sustainment costs for VistA. As a  result, the department, legislators, and the public do not have the  comprehensive, reliable information needed to understand how much it  actually cost to develop and maintain the system. Further, VA does not  have the reliable information needed to make critical management  decisions for sustaining the many versions of VistA over the next 10 years  until the Cerner system is fully deployed."], "subsections": []}]}, {"section_title": "VA Has Initiated a Number of Activities to Transition from VistA to the Cerner System", "paragraphs": ["VA has initiated a number of actions to prepare for the transition from  VistA to the Cerner system. These actions include (1) taking steps to  establish a program office reporting to senior agency management, (2)  forming a governance structure, (3) conducting assessments at initial  system deployment sites, (4) preparing program plans, and (5) setting an  initial program baseline. These activities represent important initial steps  to prepare for the transition to the new system. The program office is  working to hire staff and establish a joint governance structure to  coordinate with DOD on the departments\u2019 efforts to implement the Cerner  system."], "subsections": [{"section_title": "VA Has Taken Steps to Establish a Program Office Reporting to Senior Agency Management and Efforts to Hire Staff Are Ongoing", "paragraphs": ["Strong agency leadership support is a key factor that can increase the  likelihood of a program\u2019s success. For example, senior leadership can  define a vision for the program and intervene when there are difficulties.  Such leadership can come from the establishment of a program office  with staff reporting to senior agency management.", "VA took steps to establish a program office, under the leadership of the  VA Deputy Secretary, to support the contract negotiations between the  department and Cerner. Toward this end, in January 2018, the  department moved the EHRM program office from OIT to directly report to  the VA Deputy Secretary. Then, after the contract with Cerner was  awarded in May 2018, a new program office\u2014the Office of Electronic  Health Record Modernization\u2014was established in June 2018 to plan and  implement the EHRM program. The office is intended to coordinate with  OIT and VHA leadership\u2014specifically, VA\u2019s CIO and VHA\u2019s Under  Secretary for Health\u2014under the direction of an Executive Director. The  Executive Director reports directly to the VA Deputy Secretary. Reporting  to the Executive Director is the Deputy Executive Director, whose  responsibilities include supporting the program\u2019s execution and  management, ensuring the program\u2019s direction is in alignment with VA\u2019s  desired outcomes, and identifying strategic challenges related to the  program.", "The Office of Electronic Health Record Modernization also includes three  management structures:", "The Chief Medical Office is responsible for overseeing strategy and  planning efforts for change management, user testing and training,  and business process re-engineering. It also leads communication  efforts for the end users and deployment.", "The Technology and Integration Office is responsible for providing  technical leadership, management, and oversight of IT. As such, the  office approves technical requirements and supports interoperability  with DOD, as well as performs information security, architecture, data  migration and management, configuration management, infrastructure  engineering, transition and data engineering, and development.", "The Program Management Office is responsible for, among other  things, providing program control support for the scope, schedule,  quality, and risk management for the EHRM program; human  resources support for the Office of Electronic Health Record  Modernization government staff; financial management for operating  plans, budgets, cost estimates and reporting; test and evaluation  support; and oversight of contracts providing staffing to the EHRM  program.", "As of May 2019, VA was still working to fully staff the Office of Electronic  Health Record Modernization. Figure 1 shows the organization of the  Office of Electronic Health Record Modernization.", "According to program officials and the Office of Electronic Health Record  Modernization organization chart, the office is expected to be staffed by  289 government employees. These positions are expected to be filled by  April 2020 and represent the staff required for the program to achieve its  initial operational capability. According to the program\u2019s January 2019  hiring plan, the office had begun its process to reassign staff and hire  additional government employees.", "VA also awarded a contract for program management support. According  to EHRM program officials, the support contractor is to supplement the  Office of Electronic Health Record Modernization staff with program and  project management support, technical support, community care support,  and executive support and internal communications, among other areas.  The support contractor provides about 370 personnel to deliver project  management support. The contractor reported as of January 2019 that it  had achieved the following accomplishments, among others:", "Developed a Project Readiness Assessment Report including roles,  schedules, risk, and measures of success within the Chief Medical  Office.", "Developed a survey to identify key clinical priorities for data migration  related to patient safety and clinical quality.", "Coordinated the site visit schedule and logistics with initial operating  capability sites and conducted site surveys at eight outpatient clinics.", "By establishing a program office reporting to the Deputy Secretary, VA  has begun to build a framework to demonstrate senior agency  management support of the program. Establishing the program office also  focuses oversight and program management of the EHRM program."], "subsections": []}, {"section_title": "VA Has Established Program Governance and Is Working on Developing a Joint Management Structure with DOD", "paragraphs": ["Implementing collaborative governance brings together key agency  executives to discuss investment performance and increases  accountability. In addition, it is critical for program officials to be actively  engaged with stakeholders to ensure the success of a major acquisition.", "The department has established a governance structure that includes  multiple levels of governance bodies and stakeholders. In addition, VA  has prepared charters for the governance boards and identified board  membership. According to the charters for the governance bodies, the  structure is intended to address technical and functional issues, as well  as any joint management issues that arise between VA and DOD as both  departments implement the Cerner EHR.", "As of January 2019, the EHRM program governance structure was  comprised of a Steering Committee, Governance Integration Board,  Functional Governance Board, Technical Governance Board, and EHR  Councils. EHRM program officials have stated that the charters for these  boards, which describe their membership and responsibilities, will  continue to evolve as the program matures.", "The Steering Committee, the highest board in the program  governance structure, advises the VA Secretary on the progress and  performance of the EHRM program toward meeting program goals  and outcomes and providing strategic direction on program  implementation. This committee is chaired by the Deputy Secretary of  VA. Voting members of the committee include, among others, the VA  CIO and the Under Secretary for Health.", "According to the draft charter, the Steering Committee is expected to  resolve any items that cannot be resolved at the level of the next  lower-level board and is to meet at least quarterly. However, as of  January 2019, the Steering Committee had not met. According to  program officials, other reviews, such as a monthly program review  with the Deputy Secretary, beginning in November 2018, have  provided executive-level oversight of the EHRM program and have  met the purpose of the Steering Committee.", "The Governance Integration Board is responsible for integrating and  communicating efforts across all lower program governance boards  (including the Functional Governance Board and the Technical  Governance Board) to meet program goals and milestones. The  board has three voting members: the Office of Electronic Health  Record Modernization Executive Director, the Assistant Deputy Under  Secretary for Health, and the Principal Deputy Assistant Secretary for  OIT. According to the charter, this board is expected to act as  arbitrator between clinical, technical, and budget priorities and  adjudicate items that cannot be resolved at the lower-level boards.", "In addition, the Governance Integration Board serves as the EHRM  program Configuration Control Board. According to the charter, the  board is to meet on a monthly basis. According to program officials  and meeting minutes, as of January 2019, the Governance Integration  Board had met six times.", "The Functional Governance Board is responsible for providing  guidance on the functional and business community needs for the  EHR modernization efforts. This board interacts with the Technical  Governance Board as a functional and business advisor. The  Functional Governance Board is chaired by the program office\u2019s Chief  Medical Officer and includes members from a variety of VHA  functional areas (e.g., nursing, community care, and patient safety).  According to the charter, the board is to meet on a biweekly basis and  is to provide guidance to address functional decisions escalated from  the EHR Councils. According to program officials and meeting  minutes, as of January 2019, the Functional Governance Board had  met 10 times.", "The Technical Governance Board is responsible and accountable for  all decisions related to EHRM program technical transformation  efforts. The board is expected to provide technical decision  recommendations and collaborate with DOD and other external  partners. The chair of this board is the Office of Electronic Health  Record Modernization\u2019s Chief Technology and Integration Officer.  Other voting members include an OIT CIO representative and  selected technical directors from within the Office of Electronic Health  Record Modernization. The board\u2019s draft charter specifies that it is to  meet on a biweekly basis. According to EHRM program officials, as of  January 2019, the Technical Governance Board had met 16 times.", "The EHR Councils are working groups comprised of subject matter  experts from both clinical and functional (i.e., business) domains that  are to work with Cerner to provide input and recommendations for  developing and validating standard workflows. As of October 2018, a  total of 12 councils had been established to address clinical  processes and six councils had been established to address business  processes. A total of 121 VHA field office staff and 100 VHA central  office staff were appointed to these councils.", "In addition, the councils have eight planned national workshops and  seven planned local workshops. These workshops are ongoing and  are expected to be completed by October 2019. According to program  officials, the national workshops are intended to establish a national  baseline for workflow configuration decisions. The local workshops  are to review the national baseline and make integration decisions to  suit local needs.", "Figure 2 depicts the relationships among VA\u2019s EHRM program  governance bodies.", "In addition to the program\u2019s governance, the Secretaries of VA and DOD  issued a joint memorandum in September 2018 asserting the need to  establish a joint management structure, which could have responsibilities  beyond those currently within the purview of the Interagency Program  Office. According to the agency officials, the joint management structure  will be expected to leverage lessons learned by DOD from its experience  in deploying the Cerner system, such as the timing of infrastructure  upgrades. Further, in December 2018, the departments chartered a Joint  Electronic Health Record Modernization Work Group to assess the  departments\u2019 existing EHR modernization strategies and efforts.  According to its charter, the work group is also intended to develop and  design recommended approaches, processes, and organizational  structures to optimize the use of the departments\u2019 resources in pursuit of  EHR interoperability objectives.", "The joint working group is to develop short- and long-term  recommendations to support four objectives to provide: a single accountable authority to facilitate decision-making and an organizational structure to support the delivery of a single,  coordinated clinical and business workflows; and a coordinated implementation plan and detailed timelines.", "According to EHRM program officials, the joint working group is to define  the joint management structure to be used to coordinate between the  departments. According to the charter, the goal is for the recommended  joint organization to be operational by the end of September 2019."], "subsections": []}, {"section_title": "VA and Cerner Conducted Site Assessments to Refine the Scope of Work", "paragraphs": ["As previously discussed, according to EHRM program officials, the  department determined that site-specific assessments are required to  allow Cerner to appropriately identify the requirements for system  implementation at each site. To refine the scope of work required for  initial operating capability, Cerner and the department conducted  assessments, beginning in July 2018, at the three sites identified to be  part of the initial operating capability of the program. These site  assessments included, among other things, an assessment of the IT  infrastructure at each site and identification of site-specific requirements.", "Additional site assessments are planned at every facility before the  Cerner system will be deployed at each location. According to the task  order, the assessments are expected to provide perspective on the  current state of technical and clinical operations of each facility beyond  VA\u2019s current documentation. For example, Cerner is expected to  document all interfaces with medical devices, third-party systems and  other data sets at each site, as well as update monthly a site readiness  checklist to inform comprehensive deployment planning.", "According to the assessments of the three initial operating capability  sites, a number of issues have been identified such as updating or  replacing infrastructure and workstations to be compatible with the Cerner  COTS system. In addition, according to the site assessments, the  services offered by the department, such as telehealth and behavioral  health, are generally more expansive than commercial deployments and  will require increased collaboration between VA and Cerner to meet  business and system requirements. Thus, the assessments are intended  to position Cerner and the department to have more information readily  available in order to better plan for site-specific issues prior to actual  implementation."], "subsections": []}, {"section_title": "VA Is Preparing Program Plans for Implementation", "paragraphs": ["Program planning is critical for ensuring effective management of key  aspects of an IT program and serves as the basis for controlling and  managing project performance. These key aspects include, for example,  identification of the program\u2019s scope, responsible organizations, costs,  and schedules.", "The Office of Electronic Health Record Modernization Executive Director  approved an initial Program Management Plan for the EHRM program in  November 2018. According to the plan, it is to be used to guide the  management of the EHRM program and defines the program\u2019s policies  and processes necessary to achieve the program\u2019s goals. It briefly  defines the program\u2019s scope and strategy, including the assumptions  made. For example, according to the plan, the EHRM program assumes  that VA and DOD will use a single instance of the Cerner system. Further,  it states that both the legacy VistA data and EHRM data will be available  to both VistA and new system users during the transition.", "The Program Management Plan also identifies a series of subordinate  plans that have been developed to further elaborate on specific program  planning and execution activities. For example, the plan summarizes the  Deployment Management Plan, which details the strategy and tasks  required from initial site assessment through configuration, testing,  training, change management, deployment, and transition to sustainment.", "The plan also describes the Schedule Management Plan, which defines  the development and maintenance of the integrated master schedule for  the life of the program. Thus, the Program Management Plan provides the  guidance for where to look for key planning information for the  department.", "The EHRM program also developed a draft Risk Management Plan,  dated September 2018, that defines how risk and issue planning,  analysis, and management are to be implemented. The draft risk  management process consists of risk identification and mitigation,  including conducting risk management planning, identification, analysis,  response planning, response identification, and monitoring. According to  the plan, management of overall program risk is intended to keep risk  exposure within an acceptable range and maximize the likelihood of  achieving overall objectives.", "In addition, the EHRM program developed plans for change  management, communications, and training activities to ensure that VA  clinicians, staff members, volunteers, and veterans understand and are  ready for the changing systems and processes that will impact them. The  initial versions of the plans were delivered by Cerner in November 2018.  The program\u2019s approach is to continue to evolve these plans as the  program matures. By developing these program plans, VA is taking steps  to ensure effective management of key aspects of the EHRM program."], "subsections": []}, {"section_title": "VA Established a Program Baseline for Achieving Initial System Deployments", "paragraphs": ["Baselined program plans act as a guide throughout the life of an  investment to provide a basis for measuring performance, identify who is  accountable for the deliverables, describe the implementation approach  and interdependencies, identify key decisions, and embed quality  assurance and reviews. Ultimately, baseline management demonstrates  that a project is under financial and managerial control.", "According to EHRM program officials, on October 30, 2018, the program  conducted a review of the time period from contract award through initial  operating capability. The review validated the scope of the program for  the transition of VistA to the initial operating capability sites, identified an  initial work breakdown structure, and included an integrated master  schedule and a cost baseline. The results of this review established a  baseline for the initial operating capability and changes to the baseline  are subject to change control. Also, as a result of the review, the Office of  Electronic Health Record Modernization is to conduct monthly program  reviews to inform the Deputy Secretary of the status of the EHRM  program.", "According to EHRM program officials, upgrades to the IT infrastructure  are to be accomplished by OIT, and the local area network infrastructure  is to be upgraded at all initial operating capability sites prior to  implementation of the new system. As baselined, upgrades of end user  devices are scheduled to be completed at the Mann-Grandstaff site by  September 2019, the American Lake site by October 2019, and the  Seattle site by November 2019. Program officials have stated that the  goal is to have infrastructure upgrades at a site completed 6 months  before the site begins to implement the Cerner system. However, in May  2019, EHRM program officials indicated that infrastructure updates may  be delayed for the initial sites by up to 3 months.", "After an evaluation of the initial operating capability, the EHRM program  is to determine whether the minimum operational capabilities have been  achieved. Figure 3 shows a timeline of the baselined implementation  milestones for the initial sites, established at the review held in October  2018.", "The baseline review also included identifying and addressing program  risks related to the Cerner system implementation. The review identified  10 program risks, prioritized the risks by probability and impact, and  assigned mitigation plans for the risks. For example, the review identified  the risk that if required infrastructure upgrades were not implemented,  then VA would not be able to deploy a fully operational EHR system. The  program identified development of acquisition strategies to address  infrastructure requirements from the site assessments as an action to  mitigate this risk.", "By establishing a program baseline for the initial operating capability, VA  has instituted a basis for measuring actual versus planned program  performance. In addition, the risk mitigation plans provide an approach to  address the identified risks."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["VA lacks a comprehensive definition of the VistA system that captures the  complexity of the system, the environment in which it operates, and the  local customizations that have evolved in the VistA instances over many  years. Consequently, VA has engaged in efforts to provide additional  insight into the system. The department plans to continue to conduct  comprehensive site-specific assessments with Cerner to refine its  understanding of the unique VistA instances and the environment in  which the system operates. The continuation of planned site assessments  should help VA better define VistA.", "With regard to calculating costs for VistA, the department has identified  reliable costs for approximately $1 billion in development and sustainment  for the system over 3 fiscal years. However, VA was not able to  sufficiently demonstrate the reliability of an additional $1.3 billion of costs  identified and omitted other relevant costs from the total. The cost  deficiencies existed largely because VA officials were uncertain about  what to identify as part of VistA; documentation related to certain  categories of costs was incomplete; and a documented methodology for  identifying and reporting those costs does not exist. As a result, VA lacks  the comprehensive and reliable cost information needed to make critical  management decisions for sustaining the system and ensuring an  accurate basis for reporting on the return on its investment for replacing  VistA.", "VA has taken a number of actions to prepare for the transition from VistA  to the Cerner system, such as establishing and beginning to staff a  program office, forming a governance structure, conducting site  assessments at initial sites, preparing program plans to guide the initial  implementation, and setting an initial program baseline to help guide  implementation of the system at three key sites."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of VA should direct the Under Secretary for Health and the  Assistant Secretary for Information and Technology/Chief Information  Officer to develop and implement a methodology for reliably identifying  and reporting the total costs of VistA. The methodology should include  steps to identify the definition of VistA and what is to be included in its  sustainment activities, as well as ensure that comprehensive costs are  corroborated by reliable data. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["VA provided written comments on a draft of this report. In its comments  (reprinted in appendix II), the department generally agreed with our  conclusions and concurred with our recommendation. The department  stated that it will provide the actions it plans to take to address the  recommendation within 180 days. VA also provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of VA, 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 staffs have any questions on matters discussed in this  report, please contact me at (202) 512-4456 or harriscc@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to: (1) determine the extent to which the Department  of Veterans Affairs (VA) has defined the Veterans Health Information  Systems and Technology Architecture (VistA), (2) evaluate VA\u2019s annual  costs to develop and sustain VistA, and (3) describe the actions VA has  taken to transition from VistA to the Cerner system.", "To address the first objective, we examined VA documentation including  the VA Monograph, reports from the VA Systems Inventory, and  documents listed in the VA Software Document Library. These  documents were cited by VA officials as sources that define the VistA  system and provide information on modules and interfaces. Our review  and compilation of information from these three sources enabled us to  describe the various sources used at the department to document  information about the VistA system and identify the limitations of each  source. We also examined the VistA Product Roadmap, which described  modernization plans and achievements related to VistA. Further, we  interviewed officials from the Veterans Health Administration (VHA) to  obtain information on additional efforts undertaken by the department to  further understand and define VistA.", "In addition, we reviewed program documentation related to three  analyses undertaken by VA to further define VistA. These analyses  included the department\u2019s efforts to ascertain variances between versions  of VistA, identify components of VistA to be replaced by the Cerner  System, and document the current state of a sample instance of VistA.  For example, we examined VA documentation that described software  modules available in the department\u2019s VistA product and program  documentation identifying components of VistA to be replaced by the  Cerner system. In addition, our review of a visual mapping developed for  Electronic Health Record Modernization (EHRM) program officials  depicting the environment in which VistA operates allowed us to describe  the size and complexity of the system and how it is used by the  department.", "Further, we compared the extent to which VA has defined VistA with  criteria for defining information technology (IT) systems described in  GAO\u2019s Standards for Internal Control in the Federal Government and our  Cost Estimating and Assessment Guide. In addition, we reviewed EHRM program documentation related to site assessments that have taken  place at initial operating capability sites and are planned for future sites.  Specifically, we reviewed the relevant contract task order to understand  how site assessments were planned and to identify site-specific gaps  between the current VistA system in use and the target future Cerner  system. We supplemented our documentation reviews with information  obtained through interviews with officials from VA\u2019s Office of Information  and Technology (OIT), VHA, and the EHRM program office.", "To address the second objective, we examined department  documentation of costs associated with the development and sustainment  (operation and maintenance) of VistA for fiscal years 2015, 2016, and  2017. These 3 fiscal years were selected because development and  sustainment cost information for full fiscal years should have been  available during the time period in which we conducted our evaluation. To  compile the total costs, we examined all categories of costs identified by  VA to determine reliability of the source data. We also discussed the  methodology VA used related to identifying costs and estimating costs  when source data was not available with officials from the EHRM  program. We compared the identified cost data to best practices  described in GAO\u2019s Cost Estimating and Assessment Guide that are the  basis for effectively capturing reliable program costs. The guide also  describes the importance of documenting the methodology by which  costs are included and how they are calculated in detail, step by step, to  provide enough information so that someone unfamiliar with the program  could easily recreate or update cost calculations.", "Specifically, we analyzed all cost documentation provided by the  department over the course of our work. For example, OIT officials  identified VistA costs tracked under three programs\u2014VistA Evolution,  Interoperability, and Virtual Lifetime Electronic Record (VLER) Health\u2013 and VHA officials reported that costs for the system were tracked  separately from OIT through various types of contracts and agreements  associated with VistA Evolution. In regard to the OIT and VHA program  data, VA provided detailed source data that we analyzed for reliability and  verified the calculations of costs identified over the course of our work.", "We also examined the documentation and controls related to the IT  systems VA identified as the source of these cost data. The systems  included OIT\u2019s Budget Tracking Tool and VA\u2019s Financial Management  System. Further, we discussed the nature of the cost data, the rationale  behind why each cost line item was included, and any anomalies found  during our analysis with cognizant OIT and VHA officials. For example,  anomalies included omitted contract numbers or transposed entries in  summary tables. As a result of these efforts, OIT and VHA were able to  sufficiently demonstrate the reliability of the program data for the purpose  of calculating costs for VistA.", "Officials from the EHRM program also identified costs that were not  directly tracked under the program areas previously mentioned. OIT and  VHA relied upon subject matter experts or vendors to identify costs or to  calculate estimates for cost categories such as sustainment,  maintenance, co-location, hosting, pay, administrative, and infrastructure  costs related to VistA operations. We analyzed the data provided for  reliability consistent with GAO Cost Estimating and Assessment Guide  over the course of our work.", "Further, we discussed the nature of the cost data, the rationale behind  why each cost line item was included, and any anomalies found during  our analysis with cognizant OIT and VHA officials. We also interviewed  OIT and VHA subject matter experts and vendors identified by VA to  examine the rationale or methodology for how the costs were identified  and estimated. During the course of our work, VA continued to revise  these estimates as part of the department\u2019s efforts to identify the costs for  VistA and could not provide a consistent, documented methodology for  how the costs were calculated or provided only summary costs that could  not be analyzed. As such, VA was not able to sufficiently demonstrate the  reliability of legacy VistA, related software, and OIT personnel costs for  our purpose of calculating the total costs for VistA. This report does not  conclude that the data are unreliable, only that a reliability determination  could not be made during the course of our work. However, given the  importance of these related costs to VistA, we have summarized and  reported these costs in the total cost amount for VistA to more accurately  approximate the magnitude of total costs, but have not reported itemized  costs in these areas.", "Finally, the department identified that there were additional costs that  should be included in the compilation of the total costs for VistA related to  additional hosting costs and data standardization and testing. However,  the department did not provide such data to include in the total costs for  VistA.", "To address the third objective, we examined the department\u2019s decision  memorandums and charters establishing the Office of Electronic Health  Record Modernization and the EHRM program to manage VA\u2019s transition  from VistA to Cerner. We also examined the statement of work for the  program support contract as well as VA\u2019s draft charters, program  briefings, and organization charts that describe plans to govern the  program to acquire the Cerner system. Specifically, we examined VA\u2019s  plans to establish a structure for governing technical and functional issues  and joint decisions that arise with the Department of Defense.", "To understand how site assessments were used to refine the scope of  work, we examined the site assessment task order and the site  assessment reports. To understand how the program office plans to  manage the program, we examined the EHRM Program Management  Plan and subordinate plans that guide the management of the program  and describe ongoing efforts to define the policies and processes  necessary to achieve the program\u2019s goals. To address the program\u2019s  establishment of an initial program baseline, we examined the decision  memorandum approving the award of the Cerner contract, the briefings  presented to program stakeholders at the initial program baseline review,  and the documents supporting the program baseline review. We  supplemented our analysis with information obtained through interviews  with relevant department officials including the Executive Director and  Chief Technology and Integration Officer for the EHRM program.", "We conducted this performance audit from August 2017 to July 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mark Bird (Assistant Director),  Jennifer Stavros-Turner (Analyst in Charge), John Bailey, David Blanding,  Chris Businsky, Juan\u00e1 Collymore, Rebecca Eyler, Jacqueline Mai, Scott  Pettis, and Charles Youman made key contributions to this report."], "subsections": []}]}], "fastfact": ["The VA\u2019s health information system is more than 30 years old and is costly to maintain. Over nearly 2 decades, VA\u2019s multiple modernization efforts have continually fallen short.", "In June 2017, VA announced it would buy the same system DOD is implementing. VA plans to continue using its current system during a decade-long transition.", "We reviewed the early stages of this transition. Among other things, we found VA lacked insight into the total costs for the current system. This could make it more difficult to make decisions during the transition to the new system.", "We recommended VA more reliably identify and report system costs."]}
{"id": "GAO-18-296", "url": "https://www.gao.gov/products/GAO-18-296", "title": "U.S. Department of Agriculture: Additional Data Analysis Could Enhance Monitoring of U.S. Cattle Market", "published_date": "2018-04-10T00:00:00", "released_date": "2018-04-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The U.S. cattle industry accounted for about $64 billion in receipts in 2016, according to USDA. The price of fed cattle has fluctuated widely from 2013 through 2016 and experienced a sharp downturn beginning in late 2015, raising concerns about the market and questions about USDA's oversight.", "GAO was asked to review issues related to the U.S. cattle market. This report (1) describes key factors that affected changes in fed cattle prices from 2013 through 2016; (2) describes what CFTC found about possible trading irregularities in the futures market for fed cattle in 2015 and any changes to the futures contract for fed cattle since 2015; and (3) examines factors that may affect USDA's routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market. GAO reviewed economic data and USDA and CFTC documentation; analyzed transaction data on beef packer purchases from 2013 through 2015; and interviewed recognized experts, cattle industry stakeholders such as feedlot operators and packers, and agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Supply and demand factors , such as a drought that affected the price of cattle feed, affected changes in prices of fed cattle\u2014those ready for slaughter from 2013 through 2016. According to industry experts and GAO's analysis, a drought from late 2010 to early 2013 led the cattle inventory to fall and rise and, in turn, fed cattle prices to fluctuate (see figure). GAO's analysis of cattle market data from the U.S. Department of Agriculture (USDA) also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices.", "The Commodity Futures Trading Commission (CFTC)\u2014an agency that regulates cattle futures markets where participants buy and sell standardized agreements for cattle at an agreed-upon price at a specified date in the future\u2014did not find evidence of trading irregularities in the cattle futures market in 2015. However, to better align futures contracts with the actual fed cattle market, CFTC reviewed changes to contract terms and will continue to monitor those changes.", "The Packers & Stockyards Program (P&SP), which oversees the cattle industry within USDA's Agricultural Marketing Service (AMS), does not have routine access to daily data for transactions between feedlot operators, which produce fed cattle, and packers. Those data are collected by AMS's price reporting group, which does not routinely share them with P&SP because officials said it is prohibited by statute from doing so. The Livestock Mandatory Reporting Act of 1999 specifies that the Secretary of Agriculture may authorize the sharing of these data for enforcement purposes, which USDA interprets as an ongoing investigation, not market monitoring. In November 2017, USDA reorganized P&SP under AMS and officials said it was too early in the reorganization to determine whether AMS would view routine sharing of these data any differently. Reviewing the extent to which these data can be shared with P&SP provides an opportunity to enhance P&SP's oversight of the fed cattle market. Determining whether it is advisable to request additional exceptions from information disclosure restrictions from Congress would help USDA strengthen its oversight."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, including that USDA review the extent to which, under statute, the price reporting group can share daily transaction data with P&SP, and if USDA determines the statute does not permit such sharing and it is advisable, submit to Congress a proposal to allow such sharing. USDA agreed and subsequently determined that the act does not allow for such sharing and it would not be advisable citing concerns about the public's trust in the program."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. cattle industry is an important part of the nation\u2019s economy,  accounting for about $78 billion in receipts in 2015 and about $64 billion  in 2016, according to U.S. Department of Agriculture (USDA) documents.  Prices for fed cattle\u2014cattle ready for slaughter and processing for human  consumption\u2014fluctuated widely in recent years. Specifically, prices  increased from 2013 through 2014, decreased somewhat in early 2015,  and then decreased rapidly starting in August 2015. These fluctuations  may have affected profitability for some market participants, and some  producers who raise and feed cattle (i.e., cow-calf and feedlot operators)  have expressed concerns about the downturn and raised questions about  whether the prices they received for their cattle decreased because of  potential market manipulation and industry consolidation. Underlying  some market participants\u2019 concerns about the recent price fluctuations  are questions about the level of competition at the slaughter and  processing level. Specifically, according to USDA documents, four beef  packers (packers)\u2014businesses that slaughter and process fed cattle\u2014 comprise more than 80 percent of the national packing market and have  done so since the mid-1990s.", "USDA agencies have statutory responsibilities to oversee and facilitate  the functioning of the cattle market. For example, within USDA\u2019s  Agricultural Marketing Service (AMS), the Packers & Stockyards Program  (P&SP) is an oversight program that, among other things, is responsible  for monitoring the cattle industry and halting unfair and anticompetitive  marketing practices. In addition, AMS\u2019s Livestock Mandatory Reporting  program (price reporting group) collects information on packers\u2019 daily  livestock purchases and provides public price summaries to facilitate  open markets and provide market participants, both large and small, with  comparable levels of market information for fed cattle, according to  USDA.", "The cattle industry has long used futures contracts\u2014standardized  agreements to buy or sell cattle at an agreed-upon price on a specified  date in the future\u2014to manage the risks associated with price changes.  However, the futures market for fed cattle\u2014where participants buy and  sell such contracts\u2014has experienced a relatively high degree of volatility  since late 2015, which has been a source of concern for some futures  market participants. Some experts have also raised questions about  whether fed cattle and futures prices are appropriately converging\u2014 meaning that the futures prices, which usually start out higher, move  closer to the cash price as a futures contract nears its expiration date. If  prices do not converge appropriately, futures contracts become less  useful as a tool for managing risks associated with price changes. The  Commodity Futures Trading Commission (CFTC) is responsible for the  oversight of the futures markets, including the Chicago Mercantile  Exchange, a self-regulatory organization that operates the futures market  for fed cattle. In our past work, we have reviewed the relationship  between market concentration and prices for cattle and other  commodities as well as USDA\u2019s role in facilitating the effective function of  the market and made recommendations to strengthen oversight of the  market.", "You asked us to review issues related to the U.S. cattle market. This  report (1) describes key factors that affected fed cattle price changes from  2013 through 2016; (2) describes what CFTC found about possible  trading irregularities in the futures market for fed cattle in 2015 and any  changes to the futures contract for fed cattle since 2015; and (3)  examines factors that may affect USDA\u2019s routine monitoring to ensure  against discriminatory or anticompetitive practices in the fed cattle  market.", "To describe the key factors that affected fed cattle price changes from  2013 through 2016, we analyzed economic and other market data  collected by federal agencies, including data from USDA\u2019s Economic  Research Service, National Agricultural Statistics Service, and AMS. We  also collected USDA transaction data for 2013 through 2015 on packer  purchases of fed cattle and analyzed these data using a variety of  methods, including econometric analysis to identify key factors that  affected fed cattle price changes. We did not quantify or rank the impact  of various factors. To assess the reliability of the economic and  transactions data, we interviewed officials who maintain the data,  reviewed related documentation, and tested the data for missing or  erroneous values. We determined that the data were sufficiently reliable  for our purposes. In addition to analyzing these data, we reviewed a  P&SP investigation on the 2015 drop in fed cattle prices.", "To describe what CFTC found about possible trading irregularities in the  futures market for fed cattle in 2015 and any changes to the futures  contract for fed cattle since 2015, we reviewed and summarized CFTC  documentation on the agency\u2019s oversight activities. We also reviewed  CFTC data and its analyses of trading patterns on specific dates in 2015.  To assess the reliability of these data and analyses, we conducted a  review of the data and methods that CFTC used in these analyses by, for  example, interviewing knowledgeable officials, and determined the work  to be sufficiently reliable for our purposes. In addition, we reviewed and  summarized documentary evidence from the Chicago Mercantile  Exchange on its analysis of the market and on its changes to terms in  futures contracts for fed cattle.", "To examine factors that may affect USDA\u2019s routine monitoring to ensure  against discriminatory or anticompetitive practices in the fed cattle  market, we met with officials in AMS\u2019s P&SP and price reporting group to  discuss their roles and responsibilities, and we gathered relevant  oversight documentation. We also used the results of our analysis of  USDA transaction data on packer purchases of fed cattle. We compared  USDA actions with standards for internal control in the federal  government, specifically those related to the communication and use of  quality information.", "To address all our objectives, we conducted interviews with (1) experts in  cattle markets, identified by recognition in the professional or academic  community, and relevance of published work or research to cattle  markets; (2) stakeholders selected to represent a variety of views,  including representatives of small and large feedlot operators (feeders),  packers, futures market speculators, the Chicago Mercantile Exchange,  and an organization that focuses on competition and antitrust issues; and  (3) agency officials from AMS\u2019s P&SP and price reporting group, USDA\u2019s  Office of the General Counsel, and CFTC. We then performed a content  analysis of all interviews. The views of the experts and stakeholders we  interviewed cannot be generalized to all others with expertise in the cattle  markets or all cattle market stakeholders, but they provided valuable  insights to our work. Appendix I presents a more detailed description of  the scope and methodology of our review.", "We conducted this performance audit from August 2016 to March 2018 in  accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The livelihood of cattle producers, such as cow-calf operators and  feeders, depends fundamentally on the price they receive for their cattle  and the cost to produce these cattle. Numerous supply and demand  factors can affect this. For example, the long production cycle for cattle  means that producers must make decisions about herd size long before  they can price and sell their cattle. Producers\u2019 profits also hinge on how  weather affects the supply and cost of forage and feed grains.  Additionally, the outcome for producers depends on the effect of  consumer preferences on demand for and price of beef. International  trade in cattle and beef and competition from other protein sources\u2014such  as poultry and pork\u2014are also among the many supply and demand  factors that influence cattle prices and producers\u2019 incomes."], "subsections": [{"section_title": "Cattle Production Cycle and Recent Price Trends for Fed Cattle", "paragraphs": ["The cattle production cycle, which runs from birth to slaughter, for most  cattle generally ranges from 15 months to 24 months. Calves are usually  weaned from cows when they weigh about 500 pounds. They may then  move to stocker or growing operations until they weigh 600 to 800  pounds. At this point, they move to feedlots, which produce fed cattle.  Specifically, feedlots specialize in feeding cattle a concentrated diet of  corn and other grains to enable them to reach between 950 and 1,300  pounds. They are then transported to and slaughtered at a packing plant.  Feedlots and packing plants are located throughout the United States but  are concentrated in states such as Texas, Oklahoma, Kansas, Nebraska,  Colorado, South Dakota, and Iowa. Figure 1 traces the movement of  cattle from breeding to processing and consumption. Figure 2 shows the  locations of cattle in feedlots.", "According to price data from AMS\u2019s price reporting group, inflation- adjusted fed cattle prices have generally been increasing since about  2010. Fed cattle prices rose from about $125 per hundred pounds (live  weight) in July 2013 and began to increase rapidly in fall 2013. Prices  reached a historical high of about $173 per hundred pounds in November  2014, began to drop at the beginning of 2015, and then decreased  dramatically in August and September of 2015, decreasing to about $123  per hundred pounds by the end of that year\u2014an overall drop of about 30  percent from November 2014. In 2016, after briefly increasing, prices  dropped further throughout much of the year to about $100 per hundred  pounds\u2014an overall drop of about 40 percent from November 2014.  Prices then rose in the first half of 2017 before dropping again midyear.  See figure 3 for more detailed information on fed cattle price changes  over the past 10 years, including a trend line."], "subsections": []}, {"section_title": "Function of the Futures Market for Fed Cattle", "paragraphs": ["Market participants use the futures market for fed cattle to manage the  risk associated with price changes, determine prices, or speculate on  price changes. Futures contract terms that reflect the underlying fed cattle  market help ensure that prices in both the fed cattle and futures markets  are closely linked because they are influenced over the long run by the  same market forces. The two markets also show similar patterns because  participants in both markets tend to rely on the same types of information  when entering into transactions. The Chicago Mercantile Exchange  establishes the terms of futures contracts, including the quantity, quality,  and locations to which fed cattle bought and sold on the futures market  may be delivered. The only aspect left unspecified is the price at which  each individual contract will be bought or sold.", "The futures market provides cattle market participants with a means to  hedge\u2014shift unwanted price risk to others more willing to assume the  risk. Some buyers and sellers in the fed cattle market, such as packers  and feeders, trade in futures contracts to hedge the risks of price changes  in the fed cattle or wholesale and retail beef markets. For example, a  feeder concerned that fed cattle prices may decline in the future may  decide to lock in his or her sell price by selling futures contracts: if fed  cattle prices decline, profits from the futures contracts will generally offset  losses from the lower fed cattle prices. The same is true for a meat  packer concerned about prices going up. The packer might buy a futures  contract to lock in a purchase price, with futures profits offsetting higher  fed cattle prices. Other futures market participants\u2014generally,  speculators\u2014may take a view about whether the price of fed cattle may  go up or down and, based on that view, enter into the market as a buyer  or seller. For example, speculators could purchase futures contracts from  cattle market participants if they think that futures prices may increase in  the future or, conversely, sell a futures contract if they believe prices may  decline. These speculators provide the market with additional liquidity so  that cattle market participants have willing buyers and sellers with whom  to conduct transactions."], "subsections": []}, {"section_title": "Cattle Market Oversight Roles and Responsibilities of USDA and CFTC", "paragraphs": ["Within USDA, AMS\u2019s P&SP and price reporting group play specific roles  in the cattle market. For example, P&SP performs various functions to  help USDA execute its oversight responsibilities for cattle markets, which  include halting unfair and anticompetitive marketing practices. To help  USDA execute these oversight responsibilities, P&SP collects the  following types of information to conduct both routine monitoring and  targeted investigations:", "Packers\u2019 annual reports. Under the Packers & Stockyards Act, each  packer must submit an annual summary of operations to P&SP that  includes information on the dollar volume of cattle purchased, number  of head purchased, and some proprietary financial information. P&SP  officials use this information to, among other things, review the  financial status of packers and their ability to stay solvent to pay for  their purchases.", "Transaction data from the four largest packers. P&SP officials told  us that they send letters annually to the industry\u2019s four largest packers  requesting data on their transactions with feeders. According to P&SP  officials, the packers provide P&SP with information on every  transaction made during that year. P&SP officials told us that they  also ask for new marketing agreements the packers have entered into  throughout the year, to allow officials to track marketing agreements  over time.", "Investigation information. During investigations, P&SP officials  collect evidence such as business records and witness testimony from  packers and others. P&SP can conduct investigations based on its  own initiative or based on complaints from market participants.", "If, in the course of its oversight work, P&SP determines that a competition  violation may have occurred, P&SP officials refer the case to USDA\u2019s  Office of the General Counsel, which may pursue the case or further refer  the case to the U.S. Department of Justice.", "The price reporting group\u2019s role in the cattle market is to implement the  Livestock Mandatory Reporting program as required by the Livestock  Mandatory Reporting Act of 1999. According to AMS, the purpose of the  group is, among other things, to provide information regarding the  marketing of livestock and encourage competition in the marketplace for  livestock and livestock products. To fulfill this role, the price reporting  group collects information on packers\u2019 daily livestock purchases on both  mandatory and voluntary bases.", "Mandatory. Under the Livestock Mandatory Reporting Act of 1999, all  qualifying packers must report information on all their purchases and  sales on a daily basis. The price reporting group receives daily price  data on all fed cattle that a packing plant purchases, and all the beef it  sells. According to price reporting group officials, they aggregate and  summarize the information by sector and publish it within an hour of  receipt. For example, the price reporting group publishes information  on the number of cattle transacted, proportion of each of the four  transaction types used, and the average weight and price of cattle  transacted. The price reporting group does not report information on  individual transactions or summarized information if there is a risk that  the packer may lose confidentiality due to low reporting numbers.", "Voluntary. The price reporting group collects additional voluntary  information from packers, such as data on feeder cattle transactions  and on new or unique markets (e.g., the market for grass-fed cattle).", "CFTC, an independent agency of the federal government, has exclusive  jurisdiction over futures and other derivatives markets, except otherwise  provided in law. Consistent with the Commodity Exchange Act,  CFTC\u2019s mission is to protect market users and the public from fraud,  manipulation, abusive practices, and systemic risk related to derivatives,  and to foster open, competitive, and financially sound futures markets.  This mission is achieved through a regulatory scheme that is based on  federal oversight of industry self-regulation through organizations such as  the Chicago Mercantile Exchange. As a self-regulatory organization, the  Chicago Mercantile Exchange is responsible for, among other things,  establishing and enforcing rules governing the conduct and trading of its  members and preventing market manipulation."], "subsections": []}]}, {"section_title": "A Variety of Supply and Demand Factors Affected Fed Cattle Price Changes from 2013 through 2016", "paragraphs": ["Our review identified several supply and demand factors\u2014such as a  prolonged drought that affected the price of cattle feed and the availability  of relatively less expensive protein substitutes such as pork\u2014that  affected changes in fed cattle prices from 2013 through 2016.  Furthermore, we found that varying competition levels among packers did  not appear to explain the large national price changes but may have  contributed to variations in fed cattle prices in different areas of the  country."], "subsections": [{"section_title": "Several Supply and Demand Factors Including Drought and the Retail Price of Substitute Proteins Affected Fed Cattle Price Changes", "paragraphs": ["Based on interviews with some experts, stakeholders, officials from  USDA and CFTC, and our analysis of cattle market data, several  interrelated supply and demand factors affected the large national  changes in fed cattle prices from 2013 through 2016. These factors  included drought, costs for feed, and the price of substitute proteins, such  as pork. As it relates to supply factors, from 2010 through early 2013 a  prolonged drought\u2014beginning in the southern United States in late 2010  and expanding to the High Plains in 2012\u2014affected major cattle areas.  This drought caused the supply of young cattle to decrease and then  increase and, correspondingly, the national price of fed cattle to increase  and then decrease when those cattle came to market as fed cattle. Some  experts and stakeholders we interviewed told us that cow-calf operators  may have liquidated their herds in 2012 and 2013 because the droughts  reduced the supply of forage available to raise younger cattle, and cow- calf operators could not feed as many cattle on available pasture and  rangeland. The domestic cattle inventory decreased from about 96.5  million in 2007 to about 88.5 million in 2014. This decrease in inventory  reduced the supply of fed cattle available for sale in 2013 and 2014,  which could have driven up prices for fed cattle. As the drought eased in  late 2013, it became more feasible to feed herds on forage, creating  incentives for cow-calf operators to expand their herds throughout 2014  and 2015. This increased the number of fed cattle sold for slaughter by  late 2015, and prices began to drop at that time. See figure 4 for  information on the relationship between fed cattle price changes and the  U.S. cattle inventory over the past 10 years. See appendix II for more  information on the number of U.S. cattle at various points in the supply  chain.", "Costs for feed also affected the fed cattle supply, contributing to the large  changes in fed cattle prices from 2013 through 2016. An easing of the  widespread drought in late 2013 reduced the price of corn and other  grains used to feed cattle, which, according to some experts and P&SP  officials, may have created an incentive for feeders to grow their cattle to  heavier weights before marketing them to packers. For example, the price  of corn decreased from about $6.87 per bushel in late 2012 to about  $3.50 per bushel in late 2014. According to data from USDA\u2019s price  reporting group, fed cattle weight increases from 2003 through 2013  averaged about 14 pounds per year; however, our analysis of cattle  market data from USDA showed average fed cattle weights increased by  about 40 pounds in 2015. For additional longer-term information on  increases in cattle weights, see appendix II. However, particularly heavy  cattle can receive lower prices per pound, in part because packers told us  that unusually large cuts of beef can be more difficult to sell. In 2014  when the fed cattle supply was low, P&SP officials reported that packers  were not necessarily paying lower prices for over-heavy cattle, so feeders  would not have received this price indicator to keep the cattle they sold  below certain weights. According to some experts, these heavier weights,  combined with the larger overall number of cattle offered for sale in 2015,  resulted in increased supply, exacerbating the price decline.", "Reduced demand for wholesale beef and for fed cattle also affected the  large national changes in fed cattle prices. Our analysis of cattle market  and other economic data showed that several factors reduced demand for  beef; this in turn reduced demand for fed cattle. These factors included  (1) higher wholesale beef prices and concurrently lower relative prices of  pork and chicken, which are substitutes for beef for consumers and which  would reduce demand for retail beef; (2) increases in the amount of beef  in cold storage, also limiting packer demand for fed cattle; and (3)  fluctuations in the strength of the U.S. dollar, which would shift consumer  purchases toward or away from relatively less expensive imported beef,  as well as contribute to shifts in net exports\u2014that is, total exports minus  total imports. In addition, according to some experts and stakeholders, an  overall reduction in packing capacity when packers closed several plants,  including one large plant in Texas, may have also limited packer demand  for fed cattle.", "P&SP officials conducted an investigation into the price drop beginning in  August 2015. P&SP officials told us that as they saw fed cattle prices  rapidly decreasing in August and September 2015, they included this  investigation in the agency\u2019s annual work plan for 2016. They also told us  that P&SP conducted the work based on its own initiative and not as the  result of a request from a market participant or because it received  specific information on possible wrongdoing. The P&SP investigation  reviewed changes in price spreads between fed cattle and wholesale\u2014or  boxed\u2014beef because such price spreads can serve as a rough indicator  of packer profit. P&SP found that packers may have benefitted for a short  period as the prices they paid for fed cattle decreased more quickly than  the prices they received for boxed beef, but it also found that those price  differences quickly diminished to smaller levels than before the price  drop. The report concluded that the sharp price decrease in 2015 was  likely due to a number of market factors that affected both supply and  demand, such as an increased number of fed cattle sold for slaughter and  lower relative prices for pork and chicken."], "subsections": []}, {"section_title": "Competition Levels among Packers Did Not Appear to Affect National Price Changes in the Fed Cattle Market but May Have Contributed to Price Variations in Different Areas of the Country", "paragraphs": ["Competition levels among packers varied in different areas of the country.  These variations did not appear to explain the large national changes in  fed cattle prices from 2013 through 2015 but may have contributed to  variations in fed cattle prices in different areas of the country. Specifically,  at the national level, packer competition levels were stable from 2013  through 2015. Using P&SP\u2019s annual data on transactions between  packers and feeders during this time frame, we estimated the degree of  competition in any given area by calculating market concentration levels  among packers using a measure called the Herfindahl-Hirschman Index  (HHI). From a practical perspective, a lower HHI indicates generally that  there is more competition in a market. In particular, an HHI is lowest when  a market is occupied by a large number of firms of relatively equal size  and is highest when a market is controlled by a single firm (i.e., there is  no competition in that market). Some large packing plants closed from  2013 through 2015, but the average HHI level varied by only one  percentage point (from about 51 to about 52 percent), whereas the total  price decrease from November 2014 through December 2015 was about  30 percent. Because of this, it was unlikely that variations in competition  affected the large price decrease.", "However, variations in competition levels in different areas of the country  may have contributed to price differences we observed in those areas.  The data show that the average competition level was about 51 percent,  suggesting that, on average, a given feedlot had two packing plants to  which it could sell its fed cattle. Competition levels tended to be higher in  states such as Texas, Oklahoma, Kansas, Nebraska, Colorado, South  Dakota, and Iowa, where there are more cattle on feed as we showed in  figure 2, suggesting that feeders in those areas had more packing plants  to choose from. Competition levels tended to be lower in areas that had  fewer cattle on feed, such as in the northeast and the Pacific Northwest, suggesting that feeders in those areas had fewer packing plants to which  they could sell their cattle.", "Using an econometric model, after controlling for other factors that could  affect price\u2014such as the supply and demand factors we discuss above,  or attributes of the beef produced by fed cattle such as yield and quality  grade\u2014we found that less packer competition in any given area was  associated with lower fed cattle prices in that area. Specifically, our  model estimated that fed cattle prices in less concentrated areas (those  with an HHI in the 25th percentile of our analysis) may have been about 9  percent higher than in more concentrated areas (those with an HHI in the  75th percentile of our analysis). Such competition effects can exist in  legitimately functioning markets. The results of our analysis suggest that  some packers may have been able to exercise market power in areas  with less competition. Evidence of this effect alone does not imply that  packers engaged in anticompetitive or improper behavior. For more  detailed information on our analysis, see appendix III."], "subsections": []}]}, {"section_title": "CFTC Did Not Find Evidence of Trading Irregularities in the Futures Market for Fed Cattle in 2015, and Is Overseeing Changes to Address Contract Concerns", "paragraphs": ["CFTC\u2019s regular monitoring efforts and its analysis of trading patterns,  including of particularly volatile trading days, did not find evidence of  irregularities in the futures market for fed cattle in 2015. However, CFTC  and others have expressed concern that certain terms in futures contracts  for fed cattle\u2014such as the quality of beef represented in the contract\u2014did  not sufficiently mirror the specifics of the fed cattle market, which could  make them less useful to cattle market participants for hedging risk. In  response, the Chicago Mercantile Exchange submitted changes to  contract terms to CFTC. CFTC reviewed those changes, and where the  agency found the changes consistent with the Commodity Exchange Act  and regulations, allowed or expressly approved those changes."], "subsections": [{"section_title": "CFTC\u2019s Monitoring and Analysis of Volatile Trading Days Did Not Find Evidence of Trading Irregularities", "paragraphs": ["CFTC\u2019s daily monitoring of the futures market for fed cattle did not find  evidence of trading irregularities. In addition, CFTC conducted a more in- depth review of volatile trading days in 2015 and did not identify evidence  of trading anomalies or that certain groups of traders, such as  speculators, unduly influenced the market. Our analysis of trading data  confirmed that the futures market for fed cattle experienced episodes of  higher volatility beginning in late 2015 and going through 2017 than it had  experienced in years immediately prior, and some market participants  expressed concern that this volatility could be due to possible trading  irregularities. Specifically, variations in futures market prices were  generally higher in late 2015 than in 2013 or 2014 and more frequently  reached the maximum allowed change in price for any given day, based  on rules set by the Chicago Mercantile Exchange. See figure 5 for  information on average futures prices for fed cattle and historical volatility  from 2008 through 2017.", "Some experts told us that high volatility in the futures market generally  can be the result of uncertainty or shocks in the futures or fed cattle  markets. For example, the futures market experienced high levels of  volatility in late 2003 through 2005 after bovine spongiform  encephalopathy (BSE) was first detected in a cow in the United States in  December 2003 (see appendix II for more information on BSE events  since 2003 and their impact on U.S. beef exports). More recently, the  market also experienced high levels of volatility during the financial crisis  that began in 2008 as well as in the latter part of 2015 as the price of fed  cattle rapidly decreased. However, some cow-calf operators and feeders,  including members of the National Cattleman\u2019s Beef Association and the  Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America  raised questions about whether the futures market volatility in 2015 might  be due to manipulation or to high-frequency trading, a specific type of  activity in which a speculator makes numerous trades at very high speeds  in an effort to profit from small changes in the market.", "Both CFTC and the Chicago Mercantile Exchange conduct daily  monitoring of the futures market for fed cattle, and CFTC officials told us  that they did not identify evidence of trading irregularities in 2015. In  addition, in response to concerns and a request from some cattle market  participants, CFTC analyzed trading patterns in the market, including  reviewing particularly volatile days in 2015. CFTC did not find evidence of  trading anomalies or that certain groups of traders, such as speculators,  unduly influenced the market. The Chicago Mercantile Exchange  conducted a similar review and came to similar conclusions. Both CFTC  and the Chicago Mercantile Exchange also concluded that high-frequency  trading did not contribute substantially to volatility on the days they  reviewed. Specifically, the Chicago Mercantile Exchange concluded that  the futures market volatility was predominantly the result of non-high  frequency traders placing and executing large, aggressive futures orders.", "Furthermore, as a way of comparing the use of automated and high- frequency trading in the futures market for fed cattle to related markets,  CFTC officials told us that their review found that futures contract markets  for other agricultural commodities from 2014 through 2016\u2014including for  corn, wheat, soybeans, and pork\u2014were characterized by a greater  percentage of automated trading, including high-frequency trading, than  the futures market for fed cattle. Finally, according to documentation from  the Chicago Mercantile Exchange, the high levels of volatility in the  futures market could be related to both the swift declines in fed cattle  prices and the fact that an increasing number of fed cattle are sold during  the last few business days of the week, rather than throughout the week.  Concentrating purchases to one or two days of the business week  decreases the number of price signals that the fed cattle market can  provide futures market participants. According to Chicago Mercantile  Exchange documentation, a decrease in the frequency of price signals  creates information gaps for market participants and likely contributes to  price volatility."], "subsections": []}, {"section_title": "CFTC and Some Stakeholders Expressed Concern about Cattle Futures Contract Terms, and CFTC Is Overseeing Related Changes", "paragraphs": ["CFTC and some stakeholders expressed concern that the terms of cattle  futures contracts did not adequately reflect structural changes in the fed  cattle market and that differences between the terms of futures contracts  and the fed cattle market could cause futures contracts to become less  useful to cattle market participants to hedge risks. According to Chicago  Mercantile Exchange documents, futures contract terms are designed to  match relevant commodities markets and industry standards to help  ensure that there is a two-way relationship between the futures market  and the relevant commodity market. When contract terms reflect the  market and futures markets operate properly, prices in the fed cattle and  futures markets may initially diverge, but over time should generally  converge by the time a contract expires. If the prices do not converge,  contracts become less useful to market participants as a way to hedge  risks. For example, prior to October 2017, cattle futures contracts  specified that at least 55 percent of the fed cattle in those contracts were  to produce a beef quality grade of Choice or better. From fiscal years  2013 through 2017, the percentage of beef graded nationally as Choice  or better has been higher than this\u2014at times as high as about 80 percent,  although proportions have varied by region. Stakeholders have expressed  concern that because the beef quality specifications in futures contracts  for fed cattle are lower than the beef quality produced by animals traded  in the fed cattle market, this difference may decrease the value of those  futures contracts. Additionally, stakeholders expressed concern that this  difference can negatively impact whether prices in the futures and fed  cattle markets effectively converge as expected.", "In response to these concerns, the Chicago Mercantile Exchange made  changes to the terms of futures contracts for fed cattle in 2016 and 2017,  which were reviewed and approved by CFTC. To better align futures  contracts with the fed cattle market, the Chicago Mercantile Exchange  has increased the quality percentage of Choice or better quality beef to  60 percent, starting with October 2017 futures contracts, and to 65  percent Choice or better quality beef, starting with October 2018 futures  contracts.", "In 2016, also in response to concerns raised by stakeholders, CFTC  asked the Chicago Mercantile Exchange to provide information on  additional measures under consideration by the exchange, such as  changing the terms in futures contracts for fed cattle and making them  more consistent with the fed cattle market. As a result of dialogue  between the two entities, the Chicago Mercantile Exchange revised its  delivery process and expanded the timeframe for making deliveries,  which has allowed it to add locations where cattle can be delivered to  satisfy a futures contract. According to CFTC, this change made  delivery more accessible and improved the connection between the fed  cattle and futures markets. The Chicago Mercantile Exchange submitted  these and similar changes to CFTC. CFTC reviewed those changes, and  where the agency found the changes consistent with the Commodity  Exchange Act and regulations, allowed or expressly approved those  changes. Chicago Mercantile Exchange representatives told us that these  changes will help futures contracts better reflect the fed cattle market.  CFTC officials said that they believe the changes have the potential to  strengthen the performance of the futures market for fed cattle as a risk  management and price discovery tool, but will continue to monitor the  effectiveness of the changes."], "subsections": []}]}, {"section_title": "P&SP Does Not Analyze Some Key Transaction Data", "paragraphs": ["Two factors affect P&SP\u2019s routine monitoring to ensure against  discriminatory or anticompetitive practices in the fed cattle market. First,  USDA\u2019s view of its legal authority does not allow P&SP routine access to  the data from AMS\u2019s price reporting group on daily transactions between  packers and cattle feeders. Second, P&SP does not periodically analyze  the transaction data that it collects from packers to learn more about the  operation of the fed cattle market."], "subsections": [{"section_title": "P&SP Does Not Have Routine Access to Daily Transaction Data That the Price Reporting Group Collects", "paragraphs": ["P&SP carries out its oversight responsibilities through monitoring and  investigations. The price reporting group, housed within AMS with P&SP  (which moved to AMS in November 2017), collects extensive data on  transactions between packers and feeders via livestock mandatory price  reporting as required by law. The price reporting group does not  regularly share these data with P&SP, so the data are not available for  P&SP to use for regular monitoring activities to flag potential issues for  investigation. Currently, according to USDA officials, P&SP officials may  request and receive only specific portions of price reporting data based  on individual investigations it has already decided to conduct. For  example, P&SP was able to analyze price reporting data in the course of  its investigation into the price drop in 2015.", "Based on USDA\u2019s reading of the Livestock Mandatory Reporting Act of  1999 provisions that prohibit the disclosure of facts or information  acquired through the mandatory reporting program, the price reporting  group has not routinely shared the data with P&SP. The act provides  some exceptions to the disclosure prohibition. For example, the act allows  the price reporting group to share data, as directed by the Secretary of  Agriculture, for enforcement purposes. USDA officials told us that they  do not believe this exception allows the price reporting group to provide  routine access to the data for monitoring activities. The officials told us  that while the statute does allow for sharing of price reporting data for  enforcement purposes, they interpret the term \u201cenforcement purposes\u201d to  be a specific ongoing investigation, not market oversight. USDA officials  note that the act does not discuss market oversight; rather, it was  established to help market participants make business decisions through  USDA\u2019s collection and dissemination of price data.", "P&SP officials told us that regular access to price reporting data would  allow them to more routinely conduct analyses as part of their routine  market monitoring activities similar to those carried out in their  investigations as part of their routine market monitoring activities.  Specifically, the officials said that going forward, price reporting data  could be used to detect price outliers more quickly and help P&SP identify  potential anticompetitive behavior; for example, where buyers might  agree to take turns buying cattle at different times so as to avoid  competing with one another. Under federal internal control standards, an  agency\u2019s management should internally communicate the necessary  quality information to achieve the entity\u2019s objectives. Such information  is, for example, communicated down, across, up, and around reporting  lines to all levels of the entity.", "Because USDA eliminated the Grain Inspection, Packers & Stockyards  Administration and reorganized P&SP under AMS in November 2017, the  reorganization provides an opportunity for USDA to review the extent to  which price reporting data could be shared with P&SP under the act\u2014 now that both P&SP and the price reporting group are within the same  agency. However, USDA officials told us in November 2017 that it was  too early in the reorganization process to determine whether AMS  leadership would view routine sharing of these data any differently. By  reviewing the extent to which AMS\u2019s price reporting group can share daily  transaction data with P&SP to strengthen the effectiveness of its  oversight, USDA has an opportunity to allow P&SP to more effectively  carry out its responsibilities to ensure against discriminatory or  anticompetitive practices in the fed cattle market. In reviewing its authority  to share these data, determining whether it is necessary or advisable to  request additional exceptions from the current information disclosure  restrictions from Congress would position USDA to strengthen its  oversight of that market."], "subsections": []}, {"section_title": "P&SP Does Not Conduct Detailed Periodic Analyses of Transaction Data Collected from Packers", "paragraphs": ["P&SP does not periodically analyze the transaction data that it collects  from packers to learn more about the operation of the fed cattle market.  As part of its monitoring program, P&SP reviews publicly available,  summarized price data on a weekly basis but it does not routinely review  the data it collects on transactions between packers and feeders, a  potentially useful source of data from packers that would enable P&SP to  conduct more detailed monitoring.", "We conducted several in-depth analyses of P&SP\u2019s transaction data, and  found that some of these analyses could provide useful information to  agency management when it makes oversight decisions. For example, as  discussed earlier in this report, one of our analyses found that different  areas of the country experienced differing levels of competition and that,  controlling for other possible sources of price variation, areas with less  packer competition were associated with lower fed cattle prices. Such  analyses may allow P&SP to better monitor changes in competition and  prices over time, which may help inform its decisions on where to direct  its investigative resources and better fulfill its mission to ensure against  discriminatory or anticompetitive practices in the fed cattle market.", "Other federal agencies conduct routine, in-depth analyses to efficiently  direct their investigative resources. For example, as we reported in March  2012, as required by statute, USDA routinely conducts in-depth analyses  of crop insurance data to detect potential program fraud, waste, and  abuse by farmers, insurance agents, and loss adjusters. The agency  then uses these analyses to direct its investigative resources. Federal  internal control standards specify that management should use quality  information to achieve the entity\u2019s objectives including processing the  obtained data into quality information and then evaluating the processed  information.", "P&SP officials told us that they typically do not receive all of the previous  year\u2019s transaction data from packers until the following May. As a result,  P&SP has previously considered the use of packer transaction data for  routine monitoring to be somewhat limited by the lack of timeliness.  However, these officials also told us that the analyses we suggested  could still provide useful information. By routinely conducting in-depth  analysis of the transaction data it collects, USDA could enhance its  monitoring of the fed cattle market. Such analysis could include but not be  limited to examining competition levels in different areas of the country."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The cattle industry is an important part of the nation\u2019s agricultural sector  and contributes tens of billions of dollars to the U.S. economy. Amid  concerns about the drop in fed cattle prices beginning in late 2015 and  ongoing questions about anticompetitive behavior in the fed cattle market,  P&SP\u2019s role in overseeing this market is paramount.", "While P&SP routinely conducts monitoring and investigations, the  program does not have routine access to daily price reporting data or  periodically analyze the transaction data that it currently collects from  packers. The Livestock Mandatory Reporting Act of 1999 allows AMS\u2019s  price reporting group to share data with P&SP for enforcement purposes,  as directed by the Secretary of Agriculture, but USDA does not believe it  has the authority to do so, based on its interpretation of \u201cenforcement  purposes\u201d in the statute. Although both P&SP and the price reporting  group are within AMS because of a November 2017 departmental  reorganization, USDA officials told us that it was too early in the  reorganization process to determine whether AMS leadership would view  routine sharing of these data any differently. By reviewing the extent to  which AMS\u2019s price reporting group can share daily transaction data with  P&SP to strengthen the effectiveness of its oversight, USDA has an  opportunity to allow P&SP to more effectively carry out its responsibilities  to ensure against discriminatory or anticompetitive practices in the fed  cattle market. In reviewing its authority to share these data, determining  whether it is necessary or advisable to request additional exceptions from  the current information disclosure restrictions from Congress would  position USDA to strengthen its oversight of that market. Furthermore, as  part of its monitoring, P&SP does not periodically analyze the transaction  data that it collects from packers to learn more about the operation of the  fed cattle market. In analyzing P&SP\u2019s transaction data, we found that  while less competition among packers did not appear to result in lower  national cattle prices from 2013 through 2015 on a national level, it did  account for variations in prices in different parts of the country. By  routinely conducting in-depth analysis of the transaction data it collects,  USDA could enhance its monitoring of the fed cattle market. Such  analysis could include but not be limited to examining competition levels  in different areas of the country."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to USDA:  The Secretary of Agriculture should review the extent to which, under the  Livestock Mandatory Reporting Act of 1999, the price reporting group can  share daily transaction data with P&SP to allow P&SP to strengthen the  effectiveness of its oversight. After reviewing that authority, if the  Secretary determines that the statute does not permit the price reporting  group to share data with P&SP for routine monitoring purposes, and that  routine sharing is advisable in light of the purposes behind the statutory  disclosure restrictions, the Secretary should submit to Congress a  proposal to allow such sharing. (Recommendation 1)", "The Secretary of Agriculture should direct the AMS administrator to  ensure that P&SP routinely conducts in-depth analysis of the transaction  data that it collects. Such analysis could include but not be limited to  examining competition levels in different areas of the country.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to USDA and CFTC for comment. In  written comments, reproduced in appendix V, USDA agreed with our two  recommendations and described actions it has taken and will take to  implement them. CFTC only provided technical comments, which we  incorporated as appropriate.", "With respect to our first recommendation, USDA stated that it took action  and reviewed the authority provided by the Livestock Mandatory  Reporting Act of 1999 and determined that the act does not allow for data  sharing for routine monitoring purposes. Further, USDA stated that the  agency believes considering a statutory amendment to allow for routine  data sharing is not advisable, due to the agency\u2019s concerns about  maintaining the public\u2019s trust in USDA\u2019s administration of the Livestock  Mandatory Reporting program. We believe the steps USDA has taken  address our recommendation.", "Concerning our second recommendation, USDA agreed that routine in- depth analysis of packer transaction data would enhance USDA\u2019s  monitoring of the fed cattle market to ensure against discriminatory or  anticompetitive practices. USDA stated that it plans to create a new  competition branch in P&SP\u2014now known as the Packers and Stockyards  Division\u2014that will be staffed by employees with economic expertise.  USDA stated that this new branch will be responsible for reviewing the  transactions data P&SP receives from packers and conducting in-depth  analyses that would help the agency to monitor changes in competition  and prices over time to inform USDA decisions on where to direct its  resources. Routinely conducting such analyses would address our  recommendation.", "USDA also provided technical comments. We incorporated these  comments as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, the Chairman of the Commodity  Futures Trading Commission, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact Steve Morris at (202) 512-3841 or moriss@gao.gov or  Oliver Richard at (202) 512-2700 or richardo@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes key factors that affected fed cattle price changes  from 2013 through 2016; (2) describes what CFTC found about possible  trading irregularities in the futures market for fed cattle in 2015 and any  changes to the futures contract for fed cattle since 2015; and (3)  examines factors that may affect the U.S. Department of Agriculture\u2019s  (USDA) routine monitoring to ensure against discriminatory or  anticompetitive practices in the fed cattle market.", "To describe the key factors that affected fed cattle price changes from  2013 through 2016 and to understand changes and trends in the U.S.  cattle market since 2000, we analyzed economic and other market data  collected by federal agencies. These data included information about  cattle and beef prices, quality, and inventories; cattle and beef  transactions; feed prices and feedlot sizes; transaction methods; national  drought patterns; and consumption trends for beef, pork, and chicken. We  gathered these data from USDA\u2019s Agricultural Marketing Service (AMS),  Economic Research Service, National Agricultural Statistics Service, and  World Agricultural Outlook Board, among others. For example, we  reviewed AMS data on fed cattle prices from November 2002 through  August 2017, and we used it to, among other things, develop a long term  price trend line. We did not quantify or rank the impact of various factors.  We assessed the reliability of the data we analyzed by interviewing  officials who maintain the data, reviewing related documentation, and  testing the data for missing or erroneous values, and determined that the  data were sufficiently reliable for our purposes. When we found  discrepancies such as data entry errors, we brought them to the  agencies\u2019 attention and worked with the agencies to correct the  discrepancies before conducting our analyses.", "We also collected USDA transaction data on beef packer (packer)  purchases of fed cattle from 2013 through 2015 and we analyzed these  data using a variety of methods, including econometric analysis. For  more on the methods and results of this analysis, see appendix III. We  assessed the reliability of the transactions data we analyzed by  interviewing officials who maintain the data, reviewing related  documentation, and testing the data for missing or erroneous values. We  determined that the data were sufficiently reliable for our purposes. In  addition to analyzing these data, we reviewed an investigation by AMS\u2019s  Packers & Stockyards Program (P&SP) on the 2015 drop in fed cattle  prices. We did not obtain and review internal packer documents, so the  scope of our analysis did not include a review of whether packers  engaged in anticompetitive behavior. Such specific investigations would  typically be carried out by entities with subpoena authority such as the  Federal Trade Commission of the Antitrust Division in the Department of  Justice.", "To describe what CFTC found about possible trading irregularities in the  futures market for fed cattle in 2015 and any changes to the futures  contract for fed cattle since 2015, we reviewed and summarized relevant  statutes and regulations, such as the Commodity Exchange Act and  Commodity Futures Trading Commission (CFTC) regulations for futures  exchanges. We compared that information with CFTC documentation on  its oversight activities related to the futures market for fed cattle, such as  its 2013 review of the Chicago Mercantile Exchange and the Chicago  Board of Trade to verify the exchange\u2019s ongoing compliance with  standards intended to, among other things, prevent market manipulation.  Such rule enforcement reviews include oversight into whether designated  contract markets comply with core principles as outlined by CFTC. We  also reviewed CFTC analyses of trading patterns on specific dates in  2015 after conducting a review of the analyses data and methods and  determining the work to be sufficiently reliable for our purposes. In  addition, we reviewed and summarized documentary evidence from the  Chicago Mercantile Exchange on its analysis of the market and on its  changes to terms in futures contracts for fed cattle. To better understand  the volatility in the market in 2015, we gathered and analyzed price data  from Bloomberg on the futures market for fed cattle.", "To examine factors that may affect USDA\u2019s routine monitoring to ensure  against discriminatory or anticompetitive practices in the fed cattle  market, we gathered and reviewed relevant oversight documentation,  including P&SP annual reports and investigative policies and procedures.  In addition, we met with officials from AMS\u2019s P&SP and Livestock  Mandatory Reporting program (price reporting group) to discuss their  roles and responsibilities. We also used the results of our analysis of  USDA transaction data on packer purchases of fed cattle. We compared  USDA actions with standards for internal control in the federal  government, specifically those related to the communication and use of  quality information.", "To address all our objectives, we conducted interviews with (1) cattle  market experts; (2) stakeholders selected to represent a variety of views  including small and large feedlot operators (feeders), packers, futures  market speculators, the Chicago Mercantile Exchange, and an  organization specializing in competition and antitrust issues; and (3)  agency officials from AMS\u2019s P&SP and price reporting group, and USDA\u2019s  Office of the General Counsel, as well as CFTC. We used the following  criteria to identify cattle market experts:  the expert\u2019s recognition in the professional or academic community,  and  the relevance to cattle markets of his or her published work or  research to cattle markets.", "We identified these experts through our prior work, the recommendations  of USDA or CFTC officials, stakeholders, or other recognized experts. We  conducted semi-structured interviews with 34 individuals or groups of  experts, stakeholders, and officials, and performed a content analysis of  relevant responses to our questions. To characterize responses and  quantify interviewees\u2019 views throughout this report, we defined modifiers  (e.g., \u201csome\u201d) as follows:  \u201csome\u201d users represents 2 to 5 users,  \u201cseveral\u201d users represents 6 to 9 users,  \u201cmany\u201d users represents 10 to 15 users,  \u201cmost\u201d users represents 16 to 24 users, and  \u201cnearly all\u201d users represents 25 to 29 users.", "The views of the experts and stakeholders we interviewed cannot be  generalized to all others with expertise in the cattle markets or all cattle  market stakeholders, but they provided valuable insights to our work.  Appendix IV presents a list of recognized experts that we interviewed.", "We conducted this performance audit from August 2016 to March 2018 in  accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Supplemental Information on Trends in the Fed Cattle Market", "paragraphs": ["This appendix provides supplemental information on trends in the fed  cattle market. The sections below provide information from analyses and  interviews we conducted as part of our review of the fed cattle market,  including on fed cattle transaction methods, drought, number of U.S.  cattle, feedlot consolidation and size, cattle weights, consumption trends,  product differentiation and branded beef, beef price spread, and factors  affecting beef exports."], "subsections": [{"section_title": "Fed Cattle Transaction Methods", "paragraphs": ["Beef packers (packers) and cattle feedlot operators (feeders) generally  use one of four transaction methods to buy and sell fed cattle, and their  use of these methods has changed over time for various reasons. The  four transaction methods are:", "Cash (also referred to as spot or negotiated). A purchase price is  determined through buyer-seller interaction. The price is known at the  time of agreement, and delivery to the packing plant may take place  up to 30 days later.", "Negotiated grid. A base price is negotiated between buyer and seller  and is known at the time of agreement. Delivery to the packing plant is  usually expected within 14 days. Unlike a cash transaction, the final  net price is determined by applying a series of premiums and  discounts after slaughter based on carcass performance (usually  related to weight, beef yield grade, and beef quality).", "Forward contract. An agreement for the purchase of cattle, executed  in advance of slaughter, under which the base price is established by  reference to prices quoted on the Chicago Mercantile Exchange and  can be set any time prior to the transaction.", "Formula contract. An advance commitment of cattle\u2014by any method  other than cash, negotiated grid, or forward contract\u2014in advance of  slaughter. Formula contracts use a method of calculating price in  which the price often is not known until a later date. For example, a  feeder and a packer may enter into a formula contract several months  in advance of slaughter. According to U.S. Department of Agriculture\u2019s  (USDA) Agricultural Marketing Service (AMS) officials and others we  interviewed, formula contracts often use the cash price from AMS\u2019  Livestock Mandatory Reporting price summaries around the time of  slaughter as a base upon which the contract then applies additional  premiums and discounts.", "Since 2002, the share of fed cattle sold via cash transactions has  decreased and the share of cattle sold through formula and forward  contracts has increased proportionally. According to our analysis of AMS  data, approximately 50 percent of cattle were traded using cash  transactions in 2002, but the share fell as low as 22 percent of cattle  transactions in 2015. Conversely, the use of other types of transactions\u2014 formula and forward contracts and negotiated grid arrangements\u2014 increased from about 50 percent of cattle in 2002 to approximately 78  percent in 2015. However, the use of the cash transactions slightly  increased again from 2016 through 2017. Figure 6 shows the share of  fed cattle transactions by method from November 2002 through  September 2017.", "Several experts and stakeholders we interviewed told us that feeders and  packers have generally increased their use of formula contracts for a  variety of reasons, including improving the quality and consistency of beef  products while decreasing transaction costs. For example, one industry  stakeholder told us that formula contracts ensure a steady supply of  specific cattle breeds and eliminate the costs of sending personnel to bid  for these cattle using cash transactions. In addition, a report from AMS\u2019s  Packers and Stockyards Program (P&SP) noted that formula contracts  help feeders to, among other things, reduce the price risks of raising and  selling fed cattle; these contracts also help packers ensure a steady  supply of cattle to help them satisfy delivery requirements they may have  in contracts with their wholesale or retail customers. However, some  experts and stakeholders told us that the movement away from cash  transactions has reduced the depth and liquidity of several regional  markets, which may make it more difficult for market participants to  accurately determine the market price of cattle (e.g., for a cash sale)  because there are fewer observed price points. Moreover, the effect of  this difficulty in determining market prices is not limited to cash  transactions because cash prices are often used to establish a base price  in formula contracts. This reduction of depth and liquidity may also make  the fed cattle market more susceptible to wider price fluctuations,  according to some experts we interviewed.", "Several experts and stakeholders told us that options such as an online  fed cattle exchange, established in May 2016, may help address this  issue by providing a transparent forum for feeders and packers to sell and  purchase fed cattle. However, the exchange is still in its early stages and,  as of September 2017, comprised a small fraction of total fed cattle  transactions."], "subsections": []}, {"section_title": "Drought", "paragraphs": ["Prolonged drought may cause cow-calf operators to liquidate their herds.  This is because drought can reduce the supply of forage used to raise  younger cattle, so that cow-calf operators cannot feed as many cattle on  available pasture and rangeland. From 2000 to 2010 the United States  saw periods of both extensive drought and extensive wetness on a broad  scale, according to the National Oceanic and Atmospheric Administration.  Following that, in early 2010, little of the country was experiencing  drought, according to the U.S. Drought Monitor; however, drought  conditions worsened throughout the second half of that year and  improved through the first half of 2011 before worsening in the second  half of 2011. This drought impacted some areas of the United States  particularly hard with nearly 12 percent of the country in an exceptional  drought by the third quarter of 2011. Although the winter months of  January 2012 through March 2012 were dry, extreme drought levels  improved through early 2012 before a widespread drought began in the  summer of 2012. By July 2012, more than 80 percent of the country was  at least abnormally dry and more than 60 percent of the country was  experiencing drought.", "From 2013 through early 2015, drought conditions generally improved.  Overall drought conditions continued to improve in 2015, except in the  spring and fall, which were somewhat drier. The second half of 2016 was  drier but after this, drought conditions improved, with a smaller  percentage of the country experiencing dryness in 2017 than had been  seen since 2000. Figure 7 shows the percent of the United States land  mass experiencing drought conditions from January 2000 through May  2017."], "subsections": []}, {"section_title": "Number of U.S. Cattle at Various Points in the Supply Chain", "paragraphs": ["The number of cattle at different points in the supply chain can provide  various levels of insight into fed cattle market supply. Specifically, the  beef cow inventory provides insight into what may happen in the fed cattle  market in a few years,  and the number of cattle on feed can give an  indication of what may happen in the fed cattle market in the next few  months. The number of cattle sold for slaughter (also called marketings)  is an indication of current supply levels in the fed cattle market."], "subsections": [{"section_title": "Beef Cow Inventory", "paragraphs": ["The beef cow inventory drives the size of the overall cattle inventory and  therefore the number of fed cattle coming to market. As such, the size of  the beef cow inventory provides a sense of how the fed cattle industry  may change over the following 2 years. Our analysis of inventory data  from USDA\u2019s National Agricultural Statistics Service indicated that the  beef cow inventory declined from 2006 through 2014, at which point it  started to increase. In the most recent period of contraction the year-over- year period with the highest rate of contraction in the beef cow inventory  was from July 2011 to July 2012, during which the beef cow inventory  decreased by 3.0 percent\u2014a rate of contraction not seen in a single year- over-year period since July 1988 to July 1989. The inventory then began  to expand in 2014, increasing rapidly by mid-2014, and continued to  expand through 2016. From January 2016 to January 2017, the beef cow  inventory expanded 3.5 percent, the highest rate of expansion in a single  year-over-year period since January 1993 to January 1994. Prior to the  late 1980s, higher rates of expansion and contraction were common, but  during the next 20 years, annual changes in the beef cow inventory were  more gradual, with rates of expansion staying below 0.5 percent. Figure 8  shows the beef cow inventory from 1920\u2014the first year for which we have  data\u2014through 2016, with an overall downward trend since the mid-1970s.", "Cattle are sent to feedlots and are fed for 3 to 10 months before being  sold for slaughter. Thus, the number of cattle on feed at a given point in  time provides insight into the number of cattle that will be available for  slaughter in the coming months. Unlike the beef cow inventory, which saw  larger rates of increase in the mid-2010s than seen in the prior 2  decades, the number of cattle on feed increased at a more modest rate  during the same time frame. The total number of cattle on feed decreased  throughout 2012 and 2013, then began increasing in 2014, and continued  to increase through 2015, before decreasing in 2016. Although it might be  expected that cattle on feed would increase steeply about 18 months after  the steep increases in the beef cow inventory, these sharper increases  may be delayed as cow-calf operators continue to increase their beef cow  herds, thus preventing these heifers from going into the pool of fed cattle."], "subsections": []}, {"section_title": "Sales for Slaughter", "paragraphs": ["Total sales for slaughter declined overall from the early 2000s through  2015. On an annual basis, sales for slaughter declined sharply from 2014  through 2015 before increasing sharply in 2016. Sales for slaughter fell  5.68 percent in 2014, the largest decline in the data available (starting in  1996), followed by a further decline of 3.87 percent in 2015 and a rise of  6.29 percent in 2016, the largest increase in the data we analyzed. The  monthly sales for slaughter data show that after the long decline starting  in 2014, year-over-year increases in sales for slaughter began in  November 2015 and continued through August 2017, the most recent  month for which data were available at the time of our review."], "subsections": []}]}, {"section_title": "Feedlot Consolidation and Size", "paragraphs": ["Some experts told us that significant consolidation has occurred among  feedlots. Our analysis of USDA National Agricultural Statistics Service  data from the mid-1990s through 2016 suggests that the number of  individual larger feedlots (those with a capacity of 50,000 or more head of  cattle) increased by a small amount\u2014in terms of both number and  percentage of total feedlots. During this time frame, the number of cattle  fed at large lots increased, and the number of cattle fed at feedlots of  other sizes decreased. For example, while there were 45 feedlots with a  capacity of more than 50,000 head of cattle in 1996, there were 73  feedlots of this size in 2016. Similarly, in 1996, large feedlots made up 2  percent of all feedlots with a capacity of more than 1,000 head of cattle;  this number rose to 3 percent in 2016. Furthermore, since the late  2000s, larger feedlots generally have been contributing an increasing  portion of fed cattle to overall slaughter numbers, with medium-sized  feedlots (those with a capacity of 16,000 to 49,000 head of cattle)  generally contributing fewer."], "subsections": []}, {"section_title": "Cattle Weights", "paragraphs": ["Average cattle weights have increased gradually and steadily from 2002  through September 2017, according to our analysis of average weights  reported to AMS and several industry stakeholders we interviewed.  Figure 9 shows average monthly and annual cattle weights in live weight  contracts from November 2002 through September 2017. In the figure,  seasonal fluctuations are visible, with weights generally declining in late  fall."], "subsections": []}, {"section_title": "Consumption of Beef and Other Proteins", "paragraphs": ["According to our analysis of consumption data from USDA\u2019s Economic  Research Service, there has been a broad societal shift in consumption  from beef to chicken in the United States since the mid-1970s. Increasing  consumption of proteins such as chicken may shift consumption away  from beef, which would put downward pressure on beef and cattle prices.  Per capita chicken consumption has increased steadily for the past 40  years, though the growth in consumption has slowed since 2006. Per  capita pork consumption has remained steady over the same period,  while per capita beef consumption has largely decreased. Figure 10  provides information on the long-term trends in per capita consumption of  beef, pork, and chicken in the U.S. from 1970 through 2016."], "subsections": []}, {"section_title": "Product Differentiation and Branded Beef", "paragraphs": ["As consumer tastes and demands have changed since 2000, producers  have increased differentiation of their products. For example, producers  have increased grass-fed options since 2000, and organic beef became  available in 2002. In addition, producers have increased their offerings of  branded beef varieties (e.g., Certified Angus and Wagyu beef). As beef  products become increasingly differentiated and more branded varieties  become available, average prices of beef and fed cattle may be expected  to rise. Packers are unlikely to differentiate or brand a product if it is less  valuable than an unbranded commodity product, so they would likely only  create differentiation or branding for higher-value beef products, which  are sold at higher prices than commodity beef. Because of this, packers  will likely pay more for the fed cattle that produce these higher value  products. We analyzed information on branded beef from AMS and found  that branded beef sales increased from about 7 percent of total beef sales  in 2002 to about 17 percent of total beef sales in 2017. Some experts we  spoke with pointed out that the increase in formula and forward contracts  has gone hand-in-hand with the increase in product differentiation and  branding. They told us that, as retailers demand specific types or brands  of beef, the industry has relied more heavily on formula and forward  contracts to ensure a steady supply of those types and brands."], "subsections": []}, {"section_title": "Beef Price Spread", "paragraphs": ["In the fed cattle market, the fed cattle-retail price spread is the difference  between the price feeders receive for their cattle and the price consumers  pay for beef at the retail level. The vast majority of the price spread  comes from price spread between the wholesale and retail levels. In  short, the retail price is much higher than the wholesale price that retailers  pay packers for beef, which, in contrast, is not much higher than the price  packers pay feeders for fed cattle.", "The fed cattle-wholesale price spread remained fairly steady from 2000  through May 2016, typically remaining below $0.50 per pound of retail  weight equivalent. The price spread, at both the fed cattle-wholesale and  wholesale-retail levels, spiked in June 2016. The spike was small but  persistent, continuing through the end of 2016. To be more specific, the  fed cattle-wholesale spread was between $0.51 and $0.67 from June  through December, compared with a range of $0.36 to $0.52 from  January through May of 2016. The price spread dropped to lower levels in  early 2017, then spiked again from May through August 2017, the latest  date for which data were available at the time of our review.", "Similar to the fed cattle-retail and fed cattle-wholesale spreads, the fed  cattle share of the beef dollar is a measure of the percentage of the retail  price of beef made up by the price of fed cattle. The fed cattle share of  the beef dollar dropped from about 65 percent in the early 1970s to about  50 percent by the mid-1990s. From 2000 to the present, the farmers\u2019  share of the beef dollar has remained relatively flat, rising to close to 60  percent in 2014 but regularly being as low as 40 percent. Several factors  can drive changes in the fed cattle share of the beef dollar. For example,  a report from USDA\u2019s Economic Research Service found that much of the  decline in the proportion of the beef dollar paid to producers can be driven  by technology changes that help increase productivity; and, as producers  have become more productive, they have been willing and able to supply  more animals to packers at lower prices. Figure 11 shows the historical  price spread for beef from January 1970 through December 2016."], "subsections": []}, {"section_title": "Bovine Spongiform Encephalopathy and Beef Exports", "paragraphs": ["Some industry stakeholders told us that the bovine spongiform  encephalopathy (BSE) event\u2014in which the disease was detected in a  cow in the United States in 2003\u2014has had a lasting effect on beef  exports from the United States. Specifically, these industry stakeholders  told us that the 2003 event\u2014and additional BSE events in 2005 and  2006\u2014has continued to depress demand for beef by closing certain  foreign markets to U.S. beef. Based on our review of ERS export data,  the total tonnage of beef exports plummeted in January 2004 due to the  BSE outbreak in the United States and did not consistently return to  levels seen before the BSE outbreak until May 2010."], "subsections": []}]}, {"section_title": "Appendix III: Econometric Model to Estimate the Impact of Market Power on Fed Cattle Transaction Prices", "paragraphs": ["This appendix provides information on the econometric model we used to  estimate the impact of market power on transaction prices for fed cattle. It  describes our econometric model in detail, provides the results of our  analysis, and discusses some limitations."], "subsections": [{"section_title": "Econometric Model", "paragraphs": ["We developed an econometric model to analyze the effect of market  concentration on the cash price of fed cattle. Specifically, we analyzed  how the level of market concentration of beef packers (packers) affected  the cash price of fed cattle. The U.S. fed cattle market is characterized by  a large number of feedlot operators (feeders) that sell to a small number  of packers for slaughter at packing plants; approximately 83 to 85 percent  of the total amount of packing market is conducted by four major packing  companies. To analyze the packing market, we obtained transaction data  from the Agricultural Marketing Service\u2019s Packers and Stockyards  Program (P&SP) within the U.S. Department of Agriculture (USDA). The  data we used for our analysis comprised transactions collected from  these four largest packers for about 127,000 cash transactions from 2013  through 2015.", "The data identified the packing plant involved in each transaction;  however, we generally could not identify the specific feedlot involved,  especially when comparing transactions across different packers. The  data were administrative data from each packer, and in some instances, a  packing plant may have used a unique set of identifying codes for the  feedlots with which it did business. Therefore, we could only consistently  identify different feedlots associated with a given packing plant. The same  feedlot may have done business with a different plant but we were unable  to identify this information consistently across plants. The data contained  963 different dates on which transactions occurred, 970 counties where  feedlots were located, and 23 packing plants that purchased fed cattle.", "To reduce distortion from dissimilar transactions and outliers, we  eliminated transactions that were not cash transactions as well as cash  transactions that met certain parameters. Specifically, we excluded  transactions with (1) fewer than 10 animals; (2) a per-pound carcass price  of less than 1 dollar or of 10 dollars or more; (3) an average weight per  animal that was less than 500 pounds or more than 2,000 pounds; (4) a  slaughter date that preceded the number of days from the purchase date  by more than 14 days; (5) more than 10 percent cows in the lot; and (6)  more than 10 percent ungraded cattle in the lot."], "subsections": [{"section_title": "Dependent Variable", "paragraphs": ["Our dependent variable in the model was the logarithm of the transaction  price per carcass-based pound (not including freight) between a packing  plant and a feedlot on a given purchase date."], "subsections": []}, {"section_title": "Explanatory Variables", "paragraphs": ["Our model included a variety of explanatory variables, including the  Herfindahl-Hirschman Index (HHI), beef quality and yield grades,  feedlots, live weights, and fixed effects for time and geographic location of  the feeder and packing plants.", "HHI. The key variable in the model was the HHI, a measure of packer  market concentration faced by feedlots in a given geographic area\u2014 analyzed in the model by county\u2014on a given purchase date. The HHI  takes the same value for any transaction in a given county on a given  purchase date (it varies only at the county level and over time). Our  calculation used a 90-day moving average window (current day and  the 89 days prior) to calculate the HHI for each county on each date.", "Although our model included only cash transactions, we calculated  the HHI using all transactions; that is, we included formula contracts,  forward contracts, negotiated grid transactions, and cash  transactions. However, we excluded transactions involving packer- owned feedlots and feedlots not in the United States from our HHI  calculation. Econometric analysis that uses HHIs to explain prices  generally considers the possibility that the HHI variable is endogenous  and is possibly correlated with the error term and to address this  issue, we instrumented our HHI variable.", "Beef quality and yield grades. For each lot of cattle transacted, we  used as controls the percent of fed cattle in each transaction whose  beef graded as Choice or better. We also used as a control the  percent of fed cattle in each transaction whose beef yield was rated  grades 1 or 2. In addition, we included a measure of the percentages  of Holstein cattle, ungraded cattle, and cows in the lot.", "Large feedlots. We used an indicator (dummy) variable for large  feedlots\u2014specifically feedlots that were in the 95th percentile of  feedlots for the packing plant with which the transaction occurred. We  used this variable to control for possible extra bargaining leverage that  large feedlots may have with packers.", "Live weight. We controlled for the average live weight of the cattle lot  by including categorical variables (dummies) for: less than 1,050  pounds and more than 1,500 pounds (the 1,050 pounds to 1,500  pounds category is the omitted comparison category). We selected  these category cut-off values because generally prices are reduced  for cattle lots with an average weight of less than 1,050 pounds or  more than 1,500 pounds.", "Fixed effects. We used a set of indicator variables to account for  fixed effects associated with packing plants, time, and individual  counties. Specifically, we used a set of packing plant indicator  variables to account for effects pertaining to individual packing plants,  such as a plant\u2019s location. We also used a set of time indicator  variables\u2014one for each purchase date in the data\u2014to account for  prevailing market conditions on that particular day, such as whether  prices were generally low or high on that day. Last, we used a set of  county indicator variables to account for local or regional effects that  are time invariant, such as a county\u2019s transportation availability or  proximity to inexpensive sources of feed."], "subsections": []}, {"section_title": "The Model", "paragraphs": ["Our model was written as:  \ud835\udc66\ud835\udc66\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61=\ud835\udc4b\ud835\udc4b\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61\ud835\udefd\ud835\udefd+\ud835\udf00\ud835\udf00\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61 ,\ud835\udc56\ud835\udc56=1,\u2026,\ud835\udc41\ud835\udc41\ud835\udc61\ud835\udc61; \ud835\udc61\ud835\udc61=1,\u2026,\ud835\udc47\ud835\udc47. \ud835\udc66\ud835\udc66\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61 was the dependent variable in our model; namely, the logarithm of", "\ud835\udc4b\ud835\udc4b\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61 was the list of control variables used in the model including the the transaction price per pound.  sets of fixed effects for plants, counties and purchase dates. \u03b2 was the list of parameters associated with the control variables  Each observation in the model was a single transaction between a  packing plant and a feedlot. The subscript i represented a transaction  between a feedlot and a packing plant, and the subscript t represented  (\ud835\udc4b\ud835\udc4b\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61).  \ud835\udf00\ud835\udf00\ud835\udc56\ud835\udc56,\ud835\udc61\ud835\udc61. was an error term.  the purchase date of that transaction. The term \ud835\udc41\ud835\udc41\ud835\udc61\ud835\udc61 expressed the fact that  the number of transactions may have varied across purchase dates."], "subsections": []}]}, {"section_title": "Results", "paragraphs": ["Our results suggest that when there is a more concentrated market of  buyers (packers), those packers will have more negotiating and market  power, and therefore, with other factors held constant, these packers will  be able to purchase fed cattle at lower prices from feeders. We found a  significant negative parameter estimate for our HHI explanatory variable.  This estimate suggests that for each 0.01 increase in the HHI\u2014meaning,  a greater degree of packer concentration\u2014there is about a 0.86 percent  reduction in the price of cattle. The interquartile range for the HHI is from  approximately 0.45 to 0.55, which implies an approximate price effect of 9  percent across that range. For a carcass price of about $2.22 per  pound\u2014the average for 2013 through 2015, based on the data from P&SP\u2014that translates to a difference of about 20 cents per pound  variation across this HHI range.", "The variables used in the model to control for effects other than HHI had  the expected directional effect on price or else were not significant.  Parameter estimates for the indicator variables for beef quality and yield  were both significant and positive, suggesting that fed cattle with higher  beef quality grade and yield levels have a higher price. The indicator  variables for the lots with weights of less than 1,050 pounds average  weight suggest that lots with very low weight received lower prices.  However, the variable for lots with more than 1,500 pounds was not  significant. The feedlot size variable was not statistically significant. Our  controls for the percent of Holsteins and ungraded cattle in the lot were  both negative and statistically significant, as expected. The percent of  cows in the lot was not statistically significant. Finally, our measure of  feedlot size was positive and statistically significant, suggesting that  larger feedlots may be able to obtain higher prices from packers.", "Our results suggest that instrumenting the HHI variable was appropriate.  We used a measure of the proportion of total fed cattle traded by the  packer using non-cash transaction methods as an instrument. Our  results satisfied the essential specification tests for appropriate use of  instruments:", "The endogeneity tests rejected the null hypothesis that the  endogenous variable (HHI) can be treated as exogenous. Thus it is  appropriate to instrument the HHI variable.", "Our results rejected the null hypothesis of weak instruments\u2014 Sanderson-Windmeijer, Stock-Wright and Anderson-Rubin. The F- Statistic from the first stage of the regression (20.36) is highly  significant and exceeded the critical Stock-Yogo value for the 10  percent maximal instrumental variable size (16.38). Thus the  instruments had sufficient explanatory power in the first-stage  regression equation.", "See Table 1 for a more detailed description of our results."], "subsections": []}, {"section_title": "Limitations", "paragraphs": ["Our analysis had a number of limitations as listed below.", "Only transactions for the market\u2019s four major packers were  included in the data from P&SP. As a result, our HHI variable is a  \u201clarge firm HHI.\u201d Whereas these four firms account for approximately  83 to 85 percent of total cattle sold, the remaining 15 to 17 percent of  fed cattle sold in the United States was not included in the data from  P&SP. In addition, we did not use some of the four large packers\u2019  plant-level data because the data was missing key variables, such as  the purchase date. Therefore, our estimates of HHI in any location are  likely to be overestimates, and in general, our HHI estimates for any  location should be viewed only as relative to other locations in this  analysis and should not be compared with measures in other studies  or industries.", "The feedlot location may not be in the city listed for it. In some  cases, the feedlot city that is named in the data from P&SP as the  location of the feedlot is not the exact feedlot location. The feedlot  may be somewhat outside the city or at a headquarters location.", "Feedlot concentration differs across counties. The analysis  reflects the fact that, on average, in any given area, feedlots are far  more numerous and packing plants are relatively few in number.  However, this is not generalizable to all areas. Although there are a  relatively large number of feedlots in the United States in general, in  some cases, it is possible that a relatively small number of feedlots  account for a relatively large proportion of cattle sold to some packing  plants. Our data could only identify a feedlot that sold cattle to a  particular packing plant, so we could not identify which feedlots might  have sold fed cattle to multiple plants. We control for this in the  regression model in part by including an indicator variable for packing  plants\u2019 transactions that were with a large feedlot (in the 95th  percentile for that particular packing plant).", "HHI calculations must use a geographic definition. In our analysis,  we include fixed effects for each packing plant as well as fixed effects  for each county, which controls for variations in market conditions in  different areas that are constant over time. The calculation of the HHI  takes into account transactions flowing from different counties to the  same packing plants and from a single county to different packing  plants, so the HHI calculations by necessity must use some  geographic definition. However, our HHI calculation does not depend  upon a county to define a market, but simply measures market  concentration conditions that the feedlots in that county face.", "The level of detail and scope in the data varied across the  different packing plants in our data set. For example, a detailed  breakdown of the type of cattle was not available on a consistent  basis across all packers and packing plants. Therefore, we were  unable to control for some variation in quality and type of cattle in our  model. However, this may be mitigated by our use of fixed effects if  certain transaction characteristics\u2014for instance, the type or breed of  cattle sold\u2014are fairly constant over time in a given county or plant.", "As in any model, there is the possibility of misspecification or  bias. We used various econometric tests for our instrumental  variables estimation (two-stage least-squares): endogeneity of the  HHI measure, J-statistic for identification, and weak instrument tests.  However, in any instrumental model there is a possibility that the  instruments are inappropriate or the estimators are biased, and that  bias may be exacerbated in the presence of outliers. Sargan  recommends a simple procedure for assessing the efficacy of two- stage least-squares versus ordinary least squares. Our results using  this criterion suggests our use of two-stage least squares is justified.", "Packing plants from the same company likely did not compete  with one another. Our HHI measure was calculated treating each  packing plant as a separate entity rather than at the packing company  level, despite the fact that multiple plants are owned by each of the  four major packing companies. Therefore, we assumed that packing  plants \u201ccompete\u201d to some extent regardless of whether they are  owned by the same company. However, in the data we used for our  model, there were no plants owned by the same packing company in  the same city.", "There may be noise in the data. The data were administrative data  and may have random noise associated with issues such as different  administrative procedures of a plant, affecting when and how the data  are entered. We cleaned the data to remove observations that  appeared unreasonable or not easily explained, but some variation in  prices remains. Specifically, in the data that was used in our model,  the median intra-day price variation was about 18 percent for the 1st  to 99th percentile and about 11 percent for the 5th to the 95th  percentile."], "subsections": []}]}, {"section_title": "Appendix IV: Recognized Experts That We Interviewed", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Thomas Cook (Assistant  Director), Michael Kendix (Assistant Director), Kevin Bray, Candace  Carpenter, Tara Congdon, Jaci Evans, Dan Royer, Monica Savoy, Kiki  Theodoropoulos, Richard Tsuhara, and Jarrod West made key       contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["U.S. Agriculture: Retail Food Prices Grew Faster Than the Prices  Farmers Received for Agricultural Commodities, but Economic Research  Has Not Established That Concentration Has Affected These Trends.  GAO-09-746R. Washington, D.C.: June 30, 2009.", "Livestock Market Reporting: USDA Has Taken Some Steps to Ensure  Quality, but Additional Efforts Are Needed. GAO-06-202. Washington,  D.C.: December 9, 2005.", "Economic Models of Cattle Prices: How USDA Can Act to Improve  Models to Explain Cattle Prices, GAO-02-246. Washington, D.C.: March  15, 2002.", "Packers and Stockyards Programs: Actions Needed to Improve  Investigations of Competitive Practices, GAO/RCED-00-242. Washington,  D.C.: September 21, 2000.", "Beef Industry: Packer Market Concentration and Cattle Prices,  GAO/RCED-91-28. Washington, D.C.: December 6, 1990."], "subsections": []}], "fastfact": ["The U.S. cattle industry had about $64 billion in sales in 2016. Prices for fed cattle\u2014those ready for slaughter\u2014have fluctuated substantially over time. For example, they increased by 39% between 2013 and 2014, then dropped by 42% by the end of 2016. Cattle producers have raised questions about these fluctuations and USDA's oversight.", "We found that the Packers & Stockyards Program, which oversees the cattle industry within USDA's Agricultural Marketing Service (AMS), does not have access to certain data that AMS collects. We recommended that USDA examine the appropriate level of data sharing for oversight."]}
{"id": "GAO-19-167", "url": "https://www.gao.gov/products/GAO-19-167", "title": "Supplemental Nutrition Assistance Program: Actions Needed to Better Measure and Address Retailer Trafficking", "published_date": "2018-12-14T00:00:00", "released_date": "2019-01-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SNAP is the largest federally funded nutrition assistance program, providing about $64 billion in benefits to over 20 million households in fiscal year 2017. FNS oversees SNAP at the federal level and is responsible for authorizing and overseeing retailers. While most benefits are used as intended, some retailers have engaged in trafficking, which represents fraud and diverts federal funds from their intended use. GAO was asked to review FNS's efforts to address SNAP retailer trafficking since GAO's last report in 2006.", "This report examines (1) what is known about the extent of SNAP retailer trafficking, and (2) the extent to which FNS has taken steps intended to improve how it prevents, detects, and responds to retailer trafficking. GAO reviewed relevant federal laws and regulations, FNS policies, and studies related to retailer trafficking; assessed FNS's use of statistical standards for federal agencies and selected leading practices in GAO's Fraud Risk Framework ; and interviewed FNS and USDA Office of Inspector General officials and key stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Department of Agriculture (USDA) Food and Nutrition Service's (FNS) estimates of retailer trafficking\u2014when a retailer exchanges Supplemental Nutrition Assistance Program (SNAP) benefits for cash instead of food\u2014have limitations, though they suggest trafficking has increased in recent years, to $1 billion each year from 2012 to 2014. One key limitation of the estimates is that FNS has not evaluated the accuracy of its assumption about the percentage of SNAP benefits trafficked. FNS assumes that, among stores that trafficked, 90 percent of the benefits redeemed in small stores, and 40 percent in large stores, were trafficked. A former FNS official stated that this assumption is based on discussions with investigators in the 1990s when FNS first developed its approach to estimate trafficking, and that they have not since evaluated it for accuracy. However, there are options available for evaluating this assumption, such as reviewing SNAP transaction data from stores that are known to have trafficked. Statistical standards for federal agencies indicate that assumptions should be reviewed for accuracy and validated using available, independent information sources. By not evaluating this key assumption, FNS's commonly cited estimates of SNAP fraud are potentially inaccurate.", "FNS has generally taken steps to address retailer trafficking that align with leading fraud risk management practices, but the agency has not pursued additional actions to prevent and respond to trafficking. For example:", "Although FNS assigns a risk level to each store when it applies to participate in SNAP, it is not currently using this information to target its reauthorization activities to stores of greatest risk. During reauthorization, FNS reviews previously approved stores for continued compliance with program requirements. FNS currently reauthorizes all stores on the same 5-year cycle, regardless of risk, although its policy states that it will reauthorize certain high-risk stores annually. FNS officials planned to reauthorize a sample of high-risk stores each year, but said they did not follow through with those plans. Officials also stated that they did not document an analysis of the benefits and costs of this practice, which would be consistent with leading fraud risk management practices. As a result, FNS may be missing an opportunity to provide early oversight of risky stores and prevent trafficking.", "The Food, Conservation, and Energy Act of 2008 gave USDA the authority to strengthen penalties for retailers found to have trafficked, but as of November 2018, FNS had not implemented this authority. FNS proposed a related rule change in 2012 and indicated the change was necessary to deter retailers from committing program violations, but the rule was not finalized. By failing to take timely action to strengthen penalties, FNS has not taken full advantage of an important tool for deterring trafficking."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that FNS improve its trafficking estimates by, for example, evaluating the accuracy of its assumption of the percentage of benefits that are trafficked; assess the benefits and costs of reauthorizing a sample of high risk stores more frequently than others; and move forward with plans to increase penalties for trafficking. FNS generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Supplemental Nutrition Assistance Program (SNAP) is the largest  federally funded nutrition assistance program, providing approximately  $64 billion in benefits to about 42 million people in over 20 million  households in fiscal year 2017. SNAP recipients receive monthly cash  benefits on an Electronic Benefits Transfer (EBT) card and redeem them  for food at authorized retailers.", "Most SNAP benefits are used for the intended purpose, according to the  U.S. Department of Agriculture\u2019s (USDA) Food and Nutrition Service  (FNS), which oversees SNAP at the federal level and is responsible for  authorizing and overseeing retailers that participate in the program.  However, program officials have long-standing concerns about retailer  trafficking\u2014a practice in which retailers exchange recipients\u2019 benefits for  cash instead of food, often taking a fraudulent profit. As we previously  reported in 2006, FNS has faced challenges in addressing retailer  trafficking. You asked us to review steps FNS has taken in this area  since our last report.", "We assessed (1) what is known about the extent of retailer trafficking in  SNAP, and (2) the extent to which FNS has taken steps since 2006  intended to improve how it prevents, detects, and responds to retailer  trafficking.", "To examine what is known about the extent of retailer trafficking and  FNS\u2019s trafficking estimates, we reviewed FNS\u2019s three most recent reports  on the Extent of Trafficking in the Supplemental Nutrition Assistance  Program\u2014covering data from calendar years 2006 through 2014. In order  to assess the reliability of the estimates, we reviewed technical  information on FNS\u2019s methodology included in appendices to its  trafficking reports and additional FNS studies regarding the methodology  used to estimate trafficking. We also reviewed the Office of Management  and Budget\u2019s statistical standards for federal agencies. We interviewed  FNS officials about the methodology and data used to estimate trafficking  and any steps the agency has taken or plans to take to address any  limitations of the methodology. We also interviewed USDA Office of  Inspector General (OIG) officials about their prior work related to the  retailer trafficking estimates, as well as a former FNS official familiar with  the development of the methodology and the contractors who produced  the most recent estimates and studied limitations of the methodology. We  determined that FNS\u2019s trafficking estimates were sufficiently reliable for  the purpose of describing general trends in retailer trafficking, but we also  identified some limitations of the estimates, which we discuss in this  report.", "To examine FNS\u2019s steps intended to improve how it prevents, detects,  and responds to retailer trafficking, we reviewed relevant federal laws and  regulations and proposed rules related to retailer trafficking, as well as  relevant FNS policies, standard operating procedures, and staff  performance work plans, among other documents. We also reviewed  relevant GAO and USDA OIG reports and determined the status of FNS\u2019s  responses to prior audit recommendations by interviewing FNS and OIG  officials and obtaining relevant documents. We interviewed FNS officials  about steps the agency has taken since 2006 to improve how it prevents,  detects, and responds to retailer trafficking, and OIG officials about their  role investigating SNAP retailer trafficking. We assessed FNS\u2019s efforts to  address retailer trafficking against selected leading practices in GAO\u2019s A  Framework for Managing Fraud Risks in Federal Programs (Fraud Risk  Framework) related to designing and implementing fraud controls and  monitoring and evaluating activities. To obtain stakeholder perspectives,  we interviewed representatives from two national associations  representing independent grocery stores and convenience stores. We  also interviewed officials from three states\u2014Georgia, Pennsylvania, and  Washington\u2014about their experiences working with FNS to help  investigate SNAP retailer trafficking. We selected these states as  illustrative examples based on several criteria, including the rate at which  retailers in each state received sanctions for SNAP violations and  geographic dispersion. Finally, to provide context for our findings, we  analyzed summary-level data from FNS and the USDA OIG on trends in  SNAP participation and agency activities to address retailer trafficking  from fiscal years 2007 through 2017. We assessed the reliability of these  data through a review of FNS and OIG documents and interviews with  knowledgeable officials. We found the data to be sufficiently reliable for  the purpose of providing contextual information on trends in FNS and OIG  retailer monitoring and oversight activities.", "We conducted this performance audit from January 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["SNAP is intended to help low-income households obtain a more nutritious  diet by providing them with benefits to purchase food from authorized  retailers nationwide. SNAP is jointly administered by FNS and the states.  FNS pays the full cost of SNAP benefits and shares the costs of  administering the program with the states. FNS is responsible for  promulgating SNAP program regulations, ensuring that state officials  administer the program in compliance with program rules, and authorizing  and monitoring stores from which recipients may purchase food. States  are responsible for determining applicant eligibility, calculating the amount  of their benefits, issuing the benefits on EBT cards\u2014which can be used  like debit cards to purchase food from authorized retailers\u2014and  investigating possible program violations by recipients.", "Participation in SNAP has generally increased among recipients and  retailers in recent years. Specifically, participation in SNAP increased  from about 26 million recipients in fiscal year 2007 to 42 million in fiscal  year 2017, leading to a corresponding increase in the amount of SNAP  benefits redeemed. The number of stores FNS authorized to participate in  SNAP also increased, from about 162,000 nationwide in fiscal year 2007  to more than 250,000 in fiscal year 2017. Although there was particular  growth in the number of small grocery and convenience stores, as well as  \u201cother\u201d stores (which include independent drug stores, general  merchandise stores like dollar stores, and farmers\u2019 markets), the majority  of SNAP benefits were redeemed at large grocery stores and  supermarkets in each year (see fig. 1)."], "subsections": [{"section_title": "Retailer Trafficking", "paragraphs": ["According to FNS, most SNAP benefits are used for the intended  purpose; however, as we have reported in prior work, FNS has faced  challenges addressing trafficking\u2014one type of program fraud. In general,  trafficking occurs when retailers exchange recipients\u2019 SNAP benefits for  cash, often taking a fraudulent profit. For example, a retailer might charge  $100 to a recipient\u2019s SNAP EBT card and give the recipient $50 in cash  instead of $100 in food. The federal government reimburses the retailer  $100, which results in a fraudulent $50 profit to the retailer. While this  type of trafficking is a direct exchange of SNAP benefits for money,  trafficking also can be done indirectly. For example, a retailer might give a  recipient $50 in cash for the use of $100 in benefits on that recipient\u2019s  EBT card. The retailer could then use the EBT card to purchase $100 in  products at another SNAP retailer (see fig. 2). In this instance, the retailer  would profit because they paid $50 for $100 worth of products, and the  retailer might also increase their profit by reselling the products at a  higher price in their own store."], "subsections": []}, {"section_title": "Retailer Management and Oversight", "paragraphs": ["Among other things, FNS is responsible for authorizing and monitoring  retailers who participate in SNAP to ensure program integrity. In order to  participate in SNAP, a retailer applies to FNS and demonstrates that they  meet program requirements, such as those on the amount and types of  food that authorized stores must carry. FNS verifies a retailer\u2019s  compliance with these requirements, for example, through an on-site  inspection of the store. If the retailer meets requirements, FNS generally  authorizes it to participate for a period of 5 years.", "FNS then monitors retailers\u2019 participation by analyzing data on SNAP  transactions and conducting undercover investigations, among other  activities. If FNS suspects a retailer is trafficking, it generally must notify  the USDA OIG\u2014which is responsible for investigating allegations of fraud  and abuse in all of USDA\u2019s programs, including SNAP\u2014before opening a  case. The OIG may choose to open its own investigation of the retailer for  possible criminal prosecution, or allow FNS to pursue the case.", "If FNS determines that a retailer has engaged in trafficking, FNS  sanctions the store. Generally, stores found to have engaged in  trafficking are permanently disqualified from SNAP, but in limited  circumstances, the owner may instead receive a civil monetary penalty.  Retailers who do not agree with the sanction assessed by FNS can file a  written request to have FNS\u2019s Administrative Review Branch review the  decision, and, if not satisfied, file a complaint in the appropriate U.S.  District Court.", "In 2013, FNS consolidated its retailer management functions, including  those for authorizing stores and analyzing SNAP transaction data, into a  single national structure known as the Retailer Operations Division (see  fig. 3)."], "subsections": []}, {"section_title": "Estimating Retailer Trafficking", "paragraphs": ["Since 1995, FNS has published periodic reports estimating the extent of  trafficking in SNAP as part of its efforts to monitor program integrity.  These trafficking estimates are the most commonly cited measure of  SNAP fraud, including in the news media and congressional testimony.", "FNS estimates retailer trafficking by adjusting a sample of stores known  or suspected of trafficking to reflect the total population of SNAP- authorized stores. For each report, FNS uses 3 years of data on stores  and SNAP transactions to estimate the amount and percentage of  benefits that were trafficked and the percentage of stores engaged in  trafficking (see fig. 4). For example, the most recent report\u2014published in  September 2017\u2014analyzes data from 2012 through 2014."], "subsections": []}]}, {"section_title": "FNS Estimates Suggest Retailer Trafficking Has Increased in Recent Years, but the Estimates Have Limitations", "paragraphs": [], "subsections": [{"section_title": "FNS Estimates Indicate an Increase in Retailer Trafficking, but the Actual Extent of Trafficking Is Uncertain", "paragraphs": ["FNS\u2019s data indicate an increase in the estimated rate of retailer trafficking  in recent years. FNS reported in March 2011 that approximately $330  million in SNAP benefits (or 1 percent of all benefits redeemed) were  trafficked annually from 2006 through 2008, and that approximately 8.2  percent of all authorized stores engaged in trafficking. In its most recent  report from September 2017, FNS reported that approximately $1 billion  in SNAP benefits (or 1.5 percent) were trafficked annually from 2012  through 2014, and that approximately 11.8 percent of all authorized  stores engaged in trafficking.", "Although FNS produces the trafficking estimates with accepted statistical  methods, its reports do not clearly convey the level of uncertainty  introduced by the approach used to calculate the estimates. Throughout  each report, FNS presents its estimates as precise numbers. However,  uncertainty is introduced when extrapolating from a smaller sample\u2014in  this case, an investigative sample that solely includes stores known to  have trafficked or suspected of trafficking\u2014to the full population of SNAP- authorized stores because the extent to which the sample reflects the  broader population of stores is unknown (see sidebar). According to the  Office of Management and Budget\u2019s (OMB) statistical standards for  federal agencies, possible variation in estimates should be noted, such as  by reporting the range of each estimate. While FNS discusses some  limitations of its trafficking estimates in the body of each report, only the  report\u2019s appendices include information that can be used to assess the  level of uncertainty around the estimates.", "Using information contained in these appendices, we found widely  varying trafficking estimates. For example, although FNS reported that  approximately $1 billion in SNAP benefits were trafficked annually from  2012 through 2014, information in the report\u2019s appendices indicates that  the amount trafficked could have ranged from about $960 million to $4.7  billion. In other words, the total value of SNAP benefits that were  trafficked each year from 2012 through 2014 could have been  approximately $40 million less or $3 billion more than FNS reported (see  fig. 5).", "FNS officials stated the agency has not considered and does not intend to  consider changes to how it reports its trafficking estimates in the next  report. According to an FNS official, FNS would like the reports to  continue to provide non-technical information that is comparable to prior  years. However, as shown in the figure above, it is possible to compare  estimates over time when estimates are presented with ranges. Further,  reporting the level of uncertainty with each estimate increases  transparency. According to a recent Congressional Research Service  report, these estimates are the most-often cited measure of fraud in  SNAP. The estimates have been cited in the news media and  congressional testimony, and FNS officials stated the estimates can help  quantify the outcomes of FNS\u2019s efforts to prevent, detect, and respond to  retailer trafficking. By not clearly reporting the level of uncertainty around  these commonly cited estimates of SNAP retailer trafficking, FNS\u2019s  reports are potentially providing misleading information to Congress and  the public regarding the extent of fraud in SNAP."], "subsections": []}, {"section_title": "FNS Evaluated Ways to Address Some Limitations in the Trafficking Estimates, but Does Not Plan to Take Further Steps", "paragraphs": ["FNS has acknowledged limitations with its current approach to estimating  retailer trafficking and evaluated ways to address some of those  limitations. As previously noted, FNS selects a non-random sample of  stores known to have trafficked or suspected of trafficking when  calculating its estimates, which may introduce bias into those trafficking  estimates (see sidebar). For example, the sample could overestimate the  extent of retailer trafficking if the stores in the sample that are targeted for  investigation are more likely to traffic. Conversely, if FNS\u2019s detection  methods do not capture all instances of trafficking\u2014such as retailers who  only traffic with people they know\u2014the sample could lead to an  underestimate of trafficking among all SNAP-authorized stores.  Recognizing that the trafficking estimates provide important information  on program fraud, FNS evaluated ways to address limitations in the  estimates. In 2013, FNS convened a technical working group of experts  to discuss alternate ways to estimate retailer trafficking. That group made  various recommendations to improve the estimates, some of which FNS  pursued through additional analyses.", "For example, to address limitations introduced by the sample FNS uses  to estimate trafficking, the agency conducted a study to assess the  feasibility of calculating its estimates using a national random sample of  stores. However, FNS determined it would be infeasible to use a  random sample because of the costs and resources that would be  involved. According to FNS officials, it cost the agency approximately  $67,000 to produce the September 2017 trafficking estimates report. By  comparison, FNS estimated that using a national random sample could  cost between $11.5 million and $38 million, depending on the specific  sample selection method. This is because, among other factors, taking  this approach would require investigative staff to visit stores suspected of  trafficking as well as those that are not suspected of trafficking. Doing so  would require a significant number of additional investigators, according  to the feasibility study.", "Also in response to a recommendation by the technical working group,  FNS contracted for a study in November 2017 that reviewed the five  factors the agency uses to make adjustments to reduce the bias in its  sample of stores (see sidebar). FNS began using these five factors\u2014such  as the type of store\u2014more than 20 years ago when it initially developed  its approach to estimating trafficking. The study evaluated the continued  relevance of the five factors, as well as the relevance of additional factors  related to store characteristics and neighborhood demographics. The  study did not make recommendations, and the expert who conducted the  study told us that based on the analysis, the original five factors remain  relevant. As a result, FNS officials stated the agency would continue to  use these factors to reduce bias in the sample.", "However, FNS has not evaluated whether factors the agency currently  uses to identify stores for possible investigation could help reduce bias in  the sample and improve the trafficking estimates. Specifically, FNS  analyzes data on SNAP transactions and looks for suspicious patterns or  other indications of potential trafficking. Based on the results of these  analyses, FNS assigns a numeric score to each store, and stores with  scores above a certain threshold are added to FNS\u2019s Watch List for  further review. Several experts have suggested to FNS that including  this score or other related factors when adjusting the investigative sample  could help reduce the bias in the sample and improve the trafficking  estimates, yet FNS has not evaluated the use of these factors for this  purpose. FNS officials said that stores\u2019 numeric scores and the factors  related to the Watch List are not public information, and the agency\u2019s  preference is to be transparent about the methodology used to produce  the trafficking estimates. However, FNS already describes its Watch List  and the use of a numeric score threshold in an appendix to its trafficking  reports. According to OMB\u2019s statistical standards, federal agencies should  take steps to maximize the objectivity of the statistical information they  produce. Objectivity refers to whether the information is accurate, reliable,  and unbiased. Without evaluating the usefulness of the Watch List  factors for adjusting the sample, FNS may miss an opportunity to reduce  the bias in the sample and improve the accuracy of its trafficking  estimates.", "In addition, FNS has not evaluated the accuracy of its assumption of the  percentage of SNAP benefits trafficked by different types of stores, which  FNS developed over 20 years ago from anecdotal information. Among  stores that engaged in trafficking, FNS assumes that 90 percent of  benefits redeemed in small stores and 40 percent of benefits redeemed in  large stores were trafficked (see sidebar). A former FNS official who  helped develop the agency\u2019s approach for estimating trafficking stated  that the assumption was based on conversations with investigators in the  1990s\u2014deemed to be the best source of information at the time. He  noted that the investigators who were consulted generally disagreed on  the percentage of benefits that were trafficked, as the actual percentage  could vary widely based on whether, for example, one employee had  trafficked or the entire store was a front for trafficking. However, the  investigators generally agreed that 90 percent and 40 percent would  overestimate trafficking by retailers in small and large stores, respectively.  According to FNS officials, in the absence of other data, they preferred to  use an overestimate, rather than an underestimate, of the percentage of  benefits trafficked in stores found to have trafficked.", "Despite an increase in the availability of data on retailer trafficking over  the last 20 years, FNS officials have not evaluated the accuracy of this  key assumption and said that they have no plans to do so. FNS officials  noted that they do not believe there are available data that indicate  whether the assumption is accurate and, as such, any evaluation would  require new data collection. However, according to contractors and a  former official we spoke with who had studied the methodology as well as  USDA OIG officials, data are currently available that may help FNS  evaluate the accuracy of this assumption. For example, they suggested  FNS could analyze the transaction data of stores that trafficked to identify  the percentage of all redeemed SNAP benefits that were consistent with  known indicators of trafficking. Currently, OIG officials told us that they  use a similar approach to calculate the amount of benefits trafficked for a  store whose owner is being prosecuted. According to OMB\u2019s statistical  standards, assumptions should be reviewed for accuracy and validated  using available, independent information sources. Without FNS  evaluating its key assumption of the percentage of SNAP benefits  trafficked, the estimates it reports on the extent of program fraud are  potentially inaccurate."], "subsections": []}]}, {"section_title": "FNS Has Taken Some Steps That Generally Align with Leading Practices to Prevent, Detect, and Respond to Retailer Trafficking, but Has Not Pursued Others", "paragraphs": [], "subsections": [{"section_title": "FNS Has Taken Steps to Address Retailer Trafficking, but Has Not Pursued Certain Prevention and Response Activities", "paragraphs": [], "subsections": [{"section_title": "Preventing Trafficking in the Retailer Authorization Process", "paragraphs": ["FNS has taken some steps to prevent retailer trafficking that align with  leading fraud risk management practices and our prior recommendations,  but has not pursued some opportunities for early oversight. As we note  in our Fraud Risk Framework, while fraud control activities can be  interdependent and mutually reinforcing, preventative activities generally  offer the most cost-effective investment of resources. FNS officials told us  that the agency tries to prevent trafficking through its policies and  procedures for authorizing stores to participate in SNAP. Since our 2006  report, FNS has taken some steps to amend retailer authorization  policies to address vulnerabilities that we identified. For example:  Increasing requirements for food that retailers must stock to  participate in SNAP: In 2006, we found that FNS had minimal  requirements for the amount of food that retailers must stock, which  could allow retailers more likely to traffic into the program. At that  time, FNS officials said that they authorized stores with limited food  stock to provide access to food in low-income areas where large  grocery stores were scarce. In 2006, retailers were generally required  to stock a minimum of 12 food items (at least 3 varieties in each of 4  staple food categories), but FNS rules did not specify how many items  of each variety would constitute sufficient stock. We recommended  that FNS develop criteria to help identify the stores most likely to  traffic, using information such as the presence of low food stock. In  2016, FNS promulgated a final rule increasing food stock  requirements and, in January 2018, issued a policy memorandum to  clarify these requirements. FNS officials told us that the new  requirements are designed to encourage stores to provide more  healthy food options for recipients and discourage trafficking.  According to the memorandum, retailers are now generally required to  stock at least 36 food items (including stocking at least 3 varieties in  each of 4 staple food categories, and 3 items of each variety). See  figure 6 for a comparison of the previous (as of 2006) and current  (reflecting the January 2018 memorandum) requirements.", "Assessing retailer risk levels: Also in 2006, we found that FNS had  not conducted analyses to identify characteristics of stores at high risk  of trafficking and to target its resources accordingly. For example, we  reported that some stores may be at risk of trafficking because one or  more previous owners had been found to be trafficking at the same  location. At that time, FNS did not have a system in place to ensure  that these stores were quickly targeted for heightened attention. We  recommended that FNS identify the stores most likely to traffic and  provide earlier, more targeted oversight to those stores. In 2009,  FNS established risk levels for stores: high, medium, and low. For  example, high-risk stores are those with a prior permanent  disqualification at that location or nearby. In January 2012, FNS  revised its policy for authorizing high-risk stores. The policy requires  high-risk retailers to provide specific documentation to ensure that the  owners listed on the application have not been previously disqualified  or do not have ties to a previously disqualified owner, such as a letter  from the bank listing the authorized signers on the store\u2019s accounts.", "Although FNS took these steps to identify risk levels for stores and target  its initial authorization activities accordingly, the agency is not currently  using this information to target its reauthorization activities to stores of  greatest risk. During reauthorization, FNS reviews previously approved stores for continued compliance with program requirements. Although the  agency\u2019s policy and website both state that certain high-risk stores will be  reauthorized annually, FNS is currently reauthorizing all stores on the  same 5-year cycle, regardless of risk. FNS reauthorized most high-risk  stores under this policy one time in fiscal year 2013, but officials told us  that they then discontinued annual reauthorizations after an in-depth  assessment of the benefits and costs of this practice. For example, FNS  staff reported collecting more than 150,000 documents as part of the  fiscal year 2013 reauthorization cycle and found that collecting these  documents annually is ineffective and burdensome to FNS and the  retailer.", "FNS instead decided to annually reauthorize a sample of high-risk  retailers as a result of its assessment of the fiscal year 2013 cycle, but did  not follow through with those plans. Specifically, the agency decided to  pursue annual reauthorizations of a sample of stores at the greatest risk  of program violations\u2014those at the same address as a store that had  been previously permanently disqualified. However, FNS officials did not  have documentation that the approach was ever implemented or that they  assessed the benefits and costs of reauthorizing this sample of high-risk  retailers. More frequent reauthorization of certain high-risk stores is  consistent with federal internal control standards, which suggest that  agencies should consider the potential for fraud when determining how to  respond to fraud risks. Considering the benefits and costs of control  activities to address identified risks is a leading practice in GAO\u2019s Fraud  Risk Framework. By not assessing the benefits and costs of reauthorizing  certain high-risk stores more frequently than other stores, FNS may be  missing an opportunity to provide early oversight of risky stores and  prevent trafficking."], "subsections": []}, {"section_title": "Detecting Retailer Trafficking", "paragraphs": ["The steps FNS has taken to improve how it detects retailer trafficking  generally align with fraud risk management leading practices for  designing and implementing control activities to detect fraud. For  example, FNS\u2019s website shows how to report SNAP fraud, including  retailer trafficking, through the USDA OIG\u2019s fraud hotline. According to  our Fraud Risk Framework, reporting mechanisms help managers detect  instances of potential fraud and can also deter individuals from engaging  in fraudulent behavior if they believe the fraud will be discovered and  reported. Increasing managers\u2019 and employees\u2019 awareness of potential  fraud schemes can also help managers and employees better detect  potential fraud. To that end, FNS has developed fraud awareness training  for staff in each of the branches in its Retailer Operations Division\u2014the  office primarily responsible for oversight of SNAP-authorized retailers.  This includes training related to retailer trafficking for new staff and  refresher training for experienced staff. Some of the training materials  employ identified instances of trafficking to improve future detection and  response activities. See figure 7 for photographs from a store  investigation that were featured in an April 2017 training session.", "FNS also uses data analytics, another leading practice in our Fraud Risk  Framework, to identify potential trafficking and prioritizes its investigative  resources to the stores most likely to be trafficking. Specifically, FNS  scans about 250 million SNAP transactions per month through its Anti- Fraud Locator using EBT Retailer Transactions (ALERT) system to  identify certain patterns indicative of trafficking. ALERT assigns a numeric  score to each store based on the likelihood of trafficking. Stores with  scores above a certain threshold are added to FNS\u2019s Watch List, and  FNS analysts and investigators prioritize the stores on this list for review  based on factors such as average transaction amounts that are excessive  for that type of store. In addition, FNS\u2019s analysts conduct their own data  mining and review complaints and fraud tips from the OIG\u2019s hotline to add  stores to the Watch List.", "FNS also has explored ways and taken steps to improve its data analytics  through internal workgroups and external studies. Using the results of  monitoring and evaluations to improve fraud risk management activities is  a leading fraud risk management practice. For example, staff in the  Retailer Operations Division participate in a workgroup that uses findings  from FNS\u2019s trafficking investigations to improve the Division\u2019s detection  efforts. This collaborative effort has led to improvements such as using  store ZIP codes to compare transactions at stores suspected of trafficking  with similar stores nearby. According to FNS, its staff can use this  information to substantiate charges against retailers by establishing what  typical transaction patterns look like, compared to trafficking patterns, for  similar stores. In addition, FNS commissioned studies in fiscal years 2014  and 2015 to evaluate the effectiveness of its data analytics to monitor  stores and identify areas for improvement. For example, one of the  studies identified and recommended new ways that FNS could analyze  SNAP transaction data to detect emerging trafficking schemes\u2014such as  indirect trafficking at super stores and supermarkets, where more than 80  percent of SNAP benefits are redeemed. FNS officials reported in August  2018 that they examined the recommendations and implemented those  they determined were feasible with current resources and would add  value to their efforts. For example, they decided to analyze data over  shorter periods of time (monthly instead of a 6-month period) to more  quickly identify stores that may be trafficking. Officials also reported that  they are continuing to assess the effectiveness of their data analytics."], "subsections": []}, {"section_title": "Responding to Retailer Trafficking", "paragraphs": ["FNS\u2019s efforts to respond to retailer trafficking generally align with leading  practices for fraud risk management. Consistent with our Fraud Risk  Framework, FNS has established collaborative relationships with external  stakeholders to respond to identified instances of potential fraud. For  example, to amplify its own efforts, FNS has agreements (known as state  law enforcement bureau, or SLEB, agreements) with 28 states. Through  these agreements, FNS allows state and local law enforcement agencies  to use SNAP EBT cards in their own undercover investigations of  retailers. According to the most recent available FNS data, participating  states opened 1,955 cases from fiscal year 2012 to fiscal year 2018  under SLEB agreements. These cases resulted in a total of 139 retailers  being permanently disqualified from the program.", "Within USDA, FNS and the OIG also said they recently updated a  memorandum of understanding (MOU) that outlines, among other things,  how the two entities will coordinate on retailer trafficking investigations.  Under the MOU, FNS investigates retailers with average monthly SNAP  redemptions below a certain dollar threshold without first obtaining  clearance from the OIG to pursue the case. FNS and OIG officials said  that this provision of the MOU allows FNS to more quickly investigate  suspicious behavior and pursue administrative action, such as permanent  disqualification, against retailers found to be trafficking. Previously,  according to OIG officials, FNS needed to clear most cases against  retailers suspected of trafficking through the OIG. As we noted in our  2006 report, due to the time it takes to develop an investigation for  prosecution and the costs associated with doing so, a natural tension  exists between the goal of disqualifying a retailer as quickly as possible to  prevent further trafficking and seeking prosecution of the retailer to  recover losses and deter other traffickers. The MOU is also designed to  strengthen collaboration between FNS and the OIG in identifying the  situations that warrant criminal investigations.", "Since our 2006 report, OIG and FNS both generally increased the  number of actions taken against SNAP retailers found to be trafficking.  Specifically, the OIG reported an increase in the number of trafficking  cases that it successfully referred for federal, state, or local prosecution  (see fig. 8). The OIG also reported increases in the number of convictions  resulting from its investigations, from 79 in fiscal year 2007 to 311 in fiscal  year 2017.", "FNS also generally increased the number of retailers sanctioned for  trafficking, though few received a monetary penalty. From fiscal year  2007 to fiscal year 2017, the number of permanent disqualifications  resulting from FNS\u2019s trafficking investigations nearly doubled (see fig.  9). In lieu of a permanent disqualification, FNS sometimes imposes a  monetary penalty on a retailer found to be trafficking. However, FNS  imposed few monetary penalties for trafficking in lieu of permanent  disqualification during this period. From fiscal year 2007 to fiscal year  2017, FNS assessed a total of 40 such penalties, totaling $1.5 million (for  an average of about $38,000 each).", "In our 2006 report, we found that FNS\u2019s penalties for retailer trafficking  may be insufficient to deter traffickers. We noted that trafficking will  continue to be lucrative for retailers as long as the potential rewards  outweigh the penalties and recipients are willing to exchange their  benefits for cash. We recommended that FNS develop a strategy to  increase penalties for trafficking. Using the results of evaluations, such  as audits, to improve fraud risk management activities is a leading  practice in GAO\u2019s Fraud Risk Framework. The Food, Conservation, and  Energy Act of 2008 (known as the 2008 Farm Bill) gave USDA authority  to impose higher monetary penalties, as well as authority to impose both  a monetary penalty and program disqualification on retailers found to  have violated relevant law or regulations (such as those found to be  trafficking).", "Although USDA was granted this authority a decade ago, the department  has not finalized regulatory changes to strengthen penalties against  retailers found to be trafficking. In August 2012, FNS proposed regulatory  changes to implement this authority from the 2008 Farm Bill, including  assessing a new trafficking penalty in addition to permanent  disqualification. The penalty would have been based on the store\u2019s  average monthly SNAP redemptions and was intended to recoup  government funds diverted from their intended use. In proposing these  changes, FNS stated that they were necessary to improve program  integrity and deter retailers from committing program violations. FNS also  estimated that it would assess an additional $174 million per year in these  new trafficking penalties\u2014a significant increase from the amounts FNS  currently assesses in penalties for trafficking (less than $100,000 in fiscal  year 2017). However, FNS did not finalize this rule, and, as of spring  2018, the rule was considered \u201cinactive.\u201d At that time, FNS officials told  us that they had not finalized the rule because other rulemaking had  taken priority in the intervening 6 years. More recently, in August 2018,  FNS officials told us that they plan to revise the previously proposed rule  to increase penalties and submit it for the spring 2019 regulatory  agenda. In November 2018, FNS officials indicated that they were  beginning to draft the proposed rule but could not provide us with  documentation of this effort because the regulatory action was still  pending. Increasing penalties for retailer trafficking would serve as an  important tool to deter trafficking and safeguard federal funds."], "subsections": []}]}, {"section_title": "FNS Has Not Established Performance Measures to Assess its Retailer Trafficking Prevention Activities", "paragraphs": ["FNS measures the effectiveness of many of its trafficking detection and  response activities, but lacks measures to evaluate its prevention  activities. Measuring outputs, outcomes, and progress toward the  achievement of fraud risk objectives is a leading practice in our Fraud  Risk Framework. At the agency level, FNS has a priority plan for fiscal  year 2018 that includes a goal of reducing the SNAP trafficking rate  through retailer- and client-focused activities.", "At the program level, FNS\u2019s Retailer Operations Division has an internal  scorecard that tracks performance measures related to retailer oversight  activities, but none of these focuses on prevention of trafficking. For  example, the scorecard measures the outputs and outcomes of activities  designed to detect and respond to trafficking, such as the total number of  sanctions implemented against retailers and the percentage of  undercover investigations that result in a permanent disqualification.  However, the scorecard does not have any measures related to  preventing trafficking through the retailer authorization process\u2014a key  area for prevention activities. The scorecard includes one output measure  related to this process, but the measure (the percentage of retailer  authorization requests processed within 45 days) focuses on how quickly  retailers gain access to the program, rather than preventing trafficking.  Although FNS officials have acknowledged that their program compliance  efforts begin with the retailer authorization process, they said that they  had not considered establishing measures related to preventing  trafficking. They added that their supervisory review process may help  ensure that staff who process retailer applications in the Retailer  Operations Branch do not overlook evidence of potential fraud, but this  review includes a small sample of approved store applications (typically 5  cases per staff member monthly).", "Although FNS has not established measures to assess its trafficking  prevention activities, the agency has data that it could leverage for this  purpose. For example, FNS collects data on the number of applications  that were denied because FNS found that the retailer lacked business  integrity, such as applicants previously found to be trafficking or with ties  to a prior owner who had trafficked. Such data could be used to develop  measures related to the number and percentage of retailer applications  denied for business integrity. FNS officials acknowledged that these data  could be used to develop performance measures for its trafficking  prevention activities. Establishing such measures would enable FNS to  more fully assess the effectiveness of its retailer oversight activities and  better balance retailer access to the program with preventing retailer  fraud."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FNS must continue to balance its goal of program integrity with its  mission to provide nutrition assistance to millions of low-income  households. During a period in which SNAP retailer participation has  markedly increased, FNS has made progress in addressing SNAP retailer  trafficking by identifying high-risk stores and increasing the number of  stores disqualified for trafficking. It is critical that FNS maintain progress  and momentum in these areas, particularly since FNS\u2019s own data suggest  that trafficking is on the rise.", "To its credit, FNS has already evaluated some ways to improve how the  agency measures and addresses retailer trafficking, yet, at the same  time, the agency has missed opportunities to strengthen these areas. For  example, since FNS has not taken steps to clarify and improve its retailer  trafficking estimates\u2014one of the only available SNAP fraud measures\u2014 questions remain regarding the accuracy of the estimates and the extent  of fraud in SNAP. In addition, prevention and early detection of retailer  trafficking are particularly important and deserve continued attention,  especially since retailers can quickly ramp up the amount they redeem in  federal SNAP benefits, potentially by trafficking. However, because FNS  is reauthorizing all stores once every 5 years, the agency may be missing  an opportunity to prevent trafficking through more frequent oversight of  risky stores. Further, until FNS strengthens its response to trafficking by  increasing penalties, the agency will continue to miss an opportunity to  improve program integrity and deter retailers from committing program  violations.", "Finally, FNS directs a significant amount of staff resources to authorizing  and monitoring retailers who participate in SNAP. Ensuring that those  staff understand the importance of addressing fraud is key for program  integrity. FNS has taken steps to make that clear through the inclusion of  relevant performance measures for the branches responsible for fraud  detection and response, yet the agency has not developed such  measures for its trafficking prevention activities. Until FNS establishes  performance measures for these activities, it will be unable to fully assess  the effectiveness of its overall efforts to address retailer trafficking. In  addition, such measures would assist FNS in balancing its efforts to  ensure retailer access with those to prevent retailer fraud."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to FNS:  The Administrator of FNS should present the uncertainty around its  retailer trafficking estimates in future reports by, for example, including  the full range of the estimates in the report body and executive summary.  (Recommendation 1)", "The Administrator of FNS should continue efforts to improve the agency\u2019s  retailer trafficking estimates by evaluating (1) whether the factors used to  identify stores for possible investigation could help address the bias in its  sample, and (2) the accuracy of its assumption of the percentage of  SNAP benefits that are trafficked by different types of stores.  (Recommendation 2)", "The Administrator of FNS should assess the benefits and costs of  reauthorizing a sample of high-risk stores more frequently than other  stores, use the assessment to determine the appropriate scope and time  frames for reauthorizing high-risk stores moving forward, and document  this decision in policy and on its website. (Recommendation 3)", "The Administrator of FNS should move forward with plans to increase  penalties for retailer trafficking. (Recommendation 4)", "The Administrator of FNS should establish performance measures for its  trafficking prevention activities. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to USDA for review and comment. On  December 3, 2018, the Directors of the Retailer Policy & Management  Division and the Retailer Operations Division of FNS provided us with the  agency\u2019s oral comments. FNS officials told us that they generally agreed  with the recommendations in the report. Officials also provided technical  comments, which we incorporated as appropriate.", "Regarding the recommendation to present the uncertainty around the  retailer trafficking estimates, FNS officials told us that they plan to include  the estimate intervals and results of sensitivity analyses in the body of  their next report, rather than in appendices. This is the information we  used to determine the range around the trafficking estimates. Making this  change would address our recommendation, as we continue to believe  that reporting the level of uncertainty around each estimate would  increase transparency and provide Congress and the public with better  information on the extent of fraud in SNAP.", "In addition, regarding the recommendation to assess the benefits and  costs of reauthorizing a sample of high-risk retailers more frequently, FNS  officials noted that while reauthorizations currently occur at least once  every 5 years, monitoring for potential violations occurs on an ongoing  basis regardless of risk level. Low-, medium-, and high-risk stores are  continually scanned by FNS\u2019s ALERT system. FNS officials added that, in  fiscal year 2017, FNS imposed sanctions (e.g., fines or temporary  disqualifications) on 862 stores found to be violating program rules, and  disqualified permanently 1,661 stores for trafficking SNAP benefits or  falsifying an application. FNS officials noted that this is a 26 percent  increase in the number of stores sanctioned, compared to fiscal year  2013. We agree that ongoing monitoring is important, and we discussed  these and other FNS efforts to detect and respond to retailer trafficking in  our report. We nevertheless believe, and FNS officials agreed, that  assessing the value of earlier oversight of risky stores through the  reauthorization process is warranted, and could enhance efforts to  prevent trafficking.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  USDA, congressional committees, and other interested parties. In  addition, this report will be available at no charge on the GAO website at  www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Kathy Larin, (202) 512-7215 or larink@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rachel Frisk (Assistant Director),  Rachael Chamberlin (Analyst-in-Charge), and Swati Deo made significant  contributions to this report. Also contributing to this report were James  Bennett, Thomas Cook, Alex Galuten, Lara Laufer, Olivia Lopez, Jean  McSween, Jessica Orr, Philip Reiff, Almeta Spencer, Jeff Tessin,  Matthew Valenta, and Erin Villas."], "subsections": []}]}], "fastfact": ["Millions of households rely on the $64 billion Supplemental Nutrition Assistance Program, formerly known as food stamps, to buy food. But some stores are defrauding the program by \"selling\" cash instead of food. For example, a store might give a person $50 in exchange for $100 in benefits\u2014then pocket the difference.", "How widespread is this \"retailer trafficking\"? The Food and Nutrition Service (FNS) reports that $1 billion in benefits are trafficked annually. However, the real extent is uncertain and could be anywhere from $960 million to $4.7 billion.", "We recommended ways to improve how FNS measures and addresses trafficking."]}
{"id": "GAO-18-150", "url": "https://www.gao.gov/products/GAO-18-150", "title": "Rental Housing: Improvements Needed to Better Monitor the Moving to Work Demonstration, Including Effects on Tenants", "published_date": "2018-01-25T00:00:00", "released_date": "2018-02-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The MTW demonstration gives 39 participating public housing agencies the flexibility to use funding for HUD-approved purposes other than housing assistance, such as developing affordable housing; change HUD's tenant rent calculation; and impose work requirements and time limits on tenants. In 2015, Congress authorized the expansion of MTW by adding 100 new agencies. GAO was asked to evaluate the MTW demonstration. GAO examined HUD oversight of MTW agencies, including its monitoring of demonstration effects on tenants.", "For this report, GAO reviewed HUD and MTW agency policies and documentation; interviewed officials at HUD and seven MTW agencies (selected based on type of policy changes, size, and geographic diversity); and interviewed tenants served by selected agencies. GAO also conducted a statistical analysis comparing data for MTW and non-MTW agencies on public housing occupancy rates, voucher utilization rates, and program expenses."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Housing and Urban Development\u2018s (HUD) oversight of the Moving to Work (MTW) demonstration has been limited. Improving oversight\u2014particularly for information collection and analysis\u2014would help HUD assess what MTW agencies have done, including funding use. HUD took steps to improve oversight and reporting, but GAO found limitations in the following areas:", "Workforce planning. While HUD has taken steps to address staffing to oversee the current 39 MTW agencies, HUD has not finalized its workforce planning for 100 agencies to be added to the demonstration. According to a 2015 HUD analysis, a large number of additional staff would be needed for the expansion. HUD officials said field office staff might assume greater oversight responsibilities to fill this gap, but a joint (headquarters-field) oversight structure is not final and HUD's workforce analysis has not been updated to reflect this proposed oversight structure.", "Data collection. Due to limited data, HUD cannot fully determine the extent to which demonstration flexibilities affected the performance of MTW agencies, especially in relation to outcomes that affect the number of tenants served\u2014occupancy and voucher utilization rates and program expenses. GAO found that MTW agencies had lower yearly median rates for public housing occupancy and Housing Choice Voucher (voucher) unit utilization and higher yearly median program expenses than comparable non-MTW agencies. The differences may be partly the result of demonstration funding flexibilities, such as the ability to use public housing and voucher funding for purposes such as gap financing for affordable housing (a nontraditional activity). But limitations in HUD data (such as not differentiating expenses for nontraditional activities) make it difficult to fully explain differences in outcomes GAO analyzed.", "Oversight of reserves. HUD has not implemented a process to monitor MTW reserves or agencies' plans for such reserves, which led to agencies accruing relatively large amounts of unused funds that could be used for vouchers. According to HUD data as of June 30, 2017, the 39 MTW agencies had more voucher reserves than the 2,166 non-MTW agencies that administer the voucher program combined ($808 million compared to $737 million). Without a monitoring process, HUD cannot provide reasonable assurance that MTW agencies have sound plans for expending reserves.", "Monitoring the effect of rent reform, work requirements, and time limits on tenants. HUD is limited in its ability to evaluate the effect of MTW policies on tenants. HUD does not have a framework\u2014including clear guidance on reporting requirements and analysis plans\u2014for monitoring the effect of rent-reform, work-requirement, and time-limit policies. HUD guidance instructs agencies to analyze the impact of their rent reform activities, describe how they will reevaluate them, and develop a tenant hardship policy for such policies (but not for time limits or work requirements). But the guidance does not describe what must be included in the analyses or policies, leading to wide variation in how agencies develop them. Also, HUD does not assess the results of agencies' analyses."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes 11 recommendations to HUD, which include completing workforce planning, developing processes to track use of funds and monitor agencies' reserves, and developing a framework\u2014including clear guidance on reporting requirements and analysis plans\u2014to monitor effects on tenants. HUD generally agreed with eight of the recommendations and disagreed with three, citing the need for flexibility. GAO maintains the recommendations, as discussed further in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Moving to Work (MTW) demonstration, administered by the  Department of Housing and Urban Development (HUD), was established  in 1996 to provide statutory and regulatory flexibility to participating public  housing agencies. Of approximately 3,900 public housing agencies, 39  were participating in the MTW demonstration as of September 2017. In  fiscal year 2017, MTW agencies received funding of about $4.3 billion,  which represented more than 17 percent of HUD\u2019s public housing and  Housing Choice Voucher (voucher) programs. The Consolidated  Appropriations Act, 2016 authorized HUD to expand the MTW  demonstration to an additional 100 public housing agencies over 7  years. However, researchers and organizations that advocate on behalf  of residents, including legal aid groups, have raised questions about the  expansion because of the lack of information about the demonstration\u2019s  effects on tenants.", "The MTW demonstration is intended to give participating agencies (MTW  agencies) the flexibility to design and test innovative strategies (activities)  for providing and administering housing assistance using funding they  receive for their public housing and voucher programs, including making  changes to HUD\u2019s rent calculation and adopting work-requirement and  time-limit policies for tenants. MTW agencies also are able to combine the  funding they are awarded annually from HUD\u2019s public housing and  voucher programs into a single agency-wide funding source.", "In April 2012, we examined issues such as HUD\u2019s monitoring of the MTW  demonstration and potential benefits of and concerns about  demonstration expansion. Our April 2012 findings included that HUD had  not identified what performance data would be needed to assess the  results of the demonstration as a whole and had not established  performance indicators for the demonstration. We also found that  expanding the MTW demonstration could allow agencies to develop more  activities tailored to local conditions, but data limitations and monitoring  weaknesses would make it difficult for Congress to know whether an  expanded MTW demonstration would benefit the additional agencies and  the residents they serve.", "You asked us to conduct another review of the MTW demonstration, with  a focus on how the demonstration affected tenants. This report examines  (1) HUD oversight of MTW agencies, including agency reporting and  compliance with demonstration requirements; (2) any association  between MTW flexibilities and program outcomes, including public  housing occupancy rates and voucher unit utilization rates; and (3) the  extent to which HUD monitored effects of rent-reform, work-requirement,  and time-limit policies on tenants.", "To examine HUD\u2019s oversight of MTW agencies, we reviewed our 2012  report on the MTW demonstration, the standard agreement that governs  the participation in the demonstration of the existing 39 MTW agencies,  and HUD\u2019s guidance on agency reporting and demonstration  requirements. We interviewed HUD officials about the processes HUD  uses to review the agencies\u2019 annual reports and assess compliance. We  reviewed workforce analyses on the MTW demonstration. We interviewed  HUD officials about their resource needs and plans to monitor current  MTW agencies and any new agencies that might join the demonstration.  We compared HUD\u2019s monitoring guidance with federal internal control  standards and key principles we developed for workforce planning. To  assess the extent to which HUD followed its procedures, we reviewed  HUD\u2019s documentation of compliance assessments from 2013 through  2016 (the only years for which HUD completed such assessments). We  also interviewed officials from a nongeneralizable sample of seven MTW  agencies that had implemented major rent-reform changes and work- requirement and time-limit policies. In selecting the agencies, we also  considered size, length of time in the demonstration, and geographic  diversity.", "To identify and examine any association between MTW flexibilities and  program outcomes, we obtained the following data on MTW and non- MTW agencies for 2009 through 2015: agency and tenant characteristics  from the Public and Indian Housing Information Center (PIC) system;  public housing occupancy rates from the Picture of Subsidized  Households dataset; voucher unit utilization rates from the Voucher  Management System (VMS); and expense data from the Financial Data  Schedule (FDS). These were the most reliable and recent data available  at the time of our analysis. We combined the HUD data with data from the  American Community Survey (1-year estimates) conducted by the  Census Bureau. To assess the reliability of the data, we reviewed  relevant documentation on the information systems, conducted electronic  testing, and interviewed officials knowledgeable about the data. We  determined the data were sufficiently reliable to identify a comparison  group and compare the outcomes of certain measures for MTW and  comparable non-MTW agencies. We used the data and multivariate  statistical methods to compare MTW and similar non-MTW agencies to  estimate any association between MTW flexibilities and public housing  occupancy rates, voucher unit utilization rates, and various public housing  and voucher expenses. To identify factors that could explain the results of  our analysis, we reviewed the standard agreement, FDS data, and data  on unspent voucher funds, and interviewed HUD officials.", "To determine the extent to which HUD monitored the effect on tenants of  rent-reform, work-requirement, and time-limit policies, we reviewed HUD  guidance to determine how HUD defines these activities and what  direction it provides on monitoring and reporting the effects on tenants.  We compared HUD\u2019s monitoring guidance with relevant internal control  standards. We reviewed MTW agencies\u2019 2015 annual reports to  determine the extent to which agencies adopted rent-reform, work- requirement, and time-limit policies. We selected 2015 because it was the  most recent year for which annual reports were available for all MTW  agencies at the time of our analysis. We also reviewed MTW agencies\u2019  2011\u20132016 annual plans and requested information from all MTW  agencies on tools they use to monitor the effects of rent reform on  tenants. (We chose this range because the 2011 annual plans were the  first to require that all MTW agencies include specific information when  proposing rent-reform policies and the 2016 plans were the most recent  year available for all MTW agencies at the time of our analysis.) We also  interviewed officials from the seven selected MTW agencies about their  monitoring of rent-reform, work-requirement, and time-limit policies\u2019  effects on tenants. Additionally, we held group meetings with tenants from  five agencies and interviewed tenant advocacy organizations to obtain  their views on the effect of these policies on tenants and their awareness  of associated hardship policies. For more detailed information on our  scope and methodology, including how we selected tenants and tenant  advocacy organizations, see appendix I.", "We conducted this performance audit from February 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The MTW demonstration was authorized by the Omnibus Consolidated  Rescissions and Appropriations Act of 1996 (1996 Act). The  demonstration\u2019s ultimate goal is to identify successful approaches that  can be applied to public housing agencies nationwide. As of November  2017, a total of 39 agencies were authorized to participate in the  demonstration (see fig. 1); however, two agencies consolidated their  MTW demonstration programs and are counted as one agency for  purposes of MTW participation.", "The MTW Office within the Office of Public and Indian Housing (PIH) is  responsible for implementing the demonstration. The MTW Office  currently includes a program director and eight coordinators, who are  each assigned to a specific group of MTW agencies. MTW coordinators  facilitate the reviews of planned and implemented activities and are  responsible for coordinating with other HUD offices, including local HUD  field offices, to obtain additional input on MTW agencies\u2019 planned  activities and accomplishments."], "subsections": [{"section_title": "Objectives and Key Demonstration Requirements", "paragraphs": ["The 1996 Act that created the MTW demonstration provides three  objectives for the demonstration: (1) reduce costs and achieve greater  cost-effectiveness in federal housing expenditures; (2) give incentives to  families with children where the head of household is working, seeking  work, or is preparing for work by participating in job training, educational  programs, or programs that assist people to obtain employment and  become economically self-sufficient; and (3) increase housing choices for  low-income families.", "In making these changes, MTW agencies must comply with the following  five contractual requirements derived from the 1996 Act:  1.  assist substantially the same total number of eligible low-income  families under MTW as would have been served absent the  demonstration;  2.  maintain a mix of families (by family size) comparable to those they  would have served without the demonstration;  3.  ensure that at least 75 percent of the families assisted are very low- 4.  establish a reasonable rent policy to encourage employment and self- 5.  assure that the housing the agencies provide meets HUD\u2019s housing  quality standards."], "subsections": []}, {"section_title": "Funding for MTW Agencies", "paragraphs": ["MTW agencies do not receive special funding allocations; rather, they  receive funds from the three traditional primary funding sources (public  housing capital funds, public housing operating funds, and voucher  funds). Public housing agencies generally are required to use the funds  from each source only for specific purposes, but MTW agencies may  combine the money from the three sources and use the funds for a  variety of HUD-approved activities. This fungibility is intended to give  MTW agencies greater flexibility. For example, public housing operating  funds are traditionally used to make up the difference between rents  charged for units and the cost of operating them. Capital funds are  traditionally used for modernization and management improvements,  while voucher funds traditionally provide rental assistance in the private  market. However, an MTW agency may use public housing capital funds  to issue additional vouchers or use voucher funds to develop more public  housing. MTW agencies also have the authority to use their funds to  implement innovative activities that differ from traditional housing  assistance. For instance, an MTW agency can use funds to replace public  housing with mixed-income communities or reach special-needs  populations using vouchers paired with supportive services."], "subsections": []}, {"section_title": "Terms of Participation for MTW Agencies, Including Reporting", "paragraphs": ["HUD entered into a standard agreement with each existing MTW agency.  HUD created the agreement in 2008 to standardize the contract terms.  The agreement references an attachment that sets out reporting  requirements (Attachment B or Form 50900) and another attachment  (Attachment C) that lists the specific sections of the United States  Housing Act of 1937, as amended, and its implementing regulations that  an MTW agency may waive as part of its MTW flexibility. While the  standard agreement is generally the same for all MTW agencies, two  attachments are tailored to individual agencies: a description of the  formulas for determining the amounts of funding each agency will receive  (Attachment A) and a section that may include some agency-specific  authorizations (Attachment D).", "In addition to statutory requirements, the agreement requires all existing  MTW agencies to submit to HUD an annual plan for approval as well as  an annual report. Attachment B outlines the information that agencies  are required to include in their annual plans and annual reports. For  example, MTW agencies must include certain elements in their annual  plans for each activity they propose to adopt, such as (1) a description of  the activity and its anticipated effect in relation to the statutory objective  under which the activity is proposed; (2) the HUD metrics that will be used  to quantify the changes the agency anticipates as a result of the activity, including baseline performance level and yearly benchmarks; and (3) the  MTW authorizations that give the agency the flexibility to conduct the  activity. Similarly, MTW agencies are required to include in their annual  reports information about housing stocks and leasing as well as  information required for HUD to assess compliance with key  demonstration requirements (such as number and mix of families served  and percentage of very low-income households served). For rent-reform  activities, agencies are also required to describe the number and results  of any hardship requests.", "MTW agencies also are required to report standard information through  HUD data systems. MTW agencies must submit tenant-related data into  the Moving to Work section of the Public and Indian Housing Information  Center (MTW-PIC). According to HUD officials, the MTW-PIC module  was created in 2007 because the standard PIC system that non-MTW  agencies use could not accommodate some of the activities allowed  under MTW, such as rent calculations that vary from HUD\u2019s standard  calculations. MTW agencies also must submit year-end financial  information into FDS, and HUD issued special instructions to enable  MTW agencies to complete the reporting. Finally, MTW agencies must  report voucher unit utilization in VMS."], "subsections": []}, {"section_title": "MTW Demonstration Expansion", "paragraphs": ["The Consolidated Appropriations Act, 2016 authorized HUD to expand  the MTW demonstration from the current 39 public housing agencies to  an additional 100 agencies (expansion agencies) over 7 years. The  2016 act requires that the expansion agencies must be high performers at  the time of application and that the selected agencies represent  geographic diversity. The expansion agencies will be brought into the  demonstration by cohort, as required by the 2016 act. HUD plans to  designate the initial cohort by summer 2018. As directed by the 2016 act,  within each cohort each agency will implement one policy change that  HUD selects for that cohort to test. The 2016 act requires that expansion  agencies be rigorously evaluated and that HUD establish a research  advisory committee to advise the Secretary on policies to study and  methods of research and evaluation. HUD established the committee and  received its recommendations on which policy changes to test and how to  evaluate them. As of November 2017, HUD had not announced the  policy changes each cohort will be testing.", "On January 23, 2017, HUD published in the Federal Register a request  for comment on a draft operations notice for the MTW expansion. The  draft operations notice establishes requirements for the implementation  and continued operations of the demonstration and describes waivers  available, terms of participation, funding and financial reporting, and  administration and oversight for agencies joining under the expansion.  The comment period closed on June 5, 2017. According to HUD officials,  there will be another opportunity for comment before the notice is  finalized in early 2018."], "subsections": []}]}, {"section_title": "HUD Took Steps to Improve Oversight, but Has Not Conducted Workforce Planning for Demonstration Expansion", "paragraphs": ["Since our last review of the MTW demonstration in April 2012, HUD has  taken steps to improve MTW agencies\u2019 annual reporting and its process  for monitoring agencies\u2019 compliance with requirements of the  demonstration. However, we found that HUD\u2019s oversight\u2014review of  annual reports and compliance assessments\u2014has not been timely and  HUD has not fully documented its process for assessing compliance, due  to limited staffing and competing priorities. While the MTW Office added  staff to assist with the oversight of the current 39 MTW agencies, HUD  has not conducted workforce planning to address the resources needed  for overseeing the 100 agencies to be added through the MTW  demonstration expansion."], "subsections": [{"section_title": "HUD Took Some Steps to Improve Reporting by MTW Agencies and Its Process for Monitoring Compliance", "paragraphs": ["HUD has taken steps to improve MTW agencies\u2019 annual reporting. While  agencies were already required to submit annual plans and reports, HUD  revised its reporting requirements for MTW agencies in May 2013 in  response to our recommendations. Specifically, HUD revised  Attachment B to provide detailed clarifications on the meaning of the  three statutory objectives of the demonstration and relevant standard  metrics. For example, for each of the statutory objectives, the revised  guidance requires that the MTW agency use and report on all of the  applicable standard metrics listed in Attachment B. The revised  attachment also includes standard tables for MTW agencies to provide  operating information and financial information. Additionally, HUD  conducted training on the revised Attachment B and issued a document  containing answers to frequently asked questions about the revisions.", "HUD also took some steps to improve its monitoring of MTW agencies\u2019  compliance with the five requirements of the demonstration. Specifically,  in response to our 2012 recommendation that HUD implement a process  for assessing compliance with the requirements, HUD developed a  process and began to track MTW agencies\u2019 compliance with each of the  five requirements. The 2013 revisions to Attachment B added  requirements for agencies to submit information in annual reports with  which HUD assesses compliance. The attachment includes standard  tables for MTW agencies to provide specific information on households  served, family sizes, and income levels.", "According to our review of HUD documents and discussions with HUD  officials, the MTW Office uses this information, along with information  MTW agencies submitted in other HUD data systems, to assess  compliance with the five requirements. Table 1 summarizes HUD\u2019s  description of its compliance processes for each of the five requirements."], "subsections": []}, {"section_title": "HUD\u2019s Monitoring Was Not Timely and Its Process for Assessing MTW Agencies\u2019 Compliance Was Not Well Documented", "paragraphs": [], "subsections": [{"section_title": "Annual Report Review and Compliance Assessment Timeliness", "paragraphs": ["We found that HUD\u2019s reviews of MTW agencies\u2019 annual reports were not  completed in a timely manner; reviews were completed multiple years  after the annual reports were submitted. Specifically, HUD did not  complete its review of the agencies\u2019 2013\u20132015 reports until March 2017  and its review of 2016 reports was still underway as of November 2017  (see fig. 2).", "As previously mentioned, MTW agencies submit information about their  MTW activities, financial information, data related to compliance  assessments, and other information through annual reports. Attachment  B states that HUD officials will use this information to monitor MTW  agencies, particularly their compliance with some of the five  requirements. Although the standard agreement gives MTW agencies 90  days after the end of their fiscal year to submit the annual report to HUD,  it does not specify a time frame for HUD\u2019s review of the report. However,  it states that HUD must notify an agency in writing if it requires additional  information or clarifications to the information provided in the report.", "HUD officials said that limited staffing resources in the MTW Office in  2014\u20132016 led to delays in the reviews. Officials further noted that in  2014 and 2015 existing staff in the MTW Office had to focus on other  priorities, including renegotiating the standard agreement, and then in  2016 on implementing the expansion of the demonstration. Untimely  reviews of MTW annual reports diminishes oversight and can result in  delays on HUD\u2019s part in responding to issues arising from the review,  agencies not having an opportunity to respond to concerns promptly, and  HUD\u2019s inability to assess the information reported to determine effects on  tenants.", "As previously described, HUD developed a process to assess compliance  with the five requirements of the demonstration, but its implementation of  the process was not always timely. HUD did not complete its 2013\u20132015  reviews of MTW agencies\u2019 compliance with the five requirements until  2017. In March 2016, HUD officials provided us with a tracker of  agencies\u2019 compliance with the requirements that indicated HUD started its  review for 2013 but had not yet completed that assessment or started  reviewing compliance for subsequent years. In July 2017, HUD provided  us with evidence it had completed the 2013\u20132016 assessments for all five  requirements."], "subsections": []}, {"section_title": "Documentation of Compliance Assessment Process", "paragraphs": ["In addition, HUD has not clearly documented its process for assessing  compliance with the five requirements. HUD officials told us they did not  have documentation of the process they used to assess compliance with  most of the requirements, such as the methodologies and data used. As  previously discussed, HUD has different processes for assessing  compliance with each requirement and the information it uses to  determine compliance comes from various data sources. Based on our  review of HUD documents (including Attachment B and the recently  completed compliance assessments) and discussions with HUD officials,  it was not always clear what methods HUD used to support its  compliance determinations. For example, documentation we reviewed on  the requirement that MTW agencies ensure that 75 percent of the  households served are very low-income did not state the methodology  used to determine if MTW agencies were in compliance. While our review  of the documentation indicated that tenant income in all relevant  programs was used, it was not clear if the percentages of tenants in each  income category were averaged or weighted to obtain the final  percentage of tenants with very low incomes.", "Additionally, while Attachment B briefly describes the data sources used  for some of the compliance assessments, HUD has no documentation  specifying what data variables to extract and how to use them. The lack  of written instructions led to HUD having to redo its assessment of  compliance with the requirement that MTW agencies ensure that 75  percent of the households served are very low-income. Specifically, HUD  officials noted that HUD staff initially determined compliance with this  requirement based on tenants\u2019 current income, but later determined that  they needed to reassess compliance with the requirement using tenants\u2019  income at the time of entry to the program. In September 2017, HUD  officials said they were developing internal standard operating procedures  to document their approach to assessing compliance with each  requirement, and expected to complete the procedures by early calendar  year 2018. However, because HUD has not finalized these standard  operating procedures, it is unclear whether they fully document the steps  and data needed to complete the compliance assessments.", "Federal internal control standards state that management should develop  and maintain documentation of its internal control system, including for  controls related to any compliance objectives of the agency. They note  that effective documentation assists in management\u2019s design of internal  control by establishing and communicating purposes, roles and  responsibilities, and specifics of implementation to agency staff.", "HUD officials stated that limited staffing in the MTW Office in 2014\u20132016  and competing priorities led to delays in compliance assessments and  development of full documentation on procedures. Limited documentation  for assessing compliance can lead to inconsistent monitoring of MTW  agencies\u2019 compliance with the five requirements. For example, as  previously discussed, the lack of documentation on the process and data  needed led to the need to reassess compliance with the requirement that  MTW agencies ensure that 75 percent of the households served are very  low-income."], "subsections": []}]}, {"section_title": "HUD Has Not Yet Completed Workforce Planning for the MTW Demonstration", "paragraphs": ["While HUD has taken some steps to address oversight and staff  responsibilities for an expanded demonstration, it has not conducted  workforce planning for the expanded demonstration. Federal internal  control standards state that management should design control activities,  including management of human capital, to achieve objectives and  respond to risks. Management is to continually assess the knowledge,  skills, and ability needs of the entity so that the entity is able to obtain a  workforce that has the required knowledge, skills, and abilities to achieve  organizational goals. In previous work on human capital, we identified key  principles for effective strategic workforce planning, including determining  the critical skills and competencies needed to achieve current and future  programmatic results and developing strategies that are tailored to  address gaps in number, deployment, and alignment of human capital  approaches for enabling and sustaining the contributions of all critical  skills and competencies.", "In 2014, the MTW Office engaged in a workforce analysis exercise to  determine staffing levels needed to oversee the MTW demonstration as  configured at that time. Based on the 2014 analysis, the MTW Office  determined that seven staff were needed to oversee the 39 participating  agencies. In 2014, the MTW Office had four staff and in 2015, five (see  table 2). Officials told us that in 2016, an additional five staff were hired in  the MTW Office and that one staff member would focus on financial  analysis and compliance assessment. In 2017, the MTW staff count was  nine. In July 2017, officials told us that based on the 2014 workforce  analysis, they determined they had sufficient resources to oversee the  current 39 MTW agencies.", "In response to a congressional request to determine resource needs for  MTW expansion, in December 2015 the MTW Office updated its 2014  workforce analysis. As with the 2014 analysis, the 2015 workforce  analysis discussed the level of staffing resources needed and not the skill  sets and competencies needed to oversee the expanded MTW  demonstration and actions to fill any gaps. According to this analysis,  HUD determined that a significant number of staff would be needed to  oversee the new agencies. Specifically, 41 full-time equivalent personnel  across various HUD offices would be needed to meet the resource needs  of the expansion in 2016\u20132020.", "In September 2017, HUD officials said that because of the current budget  environment, the agency planned to address the staffing gap identified in  the 2015 analysis by developing a joint oversight structure between the  MTW Office and PIH\u2019s Office of Field Operations. According to HUD  officials, currently the MTW Office is primarily responsible for monitoring  MTW agencies (reviewing annual plans and reports and assessing  compliance with demonstration requirements). Field office staff in PIH  assist with the review of MTW agencies\u2019 overall financial health and  public housing occupancy and voucher leasing information, among other  things. HUD plans to continue to follow this oversight structure for the  existing 39 agencies, but have field office staff assume more  responsibilities for agencies that will join the MTW demonstration as a  result of the expansion. MTW Office officials said they have been having  internal discussions through a working group with field office staff in PIH  to discuss the new oversight structure and determine how best to meet  resource needs associated with the expansion. However, as of November  2017, the MTW Office and PIH had not completed plans for joint oversight  of the expanded MTW demonstration with the field offices or assessed  the knowledge, skills, or abilities needed to implement this new oversight  structure. As previously stated, the first cohort of public housing agencies  will join the expanded MTW demonstration by summer 2018.", "MTW Office officials also told us that PIH is planning to finalize a  workforce plan by early calendar year 2018 that will address the broad  resource needs of PIH. However, according to MTW Office officials, PIH  has not yet determined the extent to which the human capital resource  needs for the MTW expansion will be incorporated into the PIH workforce  plan. Without strategic workforce planning that reflects the oversight  strategy for the expanded MTW demonstration, identifies the critical skills  and competencies needed, and includes strategies to address any gaps,  HUD will not be able to reasonably ensure that it has the staffing  resources necessary to oversee an expanded demonstration."], "subsections": []}]}, {"section_title": "Data Limitations Hinder Analysis of MTW Flexibilities, and Outcomes and MTW Reserve Levels Raise Questions", "paragraphs": ["We found significant differences between MTW agencies and comparable  non-MTW agencies in key outcomes: MTW agencies had lower public  housing occupancy rates, lower voucher unit utilization rates, and higher  program expenses in 2009\u20132015 than similar non-MTW agencies. MTW  funding flexibilities may partly explain the differences, but limitations in  HUD data (such as the inability to determine which funding source was  used to fund which activity) make it difficult to more fully understand the  differences. MTW agencies accumulated relatively large reserves of  voucher funding, but HUD has performed limited oversight of reserves for  these agencies."], "subsections": [{"section_title": "MTW Agencies Had Lower Public Housing Occupancy and Voucher Utilization Rates and Higher Expenses Than Comparable Non-MTW Agencies in Recent Years", "paragraphs": ["We found significant differences between MTW agencies and comparable  non-MTW agencies in key outcomes of the public housing and voucher  programs, possibly affecting the number of tenants MTW agencies  served. MTW agencies had lower yearly median public housing  occupancy rates in fiscal years 2009\u20132015 than comparable non-MTW  agencies, and the difference was statistically significant (see fig. 3). The  median share of public housing units occupied (public housing occupancy  rate) for MTW agencies was 3 percentage points lower than for similar  non-MTW agencies (93 versus 96 percentage points). The middle 50  percent of MTW agencies in our analysis had occupancy rates that  ranged from 88 to 96 percentage points, while the non-MTW agencies in  our analysis had occupancy rates that ranged from 92 to 98 percentage  points.", "MTW agencies also had lower rates of voucher unit utilization than  comparable non-MTW agencies in each year during 2009\u20132015 (see fig.  4). The voucher unit utilization rate for MTW agencies was about 3  percentage points lower than for similar non-MTW agencies (about 93  percent versus about 96 percent). The middle 50 percent of the MTW  agencies had utilization rates that ranged from about 82 to 97 percentage  points, while the non-MTW agencies had occupancy rates that ranged  from about 92 to 98 percentage points.", "We also analyzed expenses for the public housing and voucher programs  of MTW agencies and comparable non-MTW agencies in 2009\u20132015.", "For the public housing program, we included all operating expenses the  MTW and non-MTW agencies incurred that were associated with their  public housing properties. As figure 5 shows, median public housing  operating expenses for MTW agencies in each year during 2009\u20132015  were $7,853 per household and $6,622 for non-MTW agencies, a  difference of about 19 percent. The middle 50 percent of the MTW  agencies had total public housing expenses that ranged from $6,048 to  $11,436, while the non-MTW agencies had expenses that ranged from  $5,827 to $8,355.", "We also compared the operating expenses associated with the central  office cost center of MTW and comparable non-MTW agencies. If larger  public housing agencies implement HUD\u2019s property management rules,  they generally are required to create a central office cost center, which  manages all the centralized activities of the agency and earns fees for  providing day-to-day oversight of individual public housing properties  such as property management. As figure 6 shows, median public  housing operating expenses related to the central office cost center for  MTW agencies were about 9 percent higher than comparable non-MTW  agencies in each year during 2009\u20132015 ($2,745 per household and  $2,520, respectively). The middle 50 percent of the MTW agencies had  central office cost center expenses associated with their public housing  program that ranged from $1,509 to $5,798, while the non-MTW agencies  had expenses that ranged from $1,635 to $4,939 per household.", "For the voucher program, we separately examined expenses in 2009\u2013 2015 related to administration, subsidy (housing assistance payments),  and tenant services. MTW agencies had higher median administrative,  subsidy, and tenant services expenses than comparable non-MTW  agencies. As figure 7 shows, median yearly administrative expenses for  MTW agencies were $922 per household and $642 for comparable non- MTW agencies, a difference of about 43 percent. The middle 50 percent  of the MTW agencies had voucher administrative expenses that ranged  from $713 to $1,179, while the non-MTW agencies had expenses that  ranged from $555 to $762.", "As shown in figure 8, the yearly median voucher subsidy expenses for  MTW agencies were about 25 percent higher than for comparable non- MTW agencies ($8,295 per household for MTW agencies and $6,629 per  household for non-MTW agencies). The middle 50 percent of the MTW  agencies had voucher subsidy expenses that ranged from $6,128 to  $12,201, while the non-MTW agencies had expenses that ranged from  $5,524 to $8,178.", "As shown in figure 9, the tenant services expenses for the voucher  program were higher for MTW agencies than for comparable non-MTW  agencies, and many non-MTW agencies did not record any expenses for  tenant services in HUD\u2019s database for the years we reviewed. These  results are consistent with MTW agencies having more flexibility to use  funds to provide tenant services. The median yearly expenses for tenant  services for MTW agencies were about $37 per household. Although  tenant services are an allowable administrative expense under the  traditional voucher program, more than half of the non-MTW agencies in  our sample did not report any expenses for tenant services for most of the  years we examined. Non-MTW agencies generally use their voucher  funds to make subsidy payments to landlords and for administrative  expenses.", "The statistical matching and modeling analysis we conducted improved  upon unadjusted comparisons of MTW and non-MTW agencies, but it  was not designed to estimate the causal effects of MTW flexibilities. To  reduce the influence of known differences between the two groups, we  accounted for broad characteristics that differed between MTW agencies  and non-MTW agencies. However, our analysis did not attempt to  measure the unique circumstances of each MTW agency, but rather  broad outcomes relevant to public housing and voucher programs in  general. For additional details on our methods and results, see appendix  II.", "As noted by others who studied the MTW demonstration and our previous  report, no central source of systematic data exists for MTW activities and  outcomes. However, a July 2017 report by Abt Associates, a research  and consulting firm, identified and tested indicators they developed to  track the performance of MTW demonstrations and compare them to  similar non-MTW agencies. As with our analysis, the Abt study found  MTW agencies tended to have worse outcomes than similar non-MTW  agencies on the indicators of voucher administrative expenses and  voucher unit utilization. The study also analyzed other indicators such as  increases in earnings of nonelderly, nondisabled households; households  served by a service coordinator; and share of voucher households in  neighborhoods with lower poverty rates. On many of the other indicators  analyzed, the study found that MTW agencies did better than similar non- MTW agencies. For example, for the self-sufficiency measures examined  in the study, estimates showed that household earnings were more likely  to increase at MTW agencies than at comparison non-MTW agencies.  The study also concluded that MTW agencies were able to serve a  significant number of individuals not reached by traditional housing  assistance and that in many cases, they were also able to offer additional  supportive services. However, because our analysis did not look at these  other indicators, we could not confirm these results."], "subsections": []}, {"section_title": "Limitations in HUD Data Make It Difficult to Fully Understand Differences", "paragraphs": [], "subsections": [{"section_title": "Potential Reasons for Observed Differences", "paragraphs": ["The observed differences in public housing occupancy and voucher unit  utilization rates and program expenses between MTW and non-MTW  agencies, which could affect the number of tenants served, may be a  result of MTW agencies\u2019 ability to (1) combine their public housing and  voucher funds and use them interchangeably and (2) use funds to  implement policies that go beyond traditional forms of housing  assistance.", "Combined funding and fungibility. The single fund authorization  permits MTW agencies to combine their public housing operating, public  housing capital, and voucher funds into a single agency-wide funding  source and use the funds interchangeably. For instance, voucher funds  may be used for public housing expenses and vice versa, which could  affect utilization and occupancy rates. Our analysis of 2015 data from  FDS, which HUD uses to account for the agencies\u2019 MTW financial data,  showed that 19 MTW agencies transferred voucher funding to their public  housing program as the result of the single-fund authorization (that is,  they transferred more funding to their public housing accounts than they  received through their public housing funding allocation). This analysis  was possible because HUD requires agencies to report financial information in FDS at the public housing project level. However, the  data could not be used to determine whether all the funds transferred to  the public housing accounts were spent on public housing expenses  because, according to HUD officials, FDS is not a system that tracks the  actual drawdown or disbursement of funds. Instead, public housing  agencies use the system to report year-end financial activity. (As  discussed later in this report, FDS data could not be used to determine  the extent to which public housing funds were used for voucher  expenses.)", "Nontraditional activities. Public housing occupancy and voucher unit  utilization rates might be lower for MTW agencies in part because MTW  agencies can use funds to implement policies that go beyond traditional  forms of housing assistance. Since October 2009, the demonstration\u2019s  \u201cbroader uses of funds\u201d authorization under the standard agreement has  permitted all MTW agencies to adopt local, nontraditional activities, which  HUD guidance organizes into four categories (see table 3).", "In July 2017, HUD provided us with data it had recently compiled on the  number of households served through local, nontraditional activities, by  MTW agency, during 2009\u20132016 (see fig. 10). According to these data,  in 2009 four agencies implemented at least one type of local,  nontraditional housing assistance activity and served 1,177 households (that is, less than 1 household served through local, nontraditional  housing assistance for every 100 MTW public housing and voucher units  available). In 2016, the number of agencies that implemented at least one  local, nontraditional housing assistance activity grew to 25 agencies,  which served 9,787 households (about 2 households served through  local, nontraditional housing assistance for every 100 MTW public  housing and voucher unit available). Some of these households could be  served through a rental assistance program that offers a lower level of  subsidy than is available to households served through traditional  voucher and public housing programs. For example, a local,  nontraditional activity could result in an MTW agency lowering its share of  housing assistance, thereby increasing the tenant\u2019s share of rent.  Conversely, HUD officials pointed out that because MTW agencies assist  hard-to-serve households, the subsidies provided to these households  could be higher than the subsidy provided under HUD\u2019s traditional  housing assistance programs. As such, a household served through local,  nontraditional housing activity may not be equivalent to a household  served under the traditional voucher or public housing program.", "Other factors related to expenses. According to HUD officials, factors  that could explain the observed differences in the expenses for the public  housing and voucher programs of MTW agencies and non-MTW  agencies include that MTW agencies typically (1) need more time and  resources to develop and implement \u201cinnovative\u201d activities, (2) serve  hard-to-serve households such as those experiencing homelessness, and  (3) provide additional services to the households they serve as a result of  the funding flexibilities. According to a University of North Carolina at  Chapel Hill study, nearly all MTW agencies have used program flexibility  to provide supportive housing for various hard-to-serve populations,  including the previously homeless, mentally disabled, developmentally  disabled, formerly incarcerated, domestic abuse victims, youth aging out  of foster care, and those with substance abuse issues. Some of these  programs were provided through sponsor-based voucher programs  administered by partner agencies, which required coordination between  the MTW agency and the partnering agencies."], "subsections": []}, {"section_title": "Data Limitations Hinder Fuller Explanations", "paragraphs": ["Limitations in HUD data make it difficult to more fully explain the  differences that may affect the number of households served. For  instance, HUD cannot measure how participation in the demonstration  affected the occupancy and voucher unit utilization rates of MTW  agencies. As previously discussed, HUD uses FDS to account for the  agencies\u2019 MTW funds, but once combined in the system, the funds are  decoupled from the original funding source and it is difficult to determine  how these funds were used. As described earlier, although FDS data  could be used to illustrate how many agencies transferred voucher  funding to their public housing program, these data could not be used to  illustrate how many agencies transferred public housing funding to their  voucher program because, according to HUD officials, FDS does not  identify the source of funding that is available for the voucher program  and local, nontraditional activities.", "Similarly, FDS cannot measure expenses that were for local,  nontraditional activities because FDS expenditure categories are not  tailored to the MTW demonstration. HUD officials said the reporting of  expenses associated with local, nontraditional activities varies by MTW  agency, which affects where FDS captures such expenses. HUD has  not made changes to FDS because, according to HUD officials, FDS is an  accounting system that tracks agencies\u2019 year-end financial activity and,  therefore, is not designed to keep track of these data.", "Furthermore, historical data do not exist on the households served  through local, nontraditional activities. Although HUD provided us a  spreadsheet it compiled in July 2017 with data on the number of  households served through local, nontraditional housing assistance  activities from 2009 through 2016, HUD had to manually compile the  spreadsheet because its PIC system does not capture data on these  households. HUD officials said the agency was considering capturing  some data on local, nontraditional households in PIC, but making this  change would require HUD and MTW agencies to devote resources to  update their systems.", "HUD previously considered making changes to the system. In 2012, HUD  issued a Federal Register notice requesting public comment on changes  to the system to track households provided assistance through local,  nontraditional activities. According to the notice, agencies had not been  reporting these families into the system, which made it difficult to  accurately account for the number of MTW families being served. The  notice further stated that the MTW Office was manually collecting data on  the number of families served each year but the PIC system needed to be  revised to make information collection easier for MTW agencies and  HUD. HUD officials said HUD did not have the information technology  resources needed to make this change in PIC.", "Federal internal control standards state that management should use  quality information to achieve the entity\u2019s objectives. Additionally, one of  the statutory objectives of the MTW demonstration is to reduce costs and  achieve greater cost-effectiveness in federal housing expenditures, and a  key demonstration requirement is to assist substantially the same total  number of eligible low-income families under MTW as would have been  served absent the demonstration.", "As discussed previously, intermingled funding streams, the purpose and  structure of FDS, and limitations in PIC have combined to limit the data  collected and readily available on the MTW demonstration. According to  HUD officials, it would be difficult for HUD to require existing agencies to  report additional financial data because doing so would require changes  to the standard agreement, which generally cannot occur without mutual  agreement between the agencies and HUD. Yet agencies\u2019 specific  reporting obligations are not set forth in the general standard agreement  but rather in Attachment B, which HUD already expanded without  requiring an amendment to the standard agreement in 2011 and 2013  and proposed to do in 2016. The standard agreement states that  agencies must provide in their annual plan the information required in  Attachment B, and under the standard agreement, HUD retains flexibility  to determine what constitutes satisfactory completion of the annual plan.  Further, the standard agreement, which sets forth general covenants for  the demonstration and not specific data points or reporting definitions,  specifically acknowledges that HUD must have the \u201cflexibility to design  and test various approaches\u201d for housing assistance and that the  agencies agree \u201cto cooperate fully with HUD\u201d in the monitoring and  evaluation of the MTW demonstration. Under the standard agreement,  MTW agencies must provide in their annual report \u201cthe information  necessary for HUD to assess the Agency\u2019s activities,\u201d without specific  detail. As with the annual plan, HUD retains flexibility to determine what  data agencies must report. Without more comprehensive data on the  uses of MTW demonstration funds and households served through local, nontraditional activities, HUD cannot assess the performance of MTW  agencies in relation to public housing occupancy and voucher unit  utilization rates and program expenses, which could affect the number of  tenants served."], "subsections": []}]}, {"section_title": "MTW Agencies Had Relatively Large Reserves of Unspent Voucher Funding, but HUD Performed Limited Oversight", "paragraphs": [], "subsections": [{"section_title": "Agency Reserves of Funding", "paragraphs": ["MTW agencies have accumulated relatively large reserves of voucher  funding. The agencies are able to accumulate more reserves because  their voucher funding formula differs from the formula used for the  traditional voucher program. HUD allocates voucher funds to non-MTW  agencies based on leasing rates and subsidy costs from the prior year.  As a result, these agencies have an incentive to expend their voucher  funding to keep their budget utilization rate high. However, the voucher  formula for MTW agencies, which is outlined in an attachment to each  agency\u2019s standard agreement, is generally based on the actual, per-unit  costs in the year prior to the agency joining the MTW demonstration.  Because the voucher allocation is not tied to prior-year subsidy expenses,  MTW agencies do not have the same incentive that non-MTW agencies  have to use all their voucher funds in a given year.", "According to 2016 HUD voucher reserve data, the 39 MTW agencies had  almost as much voucher reserves as the 2,166 non-MTW agencies  combined. Specifically, as of December 31, 2016, MTW agencies had a  total of about $1.11 billion in voucher reserves, whereas the 2,166 non- MTW agencies had slightly higher reserves of $1.13 billion. Similar to our  analysis above, we compared the voucher reserves MTW agencies held  to the reserves comparable non-MTW agencies held. As figure 11 shows,  as of December 31, 2016, the median amount of reserves per household  held by MTW agencies was $2,462 compared to $480 for comparable  non-MTW agencies (a difference of $1,982 or about 5 times higher). After  we completed our analysis, HUD provided updated reserve levels as of  June 30, 2017, that showed that MTW agencies\u2019 reserves exceeded non- MTW agencies\u2019 reserves. MTW agencies had a total of about $808 million  in reserves while non-MTW agencies had reserves of about $737 million.", "HUD has performed limited oversight of MTW reserves. For example,  before 2016 HUD did not capture data that would help it determine the  amount of voucher reserves held by MTW agencies. In January 2012, as  part of a new cash management requirement for the voucher program,  HUD implemented a process to help transition the accrual of excess  funds held at the agency level to HUD-held reserves. According to HUD  officials, this process was only partially implemented for MTW agencies at  that time because voucher subsidy expenses were comingled with  expenses associated with other allowable MTW activities in VMS. In  2016, HUD added new fields in VMS to distinguish various MTW  nonvoucher subsidy expenses (such as those for capital improvements of  existing public housing units and operation of local, nontraditional  activities) from unspent funding. According to HUD officials, these  enhancements to VMS now allow HUD to keep track of MTW agencies\u2019  reserves. Consequently, in 2016, HUD started cash reconciliations for  MTW agencies, consistent with the cash management procedures for  non-MTW agencies.", "HUD also does not have a process to systematically determine if MTW  agencies have public housing reserves. Unlike for the voucher program,  HUD was unable to determine the extent to which MTW agencies had  unspent public housing funding in reserves. According to HUD officials,  FDS tracks overall MTW reserves but HUD cannot distinguish between  public housing and voucher reserves because the MTW funds are  combined into a single account and because HUD does not have a  system similar to VMS that separately tracks public housing reserves for  MTW agencies.", "According to federal internal control standards, management should  internally communicate the necessary quality information, such as  through written communication, to help achieve the agency\u2019s objectives.  Management should design control activities\u2014policies, procedures,  techniques, and mechanisms\u2014to achieve objectives and respond to  risks. Maintaining comprehensive written policies and procedures will help  ensure that control activities are in place to address risks and carry out  management directives. We also developed criteria\u2014a set of questions\u2014 that agency managers and Congress could use to identify and manage  fee revenue instability, including identifying common principles and  leading practices for managing reserve funds. For example, managers  should ask what level of reserves is to be maintained. In addition, they  should consider establishing minimum and maximum reserve levels to  ensure accountability and adherence to the reserve\u2019s goals, justifying the  numbers with program data and risk management considerations. When  established reserve goals have been achieved, such as to fund planned  capital investments, the level of reserve should be assessed for  reasonableness.", "However, HUD has not developed and implemented a process to monitor  MTW reserves. Specifically, it does not monitor existing MTW agencies\u2019  reserves to determine what agencies plan to do with these reserves and  assess whether the plans are reasonable given the amount of reserves.  HUD officials said it would require a significant amount of time to  individually compare the MTW agencies\u2019 reserves to their planned  activities. However, HUD officials said that the draft operations notice for  the MTW expansion proposes requiring that expansion agencies hold no  more than 1 year of voucher subsidy funds in reserves. But the notice  did not outline a plan to evaluate whether this cap was appropriate, and  HUD has not yet finalized the notice. Without a process to monitor  existing MTW agencies\u2019 plans for their reserves and the appropriateness  of the cap for expansion agencies, HUD cannot provide reasonable  assurance that MTW agencies have sound plans for expending their  reserves."], "subsections": []}]}]}, {"section_title": "HUD Does Not Have a Framework for Monitoring the Effect of Certain Policies on Tenants", "paragraphs": ["HUD does not have a framework\u2014standard definitions for rent reform  and self-sufficiency, clear guidance on reporting requirements, or analysis  plans\u2014for monitoring the effect of rent-reform, work-requirement, and  time-limit policies."], "subsections": [{"section_title": "HUD Definition for Rent Reform and Agency- Determined Definitions for Self-Sufficiency Resulted in Inconsistent Reporting and Prevented Data Aggregation", "paragraphs": [], "subsections": [{"section_title": "Rent Reform", "paragraphs": ["HUD\u2019s definition of rent reform is unclear, leading to agencies  inconsistently categorizing some policies and not reporting required  information for rent-reform policies. Federal internal control standards  state that management should use quality information\u2014relevant and  reliable data\u2014to achieve the entity\u2019s objectives. HUD defines rent  reform as \u201cany change in the regulations on how rent is calculated for a  household.\u201d Under traditional public housing and voucher program rules,  an assisted household generally must contribute the greater of 30 percent  of its monthly adjusted income or the housing-agency established  minimum rent\u2014up to $50\u2014toward its monthly rent. Statute and HUD  regulations direct how public housing agencies are to certify tenant  income and determine a participating household\u2019s tenant rental  payments. Non-MTW agencies must implement this determination  process when a household first joins the program and then on a regular  basis. In addition, the total housing costs, which are used to calculate a household\u2019s tenant rental payment, include both the rent for the unit and  utility costs. As such, an agency is responsible for establishing and  maintaining a utility allowance schedule that provides reasonable  allowances for tenant-paid utilities. MTW agencies can propose rent- reform policies that make changes to these program rules, such as  changing how often tenants are recertified, eliminating certain exclusions  or deductions, or changing the approach agencies use to determine a  household\u2019s tenant contribution.", "HUD has 15 categories of activities it considers to be rent reform under  the MTW demonstration, but does not further define the activities under  each category (see table 4). Based on our review of MTW agencies\u2019  2015 annual reports, we identified 194 activities that involved one or more  rent-reform changes based generally on HUD\u2019s categories of rent-reform  activities.", "When we requested that agencies provide information on their rent- reform activities, several MTW agencies asked for clarification on how  rent reform was defined and what activities fell into this category.", "Based on our analysis of the agencies\u2019 2015 annual reports, we found  five agencies did not consider 15 of the 194 activities we identified to be  rent reform using HUD\u2019s definition.", "Based on our review of the agencies\u2019 2011\u20132016 annual plans, we found  that some agencies did not report information they are required to report  when proposing a rent-reform activity in their annual plans.", "Based on our review of the 2015 annual reports, we found that 83 of the  194 policies we identified as rent reform did not include any of the  hardship data HUD requires agencies to report for rent-reform activities.", "Officials from some MTW agencies said they did not agree with some of  the categories HUD considers to be rent reform. For example, officials  from three agencies told us that they did not consider changes to the  recertification schedule to be rent reform because such changes do not  change how rent is calculated, only the frequency of the calculation.  Officials from one agency said that HUD\u2019s definition did not match their  agency\u2019s definition because the agency restricts its view of rent reform to  any change that affects the actual rent calculation. HUD\u2019s definition  includes any change that affects the process related to rent. Officials from  another agency told us that they believe HUD does not uniformly apply its  definition of rent reform when reviewing agencies\u2019 policies.", "HUD officials also told us that they plan to clarify the rent-reform definition  for expansion agencies. But, as noted previously, HUD told us that  making changes for existing MTW agencies could be difficult because  doing so could require changes to the standard agreement, which  generally cannot occur without mutual agreement between the agencies  and HUD. However, HUD\u2019s definition for rent reform is set forth in  Attachment B, which HUD already has revised without changes to the  standard agreement and is currently revising to clarify existing reporting  requirements. Without a more clear definition of rent reform and specific  criteria or standards with which to classify activities as rent reform, HUD  lacks the quality information needed to monitor all rent-reform activities."], "subsections": []}, {"section_title": "Self-Sufficiency", "paragraphs": ["Although one of the requirements of the MTW demonstration is to  establish a reasonable rent policy to encourage employment and self- sufficiency, HUD has not defined self-sufficiency, but rather allowed each  agency to develop its own definition. To measure the extent to which  certain MTW activities, including rent-reform activities, encourage  households to achieve self-sufficiency, HUD requires MTW agencies to  report on the number of households that transitioned to self-sufficiency,  among other things. According to Attachment B of the standard  agreement, MTW agencies are allowed to define self-sufficiency for each  activity that is tied to this HUD metric.", "MTW agencies\u2019 definitions of self-sufficiency can diverge widely and  sometimes are inconsistent within an MTW agency. Some examples  include defining self-sufficiency as attaining a total gross household income at 80 percent of the area\u2019s paying a minimum rent of $225;  voluntarily terminating housing assistance and other forms of government  assistance; and attaining a household income of 50 percent of the area median income,  even if the family may be receiving other state benefits.", "In addition, some agencies use multiple definitions of self-sufficiency. For  example, one agency uses three definitions for self-sufficiency (one for its  public housing minimum rent activity, one for its voucher rent-reform  activity that combined various changes, and another for its public housing  earned income disregard alternative activity).", "Previously, we found that clarity, reliability, and balance are three of  several key attributes of successful performance measures, which are  means of objectively assessing the outcomes of programs, products,  projects, or services. A measure has clarity when it is clearly stated and  the name and definition are consistent with the methodology used for  calculating the measure. A measure that is not clearly stated can confuse  users and cause managers or other stakeholders to think performance  was better or worse than it actually was. A measure is reliable when it  produces the same result under similar conditions. Lack of reliability  causes reported performance data to be inconsistent and adds  uncertainty. Another key attribute of successful performance measures is  balance, which exists when measures ensure that an agency\u2019s various  priorities are covered. Performance measurement efforts that  overemphasize one or two priorities at the expense of others may skew  the agency\u2019s performance and keep managers from understanding the  effectiveness of their program.", "According to HUD officials, they have not defined self-sufficiency for MTW  agencies because they want to give agencies the ability to address local  needs. However, the individualized definitions have led to measurements  of self-sufficiency that cannot be consistently evaluated across activities  or agencies. In addition, officials said that it would be inappropriate for  them to develop a definition of self-sufficiency for the MTW demonstration  because HUD has not defined it for the department. However, despite the  lack of an agency-wide definition of self-sufficiency, HUD regulations  define self-sufficiency for certain other HUD programs. As such, HUD  also could develop a self-sufficiency definition for the MTW  demonstration. Without a more standardized definition of self-sufficiency  for the MTW demonstration, HUD cannot collect consistent information  that would allow for the evaluation of the effect of MTW rent-reform and  occupancy policies on tenants."], "subsections": []}]}, {"section_title": "HUD Guidance for Analyses and Reevaluations of Rent- Reform and Hardship Policies Was Not Detailed", "paragraphs": ["HUD\u2019s guidance on how agencies are to perform impact analyses,  reevaluate activities, and establish hardship policies has not described  the elements of the analysis, required submission of reevaluations, or  described elements of hardship policies. Attachment B of agencies\u2019  standard agreement contains general instructions for reporting  information in MTW annual plans and annual reports, including on rent- reform activities. For example, when an agency proposes a rent-reform  activity, the agency must conduct an impact analysis, describe how it will  annually reevaluate the activity, and develop a hardship policy for the  activity. According to HUD officials, HUD implemented these reporting  requirements for rent-reform activities because they could have significant  effects on tenants."], "subsections": [{"section_title": "Impact Analysis", "paragraphs": ["Attachment B suggests agencies take four steps when developing an  impact analysis and include the results, including describing the rent- reform activity and identifying the intended and possible unintended  effects of the activity; however, it does not provide any explanation or  suggestions for how agencies should approach each step. According to  HUD officials, these steps are not required and the only other guidance  provided to agencies to monitor the effect of rent-reform activities is draft  guidance from 2009. The 2009 draft guidance reiterates the four  suggested steps of an impact analysis and provides a narrative  explanation of the purpose of each step along with examples; however,  agencies are not required to follow the guidance and HUD never finalized  it.", "We reviewed the impact analyses agencies reported in their annual plans  from 2011 through 2016 and found that agencies\u2019 impact analyses for  their rent-reform policies varied widely in the type of information included  and level of detail. For example, a majority of impact analyses included  whether the activity would increase or decrease tenants\u2019 rent burden and  a majority included other benefits or costs to tenants, but analyses less  often discussed possible unintended consequences of their rent-reform  policies. In addition, some agencies did not include the same type of  information across the analyses of their activities. One agency provided  an example of how a hypothetical tenant\u2019s rent could change when the  agency moved to biennial recertifications, but did not analyze how  tenants\u2019 rent could change for its minimum rent or tiered rent policies.  Another agency included the potential impact on the agency for each of  its proposed activities, but only analyzed the potential rent burden on  tenants for one activity.", "In addition, the level of detail included in the impact analyses varied. For  example, in discussing a policy that would change what sources of  income were included in a tenant\u2019s rent calculation, one agency\u2019s impact  analysis stated that the change would save money for tenants. An impact  analysis for a similar policy from another agency included the number of  tenants who would be affected by the policy and a dollar estimate of how  much money tenants could save. Activities that might be considered  administrative, such as changes to the frequency of tenant  recertifications, were less likely to include details such as analysis of the  rent burden on tenants than were other activities. In several agencies\u2019  impact analyses, as well as in interviews with agency officials, agencies  generally indicated that they think of these MTW policies or activities as  being good for tenants, which may explain why agencies were less likely  to discuss burden on tenants.", "HUD officials acknowledged the need for more detailed guidance and  said they planned to provide such guidance for the expansion agencies.  HUD officials said that they have not created such guidance for the  existing agencies because they have been focused on the recent  expansion of the demonstration and because doing so could require  changes to the standard agreement. However, the steps for an impact  analysis are contained in Attachment B, to which, under the standard  agreement, agencies must adhere to satisfy their annual reporting  obligations. Further, HUD has already revised Attachment B and  agencies\u2019 reporting requirements contained therein on multiple occasions  without requiring changes to the standard agreement. Officials stated they  could encourage existing agencies to follow the guidance for the  expansion agencies.", "Federal internal control standards state that management should  externally communicate the necessary quality information to achieve the  agency\u2019s objectives. By framing the steps in Attachment B as  suggestions and not prescribing the elements of impact analyses, HUD  cannot consistently collect the type of information it needs to assess the  effect of MTW activities on tenants across agencies. For example,  according to HUD officials, one of the purposes of the impact analysis is  to encourage agencies to consider potential unintended consequences of  their activities. However, unintended consequences cannot be assessed  without more detailed impact analyses."], "subsections": []}, {"section_title": "Annual Reevaluations", "paragraphs": ["Attachment B does not describe the elements MTW agencies must  include in their annual reevaluation, and HUD does not require MTW  agencies to submit the results of those reevaluations. According to  Attachment B, when agencies propose a rent-reform activity in their  annual plan, they should provide an overview of how they will annually  reevaluate the proposed activity and revise the activity as necessary to  mitigate the negative effects of any unintended consequences. However,  it does not provide any further detail or examples of what agencies should  annually reevaluate. In addition, while HUD requires agencies to perform  annual reevaluations of rent-reform activities, HUD guidance does not  require MTW agencies to report the results of their annual reevaluations.  According to federal internal control standards, management should  externally communicate the necessary quality information to achieve the  agency\u2019s objectives.", "Based on our review of agencies\u2019 annual plans submitted from 2011  through 2016, about one-third of the rent-reform policies proposed by  agencies included a description of how agencies planned to annually  reevaluate the policies. The remaining proposals either did not include a  description or agencies stated that they would evaluate the activity  annually without providing further description of how they would perform  the evaluation. When we requested that agencies provide their 2015  annual reevaluations of their rent-reform policies, several of the MTW  agencies were confused about what we meant by annual reevaluation.  Some of those agencies asked if we were referring to their annual report  and one agency asked how an annual reevaluation was different from an  impact analysis.", "When we received documentation of what the agencies considered to be  the annual reevaluations of their rent-reform activities, 30 of the agencies  provided us information they are required to include for all of their  activities in their annual reports. For example, agencies must include a  description of their activities and their impact, compare policy outcomes to  HUD metrics, and explain challenges they faced if benchmarks were not  achieved. Most agencies referred us to all or part of this information.  However, some agencies provided analyses that went beyond those  required for annual reports, including evaluations from third-party  researchers. For example, one agency partners with a local university to  conduct an annual survey that allows the agency to assess the effect of  its rent-reform activities on households.", "During the course of our work, a HUD official said the agency had not  required MTW agencies to report annual reevaluations because, as long  as agencies had a plan to annually reevaluate their activities and HUD  had the ability to request the reevaluations if concerns arose, HUD did not  want to require agencies to report information HUD did not intend to  analyze. HUD officials later stated that the agency plans to provide more  detailed guidance for the expansion agencies and has been updating  Attachment B to clarify that agencies\u2019 annual reports must include the  results of their annual reevaluations of their rent-reform activities.", "In addition, HUD officials said they could issue guidance that encouraged  existing agencies to follow the guidance for the expansion agencies but it  would be difficult to require existing agencies to include specific elements  in these annual reevaluations without changes to the standard  agreement. However, the standard agreement merely requires that MTW  agencies fulfill the annual reporting requirements set forth in Attachment  B, which provides the detailed description of the required elements of the  annual plan and report and which HUD has already revised on multiple  occasions without requiring changes to the standard agreement.", "Because HUD allows agencies to determine the process for reevaluating  their activities, most MTW agencies have not collected or reported  additional information on rent-reform activities (including effects or  unintended consequences) outside of the requirements of their annual  reports. This leaves HUD and the agencies themselves less able to  assess the effects of MTW activities on tenants."], "subsections": []}, {"section_title": "Hardship Policies", "paragraphs": ["While MTW agencies must establish a hardship policy to define the  circumstances under which households may be exempted or receive  temporary waivers from a new rent-reform activity, Attachment B does not  define what elements must be included in the hardship policy. The  nonbinding draft guidance from 2009 we previously discussed suggested  four questions hardship policies should address (including the process  households would use to request an exemption or waiver and how  hardship cases would be resolved).", "Officials from the seven agencies we interviewed said they looked to a  range of tools to create their hardship policies. For example, officials from  one agency said they relied on the 2009 draft guidance and officials from  another agency said they relied on Attachment B when developing their  policies. Officials from three other agencies said they reviewed the  hardship policies of other MTW agencies, had conversations with HUD  while planning the activity or waiting for HUD\u2019s review of their annual  plan, or looked to relevant federal regulations. In contrast, officials from  another agency said that there was no guidance available on how to  create their hardship policies because their agency joined the  demonstration the year it began.", "Our review of MTW agencies\u2019 hardship policies for rent-reform activities  showed that while these hardship policies had some commonalities, they  also were inconsistent in terms of the type of information included. For  example, of the 84 hardship policies we reviewed, MTW agencies  included a discussion of how the agency processes a hardship complaint  in 56 policies and what remedies are available for residents approved for  a hardship exemption or waiver in 75 policies. In contrast, 26 policies  included information about whether tenants have the ability to reapply for  a hardship exemption or waiver, and 26 policies mentioned if the  agencies have different rules for the elderly or persons with disabilities. In  addition, although most hardship policies generally discussed how a  tenant may claim a hardship and apply for an exemption, some agencies  were much more specific about the process. For example, one agency  stated only that tenants may request a hardship exemption in writing,  while another agency explained which application a tenant needed to fill  out, what supporting documentation to include, and how to submit the  application.", "Some agencies have created more parameters around a tenant\u2019s ability  to request a hardship exemption or waiver than others. For example,  some hardship policies are time-limited (that is, tenants have a certain  window of time in which to apply). One agency instituted a hardship policy  for its minimum rent that stated that tenants had 15 days from receipt of  notice of their new household tenant rental payment to apply for a  hardship exemption or waiver. Another agency instituting a hardship  policy for a similar activity did not seem to impose a time limit for a tenant  to request an exemption. In addition, some hardship policies provided  relief for current tenants. For example, one-third of agencies created a  hardship policy for at least one of their activities that either exempted  current residents from the rent-reform activity or provided some form of  temporary relief as the rent-reform policy was implemented.", "We also found variation in the information MTW agencies were able to  provide on the households that requested a hardship exemption. We  asked all the MTW agencies to provide us a list of all tenants who  requested a hardship exemption in 2011\u20132015, including the result of  each request (denied or approved), the current status of each tenant, and  the reason the tenant was no longer receiving housing assistance, if  applicable. Of all the MTW agencies, five said they had not received any  requests for hardship exemptions. Three agencies were only able to  provide us information on those hardship requests that were approved,  two agencies did not indicate if the requests they received were approved  or denied, and one agency did not provide any data because it could not  distinguish hardship requests for its traditional programs from its MTW  activities. Additionally, five agencies did not provide the reasons why  tenants who requested a hardship exemption were no longer receiving  assistance. The remaining 22 agencies were able to provide the  information as requested.", "Tenants and advocates expressed mixed opinions about the rent-reform  hardship policies created by the MTW agencies we interviewed.", "Some tenants with whom we spoke said they were aware of rent-reform  hardship policies the agencies developed. For example, tenants who  participated in one of our group meetings told us that during their income  recertification the case worker assigned to their case provided them a  checklist that outlined each of the agency\u2019s hardship policies.", "When we spoke with advocates who work with tenants subject to MTW  activities, some said most tenants do not know about the hardship  policies available to them. Some tenants and advocates with whom we  spoke said the process for requesting a hardship could be difficult. For  example, one tenant said that although the MTW agency mailed tenants  \u201cfrequently asked questions\u201d that described the hardship policy, the  document was confusing and included a citation to the Federal Register  for more information, which was difficult for tenants to access. Advocates  at one organization also said tenants asked for help because the tenants  applied for a hardship waiver through their case manager, but never  received a response. In contrast, during these meetings some other  tenants told us that they had no issues with the hardship policies or the  way in which the MTW agencies implemented them.", "As discussed previously, federal internal control standards require  agencies to communicate effectively with external stakeholders to help  achieve agency goals. While HUD\u2019s proposed update to Attachment B  provides more detail than the current version, HUD officials said it could  be difficult to develop more descriptive guidance for existing MTW  agencies because doing so could require changes to the standard  agreement. In addition, officials said they had not been able to develop  more guidance for existing agencies because of their focus on the  expansion demonstration. However, the standard agreement merely  requires that MTW agencies fulfill the requirements contained in  Attachment B, which HUD has already revised on multiple occasions  without requiring changes to the standard agreement. Officials said that  they plan to provide more descriptive guidance for expansion agencies  and encourage existing agencies to follow such guidance. By not  providing more specific direction to the MTW agencies about what to  include in their hardship policies and therefore what is communicated to  tenants, existing agencies may not be adequately communicating all of  the information tenants need to understand the circumstances in which  they may be exempted from rent-reform activities."], "subsections": []}]}, {"section_title": "HUD Does Not Have Consistent Requirements for MTW Agencies for Rent-Reform, Work- Requirement, and Time- Limit Activities", "paragraphs": ["HUD requirements for MTW agencies that establish policies for work  requirements and time limits are largely inconsistent with requirements  pertaining to rent-reform activities (see table 5). Although HUD has said  it considers work-requirement and time-limit activities to have a great and  direct impact on tenants, the current MTW agencies in the demonstration  are not subject to the same reporting requirements when proposing those  policies as when proposing rent-reform activities. For example, as  previously discussed, HUD guidance in Attachment B requires agencies  to include an impact analysis, annual reevaluation, and hardship policy for  rent-reform activities in their annual plans when the activity is proposed.  However, Attachment B does not include similar requirements for  proposed work-requirement or time-limit policies.", "Further inconsistencies include that Attachment C of the standard  agreement, which lists the various MTW flexibilities available to agencies,  requires MTW agencies to create a hardship policy if they establish a  time-limit policy for public housing assistance. However, HUD did not  develop guidance requiring agencies to report on their hardship policies  for time-limit policies for public housing assistance. Furthermore, HUD  does not have a similar requirement for time-limit policies established for  voucher assistance. In addition, in the Federal Register operations notice  for the expansion of the MTW demonstration published in January 2017,  HUD proposed requiring the new MTW agencies to conduct an impact  analysis and develop a hardship policy for rent-reform and time-limit  policies, but develop only a hardship policy for work requirements.", "As previously discussed, federal internal control standards require  management to design control activities\u2014policies, procedures,  techniques, and mechanisms\u2014in response to the entity\u2019s risks. In  determining the necessary level of precision for a control activity,  management is to evaluate, among other things, consistency of  performance. A control activity that is performed routinely and  consistently generally is more precise than one performed sporadically.  HUD officials have said that they consider rent-reform, work-requirement,  and time-limit policies to have a great and direct impact on tenants. HUD  was not able to provide an explanation as to why they do not require  similar reporting for all of these activities.", "HUD officials said they did not know why MTW agencies were not initially  required to report on impact analyses, annual reevaluations, and hardship  policies associated with work-requirement and time-limit policies in  general. However, they said, currently, these policies are typically  implemented in conjunction with a rent-reform activity so there is still  reporting on the combined policies. HUD officials also stated that if an  agency proposed an activity with a time limit for public housing, the MTW  coordinator reviewing the agency\u2019s annual plan would ensure that a  hardship policy was in place. In addition, when MTW staff review a  proposed work requirement for both the public housing and voucher  programs and a proposed time limit for the voucher program, staff  suggest that MTW agencies adopt hardship policies and conduct impact  analyses for these policies.", "HUD officials also stated that the agency plans to require expansion  agencies to develop an impact analysis, annual reevaluation, and  hardship policy for rent-reform, work-requirement, and time-limit policies.  Although HUD officials said it would be difficult to set a similar  requirement for existing MTW agencies because doing so would require  changes to the standard agreement, they stated they could update  Attachment B to incorporate the requirement for a hardship policy for  public housing time limits and develop guidance encouraging existing  agencies to comply with the additional requirements put in place for the  expansion agencies. Without taking these steps, HUD will miss an  opportunity to collect information needed to evaluate the effect of work- requirement and time-limit policies on tenants."], "subsections": []}, {"section_title": "HUD Has Not Incorporated MTW Agency Reporting into Its Monitoring and Does Not Have an Analysis Plan", "paragraphs": ["Although HUD requires MTW agencies to report annually on their rent- reform, work-requirement, and time-limit policies, HUD could not provide  us with documentation of how it analyzed, used, or planned to use the  information it received from agencies on a continuous basis. According to  HUD officials, because of the recently resolved backlog of annual reports,  the MTW Office now can begin to use the years of reported data it  previously had not used.", "Officials added they provide the annual plans and reports to other  departments in HUD to conduct ad hoc analysis and that other HUD  offices have used MTW plans and reports when proposing new rules or  legislation related to housing. For example, officials said HUD used MTW  plans and reports when working on HUD\u2019s 2016 rule intended to provide  greater flexibility for agencies administering HUD\u2019s rental assistance  programs. HUD provided us documentation showing that it used  lessons learned from the MTW demonstration to inform legislative  proposals in the agency\u2019s fiscal year 2018 and 2019 budgets. Also, MTW  officials said they intend to use the data in annual reports to inform some  oversight rules.", "When asked about the agency\u2019s plan to analyze the information provided  in the annual plans and reports, HUD officials said it had awarded a  contract to the Urban Institute to perform a retrospective evaluation of the  demonstration, and the results will be available in 2018. Officials said  although they have not finalized their reporting requirements for agencies  in the expansion, these agencies likely will not be required to create  annual plans or reports but instead to annually create a supplemental  document to their annual public housing plan. With those agencies,  HUD will be able to learn from each of the cohorts about the effect of a  specific policy being evaluated. However, the plan to analyze the  supplemental documentation and cohorts of the expansion agencies does  not address how HUD plans to use the information it receives from the  current MTW agencies.", "Federal internal control standards state that management should  establish monitoring activities and evaluate results. Analysis (evaluation  of results) contributes to the operating effectiveness of monitoring. The  internal control standards also state that management should use quality  information to achieve the entity\u2019s objectives. In doing this, management  is expected to use quality information to make informed decisions and  evaluate the entity\u2019s performance in achieving key objectives and  addressing risks.", "Because the MTW Office has not systematically analyzed or evaluated  the information it requires MTW agencies to report\u2014or determined how  best to evaluate it\u2014the agency cannot assess the effect of MTW rent- reform, work-requirement, and time-limit policies on tenants. More  specifically, without a plan for analyzing information in agencies\u2019 impact  analyses, annual reevaluations, and hardship policies, HUD cannot  monitor the effect of rent-reform, work requirement, and time limit policies  on tenants. These limitations also extend to the definitional and guidance  issues we previously discussed. As a result, without a comprehensive  framework\u2014standard definitions, clear guidance on reporting  requirements, and analysis plans\u2014HUD cannot provide assurance that it  is adequately monitoring how MTW activities affect tenants."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The MTW demonstration is on the brink of significant expansion, but HUD  does not yet have the people, data, and processes in place to effectively  oversee agency participants and assess the demonstration\u2019s performance  and effects on tenants.", "Workforce planning. Insufficient staffing for the MTW demonstration  already has had negative effects. For instance, HUD has not always  reviewed annual reports that include information needed to determine the  demonstration\u2019s effect on tenants in a timely manner, annually assessed  whether current MTW agencies comply with demonstration requirements,  and fully documented its review processes. When complete, expansion of  the demonstration would more than triple the number of MTW agencies.  By finalizing its workforce planning (including an assessment of  competencies and skills needed) and documenting its compliance review  process, HUD can provide assurance that it would be positioned to  oversee an expanded demonstration before new agencies start being  added in 2018.", "Data collection. Our comparison of public housing occupancy and  voucher unit utilization rates and program expenses among MTW and  non-MTW agencies raises questions about agency performance and use  of funding that cannot be fully answered with current data. The  differences among agencies may result in part from the MTW  demonstration\u2019s funding flexibilities. However, HUD is limited in its ability  to readily determine the extent to which MTW funds were used for other  allowable purposes. More comprehensively capturing and tracking data  on uses of funding and the characteristics of households served by local  nontraditional activities would allow HUD to better assess agency  performance. HUD also would be better able to account for differences in  outcomes\u2014especially in relation to occupancy and voucher utilization  rates and program expenses\u2014that affect the number of tenants served.", "MTW reserves. The accumulation of relatively large reserves by MTW  agencies also raises questions about funding uses. HUD has performed  limited oversight of MTW voucher reserves and its data and financial  reporting systems are not structured to effectively track public housing  reserves. Developing and implementing a process to monitor MTW  reserves could help HUD provide reasonable assurance that MTW  agencies have sound plans for expending reserves.", "Framework for assessing effect of rent-reform, work-requirement,  and time-limit policies on tenants. The effectiveness of certain MTW  activities and their effects on tenants remain largely unknown because  HUD does not have a framework\u2014standard definitions for key terms,  clear guidance on reporting requirements, and analysis plans\u2014for  monitoring rent-reform, work-requirement, and time-limit policies. For  example, the variations in reporting on rent reform and self-sufficiency as  a result of inconsistent definitions of these terms; limited guidance (often  couched as suggestions) HUD provided to agencies for developing  impact analyses, annual reevaluations, and tenant hardship policies; and  inconsistent treatment of rent-reform and work-requirement and time-limit  policies suggest that HUD may have emphasized flexibility to the  detriment of oversight. In addition, HUD does not have a plan for  assessing the information agencies report on the effect of these policies.  Developing such a framework will help both HUD and MTW agencies to  assess performance and determine if activities have advanced  demonstration goals.", "We recognize the challenges involved with monitoring the MTW  demonstration, but maintain it is important for HUD to take steps to  achieve and sustain a better balance between flexibility and prudent  oversight. Improving oversight of the demonstration would help HUD  assess what MTW agencies have done, including their use of funding.  Such information also would help inform Congress and the public about  how demonstration innovations have affected tenants."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 11 recommendations to HUD:", "The Assistant Secretary for PIH should complete workforce planning for  the MTW demonstration to help ensure that PIH has sufficient staff with  appropriate skills and competencies to manage an expanded  demonstration, including reviewing reports and carrying out compliance  reviews in a timely manner. (Recommendation 1)", "The Assistant Secretary for PIH should more fully document the process  for annually assessing compliance with the five demonstration  requirements. (Recommendation 2)", "The Assistant Secretary for PIH should develop and implement a process  to track how MTW demonstration funds are being used for other  allowable activities, including local, nontraditional activities.  (Recommendation 3)", "The Assistant Secretary for PIH should identify and implement changes  to PIC to capture household data for households served through local,  nontraditional activities. (Recommendation 4)", "The Assistant Secretary for PIH should develop and implement a process  to monitor MTW agencies\u2019 reserves. (Recommendation 5)", "The Assistant Secretary for PIH should clarify HUD\u2019s rent-reform  definition for the MTW demonstration as part of a framework for  monitoring the effect of rent-reform, work-requirement, and time-limit  policies on tenants. (Recommendation 6)", "The Assistant Secretary for PIH should set parameters for HUD\u2019s  definition of self-sufficiency for the demonstration, either by providing one  definition or a range of options from which agencies could choose, as  part of a framework for monitoring the effect of rent-reform, work- requirement, and time-limit policies on tenants. (Recommendation 7)", "The Assistant Secretary for PIH should revise HUD\u2019s guidance to MTW  agencies to make it clear which elements are required in impact  analyses, annual reevaluations, and hardship policies and the information  required for each element as part of a framework for monitoring the effect  of rent-reform, work-requirement, and time-limit policies on tenants.  (Recommendation 8)", "The Assistant Secretary for PIH should develop written guidance for  existing MTW agencies that requires a hardship policy for public housing  time limits and encourages an impact analysis, annual reevaluation, and  hardship policy for work-requirement and time-limit policies for public  housing and voucher programs as part of a framework for monitoring the  effect of these policies on tenants. (Recommendation 9)", "The Assistant Secretary for PIH should require an impact analysis,  annual reevaluation, and hardship policy for work-requirement and time- limit policies new MTW agencies adopt for their public housing and  voucher programs as part of a framework for monitoring the effect of  these policies on tenants. (Recommendation 10)", "The Assistant Secretary for PIH should develop and implement a plan for  analyzing the information that agencies report on the effect of rent- reform, work-requirement, and time-limit policies on tenants as part of a  framework for monitoring the effect of these policies on tenants.  (Recommendation 11)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HUD for comment. In written  comments, which are summarized below and reproduced in appendix III,  HUD disagreed with three of our recommendations and generally agreed  with the remaining eight.", "In its general comments, HUD made the following points:", "HUD noted that our report did not identify any harmful effects on tenants  as a result of MTW flexibilities. As discussed in the draft report, due to  data limitations, we could not evaluate the effect of MTW flexibilities on  tenants. Instead, we focused on the extent to which HUD monitored the  effects of rent-reform, work-requirement, and time-limit policies on  tenants. Furthermore, our analysis of available data showed that MTW  agencies had lower public housing occupancy rates and voucher unit  utilization rates and higher program expenses than comparable non- MTW agencies, which could affect the number of tenants served.", "HUD also stated that it seemed we reviewed MTW agencies through the  lens of the traditional housing and voucher programs. HUD noted  fundamental differences in MTW and non-MTW agency operations and  stated it must consider the extensive MTW flexibilities and the locally- designed nature of each MTW agency\u2019s program in administering the  demonstration. HUD stated it did not agree with three of our  recommendations (discussed below) that it noted would restrict an MTW  agency\u2019s ability to exercise MTW flexibility and respond to variations in  local markets. As stated in the draft report, we recognize the challenges  involved with monitoring the MTW demonstration, but maintain it is  important for HUD to take steps to achieve and sustain a better balance  between flexibility and prudent oversight. Furthermore, given that the  demonstration\u2019s ultimate goal is to identify successful approaches that  can be applied to public housing agencies nationwide, we believe we  looked objectively and with the appropriate rigor and contextual  sophistication at MTW agencies.", "HUD disagreed with the draft report\u2019s third recommendation to develop  and implement a process to track how public housing and voucher  funding is being used for other allowable activities, including local,  nontraditional activities. HUD stated that funding fungibility and policy  flexibility are the core tenets of the MTW demonstration. As a result,  identifying and tracking expenses paid from a specific funding source are  not necessary and should not be a requirement. We acknowledge the  demonstration\u2019s funding and policy flexibility and did not intend for our  recommendation to be interpreted solely as a suggestion to track funding  sources. We therefore clarified our recommendation to focus on tracking  how MTW demonstration funds are being used for allowable activities,  such as local, nontraditional activities. HUD stated that the revised HUD  Form 50900 or Attachment B (expected to be published in early 2018)  would require existing MTW agencies to estimate the cost of each  planned activity. Although this would provide some cost information, it  would be limited to planned activities only and would not capture actual  costs. Therefore, we continue to believe that more comprehensively  tracking data on uses of funding would allow HUD to better account for  differences in outcomes\u2014especially in relation to occupancy and voucher  utilization rates and program expenses\u2014that affect the number of tenants  served.", "HUD disagreed with the fifth recommendation to develop and implement  a process to monitor MTW agencies' reserves. HUD stated that there is  no language in the 1996 Act that limits the reserves of MTW agencies to  a certain level. Although our draft report noted that leading practices for  managing reserve funds include considering establishing a maximum  reserve level, we did not recommend that HUD set such a reserve level  for MTW agencies because we recognized the demonstration\u2019s funding  flexibilities. Rather, we recommended that HUD develop a process to  monitor MTW agencies\u2019 plans for reserves. HUD also commented that by  reviewing and granting approval for all MTW activities that the existing 39  agencies implemented, it already had a process to determine if spending  of reserve funds was reasonable. However, as HUD noted in its  comments on the draft report\u2019s third recommendation, the agency does  not currently require MTW agencies to include the cost of a planned  activity when proposing the activity. An approval process that does not  include a review of information on planned costs, including the extent to  which reserves would be used to fund the activity, is not sufficient  because HUD lacks data needed to determine that reserve expenditures  are reasonable. Finally, HUD noted that PIH\u2019s Financial Management  Division currently tracks the public housing and voucher reserves of MTW  agencies. However, this does not address our concern that HUD does not  monitor existing MTW agencies\u2019 plans for their reserves and whether the  plans are reasonable given the amount of reserves. In order to provide  reasonable assurance that MTW agencies have sound plans for  expanding their reserves, HUD still would have to develop a process to  monitor MTW agencies\u2019 reserves. Therefore, we maintain our  recommendation.", "Similarly, HUD disagreed with our seventh recommendation to set  parameters for its definition of self-sufficiency for the demonstration,  either by providing one definition or a range of options from which  agencies could choose. It noted that the MTW demonstration provides  agencies with the ability to develop creative solutions to address local  conditions, and a one-size-fits-all approach is not appropriate. HUD  stated it intentionally has not developed a standard definition for self- sufficiency, because the definition could depend on local conditions such  as employment opportunities and availability of supportive services. We  recognized the need for flexibility in our recommendation by suggesting  that HUD could develop a range of definitions from which MTW agencies  could choose. This approach would provide the necessary flexibility while  still allowing HUD to collect the consistent information needed to evaluate  the effect of MTW rent-reform and occupancy policies on tenants.  Therefore, we maintain our recommendation.", "HUD generally agreed with our remaining eight recommendations. For  example, HUD agreed with the draft report\u2019s first recommendation on  workforce planning, but requested that due to the cross-cutting nature of  MTW, we expand the recommendation to include other PIH offices. We  acknowledge that the staff needed to manage the expanded  demonstration may be found outside the MTW Office, and therefore we  modified our recommendation. HUD also agreed with the second  recommendation to more fully document the process for annually  assessing compliance with the five demonstration requirements and said  it will finalize internal written procedures in early 2018. In addition, in  commenting on the fourth recommendation, HUD described plans to  update its data system to capture information on households served  through local, nontraditional MTW activities. Furthermore, in regard to the  eighth recommendation, HUD noted that it plans to develop guidance for  MTW agencies for the monitoring of high-impact activities such as rent  reform, work requirements, and time limits. Finally, in commenting on the  eleventh recommendation, HUD stated it will improve its process of  analyzing the data MTW agencies provide on high-impact activities.", "In commenting on our workforce planning finding, HUD made the  following points:", "HUD stated that our finding that planning for the MTW expansion  workforce structure has not been completed is not an accurate  characterization. It noted that HUD completed a workforce analysis and  hired five additional staff in 2016 in anticipation of the MTW expansion. In  our draft report, we acknowledged steps that HUD took to increase the  staffing levels of the MTW Office. However, we found that in its workforce  analysis, HUD had not assessed the knowledge, skills, and abilities  needed to implement an oversight structure for the MTW expansion  demonstration. HUD acknowledged in its response to the  recommendation that its workforce planning efforts will continue in 2018.", "HUD said our draft report did not discuss two other factors (beyond  insufficient staff) that affected oversight of the MTW demonstration: (1)  2013 was the first year HUD assessed each agency\u2019s compliance with  the five demonstration requirements, and (2) from 2013 to 2015, HUD  was in protracted and complex negotiations with the existing MTW  agencies to determine the terms of the extension of their MTW  participation. Our draft report acknowledged both factors. Specifically, we  noted that HUD developed a process for assessing compliance with the  five demonstration requirements in response to a recommendation in our  2012 report and that the process was implemented in 2013. Our draft  report also stated that HUD officials noted that in 2014 and 2015 existing  staff in the MTW Office had to focus on other priorities, including  renegotiating the standard agreement, and then in 2016 on implementing  the expansion of the demonstration.", "HUD said that even with limited staff, MTW agency plans had been  reviewed and approved within the required time frames.", "In commenting on our data collection finding, HUD made the following  points:", "Related to our multivariate statistical analysis to examine any association  between MTW flexibilities and program outcomes, HUD stated that HUD  and MTW agencies historically found it difficult to establish comparison  groups because MTW and non-MTW agencies implement significantly  different interventions. We agree that comparisons of MTW and non- MTW agencies are difficult to make. We acknowledge that MTW  agencies differ substantially from non-MTW agencies on factors such as  size and market housing costs. Accordingly, we used statistical  techniques to improve on simple comparisons between MTW and non- MTW agencies. These techniques enabled us to identify a group of  comparison non-MTW agencies that were similar to MTW agencies on  important factors such as geographic location, households served, and  county median rents. We then compared outcomes between the two  groups of agencies over a number of years (2009 through 2015). We did  not compare a single MTW agency to a non-MTW comparison group, as  HUD stated. For more detailed information on our analysis, see appendix  II.", "HUD also stated that our finding that MTW agencies had higher tenant  services expenses for the voucher program than non-MTW agencies was  an expected outcome (because the demonstration encourages MTW  agencies to engage in employment, self-sufficiency programming, and  tenant services). In our draft report, we stated that the results of the  analysis were consistent with MTW agencies having more flexibility to  use funds to provide tenant services.", "Furthermore, HUD said that a comparison of voucher administrative  expenses for MTW and non-MTW agencies was skewed and not a valid  comparison because administrative expenses for MTW agencies  included voucher administrative expenses and other administrative  expenses not permitted under the traditional voucher program.  Differences in financial and performance outcomes that only MTW  flexibilities allow, such as a broader range of administrative expenses,  represent the potential effects of the demonstration, not a source of bias.  The purpose of our analysis was to determine any association between  MTW flexibilities and program outcomes. Because MTW rules allow for  additional administrative expenses, it was appropriate to include these  expenses in our analysis.", "In addition, HUD stated that that it had requested the list of the  comparison group of non-MTW agencies to MTW agencies and  suggested the list be included in our report. The agency noted that  without this information, HUD was not able to validate our analysis. As  noted previously, our analysis was not a simple comparison of MTW and  non-MTW agencies. We developed a comparison group, applied  algorithms based on certain assumptions, and conducted sensitivity  analyses that tested these assumptions.  Therefore, simply providing the  list would not enable HUD to reproduce our analysis. Furthermore, we  selected the variables for matching because they were similar across all  agencies in each group (that is, the full distributions), not for any  particular pair of matched agencies. Consequently, we evaluated the  quality of our comparison group using the distributions of these variables  across all agencies in each group. We included those statistics in our  report, rather than the identity of particular agencies, to encourage  systematic evaluations of the matched comparison agencies using  aggregate statistics, rather than anecdotal evaluations of particular  matched pairs. Finally, we communicated with HUD throughout the  review about our data analysis. For example, we met with HUD to  discuss our methodology, provided initial results, and worked with HUD  officials to ensure we were using appropriate data fields.", "HUD also provided technical comments, which we incorporated as  appropriate. We considered one comment to be more than technical in  nature. Specifically, in response to our finding that HUD does not require  MTW agencies to submit the results of their annual reevaluations of the  impact of rent-reform activities, HUD officials stated that they consider the  annual report (and information therein) to be the annual reevaluation of  rent-reform activities. However, Attachment B does not include a  requirement that agencies report the results of their annual reevaluations.  Furthermore, if the information currently required to be included in the  annual report satisfied the annual reevaluation requirement, then there  would be no need for HUD to update Attachment B to clarify that  agencies\u2019 annual reports must include the results of their annual  reevaluations, as the agency plans to do. Therefore, we maintain our  finding and made revisions to the report to clarify what is currently  required in Attachment B.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of the Department  of Housing and Urban Development, and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) the Department of Housing and Urban  Development\u2019s (HUD) oversight of agencies participating in the Moving to  Work (MTW) demonstration, including agency reporting and compliance  with demonstration requirements; (2) any association between MTW  flexibilities and program outcomes, including public housing occupancy  rates and voucher unit utilization rates; and (3) the extent to which HUD  monitored effects of rent-reform, work-requirement, and time-limit policies  on tenants.", "For all our objectives, we interviewed officials from the following seven  MTW agencies:", "Boulder Housing Partners (Boulder, Colorado);", "Chicago Housing Authority (Chicago, Illinois);", "Delaware State Housing Authority (Dover, Delaware);", "Lincoln Housing Authority (Lincoln, Nebraska);", "Louisville Metropolitan Housing Authority (Louisville, Kentucky);", "Housing Authority of the County of San Bernardino (San Bernardino,", "San Diego Housing Commission (San Diego, California).", "In selecting these agencies, we focused on agencies that had  implemented major rent-reform changes and work-requirement and time- limit policies based on information in a study conducted in January 2015  by the Center for Urban and Regional Studies at the University of North  Carolina at Chapel Hill. We focused on these policies because,  according to HUD, they have a great and direct impact on tenants. We  also considered agency size, length of time in the demonstration, and  geographic diversity. Although the results of the interviews cannot be  generalized to all MTW agencies, they provide insight into the ways in  which agencies implemented MTW flexibilities and report to HUD, among  other things.", "In addition, we interviewed representatives of the following research  groups to discuss their recent or ongoing work on the MTW  demonstration: Abt Associates, the Center for Urban and Regional  Studies at the University of North Carolina at Chapel Hill, HAI Group,  Public and Affordable Housing Research Corporation, and the Urban  Institute. We also interviewed representatives of affordable housing  advocacy groups such as the Council of Large Public Housing Agencies;  National Association of Housing and Redevelopment Officials; National  Leased Housing Association; and Public Housing Authorities Directors  Association. Finally, we interviewed resident advocacy organizations such  as the Center on Budget Policy and Priorities, National Housing Law  Project, and National Low-Income Housing Coalition. To select the  groups to interview, we reviewed our 2012 report on MTW, identified  organizations through our background literature review, and obtained  recommendations from those we interviewed.", "To examine HUD\u2019s oversight of MTW agencies, we reviewed our 2012  report, relevant HUD policies and procedures, and HUD documentation  relating to compliance with the demonstration. Specifically, we reviewed  the standard agreement that governs the participation of the existing 39  MTW agencies in the demonstration and HUD\u2019s guidance on agency  reporting and the five demonstration requirements. We also interviewed  HUD officials about the processes HUD uses to review the agencies\u2019  annual reports and assess compliance with the demonstration  requirements. We also reviewed workforce analyses and interviewed  HUD officials about their resource needs and plans to monitor the current  MTW agencies and any agencies that may join the MTW demonstration  through its expansion. We compared relevant internal control standards  that apply to federal agencies and best practices we identified for  workforce planning with HUD\u2019s monitoring policies and procedures. To  assess the extent to which HUD follows its processes, we reviewed  HUD\u2019s documentation of compliance assessments from 2013 through  2016, the only years for which HUD had completed such analysis.", "To identify and examine any association between MTW flexibilities and  program outcomes, we obtained the following 2009\u20132015 data on MTW  and non-MTW agencies: agency and tenant characteristics from the  Public and Indian Housing Information Center (PIC) system, public  housing occupancy rates from the Picture of Subsidized Households  database, voucher unit utilization rates from the Voucher Management  System (VMS), and expense data from the Financial Data Schedule  (FDS). These were the most reliable and recent data available at the  time of our analysis. We combined the HUD data with data from the  American Community Survey (1-year estimates) conducted by the  Census Bureau. To assess the reliability of these data, we reviewed  relevant documentation on the information systems, conducted electronic  testing, and interviewed officials knowledgeable about the data. We  determined that the data were sufficiently reliable for the purpose of  identifying a comparison group and comparing the outcomes of certain  measures for MTW and comparable non-MTW agencies.", "We used these data and multivariate statistical methods to compare MTW  and non-MTW agencies to estimate any association between MTW  flexibilities and public housing occupancy rates, voucher unit utilization  rates, and various public housing and voucher expenses. We used  statistical matching and modeling methods to identify a comparison group  of non-MTW agencies that closely resembled MTW agencies on  characteristics including number of households served, geographic  location, and housing market characteristics. For more detailed  information on our analysis, see appendix II.", "To determine the factors that could partially explain the results of our  analysis, we reviewed Attachment C of the standard agreement to identify  the funding flexibilities the MTW demonstration affords participating  agencies. We also reviewed MTW agencies\u2019 2011\u20132016 annual plans to identify the MTW activities that were proposed under those funding  flexibilities and interviewed officials from the seven selected agencies to  learn how they used the funding flexibilities. We started with the 2011  annual plans because that was the first year in which all MTW agencies  were required to include specific information when proposing rent-reform  policies. We ended with 2016 annual plans because it was the most  recent year for which annual plans were available for all MTW agencies at  the time of our analysis.", "To illustrate how MTW agencies used their funding flexibility for public  housing, we used FDS data to determine the amount of MTW funds that  were transferred from the Housing Choice Voucher (voucher) program to  the public housing program. To perform this analysis, we compared the  MTW agencies\u2019 2015 public housing funding\u2014the sum of FDS line items  70600 (HUD public housing agency operating grants) and 70610 (capital  grants)\u2014to the aggregate amount MTW agencies transferred into  individual public housing project accounts. We selected 2015 because it  was the most recent FDS data available at the time of our analysis. We  also reviewed 2009\u20132016 data from HUD on the number of households  MTW agencies served through their local, nontraditional activities. We  determined that HUD\u2019s process for compiling this information was  sufficiently reliable for our purposes of reporting on local nontraditional activities by tracing 2015 data in the spreadsheet to data in the agencies\u2019  2015 annual reports (the most recent reports available) and interviewing  HUD staff. Finally, we analyzed program data that HUD prepared using  information derived from the Central Accounting and Program System  and VMS on unspent voucher funds as of December 31, 2016, for MTW  agencies and the comparison group of non-MTW agencies.", "To determine the extent to which HUD monitors the effect on tenants of  rent-reform, work-requirement, and time-limit policies, we reviewed HUD  documents such as Attachment B of the standard agreement and HUD\u2019s  Table of Applicable Standard Metrics by Activity to determine how HUD  defines these types of activities and the guidance HUD provides on  monitoring and reporting their effects on tenants. As previously  discussed, we compared HUD\u2019s monitoring policies and procedures with  relevant internal control standards. We reviewed MTW agencies\u2019 2015  annual reports to determine the extent to which agencies adopted rent- reform, work-requirement, and time-limit policies. We selected 2015  because it was the most recent year for which annual reports were  available for all MTW agencies at the time of our analysis. We also  reviewed agencies\u2019 2011\u20132016 annual plans and collected information  from all MTW agencies on tools they use to monitor the effects of rent- reform policies on tenants. We reviewed information from all 39 MTW  agencies on their hardship policies and data and their annual  reevaluations of the impact of rent-reform activities. We also collected  information from all MTW agencies on how they monitor the effect of  work-requirement and time-limit policies on tenants. We interviewed  officials from the seven selected agencies about their monitoring of rent- reform, work-requirement, and time-limit policies\u2019 effects on tenants and  associated hardship policies and to obtain their views about HUD  guidance.", "We also conducted group interviews with tenants from five agencies to  get their perspective on the effects of rent-reform, work-requirement, and  time-limit policies the agencies had implemented and associated hardship  policies. To select the tenants to invite to these group interviews, we  focused on the populations (for example, those able to work) subject to  these policies. To the extent the MTW agency had a resident advisory  board or comparable resident association, we worked with the boards or  associations to contact tenants. When appropriate, we asked the MTW  agencies to post notices on their websites and throughout their properties  and send mailings to tenants of interest to notify them about the  meetings. Finally, we interviewed representatives from tenant advocacy  organizations. The organizations represented tenants served by four of  the agencies we visited as well as tenants served by two additional MTW  agencies that were not part of the group of seven selected agencies but  that also had implemented major rent-reform changes, work-requirement,  or time-limit policies. We obtained information on the effect of these  policies on tenants and the extent to which tenants were aware of the  hardship policies associated with these policies. To select these groups,  we generally relied on recommendations from a representative of the  National Housing Law Project. For those areas for which a  recommendation was not provided, we identified the local legal aid  association through an Internet search.", "We conducted this performance audit from February 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Statistical Analysis of Program Outcomes in MTW and Non-MTW Agencies", "paragraphs": ["We analyzed associations between the Moving to Work (MTW)  demonstration\u2019s flexibilities and two types of outcomes: housing  availability, measured by public housing occupancy and voucher unit  utilization rates, and program expenses, measured by public housing  operating expenses and voucher administrative, subsidy, tenant services  expenses, and voucher reserves per household. These outcomes are  broadly consistent with the goals of the demonstration\u2019s authorizing  statute. MTW was designed to provide flexibility to participating public  housing agencies to design and test innovative strategies, while meeting  certain statutory objectives and demonstration requirements, including  reducing costs and achieving greater cost-effectiveness and assisting  substantially the same number of eligible low-income households as  would have been served absent the demonstration.", "In this appendix, we summarize the statistical methods we used to  analyze a dataset we assembled from administrative databases  maintained by the Department of Housing and Urban Development (HUD)  and the American Community Survey (ACS), conducted by the Census  Bureau, to compare MTW and non-MTW agencies on these outcomes.", "Our analysis did not seek to conduct a definitive evaluation of the MTW  demonstration\u2019s causal impacts. MTW agencies carry out varied and  unique activities. The agencies also vary widely in size, location, housing  market, and area and tenant demographics\u2014both compared to non-MTW  agencies and among themselves. A persuasive impact evaluation would  need to assess the unique circumstances of each activity and outcome at  each agency.", "In contrast, our analysis sought to improve on simple comparisons of  outcomes between MTW and non-MTW agencies, by constructing a  comparison group of non-MTW agencies that were similar to MTW  agencies on variables broadly relevant to housing programs. Although  this multivariate analysis reduced the risk that factors other than MTW  participation may have biased the comparison, we did not seek to hold  constant all factors uniquely relevant to each MTW agency and activity.  As a result, our analysis cannot provide definitive estimates of causal  impacts."], "subsections": [{"section_title": "Target Population and Scope of Analysis", "paragraphs": ["Developing and applying statistical \u201ctreatments\u201d to MTW agencies is  complex, due to demonstration rules that allow agencies to conduct  various activities tailored to their unique needs. We considered the option  of forming several groups of MTW agencies, defined by similar activities.  For example, we might have identified all agencies reforming HUD\u2019s rent  calculation formula, and included those agencies in one level of a  multilevel treatment variable. We ultimately rejected this approach due to  limited sample sizes and the difficulty of developing homogeneous groups  of activities. A multilevel approach would have limited the number of  agencies in each level of the treatment. Small sample sizes would have  limited our statistical power to identify differences between treatment  groups, if they existed. In addition, the wide variety of MTW activities  would have made it difficult to produce a sufficient number of  homogenous groups, and would have required subjective judgment about  what activities were sufficiently similar. Instead, we used a binary  treatment measure identifying agencies that participated in MTW or  operated under traditional public housing rules in a given year.", "The timing of MTW implementation limited our ability to account for  changes in participation and outcomes over time. Agencies joined the  MTW demonstration at various times between 1996 and 2012, and many  joined before sufficient data became available. Only nine agencies  entered the demonstration after 2009, when HUD\u2019s Public and Indian  Housing Information Center (PIC) system began to provide sufficiently  complete and reliable data on the characteristics of housing agencies we  needed to measure. All agencies that exited the demonstration did so  before 2009. Comparisons within agencies over time can implicitly control  for other factors that may not substantially change before and after  implementation by using data collected before and after agencies joined  the MTW demonstration. We might have been able to implicitly control for  many factors that did not substantially change over short periods, such as  land prices, or that changed in identical ways for MTW and non-MTW  agencies, such as national economic cycles. However, the  implementation of the MTW demonstration and available data limited our  analysis to repeated cross-sectional comparisons of MTW and non-MTW  agencies from 2009 through 2015.", "Measuring participation in the MTW demonstration at any one time was  somewhat imprecise. The MTW demonstration was not implemented at  uniform times across agencies, due to variation in the ratification dates of  MTW agreements between HUD and the agency and variation in when  each MTW agency began to implement activities under the  demonstration. For our primary analysis, we classified an agency as  participating in the MTW demonstration if it had ratified an MTW  agreement with HUD at least 1 year before the year measured. In  sensitivity analyses, described below, we assessed how classifying MTW  participants according to different time lags affected our results.", "Table 6 lists the number of MTW and non-MTW agencies in our dataset,  based on how MTW participation was defined in the analysis for housing  agencies in the PIC database from 2009 through 2015."], "subsections": []}, {"section_title": "Outcomes", "paragraphs": ["We compared MTW and non-MTW agencies on several outcomes that  are broad measures of housing availability and expenses. The outcomes  were available in HUD data systems and were reliable for our purposes.  However, they do not exhaust the potential outcomes that may be  relevant under the MTW authorizing statute or the design of specific  agency activities. For example, potential outcomes could measure the  number of households that achieve self-sufficiency (as defined by a MTW  agency) or move to a low-poverty neighborhood.", "Our specific outcome measures were the following:", "Public housing occupancy rate. Occupied units as a percentage of  units available.", "Voucher unit utilization rate. Monthly rate of unit months leased divided  by unit months available for the public housing agency.", "Public housing operating expenses per household. Total yearly  operating expenses, divided by number of public housing households.", "Public housing central office cost center expenses per household.", "Total yearly central office cost center operating expenses, divided by  number of public housing households.", "Voucher administrative expenses per household. Total yearly  administrative expenses, divided by the number of voucher households.", "Voucher subsidy expenses per household. Total yearly expenses for  housing assistance payments, divided by the number of voucher  households.", "Voucher tenant services expenses per household. Total yearly  expenses for tenant services, divided by the number of voucher  households.", "Reserves per household (2016 only). Unspent voucher housing  assistance funds as of December 31, 2016, divided by the number of  voucher households.", "Following the Rubin Causal Model, our primary parameter of interest was  the average (or median) treatment effect on the treated:  where Yij(T) denotes the outcome for agency i at time j in (potentially  counterfactual) treatment condition T. That is, we estimated the expected  difference in outcomes that would exist due to MTW participation, among  those agencies that actually participated in the demonstration.", "Estimating the average treatment on the treated is conservative and  appropriate, given the varied and unique nature of MTW activities.  Generalizing the effect of MTW participation from the treated agencies to  the rest of the public housing agency population makes the implausible  assumption that the untreated agencies would have implemented the  same activities, in the same ways, as the treated agencies. Due to the  discretion inherent to the MTW demonstration, the experiences of the  treated agencies may not generalize to the whole population, as would be  required for estimating the average treatment effect.", "We specify a parameter of interest (that is, a value to be estimated) for  methodological completeness and to specify the population of inference  (the target population of agencies). However, we do not interpret our  results as robust causal impact estimates, due to the inability to measure  the unique circumstances relevant for each MTW agency, demonstration  activity, and outcome."], "subsections": []}, {"section_title": "Matched Comparison Group", "paragraphs": ["Our analysis measured and held constant conditions that could have  otherwise explained differences in outcomes between MTW and non- MTW agencies. For each MTW and non-MTW agency, we measured the  following agency-level covariates (with sources in parentheses):", "Number of households (PIC)", "Percent of households with a member over the age of 65 (PIC)", "Percent of households with a member under the age of 18 (PIC)", "Percent of households with a disabled member (PIC)", "Whether an agency issues vouchers (VMS)", "County median household income (ACS)", "County median rent (ACS)", "County rental vacancy rate (ACS)", "County population density, measured as county population/land  area (2010 Census)", "HUD region (HUD website)", "Latitude (Picture of Subsidized Households)", "Longitude (Picture of Subsidized Households)", "We assessed the reliability of the ACS estimates by calculating the ratio  of each estimate\u2019s 95 percent margin of error to the estimate. For  example, this ratio would equal 5 for an estimated rental vacancy rate of  10 percentage points, with a margin of error equal to plus or minus 2  percentage points. Across all variables we used from ACS, we found that  this ratio did not exceed 2.0 for 99 percent of agency-county  observations. This level of reliability was acceptable for our purposes.", "When PIC showed that agencies spanned multiple counties, we  aggregated the data to the agency level by either summing count  variables across counties or calculating averages of ACS descriptive  statistics, such as county mean incomes. We calculated unweighted  averages because the Census Bureau does not release ACS microdata  with the exact geographic locations needed to re-estimate the statistics of  interest within public housing agency boundaries. Weighting by the total  area population or number of households served by each public housing  agency would have had unknown effects on the bias of the published  ACS estimates, due to their complex weighting methods. Our aggregation  methods should minimally influence our measurements, due to limited  variation across counties within agencies. To quantify this variation, we  calculated the coefficient of variation (CV) across counties served by  each agency in our analysis, and these CVs of the ACS statistics did not  exceed 0.99 for 50 percent of the agencies and 1.73 for 95 percent of the  agencies."], "subsections": []}, {"section_title": "Matching Methods", "paragraphs": ["We used statistical matching methods to construct the comparison group  of non-MTW agencies. The general iterative matching process involves  1.  identifying some distance measure that quantifies how \u201cclose\u201d units  are to each other on the covariates of interest;  2.  implementing a matching method that uses this distance measure to  identify comparison units; and  3.  assessing the quality of the matched samples and iterating between  the first two steps, until the treatment and comparison groups become  sufficiently close on the distance measure.", "We developed our specific matching approach using recent reviews of the  statistical literature.", "Two established matching methods rely on propensity scores and  Mahalanobis distance (MD). In the context of this analysis, propensity  scores estimate the probability that an agency is an MTW or non-MTW  agency, such as when Pr(MTW | X) = logit-1(X\u03b2), where X is a matrix of  covariates and \u03b2 is a vector of coefficients. Propensity scores are  calculated using the estimated coefficients and X to obtain a predicted  probability that an agency participates in the MTW demonstration. MD is  a multivariate sample statistic measuring the distance between agency i  and j, similar to the number of standard deviations away from the sample  mean vector of the covariates:  where X is the ith row vector of X and S is the sample covariance  matrix.", "Propensity scores and MD measures can have several limitations in  practice. Matching on known propensity scores is used to balance the  covariate distributions between the treatment and comparison groups and  matching using MD tends to improve balance across all measured  covariates.  However, both approaches are optimal under assumptions  of normally distributed data, and may worsen covariate balance if this  assumption does not hold.", "Genetic matching methods seek to solve the problem of achieving sample  balance in practice, using computer algorithms to search over the space  of possible distance measures. Genetic matching generalizes MD by  weighting covariates according to how they achieve balance in any  particular sample, rather than by constants equal to the inverse of their  sample covariance matrix, as in MD:  where W is the covariate weighting matrix. If desired, genetic matching  can incorporate propensity scores by including them as a covariate, with  the algorithm assigning as much weight to them as necessary to optimize  balance.", "The genetic matching algorithm, as implemented by the R software  package \u201cMatching,\u201d has the following steps:  1.  Initialize covariate weights, W, at starting values.  2.  Calculate the distance matrix between MTW and non-MTW agencies.  3.  Specify the number of non-MTW agencies to be matched comparison  agencies for each MTW agency.  4.  Assess the balance between the sample distributions of the treatment  and control groups, using p-values from matched t-tests of equal  means for each covariate or Kolmogorov\u2013Smirnov tests of equal  distributions.  5.  Apply a loss function to the vector of p-values to quantify overall  sample balance.  6.  If the loss function is not minimized, regenerate W using a genetic  algorithm.  7.  Repeat steps 2\u20136 until the loss function is optimized and covariate  balance is maximized.", "In sum, the genetic matching algorithm searches for the best k matches,  incorporating covariates and distance metrics as desired and minimizing  the distance in a candidate matched set by weighting and reweighting the  covariates and metrics, according to how they influence balance. In our  primary analysis, we ultimately used one-to-one matching (k = 1), with  one comparison agency selected for each MTW agency. Large  imbalances in the number of households served by the MTW and non- MTW agencies substantially reduced the pool of similar comparison  agencies, such that setting k > 1 substantially worsened the balance for  some variables.", "In addition to the automated matching criteria above, we compared the  sample distributions of the covariates before and after matching using  descriptive statistics and nonparametric density estimates. We required  exact matches on the year of measurement to ensure that observations  were compared at roughly the same times. We also required exact  matches on whether an agency issued vouchers and HUD region. Due to  data limitations, we compared 2016 reserve spending between MTW and  non-MTW agencies for the 2015 matched set.", "Figure 12 compares MTW agencies and non-MTW agencies on the  covariates we identified, before constructing a matched sample of  comparable non-MTW agencies. As the figure shows, there are some  covariates for which there are significant differences between the group of  MTW agencies and non-MTW agencies.", "After implementing the matching method described above, we identified a  primary group of comparison agencies that were similar to the MTW  agencies on most of the covariates, but differed on a few, as shown in  table 7. Examples of matched agencies in our primary analysis include:  Oakland Housing Authority (MTW) and Housing Authority of the County of  Sacramento (non-MTW); San Antonio Housing Authority (MTW) and  Housing Authority of New Orleans (non-MTW); and Housing Authority of  the City of Pittsburgh (MTW) and Allegheny County Housing Authority  (non-MTW). Imbalances between MTW and comparison agencies for the  main analyses remained after our primary matching analysis for county  median income, county median rental cost, number of households,  percent of households with a disabled member, and county rental  vacancy rate, as shown in table 7.", "Figure 13 shows the covariate density estimates for MTW and non-MTW  agencies, after matching. As the figure shows, there are fewer differences  in the group of MTW agencies and the matched non-MTW agencies after  matching.", "MTW agencies had higher county median incomes and rent, lower  percentages of disabled household members, and lower rental vacancy  rates, as compared to the primary matched non-MTW agencies. These  imbalances decreased when we allowed for matches across HUD region  and required matches within calipers (1 standard deviation), as shown in  table 8. However, allowing HUD region to vary potentially allowed other  unmeasured factors within a HUD region to vary between the MTW and  non-MTW groups. Applying caliper constraints failed to match a  comparison agency for 91 of the 232 yearly observations for MTW  agencies during 2009\u20132015, which changes the population for inference.  We used these matched samples with improved balance for sensitivity  checks, in our discussion of the results below."], "subsections": []}, {"section_title": "Statistical Estimation and Inference", "paragraphs": ["After constructing the primary matched analysis sample, we estimated  outcome descriptive statistics for MTW and non-MTW agencies. We  estimated differences in mean and median outcomes using paired t-tests  and nonparametric Wilcoxon signed-rank tests, respectively, that account  for correlations over time within and between matched groups of MTW  and non-MTW agencies. We estimated differences in medians between  groups using nonparametric Wilcoxon signed-rank tests to address  potential outliers. For example, the tenant services cost distributions for  MTW agencies (median = $37; 25th quantile = $2.80; 75th quantile = $110)  and non-MTW agencies (median = $0; 25th quantile = $0; 75th quantile =  $20) were highly skewed. The nonparametric test was not influenced by  these skewed distributions and outliers.", "To complement this matched comparison, we used Generalized Linear  Models to model outcomes in 2009\u20132015 using the matched sample of  MTW and non-MTW agencies.", "The models had the form:  i = 1, \u2026, n indexes agencies  j = 2009, \u2026, 2015 indexes years", "MTWij indicates whether agency i participated in the MTW demonstration \u00b5ij is the mean outcome, conditional on the covariates g is the Gaussian link function", "Year is a vector of indicators for each year from 2010 through 2015  (excluding 2009), which accounts for common period effects across  agencies, \u03b3", "Xij is a vector of linear continuous (e.g., number of households) and  categorical (e.g., HUD region) control variables that may confound the  association between agency type and the outcome of interest (discussed  above for the matched sample) \u03b2 is the parameter of interest, estimating the association between MTW  Repeated observations from 2009 through 2015 for MTW agencies and  their corresponding matched non-MTW agencies can introduce  autocorrelation within these clusters of observations, and the differences  across matched clusters can introduce heteroscedasticity (that is, the  variance in one cluster of agencies may be not be consistent with the  variance in another cluster). A conventional linear model does not  account for these interdependencies and inconsistent variances in the  data, leading to potential bias in the variance estimation for the  parameters of interest (such as variances for \u03b2 and \u03b3) and any  subsequent statistical inference on the association (and p-values)  between the outcome and covariates.", "To account for the potential bias arising from heteroscedasticity and  autocorrelation, the variance-covariance matrix used to generate the  variances for the parameters incorporated weights that (1) decreased the  influence of extreme observations, clusters, or both; (2) used an  autoregressive approximation in which the correlation was strongest for  observations closest in time and decays as time lengthens; and (3)  preprocesses (\u201cprewhitens\u201d) the variance-covariance matrix using an  autoregressive function to reduce the temporal dependence in the data.  These processes lead to statistical inference on associations of interest  that account for the interdependencies within agency clusters and the  differences across clusters. In the sensitivity analyses described below,  we will fit this model on the unmatched population of agencies."], "subsections": []}, {"section_title": "Primary Results", "paragraphs": ["In the matched sample, MTW agencies had lower median public housing  occupancy rates and voucher unit utilization rates compared to non-MTW  agencies, as shown in table 9. Compared to non-MTW agencies, MTW  agencies had higher median public housing expenses per household  (operating and central office cost center operating expenses) and higher  median voucher administrative expenses per household, subsidy  expenses per household, tenant services expenses per household, and  reserves per household. These differences were significant at the 0.05  level for all variables using the nonparametric Wilcoxon signed-rank  test. However, using the parametric t-tests and related t-tests from the  regression models, there was not a significant difference in central office  cost center operating expenses. This could arise from the presence of  outliers skewing the distribution, leading to different results compared to  the Wilcoxon test that does not make any distributional assumptions.  Regardless of the particular method used, small sample sizes in each  group, as well as repeated observations over time, may limit our statistical  power to identify differences, if they existed. Sample sizes resulting from  missing data also affect the degree to which comparable non-MTW  agencies can be found, given the limited overlap in the covariate  distributions between groups."], "subsections": []}, {"section_title": "Sensitivity Analyses", "paragraphs": ["We assessed the results above for sensitivity to various methodological  assumptions. For the matching analysis, we assessed the impact of  1.  measuring MTW status as of the agreement year, rather than as of 1  year following the agreement (i.e., 1 year lag);  2.  matching within 1 standard deviation calipers for each covariate;  3.  allowing matches between HUD regions;  4.  including county unemployment and poverty rates as covariates;  5.  including estimated propensity scores, as a logistic function of the  control variables described for the primary analysis, as a matching  covariate;  6.  increasing the number of comparison agencies for each MTW agency  to k = {2, 3, 4} using the control variables described for the primary  analysis; and  7.  excluding clusters where the MTW and/or non-MTW agencies had an  outlying value for an outcome of interest.", "For the regression model, we compared the results obtained from fitting  the model to the matched and unmatched data.", "The sensitivity tests above showed no substantively meaningful  differences in the results as compared to the primary analysis, with  several exceptions. Adding the caliper constraint and dropping the HUD  region constraint improved covariate balance. Dropping the HUD region  constraint led to MTW agencies having a smaller difference in voucher  subsidy expenses, compared to non-MTW agencies. In our primary  analysis, MTW agencies had higher subsidy expenses. However,  allowing matches between HUD regions may introduce unmeasured  geographic characteristics into the comparison group of non-MTW  agencies, which may limit the comparability of subsidy expenses and bias  the estimated difference in outcomes."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Paige Smith (Assistant Director),  Josephine Perez (Analyst in Charge), Enyinnaya David Aja, Bethany  Benitez, Farrah Graham, Anar N. Jessani, Morgan Jones, Courtney  LaFountain, Won Lee, Marc Molino, Anna Maria Ortiz, Barbara  Roesmann, Shannon Smith, and Jeff Tessin made key contributions to  this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-344", "url": "https://www.gao.gov/products/GAO-18-344", "title": "DHS Program Costs: Reporting Program-Level Operations and Support Costs to Congress Would Improve Oversight", "published_date": "2018-04-25T00:00:00", "released_date": "2018-04-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["O&S costs\u2014the costs used to operate and sustain a program\u2014can account for up to 70 percent of a program's total cost. End users rely on O&S funds for maintenance, spares, and personnel. DHS programs initially identify O&S costs in their life-cycle cost estimate at the outset of the acquisition. This estimate informs the program's budget and affects the amount the department designates for the program's use. In 2015, GAO found that DHS's budget requests did not reflect all estimated costs\u2014including O&S\u2014for certain programs, which limits visibility for decision makers.", "GAO was asked to review O&S activities for major acquisition programs at DHS. This report examines the extent that (1) DHS's budget management and reporting affects operations and oversight, and (2) cost estimates are comprehensive and accurate, as well as regularly updated.", "GAO selected a non-generalizable sample of 11 major acquisition programs, based on asset type and acquisition status, as case studies from selected DHS components. GAO analyzed selected programs' O&S cost estimates, funding, and spending. In addition, GAO interviewed DHS officials at the headquarters, component, and program office level."]}, {"section_title": "What GAO Found", "paragraphs": ["While the Department of Homeland Security's (DHS) budget management provides flexibility to conduct operations, such as shifting funds to programs within the same mission area to cover unforeseen needs, budget reporting does not provide Congress with insight into specific programs' operations and support O&S costs. The O&S budget information that DHS reports to Congress is oriented by mission\u2014for example, Integrated Operations\u2014instead of by program\u2014for example, the Multi-Role Enforcement Aircraft Program. The figure depicts the mission-oriented nature of the budget.", "While some program-oriented O&S data are available at the component level, this information does not appear in DHS's budget reports to Congress. This disparity is due in part to the manner in which the department reports budget information. However, these limitations are not insurmountable. Standards for internal controls state that managers should communicate quality information, in this case full program costs. Providing additional data on O&S costs in budget reports would preserve DHS's flexibility in its use of funds while providing Congress a better understanding of the budgetary and programmatic effect of its funding decisions.", "GAO reviewed the O&S portion of the most recently approved cost estimates for selected programs and found that 10 of the 11 estimates provided a complete accounting of all resources and associated cost elements. Further, all the programs had appropriately updated their cost estimates as required, a GAO best practice in cost estimating. Due to the sensitive nature of some programs' cost models, GAO could not verify all aspects of accuracy for all estimates reviewed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that DHS work with Congress to add program-level O&S funding details to the budget information it provides Congress. DHS concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["Operations and support (O&S) costs make up the majority\u2014sometimes  over 70 percent\u2014of an acquisition program\u2019s total lifetime costs. For  fiscal year 2017, the Department of Homeland Security (DHS) requested  over $34 billion for O&S. These costs can include funding for fuel and  other consumables, spare parts, and personnel who operate and maintain  equipment. Also, as a system becomes operational, users rely on O&S  funds for support through the duration of the system\u2019s lifetime. However, if  information on such costs is vague or inconsistent, Congress\u2019s ability to  conduct oversight would be limited, which in turn can affect its funding  decisions for major acquisition programs. If programs experience O&S  funding shortfalls, they may fall short of operational goals or not be able  to address maintenance needs.", "We found in April 2015 that DHS\u2019s funding plans for major acquisition  programs did not reflect all of the estimated costs for certain programs,  particularly for O&S, resulting in potential operational shortfalls.  Specifically, we found that the U.S. Coast Guard programs we reviewed  did not provide complete O&S information. This kind of information  shortfall could hinder DHS leadership\u2019s assessment of plans for delivering  capabilities to operators to conduct their missions. We made a  recommendation to DHS, with which the department concurred, to  account for all O&S funding DHS plans to allocate to each of the Coast  Guard\u2019s major acquisition programs. DHS and the Coast Guard are  continuing to address this recommendation.", "You asked us to evaluate O&S activities for DHS\u2019s major acquisition  programs. This report assesses, for selected major acquisition programs,  the extent that (1) DHS\u2019s budget management and reporting affects  operations and oversight; and (2) O&S life-cycle cost estimates (LCCEs)  are comprehensive and accurate, as well as regularly updated.", "To conduct our work, we reviewed the DHS Major Acquisition Oversight  List as of April 2017 and selected 11 major acquisition programs from five  components to serve as case studies for our review. We selected a non- generalizable sample of programs, and their corresponding components,  in various stages of the acquisition cycle, including programs in  deployment. Our case studies included a mix of information technology  and other programs that are not generalizable, but provide insight into  DHS\u2019s O&S activities.", "We reviewed fiscal year 2017 DHS budget documents for major  acquisition program funding information, but did not find sufficient  granularity of O&S data to do our work. As a result, we developed and  disseminated a data collection instrument for distribution to DHS program  offices to gather information on selected programs\u2019 budget requests,  budget authority, obligations, and expenditures, including personnel  expenditures, from fiscal years 2015 to 2017. We analyzed program  responses to compare expenditures and obligations to program budget  requests. We also analyzed the DHS portion of the fiscal year 2018  President\u2019s budget request to identify changes to that document.", "We analyzed the O&S portion of DHS-approved LCCEs against criteria  from GAO\u2019s Cost Estimating and Assessment Guide, focusing on the  characteristics of comprehensiveness and accuracy. We also assessed  each program\u2019s LCCE updates against DHS acquisition policy.", "We interviewed officials at DHS headquarters; component program and  budget offices; Coast Guard Surface Forces Logistics Center in  Baltimore, Maryland; Coast Guard Aviation Logistics Center in Elizabeth  City, North Carolina; Transportation Security Administration at Reagan  National Airport in Washington, D.C.; Customs and Border Protection\u2019s  Southwest Border Regional Headquarters in Albuquerque, New Mexico;  Customs and Border Protection\u2019s Tucson Air Branch in Tucson, Arizona;  and the Border Patrol\u2019s Nogales Station in Nogales, Arizona. We chose  these locations as we could often discuss multiple programs during a  single site visit. For example, we discussed both of our Coast Guard  aircraft programs at the Aviation Logistics Center. Appendix I contains  detailed information on our scope and methodology.", "We conducted this performance audit from November 2016 to April 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DHS Budget Structure and Reporting", "paragraphs": ["After the 2002 consolidation of 22 agencies into a single department,  DHS had, until recently, different appropriation structures and budget  management practices based on agencies\u2019 enacted appropriations prior  to DHS consolidation. DHS reported that, with over 70 different  appropriations and over 100 formal program/project activity (PPA)  accounts, it operated for over a decade with significant budget disparities  and inconsistencies across its components. The lack of uniformity  hindered visibility, inhibited comparisons between programs, and  complicated spending decisions.", "To address some of these inconsistencies, DHS proposed a new,  common appropriations structure to Congress in 2014, according to  officials. The House Appropriations Committee then included language  regarding a common appropriations structure for the President\u2019s budget  request in its report that accompanied a proposed House fiscal year 2015  DHS Appropriations Bill. The language in the report directed the DHS  Office of the Chief Financial Officer to work with the DHS components,  the Office of Management and Budget, and the Committee to establish a  common appropriations structure for the President\u2019s budget request.  While the specific appropriations bill that the report accompanied did not  become law, Congress subsequently enacted a common appropriations  structure for the department. DHS\u2019s fiscal year 2016 President\u2019s budget  request was the first to use this common appropriations structure.", "Under the common appropriations structure, DHS uses these four  enacted accounts to capture the following costs:", "Research and development \u2013 includes funds to support the search  for new or refined knowledge and ideas as well as improved products  or processes to yield future benefits;", "Procurement, construction, and improvements \u2013 provides funds  for planning, operational development, engineering and purchase of  one or more assets prior to deployment.", "Operations and support \u2013 provides funds necessary for operations,  mission support, and associated management and administration  activities, including salaries. Operational costs can include funding for  fuel and other consumables as well as personnel. Maintenance costs  can include routine or critical maintenance, spare parts, and additional  personnel; and", "Federal assistance \u2013 provides monetary or non-monetary support to  any entity through various types of loans, grants, and other means.", "Within each component\u2019s budget request, the four appropriations  accounts are subdivided into mission-oriented PPAs that correspond to  the components\u2019 varied operations. One PPA can include costs for  multiple programs and funding for programs may cross multiple PPAs.  For example, in the fiscal year 2017 congressional budget justification\u2014 the formal budget submission from DHS that comprises its portion of the  President\u2019s annual budget submission\u2014Customs and Border Protection\u2019s  Integrated Fixed Towers and UH-60 helicopter programs both requested  O&S funds through the Securing America\u2019s Borders PPA. Other  examples of PPAs include Transportation Screening Operations and  Securing and Expediting Trade and Travel. Figure 1 shows the  relationship between DHS appropriations PPAs.", "DHS components use the mission-oriented PPAs to develop component  budget requests within the President\u2019s budget request. The DHS budget  request includes components\u2019 requested funds within the four  appropriations accounts, including O&S, and their PPAs.", "DHS also uses the PPAs in its monthly execution reports to Congress to  communicate its obligations and expenditures, along with other  information. The monthly execution report mirrors the format of the  congressional budget justification by providing execution data organized  by appropriation account and mission-oriented PPA. This monthly  snapshot includes personnel costs as part of the O&S costs they report.", "The Future Years Homeland Security Program is a database that  contains 5-year funding plans for DHS\u2019s major acquisition programs and  is used to prepare a report to Congress that supplements information in  the annual budget request. In addition to the information presented in the  budget submission and monthly execution report, this document  organizes funding projections by major acquisition program. The 5-year  plans in the Future Years Homeland Security Program are intended to  allow the department to achieve its goals more efficiently than an  incremental approach based on 1-year plans and articulate how the  department will achieve its strategic goals within fiscal constraints."], "subsections": []}, {"section_title": "DHS Acquisition Process and Life-Cycle Cost Estimates", "paragraphs": ["The establishment of DHS in 2002 consolidated 22 agencies from  multiple cabinet-level departments and independent agencies into a  single organization. To help manage its portfolio of acquisition programs,  DHS established policies and processes for acquisition management, test  and evaluation, and resource allocation. The department uses these  policies and processes to acquire and deliver systems that are intended  to close critical capability gaps and enable DHS to execute its mission.  Figure 2 outlines the acquisition life-cycle for major acquisition programs  at DHS.", "Programs initially identify costs\u2014including those for O&S\u2014in their  department-approved LCCE during the analysis phase. When a program  becomes operational while still going through its acquisition milestones,  programs may use O&S funds during the obtain or deploy phases. For  example, the Coast Guard has several operational National Security  Cutters, but is also obtaining additional cutters; therefore, it would use  O&S funds for support of deployed cutters and procurement funds for  acquisition of additional cutters.", "GAO\u2019s Cost Estimating and Assessment Guide notes four characteristics  of a high quality cost estimate: comprehensive, well documented,  accurate, and credible. Specifically, a comprehensive cost estimate  should include all costs of the program for the O&S phase, while  reflecting the current schedule, and should document all ground rules and  assumptions. Furthermore, an accurate cost estimate should provide for  results that are based on historical data, if available, while containing few,  if any, minor errors.", "DHS acquisition policy has generally required components to update  LCCEs at Acquisition Decision Events, up until the deployment phase,  since 2008. However, since issuance of the department\u2019s October 2011  acquisition policy revision, LCCE revisions must also be DHS-approved.  Prior to the 2008 policy, GAO found that nearly two-thirds of programs did  not have life-cycle cost estimates. Each of our 11 selected programs  has an approved cost estimate. Table 1 lists the programs selected for  our study.", "In accordance with DHS policy and GAO\u2019s Cost Estimating and  Assessment Guide, the O&S costs in the LCCE should inform the O&S  portion of the program\u2019s budget request and the funds provided to the  program. Accordingly, as programs use these funds in the obtain or  deploy phases, they should update the LCCE with spending data to  reflect actual costs. Figure 3 illustrates this feedback cycle.", "To help facilitate this feedback process, DHS issued a memorandum in  January 2016 reminding components that an annual updated LCCE is  required for each major acquisition program that has not reached full  operational capacity. According to this memorandum, components must  submit this cost estimate by April 1st of each year and should include the  incurred costs to date through the prior fiscal year as well as how these  costs track to prior LCCEs."], "subsections": []}]}, {"section_title": "Mission-Oriented Budget Management Provides Operational Flexibility, but Limits Visibility of O&S Costs in Reports to Congress", "paragraphs": ["According to agency officials, DHS\u2019s mission-oriented budget  management provides operational flexibility in using O&S funding.  However, DHS\u2019s budget justifications and reports aggregate programs\u2019  O&S data, limiting oversight of major acquisition programs\u2019 O&S costs.  While some program-oriented O&S data are available at the component  level, this information does not appear in DHS\u2019s budget reports to  Congress. This disparity is due, in part, to the format of the budget  reports."], "subsections": [{"section_title": "Consolidated O&S Funds Provide Operational Flexibility", "paragraphs": ["Officials across DHS identified operational flexibility as the primary benefit  of the department\u2019s mission-oriented budget management. The mission- oriented PPA accounts allow, to a limit, components to move funds  between major acquisition programs. For example, officials from Customs  and Border Protection\u2019s Air and Marine Operations Division stated they  consolidate O&S funds within a single account, which makes them more  responsive to mission changes. If a new mission requires a specific  aircraft capability, flexible O&S funds will support using that asset, as  opposed to another. This flexibility is also apparent in other kinds of  change or trade-offs components can make in deploying their systems.  We could not identify the frequency with which programs or operators  made these operational trade-offs because of limitations in the data we  obtained. A few examples include the following:  Asset Trade-Off: Customs and Border Protection officials told us they  manage aircraft usage to meet mission needs while remaining within the  overall O&S budget for the Integrated Operations PPA. At times, they use  a less expensive and less capable asset that can still complete the  mission as a cost-saving technique. For example, officials told us the UH- 60 Helicopter cost per flight hour is nearly three times the cost of a  smaller helicopter. The smaller aircraft does not have the same  capabilities as the UH-60, but operators can save money and sufficiently  complete the mission with this aircraft, according to officials.", "Inventory Trade-Off: Coast Guard officials responsible for maintaining  aircraft, such as the Medium Range Surveillance Aircraft, noted that  recent budget constraints affected their ability to buy sufficient spare  parts. To address this shortfall, they sometimes pulled working parts from  aircraft that were grounded and awaiting maintenance to install on aircraft  already undergoing maintenance.", "Contract or Upgrade Trade-Off: Immigration and Customs  Enforcement\u2019s TECS Modernization program requested $3 million in O&S  funding for fiscal year 2017, but the program did not receive this funding.  To mitigate this unexpected shortfall, officials described how they adapted  their contracting strategy to stretch funding through the fiscal year until  they could receive full funding in fiscal year 2018. Officials stated that  additional proposed funding cuts in fiscal year 2018 would leave the  program unable to meet its minimum operating costs. According to  officials, the program has several mitigation plans that will reduce cost  through a new contract and reductions in data housing center costs.", "Because O&S funding represents the money available to end users to  carry out their missions, we attempted to use program-level data to  identify O&S funding shortfalls for our selected programs. Potentially, this  information could also identify how frequently system users are making  these trade-offs. However, the components\u2019 use of consolidated funds for  certain programs makes O&S costs difficult to see, particularly at  Customs and Border Protection\u2019s Air and Marine Operations Division.  This component relies on aggregated O&S accounting and could not  provide program-level O&S cost information for the Multi-Role  Enforcement Aircraft and UH-60 Helicopter programs. As a result, we  could not obtain usable information. However, Customs and Border  Protection Officials also informed us that they are replacing their internal  maintenance cost tracking system, which could help improve expenditure  tracking in the future."], "subsections": []}, {"section_title": "Reports to Congress Do Not Consistently Identify Program-Specific O&S Information", "paragraphs": ["DHS first used its common appropriations structure\u2014which DHS  proposed and Congress enacted\u2014to address appropriations and budget  management inconsistencies in its fiscal year 2016 budget submission.  The common appropriation structure streamlined its appropriations, but  the resulting reports that the department provides to Congress obscure  O&S costs for individual programs. Additionally, while DHS has program- level expenditure data for most of the programs we reviewed, it also relies  on fragmented financial management systems that further limit reporting."], "subsections": [{"section_title": "Budget Request and Expenditure Reporting Lacks Consistent Program-Level O&S Information", "paragraphs": ["The PPAs DHS uses to communicate its annual budget requests and  projections, as well as monthly obligations and expenditures, are mission- oriented. As a result, the budget reports DHS provides to Congress do  not always present a clear accounting of individual programs\u2019 O&S costs.", "Congressional Budget Justification \u2013 Requests for total program O&S  funds are not always visible in the DHS congressional budget justification.  This document\u2019s mission-oriented reporting within the O&S section  continues to combine program-level data within PPAs, as they were for  previous budgets. Beginning in fiscal year 2018, DHS added O&S  information to the individual program funding request summaries that  appear in the procurement, construction, and improvements section of the  budget justification, which describes acquisition funding requests.  According to officials, this line shows requested funding for O&S for the  coming fiscal year and two prior years.", "Our review of the fiscal year 2018 congressional budget justification found  this information for 5 of our 11 selected programs. However, these  program-level details did not appear in the O&S section of the same  document, except for one program: Customs and Border Protection\u2019s  TECS Modernization program, which recently transitioned to its  deployment phase. Of the remaining programs we reviewed that did not  have clear O&S information in this document, two were Customs and  Border Protection programs: the Multi-Role Enforcement Aircraft and UH- 60 Helicopter. Three were Coast Guard programs: the Long Range  Surveillance Aircraft program, the Medium Range Surveillance Aircraft  Program, and the National Security Cutter. Both of these components  consolidate their O&S funds, meaning they can direct available funds  based on program needs. As stated above, this practice also makes it  difficult to provide program-level O&S cost information and as a result, the  O&S information DHS added to its procurement section is blank for these  programs. This new information also does not include programs that  completed their procurement phase as DHS requests O&S funds for  programs in the deployment phase. Therefore programs in deployment  still lack clear program-level O&S data in the congressional budget  justification. For example, the Secure Flight program completed  procurement and does not have an entry in the procurement section and  therefore lacking O&S information.", "Monthly Execution Reports \u2013 DHS provides monthly execution reports  to Congress that include O&S expenditure, obligation, and other budget  data, organized by PPA. These reports consist of summary information at  the PPA level, again obscuring individual programs\u2019 O&S costs. For  example, the Customs and Border Protection PPA cited above would  include multiple programs in the same way.", "Visibility of DHS\u2019s O&S costs by program is further limited in  congressional budget submissions, as personnel costs are not fully  captured. For nearly all of our selected programs, we could not identify  funding for personnel who operate and maintain program assets within  the congressional budget justification or monthly execution report.  Program officials stated that, in certain cases, personnel costs are funded  in mission\u2013oriented PPAs not clearly associated with the program.  According to officials, Customs and Border Protection\u2019s Integrated Fixed  Towers program is an example of this scenario. In other cases, the  personnel funding associated with a program appears within the same  PPA but may fund operations for more than one program. As a result, the  full O&S cost of a program\u2014inclusive of operating and supporting  personnel\u2014is not clear in the budget request and execution report.", "Federal standards for internal control state that managers should  communicate quality information to external bodies. DHS is not clearly  communicating to Congress the full O&S costs of its programs\u2014inclusive  of operating and supporting personnel\u2014in congressional budget  justifications and execution reporting. By comparison, agencies such as  the National Aeronautics and Space Administration (NASA) and the  Department of Defense directly request individual programs\u2019 O&S costs,  at least until projects launch or begin operations in NASA\u2019s case. Further,  our best practices on capital decision making state that good budgeting  requires that the full costs of a project be considered when making  decisions to provide resources. Providing data on full program costs  permits Congress to better understand the long term costs of a program  and the budgetary and programmatic effect of its decisions. While the  recent change DHS made to its congressional budget justification to  include program-level O&S cost information in the procurement section is  an improvement, Congress still lacks complete information regarding  DHS O&S costs as such data are absent from monthly execution  reporting.", "In the course of our review, DHS initiated a pilot program to use unique  identifier codes to track O&S expenditures for individual major acquisition  programs. As of January 2018, headquarters officials told us the  department was testing the identifier with three components that have  relatively simple acquisition portfolios: the Domestic Nuclear Detection  Office, Immigration and Customs Enforcement, and the National  Protection and Programs Directorate. Following the pilot, officials plan to  assess whether and how to implement this identifier within other  components\u2019 financial management systems. DHS officials stated that  they intend to use this information to inform O&S cost estimating for  future acquisitions. As of January 2018, DHS did not plan to include the  information in any of the budget information provided to Congress.  According to DHS officials, they would need to work with Congress in  order for Congress to identify how its existing reporting requirements  should change, as they did during the development of a common  appropriations structure in 2015."], "subsections": []}, {"section_title": "Previous Future Years Homeland Security Program Report Contained Program- Level Information", "paragraphs": ["Prior to fiscal year 2018, the Future Years Homeland Security Program  report, which accompanies DHS\u2019s annual budget request, provided  supplemental data on planned funding for major acquisition programs.  For most components, the report included prior year funds and 5 years of  estimated procurement funding for O&S as well as government personnel  costs for each program. DHS removed this reporting in its fiscal years  2018-2022 Future Years Homeland Security Program report. Officials  explained they removed program O&S funding to focus on planned  procurement funding. However, in January 2018, DHS officials stated that  they plan to re-introduce O&S funding for major acquisition programs in  the Future Years Homeland Security Program report for fiscal years  2019-2023. DHS officials based this decision on multiple internal  discussions about the best way to present a more comprehensive view of  programs\u2019 total costs and feedback from key stakeholders, such as the  Office of Management and Budget.", "With its intention of reflecting program-level O&S costs in the upcoming  Future Years Homeland Security Program report, to be submitted with the  fiscal year 2019 President\u2019s budget request, DHS officials recognize the  value in such reporting. This change also aligns to federal standards for  internal control and communicating quality information. Re-introducing  O&S program cost information would improve the quality of information  DHS provides to Congress in its Future Years Homeland Security  Program Report. Until DHS takes concrete action to reverse the exclusion  of O&S funding at a major acquisition program level in its Future Years  Homeland Security Program reports, Congress will lack important  information necessary for oversight."], "subsections": []}, {"section_title": "Program-Level O&S Data Exist at Component Level but Not Utilized for Budget Reporting", "paragraphs": ["Programs can generally track detailed O&S obligations and expenditures  within their financial systems; however, department officials told us they  do not request this information. Each component uses a different financial  system to track its O&S costs and report expenses and, in some cases,  must manually transfer data between systems. As a result, headquarters  officials told us they do not have direct access to components\u2019 systems  and request summary information organized by PPA to develop budget  requests and monthly execution reports, in accordance with DHS\u2019s  mission-oriented budget management.", "DHS financial management systems are an area we have designated as  high risk since 2003. In September 2013, we found that without sound  internal controls over its financial reporting, DHS is hindered in its ability  to efficiently manage its operations and resources on a daily basis and  provide useful, reliable, and timely financial information for decision  making. At that time, we recommended DHS take steps to integrate  financial management systems and unify the components\u2019 financial  management. In September 2017, we found that despite efforts to  address long-standing financial management system deficiencies, several  factors delayed the Transportation Security Administration and Coast  Guard\u2019s efforts to replace their financial management systems.  Specifically, insufficient resources, an aggressive schedule, complex  requirements, increased costs, and project management and  communication concerns resulted in cost and schedule growth. DHS is  taking steps to mitigate these risks and is revising its acquisition strategy  to replace these systems, based in part on the issues we identified."], "subsections": []}]}]}, {"section_title": "Life-Cycle Cost Estimates for All but One Selected Program Were Comprehensive but Many Did Not Provide Evidence of Accuracy, and All Were Updated as Required", "paragraphs": ["The O&S portion of our selected programs\u2019 most recently approved life- cycle cost estimates (LCCEs) were nearly all comprehensive, but lacked  elements of accuracy despite annual and other updates. Program-level  LCCEs are one of the sources DHS components should rely on for  budget development. Specifically, 10 of the 11 selected programs  reviewed either substantially or fully met our best practices criteria for  comprehensiveness, while only 5 substantially or fully met criteria for  accuracy. These programs have met DHS\u2019s acquisition policy that major  acquisition programs generally revise their LCCEs at major acquisition  decision events and generally met DHS\u2019s 2016 requirement for annual  updates."], "subsections": [{"section_title": "Ten of 11 O&S Cost Estimates Were Comprehensive", "paragraphs": ["As of December 2017, 10 out of 11 selected programs\u2019 most recent DHS- approved LCCE either substantially or fully met GAO\u2019s four criteria for a  comprehensive cost estimate. Figure 4 depicts the results of our  analysis and the criteria for this characteristic.", "GAO best practices in cost estimating note it is important that the O&S  portion of a program\u2019s LCCE be comprehensive. That is, it should provide  an exhaustive and structured accounting of all resources and associated  cost elements\u2014hardware, software, personnel, and so on\u2014required to  deploy and sustain a program. Five programs fully met and 5 programs  substantially met the comprehensive characteristic.", "Within those programs that substantially met the characteristic, we found  two reasons programs did not fully address criteria. First, 2 of those  programs partially met the criterion that requires the estimate to  completely define the program, reflect current schedule, and be  technically reasonable. Second, despite substantially meeting the  characteristic, the Customs and Border Protection\u2019s TECS Modernization  program did not have a single, authoritative technical baseline document  that contained all the details to satisfy this specific criterion. Instead,  multiple technical baselines or baseline documents were present.", "The one program in our review that minimally met criteria for  comprehensiveness is the Next Generation Security Networks Priority  Services program. It is \u201cacquisition-only,\u201d meaning that its LCCE includes  the costs to acquire new capabilities for its parent program\u2014Priority  Telecommunication Services. When it has acquired these capabilities, the  parent program becomes responsible for O&S costs. This unique  acquisition relationship is a reason we selected this program, namely to  see how the component would factor O&S costs into its estimate. We also  previously reported on variance in the program\u2019s cost estimate, due to  changes in how the component included O&S costs. Our analysis found  that the Next Generation Networks Priority Services program\u2019s LCCE  contained minimal information on O&S costs. In the program\u2019s recently  updated LCCE, which we did not assess, the National Protection and  Programs Directorate refined the Priority Telecommunication Services\u2019  O&S costs to identify only those attributable to the Next Generation  Networks Priority Services acquisition."], "subsections": []}, {"section_title": "Over Half of Selected Programs Did Not Provide Evidence to Demonstrate Their Cost Estimates Were Accurate", "paragraphs": ["In contrast to the comprehensiveness of programs\u2019 O&S estimates, only 5  of the 11 selected programs we reviewed either fully or substantially met  GAO\u2019s five criteria for accuracy. Accuracy is critical to ensuring a  reliable and well-founded LCCE to support operations. This is important  because these estimates serve as the basis to request program funding  and provide insight into the overall affordability of the acquisition program.  Figure 5 depicts the results of our analysis and the selected criteria for  this characteristic.", "Two programs fully met and 3 programs substantially met the criteria we  assessed. Of the programs that substantially met these criteria, we found  a common criterion programs struggled to address: they did not  document, explain, and review variances experienced between planned  and actual costs. DHS acknowledges the importance of including this  information and, in its 2016 memorandum, required its components to  annually provide a detailed description of any differences between  updated and past cost estimates.", "Of the 5 programs that partially met criteria for accuracy, we found  several reasons for these results, including our lack of access to the cost  models used to develop the programs\u2019 LCCE and an explanation of any  variances. For example, the Coast Guard was unable to share cost  models for the programs we assessed, due to information sensitivities.  Without access to the cost models, we could not determine whether the  estimates had been properly adjusted for inflation and could not  determine whether the estimates contained few, if any, errors\u2014one of  GAO\u2019s criteria for accuracy. Similar to the results of our  comprehensiveness analysis, the Next Generation Network Priority  Services program did not meet our selected accuracy criteria because it  did not include O&S costs in its LCCE."], "subsections": []}, {"section_title": "Selected Programs Are Generally Following DHS Requirements to Update LCCEs", "paragraphs": ["While we could not determine that selected programs\u2019 LCCEs were  accurate based on the information reviewed, we found that the  department is regularly updating LCCEs, a GAO best practice that  promotes accuracy. All of the programs met DHS requirements to update  their LCCE at each acquisition decision event, as applicable, a policy that  also aligns with our cost estimating best practices. Updating LCCEs is  an important step to maintain the utility of an estimate throughout a  program\u2019s life-cycle and is critical to budget development. Outdated O&S  estimates hamper a program\u2019s ability to analyze changes in costs over  time. For example, they may not reflect fluctuation in the price of fuel,  which could lead to a program requesting insufficient funds for annual  operations. DHS relies on the programs\u2019 LCCEs to develop initial budget  requests, which it subsequently updates with actual expenditures as the  program matures.", "As of November 2017, 10 of our 11 selected programs also met DHS\u2019s  requirement for programs not yet in the deployment phase to update their  LCCEs annually. These new requirements to update LCCEs are making  this acquisition document more relevant throughout the life of a program  to inform budget requests. The Coast Guard\u2019s Long Range Surveillance  Aircraft program is the only program we selected that did not meet this  requirement for fiscal year 2017. Coast Guard officials explained that the  program is in the process of revising its LCCE, which is why it did not  have a submission within fiscal year 2017.", "While components are following DHS policy, programs may vary in their  approach to updating O&S reporting elements as newer versions of the  LCCE document are developed and approved. For about half of our  programs, we observed changes to O&S cost elements in the LCCE,  which can reflect program changes. This situation is consistent with our  cost estimating best practices, which note that cost elements should be  updated as changes occur and the program becomes better defined. For  example, the Coast Guard\u2019s Medium Range Surveillance Aircraft  program\u2019s original LCCE was completed in 2009, when the Coast Guard  planned to procure a single aircraft type. Since then, the Coast Guard  revised its LCCE in 2012 and 2016 to account for changes to the  program, namely the addition of a second aircraft type. The Medium  Range Surveillance Aircraft program\u2019s 2016 LCCE now includes an  entirely new set of O&S cost elements for both aircraft. Conversely, a  program that has very stable cost elements may not need to make such  changes. Officials from Customs and Border Protection TECS  Modernization program explained they did not alter its cost elements  between its original 2014 LCCE and its 2016 revision because O&S costs  are stable and well-known as the program enters its deployment phase."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Operations and Support (O&S) is the bulk of the taxpayer\u2019s investment in  major acquisition programs and is necessary to meet end user\u2019s needs  for spares, maintenance, and operations. To support this mission, DHS  manages its budget to maximize components\u2019 flexibility to use O&S funds  across major acquisition programs. This aspect of the department\u2019s  budget management did not change with enactment of the common  appropriation structure.", "We do not take issue with DHS\u2019s mission-oriented budget management  approach; however, with this reliance on broader O&S mission-oriented  program/project activity (PPAs) in reporting, program-specific O&S  information is difficult to discern. DHS\u2019s addition of program-level O&S  information to the procurement, construction, and improvements section  of the congressional budget justification is a positive step, but still does  not address this shortfall for all programs. The identifier pilot program  DHS has underway could add details on O&S costs for major acquisition  programs in addition to those already contained in programs\u2019 life-cycle  cost estimates. Such an action will require additional reporting from the  components, which may be challenging due to the department\u2019s  fragmented financial management systems, as we have observed and  made recommendations on in prior reports. DHS could work with  Congress to identify ways to strengthen its congressional budget  justifications and monthly execution reports by including information on  O&S costs.", "DHS\u2019s recent proposal to shift back to reporting program-level O&S  funding in the Future Years Homeland Security Program report  demonstrates that the department sees value in providing such  information to Congress and that such information is available to some  extent. Until DHS takes concrete action to reverse the exclusion of O&S  funding at a major acquisition program level in its Future Years Homeland  Security Program reports, Congress will lack important information  necessary for oversight."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DHS:  The Secretary of Homeland Security should work with Congress to add  information to its annual congressional budget justification to show O&S  funding requests for major acquisition programs within current  program/project activity accounts. (Recommendation 1)", "The Secretary of Homeland Security should work with Congress to  include O&S data in monthly execution reports at a major acquisition  program level within current program/project activity accounts.  (Recommendation 2)", "The DHS Chief Financial Officer should reverse the exclusion of O&S  funding at a major acquisition program level in its Future Years Homeland  Security Program report for all components. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DHS.", "DHS provided written comments, which are reproduced in appendix III. In  its comments, DHS concurred with all three of our recommendations and  identified actions it plans to take to address them. DHS also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["The House Homeland Security Subcommittee on Oversight and  Management Efficiency asked us to evaluate operations and  maintenance (O&S) activities for the Department of Homeland Security\u2019s  (DHS) major acquisition programs. This report assesses, for selected  major acquisition programs, the extent that (1) DHS budget management  and reporting affects operations and oversight; and (2) life-cycle cost  estimates (LCCEs) are comprehensive and accurate, as well as regularly  updated."], "subsections": [{"section_title": "Selection of Case Studies", "paragraphs": ["To conduct our work, we reviewed the DHS Major Acquisition Oversight  List as of April 2017 and selected 11 major acquisition programs from five  components to serve as case studies for our review. We selected a non- generalizable sample of programs, and their corresponding components,  based on their stage in the acquisition cycle, including programs in the  deployment phase. We also ensured we had a mix of different DHS  components reflecting the broad spectrum of DHS operations. Our case  studies included four information technology programs and seven other  programs."], "subsections": []}, {"section_title": "Analysis of Budget Information", "paragraphs": ["To determine how O&S funds are organized within the budget request,  we reviewed the O&S and procurement, construction, and improvements  appropriations accounts within the fiscal year 2017 and 2018  congressional budget justification by program/project activity account  (PPAs) for the 11 programs in our review. We identified the selected  programs within these accounts, as possible. To determine whether the  PPAs we identified in the O&S budget request were all-inclusive of O&S  costs, we developed and disseminated a data collection instrument to  program offices, which collected information on selected programs\u2019 O&S  budget requests, budget authority, obligations, and expenditures,  including personnel expenditures, from fiscal years 2015 to 2017. We  compared this information to our analysis of the congressional budget  justification and conducted follow-up meetings with each of the  component budget offices to understand differences in the data sources  and learn if program obligations and expenditures were included in other  common component PPAs.", "To determine the inclusion of personnel costs in the program O&S  expenditures, we reviewed the congressional budget justification and our  data collection instrument for personnel expenditures. We held follow-up  meetings with program offices to discuss to what extent DHS used O&S  PPA funds for personnel costs, identify those PPAs, and whether  personnel costs were shared with other programs.", "To determine if monthly execution reports contained program-level O&S  cost information, we reviewed the December 2016 monthly execution  report, as well as DHS guidance to programs on preparing that report, to  determine whether individual program obligations and expenditures could  be identified within the report. We determined that O&S cost information  is reported by mission-oriented PPA in this report and were unable to  identify O&S obligations or expenditures by program. We held follow-up  discussions with DHS officials to discuss how this information is collected  and reported to Congress.", "To determine whether O&S costs were included in the Future Years  Homeland Security Program database, we reviewed the fiscal years  2017-2021and 2018-2022 reports from the Future Years Homeland  Security Program database for identification of program costs. We found  that program costs were identified. However, while we are able to  determine the inclusion of O&S costs in the fiscal year 2017-2021 report,  DHS excluded these costs in the fiscal year 2018-2022 report.", "We discussed with DHS and components the financial management  systems used by the five components to track obligations and  expenditures, and the financial management system used by the  Department to develop the monthly execution reports and Future Years  Homeland Security Program database."], "subsections": []}, {"section_title": "Analysis of Operational Effects", "paragraphs": ["To assess the extent to which the DHS budget management and  reporting has affected operations, we reviewed program budget  information including the Congressional budget justification, a data  collection instrument, a monthly execution report to Congress, and the  fiscal years 2017-2021 and fiscal years 2018-2022 reports from the  Future Years Homeland Security Program database. In addition, we  conducted interviews with program personnel to discuss the effect of any  budget shortfall or surplus on their programs."], "subsections": []}, {"section_title": "Analysis of Life-Cycle Cost Estimates", "paragraphs": ["To assess how DHS incorporated or revised life-cycle cost estimates to  include comprehensive and accurate O&S costs, we analyzed the O&S  portion of DHS-approved LCCEs for the case study programs, as well as  prior versions where applicable, to identify changes in reporting elements  over time. We conducted an abridged analysis of programs\u2019 approved  LCCE against criteria from GAO\u2019s Cost Estimating and Assessment  Guide, with focus on comprehensiveness and portions of accuracy.", "Typically in analyzing a cost estimate against GAO best practices, we  examine four characteristics, each defined by multiple criteria:  credible.", "For this review, we assessed our case study programs\u2019 LCCEs against  the comprehensive and accurate characteristics, in part, because we  limited our analysis to the O&S portion of programs\u2019 LCCEs and did not  review entire LCCEs. Further, if the cost estimate is not comprehensive  (that is, \u201ccomplete\u201d), then it cannot fully meet the well documented,  accurate, or credible best practice characteristics. For instance, if the cost  estimate is missing some cost elements, then the documentation will be  incomplete, the estimate will be inaccurate, and the result will not be  credible due to the potential underestimating of costs and the lack of a full  risk and uncertainty analysis.", "In addition, we excluded one of the supporting criteria for the accuracy  characteristic, which assesses that the cost estimate results are  unbiased, not overly conservative or optimistic, and based on an  assessment of most likely costs. Because we did not assess program risk  as part of the characteristics we excluded, which also considers potential  bias, we did not analyze programs against this criterion.", "We interviewed officials at DHS headquarters; component program and  budget offices; Coast Guard Surface Forces Logistics Center in  Baltimore, Maryland; Coast Guard Aviation Logistics Center in Elizabeth  City, North Carolina; Transportation Security Administration at Reagan  National Airport in Washington, D.C.; Customs and Border Protection  Southwest Border Regional Headquarters in Albuquerque, New Mexico;  Customs and Border Protection Tucson Air Branch in Tucson, Arizona;  and the Border Patrol\u2019s Nogales Station in Nogales, Arizona. We chose  these locations, in part, as we could often discuss multiple programs  during a single site visit. For example, we discussed both of our Coast  Guard aircraft programs at the Aviation Logistics Center.", "We conducted this performance audit from November 2016 to April 2018  in accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Results of Life-Cycle Cost Estimate Analysis", "paragraphs": ["Using the GAO Cost Estimating and Assessment Guide, GAO cost  experts assessed selected DHS major acquisition programs against 2 of  the 4 characteristics of a quality cost estimate. Please see Appendix I for  a more detailed description of our methodology and why we did not  assess O&S cost estimates against all 4 characteristics.", "We determined the overall assessment rating by assigning each  individual rating a value:", "Not Met = 1,", "Minimally Met = 2,", "Partially Met = 3,", "Substantially Met = 4, and", "Met = 5.", "Next we averaged the individual assessment ratings to determine the  overall rating for each of the two characteristics. The resulting average  becomes the Overall Assessment as follows:", "Not Met = 1.0 to 1.4,", "Minimally Met = 1.5 to 2.4,", "Partially Met = 2.5 to 3.4,", "Substantially Met = 3.5 to 4.4, and", "Met = 4.5 to 5.0.", "Table 3 provides our results of selected Custom and Border Patrol  acquisition programs\u2019 individual and overall assessment for the  comprehensive and accuracy characteristics.", "Table 4 provides our results of the selected Immigration and Customs  Enforcement acquisition program\u2019s individual and overall assessment for  the comprehensive and accuracy characteristics.", "Table 5 provides our results of the selected National Protection and  Programs Directorate program\u2019s individual and overall assessment for the  comprehensive and accuracy characteristics.", "Table 6 provides our results of the selected Transportation Security  Administration acquisition programs\u2019 individual and overall assessment  for the comprehensive and accuracy characteristics.", "Table 7 provides our results of the selected U.S. Coast Guard acquisition  programs\u2019 individual and overall assessment for the comprehensive and  accuracy characteristics."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Marie A. Mak, (202) 512-4841, or makm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, J. Kristopher Keener, Assistant  Director; Burns Chamberlain Eckert; Peter Anderson; Jessica Berkholtz;  George Bustamante; Erin Butkowski; Jeff Cherwonik; Juana Collymore;  Matthew T. Crosby; Jennifer Echard; Jason Lee; and Robin Wilson made  key contributions to this report."], "subsections": []}]}], "fastfact": ["Up to 70% of acquisition costs can be incurred after a system or an asset\u2014like a Coast Guard cutter\u2014is deployed. Generally, these are the costs of operating, staffing, and maintaining the acquisition.", "But we found that the Department of Homeland Security's budget reporting aggregates these operations and support costs by mission, rather than by individual acquisition program. Therefore, Congress doesn't know how much DHS is actually spending on each acquisition.", "We recommended adding this level of detail to DHS's budget report for Congress and other key financial reports."]}
{"id": "GAO-18-158", "url": "https://www.gao.gov/products/GAO-18-158", "title": "Columbia Class Submarine: Immature Technologies Present Risks to Achieving Cost Schedule and Performance Goals", "published_date": "2017-12-21T00:00:00", "released_date": "2017-12-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Navy's Columbia class ballistic missile submarines will replace the 14 Ohio class that currently provide the sea-based leg of the U.S. nuclear triad, slated to begin retiring in 2027. The first Columbia must begin patrols in 2031 to prevent a gap in deterrent capabilities; the class will ultimately carry up to 70 percent of the nation's strategic nuclear capability. The program is a top Navy priority with an expected cost of $267 billion over its life cycle, including $128 billion to research, develop, and buy 12 submarines.", "House Report 114-102 included a provision for GAO to examine the Columbia class program. Among other things, this review examines (1) the status of key Columbia class technologies; and (2) potential risks with the Navy's planned approach for design and construction.", "GAO reviewed the Navy's technology readiness assessment, technology development plan, and the status of key prototyping efforts, and compared efforts with GAO's identified best practices for shipbuilding programs and technology readiness assessments. GAO also assessed the status of design maturity and the Navy's acquisition strategy and interviewed relevant officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Additional development and testing are required to demonstrate the maturity of several Columbia class submarine technologies that are critical to performance, including the Integrated Power System, nuclear reactor, common missile compartment, and propulsor and related coordinated stern technologies (see figure). As a result, it is unknown at this point whether they will work as expected, be delayed, or cost more than planned. Any unexpected delays could postpone the deployment of the lead submarine past the 2031 deadline.", "Further, the Navy underrepresented the program's technology risks in its 2015 Technology Readiness Assessment (TRA) when it did not identify these technologies as critical. Development of these technologies is key to meeting cost, schedule, and performance requirements. A reliable TRA serves as the basis for realistic discussions on how to mitigate risks as programs move forward from the early stages of technology development. Not identifying these technologies as critical means Congress may not have had the full picture of the technology risks and their potential effect on cost, schedule, and performance goals as increasing financial commitments were made. The Navy is not required to provide Congress with an update on the program's progress, including its technology development efforts, until fiscal year 2020\u2014when $8.7 billion for lead ship construction will have already been authorized. Periodic reporting on technology development efforts in the interim could provide decision makers assurances about the remaining technical risks as the Navy asks for increasing levels of funding.", "Consistent with GAO's identified best practices, the Navy intends to complete much of the submarine's overall design prior to starting construction to reduce the risk of cost and schedule growth. However, the Navy recently awarded a contract for detail design while critical technologies remain unproven\u2014a practice not in line with best practices that has led to cost growth and schedule delays on other programs. Proceeding into detail design and construction with immature technologies can lead to design instability and cause construction delays. The Navy plans to accelerate construction of the lead submarine to compensate for an aggressive schedule, which may lead to future delays if the technologies are not fully mature before construction starts, planned for 2021."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO had suggested a matter for congressional consideration related to additional reporting on the Columbia class technologies, but removed it because of recent legislation that implements this requirement. Department of Defense comments on the draft were incorporated as appropriate in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Navy plans to buy 12 Columbia class nuclear-powered ballistic  missile submarines (called SSBNs) armed with nuclear warheads as the  replacement to the Ohio class, the current sea-based leg of the nation\u2019s  strategic nuclear deterrent. The Columbia class fleet will replace the 14  Ohio class SSBNs as they begin to retire in 2027 after over 42 years,  longer than any prior class of submarine. The Navy plans to use new  technologies related to submarine propulsion, missile tubes, and stealth  to ensure that the Columbia class will remain functional throughout its  planned 42.5-year service life. The Navy has identified the Columbia  class program as its top acquisition priority and is investing significantly in  this effort\u2014approximately $267 billion (then-year dollars) in total,  including $128 billion (then-year dollars) to research, develop, and buy 12  submarines. In fiscal year 2017, the Navy began buying materials and  starting detail design, with plans to begin construction of the lead  submarine in fiscal year 2021. To avoid a gap in the nation\u2019s sea-based  deterrent as the Ohio class SSBNs retire, the lead ship will need to make  its first patrol in fiscal year 2031. Given the criticality of the program\u2019s  deterrence mission and the magnitude of the cost and schedule  pressures, any challenges could have far-reaching consequences for the  nation\u2019s defense.", "In light of the Columbia class investment requirements, the House Armed  Services Committee report for the National Defense Authorization Act for  Fiscal Year 2016 included a provision that we examine the program. This  report examines (1) the status of key Columbia class technologies and  related reporting requirements; (2) risks, if any, with the Navy\u2019s planned  approach for design and construction; and (3) whether expected funding  levels for the Columbia class will be adequate moving forward.", "To assess the status of development of key Columbia class technologies,  we reviewed the Navy\u2019s technology development plan and the status of  key prototyping efforts, and compared them with GAO\u2019s identified best  practices for shipbuilding programs. We also reviewed the program\u2019s  Technology Readiness Assessment and compared it to criteria in GAO\u2019s  Technology Readiness Assessment guide. GAO\u2019s guide draws heavily  from the Department of Defense (DOD), Department of Energy (DOE),  and National Aeronautics and Space Administration (NASA) best  practices, and establishes a methodology based on those best practices  that can be used across the federal government for evaluating technology  maturity, particularly as it relates to determining a program or project\u2019s  readiness to move past key decision points that typically coincide with  major commitments of resources. We interviewed Navy officials and  analyzed available documentation related to the Navy\u2019s technical efforts.  We also examined acquisition laws, regulations, and policies to determine  the reporting requirements for the Columbia class program following the  program\u2019s Milestone B decision, which occurred in January 2017.", "To assess the risks, if any, with the Navy\u2019s planned approach for design  and construction of the Columbia class, we compared the status of design  maturity with Navy and shipyard plans to identify any delays. We also  compared planned design maturity and schedule projections with those of  prior U.S. submarine programs to assess realism of these estimates. We  assessed the program\u2019s acquisition strategy, including plans to accelerate  the start of submarine construction and manage shipyard workload  across the Columbia and ongoing Virginia class submarine programs  (which will be built in the same shipyards) to identify factors related to  potential cost, schedule, and oversight risks. Our assessment leverages,  among other things, our prior work on shipbuilding programs.", "To assess whether expected funding levels for the Columbia class will be  adequate moving forward, we compared program cost estimates to  historical data on lead ship cost performance and the Navy\u2019s expected  budget for the program to assess the realism of these estimates. We also  reviewed the program\u2019s life-cycle cost estimate and independent cost  estimate.", "For all objectives, we interviewed officials from the Navy\u2019s Columbia class  submarine program office; the Office of the Chief of Naval Operations- Undersea Warfare; Naval Sea Systems Command Naval Nuclear  Propulsion Program; Naval Undersea Warfare Center; Naval Surface  Warfare Center Carderock Division; Office of the Secretary of Defense  (OSD) Director Operational Test and Evaluation; Office of Naval  Intelligence; OSD Acquisition Technology and Logistics (AT&L); OSD  Cost Analysis and Program Evaluation (CAPE); and the prime contractor  shipyard General Dynamics Electric Boat and its sub-contractor  Huntington Ingalls Industries Newport News Shipbuilding, among others.", "Appendix I presents a more detailed description of the scope and  methodology of our review.", "We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The U.S. strategic nuclear deterrent is spread among three legs, as  depicted in figure 1.", "DOD has continued to reinforce the high priority of the Columbia class  program to the nation\u2019s long-term defense. SSBNs are designed to  maximize stealth to remain undetected while on patrol at sea. This  survivability gives the United States a credible ability to retaliate if faced  with an attack targeting other legs of the triad, and explains DOD\u2019s  decision to ultimately deploy up to 70 percent of the nation\u2019s nuclear  warheads on SSBNs.", "As stated in its April 2010 Nuclear Posture Review Report, DOD  determined that ensuring a survivable U.S. deterrent requires continuous  at-sea deployments of SSBNs in both the Atlantic and Pacific oceans, as  well as the ability to surge additional submarines in crisis. Currently, 14  Ohio class SSBNs provide the sea-based strategic deterrent. The Navy  commissioned the lead ship of this fleet in 1981. The first Ohio class  SSBN to retire\u2014SSN 730\u2014will leave service in 2027 and plans are to  retire one per year following this. When these submarines retire, they will  have been in service over 40 years, longer than any previous  submarines. Navy officials have stated that the legacy Ohio fleet cannot  be life-extended any longer than what is planned due to aging issues.", "The U.S. Strategic Command (STRATCOM) retains operational control of  the strategic triad and determines how many SSBNs are needed to patrol  on a day-to-day basis. STRATCOM and the Navy have determined that  10 operationally available SSBNs are needed to meet mission  requirements. As a result, the lead Columbia class submarine must be  available for its first deterrent patrol in the first quarter of fiscal year 2031  to coincide with the planned 2031 retirement of SSN 734, or the Navy will  not have 10 operationally available SSBNs, thereby requiring DOD to  identify other steps to ensure it can meet current deterrent requirements.", "The Navy expects that it can meet mission requirements with 12  Columbia class submarines carrying 16 missile tubes (equating to a total  of 192 available tubes) in lieu of 14 Ohio class submarines carrying 24  tubes (336 total available tubes). Currently, it takes 14 Ohio class  submarines to provide 10 operationally available SSBNs due to  maintenance needs that can take up to 4 submarines out of the patrol  rotation at any given time. The Navy plans to reduce the number and  duration of required maintenance periods for the Columbia class, allowing  just 12 Columbia class submarines to provide the required 10 operational  submarines at all times. Between fiscal year 2031-2040, the Navy plans  to have a mix of 10 operationally available Columbia and Ohio class  submarines. In fiscal year 2041, with the retirement of the final Ohio class  submarine, this is to increase to 11 Columbia class, and finally to 12  operationally available Columbia class submarines by fiscal year 2042."], "subsections": [{"section_title": "Columbia Class Technology Efforts", "paragraphs": ["The Columbia class program is comprised of several major lines of  effort\u2014hull and supporting systems, the strategic weapons system; and  the nuclear reactor-based propulsion plant\u2014which are managed by  different program offices, as depicted in figure 2.", "The Navy is introducing new technologies to improve capabilities where  required while leveraging systems from existing submarine programs\u2014 the Virginia and Seawolf attack submarines and the Ohio class SSBNs\u2014 in order to ensure commonality with the submarine fleet and reduce  development needs for the Columbia class to limit technical risk. For  example, the program is re-using over 19,000 Virginia class standard  parts including fittings, valves, and switches and leveraging the Navy\u2019s  Submarine Warfare Federated Tactical System program, which integrates  more than 40 independent electronics systems into a common combat  system for use by multiple program offices.", "The Navy has identified several key technical efforts for the Columbia  class program: (1) the Common Missile Compartment, (2) Integrated  Power System, (3) Stern Area System, and (4) propulsor. Other systems  that we consider key technical efforts include the nuclear reactor and the  coordinated stern, a system-of-systems that includes the propulsor and  submarine maneuvering components. These areas are depicted in Figure  3 and defined below.", "Since 2008, the United States and the United Kingdom (U.K.) have been  jointly developing a common system to house the tubes that will carry  submarine launched ballistic missiles. Columbia class SSBNs and U.K.", "SSBNs will carry the Trident II D-5 missile for the first portion of their  respective operational lives; the U.S. missiles armed with nuclear  warheads which are maintained by the Department of Energy (DOE).  Figure 4 shows a notional example of the CMC.", "In addition to the missile tubes, the CMC also provides systems to  support the missiles and the launch equipment, including power, cooling,  gas venting, and launch hardware and software. The Navy\u2019s Strategic  Systems Program is responsible for CMC development efforts."], "subsections": [{"section_title": "Integrated Power System (IPS) and Nuclear Reactor", "paragraphs": ["The IPS includes an electric drive system to propel the submarine  through the water, unlike other current U.S. submarines which use a  mechanical drive system. IPS is powered by the nuclear reactor, which is  a separate system. As shown in figure 5, with a nuclear electric drive  system, steam from the nuclear reactor turns a turbine creating electricity,  which is then directly used to power electric motors. This is in contrast  with a nuclear mechanical propulsion system, where steam from the  nuclear reactor turns a turbine creating high-speed rotation; a reduction  gear then slows the speed of this rotation to a speed that is suitable for  use by the propulsor.", "To provide power to the electric drive, the Columbia class nuclear  propulsion plant relies on a life-of-the-ship reactor core\u2014called S1B\u2014that  is planned to remain in service without refueling, almost 10 years longer  than current U.S. Navy nuclear reactors. The Virginia class also uses a  life-of the-ship reactor core, but the Columbia class reactor needs to be  more powerful to drive the larger submarine, and needs to last longer to  allow for the 42.5-year Columbia class service life of versus 33 years for  the Virginia class. By using a life-of-the-ship reactor, the Columbia class  will not require a mid-life refueling. This will reduce the mid-life  maintenance period from 27 months for Ohio class to 16 months for  Columbia class. This reactor is being developed by the Naval Nuclear  Propulsion Program (also known as Naval Reactors) and the Naval  Nuclear Laboratory (operated by Bechtel Marine Propulsion Corporation)."], "subsections": []}, {"section_title": "Stern Area System (SAS)", "paragraphs": ["SAS is a technical feature of the stern that is comprised of three  subcomponents; details of which are classified."], "subsections": []}, {"section_title": "Propulsor/Coordinated Stern", "paragraphs": ["The Columbia class will use a propulsor instead of a propeller to drive the  submarine through the water. The design of the propulsor relies on  several other technical features that form a system-of-systems,  sometimes referred to as the coordinated stern. The coordinated stern is  where the rudder and other control surfaces are mounted; these control  surfaces are used for submarine maneuvering and are critical to  submarine performance. The coordinated stern consists of interrelated  technology elements, including the propulsor and advanced propulsor  bearing, the stern control surface configuration, and the propulsor shaft  and bearing.", "The propulsion shaft and bearing connects the propulsion system to the  propulsor, transferring energy from the propulsion system to the propulsor  to drive the submarine through the water. The Navy plans to use a new  design \u201cX-stern\u201d configuration instead of the cruciform stern used in other  submarines. Figure 6 depicts the major components of the coordinated  stern, omitting a depiction of the classified Stern Area System."], "subsections": []}]}, {"section_title": "Acquisition Strategy for the Columbia Class", "paragraphs": ["The Navy expects to require over $267 billion (then-year dollars) in total  life-cycle costs for the Columbia class program. Figure 7 shows the  break-down of this amount between operations and support costs and  acquisition costs, as well as the elements comprising the $128 billion in  acquisition costs.", "The approximately $128 billion total acquisition cost includes funding the  Navy expects it will need to research, develop, and build its Columbia  class SSBN.", "Due to their size and complexity, submarines require funding for design,  long-lead materials (such as nuclear propulsion plant components), and  construction over many years. To accomplish these activities, the Navy  awards contracts over several phases of design and construction. Figure  8 outlines major acquisition plans for the Columbia class.", "In 2014, Congress created a National Sea-based Deterrence Fund to  provide DOD with greater discretion to fund the design, construction, and  purchase of the Columbia class. Since then, Congress has provided the  Navy with enhanced acquisition authorities to buy and construct  submarines and certain key components early, in bulk, and continuously.", "The Columbia class program entered the Technology Development  phase of the defense acquisition process in January 2011. The schedule  to acquire the Columbia class was shifted in 2011 when the Navy decided  to delay the start of construction of the lead submarine by 2 years\u2014from  2019 to 2021\u2014due to budget constraints. The first patrol date for the lead  ship was also shifted from fiscal year 2029 to fiscal year 2031. In January  2017, the Columbia class program achieved Milestone B\u2014considered the  official start of a DOD acquisition program\u2014and moved into the  Engineering and Manufacturing Development phase of the acquisition  process. The program does not envision holding a Milestone C, which  typically denotes a program\u2019s approval to enter the production and  deployment phase as shown in figure 9, but does plan to have an OSD- level review prior to authorizing the construction of the lead ship.", "Shipbuilding programs have slightly different decision points than other  DOD weapon systems, partly because of the timing of the Milestone B  decision for ships. Milestone B for ship programs usually occurs after  development of ship specifications and system diagrams is well under  way.", "As part of the Columbia class Milestone B decision, OSD approved a Low  Rate Initial Production quantity of 12 submarines, the total quantity  expected for the class. According to the Navy, the program awarded a  $5.1 billion detail design contract to Electric Boat in September 2017 for  work including design completion, component and technology  development, and prototyping efforts. Detail design is typically funded  with Shipbuilding and Conversion, Navy funds (the Navy\u2019s procurement  fund for buying ships) and represents a further refinement of the design of  the ship and ultimately generation of work instructions needed by the  shipyard in advance of lead ship construction. The program was granted  approval to begin early detail design work in January 2017.", "In shipbuilding, the design phase generally encompasses three activities:  basic design, functional design, and detail design. These steps occur  after the Navy sets the technical requirements for the ship. At a high level: basic design serves to outline the steel structure of the ship;  functional design routes distributive systems\u2014such as electrical or  piping systems\u2014throughout the ship; a three-dimensional (3D)  computer-aided design model is often generated; and detail design completes the design work for even the lowest-level  items, and ultimately furnishes the work instructions for the shipyard  workers to use in constructing the ship. During this phase, all aspects  of the ship are defined, and two-dimensional paper or 3D electronic  drawings (also called work instructions) are generated.", "For the Columbia class program, the Navy defines design in two phases:  arrangements, which program officials describe as a combination of basic  and functional design; and disclosures, which they describe as a  combination of detail design and generation of work instructions. Figure  10 shows the phases of design for the program as compared with typical  surface ship terminology.", "Two shipbuilders\u2014General Dynamics Electric Boat and Huntington  Ingalls Industries Newport News\u2014are responsible for designing and  building nuclear submarines. For the Columbia class program, Electric  Boat is the prime contractor for design and construction, with Newport  News as a subcontractor. Similar to the Virginia class program, each  shipyard will build modules of the submarine, but Electric Boat will be  responsible for final delivery of the submarine to the Navy."], "subsections": []}, {"section_title": "Technology Readiness Assessment", "paragraphs": ["For more than a decade, our work on major acquisitions has shown that  part of an effective management process is assessing how far a  technology has matured and how it has been demonstrated, which  indicates the technology\u2019s readiness to be integrated into a system and  the degree of program risk. DOD acquisition instruction requires that  programs complete a technology readiness assessment (TRA) at  Milestone B. A TRA is a systematic, evidence-based process that  evaluates the maturity of hardware and software technologies critical to  the performance of a larger system or the fulfillment of the key objectives  of an acquisition program. A reliable TRA illuminates concerns and  serves as the basis for realistic discussions on how to mitigate potential  risks as programs move from the early stages of technology  development.", "TRAs do not eliminate technology risk but, when done well, can illuminate  concerns and serve as the basis for realistic discussions on how to  mitigate potential risks as programs move from the early stages of  technology development, where resource requirements are relatively  modest, to system development and beyond, where resource  requirements are often substantial. In addition, TRAs help legislators,  government officials, and the public hold government program managers  accountable for achieving their technology performance goals.", "A main element of a TRA is the identification of critical technology  elements (CTE) and assessment of the appropriate Technology  Readiness Level (TRL), used to measure the readiness of technologies to  be incorporated into a weapon or other type of system. TRLs range from  1 (least mature) to 9 (most mature), as shown in table 1.", "Current DOD guidance assigns the program manager responsibility for  identifying CTEs. The program manager identifies possible technologies,  then, in consultation with officials from the Assistant Secretary of Defense  for Research and Engineering\u2014ASD(R&E)\u2014and with the program  executive office and component acquisition executive approval, identifies  the subject matter experts needed to perform the TRA. For the  Columbia class TRA, the expert team was comprised of Navy program  management and technical personnel. ASD(R&E) reviews the list of  critical technologies provided by the program manager and recommends  technologies to add or delete. Ultimately, the program submits the TRA  report to ASD(R&E), who independently assesses the maturity of the  technologies. The ASD(R&E) prepares a memorandum based on the  assessment that is transmitted to the milestone decision authority, along  with the TRA Report.", "The TRA is also an element of the Milestone B approval process. Section  2366b, title 10, U.S. code states that a major defense acquisition program  may not receive Milestone B approval until the milestone decision  authority has, among other things, certified that the CTE has been  demonstrated at a TRL 6. A program may request a waiver from OSD if  the maturity provision cannot be met. The statute requires that:", "Every waiver determination must be submitted in writing to the  congressional defense committees within 30 days after the waiver  request by the program is authorized.", "The milestone decision authority reviews the program not less often  than annually until the milestone decision authority determines that  the program satisfies all certification and determination components.", "In addition, in 2015 Congress required program acquisition strategies to  include a comprehensive approach to risk management, including the  consideration of techniques such as technology demonstrations and  decision points for disciplined transition of planned technologies into  programs or the selection of alternative technologies.", "Recognizing the importance of the TRA to risk management, in 2016,  GAO developed a Technology Readiness Assessment Guide. This  guide has two purposes: (1) to describe generally accepted best practices  for conducting effective evaluations of technology developed for systems  or acquisition programs; and (2) to provide program managers,  technology developers, and governance bodies with the tools they need  to more effectively mature technology, determine its readiness, and  manage and mitigate risk. As noted above, we developed the guide by  drawing heavily from DOD, DOE, and NASA best practices, terminology,  examples, and credible resources, materials, and tools developed and  applied by experts and organizations in order to capture the current  thinking on technology readiness and maturity. In our guide, we identify  criteria for a CTE, namely that it is a technology that is \u201cnew or novel, and  needed for a system to meet its anticipated operational performance  requirements; or that poses major cost, schedule, or performance risk  during design or demonstration\u201d. According to our guide, re-used  existing technologies can also become critical if they are being used in a  different form, fit, or function\u2014as is the case with the propulsor and  coordinated stern."], "subsections": []}]}, {"section_title": "Major Funding Commitments Planned, but Reporting on the Progress of Several Key Immature Technologies Is Not Required", "paragraphs": ["Several key technical efforts remain immature as the Columbia class  program moves into its design phase\u2014a practice counter to best  practices we have previously identified. These efforts include the  integrated power system, nuclear reactor, propulsor/coordinated stern,  stern area system, and common missile compartment. While the Navy  made progress in some areas\u2014such as prototyping efforts for the missile  compartment and nuclear reactor\u2014all of these systems continue to  require development and testing to mature them to TRL 7, the point at  which GAO\u2019s technology readiness guide considers a technology mature.  Any challenges in development could put the program at risk of costing  more, taking longer to develop, or jeopardizing the program\u2019s ability to  meet its expected performance requirements. However, the Navy  identified only two of the submarine\u2019s technologies as \u201ccritical\u201d in the  program\u2019s 2015 TRA, thereby underrepresenting the technology risk in  the program. Underreporting technical risks can hinder Congress\u2019 and  other decision makers\u2019 full understanding of the program\u2019s progress. This  is especially important because the Navy has already requested $1.6  billion for advanced procurement and recently awarded the detail design  contract. Moreover, there is no requirement that the Navy report to  Congress on its progress in developing and testing the technologies until  after the program completes its production readiness review in May 2020  after the Navy requests another $8.7 billion in funding for the construction  of the lead submarine."], "subsections": [{"section_title": "Several Technologies Remain Immature as Detail Design Begins", "paragraphs": ["Demonstrating Technology Maturity  Based on our work on best practices in  weapon system acquisitions, we have  previously recommended that programs fully  mature technologies to TRL 7\u2014versus TRL 6  as required by DOD\u2014prior to passing  Milestone B and entering the engineering and  manufacturing development phase. TRL 7  represents a major step up from TRL 6,  requiring demonstration of an actual system  prototype in an operational environment such  as in an aircraft, vehicle, or space. We have  previously identified that demonstrating  technologies in an operational environment  provides a higher level of technology  understanding and reduces risk prior to  starting product development. DOD has  historically disagreed with this recommended  practice. added that modeling and simulation should be considered appropriate in  some cases in lieu of actual prototype testing.", "While the Navy has made progress in reducing technical risks in many  areas, such as starting construction of the first CMC, the program  (according to the Navy) awarded a detail design contract in September  2017, with several key technologies not yet at a TRL 7.", "The nuclear reactor, IPS, propulsor and coordinated stern, and SAS all  have potentially significant effects on design and construction of the  Columbia class because they encompass much of the design and  physical structure of the submarine. Based on our analysis, we found that  IPS, SAS, the propulsor and coordinated stern are not yet at a TRL 7, as  depicted in figure 11. The nuclear reactor and CMC are further along in  prototyping work but still require testing in an operational environment to  achieve a TRL 7.", "If any of these systems do not develop as planned, the Navy and the  shipyards could be required to complete some redesign, or, if risks  manifest later, they may force costly workarounds or construction rework.  In addition, these systems also enable many performance attributes  ranging from weapon launch to speed and maneuverability, so  performance could be negatively affected. The status of these  technologies is discussed in detail below."], "subsections": [{"section_title": "Integrated Power System", "paragraphs": ["According to officials from Naval Reactors, the permanent magnet motor- based electric drive system\u2014a key component of IPS for the Columbia  class\u2014is at a TRL 6, below the TRL 7 recommended by our work on best  practices. Naval Reactors has yet to develop an IPS prototype that is  near or at the planned operational system configuration (integrated and  full-size) and has been tested in an operational environment. The Navy  has experimented with electric drive technology on submarines in the  past with two now-decommissioned nuclear-powered attack submarines,  but these submarines used different motor technology than what is  planned for the Columbia class, and thus are not representative. The T- AKE 1 Lewis and Clark class of dry-cargo ammunition ships and DDG  1000 Zumwalt class destroyer are current U.S. Navy electric drive ships  in operation, but these two systems are somewhat different than what is  planned for the Columbia class and neither is powered by a nuclear  reactor. The Navy is currently developing the IPS and producing a  number of pre-production prototypes.", "Naval Reactors officials told us that they are confident that the IPS will  meet requirements based on 20 years of development and testing of the  underlying permanent magnet motor technology. They also noted that this  technology is proven based on testing of the smaller-scale prototype  motor to validate the main propulsion motor design. However, Naval  Reactors is still developing and producing the system\u2019s major  components. Testing of a full-scale prototype under full power, which we  would consider evidence that the technology is mature, is not scheduled  to occur until fiscal years 2018-2020. In a land-based test facility, the  Navy plans to integrate all the IPS systems in a ship-representative  layout. Successful completion of this testing is an important step in  mitigating risk. In contrast, the DDG 1000 program only tested its electric  drive system at the land based test facility at one-half of the ship\u2019s power  generation and electric propulsion system configuration, and as a result  performance problems were not discovered until well after installation and  when system testing on the ship was run at full power. Thus, the Navy\u2019s  planned full-scale prototype testing for Columbia class should prevent a  similar experience, since it will test a full-sized and full-power system  rather than a partial system."], "subsections": []}, {"section_title": "Nuclear Reactor", "paragraphs": ["According to officials from Naval Reactors, as a result of its statutory  mandate, its programs follow a different development process than typical  DOD programs and do not use documents typical of other Navy  programs, such as an Integrated Master Schedule or a Test and  Evaluation Master Plan. Instead, officials from Naval Reactors told us that  they use a rigorous process to assess, manage and control technical risk  during development and testing to manage its day-to-day technical  efforts. Based on descriptions provided by Naval Reactors officials, the  Navy has been operating a Columbia-like experimental reactor in a land- based environment for many years to demonstrate some Columbia class  submarine systems. Naval Reactors officials said that this experience  gives them confidence that the Columbia class reactor will be delivered to  the shipyard on time and will meet all requirements.", "Naval Reactors has design and development work remaining before it  awards the contract for reactor core production in fiscal year 2019. Naval  Reactors budget documentation shows that reactor design work is  planned to be 65 percent complete in fiscal year 2018. While we  recognize that it would not be realistic to expect Naval Reactors to test  the reactor in a submarine to achieve a TRL 7, a completed design would  still be required to produce a final configuration to demonstrate  technology maturity."], "subsections": []}, {"section_title": "Propulsor/Coordinated Stern", "paragraphs": ["Neither the propulsor nor other related components of the coordinated  stern have been demonstrated through testing in a near or planned  operational system configuration, a key element for achieving TRL 7.  Navy officials told us that the propulsor effort is based on prior experience  with propulsors and that it will resemble the Virginia-class propulsor  design. However, according to Navy documentation, the propulsor will be  different in form, fit, and function than prior propulsors, and the final  configuration has yet to be selected or tested. Specifically, the following  components require additional design work and testing prior to  demonstrating a representative prototype:", "Propulsor: The Navy is working with various partners to refine two  different high-level propulsor designs. The program also faced a year  delay in completing the first phase of design work, which  subsequently delayed large-scale vehicle testing. Further, the Navy  still has to complete large-scale prototype testing of different propulsor  designs that are being evaluated for an eventual down-select to one  vendor for production.", "Propulsor shaft: The system that connects the propulsion to the  motors\u2014which the Navy states is similar to shafting systems used on  previous submarine classes but with different materials and size and  weight\u2014is still in concept and preliminary design phases. Main shaft  design development and testing is being performed to select materials  and inform design efforts.", "Advanced propulsor bearing: The Navy has yet to complete the  preliminary design of the advanced propulsor bearing, with prototype  test in a full scale configuration planned to begin in fiscal year 2019.  Navy officials told us that they believe that the final design and  material selections will exceed the reserved weight and size margins  of the shafting or bearing system.", "X-stern: the final X-stern configuration has yet to be tested with a final  design propulsor.", "Our assessment of the propulsor and coordinated stern system design  indicates that it is not yet mature enough to provide the basis for a  prototype in final form, fit, and function\u2014key elements of achieving TRL  7."], "subsections": []}, {"section_title": "Stern Area System", "paragraphs": ["The Navy identified the SAS as a TRL 4 at Milestone B. The preliminary  design review for the SAS is planned for March 2018. This review  establishes the baseline (hardware, software, human/support systems)  and underlying architectures to ensure that the system has a reasonable  expectation of satisfying requirements within the current budget and  schedule. The critical design review\u2014a technical review that ensures that  a system can proceed into fabrication and demonstration and can meet  stated performance requirements within cost, schedule, and risk\u2014is not  planned until March 2020.", "A TRL 4 represents a relatively low level of maturity compared to the  eventual system. At this low level of maturity, there are no assurances  that the SAS will work as planned, which would likely result in the  Columbia class not meeting certain requirements or in cost and schedule  increases. The Navy plans to hold a critical design review for SAS in  fiscal year 2019. The Navy has identified existing fleet technologies as  backups for two SAS components, but officials noted that if these are  used the submarine will not meet current requirements. According to the  program office, there is no backup technology for one other SAS  component, and, if that element\u2014currently a TRL 4\u2014does not develop as  planned, it will be omitted, meaning that the program will lack that  capability.", "Specific details of SAS are classified and cannot be included in this  report."], "subsections": []}, {"section_title": "Common Missile Compartment", "paragraphs": ["The shipbuilders and the Navy have described CMC as complex to build.  The Navy and the two shipyards\u2014with consultation from the United  Kingdom, which will also leverage the CMC design on its new SSBN\u2014 have conducted risk-reducing prototyping work and are building a  representative CMC to demonstrate production processes. In fact,  Columbia class representative missile tubes will be first installed on a  United Kingdom submarine, scheduled for mid-2020. The Navy has plans  for a robust land-based test procedure for both the missile tubes and the  CMC as a system that will provide an operationally similar environment to  a submarine; however, this testing has yet to start and will not conclude  for several years."], "subsections": []}]}, {"section_title": "The Navy Has Not Appropriately Identified Technologies as Critical, Which Underrepresents the Program\u2019s Technical Risk", "paragraphs": ["While the Navy conducted the 2015 Columbia class TRA in accordance  with a DOD-approved plan, it did not follow our identified best practices  for identifying all critical technology elements (CTE), resulting in an  underrepresentation of the technical risk facing the program. Specifically,  the TRA only identified 2 CTEs: the SAS and a carbon dioxide removal  system. CTEs are required to be at TRL 6 at Milestone B (the official start  of a program). For the Columbia class program, OSD approved Milestone  B in January 2017. The Navy received a waiver at Milestone B for the  SAS because the system was still immature, as discussed above. The  carbon dioxide removal system has matured since the TRA following  demonstration on an operational submarine, and no longer requires  active risk mitigation efforts.", "We compared the Navy\u2019s 2015 Columbia class TRA to criteria  documented in GAO\u2019s TRA Guide and DOD\u2019s own guidance. In doing so,  we found that 4 additional key technical efforts\u2014IPS, nuclear reactor, and  propulsor/coordinated stern, and the CMC\u2014meet the criteria for a CTE.  Since the Navy did not identify these technologies in the TRA, it also did  not assign them a TRL. Their exclusion is significant because the 2015  TRA represents a key independent review and technical risk assessment  used by DOD to certify to Congress that the Columbia class program\u2019s  technologies had been demonstrated in a relevant environment (TRL 6)  at Milestone B. Because not all of the CTEs were identified, DOD and  Congress lack an important oversight tool for assessing technology  maturity and evaluating program risk. Further, this certification is the only  required reporting on technology development prior to the Navy  requesting authorization for construction of the lead ship. Some of the  concerns that we identified are discussed in detail below."], "subsections": [{"section_title": "Conflicting Criteria for Identifying Critical Technologies", "paragraphs": ["The team responsible for preparing the 2015 Columbia class TRA did not  identify all appropriate CTEs because it used a more restrictive definition  of a CTE than that recommended in our best practices guide and DOD\u2019s  2011 TRA guide. Table 2 compares the criteria in the three sources.", "As reflected in table 2, not only does the Navy\u2019s TRA definition require a  technology to meet a number of criteria to be considered a CTE, it also  has to be considered a technology development effort. According to the  Columbia class program office, the TRA team based this definition on a  2011 OSD AT&L memorandum issued contemporaneously with the 2011  TRA guidance that states: \u201cTRAs should focus only on technology  maturity, as opposed to engineering and integration risk.\u201d However, our  analysis of this memo found that it also directs programs to use DOD\u2019s  TRA guidance and CTE definition, which are broader and more consistent  with our definition of a CTE. The 2015 Columbia class TRA does not  further define what constitutes a technology development effort, with the  Navy applying this as a criterion without defining what the criteria actually  meant. Moreover, the TRA does not provide any definition or criteria for  what it considers engineering and integration risk. We determined that the  Navy under-identified program technical risks because the Navy\u2019s criteria  were more restrictive than GAO\u2019s CTE definition."], "subsections": []}, {"section_title": "Several Critical Technologies Not Identified", "paragraphs": ["We further assessed the specific technologies in the Columbia class  program against our technology readiness criteria for a CTE, as shown in  table 3.", "As shown in table 3, by applying the additional \u201ctechnology development  effort\u201d criteria in the 2015 Columbia class TRA, the TRA team eliminated  several systems from CTE consideration without criteria or a definition of  what constitutes a technology development effort. Some of these systems  were previously identified as CTEs in other recent Navy documentation.  The TRA team did not identify the nuclear reactor as a CTE because this  system is under the cognizance of Naval Reactors and not the Columbia  class program office. Officials from Naval Reactors told us that they do  not conduct TRAs, but rather follow a different and more iterative process  to manage their technology development efforts.", "While the Navy did not identify all of the program\u2019s CTEs as compared  with the TRA criteria in our guide, it is tracking these efforts to manage  technology risks. For example, 3 of the 4 CTEs we identified are also  identified in Navy documents as \u201ckey technical efforts\u201d with active risk  mitigation plans. We will continue to track the progress of these efforts  in our future work."], "subsections": []}]}, {"section_title": "Required Report to Congress on Technology Efforts Will Not Occur Until after Lead Ship Authorization", "paragraphs": ["As the Columbia class program moves into its detail design and  construction phase, it will be more than 2 years before the next  requirement for a formal DOD report to Congress on the progress of the  technology efforts. This will occur at some point after the program\u2019s  Production Readiness Review is completed in May 2020. In the  meantime, the Navy plans to request another $8.7 billion (in addition to  the $1.6 billion already requested) for lead ship construction. If a typical  budget schedule is followed, this request will come before Congress in  February 2020. The Navy plans to begin construction of the lead  submarine starting in fiscal year 2020. Congress will be asked to approve  lead ship construction absent key information on the maturity of the  critical technologies that, at present, are not up to the maturity levels that  would provide assurance they will work as intended. Without additional  updates on the progress of technology maturity between now and 2020,  we believe Congress will not have information it needs to evaluate  technical risk in advance of the Navy\u2019s requests for considerable  increases in program funding. As previously discussed, there is currently  no DOD requirement to submit such reports to congressional oversight  committees."], "subsections": []}]}, {"section_title": "The Navy Plans to Leverage Completed Design to Mitigate Aggressive Schedule, but Ongoing Technology Development Likely to Undermine This Goal", "paragraphs": ["The Navy is prioritizing design completion before starting construction,  which is a good practice that is in accordance with our work on best  practices because it helps reduce cost and schedule challenges in  construction. However, since some of the key technologies are not fully  matured, detail design work is proceeding with notional or placeholder  data representing these key systems. As a result, the design will likely  remain immature once construction starts in fiscal year 2021. We have  previously reported that concurrency of technology development and  design increases the risk of design rework\u2014or having to make  modifications to design drawings to accommodate any changes needed  as a result of technologies changing size, shape, or weight as they  mature\u2014and potentially can result in negative cost and schedule  impacts. Further, the Navy faces an aggressive production schedule in  order to deliver the lead submarine by fiscal year 2031, which will be  required to prevent a gap in U.S. nuclear deterrent capabilities. According  to our analysis of previous submarine program schedules, the Columbia  class program\u2019s schedule is aggressive in its expected short duration to  build the lead submarine. The program office intends to mitigate this  schedule challenge, in part, by starting construction of portions of the  submarine earlier than initially planned. If this early construction occurs  and the Navy does not alter design plans, construction of some parts of  the lead submarine could outpace a finalized design for developing other  components, which increases the risk of rework during construction and  could further delay completion."], "subsections": [{"section_title": "Consistent with Best Practices, Program Has Prioritized Design Completion, but Immature Technologies May Compromise Design Maturity", "paragraphs": ["The Columbia class program is prioritizing a high level of design  completion prior to the start of construction of the lead submarine of the  class. The program plans to complete 100 percent of design  arrangements and 83 percent of design disclosures prior to the start of  construction of the lead submarine. In our 2009 report on best practices in  shipbuilding, we identified design maturity as important step in reducing  cost and schedule risk. As such, we recommended that the design be  stabilized through completion of basic and functional design and 3D  product modeling prior to the start of construction for a new ship.  Because, as mentioned previously, the Navy defined design  arrangements on the Columbia class program as being equivalent to  basic and functional design, having 100 percent of the arrangements  completed prior to the start of Columbia class construction would meet  the intent of our prior recommendation.", "Further, our analysis found that the Columbia class program\u2019s planned  level of design completion prior to starting construction is much higher  than most recent Navy shipbuilding programs. For example, the Virginia  class attack submarine program started construction with only 43 percent  of the design complete compared with a planned 83 percent completion  for the Columbia class. The Columbia class program also plans to have a  52 week buffer between the completion of design for an area of the  submarine and the start of construction on that area, which is intended to  allow time to address any challenges that may arise and thus minimize  schedule delays. Additionally, the Navy plans to have all components fully  developed 8 months before they are required in the shipyard, which will  provide some additional schedule buffer to address challenges before the  components are actually needed for construction.", "To facilitate design completion, the Navy made a commitment at the start  of the program to set realistic and reasonable requirements and to keep  those requirements stable throughout the program. This approach is also  in keeping with our previously identified best practices, which highlight the  importance of demonstrating balance among program requirements,  technology demands, and cost considerations. The Columbia class  program has not had any significant requirements changes since DOD\u2019s  Joint Requirements Oversight Council validated the Capability  Development Document in 2015. Setting realistic and reasonable  requirements also permitted the Navy and shipyards to reuse some  design elements for components of the submarine that are similar in  design and function to the Virginia class instead of requiring new design  work. Similarly, the program has worked to keep stable ship specifications  to minimize design disruptions.", "The technical specifications for the ship have been set since 2014, and  the program manager maintains personal visibility and accountability over  any proposed deviations or changes to the specifications. According to  the program manager, to date there have been minimal changes made to  the technical baseline. These steps help to minimize design rework that  can be caused by changing requirements, as was seen on the Littoral  Combat Ship program, and that can lead to cost increases or scheduled  delays. The program has also conducted some prototyping efforts\u2014 including building representative portions of the submarine to  demonstrate that its design tool can send the correct information to the  shop floor to build the ship\u2014and has plans for more.", "However, based on our analysis of the program\u2019s current technology  development plan and status, it is unlikely that the Navy\u2019s planned 83  percent of design disclosures will be finalized at the time construction  begins for the lead ship in 2021. Similar to many shipbuilding programs,  the Columbia class program plans to continue to mature technologies into  their final form while detail design is underway. As we have previously  reported, to offset this risk, shipbuilding programs, including the Columbia  class, often include design \u201creservations\u201d for space, weight, power,  cooling, and other key attributes to reserve a footprint for components. As  contractors or government employees develop and refine technologies or  systems, they provide vendor furnished information (VFI) or government  furnished information (GFI) to the shipyards to update the design.  Completion of the detail design of the submarine\u2014and subsequent  achievement of design stability to support a properly sequenced  construction phase\u2014requires shipbuilders to have final information on the  form and fit of each system that will be installed on the ship, including the  system\u2019s weight and its demand for power, cooling, and other supporting  elements.", "As development proceeds on a new technology, initial assumptions about  size, shape, weight, and power and cooling requirements can change,  potentially significantly. These changes in VFI or GFI\u2014if not resolved  early in the design phase\u2014can introduce considerable volatility to the  design process for a lead ship. As such, in our May 2009 report, we  recommended that, to attain the level of knowledge needed to retire  design risk and reduce construction disruptions, complete\u2014versus  notional\u2014VFI or GFI must be incorporated for the design to be truly  stable. DOD concurred with this recommendation. We have previously  reported that other Navy programs have run into difficulties, including out- of-sequence or more costly construction work, when space, weight,  power, and cooling reservations are based on immature or ill-defined  technologies or components that have changed in size, weight, or other  attributes when they are finalized. Ramifications from such changes can  ripple through much of the ship design. For example, we reported in 2009  that during construction of the Seawolf-class attack submarine, the  AN/BSY-2 combat system did not fit into the space and weight  reservations that the Navy had allocated within the submarine\u2019s design.  As a result, a portion of the submarine had to be redesigned at additional  cost.", "However, the Navy has entered the detail design phase for the Columbia  class with incomplete technical data on several key components that are  either significant in size relative to the submarine or spread throughout a  number of spaces of the submarine. These components include IPS, the  nuclear reactor, the propulsor and coordinated stern, and SAS. This  situation is problematic because even if the Columbia class design is 83  percent complete, if it contains many reservations for systems that are not  fully developed the design will continue to be immature and subject to  change. Thus, the 83 percent completion metric may be somewhat  meaningless since elements of the design are uncertain and could  change because of the incomplete technology development efforts.", "As shown in figure 12, the Columbia class program has entered the detail  design phase with a number of technologies still in development or design  finalization, which means that the VFI/GFI for these systems are not yet  final. This figure also depicts our recommended knowledge points for  shipbuilding programs, which align with contract award for detail design  and the start of lead ship construction. The concurrency depicted  between phases could be further exacerbated if the Navy pursues plans  to start construction of some components early.", "As is shown in figure 12, the Navy plans to continue technology  development while executing detail design; this concurrency may  potentially extend through construction if the Navy pursues its plans for  early construction. For example, the Navy and the shipyards are currently  designing the stern of the submarine\u2014with 95 percent of stern  arrangements planned to be complete by December 2017\u2014but the final  configuration of the propulsor has yet to be determined. As currently  planned, the Navy will not complete prototype testing until the third  quarter of fiscal year 2020, and development and design of the SAS is  planned to continue until the end of fiscal year 2021\u2014almost a year after  the start of lead ship construction. The Navy believes it is managing this  stern risk by controlling the interfaces through an Interface Control  Document that identifies set design constraints. According to Navy  officials, all aspects of the propulsor design that could impact the overall  ship design such as size, weight, and arrangements of major sub- assemblies of the propulsor are already finalized, and that the systems  are currently tracking to the reservation allowances. However, until a final  representative prototype is tested as a system, the possibility of design  changes and broader design impacts remains. Although the Navy plans  to have arrangements for the stern 100 percent complete at construction  start, the VFI or GFI for these important systems will not be finalized until  later after these systems finish development.", "Additionally, the electric drive of IPS has already experienced  manufacturing problems that could compromise its ability to meet its  schedule if further challenges arise. According to Naval Reactors officials,  a manufacturing defect was identified in February 2017 that affected the  assembly of the first production-representative propulsion motor intended  for installation in the land-based test facility to prove out the integration of  all the electric drive components. The officials explained that the vendor  responsible for the motor is in the process of repairing the defect\u2014a  process that will take up to 9 months to complete. As a result, Naval  Reactors is now executing a schedule recovery plan to regain some  schedule margin. Part of this plan involves using a smaller scale  prototype motor in initial land-based test facility testing to prove out  system integration. This plan means that initial full-scale system testing  will be conducted with a different motor, albeit one with the same  electromagnetic properties. Further, this delay will leave less margin to  account for any unexpected challenges encountered in developmental  testing."], "subsections": []}, {"section_title": "Aggressive Construction Schedule for Lead Submarine Unprecedented", "paragraphs": ["The Columbia class program has an aggressive schedule to deliver the  lead submarine in time to begin patrols in fiscal year 2031. The Navy  plans for 84 months, or 7 years, to build the lead submarine. While  imperatives associated with our nation\u2019s nuclear deterrent are driving this  planned schedule, our analysis shows that it is significantly shorter than  what the Navy has achieved on any recent lead submarine construction  effort\u2014including during high levels of Cold War submarine production.  The Navy expects that the Columbia class will be built in the same  timeframe as was planned for the lead Virginia class submarine\u2014a  submarine that is one and a half times smaller and has less estimated  construction man hours than the Columbia class. Figure 13 shows the  estimated and actual timeframes for constructing prior lead submarines  as compared with the 84 month estimate for the Columbia class lead  submarine.", "Further, there are industrial base implications to this aggressive schedule.  The Navy and the two shipyards will be trying to attain this level of  unprecedented schedule performance with the lead submarine while the  shipbuilders are also starting work on the first few Virginia class  submarines built in a new Block V configuration. Virginia class program  officials told us that the ramp-up to building two attack submarines per  year has resulted in recent cost and schedule growth at the shipyards.  The addition of Block V and Columbia-class will likely create additional  schedule pressures with the increase in workload required to build those  submarines compared with non-Block V version submarines.", "In an effort to mitigate the risks associated with its aggressive delivery  schedule, the Navy is planning to start construction of a number of parts  of the structure of the lead submarine years earlier than the date of lead  ship authorization in fiscal year 2021. This plan, called advanced  construction, would use expanded acquisition authorities provided by  Congress in the National Sea-Based Deterrence Fund. The Navy and  its shipbuilders intend to start construction as early as 2019 on numerous  areas of the submarine\u2019s structure. Specifically, the Navy and shipyards  plan to start building the stern, bow and missile command and control  module as early as 6 months before fiscal year 2021, citing the disruptive  effects of delays to these three \u201csuper-modules\u201d that are also critical to  ensuring an on-time delivery. These super-modules also comprise vital  areas of the submarine, including the CMC, IPS and the coordinated  stern. The shipyards have proposed moving 500,000-600,000 labor hours  of construction work to before ship authorization. Figure 14 shows the  super-modules of the submarine that the Navy plans to start early.", "However, the Navy has yet to finalize or fund the approach for this type of  early work. Starting construction early for the lead and follow submarines  provides schedule relief to the Navy and shipbuilders, but these plans  may further exacerbate the existing overlap of technology development  and design and construction, which was discussed above. Moving  construction earlier could challenge the Navy\u2019s goal to have all  components developed 7 months before they are required in the  shipyard. Further, the shipbuilders acknowledge that early construction  plans will result in increased overlap between various stages of design  activities in certain areas, including the bow and stern. If Congress funds  the Navy\u2019s plans to fund advanced construction work, this incomplete  VFI/GFI situation will likely be worsened and could disrupt the optimal  build strategy.", "We have previously reported that programs starting construction of the  lead ship of a class without a mature, stable design has been a major  source of cost growth and schedule delays in Navy programs. We have  also reported that when a schedule is set that cannot accommodate  program scope, delivering an initial capability is often delayed and higher  costs are incurred because problems typically occur that cannot be  resolved within compressed, optimistic schedules. The Navy\u2019s Columbia  class plans put the program at risk of cost and schedule growth.  However, its options for reducing concurrency are, at this point, limited  due to the schedule imperatives driven by the lead ship patrol deadline."], "subsections": []}]}, {"section_title": "Columbia Class Is Not Funded Adequately to Address Program Risks", "paragraphs": ["Our analysis determined that it is more likely than not that the Columbia  class program will exceed the Navy\u2019s $128 billion (then-year dollars)  estimate of total acquisition cost to which the program will be funded.  Specifically, the program\u2019s 2017 Milestone B cost estimates are optimistic  because they do not account for a sufficient amount of program risk due  to ongoing technology development, as well as the likely costs to design  and construct the submarines. In addition, the Navy has budgeted the  program to a confidence level for the program that is lower than what  experts recommend, with a particularly optimistic estimate for the lead  ship. While there may be situations when this would be appropriate, this  is not the case for the Columbia class program due to the technical and  design risks that we identified above. As a result, program costs will more  likely than not exceed requested funding, particularly for lead ship  construction. Due to the significant level of funding required for this  program, even a small percentage of cost growth could have far-reaching  consequences on the Navy\u2019s long-range plans to fund construction of its  future fleet. For this review we conducted an initial analysis of the Navy\u2019s  cost estimate but did not assess if it was conducted in accordance with all  of the best practices identified in our cost estimating guide. We plan to  more fully assess the Navy\u2019s life-cycle cost estimate for the entire  Columbia class, including the program\u2019s risk analyses, in future work."], "subsections": [{"section_title": "Confidence Levels and the Navy\u2019s Estimate", "paragraphs": ["Confidence Levels  A confidence level is stated as a percentage  depicting the probability that the program\u2019s  cost will actually be at some value or lower,  calculated after conducting a risk analysis to  identify and quantity program risks and  determine the effects of these risks on its  point estimates.", "From early on, the Navy recognized the need to control costs for the  Columbia class. In fact, the program\u2019s cost estimates have decreased  significantly since the program\u2019s inception due to Navy decisions early in  the program to trade off some capabilities and the incorporation of  updated actual cost data from the continued procurement of Virginia class  submarines. At Milestone B, OSD determined that Columbia class  procurement costs had fallen almost 40 percent since the program\u2019s  original estimate. However, while the Navy did conduct a risk analysis  for its recent Columbia class cost estimates, the confidence level of the  Navy\u2019s estimate at Milestone B for acquisition of the entire class is 45  percent. This means that it is more likely than not that actual costs to  research, develop, and buy the submarines will exceed the Navy\u2019s $128  billion estimate.", "This situation is particularly apparent at this point with regard to costs to  design the class and build the lead submarine. Any difficulties in ongoing  technology development efforts would likely worsen the picture. At  Milestone B, the Navy\u2019s point estimate to develop the technologies,  design the class, and build the lead Columbia was at a 43 percent  confidence level.", "Experts agree that programs should be budgeted to at least the 50  percent confidence level, but budgeting to a higher level (e.g., 70 to 80  percent, or the mean) is a common practice to cover increased costs  resulting from unexpected design complexity and technology uncertainty,  among other things. Navy cost guidance recommends using the \u201crisk  adjusted mean\u201d for the cost for the program, which usually lies between  50 and 60 percent. If the Navy budgeted to an estimate at a higher  confidence level like the risk adjusted mean, its Milestone B point  estimates\u2014meaning the selected estimate of cost\u2014would be higher,  reducing the probability of overruns occurring. According to Navy cost  analysts, the program\u2019s total acquisition cost, which the Navy estimated at  Milestone B at $128 billion (then-year dollars), would exceed $131 billion  (then-year dollars) at 50 percent confidence, which is the bottom range of  the risk adjusted mean confidence level."], "subsections": []}, {"section_title": "Cost Growth Potential Based on the Navy\u2019s Estimate", "paragraphs": ["Even if the Navy budgeted to the 90 percent\u2014a \u201cworst-case\u201d scenario  where significant programmatic challenges are realized and the  probability of cost overruns is low\u2014confidence level, Columbia class lead  ship costs would not be dissimilar to cost outcomes on other lead ship  programs. We have observed in prior work that cost growth for recent  lead ships across the Navy\u2019s shipbuilding portfolio is 28 percent on  average. For example, the Navy\u2019s lead Virginia class submarines (SSN  774 and SSN 775)\u2014the most similar class to Columbia in terms of  technology and component development as well as aspects of its design  and build plans\u2014experienced 15 and 24 percent budget growth  respectively, with average cost growth of 28 percent for the three most  recent lead submarines (see figure 15).", "The 28 percent cost growth we have observed is slightly more than the 22  percent cost increase between the Navy\u2019s point estimate and the 90  percent confidence level, meaning that even if the Navy budgeted the  program to the 90 percent confidence level there would still be historical  shipbuilding precedence for further cost growth. In particular, if costs to  build the lead Columbia class submarine grow similar to the lead Seawolf  and Virginia class submarines, the cost to construct the submarine would  exceed the Navy\u2019s Milestone B estimate by more than $2.5 billion. This  would represent a total approaching $12 billion (then-year dollars) versus  the current estimate of $9.2 billion for the lead submarine. Due to the  magnitude of the Columbia class program\u2019s expected cost, any cost  growth, including for design and construction of the lead ship could  impact the availability of funds for other Navy priorities.", "The Congressional Budget Office (CBO) and CAPE also analyzed  Columbia class program costs. CBO predicted higher costs than the Navy  estimate. In its 2017 assessment of the Navy\u2019s long-term shipbuilding  plans, CBO concluded that the Navy underestimated the cost of the total  Columbia class procurement by $8 billion (2017 dollars).", "CAPE estimated a lower cost, but also identified areas where reliable cost  data were unavailable. The independent cost estimate prepared by CAPE  in support of the program\u2019s Milestone B reflects a 3 percent lower total  program life-cycle cost (2017 dollars) than the Navy estimate. In setting  the program baseline in January 2017, DOD pragmatically opted to use  the Navy\u2019s higher estimate ($7.3 billion) instead of CAPE\u2019s $7 billion  estimate for the average unit cost to procure a Columbia class submarine  (calendar year 2017 dollars). According to CAPE officials, this difference  in estimates is largely due to CAPE incorporating more recent Virginia  class actual cost data into its estimate than the Navy. However, CAPE  also identified that there is a lack of reliable cost data on some contractor- furnished materials and government furnished equipment (GFE) for the  Columbia class program, which limited the quality of the estimate. GFE  comprises critical areas of the Columbia class submarine, including the  strategic weapon system managed by Strategic Systems Program and  the IPS developed by Naval Reactors."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Columbia class submarine will be a significant DOD acquisition for  the next several decades due to cost and mission importance in  guaranteeing the nation\u2019s strategic deterrence. Failure to meet the  aggressive patrol dates required of the program could challenge the Navy  in effectively meeting strategic patrol requirements, and not delivering the  required level of performance could compromise the Navy\u2019s plan to  operate this class through 2080.", "Given the risks facing the program and the significance of potential delays  or cost growth, we believe this program warrants increased attention to  and scrutiny over what we consider to be its critical technologies  (inclusive of the program\u2019s stated technology development efforts),  several of which remain immature. Specifically, technologies such as IPS  and the propulsor and coordinated stern demand more specific  congressional visibility to ensure they stay on track. These areas also  warrant specific assurances from the Navy that they will be delivered on  time and will perform as required. This assurance could augment the  Milestone B certifications which were predicated on a TRA that was not  representative of the technical risk facing the program. Further, such  information would help bolster confidence for Congress that the program  technologies will be matured in time to support construction, which is  especially important as the Navy pursues plans to start construction of the  lead ship early. Without putting in place a requirement for the Navy to  provide these assurances on a periodic basis, Congress will not have the  information until after the Navy has asked for another $8.7 billion in  funding for lead ship construction. It is also important for Congress to be  informed of the impact on performance requirements if technologies are  delayed or fail to mature as planned.", "The Columbia class program is also facing risks from its aggressive and  concurrent schedule as a result of the continued and pressing need for it  to meet the Navy\u2019s nuclear deterrent requirements as the legacy  submarine fleet that cannot be life extended any longer. Typically  addressing risks of such concurrency is accomplished by, among other  things, delaying milestones until more knowledge is obtained. Doing so  helps reduce concurrency and bring more stability to the design before  construction activities begin. Recognizing the mission imperatives that are  driving Columbia class\u2019s aggressive and concurrent schedule it is unlikely  that the Navy will have the ability to slow the pace of the program in order  to reduce cost and schedule risk. Therefore, additional reporting to  decisionmakers on the status of key technologies could help ensure they  fully understand the risks of such an approach and account for such risks  when making programmatic decisions."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["In our draft report we had suggested a matter for congressional  consideration related to additional Navy reporting on the Columbia class  technologies, but we have since removed it because the recently passed  National Defense Authorization Act (NDAA) for 2018 includes Navy  reporting requirements for the Columbia class program that would  achieve the intent of our matter."], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this product to DOD for comment. The Navy  provided technical comments earlier in the review process which we  incorporated where appropriate. In its written comments, reproduced in  appendix III, DOD\u2019s position was that there is not a need for additional  congressional reporting on the Columbia class program because there  are new reporting requirements in the conference report accompanying  the NDAA for fiscal year 2018. We agree that the reporting requirements  in the section 231 of the NDAA for Fiscal Year 2018 meet the intent of our  matter for congressional consideration. These new reporting  requirements for the Navy became law on December 12, 2017, after we  sent the report to DOD and appropriate congressional committees. We  agree that the reporting requirements meet the intent of our matter for  congressional consideration. Accordingly, we have removed our matter  from this report.", "In addition, DOD also disagreed with our characterization of technical  risks facing the Columbia class program and its TRA. Specifically, DOD  stated that the program is meeting statutory and DOD maturity standards  and met or exceeded DOD technology maturity requirements. DOD also  stated that the program\u2019s TRA was conducted in accordance with a 2011  DOD policy memo that directed TRA\u2019s should focus only on \u201ctechnology  maturity, as opposed to engineering and integration risk.\u201d However,  neither this policy memo nor the Columbia class TRA define what  constitutes engineering and integration risk and it is unclear what criteria  the Navy used in making these determinations. Our report acknowledges  that DOD followed statutory and DOD requirements for the two  technologies that the Navy identified as critical technologies in the  program\u2019s TRA. However, our report also identifies several other  technologies that we believe should have also been subject to these  requirements had the Navy conducted a TRA in accordance with our  identified best practices. By applying our identified best practices, we  believe these efforts would have been considered critical technologies  and would have been subject to an evaluation of technology maturity  levels, additional reporting requirements and, potentially, identification of  additional risk mitigation efforts.", "DOD also disagreed with our criteria for identifying a critical technology  and assessing maturity. DOD asserted that applying our criteria would  result in nearly every system on a submarine becoming a critical  technology. We disagree. Our criteria are consistent with DOD\u2019s own  criteria for identifying critical technologies, and only focus on those that  are most significant to a program. Given the program\u2019s cost and schedule  risks and operational imperatives, we believe that appropriately identifying  the critical technologies is an important step in acknowledging and  mitigating program risk. DOD also stated that achieving a TRL 7 by  milestone B would be unrealistic because of the difficulties in testing  some systems in an operational environment prior to launching the  submarine. We agree that in some cases testing at sea is not practical  and testing in a relevant environment may be sufficient to demonstrate  maturity. However, achieving a TRL 7 is not only based on the test  environment; it is also based on demonstrating a prototype near or at the  planned operational system configuration, which requires a design  resembling the final configuration. The Columbia class program has yet to  complete this type of prototype for the key systems we identified. As we  stated in the report some systems, like the propulsor, do not yet have a  final design. While we do not expect the Navy to test every critical  technology on a submarine at sea to demonstrate maturity, we would  expect testing of a prototype near or at the planned operational system  configuration prototype in a relevant environment. For example, prototype  testing of the electric drive at a land-based test facility would demonstrate  maturity\u2014but is not planned for several years\u2014well after the submarine\u2019s  design and potentially construction is underway. While such concurrency  introduces cost, schedule and technical risk, we have previously reported  that programs may choose to move forward with these risks, but should  acknowledged and appropriately resource the program to address the  risks should they materialize. As we stated in the report, this is not the  case for the Columbia class program: some risks have not been properly  identified and the cost estimate does not fully account for the margin of  technical and schedule risks facing the program.", "DOD also provided a table of Columbia class practices, reprinted with our  comments in appendix III.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense, the Secretary of the Navy, and  other interested parties. This report will also be available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact me at (202) 512-4841 or oakleys@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 the report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the status of key Columbia class technologies  and congressional reporting requirements on this status, (2) risks, if any,  with the Navy\u2019s planned approach for design and construction, and (3)  whether expected funding levels for the Columbia class will be adequate  moving forward.", "To assess the status of key Columbia class technologies, we reviewed  the Navy\u2019s technology development plan and the planned technical  approach and the status of key prototyping efforts to all of the systems  that comprise the program, focusing on the technology readiness level of  the major components that are key to enabling program success and that  are key cost and schedule drivers. We also compared technology  development efforts with program requirements and with GAO\u2019s identified  best practices for shipbuilding programs. We also evaluated the  program\u2019s Technology Readiness Assessment, which included applying  the GAO-developed criteria documented in GAO\u2019s Technology  Assessment Guide. GAO\u2019s guide draws heavily from the Department of  Defense (DOD), Energy (DOE), and National Aeronautics and Space  Administration (NASA) best practices, and establishes a methodology  based on those best practices that can be used across the federal  government for evaluating technology maturity, particularly as it relates to  determining a program or project\u2019s readiness to move past key decision  points that typically coincide with major commitments of resources. We  also interviewed relevant officials from the Navy\u2019s Columbia class  submarine program office; the Office of the Chief of Naval Operations- Undersea Warfare; Naval Sea Systems Command Naval Nuclear  Propulsion Program; Navy Strategic Systems Program; Naval Undersea  Warfare Center Newport; Naval Surface Warfare Center Carderock  Division; Office of the Secretary of Defense (OSD) Director Operational  Test and Evaluation; OSD Acquisition, Technology, and Logistics (AT&L);  OSD Cost Analysis and Program Evaluation (CAPE); and the prime  contractor shipyard General Dynamics Electric Boat and their sub- contractor Huntington Ingalls Industries Newport News Shipbuilding. To  determine the congressional reporting requirements on this status we  reviewed relevant DOD acquisition instructions and statute.", "To assess the risks, if any, with the Navy\u2019s planned approach for design  and construction, we compared the status of design maturity with Navy  and shipyard plans to identify any delays, and compared planned design  maturity and schedule projections with those of prior U.S. submarine  efforts (the Virginia, Seawolf, and Ohio classes) to assess realism of  Columbia class estimates. We also interviewed and analyzed available  documentation from Naval Reactors (NAVSEA 08) related to nuclear  reactor and Integrated Power System status. We also interviewed  relevant officials from the Navy\u2019s Columbia class submarine program  office; Naval Sea Systems Command Naval Nuclear Propulsion Program;  Naval Surface Warfare Center Carderock Division, and the prime  contractor shipyard General Dynamics Electric Boat and their sub- contractor Huntington Ingalls Industries Newport News Shipbuilding. We  also assessed the Navy\u2019s acquisition strategy and the Integrated  Enterprise Plan that tracks shipyard workload across the Columbia and  Virginia class submarines and the Ford class aircraft carrier to identify  any factors related to potential schedule challenges.", "To assess whether expected funding levels for the Columbia class will be  adequate moving forward, we compared program cost estimates  prepared at Milestone B to historical data on lead ships and submarine  estimates and actuals to assess the realism of these requirements. We  also analyzed program documentation to identify risk factors, if any,  related to cost projections, including the program\u2019s Independent Cost  Estimate created by the OSD Cost Analysis and Program Evaluation, and  the Navy\u2019s Service Cost Position and Program Life Cycle Cost Estimate.  This evaluation leverages, among other things, prior GAO work on cost  estimating and the Navy\u2019s acquisition of lead ships.", "We also interviewed relevant officials from the Navy\u2019s Columbia class  submarine program office; the Office of the Chief of Naval Operations- Undersea Warfare; Naval Sea Systems Command Naval Nuclear  Propulsion Program; Naval Undersea Warfare Center; Naval Surface  Warfare Center Carderock Division; OSD Director Operational Test and  Evaluation; OSD AT&L; CAPE; and the prime contractor shipyard  General Dynamics Electric Boat and their sub-contractor Huntington  Ingalls Industries Newport News Shipbuilding.", "We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Department of Defense Technology Readiness Levels", "paragraphs": ["Appendix II: Department of Defense  Technology Readiness Levels Description  Lowest level of technology readiness. Scientific research begins to be translated into  applied research and development (R&D). Examples might include paper studies of a  technology\u2019s basic properties.", "Invention begins. Once basic principles are observed, practical applications can be  invented. Applications are speculative and there may be no proof or detailed analysis to  support the assumptions. Examples are limited to analytic studies.", "Active R&D is initiated. This includes analytical studies and laboratory studies to  physically validate the analytical predictions of separate elements of the technology.  Examples include components that are not yet integrated or representative.", "Basic technological components are integrated to establish that they will work together.  This is relatively \u201clow fidelity\u201d compared with the eventual system. Examples include  integration of \u201cad hoc\u201d hardware in the laboratory.", "Fidelity of breadboard technology increases significantly. The basic technological  components are integrated with reasonably realistic supporting elements so they can be  tested in a simulated environment. Examples include \u201chigh-fidelity\u201d laboratory  integration of components.", "Representative model or prototype system, which is well beyond that of TRL 5, is tested  in a relevant environment. Represents a major step up in a technology\u2019s demonstrated  readiness. Examples include testing a prototype in a high-fidelity laboratory  environment or in a simulated operational environment.", "Prototype near or at planned operational system. Represents a major step up from TRL  6 by requiring the demonstration of an actual system prototype in an operational  environment (e.g., in an aircraft, in a vehicle, or in space.", "Technology has been proven to work in its final form and under expected conditions. In  almost all cases, this TRL represents the end of the true system development.  Examples include developmental test and evaluation of the system in its intended  weapon system to determine if it meets design specifications.", "Actual system proven through  successful mission operations.", "Actual application of the technology in its final form and under mission conditions, such  as those encountered in operational test and evaluations. Examples include using the  system under operational conditions."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": [{"section_title": "GAO Comments", "paragraphs": ["DOD also provided the above table of Columbia class practices. These  practices align with GAO\u2019s identified best practices in shipbuilding\u2014stable  requirements, design maturity at construction start, and manufacturing  readiness. However, we have several observations on the DOD\u2019s  statements:  Stable Operational and Technical Requirements:", "We have previously identified maintaining stable requirements as a  best practice; in this report we note that the Navy has provided a  stable basis for the Columbia class program by adhering to this  practice.", "High Design Maturity at Construction Start:", "While we give credit to the program for striving for a high level of  design maturity at construction start for the Columbia class program,  we identify in this report that we have concerns about the Navy\u2019s  ability to stabilize design drawings while technology development  continues.", "As we point out in this report, we are concerned with the maturity of  the Columbia class design due to the unknowns with key  technologies. In this table the Department identifies that the program  is leveraging proven Virginia class technology for the propulsor, which  it identifies as a TRL 9. Although this technology is indeed mature in  the context of Virginia class submarines (i.e., not new or novel), it is  nevertheless novel in the context of Columbia class submarines and  should thus be considered a CTE to be evaluated and risk managed.   As such, we dispute the Navy\u2019s assertion that the Virginia class  propulsor is TRL 9 in the context of the Columbia class program,  since the Navy has yet to complete a design for the propulsor nor has  it tested a production representative prototype, which would achieve a  TRL 6 or 7 (depending on the test environment).", "Manufacturing and Construction Readiness:", "We have not conducted adequate work in this area to comment on  DOD\u2019s statements of manufacturing and construction readiness; we  plan to address this in future work.", "Aggressive Action to Reduce Costs:", "While the Navy has made significant progress in reducing potential  costs for the Columbia class program, we believe that the risks  identified in this report, coupled with the optimistic cost estimate and  aggressive schedule, could result in cost growth that reduces the  actual savings identified by the program."], "subsections": []}]}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition the contact name above, the following staff members made  key contributions to this report: Diana Moldafsky, Assistant Director; C.  James Madar; Jacob Leon Beier; Brian Bothwell; Herb Bowsher; Kurt  Gurka; Stephanie Gustafson; Tim Persons; and Robin Wilson."], "subsections": []}]}], "fastfact": ["Getting the first Columbia class submarine out on patrol by 2031 is essential to maintain an important U.S. nuclear capability. But doing so will be challenging and expensive\u2014over $267 billion to develop, buy and operate 12 submarines.", "We found that:", "Several technologies critical to Columbia class performance need more development and testing; and,", "Starting to design and build vessels before technologies are proven can lead to increased costs and schedule delays.", "We had suggested that Congress consider requiring additional reporting on these technologies but, before this report issued, legislation passed that did so."]}
{"id": "GAO-18-615", "url": "https://www.gao.gov/products/GAO-18-615", "title": "Reported Injuries to U.S. Personnel in Cuba: State Should Revise Policies to Ensure Appropriate Internal Communication of Relevant Incidents", "published_date": "2018-07-30T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["U.S. diplomats and their families in Havana, Cuba, were affected by incidents that were associated with injuries, including hearing loss and brain damage. Over State has reported that over 20 U.S. diplomats and family members in Havana have suffered from medical conditions believed to be connected to the incidents, which began in late 2016 and have continued into 2017. By law, State is generally required to convene an ARB within 1260 days of incidents that result in serious injury at, or related to, a U.S. mission abroad, but the Secretary of State can determine that a 60 day extension is necessary. According to State's policy, M/PRI is responsible for initiating and leading State's ARB incident vetting process.", "This report is part of a broader request to review State's response to the incidents in Cuba. In this report, GAO examines the extent to which State's ARB policy ensures that M/PRI is made aware of incidents that may meet the ARB statute criteria. GAO analyzed relevant federal laws, State policies, and other State documents. GAO also interviewed cognizant State officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of State's (State) Accountability Review Board (ARB) policy does not ensure that the responsible office\u2014State's Office of Management Policy, Rightsizing, and Innovation (M/PRI)\u2014is made aware of incidents that may meet the ARB statute criteria, such as those that occurred in Cuba and were associated with injuries to U.S. personnel. According to State policy, as soon as M/PRI becomes aware of potentially qualifying incidents, M/PRI will start the process for considering whether the incident warrants an ARB. M/PRI relies on informal communication to identify potentially qualifying incidents to begin the vetting process because State does not have a policy, procedure, or process for internal communication of such incidents to M/PRI, according to State officials and GAO analysis. As illustrated in the figure below, other State entities began responding to the incidents in early 2017, but M/PRI was not made aware of the incidents until mid-August 2017, when a former M/PRI official contacted the office after seeing media reports. If M/PRI is not aware of incidents, it cannot initiate State's ARB incident vetting process. This situation puts State at risk of not meeting statutory time frames for convening an ARB and could result in State being less able to improve security programs and practices at other U.S. diplomatic posts. Standards for Internal Control in the Federal Government call for internal communication to achieve the entity's objectives and note that management should document responsibilities through policy."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State revise its policies to define responsibilities for internal communication to M/PRI of relevant incidents. State concurred with GAO\u2019s recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["In late 2016, U.S. government personnel and their families in Havana,  Cuba, began reporting incidents associated with acoustic or sensory  phenomena. These individuals suffered serious injuries, including brain  damage and hearing loss, however the cause of the injury has not been  determined. The Department of State (State) reported that over 20 U.S.  personnel and family members in Havana have suffered from medical  conditions believed to be connected to the incidents. On September 29,  2017, State ordered the departure of non-emergency personnel assigned  to the embassy and their family members to minimize the number of U.S.  diplomats at risk of exposure to harm. In June 2018, the Secretary of  State noted that the precise nature of the injuries and the cause had not  yet been established. State is generally required by law to convene an  Accountability Review Board (ARB) within a specified time period after  the occurrence of an incident that results in serious injury, loss of life, or  significant destruction of property at, or related to, a U.S. mission  abroad. An ARB seeks to determine accountability for such incidents and  promote and encourage improved security programs and practices at  U.S. missions abroad.", "As part of a broader request, you asked us to review the process by  which State convened an ARB in response to the incidents in Cuba. This  report examines the extent to which State\u2019s ARB policy ensures that the  Office of Management Policy, Rightsizing, and Innovation (M/PRI) is  made aware of incidents that may meet the ARB statute criteria. To  address our objective, we analyzed relevant federal laws and State  policies, including the Foreign Affairs Manual (FAM) and Foreign Affairs  Handbooks, to understand State\u2019s responsibilities in convening an ARB  and how State\u2019s components are organized and directed to implement the  law. In addition, we analyzed internal State communications\u2014such as  diplomatic cables\u2014and congressional testimony by State officials on  these incidents for information about the timeline of the incidents, State\u2019s  response to the incidents, and when various State entities became aware  of the incidents. We also interviewed cognizant officials in State\u2019s Bureau  of Diplomatic Security (DS); Bureau of Medical Services (MED); Bureau  of Western Hemisphere Affairs (WHA); Office of the Under Secretary of  State for Management; Office of Foreign Missions; M/PRI; and Crisis  Management and Strategy (CMS) in the Executive Secretariat.", "We conducted this performance audit from March 2018 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "U.S. Law Requires State to Convene an ARB after Certain Types of Incidents", "paragraphs": ["Federal law generally requires the Secretary of State to convene an ARB  not later than 60 days after the occurrence of an incident that resulted in  serious injury, loss of life, or significant destruction of property at, or  related to, a U.S. mission abroad unless the Secretary determines the  incident clearly involves only causes unrelated to security. This time period can be extended for an additional 60-day period if the Secretary  determines that the additional period is necessary for the convening of  the board. Whenever the Secretary convenes an ARB, the Secretary shall  promptly inform the Chairman of the Committee on Foreign Relations in  the Senate and the Speaker of the House of Representatives. Federal  law specifies that an ARB will consist of five members appointed by the  Secretary of State and one appointed by the Director of National  Intelligence. It also states that the ARB shall submit its findings to the  Secretary of State. According to State\u2019s FAM, the ARB is a mechanism  to foster more effective security of U.S. missions and personnel abroad  by ensuring a thorough and independent review of security-related  incidents. Through its investigations and recommendations, the ARB  seeks to determine accountability and promote and encourage improved  security programs and practices."], "subsections": []}, {"section_title": "M/PRI Is Responsible for Conducting the ARB Incident Vetting Process", "paragraphs": ["M/PRI\u2014the central management analysis organization of State\u2019s Under  Secretary of State for Management\u2014is responsible for initiating and  shepherding the incident vetting process to identify incidents that may  warrant an ARB, according to the FAM. The FAM states that M/PRI will  begin the ARB incident vetting process once M/PRI becomes aware of an  incident abroad that could involve loss of life, injury, or destruction of  property. This process includes consultation with the Office of the Legal  Adviser (Legal), DS, and other offices as appropriate to evaluate whether  the ARB statute criteria apply. If the ARB statute criteria are deemed  applicable or if the applicability is questionable, M/PRI is responsible for  calling a meeting of State\u2019s ARB Permanent Coordinating Committee.  See figure 1 for members of the Permanent Coordinating Committee and  other State offices and bureaus involved in responding to the incidents in  Cuba. If M/PRI decides the ARB statute criteria are not applicable, M/PRI will notify committee members in writing, providing a summary of the  incident and an explanation as to why the criteria do not apply. If any  member disagrees, M/PRI will call a Permanent Coordinating Committee  meeting. According to the FAM, the committee will review the available  facts and recommend to the Secretary of State whether or not to convene  an ARB as quickly as possible after an incident occurs. The Secretary of  State makes the final decision on whether to convene an ARB."], "subsections": []}, {"section_title": "The U.S. Embassy in Havana Is Supported by Several State Entities", "paragraphs": ["WHA, DS, and MED, among other State entities, support the U.S.  Embassy in Havana by providing advice and guidance on policy, security,  and other issues.", "WHA. Reporting to the Under Secretary of State for Political Affairs,  WHA oversees the U.S. Embassy in Havana and is responsible for  managing and promoting U.S. interests in the region. Embassy  officials, including senior leadership, report to WHA and its Office of  the Coordinator for Cuban Affairs through diplomatic cables, email,  and phone calls.", "DS. Reporting to the Under Secretary of State for Management, DS  oversees security at diplomatic posts and is responsible for providing  a safe and secure environment for the conduct of U.S. foreign policy.  Embassy Regional Security Officers are required to report security  incidents through different systems, including diplomatic cables,  SPOT Reports, or the Security Incident Management Analysis  System, depending on the type of incident. Regional Security Officers  are also in regular contact with DS via phone and email, according to  State officials.", "MED. Reporting to the Under Secretary of State for Management,  MED ensures that U.S. government employees and their families who  are assigned to diplomatic posts have access to healthcare and  advises State management about health issues around the world. The  U.S. Embassy in Havana has a medical unit, including U.S. direct-hire  and locally hired staff. MED approves requests to medically evacuate  U.S. personnel and family members from diplomatic posts.", "Other State entities. Other State entities provide support to the U.S.  embassy in Havana on specific issues. For example, CMS, within  State\u2019s Executive Secretariat, gathers, assesses, and disseminates  information to State senior management about events that threaten  the security of U.S. missions and their personnel. The Office of  Foreign Missions, which reports to the Under Secretary of State for  Management, seeks fair treatment for U.S. personnel abroad while  ensuring that foreign diplomats based in the United States receive the  same treatment that their respective governments provide to U.S.  personnel abroad in return."], "subsections": []}]}, {"section_title": "State\u2019s ARB Policy Does Not Ensure that the Office Responsible Is Made Aware of Incidents That May Meet ARB Criteria, Such as Those That Occurred in Cuba", "paragraphs": ["Although M/PRI is responsible for initiating and leading State\u2019s ARB  incident vetting process, State\u2019s ARB policy does not define how M/PRI  should become aware of incidents that may involve injury, loss of life, or  destruction of property. Regarding Cuba, the U.S. embassy and several  State entities responded to incidents that were later associated with  various injuries in early 2017. As of June 2018, State officials remained  uncertain of the cause or perpetrator of the incidents and injuries. M/PRI  officials said they did not know about the incidents in Cuba until August  2017, when the media began to report on the incidents."], "subsections": [{"section_title": "State\u2019s ARB Policy Does Not Define How M/PRI Should Become Aware of Incidents That May Involve Injury", "paragraphs": ["Although M/PRI is responsible for initiating and leading the ARB incident  vetting process, State\u2019s polices do not define responsibilities for internal  communication to M/PRI of incidents that may involve injury, loss of life,  or destruction of property. According to the FAM, M/PRI and the  Permanent Coordinating Committee are responsible for evaluating  whether incidents meet the ARB statute criteria. However, M/PRI can only  initiate the process after it is made aware of potentially qualifying  incidents, and the FAM does not outline how M/PRI should be notified of  these types of incidents or which, if any, State entities are responsible for  notifying M/PRI. In contrast, the FAM outlines other specific reporting  responsibilities for Regional Security Officers. According to State  officials and our analysis, State\u2019s FAM and Foreign Affairs Handbooks do  not establish a policy, procedure, or process for internal communication of  such incidents to M/PRI. In 2006, the Under Secretary of State for  Management issued a cable requiring U.S. diplomatic posts to report  potential ARB incidents directly to M/PRI. However, the cable did not  identify who at post was responsible for reporting, and instructed posts to  report to an individual who is no longer in M/PRI. Moreover, State officials  we met with were unaware of the cable.", "M/PRI officials said that information about potentially qualifying incidents  is not directed to them through State\u2019s established reporting mechanisms,  such as diplomatic cables. State\u2019s cable system does not have a caption,  channel, or tag that would direct information to M/PRI about incidents that  may involve injury, loss of life, or damage to property. State\u2019s Office of  the Inspector General previously found deficiencies in State\u2019s internal  communication of incidents that may meet ARB criteria. Despite the  2006 cable on potential ARB incident reporting, in 2013, State\u2019s Inspector  General found that State had no systematic process ensuring immediate  notification of security-related incidents to M/PRI, and that DS did not  routinely provide security reports to M/PRI. The Inspector General made  an informal recommendation that DS should include M/PRI as an  addressee on all security-related incident reports. In 2015, the Inspector  General noted that DS, in response to the recommendation, said that  such a blanket inclusion of M/PRI on all security-related incident reports  would result in M/PRI being inundated with a large number of irrelevant  reports.", "Because State has no policy that ensures M/PRI becomes aware of  incidents that may involve injury, loss of life, or destruction of property,  M/PRI officials said they typically become aware of potentially qualifying  incidents\u2014such as explosions at diplomatic facilities\u2014when such  incidents are discussed internally and widely publicized. M/PRI officials  also told us they occasionally became aware of potentially qualifying  incidents through informal communication, such as during senior staff  meetings with the Under Secretary of State for Management. If M/PRI  officials are not aware of incidents, they cannot initiate State\u2019s ARB  incident vetting process. This situation puts State at risk of not meeting  statutory time frames for convening an ARB and could result in State  being unable to improve security programs and practices at other U.S.  diplomatic posts, which could affect the response to similar incidents  elsewhere.", "Standards for Internal Control in the Federal Government call for internal  communication to achieve the entity\u2019s objectives and note that  management should document responsibilities through policy. The FAM  requires internal controls, which includes as an objective that programs  are efficiently and effectively carried out in accordance with applicable law  and management policy. The FAM also states that the Under Secretary  of State for Management is responsible for, among other things,  developing and executing management policies; the organization,  operations, and assignment of functions within State; and directing and  administering worldwide information resources."], "subsections": []}, {"section_title": "The U.S. Embassy in Havana and Several State Entities Responded to Unexplained Incidents in Cuba Associated with Serious Injury to U.S. Personnel", "paragraphs": ["In January 2017, U.S. embassy and State officials began responding to  incidents in Cuba that were later associated with various injuries. In June  2018, the Secretary of State noted that the precise nature of the injuries  and the cause had not yet been established. According to congressional  testimony by State officials, in late 2016, U.S. personnel in Havana first  reported incidents, typically involving sounds and resulting in various  medical symptoms, to the embassy\u2019s Regional Security Officer and Chief  of Mission. Embassy officials reported the incidents to DS and the  National Security Council as a new type of harassment in early January  2017, according to State documents. The embassy\u2019s Medical Officer first  evaluated a U.S. official related to the incidents on December 30, 2016,  and others in January 2017. Starting in late March 2017, the embassy  held several meetings with U.S. personnel to share the limited information  it had about the incidents, according to State officials. In April 2017, the  embassy held Emergency Action Committee meetings regarding the  incidents.", "CMS communicated with State senior management about the incidents  beginning in April 2017. To ensure that State senior management were  aware of how the embassy was responding, CMS distributed among  various State entities, including M/PRI, one of the embassy\u2019s April 2017  diplomatic cables reporting on an Emergency Action Committee  meeting. According to CMS officials, the cable that CMS distributed was  unclear about what incidents had occurred and did not include detailed  information about the incidents or associated injuries. According to M/PRI  officials, M/PRI was on CMS\u2019s distribution list because M/PRI was  responsible for monitoring the implementation of a previous ARB  recommendation that called for State to review embassy risk  management decisions. According to a former M/PRI official, M/PRI did  not review these CMS communications for other purposes, including to  identify incidents that may meet ARB statute criteria. In addition, in April  and May 2017, CMS included multiple cables on the situation in Cuba in  its daily Safety Overseas Summary for State senior management.", "In response to the incidents, U.S. embassy and WHA officials met with  Cuban officials to emphasize to the Cuban government its responsibilities  to ensure the safety of foreign diplomats in Cuba, according to testimony  by State officials. In mid-February 2017, U.S. officials met with Cuban  officials in Havana and Washington, D.C., about the incidents, citing the  Vienna Convention requirements to provide for the safety and security of  diplomats, according to State officials. Following additional incidents  reported in March and April 2017, U.S. officials met again with Cuban  officials in Havana and Washington, D.C. In May 2017, State expelled two  Cuban diplomats from the United States to underscore the Cuban  government\u2019s responsibility to protect U.S. personnel in Cuba, according  to testimony by State officials. In September 2017, State ordered the  departure from Cuba of non-emergency U.S. embassy personnel and, in  October, expelled 15 Cuban diplomats from Washington, D.C. to  underscore to Cuba its obligations to protect U.S. personnel, according to  testimony by State officials.", "According to State officials, by May 2017, the embassy, WHA, DS, and  MED were aware of 16 U.S. personnel and family members in Havana  who had been injured, although unable to determine the cause. In  January 2018, State\u2019s Medical Director testified to Congress that by May  1, 2017, State had determined that several of those individuals had  serious injuries. Between February and May 2017, a specialist at the  University of Miami evaluated 80 members of the embassy community.  MED arranged for the medical evacuations of about 40 U.S. personnel  from Cuba to Miami, Florida, for evaluations with the specialist, and the  specialist subsequently conducted additional evaluations at the embassy  in Havana. According to State testimony to Congress, the specialist  identified 16 individuals who had symptoms and medically verifiable  clinical findings similar to mild traumatic brain injury. In June 2018, the  Secretary of State noted that the precise nature of the injuries and the  cause had not yet been established."], "subsections": []}, {"section_title": "M/PRI Became Aware of the Incidents in Cuba after Media Reports", "paragraphs": ["M/PRI officials said they became aware of the incidents in Cuba after  media reports in August 2017. According to M/PRI officials, a State  official\u2014who previously worked in M/PRI\u2014contacted M/PRI in early  August after seeing media reports to inquire whether they were aware of  the incidents in Cuba. Although several State entities were aware of the  incidents, WHA, DS, and MED did not report the incidents to M/PRI and it  was unclear whether the incidents met the criteria for convening an ARB,  according to officials. However, our analysis shows that State\u2019s policies  do not instruct State entities to evaluate whether incidents meet the ARB  criteria before reporting such incidents to M/PRI. Instead, State\u2019s FAM  requires M/PRI to lead the process for evaluating incidents that may  involve injury, loss of life, or destruction of property. According to the  FAM, M/PRI will call a Permanent Coordinating Committee meeting if the  ARB statute criteria apply or if the applicability is questionable. The  committee will, as quickly as possible after an incident occurs, review the  available facts and recommend to the Secretary whether to convene an  ARB. M/PRI initiated State\u2019s incident vetting process in August 2017, as  shown in figure 2 below.", "As a result of the incidents in Cuba, M/PRI officials told us they realized  that they may not be aware of all incidents that may involve injury to U.S.  diplomats. In an initial attempt to address this concern, M/PRI officials  said they requested that CMS add M/PRI officials to the distribution list for  the Safety Overseas Summary to try to increase M/PRI\u2019s awareness of  potential incidents. CMS told us that it added M/PRI officials to the  distribution list in October 2017.", "According to M/PRI officials and a timeline provided by M/PRI, once these  officials became aware of the incidents in August 2017, the office began  the ARB incident vetting process, as described in the FAM. In August  2017, these officials initially consulted with DS and MED about the  incidents. In further discussion with Legal, the officials determined that  they did not have sufficient information to determine whether the incidents  met the ARB statute criteria. Given the uncertainties surrounding the  incidents, in mid-September 2017, they decided to call a meeting of the  Permanent Coordinating Committee, which included representatives from  M/PRI, WHA, DS, MED, Legal, the Bureau of Intelligence and Research,  the Bureau of Counterterrorism, and the Intelligence Community. The  committee initially met on September 28, 2017, to review the available  facts against the ARB statute criteria, and concluded that it needed  additional time to determine whether the ARB statute criteria had been  met. On November 28, 2017, the committee met again and  recommended to the Secretary of State that an ARB be convened. The  Secretary of State concurred with the recommendation on December 11,  2017, and convened the ARB on January 12, 2018. The ARB officially  began its work in early February 2018."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["An ARB is intended to result in improved security programs and practices  at U.S. missions abroad. While State has directed M/PRI to initiate the  incident vetting process\u2014including convening the Permanent  Coordinating Committee to evaluate the facts\u2014State\u2019s policies do not  define responsibilities for internal communication to M/PRI of incidents  that may involve injury, loss of life, or destruction of property at U.S.  missions abroad. Although M/PRI officials may receive information  through informal channels, this approach does not ensure that M/PRI will  be made aware of relevant incidents. With regard to the incidents in  Cuba, M/PRI could not begin the incident vetting process for determining  whether the ARB statute criteria had been met until it became aware of  them in August 2017. When M/PRI is not aware of incidents that may  meet the ARB statute criteria, it cannot initiate the incident vetting process  for convening ARBs. Until State establishes policies that ensure the  appropriate office is promptly aware of potentially relevant incidents\u2014for  example, policies that identify formal internal communication procedures  and document responsibilities for such communication\u2014State is at risk of  failing to comply with the ARB statute. Improving its security programs at  U.S. diplomatic posts is all the more imperative given recent reports of  similar incidents, such as in Guangzhou, China."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["To ensure that State\u2019s process allows it to initiate its ARB incident vetting  process in a timely manner, the Secretary of State should revise State\u2019s  policies to define responsibilities for internal communication to M/PRI of  incidents that may involve injury, loss of life, or destruction of property at,  or related to, U.S. missions abroad. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State. In its written comments, State  concurred with our recommendation. State said it will improve its  processes for ensuring effective internal communication. We have  reprinted State\u2019s comments in their entirety in appendix I. State also  provided technical comments, which we incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of State. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you and your staff have any questions about this report, please contact  me at (202) 512-5130 or mazanecb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Judith McCloskey (Assistant  Director), Ashley Alley, Debbie Chung, Thomas Costa, Marcia Crosse,  Neil Doherty, Justin Fisher, Christopher Hayes, Brandon Hunt, Joseph  Kirschbaum, and George Ogilvie made key contributions to this report."], "subsections": []}]}], "fastfact": ["Over 20 U.S. diplomats and family members in Havana, Cuba, have suffered injuries\u2014including brain damage\u2014believed to be connected to unexplained incidents starting in 2016. A similar incident has also been reported in Guangzhou, China.", "After incidents involving serious injury, the State Department is generally required to convene an Accountability Review Board (ARB) to assess State's response and improve security at diplomatic posts.", "However, the State office responsible for convening ARBs learned of the incidents in Cuba from media reports, months after they began. We recommended improving internal communication about such incidents."]}
{"id": "GAO-18-144", "url": "https://www.gao.gov/products/GAO-18-144", "title": "Defense Nuclear Enterprise: Processes to Monitor Progress on Implementing Recommendations and Managing Risks Could Be Improved", "published_date": "2017-10-05T00:00:00", "released_date": "2017-10-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2014, the Secretary of Defense directed two reviews of DOD's nuclear enterprise. These reviews identified problems with leadership, organization, investment, morale, policy, and procedures, as well as other shortcomings that adversely affected the nuclear deterrence mission. The reviews also made recommendations to address these problems. In 2015, DOD conducted a review focused on NC3 systems, which resulted in additional recommendations.", "The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to review DOD's processes for addressing these recommendations, and House Report 114-537 includes a provision for GAO to review changes to DOD's nuclear personnel reliability assurance programs. This report addresses the extent to which DOD and the military services have (1) made progress in implementing recommendations to improve the nuclear enterprise and (2) made changes to their personnel reliability assurance programs. GAO reviewed relevant documents and interviewed agency officials from DOD and the military services. This is a public version of a classified report GAO issued in August 2017. It omits information DOD deemed classified."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has made progress in implementing the recommendations from the 2014 nuclear enterprise reviews and the 2015 nuclear command, control, and communications (NC3) systems report.", "In December 2016, the Office of Cost Assessment and Program Evaluation (CAPE) provided the military services with guidance that emphasizes using performance measures and milestones to evaluate progress to aid them in tracking and analyzing their implementation of the recommendations from the 2014 nuclear enterprise reviews. However, CAPE's guidance does not require the military services and other DOD components to identify and document risks as part of its recommendation tracking processes. As a result, DOD does not consistently identify and document risks, and it may not be identifying and communicating potential risks related to the nuclear enterprise. One of the 2014 nuclear enterprise reviews found that the avoidance of managing risks by many leaders within the enterprise adversely affected the mission. Developing additional guidance on identifying and documenting risks could enhance DOD's ability to provide oversight of its efforts to monitor progress and make informed responses to address any identified risks.", "For recommendations made in the 2015 NC3 report, DOD's Office of the Chief Information Officer (DOD CIO) uses an internal spreadsheet to track implementation but has not yet identified performance measures, milestones, or risks. DOD CIO has drafted a template that, once it has been approved and implemented, will provide a form that could be used for documenting performance measures, milestones, and risks. By identifying and communicating this information, DOD CIO could improve its efforts to track the progress of DOD's actions, evaluate their effects, and formulate responses to risks.", "DOD and the military services have implemented changes to their personnel reliability assurance programs in response to recommendations from the 2014 nuclear enterprise reviews. These programs are intended to ensure that DOD personnel who work with nuclear weapons and nuclear weapons systems, NC3 systems and equipment, and special nuclear material are trustworthy, reliable, and capable of performing their assigned nuclear weapons-related mission. The 2014 nuclear enterprise reviews found that these personnel reliability assurance programs were overly complex and administratively burdensome and that frequent and intrusive inspections left nuclear units more focused on preparing for and responding to inspections than on ensuring personnel reliability. DOD and the services have updated their guidance for personnel reliability assurance programs, including focusing on nine essential elements of reliability. For example, the Air Force has incorporated these elements into the standards it uses for its security forces. Additionally, the Air Force has centralized some of its administrative processes, and the Joint Staff has updated inspection procedures in a way that may ease the burden on personnel being inspected."]}, {"section_title": "What GAO Recommends", "paragraphs": ["DOD should develop additional guidance on identifying and documenting risks, and should identify and communicate performance measures and risks. DOD concurred and provided information about planned actions to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2014, as a response to incidents involving the nation\u2019s nuclear  deterrent forces and their senior leadership, the Secretary of Defense  directed both an internal Department of Defense (DOD) review and an  independent review of the DOD nuclear enterprise. The DOD nuclear  enterprise includes Air Force Intercontinental Ballistic Missiles; Air Force  nuclear-capable bombers and tactical fighters; Navy ballistic missile  submarines; and the supporting infrastructure to build, maintain, and  control these assets. The two reviews examined DOD\u2019s nuclear deterrent  mission, and the resulting reports\u2014Internal Assessment of the  Department of Defense Nuclear Enterprise and Independent Review of  the Department of Defense Nuclear Enterprise\u2014identified problems with  leadership, organization, investment, morale, policy, and procedures, as  well as other shortcomings that were adversely affecting the mission.  The Commander of U.S. Strategic Command also identified some  additional areas for improvement in a memorandum. Together, the two  nuclear enterprise review reports and the Strategic Command  Commander\u2019s memorandum (hereafter referred to collectively as the  2014 nuclear enterprise reviews) included recommendations to address  DOD\u2019s management of nuclear personnel, security requirements for  nuclear weapons, and the availability of key equipment and support parts,  among other issues. In 2015, DOD conducted a review focused on  nuclear command, control, and communications (NC3) systems, which  resulted in an additional report with recommendations (hereafter referred  to as the 2015 NC3 report).", "The National Defense Authorization Act for Fiscal Year 2017 includes a  provision for us to review\u2014during each of fiscal years 2017 through  2021\u2014DOD\u2019s processes for addressing the recommendations of the two  nuclear enterprise reviews and other assessments of the nuclear  enterprise, including the 2015 NC3 report, and to provide a briefing to the congressional defense committees on the results of our review. In July  2016, we reported that the process DOD had developed for tracking the  2014 reviews\u2019 recommendations generally appeared consistent with  relevant criteria from the Standards for Internal Control in the Federal  Government\u2014including using and effectively communicating quality  information and performing monitoring activities. Additionally, the House  Armed Services Committee report accompanying a bill for the National  Defense Authorization Act for Fiscal Year 2017 includes a provision for us  to review matters related to the changes that DOD and the military  services have made to their nuclear personnel reliability assurance  policies and implementing programs. This includes information on (1) the  Air Force\u2019s shift away from using the Personnel Reliability Program as its  sole nuclear personnel reliability assurance program and toward using  Arming and Use of Force as a second personnel reliability assurance  program for its security forces and (2) the Navy\u2019s continued use of the  Personnel Reliability Program as its sole personnel reliability assurance  program.", "This report evaluates the extent to which DOD and the military services  have  1.  made progress in implementing recommendations to improve the  nuclear enterprise, identified performance measures and milestones  to track the progress of its implementation actions, and identified  associated risks and  2.  made changes to their personnel reliability assurance programs to  address the personnel reliability recommendations from the nuclear  enterprise reviews, and the effects of any such changes.", "This report is a public version of a classified report that we issued in  August 2017. The Department of Defense deemed some of the  information in our August report to be classified, which must be protected  from loss, compromise, or inadvertent disclosure. Therefore, this report  omits classified information about some findings from DOD\u2019s classified  nuclear enterprise review reports. Although the information provided in  this report is more limited, the report addresses the same objectives as  the classified report and uses the same methodology.", "To evaluate the extent to which DOD and the military services have made  progress in implementing recommendations to improve the nuclear  enterprise, identified performance measures and milestones to track the  progress of its implementation actions, and identified associated risks, we  reviewed documents that establish the recommendations, including the  internal and independent nuclear enterprise reviews, U.S. Strategic  Command\u2019s action plan, and the 2015 NC3 report; guidance such as the  Secretary of Defense\u2019s memo (Nuclear Enterprise Review Corrective  Action Implementation); and additional documents from the Office of Cost  Assessment and Program Evaluation (CAPE), Office of the Chief  Information Officer (CIO), and the military services that outline their  processes for implementing, tracking, and evaluating the implementation  of the recommendations to improve the defense nuclear enterprise. We  compared these processes to relevant criteria from Standards for Internal  Control in the Federal Government\u2014including assessing and responding  to risk, using and effectively communicating quality information, and  performing monitoring activities.", "To evaluate the extent to which DOD and the military services have made  changes to their personnel reliability assurance programs to address the  personnel reliability recommendations from the nuclear enterprise  reviews, and the effects of any such changes, we reviewed the personnel  reliability assurance program requirements for DOD personnel in the  Navy, the Army, the Air Force, the Marine Corps, and DOD guidance and  other documents. We then compared these requirements to those in  prior DOD documents and service-specific guidance. We conducted  interviews with officials involved in overseeing and implementing the  department\u2019s and the services\u2019 nuclear personnel reliability assurance  programs. We also reviewed training documents, reports, and other  documents that DOD and the services used to implement changes to  their personnel reliability assurance programs and to educate their  personnel on these changes.", "We interviewed officials from the following offices to discuss progress in  implementing the recommendations to improve the nuclear enterprise,  including changes to personnel reliability assurance programs:", "Office of the Assistant Secretary of Defense for Nuclear, Chemical,  and Biological Defense Programs (Nuclear Matters)", "Defense Threat Reduction Agency", "Secretary of the Air Force, Office of the Inspector General", "Air Force Headquarters: Manpower, Personnel, and Services (A1),  Security Forces (A4S), and Strategic Deterrence and Nuclear  Integration (A10)", "Air Force Global Strike Command", "Air Force Inspection Agency", "Air Force Personnel Center", "Air Force Personnel Reliability Program Administrative Qualification", "90th Missile Wing, F.E. Warren Air Force Base", "11th Security Forces Group, Joint Base Andrews", "628th Security Forces Squadron, Joint Base Charleston", "Deputy Under Secretary of the Navy for Policy", "Chief of Naval Operations: Nuclear Policy (N514) and Undersea  Warfare (N97)", "Marine Corps Headquarters: Plans, Policies, and Operations-Security", "Navy Strategic Systems Programs", "Department of the Army Headquarters, Operations, Plans, and  Training (G3/5/7)", "U.S. Army Nuclear and Countering Weapons of Mass Destruction  We conducted this performance audit from July 2016 to August 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We subsequently worked with  DOD from August 2017 to October 2017 to prepare this unclassified  version of the original classified report for public release. This public  version was also prepared in accordance with these standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Oversight of 2014 Nuclear Enterprise Reviews\u2019 Recommendations", "paragraphs": ["In November 2014, the Secretary of Defense directed DOD to address  the 2014 nuclear enterprise reviews\u2019 recommendations and directed  CAPE to track and assess these implementation efforts. The Joint Staff,  Navy, Air Force, offices within the Office of the Secretary of Defense, and  U.S. Strategic Command are supporting CAPE\u2019s efforts. The Secretary  also established the Nuclear Deterrent Enterprise Review Group  (NDERG), a group of senior officials chaired by the Deputy Secretary of  Defense and including the Vice Chairman of the Joint Chiefs of Staff, to  oversee and make decisions regarding implementation of the nuclear  enterprise reviews\u2019 recommendations. The NDERG is supported by a  Nuclear Deterrent Working Group, which meets biweekly and reviews the  status of recommendations, and a Nuclear Deterrent Senior Oversight  Group, which meets quarterly and reviews any recommendations that the  Working Group believes are ready for the NDERG to close. The Deputy  Secretary of Defense updates the Secretary of Defense on NDERG  progress as requested.", "CAPE compiled the recommendations from the two 2014 nuclear  enterprise reviews and a memorandum from the Commander of U.S.  Strategic Command that identified several additional recommendations.  In total, CAPE identified 175 distinct recommendations from the three  documents. CAPE then identified 247 sub-recommendations from  recommendations directed to multiple services (or other DOD  components)\u2014for example, if a recommendation was directed to the Air  Force and the Navy, then one sub-recommendation was made to the Air  Force and one sub-recommendation was made to the Navy.", "CAPE then worked with the services to identify offices of primary  responsibility for implementing actions to address the recommendations,  any offices of coordinating responsibility, and any resources necessary to  implement each recommendation. CAPE has developed a tracking tool to  collect information on progress in meeting milestones and metrics. This  tracking tool identifies offices of responsibility, implementation actions,  milestones, and metrics to measure the effectiveness of the actions taken  toward implementing each of the recommendations. The tracking tool  currently contains hundreds of unique milestones and metrics, and  according to CAPE officials, additional milestones and metrics are  included as they are identified. The Air Force and the Navy also  developed their own methods of tracking their service-specific  recommendations.", "We reviewed DOD\u2019s processes for implementing the 2014 nuclear  enterprise reviews\u2019 recommendations and issued a report on July 14,  2016. We found that the process DOD had developed for implementing  and tracking the 2014 nuclear enterprise reviews\u2019 recommendations  generally appeared consistent with relevant criteria from the Standards  for Internal Control in the Federal Government\u2014including using and effectively communicating quality information and performing monitoring  activities.", "As we reported in July 2016, CAPE officials stated that it would take  about 3 years to see measurable improvements in the health of the  nuclear enterprise and 15 years to implement the great majority of the  recommendations and measure whether they have had their intended  effects. CAPE and service officials have noted that it would take years for  some of the recommended cultural changes to manifest."], "subsections": []}, {"section_title": "NC3 Systems", "paragraphs": ["NC3 is a large and complex system comprised of numerous land-, air-,  and space-based components used to assure connectivity between the  President and nuclear forces. NC3 is managed by the military  departments, nuclear force commanders, and the defense agencies and  provides the President with the means to authorize the use of nuclear  weapons in a crisis.", "NC3 systems support five important functions:", "Force management: assignment, training, deployment, maintenance,  and logistics support of nuclear forces before, during, and after any  crisis.", "Planning: development and modification of plans for the employment  of nuclear weapons and other options.", "Situation monitoring: collection, maintenance, assessment, and  dissemination of information on friendly forces, adversary forces and  possible targets, emerging nuclear powers, and worldwide events of  interest.", "Decision making: assessment, review, and consultation that occur  when the employment or movement of nuclear weapons is  considered.", "Force direction: implementation of decisions regarding the execution,  termination, destruction, and disablement of nuclear weapons."], "subsections": []}, {"section_title": "Oversight of 2015 NC3 Report Recommendations", "paragraphs": ["As recommended in the 2015 NC3 report, the Council on Oversight of the  National Leadership Command, Control, and Communications System  (the Oversight Council) has taken a lead role in providing oversight and  making the final determination on the implementation status of that  report\u2019s 13 recommendations. The Oversight Council is co-chaired by  the Under Secretary of Defense for Acquisition, Technology, and  Logistics and the Vice Chairman of the Joint Chiefs of Staff and its  members are the Under Secretary of Defense for Policy; the Commander,  U.S. Strategic Command; the Commander, North American Aerospace  Defense Command/U.S. Northern Command; the Director, National  Security Agency; and the DOD Chief Information Officer. Additional  organizations, such as CAPE, may participate in the Oversight Council\u2019s  meetings to provide subject matter expertise. The Oversight Council is  supported by the Executive Management Board\u2014a functional  governance committee chaired by the DOD Chief Information Officer.  DOD CIO tracks the implementation of the 2015 NC3 report\u2019s  recommendations, among other activities."], "subsections": []}, {"section_title": "Nuclear Personnel Reliability", "paragraphs": ["DOD and the military services set standards to ensure that personnel who  work with nuclear weapons and nuclear weapons systems, NC3 systems  and equipment, and special nuclear material are reliable, trustworthy, and  capable of performing their assigned nuclear weapons-related mission.  Nuclear surety generally refers to DOD\u2019s efforts to ensure that nuclear  weapons and materials are safe, secure, reliable, and controlled. DOD  and the military services use personnel reliability assurance programs\u2014 the Personnel Reliability Program and the Air Force\u2019s Arming and Use of  Force program for Air Force security forces\u2014to implement these nuclear  surety requirements for personnel.", "When personnel are assigned to a nuclear unit, relevant unit  commanders certify that those personnel meet the personnel reliability  assurance program standards. Commanders can also suspend or  decertify personnel from working with nuclear weapons if they fail to meet  these standards during their service. Factors that may lead to suspension  or decertification include medical issues; personal conduct; emotional,  mental and personality disorders; financial problems such as an inability  or unwillingness to satisfy debts or the presence of unexplained wealth;  criminal conduct; sexual harassment or assault; misuse of drugs or  alcohol; and security violations. According to DOD data, as of  December 31, 2016, there were 10,603 DOD personnel certified under  the Personnel Reliability Program and 36,464 security forces personnel  certified under the Air Force\u2019s Arming and Use of Force program.  Together, there were a total of 47,067 personnel that met the personnel  nuclear surety requirements of a personnel reliability assurance program  (see table 1)."], "subsections": []}]}, {"section_title": "Progress Made in Implementing Recommendations, but Identifying Additional Performance Measures, Milestones, and Risks Can Aid in Tracking and Evaluating Efforts", "paragraphs": ["DOD and the military services have made progress in implementing  recommendations to improve the defense nuclear enterprise but could  improve their efforts by identifying additional performance measures,  milestones, and associated risks. CAPE and DOD CIO have separate  processes for tracking and evaluating DOD\u2019s progress in implementing  the recommendations from the 2014 nuclear enterprise reviews and the  2015 NC3 report, respectively."], "subsections": [{"section_title": "DOD Continues to Implement the Recommendations from the 2014 Nuclear Enterprise Reviews", "paragraphs": ["The NDERG has closed 77 of the 247 sub-recommendations from the  2014 nuclear enterprise reviews following CAPE\u2019s assessment of  implementation actions that had been taken by the military services and  other DOD components (see fig. 1). For example, with regard to Nuclear  Weapons Technical Inspections, the independent 2014 nuclear enterprise  review recommended that inspection teams not focus on auditing records  but instead examine the processes in place to inform commanders of  Personnel Reliability Program issues. In response, DOD, the Air Force,  and the Navy have made changes to their inspection processes and the  Joint Chiefs of Staff have updated the Nuclear Weapons Technical  Inspections guidance to de-emphasize records reviews in favor of  knowledge checks and scenario-based discussion during the Personnel  Reliability Program portion of these inspections. After reviewing these  actions, the NDERG closed this recommendation in December 2016. The  77 closed sub-recommendations make up 62 of the initial 175  recommendations from the 2014 nuclear enterprise reviews."], "subsections": []}, {"section_title": "DOD Has Made Progress in Implementing Recommendations from the 2015 NC3 Report", "paragraphs": ["According to DOD CIO officials, as of March 2017, the Oversight Council  has closed two of the 13 recommendations from the 2015 NC3 report,  and DOD is making progress in implementing the remaining 11  recommendations (see fig. 2). The two closed recommendations are to  (1) make the Oversight Council the synchronizing body to evaluate, track,  and resolve the findings and recommendations made in that report and  (2) broaden Air Force Global Strike Command\u2019s responsibilities to include  serving as the lead command for all of the Air Force-owned portions of  the NC3 systems. DOD has made progress in implementing the  remaining 11 recommendations. For example, the 2015 NC3 report  recommended that U.S. Strategic Command review and validate the  availability requirements of one of the NC3 systems, which the command  has now completed. Additional detail about DOD\u2019s progress is omitted  because the information is classified."], "subsections": []}, {"section_title": "DOD\u2019s Processes for Tracking and Evaluating Its Progress Can Be Improved by Identifying Additional Performance Measures, Milestones, and Risks", "paragraphs": ["DOD\u2019s processes for tracking and evaluating its progress in implementing  the 2014 nuclear enterprise reviews\u2019 recommendations do not  consistently identify and document risks, and its processes for tracking  and evaluating its progress in implementing the 2015 NC3 report\u2019s  recommendations do not identify performance measures, milestones, or  risks. Identifying performance measures, milestones, and associated risks  can help an agency to track and evaluate its progress toward completing  tasks over time and can help to inform decision makers of potential issues  that need to be addressed. We have previously reported that by tracking  and developing a performance baseline for all performance measures,  agencies can better evaluate whether they are making progress and their  goals are being achieved. Similarly, Standards for Internal Control in the  Federal Government emphasizes using performance measures and  milestones to assess performance over time. We have also derived  leading practices from the Government Performance and Results Act of  1993 (GPRA) and the GPRA Modernization Act of 2010, such as clearly  defining performance measures and milestones and assessing program  results against them. Additionally, Standards for Internal Control in the  Federal Government states that management should identify, analyze,  and respond to risks related to achieving the defined objectives and  should use and internally communicate the necessary quality information  in meeting those objectives."], "subsections": [{"section_title": "DOD Has Identified Performance Measures and Milestones for Evaluating the Implementation of the 2014 Nuclear Enterprise Reviews\u2019 Recommendations, but Additional Guidance for Identifying and Documenting Risks Could Improve Oversight", "paragraphs": ["CAPE is working with the military services and other DOD components to  track and evaluate the implementation actions taken in response to the  recommendations from the 2014 nuclear enterprise reviews; however,  risks associated with these actions are not consistently identified and  documented. In July 2016, we reported on CAPE\u2019s use of a centralized  tracking tool that contains relevant information about the status of the  actions taken in response to those recommendations. CAPE continues to  use this tool, and it remains accessible to the services and other DOD  entities on DOD\u2019s classified network. As shown in figure 3, it includes  fields for the underlying problem statement, or root cause, for the  recommendation; time frames with milestones for implementing the  recommendations; and performance measures (referred to as metrics in  the tracking tool) to assess the effectiveness of the actions taken. The  tracking tool also contains a field for Key Risks and Issues, but we found  that this field has not been used consistently.", "According to CAPE officials, CAPE is using the tracking tool to track  progress in meeting milestones and record the metrics it has identified to  assess both the progress (through \u201cprocess metrics\u201d) and the  effectiveness of the implementation actions (through \u201coutcome metrics\u201d).  The outcome metrics are selected to aid CAPE in determining whether  implemented recommendations have addressed the underlying problem  that was the impetus for the original recommendation. CAPE used the  outcome metrics to inform its assessment of each of the 77 sub- recommendations that the NDERG then closed. According to CAPE  officials, CAPE\u2019s approach to measuring effectiveness is to gather  supporting data from the services and measure the effectiveness of each  recommendation separately. However, these officials noted that until a  recommendation has been implemented, CAPE cannot fully assess the  effectiveness of the implementation actions. Some recommendations\u2014 including changing a service\u2019s culture or morale\u2014will take time to  evaluate. According to CAPE officials, the tracking tool currently contains  389 unique metrics and 370 unique milestones to aid in the assessment  of the implementation actions. For each of these metrics and milestones,  the tracking tool includes expected completion dates and indicates which  have been met and which are behind schedule. Additional milestones,  particularly for actions more than 18 months out, and additional metrics to  aid in measuring the effectiveness of actions taken, are still being  identified, according to CAPE officials.", "In December 2016, the Deputy Secretary of Defense issued a  memorandum that directed the transition of the tracking and analysis  responsibilities related to implementing the 2014 nuclear enterprise  reviews\u2019 recommendations from CAPE to the military departments and  other DOD entities. However, CAPE remains responsible for providing  guidance to inform the analyses conducted by other DOD entities,  overseeing the analyses, and assessing recommendations for closure.  The aim of these changes was to enhance ownership and embed the  principles of robust analysis, continuous monitoring, and responsibility  throughout the department.", "As part of this transition, CAPE provided the military departments and  other DOD entities with guidance to aid in their tracking and analysis of  the recommendations from the 2014 nuclear enterprise reviews, but this  guidance does not require the military services and other DOD  components to identify and document risks prior to bringing a  recommendation for closure. This guidance emphasizes using  performance measures and milestones to track and measure the  progress of implementation actions. It includes sections tailored to  specific groups of recommendations from the 2014 nuclear enterprise  reviews. It also calls for the consideration of potential risks that  unintended consequences could occur when a recommendation is  brought for closure, but it does not call for risks to be identified, assessed,  or documented prior to that time.", "According to officials from CAPE and the military services, the  department considers risks in a number of ways and does capture  information about some risks. For example, CAPE has supplemented its  review of the military services\u2019 proposed budgets by conducting a review  of funding risks related to the nuclear enterprise in areas such as  modernization, investment, and personnel. CAPE briefs the results of this  review to senior leadership within the NDERG to provide them information  about whether the services are including funds to address these items in  their yearly budget requests. Additionally, CAPE personnel have identified  key risks regarding some of the recommendations and have entered this  information into the centralized tracking tool. According to CAPE officials,  63 of the 247 sub-recommendations include information in the Key Risks  and Issues field in the tracking tool. However, these officials told us that  none of the remaining 184 sub-recommendations include information in  this field, because either no key risks or issues were identified or the risks  that were identified were not formally documented within the tool.", "Additionally, risks that are introduced as a result of actions taken to  implement a recommendation are not consistently included in the  centralized tracking tool or otherwise documented by CAPE. For  example, according to Navy and CAPE officials regarding a  recommendation to increase the number of skilled shipyard workers to  keep up with the maintenance demands of ballistic missile nuclear  submarines, the centralized tracking tool documents the risks as the need  to complete hiring and training of new shipyard personnel. However,  according to Navy officials, the risks resulting from the prioritization of  maintenance of ballistic missile nuclear submarines over other vessels  not associated with the nuclear deterrent mission, such as fast attack  submarines and nuclear aircraft carriers, were discussed and accepted by  the Navy, but not documented in the centralized tracking tool. Similarly,  the risks associated with recommendations that the Air Force provide  additional incentive pay for personnel serving in nuclear positions were  identified but not documented in the centralized tracking tool prior to  implementation and closure. According to a CAPE official, the Nuclear  Deterrent Working Group determined that implementing incentive pay  could negatively affect morale, because some Air Force personnel in  nuclear positions are not eligible to receive this additional pay. The official  stated that the Nuclear Deterrent Senior Oversight Group was briefed on  this risk and responded by requesting updates from the Air Force\u2019s  annual review on the effectiveness of this incentive pay.", "The department is not consistently identifying and documenting risks  associated with the recommendations, because CAPE\u2019s guidance does  not direct the military services and DOD components to document and  update information on risk in the centralized tracking tool. According to  CAPE officials, since the release of the December 2016 memorandum  directing the transition of the tracking and analysis responsibilities for the  2014 nuclear enterprise reviews\u2019 recommendations from CAPE to the  military departments and other DOD components, the military services  have not, to date, formally identified any key risks for inclusion in the  centralized tracking tool. According to one Air Force official, the Air Force  identifies and responds to risks through its day-to-day operations;  however, this information is not captured by the tracking tool or otherwise  documented. According to a CAPE official, additional guidance on  documenting risk could encourage the military services and DOD  components to capture risks that they have identified in the tracking tool.", "In a November 2014 memo announcing the department\u2019s response to the  nuclear enterprise reviews, the Secretary of Defense stated that the  nuclear deterrent plays a critical role in assuring U.S. national security  and that it is DOD\u2019s highest priority mission. The Independent Review of  the Department of Defense Nuclear Enterprise found that the avoidance  of managing risks by many leaders within the enterprise resulted in  adverse impacts to the mission. The review noted that avoiding risk by  avoiding the problem until it becomes a major issue is a near inevitable  outcome of risk-averse cultures and that, too often, it takes a significant  event for the leadership to recognize major problems within the force.  Similarly, the Internal Assessment of the Department of Defense Nuclear  Enterprise stated that many of the senior leaders within DOD and the  military services were not cognizant of the problems faced by the  enterprise. According to that review, many issues were already being  reported through internal self-assessments, but many senior leaders  within DOD and the military services were not aware of the conclusions of  these self-assessments and so were unable to take action to address  them. Given the critical role the nuclear enterprise plays in national  security, and given the challenges the Independent Review of the  Department of Defense Nuclear Enterprise identified with respect to  managing risks and communicating them across the defense nuclear  enterprise, it is essential that risks be consistently identified and  documented. By documenting information on risks in its centralized  tracking tool, DOD could enhance its ability to provide oversight of the  recommendations throughout its review processes in the military services,  the Nuclear Deterrent Working Group, the Nuclear Deterrent Senior  Oversight Group, and the NDERG. By developing additional guidance for  identifying and documenting information about these risks, CAPE can  also aid the components of the defense nuclear enterprise in their efforts  to communicate and formulate responses to the risks\u2014either by  deliberately determining to accept the risk or by taking steps to avoid,  reduce, or share the risk across the enterprise."], "subsections": []}, {"section_title": "Identifying Performance Measures, Milestones, and Associated Risks could Improve DOD CIO\u2019s Efforts to Evaluate the Actions Taken in Response to the 2015 NC3 Report", "paragraphs": ["DOD CIO uses an internal spreadsheet to track the implementation of the  13 recommendations from the 2015 NC3 report, but it has not identified  performance measures, milestones, or associated risks to evaluate these  actions. This spreadsheet includes fields for indicating whether an  execution plan exists, the operational impact from implementing the  recommendation, forecast closeout (which lists the responsible DOD  component or designates the status of the recommendation), and follow- up actions to be taken after a recommendation is closed. Figure 4 shows  the layout of this spreadsheet.", "According to DOD CIO officials that we met with, DOD CIO shares  information about the status of the 2015 NC3 report recommendations  through meetings with the DOD entities with primary responsibility for  implementing the recommendations. However, there is currently no  centralized collection of metrics, milestones, and other information with  the same level of detail that CAPE had developed and is using for the  2014 nuclear enterprise reviews\u2019 recommendations. According to DOD  CIO officials, they are working with the offices of primary responsibility to  expand on the current content of the internal tracking spreadsheet. These  officials stated that while they had drafted a template to contain the  expanded content, it has not yet been approved by the Oversight Council.  This draft template contains fields similar to those CAPE developed and  the department uses for tracking the department\u2019s progress in  implementing the recommendations from the 2014 nuclear enterprise  reviews. When approved and implemented, this template will provide a  form that could be used for documenting performance measures,  milestones, and risks for these 2015 recommendations, once this  information is identified.", "Identifying and sharing performance measures, milestones, and risks  could aid DOD CIO in tracking and evaluating DOD\u2019s efforts to implement  the 2015 NC3 report recommendations. DOD CIO could improve its  efforts to track DOD\u2019s progress in addressing the recommendations by  identifying performance measures and milestones as part of the effort it  has initiated to expand on the content of its tracking spreadsheet. DOD  CIO could also use performance measures to evaluate the actions DOD  has taken and determine whether the actions have fully addressed the  root cause of the recommendation. DOD officials leading some of the  recommendation implementation efforts told us that a number of the  issues identified in the 2015 NC3 report stem from enduring problems.  These officials noted that an overemphasis on identifying easily attainable  performance measures and closing recommendations quickly may  improve the overall percentage of recommendations implemented but  also could result in underlying root causes continuing to go unaddressed.  Our prior work on performance measurement has identified several  important attributes\u2014such as the inclusion of baseline and trend data\u2014 that performance measures must have if they are to be effective in  monitoring progress and determining how well programs are achieving  their goals.", "Additionally, by identifying and communicating risks to NC3 stakeholders,  DOD leadership may be in a better position to formulate responses to  these risks\u2014including deliberately determining to accept the risk or take  steps to avoid, reduce, or share the risk across the defense nuclear  enterprise. Promoting the sharing of quality information on the status of  the recommendations and potential risks from the 2015 NC3 report  among the services and other DOD components with a role in NC3 could  help DOD to integrate its nuclear deterrent efforts and help decision  makers to formulate responses to any potential risks.", "The DOD CIO officials that we met with said that it will be important to  incorporate performance measures and milestones into their tracking and  evaluation process and to consider operational risk and its management  when discussing effects on the nuclear enterprise and its NC3 systems.", "The draft template that DOD CIO is developing, once it is finalized and  implemented, could aid the department in identifying performance  measures and milestones for these 2015 recommendations in the same  way that the centralized tracking tool CAPE developed has been used to  collect performance measures and milestones for the 2014  recommendations. In addition, including an assessment of risks  associated with the implementation of the recommendations from the  2015 NC3 report similar to the follow-up to the recommendations of the  2014 nuclear enterprise reviews could enhance DOD\u2019s ability to provide  oversight of the recommendations and make informed responses to  address any identified risks throughout its review processes, all the way  to their closure by the Oversight Council."], "subsections": []}]}]}, {"section_title": "DOD and the Military Services Have Implemented Recommended Changes to their Personnel Reliability Assurance Programs to Reduce Administrative Burdens", "paragraphs": ["DOD and the military services have implemented changes to their  personnel reliability assurance programs in response to 17  recommendations from the 2014 nuclear enterprise reviews. DOD has  identified nine essential elements of reliability and released updated  guidance to refocus personnel reliability on these elements. Additionally,  the Air Force has incorporated these nine essential elements into its  Arming and Use of Force program, allowing the Air Force to use this  program to ensure that its security forces meet nuclear surety  requirements. The Air Force has also created a new office within the Air  Force Personnel Center, the Personnel Reliability Program Administrative  Qualification Cell, to assist with the administrative review process for  personnel newly assigned to Personnel Reliability Program positions or  returning to Personnel Reliability Program positions after working  elsewhere. In response to both the personnel recommendations and the  inspections-related recommendations of the 2014 nuclear enterprise  reviews, the Joint Staff, the Navy, and the Air Force have made changes  to the procedures they use to conduct nuclear personnel reliability  inspections at nuclear facilities."], "subsections": [{"section_title": "DOD and the Military Services Have Altered Personnel Reliability Standards to Focus on Nine Essential Elements of Reliability", "paragraphs": ["In response to recommendations from the 2014 nuclear enterprise  reviews, the Joint Staff led a review of the department\u2019s guidance on the  personnel reliability assurance program. The Joint Staff, with the  assistance of the military services, identified nine elements from DOD\u2019s  personnel reliability assurance requirements that it considered essential  to ensure that personnel working with nuclear weapons fully met nuclear  surety standards of reliability and trustworthiness.", "These nine essential elements are that an individual must  1.  be a U.S. citizen  2.  have a security clearance and be reinvestigated every five years  3.  be fully qualified for the position in which he or she will serve  4.  have reliability verified by the commander before being assigned to a  Personnel Reliability Assurance Program position  5.  be continuously monitored by peers, supervisors, and commander for  issues that could affect reliability  6.  have his or her personnel file checked for issues that could affect  7.  undergo a medical evaluation to identify any conditions that could  8.  have a personal interview with the commander who will be assessing  9.  exhibit the character and competence to do the job, including  allegiance to the United States and a positive attitude toward nuclear  weapons  In response to the Joint Staff review, the Office of the Assistant Secretary  of Defense for Nuclear Matters, through the Office of the Under Secretary  of Defense for Acquisition, Technology and Logistics, issued a new  version of the Personnel Reliability Program manual in January 2015,  followed by a reissue and renaming of the overarching DOD instruction\u2014 changing the name to DOD Nuclear Weapons Personnel Reliability  Assurance\u2014in April 2016. This guidance requires that all DOD  personnel occupying positions subject to nuclear personnel reliability  assurance program standards must meet the nine essential elements of  reliability. Additionally, the revised guidance removed a procedure for  temporary decertification, which under the previous guidance was to  occur immediately on receipt of information that was, or appeared to be, a  reason for decertification. The manual also makes it clear that personnel  reliability assurance programs are the commanders\u2019 programs, and the  commander is exclusively accountable for determining the fitness for duty  of individuals subject to the program. The updated manual also provides  some clarity regarding requests for reinstatement by personnel who had  previously been decertified from the Personnel Reliability Program.", "The military services have responded to DOD\u2019s changes by updating their  own guidance. The Navy has released a new version of its department- specific Personnel Reliability Program manual, applicable to the Navy and  Marine Corps, and Army officials told us that the Army plans to release a  new version of its manual in early 2018. The Air Force has released a  new version of its Personnel Reliability Program manual, in addition to  other guidance changes.", "Specifically, in response to a provision in DOD\u2019s updated personnel  reliability guidance that authorizes the military departments to develop  reliability guidance specific to their security force personnel guarding  nuclear weapons, the Air Force has made changes to its Arming and Use  of Force program. Air Force Arming and Use of Force standards include  qualification requirements under which all Air Force security forces,  whether assigned to a nuclear facility or a non-nuclear facility, are  authorized to carry a weapon as part of their official duties. In addition, Air  Force nuclear security forces no longer require separate Personnel  Reliability Program certification, as they previously did. The 2014 nuclear  enterprise reviews determined that requiring nuclear security forces to  meet the standards of two reliability programs at the same time was  redundant. Air Force officials told us that utilizing the two reliability  programs caused manning problems for the Air Force, because the  availability of security force personnel qualified under both programs was  limited. As a result of the changes to DOD\u2019s guidance, the Air Force  rewrote its Arming and Use of Force guidance to incorporate a new  chapter that outlines procedures for assessing security forces against  each of the nine essential elements of reliability. This change has allowed  the Air Force to use its Arming and Use of Force program as its sole  method of establishing personnel reliability assurance for Air Force  security force personnel. The Air Force continues to use its Personnel  Reliability Program to certify nuclear operators and maintainers.", "Prior to the implementation of its new version of Arming and Use of Force  standards, the Air Force conducted an assessment of the new Arming  and Use of Force reliability standards as the sole standard for security  forces at six Air Force installations (four nuclear installations and two non- nuclear installations), to identify any gaps or areas for improvement of the  new guidance prior to its Air Force-wide implementation. The assessment  found that the new Arming and Use of Force standard adequately  addressed the nine essential elements required of a personnel reliability  assurance program, streamlined monitoring of security forces for  commanders by merging the Arming and Use of Force standards with the  Air Force Personnel Reliability Program standards, and held the security  force personnel to a higher standard to perform armed duty. The Air  Force fully implemented its new version of Arming and Use of Force  standards across the service in February 2016.", "As a result of the Air Force\u2019s changes to its Arming and Use of Force  guidance, Air Force security forces are now qualified to serve at nuclear  facilities and do not need to certify under the Personnel Reliability  Program (see fig. 5). Air Force officials told us that requiring security  forces to qualify under Arming and Use of Force standards had helped to  address manning challenges among nuclear security forces, as well as  allowing the Air Force to move experienced security forces personnel  from non-nuclear facilities to nuclear assignments. According to several  Air Force officials in command of security forces at non-nuclear  installations, the changes to the Arming and Use of Force guidance have  led to a slight increase in administrative work but have been an overall  positive development, in part due to improvements in communication with  medical personnel about factors that may affect a determination that an  airman should not be armed.", "All Air Force security force personnel are required to meet the standards  of Arming and Use of Force to carry a firearm and perform many of their  duties. The Air Force implemented the new version of the Arming and  Use of Force standards in 2016. According to Air Force officials, during  the implementation, the Air Force decided that security force personnel  who were, at that time, disqualified or permanently decertified under the  Personnel Reliability Program would not be allowed to certify under the  new version of Arming and Use of Force until they had been restored to  eligibility for the Personnel Reliability Program. In early 2016, the Air  Force conducted a review of 3,167 security force personnel who had  previously been decertified or disqualified from the Personnel Reliability  Program. The Air Force determined that 2,628 of these personnel were  able to attain Personnel Reliability Program eligibility during this review,  while 539 were not. Because qualifying under the new version of Arming  and Use of Force is now a positional requirement, Air Force officials  noted that those who do not qualify must retrain for a different job or  separate from the Air Force. Air Force officials told us that the security  forces career field received a greater number of new security forces  personnel than they had been allocated in previous years to account for  the loss of personnel who were unable to qualify under the new Arming  and Use of Force standards.", "The Air Force tracks metrics from the Personnel Reliability Program and  from the Arming and Use of Force program on an annual basis. Air Force  officials told us that they have not yet reviewed the extent to which the  changes to Arming and Use of Force made in February 2016 have been  effective. Air Force and DOD officials told us that they are waiting until  sufficient data are available before making additional changes to the  guidance for their personnel reliability assurance program. The Air Force  is currently developing a nuclear enterprise health assessment, which will  include further assessment of the effects of the changes the Air Force has  made to its Personnel Reliability Program and Arming and Use of Force  guidance. Air Force officials told us that data collection for this  assessment began in the spring of 2017 and that the first summary report  will be released in September-October 2017. Once implemented, this Air  Force nuclear health assessment will provide an overarching assessment  on a periodic basis, similar to a biennial assessment that the Navy  conducts of the Navy nuclear enterprise.", "Unlike the Air Force, the Navy and the Army have opted not to develop  separate guidance on nuclear personnel reliability assurance for their  security forces personnel. Navy and Army officials told us that there was  no reason to create separate guidance for their security forces personnel  because, unlike the Air Force, they have not faced manning challenges or  administrative burdens related to these positions. The Air Force has a  much larger nuclear security force, and personnel transfer between  nuclear and non-nuclear facilities more frequently within the Air Force  than the other services. The Navy fills security forces positions at the two  Navy nuclear facilities with Navy and Marine Corps personnel who report  directly from training. According to a Marine Corps official, once these  personnel move on to non-nuclear assignments, they generally do not  return to nuclear security positions. Army officials told us that their nuclear  security forces are highly specialized, very few in number, and serve at  only one facility."], "subsections": []}, {"section_title": "The Air Force Has Created a Personnel Reliability Program Administrative Qualification Cell to Facilitate the Assignment Process for Personnel New to Personnel Reliability Program Positions", "paragraphs": ["The Air Force has taken additional steps to improve the Personnel  Reliability Program by creating the Air Force Personnel Reliability  Program Administrative Qualification Cell to aid with the review of non- security force personnel (e.g., operations personnel, maintenance  personnel) as they transition into Personnel Reliability Program positions.  Personnel transferring into these positions are subject to an  administrative qualification process, which includes a review of their  personnel file, medical information, and security clearance information as  well as an interview by the new, gaining, commander to assess them for  factors that affect their reliability.", "Prior to October 2015, the commander for the unit that the individual was  leaving reviewed the individual\u2019s administrative paperwork and then  provided an assessment of the individual\u2019s reliability under the Personnel  Reliability Program standards to the commander of the gaining unit.  Because this initial review was often conducted by commanders outside  of the nuclear field, they had less experience than nuclear commanders in  conducting such an assessment. According to Air Force officials, this lack  of experience often resulted in the standards being applied either too  stringently or too loosely and the initial reviews often being completed  late. Additionally, although Air Force guidance indicated that personnel  transferring directly from one Personnel Reliability Program position to  another were not required to undergo administrative qualification, one of  the 2014 nuclear enterprise reviews found that some administrative file  reviews were occurring.", "As of November 2016, the Air Force Personnel Reliability Program  Administrative Qualification Cell has been staffed by personnel  experienced with the standards, and they assist in conducting reviews of  many of the Air Force personnel moving to nuclear assignments. The cell  performs the administrative review formerly conducted by the commander  of the individual\u2019s losing unit and provides a recommendation to the  commander of the gaining unit before that commander makes an  assessment (see fig. 6).", "As a result, according to Air Force officials, the qualification process is  now completed more quickly, and the administrative burden on  commanders has been lessened. Officials from the Air Force Personnel  Center told us that the Personnel Reliability Program Administrative  Qualification Cell was currently assisting all Air Force Major Commands  but had not yet begun working with all Personnel Reliability Program  units.", "In addition, in response to a recommendation from the 2014 nuclear  enterprise reviews, the Air Force has eliminated administrative reviews  that some commands were conducting of personnel transferring directly  from one Personnel Reliability Program position to another, but which  were not required in the Air Force\u2019s guidance. These personnel have  remained subject to continuous monitoring, so they do not require new  administrative qualification reviews."], "subsections": []}, {"section_title": "DOD, the Air Force, and the Navy Have Made Changes to the Inspections Processes for Their Personnel Reliability Programs", "paragraphs": ["DOD, the Air Force, and the Navy also made changes to their nuclear  inspections processes in response to the 2014 nuclear enterprise  reviews. Nuclear units are subject to a number of different inspections.  For example, Joint Staff guidance requires that each of the services  conduct Nuclear Weapon Technical Inspections biennially at each of their  nuclear units. These inspections are intended to examine every aspect  of the nuclear mission at that unit, including the processes of the  personnel reliability assurance program. Because of the importance of  maintaining nuclear surety by keeping nuclear weapons safe and secure,  units that receive an unsatisfactory rating on an inspection may be  decertified from conducting operations or have a portion of their nuclear  capabilities withdrawn and retain only a limited nuclear capability in  mission areas that would not jeopardize the safety, security, or reliability  of the nuclear weapons.", "The 2014 nuclear enterprise reviews found that inspections of nuclear  forces occurred too frequently, and that the procedures for inspections of  personnel reliability assurance programs had become overly burdensome  because of their focus on records review. The reviews found that, as a  result, these personnel reliability assurance programs had become  dominated by processes that were intended to prepare for inspections,  rather than to ensure personnel reliability. Before the 2014 nuclear  enterprise reviews, DOD personnel working with nuclear weapons were  subject to frequent inspections by multiple organizations. According to  DOD officials, Air Force major commands and Navy commands were  performing inspections at nuclear units under their control every 18  months. One such inspection was conducted as a combined military  service and Defense Threat Reduction Agency inspection. Each service  inspected additional specific areas. For Navy units, the Navy inspectors  would accept the Defense Threat Reduction Agency inspection report and  the Navy inspectors would review additional, service-specific items; this  resulted in a larger number of inspectors present. For Air Force units, the  combined inspection was performed concurrently, with the Air Force  inspecting the same items as the Defense Threat Reduction Agency  inspectors as well as reviewing additional, service-specific items; this  resulted in two separate inspection teams. The 2014 nuclear enterprise  reviews found that a mistake by a single individual could result in an  entire submarine or wing receiving an unsatisfactory rating\u2014even in  cases not involving a clear, critical error\u2014potentially leading to the  withdrawal of their nuclear weapons capabilities. The Independent  Review of the Department of Defense Nuclear Enterprise found that the  high frequency of inspections resulted in nuclear units spending  significant time preparing for inspections rather than focusing on  performing their mission.", "The Independent Review of the Department of Defense Nuclear  Enterprise also stated that the portions of these inspections concerned  with the personnel reliability assurance program were heavily focused on  records review, especially at Air Force nuclear units. During each  inspection, inspectors would review hundreds of personnel files and  medical records to assess whether the commander and medical staff had  made the correct decision in determining an individual to be reliable. Air  Force officials told us that commanders and their medical staffs could be  found deficient for improperly certifying individuals as reliable even if  these individuals had been able to perform their duties without any  issues\u2014for example, after routine medical procedures like a regular  check-up with an eye doctor. As a result, commanders and medical staff  at these units implemented additional procedures beyond those outlined  in DOD guidance, such as temporarily suspending personnel from  Personnel Reliability Program duties for every off-base medical  appointment regardless of whether it could affect their reliability.  Additionally, according to the Internal Assessment of the Department of  Defense Nuclear Enterprise, inspectors also cited minor administrative  deficiencies that were unrelated to personnel reliability, such as using the  improper color of ink to fill out a form.", "To address the recommended improvements identified by the 2014  nuclear enterprise reviews, DOD has updated its inspection procedures.  The Joint Staff has updated the Nuclear Weapons Technical Inspections  guidance to reduce the frequency of inspections at nuclear units from  every 18 months to every 24 months. DOD\u2019s Defense Threat Reduction  Agency no longer conducts joint inspections with the services but is  responsible for providing oversight of the services\u2019 inspectors on behalf of  the Chairman of the Joint Chiefs of Staff. For the portion of the  inspection concerned with personnel reliability assurance, the updated  guidance de-emphasizes records reviews in favor of focusing on  processes and procedures through observation, interviews, and scenario- based discussions. The Navy and the Air Force have also updated their  inspection procedures to implement these changes in DOD\u2019s guidance.  For example, Air Force inspectors do not conduct records checks unless  the interviews and scenario-based discussions reveal a lack of procedural  knowledge. Similarly, Navy officials stated that Navy inspectors review  additional records as needed if a lack of procedural knowledge is  revealed. To aid the Navy in assessing the overall effectiveness of the  updated inspection procedures, the Navy has opted to also review a  sample of the health records of personnel recently certified or reinstated  into the Personnel Reliability Program.", "According to Air Force officials at one nuclear wing that had recently  undergone a Nuclear Weapons Technical Inspection, the changes to  inspection procedures for their personnel reliability assurance programs  that DOD and the Air Force have implemented have had a positive effect.  These officials stated that the increased use of scenario-based  discussions and knowledge checks, combined with inspectors taking a  less adversarial and more conversational discussion approach to their  inspection inquiries, has resulted in an environment where personnel feel  more comfortable self-disclosing problems or mistakes, and where the  focus of the inspection is on process improvement rather than on  identifying administrative errors, independent of whether the errors were  substantive deficiencies."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD has taken steps to improve the defense nuclear enterprise in  response to the 2014 nuclear enterprise reviews and the 2015 NC3  report. The processes CAPE has developed to track and evaluate  continuing progress to improve the defense nuclear enterprise\u2014including  changes in DOD\u2019s and the military services\u2019 approaches to administering  their personnel reliability assurance programs\u2014provide a good  framework for continually monitoring the department\u2019s efforts. This  framework is also a good example of how similar efforts to implement and  oversee actions on department-wide improvements on a wide range of  subjects could be made effectively. By developing additional guidance to  identify and document risks associated with implementing the  recommendations from the 2014 nuclear enterprise reviews and  identifying and communicating performance measures, milestones, and  risks for the 2015 NC3 report recommendations, the department\u2014 particularly through the NDERG and the Oversight Council for NC3\u2014 would be better positioned to ensure that progress continues to be made,  underlying problems are addressed, and risks are mitigated or accepted  after considering the predictable and desirable results."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  CAPE, in coordination with the military departments and other DOD  entities serving as offices of primary responsibility for implementing the  recommendations, develop additional guidance for these offices to  identify associated risks and document information about these risks in  the centralized tracking tool. (Recommendation 1)", "DOD CIO\u2014in coordination with CAPE, the military departments, Joint  Staff, and U.S. Strategic Command\u2014as the draft template and any other  additional tools to aid in their approach are finalized, identify and  communicate to NC3 stakeholders performance measures and  milestones to assist in tracking the progress of implementation of the  recommendations from the 2015 NC3 report and evaluating the outcomes  of implementation actions, and risks associated with the implementation  of the recommendations from the 2015 NC3 report. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the classified report to DOD for comment. In its  comments, reproduced in appendix I, DOD concurred with both of our  recommendations. In response to our first recommendation, DOD  indicated that the Director, CAPE, will issue supplementary guidance for  the relevant DOD components to identify and document key risks related  to implementation of recommendations from the 2014 reviews, risks  related to implementation of alternate approaches, and potential  unintended consequences. In response to our second recommendation,  DOD stated that DOD CIO will work with the stakeholders of the Council  on Oversight of the National Leadership Command, Control, and  Communications System to identify and document performance  measures and milestones associated with progress toward the  recommendations from the 2015 NC3 report, as well as the risks related  to implementation of these recommendations. We are encouraged that  DOD is planning to take these actions and believe that, once they have  been completed, the department will be better positioned to ensure that  progress in implementing the recommendations from both the 2014  nuclear enterprise reviews and the 2015 NC3 report continues to be  made, underlying problems within the defense nuclear enterprise are  addressed, and risks are mitigated or accepted after deliberate  consideration. DOD also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, and to the Secretary of Defense; the Under Secretary of  Defense for Acquisition, Technology, and Logistics; the Chairman of the  Joint Chiefs of Staff; the Secretaries of the Army, of the Navy, and of the  Air Force; the Commandant of the Marine Corps; the Commander, U.S.  Strategic Command; the Department of Defense Chief Information  Officer; and the Director of the Office of Cost Assessment and Program  Evaluation. 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) 512-9971 or KirschbaumJ@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Penney Harwell Caramia, Assistant Director; Chris Cronin; R. Scott  Fletcher; Jonathan Gill; Brent Helt; Douglas Hunker; Joanne Landesman;  Marc Molino; Amie Lesser; Pamela Davidson; and Michael Shaughnessy."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Nuclear Weapons Sustainment: Budget Estimates Report Contains More  Information than in Prior Fiscal Years, but Transparency Can Be  Improved. GAO-17-557. Washington, D.C.: July 20, 2017.", "Nuclear Weapons: DOD Assessed the Need for Each Leg of the Strategic  Triad and Considered Other Reductions to Nuclear Force. GAO-16-740.  Washington, D.C.: September 22, 2016.", "Defense Nuclear Enterprise: DOD Has Established Processes for  Implementing and Tracking Recommendations to Improve Leadership,  Morale, and Operations. GAO-16-597R. Washington, D.C.: July 14, 2016.", "Nuclear Weapons Sustainment: Improvements Made to Budget Estimates  Report, but Opportunities Remain to Further Enhance Transparency.  GAO-16-23. Washington, D.C.: December 10, 2015."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-109", "url": "https://www.gao.gov/products/GAO-19-109", "title": "National Guard: Office of Complex Investigations Should Update Policies to Require Additional Documentation for Sexual Assault Cases", "published_date": "2018-12-12T00:00:00", "released_date": "2018-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Sexual assault incidents involving military service members can devastate victims and have far reaching impacts for DOD due to the potential for these crimes to undermine the department's core values, degrade mission readiness, and raise financial costs.", "The National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review, among other things, the purpose and structure of OCI and its adherence to policies. This report (1) describes OCI's services and budgetary and staffing resources; and (2) evaluates OCI's policies for investigations and internal controls to ensure its policies are consistently followed. GAO analyzed OCI policy, budget, and staffing documents and interviewed OCI, DOD, Army, and Air Force officials. GAO also interviewed National Guard officials and analyzed case files for select years from a nongeneralizable sample of five states."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Guard Bureau's (NGB) Office of Complex Investigations (OCI) was established in 2012 to conduct administrative investigations into allegations of sexual assault that are not criminal in nature and are conducted only when criminal law enforcement entities, such as military criminal investigative organizations or local civilian law enforcement, have declined or do not have jurisdiction to investigate and a National Guard nexus has been identified. Since 2013, OCI has completed approximately 380 investigations of allegations of sexual assault at the request of state National Guard officials and 5 assessments of state National Guard units to review the current culture, policies, and practices for the handling of sexual assault, among other things. State National Guard officials told GAO that OCI provides the states with an unbiased or impartial third-party review of reported incidents of sexual assault. OCI is primarily funded through amounts made available for the Sexual Assault Special Victims' Counsel Program in the Department of Defense's (DOD) annual defense-wide Operation and Maintenance appropriation. This funding has increased from approximately $1.4 million in fiscal year (FY) 2014 to almost $5 million in FY 2018; which OCI officials attributed to increasing demands for OCI's services. OCI uses trained National Guard members temporarily assigned to the office as investigators.", "NGB guidance establishes OCI investigation policies and OCI has implemented controls to help ensure key policies are followed. However, OCI has inconsistently documented how case acceptance criteria have been met. GAO's analysis of a sample of 27 case files from 5 states from FY 2016 and FY 2017 found that OCI generally adhered to key investigation policies. For example, in accordance with its policies, in all 27 case files GAO reviewed, OCI had included the state National Guard's requests to initiate an OCI investigation and executive summaries explaining OCI's determination of whether or not the allegation was substantiated. Furthermore, NGB has established two case acceptance criteria\u2014specifically that a National Guard nexus exists and that coordination with at least one criminal investigative organization occurred. According to OCI officials, state National Guard officials are to verify these criteria are met before submitting requests for OCI to initiate an investigation of sexual assault. NGB has developed a template with standardized language that includes these criteria that the states should use. While OCI's case files included the request letters with standardized language from state National Guards indicating the state National Guard staff had determined the case acceptance criteria were met, they did not consistently include supporting documentation to verify how the case acceptance criteria were met. This is because NGB policy does not require such documentation to be included in OCI's case files. Without such documentation, OCI does not have reasonable assurance that the cases it accepts for investigation adequately meet the two criteria for case acceptance."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD require OCI to include supporting documentation in case files to verify a National Guard nexus exists and referral to the appropriate law enforcement organization occurs. DOD concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Sexual assault incidents involving military service members can  devastate victims and can have far reaching impacts for the Department  of Defense (DOD) due to the potential for these crimes to harm an  individual\u2019s well-being, undermine the department\u2019s core values, degrade  mission readiness, and cause increased financial costs. The National  Guard Bureau (NGB) established the Office of Complex Administrative  Investigations (OCI) in 2012 to conduct administrative investigations\u2014primarily allegations of sexual assault\u2014involving National Guard  members which the military justice system or local law enforcement  cannot or will not investigate. Specifically, OCI helps fill a gap by  addressing cases involving National Guard members who (1) are not  subject to the Uniform Code of Military Justice; (2) were not investigated  by a military criminal investigative organization due to the lack of  jurisdiction; (3) were declined a criminal investigation by civilian law- enforcement organizations; or (4) were not sufficiently investigated by the  civilian law enforcement agency with jurisdiction. While OCI does not  conduct criminal investigations, OCI\u2019s administrative investigations are  intended to provide the Adjutants General with sufficient information to  take administrative actions as appropriate to maintain good order and  discipline within their National Guard units.", "In February 2017, we reported that the timeliness of investigations was a  challenge for OCI and that 57 percent of investigations conducted in fiscal  year 2015 took 6 to 9 months to complete. We recommended that the  Chief of the NGB, in collaboration with the secretaries of the military  departments, as appropriate, reassess OCI\u2019s timeliness and resources to  determine how to improve the timeliness of processing sexual assault  investigations involving members of the Army National Guard, and  identify the resources needed to improve the timeliness of these   investigations. DOD agreed with our recommendation. We provide  additional details about OCI\u2019s backlog of investigations later in this report.", "The National Defense Authorization Act for Fiscal Year 2018 included a  provision that we review the purpose and structure of OCI, its adherence  to guiding policies, and the criteria and legal authority under which it  conducts investigations. This report (1) describes the services OCI  provides and the budgetary and staffing resources used by the office; and  (2) evaluates the extent to which OCI has policies for its sexual assault  investigations and internal controls to ensure its policies, including criteria  for case selection, are consistently followed.", "For our first objective, we reviewed NGB and OCI documents and  interviewed OCI, DOD, and state National Guard officials to identify the  services provided by OCI. We reviewed OCI\u2019s budget data and  information\u2014including how the office is funded\u2014and documentation of  the office\u2019s organizational structure and staffing for fiscal years 2014  through 2018. We also interviewed relevant officials to determine the  budgetary and staffing resources used by the office. In order to assess  the reliability of OCI\u2019s investigations and budget data, we interviewed  knowledgeable officials within OCI about the controls the office uses to  ensure the validity and reliability of the data. We conducted testing of the  data, which included comparing OCI\u2019s budget numbers with those  received from DOD and the NGB Joint Staff for consistency, errors, and  logic. We also interviewed officials in the Office of the Secretary of  Defense\u2019s Sexual Assault Prevention and Response Office (SAPRO),  coordinated with officials from the NGB Joint Staff, and obtained  corroborating information to further support our data reliability  determination. We determined the budget data related to the amount of  funding OCI received for fiscal years 2014 through 2018 were sufficiently  reliable for reporting and attributing these data to OCI. We were unable to  determine the reliability of the discretionary funding OCI received, and  therefore did not include these in our report. We also interviewed OCI  officials about the steps the office takes to help ensure the reliability of its  data on the number of completed investigations. We determined that the  data on the number of investigations OCI had completed as of September  7, 2018, were sufficiently reliable for reporting and attributing these data  to OCI.", "For our second objective, we analyzed current and previous versions of  Chief of the NGB guidance to determine key policies for OCI  investigations and controls the office has in place. Primary among these  are Chief National Guard Bureau Instruction (CNGBI) 0400.01B, National  Guard Complex Administrative Investigations (the NGB Instruction) and  Chief National Guard Bureau Manual (CNGBM) 0400.01A, National  Guard Complex Administrative Investigations Procedures (the NGB  Manual). We also interviewed OCI, NGB, and DOD officials to identify  the criteria OCI established for determining which investigations and  assessments to conduct and evaluated their efforts to determine whether  they met federal internal control standards, including that management  should design appropriate types of control activities to achieve the entity\u2019s  objectives, such as conducting top-level reviews, assigning  responsibilities, and using quality information, as well as the need for  documentation. We interviewed Army Criminal Investigation Command,  Air Force Office of Special Investigations, and NGB officials about  jurisdiction and legal authorities related to criminal and administrative  investigations of reported allegations of sexual assault involving National  Guard members. We also interviewed National Guard state officials and  reviewed a sample of 27 case files from five states for fiscal years 2016  and 2017. We selected these states based on the following criteria: (1)  the number of cases the states had referred to OCI, including states with  a low and high number of cases; (2) the size of the state\u2019s National Guard  population, both large and small member populations; and (3) geographic  dispersion across the five census regions. We reviewed these case files  for documentation and other evidence and compared them with a  selection of key OCI policies to determine the extent to which the office is  following those policies for the select case files we reviewed.", "We identified policies as key based on whether the policy met specific  criteria, including whether (1) adherence to the policy was measurable in  some way, for example, written documentation was produced; (2) the  policy was relevant to the reporting requirements of our statutory  mandate; (3) the policy was deemed essential to each phase of the  investigation; (4) compliance data or information was available and could  be shared with GAO in a timely manner; and (5) the policies were  determined to be generally consistent across the 2012 and 2018 versions  of OCI\u2019s policy documents, with a few exceptions for policies that were  relevant to our mandate or essential to the investigative process. We  evaluated the 27 case files against these selected key policies to  determine if OCI followed these policies in our sample of OCI  investigation case files. Our findings from these case files are provided  solely as illustrative examples and are not generalizable to all of OCI\u2019s  investigations, to the other states and territories, or to investigations  conducted in the states we sampled any time before 2016 or after 2017.", "We conducted this performance audit from March 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The National Guard\u2019s Organizational Structure and Mission", "paragraphs": ["The National Guard consists of the NGB\u2014which includes the Office of the  Chief, National Guard Bureau; the National Guard Joint Staff; the Office  of the Director, Army National Guard; the Office of the Director, Air  National Guard\u2014and the National Guard units, which are located in the  50 states, 3 U.S. territories, and the District of Columbia. Figure 1  illustrates the organizational structure of the National Guard.", "The National Guard has both a federal- and state-level mission. The  National Guard\u2019s federal mission is to (1) maintain well-trained and well- equipped units that are ready to be mobilized by the President of the  United States during war or international peacekeeping efforts, and (2)  provide assistance during national emergencies, such as natural  disasters or civil disturbances. The National Guard\u2019s state-level mission is  to (1) protect life and property and preserve peace, order, and public  safety, and (2) provide emergency relief support during local or statewide  emergencies, such as riots, earthquakes, floods, or terrorist attacks. The  National Guard\u2019s state-level mission is executed under the control of state  and territory governors, and for the District of Columbia, the President.", "Reflecting the National Guard\u2019s federal and state roles, National Guard  members may function under one of three command statuses:", "Title 10. When performing duty under the authority of Title 10 of the  United States Code (Title 10 status), National Guard members are  under the command and control of the President and are federally  funded. When operating in Title 10 status, National Guard members  are subject to the Uniform Code of Military Justice.", "Title 32. When performing duty under the authority of Title 32 of the  United States Code (Title 32 status), National Guard members are  under the command and control of the governors, but are federally  funded. For example, past missions have included providing security  at the nation\u2019s airports in the immediate aftermath of the September  11, 2001 terrorist attacks and assisting the Gulf Coast in the aftermath  of Hurricane Katrina. While operating in Title 32 status, National  Guard members are not subject to the Uniform Code of Military  Justice, but, according to OCI officials, may be subject to a state code  of military justice enacted by the state legislature.", "State Active Duty. When performing duty in State Active Duty status,  National Guard members are under command and control of the  governors and are state funded. When operating in State Active Duty  status, National Guard members are not subject to the Uniform Code  of Military Justice.", "When performing their state-level mission, National Guard units within a  state, territory, or the District of Columbia report to a state-level senior  officer known as the Adjutant General, who in turn reports to either a state  or territorial governor, or for the District of Columbia, the President (as  Commander-in-Chief). The Adjutant General coordinates with the NGB\u2019s  Army or Air National Guard, as appropriate, on such matters as staffing  and unit readiness. The Army and Air National Guard in turn coordinate  with Army and Air Force staff, respectively."], "subsections": []}, {"section_title": "The Office of Complex Investigations", "paragraphs": ["OCI was established in 2012 by the Chief of the NGB to perform complex  administrative investigations at the request of the Adjutants General of  the 50 states, the three territories, and the District of Columbia, or at the  direction of the Chief of the NGB. OCI\u2019s primary purpose is to provide  the state National Guards with the capability to administratively  investigate reports of sexual assault having a National Guard nexus when  the reports fall outside the jurisdiction of military criminal investigative  organizations and are not sufficiently investigated by civilian law  enforcement. OCI\u2019s secondary purpose is to administratively investigate  other complex matters as assigned, one of which is a state assessment.  The types of investigations conducted by OCI are further described later  in this report.", "Congress designated the Chief of the NGB as (1) the senior military  officer responsible for the organization and operations of the NGB and (2)  the principal advisor on National Guard matters to the Secretary of  Defense through the Chairman of the Joint Chiefs of Staff, as well as to  the Secretary and Chief of Staff of the Army, and Secretary and Chief of  Staff of the Air Force. Further, a DOD directive states that one function  of the NGB is to monitor and assist states in the organization,  maintenance, and operation of National Guard units so as to provide well- trained and well-equipped units capable of augmenting the active  forces. OCI officials stated that the Chief of the NGB has the authority to  investigate matters in order to support the above statutory and regulatory  obligations and authorities. Moreover, a DOD instruction makes clear that  DOD components without law enforcement authority, like the NGB, have  the authority to conduct only administrative investigations.", "The NGB Instruction states that the Chief of OCI specifies the requisite  education, training, and experience for appointing an investigator to OCI  and for assigning investigators to conduct a specific investigation.  According to OCI officials, investigators are initially selected based on  their analytical and investigatory skills, as well as their experience and  understanding of the civilian and military criminal justice systems. OCI  officials stated that investigators are required to complete an initial two-  week training course conducted by the U.S. Army Military Police School,  followed by three days of orientation conducted by OCI. OCI officials  stated that investigators are also offered additional training opportunities  throughout the year, including annual refresher training and professional  development training."], "subsections": []}, {"section_title": "DOD\u2019s Sexual Assault Prevention and Response Program", "paragraphs": ["In response to statutory requirements, in 2005, DOD established its  Sexual Assault Prevention and Response Program to promote the  prevention of sexual assault, encourage increased reporting of such  incidents, and improve victim response capabilities. DOD\u2019s program  allows servicemembers to make a restricted or unrestricted report of  sexual assault. DOD\u2019s restricted reporting option is designed to allow  sexual assault victims to confidentially disclose an alleged sexual assault  to selected individuals without initiating an official investigation and to  receive medical and mental health care. DOD\u2019s unrestricted reporting  option triggers an investigation by a military criminal investigative  organization, such as the Army Criminal Investigation Command or the  Air Force Office of Special Investigations. DOD\u2019s directive for its Sexual  Assault Prevention and Response Program delegates authority to the  Chief of the NGB for implementing policy and procedures for the program  as it applies to National Guard members in Title 32 status."], "subsections": []}]}, {"section_title": "OCI Conducts Administrative Investigations of Sexual Assault and State Assessments, Receives Funds from DOD\u2019s Sexual Assault Program, and Uses Temporarily Assigned Investigators", "paragraphs": ["OCI conducts administrative investigations of reports of sexual assault, in  addition to state assessments of state National Guard units. OCI is  funded through appropriations made available for DOD\u2019s Sexual Assault  Special Victims\u2019 Counsel Program. Moreover, OCI is staffed with  temporarily assigned National Guard members as investigators."], "subsections": [{"section_title": "OCI Conducts Administrative Investigations of Sexual Assault and Assessments of State National Guard Units", "paragraphs": ["Since its inception, OCI has primarily conducted administrative  investigations of unrestricted reports of sexual assault, in addition to a  smaller number of state assessments. Since 2013, OCI has completed  approximately 380 administrative investigations of sexual assault and 5  state assessments, as shown in figure 2. The National Guard reported  to Congress in 2018 that OCI has experienced a 350 percent increase in  requests for assistance from fiscal year 2014 to fiscal year 2017; and 53  of the 54 states and territories have requested OCI support during this  period.", "OCI\u2019s sexual assault investigations are conducted at the request of the  Adjutants General and are intended to provide the Adjutants General with  information to make administrative decisions. Figure 3 describes the OCI  process for accepting sexual assault cases.", "Based on its investigation, OCI provides a report to the state National  Guard that includes the findings resulting from the investigation and  identifies whether OCI has found the allegation to be substantiated.  OCI\u2019s reports resulting from its sexual assault investigations do not  include recommendations for action. Rather, the Adjutant General can  use the report as the basis to determine whether and what type of  administrative action should be taken. Such administrative actions may  include a letter of reprimand, administrative separation, or other  appropriate administrative remedy.", "OCI may also conduct a state assessment at the request of a state  official, such as the Adjutant General or Governor. Each state  assessment reflects the informational needs of the requesting official.  According to NGB policy, the office will generally not conduct an  assessment into criminal matters, and the assessment will also not  include investigations of unrestricted reports of sexual assault. According  to OCI officials, state assessments generally involve matters that are  widespread issues and may adversely affect the good order and  discipline of the National Guard, such as hostile work environment or  concerns regarding a state Guard\u2019s approach to sexual assault  prevention and response. At the conclusion of an assessment, OCI  provides a report to the requesting official that may include recommended  actions to address problems identified as a result of the assessment.", "In addition, according to OCI officials, the Chief of the NGB has the  authority to direct inquiries into matters affecting the good order of the  National Guard. OCI officials stated that OCI has the capacity to conduct  inquiries at the direction of the Chief of the NGB and which are not  performed at the request of a state official. For example, according to  OCI officials, in 2014, the Chief of the NGB directed OCI to conduct an  inquiry to evaluate the fiscal stewardship of the National Guard. National  Guard officials stated that this was the only inquiry of this kind that the  office has performed. Adjutants General and their staffs stated that OCI  provides the states with an unbiased or impartial third-party review of  reported incidents of sexual assault. Officials from one state stated that  they could not identify an alternative entity that could provide this service  if OCI did not exist."], "subsections": []}, {"section_title": "OCI Is Funded through Appropriations Made Available by Congress for DOD\u2019s Sexual Assault Special Victims\u2019 Counsel Program", "paragraphs": ["OCI is primarily funded through amounts made available by Congress for  transfer to the services for the Sexual Assault Special Victims\u2019 Counsel  Program in annual Operation and Maintenance, Defense-wide (O&M,  Defense-wide) appropriations. According to OCI officials, the office  estimates its annual budgetary needs based on an analysis of prior fiscal  year\u2019s case load and expected personnel, travel, and training costs in the  upcoming fiscal year. OCI, along with the National Guard\u2019s Special  Victims\u2019 Counsel Program, submits its budget requirements to DOD  SAPRO. SAPRO then submits a consolidated request for inclusion in  DOD\u2019s overall budget request. According to OCI and DOD officials, OCI  does not receive its allotment of transferred amounts until late in the fiscal  year. When the transferred amounts are received into Army and Air  National Guard O&M and Military Personnel accounts, amounts initially  allotted for OCI are reprogrammed to other activities that supported OCI  earlier in the fiscal year.", "OCI\u2019s overall funding has increased since 2014. According to an OCI  official, the funding increase has been in response to increasing requests  for OCI\u2019s services by the states and territories. Specifically, in fiscal year  2014, OCI funding was approximately $1.4 million, and by fiscal year  2018 total funding was almost $5 million. Figure 4 shows OCI\u2019s funding  levels from fiscal year 2014 through fiscal year 2018.", "According to the NGB\u2019s 2018 manual, the NGB Joint Staff is responsible  for coordinating funding for OCI\u2019s state assessments. OCI officials said  that costs related to state assessments may be funded through available  NGB O&M amounts. However, the officials also said that OCI does not  track its expenditures related to state assessments separately from those  related to its sexual assault investigations.", "According to OCI officials, OCI does not receive reimbursement from the  states and territories for the cost of its investigations. OCI officials further  stated that OCI investigators are part of the federal oversight of the  federally recognized and funded units and members of the State National  Guards. As such, states do not reimburse DOD for the cost of  investigations performed by OCI. According to an OCI briefing document,  a benefit of the office is its ability to conduct sexual assault investigations  for the states which alleviates the need for Adjutants General to choose  between funding such investigations versus other mission needs."], "subsections": []}, {"section_title": "OCI Investigators Are Temporarily Assigned National Guard Members", "paragraphs": ["According to the National Guard\u2019s 2018 Report to Congress, OCI  primarily relies on National Guard members staffed temporarily to the  office as investigators to conduct its sexual assault investigations and  state assessments. The report stated that, since fiscal year 2015, OCI  has used active duty operational support (ADOS) orders to maintain a  staff of National Guard members, including between 22 and 28  investigator positions and 4 administrative and support positions. That  report further stated that in fiscal year 2018, OCI hired one additional full-  time Active Guard Reserve enlisted position and one Department of the  Army civilian position. According to OCI officials, the office\u2019s investigative  staff consists primarily of individuals with legal or law enforcement  experience. See appendix I for more information on the organizational  structure of OCI.", "In its 2018 Report to Congress, the National Guard stated that, of those  OCI staff serving on ADOS orders, more than half serve in their position  for one year or less, which was a contributing factor to longer  investigative timelines and a backlog of requests for investigation. In  February 2017, we found that the timeliness of investigations was a  challenge for OCI and that 57 percent of investigations conducted in fiscal  year 2015 took 6 to 9 months from the time a case was referred until the  investigation was completed. We made a recommendation that the Chief  of the NGB reassess OCI\u2019s timeliness and resources and identify the  resources needed to improve the timeliness of these investigations.", "As of October 2018, the Office of the Chief Counsel has taken some  steps to address this recommendation, which according to OCI officials include, for example, starting to develop a strategic plan to address the  office\u2019s long term staffing and funding needs. In its 2018 Report to  Congress, the National Guard stated that OCI\u2019s current manning and  resourcing strategy of one-year ADOS tours, coupled with unprogrammed  funding, impairs the office\u2019s ability to recruit and sustain a stable,  experienced workforce, resulting in longer investigation timelines and a  growing backlog of requests for assistance which OCI struggles to  meet. According to the National Guard\u2019s 2018 Report to Congress,  OCI\u2019s backlog of investigation requests grew from 7 cases in fiscal year  2014 to 55 in fiscal year 2017. According to OCI officials, the office  continued to experience a backlog in fiscal year 2018."], "subsections": []}]}, {"section_title": "OCI Has Policies for Sexual Assault Investigations and Controls to Help Ensure Key Policies Are Followed, but Has Inconsistently Documented How Case Acceptance Criteria Are Met", "paragraphs": ["NGB guidance establishes policies for OCI\u2019s investigations, and OCI has  implemented internal controls to help ensure it follows key policies. NGB  guidance also establishes two criteria that allegations of sexual assault  must meet for OCI to begin an investigation; however, this guidance does  not require OCI to consistently include documentation in its case files  related to how its case acceptance criteria are met."], "subsections": [{"section_title": "National Guard Bureau Guidance Establishes OCI Investigation Policies", "paragraphs": ["The NGB Instruction delineates the authority and responsibilities of NGB  and state officials and the NGB Manual serves as the implementing  guidance. According to OCI officials, the office\u2019s investigative process  was designed based on the Army\u2019s Procedures for Administrative  Investigations and Boards of Officers. To determine the allegations OCI  will investigate, NGB policy includes specific requirements for OCI\u2019s  coordination with state officials such as the Adjutant General and legal  staff.", "According to NGB guidance, OCI officials will work with state officials to  determine the appropriateness of sending a case to OCI, but state  National Guard officials are responsible for formally requesting an OCI  investigation. NGB policy also includes requirements for OCI investigators  and outlines policies for the investigation process. The NGB Manual has  additional requirements for the office\u2019s dissemination of investigation  results back to the state National Guard. Based on the content of the  NGB policy, OCI also created Standard Operating Procedures to guide  the activities that are designated as the office\u2019s responsibilities."], "subsections": []}, {"section_title": "OCI Has Implemented Internal Controls to Help Ensure Key Policies Are Followed", "paragraphs": ["Based on our review, we found that OCI has internal controls to help  ensure stakeholders follow key policies, including a review of final  investigation reports and checklists to monitor activity. OCI\u2019s review of its  investigations and case files includes both administrative and legal  reviews conducted by officials within OCI and the NGB\u2019s Office of the  Chief Counsel, including both administrative staff and leadership. Similar  to the Army\u2019s administrative investigations procedures, OCI\u2019s reports of  investigation undergo a review process which confirms that case files  include all required documentation and provide sufficient evidence for the  report\u2019s conclusions. Investigators have primary responsibility for storing  administrative and evidentiary case documents, and a team of quality  control administrators works with investigators to store and publish case  files in accordance with OCI\u2019s policies. According to OCI officials, once  investigators produce a report of investigation and determine whether to  substantiate the allegation, the Investigations Manager reviews the  investigators\u2019 determinations before sending the report to the office\u2019s  Deputy Chief to review. According to OCI\u2019s Standard Operating  Procedures, after the Deputy Chief\u2019s review, OCI submits the report for  review by an independent legal counsel in the Administrative Law Division  of the NGB\u2019s Office of the Chief Counsel. Furthermore, OCI\u2019s procedures  state that all OCI reports of investigation must be reviewed by both the  Chief of OCI and the Deputy Chief Counsel before being submitted to the  state that requested the investigation.", "In addition to the internal controls implemented through OCI\u2019s report  review process, OCI officials stated that the office also developed  checklists designed to support internal policy adherence. For example,  the review process includes an Investigator Checklist which outlines  investigation policies and a Quality Control Checklist for administrators to  ensure that the final report of investigation includes specific  documentation and is coordinated appropriately, consistent with policy.  Alongside these checklists, OCI\u2019s Standard Operating Procedures  provide guidance to ensure that OCI investigators securely store private  and sensitive information, particularly video recordings of personnel  related to the case.", "Our analysis of a non-generalizable sample of 27 case files from 5 states  from fiscal years 2016 and 2017\u2014out of a total of approximately 225  cases for those same years\u2014found that OCI generally adhered to key  policies. For example, OCI included the Adjutants General requests to  initiate the OCI investigation and executive summaries explaining OCI\u2019s  determination of whether or not the allegation was substantiated in all 27  case files. However, 4 of 27 case files in our sample contained  investigation request letters with personally identifiable information. OCI  policy states that these letters should not include such information. OCI  officials stated that they are unable to control the information the state  National Guards include in their request letters; however, OCI officials  also stated that investigators are expected to work with the states to get  this information removed."], "subsections": []}, {"section_title": "National Guard Bureau Policies Outline Case Acceptance Criteria, but OCI\u2019s Case Files Inconsistently Include Supporting Documentation to Show How the Criteria Have Been Met", "paragraphs": ["NGB policies describe two criteria that allegations of sexual assault must  meet for OCI to initiate and conduct an investigation. First, OCI may only  conduct administrative investigations of sexual assault with an identified  National Guard nexus. The NGB Instruction defines a National Guard  nexus as generally existing when the reported perpetrator or the alleged  victim is or was\u2014at the time of the reported incident\u2014a member or  civilian employee of the National Guard. Officials stated that this  includes National Guard members in Title 32 or state active duty status.  Second, OCI may investigate a case only after a military criminal  investigative organization or civilian law enforcement has declined to  investigate a case, when a victim declines investigation by civilian law  enforcement, or when a civilian law enforcement organization did not  sufficiently investigate. Table 1 describes the OCI criteria to  administratively investigate sexual assault cases with a National Guard  nexus.", "The NGB Manual includes a template that the states should use when  submitting requests for OCI to initiate an investigation of an unrestricted  report of sexual assault. The template includes standardized language  that the state National Guard staff determined the existence of a National  Guard nexus and confirmed coordination with at least one criminal  investigative organization prior to requesting OCI\u2019s assistance. All 27  written requests from the Adjutants General included in the sample of  case files we analyzed included a statement that used this standardized  language and indicated that the state National Guard staff had  determined the existence of a National Guard nexus and confirmed  coordination with at least one criminal investigative organization prior to  requesting OCI\u2019s assistance, consistent with NGB policy.", "However, we found that OCI\u2019s case files do not consistently include  supporting documentation to show how the case acceptance criteria\u2014 specifically the determination of a National Guard nexus and verification  of coordination with the appropriate criminal investigative organizations\u2014 were met. This is because NGB policy does not require that OCI collect  and include any additional documentation for verification purposes in its  case files. In our review of OCI\u2019s case files, we found that 12 of the 27  case files did not include additional supporting documentation, such as  police reports or e-mail correspondence with the appropriate criminal  investigative organizations. We also found that 7 of the 27 case files did  not include supporting documentation of both the nexus determination  and coordination with the appropriate criminal investigative organizations.  According to OCI officials, the office relies on state National Guard  officials\u2019 evaluation and determination about the nexus criteria and does  not always receive supporting documentation to verify the criteria have  been met before initiating an investigation. OCI officials further stated that  this is due, in part, to the fact that the NGB and Adjutants General cannot  require local law enforcement to produce documentation related to their  investigations because neither entity has subpoena power over state law  enforcement organizations. However, in response to our concerns about  the lack of supporting documentation to verify the state National Guard  officials\u2019 evaluations of the criteria, in October 2018, OCI officials shared  a draft memorandum template that they developed for verifying how the  two case acceptance criteria were met.", "Standards for Internal Control in the Federal Government state that  management should design control activities to achieve objectives and  respond to risks. More specifically, documentation of such activities  should be readily available for examination, properly managed, and  maintained. Those standards state that documentation is a necessary  part of an effective internal control system and is required to demonstrate  design, implementation, and operating effectiveness. Without a  requirement that supporting documentation related to the National Guard  nexus and criminal investigative organization coordination efforts is  included in each case file, OCI does not have reasonable assurance that  the cases it is investigating adequately meet the two criteria for case  acceptance."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Through the creation of the Office of Complex Investigations in 2012, the  NGB has taken steps to address a gap by exercising its investigative  authority to address those instances of sexual assault involving National  Guard members that the military justice system or local law enforcement  could not or would not investigate. OCI has implemented processes and  procedures to help ensure that its policies are followed. However, the  NGB does not require OCI to include supporting documentation in its  case files for verifying how state National Guard officials determined that  case acceptance criteria have been met. Without a requirement to collect  and maintain such supporting documentation as part of its case files, OCI  does not have reasonable assurance that it is only undertaking  investigations that meet case acceptance criteria."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Defense should ensure that the Chief of the National  Guard Bureau, in coordination with the Office of Complex Investigations,  includes a requirement in its guidance to collect and maintain supporting  documentation as part of its case files that verifies whether and how (1)  the National Guard nexus exists, and (2) the allegation has been referred  to the appropriate military criminal investigative organization or civilian  law enforcement organization prior to opening an OCI investigation.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix II, DOD concurred with our  recommendation and noted actions it was taking. DOD also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties,  including the Chief of the National Guard Bureau, the National Guard  Bureau\u2019s Office of Chief Counsel, and the Office of Complex  Investigations. In addition, this report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff has any questions regarding this report, please contact  Brenda Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Organizational Structure of The National Guard Bureau\u2019s Office of Complex Investigations", "paragraphs": ["The Office of Complex Investigations (OCI) was established within the  National Guard Bureau\u2019s Office of the Chief Counsel. To conduct its  sexual assault investigations and state assessments, OCI primarily relies  on Guard members staffed temporarily to the office as investigators. From  August 2012 through September 2014, the office operated with three full- time personnel, who administered the program and conducted  investigations with investigative personnel who received assignments as  an extra duty. Since fiscal year 2015, however, OCI has used one-year  active duty operational support (ADOS) orders to maintain a staff of  National Guard members, including between 22 and 28 investigator  positions and 4 administrative and support positions. In fiscal year 2018,  the office was primarily staffed with traditional Guard members on ADOS  tours\u20144 administrative support personnel and 24 investigators\u2014in  addition to one full time Active Guard and Reserve enlisted position and  one Department of the Army civilian position. According to OCI officials,  the office\u2019s investigative staff consists primarily of individuals with legal or  law enforcement experience. Figure 5 illustrates the organizational  structure of OCI."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kimberly Seay, Assistant  Director; Johana Ayers; Maurice Belding; Vincent Buquicchio; Serena  Epstein; Laura Ann Holland; Amie Lesser; Wayne McElrath; Stephanie  Moriarty; Clarice Ransom; Ramon Rodriguez; Michael Silver; Jennifer  Weber; and Nell Williams made key contributions to this report."], "subsections": []}]}], "fastfact": ["The National Guard has an office that investigates sexual assault allegations. Its investigations have no criminal outcomes, but can result in consequences like discharge from the National Guard.", "The office is only authorized to investigate cases that", "have a connection to the National Guard, and", "are not fully investigated by military or civilian law enforcement", "The office is not required to keep documentation verifying that all of its cases meet these criteria. Therefore, it can't be sure that it's only investigating the cases it's allowed to take. We recommended including this supporting documentation in the case files."]}
{"id": "GAO-18-62", "url": "https://www.gao.gov/products/GAO-18-62", "title": "Critical Infrastructure Protection: DHS Risk Assessments Inform Owner and Operator Protection Efforts and Departmental Strategic Planning", "published_date": "2017-10-30T00:00:00", "released_date": "2017-10-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The nation's critical infrastructure includes cyber and physical assets and systems across 16 different sectors whose security and resilience are vital to the nation. The majority of critical infrastructure is owned and operated by the private sector. Multiple federal entities, including DHS, work with infrastructure owners and operators to assess their risks.", "GAO was asked to review DHS's risk assessment practices for critical infrastructure. This report describes:(1) DHS's risk assessment practices in 3 of 16 critical infrastructure sectors and private sector representatives' views on the utility of this risk information, and (2) how this risk information influences DHS's strategic planning and private sector outreach.", "GAO selected 3 of 16 sectors\u2013Critical Manufacturing; Nuclear Reactors, Materials, and Waste; and Transportation Systems\u2013to examine based on their varied regulatory structures and industries. GAO reviewed DHS guidance related to infrastructure protection, the QHSR and DHS Strategic Plan, and plans for the selected critical infrastructure sectors. GAO interviewed DHS officials responsible for critical infrastructure risk assessments, and the owner and operator representatives who serve as chairs and vice-chairs of coordinating councils for the 3 selected sectors. Information from the 3 sectors is not generalizable to all 16 sectors but provides insight into DHS's risk management practices.", "GAO provided a draft of this report to DHS and relevant excerpts to the council representatives interviewed during this review. Technical comments provided were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) primarily conducts assessments for each of the three elements of risk\u2014threat, vulnerability, and consequence\u2014for critical infrastructures from the three sectors GAO reviewed\u2014Critical Manufacturing; Nuclear Reactors, Materials, and Waste; and Transportation Systems. In limited circumstances, DHS generates risk assessments that both incorporate all three elements of risk and cover individual or multiple subsectors.", "Threat : DHS's Office of Intelligence and Analysis assesses threats\u2014natural or manmade occurrences, entities, or actions with the potential to cause harm, including terrorist attacks and cyberattacks\u2014and disseminates this information to critical infrastructure owners and operators. For example, the Transportation Security Administration provides threat intelligence to mass transit security directors and others through joint classified briefings.", "Vulnerability : DHS officials provide various tools and work directly with owners and operators to assess asset and facility vulnerabilities\u2014physical features or operational attributes that render an asset open to exploitation, including gates, perimeter fences, and computer networks. For example, DHS officials conduct voluntary, asset-specific vulnerability assessments that focus on physical infrastructure during individual site visits.", "Consequence : DHS officials also assess consequence\u2014 the effect of occurrences like terrorist attacks or hurricanes resulting in losses that impact areas such as public health and safety, and the economy\u2014to better understand the effect of these disruptions on assets.", "These assessments help critical infrastructure owners and operators take actions to improve security and mitigate risks. Six private sector representatives told GAO that threat information is the most useful type of risk information because it allows owners and operators to react immediately to improve their security posture. For example, one official from the Transportation Systems sector said that government threat information is credible and is critical in supporting security recommendations to company decision-makers.", "DHS uses the results of its risk assessments to inform the department's strategic planning and to guide outreach to infrastructure owners and operators. Critical infrastructure risk information is considered within DHS's strategic planning. Specifically, according to DHS officials, risk information informs the Department's Quadrennial Homeland Security Review (QHSR)\u2014a process that identifies DHS's critical homeland security missions and its strategy for meeting them. DHS also uses risk information to guide outreach to critical infrastructure owners and operators. For example, DHS officials annually prioritize the most critical assets and facilities nationwide and categorize them based on the severity of the estimated consequences of a significant disruption to the asset or facility. DHS officials then use the results to target their assessment outreach to the infrastructure owners and operators categorized as higher risk. DHS officials also told GAO that they use risk information after an incident, such as a natural disaster, to quickly identify and prioritize affected infrastructure owners and operators to help focus their response and recovery assistance outreach."]}], "report": [{"section_title": "Letter", "paragraphs": ["The nation\u2019s critical infrastructure (CI) includes physical and cyber assets  and systems that are so vital to the United States that their incapacity or  destruction could have a debilitating impact on national security, public  health and safety, or the economy. CI provides the essential services\u2013\u2013 such as transportation, water, and energy\u2013\u2013that underpin American  society, and protecting CI assets and systems is a national security  priority. The risk environment for CI ranges from natural disasters to  cyberattacks by foreign malicious actors. Additionally, while companies  have increasingly sought to gain efficiencies by connecting their physical  and cyber business systems, the convergence between these systems  creates new opportunities for potential cyber attackers to access these  systems. Because the majority of CI is owned and operated by the private  sector, it is vital that the public and private sectors work together to  protect these assets and systems.", "The Department of Homeland Security (DHS) coordinates the overall  federal effort for national CI protection. As part of its CI protection  responsibilities, DHS is to conduct CI risk assessments and integrate  relevant information and analyses to identify priorities for protective and  support measures to be implemented by DHS, other federal agencies,  state and local government agencies and authorities, the private sector,  and other entities.", "DHS developed the first version of the National Infrastructure Protection  Plan (NIPP) in 2006 and updated it in 2009 and 2013. The NIPP  describes a voluntary partnership model as the primary means of  coordinating government and private sector efforts to protect CI. It  provides a framework for developing and implementing a coordinated  national effort to protect CI within 16 distinct sectors. The sectors vary in  structure, with some sectors, such as the chemical and nuclear sectors,  having more regulatory oversight governing their respective security  issues in addition to the voluntary partnership model. Other sectors, such  as commercial facilities and critical manufacturing, have less regulatory  oversight, according to DHS officials.", "As part of the partnership structure, each sector has a designated Sector- Specific Agency (SSA), a federal department or agency that serves as the  lead coordinator for security and resilience programs and activities for  their respective sector. Each sector also has a government coordinating  council (GCC), consisting of representatives from various levels of  government, and a sector coordinating council (SCC) consisting of owner- operators of these critical assets or members of their respective trade  associations. According to the NIPP, SCCs serve as principal  collaboration points between the government and private sector owners  and operators for CI security and resilience policy coordination and  related sector-specific activities. For example, the NIPP calls for the  individual sector-specific agencies, working with relevant sector  representatives, to develop sector-specific plans to, among other things,  describe how the sector will identify and prioritize its critical assets,  including cyber assets, and define approaches the sector will take to  assess risks and develop programs to protect these assets.", "Focusing on cyber infrastructure, DHS\u2019s National Cybersecurity and  Communications Integration Center (NCCIC) provides a central place for  federal and private-sector organizations to coordinate efforts to address  cyber threats and respond to cyber attacks. The NCCIC\u2019s mission is to  reduce the likelihood and severity of incidents that may significantly  compromise the security and resilience of the nation\u2019s critical information  technology and communications networks.", "Due to the cyber-based threats to federal systems and critical  infrastructure, the persistent nature of information security vulnerabilities,  and the associated risks, we continue to designate information security as  a government-wide high-risk area in our most recent biennial report to  Congress, a designation we have made in each report since 1997. In  2003, we expanded this high-risk area to include, the protection of critical  cyber infrastructure. While DHS has made progress in this area,  challenges remain. For example, we reported in November 2015 that  while SSAs had taken actions to mitigate cyber risks for their respective  CI sectors, most SSAs had not developed metrics to measure and report  on the effectiveness of their mitigation activities. We also reported that  DHS needed to assess whether its efforts to share information on cyber  threats, incidents, and countermeasures with federal and non-federal  entities are useful and effective.", "Over the last several years, DHS has taken actions to assess  vulnerabilities at CI facilities and within groups of related infrastructure,  regions, and systems. We reported in September 2014 that DHS offices  and components had conducted or required thousands of vulnerability  assessments of CI from October 2010 to September 2013, and that DHS  needed to enhance integration and coordination of these efforts. DHS  concurred with the six recommendations in our report, including our  recommendation that it take steps to better coordinate vulnerability assessments both within DHS and other CI partners, as appropriate. DHS  has taken steps to address this particular recommendation, which are  discussed later in this report.", "Given the importance of CI to the nation\u2019s economy and well-being, you  requested that we review DHS\u2019s efforts to assess risks to CI. This report  addresses the following questions:  1.  What are DHS\u2019s risk assessment practices in selected CI sectors and  what are private sector representatives\u2019 views on the utility of this risk  information?  2.  How, if at all, does CI risk information influence DHS\u2019s strategic  planning and private sector outreach?", "To address our first objective, we reviewed agency documents and  interviewed relevant officials to identify DHS\u2019s physical and cyber risk  assessment practices for 3 of the 16 CI sectors: Critical Manufacturing;  Nuclear Reactors, Materials, and Waste; and Transportation Systems.  We selected these three sectors because they were sectors for which  DHS serves as the SSA or the co-SSA. DHS\u2019s Office of Infrastructure  Protection is the lead component within DHS for the Critical  Manufacturing and nuclear sectors, and DHS shares SSA responsibilities  with the Department of Transportation for the Transportation Systems  sector. These three sectors also have varying levels of federal regulation.  Specifically, we chose the Critical Manufacturing sector because  according to DHS, the majority of the assets in this sector are privately  owned and operated by companies that have minimal interaction with the  federal government and other regulatory entities and includes the  manufacturing industries that are the most crucial for the continuity of  other critical sectors and has significant national economic implications.  Additionally, we selected the nuclear sector because all of the facilities in  the sector are subject to federal security requirements, which allowed us  to observe how a regulatory environment may affect DHS\u2019s provision of  risk information to CI owners and operators. We also included the  Transportation Systems sector because portions of it are regulated and  DHS regularly conducts sector-wide complete risk assessments for this  sector. The information gathered from these three selected sectors is  not generalizable to all 16 sectors but does provide insight into how  DHS\u2019s risk assessment information is used for a variety of CI. We  reviewed laws and guidance regarding DHS\u2019s roles and responsibilities  relating to physical and cyber CI risk assessment practices including the  Homeland Security Act of 2002, as amended, and Presidential Policy  Directive/PPD-21 (PPD-21). We also examined DHS\u2019s National  Infrastructure Protection Plan, DHS\u2019s Risk Management Fundamentals,  and the National Institute of Standards and Technology (NIST)  Cybersecurity Framework to identify common practices for generating  risk-related information.", "To characterize the risk information DHS distributed to CI owners and  operators in the three selected sectors, we identified the products and  activities associated with each risk element\u2014threat, vulnerability, and  consequence. Additionally, to identify cybersecurity products and services  distributed by DHS, we reviewed our previous work on DHS\u2019s NCCIC to  categorize NCCIC products and services. We interviewed DHS officials  from the National Protection and Programs Directorate (NPPD), the Office  of Policy, the Office of Intelligence and Analysis (I&A), and the  Transportation Security Administration (TSA) to discuss DHS\u2019s roles and  responsibilities related to assessing risks for CI. We also interviewed the  SCC chair and vice-chair from each of the three selected sectors to  determine how DHS risk assessment information may be used by owners  and operators, for a total of six SCC representatives. The information  gathered from interviews with these private sector representatives is not  generalizable to each of their respective sectors but provides insights into  how the asset owners use risk information provided by DHS.", "To address our second objective, we reviewed and analyzed DHS  planning products, such as the Quadrennial Homeland Security Review  (QHSR) and strategic plans for the individual CI sectors, to determine  which documents included elements that capture CI risk data for strategic  decision-making purposes. We examined DHS policies and guidance  related to administering risk assessments and obtained information from  NPPD officials to determine how DHS may use risk information when  prioritizing outreach activities within the three selected sectors. We also  reviewed our past work on DHS strategic planning and DHS\u2019s actions to  address open recommendations and interviewed DHS\u2019s Office of Policy  to discuss the next iteration of the QHSR due to be released in fiscal year  2018.", "We conducted this performance audit from July 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Presidential Directives Define DHS\u2019s CI Security Mission", "paragraphs": ["In February 2013, the White House released Presidential Policy Directive  (PPD)-21, Critical Infrastructure Security and Resilience, directing DHS to  coordinate the overall federal effort to promote the security and resilience  of the nation\u2019s CI from all hazards. Within DHS, NPPD has been  delegated the responsibility for the security and resilience of the nation\u2019s CI, and within NPPD, the Office of Infrastructure Protection (IP) leads and  coordinates national programs and policies on CI issues.", "Also in February 2013, the President issued Executive Order 13636,  \u201cImproving Critical Infrastructure Cybersecurity,\u201d citing repeated cyber  intrusions into critical infrastructure as demonstrating the need for  improved cybersecurity. Among other things, the order addressed the  need to improve cybersecurity information sharing and collaboratively  develop risk-based standards; stated U.S. policy to increase the volume,  timeliness, and quality of cyber threat information shared with private  sector entities; directed the federal government to develop a technology- neutral cybersecurity framework to help CI owners and operators identify,  assess, and manage cyber risk; and required DHS to use a consultative  process to identify infrastructure in which a cybersecurity incident could  result in catastrophic consequences."], "subsections": []}, {"section_title": "The National Infrastructure Protection Plan Provides a Framework for Managing Risk", "paragraphs": ["The NIPP sets forth a risk management framework and outlines DHS\u2019s  roles and responsibilities regarding CI security and resilience. As shown  in Figure 1, the NIPP risk management framework is a planning  methodology that outlines the process for setting goals and objectives;  identifying assets, systems, and networks; assessing risk; implementing  protective programs and resiliency strategies; and measuring  performance and taking corrective action.", "The risk management framework calls for public and private CI partners  to conduct risk assessments to understand the most likely and severe  incidents that could affect their operations and communities, and use this  information to support planning and resource allocation in a coordinated  manner. According to the NIPP, the risk management framework is also  intended to inform how decision makers take actions to manage risk,  which according to DHS, is influenced by the nature and magnitude of a  threat, the vulnerabilities to that threat, and the consequences that could  result, as shown in figure 2."], "subsections": []}, {"section_title": "Multiple DHS Offices Are Involved in CI Risk Assessment Activities", "paragraphs": ["Multiple DHS offices conduct or assist with risk assessments for CI,  including the Office of Cybersecurity and Communications (CS&C), Office  of Infrastructure Protection, and Office of Cyber and Infrastructure  Analysis (OCIA). The Office of Infrastructure Protection and CS&C both  use voluntary programs to introduce risk-related tools intended to identify  gaps in infrastructure security. These include voluntary security surveys  and vulnerability assessments carried out by DHS\u2019s Protective Security  Advisors (PSA) and Cyber Security Advisors (CSA). PSAs are CI  protection and security specialists responsible for assisting asset owners  and operators with protection strategies of physical assets, and CSAs are  cybersecurity specialists responsible for helping to bolster owners\u2019 and  operators\u2019 cyber assessment capabilities. Both types of advisors use  their respective assessment tools to work with CI stakeholders to develop  measures intended to make assets more resilient. Other DHS offices with  CI risk assessment responsibilities include DHS\u2019s Office of Intelligence  and Analysis, U.S. Coast Guard, and TSA.", "PPD-21 and the NIPP also call for other federal departments and  agencies to play a key role in CI security and resilience activities in their  capacity as SSAs. In general, an SSA is a federal department or agency  responsible for, among other things, supporting the security and  resilience programs and related activities of designated CI sectors. DHS is designated as the SSA or co-SSA for 10 of the 16 CI sectors, and has  assigned its SSA duties to multiple entities including the Office of  Infrastructure Protection, TSA, Coast Guard, and Federal Protective  Service. For our three selected sectors, DHS\u2019s Sector Outreach and  Programs Division (SOPD), within the Office of Infrastructure Protection,  serves as the SSA for the Critical Manufacturing and nuclear sectors.  DHS\u2019s TSA and the U.S. Department of Transportation serve as co-SSAs  for the Transportation Systems sector. Other federal agencies or  departments external to DHS serve as the SSAs for the remaining 6  sectors for which DHS is not designated as the SSA or co-SSA. Figure 3  provides descriptions of the 16 sectors, identifies the SSA of each sector,  and highlights the three selected sectors."], "subsections": []}, {"section_title": "Risk Assessment Activities Vary Based on Sector\u2019s Regulatory Environment", "paragraphs": ["For some sectors, assets or operations are regulated by federal or state  regulatory agencies that possess unique insight into the risk mitigation  strategies of the CI they oversee. These regulators, who may not serve  as the designated SSA for the sector, help establish safety and security  protocols for the industries they regulate and ensure sector resilience  through the policymaking and oversight processes. For example, the  Nuclear Regulatory Commission, in its role as the regulatory agency for  the nuclear sector, conducts threat assessments to help protect against  acts of radiological sabotage and to prevent the theft of special nuclear  material. Additionally, pursuant to the Maritime Transportation Security  Act of 2002, DHS must use risk management in specific aspects of its  homeland security efforts. For example, the Coast Guard and other port  security stakeholders are required to carry out certain risk-based tasks,  including assessing risks and developing security plans for ports,  facilities, and vessels."], "subsections": []}, {"section_title": "NIST Framework Provides Voluntary Cybersecurity Guidance", "paragraphs": ["DHS is also involved in promoting and supporting the adoption of the  NIST Framework for Improving Critical Infrastructure Cybersecurity. In  accordance with requirements in Executive Order 13636, as discussed  above, this framework provides voluntary standards and procedures for  CI organizations to follow to better manage and reduce cybersecurity risk,  and is designed to foster communication among CI stakeholders about  cybersecurity management.", "In December 2015, we reported that SSAs and NIST had promoted and  supported adoption of the cybersecurity framework in the CI sectors.  For example, in February 2014, DHS established the Critical  Infrastructure Cyber Community Voluntary Program to encourage  adoption of the framework and has undertaken multiple efforts as part of  this program. These include developing guidance and tools that are intended to help sector entities use the framework. We also reported that  DHS did not have metrics to measure the success of these program  efforts, and recommended that DHS develop metrics to understand the  effectiveness of their promotion activities. DHS concurred, and in  December 2016 DHS officials stated that they plan to continue to work  with SSA partners and NIST to determine how to develop measurement  activities and collect information on the voluntary program\u2019s outreach and  its effectiveness in promoting and supporting the cybersecurity  framework. We are currently conducting a review that will identify actions  taken by relevant federal entities including NIST, DHS, and other SSAs to  promote the adoption of the cybersecurity framework. We will continue to  monitor the voluntary program\u2019s outreach as well as DHS\u2019s efforts to  measure its effectiveness in promoting and supporting the cybersecurity  framework."], "subsections": []}, {"section_title": "Efforts to Increase Operational Efficiency among CI Assets Result in Physical and Cyber Security Convergence and Expand the Potential for Cyberattacks", "paragraphs": ["The convergence of physical and cyber security is a major challenge for  owners and operators of CI as more physical processes and systems are  connected to Internet-enabled networks to improve operational efficiency,  according to DHS officials. For example, facilities may make use of  automated building control systems to control certain processes or  functions, such as security, lighting, or heating, ventilation, and air  conditioning (HVAC). These control systems increase efficiency and  optimize operational performance by reducing the need for manual  controls and adjustments. Building control systems and the devices  within them are often configured with connections to the Internet. These  Internet connections allow the systems to be accessed remotely for  control and monitoring and, for example, to receive software patches and  updates. Figure 4 illustrates how a facility\u2019s HVAC and security systems  are managed through a building automation system and operated over a  control network. In this example, the information systems and networks  are protected by a firewall\u2014a cybersecurity countermeasure\u2014while the  control network and its devices have direct Internet connectivity without  going through a firewall, potentially allowing a cyber-attacker to control  the building\u2019s electronic door locks.", "Broader examples of these types of networked systems include electrical  grids and water distribution systems, as well as control systems that  operate chemical manufacturing processes, monitor natural gas pipelines,  and control petroleum refineries. Depending on the cyberattack, there is  potential to cause a disruption to specific infrastructure operations and a  possibility that such an event could lead to cascading effects within the  sector or to other sectors in the economy. According to a 2015 DHS  report on cyber-physical infrastructure risks, greater connectivity among  technologies that connect cyber systems to physical systems expands the  potential for cyberattack by malicious actors. The growing convergence of  these systems mean that exploited cyber vulnerabilities can result in  physical consequences, as well."], "subsections": []}]}, {"section_title": "DHS Primarily Assesses the Three Elements of Risk Separately for CI, and Private Sector Representatives from Selected Sectors Report Threat Information Most Valuable", "paragraphs": ["DHS primarily assesses the three elements of risk\u2013threat, vulnerability,  and consequence\u2013separately for individual CI assets and sectors.  According to DHS officials, these assessments help critical infrastructure  owners and operators take actions to improve security and mitigate risks.  However, according to SCC representatives from three selected sectors,  timely and actionable threat assessment data is the most useful type of  risk information. In limited circumstances, DHS generates risk  assessments that collectively incorporate all three elements of risk which  selected SCC representatives found of limited use for their sectors\u2019  infrastructure protection efforts due to the amount of time it takes to  finalize the assessment data, the inclusion of risk scenarios that are not  likely to occur, and the results not being applicable to individual assets."], "subsections": [{"section_title": "DHS Shares Threat Assessment Information with CI Owners and Operators", "paragraphs": ["Threat Information Products Help Make Critical Infrastructure in  Selected Sectors More Secure and Resilient  DHS\u2019s Office of Intelligence and Analysis (I&A) compiles information from  a variety of classified and unclassified sources to develop threat-related  analytic products for each of the 16 CI sectors. I&A\u2019s threat assessment  efforts include classified briefings intended to help CI owners and  operators manage risks to their individual operations and assets, and to  determine effective strategies to make them more secure and resilient.  DHS typically shares these products via its Homeland Security  Information Network for Critical Infrastructure (HSIN-CI) platform. I&A  also partners with sector-specific agencies to engage asset owners and  operators directly during biweekly classified threat briefings to share  threat data. During these meetings, both I&A officials and CI owners and  operators take this opportunity to identify potential threat-related risks that  may inform future I&A threat products.", "The Homeland Security Information  Network\u2013Critical Infrastructure (HSIN-CI)  HSIN-CI is the Department of Homeland  Security\u2019s (DHS) information sharing platform  and collaboration tool for critical infrastructure  stakeholders. It is the primary system through  which private sector owners and operators,  DHS, and other federal, state, and local  government agencies collaborate to protect  CI. According to DHS, it is an unclassified,  web-based communications system for  sharing sensitive but unclassified information.  Users can access protection alerts,  information bulletins, incident reports,  situational updates, and analyses. Users can  also engage in secure discussions with sector  peer groups. Other features include CI  protection training, planning and  preparedness information, and a document  library.", "Similarly, TSA\u2019s Office of Intelligence (TSA-OI) receives intelligence  information regarding threats to transportation-related assets and  disseminates it to industry officials with transportation responsibilities, as  well as to other federal, state, and local officials. TSA-OI disseminates  security information through products including reports, assessments, and  briefings. For example, TSA-OI, in conjunction with I&A and the Federal  Bureau of Investigation, provides intelligence and security information to  mass transit and passenger rail security directors, law enforcement chiefs  in major metropolitan areas, and Amtrak officials through joint classified  intelligence and analysis briefings. Although it is not an intelligence  generator, TSA-OI receives and assesses intelligence from within and  outside of the intelligence community to determine its relevance to  transportation security. Sources of information outside the intelligence  community include other DHS components, law enforcement agencies,  and owners and operators of transportation systems. TSA-OI also  reviews suspicious activity reporting by Transportation Security Officers,  Behavior Detection Officers, and Federal Air Marshals.", "DHS officials from IP and TSA told us that they also share threat  information within their respective sectors. For example, as the Critical  Manufacturing SSA, IP disseminates threat information to sector  stakeholders daily. Officials from IP also hold quarterly threat briefings to  alert stakeholders of relevant threats. TSA likewise shares transportation  security related information, including details on threats, vulnerabilities,  and suspicious activities, with Transportation Systems sector  stakeholders through unclassified or classified products and briefings. For  example, TSA provides Transportation Intelligence Notes to  transportation security partners to offer additional information or analysis  on a specific topic and also provides situational awareness of ongoing or  recent incidents. Table 1 in appendix I summarizes DHS threat  assessment activities and products provided to the three selected  sectors.", "Examples of Threat Information the  Department of Homeland Security  Provides to Critical Infrastructure Owners  and Operators  Classified Threat Briefings:  Officials from  the Office of Intelligence and Analysis and the  sector-specific agencies participate in  briefings at regular intervals with critical  infrastructure owners and operators to share  threat information gathered from intelligence  sources.  Incident-Specific Outreach: The Nuclear  Reactors, Materials and Waste sector-specific  agency hosts incident-specific meetings and  calls for sector stakeholders.  Daily Threat Briefings: DHS publishes a  daily e-mail that contains threat information  intended to provide situational awareness  from a variety of sources including the Federal  Emergency Management Agency,  Department of Justice, and other stakeholders  as appropriate. According to DHS, these  emails are distributed to more than 140  recipients in the Critical Manufacturing sector.", "NCCIC Established to Share Cyber Threat Information  According to DHS, the NCCIC is a 24x7 cyber situational awareness,  incident response, and management center. The center shares  information among public and private sector partners to build awareness  of cyber vulnerabilities, incidents, and mitigation strategies and its  partners include other government agencies, the private sector, and  international entities. The NCCIC works with the private sector by  integrating (both physically and virtually) CI owners and operators into the  center\u2019s operations so that, during an incident, threat information can be  aggregated and communicated between government and appropriate  private sector partners in an efficient manner. The NCCIC manages  several programs that provide data used in developing 43 products and  services in support of its 11 statutorily required cybersecurity functions.  The programs include monitoring network traffic entering and exiting  federal agency networks and analyzing computer network vulnerabilities  and threats. The products and services are provided to its customers in  the private sector; federal, state, local, tribal, and territorial government  entities; and other partner organizations. For example, the NCCIC issues  indicator bulletins, which can contain information related to cyber threat  indicators, defensive measures, and cybersecurity risks and incidents. A  list of these products and services is summarized in table 5 in appendix II.  As of September 2017, 199 private sector CI owners and operators had  as-needed access to NCCIC through their participation in the Cyber  Information Sharing and Collaboration Program (CISCP).", "The National Cybersecurity and  Communications Integration Center  (NCCIC)  The Department of Homeland Security\u2019s  (DHS) NCCIC serves as a central location  where partners involved in cybersecurity and  communications protection coordinate and  synchronize their efforts. NCCIC's partners  include other government agencies, the  private sector, and international entities.  According the DHS, working closely with its  partners, NCCIC analyzes cybersecurity and  communications information, shares timely  and actionable information, and coordinates  response, mitigation, and recovery efforts.  The NCCIC is made up of four branches:   NCCIC Operations and Integration;  United States Computer Emergency  Readiness Team;  Industrial Control Systems Cyber Emergency  Response Team; and  National Coordinating Center for  Communications.", "In February 2017, we reported that the NCCIC had taken steps to perform  each of its 11 statutorily required cybersecurity functions, such as being a  federal civilian interface for sharing cybersecurity-related information with  federal and nonfederal entities. However, we recommended nine  actions to DHS for enhancing the effectiveness and efficiency of the  NCCIC, including determining the applicability of the implementing  principles and establishing metrics and methods for evaluating  performance. DHS concurred with our recommendations and we will  monitor DHS\u2019s progress toward addressing them.", "Selected Private Sector Representatives Reported Threat Data as  Most Useful Risk Information  SCC representatives we spoke to from the three selected sectors cited  threat assessment data as generally the most useful risk information for  CI owners and operators. Each of these six representatives indicated that  threat information must be distributed rapidly to owners and operators in  order to maintain its value and utility. Three of the six representatives  reported that DHS generally provides threat information in a timely  manner. For example, SCC representatives from the nuclear sector told  us that timely threat information from DHS was helpful in clarifying  erroneous reports circulating about the terror attacks in Belgium being  aimed at nuclear sites in that region. According to these SCC  representatives, working with DHS to gather credible information in a  timely fashion was very valuable to their sector because it allowed owners  and operators within their sector to determine whether they needed to  implement certain protocols to ensure that they were not vulnerable to  similar attacks. The remaining three representatives told us that delays in  receiving threat information from DHS decreased the value of this  information. For example, one representative noted that he believes  DHS\u2019s process for vetting threat information before it is shared with his  sector prevents the agency from disseminating valuable threat  information in a timely manner. Another representative shared an  example where the threats referenced in one of the products distributed  by DHS had already been identified and addressed. However, the sixth  representative emphasized that despite delays in receiving information  from DHS, government threat information is very credible and a major  resource often used by security managers proposing security upgrades to  their respective chief executive officers. This representative also  highlighted the significance of TSA\u2019s adoption of industry-defined  intelligence priorities as directly supporting training and awareness  initiatives to create opportunities for prevention.", "The NIPP establishes that the government is to provide the private sector  with access to timely and actionable information in response to  developing threats and crises. Similarly, the sector-specific plans from  each of three selected sectors emphasize reliance upon timely and  actionable threat information. For example, the 2015 Transportation  System\u2019s sector-specific plan discusses the importance of an effective  and efficient process for receiving, analyzing, and disseminating pertinent  and timely threat information and states that effective protection or  response to a potential hazard relies on providing the stakeholders at  greatest risk with real-time or near real-time alerts of emerging or  breaking events.", "According to one SCC representative, threat information is the one  element of risk that adds the most value because it allows owners and  operators to react immediately to improve their security posture to  mitigate the effects of any potential hazards. The representative added  that specific products like TSA-OI\u2019s annual country-specific threat  assessments are particularly useful because a number of companies  within his sector have business interests outside the U.S. and these  reports help them stay abreast of potential threats abroad.", "Three of the six SCC representatives we interviewed reported that  information regarding cybersecurity threats has become increasingly  important. One SCC representative from the Critical Manufacturing sector  stated that many of the security managers within his sector are physical  security experts who are now facing more and more questions related to  cybersecurity threats as a result of the cyber and physical security  convergence their companies are experiencing. Therefore, the Critical  Manufacturing sector worked with federal partners to increase access to  the NCCIC, FBI, and U.S. Secret Service for additional cybersecurity  support and also began promoting the sector\u2019s awareness and use of the  NIST framework."], "subsections": []}, {"section_title": "DHS Conducts Voluntary Physical and Cyber Vulnerability Assessments for CI", "paragraphs": ["Infrastructure Survey Tool  The Infrastructure Survey Tool (IST) is one of  the Department of Homeland Security\u2019s (DHS)  voluntary vulnerability assessment tools  available to Critical Infrastructure owners and  operators. It is a web-based security survey  conducted by a Protective Security Advisor in  coordination with facility owners and operators  to identify the overall security and resilience of  a facility. The survey contains more than 100  questions used to gather information on such  things as physical security, security forces,  security management, information sharing,  and protective measures. The IST results  inform owners and operators of potential  vulnerabilities facing their asset or system and  recommend measures to mitigate those  vulnerabilities. Facility owners access results  and preview the effects of proposed mitigation  measures through the interactive IST  Dashboard.", "NPPD helps CI owners and operators develop capabilities to mitigate  vulnerabilities by conducting voluntary physical vulnerability assessments  primarily by using PSAs to conduct voluntary vulnerability assessments in  coordination with owners and operators. These assessments focus on  physical infrastructure and are generally asset-specific and conducted  during site visits at individual assets. They are used to identify security  vulnerabilities and identify potential risk mitigation strategies for owners  and operators to address over time. One tool PSAs use in conducting CI  assessments is the Infrastructure Survey Tool to assess facilities that  agree to voluntarily participate. According to NPPD officials, vulnerability  assessments take longer to develop than threat assessments, and the  vulnerabilities identified are typically more static than threats, which are  constantly evolving. PSAs store the collected assessment data on DHS\u2019s  Infrastructure Protection Gateway, an information sharing platform  intended for use by DHS and its homeland security partners, including CI  owners and operators, for access to infrastructure protection tools and  information in support of incident preparedness and response efforts.  Table 2 in appendix I summarizes the physical vulnerability assessments  DHS conducts for the three selected sectors.", "In September 2014, we reported that the vulnerability assessment tools  and methods that different DHS offices and components used varied with  respect to the areas of vulnerability assessed. For example, we found  that while all of the assessment tools we reviewed considered perimeter  security, approximately half of these tools (6 of 10) included an  assessment of cybersecurity. We also found that DHS had not  established guidance on what areas should be included in a vulnerability  assessment. We recommended, among other things, that DHS review its  vulnerability assessments to identify the most important areas of  vulnerability to be assessed, and establish guidance. DHS agreed with  our recommendation and in July 2016 reported that IP had taken steps to  collect and evaluate information on the various vulnerability assessment  tools and methods used by DHS offices and components. More  specifically, IP identified six security areas to incorporate into DHS  assessment tools and methods. DHS reported in August 2016 that DHS  offices and components received guidance for the areas and the specified  levels of detail to be incorporated into existing assessment tools.", "As a result of addressing this recommendation, we believe that DHS is  better positioned to collect and analyze assessment data to enable  comparisons and determine priorities between and across CI sectors.  DHS is also taking additional steps to address related recommendations  from our September 2014 report that remain open. For example, we  recommended that DHS develop and implement ways it can facilitate  data sharing and coordination of vulnerability assessments to minimize  the risk of potential duplication or gaps in coverage. As of September  2017, in response to this recommendation, DHS officials reported they  were coordinating with stakeholders and developing features in an online  portal to better facilitate information vulnerability assessment data  sharing. We will continue to monitor the status of DHS\u2019s efforts to address  these recommendations.", "In addition, in July 2017, DHS officials reported that they were finalizing a  strategy intended to identify ways that vulnerability assessment data can  be used by not only CI owners and operators but DHS and other  government stakeholders to improve their own decision-making.  According to these officials, DHS held workshops with over 120  stakeholders from NPPD as well as senior officials from other designated  sector-specific agencies and federal departments who identified the need  for DHS to provide more vulnerability assessment data related to lifeline  facilities\u2014such as water and wastewater treatment plants and train  stations. They also noted that stakeholders recommended that DHS use  the vulnerability assessment data it collects to conduct trend analysis in  specific CI sectors and geographic regions.", "The Cyber Resilience Review   The Cyber Resilience Review is one of the  Department of Homeland Security\u2019s (DHS)  cyber vulnerability assessments available to  critical infrastructure owners and operators. It  is a voluntary, nontechnical assessment to  evaluate an organization\u2019s operational  resilience and cybersecurity practices. It may  be conducted as a self-assessment or as an  on-site assessment facilitated by DHS  cybersecurity Cyber Security Advisors. It  assesses enterprise programs and practices  across 10 domains: asset management,  controls management, configuration and  change management, vulnerability  management, incident management, service  continuity management, risk management,  external dependency management, training  and awareness, and situational awareness.", "DHS Offers Voluntary Cyber Vulnerability Assessments for CI  Owners and Operators  The Office of Cybersecurity and Communications (CS&C) offers CI  owners and operators a suite of voluntary vulnerability assessments  aimed at securing their cyber systems. For example, CS&C\u2019s Industrial  Control Systems Cyber Emergency Response Team (ICS-CERT) is  responsible for taking steps to help mitigate vulnerabilities to computer- based systems that are used to monitor and control industrial processes.  CS&C also maintains the National Cybersecurity Assessment and  Technical Services team which offers cybersecurity scanning and testing  services that identify vulnerabilities within stakeholder networks and  provides risk analysis and remediation recommendations. The CSA  program also provides cyber assessment services for CI owners and  operators through on-site vulnerability assessments for cyber systems.  CSAs offer the Cyber Infrastructure Survey Tool, an assessment of  essential cybersecurity practices instituted by critical infrastructure  organizations to protect their critical IT services as well as the Cyber  Resilience Review which evaluates an organization\u2019s operational  resilience and cybersecurity practices. A summary of DHS\u2019s critical  infrastructure cyber vulnerability assessment efforts can be found in table  3 in appendix I.", "Selected Private Sector Representatives View Asset-Specific  Vulnerability Assessments As Useful  Sector Coordinating Council representatives from two of the three  selected sectors stated that DHS\u2019s vulnerability assessment efforts were  useful for determining vulnerabilities for individual CI owners and  operators, but their opinions varied concerning the usefulness of  aggregating sector-wide data and sharing broadly among private sector  stakeholders. For example, one SCC representative told us that the risk  scores associated with individual vulnerability assessments are of value  to the CI owners and operators of the infrastructure for which that  assessment was administered. However, this representative also  mentioned that these scores have limited value beyond the individual  asset because risks differ greatly between companies, rendering sector- wide or regional vulnerability assessments less useful. Another SCC  representative told us that because the membership of their respective  sectors is so broad and diverse, it is difficult for members to discern the  value of high-level aggregated vulnerability data\u2013\u2013especially from  organizations with very different business models. However, another SCC  representative indicated that DHS could offer aggregated vulnerability  assessment data to all CI stakeholders for the purpose of developing  broader situational awareness."], "subsections": []}, {"section_title": "DHS Conducts Consequence Assessments as Part of Its Infrastructure Survey Tool", "paragraphs": ["While DHS\u2019s IST is used to assess vulnerabilities for CI, the tool also  includes a consequence module intended to allow DHS to assess facility  criticality in terms of potential loss of life and economic impact. Also,  OCIA analyzes consequence from incidents, and models past events to  better understand the effect of these disruptions on assets and predict  consequences of future events. Table 4 in appendix I describes the DHS  components and corresponding products and activities associated with  consequence assessments.", "DHS officials we spoke with stated that consequence information is  important to owners and operators. These officials added that DHS needs  to demonstrate that potential losses can be avoided by owners\u2019 and  operators\u2019 investment in risk mitigation, thereby reducing the overall  consequence of a potential incident on the CI owner\u2019s operations and the  nation. Three of the six SCC representatives we interviewed shared that  consequence information was not useful. For example, one SCC  representative noted that consequence information is not very useful for  owners and operators because timely threat information combined with  knowledge of an asset\u2019s vulnerabilities put owners and operators in a  better position to mitigate potential incidents and, subsequently, any  associated consequences. DHS officials acknowledged that a range of  perspectives concerning the usefulness of consequence information  exists and stated that these differences reflect the array of owner and  operator views about how to use risk information for different risk  management decisions."], "subsections": []}, {"section_title": "DHS Conducts Complete Risk Assessments for CI Sectors on a Limited Basis", "paragraphs": ["Within DHS, NPPD, TSA, and the Coast Guard are responsible for  developing complete risk assessments, which can be conducted for an  entire CI sector or multiple sub-sectors within a CI sector. Both TSA and  the Coast Guard regularly conduct complete risk assessments within the  Transportation Systems sector. However, according to a senior OCIA  official, NPPD receives very few requests for complete risk assessments.  Our review of available assessment documentation found that among our  three selected sectors, DHS has conducted complete risk assessments  for the Transportation Systems sector but not the other two sectors. For  example, the Transportation Systems Sector Security Risk Assessment is  TSA\u2019s annual report to Congress on transportation security. It assesses  risk by establishing risk scores for various attack scenarios within the  sector, including for domestic aviation; examines risks to individual  transportation modes; and compares them to risks within and across  modes. Table 6 in appendix III describes the assessment in more detail.", "Also within the Transportation Systems sector, the Coast Guard\u2019s  Maritime Security Risk Analysis Model (MSRAM) serves as the primary  tool for assessing and managing security risks for all of the vessels,  barges, and facilities regulated by the Coast Guard under the Maritime  Transportation Security Act of 2002. Since its development and  implementation in 2005, MSRAM has provided the Coast Guard with a  standardized way of assessing risk to maritime infrastructure, referred to  in the analysis model as targets that can include chemical facilities, oil  refineries, hazardous cargo vessels, passenger ferries, and cruise ship  terminals. For example, a scenario related to cruise ships identified using  this analysis model could include a boat bomb or an attack by a hijacked  vessel. MSRAM is designed to allow comparison between different  targets at the local, regional, and national levels with the goal of reducing  risk by prioritizing security activities and resources.", "To prioritize and assess security risks at U.S. ports and facilities, the  Coast Guard uses MSRAM to calculate risk using threat judgments  provided by the Coast Guard Intelligence Coordination Center. The  Center provides threat probabilities for MSRAM based upon judgments  regarding specific intent, capability, and geographic preference of terrorist  organizations to deliver an attack on a specific type of maritime target  class\u2014for example, a boat bomb attack on a ferry terminal. To make  these judgments, Center officials use intelligence reports generated  throughout the broader intelligence community to make qualitative  determinations about certain terrorist organizations and the threat they  pose to the maritime domain. At the sector level, Coast Guard MSRAM  users are required to use the threat probabilities provided by the Center  to ensure that threat information is consistently applied across ports.", "MSRAM users at the sector level also assess the vulnerability of targets  within their respective areas of responsibility and assess the  consequences of a successful attack on these targets. Vulnerability and  consequence factors included in the MSRAM assessment can be found in  table 7 in appendix III.", "According to one NPPD official, various sector councils have requested  analysis of certain risk elements, such as vulnerabilities or consequences,  as opposed to complete risk assessments. For example, councils have  asked for analysis of vulnerabilities and consequences due to potential  failures within their sector\u2019s respective systems and the potentially  cascading effects of these failures on systems beyond their own span of  control. This official noted that these requests provide the opportunity for  OCIA to develop analytic products that companies within these sectors  can then use as part of the risk assessments they conduct for  themselves, as well as analytic products more broadly related to  homeland security risks.", "SCC representatives from our three selected sectors told us that  complete risk assessments are of limited utility for CI owners and  operators because complete assessments take a long time to produce,  often involve risk scenarios that are not likely to occur, or generates  results that are so broad that they may not be applicable to individual  assets. For example, according to one SCC representative, the diversity  among the members of his sector, including size and sophistication of  operations, is the primary reason that conducting a complete risk  assessment for their sector would not be helpful for individual companies.  Similarly, another SCC representative told us that the private sector does  not operationalize information from complete risk assessments because  the assessments do not add practical value and some of the scenarios  evaluated in the assessments are not applicable to many of the  companies within their sector.", "TSA and NPPD officials provided explanations of the utility of complete  risk assessments, particularly for government decision-making purposes.  For example, TSA officials told us that they believe the Transportation  Systems Sector Security Risk Assessment data gathering methodology for identifying risk inputs adds the most value in the assessment process  for CI owners and operators in the Transportation Systems sector.  According to these officials, the data gathering process is extensive and  involves a substantial number of industry experts who are brought  together to analyze potential threats, vulnerabilities, and consequences  across the five transportation modes for which TSA is responsible. The  officials added that this elicited risk information allows TSA to better  allocate resources across the multiple transportation modes. According to  one senior OCIA official, NPPD is best suited to execute complete risk  assessments that are intended to focus on broad risks to CI and are not  specific to individual CI assets. For example, NPPD is providing risk  information for the execution of the 2018 Homeland Security National  Risk Characterization (HSNRC), which evaluates the full range of risks  addressed by DHS. This official stated that their office is working with  DHS\u2019s Office of Policy to maximize the value of the insights gained from  the HSNRC effort and using it to inform NPPD decisions about strategy  and policy."], "subsections": []}]}, {"section_title": "DHS Uses CI Risk Information to Inform Strategic Planning and Guide Outreach to Owners and Operators", "paragraphs": ["DHS uses CI risk information in multiple ways, including informing  strategic planning and developing analytic products, and at the  component level to guide its day-to-day owner and operator outreach and  incident response. DHS is also facilitating risk-based cross-sector  planning and information sharing through sector coordinating councils."], "subsections": [{"section_title": "DHS Uses CI Risk Information to Inform Its Strategic Planning and is Taking Actions to Improve Supporting Risk Analysis", "paragraphs": ["According to DHS Office of Policy officials, DHS is using risk information  to inform departmental strategic planning as part of its third QHSR. The  QHSR is DHS\u2019s process for updating the national homeland security  strategy, identifying critical homeland security missions, and assessing  the organizational alignment of DHS with the homeland security strategy  and missions. The results of the QHSR are used in DHS\u2019s Strategic Plan,  which outlines how DHS plans to implement the QHSR homeland security  goals, lists strategies to achieve these goals, and identifies performance  measures to track progress towards these goals. The QHSR incorporates  multiple sources of risk information, including the HSNRC. The HSNRC  assesses natural hazards such as floods, and manmade hazards such as  terrorism. According to Office of Policy and NPPD officials, NPPD  provides a broad range of risk-related inputs to support the  implementation of the HSNRC risk assessment methodology. These  inputs provide DHS officials a better understanding of risks to CI during  strategic planning, according to Office of Policy officials.", "Our prior work on DHS\u2019s QHSR found that DHS assessed homeland  security risks for its second QHSR for fiscal years 2014 to 2018 by  considering threats, vulnerabilities, and consequences. We also found  that while the QHSR risk assessment described a wide range of  homeland security challenges and was a valuable step toward using risk  information to prioritize and select risk management activities, DHS did  not document how its various analyses were synthesized to generate  results, thus limiting the reproducibility and defensibility of the results. We  found that without sufficient documentation, the QHSR risk assessment  results could not easily be validated or the assumptions tested, hindering  DHS\u2019s ability to improve future assessments. In addition, the QHSR  described homeland security hazards, but did not rank those hazards or  provide prioritized strategies to address them. We reported that  comparing and prioritizing risks helps identify where risk mitigation is  most needed and helps justify cost-effective risk management options.  Thus, we recommended that future QHSR risk assessment reflect key  elements of successful risk assessment methodologies, including being documented, reproducible, and defensible. We also recommended that  DHS refine its risk assessment methodology so that in future QHSRs it  can compare and prioritize homeland security risks and risk mitigation  strategies. DHS concurred with these recommendations and outlined  steps it planned to address them.", "In response to our recommendations, DHS officials described several  steps they have taken to address our recommendations. According to  these officials, the Office of Policy held initial meetings with government  and nongovernment subject matter experts after the release of our report  to refine the HSNRC. Also, according to these officials, a Departmental  Risk Modeling and Analysis Steering Committee (Risk committee) was  convened in June 2016 to review and approve proposed new  methodologies to help identify and prioritize threats and hazards for the  HSNRC. According to NPPD officials, NPPD proposed updates to the  HSNRC process as part of the Risk committee proceedings, such as  changing the scope and detail of the assessment. The Risk committee  evaluated these requests and finalized proposals for use in the third  QHSR, which is scheduled to be released in 2018. We will continue to  monitor the status of DHS\u2019s actions to address our recommendations and  how they are implemented."], "subsections": []}, {"section_title": "DHS\u2019s Office of Infrastructure Protection Uses CI Risk Information to Inform Outreach to Owners and Operators and Incident Response", "paragraphs": ["According to IP officials, PSAs use risk information to guide their outreach  to CI owners and operators. PSAs use the National Critical Infrastructure  Prioritization Program (NCIPP) list\u2013\u2013which prioritizes CI assets into  different levels according to their criticality\u2013\u2013to inform their outreach to  owners and operators. PSAs and their leadership use the NCIPP list to  prioritize outreach to owners and operators across each level of assets  within their area of jurisdiction for participation in DHS\u2019s voluntary security  survey and vulnerability assessment programs, as shown in figure 5.  Generally, PSAs engage CI owners and operators in the order in the  pyramid shown in figure 5, starting with Level 1.", "According to IP officials, PSAs also use risk information to guide incident  response. The officials explained that when an incident occurs, they pull  information from a variety of sources, including the database of assets on  the NCIPP list, to identify CI in the affected area. OCIA officials then  prioritize this information into a list to guide incident response efforts. For example, when Hurricane Hermine approached Georgia in September  2016, PSAs received a list from OCIA that categorized potentially affected  CI assets in the region into priority levels. The PSAs used the list to  prioritize their outreach to the highest priority assets.", "Officials from the CSA program, also plan to use risk information to guide  cybersecurity outreach to CI owners and operators. According to CS&C  officials, CSAs are currently able to meet resource demands for outreach  with little or no delay. However, as the CSA program continues to expand,  CSAs plan to use a risk-based methodology to prioritize outreach. This  methodology considers cyber threats, vulnerabilities, and consequences  to determine how and where CSAs are used, according to CS&C officials.", "DHS SSA representatives for our three selected sectors also use risk  information to guide their outreach to CI owners and operators. For  example, in response to a physical threat to a nuclear facility in Brussels,  Belgium, nuclear sector SSA officials engaged with private sector  representatives on the SCC and discussed ways to improve their  information-sharing process. In another example, Critical Manufacturing  SSA officials determined that smaller businesses in their sector did not  have business continuity plans. According to these SSA officials, this  was a risk that could disrupt the operations of these small businesses and  other businesses in their supply chain. SSA officials developed a tool to  help Critical Manufacturing sector owners and operators develop their  own continuity plans\u2013\u2013including templates, tabletop exercises, and a self- directed risk assessment for private sector owners and operators to use.  According to the Critical Manufacturing sector-specific plan, the expanded  use of business continuity planning will enhance the resilience of the  Critical Manufacturing Sector."], "subsections": []}, {"section_title": "DHS Facilitates Sharing of Cross-Sector Risk Information through Coordinating Councils and Planning Documents", "paragraphs": ["As part of DHS\u2019s responsibility described in the NIPP, DHS created the  Critical Infrastructure Partnership Advisory Council (CIPAC), a forum for  stakeholders including government officials and asset owners and  operators, to facilitate planning and information sharing. CIPAC  membership consists of representatives from the government and sector  coordinating councils\u2014federal, state, and local agency officials, and  private owners and operators, respectively\u2014who work together to  coordinate strategies, activities, and policies across governmental entities  within each of the 16 CI sectors. There is also a Critical Infrastructure  Cross-Sector Council comprised of SCC chairs and vice chairs from each  of the 16 sectors that meets quarterly to discuss, among other things,  details about risks and opportunities to share information across sectors.  Additionally, this Critical Infrastructure Cross-Sector Council provides a  forum for the leaders of the SCCs to provide senior-level, cross-sector  strategic coordination with DHS. The chairperson of the cross-sector  council also communicates with owners and operators across the sectors  as situations arise. For example, the chairperson convened a  teleconference within 24 hours of a recent terror attack in the United  Kingdom to share information and answer questions about potential risks  or lessons learned for CI owners and operators.", "In addition, DHS engages private sector owners and operators in cross- sector discussions through sector planning documents. For example, the  2015 sector-specific plans for each of the three sectors we studied  include descriptions of cross-sector interdependencies. These include  summaries of lifeline functions\u2013\u2013such as energy, water, communications,  and transportation systems\u2013\u2013which are essential to the operations of  most CI partners and communities. During development of the 2015  sector-specific plans the sectors and SSAs also collaborated and  identified emerging risks that spanned across multiple sectors, as shown  in figure 6."], "subsections": []}]}, {"section_title": "Agency and Third Party Comments", "paragraphs": ["We provided a draft of this product to DHS for review and comment. DHS  provided technical comments, which we incorporated as appropriate.  We  also provided draft excerpts of this product to the selected sector  coordinating council representatives we interviewed, who provided  technical comments that we also incorporated as appropriate.", "We are sending copies of this report to interested congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (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. Key contributors to this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Selected Risk Information Products and Activities Distributed by the Department of Homeland Security", "paragraphs": ["The following tables highlight threat, vulnerability and consequence  products and activities developed by the Department of Homeland  Security for the purpose of providing risk information to critical  infrastructure owners and operators."], "subsections": []}, {"section_title": "Appendix II: NCCIC Cybersecurity Products and Services", "paragraphs": ["Table 5 below highlights the cybersecurity products and services that the  National Cybersecurity and Communications Integration Center (NCCIC)  reported providing to its customers in fiscal years 2015 and 2016."], "subsections": []}, {"section_title": "Appendix III: Summary of Department of Homeland Security Complete Risk Assessments for Critical Infrastructure", "paragraphs": ["The following tables highlight complete risk assessments regularly  conducted by the Transportation Security Administration and the U.S.  Coast Guard within the Transportation Systems sector."], "subsections": []}, {"section_title": "Appendix IV: National Critical Infrastructure Prioritization Program Consequence-Based Criteria and Relative Thresholds", "paragraphs": ["Figure 7 below illustrates the Department of Homeland Security\u2019s (DHS)  approach for prioritizing the list of systems and assets that the Secretary  of Homeland Security determines would, if destroyed or disrupted, cause  national or regional catastrophic effects. DHS has prioritized these CI  assets into different levels according to their criticality, to inform their  outreach to owners and operators. Consistent with the National  Infrastructure Protection Plan risk management framework, the criteria for  determining which level each asset is assigned to on the National Critical  Infrastructure Prioritization Program (NCIPP) list are entirely  consequence based thresholds and include fatalities, economic loss,  mass evacuation length, or national security impacts."], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Ben Atwater (Assistant Director)  and Landis Lindsey (Analyst-in-Charge) managed this audit engagement.  Chuck Bausell, Michele Fejfar, Daniel Glickstein, Tracey King, Steve  Komadina, Tom Lombardi, Kush Malhotra, Gabrielle Matuzsan, and  Claire Peachey made significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-266", "url": "https://www.gao.gov/products/GAO-18-266", "title": "Office of Navajo and Hopi Indian Relocation: Executive Branch and Legislative Action Needed for Closure and Transfer of Activities", "published_date": "2018-04-24T00:00:00", "released_date": "2018-04-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 1974, the Settlement Act was intended to provide for the final settlement of a land dispute between the Navajo and Hopi tribes that originated nearly a century ago. The act created ONHIR to carry out the relocation of Navajo and Hopi Indians off land partitioned to the other tribe. ONHIR's relocation efforts were scheduled to end by 1986. However, those efforts continue today.", "GAO was asked to review ONHIR's operations. Among other things, this report discusses (1) ONHIR's management and the status of relocation activities and (2) executive branch and legislative actions that may be needed for ONHIR to close and transfer remaining activities. GAO reviewed documentation; interviewed officials at ONHIR and other federal agencies, as well as from the Navajo Nation and Hopi Tribe; and conducted two site visits to ONHIR's offices and the Navajo reservation in Arizona."]}, {"section_title": "What GAO Found", "paragraphs": ["As of December 2017, the Office of Navajo and Hopi Indian Relocation, and its predecessor agency (collectively, ONHIR), has relocated 3,660 Navajo and 27 Hopi families off disputed lands that were partitioned to the two tribes and provided new houses for them. Although the Navajo-Hopi Settlement Act of 1974 (Settlement Act) intended for ONHIR to complete its activities 5 years after its relocation plan went into effect, the agency has continued to carry out its responsibilities for over three decades beyond the original deadline and the potential remains for relocation activities to continue into the future. For example, GAO found that by the end of fiscal year 2018", "at least 240 households whose relocation applications were previously denied could still file for appeals in federal court and if the court rules in their favor these households could become eligible for relocation benefits under the Settlement Act, and", "ONHIR is still responsible for helping homeowners who might request repairs for 52 relocation homes that remain under warranty.", "ONHIR believes that it has substantially completed its responsibilities under the Settlement Act and has stated its intent to close by September 2018. However, ONHIR does not have the authority to close its operations and has not yet taken the steps necessary to facilitate such a closure. GAO identified a number of areas where either executive branch or congressional actions would be needed to affect a closure of ONHIR, as shown in these examples:", "The Settlement Act states that ONHIR will cease to exist when the President determines that its functions have been fully discharged. ONHIR, however, has not requested a determination nor provided specific information to the President that could facilitate such a decision.", "ONHIR has prepared a transition plan and identified potential successor agencies that could assume its remaining activities. However, officials at these agencies said they currently do not have authority under the Settlement Act to undertake ONHIR's activities. Without congressional authorization these agencies would not be able to succeed ONHIR.", "ONHIR has prepared an implementation plan to guide its closure but has not yet taken necessary steps to ensure that all the key information about its activities has been compiled. For example, ONHIR's database for tracking warranty requests is missing information, such as the date of warranty repairs and other contractor information. Similarly, ONHIR has not prepared complete information from its files on the remaining denied households who could file for federal appeals. Federal internal control standards state that agencies should identify and respond to risks and use quality information. By not preparing complete information on the relocation activities it has been engaged in, ONHIR places an effective transition of its functions to another agency at risk. This is because any successor agency authorized to continue these activities will not have the complete information needed to effectively fulfill these functions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four matters for congressional consideration; including that Congress provide successor agencies necessary authority to continue ONHIR's remaining activities if it closes. GAO is also making five recommendations to ONHIR, including that it request a closure determination from the President and prepare necessary information to facilitate the transfer of its activities to a successor. ONHIR neither agreed nor disagreed with the five recommendations and stated it had either already taken steps or planned to once a successor is identified. GAO continues to believe the recommendations are valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Office of Navajo and Hopi Indian Relocation (ONHIR), an  independent entity within the executive branch, was created as a result of  the passage of the Navajo-Hopi Settlement Act of 1974 (Settlement Act).  This act authorized the partition of disputed lands between the Navajo  and Hopi tribes originally set aside by the federal government for a  reservation in 1882. Members of one tribe who were living on land  designated to the other tribe were to be relocated and provided new  homes and cash bonuses. As of December 2017, ONHIR had relocated  more than 3,600 Navajo and Hopi families, consisting of about 16,700  individuals, and had expended around $600 million since it was  established, according to ONHIR officials.", "ONHIR\u2019s relocation process was originally scheduled to end in July 1986,  but the process is ongoing and ONHIR continues to operate. ONHIR  requested nearly $15 million for fiscal year 2018, more than double the  amount it had received prior to fiscal year 2016, to facilitate and expedite  relocation activities. ONHIR officials have said that the relocation  activities ONHIR was charged to administer\u2014certifying applicants as  eligible for relocation, reviewing appeals, and providing relocation  homes\u2014would be completed by the end of fiscal year 2018. As of  December 2017, ONHIR\u2019s remaining activities included relocating 20  certified families, resolving 25 active administrative appeals cases, and  managing other activities, including a cattle ranch and land held in trust  by the federal government for the benefit of the Navajo Nation. ONHIR  officials have recognized that some remaining activities and continued  responsibilities would need to be transferred to another agency or entity  in the event of ONHIR\u2019s closure.", "You asked us to review issues related to ONHIR and its ongoing  activities. This report examines (1) ONHIR\u2019s management of the eligibility  and appeals processes and the status of these activities; (2) ONHIR\u2019s  management of the home-building process and the status of these  activities; (3) executive branch or legislative actions that may be  necessary to terminate ONHIR in an orderly manner and transition  remaining relocation activities; (4) ONHIR\u2019s management of Navajo trust  lands and related transition activities; and (5) legislative actions that may  be necessary to address other Settlement Act provisions.", "To address these objectives, we reviewed our prior related reports and  other studies and analyzed relevant laws and regulations. We reviewed  policies and procedures for relocation activities\u2014the eligibility and  appeals process and home-building activities\u2014and for other key  activities, as well as related documentation, including home-building  contracts and lease agreements. We interviewed ONHIR officials about  relocation and other key activities, and we interviewed ONHIR\u2019s hearing  officer to better understand his role in the appeals process. We also  interviewed federal officials from the Department of the Interior\u2019s (Interior)  Bureau of Indian Affairs (BIA), Office of Inspector General, and Bureau of  Land Management (BLM); Department of Housing and Urban  Development (HUD); Department of the Treasury (Treasury); and Indian  Health Service, within the Department of Health and Human Services. We  also conducted interviews with officials from the Navajo Nation and the  Hopi Tribe, as well as tribal entities including the Navajo-Hopi Legal  Services Program, the Navajo-Hopi Land Commission Office, and the  Navajo Nation Human Rights Commission. We conducted two visits to  ONHIR\u2019s offices and the Navajo region in August 2017, where we  interviewed ONHIR staff, observed a transition meeting, took two  separate tours of homes (one with ONHIR officials and the other with  Navajo Nation officials) and observed rangeland management activities,  and attended presentations at three Navajo Nation chapters. Additional  information on our methodology is provided in appendix I.", "We conducted this performance audit from March 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Settlement Act, enacted on December 22, 1974, was intended to  provide for the final settlement of a land dispute between the Navajo and  Hopi tribes that originated nearly a century ago. The 1882 Executive  Order, signed by President Chester Arthur, set aside approximately 2.5  million acres of land for the Hopi and \u201csuch other Indians as the Secretary  of the Interior may see fit to settle thereon.\u201d Since that time, the Navajo  and Hopi tribes have disputed the rights and occupancy of the lands. In a  1962 court case, Healing v Jones, the Hopi tribe claimed exclusive rights  to the entire reservation, and the Navajo claimed exclusive rights to about  80 percent of the reservation. In 1963, the U.S. Supreme Court affirmed  an Arizona District Court decision that set aside about 631,000 acres of  the land\u2014known as District Six\u2014as exclusively Hopi and designated the  remaining about 1.9 million acres as a joint use area, to be managed and  used jointly by the two tribes. The two tribes legally co-owned the joint  use area, but the use of the land remained a source of disputes between  the two tribes. The Settlement Act authorized the partitioning of the  surface of the joint use area and directed that it generally be split evenly  between the tribes. It required Navajo households residing on lands  partitioned to the Hopi Tribe (Hopi Partitioned Lands) to relocate and,  similarly, Hopi households residing on lands partitioned to the Navajo  Nation (Navajo Partitioned Lands) to relocate. Figure 1 illustrates the  current Navajo and Hopi reservations.", "Figure 2 illustrates the portion of the reservation near Tuba City, Arizona,  that was subject to the land dispute, the area that was designated as  exclusively Hopi (District Six), and the partitioned lands."], "subsections": [{"section_title": "Selected Settlement Act Provisions and ONHIR\u2019s Responsibilities and Structure", "paragraphs": ["The Settlement Act and its subsequent amendments contain several key  provisions for relocation and other activities.", "Relocation. The Settlement Act mandated that ONHIR submit a  report, including a detailed plan, to Congress concerning the  relocation of households and members of each tribe from lands  partitioned to the other tribe. ONHIR stated that it has no authority to  require any person to leave the land that was awarded to the other  tribe. The act instructed that the relocation process be completed 5  years after the relocation plan took effect. The report and plan, which  ONHIR transmitted to Congress in April 1981, provided details on  relocation of households and their members, including generating  names of those residing on the partitioned lands and identifying sites  for relocation, among other things. The relocation was scheduled to  be completed by July 1986. Specifically, the relocation benefits  include $130,000, adjusted to current construction and housing  development costs, for a household of three or fewer and $136,000  for a household of four or more to obtain a decent, safe, and sanitary  replacement home, in addition to moving expenses and, within the  first few years, bonus payments provided within the first years  following the relocation plan. Because there were far fewer Hopi  households residing on lands partitioned to the Navajo Nation, almost  all of the households relocated (about 99 percent) have been for  Navajo families.", "Resettlement land taken into trust for the Navajo Nation. The  Settlement Act as amended authorizes and directs the Secretary of  the Interior to take certain lands into trust for the Navajo Nation, which  would become part of the Navajo Reservation. The 1980 amendments  to the Settlement Act required the border of any parcel taken into trust  to be within 18 miles of the Navajo reservation\u2019s then boundary. Most  of the lands taken into trust in Arizona pursuant to the Settlement Act  as amended are known as the New Lands. Navajos living on Hopi  Partitioned Lands could choose to relocate to the New Lands, as well  as other areas on the Navajo reservation or off-reservation.", "Administration and use of acquired trust land. Pursuant to the  Settlement Act as amended, ONHIR administers these lands taken  into trust for the Navajo Nation until relocation is complete. In contrast,  Interior administers other land the federal government holds in trust  for Indian tribes, including the Navajo Nation. In addition, the  Settlement Act as amended requires the lands taken into trust for the  Navajo Nation to be used solely for the benefit of Navajo families\u2014 known as relocatees\u2014that at the time of the Settlement Act\u2019s  enactment had been residing on lands partitioned to the Hopi.", "Leasing of acquired trust land. The Navajo and Hopi Indian  Relocation Amendments of 1988 transferred responsibility for issuing  leases and rights-of-way for housing and related facilities on the New  Lands from Interior to ONHIR. In July 1990, ONHIR issued  procedures for the leasing of New Lands, including homesite and  business leases, in section 1810 of its management manual.  ONHIR\u2019s regulations specify that the agency\u2019s operation is to be  governed by a management manual.", "Navajo Rehabilitation Trust Fund. The 1988 amendments to the  Settlement Act established the Navajo Rehabilitation Trust Fund in the  U.S. Treasury. The Trust Fund consists of appropriations made for the  fund, deposits of income from certain trust assets, and any interest or  investment income accrued. The Trust Fund is essentially a loan from  the federal government to the Navajo Nation to be repaid from  revenues derived from leases of the lands and minerals taken into  trust in New Mexico pursuant to the Settlement Act as amended. The  tribe assumed responsibility for managing the Trust Fund pursuant to  the American Indian Trust Fund Management Reform Act of 1994,  according to Interior officials. Under this act, neither Interior, ONHIR,  nor Treasury has a role in managing or overseeing the Trust Fund  once a tribe has assumed responsibility for managing it.", "Aside from administering the relocation activities and the lands taken into  trust pursuant to the Settlement Act as amended, ONHIR also operates  the Padres Mesa Demonstration Ranch. The ranch was established in  fiscal year 2009 on the New Lands and teaches sustainable cattle  ranching and modern livestock marketing to the Navajo. According to  ONHIR officials, the ranch is on approximately 60,000 acres of trust land  acquired pursuant to the Settlement Act as amended. The purpose of the  ranch is to teach relocatees methods to maximize income from cattle- raising operations and be good stewards of the land. In addition to  purchasing cattle, ONHIR hired an employee to manage the ranch\u2019s  operations and contract cowboys to work on the ranch. ONHIR sells the  cattle raised on the ranch and uses the proceeds to help pay for ranch  operations. According to ONHIR documents, from fiscal years 2009  through 2016, ONHIR obligated approximately $1.8 million for the ranch\u2019s  operation from a mixture of appropriations and cattle sale revenue. Over  the same period, cattle sales generated over $1.4 million, according to  ONHIR documents.", "The Settlement Act established a three-member commission, the Navajo  and Hopi Indian Relocation Commission, to administer the relocation  program. The 1988 amendment abolished the three-member Relocation  Commission and established in its place ONHIR as an independent entity  of the executive branch under the authority of a single Commissioner.  ONHIR has not had a Commissioner since 1994 and has been under the leadership of its Executive Director. As of December 2017, ONHIR said  that they had 31 employees among its three offices in Flagstaff, Sanders,  and Chambers, Arizona.", "ONHIR was not designed to be a permanent agency, but a specific  closing date has not been determined. ONHIR previously developed  plans to close out its activities in 2008, according to ONHIR officials, but  has continued to operate. The Settlement Act states that ONHIR will  cease to exist when the President of the United States determines that its  functions have been fully discharged. During a testimony at a  congressional hearing in February 2016, ONHIR\u2019s Executive Director said  that ONHIR was working toward completing its work so the office can  close by the end of fiscal year 2018. ONHIR has developed a draft  transition plan, dated March 2017, that identifies, among other things, four  areas of activity that would need to be transferred to another entity in the  event of its closure in September 2018: (1) appeals and eligibility; (2)  housing; (3) administration of the New Lands; and (4) the Padres Mesa  Demonstration Ranch. In the draft transition plan, ONHIR primarily  identified offices within Interior\u2014including BIA, the Office of Hearings and  Appeals, and the Office of the Solicitor\u2014to take over several key  activities, as well as other entities including the Department of Justice and  the Navajo Nation government. In October 2017, ONHIR supplemented  the draft transition plan with an implementation plan to outline the transfer  of these four areas, among other things."], "subsections": []}, {"section_title": "Other Federal Agencies and Tribal Entities with Responsibilities in Indian Country", "paragraphs": ["BIA is generally responsible for the administration and management of  land held in trust by the United States for Indians and Indian tribes. BIA  provides services to 573 federally recognized tribes and about 1.9 million  individual American Indians and Alaska Natives. BIA\u2019s responsibilities  include regulating grazing on trust land, leasing trust land, and  maintaining roads in Indian country, among other things. BIA administers  the vast majority of land held in trust for Indian tribes and has issued  regulations governing leasing of and grazing on trust land that it  administers, including the Hopi Partitioned Lands and the portions of the  Navajo reservation that are not administered by ONHIR. BIA\u2019s  regulations do not apply to the lands acquired pursuant to the Settlement  Act as amended because under the act, ONHIR is responsible for  administering those lands. BIA also administers a Housing Improvement  Program that funds rehabilitation of housing units.", "Other federal agencies, such as HUD and the Indian Health Service,  provide housing assistance and infrastructure in Indian country and tribal  entities, such as the Navajo Tribal Utility Authority, provide services on  the Navajo reservation. HUD, through its Office of Native American  Programs, awards block grants (known as the Indian Housing Block  Grant program) to tribally designated housing entities, such as the Navajo  Housing Authority. These grants can be used to provide housing  assistance for tribal members, such as constructing homes. The Indian  Health Service is authorized to provide drinking water and sanitation  services to Indian homes and communities, among other things. ONHIR  and the Indian Health Service have an interagency agreement to share  the cost of connecting relocation homes on the reservation to water and  sewer lines. Most of the electricity, water, and wastewater on the Navajo  reservation are operated by the Navajo Tribal Utility Authority, an  enterprise of the Navajo Nation government. Similarly, ONHIR and the  Navajo Tribal Utility Authority have an interagency agreement for the  construction of electrical power lines and related services for relocation  homes.", "The Navajo Nation government makes decisions about allocation of  resources, including federal grants it receives. The Navajo Nation Council  hosts 24 council delegates representing 110 Navajo Nation chapters. The  chapters are political subdivisions of the Navajo Nation with delegated  authority to address local issues pertaining to the land and health status  of their respective chapter populations. In a March 2014 report, we found  each chapter could have different development priorities and approval  processes for housing programs and services. In its comments on a  draft of this report, ONHIR stated that more than 400 families have moved  to the New Lands, and over 1,200 families have moved to locations  outside the Navajo Nation. The New Lands are part of the Nahata Dziil  Chapter."], "subsections": []}, {"section_title": "Housing Issues in Indian Communities", "paragraphs": ["We have previously found that American Indians have historically faced  worse housing conditions than other socioeconomic groups. They  disproportionately experience socioeconomic challenges, including high  unemployment and extreme poverty, which affect housing conditions on  Indian reservations and in Indian communities. Overcrowding,  substandard housing, and homelessness are far more common in  American Indian communities. For example, a 2017 Urban Institute report  prepared for HUD found that 5.6 percent of American Indian households  had problems with plumbing, 6.6 percent had problems with the kitchen,  and 12 percent had problems with heating. In comparison, 1.3 percent of  households in the United States had problems with plumbing, 1.7 percent  had problems with the kitchen, and 0.1 percent had problems with  heating.", "As we have previously found, common housing challenges in Indian  communities are largely related to remoteness and other geographical  factors, lack of adequate infrastructure, land use regulation, and other  factors. Some remote areas where Indian tribes are located can present  unique logistical challenges, including a lack of buildable land and limited  supply of building materials. In some regions, tribes face challenges  related to a lack of adequate infrastructure, such as roads, water, and  sewer systems. According to Navajo Nation officials, traditionally, tribes  lived a lifestyle that was connected to their traditional and ancestral lands,  with homes and other structures built from natural materials and  constructed in communities with extended families. For example, many of  the Navajo who were on the Hopi Partitioned Lands were self-sufficient  and lived in traditional homes called hogans, which are made of wooden  poles, tree bark, and mud. See figure 3 for an example of a traditional  home."], "subsections": []}]}, {"section_title": "ONHIR Has Changed Relocation Eligibility Requirements and Application Deadlines for Various Reasons, and Additional Applicants Could Still File Court Appeals", "paragraphs": [], "subsections": [{"section_title": "ONHIR Developed an Eligibility Certification Process, and Denied Applicants Can Appeal Their Eligibility Determination", "paragraphs": ["ONHIR\u2019s process for certifying applicants\u2019 eligibility to receive relocation  benefits has generally been consistent over time since ONHIR began  accepting applications. All applicants must apply through ONHIR for  relocation benefits and demonstrate that they meet eligibility criteria,  discussed later in this report. Based on eligibility criteria, in general, a  certifying officer determines whether an applicant is certified or denied. If  an applicant is certified, the applicant becomes an ONHIR client for  relocation. If an applicant is denied, the applicant is eligible to file for  appeals\u2014first, an administrative appeal, then an appeal with the U.S.  District Court for the District of Arizona, if the administrative appeal  upholds the denial decision. Figure 4 illustrates this process.", "If an applicant is denied, he or she can obtain assistance from the  Navajo-Hopi Legal Services Program, an entity established in 1983 within  the Navajo Nation\u2019s Department of Justice to assist individual members of  the Navajo and Hopi tribes who were affected by the Settlement Act.  Applicants\u2019 denial letters indicate that the applicant can seek counsel  through this program; however, not all applicants are represented by  counsel for the administrative hearing. As of July 2017, ONHIR had spent  about $1.5 million on legal services and over $1.2 million on the hearing  officer who adjudicates the administrative appeals. In addition, about  $285,000 was spent for an attorney salary at the Navajo-Hopi Legal  Services Program from 2009 through 2011 and, according to ONHIR  officials, about $418,000 was spent on attorney fees for applicants whose  eligibility for relocation benefits was reversed in the U.S. District Court.", "As of December 2017, ONHIR had certified more than 3,800 households  since the agency began reviewing its first applicants in 1977. The  certification process on average has taken about 979 days for those who  were certified without a need to file for an appeal and 3,301 days for  those who were certified through the appeals process (that is, those who  had their denied application reversed through the appeals process).  Figure 5 illustrates these time frames."], "subsections": []}, {"section_title": "ONHIR Has Extended Application Periods and Changed Eligibility Requirements for Varying Reasons", "paragraphs": ["For various reasons, ONHIR provided three additional application periods  after the first application period deadline in 1986, which were not included  in the plan ONHIR submitted to Congress. After the original deadline,  ONHIR provided a second application period from April 1997 through  March 2000 after the enactment of a new law, which ratified a formal  agreement under which the Hopi tribe agreed to allow traditional Navajo  residents to remain living on Hopi Partitioned Lands for 75 years. In  conjunction, the formal agreement provided that ONHIR relocate all  eligible Navajo residents on Hopi Partitioned Lands who (1) did not sign  an individual agreement to remain on the land, or (2) signed but then  surrendered their signed individual agreement before the February 2000  deadline.", "ONHIR accepted applications again from May 2005 through June 2006  (third application period) based on language in a 2005 Senate bill to  provide a last chance for Navajos living on Hopi Partitioned Lands to  relocate, which passed the Senate but was not enacted, according to  ONHIR officials. ONHIR was not required to reopen its application process, but it chose to do so. Even though ONHIR issued relocation  notices in newspapers and at chapter facilities at the time of the original  application period, ONHIR officials said that the additional application  periods were in recognition that not all Navajo residing on the Hopi  Partitioned Lands had moved, an outcome that was not considered in the  original plans.", "ONHIR also accepted applications from February 2008 through  September 2010 (fourth application period) in response to a federal court  decision that concluded that ONHIR had not provided personal notice to a  potentially eligible applicant before July 7, 1986 (the deadline for the initial  application process) to enable him to apply for relocation benefits.  According to ONHIR officials, in consultation with the Department of  Justice in Washington, D.C. and the U.S. Attorney\u2019s Office in Arizona,  ONHIR reopened the process for applications to help ensure that  everyone who might be eligible for benefits was given the opportunity to  apply, rather than litigating a series of similar cases. ONHIR officials said  they worked closely with the Navajo Nation to send out letters of  notification to potential eligible applicants, even though they were not  required to reopen the application process.", "These three additional application periods have resulted in more  applicants and time required for ONHIR to review applications. The  numbers of applicants and outcomes across the different application  periods are summarized in table 1. The attempts to prompt more Navajos  to relocate in the second and third application periods resulted in a limited number of applications, 129 and 167 applicants, respectively. However,  ONHIR received nearly 2,300 applicants during the fourth application  period.", "Throughout the multiple application periods, applicants demonstrated two  key eligibility criteria: (1) head of household status and (2) residency on  the lands partitioned to the other tribe. However, ONHIR chose and  applied varying eligibility rules related to residency status over the  different application periods.", "Original application period. Under the original residency status  criterion, applicants had to demonstrate that they were residents of  the partitioned lands on December 22, 1974 (the date the Settlement  Act was passed) and had not moved there within the previous year.", "Second and third application periods. During the second and third  application periods, ONHIR used provisions for late applicants\u2014 persons who had not applied for relocation benefits before the original  deadline\u2014that were established in 1986 amendments to ONHIR\u2019s  regulations and that revised the residency status eligibility criterion.  Unlike the original residency criterion, the agency guidance applicable  to applicants during the second and third application period stated that  applicants must demonstrate continuous residence on the partitioned  lands from December 22, 1974, to July 7, 1986 (the original deadline)  and until eligibility determination is rendered. There were exceptions  for demonstrating continuous residency as set out in the agency  guidelines interpreting the regulations, including for those who were  temporarily away for school, prison, medical treatment, and military  service.", "Fourth application period. During the fourth application period,  ONHIR decided to apply the original criterion, without the continuous  residency requirement implemented in the guidelines for the second  and third application periods, for all applicants. ONHIR officials said  they made this decision in response to a federal court decision,  discussed previously, that concluded that ONHIR had not provided  personal notice to a potentially eligible applicant before the original  July 1986 deadline; the U.S. District Court District of Arizona applied  the original criterion in this decision.", "The applicant has the burden of proof for providing evidence to meet the  eligibility criteria. Demonstrating head of household or residency status  has been difficult for residents for several reasons, according to a Navajo-Hopi Legal Services Program representative and Navajo Nation chapter  officials we interviewed. For example, Navajo is an oral culture that  historically existed mostly on a livestock or cash economy in which  transactions were not documented, making it difficult to document the  source of income or head of household status. In its comments on a draft  of this report, ONHIR stated that the legal residence determination was  complicated because many Navajos performed seasonal work and lived  outside the Hopi Partitioned Lands for extended periods. According to  Navajo Nation officials, oral evidence has not been allowed by the ONHIR  Hearings Officer, and language and cultural barriers have also been  obstacles. Some Navajos have limited English proficiency, although  ONHIR offers translators for Navajo speakers. In its comments on a draft  of this report, ONHIR stated that oral evidence has always been allowed  but has sometimes been found not to be credible. Another unique  characteristic of the Navajo is the use of shared mailboxes at trading  posts\u2014a place in the community for people to meet and receive their  mail\u2014making it difficult to ensure that ONHIR denial letters or other  notifications reach individual applicants. For example, in one appeals  case a court found that applicants who did not personally sign for the  receipt of a denial letter must be notified of the court\u2019s decision to allow  those applicants to file a waiver of the appeal deadline. ONHIR also  stated that it offered administrative appeals to Navajos for whom ONHIR  could not show actual receipt of denial letters."], "subsections": []}, {"section_title": "Although ONHIR Officials Believe That Most Eligible Applicants Have Been Processed, the Potential for Future Court Appeals Remains", "paragraphs": ["While ONHIR officials said that eligibility determination has been  completed, the potential exists for further federal court appeals,  potentially resulting in the need for additional eligibility determinations. As  of January 2018, ONHIR officials said that 24 of the remaining 25  households that were denied eligibility benefits have gone through the  hearing process and are awaiting their decisions, which officials said  should be completed in early 2018. Households whose denials are  upheld will be eligible to file for an appeal with the U.S. District Court for  the District of Arizona. Additionally, any households that have been  denied and are within the 6-year statute of limitations are still eligible to  file for appeals in federal court. Eleven cases were pending in the federal  district courts and four in federal appeals court as of March 2018, and  according to ONHIR officials, at least 240 households that were denied  eligibility benefits and whose decisions were upheld by the hearing officer  (and are within the 6-year statute of limitation) could potentially file for  appeals in federal court before the end of fiscal year 2018.", "Any additional court appeals could result in the need for additional  eligibility determinations in the future. For example, a federal court  recently remanded a case to ONHIR to review the applicant\u2019s income  information and reevaluate the eligibility determination. According to  ONHIR officials, they are taking steps to review the applicant\u2019s case file,  investigate the evidence of the applicant\u2019s income to demonstrate the  head of household status, and share the findings with the applicant\u2019s  attorney. ONHIR officials stated that due to the unique situation of each  applicant, they review the information in the applicant\u2019s case file to  comply with the court\u2019s order on eligibility determination."], "subsections": []}]}, {"section_title": "ONHIR Has Nearly Completed Home Building but Provided Limited Contractor Oversight, and Outstanding Warranties Remain in Effect", "paragraphs": [], "subsections": [{"section_title": "ONHIR Developed Policies and Procedures for the Home-Building Process", "paragraphs": ["ONHIR\u2019s policies and procedures are intended to provide certified  applicants who are eligible for relocation benefits with decent, safe, and  sanitary homes, as mandated in the Settlement Act. For example,  ONHIR\u2019s management manual includes policies that require ONHIR to  provide counseling on the home-building process and home maintenance  training for relocatees. Figure 6 shows an example of a relocation home.  Prior to moving to relocation homes, many families lived in one-room  houses that they constructed themselves with no basic infrastructure,  such as electricity, water, or plumbing facilities, and some families were  unfamiliar with the features of a modern home. Families lived a spiritual  and religious lifestyle that was connected to their traditional culture and  ancestral lands, with homes constructed in communities with extended  families.", "ONHIR\u2019s management manual also includes policies that require  employees to work with clients on the home acquisition process starting  from the time clients are certified and continue until 2 years after the client  has been relocated, including assisting clients with finding contractors,  signing home-building contracts, understanding home maintenance, and  requesting warranty repairs. ONHIR works with families after they have  moved into their relocation home by providing assistance with warranty  issues; assistance in adjusting to their new community; and referrals to  agencies in the new community that provide health care, supplemental  nutrition, financial assistance, behavioral health, employment, and other  social services. Relocation homes are the property of the client, and  ONHIR has no responsibility for relocation homes after a 2-year warranty  period on each home expires. ONHIR wrote a standard template of a  contract that clients and contractors must sign, but ONHIR is not a  signatory of the home-building contract. However, ONHIR is a signatory  to the 2-year home warranty contract, along with the client and the  contractor. Additional policies and procedures required by ONHIR\u2019s  management manual are summarized in table 2.", "ONHIR\u2019s management manual also includes policies for overseeing  contractor performance. ONHIR officials provide clients with a list of home-building contractors, but clients may choose any licensed  contractor in the jurisdiction where the home is built. ONHIR officials  estimate that more than 95 percent of relocation homes have been built  by contractors from its list. ONHIR officials said that contractors on the list  ONHIR provides to clients must demonstrate good standing and must be  licensed by the state of Arizona, as stated in its policy. In addition,  ONHIR\u2019s policy states that ONHIR may take action against contractors  whose work results in an excessive number of warranty complaints."], "subsections": []}, {"section_title": "Most Building Is Complete, but Weaknesses in Oversight Allowed Poor Performing Contractors to Build Homes", "paragraphs": ["The majority of ONHIR\u2019s home-building work is now complete. As of  December 2017, according to officials, ONHIR had relocated 3,687  families into new homes, and ONHIR officials said they expect  construction on the remaining 20 homes to be completed by September  2018.", "Although most home-building activities are complete, we found that  ONHIR has historically allowed contractors with a history of performance  issues to build relocation homes. For example, ONHIR provided us with  a report generated from its contractor performance database that shows a  contractor who had failed 42 percent of final inspections during a 11-year  period\u2014from January 2006 through September 2017\u2014continued to  receive home-building contracts. Similarly, we identified homes with  multiple warranty complaints in ONHIR\u2019s warranty database. Specifically,  one home in the warranty file database had 17 warranty defect  complaints attributed to the contractor. ONHIR officials said that they do  not track complaints by contractor in a database nor do they have a defined number of complaints for removing contractors. ONHIR officials  said that they have not removed a contractor involuntarily from their list  since the 1990s.", "ONHIR officials explained that these contractors continued building  homes because it is difficult to find contractors who want to work on the  reservation due to the isolated nature of homesites. Moreover, in recent  years they said they did not track complaints by contractor because they  would be aware of complaints about a contractor due to the smaller  number of relocation homes that have been built. As a result, according to  ONHIR officials, they have not needed to take actions to remove  contractors from their list since the 1990s or to generate reports on  contractor performance. In addition, ONHIR officials said some warranty  complaints were trivial, such as peeling paint or visible carpet seams, and  thus terminating contractors for such issues was unnecessary. ONHIR  officials also noted that all homes eventually passed their final inspections  and any failed inspection items were corrected and reinspected before  contractors received payments."], "subsections": []}, {"section_title": "Some Tribal Government Officials and Relocatees Said ONHIR Has Not Discharged Its Responsibilities because of Construction, Societal, and Infrastructure Concerns", "paragraphs": ["Although ONHIR said it has nearly completed its relocation obligations,  some relocatees, the Hopi tribe, and Navajo Nation government officials  said that it has not completed its work. Specifically, Navajo Nation  officials and some relocatees said the office should remain open to  address various concerns with relocation homes and the societal effects  of relocation. Moreover, according to some relocatees and Navajo Nation  government officials, these concerns include homes that were built with  faulty materials and with unfinished infrastructure, such as electricity. As  previously mentioned, ONHIR has no responsibility over relocation homes  after the 2-year warranty period on each home expires. However, an  official from the Navajo-Hopi Legal Services Program said that  homeowners had concerns with their homes beyond the 2-year warranty  period. While ONHIR has attributed such issues to a lack of homeowner  maintenance, relocatees have attributed these issues to ONHIR\u2019s lack of  oversight of the home-building process. Concerns some relocatees and  tribal government officials described include the following:  Construction. Navajo Nation officials from three separate chapters told  us that relocation homes were not built properly. The President of the  Navajo Nation said that homes frequently have construction issues  related to cheap materials or poor workmanship, while another official  said that ONHIR does not properly oversee contractors. Another official  told us that the windows fall out of homes when it gets too windy. One  official said that some families have left their relocation homes behind  because of structural issues. Hopi tribe officials said relocatees from their  tribe were provided the cheapest homes available and that the conditions  of mobile homes are substandard. See figure 7 for examples of homes  with cracked foundations and broken windows.", "ONHIR officials said they inspect all complaints on relocation homes,  even after the warranty period has expired. If the investigation reveals an  issue that is a result of a construction defect, ONHIR officials said they  will fix the issue, whereas they will not fix issues they deem are the result  of poor homeowner maintenance.", "Soil settling. Navajo Nation officials from two chapters told us that  ONHIR did not conduct soil tests on homesites and others said that some  homes have experienced foundation issues. For example, one relocatee  said her relocation home has cracks in the walls and the floors. ONHIR  helps clients to apply for homesite leases, and according to ONHIR  officials, they assigned engineering technicians to conduct feasibility  studies to assess the condition of the soil for all on-reservation homesites,  as required by ONHIR policy. However, ONHIR officials also  acknowledged that expansion and contraction of soil over time in Arizona  is common and that shifting soil can lead to cracks in the foundation or  walls of homes. As reported by the Interior Inspector General in 2016, 5  relocatee homes on the Navajo reservation experienced cracks and other  visible signs of damage due to soil settling and have consequently been  replaced by ONHIR. ONHIR officials acknowledged that they have  demolished and replaced an additional 9 homes due to foundation issues  related to soil expansion and other issues, such as leaks in utility lines  and septic tanks. For the homes experiencing foundation issues outside  of the 14 homes ONHIR has replaced, ONHIR attributed continued soil  collapse to homeowners not maintaining the proper degree of slope  around their home to allow for drainage. In addition, they said that homes  may now be occupied by three generations of families. According to a  2016 Interior Inspector General report, ONHIR officials said this leads to  increased water use inside the homes which, in their opinion, exacerbates  the soil-settling issue.", "Societal effects. Relocated families expressed that relocation has  contributed to societal ills such as depression; alcoholism; drug abuse;  and suicide due to substandard living conditions and homesites away  from their family and previous sources of livelihood. The Navajo Nation  stated that relocatees experienced hardships adjusting to a new way of  life and felt a loss of connection with their culture moving away from their  ancestral lands and traditional way of life. According to a report issued by  the Navajo Nation Human Rights Commission, relocatees were promised  by the federal government, the Hopi Tribe, and the Navajo Nation that  relocation would offer a better life that did not materialize. ONHIR  officials noted that both the Navajo Nation and the Hopi Tribe have  requested extended counseling beyond the warranty period; however,  according to the March 2017 transition plan, ONHIR does not believe  providing it is within their statutory authority.", "Connections to utility infrastructure. According to Navajo Nation  officials, some homes are not properly connected to utility infrastructure,  such as electricity and water. For example, they stated that a number of  relocation homes in the Navajo area do not have electricity. In its  comments on a draft of this report, ONHIR stated that some relocatees  chose to relocate to remote areas and signed a form to affirm that they  wanted solar or cistern rather than grid utilities. A representative from the  Hopi Tribe told us that in one home, contractors installed plumbing  systems that were subsequently covered in concrete, which made repairs  difficult. Another chapter official said that a septic tank in one relocation  home continually overflowed because the tank was smaller than the  specifications. ONHIR officials said all homes are built to code at the time  of construction and have proper connections to infrastructure in terms of  water and electricity. They said they verify that homes pass necessary  inspections, including framing; mechanical; plumbing; and insulation, prior  to disbursing payments to the contractors.", "Community infrastructure. Some Navajo Nation chapter members and  ONHIR officials disagree as to whether ONHIR had an obligation to  provide additional community infrastructure under the Settlement Act.  Some chapter members said that ONHIR should not close because it has  not met its responsibilities to provide infrastructure projects, such as  paved roads and running water. The Navajo Nation Human Rights  Commission report states that relocatees were told they would be  provided with running water and the ability to raise livestock, among other  things. Provisions in the Settlement Act directed ONHIR to create a  report with a plan to ensure that infrastructure such as water, sewers, and  roads would be available at their relocation sites. ONHIR published a  report to meet the provision in 1981. This provision was repealed in  November 1988. ONHIR officials acknowledged that relocatees have  expressed the need for additional infrastructure, but said it is not within  ONHIR\u2019s statutory responsibility to provide it. The Settlement Act as  amended does not require ONHIR to provide infrastructure for the New  Lands."], "subsections": []}, {"section_title": "Warranty Commitments on Homes Already Built and Homes for Newly Eligible Applicants Are Activities That May Continue into the Future", "paragraphs": ["Although ONHIR\u2019s home building for certified applicants is nearly  complete, responsibilities remain for existing homes under warranty and  any additional homes built for newly certified applicants. As previously  discussed, relocation homes are under warranty for 2 years, starting at  the time when the house passes final inspection. During this 2-year  period, ONHIR is responsible for helping homeowners, who are located  on-reservation, request warranty repairs. After September 2018, 52  relocation homes will remain under the 2-year warranty period, according  to ONHIR officials. In addition, as previously discussed, ONHIR officials  told us that at least 240 denied applicants could still file for appeals in the  federal court and become eligible for relocation benefits, which would  necessitate the construction of additional homes. A 2-year warranty  period would then begin after these houses pass final inspection."], "subsections": []}]}, {"section_title": "Executive Branch or Congressional Action May Be Needed to Terminate ONHIR and Effectively Transfer Remaining Relocation Activities", "paragraphs": [], "subsections": [{"section_title": "ONHIR Has Not Yet Requested a Presidential Determination for Closure", "paragraphs": ["As previously mentioned, ONHIR was not designed to be a permanent  agency. The Settlement Act states that ONHIR will cease to exist when  the President of the United States determines that its functions have been  fully discharged. Although ONHIR officials have said they are working  toward completing their tasks so the office can close by the end of fiscal  year 2018, they acknowledge that not all activities will be complete by that  time. Federal internal control standards state that management should  externally communicate the necessary quality information to achieve the  entity\u2019s objectives. For example, information necessary to communicate  to an agency\u2019s oversight body includes significant matters related to risks  or changes. However, according to ONHIR officials, they have not  specifically communicated with the President about the determination on  whether the agency has fully discharged its functions and whether the  office should close.", "Instead of directly requesting that the President make a determination for  ONHIR to cease operations, ONHIR has been making plans to close  through other means and transition remaining activities. Specifically,  ONHIR officials told us that they anticipate that closure of the office will  need to occur through a legislative change or through the termination of  program funds through the budget and appropriations process. As  stated in the March 2017 transition plan, the plan was developed in  response to direction from the Office of Management and Budget and the  Senate and House Appropriations Committees that ONHIR should wind  down its activities. Further, in its comments on a draft of this report,  ONHIR stated that it has had regular communications with executive and  legislative branch offices on completing its work and closing. However,  neither the draft transition plan nor the October 2017 implementation plan  indicates how ONHIR would request a determination from the President  that ONHIR has fully discharged its responsibilities and can be  terminated. Without such a presidential determination, ONHIR has not  met the explicit requirements for being permitted to cease operation  under the Settlement Act."], "subsections": []}, {"section_title": "ONHIR Has Not Developed Complete Information on Its Remaining Activities", "paragraphs": ["Although ONHIR officials anticipate that the agency will close by  September 2018, they have not ensured that complete information related  to its relocation activities can be made available to other successor  agencies. This lack of planning and information could hamper the efforts  of a successor agency or agencies to effectively take over these  activities.", "Eligibility and appeals. As previously mentioned, there is the possibility  for 240 or more denied households to appeal their eligibility decision in  the future, and the paper case files and client database contain important  information regarding eligibility for the continuation of ONHIR\u2019s relocation  activities. Specifically, paper case files contain comprehensive  information on each applicant from the time he or she applied for  relocation benefits, including documents submitted to prove head of  household or residency status for eligibility determination. In addition, the  client database tracks decisions and dates related to the eligibility  determination process and is necessary to identify applicants\u2019 status.", "In its March 2017 transition plan and October 2017 implementation plan,  ONHIR has not developed detailed information on how it plans to identify  and prepare information in the paper case files and client database for the  240 or more denied households that could file for federal appeals. ONHIR  officials said that they have not prepared eligibility determination and  appeals information for transfer because they expect eligibility  determinations to be completed by the time the office plans to close. In  the event that such transfers are needed, they said the transfer of these  records will be through an agreement between ONHIR, the National  Archives and Records Administration, and BIA. However, such an  agreement has not yet been developed, and discussions on the transfer  of records\u2014such as during monthly transition meetings\u2014are high-level  and mostly unrelated to information needed for potential eligibility  determination responsibilities. In addition, officials said that information  about appeals filed in the future in the federal court could be obtained  from an online federal database.", "Federal internal control standards state that management should use  quality information to achieve the entity\u2019s objectives. Additionally, the  standards state that management should identify, analyze, and respond  to risks related to achieving the defined objectives. If ONHIR does not  take the steps to ensure that complete information for the 240 or more  denied households eligible to appeal their eligibility decision is available  to a successor agency, a successor agency could face difficulty in  administering eligibility determinations and remaining appeals in the  future.", "Warranties and contractor performance. As previously discussed,  ONHIR\u2019s remaining home-building responsibilities include managing the  52 remaining 2-year warranty agreements and assisting in the  construction of homes for any newly certified applicants. To fulfill these  responsibilities, complete information on home warranties and contractor  performance is critical. ONHIR\u2019s warranty database has data fields to  track relevant information on concerns reported to ONHIR\u2014including  warranty expiration date, date warranty complaint received, type of  complaint (possible warranty defect or homeowner maintenance issue).  However, the database is incomplete. For example, our review found that  about 98 percent of warranty complaints in the warranty database have  no record of the date of warranty repairs. Moreover, ONHIR does not list  the names of contractors in its database. ONHIR officials said the  information is not recorded because they rely on memory and paper files  to supplement the information in the warranty database about contractors.  ONHIR officials also said they do not regularly use the database to  monitor contractors\u2019 performance because it became too cumbersome to  track electronically. However, in its comments on a draft of this report,  ONHIR stated that it has the capability in its electronic data system to  search for warranty complaints.", "In its October 2017 implementation plan, ONHIR suggested BIA\u2019s  contract office as a potential successor agency for administering the  remaining warranty provisions in the event that it closes before these  home-building responsibilities are fully discharged. With regard to any  newly certified applicants deemed eligible for benefits through the  appeals process, the October 2017 implementation plan suggests that  these applicants be given the cash equivalent of a relocation home  instead of building new homes. However, the Settlement Act provides for  no authority to issue cash payments and Congress has not otherwise  authorized cash payments, and any future home-building activities may  need to be assumed by a successor agency. Because OHNIR does not  have complete information on existing warranties and contractor  performance, another successor agency could be hampered in its ability  to assume ONHIR\u2019s remaining home-building responsibilities. Federal  internal control standards state that management should identify, analyze,  and respond to risks related to achieving the defined objectives.  Additionally, the standards state that management should use quality  information to achieve the entity\u2019s objectives. Without complete warranty  and contractor information, a successor agency may have difficulty  understanding what warranty issues have already been addressed or  have difficulty overseeing contractors to help ensure that newly certified  applicants secure decent, safe, and sanitary relocation homes."], "subsections": []}, {"section_title": "The Settlement Act Does Not Include Provisions for Transferring Remaining Relocation Activities to Successor Agencies", "paragraphs": ["In its transition and implementation plans, ONHIR has identified a number  of potential successor agencies that could be selected to take over  ONHIR\u2019s remaining activities in different areas. However, officials at these  agencies said they currently do not have the authority to undertake these  activities under the Settlement Act.", "Appeals and eligibility. Should ONHIR close before the 6-year statute of  limitations has expired for all denied applicants, another agency or  agencies would need statutory authority for coordinating eligibility  determinations and home-building for any newly certified applicants. As  previously discussed, at least 240 households that had been denied  relocation benefits as of September 2017 may choose to contest their  denial in federal court, according to ONHIR officials. ONHIR\u2019s March  2017 transition plan states that the Department of Justice will continue to  represent the government on behalf of ONHIR in any federal court  hearings, and ONHIR has also identified Interior\u2019s Office of Hearing and  Appeals to hear any matter remanded to the agency by the federal court  for a further hearing.", "Home-building. Another entity would need authority to assume  remaining home-building activities. Alternatively, ONHIR\u2019s October 2017  implementation plan suggests that newly certified applicants be given the  cash equivalent of a relocation home. However, as previously  mentioned, cash payments are not currently authorized under the  Settlement Act and legislation would be needed to provide such  payments. Moreover, Navajo Nation officials said they do not approve of  using cash payments in place of providing relocatees with a home. In  November 2017, ONHIR officials said that, as an alternative to cash  payments, they discussed with the Navajo Nation the potential for the  Navajo Housing Authority\u2014a recipient of the HUD Indian Housing Block  Grant Program\u2014to administer remaining home-building activities. They  did not make a decision, however, because the Navajo Nation wanted to  inquire about the capacity of the Navajo Housing Authority to assume  these activities. Although ONHIR has not identified HUD as an agency  with a potential role, such as assuming or providing oversight of Navajo  Housing Authority administration of remaining home-building activities,  HUD officials told us that HUD would not be able to assume ONHIR  housing functions. This is due to the nature of its block grant program,  restricted oversight mechanisms, and limited capacity in terms of staff  resources and technical skills to supervise construction. In addition,  HUD officials said that their current oversight is limited to reviewing a  sample of Indian Housing Block Grant program grantees\u2019 policies,  procedures, and implementation of procurement and environmental  regulations, which may not be consistent with the oversight or authority  needed should the Navajo Housing Authority administer the remaining  ONHIR home-building activities.", "Warranties. Should ONHIR close before 2-year home warranties expire  on the remaining homes constructed under ONHIR\u2019s oversight, another  agency would need statutory authority to oversee these home warranties.  As previously mentioned, ONHIR is currently a signatory to the warranty  along with the contractor and the client, and more than 52 homes will  have warranties in effect after ONHIR\u2019s proposed closure date of  September 2018, according to ONHIR officials. In its draft transition plan,  ONHIR suggests transferring warranty-related activities to the BIA  Contract Office. However, according to BIA officials, BIA does not  currently have the authority to conduct these activities, and BIA is not  equipped to implement warranties.", "Post-move counseling. Another agency would need statutory authority  to provide post-move counseling to the 52 clients who will remain under  warranty after ONHIR\u2019s proposed closure date of September 2018.  Currently, ONHIR provides relocatees with post-move counseling during  the 2-year warranty period. According to ONHIR\u2019s management manual,  the purpose of post-move counseling is to assist families in adjusting to  their new house, connect families to local service agencies, and gain  understanding about the client\u2019s familial and employment situation.  ONHIR\u2019s March 2017 transition plan suggested that the post-move  counseling program could be transitioned to BIA. However, BIA officials  said BIA currently does not have the authority to conduct these  activities. In November 2017, ONHIR officials said the program would  discontinue for any newly certified applicants if cash settlements for  relocation benefits were authorized, but they did not address what would  happen to the 52 clients that will remain within the 2-year warranty period  after September 2018.", "The Settlement Act does not include provisions on the transfer of  activities after ONHIR\u2019s closure, and as described above several activities  will remain past ONHIR\u2019s planned closure date. Without legal direction to  authorize the transfer of ONHIR\u2019s remaining activities to other federal  entities, the future of these activities remains uncertain and may  adversely affect those in the process of relocating."], "subsections": []}]}, {"section_title": "ONHIR Has Not Always Managed Navajo Trust Land in Accordance with Its Policies", "paragraphs": [], "subsections": [{"section_title": "ONHIR Has Entered Into Lease and Other Agreements for Navajo Trust Land but Has Not Properly Managed Them", "paragraphs": ["ONHIR is statutorily required to administer the land taken into trust for the  Navajo Nation pursuant to the Settlement Act as amended until relocation  is complete. The act also authorizes ONHIR to issue leases for housing  and other related facilities on the New Lands. ONHIR\u2019s management  manual, which governs its operations, states that it will grant appropriate  requests for leases of the New Lands\u2014both developed and undeveloped  land\u2014for homesites, businesses, and community services facilities,  among other things. According to the manual, entities that want to lease  property in the New Lands are to submit an application form and  supporting documents to ONHIR. Since the 1980s, ONHIR has received  applications from and granted leases to various businesses, the New  Lands chapter, and other tribal entities. The leases give the lessee  permission to occupy and use the land, including, in the case of  developed land, any structures on it, for terms varying from 2 to 99 years.  In addition, ONHIR has entered into or administered surface use  agreements for the New Lands.", "Unlike ONHIR\u2019s eligibility determinations and home-building activities,  which were intended to have a finite end, the Navajo trust land will need  to be managed in perpetuity so long as it is held in trust by the federal  government. ONHIR\u2019s draft transition and implementation plans identify BIA and the Navajo Nation as entities that could assume responsibility for  managing the trust land once ONHIR terminates. However, ONHIR does  not have the authority to transition management of the trust land it  administers to another entity. Moreover, we identified a number of  concerns with how ONHIR has maintained information or established  controls for proper administration of leases and agreements for the New  Lands, which could further hinder an eventual transition of these  responsibilities to another entity."], "subsections": [{"section_title": "ONHIR Does Not Have a Complete Inventory of Leased or Occupied Land", "paragraphs": ["ONHIR does not have a comprehensive inventory of leased and vacant  properties on or surface use and other agreements for Navajo trust land it  administers. ONHIR officials identified 23 properties on trust land they  administer through documentation and in interviews. Of these  23 properties, ONHIR possessed the current lease for 15 properties.  ONHIR officials also identified 5 surface use agreements for Navajo trust  land they administer, 3 of which are listed as active on their transition  website. ONHIR officials said they have not maintained a comprehensive  inventory because they had a long tenure with the agency and are  cognizant of what properties and agreements exist.", "Federal internal control standards state that management should design  control activities to achieve objectives and respond to risk. For example,  as part of control activities, management clearly documents all  transactions and other significant events in a manner that allows the  documentation to be readily available for examination. Without developing  a comprehensive inventory of leased and vacant properties on Navajo  trust land that ONHIR administers, the entity which assumes  responsibility for leasing the land will not have the information it needs to  carry out that responsibility."], "subsections": []}, {"section_title": "As of December 2017, ONHIR Does Not Have Written Leases for Some Occupied Lands", "paragraphs": ["ONHIR has occupied or has allowed others to occupy Navajo trust land it  administers without a written lease or agreement, which is inconsistent  with ONHIR\u2019s management manual. Specifically, of the 23 existing  properties on trust land ONHIR officials identified, 7 were in use as of  December 2017 but did not have a written lease, as required, for various  reasons:", "ONHIR issued a permit for the use of one property in 2000 that was  valid through 2005 and then, according to ONHIR officials, had an oral  agreement to indefinitely extend the permit. The officials also said  they had an oral agreement to lease another property.", "ONHIR itself occupies and uses 4 properties without leases, including  a headquarters and New Lands office and two structures on the  Padres Mesa Demonstration Ranch, discussed below.", "A lease for 1 property expired in 2011 but it has not been renewed  and does not include an option to extend the lease beyond its initial  termination date. The Navajo Nation is currently working to renew the  lease because it has assumed responsibility from BIA for leasing its  trust land. In its comments on a draft of this report, ONHIR stated  that in the meantime the federal agency using the property has  continued to pay rent to ONHIR while a new lease is negotiated.", "ONHIR officials said some of these properties do not have written leases  because the agency deferred to the tribe\u2019s wishes. However, not having  written leases for these properties on trust land is inconsistent with  ONHIR\u2019s management manual, which calls for written leases and land  use approvals for the New Lands. Without written leases for these  properties, the entity which assumes responsibility for leasing the Navajo  land that ONHIR has been administering will not know the status of these  properties because they are being used without written leases."], "subsections": []}, {"section_title": "For Most of the Leases, ONHIR Is the Lessor Rather than the Tribe and No Successor Has Been Identified", "paragraphs": ["There are at least two parties to every lease of land, the lessor and the  lessee. The lessor is generally the landowner, and the lessee is the party  to whom the lease grants permission to use or occupy the land. However,  the New Lands are held in trust by the federal government for the Navajo  Nation, and federal law provides that trust lands may be leased by the  Indian owners with the approval of the Secretary of the Interior. ONHIR is  the lessor for 20 of the 22 leases that we reviewed. ONHIR officials said  the leases were done this way because its management manual called  for ONHIR to serve as the lessor. However, ONHIR changed its  management manual in 2011 to say the Navajo Nation should serve as  the lessor for business; commercial; industrial; and mineral leases unless  the tribe requests ONHIR to be the lessor. ONHIR did not revise the  leases in effect in 2011 to reflect this change. After the 2011 changes to  the management manual, ONHIR became the lessor for the one business  lease entered into for the New Lands. ONHIR did not provide  documentation that the tribe requested ONHIR to serve as lessor for this  lease. Navajo Nation officials said ONHIR informs the tribe about leases  out of courtesy and does not seek the tribe\u2019s permission to lease Navajo  trust land. Moreover, the Navajo Nation Department of Justice has taken  the position that ONHIR does not have the authority to lease Navajo trust  land.", "In addition to these leases, ONHIR identified 5 surface use agreements  for Navajo trust land it administers. In 3 of 5 of these agreements,  ONHIR, not the tribe, is the party granting the right to access and use the  Navajo trust land. However, ONHIR is not the landowner and this is also  inconsistent with BIA\u2019s leasing practices.", "In addition, of the current leases of New Lands with ONHIR as the lessor,  2 leases specify what is to happen should ONHIR close. None of the  surface use agreements specify what is to happen should ONHIR close.  ONHIR officials said that they have not updated or amended the other  leases and agreements because there is no need to do so yet. ONHIR\u2019s  transition and implementation plans also do not identify which leases and  agreements need to be amended or assigned upon ONHIR\u2019s closure. In  its March 2017 transition plan, ONHIR identified BIA as the successor  agency for managing leases on the Navajo trust land ONHIR is currently  administering. However, this is inconsistent with the Navajo Nation\u2019s  assumption of responsibility for leasing its trust land from BIA.", "Federal internal control standards state that management should design  control activities to achieve objectives and respond to risk, for example, to  ensure that transactions such as leases are properly executed. In  addition, federal internal control standards state that management should  design control activities to identify, analyze, and respond to change,  including changes to the entity\u2019s activities. Without ONHIR identifying  which leases and other agreements need to be amended or assigned  because they identify ONHIR as the lessor, any entity that assumes  responsibility for leasing these trust lands in the event that OHNIR closes  will not be able to effectively manage these properties."], "subsections": []}, {"section_title": "ONHIR Has Collected and Retained Revenues from These Lands", "paragraphs": ["Half of the 22 leases we reviewed required the lessee to pay a non- nominal amount (i.e., more than $1 a year) of annual rent to ONHIR. In  addition, annual payments for 3 of 5 surface use agreements are made to  ONHIR, according to ONHIR officials. According to agency documents,  since the 1990s, ONHIR has collected and retained over $1 million in  revenue from these leases of and surface use agreements for Navajo  trust land it administers. ONHIR deposits the lease revenue into ONHIR\u2019s  Treasury account. ONHIR officials said they have used the revenue to  aid relocation efforts by renovating facilities located on Navajo trust land  ONHIR administers, providing grants to Navajo chapters, and funding  other activities to benefit the relocatees. However, the Settlement Act as  amended does not state that ONHIR may collect, retain, and use revenue  from leases of Navajo trust land, and ONHIR officials have not identified  another statute authorizing the agency to do so. ONHIR officials said the  agency retained this revenue to ensure that all net revenues from these  trust lands are used exclusively for the benefit of relocatees because the  Settlement Act as amended requires the trust lands be administered for  the benefit of relocatees. However, this statutory provision does not  authorize ONHIR to receive lease revenues."], "subsections": []}]}, {"section_title": "ONHIR Is Operating the Padres Mesa Demonstration Ranch without a Land Use Agreement and Grazing Permit", "paragraphs": ["ONHIR is operating the Padres Mesa Demonstration ranch on Navajo  trust land, but has not leased the land, which is inconsistent with ONHIR\u2019s  management manual. As mentioned previously, ONHIR\u2019s management  manual calls for written leases for and land use approvals of the New  Lands. According to ONHIR officials, there is no requirement for them to  have a lease or obtain permission from the tribe to occupy the structures  on the ranch, including a range office, or operate a ranch on Navajo trust  land.", "In addition, ONHIR\u2019s grazing of the ranch\u2019s cattle on the New Lands  without a grazing permit is inconsistent with ONHIR\u2019s regulations.  ONHIR\u2019s grazing regulations require a grazing permit for all livestock  grazed on the New Lands, but ONHIR does not have a grazing permit for  the cattle on the ranch because ONHIR officials decided it was not  necessary to issue a permit to itself. Moreover, ONHIR is not eligible for a  grazing permit under its regulations because it is a federal entity and only  enrolled Navajo tribal members are eligible for permits. We are examining  ONHIR\u2019s use of appropriations to establish and operate a cattle ranch in a  separate legal opinion.", "ONHIR has identified two different entities to assume operation of the  ranch in the event of its closure. ONHIR\u2019s March 2017 transition plan  identified BIA as the entity to oversee the continued operation of the  Padres Mesa Demonstration Ranch. However, BIA officials said the  agency does not have the statutory authority to operate a for-profit ranch.  Moreover, these officials said they are not interested in doing so because  it is a role for the tribe and would be a conflict of interest for the agency  since BIA regulates grazing on trust land. In addition, ONHIR\u2019s October  2017 implementation plan indicates that the Navajo Nation would assume  responsibility for the ranch after ONHIR\u2019s closure and after negotiating an  agreement with the chapter. Because the ranch is located on Navajo  Nation trust land, the tribe could choose to continue its operation after  ONHIR closes. Navajo officials said they are interested in operating the  ranch but they have not determined how the for-profit ranch would be  managed if the tribe also regulated grazing on the New Lands, which it is  also interested in doing."], "subsections": []}]}, {"section_title": "Congressional Action May also Be Needed to Address Other Provisions in the Settlement Act as Amended", "paragraphs": ["Congressional action may also be needed to address other provisions in  the Settlement Act as amended regarding (1) the use of the acquired trust  lands, (2) trust acquisition, and (3) the Navajo Rehabilitation Trust Fund."], "subsections": [{"section_title": "Use of Acquired Trust Lands to Benefit Relocatees and Regulation of Grazing", "paragraphs": ["Trust land is generally held in trust for the benefit of an Indian tribe or  individual Indian. However, the Settlement Act as amended requires the  land taken into trust pursuant to the Settlement Act, including the New  Lands, to be used solely for the benefit of relocatees. The New Lands  chapter government wants this restriction to continue if and when ONHIR  terminates. However, without congressional action to continue this  restriction, it is likely the trust lands acquired in Arizona pursuant to the  Settlement Act as amended would be administered for the benefit of the  tribe as a whole rather than to solely benefit the relocatees.", "In addition, as part of its administration of the New Lands, ONHIR\u2019s  regulations governing grazing of livestock on the New Lands are different  from how grazing is regulated by BIA for other Indian trust land. The  purpose of ONHIR\u2019s regulations was to aid in the resettlement of Navajo  Indians residing on Hopi Partitioned Lands to the New Lands and to  preserve the New Lands\u2019 forage, land, and water resources. Under these  regulations, grazing permit holders must be permanent residents of the  New Lands. In contrast, under BIA\u2019s regulations that apply to the portions  of the Navajo reservation not under ONHIR\u2019s administration, any Navajo  tribal member is eligible for a grazing permit. Navajo Nation and chapter  officials told us they would like ONHIR\u2019s grazing regulations to continue if  ONHIR were to close.", "ONHIR\u2019s implementation plan identifies BIA as the entity to regulate  grazing on the New Lands after ONHIR closes. ONHIR\u2019s implementation  plan also says BIA officials have agreed to regulate grazing on the New  Lands in accordance with ONHIR\u2019s regulations. However, BIA officials  said Interior currently does not have the authority to regulate grazing on  the New Lands, so they cannot make any decisions on how to do so. In  addition, Navajo Nation officials said they want to assume responsibility  for regulating grazing on the New Lands and prefer to have ONHIR\u2019s  grazing regulations, which are stricter than BIA\u2019s, remain in place at least  at the Padres Mesa Demonstration Ranch. Should ONHIR close,  Congress will need to consider addressing how grazing on the New  Lands will be regulated after ONHIR\u2019s closure."], "subsections": []}, {"section_title": "Mandatory Trust Acquisition Provision for the Navajo Nation", "paragraphs": ["The Settlement Act as amended provides for two categories of land to be  taken into trust for the Navajo Nation: (1) up to 250,000 acres of BLM  land in Arizona and New Mexico that is transferred to the tribe (category  1) and (2) up to 150,000 acres of land held in fee by the Navajo Nation  (category 2). No more than 35,000 of the 400,000 acres selected could  be in New Mexico. The tribe was authorized to select the lands in both  categories for 3 years after the 1980 amendments\u2019 enactment, and then  ONHIR was authorized to select the lands after consultation with the  Navajo Nation. Once the lands are selected, the Settlement Act as  amended provides for the mandatory acquisition of these selected lands  as land held in trust by the federal government for the Navajo Nation.  Mandatory trust acquisitions are not subject to BIA\u2019s regulatory  requirements for discretionary trust acquisitions under the Indian  Reorganization Act.", "As of December 2017, about 12,000 of the 400,000 acres had yet to be  selected, and about 24,000 acres that had been selected had yet to be  taken into trust (see table 3).", "The over 11,000 acres of category 1 land selected but not yet taken into  trust are located in New Mexico. These lands have not been taken into  trust because of unprocessed coal preference right lease applications.", "Congress will need to determine whether the Navajo Nation should be  able to select the entire 400,000 acres and have that land taken into trust  as a mandatory trust acquisition, as provided for in the Settlement Act as  amended. Without congressional action, any additional land the tribe  acquired and wanted taken into trust would be a discretionary trust  acquisition subject to BIA\u2019s regulations.", "Furthermore, the Navajo Nation has raised two additional issues  regarding the trust acquisition provision that Congress may also need to  address.", "Deselection and reselection. The Navajo Nation would like to make  changes to some of the land it has selected and make new selections,  but the Settlement Act as amended does not authorize deselection of  land the tribe previously selected to be taken into trust pursuant to the  act\u2019s mandatory trust acquisition provision. Deselection had not  occurred as of January 2018, but bills have been introduced in  Congress that would cancel some of the tribe\u2019s land selections and  authorize the tribe to replace those with new selections. Without  statutory authorization, the Navajo Nation cannot deselect these lands  and make new selections to reach the 400,000 acres provided for in  the Settlement Act as amended.", "Trust status versus restricted fee status. The Navajo Nation has  indicated that it is interested in having a statutory option for the  selected land to be held in restricted fee status rather than held in  trust. In 2016, a law was enacted that mandated a trust acquisition  for certain parcels of land unassociated with the Settlement Act unless  the Navajo Nation elected to have the land conveyed to it in restricted  fee status. The President of the Navajo Nation has testified before  Congress that the tribe is interested in having this option in future  legislation involving the Settlement Act. Without statutory  authorization, the land not yet selected pursuant to the Settlement Act  as amended could not be held in restricted fee status if the tribe so  chooses. However, without congressional action this cannot be  changed."], "subsections": []}, {"section_title": "The Navajo Rehabilitation Trust Fund", "paragraphs": ["Established in the U.S. Treasury by the 1988 amendments to the  Settlement Act, the Navajo Rehabilitation Trust Fund is essentially a loan  from the federal government to the Navajo Nation to be paid back from  revenues derived from leases of the lands and minerals taken into trust in  New Mexico pursuant to the Settlement Act as amended. From fiscal  years 1990 through 1995, Congress appropriated approximately $16  million to the Trust Fund. The Settlement Act as amended requires all  net income derived by the Navajo Nation from the surface and mineral  estates of lands in New Mexico taken into trust pursuant to the act to be  deposited into the Trust Fund. Moreover, the net income is required to be  used to reimburse the general fund of the Treasury for the amounts  originally appropriated to the Trust Fund. According to leasing and other  documents from the Navajo Nation and BLM, several of these parcels  have been generating modest income since at least the 1990s.  Specifically, BLM identified several parcels of the New Mexico trust land  with grazing allotments or oil and gas leases. In addition to these sources  of revenue, the tribe entered into an agreement for use of a parcel of the  New Mexico trust land that requires, beginning in 2015, annual rent  payments of $25,000 to be paid to the Trust Fund.", "The Navajo Nation has not reimbursed the general fund of the Treasury  for the approximately $16 million appropriated to the fund, contrary to the  statutory requirement to do so. While the Navajo Nation acknowledges its  legal obligation to repay the Treasury, the tribe is seeking loan  forgiveness because the Trust Fund\u2019s purpose was to aid the relocatees  and the tribe views such aid as an unfulfilled federal obligation, according  to tribal officials. Further, these officials said repaying the Treasury would  eliminate any benefit the relocatees received from the land because the  revenue generated from the New Mexico trust lands and minerals has not  been sufficient to justify partial payment.", "Because much of the land the Navajo Nation selected in New Mexico has  not been taken into trust and the land that has been taken into trust is  generating modest income, Congress will need to consider whether to  continue the statutory repayment requirement or repeal it. If Congress  decides to repeal the repayment requirement, it will need to consider  specifying whether revenues from the trust lands acquired in New Mexico  pursuant to the Settlement Act as amended are to be used by the tribe  exclusively for the benefit of relocatees."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The relocation of Navajo and Hopi families has taken more time than  originally anticipated when the Settlement Act was enacted in 1974,  extending ONHIR operations more than 30 years beyond the original  estimates. ONHIR has proposed to close by the end of fiscal year 2018  and initiated steps to identify agencies to handle the remaining activities.  However, the Settlement Act does not give other agencies the authority to  undertake various ONHIR responsibilities. Therefore, if ONHIR closes  without congressional actions, any potential successor agency will not  have the appropriate authority to administer any remaining activities. As a  result, newly certified applicants and clients who remain under the 2-year  warranty period will not have an entity to assist with securing decent,  safe, and sanitary relocation homes, as intended in the Settlement Act.  Further, several other provisions in the Settlement Act as amended may  need congressional action. These include (1) the requirement for the trust  lands acquired in Arizona pursuant to the Settlement Act as amended to  be used solely for the benefit of relocatees and whether grazing on the  New Lands should be regulated consistent with ONHIR\u2019s current  regulations; (2) the mandatory trust acquisition provision for the Navajo  Nation; and (3) the requirement for the Navajo Nation to repay the U.S.  Treasury for appropriations made to the Navajo Rehabilitation Trust Fund.", "In addition, although ONHIR believes it has completed most of its  responsibilities under the act and believes it can close by September  2018, it does not have the authority to make this decision. Rather, the  Settlement Act states that ONHIR will cease to exist when the President  of the United States determines that its functions have been fully  discharged. However, ONHIR has yet to request that the President make  this determination. Moreover, OHNIR has not prepared complete  information about its various activities, such as eligibility determinations,  appeals, and home building, which increases the risk that successor  agencies will not be able to effectively assume ONHIR\u2019s activities.", "Finally, ONHIR has not appropriately managed leases and other  agreements for Navajo trust land it administers or identified changes that  would need to be made in leases in the event that it closes. Because the  land ONHIR administers is held in trust by the federal government,  another entity will need to assume these responsibilities if ONHIR closes.  However, OHNIR does not maintain a complete inventory of leased or  occupied land and does not have written agreements for some occupied  land. Further, ONHIR has not identified which leases will need to be  amended to identify the appropriate lessor and the entity to receive the  lease revenue. Without these actions, the entity that assumes  responsibility for leasing the New Lands will not have the information it  needs to effectively manage the properties."], "subsections": []}, {"section_title": "Matters for Congressional Consideration", "paragraphs": ["We are making the following four matters for congressional consideration  for when ONHIR closes:  Congress should consider providing necessary authority for other  agencies to continue remaining activities when ONHIR closes. (Matter for  Consideration 1)", "Congress should consider determining (1) whether the requirement for  the land acquired pursuant to the Settlement Act as amended to be used  solely for the benefit of relocatees should continue and (2) how grazing  on the New Lands should be regulated. (Matter for Consideration 2)", "Congress should consider addressing the mandatory trust acquisition  provision for the Navajo Nation in the Settlement Act as amended. (Matter  for Consideration 3)", "Congress should consider whether the requirement for the Navajo Nation  to repay the U.S. Treasury for appropriations made to the Navajo  Rehabilitation Trust Fund should continue. (Matter for Consideration 4)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to ONHIR.", "The Executive Director of ONHIR should request a presidential  determination as to whether ONHIR has fully discharged its  responsibilities and whether it should close. (Recommendation 1)", "The Executive Director of ONHIR should prepare complete information on  the remaining denied households who could still file for federal appeals.  Such information could include paper case files and information in  ONHIR\u2019s client database for those households. (Recommendation 2)", "The Executive Director of ONHIR should prepare complete information on  warranties and contractors. Such preparation should include linking  warranty complaints to the relevant contractor, completing missing  warranty information, and completing information on contractors\u2019 past  performance. (Recommendation 3)", "The Executive Director of ONHIR should establish a comprehensive  inventory of (1) properties located on trust land it administers, (2) leases  of those properties, and (3) surface use and other use agreements for  trust land it administers. (Recommendation 4)", "The Executive Director of ONHIR should identify which leases and other  agreements need to be amended or assigned because (1) ONHIR is the  lessor, (2) the lease or agreement provides for annual payments to be  made to ONHIR, and/or (3) the lease or agreement terminates upon  ONHIR\u2019s closure. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Office of Navajo and Hopi Indian  Relocation (ONHIR); Department of the Interior; Department of Justice;  Department of Housing and Urban Development (HUD); Department of  Health and Human Services; Department of the Treasury; the Navajo  Nation; and the Hopi Tribe for review and comment. The Department of  Justice, Department of the Treasury, and the Hopi Tribe did not provide  comments. The Department of the Interior and the Department of Health  and Human Services provided technical comments that we incorporated  as appropriate.", "We received comments via e-mail from HUD\u2019s Acting Director of Grants  Evaluation in the Office of Native American Programs. In this e-mail, the  Acting Director stated that HUD believes the report should clearly state  that HUD would not be an appropriate agency to continue ONHIR\u2019s  housing functions, because it does not provide direct services to tribes,  review or approve actions or transactions, or have the technical capacity  to assume ONHIR housing functions. We have acknowledged this in the  report and our objective was to identify legislative actions that may be  necessary to transition remaining relocation activities. Therefore, our  focus was on whether or not additional authorities might be needed if  ONHIR were to close. Although we present background information about  other federal agencies and tribal entities with responsibilities in Indian  Country as well as perspectives from various agencies on the transition  and remaining activities, we did not independently evaluate these  agencies\u2019 authorities or capacity and do not draw conclusions about  which agencies and tribal entities including HUD should be provided the  necessary authority by Congress to continue ONHIR\u2019s remaining  activities.", "In ONHIR\u2019s comments, which are summarized below and reproduced in  appendix II, ONHIR did not explicitly agree or disagree with our five  recommendations but stated that it had either already taken steps or had  plans to once a successor is identified.", "With regard to the draft report\u2019s first recommendation to request a  presidential determination as to whether ONHIR has fully  discharged its responsibilities and whether it should close, ONHIR  stated that it has worked for decades with the Office of  Management and Budget within the Executive Office of the  President on completing its work. While this may be the case, our  review found that no presidential determination for ONHIR to  cease operation has been requested, and no such decision has  been communicated, therefore we believe our recommendation is  valid.", "With regard to the second recommendation to prepare complete  information on the remaining denied households that could still file  for federal appeals, ONHIR stated that it has a solid grasp of  potential appeals. Specifically, ONHIR said that case files have  been identified and all needed information already exists in the  case files and in its database. ONHIR stated that it will provide  potential successor agencies with any information they request.  However, because it is unclear when ONHIR will close and which  agency will assume ONHIR\u2019s remaining eligibility and appeals  activities at that time, a successor agency will not have the  institutional knowledge to follow and connect the information  needed for determining eligibility and providing support for cases  for which appeals were filed in federal court. Therefore, we  maintain that ONHIR should proactively prepare the necessary  information associated with these appeals for any successor  agency. Preparing complete and readily available information  could minimize the challenges the successor agency may  encounter in administering future appeals and eligibility  determinations.", "With regard to the third recommendation to prepare complete  information on warranties and contractors, ONHIR stated that up- to-date and complete information on warranty status appears in  the existing case files. We maintain our concern about the  accuracy of ONHIR\u2019s warranty database because in its comment  letter ONHIR acknowledged that some complaints were entered  multiple times due to data entry issues. Moreover, ONHIR states  that its staff know which relocatee homes will still be under  warranty as of September 30, 2018, and have compiled a list of  such homes. However, preparing the case file and list of such  homes does not address the deficiencies that we found in the  warranty database. While we revised the report by including  ONHIR\u2019s statement that its system has the capability to search  warranty complaints, we continue to believe that the information  available through searches will be incomplete for a successor  agency because the information is disconnected. Without linking  warranty complaints to the relevant contractor, completing missing  warranty information, and completing information on contractors\u2019  past performance, any successor agency may have difficulty  understanding what warranty issues have already been addressed  or have difficulty overseeing contractors to help ensure that newly  certified applicants secure decent, safe, and sanitary relocation  homes.", "With regard to the fourth recommendation to establish a  comprehensive inventory of (1) properties located on trust land it  administers, (2) leases of those properties, and (3) surface use  and other use agreements for trust land it administers, ONHIR  stated that such documentation exists and is maintained and  updated. However, this statement is inconsistent with what we  found during our review. We reviewed information provided by  ONHIR from various sources as part of our review, and the  information available did not include a comprehensive inventory of  leased and vacant properties on or surface use and other  agreements for Navajo trust land ONHIR administers. We  continue to believe that without developing a comprehensive  inventory of leased and vacant properties on Navajo trust land that  ONHIR administers and leases and agreements for those  properties, the entity that assumes responsibility for leasing the  land will not have the information it needs to carry out that  responsibility.", "With regard to the fifth recommendation to identify which leases  and other agreements need to be amended or assigned because  (1) ONHIR is the lessor; (2) the lease or agreement provides for  annual payments to be made to ONHIR, and/or (3) the lease or  agreement terminates upon ONHIR\u2019s closure, ONHIR stated that  it will move forward with specific transition activities after a  successor entity is identified. We believe that such an approach is  risky because it assumes that ONHIR staff will be available to  work closely with staff from a new successor entity to personally  transfer their knowledge to the new staff. However, there is no  guarantee that ONHIR will continue operating or that its many  retirement-eligible employees will be available to assist any  successor entities during a transition period. We, therefore,  maintain that the Executive Director of ONHIR should identify  which leases and other agreements need to be amended or  assigned.", "ONHIR also made other comments in its letter, which we have responded  to in appendix II.", "The Navajo Nation and the Navajo Nation Human Rights Commission  also submitted comments on a draft of this report, which are reproduced  in appendix III and IV.", "We are sending copies of this report to the appropriate committees and  the Office of Navajo and Hopi Indian Relocation, Department of the  Interior, Department of Justice, Department of Housing and Urban  Development, Department of Health and Human Services, Department of  the Treasury, the Navajo Nation, and the Hopi Tribe. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  us at (202) 512-8678 or shearw@gao.gov or (202) 512-3841 or  fennella@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) ONHIR\u2019s management of the eligibility and  appeals processes and the status of these activities; (2) ONHIR\u2019s  management of the home-building process and the status of these  activities; (3) executive branch or legislative actions that may be  necessary to terminate ONHIR in an orderly manner and transition  remaining relocation activities; (4) ONHIR\u2019s management of Navajo trust  lands and related transition activities; and (5) legislative actions that may  be necessary to address other Settlement Act provisions.", "To address these objectives, we reviewed our prior related reports and  other studies and analyzed relevant laws and regulations. We  interviewed ONHIR officials on relocation and other key activities, and we  interviewed ONHIR\u2019s hearing officer to better understand his role in the  appeals process. We also interviewed federal officials from the  Department of the Interior\u2019s (Interior) Bureau of Indian Affairs (BIA), Office  of Inspector General, and Bureau of Land Management (BLM);  Department of Housing and Urban Development (HUD); Department of  the Treasury (Treasury); and Indian Health Services within the  Department of Health and Human Services. We also conducted  interviews with tribal government officials from the Navajo Nation and the  Hopi Tribe including officials from the Navajo-Hopi Legal Services  Program, the Navajo-Hopi Land Commission Office, and the Navajo  Nation Human Rights Commission. Additionally, we conducted two visits  in August 2017 to ONHIR\u2019s offices in Flagstaff and Sanders, Arizona, and  the Navajo region where we interviewed ONHIR staff, observed a  transition meeting, took two separate tours of homes (one with ONHIR  officials and the other with Navajo Nation officials) and observed  rangeland management activities, and attended presentations in three  Navajo Nation chapters.", "Additionally, to address the first, second, and third objectives, we  reviewed ONHIR\u2019s management manual, policy memorandums, the 1981  Report and Plan, and the 1990 Plan Update on relocation activities,  including the eligibility and appeals processes, and home-building  activities. We obtained two data files as of June 2017 from ONHIR\u2019s  Client Database\u2014Client Master and Hearing File\u2014to analyze the time  frame for becoming certified for relocation benefits and relocating to the  house provided by ONHIR. Using the case numbers in the Hearing File,  we identified those applicants that were certified for relocation benefits  through the administrative appeals process. We assessed the reliability of  ONHIR\u2019s data files by conducting a file review of a random sample of 30  case numbers, which we selected based on the distribution of two factors:  (1) application date, and (2) type of determination. We recorded the  relevant information in the paper files\u2014 such as date applied, date of  determination, determination code, and date relocated\u2014and compared it  to the data fields in the electronic files. We determined that ONHIR\u2019s data  files were sufficiently reliable for the purpose of our report. We also  reviewed home-building-related documentation, including contractor lists,  contracts, warranty information, and contractor performance reports, to  understand ONHIR\u2019s oversight of home-building activities. In addition, we  reviewed ONHIR\u2019s transition-related documentation including transition  guiding principles, the draft transition plan, and the draft \u201cFrom Transition  Plan to Transition Implementation\u201d document to understand ONHIR\u2019s  planned closure. We also reviewed and assessed the original statute to  determine the extent to which ONHIR has the authority to transfer those  activities. We interviewed ONHIR and Interior officials to identify any  opportunities for modifying or continuing other Settlement Act provisions.", "To address the fourth and last objectives, we obtained from ONHIR  copies of all leases and use agreements for Navajo trust land it  administers pursuant to the Settlement Act as amended from the 1980s to  the present. We reviewed the terms of the leases and agreements  provided to identify specific elements, such as the identity of the lessor,  lessee, and any concurring parties; start and end dates; required rental  payments, if any; and any provisions on the leases\u2019 continuation or  termination in the event that ONHIR closes. We compared the leases to  ONHIR\u2019s list of properties on Navajo trust land it administers to determine  if all of the properties were covered by leases. We also reviewed  information, such as summary spreadsheets, on sources of revenue  ONHIR collects, retains, and uses, including documentation of Treasury  accounts where such revenue is deposited. We cross-checked the  revenue information ONHIR provided with information from Treasury  about deposits into ONHIR\u2019s Treasury account and we interviewed  ONHIR officials regarding discrepancies. Revenues from the Padres  Mesa Demonstration Ranch were included as part of the revenue  information and ONHIR provided a separate accounting of the  obligations, expenditures, and revenues for the ranch. We reviewed  ONHIR\u2019s regulations and management manual for policies and  procedures on leasing and grazing on the New Lands and compared  them to the agency\u2019s practices. We also reviewed BIA\u2019s regulations on  leasing and grazing on Indian trust lands under the agency\u2019s  administration to identify comparable grazing and leasing policies and  procedures. Furthermore, we interviewed ONHIR, Interior, BLM,  Treasury, and Navajo Nation officials and reviewed documents from the  agencies and tribe to identify any opportunities for modifying or continuing  other Settlement Act provisions.", "We conducted this performance audit from March 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Office of Navajo and Hopi Indian Relocation", "paragraphs": [], "subsections": [{"section_title": "GAO Comments", "paragraphs": ["1.  We revised the report to state that ONHIR has no authority to require  any person to leave the land that was awarded to the other tribe.   2.  We disagree with the Office of Navajo and Hopi Indian Relocation\u2019s  (ONHIR) characterization of our report and did not make a change  based on this comment. Our report focuses on ONHIR\u2019s management  of the home building process and the status of these activities. To  appropriately address our audit objective on the home building  process, we included the experiences of the population that was being  served by ONHIR. While ONHIR states that the information included  in our report is unsubstantiated, we do not assert that the views on  home building from those we attributed\u2014tribal government officials  and relocatees\u2014are accurate or draw conclusions about the reasons  for the condition of the homes. Further, we presented ONHIR\u2019s  counterargument to the concerns raised by the relocatees to provide  context and balance, with additional details explained in footnotes.  Throughout our report, we ensured a balanced presentation with an  objective tone, consistent with generally accepted government  auditing standards and our quality assurance framework. We believe  that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. Moreover, our  description of Navajo Nation chapters was reviewed and verified by  the Navajo Nation, therefore we believe it accurately states the views  of Navajo Nation officials.   3.  We revised the report to indicate the attorney fees reported were over  a 35-year period.  4.  We revised the report to state that, for the third application period, the  requirement was for applicants to maintain legal residency until their  contact with ONHIR.   5.  We made revisions to the report to include ONHIR\u2019s efforts related to  eligibility determination, such offering administrative appeals to  Navajos for whom ONHIR could not show actual receipt of denial  letters and using restricted delivery certified mail for almost 30 years.  6.  We made revisions to the report to include ONHIR\u2019s perspective on  the difficulties in determining residency because of the nature of  Navajos\u2019 employment opportunities.  7.  Our report does not evaluate the reasons that have affected the  length of the appeal process because it is not pertinent to our  objectives. Therefore, we did not make a change to the report in  response to this comment.  8.  Although this is new information that was not presented to us during  our review, it does not materially affect our findings, therefore we did  not make a change in the report.   9.  We clarified the report to state that ONHIR consulted with the  Department of Justice in Washington, D.C, and the U.S. Attorney\u2019s  Office in Arizona.  10. We clarified the report to indicate that, in response to the Herbert  decision, ONHIR was required to provide notices to \u201cpotentially\u201d  eligible applicants.  11. Our report focuses on actions that may be necessary to terminate  ONHIR in an orderly manner and transition remaining relocation  activities. We did not make a change in the report in response to  ONHIR\u2019s comment because ONHIR had not identified and compiled  the case files during our review that would be necessary or easily  accessible for a successor agency. While ONHIR states in its letter  that case files have been identified and all needed information already  exists in the case files and in its database, because these activities  may have occurred subsequent to our review, we cannot confirm the  accuracy of this comment. We maintain our concerns about ONHIR\u2019s  database given its admission of data entry issues as stated in the  comment letter.   12. We revised the headings of two report sections to emphasize the  distinction between administrative appeals and appeals to the federal  court.   13. We revised the report to include ONHIR\u2019s perspective on allowing oral  evidence.   14. We revised the report to incorporate information ONHIR provided  related to the communities to which relocatees have moved.  15. We clarified the report to state that relocatees with existing Navajo  homesite leases can have their relocation home built on the homesite  lease site if it meets feasibility requirements.   16. We revised the report to incorporate information ONHIR provided on  relocatees who chose to relocate to remote areas.   17. Our report focuses on ONHIR\u2019s management of the home building  process. We did not make a change to the report in response to  ONHIR\u2019s comment because we already describe several procedures  related to home building, including contractor licensing requirements  and feasibility studies. The report also acknowledges that houses  have passed final inspection.    18. As described in comment 2, we disagree with ONHIR\u2019s  characterization of our methodology. We did not make a change in the  report because we maintain that including the experiences of the  population served by ONHIR is appropriate for balance.  19. We disagree with ONHIR\u2019s characterization of our report and did not  make a change to the report based on this comment. Throughout the  body of the report, we have included ONHIR\u2019s policies, its  implementation of activities, as well as the statements of officials  related to relocatees\u2019 home-building concerns.  20. We have made revisions to clarify the figure title.  The two  photographed houses are on the Navajo reservation, shown to us  during our site visit. Because one of the houses was shown to us by  ONHIR officials, we believe the home was built by ONHIR. The other  home was from a separate tour with Navajo Nation officials. The  Navajo Nation officials indicated that the home was built by ONHIR.    21. As described in comment 2, we disagree with ONHIR\u2019s  characterization of our methodology. We did not make a change in the  report because we maintain that including the experiences of the  population served by ONHIR is appropriate for balance.   22. As described in comment 2, we disagree with ONHIR\u2019s  characterization of our methodology. Throughout the report, we  specifically attribute all the views on home building to those we  interviewed\u2014tribal government officials and relocatees. We also do  not draw conclusions about the reasons for the condition of the  homes. We did not make a change in the report because we maintain  that including the experiences of the population served by ONHIR is  appropriate for balance.   23. We revised the report to include ONHIR\u2019s statement about the search  capability of its electronic data system.    24. During our review, ONHIR officials did not identify contracting for post- move counseling services as an option that they have considered nor  did we find any such reference in transition documents we reviewed.  Therefore we have not made any changes to the report based on this  comment.  25. We disagree with ONHIR\u2019s characterization of our report. We  reviewed information provided by ONHIR from various sources, and  accurately reported that ONHIR does not have a comprehensive  inventory of leased and vacant properties or surface use and other  agreements for Navajo trust land it administers. Therefore, we made  no changes in response to this comment.  26. We disagree with ONHIR\u2019s characterization of our report and did not  make a change in the report based on this comment. ONHIR\u2019s  management manual calls for written leases and land use approvals  for the New Lands, whether or not the Navajo Nation requests these.  It is not the responsibility of the trust beneficiary to request a written  lease. The trustee has a duty to maintain clear, complete, and  accurate books and records regarding trust property.  27. We disagree with ONHIR\u2019s statement that it will wait until a successor  is identified to inform it of the leases. Moving forward with specific  transition activities only after a successor entity is identified is a risky  approach because it assumes that ONHIR staff will be available to  work with staff from a successor entity to transfer their knowledge to  the new staff. However, there is no guarantee that ONHIR will  continue to be operating at that time or that its many retirement- eligible employees will be available to assist any successor entities  during a transition period. ONHIR has proposed closing on September  30, 2018. As of March 2018, no successor entities have been  designated or authorized to assume any ONHIR activities. As we  recommended, clearly documenting what needs to happen as part of  the transition will help ensure a smoother transition in the event that  there is not a transition period between ONHIR and a new successor  entity.  28. We revised the report to indicate that, according to ONHIR, Federal  Aviation Administration has continued to pay rent to ONHIR while a  new lease is negotiated.  29. We disagree with ONHIR\u2019s characterization of the report and did not  make a change based on this comment. As we reported, the  Settlement Act as amended does not specifically authorize ONHIR to  collect, retain, and use revenues from leases of Navajo trust land it  administers. The Settlement Act as amended also does not specify  whether ONHIR, the Navajo Nation, or the relocatees should receive  lease revenues. However, as we reported, under BIA\u2019s regulations for  trust land it administers, revenue from leases is to be either paid  directly to the tribe whose trust land is being leased or to BIA, which  deposits the revenue in the tribe\u2019s trust account that generally earns  interest. BIA officials told us leases of trust land that provide for BIA to  retain lease revenue would not be consistent with the agency\u2019s trust  responsibility.  30. We recognize that ONHIR is not, and has never been, part of BIA. As  we note in the report, the comparison to BIA is instructive because  BIA administers the vast majority of Indian trust land. In addition,  ONHIR in its comments and draft transition plan identify BIA as a  possible successor entity for some activities.  31. As described in comment 29, we disagree with ONHIR\u2019s  characterization of its duties and powers as a trustee and did not  make a change to the report. The Settlement Act as amended does  not specifically authorize ONHIR to collect, retain, and use revenues  from leases of Navajo trust land it administers. Moreover, BIA officials  told us leases of trust land that provide for BIA to retain lease revenue  would not be consistent with the agency\u2019s trust responsibility.  32. We disagree with ONHIR\u2019s characterization of the realities of leasing  Navajo trust land and did not make a change to the report. ONHIR did  not provide documentation of requests from the Navajo Nation for  ONHIR to serve as the lessor on some commercial leases. When  ONHIR served as the lessor, ONHIR provided the Navajo Nation with  some leases for \u201ctechnical review\u201d or for \u201creview and comment\u201d.  However, only one of the leases we reviewed includes the Navajo  Nation President\u2019s signature when the tribe, or a tribal entity, is not the  lessee. Moreover, as we reported, the Navajo Nation Department of  Justice repeatedly informed ONHIR that it lacked the authority to  lease Navajo trust land.  33. As described in comment 27, we disagree with ONHIR\u2019s planned  approach to wait until a successor is identified and did not make a  change in the report. Moving forward with specific transition activities  only after a successor entity is identified is a risky approach because  it assumes that ONHIR staff will be available to work with staff from a  successor entity to transfer their knowledge to the new staff. However,  there is no guarantee that ONHIR will continue operating or that its  many retirement-eligible employees will be available to assist any  successor entities during a transition period.  34. We clarified the report to note that another entity is needed to assume  remaining home building activities.  35. We clarified the report to include ONHIR\u2019s statement that it has had  regular communications with executive and legislative branch offices  on completing its work and closing.   36. We disagree with ONHIR\u2019s comments that the report is misleading  related to a presidential determination. Although we included ONHIR\u2019s  statement on its communications about closure in the report, we  maintain that without a presidential determination, ONHIR has not met  the explicit requirements for being permitted to cease operations  under the Settlement Act.  37. As described in comment 11, during the course of our review, ONHIR  did not have complete information readily available for use by a  successor agency. We cannot assure that any efforts ONHIR has  taken subsequently to compile this information as stated in its  comment letter are accurate. We continue to believe that ONHIR  should proactively compile necessary information rather than waiting  for a successor to request it. Moreover, we maintain our concerns  about ONHIR\u2019s database given its admission of data entry issues in  its comment letter. Therefore, we did not make a change in the report  based on this comment."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Navajo Nation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Navajo Nation Human Rights Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jill Naamane and Jeffrey  Malcolm (Assistant Directors), Chir-Jen Huang (Analyst in Charge),  Susan Baker, William Chatlos, Brad Dobbins, Justin Fisher, Randi Hall,  Erik Kjeldgaard, Ellie Klein, Jessica Sandler, Jennifer Schwartz, Jena  Sinkfield, and Jeanette Soares made key contributions to this report."], "subsections": []}]}], "fastfact": ["A 1974 law divided land used by the Navajo and Hopi tribes into two regions, requiring families to move. Eligible families could receive relocation expenses.", "Lawmakers anticipated 1,000 families would relocate in under 5 years, but decades later, over 3,600 families have relocated and the Office of Navajo and Hopi Indian Relocation\u2014created to carry out the relocation\u2014continues to operate. The office stated its intent to close by September 2018.", "We recommend that the office take steps to help ensure that its uncompleted relocation activities can be transferred to other agencies if it closes."]}
{"id": "GAO-18-305", "url": "https://www.gao.gov/products/GAO-18-305", "title": "Coal Mine Reclamation: Federal and State Agencies Face Challenges in Managing Billions in Financial Assurances", "published_date": "2018-03-06T00:00:00", "released_date": "2018-04-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Coal accounts for 17 percent of domestic energy production. SMCRA requires coal mine operators to reclaim lands that were disturbed during mining and to submit a financial assurance in an amount sufficient to ensure that adequate funds will be available to complete reclamation if the operator does not do so. Recent coal company bankruptcies have drawn attention to whether financial assurances obtained by OSMRE and state agencies will be adequate to reclaim land once coal mining operations have ceased.", "GAO was asked to review management of financial assurances for coal mine reclamation. This report describes, among other things, the amounts and types of financial assurances held for coal mine reclamation in 2017 and the challenges that OSMRE and state agencies face in managing these financial assurances. GAO collected and analyzed data from OSMRE and 23 state agencies; reviewed federal laws, regulations, and directives; and interviewed OSMRE and state agency officials and representatives from organizations associated with the mining and financial assurance industries and environmental organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["State agencies and the Department of the Interior's Office of Surface Mining Reclamation and Enforcement (OSMRE) reported holding approximately $10.2 billion in surety bonds (guaranteed by a third party), collateral bonds (guaranteed by a tangible asset, such as a certificate of deposit), and self-bonds (guaranteed on the basis of a coal operator's own finances) as financial assurances for coal mine reclamation.", "OSMRE and state agencies face several challenges in managing financial assurances, according to the stakeholders GAO interviewed. Specifically,", "Obtaining additional financial assurances from operators for unanticipated reclamation costs, such as long-term treatment for water pollution, can be difficult.", "Determining the financial stability of surety companies has been challenging in certain instances.", "Self-bonding presents a risk to the government because it is difficult to (1) ascertain the financial health of an operator, (2) determine whether the operator qualifies for self-bonding, and (3) obtain a replacement for existing self-bonds when an operator no longer qualifies. In addition, some stakeholders said that the risk from self-bonding is greater now than when the practice was first authorized under the Surface Mining Control and Reclamation Act (SMCRA).", "GAO's previous work examining environmental cleanup found that the financial risk to government and the amount of oversight needed for self-bonds are relatively high compared to other forms of financial assurances. GAO also previously reviewed federal financial assurance requirements for various energy and mineral extraction sectors and found that coal mining is the only one where self-bonding was allowed. However, because SMCRA explicitly allows states to decide whether to accept self-bonds, eliminating the risk that self-bonds pose to the federal government and states would require SMCRA be amended."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Congress consider amending SMCRA to eliminate self-bonding. Interior neither agreed nor disagreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Coal accounted for approximately 17 percent of domestic energy  production in 2016, and extracting this resource requires disturbing the  land, potentially affecting vegetation, wildlife, and water quality, among  other things. Under the Surface Mining Control and Reclamation Act  (SMCRA), operators of coal mines on federal and nonfederal lands in the  United States are required to reclaim mined lands\u2014for example, by  regrading and replanting the area. To help ensure that reclamation  occurs, SMCRA requires an operator to submit a financial assurance  (e.g., a bond) in an amount sufficient to ensure that adequate funds will  be available for the regulatory authority\u2014either the Department of the  Interior\u2019s Office of Surface Mining Reclamation and Enforcement  (OSMRE) or an approved state regulatory authority\u2014to complete  required reclamation if the operator does not do so. If specific conditions  are met, SMCRA allows states to let an operator guarantee the cost for  reclaiming a mine on the basis of its own finances, a practice known as  self-bonding, rather than by securing a bond through another company or  providing collateral, such as cash, letters of credit, or real property.", "Three of the largest coal mining companies in the United States filed for  bankruptcy in 2015 and 2016. This drew attention to whether financial  assurances obtained by OSMRE and approved state regulatory  authorities will be adequate to reclaim land once coal mining operations  have ceased, particularly in cases where operators had used self-bonds  as their financial assurance. In August 2016, citing the recent  bankruptcies, lower market demand for coal, and the potential for more  market downturn, OSMRE issued a policy advisory to states suggesting,  among other things, that states take steps to assess whether operators  currently using self-bonds continue to qualify to do so and that states not  accept new self-bonds. Moreover, in September 2016, in response to a  petition seeking revisions to its self-bonding regulations, OSMRE stated  that it planned to examine changes to its bonding regulations that would,  among other things, help ensure the completion of the reclamation plan if  the regulatory authority has to perform the work in the event the operator  does not do so.", "You asked us to review OSMRE\u2019s oversight of financial assurances for  coal mine reclamation. This report examines (1) the amounts and types of  financial assurances held for coal mine reclamation, (2) the extent to  which financial assurances to reclaim coal mines were forfeited from July  2007 through June 2016, (3) how OSMRE oversees financial assurances  for coal mine reclamation, and (4) any challenges that OSMRE and  approved state regulatory authorities face in managing financial  assurances for coal mine reclamation.", "To determine (1) the amounts and types of financial assurances held for  coal mine reclamation and (2) the extent to which financial assurances to  reclaim coal mines have been forfeited, we developed a data collection  instrument and sent it to the relevant state regulatory authority for the  23 primacy states that OSMRE identified as having active coal mining in  2017. We also sent it to OSMRE to request data for the 2 states and four  Indian tribes with active coal mining where it directly manages the coal  program. In developing the instrument, we discussed available data with  OSMRE and state regulatory authority officials and with a representative  of the Interstate Mining Compact Commission, a multistate governmental  agency representing state mining regulatory authorities. All 23 states we  contacted and OSMRE responded to our data collection instrument. For  financial assurances forfeited, the data reported includes forfeitures that  occurred from July 2007 through June 2016. We discussed with state  and OSMRE officials how the data were collected and maintained and  determined that the data were sufficiently reliable for our purposes.", "To determine how OSMRE oversees financial assurances for coal mine  reclamation, we analyzed SMCRA, federal regulations, and OSMRE  directives. Specifically, we reviewed directives pertaining to OSMRE\u2019s  oversight of state and tribal programs, its inspections of mines in both  primacy and nonprimacy states, and a handbook on the calculation of the  amount of financial assurance that OSMRE and primacy states obtain.  We also reviewed agency documents, including the 2010 National Priority  Review that examined how financial assurance amounts were calculated,  and interviewed OSMRE officials from its headquarters and its three  regional offices. We selected a nonprobability sample of 7 states\u2014 Illinois, Kentucky, Montana, Pennsylvania, Tennessee, West Virginia, and  Wyoming\u2014to examine OSMRE\u2019s oversight activities in more detail. We  generally selected states that produced the most coal in 2015 (the most  recent data at the time we began our review), according to the U.S.  Energy Information Administration. We also selected states to achieve  some variation in factors such as geographic location, the dominant type  of coal mining conducted (e.g., surface or underground mining), whether  the state had primacy, and whether the state allowed self-bonding (see  app. I). Because this is a nonprobability sample, the oversight activities in  the 7 states are not generalizable to all 25 primacy and nonprimacy states  with active coal mining but provide illustrative examples. For each of the  7 states, we reviewed agency documents, including OSMRE\u2019s annual  evaluation of the state\u2019s program, agreements between OSMRE and the  state regulatory authority specifying oversight steps OSMRE would take,  and in some cases OSMRE and state documents related to OSMRE\u2019s  determination that a state was not implementing its primacy program as  required. We also interviewed OSMRE field office officials responsible for  these 7 states and, for primacy states, officials from the state regulatory  authority.", "To obtain additional perspectives on OSMRE\u2019s oversight of financial  assurances, we interviewed the following parties: officials from the  Interstate Mining Compact Commission, officials from the National  Association of Insurance Commissioners, and representatives from two  organizations associated with the mining and financial assurances  industries (the National Mining Association and The Surety and Fidelity  Association of America) and from two environmental nongovernmental  organizations (the Natural Resources Defense Council and the Western  Organization of Resource Councils) actively involved with these issues.  These organizations were identified through our research as well as by  other stakeholders as potentially having relevant perspectives and  information to share with regard to financial assurances for coal mine  reclamation.", "To identify any challenges that OSMRE and approved state regulatory  authorities face in managing financial assurances for coal mine  reclamation, we interviewed the federal and state officials and industry  and environmental nongovernmental organization representatives  identified above. Interview questions were designed to elicit officials\u2019 and  representatives\u2019 views on any challenges facing OSMRE and state  regulatory authorities and potential actions to address those challenges.  We also asked about any actions OSMRE has taken or could take to  address the challenges identified. We included those challenges that  were identified by at least 4 of the 13 parties we interviewed. Not all  parties we interviewed commented on every challenge identified.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Coal accounted for 17 percent of energy production (30 percent of  electricity production) in the United States in 2016. To generate this  energy, approximately 730 million tons of coal were mined domestically in  2016, according to the U.S. Energy Information Administration,  approximately 40 percent of which was produced on federal lands. As of  2016, state regulatory authorities and OSMRE had received financial  assurances associated with coal mines that had been permitted to disturb  approximately 2.3 million acres, according to OSMRE data.", "Coal is mined in two different ways: surface mining and underground  mining. In surface coal mining, before the underlying coal can be  extracted, the land is cleared of forests and other vegetation and topsoil is  removed and stored for later use. Explosives or other techniques are then  used to break up the overlying solid rock, creating dislodged earth, rock,  and other materials known as spoil. Surface coal mines can cover an  area of many square miles. In underground coal mining, tunnels are dug  to access coal that is too deep for surface mining methods. In some  cases, underground coal mines are designed to leave sufficient coal in  the mine to support the overlying surface, and in other cases, they are  designed to extract higher quantities of coal that results in subsidence of  the overlying surface as mining progresses.", "In addition to disturbing the land surface, coal mining can affect water  quality, according to the Environmental Protection Agency, the National  Academies, and others. For example, mining can increase sediments in  rivers or streams, which may negatively affect aquatic species. Moreover,  mining can expose minerals and heavy metals to air and water, leading to  a condition known as acid mine drainage, which can lead to long-term  water pollution and harm some fish and wildlife species. Mining can also  lower the water table or change surface drainage patterns."], "subsections": [{"section_title": "Regulation of Coal Mining", "paragraphs": ["The surface effects of coal mining in the United States are regulated  under SMCRA, which also created OSMRE to administer the act. SMCRA  allows an individual state or Indian tribe to develop its own program to  implement the act if the Secretary of the Interior finds that the program is  in accordance with federal law. A state with an approved program is  said to have \u201cprimacy\u201d for that program. To obtain primacy, a state or  Indian tribe submits to the Secretary of the Interior for approval a program  that demonstrates that the state or tribe has the capability of carrying out  the requirements of SMCRA. The program must demonstrate that the  state or Indian tribe has, among other things, a law that provides for the  regulation of the surface effects of coal mining and reclamation in  accordance with the requirements of SMCRA, and a regulatory authority  with sufficient personnel and funding to do so. Of the 25 states and four  Indian tribes that OSMRE identified as having active coal mining in 2017,  23 states had primacy, and OSMRE manages the coal program in  2 states and for the four Indian tribes.", "SMCRA requires a mine operator to obtain a permit before starting to  mine. The permit process requires operators to submit plans describing  the extent of proposed mining operations and how and on what timeline  the mine sites will be reclaimed. In general, an operator must reclaim the  land to a use it was capable of supporting before mining or to an  alternative postmining land use that OSMRE or the state regulatory  authority deems higher or better than the premining land use. In  reclaiming the mine site, operators must comply with regulatory standards  that govern, among other things, how the reclaimed area is regraded,  replanting of the site, and the quality of water flowing from the site.  Specifically:", "Operators are generally required to return mine sites to their  approximate original contour unless the operator receives a variance  from the regulatory authority. To return to this contour, the surface  configuration achieved by backfilling and grading of the mined area  must closely resemble the general surface configuration of the land  before mining and blend into and complement the drainage pattern of  the surrounding terrain, with all highwalls and spoil piles eliminated.", "Operators are required to demonstrate successful revegetation of the  mine site for 5 years (in locations that receive more than 26 inches of  rain annually) or 10 years (in drier areas). States have requirements  for what vegetation may be planted depending on the approved  postmining land use. For example, West Virginia\u2019s regulations call for  sites with a postmining land use of forest land to be planted with at  least 500 woody plants per acre. The state specifies that at least five  species of trees be used, including at least three of the species being  higher value hardwoods, such as oak, ash, or maple.", "SMCRA requires that financial assurances be sufficient to ensure  reclamation compliant with water quality standards, including those  established by the Environmental Protection Agency or the states  under the Clean Water Act. SMCRA\u2019s implementing regulations also  contain additional water protection requirements. For example, the  regulations require that all surface mining and reclamation activities  be conducted to minimize disturbance of the hydrologic balance within  the permit and adjacent areas and to prevent material damage to the  hydrologic balance outside the permit area.", "The federal government also enacted SMCRA, in part, to implement an  abandoned mine land program to promote the reclamation of mined areas  left without adequate reclamation prior to 1977, when SMCRA was  enacted, and that continue to substantially degrade the quality of the  environment, prevent or damage the beneficial use of land or water  resources, or endanger the health or safety of the public. Specifically, Congress found that a substantial number of acres of land throughout the  United States had been disturbed by surface and underground coal  mining on which little or no reclamation was conducted. Further, it found  that the impacts from these unreclaimed lands imposed social and  economic costs on residents in nearby areas as well as impaired  environmental quality. Since the abandoned mine land program was  created, approximately $3.9 billion has been spent to reclaim abandoned  mine lands, and there is at least $10.2 billion in remaining reclamation  costs for coal mines abandoned prior to 1977, as of September 30, 2017,  according to OSMRE."], "subsections": []}, {"section_title": "Financial Assurances for Reclamation", "paragraphs": ["SMCRA generally requires operators to submit a financial assurance in  an amount sufficient to ensure that adequate funds will be available for  OSMRE or the state regulatory authority to complete the reclamation if  the operator does not do so. The amount of financial assurance required  is determined by the regulatory authority\u2014OSMRE or the state\u2014and is  based on its calculation of the estimated cost to complete the reclamation  plan it approved as part of the mining permit. Financial assurance  amounts can be adjusted as the size of the permit area or the projected  cost of reclamation changes.", "SMCRA also authorizes states to enact an OSMRE-approved alternative  bonding system as long as the alternative achieves the same objectives.  One kind of alternative bonding system is known as a bond pool. Under  this type of system, the operator may post a financial assurance for an  amount determined by multiplying the number of acres in the permit area  by a per-acre assessment. The per-acre assessment may vary depending  on the site-specific characteristics of the planned mining operation and  the operator\u2019s history of compliance with state regulations. However, the  per-acre bond amount may be less than the estimated cost of  reclamation. To supplement the per-acre bond, the operator generally  must pay a fee for each ton of mined coal and may also be required to  pay other types of fees. These funds are pooled and can be used to  reclaim sites that participants in the alternative bonding system do not  reclaim. Under OSMRE regulations, all alternative bonding systems must  provide a substantial economic incentive for the operator to comply with  reclamation requirements and must ensure that the regulatory authority  has adequate resources to complete the reclamation plan for any sites  that may be in default at any time.", "OSMRE regulations implementing SMCRA recognize three major types of  financial assurances: surety bonds, collateral bonds, and self-bonds.", "A surety bond is a bond in which the operator pays a surety company  to guarantee the operator\u2019s obligation to reclaim the mine site. If the  operator does not reclaim the site, the surety company must pay the  bond amount to the regulatory authority, or the regulatory authority  may allow the surety company to perform the reclamation instead of  paying the bond amount.", "Collateral bonds include cash; certificates of deposit; liens on real  estate; letters of credit; federal, state, or municipal bonds; and  investment-grade rated securities deposited directly with the  regulatory authority.", "A self-bond is a bond in which the operator promises to pay  reclamation costs itself. Self-bonds are available only to operators  with a history of financial solvency and continuous operation. To  remain qualified for self-bonding, operators must, among other  requirements, do one of the following: have an \u201cA\u201d or higher bond  rating, maintain a net worth of at least $10 million, or possess fixed  assets in the United States of at least $20 million. In addition, the total  amount of self-bonds any single operator can provide shall not exceed  25 percent of its tangible net worth in the United States. Primacy  states have the discretion on whether to accept self-bonds."], "subsections": []}]}, {"section_title": "State Regulatory Authorities and OSMRE Reported Holding $10.2 Billion in Various Types of Financial Assurances", "paragraphs": ["State regulatory authorities and OSMRE reported holding a total of  approximately $10.2 billion in surety bonds, collateral bonds, and self- bonds as financial assurances for coal mine reclamation in 2017. Of the  total amount of financial assurances, approximately 76 percent  ($7.8 billion) were in the form of surety bonds, 12 percent ($1.2 billion) in  collateral bonds, and 12 percent ($1.2 billion) in self-bonds (see fig. 1).", "Twenty-four states reported holding surety bonds, 20 states reported  holding collateral bonds, and 8 states reported holding self-bonds (see  table 1). In addition, OSMRE officials identified 6 states\u2014Indiana,  Kentucky, Maryland, Ohio, Virginia, and West Virginia\u2014that have also  established alternative bonding systems, such as bond pools. In a state  with a bond pool, the operator may generally post a financial assurance  for less than the full estimated cost of reclamation; in addition, the  operator must pay into a bond pool. The pooled funds can be used to  supplement forfeited financial assurances to reclaim sites that operators  participating in the bond pool do not reclaim."], "subsections": []}, {"section_title": "About Half of the States Reported at Least One Forfeited Financial Assurance", "paragraphs": ["States and OSMRE reported that operators forfeited more than  450 financial assurances for reclaiming coal mines between July 2007  and June 2016, with 13 of the 25 states reporting at least one  forfeiture. States and OSMRE reported that the amount of financial  assurance forfeited was sufficient to cover the cost of required  reclamation in about 52 percent of the cases and did not cover the cost of  required reclamation in about 22 percent of the cases. In the remainder  of the cases (26 percent), the state or OSMRE reported that it had not yet  determined if the financial assurance amount covered the reclamation  costs that it was intended to cover. State and OSMRE officials said that it  can take many years to fully reclaim a site and that it may take time for  them to identify the extent of reclamation needed and to determine if the  amount of financial assurance forfeited was sufficient to cover  reclamation costs.", "State and OSMRE officials said there were several reasons why the  amount of financial assurance obtained might not be sufficient to cover  reclamation costs. For example, officials said the amount of financial  assurance might not be sufficient if an operator mined in a manner  inconsistent with the approved mining plan upon which the amount of  financial assurance was calculated or if mining activity resulted in water  pollution that was not considered when the amount of financial assurance  was calculated. In cases where the amount of financial assurance does  not cover the cost of reclamation, the operator remains responsible for reclaiming the mine site. However, OSMRE officials said that in those  cases where the operator may be experiencing financial difficulties, it  might be difficult for the states or OSMRE to compel the operator to  complete the reclamation or provide additional funds to do so without  having the operator go out of business or into bankruptcy. If the operator  does not reclaim the site, the regulatory authority must use the forfeited  financial assurance to do so. If the forfeited funds are not adequate, the  site may not be fully reclaimed unless the regulatory authority either  successfully sues the operator for more funds or provides any additional  funds needed for reclamation. One other source of funds states can use  to reclaim forfeited mines is civil penalties that the United States  government collects from operators that violate conditions of their mining  permits. OSMRE obligated approximately $2.8 million in civil penalties  from fiscal years 2012 through 2017 for states to use to perform  reclamation in cases where the financial assurance was not sufficient,  according to agency officials."], "subsections": []}, {"section_title": "OSMRE Has Taken a Variety of Steps Related to Oversight of Financial Assurances", "paragraphs": ["OSMRE has taken steps\u2014including periodically reviewing financial  assurance amounts, inspecting mine sites, and reviewing state programs  that implement SMCRA\u2014to oversee financial assurances and aspects of  the mining and reclamation process that can affect whether the amount of  financial assurances obtained will cover the cost of required reclamation."], "subsections": [{"section_title": "OSMRE and State Regulators Periodically Review Financial Assurance Amounts", "paragraphs": ["SMCRA requires OSMRE or the primacy state regulatory authority to  calculate the amount of financial assurance required for each mine and to  adjust the amount when the area requiring bond coverage increases or  decreases or when the cost of future reclamation changes. OSMRE  officials and state regulatory authority officials from four of the six states  we interviewed said they generally review the amount of financial  assurance at least every 2 1/2 years or when the mining plan has been  modified in a way that may affect the amount of financial assurance  required. Such periodic reviews are in part to help ensure that OSMRE  and state regulatory authorities continue to hold an amount sufficient to  complete required reclamation as conditions change. These reviews can  lead to OSMRE or the state regulatory authority changing the amount of  financial assurance required for a mine. For example:", "A state regulatory authority official in Utah said that the regulatory  authority reviewed an existing mine permit in 2014, which led to it  recalculating the estimated cost of reclamation on the basis of current  costs. The state regulatory authority requested that the operator  provide a financial assurance to cover the difference (approximately  $195,000), in addition to the $445,000 financial assurance already in  place. However, the official said that the operator\u2014which had stopped  mining the site in 2012 and filed for bankruptcy in 2013\u2014did not  provide the additional financial assurance amount. As a result, in 2017  the state regulatory authority collected the financial assurance that  was in place (i.e., the operator forfeited its assurance). The official  said in December 2017 that the state regulatory authority is  determining the steps it will take to reclaim the site and expects that  the forfeited amount will be sufficient to cover reclamation costs.", "OSMRE officials said that the agency reviewed a permit for a mine on  Navajo tribal lands and determined that it needed to ask the operator  to provide an additional financial assurance in the amount of  $5.7 million. The increase was due to inflation and to include certain  costs, such as the cost of mobilizing equipment needed for  reclamation, that had inadvertently been excluded from the earlier  calculation of the financial assurance required. The officials said that  the operator provided the additional financial assurance amount.", "State regulatory authority officials in Wyoming said they review  financial assurance amounts annually, and in 2017 they reduced the  financial assurance for one mine by almost $35 million because of a  substantial decline in fuel costs and the mine\u2019s ability to share the cost  of needed reclamation equipment with a neighboring mine."], "subsections": []}, {"section_title": "OSMRE Inspects Mine Sites", "paragraphs": ["SMCRA requires OSMRE to make an average of at least one complete  inspection per calendar quarter and one partial inspection per month for  each active permit for which it is the regulatory authority to ensure that  mines are in compliance with SMCRA and federal regulations.  Complete inspections cover all inspection elements in OSMRE\u2019s directive,  while partial inspections may instead focus on issues that most frequently  result in violations or a specific topic identified for oversight, according to  OSMRE officials. In addition, OSMRE\u2019s directive instructs the agency to  inspect a sample of mines annually in states that have primacy to monitor  and evaluate approved state programs\u2019 compliance with SMCRA. The  total number of inspections OSMRE is directed to conduct in primacy  states is based on the number of inspectable units in each state.  Complete inspections are to be done on 33 percent of those sites  selected for inspection. Overall, OSMRE completed more inspections in  primacy states than directed each year for evaluation years 2013 through  2016, according to agency data. For example, in evaluation year 2016,  OSMRE\u2019s directive called for it to conduct 1,225 inspections and OSMRE  completed 1,388.", "As part of a complete inspection, OSMRE confirms that the operator is  following the mining and reclamation plans to assure that the amount of  financial assurance in place is adequate, according to OSMRE officials. If a violation is identified during an inspection, SMCRA requires OSMRE to  issue a ten-day notice to the state regulatory authority or an immediate  cessation order to the operator. If the violation increases the estimated  cost of reclamation (e.g., if the operator disturbed more land than it was  approved for) or an adequate financial assurance had not been collected,  OSMRE or the state regulatory authority can request that the operator  provide an additional financial assurance. For example:", "OSMRE issued a ten-day notice to the Pennsylvania regulatory  authority in 2015 because a water treatment system for a mine in that  state did not have a financial assurance. According to OSMRE  officials, the state regulatory authority took appropriate action to  resolve the situation by issuing an order for the operator to post a  financial assurance within 7 days.", "During an inspection of a mine in Tennessee, a nonprimacy state,  OSMRE determined that the operator had not correctly reclaimed a  portion of the mine because the slope of the regraded area was too  steep, according to an OSMRE official. For the reclamation work that  would be needed to regrade that area, OSMRE determined that the  operator needed to provide an additional financial assurance of  $272,000."], "subsections": []}, {"section_title": "OSMRE Reviews State Coal Programs", "paragraphs": ["Under SMCRA, OSMRE is required to evaluate each primacy state\u2019s coal  program annually to ensure that it complies with SMCRA. SMCRA  includes a requirement that the regulatory authority secure necessary  financial assurances to assure the reclamation of each permitted mine  site. While OSMRE\u2019s directive on oversight of state and tribal regulatory  programs does not instruct the agency to review state regulatory authority  calculations of financial assurance amounts, it instructs OSMRE to focus  on the state programs\u2019 success in achieving the overall purposes of  SMCRA. For example, OSMRE, in conducting its oversight, is to evaluate  the states\u2019 effectiveness in successfully reclaiming lands affected by  mining and in avoiding negative effects outside of areas authorized for  mining activities. If OSMRE\u2019s review of a state program identifies an  issue that could result in the state not effectively implementing,  administering, enforcing, or maintaining all or any portion of its approved  coal program, OSMRE can work with the state regulatory authority to  develop an action plan to correct the issue. If a state regulatory authority  does not take the necessary corrective action, OSMRE may begin the  process of withdrawing approval for a part or all of the state\u2019s primacy.", "In addition to annually evaluating state programs, OSMRE can conduct  national or regional reviews on specific topics. For example, OSMRE  conducted a national review in 2010 that examined how state regulatory  authorities calculated the required amount of financial assurances for coal  mine reclamation. The review examined financial assurance practices in  23 states and reported that on the basis of the sample of mining permits  reviewed, OSMRE was unable to determine if the amount of financial  assurances was adequate for at least one of the permits it reviewed in  10 of the 23 states. Among the potential issues OSMRE identified were  errors in the methods state regulatory authorities used to calculate  financial assurance amounts and insufficient information in the  reclamation plan upon which to calculate reclamation costs.", "OSMRE has worked with the 10 state regulatory authorities to address  the financial assurance issues identified in the 2010 review. For example,  OSMRE\u2019s review found that the regulatory authority in Pennsylvania did  not secure sufficient financial assurances to complete reclamation plans,  in part because amounts were not calculated based on the actual sizes of  the areas excavated for mining. In August 2014, OSMRE and  Pennsylvania\u2019s regulatory authority agreed to an action plan to ensure  that the financial assurances for all active and new permits would be  calculated using the actual sizes of the excavated areas. According to an  OSMRE official, as of February 2017, the state regulatory authority had  recalculated the financial assurance amount for all mines and had  secured the additional financial assurances needed from operators of all  but two of the mines. State officials said in October 2017 that they were  continuing to work to obtain the assurances required for the two mines.", "OSMRE\u2019s 2010 review also found that financial assurances in Kentucky  were not always sufficient to cover required reclamation costs, in part  because the method Kentucky\u2019s regulatory authority used to calculate  financial assurance amounts did not factor in all costs, such as the cost of  moving equipment to and from the reclamation site. In February 2011,  OSMRE and Kentucky\u2019s regulatory authority signed an action plan  identifying steps needed to address the issues OSMRE had identified.  However, in May 2012, OSMRE determined that the state regulatory  authority\u2019s proposed changes to its method for calculating financial  assurance amounts was an improvement but would not result in the  authority obtaining sufficient funds to cover required reclamation. As a  result, OSMRE initiated the process of revoking Kentucky\u2019s primacy for  this aspect of its program. In response, Kentucky implemented  regulations to increase the minimum financial assurance required. The  regulations also required the state regulatory authority to evaluate  financial assurance amounts every 2 years to determine whether they  need to be increased, among other things. The state regulatory authority  sent a set of program amendments to OSMRE designed to address the  identified deficiencies, some of which OSMRE is currently reviewing."], "subsections": []}]}, {"section_title": "OSMRE and State Regulatory Authorities Face a Number of Challenges in Managing Financial Assurances", "paragraphs": ["OSMRE and state regulatory authorities face a number of challenges in  managing financial assurances for coal mine reclamation\u2014including  those related to self-bonding, unanticipated reclamation costs, and the  financial stability of surety companies\u2014according to federal and selected  state regulatory authority officials, representatives from organizations  associated with the mining and financial assurance industries, and  representatives from environmental nongovernmental organizations  whom we interviewed."], "subsections": [{"section_title": "Regulatory Authorities Face Several Challenges Associated with Self- Bonding", "paragraphs": ["Challenges facing OSMRE and state regulatory authorities related to self- bonding include the following:", "Not knowing the complete financial health of an operator. The  information federal regulations require operators to provide to  regulatory authorities may provide an incomplete picture of the  financial health of an operator, according to some parties we  interviewed. For example, the financial information that operators  provide reflects their past financial health, which may not reflect the  operators\u2019 current financial position, according to OSMRE\u2019s response  to the 2016 petition seeking revisions to its self-bonding regulations.  In addition, if an operator applying for a self-bond is a subsidiary of  another company, the operator is not required by regulation to submit  information on the financial health of its parent company. While the  operator applying may have sufficient financial assets to qualify for  self-bonding, if its parent company experiences financial difficulties,  the operator\u2019s assets may be drawn on to meet the parent\u2019s  obligations, which could worsen the financial health of the self-bonded  operator. In addition, according to OSMRE officials, even if OSMRE or  a state regulatory authority were to become aware that an operator\u2019s  parent company was at financial risk, it would be difficult for the  agency to deny the operator\u2019s request for a self-bond because  eligibility is specific to the entity applying for the self-bond, according  to regulations.", "OSMRE could change its self-bonding regulations to require more  information, according to OSMRE officials. However, the financial  relationships between parent and subsidiary companies have become  increasingly complex, making it difficult to ascertain an operator\u2019s  financial health on the basis of information reported in company  financial and accounting documents, according to officials. When  OSMRE first approved its self-bonding regulations in 1983, it noted  that it was attempting to provide rules that would allow self-bonding  without necessitating regulatory authorities to employ financial experts  to determine which companies should be allowed to self-bond.  However, according to OSMRE officials, financial expertise is now  often needed to evaluate the current complex financial structures of  large coal companies, which was not envisioned when the regulations  were developed.", "Difficulty in determining whether an operator qualifies for self- bonding. The regulatory authority in a given state may not be aware  that an operator had self-bonded in other states, making it difficult for  the agency to determine whether the operator qualifies for self- bonding, according to some parties we interviewed. Operators are  only allowed to self-bond for up to 25 percent of their net worth in the  United States, according to regulations. Regulatory authority  decisions on accepting self-bonds generally focus on assessing  activities occurring in a specific state, not nationwide, according to the  Interstate Mining Compact Commission. As a result, the state  regulatory authority or OSMRE may know whether an operator has  applied for self-bonds in other states that if approved would exceed  25 percent of its net worth in total.", "Difficulty in replacing existing self-bonds with other assurances  if needed. OSMRE and state regulatory authorities may find it difficult  to get operators to replace existing self-bonds with another type of  financial assurance when needed, according to some parties we  interviewed. If an operator no longer qualifies for self-bonding (e.g., if  it has declared bankruptcy), federal regulations require it to either  replace self-bonds with other types of financial assurances or stop  mining and reclaim the site. In either case, however, some parties  noted that such actions could lead to a worsening of the operator\u2019s  financial condition, which could make it less likely that the operator will  successfully reclaim the site.", "Some parties we interviewed have noted that regulatory authorities  may be reluctant to direct the operator to replace a self-bond with  another type of financial assurance and may instead allow the  operator to keep mining so that any generated revenue could help the  operator reclaim the site. For example, in 2015 the Wyoming  regulatory authority determined that an operator no longer qualified for  self-bonding and ordered it to replace a $411 million self-bond.  However, the operator entered into bankruptcy without having  replaced the self-bond. In this case, the state regulatory authority  determined that reclamation was more likely to occur if the operator  continued mining and allowed the operator to do so without a valid  financial assurance. The operator replaced its self-bond as a part of  its bankruptcy settlement approximately 17 months after the state  regulatory authority\u2019s order to replace the self-bond, according to  OSMRE officials. However, if a self-bonded operator were to enter  bankruptcy and did not secure a financial assurance to replace the  self-bond or complete the required reclamation, the state regulatory  authority would have to work through the bankruptcy proceedings to  obtain funds for reclamation, according to OSMRE\u2019s preamble to its  1983 self-bonding regulations. As a result, the state may recover  only some, or possibly none, of the funds promised through the self- bond, and the cost of reclamation could fall on taxpayers.", "Difficulty in managing the risk associated with self-bonding. The  risk associated with self-bonding is greater now than when the  practice was first authorized under SMCRA, according to some  parties we interviewed. According to SMCRA, the purpose of financial  assurances is to ensure that regulatory authorities have sufficient  funds to complete required reclamation if the operator does not do so.  While SMCRA allows self-bonding in certain circumstances, when  OSMRE first approved its self-bonding regulations, the agency did so  noting that at the time there were companies financially sound enough  that the probability of bankruptcy was small. Furthermore, the  regulations stated that the intent was to avoid, to the extent  reasonably possible, the acceptance of a self-bond from a company  that would enter bankruptcy. However, as previously mentioned,  three of the largest coal companies in the United States declared  bankruptcy in 2015 and 2016, and these companies held  approximately $2 billion in self-bonds at the time, according to an  OSMRE August 2016 policy advisory, making it a very different risk  landscape than originally envisioned.", "Following these bankruptcies\u2014and recognizing that the coal industry was  likely to continue to face economic challenges for several more years\u2014 OSMRE initiated steps in 2016 to reexamine the role of self-bonding for  coal mine reclamation. Specifically, as previously mentioned, OSMRE  issued a policy advisory in August 2016 noting that given these  circumstances, state regulatory authorities should exercise their  discretion under SMCRA and not accept new or additional self-bonds for  any permit until coal production and consumption market conditions reach  equilibrium. OSMRE has reported that it is not likely for that to occur until  at least 2021. OSMRE also announced in September 2016 that the  agency planned to examine changes to its bonding regulations that  would, among other things, help ensure that reclamation is completed if a  self-bonded operator does not do so. However, following a review of  department actions that could affect domestic energy production, Interior  announced in October 2017 that it was reconsidering the need for and  scope of potential changes to its bonding regulations. OSMRE officials  said that they did not have a timeline for finalizing a decision on potential  changes in its bonding regulations. In addition, OSMRE rescinded its  August 2016 policy advisory that states take steps to assess whether  operators currently using self-bonds can still quality to do so and that  states not accept any new self-bonds.", "Similar issues involving bankruptcies of hardrock mining operators led the  Bureau of Land Management to implement regulations in 2001  eliminating the use of self-bonding for hardrock mining. In doing so, the  Bureau of Land Management determined that a self-bond is less secure  than other types of financial assurances, especially in cases where  commodity prices fluctuate. The agency also noted that operators that  would otherwise be eligible to self-bond should not have a significant  problem obtaining another type of financial assurance. In our previous  work examining other types of environmental cleanup, we found that the  financial risk to the government and the amount of oversight needed for  self-bonds are relatively high compared to other forms of financial  assurances. Furthermore, we also previously reviewed federal financial  assurance requirements for coal mining, hardrock mining, onshore oil and  gas extraction, and wind and solar energy production and found that of  these activities coal mining is the only one where self-bonding was  allowed. Because SMCRA explicitly allows states to decide whether to  accept self-bonds, eliminating the risk that self-bonding poses to the  federal government and states would require that SMCRA be amended."], "subsections": []}, {"section_title": "Obtaining Additional Financial Assurances for Unanticipated Reclamation Can Be Difficult", "paragraphs": ["Unanticipated reclamation costs, such as those related to long-term  treatment for water pollution, may arise late in a mine\u2019s projected lifespan,  and the operator may not have the financial means to cover the additional  costs, according to OSMRE officials. Under SMCRA, OSMRE and state  regulatory authorities are not to approve a permit for a coal mine if the  regulatory authority expects the mine to result in long-term water  pollution. As a result, since long-term water pollution is not anticipated to  occur, the cost of addressing it would not be included in the initial  financial assurance that the operator provides. If the regulatory authority  later determines that long-term water treatment is needed, the regulatory  authority must adjust the amount of financial assurance that the operator  is required to provide.", "Some parties we interviewed have also noted that the costs and duration  of long-term water treatment are not well defined and that surety bonds  are not well-suited to provide assurance for such indefinite long-term  costs. For example, according to the Interstate Mining Compact  Commission, surety bonds are designed for shorter-term, defined  obligations that have a high certainty for bond release following the  completion of reclamation. To help address this challenge, some states  have established, or allowed operators to establish, trust funds to help  cover such unanticipated reclamation costs. For example, West Virginia  established a fund, primarily supported through a tax on the amount of  coal mined, to operate water treatment systems on forfeited sites. West  Virginia\u2019s regulatory authority is also working to evaluate permits for sites  with water pollution to estimate water treatment costs within the state  more precisely. Similarly, Pennsylvania allows operators to establish trust  funds that are maintained by foundations and monitored by the state  regulatory authority and are intended to ensure that there are sufficient  funds to cover the costs of long-term water treatment, according to state  regulatory authority officials. In addition, the OSMRE-run coal program in  Tennessee allows trust funds for water treatment, in part because an  assurance system that provides an income stream may be better suited  to ensuring the treatment of long-term water pollution than conventional  financial assurances, according to an OSMRE notice in the Federal  Register."], "subsections": []}, {"section_title": "Determining the Financial Stability of Surety Companies Has Been Challenging in Certain Instances", "paragraphs": ["The utility of surety bonds in providing a financial assurance depends on  the surety company\u2019s ability to pay the amount pledged if the operator  forfeits. OSMRE regulations require that a surety company be licensed to  do business in the state where a mine is located. Some parties we  interviewed noted that surety companies have declared bankruptcy or  experienced financial difficulties in the past and could experience similar  difficulties in the future. In addition, two states reported recent issues  related to surety companies. For example, state regulatory authority  officials in Alabama said that a surety company that had provided surety  bonds totaling $760,000 for four mines in that state had gone bankrupt or  was insolvent. As of May 2017, the state had collected only $127,000.  Similarly, state regulatory authority officials in Alaska said that as of  August 2017, the state had not collected any part of a forfeited $150,000  surety bond because the surety company had gone bankrupt. In our  previous work examining other types of environmental cleanup, we have  found that the financial risk to the government and the amount of  oversight needed for surety bonds are relatively low to moderate  compared to other forms of financial assurances."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Billions have been spent to reclaim mines abandoned prior to the financial  assurance requirements SMCRA put in place, and billions more remain.  Under SMCRA, self-bonding is allowed for coal mine operators with a  history of financial solvency and continuous operation\u2014the only type of  energy production or mineral extraction activity we have reviewed for  which this is allowed. Bankruptcies of coal mine operators in 2015 and  2016 have highlighted risks that OSMRE and state regulatory authorities  face in managing self-bonding\u2014a risk that may be greater today than  when self-bonding was first authorized under SMCRA. If a self-bonded  operator were to enter bankruptcy and does not provide a different type of  financial assurance or complete the required reclamation, the regulatory  authority and the taxpayer potentially assume the risk of paying for the  reclamation. Although OSMRE said it would examine changes to its self- bonding regulations following recent bankruptcies, Interior recently said  that it is reconsidering the need to do so. Because SMCRA explicitly  allows states to decide whether to accept self-bonds, eliminating the risk  that self-bonding poses would require amending SMCRA. Until such a  change is made, the government will remain potentially at financial risk for  future reclamation costs resulting from coal mines with unsecured  financial assurances."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider amending SMCRA to eliminate the use of self- bonding as a type of financial assurance for coal mine reclamation.  (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of the Interior for  review and comment. Interior did not provide written comments on our  findings and matter for congressional consideration. OSMRE provided  technical comments in an e-mail, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, the Acting  Director of OSMRE, and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions, please contact Anne-Marie  Fennell at (202) 512-3841 or fennella@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Major contributors to this report are listed in  appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Characteristics of States GAO Selected for Review to Obtain Additional Information regarding OSMRE Oversight", "paragraphs": ["We selected a nonprobability sample of states to examine the Office of  Surface Mining Reclamation and Enforcement\u2019s (OSMRE) oversight  activities in more detail. We generally selected states that produced the  most coal in 2015 but also selected states in order to achieve some  variation in factors such as geographic location, the dominant type of coal  mining conducted (e.g., surface or underground mining), whether the  state had primacy, and whether the state allowed self-bonding (see  table 2)."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Elizabeth Erdmann (Assistant  Director), Antoinette Capaccio, Jonathan Dent, Cynthia Grant, Marya  Link, Anne Rhodes-Kline, Sheryl Stein, Guiovany Venegas, and Jack  Wang made key contributions to this report."], "subsections": []}]}], "fastfact": ["After mining, a coal company is required to restore the land it disturbed, e.g., by regrading or replanting. The federal government requires coal companies to get bonds to assure their payment for these activities.", "Federal law permits coal mine operators in some cases to guarantee these costs on the basis of their own finances, a practice known as self-bonding, rather than by securing a bond through another company or providing collateral.", "Some stakeholders told us that self-bonds are riskier now than before, citing industry bankruptcies and lower coal demand.", "We recommended that Congress consider amending the law to eliminate self-bonding."]}
{"id": "GAO-19-178", "url": "https://www.gao.gov/products/GAO-19-178", "title": "Presidential Travel: Secret Service and DOD Need to Ensure That Expenditure Reports Are Prepared and Submitted to Congress", "published_date": "2019-01-17T00:00:00", "released_date": "2019-02-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Secret Service is responsible for protecting the President and his family, including adult children when they travel. The Secret Service can request assistance in its mission from other agencies, such as DOD and the Coast Guard. When the President travels, he must fly on DOD aircraft.", "GAO was asked to review the travel- related costs for four trips that the President took to Mar-a-Lago and three trips that the President's adult children made to certain overseas destinations. This report examines (1) the costs incurred by federal agencies associated with the President's travel on selected trips to Mar-a-Lago, (2) the costs incurred by federal agencies associated with certain overseas trips taken by Donald Trump, Jr. and Eric Trump, and (3) the extent to which the Coast Guard, the Secret Service, and DOD have reported their costs pursuant to the Presidential Protection Assistance Act of 1976. GAO analyzed agency cost data in connection with the President's travel to Mar-a-Lago and the President's adult children's trips to certain overseas locations. GAO also reviewed the law, agency guidance, and semiannual reports related to the Presidential Protection Assistance Act of 1976."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO estimated that federal agencies incurred costs of about $13.6 million for the President's four trips to Mar-a-Lago from February 3 through March 5, 2017. This estimate consisted of approximately $10.6 million for operating costs of government aircraft and boats and $3 million for temporary duty costs of government personnel supporting the President's travel, including transportation, lodging, and meals and incidental expenses. These figures do not include certain classified cost information or the salaries and benefits of government personnel traveling with the President because, salaries and benefits would be paid regardless of whether the President was traveling.", "The United States Secret Service (Secret Service) incurred about $396,000, primarily for temporary duty costs, while protecting Donald Trump, Jr. and Eric Trump during three international trips taken in January and February 2017. Eric Trump traveled to Uruguay and the Dominican Republic and Donald Trump, Jr., Eric Trump, and their spouses traveled to the United Arab Emirates. Documentation provided by Secret Service officials confirmed that the Trumps and their spouses flew on commercial aircraft. Officials from the 89th Airlift Wing confirmed that no military aircraft supported these trips. Secret Service agents protecting the Trump family flew by commercial aircraft.", "GAO found that, of the three agencies required to report by the Presidential Protection Assistance Act of 1976, as amended, only the United States Coast Guard (Coast Guard) reported protection costs semiannually to Congress for fiscal years 2015 through 2017. GAO found that the Secret Service does not have a policy for ensuring that the semiannual reports are prepared and has not consistently submitted the reports. Secret Service officials last submitted reports in fiscal year 2015 and were unaware that reports had not been submitted in fiscal years 2016 and 2017 until GAO requested this information. GAO also found that the Department of Defense (DOD) has a policy but did not produce and submit the reports as required. Moreover, weaknesses in DOD's existing policy and instruction do not clearly establish the responsibility for preparing and reporting the costs incurred to support protection activities. Absent clear policies with an oversight mechanism to ensure that the reports are produced, Congress has not been provided required information concerning the costs for providing protective services for the President and others."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making recommendations to the Secret Service and DOD to ensure that the reports required under the Presidential Protection Assistance Act of 1976, as amended, are prepared and submitted. The Department of Homeland Security and DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The President of the United States must be ready to travel anywhere in  the world on a moment\u2019s notice. The President flies on military aircraft  provided by the Department of Defense (DOD) on all trips, regardless of  the type of travel: official, political, or other non-official purposes.  Department of Justice memoranda have advised that when presidential  travel is for official purposes it is to be paid for with government funds,  and when it is for political purposes, appropriated funds cannot be used.  These memoranda also note that even though presidential travel may not  be official, there are certain individuals who are required, in the  performance of their official duties, to accompany the President when he  travels; therefore their costs are to be paid from appropriated funds.", "The United States Secret Service (Secret Service) is responsible for  protecting the President and his family, including the adult children of the  President, unless they decline such protection. At the request of the  Secret Service, assistance must be provided by other agencies, such as  DOD and the United States Coast Guard (Coast Guard). Under the  Presidential Protection Assistance Act of 1976, as amended, the Secret  Service does not reimburse DOD or the Coast Guard for assistance  provided on a temporary basis when the duties are directly related to the  protection of the President, the Vice President, or other officer  immediately next in order of succession to the office of the President.  Otherwise, all assistance that executive departments and agencies  provide to the Secret Service in the performance of its duties must be  reimbursed by the Secret Service.", "We previously reported on certain costs of presidential travel during the  administrations of former Presidents Barack Obama and Bill Clinton. In  2016, we reported on travel costs for former President Obama for a 2013  trip to Chicago, Illinois, and West Palm Beach, Florida. In 2000, we  reported on total aircraft support costs for international trips taken by the  President, Vice President, and First Lady from January 1997 through  March 2000. Finally, we reported in 1999 on travel costs for former  President Clinton for international trips to Africa, Chile, and China.", "You requested that we examine costs associated with the President\u2019s four  trips to the Mar-a-Lago property in Palm Beach, Florida between  February 3, 2017 and March 5, 2017, and three international trips taken  by Donald Trump, Jr. and Eric Trump in January and February 2017. This  report examines  1.  the costs incurred by federal agencies associated with the President\u2019s  travel on selected trips to Mar-a-Lago from February to March 2017;  2.  the costs incurred by federal agencies associated with Donald Trump,  Jr.\u2019s and Eric Trump\u2019s trips to Uruguay, the Dominican Republic, and  the United Arab Emirates in January and February 2017; and  3.  the extent to which the Coast Guard, Secret Service, and DOD have  reported their costs for protection from fiscal year 2015 to 2017,  pursuant to the Presidential Protection Assistance Act of 1976, as  amended.", "To address our first objective, we collected and reviewed data on agency  assets and personnel used in support of presidential travel that was  completed between February 3, 2017 and March 5, 2017. Specifically,  we collected and analyzed operational cost data, including operating  hours and estimated operating costs, from the Air Force\u2019s 89th Airlift Wing,  the 618th Air Operations Center, and Marine Corps Helicopter Squadron  One that were related to supporting the presidential airlift requirement,  including any supporting vehicles or equipment. We also obtained and  analyzed travel cost data, including per diem and other travel expenses,  for any Secret Service personnel and military personnel who supported  the President\u2019s trips. Additionally, we collected and reviewed cost data  from agencies directly supporting the Secret Service during the  presidential travel completed between February 3, 2017 and March 5,  2017, such as the Coast Guard, Military Working Dog teams, and the  Explosive Ordnance Disposal team. We collected and reviewed available  travel data, to the extent it was provided to us, to account for the travel  costs of government officials on official travel at Mar-a-Lago during the  time frame of our audit. Although we collected the major, unclassified  travel-related costs that agencies incurred (hereafter referred to as costs),  we did not collect travel costs for officials from the Executive Office of the  President. Therefore, our totals represent an approximate amount spent  for the four trips. We contacted White House Counsel\u2019s Office in April  2017 and January 2018 to solicit information from the Executive Office of  the President related to coordinating travel for the President and any  costs associated with White House staff traveling with the President. As  of January 2019, the White House had not responded to our requests for  information. We also did not include certain classified cost information or  information about federal funds provided to local law enforcement by the  Federal Emergency Management Agency.", "As we examined the costs incurred for the President\u2019s travel, we did not  include the salaries and benefits, including overtime, of U.S. government  civilian and military personnel traveling with the President or involved with  agency travel preparations, since these personnel would have received  their salaries and benefits for the conduct of their regular duties and  responsibilities regardless of whether the President traveled. We  reviewed laws, regulations, and policies to identify the rules and  processes governing agencies that support presidential travel and agency  costs on employee per diem and operational spaces for employees who  accompany the President when he is traveling domestically. We also  interviewed officials from DOD, the Department of Homeland Security  (DHS), and the Department of Justice.", "To address our second objective, we collected and analyzed cost data  from the Secret Service and the Department of State in connection with  trips taken by Donald Trump, Jr. and Eric Trump to the Dominican  Republic, the United Arab Emirates, and Uruguay. Additionally, we  interviewed officials from the Secret Service and the Department of State  and reviewed relevant policies and guidance regarding reimbursement for  agencies that provide support to the Secret Service. We also obtained  documents and interviewed DOD officials concerning whether any DOD  aircraft had been used to support these overseas trips.", "To address our third objective, we reviewed applicable laws, regulations,  and internal Coast Guard, Secret Service, and DOD policies related to the  preparation and submission of reports required by the Presidential  Protection Assistance Act. We also obtained and reviewed available  reports from the Coast Guard, Secret Service, and DOD from 2015  through 2017. We selected these three years because they included  travel conducted in 2017 and they were the most recent years that would  have been available at the time of our review. We interviewed officials  from the Coast Guard, Secret Service, and DOD regarding the contents  and submission of these reports.", "As part of this work, we assessed the reliability of DHS and DOD data by  interviewing officials to determine what mechanisms were in place to  ensure data quality, and we reviewed the data for obvious errors and  anomalies. We further conducted manual testing procedures such as  reviewing underlying documents for missing data, recreating calculations  to ensure that totals were correct, and matching selected cost data to  supporting documentation such as credit card statements and travel  vouchers. Based on these steps we determined the data to be sufficiently  reliable for our purposes.", "We conducted this performance audit from April 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Agency Support of Presidential Travel", "paragraphs": ["Guidance governing executive agencies\u2019 use of government aircraft  generally does not apply to aircraft in use by or in support of the  President. Memorandum opinions to the White House from the  Department of Justice\u2019s Office of Legal Counsel have provided guidance  for categorizing expenses associated with official, political, and personal  travel by the President or Vice President. These memoranda provide that  certain individuals\u2014such as Secret Service and military aides and  support personnel\u2014are required in the performance of their official duties  to accompany the President whenever he travels. Further, the official  nature of the responsibilities performed by these persons does not  change depending upon whether the trip is official, political, or personal  and their expenses should generally be paid from public funds.", "DOD organizations such as the Air Force 89th Air Wing, Presidential  Airlift Group, and Marine Helicopter Squadron One provide passenger  airlift for presidential travel (fig. 1). The Air Force Air Mobility Command  also provides aircraft to move equipment, such as limousines, to support  the President\u2019s travel. The Military Working Dog Program and Explosive  Ordnance Disposal Program support protection of the President while he  is on travel by providing explosive detection capabilities.", "The Secret Service protects the President through a layered security plan  that includes securing locations the President will be visiting, as well as  physically screening individuals entering secure areas and conducting  background checks on individuals scheduled to be within close proximity  to the President, as deemed necessary. Secret Service personnel who  support presidential travel include personnel from the Presidential  Protection Division and from various headquarters divisions that support  protective operations, field offices across the country that provide  additional manpower, and the field office with jurisdiction over the  location. Additionally, the field office with jurisdiction over the location  provides logistical support, additional manpower, regional expertise, and  coordinates with state and local law enforcement entities. Consistent with  the Presidential Protection Assistance Act, the Secret Service requests  support from other agencies\u2014including the Coast Guard and DOD\u2014as  necessary when the President travels.", "The Coast Guard primarily secures the waterways in support of protecting  the President, family members, and other designated protectees, as  necessary. Specifically, when requested by the Secret Service, the Coast  Guard will enforce security zones and provide air intercept capabilities for  protectees. Local assets are used to the extent that they are available.  However, the Coast Guard can request additional support from Coast  Guard assets across the nation to meet the security demand."], "subsections": []}, {"section_title": "Costs Related to Presidential Travel", "paragraphs": ["Costs related to presidential travel fall into two primary categories:", "Operational costs include costs for assets used to transport or provide  protection for the President or spaces used for operational purposes.  These include costs for government aircraft and vehicles, such as Air  Force One, Marine One, airlift, patrol boats, and hotel rooms used as  command centers.", "Temporary duty costs are costs incurred for personnel who are  traveling on official business. These costs include those for  transportation, lodging, meals and incidental expenses and other  travel-related expenses for personnel supporting the President\u2019s  trips. They also include travel-related expenses for personnel who  operate the government aircraft and vehicles used to support the  President\u2019s trips and Secret Service agents who provide protection.  They include the costs for additional personnel who provide bomb  detection and disposal capability\u2014military working dog teams and  explosive ordinance disposal teams\u2014and support personnel from the  White House Military Office, the White House Communications  Agency, and the White House Transportation Agency.", "Two regulations implement statutory requirements and executive branch  policies for travel, allowing agencies to pay for or reimburse their  employees\u2019 per diem expenses (lodging, meals, and incidentals  expenses) and other travel-related expenses:", "The Federal Travel Regulation (FTR), issued by the General  Services Administration (GSA), applies to Secret Service personnel.", "The Joint Travel Regulations (JTR), issued by the Department of  Defense, apply to DOD personnel.", "Both regulations allow agencies to pay for employees\u2019 daily expenses  when they travel, based on allowances set by GSA for the applicable  location and date (per diem rates) or the actual expense of travel. Under  the FTR, the maximum amount that a civilian employee may be  reimbursed is 300 percent of the applicable per diem rate. The JTR  allows uniformed service members to be reimbursed up to 300 percent  when they travel in the continental United States, but they can be  reimbursed more than 300 percent of the per diem rate for lodging when  they travel outside the continental United States.", "Costs for each presidential trip may vary, because each trip is unique.  Costs associated with each trip can be influenced by a number of factors,  mainly the location, number of protectees, foreign visitors, time of year,  the protectee\u2019s schedule of events, and the airlift requirements\u2014including  the originating location of airlift flights. The combination of these factors  can increase or decrease the cost to transport and protect the President.  Specifically, an increase in the number of protectees, including foreign  dignitaries, would require the Secret Service to deploy additional  personnel to support its protective operations."], "subsections": []}, {"section_title": "Presidential Protection Assistance Act of 1976", "paragraphs": ["The Presidential Protection Assistance Act establishes procedures and  reporting requirements for protective services provided by the Secret  Service. The primary aim of the legislation was to strengthen control over  costs for protective services, particularly at non-governmental properties,  by centralizing in the Secret Service authority and accountability for such  costs. The Act continues the authority of executive departments and  agencies to assist the Secret Service in meeting its protective  responsibilities but specifies that protective services may only be provided  at the request of the Secret Service and must be on a reimbursable basis  except when temporary support is provided by DOD and the Coast Guard  and is directly related to protecting the President, Vice President, or an  officer immediately next in the order of succession to the office of the  President. The Act further requires that the Secret Service, DOD, and the  Coast Guard submit semiannual reports in March and September to six  congressional committees on expenditures pursuant to the Act."], "subsections": []}]}, {"section_title": "Costs for the President\u2019s Travel for Four Trips to Mar-a- Lago Totaled about $13.6 Million", "paragraphs": ["For the President\u2019s four trips to Mar-a-Lago from February 3, 2017 to  March 5, 2017, we estimate that federal agencies incurred costs of about  $13.6 million. As shown in table 1, these costs consisted of approximately  $10.6 million for operating costs and $3.0 million for temporary duty costs.  DOD and DHS incurred the majority of these costs\u2014about $8.5 million  and $5.1 million, respectively. As previously mentioned, these figures do  not include certain classified cost information. Moreover, they do not  include the salaries and benefits of U.S. government civilian and military  personnel traveling with the President or involved with agency travel  preparations, because these personnel would have received their salaries  and benefits for the conduct of their regular duties and responsibilities  regardless of whether the President traveled.", "We identified about $60,000 in expenses paid to Mar-a-Lago for these  four trips. DOD lodging expenses of about $24,000 were within GSA  limits of 300 percent of the per diem rate. DHS expenses of about  $36,000 were for space required by the Secret Service for operational  purposes. The legal authorities that the Secret Service relied on to pay for  these kinds of rooms do not limit how much the agency can pay;  however, none of the rooms used to meet operational security standards  exceeded the maximum allowed under the FTR\u2019s actual expense  reimbursement method."], "subsections": [{"section_title": "Costs Incurred by DOD", "paragraphs": ["DOD incurred an estimated $8.5 million in costs to provide support for the  President\u2019s four trips to Mar-a-Lago from February 3, 2017 to March 5,  2017, as shown in table 2 below. The majority of these costs were  operational costs for DOD assets, specifically, for operating Air Force  One and Marine Corps One to transport the President, as well as airlift  support from the Air Mobility Command.", "Table 2 shows the estimated costs incurred by DOD for these trips. The  cost per flying hour for military aircraft is a significant cost driver that  affects the overall costs of any presidential travel. These costs are  predominately borne by the Air Force and the Marine Corps, because  they operate the aircraft used by the President. Generally, Air Force One  costs represent the operating costs to fly the President from Joint Base  Andrews, Maryland, to Palm Beach, Florida. Similarly, the Marine Corps  One costs represent the operating costs to fly the President between the  White House and Joint Base Andrews. For the airlift support  requirements, the Air Mobility Command used aircraft departing from  various U.S. Air Force bases. These aircraft arrived at Joint Base  Andrews or Marine Corps Base Quantico to transport Secret Service  personnel and vehicles and Marine Corps personnel and helicopters to  support the trip before returning to their air base of origin (see fig. 2).", "DOD also incurred temporary duty costs for DOD personnel who  supported these trips, including the travel associated with the aircrews  and support personnel for Air Force One and Marine Corps One. Each of  the military services also provided military working dog teams (see fig. 3)  and explosive ordnance disposal teams to provide explosive detection  and disposal capabilities and to perform patrol functions.", "Finally, personnel from the White House Military Office incurred travel  expenses associated with the President\u2019s trips. For these four trips, the  majority of DOD personnel stayed at nearby hotels with rooms at the GSA  rate or within 300 percent of the GSA per diem rate, as required by the  FTR and JTR. DOD paid $24,414.70 to Mar-a-Lago for lodging expenses  for DOD personnel. We reviewed lodging receipts and confirmed that  these payments were within 300 percent of the GSA per diem rate."], "subsections": []}, {"section_title": "Costs Incurred by DHS", "paragraphs": ["DHS incurred an estimated $5.1 million in costs to provide support for the  President\u2019s four trips to Mar-a-Lago from February 3, 2017 to March 5,  2017. Of this figure, the Secret Service incurred about $1.6 million to  provide support. This included per diem and other related travel  expenses, such as commercial airfare or use of rental cars for officials  traveling in advance of the President. We identified about $35,750 in  expenses for operational space at Mar-a-Lago for these four trips. Table 3  shows the estimated costs incurred by the Secret Service and the Coast  Guard for these trips.", "The majority of costs incurred by the Secret Service were temporary duty  costs associated with travel to protect the President. The number of  agents assigned to the protective detail for each trip varied based on the  number of protectees present (including foreign dignitaries) and unrelated  events at the same location.", "To execute the four trips, the Secret Service leveraged support from  across the agency and field offices across the country to implement  protective operations for the President\u2019s travel. Agents were assigned as part of the protective detail\u2014providing twenty-four hour protection for  the President or other protectee; members of the advance team\u2014determining and implementing the  security plan for the site; or on-site support throughout the duration of the visit.", "For example, agents from the Secret Service\u2019s Presidential Protective  Division, Uniformed Division, and Technical Security Division, among  others, traveled in advance of the President to assess the location and  develop and implement a security plan. Further, agents from Secret  Service field offices across the country provided additional manpower at  Mar-a-Lago and supported the Presidential Protection Division within the  Office of Protective Operations \u2014which holds primary responsibility for  the daily protection of the President\u2014in ensuring that the location  remained safe for the President and other protectees.", "The majority of agents who supported the four trips during our time frame  did not stay at Mar-a-Lago. The Secret Service booked a limited number  of rooms around the President to meet operational security  requirements. According to officials, these rooms allowed the Secret  Service to provide 360-degree protection around the President. For these  four trips, most Secret Service agents stayed at nearby hotels at which  rooms were at the GSA lodging rate or within 300 percent of the GSA per  diem rate, consistent with the FTR."], "subsections": [{"section_title": "Coast Guard\u2019s Costs and Resources", "paragraphs": ["The Coast Guard incurred about $3.4 million in costs to provide support  for the four trips to Mar-a-Lago. The majority of these costs were  operational costs for Coast Guard assets, specifically, the use of small  response boats, special purpose law enforcement boats, deployable  rotary wing aircraft, and marine protection-class cutters to provide support  in waterways near Mar-a-Lago (see fig. 4). For the Coast Guard,  operating costs are determined by the type of boat or aircraft used and  the hourly operating costs.", "According to Coast Guard officials, to the extent possible, they request  support from assets that they determine are within close proximity to the  travel location. For the four Mar-a-Lago trips, support was requested from  the local Miami sector, Kings Bay (Georgia), New Orleans (Louisiana),  Houston (Texas), Boston (Massachusetts), and New York (New York).", "The Coast Guard incurred other travel-related costs, such as for meals  and incidental expenses and lodging for officials on temporary duty  assignment to support the President\u2019s travel. Coast Guard officials noted  that, if possible, personnel are to stay on the asset (for example a boat);  however, if this is not possible, they are to stay in nearby lodging at or  within 300 percent of the GSA per diem rate. Coast Guard officials  confirmed that personnel supporting presidential travel for these four trips  did not stay at Mar-a-Lago."], "subsections": []}, {"section_title": "Costs for the Secretary of Homeland Security\u2019s Travel", "paragraphs": ["The Department of Homeland Security incurred costs of about $6,000 in  connection with the Secretary of Homeland Security and staff\u2019s travel to  Mar-a-Lago on March 4, 2017. Costs included transportation to and from  Mar-a-Lago and per diem expenses (meals and incidental expenses).  According to DHS officials, agents supporting the protection of the  Secretary of the Department of Homeland Security were multi-staffed and  protected other protectees at the same time. Therefore, travel costs for  personnel associated with the Secretary\u2019s protective detail are captured in  the overall travel costs for this trip. No lodging costs were incurred at Mar- a-Lago in connection with the Secretary of Homeland Security\u2019s travel."], "subsections": []}]}, {"section_title": "Additional Costs by Other Agencies for Official Travel", "paragraphs": ["The Department of Justice and the Department of State incurred costs of  about $29,000 for official travel to Mar-a-Lago during these four trips.  The Department of Justice incurred costs of about $18,000 to transport  the Attorney General, his Federal Bureau of Investigation (FBI) detail, and  three Department of Justice personnel to Mar-a-Lago for one trip. The  operational costs were for the FBI Gulfstream 550 used to transport the  officials from the Washington, D.C. area to West Palm Beach, Florida and  back. The Department of Justice provided documentation that no  Department of Justice or FBI personnel had per diem expenses, since the  trip was less than 12 hours. In addition, the Department of State  incurred costs of about $10,000 to provide interpreter support and  protocol officials associated with the President\u2019s trip to Mar-a-Lago in  February 2017 when the Prime Minister of Japan was a guest."], "subsections": []}]}, {"section_title": "Costs for the President\u2019s Two Adult Children\u2019s Travel to Uruguay, the Dominican Republic, and the United Arab Emirates Totaled about $396,000", "paragraphs": ["The Secret Service incurred costs of approximately $396,000, primarily  for Secret Service agents\u2019 temporary duty costs, while protecting Donald  Trump, Jr., Eric Trump, and their spouses during three international trips  taken during January and February 2017, as shown in table 4 below. Eric  Trump traveled to Uruguay from January 3, 2017 to January 5, 2017 and  the Dominican Republic from February 2, 2017 to February 3 2017.  Donald Trump, Jr., Eric Trump, and their spouses traveled to the United  Arab Emirates from February 14, 2017 to February 19, 2017. The Secret  Service protects presidential family members domestically and  internationally. Children of the President with a protective detail are  required to receive protection twenty-four hours a day, and agents who  are part of their detail travel with them wherever they go.", "For international travel, because there are no local Secret Service field  offices in most countries, the Department of State supports the Secret  Service by booking and paying for all hotel reservations required by  Secret Service and State Department personnel and coordinating onsite  needs. This includes, but is not limited to, acquiring rental cars, phones,  and interpreters at the trip\u2019s destination. Transportation for individuals in  foreign offices is booked in a variety of ways. For example, agents may  book their own flights, flights may be booked by a contracted agency, or  sometimes the local embassy may assist in booking transportation. Meals  and incidental expenses are reimbursed to the traveler. The Secret  Service and the Department of State have implemented a memorandum  of understanding detailing their respective roles and responsibilities and,  as required by law, the Secret Service is to reimburse the Department of  State for all costs incurred in support of the Secret Service\u2019s protective  operations.", "Documentation provided by the Secret Service confirmed that Donald  Trump Jr., Eric Trump and their spouses flew on commercial aircraft.  Officials from the 89th Airlift Wing confirmed that no military aircraft  supported these trips. Secret Service agents protecting the Trump family  flew by commercial aircraft. Additionally, reimbursement documentation  provided by both the State Department and the Secret Service confirmed  that no costs were incurred for chartered air travel.", "As with all protective missions, Secret Service officials noted that the  number of agents assigned to the detail depended on the number of  protectees and the threat environment, among other things. The trips to  the Dominican Republic and Uruguay each included only one protectee,  and the trip to the United Arab Emirates included four protectees."], "subsections": []}, {"section_title": "Secret Service and DOD Have Not Reported Costs as Required Under the Presidential Protection Assistance Act of 1976", "paragraphs": ["For fiscal years 2015 through 2017 we found that, of the three agencies  required to report costs incurred for protecting the President and others  under the Presidential Protection Assistance Act, only the Coast Guard  reported semiannually on costs under the Act. The Secret Service did  not do so consistently, and DOD did not report any protection costs  during this time frame.", "Coast Guard: The Coast Guard submitted the semiannual reports  required under the Act for fiscal years 2015 through 2017. To facilitate  complying with the Presidential Protection Assistance Act, the Coast  Guard developed and implemented a policy for preparing the semiannual  reports to Congress. The policy contains business rules identifying what  information is to be collected and by whom, who is responsible for  compiling the information, and time frames for when the information is to  be submitted internally. For example, the Coast Guard operationalized  collection of this information by requiring a form to be used when  collecting information related to protective details for the Vice President  and the President. Its internal policy and additional guidance also require  that information be submitted internally no more than 14 days after each  event and validated no more than 30 days after each event. According  to agency officials, these business rules and forms are published and  provided to all Coast Guard field units, and quarterly reminders about  completing the forms are disseminated via email.", "Secret Service: The Secret Service has not consistently submitted the  semiannual reports to Congress and does not have a policy for ensuring  that the semiannual reports are prepared. Specifically, we found that the  Secret Service submitted semiannual reports to Congress in 2015 but  had not submitted semiannual reports for fiscal years 2016 and 2017. The  Secret Service notified us that it was compiling and submitting reports for  fiscal year 2017 after we had brought the reporting requirement to  officials\u2019 attention during the course of our review. Secret Service officials  told us that they were unaware that the reports for 2016 and 2017 had not  been submitted until we requested this information.", "According to Secret Service officials, the division that is responsible for  preparing and submitting the reports to Congress experienced a transition  in leadership during the period when there was the lapse in reporting.  Specifically, management and the personnel responsible for preparing  and submitting the reports to Congress were no longer with the agency in  2016 and therefore could not brief incoming management hired in 2017.  According to officials, this contributed to a reporting lapse. Standards for  Internal Control in the Federal Government states that management  should implement control activities through policies, for example, by  documenting responsibilities for each unit. Control activities are the  policies, procedures, techniques, and mechanisms that enforce  management\u2019s directives to achieve the entity\u2019s objectives. Further,  management should also define objectives clearly to enable the  identification of risks and define risk tolerances. This would include  defining objectives in specific terms so they are understood at all levels  and can be carried out without regard to personnel changes. This further  involves clearly defining what is to be achieved, who is to achieve it, how  it will be achieved, and the time frames for realizing the achievement.  Establishing a policy defining requirements for producing the semiannual  reports to Congress\u2014including what is to be reported, the entity  responsible for preparing and submitting the reports, and reporting time  frames\u2014and an oversight mechanism to ensure that the reports are  prepared and submitted to Congress, may better position the Secret  Service to consistently report required expenditure data to specified  congressional committees as required.", "DOD: DOD has issued a policy related to collecting information on its  support for the Secret Service\u2019s protective duties but has not produced  and submitted the required reports to Congress in accordance with its  policy. DOD officials were unaware that the reports had not been submitted until we requested them. According to DOD officials, the  reports were not submitted as a result of an administrative oversight, and  they could not determine when the reports had last been submitted.", "This situation is in part the result of weaknesses in DOD\u2019s existing policy  and implementing instruction with regard to specific information that could  help ensure the reports are consistently produced and provided to  Congress. For example, the policy requires that any DOD organization  incurring costs associated with support provided to the Secret Service  collect and report the costs to the Assistant Secretary of Defense for  Homeland Defense and Global Security, the Chairman of the Joint Chiefs  of Staff, and the Chief Financial Officer. However, neither the policy nor  underlying instruction sets forth time frames for internal or external  reporting to ensure that the semiannual dates are met. Further, DOD has  no mechanism for ensuring that the required information is submitted to  Congress.", "As previously noted, internal control standards require that management  should implement control activities through policies and define objectives  clearly to enable the identification of risks and define risk tolerances. This  involves clearly defining what is to be achieved, who is to achieve it, how  it will be achieved, and the time frames for realizing the achievement.  Moreover, the policies, procedures, techniques, and mechanisms that  enforce management\u2019s directives to achieve the entity\u2019s objectives are to  be defined.", "According to a DOD official, in March 2018 the department began efforts  to gather the information necessary to prepare the required report.  However, collecting the information has been challenging, largely due to  the multiple data sources and inconsistent methods for capturing the data  to date. Therefore, according to DOD officials, once the department  completes its initial data collection effort, officials plan to assess the  adequacy of the data and review DOD\u2019s existing guidance to identify  revisions needed to ensure that future reports are submitted in  accordance with Presidential Protection Assistance Act. However, the  agency has not yet defined the steps necessary to fulfill near-term  reporting requirements under the Act, or time frames for doing so. By  addressing these issues, DOD could be better positioned to comply with  the law.", "Further, while DOD officials anticipate updating the policy and instruction  at a future date, steps and time frames for completing the update have  not yet been defined, and it is unclear when or whether the updates will  occur. Updating DOD\u2019s policy and instruction to specify the requirements  and establish an oversight mechanism may better position DOD to report  expenditure data to Congress, as required, on a semiannual basis and  enhance visibility over the costs associated with providing protective  services, in particular in relation to protection at nongovernmental  properties."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The Secret Service, with help from the Coast Guard and DOD, plays a  vital role in protecting the President during his travels. The Presidential  Protection Assistance Act was intended to establish procedures to control  the expenditure of federal funds for protection at nongovernmental  properties; it requires that each of these entities report expenditures  under the Act. The Secret Service, the Coast Guard, and DOD have all  incurred costs related to protection for the President and others.  However, information on such costs is limited, because only the Coast  Guard has been reporting them. As a result, Congress lacks information  about the amounts that DOD and the Secret Service have expended for  providing protection\u2014including providing protection at nongovernmental  properties. This limits congressional efforts to ensure accountability for  these costs. The Secret Service does not have a policy in place that  defines and enforces reporting requirements, and DOD\u2019s policy and  underlying instruction lack important details such as time frames for  reporting expenditures and a mechanism for ensuring that the required  information is submitted to Congress. DOD has initiated steps to develop  required reports but has not identified the specific steps it will take and  the time frames within which these efforts will be completed."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making one recommendation to the Director of the Secret Service  and two to the Secretary of Defense.", "The Director of the Secret Service should establish a policy defining  requirements for producing the semiannual reports of expenditures  required by the Presidential Protection Assistance Act of 1976, as  amended, and an oversight mechanism to ensure that the Secret Service  consistently submits these reports to specified congressional committees.  (Recommendation 1)", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Policy updates its policy and instruction on providing support  to the Secret Service to define the requirements for producing semiannual  reports of expenditures required by the Presidential Protection Assistance  Act of 1976, as amended. These requirements should, at a minimum,  include (1) the steps and time frames for completing updates to the policy  and instruction, (2) time frames for reporting the expenditures, and (3) an  oversight mechanism to ensure that the Department of Defense  consistently submits these reports to specified congressional committees.  (Recommendation 2)", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Policy defines the steps, including time frames, necessary to  achieve near term reporting requirements under the Presidential  Protection Assistance Act of 1976, as amended, and submit the reports  as required. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to the  Executive Office of the President, and the Departments of Homeland  Security, Defense, Justice, and State. DHS and DOD provided written  comments, which are reproduced in appendixes I and II respectively. In  their comments, DHS and DOD concurred with their respective  recommendation(s).", "DHS concurred with our first recommendation, which called for the Secret  Service to establish a policy defining requirements for producing the  semiannual reports of expenditures required by the Presidential  Protection Assistance Act of 1976, as amended, and an oversight  mechanism to ensure the Secret Service consistently submits these  reports to specified congressional committees. Specifically, the Secret  Service has recently updated several guidance documents related to the  Act. It further plans to publish a directive during fiscal year 2019  documenting the requirements for producing the semiannual reports and  defining the oversight mechanism to ensure that the reports are  consistently submitted.", "DOD concurred with our second recommendation, which called for DOD  to update its policy and instruction on providing support to the Secret  Service to define the requirements for producing semiannual reports of  the expenditures required by the Presidential Protection Assistance Act of  1976, as amended.", "DOD concurred with our recommendation that DOD define the steps,  including time frames, necessary to achieve near term reporting  requirements under the Presidential Protection Assistance Act of 1976, as  amended, and submit the reports as required.", "DHS and DOJ also provided technical comments, which we incorporated  into the report as appropriate.", "The Department of State and the Executive Office of the President had no  comments.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Executive Office of the  President; the Secretary of Homeland Security; the Director of the Secret  Service; the Commandant of the Coast Guard; the Secretary of Defense;  the Secretaries of the Army, Navy, and Air Force; the Commandant of the  Marine Corps; the Under Secretary of Defense for Policy; the Secretary of  State; and the Attorney General.", "Consistent with section 10 of the Presidential Protection Assistance Act of  1976, this report is also being sent the Committees on Appropriations and  on the Judiciary, the House Committee on Oversight and Government  Reform, and the Senate Committee on Homeland Security and  Governmental Affairs.", "In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact Brian Lepore at (202) 512-4523 or leporeb@gao.gov or Diana  Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Gina R. Hoffman, Assistant  Director; Joseph P. Cruz, Assistant Director; Tracy Barnes, Kerstin  Hudon, Jennifer Kamara, Joanne Landesman, Carol Petersen, Michael  Silver, Janet Temko-Blinder, and John Wren made key contributions to  this report."], "subsections": []}]}], "fastfact": ["We were asked to examine the cost of 4 trips to the Mar-a-Lago resort by the President and 3 international trips by Donald Trump Jr. and Eric Trump between January and March 2017.", "We estimate that", "federal agencies spent about $13.6 million for the Mar-a-Lago trips. The Departments of Defense and Homeland Security incurred most of the costs\u2014about $8.5 million and $5.1 million, respectively. This excludes certain classified cost information.", "the Secret Service spent about $396,000 protecting the President's sons and their spouses on 3 international trips.", "We recommended that agencies comply with reporting requirements for protection costs."]}
{"id": "GAO-18-319", "url": "https://www.gao.gov/products/GAO-18-319", "title": "Federal Real Property: Agencies Make Some Use of Telework in Space Planning but Need Additional Guidance", "published_date": "2018-03-22T00:00:00", "released_date": "2018-03-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies are exploring ways to use telework as a tool to reduce the federal footprint and use space more efficiently. GAO was asked to examine the effects of telework on agencies' space-planning efforts. In this report, GAO reviewed: (1) how the 23 civilian CFO Act agencies reported using telework in office space planning; (2) the specific ways selected agencies and GSA used telework in their office space planning; and (3) any challenges the civilian CFO Act agencies faced in using telework in office space planning.", "GAO surveyed all 23 civilian CFO Act agencies, analyzed each agency's space-planning documents, and Real Property Efficiency Plans . GAO reviewed four agencies in greater detail based on analysis of telework data and other factors. For those four agencies GAO conducted site visits, interviewed officials, and analyzed agency documents. GAO also identified challenges agencies faced in using telework in space planning, based on survey results, agency documents, and interviews."]}, {"section_title": "What GAO Found", "paragraphs": ["The 23 civilian Chief Financial Officer (CFO) Act agencies reported various ways of considering and using telework as a space-planning tool, by, for example, implementing desk-sharing for employees who telework in order to relinquish leased space, or increasing the number of staff working in an existing space without increasing its size. All of the 23 agencies discussed telework in the context of space planning and achieving greater space efficiencies in either their space-planning documents or Real Property Efficiency Plans . The agencies that used telework as a space-planning tool generally reported implementing smaller or unassigned workstations.", "Three of the four agencies GAO reviewed in greater detail\u2013\u2013the General Services Administration (GSA); the Office of Justice Programs at the Department of Justice; the Centers for Disease Control at the Department of Health and Human Services; and the Bureau of the Fiscal Service at the Department of the Treasury\u2013\u2013leveraged telework to reduce or use office space more efficiently. For example, GSA and the Office of Justice Programs used telework to accommodate more employees in a smaller office space as illustrated in figure 1 below. The Centers for Disease Control used telework to accommodate more employees in the same amount of space. The Bureau of the Fiscal Service reduced space without telework by reducing the size of individual workstations.", "The 23 civilian CFO Act agencies reported several challenges in using telework to reduce space including human capital issues, mission suitability, and measuring cost savings attributable to telework. About two-thirds of the agencies said they would find it helpful to have additional information, assistance, or resources in using telework as a space-planning tool. GSA provides guidance to improve space utilization. However, GAO found that GSA last developed relevant formal guidance in 2006. This information, and that on GSA's telework and space-planning websites, was neither specific nor detailed and therefore of limited assistance to agencies that would like to use telework as a space-planning tool. Additionally, GSA's space-planning tool\u2014the Workplace Investment and Feasibility Tool, intended to help agencies quantify the benefits and costs of telework\u2013\u2013remains under development after more than 4 years, and GSA officials have not decided whether to make the tool available to other federal agencies. As such, agencies reported that they lack adequate guidance to determine how best to reduce space or use it more efficiently, and how to assess the benefits and costs of using telework in space planning."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GSA concurred with recommendations that GSA should: (1) develop guidance on how agencies can use telework as a strategic space-planning tool and make this guidance readily available and (2) complete and make the Workplace Investment and Feasibility Tool available to federal agencies for use in assessing the benefits and costs of telework."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government is committed to the goal of reducing its real  property footprint. As part of achieving this goal, the Office of  Management and Budget\u2019s (OMB) Reduce the Footprint Policy requires  that federal agencies explore alternatives to acquiring more office space.  One such alternative is telework, which can be used to reduce the  number of personnel using onsite workspace, thereby reducing  agencies\u2019 space needs while continuing to fulfill missions. Already, nearly  half of all eligible federal employees participate in telework programs.", "You asked us to examine the impact of telework on space planning,  including how agencies use telework to reduce space or realize other  benefits. This report addresses:  how the 23 civilian Chief Financial Officers (CFO) Act agencies reported using telework in office space planning; the specific ways selected agencies and the General Services Administration (GSA) used telework in their office space planning; and any challenges the 23 civilian CFO Act agencies faced in using telework in office space planning.", "To determine how the civilian CFO Act agencies reported using telework  in office space planning, we surveyed these agencies and analyzed their  responses. We also obtained and analyzed these agencies\u2019 space- planning documents and Real Property Efficiency Plans to identify  common themes and references to telework. To determine the specific  ways agencies included telework in their office space planning, we  selected and reviewed four agencies in greater detail. We selected a non- generalizable sample of three sub-agencies as illustrative case studies  with criteria such as an agency-level goal of using telework to reduce real  estate costs, the rate of telework among employees, and range of size.  The selected sub-agencies include: (1) Bureau of the Fiscal Service  (Fiscal Service)\u2014Department of the Treasury (Treasury); (2) Centers for  Disease Control and Prevention (CDC)\u2014Department of Health and  Human Services (HHS); and (3) Office of Justice Programs (OJP)\u2014 Department of Justice (DOJ). We also selected GSA as a comparative  example since it is responsible for providing space-planning guidance to  client agencies and has experience using telework in space planning. For  each of these case studies, we reviewed telework and space-planning  documents; visited seven office locations with recent space reductions in  New York City, Philadelphia, and the Washington, D.C., area; and  interviewed knowledgeable agency officials. Information from these case  studies is not generalizable to the universe of federal agencies.", "To identify challenges agencies face in using telework in space planning,  we reviewed agencies\u2019 Real Property Efficiency Plans and analyzed  responses to survey questions. Additionally, we selected two outside  experts and four entities from the private sector for informational  interviews based in part on our literature review and their experience with  telework and the space-planning process. Statements made by  knowledgeable federal officials, outside experts, and private sector  entities are not generalizable to the universe of civilian CFO Act agencies.  Because GSA bears responsibility for government-wide space-planning guidance, we also reviewed and analyzed the guidance it has developed  and available information on its telework and space- planning websites.  We compared GSA\u2019s guidance and website information to relevant  statutory requirements and federal internal controls standards related to  external communication (see app. 1 for additional details on our scope  and methodology).", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained for this review provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Requirements for Implementing Telework and Reducing Space", "paragraphs": ["Implementing Telework: The Telework Enhancement Act of 2010 (the  Act) establishes telework implementation requirements for agencies,  including, for example, that each agency designate a Telework Managing  Officer and that each agency incorporate telework into its continuity of  operations plans. The Act does not mention telework specifically in the  context of space planning. The Act also requires the Office of Personnel  Management (OPM) to assess whether agencies have met agency- established telework outcome goals such as real estate savings.  It also  requires OPM to  submit reports that include executive agencies\u2019 goals for increasing  telework participation to the extent practicable, assist each agency with developing qualitative- and quantitative- teleworking measures and goals, and  track telework eligibility and participation rates across the government.", "According to OPM telework information from fiscal year 2012 through  fiscal year 2015, the percentage of federal workers eligible to telework  remained stable at about 45 percent, on average. However, during the  same period, the percentage of eligible employees who participated in  telework increased from 29 percent to 46 percent. Figure 1 shows the  frequency of telework across the federal government from fiscal years  2012 through 2015 by type of telework.", "Reducing Space: OMB issued the National Strategy for the Efficient Use  of Real Property and the Reduce the Footprint policy in 2015, which  require all CFO Act agencies to improve the efficiency of real property  use, control costs, and reduce holdings. These OMB initiatives also  required agencies to develop Five-Year Real Property Efficiency Plans annually; develop office space standards that specify maximum square footage  identify reduction targets for office space in square feet; and  freeze the footprint (i.e., not increase square footage of office space).", "OMB\u2019s National Strategy noted that employee telework has changed the  dynamic of the federal real property portfolio and resulted in a need for  less space. OMB\u2019s Reduce the Footprint guidance memo states that  agencies\u2019 5-year plans should include an explanation of actions the  agency is taking to increase space efficiency, including cost-effective  alternatives to acquisition of additional office space, such as  consolidation, colocation, teleworking, and \u201choteling.\u201d Federal statute also  requires that agencies consider whether space needs can be met using  alternative workplace arrangements when deciding whether to acquire  new space."], "subsections": []}, {"section_title": "Mobility as a Space- Planning Tool", "paragraphs": ["GSA defines mobility as an overarching term describing the ability of  employees, enabled by information technology (IT) and workplace  policies to perform work both within and outside the agency worksite.  Under this definition, mobility includes telework, desk-sharing, site work,  and travel. Agencies can strategically use telework\u2014one form of  mobility\u2014combined with desk-sharing and hoteling to reduce space  needs and increase efficiency. This allows agencies to plan for fewer  workstations than the number of employees. Other space efficiency strategies such as smaller workstations (e.g., reduced space standards),  reconfigured office space (e.g., open-office plans instead of private  offices), and mobile technology (e.g., laptops, Wi-Fi throughout the office,  and smart phones) can be combined with telework and used as planning  tools to reduce office space, use space more efficiently, and potentially  cut costs.", "GSA, in a 2010 publication, described a continuum of three different  scenarios for the ways agencies may use mobility, including telework.  These scenarios range from limited mobility not leveraged for space  planning to extensive mobility leveraged for space planning to reduce and  use office space more efficiently:  (1) No space changes: Some employees telework at least 2 scheduled  days per week but retain assigned workstations with no changes to the  existing space configuration.  (2) No space reduction but different space allocation: Most employees  telework at least 2 scheduled days per week and keep assigned  workstations. Workstations are smaller and more densely organized; and  space freed up by smaller workstations can be used for collaborative  work spaces.  (3) Space reduction and different space allocation: Nearly all employees  telework at least 3 scheduled days per week and participate in hoteling  (i.e., unassigned workstations), and workstations are also smaller and  more densely organized. In this scenario, according to GSA, an agency  can redesign its office and potentially reduce space by up to 30 percent.", "The key factors in distinguishing these scenarios illustrated in figure 2  below include the:  level of employee participation in telework;  changes to physical office spaces (e.g., smaller and more densely  organized workstations and more emphasis on collaborative  workspaces); and extent to which employees have assigned workstations or participate  in desk-sharing."], "subsections": []}, {"section_title": "GSA Provides Space- Planning Guidance and Assistance to Agencies", "paragraphs": ["Under federal statute, GSA has a role in promulgating rules and  developing guidance promoting the efficient use of real property. For  example, the GSA Administrator may provide guidance, assistance, and  oversight to client agencies regarding the establishment and operation of  alternative workplace arrangements, which include leveraging telework to  reduce space needs. GSA also directly assists client agencies with  identifying and prioritizing opportunities to improve and implement real- property efficiency measures."], "subsections": []}]}, {"section_title": "Agencies Reported Various Ways of Considering and Using Telework as a Space Planning Tool", "paragraphs": ["In reviewing planning documents, policies, and survey data, we found that  the 23 civilian CFO Act agencies reported using telework to reduce or use  space more efficiently. Specifically, our analysis of (1) agency-wide  space-planning policies and procedures and (2) Real Property Efficiency  Plans found that all of the agencies discussed telework in the context of  space planning and achieving greater space efficiencies. Agencies also  provided examples in survey responses of how they have used telework  to increase operational effectiveness while optimizing their use of space."], "subsections": [{"section_title": "Agencies Use Telework in Space Planning, and Most Include It in Their Agency- Wide Policies", "paragraphs": ["Fifteen agencies\u2019 space-planning policies and procedures included  provisions for using telework and other mobility strategies, such as  hoteling and desk-sharing, as a strategic space-planning tool. Three of  the agencies mentioned these strategies only in the context of space  planning, and five agencies did not mention them at all (see table 1).", "For the fifteen agencies with space planning policies that incorporated  telework, the documents either expressly directed agency planners to  include telework, hoteling, or desk-sharing in space planning; provided  instructions and guidance for using these in space planning; or issued  space allocation standards for their implementation. Several agency-wide space plans identify space reduction goals based on using telework  strategically. For example, the Department of Transportation (DOT)  documents identify a goal of at least a 10 percent workspace reduction in  new acquisitions as a result of compressed work schedules and telework,  and specifically state that employees who telework six or more days per  pay period should not have a permanent workspace.", "Agency-wide space planning documents from three civilian CFO Act  agencies mentioned telework, hoteling or desk-sharing as strategies in  the context of space planning. For example, DOJ\u2019s agency-wide policy  notes that telework and hoteling could increase the efficient use of space  and directs each sub-agency to maintain its own space design guidelines  within agency-wide policy office space standards. The other two  agencies, the Department of State and the Nuclear Regulatory  Commission, either had a short provisional agency-wide space planning  document that laid out space standards or mentioned telework, hoteling  and desk-sharing as a tool for creating sustainable space. Five agencies\u2019  space planning documents made no reference to telework; however, one  agency, OPM, developed a maximum office space utilization rate and  criteria for determining which positions require a private office."], "subsections": []}, {"section_title": "Real Property Efficiency Plans Provide Information on Agencies\u2019 Efforts to Use Telework", "paragraphs": ["As noted above, OMB\u2019s Reduce the Footprint policy (2015) requires  agencies to establish Real Property Efficiency Plans. In our analysis of  the agencies\u2019 fiscal year 2016 or 2017 plans, we found that 19 of the 23  civilian CFO Act agencies discussed telework in the context of space  planning. A few agencies\u2019 Real Property Efficiency Plans explicitly  stated that the agency reduced space as a result of telework. For  example, GSA used telework to reduce space in its Heartland, Rocky  Mountain, and National Capital Region offices.", "Some (5 of 23) Real Property Efficiency Plans discussed the telework  pilot programs agencies have initiated. For example, the Department of  Education\u2019s plans reported using a pilot program to acclimate employees  to teleworking and desk-sharing; as a result, the agency intends to  incorporate hoteling or space-sharing opportunities into proposed space  designs in future projects. The Social Security Administration (SSA) plans  also reported initiating a pilot program to experiment with smaller  \u201choteling\u201d workspaces. Similarly, the Nuclear Regulatory Commission\u2019s  plan reported conducting a pilot program at its headquarters offices to  identify challenges, better understand telework, and evaluate the potential  of shared workspaces."], "subsections": []}, {"section_title": "Agencies Reported Using Telework to Reduce Space and Achieve Space Efficiencies", "paragraphs": ["In response to our survey, about three-quarters of agencies reported  space-planning policies that use telework to reduce office space, lower  real estate costs, or reduce the size of individual workstations. Agencies  reported accomplishing this by using desk-sharing and hoteling for  employees who have relinquished permanent workspaces. For example,  several agencies discussed strategies to reduce space in their responses  to our survey.", "The Department of Labor reported using telework to close some small  offices resulting in overall space reductions of about 16,000 square  feet.", "OPM reported that it both reduced space and created space  efficiencies by transitioning staff in its Eastern Management  Development Center to full-time telework and terminating the lease,  resulting in a space reduction of about 32,000 square feet. OPM\u2019s  Human Resource Solutions Program also achieved a 47 percent  space reduction when it instituted desk-sharing and freed the vacated  space for use by another program office.", "The Department of the Treasury reported that its sub-agency, the  Internal Revenue Service, has aggressively used telework to help  reduce its real property portfolio, while other Treasury units have  leveraged telework to achieve significant space reductions. At the end  of fiscal year 2016, Treasury reported agency-wide reductions of  about 484,000 square feet at a cost savings of about $10 million.", "Two agencies\u2013\u2013Department of Homeland Security, and the National  Science Foundation\u2013\u2013reported using telework to increase the efficiency  of existing office space in sub-agencies by increasing staff without  increasing the size of offices, for example:", "The Department of Homeland Security reported that one of its sub- agencies used telework in the planning and design of a new office,  resulting in both a space reduction and more efficient use of the  space. The new office is 57,573 square feet smaller than the prior  office while personnel assigned to the office increased from 315 to  394.", "The National Science Foundation reported that it used teleworking,  among other workspace strategies such as new space standards and  virtual technologies, to increase staff numbers without increasing its  real estate footprint."], "subsections": []}]}, {"section_title": "Three of the Four Agencies We Reviewed in Depth Leveraged Telework to Reduce or Use Office Space More Efficiently", "paragraphs": ["Among the agencies we reviewed in detail\u2014GSA, OJP, CDC, and the  Fiscal Service\u2014the use of telework in office space planning varied from  emerging consideration to extensive implementation. GSA and OJP  have used telework extensively to both reduce space and increase space  efficiency in their office spaces. CDC has leveraged telework to reduce  space or use space more efficiently in more limited cases while the Fiscal  Service has begun to consider telework in future space planning.  Appendix II provides additional details on office spaces where these  agencies reduced space or used space more efficiently, including the role  of telework, if any."], "subsections": [{"section_title": "GSA Used Telework Extensively as a Space- Planning Tool", "paragraphs": ["GSA has leveraged telework to reduce space by implementing  unassigned workstations in nearly all of its regional and headquarters  offices, along with other forms of \u201cemployee mobility,\u201d complementary  IT, and smaller space standards. GSA adopted telework as early as 1999  and by fiscal year 2015, more than 90 percent of all eligible GSA  employees teleworked, and nearly half of all employees teleworked 3 or  more days per pay period, according to OPM data. GSA\u2019s space policy  cites desk-sharing (e.g., hoteling, \u201chot-desking,\u201d or other arrangements)  as one strategy to help meet its space standard of 136 useable square  feet (USF) per person. GSA employees may telework full-time, but may  be required to give up dedicated workstations if they are on site 2 or  fewer days per week.", "GSA has gradually transitioned to unassigned workstations at  headquarters and in its regional offices, allowing the agency to implement  desk-sharing and calculate space needs at less than one desk per  employee. The agency also assigned laptops and mobile or soft phones  to employees to further maximize mobility. The three GSA sites we visited  used space-planning strategies to achieve, or nearly achieve, GSA\u2019s  space standard of 136 USF per person. For example, at its Philadelphia  Regional Office, GSA leveraged existing telework levels to meet reduced  space standards and move to a smaller leased space by accommodating  about 600 employees in fewer than 500 workstations. According to GSA,  this allowed the office to achieve a utilization rate of 139 USF per person  and realize a reported annual rent cost savings of about $2 million.  Similarly, at its New York Regional Office, GSA also leveraged existing  telework levels to meet reduced space standards and move to a smaller  leased space. This step allowed the office to achieve a utilization rate of  119 USF per person and realize a reported total rent cost savings of  nearly $11 million.", "GSA also leveraged telework as part of its headquarters consolidation.  GSA reports that it was able to move approximately 1,000 additional  employees to the headquarters building by implementing a hoteling  system and planning for less than one workstation per employee. This  allowed GSA to achieve a utilization rate of 138 USF per person at its  headquarters and realize a reported annual rent-cost savings of  approximately $24 million."], "subsections": []}, {"section_title": "OJP Leveraged Telework to Consolidate Its Offices", "paragraphs": ["Similar to GSA, OJP used telework, along with complementary tools, to  reduce space and use space more efficiently at its consolidated office.  More than 90 percent of eligible employees teleworked in fiscal year  2015, and nearly half of all employees teleworked 3 or more days per pay  period, according to OPM data. More recently, OJP reported that around  70 percent of its employees teleworked in August 2017, with just less  than 40 percent doing so three or more days per pay period. At the  departmental level, DOJ\u2019s plans to improve space utilization include  reduced space requirements, and, in some cases, alternative workplace  strategies. DOJ\u2019s space utilization policy mentions telework with  hoteling as one way to increase efficient use of space, and DOJ\u2019s  telework policy mentions the potential of telework to create cost savings  by decreasing space needs. While most OJP employees are eligible to  telework, a few federal staff occupying administrative positions are not  eligible.", "OJP took the opportunity to examine and improve its space use as three  of its leases approached expiration in 2013. It leased space in two  adjacent buildings under three separate leases. OJP worked with GSA to  analyze space-planning options, contracting a study of the office that  recommended ways to improve space utilization. This study included a  survey of all employees, a complete physical space survey, and  interviews with leadership. The results of this study not only indicated  OJP employees\u2019 openness to more mobility but also that they had  concerns such as loss of privacy and social connectedness. For example,  more than 80 percent of survey respondents said they could work off-site  more often with proper tools and support, and almost half said they would give up dedicated space to work remotely more often. Furthermore,  interviews with the leadership of several OJP units indicated a willingness  to support increased mobility but also a need to maintain privacy and  improve mobile IT. According to OJP, it alleviated these concerns by  encouraging participation in the planning process, highlighting  opportunities for positive changes, and maintaining open communication  (e.g., communicating changes and expected benefits).", "Based on the analysis of space-planning options, OJP retained one of the  three previous leases and leveraged telework to accommodate all  employees into less space overall in one building. OJP achieved this  objective by targeting 25 percent employee mobility and implementing  hoteling. Concurrently, OJP officials explained that they introduced  smaller workstations and used tenant-improvement allowance funds to  reconfigure space for more flexible use. Physical reconfigurations  included changing hard-walled office spaces with dedicated workstations  to a primarily open office with few walls or dedicated workstations.", "According to OJP, it complemented these changes with investments in  mobile IT for individual employees, improved IT capabilities in conference  rooms and other collaborative spaces, and an emphasis on training  employees to work well in a mobile office environment. For example, OJP  officials said they installed Wi-Fi throughout the space, issued laptops  and smart phones to employees, upgraded video-conferencing  capabilities in conference rooms and collaborative spaces, and expanded  tools for informal employee communication. According to OJP officials,  through the consolidation, they said they achieved a utilization rate of 190  USF per person\u2014a decrease of 30 USF per person from the prior 220  utilization rate. This rate remained higher than DOJ\u2019s overall target and  housed the same total number of employees\u2014about 1,000\u2014in about  50,000 fewer USF. OJP reports that the consolidation resulted in an  estimated $3 million annual lease- cost savings. OJP also estimates  additional savings from reduced transit subsidies, carbon emissions, and  continuity of operations."], "subsections": []}, {"section_title": "CDC Used Telework to Achieve Space Efficiencies in Limited Cases", "paragraphs": ["Relative to GSA and OJP, CDC has made more limited use of telework in  office space-planning. CDC officials told us that they have leveraged  telework as a space-planning tool in many locations, but they have only  documented doing so in one case. HHS expects each sub-agency to  comply with its 170 USF per-person utilization-rate policy, and this policy  suggests that planned space reductions should take telework into  account. As a component of HHS, CDC has its own space policy, which  states that telework, desk-sharing, and hoteling can help CDC\u2019s units  meet HHS\u2019s utilization rate policy of 170 USF per person. CDC\u2019s telework  policy requires employees who telework frequently to agree to participate  in desk-sharing, but according to CDC officials, how and to what extent  this portion of the broader policy is implemented is up to the discretion of  management. CDC officials cited two limitations to further implementing  space sharing techniques: (1) the large number of employees\u2019 who may  be unable to telework on certain days based upon their job  responsibilities and (2) the voluntary nature of telework. Some CDC  employees cannot work off-site at least some of the time due to  confidential data or lab-based work. Approximately 60 percent of eligible  CDC employees teleworked in fiscal year 2015 and about one-quarter of  all employees teleworked 3 or more days per pay period, according to  OPM data. CDC officials told us that telework participation ranges from 49  to 86 percent across CDC units.", "CDC\u2019s National Center for Chronic Disease Prevention and Health  Promotion\u2019s office in Chamblee, GA, provides the most clearly  documented case of CDC\u2019s leveraging telework for space efficiency.  According to CDC officials, this unit accommodated more than 300  additional employees within its existing space by implementing hoteling  for employees who telework 4 or more days per pay period, and it  continues to use hoteling as part of its space management strategy. In  contrast, CDC\u2019s National Center for Health Statistics\u2019 (NCHS) office in  Hyattsville, MD, reduced space without leveraging telework by  reconfiguring the space with smaller, soft-walled workstations.", "CDC officials told us that NCHS reduced its office space from seven  floors to three and three-quarters floors, resulting in a reported space  reduction of more than 40 percent and allowing it to achieve a 170 USF  per person utilization rate. CDC officials reported that this space reduction  resulted in annual rent cost savings of approximately $1 million. Hoteling  was not feasible at this location because work on confidential data limits  the ability of employees to work off-site, and NCHS employees also  prefer dedicated workstations. CDC officials said that there is limited  documentation of any additional cases of CDC\u2019s leveraging telework as a  space- planning tool because, prior to our review, there had been no  formal request to connect telework and space utilization data."], "subsections": []}, {"section_title": "The Fiscal Service Has Reduced Space without Leveraging Telework", "paragraphs": ["In contrast to GSA, OJP, and CDC, telework as a space-planning tool is  an emerging consideration at the Fiscal Service. At the departmental  level, Treasury has space standards that aim for efficient and effective  offices that use increased telework and shared workstations to minimize  the number of dedicated workstations. Similarly, objectives of the Fiscal  Service telework policy include cost savings from reduced office space  needs. Treasury\u2019s space standards specify a planned maximum utilization  rate of 200 USF per person for facilities with general office space, and the  Fiscal Service reported that its average office space-utilization rate was  183 USF per person at the time of our review. Treasury policy also  recommends hoteling for employees who are out of the office 80 or more  hours per month, but the Fiscal Service told us that it would like to  conduct additional desk-sharing pilots to assess their impact before  negotiating broader desk-sharing with the union. At the Fiscal Service,  approximately 80 percent of eligible employees teleworked in fiscal year  2015, and about one-quarter of all employees teleworked 3 or more days  per pay period, according to OPM data. The Fiscal Service reported that  approximately 80 percent of Fiscal Service employees telework at its  Washington, D.C., Maryland, and West Virginia locations.", "At the time of our review, the Fiscal Service officials said the agency had  reduced space without leveraging telework or implementing hoteling,  instead relying on smaller space standards (i.e., fewer square feet per  workstation) to lease smaller offices. For example, the Fiscal Service  reduced space by giving up several floors at its Hyattsville, MD, office  starting in 2012. According to Fiscal Service officials, they accomplished  these reductions by consolidating data centers to other locations,  conducting targeted buyouts of employees, and, most recently, by  implementing a new space standard of 183 USF per person through  smaller workstations. The officials said that the most recent space  reduction at this location resulted in savings in annual rent costs not  attributable to telework. Looking forward, the Fiscal Service reported that  it has started taking preliminary steps to promote efficient space utilization  through telework. These steps have included:  creating an Executive Space Management Council that discussed  incorporating telework and desk-sharing into space management  guidelines;  implementing a voluntary, informal desk-sharing pilot in one program  area for employees who already telework 50 percent or more of the  time; and  seeking information from GSA, including discussing and visiting GSA  offices that have implemented hoteling as part of their space planning  model.", "In addition, the Fiscal Service officials told us that the agency plans to  negotiate the impact and implementation of desk-sharing and hoteling for  telework employees with its union, but the Fiscal Service has not yet  begun this effort."], "subsections": []}]}, {"section_title": "Agencies Face Several Planning Challenges in Using Telework to Reduce Space", "paragraphs": ["Our analysis of the survey responses from the 23 civilian CFO Act  agencies identified three major planning challenges agencies face with  using telework to reduce space: human capital issues such as negotiating workspace changes with  collective bargaining units and managing organizational change;  the suitability of telework to mission work requirements; and difficulty measuring cost savings that might result from space  reductions attributable to telework.", "This measuring difficulty may include both gross savings as well as  savings net of costs, such as for renovations or IT investments. See table  3 for examples of space-planning challenges related to telework reported  by the 23 agencies.", "To address these challenges, nearly two thirds of the agencies we  surveyed reported they would like guidance on using telework programs  or other alternatives to meet the federal goals of reducing space or using  space more efficiently."], "subsections": [{"section_title": "Challenges to Telework as an Office-Space-Planning Tool Include Human Capital and Mission Suitability Issues", "paragraphs": [], "subsections": [{"section_title": "Human Capital", "paragraphs": ["Our review of agency survey responses, Real Property Efficiency Plans,  and other agency space-planning documents, found that human capital  challenges to using telework in space planning generally fell into two  categories: (1) requirements to negotiate space allocation changes with  collective-bargaining units; and (2) managing department workforces in  adapting to new workspace designs and altered workspace allocations.", "Collective-bargaining challenges: Of the 23 civilian CFO Act agencies,  7 of 23 noted that changes to telework policy or workspace  arrangements required negotiation with collective bargaining units,  for example,", "The Small Business Administration (SBA) reported its greatest  challenge to incorporating telework in office space planning has  been with negotiating and securing agreement from all parties,  including management and its union, on establishing space  standards.", "HUD reported that it could not implement hoteling or desk-sharing  as its collective-bargaining agreements require that each  employee retain an assigned workstation regardless of an  employee\u2019s type of telework agreement.", "SSA reported that changing floor plans required negotiation with  its three collective-bargaining units, which could extend the time  needed for construction and relocation.", "DOT reported that collective-bargaining agreements posed a  challenge to incorporating workforce mobility options, including  telework.", "In addition, the collective-bargaining agreements we reviewed from the  four agencies we reviewed in detail\u2013\u2013GSA, OJP, CDC and Fiscal  Service\u2013\u2013required negotiations or the opportunity to negotiate changes to  matters relating to workspace arrangements and in some cases, to  telework policy.", "Managing change: Using telework as a strategic space-planning tool,  particularly in conjunction with complementary space-saving efforts  such as desk-sharing, hoteling, or open-space designs, generally  involves a cultural change. Nine of the 23 agencies we surveyed  reported challenges associated with managing change. For  example, three agencies reported employees\u2019 discomfort or  apprehension about desk-sharing and hoteling. In 2013, we reported  that organizations may also encounter concerns from agency leaders,  managers, employees, or employee organizations when introducing  physical space changes associated with increased workforce mobility  (telework). More recently, we reported that management concerns  remain the most frequently reported barrier to expanding telework.", "Two private sector experts we met with underscored the importance  of management \u201cbuy-in\u201d saying it was imperative that senior  executives fully support the initiative to facilitate the necessary cultural  change for agencies to use telework in space planning. One noted  that management needed to make the business case to employees so  that each layer of the organization could understand the importance of  the initiative and its potential benefits. Another suggested a change  management plan tailored to the work performed within a unit. This  individual said that key components of such a plan might include  studying existing work practices and program requirements, surveying  employee preferences, and including employees in the planning  process. Further, a GSA document circulated in response to the  Telework Enhancement Act of 2010 mentions obtaining supervisory  \u201cbuy-in\u201d or support as key to facilitating change."], "subsections": []}, {"section_title": "Mission Suitability", "paragraphs": ["According to survey responses, within agencies there are sub-agencies  that have individual mission requirements that may or may not be suitable  for telework. This makes it difficult for agencies to implement overarching  telework and space planning policies that apply department-wide. Sub- agencies and units within sub-agencies must individually determine if  telework is appropriate given their particular mission requirements. For  example, the Veterans Administration reported that although it developed  an agency-wide telework policy, each sub-agency and supervisor has the  flexibility to implement telework based on operational needs. Moreover,  because the agency\u2019s core mission involves direct services to veterans,  about 83 percent of agency staff positions are not suitable for telework.  The Telework Enhancement Act of 2010 outlines two broad exceptions to  telework participation for employees: (1) directly handling secure  materials determined to be inappropriate for telework by the agency head  and (2) on-site activity that cannot be handled remotely or at an  alternative worksite. In cases where telework does not support an  agency\u2019s mission or where a particular mission may require increases or  decreases in personnel, telework as a strategic space-planning tool may  not work."], "subsections": []}]}, {"section_title": "Agencies Face Challenges in Measuring the Effect of Telework on Reducing Office Space", "paragraphs": ["About half (12 of 23) of the agencies we surveyed reported that office  space reductions resulting from using telework in space planning led to  real estate cost savings while the other half reported either that cost  savings did not result or they did not know. GSA officials told us that  calculating cost savings attributable to a particular aspect of space  planning is complicated as several factors contribute to savings. In  particular, in survey responses, the Departments of Education, Energy,  and Agriculture reiterated this point.", "OMB\u2019s National Strategy for the Efficient Use of Real Property and its  Reduce the Footprint policy encourage agencies to increase and  maximize efficiencies in office space by implementing cost-effective  strategies such as telework. For example, the National Strategy outlines a  framework that aims to measure real property costs and utilization to  improve the efficient use of federal real property. The Reduce the  Footprint policy requires agencies to measure cost savings that result  from reducing space through disposals. However, neither document  offers guidance or methodologies on how to measure the costs or savings  that may result from using telework. We previously reported that GSA  works with client agencies to develop tools to measure office space  utilization and, in 2013, was developing an Excel-based tool to help  agencies quantify the benefits and costs of using telework to achieve  greater office space efficiencies. This tool\u2014the Workplace Investment  and Feasibility Tool\u2014is aimed at helping agencies quantify the benefits  and costs of increased telework participation and implementing other  alternative-work arrangements. When completed, the tool will enable  users to quickly develop rough estimates of cost and space impacts  resulting from workplace changes, particularly relating to desk-sharing,  workspace reconfiguration, and consolidation. Key features include the  ability to compare up to three scenarios, which in turn may be used to  inform a more detailed design program.", "As of January 2018, GSA had not yet completed the tool. GSA officials  said mission needs, resource constraints, and developmental  adjustments have contributed to delays in the time frame for completing  the tool. They added that during this time, GSA has diverted resources to  space calculation tools for individual agencies. For example, GSA worked  with DHS on its Space Calculation Tool as a way to help determine  workplace space requirements in a manner consistent with DHS space  policies. In January 2018, GSA officials told us that they plan to make the  Workplace Investment and Feasibility Tool available to GSA staff in  March 2018 along with training on how to use it. However, GSA officials  have not decided whether to make the tool available to other federal  agencies to use as a space-planning tool. Instead, the officials plan to  assess GSA\u2019s use of the tool and then determine in late 2018 if and how  it should be released to other agencies for independent use. Given the  absence of a government-wide tool, in our review, we found that some  agencies had used their own resources to purchase similar tools for their  space-planning needs from the private sector. Without such a  government-wide resource, agencies may not be able to determine how  best to reduce space or use it more efficiently."], "subsections": []}, {"section_title": "GSA Guidance Does Not Specifically Address How to Use Telework in Space Planning", "paragraphs": ["In responses to our survey, nearly two-thirds of agencies reported that  they would find it helpful to have additional information, assistance, or  resources to assist them in using telework as a space-planning tool. As  noted above, a key element of GSA\u2019s mission is to provide guidance and  services that enable agencies to improve space utilization, reduce costs,  and better achieve their missions. Moreover, under federal statute, GSA  may provide guidance to executive agencies on the implementation of  alternative workplace arrangements, which includes telework. Federal  standards for internal control also call for agencies to communicate  necessary quality information such as guidance with external parties.", "In reviewing GSA\u2019s websites, we found that GSA last developed formal  guidance on alternative workplace arrangements in 2006 and maintains  several separate informational websites on implementing telework and  optimizing space utilization. Our review of this guidance and these  websites found that they do not provide specific guidance for using  telework as a strategic space-planning tool. For example, the 2006  guidance is generally limited to defining the factors agency heads must  contemplate when considering alternative workplace arrangements along  with the equipment and technical services agencies may provide for  alternative worksites. However, this guidance does not address in detail  the impact of such arrangements on agency office space and resulting  planning issues. Similarly, our review of GSA\u2019s teleworking and space- planning websites found that although they separately offered  documented case studies along with information such as tips for  implementing telework and managing a mobile workforce, GSA did not  provide documents consolidating the concept of using telework as a  strategic space-planning tool. For example, information on GSA\u2019s Total  Workplace Program website\u2013\u2013intended to assist agencies in using  workforce mobility (including telework) to increase space efficiencies\u2013\u2013is  generally limited. Although this website includes high-level information  that describes the potential benefits of using telework with office space  planning and design, it lacks a practical outline of the process agencies  might use to achieve them. Because the information in the 2006 guidance  and the telework and space-planning websites is neither specific nor  detailed, it is of limited assistance for agencies that would like to use  telework as a strategic space-planning tool to meet the goals of a more  efficient use of space."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While using telework to reduce space is not a new challenge, it has  become more pressing with OMB\u2019s requirement for federal agencies to  explore alternatives to acquiring more office space. Most civilian CFO Act  agencies reported having a telework program in place and some reported  success with using it in space planning to reduce space or accommodate  more employees without increasing space. However, many of the  agencies continue to face challenges and do not believe that they have  adequate information, assistance, or resources to assist them in using  telework as a space-planning tool or assess its costs and benefits. Until  agencies have access to detailed guidance and tools to help utilize  various space-planning options, they may not be able to effectively  identify opportunities to use telework toward the goal of reducing their real  property footprint."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to GSA:  The Administrator of General Services should ensure that the appropriate  GSA offices develop guidance including, but not limited to, how agencies  can use telework as a strategic space-planning tool for reducing and  optimizing office space efficiency and that the offices make the guidance  readily available. (Recommendation 1)", "The Administrator of General Services should ensure the appropriate  GSA offices complete the Workplace Investment and Feasibility Tool and  make it available to federal agencies for use in assessing the benefits and  costs of telework to achieve office space efficiencies. (Recommendation  2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to GSA, the Department of Justice, the  Department of Health and Human Services, and the Department of the  Treasury. In its written comments, reproduced in Appendix III, GSA  concurred with our recommendations and stated that it is developing a  plan to address them. We received technical comments from the  Department of Justice and the Department of Health and Human  Services, which we incorporated where appropriate. The Department of  the Treasury did not have comments on our draft report.", "We are sending copies of this report to the appropriate congressional  committees; the Administrator of GSA; and the Secretaries of the  Department of Health and Human Services and Department of the  Treasury, and the Attorney General of the Department of Justice. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov. If you or your staff has any questions concerning this  report, please contact me at (202) 512-2834 or rectanusl@gao.gov.  Contact points for our Offices of Congressional Relations and Public   Affairs may be found on the last page of this report. GAO staff that made  key contributions to this report is listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report addresses: (1) how the 23 civilian Chief Financial Officer  (CFO) Act agencies reported using telework in office space planning; (2)  the specific ways selected agencies and GSA used telework in their office  space planning; and (3) any challenges the 23 civilian CFO Act agencies  faced in using telework in office space planning.", "To determine how the 23 civilian CFO Act agencies reported using  telework in office space planning, we surveyed the agencies. The survey  asked questions about agency-wide efforts to use telework in the human- capital and space-planning areas; whether agencies had achieved any  cost savings as a result; the challenges agencies faced in using telework  in space planning; and asked agencies to identify additional information,  resources, or guidance that might be helpful. In addition to the survey  questions, we asked each agency real property officer to provide copies  of agency-wide space-planning documents and the Real Property  Efficiency Plans agencies prepared for fiscal years 2016 and 2017  pursuant to the requirements of the Office of Management and Budget\u2019s  (OMB) Reduce the Footprint policy. We developed survey questions  based on our review of the relevant literature, white papers from federal  agencies and private sector entities, and past GAO reports. We pre- tested the survey instrument with three federal agencies to ascertain: (1)  the clarity of survey questions; (2) the precision of language; and 3) the  availability of information queried. As a result of the pre-tests we made  changes to the content and format of the survey where appropriate.", "We received survey responses from each of the 23 civilian CFO Act  agencies in addition to requested space-planning documents and Real  Property Efficiency Plans, and thus achieved a 100 percent response  rate. We analyzed survey results by calculating the frequency of  responses to dichotomous questions (i.e., questions requiring a \u201cyes\u201d or  \u201cno\u201d answer). We also conducted a content analysis on the open-ended,  narrative-based questions by identifying common themes and tabulating  results. We also conducted a content analysis to determine the extent to  which agencies referenced telework in their agency-wide space-planning  documents and in their Real Property Efficiency Plans. To accomplish  these analyses, we developed separate coding schemes for each of the  two types of documents. These were based on information obtained in  our literature review, interviews with subject matter experts, and our  professional judgment. We then identified relevant sections and common  themes, and coded and tabulated the results. To validate the coding  results, we used a second, independent coder.", "To determine the specific ways agencies include telework in their office  space planning, we selected a non-generalizable sample of three CFO  Act agency sub-agencies as illustrative case studies. To select sub- agencies, we analyzed data from the Office of Personnel Management\u2019s  (OPM) Public Use 2014-2015 Telework Data call.  First, we applied two  selection criteria: (1) agency-wide progress toward a stated goal of using  telework to reduce real estate costs, and (2) agency-reported data  indicating that more than 25 percent of sub-agency employees  teleworked 3 or more days per pay period. Next, we considered variations  in sub-agency size and percentage of employees eligible to telework.  Finally, we excluded candidates that had recently been selected for  related GAO work and we excluded sub-agencies related to agency  administration such as Offices of Inspector General or Secretary-level  offices. We assessed the reliability of the OPM\u2019s data by interviews with  knowledgeable officials and by reviewing prior assessments of the same  data, and we found the data reliable for our purposes.", "As a result of this process, we selected (1) the Department of the  Treasury\u2019s Bureau of the Fiscal Service (Fiscal Service); (2) the  Department of Health and Human Services\u2019 (HHS) Centers for Disease  Control and Prevention (CDC); and (3) the Department of Justice\u2019s Office  of Justice Programs (OJP). For each of the selected agencies, we  interviewed agency officials and reviewed their telework and space- planning documents. We also visited four sub-agency office locations to  determine if and how telework played a role in any space reductions or  efficiencies along with any associated cost savings. In addition to these  three sub-agencies, we used the General Services Administration (GSA)  as a comparative example since it is responsible for providing space- planning guidance to client agencies and has experience using telework  in space planning. We interviewed GSA officials, reviewed relevant  documents, and visited three GSA office locations with recent space  reductions or efficiencies. In total, we conducted seven site visits  including two Fiscal Service locations, one location each for CDC and  OJP, and three GSA locations (National Headquarters, Region 2 Office,  and Region 3 Office) in Washington, D.C.; New York City; and  Philadelphia, respectively.", "To identify any challenges the 23 civilian CFO Act agencies faced in  using telework in office space planning, we analyzed results from survey  questions addressed to challenges, interviewed sub-agency and GSA  officials as detailed above, interviewed two private sector subject matter  experts, and representatives from four private-sector entities that had  reported using telework to reduce and use office space more efficiently.  Statements made by knowledgeable federal officials, outside experts and  private sector entities are not generalizable to the universe of civilian CFO  Act agencies. We also analyzed the section of each of the 23 civilian CFO  Act agencies\u2019 Real Property Efficiency Plans devoted to challenges  agency face in reducing space. We selected the two subject matter  experts\u2013\u2013representatives from Global Workplace Analytics and Fentress  Facility Planning and Analytics\u2013\u2013based on: (1) their experience working  with federal agencies to incorporate telework programs into the space  planning process; (2) information compiled in our literature review; (3)  prior GAO reports; (4) internal GAO recommendations; and (5) industry  recommendations. We selected the four private sector entities (AT&T,  Deloitte, Adobe, and CapitalOne) based on our literature review,  recommendations from industry experts, and reports of having achieved  space efficiencies including space reduction, cost savings, or cost  avoidance(s).", "To identify what guidance or information on using telework as a space- planning tool GSA makes available through its website, we reviewed the  contents of multiple GSA websites including Telework, Total Workplace,  Alternative Work, and GSA Telework Resources. We followed links and  reviewed webpage contents for information on how agencies might use  telework as a strategic tool to reduce space or use space more efficiently.  We compared GSA\u2019s guidance and website information to relevant  statutory requirements and federal internal controls standards related to  external communication.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Selected Agency Case Study Profiles", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the General Services Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, David J. Wise (Director); Amelia  Bates Shachoy (Assistant Director); Lindsay Bach (Analyst-in-Charge);  Geoff Hamilton; Malika Rice; Kelly Rubin; Shelia Thorpe; Elise Vaughan  Winfrey; and Amelia Michelle Weathers made key contributions to this  report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-240", "url": "https://www.gao.gov/products/GAO-18-240", "title": "Physician Workforce: HHS Needs Better Information to Comprehensively Evaluate Graduate Medical Education Funding", "published_date": "2018-03-09T00:00:00", "released_date": "2018-03-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["An adequate, well-trained physician workforce is essential for providing access to quality health care. While a number of factors affect the supply and distribution of physicians, GME is a significant determinant. A significant portion of GME training funds come from federal programs and states.", "This report (1) describes the amount and distribution of federal government and state Medicaid agency spending on GME; (2) describes what is known about GME costs; and (3) examines the extent to which the federal government collects information to understand its investment in GME. GAO reviewed reports, agency websites, and interviewed agency officials to identify federal programs that fund the clinical training of residents and were authorized through 2017. GAO analyzed 2015 data\u2014the most recent data available at the time of GAO's analysis\u2014including from a state survey. All 50 states and the District of Columbia responded to the survey. GAO reviewed literature, interviewed experts from seven organizations knowledgeable about GME costs, and analyzed Medicare data. GAO also reviewed documentation from HHS and the Department of Veterans Affairs (VA) and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal agencies and state Medicaid agencies spent over $16.3 billion in 2015 to fund graduate medical education (GME) training for physicians\u2014commonly known as residency training. The federal government spent $14.5 billion through five programs, and 45 state Medicaid agencies spent $1.8 billion. About half of teaching sites that received funding\u2014such as teaching hospitals\u2014received funds from more than one of the five programs.", "GME training costs vary due to the characteristics of teaching sites, such as the number of residents trained and their specialty, which can make it difficult to compare training costs across sites. Further, challenges exist in measuring training costs because some costs, such as faculty teaching time, are difficult to identify. Also, there is no standard method for identifying and capturing training costs, and each teaching site may vary in how it does so.", "While federal agencies generally collect information needed to manage their individual programs, this information is not sufficient to comprehensively understand whether the federal investment in GME training meets national physician workforce needs. The information agencies collect is not always complete or consistent within or across programs. For example, national data on GME training costs are not systematically collected, and some agencies lacked data to understand the total amount spent, or the outcomes of their programs, such as where supported residents went on to practice. GAO recommended in 2015 that the Department of Health and Human Services (HHS) develop a comprehensive planning approach to identify and address areas of health care workforce need. HHS concurred and identified steps it could take. While HHS has yet to take these steps, the information currently available is also insufficient for such planning. Comprehensive information is needed to identify gaps between federal GME programs and national physician workforce needs\u2014particularly the distribution of physicians geographically or across specialties\u2014and to make or recommend to Congress changes to improve the efficient and effective use of federal funds to meet those needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that HHS coordinate with federal agencies, including VA, to (1) identify information needed to evaluate federal GME programs, and (2) identify opportunities to improve the quality and consistency of information, and implement these improvements. HHS concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["An adequate, well-trained, and diverse physician workforce is essential  for providing Americans with access to quality health care services.  However, studies have identified shortages of certain types of physicians,  and rural areas may be more likely to experience shortages. While a  number of factors affect the supply and distribution of physicians, their  graduate medical education (GME)\u2014commonly known as residency  training\u2014is a significant determinant.", "GME training is funded through both public and private sources, with a  significant amount coming through a number of federal programs and  states. The federal programs are managed by multiple agencies\u2014largely  through the Department of Health and Human Services (HHS). HHS  funding for GME training is distributed by the Centers for Medicare &  Medicaid Services (CMS) through the Medicare program, and states may  choose to make payments for GME training with state Medicaid funds,  which are matched by federal Medicaid funding. Other, smaller sources of  federal funding include the Children\u2019s Hospitals GME (CHGME) Payment  Program and the Teaching Health Center GME (THCGME) Program\u2014 payment programs administered by HHS\u2019s Health Resources and  Services Administration (HRSA)\u2014as well as funding from the Department  of Veterans Affairs (VA) for GME training that occurs in its medical  facilities.", "However, we and other experts have raised concerns about the ability of  federal programs that fund GME training, especially Medicare, to address  current and future physician workforce needs. In a 2015 report, we found  that HHS cannot target Medicare GME funding to specific areas of  workforce need because funds are disbursed based on a statutory  formula that is unrelated to projected needs. As a result of this and other  factors, stakeholders have long raised concerns about the distribution of  residents geographically. In a 2017 report, we found that there is an  uneven distribution of residents across the country, with most  concentrating in certain urban centers and the northeast, where GME  training programs have historically been located. The distribution of  residents is particularly important given evidence that physicians tend to  practice in geographic areas similar to those where they complete their  GME training.", "We and others have also raised concerns about a lack of comprehensive  planning for the federal investment in GME training and have called for  increased accountability and transparency of federal GME funding. For  example, the National Academy of Medicine found that there is no single  entity that oversees the GME system, especially federal financing, and  that information about how federal funding, especially Medicare and  Medicaid GME payments, is used to support GME training is lacking. In a  2015 report, we found that HHS conducts limited ongoing, comprehensive  assessments of the performance of federal health care workforce  programs, including those that fund GME training, in meeting the national  health care workforce needs. In addition, we recommended that, to ensure that HHS workforce efforts meet national needs, HHS should  develop a comprehensive and coordinated planning approach to guide its  health care workforce development programs. In making this  recommendation we noted that, without such planning, HHS cannot fully  identify the gaps between existing programs and national needs as well  as the actions needed to address these gaps.", "Given the significant role of the federal government in supporting GME  training, you asked us to review aspects of this spending and related  federal oversight. In this report, we:  1.  Describe how much the federal agencies and state Medicaid agencies  spent on GME training and the distribution of spending by geographic  area;  2.  Describe what is known about the costs of GME training programs;  3.  Examine the extent to which the federal government collects  information to understand its investment in GME training.", "To describe the amount the federal agencies and state Medicaid  agencies spent on GME training and how that spending varied by  geographic area, we reviewed prior GAO reports, searched federal  agency websites, and interviewed agency officials to identify federal  programs that fund GME training. We analyzed 2015 data, the most  recent reliable data available at the time of our analysis, on the five  federal programs that fund GME training\u2014HHS\u2019s Medicare, Medicaid,  CHGME, and THCGME programs and VA\u2019s physician GME training  program. Specifically, we analyzed 2015 data on the amount spent and  number of full-time equivalent (FTE) residents supported by each  recipient of funding from Medicare, CHGME, THCGME, and the VA  program. Comprehensive data on Medicaid GME spending and FTE  residents supported were not available from CMS, so we collected 2015  federal and state data using a survey of state Medicaid agencies from 50  states and the District of Columbia. All agencies responded to the  survey. We merged data from the five programs based on each funding  recipient\u2019s Medicare identification number. For each funding recipient,  we calculated the total amount of federal, as well as state Medicaid,  funding received for GME training and, where FTE resident data were  available, the amount of funding received per FTE resident adjusted for  geographic differences in the cost of labor. We also calculated the  extent to which recipients received funding from more than one federal  source. To assess the reliability of each of these sources of data, we  reviewed documentation, interviewed agency officials, and checked the  data for obvious errors. While we discuss CMS data collection efforts later  in this report, we found the data to be sufficiently reliable for the purposes  of our reporting objective.", "To describe what is known about the costs of GME training programs, we  interviewed experts from seven research and industry organizations  about the costs to train residents, teaching sites\u2019 measurement of costs,  and how costs compare to federal funding levels. We also conducted a  literature review of studies that estimated the costs of training physician  residents. To identify relevant studies, we searched multiple reference  databases and reviewed the abstracts of studies initially identified to  select potentially relevant studies for full review. We also asked for  studies that estimated the costs of GME during interviews with experts. Of  the over 300 studies we initially identified, 10 were deemed relevant  because the studies provided estimates of the costs of training residents.  We also analyzed 2015 data on the costs of GME training reported by  teaching hospitals to CMS. To assess the reliability of these data, we  reviewed documentation about how the data were collected and verified,  and we checked the data for obvious errors. We found the data to be  sufficiently reliable for the purposes of our reporting objective. We also  interviewed officials from three Medicare Administrative Contractors  (MAC) selected based on the high percentage of new teaching hospitals  in the MAC\u2019s geographic jurisdiction. We asked the MAC officials about  their role and responsibilities in reviewing and auditing teaching hospitals\u2019  GME costs that are reported annually to CMS.", "To examine the extent to which the federal government collects  information needed to understand its investment in GME training, we  reviewed, where available, public laws, regulations, agency guidance,  reporting forms and instructions, and performance reports concerning the  five federal programs that fund GME training. We interviewed officials  from HHS\u2019s Office of the Assistant Secretary for Planning and Evaluation,  CMS, HRSA, and VA about their reporting requirements, program  management and oversight responsibilities, and program evaluation and  performance measurement activities. We compared the information that  agencies collect to the leading practices we derived from the Government  Performance and Results Act of 1993 (GPRA) and the GPRA  Modernization Act of 2010 (GPRAMA) and Federal Standards for Internal  Controls to determine whether agencies collected information needed to  understand the federal investment in GME training.", "We conducted this performance audit from March 2016 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "GME Training", "paragraphs": ["Following medical school, GME training provides the clinical training  required for a physician to be eligible for licensure and board certification  to practice medicine independently in the United States. Physicians  pursue GME training within a variety of specialties or subspecialties.  Initially, these physicians, known as residents, go through GME training  for a specialty\u2014such as internal medicine, family medicine, pediatrics,  anesthesiology, radiology, or general surgery. Of the specialties, family  medicine, internal medicine, and pediatrics are generally considered  primary care specialties. However, a resident who trained in a primary  care specialty may not ultimately practice as a primary care physician.  Some residents may choose to subspecialize and seek additional GME  training. For example, a resident who completed an internal medicine  GME training program may decide to subspecialize in cardiology. The  percentage of residents who later subspecialize varies based on specialty  type.", "To operate and maintain GME training programs, teaching sites, including  hospitals, health centers, medical schools, and other settings, incur  medical education costs that can generally be categorized into two  groups\u2014direct costs and indirect costs. Direct costs include, for example,  residents\u2019 salaries and benefits; compensation for faculty who supervise  the residents; and overhead costs. Indirect costs are the portion of higher  patient care costs that teaching sites are thought to incur as a result of  training residents, such as increased diagnostic testing and procedures  performed. (See table 1.)", "While they may generate costs, residents may also produce financial  benefits for a teaching site. Teaching sites may incur lower personnel  costs because residents perform services at lower pay than more  experienced clinicians or other health care professionals. And, residents  may have more flexibility to work long or irregular hours. For example,  residents can provide on-call services in lieu of fully trained physicians at  a much lower cost to the teaching site. Residents may also increase the  efficiency and productivity of faculty with whom they work by, for example,  enabling the faculty to increase the number of patient services for which  they can bill."], "subsections": []}, {"section_title": "Funding of GME Training through Federal Programs and State Medicaid Agencies", "paragraphs": ["Within the federal government, funding of GME training is fragmented.  Most federal GME funding is provided through five programs\u2014Medicare  GME payments, Medicaid GME payments, HRSA\u2019s CHGME and  THCGME payment programs, and the VA\u2019s physician GME training  programs. For most of the programs, the funding is formula-driven and  essentially guaranteed if eligibility requirements are met. Each program  uses a different methodology to determine the amount of payments to  funding recipients, though there are some similarities between programs.", "GME training programs generally must be accredited by an independent  organization in order to receive federal funding."], "subsections": [{"section_title": "Medicare GME Payments", "paragraphs": ["Medicare\u2014a federally financed program that provides health insurance  coverage to people age 65 and older, certain individuals with disabilities,  and those with end-stage renal disease\u2014pays for GME training. It does  so through two mechanisms\u2014Direct Graduate Medical Education  (DGME) payments and Indirect Medical Education (IME) payments\u2014both  of which are formula-based payments set by statute. These payments  are made to reflect Medicare\u2019s \u201cshare\u201d of the costs associated with  providing GME training.", "Medicare DGME payments are made to cover a hospital\u2019s direct costs  associated with GME training, such as stipends, supervisory physician  salaries, and administrative costs. The payments are the product of a  hospital\u2019s weighted 3-year average number of FTE residents, subject to a  cap; a per resident amount (PRA); and the hospital\u2019s Medicare patient  load\u2014the portion of a hospital\u2019s total inpatient bed days that were paid for  by Medicare. In part to constrain spending, the Balanced Budget Act of  1997 capped, for most hospitals, the number of FTE residents that  hospitals may count for DGME and IME payment at the number of FTE  residents in place in 1996.", "Rather than reimburse teaching hospitals for actual direct costs incurred  each year from training residents, DGME payments are calculated using  a PRA. A hospital\u2019s PRA is based on its direct costs and its number of  FTE residents when the PRA was set in a base year, which is fiscal year  1984 for most hospitals, and is adjusted annually for inflation. Congress  set a base year for calculating DGME costs that would incentivize local  providers to keep down their costs and for local communities to assume a  greater role in the costs of medical education. After fiscal year 1984, for  hospitals that did not previously have any approved residency programs  or did not participate in Medicare but began doing so, a PRA for the  hospital is established using direct costs the hospital reported that it  incurred on its cost report during its base year, which is generally the first  cost reporting year it began training residents. In general, each hospital  has two separate PRAs\u2014a primary care PRA and a nonprimary care  PRA\u2014whereby teaching hospitals receive slightly higher payments for  residents training in primary care specialties.", "Medicare IME payments, which are made to cover a hospital\u2019s indirect  costs associated with GME training, are an add-on to the hospital\u2019s  Medicare reimbursement for each discharge. IME payments are not  based on teaching hospitals\u2019 actual indirect costs. Rather, the adjustment  is based on the number of FTE residents per hospital bed, referred to as  the resident-to-bed ratio, and a statistically estimated factor that  represents the incremental patient care cost due to providing GME  training."], "subsections": []}, {"section_title": "Federal and State Medicaid GME Payments", "paragraphs": ["Medicaid is a joint federal-state program that finances health care  coverage for low-income and medically needy individuals. While there is  no federal requirement for state Medicaid programs to fund GME training,  states may elect to recognize GME training costs as a component of the  overall costs incurred by hospitals. And, payment for these expenses is  shared by the federal government through federal matching funds. GME  training costs may be reimbursed as an add-on adjustment to the state\u2019s  payment rates to eligible providers or as an enhanced payment made as  a lump sum supplemental to the initial payment rate."], "subsections": []}, {"section_title": "CHGME Payment Program", "paragraphs": ["Because children\u2019s hospitals treat very few Medicare patients and  consequently receive few GME payments from Medicare, the CHGME  Payment Program was created in 1999 and reauthorized through fiscal  year 2018 to support pediatric and pediatric subspecialty GME training in  freestanding children\u2019s hospitals. Unlike Medicare GME, which is a  mandatory spending program, the CHGME program relies on  discretionary spending. And, the total amount of payments available to  each hospital varies from year to year depending on the total amount of  funding made available from annual appropriations and the total number  of hospitals that participate. The CHGME program makes both DGME  and IME payments where one-third of program funds are allocated for  DGME payments and two-thirds for IME payments. Both payments are  calculated using formulas similar to Medicare. For example, the  program\u2019s DGME payments are based, in part, on the number of FTE  residents, subject to a cap, and an updated national standardized PRA.  And, the IME payment is based, in part, on an estimated factor that  represents the incremental patient care cost due to providing GME  training, rather than the hospital\u2019s actual indirect costs."], "subsections": []}, {"section_title": "THCGME Program", "paragraphs": ["The THCGME program was created under the Patient Protection and  Affordable Care Act and reauthorized through fiscal year 2017 to increase  the number of primary care residents who trained in community-based,  ambulatory patient settings. HRSA awards funds to eligible teaching  health centers for the purpose of covering both direct and indirect GME  costs of new or expanded community-based primary care residency  programs. HHS established an interim annual payment rate of $150,000  per resident until it establishes formulas for determining the payments.", "However, the payment rate for THCGME recipients may fluctuate over  time, depending on available appropriations, the number of eligible  applicants, and the number of FTE residents supported. THCGME  awards can supplement GME payments from other federal sources,  including Medicare, Medicaid, and CHGME, but recipients generally  cannot use funds to pay for the same portion of resident time that they  used to count toward funding in these other GME programs."], "subsections": []}, {"section_title": "VA GME Program", "paragraphs": ["GME training is a statutory requirement of VA to enhance the nationwide  supply of health care professionals and assists VA in the recruitment and  retention of staff at its medical facilities. Nearly all of VA\u2019s GME training is  conducted through academic affiliations with medical schools and  teaching hospitals where residents from those institutions do clinical  rotations at VA medical facilities.", "VA provides financial support for GME training at its facilities in two  ways\u2014disbursement payments to its academic affiliates and educational  support payments for its VA medical facilities. VA reimburses academic  affiliates through disbursement agreements to cover the costs of stipends  and benefits for the period of time that a resident serves in a VA medical  facility. Reimbursement is based on the number of FTE residents  completing a VA rotation and the approved per diem rate of the academic  affiliates\u2019 stipend and benefit costs by residents\u2019 postgraduate year level  of training. In addition, VA allocates a portion of VA-wide funding for  educational support using a formula that accounts for the number of FTE  resident positions and a per resident cost factor. According to VA officials,  the funding is used to pay for compensation of faculty and other staff,  overhead costs, and other costs necessary to host and manage the GME  training at VA medical facilities."], "subsections": []}]}, {"section_title": "Federal Oversight of GME Funding", "paragraphs": ["Like its funding, federal oversight of programs that fund GME training is  fragmented. Federal agencies are responsible for the management and  oversight of their respective GME training program or programs. For  Medicare, CMS uses regional contractors\u2014MACs\u2014to process and audit  payments for health care items and services submitted by enrolled  Medicare providers on their annual cost report, including Medicare DGME  and IME payments. For example, MACs audit the number of FTE  residents that hospitals report on their annual cost report by reviewing  relevant rotation schedules. Hospitals claiming reimbursement for GME  training are also required to submit Intern and Resident Information  System (IRIS) files that provide data on each resident that the hospital  trained, including the resident\u2019s specialty type, postgraduate year, and  proportion of time spent on rotation at each training site.", "CMS is responsible for broad oversight of the Medicaid program, while  states are responsible for the daily administration of their individual  Medicaid programs, including program integrity activities. In its broad  oversight role, CMS develops guidance and provides assistance to the  states. However, state Medicaid programs are not required to make GME  payments, and CMS has not established requirements or guidance  specifically related to Medicaid GME payments. Instead, CMS reviews  states\u2019 Medicaid payments to providers, including GME payments, as part  of its review of Medicaid state plans.", "HRSA is responsible for the management and oversight of the CHGME  and THCGME programs. Specifically, it is responsible for determining  applicants\u2019 program eligibility, making payments, and auditing those  payments. HRSA is also responsible for collecting information about, and  reporting on, the performance of the CHGME and THCGME programs.", "Oversight of GME training at VA medical facilities is shared between the  VA medical facilities and their academic affiliates. Through affiliation  agreements, academic affiliates provide for the central administration of  residents\u2019 stipends and benefits. Academic affiliates are also  responsible for the overall quality of the GME training program,  monitoring all resident educational activities, obtaining and maintaining  accreditation, developing educational objectives and curriculum, selecting  residents, creating resident rotation schedules, and submitting residents\u2019  schedules of educational activities to VA for reimbursement. VA has the  responsibility of overseeing and managing clinical training in VA medical  facilities, and must ensure that there are sufficient patient care  opportunities, educational infrastructure, and qualified teaching  physicians to accommodate trainees from the affiliates. Each VA medical  facility must also track the educational activities of all residents, including  the amount of time the resident spent training at its facility."], "subsections": []}]}, {"section_title": "Federal Agencies and State Medicaid Agencies Spent Over $16.3 Billion on GME Training in 2015, and the Amount Spent Per FTE Resident Varied", "paragraphs": ["Federal agencies and state Medicaid agencies spent over $16.3 billion on  GME training in 2015 to support direct and indirect costs of training. The  amount spent per FTE resident varied across programs, and the largest  variation across payment recipients and regions was within Medicare due  to variation in the values of factors used to calculate Medicare payment  amounts. Almost half of participants received payments from more than  one program, and the designs of federal programs may reduce the  potential for duplicate payments."], "subsections": [{"section_title": "Federal Agencies and State Medicaid Agencies Spent Over $16 Billion on GME Training in 2015 to Support Direct and Indirect Costs of Training", "paragraphs": ["Federal agencies and state Medicaid agencies spent over $16.3 billion on  GME training in 2015 through five federal programs and 45 state  Medicaid agencies. Of this, the federal government spent $14.5 billion  through Medicare, Medicaid, VA, the CHGME program, and the THCGME  program. (See table 2). Most spending on GME training came from  Medicare, accounting for 71 percent of federal spending, with over $10.3  billion in payments to teaching hospitals. Medicaid spending accounted  for 16 percent of federal spending on GME training, or $2.4 billion. These  federal Medicaid funds matched an additional $1.8 billion that Medicaid  agencies in 45 states spent on GME training in 2015. (For information  about state Medicaid agency and other non-federal sources of funding on  GME training, see appendix I.)", "These payments supported both direct and indirect costs associated with  GME training, though data were limited for some programs. We  calculated that about one-third of Medicare payments were made to cover  the direct costs of GME training. Similarly, HRSA reported that one-third  of CHGME payments were made to cover direct costs. For the VA GME  program, we calculated that 44 percent of payments were made to  academic affiliates to reimburse them for resident salaries and benefits, a  category of direct costs. HRSA does not separate payments for direct  costs from those for indirect costs under the THCGME program. And, the  data we received from state Medicaid directors did not separate them,  though 8 of 45 states specifically reported paying providers for indirect  costs in addition to direct costs.", "Providers in all 50 states and the District of Columbia received payments  for training GME residents, but some regions received a notably higher  amount compared to others. In particular, federal agencies spent $5.47  billion ($97 per-capita) in the Northeast region, which represents 38  percent of total federal spending, compared with the West where federal  agencies spent $1.83 billion ($24 per-capita or 13 percent of total federal  spending). (See table 3). State Medicaid agencies in the Northeast also  spent significantly more on GME training than did agencies in other  regions. Agencies in the Northeast spent $1 billion ($18 per-capita),  whereas agencies in the West spent $120 million ($2 per-capita). Notably,  New York accounted for about half (48 percent) of nationwide state  Medicaid agency spending on GME and 86 percent of spending in the  Northeast. Overall, GME spending was somewhat more concentrated in  the Northeast than was the number of GME residents; in a May 2017  study, we found that 31 percent of GME residents were located in the  Northeast. The Northeast was the only region for which the percentage  of the GME spending in the region was higher than the percentage of  GME residents.", "Available data show that almost all spending on GME training (99  percent) went to recipients located in urban areas. However, it is likely  that more than 1 percent of spending was used to support training in rural  areas; data limitations in HHS and state Medicaid agency data preclude  calculation of the amount of spending on GME training in rural areas. The  data we received from HHS listed only the direct recipient of the  payments, such as a hospital or a medical school, which can arrange  rotations at other teaching sites that may be located in rural areas.", "Data limitations also preclude calculation of the overall amount of  spending on GME resident training in specific specialties, such as primary  care. With data that were available, we found:", "Of the 10,367 FTE residents that VA funded, 53 percent were training  in a primary care specialty. We also estimated that 52 percent of VA\u2019s  spending supported primary care training.", "The THCGME program is intended to train residents in primary care,  with 100 percent of the $76.3 million used to support 630 primary care  residency positions.", "HRSA reported that 43 percent of the 11,667 trainees supported by  CHGME funds trained in general pediatrics or combined pediatrics  programs. HRSA did not report how much it spent on primary care  training, or the number of FTE residents training in primary care  specialties.", "Of the 87,980 FTE residents that Medicare funded, 44 percent were  denoted as primary care residents. However, Medicare is likely  supporting more residency positions than these data indicate, and  these residents are unlikely to be training in primary care. The  program counts each resident pursuing additional training, such as a  resident training in a subspecialty, as half of an FTE when calculating  DGME payments."], "subsections": []}, {"section_title": "The Amount Paid Per FTE Resident Varied Across Programs, and the Largest Variation Across Recipients and Regions Was within Medicare", "paragraphs": ["We found that in 2015, the average amount that a program paid per FTE  resident ranged from $34,814 for Medicaid GME payments to $137,491  for the VA GME program. (See table 4.) Programs use different  methods to calculate how much to pay providers on a per resident basis,  thus payment amounts are not comparable across programs. For  example, Congress appropriated funding for the THCGME program for  each of the fiscal years 2011 through 2017 and eligible entities received  the same amount per FTE resident. In contrast, Medicare GME payments  to eligible entities are determined according to formulas that take many  factors into account, including the share of a hospital\u2019s patients that are  covered under Medicare. Consequently, the amount that Medicare pays  recipients varies widely based on variation in the values of factors used to  calculate payments. Nationwide, hospitals received $116,997 on average  from Medicare for each FTE resident, and the middle 50 percent of  hospitals received between $85,478 and $150,610.", "Given the wide variation in overall Medicare per FTE resident payment  amounts by hospital, we examined variation among regions and states.", "Regionally, the average total Medicare per FTE resident payment  ranged from $127,503 in the Midwest to $87,172 in the West. (See  table 5.)", "Across individual states, the average total Medicare per FTE resident  payment amount ranged from $65,672 in California to $170,591 in  New Hampshire. (See fig. 1.)", "Some of this variation is due to significant variation in the values of  certain factors used to calculate Medicare DGME payments\u2014specifically,  the PRA and Medicare patient load. (See table 6.)", "The Medicare PRA varies among recipients and across regions,  though to a lesser degree than the overall per FTE resident payment.  For example, the average PRA for the middle 50 percent of primary  care residents ranged from $87,962 to $117,144 per FTE resident,  compared to $85,478 to $150,610 for the overall per FTE resident  payment. The PRA also varied by region and, as with the overall  payment amounts, the average PRA was lowest in the West.  However, in contrast to the nationwide average per FTE resident  payment, which was highest in the Midwest, the recipients in the  Northeast had the highest average PRA.", "The Medicare patient load also varies across regions, which affects  DGME payments. Medicare DGME payment recipients in the West  reported an average Medicare patient load of 24 percent, which is  significantly lower than the 34 to 36 percent reported in other regions.", "A hospital\u2019s Medicare patient load also affects Medicare IME payments  per FTE resident. A hospital\u2019s IME payment is calculated by increasing  Medicare\u2019s payments for inpatient services to a hospital by an IME  adjustment factor. Therefore, a hospital that received more Medicare  payments for inpatient services will receive a larger IME payment."], "subsections": []}, {"section_title": "About Half of GME Program Participants Received Payments from More than One Program", "paragraphs": ["Over half (51 percent) of providers that participated in any of the five  GME programs received payments from more than one federal program.  For example, 69 percent of providers that participated in Medicare also  participated in another program, and 84 percent of CHGME awardees  participated in another program. However, in each case, these programs  provided most of these recipients\u2019 total funding (74 percent and 66  percent respectively). In contrast, recipients of Medicaid or VA payments  also generally participated in another program, but received only 22  percent and 10 percent of their total funding for GME training through  Medicaid and VA, respectively. (See table 7.)", "Though the high portion of providers that receive payments from multiple  sources creates the potential for providers to receive duplicate payments,  this risk of duplication is reduced by the programs\u2019 designs.", "The CHGME program was established for children\u2019s hospitals  because they did not traditionally receive significant Medicare GME  payments.", "The THCGME program provides payments to outpatient facilities,  whereas residency training has been, in general, hospital based.", "VA only pays for residents\u2019 time spent training at a VA medical facility,  and not for time residents spent training in non-VA settings that may  receive other federal payments for GME training.", "Medicare adjusts all DGME payments by the ratio of a hospital\u2019s  patients covered under Medicare.", "CMS has not established requirements or guidance specifically  related to Medicaid GME payments, including how the payments are  to be calculated. However, 10 states adjust payments by the ratio of  a teaching site\u2019s patients covered under Medicaid."], "subsections": []}]}, {"section_title": "GME Training Costs Vary by Residency Program Characteristics, and Teaching Sites Face Challenges in Measuring These Costs", "paragraphs": ["GME training costs vary by program characteristics, such as size, type,  training setting, and age, and some training costs are more prone to  variation than others. Challenges exist in measuring and comparing GME  training costs due to a lack of standard cost methodologies across  teaching sites and some training costs being difficult to measure. Further,  little is known about how GME training costs relate to federal GME  funding."], "subsections": [{"section_title": "GME Training Costs Vary by Program Size, Type, Setting, Age, and Location", "paragraphs": ["According to literature we reviewed and experts we interviewed, GME  training costs vary by residency program characteristic, and some costs,  such as faculty teaching time, are more prone to variation than others.  Specifically, variation in training costs can be explained by one or more of  the following program characteristics:", "Program size: Larger residency programs may be more cost efficient  than smaller ones in that fixed costs, such as infrastructure and  program administration, can be spread out over a larger number of  residents. Therefore, adding another resident increases variable  costs, but lowers per resident fixed costs.", "Type of Specialty: Residency training in some specialties costs more  than others, and accreditation requirements are one of several factors  driving this variation. For example, compared to internal medicine  programs, accreditation standards for family medicine programs  require more hours of faculty involvement and higher faculty-to- resident ratios. Therefore, these residency programs may incur higher  per resident costs. The complexity of a specialty program also affects  its training costs\u2014for example, subspecialty programs, such as  vascular surgery or gastroenterology, require additional GME training  or specialized equipment and will thus incur more training costs. In  addition, costs can be affected by variation in faculty compensation.  According to a 2013 analysis of available data on residency training  costs, the median compensation for attending physicians in academic  health centers ranged from $163,319 for family medicine to $336,136  for radiation oncology. Further, malpractice insurance premium  costs can vary based on the degree of surgical involvement, with  primary care specialties having the lowest premium costs and general  surgery physicians the highest.", "Type of Training Setting: GME training in outpatient settings, such  as community-based clinics, is considered less efficient and more  expensive than in inpatient hospital settings, according to reviewed  literature and experts we interviewed. One reason for this may be  differences in the models of teaching used in each of these settings.  According to one group of experts we interviewed, residents in  inpatient settings are part of teams that do rounds together, where  much of the teaching time involves one clinical teacher and a team of  residents, nurses, and other affiliated professionals. This method of  teaching may not be feasible in outpatient settings where teaching is  more often provided on a more expensive one-to-one basis.  Outpatient settings, particularly smaller ones, may also have to incur  more fixed costs relative to inpatient settings that may have more  facility space and other resources in place to meet accreditation  requirements.", "Location: Geographic location also drives the variation in training  costs. For example, resident salaries vary based on general salary  patterns across the United States. According to one group of experts  we interviewed, there is a range of compensation packages for  residents, and base salaries can vary from $35,000 to $55,000 per  year. Malpractice insurance may also vary by geographic location.  Further, rural training sites may incur higher costs because their  training may have to utilize multiple training sites\u2014such as community  hospitals or rural health clinics\u2014in order to meet accreditation  requirements for resident rotations and patient case-mix. The added  administrative work of coordinating with other sites to provide these  resources can be a challenge.", "Age of the program: Newer residency programs may have higher  costs than older, more established programs. According to some  GME experts we interviewed, the first year a teaching site operates a  residency program is more expensive because new programs may be  smaller and cannot spread out fixed costs. In addition, it can be  expensive for a new GME program to meet accreditation  requirements, such as required infrastructure and minimum faculty.", "Studies estimating GME training costs show these costs vary by program  characteristics. For example, we identified 10 studies that estimated GME  training costs; however, these studies were not comparable because they  focused on discrete programs with different characteristics, utilized  different methodologies, were conducted at different points in time, and  did not examine the same cost elements. Further, these studies are not  generalizable due to limitations in study methodology, such as small  sample sizes. And, given the age of some of these studies, they may not  be reflective of current GME training costs. Across the 10 studies we  reviewed, estimates of costs ranged from $35,164 to $226,331 per  resident. (See table 8.)", "The Medicare cost reports that hospitals submit annually to CMS, though  they have certain limitations, also suggest variability in residency training  costs. For example, according to the cost reports, in 2015, direct costs  varied from $56,998 to $333,565 per resident (excluding outliers). (See  table 9.) However, these costs are limited to direct GME costs specified in  Medicare guidance, and they have other limitations due to their collection  and reporting."], "subsections": []}, {"section_title": "Challenges Exist in Measuring and Comparing GME Training Costs and Little is Known about their Relationship to Federal GME Funding", "paragraphs": ["We found that there is no standard method or tool across teaching sites  for identifying and capturing GME training costs. One expert told us that,  therefore, the reporting of costs depends on how each teaching site, and  the individuals at each site, are tracking and defining those costs. Another  group of experts who conducted a study to estimate GME training costs in  teaching health centers told us they were unable to identify a common  instrument and had to develop their own instrument to standardize costs.", "According to literature we reviewed and experts we interviewed, Medicare  GME guidance for reporting training costs is not always clear, and  differences in how teaching sites define costs can lead to inconsistent  measurement. One expert told us that Medicare GME payment rules are  subject to interpretation, and thus there is variation between teaching  sites in how costs are reported on Medicare cost reports. Other GME  experts told us that many teaching health center residency programs rely  on in-kind benefits, such as building space donated by organizations, but  health centers vary in how they account for the costs of these benefits.  Some teaching health centers will score them as in-kind contributions,  others will provide a square footage cost amount, and others may not  track and report these costs at all. While one group of experts suggested  there be national guidelines to ensure all teaching sites are using the  same rules to define and report costs, one expert cautioned that a  common tool would make it impossible to reflect the unique  characteristics of each program.", "Factors specific to teaching sites may affect how they identify their  training costs. The varying relationships and financial arrangements  between the teaching site, its partners, and its faculty affect how it  allocates and reports training costs. For example, a teaching site may  have various educational partners, such as medical schools and  community-based training sites, and be affiliated with multiple hospitals,  each of which tracks costs differently. Teaching sites differ in how they  share training costs with these partners. In addition, faculty arrangements  vary. For example, in some cases faculty are employees of the teaching  site and in other cases, faculty bill for their services independently.  Moreover, facilities vary in the experience of their personnel responsible  for identifying GME training costs. For example, program directors may  not have the financial experience needed to identify costs, and some  teaching sites may use outside consultants to identify costs. Turnover in  the staff responsible for tracking costs, lack of communication between  program staff and the accounting departments, or a change in ownership  of the teaching site may add to the challenge of accurately identifying  costs.", "According to studies we reviewed and experts we interviewed, some  GME training costs are difficult to accurately identify and measure. For  example:", "Faculty Costs: Faculty responsibilities are spread out across  education, research, administrative, and patient care activities, and  the time spent in each activity is not always clear. The only allowable  faculty costs on Medicare cost reports are those for education-related  activities, such as the clinical supervision of residents. For example, if  a faculty member performs a procedure while doing rounds with  residents, the teaching site must determine how much of that time  was for patient care and how much was for education. However,  making this determination can be challenging for teaching sites. One  group of experts told us that while most teaching sites have a formula  to calculate these education costs, they are most likely an undercount.  However, another expert said that officials preparing the cost reports  are not systematically splitting faculty time between education and  patient-care activities and are most likely guessing.", "Facility Costs: MAC officials told us that facility costs that hospitals  report on their cost reports should be allocated based on square  footage, building depreciation, and utility costs, but there is some  variation in how teaching sites calculate their square footage. Further,  as previously described, donated building space may not be  accurately identified by teaching sites. Experts who conducted a study  to estimate teaching health center program costs told us that several  centers in their study were not accustomed to thinking of donated  space as a residency program expense.", "Indirect Medical Education Costs: There is not a clear and  consistent definition of the indirect medical education costs, and there  may be variability in these costs. Furthermore, there is little incentive  for teaching sites to accurately identify these costs because Medicare  does not require them for purposes of determining IME payments,  according to one reviewed study. As a result, it is unclear what  indirect costs the Medicare IME payment adjustment is meant to  cover. Additionally, experts told us that it is difficult to measure the  extent to which costs associated with the unique services that  teaching sites provide, such as stand-by services or their role as a  safety net provider, are attributable to GME training.", "Resident benefits for teaching site costs and productivity: The  benefits that residents provide can generate cost savings and revenue  for the teaching site, yet the extent of these benefits can be difficult to  calculate. According to one study we reviewed, the value that  residents provide cannot be measured directly; rather, the value is  reflected in the teaching site\u2019s patient care costs and on the clinical  productivity of attending physicians. One expert we interviewed said  that identifying when residents move from a cost to a financial benefit  is complicated and depends, for example, on a resident\u2019s year of  training and residency program requirements. Also, the value of  resident services can vary by specialty. For example, residents in  general surgery or internal medicine provide more on-call services  than residents in dermatology or radiation oncology. Although the  cost savings and revenue generated by residents has an effect on the  net costs of GME training, it is typically not accounted for when  estimating costs.", "In addition to these challenges, federal agencies do not systematically  collect and standardize cost information at the national level, according to  literature we reviewed and experts we interviewed. For example, a HRSA  study identified training costs in teaching health centers, but the study  only captured costs over one year and did not include all THCGME  programs. Further, in addition to inconsistencies in how teaching sites  collect data for Medicare cost reports, the data do not include the revenue  impact and actual indirect costs associated with training residents and  cannot be broken down by specialty programs. In addition, they are not a  comprehensive source of training costs because they are limited to  teaching sites that received Medicare GME payments. It does not include  other teaching sites, such as medical schools, teaching health centers,  and teaching hospitals that may have only received other federal funding  for GME training, such as VA GME payments. Finally, because Medicare  cost report data are not generally used to calculate GME payments, they  are not reviewed or audited by contractors except when new teaching  sites establish their base year PRA.", "Further, teaching sites may not have accurately reported costs used to  calculate Medicare DGME payments. According to experts we  interviewed, at the time that most teaching sites established the base  year PRAs used to calculate DGME payments, teaching site accounting  practices and their varying financial relationships with affiliated education  partners may have led them to over-report or under-report their costs.  As a result, there is variation in sites\u2019 PRAs, which may not reflect actual  variation in direct costs. To identify how the PRA compares to reported  direct training costs, we compared teaching site PRAs with the direct  training costs that they reported for 2015 (though reported costs may not  accurately reflect all GME training costs, as previously noted). For  teaching sites in the median range, their Medicare DGME payment  covered 67 percent of their reported direct training costs in 2015.  However, we found wide variation across teaching sites\u2014the PRA ranged  from 31 to 157 percent (excluding outliers) of teaching sites\u2019 reported  direct costs. (See table 10.)", "In addition to the challenges of identifying and comparing costs, little is  known about their relationship to federal GME funding. Some studies  have analyzed federal GME funding relative to GME training costs but do  not consistently indicate whether federal payments accurately reflect  training costs. For example, both the Medicare Payment Advisory  Commission and HHS found that the Medicare IME payment adjustment  exceeds the actual indirect costs that teaching sites incur from operating  GME programs. The studies recommended modifying the IME payment  adjustment. However, another study found that indirect medical education  costs and other costs, such as stand-by services, add to patient care  costs in teaching hospitals, and concluded that a reduction in the  Medicare IME payment adjustment could result in insufficient Medicare  payments to cover these costs. Other studies found that federal funding  is lower than actual program costs. For example, one study estimated the  per resident training cost in teaching health centers in fiscal year 2017 to  be $157,602, compared to the $95,000 per resident that was being  provided in federal funding. Another study found that their average  $183,138 per resident cost estimate for internal medicine programs of  120 residents exceeded Medicare DGME payments in 2012 by  approximately $160,000 per resident, and noted that other sources of  funding, including Medicare IME payments, subsidized training costs.", "The relationship between training costs and federal GME funding is  complicated by the nature of how most GME payments are made. For  example, with respect to Medicare GME payments, the largest source of  federal GME funding, payments are not based on actual costs, and there  are no reporting requirements for how teaching sites use the payments.  Specifically, teaching sites distribute these payments depending on their  needs and the needs of their affiliates, making it difficult to understand the  relationship between GME funding and training costs."], "subsections": []}]}, {"section_title": "Information the Federal Government Collects to Manage Programs Is Not Sufficient to Comprehensively Understand Its Investment in GME Training", "paragraphs": ["Agencies generally collect information to manage their respective  programs, ensure the accuracy of payments, and reduce the potential for  duplicative payments within or across federal programs that fund GME  training. However, HHS does not have sufficient information available to  comprehensively evaluate the federal programs that fund GME training,  identify gaps between federal GME programs\u2019 results and physician  workforce needs, and make or recommend to Congress changes in order  to improve the efficient and effective use of federal funds."], "subsections": [{"section_title": "Each Federal Agency Generally Collects Information Needed to Manage Its Respective Program and Ensure Payment Accuracy", "paragraphs": ["Federal agencies generally collect information to manage their respective  programs and ensure the accuracy of payments. To manage their  programs, agencies use information, such as the total number of FTE  residents and training costs, to calculate payments. For example, VA  medical facilities use information that academic affiliates report about the  costs of their resident salaries and benefits to set payment rates used to  reimburse the affiliates. And, information about individual residents is  used to verify that recipients accurately reported, according to resident  counting rules, the number of FTE residents used to calculate payments.  For example, MACs use IRIS data about residents\u2019 number of years  completed in all types of GME training programs to verify that residents  who have completed their initial residency period were only counted as  half (50 percent) when determining the DGME payment amount. (For a  summary of the information that agencies collect for each of the five  programs we reviewed, see appendix II. See table 11 for a summary of  how agencies use the collected information.)", "In contrast to the other programs, states establish and administer  Medicaid GME payment policies and CMS generally collects limited  information about states\u2019 Medicaid GME payments. CMS does not use  this information except to determine the amount of federal matching funds  for each state. While state Medicaid agencies report the aggregate  amount of GME supplemental payments they make to CMS, there are no  federal requirements that states or teaching institutions report information  about supplemental payments at the provider level, the aggregate or  provider-level amount of add-on adjustments to the state\u2019s payment rates  for GME training, or how these payments support GME training. Rather,  CMS officials said that states have the option to collect information about  Medicaid GME payments. However, of the 45 state Medicaid agencies  that reported on our survey that they paid for GME training, less than half  (20 states) indicated that they require funding recipients to report any  information related to Medicaid GME payments, such as the number or  type of residents supported.", "While the risk of duplication is reduced by each program\u2019s design, federal  agencies also use the information collected to identify duplicative  payments within and between most of the federal programs, with the  exception of Medicaid. For example, IRIS data is used to identify whether  more than one hospital claimed the same resident\u2019s time for purposes of  Medicare GME payments. Also, according to HRSA officials, contractors  conduct assessments of the FTE resident counts reported by recipients of  CHGME or THCGME program funding to identify duplication with FTE  residents reported for Medicare GME payments. For example, HRSA  officials told us that its combined academic years 2012-2013, 2013-2014,  and 2014-2015 FTE assessment of the 59 teaching health centers in the  THCGME program identified 6 centers, from 3 unique organizations, that  had a combined total of 6.63 FTE residents that were duplicative with  Medicare FTE resident claims, out of over 1,000 FTE residents reviewed  over that 3-year time period. In addition, HRSA has worked with CMS to  maintain data for this assessment. For example, at HRSA\u2019s request, CMS  added a field to the cost reports to check whether any residents from a  teaching health center rotated to the hospital and, if so, the number that  rotated from a teaching health center. However, these agencies do not  have procedures in place to identify potentially duplicative payments  between their programs and Medicaid GME payments, which totaled $2.3  billion in federal Medicaid spending in 2015. There is no federal  requirement that CMS identify potentially duplicative payments between  Medicaid GME payments and other federal GME programs. And, without  better data collected about Medicaid GME payments, there is limited  information available to identify potentially duplicative payments between,  for example, HRSA\u2019s GME programs and Medicaid GME payments.", "HRSA and VA, which combined provided 13 percent of total federal GME  funding in 2015, use the information collected for ongoing program  performance measurement and program evaluation. HRSA evaluates the  performance of its payment programs. To do so, HRSA collects  information on program outcomes, such as whether supported residents  received training in, or went on to practice in, a medically underserved  area, a primary care setting, or rural area. HRSA uses these performance  measures for ongoing evaluations, for internal and congressional  reporting, and in its budget justification. In addition, HRSA is authorized to  implement a quality bonus system for the CHGME program, which it  plans to do by fiscal year 2019. VA issues a survey to VA residents to  assess, among other things, a resident\u2019s likelihood of considering a future  employment opportunity at a VA medical facility. VA medical facilities are  required to collect detailed records of residents\u2019 participation in assigned  educational activities and they must evaluate each resident according to  accrediting body requirements, such as patient care and medical  knowledge. VA medical facilities are also required to produce an annual  report on each GME training program that includes, among other things,  the accreditation status of its GME training programs, its response to  results of the resident satisfaction survey, and opportunities for  improvement in residents\u2019 education.", "CMS, however, does not use the information it collects for Medicare or  Medicaid to evaluate the performance of these programs toward meeting  physician workforce goals, even though they accounted for 87 percent of  federal GME spending in 2015. As noted, Medicaid programs are  administered at the state level. For Medicare, CMS officials said that their  goal is to ensure hospitals are paid according to the GME statutes and  regulations. It does not use information collected to evaluate the  performance of Medicare GME payments, such as evaluating the number  of residents supported by specialty or whether residents went on to  practice in rural areas, primary care, or in medically underserved areas.  The officials further noted that Medicare is an insurance program, and not  among the health care workforce programs that are under the purview of  HRSA. Although CMS officials told us that they coordinate with HRSA  regarding Medicare GME payments, HRSA does not conduct research to  inform GME policy related to CMS\u2019s GME payments. Also, in a 2015  report, we found that HHS lacks performance measures of Medicare  GME payments that are directly aligned with areas of health care  workforce needs identified in HRSA workforce projections."], "subsections": []}, {"section_title": "Agencies Do Not Collect Sufficient Information for HHS to Comprehensively Understand the Federal Investment in GME Training", "paragraphs": ["Information that agencies collect is not always complete, especially  information about Medicaid GME spending. As previously noted, CMS  collects limited information about the amount of Medicaid GME payments  and how these payments support GME training, such as the number or  type of residents supported. In addition, agencies did not collect or use  the following information, with some exceptions, to understand the federal  investment in GME training:", "Payment Amounts by Recipient Characteristics: With the  exception of HRSA\u2019s CHGME and THCGME programs, agencies do  not collect information on payment amounts to training programs with  specific characteristics, such as payment amounts by the type of  training programs supported. This information would be needed, for  example, to compare the payment rates of each program to the costs  of training residents in the teaching sites supported.", "GME Costs and Revenues: Agencies did not collect information  about funding recipients\u2019 indirect costs or revenue generated from  resident activities, with the exception of HRSA\u2019s THCGME program.  Also as previously noted, the costs that hospitals are required to  report annually on their Medicare cost report may not be complete or  consistent, nor, according to CMS officials we interviewed, is this  information audited and used except in limited cases. No information  is collected by CMS about direct or indirect training costs incurred by  recipients of Medicaid GME payments, and only eight state Medicaid  agencies reported on our survey that they require recipients to report  information about their direct costs.", "Output or Outcome Measures: Unlike HRSA and VA, CMS does not  collect information for the GME training programs that it supports  through Medicaid to assess outputs or outcomes related to health  care workforce planning. In addition, while CMS uses IRIS to collect  information on the number and type of residents and their number of  years completed in all types of GME training programs of residents  supported by Medicare GME payments, it does not use it to  understand the output of such spending or for health care workforce  planning. CMS also does not collect information on the outcomes  associated with Medicare GME payments, such as whether residents  who were supported by Medicare went on to practice primary care  specialties or in rural or medically underserved areas. Further,  although HRSA collects data about the outcomes of its CHGME and  THCGME programs, this information is self-reported by funding  recipients. However, HRSA officials told us that it has taken steps to  validate the information reported. For example, it has started to collect  residents\u2019 national provider identifiers for residents supported by the  CHGME and THCGME programs, which is used to validate resident  FTE counts and reported outcomes, such as whether residents went  on to practice in primary care.", "Quality Measures: Agencies generally require that GME training  programs be accredited in order to receive funding, and accrediting  bodies are responsible for evaluating the educational quality of GME  training programs. In addition, HRSA and VA collect some information  about the learning experiences of residents in GME training programs  supported, such as whether residents received training in certain topic  areas. HHS and its advisory bodies have proposed tying federal  funding to the performance of the programs. For example, the  President\u2019s budget proposals for fiscal years 2015, 2016, and 2017 for  HHS proposed to Congress that it be allowed to set standards for  teaching hospitals that receive Medicare GME payments to  emphasize skills that promote high quality and high value in health  care. In addition, the National Academy of Medicine has called for  improved measures of the performance of GME training programs,  and as of October 2017, it had an initiative to identify quality and other  measures, such as residents\u2019 competency or patient outcomes of care  provided by residents.", "Information is also not always consistently collected within programs or  standardized across programs. For example, VA medical facilities report  information centrally to VA about their total payments to academic  affiliates, but they inconsistently used accounting codes to report the total  amount that they spent and did not report the amount they paid each  academic affiliate, limiting the reliability of data VA collects on the total  amount spent on GME. Additionally, VA medical facilities are required to  report annually to VA their approved payment rates that each affiliate  charges, but VA was unable to provide payment rate schedules for all  affiliates in fiscal year 2015. Across all agencies, information about the  number of FTE residents supported was collected at, and for, generally  different points in time and through different reporting systems. (See table  12.) For example, HRSA generally collects FTE resident information  through applications or supporting documentation prior to and at the end  of a fiscal year, while VA collects such information in monthly or quarterly  invoices throughout an academic year. And, CMS collects similar FTE  resident information through cost reports and IRIS files based on each  hospital\u2019s own cost reporting period, which can vary by hospital. In  addition, the five federal programs do not consistently use the same  unique identifiers for their funding recipients, such as a hospital\u2019s  Medicare provider identification number, or individual residents  supported, such as their national provider identifier, which limits the ability  to link data across programs.", "In some cases, data collection may vary across the various GME  programs based on program requirements. Additionally, GME funding  recipients may be required by law to report certain types of information for  some programs, but not for others. For example, THCGME recipients are  required to report on the number of residents trained at the health centers  who completed their residency and care for vulnerable populations living  in underserved areas. Relatedly, CHGME funding recipients are required  to report the number of residents trained at the hospital who completed  their residency training and care for children within the service area of the  hospital or state in which the hospital is located. No similar requirements  apply to Medicare GME recipients.", "Because the information that agencies collect is not always complete or  consistent, HHS does not have sufficient information available to  comprehensively evaluate the federal programs that fund GME training.  As a result, HHS cannot identify problems and make or recommend  changes to Congress in order to improve the efficient and effective use of  federal funds. Under leading practices we derived from GPRA and  GPRAMA and federal standards for internal controls, agencies should  identify and collect complete and reliable information needed to evaluate  the performance of federal programs, while balancing the administrative  costs of such efforts. In addition, agencies should use that information to  monitor performance of programs in order to identify problems and make  changes or recommendations to Congress for improvements.  Improvements in the performance monitoring can enhance and sustain  collaboration and reduce fragmentation within and across federal  agencies that administer programs that fund GME training. However,  because of limitations with the information agencies collect, HHS does  not have information available to comprehensively understand across all  programs that fund GME training, for example, the:  1.  Total amount that the federal government spends on GME training  that includes total Medicaid GME spending and the total amount VA  medical facilities paid to academic affiliates;  2.  The amount the federal government paid each recipient for GME  training, such as the amount paid to each VA academic affiliate;  3.  Distribution of funding\u2014that is, the amount of funding by GME training  program characteristics, including program type;  4.  Extent to which the net cost of training residents, including the  variation in costs along different factors that were previously  discussed, are accurately represented by formulas used to calculate  payments;  5.  Output and outcomes of GME training funded by federal programs\u2014 that is, how many and what type of residents the federal government  supports, where those residents trained and went on to practice, and  whether those residents will help address future health care workforce  needs; and  6.  Quality of GME training programs that are supported by the federal  government, such as whether residents participated in certain  educational activities or the practice readiness or competence of  residents who completed GME training programs supported.", "HHS\u2019s advisory bodies and stakeholders have made calls for  improvements in the accountability and transparency of federal programs  that fund GME training. For example, the Medicare Payment Advisory  Commission recommended greater accountability and transparency for  Medicare GME payments by making information about Medicare GME  payments and teaching costs available to the public. And, the National  Academy of Medicine recommended that a GME Center within the  Centers for Medicare & Medicaid Services be created to be responsible  for, among other things, data collection and detailed reporting to ensure  transparency in the distribution and use of Medicare GME payments."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The federal government is an important source of funds for GME training,  and through its funding and workforce planning efforts, HHS, as the  largest funder of GME training, has an important role in ensuring federal  programs are meeting the nation\u2019s workforce needs. For HHS to carry out  the comprehensive planning approach that we recommended in 2015,  complete and consistent information on GME training is important.  However, the information currently collected is insufficient for this  purpose. For example, HHS lacks comprehensive information on the total  number and specialty type of residents supported by all of the federal  programs that fund GME training. But, HHS may have the opportunity to  improve the information that its component agencies collect about how  federal funding is used to support GME training to determine whether  these programs are meeting these needs. New data collection efforts  could potentially increase certain administrative costs for the federal  government and providers. However, unless HHS collects more complete  and consistent information, it will be limited in its ability to conduct  comprehensive, ongoing evaluations of the federal government\u2019s $14.5  billion annual investment in GME training. Such evaluations could allow  HHS and other federal agencies to make programmatic changes, or make  recommendations to Congress if legislative authority is needed, to  improve the cost effectiveness of current federal funding. In addition,  collecting more complete information could help HHS and other federal  agencies better manage fragmentation in spending, management, and  oversight of federal programs that fund GME training."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following two recommendations to HHS:  The Secretary of HHS should coordinate with federal agencies, including  VA, that fund GME training to identify information needed to evaluate the  performance of federal programs that fund GME training, including the  extent to which these programs are efficient and cost-effective and are  meeting the nation\u2019s health care workforce needs. (Recommendation 1)", "The Secretary of HHS should coordinate with federal agencies to identify  opportunities to improve the quality and consistency of the information  collected within and across federal programs, and implement these  improvements. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to HHS and VA for comment. In its  comments, reproduced in appendix III, HHS concurred with our two  recommendations to identify and improve information collected to  evaluate the performance of federal GME programs. HHS noted that the  President\u2019s fiscal year 2019 budget for HHS, released on February 12,  2018, proposed consolidating federal spending from Medicare, Medicaid,  and the CHGME Payment Program into a single grant program for  teaching hospitals. The proposed program would be jointly operated by  CMS and HRSA and grant HHS authority to modify GME payment  amounts based on criteria, including addressing health care workforce  shortages. HHS stated that the program would allow the department to  set priorities, reward performance, and align reporting metrics across its  GME efforts. HHS indicated that, if the Congress adopts this proposal, it  could work toward addressing both recommendations. It is important to  note, however, that the recommendations in this report stand on their own  and are separate from any efforts to modify how federal GME funds are  distributed. Whether or not legislation is enacted to implement a  consolidated federal GME grant program, HHS still needs to take actions  to improve the information that agencies collect about how federal funding  is used to support GME training. Such actions are important for HHS to  assess the cost effectiveness of federal efforts to help meet the nation\u2019s  physician workforce needs.", "HHS also provided technical comments, which we incorporated as  appropriate.", "In its comments, reproduced in Appendix IV, VA said that it has significant  relationships with other federal funders of GME, including HRSA. In  addition, VA said it looks forward to further dialogue with other agencies  to better share GME information. VA did not provide technical comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 20 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services and the Secretary of Veterans  Affairs. In addition, the report will be available at no charge on GAO\u2019s  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our  Office of Congressional Relations and Office of Public Affairs can be  found on the last page of this report. Other major contributors to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: State Medicaid Agency and Other State and Private Sources of Graduate Medical Education Funding", "paragraphs": ["In addition to federal funding, state governments\u2014including state  Medicaid agencies\u2014and private sources also support graduate medical  education (GME) training. However, little is known about these other  sources. Therefore, we analyzed Medicare cost report data to determine  the extent to which teaching hospitals were operating above their FTE  resident caps in 2015\u2014an indication of the extent to which hospitals may  receive other sources of GME funding, such as state or private sources.  We also surveyed state Medicaid Directors from 50 states and the District  of Columbia to collect information on how and the extent to which states  paid for GME training through Medicaid payments, and the states\u2019 related  reporting requirements and oversight activities. As part of our interviews  with experts from research and industry organizations, we asked about  state and private sources of funding for GME training and what is known  about the amount of such funding.", "Teaching hospitals likely utilize state and private sources of funding, as  well as other federal funding, to pay for residents beyond those paid for  by Medicare\u2014the largest federal funder of GME training. Hospitals have  continued to add residents over time even though for most hospitals  Medicare capped funding based on their number of full-time-equivalent  (FTE) residents in 1996. In 2015, about half of teaching hospitals that  receive Medicare GME payments had expanded their GME training  programs above their Medicare FTE cap, and the extent to which they  operate above their cap varied by hospital. We found that 47 percent of  teaching hospitals were operating their GME training programs above  their Medicare FTE cap on direct GME (DGME) payments. These  hospitals had an average of 30.8 additional FTE residents above their  DGME cap, ranging from 1.0 to 284.3 additional FTE residents.", "Most states (45) paid for GME training through their Medicaid programs in  2015; however, states varied in the payment model that they used to  make Medicaid payments for GME training, though most used fee-for- service payments, including supplemental payments. Of the 45 state  Medicaid agencies that paid for GME training, 25 states did so through  fee-for-service payments only; 19 states did so through both fee-for- service and managed care payments; and 1 state (New Jersey) made  managed care payments only.", "Of the 44 states that paid for GME through Medicaid fee-for-service  payments, 21 states paid as an add-on to its fee-for-service rate, and  31 states paid through lump sum supplemental or other payments.", "Of the 20 states that made Medicaid managed care payments for  GME, 12 paid teaching sites directly and 10 states made GME  payments through managed care plans.", "Of the 19 states that paid for GME through both Medicaid fee-for- service and managed care, fee-for-service GME payments made up  48 percent of all Medicaid GME payments, on average, while  managed care payments made up 52 percent. (See table 13.)", "While some states followed the Medicare formula for calculating GME  payments, most have deviated from this method. Of the 43 states that  responded about how they calculated the amount of GME payments, 10  states reported that they followed the Medicare GME payment formula to  calculate Medicaid fee-for-service payments for GME training. In addition,  two states followed Medicare\u2019s formula for making managed care  payments for GME training. Most states (32) followed another method.", "Medicaid GME payments per FTE resident varied by state and within  states, even after adjusting for geographic differences in labor costs.  Specifically, the average combined federal and state payment per FTE  resident ranged from $2,108 in Rhode Island to $100,587 in Arizona.  (See table 14.) The payment per FTE resident also varied within states.  The Medicaid payment per FTE varied the most within Ohio, where the  state reported payments ranging from $1,415 per FTE to $453,098 per  FTE.", "About half of the states (22 of 45) reported that they specified the type of  expenses that its Medicaid GME payments were intended to cover. Of  these 22 states, payments were intended to cover the costs of residents\u2019  salaries and benefits (14 states), faculty salaries and benefits (11 states),  program administration costs (10 states), or indirect medical education  costs (8 states).", "Some state Medicaid agencies have tied their payments to incentives to  expand the physician workforce. Of the 45 states that reported Medicaid  GME payments in 2015, 4 states\u2014Alabama, Montana, New Mexico, and  South Dakota\u2014reported that they restrict payments to the training of  primary care physicians only. (See table 15.) An additional 9 states  required that the funding recipient have a primary care residency  program. In addition, according to experts we interviewed, states have  been considering how to target Medicaid GME payments to meet state  workforce needs. For example, one expert said some states have used  Medicaid payments to expand GME training of physicians in outpatient,  ambulatory care settings. However, Medicaid GME payments generally  go to hospitals. Specifically, 44 of the states reported making payments to  hospitals and 7 states paid other teaching sites, such as teaching health  centers. The one state that did not make payments to teaching hospitals  directed all Medicaid payments for GME training to medical schools.  Further, one expert we interviewed told us that it is difficult for states to  change their GME financing models to direct funding to specific workforce  goals because hospitals are reliant on state GME payments to support  certain residency positions. Instead, states have used a moderate  approach, such as providing additional funding targeted to specific  training, rather than a complete funding overhaul that would redistribute  existing funds.", "Despite the significant investment in GME training by state Medicaid  agencies, which is matched by the federal government, the extent of state  oversight of Medicaid GME spending varied by state. As previously  mentioned, less than half of the states (20 of 45) required teaching sites  that received Medicaid GME payments to report information to the state.  (See table 16.) Among these 20 states, 16 required recipients to report  information on the number of residents or FTE residents, 8 states  required information about direct medical education costs, 6 states  required information about the GME training program specialties  supported, and 4 states required recipients to report information about the  residents\u2019 characteristics, such as their post-graduate year. Of the 10  states that made Medicaid GME payments to managed care plans, 4  states\u2014Kansas, Kentucky, Michigan, and Minnesota\u2014set the  methodology or base rate that managed care plans were required to use  to calculate GME payments. None of the states reviewed and approved  payments.", "Further, 44 of the 45 states were able to provide at least some  information on the total amount the state spent on Medicaid GME  payments, but the amount of information they were able to provide varied.  While most states (38) were able to provide data on all GME payments by  recipient, 4 states could provide data on some but not all payments, and 2  states could not provide data on the amount of GME payments by  recipient. And, less than half of the states (18 of 45) were unable to  provide data on either the number of FTE residents or resident counts at  teaching entities that received Medicaid GME payments. (See table 17.)", "Experts we interviewed identified other sources of state and private  funding for GME training.", "Hospitals and health systems: Hospitals may rely on their own  funding to support their residency programs. One expert we  interviewed said that hospitals that sponsor GME residency programs  provide funding for certain specialty residency programs that make  money for the hospital.", "State government grant or other funding: Aside from GME funding  through Medicaid, one expert told us that some states make direct  grants to residency programs, mostly primary care residency  programs, or through state appropriations specifically for GME  training. For example, Florida created an $80 million fund to support  state training in outpatient or community-based programs. And, one  expert told us that some states have developed innovative funding  mechanisms. This was the case in Georgia, which established a  hospital coalition that funded 400 new residency slots to meet the  needs of medically underserved populations.", "Private health insurers: Experts said GME funding from private  health insurers is generally thought to be provided through higher  reimbursement rates to teaching hospitals than nonteaching hospitals,  including through Medicare reimbursement. While private insurers  fund GME training through their contracts with individual hospitals,  one expert told us that those contracts do not likely differentiate the  amount of funding that is used toward GME training versus other  activities. However, one expert raised concerns that private insurers  are not paying their share of GME costs. Another expert noted that  there have been some state-level efforts to require all payers,  including private insurers, to have some responsibilities in paying for  the education of the health care workforce, even beyond physician  GME training.", "Other: Experts also identified other possible sources of private  funding. For example, one expert told us that, while the amount of  funding from pharmaceutical or medical device companies has not  been identified in existing studies, anecdotally there is a growing use  of these funding sources. Experts also said that some funding is  provided by philanthropic organizations or medical schools that are  affiliated with residency programs."], "subsections": []}, {"section_title": "Appendix II: Information that Federal Programs Collect about Funding for Graduate Medical Education Training", "paragraphs": ["Appendix II: Information that Federal Programs  Collect about Funding for Graduate Medical  Education Training Medicaid Services (CMS)", "Administration (HRSA)", "Affairs (VA)", "Medicaid Services (CMS)", "Administration (HRSA)", "Affairs (VA)"], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, William Hadley, Assistant  Director; Christine Brudevold, Assistant Director; Katherine Mack,  Analyst-in-Charge; A. Elizabeth Dobrenz; Maggie G. Holihan; Daniel Lee;  and Todd Anderson made key contributions to this report. Also  contributing were Sam Amrhein, Muriel Brown, Lisa Opdycke, and  Jennifer Whitworth."], "subsections": []}]}], "fastfact": ["Will there be enough doctors with the specialties people need in the places where people need them?", "Multiple federal programs fund graduate medical education for physicians-in-training, known as residents. However, the government doesn't know if these dollars are helping to build the physician workforce that the nation needs.", "The data collected don't provide all the information needed to fully understand", "how much it costs to train physicians", "how much the government spends", "what the government gets for its money", "We recommended improving the data to help ensure that the government's funds are being used effectively."]}
{"id": "GAO-19-24", "url": "https://www.gao.gov/products/GAO-19-24", "title": "Agent Orange: Actions Needed to Improve Accuracy and Communication of Information on Testing and Storage Locations", "published_date": "2018-11-15T00:00:00", "released_date": "2018-11-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The tactical herbicide Agent Orange was first produced in 1964, and some 12 million gallons were shipped from U.S. ports to Southeast Asia from 1965 to 1970. DOD suspended its use in 1970 and incinerated remaining stockpiles at sea in 1977. Congress has expressed long-standing interest in the effects of Agent Orange exposure.", "The House report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review the government's handling of Agent Orange on Guam. This report examines (1) information the federal government has about the procurement, distribution, use, and disposition of Agent Orange; (2) DOD and VA efforts to make information about where Agent Orange and its components were tested and stored available; and (3) challenges associated with Agent Orange testing. GAO reviewed agency policies, documents, and available archival records that GAO identified; interviewed DOD, VA, and other agency officials; and met with a non-generalizable sample of 38 veterans and a veterans service organization."]}, {"section_title": "What GAO Found", "paragraphs": ["Available shipment documentation indicates that nearly all of the Agent Orange procured was either used in U.S. military operations in Southeast Asia, used for testing, damaged, or destroyed. However, some records are incomplete, such as shipment documentation and logbooks that identify ports where vessels stopped on the way to Southeast Asia. GAO obtained and reviewed shipment documentation for over 12.1 million of the 13.9 million gallons of Agent Orange procured by the Department of Defense (DOD). GAO reviewed logbooks for 96 percent (152 of 158) of those shipments and identified that vessels stopped at various ports on the way to Southeast Asia, including at least one vessel carrying Agent Orange that stopped at Guam. While the logbooks GAO reviewed identify when vessels left various ports as they traveled to and from Vietnam, they do not show whether and how much cargo was loaded or unloaded at those ports.", "DOD's official list of herbicide testing and storage locations outside of Vietnam that is posted on the Department of Veterans Affairs' (VA) website is inaccurate and incomplete. For example, the list lacks clarity in descriptive information and omits both testing and storage locations and additional time periods covered by testing events. Also, the list has not been updated in over a decade, though DOD and VA have obtained reports on its shortcomings since 2006. Both DOD and VA communicate with veterans in response to inquiries about Agent Orange, but some veterans GAO met with expressed confusion regarding how to obtain information on potential exposure. DOD officials acknowledged this confusion and stated that veterans are contacting multiple agencies to obtain such information. However, DOD and VA have not established a formal process for coordinating on how best to communicate information to veterans and the public regarding the presence of Agent Orange outside of Vietnam. Without a reliable list with complete and accurate information and a formal process for DOD and VA to coordinate on communicating this information, veterans and the public do not have quality information about the full extent of locations where Agent Orange was present and where exposure could potentially have occurred.", "Challenges exist with testing for Agent Orange today due to degradation of the herbicide's two chemical components and a potential for sources of contamination other than the herbicide. According to scientific research, the half-life (average time for components to decrease by half of the original amount) of Agent Orange's two chemical components\u2014n-butyl 2,4-D and n-butyl 2,4,5-T\u2014 in soil can range from several days to many months, depending on conditions. The suggested half-life of the dioxin 2,3,7,8-TCDD\u2014a by-product of the 2,4,5-T manufacturing process\u2014is much longer, but there are multiple sources of dioxins, including the burning of wood and waste. DOD and the U.S. and Guam Environmental Protection Agencies are testing for the acid form of the components of Agent Orange at Andersen Air Force Base on Guam. While acknowledging the low probability of conclusively identifying the components of Agent Orange on Guam, DOD has made a decision to move forward with testing to address veterans' and the public's concerns, and it expects to complete the updates for the sampling and analysis plan, field sampling, analysis, and reporting in early 2019."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that DOD develop a process for updating its list of Agent Orange testing and storage locations, and that DOD and VA develop a process for coordinating the communication of information on where Agent Orange was known to have been present. DOD concurred with four recommendations. VA concurred with one recommendation and non-concurred with one recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["From the 1940s to the 1970s, the U.S. government developed and tested  tactical herbicides in the United States and abroad. These tactical  herbicides were known as \u201crainbow herbicides\u201d and included Orange,  Purple, Pink, Green, Blue, and White. Tactical herbicides were intended  for use by the U.S. military in the conflicts in Korea and Vietnam, but were  not intended for use on U.S. military installations. During the mid-1960s,  U.S. chemical companies manufactured and shipped large quantities of  tactical herbicides to Vietnam for use by the U.S. military to eliminate  enemy cover and destroy the enemy\u2019s crops. The tactical herbicide  designated \u201cOrange\u201d\u2014later known as Agent Orange\u2014was first produced  in 1964, and approximately 12.1 million gallons were shipped to  Southeast Asia from several U.S. ports between 1965 and 1970. The  Department of Defense (DOD) suspended the use of Agent Orange in  Vietnam in 1970 and incinerated remaining stockpiles at sea in 1977.", "In 1984, the U.S. Environmental Protection Agency (U.S. EPA)  determined that a form of dioxin that is a by-product of the manufacturing  process of one of the two components of Agent Orange had been  associated with a number of health effects, including cancer, in exposed  animals and in humans, including children. The Agent Orange Act of  1991, as amended, established a presumption of service connection for  certain diseases manifesting in veterans by way of exposure to herbicide  agents while deployed in the Republic of Vietnam at any time beginning  January 9, 1962, and ending on May 7, 1975. The act also required that whenever the Secretary of Veterans Affairs determined that a positive  association existed between humans\u2019 exposure to an herbicide agent and  the occurrence of a disease in humans, the Secretary shall prescribe  regulations providing that a presumption of service connection was  warranted for that disease. The Department of Veterans Affairs (VA) has  developed procedures to assess veterans\u2019 claims for disability  compensation for exposure to Agent Orange and provides on its website  a list of locations where tactical herbicides were thought to be tested,  stored, or destroyed. Both DOD and U.S. EPA have conducted some  remediation of dioxin-contaminated sites where these herbicides were  known to be present in the United States.", "There has been long-standing congressional interest in and concern  about the effects of exposure to herbicides such as Agent Orange.  Although DOD policy restricted the domestic use of tactical herbicides,  the House Armed Services Committee has expressed concern that  additional exposures to Agent Orange may have occurred on Guam.  House Report 115\u2013200 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 included a provision that we review  the government\u2019s handling of Agent Orange on Guam. In response to  both this provision and a separate request letter, this report examines (1)  the extent to which the federal government has information about the  procurement, distribution, use, and disposition of Agent Orange or its  components at locations in the United States and its territories, including  Guam; (2) the extent to which DOD and VA have complete and accurate  information about where Agent Orange and its components were tested  and stored and communicated this information to veterans and the public;  and (3) challenges associated with testing for Agent Orange.", "We scoped this review to include locations where Agent Orange or its  components were tested, distributed, and stored in the United States and  its territories. For each objective, we reviewed agency documents and  policies; interviewed officials from DOD, VA, and U.S. EPA, as well as  from the government of Guam; and met with some veterans and a  veterans service organization.", "For objective one, we obtained through archival research available  shipping and agency records, including U.S. military correspondence and  logistics reports, and we reviewed these documents to trace the federal  government\u2019s procurement, distribution, use, and disposition of Agent  Orange and its components. We analyzed this documentation, hereinafter  referred to as shipment documentation, to prepare summary information  on the quantities of Agent Orange and the vessels that carried the  shipments. We used this information to obtain official Navy and merchant  vessel logbooks\u2014hereinafter referred to as logbooks\u2014to the extent that  they were available, to identify the routes the vessels took from U.S. ports  to Vietnam and back, and to identify any port calls made en route.", "For objective two, we obtained documentation from DOD and analyzed  archives search reports and other environmental studies for several U.S.  installations to identify additional locations where Agent Orange or its  components were tested and stored in the United States and its  territories. We compared the results with information DOD has provided  to VA for public dissemination on testing and storage locations of tactical  herbicides in the United States and its territories. We also compared the  results with DOD policies for conducting records research and responding  to inquiries related to past environmental exposures. We reviewed the  process by which DOD and VA communicate with veterans, to include  providing information about where Agent Orange was tested and stored.  We compared the communication process with DOD\u2019s policy on  assessing long-term health risks and with VA\u2019s process for determining  benefits based on veterans\u2019 claims, and we assessed the extent to which  DOD and VA had responded to reports related to the information on  locations that were posted on VA\u2019s website.", "For objectives one and two, we held six discussion sessions with a non- generalizable sample of veterans\u2014four sessions in person in Hawaii and  Guam, and two sessions that were moderated via telephone from  Washington, D.C.\u2014to discuss veterans\u2019 experiences specific to Agent  Orange. A total of 38 individuals attended the sessions, which ranged  from 1 to 10 participants per session. During the sessions, we discussed  information that individuals received from DOD, VA, and other federal  agencies about any links between exposure to herbicides and negative  health effects, or the potential that they could have been exposed to  Agent Orange or its components at locations where Agent Orange was  manufactured, transported, stored, used, or destroyed. We also asked  the veterans whether they believed they had been exposed to Agent  Orange in Vietnam, Guam, or another location, and, if so, to describe the  circumstances of the exposure. At the discussion sessions in Hawaii and  Guam, we also requested participants to complete a short questionnaire  about their military service and their recollections about experiences with  herbicides during their military service.", "For objective three, we reviewed scientific literature and agency  documents regarding the degradation and sources of the components of  Agent Orange and an associated dioxin contaminant. This review  included documents from the Agency for Toxic Substances and Disease  Registry and reports and protocols from U.S. EPA, the World Health  Organization, and the Centers for Disease Control and Prevention. We  also reviewed the draft and final plan for testing for the presence of the  components of Agent Orange at three sites at Andersen Air Force Base  on Guam. We compared the information outlined in the testing plan with  scientific literature on the environmental fate of the components of Agent  Orange and other Agent Orange testing methodologies. We conducted a  site visit to Guam and visited the three sites where testing was  subsequently done. We also spoke with cognizant officials at DOD, U.S.  EPA, and Guam EPA about testing for the components of Agent Orange.  Further details on our scope and methodology can be found in appendix I.", "We conducted this performance audit from May 2017 through November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Composition of Agent Orange", "paragraphs": ["Agent Orange is composed of two different chemical components\u2014the n- butyl ester forms of 2,4-dichlorophenoxyacetic acid (hereinafter referred  to as n-butyl 2,4-D) and 2,4,5-trichlorophenoxyacetic acid (hereinafter  referred to as n-butyl 2,4,5-T)\u2014that are manufactured separately and  then combined to form the tactical herbicide. The U.S. EPA has  determined that there was not adequate data either to support or to refute  that the acid or ester forms of 2,4-D can cause cancer in humans. In  2015 the International Agency for Research on Cancer classified 2,4-D as  possibly causing cancer to humans, since there was inadequate evidence  in humans and limited evidence in experimental animals. According to  an Institute of Medicine report, information on the toxic effects of 2,4,5-T  alone is sparse. However, in the 2,4,5-T manufacturing process, the  dioxin 2,3,7,8-tetrachlorodibenzo-p-dioxin (hereinafter referred to as  2,3,7,8-TCDD) is formed, particularly when the reaction temperature is  excessive.", "The World Health Organization has determined that dioxins are highly  toxic and can cause a variety of illnesses, including reproductive and  developmental problems and damage to the immune system. The World  Health Organization reports that 2,3,7,8-TCDD, a human carcinogen, is  the most toxic dioxin-related compound. Moreover, according to the  National Academies of Sciences, Engineering, and Medicine report,  2,3,7,8-TCDD has been shown by researchers to be very toxic in  animals. Figure 1 depicts the proportion of the components of Agent  Orange and the amount of 2,3,7,8-TCDD contamination that would be  present in an average 55-gallon drum."], "subsections": []}, {"section_title": "Agent Orange Origins and Life Cycle", "paragraphs": ["The Crops Division of the U.S. Army Chemical Corps was established at  Camp Detrick (now Fort Detrick), Maryland, in 1943 to conduct anti-crop  research, development, and engineering. In 1944 the Crops Division was  given the mission of developing chemical compounds to destroy or  reduce the value of crops. These chemical compounds were intended to  rapidly clear vegetation in military operations in order to eliminate  concealed enemy positions, improve air and ground observations, and  destroy or reduce the value of crops. Initial field trials at Camp Detrick  were small-scale efforts involving test plots typically 6 by 18 feet in size,  and the herbicides being tested were usually applied using a hand  sprayer. Over the following three decades, DOD collaborated with the  U.S. Department of Agriculture, universities, and private companies to  conduct testing activities ranging from laboratory experiments to spray  tests of larger-scale aerial dissemination of a variety of chemical  compounds throughout the United States, U.S. territories, and abroad.", "The tactical herbicides used by the U.S. military in Vietnam were  formulations based on tests of thousands of different chemical  compositions at Camp Detrick in an effort to determine chemical agents  and chemical compounds that would meet specific requirements. The  U.S. military developed and tested six tactical \u201crainbow\u201d herbicides that it  used during the Vietnam War era\u2014Pink, Purple, Green, Blue, White, and  Orange. The chemical component n-butyl 2,4,5-T, which is known to have  been contaminated with 2,3,7,8-TCDD, was present in four of these six  tactical herbicides\u2014specifically, Agents Pink, Purple, Green, and  Orange. In late 1961, DOD began color-coding the herbicide  formulations that it was testing in aerial spray trials in Vietnam and  elsewhere in Southeast Asia. The tactical herbicides, which were used for  a variety of different purposes, to include defoliation and crop destruction,  were identified by colored bands placed around the drums, as shown in  figure 2. Beginning in 1962, the U.S. Air Force received shipments of  Agents Pink, Purple, and Green to supply the first spray missions for  Operation Ranch Hand, the program for defoliation and crop destruction  missions during the Vietnam War. Agent Purple was similar to the  herbicide formulation that was later designated \u201cOrange,\u201d but it was more  costly to purchase. Agents Blue and White were used in Vietnam  extensively along with Agent Orange after 1964, but they were of a  different chemical composition and did not contain any form of 2,4,5-T,  the component that produced 2,3,7,8-TCDD as a by-product of the  manufacturing process.", "Of the tactical herbicides, Agent Orange was used the most extensively in  Vietnam. In 1964 DOD began to procure large quantities from U.S.  manufacturers for military use in Vietnam. The first shipment of Agent  Orange arrived in Saigon in February 1965 by merchant vessel. Together,  nine manufacturers produced a total of approximately 13.9 million gallons  of Agent Orange, and DOD is estimated to have used approximately  12.1 million gallons between 1965 and 1970 in operations in Vietnam,  and much smaller quantities in Korea and Thailand.", "Evidence from animal and epidemiologic studies of adverse effects from  Agent Orange exposure led the U.S. government to restrict the use of  2,4,5-T in April of 1970 and led DOD to temporarily suspend the use of  Agent Orange. In 1972 the U.S. Air Force consolidated the approximately  1.36 million gallons of the herbicide that had remained unused in Vietnam  and shipped them for storage on Johnston Island in the Pacific. DOD  held its remaining stocks of Agent Orange\u2014approximately 860,000  gallons\u2014within the continental United States, at the Naval Construction  Battalion Center Gulfport, Mississippi, until those stocks were also  shipped toward Johnston Island in June 1977. All of these remaining  stocks of Agent Orange were incinerated at sea aboard the M/T Vulcanus  by September 1977."], "subsections": []}, {"section_title": "Comparison between Tactical and Commercial Herbicides", "paragraphs": ["In addition to the tactical herbicides used during the Vietnam War era, the  U.S. military also used commercial herbicides to manage vegetation on  its installations. The U.S. military managed tactical herbicides differently  from commercial herbicides. According to DOD officials and archived  military specifications, tactical herbicides were not authorized for use on  lands owned by, or otherwise managed as military installations and were  not to be diverted for domestic use. DOD developed military  specifications for the tactical herbicides that provided detailed information  on product requirements, quality assurance, packaging, and  precautionary statements that prohibited domestic use. The tactical  herbicides were centrally managed, first by the Army Chemical Corps and  later by the U.S. Air Force Logistics Command. Agent Orange used in  Vietnam was formulated for aerial spraying by aircraft and helicopter and  applied at full strength without additional solvents at a rate of 3 gallons  per acre. Agent Orange is soluble in diesel fuel and organic solvents, but  it is insoluble in water, so equipment was cleaned using diesel fuel rather  than water.", "Commercial herbicides, conversely, were widely available worldwide for  use in vegetation management at military installations, to include  controlling vegetation adjacent to flightlines or along perimeter fencing.  Federal agencies developed federal specifications for these products to  ensure that they met specific requirements, and these specifications were  approved by the Commissioner, Federal Supply Service, in the General  Services Administration for use by all federal agencies. According to DOD  officials, during the Vietnam era there was no requirement for DOD to  retain records concerning the use of commercial herbicides on military  bases beyond 5 years. DOD officials also stated that DOD catalogued  these herbicides available for use on military installations in the federal  supply schedule under federal supply classification group 68, which  contains chemicals and chemical products.", "In reviewing supply catalogues from that time period, DOD officials  identified more than 35 different commercial herbicides that were listed in  the federal supply system for use on DOD installations between 1960 and  1973. Some of these commercial herbicides contained 2,4-D; 2,4,5-T; or  both, although they were not in the n-butyl form used in Agent Orange.  These included at least 4 commercial herbicides that contained some  form of 2,4,5-T, the component that contained the contaminant 2,3,7,8- TCDD. In addition, numerous commercial herbicides that were not in the  federal supply system but were being widely used elsewhere for  agriculture purposes contained the form of n-butyl 2,4,5-T found in Agent  Orange and thus its associated contaminant, 2,3,7,8-TCDD. According to  DOD officials, the commercial herbicides used on installations were  mixed with diesel or water and sprayed by hand or truck. Tactical  herbicides, however, were formulated for aerial spraying by fixed-wing  aircraft or helicopter without being diluted.", "When the U.S. military was employing these tactical and commercial  herbicides during the Vietnam War era, U.S. EPA had not yet been  established, and the U.S. Department of Agriculture had oversight of  commercial herbicides. The Federal Insecticide, Fungicide, and  Rodenticide Act of 1947, then administered by the U.S. Department of  Agriculture, governed the marketing and use of these commercial  herbicides. Until amended in 1972, the Federal Insecticide, Fungicide,  and Rodenticide Act review process was designed as a consumer  protection measure that focused primarily on a product\u2019s effectiveness,  rather than on concerns about health or the environment."], "subsections": []}, {"section_title": "Agent Orange Legislative and Regulatory History", "paragraphs": ["The Agent Orange Act of 1991, as amended, requires a review of the  available scientific evidence regarding the associations between certain  diseases and exposure to tactical herbicides. The act specifically  requires the VA to enter into an agreement with the National Academy of  Sciences (the Academy), or with an alternative scientific organization, to  review and evaluate the scientific evidence concerning the association  between exposure to an herbicide agent and each disease suspected to  be associated with such exposure. The Academy is required to submit  periodic reports at least once every 2 years. The most recent report\u2014the  2014 report\u2014was issued in March 2016. The next report, which Academy  officials told us would focus on inter-generational and trans-generational  effects of exposure to herbicides, was at the time of our report scheduled  to be issued in late 2018.", "In its biannual reports, the Academy identifies different levels of  association between exposure to 2,3,7,8-TCDD or other chemical  compounds in herbicides used in Vietnam and a wide range of health  effects. These levels include the following:  sufficient evidence of an association;  limited or suggestive evidence of an association;  inadequate or insufficient evidence to determine an association; and  limited or suggestive evidence of no association.", "The Academy has identified that there is either sufficient evidence of an  association with exposure to a tactical herbicide or limited or suggestive  evidence of an association leading to certain diseases. For example, the  Academy has identified both chloracne and non-Hodgkin\u2019s lymphoma as  having sufficient evidence of an association with exposure to a tactical  herbicide, and both Parkinson\u2019s disease and diabetes mellitus (type 2) as  having limited or suggestive evidence of an association. Examples of  diseases for which the Academy has found inadequate or insufficient  evidence to determine an association include kidney disease and  pancreatic cancer.", "In making determinations regarding the association between certain  diseases and exposure to herbicide agents, the Secretary of Veterans  Affairs is required to take into account the Academy\u2019s reports. Once the  Secretary finds that such an association existed, the Secretary is then  required to prescribe regulations, providing that a presumption of service  connection is warranted for that disease. The Agent Orange Act of  1991, as amended, also establishes a presumption of service connection,  by reason of exposure to an herbicide agent, for diseases listed in the  statute, to include Hodgkin\u2019s disease and diabetes mellitus (type 2).  This presumption applies to veterans who, during active military, naval, or  air service, served in the Republic of Vietnam during the period beginning  on January 9, 1962, and ending on May 7, 1975. Veterans who served  in Vietnam and other specific locations and time frames and who have  been diagnosed with those diseases are presumed to have incurred  those diseases as a result of their service and are thus eligible for  presumptive service connection for disability compensation. Figure 3  illustrates the diseases for which the Academy has found either sufficient,  or limited or suggestive, evidence of an association. In addition, appendix  II provides information on the 14 presumptive diseases that the VA  currently identifies as being associated with exposure to Agent Orange or  other tactical herbicides during military service for which veterans and  their survivors may be able to receive disability compensation benefits."], "subsections": []}, {"section_title": "Veterans\u2019 Benefits", "paragraphs": ["Under 38 U.S.C. \u00a7 1110, the United States will pay benefits to any  veteran disabled for a disability resulting from personal injury suffered or  disease contracted in line of duty, or for aggravation of a preexisting injury  suffered or disease contracted in line of duty, in the active military, naval,  or air service, during a period of war. The VA offers health registry  exams, health care, disability compensation, and other benefits to eligible  veterans who were exposed to herbicides during military service.  According to the VA\u2019s Claims Adjudication Procedures Manual, the claims  evaluation process begins with the VA requesting any information missing  from the veteran\u2019s claim, such as the approximate dates and location(s)  of service, claimed disability, and, for certain locations, the nature of the  alleged exposure to herbicides. Generally, the veteran then has 30 days  to submit the requested information. During the claims process, VA will  check military records to confirm exposure to Agent Orange or other  herbicides and qualifying military service. Certain diseases have already  been presumed to be associated with herbicide exposure, and no further  evidence of an association is needed. However, if the claimed disability is  not a presumed condition, then VA will request that the veteran present  scientific or medical evidence showing that the claimed condition is  medically associated with herbicide exposure. If the veteran is not able to  provide this information, the case is referred to DOD for verification of  exposure to herbicides. Veterans\u2019 claims can either be approved or  denied based on the evidence submitted by the veteran, and, if needed,  by DOD.", "The VA tracks its claims data for Agent Orange exposure according to  whether the exposure occurred inside or outside of Vietnam, which  includes the Korean demilitarized zone and certain locations in Thailand.  According to VA officials, as of June 30, 2018, 557,653 living veterans  and 199,451 deceased veterans have been granted benefits for diseases  associated with Agent Orange exposure inside Vietnam, with 44,925  claims pending for veterans who served in Vietnam and believe they were  exposed to Agent Orange. For diseases associated with Agent Orange  exposure outside of Vietnam, VA had granted service connection  decisions to more than 10,758 veterans and denied service connection  decisions to more than 58,250 veterans, as of June 30, 2018. According  to VA, there are an additional 23,400 claims pending for veterans who did  not serve in Vietnam but believe they were exposed to Agent Orange."], "subsections": []}, {"section_title": "Environmental Cleanup", "paragraphs": ["In 1980 Congress passed the Comprehensive Environmental Response,  Compensation, and Liability Act, which established the Superfund  program\u2014the federal government\u2019s principal program to clean up  hazardous waste sites. The U.S. EPA is responsible for administering  the Superfund program, which places some of the most seriously  contaminated sites on the National Priorities List, and has oversight for  federal and non-federal sites on that list. Additionally, amendments to the act in 1986 require the Secretary of Defense to carry out the Defense  Environmental Restoration Program, which was specific to DOD  environmental cleanup activities at active installations, formerly used  defense sites, and base realignment and closure locations in the United  States. The cleanup process under the Environmental Response,  Compensation, and Liability Act process generally includes the following  phases and activities: preliminary assessment, site inspection, remedial  investigation and feasibility study, remedial design and remedial action,  and long-term monitoring.", "Through this process, DOD and U.S. EPA cleaned up some U.S. sites  where Agent Orange was known to have been present after the sites  were tested and confirmed to have been contaminated with 2,3,7,8- TCDD. For example, U.S. EPA identified a site in Jacksonville,  Arkansas, where 2,4,5-T had been manufactured, that was contaminated  with 2,3,7,8-TCDD. In addition, under the Defense Environmental  Restoration Program, DOD cleaned up the Naval Construction Battalion  Center Gulfport, Mississippi, where Agent Orange had been stored while  awaiting shipment for use in Southeast Asia. The site had also been used  to store Agent Orange drums that were awaiting shipment to Johnston  Island for disposal. According to a DOD report, approximately 860,000  gallons of the herbicide were stored at the site. An Agency for Toxic  Substances and Disease Registry report further states that spills that  occurred during storage caused 2,3,7,8-TCDD contamination around  several water areas. According to a 5-year review completed by DOD in  2017, capping of the contaminated soil at the site where herbicides were  stored has been completed, and long-term monitoring of the soil and  groundwater began in 2012 and continues today.", "DOD also cleaned up the Johnston Island site where Agent Orange was  ultimately disposed of. Once drums of Agent Orange were stored at  Johnston Island, environmental sea conditions caused them to corrode  and leak. Initial cleanup activities assessed and monitored the area to  track the chemical components remaining as a result of Agent Orange  contamination. Site remediation and environmental monitoring continued  throughout the 1970s until February 1989, when the Air Force, in  accordance with the Defense Environmental Restoration Program,  completed a final site cleanup at Johnston Island by destroying all  remaining 2,3,7,8-TCDD-contaminated soil. Figure 4 shows drums of  Agent Orange stored at Johnston Island.", "In addition, U.S. EPA listed on its National Priorities List two former Agent  Orange manufacturing sites\u2014the Kanawha River site in West Virginia  previously owned by the Monsanto Company and a site in Newark, New  Jersey, owned by the Diamond Alkali Company\u2014due to high levels of  contamination from various sources and threats to human health. In 2017,  U.S. EPA entered into an agreement with the Monsanto Company on a  cleanup plan to address 2,3,7,8-TCDD contamination at the Kanawha  River Superfund Site in Putnam and Kanawha counties, West Virginia.  The cleanup effort will focus on a 14-mile stretch within the Kanawha  River. Cleanup work will include constructing a cap over more than 9  acres of contaminated river sediments. Similarly, the Diamond Alkali site  in New Jersey contained 2,3,7,8-TCDD contamination at both the  manufacturing site and the nearby Lower Passaic River. The site was  found to contain high levels of 2,3,7,8-TCDD and was placed on the  National Priorities List in 1984. As late as 2014, the site was still  undergoing cleanup actions to prevent exposure to the contaminated soil  and prevent further releases to the river.", "It is difficult to isolate the specific costs of cleaning up Agent Orange  contamination under the Comprehensive Environmental Response,  Compensation, and Liability Act, according to DOD and U.S. EPA  officials. Moreover, cleanup plans address multiple contaminants,  making it difficult to isolate the costs for cleaning up a specific  contaminant, according to DOD and U.S. EPA officials. For example, the  Diamond Alkali site had multiple contaminants from a number of  companies that owned or operated facilities from which hazardous  substances, including 2,3,7,8-TCDD and pesticides, were potentially  discharged into the river and found in the soil and groundwater. Various  cleanup actions were taken to address not only 2,3,7,8-TCDD  contamination but the other contaminants as well. These actions included  a groundwater collection and treatment system and capping to prevent  exposure to contaminated soil (including contaminated soil that originated  at the facility and soil that was brought to the facility from neighboring  lots) and prevent further releases to the river."], "subsections": []}]}, {"section_title": "The Federal Government Has Some Information on the Procurement, Use, and Destruction of Agent Orange, and Available Documentation Indicates at Least One Vessel Carrying Agent Orange Transited through Guam to Vietnam, but Information Is Not Complete", "paragraphs": ["The federal government maintains information on Agent Orange, and  available records indicate that DOD procured approximately 13.9 million  gallons of the tactical herbicide, which was either used in U.S. military  operations in Southeast Asia, used for testing, or destroyed. Our analysis  of the available logbooks for 152 of the 158 shipments (approximately 96  percent) of Agent Orange to Southeast Asia that we identified indicates  that the vessels carrying tactical herbicides generally stopped at foreign  ports and sometimes at U.S. ports en route to Southeast Asia. Available  primary source materials, such as shipment documentation, are  incomplete because they were likely not maintained during and after the  Vietnam era. However, based on the available information, we identified  at least one ship carrying Agent Orange that stopped at Port Apra (now  Apra Harbor) on Guam on its way to Vietnam, although we could not  locate any evidence showing that any cargo was offloaded. Further, while  DOD documents identify the use of commercial herbicides on Guam, they  do not identify the use of tactical herbicides there."], "subsections": [{"section_title": "Available Records Indicate That All of the Agent Orange Procured Was Either Used in U.S. Military Operations, Used for Testing, Damaged, or Destroyed", "paragraphs": ["Available records that the federal government maintains indicate that  DOD procured approximately 13.9 million gallons of Agent Orange  between 1963 and 1968, of which it used an estimated 12.1 million  gallons in Southeast Asia from 1965 to 1970; used a small amount for  testing; and incinerated another 2.3 million gallons in 1977. Thus, the  total quantity of Agent Orange that DOD procured was approximately  equal to the total quantity that records indicate was tested in the United  States and its territories, damaged during storage and shipment, and  used during the Vietnam War, combined with the total quantity that  records indicate was disposed of afterwards.", "Procurement and Use. Based on available records we reviewed, DOD  procured approximately 13.9 million gallons of Agent Orange from nine  chemical manufacturers between 1963 and 1968. In 1963 DOD used  small amounts of Agent Orange for testing. DOD procurement officers  then advised the Military Assistance Command, Vietnam, in late 1964 that  they could fulfill the supply requirements for tactical herbicides with Agent  Orange. Available records further indicate that of the approximately 13.9  million gallons of Agent Orange procured, DOD used an estimated 12.1  million gallons in operations in Vietnam from 1965 to 1970. In addition to  the quantity used in Vietnam, Agent Orange usage also included  quantities that were tested in the United States and its territories; used or  tested in countries outside of Vietnam; lost during shipment and storage;  or removed from the inventory and used to test different disposal options  after its use was suspended. With the exception of the disposal testing  amounts, no archival resources we could locate and obtain provided  definitive usage figures. The last known shipment of Agent Orange to  Vietnam was aboard the SS Frederick Lykes and arrived in May 1970.", "Restrictions on Use. In 1969 the National Environmental Health Service  of the Department of Health, Education, and Welfare conducted testing of  n-butyl 2,4,5-T\u2014the component of Agent Orange whose manufacturing  process produced 2,3,7,8-TCDD as a by-product\u2014on mice, which raised  concerns about health effects of the herbicide for women of child-bearing  age. These concerns led to several U.S. government decisions that  ended the use of tactical herbicides. Specifically, in 1969 DOD restricted  the use of Agent Orange in Vietnam to keep it away from population  centers. In April 1970 the federal government began restricting the use of  2,4,5-T in the United States. Exceptions were made for the control of  weeds and brush on range, pasture, and forests, or on rights of way and  other nonagricultural land. On April 15, 1970, DOD temporarily  suspended the use of Agent Orange, including new procurement,  acceptance of product on terminated contracts, transfer of stocks at  Gulfport, and ocean shipping operations.", "Consolidation and Incineration of Remaining Stocks. After the U.S.  government restricted the use of n-butyl 2,4,5-T\u2014a component of Agent  Orange\u2014in 1970, DOD decided to consolidate the remaining 2.3 million  gallons of Agent Orange stored in Vietnam and Gulfport, Mississippi, as  well as any remaining amounts of n-butyl 2,4,5-T. According to an Office  of Air Force History monograph, on January 16, 1971, DOD ordered the  termination of all crop destruction missions by U.S. forces in Vietnam, and  on September 27 of that year, the Chairman of the Joint Chiefs of Staff  directed the Air Force to return all remaining stocks of Agent Orange to  the United States and to dispose of them. Specifically,", "Agent Orange stocks in Vietnam were temporarily stored at U.S. Air  Force bases at Da Nang, Phu Cat, and Bien Hoa until they were  moved to Johnston Island in 1972. In 1972 the U.S. military moved  approximately 1.36 million gallons of Agent Orange onto Johnston  Island for storage. The cargo vessel SS Transpacific picked up this  quantity at three Vietnamese ports from March 15 to April 1, traveled  to Johnston Island, arrived on April 18, and completed offloading on  April 28 before returning to the United States. This consolidated  quantity of Agent Orange from Vietnam remained at Johnston Island  until 1977.", "The Naval Construction Battalion Center Gulfport, Mississippi, was  the final storage location in the continental United States for Agent  Orange until the U.S. Air Force began the incineration of Agent  Orange in 1977. There were approximately 860,000 gallons of Agent  Orange at this location in 1977, which takes into account amounts lost  in Hurricane Camille in 1969 or shipped away for testing, as described previously. The 1977 figure also takes into account 14,025 gallons  transferred to the Naval Construction Battalion Center Gulfport, from  Eglin Air Force Base, Florida, where the Air Force had tested  formulations of Agent Orange for aerial spraying. In addition, available  records show that quantities of the two components of Agent Orange  were stored at the former Kelly Air Force Base, Texas, until 1972  before they were transferred to the U.S. Department of Agriculture for  brush control projects. These reported amounts included 106,260  gallons of n-butyl 2,4-D and 38,940 gallons of n-butyl 2,4,5-T. These  records also show that 173,910 gallons of Agent Blue were stored at  the installation; see figure 5.", "DOD chartered the incinerator ship M/T Vulcanus and loaded the 860,000  gallons stored at Naval Construction Battalion Center Gulfport,  Mississippi, beginning in May 1977. The vessel left Gulfport, Mississippi,  in June 1977, and began incinerating the Agent Orange on board in July  1977 in a research burn to test the incineration process at sea near  Johnston Island. In August 1977, the M/T Vulcanus loaded the remaining  1.36 million gallons stored at Johnston Island and conducted two more  incineration operations just southwest of Johnston Island, as shown in  figure 6. By September 3, 1977, all stocks of Agent Orange had been  incinerated."], "subsections": []}, {"section_title": "Available Records Indicate That Vessels Transporting Agent Orange Stopped at Various Ports en Route to Southeast Asia, but Shipment Information Is Not Complete", "paragraphs": ["Our review of documentation for the shipment of almost 12.1 million  gallons of the approximately 13.9 million gallons (approximately 87  percent) of Agent Orange procured by DOD found, based on available  shipment documentation, that vessels transporting Agent Orange made  stops at various ports on the way to Southeast Asia. However, shipment  documentation is incomplete. Manufacturers of Agent Orange blended  the two components of the herbicide\u2014the n-butyl forms of 2,4-D and  2,4,5-T\u2014and marked 55-gallon drums for shipment to Southeast Asia.  Available records indicate that manufacturers produced Agent Orange  according to military specifications and marked all drums for shipment  directly to the receiving U.S. military unit in Vietnam. These specifications  indicated the precise herbicide formulation of Agent Orange (n-butyl  esters, 50 percent 2,4-D and 50 percent 2,4,5-T) and general instructions  for marking the 55-gallon drums for shipment. For example, according to  a historical monograph by the San Antonio Air Materiel Area, DOD  specified that each drum was to be marked with a colored band or bands  around the center as well as with transportation and contract data. Figure  7 shows an example of these drum markings.", "DOD then arranged for the transport of these drums, as well as drums of  other tactical herbicides, by train from the manufacturers to several U.S.  ports. DOD transportation officials accepted the product by signing a  Material Inspection and Receiving Report that indicated the destination of  the rail shipment and the final destination in Vietnam. DOD primarily  chartered merchant marine vessels to ship the drums to Southeast Asia,  but we identified one official Navy vessel, the USNS Lt. George W.G.  Boyce, that carried Agent Orange to Southeast Asia. The first known  shipment of Agent Orange left the port of New Orleans, Louisiana, on the  SS Adabelle Lykes and arrived in Vietnam in February 1965. The last  known shipment left the port of Gulfport, Mississippi, on the SS Frederick  Lykes and arrived in Vietnam in May 1970. By that time, DOD had  suspended all further shipments of Agent Orange. The photos in figure 8  provide examples of drums of Agent Orange being shipped by rail and  tactical herbicides being loaded onto a cargo ship.", "The bulk of materiel used to support U.S. military forces in Vietnam,  including tactical herbicides, was transported from the continental United  States to Vietnam via ship. The vessels carrying the tactical herbicides  generally stopped at foreign ports and sometimes at U.S. ports on the  way to Southeast Asia. Our analyses of available shipment  documentation indicate that at least 114 unique cargo vessels carried  Agent Orange to Southeast Asia on at least 158 different voyages from  1965 through 1970. For each of these voyages, merchant vessel captains  submitted logbooks to the U.S. port authorities at the end of each  voyage. We were able to locate and obtain logbooks for 152 of the 158  shipments (approximately 96 percent) we identified. For 3 of the 6  voyages for which we were not able to locate logbooks, we obtained  copies of the vessels\u2019 shipping articles. We were not able to obtain  shipping articles for the 3 foreign-flagged vessels because documents for  such vessels were not turned in at U.S. ports.", "The Military Sea Transportation Service  directly chartered merchant vessels to carry  tactical herbicides during the Vietnam War. At  least 28 vessels owned by the New Orleans,  Louisiana-based Lykes Brothers Steamship  Company transported Agent Orange between  1965 and 1970 from Gulf Coast ports to  Southeast Asia. Lykes Brothers vessels were  designed to handle cargo with cables that  could place the cargo in a series of holds\u2014 numerous compartmented internal storage  spaces. Tactical herbicides were stored  vertically on pallets in these holds. The first  large shipments of Agent Orange took place  on the SS Adabelle Lykes, SS Elizabeth  Lykes, and SS Mayo Lykes, traveling from the  port of New Orleans, Louisiana, through the  Panama Canal, and refueling in the  Philippines before offloading a total of 1,782  55-gallon drums (approximately 97,000  gallons) in Saigon, Vietnam, in February and  March of 1965.", "Our review of the logbooks and shipping articles for vessels carrying  Agent Orange and other tactical herbicides showed that these vessels  made stops at several U.S. and foreign ports, both in going to and in  returning from Vietnam. For example, we identified vessels that stopped  at several West Coast ports to load cargo before traveling to Vietnam,  and others that made port calls to refuel in Hawaii. We also identified  vessels that stopped at foreign ports such as Okinawa, Thailand, and  Taiwan, as well as locations near the major U.S. Naval Supply Depots in  Yokosuka, Japan, or Subic Bay, Philippines. These supply depots were  major logistics hubs for U.S. military operations in East Asia, and they  provided supplies to commercial ships that were chartered by DOD\u2019s  Military Sea Transportation Service through contracts with shipping  companies. These companies would reserve cargo space for military  cargo and include Saigon, Vietnam, as a destination, but the voyages  were otherwise made for normal commercial activities. From those  locations, the cargo vessels traveled to one or more ports in Vietnam.  However, while the logbooks we reviewed identify when vessels left the  various ports as they traveled to and from Vietnam, logbooks do not  provide information on whether and how much cargo was loaded and  unloaded at those ports of call, nor do they indicate whether tactical  herbicides were offloaded at any ports before the vessels reached  Vietnam."], "subsections": []}, {"section_title": "Available Shipment Documentation Indicates at Least One Vessel Carrying Agent Orange Went Through Guam en Route to Vietnam, but Archival Information Lacks Details or Is Not Complete", "paragraphs": ["Based on our review of available logbooks, we identified at least one  vessel carrying Agent Orange that stopped at Guam en route to Vietnam  and at least three vessels that stopped at Guam on the return from  Vietnam. However, in our review of available shipment documentation,  we found no evidence indicating that Agent Orange or any other tactical  herbicides were offloaded from those vessels or used in the U.S.  territories of Guam or the Northern Mariana Islands. Figure 9 indicates  the timelines of the four vessels known to have carried Agent Orange that  stopped at Guam either on their way to or returning from Vietnam, each of  which is discussed in detail below.", "Available shipment documentation indicates that hundreds of vessels  delivered supplies to the Naval Supply Depot, including supplies bound  for Andersen Air Force Base, on Guam during the Vietnam War due to  both installations\u2019 strategic location in supporting the war effort. While the  logbooks we were able to locate and review for vessels that transported  Agent Orange to Southeast Asia between 1965 and 1970 do not show  that these vessels typically stopped at Guam or the Northern Mariana  Islands at any time during their voyages, we identified one ship carrying  Agents Orange, Blue, and White that did stop at Guam on its way to  Vietnam. Specifically, available records indicate that sometime around  February 1, 1968, the SS Gulf Shipper stopped at Port Apra (now Apra  Harbor) on Guam en route to Vietnam. Figure 10 shows a photo of the  logbook from the SS Gulf Shipper indicating the ship\u2019s ports of call en  route to Vietnam.", "The logbooks do not provide details about whether cargo was moved on  or off the vessels during these port calls, or whether tactical herbicides  were offloaded at these ports before the vessels reached Vietnam.  However, the SS Gulf Shipper\u2019s logbook indicates that the stop at Guam  could have been related at least in part to the repatriation of an injured  crew member to the United States, and not to matters related to the  loading or unloading of cargo. Further efforts to locate information on  cargo movements for the SS Gulf Shipper, such as customs records,  manifests, or bills of lading, were unsuccessful, because those records  were not routinely retained. As such, we were not able to verify why the  SS Gulf Shipper stopped at Guam, what its crew did while there, or  whether any cargo was loaded or unloaded.", "We also identified at least three vessels that stopped on Guam on their  return from Vietnam, based on our review of available logbooks.  Specifically, around November 30, 1969, the SS Aimee Lykes stopped at  Port Apra on Guam and offloaded an injured crew member into a small  motorboat so that he could be hospitalized on Guam. In addition, around  December 23, 1969, the SS Buckeye Atlantic stopped at Guam and  offloaded two injured crew members. Lastly, around May 5, 1970, the SS  Overseas Suzanne stopped at Guam and offloaded an injured crew  member. Based on a review of the vessels\u2019 logbooks, it is not clear  whether the stops at Guam were for reasons other than offloading injured  crew members\u2014for example, reasons related to the loading or unloading  of any cargo. Appendix III describes information that we were able to  obtain regarding the quantities of herbicides known to have been shipped  to Southeast Asia on the four vessels that we identified as having stopped  at Guam (either on the way to or from Vietnam) between February 1968  and May 1970.", "As noted earlier, based on our review of available shipment  documentation, we were able to identify approximately 87 percent of the  shipments of Agent Orange to Southeast Asia, and to obtain logbooks for  about 96 percent of the vessels known to have transported Agent Orange  from U.S. ports to Vietnam. Because we were unable to obtain logbooks  for every shipment of Agent Orange, we cannot conclude with certainty  whether any ships other than the SS Gulf Shipper that were transporting  the tactical herbicide to Vietnam, or the three ships returning to the United  States from Vietnam\u2014the SS Aimee Lykes, the SS Buckeye Atlantic, and  the SS Overseas Suzanne\u2014made port calls either at Guam or the  Northern Mariana Islands. Additionally, we found and U.S Air Force  officials agreed that it is unlikely that Agent Orange was shipped by air to  or from Guam. The U.S. Air Force transported small quantities of tactical  herbicides by air to Vietnam in 1961. However, we did not identify any  documentation showing the transport of tactical herbicides by air to  Vietnam after 1961. During our visit, officials at Andersen Air Force Base  stated that it would have been possible to fly 55-gallon drums from Guam  to supply operations in Vietnam, but that such an action would have been  an inefficient method of transporting large quantities of herbicides. Agent  Orange weighed approximately 600 pounds per drum, or about 11  pounds per gallon, a weight that, according to a 1966 memorandum from  the Military Assistance Command, Vietnam, would have precluded large- scale transport of the herbicide by aircraft."], "subsections": []}, {"section_title": "DOD Documents Identify the Use of Commercial but Not Tactical Herbicides on Guam", "paragraphs": ["Available records show that DOD stored and used commercial herbicides  on Guam, possibly including those containing n-butyl 2,4,5-T, during the  1960s and 1970s, but documents do not indicate the use of tactical  herbicides on Guam. Commercial herbicides were available through the  federal supply system for use on U.S. military installations worldwide. For  example, the fuel supply for Andersen Air Force Base was delivered by  ship to the port at Naval Base Guam and was then delivered to the Air  Force base by a cross-island fuel pipeline\u2014see figure 11. A detailed 1968  report by the Naval Supply Depot states that the Public Works Center  sprayed herbicides semi-annually to control the vegetation along fuel  pipelines between the depot and Andersen Air Force Base.", "Additionally, draft environmental assessments written in 1999 and 2009  by Naval Facilities Engineering Command, Pacific, indicate that  commercial herbicides containing 2,4-D were present on Guam, and that  commercial herbicides containing 2,4,5-T, which included the  contaminant 2,3,7,8-TCDD, had been used for weed control along power  lines and substations through 1980. Further, a 1969 master storage plan  for the Naval Supply Depot includes sketches of storage facilities that  specify the location of weed killers. Commercial herbicides approved for  DOD procurement for use on installations were issued in 55-gallon drums  and 5-gallon containers during the Vietnam War era, as were a range of  other products, such as fuel oil and diesel. According to DOD officials,  records for such purchases were not typically retained due to short record  retention policies related to such routine supply transactions.", "During the course of our review, we received photographs and written  statements from veterans alleging the presence of Agent Orange on  Guam. However, based on our discussion sessions with veterans and  civilians and our review of this documentation, we could not substantiate  the presence or use of Agent Orange or other tactical herbicides on  Guam. We asked veterans in our six discussion sessions about their  potential for exposure to Agent Orange and where, if, and how they  believe they were exposed. In their responses, some veterans in each of  the six discussion sessions stated that they believe they were exposed to  Agent Orange while deployed in Vietnam or other areas where a  presumption of service for benefits has already been granted, while some  veterans in three of the six discussion sessions stated that they believe  they were exposed to Agent Orange while stationed on Guam.  Specifically, some veterans in our discussion sessions described using  herbicides or witnessing the spraying of herbicides at locations on  Andersen Air Force Base and along the pipeline, as well as the burning of  contaminated fuel as part of firefighting training on the installation. As we  previously stated, according to DOD officials and archived military  specifications, tactical herbicides were not authorized or available for use  on lands owned by, or otherwise managed as military installations.  However, commercial herbicides were widely available worldwide for use  in vegetation management at military installations, to include controlling  vegetation adjacent to flightlines or along perimeter fencing.", "Selected Comments by Veterans at Discussion Sessions Moderated by GAO  Regarding Where They Believe They Were Exposed to Agent Orange or Its  Components  I feel like I was exposed on Guam. I was  temporary duty there during the conflict  and my duties were as a squadron controller that worked the schedules for the B-52  Bombers on Guam. I did venture into the loading area because I was with the aircrew on  the Navy field at Andersen Air Force Base.  I thought I was in contact with Agent Orange in Guam loading bombs in sites. We would  move from one site to another and they would spray those areas before we got there. I  never saw spraying but could smell it. One time I was near that and I broke out in boils  and blisters on my face and arms.  I was a fuel specialist  I witnessed spraying going on at the barracks at Marbo  Annex, 2 to 3 miles off the main Air Force base. It was sprayed all around the barracks.  As my job, I worked at POL \u2014where they stored all of the 55-gallon drums\u2014fuels,  pesticides, herbicides\u2014in bulk storage. Those were constantly sprayed around\u2014for  maintenance and fire safety. Also, I would work on the flightline and at the pump  houses\u2014these were about 20 yards from the security fence. As I was working there, I  witnessed spraying."], "subsections": []}]}, {"section_title": "DOD\u2019s List of Herbicide Testing and Storage Locations Is Incomplete, and Veterans Have Expressed Confusion about How to Obtain Information on Potential Exposure", "paragraphs": ["DOD\u2019s official compilation of herbicide testing and storage locations  outside of Vietnam, which is posted on the VA\u2019s website, is inaccurate  and incomplete, and DOD does not have a process for managing the list.  Further, while DOD and VA each have methods for communicating  information to veterans and the public about Agent Orange, they do not  have a formal process for communicating the most accurate available  information to veterans about potential locations where they could have  been exposed to Agent Orange or other tactical herbicides."], "subsections": [{"section_title": "DOD\u2019s List of Locations Where Herbicides Were Tested and Stored Is Inaccurate and Incomplete", "paragraphs": ["DOD developed a list that identifies locations and dates where herbicides,  including Agent Orange, are thought to have been tested and stored  outside of Vietnam, which VA has made publicly available on its website,  but this list is neither accurate nor complete. DOD\u2019s list includes  information on testing and storage locations, applicable dates, the  herbicide or herbicide components tested, a description of the project,  and DOD\u2019s involvement. See appendix IV for the list that was posted on  the VA website as of September 2018. When we began this review, DOD  and VA officials were unable to identify the origin of the DOD list that is  posted on the VA website, which does not have a date. A DOD official  subsequently informed us that the list was initially created in 2003 by an  individual in the Office of the Secretary of Defense in response to a  congressional inquiry about the use of Vietnam-era herbicides at specific  locations in the United States and overseas. DOD subsequently provided  this list to VA, which in turn posted the information on its website. VA\u2019s  Claims Adjudication Procedures Manual related to Agent Orange directs  VA officials to review the DOD list to determine whether herbicides were  used as claimed as part of verifying potential herbicide exposure when a  veteran alleges exposure at locations other than the Republic of Vietnam,  the Korean demilitarized zone, or Thailand. However, in our review of  several sources provided by DOD and VA officials, we identified multiple  examples of inaccurate and incomplete information in DOD\u2019s list, to  include the following:", "Omission of specific testing and storage locations: We identified  additional testing and storage locations in the United States and its  territories that were not included on DOD\u2019s list. For instance, we  identified additional testing locations at Belle Glade, Florida, and  Stuttgart, Arkansas, where researchers reported small-plot field tests  of the components of Agent Orange on rice. In addition, we found  examples of shipments of herbicides to Kelly Air Force Base, Texas,  where Agent Orange components were stored following the  cancellation of tactical herbicide contracts. None of these locations  are included on DOD\u2019s list.", "Lack of clarity in descriptive information: DOD\u2019s list lacks clarity in  descriptive information, making it difficult to identify which specific  herbicides or components were tested and stored, as well as when  and where. For example, the size and scope of some testing activities  are unclear from the descriptions provided in DOD\u2019s list, making it  difficult to differentiate between small-scale and large-scale testing.  Some testing events on DOD\u2019s list are described in detail, including  the amount of herbicide or components tested, while descriptions of  other testing activities contain little information about what took place.  Furthermore, we could not identify the chemical components of some  of the agents on DOD\u2019s list. We asked DOD and VA officials to  identify those specific agents for us, and they were unable to do so.  Specifically, neither DOD nor VA officials could identify the chemical  composition of 26 different agents on the DOD list, making it difficult  to determine whether these agents should be included on the list.", "Omission of additional time periods for identified locations: We  identified additional testing events of Agent Orange or its components  at locations that are on the DOD list but that cover additional time  periods not reflected on the list. For instance, the DOD list identified  testing that took place at Aberdeen Proving Grounds, Maryland, in  July 1969. However, our review uncovered additional testing events  that took place at Aberdeen Proving Grounds in 1963, 1965, and  1966.", "In addition to the lack of clarity and omissions that we identified, reports  commissioned by DOD and VA since 2003 have also identified omissions  in the list. For example, a report prepared for DOD in 2006 identified 40  different locations where Agent Orange was tested or stored outside of  Vietnam. However, during our review, we found several examples of  locations in the United States and its territories that were included in that  2006 report but are not included on the DOD list that is currently posted  on the VA website. These include locations in Arkansas, California, New  Jersey, New York, Maryland, Ohio, Oregon, Puerto Rico, Texas, and  Utah. Similarly, a report prepared for VA in May 2013 described locations where Agent Orange exposure to Vietnam-era veterans has  been alleged. This report summarized additional sites where veterans  alleged Agent Orange was used, stored, or destroyed. It also included an  assessment of the DOD information posted on the VA\u2019s website\u2014and  indicated, notably, that information had not changed since the 2006 report  to DOD. In the assessment, the report identified that the list contained  many errors of dates, chemicals, locations, and the governmental  agencies or institutions responsible for conducting the tests or military  operations. The report suggested specific criteria for validating the  presence of a tactical herbicide at a site, including evidence that a  veteran actually came into contact with a tactical herbicide at that site.", "Even though they have received reports dating back more than a decade  that identified issues with the accuracy and completeness of the list,  neither DOD nor VA has taken steps to validate or correct the list, or to  develop the criteria they would use to determine which locations and  dates to include on the list. As previously stated, this list is posted on the  VA\u2019s Agent Orange website as a primary source for veterans seeking  information on Agent Orange. Despite its inconsistencies, the list can be  accessed from multiple places on the VA website, and we found that  some veterans service organizations and other groups also post this  incomplete and inaccurate list of testing and storage sites on their  websites, as well as communicate this information to their members.  Standards for Internal Control in the Federal Government state that  agencies should use quality information to achieve their objectives. We  found and DOD officials agreed that DOD\u2019s list was not as accurate or  complete as available records would allow because (1) there are not  clearly identified responsibilities for validating the information on this list,  (2) there is no process for updating the list as needed, and (3) criteria  have not been developed and used to determine which locations and  dates to include on the list.", "Until recently, neither DOD nor VA has taken responsibility for ensuring  the accuracy and completeness of the list, which is being provided to  veterans and the public on the VA website. Federal internal control  standards state that management should establish an organizational  structure, assign responsibility, and delegate authority to achieve the  entity\u2019s objectives. As noted earlier, DOD and VA officials were initially  unable to identify the source or date of this list, and neither agency took  action to respond to reports about the problems with it. During the course  of our review, DOD took some initial steps to begin validating the  accuracy and completeness of information on its list by reviewing primary  source records for additional locations and events of herbicide testing and  storage. However, thus far in its efforts, DOD has not identified  responsibilities for completing the validation of the information included on  the list, nor has it established a process for updating the list as any new  information becomes available.", "Moreover, it remains unclear whether DOD\u2019s review will cover all  locations, including non-DOD sites, where testing and storage of Agent  Orange or its components were thought to have occurred, or if it will focus  only on U.S. military installations. Private companies, academic  institutions, and other federal agencies were involved in the testing of  herbicides at some of the non-DOD sites on the list, and, in some of those  cases, Army personnel were involved in the testing at the non-DOD  locations. For instance, testing was performed by DOD personnel at non- DOD locations in Georgia and Tennessee in the 1960s. Some non-DOD  storage locations included various U.S. commercial ports, such as Mobile,  Alabama, where Agent Orange was transferred by rail from the  manufacturers to be stored until it was loaded onto vessels for shipment  to Vietnam. According to a DOD official, DOD\u2019s priority in its review of  testing and storage locations is to focus on DOD installations. Although  this official told us that the department expects to eventually identify non- DOD locations where the department was involved in herbicide testing  and/ or storage through collaboration or funding, the official was not able  to provide information on the time frames for conducting this review.  Finally, DOD has not established a process for how this list will be  updated once it has been validated and revised, when and if new  information about Agent Orange testing and storage locations is  identified.", "In our analysis of the DOD list, we were also unable to determine the  criteria that DOD initially used to select which locations and time periods  to include\u2014particularly given that the testing varied in intensity and  duration, and that the likelihood that personnel at a particular location  could have been exposed to the herbicides or components was unclear.  For example, some tests on the list included small laboratory experiments  on a couple of plants using a very small amount of chemical agents, as in  bench tests of various compounds at Forts Detrick and Ritchie, Maryland,  in the 1950s, while other tests included gallons of Agent Orange or other  chemical agent components that were used in field testing trials or to test  aerial spraying, as in a defoliation effort in which 13 drums were sprayed  by helicopter over an area covering 4 square miles. Similarly, the duration  of testing events could have been over a total of 3 days, as with spray  testing in Marathon, Florida, or over several months or even years, as  with spray testing of several tactical herbicides at Eglin Air Force Base,  Florida. Because of the variance in the size and duration of testing  events; the specific areas where the testing events took place at the  locations; and the number of personnel who actually came into contact  with the chemical agents during the testing, the presence of a location on  this list does not clearly indicate the likelihood or extent of potential  exposure that individuals not involved would have had if they were simply  present at the locations on the list at the times indicated.", "In May 2018, during the course of our review, a DOD official noted that  DOD and VA formed a joint Herbicide Orange Working Group to address  the issues with the DOD list and identify criteria for including information  on this list. This group held its first meeting on May 31, 2018. As of July  2018, a DOD official noted that the group was working to identify  appropriate steps to take, but that it was too soon to report specific  actions that were being implemented, and that no documentation on the  group\u2019s efforts was available.", "Without assigned responsibility for ensuring an accurate and complete list  of locations where Agent Orange or its components were tested and  stored; a process for updating the list as needed; and clearly defined and  transparent criteria for what to include on this list, DOD will not have  reasonable assurance that it has identified the most complete information  possible for VA to use when informing veterans and the public of the full  extent of locations where Agent Orange exposure could potentially have  occurred. As a result, veterans may not have complete information about  the risk that they could have been exposed to Agent Orange during their  military service, and VA may not have quality information when making  important decisions on claims for veterans who may not be eligible for  benefits."], "subsections": []}, {"section_title": "DOD and VA Have Communicated with Veterans and Others about Potential Exposure to Agent Orange, but Veterans Have Expressed Confusion Regarding How to Obtain Needed Information", "paragraphs": ["Both DOD and VA have communicated with veterans in response to  inquiries about Agent Orange, but veterans have expressed confusion  regarding how to obtain information to determine their potential exposure  to Agent Orange. Further adding to this confusion are inconsistencies in  the list of testing and storage locations, as discussed above. As the  agency responsible for reviewing and validating veterans\u2019 disability  compensation claims for possible Agent Orange exposure, VA  communicates with veterans largely through the agency\u2019s website, which  contains information on Agent Orange regarding related diseases,  benefits, exposure locations, and resources. The VA also communicates  through other means, including an annual newsletter and forums with  veterans service organizations. DOD also receives inquiries from  veterans about the potential that they could have been exposed to Agent  Orange at DOD installations outside of Vietnam. In addition, DOD  receives Freedom of Information Act inquiries and congressional requests  for information on where Agent Orange was present. A DOD official  stated that while they will respond to veterans\u2019 inquiries, they typically  direct veterans with Agent Orange inquiries to VA.", "In responding to these inquiries, both DOD and VA officials stated that  they rely on the expertise of staff at the Armed Forces Pest Management  Board to provide details to answer questions related to locations where  exposure might have occurred. According to a DOD official, the board  received 109 inquiries in 2017 alone. In addition, DOD\u2019s Joint Services  Records Research Center provides information to VA regional liaisons  electronically in response to their questions about where and when  specific units were stationed or on temporary duty. The center extracts  operational records from various record repositories and, if the  information is available, corroborates the descriptions of incidents  described by veterans in their claims. According to DOD officials, unless  an herbicide-related incident was documented in some sort of unit record,  the center would not have information on where Agent Orange was  present.", "Despite these various approaches for communicating information to  veterans and the public, veterans we spoke with expressed confusion as  to where to obtain information on their potential exposure to Agent  Orange. Specifically, we asked veterans in our six discussion sessions  about what they had heard from DOD, VA, or other federal agencies  about the potential that they could have been exposed to Agent Orange  or its components at locations where Agent Orange was manufactured,  transported, stored, used, or destroyed. Veterans in each of the six  sessions stated that, generally, the federal government has not reached  out to them regarding Agent Orange, but that they instead have relied on  their own research to learn more about their potential for having been  exposed, adding to the confusion about where to obtain information on  Agent Orange exposure. Other veterans, however, stated that they have  received information from VA regarding potential exposure. DOD officials  acknowledged that there is confusion among veterans about a variety of  issues related to their potential for exposure to Agent Orange, including  where to go for information. U.S. EPA and DOD officials stated that  veterans are contacting multiple agencies to get information on herbicide  exposure.", "Selected Comments by Veterans at Discussion Sessions Moderated by GAO  Regarding What They Had Heard from the Federal Government about Negative  Health Effects Associated with Exposure to Herbicides, Including Agent Orange or  Its Components  I\u2019ve heard things from multiple sources\u2014media, newspaper, television, people  themselves. It has mainly been from my own research, not from a federal agency.  Just based on the fact that I have heart disease and going through the VA process  means I receive updates from VA on just about everything going on, including Agent  Orange and all of the research they have done. I do know the Secretary is authorized  by law from Congress late last year to add additional presumptive diseases  associated with Agent Orange and how one would contract that.  I had to do the research myself. It seems to be a secret with information coming out in  spurts. When you have things happen to your body, they [the Department of Veterans  Affairs] say it is not service connected. Sometimes when the government tries to  explain something, they don\u2019t give the whole thing and they give it piecemeal. It does  not carry any essence of importance.  I am not hearing anything from the federal government. Most of the information I get  is from a USveterans.com website and I subscribe to a daily newsletter from the  Vietnam Veterans of America and the Veterans of Foreign Wars.  There is information on the VA website about conditions attributed to Agent Orange In  that context, I went to the VA website and found that there are 21 states where Agent  Orange was used, including on Hawaii in Kauai. It is because of this list that I became  aware that people in Hawaii may have been exposed to Agent Orange. I learned that  such exposure might increase the likelihood of having diabetes or cancer. I believe  the list is still on the VA website and that there is also a list of units that were possibly  exposed to Agent Orange.  I have not been contacted by any government agency with regard to Agent Orange  exposure or ill health. I first heard about Agent Orange and dioxin and cancer related  issues/illnesses in late 1980s or early 1990s and later on after doing own research.", "Standards for Internal Control in the Federal Government state that  management should internally and externally communicate the necessary  quality information to achieve an entity\u2019s objectives. The standard further  states that management should evaluate the entity\u2019s methods of  communication so that the organization has the appropriate tools to  communicate quality information throughout the entity on a timely basis.  Additionally, DOD issued guidance in June 2017 establishing procedures  for DOD components to implement when there is a scientifically plausible  likelihood of a significant long-term health risk from a past environmental  exposure to military personnel or civilians resulting from living or working  on military installations. Even though the testing and storage of Agent  Orange and its components occurred several decades ago, this  instruction states that DOD components should provide targeted and  effective health risk communication early and continuously, as new and  credible information becomes available.", "However, DOD and VA officials stated that they have not developed a  formal process for coordinating on how best to communicate information  to veterans and the public regarding the presence of Agent Orange at  locations outside of Vietnam. Officials stated that the DOD-VA  Deployment Health Working Group\u2014an existing forum for exchanging  information\u2014meets monthly to discuss health issues, including those  related to Agent Orange. However, the working group is not focused on  ensuring the availability and distribution of information on Agent Orange  testing and storage locations. DOD\u2019s and VA\u2019s joint Herbicide Orange  Working Group has the potential for being an effective forum for  communicating this information; however, a DOD official noted that this is  an ad hoc group, and as we discussed earlier, it has not yet determined  the direction it will be taking for communicating with veterans regarding  exposure to Agent Orange. By coordinating on how best to communicate  this information, VA would be better positioned to provide veterans with  information regarding their potential exposure to Agent Orange at  locations where Agent Orange was known to have been present outside  of Vietnam."], "subsections": []}]}, {"section_title": "Challenges Exist with Testing for Agent Orange Today Due to Degradation and Multiple Sources of Potential Contamination", "paragraphs": ["Testing to determine whether Agent Orange was present in a particular  location is challenging because, for example, derivatives of Agent  Orange\u2014including the two components of Agent Orange (n-butyl 2,4-D  and n-butyl 2,4,5-T) and the contaminant from the 2,4,5-T manufacturing  process (2,3,7,8-TCDD)\u2014degrade over time, and because derivatives of  2,4-D and 2,4,5-T can come from multiple sources. Regardless of these  challenges, in response to a request by the Government of Guam, DOD  developed a testing plan that was reviewed and accepted by U.S. EPA  and Guam EPA to conduct a limited investigation into alleged Agent  Orange use at three sites on Guam."], "subsections": [{"section_title": "Testing for Agent Orange Presents Challenges Due to Degradation and Multiple Sources of Potential Contamination", "paragraphs": [], "subsections": [{"section_title": "Challenges Due to Degradation", "paragraphs": ["Testing to identify locations where Agent Orange may have been present  is challenging because the components of Agent Orange degrade over  time. It has been nearly 50 years since Agent Orange was last  transported and used in support of military operations in Vietnam.  According to scientific research, it is difficult to find traces of the two  components of Agent Orange\u2014n-butyl 2,4-D and n-butyl 2,4,5-T\u2014 because, under normal environmental conditions, the n-butyl forms break  down rapidly into the acid forms. Scientific research indicates that the  half-lives of the acid forms of the chemical components 2,4-D and 2,4,5-T  in soil can range from several days to many months, depending on  conditions. The World Health Organization has stated that the half-life of  2,4-D in soil is reported to range from 4 to 7 days in most soil types.  According to the Centers for Disease Control and Prevention, the half-life  of 2,4,5-T in soil varies with conditions, ranging from several weeks to  many months. In addition, when Agent Orange is sprayed for  defoliation, there are several things that can happen to it. For example, it  can be washed out by rain, degrade in the presence of sunlight  (photodegradation), or slowly turn into a vapor (volatize) from surfaces  such as foliage. These factors reduce the chances of finding traces of  Agent Orange components after 50 years.", "The amount of time it takes for the contaminant 2,3,7,8-TCDD to degrade  is longer than that for the components of Agent Orange, although  estimates vary. For example, according to the research cited by the  Agency for Toxic Substances and Disease Registry, the half-life of  2,3,7,8-TCDD is approximately 9 to 15 years in surface soil and 25 to 100  years in subsurface soil. Further, 2,3,7,8-TCDD breaks down quickly  when exposed to sunlight, providing one explanation for the shorter half- life in surface soil. Any 2,3,7,8-TCDD contamination from herbicide  spraying\u2014as opposed to being spilled onto the soil\u2014would generally be  expected to be found in surface soil, where it would be exposed to  degradation due to sunlight. This reduces the likelihood of detecting this  compound 50 years later. However, as discussed below, there are  multiple sources of dioxins, including 2,3,7,8-TCDD, and the specific  source of dioxin contamination is difficult to identify."], "subsections": []}, {"section_title": "Challenges Due to Multiple Sources of Potential Contamination", "paragraphs": ["Testing to identify locations where Agent Orange may have been present  is challenging because there are multiple sources of 2,4-D and 2,4,5-T  derivatives as well as multiple sources of the contaminant, 2,3,7,8-TCDD.  Specifically, many commercial herbicides that were available at the time  Agent Orange was used contained derivatives of 2,4-D; 2,4,5-T; or both.  Additionally, 2,4-D derivatives are still used in commercial herbicides  today. Therefore, even if testing were to show the presence of one of the  two components of Agent Orange, it would be difficult to distinguish  whether the chemicals were present from the use of commercial  herbicides or the use of tactical herbicides. Further, because 2,4-D is still  used in many commonly used herbicides sold today, the presence of this  component could be due to a recent use of a commercial herbicide rather  than a tactical herbicide used decades ago.", "Moreover, multiple sources of the contaminant 2,3,7,8-TCDD can be  found in the environment today. DOD and U.S. EPA officials told us that if  2,3,7,8-TCDD is found in soil today, the source of the dioxin  contamination could be a result of other sources besides Agent Orange.  For example, according to the World Health Organization, dioxins\u2014 including 2,3,7,8-TCDD\u2014are primarily released to the environment with  the burning of materials such as wood and waste (see figure 12)."], "subsections": []}]}, {"section_title": "Testing for the Components of Agent Orange on Guam Is Challenging", "paragraphs": ["In 2017 the Government of Guam coordinated with DOD to test for Agent  Orange and other tactical herbicides at Andersen Air Force Base due to  claims from veterans that they were exposed to Agent Orange while  stationed on Guam during the 1960s and 1970s. In December 2017 DOD  developed a draft testing plan in collaboration with U.S. EPA and Guam  EPA to test for the acid form of the components 2,4-D and 2,4,5-T at  three different sites on Andersen Air Force Base. The draft testing plan  did not include testing for the presence of 2,3,7,8-TCDD. According to  DOD and U.S. EPA officials, they are not testing for 2,3,7,8-TCDD  because the test would not be able to conclusively link any positive  results to the use of tactical herbicides, given that dioxins are also  produced by, among other things, burning fossil fuels. These officials  noted that, over time, large quantities of fuel have been burned at  Andersen Air Force Base, and they stated their belief that if 2,3,7,8-TCDD  were found, the likely source would be from combustion. The areas  identified for testing included the fuel pipeline, a perimeter fenceline, and  an area near some fuel storage tanks. See figure 13 for a photograph of  the fenceline testing site near the fuel storage tanks on Andersen Air  Force Base.", "Based on our initial review of the draft testing plan and a review of the  scientific literature, we identified and discussed with DOD and U.S. EPA  officials some challenges the two agencies would face in detecting the  presence of Agent Orange on Guam due to two factors: (1) the short  amount of time that it takes for 2,4-D and 2,4,5-T to degrade; and (2) the  inability of testing to determine whether the presence of 2,4-D and 2,4,5-T  is attributable to the use of Agent Orange or to some other source.", "Degradation of 2,4-D and 2,4,5-T: DOD officials and the jointly  developed draft testing plan acknowledged that the planned testing  would not be able to confirm the presence of Agent Orange, given that  the components degrade over time. The draft testing plan indicates  that the maximum half-lives of 2,4-D and 2,4,5-T are 14 days and 24  days, respectively, in soil and groundwater. Even given the possible  variation in half-lives discussed above, it is likely that no detectable  concentrations remain in soil today, given that the alleged period of  use on Guam was in the 1960s and 1970s.", "Inability to distinguish whether the presence of 2,4-D and 2,4,5-T is  attributable to the use of Agent Orange or some other source: Even if  the results were to confirm the presence of either 2,4-D or 2,4,5-T in  any form, it would be difficult to distinguish the source of the chemical,  and whether its presence was attributable to the use of Agent Orange  or some other source. For example, 2,4-D is still in use today, and  2,4,5-T was used in both tactical and commercial herbicides during  the 1960s. In addition, if the components were found, the  interpretation of those results could be complicated by, for example,  natural variability in the potential half-lives and the possibility of more  recent use of banned products. Further, the testing protocol will  convert all forms of 2,4-D and 2,4,5-T, including the ester forms, to the  acid forms, further complicating any attempt to identify the source of  the compounds.", "We discussed with cognizant officials the challenges that we identified in  the draft testing plan to determine how the information from the testing  would be used to inform U.S. EPA, DOD, veterans, and the public about  whether Agent Orange was present on Andersen Air Force Base. DOD  officials subsequently stated that the questions raised by us and internally  within DOD led them to reconsider the approach for testing for Agent  Orange on Guam. For example, in December 2017, DOD officials told us  that they would begin testing for Agent Orange and other tactical  herbicides in March 2018. In late March 2018, a DOD official noted that  the department had placed the testing on hold until they were certain that  the methodology to be employed would meet scientific rigor and could be  replicated in future testing efforts at other locations. In April 2018, DOD  officials told us that the contract execution took longer than anticipated,  and that soil sample testing would commence that month.", "In April 2018, DOD provided us with a copy of the final plan that was  reviewed and approved by U.S. EPA and Guam EPA and was used to  test for Agent Orange and other tactical herbicides at Andersen Air Force  Base. When we reviewed the final testing plan and compared it with the  draft previously provided, we found that some of the challenges we had  initially identified in the draft testing plan, as described above, were still  present. For example, based on our review of the final testing plan, with  the proposed testing methodology, it would be difficult to determine if 2,4- D and 2,4,5-T came from Agent Orange or another source, and there  were inconsistencies in the reported half-lives of the components of Agent  Orange. At the same time, both DOD and U.S. EPA officials questioned  the ability of any testing for 2,4-D or 2,4,5-T on Andersen Air Force Base  to either confirm or deny the presence of Agent Orange on Guam.  Specifically, the final testing plan states that more than 50 years have  passed since the period of alleged use, and that a lack of detection  provides no evidence that herbicides were not used historically.  Moreover, U.S. EPA officials noted that the testing on Guam would not  provide definitive proof of Agent Orange use on the island. Although DOD  officials recognized these challenges and acknowledged the low  probability of conclusively identifying the components of Agent Orange,  they decided to move forward with testing to address veterans\u2019 and the  public\u2019s concerns.", "In April 2018, samples were collected from the three areas at Andersen  Air Force Base, according to DOD officials. Each sample was divided  following procedures outlined in the final testing plan, resulting in two  identical sample sets. A sample set was sent to two independent  laboratories for analysis. According to officials from DOD and U.S. EPA,  test results and associated quality control reports from both laboratories  agreed on the results from two of the area samples, but did not agree on  the third area sample. The jointly developed decision rules for the  sampling and analysis plan required the results from both laboratories to  agree in order to draw a conclusion on the presence or absence of Agent  Orange. As a result, according to the officials, the DOD, U.S. EPA, and  Guam EPA project team agreed in July 2018 to resample the one area  where the two labs reported differing results. The project team is updating  the sampling and analysis plan to address the various possible reasons  for the differing laboratory results in order to provide a conclusive final  testing result. DOD officials told us they do not anticipate completing the  updates for the sampling and analysis plan, field sampling, analysis, and  reporting until early 2019. As such, we were not able to comment on the  results of the final testing in this report. Moreover, DOD officials said that,  provided the final resampling results are negative, DOD does not have  plans to conduct additional testing, because the testing was conducted in  areas alleged to be the likeliest locations for the application of Agent  Orange. However, an official from U.S. EPA said that the challenges  associated with testing on Guam are not insurmountable and that the  agency would like to continue this investigation. Given that (1) DOD,  working with U.S. EPA and Guam EPA, made a decision to test for Agent  Orange and other tactical herbicides; (2) DOD, U.S. EPA, and Guam EPA  recognize the limitations associated with the testing; (3) the testing and  analysis of results are still on-going; and (4) there is currently uncertainty  regarding whether any additional testing will take place on Guam, we are  not making any recommendations with respect to the testing plan or its  execution."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD suspended the use of Agent Orange in Vietnam in 1970 and  incinerated remaining stockpiles at sea in 1977, but concerns about the  effects of exposure in U.S. locations have persisted. DOD developed a  list that identifies locations and dates where herbicides, including Agent  Orange, are thought to have been tested and stored outside of Vietnam,  which VA has made publicly available on its website, but this list is neither  accurate nor complete. Without assigning responsibilities for verifying the  accuracy of the information included on the list; a process for ensuring  that the list is updated, as new information is found; and clear and  transparent criteria, indicating which locations should be included on the  list, DOD and VA will not have assurance that they have the most  complete information possible when informing veterans and the public of  the full extent of locations where Agent Orange exposure could potentially  have occurred. By relying on an inaccurate list, VA may not have quality  information when making important decisions on claims for veterans who  might or might not be eligible for benefits. Further, while DOD and VA  both communicate with veterans in response to their Agent Orange  inquiries, the two agencies do not have a formal process for coordinating  on how best to communicate this information. Until DOD and VA develop  a process for how best to coordinate to ensure that they are  communicating information, veterans and the public may not have the  information needed regarding their potential exposure to Agent Orange."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making six recommendations: four to the Secretary of Defense  and two to the Secretary of Veterans Affairs.", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Acquisition and Sustainment assigns responsibility for  ensuring that DOD\u2019s list of locations where Agent Orange or its  components were tested and stored is as complete and accurate as  available records allow. (Recommendation 1)", "The Secretary of Defense should ensure that the Under Secretary of  Defense for Acquisition and Sustainment develops a process for updating  the revised list as new information becomes available. (Recommendation  2)", "The Secretary of Defense, in collaboration with the Secretary of Veterans  Affairs, should develop clear and transparent criteria for what constitutes  a location that should be included on the list of testing and storage  locations. (Recommendation 3)", "The Secretary of Veterans Affairs, in collaboration with the Secretary of  Defense, should develop clear and transparent criteria for what  constitutes a location that should be included on the list of testing and  storage locations. (Recommendation 4)", "The Secretary of Defense, in collaboration with the Secretary of Veterans  Affairs, should develop a formal process for coordinating on how best to  communicate information to veterans and the public regarding where  Agent Orange was known to have been present outside of Vietnam.  (Recommendation 5)", "The Secretary of Veterans Affairs, in collaboration with the Secretary of  Defense, should develop a formal process for coordinating on how best to  communicate information to veterans and the public regarding where  Agent Orange was known to have been present outside of Vietnam.  (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DOD, VA,  U.S. EPA, the U.S. Department of Agriculture, and the U.S. Department  of Health and Human Services. In its written comments, DOD concurred  with each of our four recommendations directed to the Secretary of  Defense and identified actions it plans to take to implement them. In its  written comments, VA concurred with one recommendation directed to  the Secretary of VA and described actions it would take to implement the  recommendation. VA also non-concurred with one recommendation. In its  written comments, the U.S. Department of Agriculture agreed with the  report\u2019s findings related to matters under the purview of agricultural  research and programs, though we did not make any recommendations  to the department. Comments from DOD, VA, and the U.S. Department of  Agriculture are reprinted in their entirety in appendixes V through VII. We  also received technical comments from DOD, VA, U.S. EPA, and the U.S.  Department of Health and Human Services, which we incorporated as  appropriate.", "Based on oral comments we received from DOD, we revised our  recommendation regarding the development of clear and transparent  criteria for what constitutes a location that should be included on the list of  testing and storage locations to clarify that DOD and VA should  collaborate on this effort. VA non-concurred with this recommendation,  noting that DOD chairs the Herbicide Orange Working Group that will be  responsible for developing the criteria (Recommendation 4). However, VA  stated that as a member of the working group, it would work  collaboratively with DOD as the lead. Doing so would meet the intent of  our recommendation.", "In its overall written comments, VA stated that it was concerned that the  report conflates the terms \u201ccommercial herbicides\u201d with \u201ctactical  herbicides,\u201d which the department noted were distinctive from one  another. While VA stated that it does not dispute that some chemicals  found in the VA regulation may be included in certain commercial  herbicides, VA noted that exposure to tactical herbicides intended for  military operations in Vietnam is required for VA to grant disability benefits  on a presumptive basis. We recognize that the presumption for service- connection applies to exposure to tactical herbicides and nothing in our  report states otherwise. VA also stated in its letter that the focus on  commercial herbicides is not relevant for determining the list of locations  where tactical herbicides were tested or stored. We agree and as we  noted in this report, the U.S. military managed tactical herbicides used  during the Vietnam War era differently from commercial herbicides in the  federal supply system, which were widely available worldwide for use in  vegetation management at military installations. To avoid conflating  tactical and commercial herbicides, the report further notes that while  some of these commercial herbicides contained 2,4-D; 2,4,5-T; or both,  these commercial herbicides were not in the n-butyl form used in Agent  Orange. However, commercial herbicides with 2,4,5-T likely contained  some level of 2,3,7,8-TCDD. Moreover, we believe it is important to  reiterate that numerous commercial herbicides that were being widely  used elsewhere for agriculture purposes contained the form of 2,4,5-T  found in Agent Orange and thus its associated dioxin contaminant,  2,3,7,8-TCDD.", "In its overall written comments, VA also recommended that GAO analyze  its list to ensure that only locations where the presence of tactical  herbicides has been confirmed are included on the list of locations. It is  important to note that we do not maintain a list of herbicide testing and  storage locations. As we noted in this report, DOD developed a list that  identifies locations and dates where herbicides, including Agent Orange  and its components, are thought to have been tested and stored outside  of Vietnam, which VA has made publicly available on its website.", "We are sending copies of this report to the appropriate congressional  addressees; the Secretaries of Defense, VA, Agriculture, and Health and  Human Services; and the Administrator of U.S. EPA. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Brian Lepore at (202) 512-4523 or leporeb@gao.gov or J. Alfredo G\u00f3mez  at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["House Report 115\u2013200 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 included a provision that we review  the government\u2019s handling of Agent Orange on Guam. In response to  both this provision and a separate request letter, this report examines (1)  the extent to which the federal government has information about the  procurement, distribution, use, and disposition of Agent Orange or its  components at locations in the United States and its territories, including  Guam; (2) the extent to which the Department of Defense (DOD) and the  Department of Veterans Affairs (VA) have complete and accurate  information about where Agent Orange and its components were tested  and stored and communicated this information to veterans and the public;  and (3) challenges associated with testing for Agent Orange.", "For objective one, we collected and reviewed available agency records  and shipping documents on Agent Orange from the following sources:  the U.S. National Archives and Records Administration;  the U.S. National Agricultural Library;  the U.S. Air Force Historical Research Agency at Maxwell Air Force  Base, Alabama;  staff historians at the Air Force Materiel Command at Wright- Patterson Air Force Base, Ohio, and Pacific Air Forces at Joint Base  Pearl Harbor\u2013Hickam, Hawaii;  the Armed Forces Pest Management Board in Silver Spring,  Maryland;  the Defense Logistics Agency;  the U.S. Army Corps of Engineers; and  the Naval History and Heritage Command.", "The records we researched and collected include published and  unpublished materials on the procurement, shipment, and disposition of  Agent Orange, including U.S. military correspondence, logistics reports,  and Navy and merchant vessel logbooks. We reviewed DOD documents  related to Agent Orange contracts to determine the total quantity of Agent  Orange that was produced by the nine manufacturers. To show how  much Agent Orange was used in Vietnam, we used estimates from the  National Academy of Sciences analysis of Operation Ranch Hand data.  Details about the estimated quantity of Agent Orange that was destroyed  in 1977 are available in public reports from DOD and the U.S.  Environmental Protection Agency (U.S. EPA).", "We used a variety of archival sources to identify the shipping routes for  Agent Orange, to include a database prepared for VA that lists records  held in National Archives and Records Administration Record Group 341,  which contains more than 200 boxes of unclassified records relating to  tactical herbicides used in Vietnam. During our review of this record  group, we identified and summarized the correspondence between and  reports submitted by the U.S. military commands that managed the  tactical herbicides, to identify details of tactical herbicide shipments and,  to the extent that the data were available, to develop a consolidated list of  shipments of Agent Orange, including vessel names, ports of  embarkation and debarkation, time frames, and quantities. In some  cases, individual source documents did not identify which specific tactical  herbicides were being shipped. To the extent we were able, we used  multiple sources to identify which shipments carried Agent Orange. For  the purposes of this report, we refer to these records collectively as  shipment documentation.", "Using this shipment documentation, we located and obtained from  several regional facilities of the National Archives and Records  Administration logbooks for the vessels that we had identified as having  shipped Agent Orange\u2014hereinafter referred to as logbooks\u2014which  accounted for approximately 83 percent of the shipments we found.  Logbooks that were submitted to port authorities upon the vessels\u2019  returns to the United States were consolidated at National Archives and  Records Administration facilities including Fort Worth, Texas; Seattle,  Washington; San Francisco and Riverside, California; New York, New  York; Philadelphia, Pennsylvania; Boston, Massachusetts; Chicago,  Illinois; and Atlanta, Georgia, as well as at Archives I in Washington, D.C.,  and Archives II in College Park, Maryland. These logbooks recorded  basic details about each ship\u2019s operation and route, which we analyzed to  identify any shipments that stopped at locations in the United States or its  territories before arriving in Vietnam. Because none of the logbooks we  reviewed provided detail about the specific types of cargo that were  loaded onto or unloaded from the vessels, we relied on available military  correspondence and reports about those vessels to identify whether the  ships carried Agent Orange.", "We attempted to locate the remaining 17 percent of the logbooks, or 27  shipments. Of those shipments, 3 were by foreign-flagged merchant  vessels, which did not submit logbooks to U.S. ports. Working with  officials from the U.S. Coast Guard, the agency that oversees the  retention and archiving of logbooks, we coordinated with archivists at the  Federal Records Centers to determine whether there were any  unprocessed boxes of logbooks that had not yet been archived. When  that effort did not turn up additional logbooks, we worked with archivists at  Archives I to obtain copies of shipping articles\u2014the articles of agreement  between the captain of a ship and the seamen with respect to wages,  length of time for which they are shipped, and related matters\u2014for the  remaining 24 shipments. While these documents focus on employment  issues, the annotations include the locations where different personnel  actions took place. We reviewed these documents to identify the locations  and approximate dates of the ports of call during those voyages. We were  able to obtain the shipping articles for the 24 remaining voyages, as well  as for the one vessel that stopped in Guam on the way to Vietnam (SS  Gulf Shipper) and the three that stopped in Guam on the way back (SS  Aimee Lykes, SS Buckeye Atlantic, and SS Overseas Suzanne). Using  the information on voyage ending dates and ports that we obtained from  the shipping articles, we were able to work with the regional archives to  obtain another 21 logbooks, bringing the total number of logbooks  obtained to 152, or 96 percent of the shipments we identified. We relied  on the shipping article information for the remaining three voyages  (excluding the shipments on the three foreign-flagged vessels) to provide  some information on the routes taken by those vessels. However, one  limitation of relying on shipping articles for port information and dates is  that locations are mentioned only if a personnel action\u2014such as an injury,  hospitalization, or desertion\u2014took place. If no personnel action took place at a location on a vessel\u2019s route, that port would not be listed in the  shipping articles.", "To obtain specific information about the SS Gulf Shipper voyage that  stopped in Guam en route to Vietnam, to include documentation on its  cargo and whether or not cargo was loaded or unloaded at the ports on  the way to Vietnam, we contacted officials at several agencies.", "In Guam, we contacted the Customs and Quarantine Service, the  University of Guam\u2019s Micronesian Research Center, and officials at  Naval Base Guam for information on vessels that stopped in Guam  during the Vietnam War era, and any cargo they carried.", "We also contacted archivists at the Federal Records Center in  Seattle, Washington, where the SS Gulf Shipper logbook is archived,  and the regional archives in Fort Worth, Texas, for additional  information on the vessel itself and guidance on retaining and  archiving cargo information. The National Archives had some  information on the SS Gulf Shipper, such as sales documents and  company correspondence records. However, the National Archives  did not have records for the manifest or bills of lading, which may  have documented any cargo offloaded from the ship.", "We contacted U.S. Customs and Border Protection for information on  movements of vessels engaged in foreign trade in and out of ports,  which is found in customs forms that are required to be archived after  30 years. We were unsuccessful in locating the customs forms for the  SS Gulf Shipper\u2019s voyage to Vietnam through Guam; however, an  official noted that although these records provide manifest numbers  and ports of sailing, the manifests themselves are not archived.", "An online search on the SS Gulf Shipper through the U.S. Maritime  Administration\u2019s website identified the transfer of vessel ownership  over the years. We contacted the latest company that owned the  vessel to see whether the company had retained any cargo manifests  or other historical records as the ownership changed hands. However,  we could not obtain this information because, according to a company  official we contacted, the vessel\u2019s records, along with other historical  documents, were stored in an off-site storage facility in New Jersey,  and were subsequently destroyed in a fire in 1996.", "We also looked at articles from Guam newspapers and news sources  such as the Military Sea Transportation Service Vietnam Chronicles for  any information about vessel comings and goings in Guam in early 1968  to see if they mentioned the SS Gulf Shipper or specific cargo being  offloaded in Guam. None of these contacts or written sources provided  information specific to any cargo that was being moved through Guam, or  about this particular vessel.", "We also obtained original DOD reports and command histories that  provided additional operational details about the procurement,  distribution, use, and disposition of Agent Orange and its components.  According to an Office of History, Air Force Logistics Command,  monograph, the command directly responsible for managing Agent  Orange was the Directorate of Aerospace Fuels at the San Antonio Air  Materiel Area at the former Kelly Air Force Base, Texas, which was a  sub-component of the U.S. Air Force Logistics Command during the  Vietnam War. The unclassified San Antonio Air Materiel Area command  histories for the years 1966 through 1973 include chapters with extensive  documentation on \u201cherbicide management.\u201d We obtained copies of  command histories from the Air Force Historical Research Agency at  Maxwell Air Force Base, Alabama, and the Air Force Materiel Command  at Wright-Patterson Air Force Base, Ohio.", "To obtain information regarding herbicide use on Guam, we obtained  command histories for Naval Base Guam and an analysis and summary  of the available documentation by the historian at Andersen Air Force  Base. We also spoke with Navy and Air Force officials on Hawaii and  Guam to identify any relevant records pertaining to such use. In addition,  we met with and obtained information from officials representing the  Office of the Governor of Guam and senior members and staff from the  Guam Legislature. We also met with officials representing a veterans  service organization. Finally, as discussed below, we spoke directly with  veterans about their recollections of herbicide use on Guam, and any  documentation they might have pertaining to such use.", "For objective two, we analyzed the archival search records provided by  DOD to identify additional locations where Agent Orange or its  components were tested and stored in the United States and its  territories. We reviewed Army archives search reports of herbicide testing  at Aberdeen Proving Grounds (including Edgewood Arsenal), Maryland;  Dugway Proving Ground, Utah; Fort Chaffee, Arkansas; Fort Gordon,  Georgia; Fort Meade, Fort Ritchie, and Fort Detrick, Maryland; and two  Air Force studies related to herbicide equipment testing at Eglin Air Force  Base, Florida, to determine whether there were additional sites and  testing events that were not included on the DOD list found on the VA  website. We also reviewed the proceedings of the First, Second, and  Third Defoliation Conferences, technical and special reports, and  published papers provided by the Armed Forces Pest Management Board  to determine whether there were additional sites and testing events that  were not included on the list. We compared the information about testing  locations and dates on the DOD list found on the VA website with  information found in a 2006 report on locations where Agent Orange was  tested and stored.", "To determine the locations where Agent Orange or its components were  tested and stored, we attempted to identify the chemical composition of  all the agents on DOD\u2019s list found on the VA website. We located  information on the chemical composition of agents on the list in archives  search reports for Forts Detrick, Meade, and Gordon; a glossary of  pesticide chemicals from the Food and Drug Administration; journal  articles; and the defoliation conference proceedings. We also  interviewed DOD and VA officials about the chemical composition of  agents on the list, the origins of the list, how the list is used, and the role  of each agency in managing the list. We compared the results with  information that DOD and VA provided publicly on testing and storage  locations of tactical herbicides in the United States and its territories, and  with DOD policies for conducting record research and responding to  inquiries related to past environmental exposures. We also compared the  accuracy and completeness of the list with Standards for Internal Control  in the Federal Government, which state that management should  internally and externally communicate the necessary quality information  to achieve the entity\u2019s objectives.", "We also reviewed the extent to which DOD and VA have communicated  health information to DOD personnel and veterans. We compared the  communication process that both DOD and VA use with DOD\u2019s guidance  on assessing long-term health risks, and with VA\u2019s process for  determining benefits based on veterans\u2019 claims. We also compared DOD  and VA actions with Standards for Internal Control in the Federal  Government, which state that management should internally and  externally communicate the necessary quality information to achieve the  entity\u2019s objectives. The standard further states that management should  evaluate the entity\u2019s methods of communication so that the organization  has the appropriate tools to communicate quality information throughout  the entity on a timely basis. We also reviewed documents from DOD and  VA on communication with veterans, including the VA\u2019s website on Agent  Orange. Further, we interviewed cognizant agency officials from DOD and  VA, including officials from the Armed Forces Pest Management Board  and DOD\u2019s Joint Services Records Research Center.", "For objectives one and two, to better understand veterans\u2019 experiences  with Agent Orange and other herbicides and the health effects of  exposure to them, we conducted six small discussion sessions with a  non-generalizable sample of veterans. Four of the discussion sessions  were conducted in person in the following locations: two discussion  sessions in Guam, and two discussion sessions in Hawaii. We  conducted two additional discussion sessions that were moderated via  telephone from Washington, D.C.: one of those had individuals participate  both in person and by telephone, while the other was held solely by  telephone. We selected Guam because of the provision in House Report  115\u2013200 accompanying a bill for the National Defense Authorization Act  for Fiscal Year 2018 for GAO to review the government\u2019s handling of  Agent Orange on Guam. We selected Hawaii because of its strategic  location during the Vietnam War and because of the VA presence in the  region. A total of 38 individuals attended the sessions, which ranged from  1 to 10 participants per session and lasted approximately 1 to 2 hours.  These discussion sessions were consistently moderated by the same  team member using a prepared script and documented by several other  team members.", "To select candidates for participating in our discussion sessions, we  worked with the Veterans Health Administration as well as veteran clinics  and veteran centers at the selected locations to identify non-combat  veterans who had served during the Vietnam era. In Guam, we also  worked with the Guam Environmental Protection Agency to coordinate a  discussion session. Attendees included Vietnam-era veterans who self- reported that they were in active service between 1961 and 1977 in  Vietnam, the United States, and its territories, including Guam. As we  became aware of other veterans who might be interested in these  discussion sessions, including Vietnam combat veterans, we reached out  to offer them the opportunity to participate in one of our discussion  sessions. Our six discussion sessions included questions to individuals  regarding what, if anything, they had heard from DOD, VA, or other  federal agencies about links between exposure to herbicides and  negative health effects, and whether attendees believed that they had  been exposed to Agent Orange or its components at locations where  Agent Orange was manufactured, transported, stored, used, or  destroyed. We also asked individuals if they believed they had been  exposed to Agent Orange in Guam, Vietnam, or another location, and if  so, to describe the situation. At the start of the discussion sessions, the  moderator told participants that their responses would be kept confidential  and that we were not recording their statements. The moderator noted  that we would be taking notes to make sure we accurately captured the  conversations, but that we would not attribute statements directly to  individuals.", "For those discussion sessions held in person in Guam and Hawaii, we  also administered a brief, written questionnaire about individuals\u2019  experiences during the Vietnam era (for example, duty locations, military  occupation, rank), and what they had heard and experienced related to  Agent Orange and other herbicides. Due to logistical obstacles, we were  not able to administer the questionnaire to participants in sessions held  via telephone. However, the information requested in the questionnaire  was also covered in the discussion sessions themselves. Therefore, we  did not analyze the information from the completed questionnaires. We  also solicited from the veterans any documentation they might have that  could support their allegations of the use of Agent Orange on Guam, but  we did not receive documentation that corroborated the use of Agent  Orange on Guam. In addition, we met with officers from the Vietnam  Veterans of America to discuss how, if at all, veterans could have been  exposed to Agent Orange beyond serving directly in Vietnam as part of  Operation Ranch Hand, and how the organization disseminates  information, especially on Agent Orange, to veterans.", "For objective three, we reviewed scientific literature and agency  documents regarding the degradation and sources of the components of  Agent Orange and an associated dioxin contaminant, 2,3,7,8-TCDD, as  well as other sources of dioxins. This review included documents from the  Agency for Toxic Substances and Disease Registry and reports and  protocols from U.S. EPA, the World Health Organization, the Centers for  Disease Control and Prevention, and the American Industrial Hygiene  Association. We also reviewed the draft and final plans for testing for the  presence of the acid forms of the components of Agent Orange\u20142,4-D  and 2,4,5-T\u2014on Guam. We compared the information outlined in the  testing plan with scientific literature on the environmental fate of the  components of Agent Orange and other Agent Orange testing  methodologies. We interviewed officials from DOD, U.S. EPA, and Guam  EPA about the testing plan for Guam and the science surrounding Agent  Orange testing. We also conducted a site visit to Naval Base Guam and  Andersen Air Force Base on Guam and interviewed DOD and  Government of Guam officials involved in the planning for the testing for  Agent Orange on Andersen Air Force Base. We visited the three selected  sites where the initial testing took place and took photographs of those  sites.", "We conducted this performance audit from May 2017 through November  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comparison of the Department of Veterans Affairs (VA) List of Diseases Associated with Agent Orange against Those Identified by the National Academy of Sciences", "paragraphs": ["The VA recognizes 14 presumptive diseases associated with exposure to  Agent Orange or other herbicides during military service for which  veterans and their survivors may be eligible to receive disability  compensation benefits. The list of diseases provided by the VA has  generally incorporated the findings of reviews performed by the National  Academy of Sciences (the Academy). The list includes 5 diseases that  have been identified as having sufficient evidence of association and 9  that have been identified as having limited or suggestive evidence of  association. In the Academy\u2019s biannual reports, for a disease identified as  having sufficient evidence of association, the evidence is sufficient to  conclude that there is a positive association\u2014that is, a positive  association has been observed between herbicides and the outcome in  studies for which chance, bias, and confounding could be ruled out with  reasonable confidence. For a disease identified as having limited or  suggestive evidence of association, the evidence is suggestive of an  association between herbicides and the outcome but is limited, because  chance, bias, and confounding could not be ruled out with confidence.  Table 1 describes those 14 diseases and the extent of association  identified by the Academy.", "The 2014 Academy biannual report, issued in 2016, listed four more  diseases it categorized as having limited or suggestive evidence of  association, as described in table 2.", "VA officials told us that these diseases are not included on the VA\u2019s  current list of presumptive diseases associated with exposure to Agent  Orange or other herbicides because, as of October 25, 2018, the  Secretary of Veterans Affairs had yet to make the determination based on  the most recent biannual review (the 2014 report). According to the  officials, the Secretary is also considering the inclusion of parkinsonism  and Parkinson-like syndromes.", "Finally, according to the VA website, VA has recognized that certain birth  defects among veterans\u2019 children are associated with veterans\u2019 qualifying  service in Vietnam or Korea. For example, spina bifida (except spina  bifida occulta) is associated with veterans\u2019 exposure to Agent Orange or  other herbicides during qualifying service in Vietnam or Korea. The  affected child must have been conceived after the veteran entered  Vietnam or the Korean demilitarized zone during the qualifying service  period, and a child with spina bifida or covered birth defects who is a  biological child of a veteran with qualifying service may be eligible for a  monetary allowance, health care, and vocational training. The 2014 report  moved spina bifida to the lower category of \"inadequate or insufficient  evidence to determine an association,\" as studies that have been  released since the 1996 update do not support a link between the  condition and exposure to herbicides. According to VA officials, VA does  not currently plan to change its regulations based on this conclusion."], "subsections": []}, {"section_title": "Appendix III: Quantities of Herbicides Known to Have Been Shipped to Southeast Asia on Ships Identified as Having Stopped in Guam between February 1968 and May 1970", "paragraphs": ["Based on available shipment documentation and logbooks, we identified  one vessel\u2014the SS Gulf Shipper\u2014carrying Agents Orange, Blue, and  White that stopped at Port Apra (now Apra Harbor) on Guam on its way to  Southeast Asia. Additionally, we identified three vessels\u2014the SS Aimee  Lykes, the SS Buckeye Atlantic, and the SS Overseas Suzanne\u2014that  stopped in Guam on the return routes after having made various port calls  in Southeast Asia. For each of these voyages, we obtained shipment  documentation that outlined the quantities of herbicides that records  indicate had been loaded onto the vessels while at port in the United  States, and to the extent available, quantities of herbicides that were  discharged in Southeast Asia. We also obtained logbooks that identified  the routes the vessels took from U.S. ports to Vietnam and back, and  identified any port calls en route. While we are unable to confirm the  reliability of the information available in shipment documentation and  logbooks, details on the quantities of herbicides that were documented to  have been transported on these vessels during their routes are outlined  below.", "SS Gulf Shipper: According to shipment documentation and the vessel\u2019s  logbook, the SS Gulf Shipper left the port of Mobile, Alabama, on January  9, 1968, and stopped at Port Apra (now Apra Harbor) on Guam and  offloaded a mariner for repatriation to the United States on February 2,  1968. We are unable to state with certainty whether there were reasons  why this vessel stopped in Guam beyond what was reported in available  shipment documentation and the vessel\u2019s logbook. The logbook further  indicates that the SS Gulf Shipper then arrived in Saigon, Vietnam,  approximately February 27, 1968, with subsequent stops in Cam Rahn  Bay, Vietnam, approximately February 29, 1968, and Nha Trang,  Vietnam, approximately March 2, 1968. According to available  documentation, there is some discrepancy with regard to the amount of  herbicides that records indicate were loaded onto the SS Gulf Shipper  when it left the port of Mobile, Alabama. Specifically, shipment  documentation indicates that 62,570 gallons of Agent Orange, 31,735  gallons of Agent White, and 4,620 gallons of Agent Blue\u2014a total of  98,925 gallons of herbicides\u2014were loaded onto the SS Gulf Shipper  before it departed for Saigon, Vietnam. On the contrary, according to the  available shipping documentation, the vessel\u2019s manifest indicates that the  vessel was carrying 86,270 gallons of herbicides, but does not break the  total down by individual herbicide. The vessel\u2019s manifest further indicates  that the SS Gulf Shipper discharged 93,150 gallons of herbicide in  Saigon, Vietnam, on March 1, 1968, which does not align with reported  dates in the vessel\u2019s logbook. However, we are unable to determine  discharge quantities by specific herbicide\u2014for example, the quantities of  Agents Orange, Blue, or White discharged\u2014because available  documentation states that the breakdown of the herbicides would not be  determined until arrival at the depot. Moreover, we are unable to account  for the difference between the number of gallons of herbicides reported to  have been loaded onto the vessel and the number of gallons reported to  have been discharged in Saigon, Vietnam, or potentially any other  location.", "SS Aimee Lykes: According to shipment documentation and the vessel\u2019s  logbook, the SS Aimee Lykes left the port of Beaumont, Texas, on  October 4, 1969. The vessel arrived in Saigon, Vietnam, approximately  November 9, 1969. The vessel made a subsequent stop at Da Nang,  Vietnam, approximately November 23, 1969. Following its departure from  Vietnam, the SS Aimee Lykes stopped in Apra Harbor on Guam  approximately November 30, 1969, and offloaded an injured crew  member. However, the logbook does not include Guam on its list of ports  of call. Rather, there is a separate entry within the logbook that describes the vessel pulling into Apra Harbor and offloading the injured mariner into  a small motorboat so that he could be hospitalized in Guam. Therefore,  we cannot confirm whether the vessel docked at Port Apra during this  voyage. According to available documentation, the SS Aimee Lykes left  the port of Beaumont, Texas, with 880 gallons of Agent Orange on  board\u2014documentation does not indicate that there were any amounts of  Agents White or Blue on this voyage. Based on the available  documentation, we are unable to determine the quantity of Agent Orange  that was discharged in Saigon, Vietnam, or potentially any other location.", "SS Buckeye Atlantic: According to shipment documentation and the  vessel\u2019s logbook, the SS Buckeye Atlantic left the port of New Orleans,  Louisiana, on October 1, 1969. The vessel arrived in Saigon, Vietnam,  approximately November 20, 1969. The vessel made a subsequent stop  at Qui Nhon, Vietnam, approximately November 29, 1969. Following its  departure from Vietnam, the SS Buckeye Atlantic stopped at various ports  in Japan before stopping in Guam approximately December 23, 1969,  and offloading two injured crew members, one who returned to duty and  another who was repatriated to the United States. While on Guam, the SS  Buckeye Atlantic also performed a fire and boat drill on December 26,  1969, before departing. According to available documentation, the SS  Buckeye Atlantic left the port of New Orleans, Louisiana, with 17,105  gallons of Agent Orange on board. Based on the available  documentation, we are unable to determine the quantity of Agent Orange  that was discharged in Saigon, Vietnam, or potentially any other location.", "SS Overseas Suzanne: According to shipment documentation and the  vessel\u2019s logbook, the SS Overseas Suzanne left the port of New Orleans,  Louisiana, on February 28, 1970. The vessel arrived in Saigon, Vietnam,  approximately April 9, 1970. The vessel made a subsequent stop at Da  Nang, Vietnam, approximately April 17, 1970, and at Cam Rahn Bay,  Vietnam, approximately April 22, 1970. Following its departure from  Vietnam, the SS Overseas Suzanne stopped in Taiwan and Japan before  stopping in Guam approximately May 5, 1970, and offloading an injured  crew member. The vessel then departed Guam on May 9, 1970.  According to available documentation, the SS Overseas Suzanne left the  port of New Orleans, Louisiana, with 80,795 gallons of Agent Orange and  48,537 gallons of Agent Blue on board. Based on the available  documentation, we are unable to determine the quantity of Agent Orange  that was discharged in Saigon, Vietnam, or potentially any other location."], "subsections": []}, {"section_title": "Appendix IV: The Department of Defense\u2019s (DOD) List of Testing and Storage Locations Posted on the Department of Veterans Affairs (VA) Website", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Kristy Williams and Barbara  Patterson (Assistant Directors), Karyn Angulo, Emil Friberg, Ashley Grant,  Karen Howard, Kelly Husted, Richard Johnson, Amie Lesser, Keegan  Maguigan, Jeff Mayhew, Dennis Mayo, Parke Nicholson, Shahrzad  Nikoo, Josie Ostrander, Rebecca Parkhurst, Michael Silver, Anne  Stevens, Rachel Stoiko, Roger Stoltz, and Cheryl Weissman made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Agent Orange: Limited Information Is Available on the Number of Civilians  Exposed in Vietnam and Their Workers\u2019 Compensation Claims.  GAO-05-371. Washington, D.C.: Apr. 22, 2005.", "Agent Orange: Persisting Problems with Communication of Ranch Hand  Study Data and Results. GAO/T-NSIAD-00-117. Washington, D.C.: Mar.  15, 2000.", "Agent Orange: Actions Needed to Improve Communications of Air Force  Ranch Hand Study Data and Results. GAO/NSIAD-00-31. Washington,  D.C.: Dec. 17, 1999.", "Agent Orange Studies: Poor Contracting Practices at Centers for Disease  Control Increased Costs. GAO/GGD-90-122BR. Washington, D.C.: Sept.  28, 1990.", "Agent Orange: VA Needs To Further Improve Its Examination and  Registry Program. GAO/HRD-86-7. Washington, D.C.: Jan. 14, 1986.", "VA\u2019s Agent Orange Examination Program: Actions Needed To More  Effectively Address Veterans\u2019 Health Concerns. GAO/HRD-83-6.  Washington, D.C.: Oct. 25, 1982."], "subsections": []}], "fastfact": ["Veterans who were exposed to Agent Orange in the Vietnam War era may be eligible for disability compensation.", "We examined how the Departments of Defense and Veterans Affairs communicated information to veterans and the public about possible Agent Orange exposure. Specifically, we looked at information about where Agent Orange had been tested, distributed, or stored in U.S. states and territories. We found that VA's website listing of locations outside of Vietnam where veterans may have been exposed is inaccurate and incomplete.", "We made 6 recommendations to improve DOD and VA communication about Agent Orange."]}
{"id": "GAO-19-16", "url": "https://www.gao.gov/products/GAO-19-16", "title": "Older Workers: Other Countries' Experiences with Phased Retirement", "published_date": "2019-02-28T00:00:00", "released_date": "2019-04-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In response to an aging workforce, countries around the world have developed policies to encourage older workers to work longer to improve the financial sustainability of national pension systems and address shortages of skilled workers. Phased retirement is one option that can be used to encourage older workers to stay in the workforce. GAO was asked to look at phased retirement programs in the United States and other countries. In June 2017, GAO issued a report (GAO-17-536) that looked at phased retirement in the United States, where formal phased retirement programs are as yet uncommon. This report looks at phased retirement in other countries.", "Specifically, GAO examined (1) the extent to which phased retirement exists in other countries with aging populations, (2) the key aspects of phased retirement programs in selected countries, and (3) the experiences of other countries in providing phased retirement and how their experiences can inform policies in the United States.", "GAO analyzed relevant data, reviewed academic research, and conducted interviews to identify countries with phased retirement, and selected four countries with national policies permitting phased retirement programs with broad coverage for case studies. GAO also conducted interviews with government officials, unions, employer associations, and other experts."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's review of studies and interviews with employment and retirement experts identified 17 countries with aging populations and national pension systems similar to the Social Security program in the United States. These countries also have arrangements that allow workers to reduce their working hours as they transition into retirement, referred to as \u201cphased retirement.\u201d Phased retirement arrangements encourage older workers who might otherwise retire immediately to continue working, which could help alleviate pressures on national pension systems as well as address labor shortages of skilled workers. The17 countries had established phased retirement programs in different ways: at the national level via broad policy that sets a framework for employers; at the industry or sector level; or by single employers, often through the collective bargaining process.", "GAO's four case study countries\u2014Canada, Germany, Sweden, and the United Kingdom (UK)\u2014were described as employing various strategies at the national level to encourage phased retirement, and specific programs differed with respect to design specifics and sources of supplemental income for participants. Canada and the U.K. were described as having national policies that make it easier for workers to reduce their hours and receive a portion of their pension benefits from employer-sponsored pension plans while continuing to accrue pension benefits in the same plan. Experts described two national programs available to employers and workers in Germany, with one program using tax preferences. Experts also said Sweden implemented a policy in 2010 that allows partial retirement and access to partial pension benefits to encourage workers to stay in the labor force longer.", "Even with unique considerations in the United States, other countries' experiences with phased retirement could inform U.S. efforts. Some employer-specific conditions, such as employers offering employee-directed retirement plans and not being covered by collective bargaining are more common in the United States, but the case study countries included examples of designs for phased retirement programs in such settings. Certain programs allow access to employer-sponsored or national pension benefits while working part-time. For example, experts said the U.K. allows workers to draw a portion of their account based pension tax-free, and one U.K. employer GAO spoke to also allows concurrent contributions to those plans. In addition, experts said that certain program design elements help determine the success of some programs. Such elements could inform the United States experience. For instance, U.S. employers told us that while offering phased retirement to specific groups of workers may be challenging because of employment discrimination laws, a union representative in Germany noted that they reached an agreement where employers may set restrictions or caps on participation, such as 3 percent of the workforce, to manage the number of workers in the program. Employers in the U.S. could explore whether using a similar approach, taking into consideration any legal concerns or other practical challenges, could help them to control the number of workers participating in phased retirement programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The aging of the labor force has resulted in many policies designed to  keep older workers in the work force longer. One such policy, phased  retirement, allows workers to reduce their working hours and transition  into retirement. We were asked to look at phased retirement programs in  the United States and in other countries. In June 2017, we issued a report  that examined phased retirement programs in the U.S., and this report  examines phased retirement programs in other countries. The  experiences in other countries regarding phased retirement could provide  useful information to the United States where formal phased retirement  programs are not yet common.", "Our 2017 report on phased retirement in the U.S. found that although  phased retirement programs are uncommon, the programs that do exist  provide flexibility for workers and employers. This report focuses on other  countries\u2019 experiences with phased retirement and examines: (1) the  extent to which phased retirement exists in other countries with aging  populations, (2) the key aspects of phased retirement programs in  selected countries, and (3) the experiences that other countries have had  in providing phased retirement and how can that inform the U.S.  experience.", "To determine the extent to which phased retirement programs exist in  other countries with an aging population, we first used the Social Security  Administration\u2019s publication Social Security Programs throughout the  World to gather a list of 179 countries that have a national pension  program, similar to Social Security, in place. Then we used United  Nations population data to identify countries with an aging population\u2014 those with a high percentage of people aged 50 and over\u2014which further  narrowed our list to 44 countries. Next, to determine whether these  countries have phased retirement arrangements, we conducted literature  searches and reviews of relevant research published in the last 10 years;  reviewed data from the Organisation for Economic Co-operation and  Development (OECD); and consulted with subject matter experts. This  approach resulted in 17 countries with some form of phased or gradual  retirement options for older workers. From these 17 countries, we  selected 4 countries for case studies\u2014Canada, Germany, Sweden, and  the United Kingdom (U.K.)\u2014that have national policies with relatively  broad coverage to encourage phased retirement. To understand the  characteristics of the phased retirement programs in the case study  countries and whether experiences with the programs could inform efforts  in the U.S., we conducted interviews with government officials,  employers, employer associations, unions, and other experts. We  identified employers and other experts for interview through a review of  relevant research, referrals from subject matter experts, and referrals  from the U.S. Embassy in each country. For more information on our  objectives, scope, and methodology, see appendix I.", "We conducted this performance audit from June 2017 to February 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 we obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Phased retirement arrangements are programs that allow older workers  to reduce their working hours to transition into retirement, rather than  stopping working abruptly at a given age. The option to transition into  retirement through phased retirement encourages older workers who  might otherwise retire immediately to continue working. Delayed  retirement may help alleviate pressures on national pension systems and  address labor shortages and shortages of skilled workers. Phased  retirement programs exist in both the public and private sectors and are  used by employers that cover workers through both defined benefit (DB)  and defined contribution (DC) retirement plans. The programs sometimes  include a partial draw-down of pension benefits for workers while they  continue to work and may include a knowledge-transfer component.  Phased retirement programs are often called \u201cflexible,\u201d \u201cpartial,\u201d or  \u201cgradual\u201d retirement programs."], "subsections": [{"section_title": "Sources of Retirement Income", "paragraphs": ["Similar to the United States, the retirement systems in other developed  countries consist of three main pillars: a national pension, similar to the  U.S. Social Security program; workplace employer-sponsored pensions  or retirement savings plans; and individual savings. Retirement plans  can be broadly classified as DB or DC. A DB plan promises a stream of  payments at retirement for the life of the participant, based on a formula  that typically takes into account the employee\u2019s salary, years of service,  and age at retirement. A DC plan, such as a 401(k) plan in the U.S.,  allows individuals to accumulate tax-advantaged retirement savings in an  individual account based on employee and/or employer contributions, and  the investment returns (gains and losses) earned on the account. With  DC plans certain risks and responsibilities shift from the plan sponsor  (employer) to the plan participant (employee). For example, workers with  a DC plan often must decide how much to contribute, how to invest those  contributions, and how to spend down the savings in retirement. For DB  plans, many of those decisions reside with the employer. Some  retirement plans combine features of both DB and DC plans, often  referred to as hybrid plans.", "National pensions: According to literature we reviewed, many countries  have created retirement plans for their citizens and residents to provide  income when they retire. These plans are typically earnings-based and  require employer and employee contributions over a number of years,  with pension benefits not accessible before a certain age. National  pensions are generally DB plans, similar to the U.S. Social Security  program.", "Employer-sponsored pensions or retirement savings plans:  Employer-based pensions or retirement savings plans are set up by  employers to help ensure their workers have income during retirement.  Employer-sponsored plans often require both the employer and employee  to contribute money to a fund during employment so that the employee  may receive benefits upon retirement. Employer-sponsored pensions  typically refer to DB plans that promise a source of lifetime income at  retirement, whereas retirement savings plans are typically DC plans, with  retirement benefits that accrue based on contributions and the  performance of the investments in the employees\u2019 individual accounts.  Over the past several decades, there has been a significant shift in  private sector employer-based retirement plans from traditional DB plans  to DC plans. In the U.S. this shift has been to 401(k)s as the primary  employer-sponsored retirement plans.", "Individual savings: Individuals can augment their retirement income  from the national pension and employer-sponsored plans with their own  savings, which would include any home equity, investments, personal  retirement savings accounts like Individual Retirement Accounts (IRA)  used in the United States, and other non-retirement savings."], "subsections": []}, {"section_title": "Population Aging and Economic Productivity", "paragraphs": ["Population aging, primarily due to declining fertility rates and increasing  life expectancy, has raised concerns about the sustainability and  adequacy of pensions, especially as many workers continue to exit the  labor force before the statutory or full retirement age. Research indicates  that while certain countries are aging more rapidly than others, population  aging will affect most OECD countries, including the United States, over  the coming decades. For example, the share of the population aged 65  and older is projected to increase significantly by 2030 (see fig. 1).", "According to a 2017 OECD report, since 1970, the average life  expectancy at age 60 in OECD countries has risen from 18 years to 23.4  years and, by 2050, it is forecast to increase to 27.9 years. At that time,  the average person is expected to live to nearly 90 years old. The  increased life expectancy means that workers are spending more years in  retirement. In many instances, the aging population is placing additional  pressure on public pension systems and has raised concerns about the  solvency of national pension systems and the long-term adequacy of  benefits. In response, countries have used strategies, including  increasing the statutory retirement age of their national pension systems,  to reduce that pressure. However, many workers continue to leave the  workforce prior to reaching the statutory retirement age, according to  OECD data.", "To address this development, retaining older workers in the labor market  has been an objective in many countries. Some researchers have  suggested that, in the U.S., economic productivity could decline as baby  boomers age and leave the labor force, thus reducing the rate of  economic growth. For example, a 2016 study found that a 10 percent  increase in the percentage of the population age 60 and older decreases  the growth rate of per capita gross domestic product (per capita GDP) by  5.5 percent. According to this study, two-thirds of the reduction is due to  slower growth in the labor productivity of workers of all ages while one- third is due to slower labor force growth, suggesting that annual GDP  growth in the U.S. could slow by 1.2 percentage points per year this  decade, entirely for demographic reasons. Phased retirement has the  potential to provide options that would be beneficial both to older workers  and the overall economy by extending labor force participation."], "subsections": []}]}, {"section_title": "We Identified 17 Countries with Aging Populations That Have Phased Retirement Options for Older Workers", "paragraphs": ["Among the 44 countries that met our initial criteria as having a national  pension system similar to Social Security and an aging population, we  identified 17 with some kind of phased retirement program. Based on a  review of relevant research, studies, and interviews, we determined that  phased retirement programs in these countries were established in  several ways: (1) through national policies including legislative actions  and specific programs that encourage phased retirement; (2) at the  industry or sector-level through collective bargaining agreements that  cover specific occupations or sectors; and (3) by individual employers.  Table 1 shows the three types of phased retirement arrangements found  in the 17 countries we identified.", "Based on our research, we determined that a national policy on phased  retirement may provide a voluntary framework within which employers  may participate rather than a requirement that they offer such programs.  For example, Canadian officials reported Canada changed regulations  that require employers who provide defined benefit pension plans and  also offer phased retirement to allow participating workers to receive  some partial pension benefits while continuing to accrue pension credits.  However, according to the Canadian government, it is ultimately up to  individual employers to make phased retirement available for their  employees.", "In many countries, collective bargaining played a key role in the formation  of phased retirement programs, particularly at the industry or sector level.  Half of the 17 countries have \u201csectoral\u201d phased or partial retirement  arrangements established through collective bargaining agreements that  cover a large number of workers from specific industrial sectors or  occupations, such as local government workers in Sweden or metal and  chemical sector workers in Germany. Such sectoral programs can include  public and private employers that provide a program or policy that applies  to their workers only. Sometimes, companies with sectoral programs have  the flexibility to set their own program requirements, within the broad  guidelines of arrangements established through collective bargaining  agreements.", "Phased retirement programs can also be established by individual  employers. Employers offering phased retirement are generally larger  companies in the private sector with their own pension plans. Our  research found examples of phased retirement programs offered by  individual employers both within and outside of collective bargaining  agreements."], "subsections": []}, {"section_title": "Selected Countries\u2019 National Policies Were Generally Designed to Encourage Phased Retirement, and Individual Program Design Aspects Vary", "paragraphs": [], "subsections": [{"section_title": "Selected Countries Employ Various Strategies to Encourage Phased Retirement", "paragraphs": ["The national policies implemented in our four case study countries\u2014 Canada, Germany, Sweden, and the U.K.\u2014currently, are mainly  designed to encourage older workers to remain in the labor force and  continue to earn and contribute to their pensions, and often, share their  institutional knowledge with younger workers, according to the officials,  experts, and employers we interviewed. For example, according to  Canadian government officials, Canada, to retain older workers and meet  the financial needs of those workers, amended its income tax regulations  in 2007 to allow phased retirement under certain DB pension plans.  Additionally, government officials in the U.K. reported that in 2014, the  U.K.\u2019s national flexible work policy was expanded to cover older workers  who wanted to phase into retirement. They said that this was done, in  part, to keep older workers\u2014aged 50 and over\u2014in the labor force.  However, the reasons for instituting phased retirement have shifted over  time. Based on our research and interviews with foreign officials and  other experts, we found that, in some cases, phased retirement was  initially used as an incentive for older workers to retire early so employers  could hire unemployed younger workers. For example, officials reported  that in 1996 at a time of double-digit unemployment (around 10 percent),  Germany instituted a national part-time work program, the  Altersteilzeitgesetz (ATZ), to encourage older workers to retire. Officials  said this phased retirement program originally sought to get older workers  out of the labor force and encourage employers to hire unemployed  workers and trainees. Today, in response to an aging population,  Germany is using phased retirement to encourage older workers to  remain in the workforce and ensure knowledge and skills transfer,  according to officials we interviewed. In addition, our research found that  Sweden offered a national phased retirement program or a \u201cpartial  pension\u201d scheme from 1976 to 2001, mainly as an option to allow workers  to gradually withdraw from work 5 years before the statutory retirement  age. According to our research, this program was implemented, in part, to  make it the transition from work to retirement more flexible. Swedish  officials stated that the country abolished the program in 2001, mainly due  to excessive costs, and implemented a new policy in 2010 that permits  partial retirement and access to partial pension to encourage workers to  stay in the labor force longer.", "The four case study countries employed various efforts at the national  level to encourage phased retirement options that seek to keep older  workers in the labor force. From our interviews with government officials,  unions, and other experts, we found that all four countries have national  policies to help facilitate phased retirement. Examples include national  programs that companies and sectors can offer to workers\u2014such as the  national program in Germany or the program in Sweden that ended in  2001\u2014as well as implementing policies that seek to incentivize both  employers and employees to offer and participate in phased retirement  programs.", "As shown in table 2, the four countries reported having made efforts at  the national level to encourage phased retirement, including implementing  national policies and programs that involve public subsidies, tax  incentives, or changing pension rules to allow individuals to receive partial  pension benefits while continuing to accrue benefits in the same pension  plan. For additional information on the national efforts made by case  study countries, see appendix II."], "subsections": []}, {"section_title": "Individual Programs in Case Study Countries Have Similar Aspects, but Vary in Design and Sources of Supplemental Income to Workers", "paragraphs": ["Employers in our case study countries have implemented various phased  retirement programs that reflect the employers\u2019 goals for offering phased  retirement and the preferences of participating employees. Based on our  interviews with officials, employers, and representatives from employer  associations and unions in the four selected countries, we found that the  programs offered by employers in those countries had similarities and  differences in how the programs were established, designed,  implemented, and funded.", "Role of collective bargaining. Based on our research and interviews  with experts, we found that most of the phased retirement programs we  reviewed in the four case study countries were established as part of  collective bargaining agreements between employers and union- represented workers. This was often the case for sectoral programs in  either the public or private sectors and for those covering specific  occupations. The programs often covered a large number of workers. For  example, in Sweden, representatives of an organization for public  employers with approximately 1.2 million employees (23 percent of the  Swedish workforce) told us that 90 percent of the workers in Sweden  were covered by collective agreements, and that they have negotiated  collective agreements that included phased retirement for many of their  members. In Canada, one expert reported that phased retirement was  most common in fields that are highly unionized, because Canadian  unions wanted to increase flexibility for members to gradually decrease  work, but also receive a pension payment. For example, the expert said  that universities were at the forefront of phased retirement implementation  and they are highly unionized.", "While most of the programs we reviewed were based on collective  bargaining agreements, we identified a few companies that initiated  phased retirement for their workers outside of the collective bargaining  process, when the employer determined a need for such a program. For  example, one private sector employer in the financial industry we  interviewed in the U.K. told us that offering phased retirement options  addressed employees\u2019 need for flexibility. This employer commented that  if employees are happy, they will stay with the company longer and  continue to provide customers with superior service. As another example,  a large German employer in the transportation industry offers a phased  retirement program for managers who are not covered by a collective  bargaining agreement.", "Defined benefit and defined contribution plans available. Many  phased retirement programs we reviewed involve DB pension plans that  provide a fixed stream of payments at retirement for the life of the  participant. However, we also found some employers that were moving  from such plans to DC or hybrid pension plans, and phased retirement is  permitted under those plans as well. For example, a private sector  employer in the U.K. that sponsors both DB and DC retirement plans, told  us that workers in both types can participate in phased retirement and  can draw from their employer-sponsored retirement accounts at age 55,  although the drawdown rules are different for each type of retirement  plan. As another example, the UK\u2019s National Health Service workers are  currently covered by two retirement plans, according to pension plan  administrators we interviewed. Specifically, a pure DB plan initiated in  2008 is being phased out and replaced by a DB hybrid plan introduced in  2015. Both plans offer flexible retirement options, plan administrators  said.", "Health care coverage. Each of the four countries we reviewed provided  universal health care coverage. The broad availability of health care in  these countries, allows workers to reduce their work hours or  responsibilities without concern for losing health coverage, while not  increasing employer costs. This also made it easier for employers in our  case study countries to retain phasing part time workers and potentially  hire another worker without the additional cost of providing health care to  two workers.", "Program limits. Other similarities found in the phased retirement  programs that we reviewed in the four case study countries, include 1)  having a maximum age up to which a worker can partially retire\u2014 sometimes phased retirement can only be taken previous to the statutory  retirement age as set by the country\u2019s national pension system\u2014and 2)  limiting phased retirement to specific groups of employees. As examples,  one employer in Germany told us that it offers phased retirement only to  employees working in \u201chardship\u201d positions, such as those who work night  or rotating shifts, while some employers in Sweden offer phased  retirement to workers in particularly skilled occupations where workers  cannot be easily replaced, such as certain health professionals, according  to representatives from an employer association.", "Program terms and conditions. Based on our review of program  documents and interviews with program administrators, we found that the  phased retirement programs we reviewed in the four countries, regardless  of type, had basic requirements, such as age of participation, years of  service, eligible positions, period of phasing work, and time requirements;  however, the specific terms differed from program to program. For  example, a sectoral phased retirement program in Sweden allowed  workers to apply for phased retirement at age 60, and draw down 50, 80,  or 90 percent of their earned employer-sponsored retirement account  while phasing. A public sector employee program in the U.K. provided a  phased retirement option at age 55, and workers could draw down from  20 to 80 percent of their employer-sponsored pension while reducing their  work hours. In contrast, a program in Germany only allowed workers  aged 56 and older, with 20 years of service, and who had rigorous work  schedules (i.e., night shifts or rotating shifts) to apply for phased  retirement. Other aspects, such as the categories of workers eligible to  participate, also differ. For example, one higher education employer in  Canada only allows faculty and librarians to participate in phased  retirement, while another employer in the U.K. allows all employees to  apply for phased retirement.", "Sources of income. Workers participating in phased retirement typically  forego some amount of wages as a result of reduced working hours or  reduced responsibilities, similar to the wage reduction in full retirement. In  the programs we reviewed in our four countries, workers are able to offset  foregone wages, at least partially, from multiple sources. According to  program administrators and employers we interviewed, these sources  include the national pension; employer-sponsored retirement accounts;  an employer-provided benefit designated for this purpose; personal  savings; or some combination of these sources. For example, German  experts told us that, in Germany, workers participating in the national ATZ  program can reduce their work hours by 50 percent. Experts told us that  employers are required to pay a minimum of 70 percent of full-time wages  for phasing employees and pay contributions toward the employee\u2019s  pension as though the employee were working 90 percent. Among the  employers we interviewed that continue to offer the national ATZ  program, the 20 percent topped-off amount was reported as generally  financed by the employer. In the U.K., employees participating in a  private-sector employer\u2019s phased retirement programs make up for the  foregone wages by withdrawing funds from their own employer- sponsored retirement plan.", "In Canada, one employer offers a lump-sum allowance to employees  between 60 and 64 years of age who wished to reduce their hours as part  of phased retirement. Participating employees are paid a salary  proportional to their reduced hours and can use the lump-sum benefit to  supplement their income, but may not exceed their full-time salary. This  lump-sum is funded solely by the employer. During the phased retirement  period, employees can continue to contribute to their employer-sponsored  retirement account as if working full time, and need not withdraw from  their pension. In Sweden, one public sector phased retirement  arrangement is financed by employers as part of collective bargaining  agreements. This program allows workers to work 80 percent of a full- time job and receive 90 percent of a full-time salary. The employers  continue to contribute to the employer-sponsored pension as if  employees were working full-time. Workers in Sweden can also  supplement any reduced income with national pension benefits."], "subsections": []}, {"section_title": "Even with Unique Considerations for the United States, the Experiences of Other Countries with Phased Retirement Could Inform U.S. Efforts Differences in Institutional and Employer-Specific Factors May Affect How U.S. Efforts to Provide Phased Retirement Can Be Informed by Other Countries\u2019 Experiences", "paragraphs": ["Institutional and employer-specific factors in other countries, which shape  the design of phased retirement programs, typically differ from the  institutional environment experienced by many U.S. private sector  employers, although they may be similar to those common in U.S. public  sector employment. Some of these institutional factors include the extent  to which employers and workers are supported by universal health  insurance, whether the programs are structured around employer- sponsored traditional DB plans\u2014particularly for workers who have  worked at their firm long enough to qualify for phased retirement\u2014and  whether programs are the result of collective bargaining agreements. In  many of the selected countries we reviewed, phased retirement programs  designed to extend labor force participation are fairly recent. While the  rate of employment among older workers in the case study countries and  the U.S. increased in recent years, data has not been collected in the  case study countries to gauge the effects of phased retirement and  participation is low. Experiences of the case study countries suggest that,  in implementing such programs at the employer or national level, phased  retirement programs may be more effective if carefully designed based on  the employer\u2019s specific industry or production characteristics, and with  data collected and analyzed to pinpoint the most successful strategies.", "A Unique Consideration for U.S.  Companies Wishing to Offer Phased  Retirement: Importance of Employer- Sponsored Benefits  Unlike our case study countries, most U.S.  workers get their health insurance through  their employer, which can be a costly benefit  to provide. Employers with 50 or more  employees must provide coverage or pay a  fee; however, the requirement does not apply  to those working less than 30 hours per  week, on average. In June 2017, we found  that employers offering phased retirement  programs must decide if they will include  participants in their health care coverage and  that all eight of the employers with phased  retirement programs with whom we spoke  had extended their employer-sponsored  insurance to program participants.  In addition, the benefit payments provided  under U.S. Social Security may not be as  high as the national retirement benefits in  some of our case study countries and many  U.S. workers rely on employer-based  retirement benefits and personal savings for a  secure retirement. Strategies such as  allowing continued contributions during  phased retirement and supplementing  phased retirement income through partial  retirement payouts or other sources may be  helpful for worker satisfaction in phased  retirement programs. more common in the U.S. than in most of our case study countries. (see  sidebar) However, we found examples of phased retirement programs  offered to workers covered under DC pension plans that are not  collectively bargained in our case study countries. Some of the employers  with DC pensions that we learned about were transitioning from traditional  DB plans to DC plans. In these instances, newer workers are usually  enrolled in the DC plan and, because the shift is recent, many of the  workers covered under DC plans may not be old enough or have  sufficient years of service to qualify for phased retirement, where such  characteristics are criteria for participation. For example, a privately-run  transportation company in Germany reported offering phased retirement  programs that reduce working hours by about 20 percent, to workers who  meet certain criteria. Workers hired after 1995 and workers from the  former East Germany are covered under a DC plan and may qualify for  the phased retirement program. These examples indicate that private  sector employers in the U.S., where workers are increasingly covered by  DC plans rather than DB plans and generally not covered by collective  bargaining agreements, may also be able to implement and benefit from  phased retirement programs.", "Most of the programs we reviewed are relatively recent and have reported  small numbers of participants. Although OECD\u2019s data show that  employment of 55- to 64-year-olds increased between 2006 and 2016 in  Germany, Sweden, and the U.K., it is not clear what role phased  retirement has played in that growth. (see fig. 2) Governments,  employers, and unions have not systematically collected data to  understand the effect of the program on choices older workers make  regarding when to retire or the effects of phased retirement on employers,  workers, or national workforce participation. Some employers we spoke  with provided information on the number of workers who had used or  were currently using the programs, but there is not enough data to draw  conclusions, possibly because the programs are relatively new.", "As previously mentioned, the goal for some phased retirement programs  has shifted and although employers and national governments now have  greater incentives to retain older workers, the design of some phased  retirement programs may encourage workers to use the program to leave  the workforce earlier than they might in its absence. For example, experts  at a high-skill employer in Canada said that they believed that the  program may have incentivized older workers to reduce their hours when  in the absence of the program they may have worked full time."], "subsections": []}, {"section_title": "Competing Needs of Employers, Workers, and Countries Mean That Benefits for Some May Be Challenges for Others", "paragraphs": ["Employers, workers, and countries may have competing needs and goals  in phased retirement programs, which must be considered in designing  programs. Specifically, these groups may differ in their preferences in the  areas of who may participate, the primary goals for the program, and how  the program will be financed. In previous work, we found that some U.S.  employers are reluctant to offer phased retirement programs because  they believe there is not sufficient interest among employees and that  employers in industries with technical and professional workforces were  more likely to provide formal and informal phased retirement programs.  Challenges identified by the programs in our case study countries can  provide helpful insights into areas of concern in designing phased  retirement programs in the U.S.", "A Unique Consideration for U.S.  Companies Wishing to Offer Phased  Retirement: Nondiscrimination Laws  In June 2017, we found that U.S. industries  with skilled workers or with labor shortages  also have motivation to offer phased  retirement programs, in part because their  workers are hard to replace. However, U.S.  companies must comply with laws intended to  protect workers from discrimination. Experts  and employers said programs that target  highly skilled workers, who are often highly  paid, could violate nondiscrimination rules,  which generally prohibit qualified pension  plans from favoring highly compensated  employees. One study we reviewed for that  work noted that regulatory complexities and  ambiguities involving federal tax and age  discrimination laws impact an organization\u2019s  ability to offer a phased retirement program.", "Program scope: Certain experts noted that, particularly in the context of  collective bargaining, workers typically want phased retirement programs  to be broadly available; in contrast, certain employers may want narrowly  scoped programs that are targeted to certain high-skilled or scarce  workers. Phased retirement is also used by certain employers to target  key employees with rare or sought after knowledge, skills, and experience  and provide opportunities for knowledge transfer prior to retirement.  Representatives from two German companies with high-tech or high- skilled workforces noted that phased retirement was important to retain  workers with experience and knowledge.", "Employers also reported setting criteria that limit the program to  individuals with a specific length of service with the employer, with  physically difficult jobs, or with challenging schedules, which may help  employers to target the program to certain workers. We reported in June  2017, that U.S. employers noted that targeting specific workers might  pose a challenge because of laws that prohibit special treatment of  selected workers for certain U.S. pension plans. (see sidebar) The  differences in the desired scope of phased retirement programs could  potentially be resolved. For example, some experts we interviewed  reported that employers may have caps which limit participation, such as  limiting participation to a specific percentage of employees who are age  eligible. A union representative in Germany noted that employers there  may set restrictions or caps on participation, such as 3 percent of the  workforce, or an employer may effectively cap the extent of participation  by restricting the program to a budgeted amount of funds. Employers in  the U.S. could explore whether using a similar approach regarding the  scope of a phased retirement program, taking into consideration any legal  concerns or other practical challenges, could help them to control the  number of workers participating in phased retirement programs.", "Knowledge sharing/succession planning: A representative at a  German employer noted that the employer has integrated a knowledge  sharing component to its program so that workers are able to train  younger workers and share their expertise. Retaining older workers may  have an added benefit\u2014according to a U.K. public plan administrator,  their phased retirement program also brought more age diversity to the  workforce.", "One expert said that phased retirement has the additional benefit of  helping with succession planning since management has more  information about the retirement decisions of those participating in the  program. An official from a Canadian university stated that the university\u2019s  phased retirement program, which includes a specified timeframe of 3  years, helps with planning because they know exactly when the worker  will leave their job and can begin the sometimes lengthy process of  recruiting replacement faculty. In our previous report, we noted that five of  the nine employers we interviewed said that knowing when workers will  retire allows employers to plan for the future.", "Work life balance/program complexity. Union representatives in our  case study countries described several benefits that phased retirement  provides to workers. For example, one said that phased retirement  provides more choice for workers, another noted that phased retirement  allows workers to continue to work at reduced hours until they reach the  statutory age to receive a national pension, and a third mentioned that  such programs reduce the burden for workers who cannot or do not want  to work full time. Similarly, other experts we interviewed said that phased  retirement\u2019s part time work schedule provides workers the opportunity to  continue working when they might otherwise retire. The experts each  cited specific reasons workers might retire, including health concerns, the  physical demands of their work, or the responsibility of caring for a loved  one. U.K government officials stated that phased retirement for older  workers in their country originated from a 2002 policy to facilitate flexible  work for caregivers of dependent adults and young and disabled children.  According to the U.K.\u2019s government website, flexible work can be part  time, job sharing, annualized hours, or telework, among others. It also  states, that employers can decline a request for flexible employment if  they can demonstrate that granting such a request can have a detrimental  effect on the firm, but, according to a 2013 U.K. government survey, 97  percent of employers offer some kind of flexible work.", "Experts in several of our case study countries noted that the rate of  participation in phased retirement programs is low, which each attributed  to different factors, including that workers may have insufficient  knowledge or understanding of the programs; employers may have  restrictions on program participation, such as eligibility requirements or  caps on participation; or there may be insufficient interest or incentives for  workers. For example, a German academic noted that his country\u2019s  Teilrente program, which combines partial national pension benefits and  reduced work hours for workers age 63 and older, is confusing and has  not been well-marketed, leading to low uptake. In our previous report,  we noted that according to 2014 Health and Retirement Study data, an  estimated 29 percent of 61- to 66-year-olds in the U.S. plan to reduce  their work hours: however only an estimated 11 percent actually did  gradually reduce their hours.", "Extending labor force participation: Countries may want to encourage  older workers to delay retirement to increase labor force participation,  broadly or in certain sectors, especially in times of low unemployment. In  the past, phased retirement in some nations had been used as a tool to  downsize workforces and encourage workers to retire early. However, the  rising costs of national pensions and an aging workforce have now  encouraged nations to view phased retirement as a tool or mechanism to  extend labor force participation. Indeed, according to the European  Commission, increased labor force participation of older workers is a goal  of the Eurozone. According to an academic expert we interviewed,  increasing the use of phased retirement is not a specific strategy to  achieve that goal, some countries are now using such programs to help  achieve it. For example, a Swedish official commented that the availability  of phased retirement can help older workers stay in the workforce longer.  In addition, an association of employers in Germany stated that raising  the age of eligibility for national pension benefits and eliminating  incentives for early retirement was likely to induce older workers to work  longer. Delayed retirement also gives workers longer working lives and  earning potential, which may help make pension systems sustainable. A  German academic noted that continued work keeps older individuals out  of poverty and increasing retiree income could reduce their reliance on  national \u201csafety net\u201d benefits. He said that retired people are interested in  Germany\u2019s program allowing work after retirement age because they may  have insufficient savings and \u201cmini jobs\u201d provide opportunities for earning  more.", "Certain sectors of national economies may particularly benefit from  extending workers\u2019 time in the workforce. For example, an expert at a  U.K. consulting firm noted that, due to Britain\u2019s expected departure from  European Union membership the country may face labor shortages in  certain sectors, such as health care and hospitality, because of the loss of  foreign workers. He also suggested that flexible work arrangements may  help to avoid potential shortages by retaining older workers who are  citizens in those sectors. We also found, in our previous report, that  phased retirement could also benefit the U.S. economy in helping to  extend participation in the workforce.", "A Unique Consideration for U.S.  Companies Wishing to Offer Phased  Retirement: In-service Distributions and  ERISA Requirements Related to Plan  Design  We previously reported that defined benefit  (DB) plans may provide in-service  distributions, which would allow phased  retirement participants to draw a portion of  their retirement benefit during their  participation in phased retirement, to workers  aged 62 and older. Defined contribution (DC)  plan participants generally may not receive  distributions from a DC plan until they reach  age 59 \u00bd and distributions before that age  may be subject to an additional tax. Our  previous work also found that in-service  distributions may be important to supplement  salaries for participants in phased retirement.  An expert we spoke to stated that the  Employee Retirement Income Security Act of  1974 (ERISA) requirements pertaining to plan  design reduce plan flexibility since changes to  plan structure to allow for phased retirement  have to be honored even if the economy  changes and employers want to shed rather  than retain older workers. He stated that this  requirement reduces the appeal of phased  retirement for employers sponsoring DB  plans.", "Program design. Experts in certain case study countries reported that  employers must design their programs carefully to ensure that they meet  sometimes complex statutory requirements and to ensure that workers  are eligible for and benefit from phased retirement. However, some also  mentioned that designing a program that incentivizes continued work and  avoids penalties for workers can be a challenge. For example, an expert  we interviewed stated that, in Germany, early retirees can receive their  full pension benefit after 45 years of work, but they are subject to salary  caps until they reach the full retirement age, which may be a disincentive  to combining continued work with a pension draw down. Conversely,  there is an incentive for continued work in Germany without claiming a  pension since, should the worker continue to work, contribute to the  public pension, and delay claiming, their benefit increases by 0.5 percent  for each additional month worked.  In our previous report, U.S.  employers also cited concerns in designing programs to meet statutory  requirements. (See sidebar).", "According to a Eurofound report, the flexibility of phased retirement can  come with administrative costs, particularly if frequent changes are  allowed. For example, a Canadian employer noted that managing a  workforce of part-time employees was a challenge because it was  unfamiliar. They also said that, in some circumstances, their program  allowed participants to renege on their retirement date and that it was  administratively cumbersome. We also reported in our previous work that  employers using phased retirement in the U.S. had experienced  administrative concerns that included challenges with part-time  workforces.", "Potential costs of phased retirement programs. Several of the experts  we spoke with said that making programs sufficiently financially beneficial  to encourage worker participation can be costly. In addition, some  employers reported that, where available, tax incentives, government  subsidies, or financing salary supplements directly from the workers\u2019 retirement benefits were used, which may have helped to minimize their  costs in providing the programs. In contrast, some government experts  from the case study countries noted in interviews that certain government  supports had been cut, suggesting that those governments prefer  employers to finance more of the benefit. Other experts we spoke to  explained that some employers in our case study countries paid for most  of the cost of the programs themselves, although, some employers also  benefit from tax incentives. For example, according to experts, the current  provisions of the German ATZ program\u2019s required that employers provide  salary supplements of at least 20 percent of full-time wages above the  pay for partial (50 percent) employment. According to an OECD report,  initially, the supplement was paid through government subsidies to  employers but now, if employers wish to retain the program, they must  pay the salary supplement themselves, adding additional costs to  employers. German government officials noted that the salary  supplement paid during phased retirement is tax-advantaged. Such  incentives might also encourage employers in the U.S. to offer phased  retirement programs.", "Potential reductions in future benefits: Some experts noted that  certain phased retirement programs allow workers to reduce their hours  without a proportional reduction in wages or benefits when they enter full  retirement. It may also provide more options in how to draw down  benefits. However, some programs we reviewed also include pay that is  less than what is received during full employment and may involve  reduced benefits after retirement, which is a factor for workers  considering participation. For example, German experts explained that  ATZ requires a salary supplement of at least 20 percent of salary,  effectively resulting in workers receiving 70 percent of their wage for 50  percent of hours worked. In our previous report, we noted that according  to 2014 HRS data, an estimated 22 percent of U.S. workers aged 61- to  66-years surveyed would be interested in reducing their hours even if it  meant their pay would be reduced proportionally. We also found in our  previous report that low savings and concerns about eligibility for health  benefits may create barriers that affect workers\u2019 ability or interest in  participating in phased retirement programs.", "Even when they receive employer-provided subsidies, as in Germany,  workers\u2019 salaries in phased retirement programs are less than under what  is earned for full-time work. A recent OECD report noted that removing  obstacles, such as limits on earnings while working and receiving pension  payouts and limits on the accumulation of benefits, is important to make  combining work and pensions more attractive. A Canadian employer  had similar concerns and noted that workers may be reluctant to reduce  their hours without having some way to supplement their income, for  example through a partial draw down on their retirement savings or  private or public pension.", "In some cases, workers may work and draw a benefit from their national  or employer-sponsored pension plan. Some experts reported that certain  programs allow workers to continue to contribute to their pension plans or  earn pension credits. Union representatives in the U.K. and Germany  noted the importance of workers remaining in the labor force longer for  the purpose of increasing their income after full retirement. For example,  according to a U.K. government website, the U.K. has no mandatory  retirement age for the national pension system and allows individuals who  have reached the retirement age to work and draw a benefit. According  to a U.K. government website, if a worker continues to work after the full  retirement age and delays their claim for the national pension benefit,  their weekly payments could be larger when they do choose to retire and  take their benefit. Experts at a privately run German transportation  company noted that workers earn 100 percent of their pension credits  during the period that they are participating in the company\u2019s phased  retirement program. In addition, the U.K. allows workers to draw a portion  of their plan benefits\u2014with 25 percent being tax-free\u2014and one U.K.  employer we spoke to allows continued contributions to those plans.", "Participants may also see reductions in their retirement benefits after full  retirement. Workers with DC plans may reduce their retirement savings  through early withdrawals during phased retirement. Similarly, depending  on program design, workers may have limitations on their contributions to  their employer-sponsored DB plan or public pension during phased  retirement; yielding lower pension benefits at retirement. An OECD report  notes that national pension payments made during participation in phased  retirement programs and any change in the age at which a worker retires,  such as retiring prior to or after the full retirement age, should result in  pension adjustments that are actuarially neutral\u2014in other words, workers  taking early pension payments will have reduced benefits for the duration  of their retirement while those who delay payment receive increased  benefits. One expert at a German university noted that participants do  not always realize the effect the program will have on their pensions."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Commissioner of the Social  Security Administration, the Secretary of State, the Secretary of Labor,  the Secretary of the Treasury, the Commissioner of the Internal Revenue  Service, and the Acting Director of the Office of Personnel Management.  The Social Security Administration provided a technical comment, which  was incorporated as appropriate. The remaining agencies had no  comments.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Commissioner of the Social  Security Administration, the Secretary of State, the Secretary of Labor,  the Secretary of the Treasury, the Commissioner of the Internal Revenue  Service, the Acting Director of the Office of Personnel Management, and  other interested parties. This report will be available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the extent to which phased retirement exists in  other countries with aging populations, (2) the key aspects of phased  retirement programs in selected countries, and (3) the experiences that  other countries have had in providing phased retirement and how that can  inform the U.S. experience.", "To determine the extent to which phased retirement exists in other  countries with aging populations, we used data from the Social Security  Administration\u2019s publication Social Security Programs throughout the  World and United Nations population data to first identify countries with  aging populations. Social Security Programs throughout the World  contains comprehensive data on the social security programs in different  countries around the world, including the statutory retirement age, early  retirement age, and GDP per capita. We used the Social Security  Administration\u2019s publication to gather a list of 179 countries that have  some kind of social security program. For these countries, we used  United Nations population data to find the proportion of the population  aged 50 and over, where available. We then limited our research to those  countries whose proportion of population aged 50 and over is more than  one standard deviation above the average. This group represents  countries where the proportion of the population aged 50 and over is  above 33 percent, and includes a total of 44 countries.", "To determine whether the 44 countries that met our initial criteria of  having 1) an national pension program similar to social security and 2) an  aging population have adopted phased retirement programs, we reviewed  the Organisation for Economic Co-operation and Development (OECD)  and the European Union reports and data that focus on older workers and  extending work life in other countries. We focused on OECD and  European Union countries because they are advanced economies that  are most similar to that of the United States. In addition, we conducted  literature searches and reviews to identify countries with phased  retirement programs aimed at extending working lives of older workers as  well as to assist with knowledge transfer from older workers to younger  workers. The literature searches comprised of terms related to phased  retirement, such as gradual retirement; partial retirement; labor force  participation of older workers; and transitional retirement. We limited our  searches to literature released during the 10-year period from 2007 to  2017. Additionally, we spoke with subject matter experts to gain their  perspective on which countries offer phased retirement programs or have  a policy aimed at extending working lives of older workers. We identified  these experts through our review of relevant literature and expert  referrals. In total, we identified 17 countries with some form of phased or  gradual retirement options for older workers. We examined these 17  countries to identify the types of phased retirement programs within each  country. For example, we researched whether the country had (1)  national phased retirement policies or programs (2) sectoral programs  established through collective bargaining agreements that cover specific  industries, occupations, or sectors; and (3) individual employer programs.", "To obtain a more complete understanding of key aspects, and the  benefits and challenges of phased retirement programs in selected  countries, as well as potential lessons learned for the U.S., we reviewed  the group of aging countries with relevant programs identified in the first  objective, to select a sample of four countries for case studies. These  countries are Canada, Germany, Sweden, and the United Kingdom  (U.K.). The criteria for selecting case study countries included being  described in literature or by experts as having a national policy related to  phased retirement or as having taken legislative action, in part, to  facilitate or encourage phased retirement, a variety of sectoral and  individual employer programs (public and private sector), when the  programs were implemented, and expert or industry recommendations.  We also considered the various countries\u2019 economic and social  frameworks and whether they are similar to that of the U.S. Specifically,  we selected Canada, Germany, Sweden, and the U.K. because they had  national phased retirement policies, which may include a national  program such as in Germany and Sweden, and a wide variety of phased  retirement programs in both the private and public sectors. For the case  studies, we conducted interviews with government officials, program  administrators, employer associations, unions, and employers to obtain  in-depth program information and to learn about their experiences with  phased retirement. We identified appropriate officials and organizations to  contact primarily through review of relevant literature, subject matter  expert recommendations, and referrals from the U.S. Embassy in each  country. We reached out to a variety of labor unions and employers in  selected countries in an effort to obtain multiple perspectives on issues  related to phased retirement and met with those available to speak with  us. We did not conduct an independent legal analysis to verify the  information provided about the laws, regulations, or policies of the foreign  countries selected for this study. Rather, as described above, we relied  on appropriate secondary sources, interviews, and other sources to  support our work. We submitted key report excerpts to government  officials in each country, as appropriate, for their review and verification,  and we incorporated their technical corrections as necessary.", "To determine whether experiences with phased retirement in other  countries could inform efforts in the U.S., we relied on testimonial  evidence from interviews and a review of relevant research. The  applicability of lessons learned was shaped by the differences in the  national pension and social systems in the selected countries, such as  the availability of healthcare and other retirement benefits."], "subsections": []}, {"section_title": "Appendix II: Key Features of Phased Retirement Systems", "paragraphs": ["To compile the information in this appendix, we interviewed officials and  program administrators from selected phased retirement programs in  Canada, Germany, Sweden, and the United Kingdom (U.K.), as well as  employer associations, unions, and retirement experts. We also reviewed  documentation and obtained statistics from country agencies. We  identified employers offering phased retirement programs primarily  through reviews of relevant literature, referrals from subject matter  experts, and referrals from the U.S. Embassy in each country. We  reached out to a variety of labor unions and employers in selected  countries and met with those available to speak with us. We did not  conduct an independent legal analysis to verify the information provided  about the laws, regulations, or policies of the countries selected for this  study. Rather, we relied on appropriate secondary sources, such as plan  documents; interviews; and other sources. We submitted key report  excerpts to government officials in each country, as appropriate, for their  review and verification, and we incorporated their technical corrections as  necessary."], "subsections": [{"section_title": "At a glance", "paragraphs": [], "subsections": [{"section_title": "\u2022 Population: 37 million (2018) \u2022 GDP: $1.65 trillion (2017) \u2022 Statutory retirement age:", "paragraphs": ["starting at age 65 with full  benefits", "Early retirement age: 60, with  Sources of retirement  income  National pension: The earnings- related Canada Pension Plan  targets a replacement rate of 25  percent of average lifetime  earnings, up to a maximum  earnings limit each year. Starting in  2019, this plan will replace one- third of average earnings, and the  earnings range used to determine  average earnings will also  gradually increase. Employees in  the province of Quebec have their  own Quebec Pension Plan, broadly  similar to the Canada Pension  Plan.", "National efforts to encourage phased retirement  In 2007, Canada introduced changes to the Income Tax Regulations to  allow more flexible phased retirement arrangements under defined benefit  (DB) registered pension plans. Under the pension tax rules, phased  retirement allows an individual to receive a portion of his or her pension  benefit from a DB pension plan while continuing to accrue pension  benefits in the same plan. The income tax regulation changes permitted  qualifying employees to receive up to 60 percent of their accrued benefits  in their employer-sponsored DB pension while continuing to accrue further  pension benefits based on either full-time or part-time work, subject to  employer agreement. Qualifying employees must be at least 60 years of  age or aged 55 or older and eligible for an unreduced pension under the  terms of the DB plan.   Highlights of individual phased retirement programs  Sectoral Collectively Bargained Programs", "Employer group 1: Certain provincial government hospital employees  of this public sector employer, those aged 55 or older with at least 5  years of service, can reduce their work schedule to between 50 and 60  percent of full-time work, and receive pay proportional to hours worked  plus an annual pension pre-payment from their employer-sponsored  retirement plan, which changed from a DB to a target benefit or  shared-risk plan. Combined, the payments equal 85 percent of full- time earnings. Workers can choose to phase for a period of 1 to 5  years. Participants continue to accrue pension service benefits based  on full-time work.", "Employer-sponsored pensions:  Registered Pension Plans  established by employers or unions  to provide pensions for employees.  In general, the plans can be  defined benefit (DB), defined  contribution (DC), or a combination  of DB and DC plans.", "Individual savings: Individuals  can use tax-assisted arrangements  that foster personal savings  including Registered Retirement  Savings Plans that are similar to  traditional IRAs in the United  States and the Tax Free Savings  Account\u2014a general purpose  savings plan that provides tax  treatment similar to Roth IRAs in  the United States. the ages of 60 and 64, can reduce their workload by working fewer  hours. They are paid a salary proportional to their reduced hours and a  lump-sum retirement allowance, paid by the employer that can be  used to supplement their income, not to exceed their full time salary.  Participants can continue to contribute to the employer-sponsored DB  plan as if working full time.", "Canada (cont.) participate in phased retirement up to 3 years prior to age 71.  Participants can work 50 percent of full time work each year over a 3- year period and get paid a salary proportional to their reduced hours.  Participants cannot draw from their employer-sponsored DB plan, but  can contribute to it and the national pension as if working full time.", "Employer 5: An employer with two phased retirement programs. One  program was established through a collective bargaining agreement,  and allows unionized faculty aged 60 or older with at least 10  continuous years of service to slowly reduce their work time and  receive proportionate pay. Participants can contribute to their  employer-sponsored DC pension as if working full time. Participants in  this program cannot draw from their pension until fully retired. The  second phased retirement program was established in-house by the  employer (outside of collective bargaining agreements) for non-faculty  staff (see details below).", "Employer 5 (same employer 5 above): All non-faculty staff over age  55, with at least 15 years of full-time work can reduce hours for up to 3  years.", "Source of supplemental income  In Canada, employees participating in phased retirement programs we  reviewed were compensated for foregone wages due to reduced hours  primarily by withdrawing funds from their own employer-sponsored  pension plan, a lump sum benefit funded by the employer, or their  savings, as necessary."], "subsections": []}]}, {"section_title": "At a glance", "paragraphs": [], "subsections": [{"section_title": "\u2022 Population: 82.3 million (2018)", "paragraphs": ["GDP: $3.68 trillion (2017) and a few months, gradually  increasing to 67 by 2029  (Those with 45 years of  contribution can get a full  pension at 63, gradually  increasing to 65)", "Early retirement age: 63 with  35 years of contributions, with  reduced benefits, gradually  increasing to 67  Sources of retirement  income  National pension: An earnings- related pension, requiring at least 5  years of contributions. In 2018, the  employer and employee  contribution rates were 18.6  percent of covered earnings. common national phased retirement program, the ATZ was  established in 1996. Broad program guidelines specify that the  program is available to those 55 and older and allows part-time work  up to 6 years prior to the statutory retirement age. Workers can  participate in the ATZ under two basic models: one in which an  employee works part-time the entire period (reducing hours up to 50  percent of full-time work) and a second \u201cblock\u201d model with 100 percent  work the first half of the period and 0 percent the second half. The  second model was the most popular among workers as a way to retire  early. Employers pay a minimum of 70 percent of full-time wage for  works in the phasing period. In general, 20 percent of the income  foregone due to a reduction in hours worked is paid by the employer,  who would also pay contributions toward the national pension as  though the employee was working 90 percent of the time. ATZ  provides tax benefits to both employers and employees on the 20  percent supplemented wages and the national pension contributions.  The ATZ program provides the general framework, but employers and  employees can set specific parameters through collective bargaining  agreements. In 2009, the program reached its peak with 680,000  participants, when public subsidies were discontinued. Public sector  employees have access to a phased retirement program similar to  ATZ with minor differences such as a starting age of 60 instead of 55  and a maximum duration of 5 years.", "Employer-sponsored pensions:  While most occupational pension  plans are DB plans, they vary by  how they are funded, such as book  reserves, autonomous pension  funds or direct insurance.  Employer-sponsored pensions are  generally voluntary and cover  about 60 percent of the workforce.  Pension reforms implemented in  January 2018 aim at increasing  coverage by making it less onerous  for employers to sponsor DC  pensions. The reforms removed  the guaranteed minimum benefit  that was previously required for DC  plans that made it difficult for  smaller employers especially to  offer pensions to their workers.", "Teilrente: This national phased retirement program, established in  1992, allows eligible workers to work reduced hours and draw partial  benefits from the national pension at the same time, with a ceiling on  allowable earnings for those below the statutory retirement age. The  program is used very little because it is perceived as complicated,  though program reforms in 2017 simplified some of the features and  added flexibility, such as raising the earnings limit and replacing the 3- tier partial benefits with smoother withdrawal options between 10  percent and 99 percent of pensions. In general, eligibility for Teilrente  starts at age 63, and there are no rules on additional earnings past the  full retirement age. With the reforms, policymakers hope more people  will consider the program and not stop working completely at 63 when  they reach early retirement age.", "Sources of retirement  income (cont.)  Individual savings: Private  retirement savings include products  such as Riester pensions, first  introduced in 2002. Riester  pensions benefit from tax  incentives on contributions but also  from additional direct public  subsidies for low-income  households and households with  children. The self-employed are  generally not eligible for Riester  pensions but can benefit from the  Ruerurp pensions, another  instrument for private retirement  savings.", "Germany (cont.)", "Employer 1: This employer offers the ATZ program to its workers.", "Currently, almost 14 percent of this employer\u2019s eligible workers aged  over 55 and covered by collective bargaining agreements participate in  the ATZ phased retirement program. Of those in the program, about  half are in the active phase of ATZ, working 100 percent (first years of  the block model), while the other half are in the second phase with 0  percent work (last years or second half of the block model).  Participants in the ATZ receive 85 percent of full-time wages for an  average of 50 percent of full-time hours during the phasing period,  which lasts up to 6-years. The employer also contributes 100 percent  of full-time wages to the employer-sponsored hybrid contribution plan  and the national pension plan during the entire phasing period.", "Employer 2: This employer has workers covered by collective  bargaining agreements participating in the ATZ phased retirement  program. Accordingly, employees 55 and older can reduce their hours  to 50 percent for up to 6 years prior to the statutory retirement age,  subject to approval. However, the employer reports it is phasing out  ATZ as it has negotiated its own company phased retirement program.  The new program targets workers in hardship positions, such as those  who work night or rotating shifts. Specifically, workers aged 56 and  older with at least 20 years of service with this employer, including at  least 10 years of service in a hardship position, can phase into  retirement for a maximum of 6 years and then must retire. Eligible  workers can work 80 percent of full-time hours, receive 90 percent of  their full-time wage, and receive 100 percent of their employer- sponsored pension credits as well as 90 percent of national pension  credits. There is no cap on the number of workers who may  participate, though eligibility requirements effectively limit the number  of workers who can enroll. Currently 2,400 workers are participating in  the program.", "Employer 1 (same employer 1 above): This employer offers a  phased retirement program to certain retired executives for the  purpose of retaining experience and knowledge, with a temporary  contract (18 months maximum). The program is relatively new and  currently includes about 80 senior experts, about 85 percent of which  are aged 65 or older.", "Employer 2 (same employer 2 above): This employer offers a  phased retirement program for managers, that allows managers to  work an 80 percent schedule and receive 80 percent of their pay and  100 percent of their pension credits.", "Source of supplemental income  In Germany, employees participating in phased retirement programs we  reviewed were compensated for the foregone wages due to reduced hours  primarily by their employer, together with their own savings schemes.", "National efforts to encourage phased retirement", "The current part-pension national policy, in effect since 2010, allows  workers, after age 61, to withdraw 25, 50, 75, or 100 percent of their  national pension benefits, independent of hours worked. Individuals  can draw from the earnings related to part of their national pension  and continue to earn new pension entitlements. There is no penalty for  working and earning and drawing from the national pension. The  decision to draw a pension has a lifelong effect, but is not irrevocable.  The pensioner can instruct pension payments to cease and  subsequently for the pension to resume at any time. The two  components of the national pension, the income pension and the  premium pension, are drawn independently of each other.", "Early retirement age: None  Sources of retirement  income   National pension: The earnings- related national pension has two  components, one notional income  pension and a smaller DC premium  pension. Employers and  employees contribute 16 percent of  salary toward the income pension  and 2.5 percent towards the  premium pension, for a total of an  18.5 percent contribution rate.", "Sweden had a national partial pension program that was in effect from  1976 to 2001, when it was abolished. The program allowed workers to  gradually withdraw from work 5 years before the statutory retirement  age, which was lowered from 67 to 65 at the time. Partial retirement  was publicly funded, replacing 65 percent of the loss of income  resulting from the reduction in hours worked (made less generous with  a replacement rate of 50 percent in 1981). Upon reaching the statutory  pension age of 65, program participants still received a full old-age  pension.", "Highlights of individual phased retirement programs  Sectoral Collectively Bargained Programs", "Local authorities and regions employers: Public sector workers  covered by a multiemployer collective bargaining agreement can work  80 percent of full-time work, receive 90 percent of full time salary, and  receive an employer-sponsored pension as if working full-time.", "Employers of graduate engineers: Engineers covered by a  multiemployer collective bargaining agreement, age 60 and older may  apply for the right to part-time retirement. Once approved the  employees can ask to reduce their hours and receive 50, 80, or 90  percent of the earned employer-sponsored pension.", "Employers of professional employees: White collar union members  working in all parts of the labor market, including schools, healthcare,  trades, media, police, sports, and telecom, among others, are covered  by a multiemployer collective bargaining agreement that allows  phased retirement. This program allows workers aged 62 and older to  shorten their working hours and begin to take withdrawals from their  employer-sponsored pension.", "Sweden (cont.)", "Sources of retirement  income (cont.)  Employer-sponsored pensions:  Workplace pension plans are  generally established through  collective bargaining agreements  and cover about 90 percent of  workers, in the public and private  sectors. Employers and unions  negotiate the details of workplace  pensions in four sectoral collective  bargaining agreements: blue-collar  private sector, white-collar private  sector, state employees, and  municipal employees. Most  workplace pensions are DC plans.  In general, workers can withdraw  from pensions at age 55.", "Source of supplemental income  In Sweden, employees participating in a phased retirement programs we  reviewed were generally compensated for foregone wages due to reduced  hours primarily by withdrawing funds from their own employer-sponsored  pension plan or their own savings, as necessary. Workers also have the  option to withdraw benefits from the national pension after age 61.", "Individual savings: Until 2016, it  was possible to make tax  deductions for private pension  saving, up to a maximum. The tax- deductibility of private voluntary  pension savings was abolished in  2016 for all but the self-employed,  who do not qualify for occupational  pension plan reductions.", "Population: 66 million (2017)", "GDP: $2.62 trillion (2017)", "Statutory retirement age:  (state pension age) 65,  gradually rising to age 66 from  2018 to 2020, to age 67 from  2026 to 2028 and to age 68  between 2037 and 2039.", "National efforts to encourage phased retirement  Since 2014, the UK has had a flexible work policy where any employee  who has worked for their employer continuously for at least 26 weeks has  the statutory right to request flexible work. There are several types of  flexible working, including job sharing, working from home, working  compressed hours, or working annualized hours, among other things. The  policy covers workers who want to phase into retirement.", "Early retirement age: None  (for the state pension)"], "subsections": []}]}, {"section_title": "Sources of retirement income", "paragraphs": [], "subsections": [{"section_title": "National pension: A flat-rate single-tier national pension was introduced in April 2016. This new pension plan replaces the previous two-tier system and provides a regular payment of about \u00a3164 per week (increasing to \u00a3168.60 in April 2019) or \u00a38,528 per year, unless the pension is deferred, in which case it increases by about 5.8 percent per year.", "paragraphs": ["Employer-sponsored pension:  Since the 2008 Pensions Act,  employers have been required to  automatically enroll eligible workers  into a qualified workplace pension  plan and make minimum  contributions, with the option for  workers to opt-out. The qualified  plans can be either DB, DC, or  hybrid plans. The National  Employment Savings Trust (NEST),  managed as an independent entity,  was established by the government  to help employers meet their  obligation to automatically enroll  eligible workers in a retirement plan  and thus functions as the default  qualified workplace plan. covered by this DB pension plan, aged 55 and older, can reduce their  hours or move to a less senior position. Reduced income can be  supplemented by the workers workplace pension. Participants can  draw some or all of their pension benefits, while continuing to  contribute into their pension and build up future pension benefits.  According to plan documents, actuarial reductions on benefits paid  before a worker reaches their statutory retirement age can be waived,  in whole or in part, upon agreement with the employer.", "Teacher\u2019s Pension: Since 2007, teachers, between the age of 55 and  75 in England and Wales covered by this DB pension plan, can reduce  earnings by at least 20 percent due to part time work or a reduction in  responsibilities for a minimum of 1 year. This reduction in income can  be supplemented by the workers workplace pension. The maximum  amount that participants can withdraw from their pension is 75 percent  of the total pension benefits. Remaining pension benefits continue to  grow as participants continue to work and contribute on a reduced  salary. According to plan documents, benefits taken before statutory  retirement age would be subject to actuarial reductions.", "United Kingdom (cont.)", "Sources of retirement  income (cont.)  Individual savings: Savings  arranged by the individual\u2014similar to  traditional or Roth IRAs in the U.S.  The U.K. has Individual Savings  Accounts that allow an individual to  save up to a designated amount per  year tax-free. Workers can take  money out of their Individual Savings  Account at any time.", "Highlights of individual phased retirement programs (cont.)", "Civil service pension: Since 2008, civil service workers covered by  the civil service pension, aged 55 and older, can reduce their earnings  by at least 20 percent due to reduced hours or reduced job  responsibilities. Participants can take some or all of their pension and  pension lump sum they have accrued, while continuing to work, and  contribute to their pension until their normal pension age. Drawn down  benefits paid before a worker reaches their normal pension age are  actuarially reduced as they are being paid early.", "A private sector employer in the financial industry offered phased  retirement to employers under both a DB and a DC plan. Both plans allow  workers age 55 and older to reduce their hours and receive benefits from  their DB and DC pension plans. Workers continue to contribute to their  workplace pension and the national pension plan.", "In the U.K., employees participating in phased retirement programs we  reviewed were generally compensated for the foregone wages by  withdrawing funds from their own workplace employer sponsored pension  plan."], "subsections": []}]}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above Michael Collins (Assistant  Director), Susan Chin (Analyst-in-Charge), Laurel Beedon, Britney Tsao,  Margaret J. Weber, and Seyda Wentworth made key contributions to this  report. Also contributing to this report were Sharon Hermes, Amy  MacDonald, Sheila R. McCoy, Kelly Snow and Adam Wendel."], "subsections": []}]}], "fastfact": ["\u201cPhased retirement\u201d lets you work less than full-time before you fully retire. This can help keep skilled people working longer while easing pressure on national pensions (e.g. Social Security).", "The U.S. workforce is aging, but there are few formal phased retirement programs here. We looked at 4 other countries to potentially inform a U.S. strategy.", "We found program designs that could work under the unique institutional conditions here. For example, many of the programs were designed to work with traditional pensions, but some included employee-directed retirement plans, which are more common here."]}
{"id": "GAO-17-801T", "url": "https://www.gao.gov/products/GAO-17-801T", "title": "Environmental Protection: Status of GAO Recommendations Made to EPA since Fiscal Year 2007", "published_date": "2017-09-06T00:00:00", "released_date": "2017-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["EPA's mission is to protect human health and the environment. To accomplish this mission, EPA develops and enforces environmental regulations; awards grants; and studies environmental issues, among other things. GAO has conducted reviews focused on various aspects of EPA's operations and programs. Through this work, GAO has made numerous recommendations to improve EPA's performance and the efficiency and effectiveness of its operations.", "GAO follows up with executive branch agencies to determine the extent to which they have implemented its recommendations. In fiscal year 2015, GAO began sending letters annually to the heads of key executive branch agencies, including EPA, identifying unimplemented recommendations that warrant priority attention.", "This statement discusses (1) the status of EPA's implementation of GAO recommendations made since fiscal year 2007 and how these recommendations relate to EPA's operations and programs and (2) examples of benefits realized by EPA and others based on GAO's work, including through the agency's implementation of these recommendations. This statement is based on GAO's work since fiscal year 2007 and on an analysis of recommendations GAO has made to EPA during this period."]}, {"section_title": "What GAO Found", "paragraphs": ["As of August 23, 2017, the U.S. Environmental Protection Agency (EPA) had implemented 191 of the 318 recommendations GAO made since fiscal year 2007. EPA had not yet implemented the remaining 127 recommendations. The figure below shows the status of the 318 recommendations. The recommendations fall into six broad categories that relate to EPA programs and operations: (1) management and operations; (2) water issues; (3) environmental contamination and cleanup; (4) toxics, chemical safety, and pesticides; (5) public health and environmental justice; and (6) air quality, climate change, and energy efficiency. Almost three-fourths of the recommendations fall into the first three categories and include actions for EPA to better manage grants, improve the regulation of drinking water contaminants, and better manage hazardous waste cleanup. Most of the recommendations that have not yet been implemented concern EPA management and operations and water issues. For example, regarding management and operations, EPA has not yet implemented GAO's recommendation to link its workforce plan with its strategic plan to help ensure EPA has an appropriately skilled workforce to achieve its mission. Similarly, for water issues, EPA has not fully implemented GAO's recommendation to provide guidance to regional offices on overseeing state water quality programs.", "GAO has identified many benefits\u2014that is, process and programmatic improvements and financial benefits\u2014based on EPA taking actions on GAO's recommendations and related work. For example, in October 2012, GAO recommended that EPA and the U.S. Department of Agriculture (USDA) develop guidelines to assist states in developing uniform environmental analyses to meet state and federal requirements for water and wastewater infrastructure projects. EPA and USDA issued a joint memorandum in February 2017 that, among other things, highlighted best practices to eliminate duplicative environmental reviews. In addition, GAO has identified financial benefits from the implementation of its recommendations and related work. For example, during the course of work related to a July 2008 report, GAO identified an error in EPA's calculation of recoverable indirect costs for hazardous waste cleanup. EPA acknowledged the error and published revised indirect costs rates. As a result, GAO estimated in 2010 that EPA had recovered or would recover $42.2 million."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to testify on the status of recommendations  GAO has made to the U.S. Environmental Protection Agency (EPA). As  you know, the mission of EPA is to protect human health and the  environment, with the purpose of protecting all Americans from significant  risks to human health and the environment where they live, learn, and  work, among other things. To accomplish this mission, EPA develops and  enforces environmental regulations; awards grants to state environmental  programs, non-profits, educational institutions, and others; studies  environmental issues; and sponsors partnerships, among other things.  We have conducted reviews focused on various aspects of EPA\u2019s  operations and programs. For example, we have conducted reviews  focused on aspects of EPA\u2019s operations, such as managing grants,  workforce planning, and processes for developing and enforcing  regulations. We have also conducted reviews on EPA\u2019s programs to  manage toxic chemicals, improve water infrastructure, and clean up  hazardous waste sites. Through these reviews, we have made numerous  recommendations to improve EPA\u2019s performance and the efficiency and  effectiveness of its operations and programs. Today I will discuss (1) the  status of EPA\u2019s implementation of recommendations we have made since  fiscal year 2007 and how these recommendations relate to EPA\u2019s  operations and programs and (2) examples of benefits realized by EPA  and others based on our work, including through the agency\u2019s  implementation of our recommendations.", "This statement is based on our reports issued since fiscal year 2007,  including reports issued from October 1, 2006, through May 31, 2017. To  determine the number and status of recommendations we made to EPA  during this period, we reviewed data from our internal database that  maintains information on the status of recommendations we have made  to all agencies. To determine how these recommendations relate to EPA  operations and programs, we developed categories based on areas of  EPA\u2019s work and its organizational structure. Two analysts then  independently categorized each of the recommendations and resolved  any differences. To identify benefits realized by EPA in implementing our  recommendations, we also relied on our internal database for information  on financial and non-financial benefits. In addition, we asked EPA to  review the information provided in this statement for completeness and  accuracy. Detailed information about the scope and methodology used to  conduct our prior work can be found in each of our issued reports.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Many of our reports and testimonies include recommendations that, if  acted upon, may result in tangible benefits for the U.S. taxpayer by  improving the federal government\u2019s efficiency, effectiveness, and  accountability. Implemented recommendations can result in financial or  nonfinancial benefits for the federal government. An estimated financial  benefit is based on agency actions taken in response to our  recommendations; such benefits can result in reduced government  expenditures, increased revenues, or a reallocation of funds to other  areas. For example, in fiscal year 2016, our work across the federal  government resulted in $63.4 billion in financial benefits. Other benefits  that result from our work cannot be measured in dollar terms, and we  refer to them as nonfinancial or other benefits. During fiscal year 2016,  we recorded a total of 1,234 other benefits from our work that cannot be  measured in dollars, but that led to program and operational  improvements to the federal government. These benefits are linked to  specific recommendations or other work that we completed over several  years and could include improvements to agency programs, processes,  and policies. In some cases, benefits are realized based on the actions of  Congress. For example, since 1994, we have found that EPA faces  challenges in its ability to assess and control toxic chemicals under the  Toxic Substances Control Act of 1976\u2014largely due to issues of statutory  choice, regulatory control, data, confidentiality, workload, and resources.  In response to our work and the work of others, Congress passed the  Lautenberg Act in 2016, giving EPA greater authority to implement  several of our outstanding recommendations related to these six areas  and positioning the agency to better protect public health and the  environment from the risks posed by toxic chemicals.", "As part of our responsibilities under generally accepted government  auditing standards, we periodically follow up on recommendations we  have made to agencies and report their status to Congress. Agencies  also have a responsibility to monitor and maintain accurate records on  their progress made toward addressing our recommendations. After  issuing a report, we follow up with audited agencies at least once a year  to determine the extent to which they have implemented our  recommendations and the benefits that they have realized. During these  follow-up contacts, we identify for agencies what additional actions, if any,  they would need to take to address our recommendations. A  recommendation is considered implemented when agencies have taken  actions that, consistent with our recommendation, address the issue or  deficiency we identified and upon which the recommendation is based.  Experience has shown that it takes time for agencies to implement some  recommendations. For this reason, we actively track unaddressed (i.e.,  open) recommendations for 4 years and review them to determine  whether implementation can be reasonably expected. The review  includes consideration of alternative strategies an agency may have for  implementing recommendations. Our experience has shown that  recommendations remaining open after 4 years are generally not  implemented in subsequent years. We will close a recommendation as  not implemented if an agency has indicated that it was not planning to  take action or if we have determined that it is unlikely that the agency will  take action to address the recommendation. Figure 1 shows our process  for monitoring and reporting on recommendations.", "We maintain a publicly available database with information on the current  status of most open recommendations. The database allows searches  by agency, congressional committee, or key words and is available at  http://www.gao.gov/openrecs.html.", "In addition to our process for monitoring and reporting on  recommendations, we use other mechanisms to encourage agencies to  implement our recommendations in a timely manner. For example, we  initiated an effort in fiscal year 2015 to call attention to unimplemented  recommendations that we believe warrant priority attention by the  Secretary or agency heads at key departments and agencies. We sent  letters to the heads of key executive branch agencies, including EPA, in  fiscal years 2015, 2016, and 2017 identifying these high-priority  recommendations and urging the agency head to continue to provide  attention to these issues."], "subsections": []}, {"section_title": "EPA Has Implemented 191 of 318 GAO Recommendations, Which Relate to a Variety of EPA Operations and Programs", "paragraphs": ["As of August 23, 2017, EPA had implemented 191 of the 318  recommendations we made since fiscal year 2007, and the  recommendations fall into six broad categories that relate to EPA  operations and programs. EPA had not yet fully implemented the  remaining 127 recommendations. Figure 2 shows the status of the 318  recommendations. For recommendations that we made over 4 years ago  (i.e., fiscal years 2007 to 2012), EPA had implemented 77 percent. For  recommendations made since fiscal year 2013, EPA had implemented 34  percent.", "The 318 recommendations we made to EPA since fiscal year 2007 fall  into six broad categories that relate to EPA operations and programs and  generally align with many of the goals and strategies identified in EPA\u2019s  Fiscal Year 2014-2018 Strategic Plan. These six broad categories are:  (1) management and operations; (2) water issues, which includes water  infrastructure, drinking water, water quality, and ecosystem restoration;  (3) environmental contamination and cleanup, which includes  environmental cleanup, pollution prevention, hazardous and other waste  programs, and emergency management; (4) toxics, chemical safety, and  pesticides; (5) public health and environmental justice; and (6) air quality,  climate change, and energy efficiency. The percentage of  recommendations implemented within each category ranged from 80  percent for the environmental contamination and cleanup category to 48  percent in the management and operations category. Figure 3 shows  the number of recommendations we identified in each of these categories and the percentage of recommendations within each category that had  been implemented and not implemented.", "Almost three-fourths of the recommendations we made since fiscal year  2007 fall into three categories: management and operations, water  issues, and environmental contamination and cleanup. The  recommendations to EPA relating to management and operations  included actions for better managing its grants, better coordinating  management of its laboratories, and improving the agency\u2019s information  security. Recommendations on water issues included actions targeted at  improving the regulation of contaminants in drinking water, improving  water quality and ecosystem health in regions such as the Great Lakes  and Chesapeake Bay, and better managing water pollution from both  point and nonpoint sources. Recommendations related to environmental  contamination and cleanup included: taking actions for better managing  cleanup at hazardous waste sites; enhancing responses to disasters,  such as the collapse of the World Trade Center on September 11, 2001,  and Hurricane Katrina in August 2005; and promoting proper disposal and  recycling of electronic waste. The remaining quarter of the  recommendations fell into the other three categories of toxics, chemical  safety, and pesticides; air quality, climate change, and energy efficiency;  and public health and environmental justice. Appendix I lists, by category,  our reports with recommendations to EPA since fiscal year 2007, and for  each report lists the numbers of implemented, not implemented, and total  recommendations, as of August 23, 2017.", "Of the 127 recommendations that EPA has not implemented, we made  82, or 65 percent, since fiscal year 2013 and 45, or 35 percent, earlier  (i.e., fiscal years 2007 to 2012). Most of these recommendations  concern EPA management and operations and water issues. Some  examples of recommendations that have not yet been implemented in  these categories are described below."], "subsections": [{"section_title": "Management and Operations", "paragraphs": ["In January 2017, we made recommendations to EPA related to their  management of grants. In 2015, EPA awarded roughly $3.9 billion,  about 49 percent of its budget, in grants to states, local governments,  tribes, and other recipients. These grants supported activities such as  repairing aging water infrastructure, cleaning up hazardous waste sites,  improving air quality, and preventing pollution. In our January 2017 report,  we concluded that EPA\u2019s ability to manage this portfolio depended  primarily on grant specialists and project officers, but the agency did not  have the information it needed to allocate grants management resources  in an effective and efficient manner. In addition, EPA had not identified  project officer critical skills and competencies or monitored its recruitment  and retention efforts for grant specialists. We recommended that EPA,  among other things, develop documented processes that could be  consistently applied by EPA offices to collect and analyze data about  grants management workloads and use these data to inform staff  allocation. We also recommended that EPA review project officer critical  skills and competencies and determine training needs to address gaps  and develop recruitment and retention performance measures and collect  performance data for these measures. According to a May 2017 letter,  EPA agreed with the five recommendations we made in the report and  identified steps it was initiating to address them. We will continue to  monitor EPA\u2019s actions to implement these recommendations.", "In August 2014, we made recommendations to EPA related to information  security. Federal agencies rely on contractors to operate computer  systems and process information on their behalf. Federal law and policy  require that agencies ensure that contractors adequately protect these  systems and information. In our August 2014 report, we evaluated how  six agencies, including EPA, oversaw contractor-operated systems. With  regard to EPA, we found that the agency generally established security  and privacy requirements for contractors to follow and prepared for  assessments to determine the effectiveness of contractors\u2019  implementation of controls but was inconsistent in overseeing the  execution and review of those assessments. We recommended that EPA  develop, document, and implement oversight procedures for ensuring  that, for each contractor-operated system: (1) a system test is fully  executed and (2) plans of action and milestones with estimated  completion dates and resources assigned for resolution are maintained.  In comments on the report, EPA generally agreed with our  recommendations and has recently told us that it has taken steps to  implement these recommendations. We will evaluate whether these steps  meet the intent of the recommendations.", "In March 2010, we made recommendations to EPA related to workforce  planning. The ability of federal agencies to achieve their mission and  carry out their responsibilities depends in large part on whether they can  sustain a workforce that possesses the necessary education, knowledge,  skills, and other competencies. We and others have shown that  successful organizations use strategic workforce planning to help meet  present and future mission requirements. In our March 2010 report on  workforce planning at EPA and other agencies, we found that EPA\u2019s  workforce plan was not clearly aligned with its strategic plan or budget  formulation, consistent with leading workforce planning principles. For  example, EPA\u2019s workforce plan did not show how full-time equivalent  employees, skills, and locations would be aligned with the strategic plan  or budget. Without alignment to the strategic plan, we concluded that EPA  was at risk of not having the appropriately skilled workforce it needs to  effectively achieve its mission. We recommended, among other things,  that EPA incorporate into its workforce plan clear and explicit links  between the workforce plan and the strategic plan, and describe how the  workforce plan will help the agency achieve its strategic goals. In  comments on our report, EPA generally agreed with our recommendation.  According to EPA, the agency has taken some positive steps toward  better workforce planning, such as developing workforce planning gap  analyses. However, EPA has not fully implemented this recommendation."], "subsections": []}, {"section_title": "Water Issues", "paragraphs": ["In May 2012, we made recommendations to EPA related to a key  program under section 319 of the Clean Water Act to address water  pollution from nonpoint sources. Under this program, EPA provides  grants to states to implement programs and fund projects that address  nonpoint source pollution. We found that EPA\u2019s regional offices had  varied widely in the extent of their oversight and the amount of influence  they had exerted over states\u2019 nonpoint source pollution management  programs. In addition, EPA\u2019s primary measures of effectiveness of states\u2019  management programs did not always demonstrate the achievement of  program goals, which are to eliminate remaining water quality problems  and prevent new threats from creating future water quality problems in  water bodies currently of high quality. To help protect water quality, we  recommended that EPA (1) provide guidance to its regional offices on overseeing state programs and, (2) in its revised reporting guidelines to  states, emphasize measures that more accurately reflect the overall  health of targeted water bodies and demonstrate states\u2019 focus on  protecting high-quality water bodies, where appropriate. EPA agreed  with these recommendations in its comments on the report. In 2013, EPA  issued final guidelines laying out expectations for EPA\u2019s regional  oversight and issued a memorandum to its regional managers  highlighting their oversight responsibilities. However, in a subsequent  report issued in July 2016, we found that EPA\u2019s 2013 guidance did not  completely address our recommendation to provide sufficient guidance to  states to fulfill their oversight responsibilities. We also found that  according to EPA officials, the agency planned to make changes to some  of the program\u2019s measures of effectiveness. Although EPA has taken  some action, these recommendations remain open pending EPA\u2019s (1)  ensuring that the guidelines to states incorporate specific instructions on  how to review states\u2019 plans and criteria for ensuring funded projects  reflect characteristics of effective implementation and tangible results,  and (2) improving its measures of program effectiveness."], "subsections": []}]}, {"section_title": "EPA\u2019s Implementation of GAO Recommendations and Related Work Has Resulted in Process and Programmatic Improvements and Financial Benefits", "paragraphs": ["We have identified many benefits\u2014process and programmatic  improvements and financial benefits\u2014based on EPA taking actions on  our recommendations and related work. Since fiscal year 2007, we have  identified improvements to EPA\u2019s operations and programs in categories  such as management and operations, water issues, and public health and  environmental justice. In addition, we have identified financial benefits  resulting from the implementation of our recommendations and our  related work."], "subsections": [{"section_title": "Process Improvements", "paragraphs": ["The following are examples of process improvements we have identified  based on actions EPA has taken in response to our recommendations."], "subsections": [{"section_title": "Management and Operations", "paragraphs": ["In August 2015, we reviewed EPA\u2019s grant management program,  including the extent to which its grants management plan followed leading  practices for federal strategic planning. We found that EPA could better  ensure the effectiveness of its planning framework for meeting grants  management goals. We recommended that EPA incorporate all leading  practices in federal strategic planning relevant to grants management as  it finalized its draft 2016-2020 grants management plan, such as defining  strategies that address management challenges and identifying the  resources, actions, and time frames needed to meet EPA\u2019s goals. In  response to our recommendation, EPA fully incorporated each of the  relevant leading practices for federal strategic planning in its final 2016- 2020 grants management plan, issued in February 2016. Specifically,  EPA included an annual priority-setting process to identify strategies to  address management challenges and the resources needed to achieve  its goals. EPA also incorporated mechanisms to ensure leadership  accountability for achieving results, including numeric targets and time  frames for each action identified in performance measures.  Consequently, EPA has better assurance that its 2016-2020 grants  management plan is an effective framework to guide and assess its  efforts to meet its grants management goals.", "In August 2011, we found that EPA operated 37 laboratories across the  nation to provide the scientific research, technical support, and analytical  service to support its mission. In that report, we also found that EPA did  not use a comprehensive process for managing its laboratories\u2019 workforce  and lacked basic information on its laboratory workload and workforce.  Without such information, we found that EPA could not undertake  succession planning and management to help the organization adapt to  meet emerging and future needs. We recommended that EPA for all of its  laboratories develop a comprehensive workforce planning process that is  based on reliable workforce data and reflects the agency\u2019s current and  future needs in the overall number of federal and contract employees,  skills, and deployment across all laboratory facilities. EPA generally  agreed with our recommendation and, in 2015, developed a  comprehensive workforce planning process for all of its laboratories and,  according to the agency, collected, verified, and analyzed, from all of its  laboratories, workforce data that included personnel\u2019s organization,  location, grade levels, and area of expertise."], "subsections": []}, {"section_title": "Water Issues", "paragraphs": ["In October 2012, we found that funding for rural water and wastewater  infrastructure was fragmented across the three largest federal  programs\u2014EPA\u2019s Drinking Water and Clean Water State Revolving Fund  programs and the U.S. Department of Agriculture\u2019s (USDA) Rural Utilities  Service Waste and Waste Disposal program\u2014leading to program overlap  and possible duplication of effort when communities applied for these  programs. For example, we found that some communities had to  prepare separate environmental analyses for each program, resulting in  delays and increased costs to communities applying to the programs. We  recommended that EPA and USDA work together and with state and  community officials to develop guidelines to assist states in developing  uniform environmental analyses that could be used, to the extent  appropriate, to meet state and federal requirements for water and  wastewater infrastructure projects. In February 2017, EPA and USDA  issued a joint memorandum to address concerns identified in our report  and highlighted best practices currently employed in some states to  eliminate duplicative environmental reviews. In particular, the  memorandum highlighted a uniform environmental review document  developed by the state of Pennsylvania. To eliminate potential duplication  of effort during the environmental review process, the memorandum  encouraged state programs to evaluate the best practices and  incorporate the practices into their own operations where applicable."], "subsections": []}]}, {"section_title": "Programmatic Improvements", "paragraphs": ["The following are examples of programmatic improvements we have  identified based on actions EPA has taken in response to our  recommendations."], "subsections": [{"section_title": "Water Issues", "paragraphs": ["Under the Clean Water Act, EPA currently regulates 58 industrial  categories of wastewater pollution\u2014such as petroleum refining, fertilizer  manufacturing, and coal mining\u2014with technology-based regulations  called \u201ceffluent guidelines.\u201d Such guidelines are applied in permits to limit  the pollutants that facilities may discharge. The Clean Water Act also  calls for EPA to revise the guidelines when appropriate. EPA has done  so, for example, to reflect advances in treatment technology or changes  in industries. EPA uses a two-phase process to identify industrial  categories needing new or revised effluent guidelines, including an initial  \u201cscreening\u201d phase in which EPA ranks industrial categories according to  the total toxicity of their wastewater. In September 2012, we concluded  that limitations in EPA\u2019s screening phase may have led the agency to  overlook some industrial categories that warrant further review for new or  revised effluent guidelines. For example, during the screening phase,  EPA had not considered the availability of advanced treatment  technologies for most industrial categories. We recommended that EPA  modify the screening phase of its review process to include a thorough  consideration of information on the treatment technologies available to  industrial categories as it considered revisions to its screening and review  process. In comments on the report, EPA agreed that factoring treatment  technology information into its reviews would be valuable. In September  2014, EPA published a combined Final 2012 and Preliminary 2014  Effluent Guidelines Program report that discussed revisions to its  screening process in response to our report. Specifically, EPA stated that  it recognized the need to consider the availability of treatment  technologies, process, changes, or pollution-prevention practices in the  screening phase of its process and said that it was targeting new data  sources to provide such information. In July 2015, EPA published its  \u201cFinal 2014 Effluent Guidelines Program\u201d with a diagram showing the  change to EPA\u2019s screening process to include screening of treatment  technologies."], "subsections": []}, {"section_title": "Public Health and Environmental Justice", "paragraphs": ["EPA established a 1995 Policy on Evaluating Health Risks to Children to  ensure that the agency consistently considers children in its actions, since  children can be more vulnerable than adults to certain environmental  hazards. In August 2013, we found that EPA did not have a specific  process for program offices that led regulatory workgroups to document  how the agency considers children\u2019s health risks in rulemakings and other  actions or how the agency\u2019s analyses comply with the 1995 policy. We  recommended that EPA require lead program offices to document their  decisions in rulemakings and other actions regarding how health risks to  children were considered and that their decisions be consistent with  EPA\u2019s children\u2019s health policy. In comments on our report, EPA generally  agreed with the recommendation and stated that the Office of Children\u2019s  Health Protection worked with the Office of Policy and the program offices  to assure a consistent approach for documenting these decisions as part  of EPA\u2019s process to develop rules, regulations, and other agency actions.  Subsequently, in October of 2014, EPA finalized a template for all EPA  employees to use that outlined how to address EPA\u2019s 1995 policy and  other requirements under various situations. The template instructs lead  program offices to document their decisions in rulemaking and other  actions regarding how they considered health risks to children (e.g.,  conducting a children\u2019s health risk assessment), or provide a rationale for  why such an evaluation was not necessary."], "subsections": []}]}, {"section_title": "Financial Benefits", "paragraphs": ["The following are examples of financial benefits we have identified based  on actions EPA has taken in response to our prior reviews."], "subsections": [{"section_title": "Environmental Contamination and Cleanup", "paragraphs": ["During the course of work related to a July 2008 report on the funding and  reported costs of Superfund enforcement and administrative activities,  we reviewed EPA\u2019s methodology for calculating the indirect costs\u2014or  administrative costs for managing the Superfund program\u2014that EPA  charged responsible parties in fiscal year 2006. In conducting this work,  we identified two spending codes for which associated administrative  costs had not been carried over into EPA\u2019s calculations of the indirect  cost rate applicable to each region for fiscal year 2006. As a result of  this error, we determined that the percentage that EPA was charging  responsible parties for indirect costs associated with fiscal year 2006  spending was lower than it should have been. In response to our finding,  EPA published revised indirect cost rates for fiscal years 2005 and 2006  in May 2008 to correct the error. EPA acknowledged that correcting this  error would result in more money being potentially recoverable from  responsible parties. In 2010, we estimated that the additional amount  EPA has recovered (or would recover) had a present value worth about  $42.2 million."], "subsections": []}, {"section_title": "Management and Operations", "paragraphs": ["Since fiscal year 2000, we have issued a body of work aimed at raising  the level of attention given to improper payments across government.  Our work demonstrated that improper payments have been a long- standing, widespread, and significant problem in the federal government  and as a result, contributed to Congress passing the Improper Payments  Information Act of 2002 (IPIA). This act, as amended, requires, among  other things, that all agencies annually identify and review programs and  activities that may be susceptible to significant improper payments,  provisions that coincide with recommendations we have made that  agencies estimate, reduce, and publicly report improper payments.  Subsequently, in 2005, EPA began reporting on the improper payment  rate for the Clean Water and Drinking Water State Revolving Funds. By  2009, the most recent year for which we identified financial benefits from  the agency addressing improper payments, EPA reported that its total  improper payment error rates for the State Revolving Funds declined by  0.16 percent since it first reported on this issue. This resulted in about a  $4.5 million decrease in improper payments from the Clean Water and  Drinking Water State Revolving Funds for fiscal years 2008 and 2009.", "In conclusion, as the fiscal pressures facing the government continue, so  too does the need for executive branch agencies to improve the efficiency  and effectiveness of government programs and activities. Our  recommendations provide a significant opportunity to improve the  government\u2019s fiscal position, better serve the public, and make  government programs more efficient and effective. We believe that EPA\u2019s  implementation of our outstanding recommendations will enable the  agency to continue to improve its performance and the efficiency and  effectiveness of its operations. We will continue to work with Congress to  monitor and draw attention to these important issues.", "Chairman Murphy, Ranking Member DeGette, and Members of the  Committee, this completes my prepared statement. I would be pleased to  answer questions that you may have at this time."], "subsections": []}]}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any future questions about this  testimony, please contact Alfredo G\u00f3mez at (202) 512-3841 or  gomezj@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Key contributors to this testimony include Barb Patterson,  Assistant Director; Cindy Gilbert; Anne Hobson; Richard Johnson; Dan C.  Royer; and Kiki Theodoropoulos."], "subsections": []}]}, {"section_title": "Appendix I: GAO Reports since Fiscal Year 2007 with Recommendations to EPA, by Category", "paragraphs": ["Appendix I: GAO Reports since Fiscal Year  2007 with Recommendations to EPA, by  Category This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["Through our work, we've made numerous recommendations to EPA about its management and operations, as well as its programs related to water issues; environmental contamination and cleanup; toxics, chemical safety, and pesticides; public health and environmental justice; and air quality, climate change, and energy efficiency.", "We testified that, as of August 23, 2017, EPA had implemented 191 of 318 recommendations we made since 2007. Most of the unimplemented recommendations concern management and operations and water issues. For example, EPA has not fully implemented our recommendation to link its workforce plan to its strategic plan."]}
{"id": "GAO-18-654", "url": "https://www.gao.gov/products/GAO-18-654", "title": "Overseas Conflicts: U.S. Agencies Have Coordinated Stabilization Efforts but Need to Document Their Agreement", "published_date": "2018-09-27T00:00:00", "released_date": "2018-09-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States has a national security interest in promoting stability in conflict-affected countries to prevent or mitigate the consequences of armed conflict, according to the 2017 National Security Strategy. State, USAID, and DOD have reported that a collaborative government approach is an essential part of maximizing the effectiveness of U.S. efforts in conflict-affected areas.", "GAO was asked to review U.S. conflict prevention, mitigation, and stabilization efforts abroad. This report (1) describes examples of conflict prevention, mitigation, and stabilization efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria and their goals in fiscal year 2017 and (2) examines the extent to which U.S. agencies and USIP incorporated key collaboration practices to coordinate their efforts. GAO collected data from the agencies and USIP on their efforts and goals in Iraq, Nigeria, and Syria. GAO selected these countries based on U.S. national security interests, among other criteria. GAO reviewed agency and USIP documents, interviewed officials, and conducted fieldwork in Iraq, Nigeria, and Jordan. GAO assessed coordination against key practices identified by GAO to enhance interagency collaboration."]}, {"section_title": "What GAO Found", "paragraphs": ["The Departments of State (State) and Defense (DOD), the U.S. Agency for International Development (USAID), and the U.S. Institute of Peace (USIP)\u2014an independent, federally funded institute\u2014reported conducting various efforts to address conflict prevention, mitigation, and stabilization for Iraq, Nigeria, and Syria in fiscal year 2017. For example, in Iraq, State supported efforts to remove improvised explosive devices from homes and infrastructure (see figure); USAID contributed to the United Nations to restore essential services; DOD provided immediate medical trauma supplies to the World Health Organization to treat injured civilians; and USIP conducted facilitated dialogs to enable local reconciliation in areas liberated from the Islamic State of Iraq and the Levant.", "In conducting U.S. conflict prevention, mitigation, and stabilization efforts, State, USAID, DOD, and USIP have addressed aspects of key collaboration practices such as elements of bridging organizational cultures and leadership. However, the agencies have not formally documented their agreement on coordination for U.S. stabilization efforts through formal written guidance and agreements that address key collaboration practices. GAO found the following, for example, with regard to the extent key collaboration practices have been used by these entities.", "Bridging organizational cultures: U.S. agencies have established various mechanisms to coordinate their efforts, such as interagency working groups and staff positions focused on coordination. USIP convenes interagency actors, including State, USAID, and DOD through various programs and events.", "Defining outcomes and accountability: One or more agencies have established some common outcomes and accountability mechanisms for their stabilization efforts in Iraq, Nigeria, and Syria. Moreover, through an interagency review of U.S. stabilization assistance, State, USAID, and DOD identified a need to develop an outcome-based political strategy outlining end states for U.S. stabilization efforts and strategic analytics to track and measure progress, among other needs.", "Written guidance and agreements: Although State, USAID, and DOD have developed a framework for stabilization, they have not documented their agreement on the key collaboration practices identified, such as defining outcomes and accountability and clarifying roles and responsibilities. According to key practices for enhancing interagency collaboration, articulating agreements in formal documents can strengthen collaborative efforts, and reduce the potential for duplication, overlap, and fragmentation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["State, USAID, and DOD should document agreement on their coordination for U.S. stabilization efforts though formal written guidance and agreements addressing key collaboration practices. The agencies concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. government has invested tens of billions of dollars during the  past decade in efforts to counter overseas threats, including countering  violent extremism in the Middle East and Africa and addressing instability  in fragile and conflict-affected states. Weak governance, political  instability, corruption, and lack of economic opportunity are some of the  factors fueling conflict and violent extremism. The 2017 National Security  Strategy cites violent extremism and weak governance as causes of  instability in various regions of the world that threatens U.S. interests. The  strategy commits to strengthening fragile states in order to prevent threats  against the United States and prevent the reemergence of violent  extremist groups. The strategy also identifies the integration of U.S.  political, economic, and military power and influence as a force that can  deter aggression and help set the conditions for peace and prosperity.  The results the U.S. government seeks to achieve under this strategy  require the coordinated effort of multiple federal agencies and  organizations.", "You asked us to review U.S. conflict prevention, mitigation, and  stabilization efforts abroad. This report (1) describes examples of conflict  prevention, mitigation, and stabilization efforts that U.S. agencies and the  U.S. Institute of Peace (USIP) conducted in Iraq, Nigeria, and Syria and  their goals in fiscal year 2017 and (2) examines the extent to which U.S.  agencies and USIP incorporated key collaboration practices to coordinate  their efforts.", "To address both objectives, we reviewed the conflict prevention,  mitigation, and stabilization efforts of the Departments of State (State)  and Defense (DOD), the U.S. Agency for International Development  (USAID), and USIP. We reviewed relevant program, coordination,  strategy, and planning documents and interviewed State, USAID, DOD,  and USIP officials at headquarters and in the field with regard to specific  efforts in Iraq, Nigeria, and Syria. We conducted work in Washington,  D.C.; Iraq; Nigeria; and Jordan and held teleconferences with officials in  Syria, Turkey, and Kuwait. We focused on Iraq, Nigeria, and Syria based  on several criteria, including U.S. national security interests, countries  with ongoing conflict, countries where all three agencies and USIP initially  reported that they conducted relevant efforts in fiscal year 2017, prior  GAO reporting, and input from agencies and USIP. We cannot generalize  our findings from these three countries to the other countries where these  agencies have conflict prevention, mitigation, and stabilization efforts.", "To describe examples of conflict prevention, mitigation, and stabilization  efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria  and their goals in fiscal year 2017, we collected, synthesized, and  summarized information from State, USAID, DOD, and USIP. We  obtained the definitions of conflict prevention, mitigation, and stabilization  from each entity to the extent each entity used and defined these terms.  To collect the data describing the efforts and their goals from each  agency and USIP, we developed a standardized data collection  instrument. Within the data collection instrument, we asked agencies to  use their own terms, definitions, and categorizations of efforts to report  their efforts by country, specifically, for Iraq, Nigeria, and Syria. We  defined efforts as programs, initiatives, and in some cases, projects. We  reviewed the reported data and supporting documents and obtained  clarification from agency officials where needed.", "To examine the extent to which U.S. agencies and USIP incorporated key  collaboration practices to coordinate their conflict prevention, mitigation,  and stabilization efforts, we analyzed information about their coordination  using six of seven key practices for implementing interagency  collaborative mechanisms that we have previously identified and that  were applicable to our review. We assessed coordination of agency and  USIP efforts for conflict prevention, mitigation, and stabilization as a  whole because, as indicated above, the agencies did not always  distinguish their coordination efforts to address conflict using the same  terms or categorization of efforts. Where information was available, we  assessed whether the agencies and USIP had generally incorporated or  not incorporated the six selected key practices to coordinate their efforts  between State, USAID, DOD, and USIP at the headquarters level and for  our selected countries of Iraq, Nigeria, and Syria. To make this  determination, we reviewed agency and USIP documents and conducted  interviews about interagency collaboration activities with officials from  State, USAID, DOD, and USIP. During the course of our work, State,  USAID, and DOD released the 2018 Stabilization Assistance Review: A  Framework for Maximizing the Effectiveness of U.S. Government Efforts  to Stabilize Conflict-Affected Areas (hereafter referred to as the SAR).  We reviewed the contents of that report and interviewed agency officials  associated with it to better understand how the report\u2019s findings may be  related to the key collaboration practices applicable to our review.", "Although the National Security Council (NSC) is responsible for  coordination of security-related activities and functions of the executive  departments and agencies, the NSC did not respond to our request for  documents and interviews. We mitigated this limitation by interviewing  other relevant agency officials and reviewing other available  documentation, as described above. We used our analysis of agency and  USIP documents and the results of our interviews with officials to assess  collaboration practices among State, USAID, DOD, and USIP. To aid in  our analysis of coordination from our review of documents and interviews,  we compared descriptions from State, DOD, USAID, and USIP of each of  their relevant efforts in Iraq, Nigeria, and Syria to assess for any  unnecessary duplication. As discussed above, some entities may have  included programs that other entities would not have included because of  differences in how the agencies defined the terms in our scope. As a  result, our analysis only includes the list of programs provided by the  agencies to assess for duplication. Further details about our scope and  methodology can be found in appendix I.", "We conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Preventing Conflict and Seeking Stability Abroad Are U.S. Priorities", "paragraphs": ["The National Security Strategy released in December 2017 states that the  U.S. government has a national security interest in addressing conflict  and instability in fragile and failing nations. The strategy commits to  strengthening nations where state weakness may foster threats such as  violent extremism. The strategy also prioritizes efforts that empower  reform-minded governments, people, and civil society in order to address  the drivers of state fragility. In the SAR, a joint review of U.S. stabilization  efforts\u2014diplomacy, assistance, and defense\u2014 the Secretaries of State  and Defense and the USAID Administrator stated that increasing stability  and reducing violence in conflict-affected areas are essential to meeting  U.S. national security goals. State and USAID\u2019s joint strategic plans have  identified strategic objectives to counter instability, transnational crime,  and violence that threaten U.S. interests. Notably, the plan for fiscal  years 2018\u20132022 states that the agencies will make early investments in  preventing conflict, atrocities, and violent extremism before they spread.  The 2018 National Defense Strategy identifies objectives to deter  adversaries from aggression against U.S. interests and prevent terrorists  from directing or supporting external operations against the United States  and its citizens and allies overseas.", "Additionally, the Quadrennial Diplomacy and Development Review  released in 2015 and covering 2015 to 2019 outlines the lines of effort  that fall under State and USAID\u2019s commitment to prevent and mitigate  conflict. These lines of effort include countering violent extremism,  strengthening U.S. and international capacity to prevent conflict,  preventing atrocities, establishing frameworks for action in fragile states,  strengthening partner capacity to protect civilians and restore peace, and  eliminating the threat of destabilizing weapons. In the Quadrennial  Defense Review released in 2014 and covering 2014\u20132018, DOD also  asserts that \u201cthe surest way to stop potential attacks is to prevent threats  from developing.\u201d The 2014 Quadrennial Defense Review further states  that tackling root drivers of conflict, including building capacity with allied  and partner militaries, and sustaining a global effort to detect, disrupt, and  defeat terrorist plots are part of DOD\u2019s efforts to protect the United States.", "U.S. foreign policy strategies and plans identify the Middle East and  Africa as strategically important regions affected by conflict and instability.  In countries such as Iraq, Nigeria, and Syria, the United States is working  to address drivers of conflict and stabilize areas liberated from violent  extremist groups.", "Iraq. As we have previously reported, U.S. government efforts for the  global war on terrorism in Iraq began in 2003. Since the removal of  the Ba\u2019ath regime and the construction of a new government, Iraq has  experienced varying levels of political instability, sectarianism, and  conflict. In December 2011, the last units of U.S. Forces\u2013Iraq were  withdrawn from that country. After their departure, the United States  continued to provide assistance such as training and equipment to  Iraq\u2019s military and security forces and funding for programs to  strengthen political institutions and civil society organizations and to  promote economic growth in Iraq. In 2014, the Islamic State of Iraq  and Syria (ISIS) emerged as a major force in Iraq, destabilizing  various areas of the country according to reporting from State and  USAID. As of December 2017, Iraqi forces, with support from the  United States and the Global Coalition to Defeat ISIS (Coalition), had  liberated the country\u2019s territory from the control of ISIS, according to  State (see fig. 1). According to a State official, although ISIS no  longer holds Iraqi territory, it remains a terrorist threat.", "Syria. Syria\u2019s instability is largely caused by an ongoing civil war that  began with a government crackdown on antigovernment protests in  March 2011. USAID has reported that the conflict has led to  economic collapse, a breakdown in services and governance, and  instability, which violent extremist groups, including ISIS, have sought  to exploit. Millions of Syrians have become refugees or internally  displaced due to this crisis, according to reporting from the United  Nations High Commissioner for Refugees. In May 2012, the United  States began providing nonlethal aid to Syrian opposition forces, and  in September 2014, the United States began air strikes against ISIS  components in Syria. In January 2015, DOD created the Syria Train  and Equip program to provide assistance, including training and  equipment, to vetted members of the Syrian opposition and to support  efforts to counter ISIS and liberate territory from ISIS. For  populations that remain in Syria, governance entities and institutions  face challenges in delivering services to their communities, according  to USAID. As of July 2018, DOD has reported that the Syrian  Democratic Forces, with Coalition support, continued efforts to defeat  ISIS in the middle Euphrates River Valley (see fig. 1 above).  Additionally, the civil war between Syrian opposition forces and the  Assad regime was ongoing as of July 2018, according to reporting  from the United Nations.", "Nigeria. There are multiple sources of instability across Nigeria. The  terrorist groups Boko Haram and its offshoot ISIS-West Africa have  destabilized areas in northeast Nigeria and the greater Lake Chad  Region leaving over 2 million people displaced and millions more  dependent upon humanitarian assistance as of June 2018, according  to USAID reporting. Also, in the Middle Belt and Northwest of the  country, according to a State official and reporting from Search for  Common Ground, there is rural violence among civilians which  includes criminal attacks, banditry, cattle rustling, and long-standing  intercommunal conflicts between farming and herding communities.  This violence has exacerbated tensions between the populations in  the north and south and among ethnic and religious groups across the  country. Figure 2 shows incidents involving fatalities due to conflict  and violent extremism in Nigeria from January 1, 2012 to September  8, 2018."], "subsections": []}, {"section_title": "Multiple U.S. Entities Conduct Efforts to Address Conflict Abroad", "paragraphs": ["The U.S. government, through federal agencies and federally funded  organizations, supports numerous efforts to address instability and  prevent conflicts abroad.", "State and USAID. These are the principal agencies conducting U.S.  foreign policy and international development and humanitarian  assistance. State is the Executive Branch\u2019s lead foreign affairs  agency. State leads U.S. foreign policy through diplomacy, advocacy,  and assistance. USAID is the U.S. government\u2019s lead international  development and humanitarian assistance agency with a key role in  U.S. efforts to ensure stability, prevent conflict, and build citizen- responsive local governance.", "DOD. While DOD\u2019s primary mission is to provide combat-ready  military forces to deter war and protect the United States, DOD also  provides support to foreign disaster relief through humanitarian  assistance and stabilization efforts across all phases of conflict and  military operations, and in combat and non-combat environments.", "U.S. Institute of Peace (USIP). USIP is an independent national  institute, founded by Congress, to promote international peace and  the resolution of conflicts among the nations and peoples of the world  without recourse to violence. USIP is governed by a bipartisan Board  of Directors, which includes the Secretaries of State and Defense or  their designees, the President or Vice President of the National  Defense University, and 12 others. USIP\u2019s primary funding comes  from congressional appropriation and can be supplemented by funds  from U.S. government partners. USIP staff work abroad and at its  headquarters in Washington, D.C. USIP initiates its own work and  enters into interagency agreements with U.S. agencies such as State,  USAID, and DOD, according to USIP officials. Because USIP is not  an agency within the executive branch, it is not a formal participant in  interagency national security policy processes involving State, USAID,  and DOD, according to State.", "U.S. agencies and USIP are engaged in efforts to counter violent  extremism and address conflict in countries affected by instability and  violent conflicts, including Iraq, Syria, and Nigeria. For example, as areas  are liberated from ISIS in Iraq and Syria, the United States is working with  its partners to try to consolidate gains, reduce levels of local instability,  peaceably manage change, and build the capacity of local governance  entities. To improve the effectiveness of these efforts, U.S. agencies have  evaluated lessons from similar efforts in countries such as Afghanistan  and Iraq. The SAR and assessments from the Special Inspector General  for Afghanistan Reconstruction and the Special Inspector General for Iraq  Reconstruction are examples of U.S. government initiatives to identify  lessons learned from past U.S. efforts."], "subsections": []}, {"section_title": "Key Practices That Can Enhance Interagency Collaboration", "paragraphs": ["In prior work, we have identified key collaboration practices that can be  used to assess collaboration at federal agencies (see fig. 3). These  practices can help agencies implement actions to operate across  boundaries, including fostering open lines of communication, and  establish goals based on what the agencies share in common.  Additionally, clarifying roles and responsibilities allows agencies to  determine who will do what, organize their joint and individual efforts, and  facilitate decision making. We have previously found that improving  coordination and collaboration across agencies can potentially help  agencies reduce or better manage fragmentation, overlap, and  duplication."], "subsections": []}]}, {"section_title": "U.S. Agencies and USIP Conduct Various Efforts to Prevent and Mitigate Violent Conflict and Stabilize Conflict- Affected Areas Abroad", "paragraphs": ["State, USAID, DOD, and USIP reported that they have conducted a  variety of efforts in Iraq, Nigeria, and Syria aimed at preventing and  mitigating violent conflicts and stabilizing areas affected by such  conflicts. In response to our request, each agency and USIP provided  descriptions and goals for their specific program-level or project-level  efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).  To identify these efforts, each agency and USIP used its own terminology  and definitions that were in place in fiscal year 2017.", "Efforts reported by State as active in fiscal year 2017. State reported  that it conducted a range of ongoing conflict mitigation and stabilization  efforts to address violent conflict in Iraq, Nigeria, and Syria, in fiscal year  2017. State, in addition to conducting its own efforts, reported that it  sometimes conducted these efforts through grants to implementing  partners or through interagency agreements with USIP.", "For Iraq, State reported a list of three individual efforts and four  categories of other efforts as active in fiscal year 2017. These efforts  included, for example, antiterrorism training and equipment for law  enforcement; promotion of democratic governance and protection of  basic human rights; support for religious and ethnic minority groups,  internally displaced persons (IDP), and returnees; and clearance of  explosive hazards. These programs were intended to help defeat ISIS  and transnational terror groups, improve governance and rule of law,  and promote reconciliation and the safe return of displaced Iraqis.  Figure 4 depicts clearance operations for explosive remnants of war  at a water treatment facility in Iraq supported by State.", "For Nigeria, State reported 21 efforts as active in fiscal year 2017.", "State supported programs to prevent and counter violent extremism  though media programing, human rights training, police and law  enforcement training and equipment, conflict early warning and  response systems, and women\u2019s and youth empowerment. According  to State, these programs were intended to aid in the fight against  Boko Haram and ISIS-West Africa by countering the radicalization  process that leads individuals to violent extremism, protecting civilians  from terrorist groups, and assisting the victims of Boko Haram and  ISIS-West Africa and their host communities. To address crime and  communal conflict in other regions of Nigeria, State reported that it  conducts human rights and investigative training for Nigerian police,  supports efforts to teach conflict resolution skills to youth, convenes  dialogues between farmer and herder stakeholders to develop conflict  resolution mechanisms, and other efforts.", "For Syria, State reported nine efforts as active in fiscal year 2017.", "State reported efforts that included providing training, equipment, and  stipends to Free Syrian Police and education directorates in  opposition-controlled parts of the country, and building the capacity of  civil society and advocacy organizations, local councils, and civilian  networks. According to State, these programs were intended to  support the opposition and help counter violent extremists, such as  ISIS and al Qaeda in Syria.", "Appendix II presents a full list of State\u2019s reported conflict mitigation and  stabilization efforts and their respective goals for Iraq, Nigeria, and Syria,  active in fiscal year 2017.", "Efforts reported by USAID as active in fiscal year 2017. USAID  reported that it conducted a range of ongoing conflict mitigation and  stabilization efforts to address violent conflict in Iraq, Nigeria, and Syria, in  fiscal year 2017. USAID reported that it primarily conducted these  efforts through grants and contracts awarded to implementing partners.", "For Iraq, USAID reported one effort as active in fiscal year 2017.", "USAID, along with other international donors, supplies funding to the  United Nations Development Program\u2019s (UNDP) Funding Facility for  Stabilization. The UNDP, at the request of the Prime Minister of Iraq,  and with support from leading members of the Coalition to Degrade  and Defeat the Islamic State of Iraq and the Levant (ISIL), established  the Funding Facility for Stabilization in June 2015 to help rapidly  stabilize newly retaken areas. The aim is to help restore confidence in  the leading role of the Iraqi government in these areas and give  populations a sense of progress and forward momentum. According  to USAID, the Funding Facility for Stabilization supports restoration of  essential services and efforts to kick-start the local economy, enabling  internally displaced persons to return to their homes.", "For Nigeria, USAID reported five efforts as active in fiscal year 2017.", "USAID reported that it works through its implementing partners to  conduct a variety of ongoing country-specific efforts including working  with youth to develop countering violent extremism (CVE) action  plans, building the capacity of civil society organizations and religious  leaders, and providing education for displaced persons and host  communities. According to USAID, these efforts are intended to  counter violent extremism from Boko Haram and ISIS-West Africa,  reduce conflict between herders and farmers, and support state and  local government ownership for the continued education of internally  displaced children.", "For Syria, USAID reported five efforts as active in fiscal year 2017.", "USAID reported that it supports a multidonor trust fund to restore  essential services and works through an implementing partner to  enable local councils\u2019 ability to restore essential services. USAID  reported that it also works through implementing partners to support  democratic institutions, livelihoods, and local nongovernmental  organizations. According to USAID, the intent of these programs is to  enable the early recovery of areas liberated from ISIS by  strengthening resistance to extremists, democratic processes, and the  influence of strategic moderate actors. Figure 5 depicts a solar array  installation that provides renewable energy for a drinking water  pumping station in Dar\u2019a Province, Syria, supported by a USAID  essential services program.", "Efforts reported by DOD as active in fiscal year 2017. DOD reported  that it conducted stabilization efforts to address violent conflict in Iraq and  Syria, in fiscal year 2017.", "In Iraq, DOD reported one effort as active in fiscal year 2017. Medical  Staff of the Combined Joint Forces Land Component Command\u2014 Operation Inherent Resolve provided immediate medical trauma  supplies to the World Health Organization to fill a gap in medical  supplies available to treat injured civilians. According to DOD, the  project was coordinated with State and USAID and was funded  through the Overseas Humanitarian, Disaster, and Civil Aid  (OHDACA) appropriation. According to DOD, this project was  intended to increase the chance of survival for civilians affected by  military operations, increase civilian confidence in the government and  the humanitarian assistance community, and provide access,  influence, and visibility to DOD.", "In Syria, DOD reported eight efforts as active in fiscal year 2017. Civil  Affairs personnel of Special Operations Joint Task Force\u2014Operation  Inherent Resolve provided classroom furniture and school supplies;  cold weather items such as jackets, hats, gloves, socks and blankets;  and in one area food, cooking fuel, construction material, and garbage  removal. The projects were often managed through the local councils.  According to DOD, the projects were coordinated with State and  USAID and were funded through the OHDACA appropriation.  Generally, according to DOD, the projects were intended to assist  vulnerable populations, protect them from ISIL, and support local  councils, while also providing access, visibility, and influence for DOD  forces.", "Appendix IV presents a full list of DOD\u2019s reported conflict stabilization  efforts and their respective goals for Iraq and Syria, active in fiscal year  2017.", "Efforts reported by USIP as active in fiscal year 2017. Although USIP  generally refers to all of its work as \u201cconflict prevention and resolution,\u201d  USIP officials stated that all of USIP\u2019s efforts fit under the general  umbrella of conflict prevention, mitigation, and stabilization and thus  reported all of USIP\u2019s efforts abroad for Iraq, Nigeria, and Syria (and in  neighboring countries for Syria) that were active in fiscal year 2017.  USIP reported that it conducts its efforts in conjunction with local staff and  implementing partners. According to USIP, some USIP efforts are  supported through interagency agreements with U.S. agencies.", "For Iraq, USIP reported eight efforts as active in fiscal year 2017.", "USIP reported that it facilitated targeted dialogues among Iraq\u2019s  religious minorities to address security and governance challenges to  reduce the likelihood of recurring violence and enable the return of  IDPs. These dialogues created a monitoring framework to provide  early warnings of potential violence. USIP also reported that it  facilitated dialogues among Iraqis intended to prevent revenge acts of  violence, facilitate the return of the internally displaced, and increase  the resilience of communities to violent extremism from ISIS or others.  Additionally, USIP reported that it provided both governmental and  nongovernmental organizations with training in conflict management  and identified influential religious leaders in specific conflict zones for  future Iraqi-led mediations, dialogues, and peace and reconciliation  efforts. Further, USIP reported that it conducted multiple justice and  security dialogues that included police and government officials and  citizens in areas affected by the aftermath of ISIS to collect and  disseminate lessons learned and best practices.", "For Nigeria, USIP reported 14 efforts as active in fiscal year 2017.", "USIP reported that it conducted training programs, facilitated  dialogues, established working groups, collected and shared lessons  learned and best practices, and conducted in-country research and  assessments involving civilian populations, nongovernmental  organizations, police, and youth. The intent of these programs,  according to USIP, was to reduce violent conflict and its root causes,  strengthen the country\u2019s recovery from Boko Haram, and prevent the  emergence of other extremist groups in support of long-term stability.  In addition, according to USIP, the institute connected U.S.  policymakers with key Nigerian officials at the subnational levels who  wield significant influence in Nigeria\u2019s federal government system but  with whom the United States has had limited contact. Figure 6 depicts  a USIP symposium in Washington, D.C., funded by State, which  included governors from states across northern Nigeria to foster key  exchanges and critical discussions with leading American and  international experts on the drivers of violent conflict in the region and  how to resolve them.", "For Syria, USIP reported three efforts as active in fiscal year 2017.", "USIP reported that it held dialogues with interfaith and other key  leaders to strengthen civil society\u2019s engagement and coordinating role  with civic, religious, and tribal leaders on conflict management and  prevention. For one effort, according to USIP, it has three ongoing  grants related to the Syria conflict in neighboring countries that focus  on reducing tensions associated with the absorption of Syrian  refugees.", "Appendix V presents a full list of USIP\u2019s reported efforts and their  respective goals for Iraq, Nigeria, and Syria, active in fiscal year 2017."], "subsections": []}, {"section_title": "U.S. Agencies and USIP Have Incorporated Aspects of Key Collaboration Practices for Their Conflict Prevention, Mitigation, and Stabilization Efforts but Have Not Documented Their Agreement", "paragraphs": ["State, USAID, DOD, and, where appropriate, USIP have incorporated  aspects of key collaboration practices to coordinate their conflict  prevention, mitigation, and stabilization efforts for Iraq, Nigeria, and Syria.  However, the agencies have not documented their agreement on  coordination for stabilization efforts in conflict-affected areas through  formal written guidance and agreements that address key collaboration  practices. The agencies have individually and jointly established some  common outcomes for stabilization efforts in Iraq, Nigeria, and Syria.  Additionally, State, USAID, DOD, and USIP have generally taken steps to  bridge their organizational cultures; identify sources of leadership that  facilitate coordination; establish roles and responsibilities; and include  relevant participants for their conflict prevention, mitigation, and  stabilization efforts in these countries. During the course of our review,  State, USAID, and DOD released the SAR, which identified areas where  U.S. government coordination for stabilization efforts in conflict-affected  areas could be improved; however, the agencies have not documented  their agreement as to how they will coordinate these efforts in formal  written guidance and agreements that address key collaboration  practices. Because multiple federal entities are engaged in U.S. conflict  prevention, mitigation, and stabilization efforts in Iraq, Nigeria, and Syria,  there is some inherent fragmentation in their efforts as well as the  potential for overlap and duplication. According to key practices for  enhancing interagency collaboration, articulating interagency agreement  on collaborative efforts in formal documents, can strengthen those  collaborative efforts and could reduce the potential for unnecessary  fragmentation, overlap, and duplication."], "subsections": [{"section_title": "Outcomes and Accountability", "paragraphs": ["We previously found that establishing common outcomes can help  agencies shape and define the purpose of their collaborative efforts.  According to a senior State official, the classified country strategies  maintained by the National Security Council (NSC) may contain common  outcomes for some U.S. conflict prevention, mitigation, and stabilization  efforts. However, the NSC did not respond to our requests for information  regarding NSC-level country strategies for Iraq, Nigeria, and Syria.", "In the absence of information from the NSC, we reviewed information  provided by the agencies as well as other government documents and  found that outcomes for U.S. stabilization efforts in Iraq, Nigeria, and  Syria have generally been established by one or more of the agencies.  For example, for its stabilization efforts for Iraq, USAID reported that its  outcome metric is the return of internally displaced populations to their  communities. USAID also reported that it monitors progress toward this  outcome using, in part, quarterly reporting from the United Nations  Development Program (UNDP), the implementer for the primary  mechanism through which the United States and other donor partners  fund stabilization efforts in Iraq.", "Similarly, in the case of Nigeria, the U.S. government has established  common outcomes and accountability mechanisms related to U.S. efforts  to counter Boko Haram and ISIS-West Africa, which includes stabilization  assistance. For example, the interagency, NSC-approved U.S. Strategy  for Countering Boko Haram/ISIS-West Africa (March 2017), states that  the United States seeks long-term end states under which Lake Chad  Basin countries, in tandem with local authorities and international  partners, are able to address specific regional and community-level  conditions that are drivers of conflict and that make communities  vulnerable to violent extremist groups. The National Counterterrorism  Center facilitates an annual assessment of this strategy, and State,  USAID, and DOD review their progress toward achieving objectives in  this strategy during weekly meetings, according to State officials.", "For Syria, in January 2018, then-Secretary of State Tillerson identified the  creation of conditions for the safe and voluntary return of Syrian refugees  and internally displaced persons as one of several end states for Syria.  However, agency officials reported different views regarding clarity about  end states and goals for U.S. efforts in Syria. While some U.S. officials  we interviewed could point to sources for U.S. strategy in Syria, other  U.S. officials told us that the United States\u2019 policy and goals for Syria  were unclear. State and DOD officials indicated that the U.S. goals for  Syria change in response to conditions where U.S. agencies and their  partners operate. A USAID official told us that events on the ground often  overtake U.S. efforts, and the complicated regional dynamics also affect  U.S. policy goals.", "Moreover, the U.S. government has also developed Integrated Country  Strategies for Iraq and Nigeria. The Integrated Country Strategies  developed by U.S. embassies and missions may contain outcomes  related to, but not necessarily specific to, U.S. conflict prevention,  mitigation, and stabilization efforts abroad, according to a senior State  official. According to State guidance, Integrated Country Strategies  should articulate a common set of U.S. government goals and objectives  in a country and may also outline performance indicators to measure  progress toward each mission objective. The guidance further states that  the development of these strategies should include coordination and  collaboration among State, USAID, and other U.S. government agencies  at the mission.", "Finally, at a global-level, State, USAID, and DOD have identified a need  to improve the outcomes and accountability of U.S. stabilization efforts.  Specifically, the 2018 SAR recommended that State, USAID, and DOD  work with relevant U.S. embassy, State regional bureaus, DOD  combatant commands, and other stakeholders to develop an outcome- based political strategy for stabilization in countries where stabilization is  a high priority. The SAR notes the importance of developing an  outcome-based political strategy that outlines core assumptions and  achievable end states and that guides all lines of effort to ensure unity of  purpose within the U.S. government. The SAR also identified a need to  establish indicators to measure changes in the conflict environment and  track them consistently over time and stated that doing so could facilitate  more rigorous reviews by policy makers to determine whether  adjustments are needed in U.S. government political strategy and  objectives.", "State and USIP officials reported that due to USIP\u2019s status as an  independent, federally funded institute that operates outside of executive  branch mechanisms, USIP is not a direct participant in processes to  establish common outcomes and accountability mechanisms for U.S.  government conflict prevention, mitigation, and stabilization efforts."], "subsections": []}, {"section_title": "Bridging Organizational Cultures", "paragraphs": ["We previously found that it is important for agencies to establish ways to  operate across agency boundaries. According to State, USAID, and DOD  officials, they have taken steps to bridge their different organizational  cultures with regard to their conflict prevention, mitigation, and  stabilization efforts for Iraq, Nigeria, and Syria. Specifically, officials said  that they have developed a variety of ways to jointly operate across  agency boundaries, such as through interagency groups and special  coordination positions. USIP does not participate in such interagency  mechanisms; however, it reported that it communicates and coordinates  with State, USAID, and DOD through other means, such as through  bilateral communications and interagency tabletop exercises."], "subsections": [{"section_title": "Interagency Groups", "paragraphs": ["State, USAID, and DOD have established various interagency groups to  coordinate their efforts for Iraq, Nigeria, and Syria. According to State,  USAID, and DOD officials, interagency working groups help agencies to  reduce the potential for overlap and duplication of effort. Examples of  interagency groups, by country, are described below.", "Iraq: A \u201cLiberated Areas Working Group\u201d serves as a clearinghouse  and information exchange for both mission-level and headquarters- based counterparts to coordinate agencies\u2019 post-ISIS stabilization  efforts for Iraq. As another example, the Ambassador or Deputy Chief  of Mission at Embassy Baghdad leads a stabilization and  humanitarian assistance working group that meets biweekly and  includes participation from State, USAID, and DOD.", "Nigeria: In 2015, State established an interagency group, headed by a  retired U.S. Ambassador, that aims to ensure the coordination of U.S.  government efforts to counter Boko Haram. Additionally, the U.S.  mission in Nigeria has working groups that examine various issues,  such as U.S. efforts to mitigate conflict in the country and address  conflict issues in northeast Nigeria.", "Syria: Given that the U.S. agencies do not have an embassy-based  presence in Syria, State, USAID, and DOD coordinate their  stabilization efforts for Syria through three interagency platforms: the  Southern Syria Assistance Platform (SSAP), located in Jordan; the  Syria Transition Assistance Response Team (START), located in  Turkey; and, according to a State official, START-Forward in  northeastern Syria, which reports to START. START and SSAP  personnel noted that the colocation of State and USAID personnel  through these platforms has facilitated coordination between the two  agencies, including information sharing. Further, a State Office of  Inspector General inspection of the U.S. Embassy Ankara, Turkey,  described START as a \u201ccohesive unit\u201d that blends State and USAID  officials, and as a unique and \u201cinnovative model for diplomacy in  dangerous environments.\u201d In addition, for northeast Syria, START  established four stabilization-related working groups that meet on a  regular basis and include civilian and military representation.", "USIP does not participate in these interagency working groups. Rather,  USIP reported that it coordinates on a bilateral, multilateral, and as- needed basis with State, USAID, and DOD headquarters personnel as  well as with embassy personnel in the countries where USIP conducts  work. USIP also reported that it convenes interagency officials through  various programs and events, such as tabletop exercises and  conferences. For example, in 2016, USIP convened State, USAID, and  DOD, along with various nongovernmental and international  organizations, to design and implement a tabletop exercise on countering  violent extremism in the Lake Chad Basin."], "subsections": []}, {"section_title": "Interagency Collaboration Staff Positions", "paragraphs": ["State, USAID, and DOD officials reported that they also bridge their  organizational cultures through staff positions that are aimed at  enhancing interagency collaboration, such as liaison positions and  officials who are embedded in other organizations. For example, SSAP  and START each have civil-military liaisons, and agency officials said that  these positions have helped to facilitate information sharing among State,  USAID, and DOD. As another example, DOD officials reported that  embedded State and USAID officials at U.S. Africa Command have  helped to inform DOD\u2019s perspective on stabilization in Nigeria.", "USIP reported that to help bridge organizational cultures and enhance  cooperation with its agency partners, the institute operates an annual  interagency fellows program. Through the program, USIP hosts one  fellow each from State and USAID, and two military officers\u2014one Marine  lieutenant colonel and one Army lieutenant colonel\u2014to conduct research  and work alongside USIP program staff, according to USIP."], "subsections": []}, {"section_title": "Interagency Definitions of Conflict Prevention, Mitigation, and Stabilization", "paragraphs": ["In 2018, State, USAID, and DOD established a common definition of  \u201cstabilization.\u201d The three agencies have not established common  definitions of the terms \u201cconflict prevention\u201d and \u201cconflict mitigation.\u201d In  the SAR, State, USAID, and DOD defined \u201cstabilization\u201d as \u201ca political  endeavor involving an integrated civilian-military process to create  conditions where locally legitimate authorities and systems can peaceably  manage conflict and prevent a resurgence of violence. Transitional in  nature, stabilization may include efforts to establish civil security, provide  access to dispute resolution, and deliver targeted basic services, and  establish a foundation for the return of displaced people and longer term  development.\u201d According to USAID\u2019s Administrator, the SAR built on  lessons learned from Iraq and Syria, among other locations. The SAR  states that, despite the U.S. government\u2019s significant international  experience in conducting stabilization efforts over recent decades, the  U.S. government\u2019s concept of stabilization was previously ill-defined and  poorly institutionalized across government structures. The SAR also  notes that the lack of standardization in defining and conducting  stabilization led to repeated mistakes, inefficient spending, and poor  accountability for results. During the course of our review, agency and  USIP officials expressed varying views related to the feasibility of  articulating a common definition for \u201cconflict prevention\u201d and \u201cconflict  mitigation.\u201d For example, State and USAID officials noted that all of their  agencies\u2019 foreign assistance and diplomatic efforts could be considered  conflict prevention. USAID also noted that defining the issues or problem  sets associated with \u201cconflict prevention\u201d or \u201cconflict mitigation\u201d will  depend, in part, on the context in which the relevant government agency  engages on those issues. In addition, State\u2019s Bureau of Conflict and  Stabilization Operations opined that conflict management and mitigation  is an evolving field of practice as well as an area that can encompass a  very broad and multifaceted range of efforts, including diplomacy, foreign  assistance, sanctions, and mobilization of international actions. Agency  and USIP officials did not identify a negative effect associated with the  lack of common definitions of the terms \u201cconflict prevention\u201d and \u201cconflict  mitigation.\u201d", "Nonetheless, according to State and DOD officials, the agencies have  started discussing the merits and feasibility of defining \u201cconflict  prevention.\u201d For example, in response to our inquiry during a joint  meeting of the three agencies with us in March 2018 to discuss the SAR,  a senior State official noted that the three agencies were collectively  exploring the feasibility of developing a standardized definition and  harmonized approach for conflict prevention. In its technical comments to  our draft report, State indicated that the agencies have begun to  collaborate on the development of a definition for \u201cconflict prevention.\u201d In  addition, as part of its planned structural reorganization of its  headquarters bureaus, USAID is proposing the establishment of a new  Bureau for Conflict Prevention and Stabilization."], "subsections": []}]}, {"section_title": "Leadership", "paragraphs": ["We previously found that it is important for agencies to identify sources of  leadership for the collaborative effort. Agency and USIP officials identified  sources of leadership, such as various NSC committees and special  leadership positions, that facilitate coordination of the U.S. government\u2019s  conflict prevention, mitigation, and stabilization efforts for Iraq, Nigeria,  and Syria. State and DOD officials reported that the NSC plays a  leadership role in providing strategic direction and policy guidance on  issues related to conflict prevention, mitigation, and stabilization. State  and DOD officials also said that the NSC convenes interagency actors,  including State, USAID, and DOD, to discuss high-level issues in these  areas. State reported that the NSC Fragile States and Stabilization  Policy Coordination Committee is the broadest conflict-related  coordination group. State also reported that a significant degree of  NSC-level coordination on conflict-related issues occurs through country- specific working groups, including the groups for Iraq, Syria, and Nigeria.  The NSC-level Atrocities Prevention Board is another interagency  mechanism that covers conflict-related issues. It has the primary purpose  of coordinating a whole-of-government approach to prevent mass  atrocities and genocide. While USIP is not a member of NSC-level  groups, USIP reported that it engages with the NSC regarding national  security issues on a bilateral basis.", "Agency officials also told us that various special diplomatic positions,  such as special envoys and designated coordinators, are a source of  leadership for the coordination of U.S. efforts to address conflict abroad.  State and USAID officials cited the role of the Special Presidential Envoy  for the Global Coalition to Counter ISIS, who reports to the Secretary of  State, as a source of leadership for U.S. stabilization efforts for Iraq and  Syria. State officials also cited the former U.S. Special Envoy for Syria  position as a source of leadership for U.S. efforts for Syria.", "In 2015, the Assistant Secretary of State for African Affairs at the time  appointed a retired Ambassador as Senior Coordinator on Boko Haram  for the Lake Chad Basin region (which includes Nigeria), according to a  State official. The Senior Coordinator on Boko Haram chairs a weekly  interagency working group that includes a wide array of U.S. agency  offices, including State, USAID, and DOD elements at both the  headquarters and field-levels. According to DOD and State officials, the  weekly meetings led by the Senior Coordinator on Boko Haram have  helped U.S. agencies deconflict their efforts. According to a USIP report,  the Senior Coordinator position has improved the U.S. government\u2019s  ability to align its efforts at both senior and working levels and has  supported broad, interagency information sharing and coordination in the  development of a common U.S. strategy to defeat Boko Haram.", "Agency officials also cited field-level leadership as helpful in coordinating  U.S. government efforts for Iraq, Nigeria, and Syria. For example, for  Nigeria, a USAID official told us that the Ambassador and the Deputy  Chief of Mission at the U.S. embassy have enhanced and led interagency  coordination. The Ambassador has provided input to help deconflict U.S.  programming related to conflict mitigation and stabilization, according to  this USAID official. For Syria, agency officials identified the leadership of  START as helpful in coordinating U.S. stabilization efforts for Syria.  Agency officials provided various views regarding the sufficiency of  leadership mechanisms currently in place for coordinating U.S.  stabilization efforts for Syria. While U.S. field-level efforts for Iraq and  Nigeria are led by Ambassadors, the U.S. government\u2019s ambassadorial  position for Syria has been vacant since 2014. Some officials told us  there was a lack of centralized leadership and decision-making authority  for Syria, while others said that the current leadership structures were  generally sufficient for the coordination of U.S. government efforts for  Syria."], "subsections": []}, {"section_title": "Clarity of Roles and Responsibilities", "paragraphs": ["We previously found that it is important for agencies to define and agree  on their respective roles and responsibilities for a collaborative effort. We  found that agencies\u2019 roles and responsibilities for conducting stabilization  efforts for Iraq, Nigeria, and Syria were generally clear, and through the  SAR, agencies have taken steps to clarify their stabilization roles and  responsibilities at a global level. USAID officials reported that the agency  has largely funded and overseen stabilization efforts for Iraq through the  UNDP and local implementers. In Syria, State and USAID reported that  they formed a combined team for implementing stabilization assistance,  with support and equipment supplied by the U.S. military. For Nigeria,  according to DOD and USAID officials, roles and responsibilities for  agencies, including lead and supporting roles, have been defined for the  U.S. counter Boko Haram and ISIS-West Africa effort.", "Through the 2018 SAR, State, USAID, and DOD recommended the  clarification of their respective roles and responsibilities for conducting  U.S. stabilization efforts abroad. The SAR recommended State as the  overall lead federal agency for U.S. stabilization efforts, USAID as the  lead implementing agency for nonsecurity U.S. stabilization assistance,  and DOD as a supporting federal agency that provides security and  reinforces civilian efforts where appropriate. The SAR noted that clear  lines of authority between U.S. agencies would improve effectiveness,  reduce duplication and confusion, enable greater accountability, and fully  operationalize a whole-of-government approach. In June 2018, the  Secretaries of State and Defense and the USAID Administrator approved  the SAR, including its recommendations regarding proposed U.S. agency  roles and responsibilities for U.S. stabilization efforts.", "In addition to the SAR, a 2018 DOD-sponsored study also recommended  that DOD play a primarily supporting role in non-military, U.S. stabilization  efforts. According to a DOD official, DOD is in the process of updating  its stabilization policy to reflect DOD\u2019s supporting role in U.S. government  stabilization efforts, in accordance with the SAR. As indicated above, U.S.  agencies do not distinguish their coordination of prevention and mitigation  efforts as discrete areas of work; as a result, we were unable to assess  specific roles and responsibilities among U.S. agencies for these areas.", "According to USIP, it aims to complement U.S. executive branch efforts  and partner with U.S. agencies to prevent and resolve conflict in areas of  interest to U.S. security. USIP reported that it convenes U.S. government  and non-U.S. government entities on a variety of high-level policy issues;  conducts its own research and programs; and partners with U.S.  agencies to conduct research and programs abroad. State, DOD, and  USAID officials said that USIP plays a valuable, unique, and helpful role  given its status as an independent organization, its specialized expertise,  its ability to convene interagency actors in a non-official setting, and its  ability to build local relationships through a continuous, field-based  presence in certain countries. For example, State officials and  nongovernmental partners of USIP in Nigeria told us that USIP played a  beneficial role in convening national and local Nigerian leaders for peace  and reconciliation dialogues."], "subsections": []}, {"section_title": "Participants", "paragraphs": ["We previously found that it is important to ensure that the relevant  participants have been included in the collaborative effort. U.S.  government entities conducting conflict prevention, mitigation, and  stabilization efforts abroad have demonstrated the key collaboration  practice of ensuring the inclusion of all relevant participants. State,  USAID, DOD, and other agency officials identified State, USAID, and  DOD as the primary U.S. government agencies that participate in  mechanisms to coordinate U.S. conflict prevention, mitigation, and  stabilization efforts abroad. Agency officials conducting such efforts for  Iraq, Syria, and Nigeria reported that the relevant participants\u2014State,  USAID, and DOD\u2014are involved in the coordination of such efforts.", "USIP also reported that it participates in U.S. conflict prevention,  mitigation, and stabilization efforts through a variety of means. At the  headquarters-level, USIP officials told us that they conduct both regular  and as-needed consultations and discussions with senior agency officials  at the NSC, State, USAID, DOD, and other agencies. USIP and State  officials also indicated that they coordinate their Iraq, Nigeria, and Syria  programs that are funded by State through interagency agreements.  USIP officials said that it is in communication with the embassies where  USIP has a USIP office or ground presence. For Iraq, State and USIP  officials located in-country said that they contact one another as needed.  According to USIP, in March 2018, it reestablished an American country  manager position in Baghdad, Iraq, whose responsibilities include regular  communication and coordination with relevant U.S. government officials.  For Nigeria, USAID and USIP officials said that USIP participates in a  peace and security network that brings together international  nongovernmental organizations and governmental actors\u2014including  USAID\u2014to share information on peace and security efforts being  conducted in Nigeria."], "subsections": []}, {"section_title": "Written Guidance and Agreements", "paragraphs": ["We previously found that agencies that articulate their agreements in  formal documents can strengthen their commitment to working  collaboratively. We found that U.S. agencies and USIP have documented  some aspects of how they coordinate their conflict prevention, mitigation,  and stabilization efforts in Iraq, Nigeria, and Syria. However, State,  USAID, and DOD have not documented their agreement from the SAR on  how they will coordinate their global stabilization efforts in conflict-affected  areas, such as their agreements on common outcomes and accountability  and their roles and responsibilities for conducting U.S. stabilization  efforts.", "Specifically, we found that U.S. agencies and USIP have documented  some aspects of how they coordinate their conflict prevention, mitigation,  and stabilization efforts in Iraq, Nigeria, and Syria. Notably, USIP  provided us with examples of its written agreements with U.S. agencies  for which USIP implements conflict prevention and mitigation  programming with agency funding. USIP has written agreements with  USAID and various State bureaus for programs implemented in Iraq,  Nigeria, and Syria. According to USIP officials in Nigeria, USIP and State  coordinated the planning and implementation of their efforts during the  course of these interagency agreements.", "In June 2018, State publically announced that the Secretaries of State  and Defense and the USAID Administrator approved the SAR\u2019s  recommendations regarding U.S. stabilization efforts, such as the SAR\u2019s  recommendations to establish outcomes and accountability mechanisms  and to formally define agencies\u2019 stabilization roles and responsibilities.  According to the SAR, while the principles for effective stabilization, such  as clarified and formally defined roles and responsibilities, have been  widely studied, they have not been systematically applied and  institutionalized. According to key practices for enhancing interagency  collaboration, articulating agreements in formal documents can  strengthen collaborative efforts, and reduce the potential for  fragmentation, overlap, and duplication. However, the SAR remains a  \u201cframework\u201d that, according to State, has yet to be translated into agency  policy and practice, and State, USAID, and DOD have not yet developed  a plan to implement the SAR recommendations.", "State, USAID, and DOD officials acknowledged the importance of  codifying their agreement on the collaboration elements raised in the SAR  but said that they had not yet decided on a specific document or  documents for doing so. For example, officials discussed the idea of  establishing an interagency memorandum among the three agencies to  codify their specific roles and responsibilities for conducting stabilization  efforts, but they indicated that next steps will depend on various factors,  such as decisions with regard to State\u2019s and USAID\u2019s ongoing  organizational redesign processes. Agency officials also indicated that they are considering implementing the SAR\u2019s recommendations through  issuing written, internal guidance within each agency. We have previously  found that written guidance, such as an implementation plan or  memorandum of agreements, can help agencies during times of transition  when leadership changes and there is a need for continuity. By formally  documenting agreements according to key leading practices, the  agencies will be better positioned to strengthen their collaborative efforts,  and reduce any potential for fragmentation, overlap, and duplication."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In the National Security Strategy issued in December 2017, the United  States emphasized the need to integrate all instruments of the United  States\u2019 national power in order to deter conflict and secure peace. State,  USAID, DOD, and USIP work individually and jointly to prevent and  mitigate conflict and stabilize conflict-affected areas. Although the three  agencies have incorporated aspects of key practices in the coordination  of their conflict prevention, mitigation, and stabilization efforts in Iraq,  Nigeria, and Syria, they have not fully demonstrated the key practice of  documenting agreements in written guidance. By articulating their  agreement in formal documents, such as a memorandum of agreement or  an implementation plan, these agencies can strengthen their coordination  of U.S. stabilization efforts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of three recommendations, one each to State,  USAID, and DOD. Specifically:", "The Secretary of State, in collaboration with the Administrator of the  U.S. Agency for International Development and the Secretary of  Defense, should document their agreement on coordination for U.S.  stabilization efforts through formal written guidance and agreements  that address key collaboration practices such as defining outcomes  and accountability and clarifying roles and responsibilities for U.S.  stabilization efforts. (Recommendation 1)", "The Administrator of the U.S. Agency for International Development,  in collaboration with the Secretaries of Defense and State, should  document their agreement on coordination for U.S. stabilization efforts  through formal written guidance and agreements that address key  collaboration practices such as defining outcomes and clarifying roles  and responsibilities for U.S. stabilization efforts. (Recommendation 2)", "The Secretary of Defense, in collaboration with the Administrator of  the U.S. Agency for International Development and the Secretary of  State, should document their agreement on coordination for U.S.  stabilization efforts through formal written guidance and agreements  that address key collaboration practices such as defining outcomes  and accountability and clarifying roles and responsibilities for U.S.  stabilization efforts. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency and USIP Comments", "paragraphs": ["We provided a draft of this report to State, USAID, and DOD for  comment. State, USAID, and DOD concurred with the recommendations  and provided comments, which are reproduced in appendixes VI through  VIII, respectively. State, USAID, and DOD also provided technical  comments, which we incorporated as appropriate.", "We also provided a draft of this report to USIP for comment. USIP\u2019s  comments are reproduced in appendix IX. USIP also provided technical  comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Administrator of USAID, the  Secretary of Defense, the President of USIP, 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) 512-7114 or FarbJ@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last   page of this report. GAO staff who made key contributions to this report  are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes examples of conflict prevention, mitigation, and  stabilization efforts that U.S. agencies and the U.S. Institute of Peace  (USIP) conducted in Iraq, Nigeria, and Syria and their goals in fiscal year  2017 and (2) examines the extent to which U.S. agencies and USIP  incorporated key collaboration practices to coordinate their efforts.", "To address both objectives, we reviewed the conflict prevention,  mitigation, and stabilization efforts of the Departments of State (State)  and Defense (DOD), the U.S. Agency for International Development  (USAID), and USIP. We reviewed program, coordination, strategy, and  planning documentation and interviewed State, USAID, DOD, and USIP  officials at headquarters and in the field with regard to specific efforts in  Iraq, Nigeria, and Syria. We conducted work in Washington, D.C.; Iraq;  Nigeria; and Jordan and held teleconferences with officials in Syria,  Turkey, and Kuwait. At the posts, we interviewed U.S. embassy  leadership, agency program officers, and implementing partners, where  available. We focused on Iraq, Nigeria, and Syria based on several  criteria, including U.S. national security interests, countries with ongoing  conflict, countries where all three agencies and USIP initially reported that  they conducted relevant efforts in fiscal year 2017, prior GAO reporting,  and input from agencies and USIP. We cannot generalize our findings  from these three countries to the other countries where these agencies  have conflict prevention, mitigation, and stabilization efforts.", "Specifically, we interviewed officials at the following entities.", "State officials in the Bureau of African Affairs; Bureau of Conflict and  Stabilization Operations; Bureau of Democracy, Human Rights, and  Labor; Bureau of International Narcotics and Law Enforcement;  Bureau of Near Eastern Affairs; Bureau of Political-Military Affairs;  Bureau of Public Affairs; Office of the Inspector General; Office of the  Special Presidential Envoy for the Global Coalition to Defeat ISIS (the  Islamic State of Iraq and Syria); and the Office of U.S. Foreign  Assistance Resources;", "USAID officials in the Bureau for Africa; Bureau for Democracy,  Conflict, and Humanitarian Assistance; and Bureau for the Middle  East;", "DOD officials in the Office of the Secretary of Defense, Office of the  Joint Chiefs of Staff, U.S. Africa Command, and U.S. Central  Command; and", "USIP officials in the Middle East and Africa Center and the Policy,  Learning, and Strategy Center.", "To describe examples of conflict prevention, mitigation, and stabilization  efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria  and their goals in fiscal year 2017, we collected, synthesized, and  summarized information from State, USAID, DOD, and USIP.", "First, we obtained the definitions of conflict prevention, mitigation, and  stabilization from each entity to the extent each entity used and defined  these terms. Based on our discussions with each agency and USIP, we  determined that we could not use one common definition, as each agency  and USIP defined these terms based on its programs and the context of  its operations; thus, we would have had to use overlapping terms and  definitions to capture their efforts for fiscal year 2017.", "State and USAID used the term \u201cconflict mitigation and stabilization\u201d  and defined their efforts as foreign assistance programs that reduce  the threat or impact of violent conflict and promote the peaceful  resolution of differences, mitigate violence if it has already broken out,  establish a framework for peace and reconciliation, and provide for  the transition from conflict to post-conflict environments.", "DOD used the term \u201cstabilization\u201d and defined it as \u201can integrated  civilian and military process applied in designated fragile and conflict  affected areas outside the United States to establish civil security,  address drivers of instability, and create conditions for sustainable  stability\u2014a condition characterized by local political systems that can  peaceably manage conflict and change; effective and accountable  institutions that can provide essential services; and societies that  respect fundamental human rights and the rule of law.\u201d", "USIP generally referred to its work as conflict prevention and  resolution, which may include conflict prevention, mitigation, and  stabilization efforts. USIP did not have current definitions for these  terms in fiscal year 2017. USIP officials stated that all of USIP\u2019s efforts  would fit under the general umbrella of conflict prevention, mitigation,  and stabilization and reported all of USIP\u2019s efforts abroad for Iraq,  Nigeria, and Syria (and in neighboring countries for Syria) that were  active in fiscal year 2017.", "Second, to collect the data describing the efforts and their goals from  each agency and USIP, we developed a standardized data collection  instrument. We defined \u201cefforts\u201d as any program, initiative, or other similar  level of engagement and also accepted projects and activities when  reported. We had each agency and USIP use its own terms, definitions,  and categorizations of efforts in this instrument. Based on our discussions  with the agencies and USIP, we determined that this would still allow us  to collect a comprehensive set of programs from each entity and to learn  about their key efforts in this domain. However, we recognize that some  entities might have included programs that other entities would not have  included, even though both entities\u2019 programs may have had many  similarities, because of the entities\u2019 differing definitions and terms. To  ensure that our report could be made publically available, we also  accepted reported categories of programs if listing each program  separately would have meant including controlled unclassified information  (sensitive but unclassified) .", "Within the data collection instrument, we asked agencies to report efforts  by country, specifically, for Iraq, Nigeria, and Syria. To corroborate entries  in the instrument, we requested that the agencies and USIP also provide  one document or website link supporting each entry. Not all agencies fully  complied with this request. In some cases, we conducted web searches  for any publicly available supporting information.", "Third, we reviewed the reported data and supporting documents and  obtained clarification from agency officials where needed. We  synthesized and summarized information for each effort in this report\u2019s  appendixes and, at a higher level, in the body of the report. We requested  technical comments on our summarized information from the agencies  and USIP, and incorporated their suggestions as appropriate. We did not  independently verify whether the reported lists of conflict prevention,  mitigation, and stabilization efforts included all such efforts in Iraq,  Nigeria, and Syria (and in neighboring countries for Syria).", "To examine the extent to which U.S. agencies and USIP incorporated key  collaboration practices to coordinate their conflict prevention, mitigation,  and stabilization efforts, we analyzed information about State, USAID,  DOD, and USIP\u2019s coordination using six of the seven key practices for  implementing interagency collaborative mechanisms that we have  previously identified and that were applicable to our review. We  assessed coordination of agency and USIP efforts for conflict prevention,  mitigation, and stabilization as a whole because, as indicated above, the  agencies did not always distinguish their coordination efforts to address  conflict using the same terms or categorization of efforts. Where  information was available, we assessed whether the agencies and USIP  had generally incorporated or not incorporated the six selected key  practices to coordinate their efforts between State, USAID, DOD, and  USIP at the headquarters level and for our selected countries of Iraq,  Nigeria, and Syria. To make this determination, we examined agency and  USIP documents and conducted interviews about interagency  collaboration activities with officials from State, USAID, DOD, and USIP.  We reviewed agency reports; jointly developed and independently  developed strategies; interagency agreements; monitoring reports; and  public statements by senior U.S. government officials, among other  documents. We also reviewed agency and third-party reports that  assessed interagency collaboration, among other issues, though it was  beyond the scope of this review to assess the methodology or underlying  data in these reports. During the course of our work, State, USAID, and  DOD released the 2018 Stabilization Assistance Review: A Framework  for Maximizing the Effectiveness of U.S. Government Efforts to Stabilize  Conflict-Affected Areas. This report assessed U.S. stabilization  assistance globally in conflict-affected areas. We reviewed the contents of  the report and interviewed agency officials associated with this review to  better understand their findings as may be related to the key collaboration  practices applicable to our review.", "Although the National Security Council (NSC) is responsible for  coordination of security-related activities and functions of the executive  departments and agencies, the NSC did not respond to our request for  documents and interviews. We mitigated this limitation by interviewing  officials at the three agencies and reviewing other available  documentation including the U.S. Strategy for Countering Boko  Haram/ISIS-West Africa and the U.S. Strategy to Counter the Islamic  State of Iraq and the Levant. During our visit to the U.S. embassy in  Nigeria, we observed meetings for two interagency working groups. We  also interviewed implementing partners for U.S. government and USIP  efforts in Iraq, Jordan, and Nigeria. We used our analysis of agency and  USIP documents and the results of our interviews with officials to assess  collaboration practices among State, USAID, DOD, and USIP. To aid in  our analysis of coordination from our review of documents and interviews,  we used the information obtained under the first objective and compared  State, DOD, USAID, and USIP descriptions of each of their efforts in Iraq,  Nigeria, and Syria to assess for any unnecessary duplication. As  discussed above, some entities may have included efforts that other  entities would not have included based on their definitions for the terms in  our scope. As a result, our analysis only includes the list of programs  provided by the agencies to assess for duplication.", "We conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: State Reported Conflict Mitigation and Stabilization Efforts for Iraq, Nigeria, and Syria, Fiscal Year 2017", "paragraphs": [], "subsections": [{"section_title": "Conflict mitigation and stabilization effort IRAQ", "paragraphs": ["Anti-Terrorism Assistance Program (ATA)", "The Department of State\u2019s (State) ATA Program is managed by the Bureau of  Counterterrorism and implemented by the Bureau of Diplomatic Security. The ATA  program trains and equips selected Iraqi law enforcement agencies to counter  improvised explosive devices, respond to critical incidents, and conduct terrorism  related investigations. ATA funds support training courses, consultations, associated  equipment deliveries, and training support costs in Iraq and other selected third-country  training locations. ATA provides the antiterrorism training and equipment to help Iraqi  law enforcement agencies deal effectively with security challenges within their borders,  to defend against threats to national and regional stability, and to deter terrorist  operations across borders and regions. ATA assists efforts to defeat the Islamic State  of Iraq and Syria (ISIS) and counter transnational terror groups and organizations by  curtailing the transit of foreign terrorist fighters throughout the country and mitigating the  effects of terrorist incidents.", "State\u2019s Bureau of Democracy, Human Rights, and Labor (DRL) conducts Good  Governance Programs in Iraq through grants to implementing partners. These  programs aim to advance the equitable representation of religious and ethnic minority  groups and internally displaced persons (IDP), women, and other populations  marginalized in governance structures. The programs are also intended to promote  equitable access to resources and services and support reform efforts on key issues of  human rights and democratic governance. Programming engages civil society to  develop and implement key democratic reform processes and institutions in both the  central government and the Kurdistan Regional Government. The goals of Good  Governance Programs in Iraq are to strengthen citizen-responsive governance,  security, and rule of law to prevent instability, violence, or other crises through  collaboration with Iraqi partner institutions on activities that combat corruption and  strengthen governance.", "State\u2019s DRL conducts Political Competition and Consensus Building Programs in Iraq  through grants to implementing partners. Capitalizing on political openings created  through national and provincial elections, these programs intend to work with newly  elected officials and parties to strengthen their ability to equitably represent the needs  of their constituents, with a particular focus on outreach to minorities and marginalized  populations. One publicly competed grant will support avenues for citizens to negotiate  disputes and debate policy priorities through peaceful, democratic methods, and will  work to ease tensions between the central government and the Kurdistan Regional  Government. The overall goal of these programs is to build the capacity of the  government of Iraq to take the lead in strengthening citizen-responsive governance,  security, and rule of law to prevent further instability and violence. DRL programing  intends to help the government of Iraq become more inclusive, transparent, and  responsive with increased participation by women, youth, and religious and ethnic  minorities."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort DRL Rule of Law Programs", "paragraphs": ["State\u2019s description of effort and its goals   State\u2019s DRL conducts Rule of Law Programs in Iraq through grants to implementing  partners. These programs are intended to promote reconciliation initiatives, including  efforts to counter violent extremism; reintegrate returning IDPs, survivors, and their  families; rehabilitate men and boys affected by the conflict; reconstitute and protect  minority communities\u2014in support of the global religious minorities earmark; and support  civil society to promote accountability and transparency. More specifically, these efforts  aim to (1) strengthen civil society\u2019s ability to monitor the status of detainees and  advocate for fair treatment, anti-torture, and due process; promote protection of basic  human rights and democratic principles; and provide psychosocial support for trauma  survivors; (2) increase accountability for human rights violations, including those  associated with the current crisis, with a particular focus on the most vulnerable Iraqis,  including religious and ethnic minorities, and women and children; and (3) support  efforts to advocate for the rights and protections of women, girls, IDPs, victims of war\u2014 including Marla Ruzicka Iraqi War Victims Fund beneficiaries\u2014and other marginalized  groups.", "State\u2019s DRL conducts Social and Economic Services and Protections for Vulnerable  Populations Programs in Iraq through grants to implementing partners. Programs may  include livelihood and vocational training; small and medium enterprise creation and  support; psychosocial and legal aid services; compensation for war victims/reparations;  and other efforts to support the rehabilitation of victims of conflict that are not reached  through current assistance. These programs aim to address the post-conflict  vulnerabilities of disproportionately affected marginalized populations that are often  targeted by transnational terror groups and organizations to spread radicalization. The  particular emphasis is on widows, single female-headed households, vulnerable youth,  religious minorities in support of the global earmark, and victims of torture and war\u2014 including Marla Ruzicka Iraqi War Victims beneficiaries.", "State\u2019s Bureau of Political and Military Affairs supports Explosive Remnants of War  (ERW) Clearance efforts in response to recent activities of ISIS in Iraq that have  dramatically altered the Conventional Weapons Destruction landscape. ISIS used  mass-produced, technologically advanced improvised explosive devices (IED) to  defend captured territory and target Iraqi Security Forces, as well as to booby trap  homes, public spaces, farm land, and infrastructure to discourage the return of IDPs. As  IDPs return to their communities, these devices continue to perpetuate ISIS\u2019s reign of  terror by indiscriminately killing civilians and impeding stabilization operations. This  program, which State conducts through implementing partners, supports the urgent  survey and clearance of explosive hazards from critical infrastructure associated with  the delivery of clean water, electricity, healthcare, education, and transportation, as well  as other sites in areas of Iraq liberated from ISIS to facilitate follow-on stabilization  projects, the restoration of basic community services, and the return of IDPs. This  program also supports the survey and clearance of ERW in areas impacted by legacy  contamination in Iraq\u2019s North and South. The overall goal is to assist efforts to defeat  ISIS and help the government of Iraq support the safe return of Iraqis that were  displaced from their homes by ISIS or liberation campaigns."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort Mine Risk Education", "paragraphs": ["State\u2019s description of effort and its goals   State\u2019s Bureau of Political and Military Affairs conducts the Mine Risk Education and  Victims\u2019 Assistance programs in Iraq through grants to implementing partners. The risk  education program teaches men, women, and children across Iraq about the dangers  posed by explosive hazards. This program focuses on IDPs who will be returning to  areas liberated from ISIS as well as communities who have already returned to  liberated areas. The program also provides risk education to people in North and South  Iraq who live and work near legacy ERW contamination. The goal of this program is to  strengthen citizen-responsive governance and security to prevent further instability and  violence as well as to bolster human security.", "State\u2019s Bureau of International Narcotics and Law Enforcement, Office of Africa and  Middle East Programs, is responsible for the Advance Human rights Training for Law  Enforcement Officers effort. It provides advanced human rights training to Nigerian  Police Force officers deploying to the northeast and to trainers from the force\u2019s  academies and colleges (a train-the-trainer focus). The goal of the effort is to increase  the Nigerian Police Force\u2019s capacity to better prevent, detect, respond to, and  investigate crime while protecting the rights of all citizens.", "Arewa 24\u2014Hausa Language Media Platform  State\u2019s Bureau of African Affairs, Office of Security Affairs, was responsible for  supporting Arewa 24\u2014Hausa Language Media Platform. Arewa 24 is a free-to-air  satellite TV channel and trans-media platform based in Kano, Nigeria. Positive  narratives intended to help counter violent extremism were inserted into general  entertainment programming aimed at young Hausa speakers in Northern Nigeria.  Arewa 24 contributed to a sustainable ecosystem of indigenous capacity to create,  develop, produce, and disseminate countering violent extremism (CVE) programming.  State supported this effort through grants to an implementing partner. State\u2019s Bureau of  Counterterrorism also managed separate awards in support of this program. This effort  was a Trans-Sahara Counterterrorism Partnership (TSCTP) project, and the U.S.  Embassy Abuja Public Affairs Section also supported it. The goals of the effort were to  (1) sustain broadcast quality of credible, effective, and entertaining CVE television  programming; (2) increase the capacity of media professionals in Northern Nigeria to  produce CVE programming; (3) expand the reach of Arewa 24\u2019s messaging in Nigeria  through agreements and arrangements with other distribution channels; and (4)  continue to build commercially derived revenue, paving the way to sustainability.  Although all U.S. funding for this program ended on September 30, 2017, Arewa 24  remains on the air through support from private Nigerian investors.", "State\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Community  Engagement of Federal Security Agents in Peace and Trustbuilding effort through a  grant to an implementing partner. This project is intended to promote confidence- building measures between youth and government of Nigeria law enforcement and  security personnel in Kaduna state. The goal is to improve cooperation between local  residents and the government\u2019s law and security forces essential to deterring and  capturing members of violent extremist organizations.", "Conflict mitigation and stabilization   effort  CVE Messaging Center\u2014White Dove (Farar  Tattabara)", "State\u2019s description of effort and its goals   State\u2019s Bureau of African Affairs, Office of Public Diplomacy and Public Affairs,  conducts this effort through a cooperative agreement and grant to an implementing  partner. This effort supports the establishment of a messaging center to produce three  original radio programs in the Hausa language broadcast weekly over 22 stations  across 19 states of northern Nigeria. The program also includes a social media  component. The three radio programs deal with themes of de-radicalization,  rehabilitation, and reintegration. The primary goal is to produce and disseminate  counter-violent extremism organization messaging to mitigate efficacy of such  organizations\u2019 propaganda and recruitment efforts.", "State\u2019s Bureau of African Affairs, Office of Security Affairs, conducted the Ending Labor  Exploitation of Almajiri Children and De-Escalating Insecurity project through a grant to  an implementing partner. The project aimed to reduce vulnerabilities associated with  the Almajiri education system by (1) enhancing public awareness of the threat  presented to community security by the present state of degeneration of the system of  Almajiri education; (2) mobilizing the voices of key community stakeholders, including  teachers, parents, religious scholars and institutions; and (3) supporting the government  to put in place adequate laws and policies to reform the system and combat exploitation  of the Almajiri in the state of Kano. This effort was a TSCTP project, and the U.S.  Embassy Abuja Public Affairs Section also supported it. The project\u2019s goal was to  contribute to ending the systemic labor exploitation and abuse of Almajiri children  prevalent in the Almajiranci system of education, and to reduce the risk of violence and  insecurity in Kano state in Northern Nigeria. This project ended on January 30, 2018  State\u2019s Bureau of International Narcotics and Law Enforcement, Office of Africa and  Middle East Programs, is responsible for the Equipment Procurements for Police in  Northeast Nigeria effort. This program equips police commands, stations, and officers in  northeast Nigeria. The equipment includes military-grade tents, ponchos, poncho stuff  sacks, cots, flashlights, flashlight holsters, individual first aid kits, and portable  emergency lighting for 1,500 officers. The goal of this effort is to increase the Nigerian  Police Force\u2019s capacity to provide security in the Northeast and to lay the foundation for  the safe and voluntary return of displaced persons when conditions are conducive.", "State\u2019s DRL, Office of Global Programming, is responsible for the Global Center on  Cooperative Security, Promoting Resilient Communities in Nigeria and Kenya effort.  The U.S. Embassy Abuja Political Section also supports this effort. This 2-year program  is designed to support existing networks of young civil society leaders; forge new  partnerships among local civil society organizations, young people, and government  stakeholders; facilitate collaborative learning activities; and organize small grant  assistance and in-kind support to local civil society organizations working to prevent  violent extremism. The goal of the effort is to mitigate threats of violent extremism in  Nigeria and Kenya by promoting community resilience and empowering youth leaders  to recognize and prevent violence committed by groups such as Boko Haram and Al  Shabaab.", "State\u2019s description of effort and its goals   State\u2019s Bureau of African Affairs, Office of Security Affairs, conducted the Healing,  Reconciliation, and Counter-Radicalization in Adamawa, Borno, and Yobe State project  through a grant to an implementing partner. Project activities were designed to help  resolve tensions between individuals returning to local communities and those who  remained throughout periods of instability and to reduce prejudice and stigmatization of  those captured by Boko Haram (especially women who were raped and impregnated,  forced into marriage, and/or kept as sex slaves). Community resilience groups were  also created to promote community cohesion through the use of strategic  communications and counter narratives. This effort was a TSCTP project, and the U.S.  Embassy Abuja Public Affairs Section also supported it. This project ended on May 31,  2018.", "State\u2019s Bureau of International Narcotics and Law Enforcement Affairs, Office of Anti- Crime Programs, is responsible for the International Law Enforcement Academy  Program (ILEA)\u2014Countering Violent Extremism Series. Nigeria is one of the member  countries of ILEA Gaborone, ILEA Roswell, and the West Africa Regional Training  Center in Accra. In fiscal year 2017, Nigerian law enforcement and criminal justice  system personnel participated in a specialized Countering Violent Extremism (CVE)  course series, which included anticorruption, community policing, combatting CVE in  prisons, threat finance, post-blast investigations, and law enforcement techniques to  combat terrorism. The ILEA program generates course schedules annually based on  feedback from participant countries, like Nigeria, as well as U.S. federal law  enforcement, and State functional and geographic bureaus. The program is also a  cooperative effort that involves the expertise of trainers and agents from federal, state,  municipal, and foreign law enforcement agencies. The ILEA program pursues three  core objectives: building the capacity of foreign criminal justice partners of the United  States to stop crime before it comes to the United States, fostering partnerships across  national borders within important regions of the world, and advancing partner nations\u2019  engagement with U.S. law enforcement agencies. The ILEA program is an important  part of the interagency U.S. effort to combat transnational criminal organizations and  combat violent extremism, which facilitates stability in individual countries and regions,  including Nigeria.", "State\u2019s Bureau of International Narcotics and Law Enforcement, Office of Africa and  Middle East Programs, awarded funds to the U.S. Institute of Peace to conduct the  Justice and Security Dialogues project. Under this effort, citizens and authorities work to  jointly address important security challenges within select communities of the Sahel and  Maghreb, including in Nigeria. Participants share knowledge and skills and support  each other across the broader region. The project is targeting a community population  of 430,000 in the north local government of Jos in Plateau state. The goal of the effort is  to improve the relationship between security providers and citizens and to support  civilian security forces to be more effective, accountable, and responsive to community  needs."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort Northern Governors Dialogue", "paragraphs": ["State\u2019s description of effort and its goals   State\u2019s Bureau of Conflict and Stabilization Operations, Office of Africa Operations,  awarded funds to the U.S. Institute of Peace to conduct the Northern Governors  Dialogue. This effort supports governors of northern states, relevant federal government  officials, and representative civil society leaders in addressing conflict drivers and  stabilization-related challenges. The program is intended to strengthen their collective  understanding of relevant issues and their capacity to develop sustainable and inclusive  policies. The goal is to have an invested group of northern governors and a Senior  Working Group of civil society leaders that have (1) identified a set of citizen-informed  priority policy areas for northern Nigeria to prevent and resolve violent conflict, as well  as to enhance stabilization efforts where appropriate, and (2) demonstrated a continued  willingness to engage together on specific conflict-related issues.", "State\u2019s Public Affairs Section at the U.S. Embassy Abuja, conducts the Open Minds  Project through a grant to an implementing partner. This project intends to train and  mentor 80 primary and secondary school students from Plateau state and Federal  Capital Territory in critical thinking skills in support of CVE efforts. The goal is to better  enable participants to resist messaging and recruitment efforts of violent extremist  organizations  State\u2019s Bureau of Democracy, Human Rights, and Labor, Office of Global  Programming, is responsible for the Search for Common Ground, Early Warning/Early  Response effort. This program establishes community-based early warning and early  response systems and strengthens the capacity of state and local actors to secure  communities. The intent is to enhance community and state actors\u2019 ability to protect  citizens from imminent threats from Boko Haram. Overall goals of the program are to  increase capacity of target communities to identify and analyze early warning signs of  violence; to increase collaboration between communities and local government officials  and security actors in responding to these signs; and to enhance mutual understanding  of their roles in protecting their communities.", "State\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Strengthening  Community Resilience through Peace Building project through a grant to an  implementing partner. The project intends to train 50 youth in conflict resolution. The  participants, supported by traditional elders, engage in local community-driven  initiatives. The goal is to strengthen conflict resolution capacity at the community level  by promoting peaceful dialogue and tolerance in S. Kaduna state.", "State\u2019s Bureau of African Affairs, Office of Security Affairs, conducts this effort through  a grant to an implementing partner who is to produce and air 52 episodes of a weekly  radio drama based on stories of victims of the Boko Haram insurgency, especially  women and children. The series focuses on reducing the risks of radicalization and  recruitment, while encouraging adult listeners to reflect on the effects of the insurgency  on their communities and vulnerable groups. The B Chronicles, created in English but  performed in Hausa and Kanuri, are interpreted by the actors and aired on radio  stations in Bauchi, Gombe, Adamawa, Yobe, and Borno states. The series targets a  regional audience of approximately 6\u20138 million people. The goal of this project is to  chronicle and help mitigate the current security challenges in Northern and  Northeastern Nigeria through real life stories that encourage dialogue while fostering  peace, respect, and the spirit of community. This effort is a TSCTP project, and the U.S.  Embassy Abuja Public Affairs Section also supports it."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort Training Almajiri as Peace Promoters in Kano", "paragraphs": ["State\u2019s description of effort and its goals   State\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Training Almajiri  as Peace Promoters in Kano project through a grant to an implementing partner. This  project intends to train 240 students from the formal education system and the  traditional Islamic school system (Almajiri) as peace ambassadors. Student participants  advocate for peaceful conflict resolution, improvements in youth education, and  incorporation of Almajiri schools into the formal educational system.", "State\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Training of Youth  Leaders and Community Influencers effort through a grant to an implementing partner.  The project intends to train 25 youth and community influencers from Adamawa, Borno,  and Yobe states as CVE messengers with enhanced leadership skills. The goal is to  develop peer-to-peer CVE messengers with proven community influence to mitigate  propaganda and recruitment efforts of violent extremist organizations.", "State\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Transformation  of Farmer/Herder Conflict in Plateau State effort through a grant to an implementing  partner. This project convenes dialogues between farmer and herder stakeholders in  Plateau state to develop mechanisms to resolve disputes between these groups. The  goal is to establish a multistakeholder peace architecture committee to periodically  review conflict risks and to develop a framework for adjudicating conflict.", "State\u2019s Public Affairs Section at the U.S. Embassy Abuja, conducts the United in  Diversity effort through a grant to an implementing partner. This project aims to  increase a core team of 25 youths\u2019 conflict resolution skills and, through a Training of  Trainers model, to train additional youths. The goal is to facilitate interreligious dialogue  between religious groups.", "State\u2019s Bureau of African Affairs, Office of Security Affairs, conducts the Vocational  Training for Women in Adamawa State through a grant to an implementing partner. This  effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs section also  supports it. This project intends to provide rural women living in IDP camps and the  surrounding communities with training and employment opportunities in poultry and  cash-crop farming to help raise their social status, enhance their self-esteem, and  encourage self-reliance to contribute income to their households. The goal is to help  these women learn to recognize and resist techniques and methods of recruitment and  radicalization to violence; and provide options for resisting recruitment into violent  extremist organizations.", "State\u2019s Bureau of African Affairs, Office of Security Affairs, conducts the Youth for  Healthy Communities Initiative through a grant to an implementing partner. This  program is a community initiative anchored in athletic competition that offers concurrent  workshops and creates social and mentoring networks to engage youth on issues of  civic responsibility, conflict mitigation, and the dangers of drug abuse and violent  extremism. This effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs  Section also supports it. The goals of this program are to build teamwork and  leadership skills, foster citizen responsibility, and counter drug abuse and the risk of  recruitment and radicalization to violence among vulnerable youth in the Kano city  metropolitan area."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort SYRIA", "paragraphs": ["State\u2019s Bureau of Near Eastern Affairs (NEA), Office of Near Eastern Affairs Assistance  Coordination, is responsible for the Access to Justice and Community Security  Program, which provides training, equipment, and stipends to Free Syrian Police  stations in liberated areas of Syria. The United States supports 56 Free Syrian Police  stations comprising approximately 3,500 officers. Support includes vehicles, equipment,  stipends, and training to help moderate community security actors to establish public  security and stand up local unarmed civilian police forces. State conducts this effort  through an implementing partner, and NEA manages this effort as part of the Syria  Transition Assistance Response Team based in U.S. Embassy Ankara. The program\u2019s  goal is to improve local stability, mitigate sectarian violence, and counter the influence  of violent extremists.", "State\u2019s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts the  Building the Legitimacy of Local Councils effort through an implementing partner. NEA  manages this effort as part of the Syria Transition Assistance Response Team, which is  based in U.S. Embassy Ankara. The effort aims to build the capacity of local and  provincial councils and civilian networks through (1) organizational development,  standardized processes, and institutional capacity for effective civil administration; (2)  strengthened cooperation between local and provincial councils, civil society  organizations, Free Syrian Police, technical directorates, and moderate armed actors;  (3) increased engagement between citizens and opposition governance structures; (4)  increased inclusiveness in governance structures, especially with regard to  representation of women, religious and ethnic minorities, and other marginalized  populations; and (5) more effective provision of basic local governance services to meet  citizen priorities and needs through cash subgrants for essential services. The goal of  the effort is to strengthen the moderate Syrian institutions by building their capacity to  provide services, promote stability, counter extremism, and advocate for political  dialogue.", "State\u2019s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts the Civil  Society in Syria effort through an implementing partner. NEA manages this effort as  part of the Syria Transition Assistance Response Team, which is based in U.S.  Embassy Ankara. Through cash subgrants, this effort works to enhance civil society  and advocacy organizations in eastern and western Syria to implement activities that  (1) improve communication mechanisms with constituents and key stakeholders in  reconciliation, conflict mediation, and advocacy efforts; (2) increase citizen  understanding of rights and civic responsibilities; (3) enhance civil society advocacy  efforts to promote strengthened competitive, inclusive, and transparent political  processes; (4) improve organizational structures and internal processes that allow civil  society organizations to become more effective public advocates; and (5) provide  community services, such as vocational training for women and youth and essential  services in areas newly liberated from ISIS where governance bodies are still emerging.  The goal of the effort is to increase the ability of civil society organizations to serve,  represent, and advocate for all Syrians and hold local governance structures  accountable.", "State\u2019s description of effort and its goals   State\u2019s DRL conducts the Civil Society Support for Peacebuilding, Reconciliation, and  Conflict Mitigation effort through implementing partners. These efforts provide funding  to build local leadership and reconciliation processes and to support activities related to  inclusive peace-building and conflict mitigation that are specifically designed to be more  responsive to the evolving nature of the conflict. Current programming focuses on local  community members, including women, religious minorities, and other marginalized  populations, to use advocacy and other skills needed to effectively engage with armed  factions. This work also supports the political transition process by fortifying the  conditions for stabilization and empowering local leadership.", "State\u2019s Bureau of Political-Military Affairs supports ERW clearance efforts in areas of  northeast Syria recently liberated from ISIS, in particular the urban centers of Raqqa  and Tabqa cities. Following their defeat, ISIS placed mass-produced, technologically  advanced IEDs and booby-traps in homes, public spaces, farm land, and infrastructure  to discourage the return of IDPs and cut off essential services. As IDPs return to their  communities, these devices continue to perpetuate ISIS\u2019s reign of terror by  indiscriminately killing civilians and impeding stabilization operations. ERW clearance  programs, which State conducts through implementing partners, supports the urgent  marking, survey and clearance of explosive hazards from critical infrastructure  associated with the delivery of clean water, electricity, healthcare, education, and  governance to facilitate follow-on stabilization projects, the restoration of basic  community services, and the return of IDPs in coordination with USAID and other State  offices.", "State\u2019s DRL conducts the Meaningful Justice and Accountability for Syria efforts  through implementing partners. These efforts involve the documentation of human  rights violations committed by all parties; increased coordination among international  and local civil society groups on transitional justice processes, including  memorialization; and support to survivors of torture, sexual and gender-based violence,  and other gross human rights violations. The goal is to support the capacity of local civil  society groups to secure and preserve documentation of human rights abuses and  increase advocacy around accountability and transitional justice mechanisms, including  domestic and regional led efforts.", "State\u2019s Bureau of Political-Military Affairs delivers Mine Risk Education, through  nongovernmental organizations, to affected communities by teaching children and  young adults about the dangers posed by explosive hazards. Also, due to the lack of  national capacity, a mine action nongovernmental organization collects, stores, and  disseminates data on areas contaminated and cleared to the coalition,  nongovernmental organizations, humanitarian community, and military.", "State\u2019s DRL awarded funds to the U.S. Institute of Peace to conduct the Strengthening  Social Cohesion in Northern Syria effort, which aims to provide positive engagement  and lines of communication across religious and sectarian groups, particularly in key  districts prone to sectarian violence. The goals are to (1) support Syrian civilian  networks to maintain stabilization and mitigate violence and (2) manage localized  ceasefires, including reconciliation and stabilization of areas as they are being  liberated."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort Syria\u2019s Education Program (Idarah/Injaz)", "paragraphs": ["State\u2019s description of effort and its goals   State\u2019s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts Syria\u2019s  Education Program through an implementing partner that works closely with opposition  education directorates in Western Syria and moderate education actors in newly  liberated areas in the east to (1) support the development of the Syrian Interim  Government\u2019s aligned Provincial Education Directorates and other education actors to  better manage education in non\u2013regime-controlled communities; (2) provide stipends  and salaries for education staff to ensure schools have people to deliver education; (3)  engage in teacher training; (4) provide light refurbishments and supplies for damaged  schools, and; (5) provide psychosocial support and training to children, teachers, and  community members. NEA manages this effort as part of the Syria Transition  Assistance Response Team, which is based in U.S. Embassy Ankara. The goal of this  effort is to improve equitable access to Syrians to moderate, vital education services for  youth and children.", "We did not independently verify whether State\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).", "For the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources referred to as  \u201cprograms,\u201d \u201cprogram-level initiatives,\u201d and \u201cprojects.\u201d", "Countries for which State conducts efforts are shaded in gray."], "subsections": []}]}, {"section_title": "Appendix III: USAID Reported Conflict Mitigation and Stabilization Efforts for Iraq, Nigeria, and Syria, Fiscal Year 2017", "paragraphs": [], "subsections": [{"section_title": "Conflict mitigation and stabilization effort IRAQ", "paragraphs": ["USAID\u2019s description of effort and its goals  The U.S. Agency for International Development (USAID), along with other international  donors, supplies funding to the UNDP FFS. The UNDP, at the request of the Prime  Minister of Iraq, and with support from leading members of the Coalition to Degrade and  Defeat the Islamic State of Iraq and the Levant (ISIL), established the FFS in June 2015  to help rapidly stabilize newly retaken areas. The FFS works in areas liberated from the  Islamic State of Iraq and Syria (ISIS)\u2014another name for ISIL\u2014to restore essential  services and kick-start the local economy. The FFS rehabilitates water, health, electricity,  education, and municipal light infrastructure. The FFS also provides temporary  employment to local laborers to remove rubble and grants to small businesses to restock  and reopen. The aim of the FFS is to help restore confidence in the leading role of the  Iraqi government in newly retaken areas, give populations a sense of progress and  forward momentum, and enable the voluntary return of internally displaced persons.", "USAID\u2019s Office of Peace and Democratic Governance (PDG) is responsible for the  Building Bridges Between Herders and Farmers in Nasarawa, Plateau, and Kaduna States  effort. The overall goal is to strengthen engagement and understanding to reduce conflict  between the nomadic pastoralist and sedentary farming communities in the three states.  Given the herders\u2019 and farmers\u2019 ethnic, religious, economic, and lifestyle differences, these  two groups rarely come into contact with each other outside of confrontational scenarios or  passing encounters, creating a deadly social disconnect that risks dehumanizing each  community in the other\u2019s eyes. The program aims to achieve its goal by (1) improving  intercultural understanding between nomadic pastoralist and sedentary farming  communities and (2) building capable coalitions between community leaders, civil society,  and government to prevent conflict between nomadic pastoralist and sedentary farming  communities.", "USAID\u2019s Education Office is responsible for the ECR, which, addresses the main learning  needs of internally displaced and host community pupils affected by the crisis in Northeast  Nigeria through nonformal learning centers, Youth Learning Centers, and Adolescent Girls  Learning Centers. The ECR provides learning in protective centers, supports integration of  pupils from nonformal to formal schools, and works within communities hosting internally  displaced persons. For example, the ECR established more than 935 nonformal learning  centers that provided services to internally displaced children and youth and their host  communities affected by violence in Adamawa, Bauchi, Borno, Gombe, and Yobe.  Nonformal centers may be located in churches, mosques, Qur\u2019anic schools, and other  locations. The services provided included access to quality education, psycho-social  counseling, child-friendly spaces, and opportunities for peer reading, mentoring,  counseling, and vocational skills training. The ECR also trains and mobilizes instructors to  provide conflict-sensitive lessons, while engaging communities and local leaders to  increase education options, such as nonformal learning centers. The ECR has provided  assistance to over 80,341 individuals since 2014. The overall goal is to support the efforts  of northeastern states and local governments to take full ownership for the continued  education of internally displaced children."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort Engaging Communities for Peace in Nigeria", "paragraphs": ["USAID\u2019s description of effort and its goals  USAID\u2019s PDG is responsible for the Engaging Communities for Peace in Nigeria effort.  The initial goal was to reduce violence between farmers and pastoralists in Nigeria\u2019s  Middle Belt states in target sites by (1) strengthening the capacity of farmer and pastoralist  leaders to resolve disputes in an inclusive, sustainable manner; (2) leveraging social and  economic opportunities to build trust across lines of division; and (3) fostering engagement  among farmer-pastoralist communities, local authorities, and neighboring communities to  prevent conflict. Under a scope and cost extension, PDG expanded the effort to help with  conflict sensitivity integration throughout the USAID mission\u2019s portfolio, and build the  technical and operations capacity of nongovernmental organizations working on peace  building in the northeast. PDG intends to do this by providing (1) conflict mitigation,  monitoring and evaluation, and administrative/financial management training to civil  society organizations in the northeast, and (2) conflict analysis and conflict mitigation  training for USAID mission personnel and implementing partners anywhere in the country.", "USAID\u2019s Office of Transitional Initiatives (OTI) launched the Nigeria Regional Transition  Initiative in September 2014 to minimize conditions that allow terrorism to flourish, in turn  reducing Boko Haram and ISIS-West Africa recruitment and support for their ideology and  the insecurity they cause. Following a Strategic Review Session in September 2017, OTI  established a new program goal: to deny terrorists space to operate. The goal has a two  pronged focus: (1) to \u201ccompete\u201d with ISIS-West Africa, thereby reducing its appeal before  it is able to seize and hold significant territory and (2) to continue to work on issues that  weaken Boko Haram\u2019s ability to operate. OTI\u2019s two main objectives to achieve this goal  are to offer alternatives to extremist action for vulnerable individuals and increase  community resilience to extremist action.", "Training of Religious Leaders for National  Coexistence (TOLERANCE)", "USAID\u2019s PDG is responsible for the TOLERANCE effort, which aims to support stability in  Nigeria by enhancing the legitimacy and capacity of governance structures to defend  religious freedom. TOLERANCE supports community-based peacebuilding approaches by  strengthening the capacity of religious and traditional leaders, women and youth groups,  government officials, and civil society to mitigate and manage conflicts, and improve  responses to threats and outbreaks of violence. TOLERANCE is implemented in seven  states\u2014Borno, Bauchi, Imo, Kaduna, Kano, Plateau, and Sokoto. A human rights funding  component promotes the culture of interfaith peaceful coexistence between target states in  the North and South, respect for human rights, religious freedom and nonviolent elections.  The goal of TOLERANCE is to develop an active network of religious, government, and  civil society leaders that can effectively address ethno-religious violence in Northern  Nigeria and beyond through shared strategies and common messages that have strong  resonance and popular support from a wide range of stakeholders."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort SYRIA", "paragraphs": ["Contributions to the Syria Recovery Trust  Fund (SRTF)", "USAID contributes funding to the SRTF, a multidonor trust fund initiated by the Group of  Friends of the Syrian People and its Working Group on Economic Recovery and  Development. The SRTF\u2019s core objective is to relieve the suffering of the Syrian people  affected by the ongoing conflict through recovery and rehabilitation efforts undertaken in  partnership with the Interim Government of the Syrian Opposition Coalition, local councils,  local community organizations, and service providers. While the conflict continues, the  SRTF assists Syrian communities in opposition-controlled territories by funding essential  services and early recovery programming in critical sectors, including health, electricity,  water, agriculture and food security, education, and waste management. For example, the  SRTF completed the renovation of two gynecological operating rooms, two obstetrics  rooms, adult and pediatric intensive care units, and provided incubators, an oxygen  generation system, and 6 months\u2019 worth of essential medications to a hospital in Aleppo  Governorate so that it could treat an average of 1,000 patients each month. More than 2  million Syrians have received assistance through more than 30 SRTF projects. USAID  funds totaling almost $60 million to date have leveraged other donor funds totaling $190  million. USAID\u2019s goal is to support the restoration of essential services and early recovery.  USAID\u2019s Bureau for the Middle East (ME) provides support for the SRTF.", "USAID\u2019s ME is responsible for the PRIDE program, which supports the establishment of  robust, inclusive, effective, and accountable democratic processes and institutions in  opposition-held areas and areas liberated from ISIS and advances freedom, dignity, and  development. The goal of the program is to increase political and civic participation and  representation of women, youth, and minorities, to foster public and stakeholder  confidence in peaceful and representative transitional political processes and bolster  opposition credibility. PRIDE is also intended to increase knowledge and understanding of  democratic processes among the Syrian population, including consensus building,  coalition formation, citizen and stakeholder engagement, and elections, which will enhance  an inclusive Syrian-led transition.", "USAID\u2019s ME and the Offices of U.S. Foreign Disaster Assistance and Food for Peace are  responsible for the SLS program, which is intended to help increase production and  productivity of key products that have both food security and market potential, in  moderate, opposition-held areas and areas liberated from ISIS. The effort is based on the  theory that if communities have humanitarian support in the short-term and have access to  agricultural inputs and extension, they will adopt behaviors that increase productivity along  with household-level income, ultimately improving food security and resilience to shocks.  ME and the Office of Foreign Disaster Assistance have funded an implementing partner to  initiate this effort in fiscal year 2017. If this effort is successful, USAID intends to replicate  this effort in other barley-belt areas of Syria, including in the Idleb, Raqqa, and Hasakah  governorates.", "USAID\u2019s ME is responsible for the SES II effort, which supports the restoration of essential  services through local councils in communities. The essential services include support for  water services, electricity, sewage systems, public use buildings, agricultural  infrastructure, and market access. The program provides technical and material  assistance, including capacity building for local councils and civil society, engineering  expertise and other training, and cash grants to communities. The goal of the program is  to restore essential services and strengthen institutions in non-regime areas."], "subsections": []}, {"section_title": "Conflict mitigation and stabilization effort Syria Regional Program (SRP)", "paragraphs": ["USAID\u2019s description of effort and its goals  USAID\u2019s OTI is responsible for the SRP. The SRP works closely with trusted and vetted  local organizations to implement quick-impact activities that promote an inclusive and  stable Syria. OTI has conducted this effort since 2012 through an implementing partner  that has implemented about 538 activities through about 155 local and provincial partners  and 570 subpartners with a budget of about $172.5 million. OTI works along three lines of  effort: (1) enable the early recovery of areas liberated from ISIS; (2) strengthen  communities\u2019 ability to resist extremist groups; and (3) maintain and increase the influence  of strategic moderate actors. For example, OTI partners restore services in communities  liberated from ISIS to reduce ISIS\u2019s appeal; support local councils and civil society  organizations, increasing the influence of moderate actors in strategic areas where  extremist groups are vying for control; and support Syrian Civil Defense and impartial  emergency responders who amplify the voice of Syrians struggling against extremism and  authoritarianism. OTI aims to support resistance to extremists, particularly ISIS, by  strengthening individuals and groups who are saving lives, meeting basic needs,  promoting moderate values, and engaging with vulnerable populations.", "We did not independently verify whether USAID\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).", "For the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources referred to as  \u201cprograms,\u201d \u201cprogram-level initiatives,\u201d and \u201cprojects.\u201d", "USAID conducted its efforts through grants and contracts to implementing partners.", "Countries for which USAID conducts efforts are shaded in gray."], "subsections": []}]}, {"section_title": "Appendix IV: DOD Reported Stabilization Efforts for Iraq and Syria, Fiscal Year 2017", "paragraphs": [], "subsections": [{"section_title": "Conflict stabilization effort IRAQ", "paragraphs": ["DOD\u2019s description of effort and its goals  Medical Staff of the Combined Joint Forces Land Component Command\u2013Operation  Inherent Resolve provided immediate medical trauma supplies to the World Health  Organization to fill a gap in medical supplies available to treat injured civilians. The project  was coordinated with the Department of State (State) and the U.S. Agency for  International Development (USAID) and was funded through the Overseas Humanitarian,  Disaster, and Civic Aid (OHDACA) appropriation. The project was intended to increase the  chance of survival for civilians affected by military operations; increase civilian confidence  in the government and the humanitarian assistance community; and provide access,  influence, and visibility to the Department of Defense (DOD).", "U.S. Army Civil Affairs (CA) personnel of Special Operations Joint Task Force\u2013Operation  Inherent Resolve (SOJTF\u2013OIR) provided winterization kits including jackets, hats, gloves,  socks, and blankets to Syrian civilians displaced from their homes in the Raqqa region.  The project provided much needed cold weather items. This project was coordinated with  State and USAID and funded through the OHDACA appropriation. The project was  intended to alleviate human suffering; pull the population away from Islamic State of Iraq  and the Levant (ISIL) population centers; and provide access, visibility, and influence for  DOD forces.", "U.S. Army CA personnel of SOJTF\u2013OIR provided 1,200 winterization kits consisting of  jackets, hats, gloves, and socks to Syrian families in the Hamad desert. This project  addressed a critical need among the poorest and most vulnerable of the Syrian  population. The project was coordinated with State and USAID and was funded through  the OHDACA appropriation. The project was intended to alleviate human suffering;  support DOD efforts to diminish ISIL influence; and provide access, visibility, and influence  for DOD forces.", "U.S. Army CA personnel of SOJTF\u2013OIR provided assistance, including food, cooking fuel,  construction material, and garbage removal, for up to 31,000 civilians in Manbij, Syria.  DOD undertook this project because USAID and State were unable to provide any support  to the civilians in need. This project was coordinated with State and USAID and was  funded through the OHDACA appropriation. The project was intended to alleviate human  suffering and improve the civilian populace\u2019s perception of the local council.", "U.S. Army CA personnel of SOJTF\u2013OIR provided basic education supplies and  equipment, including desks, chairs, and whiteboards, to schools in Karamah. This project  was coordinated with State and USAID and funded through the OHDACA appropriation.  The project was intended to assist in reestablishment of education services in the area,  enhance the local council\u2019s ability to provide essential services and increase their standing  with the community, and provide access to DOD forces operating in the area.", "U.S. Army CA personnel of SOJTF\u2013OIR provided basic education supplies and  equipment, including desks, chairs, whiteboards, and backpacks, to schools in Kobani.  This project was coordinated with State and USAID and funded through the OHDACA  appropriation. The project was intended to assist in reestablishment of education services,  improve the capacity of the local government to provide essential services; improve the  perception of the local council; and provide access, visibility, and influence for DOD  forces."], "subsections": []}, {"section_title": "Conflict stabilization effort Manbij School Supplies", "paragraphs": ["DOD\u2019s description of effort and its goals  U.S. Army CA personnel of SOJTF\u2013OIR provided classroom furniture and school supplies  to 4,000 students in Manbij. The project, managed through the local council, provided a  viable opportunity to resume attending classes for students who had not attended school  in over 4 years. The project was coordinated with State and USAID and funded through  the OHDACA appropriation. The project was intended to assist in reestablishment of  education services; improve the perception of the local council; and provide access,  visibility, and influence for DOD forces.", "U.S. Army CA personnel of SOJTF\u2013OIR provided winterization kits, including jackets,  hats, gloves, socks, and blankets, to civilians in the Raqqa region. The project provided  much needed winter clothing to civilians who had fled their homes due to ISIL operations.  The project was coordinated with State and USAID and funded through the OHDACA  appropriation. The project was conducted through the local council and intended to  alleviate human suffering, build the council\u2019s legitimacy, and provide access to DOD  forces.", "U.S. Army CA personnel of SOJTF\u2013OIR provided winterization kits, including jackets,  hats, gloves, socks, and blankets to civilians in the Manbij region. The project provided  cold weather items, through the local council, to civilians fleeing ISIL forces because State  and USAID were unable to provide support. The project was coordinated with State and  USAID and funded through the OHDACA appropriation. The project was intended to  alleviate human suffering, elevate the standing of the local council with the populace, and  improve access to DOD forces operating in the area.", "We did not independently verify whether DOD\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).", "For the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources referred to as  \u201cprograms,\u201d \u201cprogram-level initiatives,\u201d and \u201cprojects.\u201d", "Countries for which DOD conducts efforts are shaded in gray."], "subsections": []}]}, {"section_title": "Appendix V: USIP Reported Conflict Prevention and Resolution Efforts for Iraq, Nigeria, and Syria, Fiscal Year 2017", "paragraphs": [], "subsections": [{"section_title": "Conflict prevention and resolution effort IRAQ", "paragraphs": ["USIP\u2019s description of effort and its goals  The U.S. Institute of Peace\u2019s (USIP) Middle East and Africa Center (MEA) is  responsible for the Advancing the Role of Iraqi Minorities in Stabilization and  Governance effort with funding from and in partnership with the Department of State\u2019s  (State) Bureau of Democracy, Human Rights, and Labor. This effort creates  mechanisms for gathering and sharing high-quality information with key Iraqi decision  makers and stakeholders on the minorities\u2019 situations, regardless of whether these  groups return home or remain displaced. The project utilizes and acts upon  information gathered through facilitated local dialogues that prevent violence  (especially violence stemming from revenge killing) and/or reduce tensions between  displaced minorities and host communities. Improving access to this information is  intended to strengthen the role of civil society in stabilization and enable Iraqi decision  makers to enact more inclusive and information-based governance policies. The  specific objectives are to (1) improve key decision makers\u2019 understanding of conflict  drivers in liberated and minority-rich areas and (2) reduce tensions among and  between communities in Nineveh and other minority areas during the stabilization  process and in the build-up to provincial-level, Kurdish Regional Government, and  national elections. The goal of the effort is to improve stabilization and promote  inclusive governance in areas liberated from the Islamic State of Iraq and Syria (ISIS)  in Nineveh province and other minority-rich territories.", "USIP\u2019s MEA and its strategic partner, Sanad for Peacebuilding, conduct the Facilitated  Dialogues effort in Iraq. The effort supports facilitated, outcome-oriented dialogue  processes that enable local reconciliation in areas liberated from ISIS. This type of  engagement has two main objectives in the current context: (1) preventing revenge  acts of violence by communities in conflict and (2) identifying and addressing the main  barriers impeding the return of internally displaced persons (IDP). Such engagement is  intended to increase the resilience of communities to the persistent threat of violent  extremism from ISIS remnants, the Popular Mobilization Forces, or others.", "USIP\u2019s Center for Applied Conflict Transformation (ACT) is responsible for the JSD \u2013  Lessons Learned effort. Approximately 200 security and community representatives  from three major cities affected by the aftermath of ISIS participated in nine JSD  sessions as part of an assessment on preventing violent extremism in Iraq. The project  culminated in a conference attended by members of the JSD-Community of Practice  (COP), a network of local leaders committed to dialogue processes established by  USIP through its ongoing engagement in Iraq to support dialogue. The project\u2019s three  objectives are to (1) better understand local drivers of violent extremism through the  multiple perspectives included in the JSD-COP, (2) strengthen capacity of the JSD- COP to continue efforts to sustain local stability and promote the rule of law, and (3)  identify key lessons learned to further strengthen future JSD initiatives in the region.", "USIP\u2019s ACT is responsible for the Mapping Post-ISIS Iraqi Religious Groups for Peace  and Reconciliation effort. ACT is partnering with country teams to undertake mappings  of influential religious actors, institutions, and ideas in conflict zones. This project  identifies and maps influential religious leaders in specific conflict zones with the long- term goal of including them in future Iraqi-led mediations, dialogues, and peace and  reconciliation efforts.", "USIP\u2019s description of effort and its goals  USIP\u2019s MEA is responsible for the Problem-Solving Dialogues for Iraq\u2019s Religious  Minorities and Governance Issues with funding from and in partnership with State\u2019s  Bureau of Democracy, Human Rights, and Labor. The effort addresses tensions and  disputes between the Christian and Shabak communities in Nineveh in the wake of  ISIS, pushing toward outcome-oriented solutions through facilitated dialogues led by  experienced Iraqi facilitators. This effort also provides the USIP-created Alliance of  Iraqi Minorities (AIM) with experience in project development and execution as AIM  seeks to improve its impact on the provincial budget process, curriculum reform,  outreach, and influencing specific legislation pertaining to minorities. The effort  supports AIM\u2019s organizational capacity toward becoming more independent, self- reliant, and self-sustaining through developing the capacity and assuming total  responsibility for its organizational, administrative, programmatic, financial, and  logistical affairs. Establishing facilitated dialogues among Iraq\u2019s religious minorities  and, most importantly, between those groups and the majority Muslim communities, is  especially important as Nineveh is home to one of Iraq\u2019s largest concentration of  minorities. The goal of the effort is for Iraqis\u2014minorities in particular\u2014to prevent the  recurrence of violence through peaceful dialogue with each other and various  stakeholders, including national, provincial, and local governments.", "USIP\u2019s MEA is responsible for the Support to Sanad for Peacebuilding effort. This  effort provides ongoing technical and financial support to USIP\u2019s strategic national  partner, Sanad, and the networks it manages, including the Network of Iraqi  Facilitators and the Alliance of Iraqi Minorities. Sanad and its affiliated networks serve  as a resource for conflict analysis, bringing disputing parties together through  facilitated dialogue and providing technical expertise for training and peacebuilding.  The goal, through helping Sanad become Iraq\u2019s leading and self-sustaining  peacebuilding organization, is to increase Iraqi capacity and leadership in conflict  prevention and mitigation.", "USIP\u2019s MEA is responsible for the Training Iraqis in Conflict Management effort. This  project provides training to both governmental and nongovernmental organizations,  including officials and civil society activists in Kurdistan working to prevent the  escalation of tensions among the nearly 1.8 million IDPs located there and in local  communities. It also provides technical support to the Kurdish Regional Government  on the implementation of Iraq\u2019s national action plan under United Nations Security  Council Resolution 1325, and ongoing assistance to Iraq\u2019s National Reconciliation  Committee and other governmental bodies that play a key role in local and national  reconciliation. The goal of the project is to enable a variety of Iraqi organizations to use  the tools and skills taught to them by professional trainers and USIP staff to resolve  local tensions that have the potential to reignite sectarian tensions on a large scale.  Building the skills of Iraqis in this field is intended to enable them to solve issues  stemming from extremist violence and local sectarian conflict without external aid, thus  stopping violence at its sources before it spreads to other communities and causes  further destabilization.", "USIP\u2019s description of effort and its goals  USIP\u2019s ACT was responsible for the Youth Leaders\u2019 Exchange with His Holiness the  Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual  dialogue with youth peacebuilders drawn from countries across Africa, Asia, and the  Middle East, including Iraq. Many of these countries grapple with the world\u2019s deadliest  conflicts, as well as campaigns by extremist groups to incite youth to violence. The  youth leaders are among their countries\u2019 most effective peacebuilders. The dialogue  with the Dalai Lama was intended to help them to build the practical skills and  personal resilience they need to work against the tensions or violence in their  homelands. The overarching goal was to strengthen the capacity of youth to create  positive change as leaders and peacebuilders in their communities by partnering with  more traditional leaders.", "USIP\u2019s MEA is responsible for the development of a USIP strategy for countering  violent extremism (CVE) for Nigeria that is integrated with its Nigeria country strategy  and consistent with USIP\u2019s overall CVE strategy. Working in collaboration with ACT,  MEA partners with a local organization for project implementation and uses local staff  for support. This effort is intended to further USIP\u2019s current process of strengthening  its Nigeria country strategy to guide program initiatives for its Africa team and USIP  more broadly. The goal is to deepen and expand USIP\u2019s programming and thought  leadership in the field of CVE through initiatives based on an evidence-based  assessment.", "USIP\u2019s MEA and ACT are responsible for the Election Security Assessment. Together  with selected partners, USIP began three assessment rounds in Washington, D.C.,  and Nigeria focused on assessing election violence risks and gaps in electoral security  and peacebuilding planning. USIP works closely with State\u2019s Nigeria desk, USAID\u2019s  political section, the USAID\u2019s mission at U.S. Embassy Abuja, and relevant  international and local partners engaged in election programming. The assessment will  produce programmatic recommendations to address identified vulnerabilities and seize  opportunities for the promotion of peaceful elections. The goal of the effort is to help  ensure that the prevention activities by USIP, U.S. government partners and civil  society are better integrated and evidence-based.", "Generation Change Fellows Program (GCFP)  USIP\u2019s ACT is responsible for the GCFP, which strengthens youth leaders\u2019  peacebuilding skills and creates a community of practice through which they can learn  from and mentor each other, share best practices, and work to create positive change  in their communities. GCFP carefully selects small cohorts of dedicated peacebuilders  aged 18\u201335 through a highly competitive application process. These Fellows hold  leadership roles within their local communities and tackle challenges, from countering  violent extremism to enhancing gender equality. The goal of the GCFP is to increase  youth leaders\u2019 participation in and contribution to conflict transformation and positive  social change in conflict-affected communities.", "USIP\u2019s ACT, with funding from and in partnership with State\u2019s Bureau of International  Narcotics and Law Enforcement Affairs, is responsible for the Justice and Security  Dialogue Project in the Sahel and Maghreb. The project offers opportunities to  develop, refine, and test models and tools through field pilot experimentation in six  countries, including Nigeria. The project aims to strengthen the relationship between  civilian security services and communities at the local level and to pilot a model for  bridging the gap between police and citizens for use across the region. Through a  series of dialogues and activities supported by USIP and local partners, participants  will collaboratively identify and address concrete security challenges at the local level.", "Conflict prevention and resolution effort  Lake Chad Basin and Sahel Working Group  USIP\u2019s MEA is responsible for the Lake Chad Basin and Sahel Working Group. USIP  USIP\u2019s description of effort and its goals  will convene a working group focused on addressing the drivers of violent extremism in  the Lake Chad Basin and the Sahel. This will include developing a research  framework, drawing on ACT\u2019s CVE assessment tool, and commissioning a series of  papers by academics, policy experts, and practitioners from countries across the  region. The goal is to advance USIP\u2019s thought leadership in the field of preventing  violent extremism by studying the impact of the Boko Haram crisis in the context of  broader regional dynamics and the potential for more regional approaches to foster  resilience to violent extremism.", "USIP\u2019s MEA is responsible for the Lake Chad Basin Project, with funding from and in  partnership with State\u2019s Bureau of Conflict and Stabilization Operations. This project  builds upon over a decade of programming in Nigeria to implement a multiyear  program that seeks to strengthen the capacity of Nigerian opinion leaders and policy  makers, to foster sustainable and inclusive strategies toward addressing the root  causes of violent conflict, particularly in Northern Nigeria. Some activities included (1)  convening a 3-day symposium in Washington, D.C., of governors from states across  northern Nigeria to foster key exchanges and critical discussions with leading  American and international experts on the drivers of violent conflict in the region and  how to resolve them; (2) creating a senior working group of 11 Nigerian civic leaders  that can engage strategically with the governors and work collaboratively to articulate  a set of policy priority areas toward addressing the drivers of conflict; (3) conducting  quantitative and qualitative studies in Borno and Plateau states to understand citizen  perceptions to the drivers of violent conflict, and how policymakers should address  them; and (4) supporting sustained, facilitated engagement between the governors  and members of the senior working group to help to shape a more inclusive policy  platform toward preventing violent conflict and addressing stabilization needs in target  states across the north. The goal of this project is to have an invested group of  governors from across the northern states in Nigeria and a senior working group of  civic leaders identify a set of citizen-informed priority policy areas for northern Nigeria  to prevent and resolve violent conflict, increase stabilization efforts where appropriate,  and demonstrate a continued willingness to engage together on specific conflict- related issues.", "USIP\u2019s MEA is responsible for the Network of Nigerian Facilitators. USIP is identifying  and supporting a group of community leaders, including youth, women, and religious  leaders with dialogue facilitation skills to prepare, convene, and facilitate intergroup  dialogues in their communities. In addition to building the abilities of the facilitators to  locally manage conflict, USIP will provide financial support to the facilitators to  implement localized conflict management activities. The goal is to build capacity and  provide ongoing support to a network of community facilitators that can prevent and  resolve conflict nonviolently.", "USIP\u2019s MEA is responsible for the Nigeria Conversation Series. MEA partners with a  local organization to implement the series and uses local staff for support. The series  brings together a broad array of policy professionals for in-depth discussions on  current issues in Nigeria and to explore options for preventing and resolving violent  conflict in the country. The purpose of the series is to inform and influence Nigerian,  U.S., and international policies and programs that seek to address conflict in Nigeria.  The discussions seek to promote improved understanding and shared analysis of the  conflict dynamics in the country through engagement with informed researchers and  practitioners.", "Conflict prevention and resolution effort  Nigeria\u2019s Imam and Pastor: Faith at the Front  USIP\u2019s MEA is responsible for Nigeria\u2019s Imam and Pastor project. In fiscal year 2017,  USIP\u2019s description of effort and its goals  the findings from USIP research were used to inform the production of a short USIP  video to contribute to understanding (1) the role of religious leaders in peacebuilding  and (2) that grassroots dialogues are necessary for reducing violence but are  complemented by changes in governance. Also, USIP produced a video series of  pieces to highlight the work and voices of USIP\u2019s country and partner organizations  and provide practical tools to inform policymakers and partners in their work in  reducing violent conflict.", "USIP\u2019s ACT, with funding from and in partnership with USAID, is responsible for the  Research on Violent Extremism, Politics, Religion, and the Higher Education Sector in  the Lake Chad Basin effort. Under the rubric of the RESOLVE Network\u2014a global  consortium of research organizations established by USIP\u2014this project is intended to  enhance USAID\u2019s assistance to the educational sector in the Lake Chad Basin region  by providing research support for locally driven analysis in Nigeria, Chad, and  Cameroon. The primary purpose of the RESOLVE Network initiative in the Lake Chad  Basin is to assess the role of the state, civil society, and other nonstate actors in  shaping the political divides over the role of religion in education and community and  state responses to extremism in Chad, Nigeria, and Cameroon.", "USIP\u2019s MEA is responsible for the Support to State Peacebuilding Institutions effort,  which is being implemented by a local partner with the support of local USIP staff in  Abuja. The Africa Team, in partnership with USIP\u2019s ACT, provides training for the  Plateau Peacebuilding Agency, the Kaduna Peace Commission and the relevant  peacebuilding entities in the Borno state administration on conflict analysis, conflict  management and facilitation. USIP delivers the training through a combination of  online and in-person training. The Africa team identifies ways to engage the Interfaith  Mediation Center (the Imam and the Pastor) to share their expertise and experiences.  The goal is to advance the skills of the practitioner peacebuilding community in Nigeria  to inform policy to prevent and resolve conflict at the state-level through online and in- person training.", "USIP\u2019s MEA is responsible for the Supporting Transition to Civilian-Led Governance  and Security effort, which is being implemented by a local partner with the support of  local USIP staff in Abuja. The Africa team developed a framework for the transition  from military and vigilante security to community-oriented policing through (1) research  on comparative experiences in the transition from nonstate actors to civilian  governance and (2) a series of roundtables and engagements with The Multinational  Joint Task Force. The research seeks to incorporate USIP\u2019s experiences in  Afghanistan, Iraq, Colombia, Nepal, and Myanmar to offer concrete lessons, tools, and  approaches. The goal is to contribute evidence-based and comparative research that  will inform discussions on civil-military relationships, justice, security, and rule of law  reform in the Northeast and Lake Chad Basin.", "USIP\u2019s MEA is responsible for the Women Preventing Violent Extremism effort, with  funding from and in partnership with State\u2019s Bureau of Counterterrorism. The project is  implemented by a local organization. This project began as a pilot project in 2012 and  is designed to increase women\u2019s agency and influence in strengthening community- level resilience to violent extremism through engagement and collaboration with  security actors. The project was piloted in Plateau and Kaduna states in Nigeria and in  Nairobi, Mombasa, and Garissa, Kenya. The project aims to understand ways in which  trust and cooperation between women in civil society and the security sector can best  be fostered and supported.", "USIP\u2019s description of effort and its goals  USIP\u2019s ACT is responsible for the Youth Leaders\u2019 Exchange with His Holiness the  Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual  dialogue with youth peacebuilders drawn from countries across Africa, including  Nigeria; Asia; and the Middle East. Many of these countries face the world\u2019s deadliest  conflicts, as well as campaigns by extremist groups to incite youth to violence. The  youth leaders are among their countries\u2019 most effective peacebuilders. The dialogue  with the Dalai Lama was intended to help them to build the practical skills and  personal resilience they need to work against the tensions or violence in their  homelands. The overarching goal was to strengthen the capacity of youth to create  positive change as leaders and peacebuilders in their communities by partnering with  more traditional leaders.", "USIP\u2019s MEA is responsible for the Dialogues with the Interfaith and Other Key Leaders  effort in partnership with and with funding from State\u2019s Bureau of Democracy, Human  Rights, and Labor. In Northeastern Syria, USIP works with Syrian partners to  strengthen civil society\u2019s engagement and coordinating role with civic, religious, and  tribal leaders in al-Qamishli/al-Qahtaniya. The effort aims to address drivers of  tensions and conflicts through an evidenced-based, outcome-oriented dialogue  process. The overall goal is to strengthen social cohesion among and between the  communities in Northern Syria, enable the return of displaced communities, and stem  potential conflict.", "USIP\u2019s MEA is responsible for three ongoing grants related to the Syria conflict in  neighboring countries: The first is a grant to War Child to work with a local network of  Jordanian organizations training young Syrian refugees in Amman and vicinity on  youth leadership, peacebuilding, and conflict resolution skills. The two other grants  fund (1) a Lebanese civic group that supported mediation and training aimed at  reducing refugee-related tensions in Lebanon\u2019s Bekaa Valley and to enable Syrian  refugees to find jobs and register their children in schools, and (2) a nongovernmental  organization that trained Syrian and Lebanese journalists on conflict-sensitive  reporting about the Syrian refugee crisis and on raising awareness of the benefits the  refugees bring to the host community. These grants are aimed at reducing tensions  that threaten peace and stability in Lebanon and Jordan because of the burdens of  their absorption of Syrian refugees.", "USIP\u2019s ACT was responsible for the Youth Leaders\u2019 Exchange with His Holiness the  Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual  dialogue with youth peacebuilders drawn from countries across Africa, Asia, and the  Middle East, including Syria. Many of these countries face the world\u2019s deadliest  conflicts, as well as campaigns by extremist groups to incite youth to violence. The  youth leaders are among their countries\u2019 most effective peacebuilders. The dialogue  with the Dalai Lama was intended to help them to build the practical skills and  personal resilience they need to work against the tensions or violence in their  homelands. The overarching goal was to strengthen the capacity of youth to create  positive change as leaders and peacebuilders in their communities by partnering with  more traditional leaders.", "We did not independently verify whether USIP\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).", "For the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources also referred to as  \u201cprojects.\u201d", "Countries for which USIP conducts efforts are shaded in gray."], "subsections": []}]}, {"section_title": "Appendix VI: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the U.S. Institute of Peace", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Godwin Agbara (Assistant  Director), Kathleen Monahan (Analyst-in-Charge), David Dayton, Martin  de Alteriis, Mark Dowling, Emily Gupta, and Jasmine Senior made key  contributions to this report. Additional assistance was provided by Michael  Fahy, Christopher Keblitis, Judith McCloskey, James Reynolds, Kira Self,  and Sarah Veale."], "subsections": []}]}], "fastfact": ["The United States has a national security interest in promoting stability in countries affected by violent conflict. We looked at how 3 federal agencies and an independent institute support conflict prevention, mitigation, and stabilization efforts, such as removing explosives hidden near homes.", "Although these entities have worked together in Iraq, Nigeria, and Syria, the federal agencies have not documented their agreement on key areas of collaboration such as clarifying roles and responsibilities for stabilization efforts.", "We recommended that they formally document their agreement on coordination for stabilization in written guidance."]}
{"id": "GAO-18-556T", "url": "https://www.gao.gov/products/GAO-18-556T", "title": "Drug Discount Program: Status of Agency Efforts to Improve 340B Program Oversight", "published_date": "2018-05-15T00:00:00", "released_date": "2018-05-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to HRSA, the purpose of the 340B Program, which was created in 1992, is to enable covered entities to stretch scarce federal resources to reach more eligible patients, and provide more comprehensive services. Covered entities can provide 340B drugs to eligible patients regardless of income or insurance status and generate revenue by receiving reimbursement from patients' insurance. The program does not specify how this revenue is to be used or whether discounts are to be passed on to patients. The number of participating covered entity sites\u2014currently about 38,000\u2014has almost doubled in the past 5 years and the number of contract pharmacies increased from about 1,300 in 2010 to around 18,700 in 2017. In recent years, questions have been raised regarding oversight of the 340B Program, particularly given the program's growth over time.", "In September 2011, GAO identified inadequacies in HRSA's oversight of the 340B Program and made recommendations for improvement. Among other things, this statement describes HRSA actions in response to GAO recommendations to improve its program oversight.", "For this statement, GAO obtained information and documentation from HRSA officials about any significant program updates and steps they have taken to implement the 2011 GAO recommendations. More detailed information on the objectives, scope, and methodology can be found in GAO's September 2011 report."]}, {"section_title": "What GAO Found", "paragraphs": ["The 340B Drug Pricing Program requires drug manufacturers to sell outpatient drugs at discounted prices to covered entities\u2014eligible clinics, hospitals, and others\u2014in order to have their drugs covered by Medicaid. Covered entities are only allowed to provide 340B drugs to certain eligible patients. Entities dispense 340B drugs through in-house pharmacies or contract pharmacies, which are outside pharmacies entities contract with to dispense drugs on their behalf. The number of contract pharmacies has increased significantly in recent years.", "In its September 2011 report, GAO found that the Health Resources and Services Administration's (HRSA) oversight of the 340B Program was inadequate to ensure compliance with program rules, and GAO recommended actions that HRSA should take to improve program integrity, particularly given significant growth in the program in recent years. HRSA has taken steps to address two of GAO's four recommendations:", "HRSA initiated audits of covered entities . GAO found that HRSA's oversight of the 340B Program was weak because it primarily relied on covered entities and manufacturers to ensure their own compliance with program requirements and HRSA engaged in few oversight activities. GAO recommended that HRSA conduct audits of covered entities and in fiscal year 2012, HRSA implemented a systematic approach to conducting annual audits of covered entities. HRSA now audits 200 covered entities a year, which is less than 2 percent of entities participating in the 340B Program. Audits conducted to date have identified instances of non-compliance with program requirements, including the dispensing of drugs to ineligible patients. GAO currently has work underway reviewing HRSA's efforts to ensure compliance at contract pharmacies, which includes an examination of HRSA's audits of covered entities.", "HRSA clarified guidance for manufacturers. GAO found a lack of specificity in guidance for manufacturers for handling cases in which distribution of drugs is restricted, such as when there is a shortage in drug supply. GAO recommended that HRSA refine its guidance. In May 2012, HRSA clarified its policy for manufacturers that intend to restrict distribution of a drug and provided additional detail on the type of information manufacturers should include in their restricted distribution plans.", "HRSA has not clarified guidance on two issues. GAO also found that HRSA guidance on (1) the definition of an eligible patient and (2) hospital eligibility criteria for program participation lacked specificity and recommended that HRSA clarify its guidance. HRSA agreed that clearer guidance was necessary and, in 2015, released proposed guidance that addressed both issues. However, in January 2017, the agency withdrew that guidance in accordance with recent directives to freeze, withdraw, or postpone pending federal guidance. In March 2018, HRSA indicated it was in the process of determining next steps related to guidance on the patient definition, but would need additional authority to further clarify guidance on hospital eligibility; rulemaking authority for the 340B Program was requested in the administration's fiscal year 2019 budget proposal."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today as you examine the 340B Drug Pricing  Program (340B Program), including issues concerning its oversight. The  program, created in 1992 and named for the statutory provision  authorizing it in the Public Health Service Act (PHSA), requires drug  manufacturers to sell outpatient drugs at discounted prices to eligible  clinics, hospitals, and other entities\u2014commonly referred to as covered  entities\u2014in order to have their drugs covered by Medicaid. According to  the Health Resources and Services Administration (HRSA), the agency  within the Department of Health and Human Services (HHS) responsible  for administering and overseeing the 340B Program, the purpose of the  program is to enable covered entities to stretch scarce federal resources  to reach more eligible patients, and provide more comprehensive  services. In recent years, questions have been raised regarding HRSA\u2019s  oversight of the 340B Program, particularly given growth in the program  over time. According to HRSA, as of January 2017, covered entities had  more than 38,000 sites participating in the 340B Program\u2014almost double  the number reported just 5 years earlier.", "Participation in the 340B Program is voluntary for both covered entities  and drug manufacturers, but there are strong incentives to participate:", "Covered entities can realize substantial savings through 340B price  discounts\u2014an estimated 20 to 50 percent of the cost of the drugs,  according to HRSA. In addition, covered entities can generate 340B  revenue. For example, they can purchase drugs at 340B prices for all  eligible patients regardless of the patients\u2019 income or insurance status  and generate revenue, such as by receiving reimbursement from a  patient\u2019s insurance that may exceed the 340B price paid for the drugs.  The 340B Program does not dictate how covered entities should use  this revenue or require that discounts on the drugs be passed on to  patients.", "Incentives for participation by drug manufacturers also are strong  because they must participate in the 340B Program to receive  Medicaid reimbursement for their drugs. According to HRSA, most  manufacturers that produce outpatient drugs have participated in the  program since its inception.", "HRSA also requires program participants to meet certain conditions set  forth both in law and agency guidance. For example, covered entities are  prohibited from diverting 340B drugs\u2014that is, transferring 340B drugs to  individuals who are not eligible patients of the entities. Similarly, to help  ensure covered entities receive discounts to which they are entitled,  HRSA has issued guidance (referred to as \u201cHRSA\u2019s nondiscrimination  guidance\u201d throughout this statement) prohibiting drug manufacturers from  distributing drugs in ways that would discriminate against covered entities  compared to non-340B health care providers, such as by imposing  minimum purchase requirements or other restrictive conditions.", "In a September 2011 report, we identified inadequacies in HRSA\u2019s  oversight of this program and recommended actions that should be taken  to improve oversight and ensure appropriate use of the program. Since  then, we have been monitoring HRSA\u2019s progress in addressing our  recommendations and have testified about this at hearings before the  House Committee on Energy and Commerce on March 24, 2015, and  July 18, 2017. My statement today will describe HRSA actions in  response to GAO recommendations to address (1) weaknesses in  oversight of the 340B Program and (2) the lack of clarity in program  guidance. The statement will also (3) describe ongoing GAO work  regarding the 340B Program and HRSA oversight.", "For this statement, we obtained information and documentation from  HRSA officials about any significant program updates, and steps they  have taken to implement our 2011 recommendations. More detailed  information on the objectives, scope, and methodology for our 2011  report can be found in that report. We conducted our work for the 2011  report from September 2010 to September 2011, and updated this work  in February and March 2015, in June and July 2017, and again in March  2018. The work upon which this statement is based was conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The 340B Program was created following the enactment of the Medicaid  Drug Rebate Program and gives 340B covered entities discounts on  outpatient drugs comparable to those made available to state Medicaid  agencies. HRSA is responsible for administering and overseeing the  340B Program."], "subsections": [{"section_title": "Program Participants", "paragraphs": ["Eligibility for the 340B Program, which is defined in the PHSA, has  expanded over time, most recently through the Patient Protection and  Affordable Care Act (PPACA), which extended eligibility to additional  types of hospitals. Entities generally become eligible by receiving  certain federal grants or by being one of six hospital types. Eligible  grantees include clinics that offer primary and preventive care services,  such as Federally Qualified Health Centers, clinics that target specific  conditions or diseases that raise public health concerns or are expensive  to treat, and AIDS Drug Assistance Programs, which serve as a \u201cpayer of  last resort\u201d to cover the cost of providing HIV-related medications to  certain low-income individuals. Eligible hospitals include certain children\u2019s  hospitals, free-standing cancer hospitals, rural referral centers, sole  community hospitals, critical access hospitals, and general acute care  hospitals that serve a disproportionate number of low-income patients,  referred to as disproportionate share hospitals (DSH). To become a  covered entity and participate in the program, eligible entities must  register with HRSA and be approved. Entity participation in the 340B  Program has grown over time to include more than 38,000 entity sites,  including more than 21,000 hospital sites and nearly 17,000 federal  grantee sites (see fig. 1).", "To be eligible for the 340B Program hospitals must meet certain  requirements intended to ensure that they perform a government function  to provide care to the medically underserved. First, hospitals generally  must meet specified DSH adjustment percentages to qualify.  Additionally, they must be (1) owned or operated by a state or local  government, (2) a public or private nonprofit corporation that is formally  delegated governmental powers by a unit of state or local government, or  (3) a private, nonprofit hospital under contract with a state or local  government to provide health care services to low-income individuals who  are not eligible for Medicaid or Medicare.", "All drug manufacturers that supply outpatient drugs are eligible to  participate in the 340B Program and must participate in order to have  their drugs covered by Medicaid. To participate, manufacturers are  required to sign a pharmaceutical pricing agreement with HHS in which  both parties agree to certain terms and conditions."], "subsections": []}, {"section_title": "Program Structure, Operation, and Key Requirements", "paragraphs": ["The 340B price for a drug\u2014often referred to as the 340B ceiling price\u2014is  based on a statutory formula and represents the highest price a  participating drug manufacturer may charge covered entities. Covered  entities must follow certain requirements as a condition of participating in  the 340B Program. For example  covered entities are prohibited from subjecting manufacturers to  \u201cduplicate discounts\u201d in which drugs prescribed to Medicaid  beneficiaries are subject to both the 340B price and a rebate through  the Medicaid Drug Rebate Program.  covered entities are also prohibited from diverting any drug purchased  at the 340B price to an individual who does not meet HRSA\u2019s  definition of a patient. This definition, issued in 1996, outlines three  criteria that generally state that diversion occurs when 340B  discounted drugs are given to individuals who are not receiving health  care services from covered entities or are only receiving non-covered  services, such as inpatient hospital services. (See table 1 for more  information on HRSA\u2019s definition of an eligible patient.) Covered  entities are permitted to use drugs purchased at the 340B price for all  individuals who meet the 340B Program definition of a patient  regardless of whether they are low-income, uninsured, or  underinsured.", "A covered entity typically purchases and dispenses 340B drugs through  pharmacies\u2014either through an in-house pharmacy, or through the use of  a contract pharmacy arrangement, in which the covered entity contracts  with an outside pharmacy to dispense drugs on its behalf. The adoption  and use of contract pharmacies in the 340B Program is governed by  HRSA guidance. HRSA\u2019s original guidance permitting the use of contract  pharmacies limited their use to covered entities that did not have in-house  pharmacies and allowed each covered entity to contract with only one  outside pharmacy. However, March 2010 guidance lifted the restriction  on the number of pharmacies with which a covered entity could  contract. Since that time, the number of unique contract pharmacies has  increased significantly, from about 1,300 at the beginning of 2010 to  around 18,700 in 2017 (see fig. 2); and, according to HRSA data, in 2017,  there were more than 46,000 contract pharmacy arrangements. HRSA  guidance requires a written contract between the covered entity and each  contract pharmacy. Covered entities are responsible for overseeing  contract pharmacies to ensure compliance with prohibitions on drug  diversion and duplicate discounts. HRSA guidance indicates that covered  entities are \u201cexpected\u201d to conduct annual independent audits of contract  pharmacies, leaving the exact method of ensuring compliance up to the  covered entity.", "Drug manufacturers also must follow certain 340B Program requirements.  For example, HRSA\u2019s nondiscrimination guidance prohibits  manufacturers from distributing drugs in ways that discriminate against  covered entities compared to other providers. This includes ensuring that  drugs are made available to covered entities through the same channels  that they are made available to non-340B providers, and not conditioning  the sale of drugs to covered entities on restrictive conditions, which would  have the effect of discouraging participation in the program."], "subsections": []}]}, {"section_title": "HRSA Has Implemented GAO\u2019s Recommendation to Improve Its Oversight of the 340B Program by Conducting Audits", "paragraphs": ["In our September 2011 report, we found that HRSA\u2019s oversight of the  340B Program was weak because it primarily relied on covered entities  and manufacturers to police themselves and ensure their own compliance  with program requirements. Upon enrollment into the program, HRSA  requires participants to self-certify that they will comply with applicable  340B Program requirements and any accompanying agency guidance,  and expects participants to develop the procedures necessary to ensure  and document compliance, informing HRSA if violations occur. HRSA  officials told us that covered entities and manufacturers could also  monitor each other\u2019s compliance with program requirements, but we  found that, in practice, participants could face limitations to such an  approach.", "Beyond relying on participants\u2019 self-policing, we also found that HRSA  engaged in few activities to oversee the 340B Program and ensure its  integrity, which agency officials said was primarily due to funding  constraints. Further, although HRSA had the authority to conduct audits  of program participants to determine whether program violations had  occurred, at the time of our 2011 report, the agency had never conducted  such an audit.", "In our 2011 report, we concluded that changes in the settings where the  340B Program was used may have heightened the concerns about the  inadequate oversight we identified. In the years leading up to our report,  the settings where the 340B Program was used had shifted to more  contract pharmacies and hospitals than in the past, and that trend has  continued in recent years. We concluded that increased use of the 340B  Program by contract pharmacies and hospitals may have resulted in a  greater risk of drug diversion to ineligible patients, in part because these  facilities were more likely to serve patients that did not meet the definition  of a patient of the program.", "To address these oversight weaknesses, we recommended that the  Secretary of HHS instruct the Administrator of HRSA to conduct selective  audits of covered entities to deter potential diversion. In response to that  recommendation, in fiscal year 2012, HRSA implemented a systematic  approach to conducting annual audits of covered entities that is outlined  on its website. HRSA audits include entities that are randomly selected  based on risk-based criteria (approximately 90 percent of the audits  conducted each year), and entities that are targeted based on information  from stakeholders (10 percent of the audits conducted). HRSA currently  audits a total of 200 entities per year, which accounts for less than 2  percent of covered entities. (See table 2.)", "As a result of the audits already conducted, HRSA has identified  instances of non-compliance with program requirements, including  violations related to drug diversion and the potential for duplicate  discounts. The agency has developed a process to address non- compliance through corrective action plans. The results of each year\u2019s  audits are available on HRSA\u2019s website, and we currently have work  underway reviewing HRSA\u2019s efforts to ensure compliance with 340B  Program requirements at contract pharmacies that includes an  examination of HRSA\u2019s audits of covered entities."], "subsections": []}, {"section_title": "HRSA Implemented One of Three GAO Recommendations to Clarify Program Guidance", "paragraphs": ["In our 2011 report, we found that HRSA\u2019s guidance on three key program  requirements lacked the necessary level of specificity to provide clear  direction, making it difficult for participants to self-police or monitor others\u2019  compliance, and raising concerns that the guidance could be interpreted  in ways that were inconsistent with its intent.", "First, we found that HRSA\u2019s nondiscrimination guidance was not  sufficiently specific in detailing practices manufacturers should follow to  ensure that drugs were equitably distributed to covered entities and non- 340B providers when distribution was restricted. Some stakeholders we  interviewed for the 2011 report, such as covered entities, raised concerns  about the way certain manufacturers interpreted and complied with the  guidance in these cases. We recommended that HRSA further clarify its  nondiscrimination guidance for cases in which distribution of drugs is  restricted and require reviews of manufacturers\u2019 plans to restrict  distribution of drugs at 340B prices in such cases. In response, HRSA  issued a program notice in May 2012 that clarified HRSA\u2019s policy for  manufacturers that intend to restrict distribution of a drug and provided  additional detail on the type of information manufacturers should include  in such restricted distribution plans.", "In addition, we found a lack of specificity in HRSA\u2019s guidance on two  other issues\u2014the definition of an eligible patient and hospital eligibility for  program participation. Specifically, we found that", "HRSA\u2019s guidance on the definition of an eligible patient lacked the  necessary specificity to clearly define the various situations under  which an individual was considered eligible for discounted drugs  through the 340B Program. As a result, covered entities could  interpret the definition either too broadly or too narrowly. At the time of  our report, agency officials told us they recognized the need to  provide additional clarity around the definition of an eligible patient, in  part because of concerns that some covered entities may have  interpreted the definition too broadly to include non-eligible  individuals, such as those seen by providers who were only loosely  affiliated with a covered entity.", "HRSA had not issued guidance specifying the criteria under which  hospitals that were not publicly owned or operated could qualify for  the 340B Program. For example, we found HRSA guidance lacking  on one of the ways hospitals could qualify for the program, namely by  executing a contract with a state or local government to provide  services to low-income individuals who are not eligible for Medicaid or  Medicare. Specifically, we found that HRSA did not outline any criteria  that must be included in such contracts, such as the amount of care a  hospital must provide to these low-income individuals, and did not  require the hospitals to submit their contracts for review by HRSA.  As a result, hospitals with contracts that provided a small amount of  care to low-income individuals not eligible for Medicaid or Medicare  could claim 340B discounts, which may not have been what the  agency intended.", "Given the lack of specificity in these areas, we recommended that HRSA  (1) finalize new, more specific guidance on the definition of an eligible  patient, and (2) issue guidance to further specify the criteria that hospitals  not publicly owned or operated must meet to be eligible for the 340B  Program. HRSA agreed with these recommendations and had planned to  address them in a comprehensive 340B Program regulation that it  submitted to the Office of Management and Budget for review in April  2014. However, HRSA withdrew this proposed regulation in November  2014 following a May 2014 federal district court ruling that the agency had  not been granted broad rulemaking authority to carry out all the provisions  of the 340B Program. After this ruling, the agency issued a proposed  Omnibus Guidance in August 2015 to interpret statutory requirements for  the 340B Program in areas where it did not have explicit rulemaking  authority, including further specificity on the definition of a patient of a  covered entity and hospital eligibility for 340B Program participation.  However, in January 2017, the agency withdrew the guidance following  the administration\u2019s January 20 memorandum directing agencies to  withdraw or postpone regulations and guidance that had not yet taken  effect. In March 2018, HRSA indicated that it was working with HHS to  determine next steps regarding the proposed Omnibus Guidance, which  included the patient definition, but that it was unable to further clarify  guidance on hospital eligibility without additional authority. HRSA also  noted that the administration\u2019s fiscal year 2019 budget proposal requests  rulemaking authority, which, if enacted, would provide the agency with the  authority to regulate hospital eligibility for the 340B Program."], "subsections": []}, {"section_title": "GAO Has Ongoing Work Related to the 340B Program", "paragraphs": ["GAO has ongoing work related to 340B contract pharmacies and the  characteristics of hospitals participating in the program.  Specifically,  given the increase in the number of contract pharmacies in the 340B  Program and concerns that contract pharmacy arrangements present an  increased risk to the integrity of the program, we were asked to review  contract pharmacy use under the 340B Program. In our forthcoming  report, we plan to describe the extent to which covered entities contract with pharmacies  to distribute 340B drugs, and the characteristics of these pharmacies; describe financial arrangements selected covered entities have with  contract pharmacies and third-party administrators related to the  administration and dispensing of 340B drugs; describe the extent to which selected covered entities provide  discounts on 340B drugs dispensed by contract pharmacies to low- income, uninsured patients; and examine HRSA\u2019s efforts to ensure compliance with 340B Program  requirements at contract pharmacies.", "In addition, with the growth in the number of hospitals participating in the  340B Program and Medicaid coverage expansions as a result of PPACA,  we were asked to review how hospitals that participate in the 340B  Program compare to other hospitals. In our forthcoming report, we plan to  address how hospitals that participate in the 340B Program compare to non- 340B hospitals in terms of certain characteristics; and how, if at all, the characteristics of 340B and non-340B hospitals  changed after state Medicaid coverage was expanded under PPACA.", "We expect to issue these reports this summer.", "Chairman Alexander, Ranking Member Murray, and Members of the  Committee, this concludes my statement. I would be pleased to respond  to any questions you may have."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For further information about this statement, please contact Debra A.  Draper at (202) 512-7114 or draperd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony. Key contributors to this statement were  Michelle Rosenberg, Assistant Director; Amanda Cherrin, Sandra  George, and David Lichtenfeld.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The \"340B\" program requires drug manufacturers to sell outpatient drugs to covered entities\u2014certain hospitals and federal grantees (like health centers and clinics)\u2014at a discount to have their drugs covered under Medicaid.", "This testimony describes the Health Resources & Services Administration's oversight of the 340B Program. In 2011 we made recommendations to HRSA to address weaknesses we identified in its oversight of the program. HRSA has addressed some of our recommendations but has yet to address our recommendations to clarify guidance on patient and hospital eligibility."]}
{"id": "GAO-19-94", "url": "https://www.gao.gov/products/GAO-19-94", "title": "Streamlining Government: OMB and GSA Could Strengthen Their Approach to Implementing a New Shared Services Plan", "published_date": "2019-03-07T00:00:00", "released_date": "2019-04-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government can reduce duplicative efforts and free up resources for mission-critical activities by consolidating mission-support services that multiple agencies need\u2014such as payroll or travel\u2014within a smaller number of providers so they can be shared among agencies. However, migrating to a shared services provider has not consistently increased cost savings, efficiencies, or customer satisfaction, according to OMB and others who have observed these migrations.", "GAO was asked to review previous shared services initiatives. This report: (1) identifies the progress and challenges associated with federal shared services initiatives for selected HR and financial management activities and (2) assesses OMB and GSA's actions to address those challenges. GAO analyzed planning and performance documents and interviewed officials from selected customer and provider agencies and from agencies involved with shared services policy and guidance. GAO also interviewed subject-matter experts familiar with shared services. GAO reviewed steps OMB and GSA are taking to identify and address challenges from past migrations to improve shared services performance."]}, {"section_title": "What GAO Found", "paragraphs": ["Efforts to promote greater use of shared services for human resources (HR) and financial management activities resulted in some cost savings and efficiency gains, but challenges impeded more widespread adoption. For example, the Office of Personnel Management estimates that shared services for HR, including payroll resulted in more than $1 billion in government-wide cost-savings and cost avoidance between fiscal years 2002 and 2015. However, challenges include limited oversight, demand uncertainty among providers, and limited choices for customers. To address these challenges, the Office of Management and Budget (OMB) and the General Services Administration (GSA), as the shared services initiative leaders, introduced a new marketplace model in 2018 meant to better meet the needs of customers and service providers by offering more choices for purchasing shared services (see figure). They are also working on plans to create Service Management Offices and Task Order Review Boards to work with agencies to adopt standards for common management activities.", "GAO found that OMB and GSA were following some key change management practices such as improving interagency collaboration in their design of the marketplace model. However, implementation weaknesses may limit their success. For example, OMB and GSA do not have a plan to monitor the implementation of NewPay, a 2018 payroll shared services initiative designed to determine how well the new model works. A monitoring plan which includes performance goals and milestones could help OMB and GSA avoid gaps in service or costly delays as agencies transition to the new model for obtaining shared services."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to OMB including to work with GSA to finalize a plan for monitoring the implementation of NewPay, among other actions. OMB staff did not comment on GAO's recommendations, but noted that OMB may update its shared services policy in the future."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government can reduce duplicative efforts and free up  resources for mission-critical activities by consolidating mission-support  services that multiple agencies need\u2014such as payroll or travel\u2014within a  smaller number of providers so they can be shared among agencies.  Over the past 15 years, the federal government has undertaken efforts  that have saved money and increased efficiency through shared services  solutions. The federal government could potentially save billions more  and reduce overlap and duplication by migrating additional services to  shared services solutions.", "The Office of Management and Budget (OMB) and the General Services  Administration (GSA) are responsible for overseeing a strategic,  government-wide framework for improving the effectiveness and  efficiency of shared services. To date, the federal government has made  significant efforts to promote shared services in several areas such as  human resources (HR) and financial management. However, according to  OMB and others who have observed shared services migrations,  migrating these services from individual agencies to a shared services  provider has not consistently resulted in cost savings, greater efficiencies,  or improved customer satisfaction.", "You asked us to review previous shared services initiatives for HR and  financial management activities. This report: (1) identifies the progress  and challenges associated with federal shared services initiatives for  selected HR and financial management activities, and (2) assesses OMB  and GSA\u2019s actions to address those challenges.", "To address our objectives, we conducted a literature review of GAO\u2019s  work and other relevant publications from the past 15 years on HR and  financial management shared services, such as reports by the  Partnership for Public Service and the Association of Government  Accountants (AGA). We also reviewed our reports that focused on  specific agency migrations. We reviewed planning and performance  documents and interviewed officials from (1) OMB and GSA\u2014the  agencies that currently oversee shared services policy and guidance\u2014 and (2) the Office of Personnel Management (OPM) and the Office of  Financial Innovation and Transformation (FIT) within the Department of  the Treasury (Treasury), both of which oversaw past shared services  initiatives and continue to play a key role developing government-wide  HR and financial management shared services policy.", "Further, we reviewed guidance, planning, and performance documents  and interviewed agency officials at four agencies engaged in the shared  services process. We selected two federal shared services providers  (FSSPs), federal agencies that provide shared services to other agencies:  the National Finance Center (NFC) housed within the U.S. Department of  Agriculture (USDA) and the Administrative Resource Center (ARC)  housed within Treasury. We also selected two customer agencies: the  Departments of Justice (Justice) and Education (Education) involved in  different phases of shared services migrations. We made our selection  based on a number of factors. To capture a range of experiences and  perspectives, we selected a mix of customer and provider agencies. We  selected one HR and one financial management systems migration to  review, as well as one migration in an earlier phase and one in a later  phase. To capture an in-depth perspective of a migration, we selected  one customer and provider working together on a migration. To capture  perspectives on OMB and GSA\u2019s efforts to address shared services  challenges and improve outcomes, we selected provider and customer  agencies that were meeting regularly with GSA in 2016 or 2017 on their  shared services migration. Our selection of agencies is non-generalizable  and their experiences and outcomes may not reflect all migrations. We  also interviewed subject-matter experts who were involved in public and  private shared services migrations as customers, providers, or  consultants.", "To address the second objective, we reviewed OMB and GSA\u2019s efforts to  identify and address challenges and lessons learned from past  migrations, including the new shared services action plan OMB released  in spring 2018. We assessed the extent to which OMB and GSA\u2019s plan  and guidance are designed to facilitate better shared services outcomes  using criteria such as standards for internal control in the federal  government, principles identified in our previous work related to  addressing major management challenges, and the AGA criteria for  effective marketplaces. Additional details on our objectives, scope, and  methodology are in appendix I.", "We conducted this performance audit from June 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["According to OMB, the federal government spends more than $25 billion  annually for core mission support services, such as HR and financial  management that are common across agencies. These services are  generally supported by a wide range of activities. For example, the HR  employee life cycle functions represent hiring to retirement and include  activities such as payroll and other compensation and benefits  management. The financial management function includes core financial  activities such as making and receiving payments for goods or services.", "As shown in figure 1, for more than two decades, the federal government  has taken actions aimed at increasing agencies\u2019 use of shared services.  Key congressional actions included new laws to create uniform standards  for financial reporting, promote agency use of information technology (IT)  to deliver core mission support services, and establish funding  mechanisms for agencies to modernize IT systems. Presidential  administrations have made it a priority to promote the use of shared  services for HR and financial management activities for many years. For  example, in 2014 and again in 2018, OMB established a cross-agency  priority (CAP) goal of improving the use, quality, and availability of  administrative shared services. Complementing the goal, the Digital  Accountability and Transparency Act of 2014 is intended to standardize  and increase the transparency of agencies\u2019 spending data.", "At present, OMB has responsibility and authority to develop and  implement government-wide shared services policy. OMB is working with  GSA to develop shared services strategy, policies, and guidance, with  OPM and Treasury also having important roles (see table 1). Table 1 also  describes the agencies we selected and their roles in the shared services  initiatives."], "subsections": []}, {"section_title": "Federal Efforts to Promote Shared Services Resulted in Some Cost Savings and Efficiency Gains, but Challenges Impeded More Widespread Adoption", "paragraphs": [], "subsections": [{"section_title": "Efforts to Promote Shared Services for HR Activities Contributed to Cost Savings and Cost Avoidance", "paragraphs": ["OMB\u2019s efforts to promote HR shared services resulted in cost savings,  cost avoidance, and more consistent service delivery. OMB announced  the HR Line of Business in 2004 simultaneously with the Financial  Management Line of Business. These shared services initiatives shared  similar goals: (1) standardize systems, business processes, and data  elements to promote consistency across the federal government; and (2)  reduce costs by establishing a marketplace or a system of buying and  selling products and services. In this context, the marketplace would allow  agencies to acquire IT systems for core mission support services through  shared services solutions.", "OPM and FIT coordinated with their respective Chief Human Capital  Officer and CFO stakeholder communities to develop data elements and  business process standards for common HR and financial management  activities. Setting consistent standards for data and systems can lead to  benefits for shared services customers as well as providers. For example,  the ability to meaningfully aggregate or compare data across the federal  government increases as more agencies adopt common or standardized  data elements or processes. As we have previously reported, the lack of  comparable data across agencies can hinder efforts to analyze  government-wide trends. Specifically, OPM reported in 2015 that the  lack of standardized time and attendance data or required data  components limits access to workforce data and hinders efforts to  analyze government-wide trends. In addition, once providers know the  standards, they can develop a solution applicable to multiple customer  agencies and achieve economies of scale.", "OPM oversaw one of the first efforts to create a shared services  marketplace in 2001, which focused on payroll. That effort resulted in cost  savings, cost avoidance, and greater consistency in the interpretation and  application of payroll rules. In the early 2000s, many agencies\u2019 payroll  systems were nearing the end of their estimated life cycles. As managing  partner of the HR Line of Business, OPM worked with OMB to identify  payroll providers. They selected 4 of the then 22 federal payroll providers  to serve as FSSPs for the 116 executive branch agencies. We  previously reported that, according to OPM officials who had overseen  the payroll consolidation effort, OMB authorized only the chosen federal  payroll providers\u2014not other agencies\u2014to spend money on modernizing  payroll systems, thereby encouraging the shift to the selected FSSPs.", "OPM designated six more public- and private-sector shared services  centers to provide additional HR functions to agencies in between 2005- 2008. These functions include core HR services such as personnel  action processing and benefits and compensation management, as well  as noncore services such as HR strategy and performance management.  According to OPM, more than 99 percent of agencies migrated to a  payroll provider and more than 88 percent of agencies migrated to an HR  shared services center. This resulted in an estimated savings and cost  avoidance of more than $1 billion between fiscal years 2002 and 2015.  The consolidation of payroll providers from 22 to 4 providers also  contributed to greater consistency in the way the federal government  interprets and applies payroll rules."], "subsections": []}, {"section_title": "Outcome Information on Financial Management Shared Services Efforts Is Limited", "paragraphs": ["The federal government made progress toward establishing standards for  selected financial management activities and designating providers to  engage in a marketplace. However, information on outcomes is limited  because data were not tracked amidst changes in the Financial  Management Line of Business leadership and strategy. In 2004, OMB  designated GSA\u2019s Financial Systems Integration Office (FSIO) as  managing partner of the Financial Management Line of Business. OMB  also designated four FSSPs to provide financial management services to  other agencies. They were: the Department of the Treasury\u2019s  Administrative Resource Center (ARC), the Department of the Interior\u2019s  Interior Business Center (IBC), the Department of Transportation\u2019s  Enterprise Service Center (ESC), and GSA\u2019s Federal Integrated Solutions  Center.", "Under the original Financial Management Line of Business, which was  launched in 2004, federal agencies were required to either serve as a  shared services provider or leverage a shared services provider when  modernizing a financial system. In 2010, OMB changed this strategy.  Agencies would no longer be required to adopt shared services for  financial systems. In announcing this change in strategy, OMB noted  concerns related to the costs and risks\u2014such as projects that did not  meet agency needs upon completion\u2014that medium and large agencies  had encountered as they pursued shared services for financial  management activities. OMB also noted that agency managers were  more likely to pursue shared services for less complex operations such as  common website hosting, rather than more complex operations, such as  financial transactions. Further, OMB announced a change in leadership.  FSIO ceased operations and OMB later designated the Department of the  Treasury\u2019s Office of Financial Innovation and Transformation (FIT) as the  new managing partner of the Financial Management Line of Business.", "FIT took steps to establish a marketplace for customers seeking shared  financial management services and to develop standards for financial  management activities. As part of this effort, FIT created a process to  analyze the existing financial management FSSPs to identify capability  gaps. FIT invited the existing FSSPs and other agencies that wanted to  receive FSSP designation to apply. In 2014, FIT selected ARC, IBC,  ESC, and USDA Financial Management Services (which is separate from  NFC) to provide financial management services to other federal  agencies. FIT also worked with the CFO community to develop more  than 40 business use cases for financial management activities. Business  use cases document how a common activity, such as disbursing  payments, is executed, including a sequential description of each step in  the process. According to a FIT official, these business use cases foster a  common understanding of how to execute specific financial management  functions among customers and providers, which can make it easier for  customers to transition to shared services.", "Further, FIT identified four initiatives to expand shared services for  financial transactions. FIT\u2019s four shared services initiatives included  expanding shared services for accounts payable and accounts  receivable, debt collection, and payment processing. FIT officials  estimated these projects could contribute to cost savings of around $620  million over 5 years, but they did not track cost savings. FIT officials also  did not track the percentage of non-CFO Act agencies that migrated  financial systems to a shared services provider. FSSP customer lists  show that non-CFO Act agencies and commissions more frequently rely  on external providers for core financial shared services than do medium  and large agencies.", "FIT officials stated that OMB transferred many of FIT\u2019s responsibilities,  including collecting performance information, to GSA in 2016. In 2018,  GSA officials published customer satisfaction data from 2017 and 2018  for administrative functions, including financial management services  through the Customer Satisfaction Survey. GSA also plans to track the  percentage of selected financial transactions\u2014such as certain types of  payments\u2014completed by a shared services provider starting in 2020.  However, tracking of cost data continues to be an issue, which we  address later in this report."], "subsections": []}, {"section_title": "Governance and Marketplace Challenges Have Impeded Greater Progress toward Cost Savings and Other Performance Goals", "paragraphs": ["Wider adoption of HR and financial management shared services has  been impeded by challenges in two areas. First, shared services efforts  have faced persistent governance challenges, such as limited interagency  collaboration, difficulty reconciling benefits and trade-offs, and limited  oversight and technical support for shared services migrations. Second,  the efforts have also experienced marketplace challenges, which involve  difficulty obtaining funding to invest in shared services, demand  uncertainty among providers, and limited choices for customers. These  issues hampered efforts to establish effective and efficient shared  services marketplaces. As a result, these marketplaces have not been  able to consistently support sufficient competition limiting the potential  cost sharing efficiencies and improved performance that could be realized  with greater usage. OMB and GSA have taken steps to address these  challenges, which we assess later in this report.", "Limited interagency collaboration. The Lines of Business governance  structure limited collaboration across different mission support areas. This  made it more difficult for those with expertise in acquisitions, IT, HR, and  financial management policy to work together on shared services  solutions. For example, although a shared payroll solution should ideally  consider how to appropriately implement payroll rules, an area in which  the Chief Human Capital Officers community has subject-matter  expertise, it also needs the expertise of others. Specifically, the solution  should also be able to integrate with an agency\u2019s financial reporting  systems, an area in which the CFOs and Chief Information Officers have  expertise. Additionally, the solution should ideally leverage the  government\u2019s purchasing power, an area in which the Chief Acquisition  Officers have expertise. The Lines of Business Managing Partners took  steps intended to address this issue. For example, the HR Line of  Business chartered the Multi-Agency Executive Strategy Committee to  facilitate interagency collaboration by bringing together representatives  from human capital offices across CFO Act agencies. Later in this  report, we describe additional steps OMB and GSA took to promote  greater collaboration across the individual Lines of Business.", "Difficulty reconciling benefits and trade-offs. We found that agencies  have had difficulty reconciling the trade-offs associated with adopting a  standardized service. OMB has issued multiple memorandums over the  years directing agency officials to consider shared services solutions  when researching options for replacing legacy HR or financial  management systems. Despite OMB\u2019s direction, the benefits for  customers to migrate to a standardized solution were not always clear.  According to ARC officials, prospective customers were invested in their  legacy processes, or did not factor long-term cost savings or cost  avoidance into their decision-making process, therefore limiting the full  realization of standardized shared services.", "These difficulties are illustrated in a recent experience at Education.  Education officials debated whether to migrate the department\u2019s financial  management system to a shared services provider, and spent substantial  time and money determining whether it was feasible. Education has several systems which are closely integrated and dependent on one  another, including financial and grants management. In considering trade- offs, officials were concerned about the costs they would incur and the  impact to their grantees if they de-coupled these systems to migrate to a  standardized financial system. According to Education officials, they  spent about a year meeting with officials from OMB, FIT, and ARC to  determine the feasibility of migrating their core accounting system to  ARC.", "They also reported spending more than $750,000 on a feasibility study.  The study noted that the cost of an internal migration would be less  expensive than migrating to ARC. Ultimately, in 2016, Education  officials decided that instead of migrating they would modernize their  legacy system internally. GSA and OMB supported Education\u2019s decision  to modernize in house and agreed that Education did not need to move to  a shared services provider at that time. However, GSA officials working  with Education on their financial management modernization efforts noted  that Education\u2019s decision to pursue a customized solution that paired  financial systems and grants contributed to the higher quoted cost of  migrating to ARC. GSA officials also recommended that Education  consider the costs and benefits of making changes to its financial  management systems that would eventually facilitate the transition to a  shared services solution. Education officials said they remain committed  to reviewing this effort again in the future.", "Limited oversight and technical support. Customer and provider  agencies experienced issues with project management, which contributed  to delayed and costly migrations. For example, we previously reported  that two recent financial management migrations\u2014involving the  Department of Housing and Urban Development (HUD) migrating to ARC  and the Department of Homeland Security (DHS) migrating to IBC, the  federal shared services provider within the Department of the Interior\u2014 were late, over budget, and only addressed a portion of the original  project scope. In 2016, we reported that HUD migrated 4 of 14 planned  financial management capabilities to shared service solutions, but ended  efforts to migrate the remaining 10 planned capabilities to ARC, in part because of weaknesses in implementing key management practices.  For example, HUD\u2019s senior leaders did not recognize and fully address  challenges as they arose, including those identified with scope, schedule,  and program costs. As a result, HUD was unable to follow through with its  plans to replace a number of its legacy financial management systems  and continues to maintain those systems while seeking other new  initiatives to address aspects of the remaining capabilities. HUD spent  about $58 million over three years before deciding to end the migration  and modernization effort in April 2016. ARC officials reported that as of  November 2018, it continues to provide financial management services  for the capabilities that HUD migrated.", "Similarly, in 2017, we reported that to address long-standing deficiencies  in DHS\u2019s financial management systems, DHS started to migrate three  components to a modernized financial management system solution  provided by the IBC. However, we found that significant challenges  such as project management and communication problems, among  others, disrupted the project, raising concerns about the extent to which  objectives would be achieved as planned. In May 2016, DHS and IBC  determined that the planned implementation dates were not viable. We  reported that plans for DHS\u2019s path forward on this project were delayed  for 2 years.", "In both cases, we found that the customer agencies did not consistently  follow leading project management practices, such as properly identifying  potential risks and developing mitigation plans. We made four  recommendations to HUD and two recommendations to DHS intended to  address weaknesses in their department\u2019s financial management systems  modernization efforts. However, as of November 2018, they had not yet  implemented them.", "OPM took steps to address this issue for the HR Line of Business. OPM  officials told us that in 2007 they developed an online guide to assist  customer agencies to prepare for and manage a migration of their human  resources operations to a shared services center. According to OPM, the  guidance contains information regarding different delivery models, the  migration process, and roles and responsibilities. Further, OMB and  GSA recognized that customers and providers would benefit from  additional technical support and oversight. In May 2016 guidance, OMB  tasked GSA with assisting agencies during implementation by publishing  guidance incorporating best practices and lessons learned in project  management. OMB also tasked GSA with monitoring implementations  to ensure that agencies are following a disciplined process and properly  assessing project risk in partnership with OMB. Later in this report, we  describe steps GSA has taken to provide guidance and technical  assistance to agencies.", "Funding challenges, demand uncertainty, and limited choices.  Funding challenges, demand uncertainty among providers, and limited  choices for customers are challenges that have limited the effectiveness  of shared services marketplaces for HR and financial management  services. We have previously reported that agencies consider obtaining  the funding required for consolidation and migration efforts to be a  challenge. This can affect their ability to realize cost savings and cost  avoidance. GSA officials said funding challenges can be a barrier to  entry into the marketplace for potential customers. In part because of  funding challenges, agencies continue to rely on legacy IT systems for  core mission support services. Many of these systems are increasingly at  risk of failure because of aging technology and reliance on applications  that are no longer supported by vendors. As a result, agencies are limited  in their ability to deploy updates or make adjustments to ensure the  systems support mission needs. In our 2017 High-Risk report, we found  that agencies needed to establish action plans to modernize or replace  obsolete IT investments across the federal government.", "Some FSSPs have also struggled to keep up with the capital investments  necessary to modernize. We previously reported that OPM officials  involved with the payroll consolidation effort said that funding had not  materialized for systems modernization for the four payroll service  providers, though it was expected at the outset of the initiative. The  officials said this lack of funding was a major problem that put the long- term viability of the effort at risk. According to NFC officials, the HR  FSSPs continue to find it difficult to keep up with the capital investments  necessary to modernize. GSA officials said that federal investment in HR  and financial management systems modernization lags behind the private  sector.", "According to agency officials and subject-matter experts, federal and  commercial shared services providers faced uncertainty related to  customer demand, which made it difficult for them to plan and more fully  participate in the shared services marketplace. For example, ARC  officials said that in determining whether to invest in system improvement,  they need to evaluate the impact on current customers as well as the  benefits to potential customers. They also pointed out that the costs  associated with systems improvements would be borne by the current  customer base if potential new customers failed to materialize.", "On the customer side, both agency officials and subject-matter experts  told us that potential customers often found it difficult to identify providers  capable of meeting their needs. Some customers wanted a la carte  services and others had needs which surpassed the capacity of available  providers. For example, Education\u2019s HR officials said it was difficult to find  a provider to meet their needs for specific HR services. A lack of up-to- date information about providers\u2019 services and costs complicated their  search process. Education officials said they reached out to several  FSSPs, but either they did not provide the specific services Education  wanted, they were not taking on new customers, or the cost was not  feasible for Education. We previously found that as more agencies  consider transitioning to shared services providers, making pricing and  performance information publically available can help agencies determine  the most efficient method for obtaining services.", "Subject-matter experts said that large agencies also had challenges  finding an FSSP capable of meeting their needs. For example, one  subject-matter expert who works at a large agency with more than  350,000 employees described the challenges his agency faced identifying  a provider capable of providing financial management services. He said  one potential FSSP was concerned that adding a large customer would  negatively impact its ability to serve other customers. In light of the  difficulty in finding a provider with sufficient capacity, the agency decided  to modernize its financial system internally.", "In light of these challenges, agency adoption of shared services has been  slow and uneven. In 2015, the Association of Government Accountants  (AGA) surveyed government managers and staff, and found that difficult  migration experiences raised doubts among officials at other agencies  contemplating shared services. AGA found that respondents considering  migrating to a shared services provider were hearing enough concerns  that they were not eager to undergo a substantial migration.  Consequently, agencies continue to conduct common business activities  in an inconsistent manner and maintain unique systems. Therefore, they  may be missing opportunities to achieve cost savings offered by greater  use of shared services. For example, according to OPM, there are at  least 108 different systems that send time and attendance data to FSSPs.  There are also an estimated 86 learning management systems across the  government. We have consistently reported that duplicative and  incompatible agency business systems and data prevent agencies from  sharing data, or force them to depend on expensive, custom-developed  systems or programs to do so."], "subsections": []}]}, {"section_title": "OMB and GSA Have Taken Actions to Address Governance and Marketplace Challenges, but Could Strengthen Their Implementation Approach", "paragraphs": [], "subsections": [{"section_title": "OMB and GSA Have Taken Actions to Address Persistent Challenges", "paragraphs": ["Over the past several years, OMB and GSA have taken actions\u2014 including creating a new governance structure and redesigning the  marketplace\u2014to address the challenges that impeded more widespread  adoption of shared services. To bolster interagency collaboration, OMB  issued guidance in 2016, which designated a Shared Services Policy  Officer within OMB with responsibility and authority to develop and  implement government-wide shared services policy. OMB also tasked the  new Unified Shared Services Management (USSM) office within GSA to  bring together key stakeholders, including the managing partners of the  different lines of business, and representatives from customer and  provider agencies.", "GSA also introduced the Federal Integrated Business Framework to build  on ongoing efforts by OPM and FIT to develop standards for HR and  financial management data elements and business processes, among  other things. As part of this effort, cross-agency working groups  identified 11 end-to-end processes for mission support services. Similar  to the business use cases FIT developed, these business processes  document how a common administrative activity is executed, including a  sequential description of each step in the process. According to GSA  officials, these business processes serve as the basis for a common  understanding of what services agencies need, and what shared services  providers should offer. These working groups also bring together those  with expertise in acquisitions, IT, HR, and financial management policies.", "GSA also developed guidance for selecting and migrating to a shared  services provider. The new guidance identified opportunities for GSA to  review agency migration materials. GSA developed the Modernization  and Migration Management Playbook (M3 Playbook), a compilation of  leading project management practices and lessons learned from past  systems migrations, and met with agencies contemplating or undertaking  migrations. The M3 Playbook divides a typical shared services migration  into six phases. For each phase, the M3 Playbook identifies key steps  agencies should take before they move on, such as completing a risk  mitigation strategy and defining performance and success metrics. At the  end of each phase, the M3 Playbook recommends a \u201ctollgate\u201d review to  ensure both customer and provider completed the necessary steps and  are ready to move to the next phase. GSA is to provide recommendations  to OMB on the migrations based on observations of project status and  risk from tollgate reviews.", "Agency officials involved with HR and financial management migrations  we spoke with said they found both the Playbook and GSA\u2019s reviews  helpful. For example, Justice officials said they started to use the  Playbook once it was available midway through their HR system  migration to NFC. Prior to each tollgate review, Justice officials said they  submitted the required deliverables so that GSA had time to review the  documents prior to the meetings. Justice officials said that GSA staff  reviewing their materials offered concrete suggestions such as  developing and documenting success metrics, strengthening their  business case, and developing a risk assessment document. According  to Justice officials, these suggestions improved the migration process.  Education officials also reported they appreciated the project  management expertise provided by GSA staff."], "subsections": []}, {"section_title": "OMB and GSA Introduced a New Shared Services Marketplace Model, but Could Strengthen Their Implementation Approach", "paragraphs": ["In fiscal year 2018, OMB and GSA introduced a new marketplace model  for shared services that seeks to better meet the needs of customers and  providers by offering more choices for purchasing shared services. We  examined their approach for the new model and found they were  following some key change management practices, but there are  weaknesses with the implementation. Specifically, we found OMB and  GSA do not have a plan to monitor the implementation of an initiative  designed to determine how well the new marketplace model works as  intended. Nor have they identified and documented some key roles and  responsibilities. The action plan also does not explain how OMB and GSA  will provide information to customers about provider services, pricing, and  performance. Lastly, OMB and GSA have not implemented a process for  collecting and tracking cost-savings data.", "OMB and GSA described their plan for the new marketplace in an action  plan, released in March 2018, along with the President\u2019s Management  Agenda. The management agenda issued a new cross-agency priority  (CAP) goal to improve the effectiveness of shared services. According to  the management agenda, the shared services goal will support CAP  goals related to IT modernization, data accountability and transparency,  and the workforce of the future. OMB and GSA are the shared services  goal leaders and staff said they are coordinating with other CAP goal  leaders to achieve their objectives.", "To oversee the marketplace and provide greater accountability for  migrations, OMB and GSA are implementing a new two\u2013tier governance  structure (see figure 2).", "To ensure that agencies are adhering to the standards developed by the  Business Standards Council and to provide greater oversight and  accountability for shared services migrations, OMB and GSA are working  on plans to create Task Order Review Boards (Review Boards) for  different types of services, such as payroll or accounting. According to  OMB and GSA\u2019s action plan, the Review Boards will administer standards  and will review all task orders for shared services purchases for  compliance with the standards. The Review Boards will need to approve  any requested customizations. According to GSA officials, the contracts  for the various vendors providing shared technology and transaction  processing services will be purchased through and managed by Service  Management Offices (SMO). The SMO will be responsible for managing  the integration of new commercial suppliers into the marketplace and  responding to user concerns. The SMO will also be held accountable for  provider performance. OMB staff noted that the details of the Review  Boards depend on the shared services solutions that are identified.", "Figure 3 describes the different options customers will have for  purchasing shared services in the new marketplace. The figure also  shows how a Review Board and SMO are intended to interact with  customers and providers.", "To determine whether the marketplace model functions as intended, OMB  and GSA introduced an initiative, NewPay. In September 2018, GSA  awarded a 10-year, $2.5 billion NewPay agreement to two commercial  teams to provide payroll, and work schedule and leave management  services using Software-as-a-Service. Software-as-a-Service\u2014a cloud- based computing model\u2014delivers one or more applications and all the  resources\u2014operating system, programming tools, and underlying  infrastructure to run them\u2014for use on demand. According to OMB and GSA staff, Software-as-a Service should help address some of the  challenges with demand uncertainty because providers can more easily  increase and decrease capacity depending on changes in demand than  FSSPs have been able to do with their current technology.", "Our prior work on organizational transformations shows that incorporating  change management practices\u2014such as setting implementation goals  and a timeline to show progress\u2014improves the likelihood of successful  reforms. Adopting key change management practices can also help  managers recognize and address agency cultural factors that can inhibit  reform efforts. As OMB and GSA prepared to implement the new  marketplace model, they incorporated some key change management  practices. For example, they defined their vision for a shared services  marketplace and some of the key activities needed to achieve that future  state. GSA also issued a draft statement of objectives for NewPay in  December 2017. The statement includes a comprehensive list of tasks  related to project management and assigns responsibility for those tasks  to the prospective customers, providers, or the government agency that  will fulfill the SMO role.", "Although OMB and GSA have incorporated some key change  management practices, we found some weaknesses in OMB and GSA\u2019s  implementation of the marketplace.", "Monitoring. OMB and GSA do not have a finalized plan to monitor the  implementation of NewPay. We have previously identified key questions  for agencies that are planning and implementing transformations. In that  work, we found that agencies need to monitor and evaluate their efforts to  identify areas for improvement. We have also reported that effective  monitoring plans should include performance goals and milestones,  transparent reporting tools to help manage stakeholder expectations, and  a process for capturing lessons learned to improve the management of  subsequent phases.", "OMB and GSA staff said they are working on a plan to help them  implement NewPay. However, it is not yet complete and they did not  provide us with a draft to review. They said their plans continue to evolve  and they anticipate having an implementation plan by spring 2019. The  lack of a finalized plan with the elements listed above hinders OMB and  GSA\u2019s ability to provide sufficient oversight for this transition. Having such  a plan would provide various benefits to the NewPay implementation  effort. First, a monitoring plan that includes performance goals and  milestones would help OMB and GSA track how many and how well  customer agencies are transitioning from one provider to another.  Similarly, setting performance goals related to continued delivery of  services during the transition could help OMB and GSA more quickly  identify gaps and make adjustments as needed. Specifically, OMB and  GSA could more effectively monitor how the new approach for purchasing  payroll, and work schedule and leave management systems integrates  with current HR systems.", "Additionally, transparent reporting tools, such as web-based reporting on  key milestones, could help OMB and GSA demonstrate that they are  aware of challenges and are addressing them as they arise. Greater  reporting transparency could also help build momentum, show progress,  and help justify continuing investments in reforming shared services  efforts. Finally, a process for capturing lessons learned based on NewPay  could help OMB and GSA improve the process for subsequent initiatives  and further minimize disruptions to agency delivery of services during  these future transitions.", "Without a monitoring plan with performance goals and milestones,  transparent reporting tools, and a process for capturing lessons learned, it  will be more difficult for OMB and GSA to provide oversight of the  transition and its effects on providers and customers, including whether  there are interruptions to delivery of services. A monitoring plan could help OMB and GSA avoid gaps in service or costly delays as agencies  transition to the new model for obtaining payroll and work management  services.", "Roles and responsibilities. OMB and GSA have also not identified or  documented some key roles and responsibilities related to the  implementation of NewPay. Identifying a NewPay SMO is a crucial first  step, since the SMO is supposed to play a key role driving standards and  holding customers and providers accountable for performance. However,  OMB and GSA have not announced which agency will serve as the SMO.  Further, they have not identified which agencies or officials will serve on  the NewPay Review Board. They also have not documented the authority  or the resources the SMO and Review Board will have to enforce agency  adoption of standards.", "OMB and GSA have also not yet documented which agency will be  responsible for interpreting payroll rules and regulations. This has been  an ongoing issue for the payroll FSSPs. According to GSA and NFC  officials, the payroll FSSPs have been interpreting business rules  differently, and thus have implemented new regulations inconsistently.  According to NFC officials, the payroll FSSPs requested the  establishment of a governing body to help standardize the process for  implementing new regulations. OPM officials told us in September 2018  that they intend to start providing guidance to support payroll  standardization to the extent allowed by law and regulation in the future.  However, as of October 2018, OMB and GSA had not documented this  decision.", "According to federal standards on internal control, management should  establish an organizational structure, assign responsibility, and delegate  authority to achieve an entity\u2019s objectives. When the organizational  structure describes overall responsibilities, and when those  responsibilities are assigned to discrete units, then organizations can  operate more efficiently and effectively. Moreover, in our previous body  of work on enhancing interagency collaboration, we identified key  practices that can help agencies mitigate challenges when they attempt to  work collaboratively. For example, clarifying roles and responsibilities  can enhance interagency collaboration.", "OMB staff and GSA officials said they are still identifying which agencies  or entities will fill key roles and assume key responsibilities. They  anticipate that some of this information will be finalized by spring 2019.  Identifying and documenting roles and responsibilities would help ensure  that key stakeholders are involved in planning and implementation  activities. Until OMB and GSA clearly identify, communicate, and  document key roles and responsibilities, they run the risk of not achieving  their objectives. They also risk repeating past problems, such as the  inconsistent implementation and interpretation of standards and  migrations that encounter costly delays because agencies do not follow  available guidance.", "Information on services, pricing, and performance. Although the  action plan aims to help additional providers enter the marketplace, it  does not explain how OMB and GSA will provide information to  customers about provider services, pricing, and performance. According  to the Association of Government Accountants, effective marketplaces  require market transparency with information on services, pricing, and  performance. Also, according to federal standards on internal control,  managers should externally communicate the necessary quality  information to achieve an entity\u2019s objectives.", "As we have previously reported, reliable information on the costs of  federal programs and activities is crucial for effective management of  government operations. OMB staff and GSA officials said that data  collection efforts are on hold as they continue to try to determine what  performance metrics they will use and share with potential customers.  Without up-to-date information on providers\u2014such as the services they  offer, their level of performance, and their costs\u2014it will be time  consuming and difficult for potential customers to compare providers. This  lack of information could slow the rate of shared services adoption.", "Cost-savings data. In the CAP goal action plan for shared services,  OMB and GSA established a cost savings goal of an estimated $2 billion  over 10 years based on reforms to the shared services governance  structure and marketplace. However, their action plan does not include  steps they intend to take to collect and track cost-savings data. Such data  would allow them to assess their progress toward their goal. In their  action plan, OMB and GSA included performance measures for goals  such as customer satisfaction. They also have output measures related to  HR and financial management activities. However, they did not include a  measure to gauge their progress in achieving cost savings. In our  previous work on key questions for agencies that are planning and  implementing transformations, we found that agencies need to have  processes in place to collect the needed data and evidence to effectively  measure goals of reform efforts.", "OMB and GSA said they are still finalizing their implementation plan.  Including a process to collect and track cost savings data in the final plan  would position them to assess how well their reform efforts are  contributing to their cost savings goal. Cost savings data would also  support oversight efforts, as OMB and GSA could better communicate to  Congress and other relevant stakeholders the extent to which their  reforms are contributing to cost savings goals. Earlier in this report, we  described how difficult it was to determine the progress of the financial  management line of business because the managing partners of that  effort did not track data on cost savings. Until OMB and GSA finalize a  plan for collecting the needed data and evidence to effectively measure  cost-savings goals, they risk experiencing a similar challenge.", "OMB and GSA\u2019s action plan to support the shared services CAP goal  does not directly address funding challenges. However, new legislation  intended to promote IT modernization efforts may address these  challenges. In 2017, Congress enacted the Modernizing Government  Technology (MGT) Act as part of the 2018 National Defense  Authorization Act. The MGT Act allows agencies to create working  capital funds for modernizing IT systems. Working capital funds are  primarily used for business-like activities, such as purchasing  consolidated or shared services within and between federal agencies.  The MGT Act allows CFO Act agencies to transition legacy systems to  cloud computing platforms or other innovative platforms and technologies,  among other things. We have previously reported that working capital  funds provide agencies with an opportunity to operate more efficiently by  consolidating services and creating incentives for customers and  managers to exercise cost control and economic restraint.", "The MGT Act also established the Technology Modernization Fund and  Technology Modernization Board. Agencies can apply to the board for  loans for IT modernization projects, including replacing legacy systems  with shared services. In February 2018, OMB issued guidance on the  initial process agencies should follow to submit proposals to the board.  As of February 2019, OMB announced plans to award close to $90 million  to various agencies for modernization projects. Two of these awards  were for shared services: one award was to GSA for more than $20  million to help fund NewPay and one award was to USDA for $5 million to  migrate 10 IT applications to a shared services cloud platform model."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["When properly implemented, a shared services model for HR and  financial management activities has the potential to help the federal  government cut costs and modernize aging IT systems. Over the past 15  years there have been some notable shared services successes: for  example, consolidating payroll services resulted in more than $1 billion in  cost savings and cost avoidance over 10 years, according to OPM  estimates. However, there have also been persistent governance and  marketplace challenges that have impeded more widespread adoption of  shared services.", "OMB and GSA have been involved in shared services reform efforts for  decades. Their plan for a new shared services governance structure and  marketplace has the potential to address some of the challenges that  have previously hindered more widespread adoption of shared services.  For example, their proposed marketplace model has the potential to make  the marketplace more effective by reducing demand uncertainty among  shared services providers and providing more choices for customers.  However, several weaknesses in their implementation of NewPay could  limit the initiative\u2019s success. OMB and GSA do not have a plan to monitor  NewPay\u2019s implementation. They also have not documented key decision- making roles and responsibilities related to the implementation of  NewPay. Until they develop a monitoring plan which includes  performance goals and milestones, transparent reporting tools, and a  process for capturing lessons learned, and documenting key roles, they  risk implementation challenges that could cause gaps in service or costly  delays.", "OMB and GSA also do not have a process to provide information to  customers about provider services, pricing, and performance. Developing  such a process would help minimize the challenges of transitioning to  shared services on key stakeholders. Finally, OMB and GSA do not have  a process for collecting and tracking cost-savings data. Until OMB and  GSA finalize their plan for collecting the related data and evidence to  measure their cost savings goal of an estimated $2 billion over 10 years,  they will not be able to determine and report progress made."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations to OMB to work with GSA, which is  the co-goal leader for the shared services CAP goal.", "OMB\u2019s Shared Services Policy Officer should work with GSA to finalize a  plan for monitoring the implementation of NewPay. The plan should  include:  implementation goals, a timeline, and milestones for agencies to  transition from one provider to another;  transparent reporting mechanisms on key milestones; and a process for capturing and communicating lessons learned.  (Recommendation 1)", "OMB\u2019s Shared Services Policy Officer should work with GSA to document  key roles and responsibilities, including which agency will be the NewPay  SMO, who will be assigned to the NewPay Task Order Review Board,  how the SMO, the Review Board, and other key stakeholders will work  together, and which agency will be responsible for interpreting payroll  rules and regulations. (Recommendation 2)", "OMB\u2019s Shared Services Policy Officer should work with GSA to update  provider information on services offered, pricing, and performance and  share that information with prospective customers. (Recommendation 3)", "OMB\u2019s Shared Services Policy Officer should work with GSA to  implement a process for collecting and tracking cost-savings data that  would allow them to assess progress toward the shared services cost- savings goal of an estimated $2 billion over 10 years. (Recommendation  4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Director of OMB, the  Administrator of GSA, the Acting Director of OPM, the Secretary of the  Treasury, the Deputy Assistant Inspector General for Audit of the USDA,  the Secretary of Education, and the Assistant Attorney General for  Administration of Justice for review and comment. OMB staff did not  agree or disagree with our recommendations. In comments provided by  email, OMB staff stated OMB has been re-evaluating its shared services  policies and may provide an updated policy in the future. OMB, GSA,  Treasury, OPM, USDA, and the Department of Education provided  technical comments on this report which were incorporated as  appropriate. The Department of Justice did not have comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Director of the Office of Management and  Budget, the Administrator of General Services Administration, the Acting  Director of the U.S. Office of Personnel Management, the Secretary of the  Treasury, the Deputy Assistant Inspector General for Audit of the U.S.  Department of Agriculture, the Secretary of the Department of Education,  and the Assistant Attorney General for Administration of the Department  of Justice, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff has any questions about this report, please contact  Tranchau (Kris) T. Nguyen at (202) 512-2660 or Nguyentt@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of our report. Key contributors to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report: (1) identifies the progress and challenges associated with  federal shared services initiatives for selected human resources (HR) and  financial management activities, and (2) assesses the Office of  Management and Budget\u2019s (OMB) and the General Service  Administration\u2019s (GSA) actions to address those challenges.", "To address both of our objectives, we conducted a literature review of  GAO work and other relevant publications on HR and financial  management shared services. In addition to GAO reports, we selected  reports by think tanks and professional associations from the past 15  years, such as reports by the Partnership for Public Service and the  Association of Government Accountants (AGA). We reviewed reports  that described past HR and financial management federal shared  services initiatives or specific shared services migrations involving HR or  financial management services. These reports assessed the outcomes,  challenges, or summarized lessons learned associated with those  initiatives or migrations.", "We reviewed planning and performance documents and we interviewed  officials from (1) OMB and GSA, the agencies that oversee shared  services policy and guidance, and (2) the Office of Personnel  Management (OPM) and the Office of Financial Innovation and  Transformation (FIT) within the Department of the Treasury (Treasury),  agencies that oversaw past shared services initiatives and continue to  play a key role developing government-wide policy for HR and financial  management shared services. Key documents we reviewed included:  OMB memorandums announcing federal shared services initiatives; the  Modernization and Migration Management (M3) Playbook, guidance that  GSA developed and provides to agencies considering or implementing  shared services migrations; strategic or operational plans for earlier  shared services initiatives, such as the Human Resources and Financial  Management Lines of Business; and strategic or operational plans for  ongoing shared services initiatives such as the Federal Integrated  Business Framework, a model GSA developed with the lines of business  managing partners for moving agencies toward common, cloud-based  solutions for management functions.", "To illustrate examples of outcomes and challenges, we selected two  federal shared services providers (FSSPs), federal agencies that provide  shared services to other agencies: the National Finance Center (NFC)  within the U.S. Department of Agriculture (USDA) and the Administrative  Resource Center (ARC) within Treasury. We also selected two customer  agencies: the Departments of Justice (Justice) and Education  (Education), which are experiencing different phases of shared services  migrations.", "We made our selection based on a number of factors. To capture a range  of experience and perspectives, we selected a mix of customer and  provider agencies. We selected one HR and one financial management  systems migration to review, as well as one migration in an earlier phase  and one in a later phase. To capture an in-depth perspective of a  migration, we selected one customer and provider working together on a  migration. To capture perspectives on OMB and GSA\u2019s efforts to address  shared services challenges and improve outcomes, we selected provider  and customer agencies that were meeting regularly with GSA in 2016 or  2017 on their shared services migration. Our selection of agencies is non- generalizable and their experiences and outcomes may not be reflective  of all migrations.", "We reviewed guidance, planning, and performance documents at the four  selected agencies. Specifically, we reviewed planning documents that  describe shared services migration purpose and goals, the composition  and responsibilities of the project management team, and estimated costs  and savings; documented results of market research and analyses of  alternatives; risk management strategies; service level agreements and  performance metrics; communication plans for stakeholders; and reports  that capture lessons learned.", "For each of the illustrative example agencies, we interviewed agency  officials involved with shared services migrations. At Justice, we  interviewed the project management team overseeing the HR migration to  the NFC. At Education, we interviewed the officials who reviewed the  Department\u2019s HR and financial management shared services options. At  the two FSSPs, we interviewed officials knowledgeable about the  outcomes and challenges associated with past and ongoing federal  shared services initiatives.", "We also interviewed subject-matter experts who were involved in public  and private shared services migrations as customers, providers, or  consultants. We met with members of the Shared Services Leadership  Coalition, an interest group promoting shared services solutions involving  commercial vendors. The members who participated in the group  interview discussed shared services benefits, challenges, and lessons  learned. We also met with members of the nonprofit Partnership for  Public Service Shared Services Roundtable. The roundtable members  who participated in the group interview are federal employees involved  with shared services operations. They represented a mix of small and  large agencies.", "To further address the second objective, we reviewed OMB and GSA\u2019s  efforts to identify and address challenges and lessons learned from past  migrations, including the new shared services action plan OMB released  in March 2018. We assessed the extent to which OMB and GSA\u2019s plan  and guidance are designed to facilitate better shared services outcomes  using criteria such as standards for internal control in the federal  government, principles identified in our previous work related to  addressing major management challenges, and the Association of  Government Accountants criteria for effective marketplaces. During our  interviews with customer and provider agency officials and subject-matter  experts, we asked for their perspectives on these efforts and the likely  effect they will have on ongoing and future shared services migrations.", "We conducted this performance audit from June 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["Key contributors to this report include Sonya Phillips (Assistant Director),  Jessica Nierenberg (Analyst-in-Charge), Rose Almoguera, and Monique  Nasrallah. Faisal Amin, Ann Czapiewski, Timothy J. DiNapoli, Jared  Dmello, Robert Gebhart, Amanda Gill, Dave Hinchman, Gina Hoover,  Valerie Hopkins, John Hussey, Heather Krause, Michael LaForge, Laura  Pacheco, Paula M. Rascona, and Kevin Walsh also contributed to this  report."], "subsections": []}]}], "fastfact": ["A federal agency needs services like payroll and travel to support its work, but it can save money by sharing those services with other agencies. For example, agencies sharing payroll services across government saved more than $1 billion over 10 years, according to a federal estimate.", "The Office of Management and Budget and the General Services Administration are promoting human resources and financial management shared services, among others, and trying to address the reasons why agencies don't participate more. We suggested ways to improve their approach to increasing participation."]}
{"id": "GAO-18-70", "url": "https://www.gao.gov/products/GAO-18-70", "title": "Medicaid: Further Action Needed to Expedite Use of National Data for Program Oversight", "published_date": "2017-12-08T00:00:00", "released_date": "2018-01-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GAO and others have identified insufficiencies in state-reported Medicaid data that affect CMS's ability to oversee the program effectively. Recent increases in improper payments\u2014estimated at $36.7 billion in fiscal year 2017\u2014exacerbate concerns about program oversight.", "CMS officials identified the T-MSIS initiative, which began in 2011, as its main effort to improve Medicaid data, and cited aspects of T-MSIS aimed at improving the scope and quality of state-reported data. GAO reported in January 2017 that it is unclear when T-MSIS data will be available from all states; how CMS will ensure data quality; or how the data will be used to enhance oversight of Medicaid.", "GAO was asked to review states' experiences with T-MSIS implementation and planned uses of T-MSIS data. This report examines (1) states' experiences regarding T-MSIS implementation, and (2) challenges to CMS's and states' use of T-MSIS data for oversight. GAO reviewed federal laws, guidance, and internal control standards; reviewed documents and interviewed officials from eight states, selected based on their T-MSIS reporting status, location, program expenditures, and other factors; and interviewed CMS officials, CMS contractors, and individuals involved with other states' T-MSIS efforts."]}, {"section_title": "What GAO Found", "paragraphs": ["As of November 2017, 49 states had begun reporting Transformed Medicaid Statistical Information System (T-MSIS) data\u2014a significant increase from 18 states reporting these data one year earlier. All eight states GAO reviewed identified converting their data to the T-MSIS format on an element-by-element basis as the main challenge in their reporting efforts. For some data elements, states had to expand or collapse their data to match the T-MSIS format.", "With the continued implementation of T-MSIS, the Centers for Medicare & Medicaid Services (CMS) has taken an important step toward developing a reliable national repository for Medicaid data. However, data challenges have hindered states' and CMS's use of the T-MSIS data for oversight.", "None of the six selected states reporting T-MSIS data in August 2017 was reporting complete data. These states said that certain unreported elements were contingent on federal or state actions, and others were not applicable to the state's Medicaid program. States did not always specify in their documentation whether they planned to report elements in the future or when they would report complete data.", "Six of eight selected states expressed concerns about the comparability of T-MSIS data across states. Further, all states were interested in CMS facilitating information sharing among states. CMS has not compiled and shared information about states' data limitations, which would help states accurately compare their T-MSIS data to other states' T-MSIS data.", "CMS has taken steps for the initial use of T-MSIS data, but does not have a plan or associated timeframes for using these data for oversight. As a result, important CMS goals for T-MSIS, such as reducing states' reporting burden and enhancing program integrity activities, are not being fully realized."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS (1) improve T-MSIS's completeness and comparability to expedite its use, and (2) articulate a specific oversight plan. The Department of Health and Human Services concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Medicaid\u2014the joint federal-state health financing program estimated to  cover over 73 million low-income and medically needy individuals in fiscal  year 2017\u2014allows states significant flexibility to design and implement  their programs within broad federal parameters. While this flexibility has  allowed states to fashion their programs based on their unique needs, it  also complicates oversight. The Centers for Medicare & Medicaid  Services (CMS), the agency within the Department of Health and Human  Services (HHS) that oversees Medicaid, has a critical role in monitoring  states\u2019 compliance with federal requirements, including ensuring that  federal Medicaid payments are made appropriately. To help inform its  oversight, CMS relies on data that are submitted by states. For example,  for expenditure and utilization data that can be linked to individual  enrollees, states historically submitted data to be incorporated into CMS\u2019s  Medicaid Statistical Information System (MSIS) data.", "We and others have reported that insufficiencies in available Medicaid  data, including MSIS data, have affected CMS\u2019s ability to ensure proper  payments and beneficiaries\u2019 access to care. These concerns are not  new; however, recent trends in improper payments have exacerbated  concerns about Medicaid oversight. In particular, of the $596 billion in  federal and state Medicaid expenditures in fiscal year 2017, improper  payments were an estimated $36.7 billion, a significant increase from the  estimated $14.4 billion in improper payments in fiscal year 2013.", "CMS has acknowledged the need for improved Medicaid data. The  Transformed Medicaid Statistical Information System (T-MSIS) initiative is  the agency\u2019s primary effort, conducted jointly with states, to improve its  collection of Medicaid expenditure and utilization data, and replace  MSIS. CMS officials cite aspects of T-MSIS that are designed to broaden  the scope and improve the quality of state-reported data, as well as the  data\u2019s usefulness for states. For example, T-MSIS is intended to include  data not previously reported by states, such as unique provider  identification numbers and information on third-party liability, which could  be used to help enhance CMS and states\u2019 program oversight. T-MSIS  also includes automated quality checks that should improve the quality of  data that states report.", "In a January 2017 report, we examined CMS efforts to implement T-MSIS  and concluded that uncertainty existed with respect to when all states  would report T-MSIS data; how CMS will ensure the quality of these data;  and how CMS will use them for oversight purposes. You asked us to  examine states\u2019 experiences regarding T-MSIS implementation, including  obstacles they have faced in reporting quality data, and their planned  uses of these data for oversight. In this report, we examine  1.  states\u2019 experiences regarding the implementation of T-MSIS, including  CMS\u2019s actions to facilitate states\u2019 efforts; and  2.  challenges to CMS\u2019s and states\u2019 use of T-MSIS data for oversight.", "To examine states\u2019 experiences regarding the implementation of T- MSIS\u2014including CMS\u2019s actions to facilitate their efforts\u2014we reviewed  federal laws and guidance, and interviewed CMS officials and contractors  who assisted the agency with T-MSIS implementation. We reviewed  CMS documentation of the number of states reporting T-MSIS data and  of its actions to support states\u2019 T-MSIS implementation efforts. We also  selected a non-generalizable sample of eight states for further review:  Louisiana, Michigan, Minnesota, North Carolina, Pennsylvania, Utah,  Virginia, and Washington. We selected these states based on variation in  their T-MSIS reporting status, geographic location, program expenditures,  use of Medicaid managed care programs, and participation in CMS\u2019s T- MSIS pilot program. For each selected state, we reviewed relevant  documents, and interviewed officials about their experiences reporting T- MSIS data and CMS\u2019s efforts to assist them. To supplement the  information provided by our selected states, we also interviewed  individuals who were identified through background research as having  experience with other states\u2019 T-MSIS reporting efforts. We also reviewed  prior GAO reports on Medicaid data and reports published by other  entities, such as the HHS Office of Inspector General (HHS-OIG).", "To examine challenges to CMS\u2019s and states\u2019 use of T-MSIS data for  oversight, we reviewed CMS guidance, selected states\u2019 documentation of  T-MSIS reporting efforts, and federal internal control standards. We also interviewed officials from CMS and selected states regarding their plans  to use these data for oversight. To assess the completeness of the T- MSIS data that selected states were reporting, we analyzed state  documents regarding unreported T-MSIS data elements and their plans to  report them in the future. These documents, which states submit to CMS,  are known as Addendum Bs. To assess the reliability of the Addendum B  data, we compared them with related documentation, such as CMS  guidance, and with information from interviews with knowledgeable CMS  and state officials. We also assessed the data for duplicate values and  clarified inconsistencies we identified. We confirmed with state officials  that their documents reflected unreported T-MSIS data elements as of  August 2017. We determined that these data were sufficiently reliable  for our purposes.", "We conducted this performance audit from December 2016 through  December 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CMS intends for the T-MSIS initiative to provide a national data repository  that would support federal and state program management, financial  management, and program integrity activities, among other functions. T- MSIS is also intended to benefit states by reducing the number of reports  CMS requires them to submit, and by improving program efficiency by  allowing states to compare their data with other states\u2019 data in the  national repository or with information in other CMS repositories, including  Medicare data. For example, CMS intends to use T-MSIS data for  reports that states are currently required to submit, such as Early and  Periodic Screening, Diagnostic, and Treatment Program reports.", "T-MSIS is designed to capture significantly more data from states than is  the case with MSIS, thereby collecting data not previously reported that  should provide CMS and states with information to enhance their  oversight efforts. T-MSIS includes the five data files that were collected  through MSIS: an eligibility file and four claims files (inpatient, long-term  care, pharmacy, and other). The scope of data to be collected from these  five previously defined MSIS files has expanded to include more detailed  information on enrollees, such as their citizenship, immigration, and  disability status; and expanded diagnosis and procedure codes  associated with their treatments.", "Additionally, T-MSIS requires states to report three new data files on (1)  providers, (2) third-party liability, and (3) managed care organizations  (MCO).", "The provider file includes a unique identifier for each provider, as well  as data fields to show provider specialty and practice locations. Each  of these identifiers can assist CMS and state oversight by providing  information on provider referrals, Medicaid payments to specific  providers, and identifying ineligible providers.", "The third-party liability file includes data on whether a beneficiary has  any health insurance in addition to Medicaid, or other potential  sources of funds that could reduce Medicaid\u2019s expenditures. Medicaid  is generally the payer of last resort, meaning if Medicaid enrollees  have another source of health care coverage, that source should pay,  to the extent of its liability, before Medicaid does. Information on  beneficiaries\u2019 other sources of coverage could help ensure that  Medicaid pays only those expenditures for which it is liable.", "The managed care file includes more detailed information on MCOs,  such as type and name of managed care plans, covered eligibility  groups, service areas, and reimbursement arrangements. In addition  to identifying which MCOs are reporting encounter data as required,  this file could help CMS\u2019s oversight by allowing the agency to identify  excess plan profits and volatility of expenditures for some beneficiary  groups across states.", "In total, T-MSIS includes approximately 1,400 data elements, according  to CMS. Many of these elements, however, have content that is used in  more than one of the eight T-MSIS files. For example, the element \u201cDATE  OF BIRTH\u201d is required in five T-MSIS files\u2014Eligibility, Claim Inpatient,  Claim Long-term Care, Claim Prescription, and Claim Other. CMS  requires states to report all T-MSIS elements that are applicable to their  programs, and has worked closely with states to facilitate their efforts to  report these data. For example, before CMS approves a state for  reporting T-MSIS data, states must complete a number of activities,  including developing detailed work plans and completing a series of data  testing phases. For a state to meet CMS\u2019s requirements for submitting  T-MSIS data, it must report data for all eight files, but not necessarily all  elements within each file.", "In addition, T-MSIS includes aspects aimed at improving the timeliness  and accuracy of data submitted by states. For example, CMS requires  states to report T-MSIS data monthly, rather than quarterly, as was the  case with MSIS. Regarding data accuracy, T-MSIS includes  approximately 2,800 automated quality checks that provide states with  feedback on data format and consistency, according to CMS; this is in  contrast to MSIS, which had relatively few automated checks. Other  quality checks are to ensure logical relationships across T-MSIS files.", "Both we and the HHS-OIG have previously recommended that CMS take  steps to address the quality of T-MSIS data. In our January 2017 report,  we recommended that CMS take immediate steps to assess and improve  T-MSIS data. As part of that effort, we noted that CMS could refine their  T-MSIS data priority areas to identify those that are critical for reducing  improper payments and expedite efforts to assess and ensure their  quality. CMS agreed with our recommendation, but as of September  2017, the agency had not implemented it. More recently, the HHS-OIG  reported that CMS and states continue to have concerns regarding the  completeness and reliability of T-MSIS data, echoing concerns raised in  its 2013 review of CMS\u2019s T-MSIS pilot program. The HHS-OIG noted it  was concerned that CMS and states would delay further efforts rather  than assign the resources needed to address the outstanding challenges,  and reaffirmed its 2013 recommendation that CMS establish a deadline  for when T-MSIS data will be available for program analysis and other  management functions."], "subsections": []}, {"section_title": "Despite Challenges Converting State Data to the T-MSIS Format, Nearly All States are Reporting T-MSIS Data, and CMS Has Shifted Its Focus to Improving Data Quality", "paragraphs": ["Despite challenges converting their data to the T-MSIS format, most  states were reporting T-MSIS data as of November 2017, representing  significant progress over the past year. With most states reporting, CMS  has shifted its efforts to working with states to improve the quality of T- MSIS data."], "subsections": [{"section_title": "Overall, 49 States Are Reporting T-MSIS Data; Selected States Identified Converting their Data into the T-MSIS Format as a Significant Reporting Challenge", "paragraphs": ["As of November 2017, 49 states have begun reporting T-MSIS data, a  significant increase from the 18 states that had started reporting these  data in October 2016. These reporting states represent over 97 percent of  the 2017 Medicaid population nationwide. CMS officials told us that they  expect all states to report T-MSIS data by 2018. (See fig. 1.)", "As of November 2017, all eight of our selected states were reporting T- MSIS data, with seven of them having begun in September 2016 or  later. Selected states\u2019 estimated spending a collective $14.16 million on  their efforts to report T-MSIS data from October 2011 through June 2017,  ranging from approximately $850,000 in Virginia to $4.42 million in  Minnesota. (See table 1.) The age and scope of states\u2019 existing  Medicaid Management Information Systems (MMIS) were among the  factors that affected certain states\u2019 spending and timing on this effort.", "Mapping the data\u2014the process by which states convert their data to the  T-MSIS format on an element-by-element basis\u2014was the primary  challenge our eight selected states identified in reporting T-MSIS data. In  some cases, before converting their data to the T-MSIS format, states  had to obtain data they had not previously collected from other state  entities, MCOs, or providers. For example, Minnesota had to begin  collecting information on denied claims from MCOs, and Utah had to  collect third-party liability information from other state agencies. In  addition, while some state data elements could be converted to the T- MSIS format fairly easily, because the relationships between the two were  clear, the conversion of other data elements was more complicated. For  example, the T-MSIS data element for male and female is \u201cM\u201d and \u201cF,\u201d  respectively. Accordingly, in states that identified gender by a numeric  value, \u201c1\u201d for male and \u201c2\u201d for female, the conversion to T-MSIS for this  element was a fairly straightforward one-to-one relationship. However, for  other data elements, the conversion process was more complex,  requiring states to expand or collapse their data to match the T-MSIS  format. (See fig. 2.) Selected states shared examples of steps they took  to convert state data to the T-MSIS format.", "Louisiana officials noted that they had to map the state\u2019s single  durable medical equipment (DME) element to multiple specific T- MSIS DME elements, such as DME pharmacy or DME orthotics.", "Virginia officials said they had to combine three state ambulance  service provider elements into a single T-MSIS element.", "In addition, individuals who had experience with other states\u2019 T-MSIS  reporting efforts also noted that states may not have always collapsed  categories in the same way. For example, one state collapsed its 109  provider categories to match T-MSIS\u2019s 57 provider categories, according  to an individual who worked with the state on this effort. This individual  noted that there were 32 state provider elements that did not directly  match a specific T-MSIS element, so the state grouped them all into the  \u201cother\u201d T-MSIS element.", "Changes in CMS\u2019s data reporting requirements further complicated some  states\u2019 efforts to convert their data to the T-MSIS format, according to  officials from our selected states. CMS updated the T-MSIS data  dictionary\u2014the document that defines the required T-MSIS elements and  their reporting formats\u2014twice in 2013 and again in November 2015.  According to CMS officials, they updated the data dictionary to clarify and  remove inconsistencies from guidance in response to feedback from  states. Some of the selected states reported that the changes included in  this update required considerable rework, and in some cases, delayed  their T-MSIS reporting. For example, Washington officials noted that the  2015 update became available at the point it was completing a T-MSIS  testing phase. Due to the rework required to comply with the new data  specifications, the state\u2019s efforts to report T-MSIS data were delayed by  nearly one year. Similarly, Minnesota officials also cited rework  associated with changes to the 2015 data dictionary, which contributed to  delays in their efforts to report T-MSIS data."], "subsections": []}, {"section_title": "CMS\u2019s Efforts to Support States Have Shifted from Reporting T-MSIS Data to Improving T-MSIS Data Quality", "paragraphs": ["Over the past six years, CMS has relied on a variety of mechanisms to  support states\u2019 efforts to report T-MSIS data.", "CMS assigned technical assistants to help states understand the T- MSIS requirements, prioritize steps to report T-MSIS data, and serve  as a resource on technical issues. The majority of selected states  had positive comments about the technical assistance they received.  For example, Pennsylvania officials said its technical assistant  regularly met with them, answered any questions they had, and  facilitated their efforts to complete T-MSIS testing.", "CMS began hosting national webinars covering a range of topics,  including clarification on specific T-MSIS elements that CMS identified  as challenging or subject to error, and updates on the nationwide  implementation. The webinars also provided an opportunity for states  to ask CMS questions about T-MSIS requirements.", "CMS established web-based avenues through which the agency  could compile and disseminate information, as well as elicit questions  from states and contractors. For example, CMS provided an electronic  option for states to submit questions regarding policy and technical  issues.", "CMS took additional steps to help states, including creating a  SharePoint web site through which states are notified about changes  in guidance.", "With nearly all states having begun reporting T-MSIS data, CMS has  shifted its efforts to improving the quality of the T-MSIS data reported,  and these efforts are still evolving. For example, to provide states with  immediate feedback on their reported T-MSIS data, CMS created an  online \u201coperational dashboard\u201d for each state, which provides specific  information on errors in its reported data. Using information on the  operational dashboard, states can identify the frequency and cause of  certain errors, which facilitates their efforts to resolve them more  expeditiously and to improve future submissions. All six of the selected  states reporting T-MSIS data had positive comments about the value of  the operational dashboard, with some of them noting that the feedback on  errors was a significant improvement from their experience with MSIS,  where feedback had a considerable time-lag. More recently, according to  agency officials, CMS has initiated a pilot study with four states to identify  anomalies in their reported data that merit further attention, obtain  feedback on automated quality measures, and determine the best  approach for ongoing quality review. While work on the pilot is ongoing,  CMS officials anticipate using what they learned to expand the agency\u2019s  quality review to include all states.", "In addition, CMS has turned to external stakeholders to evaluate the  quality of T-MSIS data. Specifically, CMS has shared T-MSIS data with a  Technical Expert Panel it formed to obtain feedback on inconsistencies  and other quality concerns. According to CMS officials, the Technical  Expert Panel focused on a preliminary set of T-MSIS data from a limited  number of states. The agency officials noted that Technical Expert Panel  members include individuals from HHS\u2019s Office of the Actuary, the  Congressional Budget Office, and the Medicaid and CHIP Payment and  Access Commission, among others. Panel participants analyzed the T- MSIS data from 11 states on the specific topics in which they have  expertise. According to CMS officials, the panel is to provide its results to  the agency in a summary report."], "subsections": []}]}, {"section_title": "Data Completeness and Comparability Concerns Hinder CMS\u2019s and States\u2019 Use of T-MSIS for Oversight", "paragraphs": ["Ongoing data concerns raise questions about how soon\u2014and to what  extent\u2014T-MSIS data will be sufficient to achieve the goals of improving  CMS\u2019s and states\u2019 ability to use Medicaid data for oversight. For example,  none of the six selected states that were reporting T-MSIS data as of  August 2017 were reporting complete data at that time. In reviewing  selected states\u2019 documentation of unreported data elements, we  determined that the number of unreported data elements ranged from  about 80 elements to 260 elements. Although T-MSIS includes about  1,400 data elements, the number of data elements relevant to each state  varies, in part, because certain elements may not be applicable to all  states and others may be populated at the state\u2019s discretion. In addition,  the content of some data elements are present in more than one of the  eight T-MSIS files. As a result, the number of unreported elements may  overstate the extent of state efforts needed to report complete T-MSIS  data.", "Our selected states provided a range of reasons for not reporting T-MSIS  data elements, including that certain elements were contingent on federal  or state actions. In other cases, state officials indicated that data  elements were too costly to report, so they would not be reporting them.  We identified further examples of where certain data elements were not  applicable to states\u2019 Medicaid programs, and therefore were not  required. (See table 2.)", "Although CMS requires states to report all T-MSIS data elements  applicable to their program, CMS officials said they did not specify a  reporting deadline for states, and selected states\u2019 documentation to CMS  did not always include the reasons they did not report certain elements, or  whether or when they planned to report them. Due to the lack of clarity  and completeness in selected states\u2019 documentation, we were not able to  identify the reasons for all unreported data elements. However, among  our selected states, Virginia\u2019s documentation more clearly specified  most\u2014but not all\u2014of the reasons it was not reporting 260 T-MSIS  elements.", "Virginia identified 167 elements that its MMIS did not capture, and  noted that once the state\u2019s new Medicaid information system is fully  implemented in 2019, the state will be able to report them.", "Virginia identified 16 elements as pending other state or related  actions.", "Virginia identified 18 elements as pending the implementation of HHS  efforts.", "Virginia identified 53 elements as not applicable to aspects of its  Medicaid program.", "Without complete information from all states on unreported data elements  and their plans to report them, it is unclear when\u2014and to what extent\u2014T- MSIS data will be available to use for oversight, which is inconsistent with  federal internal control standards for using quality information to achieve  objectives.", "In some cases, data elements important for program oversight were not  reported by two or more of the six selected states reporting T-MSIS data,  limiting T-MSIS\u2019s usefulness for oversight in these areas. (See table 3.)", "Another factor affecting the ability of CMS and states to use T-MSIS data  for oversight is that not all of the 49 states submitting T-MSIS data are  submitting current data. According to CMS officials, before beginning to  report T-MSIS data, each state stops reporting MSIS data. At that point,  there is a temporary gap in the state\u2019s reporting until it receives CMS\u2019s  approval to begin reporting T-MSIS data. After a state gets CMS\u2019s  approval, it must first submit the T-MSIS data that correspond to the date  that it stopped submitting MSIS data; the data for previous months is  known as \u201ccatch up\u201d data. Once a state reports that data, it then shifts to  reporting current T-MSIS data. According to CMS, as of November 2017,  42 of the 49 states reporting T-MSIS data were reporting current data; the  remaining 7 states were still reporting catch up data for previous  months.", "Regarding the comparability of T-MSIS data across states, state officials  we interviewed cited concerns that could affect their use of T-MSIS for  oversight. Officials from most selected states cited the benefit that a  national repository of T-MSIS data could provide by allowing them to  compare their Medicaid program data\u2014such as spending or utilization  rates\u2014to other states, which could potentially improve their oversight.  However, concerns about comparability of the data make officials from  most selected states hesitant to use the data for this purpose. In  particular, officials from six of eight selected states, and other individuals  we interviewed, are not confident that the decisions states made when  converting their data to the T-MSIS format were consistent across states.  An individual who worked with other states on T-MSIS reporting efforts  noted that states may have made different decisions about what types of  providers to include as part of the \u201call other\u201d category of providers within  T-MSIS. While one state he worked with included a range of provider  types, such as licensed drug and alcohol counselors and non-emergency  medical transportation providers, in the \u201call other\u201d T-MSIS provider  category, other states may have made different decisions. Some state  officials and individuals working with states noted that states\u2019 different  decisions may complicate their ability to use the data for cross-state  comparisons. Further, officials from some of the selected states noted  that they were not familiar with the quality of other states\u2019 T-MSIS data.", "CMS has begun to take steps to address the quality of the T-MSIS data;  however, its efforts are still evolving. For example, in May 2017, CMS  identified 12 data quality priority areas for states to focus on for improving  the accuracy and consistency of T-MSIS data, including accurately  categorizing beneficiaries into T-MSIS eligibility groups and ensuring  consistency related to MCO reporting. CMS has worked to identify  existing or develop new guidance for each of these priority areas, and to  compile the guidance in a central location for states\u2019 reference. As of  August 2017, CMS officials said they compiled guidance for 11 of the 12  areas, and intended to continue work with states on these priorities.", "In addition, CMS has not created a mechanism to disseminate  information about states\u2019 data limitations or states\u2019 efforts to improve and  use the data, which also affects their utility for oversight. Officials from  four of the eight selected states said that learning more about other  states\u2019 T-MSIS data could help allay their concerns about comparability,  and two of the four states said it could also help them address their own  data quality issues. Additionally, officials from all eight selected states  were interested in opportunities to learn more about other states\u2019 use of  the data.", "CMS officials acknowledged the benefits of a mechanism to disseminate  information about states\u2019 data limitations more broadly, and to facilitate  information sharing among states. CMS officials told us that they plan to  launch a Learning Collaborative with states to facilitate feedback and  collaboration. This effort could address a range of data-related topics,  including data quality. CMS officials told us they were taking actions to  put the Learning Collaborative in place, and may launch the collaborative  in early 2018.", "The lack of an effort to facilitate information sharing is inconsistent with  CMS\u2019s goals for T-MSIS and with federal internal control standards for  using and communicating quality information to achieve objectives.  Absent such an effort, CMS is missing an opportunity to help states  understand ways they could improve the quality of their T-MSIS data and  facilitate states\u2019 use of the data for oversight. CMS is also missing an  opportunity to expedite quality improvements that could result from states  conducting their own independent analyses.", "Although CMS has taken steps to begin using T-MSIS data, it has not yet  fully articulated a plan for how and when it will use T-MSIS data for its  own broader oversight efforts of state Medicaid programs. For example,  according to CMS officials, the agency has begun to use T-MSIS data to  generate Money Follow the Person reports, and has begun exploring  additional uses of T-MSIS data to reduce states\u2019 reporting burden.  These preliminary efforts are consistent with one of CMS\u2019s stated goals  for T-MSIS, which is to reduce states\u2019 reporting burden by relying on T- MSIS data in place of separate reports that states currently submit, and  officials from six of eight selected states indicated that such an effort  would reduce their reporting burden.", "However, as of August 2017, CMS officials acknowledged that they had  yet to outline how best to use T-MSIS data for program monitoring,  oversight, and management, because they were still largely focused on  working with the remaining states to begin reporting T-MSIS data,  analyzing the quality and usability of the T-MSIS data, and preparing the  data for research purposes. CMS\u2019s lack of a specific plan and time frames  for using T-MSIS data is inconsistent with federal internal control  standards related to using and communicating quality information to  achieve objectives. Absent a specific plan and time frames, CMS\u2019s ability  to use these data to oversee the program, including ensuring proper  payments and beneficiaries\u2019 access to services, is limited."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["As part of its efforts to address longstanding concerns about the data  available to oversee the Medicaid program, CMS has taken important  steps toward developing a reliable national repository for Medicaid data.  T-MSIS has the potential to improve CMS\u2019s ability to identify improper  payments, help ensure beneficiaries\u2019 access to services, and improve  program transparency, among other benefits. By providing more  standardized data on various aspects of Medicaid\u2014such as spending or  utilization rates\u2014states could be better positioned to compare their  programs to other states, thereby improving their ability to identify  program inefficiencies or opportunities for improvement.", "Implementing the T-MSIS initiative has been a significant undertaking.  Over the past 6 years, CMS has worked closely with states and has  reached a point where nearly all states are reporting T-MSIS data. While  recognizing the progress that has been made, more work needs to be  done before CMS or states can use these data for program oversight. It  remains unclear when all states will report complete and comparable T- MSIS data, and how CMS and states will use them to improve oversight.  In the interim, improper Medicaid payments continue to increase,  reaching $36.7 billion in fiscal year 2017. Further delays in T-MSIS\u2019s use  limit CMS\u2019s ability to reverse that trend in the near term, underscoring the  need for CMS to take additional steps to expedite the use of the data."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to CMS.", "The Administrator of CMS, in partnership with the states, should take  additional steps to expedite the use of T-MSIS data for program  oversight. Such steps should include, but are not limited to, efforts to obtain complete information from all states on unreported T-MSIS  data elements and their plans to report applicable data elements;  identify and share information across states on known T-MSIS data  limitations to improve data comparability; and  implement mechanisms, such as the Learning Collaborative, by which  states can collaborate on an ongoing basis to improve the  completeness, comparability, and utility of T-MSIS data.  (Recommendation 1)", "The Administrator of CMS should articulate a specific plan and associated  time frames for using T-MSIS data for oversight. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for comment. In its written  comments, HHS concurred with our recommendations, and noted that  strong Medicaid data can help the federal government and the states  move toward better health outcomes and improve program integrity,  performance, and financial management. With most states now reporting  T-MSIS data, HHS highlighted efforts it has taken to improve the quality  of T-MSIS data. For example, HHS developed a database on data quality  findings, which could be used to identify solutions for common problems  across states, and has begun to develop a data quality scorecard for T- MSIS users, which aggregates data quality findings in a user-friendly tool.  Regarding taking steps to expedite the use of T-MSIS data for program  oversight, HHS stated that it will (1) continue to work to obtain complete  T-MSIS information from all states; (2) take additional steps to share  information across states on T-MSIS data limitations; and (3) implement  ways for states to collaborate regarding T-MSIS. HHS also noted that it is  in the process of developing a plan for using T-MSIS data for oversight.  HHS emphasized that it is dependent on states\u2014and their available  staffing and resources\u2014to address data quality and reporting issues.  HHS also provided technical comments, which we incorporated as  appropriate. HHS\u2019s comments are reprinted in appendix I.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of HHS, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs can be found on the last  page of this report. Major contributors to this report are listed in appendix  II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals making key  contributions to this report include Susan Anthony (Assistant Director),  Manuel Buentello (Analyst-in-Charge), Anna Bonelli, and Robin Burke.  Also contributing were Muriel Brown, Drew Long, and Jennifer Rudisill."], "subsections": []}]}], "fastfact": ["State-reported data help the federal government oversee the Medicaid program, which made an estimated $36.7 billion in payment errors in 2017. However, there have been longstanding concerns that those data are not sufficient for effective oversight.", "To help, federal administrators established a new data repository. Nearly all states now submit data that could be used to improve oversight and program management. However, concerns persist over the completeness and comparability of state data.", "We recommended federal administrators take steps to expedite collection of complete and comparable data, and draft a plan for how they will use the data."]}
{"id": "GAO-18-257", "url": "https://www.gao.gov/products/GAO-18-257", "title": "Federal Personal Property: Opportunities Exist to Improve Identification of Unneeded Property for Disposal", "published_date": "2018-02-16T00:00:00", "released_date": "2018-02-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government owns billions of dollars of personal property\u2014such as office furniture, scientific equipment, and industrial machinery. By law, each agency is required to follow GSA's disposal process so that an agency's unneeded property can be used by other agencies or certain non-federal entities. Since 2012, agencies have reduced their office and warehouse space due to government-wide initiatives, a reduction that in turn has required agencies to dispose of some affected personal property.", "GAO was asked to review how federal agencies identify and dispose of unneeded personal property. This report examines (1) how selected agencies assess whether personal property is needed and (2) how these agencies dispose of unneeded property and how, if at all, space reduction efforts have affected disposals. GAO reviewed federal statutes and regulations, and selected five agencies\u2014EPA, Forest Service, GSA, HUD, and IRS\u2014mainly based on space reduction results and goals. GAO reviewed these agencies' property disposal data for 2012 through 2016 and interviewed headquarters and field staff about their property management and disposal processes."]}, {"section_title": "What GAO Found", "paragraphs": ["The five agencies GAO reviewed\u2014the Environmental Protection Agency (EPA), Forest Service, General Services Administration (GSA), Department of Housing and Urban Development (HUD), and Internal Revenue Service (IRS)\u2014generally do not have policies or processes for identifying unneeded personal property, such as office furniture, on a proactive basis. Instead, officials from these agencies said they typically identified unneeded property as a result of a \u201ctriggering event,\u201d such as an office space reduction. Executive agencies are required by law to continuously review property under their control to identify unneeded personal property and then dispose of it promptly. Without such policies or processes, agencies may not be routinely identifying unneeded property that could be used elsewhere, and efforts to maximize federal personal property use and minimize unnecessary storage costs may not be effective. GSA has issued regulations establishing a government-wide disposal process for unneeded personal property. However, according to GSA officials, the agency lacks the authority to promulgate regulations or formal guidance on management of in-use agency property, and there is no government-wide guidance to agencies on identifying unneeded personal property. Agencies are required to have internal control activities\u2014such as policies and procedures\u2014for reasonable assurance of efficient operations and minimal resource waste, and the Office of Management and Budget (OMB) provides guidance to agencies on implementing such activities. Guidance from OMB that emphasizes agencies' internal control responsibilities could help ensure that agencies are proactively and regularly identifying property that is no longer needed.", "The selected agencies reported little difficulty in following GSA's personal property disposal process, reporting over 37,000 items as unneeded property in fiscal years 2012 through 2016. This property was disposed of through transfers to other agencies, donations to authorized recipients, sales, or discarding. When disposing of personal property from space reduction projects at locations GAO visited, agencies also reported using GSA's process (see figure). Overall, agencies said they have not experienced major challenges with disposing of personal property from space reduction efforts. This lack of challenges could be because projects are geographically dispersed and spread over several years."]}, {"section_title": "What GAO Recommends", "paragraphs": ["OMB should provide guidance to executive agencies on managing their personal property, emphasizing that agencies' policies or processes should reflect the requirement to continuously review and identify unneeded personal property. OMB did not comment on GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government owns and manages billions of dollars of  \u201cpersonal property\u201d\u2014a term that refers to most government property other  than real property\u2014ranging from common products, such as office  equipment and furniture, to specialized apparatuses, including scientific  devices and heavy machinery. In fiscal year 2016, federal civilian  agencies reported $206 billion in personal property assets, but the actual  amount owned is considerably higher. Each year, agencies identify  thousands of items that are no longer needed, or \u201cexcess.\u201d  In some  cases, this classification is because the items are broken and cannot be  repaired, or obsolete; however, many items are in good working order but  are no longer needed to meet agencies\u2019 missions. Because this property  was originally purchased with federal funds and represents a significant  investment, the government seeks to promote its reuse by other federal  agencies, to minimize new procurement costs, and by non-federal  entities, in order to maximize the property\u2019s public benefit. The General  Services Administration (GSA) plays a central role in the process of  reusing and disposing of excess property and has issued regulations  which govern agencies\u2019 personal property disposal. In fiscal year 2016,  agencies reported disposing of more than 160,000 items (with an original  acquisition cost reported at nearly $2 billion in nominal dollars) using  GSA\u2019s disposal process. However, reports that we and others have  previously issued have shown that this process is not always effective in  maximizing use of property because, for example, agencies have retained  property that they no longer need and that others could have used.  Furthermore, government-wide space reduction initiatives\u2014such as  Freeze the Footprint and Reduce the Footprint\u2014have encouraged  agencies to reduce their domestic office and warehouse space and could  have implications for how agencies identify and dispose of unneeded  personal property. As agencies reduce office and warehouse space, they  will also likely have to make arrangements for the personal property  inside these spaces.", "You asked us to review agency processes for managing and disposing of  federal personal property, including preparations to address excess  personal property resulting from space reduction efforts. This report  examines (1) how selected federal agencies assess whether personal  property is needed and (2) how selected federal agencies dispose of  unneeded personal property and how, if at all, space reduction efforts  have affected these disposals.", "To address our objectives, we reviewed applicable federal statutes,  regulations, and guidance regarding personal property management; our  prior work; and reports by other federal agencies\u2019 offices of inspectors  general on personal property issues. In addition, to determine how  selected federal agencies assess whether personal property is needed,  we selected five federal agencies and reviewed pertinent agency  documents, such as personal property policies, and interviewed agency  officials about their processes for managing personal property assets,  such as their inventory procedures and asset management systems.  These agencies are the Environmental Protection Agency (EPA), the  Forest Service within the U.S. Department of Agriculture (USDA), GSA\u2019s  Office of Administrative Services (GSA OAS), the Department of Housing  and Urban Development (HUD), and the Internal Revenue Service (IRS)  within the Department of the Treasury. In order to select agencies that  were more likely to have relevant, recent experience with excess personal  property from space reduction efforts, we ranked the 23 non-Defense  agencies based on their Freeze the Footprint square footage reduction  results, Reduce the Footprint space reductions goals, and the amount of  declared excess personal property over the last 5 years, and eliminated  the bottom third of the agencies. We selected GSA as our first agency  due to its central role in personal property disposal and randomly selected  four additional agencies from the remaining agencies. The information we  obtained from these agencies about their personal property management  is not generalizable to all federal agencies. We compared existing federal  guidance related to personal property management and the selected  agencies\u2019 policies and processes with federal internal control standards  related to designing control activities. We also conducted literature  searches to identify best practices in personal property or asset  management. To identify criteria and examples of a formal process for  assessing property for continued need, we reviewed federal regulations  and agency policies on personal property management from the National  Aeronautics and Space Administration (NASA) based on our prior work.  We also interviewed GSA\u2019s Office of Government-wide Policy (GSA  OGP) officials and Office of Management and Budget (OMB) staff to  discuss regulations and policies pertaining to personal property and their  role in personal property management.", "To determine how selected federal agencies dispose of excess and  surplus personal property and how, if at all, space reduction efforts have  affected disposals, in addition to the above, we conducted site visits to a  non-generalizable selection of 2 locations\u2014Philadelphia, Pennsylvania,  and Denver, Colorado\u2014to meet with regional and local officials from each  of our agencies responsible for managing and disposing of excess  personal property. We selected locations that had the highest number of  our selected federal agencies present, the largest amount of personal  property declared as excess, and space reduction projects. We discussed  any impacts space reductions had on excess property and requested  supporting documentation on the amount of property declared as excess  and the disposition outcomes of that property. We did not independently  verify the information that was provided because data reported as excess  from space reduction projects is not always tracked separately from other  property disposed of for other purposes. We also reviewed documents  and interviewed officials from GSA\u2019s Office of Personal Property  Management (GSA OPPM) in GSA\u2019s headquarters, in Philadelphia, and  in Fort Worth, Texas. The GSA OPPM offices in these two cities have  responsibility over the locations we selected to visit. We did not assess  agencies\u2019 inventory processes and generally excluded certain types of  personal property, such as aircraft and vehicles, from our review because  we have reviewed or are reviewing these types of property in prior or  ongoing work. We reviewed regulations governing some of these types of  property as part of our work and some of the data on agencies\u2019 owned  property and property they declared excess includes these items.", "We conducted this performance audit from July 2016 to February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix I contains additional  information about our scope and methodology."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies\u2019 personal property may include commonly used items,  such as computers, office equipment, and furniture, and more specialized  property reflective of their mission, such as scientific devices, fire control  equipment, heavy machinery, precious metals, generators, and  chemicals. Some items require special handling, such as hazardous  materials, animals, and firearms. See figure 1 for examples of federal  personal property.", "Federal agencies manage personal property while they are using it.  Specifically, executive agencies are required by law to: maintain adequate inventory controls and accountability systems for  property under their control;   continually survey property under their control to identify excess; promptly report excess property to GSA and dispose of it in  accordance with GSA regulations; and use existing agency property or obtain excess property from other  federal agencies before purchasing new property.", "GSA assists agencies when they no longer need personal property and  has established a government-wide personal-property disposal process in  federal regulation. The process generally begins when an agency  declares a personal property item as \u201cexcess\u201d\u2014that is, the agency  determines it no longer needs the item to carry out its mission. Agencies  are to make this determination only after ensuring the property is not  needed elsewhere within the agency. Once property is declared excess,  there are four potential property disposal methods: transfer to another  federal agency or certain non-federal entities, donation, sale, and  abandonment or destruction. Federal agencies and some non-federal  entities have the priority to acquire excess property, through transfer. If  none of these eligible entities have requested the property for transfer  after 21 days, the property becomes \u201csurplus\u201d\u2014that is, GSA determines  that federal agencies no longer need the item to carry out their missions.  Surplus property may be donated to eligible entities through a State  Agency for Surplus Property, representing the state of the prospective  donee. Property not donated within 5 days after the close of the 21-day  screening period may be sold to the general public and, finally, unsold  property may be abandoned or destroyed. See appendix II for an  expanded description of the personal property disposal process.", "OMB is responsible for establishing government-wide management  policies and requirements and provides guidance to agencies to  implement them. OMB has issued guidance for specific types of personal  property, such as for government aircraft and information technology  systems. OMB also implemented the Freeze the Footprint and Reduce  the Footprint initiatives, starting in 2012, to reduce the amount of  domestic office and warehouse space needed by the federal government,  in part, through consolidations and improved space utilization. As a result,  federal agencies have reported achieving space reductions, and they  have goals for additional reductions in the future. Although these  reductions are a relatively small part of the federal government\u2019s overall  footprint, according to OMB, through this and other efforts agencies  collectively reduced their office and warehouse space by about 25 million  square feet from fiscal years 2012 through 20156. As federal agencies  continue to reduce office and warehouse space, they will also likely have  to manage or dispose of personal property, such as office furniture or  stored property, from these spaces."], "subsections": []}, {"section_title": "Selected Agencies Had Personal Property Accountability and Inventory Control Processes but Most Did Not Have a Formal Process for Assessing Property for Continued Need", "paragraphs": [], "subsections": [{"section_title": "Agencies Inventory Their Most Valuable and Sensitive Property", "paragraphs": ["Each of the five selected agencies we reviewed have policies and  processes for carrying out their responsibilities to maintain adequate  accountability systems and inventory controls for property under their  control:", "All five agencies have policies for regularly inventorying their personal  property to physically locate and verify property tracked in their asset  management systems. EPA, GSA OAS, and IRS policies require  physical inventories of personal property once a year, while Forest  Service\u2019s policy requires inventories every other fiscal year and a 10  percent sample inventory in the alternate years. HUD policies  require inventories every 2 years at its headquarters, but according to  HUD officials, field locations conduct inventories annually.", "All of the agencies also have an electronic asset-management system  for maintaining information on personal property. Although each  agency has its own system, and the type of information maintained  varied by agency or type of property, generally each system  generates a record for each property item that provides descriptive  information about the item, such as manufacturer name, model  number, serial number or other identifier, acquisition cost, condition,  and current location.", "We found that the five agencies use these policies and processes to track  and inventory certain property determined by each agency to be  \u201caccountable.\u201d Accountable property is nonexpendable personal property  with an expected useful life of 2 years or longer that an agency  determines should be tracked in its property records, based on an item\u2019s  acquisition cost and sensitivity. Each agency determines its own  appropriate acquisition cost threshold: four of the agencies\u2014EPA, Forest  Service, HUD, and IRS\u2014consider property with an original acquisition  cost of $5,000 or greater to be accountable; GSA OAS\u2019s accountable  threshold is $10,000 or greater. In addition, certain sensitive property\u2014 such as digital cameras, laptop computers with hard drives, and  firearms\u2014is considered accountable regardless of acquisition cost  because it could be easily stolen or can store data or personal  information.", "Table 1 provides a snapshot of accountable personal property items\u2014 including the reported original acquisition cost, amount, and examples\u2014 reported from 4 of the selected agencies\u2019 asset management systems in  2017.", "The agencies in our review generally did not track in their asset  management systems or formally inventory their remaining\u2014or \u201cnon- accountable\u201d\u2014personal property that did not meet their definition of  accountable property. According to agency officials we interviewed, they  do not track or inventory low value items because: (1) the cost and  manpower required to do so are too high; (2) certain property, such as  office furniture, is less susceptible to theft; or (3) agencies believe they  are not required by law to inventory low value items. While agencies are  required to have systems of accounting and internal controls that provide  effective control over, and accountability for, their assets, they generally  have latitude in how they implement these procedures, including which  property to track and inventory."], "subsections": []}, {"section_title": "Most Selected Agencies Did Not Have a Systematic Process for Assessing the Continued Need for Personal Property", "paragraphs": ["While the five selected agencies had policies and processes for their  property accountability and inventory control responsibilities, they largely  did not have policies and processes for carrying out their responsibilities,  as established in law, to continually survey property under their control to  identify excess. According to officials at each of the selected agencies,  the responsibility for identifying unneeded property generally lies with that  agency\u2019s property custodians\u2014designated officials who are assigned  responsibility for the property\u2014or the agency program or individual using  the property. Four of the five selected agencies\u2019 policies do not require  property custodians or other property users to assess property for  continued need. Furthermore, these four agencies\u2019 policies did not have  specific criteria for the property custodian or user to assess property for  continued need. Only IRS\u2019s personal-property management policy  specifies that the property custodian is responsible for identifying excess  property and provides criteria to be applied in doing so, such as whether  property is still needed in its location and the feasibility of transferring it to  other locations, taking into account the property\u2019s condition and  transportation charges. An official at one of the selected agencies  identified several specific criteria that should be used to assess property  for continued need, including the item\u2019s serviceability, whether it poses a  safety hazard, and the feasibility of relocating it. However, the official  acknowledged that these or any other criteria are not part of the agency\u2019s  formal policy.", "The personal property policy of an agency not included in our review\u2014 NASA\u2014includes requirements and criteria to review NASA property for  continued need in multiple ways. For example, it requires a high-level  NASA official to conduct a walk-through inspection annually to identify  idle or underused equipment that is no longer needed and report it as  excess. It also requires, as part of an annual property inventory, that  property that appears to be excess, worn out, or in obvious need of repair  be noted as such and that guidance on identifying unneeded property be  provided to personnel involved in conducting the inventories as well as  employees assigned to use the property.", "In addition to not having policies on identifying and assessing property for  continued need, agencies we reviewed also did not have a systematic  process for doing so. Instead, when describing situations in which they  declared property as excess, officials said they typically did so as a result  of a \u201ctriggering event.\u201d The types of triggering events the officials cited  include an office move or consolidation or a lifecycle replacement of  laptops. For example, officials from field locations of three of these  agencies reported declaring most of their existing furniture as excess as  the result of an office relocation or renovation. Agency officials said they  were unable to use their existing furniture and had to declare it excess  because it did not conform to new space utilization standards. At  another agency, officials were disposing of a large number of laptop  computers that had been declared excess because they had been  replaced by new computers. Officials at two agencies said an assessment  of property for continued need is an assumed practice that is part of the  inventory for accountable property. However, an official from one of these  agencies acknowledged that assessing need is not addressed in the  written instructions provided to those conducting the inventory. Officials  from two other agencies acknowledged that they continue to retain  unneeded property that should be declared excess in storage on-site but  had not pursued disposal due to other competing responsibilities with  higher priorities.", "Proactively assessing personal property for continued need instead of  responding to a triggering event can help agencies achieve both effective  and efficient operations by ensuring that only needed property is retained  and unneeded property is identified and declared excess. Federal internal  control standards require that agencies design and maintain internal  control activities\u2014such as policies and procedures\u2014to identify risks  arising from mission and mission-support operations, and to provide  reasonable assurance that agencies are operating in an efficient manner  that minimizes the waste of resources. Such a system also provides  reasonable assurance that agency property is safeguarded against  waste, loss, or unauthorized use. OMB staff and GSA officials agreed that  assessing all types of property\u2014accountable and non-accountable\u2014for  continued need is important and called-for by internal control standards.  Because the agencies we reviewed did not have systematic processes for  assessing the continued need for personal property, they may not be  aware of potential risks of maintaining property that may no longer be  needed for operational purposes.", "Furthermore, previous work others have performed has shown that  inaction on unneeded or idle property can limit efficient use of the  government\u2019s personal property, unnecessarily use an agency\u2019s  resources, or miss opportunities for potential cost savings, for example:", "The Department of Homeland Security\u2019s Inspector General found that  the U.S. Coast Guard could not ensure that personal property was  efficiently reutilized or properly disposed of to prevent unauthorized  use or theft because the Coast Guard did not have adequate policies,  procedures, and processes to identify and screen, reutilize, and  dispose of excess personal property properly, including criteria for  identifying such property.", "The EPA\u2019s Inspector General estimated EPA could save $8.9 million  in reduced warehouse costs through improved management of stored  personal property.", "GSA personal property asset management studies conducted in 2003  and 2005 found, among other things, that personal property is not  being used to its fullest extent in some agencies and that no  government-wide usage assessment or standard exists to detect  whether property is no longer needed and can be reported as  excess.", "Without a triggering event, agencies may not be seeking out or identifying  property that is no longer needed and declaring it excess as often as they  should. Such unneeded property may be put to better use elsewhere  within the agency or the federal government, or agencies may purchase  or lease new property instead of using another agency\u2019s property that is  unneeded but not reported as excess. In addition, agencies may be  missing opportunities to realize cost savings by identifying and disposing  of unneeded property, such as property stored in warehouses, to reduce  or make better use of that space.", "While the requirements for agencies to continually survey property under  their control to identify excess is established in law, according to GSA  officials, there are no government-wide regulations on managing personal  property or fulfilling this specific requirement. According to GSA OGP officials, GSA does not have the authority to promulgate regulations or  issue formal guidance on personal property that is in use by executive  agencies. Furthermore, according to the officials, GSA is only authorized  by law to prescribe regulations on excess and surplus personal property.  OMB staff stated that they could issue a notification, such as a controller  alert to agencies\u2019 chief financial officers, to reinforce the statutory  requirement that agencies conduct assessments of personal property for  continued need. OMB periodically issues such alerts to highlight  emerging financial management issues for agencies and also issues  guidance to agencies through bulletins, circulars, and memorandums. By  issuing a controller alert or other guidance, OMB can help ensure that  agencies are proactively taking steps to evaluate their property for  continued need, including developing appropriate policies for doing so,  and can thereby improve efforts to promote maximum use of excess  personal property."], "subsections": []}]}, {"section_title": "Selected Agencies Used GSA\u2019s Disposal Process to Dispose of Unneeded Property, Including Property from Space Reductions Selected Agencies Used a Structured Disposal Process for Personal Property", "paragraphs": ["Officials from the five agencies we reviewed reported that they followed  GSA\u2019s automated process to dispose of property once they had made the  determination it was no longer needed to support their agency\u2019s mission.  As previously described, GSA regulations on disposing of property  establish a specific process for all executive agencies to follow, and GSA  has also issued guidance to help agencies dispose of property under this  process. In particular, once an agency has determined that the property it  has is no longer needed within the agency, the agency is required to  promptly report the property to GSA as excess, typically by entering  information about it into GSAXcess, GSA\u2019s web-based system for  facilitating personal property disposal. This method requires agency  employees to manually enter information using data entry screens that  include help screens and error messages. GSA encourages agencies to  provide a complete description of the property and to include multiple  photographs of it. Officials from the five agencies we reviewed reported  no significant difficulties with entering information into GSAXcess;  collectively, these agencies reported over 37,000 items as excess  property from fiscal year 2012 through 2016. Figure 2 indicates the  number of items each selected agency reported to GSA as excess during  that period.", "Once information entry is completed, the disposal process begins. If the  property is not disposed of during one stage, it advances to the next  stage. The disposal process is shown in figure 3.", "Agency officials we interviewed told us that responsibility for disposing of  property is decentralized and typically occurs at the property\u2019s location,  whether at an agency headquarters, regional office, or lower level.  Because of the large federal government presence in the Washington,  D.C., area, agency offices in that area may have access to resources to  facilitate the disposal process that are unavailable elsewhere, such as  transferring excess property to certain entities that complete some or all  aspects of the disposal process for a fee. Two such entities are GSA\u2019s  Personal Property Center in Springfield, Virginia, which takes full  accountability and control of an agency\u2019s excess property for a fee and  handles all the details of the disposal process, and USDA\u2019s Centralized  Excess Property Operation in Beltsville, Maryland. According to USDA\u2019s  Agriculture Property Management Regulations, property not needed by  USDA or its bureau offices in the Washington, D.C., area must be  transferred to this office for final disposal actions. It also provides these  same services to some non-USDA agencies.", "Agencies also use GSAXcess to search for and select available excess  property. Agency officials told us that the system also sends disposition  instructions to the property-holding agency, when the property is to be  transferred to other federal agencies, donated, or sold and that the  agencies follow these instructions. For example, when an agency  requests an excess item in GSAXcess and GSA approves the request,  the system notifies the requesting agency and the property-holding  agency and provides contact information to arrange to complete the  transaction. None of the selected agency officials reported difficulties  completing a transfer or donation transaction. For property not  transferred, donated, or sold, GSA notifies the agency that the property  has no commercial value and can be abandoned or destroyed. All of our  selected agencies reported trying to recycle such property."], "subsections": [{"section_title": "Selected Agencies Reported Little Difficulty Disposing of Personal Property from Space Reduction Initiatives", "paragraphs": ["Selected agency officials told us they disposed of property from space  reduction efforts, such as Freeze the Footprint and Reduce the Footprint,  the same way as other personal property\u2014using GSA\u2019s disposal process.  To meet space reduction goals, selected agencies are undertaking  projects at dozens of locations. Projects have primarily involved leased  space for offices and warehouses and have included office moves,  consolidations, and closures.", "As federal agencies carry out these space reduction projects, they must  also address any personal property in the project spaces. Selected  agencies reported several factors that affected their decisions about this  property, which for three of the agencies was primarily office furniture.  Four agencies reported needing less space than they previously occupied  because of changes in agency missions or staffing levels. Furthermore,   officials from GSA OAS and IRS noted that workplace trends, including  teleworking and decreased staffing, reduced the space needed. Finally,  agencies also reported that the office furniture itself was mostly  unsuitable because it was old and because it could not be configured for  use in more efficient office space designs. As a result, some selected  agency locations that completed an office move or renovation project  reported that most of their existing furniture was not needed in their new  space. For example, in its Reduce the Footprint plan for fiscal years 2017  through 2021, HUD noted that many of its locations were designed and  furnished when it had a much larger staffing level and reported that in  2016, its usable square feet per employee was 356. Subsequently, HUD  revised its space design standards, requiring future office spaces to  adhere to a utilization rate of 175 square feet or less. At the HUD project  we visited, an official told us the furniture in use before the project was old  and was generally too large to be used to achieve space design  standards.", "In 2017, Housing and Urban Development  (HUD) reduced its Denver regional office  space by 30 percent. HUD\u2019s lease was  expiring and it needed less space because it  had fewer employees in the office, in part due  to increased telework. Adhering to new space  utilization standards in its office and furniture  design further reduced HUD\u2019s overall required  space. An example of a new workstation is  shown above. Before the project, the agency  occupied about five floors of a commercial  building. HUD renovated in place, one floor at  a time, and replaced its existing office  furniture with new. Personal property at this  office included primarily office furniture, such  as desks and 25-year old modular systems,  and equipment, such as telephones. As each  floor was completed and employees moved to  new workstations, the property official on-site  disposed of their old furniture and  workstations by entering its information in  GSAXcess. The official reported selling some  of the excess furniture after completing the  first floor but recycled or discarded excess  furniture in subsequent rounds.", "In some cases, agencies did not dispose of all the personal property after  a space reduction project but instead were able to retain it for other uses  within the agency. For example, IRS officials reported closing an office in  Englewood, Colorado, and transferred its furniture to Ogden, Utah, for  storage for an upcoming project. GSA OAS officials in Denver said that  after a space reduction project in which GSA decreased the size of its  regional office, it retained the unneeded furniture and office space for  temporary use by other agencies. For property that was declared excess  following a space reduction project, agencies reported transferring,  donating, and selling property to dispose of it, using GSA\u2019s process. For  example, officials in GSA OAS, Forest Service, and IRS locations told us  they transferred some excess property to other federal agencies. The  Forest Service in Denver transferred some modular office furniture to the  Bureau of Land Management and the U.S. Postal Service. The Forest  Service and IRS also reported donating property, such as office furniture  and equipment, through the State Agencies for Surplus Property program.  Four agencies reported selling some of their property from a space  reduction project. For example, HUD\u2019s regional office in Denver sold  some of its excess office furniture, which dated to 1992, and recycled or  discarded the remainder.", "When disposing of property from a space reduction project, some  agencies sought assistance from GSA. GSA\u2019s Office of Personal Property  Management (GSA OPPM) assists agencies, when requested, in  disposing of personal property, and officials at selected agency locations  reported receiving assistance and training. In one example, GSA  officials told us that a regional office of a selected agency needed to  dispose of an office full of furniture and, in addition to using the disposal  process, contacted GSA OPPM for additional assistance. Because of the  large amount of property, GSA OPPM took steps to make other agencies  in the area aware of the available property and facilitated access to allow  agencies to view the property. In another example, GSA OPPM officials  met with officials from another agency in the planning stages of a  relocation to answer questions and provided advice and guidance for  disposing of personal property.", "When the Forest Service\u2019s lease on its  Denver-area office expired, the agency leased  space in another location, requiring a move  but reducing its office by over 21,000 square  feet. The agency sought to conform to new  space utilization standards, which required  more efficiently-designed furniture than its  existing office furniture. Because the Forest  Service did not reuse most of its old furniture  in its new space, it no longer had a need for it.  The Forest Service retained some of the  furniture for use in other Forest Service offices  within the region and declared the remainder  as excess. Through GSAXcess, the Forest  Service transferred some of its excess  furniture to other federal agencies, such as  the Bureau of Land Management and the U.S.  Postal Service. The Forest Service sold some  furniture at auction; broken items were  recycled.", "Agencies may dispose of large amounts of property during a space  reduction project, but overall, agency officials reported few challenges in  doing so. This may be in part because any effects from space reductions  are distributed across an entire agency. Although selected agencies\u2019  average Reduce the Footprint space reduction goals ranged from 97,000  square feet to 662,000 square feet each fiscal year from 2016 to 2020,  each agency\u2019s efforts consisted of dozens of geographically dispersed  projects of various sizes to be completed over several years. For  example, as of fiscal year 2016, EPA had 21 space reduction projects  planned from fiscal years 2016 through 2021, with individual anticipated  reductions ranging from less than 1,000 square feet to more than 140,000  square feet. At least one project is present in 8 of EPA\u2019s 10 regions.  Agencies\u2019 ability to pay for space reduction projects may also have  affected these projects\u2019 effects. Two selected agencies said they delayed  projects because of a lack of funding. Agencies may reduce costs over  the long term because of lower rent for smaller spaces but they may have  to pay some expenses upfront, such as for moving, renovations, and new  furniture.", "Although officials from all five agencies told us they have been able to  manage personal property disposals from space reductions, they  identified factors that can impact the efficient use of the disposal process  during a space reduction project and some strategies taken to address  them:  Inventorying non-accountable property: As a space reduction project  commenced at a location, most selected agencies reported that they  did not have a complete list of the personal property affected by the  project. As previously described, selected agencies do not maintain  an itemized list of non-accountable personal property and for four  agencies, office furniture is generally non-accountable. During a  space reduction project, property personnel had to develop some type  of inventory to identify property that would be needed and property  that should be disposed of. Selected agencies had various methods  for conducting such an inventory. For example, officials from two  agencies said they walked through the affected space and created a  list of all the items. Officials from one agency said a contractor was  hired for this purpose. Most agencies reported using the inventory  they created to enter information on excess property into GSAXcess.  Officials at GSA\u2019s OPPM offices in Philadelphia and Fort Worth said  that they offer training and guidance to agencies in conducting  inventories.", "Managing disposals within time frames: Agencies generally are not  able to begin the disposal process until the property is no longer in  use. For example, agency staff continue to use their old workspaces  until they can move to new workspaces. Agencies also face  deadlines, such as vacating space due to a lease expiration or  commencement of renovation work. Officials from three agencies  described challenges completing the disposal process\u2014reporting  excess personal property as well as completing transactions to  transfer, donate, sell or abandon or destroy it\u2014within required time  frames. Some agency officials reported using different strategies to  address this timing challenge. For example, one agency official was  able to enter information about the excess property items into  GSAXcess while employees were still using them. According to the  official, this was possible because a note could be included in the  property item\u2019s description in GSAXcess, with the date when the  property would be available. When the property was no longer in-use  within the agency, the transfers or other transactions were completed.  Additionally, an agency may conduct an on-site screening of its  unneeded property to allow other federal agencies or authorized  parties to physically view and identify any furniture they want. For  example, GSA OPPM officials in Philadelphia conducted an on-site  screening of unneeded office furniture resulting from the agency\u2019s  regional office relocation."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Federal agencies collectively have billions of dollars\u2019 worth of personal  property, ranging from office furniture to highly specialized equipment  that, when in use, supports agency missions. However, the agencies in  our review did not have policies and systematic processes for identifying  unneeded property. Furthermore, other\u2019s previous work has shown that  agencies across the government may not be effectively assessing their  property for continued need, leading to idle property that could be put to  better use elsewhere within the agency or the federal government and  potential unnecessary storage costs. Consequently, agencies may be  retaining property that is no longer needed. GSA has recognized that  opportunities may exist for agencies to more effectively manage property  under their control, but according to GSA OGP officials, GSA\u2019s authority  is limited to agency property that has been declared excess or surplus.  According to OMB staff, OMB has the authority to issue guidance, such  as controller alerts, emphasizing agencies\u2019 property management  obligations, and thus, it is well-positioned to assist agencies to more  effectively manage their property and to ensure unneeded property is  made available to others, as appropriate."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Director of OMB should provide guidance to executive agencies on  managing their personal property, emphasizing that agencies\u2019 policies or  processes should reflect the requirement to continuously review and  identify unneeded personal property. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to OMB, EPA, the Forest Service, GSA,  HUD, and IRS for comment.  OMB stated that it did not have any  comments on our draft report in an email and provided a technical  clarification to the report, which we incorporated. GSA and IRS provided  technical comments in an email, which we incorporated as appropriate.   EPA, the Forest Service, and HUD each stated in an email that they did  not have any comments on the draft report.", "We are sending copies of this report to the appropriate congressional  committees, the Director of the Office of Management and Budget, the  Administrator of the Environmental Protection Agency, the Secretary of  the U.S. Department of Agriculture, the Administrator of the General  Services Administration, the Secretary of the Department of Housing and  Urban Development, and the Secretary of the Department of the  Treasury. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff making key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to examine (1) how selected federal  agencies assess whether personal property is needed and (2) how  selected federal agencies dispose of unneeded personal property, and  how, if at all, space reduction efforts have affected disposals. We  excluded certain types of personal property, such as aircraft and vehicles,  from our review because of our prior or ongoing work. To address our  objectives, we reviewed applicable federal statutes and regulations  pertaining to personal property management and disposal, our prior work,  and reports by federal agencies\u2019 Offices of Inspector General on personal  property issues.", "In addition, to determine how selected federal agencies assess whether  personal property is needed, we conducted background searches to  inform our understanding of key practices for personal property and asset  management through a search of databases containing peer-reviewed  articles, government reports, general news, hearings and transcripts, and  association and think tank papers. We also reviewed relevant asset  management practices, such as ASTM standards and the General  Services Administration\u2019s (GSA) Federal Asset Management Evaluation  and Personal Property Asset Management Study. In order to select  agencies that may have had recent experiences with excess personal  property, we selected 5 of the 24 agencies that were included in the  Freeze the Footprint and Reduce the Footprint initiatives.  We selected  agencies based on their overall Freeze the Footprint results, in terms of  the amount of square feet reduced, and Reduce the Footprint goals for  reducing domestic office and warehouse space, and the amount of  personal property declared excess over the last 5 years, as reported to  GSA\u2019s GSAXcess system from fiscal years 2012 to 2016, to coincide with  the Freeze the Footprint time frame. Specifically, we obtained  information on the Freeze the Footprint results and Reduce the Footprint  goals from the Office of Management and Budget\u2019s public website and  from Performance.gov. We limited our scope to civilian federal agencies  with personal property within the United States. Although we have  previously reported that the overall accuracy of data that agencies  reported on office and warehouse space reductions could be improved,  we found that the data were generally reliable for our purposes. After  reviewing the data for any inconsistencies and discussing the information  with selected agency officials to ensure that the reported numbers for the  Reduce the Footprint initiative were current, we determined that the  quality of the data were sufficient for our use in selecting agencies. In  order to select agencies that were more likely to have relevant, recent  experience with excess personal property from space reduction efforts,  we ranked these agencies based on their Freeze the Footprint results,  Reduce the Footprint goals, and the amount of declared excess personal  property, and eliminated the bottom third of the agencies. We selected  GSA as our first agency due to its central role in excess personal property  disposal, and randomly selected four additional agencies from the  remaining agencies. These agencies were the Environmental Protection  Agency, the U.S. Department of Agriculture, the Department of Housing  and Urban Development, and the Department of the Treasury. The  organizational structure of two selected agencies, the Department of  Agriculture and the Department of the Treasury, is different than the other  three agencies in that they are comprised primarily of sub-agencies.  Therefore, we selected the largest sub-agency for both departments\u2014the  Forest Service within the Department of Agriculture and the Internal  Revenue Service within the Department of the Treasury.", "We obtained information from the five selected federal agencies on the  total value and number of items in their asset management systems in  2017 to understand the size and scope of personal property assets they  manage. As we used the information to describe the scope of the  agencies\u2019 property holdings, we did not verify the data. We also analyzed  documents, such as the selected agencies\u2019 personal property  management policies, along with policies from the National Aeronautics  and Space Administration and Department of Energy, to understand how  they addressed requirements for managing personal property. We  included these agencies\u2019 policies based on our review of prior work  related to personal property. We interviewed officials from the selected  agencies about their processes for managing personal property assets,  such as their inventory procedures. However, we did not independently  assess agencies\u2019 inventory practices. We also interviewed staff from the  Office of Management and Budget (OMB) to discuss regulations and  policies pertaining to personal property and OMB\u2019s role in personal  property management.", "To determine how selected federal agencies dispose of excess and  surplus personal property and how space reduction efforts may have  affected disposals, in addition to the above, we obtained information from  each selected agency on its space reduction projects and interviewed  officials about their roles and responsibilities in the agency\u2019s space  reduction planning efforts and personal property disposal process. We  also conducted site visits to Philadelphia, Pennsylvania, and Denver,  Colorado to meet with regional and local officials from each selected  agency responsible for managing and disposing of personal property.  These locations were chosen based on the number of our selected  federal agencies present, the amount of excess personal property  declared, and the existence of space reduction projects. We discussed  property accountability policies, overall personal property disposal  processes, and how the disposal processes were affected by  government-wide space savings initiatives, such as Freeze the Footprint  and Reduce the Footprint, and any efforts to prepare for them, and  requested supporting documentation on the amount of property declared  as excess and the disposition outcomes of that property. We did not  independently verify the information that was provided, as data reported  as excess from space reduction projects are not always tracked  separately from other property disposed of for other reasons. We  reviewed documents and interviewed officials from GSA\u2019s Office of  Personal Property Management (GSA OPPM) in GSA\u2019s headquarters, in  Philadelphia and in Fort Worth, Texas, to discuss their role in assisting  agencies in disposing of personal property and to obtain their views on  how personal property disposals have been affected by space  reductions. Finally, we interviewed GSA\u2019s Office of Government-wide  Policy (GSA OGP) officials about the Interagency Committee on Property  Management and the Property Management Executive Council  regarding their personal property and asset management efforts and met  with officials and representatives from the following: the U.S. Department  of Agriculture\u2019s Centralized Excess Property Operation, the Users and  Screeners Association\u2013Federal Excess Personal Property, and the  National Association of State Agencies for Surplus Property to discuss  their roles in the reuse and disposal of Federal personal property.", "We conducted this performance audit from July 2016 to February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: The Disposal Process for Federal Personal Property", "paragraphs": ["The Federal Property and Administrative Services Act of 1949, as  amended, requires executive agencies, in part, to promptly report excess  property to the General Services Administration (GSA) and dispose of it in  accordance with GSA regulations. Each executive agency is also  required to fulfill requirements for personal property by using existing  agency property or by obtaining excess property from other federal  agencies before purchasing new property. GSA\u2019s disposal process, as  laid out in federal regulation, incorporates and facilitates these  requirements, providing a means for both disposing of and acquiring  unneeded property: agencies with excess personal property can dispose  of it and other agencies, authorized non-federal entities, and, eventually,  the general public can acquire this property."], "subsections": [{"section_title": "Disposal before Declaring Property as Excess to GSA", "paragraphs": ["After determining that a property item is no longer needed to complete its  mission, an agency may have several options for proceeding before  formally declaring the property as excess to GSA:  Immediately authorize abandonment or destruction of the property:  Determine, in writing, that the property has no commercial value or  the estimated cost of its continued care and handling would exceed  the estimated proceeds from its sale. If an agency makes such a  determination, it may abandon or destroy the property without  reporting it to GSA as excess. In lieu of abandonment or destruction,  an agency may donate excess personal property to a public body  without going through GSA.", "Directly transfer the property to another federal agency: Agencies  usually become aware of available property through informal means,  such as a contact at the disposing agency, according to GSA. GSA  approval for such a transfer is not needed if the total original  acquisition cost for each item does not exceed $10,000. If this cost is  greater than $10,000, the acquiring agency must obtain prior approval  from GSA. In either case, the acquiring agency must notify GSA of the  transfer.", "Directly transfer the property to an eligible recipient under a special  authority: Special authorities are legal provisions that are designed to  give excess assets to groups that may use them for a particular  purpose, such as universities that can use the National Aeronautics  and Space Administration\u2019s scientific equipment in their research.  Some authorities exist to collectively support all federal agencies and  some support an agency-specific program. According to GSA, the  primary government-wide programs are the Stevenson-Wydler  Technology Innovation Act of 1980 and Executive Order 12999, also  known as the Computers for Learning program. Recipients meeting  eligibility requirements of the special authority contact agencies to  determine the availability of property, and the agency and recipient  must complete the appropriate documentation to make a record of the  transfer."], "subsections": []}, {"section_title": "Disposal Process after Declaring Property as Excess to GSA", "paragraphs": ["An agency initiates GSA\u2019s disposal process by formally declaring property  as excess, either by completing and submitting a form to GSA or, more  typically, by electronic entry of an item into GSAXcess, GSA\u2019s real-time,  Web-based site for facilitating the disposal process. The latter method  requires agency employees to enter information about the excess  property using data entry screens that include help screens and error  messages. GSA encourages reporting agencies to provide a complete  description of the property and to include multiple photographs of the  property.", "The disposal process generally consists of four sequential stages in  which personal property may be transferred to another agency or eligible  recipient, donated, sold, or abandoned or destroyed, as described  below. If the property is not disposed of during one stage, it advances to  the next stage, though the holding agency generally retains physical  custody of the property until it is disposed of. Table 2 illustrates actions  a disposing agency and eligible property recipients take during each of  the four stages of the disposal process after an agency declares property  excess."], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, the following individuals made  important contributions to this report: David J. Wise (Director), Nancy  Lueke (Assistant Director), Travis Thomson (Analyst-in-Charge), Lacey  Coppage, Rosa Leung, Josh Ormond, Amy Rosewarne, Pamela Vines,  and Elizabeth Wood."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-219", "url": "https://www.gao.gov/products/GAO-19-219", "title": "Manufacturing Extension Partnership: Centers Cite Benefits from Funding Change, but Impacts Hard to Distinguish from Other Factors", "published_date": "2019-03-07T00:00:00", "released_date": "2019-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Small and medium-sized manufacturers are an important part of the U.S. economy. In 1988, to enhance the competitiveness, productivity, and technological performance of U.S. manufacturing, NIST established what is now called the MEP program. The program supports manufacturers through services provided by MEP centers. The centers, located in all 50 states and Puerto Rico, are operated by nonfederal organizations. The MEP centers provide assistance, either directly or through third parties, to help improve manufacturing firms' processes and productivity; expand their capacity; and help them adopt new technologies, utilize best management practices, and accelerate company growth. NIST enters into a cooperative agreement with the nonfederal organization that runs each center to provide federal financial assistance conditional upon the center contributing nonfederal matching funds\u2014known as a cost share.", "The AICA included a provision for GAO to review the effect of the 2017 cost share adjustment. This report describes (1) the MEP centers' views regarding the extent to which the recent cost share adjustment has helped them serve manufacturers and (2) the extent to which NIST data show impacts of the cost share adjustment on centers' finances and activities. GAO surveyed all 51 MEP centers, analyzed NIST data on the MEP program, and interviewed NIST and MEP center officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Most Manufacturing Extension Partnership (MEP) centers reported that the January 2017 American Innovation and Competitiveness Act (AICA) cost share adjustment has helped them serve manufacturers, especially very small (i.e., less than 20 employees) and rural ones. The AICA adjusted the cost share ratio to remain at 1:1, that is, $1 of nonfederal contributions for each $1 of federal assistance. Before the adjustment, MEP centers' cost share requirement increased over the course of their cooperative agreements from 1:1 to 2:1, requiring centers to obtain a greater proportion of revenue from nonfederal sources. In GAO's survey of all 51 MEP centers, 44 centers cited positive effects of the adjustment on center operations, such as helping to improve center services or better reach underserved manufacturers. Also, 41 centers indicated the adjustment increased their financial stability, which some centers stated has allowed them to focus less on revenue generation and to serve very small and rural manufacturers. However, some MEP center officials observed that the AICA cost share adjustment impact is hard to distinguish from other factors, such as the National Institute of Standards and Technology's (NIST) recompetition of nearly all centers' cooperative agreements between fiscal years 2014 and 2017. The recompetition increased the level of federal financial assistance for most centers and reset many centers' cost share ratio from 2:1 to 1:1 prior to the 2017 adjustment. Still, center officials said that if the cost share requirement reverted to what it was prior to the 2017 adjustment, centers would be less able to serve manufacturers, particularly very small and rural ones.", "NIST data show that there have been some changes in MEP centers' finances and activities since the AICA cost share adjustment; however, these changes generally began prior to the adjustment. For example, NIST data on centers' finances show an increase in federal assistance and a decrease in reported nonfederal contributions from fiscal year 2017 to 2018, but these changes generally began around fiscal year 2014, when NIST began the recompetition process. Similarly, NIST data on centers' activities show an overall increase in the numbers of very small and rural manufacturers served from fiscal year 2017 to 2018. While the change in the number of very small manufacturers served began around fiscal year 2014, the number of rural manufacturers served fluctuated from fiscal years 2014 through 2018. Like MEP center officials, NIST officials said the impact of the AICA cost share adjustment is intertwined with the recompetition impacts and, going forward, the AICA adjustment may help sustain recent increases in the number of very small and rural manufacturers served."]}], "report": [{"section_title": "Letter", "paragraphs": ["Small to medium-sized manufacturers are an important part of the U.S.  economy. According to the U.S. Census Bureau, in 2016 there were  about 290,000 firms in the United States with fewer than 500 employees,  representing nearly 99 percent of the nation\u2019s manufacturers and  employing about 8.4 million people. To enhance the competitiveness,  productivity, and technological performance of the U.S. manufacturing  sector, in 1988 Congress directed the Director of the National Institute of  Standards and Technology (NIST) to establish a public-private program,  now known as the Hollings Manufacturing Extension Partnership (MEP)  program. NIST\u2019s MEP program supports manufacturers primarily through  the efforts of nonfederal centers, known as MEP centers. The MEP  centers provide assistance, either directly or through third parties, to help  improve manufacturing firms\u2019 processes and productivity; expand their  capacity; and help them adopt new technologies, utilize best  management practices, and accelerate company growth. The program  has grown from a pilot program of three centers for which Congress  appropriated $7.5 million as part of the annual appropriations process for  fiscal year 1989 into a national network of 51 centers, located in all 50  states and Puerto Rico, for which Congress appropriated $140 million as  part of the annual appropriations process for fiscal year 2018. In 2018,  the MEP program employed around 51 full-time equivalent federal staff at  NIST and about 1,400 nonfederal technical experts at the 51 centers.  According to NIST data, the MEP program served more than 8,400  manufacturers in fiscal year 2018.", "NIST provides funding to the MEP centers on a cost share basis; that is,  NIST and the MEP centers share the operating costs for the program. A  nonfederal organization\u2014generally a nonprofit institution, state agency, or  university\u2014is responsible for operating each MEP center. NIST enters  into a cooperative agreement with the nonfederal organization to award  federal financial assistance conditional upon the center contributing  matching funds and receiving a positive performance evaluation; the  agreement may be renewed annually.  The funding model for the centers  has evolved over the years. Under the original legislation, every $1  contributed by a center was matched by $1 of federal assistance (or a 1:1  cost share ratio) for the first 3 years of the center\u2019s cooperative  agreement, and federal assistance gradually decreased to zero by the  end of the sixth year. For the fourth through sixth years of a center\u2019s  cooperative agreement, the legislation directed the Secretary of  Commerce to determine the cost share. In 1990, NIST established the  cost share ratios for the fourth through sixth years as 3:2 after 3 years,  7:3 after 4 years, and 4:1 after 5 years. Three years later, NIST changed  those ratios to 3:2 after 3 years and 2:1 after 4 years.  In January 2017,  the American Innovation and Competitiveness Act (AICA) was enacted.  Among other things, the AICA adjusted the cost share to 1:1 for the life of  the cooperative agreement.", "The AICA also includes a provision for GAO to submit a report within 2  years to the appropriate committees of Congress that analyzes, among  other things, whether the cost share adjustment has any effect on the  services provided. This report describes (1) MEP centers\u2019 views regarding  the extent to which the recent cost share adjustment has helped them  serve manufacturers and (2) the extent to which NIST data show impacts  of the cost share adjustment on centers\u2019 finances and activities.", "To describe the MEP centers\u2019 views regarding the extent to which the  recent cost share adjustment has helped them serve manufacturers, we  sent a survey to all 51 MEP centers and received a response from every  center. To obtain additional information on MEP centers\u2019 views, we also  conducted follow-up interviews with officials from nine MEP centers using  a standard set of questions. We selected these centers to represent a  variety of characteristics, such as the number of manufacturers in the  state and whether the center is run by a nonprofit institution, state  agency, or university.", "To describe the extent to which NIST data show impacts of the cost share  adjustment on centers\u2019 finances and activities, we obtained and analyzed  NIST data on MEP centers\u2019 finances and activities for fiscal years 2013 to  2018. We reviewed NIST guidance for the MEP program and interviewed  NIST and MEP center officials to gain an understanding of the data NIST  collects and any changes in the data. We assessed the reliability of the  data by reviewing agency documentation, verifying some data against  other sources, and interviewing NIST officials and selected centers. While  our efforts indicated some factors caused certain aspects of centers\u2019  financial and activity data to be underreported to some extent, as noted in  the report, we believe the data are the best available and are sufficiently  reliable for identifying general changes in MEP centers\u2019 finances and  activities as a result of the cost share adjustment.", "To gain additional insight on the impact of the cost share adjustment, we  also interviewed NIST officials, members of the MEP Advisory Board, and  the head of an association representing the MEP centers.  To see  firsthand how a MEP center serves manufacturers, we visited a MEP  center in Bothell, Washington, and a manufacturer in Woodinville,  Washington, that used services from that MEP center. For additional  information about our objectives, scope, and methodology, see appendix  I.", "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."], "subsections": [{"section_title": "Background", "paragraphs": ["According to its strategic plan for 2017 through 2022, the MEP program  aims to strengthen and empower U.S. manufacturers by providing them  with the information and tools to improve productivity, assure consistent  quality, and accelerate the transfer of manufacturing technology into  production processes and new products.  MEP centers do not all offer the  same services; however, across the network, their services span areas  such as the following:", "Lean services. These services help manufacturers implement tools  and practices to incorporate \u201clean\u201d manufacturing principles, which  involve producing more with existing resources through eliminating  and reducing incidental work or non-value-added activities.", "Quality services. These services help manufacturers implement  management systems to achieve a defined industry-specific or  general quality certification or standard.", "Growth services. These services provide manufacturers with the  tools and methods to identify and target opportunities to develop new  products, markets, services, or customers.", "Technology/product development services. These services help  manufacturers identify, develop, and diffuse technology and new  products.", "Workforce services. These services help manufacturers recruit,  retain, or develop human resources.", "Some centers provide services directly to manufacturers, and others, to  varying extents, use external consultants to provide services. In fiscal year 2018, the 51 MEP centers served 8,425 manufacturers  encompassing a variety of manufacturing subsectors (see fig. 1).", "To receive federal financial assistance from NIST, MEP centers must  match the federal contribution with a nonfederal contribution. MEP  centers provide their nonfederal contributions through various means,  such as fees collected from manufacturers for services provided or in the  form of cash or in-kind contributions from other sources, such as state or  local governments, trade associations, or community colleges. MEP  centers may receive nonfederal resources in any of those forms in excess  of the amount needed to match the federal contribution.", "Prior to the 2017 AICA cost share adjustment, we, NIST, and others  reported on issues associated with the cost share structure for the MEP  program. For example:  In April 2011, we reported that MEP centers identified positive and  negative effects of the cost share structure in place at the time.   Positive effects of the cost share structure included encouraging MEP  centers to leverage resources and emphasize services relevant to  manufacturers, and negative effects included MEP centers spending  more time and effort seeking cost share matching funds and focusing  more on larger clients that could pay higher fees and less on rural  clients.", "In July 2013, NIST analyzed the cost share structure and found that it  provided MEP centers with incentives to make strategic and  operational decisions based largely on which services generated  revenue rather than on which services manufacturers needed to be  competitive. NIST recommended several criteria upon which to base  the MEP program\u2019s cost share, such as encouraging delivery of  innovative services, providing financial stability, and enabling the  program to adapt quickly to changing economic conditions and the  needs of small and medium-sized manufacturers. NIST requested that  the MEP Advisory Board review this analysis and provide  recommendations on how best to structure the cost share requirement  to provide for the long-term sustainability of the program.", "In October 2013, the MEP Advisory Board responded to a request in  NIST\u2019s July 2013 report with a letter to the NIST Director largely  echoing the findings of the earlier reports\u2014for example, that the cost  share structure in place at the time made it more difficult to serve  smaller and rural clients and drove centers to focus on larger  manufacturers that could pay fees. The MEP Advisory Board  recommended, among other things, adjusting the cost share ratio to  1:1.", "In 2014, we reported on NIST\u2019s spending on the MEP program and found  that NIST\u2019s financial assistance to MEP centers did not take into account  variations across service areas in the demand for program services and  the cost of providing services. We recommended that the Secretary of  Commerce revise the program\u2019s cooperative agreements to account for  such variations. Subsequently, from 2014 through 2017, NIST undertook  a system-wide recompetition of MEP centers\u2019 cooperative agreements to  better align center funding levels with the national distribution of  manufacturing activity and cost of providing services. As a result, NIST  recompeted most MEP centers\u2019 cooperative agreements and reduced the  number of centers to 51, with a single center in each state and Puerto  Rico. Additionally, the recompetition provided for a new minimum  annual funding level of $500,000 per center (previously eight centers  were below this mark) and nearly $20 million more in federal financial  assistance for 34 of the centers. According to NIST\u2019s 2017 congressional  budget request, recompetition would increase the capacity and capability  of the MEP centers to help small and medium-sized manufacturers,  including very small manufacturers\u2014those with fewer than 20  employees\u2014and rural manufacturers."], "subsections": []}, {"section_title": "Most Centers Reported that the Cost Share Adjustment Has Helped Them Better Serve Manufacturers, but Some Officials Noted that the Impact Is Hard to Measure", "paragraphs": ["In response to our survey, most MEP centers reported that the AICA cost  share adjustment has helped them serve manufacturers, but some center  officials indicated that the impact is hard to measure. Specifically, most  MEP centers we surveyed reported that the AICA\u2019s adjustment of the cost  share to 1:1 for the life of a center\u2019s cooperative agreement has increased  their financial stability and helped them serve very small and rural  manufacturers. According to the survey results, centers run by nonprofit  organizations reported greater impacts of the cost share adjustment than  those run by states or universities. In follow-up interviews, some MEP  center officials indicated that the impact is difficult to measure because of  other recent changes that have also impacted their ability to serve  manufacturers."], "subsections": [{"section_title": "Most Centers Reported that the Cost Share Adjustment Has Increased Financial Stability and Enhanced Their Ability to Serve Very Small and Rural Manufacturers", "paragraphs": ["In response to our survey, most of the 51 MEP centers reported that the  cost share adjustment has had a positive impact on their finances,  particularly by increasing their financial stability. Specifically, in their  responses to an open-ended question on the effect of the cost share  adjustment on the overall financial resources to support center  operations, 44 centers provided examples of how the adjustment has  generally helped them in areas such as  improving center services (23 centers), better serving underserved manufacturers (17 centers),  improving collaboration with partners (10 centers),  improving planning and financial stability (10 centers), and  improving ability to secure funding (10 centers).", "In responses to a separate question about the impact of the cost share  adjustment, 41 centers indicated that the adjustment has provided a more  stable financial outlook. Centers noted that in the past, meeting the 2:1  cost share often meant diverting their focus from serving manufacturers to  generating and documenting revenue. Some centers provided the  following examples of how the financial stability provided by the 1:1 cost  share has helped them:", "One center stated that its staff now spend less time accounting for the  hundreds of small transactions used to count toward the 2:1 cost  share and can now focus their time on managing the program.", "One center stated that its budget is now less complicated and center  staff are now less distracted by having to generate matching funds.", "One center stated that before the cost share adjustment, it could not  plan on growing its capabilities after the third year of the cooperative  agreement because of the anticipated impact of increased cost share  requirements. The center noted that since the cost share adjustment,  it can continue to plan for growth and has modified its strategic plan to  reflect this shift.", "With a decreased focus on generating revenue, some MEP centers  reported that they are now better able to serve manufacturers, particularly  very small and rural manufacturers. Overall, 47 of the 51 MEP centers (92  percent) reported that the cost share adjustment has helped them serve  manufacturers to a moderate or greater extent.  In particular, in response  to a question asking if MEP centers experienced certain changes as a  result of the cost share adjustment, 43 (84 percent) reported conducting  more work with very small manufacturers, and 39 (76 percent) reported  conducting more work in rural areas. MEP centers reported that the cost  share adjustment has allowed them to take a number of specific actions  to serve manufacturers, such as conducting additional outreach (46 of  51), providing new services (45 of 51), offering a greater quantity of  existing services (40 of 51), offering training events (39 of 51), and  providing services at reduced cost (28 of 51). In follow-up interviews,  officials from eight of the nine MEP centers we contacted stated that the  cost share change has either already helped or should help them serve  underserved manufacturers. These MEP center officials provided the  following examples:", "One center official said that the cost share adjustment has allowed the  center to donate time to help manufacturers that could not afford to  pay the fees for the services provided.", "One center official said that the cost share adjustment could provide  the financial stability to hire an additional staff person to serve rural  parts of the state that were underserved before the adjustment.", "One center official said that the cost share adjustment has allowed the  center to provide new services that it was not able to provide prior to  the adjustment because the center struggled to meet its cost share  requirement. For example, the center expanded its work to help  manufacturers with Food and Drug Administration requirements  pursuant to the FDA Food Safety Modernization Act.", "One center official stated that the cost share adjustment provided the  center a strong financial basis upon which to begin offering  Manufacturing 4.0 services throughout the state."], "subsections": []}, {"section_title": "Centers Run by Nonprofit Organizations Reported Experiencing Impacts to a Greater Extent than Centers Run by States or Universities", "paragraphs": ["Our analysis of survey results indicates that MEP centers run by nonprofit  organizations reported impacts from the AICA cost share adjustment to a  greater extent than centers run by states or universities. For instance,  22 of 26 centers (85 percent) run by nonprofits reported that the cost  share adjustment has to a great or very great extent helped them serve  manufacturers, compared to 14 of 25 centers (56 percent) run by states  and universities. As table 1 shows, a greater percentage of nonprofit  centers reported experiencing certain changes, such as an increase in  center staff and the development of stronger partnerships, as a result of  the cost share adjustment compared to centers run by states and  universities.", "Officials from MEP centers run by states and universities stated that their  centers are often directly funded by a state agency or educational  institution and already enjoyed some degree of financial stability, which is  why they generally reported fewer changes from the cost share  adjustment compared to centers run by nonprofits. In a follow-up  interview with the operations director of a MEP center run by a state  agency, the operations director told us that one advantage of being  funded by the state is that, even prior to the adjustment, the center had a  steady source of income to help meet its cost share. In response to an  open-ended survey question, one university-run MEP center noted that  being part of a university provided access to professional services,  support systems, and a network of resources that would not otherwise be  available at an affordable rate. In responding to another open-ended  question on the effect of the cost share adjustment on financial resources  to support center operations, another university-run MEP center noted  that the AICA adjustment has not resulted in significant changes to the  center\u2019s financial resources but could put some of its university funding at  risk in the future. In a follow-up interview with the director of this MEP  center, she told us that in a university setting her center competes against  other university priorities for grant funding and being on a 1:1 cost share  puts the center on a less competitive footing against other candidates  because the center will no longer need additional university grant funding  to meet a higher cost share ratio in the later years of its cooperative  agreement."], "subsections": []}, {"section_title": "Center Officials Noted that Other Factors Have Impacted Their Ability to Serve Manufacturers, Making It Hard to Measure the Impact of the Cost Share Adjustment", "paragraphs": ["In survey responses and follow-up interviews, MEP center officials noted  that a number of factors have impacted their ability to serve  manufacturers in recent years. For example, in response to an open- ended survey question, centers provided the following as possible factors  other than the cost share adjustment that could have impacted their  operations:  the strength of the overall economy of the nation or of the state in  which they are located (19 centers), budgetary or political stability in their state (e.g., stability of state  funding) (19 centers), and", "NIST\u2019s recompetition of nearly all MEP centers\u2019 cooperative  agreements between 2014 and 2017 (10 centers).", "According to several MEP centers we surveyed or officials we  interviewed, it is difficult to identify the impacts of the cost share  adjustment because of the other factors that have also impacted MEP  center operations. For example, in its survey response, one MEP center  noted that it would not be easy to isolate the impact of the cost share  adjustment from the impact of factors such as the recent recompetition  that doubled the center\u2019s federal financial assistance, new leadership at  the center, and an improving economy and a tighter labor market that  may have resulted in more companies needing the center\u2019s services. In  our follow-up interviews, some MEP center officials said that the  recompetition, in particular, makes it difficult to isolate the effect of the  cost share adjustment. Officials from several MEP centers we contacted  cited effects of the recompetition, such as increased baseline funding,  resetting of the cost share to 1:1, center leadership changes, and  consolidation of centers within states, as reasons why it would be hard to  separate the effects of the recompetition from those of the cost share  adjustment.", "For certain centers, the impact of the cost share adjustment was clearer  because they did not undergo recompetition, which meant that their cost  share had not been reset to 1:1 through that process. Seven MEP centers  were not included in the recompetition process that NIST began in 2014  because their cooperative agreements had recently been recompeted  (i.e., within 2 years before 2014). Four of these seven \u201clegacy\u201d MEP  centers were at or past the third year of their cooperative agreements  and, as a result, were at a greater than 1:1 cost share ratio when the  AICA was enacted in 2017. These four centers reported that the AICA\u2019s  cost share adjustment was helpful in the following ways:", "One center wrote that having to generate more matching contributions  during its fourth year in operation coincided with a drop in its  performance that continued until the 2017 cost share adjustment. This  center said the cost share adjustment allowed it to devote additional  resources to maintaining its services to manufacturers.", "One center wrote that it was already scaling back its plans to expand  manufacturer engagement by the second and third years of its  cooperative agreement in anticipation of the higher cost share ratios  that would start in the fourth year of operation. This center noted that  following the 2017 cost share adjustment, it revised its strategic plan  to focus on growing its capabilities instead of scaling them back.", "One center wrote that moving to the 1:1 cost share helped it increase  its focus on service delivery to clients with less concern for cost  matching.", "One center wrote that the 2:1 cost share incentivized a focus on larger  manufacturers to meet the cost share requirement. Following the cost  share adjustment, the center is now able to develop new services for  small and very small manufacturers.", "Should the cost share structure revert to what it was before the 2017  adjustment, most of the 51 MEP centers that we surveyed stated that  they likely would be less able to serve manufacturers, particularly very  small and rural manufacturers. In response to an open-ended survey  question on the effect of changing the cost share requirement back to  what it was before enactment of the AICA, 45 of the 47 MEP centers that  responded to this question wrote that such a change would generally  reduce their ability to serve manufacturers by causing them to do one or  more of the following:  shift to higher-revenue clients and services (23 centers),  reduce center services and staff (21 centers),  seek new revenue sources (11 centers),  reduce staff (10 centers),  reduce ability to collaborate with partners (7 centers), and  increase fees (7 centers)."], "subsections": []}]}, {"section_title": "NIST Data Show Some Changes in Centers\u2019 Finances and Activities, but the Changes Generally Predate the Cost Share Adjustment", "paragraphs": ["Our analysis of NIST data indicates that there have been some changes  in MEP centers\u2019 finances and activities since the 2017 AICA cost share  adjustment. However, these changes generally began around the time  NIST recompeted the centers\u2019 cooperative agreements, before the  enactment of the AICA, and cannot necessarily be linked to the cost  share adjustment.", "NIST data on funding for the MEP centers show that, from fiscal year  2017 to fiscal year 2018, the amount of federal assistance to the MEP  centers increased and funds reported by MEP centers to meet cost share  requirements decreased. However, these changes generally began  around fiscal year 2013. As figure 2 shows, during the period from fiscal  year 2013 through fiscal year 2018, federal assistance to MEP centers  increased from about $81 million to $116 million while MEP centers\u2019  reported nonfederal contributions decreased from approximately $195  million to $135 million. The centers\u2019 reported nonfederal contributions  generally decreased across all three of their primary sources of  revenue\u2014program income, cash contributions, and in-kind contributions.  Specifically, the amount of program income centers reported to meet their  cost share requirement decreased from approximately $95 million in fiscal  year 2013 to $71 million in fiscal year 2018. Reported cash and in-kind  contributions decreased from approximately $100 million in fiscal year  2013 to $65 million in fiscal year 2018. In particular, the MEP centers  reported a substantial decrease in in-kind contributions over this time  period, from approximately $25 million in fiscal year 2013 to $5 million in  fiscal year 2018.", "Based on our analysis of NIST data, the overall changes in center  financing\u2014that is, the changes in both federal assistance and reported  nonfederal contributions\u2014were influenced by NIST\u2019s recompetition of  nearly all MEP centers\u2019 cooperative agreements. When NIST recompeted  the MEP centers\u2019 agreements, it increased the level of federal assistance  for 34 of the 51 MEP centers, constituting an overall increase in base  funding amounts for federal assistance from about $90 million before  recompetition began in fiscal year 2014 to about $110 million after the  recompetition process was complete.  Additionally, as MEP centers\u2019 cooperative agreements were recompeted, the centers\u2019 cost share was  reset to 1:1, and the centers\u2019 reported nonfederal contributions began to  decrease. As figure 3 shows, in fiscal years 2013 and 2014, before the  new cooperative agreements began taking effect, most MEP centers  operated under a 2:1 cost share. After fiscal year 2014, the number of  MEP centers operating under a 1:1 cost share began to increase. With  enactment of the AICA, all MEP centers operated under a 1:1 cost share  in fiscal year 2017.", "NIST data show that there also may have been some changes in MEP  centers\u2019 activities since the 2017 cost share adjustment. Our analysis of  NIST data indicated that from fiscal year 2017 to fiscal year 2018, the  total number of manufacturers MEP centers reported serving increased from  approximately 8,000 to 8,400,  very small manufacturers MEP centers reported serving increased  from approximately 2,600 to 2,700, and  rural manufacturers MEP centers reported serving increased from  approximately 1,500 to 1,600.", "As with the changes in MEP centers\u2019 finances, the changes in the  numbers of total manufacturers and very small manufacturers these  centers reported serving generally began before the cost share  adjustment. When we analyzed NIST\u2019s data, we found that the total  number of manufacturers and the number of very small manufacturers  served began increasing around fiscal year 2014, when NIST started  recompeting centers\u2019 cooperative agreements, and this increase  continued through fiscal year 2018. The overall direction of the change in  the number of rural manufacturers served during this period was mixed.  Specifically, the number of rural manufacturers centers reported serving  increased from fiscal year 2014 to fiscal year 2015, then decreased  through fiscal year 2017, and then increased in fiscal year 2018.", "NIST officials, like MEP center officials, said that it may not be possible to  separate the effects of the AICA cost share adjustment from the effects of  the recompetition. NIST officials stated that a longer time span would be  needed to identify trends in the manufacturers served by MEP centers;  however, even then, confounding factors, such as overall economic  conditions, could continue to make it difficult to analyze and isolate the  effect of the AICA\u2019s cost share adjustment. Looking forward, NIST  officials said one impact of the 2017 cost share adjustment is that it will  help sustain recent increases in the number of very small and rural  manufacturers served by MEP centers.", "In addition, establishing a link between changes in MEP centers\u2019 finances  and activities and the cost share adjustment is difficult not only because  the changes generally predated the cost share adjustment, but also  because MEP centers likely underreport certain data to NIST.  Specifically:", "Financial data underreporting. NIST officials stated that because  MEP centers are not required to report all of their nonfederal  resources in excess of the nonfederal contributions required to meet  their cost share, the amount of resources available to centers is likely  underreported. According to NIST officials, NIST\u2019s Grants  Management Division policy provides that centers will generally be  held accountable for any amounts that they opt to pledge in excess of  the 1:1 cost share. According to NIST officials, centers are thus  operating rationally and legally in pledging and reporting only the  amount needed to meet their nonfederal contribution for their cost  share match.", "Activity data underreporting. NIST officials said that because MEP  centers are not required to report activity data on manufacturers  served if the services provided used nonfederal resources that were  not directly related to meeting the MEP centers\u2019 cost share, certain  activity data, such as the number of rural manufacturers served, is  likely underreported. During their discussions with some MEP centers  leading up to the 2017 AICA cost share adjustment, the NIST officials  learned that some centers were not reporting activity data on  manufacturers served if the services provided used nonfederal  resources that were not directly related to meeting the MEP centers\u2019  cost share. An official with one such center provided us with  information indicating that the number of rural manufacturers served  in fiscal year 2016 was about 36 percent more than the number the  center reported to NIST. According to NIST officials, centers are not  obligated to report activity data on manufacturers served if those  activities are not directly related to funds used to meet the MEP  centers\u2019 cost share requirements.", "Because of this underreporting, NIST officials stated that the amount of  nonfederal resources in excess of the nonfederal contributions required to  meet the cost share, as well as the total number of manufacturers served  and the number of very small and rural manufacturers served, are likely  higher that what centers reported to NIST. Moreover, the officials noted  that, because of the recompetition and the 2017 AICA cost share  adjustment, they believe that the extent of MEP centers\u2019 underreporting  may have increased in recent years as more centers began operating  under a 1:1 cost share ratio."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to the  Secretary of Commerce. NIST provided technical comments, which we  incorporated as appropriate. NIST\u2019s comments also included some  comments of a more general nature. For example, NIST highlighted the  impact that the recompetition had on MEP centers. NIST also noted that  while it cannot directly attribute recent increases in the number of  manufacturers served to the AICA cost share adjustment, it believes the  AICA cost share adjustment has fundamentally allowed MEP centers to  deliver more value to clients rather than tie up resources in fundraising.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Commerce, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to describe (1) Manufacturing  Extension Partnership (MEP) centers\u2019 views regarding the extent to which  the recent cost share adjustment has helped them serve manufacturers  and (2) the extent to which National Institute of Standards and  Technology (NIST) data show impacts of the cost share adjustment on  centers\u2019 finances and activities."], "subsections": [{"section_title": "MEP Centers\u2019 Views", "paragraphs": ["To describe MEP centers\u2019 views regarding the extent to which the 2017  American Innovation and Competitiveness Act (AICA) cost share  adjustment has helped them serve manufacturers, we sent a survey to all  51 MEP centers and received a response from every center. We  administered this survey in July and August 2018. Because this survey  was not a sample survey, there are no sampling errors. As part of  developing this survey, we conducted pretests over the telephone with  four MEP centers to ensure that the questions were understandable, that  the data collected are uniform and usable, and that the survey would  place minimal burden on center officials. We pretested our survey with  the MEP centers for California, Kentucky, Virginia, and Washington.  Using data on MEP center characteristics provided by NIST, we selected  these centers to reflect a range of characteristics in the following  categories, among others: the number of manufacturers in the state, the  type of MEP organization (i.e., whether the center is run by a nonprofit,  state agency, or university), and NIST\u2019s classification of the state as  urban or rural. We made changes to the content and format of the survey  based on the feedback we received.", "In the survey, we asked the MEP centers about the effects of the cost  share adjustment, both experienced and anticipated, using several  different types of questions. For example:", "We asked the MEP centers whether the cost share adjustment has  resulted in or will likely result in changes such as an increase in center  staff; an increased use of contractors; an increase in overall financial  resources to support the centers\u2019 operations; a more stable financial  outlook; or the ability to develop stronger partnerships, conduct more  work in rural areas, or conduct more work with very small  manufacturers (fewer than 20 employees).  If centers responded in  the affirmative, we asked whether those changes have already  allowed the center to take specific actions such as conducting  additional outreach to manufacturers, providing new services to  manufacturers, offering manufacturers a greater quantity of existing  services, providing services to manufacturers at reduced cost, or  offering training events to manufacturers.", "We asked questions that allowed the MEP centers to identify the  extent to which they had experienced a change. For example, we  asked, \u201cWhether or not there were any specific types of  manufacturers that may have previously underutilized the center\u2019s  services, to what extent has changing the federal/nonfederal cost  share to 1:1 for future years for all centers regardless of when they  began operating helped the center serve manufacturers overall?\u201d The  centers could select one of the following responses: very great extent,  great extent, moderate extent, some extent, little or no extent, don\u2019t  know.", "We asked open-ended questions to gain additional understanding  about the effect of the cost share adjustment, including the following:", "What, if any, other factors might contribute to the changes or lack  of changes identified in ? Please consider  factors such as general economic conditions in the center\u2019s state,  the recompetition of the center\u2019s cooperative agreement with  NIST, or other factors.", "What has been the effect of changing the federal/nonfederal cost  share to 1:1 for future years for all centers regardless of when  they began operating on the overall financial resources to support  the center\u2019s operations?", "What, if anything, would the center change about how it provides  services to manufacturers in that state if the federal/nonfederal  cost share were to change back to the way it was prior to  enactment of the AICA in January 2017?", "We analyzed the survey responses using content analysis and descriptive  statistics. Using content analysis, we analyzed the responses to the three  open-ended questions listed above by identifying common themes in  centers\u2019 open-ended survey responses to establish categories. Two  analysts independently reviewed and coded the survey responses to the  categories. Then the analysts compared their coding and if there was  disagreement, they discussed their assessment and reached a final  determination on the categorization. We also used descriptive statistics to  analyze centers\u2019 survey responses to evaluate the impact of the cost  share adjustment on different types of MEP centers. For example, we  compared the number of centers responding to certain survey questions  by center type (i.e., nonprofit institutions, state agencies, or universities)  as well as centers whose cooperative agreements were or were not  recompeted.", "To further understand the impacts of the AICA cost share adjustment on  different types of MEP centers, we conducted follow-up interviews with  officials from nine MEP centers using a standard set of questions. We  selected these MEP centers based on our analysis of centers\u2019 survey  responses. Furthermore, we selected these centers to include the  perspectives of a variety of MEP centers, accounting for factors such as  when the center\u2019s agreement was recompeted, number of manufacturers  in the state, and whether the center is operated by a nonprofit institution,  state agency, or university. During these follow-up interviews, we asked  the centers questions such as the following:", "To what extent did the cost share change affect the center and why?", "Please explain.", "Please explain how the center meets the cost share requirement.", "What has changed since the AICA set the cost share at 1:1?", "To what extent will the cost share change help or hinder the center\u2019s  ability to reach underserved manufacturers?", "Is there any way that the center can isolate the changes in the cost  share from the recompetition?"], "subsections": []}, {"section_title": "GAO Analysis of NIST Data", "paragraphs": ["To describe the extent to which NIST data show impacts from the AICA  cost share adjustment, we obtained NIST data on MEP centers\u2019 finances  and activities for fiscal years 2013 through 2018. We selected this period  to encompass the year prior to when NIST began recompeting MEP  centers\u2019 cooperative agreements. NIST collects financial information from  each MEP center, including the amount of financial assistance received  from NIST, program income received from manufacturers for services  provided, cash received from other sources (such as grants), and in-kind  contributions. We analyzed these data to identify any changes in centers\u2019  finances for fiscal years 2013 through 2018. We also obtained NIST data  detailing the cost share under which each center was operating for fiscal  years 2013 through 2017. We assessed the reliability of centers\u2019  financial data by reviewing agency documentation, verifying some data  against another data source, and interviewing NIST officials and officials  from selected centers. We determined that NIST\u2019s data on MEP centers\u2019  federal assistance and nonfederal contributions are the best available  data and are sufficiently reliable to describe general changes in these  aspects of centers\u2019 finances during this time period. However, as noted in  the report, we found that some centers underreport their nonfederal  resources in excess of the nonfederal contributions required to meet their  cost share. As a result, we expect that centers\u2019 total available  resources\u2014including their federal assistance, nonfederal contributions,  and nonfederal resources in excess of their nonfederal contributions\u2014are  higher than what we present in the report. We determined this because  the underreporting we identified with centers\u2019 nonfederal resources in  excess of their nonfederal contributions would tend to understate the  amount of these resources over time and because we did not find  evidence of overreporting that would contradict this pattern. In addition,  we did not independently verify the nonfederal contributions reported by  the MEP centers because it was outside the scope of our work.", "We also obtained and analyzed NIST data on MEP centers\u2019 activities,  such as data on the size, location, and number of manufacturers the  centers reported serving in fiscal years 2013 through 2018. NIST  guidance for MEP centers calls for centers to report various information  about the manufacturers that they serve, including company name, Dun  and Bradstreet number, and the North American Industry Classification  System code. NIST uses the Dun and Bradstreet number to compile  other information about each manufacturer, including location and  number of staff. We analyzed the data to identify any changes in centers\u2019  activities and to determine the extent to which any changes might be  associated with the AICA cost share adjustment. We also reviewed NIST  guidance for the MEP program and interviewed NIST and MEP center  officials to gain an understanding of the MEP center activity data NIST  collects. We assessed the reliability of the activity data by reviewing  agency documentation and interviewing NIST officials and selected  centers. As noted in the report, these efforts indicated that cost share  changes caused some centers\u2019 activity data to be underreported. While  we were not able to precisely determine the extent of underreporting or  precise changes in centers\u2019 activities over time, as noted in the report, we  believe the data are the best available data and are sufficiently reliable to  describe general changes in centers\u2019 activities during this time period. We  determined this because the underreporting we identified would tend to  understate the increases in the total number of manufacturers and the  number of very small manufacturers served over time and because we  did not find evidence of overreporting that would contradict this pattern.  Since the number of rural manufacturers served fluctuated during this  time period, however, we were unable to determine whether complete  data would indicate a general increase in the number of rural  manufacturers served similar to the increases in the total number of  manufacturers and the number of very small manufacturers served."], "subsections": []}, {"section_title": "Other Efforts", "paragraphs": ["To help us understand the legal framework for the cost share adjustment,  we reviewed the AICA. We reviewed other documents to provide  additional context regarding MEP centers\u2019 cost share requirements,  including past GAO reports and reports from the Congressional Research  Service and National Academies of Sciences, Engineering, and Medicine.  We also reviewed reports on the MEP program\u2019s cost share structure  from NIST and the MEP Advisory Board. To gain additional insight on the  impact of the cost share adjustment, we also interviewed NIST officials,  members of the MEP Advisory Board, and the head of an association  representing the MEP centers. Further, we visited a MEP Center in  Bothell, Washington, and a manufacturer in Woodinville, Washington, to  obtain a more in-depth perspective on the services MEP centers provide  to manufacturers.", "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."], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Chris Murray (Assistant Director),  Arvin Wu (Analyst in Charge), Stephen Betsock, Kevin Bray, Mark Braza,  TC Corless, Ellen Fried, Jill Lacey, John Mingus, Calaera Powroznik,  Sara Sullivan, David Wishard, and John Yee made key contributions to  this report."], "subsections": []}]}], "fastfact": ["Commerce's Manufacturing Extension Partnership (MEP) Program has centers in each state that help small- and medium-sized companies improve their technology and management practices.", "Recent legislation set the cost sharing ratio at 1:1, reducing the cost burden for some centers. All centers now match federal funding dollar for dollar. Prior to the change, the cost share increased over time from $1 for $1 to $2 for each $1.", "Most centers told us this change improved their financial stability, allowing them to better serve very small and rural companies; however, recent program changes and other factors make it hard to determine the exact impact."]}
{"id": "GAO-18-155", "url": "https://www.gao.gov/products/GAO-18-155", "title": "Biodefense: Federal Efforts to Develop Biological Threat Awareness", "published_date": "2017-10-11T00:00:00", "released_date": "2017-10-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Biological threats come from a variety of sources and can pose a catastrophic danger to public health, animal and plant health, and national security. Threat awareness, which consists of activities such as collecting and analyzing intelligence, developing risk assessments, and anticipating future threats, is vital to help federal agencies identify necessary biodefense capabilities and ensure investments are prioritized to make effective use of federal funds.", "GAO was asked to review how key federal agencies develop and share threat awareness information, and how that information informs further investments in biodefense. This report describes: (1) the types of actions that key federal agencies have taken to develop biological threat awareness, and how that information is used to support investment decisions; (2) the extent to which these agencies have developed shared threat awareness; and (3) how DHS's NBACC determines what additional threat characterization knowledge to pursue.", "GAO analyzed federal policies, directives, and strategies related to biodefense, as well as agency documents such as threat assessments and modeling studies. We identified five key biodefense agencies based on review of the roles designated in these documents. GAO interviewed officials from these agencies about threat awareness activities, and reviewed prior GAO work and related biodefense studies. Each of the key agencies reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Key biodefense agencies\u2014the Departments of Homeland Security (DHS), Defense (DOD), Agriculture (USDA), and Health and Human Services (HHS), and the Environmental Protection Agency\u2014conduct a wide range of activities to develop biological threat awareness for intentional and naturally occurring threats, and reported using that information to support investment decisions.", "Intelligence gathering: Agencies use a combination of intelligence gathering on adversaries' capabilities to cause harm with a biological weapon and global disease surveillance to monitor threats from naturally occurring health threats that might impact humans, animals, or plants.", "Scientific research: Agencies use traditional laboratory research to help understand the characteristics of various threat agents, including their virulence, stability, and ability to be dispersed through various methods. Scientific research is also performed on emerging pathogens to understand their means of transmission, host susceptibility, and effects of infection.", "Analysis activities: Agencies use modeling studies and other analytical work to help determine the scope and impact of possible biological threats.", "These three activities help agencies identify and prioritize the most dangerous biological threats, which can then be used to guide biodefense investments. For example, USDA told GAO it uses threat information to determine which foreign animal diseases represent its highest priorities based on the potential of those agents to cause catastrophic harm, and those priorities are used to inform investments. Similarly, HHS said it conducts threat awareness activities to help inform the development and acquisition of human medical countermeasures.", "Federal agencies with key roles in biodefense share biological threat information through many different mechanisms designed to facilitate collaboration among government partners, including working groups and interagency agreements. For example, agency officials reported using collaborative mechanisms to coordinate activities and avoid duplication and overlap. However, as GAO and others have noted, opportunities exist to better leverage shared resources and inform budgetary tradeoffs. Recent legislation requires key biodefense agencies to create a national biodefense strategy that has the potential to help address these issues, by, among other things, supporting shared threat awareness. Until the strategy is developed, the extent to which it will meet this need is unknown.", "The threat characterization research agenda at DHS's National Biodefense Analysis and Countermeasures Center (NBACC) is based primarily on the results and knowledge gaps identified through the Bioterrorism Risk Assessment (BTRA). According to DHS officials, the knowledge gaps deemed most critical include data about biological agents that have a high impact on BTRA consequence estimates and also a high degree of uncertainty. Each year NBACC produces an annual plan that outlines new research projects intended to address these knowledge gaps, and incorporates additional planning criteria, such as interagency stakeholder input, resource availability, and maintenance of required technical capabilities. According to DHS officials, the results of NBACC research were used to directly enhance the BTRA, including updating data associated with eight biological agents since 2010."]}], "report": [{"section_title": "Letter", "paragraphs": ["Key Biodefense Terminology  Biodefense\u2014To prevent, protect against, and  mitigate biological threats that could have  catastrophic consequences to the nation.  Threat\u2014For the purposes of this report, we  use the term threat to describe both the  intentional use of biological weapons by  individuals or entities and naturally occurring  biological events that have the potential to  have catastrophic biological consequences for  the United States including loss of life or  national security and economic welfare  effects.  Agent\u2014Microorganism (or derived toxin) or  pest that causes disease in humans, animals,  or plants.  Characterization (of agents, pests and  biological events)\u2014Agents and pests can be  characterized by applying modern scientific  techniques that describe their properties,  behaviors, life cycle, or genetic makeup.  Biological events can be characterized by  evaluating specific disease outbreaks to  understand what the outbreak is and how  serious it is likely to be by monitoring such  things as the cause, speed, duration, and  means of transmission.  Surveillance\u2014In the biological context, the  ongoing collection, analysis, and  interpretation of data to help look for  pathogens in plants, animals, and humans; in  food supplies; and in the environment.  Detection\u2014In the biological context, involves  recognition of signs and signals to discern  whether disease occurrence is abnormal  based on its general characteristics, as well  as where, when, and how severely the  disease has historically occurred. supply, or used to contaminate the water supply. These specific types of  threats, whether naturally occurring or deliberate, may contribute to  Global Catastrophic Biological Risks, a term of art that that represents  extraordinary biological disaster beyond the collective capability of  national and international governments and the private sector to control.", "In 2004, Homeland Security Presidential Directive (HSPD) 10 identified  four key areas\u2014or pillars\u2014of national biodefense. One of the pillars of  biodefense identified in HSPD-10 is threat awareness, which consists of  activities such as collecting and analyzing intelligence, developing risk  assessments, and anticipating future threats. For example, such  information may include assessment about where biological threat agents  might come from, how outbreaks may unfold, and the effectiveness of  available defenses against them. Threat awareness is vital to help identify  necessary biodefense capabilities to help identify, protect against, and  respond to National or Global Catastrophic Biological Risks and help  ensure investments are prioritized to make effective use of federal funds.", "Protecting humans, animals, plants, food, and the environment (air, soil,  and water) from potentially catastrophic effects of intentional or natural  biological events entails numerous activities carried out within and among  multiple federal agencies and their nonfederal partners. The Department  of Homeland Security (DHS) plays a lead role in interagency coordination  and planning for emergency response to biological incidents in the United  States and is responsible for assessing the risks to the civilian population  posed by various biological agents. DHS conducts multiple efforts to  enhance biological threat awareness, including development of the  Bioterrorism Risk Assessment (BTRA) with input from other key federal  agencies, such as the Departments of Defense (DOD) and Health and  Human Services (HHS). DHS also operates the National Biodefense  Analysis and Countermeasures Center (NBACC), which, among other  activities, carries out research to better characterize individual biological  agents and provide timely scientific data, knowledge products, and  expertise to support threat analyses.", "You asked us to review how key biodefense agencies develop and share  threat awareness information, and how this information informs further  investments in biodefense. This report describes: (1) the types of actions  that key federal agencies have taken to develop biological threat  awareness and how that information is used to support investment  decisions, (2) the extent to which federal agencies have developed  shared threat awareness, and (3) how NBACC determines what  additional threat characterization knowledge to pursue.", "To conduct work related to all three objectives, we analyzed government- wide policies, directives, and strategies related to biodefense, including  HSPD-9 (Defense of United States Agriculture and Food), HSPD-10  (Biodefense for the 21st Century), and the National Strategy for  Countering Biological Threats, among others. We analyzed these  documents to understand agencies\u2019 roles and responsibilities regarding  biodefense, specifically those pertaining to threat awareness activities.  We identified the key biodefense agencies by reviewing the biodefense  policies mentioned above, as well as through interviews with DHS officials  who identified the key agencies with which they collaborate on threat  awareness activities. The agencies we identified through these policy  reviews and interviews were DHS, DOD, HHS, the U.S. Department of  Agriculture (USDA), and the Environmental Protection Agency (EPA).", "To describe how these five key agencies conduct their threat awareness  activities and use this information to support investment decisions, we  reviewed agency-specific strategies and plans related to their biodefense  activities, including those from NBACC, DOD\u2019s Chemical and Biological  Defense Program, the multiagency Public Health Emergency Medical  Countermeasures Enterprise (PHEMCE), and USDA\u2019s Animal and Plant  Health Inspection Service (APHIS). We also analyzed information  provided by agencies and conducted interviews with agency officials  related to agencies\u2019 threat awareness activities to determine how threat  awareness is conducted and how it informs other biodefense  investments. For example, we reviewed documents such as threat  assessments, including the 2010 and 2016 BTRAs; scientific reports on  biological agent characteristics; modeling studies of the potential impact  of various biological threats; and response guidelines informed by  biological threat awareness activities. For additional context and support,  we also reviewed prior GAO work related to biodefense and reports from  other organizations, such as the Congressional Research Service, the  Bipartisan Weapons of Mass Destruction Terrorism Research Center, the  Blue Ribbon Study Panel on Biodefense, and the National Research  Council of the National Academies.", "To determine the extent that federal agencies have developed shared  threat awareness and how NBACC determines what additional threat  characterization knowledge to pursue, we conducted a site visit to  NBACC at Fort Detrick, Maryland, to meet with DHS officials and NBACC  staff to discuss the collaborative efforts among the key biodefense  agencies in conducting and reviewing the BTRA. We interviewed agency  officials from DHS, DOD, HHS, USDA, and EPA to understand the types  of collaborative activities they engage in, examine the opportunities  available to share threat awareness information, and identify any  challenges in sharing information across agencies. We compared the  activities to leading practices we have identified in prior work to enhance  and sustain interagency collaboration. We also examined existing policy,  strategies, and structures that could enable shared threat awareness  activities, including the recent National Defense Authorization Act (NDAA)  mandate to create a national biodefense strategy. We analyzed  NBACC\u2019s strategic plans and annual plans from fiscal year 2011 through  fiscal year 2017, as well as funding information, to identify biodefense- related investments. We also met with key DHS officials involved in  planning NBACC\u2019s threat awareness projects to determine how priorities  are set for NBACC\u2019s biodefense investments.", "We conducted this performance audit from April 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Biodefense Doctrine", "paragraphs": ["Several presidential directives and national strategies establish  biodefense policy for the federal government. These directives establish  overall goals and policies as well as assign specific responsibilities to  federal agencies. See table 1 for relevant directives and strategies.  Among these directives, the White House released HSPD-10 in 2004,  which outlines the structure of the biodefense enterprise and discusses  various federal efforts and responsibilities that help to support it. The  directive organizes biodefense efforts into four key pillars, consisting of  threat awareness, prevention and protection, surveillance and detection,  and response and recovery. Each of these pillars comprise numerous  activities\u2014such as conducting research on emerging pathogens that  could pose a threat\u2014that are carried out by multiple federal agencies and  generally require coordination across the entire biodefense enterprise."], "subsections": []}, {"section_title": "The Challenges of Threat Awareness in a Vast and Evolving Biological Threat Landscape", "paragraphs": ["The biological threat landscape is vast and requires a multidisciplinary  approach to developing threat awareness. Synthetic biology, if used to  create and combine agents, also poses a significant threat and potentially  complicates the ability to assess the biological threat landscape.  Despite ratification of the Biological Weapons Convention in 1975 and the  end of the Cold War decades later, the threat of biological warfare  persists today. For example, as the Blue Ribbon Study Panel on  Biodefense reported, the State Department assessed in 2015 that China,  Iran, North Korea, Russia, and Syria continue to engage in dual-use or  biological weapons-specific activities and are failing to comply with the  convention, to which each of these countries has agreed. Additionally, the  revolution in biotechnology presents opportunities to advance the life  sciences, yet that same technology in the wrong hands could be used to  create biological weapons. For example, nonstate actors such as  terrorist organizations, domestic militia groups, and \u201clone wolves\u201d have  both the interest and capacity to develop biological weapons. The  intelligence community plays a key role in assessing these types of  threats.", "Threat awareness is also challenged by the unpredictable nature of  naturally occurring disease, which could affect human and animal health  and agricultural security, potentially causing global catastrophic biological  risks which could lead to loss of life, and sustained damage to the  economy, societal stability, or global security. To assess and develop  means to combat these threats, many federal agencies conduct biological  threat awareness activities, which may include a combination of risk  assessment and key activities to better understand certain characteristics  of biological threats. For example, the genetic compositions of some  viruses naturally change, as exemplified in 2009, when an H1N1  influenza virus emerged with a new combination of genes, causing a  global pandemic. According to the Centers for Disease Control and  Prevention (CDC)\u2014an entity within HHS\u2014when these significant genetic  changes occur in a virus, most people have little or no immunity to the  new virus. Climate change also has the potential to negatively impact  human health and the agriculture industry. As we reported in October  2015, climate change may contribute to the spread of vector-borne  diseases that are transmitted to humans by animals, including  invertebrate animals such as mosquitoes and ticks. Examples of vector- borne diseases that currently pose health risks in some regions of North  America include chikungunya disease, dengue fever, Lyme disease, and  West Nile virus fever. Additionally, habitat loss and human  encroachment on rural and wildlife environments are bringing populations  of humans and animals into closer and more frequent contact, increasing  the risk of disease transmission among people, pets, livestock, and  wildlife.", "Finally, the scientific community must safeguard the biological agents it  uses to assess threats. Protecting laboratory workers and the population  at large from intentional or accidental release of dangerous pathogens  during the pursuit of more knowledge about them is also challenging.  Recent high-profile events, such as a DOD laboratory inadvertently  shipping incompletely inactivated samples of Bacillus anthracis, the  bacterium that causes anthrax, to almost 200 laboratories worldwide over  the course of 12 years and the unexpected discovery of misplaced vials  of smallpox (variola) virus at the National Institutes of Health (NIH)  campus, also highlight the threat due to improper handling and unknown  storage of dangerous biological agents."], "subsections": []}, {"section_title": "Federal Roles and Responsibilities", "paragraphs": ["Several federal departments and agencies have responsibilities as part of  their mission to assess the threat of biological agents and carry out key  biodefense roles as delineated in HSPD-10 and the National Strategy for  Countering Biological Threats, among other documents.", "National Biodefense Analysis and  Countermeasures Center (NBACC)  NBACC consists of two centers:  National Biological Threat Characterization  Center  Its mission supports national goals to deter  and reduce the impact of current and newly  identified biological threats by providing timely  scientific data, knowledge products, and  expertise required for accurate and informed  threat analyses and biodefense planning,  preparedness, response, and recovery.  National Bioforensics Analysis Center  It serves as the lead federal facility to conduct  and facilitate the technical forensic analysis  and interpretation of materials from biocrime  and bioterror investigations or those  recovered following a biological attack in  support of the lead federal agency.", "Department of Homeland Security. DHS is the principal federal  department with responsibility for domestic incident management and  supports federal efforts to prepare for, respond to, and recover from  domestic biological attacks. Within DHS, the Science & Technology  Directorate\u2019s (S&T) Chemical and Biological Defense (CBD) Division  leads key efforts related to enhancing threat awareness with a focus on  bioterrorism. S&T develops Material Threat Assessments in collaboration  with HHS, as well as the BTRA, which includes assessments of the  relative risks posed by biological agents based on variable threats,  vulnerabilities, and consequences. S&T also operates NBACC, which  conducts scientific research and develops reports and products  specifically intended to address identified knowledge gaps associated  with current and future biological threats, including the characterization of  key attributes of biological attacks by an adversary such as agent  acquisition; agent production; dissemination methods; virulence; and the  effectiveness of potential countermeasures.", "Department of Defense. DOD is responsible for protecting U.S. armed  forces from biological threats worldwide and conducts a range of efforts to  support research, development, and acquisition of medical  countermeasures and other technologies to prevent or mitigate the health  effects of biological agents and naturally occurring diseases. Multiple  organizations across DOD are responsible for a number of activities,  including (1) determining requirements; (2) providing science and  technology expertise; (3) conducting research, development, test, and  evaluation; and (4) providing oversight. This enterprise is structured to  conduct research and develop defenses against chemical and biological  threats.", "Department of Health and Human Services. HHS is the federal agency  primarily responsible for identifying needed medical countermeasures to  prevent or mitigate potential health effects from exposure to biological  agents for the nation and engaging with industry to develop them. In  2006, HHS established the Public Health Emergency Medical  Countermeasures Enterprise (PHEMCE), a federal interagency body that  is responsible for providing recommendations on medical  countermeasure priorities and development and acquisition activities.  Within HHS, the Office of the Assistant Secretary for Preparedness and  Response (ASPR) leads PHEMCE and the federal medical and public  health response to public health emergencies, including strategic  planning, medical countermeasure prioritization, medical countermeasure  requirements development, and support for developing and procuring  medical countermeasures for the Strategic National Stockpile. CDC  maintains the Strategic National Stockpile and supports state and local  public health departments\u2019 efforts to detect and respond to public health  emergencies, including providing guidance and recommendations for the  mass distribution and use of medical countermeasures, among other  activities. The agency also engages in laboratory detection of diseases  and epidemiological investigation of outbreaks to protect the nation from  health, safety, and security threats, both foreign and in the United States.  The Food and Drug Administration (FDA) conducts research and  performs vulnerability assessments to help prevent adulteration of the  food supply. NIH conducts and funds basic and applied research to  develop new or enhanced medical countermeasures and related medical  tools and provides oversight and guidance on biosafety and biosecurity to  research laboratories.", "U.S. Department of Agriculture. USDA is the lead agency with  responsibility to protect and improve the health, quality, and marketability  of our nation\u2019s agricultural products. Within USDA, the Animal and Plant  Health Inspection Service (APHIS) is responsible for working to prevent,  control, or eliminate harmful pests, pathogens, and diseases of animals  and plants. APHIS consists of multiple component units with key roles in  biodefense including Veterinary Services, and the Plant Protection and  Quarantine (PPQ) program. These offices are supported by multiple  research centers and laboratory networks, as well as the Agricultural  Research Service (ARS), which conducts a wide range of research  addressing agricultural issues of high national priority.", "Environmental Protection Agency. EPA is the lead agency for  environmental cleanup and remediation, including indoor cleanups. EPA  is also the lead federal agency for protecting drinking water and  wastewater infrastructure. In addition, EPA provides technical assistance  and operational support for sampling, characterization, decontamination,  clearance, and waste-management efforts. According to EPA officials, if  there is potential for environmental contamination due to a biological  incident, HHS collaborates with EPA in developing and implementing  sampling strategies and sharing results. EPA\u2019s Office of Research and  Development\u2019s Homeland Security Research Program aims to help  increase the capabilities of EPA and communities to prepare for and  respond to chemical, biological, and radiological disasters. EPA\u2019s Water  Security Division also provides resources to monitor incidents and  threats."], "subsections": []}]}, {"section_title": "Intelligence Gathering and Global Surveillance, Research, and Analysis Are Designed to Inform Biological Threat Awareness and Investment Decisions", "paragraphs": ["Key biodefense agencies, including DHS, DOD, HHS, USDA, and EPA  rely on intelligence and global surveillance information, scientific study of  disease agent characteristics, and analysis to better understand threats  and help make decisions about biodefense investments. Figure 1  depicts the three components of threat awareness described in this  report."], "subsections": [{"section_title": "Agencies Rely on Intelligence Gathering, Scientific Research, and Analysis Activities to Develop Biological Threat Awareness", "paragraphs": [], "subsections": [{"section_title": "Intelligence Collection and Global Disease Surveillance", "paragraphs": ["Key federal biodefense agencies use intelligence to understand  adversaries\u2019 capabilities to cause harm with a biological weapon and  conduct global disease surveillance to monitor threats from naturally  occurring agents. DHS and DOD rely on information from the  intelligence community about adversaries\u2019 capabilities to acquire,  produce, reengineer, and disseminate a biological agent. For example,  DHS solicits information from the intelligence community to create models  on nonstate actors\u2019 possible target (e.g., a transportation hub), the  possible agent and amount used, and the method of attack. DHS also  gathers information on terrorist organizations\u2019 financial and technical  resources to help determine their capabilities in staging an attack. This  information is used to develop the BTRA to support DHS\u2019s responsibilities  to protect against non-state actor intentional acts of bioterrorism. For  more information on the BTRA and its development and evolution, see  appendix I.", "Predicting the Threat of Zika Virus Spread  to the United States Based on  Chikungunya and Dengue  Zika virus is a flavivirus that is primarily  spread in humans by the same mosquitos that  also spread dengue, chikungunya, and other  viruses. The first confirmed local transmission  of this emerging threat in Brazil occurred in  May 2015. Since that time, the Centers for  Disease Control and Prevention\u2019s (CDC)  Global Disease Detection Operations Center  has been monitoring the spread of the  epidemic from Brazil to other countries in the  Americas. By early 2016, the Zika virus had  spread to dozens of countries, including local  transmission in U.S. territories. At this time,  CDC activated its Emergency Operations  Center to respond to outbreaks of Zika  occurring in the Americas, and enhance  disease surveillance and response  coordination.  In February 2016, the director of CDC said  that recent chikungunya and dengue  outbreaks in the United States suggest that  Zika outbreaks in the U.S. mainland may be  relatively small and localized, which can be  attributed to better infrastructure and mosquito  control than that found in Latin America. In  contrast, he said outbreaks of dengue and  chikungunya suggest that Zika virus may  spread widely in the U.S. territories.  CDC estimates of Zika virus cases for 2016  support the CDC director\u2019s prediction, with  224 locally acquired mosquito-borne cases in  the United States (in Florida and Texas)  compared to nearly 36,000 locally acquired  cases in U.S. territories (largely in Puerto  Rico).  Efforts to improve international capacity for  virus surveillance support CDC\u2019s ability to  characterize emerging threats and enhance  threat awareness. subjects. It projects foreign capabilities in particular warfare areas out 20  years in the future.", "Other agencies, such as HHS and USDA, rely on global disease  surveillance to identify and characterize naturally occurring disease  events that may impact human, animal, or plant health. Although  surveillance and detection activities constitute an entire separate pillar of  the biodefense enterprise, these activities can also help federal agencies  enhance threat awareness by providing information about emerging  global disease events that might affect the United States. For example,  within HHS, CDC\u2019s Global Disease Detection program conducts global  surveillance on emerging infectious disease events to rapidly detect and  monitor the characteristics of the disease event to determine whether and  what kind of threat it poses to the U.S. population.", "Similarly, within USDA, APHIS conducts surveillance of foreign animal  diseases and plant pests and pathogens to determine what threat they  may pose to the U.S. agriculture industry. APHIS officials said they have  a number of relationships and sources they use to gather information on  traditional and emerging animal diseases. These include the National  Center for Medical Intelligence within DIA, DHS\u2019s National Biosurveillance  Integration Center, CDC, and the World Organisation for Animal Health.  USDA\u2019s Risk Identification and Risk Assessment unit conducts open  source monitoring globally to identify situations of greatest risk to the  animal agriculture community. For plant surveillance, USDA\u2019s PestLens  is an offshore open-source monitoring and analysis function designed to  identify emerging pests and diseases. The PestLens team stationed  overseas evaluates these potential threats for their impact on trade and  identifies threats to look for at ports. It conducts research to determine  whether there are outbreaks of disease or pests in other countries."], "subsections": []}, {"section_title": "Scientific Research", "paragraphs": ["Epidemiology Terms  Virulence is the relative capacity of a  pathogen to overcome body defenses.  Pathogenesis is the process by which an  infection leads to disease.   Infectious dose is an estimate of the amount  of a pathogen required to cause illness.   Zoonotic disease is an infectious disease that  is transmissible from animals to humans.", "Agencies use scientific research to help understand the characteristics of  various threat agents, including their virulence, stability, and ability to be  dispersed through various methods. Agencies also perform or contract for  scientific research on emerging pathogens to understand their means of  transmission, host susceptibility, and effects of infection. Research is  conducted on agents that may be used intentionally as biological  weapons or on disease-causing agents that may exist in nature and  contribute to outbreaks or pandemics, such as influenza viruses. One  example of DHS-conducted scientific research is NBACC\u2019s work to  understand properties associated with agent acquisition, production,  dissemination, stability, virulence and pathogenesis, and existing medical  countermeasure efficacy. A DOD example of scientific research is  DTRA\u2019s efforts to characterize biological agents (virulence, dissemination,  infectious dose, etc.). For instance, DTRA might fund research to  determine whether current diagnostic tools would be adequate if the  Ebola virus\u2019s genetic sequence were to change.", "For conducting scientific research to characterize naturally occurring  threats, HHS and USDA agencies engage in a spectrum of activities.  Within HHS, CDC, NIH, and FDA all conduct various scientific research to  characterize biological agents. For example, CDC conducts  characterization of infectious diseases, including analyses of  pathogenesis, and works to identify uncommon signals of disease and  conduct research to assess zoonotic potential. One effort CDC has to  characterize an infectious disease is the Influenza Risk Assessment Tool  that assesses potential pandemic risk. NIH also conducts characterization  research\u2014such as pathogenesis, infectious dosage rates, and potential  effects if agents are aerosolized\u2014primarily for known public health  threats, which may also be used as inputs into modeling. Additionally,  FDA conducts scientific food defense research to understand, among  other things, thermal stability and inactivation of biological agents.", "Within USDA, ARS also conducts basic biological research on animal and  plant pathogens. Because of the sheer volume of animal diseases, ARS  takes a strategic approach to research and study families of viruses,  rather than a single virus. For example, ARS officials said they were able  to leverage ongoing research on flaviviruses when Zika virus, a flavivirus,  emerged in the Americas. ARS is also trying to use more predictive  biology to anticipate and properly prepare for new and emerging  pathogens\u2014such as understanding vector-borne virus adaptability to  potentially prevent transmission to humans\u2014to ensure the public and  animal health, as 70 percent of new and emerging diseases are zoonotic.  ARS researchers also look at pests and pathogens not currently in the  United States to help identify countermeasures, should they appear.", "Additionally, EPA conducts research to fill science gaps associated with  environmental contamination resulting from accidental or intentional  releases of biological agents. For example, EPA studies the behavior of  biological agents in the environment to inform strategies for  characterization and remediation. Research includes developing methods  for characterization of persistent biological contamination, mitigating its  impacts, cleaning it up in the environment, and managing the subsequent  waste."], "subsections": []}, {"section_title": "Modeling Studies and Other Analytical Work", "paragraphs": ["All agencies we interviewed described modeling studies and other  analytical work they conduct to help determine the scope and impact of  possible biological threats. For example, because biological threat agents  cannot be released into the air in operational environments due to health  risks, programs such as DHS\u2019s BioWatch Program rely on computer  modeling and attack simulations to assess the performance of biological  detection systems. DHS also uses the BTRA modeling to assess  potential public health impacts and mitigation efforts for potential  biological attacks (see app. I). Similarly, according to DOD officials, DTRA  develops and employs modeling and simulation tools for consequence  assessment of biological attacks within and outside of the United States.", "HHS conducts public health consequence modeling for various types of  attacks with specific agents, which uses inputs from DHS Material Threat  Assessments to help determine the unmitigated medical consequences.  Unmitigated consequence estimates are modeled based on factors such  as projected spread patterns, infectious dose rates, and estimated time  frames, which can help inform response efforts that could mitigate these  consequences such as needed prophylaxis and medical  countermeasures as part of the PHEMCE process. The public health and  medical consequence assessment is the first step in developing the  documents necessary for the PHEMCE to establish medical  countermeasure requirements. This analysis allows PHEMCE to  determine how many lives could be saved if a medical countermeasure  were developed, procured, and deployed, and informs HHS decisions  regarding the development of medical countermeasures that might be  needed during an event.", "HHS and USDA also conduct disease patterns and pathways analysis to  determine the routes by which certain pathogens found overseas might  arrive in the United States. For example, CDC conducts modeling to  identify modes of transmission, sources and nodes; and to project  epidemiological patterns. One such example is a 2015 CDC study to  estimate future numbers of Ebola patients needing treatment at any one  time in the United States. The model was developed to help public health  officials assess the potential risk for Ebola virus infection in individual  travelers and the subsequent need for postarrival monitoring. USDA units  also use pathways analysis to assess the likelihood and means by which  animal diseases and plant pests might arrive in the United States. For  example, USDA Plant Protection and Quarantine (PPQ) evaluates the  environmental and economic impacts of pest introduction, and the  pathways by which certain pests might arrive (e.g., imported commodities  via ship or rail).", "Additionally, EPA supports water utilities by providing models, tools, and  guidance that help harden their infrastructure to respond to and recover  from contamination incidents and other disasters, as contamination of  drinking water can result from acts of terrorism."], "subsections": []}]}, {"section_title": "Agencies Reported Using Biological Threat Awareness Information to Help Prioritize Their Various Biodefense Activities and Investments", "paragraphs": ["Agency officials in our review described how their threat awareness  activities help identify biological threat agents of concern and broad- based capability needs, which help guide their biodefense investment  decisions. For example, agencies use threat information to determine  which agents represent their highest priorities based on the potential of  those agents to cause catastrophic harm. Officials from HHS and USDA  also described properties or criteria against which they evaluate emerging  or reemerging biological agents while conducting surveillance activities to  determine whether they pose a serious threat, such as: health effects after exposure to an agent or toxin, degree of contagiousness, economic and trade impact, and  likely transmission routes.", "This threat assessment activity allows agencies to characterize and  respond to urgent or real-time disease events, such as a Zika virus or an  avian influenza outbreak.", "In addition to agent-specific approaches, some agencies also reported  using threat awareness information as part of efforts to identify and  develop broader capabilities that would prepare them to respond to more  than one agent. For example, DOD looks at what types of protective  equipment are needed to complete the mission in the face of various  threats, rather than starting with an individual threat agent. DOD\u2019s Joint  Requirements Office (JRO) uses a broad capability-based approach by  performing operational risk assessments to evaluate current and future  capability needs that will translate into military service requirements.  Additionally, HHS, through PHEMCE, reported working on broad  capabilities-based investments for medical countermeasures that provide  more flexible and sustainable capabilities over the long term. In this  regard, PHEMCE seeks to promote technologies that have more than one  application or are able to be quickly modified to respond to new threats.  For example, according to the PHEMCE Strategy and Implementation  Plan, HHS agencies continue to expand their broad-spectrum  antimicrobial programs to address both biodefense disease threats, such  as plague and tularemia, and the more general public health concern of  antimicrobial resistance. Investments in multiplex diagnostic tools also  represent a move beyond single-agent detection capabilities.", "Once threats have been established and capability gaps have been  identified, agencies reported using threat awareness information to help  prioritize their investments across various biodefense enterprise  activities\u2014threat awareness, prevention and protection, surveillance and  detection, and response and recovery\u2014to support their missions (see fig.  2).", "The following figures present examples, based on our analysis of agency  documents and interviews, of how agencies use threat awareness  information to help direct resources and investments across the  biodefense pillars. This presentation is not a comprehensive catalogue of  all biodefense investments in these areas, but rather examples of the  diversity of activities agencies conduct to fulfill their biodefense missions  for threat awareness, prevention and protection, surveillance and  detection, and response and recovery. Appendix II includes information  organized by agency."], "subsections": []}]}, {"section_title": "Multiple Mechanisms Exist to Share Biological Threat Information, and New Biodefense Strategy Could Help Agencies Better Use Threat Information to Leverage Resources across the Enterprise", "paragraphs": ["Federal agencies with key roles in biodefense share biological threat  information through many different mechanisms designed to facilitate  collaboration among government partners, including working groups and  interagency agreements. However, as we and others have observed in  recent reports, opportunities remain to enhance threat awareness across  the entire biodefense enterprise, leverage shared resources, and inform  budgetary tradeoffs among various threats and agency programs."], "subsections": [{"section_title": "Federal Partners Share Biological Threat Information through a Combination of Working Groups, Interagency Agreements, and Other Mechanisms", "paragraphs": ["Officials from key federal agencies, including DHS, DOD, EPA, HHS, and  USDA, identified multiple mechanisms that facilitated biodefense  collaboration and shared awareness of biological threats. These  mechanisms often serve multiple purposes; for example, a working group  can develop policy and also aid in information sharing, among other  benefits. Officials from these key biodefense agencies reported using  collaborative mechanisms to share biological threat information, as well  as to coordinate activities, avoid duplication and overlap, implement  specific programs for addressing biological threats, and assist in policy  development at the agency and White House level. The existence of  working groups and similar bodies to help promote information sharing,  align policies and procedures, and coordinate to leverage resources is  consistent with key practices and mechanisms that we have previously  reported as useful for enhancing and sustaining interagency  collaboration. Figure 7 provides examples of collaborative mechanisms  identified for biodefense.", "Officials at key federal agencies reported participating in several types of  collaborative mechanisms, including interagency bodies, working groups  at the agency and executive level, formalized agreements, colocation,  joint projects and funding efforts, and shared expertise. Examples within  each mechanism include the following:  Interagency bodies. Key federal agencies reported participating in  formal interagency bodies that have their own authority and resources  and are established to coordinate activities related to biodefense. One  such group is PHEMCE, the federal interagency decision-making body for  medical countermeasure development and acquisition. PHEMCE is led  by HHS, and includes both internal HHS partners, such as CDC, FDA,  and NIH, and external interagency partners, such as DOD, DHS, USDA,  and the Department of Veterans Affairs. In addition, other key agency  officials reported participating in interagency bodies coordinated by HHS  and USDA to determine additions and removals to the select agent list.", "Working groups. Officials in each of the key agencies said they  participate in established and ad hoc working groups to provide subject- matter knowledge and expertise, share information, prioritize research,  and avoid duplicating efforts. For example, officials from over a dozen  agencies and components participate in an Interagency Bioterrorism  Working Group through DHS that provides a conduit for interagency  review of technical inputs and assumptions for biological agents and other  parameters in the BTRA. DHS officials stated that this working group also  works to obtain wider interagency understanding and ownership of the  DHS BTRA. Officials from DOD\u2019s JPEO-CBD also stated that they sit on  multiple interagency working groups with DHS officials that focus on  combating terrorism, biosurveillance, and research and development,  among other topics. Similarly, CDC officials stated they participated on  approximately 10 to 20 separate working groups with specialized  purposes, such as integrated process teams for specific research  programs.", "Collaborative mechanisms within the Executive Office of the  President. Some working groups and other collaboration mechanisms  have been led by the National Security Council and other offices within  the Executive Office of the President in order to ensure a comprehensive  and coordinated approach to biodefense across agencies. For example,  the Subcommittee on Biological Defense Research and Development  was led by the White House Office of Science and Technology Policy and  included representatives from 16 agencies and three White House  offices. This subcommittee evaluated U.S. biological defense capabilities  to identify future priorities and actions. The National Security Council has  also led integrated policy committees focused on a particular threat or  range of threats, such as genome editing and synthesis and select agents  and toxins.", "Written interagency agreements. Agencies have executed written  agreements in order to define their relationships for a particular aspect of  biodefense. For example, in March 2015, DOD, DHS, and EPA renewed  a formalized relationship through a memorandum of understanding for  chemical and biological defense research, development, and  acquisition\u2014all of which require shared threat awareness. The  agreement identifies roles and responsibilities for chemical and biological  defense, establishes senior and technical working groups, and  establishes cross-agency responsibilities. In particular, DOD, DHS, and  EPA agreed to exchange and identify program needs and overlapping  interests; establish interagency agreements between parties for joint  projects and funding; conduct research and provide data to the partner  agencies; and facilitate the establishment of interagency projects and  working groups. DOD officials stated that the activities carried out under  the memorandum have varied over time, but ongoing collaborative  activities included efforts in biosurveillance, wearable sensors,  decontamination, and a repository for threat agent data.", "Joint facility locations. As we reported in 2014, to maximize resource  sharing and facilitate scientific exchange on the study of biological threat  agents and other pathogens, DOD, HHS, and DHS share a joint biological  campus, known as the National Interagency Biodefense Campus, located  at Fort Detrick, Maryland. DHS officials said that, in addition to gaining  efficiencies by sharing biosecurity and infrastructure requirements among  all three facilities (U.S. Army Medical Research Institute of Infectious  Diseases, DHS\u2019s NBACC, and NIH\u2019s Integrated Research Facility),  personnel at the three laboratories can communicate more regularly than  would otherwise be possible with different locations. The agencies  represented on the National Interagency Biodefense Campus also  conduct a research consortium to coordinate projects.", "Joint funding and program efforts. Key federal biodefense agencies  have provided funding to partner organizations and agencies in order to  obtain technical assistance or expertise for individual projects. DOD and  EPA officials stated that DHS\u2019s S&T Directorate often funds subject- matter experts to perform research and testing to assist in the  development of answers to technical questions. For example, DHS  funded staff at the U.S. Army Medical Research Institute of Infectious  Diseases to research the characteristics of a particular agent in an  aerosolized environment.", "Leveraging expertise. Agency officials also stated how more informal  mechanisms, such as relationships between key personnel and soliciting  input for research projects, provide the opportunity to leverage expertise  to share threat awareness information and can increase collaboration and  positive results between agencies. For example, DHS holds interagency  stakeholder panels and outreach events (separate from existing working  groups) to gather expertise during development of several biodefense  products, including the BTRA. DHS officials said that DOD personnel  from DTRA and DHS\u2019s Biological Threat Characterization Program also  conduct joint program reviews, and DHS personnel contribute expertise to  DTRA\u2019s contract evaluation teams."], "subsections": []}, {"section_title": "Biodefense Strategy Provides an Opportunity to Use Enterprise-Wide Threat Awareness to Help Leverage Resources and Inform Resource Tradeoffs", "paragraphs": ["The collaborative mechanisms in which the key agencies in our review  participate may facilitate information sharing in support of specific federal  activities and in individual programs, or in response to specific biological  events after they begin to unfold, but there is no mechanism in place to  develop enterprise-wide threat awareness and assess the relative risks.  For example, the BTRA is a dedicated effort to identify and assess the  risk of biological events that stem from nonstate actors intentionally  seeking to harm U.S. interests using biological agents. By design, it is  focused on the consequences and likelihood of terrorist events  threatening human health, and does not assess the risk from other types  of biological threats. However, there is no similar comprehensive  mechanism in place that integrates threat awareness information for all  sources of intentional biological threats, as well as naturally occurring  events that could harm or destabilize U.S. interests by catastrophically  affecting humans, animals, and plants. Similarly, HHS officials stated that  PHEMCE is a primary mechanism used to communicate threat  awareness and other information on biodefense. However, the primary  purpose of PHEMCE is to make decisions about human health  countermeasures to be acquired for the Strategic National Stockpile. As a  result, biological threat information pertaining to other domains, such as  plant or animal health, may not be discussed and shared within this  venue without a connection to human health.", "In addition, there is no existing mechanism that can leverage threat  awareness information to direct resources and set budgetary priorities  across all agencies for biodefense. Agencies use threat awareness  mechanisms for resource planning according to the individual agency\u2019s  mission. For example, DOD guidance states that budgeting and planning  for biodefense relies, in part, on DIA\u2019s CBRN Warfare Capstone Threat  Assessment. Similarly, DHS officials stated they use the BTRA to help  plan DHS investments in future research or to help inform domestic  biodefense preparations. According to DOD officials, because the DOD  mission is different, they only use the BTRA indirectly and do not  specifically rely on it for prioritizing activities or planning efforts.", "HSPD-10 requires the development of periodic assessments of the  evolving biological weapons threats. DHS officials stated that the BTRA  was created, in part, to fulfill the need for an assessment of the risk of  intentional use of biological weapons by nonstate terrorists. However, the  nation faces other biological threats, including naturally occurring  diseases that affect human, animal, and plant health, and biological  weapons used by state actors. Without a mechanism that is able to  assess the relative risk from biological threats across all sources and  domains, the nation may be unable to prioritize resources, defenses, and  countermeasures against the most pressing threats.", "We previously reported in 2011 that the overarching biodefense  enterprise would benefit from strategic oversight mechanisms, including a  national strategy, to ensure efficient, effective, and accountable results.  We noted that the complexity and fragmentation of roles and  responsibilities across numerous federal and nonfederal entities presents  challenges to ensuring efficiency and effectiveness across the entire  biodefense enterprise. In light of that complexity and fragmentation, we  observed that a national biodefense strategy could help address the key  fragmentation issues across the biodefense enterprise, such as ensuring  strong linkage and identifying gaps in investments across the four pillars.  In response to our observations, National Security Council staff in  December 2014 identified three presidential policy documents\u2014the  National Strategy for Countering Biological Threats, the National  Biosurveillance Strategy, and Presidential Policy Directive 8\u2014they  reported work in concert to provide comprehensive strategic guidance.  However, none of these documents comprehensively addresses all four  pillars of biodefense, and, even when taken together, they do not fully  address the fragmentation issues we have previously identified.", "Other independent observers have also commented on challenges  presented by fragmentation and complexity across the biodefense  enterprise. For example, in October 2015, the Blue Ribbon Study Panel  on Biodefense reported that the United States lacked strategic leadership  to promote collaboration within the federal government and other  biodefense partners and achieve innovation throughout the enterprise.  The study panel also recommended that the federal government develop,  implement, and update a comprehensive national biodefense strategy  that would define all organizational structures, future plans, and resource  requirements along with unified budgetary authority.", "We testified in 2016 that several high-level biodefense strategies had  been created in the past. However, there is no broad, integrated  strategy that can be used to identify risk, assess resources, and prioritize  investments. For example, the National Security Council\u2019s National  Strategy for Countering Biological Threats is focused solely on outlining  the federal government\u2019s approach to reducing the risks of biological  weapons proliferation and terrorism, while the National Health Security  Strategy authored by the Assistant Secretary for Preparedness and  Response (ASPR) seeks to strengthen communities\u2019 abilities to protect  against and respond to any incidents with negative health consequences.  While these and other strategies, such as the National Strategy for  Biosurveillance, address aspects of biodefense, no single strategy  provides a comprehensive approach for the nation to prepare and plan for  biological threats. In addition, as we reported in 2016, the individual  strategies related to pieces of the biodefense enterprise do not currently  address the need for prioritization and tradeoffs among approaches when  faced with limited resources and expansive threat.", "In addition, there is no individual or entity with responsibility, authority,  and accountability for overseeing the entire biodefense enterprise. White  House officials have previously told us that the National Security Council  and the Homeland Security Council act together as focal points for federal  biodefense efforts. As noted above, many federal departments and  agencies participate in National Security Council groups and  mechanisms, and biodefense efforts at the White House level are  recognized collaboration mechanisms. However, as described in the Blue  Ribbon Study Panel report and reported to us by HHS and DHS officials,  these mechanisms may not persist from one presidential administration to  the next. As a result, any mechanism located within bodies such as the  National Security Council and Homeland Security Council may not  provide the continuity and leadership needed to address persistent  biological threats. The absence of mechanisms to develop shared threat  awareness across the full set of biological threats and use that  information to identify opportunities for leveraging resources to mitigate  risk across the enterprise is another example of the fragmentation we  have previously identified.", "However, opportunities exist to enhance shared threat awareness across  the biodefense enterprise. Enacted on December 23, 2016, the National  Defense Authorization Act (NDAA) for Fiscal Year 2017 required DOD,  HHS, DHS, and USDA to jointly develop a national biodefense strategy and associated implementation plan. The law requires the strategy and  implementation plan to:  inventory and assess all existing strategies, plans, policies, laws, and  interagency agreements related to biodefense; describe biological threats from warfare, terrorism, naturally occurring  infectious disease, and accidental exposure; describe current federal efforts preventing the proliferation and use of  biological weapons, preventing accidental or naturally occurring  outbreaks, and mitigating the effects of an epidemic; describe roles and responsibilities of the agencies for biodefense; describe interagency capabilities required to support the national  recommend actions for strengthening current biodefense capabilities  and structures, and for improving interagency coordination.", "According to DHS officials, as of September 2017, the White House  National Security Council is currently overseeing an interagency  workgroup to develop that strategy. DOD officials confirmed that the  process to create such a strategy is under way, and the effort may include  revising or consolidating existing guidance in addition to developing a  new national biodefense strategy.", "As the departments fulfill their obligations under the NDAA for 2017, key  federal organizations have the opportunity to institutionalize mechanisms  to help the nation make the best use of limited biodefense resources, to  include broader shared threat awareness to inform opportunities to  leverage resources. However, until the strategy is developed, we will not  know the extent it will address shared threat awareness, if at all. The  NDAA for 2017 requires the strategy to be submitted to Congress not  later than 275 days after enactment (September 2017) and requires us to  review it 180 days after the date of submittal. We will continue to  monitor progress toward developing strategic mechanisms to help  confront fragmentation and complexity across the biodefense enterprise."], "subsections": []}]}, {"section_title": "NBACC Threat Characterization Research Is Largely Driven by Knowledge Gaps Identified through the BTRA Process", "paragraphs": ["According to DHS officials, the threat characterization research agenda at  NBACC is based primarily on the results and knowledge gaps identified  through evaluation of the BTRA. Each year NBACC produces an annual  plan that, among other elements, outlines new research projects intended  to address priority knowledge gaps for identified biological threat  agents. These projects are identified through a multistep process that  incorporates a combination of DHS-designated priorities, interagency  stakeholder input, and additional planning criteria, such as resource  availability and ongoing maintenance of required technical capabilities.  (See fig. 8.)"], "subsections": [{"section_title": "Priority Knowledge Gaps and Research Needs", "paragraphs": ["The first step in the project selection process is the identification of  knowledge gaps by officials within DHS\u2019s Biological Threat  Characterization Program (BTCP) based on their evaluation of the BTRA.  According to these officials, identification of the most critical knowledge  gaps involves determining which inputs have a relatively high impact on  BTRA consequence estimates and have a relatively high degree of  uncertainty, for example, because data about agent attributes are limited.  The officials said they aim to enhance the value of BTRA conclusions by  increasing the accuracy and completeness of the data used as modeling  inputs through the work of NBACC. DHS has historically relied on the  opinions of subject-matter experts to review the BTRA and support  determinations regarding data quality but has also recently developed  more quantitative methods to integrate BTRA results into the research  planning and prioritization process for NBACC.", "Using data from the 2010 BTRA, DHS identified a total of 22 priority  knowledge gaps that it is currently working to address through NBACC  research and plans to complete within 6 to 10 years. BTCP program  officials reported that although research priorities generally target Tier 1  Select Agents, they also seek to advance research projects that broadly  encompass (1) a variety of biological threat agents (e.g., bacteria,  viruses, and toxins); (2) agents representing different characteristics that  affect threat (e.g., means of acquisition or production, dissemination and  exposure attributes, and expected medical consequences), and (3) a  selection of traditional, emerging, enhanced, and advanced biological  threat agents.", "In addition to the identification of BTRA-related knowledge gaps, BTCP  officials stated that emerging events and specific stakeholder needs could  also influence research priorities. For example, during the 2014 Ebola  outbreak, BTCP officials directed NBACC to perform research to better  understand the risk factors associated with disease transmission, such as  the persistence of the virus on various surfaces, and the efficacy of  common disinfectants to inform decontamination and public health  response efforts. DHS officials also noted that the needs of the Federal  Bureau of Investigation, particularly through its casework at the National  Bioforensics Analysis Center, may drive some of NBACC\u2019s research  priorities."], "subsections": []}, {"section_title": "Proposed Annual Research Plan", "paragraphs": ["The second step in the process for identifying NBACC threat  characterization research projects includes the development of a  proposed annual research plan. The annual plan is developed using a  combination of inputs including DHS\u2019s research priorities, annual NBACC  budgetary resources, and technical capability and staff development  needs. Although the plan documents the DHS knowledge gaps that serve  as a key driver for developing specific project proposals, in some cases  these gaps are identified only as general areas of research, such as the  virulence of specified threat agents, which could require a broad scope of  research to address. As the plan notes, these priority knowledge gaps  exceed the resources available for threat characterization each year. For  this reason, NBACC uses a combination of additional criteria to further  refine research priorities and select projects for inclusion in the new  scope of work, such as consideration of the time and resources required  and which knowledge gaps are most likely to provide clear and  compelling answers through experimentation. Other factors that may  influence final project selection include addressing the knowledge gaps  that could be completed reasonably comprehensively in 3 to 4 years or  may have potential to provide a framework to better understand other  priority agents or emerging threats, such as the Ebola virus or other  infectious diseases (see fig. 9). In developing the annual research plan,  NBACC also sets aside a small portion of its threat characterization  budget to respond to emerging requests, and the plan notes that project  plans may be readjusted due to any emerging requirements.", "The annual plan also identifies priorities needed to maintain four core  technical capabilities (aerobiology, bacteriology, virology, and  comparative medicine) and accreditation standards required to perform  ongoing threat characterization research on potential threat agents in a  maximum security national biocontainment laboratory. For example, one  of the priorities identified within the 2016 annual plan includes the  installation and verification of new equipment intended to enhance  aerobiology capabilities. Each annual plan includes a crosswalk between  the proposed projects and the associated capabilities that will be utilized.  For example, the 2016 NBACC annual plan outlines a scope of work that  includes seven research studies that collectively cover all four of the core  technical capabilities. Examples of some of the research conducted in  recent years include assessment of the decay rates of aerosolized Tier 1  agents and the virulence of select agents based on particle size and  production methods."], "subsections": []}, {"section_title": "Plan Approval and Oversight", "paragraphs": ["Once NBACC develops a proposed annual research plan, stakeholders  review it before the plan goes for S&T approval. According to S&T  officials we interviewed, the BTCP program solicits input and feedback on  the draft annual plan from interagency stakeholders within DOD, HHS,  and the Intelligence Community, among others. According to these  officials, the community of practice for conducting this type of research is  small and is generally well coordinated to avoid potential duplication of  work. Once S&T officials approve the plan, it then undergoes a final  approval process through DHS\u2019s Compliance Review Group to ensure  adherence with the Biological Weapons Convention.", "According to S&T officials, they also participate in periodic project reviews  to maintain oversight regarding the extent to which each research study is  achieving its objectives, and an overall assessment is performed as part  of the annual evaluation process of the NBACC contract performer. The  purpose of these periodic reviews is to help identify any changes to the  project plan that may be required and help ensure that the research is  making progress toward addressing identified knowledge gaps. S&T  officials stated that although some projects have been modified based on  preliminary results, they rely much more heavily on advance review of the  experimental methodology by technical subject-matter experts before a  project is initiated to help ensure the research will address identified gaps  and help inform future iterations of the BTRA."], "subsections": []}, {"section_title": "NBACC Impacts", "paragraphs": ["Consistent with its strategic goals, S&T officials reported that NBACC  research has directly contributed to the closing of identified knowledge  gaps and the development of capabilities that are used to respond to  emerging threat characterization needs. According to these officials,  NBACC products have improved BTRA consequence and hazard  modeling by reducing the uncertainty associated with key data inputs.  Specifically, officials cited that significant changes were made to the  underlying risk models as a result of NBACC research conducted since  the completion of the 2010 BTRA, including updates to 62 individual data  points associated with eight biological hazards. As noted in the 2016  NBACC annual plan, the limited research available on authentic threat  agents has historically entailed the use of data from surrogate or  unrelated biological agents to evaluate the threat and consequences of a  biological attack on the homeland. According to S&T officials, the use of  authentic threat agents at NBACC addresses this shortcoming and has  enhanced confidence in estimates of risk and operational response  planning. Although NBACC research currently remains focused on  closing specific knowledge gaps, officials noted that this research is also  intended to lay a foundation for more predictive modeling, such as using  the data to identify shared characteristics among a class of agents.", "Although the focus of NBACC threat characterization research is  generally on the intentional use of Tier 1 biological agents, S&T officials  stated that NBACC capabilities could also be employed to address  challenges associated with emerging infectious diseases. They further  noted that, because many of the high-priority biological threat agents that  affect humans also may affect livestock, NBACC\u2019s studies could also be  useful for informing risk associated with animal health.", "NBACC expertise has also been leveraged by other DHS components.  For example, S&T officials reported that the U.S. Coast Guard requested  information from NBACC to help inform its global vaccine program for its  workforce, and DHS\u2019s National Protection and Programs Directorate and  the Secret Service have requested NBACC to review their own biological  risk assessments. Within S&T, CBD officials stated that NBACC- produced products were used to inform the development of new biological  sensor technologies. In addition to sharing NBACC research findings  through briefings and reports, NBACC officials also reported that they are  currently pursuing efforts to establish an electronic repository for NBACC  scientific products at the Unclassified/ For Official Use Only, Secret, and  Top Secret levels. The goal of this repository site is to facilitate the ability  of end users to search, view, and download documents according to their  approved access."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS, DOD, EPA, HHS, and USDA  for review and comment. Each of these departments provided technical  comments that we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Agriculture, Defense, Health and Human  Services, and Homeland Security; and the EPA Administrator. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (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 III."], "subsections": []}]}, {"section_title": "Appendix I: Bioterrorism Risk Assessment", "paragraphs": ["The Department of Homeland Security (DHS) is responsible for assessing  the risks posed by biological agents as directed by the Project BioShield  Act of 2004 and Homeland Security Presidential Directives 10\u2014 Biodefense for the 21st Century, and 18\u2014Medical Countermeasures  against Weapons of Mass Destruction. To this end, DHS\u2019s Science &  Technology Directorate (S&T) has developed four Bioterrorism Risk  Assessments (BTRA) since 2006 to assess the relative risks posed by  various biological agents based on estimates of likelihood and  consequence parameters for a number of potential attack scenarios."], "subsections": [{"section_title": "BTRA Scope and Methodology", "paragraphs": ["The BTRA is a probabilistic risk assessment intended to quantify risk for  rare yet potentially catastrophic intentional attacks using biological agents  by nonstate actors. Results are based on risk modeling for a vast  number of potential scenarios derived from multiple event trees  representing specific decisions or actions an adversary may pursue. The  most recent iteration issued in 2017, called the BTRA 5.0, includes over  600,000 scenarios with predicted impacts on human health, fatalities, and  economic costs. These consequence estimates are based in part on  inputs provided or validated by the Intelligence Community, various  estimates of likelihood, and applicable consequence parameters, such as  specific agent attributes and threat characterization research results from  the National Biodefense Analysis and Countermeasures Center  (NBACC).", "The BTRA incorporates a number of different models related to the  various attack scenarios being assessed. For example, DHS utilizes  unique models to assess risk for indoor attacks (in 12 different target  categories, such as transportation hubs and sporting events), outdoor  attacks (including the top 100 most populated U.S. cities and their  associated weather patterns), and potential dissemination via food or  water systems, as well as a model that estimates the ability for the public  health system to mitigate potential illnesses or fatalities based on disease  progression, response timelines, and available medical countermeasures.  According to S&T officials, one of the key updates in the BTRA 5.0 is the  introduction of adversary-decision models, which allow BTRA program  officials to incorporate inputs from subject-matter experts and other data  sources regarding the likelihood of various attack scenarios. Selected  factors that are considered to help identify potential agents or  dissemination methods chosen by an adversary include data on agent  acquisition or the means of production in various countries, as well as the  likelihood of interdiction during transport."], "subsections": []}, {"section_title": "BTRA 5.0 Updates and Prior Recommendations", "paragraphs": ["According to S&T officials, the BTRA 5.0 is intended to address previous  recommendations of the National Research Council of the National  Academies (National Academies) and provide additional information  regarding data and intelligence inputs provided by subject-matter  experts. The BTRA 5.0 was released in May 2017 and represents the  first full BTRA product since 2010. According to BTRA program officials,  a series of limited reports were issued in 2012, but S&T management  instructed the division to address previous criticisms of the BTRA,  including the National Academies\u2019 recommendations, before developing  another full report. S&T program officials reported taking action on 12 of  the 13 National Academies\u2019 recommendations, and determined, after  subsequent review by DHS, that no action was required to address the  final recommendation. Some notable changes that DHS reported making  in response to the National Academies\u2019 recommendations include:", "Officials reported implementing adversary-decision models to assess  the probabilities of terrorist decisions for transporting materials and  selecting targets to respond to National Academies\u2019 criticism that the  BTRA methodology may not fully consider adversaries\u2019 efforts to  maximize their chance of success.", "Officials reported publishing models and methodology reports and  sending biological data for interagency review to respond to the  National Academies\u2019 recommendation to improve transparency. In  addition, officials said that DHS had made this information available to  stakeholders on a secured electronic site for those with access.", "Officials reported developing additional tools and methods to assess  consequences and probabilities of changing threats to address the  National Academies\u2019 concern that the BTRA did not allow for  incorporation of newly recognized threats or those that may not yet be  well understood.", "Officials reported developing an economic consequence model and  beginning to incorporate assessments of agricultural risk in addition to  human mortality and morbidity to respond to the National Academies\u2019  recommendation that DHS add economic and agricultural effects,  among other losses, to its consequence modeling.", "According to S&T officials, another change implemented in the BTRA 5.0  is an effort to collect more detailed information about the sources and  confidence level of the data inputs provided by subject-matter experts.  These officials reported that they obtained expertise by survey primarily  from terrorism subject matter experts, including members of the  Intelligence Community. Data results now indicate whether inputs are  based upon official reporting or the contributor\u2019s opinion based upon  subject knowledge."], "subsections": []}, {"section_title": "Additional BTRA Tools and Model Development", "paragraphs": ["DHS also reported working on additional tools and models that officials  expected would enhance the BTRA and make the results more useful to  stakeholders. The following are examples of new developments identified  to us by S&T officials:", "Research Prioritization Matrix (RPM) Tool. The RPM tool is  intended to help identify areas of research that will be of greatest  benefit to further inform future iterations of the BTRA. The RPM Tool  uses a mathematical formula to develop a score based on numerous  factors including (1) estimates of likelihood and consequences  calculated by the BTRA, (2) the results of a sensitivity analysis of  individual data parameters, and (3) an estimate of the confidence in  the underlying and supporting data. According to officials, the result is  a parameter and agent-specific score that can be used to support  decisions regarding research prioritization in a structured, transparent  manner that can be tracked over time to demonstrate progress. For  example, a specific parameter in the RPM tool may include the decay  rate of an agent in a particular substance (for example, in food items),  and another parameter might be how much of a certain agent can  likely be produced by certain adversaries. According to S&T officials,  the RPM tool was recently updated with the latest data and results  from the BTRA 5.0 and is expected to be more influential on the  development of the research plan for fiscal year 2018. S&T program  officials also said that the RPM tool will be made available to other  federal entities so that they may use it for their own research  prioritization needs, as well as customize the results, such as  restricting the model to include only indoor attacks.", "Agricultural Terrorism Modeling. S&T officials have initiated efforts  to develop additional modeling of potential agricultural impacts of a  biological attack. Although a risk assessment of agricultural terrorism  was completed in 2012 that assessed potential impacts from five  animal diseases and two plant pathogens, officials reported that it was  criticized for having substandard modeling and employing limited  scenarios. The current effort includes representatives from the U.S.  Department of Agriculture, the Food and Drug Administration, and the  Federal Bureau of Investigation, and is focused on development of  modeling for biological attacks on agriculture that may occur pre- harvest (before food processing begins) to differentiate it from attacks  on the food system itself. DHS and stakeholders are currently  evaluating available modeling tools and they plan to include the new  modeling within the BTRA 6.0.", "Key threat awareness activities identified by the agency  The U.S. Department of Agriculture (USDA) operates numerous programs  designed to help prevent the entry and spread of agricultural pests and  diseases, and protect the health of U.S. agricultural resources by  addressing zoonotic diseases (transmissible from animals to humans) and  implementing surveillance, preparedness and response, and control  efforts. Examples of program activities include the following:", "High Consequence List. A three-tier classification system of foreign  animal diseases determined to pose a significant threat to animal  health if introduced into the United States. The list was developed in  2013 to help prioritize investments in the National Veterinary Stockpile. produced annually to provide an assessment of pests deemed most  important in terms of likelihood or potential consequence. These  guidelines define the procedures that stakeholders are to use to  identify, characterize, survey, and respond to a particular pest if  detected in the United States.", "Vulnerability Assessments. The Food Safety and Inspection Service  conducts vulnerability assessments that, among other things, can  inform the development of countermeasures to help prevent or mitigate  the impacts of an intentional attack on the food supply.", "Scientific Research. The Agricultural Research Service conducts  research to help characterize the status of diseases worldwide and  assess their spread patterns. This work can also include basic  research on various biological agents, as well as identification of  specific scientific and technology gaps related to effective  preparedness and response efforts.", "Chemical and Biological Defense (JPEO-CBD) manages the  development and acquisition of different technologies and prototypes  in order to provide biological defense products to the military services.  The technologies can include biological detection systems and  laboratory equipment, medical countermeasures, protective equipment  for individual warfighters to provide deployed units detection and  protection capabilities against different types of biological weapons.", "Threat assessment. The Defense Intelligence Agency produces the  Chemical, Biological, Radiological, and Nuclear Warfare Capstone  Threat Assessment, a report on chemical and biological programs of  countries and technology that could be used by adversaries in a threat  environment. DOD officials said that JPEO-CBD uses the report to  identify biological warfare threats against military and civilian  populations and help prioritize resources and investments into  research and development. assessments of potential impacts to water systems and the  environment in the event of a biological incident. EPA officials said  EPA relies on the Department of Homeland Security\u2019s Bioterrorism  Risk Assessment and information on adversary capabilities and tactics  to better assess potential environmental countermeasures for attacks  on water systems and indoor/outdoor areas, to steer research  resources, and to support responders who may need to address the  consequences of an attack. EPA Water Security Division officials said  they develop tools, training, and programs to address intentional  contamination, detection in distribution networks, vulnerability  assessments, emergency response capabilities, and how to monitor  incidents and threats.", "Research and Development. The Office of Research and  Development\u2019s Homeland Security Research Program aims to help  increase the capabilities of EPA and communities to prepare for and  respond to chemical, biological, and radiological disasters. EPA relies  on information from the BTRA in addition to its own research to inform  preparedness activities and its research agenda. EPA\u2019s homeland  security research is organized into three topic areas that support these  objectives: (1) characterizing contamination and assessing exposure;  (2) water system security and resilience; and (3) remediating wide  areas. (PHEMCE). Includes various HHS agencies and other federal departments,  such as the Department of Defense (DOD), DHS, and the U.S. Department  of Agriculture, to advise the Secretary of HHS on medical countermeasure  priorities and approaches to the development, acquisition, stockpiling, and  distribution of medical countermeasures for biological weapons attack  agents, pandemic influenza, and other emerging infectious diseases.", "Global disease surveillance. Helps identify and respond to emerging  infections, including pathogenic avian influenza, which remains an urgent  global infectious disease threat.", "Medical and Public Health Consequence Modeling. HHS\u2019s medical and  public health consequence modeling reports use the exposure information  from DHS\u2019s material threat assessments (MTA) to calculate the number of  individuals who may become ill, be hospitalized, or die based on the MTA  scenario with and without medical countermeasures. HHS reported using the  modeling reports as part of an assessment process to establish requirements  for medical countermeasures that need to be developed and acquired to  respond to a biological incident. aimed at reducing large public health consequences of attacks on the food  supply. FDA assesses public health and economic impact of an attack, the  accessibility of a target and ease of an attack, the ability to recover, the loss  of production due to an attack, and target selection. FDA also said it  considers the health, economic, and psychological impacts of an attack on  the food industry.", "Scientific Research. Studies include thermal stability of microbial agents  and ability to inactivate biological agents in the food supply, and studies of  pathogenic properties of viruses to help understand the epidemiology,  transmission, evolution and origin of an outbreak. which is a system of environmental monitoring intended to provide  early warning and detection of a biological attack. DHS also houses  and supports the National Biosurveillance Integration Center\u2014a  collaboration of 14 federal partners intended to integrate information  about threats to human, animal, plant, and environmental health from  thousands of sources to develop a more comprehensive picture of the  threat landscape.", "Research and Analysis. DHS operates the National Biodefense  Analysis and Countermeasures Center, which conducts scientific  research and develops reports and products intended to address  identified knowledge gaps associated with current and future  biological threats, including the effectiveness of potential  countermeasures and the characterization of key attributes of  biological attacks by an adversary such as agent acquisition; agent  production; dissemination methods; and virulence. Additional research  and analysis efforts are supported by the Biodefense Knowledge  Center and multiple National Laboratories."], "subsections": []}]}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Kathryn Godfrey (Assistant  Director), Ryan Lambert (Analyst-in-Charge), Amy Bowser, Ben Emmel,  Ashley Grant, Eric Hauswirth, Susanna Kuebler, Cody Raysinger, and  Amber Sinclair made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Biological Defense: Additional Information That Congress May Find  Useful as It Considers DOD\u2019s Advanced Development and Manufacturing  Capability. GAO-17-701. Washington, D.C.: July 17, 2017.", "Chemical and Biological Defense: DOD Has Identified an Infrastructure  Manager and Is Developing the Position\u2019s Roles and Responsibilities.  GAO-17-522R. Washington, D.C.: July 7, 2017.", "Emerging Infectious Diseases: Actions Needed to Address the  Challenges of Responding to Zika Virus Disease Outbreaks.  GAO-17-445. Washington, D.C.: May 23, 2017.", "Avian Influenza: USDA Has Taken Actions to Reduce Risks but Needs a  Plan to Evaluate Its Efforts. GAO-17-360. Washington, D.C.: April 13,  2017.", "Defense Civil Support: DOD, HHS, and DHS Should Use Existing  Coordination Mechanisms to Improve Their Pandemic Preparedness.  GAO-17-150. Washington, D.C.: February 10, 2017.", "Bioforensics: DHS Needs to Conduct a Formal Capability Gap Analysis to  Better Identify and Address Gaps. GAO-17-177. Washington, D.C.:  January 11, 2017.", "Defense Intelligence: Additional Steps Could Better Integrate Intelligence  Input into DOD\u2019s Acquisition of Major Weapon Systems. GAO-17-10.  Washington, D.C.: November 1, 2016.", "High-Containment Laboratories: Actions Needed to Mitigate Risk of  Potential Exposure and Release of Dangerous Pathogens.  GAO-16-871T. Washington, D.C.: September 23, 2016.", "High-Containment Laboratories: Improved Oversight of Dangerous  Pathogens Needed to Mitigate Risk. GAO-16-642. Washington, D.C.:  August 30, 2016.", "Biodefense: The Nation Faces Multiple Challenges in Building and  Maintaining Biodefense and Biosurveillance. GAO-16-547T. Washington,  D.C.: April 14, 2016.", "Emerging Infectious Diseases: Preliminary Observations on the Zika  Virus Outbreak. GAO-16-470T. Washington, D.C.: March 2, 2016.", "Air Travel and Communicable Diseases: Comprehensive Federal Plan  Needed for U.S. Aviation System\u2019s Preparedness. GAO-16-127.  Washington, D.C.: December 16, 2015.", "Emerging Animal Diseases: Actions Needed to Better Position USDA to  Address Future Risks. GAO-16-132. Washington, D.C.: December 15,  2015.", "Biosurveillance: DHS Should Not Pursue BioWatch Upgrades or  Enhancements Until System Capabilities Are Established. GAO-16-99.  Washington, D.C.: October 23, 2015.", "Climate Change: HHS Could Take Further Steps to Enhance  Understanding of Public Health Risks. GAO-16-122. Washington, D.C.:  October 5, 2015.", "Biosurveillance: Challenges and Options for the National Biosurveillance  Integration Center. GAO-15-793. Washington, D.C.: September 24, 2015.", "Chemical and Biological Defense: Designated Entity Needed to Identify,  Align, and Manage DOD\u2019s Infrastructure. GAO-15-257. Washington, D.C.:  June 25, 2015.", "Biological Defense: DOD Has Strengthened Coordination on Medical  Countermeasures but Can Improve Its Process for Threat Prioritization.  GAO-14-442. Washington, D.C.: May 15, 2014.", "National Preparedness: HHS Is Monitoring the Progress of Its Medical  Countermeasure Efforts but Has Not Provided Previously Recommended  Spending Estimates. GAO-14-90. Washington, D.C.: December 27, 2013.", "Homeland Security: An Overall Strategy Is Needed to Strengthen Disease  Surveillance in Livestock and Poultry. GAO-13-424. Washington, D.C.:  May 21, 2013.", "Influenza: Progress Made in Responding to Seasonal and Pandemic  Outbreaks. GAO-13-374T. Washington, D.C.: February 13, 2013.", "Managing for Results: Key Considerations for Implementing Interagency  Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September  27, 2012.", "Biosurveillance: DHS Should Reevaluate Mission Need and Alternatives  before Proceeding with BioWatch Generation-3 Acquisition. GAO-12-810.  Washington, D.C.: September 10, 2012.", "Chemical, Biological, Radiological, and Nuclear Risk Assessments: DHS  Should Establish More Specific Guidance for Their Use. GAO-12-272.  Washington, D.C.: January 25, 2012.", "Biosurveillance: Nonfederal Capabilities Should Be Considered in  Creating a National Biosurveillance Strategy. GAO-12-55. Washington,  D.C.: October 31, 2011.", "National Preparedness: Improvements Needed for Acquiring Medical  Countermeasures to Threats from Terrorism and Other Sources.  GAO-12-121. Washington, D.C.: October 26, 2011.", "Homeland Security: Challenges for the Food and Agriculture Sector in  Responding to Potential Terrorist Attacks and Natural Disasters.  GAO-11-946T. Washington, D.C.: September 13, 2011.", "Homeland Security: Actions Needed to Improve Response to Potential  Terrorist Attacks and Natural Disasters Affecting Food and Agriculture.  GAO-11-652. Washington, D.C.: August 19, 2011.", "National Preparedness: DHS and HHS Can Further Strengthen  Coordination for Chemical, Biological, Radiological, and Nuclear Risk  Assessments. GAO-11-606. Washington, D.C.: June 21, 2011.", "Live Animal Imports: Agencies Need Better Collaboration to Reduce the  Risk of Animal-Related Diseases. GAO-11-9. Washington, D.C.:  November 8, 2010.", "Biosurveillance: Efforts to Develop a National Biosurveillance Capability  Need a National Strategy and a Designated Leader. GAO-10-645.  Washington, D.C.: June 30, 2010.", "Agricultural Quarantine Inspection Program: Management Problems May  Increase Vulnerability of U.S. Agriculture to Foreign Pests and Diseases.  GAO-08-96T. Washington, D.C.: October 3, 2007.", "Global Health: U.S. Agencies Support Programs to Build Overseas  Capacity for Infectious Disease Surveillance. GAO-07-1186. Washington,  D.C.: September 28, 2007."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-533", "url": "https://www.gao.gov/products/GAO-18-533", "title": "National Science Foundation: A Workforce Strategy and Evaluation of Results Could Improve Use of Rotating Scientists, Engineers, and Educators", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NSF has identified potential benefits and challenges associated with its use of rotators. Benefits include fresh perspectives and close connections to the scientific community, while challenges include staffing turnover and higher costs for some rotators compared with permanent employees.", "GAO was asked to review NSF's use and management of the IPA and VSEE rotator programs, among other things. This report examines (1) the number, costs, and uses of NSF rotators for fiscal year 2008 through fiscal year 2017; (2) the strategies NSF has used to manage rotator costs and the results of these efforts; and (3) the extent to which NSF has a workforce strategy for using rotators and has evaluated the results of its rotator programs. GAO analyzed summary-level data on NSF's rotators; reviewed key documents; interviewed NSF officials; conducted semistructured interviews with a nongeneralizable sample of rotators and permanent federal employees selected from different scientific directorates within NSF; and compared NSF's management of the program to key principles for effective strategic workforce planning."]}, {"section_title": "What GAO Found", "paragraphs": ["The numbers of rotators\u2014outside scientists, engineers, and educators on temporary assignment\u2014at the National Science Foundation (NSF) and their costs in proportion to other staff remained relatively stable in fiscal years 2008 through 2017. Most rotators joined NSF under its Intergovernmental Personnel Act (IPA) mobility program. IPA rotators comprised about 12 percent of NSF's workforce and 17 percent of staff costs on average and were not subject to a federal salary cap. They remain employees of their home institutions, with NSF reimbursing the institutions for most of their salaries and benefits. The remaining rotators are considered temporary federal employees under the Visiting Scientist, Engineer, and Educator (VSEE) program; their salaries could not exceed the federal maximum for their positions.", "Beginning in fiscal year 2017, NSF adopted IPA rotator program cost management strategies expected to achieve the greatest savings with the least harm to recruitment, but NSF officials said it is too soon to determine the full results. For example, for new IPA rotators who had not yet begun negotiating their assignments, NSF began requiring their home institutions to pay for 10 percent of the rotators' salary and benefits. NSF officials told GAO they expect to issue a report evaluating the strategies in December 2018.", "NSF's IPA program steering committee recommended developing a workforce strategy for balancing the agency's use of rotators with federal staff, but as of June 2018, NSF had not developed a strategy or fully evaluated the IPA and VSEE rotator programs' results, as called for by GAO's key principles for effective strategic workforce planning. NSF officials said they recognized the value of a workforce strategy but were focusing instead on other workforce planning efforts, and they had not fully evaluated program results in part because rotators are blended into the agency's permanent workforce, making a separate evaluation difficult. Without a workforce strategy and evaluation of results, NSF is limited in its ability to manage and, if warranted, adjust its use of rotators."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that NSF develop an agency-wide strategy for balancing the agency's use of rotators with permanent staff and evaluate the contributions of its rotator programs toward NSF's human capital goals and programmatic results. NSF agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["To advance its mission of supporting research and education in science  and engineering, the National Science Foundation (NSF) brings in outside  scientists, engineers, and educators on temporary assignments to work  alongside its staff of permanent federal employees. NSF refers to these  individuals as rotators. Rotators generally perform the same work and  have the same responsibilities as permanent employees who fill similar  positions within the agency. NSF\u2019s rationale in using rotators is that they  bring fresh perspectives and up-to-date insights about the direction of  science and engineering and help NSF maintain a close connection to the  scientific community. However, NSF\u2019s use of rotators has also introduced  management challenges. For example, according to the agency\u2019s Human  Capital Strategic Plan, continual turnover resulting from the use of  rotators has presented challenges in ensuring seamless staffing  transitions.", "NSF recruits its rotators primarily under the Intergovernmental Personnel  Act (IPA) mobility program, which allows for details of individuals from  state and local governments, institutions of higher education, and other  organizations. NSF refers to individuals detailed under this program as  IPA rotators. Under NSF\u2019s IPA program, rotators remain employees of  and continue to receive salaries and benefits from their home institutions.  During rotators\u2019 assignments, NSF reimburses the majority of their  salaries and benefits under cost-sharing agreements with the rotators\u2019  home institutions. Rotators may occasionally take NSF-funded trips to  continue research and research-related activities at their home  institutions. NSF can negotiate IPA rotator details for an initial assignment  of up to 2 years and may extend the assignment for another 2 years\u2014for  a maximum of 4 years\u2014if NSF, the rotator, and the rotator\u2019s home  institution agree.", "NSF also recruits rotators from research or educational institutions under  its Visiting Scientist, Engineer, and Educator (VSEE) program and refers  to these individuals as VSEE rotators. Under this program, VSEE  rotators are considered temporary federal employees. They are on a  nonpaid leave of absence from their home institution and receive their  salaries directly from NSF. Assignments are usually made for up to 1 year  and may be extended for an additional year.", "The NSF Office of Inspector General has examined several management  and oversight issues associated with NSF\u2019s use of IPA rotators. For  example, the Inspector General identified the potential effect of the time  that IPA rotators spend at their home institutions on the rotators\u2019 ability to  fulfill their responsibilities at NSF. In addition, the Inspector General  reported that in fiscal year 2012, NSF spent approximately $6.7 million  more by using rotators instead of hiring permanent federal employees.  That report identified opportunities for NSF to reduce the cost of IPA  rotators. In a follow-up report, the Inspector General found that both the  number and cost of IPA rotators increased in fiscal year 2015 from fiscal  year 2012.", "The American Innovation and Competitiveness Act of 2017 directs NSF to  report to certain congressional committees on its efforts to control costs  associated with employing rotators and on its progress in responding to  the Inspector General\u2019s findings and implementing its recommendations  related to the employment of rotators. In addition, the act directs NSF to  annually provide written justification for each rotator who it pays more  than the maximum rate for the Senior Executive Service\u2014which was  $187,000 in fiscal year 2017.", "NSF\u2019s use of rotators is one of the agency\u2019s strategies for managing its  human capital. We have previously found that strategic human capital  management addresses two critical needs: (1) aligning an organization\u2019s  human capital program with its current and emerging mission and  programmatic goals and (2) developing long-term strategies for acquiring,  developing, and retaining staff to achieve programmatic goals. Strategic  human capital management is a pervasive challenge the federal  government faces and is one of the areas we identified in our High Risk  List. While agencies\u2019 approaches to workforce planning will vary, we have  previously identified key principles that strategic workforce planning  should address irrespective of the context in which the planning is done,  including:", "Determine the critical skills and competencies that will be needed  to achieve current and future programmatic results;", "Develop strategies that are tailored to address gaps in number,  deployment, and alignment of human capital approaches for  enabling and sustaining the contributions of all critical skills and  competencies; and", "Monitor and evaluate progress toward the human capital goals  and the contribution that human capital results have made toward  achieving programmatic results.", "You asked us to review NSF\u2019s use and management of the rotator  programs, among other things. This report examines (1) the number,  costs, and uses of NSF rotators over time; (2) the strategies NSF has  used to manage rotator costs and the results of these efforts; and (3) the  extent to which NSF has a workforce strategy for using rotators and has  evaluated the results of its rotator programs.", "To examine the number, costs, and use of NSF rotators over time, we  collected and analyzed summary-level data on NSF\u2019s rotators, permanent  employees, and other temporary employees for fiscal years 2008 through  2017 so that we could observe any trends over the most recent 10-year  period for which data were available. Data on the number of employees  included the number of permanent federal employees, temporary federal  employees, IPA rotators, and VSEE rotators; the number of each type of  employee in executive positions; and counts of the types of home  institutions that IPA rotators came from in fiscal year 2017. We collected  data on the number of employees and rotators as of the last day for each  fiscal year for fiscal years 2008 through 2017. We supplemented this  summary-level data with data on executive-level positions held by IPA  rotators or federal employees and executive-level vacancies as of  November 2017\u2014the most recent data available at the time of our review.  Cost data included NSF\u2019s actual costs for IPA rotators from fiscal years  2008 through 2017, and actual costs for federal employees from fiscal  years 2009 through 2017, and budgeted amounts for cost-sharing  agreements. To adjust costs for inflation, we converted them to constant  2017 dollars using a Gross Domestic Product price index. We focused  our review on IPA rotators and reviewed VSEE rotators to a lesser extent,  in part because NSF maintains cost data on VSEE rotators commingled  with data on other federal employees and the aggregate data we obtained  from NSF did not separate out most costs for VSEE rotators.", "We assessed the reliability of the data we collected on the number and  costs of NSF rotators and permanent and other temporary federal  employees by performing manual testing for missing data or obvious errors and conducting interviews with NSF officials knowledgeable about  the data. In particular, we discussed the data sources\u2014including NSF\u2019s  grant database, financial system, and human resources database\u2014and  methods used to provide the data. We determined that the data were  sufficiently reliable for reporting summary-level data on the number of  rotators and associated costs over time.", "For further information on NSF\u2019s use of rotators, we reviewed NSF\u2019s  personnel manual, public website, and other information provided by NSF  officials on how IPA and VSEE rotators are compensated and the types of  positions they fill. We reviewed all IPA rotator agreements made in fiscal  year 2017; those agreements included information on rotator costs and  cost-sharing amounts and the responsibilities of the positions filled by  rotators. We also reviewed reports issued by the NSF Inspector General  and the National Academy of Public Administration on NSF\u2019s use of  rotators. Finally, we reviewed regulations and policies on the IPA  program issued by the Office of Personnel Management (OPM).", "To examine the strategies that NSF has used to manage IPA rotator  costs and the results of these efforts, we reviewed key agency  documentation, such as documents related to the establishment of cost- management strategies; NSF\u2019s January 2018 report to Congress on  NSF\u2019s efforts to manage rotator costs; and NSF\u2019s March 2018 preliminary  evaluation of its cost-sharing pilot program. We also discussed with  knowledgeable NSF officials NSF\u2019s cost-management strategies and the  extent to which the officials had identified any preliminary results.", "To examine the extent to which NSF has a workforce strategy for using  rotators and has evaluated the results of its rotator programs, we  reviewed NSF\u2019s workforce planning documents, including its human  capital strategic plan for 2011 to 2014 (the latest plan available) and  internal NSF documents issued in 2016 and 2017 on plans for developing  an agency-wide workforce strategy that would include rotators. In  addition, we interviewed NSF\u2019s chief human capital officer and other NSF  officials regarding NSF\u2019s decision-making process for hiring rotators, its  objectives for the rotator programs, its efforts to evaluate program results,  and its plans for developing an agency-wide workforce strategy. We  compared NSF\u2019s efforts with three of the five principles from GAO\u2019s Key  Principles for Effective Strategic Workforce Planning, which we selected  on the basis of their relevance to NSF\u2019s efforts.", "For further insight into NSF\u2019s rotator programs, we conducted  semistructured interviews with a nongeneralizable sample of IPA rotators,  VSEE rotators, and permanent federal employees. The sample included  two individuals in executive positions (an IPA rotator and a permanent  employee who followed an in-house career path) and four individuals in  program director positions (an IPA rotator, a VSEE rotator, and two  permanent employees). We selected the individuals from 5 of the 7  scientific directorates within NSF. In addition, our sample included a  former NSF employee in an executive position. Our semistructured  interviews included questions regarding the individuals\u2019 experiences and  perspectives on their work activities, the benefits and challenges of NSF\u2019s  use of rotators, and the effect of NSF\u2019s use of rotators on the in-house  career paths of permanent employees. In addition, we asked individuals  in executive positions about the effect of the NSF\u2019s use of rotators on (1)  the ability to set directions for the agency and to achieve associated goals  and objectives and (2) succession planning. The information provided  through the interviews is anecdotal and cannot be generalized to a larger  population, but it provides illustrative perspectives and opinions of  different subgroups within NSF on NSF\u2019s rotator programs.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["NSF relies on two programs for bringing rotators into the agency: (1) the  IPA program and (2) the VSEE program. The Office of Personnel  Management develops policies on agencies\u2019 use of the IPA program and  promulgates program regulations.", "Rotators in NSF\u2019s IPA and VSEE programs differ in key respects,  including their employment status and compensation.", "IPA rotators. NSF enters into written agreements with rotators\u2019  home institutions for all IPA assignments. The agreements detail  rotators\u2019 salaries and health, retirement, and other fringe benefits  at their home institutions, as well as the cost-sharing amounts  NSF and home institutions are to pay during rotators\u2019  assignments. NSF reimburses its cost-sharing amounts to home  institutions, which continue to pay rotators\u2019 full salaries and  benefits. NSF does not cap the salaries of IPA rotators; as a  result, IPA rotators may receive salaries that exceed the maximum  federal salary for the position they hold at NSF. In contrast, if an  IPA rotator\u2019s salary is less than the minimum federal salary for the  position, NSF will supplement the salary to the minimum rate.", "VSEE rotators. NSF appoints VSEE rotators as federal  employees on a nonpaid leave of absence from their home  institutions. VSEE rotators receive their salaries directly from NSF  but are not eligible for certain federal benefits, such as retirement;  instead, NSF reimburses home institutions for the employer\u2019s  share of retirement, life insurance, and health benefits that would  otherwise be discontinued. NSF\u2019s policy is to set salaries for  VSEE rotators that are generally comparable to the salaries the  rotators would receive at their home institutions. In setting  salaries, NSF also takes into account other sources of income,  such as consulting, and allows for locality pay adjustments  applicable to employees in the Washington, D.C., metropolitan  area. However, because VSEE rotators are federal employees,  NSF caps their salaries at the federal maximum for the position  they hold at NSF.", "Both IPA and VSEE rotators are eligible for certain other types of  reimbursement. In particular, rotators have the option of having NSF pay  their moving expenses to and from Washington, D.C., or receiving per  diem allowances in accordance with federal travel regulations for up to 2  years. In addition, NSF may reimburse rotators for travel-related  expenses related to their participation in NSF\u2019s Independent Research  and Development program, which enables NSF staff to maintain their  involvement with their professional research and research-related  activities at their home institutions. Table 1 shows additional information  on IPA and VSEE rotator expenses.", "Rotators are generally assigned to one of NSF\u2019s seven directorates that  support science and engineering research and education (see table 2).  Each directorate is headed by an assistant director and deputy assistant  director. Directorates are further subdivided into divisions, offices, or  sections. Each division is headed by a division director and typically a  deputy division director, and each office is headed by an office director  and typically a deputy office director. All these positions are executive  positions at NSF. At the staff level, NSF uses program directors\u2014subject  matter experts in the scientific areas they manage\u2014to conduct reviews of  proposals and recommend which projects the agency should fund. With  an annual budget of about $7.5 billion, NSF funds approximately 24  percent of all federally supported basic research conducted by colleges  and universities in the United States.", "In 2016, NSF established the Steering Committee for Policy and  Oversight of the IPA Program. The steering committee serves as the  primary body for considering policy on NSF\u2019s use of IPA rotators and  overseeing common approaches to budgeting and implementation of the  IPA program. The committee\u2019s membership includes NSF\u2019s chief human  capital officer, who serves as the chair, and several other NSF officials.  The steering committee has established strategic principles for  management of the IPA program. These principles include maintaining a  balance between IPA rotators and federal staff and a commitment to  ongoing improvement of the program. NSF officials told us that there is no  similar steering committee for overseeing VSEE rotators. Instead, each  VSEE rotator is individually overseen by his or her respective supervisor.", "For the agency as a whole, NSF\u2019s Office of Information and Resource  Management and its Division of Human Resource Management conduct  human capital management. NSF officials stated that the head of the  Office of Information and Resource Management serves as the Chief  Human Capital Officer and develops and oversees NSF\u2019s human capital  approaches and strategies. These officials also told us that the Deputy  Chief Human Capital Officer serves as the division director of Human  Resource Management and is responsible for administering the division\u2019s  day-to-day operations. The Division of Human Resource Management  administers the agency\u2019s human capital policies as set forth in NSF\u2019s  personnel manual."], "subsections": []}, {"section_title": "NSF Maintained a Relatively Stable Number and Cost of Rotators and Used Them in Executive and Program Director Positions", "paragraphs": ["The numbers of rotators and their costs to NSF in proportion to other staff  have remained relatively stable. Most rotators were IPA rotators, and  were used in both executive and program director (staff-level) positions.  NSF generally used VSEE rotators in program director positions."], "subsections": [{"section_title": "Most Rotators Were IPA Rotators, Comprising About 12 Percent of NSF\u2019s Workforce and 17 Percent of Staff Costs on Average in Fiscal Years 2008-2017", "paragraphs": ["Most rotators at NSF were IPA rotators, and the proportion of rotators  relative to other staff has remained relatively stable over time (see fig. 1).  During the 10-year period we reviewed, from fiscal year 2008 through  fiscal year 2017,  IPA and VSEE rotators comprised about 12 percent and about 3  percent, respectively, of NSF\u2019s total workforce; and  the number of IPA rotators ranged from 162 to 190 (about 11 to 12  percent of total staff), and the number of VSEE rotators ranged  from 22 to 52 (about 1 to 3 percent of total staff)."], "subsections": []}, {"section_title": "NSF Primarily Used IPA Rotators in Executive and Program Director Positions and VSEE Rotators in Program Director Positions", "paragraphs": ["NSF primarily used rotators across its seven scientific directorates, using  IPA rotators in executive and program director positions and VSEE  rotators in program director positions. The agency used rotators in these  positions alongside NSF\u2019s permanent staff to perform day-to-day agency  operations, including managing the agency\u2019s merit review process for  determining which projects to fund."], "subsections": [{"section_title": "Use of IPA Rotators in Executive Positions", "paragraphs": ["NSF used IPA rotators in executive positions such as assistant director.  According to agency officials, individuals in executive positions at NSF  are responsible for setting the direction for the scientific area they are  assigned, leading scientific and technical matters, establishing an  organizational culture, overseeing outreach and collaboration with NSF  stakeholders, and contributing to NSF and national policy development  and implementation. For example, an executive IPA rotator that we  interviewed told us that he emphasized forming partnerships with industry  when setting the direction for his directorate, including issuing joint  solicitations for research proposals with industry partners. In addition,  according to NSF officials, individuals in executive positions provide  guidance and team management for staff.", "The proportion of IPA rotators to federal employees in executive positions  within NSF\u2019s seven scientific directorates and other staff offices has  generally increased since fiscal year 2012. As shown in figure 4, from  fiscal year 2008 through fiscal year 2017, the number and proportion of  executive positions filled by IPA rotators ranged from 18 of 98 (about 18  percent) in 2008 to 30 of 108 (about 28 percent) in fiscal year 2016.", "In November 2017, IPA rotators filled 29 of 88 (about 33 percent)  executive positions within NSF\u2019s seven scientific directorates. At that  time, the proportion of executive positions filled by IPA rotators varied  among directorates, as shown in table 3. For example, IPA rotators filled  4 of 8 (50 percent) of the executive positions in the Directorate for Social,  Behavioral, and Economic Sciences and 2 of 14 (about 14 percent) of the  executive positions in the Directorate for Mathematical and Physical  Sciences.", "According to NSF officials, NSF often pairs IPA rotators and federal  employees at the executive level so that each can benefit from the other\u2019s  experience and perspective. For example, in all but one directorate, an  IPA rotator filled the assistant director position and a federal employee  filled the corresponding deputy assistant director position. Two NSF  executives we interviewed, including an IPA rotator and a federal  employee, commented positively on the pairing of IPA rotators and  federal employees at the executive level. For example, they said that  rotators maintain close ties to the research community and federal  employees may have more experience with NSF\u2019s institutional history.  One NSF executive told us that IPA rotators help keep the agency at the  forefront of science because they have deep ties with the research  community and regularly publish their own research. Additionally, a  federal program director we interviewed told us that in one previous  instance in which an IPA rotator filled an executive position without being  paired with a federal employee, the rotator\u2019s lack of institutional  knowledge of NSF and the steep learning curve for the position caused  inefficiencies during the rotator\u2019s first year at NSF. The agency, however,  does not require pairing IPA rotators and federal employees at the  executive level, according to NSF officials. For example, in November  2017, IPA rotators filled both the division director and deputy division  director positions in the Division of Behavioral and Cognitive Science and  Division of Undergraduate Education.", "In our interviews with a nongeneralizable sample of NSF employees and  rotators, we found mixed perceptions about the effect of NSF\u2019s use of IPA  rotators on opportunities for advancement for permanent employees. For  example, in response to a question about this effect, one permanent NSF  employee told us that she advanced to an executive position and that  opportunities exist for advancement within the agency. In contrast,  another NSF employee we interviewed told us that she did not feel there  were opportunities for advancement because, in her view, executive  vacancies created by the departure of rotators were exclusively filled with  other rotators. NSF officials said that the agency has no policy that  restricts repeatedly filling certain executive positions with rotators and that  such a situation is a common practice. Nevertheless, NSF officials told us  32 of the 88 executives (about 36 percent) in NSF\u2019s seven scientific  directorates in November 2017 had held staff-level positions within the  agency before becoming executives."], "subsections": []}, {"section_title": "Use of IPA and VSEE Rotators as Program Directors", "paragraphs": ["NSF uses both IPA and VSEE rotators in program director positions,  which are staff-level positions. In fiscal year 2016, NSF had a total of 506  program directors, including 139 IPA rotators (about 27 percent) and 39  VSEE rotators (about 8 percent). According to NSF officials, program  directors are responsible for conducting long-range planning and  developing budgets for the areas of science represented by their program  and for administrating the merit review process. In particular, IPA and  VSEE rotators who serve as program directors help determine the  projects that NSF funds. To do so, they review proposals, identify experts  in their field to serve as external reviewers, and make funding  recommendations to their respective division directors.", "NSF officials told us that, similar to the pairing of IPA rotators and federal  employees at the executive level, permanent and rotating program  directors frequently work together on a shared program so that each can  benefit from the other\u2019s experience and perspective. For example, a  rotating program director we interviewed told us that she worked under  the guidance of a program lead, who is typically a permanent employee.  Another rotating program director told us that NSF\u2019s permanent federal  employees are good at training incoming rotators."], "subsections": []}]}]}, {"section_title": "NSF Adopted Rotator Program Cost- Management Strategies to Achieve the Greatest Savings with the Least Harm to Recruitment, but Results Are Unknown", "paragraphs": ["Beginning in fiscal year 2017, NSF adopted rotator program cost- management strategies expected to achieve the greatest savings with the  least harm to recruitment, but NSF officials said it is too soon to  determine the full results because these new strategies are being phased  in for new IPA agreements only. NSF considered other strategies to  manage rotator costs, but it did not adopt them, generally because NSF  anticipated negative effects on rotator recruitment or because it estimated  the resulting cost savings would be small."], "subsections": [{"section_title": "NSF Adopted Three Strategies to Manage IPA Rotator Costs in Fiscal Year 2017 and Has Not Yet Determined Their Full Results", "paragraphs": ["NSF has adopted three strategies to manage rotators\u2019 costs in fiscal year  2017, but, NSF officials said it is too soon to determine the full results  because these new strategies are being phased in for new IPA  agreements only. All three of these strategies relate to IPA rotators; NSF  officials told us that they have not considered or adopted any cost- management strategies related to VSEE rotators. The officials explained  that any such strategies could affect NSF\u2019s entire federal workforce  because VSEE rotators are federal employees. The three strategies are:  (1) obtaining a minimum 10 percent cost-share from each IPA rotator\u2019s  home institution, (2) limiting IPA rotators\u2019 paid trips to their home  institutions to 12 per year, and (3) no longer reimbursing IPA rotators for  consulting income that they forgo while at NSF. NSF officials told us they  expect to issue a report with the results of evaluations of all three  strategies in December 2018."], "subsections": [{"section_title": "Cost-Sharing Pilot Program", "paragraphs": ["In October 2016, NSF implemented a cost-sharing pilot program that  requires institutions covered by the program\u2014those who entered into  negotiations for new IPA agreements in fiscal year 2017\u2014to pay for at  least 10 percent of the IPA rotators\u2019 salaries and fringe benefits.  Implementing this cost-management strategy, and the other strategies  that NSF adopted, was consistent with recommendations from NSF\u2019s  steering committee for oversight of IPA rotators. This cost-management  strategy targeted NSF\u2019s costs for IPA rotators\u2019 salary and fringe benefits,  which constitute the largest component of IPA rotators\u2019 costs. For  example, these costs were about $34.7 million, or about 89 percent of  IPA rotator costs in fiscal year 2017.", "Previously, according to NSF officials, the agency requested an optional  cost-share amount of 15 percent from rotators\u2019 home institutions, but it  typically received less because of variations in the amounts that home  institutions provided. According to an October 2016 report from the task  force on fiscal oversight, NSF decided on 10 percent for the cost-sharing  pilot program because, historically, few home institutions provided the full  15 percent and NSF believed a requirement of 10 percent would not  significantly affect its ability to recruit and hire IPA rotators. If a home  institution is unable to provide the full 10 percent, the institution may  request that NSF waive the cost-sharing requirement. According to NSF  officials, such requests must be signed by a senior administrator at the  rotator\u2019s home institution and include the rationale for not being able to  provide the required amount, the financial impact on the institution if it  were to provide the full 10 percent, and associated documentation,  among other things.", "Changes made in implementing this strategy, and the other strategies  that NSF adopted, applied to new IPA agreements made in fiscal year  2017. These changes did not apply to IPA rotators with agreements made  prior to 2017\u2014even if those agreements are subsequently extended or  renewed\u2014or that were being negotiated at the time of the policy change,  provided that the rotators\u2019 appointment memoranda were already being  reviewed by NSF\u2019s Division of Human Resource Management.", "NSF officials told us that as of March 2018, the agency had not  conducted full evaluations of this strategy or the other strategies because  it was too soon to determine their full effects and NSF had not yet  collected enough data to do so. Instead, NSF issued reports in January  and March 2018 containing its preliminary analyses. In general, these  preliminary reports found that the cost-management strategies resulted in  savings to NSF. Similarly, our analysis of data from NSF found that cost  sharing as a percentage of IPA rotators\u2019 salary and fringe benefits  increased from about 7 percent in fiscal year 2016 to about 8 percent in  fiscal year 2017.", "NSF officials told us that of the 55 IPA rotators who were subject to the  cost-sharing requirement in fiscal year 2017:  the home institutions for 54 rotators met or exceeded the 10  percent cost-share requirement, and of those, 16 exceeded the  cost-share requirement; and  the home institution for 1 rotator did not cost-share because the  rotator was from a Federally Funded Research and Development  Center and NSF waived the cost-share requirement because cost- sharing would not decrease the overall federal cost.", "In November 2017, NSF decided to extend the cost-sharing pilot through  at least the end of fiscal year 2018, to ensure a full evaluation could be  conducted. In particular, NSF officials told us that they need more data  and experience with this pilot program to better understand its effects,  such as the ability to recruit potential IPA rotators. For example, one IPA  rotator that we interviewed expressed concern with the cost-sharing  requirement\u2019s potential effect on small or publicly funded universities,  which may lack funds to contribute to the cost of an IPA assignment.  According to NSF officials, their evaluation will include an analysis of the  cost of IPA rotators under the cost-sharing requirement and its effect on  the IPA program, including recruitment."], "subsections": []}, {"section_title": "Limitation on NSF-Funded Trips to IPA Rotators\u2019 Home Institutions", "paragraphs": ["Beginning in fiscal year 2017, for IPA rotators who entered into  negotiations for new agreements in that fiscal year, NSF placed a limit of  12 agency-funded trips per year that rotators may take to their home  institutions under the Independent Research and Development  program. In our analysis of data from NSF, we found that NSF\u2019s costs  for IPA rotators under this program decreased from about $1.5 million  (about 3 percent of IPA rotator costs) in fiscal year 2016 to $1.1 million  (about 3 percent of IPA rotator costs) in fiscal year 2017.", "NSF officials told us that the new limit applies only to an IPA rotator\u2019s trips  to their home institution and does not limit travel to other locations for  fieldwork or scientific conferences, among other things. These officials  explained that NSF chose not to limit trips to these other locations  because they are considered fundamental to IPA rotators\u2019 research and  are infrequent\u2014occurring one to three times per year, on average, per  IPA rotator. Additionally, rotators are permitted to use annual leave, leave  without pay, or flexitime to take trips using non-NSF funds for activities  performed on a rotator\u2019s own time.", "In adopting this cost-management strategy, NSF sought to balance the  benefits of IPA rotators\u2019 travel with the travel costs. According to the Task  Force on Fiscal Oversight\u2019s October 2016 report, NSF\u2019s support for travel  benefits the agency by providing a way for program directors and  executives to stay current in their scientific fields, conduct outreach with  scientific communities, and provide oversight and stewardship of NSF\u2019s  programs and awards. NSF officials told us that the agency sought to  control travel costs under the Independent Research and Development  program by setting a reasonable limit to NSF-funded trips that would  cause the least harm to rotators\u2019 research so as not to discourage them  from coming to NSF. As a result, NSF decided on a maximum of 12 trips  per year under this program because, historically, more than 80 percent  of the IPA rotator participants traveled to their home institution less than  once per month."], "subsections": []}, {"section_title": "Elimination of Reimbursement for Lost Consulting Income", "paragraphs": ["In fiscal year 2017, for IPA rotators who entered into new agreements in  that fiscal year, NSF ended reimbursements for consulting income that  the rotators forgo as a result of their assignment to NSF. Previously,  when an IPA rotator discontinued consulting activities during an IPA assignment, NSF would reimburse the rotator up to $10,000 a year. IPA  rotators who entered into negotiations or agreements with NSF prior to  this change may still receive this reimbursement. In fiscal year 2017,  NSF\u2019s cost for lost consulting reimbursements to IPA rotators was  $150,000. This amount represented a decrease of about $160,000, or  about 52 percent, from fiscal year 2016. NSF made this change because  it determined that doing so would not negatively affect the IPA program.  In particular, NSF found that other federal science agencies typically did  not reimburse IPA rotators for lost consulting income and it concluded  that IPA rotators typically do not expect NSF to offer reimbursement."], "subsections": []}]}, {"section_title": "NSF Did Not Adopt Certain Cost-Management Strategies It Considered Because of Small Cost Savings or Potential Negative Effects", "paragraphs": ["In addition to the three adopted strategies, NSF\u2019s Task Force on Fiscal  Oversight identified other potential cost management strategies for the  IPA program. The task force reviewed various data on the costs that  make up the IPA program, such as the number of IPA rotators who  received a particular form of compensation or who would be affected by  the potential strategies. In addition, the task force took into account  anecdotal and other evidence on how IPA rotators might react to the  strategies. Using input from the task force, NSF opted against the other  potential strategies because it either (1) expected the resulting cost  savings to be small or (2) anticipated potential negative effects from  implementing them, such as increased difficulty in hiring IPA rotators.  These potential cost-management strategies primarily related to IPA  rotator compensation, as described below.", "Capping IPA rotators\u2019 salaries. NSF decided against  establishing a salary cap for IPA rotators at various levels  between about $185,000 and $240,000 annually. The task force  found that salary caps at lower levels would have greater cost  savings because of the higher number of individuals covered by  the cap, but that the caps would also pose a significant risk to  NSF\u2019s ability to recruit IPA rotators. In particular, the task force  found that salary caps at lower levels would disproportionately  affect IPA rotators in two of its directorates\u2014the Directorate for  Computer and Information Science and Engineering and the  Directorate for Engineering\u2014because of the higher salaries of  individuals in positions associated with those fields. As a result,  the task force recommended that NSF first assess the effects of  its cost-sharing pilot program before proceeding with any cap on  IPA rotators\u2019 salaries.", "Reducing or eliminating IPA rotators\u2019 supplemental pay. NSF  decided against reducing or eliminating the supplemental pay that  IPA rotators receive when their salary at their home institution is  below the minimum for their NSF position. In fiscal year 2017,  NSF\u2019s cost for IPA rotators\u2019 supplemental pay was $1.0 million  (about 3 percent of IPA rotator costs). The task force  recommended against this potential cost-management strategy  because it would disproportionately affect IPA rotators in two of its  directorates\u2014the Directorate for Biological Sciences and the  Directorate for Geosciences. In addition, the task force expected  that any cost savings associated with this strategy would be  small.", "Reducing IPA rotators\u2019 per diem payments. NSF decided  against reducing or eliminating per diem payments for lodging  (excluding taxes), meals, and incidental expenses incurred during  the length of rotators\u2019 assignments. In fiscal year 2017, NSF\u2019s cost  for per diem payments was $3.1 million (about 8 percent of IPA  costs). The task force concluded, based on its analysis of per  diem costs and anecdotal evidence, that many IPA rotators would  opt to depart NSF if NSF did not provide per diem payments. As a  result, the task force recommended against this strategy."], "subsections": []}]}, {"section_title": "NSF Has Not Developed a Workforce Strategy for Using Rotators or Fully Evaluated Rotator Program Results NSF Has Not Developed an Agency-Wide Workforce Strategy for Balancing Rotators and Federal Staff", "paragraphs": ["As of June 2018, NSF had not developed an agency-wide workforce  strategy for using rotators, as its IPA program steering committee  recommended. In addition, NSF has not fully evaluated or developed  plans to evaluate both IPA and VSEE rotator program results in terms of  progress toward NSF\u2019s human capital goals or programmatic results.", "As of June 2018, NSF had not developed an agency-wide workforce  strategy that includes use of rotators, as NSF\u2019s IPA program steering  committee had recommended. In an August 2016 report on the IPA  program, the steering committee stated that NSF did not have an agency- wide workforce strategy; instead, each directorate made decisions on its  own about when and how to use IPA rotators in executive and program  director positions. According to the report, an agency-wide framework  would enable NSF to ensure an optimal balance of federal and rotator  executives and program directors, which is a strategic principle that the  steering committee developed for the IPA program.", "In February 2017, the committee issued an internal report to agency  leadership that recommended expanding what was originally envisioned  as a workforce strategy for the IPA program into a comprehensive  agency-wide workforce strategy. The report stated that expanding the  scope of the workforce strategy would have the greatest impact across  the agency and would help NSF leadership in making strategic human  capital decisions. The report outlined a process for developing a  workforce strategy with various steps, including the following:", "Job analyses. The report recommended job analyses to review  the roles and responsibilities of executive and staff-level positions  and to identify the skills and capabilities required for successful  performance of the work. According to the report, the steering  committee\u2019s working group for developing a workforce strategy  found, based on its initial efforts to review position descriptions  and roles and responsibilities, that some functions may be better  served if performed by permanent federal employees and other  functions by rotators. However, the working group concluded that  NSF should obtain additional input and evidence before initiating  large-scale changes in its workforce.", "Analysis of workforce gaps and surpluses. The report stated  that identifying gaps and surpluses in the demand and supply for  federal and rotator scientific staff would inform opportunities to  optimize recruitment and retention efforts. The report  recommended separate analyses for executive and scientific staff- level positions.", "Development of strategies to close workforce gaps and  address surpluses. According to the steering committee\u2019s report,  examples of strategies include succession planning and  rebalancing the mix of permanent federal staff and rotators to  ensure an optimal workforce with the skills, experience, and  capabilities to accomplish NSF\u2019s science-related work.", "According to NSF officials, the agency\u2019s Division of Human Resource  Management was responsible for implementing the steering committee\u2019s  recommendation. In particular, it undertook an effort to work with senior  leadership to develop a broad strategic workforce plan for the agency.  However, in June 2018, NSF officials told us that they shifted their focus  from developing a separate workforce strategy in order to focus instead  on (1) development of a human capital operating plan, which agencies  are required to develop and approve annually, and update as needed,  under OPM regulations that went into effect on April 11, 2017; and (2) an  Office of Management and Budget (OMB) memorandum issued in April  2017 directing agency heads to develop reform plans that identify ways to  improve the efficiency, effectiveness, and accountability of their  respective agencies. The NSF officials explained that they recognized the  value in having a workforce strategy, but they did not consider it  appropriate for the Division of Human Resource Management to develop  a workforce strategy at the same time that the agency was completing the  OPM and OMB plans.", "NSF did not specify how its efforts to complete the OPM and OMB plans  would address the need the steering committee identified for an agency- wide framework that would enable NSF to ensure an optimal balance of  federal and rotator executives and program directors. In particular, NSF\u2019s  human capital operating plan, which it approved in April 2018, does not  discuss NSF\u2019s use of rotators or include information on balancing the agency\u2019s use of rotators with permanent staff. Furthermore, NSF has not  yet determined how it will address its use of rotators as part of its agency  reform plan. In particular, NSF officials told us in June 2018 that they may  address the agency\u2019s use of rotators under the workforce focus area of its  reform plan, but that they were only just beginning to identify and select  initiatives under this focus area and that these initiatives have not yet  been finalized.", "The process the NSF steering committee laid out in its internal report,  when implemented, would align with two key principles GAO has  identified for effective strategic workforce planning. Specifically, it would  align with the principles of (1) determining the skills and competencies  that are critical to successfully achieving missions and goals, and (2)  developing human capital strategies to address gaps and enable the  contribution of critical skills and competencies needed for mission  success. By incorporating the NSF\u2019s steering committee\u2019s  recommendation for a workforce strategy\u2014and the process outlined by  the steering committee for developing this strategy\u2014into its human  capital operating plan or agency reform plan, NSF could better manage  its use of rotators and balance them with its permanent staff."], "subsections": [{"section_title": "NSF Has Not Fully Evaluated the Rotator Program\u2019s Progress toward Human Capital Goals or Their Programmatic Results", "paragraphs": ["We have previously found that high-performing organizations recognize  the fundamental importance of measuring both the outcomes of human  capital strategies and how these outcomes have helped the organizations  accomplish their missions and programmatic goals. However, as of May  2018, NSF had not fully evaluated and did not have plans to evaluate the  results of its IPA and VSEE rotator programs in terms of progress toward  human capital goals and the contributions the programs made toward  achieving programmatic results. One of GAO\u2019s key principles for effective  strategic workforce planning states that agencies should monitor and  evaluate progress toward the agencies\u2019 human capital goals and the  contribution that human capital results have made toward achieving  programmatic results. In particular, we previously found that evaluation  activities can improve the effectiveness of workforce strategies by  identifying shortfalls in performance and other improvement opportunities.", "OPM also requires agencies to develop a human capital operating plan  that will support the evaluation of the agency\u2019s human capital strategies.", "In March 2014, NSF published a summary of the results of focus groups  with IPA rotators and their supervisors. This summary outlined benefits  and challenges of the program from the perspectives of both groups, such  as the benefit of bringing fresh perspective and new ideas to NSF and the  challenge of recruiting and retaining qualified IPA rotators. However, the  summary did not provide the agency\u2019s assessment of progress towards  programmatic results and human capital goals. For example, it  summarized the benefits of the program from the standpoint of rotators  and did not provide NSF\u2019s assessment of how individual IPA rotators or  the program as a whole contributed to NSF\u2019s scientific mission. In  addition, the summary did not provide an assessment of the extent to  which the current workforce balance of federal and rotator executives and  program directors is aligned with NSF\u2019s work. In our semistructured  interviews with federal staff and rotators in executive and staff-level  positions at NSF, most were comfortable with the current balance, but  three individuals raised concerns about the use of rotators in executive  positions, suggesting that NSF could benefit from further analysis of its  balance of rotators and federal staff.", "In April 2018, NSF adopted its human capital operating plan which  identifies specific, short-term actions that the agency will take to achieve  its human capital goals. In its plan, NSF identified strategies derived from  NSF\u2019s commitment to ongoing improvement, such as reviewing and  realigning its workforce to meet future needs. Also, NSF\u2019s process for  developing a workforce strategy, outlined in the steering committee\u2019s  February 2017 internal report, included recommendations to conduct an  assessment of the outcomes of workforce strategies and the impact of  these outcomes on helping NSF accomplish its scientific mission and  related programmatic goals. However, plans for this assessment did not  include an evaluation of the agency\u2019s rotator programs. Moreover, neither  the steering committee\u2019s February 2017 internal report nor NSF\u2019s April  2018 report committed to conducting such an evaluation or specified how  assessments described in its reports would address NSF\u2019s rotator  programs. For example, neither report specified how NSF would evaluate  the extent to which the rotator programs have achieved NSF\u2019s objectives,  which we identified through our review of NSF documentation and  interviews with NSF officials. These objectives include: bringing fresh perspectives from across the country and across all  fields of science and engineering supported by NSF; helping influence new directions for research in science,  engineering, and education, including emerging interdisciplinary  fields; providing scientific leadership and management of NSF\u2019s research  and education programs; and providing opportunities for researchers to gain first-hand  knowledge of the philosophy and mechanisms of federal support  for research and bring this knowledge back to their home  institutions.", "According to NSF officials, the agency has not separately evaluated the  results of its rotator programs in part because rotators are blended into its  permanent federal workforce, making it difficult to evaluate the results of  its rotator programs separately from those of its overall workforce. In our  December 2003 report on key principles for effective strategic workforce  planning, we found that federal agencies in general have experienced  difficulties in defining practical and meaningful measures that assess the  effects human capital strategies have on programmatic results. However,  without an evaluation of the extent of the rotator programs\u2019 contributions  toward NSF\u2019s human capital goals or programmatic results, NSF is limited  in its ability to demonstrate the programs\u2019 benefits to external  stakeholders, such as the Congress, and to adjust the programs, if  warranted. Such adjustments could include increasing or decreasing the  use of rotators overall or in certain types of positions, such as executive  or staff-level positions."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In recent years, NSF has recognized the need to think more strategically  about its use of rotators and has taken positive steps to manage its  rotator programs. For example, beginning in fiscal year 2017, NSF  adopted several strategies to manage the cost of rotators. However, as of  June 2018, NSF had decided against developing a separate agency-wide  strategy for balancing its use of IPA rotators and federal staff, as NSF\u2019s  steering committee for the IPA program recommended in February 2017.  NSF officials said that they recognized the value in having a workforce  strategy but wanted to focus instead on addressing OPM and OMB  requirements related to workforce planning. By following through on the  steering committee\u2019s recommendation for a workforce strategy, NSF  could better manage its use of rotators and balance them with its  permanent staff.", "Moreover, as of June 2018, NSF had not fully evaluated the results of the  rotator programs, as called for by key principles for effective strategic  workforce planning. NSF officials told us they have not done so, in part,  because rotators are blended into NSF\u2019s permanent federal workforce,  making it difficult to evaluate the results of its rotator program separately  from those of its overall workforce. However, without an evaluation of the  extent of the rotator programs\u2019 contributions toward NSF\u2019s human capital  goals or programmatic results, NSF is limited in its ability to demonstrate  the programs\u2019 benefits to external stakeholders, such as the Congress,  and to adjust the programs, if warranted."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to NSF:   The NSF Director of Human Resource Management should complete the  development of an agency-wide workforce strategy for balancing the  agency\u2019s use of IPA and VSEE rotators with permanent staff as part of  NSF\u2019s current agency reform planning efforts or updates to its human  capital operating plan. (Recommendation 1)", "The NSF Director of Human Resource Management should evaluate the  contributions of the IPA and VSEE rotator programs toward NSF\u2019s human  capital goals and the contributions the programs have made toward  achieving programmatic results. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to NSF for comment. In its written  comments, which are reproduced in appendix I, NSF concurred with our  recommendations and stated that implementation of the  recommendations will enhance efforts to fulfill the agency\u2019s mission and  strengthen its workforce. NSF also provided technical comments, which  we incorporated as appropriate.", "We are sending copies to the appropriate Congressional Committees, the  Director of the National Science Foundation, and other interested parties.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or neumannj@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the National Science Foundation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Joseph Cook (Assistant  Director), Nkenge Gibson, Kathryn Smith, and Douglas Hunker made key  contributions to this report. Also contributing to this report were Antoinette  Capaccio, Serena Lo, Timothy Guinane, Cynthia Norris, and Sara  Sullivan."], "subsections": []}]}], "fastfact": ["The National Science Foundation (NSF) brings in outside scientists, engineers, and educators on temporary, rotational assignment to work with its staff of permanent federal employees to help decide which projects the agency will fund.", "NSF wants to take a more strategic approach to managing its rotating staff. However, these rotating staff are blended with permanent staff, making it difficult to evaluate the cost and benefits of their contributions to NSF projects.", "We recommended that NSF develop a strategy to balance the use of rotating and permanent staff and evaluate the benefits of using rotating staff."]}
{"id": "GAO-19-230", "url": "https://www.gao.gov/products/GAO-19-230", "title": "Data Breaches: Range of Consumer Risks Highlights Limitations of Identity Theft Services", "published_date": "2019-03-27T00:00:00", "released_date": "2019-03-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Recent large-scale data breaches of public and private entities have put hundreds of millions of people at risk of identity theft or other harm. GAO was asked to review issues related to consumers' options to address risks of harm from data breaches. This report, among other things, examines information and expert views on the effectiveness of consumer options to address data breach risks. GAO analyzed available data on options, collected and analyzed related documentation, conducted a literature review of studies, and interviewed a nongeneralizable sample of 35 experts (from academia, government entities, consumer and industry organizations) and identity theft service providers to reflect a range of views."]}, {"section_title": "What GAO Found", "paragraphs": ["No one solution can address the range of potential risks from a data breach, according to interviews with academic, consumer, government, and industry experts and documentation GAO reviewed. Perpetrators of fraud can use stolen personal information\u2014such as account numbers, passwords, or Social Security numbers\u2014to take out loans or seek medical care under someone else's name, or make unauthorized purchases on credit cards, among other crimes. Foreign state-based actors can use personal information to support espionage or other nefarious uses.", "Public and private entities that experience a breach sometimes provide complimentary commercial identity theft services to affected individuals to help monitor their credit accounts or restore their identities in cases of identity theft, among other features. Consumers also may purchase the services. As of November 30, 2018, the Office of Personnel Management (OPM) had obligated about $421 million for a suite of credit and identity monitoring, insurance, and identity restoration services to offer to the approximately 22 million individuals affected by its 2015 data breaches. As of September 30, 2018, about 3 million had used the services and approximately 61 individuals had received payouts from insurance claims, for an average of $1,800 per claim. OPM re-competed and awarded a contract to the previously contracted company in December 2018.", "GAO's review did not identify any studies that analyzed whether consumers who sign up for or purchase identity theft services were less subject to identity theft or detected financial or other fraud more or less quickly than those who monitored their own accounts for free. A few experts said consumers could sign up for such services if offered for free. Credit monitoring may be convenient for consumers and personalized restoration services may help identity theft victims recover their identities, but such services do not prevent fraud from happening in the first place. The services also do not prevent or directly address risks of nonfinancial harm such as medical identity theft.", "Consumer, government, and industry experts highlighted other free options, including a credit freeze, which prevents one type of fraud. A freeze restricts businesses from accessing a person's credit report\u2014and can prevent the illicit opening of a new account or loan in the person's name. A provision of federal law that took effect in September 2018 made it free for consumers to place or lift credit freezes quickly at the three nationwide consumer reporting agencies (Equifax, Experian, and TransUnion). Consumers also can regularly monitor their accounts and review their credit reports for free every 12 months. In addition, they can take advantage of free federal assistance such as the guidance on the Federal Trade Commission's IdentityTheft.gov website.", "Finally, large amounts of personal information are outside of consumers' control and bad actors can use stolen information for years after a breach. Therefore, experts noted that data security at entities that hold such information\u2014and efforts to make stolen information less useful for identity thieves, through use of new identity verification technologies, for example\u2014are important ways to mitigate risks of harm for consumers."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO reiterates a matter for congressional consideration and a recommendation from its 2017 report on identity theft services ( GAO-17-254 ). In that report, GAO found that legislation requiring federal agencies that experience data breaches, including OPM, to offer certain levels of identity theft insurance coverage to affected individuals requires coverage levels that are likely unnecessary. Therefore, Congress should consider permitting agencies to determine the appropriate coverage level for such insurance. GAO also recommended the Office of Management and Budget (OMB) update its guidance for agency responses to data breaches, after analyzing the effectiveness of identity theft services relative to lower-cost alternatives. OMB did not agree or disagree and had not taken action as of early March 2019."]}], "report": [{"section_title": "Letter", "paragraphs": ["Sensitive personal information\u2014such as Social Security numbers or  dates of birth\u2014can be exposed in several ways, including on a very large  scale through a data breach. For example, major retail and hotel chains  have suffered data breaches that exposed the identifying information,  including financial account or Social Security numbers, of millions of  people. Consumers whose information is exposed can be at risk of a  range of harms, including identity theft or fraud. Consumers can try to  prevent or mitigate these harms in a number of ways, such as monitoring  their credit reports and credit card statements for suspicious activity, or  placing a credit freeze that restricts access to their credit report. They  also may enroll in free or fee-based identity theft services. Private-sector  and government entities that experienced data breaches have provided  these services to millions of affected consumers.", "In March 2017, we reported on the potential benefits and limitations of  commercially available identity theft services and factors that affect  public- and private-sector decision-making about them. Since that time,  additional large-scale data breaches have occurred and Congress passed  legislation that enhances some of the options available to consumers to  prevent or mitigate identity theft. You asked us to review issues related to  actions consumers can take to address risks of harm from data breaches.  This report examines (1) information and expert views on the  effectiveness of options consumers can use to prevent or address the  risks resulting from data breaches; and (2) federal assistance available to  help consumers understand these options, including the status of one  matter for congressional consideration and one recommendation relating  to these issues in our 2017 report.", "To address the first objective, we conducted a literature review to identify  any studies or independent research on the effectiveness of consumers\u2019  options for mitigating or preventing harm from exposure of personal  information. We also searched for studies that examined consumer  attitudes and behavior following data breaches, and harms to individuals  from data breaches. We interviewed a nongeneralizable sample of  experts and private companies that provide identity theft services to  consumers. Specifically, we interviewed representatives of 35 entities in  the following categories: academic or independent research institution (4);  consumer or privacy research and advocacy (10); industry association or  identity theft service provider, or industry consultant (12); and federal or  state government (9). We selected the experts and identity theft service  providers to represent a range of perspectives. We also reviewed  provisions in the Economic Growth, Regulatory Relief, and Consumer  Protection Act, enacted in May 2018, that address credit freezes and fraud alerts (two tools for preventing one type of identity theft).  Furthermore, we reviewed the evidence collected for the 2017 GAO  report on identity theft services.", "To address the second objective, we reviewed documentation and  interviewed staff from the Federal Trade Commission (FTC), Consumer  Financial Protection Bureau (CFPB), and Office of Personnel  Management (OPM). We analyzed data from the company that  contracted to provide identity theft services to individuals affected by two  data breaches at OPM in 2015. We assessed the reliability of the data by  interviewing agency officials and reviewing documentation about the  systems used to store the data. We found the data to be reliable for  purposes of this reporting objective. We also reviewed documentation  and interviewed agency staff about the development, implementation, and  assessment of their consumer education materials and other resources  and assistance. We compared these activities against a 2014 Executive  Order on the security of consumer financial transactions, key practices for  consumer education planning identified in our prior work, and federal  standards for internal control. In addition, we followed up on  recommendations made in our 2017 report. For more information on our  scope and methodology, including the organization representatives we  interviewed, see appendix I.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Harm from Exposure of Personal Information", "paragraphs": ["Individuals\u2019 sensitive personal information can be lost, stolen, or given  away. Once exposed, individuals\u2019 information can be misused to commit  identity theft, fraud, or inflict other types of harm. Identity theft occurs  when individuals\u2019 information is used without authorization in an attempt  to commit fraud or other crimes. In 2016, according to the Bureau of  Justice Statistics, an estimated 26 million people\u201410 percent of U.S.  residents aged 16 or older\u2014reported that they had been victims of  identity theft in the previous year. One potential source of identity theft is  a data breach at an organization that maintains large amounts of  sensitive personal information. Recent data breaches include the 2018  breach of Marriott International\u2019s Starwood guest registration database,  which may have exposed information of millions of individuals, and the  2017 data breach at Equifax, Inc., a nationwide consumer reporting  agency, which exposed identifying information of at least 145.5 million  people. The types of harm that can result from exposure of sensitive  personal information include the following:", "Financial fraud from identity theft, which can include new-account fraud, in which thieves use identifying data, such as  Social Security and driver\u2019s license numbers, to open new  financial accounts without that person\u2019s knowledge; and, existing-account fraud, which is more common and entails the  use or takeover of existing accounts, such as credit or debit card  accounts, to make unauthorized charges or withdraw money.", "Tax refund fraud, which occurs when a Social Security number or  other personally identifiable information is used to file a fraudulent tax  return seeking a refund.", "Government benefits fraud, which occurs when thieves use stolen  personal information to fraudulently obtain government benefits. For  example, the Social Security Administration has reported that  personal information of beneficiaries has been used to fraudulently  redirect the beneficiary\u2019s direct deposit benefits.", "Medical identity theft, which occurs when someone uses an  individual\u2019s name or personal identifying information to obtain medical  services or prescription drugs fraudulently, including submitting  fraudulent insurance claims.", "Synthetic identity theft, which involves the creation of a fictitious  identity, typically by using a combination of real data and fabricated  information. The federal government has identified synthetic identity  theft as an emerging trend.", "Child identity theft, which occurs when a child\u2019s Social Security  number or other identifying information is stolen and used to commit  fraudulent activity.", "Other types of fraud that occur when personal information is used;  for example, to set up mobile phone or utility accounts, or to engage  in activities such as applying for employment or renting a home.", "The harms caused by exposure of personal information or identity theft  can extend beyond tangible financial loss, including the following:", "Lost time. Victims of identity theft or fraud may spend significant  amounts of time working to restore their identities. In 2016, according  to the Bureau of Justice Statistics survey of identity victims, most  victims resolved issues in 1 day or less but about 1 percent of victims  spent 6 months or more resolving their identity theft issues.", "Emotional distress and reputational harm. Exposed information  also can cause emotional distress, a loss of privacy, or reputational  injury. In 2016, according to the Bureau of Justice Statistics, about 10  percent of those who experienced identity theft reported suffering  severe emotional distress.", "Harm from state-based actors. State-sponsored espionage can  cause harm to individuals when nations use cyber tools as part of  information-gathering, espionage, or other nefarious activities."], "subsections": []}, {"section_title": "Consumers\u2019 Options to Address Risks or Harm", "paragraphs": ["Options available to consumers to help prevent or mitigate identity theft  include actions they can take on their own (generally for free) or services  they can purchase.", "Actions individual consumers can take themselves include the following:", "Placing a credit freeze. A credit or security freeze restricts potential  creditors from accessing a credit report until the consumer asks the  agency to remove or temporarily lift the freeze.", "Placing a fraud alert. A fraud alert on a credit report requires  businesses to verify a consumer\u2019s identity before they issue credit.", "Monitoring accounts and other information.", "Reviewing free annual credit reports. Individuals can request  one copy of their credit report every 12 months (available for free  at AnnualCreditReport.com).from each of the three nationwide  consumer reporting agencies.", "Reviewing financial statements and other accounts.", "Individuals can review bank and other financial statements  regularly for suspicious activity and make use of automatic  transaction alerts and other free features that financial institutions  offer to detect potential fraud. Individuals also can regularly review  mobile phone or utility accounts for unusual activity.", "Reviewing health insurance benefits explanations and  medical information. Individuals can review explanation-of- benefits statements from their health insurer to detect fraudulent  insurance claims or monitor their files at their healthcare providers  to detect unauthorized use of medical services.", "Consumers also can obtain various free or fee-based identity theft  services, which are commercial products that generally offer tools  intended to help consumers detect identity theft and restore their identity  if it has been compromised. The private research firm IBISWorld  estimated that the U.S. market for identity theft services was about $3  billion annually in 2015\u20132017. The services may be marketed directly to  individuals for a monthly or annual fee. In addition, private- and public- sector entities that have experienced data breaches sometimes purchase  these services and offer them to affected individuals at no cost.", "Identity theft services most often include credit monitoring, which tracks an individual\u2019s credit reports and  sends alerts about potentially suspicious activity;  identity monitoring, which aims to monitor other sources such as  public records and illicit websites (sometimes referred to as the  \u201cdark web\u201d);  identity restoration, which provides a range of services to  recover from identity theft; and  identity theft insurance, which reimburses individuals for certain  costs related to the process of restoring identities.", "Other actions consumers can take to protect their identity include  adoption of certain data security practices and early filing of tax returns.  Data security practices can help protect sensitive information. For  example, individuals can change or avoid sharing or re-using passwords,  and make use of strong passwords and authentication options on online  accounts; properly safeguard or shred sensitive paper documents; and  limit access to their sensitive information on social media. Filing a tax  return early reduces the risk of tax refund fraud, and some victims of tax  refund fraud may be eligible for an Identity Protection Personal  Identification Number (PIN)\u2014issued by the Internal Revenue Service  IRS)\u2014to prevent future fraud. To protect their Social Security benefits,  individuals can set up an online account at the Social Security  Administration to monitor their benefits accounts."], "subsections": []}]}, {"section_title": "Limited Information Is Available on Effectiveness of Options after Data Breaches, but Credit Freezes Can Prevent New-Account Fraud", "paragraphs": ["We did not identify any studies that analyzed whether consumers who  sign up for or purchase identity theft services encounter fewer instances  of identity theft or detect instances of financial or other fraud more\u2014or  less\u2014rapidly than consumers who take steps on their own. Views of  experts varied, but most said identity theft services have limitations and  would not address all data breach risks. Most experts also said that a  credit freeze, which consumers place on their own for free, is a useful  way to prevent one type of financial fraud\u2014the illegal opening of new  credit accounts in consumers\u2019 names. Based on our review and  discussions with experts, consumers can consider four factors when  deciding on options to address risks after a data breach: the extent to  which an option might prevent fraud; the cost of an option; its  convenience; and the type of information that was exposed and may be at  risk."], "subsections": [{"section_title": "No Independent Research Assesses Effectiveness of Consumer Options to Address Risks after Data Breaches", "paragraphs": ["Information that can help consumers assess their options for mitigating  and addressing the risks of identity theft and other harm from data  breaches is limited. Specifically, we did not identify any studies that  analyzed whether consumers who sign up for free or purchase identity  theft services encounter fewer instances of identity theft or detect  instances of financial or other fraud more\u2014or less\u2014rapidly than  consumers who take steps on their own for free\u2014such as monitoring their  credit reports or placing a credit freeze. For consumers who experienced  identity theft, we did not find any studies that compared the effectiveness  of free options to help consumers recover from identity theft with  commercial identity restoration services. In addition to searching  databases of scholarly publications and other sources, a range of  academic, consumer, government, and industry experts we interviewed  told us that they were unaware of any specific independent studies on the  effectiveness of consumer options.", "We interviewed representatives of seven companies that provide identity  theft services about how they assess the effectiveness of their services  and found that what they measure does not directly address how effective  these services would be in mitigating the risks of identity theft compared  with options consumers can take on their own. For example, two  company representatives said that their services focus on detection of  fraudulent activity or assistance after identity theft has occurred, rather  than on prevention of identity theft or other harms. The representatives of  each of the providers said that their companies generally measure how  customers use their products and services; customer satisfaction (for  example, through surveys or other feedback); and whether the products  work as intended (for example, whether alerts of fraudulent activity are  successfully delivered to customers or customers can successfully  access the company\u2019s website when they need to). Companies that offer  identity restoration services also measure the rate at which they complete  the process of recovering stolen identities. While it is not possible to  prevent identity fraud, four representatives said that early detection of  fraud is important as it allows consumers to address potential fraud more  quickly.", "FTC, a primary source for assistance to consumers on issues related to  data breaches and identity theft, has advised consumers that the  effectiveness of services that offer identity monitoring depends on factors  such as the kinds of databases the service provider monitors, how well  the databases collect information, and how often the service provider  checks each database. For example, FTC suggests that consumers ask  if service providers check databases that show payday loan applications  or changes in addresses for misuse of their information as part of identity  monitoring. In reviewing consumer education and promotional materials  on the websites of five identity theft service companies we contacted that  offer identity monitoring, we found that three providers included  information about which types of databases they monitor; the other two  did not.", "Government and commercial entities\u2014such as federal agencies and  retail stores\u2014that decide to purchase identity theft services to offer to  affected individuals after a breach of their data do not necessarily base  their decision on how effective these services are. Rather, according to  industry and some government representatives we interviewed, some  base their decisions on federal or state legal requirements to offer such  services and the expectations of affected customers or employees for  some action on the breached entities\u2019 part. Representatives of retail and  banking associations we interviewed indicated that it has become the  industry standard to offer 1 year of credit or identity monitoring services in  the wake of a data breach. One industry representative said that in some  cases the decision is not based on the effectiveness of the services.  States such as California require companies to offer some type of identity  theft service after a data breach. Moreover, Connecticut requires health  insurers and certain health care-related companies to offer identity theft  services following an actual or suspected data breach. In 2017, we  reported that companies do not assess the effectiveness of an identity  theft provider\u2019s services when selecting a vendor to provide such  services. Rather, they consider other selection factors, including price,  reputation, capacity to respond quickly to large-scale breaches, and  ability to provide comprehensive post-breach services, such as complying  with statutory notification requirements. But companies that purchase  identity theft services may be in a position to obtain more detailed  information from potential providers than is publicly available to  consumers."], "subsections": []}, {"section_title": "Views of Experts Varied, but Most Said Identity Theft Services Have Limitations and Would Not Address All Data Breach Risks", "paragraphs": ["In the absence of independent evidence of the effectiveness of identity  theft mitigation options, we interviewed representatives and reviewed  consumer education materials, working papers, and articles from  academic, consumer, industry, and government entities. No one solution  can protect against the full range of risks to individuals whose personal  information was exposed in a data breach, based on our review of  documentation and the views of academic, consumer, government, and  industry experts. We obtained perspectives on the value of options  available to consumers. The following summarizes key observations:  Identity theft services. Representatives of 9 of the 10 consumer groups  we interviewed generally viewed credit or identity monitoring (or both) to  be of limited value. However, one consumer group representative noted  that identity monitoring might be useful in circumstances in which Social  Security numbers were compromised. In addition, a few consumer group  representatives indicated that consumers could consider signing up for  such services if they are offered for free. If identity theft services are not  free, FTC and CFPB consumer education materials recommend that  consumers consider the benefits and limitations of such services and  compare them to free or low-cost options before signing up. A few  consumer groups and one academic highlighted that consumers may not  fully understand the limitations of signing up for identity theft services. A  few consumer group representatives and one industry and state  government representative cautioned that free services may be offered for only 1 or 2 years; exposed information can be used for identity theft or  other harms over a much longer period. For example, in 2017, we  reported that nation-state actors that steal consumer data as part of their  espionage activities can wait much longer than a private identity thief to  use compromised information (if at all), according to one identity theft  service provider. In addition, CFPB consumer information and a few  consumer group representatives noted that consumers should be aware  that some services may try to charge consumers after the free period  ends.", "Some consumer group and one industry representatives also said that  the value of one feature of identity monitoring\u2014dark web monitoring\u2014is  unclear. One representative said that there is nothing new that  consumers can do once they learn their information was found on an illicit  website. Rather, they must continue to monitor their accounts as they  already should have been doing. In addition, one consumer group  representative indicated that these services may provide consumers with  a false sense of security.", "Experts we interviewed for our 2017 report said that identity restoration in  particular could be helpful to consumers. FTC staff and one consumer  group representative we interviewed said that one-on-one assistance can  be helpful. Identity restoration typically is included with other identity theft  services rather than offered as a stand-alone service. However, the level  of service provided in identity restoration can vary substantially\u2014some  providers offer individualized hands-on assistance, while others largely  provide self-help information that is of more limited value. In our 2017  report, we also found that another feature of identity theft services,  identity theft insurance, may provide minimal benefits for consumers.  More details about identity theft insurance appear later in this report.", "Options to prevent fraud or harm unrelated to credit accounts.  Consumers have limited options to mitigate risks of other harms from data  breaches, such as medical identity theft and identity theft tax refund fraud.  Commercial identity theft services, credit freezes, and fraud alerts do not  directly address these risks. Some consumer, government, and industry  representatives cited self-monitoring as a way for consumers to be on the  alert for these other types of fraud.", "Consistent with our 2017 report, identity theft service providers we  interviewed generally indicated that their products and services do not  directly monitor for these types of fraud. However, two noted that they  would assist with any identity restoration involving medical identity theft,  tax refund fraud, or government benefits fraud (such as fraudulently  redirecting Social Security benefits). Identity theft services also may  address these types of fraud indirectly\u2014for example, detecting a  fraudulent change of address can prevent sensitive health insurance  information from being redirected to the fraudster. A few consumer  groups said that consumers may not understand which risks commercial  identity theft services address. Additionally, we reported in 2017 that  identity theft services do not address non-financial harms, such as  emotional distress, embarrassment, and harm to one\u2019s reputation. For  example, a House Committee report on the OPM data breaches noted  that the information stolen from background investigations included some  of the most intimate and potentially embarrassing aspects of a person\u2019s  life, such as mental health history, misuse of alcohol or drugs, or  problems with gambling. Identity theft services also may be of limited  value in cases of nation-state espionage. For example, in 2017, we  reported that when the source of the data breach appears to be a nation  state (as opposed to a private party), the risk of the information being sold  for monetary purposes is likely to be lower, according to an FTC  representative.", "Importance of data security. In the view of some experts, entities such  as the federal government and private companies that hold consumer  data have a responsibility to protect those data. A few experts said that  the burden should not be on consumers to protect data they do not  control. Except in certain circumstances, companies are generally not  required to be transparent about the consumer data they hold or how they  collect, maintain, use, and secure these data. Identity theft service  providers may contract with third parties such as consumer reporting  agencies or with third-party identity monitoring providers, such as dark  web monitoring services. Moreover, one consumer group representative  noted that identity monitoring services require consumers to provide  additional personal information to enroll\u2014which also could be  compromised if the service provider\u2019s information were breached.", "Finally, consumer group and government researchers we interviewed  suggested other options that entities can (or already) use to address risks  of harm. For example, one government researcher noted that financial  institutions have started to use multifactor authentication and other  technologies that can help institutions verify a consumer\u2019s identity and  thus help prevent fraud. Multifactor authentication involves first logging  into an online account using the traditional username and password, and  then the institution sending a verification code to a mobile phone or e-mail  address that the consumer must enter as part of the log-in process. In  addition, one researcher noted that some institutions have started to use  facial recognition technology, or to ask an account holder to provide  answers to questions such as the size of the account holder\u2019s last  deposit. Other biometric technologies such as fingerprint recognition on  mobile phones, or one-time passcodes that are synced with financial  institutions\u2019 websites, also can help, according to one researcher and one  consumer group representative. Other strategies can focus on reducing  the riskiness of breaches by making information less useful for purposes  of committing identity theft. For example, one researcher noted that  organizations could encrypt data or use tokens so static account numbers  could not be used on their own. There is no single solution to address all  risks of harm, based on our review of documentation and the views of  academic, consumer, government, and industry experts."], "subsections": []}, {"section_title": "Consumers Can Use Free Credit Freezes and Fraud Alerts to Effectively Prevent New-Account Fraud", "paragraphs": ["A credit freeze is the only consumer option that can prevent one type of  identity theft-related fraud, and recent federal legislation made credit  freezes free and easier to place or lift. This option is effective because it  restricts potential creditors from accessing a consumer\u2019s credit report to  open a new account until the consumer asks the nationwide consumer  reporting agency to remove or temporarily lift the freeze. In contrast,  identity theft services and self-monitoring detect or remediate identity theft  after it has occurred, but do not prevent the fraud from occurring in the  first place. We interviewed representatives, or reviewed the consumer  education or informational materials, of consumer, industry, and  government entities and found that almost all of them included credit  freezes on credit reports as a useful consumer option to protect against  identity theft.", "More specifically, the Economic Growth, Regulatory Relief, and  Consumer Protection Act, which took effect on September 21, 2018,  required the three nationwide consumer reporting agencies (Equifax,  Experian, and TransUnion) to make placing and lifting freezes free and  specifies that the agencies must place a freeze within 1 business day,  and lift it within 1 hour, of receiving a telephone or electronic request (see  fig. 1). Consumers must contact each of the three agencies individually  and request the freeze. Consumers obtain a PIN from each company,  which enables them to lift or remove a freeze at a later date. Before the  2018 act, consumers typically had to pay $5-$10 per agency to place a  credit freeze. Some experts had noted cost and inconvenience as some  of the limitations to a credit freeze. The new law addresses these  concerns to some degree by making credit freezes free and requiring  these consumer reporting agencies to lift freezes expeditiously on  request.", "While the new law removed some barriers to placing credit freezes,  others still exist and the freezes have some limitations. For example,  consumers still have to lift a freeze before applying for a loan or new  credit account and need to place or remove a freeze at each consumer  reporting agency separately, which could cause delays for consumers  actively shopping for a home, car, or other purchase requiring the  extension of credit. Two consumer groups said that there is confusion  about how the law would affect minor children. (Under the new law, credit  freezes only can be placed on behalf of children under age 16, but not  minors ages 16 and 17\u2014who must place freezes themselves).", "Moreover, as the new law only applies to the three nationwide consumer  reporting agencies, credit freezes do not protect against new-account  fraud resulting from the use of credit reports from other consumer  reporting agencies. For example, one consumer group recommended that  consumers place a fourth freeze with the National Consumer Telecom  and Utilities Exchange\u2014a consumer reporting agency that maintains  credit reports that telecommunications or utilities companies may use to  check the creditworthiness of consumers interested in opening phone or  utility accounts. The law also permits insurance companies and  employers to continue to access credit reports even after they are frozen,  among other exceptions.", "One general limitation of credit freezes is that they do not protect against  new-account fraud in cases in which credit reports are not used to verify a  consumer\u2019s creditworthiness. Furthermore, credit freezes do not protect  against existing-account fraud, such as fraudulent credit card charges, or  certain other types of fraud, such as identity theft tax refund fraud or  synthetic identity fraud using elements of individuals\u2019 identity information.", "While experts with whom we spoke across industry, government, and  consumer groups generally believed credit freezes to be an effective tool  in preventing new-account fraud, some consumer and industry experts  indicated that fraud alerts also can be a good alternative for consumers.  Unlike a credit freeze, a fraud alert still allows companies to access an  individual\u2019s credit report for the purpose of opening a loan or credit  account. Fraud alerts notify companies requesting the reports that the  individual may have been a victim of identity theft. The alerts require  companies to verify consumers\u2019 identities before they issue credit to a  consumer. Fraud alerts therefore can make it harder for an identity thief  to open accounts in a consumer\u2019s name. Moreover, fraud alerts are  easier to place than credit freezes, as consumers only need to contact  one of the three nationwide consumer reporting agencies to place a fraud  alert (that agency is then obligated to contact the other two on the  individual\u2019s behalf). The Economic Growth, Regulatory Relief, and  Consumer Protection Act extended the period of an initial fraud alert from  90 days to 1 year.", "However, fraud alerts do not restrict access to consumers\u2019 credit reports  the way freezes do. Therefore, some consumer group and industry  representatives noted that consumers should be aware that a fraud alert  may not offer as strong a protection as a credit freeze does. We did not  find any data or analysis on the effectiveness of fraud alerts compared to  credit freezes or monitoring options. One consumer group told us that it  recommends that after a data breach consumers first place a fraud alert,  because it requires contacting only one of the three nationwide consumer  reporting agencies, and then follow up by placing a credit freeze at the  three agencies.", "The three nationwide consumer reporting agencies also offer a product  called a credit lock that is functionally similar to a credit freeze in that it  restricts access to an individual\u2019s credit report. Credit locks do not require  consumers to use a PIN and consumers can turn access to credit reports  on or off through an application on their mobile phone. However, credit  locks are not subject to the same federal requirements regarding the  placement and removal of freezes and therefore do not offer the same  degree of protection to consumers. Instead, credit locks are private  products subject to the consumer reporting agencies\u2019 terms and  conditions, which could change. A credit lock is in place only as long as  the individual subscribes to an agency\u2019s service, but a credit freeze  remains in place until the consumer chooses to remove it. Finally,  consumers may be charged a fee to place a credit lock, whereas credit  freezes can now be placed for free."], "subsections": []}, {"section_title": "Factors Consumers Can Consider When Assessing Options after Data Breaches", "paragraphs": ["Based on our interviews and review of consumer education materials and  our 2017 report, we identified four factors that consumers can consider in  deciding which options are best for them in responding to a breach of  their personal information:", "Prevention. Consumers can consider the extent to which an option  might prevent fraud. For example, because credit freezes block all  access to an individual\u2019s credit report, by definition they are effective  in preventing new-account fraud where credit reports are used as part  of the account-opening process. Identity theft services do not prevent  fraud, but detect suspicious activity or help restore identities after  identity theft.", "Cost. Consumers can consider the cost of a service. For instance,  consumers can consider whether to pay for commercial identity theft  services if they believe the value of the service outweighs the effort of  monitoring their accounts on their own. In addition, they may consider  that credit freezes now are available for free.", "Convenience. Consumers may consider the convenience of a  service. For example, while consumers can monitor their own credit  reports and accounts, some might prefer not to or may be limited in  their ability to do so. In addition, technologies offered through financial  institutions that automatically alert customers to any transactions  involving their accounts can be a convenient, no-cost way for  consumers to monitor their accounts.", "Type of information at risk. Finally, several experts from consumer  and industry organizations indicated that the type of option that might  be beneficial would depend on the type of information at risk. For  example, one consumer group representative noted that if a credit  card number were stolen, an identity monitoring service that  monitored the dark web for Social Security numbers might not be  needed. Furthermore, consumers should consider that credit  monitoring will be of limited effectiveness in alerting them to misuse of  an existing credit account\u2014which is more common than fraud related  to setting up new accounts. For more information on consumers\u2019  options, see appendix II."], "subsections": []}]}, {"section_title": "Federal Agencies Provide Assistance to Consumers Affected by Data Breaches and Identity Theft", "paragraphs": ["Among federal agencies, FTC serves as a primary source for free  assistance (including online resources, educational outreach, and  customized assistance through IdentityTheft.gov) to consumers on ways  to respond to data breaches, identity theft, and related harm.  Approximately 13 percent of those affected by the 2015 OPM breaches  used credit and identity monitoring and identity restoration services that  OPM offered them and a fraction of a percent made identity theft  insurance claims (the payouts for which averaged $1,800). Data we  assessed for this report support a 2017 recommendation we made to the  Office of Management and Budget (OMB) to revise guidance to federal  agencies about responding to data breaches and one to Congress to  consider permitting agencies to determine appropriate levels of identity  theft insurance offered after data breaches."], "subsections": [{"section_title": "FTC Is Primary Provider of Federal Assistance to Consumers Affected by Data Breaches and Identity Theft", "paragraphs": [], "subsections": [{"section_title": "Federal Trade Commission", "paragraphs": ["FTC, as a primary source for assistance to consumers on issues related  to data breaches and identity theft, provides guidance and assistance  through its website and through conferences and workshops.", "Online and printed resources. FTC\u2019s home page includes links to  identity theft-related resources, including information about key options  consumers can consider to help them mitigate identity theft risks and  other harms, and a link to IdentityTheft.gov (discussed later in this  section). FTC updates the information regularly, such as after large-scale  data breaches.", "Outreach. FTC maintains relationships with state government, law  enforcement, and community and consumer organizations, through which  it conducts outreach about how to respond to exposure or loss of  personal information and identity theft mitigation. For example, FTC  collaborated with the International Association of the Chiefs of Police to  update the association\u2019s model policy for identity theft to include referral  information for IdentityTheft.gov. FTC also has held webinars,  conferences, and workshops on topics related to data breaches and  identity theft for groups including government officials, nonprofits, and the  general public.", "Customized assistance (IdentityTheft.gov). FTC provides information  and customized assistance through IdentityTheft.gov to individuals whose  information was lost or stolen or who experienced identity theft or other  harm, such as tax refund fraud. During fiscal year 2018, IdentityTheft.gov  received almost 2 million unique visitors. The website in its current form  has been in place since January 2016 and offers the following types of  assistance:", "Steps to take after identity theft. IdentityTheft.gov provides  individual victims with step-by-step instructions to resolve specific  problems. From January 2016 (when FTC launched the current  version of IdentityTheft.gov) through October 1, 2018, approximately  700,000 individuals set up and activated accounts on the website to  help them recover from identity theft. Individuals who set up accounts  can indicate what kind of information was stolen and what kind of  adverse event they experienced. The site helps users generate pre- filled letters, affidavits, and forms to send to consumer reporting  agencies, businesses, debt collectors, and IRS, as appropriate. For  example, individuals who fill out an Identity Theft Report affidavit can  use this report instead of filing a police report to request extended 7- year fraud alerts (available to identity theft victims) on their credit  reports. In addition, individuals who experienced tax refund fraud can  fill out a form on IdentityTheft.gov that is then submitted directly to  IRS. An individual who experienced credit card fraud would be  advised to take different steps than one who experienced fraud  related to utility bills or medical insurance.", "Steps to take after data breaches or loss of personal information.", "IdentityTheft.gov/databreach provides checklists and suggestions for  people whose personal information was lost or exposed but has not  yet been misused.", "FTC also maintains an online chat function and telephone number for  those who need additional assistance. For complex cases, FTC staff may  refer individuals to the Identity Theft Resource Center, a nonprofit  organization.", "We found that in developing and updating the website, FTC followed  some key practices for consumer education planning. One key practice  we identified was consulting with stakeholders. According to FTC staff we  interviewed and documentation we reviewed, FTC obtained feedback  from stakeholders such as law enforcement agencies and community  organizations in developing IdentityTheft.gov. Another key practice we  identified was assessing users\u2019 needs. FTC conducted usability testing to  ensure the site\u2019s features were easy to use. FTC staff also told us that  after receiving user feedback, they made it easier for users to set up an  account. FTC also made changes to IdentityTheft.gov\u2014such as  incorporating the ability to auto-generate forms\u2014to implement a 2014  Executive Order calling for federal agencies to centralize identity theft  information at the website. Furthermore, in January 2018, FTC  implemented a new function that allows users who report identity theft tax  refund fraud to file reports directly with IRS. Since its launch in early 2018  through October 1, 2018, almost 22,000 IRS Identity Theft Affidavits (IRS  Form 14039) were submitted to IRS through IdentityTheft.gov. In general,  experts across consumer, government, and industry organizations and  identity theft service providers we interviewed expressed the view that  IdentityTheft.gov is a valuable or user-friendly resource."], "subsections": []}, {"section_title": "Other Federal Agency Resources", "paragraphs": ["Other federal agencies provide assistance to consumers on topics related  to identity theft, including CFPB, the Department of Justice, IRS, and the  Social Security Administration.", "CFPB. CFPB enforces, supervises for compliance with, and issues  regulations to implement the federal consumer financial laws that address  certain firms\u2019 and financial institutions\u2019 practices, which may include data  security. A few of these laws and regulations contain provisions that can  help protect the personal information of consumers. CFPB also offers  consumer education resources.", "Similarly to FTC, CFPB included information about how consumers can  address risks related to exposure of personal information and recover  from identity theft in the bureau\u2019s overall consumer education activities.  CFPB provides consumer education materials related to data breaches  and identity theft through its blog and its financial education resource,  \u201cAsk CFPB.\u201d CFPB also maintains relationships with external groups,  such as librarian networks. CFPB provides links to FTC resources about  data breaches and identity theft topics on its website, so as not to  duplicate efforts, according to CFPB staff. The two agencies also have  coordinated some efforts. FTC and CFPB published a jointly produced  blog post on September 21, 2018, the date the new free credit freeze and  1-year fraud alert provisions took effect. Such coordination is consistent  with the 2014 Executive Order, which designated FTC as a centralized  source of information about identity theft across the federal government.", "Staff of both agencies said that in developing new resources, they  monitor information from a variety of sources, including consumer  complaints, news and social media, and reports from other government  entities, law enforcement, or nongovernmental stakeholders.", "Other federal and state agencies. IRS and the Social Security  Administration provide some assistance to consumers for specific types  of identity theft. For example, as noted previously, IRS provides some  taxpayers with PINs if they are victims of identity theft tax refund fraud. In  addition, states enforce laws and regulations and provide consumer  education resources and assistance to consumers at risk of identity theft and other harms as a result of data breaches. For example, the Illinois  Attorney General\u2019s office maintains a call-in number for victims of identity  theft, and the Colorado Bureau of Investigation can assist residents with  identity theft issues."], "subsections": []}]}, {"section_title": "Few People Used Identity Theft Services OPM Provided, Very Few Made Insurance Claims, and Payouts Received Were Low", "paragraphs": ["OPM offered identity theft services to approximately 22.1 million  individuals whose personal information was compromised during the  2015 data breaches at OPM. Personnel records or OPM systems  containing information from the background investigations of current,  former, and prospective federal employees and other individuals were  breached. The services, offered at no cost to affected individuals,  included credit monitoring, identity monitoring, identity restoration  services, and identity theft insurance. To receive credit and identity  monitoring services, affected people have to enroll with the identity theft  service provider with which OPM contracted, but identity theft insurance  and identity theft restoration services are available to the entire affected  population whether or not they enroll.", "Few affected individuals have used the services. According to data from  OPM, as of September 30, 2018, close to 3 million, or 13 percent, of  individuals affected by the 2015 incidents had made use of the services.  As seen in figure 2, the great majority of enrollments occurred in the  months immediately following notification of the breach. OPM staff said  that the spike in enrollments in July and August 2016 likely was due to the  follow-up mailing that OPM sent to approximately 10 percent of affected  individuals whose mailing addresses were incorrect in the original mailing  of notifications.", "In addition, according to OPM-reported data we reviewed, of the 3 million  individuals who used the services, about 1 percent made identity  restoration requests and a fraction of 1 percent submitted insurance  claims. According to data we reviewed, approximately 27,000 identity  restoration cases had been resolved as of September 30, 2018. In  addition, 61 insurance claims (of 81 submitted) had been paid, totaling  $112,000, with an average payout of $1,800.", "Since 2015, OPM has obligated approximately $421 million for identity  theft services and as of November 30, 2018, OPM paid out approximately  $361 million of the obligated funds. OPM is required to provide identity  theft services through September 2026. The contract to provide these  services on behalf of OPM expired in December 2018; OPM re-competed  and awarded a single contract that month to ID Experts, the company that  had been providing these services.", "After the OPM breaches in 2015, OPM provided federal employees and  other affected individuals with information and guidance about their  options in mailed letters and on its website. On its website, OPM  developed a Cybersecurity Resource Center and included background  about the breaches and who was affected; instructions for how to enroll in  identity theft services; and a Frequently Asked Questions webpage that  included links to FTC resources, including IdentityTheft.gov. OMB\u2019s 2017  policy guidance to federal agencies, including OPM, states that agencies  should determine appropriate information to provide to affected  individuals and review breach responses annually. Consistent with that  guidance, OPM\u2019s September 2017 Breach Response Plan calls for the  agency to review its breach response plan annually, including to reinforce  or improve training and awareness. In December 2018, OPM updated its  website to incorporate changes in the cost of credit freezes and duration  of fraud alerts resulting from new legislation we discussed earlier."], "subsections": []}, {"section_title": "OMB Has Not Revised Post-Data Breach Guidance to Agencies and Insurance Coverage Amount for Identity Theft Insurance Remains High", "paragraphs": ["Data we assessed for this report support a 2017 recommendation we  made to OMB and a matter for congressional consideration, both of which  have not yet been implemented. In our March 2017 report, we found  that OMB policy guidance for federal agencies on how to prepare for and  respond to data breaches did not address how agencies might assess the  effectiveness of identity theft services relative to lower-cost alternatives.  For example, the guidance did not discuss whether identity theft services  would be preferable to alternatives (such as fraud alerts, credit freezes, or  the agency conducting its own database monitoring). We concluded that  the guidance might not fully reflect the most useful and cost-effective  options agencies should consider in response to a breach\u2014contrary to  OMB\u2019s risk-management and internal control guidance calling on federal  leaders to improve effectiveness and efficiency. Therefore, we  recommended that OMB conduct an analysis of the effectiveness of  identity theft services relative to alternatives, and revise its guidance to  federal agencies in light of the analysis. In oral comments on a draft of the  2017 report, staff from OMB\u2019s Office of Information and Regulatory Affairs  said that our draft recommendation to OMB on expanding OMB\u2019s  guidance to federal agencies would benefit from greater specificity, and  we revised this recommendation to provide greater clarity.", "We contacted OMB several times between May 2018 and early March  2019 to update the status of this recommendation but as of March 2019,  OMB had not responded with an update. In our current review, we found  that information on the effectiveness of various consumer options continues to be limited. We also found that some free and low-cost  alternatives to free or fee-based identity theft services can prevent or  more directly address new account fraud and some options consumers  can take on their own have become less burdensome. Therefore, we  stand by this recommendation.", "In addition, as noted previously in this report, the identity theft insurance  that OPM offered to affected individuals resulted in few insurance claims,  and the amounts claimed have been small. These data are consistent  with the findings of our 2017 report\u2014which reported that the number and  dollar amount of claims for identity theft generally were low. They also  reinforce our conclusion that the $5 million per-person coverage limit  mandated by Congress likely was unnecessary and might impose costs  without providing a meaningful corresponding benefit. Specifically, we  noted that $5 million in coverage would increase federal costs  unnecessarily, likely mislead consumers about the benefit of the product,  and create unwarranted escalation of coverage amounts in the  marketplace.", "Therefore, we reiterate the matter for congressional consideration we  made in our March 2017 report: in the event that Congress again requires  an agency to provide individuals with identity theft insurance in response  to a breach, it should consider permitting the agency to determine the  appropriate level of that insurance."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to CFPB, FTC, and OPM. The agencies  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Director of CFPB, the Chair of FTC, and the Acting  Director of OPM. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-8678 or ortiza@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) information and expert views about the  effectiveness of options consumers can use to prevent or address the  risks resulting from data breaches; and (2) federal assistance available to  help consumers understand these options, including the status of one  matter for congressional consideration and one recommendation relating  to these issues in our 2017 report.", "To address the first objective, we conducted a literature review to identify  any studies or independent research on the effectiveness of various  options consumers have for mitigating data breach harms, consumer  attitudes and behavior following data breaches, and identity theft and  other harm to individuals from exposure of personal information. We  searched databases of scholarly publications and other sources for work  generally published within the last 5 years. Examples of databases  searched include ProQuest, EconLit, Policy File Index, and SciTech  Premium Collection. We searched for terms including \u201ceffective,\u201d \u201cdata  breach,\u201d \u201cidentity theft,\u201d \u201cconsumer attitudes,\u201d and \u201cconsumer behavior\u201d  and options such as \u201ccredit freeze,\u201d \u201cfraud alert,\u201d and \u201ccredit lock.\u201d We  also reviewed relevant academic literature to identify additional studies.  From these searches, we did not identify any studies that assessed the  extent to which commercial identity theft services were effective in  preventing or mitigating harm from exposure of personal information. We  identified and reviewed 54 studies that appeared in peer-reviewed  journals or research institutions\u2019 publications and were relevant to  consumer attitudes and behavior related to privacy, data breaches, and  identity theft.", "To ensure the selection of a range of perspectives on the effectiveness of  options to mitigate harms, we reviewed the selection of experts and  sources in our prior report and our literature review, and updated that  selection through additional searches and recommendations from  discussions with experts and identity theft service providers and review of  relevant literature. We defined experts as those representing consumer  and industry policy organizations that have conducted research or taken  policy positions on consumers\u2019 or entities\u2019 options after data breaches;  academics who conducted research on relevant topics; and federal and  state government staff with specific positions of responsibility in consumer  protection or education. We also contacted seven companies that provide  identity theft services to consumers.", "We interviewed representatives of a nongeneralizable sample of 35  entities in the following categories: academic or independent research  institution (4); consumer or privacy research and advocacy (10); industry  association, identity theft service provider, or industry consultant (12); and  federal or state government (9). We also reviewed relevant consumer  education and other materials produced by consumer, government,  industry, and other entities. We interviewed academics from Carnegie- Mellon University, RAND Corporation, the University of Maryland, and the  University of Rochester. In addition, we interviewed representatives from  the following organizations:", "Consumer or privacy groups: AARP, Consumer Action, Consumer  Federation of America, Consumer Reports, Electronic Privacy  Information Center, Identity Theft Resource Center, National  Consumer Law Center, Privacy Rights Clearinghouse, U.S. PIRG,  and World Privacy Forum.", "Industry associations or consultants: American Bankers  Association, Consumer Data Industry Association, Property and  Casualty Insurers Association of America, National Retail Federation,  and Rational 360.", "Identity theft service providers: Credit Karma, Equifax, Experian, ID  Experts, ID Shield, LifeLock, and TransUnion.", "Government agencies: Consumer Financial Protection Bureau  (CFPB), Federal Reserve Bank of Philadelphia, Federal Trade  Commission (FTC), Office of Personnel Management (OPM), and  Offices of the Attorney General of California, Connecticut, Illinois,  Massachusetts, and New York.", "Throughout this report, we use certain qualifiers when describing  responses from interview participants and views of entities whose articles  and written material we reviewed, such as \u201cfew,\u201d \u201csome,\u201d and \u201cmost.\u201d We  define few as a small number such as two or three. The specific  quantification of categories depends on the overall numbers of entities  that addressed a specific topic. For example, we may refer to views  shared by a proportion of the 10 consumer groups we interviewed, or  those shared by identity theft service providers.", "We also reviewed provisions in the Economic Growth, Regulatory Relief,  and Consumer Protection Act, enacted in May 2018, that address credit  freezes and fraud alerts (two tools for preventing new-account fraud).", "To address the second objective, we reviewed and analyzed  documentation and interviewed staff from FTC, CFPB, and OPM. We  reviewed and analyzed FTC, CFPB, and OPM consumer education  materials including blog posts, online fact sheets, and printed brochures  and data on usage of the materials. For example, we analyzed FTC,  CFPB, and OPM data and website analytics for their data breach- and  identity theft-related web pages. We interviewed FTC and CFPB agency  staff about their assistance to individuals and how they measure  effectiveness of their efforts. We reviewed documentation and interviewed  agency staff about the development, implementation, and assessment of  consumer education materials and other resources and assistance. For  example, we reviewed materials documenting FTC\u2019s outreach to  stakeholders and usability testing of IdentityTheft.gov. We compared the  activities against a 2014 Executive Order on the security of consumer  financial transactions, key practices for consumer education planning we  identified in prior work, and federal standards for internal control.", "We analyzed data from the company with which OPM contracted to  provide identity theft services to the approximately 22.1 million individuals  whose information was exposed in the 2015 data breaches. We obtained  data on the number of enrollments, the number and size of identity theft  insurance claims submitted and paid, and number of identity restoration  cases the companies handled. We assessed the reliability of the data by  interviewing agency officials and reviewing documentation about the  systems used to store the data. We found the data to be reliable for  purposes of this reporting objective. We also reviewed the online  guidance OPM provided to affected individuals and assessed the  guidance against Office of Management and Budget guidance for  agencies following data breaches and OPM\u2019s 2017 Breach Response  plan.", "In addition, for both objectives, we reviewed the evidence gathered and  analyzed for the 2017 GAO report (GAO-17-254) and updated the status  of the matter for congressional consideration and recommendations made  in that report.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: What Can Consumers Do After a Data Breach?", "paragraphs": ["Appendix II: What Can Consumers Do After a  Data Breach?", "Figure 3 below provides information on actions consumers can take to  monitor for identity theft or other forms of fraud, protect their personal  information, and respond if they have been a victim of identity theft. This  information summarizes prior GAO work and comments of academic,  consumer organization, industry, and government experts."], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kay Kuhlman (Assistant  Director), Meghana Acharya, Carl Barden, Bethany Benitez, Catherine  Gelb (Analyst in Charge), Danielle Koonce, Jill Lacey, Kathleen  McQueeney, Barbara Roesmann, Jena Sinkfield, and Meg Tulloch made  significant contributions to this report."], "subsections": []}]}], "fastfact": ["Data breaches have exposed the personal data of hundreds of millions of people and put them at risk for identity theft.", "We looked at what you can do if you're a victim of a data breach. Identity theft services can be convenient, but they don't prevent fraud from happening in the first place.", "There are also some steps you can take on your own for free\u2014such as freezing your credit reports. A freeze prevents the opening of new credit accounts or loans in your name.", "We've previously recommended that Congress reconsider legislation requiring federal agencies to offer high levels of identity theft insurance coverage."]}
{"id": "GAO-18-478", "url": "https://www.gao.gov/products/GAO-18-478", "title": "Maritime Security: DOT Needs to Expeditiously Finalize the Required National Maritime Strategy for Sustaining U.S.-Flag Fleet", "published_date": "2018-08-08T00:00:00", "released_date": "2018-08-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The U.S. government relies on U.S.-flag vessels that trade internationally to transport cargo and to provide a pool of U.S. mariners who could be called upon in times of crisis for DOD's reserve fleet. Through financial support and cargo preferences, the United States has supported the viability of the U.S.-flag fleet. However, in recent years concern has grown about the sustainability of the U.S.-flag fleet, and in 2014, Congress statutorily mandated that DOT develop national strategies related to the sustainability of the U.S.-flag fleet including recommendations for the future.", "GAO was asked to review U.S. government support for these U.S.-flag vessels that trade internationally. This report discusses: (1) the effect the U.S. government's support for the U.S.-flag fleet has had on national defense needs and other government programs; (2) the challenges identified by stakeholders in sustaining the U.S.-flag fleet for defense needs; and (3) the status of the mandated national strategies related to the U.S.-flag fleet.", "GAO reviewed relevant laws and analyzed DOT and DOD documents and government cargo data for fiscal years 2012\u20132017. GAO also interviewed officials from DOT, DOD, and other federal agencies subject to cargo preference; MSP vessel operators; and other stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. government support for the U.S.-registered (U.S.-flag) fleet has helped meet national defense needs, but it has had a negative effect on some non-defense government programs. Specifically, the U.S. government supports U.S.-flag vessels through: (1) an annual stipend provided through the Maritime Security Program (MSP) and (2) cargo preferences that require federal agencies to transport certain percentages of government cargo on U.S.-flag vessels. These supports have helped ensure that a sufficient number of U.S.-flag vessels are available to meet the Department of Defense's (DOD) cargo capacity needs. Although cargo preference requirements have helped support the financial viability of U.S.-flag vessels that participate in the MSP, they have had a negative impact on some non-defense programs. For example, the requirement pursuant to which food-aid agencies send a certain percentage of food aid on U.S.-flag vessels has resulted in higher shipping costs for these agencies and has negatively affected their missions, according to officials at these agencies.", "Stakeholders GAO spoke to identified two primary challenges in sustaining the internationally trading U.S.-flag fleet for national defense needs.", "First, even with the annual MSP stipend, maintaining the financial viability of U.S.-flag vessels is a challenge. This challenge largely results from the higher costs of operating a U.S.-flag vessel. According to U.S. Maritime Administration (MARAD) officials, the additional cost of operating a U.S. flag vessel compared to a foreign-flag vessel has increased\u2014from about $4.8 million annually in 2009 and 2010 to about $6.2 to $6.5 million currently\u2014making it harder for such vessels to remain financially viable. In addition, government cargo volumes have fallen in recent years. In response to this challenge, Congress increased the MSP stipend from $3.5 million per vessel for fiscal year 2016 to $4.99 million per vessel for fiscal year 2017. MARAD officials said this increase has temporarily stabilized the financial situation of MSP vessel operators. However, MARAD officials stated trends in operating costs and government cargo suggest this will remain an ongoing challenge.", "Second, a potential shortage of U.S.-citizen mariners available to crew the government-owned reserve fleet during a crisis is a challenge. DOD counts on mariners working on U.S.-flag vessels to crew this fleet when activated. A MARAD working group recently estimated a shortage of over 1,800 mariners in the case of a drawn-out military effort, although it also recommended data improvements to increase the accuracy of the count of available mariners.", "The Department of Transportation (DOT) has drafted but not issued the national maritime strategies mandated by Congress. The strategies are intended to address U.S.-flag vessels' competitiveness and ensure the long-term viability of U.S.-flag vessels and U.S.-citizen mariners. According to DOT officials, a combined draft strategy was developed under the previous administration but is now being reviewed by the current administration. DOT has not established a timeline for finalizing the strategy even though it was to be completed by 2015. Without establishing a timeline to complete this required strategy, DOT continues to delay providing decision-makers the information they need to determine how best to address the challenges facing the U.S.-flag fleet."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOT complete the national maritime strategy and establish time frames for its issuance. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) ships more than a million metric tons  of cargo overseas annually to sustain its military presence around the  world. In a time of war or crisis, it may need access to additional vessel  capacity to transport supplies to support both the surge\u2014the initial  movement of troops, equipment, and supplies to a war\u2019s location\u2014and to  sustain these troops during a potentially long-lasting conflict, while  continuing operations elsewhere. The process of transporting government  equipment and supplies by sea for military purposes is often referred to  as \u201csealift\u201d. Due to certain statutory requirements and long-time  government policy, DOD largely relies on internationally trading U.S.-flag  vessels to transport its cargo in peacetime and to supplement the  government-owned reserve fleet in times of war or crisis. However, it has  long been recognized that the operating costs of U.S.-flag vessels are  higher than the operating costs of foreign-flag vessels, and that  government support is therefore necessary to maintain a fleet of  internationally trading U.S.-flag vessels.", "Currently, the U.S. government financially supports internationally trading  U.S.-flag vessels in two key ways: (1) by providing an annual stipend for  60 specific vessels through the Department of Transportation\u2019s (DOT)  Maritime Security Program (MSP) and (2) by requiring, under laws that  are distinct from the MSP, that the federal government transport certain  types and percentages of government cargo on U.S.-flag vessels, also  known as cargo preference requirements. Federal agencies can meet  cargo preference requirements by transporting cargo on vessels in the  MSP or on other U.S.-flag vessels. The shipping fees federal agencies  pay to U.S.-flag vessels to transport government cargo under cargo  preference requirements also help to financially support U.S.-flag vessels.  In recent years, Congress has increased appropriations to support  vessels in the MSP; however, the amount of government cargo available  to be shipped under cargo preference requirements has decreased. This  decrease has prompted questions regarding the future of the U.S.-flag  fleet and the costs to the government to support it. In 2014, Congress  statutorily mandated that DOT develop two national strategies related to  the U.S.-flag fleet, one a national sealift strategy focused on ensuring the  long-term viability of the U.S. Merchant Marine (U.S.-flag vessels and  U.S.-citizen mariners) and the other a national maritime strategy  focused, among other things, on increasing the competitiveness of  internationally trading U.S.-flag vessels.", "You asked us to review the costs to the government of supporting U.S.- flag vessels for military needs. This report responds to the following  objectives:", "What effect has the U.S. government\u2019s support for the internationally  trading U.S.-flag fleet had on defense needs and other government  programs?", "According to stakeholders, what, if any, sustainability challenges does  the internationally trading U.S.-flag fleet face in meeting national  defense needs?", "What is the status of the mandated national sealift and maritime  strategies, and what options has DOT considered to address any  challenges related to sustaining the internationally trading U.S.-flag  fleet to meet defense needs?", "In addition, you requested that we identify and discuss alternatives to the  MSP with DOD, the Department of Transportation\u2019s Maritime  Administration (MARAD), and other stakeholders, and this information is  included in appendix I.", "To identify the effect the U.S. government\u2019s support for the internationally- trading U.S.-flag fleet has had on national defense needs and other  government programs, we reviewed relevant laws, regulations, and  directives, including the Maritime Security Act of 1996, the Maritime  Security Act of 2003, National Security Directive 28, and laws and  regulations related to cargo preference requirements, among others. We  also reviewed unclassified summaries of DOD studies and interviewed  officials from DOD\u2019s U.S. Transportation Command (Transportation  Command) to learn how these studies are used to determine defense  needs for U.S.-flag vessels. We reviewed DOT guidance on the MSP and  interviewed MARAD officials to learn how the program operates, including  how participants are selected for the program and how the stipend is  determined. We also conducted a literature search on the MSP and  maritime economics and reviewed prior GAO reports as well as reports  from the Congressional Research Service, MARAD, Econometrica, and  academics on the MSP and cargo preference requirements.", "In addition, to understand the extent to which the U.S. government is  supporting U.S.-flag vessels through shipments of government cargo  under cargo preference requirements and the effect of this support on defense and other government programs, we obtained and analyzed data  from DOD on the amount of DOD cargo shipped from fiscal years 2012  through 2017 and data from MARAD on the amount of government cargo  that was shipped by non-defense government agencies during the same  time period to determine the volume of government cargo shipped on  U.S.-flag vessels (including MSP and non-MSP vessels) and the types of  vessels used, and the volume of government cargo shipped on foreign- flag vessels. We chose this time period to provide the most recent  information with the most complete data available, as data prior to fiscal  year 2012 are less complete. To determine whether these data were  sufficiently reliable for our analysis, we reviewed the program  documentation associated with the files and discussed various data  elements and collection processes with MARAD and Transportation  Command staff responsible for the data. We also conducted our own  electronic testing to check the consistency of the data and to reconcile the  accuracy of certain data elements. We did not attempt to evaluate or test  all aspects of the data files but focused on data on government cargo  transported on U.S.-flag vessels. As a result of our review and  discussions, we determined that these data were sufficiently reliable for  the purposes of our review. We also interviewed officials representing  federal agencies affected by cargo preference requirements, including the  U.S. Department of Agriculture (USDA), U.S. Agency for International  Development (USAID), U.S. Export-Import Bank (EXIM Bank),  Department of Energy, and the State Department; all 14 MSP vessel  operators; six labor unions; an international ship-registry service; a  maritime association; two stakeholders in nongovernmental organizations  involved with food aid; and six academics with a background in defense  transportation, food assistance or maritime economics.", "To identify stakeholders\u2019 views on any challenges the government faces  in sustaining the internationally trading U.S.-flag fleet to meet defense  needs, we conducted a literature search on the MSP and maritime  economics and reviewed prior GAO reports as well as reports from the  Congressional Research Service, MARAD (including, among others,  MARAD\u2019s 2015 report on cargo preference requirements, 2011 report on  the costs of operating U.S.- and foreign-flag vessels, and 2017 Maritime  Workforce Working Group Report), Econometrica, and academics on  the MSP and cargo preference programs. We reviewed data provided by  MARAD on MSP vessel operators\u2019 finances and laws authorizing and  appropriating funds for the MSP. We also interviewed MARAD and  Transportation Command officials as well as the stakeholders identified  above.", "To discuss the status of the mandated national sealift and maritime  strategies and options that DOT has considered to address any  challenges related to sustaining the internationally trading U.S.-flag fleet  to meet defense needs, we reviewed the laws requiring MARAD or DOT  to develop these strategies and interviewed MARAD and DOT officials on  the status of their efforts to develop the mandated strategies and the  process the officials used. We compared MARAD\u2019s efforts to the pertinent  laws. We also reviewed laws requiring MARAD to convene a working  group in order to study the sufficiency of the mariner pool and the working  group\u2019s 2017 Maritime Workforce Working Group Report. In addition, we  reviewed MARAD\u2019s strategic plan and reports and documents related to  the U.S.-flag fleet and Coast Guard requirements, mariners, and cargo  preference, among other things; and interviewed MARAD and DOD  officials.", "To identify alternatives and modifications to the MSP, we conducted a  literature search on the program and reviewed a 2009 study of the MSP,  and prior GAO work. We then interviewed stakeholders, including  MARAD and DOD officials; MSP participants; an international ship- registry service; a maritime association; academics with backgrounds in  food aid, defense transportation, food assistance; and maritime  economics; as well as maritime unions about these alternatives and  modifications and on other ways to potentially improve the MSP. (See  app. I.)", "We conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["A series of laws and policy directives dating back to 1904 require DOD to  rely in large part on U.S.-flag commercial vessels over government- owned or foreign-flag vessels for its sealift needs. Most recently, a 1989  National Security Directive reaffirmed the policy of relying on U.S.-flag  commercial vessels to provide sealift in times of peace, crisis, and war.  These requirements and policies align with the following principles from  the Merchant Marine Act of 1936, as amended:", "A fleet of commercial vessels with military utility that are owned and  operated by U.S. citizens and are able to provide reliable support  during difficult wartime missions is necessary for national defense.  According to testimony by the Commander of Transportation  Command, during Operation Desert Shield, 7 percent of foreign-flag  vessels refused to go into war zones, whereas U.S.-flag vessels  continued to deliver cargo as promised.", "A pool of trained U.S. mariners is needed to crew the U.S.-flag fleet.  According to DOD and MARAD, mariners are necessary to crew not  only the U.S.-flag commercial vessels but also the U.S. government- owned reserve cargo vessels. These vessels are held in reduced  operating status with minimal crew in peacetime. When put into full  operating status\u2014such as for a surge related to a wartime effort\u2014the  government needs to add additional trained and qualified mariners to  operate them. U.S.-flag commercial vessels, which are required to be  staffed by U.S.-citizen mariners, provide a pool of mariners who can  be used for this task. Because mariners work on vessels for months at  a time, commercial vessels typically have at least two full sets of  mariners to crew a single vessel\u2014one set of which is on the vessel  while the other is on leave. In times of crisis, one set of mariners  could continue to work on the commercial vessel, while some of those  on leave could be called upon to voluntarily crew vessels in the  government-owned reserve fleet.", "A U.S. presence in international trade is needed to carry goods  overseas. According to MARAD, a U.S. presence in international  trade helps ensure that both commercial shippers and the military can  access vessels to carry their goods overseas at all times, both in  times of peace and in times of war.", "In line with this policy, as of March 2018, DOD\u2019s sealift capacity consisted  of 61 government-owned reserve vessels held in reduced operating  status and 113 commercial vessels operating under the U.S. flag in  regular trade (see fig. 1).", "MARAD, in consultation with DOD, administers a program designed to  ensure that needed U.S.-flag commercial vessel capacity will be available  during a wartime activation. The program consists of an agreement  between the U.S. government and operators of U.S.-flag commercial  vessels, called the Voluntary Intermodal Sealift Agreement (VISA). MSP  vessel operators are required to enroll in VISA or a similar agreement for  tankers as part of their participation in the MSP, while other operators  with U.S.-flag vessels may but are not required to enroll in VISA.  Operators enrolled in VISA:  commit to providing their intermodal resources and a certain  percentage of their U.S.-flag vessel capacity to meet national defense  needs during times of war or national emergency, if activated by DOD; will receive compensation during a VISA activation at rates that are  set according to certain parameters established in contingency  contracts between DOD and the operator; and  receive priority for peacetime DOD cargo contracts, under which they  carry DOD cargo at established or negotiated rates.", "According to Transportation Command and MARAD officials, DOD has  never formally activated VISA, as vessel operators with these agreements  have voluntarily met DOD\u2019s ocean cargo carrying needs under regular  operations and compensation rates established under contract with  DOD. For example, these officials said that U.S.-flag vessels carried  significant amounts of cargo during recent military conflicts such as those  in Iraq and Afghanistan, and DOD did not have to activate VISA to obtain  additional capacity.", "International shipping is dominated by foreign-flag vessels. According to  MARAD, only about 1.5 percent of U.S. international oceangoing trade by  weight is carried on U.S.-flag vessels. U.S.-flag vessels face difficulties  competing in international markets due to the higher costs of operating  under the U.S. flag. For example, to operate under the U.S. flag, vessel  operators must comply with various U.S. laws, including requirements of  the United States Coast Guard (Coast Guard), and must use U.S.-citizen  and permanent resident crews, which according to a MARAD 2011  report, results in higher labor costs than are typically incurred by  foreign-flag vessels for foreign crews. Since U.S.-based vessel operators  engaged in international trade can choose to operate vessels under a  foreign flag, according to the 2011 MARAD report, the majority of large,  oceangoing, self-propelled merchant-type U.S.-owned vessels are not  registered under the U.S. flag. In 2011, MARAD reported that the  Marshall Islands, Singapore, and Liberia registries accounted for 52  percent of U.S.-owned vessels. According to MARAD, these registries  have different requirements than the U.S. registry that result in lower  associated operating costs. Further, according to MARAD data, the fleet  of large U.S.-flag vessels engaged in international trade has declined  from approximately 199 vessels at the end of 1990 to 82 vessels at the  end of 2017 (see fig. 2). In February 2018, the number of U.S.-flag  vessels dropped again, to 81 vessels.", "To ensure the existence of an international maritime presence of U.S.- registered and U.S.-citizen-crewed vessels, the U.S. government has, at  least since 1936, had laws designed to provide financial support to offset  the higher costs of operating an internationally trading vessel under the  U.S.-flag. This support has provided an incentive for U.S. commercial  vessel operators to register vessels under the U.S. flag in spite of the  higher operating costs. Currently, this support is provided through the (1)  MSP stipend for certain vessels and (2) cargo preference requirements:", "MSP stipend\u2014Since fiscal year 1996, the MSP has provided an  annual stipend set by statute to support a specific number of vessels.  In return for receiving the stipend, the MSP vessel operator agrees to  keep the vessel or an equivalent vessel under the U.S. flag for the life  of a 10-year operating agreement (subject to annual appropriation),  and enrolled in VISA. For fiscal year 2018, the MSP provided an  annual stipend of $5 million per vessel, for a total cost of $300 million  for the 60 vessels in the MSP. According to MARAD officials, the MSP  was designed as a less costly replacement for the Operating  Differential Subsidy that, since 1936, had subsidized the higher  operating costs of the U.S.-flag fleet. According to DOT officials, the  MSP currently covers approximately 80 percent of the average annual  operating cost differential between U.S. and foreign-flag vessels,  although this varies across vessels in the MSP.", "Cargo preference requirements\u2014In general, cargo preference  requirements specify that certain percentages of all U.S. government  cargo, military and otherwise, must be carried on U.S.-flag vessels, to  the extent the vessels are available at reasonable rates. Current law  requires that 100 percent of military cargo be transported on U.S.-flag  vessels. DOD charters a small number of internationally trading  U.S.-flag vessels, while contracting with other internationally trading  U.S.-flag vessels to carry cargo as part of the vessel\u2019s regular  operations. A minimum of 50 percent of the gross tonnage of all other  government civilian cargo, such as food aid or freight sent to overseas  embassies and consulates, is to be transported on privately owned  commercial U.S.-flag vessels. In addition, cargoes financed by U.S.  agencies, such as through loans from EXIM Bank, have been  congressionally directed to be transported on U.S.-flag vessels.", "DOD and MARAD each play a role in managing the nation\u2019s sealift  capacity. DOD\u2019s Transportation Command determines the vessel  capacity necessary to meet national security requirements, whereas  MARAD is responsible for determining whether there are enough  commercial vessels and mariners available to support the activation of  the government-owned reserve fleet while maintaining trade. In addition,  MARAD supports the U.S.-flag fleet by administering VISA and the MSP  and monitoring federal agencies\u2019 compliance with cargo preference  requirements, among other responsibilities. DOD and MARAD each  maintain their own set of government-owned vessels that are part of the  surge sealift fleet."], "subsections": []}, {"section_title": "U.S. Government Support for the U.S.- Flag Fleet Has Helped Meet National Defense Needs but Has Had a Negative Effect on Some Non- Defense Government Programs", "paragraphs": ["U.S. government support for the internationally trading U.S.-flag fleet has  helped meet national defense needs. Specifically, financial support to  U.S.-flag vessels through both the MSP stipend and the cargo preference  requirements has helped ensure a sufficient number of internationally  trading U.S.-flag vessels are available to meet DOD\u2019s most recently  stated cargo capacity needs from such vessels. In contrast, while cargo  preference requirements are a means of providing government support to  U.S.-flag vessels, these requirements have had a negative impact on  some non-defense programs. For example, the requirement that food aid  agencies send a certain percentage of food aid on U.S.-flag vessels has  resulted in higher shipping costs for these agencies, and USAID and  USDA officials stated that this has reduced the amount of funds the  agencies can spend on their mission to reduce hunger."], "subsections": [{"section_title": "MSP and Cargo Preference Requirements Have Resulted in Sufficient U.S.-Flag Vessel Capacity to Date to Meet Defense Needs, At Acceptable Risk", "paragraphs": [], "subsections": [{"section_title": "Under the MSP, DOD and MARAD Select Vessels for Government Support That Meet the Military\u2019s Needs and Have Commercial Viability", "paragraphs": ["DOD\u2019s Transportation Command conducts periodic mobility studies that,  among other things, determine the overall vessel capacity needed under  differing wartime scenarios, including resource-heavy scenarios involving  a range of concurrent military operations for a sustained period of time. A  mobility requirements study completed in 2000 found that in addition to  the cargo capacity that could be provided by government-owned or long- term chartered vessels and by vessels belonging to allies, the United  States would need the capacity of approximately 55 commercial vessels  designed to carry dry cargo to meet mobility requirements. The study also  found a potential need for additional tankers, which are designed to carry  liquid cargo. At the time, the MSP stipend was provided to 47 vessels;  subsequently, through the Maritime Security Act of 2003, a new MSP was  established that raised funding levels to support an increase in the  program fleet to 60 vessels beginning in fiscal year 2006, to include both  vessels designed to carry dry cargo and tankers.", "According to Transportation Command officials, mobility study updates in  2010 and 2013 confirmed that this capacity remained sufficient to meet  defense needs. As a result, the 60 vessels currently participating in the  MSP have the ability to meet DOD\u2019s stated cargo capacity needs. They  include a mix of vessel types designed to carry dry cargo as well as two  tankers for liquid cargo (see table 1). DOD is required by statute to  complete a new study by September 30, 2018.  According to  Transportation Command officials, this study will evaluate the sufficiency  of the sealift fleet in light of the current defense strategy, plans, threats,  and DOD's mobility capabilities.", "MSP regulations establish that DOD and MARAD select vessels for the  MSP based in part on their military utility. Due to different configurations  and cargo capacity, some vessel types are more useful to the military  than others. For example, Transportation Command officials stated that  currently the most useful type of cargo vessel for DOD\u2019s military needs is  the roll on/roll off (Ro-Ro) vessel, in part because it is configured so that  vehicles, including tanks, can be easily driven on and off the vessel.  DOD\u2019s priority for the selection of MSP vessels is Ro-Ro vessels, multi- purpose/heavy-lift vessels (also referred to as general cargo vessels),  geared containerships, and all others (including tankers), in that order.  According to Transportation Command officials, due to the need to  balance military utility with commercial viability, a mix of vessel types with  military utility is currently in the MSP, with over half of the vessels in the  MSP being containerships.", "In addition to selecting vessels based on military utility, MARAD, in  consultation with Transportation Command, also bases their MSP vessel  selections on the commercial viability of operations. The assessment of  commercial viability includes, among other things, four key areas: 1) the  intermodal networks accessible to the applicant; 2) the trading routes  operated by the applicant, and the ability to maintain service during  military operations; 3) the applicant\u2019s record of owning and operating  vessels; and 4) the applicant\u2019s financial condition.", "MARAD and Transportation Command officials cited numerous benefits  to the current configuration of the MSP. First, MARAD and Transportation  Command officials stated that the annual cost of the stipend is small  compared to the outlay required to acquire, crew, and maintain a  government-owned fleet of vessels that are not needed on a day-to-day  basis. (See app. I for more information on the potential effects of  discontinuing the MSP stipend and instead relying on a government- owned fleet.) Second, MSP vessels must be less than 25 years of age.  According to MARAD officials, this requirement helps ensure the  recapitalization of the U.S.-flag fleet participating in the program.  According to our analysis of MARAD data, since the beginning of fiscal  year 2006, MSP vessel operators have replaced more than 70 MSP  vessels. In most cases, we found that the replacement vessels have been  newer and provide greater capacity to meet DOD requirements. Finally,  under the MSP\u2019s operating agreements, participating vessel operators are  required to make their commercial transportation resources, including  infrastructure, available upon request by the Secretary of Defense during  times of war or national emergency. In this way, according to MARAD and  Transportation Command officials as well as MSP vessel operators, the  MSP provides DOD with assured access to a global intermodal  transportation network, including logistical management services,  infrastructure, and terminal facilities. According to MARAD and  Transportation Command officials, without assured access to this network  and infrastructure, the government would have to undertake a multi-billion  dollar effort to create such a network on its own or would have to contract  for such a network separately, a process that could come with additional  risks and costs in a war-time scenario. A 2006 study for the National  Defense Transportation Association estimated that it would cost  approximately $13 billion to replicate the Ro-Ro and containership  capacity of MSP vessels and $52 billion to replicate the intermodal  networks provided by MSP vessel operators.", "A 2012 report by the National Defense Transportation Association  provided some examples of how intermodal networks made available by  MSP vessel operators have helped meet DOD needs. This report states  that during military action in Afghanistan, U.S. forces depended on  supplies transported overland through Pakistan. However, the limited  road capacity in Pakistan resulted in delayed cargo and left drivers  vulnerable to attacks. In addition, U.S.-Pakistan relations became  strained, and the need for an alternative delivery method arose. The  report says that MSP vessel operators devised alternative distribution  systems, including an overland distribution network from Baltic seaports  to Afghanistan as well as a multimodal (both sea and air transport) route  from other seaports in the region. Some MSP vessel operators also told  us that they were willing to participate in the MSP because, as U.S.- based companies, they felt a responsibility to contribute to national  security."], "subsections": []}, {"section_title": "Vessels in the MSP Rely on the Combination of MSP Stipend and Government Cargo Shipped Under Cargo Preference Requirements to Maintain Financial Viability", "paragraphs": ["The MSP stipend provides a fixed financial incentive for vessel operators  to maintain vessels under the U.S. flag, but on its own is not sufficient to  support the higher costs of operating U.S.-flag vessels, according to  MARAD officials and 12 of the 14 MSP vessel operators we spoke to.  According to MARAD officials, the MSP currently covers about 80 percent  of the operating cost differential between U.S. and foreign-flag vessels.  However, a majority of MSP vessel operators we spoke with said that in  order for a U.S.-flag vessel to be financially viable, the entire operating  cost differential must be somehow made up. The other key way that MSP  vessel operators can make up the difference in operating costs between  U.S.-flag and foreign-flag vessels is through the transport of government  cargo under cargo preference requirements. According to a 2015 MARAD  report, the higher freight rates that DOD and other federal agencies pay  to transport government cargo on U.S.-flag vessels are critical to these  vessels\u2019 financial viability. According to this report, carriers of U.S.-flag  vessels stated that in the absence of government cargo at freight rates  that cover the higher commercial cost of operating under a U.S. flag, the  financial support provided by MSP would be insufficient to continue  operating under the U.S. flag. A 2011 MARAD report similarly stated that  the portion of U.S.-flag vessels\u2019 higher operating costs not covered by the  MSP stipend is defrayed by the ability of those vessels to carry  government cargo at rates that are significantly higher than commercial  rates.", "Under cargo preference requirements, the use of U.S.-flag commercial  vessels is required to the extent that such vessels are available at rates  that are fair and reasonable, as determined by MARAD and the  Transportation Command. According to Transportation Command  guidance, even though lower prices may be available from foreign-flag  carriers, a lower price for use of a foreign-flag vessel is not a sufficient  basis, on its own, to determine the ocean freight rate proposed by a U.S.- flag vessel operator is excessive or otherwise unreasonable. Similarly, by  regulation, MARAD\u2019s determination of U.S.-flag vessels\u2019 fair and  reasonable rates takes into account the vessels\u2019 operating costs, among  other things, which as described previously are higher than foreign-flag  vessels\u2019 operating costs.", "Our analysis of DOD and MARAD data show that in total, more than 1.4- million metric tons of government cargo were shipped on MSP vessels in  fiscal year 2016. Fifty-nine of the 60 MSP vessels carried government  cargo in fiscal year 2016. One MSP vessel (a general cargo vessel)  entered the MSP at the end of the fiscal year but did not carry any  government cargo until the next fiscal year. As shown in figure 3, the  MSP Ro-Ro and containership vessels carried more cargo for DOD than  for civilian agencies. MSP general cargo vessels predominantly carried  food aid, and during this time, tankers were used only by civilian agencies  for foreign military assistance.", "Our analysis also found that the extent to which government cargo  shipped on U.S.-flag vessels was transported on MSP vessels varied. For  example, 69 percent of the cargo DOD shipped on U.S.-flag vessels was  transported on an MSP vessel; 99 percent of non-food aid cargo that  civilian agencies shipped via U.S.-flag vessels was transported on an  MSP vessel; and 24 percent of food aid shipped on U.S.-flag vessels was  transported on MSP vessels. The rest of the government cargo shipped  on U.S.-flag vessels was shipped on vessels that are not in the MSP.", "Most of the MSP vessel operators we spoke to said that in addition to  government cargo, their MSP vessels also carry commercial cargo.  These vessel operators told us that because they have to compete for  commercial cargo with foreign-flag vessels that have lower operating  costs, commercial cargo alone typically does not have high-enough rates  to maintain the financial viability of U.S.-flag vessels. However, when  added to the MSP stipend and government cargo rates, the rates they  receive for commercial cargo are part of the overall financial picture that  allows them to operate MSP vessels under the U.S. flag (see fig. 4)."], "subsections": []}]}, {"section_title": "Cargo Preference Requirements Have Had a Negative Effect on Some Non-Defense Agency Programs", "paragraphs": ["Officials at USAID and the EXIM Bank have raised concerns that the  higher shipping costs that result from cargo preference requirements  have had a negative effect on their missions. For example:", "According to officials at USAID\u2019s Office of Food for Peace, the  additional costs the agency incurs by using U.S.-flag vessels instead  of foreign-flag vessels for its cargo directly reduces its budget to fulfill  its mission of reducing hunger and malnutrition. For example, USAID  officials stated that for each $40-million increase in shipping costs, its  food aid reaches one-million fewer recipients each year. Concerns  about the role of cargo preference requirements for food aid in  supporting the U.S.-flag fleet are longstanding, and we reported on  them in 1994, 2011, and 2015. Others have also reported on these  concerns over the last few decades.", "According to USAID officials, due to cargo preference requirements  and the limited availability of U.S.-flag bulk carriers, the agency has at  times had to send bulk food, such as grain, on other types of U.S.-flag  vessels that are not meant to carry this type of cargo. According to  these officials, this process has resulted in additional costs and delays  because the equipment used to load and unload bulk grains onto and  off of a bulk cargo vessel cannot be used with other types of vessels,  as wells as concerns about the appearance and health of bulk food  being transported, for example, on vessels that typically carry oil or  other fuels.", "Officials from the EXIM Bank said that U.S. shipping provisions may  have put EXIM bank at a competitive disadvantage compared with  other countries\u2019 export credit agencies, thus having a negative impact  on the Bank\u2019s mission\u2014which is to support American jobs by  facilitating the export of U.S. goods and services. Cargoes financed  through loans from EXIM Bank have been congressionally directed to  be transported on U.S.-flag vessels. According to a 2014 survey of  exporters and lenders conducted by EXIM Bank, arranging U.S.  transport typically results in higher costs and can result in shipment  delays. These exporters and lenders reported that the requirement  to ship on U.S.-flag vessels placed them at a competitive  disadvantage relative to other countries\u2019 exporters\u2014and may have  resulted in potential clients choosing to import goods from other  countries without the same requirements. According to our prior work  and EXIM\u2019s 2016 Competitiveness Report, export credit agencies in  many other countries do not have such a requirement.", "Furthermore, food aid advocates have questioned the economic  efficiency of using food aid shipments to financially support the U.S.-flag  fleet for defense purposes, particularly in light of the increased costs to  food aid agencies. These advocates have argued that it is inefficient to  spend U.S. government funds to support U.S.-flag vessels generally  considered to have little military utility\u2014such as bulk carriers\u2014primarily  for the U.S.-citizen mariners they provide. According to our analysis of  MARAD data, during fiscal year 2016, food aid agencies shipped 592,000  metric tons of cargo on U.S.-flag dry bulk carriers, providing substantial  government support to a vessel type that Transportation Command  officials have stated is not a priority for the military\u2019s cargo needs and that  Transportation Command and MARAD officials acknowledge has only  limited military utility. Based on our analysis of data provided by DOD,  during fiscal year 2016, DOD did not ship any cargo on dry bulk vessels.  In contrast, based on our review of data provided by MARAD, in fiscal  year 2016, 57 percent of food aid transported on U.S.-flag vessels was  transported on vessels flagged by MARAD as having limited military  utility. In contrast to the food aid advocates\u2019 perspective, Transportation  Command and MARAD officials stated that ensuring sufficient mariners  for defense purposes is one key purpose of supporting the U.S.-flag fleet,  regardless of the military utility of the vessel.", "The total additional cost the government incurred due to cargo preference  requirements is not known, as neither Transportation Command nor  MARAD track the additional costs to ship on U.S.-flag vessels.  Transportation Command and MARAD officials both stated that their  current processes are not designed to track the difference between what  federal agencies are paying to ship government cargo on U.S.-flag  vessels and what they would pay to ship the same cargo on foreign-flag  vessels, and that it would require considerable time and expense for them  to create processes to do this. Moreover, Transportation Command  officials stated that there would be little value in tracking this information,  since their focus is on complying with the requirement to transport DOD  cargo on U.S.-flag vessels whenever possible. Our past work on this  issue has shown that cargo preference laws have increased  transportation costs to federal agencies. For example, in 1994 we  reported that these costs increased by $578 million per year between  fiscal years 1989 and 1993, with DOD estimating that it spent about $350  million of that amount in increased costs. More recently, in 2015, we  found that cargo preference requirements for food aid increased the cost  of shipping food aid by 23 percent, or $107 million, for the period from  April 2011 through fiscal year 2014.", "MARAD and Transportation Command officials acknowledged that some  agencies have raised concerns that cargo preference requirements may  have adverse impacts on their programs. According to MARAD officials,  while there is not overall agreement on the net benefit to the nation of  cargo preference requirements, such requirements provide offsetting  benefits to the U.S. maritime sector that are difficult to quantify in dollar  terms. A Transportation Command official stated that cargo preference for  food aid has been less beneficial in supporting U.S.-flag vessels than it  once was because of recent decreases in food aid volumes. However,  this official emphasized that cargo preference for food aid continues to  provide value as a tool to help support the U.S.-flag vessels that provide  mariners to meet DOD\u2019s needs."], "subsections": []}]}, {"section_title": "Stakeholders Identified Two Primary Sustainability Challenges the Internationally Trading U.S.-Flag Fleet Faces in Meeting National Defense Needs", "paragraphs": ["Stakeholders we spoke with identified two primary challenges to ensuring  that the U.S.-flag fleet would continue to meet DOD\u2019s national defense  needs. First, stakeholders described maintaining the financial viability of  U.S.-flag vessels participating in MSP as a challenge. Second,  stakeholders identified a potential shortage of U.S. citizen mariners  available to crew the government-owned reserve fleet during a military  activation as a challenge, in part due to the declining numbers of U.S.-flag  vessels."], "subsections": [{"section_title": "According to Stakeholders, Maintaining the Financial Viability of Vessels Participating in the MSP Is a Challenge due to Increasing Costs and Decreasing Levels of Government Cargo", "paragraphs": ["According to MARAD officials, the relative cost of operating a U.S.-flag  vessel compared to a foreign-flag vessel has increased in recent years,  making it increasingly challenging for vessel operators to remain  economically viable under the U.S. flag. While an increasing cost  differential between U.S.-flag and foreign-flag vessels affects all U.S. flag  vessels, MARAD officials raised particular concerns related to defense  needs about maintaining the financial viability of vessels in the MSP.  MARAD estimates this operating cost differential is currently between  $6.2 million and $6.5 million per vessel per year, up from an estimated  $4.9 million in 2009 and 2010\u2014an increase of more than 25 percent.  MARAD and MSP vessel operators we spoke with stated that the  increase is due to a range of factors, primarily the rising relative costs of  employing U.S. mariners as crew versus foreign crew members. For  example, one MSP vessel operator indicated that labor costs for its U.S.- flag vessels are projected to increase approximately 4 percent per year  compared to smaller increases in its foreign-flag crew costs.", "Representatives from maritime unions that we interviewed acknowledged  that labor costs have risen and also noted that one factor contributing to  higher labor costs in the United States is that operators are required to  cover retirement benefits for employees. These representatives stated  that such benefits are paid by the government in some other countries. In  addition to labor costs, MSP vessel operators also mentioned that  increasing insurance and maintenance and repair costs are also factors.", "At the same time, total government cargo volumes have fallen,  compounding the challenge for vessel operators to remain viable under  the U.S. flag. Figure 5 below shows the decline in total government cargo  volumes between 2004 and 2014 for DOD, food aid, and other civilian  agencies. According to a 2015 MARAD report on the effect of declining  cargo preference volumes, vessel operators that reflagged vessels from  the U.S. flag to a foreign flag, or retired vessels in recent years said that  the primary reason for doing so was the loss of government cargo.  However, it is not known exactly how many vessels have been reflagged,  and the 2015 MARAD report stated it could not quantify the number of  vessels that left the U.S. flag specifically for this reason. One vessel  operator we spoke with stated that it removed five vessels from the U.S.- flag registry due to a decline in food aid shipments and an increase in the  cost of operating under the U.S flag. According to MARAD officials, if  government cargo volumes continue to decline in future years, the  resulting decline in revenue to U.S.-flag vessels for shipping these goods  may lead to further reductions in the number of U.S.-flag vessels and may  also affect the financial viability of those vessels in the MSP.", "According to the 2015 MARAD report, the decrease in total government  cargo volumes has been driven by two trends.", "First, the international military presence of the United States has  decreased overseas. DOD, which generates 75 percent of preference  cargo, has gone through a worldwide drawdown following the end of  the cold war in the 1990s, notwithstanding brief upticks in volume  during military escalations since that time.", "Second, due to reduced funding, fluctuating commodity prices, and  other factors, food aid agencies, such as USDA and USAID, have  shipped reduced volumes of food aid overseas.", "Further affecting the amount of food aid cargo on U.S.-flag vessels were  changes to the cargo preference requirement and the elimination of  reimbursements designed to help cover the extra cost of meeting the  preference requirement. The Cargo Preference Act of 1954, as amended,  requires that at least 50 percent of all U.S. government cargo be shipped  on U.S.-flag commercial vessels. For food aid programs, an additional  25 percent of the tonnage of certain agricultural commodities was  required beginning in 1988. This increase was repealed in 2012, and  the cargo preference requirement for food aid effectively returned to 50  percent. In prior work, we found that although the reduction in the food  aid cargo preference requirement reduced overall shipping costs for food  aid, food aid agencies still paid a higher price to ship on U.S.-flag vessels  than on foreign-flag vessels to meet cargo preference requirements.  Further, in 2012 and 2013, government reimbursements to USAID and  USDA to help cover the extra costs to meet cargo preference  requirements were discontinued. As we reported in 2015, this change in  reimbursement policy reduced the amount of food aid these agencies  were able to provide.", "In 2015, to ensure the continued financial viability of vessels in the MSP,  maritime unions advocated for and eventually received an MSP stipend  increase. According to MARAD data, at the time, several companies with  vessels in the MSP were in financial trouble, and all but three of the  companies participating in the MSP would have been operating at a loss  without the MSP stipend. Congress authorized the appropriation of a 42  percent increase in the MSP appropriation from fiscal year 2016 to fiscal  year 2017\u2014from $210 million to $299 million. The corresponding  authorized stipend rose from $3.5 million to $4.99 million per vessel  annually. The appropriation for fiscal year 2018 further increased this  amount to $5 million, and an additional increase to about $5.23 million is  authorized for fiscal year 2021. Figure 6 shows the authorized annual  stipend for MSP vessels from fiscal year 1996 through fiscal year 2021.", "According to MARAD officials, the recent increase in the MSP stipend to  the current level of $5 million in fiscal year 2018 has temporarily stabilized  the financial situation of MSP vessel operators. However, concerns  remain about the future of the U.S.-flag fleet. According to MARAD  officials and commercial vessel operators we spoke with, if the cost  differential between operating U.S.-flag and foreign-flag vessels continues  to increase, the levels of government support would accordingly need to  rise to ensure that vessel operators would be willing and able to keep the  existing U.S.-flag vessels under the U.S. flag, including those in the MSP.  In 2015, MARAD issued a statutorily-mandated report that concluded that  without a comprehensive change to maritime policy, the size of the U.S.- flag fleet would continue to decline. However, in this report, MARAD did  not propose specific changes or options to address this concern."], "subsections": []}, {"section_title": "MARAD and Stakeholders Identified a Potential Shortage of U.S.-Citizen Mariners as a Challenge to Meeting National Defense Needs", "paragraphs": ["According to MARAD and DOD officials, another challenge related to the  ability of the U.S.-flag fleet to meet national defense needs is a potential  shortage of U.S.-citizen mariners qualified to crew government-owned  reserve vessels. While in terms of cargo capacity, the current number of  U.S.-flag commercial vessels in international trade is sufficient to meet  DOD\u2019s stated needs, MARAD and DOD have raised concerns that the  declining number of such U.S.-flag vessels has led to a corresponding  decline in the number of U.S.-citizen mariners qualified to crew these  types of vessels and who are also able to crew government-owned  reserve vessels that are usually held in reduced operating status.", "On January 23, 2018, MARAD\u2019s Maritime Workforce Working Group  issued a statutorily-mandated report that found that the current number of  U.S.-citizen mariners is insufficient to support sustained activation of the  government-owned reserve fleet for military operations. Specifically, the  report estimated approximately 11,768 qualified and available U.S.-citizen  mariners as of June 2017\u20141,839 less than the 13,607 mariners the  working group estimates would be needed for sustained operation of the  reserve and commercial fleet.", "The working group based its identification of 11,768 existing qualified  U.S.-citizen mariners on the number of U.S.-citizen mariners actively  sailing on U.S.-flag commercial and government-owned ocean-going  vessels. For the vessels in full operating status, the working group  accounted for 2 mariners employed for each crew position. The double  crew, which according to MARAD officials is typical for a commercial  U.S.-flag vessel operating in international trade, allows each mariner,  over the course of a year, to work for 6 months on the vessel and take 6  months of earned leave. According to MARAD officials, this typical double  crew configuration is based on the fact that while on duty, mariners work  long hours with little to no opportunity to leave the vessel. The working  group assumed that during a military activation, commercial operations  would continue at the same level as during peacetime\u2014but that some  U.S-citizen mariners currently working on commercial vessels would be  willing to reduce the amount of earned leave they took in order to work on  government-owned reserve vessels. The working group analyzed this  scenario by changing the ratio of crew positions to crew from 2 (in which  case half of the employed mariners are working on the vessel and half  are on earned leave at any one time) to 1.75. As illustrated in figure 7,  under this scenario, with an average of 26 crew positions per vessel,  between 6 and 7 mariners per existing commercial oceangoing U.S.-flag  vessel are made available to crew the reserve fleet.", "According to the working group\u2019s methodology, given the size of the  current U.S. flag oceangoing fleet and the number of currently employed  mariners on this fleet, there are enough U.S.-citizen mariners to crew the  reserve fleet during an initial surge, but not for a sustained activation,  during which the working group estimated that the reserve vessels  themselves would need a double crew to allow for crew rotations. This  need for crew rotations on the reserve vessels led the working group to  the estimate a shortage of 1,839 U.S.-citizen mariners. Moreover, the  working group\u2019s report found that the shortage of mariners may be  understated if some of the estimated available mariners are unable or  unwilling to continue sailing during times of national emergency, as  available mariners are not required to crew the reserve fleet.", "Although the working group concluded that there is a shortage of  mariners for sustained operations, its report also details data limitations  that cause some uncertainty regarding the actual number of existing  qualified mariners and, thus, the extent of this shortage. The working  group\u2019s approach\u2014driven, in part, by limitations of the U.S. Coast  Guard\u2019s database that tracks mariner credentials\u2014did not count any  qualified mariners who are no longer employed on U.S.-flag oceangoing  vessels or who are employed on other types of vessels but may have the  required credentials. In fact, according to the working group\u2019s analysis,  over 15,000 mariners listed in the U.S. Coast Guard\u2019s database have  unlimited credentials but are unaccounted for, as they are neither  currently employed on large, oceangoing vessels nor serving as civil- service mariners committed to government-owned vessels. The working  group stated that the availability and continuing proficiency of these  mariners remains unknown. These data limitations, which the working  group was unable to resolve, are long standing. For example, in August  2015, we reported that the number of U.S. civilian mariners who would be  qualified and available to serve during a prolonged defense activation  was uncertain. We found that MARAD\u2019s analysis of the sufficiency of the  mariner pool could have included more qualified mariners using different  assumptions, and we recommended that MARAD study this issue.", "MARAD was later mandated by statute to convene a working group to  study the sufficiency of the U.S.-citizen mariner pool. MARAD officials  emphasized to us, however, that mariners who have not worked on the  right types of vessels for more than 18 months are likely to need  additional training before they would be qualified to crew the reserve fleet  during a military activation.", "The working group\u2019s report contains several recommendations related to  improving information on the number of available and willing mariners.  These recommendations include that the Coast Guard database should  be replaced with one that would enable a more accurate account of  available mariners, and that a periodic survey of the U.S.-citizen mariner  pool should be established to allow MARAD to determine, with  reasonable certainty, how many qualified mariners would be available  and willing to sail in U.S. government reserve vessels if called upon to do  so. The report concluded that until these agencies improve the tracking of  licensed mariners who may be available to crew the government-owned  reserve vessels when activated into full operating status, the extent to  which there is a shortage of mariners for defense needs will remain  unclear. The lack of information on the extent to which there is a shortage  of mariners limits the U.S. government\u2019s ability to effectively plan for such  needs. In January 2018, MARAD\u2019s administrator testified that MARAD is  working with the Coast Guard and the maritime industry to better track  licensed mariners who may no longer be sailing but could serve in a time  of crisis, and in March 2018, MARAD officials told us they are taking  steps to initiate a new survey of mariners, as recommended in the  Mariner Workforce Working Group\u2019s report."], "subsections": []}]}, {"section_title": "DOT Has Not Finalized Mandated National Strategies but Has Identified Various Options to Address Challenges to Sustaining U.S.- Flag Fleet for Defense Needs", "paragraphs": ["Congress issued two separate mandates to DOT to develop strategies  related to challenges facing the U.S.-flag fleet, specifically:", "The Secretary of Transportation was directed in 2014 to develop a  national maritime strategy with recommendations, among other  things, to increase U.S.-flag vessel competitiveness.", "The Secretary of Transportation and MARAD were directed in 2014 to  develop, in collaboration with DOD, a national sealift strategy to  ensure the long-term viability of the U.S. Merchant Marine (which  encompasses U.S.-flag vessels and U.S.-citizen mariners).", "According to MARAD and DOD officials, MARAD has been working on a  single draft maritime strategy to meet both mandates, since from their  perspective, the national maritime strategy would need to encompass the  national sealift strategy, as well.", "While there was no statutory deadline for the completion of the national  sealift strategy, there was a statutory deadline of February 2015 for the  national maritime strategy to be submitted to Congress. However, DOT  had not finalized the national maritime strategy as of May 2018.  According to MARAD officials, MARAD completed a draft strategy in  2016, which was approved by DOT and reviewed by the Office of  Management and Budget (OMB) and 28 additional agencies identified as  being stakeholders, including DOD. MARAD officials told us that while  MARAD had reached initial concurrence with these other agencies, the  strategy is now subject to the new administration\u2019s review. MARAD and  DOT officials told us that they now view the existing draft strategy as pre- decisional and emphasized that no decisions have yet been made about  the extent to which it must be revised before being sent out for a new  round of review by the stakeholder agencies. DOT officials provided no  timeline to us as to when they expect the strategy to move forward,  stating that it was not yet clear how long DOT would be reconsidering and  potentially revising the strategy before moving it forward again. Similarly,  no time frames have been provided to Congress. The delay in submitting  this strategy to Congress means that decision-makers do not have  information and recommendations from the agency to inform policy- making in this area. Moreover, it further delays a response to a specific  statutory requirement that DOT make recommendations related to U.S.- flag vessel competitiveness and develop a strategy to ensure the long- term viability of U.S.-flag vessels and U.S.-citizen mariners.", "While DOT has been delayed in issuing the national strategy, MARAD  has in other agency reports or through discussions with stakeholders  identified some options to address the competitiveness of U.S.-flag  vessels and the long-term viability of the U.S. Merchant Marine\u2014issues  that are very similar to the key challenges identified by stakeholders with  whom we spoke. However, DOT and MARAD officials stated that they are  not yet ready to address the feasibility of these options. For example,  MARAD has identified the following options as having potential to reduce  the costs of operating a U.S.-flag vessel\u2014which would in turn increase  U.S.-flag vessels\u2019 competitiveness:", "MARAD is part of a U.S. Registry Working Group that was established  in response to a 2016 report and is looking at actions to decrease  the time and cost of bringing vessels under the U.S. flag, including the  cost of meeting Coast Guard requirements. This working group is  considering actions, such as applying internationally recognized  vessel standards to U.S.-flag vessels to meet Coast Guard  requirements, among others.", "In the current strategic plan for 2017 through 2021, MARAD identified  two areas of reform\u2014mariner income-tax relief and liability insurance  reform\u2014that could reduce the crew costs of operating under a U.S.  flag.", "MARAD officials stated that stakeholders have recommended that  MARAD consider whether a tax on U.S.-flag vessels receiving  maintenance overseas should be eliminated in order to reduce  maintenance costs for U.S.-flag vessels. In general, maintenance and  repairs on U.S.-flag vessels not conducted at U.S. shipyards are  subject to a statutory 50 percent ad valorem tax on the cost of  maintenance performed overseas. According to 12 of the 14 MSP  vessel operators we spoke with, U.S. shipyards are typically more  expensive than foreign shipyards or may not be close to the vessel\u2019s  location or route, so they typically choose to pay the tax and have the  maintenance performed overseas. Four MSP vessel operators stated  that they send U.S.-flag vessels to U.S. shipyards for maintenance  when it makes sense from a logistical and financial perspective.  MARAD officials stated they are considering the effect of eliminating  the tax, a step that would reduce costs for vessel operators but would  potentially negatively affect the financial viability of U.S. shipyards,  which the law was designed to assist. However, MARAD officials  stated that they have not yet evaluated these trade-offs.", "MARAD and Transportation Command officials have also identified\u2014but  not officially proposed\u2014several options to increase the volume of  government cargo carried on U.S.-flag vessels, which was identified by  stakeholders we spoke with as a cause of the challenge of sustaining the  financial viability of MSP vessels. For example, Transportation Command  officials told us that they consider access to cargo to be a critical means  of sustaining U.S.-flag vessels.", "Transportation Command and MARAD officials stated that one way to  increase the amount of commercial cargo on U.S.-flag vessels would  be to require that certain energy export commodities, such as oil or  liquefied natural gas, be carried on U.S.-flag vessels. While this option  has been considered in the past, it would require new legislation and  would have potential trade-offs. For example, in 2015, we analyzed  the potential effects of a requirement that U.S. liquefied natural gas  exports be carried on U.S.-built and flagged vessels. We found that  such a requirement could potentially increase the number of U.S.-flag  vessels by 100, but, due to their higher operating costs, could also  increase the cost of transporting liquefied natural gas from the United  States, decrease the competitiveness of U.S. liquefied natural gas in  the world market, and in turn, reduce demand for U.S. liquefied  natural gas. MARAD officials stated that another option would be  increasing the percentage of cargo, such as food aid, that civilian  agencies are required to transport on U.S.-flag vessels. This would  also require an amendment to existing legislation and would also have  trade-offs since as described previously, cargo preference  requirements can negatively affect the missions of civilian agencies.", "Another option stated by MARAD officials to address declining  government cargo volumes would be to increase the MSP stipend to  replace some of the government support previously provided through  cargo preference programs. This option was previously used to  address the recent reduction in government cargo, as described  previously in this report.", "MARAD, through its 2017 Mariner Workforce Working Group report, also  identified options to address the challenge of ensuring a sufficient number  of U.S.-citizen mariners for defense needs. This challenge was identified  by stakeholders we spoke with and by the sealift strategy mandate\u2019s call  for DOT to ensure the long-term viability of the U.S. Merchant Marine,  which includes U.S.-citizen mariners. The Mariner Workforce Working  Group report identified two actions that could help increase the number of  U.S.-citizen mariners. However, the working group\u2019s report did not  discuss specific costs or trade-offs related to either action or elaborate  any further on them. The identified actions were as follows:", "MARAD should develop a broad-based reserve program that would  identify and support qualified mariners willing to sail in commercial  and government-owned vessels during an emergency. MARAD would  provide limited financial assistance in training mariners and  maintaining credentials, in turn for which mariners who participate  would be obligated to sail in the event of a defense need.", "MARAD and other U.S. government agencies should support a  healthy merchant marine (which encompasses U.S.-flag vessels and  U.S.-citizen mariners). The government should fully support programs  including MSP, cargo preference requirements, the Jones Act, and  government chartering of privately owned vessels. When DOD  determines that national needs require more mariners and vessels  than can be provided through current programs, those programs  should be expanded to meet such needs.", "MARAD and DOT officials stated that they are not yet ready to propose  actions to address any of these issues. According to these officials, they  have not yet developed cost estimates or analyzed the trade-offs of  various alternatives to increasing U.S.-flag vessels\u2019 competitiveness or  otherwise supporting the financial viability of the U.S.-flag fleet or  ensuring sufficient U.S. citizen mariners for defense purposes. The  officials stated that they are therefore not ready to recommend which of  the identified options, if any, should be pursued, either as  recommendations in the national maritime strategy or elsewhere."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["To date, U.S. government support for commercial sealift has helped meet  national defense needs, but recent increases in the cost differential of  U.S.-flag vessels versus foreign-flag vessels and decreases in the  volumes of government cargo have made it more challenging to ensure  the financial viability of U.S.-flag vessels. Moreover, with a smaller  number of U.S. flag vessels in international trade than in previous years,  DOD and MARAD have raised concerns about the sufficiency of the pool  of U.S. citizen mariners the United States can count on to crew  government-owned reserve vessels activated for national defense needs.  Congress mandated in 2014 that DOT issue strategies to address these  challenges. MARAD has been working on a national maritime strategy to  address both mandates. However, over 3 years after a congressionally  mandated issuance date of February 2015, DOT has not published this  strategy or made any recommendations to increase U.S.-flag vessels\u2019  competitiveness or to ensure the long-term viability of the U.S.-flag fleet  and U.S. citizen mariners. DOT has also not developed a timeline for  when it will complete and provide this strategy to Congress. The  continued lack of such a strategy limits decision-makers\u2019 ability to make  policy choices related to these challenges in a comprehensive way that  considers the complex issues related to the long-time government  support for the U.S.-flag fleet."], "subsections": []}, {"section_title": "Recommendation for Executive Action:", "paragraphs": ["The Secretary of the Department of Transportation should complete the  national maritime strategy and establish and provide to Congress a  timeline by which the strategy document will be issued.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOT, DOD, USDA, USAID, EXIM  Bank, the Department of Energy, and the State Department for review  and comment. DOT provided written comments, which are reprinted in  appendix II, and technical comments, which we incorporated as  appropriate. DOT agreed with our recommendation that DOT should  complete the national maritime strategy and provide a timeline to  Congress by which the document will be issued. USAID provided written  comments, which are reprinted in appendix III. DOD and EXIM Bank  provided technical comments, which we incorporated as appropriate.  USDA, the Department of Energy, and the State Department informed us  that they had no comments.", "We are sending copies of this report to the Secretary of Transportation,  the Secretary of Defense, the Secretary of State, the Secretary of Energy,  the Secretary of Agriculture, the Administrator of USAID, and the  Chairman of EXIM Bank, as well as appropriate congressional  committees and other interested parties. In addition this report is available  at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-2834 or vonaha@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Alternatives and Potential Modifications to the Maritime Security Program", "paragraphs": ["In addition to the potential modifications to the Maritime Security Program  (MSP) that we described in the report, we examined two alternatives to  the MSP that we identified by conducting a literature search on the  program and reviewing a 2009 study of the MSP. We also interviewed  stakeholders about these two alternatives. These two alternatives were  for the government to purchase its own vessel fleet to meet defense  requirements or for DOD to charter or contract for vessels in times of  need. However, these options do not present clear cost savings or would  reduce the government\u2019s ability to meet national defense goals, according  to stakeholders we interviewed and the 2009 study. We also identified  additional options beyond those described in the report to modify the  MSP while maintaining the annual stipend by reviewing prior GAO work  and interviewing the same stakeholders on ways to improve the MSP.  These modifications included implementing a competitive-bidding process  to select participants and varying payments to MSP vessel operators  based on the vessel\u2019s type and military usefulness, among others. Cost  savings to the government associated with these modifications are likely  to be small to nonexistent, according to MARAD officials, and maritime  stakeholders had differing views on whether these modifications would  improve the program. Tables 2 and 3 below show the potential effects, as  identified by stakeholders, that each of the alternatives and modifications  to the MSP would have on costs, mission, and other areas."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Alwynne Wilbur (Assistant  Director), Stephanie Purcell (Analyst in Charge), Amy Abramowitz, David  Ballard, Geoff Hamilton, Bonnie Ho, Christopher Jones, Josh Ormond,  Amy Rosewarne, and Kelly Rubin made key contributions to this report."], "subsections": []}]}], "fastfact": ["In a crisis, the government relies on oceangoing U.S.-flag ships and U.S.-citizen crews to help the military. To ensure their availability, the government provides stipends and requires certain government cargoes to be shipped on U.S.-flag ships.", "Despite these efforts, there are challenges:", "In recent years, U.S.-flag ships have become more expensive to run and the government has shipped less cargo\u2014making it harder for carriers to stay in business.", "There may not be enough U.S.-citizen sailors to meet defense needs.", "In 2014, Congress required the Department of Transportation to develop a U.S. maritime strategy, which we recommended completing."]}
{"id": "GAO-18-8", "url": "https://www.gao.gov/products/GAO-18-8", "title": "U.S. Marshals Service: Additional Actions Needed to Improve Oversight of Merit Promotion Process and Address Employee Perceptions of Favoritism", "published_date": "2017-10-17T00:00:00", "released_date": "2017-10-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["USMS mission areas include fugitive apprehension, witness protection, and federal prisoner transportation, among others. USMS whistleblowers recently alleged that USMS officials engaged in improper promotion practices\u2014such as routinely preselecting favored candidates. Investigations have substantiated multiple whistleblower allegations which has raised questions about the integrity of USMS's merit promotion process. USMS announces about 260 law enforcement promotion opportunities annually.", "GAO was asked to review USMS's promotion processes and policies and effects that USMS promotion practices have on employee morale. This report examines (1) the extent to which the USMS's merit promotion policies are aligned with federal guidelines; (2) the extent to which USMS monitors its merit promotion processes; and (3) the steps, if any, USMS has taken to understand and address employee concerns about its merit promotion policies and processes. GAO analyzed data and documents on USMS promotions from October 2015 through April 2017, and found these data to be sufficiently reliable for the purposes of GAO's study. GAO also analyzed USMS documentation, and interviewed USMS officials and non-generalizable groups of employees (85 in total) in four district locations."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Marshals Service's (USMS) merit promotion policy aligns with relevant provisions in title 5 of the United States Code and Code of Federal Regulations, which are the government-wide laws and related provisions agencies must follow to make federal appointments. Agencies must design and administer merit promotion programs to ensure a systematic means of selection for promotion based on merit and these programs must conform to five key requirements outlined in title 5. GAO found that the USMS merit promotion plan, as revised in November 2016, aligned with each of these five requirements. For example, the first requirement states that agencies must establish merit-based procedures for promoting employees that are available in writing to candidates. The USMS merit promotion plan, which is available to employees, outlines such procedures.", "USMS is taking steps to improve how it monitors the implementation of the scoring component of its process to rate promotion applications, but lacks documented guidance to ensure consistent compliance with its merit promotion policy. GAO found that USMS does not adequately monitor the rating process, which allowed for conflicts of interest with raters who may compete with candidates whose applications they score. USMS also does not monitor the rating process to ensure that raters complied with a key requirement\u2014that raters decline to score applications of candidates with whom there is a conflict of interest, such as a supervisor-employee relationship. USMS is implementing a process change that, if implemented effectively, can address these two deficiencies. The new process entails having a third-party contractor, rather than USMS employees, determine candidates' scores. Finally, GAO found that USMS lacks documented guidance on rater scoring. USMS only provides verbal guidance to instruct raters on how to score the experience category of merit promotion packages, creating inconsistent application of the guidelines. Employees GAO met with expressed the view that such discrepancies create the perception that the rating process is unfairly subjective. Developing clear and specific documented guidance on how raters should apply the benchmark guidelines could minimize scoring inconsistency and potential rater subjectivity for both the current rating process and the new competency-based assessment.", "USMS has taken limited steps to understand and address employee concerns about the promotion process. An estimated 41 percent of USMS respondents to the 2016 Office of Personnel Management Federal Employee Viewpoint Survey strongly disagreed or disagreed that USMS promotions are merit-based, while 34 percent strongly agreed or agreed, and 25 percent neither agreed nor disagreed. During discussion groups GAO held at four USMS district locations across the U.S., employees frequently expressed negative views and many indicated low or no trust that the process is fair and merit-based. Although USMS has acknowledged employees' negative perceptions of the promotion process, it has not developed an agency-wide action plan in accordance with federal guidance to better understand the nature and causes of employee concerns across districts and divisions. Providing specific and consistent information to employees about key steps in the merit promotion process and internal management decisions could improve transparency and help mitigate employee perceptions of favoritism that have negatively impacted employee morale."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that USMS develop specific rater guidance and develop and implement an agency-wide action plan to better understand and address employee concerns, among other steps. USMS concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Between February 2015 and November 2016 more than 85 United States  Marshals Service (USMS) employees made allegations that USMS  officials engaged in improper promotion practices\u2014such as routinely pre- selecting favored candidates and offering detail assignments to certain  individuals based on non-merit factors\u2014among others. In recent years,  several internal and external investigations have substantiated several  allegations. Specifically, investigations in 2014 and 2015 found evidence  of nepotism and employee misconduct.", "In January 2016, the Department of Justice (DOJ) Justice Management  Division (JMD) completed a review of USMS hiring and promotion policies  and procedures and found several deficiencies. JMD made  recommendations to bring USMS into compliance with applicable  statutes, regulations, and policies. For example, based on this review  USMS revised its scoring process to remove points awarded to  candidates for service in an acting (temporary promotion) capacity.  Furthermore, in November 2016, a Senate Judiciary Committee report on  improper hiring practices and whistleblower reprisal noted that USMS had  begun implementing changes in response to the January 2016 JMD  review, such as incorporating and elaborating on restrictions against  nepotism. However, the Committee report also determined that USMS  lacked protections for whistleblowers and could improve employee  engagement to promote a stronger merit-based culture.", "In light of ongoing Congressional questions, you asked us to assess the  extent to which USMS\u2019s promotion processes and policies ensure the  selection of candidates based on merit as well as any effects that USMS  promotion practices may have on employee morale. This report  addresses the following objectives:  1.  To what extent are the USMS\u2019s merit promotion policies aligned with  federal guidelines?  2.  To what extent does the USMS monitor its merit promotion  processes?  3.  What steps, if any, has the USMS taken to understand and address  employee concerns about its merit promotion policies and processes?", "To address these objectives, we analyzed relevant USMS documentation  and data. In determining whether the USMS merit promotion policies are  aligned with federal guidelines, we reviewed relevant provisions in title 5  of the United States Code and the Code of Federal Regulations and  compared these with certain provisions in the USMS Merit Promotion  Plan. Specifically, we examined the extent to which the USMS Merit  Promotion Plan conformed to the five general requirements outlined in  title 5 of the Code of Federal Regulations that agencies must incorporate  in merit promotion programs to ensure a systematic means of selection.", "In determining the extent to which USMS monitors its merit promotion  processes, we examined documentation on merit promotion procedures  and practices, including documentation on the merit promotion rating  process. To examine USMS compliance with key aspects of this plan,  such as candidate rating and selection, we analyzed merit promotion  documentation, including all lists containing competitive candidate scores  for fiscal years 2015 and 2016.", "We examined the extent to which USMS complied with federal  regulations on temporary promotions by analyzing the records for all 844  noncompetitive, not-to-exceed 120-day temporary promotion selection  records from October 2015 through February 2017. We reviewed USMS  compliance with temporary promotion regulations because whistleblowers  alleged that candidates who received temporary promotions may have  received unfair advantages for permanent promotion. We assessed the  reliability of the temporary promotions data we used by reviewing the data  for missing elements, outliers, and obvious errors, and interviewing  officials about data errors and applicable quality control procedures to  ensure the accuracy and integrity of the data. Although we found some  inconsistencies, such as incorrect documentation of legal citations and  some missing data elements, we determined these data were sufficiently  reliable for identifying the extent to which non-competitive temporary  promotions exceeded the regulatory limit of 120 days.", "We evaluated USMS internal control activities against Standards for  Internal Control in the Federal Government to determine the extent to  which USMS has developed internal control mechanisms to monitor the  implementation of key steps in the merit promotion process. We reviewed  all job vacancy announcements for fiscal years 2015, 2016, and part of  fiscal year 2017 (October 2016 through April 2017) to determine the  extent to which USMS has documented steps in accordance with Office  of Personnel Management (OPM) requirements.", "To identify areas of concern raised by employees, we reviewed USMS  Federal Employee Viewpoint Survey data for fiscal years 2015 and 2016.  We also interviewed USMS officials and federal human capital experts in  OPM and the Merit Systems Protection Board (MSPB) for their  perspectives on the extent to which USMS implemented key steps in its  merit promotion process in accordance with federal guidelines and merit  principles. In addition, we met with four whistleblowers and employees  who contacted us anonymously to provide their perspectives on these  issues. Because of the sensitivity of whistleblowers\u2019 identities, we are not  identifying their locations.", "We also interviewed employees in four district locations for their  perspectives on how USMS implemented key steps in its merit promotion  process and efforts to understand and address employee concerns about  the merit promotion process. The four district locations were Chicago, Los  Angeles, San Diego, and Washington, D.C. We selected these sites  based on a range of geographic locations and a medium-to-large district  size to obtain a wide representation of employees and maximize the pool  of employees available to meet with us. At each location, we interviewed  the U.S. Marshal and Chief Deputy U.S. Marshal, and conducted  separate discussion groups with GS-14, GS-13, and GS-12 level law  enforcement employees. For the discussion groups, we used a structured  interview questionnaire, which focused on implementation of USMS merit  promotion processes and potential concerns about merit promotion  practices. Collectively, we met with a total of 93 USMS employees,  including 4 U.S. Marshals, 4 GS-15 Chief Deputy U.S. Marshals, 7 GS-14  Assistant Chief Deputy U.S. Marshals and Chief Inspectors, 24 GS-13  Criminal Investigators (which included both supervisors and non- supervisors), and 54 GS-12 Deputy U.S. Marshals. USMS uses a  separate process for promoting non-operational employees (i.e.,  administrative) which we did not include in our scope. We collectively  refer to law enforcement employees in our discussion groups as USMS  employees. The selection of employees we met with in each district was  based on which employees were available and willing to meet during our  visit. Our discussion groups included a total of 85 GS-14, GS-13, and GS- 12 employees, and we collected questionnaire responses from all 85  participants. To ensure candid discussions, we met separately with  groups of employees by GS level and did not include supervisors with  non-supervisors. While not generalizable to all USMS districts and  divisions, the views we collected overall provide insights into employee  perspectives on USMS merit promotion practices.", "We conducted this performance audit from July 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["USMS mission areas include fugitive apprehension, witness protection,  and federal prisoner transportation, among others. There are 94 U.S.  Marshals\u2014one for each federal judicial district\u2014who are presidentially  appointed and direct agency operations in each district. U.S. Marshals  are considered to generally operate autonomously from headquarter  offices and divisions. USMS\u2019s current workforce consists of roughly 3,709  Deputy U.S. Marshals and Criminal Investigators, and approximately  1,435 Detention Enforcement Officers and administrative employees. In  general, a cadre of Deputy U.S. Marshals in each district collectively  conducts various activities associated with the USMS mission areas. In  addition, Deputy U.S. Marshals and Criminal Investigators who are  assigned to headquarter operational divisions are located in district  offices and work collectively with district employees across the 94 districts  to carry out division functions.", "Deputy U.S. Marshals are categorized into two federal government  occupational series \u2013 0082 and 1811. USMS typically hires entry-level  Deputy U.S. Marshals in the 0082 series at the GS-5 or GS-7 level. At the  GS-11 level, deputies automatically convert to the 1811 series and  receive non-competitive career ladder promotions through GS-12 if they  complete the required waiting period for advancement to the next grade  level and maintain an acceptable level of performance. For GS-13 and  above, deputies must compete for promotions through the operational  merit promotion process.", "USMS\u2019s Human Resources Division (HRD) is responsible for issuing and  implementing policy guidelines, revisions, and supplements in  accordance with appropriate regulations and merit system principles.  HRD also periodically assesses the effectiveness of merit promotion  policy, assists in filling division and district vacancies, and reports officials  who inappropriately discriminate against candidates, and candidates who  engage in improper behavior, such as willful exaggeration,  misstatements, or other abuses of the application process. USMS\u2019s Office  of Professional Responsibility (OPR) oversees the internal compliance  review of USMS staff, division, and district offices, which assess  compliance with DOJ and USMS policies and procedures, and ensures  the integrity of the agency\u2019s internal controls."], "subsections": [{"section_title": "Federal Guidelines on Merit Promotion Policy", "paragraphs": ["Congress passed the Pendleton Act in 1883, establishing that federal  employment should be based on merit. The nine merit system principles  established by the Pendleton Act were later codified as part of the Civil  Service Reform Act of 1978. The first merit principle indicates that  federal personnel management should be implemented consistent with  certain merit system principles, including that selection and advancement  should be determined solely on the basis of relative ability, knowledge,  and skills, after fair and open competition which assures that all receive  equal opportunity.", "Title 5 of the United States Code refers to the government-wide personnel  management laws and related provisions generally applicable to federal  employment. While title 5 of the United States Code generally outlines the  rules agencies must follow to make appointments in the competitive  service, excepted service, and the senior executive service, agencies  have significant discretion to design and implement internal merit  promotion policies and processes. Title 5 also states that federal  personnel management should be implemented consistent with merit  system principles that protect federal employees against \u201cpersonal  favoritism.\u201d According to MSPB, personal favoritism occurs when a  supervisor or selecting official grants an advantage to one employee or  candidate but not another similarly situated employee or candidate based  on friendship or other affinity rather than a legitimate merit-based reason.  Favoritism is distinct from discrimination on legally protected bases and is  frequently more difficult to clearly identify when it occurs.", "OPM is responsible for overseeing all policy created to support Federal  human resources departments as well as for ensuring that these policies  are properly implemented and continue to be correctly carried out. OPM  delegates many personnel decisions to federal agencies, but is  responsible for establishing and maintaining an oversight program  ensuring that the personnel management functions it delegates to  agencies are in accordance with merit system principles and the  standards established by OPM for conducting those functions.", "OPM has also established minimum qualification requirements for hiring  or promoting individual employees under the competitive process. In  addition, OPM allows agencies to make minimum qualification  requirements more specific by adding selective placement factors.  According to OPM, selective placement factors identify any qualifications  that are important for the job and are required when an individual starts  the job. Candidates who do not meet selective placement factors are  ineligible for further consideration. OPM generally allows agencies to  establish selective placement factors for any position without prior OPM  approval, but requires agencies to establish and document selective  placement factors through the job analysis process. OPM guidance also  states that selective placement factors have four characteristics: extensive training or experience to develop; essential for successful performance on the job (i.e., if individuals do  not have the selective factor, they cannot perform the job); almost always are geared toward a specific technical competency;  cannot be learned on the job in a reasonable amount of time."], "subsections": []}]}, {"section_title": "USMS Has Aligned its Merit Promotion Policy with Federal Guidelines and Developed a Corresponding Process", "paragraphs": [], "subsections": [{"section_title": "USMS Merit Promotion Policy Is Aligned with Federal Human Capital Guidelines", "paragraphs": ["We determined that the USMS merit promotion policy aligns with relevant  provisions of title 5 of the United States Code, and title 5 of the Code of  Federal Regulations. Specifically, the most recent version of the USMS  Merit Promotion Plan, which was revised in November 2016, outlines the  mechanisms for affording merit staffing and promotional opportunities to  competitive status candidates for GS-13, GS-14, and GS-15 1811  operational law enforcement positions. The plan states that it is the  policy of the USMS to maintain a sound staffing program that will ensure  that USMS fills positions from among the best qualified candidates and  that the selection, assignment, and promotion of employees are on the  basis of job-related criteria.", "The Merit Promotion Plan cites parts of title 5 of the Code of Federal  Regulations as the governing authority under which the plan was  developed and aligns with key provisions of title 5 of the United States  Code and title 5 of the Code of Federal Regulations. Agencies must  design and administer merit promotion programs to ensure a systematic  means of selection for promotion based on merit. These programs must  conform to five requirements outlined in title 5 of the Code of Federal  Regulations. Table 1 describes the five requirements and how key  provisions in the USMS Merit Promotion Plan align with these  requirements."], "subsections": []}, {"section_title": "USMS Has Developed a Promotion Process Based on Its Merit Promotion Plan", "paragraphs": ["USMS has developed a multi-step process based on the USMS Merit  Promotion Plan to assess and select eligible candidates for promotion. To  be considered eligible for promotion to GS-13, GS-14, or GS-15 law  enforcement positions, candidates must (1) serve one year in an  operational position at the next lower grade than the position desired; (2)  take the most recent USMS merit promotion examination, which is  administered every two years; and (3) submit required documents,  including the promotion application package, during an annual open  season submission process. Once candidates have met these  prerequisites, they may apply to individual position vacancy  announcements, which are advertised electronically to all USMS  employees. Figure 1 depicts the multiple steps in the USMS merit  promotion process.", "Table 2 provides a detailed description of the multiple steps in the USMS  merit promotion process."], "subsections": []}]}, {"section_title": "USMS Is Taking Steps to Improve Monitoring of Its Merit Promotion Process, but Lacks Documented Guidance to Ensure Consistent Compliance with Merit Promotion Policy", "paragraphs": [], "subsections": [{"section_title": "Although USMS Does Not Monitor Key Aspects of Its Merit Promotion Process, It Is Taking Steps to Improve", "paragraphs": ["USMS does not monitor the implementation of the scoring component of  its rating process or compliance with its temporary promotion policy, but is  taking steps to improve these aspects. We found that raters may directly  compete with candidates whose merit promotion packages they score.  For example, for an open GS-13 position, a GS-12 employee may  promote into the position or a GS-13 employee may be laterally  reassigned to the position. Employees seeking a lateral reassignment to  another district or division are not required to submit a merit promotion  application package during the open season, but instead submit  documentation to the merit promotion staff to confirm their eligibility for a  lateral reassignment. Thus, a GS-13 employee who serves as a rater may  directly compete as a lateral candidate with a GS-12 employee seeking a  promotion to the same position. Some USMS employees in our  discussion groups expressed the view that the rating process is biased  due to this potential conflict of interest. Specifically, seven employees  across multiple districts, including four who had served as raters,  expressed the view that raters may have personal incentives to score  strong candidates lower because they may compete with these  candidates for the same positions.", "The Office of Management and Budget\u2019s (OMB) Circular No. A-123,  Management\u2019s Responsibility for Internal Control (A-123) explains that an  agency should have processes in place to detect and mitigate potential  employee conflicts of interest to demonstrate a commitment to integrity  and ethical values. We found that USMS does not have a process in  place to eliminate potential rater conflicts of interest. USMS stated that it  would be difficult to detect situations where raters who might be seeking a  lateral reassignment would be scoring a potential competitor, but  acknowledged that to the extent this is occurring, it would be a conflict of  interest.", "USMS also does not monitor the implementation of the rating component  of its process to ensure that raters complied with a key merit promotion  process requirement. Specifically, USMS guidance states that raters are  expected to decline to score a candidate\u2019s application if there is a conflict  of interest with the candidate, for example, a former employee or  supervisor relationship or a close personal relationship. USMS officials  explained that using two raters to score each merit promotion application  is intended to mitigate personal bias. However, during our discussion  groups, 4 employees who had served as raters said they had directly  observed raters scoring applications for employees with whom there  existed possible conflicts of interest. Additionally, 18 employees in our  discussion groups told us they had heard from colleagues who served on  rating panels that raters have used personal knowledge of candidates to  influence their scoring. Another 16 employees expressed a related  concern that raters can see the names of the applicants they are scoring.  According to HRD officials, they relied on raters to decline to score  applications of candidates for which they may have personal knowledge  and only use the information in the package to determine candidate  scores.", "Although USMS does not monitor the implementation of key aspects of its  rating process to mitigate potential rater conflicts of interest or bias,  USMS has begun to implement changes that could address these  deficiencies. In February 2017, during the course of our review, USMS  announced a planned change to the process the agency uses to assess  the experience component of candidate applications. Under the existing  process, USMS raters collectively score the experience narrative  component, which helps determine the overall merit promotion score. The  planned change entails having a third-party contractor, rather than USMS  employees, determine candidates\u2019 competency scores using a scenario- based competency assessment. As part of the new process, USMS also  updated the scoring rubric based on the new competency assessment,  which includes the elimination of the experience category (see table 3).", "USMS started to implement this change to the process during the  summer 2017 promotion cycle for GS-13 promotions. USMS plans to  evaluate the effectiveness of the new process during the fall of 2017 and  determine whether the new process is ready to be implemented for GS- 14 and GS-15 promotions during the next promotion cycle. If USMS  effectively implements these planned changes, these actions could  address the deficiencies we identified by reducing the potential for rater  conflict of interest and bias because independent, third-party raters will  assess candidate qualifications, rather than USMS employees evaluating  their colleagues.", "We reviewed USMS compliance with federal guidelines for  noncompetitive temporary promotions and found, in a few instances, that  USMS violated federal guidelines and its merit promotion policy by  extending some noncompetitive temporary promotions beyond the  regulatory limit of 120 days. According to USMS officials, they typically  use temporary promotions to fill open positions between merit promotion  cycles. A temporary promotion may also be used to temporarily promote  a GS-14 employee to the Chief Deputy position in the event a U.S.  Marshal resigns and the Chief Deputy becomes the acting U.S. Marshal.  According to title 5 of the Code of Federal Regulations and the USMS  Merit Promotion Plan, individual employees may receive noncompetitive  temporary promotions or details to a higher-graded position, or a position  with known promotion potential, if the total time spent in any  noncompetitive position is 120 days or less within a 12-month  timeframe. USMS may also fill open positions between cycles using  another type of temporary promotion for up to one year; however,  employees are required to compete for temporary promotions beyond 120  days through the merit promotion process. These requirements help  USMS use a systematic process of selection according to merit. We  analyzed all 844 noncompetitive temporary promotion selections (of 120  days or less) from October 2015 through February 2017 and found 9  instances in which the USMS exceeded the regulatory limit of 120 days  for individual employees. These 9 instances exceeded the statutory limit  by approximately 30 days on average, while ranging from 5 days to 103  days.", "USMS officials acknowledged that because they manually enter the  noncompetitive temporary promotion end dates into the system that  contains the temporary promotions data, they have made errors in  reviewing these dates, such as incorrectly adding dates for candidates  who have received multiple noncompetitive temporary promotions that  exceeded a 12-month timeframe. According to HRD, this system has  internal checks and controls to ensure an employee\u2019s temporary  promotion does not go beyond the not-to-exceed date. For example, the  system does not allow an employee who received a noncompetitive  temporary promotion to a higher grade level to continue to be paid at the  higher level beyond the date the temporary promotion is set to expire  unless HRD processes an action to extend the promotion. Otherwise, to  ensure the employee continues to be paid, HRD must process an action  to revert the employee back to their original grade level. USMS officials  explained that they must manually review instances in which employees  receive multiple noncompetitive temporary promotions within a year, to  ensure the total time spent serving in these positions does not exceed  120 days during any 12-month period.", "Despite having identified relatively infrequent instances of non- compliance, we note that agencies are required to comply with federal  regulations. As a result of our review, USMS took immediate steps to  strengthen its internal controls to ensure its compliance with these  temporary promotion regulations. Specifically, USMS reported to us that  they developed a spreadsheet to help staffing specialists correctly  calculate the number of days the employee is eligible for a temporary  promotion. Moreover, USMS has developed training on how to use the  new tool and on the federal regulations that guide temporary promotions,  which it plans to provide to staffing specialists in October 2017. Finally,  USMS plans to incorporate a regular review of temporary promotion  actions into the HRD standard operating procedure."], "subsections": []}, {"section_title": "USMS Lacks Documented Guidance on Rater Scoring", "paragraphs": ["USMS provides verbal guidance to instruct raters on how to score the  experience category of merit promotion packages, which may result in  inconsistent application of the guidance. USMS Merit Promotion  Procedures generally state that raters assign a numerical grade to each  experience category\u2014such as problem-solving or leadership\u2014by  comparing how the experience described in the application relates to the  established benchmarks. The benchmarks, which are provided to raters,  contain descriptions of relevant experience that are designed to guide the  raters as they assign scores to specific knowledge, skills and abilities,  such as supervising staff and working with databases. At the beginning of  the scoring process, each rating panel receives verbal guidance from  merit promotion staff, which entails using actual candidate applications as  examples and verbally discussing how to use professional judgment to  apply the benchmarks.", "Some employees in our discussion groups expressed the opinion that the  guidance provided to raters to score candidate experience narratives is  unclear, which results in inconsistent scoring. Specifically, during our  discussion groups, 39 employees across multiple districts, including 7  employees who had served as a rater, stated that raters often had  different interpretations of HRD\u2019s expectations for how to apply the  benchmarks. For example, they stated that some raters determined  scores based on whether a candidate\u2019s narrative contained the specific  language in the benchmark. Other raters, by contrast, determined scores  based on whether the candidate met the intent of the benchmark,  regardless of whether the candidate included the specific language in the  benchmark. As a result, employees in our discussion groups explained  that highly qualified candidates with relevant management and  supervisory experience may receive a low experience score if a rater  determines that the candidate did not use the exact language appearing  in the benchmarks.", "Furthermore, 70 of 85 employees (82 percent) expressed the view that  inconsistent scoring of similarly qualified candidates creates the  perception that the rating process is unfairly subjective. Specifically, they  asserted that comparable candidates with similar types of experience  have received vastly different scores depending on which raters scored  their applications. Two employees in different districts also said that they  re-submitted the same experience narrative as the prior year, and  received a significantly different score each year. Additionally,  approximately 20 employees contended that raters may be influenced by  their own professional experiences. For example, raters who have  operational experiences that are different from candidates\u2019 experiences  may not sufficiently understand the duties or professional experiences  described by candidates. Consequently, they argued, these raters may be  limited in their ability to fairly rate some candidates\u2019 experiences.", "Although USMS is implementing a new competency assessment process  for GS-13 merit promotions, it is not clear at this time whether the new  process will address concerns about inconsistent rater scoring because  the agency plans to use new benchmarks that were developed by a third- party contractor in collaboration with USMS subject matter experts to  determine candidate scores. According to USMS officials, the new  process will entail professionally trained assessors using evaluation  guidelines to assess how well USMS promotion candidates respond to  scenario-based questions. In collaboration with the contractor, USMS  also developed evaluation guidelines that include plans for monitoring  quality assurance over the rating process. For example, according to  USMS officials, the third-party contractor will conduct random spot checks  to assess the consistency with which raters apply the new benchmarks  and will provide USMS a report on the results of the quality assurance  monitoring. However, given that USMS implemented these changes near  the end of our review, we did not assess the implementation of the new  process or the related quality assurance monitoring. Furthermore, until  USMS determines a timeframe for implementing the new competency  assessment at the GS-14 and GS-15 levels, the current rating process  will remain in effect.", "Standards for Internal Control in the Federal Government call for agency  management to determine the consistency with which controls are  applied. Furthermore, it states management should document policies in  the appropriate level of detail to allow management to effectively monitor  the control activity. While USMS provides raters with benchmarks and  verbal guidance on how to apply the benchmarks when scoring  applications, USMS has not documented guidance for raters. Six  employees who had served as raters said the rating guidance provided  was insufficient or the guidance could be improved. By developing clear  and specific documented guidance on how raters should interpret and  apply the benchmark guidelines, USMS could minimize rater subjectivity  and scoring inconsistency for both the current rating process and the  forthcoming competency-based assessment."], "subsections": []}]}, {"section_title": "USMS Has Taken Limited Steps to Understand or Address Employee Concerns about the Merit Promotion Process", "paragraphs": [], "subsections": [{"section_title": "USMS Employees Have Expressed Negative Views and Concerns about the USMS Merit Promotion Process", "paragraphs": ["According to an OPM report summarizing 2016 Federal Employee  Viewpoint Survey (FEVS) data, about one-third of USMS employees who  answered the survey indicated they agree that promotions are based on  merit. Specifically, in response to the survey statement, promotions in my  work unit are based on merit, an estimated 41 percent of USMS  respondents strongly disagreed or disagreed with the statement, while 34  percent strongly agreed or agreed, and 25 percent neither agreed nor  disagreed. Based on our review of an agency report examining district  and division-level USMS 2016 FEVS scores, district and division scores  varied greatly among those employees who responded to the FEVS.  For example, across the 10 districts with the lowest reported ratings in  2016, we found that 63 percent to 78 percent of respondents disagreed  that promotions are based on merit. By comparison, across the 10  districts with the highest reported satisfaction ratings in 2016, 7 percent to  16 percent of respondents disagreed that promotions are based on merit.", "Most of the USMS employees at four district locations who met with us  and answered our questions viewed the merit promotion process  unfavorably, citing concerns primarily related to favoritism in the process.  For example, 57 of 82 employees (70 percent) indicated that they had low  or no trust that the merit promotion process is fair and based on merit.  Employees in lower grade levels expressed a greater degree of mistrust  than did those in higher grades (see table 4). Specifically, 45 of 53 GS-12  employees (85 percent) indicated that they had low or no trust in the merit  promotion process, while just less than half of GS-13 employees (10 of  22) and relatively few GS-14 employees (2 of 7) said they had low or no  trust in the merit promotion process. While most employees (51 of 70, or  73 percent) answered that sometimes qualified candidates get promoted;  several explained during our discussion groups that they believe the  promotion of less qualified\u2014or unqualified\u2014employees occurs frequently  enough to affect morale. Further, 47 of 84 employees (56 percent) noted  that morale has deteriorated as a result of merit promotion processes or  selections. Finally, most of the employees (66 of 85, or 78 percent)  answered that USMS has not taken any steps to understand or improve  employee morale or they were unsure of whether any steps had been  taken.", "In addition, USMS employees we talked with during our discussion  groups expressed concerns about the USMS merit promotion process.  The prevalent themes that emerged during these groups were concerns  that (1) promotions are based on favoritism, (2) the promotion process  lacks transparency, and (3) promotion guidance is unclear and promotion  candidates do not receive feedback."], "subsections": [{"section_title": "Concerns that Promotions are Based on Favoritism", "paragraphs": ["Employees in our discussion groups expressed the view that many  promotion decisions are based on personal relationships over individual  merit. Notably, 51 of 85 employees in our discussion groups cited  examples of qualified candidates who were passed over for promotion by  those whom they believed were less-qualified due to favoritism. From  their perspective, there have been instances where candidates with high  promotion package scores and good reputations as supervisors have not  been promoted, while lower scoring candidates with poor reputations as  supervisors who have personal relationships with decision-makers have  been promoted. Further, 36 employees in our discussion groups said they  believed that career-enhancing opportunities, such as temporary  promotions, which improve employees\u2019 promotion potential by providing  them with directly related experience in positions for which they may be  competing, are often provided unfairly to employees based on personal  relationships.", "Employees in our discussion groups also expressed the view that some  employees receive more guidance on their application from supervisors  than do others, which they attributed to favoritism. As part of the merit  promotion process, supervisors are required to verify the experience  statements submitted by candidates. We found that among the limited  number of supervisors with whom we met, there were varying  interpretations of their responsibility in meeting this requirement.  Specifically, 1 supervisor viewed his role as strictly verifying the  experience and providing no further input. However, 7 other supervisors  viewed their role as providing guidance and mentorship to employees by  offering advice for improving candidate applications. Finally, 5 additional  supervisors said they provided additional guidance to employees only  when specifically requested. Of the 85 employees in our discussion  groups, 28 indicated that they believed supervisors helped certain  candidates develop their merit promotion packages, which provides an  unfair advantage over candidates who do not receive such guidance.", "Additionally, nine employees raised concerns that USMS has sometimes  expanded certificate of eligibles lists inconsistent with USMS policy to  include preselected, favored candidates. According to the USMS Merit  Promotion Plan, if there are more than five candidates applying for a  position, at least the top five scoring candidates will generally be included  on the list and subsequently referred for candidate selection. In some  circumstances, more than five eligible candidates are allowed to be  placed on the list. For example, if there is a tie for the last position on the  list, all candidates with that score will be included. Additionally,  candidates with a score within one point from the fifth highest scoring  candidate would also be included on the list. Finally, if there are multiple  vacancies for the same position (same series, grade, title, and location),  one additional name for each vacancy may be added to the list.", "To examine USMS compliance with this policy, we analyzed certificate of  eligibles lists and the corresponding candidate scores for fiscal years  2015 and 2016. For fiscal year 2015, we examined all 213 position  vacancies and found 2 instances where additional candidates were  included on the list inconsistent with USMS\u2019 established policy.  Specifically, these 2 lists contained the names of candidates with scores  that were more than one point below the fifth highest-scoring candidate,  and of these 2 instances, 1 candidate was promoted. For fiscal year  2016, we examined all 224 position vacancies and did not find any  inconsistencies with USMS\u2019 established policy.", "Whistleblowers who raised concerns about improper promotion practices  to Congress had alleged that USMS managers used selective placement  factors to limit competition for certain positions or to tailor vacancy  announcements for preselected, favored candidates. Similarly, five  employees in our discussion groups expressed the view that USMS used  selective placement factors to limit competition or pre-select certain  candidates. In this regard, we reviewed USMS compliance with OPM  requirements for the use of selective placement factors. Specifically, OPM  requires that agencies document the justification for using selective  placement factors through a job analysis process.", "We reviewed all job vacancy announcements for fiscal year 2015, fiscal  year 2016, and part of fiscal year 2017 (October 2016 through April 2017)  to determine if a job analysis had been performed when selective  placement factors were included in the announcement. In fiscal year  2015, there were 213 vacancy announcement positions, and 12  contained selective placement factors. We found USMS had not  completed a job analysis justification for any one of these 12  announcements. In fiscal year 2016, there were 224 vacancy  announcements, and 15 contained selective placement factors. USMS  completed a job analysis justification for all 15. For part of fiscal year  2017, there were 171 vacancy announcements, and 23 contained  selective placement factors, each of which had a justification. HRD  officials acknowledged that in the past they did not consistently document  the agency\u2019s use of selective placement factors by conducting job  analysis justifications, as required by OPM, but have consistently  complied with this requirement since April 2016."], "subsections": []}, {"section_title": "Concerns that the Promotion Process Lacks Transparency", "paragraphs": ["Employees in our discussion groups also expressed the view that poor  communication and limited transparency about the merit promotion  process and certain management decisions further contribute to  employees\u2019 negative perceptions of the merit promotion process. For  example, among the 85 employees in our discussion groups:", "Sixty-three employees expressed the view that the merit promotion  process lacks transparency because HRD does not effectively  communicate with employees about procedural steps or process  changes, contributing to a lack of understanding about the process.", "Forty-eight employees expressed the view that they have a limited  understanding of the rating and ranking process or that there is no  mechanism to dispute or appeal their score if they do not believe they  were fairly rated.", "Nineteen employees stated that HRD does not provide information  about policy or process changes until the changes have been  implemented and that they initially learn about forthcoming process  changes through other employees and hearsay, causing confusion  and frustration.", "Twenty-five employees expressed the perspective that USMS  management cancels vacancy announcements when preselected or  favored candidates do not appear on the certificate of eligibles list.", "According to USMS officials, the agency cancels an announcement when  the announcement posting was made in error (i.e., the position was not  actually available) or when they need to reassign an employee to a  different location. We found vacancy cancellations were infrequent\u20149 of  437 announcements\u2014during fiscal years 2015 and 2016; however, we  noted that USMS canceled 5 of the 9 announcements after final certificate  of eligibles were issued, which may have contributed to employees\u2019  concerns."], "subsections": []}, {"section_title": "Concerns that Promotion Process is Unclear and Promotion Candidates Lack Feedback", "paragraphs": ["Another prevalent theme that emerged during our discussion groups was  that the merit promotion process is unclear, and that employees do not  receive feedback when they do not get promoted. Notably, among the 85  employees in our discussion groups:", "Forty-six employees described the merit promotion process as  unclear.", "Fifty-nine employees stated that the merit promotion application  package does not reflect their qualifications to perform specific jobs or  their readiness to be promoted.", "Thirty-seven employees told us they are not notified of key steps in  the merit promotion process, such as whether they make the  certificate of eligibles list.", "Thirty-eight employees stated that because they are not provided  feedback when they are not selected for a promotion, they do not  have a clear understanding of how the USMS promotion process  assesses the extent to which candidates are ready for promotion.", "While there is no formal mechanism for providing specific feedback, HRD  officials explained, they may provide general feedback about the process  to candidates who proactively request feedback. However, as part of the  promotion process, HRD officials do not provide employees with specific  feedback at that time about their performance or readiness for promotion.  HRD officials also noted that as part of the new competency-based  assessment process, candidates will receive detailed instructions and  guidance on how candidates will be assessed for each competency. HRD  officials acknowledged that informing candidates about key merit  promotion steps, such as making the certificate of eligibles, would help  improve transparency and employee morale. They further explained that  while they do not directly inform candidates about making the certificate  of eligibles, in 2016 during the course of our review, they began posting  the cutoff scores for each job so candidates are now able to determine  whether they made the certificate of eligibles by comparing their final  score to the cutoff score for each position.", "Federal guidance notes that perceptions of favoritism, particularly when  combined with unclear guidance, a lack of transparency, and limited  feedback, negatively impact employee morale. According to MSPB,  perceptions of favoritism are damaging to employee morale regardless of  their basis in fact, because employees\u2019 perceptions are their reality.  Moreover, MSPB noted that providing honest feedback from selecting  officials can help employees improve their readiness for future  opportunities, and provide transparency to decrease perceptions of  favoritism. The report further noted that to achieve the goals of fair and  effective management of the federal workforce, organizations must  establish clear expectations for supervisors, and supervisors must be  aware of employees\u2019 perceptions and exercise sound judgment when  making a variety of decisions such as promotion selections, work  assignments, training, performance management, and providing  workplace flexibilities.", "In addition, Standards for Internal Control in the Federal Government  state that management should communicate quality information down and  across reporting lines to enable personnel to perform key roles in  achieving objectives, addressing risks, and supporting the internal control  system. Providing specific and consistent information to employees  about key steps in the merit promotion process and internal management  decisions, and constructive feedback to employees on the results of the  promotion process, including employee readiness for promotion, would  improve transparency and help mitigate employee perceptions of  favoritism that have negatively impacted employee morale."], "subsections": []}]}, {"section_title": "USMS Has Taken Limited Steps to Understand and Address Employee Concerns about the Merit Promotion Process", "paragraphs": ["USMS has taken limited steps to understand and address employee  concerns about its merit promotion process. Specifically, after analyzing  the results of the 2016 FEVS responses, USMS headquarters staff  acknowledged employees\u2019 negative perceptions of the merit promotion  process as an internal agency challenge. In an update provided to DOJ  on plans for addressing employee engagement challenges identified in  the FEVS, USMS reported that the primary employee engagement  challenges are the geographical dispersal and management structure of  district offices (since USMS districts are led by political appointees, who  have different management styles). To address this challenge, USMS  disseminated an agency-wide memorandum emphasizing to all  employees that each employee and manager has an individual  responsibility to take action to improve engagement at the local level.  Also, USMS encouraged local managers to evaluate their FEVS results  and formulate an action plan that fits their individual district or division.", "USMS does not track the extent to which district and divisions complete  action plans and does not require district or division offices to submit their  action plans to HRD. We found that none of the four districts we visited  had developed a written action plan in response to the 2016 FEVS  results. At three of these districts, the Chief Deputy U.S. Marshals  indicated to us that no steps were being taken to develop an action plan  because they did not consider it a required or necessary step. However,  the Chief Deputy U.S. Marshal in one district explained that while he did  not document an action plan, he took steps to better understand  employee engagement challenges identified in the FEVS for his district.  Specifically, he facilitated small discussion groups to better understand  low employee agreement with two FEVS survey statements, including  promotions in my work unit are based on merit. During these discussions,  he said that he aimed to clarify areas where employees\u2019 negative  perspectives were based on a lack of understanding about the merit  promotion process.", "While USMS has taken some positive steps, having a better  understanding of the basis for these concerns, and how to address them,  will likely require that USMS take additional steps. Most of the employees  we interviewed said they were unaware of whether USMS has taken any  steps to understand or improve employee morale related to merit  promotions, and some feared raising concerns to management.  Specifically, 25 of 85 (29 percent) employees in our discussion groups  said no steps were taken to understand or improve employee morale,  while an additional 41 employees (48 percent) were unsure that any steps  were taken. Further, 24 of 85 employees in our discussion groups  expressed fears of raising concerns to USMS district or headquarters  management, citing allegations of district management intimidating or  retaliating against employees who raise issues, such as not selecting  those employees for career-enhancing opportunities or promotions. To  the extent that employees fear they will not get promoted if they raise  concerns to management and management does not have sufficient  information to understand the nature and causes of employee concerns  about the merit promotion process, taking meaningful and effective steps  to address the concerns will be difficult.", "OMB and OPM intend for agency managers to use the findings in the  FEVS to develop policies and action plans for improving agency  performance, including the enhancement of employee engagement and  satisfaction. According to OPM, action plans should be developed at  multiple levels; agency-wide, by subcomponent, and several levels down  in the agency. Also, many agencies have found it beneficial to conduct  focus groups after reviewing survey results to better understand the  underlying causes of employee engagement scores and get employee  suggestions for how to improve. OPM\u2019s action planning guidance also  suggests that agencies specify  time frames for accomplishing the actions, who will be responsible for implementing the actions, who will be affected by the actions,  the resources required, and a plan to communicate these actions to managers and employees.", "Although HRD disseminated a memorandum requesting district and  division managers to develop action plans, it has not developed an  agency-wide action plan, nor has it taken steps to ensure that all districts  and divisions develop action plans. By delegating responsibility for  developing action plans to individual districts and divisions, HRD does not  have consistent or adequate information to understand the nature and  causes of employee concerns across districts and divisions. Without this  information, USMS is unable to address employee concerns about its  merit promotion process and remains vulnerable to adverse effects, such  as decreased employee satisfaction and engagement, and decreased  agency performance.", "USMS management stated that they take employee concerns and  feedback into consideration as appropriate, but are primarily concerned  with ensuring the process is implemented in accordance with legal  requirements. They further stated that they generally believe the USMS  merit promotion process to be fair, and attributed some employee  concerns with the merit promotion process to a lack of available positions  relative to the number of employees who are ready for promotion.  Nevertheless, we believe an agency-wide action plan would help USMS  more fully understand and address areas where employees express  negative perceptions of the merit promotion process."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Selecting candidates based on their qualifications instead of patronage  has been the foundation of the federal hiring system for more than 130  years. Federal guidelines give agencies significant discretion to design  and implement their merit promotion processes to best meet their needs.  Since 2016, USMS has been implementing changes to its merit  promotion process in response to multiple internal and external  investigations, which substantiated allegations made by whistleblowers.  While the new competency assessment process has the potential to  reduce the risk of rater conflicts of interest and bias, USMS could still do  more to further improve its process. Developing specific guidance to help  raters more consistently score candidate applications would minimize  scoring subjectivity. Continuing to take steps to improve this process  would better position USMS to improve employee engagement. In light of  the significant distrust in the merit promotion practices we heard from  employees, USMS management can also take further action to better  understand and appropriately address employee concerns, such as  providing employees specific feedback on the results of the promotion  process, including their readiness for promotion and developing an  agency-wide action plan to more fully understand and address areas  where employees express negative perceptions of the merit promotion  process. More actively engaging employees could also bolster ongoing  USMS efforts to improve the promotion process and enhance agency  performance."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We recommend that the Director of the USMS take the following actions:", "Develop specific documented guidance\u2014both for the current and new  processes\u2014to enhance raters\u2019 ability to consistently interpret and  apply experience-based benchmarks for GS-14 and GS-15 positions  and competency-based benchmarks for GS-13 positions when  evaluating candidate qualifications. (Recommendation 1)", "Develop and implement a mechanism to provide specific feedback to  employees on the results of the promotion process, including their  readiness for promotion. (Recommendation 2)", "Develop and implement an agency-wide action plan to more fully  understand and address areas where employees express negative  perceptions of the merit promotion process. Consistent with OPM  guidance in this area, the plan should specify  time frames for accomplishing the actions, who will be responsible for implementing the actions, who will be affected by the actions,  the resources required, and a plan to communicate these actions to managers and employees.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOJ and USMS for review and  comment. Liaisons from DOJ and USMS responded in an email that DOJ  had no formal comments on the report. In addition, the USMS liaison  concurred with the recommendations and provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to DOJ, the Director of the USMS,  appropriate congressional committees and members, and other  interested parties. In addition, this report is available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions, please contact Diana Maurer at  (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made significant contributions to this report  are listed in appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Brett Fallavollita (Assistant  Director), Carissa Bryant (Analyst-in-Charge), Jessica Du, and Kelsey  Hawley made key contributions to this report, along with David Alexander,  Willie Commons III, Dominick Dale, and Eric Hauswirth."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-315", "url": "https://www.gao.gov/products/GAO-18-315", "title": "Substance Use Disorder: Information on Recovery Housing Prevalence, Selected States' Oversight, and Funding", "published_date": "2018-03-22T00:00:00", "released_date": "2018-04-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Substance abuse and illicit drug use, including the use of heroin and the misuse of or dependence on alcohol and prescription opioids, is a growing problem in the United States. Individuals with SUD may face challenges in remaining drug- and alcohol-free. Recovery housing can offer safe, supportive, drug- and alcohol-free housing to help these individuals maintain their sobriety and can be an important resource for individuals recovering from SUD. However, the media has reported allegations about potentially fraudulent practices on the part of some recovery homes in some states.", "GAO was asked to examine recovery housing in the United States. This report examines (1) what is known about the prevalence and characteristics of recovery housing across the United States; (2) investigations and actions selected states have undertaken to oversee such housing; and (3) SAMHSA funding for recovery housing, and how states have used this or any available state funding. GAO reviewed national and state data, federal funding guidance, and interviewed officials from SAMHSA, national associations, and five states\u2014Florida, Massachusetts, Ohio, Texas, and Utah\u2014selected based on rates of opioid overdose deaths, dependence on or abuse of alcohol and other drugs, and other criteria. State information is intended to be illustrative and is not generalizable to all states."]}, {"section_title": "What GAO Found", "paragraphs": ["Nationwide prevalence of recovery housing\u2014peer-run or peer-managed drug- and alcohol-free supportive housing for individuals in recovery from substance use disorder (SUD)\u2014is unknown, as complete data are not available. National organizations collect data on the prevalence and characteristics of recovery housing but only for a subset of recovery homes. For example, the National Alliance for Recovery Residences, a national nonprofit and recovery community organization that promotes quality standards for recovery housing, collects data only on recovery homes that seek certification by one of its 15 state affiliates that actively certify homes. The number of homes that are not certified by this organization is unknown.", "Four of the five states that GAO reviewed\u2014Florida, Massachusetts, Ohio, and Utah\u2014have conducted, or are in the process of conducting, investigations of recovery housing activities in their states, and three of these four states have taken formal steps to enhance oversight. The fifth state, Texas, had not conducted any such investigations at the time of GAO's review. Fraudulent activities identified by state investigators included schemes in which recovery housing operators recruited individuals with SUD to specific recovery homes and treatment providers, who then billed patients' insurance for extensive and unnecessary drug testing for the purposes of profit. For example, officials from the Florida state attorney's office told GAO that SUD treatment providers were paying $300 to $500 or more per week to recovery housing operators for every patient they referred for treatment and were billing patients' insurance for hundreds of thousands of dollars in unnecessary drug testing over the course of several months. Some of these investigations have resulted in arrests and other actions, such as changes to insurance payment policies. Florida, Massachusetts, and Utah established state certification or licensure programs for recovery housing in 2014 and 2015 to formally increase oversight. The other two states in GAO's review\u2014Ohio and Texas\u2014had not passed such legislation but were providing training and technical assistance to recovery housing managers.", "The Substance Abuse and Mental Health Services Administration (SAMHSA), within the Department of Health and Human Services (HHS), administers two federal health care grants for SUD prevention and treatment that states may use to establish recovery homes and for related activities. First, under its Substance Abuse Prevention and Treatment block grant, SAMHSA makes at least $100,000 available annually to each state to provide loans to organizations seeking to establish recovery homes. Second, states have discretion to use SAMHSA funding available under a 2-year grant for 2017 and 2018 primarily for opioid use disorder treatment services, to establish recovery homes or for recovery housing-related activities. Of the five states GAO reviewed, only two, Texas and Ohio, have used any of their SAMHSA grant funds for these purposes. Four of the five states\u2014Florida, Massachusetts, Ohio, and Texas\u2014have also used state general revenue funds to establish additional recovery homes.", "HHS had no comments on this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Substance abuse and illicit drug use, including the use of heroin and the  misuse of alcohol and prescription opioids, is a growing problem in the  United States. Individuals recovering from substance use disorder (SUD)  may face challenges remaining alcohol- or drug-free. Recovery housing\u2014 peer-run or peer-managed supportive residences\u2014can offer safe,  supportive, stable living environments to help individuals recovering from  SUD maintain an alcohol- and drug-free lifestyle. In addition, such  housing can also help improve individuals\u2019 ability to work, their physical  health, and their relationships with friends and family, and help them gain  skills and resources to sustain their recovery. There are no federal laws  or regulations governing the operation of recovery housing, and there is  no federal agency responsible for overseeing recovery housing. Within  the Department of Health and Human Services (HHS), the Substance  Abuse and Mental Health Services Administration (SAMHSA)\u2014 responsible for promoting SUD prevention, treatment, and recovery to  reduce the impact of SUD on communities\u2014makes some funding  available to states to support recovery housing.", "The media has reported allegations that some unscrupulous recovery  housing operators and associated SUD treatment providers have  engaged in fraudulent and misleading practices and exploited residents  for the purposes of profit. In addition, at least two states\u2014California and  Florida\u2014have conducted criminal investigations into recovery housing  and recovery housing operators within their states. Following reported  allegations, members of Congress have raised questions about the  oversight of recovery housing.", "You asked us to review federal and state oversight of recovery housing.  This report examines  1.  what is known about the prevalence and characteristics of recovery  housing across the United States;  2.  any investigations and actions selected states have undertaken to  oversee recovery housing; and  3.  SAMHSA funding for recovery housing, and how selected states have  used this or any available state funding.", "To address these three objectives, we reviewed available information and  interviewed officials from national organizations that provide or have  missions related to recovery housing, state agencies and related entities  in five selected states, and federal agencies. Specifically, we reviewed  information and available documentation and interviewed officials from  the National Alliance for Recovery Residences (NARR) and Oxford  House, Inc. to obtain information on the prevalence and characteristics of  recovery housing across the United States. To obtain information on  actions states have taken to investigate and oversee recovery housing  and how they used federal and any available state funding to support  such housing from fiscal year 2013 through fiscal year 2017, we also  interviewed officials from five states we selected for review\u2014Florida,  Massachusetts, Ohio, Texas, and Utah. We identified the states that met  at least three of the following criteria: (1) had high rates and numbers of  opioid overdose deaths in 2015 (the most recent publicly-available  information), (2) had high rates of dependence on or abuse of illicit drugs  and alcohol in 2013-2014 (the most recent publicly-available information),  (3) had an active NARR affiliate, (4) received certain SAMHSA funding for  recovery services, and (5) were reported in the media or by other sources  to have enacted legislation pertaining to the regulation or oversight of  recovery housing. We then selected five states from different areas of  the country. In each state, we interviewed officials from the state  substance abuse agency, the state Medicaid agency, the state Medicaid  Fraud Control Unit, the state insurance department, and others. For a  complete list of state agencies and related state entities we interviewed,  see appendix I. We also interviewed officials from two insurance  companies operating in Florida. The results of our state analyses are  intended to be illustrative and are not generalizable to all states. To obtain  information on SAMHSA funding for recovery housing, we also reviewed  available documentation and interviewed agency officials.", "We conducted this performance audit from February 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Definitions of and terms for recovery housing can vary, and recovery  housing may differ in the types of services offered and resident  requirements. Alcohol- and drug-free housing for individuals recovering  from SUD may be referred to as \u201crecovery residences,\u201d \u201csober homes,\u201d or  other terms. NARR has defined four levels of recovery housing (I through  IV) based on the type and intensity of recovery support and staffing they  offer, up to and including residential, or clinical, treatment centers. For  the purposes of this report, we use the term \u201crecovery housing\u201d to refer to  peer-run, nonclinical living environments for individuals recovering from  SUD in general, and \u201crecovery homes\u201d to refer to specific homes. These  homes generally are not considered to be residential treatment centers,  not eligible to be licensed providers for the purposes of billing private  insurance or public programs\u2014such as Medicaid and Medicare\u2014and  residents typically have to pay rent and other housing expenses  themselves. Recovery home residents may separately undergo outpatient  clinical SUD treatment, which is typically covered by health insurance. In  addition, recovery homes may encourage residents to participate in  mutual aid or self-help groups (e.g., 12-step programs such as Alcoholics  Anonymous) and may require residents to submit to drug screenings to  verify their sobriety. Residents may be referred to recovery homes by  treatment providers, the criminal justice system, or may voluntarily seek  out such living environments.", "In addition to SAMHSA, two national nonprofit organizations that have  missions dedicated to recovery housing include NARR and Oxford  House, Inc. NARR promotes standards for recovery housing, provides  training and education to recovery housing operators and others, and  conducts research and advocacy related to recovery housing to support  individuals in recovery from SUD. As of January 2018, NARR\u2019s  membership comprised 27 state affiliates that work to promote and  support NARR\u2019s quality standards for recovery housing and other  activities in their states. Of the 27 NARR affiliates, 15 were actively  certifying recovery homes. Oxford House, Inc. connects individual Oxford  Houses across the United States and in other countries. Individual Oxford  Houses, which operate under charters granted by Oxford House, Inc., are  democratically run, self-supporting homes. According to the Oxford  House manual and related documents, all Oxford Houses are rentals, and  residents are responsible for sharing expenses, paying house bills on  time, and immediately evicting residents who drink or use illicit drugs  while living in the house. Oxford House, Inc. maintains a directory of  houses on its website, and individuals can search this directory for  vacancies by state. Oxford Houses align with NARR\u2019s definition of level I  residences; that is, peer-run, self-funded, typically single family homes  where residents have an open-ended length of stay.", "SAMHSA and other organizations recognize recovery housing as an  important step in SUD treatment and recovery. Research has shown  positive outcomes of recovery housing on long-term sobriety, such as at  6-, 12-, and 18-month follow up. However, according to SAMHSA and  NARR officials, much of the available research on effectiveness of  recovery housing focuses on the Oxford House population, and research  on other types of recovery homes is limited."], "subsections": []}, {"section_title": "Nationwide Prevalence of Recovery Housing Is Unknown, but National Organizations Collect Data on the Number and Characteristics of a Subset of Recovery Homes", "paragraphs": ["The nationwide prevalence of recovery housing is unknown because  there are no comprehensive data regarding the number of recovery  homes in the United States, although NARR and Oxford House, Inc.  collect data on a subset of recovery homes across the United States.  Specifically, NARR collects data only on recovery homes that seek  certification from one of its 15 state affiliates that certify homes. However,  NARR-certified homes may represent only a portion of existing recovery  homes, as NARR does not know how many such homes are uncertified.  As of January 2018, NARR reported that its affiliates had certified almost  2,000 recovery homes, which had the capacity to provide housing to over  25,000 individuals; NARR-certified recovery homes include recovery  housing across all four NARR levels, including residential treatment  centers that provide clinical services, which are outside the scope of our  study.", "Oxford House, Inc. collects data annually on the prevalence and  characteristics of Oxford Houses across the United States. In its 2017  annual report, Oxford House, Inc. reported that there were 2,287 Oxford  Houses in 44 states that provided housing to a total of 18,025  individuals. Of the total number of Oxford Houses in 2017, 71 percent  served men and 29 percent served women, with the average resident  aged 37 years. The Oxford House, Inc. report also provides information  on other characteristics of Oxford House residents. For example, of the  18,025 Oxford House residents in 2017, Oxford House, Inc. reported the  following:", "79 percent were addicted to drugs and alcohol; 21 percent were  addicted to alcohol only.", "77 percent had been incarcerated.", "68 percent had previously experienced homelessness.", "12 percent were veterans.", "87 percent were employed.", "98 percent regularly attended 12-step meetings, such as Alcoholics  Anonymous or Narcotics Anonymous.", "45 percent attended weekly outpatient counseling in addition to", "Average length of sobriety was 13.4 months."], "subsections": []}, {"section_title": "Most States We Reviewed Have Investigated Potential Fraud Related to Recovery Housing and Taken Steps to Enhance Oversight", "paragraphs": ["The five states we selected for review have taken actions to investigate  and oversee recovery housing. Four of the five states have conducted law  enforcement investigations of recovery homes in their states and some of  these investigations have resulted in arrests and changes to public and  private insurance policies. In addition to actions taken in response to state  investigations, three of the five states in our review have also taken steps  to formally enhance their oversight of recovery homes, and the other two  states have taken other steps intended to increase consistency,  accountability, and quality across recovery homes."], "subsections": [{"section_title": "Four of Five States Have Conducted Investigations of Recovery Housing", "paragraphs": ["Officials from four of the five states we reviewed (Florida, Massachusetts,  Ohio, and Utah) told us that since 2007, state agencies have conducted,  or are in the process of conducting, law enforcement investigations of  unscrupulous behavior and potential insurance fraud related to recovery  housing, and outcomes of some of these investigations included criminal  charges and changes to health insurance policies. An official from the fifth  state, Texas, told us that the state had not conducted any recent law  enforcement investigations related to recovery housing. This official, from  the Texas Department of Insurance, told us that the department received  two fraud reports in 2014 and 2016 related to recovery homes and that  the state was unable to sufficiently corroborate the reports to begin  investigations.", "Across the four states, officials told us that potential insurance fraud may  have relied on unscrupulous relationships between SUD treatment  providers, including laboratories, and recovery housing operators,  because recovery homes are not considered eligible providers for the  purposes of billing health insurance. For example, treatment providers  may form unscrupulous relationships with recovery housing operators  who then recruit individuals with SUD in order to refer or require residents  to see the specific SUD treatment providers. This practice is known as  patient brokering, for which recovery housing operators receive kickbacks  such as cash or other remuneration from the treatment provider in  exchange for patient referrals. The extent of potential fraud differed  across the four states, as discussed below.", "Officials from several state agencies and related entities described  investigations into fraud related to recovery housing in southeastern  Florida as extensive, although the scope of the fraud within the industry is  unknown. In 2016, the state attorney for the 15th judicial circuit (Palm  Beach County) convened a task force composed of law enforcement  officials tasked with investigating and prosecuting individuals engaged in  fraud and abuse in the SUD treatment and recovery housing industries.  The task force found that unscrupulous recovery housing operators or  associated SUD treatment providers were luring individuals into recovery  homes using deceptive marketing tactics. Deceptive marketing practices  included online or other materials that willfully misdirected individuals or  their family members to recruiters with the goal of sending these  individuals to specific treatment providers, in order to receive payments  from those treatment providers for patient referrals. According to officials  from the Florida state attorney\u2019s office, these individuals, often from out of  state, were lured with promises of free airfare, rent, and other amenities  to recover in southern Florida\u2019s beach climate. Recruiters brokered these  individuals to SUD treatment providers, who then billed their private  insurance plans for extensive and medically unnecessary urine drug  testing and other services. Officials from the Florida state attorney\u2019s  office told us that SUD treatment providers were paying $300 to $500 or  more per week to recovery housing operators or their staff members for  every patient they referred for treatment. In addition, these officials cited  one case in which a SUD treatment provider billed a patient\u2019s insurance  for close to $700,000 for urine drug testing in a 7-month period. Officials  from the state attorney\u2019s office noted that the recovery homes that the  task force was investigating were not shared housing in the traditional,  supportive sense, such as Oxford Houses, where residents equally share  in the rent and division of chores, but rather existed as \u201cwarehouses\u201d  intended to exploit vulnerable individuals.", "As a result of these investigations, as of December 2017, law  enforcement agencies had charged more than 40 individuals primarily  with patient brokering, with at least 13 of those charged being convicted  and fined or sentenced to jail time, according to the state attorney\u2019s  office. In addition, the state enacted a law that strengthened penalties  under Florida\u2019s patient brokering statute and gave the Florida Office of  Statewide Prosecution, within the Florida Attorney General\u2019s Office,  authority to investigate and prosecute patient brokering.", "An official from the Massachusetts Medicaid Fraud Control Unit told us  that the unit began investigating cases of Medicaid fraud in the state on  the part of independent clinical laboratories associated with recovery  homes in 2007. The unit found that, in some cases, the laboratories  owned recovery homes and were self-referring residents for urine drug  testing. In other cases, the laboratories were paying kickbacks to  recovery homes for patient referrals for urine drug testing that was not  medically necessary. According to the Medicaid Fraud Control Unit  official, as a result of these investigations the state settled with nine  laboratories between 2007 and 2015 for more than $40 million in  restitution. In addition, the state enacted a law in 2014 prohibiting clinical  laboratory self-referrals and revised its Medicaid regulations in 2013 to  prohibit coverage of urine drug testing for the purposes of residential  monitoring.", "Ohio has also begun to investigate an instance of potential insurance  fraud related to recovery housing, including patient brokering and  excessive billing for urine drug testing. Officials from the Ohio Medicaid  Fraud Control Unit told us that the unit began investigating a Medicaid  SUD treatment provider for paying kickbacks to recovery homes in  exchange for patient referrals, excessive billing for urine drug testing, and  billing for services not rendered, based on an allegation the unit received  in September 2016. As of January 2018, the investigation was ongoing,  and the Ohio Medicaid Fraud Control Unit had not yet taken legal or other  action against any providers. Officials from other state agencies and  related state entities, such as the state substance abuse agency and the  state NARR affiliate, were not aware of any investigations of potential  fraud on the part of recovery housing operators or associated treatment  providers when we spoke with them and stated that this type of fraud was  not widespread across the state.", "In August 2017, officials from the Utah Insurance Department told us that  the department is conducting ongoing investigations of private insurance  fraud similar to the activities occurring in Florida, as a result of a large  influx of complaints and referrals it received in 2015. These officials told  us that the department has received complaints and allegations that SUD  treatment providers are paying recruiters to bring individuals with SUD  who are being released from jail to treatment facilities or recovery homes;  billing private insurance for therapeutic services, such as group or equine  therapy, that are not being provided, in addition to billing frequently for  urine drug testing; and encouraging patients to use drugs prior to  admission to qualify patients and bill their insurance for more intensive  treatment. In addition, insurance department officials told us that they  believed providers are enrolling individuals in private insurance plans  without telling them and paying their premiums and copays. According to  these officials, when doing so, providers may lie about patients\u2019 income  status in order to qualify them for more generous plans. Officials found  that providers were billing individual patients\u2019 insurance $15,000 to  $20,000 a month for urine drug testing and other services. Officials noted  that they suspect that the alleged fraud was primarily being carried out by  SUD treatment providers and treatment facilities that also own recovery  homes. Officials told us that the department has not been able to file  charges against any treatment providers because it has been unable to  collect the necessary evidence to do so. However, according to insurance  department officials, the state legislature enacted legislation in 2016 that  gives insurers and state regulatory agencies, such as the state insurance  department and state licensing office, the authority to review patient  records and investigate providers that bill insurers. This authority may  help the insurance department and other state regulatory agencies better  conduct investigations in the future."], "subsections": []}, {"section_title": "Three States Have Established Oversight Programs, and Two States Are Taking Other Steps to Support Recovery Housing", "paragraphs": ["In addition to actions taken in response to state investigations, three of  the five states in our review\u2014Florida, Massachusetts, and Utah\u2014have  taken steps to formally increase oversight of recovery housing by  establishing state certification or licensure programs. Florida enacted  legislation in 2015 and Massachusetts enacted legislation in 2014 that  established voluntary certification programs for recovery housing. Florida  established a two-part program for both recovery homes and recovery  housing administrators (i.e., individuals acting as recovery housing  managers or operators). According to officials from the Florida state  attorney\u2019s office and Massachusetts Medicaid Fraud Control Unit, their  states established these programs in part as a result of state law  enforcement investigations. In 2014, Utah enacted legislation to establish  a mandatory licensure program for recovery housing. According to  officials from the Utah substance abuse agency and the state licensing  office, the state established its licensure program to, in part, protect  residents\u2019 safety and prevent their exploitation and abuse.", "Although state recovery housing programs in Florida and Massachusetts  are voluntary and recovery homes and their administrators can operate  without being certified, there are incentives for homes to become certified  under these states\u2019 programs, as well as incentives to become licensed  under Utah\u2019s program. Specifically, all three states require that certain  providers refer patients only to recovery homes certified or licensed by  their state program. Thus, uncertified and unlicensed homes in Florida,  Massachusetts, and Utah would be ineligible to receive patient referrals  from certain treatment providers. Further, state officials told us that state  agencies are taking steps to ensure providers are making appropriate  referrals. For example, according to officials from the Florida substance  abuse agency, treatment providers may refer patients to certified recovery  homes managed by certified recovery home administrators only and must  keep referral records. These officials also told us that the state substance  abuse agency can investigate providers to ensure they are referring  patients to certified homes and issue fines or revoke providers\u2019 licenses if  the program finds providers are referring patients to uncertified homes.  Recovery homes may also view certification as a way to demonstrate that  they meet quality standards. For example, the official from the  Massachusetts NARR affiliate told us that some residential treatment  centers that are required to be licensed by the state are also seeking  certification to demonstrate that they meet the NARR affiliate\u2019s quality  standards.", "To become state-certified or licensed, recovery homes in Florida,  Massachusetts, and Utah must meet certain program requirements\u2014 including staff training, documentation submissions (such as housing  policies and code of ethics), and onsite inspections to demonstrate  compliance with program standards\u2014though specific requirements differ  across the three states. For example, while all three state programs  require recovery housing operators or staff to complete training, the  number of hours and training topics differ. In addition, for recovery homes  to be considered certified in Florida, they must have a certified recovery  housing administrator. Similar to Florida\u2019s certification program for the  homes, individuals seeking administrator certification must also meet  certain program requirements, such as training in recovery residence  operations and administration and legal, professional, and ethical  responsibilities. Features of the state-established oversight programs may  also differ across the three states, including program type, type of home  eligible for certification or licensure, how states administer their programs,  and initial fees. See table 1 for additional information on features of state- established oversight programs for recovery housing.", "State-established oversight programs in Florida, Massachusetts, and  Utah also include processes to monitor certified or licensed recovery  homes and take action when homes do not comply with program  standards. For example, an official from the Florida Association of  Recovery Residences\u2014the state NARR affiliate and organization that  certifies recovery homes in Florida\u2014told us that the entity conducts  random inspections to ensure that recovery homes maintain compliance  with program standards. State-established oversight programs in the  three states also have processes for investigating grievances filed against  certified or licensed recovery homes. Further, officials from certifying or  licensing bodies in all three states\u2014the Florida Association of Recovery  Residences, Massachusetts Alliance for Sober Housing, and the Utah  Office of Licensing\u2014told us their organizations may take a range of  actions when they receive complaints or identify homes that do not  comply with program standards, from issuing recommendations for  bringing homes into compliance to revoking certificates or licenses.  According to officials from the certifying body in Florida, the entity has  revoked certificates of recovery homes that have acted egregiously or  have been nonresponsive to corrective action plans. Officials from the  certifying and licensing bodies in Massachusetts and Utah told us that  these entities had not revoked certificates or licenses when we spoke to  them for this review, but may have assisted homes with coming into  compliance with certification standards or licensure requirements.", "Officials from Ohio and Texas told us that their states had not established  state oversight programs like those that exist in Florida, Massachusetts,  and Utah, but their states had provided technical assistance and other  resources to recovery homes that were intended to increase consistency,  accountability, and quality:", "Officials from the Ohio substance abuse agency told us that since  2013 the state has revised its regulatory code to define recovery  housing and minimum requirements for such housing. Officials also  told us that the agency does not have authority to establish a state  certification or licensure program for recovery housing. According to  these officials, the state legislature wanted to ensure that Ohio\u2019s  recovery housing community maintained its grassroots efforts and did  not want a certification or licensure program to serve as a roadblock  to establishing additional homes. However, officials from the Ohio  substance abuse agency told us that the agency encourages recovery  homes to seek certification by the state NARR affiliate\u2014Ohio  Recovery Housing\u2014to demonstrate quality. In addition, these officials  told us that the state substance abuse agency also provided start-up  funds for Ohio Recovery Housing and has continued to fund the  affiliate for it to provide training and technical assistance, as well as to  continue certifying recovery homes. According to officials from Ohio  Recovery Housing, the NARR affiliate regularly provides the state  substance abuse agency with a list of newly-certified recovery homes,  as well as updates on previously-certified homes, as part of ongoing  efforts to develop a recovery housing locator under its contract with  the agency.", "Officials from the Texas substance abuse agency noted that  establishing a voluntary certification program, such as one that  certifies homes according to NARR\u2019s quality standards, would be  beneficial. However, the state legislature has not enacted any  legislation establishing such a program to date. The agency is in the  process of developing guidance for providers on where and how to  refer their patients to recovery housing, which includes a  recommendation to send patients to homes certified by the Texas  NARR affiliate, but officials could not tell us when they expected the  guidance to be finalized."], "subsections": []}]}, {"section_title": "Certain SAMHSA Grant Funding Can Be Used for Recovery Housing, and Selected States Have Used SAMHSA and State Funding to Support Recovery Housing", "paragraphs": ["SAMHSA provides some funding for states to establish recovery homes.  Of the five states we reviewed, two used SAMHSA funding and four used  state funding to help support recovery housing from fiscal year 2013  through fiscal year 2017."], "subsections": [{"section_title": "SAMHSA Provides Funding for Recovery Housing and Has Undertaken Other Initiatives to Support Recovery Housing", "paragraphs": ["SAMHSA makes funding available to states for recovery housing through  certain grant programs for SUD prevention and treatment. Specifically,  under its Substance Abuse Prevention and Treatment block grant, which  totaled approximately $1.9 billion in fiscal year 2017, SAMHSA makes at  least $100,000 available annually to each state to provide loans for  recovery housing. States that choose to use this funding may provide up  to $4,000 in loans to each group that requests to establish alcohol- and  drug-free housing for individuals recovering from SUD. The loan can be  used for start-up costs such as security deposits and must be repaid  within 2 years. Loans are to be made only to nonprofit entities that agree  to requirements for the operation of the recovery homes outlined in the  authorizing statute, namely that (1) the homes must prohibit the use of  alcohol and illegal drugs; (2) the homes must expel residents who do not  comply with this prohibition; (3) housing costs, such as rent and utilities,  are to be paid by the residents; and (4) residents are to democratically  establish policies to operate the homes. According to SAMHSA officials,  states are prohibited from using block grant funding other than the loan  funding for recovery housing. However, the block grant application does  not require states to provide a description of whether and how they will  use the loan.", "SAMHSA has also made funding for recovery housing available under the  agency\u2019s State Targeted Response to the Opioid Crisis grant (opioid  grant), a 2-year grant program under which SAMHSA anticipated  awarding up to $485 million for each of fiscal years 2017 and 2018. The  opioid grant is intended to supplement states\u2019 existing opioid prevention,  treatment, and recovery support activities, and SAMHSA requires most of  states\u2019 funding to be used for opioid use disorder treatment services, such  as expanding access to clinically appropriate, evidence-based treatment.  States may also use their opioid grant funding for recovery housing and  recovery support services\u2014which SAMHSA recognizes as part of the  continuum of care\u2014such as establishing recovery homes and providing  peer mentoring. (See the next section of this report for information on  how states have used SAMHSA funding.)", "In addition to providing funding, SAMHSA has undertaken other initiatives  related to recovery housing, including an assessment of needs for  certifying recovery housing in the future. In 2017, SAMHSA held two  recovery housing meetings that covered topics including research on  emerging best practices in recovery housing, state recovery housing  programs, available funding for recovery housing, and challenges that  state entities have experienced regulating recovery homes in their states.  SAMHSA contracted with NARR at the end of fiscal year 2017 to provide  technical assistance and training to recovery housing organizations,  managers, and state officials on NARR\u2019s quality standards and  certification process, including presentations at three to four national and  regional SUD conferences, such as those held by the National  Association of State Alcohol and Drug Abuse Directors and other  associations. NARR is also required to submit a final report to SAMHSA  before the 1-year contract ends with recommendations for future needs  for certifying recovery housing and establishing additional NARR state  affiliates. SAMHSA officials told us that this is the agency\u2019s first contract  with NARR, and SAMHSA plans to conduct an internal assessment at the  end of fiscal year 2018 to determine next steps."], "subsections": []}, {"section_title": "Selected States Have Used SAMHSA and State Funding for Recovery Housing", "paragraphs": ["Two of the five states we reviewed used SAMHSA funding to help support  recovery housing in their states from fiscal years 2013 through 2017,  according to state officials. Texas was the only state in our review that  used the loan funding available under SAMHSA\u2019s block grant. Officials  from the Texas substance abuse agency told us that from fiscal years  2013 through 2017, the state used at least $150,000 of this funding  annually to increase the number of Oxford Houses in the state and hire  Oxford House outreach workers. Texas and Ohio also used a portion of  their SAMHSA opioid grant funding for recovery housing. For example, in  fiscal year 2017, officials from Ohio\u2019s substance abuse agency told us  that the state used $25,000 of its approximately $26 million in opioid grant  funding to support and train recovery housing operators, with the goal of  increasing the number of recovery homes that accept individuals who  receive medication-assisted treatment. The other states we reviewed\u2014 Florida, Massachusetts, and Utah\u2014did not opt to use the loan funding  available under the SAMHSA block grant and did not use their SAMHSA  opioid grant funding for recovery housing services, according to state  officials.", "Four of the five states in our review\u2014Florida, Massachusetts, Ohio, and  Texas\u2014have used state funding to establish and support recovery  housing and recovery housing-related activities. For example, officials  from the Texas substance abuse agency told us that, since 2013, the  state legislature has authorized at least $520,000 annually for recovery  housing. In fiscal years 2015 through 2017, the state used this funding for  personnel costs and related expenditures, such as hiring seven Oxford  House outreach workers and establishing a state loan fund of $200,000 to  supplement the SAMHSA loan funding to support the establishment of an  additional 25 new Oxford Houses. Officials from the Massachusetts  substance abuse agency told us that the agency has received annual  state appropriations in the amount of $500,000 since fiscal year 2015 to  contract with the entities that inspect and certify recovery homes for the  state certification program and to contract with the state NARR affiliate for  technical assistance with developing recovery housing certification  standards and supporting the certification process. State substance  abuse agency officials from the fifth state, Utah, told us that the state did  not use state funding to establish recovery homes during fiscal years  2013 through 2017. See table 2 for states\u2019 use of SAMHSA and state  funding for recovery housing activities."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS. HHS did not have any  comments.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, appropriate congressional committees, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact Katherine M. Iritani, Director, Health Care at (202) 512-7114 or  iritanik@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."], "subsections": []}]}, {"section_title": "Appendix I: State Agencies and Related Entities GAO Interviewed", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tom Conahan, Assistant  Director; Shana R. Deitch, Analyst-in-Charge; Kristin Ekelund; and  Carmen Rivera-Lowitt made key contributions to this report. Also  contributing were Lori Achman, Jennie Apter, Colleen Candrl, and Emily  Wilson."], "subsections": []}]}], "fastfact": ["Recovery housing allows people recovering from addiction to alcohol or illicit drugs to live together in a safe, supportive, stable, and alcohol- and drug-free environment. However, there have been reports that some recovery housing owners are exploiting residents to profit from them\u2014for example, by sending them to doctors who bill their insurance for extensive and unneeded drug testing and share insurance payments with the owners.", "We looked at federal health care funding for recovery homes, as well as the actions of five states\u2014Florida, Massachusetts, Ohio, Texas, and Utah\u2014to investigate and oversee these homes in their states."]}
{"id": "GAO-18-256", "url": "https://www.gao.gov/products/GAO-18-256", "title": "Financial Services Regulations: Procedures for Reviews under Regulatory Flexibility Act Need to Be Enhanced", "published_date": "2018-01-30T00:00:00", "released_date": "2018-01-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since the 2007\u20132009 financial crisis, federal financial regulators have issued hundreds of rules to implement reforms intended to strengthen the financial services industry. Financial regulators must comply with rulemaking requirements such as RFA when drafting and implementing regulations. Congress included a provision in statute for GAO to study these financial services regulations annually.", "This annual report examines the extent to which and how financial regulators performed required RFA analyses and established policies and procedures for complying with RFA requirements, among other objectives. GAO reviewed the RFA section of financial regulators' Federal Register notices of rulemaking, related internal workpapers, and policies and procedures for conducting RFA analyses. GAO also determined the extent to which regulators' analyses reflected RFA requirements, guidance issued by the Office of Advocacy, and OMB guidance on regulatory analysis. GAO's review covered certifications in 66 final rules and regulatory flexibility analyses in 39 proposed and final rules."]}, {"section_title": "What GAO Found", "paragraphs": ["To comply with the Regulatory Flexibility Act (RFA), agencies generally must assess the rule's potential impact on small entities and consider alternatives that may minimize any significant economic impact of the rule (regulatory flexibility analyses). Alternatively, agencies may certify that a rule would not have a significant economic impact on a substantial number of small entities. GAO found several weaknesses with the analyses of six financial regulators (Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, Commodity Futures Trading Commission, and Consumer Financial Protection Bureau) that could undermine the goal of RFA and limit transparency and public accountability, as shown in the following examples.", "Certifications. In certifications for rules that regulators determined may affect small entities, regulators conducted analyses to support their conclusions. GAO found many analyses across all regulators lacked key information the Small Business Administration's Office of Advocacy and the Office of Management and Budget (OMB) recommend. Missing information included discussions of data sources or methodologies, consideration of broader economic impacts of the rulemaking (such as cumulative economic impacts of regulations), and definitions of the criteria regulators used for \u201csubstantial number\u201d and \u201csignificant economic impact.\u201d", "Regulatory flexibility analyses. In many of the initial and final regulatory flexibility analyses that GAO reviewed, financial regulators' evaluation of key components required by RFA\u2014potential economic effects and alternative regulatory approaches\u2014was limited. Most regulators (five of six) also did not disclose data sources or methodologies used for their analyses, as OMB recommends. For most rules GAO reviewed, regulators (five of six) were unable to provide documentation supporting their regulatory flexibility analyses, as OMB recommends, including analyses supporting certification decisions. However, the extent of documentation varied by regulator.", "Federal internal control standards state the importance for agency management to establish policies and procedures to achieve objectives. All but one of the financial regulators have guidelines that restate RFA requirements for certification and for preparing regulatory flexibility analyses and provide some information on how to approach these analyses. However, these regulators generally have not developed specific policies and procedures to assist staff in complying with RFA, which may contribute to the weaknesses GAO identified in the analyses. For example, regulators' guidance generally did not include procedures for evaluating a rule's potential economic impact; identifying and assessing regulatory alternatives that could minimize impact on small entities; disclosing methodology and data sources; and creating and maintaining documentation that supports findings. By not developing and implementing comprehensive policies and procedures for RFA analyses, regulators' ability to consistently and effectively meet RFA objectives may be limited."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making a total of 10 recommendations among the six financial regulators reviewed, including that regulators develop and implement specific policies and procedures for consistently complying with RFA requirements and related guidance for conducting RFA analyses. Five agencies generally agreed with the recommendations and one did not provide written comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2010, Congress passed the Dodd-Frank Wall Street Reform and  Consumer Protection Act (Dodd-Frank Act) in response to the 2007\u20132009  financial crisis that disrupted the U.S. financial system. Under the Dodd- Frank Act, federal agencies are directed or have the authority to issue  hundreds of regulations to implement the act\u2019s provisions. Federal  agencies\u2014including financial regulators\u2014normally must comply with  various rulemaking requirements, such as the Regulatory Flexibility Act  (RFA), as they draft and implement regulations. RFA was enacted in  response to concerns about the effect federal regulations can have on  small entities. RFA requires regulatory agencies to provide an  assessment\u2014known as a regulatory flexibility analysis\u2014of a rule\u2019s  potential impact on small entities and consider alternatives that may  reduce burden. Alternatively, agencies may certify that a rule would not  have a significant economic impact on a substantial number of small  entities instead of performing a regulatory flexibility analysis.  Furthermore, RFA requires agencies to review within 10 years of  issuance existing rules that have a significant economic impact on a  substantial number of small entities to determine if such rules should be  continued without change or amended or rescinded to minimize their  economic impact on a substantial number of small entities.", "Section 1573(a) of the Department of Defense and Full-Year Continuing  Appropriations Act of 2011 amends the Dodd-Frank Act and includes a  provision for us to annually review financial services regulations. We  previously issued six reports under this mandate.  trends in financial regulators\u2019 application of RFA requirements in  recent rulemakings;  the extent to which financial regulators performed analyses for rules  they certified would not have a significant economic impact on small  entities;  the extent to which financial regulators performed regulatory flexibility  analyses and the analyses\u2019 effects on their rulemakings;  the extent to which financial regulators established policies,  procedures, and criteria for complying with RFA requirements; and  the extent to which financial regulators performed retrospective  reviews required by RFA.", "To analyze trends in the application of RFA requirements by financial  regulators in recent rulemakings, we reviewed the Federal Register  notices for all final rules that the regulators promulgated from January  2010 through December 2016 (520 rules). We analyzed the notices to quantify how many rules (1) did not have a proposed rule, (2) included an  initial regulatory flexibility analysis in the proposed rule, (3) included a  final regulatory flexibility analysis in the final rule, (4) certified that RFA  analyses were not required, and (5) had other characteristics, such as a  final regulatory flexibility analysis and a certification that the analysis was  not required.", "To examine the extent to which financial regulators performed analyses  for rules they certified would not have a significant economic impact on a  substantial number of small entities, we reviewed the RFA section of the  Federal Register notices and the regulators\u2019 internal workpapers for all  certifications made in the final rule (66 certifications) in calendar years  2015 and 2016. To examine the extent to which the regulators performed  initial and final regulatory flexibility analyses and the analyses\u2019 effects on  rulemakings, we reviewed the RFA sections of the Federal Register  notices and the regulators\u2019 internal workpapers for all rules for which  agencies performed an initial regulatory flexibility analysis in the proposed  rule and a final regulatory flexibility analysis in the final rule. For any  regulator that had fewer than three rules meeting these criteria, we  selected all rules published in the prior year for which the agency  performed an initial and final regulatory flexibility analysis until we  reached three rules or a publication date of January 2013, for a total of 39  final rules.", "For the review of certifications and the regulatory flexibility analyses, we  examined the extent to which they reflected RFA requirements and Small  Business Administration\u2019s Office of Advocacy (Office of Advocacy)  guidance on complying with RFA and other best practices for rulemaking.  We also reviewed the workpapers and notices of joint rules for  coordination on the certifications and regulatory flexibility analyses. We  analyzed the workpapers and notices of the rules in which the regulators  performed an initial and final regulatory flexibility analysis to identify the  extent to which regulators revised draft and proposed rules as a result of  regulatory flexibility analyses, the source of the changes, and the types  and characteristics of changes that regulators made to draft and  proposed rules.", "To examine the extent to which financial regulators established policies,  procedures, and criteria for complying with RFA requirements, we  obtained and reviewed internal agency policies, procedures, and  guidance for conducting initial and final regulatory flexibility analyses or  certifying that such analyses were not required. To examine the extent to  which financial regulators performed retrospective reviews required by  RFA, we searched the Federal Register for notices of upcoming section  610 reviews as well as results of section 610 reviews. We also obtained  and reviewed financial regulators\u2019 documentation of section 610 reviews  performed from calendar years 2006 through 2016. We interviewed staff  from each of the financial regulators to understand the processes and  analyses supporting their certification decisions, regulatory flexibility  analyses, and retrospective reviews. For more information on our scope  and methodology, see appendix I.", "We conducted this performance audit from January 2017 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Financial Regulators", "paragraphs": [], "subsections": [{"section_title": "Regulators for the Banking Industry", "paragraphs": ["All depository institutions that have federal deposit insurance have a  federal prudential regulator, which generally may issue regulations and  take enforcement actions against institutions within its jurisdiction (see  table 1).", "The securities and futures markets are regulated under a combination of  self-regulation (subject to oversight by the appropriate federal regulator)  and direct oversight by the Securities and Exchange Commission (SEC)  and Commodity Futures Trading Commission (CFTC), respectively. SEC  regulates the securities markets, including participants such as corporate  issuers, securities exchanges, broker-dealers, investment companies,  and certain investment advisers and municipal advisors. SEC\u2019s mission  is to protect investors; maintain fair, orderly, and efficient markets; and  facilitate capital formation. SEC also oversees self-regulatory  organizations\u2014including securities exchanges, clearing agencies, and  the Financial Industry Regulatory Authority\u2014that have responsibility for  overseeing securities markets and their members; establishing standards  under which their members conduct business; monitoring business  conduct; and bringing disciplinary actions against members for violating  applicable federal statutes, SEC\u2019s rules, and their own rules.", "CFTC is the primary regulator for futures markets, including futures  exchanges and intermediaries, such as futures commission merchants.  CFTC\u2019s mission is to protect market users and the public from fraud,  manipulation, abusive practices, and systemic risk related to derivatives  subject to the Commodity Exchange Act, and to foster open, transparent,  competitive, and financially sound futures markets. CFTC oversees the  registration of intermediaries and relies on self-regulatory organizations,  including the futures exchanges and the National Futures Association, to  establish and enforce rules governing member behavior. CFTC and SEC  jointly regulate security futures (generally, futures on single securities and  narrow-based security indexes). CFTC and SEC serve as primary  regulators for certain designated financial market utilities.", "In addition, Title VII of the Dodd-Frank Act expands regulatory  responsibilities for CFTC and SEC by establishing a new regulatory  framework for swaps. The act authorizes CFTC to regulate swaps and  SEC to regulate security-based swaps with the goals of reducing risk,  increasing transparency, and promoting market integrity in the financial  system. CFTC and SEC share authority over mixed swaps\u2014that is,  security-based swaps that have a commodity component."], "subsections": []}, {"section_title": "Consumer Financial Protection Bureau", "paragraphs": ["The Dodd-Frank Act transferred consumer financial protection oversight  and other authorities over certain consumer financial protection laws from  multiple federal regulators to the Consumer Financial Protection Bureau  (CFPB). The Dodd-Frank Act charged CFPB with responsibilities that  include the following: ensuring that consumers are provided with timely and understandable  information to make responsible decisions about financial  transactions; ensuring that consumers are protected from unfair, deceptive, or  abusive acts and practices and from discrimination; monitoring compliance with federal consumer financial law and taking  appropriate enforcement action to address violations;  identifying and addressing outdated, unnecessary, or unduly  burdensome regulations; ensuring that federal consumer financial law is enforced consistently,  in order to promote fair competition; ensuring that markets for consumer financial products and services  operate transparently and efficiently to facilitate access and  innovation; and  conducting financial education programs.", "Furthermore, the Dodd-Frank Act gave CFPB supervisory authority over  certain nondepository institutions, including certain kinds of mortgage  market participants, private student loan lenders, and payday lenders."], "subsections": []}]}, {"section_title": "Regulatory Flexibility Act", "paragraphs": ["The uniform application of new or revised regulations can have a  comparatively greater impact on smaller entities than on larger entities  because the smaller entities have small staffs with which to face  expanded demands and a smaller asset and income base with which to  absorb increases in compliance costs. RFA was enacted in 1980 in part  to address this disparity. The act requires that federal agencies, including  the financial regulators, engaged in substantive rulemaking analyze the  impact of proposed and final regulations on small entities and, when there  may be a significant economic impact on a substantial number of small  entities, to consider any significant regulatory alternatives that will achieve  statutory objectives while minimizing any significant economic impact on  small entities. RFA defines \u201csmall entity\u201d to include small businesses,  small governmental jurisdictions, and certain small not-for-profit  organizations.", "RFA does not seek preferential treatment for small entities, require  agencies to adopt regulations that impose the least burden on small  entities, or mandate exemptions for small entities. Rather, it requires  agencies to examine public policy issues using an analytical process that  identifies, among other things, barriers to small business competitiveness  and seeks a level playing field for small entities, not an unfair advantage.  Unless the head of the agency certifies that the proposed regulation  would not have a significant economic impact upon a substantial number  of small entities, RFA requires regulators to prepare an initial regulatory  flexibility analysis for each draft rule that requires a notice of proposed  rulemaking. These analyses must contain an assessment of the rule\u2019s  potential impact on small entities and describe any significant alternatives  to the rule that would reduce its burden on small entities while achieving  statutory objectives (see table 2 for more information).", "RFA requires that regulators publish in the Federal Register their initial  regulatory flexibility analysis, or a summary, with the proposed rule.  Following a public comment period, RFA requires regulators to conduct a  similar analysis when they promulgate the final rule\u2014the final regulatory  flexibility analysis. This analysis must address any comments received on  the initial regulatory flexibility analysis and include a description of the  steps the agency took to minimize the rule\u2019s significant economic impact  on small entities, consistent with statutory objectives. Agencies then must  publish the final analysis, or a summary, with the final rule.", "If the head of the agency certifies in the Federal Register that the rule  would not have a significant economic impact on a substantial number of  small entities, agencies do not have to conduct the initial or final  analysis. Certifications must include a statement providing a factual  basis for the certification. Agencies may make a certification in lieu of the  initial or final analysis, and can choose to certify at both points. Figure 1  illustrates the decision process that agencies must follow to comply with  RFA.", "Section 610 of RFA requires agencies to review, within 10 years of a final  rule\u2019s publication, those rules assessed as having a significant economic  impact on a substantial number of small entities to determine if they  should be continued without change, amended, or rescinded (consistent  with statutory objectives) to minimize any significant economic impact on  small entities. Section 610 requires that agencies publish in the Federal  Register a list of the rules that have a significant economic impact on a  substantial number of small entities and are to be reviewed pursuant to  section 610 during the upcoming year. These notices alert the public to  the upcoming review and permit interested parties to submit their  comments on the rule\u2019s impact on small entities.", "The Dodd-Frank Act, which established CFPB, amended RFA to impose  additional rulemaking requirements for CFPB for certain proposed rules.  Specifically, when CFPB conducts rulemakings it expects will have a  significant economic impact on a substantial number of small entities it  must convene Small Business Review Panels, comprising employees  from CFPB, the Small Business Administration\u2019s Chief Counsel for  Advocacy, and Office of Management and Budget\u2019s (OMB) Office of  Information and Regulatory Affairs. The panels must seek direct input  from a representative group of small entities that would be affected by  CFPB\u2019s rulemakings. The panels must be conducted before publication of  an initial regulatory flexibility analysis (in effect, before the proposed rule  is issued for public comment).", "RFA designates certain responsibilities to the Small Business  Administration\u2019s Chief Counsel for Advocacy, including monitoring agency  compliance with RFA and reviewing federal rules for their impact on small  businesses. Executive Order 13272 requires the Office of Advocacy to  provide notifications about RFA requirements and training to all agencies  on complying with RFA. The Office of Advocacy published guidance on  complying with RFA in 2003 (updated in 2012 and August 2017), which  was designed to be a step-by-step guide for agency officials.", "The Small Business Administration publishes size standards to determine  eligibility for classification as a small entity. Generally, to qualify as a  small entity the annual asset threshold for banks is $550 million in assets;  for financial investment and related activities, the annual revenues  threshold is $38.5 million. Most agencies rely on these size standards;  however, RFA also sets forth a procedure that permits agencies to  formulate their own definitions of small entities."], "subsections": []}]}, {"section_title": "Many Rules Were Not Subject to RFA Requirements and Regulators Concluded Many Would Not Significantly Affect Small Entities", "paragraphs": [], "subsections": [{"section_title": "Regulators Determined That Almost 40 Percent of Recent Rules Were Not Subject to RFA Requirements", "paragraphs": ["Rules that do not have a proposed rule are not subject to RFA  requirements, such as analyzing the rule\u2019s effects on small entities and  considering alternatives. Financial regulators promulgated 520 rules (483  final and 37 interim final) during calendar years 2010\u20132016. Of those,  RFA requirements were not applicable in 39 percent (204 rules) because  the regulators did not publish a proposed rule. The regulators published a  proposed rule for the other 316 final rules. This result is consistent with  our prior analysis of rulemaking government wide. In December 2012, we  found that about 35 percent of major rules and about 44 percent of  nonmajor rules published during calendar years 2003\u20132010 did not have  a proposed rule. The percentage of rules finalized without a proposed  rule and therefore not subject to RFA requirements varied by regulator.  As shown in figure 2, CFPB had the largest percentage (53 percent) of  rules not subject to RFA requirements and CFTC the smallest percentage  (16 percent).", "In their rulemakings, the regulators gave several reasons for not  publishing a proposed rule. The Administrative Procedure Act (APA),  which outlines the process for informal rulemaking, includes six broad  categorical exceptions to publishing a proposed rule (for example, rules  dealing with agency organization and procedure). Additionally, APA  provides that an agency may forgo a notice of proposed rulemaking when  it finds for \u201cgood cause\u201d that such notice is \u201cimpractical, unnecessary, or  contrary to the public interest.\u201d We found that the regulators used such  exceptions for a number of the rules we reviewed. For example, in  December 2015, the Office of the Comptroller of the Currency (OCC), the  Board of Governors of the Federal Reserve System (Federal Reserve),  and the Federal Deposit Insurance Corporation (FDIC) used the good- cause exception to publish a joint rule to adjust the asset-size thresholds  for small and intermediate banks and savings associations related to  performance standards under the Community Reinvestment Act without a  proposed rule. According to the Federal Register notice, the agencies  had no discretion on the computation or timing of the changes, which  were based on a regulation that previously had been published for public  comment before being finalized. In another rule published in October  2013, SEC made changes to the filer manual for its Electronic Data  Gathering, Analysis, and Retrieval System based on updates to the  system and did not publish a proposed rule because the rule changes  related solely to agency procedures or practice. According to CFPB  officials, the majority of final CFPB rules issued during this time period  without a proposed rule involved technical\u2014and in many cases non- discretionary\u2014adjustments of statutory or regulatory thresholds to  account for inflation.", "While RFA requirements do not apply when an agency does not publish a  proposed rule, all the financial regulators (except OCC) occasionally  performed some RFA evaluation in rules without a proposed rule. For  example, each agency, except for OCC, certified that at least one of the  final rules they promulgated without publishing a proposed rule (within our  time frame) would not have a significant economic impact on a substantial  number of small entities. The Federal Reserve most frequently performed  some RFA analyses in these rules, although such analyses were not  required. Of 51 rules without a proposed rule, the Federal Reserve  certified in 7 rules and performed an initial or final regulatory flexibility  analysis in 10 rules."], "subsections": []}, {"section_title": "Most Recent Rules Subject to RFA Requirements Were Certified as Not Producing Significant Impacts on Small Entities, but There Were Differences among Agencies", "paragraphs": ["For the 316 rules subject to RFA requirements from 2010 through 2016,  regulators certified that most would not have a significant economic  impact on a substantial number of small entities, although the frequency  with which individual regulators certified varied. Such certifications may  be made at either the proposed rule or final rule stage, and a certification  in a final rule may be preceded by an initial regulatory flexibility analysis in  the proposed rule. When certifying, the regulators most often made such  certifications in both the proposed and final rules (63 percent of analyses  in rules subject to RFA requirements) and did not perform regulatory  flexibility analyses. Certifications of final rules made after performing an  initial regulatory flexibility analysis accounted for another 4 percent. As  shown in figure 3, CFPB, CFTC, FDIC, and OCC certified most-to-nearly- all of their final rules that were subject to RFA requirements, while the  Federal Reserve rarely certified final rules, and SEC certified almost half.  According to Federal Reserve officials, the agency generally performed a  full regulatory flexibility analysis for almost all rulemakings regardless of  the rule\u2019s impact on small entities.", "This pattern was generally consistent across our time period (see fig. 4).  The Federal Reserve usually performed an initial and final regulatory  flexibility analysis, while the other agencies, except SEC, rarely did.  SEC\u2019s RFA analyses were the most variable over our time period. The  spikes in analyses were generally due to the small number of rules  promulgated each year. For example, in 2013, OCC promulgated three  rules subject to RFA requirements, performing an initial and final  regulatory flexibility analysis in one (33 percent) and certifying in two (67  percent). SEC published seven rules in 2013, completing an initial and  final regulatory flexibility analysis in all of them.", "While the Federal Reserve usually performed initial and final regulatory  flexibility analyses, it concluded that almost all of its rules would not  significantly affect small entities. In 86 percent of its analyses (54 of 63),  the Federal Reserve concluded that the rule would not have a significant  economic impact on a substantial number of small entities (see fig. 5). In  addition, FDIC concluded that almost all of its rules (5 of 6) in which it  performed a final regulatory flexibility analysis would not significantly  affect small entities, although as previously mentioned, FDIC certified  almost all its final rules subject to RFA requirements. (We discuss the  Federal Reserve\u2019s and FDIC\u2019s RFA analyses in more detail later in this  report.) SEC, CFPB, and CFTC also concluded that at least one of their  rules would not significantly affect small entities after performing a final  regulatory flexibility analysis. For the CFPB rule, the Federal Reserve first  proposed the rule and performed the initial regulatory flexibility analysis  before certain rulemaking authorities were transferred to CFPB for the  final rule."], "subsections": []}]}, {"section_title": "Certifications We Reviewed Were Not Always Consistent with Office of Advocacy Guidance and Other Best Practices", "paragraphs": ["We reviewed Federal Register notices and the regulators\u2019 internal  workpapers for all certifications made in the final rule (66 certifications) in  calendar year 2015 and 2016 to determine the basis for the certifications  and the extent to which the analyses were consistent with RFA  requirements and Office of Advocacy\u2019s guidance and other best  practices. As previously discussed, RFA requires that agencies provide  the factual basis for their certifications in the Federal Register. In most  certifications, the agencies provided a factual basis and concluded the  rule would not apply to small entities or have any economic impact. In  others, the agencies found the rule would have some economic impact on  small entities, but concluded that the impact would not be significant for a  substantial number of small entities. In those instances, we found that the  factual basis provided for most certifications across all regulators lacked  key components recommended by the Office of Advocacy for  understanding the analyses regulators used to support their conclusion.  We also found that while most agencies relied on the Small Business  Administration\u2019s definitions of small entities for use in their RFA analyses,  two agencies relied on alternative definitions of small entities, some of  which have not been updated in more than 35 years."], "subsections": [{"section_title": "Most Certifications in 2015 and 2016 Concluded the Rule Would Not Apply to Small Entities or Have Any Economic Impact", "paragraphs": ["In almost half of the certifications (31 of 66) we reviewed, regulators  concluded the rule would apply to no or few small entities (see table 3).  According to the regulators, these rules generally regulated activities in  which small entities do not engage, pertained to the internal processes of  the agency, or applied only to entities that were not small as defined by  the Small Business Administration or the agency. For example, in a rule  on recovery planning, OCC determined that the rule did not have an  impact on small entities because it applied only to banks with $50 billion  or more in assets, which are not small entities based on the Small  Business Administration\u2019s definition.", "In 12 certifications, the agencies concluded the rules would have no  economic impact regardless of whether small entities were affected and  therefore did not require regulatory flexibility analyses. According to the  regulators, most of these certifications applied to rules that did not create  new regulatory requirements, eliminated duplicative rules, or established  optional specifications. For example, FDIC published a rule in October  2015 that consolidated into a single part Fair Credit Reporting regulations  for all institutions FDIC regulates. According to the Federal Register  notice, the rule eliminated redundant requirements and aligned FDIC\u2019s  definitions with CFPB rules that were substantively similar. Regulators  generally used the current state of regulations as the baseline for these  determinations. For example, when analyzing the economic effects of a  new rule that consolidated duplicative regulations, the regulator compared  the compliance costs of the new rule with the costs small entities already  incurred to comply with the duplicative regulations.", "Additionally, regulators concluded in 5 of 66 certifications that the rule  would have a beneficial impact on small entities. For these rules,  agencies concluded they reduced regulatory burden, eliminated  regulations, or exempted certain entities.", "In almost a third (18 of 66) of the certifications, the agencies found that  the rule would have some economic impact on small entities, but  determined that the impact would not be significant for a substantial  number of small entities. For example, in a rule that required specified  entities to become members of an association, CFTC identified as an  economic impact the costs of membership dues and attorney fees related  to completing registration filings and preparing for required audits. But it  determined that the costs were not significant for a substantial number of  the specified small entities. In the seven joint rules we reviewed, we  determined regulators conducted their own certification analysis  independent of other agencies, although they generally reached the same  conclusion to certify (except for the Federal Reserve, which generally  treated RFA analysis differently, as discussed later)."], "subsections": []}, {"section_title": "Two Agencies Used Alternative Definitions of Small Entities That May Be Outdated", "paragraphs": ["As previously noted, the Federal Reserve, FDIC, and OCC rely on the  Small Business Administration\u2019s definition of small banks for RFA  purposes. CFPB also relies on the Small Business Administration\u2019s  definitions of small entities; for example, a business engaged in  automobile financing is considered small if its revenues are $38.5 million  or less. In contrast, CFTC and SEC previously established alternative  definitions of small entities for the purposes of RFA that the agencies  used to conclude that most of their rules (10 of 15 for CFTC and 9 of 12  for SEC) would not apply to small entities.", "But some of these small entity definitions have not been updated in more  than 35 years. In a 1982 policy statement, CFTC published its first set of  RFA definitions, which covered designated contract markets, futures  commission merchants, and commodity pool operators, among others. In  subsequent years, CFTC modified its definitions of small entities to  exclude several other groups of entities that it regulates, such as eligible  contract participants and major swap participants. SEC originally  established definitions for small entities through a rule published in the  Federal Register in 1982 after consulting with the Office of Advocacy. The  agency subsequently updated some of its definitions in 1986 and 1998,  although others have not been updated at all.", "In an October 2017 report to the President, the Department of the  Treasury recommended CFTC and SEC review and update their small  entity definitions for RFA purposes to ensure their RFA analyses  appropriately consider small entities. According to CFTC officials, the  agency has been reviewing its small entity definitions since April 2017 as  part of its working group to update the agency\u2019s RFA practices. SEC staff  told us they had no comment on Treasury\u2019s recommendation."], "subsections": []}, {"section_title": "Analyses in Some Certifications Lacked Key Components Recommended by Office of Advocacy", "paragraphs": ["For the 18 certifications in which regulators determined rules would have  some economic impact on small entities, they conducted additional  analyses to determine that the impact was not significant for a substantial  number of small entities. We found that the factual basis provided for  many of these certifications lacked key information (discussions of data  sources or methodologies and of broader economic impacts, or  definitions for key criteria) for understanding the analyses regulators used  to support their conclusion.", "The Office of Advocacy interprets RFA\u2019s factual basis requirement to  mean that a certification should include, at a minimum, why the number of  entities or the size of the economic impact justifies the certification. In its  RFA guide, the Office of Advocacy details the components regulators  should include in their certification discussion to obtain meaningful public  comment and information on the rule\u2019s impact on small entities. These  components include a description and estimate of the economic impact,  criteria for \u201csignificant economic impact\u201d and \u201csubstantial number,\u201d and a  description of any uncertainties in the analysis, including sensitivity  analysis when appropriate. The Office of Advocacy guidance states that  agencies\u2019 reasoning and assumptions underlying the analyses used to  support their certifications, including data sources, should be explicit in  the Federal Register notices. Additionally, when estimating significant  economic impact, the guidance states agencies should not view impact in  absolute terms, but relative to the size of the business, the size of the  competitor\u2019s business, and the impact on larger competitors. According to  the Office of Advocacy, broader economic impacts (such as a disparity in  impact on small entities that affects their ability to compete) could be  significant.", "Data sources or methodologies. In most of these certifications (15 of  18), regulators did not describe or did not fully describe their methodology  or data sources for their conclusions. In addition to the Office of  Advocacy\u2019s RFA guide, OMB guidance on regulatory analysis\u2014regulatory  agencies\u2019 evaluation of the likely consequences of rules\u2014states that  agencies should clearly set out the basic assumptions, methods, and data  underlying the analysis and discuss the uncertainties associated with the  estimates. While independent regulatory agencies, including those in  our review, are not required to follow the OMB guidance, it provides a  strong set of analytical practices relevant to agency rulemakings. For  these certifications, regulators generally provided partial sources and  methodology for their conclusions. Examples of incomplete discussions  include the following:  In its rule requiring specified entities to become members of an  association, CFTC detailed its source and methodology for estimating  the hourly labor costs of retaining a lawyer, as mentioned above, but  did not provide the reasoning for its estimate of the number of hours  that a lawyer would spend counseling entities with respect to the  rule\u2019s requirements.", "In a joint rule related to homeowner flood insurance, OCC provided  the source for the estimated number of affected small entities, but  provided no source or methodology for its estimated economic impact  of $6,000.", "In a rule amending reporting requirements for the dissemination of  security-based swap information, SEC said that it partially relied on its  \u201cown information\u201d without explanation for declaring that small entities  do not participate in security-based swap markets.", "In a joint rule implementing the minimum requirements in the  registration and supervision of appraisal management companies, the  Federal Reserve estimated a range of small entities that might be  affected but did not provide the source or methodology for how it  approximated the number.", "CFPB fully discussed sources and methodology in some of its  certifications but not others. In three of five certifications that required  additional analysis, CFPB provided thorough descriptions of its  methodology and data sources for its conclusions. The agency detailed  its assumptions and uncertainties in these rules and performed a  sensitivity analysis to ensure the rules would not significantly affect small  entities. However, in the other two certifications, CFPB did not discuss all  of the data sources on which it relied.", "Broader economic impacts. The regulators\u2019 certifications generally did  not address broader economic impacts such as cumulative effects,  competitive disadvantage, or disproportionality of effects and focused  most of the analysis on specific compliance costs. In addition to the Office  of Advocacy\u2019s guidance on analyzing broader economic impacts,  Executive Order 13563 requires agencies to consider the cumulative  economic impacts of regulations during the rulemaking process, which  reinforces the agencies\u2019 obligations under RFA. While this executive  order is not binding on independent regulatory agencies, such as those in  our review, it represents a best practice for rulemaking.", "Of the 18 certifications that contain additional analysis, agencies  discussed some aspect of broader economic impacts in 3. CFPB  considered future changes in market share for small entities because of  new requirements in one rule and whether the regulation placed small  entities at a competitive disadvantage in another rule. OCC also  examined a rule\u2019s impact on small entities\u2019 competitiveness and  profitability in one certification. None of the regulators discussed  cumulative effects in their certifications.", "Defining key criteria. Regulators generally did not define the criteria they  used for \u201csubstantial number\u201d and \u201csignificant economic impact\u201d in their  certifications. RFA does not define these terms. The Office of Advocacy  has left it up to agencies to determine their own criteria, which it  recommends that agencies discuss in their certifications. None of the  regulators defined what would constitute a substantial number of small  entities for the rule in the Federal Register notices. OCC was the one  agency to define its criteria for a significant economic impact in its  rulemaking, although it did not include this definition in all of its  certifications. The other agencies did not define significant economic  impact for the rule in the Federal Register notices. While CFPB did not  disclose its criteria in the Federal Register notices, it defined these criteria  in its internal workpapers for two certifications. Additionally, many of the  analyses (13 of 18) did not discuss the significance of the rule\u2019s costs  relative to the size of the business, such as profits, revenues, or labor  costs.", "Limited information. In addition, three of the certifications we reviewed  included none of the Office of Advocacy\u2019s suggested components. The  factual basis provided for these certifications did not include a description  of the number of affected entities, the size of the economic impacts, or  the justification for the certification. Two FDIC rules related to revisions of  the treatment of financial assets transferred in connection with a  securitization provided no additional information beyond the declarative  statement that the agency certified that the rule would not have a  significant economic impact on a substantial number of small entities.  Additionally, an OCC certification in a joint rule that formalized the  calculation method for mortgage loans exempted from certain  requirements provided little information, although an internal agency  workpaper detailed the number of small entities affected and the  estimated economic impact that supported the certification. OCC  officials said that the agency will comply with instructions from its  rulemaking procedure guide, which was updated in August 2016.  According to the guide, certifications should include additional information  beyond the certification statement, such as number of affected small  entities, size of the economic impact, and reason for the certification.", "The regulators\u2019 guidance for complying with RFA generally does not  include policies and procedures for helping to ensure consistent and  complete RFA analyses. (We discuss the regulators\u2019 guidance later in this  report.) Without policies and procedures that would help ensure that key  components were incorporated in certification assessments\u2014including  disclosing the methodology and data sources of economic analyses and  considering potential broad economic impacts\u2014regulators may be limiting  the effectiveness of their reviews. In turn, such reviews hinder the  achievement of RFA\u2019s goal. For example, incomplete disclosure of  methodology and data sources could limit the public and affected entities\u2019  ability to offer informed comments in response to regulators\u2019 certification  assessments in proposed rules."], "subsections": []}]}, {"section_title": "Many RFA-Required Analyses Had Weaknesses", "paragraphs": ["In many recent regulatory flexibility analyses, the evaluation of key  components\u2014potential economic effects and alternative regulatory  approaches\u2014was limited. Many final rules described changes to limit  burden, and few regulatory flexibility analyses concluded rules would  have a significant impact on small entities. For most rules we reviewed,  regulators were unable to provide documentation supporting their  regulatory flexibility analyses."], "subsections": [{"section_title": "Regulatory Flexibility Analyses Often Included Limited Evaluation of Costs and Alternatives", "paragraphs": ["Our review of recent regulatory flexibility analyses found that in many  cases, the evaluation of key components\u2014potential economic effects and  alternative regulatory approaches\u2014was limited, although the extent  varied by regulator. RFA requires the initial and final analyses to include  information to assist the agency, regulated entities, and the public in  evaluating the potential impact of rules on small entities (see sidebars).  The most important components include the assessment of a rule\u2019s  potential economic effects on small entities\u2014such as compliance costs\u2014 and the identification and evaluation of alternative regulatory approaches  that may minimize significant economic effects while achieving statutory  objectives. The Office of Advocacy\u2019s guide on RFA compliance explains  that an agency principally should address these components in an initial  regulatory flexibility analysis. feasible\u2014of the number of small entities  to which the rule will apply.", "Description of the projected reporting,  recordkeeping, and other compliance  requirements of the rule, including the  type of necessary professional skills.  Identification\u2014to the extent practicable\u2014 of all relevant federal rules that may  duplicate, overlap, or conflict with the  proposed rule. goal of RFA. See appendixes V\u2013XII for a summary of findings for each of  the six regulators.", "We reviewed regulatory flexibility analyses for recent rulemakings to  assess the extent to which they included these and other elements and to  examine the outcome of the analyses. For each regulator, we selected  all final rules published in 2015 and 2016 for which the agency performed  an initial and final regulatory flexibility analysis. For regulators with fewer  than three such rules, we included rules published in prior years (on a full- year basis) until we reached three rules or 2013. See table 4 for the  number of rules selected for each regulator. For each rule, we reviewed  Federal Register notices for the proposed and final rules and supporting  documentation on the initial and final regulatory flexibility analyses. small entities to which the rule will apply  or explanation of why no such estimate is  available.  the significant economic impact on small  entities consistent with statutory  objectives, including the reasons for  selecting the alternative adopted in the  final rule and why each of the other  alternatives was rejected.", "In meeting the requirements, agencies  may provide either a quantifiable or  numerical description of the rule\u2019s effects  or alternatives or more general descriptive  statements if quantification is not  practicable or reliable.", "Many of the Federal Reserve\u2019s regulatory flexibility analyses lacked some  required components and contained limited information and analysis. As  previously discussed, the Federal Reserve generally performed  regulatory flexibility analyses for its rulemakings regardless of the rule\u2019s  potential impact on small entities. The majority (11 of 17) of the Federal  Reserve\u2019s analyses stated that the rules either did not apply to small  entities or lacked compliance requirements. Nevertheless, the Federal  Reserve conducted regulatory flexibility analyses in which nearly all of the  initial (14 of 17) and final analyses (15 of 17) concluded that the rule  would not have a significant economic impact on small entities, which  generally is a basis for certification. Examples included rules on capital  and liquidity requirements applicable only to large banking organizations  and rules that amended official regulatory interpretations or repealed  regulations. None of the regulatory flexibility analyses performed by other  regulators indicated that a rule did not apply to small entities or lacked  compliance requirements. For additional information, see appendix V.", "More specifically, the regulatory flexibility analyses for the 11 rules that  did not apply to small entities or impose compliance requirements  were minimal. The analyses did not describe or estimate compliance  costs, identify alternatives, or include other items. In the case of  alternatives, the analyses either stated that there were no alternatives  that would further minimize economic impact on small entities or  requested comments on any alternatives. The analyses did not include  some other information that could be available and relevant such as the  reasons or need for the rule.", "Because the purpose of a regulatory flexibility analysis is to evaluate a  rule\u2019s potential effects on small entities, key components of the analysis  may not be relevant or meaningful in such cases. For example, there may  be no compliance costs to estimate, alternatives to consider, necessary  professional skills to describe, or actions that could minimize impact on  small entities. With their focus largely on explaining why the rule would  not affect small entities rather than examining effects of compliance  requirements and potential alternatives to limit such effects, such cases  resemble certifications more than regulatory flexibility analyses. See  appendix V for further information on the Federal Reserve\u2019s regulatory  flexibility analyses.", "The Federal Reserve\u2019s regulatory flexibility analyses for six rules that  might impose compliance requirements on small entities also had  limitations. Specifically, most of the analyses (both initial and final)  contained limited evaluation of the potential economic impact on small  entities and lacked other components. RFA directs agencies to provide a  quantifiable or numerical description of the effects of a proposed rule and  allows a qualitative description in lieu of a numerical evaluation in  instances when quantification is not practicable or reliable.", "Most of the analyses for rules that might impose compliance requirements  on small entities did not include a description of potential compliance  costs. Nearly all (five of six) did not quantify compliance costs in either the  initial or final analyses or explain why such assessments were not  possible. For two rules, the Federal Reserve\u2019s assessments of economic  effects and compliance costs generally consisted of descriptive  statements on the rule\u2019s provisions and coverage. For example, the final  analysis for a rule on margin and capital requirements for participants in  financial swap transactions stated that, among other things, all financial  end users would be subject to the variation margin requirements and  documentation requirements of the rule but that the Federal Reserve  believes such treatment is consistent with current market practice and  should not represent a significant burden on small financial end users.", "Although containing minimal information, analyses in three of the six rules  indicated that the rules would have a largely beneficial impact for small  entities by reducing burden or offering positive economic effects. These  analyses generally lacked clear descriptions of any compliance  requirements that would apply to small entities. For example, the initial  and final analyses for a rule involving the Federal Reserve\u2019s emergency  lending authority stated that participants at a minimum likely would be  required to pay interest on loans extended to them and to keep records,  but that the positive economic impact of receiving a loan likely would  outweigh any economic burden. The initial analysis for another rule  stated that the projected reporting, recordkeeping, and other compliance  requirements were expected to be minimal but did not describe the  requirements or any associated costs.", "Alternatives. Few of the Federal Reserve\u2019s initial regulatory flexibility  analyses identified alternatives to the proposed rule and some did not  explain why there were no alternatives. Although most of the rules\u2019  analyses (10 of 17) described alternatives, all but 2 stated that there were  no alternatives that would have less economic impact on small entities. Of  the 6 rules that might impose compliance requirements on small entities,  2 included such a statement, 1 had no mention of alternatives, and  another solicited comments on any significant alternatives that would  reduce burden associated with the proposed rule. Analyses for the other  two rules described alternative approaches included in the proposed rule  to limit economic impact on small entities. For example, one of the rules incorporated an applicability threshold for certain compliance  requirements and the other exempted small entities from some of the  rule\u2019s provisions and applied a longer transition period.", "Other Components. Several of the final regulatory flexibility analyses  also lacked other RFA-required components. In particular, only three of  the six rules described steps taken to minimize economic impact on small  entities and reasons for selecting the alternative adopted in the final rule.  The other three rules did not include either component. The reasons cited  for selecting the approach in the final rule generally reflected the actions  taken by the agency to mitigate the rule\u2019s economic impact on small  entities."], "subsections": [{"section_title": "Other Regulators\u2019 Regulatory Flexibility Analyses Generally Included Most Required Components but Some Analyses Had Weaknesses", "paragraphs": ["For the other financial regulators (FDIC, CFPB, CFTC, OCC, and SEC),  most of the regulatory flexibility analyses we reviewed included the  components required by RFA, but the extent of the analyses varied  among regulators, with some lacking required information or having other  limitations.", "For the majority (three of four) of FDIC\u2019s analyses, the agency indicated  that the rules were not subject to RFA but that it voluntarily undertook the  analyses to help solicit public comments on the rules\u2019 effects on small  entities. For these three rules, FDIC\u2019s analyses described and quantified  each of the rule\u2019s compliance costs and concluded that each rule would  not have a significant economic impact on small entities, but other  components were missing. For example, these rules\u2019 analyses focused  on illustrating how the rule would not have an economic impact on small entities and did not include other required components including a  description and assessment of regulatory alternatives. The initial and final  analyses for each of the rules were nearly identical and did not include  statements about alternatives, any issues raised in public comments, or  steps to minimize impact on small entities, among other missing  components. In that regard, FDIC\u2019s analyses for these rules\u2014similar to  many of the Federal Reserve\u2019s analyses\u2014resembled a certification. The  regulatory flexibility analyses for the fourth FDIC rule that we reviewed  included all required components.", "CFPB\u2019s regulatory flexibility analyses generally included all required  components. However, for three of the seven rules neither the initial nor  final analyses estimated compliance costs for small entities. In some  cases, the analyses stated that costs likely would be minimal or described  difficulties in estimating costs such as a lack of information about the  current practices of subject entities. Of the analyses that included cost  estimates, several did not quantify all identified costs or explain why such  estimates were not available. Unlike other regulators we reviewed, CFPB  is required to seek input from small entities during the rulemaking process  (through Small Business Review Panels) when proposed rules are  expected to have a significant economic impact on a substantial number  of small entities. CFPB\u2019s regulatory flexibility analyses often  incorporated information received from these panels in its assessment of  potential economic effects and regulatory alternatives. For example,  several analyses that estimated compliance costs relied on information  from small entities that participated in the panel process as well as data  from other sources. The description of regulatory alternatives often  reflected comments received from small-entity representatives. Although  each of CFPB\u2019s initial analyses described alternatives, in some cases, it  was not clear whether CFPB had identified alternatives of its own.", "CFTC performed initial and final analyses for one rule during the period  we reviewed and the analyses had limited evaluation of potential effects  on small entities. The analyses did not estimate the number of affected  entities or compliance costs, but indicated that the rule\u2019s compliance  requirements would be minimal while concluding the rule likely would  have a beneficial impact on small entities. The discussion of compliance  requirements in the final analysis stated only that the rule would relieve  affected entities from certain compliance requirements, although the initial  analysis stated that the proposed rule would impose a new requirement  on certain entities\u2014which could include small entities\u2014to annually  provide CFTC with a notice about certain trading activity. In other sections  of the final rule, CFTC discussed its decision to address concerns raised  in public comments by not adopting the notice requirement.", "OCC also had one rule with initial and final regulatory flexibility analyses,  and it included nearly all required components. The rule revised capital  requirements for banking organizations and was issued jointly with the  Federal Reserve. The initial analysis described multiple alternative  approaches that it stated were included in the proposed rule to  incorporate flexibility and reduce burden for small entities. However, other  than listing the alternatives and requesting comment, the analysis does  not discuss or evaluate how the options minimize economic impact on  small entities. The regulatory flexibility analysis in the final rule notes that  the Small Business Administration\u2019s Chief Counsel for Advocacy  submitted a comment letter in which it encouraged the agencies to  provide more detailed discussion of the alternatives and the potential  burden reductions associated with them.", "SEC\u2019s regulatory flexibility analyses also included most components, but  some rules\u2019 assessment of compliance costs and alternatives had  limitations. Specifically, although all of the rules described compliance  requirements, some did not describe (four of nine) or estimate (five of  nine) the costs they might impose on subject entities. For example, in  December 2015, SEC published a proposed rule requiring resource  extraction issuers to disclose certain payments. The proposed rule\u2019s  initial regulatory flexibility analysis described requirements for the  disclosures. However, the regulatory flexibility analysis did not discuss or  evaluate potential compliance costs and concluded with statements on  alternatives and a request for comments.", "Many of the SEC rules we reviewed focused on reasons why alternatives  were not appropriate and did not discuss specific options for minimizing  economic impact on small entities. As part of describing any significant  alternatives to the proposed rule which accomplish statutory objectives  while minimizing any significant economic impact on small entities, RFA  requires that initial regulatory flexibility analyses discuss alternatives such  as  the establishment of differing compliance or reporting requirements or  timetables that take into account the resources available to small  entities;  the clarification, consolidation, or simplification of compliance and  reporting requirements under the rule for such small entities;  the use of performance rather than design standards; and an exemption from coverage of the rule, or any part thereof, for such  small entities.", "For five of the nine rules, the initial analysis discussed the general types  of alternatives listed in RFA but did not describe specific options for  implementing them in the proposed rule. For example, the initial  regulatory flexibility analyses did not identify how compliance or reporting  requirements might be altered for small entities or in what ways  requirements could be simplified. One of the rules involved changes to  SEC\u2019s requirements for the reporting and disclosure of information by  registered investment companies. The initial analysis stated that the  agency had considered (1) establishing different reporting requirements  or frequency to account for resources available to small entities, (2) using  performance rather than design standards, and (3) exempting small  entities from all or part of the proposal. However, the analysis lacked  details about what different reporting requirements, frequencies,  performance standards, or partial exemptions it considered for small  entities.", "In addition, for seven of the rules\u2014including the five rules considering  only the general alternative types\u2014the discussion was limited to  describing the reasons why regulatory alternatives were not appropriate.  The reasons cited typically included that the different regulatory  approaches would not be consistent with the agency\u2019s goals or statutory  objectives. For example, the analysis for SEC\u2019s rule on reporting and  disclosure by registered investment companies concluded that the  agency believed that establishing different reporting requirements or  frequency for small entities would not be consistent with SEC\u2019s goal of  industry oversight and investor protection. However, for this and the other  proposed rules, the analyses generally did not examine the extent to  which the considered alternatives could limit the rule\u2019s economic impact  on small entities. In another case, a rule\u2019s final analysis stated that one public commenter raised concerns that the initial analysis did not identify  significant alternatives, including that it only considered alternatives  related to exempting small business from the proposed rules. Several of  the commenters suggested additional alternatives for reducing burden.  The lack of specific details about potential alternatives may limit the  usefulness of public comments on SEC\u2019s regulatory flexibility analyses  and its ability to identify alternatives that could reduce economic impacts  on small entities while achieving a rule\u2019s objectives."], "subsections": []}, {"section_title": "Many Analyses Did Not Disclose Information Sources or Methodology", "paragraphs": ["Most regulators (five of six) did not disclose the data sources or  methodologies used for estimating the number of subject small entities or  compliance costs for the regulatory flexibility analyses we reviewed. OMB  guidance on regulatory analysis\u2014regulatory agencies\u2019 anticipation and  evaluation of the likely consequences of rules\u2014states that agencies  should clearly set out the basic assumptions, methods, and data  underlying the analysis and discuss the uncertainties associated with the  estimates. While independent regulatory agencies, such as those in our  review, are not required to follow the OMB guidance, it provides a strong  set of analytical practices relevant to agency rulemakings that serves as  best practices for all agencies. Many initial analyses (11 of 23) and final  analyses (11 of 24) that estimated the number of subject small entities did  not describe the data source used for the estimate. Each of the  regulators except for CFPB (which included data sources) and CFTC  (whose only rule did not include an estimate) had at least one rule that did  not disclose the data source for the estimate of subject small entities.", "Furthermore, many analyses that estimated a rule\u2019s compliance costs (5  of 12 initial and 5 of 14 final) did not describe the information sources  used to calculate the projections. The analyses for several additional  rules included data sources for some but not all cost estimates. Except for  CFPB, each of the regulators that estimated compliance costs had at  least one rule that lacked information on data sources for some  estimates. For example, the regulatory flexibility analyses for a joint OCC  and Federal Reserve rule discussed how the agencies estimated costs of  implementing new capital requirements but did not disclose the data  sources or methodology used to calculate the costs of creditworthiness  measurement activities. A lack of information necessary to understand  how an agency evaluated a rule\u2019s economic impact on small entities may  limit the extent to which the public and other interested parties can  meaningfully comment on the analyses."], "subsections": []}]}, {"section_title": "Few Rules Found to Have a Significant Impact and Many Described Changes to Reduce Burden", "paragraphs": ["Although a regulatory flexibility analysis is required only for rules that may  have a significant economic impact on a substantial number of small  entities, few final analyses concluded that the rules would have such an  impact. Specifically, the final analysis for only 4 of 39 rules that we  reviewed stated that the rule likely would have a significant economic  impact. Final analyses for the majority of rules (20 of 39) concluded there  would be no significant impact and the remainder did not have a clear  conclusion. The Federal Reserve accounted for 15 of those 20 analyses.  As discussed previously, nearly all of the Federal Reserve\u2019s regulatory  flexibility analyses concluded a rule would not have a significant impact  on small entities.", "About half of the regulatory flexibility analyses we reviewed (18 of 39)  described changes to the proposed rule to limit economic impact on small  entities and most were by regulators other than the Federal Reserve.  Several rules (12 of 39) described changes attributable to comments on  the regulatory flexibility analyses. Specifically, for regulators other than  the Federal Reserve, the final analyses for about half of the rules (11 of  22) noted receiving public comments on the initial analysis and nearly all  of those described changes resulting from the comments. A smaller  number of rules described changes related to comments on the initial  analysis received from the Office of Advocacy.", "Some rules also described other changes to the proposed rule, including  changes in response to general public comments and the adoption of  alternatives. For rules that identified alternatives to a proposed rule in the  initial analysis, about half of the final analyses (10 of 21) described  reasons for rejecting all the alternatives. An additional 2 rules noted  reasons for rejecting some of the alternatives. For further information on  the results of regulators\u2019 regulatory flexibility analyses, see appendix XII.", "Regulators described taking various steps to minimize impact on small  entities, although they did not all result from changes to the proposed rule  and were not all clearly attributable to the agency\u2019s consideration of  alternatives. For example, some analyses described provisions that had  been included as part of the proposed rule. For rules that disclosed  actions to minimize effects on small entities, most regulators noted  multiple actions that included  reducing compliance requirements such as for reporting and  disclosure, exempting small entities from certain requirements,  increasing applicability or exemption thresholds, providing for flexibility in meeting compliance requirements,  clarifying and simplifying compliance requirements, not adopting certain provisions of the proposed rule, and providing for delayed or gradual implementation of compliance  requirements.", "Although some actions were specific to small entities, many applied more  broadly, such as to all subject firms."], "subsections": []}, {"section_title": "Most Regulators Lacked Documentation of Regulatory Flexibility Analysis and Certifications for Most Rules", "paragraphs": ["For most rules we reviewed, regulators (five of six) were unable to  provide documentation supporting their regulatory flexibility analyses or  certification decisions, although the extent of documentation varied by  regulator (see table 5). We requested supporting documentation for the  39 rules we reviewed for which the agency performed initial and final  regulatory flexibility analyses and the 66 rules for which the agency made  a certification determination.", "Staff from two regulators\u2014CFPB and OCC\u2014provided documentation for  all or nearly all of the rules we reviewed. Many of these documents were  formal analysis or decision memorandums on assessing a rule\u2019s potential  economic impact on small entities. For CFPB rules that had regulatory  flexibility analyses, documentation included RFA-required reports  summarizing the results of Small Business Review Panels. Staff from  the other regulators produced documentation for fewer or no rules and  the documents they provided were largely limited and informal. For  example, other than for CFPB and OCC, RFA-related documentation  generally consisted of emails between agency staff and data queries and  output files on the number of affected entities and potential economic  effects.", "OMB guidance on regulatory analysis states that agencies should  prepare documentation of their economic analysis so that a qualified third  party reading the analysis can understand the basic elements and the  way in which the agency developed its estimates. The guidance also  states that agencies are expected to document all the alternatives  considered as part of their regulatory analysis and which alternatives  were selected for emphasis in the main analysis. As previously  discussed, independent regulatory agencies are not required to follow the  OMB guidance, but it provides a strong set of analytical practices relevant  to agency rulemakings. A lack of documentation of the analysis  supporting regulators\u2019 RFA implementation limits transparency and  accountability."], "subsections": []}]}, {"section_title": "Regulatory Guidance Generally Does Not Include Policies or Procedures for Ensuring Consistent and Complete RFA Analyses", "paragraphs": [], "subsections": [{"section_title": "Most of the Regulators Have Established General Guidance for Complying with RFA Requirements", "paragraphs": ["Most regulators (five of six) have established written guidelines that  restate the statutory requirements for certification and for preparing the  regulatory flexibility analyses and provide some additional guidance for  staff conducting the analyses, as shown in table 6. However, they  generally have not developed comprehensive policies and procedures to  assist staff in complying with RFA, which may contribute to the  weaknesses we identified in some certifications and regulatory flexibility  analyses.", "The guidelines for FDIC, OCC, CFPB, and SEC discuss regulatory  flexibility analyses as part of their general rulemaking guidance for staff.  At a minimum, each of these regulators\u2019 guidance describes the statutory  requirements under RFA for certifications and for preparing the initial and  final analyses, and, for CFPB, agency-specific RFA requirements.  These four agencies also provide some additional information intended to  be useful in complying with RFA requirements, such as excerpts from the  Office of Advocacy\u2019s RFA compliance guide. For example, some of the  incorporated Office of Advocacy guidance covers considerations for  determining whether a rule would have a significant economic impact on  a substantial number of small entities. In addition, some regulators\u2019 RFA  guidelines include organizational information for coordinating with certain  agency departments (such as offices responsible for economic analysis  or legal review) and identifying staff responsible for completing RFA  analyses.", "Until recently, CFTC and the Federal Reserve had not established any  policies, procedures, or guidance for conducting regulatory flexibility  analyses, except for a policy statement CFTC issued in 1982 that defines  small entities and an informal Federal Reserve document listing RFA  requirements. Since we started our review, CFTC announced a working  group intended to enhance compliance with RFA. According to CFTC  staff, the group began its work in April 2017 with a focus on updating  CFTC\u2019s small-entity definitions. Staff said that the group\u2019s next task would  be to formulate RFA policies and procedures with a goal of adopting them  in spring 2018. Also during the course of our review, the Federal Reserve  finalized a handbook covering guidelines and policies for RFA and small- entity compliance guides that it provided to us in November 2017.  Previously, the Federal Reserve\u2019s RFA guidance consisted of an informal  resource document identifying RFA requirements that it made available to  rulemaking staff."], "subsections": []}, {"section_title": "Regulators\u2019 RFA Guidance Does Not Include Policies or Procedures for Helping Ensure Consistent and Complete RFA Analyses", "paragraphs": ["While the financial regulators\u2019 guidance discusses RFA requirements for  regulatory flexibility analyses and includes some information on how to  approach these analyses, it generally does not address how each agency  helps ensure that its rulemakings consistently and completely comply with  RFA requirements. Federal internal control standards state the  importance for agency management to establish through policies and  procedures the actions needed to achieve objectives. In addition,  Executive Order 13272 required agencies to establish policies and  procedures to promote compliance with RFA. While this executive order  is not binding on independent regulatory agencies, it represents a best  practice for rulemaking.", "We found that the regulators\u2019 guidance lacks specific details on the  procedures by which the agency expects rulemaking staff to implement  RFA requirements. Other than restating RFA requirements and identifying  organizational responsibilities, regulators\u2019 guidance documents largely  are limited to offering suggestions for rulemaking staff to consider while  preparing RFA sections of the rule. For example, in many cases, the  guidance documents include recommendations and excerpts from the  Office of Advocacy\u2019s RFA compliance manual such as factors to consider  about what constitutes a significant economic impact and a substantial  number of small entities. In another case, guidance suggests staff refer  to RFA statements included in previously issued rules to use as  examples. In addition, some guidance documents described agency  policies on certain RFA elements. For example, one regulator\u2019s guidance  states a preference for completing an initial regulatory flexibility analysis,  rather than making a certification determination. Yet, while these types of  guidance may be instructive and allow for necessary flexibility, they do  not represent specific and comprehensive procedures for implementing  RFA requirements.", "As illustrated in table 7, the extent to which regulators\u2019 guidance includes  policies and procedures varies but generally does not include policies or  procedures for  identifying definitions or criteria for assessing whether a rule will have  a significant economic impact on a substantial number of small  entities; evaluating a rule\u2019s potential economic impact on small entities,  including compliance costs and broad effects such as cumulative  effects, competitive advantage, and disproportionality;  identifying and assessing regulatory alternatives that could minimize  impact on small entities while accomplishing statutory objectives; disclosing analytical methodology and data sources; and  creating and maintaining documentation that supports analytical  findings.", "Some regulators\u2019 guidance, including CFPB and OCC, includes policies  and procedures for certain elements\u2014such as disclosing methodology  and sources\u2014but not for others, such as defining what constitutes  significant economic impact or a substantial number of small entities.  FDIC\u2019s rule development guide includes guidance for certification  determinations (largely from Office of Advocacy\u2019s compliance guide) but  not for initial and final regulatory flexibility analyses for which the guide  restates RFA requirements. SEC\u2019s handbook describes some policies  and procedures on alternatives but it focuses on having RFA statements  acknowledge consideration of each RFA alternative type even if  unsuitable. It also includes some policies and procedures for assessing  economic impact. However, the handbook was last revised in 1999, so it  does not incorporate recommendations from the Office of Advocacy\u2019s  compliance guide, and two SEC divisions have developed their own  manuals, which generally restate RFA requirements.", "As previously described, we found inconsistencies and weaknesses in  financial regulators\u2019 certifications and regulatory flexibility analyses that  we reviewed, including for the key elements discussed in this section. The  shortcomings are attributable in part to the regulators\u2019 lack of  comprehensive policies and procedures for RFA requirements. Our prior  work on RFA implementation by federal agencies found that uncertainties  about RFA\u2019s requirements and varying interpretations of those  requirements by federal agencies limited the act\u2019s application and  effectiveness. However, the Office of Advocacy subsequently published  guidance on complying with RFA requirements that includes information  to help agencies interpret and implement RFA requirements. Such  guidance could help regulators develop comprehensive and specific  policies and procedures. Without such policies and procedures,  regulators\u2019 ability to consistently and effectively meet RFA objectives may  be limited."], "subsections": []}]}, {"section_title": "Financial Regulators Varied in Their Approach to RFA- Required Retrospective Reviews", "paragraphs": [], "subsections": [{"section_title": "Federal Banking Regulators Relied on Other Retrospective Reviews to Meet RFA Section 610 Requirements", "paragraphs": ["As previously discussed, section 610 of RFA requires agencies to review,  within 10 years of adoption, those rules assessed as having a significant  economic impact on a substantial number of small entities to determine if  they should be continued without change, amended, or rescinded to  minimize any significant economic impact on small entities. During the  last 10 years, the three federal banking regulators (Federal Reserve,  FDIC, and OCC) used other retrospective reviews that they said fulfilled  RFA requirements. Specifically, the banking regulators said that the  retrospective reviews required under the Economic Growth and  Regulatory Paperwork Reduction Act of 1996 (EGRPRA) also satisfied  RFA section 610 requirements. EGRPRA requires the federal banking  regulators to identify outdated or otherwise unnecessary regulatory  requirements imposed on insured depository institutions every 10 years.", "We compared EGRPRA requirements for retrospective reviews to those  of section 610 and found they do not fully align (see table 8). For  example, the EGRPRA review process relies on public comments to  identify rules that may be outdated, unnecessary, or unduly burdensome.  The comments are solicited through public notices in the Federal Register  and through public outreach meetings held across the country. In  contrast, public comments are only one component of section 610  reviews. Following a public notice and comment period, section 610  requires agencies to evaluate rules found to have a significant economic  impact on a substantial number of small entities to identify opportunities  to reduce unnecessary burden. The section 610 reviews are to consider  five specific factors, such as the degree to which technology and  economic conditions have changed in the area affected by the rule.  Section 610 reviews focus specifically on reducing unnecessary  regulatory burden on small entities; EGRPRA reviews focus more broadly  on reducing regulatory burden on all insured depository institutions.", "We reviewed the 2007 and 2017 EGRPRA reports, along with their  preceding Federal Register notices, and found that the regulators  solicited comment from the public on the burden of regulations on  community banks and other smaller, insured depository institutions.  However, we found that the final reports primarily focus on the issues  identified through public comments and generally did not include  independent agency consideration of the impact of regulations on small  entities, as required by section 610.", "The public notice requirements for RFA section 610 and EGRPRA also  differed. RFA requires agencies to publish in the Federal Register a list of  the rules that have a significant economic impact on a substantial number  of small entities and that are to be reviewed pursuant to section 610  during the upcoming year. This list must include a brief description of  each rule and the need for and legal basis of each rule. The notices alert  the public to specific rules that may affect small entities and request  public comment on these rules. EGRPRA public notice requirements do  not require agencies to specifically identify rules that have an impact on  small entities. Rather, agencies must at regular intervals provide notice  and solicit public comment on a particular category or categories of rules  (such as consumer protection, safety and soundness) governing all  insured depository institutions. The notices request commenters to  identify areas of the regulations that are outdated, unnecessary, or unduly  burdensome. Our searches of the Federal Register turned up no notices  of section 610 reviews posted by the regulators in the last 10 years.", "In its RFA guide, the Small Business Administration\u2019s Office of Advocacy  stated that agencies may satisfy section 610 requirements through other  retrospective reviews if these other reviews meet the criteria of section  610. To obtain credit for a section 610 review through another review  process, the Office of Advocacy recommends that agencies adequately  communicate with stakeholders and the Office of Advocacy. According to  an official from the Office of Advocacy, the office has not yet made a  determination on whether the EGRPRA review process satisfies the  requirements of section 610. Although the agencies stated that they fulfill  RFA requirements through EGRPRA, without confirming this with the  Office of Advocacy, it is possible that they are not meeting the RFA  section 610 requirements and therefore may not be achieving the small- entity burden reduction that the statute seeks to ensure. We found that  the regulators lack policies and procedures for how to conduct section  610 reviews or provide rationale for meeting the section 610 review  requirements through other retrospective review processes."], "subsections": []}, {"section_title": "SEC Conducted RFA Section 610 Reviews, but the Reviews Were Late and Not Fully Consistent with RFA Requirements or Office of Advocacy Guidance", "paragraphs": ["Our review of SEC\u2019s section 610 reviews found that they were conducted  late and were not fully consistent with RFA requirements or the Office of  Advocacy\u2019s guidance for such reviews. Although SEC staff have a  process for tracking which rules are due for section 610 reviews, SEC  conducted all but one of its reviews 12 years after the rules were  published. According to RFA requirements, rules must be reviewed within  10 years of their publication as final rules. SEC staff told us that SEC  conducted a broader review than required by RFA and recommended by  the Office of Advocacy. Moreover, staff said that SEC conducted section  610 reviews for all rules previously published for notice and comment to  assess the continued utility of the rules. Agency officials stated that  when they prepare the agency\u2019s annual Federal Register notice of rules  to be reviewed during the succeeding 12 months, they consult a  chronological list of final rules adopted by the agency to determine which  rules are due for a section 610 review. However, when we reviewed  documentation of 46 section 610 reviews SEC staff conducted in 2015  and 2016, we found that each of the reviews was conducted for a rule  adopted in 2003 or 2004, with 45 rule reviews being conducted 12 years  after their publication as final rules. By not conducting section 610  reviews within the time frame established by RFA, SEC may delay taking  timely action to minimize significant economic impact of rules on small  entities.", "In general, SEC did not follow Office of Advocacy\u2019s guidance for  conducting section 610 reviews. The Office of Advocacy recommends  that to evaluate and minimize any significant economic impact of a rule on  a substantial number of small entities, agencies may want to use an  economic analysis similar to the initial regulatory flexibility analysis.  Additionally, OMB guidance on regulatory analysis states that agencies  should provide documentation that analysis is based on the best  reasonably obtainable scientific, technical, and economic information  available. As previously discussed, independent regulatory agencies are  not required to follow the OMB guidance, but it provides a strong set of  analytical practices relevant to agency rulemakings.", "To facilitate its section 610 reviews, SEC staff used a template that  prompts staff to consider each of the five RFA-required section 610  considerations and to document the conclusion of the review (if the rule  should be continued without change, amended, or rescinded). We  reviewed the templates for all 46 reviews conducted between 2015 and  2016 and found that SEC staff consistently followed this template to  document their conclusions. However, the reviews generally lacked  substantive analysis and no rules were amended as a direct result of their  section 610 review. Overall, of the 46 reviews, 7 identified comments or  complaints from the public, 4 identified changes in technology, economic  conditions, or other factors in the area affected by the rule, and 4  identified instances of overlap, conflict or duplication. The reviews  generally provided no evidence of empirical analysis and no data to  support the conclusions of the reviews, as recommended by the Office of  Advocacy and OMB. Furthermore, in most cases, the reviews lacked a  description of whether, or to what extent, the rule was affecting small  entities. For example, when addressing the first RFA-required  consideration, describing and evaluating the continuing need for a rule,  most SEC section 610 reviews included language from the final rule as a  description and included SEC\u2019s conclusion that the rule continues to be  necessary.", "The Office of Advocacy also suggests that useful section 610 reviews  should evaluate potential improvements to the rule by going beyond  obvious measures and evaluating factors such as the unintended market  effects and distortions and widespread noncompliance with reporting and  other paperwork requirements. We found no evidence that these factors  were considered. The Office of Advocacy further recommends that  agencies pay particular attention to changes in the cumulative burden  faced by regulated entities. We did not find evidence that SEC considered  the cumulative burden faced by regulated agencies in the reviews we  examined. By not including these best practice elements as part of its  section 610 reviews, SEC may not fully achieve RFA\u2019s purpose of  minimizing significant economic impact of rules on small entities.", "SEC does not have written policies or procedures for completing rule  reviews pursuant to RFA section 610, potentially contributing to the  weaknesses we identified on the timing of the reviews, and the lack of  data and analysis to support the review findings. As previously  mentioned, federal internal control standards state the importance for  agency management to establish policies and procedures needed to  achieve objectives. In addition, Executive Order 13272 requires  agencies to establish policies and procedures to promote compliance with  RFA. While this executive order is not binding on independent  regulatory agencies, including SEC, it represents a best practice for  rulemaking.", "SEC also does not publicly disclose the findings or conclusions of its  section 610 reviews. Although RFA does not require that agencies  publish the results of their 610 reviews, the Office of Advocacy  recommends that to enhance transparency, agencies should  communicate with interested entities about the status of ongoing as well  as completed section 610 reviews. Several executive orders also highlight  the importance of public disclosure of retrospective reviews. For example,  Executive Order 13563 recommends that retrospective analyses,  including supporting data, should be released online whenever  possible. Executive Order 13610 reiterated this recommendation,  stating that public disclosure promotes an open exchange of  information. While these executive orders are not binding on  independent regulatory agencies, we consider them a best practice for  rulemaking. OMB guidance on regulatory analysis states that to provide  greater access to regulatory analysis, agencies should post their analysis,  along with supporting documents, on the Internet so the public can review  the findings. Staff from SEC confirmed that they do not publish the results  or summaries of their section 610 reviews, stating that they are not  required to do so by law. Lack of public disclosure limits the transparency  of section 610 reviews, hindering the public\u2019s ability to hold agencies  accountable for the quality and conclusions of their reviews."], "subsections": []}, {"section_title": "CFTC and CFPB Plan to Develop Policies and Procedures for Future Retrospective Reviews", "paragraphs": ["The other two regulators we reviewed, CFTC and CFPB, plan to put  procedures in place for section 610 reviews. According to CFTC officials,  the agency has not conducted any section 610 reviews in at least the last  10 years. CFTC officials confirmed that the agency currently has no  policies or procedures in place to track which rules require reviews or to  conduct the reviews. Furthermore, agency officials were unable to identify  any final rules published by the agency from 1997 through 2007 that were  found to have a significant economic impact on a substantial number of  small entities and therefore would have required a section 610 review.  According to CFTC officials, an agency working group has a goal to  develop a process and criteria for conducting section 610 reviews.  Additionally, agency officials stated an interest in establishing an  automated system to develop a schedule for tracking which rules require  section 610 reviews.", "CFPB has not yet been required to conduct any section 610 reviews.  Section 610 reviews are required within 10 years of a rule\u2019s adoption as a  final rule; to date, none of the rules issued by CFPB, which was created in  2010, have met this deadline. CFPB officials confirmed that CFPB has  conducted no section 610 reviews and stated that the agency currently  has no formal plan or procedure in place to begin conducting these  reviews. However, officials further stated that CFPB has had initial  planning discussions about the section 610 review requirements and their  role in a comprehensive regulatory review program."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["RFA aims to have agencies tailor regulatory requirements to the scale of  regulated entities in a manner consistent with the objectives of the rule  and applicable statutes. To achieve this goal, RFA requires agencies to  assess the impact of proposed rules on small entities, solicit and consider  flexible regulatory proposals, and explain the rationale for their actions.", "While many of the regulators\u2019 certification determinations and regulatory  flexibility analyses incorporated RFA-required components, the  weaknesses and inconsistencies we found\u2014in the analyses and in  documentation\u2014could undermine the act\u2019s goal.", "Some certification determinations lacked important information  recommended by the Office of Advocacy and OMB, including data  sources and methodologies, definitions, and consideration of broad  economic impacts.", "Many evaluations of key components\u2014potential economic effects and  alternative regulatory approaches\u2014in the regulatory flexibility  analyses were limited.", "For most rules we reviewed, regulators were unable to provide  documentation supporting the economic analysis underlying their  regulatory flexibility analyses\u2014including their certification decision.", "Moreover, regulators generally lacked comprehensive policies and  procedures for RFA implementation, a potential contributing factor for  many of the weaknesses we identified.", "By developing policies and procedures that provide specific direction to  rulemaking staff, the regulators could better ensure consistent and  complete implementation of RFA requirements and more fully realize the  RFA goal of appropriately considering and minimizing impacts on small  entities during and after agency rulemakings.", "The issues we identified with section 610 reviews included the use of a  substitute review process as well as gaps or weaknesses in analysis and  documentation.", "To fulfill section 610 requirements, the Federal Reserve, FDIC, and  OCC used other retrospective reviews required under EGRPRA that  do not fully align with requirements under section 610.", "SEC\u2019s section 610 reviews are not fully consistent with RFA  requirements and Office of Advocacy and OMB guidance (for  example, not within the 10-year time frame, no evidence of empirical  analysis, and no data to support the conclusions of the reviews).", "CFTC has not recently completed section 610 reviews and CFPB has  not yet been required to do so. These regulators have begun or will  soon begin developing policies and procedures for conducting the  reviews.", "By meeting section 610 review requirements and using best practices,  regulators will be in a better position to minimize any significant economic  impact of a rule on small entities that the statute seeks to ensure.  Additionally, for regulators that have not publicly issued their finding or for  those that have yet to undertake the reviews, it will be important to adopt  best practices for transparency and accountability."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 10 recommendations among the six financial  regulators we reviewed:  FDIC should develop and implement specific policies and procedures for  how it will consistently comply with RFA requirements and key aspects of  Office of Advocacy and OMB guidance that include the following three  elements: processes for creating and maintaining documentation sufficient to  support analysis of economic impact and alternatives; processes for disclosing the methodology\u2014including criteria for  assessing significant economic impact and substantial number of  small entities\u2014and data sources of economic analysis supporting  certification determinations and regulatory flexibility analyses; and processes for considering to the extent practicable a rule\u2019s potential  economic impacts on small entities, including for evaluating broad  economic impacts of regulations in certification determinations and  assessing alternatives that could minimize impact on small entities.  (Recommendation 1)", "FDIC should coordinate with the Office of Advocacy to determine whether  the EGRPRA review process satisfies the requirements of section 610  and, if not, what steps should be taken to align the process with section  610 requirements. If additional actions are needed, FDIC should develop and implement specific policies and procedures for  performing section 610 reviews, including processes for determining  which rules require review, posting notices of upcoming reviews in the  Federal Register, and maintaining documentation supporting the  analysis and conclusions of RFA-required considerations; and publicly disclose the reviews, or summaries of the reviews, with the  basis for any conclusions. Such disclosure could include publishing  results as part of the EGRPRA report, in the Federal Register, or on  the agency\u2019s website.  (Recommendation 2)", "OCC should develop and implement specific policies and procedures for  how it will consistently comply with RFA requirements and key aspects of  Office of Advocacy and OMB guidance that include the following three  elements: processes for creating and maintaining documentation sufficient to  support analysis of alternatives that could minimize impact on small  entities; processes for disclosing the methodology\u2014including criteria for  assessing significant economic impact and a substantial number of  small entities\u2014and data sources of economic analysis supporting  certification determinations and regulatory flexibility analyses; and processes for considering to the extent practicable a rule\u2019s potential  economic impacts on small entities, including for evaluating broad  economic impacts of regulations in certification determinations and  assessing alternatives that could minimize impact on small entities.  (Recommendation 3)", "OCC should coordinate with the Office of Advocacy to determine whether  the EGRPRA review process satisfies the requirements of section 610  and, if not, what steps should be taken to align the process with section  610 requirements. If additional actions are needed, OCC should develop and implement specific policies and procedures for  performing section 610 reviews, including processes for determining  which rules require review, posting notices of upcoming reviews in the  Federal Register, and maintaining documentation supporting the  analysis and conclusions of RFA-required considerations; and publicly disclose the reviews, or summaries of the reviews, with the  basis for any conclusions. Such disclosure could include publishing  results as part of the EGRPRA report, in the Federal Register, or on  the agency\u2019s website.  (Recommendation 4)", "The Federal Reserve should develop and implement specific policies and  procedures for how it will consistently comply with RFA requirements and  key aspects of Office of Advocacy and OMB guidance that include the  following three elements: processes for creating and maintaining documentation sufficient to  support analysis of economic impact and alternatives; processes for disclosing the methodology\u2014including criteria for  assessing significant economic impact and a substantial number of  small entities\u2014and data sources of economic analysis supporting  certification determinations and regulatory flexibility analyses; and processes for considering to the extent practicable a rule\u2019s potential  economic impacts on small entities, including for evaluating broad  economic impacts of regulations in certification determinations and  assessing alternatives that could minimize impact on small entities.  (Recommendation 5)", "The Federal Reserve should coordinate with the Office of Advocacy to  determine whether the EGRPRA review process satisfies the  requirements of section 610 and, if not, what steps should be taken to  align the process with section 610 requirements. If additional actions are  needed, the Federal Reserve should develop and implement specific policies and procedures for  performing section 610 reviews, including processes for determining  which rules require review, posting notices of upcoming reviews in the  Federal Register, and maintaining documentation supporting the  analysis and conclusions of RFA-required considerations; and publicly disclose the reviews, or summaries of the reviews, with the  basis for any conclusions. Such disclosure could include publishing  results as part of the EGRPRA report, in the Federal Register, or on  the agency\u2019s website.  (Recommendation 6)", "CFPB should develop and implement specific policies and procedures for  how it will consistently comply with RFA requirements and key aspects of  Office of Advocacy and OMB guidance that include the following three  elements: processes for creating and maintaining documentation sufficient to  support analysis of alternatives that could minimize the impact on  small entities; processes for considering to the extent practicable a rule\u2019s potential  economic impacts on small entities, including for evaluating broad  economic impacts of regulations in certification determinations and  assessing alternatives that could minimize impact on small entities;  and  in developing policies and procedures for section 610 reviews, include  processes for determining which rules require review, posting notices  of upcoming reviews in the Federal Register, maintaining  documentation supporting the analysis and conclusions of RFA- required considerations, and establishing procedures for publicly  disclosing the review or summaries (such as in the Federal Register  or on the agency\u2019s website).  (Recommendation 7)", "CFTC should develop and implement specific policies and procedures for  how it will consistently comply with RFA requirements and key aspects of  Office of Advocacy and OMB guidance that include the following four  elements: processes for creating and maintaining documentation sufficient to  support analysis of economic impact and alternatives; processes for disclosing the methodology\u2014including criteria for  assessing significant economic impact and a substantial number of  small entities\u2014and data sources of economic analysis supporting  certification determinations and regulatory flexibility analyses; processes for considering to the extent practicable a rule\u2019s potential  economic impacts on small entities, including for evaluating broad  economic impacts of regulations in certification determinations and  assessing alternatives that could minimize impact on small entities;  and  in developing policies and procedures for section 610 reviews, include  processes for determining which rules require review, posting notices  of upcoming reviews in the Federal Register, maintaining  documentation supporting the analysis and conclusions of RFA- required considerations, and establishing procedures for publicly  disclosing the review or summaries (such as in the Federal Register  or on the agency\u2019s website).  (Recommendation 8)", "SEC should develop and implement specific policies and procedures for  how it will consistently comply with RFA requirements and key aspects of  Office of Advocacy and OMB guidance that include the following four  elements: processes for creating and maintaining documentation sufficient to  support analysis of economic impact and alternatives; processes for disclosing the methodology\u2014including criteria for  assessing significant economic impact and a substantial number of  small entities\u2014and data sources of economic analysis supporting  certification determinations and regulatory flexibility analyses; processes for considering to the extent practicable a rule\u2019s potential  economic impacts on small entities, including for evaluating broad  economic impacts of regulations in certification determinations and  assessing alternatives that could minimize the impact on small  entities; and processes for performing section 610 reviews, including determining  which rules require review, posting notices of upcoming reviews in the  Federal Register, and maintaining documentation supporting the  analysis and conclusions of RFA-required considerations.  (Recommendation 9)", "SEC should publicly disclose its section 610 reviews, or summaries of the  reviews, with the basis for any conclusions. Such disclosure could include  publishing results in the Federal Register or on the agency\u2019s website.  (Recommendation 10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to CFPB, CFTC, the Federal Reserve,  FDIC, OCC, Office of Advocacy, and SEC for review and comment.  CFPB, CFTC, the Federal Reserve, FDIC, and SEC provided written  comments that we have reprinted in appendixes XIII\u2013XVII, respectively.  CFTC, the Federal Reserve, and FDIC also provided technical  comments, which we have incorporated, as appropriate. We received  technical comments from OCC too late to be incorporated in the final  product. Although the comments were not incorporated, they do not  significantly affect the facts or conclusions we presented.", "In their written comments, CFPB, CFTC, the Federal Reserve, FDIC, and  SEC generally agreed with the report\u2019s recommendations. CFPB  recognized the importance of having specific policies and procedures to  consistently comply with RFA requirements. CFPB noted the existence of  formal guidance instructing staff on conducting and documenting  analyses for substantive rulemakings, including following RFA, and stated  its commitment to updating its policies and procedures\u2014and developing  them for section 610 reviews\u2014to ensure it will consistently comply with  RFA requirements.", "In written comments provided by CFTC, the agency stated its  commitment to fully complying with RFA and described the formation and  progress of its interdivisional working group for enhancing RFA  implementation. CFTC noted that our recommendations are largely  consistent with the planned efforts of the working group and that the  group will use the recommendations as a guide in completing its work.  CFTC also explained that while not a clear requirement of RFA, it will  carefully consider making the public aware of the results of section 610  reviews in cases in which the review does not lead to proposed changes  to a rule.", "In its written comments, the Federal Reserve noted that it strives for  consistent and complete compliance with RFA requirements. Regarding  our recommendation to develop and implement specific policies and  procedures for complying with RFA requirements and key aspects of  Office of Advocacy and OMB guidance, the Federal Reserve stated it  plans to review existing policies and procedures to develop and  implement, as appropriate, additional processes with respect to  documentation, disclosing methodology and data sources, and  considering a rule\u2019s potential economic impact on small entities.  Regarding our recommendation to coordinate with the Office of Advocacy  and take steps to align the EGRPRA review process with section 610  requirements, the Federal Reserve stated that it will coordinate with the  Office of Advocacy and noted that it also plans to conduct a broader  review of processes for section 610 reviews to ensure they are  comprehensive and transparent.", "In its written comments, FDIC stated it will consider our recommendations  as it continues to enhance its policies and procedures for performing  regulatory analyses, in particular compliance with RFA.", "Regarding our recommendation to develop and implement specific  policies and procedures for complying with RFA requirements and key  aspects of Office of Advocacy and OMB guidance, FDIC noted that  although independent agencies are not required to follow certain  guidance used as criteria in the report, it will continue to incorporate  provisions from Office of Advocacy and OMB guidance where  feasible.", "FDIC noted that GAO limited its review to analysis specifically  included in the RFA sections of a rule and did not consider  analysis published elsewhere in the preamble, as permitted by  RFA. FDIC stated that it continues to look for ways to make its  regulatory analysis more transparent. However, while RFA allows  agencies to perform regulatory flexibility analyses as part of other  required analysis if such other analysis satisfies RFA  requirements, RFA also calls for initial and final regulatory  flexibility analyses to contain or describe the required  components. Including these components elsewhere in a rule\u2019s  preamble without referencing or describing them in the RFA  section does not help promote transparency for the public or small  entities the rule might affect. As the Office of Advocacy\u2019s guidance  notes, agencies can coordinate preparation of regulatory flexibility  analyses with any other analyses accompanying a rule. But in  doing so, agencies should ensure that such analyses describe  explicitly how RFA requirements were satisfied. Otherwise, it may  be unclear to small entities and others if relevant analysis appears  elsewhere in a rule\u2019s preamble, which could limit transparency and  the ability of small entities to review and respond to relevant  analyses.", "Regarding documentation supporting regulatory flexibility analyses  and certification determinations, FDIC noted that it will ensure staff  considers our recommendation.", "Regarding our recommendation to coordinate with the Office of  Advocacy and take steps to align the EGRPRA review process with  section 610 requirements, FDIC stated that it will consider the  recommendation. FDIC noted that before this year, the last section  610 review for FDIC was part of the 2007 EGRPRA review process,  and notices of that review were provided at that time. Since then,  FDIC said that it issued one rule in 2014 that requires a section 610  review, which must be completed by 2024.", "In written comments, SEC\u2019s chairman stated that he asked staff to identify  additional ways to improve the quality of SEC\u2019s rulemaking analysis and  procedures.", "SEC noted that as an independent regulatory agency, it is not subject  to the specific requirements for regulatory analysis in Executive  Orders 12866 and 13563 and OMB Circular A-4, but that it will  continue to strive to incorporate the principles and best practices in  those documents into internal practices, where appropriate. SEC also  noted that as part of its rulemaking, it engages in economic analyses  of the likely costs and benefits of proposed and final rules along with  other anticipated effects.", "SEC further explained that as permitted by RFA, relevant RFA  analyses in SEC rulemaking releases often are found across several  sections of the releases, and that it would therefore consider potential  improvements to better communicate to the public about other  analyses relevant to the RFA analyses. As we previously stated,  although RFA allows agencies to perform regulatory flexibility  analyses as part of other required analysis, it also requires the initial  and final analyses to include or describe the required components.  Including these components in different parts of a rule release without  explicitly referencing or describing them in the RFA section may limit  transparency and the ability of small entities to review and respond to  relevant analyses.", "We are sending copies of this report to the appropriate congressional  committees and members and financial regulators. This report will also be  available at no charge on our website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or EvansL@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  XVIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to (1) analyze the trends in financial  regulators\u2019 application of Regulatory Flexibility Act (RFA) requirements in  their recent rulemakings; (2) examine the extent to which financial  regulators performed analyses for rules they certified would not have a  significant economic impact on a substantial number of small entities; (3)  examine the extent to which financial regulators performed regulatory  flexibility analyses and the analyses\u2019 effects on their rulemakings; (4)  examine the extent to which financial regulators established policies,  procedures, and criteria for complying with RFA requirements; and (5)  examine the extent to which financial regulators performed retrospective  reviews required by RFA.", "For the purposes of this report, financial regulators are the Consumer  Financial Protection Bureau (CFPB), the Board of Governors of the  Federal Reserve System (Federal Reserve), Federal Deposit Insurance  Corporation (FDIC), Office of the Comptroller of the Currency (OCC),  Commodity Futures Trading Commission (CFTC), and the Securities and  Exchange Commission (SEC).", "To analyze the trends in financial regulators\u2019 application of RFA  requirements in their recent rulemakings, we reviewed all final rules  published in the Federal Register from January 2010 through December  2016. Using the document search on the official Federal Register  website, we downloaded all actions published in the Rules and  Regulations section of the Federal Register for the financial regulators  during our time period. The downloaded file had 744 actions and included  a website link to each notice on the Government Printing Office\u2019s website.  We then reviewed each notice to remove actions that were not final rules,  such as corrections, orders, and statements of policies. We also removed  obvious duplicate rules, using the rule\u2019s Regulation Identifier Number that  we recorded from the notice or the title for rules without such an  identification number. We considered rules to be duplicates if they were  (1) a final rule confirming an interim rule or (2) an extension of the  compliance date that did not make changes to the Code of Federal  Regulations. We removed 181 actions that were not final rules and 43  duplicates, leaving 520 final rules promulgated by the financial regulators  from 2010 through 2016.", "We then analyzed the Federal Register notices for these final rules, using  a spreadsheet-based data collection instrument, to quantify how many  rules (1) did not include a proposed rule, (2) included an initial regulatory  flexibility analysis, (3) included a final regulatory flexibility analysis, (4)  certified that RFA analyses were not required, and (5) had other  characteristics, such as those rules that performed a final regulatory  flexibility analysis but also certified that it was not required. In cases in  which the RFA analysis performed in the proposed rule was not clear or  present in the final rule, we used the Regulation Identifier Number or  citations listed in the final rule to locate the proposed rule to make the  determination.", "To examine the extent to which financial regulators performed analyses  for rules they certified would not have a significant economic impact on a  substantial number of small entities, we used the results from the trend  review to select all final rules published in the Federal Register from  January 2015 through December 2016 for which an agency published a  notice of proposed rulemaking and certified in the final rule that the rule  would not have such an economic impact. We identified a total of 66 final  rules that included certifications. More specifically, CFPB had 11 rules  that included certifications, CFTC had 15, FDIC had 18, the Federal  Reserve had 1, OCC had 9, and SEC had 12. For these rules, we  collected and reviewed internal workpapers from the financial regulators  on their decisions to certify that regulatory flexibility analyses were not  required because the rule would not have a significant economic impact  on a substantial number of small entities (certifications).", "We then assessed the regulators\u2019 certifications in Federal Register  publications to determine the extent to which they reflected RFA  requirements, guidance from the Small Business Administration\u2019s Office  of Advocacy on complying with RFA, and other best practices for  rulemaking, specifically Office of Management and Budget (OMB)  guidance on regulatory analysis and Executive Order 13563. Our  analysis did not include an evaluation of other aspects of agency  rulemaking, including regulatory analyses for purposes other than RFA,  such as analyses for the Paperwork Reduction Act and other economic  analyses in the preamble. We based our evaluation on the RFA sections  of each Federal Register notice for proposed and final rules and did not  review other rule sections unless the RFA section explicitly referenced  them. We also reviewed the workpapers and notices of joint rules for  coordination on the certification analysis or decisions between regulators.", "To examine the financial regulators\u2019 initial and final regulatory flexibility  analyses and the analyses\u2019 effects on their rulemakings, we used the  results from the trend review to select all final rules published in the  Federal Register from January 2015 through December 2016 for which  the agency performed an initial regulatory flexibility analysis in the  proposed rule and a final regulatory flexibility analysis in the final rule. For  any regulator that had fewer than three rules meeting these criteria, we  selected all rules published in the prior year for which the agency  performed an initial and final regulatory flexibility analysis until we  reached three rules or a publication date of January 2013. For rules  issued jointly by multiple financial regulators in our scope, we included the  rule for each regulator that prepared an initial and final regulatory  flexibility analysis. We included such rules even if they would not  otherwise have been selected using the outlined criteria. This resulted in  the inclusion of one additional rule for the Federal Reserve (a 2013 rule  issued jointly with OCC). We selected a total of 39 final rules for which the  agency performed an initial and final regulatory flexibility analysis. More  specifically, we selected 7 CFPB rules, 1 CFTC rule, 4 FDIC rules, 17  Federal Reserve rules, 1 OCC rule, and 9 SEC rules. For these rules, we  obtained and reviewed internal workpapers from the financial regulators  related to the initial and final regulatory analyses.", "We assessed the regulators\u2019 regulatory flexibility analyses contained in  the RFA summary in the notices of proposed and final rules published in  the Federal Register to determine the extent to which they reflected RFA  requirements, the Office of Advocacy\u2019s guidance on complying with RFA,  and OMB guidance on regulatory analysis. Our analysis did not include  an evaluation of other aspects of agency rulemaking, including regulatory  analyses for purposes other than RFA. We based our evaluation on the  RFA sections of each rule and did not review other rule sections unless  the RFA section explicitly referenced them. We also analyzed the  workpapers, notices, and interviews to identify the extent to which  regulators revised draft and proposed rules as a result of regulatory  flexibility analyses, the source of the changes, and the types and  characteristics of changes that regulators made to draft and proposed  rules as a result of regulatory flexibility analyses. We also reviewed the  workpapers and notices of joint rules for coordination on the analyses.", "To examine financial regulators\u2019 policies, procedures, and criteria for  complying with RFA requirements, we obtained and reviewed internal  agency policies, procedures, and guidance for conducting initial and final  regulatory flexibility analyses or certifying that such analyses were not  required. We then assessed the documents received to determine the  extent to which they reflected RFA requirements and Office of Advocacy\u2019s  guidance on complying with RFA. We also assessed the extent to which  the documents included comprehensive policies and procedures to assist  staff in complying with RFA in accordance with best practices outlined in  Executive Order 13272 and federal internal control standards.", "To examine the extent to which financial regulators performed  retrospective reviews required by RFA, we searched the Federal Register  for notices of upcoming section 610 reviews as well as results of section  610 reviews. We also obtained and reviewed documentation from the  financial regulators of section 610 reviews performed from calendar year  2006 through 2016. We assessed the section 610 reviews we received  against RFA requirements and other best practices for rulemaking,  specifically OMB guidance on regulatory analysis and Executive Orders  13563 and 13610. For agencies that conducted other retrospective  reviews in lieu of section 610 reviews, we compared the other  retrospective review processes to RFA requirements for section 610  reviews to determine the extent to which they aligned. We also  interviewed staff from each of the financial regulators to understand the  process and analysis supporting their certification decisions, regulatory  flexibility analyses, and retrospective reviews.", "We conducted this performance audit from January 2017 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Extent of Coordination in Financial Regulators\u2019 Certifications and Regulatory Flexibility Analyses", "paragraphs": ["In the seven joint rules we reviewed with a certification, financial  regulators conducted their own certification analyses independently of the  other agencies responsible for the rule. The Regulatory Flexibility Act  (RFA) allows agencies to coordinate on their RFA analyses but does not  require it. The Small Business Administration\u2019s Office of Advocacy does  not make any recommendation on coordination in its RFA guide. Because  agencies regulate different small entities that could be affected differently  by a rule, coordination would not necessarily result in efficiencies or other  benefits.", "In joint rules, the regulators (except for the Board of Governors of the  Federal Reserve System (Federal Reserve), which generally treated  regulatory flexibility analyses differently) reached the same conclusion to  certify, although their analyses sometimes differed. For example, in one  joint rule, the Office of the Comptroller of the Currency (OCC) and the  Federal Deposit Insurance Corporation (FDIC) concluded that the rule  mainly imposes requirements on states and therefore affected no small  entities. The Consumer Financial Protection Bureau agreed that the rule  pertained mainly to states, but performed an analysis to assess the  indirect impact on small entities, concluding that even indirectly the rule  would not have a significant economic impact on a substantial number of  small entities. The Federal Reserve found that some entities would be  federally regulated but that the number was uncertain but not substantial  (less than five). In another joint rule, FDIC concluded that the rule would  not have a significant economic impact on a substantial number of small  entities because banks with less than $1 billion in assets were  exempted. The Small Business Administration defines a small bank as one with assets of $550 million or less; therefore, no small entities would  be affected. However, OCC assumed that every bank subject to the rule  would be required to comply regardless of the exemption and performed  its analysis with that assumption. Under this premise, OCC found that a  substantial number of small entities would be affected by the rule but that  the economic impact would not be significant.", "Of the seven joint rules that we reviewed with initial and final regulatory  flexibility analyses, the analyses for two rules indicated that regulators  collaborated in preparing the analysis. For one rule, the Federal  Reserve, FDIC, and OCC published a joint initial analysis but FDIC and  OCC made a certification determination in the final rule. For the other  rule, the Federal Reserve and OCC prepared separate initial analyses but  published a joint final analysis that included separate sections evaluating  the potential economic impact of the final rule. The remaining five joint  rules included separate regulatory flexibility analyses for each regulator  and all but the Federal Reserve reached a certification determination.  None of the rules we reviewed with initial and final flexibility analyses that  were issued by individual regulators indicated that the regulator had  coordinated with other agencies."], "subsections": []}, {"section_title": "Appendix III: Commodity Futures Trading Commission Entities That Are Not Small Entities for Regulatory Flexibility Act Purposes", "paragraphs": ["The following table details the entities regulated by the Commodity  Futures Trading Commission (CFTC) that the agency determined were  not small entities for the purposes of the Regulatory Flexibility Act (RFA).  RFA allows agencies to establish alternative definitions of small entities  when appropriate by publishing the definition in the Federal Register and,  in the case of small businesses, in consultation with the Small Business  Administration\u2019s Office of Advocacy. We reviewed CFTC\u2019s small-entity  definitions to assess the extent to which they met these requirements. We  reviewed the Federal Register notices for the definition of those entities  included in final rules in calendar years 2015 and 2016 where the agency  certified that the rule would not have a significant economic impact on a  substantial number of small entities."], "subsections": []}, {"section_title": "Appendix IV: Securities and Exchange Commission\u2019s Small Entity Definitions for Regulatory Flexibility Act Purposes", "paragraphs": ["The following table compares the Securities and Exchange Commission\u2019s  definitions of small entities for the purposes of the Regulatory Flexibility  Act (RFA) with the Small Business Administration\u2019s size standards that  RFA uses to define small entities."], "subsections": []}, {"section_title": "Appendix V: Assessment of Board of Governors of the Federal Reserve System\u2019s Regulatory Flexibility Analyses, 2015\u20132016", "paragraphs": ["The Board of Governors of the Federal Reserve System (Federal  Reserve) generally performed regulatory flexibility analyses for its  rulemakings regardless of the rule\u2019s potential impact on small entities. As  shown in table 11, nearly all of the Federal Reserve\u2019s initial and final  regulatory flexibility analyses concluded that the rule would not have a  significant economic impact on a substantial number of small entities,  which generally is a basis for certification. Furthermore, the majority of the  Federal Reserve\u2019s analyses stated that the rules either did not apply to  small entities or lacked compliance requirements.", "Table 12 summarizes our findings on the Federal Reserve\u2019s initial and  final regulatory flexibility analyses for the 17 rules we reviewed.", "Table 13 summarizes our findings for the six rules we reviewed for which  the Federal Reserve\u2019s regulatory flexibility analysis indicated the rule  might impose compliance requirements on small entities."], "subsections": []}, {"section_title": "Appendix VI: Assessment of Other Financial Regulators\u2019 Regulatory Flexibility Analyses, 2013\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Assessment of Federal Deposit Insurance Corporation\u2019s Regulatory Flexibility Analyses, 2014\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Assessment of Consumer Financial Protection Bureau\u2019s Regulatory Flexibility Analyses, 2013\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Assessment of Commodity Futures Trading Commission\u2019s Regulatory Flexibility Analyses, 2013\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Assessment of Office of the Comptroller of the Currency\u2019s Regulatory Flexibility Analyses, 2013\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Assessment of Securities and Exchange Commission\u2019s Regulatory Flexibility Analyses, 2015\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: Outcomes of Financial Regulators\u2019 Regulatory Flexibility Analyses on Final Rules, 2013\u20132016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIII: Comments from the Consumer Financial Protection Bureau", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XIV: Comments from the Commodity Futures Trading Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XV: Comments from the Board of Governors of the Federal Reserve System", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVI: Comments from the Federal Deposit Insurance Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVII: Comments from the Securities and Exchange Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Lawrance L. Evans, Jr., (202) 512-8678, EvansL@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Stefanie Jonkman (Assistant  Director), Kevin Averyt (Analyst in Charge), Bethany Benitez, Katherine  Carter, Andrew Emmons, Marc Molino, Lauren Mosteller, and Barbara  Roesmann made key contributions to this report. Other assistance was  provided by Farrah Graham, Courtney LaFountain, and Tim Bober."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-499", "url": "https://www.gao.gov/products/GAO-18-499", "title": "Foreign Assistance: Better Guidance for Strategy Development Could Help Agencies Align Their Efforts", "published_date": "2018-07-12T00:00:00", "released_date": "2018-07-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["More than 20 federal agencies spend billions of dollars on U.S. foreign assistance each year. Six agencies\u2014the Departments of Agriculture, Defense, Health and Human Services, and State; the Millennium Challenge Corporation; and the U.S. Agency for International Development\u2014implement most of this assistance, using multiple strategies. State is responsible for coordinating their efforts. Questions have been raised about potential inefficiencies in implementing multiple foreign assistance strategies.", "GAO was asked to review the alignment of U.S. foreign assistance strategies. This report examines the extent to which strategies include key elements GAO identified, related to interagency coordination, strategic integration, and assessment of progress, that help ensure alignment. These elements are based on GAO's prior work on strategic planning and interagency collaboration. GAO reviewed 52 strategies related to health, security, and democracy assistance that were current in 2017. These included government-wide, agency, multi-agency, and regional strategies as well as strategies for two countries. GAO also reviewed agency guidance and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Many foreign assistance strategies related to health, security, and democracy assistance that GAO reviewed at least partially addressed key elements GAO identified that help ensure the strategies are aligned. Prior work has found that consistently addressing these elements, related to interagency coordination, strategic integration, and assessment of progress, is important for, among other things, better managing fragmentation in strategic planning. However, some strategies did not address these elements (see figure). For example:", "Interagency coordination . Twenty-three percent of the strategies (12 of 52) did not address agencies' roles and responsibilities, and 38 percent (20 of 52) did not identify specific interagency coordination mechanisms.", "Strategic integration . Twenty-one percent of the strategies (11 of 52) did not address linkages with other related strategies, and 25 percent (13 of 52) did not address linkages with higher- or lower-level strategies.", "Assessment of progress toward strategic goals . Twenty-one percent of the strategies (11 of 52) did not include milestones and performance indicators, and 21 percent (11 of 52) did not outline plans for monitoring and evaluation.", "The six agencies implementing most U.S. foreign assistance do not have consistent guidance for strategy development that could help ensure their strategies address these key elements. Some agencies' guidance addresses many of the elements but does not apply to all of their foreign assistance strategies, while other agencies have no such guidance. The Department of State (State) plays a significant role in interagency coordination. By collaborating with other agencies to establish guidance that addresses the key elements GAO identified, State could help the agencies improve their ability to align future strategies and identify and manage fragmentation in foreign assistance planning."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State lead an effort to establish, in collaboration with the five other agencies, guidance for developing foreign assistance strategies that addresses the key elements GAO identified related to interagency coordination, strategic integration, and assessment of progress. State concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["More than 20 federal agencies and departments spend billions of dollars  each year on various types of U.S. foreign assistance\u2014health, security,  and democracy assistance as well as education, energy, environmental  protection, food aid, refugee assistance, water and sanitation assistance,  and countering illicit activities. These agencies implement foreign  assistance with, in some cases, separate strategies\u2014including  government-wide and country-level strategies\u2014guiding their efforts.  Questions have been raised about potential inefficiencies stemming from  the multiplicity of strategies related to foreign assistance as well as about  the ability of agencies to demonstrate progress in achieving strategic  goals.", "You asked us to assess alignment among U.S. foreign assistance  strategies. This report examines the extent to which foreign assistance  strategies address key elements we identified that help promote  alignment of agencies\u2019 efforts\u2014specifically, elements related to  interagency coordination, strategic integration, and assessment of  progress toward strategic goals and objectives. We focused on strategies  identified by the six largest providers of U.S. foreign assistance: the  Department of State (State); the U.S. Agency for International  Development (USAID); the Millennium Challenge Corporation (MCC); and  the Departments of Defense (DOD), Health and Human Services (HHS),  and Agriculture (USDA).", "In a June 2017 report, we listed 63 foreign assistance strategy documents  that these six agencies had identified; the agencies subsequently  identified 9 additional strategies. For our current report, we conducted a  detailed review of 52 of the 72 strategies identified. The 52 strategies we  reviewed had been issued by December 2017 and were current in 2017.  In addition, the strategies incorporated goals and activities related to the  health, security, or democracy assistance sectors, which accounted for  the majority of foreign assistance obligations in fiscal year 2016, the most  recent year for which data were available. The strategies we reviewed  include government-wide, agency-specific, multi-agency, regional,  sectoral, and multisectoral strategies as well as country-level strategies  for Afghanistan and Kenya, which are among the largest recipients of  U.S. foreign aid. We limited our review to strategy documents that  agencies provided. We did not review agencies\u2019 efforts to implement the  strategies and did not assess the overall effectiveness of such efforts.  Instead, we focused on the extent to which the strategies we reviewed  provided a clear picture of the organization and management of U.S.  foreign assistance efforts.", "We reviewed the strategies to determine the extent to which each  addressed nine key elements we had identified as important for helping to  ensure that agencies\u2019 foreign assistance is well aligned in terms of  implementation approach and desired results. These elements related to  (1) delineation of agencies\u2019 roles and responsibilities and coordination  mechanisms; (2) integration with other related strategies; and (3)  assessment of progress toward strategic goals, including identifying  activities to achieve results, performance indicators, and monitoring and  evaluation plans. We developed these elements on the basis of prior work  related to U.S. government strategies and interagency collaboration as  well as prior work on addressing fragmentation, overlap, and duplication  in the federal government. Our prior work suggests that strategic  documents offer an opportunity to consider the relationship among goals  outlined in the strategies, the roles and responsibilities of various  stakeholders involved in achieving those goals, and information on how  progress toward those goals will be measured. Each strategy was  reviewed and rated by two analysts, including a subject-matter expert in  the strategic area that the strategy addressed. Given the variety of  strategies we reviewed and reviewers\u2019 varying expectations for the detail  and emphasis accorded to the key elements we identified, we rated the  strategies using a three-part scale focused on their presence in each  strategy. We rated a strategy as generally addressing an element if the  strategy provided sufficient detail to understand the element within that  strategy, as partially addressing the element if the strategy mentioned the  element but did not provide sufficient detail, and as not addressing the  element if the strategy did not mention it. We also reviewed agency  guidance for developing foreign assistance strategies. See appendix I for  further details of our scope and methodology, and see appendix II for a  list of the 52 strategies we reviewed.", "We conducted this performance audit from May 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["U.S. agencies implementing foreign assistance have individually and  jointly developed strategies to guide their efforts. While State\u2019s, USAID\u2019s,  and MCC\u2019s strategies focus exclusively on foreign affairs or foreign  assistance, DOD\u2019s, HHS\u2019s, and USDA\u2019s strategies\u2014as well as those of  other agencies\u2014address foreign assistance as part of larger portfolios of  programs.", "State and USAID, which provide the majority of all foreign assistance,  develop joint foreign assistance-related strategies. The State-USAID  Joint Strategic Plan outlines top-level goals for State and USAID  efforts, including the use of foreign assistance, to inform strategies  developed by State and USAID bureaus, offices, and country teams.  Six joint State-USAID regional strategies (e.g., the State Bureau of  African Affairs\u2013USAID Bureau for Africa Joint Regional Strategy)  identify regional bureau priorities that are intended to align with the  State-USAID Joint Strategic Plan and guide country-level planning for  joint integrated country strategies.", "State, the lead U.S. foreign affairs agency, also develops strategies  for its functional bureaus, which implement foreign assistance  programs, and has participated in the development of a number of  multisectoral and global strategies. State\u2019s Office of U.S. Foreign  Assistance Resources is responsible for coordinating foreign  assistance programs, including providing strategic direction for both  State and USAID. According to State documents, the Office of U.S.  Foreign Assistance Resources strengthens the integration of foreign  assistance with U.S. foreign policy priorities by guiding the  development of coordinated strategic plans for each U.S. overseas  mission at the country level (i.e., integrated country strategies), aiming  for a holistic, whole-of-government approach. It provides tools and  resources to assist bureaus, offices, and country teams in designing  foreign assistance programs, projects, and processes that can help  align with, and advance, broader strategic goals as well as monitoring  and evaluation of progress and results.", "USAID, the lead U.S. foreign assistance agency, develops global,  regional, and country strategies in the areas of health, democracy and  human rights, water and sanitation, food security, education, poverty,  and the environment, among others.", "MCC has developed one overall strategy document, related to its  mission of reducing poverty through country-led economic growth.  MCC also collaborates with stakeholders in and outside government  to develop and implement foreign assistance programs.", "DOD performs security cooperation strategic planning,  implementation, and oversight to achieve national defense strategy  objectives. DOD also develops country-specific strategies for security  cooperation and other assistance, including humanitarian assistance  and efforts to build foreign partner security capacity.", "HHS has developed, or is a party to, a number of strategies related to  global health, including strategies for specific diseases, such as  HIV/AIDS, malaria, and Ebola, and for immunization and emergency  preparedness. The Centers for Disease Control and Prevention  (CDC), a component of HHS, develops its own strategies, which  discuss CDC\u2019s plans to combat infectious diseases worldwide.", "USDA has contributed to jointly issued strategies in food security  related to two food aid programs that it administers\u2014the Food for  Progress program and the McGovern-Dole International Food for  Education and Child Nutrition program.", "In addition, these agencies implement foreign assistance programs under  the auspices of government-wide foreign assistance strategies developed  by the National Security Council, the Executive Office of the President,  and the Office of Management and Budget. These government-wide  strategies include, for example, the National Security Strategy and the  National Action Plan for Women, Peace, and Security.", "The geographic focus of these six agencies\u2019 foreign assistance strategies  ranges from country level to regional to global. For example, State,  USAID, and DOD have developed integrated country strategies, country  development cooperation strategies, and country cooperation plans,  respectively, applicable to the countries where they implement foreign  assistance. Similarly, State and USAID have six joint regional strategies  and DOD has strategies focusing on its various geographic areas of  command. In addition, various agencies, working both jointly and  independently, have developed a wide variety of sectoral, multisectoral,  agency-specific, and multi-agency strategies to guide global assistance  efforts.", "Foreign assistance strategies are continuously developed and updated.  Some strategies emerge after the launch of a specific initiative, such as  the President\u2019s Emergency Plan for AIDS Relief (PEPFAR), while others  are updated as part of agencies\u2019 strategic management processes. For  example, State\u2019s functional bureau strategies and its joint regional  strategies with USAID are periodically updated as bureau-level  components of State\u2019s planning, budgeting, and performance  management cycle. Planning at the agency level is reflected in the State- USAID Joint Strategic Plan, updated most recently in February 2018, with  which bureau- and country-level strategies are expected to align. As we  have previously reported, strategies that consider relationships among  goals and objectives, interagency collaboration, and performance  assessment can improve federal management. In particular, these  considerations can help identify, eliminate, or better manage  fragmentation, overlap, and duplication in the federal government."], "subsections": []}, {"section_title": "Many Selected Foreign Assistance Strategies Addressed Key Elements We Identified That Help Promote Alignment, but Some Did Not", "paragraphs": ["While many of the 52 foreign assistance strategies that we reviewed at  least partially addressed the key elements we identified related to  alignment of foreign assistance strategies, some did not address these  elements. Regarding interagency coordination, 40 percent of the  strategies generally identified roles and responsibilities for implementing  the strategies, while 33 percent generally identified interagency  coordination mechanisms; 23 percent and 38 percent, respectively, did  not address these elements. Regarding strategic integration, 58 percent  of the strategies we reviewed described linkages with U.S. foreign  assistance strategies in the same sector and 54 percent generally  described linkages with relevant higher- or lower-level U.S. foreign  assistance strategies; 21 percent and 25 percent, respectively, did not  identify such linkages. Regarding assessment of progress toward  strategic goals, almost all of the strategies generally established desired  results and a framework of goals and objectives and described activities  to achieve results; however, 21 percent did not identify milestones or  performance indicators and 21 percent did not outline plans for monitoring  and evaluation. We also found that the six agencies implementing most  U.S. foreign assistance do not have consistent guidance for strategy  development that could help ensure their strategies address the key  elements we identified."], "subsections": [{"section_title": "We Identified Nine Key Elements That Help Ensure Strategies Are Aligned and Planning Is Not Fragmented", "paragraphs": ["On the basis of our prior reporting about U.S. government strategic  planning and interagency collaboration, we identified nine key elements  that are important for helping to ensure that agencies\u2019 foreign assistance  strategies are well aligned in terms of implementation approach and  desired results and that planning among multiple agencies is not  fragmented. The nine elements we identified are associated with (1)  interagency coordination, (2) strategic integration, and (3) assessment of  progress toward strategic goals (see table 1). As we have previously  reported, fragmentation in the U.S. government refers to circumstances in  which multiple federal agencies are involved in serving the same broad  area of national need and opportunities exist to improve service delivery."], "subsections": []}, {"section_title": "Many Strategies We Reviewed Addressed Elements Related to Interagency Coordination, Strategic Integration, and Assessment of Progress, but Some Did Not", "paragraphs": [], "subsections": [{"section_title": "Interagency Coordination", "paragraphs": ["Implementing foreign aid involves the collaborative efforts of multiple U.S.  agencies, each of which brings specific contributions and statutory  authorities and has its own organizational structure, culture, and priorities.  Our prior work has shown that foreign assistance strategies that  consistently address (1) agencies\u2019 roles and responsibilities and (2)  interagency coordination mechanisms can help guide the implementation  of various aspects of a strategy and the identification of agreed-on  processes for effective collaboration to resolve conflicts and better  manage fragmentation. Strategies that do not consistently address  elements related to interagency coordination miss opportunities to ensure  that agencies\u2019 roles and responsibilities are clear and distinct and that  coordination mechanisms are well defined. As figure 1 shows, of the 52  strategies we reviewed, 40 percent generally identified agencies\u2019 roles  and responsibilities and 23 percent did not address this element. In  addition, while 33 percent generally identified interagency coordination  mechanisms, 38 percent did not identify any such mechanisms.", "Agencies\u2019 roles and responsibilities. Forty percent (21 of 52) of the  strategies we reviewed generally defined agencies\u2019 roles and  responsibilities. For example, USAID\u2019s Strategy on Democracy, Human  Rights and Governance identified all agencies involved in its  implementation and laid out the roles and responsibilities of each agency  as well as USAID offices. Thirty-seven percent (19 of 52) of the strategies  partially defined agencies\u2019 roles and responsibilities, which suggests the  potential for improvement in this area. For example, State-USAID joint  regional strategies identified the partners and stakeholders and  enumerated the activities that State and USAID or the embassy and  missions would undertake. However, most of those strategies did not  specify the individual agencies\u2019 roles and responsibilities. Twenty-three  percent (12 of 52) of the strategies contained no information about  agencies\u2019 lead, support, and partner roles.", "Interagency coordination mechanisms. Thirty-three percent (17 of 52)  of the strategies we reviewed generally identified interagency  coordination mechanisms. For example, USAID\u2019s Multi-Sector Nutrition  Strategy identified joint planning, funding, and programming mechanisms  for coordination among development and humanitarian assistance  agencies at country and regional levels in USAID and the U.S.  government as a whole. Twenty-nine percent (15 of 52) of the strategies  partially identified coordination mechanisms. For example, CDC\u2019s Global  Health Strategy and USAID\u2019s Global Health Strategic Framework both  described the agencies\u2019 respective unique roles in global health but did  not specifically discuss how the agencies would work together to achieve  their goals. Thirty-eight percent (20 of 52) of the strategies did not discuss  interagency coordination mechanisms."], "subsections": []}, {"section_title": "Integration with Other Related Strategies", "paragraphs": ["As our prior work has shown, agencies that establish strategies that align  with partner agencies\u2019 activities, processes, and resources are better  positioned to accomplish common goals, objectives, and outcomes. Our  prior work has also determined that collaboration among federal agencies  working toward similar results can help ensure consistent goals and  mutually reinforcing program efforts that effectively manage  fragmentation. These agencies can use higher-level strategic plans as a  tool to drive interagency collaboration to ensure complementarities in  goals and objectives. To improve alignment of related strategies, each  strategy should address (1) integration with relevant sectoral strategies  and (2) integration with relevant higher- or lower-level strategies.  Strategies that do not consistently address elements related to strategic  integration do not clearly show whether objectives and activities align with  existing strategic priorities at the government-wide, sectoral, regional, and  country levels. As figure 2 shows, 58 percent of the strategies we  reviewed generally described linkages with at least one relevant sectoral  strategy, while 21 percent did not mention such linkages at all. In addition,  54 percent of the strategies generally described linkages with at least one  higher- or lower-level foreign assistance strategy, while 25 percent did not  describe any such linkages.", "Integration with relevant sectoral strategies. Fifty-eight percent (30 of  52) of the strategies we reviewed generally identified or described  linkages with other, related U.S. government strategies. For example,  State\u2019s Strategy for Women\u2019s Economic Empowerment discussed how its  activities are designed to complement and reinforce those of the U.S.  National Action Plan on Women, Peace and Security, the U.S. Strategy to  Prevent and Respond to Gender-Based Violence Globally, and the U.S.  Global Strategy to Empower Adolescent Girls. About 21 percent (11 of  52) of the strategies we reviewed partially addressed this element. For  example, the strategy PEPFAR 3.0\u2014Controlling the Epidemic: Delivering  on the Promise of an AIDS-Free Generation explicitly referred to the  PEPFAR Blueprint for Creating an AIDS-Free Generation and stated that  targeting interventions for populations at greatest risk for HIV incidence is  an important activity. However, the strategy did not discuss how its goals  and objectives relate to the strategies of the various agencies  implementing PEPFAR and did not refer to the other strategies pertaining  to PEPFAR. The remaining 21 percent (11 of 52) of strategies did not  mention any other relevant U.S. government strategies. (See app. II for  additional analysis of strategies by sector.)", "Integration with relevant higher- or lower-level strategies. Fifty-four  percent (28 of 52) of the strategies we reviewed generally described their  relationship to relevant strategies at higher or lower levels of government.  For example, the U.S. Global Strategy to Empower Adolescent Girls  discussed its relationship to a policy framework that, according to the  strategy, is embodied in three higher-level strategies establishing gender  equality as an important element of U.S. foreign policy\u2014the National  Security Strategy, the U.S. Global Development Policy, and the  Quadrennial Diplomacy and Development Review. About 21 percent (11  of 52) of the strategies we reviewed partially addressed this element\u2014 that is, they discussed their relationship with higher- or lower-level  strategies in a limited way. For example, the U.S. Government Approach  on Business and Human Rights discussed priorities outlined in the  National Security Strategy, aligning activities of business with those  priorities, and noted efforts by State\u2019s Bureau of Democracy, Human  Rights, and Labor to discuss human rights with businesses. However, the  U.S. Government Approach on Business and Human Rights did not  reference common goals or activities outlined in other relevant higher- level strategies, such as the U.S. Global Development Policy or the  Quadrennial Diplomacy and Development Review. The remaining 25  percent (13 of 52) of strategies did not address their relationship with  strategies at other levels of government."], "subsections": []}, {"section_title": "Assessment of Progress toward Strategic Goals", "paragraphs": ["Our prior work has shown that effective strategies clearly identify goals  and objectives and a means for assessing progress in achieving them  and that alignment of strategies and other plans can improve the  management of fragmentation. Therefore, our prior work has called for  agencies to develop strategies that identify and describe (1) desired  results, (2) activities to achieve results, (3) a hierarchy of goals and  subordinate objectives, (4) milestones and indicators, and (5) plans for  monitoring and evaluation. Strategies that do not consistently address  elements related to assessing progress may limit agencies\u2019 ability to  specify and assess common goals and objectives and mutually  reinforcing results. As figure 3 shows, most of the strategies we reviewed  generally identified desired results, activities to achieve those results, and  a hierarchy of goals and subordinate objectives. However, fewer  strategies addressed how progress toward those goals and objectives  would be assessed. In particular, 63 percent generally identified  milestones and performance indicators, while 21 percent did not address  this element. In addition, 42 percent of the strategies generally outlined  plans for monitoring and evaluation, while 21 percent did not outline such  plans.", "Desired results, activities to achieve results, and hierarchy of goals  and objectives. Ninety-two percent (48 of 52) of the strategies we  reviewed generally included a statement of desired results, and 90  percent (47 of 52) generally included a description of activities to achieve  these results. For example, MCC\u2019s Next: A Strategy for MCC\u2019s Future  stated the agency\u2019s overall mission of reducing poverty through economic  growth and listed priority actions for each goal, such as exploring new  data sources for accurately identifying countries with high poverty rates.  In addition, about 83 percent (43 of 52) of the strategies generally  included a hierarchy of strategic goals and subordinate objectives. For  example, CDC\u2019s Global Health Strategy included a clear hierarchy of  goals and subordinate objectives (see table 2). Six percent (3 of 52) of  the strategies did not identify desired results, 2 percent (1 of 52) did not  describe activities to achieve these results, and 10 percent (5 of 52) did  not include a hierarchy of goals and objectives.", "Milestones and performance indicators. Sixty-three percent (33 of 52)  of the strategies we reviewed generally included milestones or  performance indicators. These strategies often incorporated milestones or  indicators as discrete components of each goal or subordinate  objective. For example, DOD\u2019s Kenya Country Cooperation Plan  tracked discrete tasks with specific time frames, using color-coding to  designate stages of implementation. Fifteen percent (8 of 52) of the  strategies partially addressed milestones or indicators. For example, the  2016 updated joint State-USAID Strategy to Prevent and Respond to  Gender-Based Violence Globally included an annex listing indicators but  did not link them to the strategic objectives and planned actions. Twenty- one percent (11 of 52) of the strategies did not include any milestones or  performance indicators.", "Monitoring and evaluation plans. Forty-two percent (22 of 52) of the  strategies we reviewed generally outlined monitoring and evaluation  plans. These strategies typically outlined such plans in a specific goal or  in a designated section or appendix. For example, USAID\u2019s Kenya  Country Development Strategy included a section on monitoring and  evaluation planning. In this strategy, USAID committed to host donor  coordination and other stakeholder forums to monitor progress and to  establish a monitoring and evaluation \u201ccore team\u201d to ensure that learning  is incorporated in decision making. Thirty-seven percent (19 of 52) of the  strategies partially addressed monitoring and evaluation planning. Some  of these strategies emphasized the importance of monitoring and  evaluation or made broad statements without outlining more specific  plans. For example, the State-USAID Joint Strategy on Countering  Violent Extremism noted that State and USAID will develop a results  framework for measuring progress that will be accompanied by clear,  well-developed, and well-resourced monitoring and evaluation plans. The  strategy also noted that State and USAID will, to the extent possible,  develop a common set of indicators to measure outputs and outcomes.  However, the strategy provided no additional details. Twenty-one percent  (11 of 52) of the strategies did not outline any monitoring and evaluation  plans."], "subsections": []}]}, {"section_title": "Agencies Do Not Have Consistent Guidance for Foreign Assistance Strategy Development That Addresses the Key Elements We Identified", "paragraphs": ["The six agencies implementing most of U.S. foreign assistance do not  have consistent guidance for strategy development that could help ensure  their strategies address the key elements we identified. For example,  State and USAID guidance for strategy development includes many of  these elements but does not cover all strategies that these agencies are  involved in developing. Additionally, guidance for State\u2019s and USAID\u2019s  joint regional strategies, State\u2019s functional bureau strategies, and  USAID\u2019s country development cooperation strategies does not apply to  other State and USAID strategies, such as the joint State-USAID  integrated country strategies. DOD has also established guidance for  developing security assistance programs that addresses the key  elements we identified. However, DOD\u2019s guidance does not explicitly  apply to the development of foreign assistance strategies. HHS, MCC,  and USDA have not established any guidance on foreign assistance  strategy development. Inconsistent guidance for developing foreign  assistance strategies has contributed to variations in the strategies\u2019  addressing the key elements we identified related to interagency  coordination, strategic integration, and assessing progress toward  strategic goals.", "Existing government-wide guidance requires agencies to address some  of the key elements of assessment of progress toward strategic goals that  we identified as being important for ensuring alignment of agencies\u2019  foreign assistance strategies. In January 2018, the Office of Management  and Budget issued new guidance for agencies that administer foreign  assistance that includes some of the elements we used to assess the  strategies we reviewed. For example, the guidance recommends that  agencies ensure their programs have clear goals and objectives, align  their programs with higher-level strategies or objectives, and plan for  monitoring and evaluation while developing policies and strategies. In  addition, the Government Performance and Results Act, as amended,  requires agencies to submit strategic plans for program activities that  include general goals and objectives for the major functions and  operations of the agency, a description of how the goals are to be  achieved, and a description and schedule of program evaluations. The  act\u2019s provisions were among the sources we used to develop the  desirable characteristics from which we derived the key elements we  identified. However, according to officials of State\u2019s Office of U.S. Foreign  Assistance Resources, there is no government-wide guidance that  incorporates interagency coordination, strategic integration, and  assessment of progress toward strategic goals into the interagency  strategic planning process. In addition, the officials stated that there is no  overarching review mechanism for strategies outside of the core strategic  planning process for joint State-USAID strategies.", "According to State officials, State\u2019s Office of U.S. Foreign Assistance  Resources plays a significant role in promoting interagency coordination  by convening roundtables and working groups. By collaborating with the  five other agencies that implement most of U.S. foreign assistance to  establish guidance for developing foreign assistance strategies, the office  could help the agencies ensure that future strategies address the key  elements we identified. Consistent guidance for strategy development  could help the agencies align their strategies and better identify and  manage fragmentation in foreign assistance planning."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["U.S. foreign assistance often involves multiple agencies or a whole-of- government approach. Alignment of related foreign assistance strategies  can help agencies better identify and manage fragmentation. Moreover,  consistently addressing the key elements we identified related to  interagency coordination, strategic integration, and assessment of  progress toward strategic goals can help ensure that strategies provide a  clear and comprehensive picture of alignment.", "Several of the six largest providers of U.S. foreign assistance in the three  sectors we reviewed have not issued consistent guidance for foreign  assistance strategy development that incorporates these key elements.  For example, some agencies have issued guidance that addresses many  of the key elements we identified related to interagency coordination,  strategic integration, and assessment of progress toward strategic goals,  but this guidance does not apply to all of these agencies\u2019 strategies.", "State\u2019s Office of Foreign Assistance Resources leads interagency  strategic planning for the implementation of foreign assistance. This  office\u2014which has responsibility for, and experience in, promoting  coordination among agencies involved in foreign assistance\u2014is uniquely  placed to collaborate with other agencies implementing foreign assistance  to establish guidance for developing foreign assistance strategies that  addresses the key elements we identified. Such guidance would improve  the agencies\u2019 ability to align future strategies and to identify and manage  fragmentation in foreign assistance planning."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to the Department of State:  The Secretary of State should ensure that the Director of the Office of  U.S. Foreign Assistance Resources leads an effort to establish, in  collaboration with the five other agencies that implement most of U.S.  foreign assistance, guidance for strategy development that addresses the  key elements we identified related to interagency coordination, strategic  integration, and assessment of progress toward strategic goals.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State, USAID, MCC, DOD, HHS, and  USDA for review and comment. We received substantive comments from  State, USAID, and MCC, which are reprinted in appendixes IV through VI,  respectively. In addition, we received technical comments from HHS,  which we incorporated as appropriate. State, USAID, MCC, USDA, and  DOD did not provide technical comments about our draft report.", "In their substantive comments, State and MCC concurred with our  recommendation. USAID\u2019s comments expressed support for our goal of  strengthening interagency coordination, strategic integration, and  assessment of progress across the federal departments and agencies  that implement U.S. foreign assistance. However, USAID suggested that  we issue our recommendation to the National Security Council or address  it jointly to State and USAID. We believe that our recommendation is  appropriately addressed to State, given the responsibility of State\u2019s Office  of U.S. Foreign Assistance Resources for coordinating foreign assistance  programs, including providing strategic direction for both State and  USAID.", "We are sending copies of this report to the appropriate congressional  committees and to the Secretaries of Agriculture, Defense, Health and  Human Services, and State; the Chief Executive Officer of MCC; and the  Administrator of the USAID. In addition, the report will be available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have questions about this report, please contact me at  (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the extent to which foreign assistance strategies  address key elements that we identified related to alignment of agencies\u2019  efforts\u2014specifically, elements related to (1) interagency coordination, (2)  strategic integration, and (3) assessment of progress toward strategic  goals. We focused on the six agencies that administer the largest  amounts of foreign assistance, according to fiscal year 2016 obligations  data: the Departments of Agriculture (USDA), Defense (DOD), Health and  Human Services (HHS), and State (State); the Millennium Challenge  Corporation (MCC); and the U.S. Agency for International Development  (USAID). We limited our review to foreign assistance strategies that were  in effect during 2017. We further focused on strategies relating to health,  security, and democracy assistance, which account for the majority of  total foreign assistance obligations, according to fiscal year 2016 data.  We excluded strategies for other assistance sectors, such as  counternarcotics and other law enforcement activities that require  interagency coordination with domestically focused agencies outside the  scope of our review, such as the Departments of Homeland Security and  Justice.", "To identify the strategies for this review, we asked the six agencies to  update a list of 63 government-wide, agency, multi-agency, regional,  sector-specific, and multisectoral strategies that they had provided for a  related report that we published in June 2017. We also asked the  agencies to provide country-level strategies for Afghanistan and Kenya,  two of the largest recipients of U.S. security and development assistance,  based on fiscal year 2016 obligations data. We obtained and initially  reviewed 72 strategies, which included the 63 strategies we identified for  the June 2017 report; 6 country-level strategies for Afghanistan and  Kenya; and 3 updated strategies covering national security, the  President\u2019s Emergency Plan for AIDS Relief, and water and sanitation.  We determined that 52 of these 72 strategies incorporated goals or  activities related to health, security, or democracy assistance (see fig. 4).  These 52 strategies, which had been issued by December 2017 and were  current in that year, include 44 of those listed in our June 2017 report and  8 of those subsequently identified by the agencies.", "We reviewed the 52 strategies to determine the extent to which they  addressed nine key elements we identified relating to the alignment of  multiple strategies. We identified these nine elements by reviewing prior  reports focused on foreign assistance in the security sector that assessed  the quality of various U.S. government strategies; articulated practices for  enhancing collaboration among federal agencies; or discussed  fragmentation, overlap, and duplication among government programs.  Those reports identified six desirable characteristics for government-wide  strategies and practices for enhancing agency collaboration. For the  purposes of this report, we selected three of these characteristics, related  to interagency coordination, strategic integration, and assessment of  progress toward strategic goals. We excluded three characteristics\u2014 purpose, scope, and methodology; detailed discussion of problems, risks,  and threats; and description of future costs and resources needed\u2014 because we did not consider them to be directly related to alignment of  strategies. The three characteristics we included comprised 15 elements,  9 of which we considered to be directly related to the alignment of health,  security, and democracy assistance sector strategies across multiple  agencies. We excluded 6 elements\u2014for example, potential changes to  structure and details on subordinate strategies and plans for  implementation (e.g., enterprise architecture)\u2014that we did not consider to  be directly related to this topic.", "We reviewed the selected strategies using NVivo, a qualitative data  analysis software package. For each strategy, two reviewers, including at  least one with expertise in the area of foreign assistance addressed by  each strategy, independently identified text related to each of the key  elements we had identified. We used a standardized set of criteria in an  assessment instrument to consistently judge whether each strategy  sufficiently addressed these elements. This instrument contained  evaluative questions intended to gauge the presence of each element\u2014 for example, \u201cTo what extent does the strategy address the agencies  involved and their roles and responsibilities?\u201d. Given the variety of  strategies we reviewed and reviewers\u2019 varying expectations for the detail  and emphasis accorded the key elements we had identified, we rated the  strategies using a three-part scale focused on the presence of these  elements. We rated a strategy as generally addressing an element if the  strategy provided sufficient detail to understand the element in that  strategy; as partially addressing an element if the strategy mentioned it  but lacked sufficient detail; and as not addressing an element if the  strategy did not mention it. The two reviewers for each strategy  independently documented their judgments on the extent to which the  strategy addressed the key elements we had identified. Our initial coding  shows that the reviewers agreed in about 78 percent (363 of 468) of  these initial judgments. The reviewers reconciled their judgments, with  resolution of differences split roughly evenly between accepting the  higher and lower of the initial ratings. A supervisor reviewed each set of  ratings for internal consistency. The supervisor related any identified  issues, as appropriate, to the reviewers, who addressed them before the  supervisor recorded the review as final.", "We examined these strategies and any appendixes included in the  documents that the agencies submitted, because these strategic  documents should broadly describe objectives and efforts\u2014including  interagency coordination, strategic integration, and assessment of  progress toward strategic goals\u2014needed to achieve them. We did not  review agencies\u2019 efforts to implement the strategies and did not assess  the overall effectiveness of such efforts. Instead, we focused on the  extent to which the strategies we reviewed provided a clear picture of the  organization and management of U.S. foreign assistance efforts.", "To measure the extent of strategies\u2019 integration with other relevant  sectoral strategies and with higher- and lower-level strategies, we  performed a word search for references to the other selected strategies in  the same sector and to other strategies or sets of strategies (e.g.,  regional or country-level strategies) that we classified as either higher- or  lower-level strategies. We searched for such references in each of the 14  strategies that we classified as covering the health sector, the 12  strategies that we classified as covering the security sector, and the 8  strategies that we classified as covering the democracy assistance  sector. See appendix III for the results of this analysis.", "We also reviewed agency guidance related to foreign assistance  strategies. We requested current versions of any relevant documentation  from each of the six agencies. State provided us with agency guidance for  developing its functional bureau strategies and joint State-USAID regional  strategies as well as a related template. State also provided guidance  documents related to its monitoring and evaluation policy and  performance management. USAID provided strategic planning and  implementation guidance for its country development and cooperation  strategies. HHS, USDA, and MCC did not provide\u2014and, according to  agency officials, do not have\u2014specific guidance related to what  constitutes a foreign assistance strategy. DOD provided guidance for  developing security assistance programs.", "We conducted this performance audit from May 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Listing of 52 Selected Foreign Assistance Strategies", "paragraphs": ["The following list shows the 52 foreign assistance strategies that we  reviewed.  1.  Quadrennial Diplomacy and Development Review: Enduring  Leadership in a Dynamic World (2015)  2.  U.S. Global Development Policy (Sept. 22, 2010)  3.  State-USAID Joint Strategic Plan FY2014-2017 (Mar. 17, 2014)  4.  State Department, Office of U.S. Foreign Assistance Resources (F),  Functional Bureau Strategy (2016)  5.  Millennium Challenge Corporation, NEXT: A Strategy for MCC\u2019s  Future (Feb. 24, 2016)  6.  USAID Multi-Sectoral Nutrition Strategy 2014-2025 (May 2014)", "Regional strategies (not specific to any single sector)  7.  State Bureau of East Asian and Pacific Affairs/USAID Bureau for Asia  Joint Regional Strategy (approved May 24, 2016)  8.  State Bureau of African Affairs/USAID Bureau for Africa Joint  Regional Strategy (approved Apr. 5, 2016)  9.  State Bureau of Near Eastern Affairs/USAID Bureau for Middle East  Joint Regional Strategy, FY 2016-2018  10. State Bureau of European and Eurasian Affairs/USAID Bureau for  Europe and Eurasia Joint Regional Strategy, FY 2015-2018  (approved April 2015)  11. State Bureau of Western Hemisphere Affairs/USAID Bureau for Latin  America and the Caribbean Joint Regional Strategy, FY 2015-2018  12. State and USAID Joint Regional Strategy for South and Central Asia,  and Afghanistan and Pakistan, FY 2015-2018 (June 2014)  13. PEPFAR: Strategy for Accelerating HIV/AIDS Epidemic Control 2017- 2020 (September 2017)  14. 2016-2020 CDC Strategic Framework for Global Immunization (May  2016)  15. \u201cU.S. Government Strategy for Reducing Transmission of the Ebola  Virus Disease in West Africa\u201d (draft strategy, Sept. 30, 2015)  16. President\u2019s Malaria Initiative Strategy 2015-2020 (April 2015)  17. President\u2019s Emergency Plan for AIDS Relief (PEPFAR) Human  Resources for Health Strategy PEPFAR 3.0 (February 2015)  18. CDC Division of Parasitic Diseases and Malaria Strategic Priorities  19. The Global Strategy of the U.S. Department of Health and Human  Services (2015-2019)  20. State Department, Office of the U.S. Global AIDS Coordinator,  21. PEPFAR 3.0 Controlling the Epidemic: Delivering on the Promise of  an AIDS-Free Generation (December 2014)  22. HHS Strategic Plan, 2014-2018 (updated March 10, 2014)  23. HHS Assistant Secretary for Preparedness and Response Strategic  Plan (February 2014)  24. PEPFAR Blueprint: Creating an AIDS-Free Generation (November  2012)  25. USAID\u2019s Global Health Strategic Framework: Better Health for  26. CDC Global Health Strategy 2012-2015 (June 29, 2012)  27. National Security Strategy of the United States of America (December  2017)  28. State Bureau of Political-Military Affairs, Office of Weapons Removal  and Abatement, Conventional Weapons Destruction Strategic Plan,  2017-2019  29. Department of Defense Guidance for Security Cooperation (Aug. 29,  2016)  30. Department of State & USAID Joint Strategy on Countering Violent  Extremism (May 2016)  31. State Department, Arms Control, Verification and Compliance,   Functional Bureau Strategy (approved December 2015)  32. State Bureau of Political-Military Affairs, Office of Plans & Initiatives,  Peace Operations Capacity Building Division, U.S. Global Peace  Operations Initiative Strategy: Strengthening the Effectiveness of  United Nations and Regional Peace Operations (October 2015)  33. National Security Strategy (February 2015)  34. State Department, Bureau of International Security and  Nonproliferation, Functional Bureau Strategy, FY 2015-2018 (January  2015)  35. State Department, Bureau of Political-Military Affairs, Functional  Bureau Strategy, FY 2015-2018 (January 2015)  36. State Department, Bureau of Counterterrorism, Functional Bureau  Strategy, FY 2015-2017 (January 2015)  37. National Strategy for Counterterrorism (June 2011)  38. Security Sector Reform (February 2009)  39. State Department, The Secretary\u2019s Office of Global Women\u2019s Issues,  Functional Bureau Strategy (approved Mar. 27, 2017)  40. United States Strategy to Prevent and Respond to Gender-based  Violence Globally (June 2016)  41. United States National Action Plan on Women, Peace, and Security  (June 2016)  42. U.S. Department of State Strategy for Women\u2019s Economic  Empowerment (June 2016)  43. United States Global Strategy to Empower Adolescent Girls (March  2016)  44. State Department, Bureau of Democracy, Human Rights, and Labor,  Functional Bureau Strategy, FY 2015-2018 (approved 2014)  45. U.S. Government Approach on Business and Human Rights (2013)  46. USAID Strategy on Democracy, Human Rights and Governance  (June 2013)", "Country strategies (for Afghanistan)  47. Department of Defense, Enhancing Security and Stability in  Afghanistan. Report to Congress in Accordance With Section 1225 of  the Carl Levin and Howard P. \u201cBuck\u201d McKeon National Defense  Authorization Act for Fiscal Year 2015 (P.L. 113-291), as Amended  (June 2017)  48. USAID Afghanistan Plan for Transition 2015-2018 (Jan. 6, 2016)  49. State/USAID Integrated Country Strategy: Afghanistan (February  2015)", "Country strategies (for Kenya)  50. State/USAID Integrated Country Strategy: Kenya (approved Feb. 1,  2017)  51. DOD/USAFRICOM: Kenya Country Cooperation Plan FY 2017-2021  (Nov. 8, 2016)  52. USAID Kenya Country Development Cooperation Strategy 2014-2018  (May 2014)"], "subsections": []}, {"section_title": "Appendix III: Extent to Which Sectoral Strategies Addressed Interagency Coordination, Strategic Integration, and Assessment of Progress toward Strategic Goals", "paragraphs": ["Our analysis of strategies we reviewed in the health, security, and  democracy assistance sectors found inconsistency in the extent to which  the strategies addressed selected, or key, elements that we identified  related to interagency coordination, strategic integration, and assessment  of progress toward strategic goals."], "subsections": [{"section_title": "Interagency Coordination", "paragraphs": ["As figure 5 shows, about 30 percent (4 of 14) of the strategies in the  health sector and about 17 percent (2 of 12) in the security sector  generally identified interagency coordination mechanisms, while about 33  percent (4 of 12) in the security sector addressed agencies\u2019 roles and  responsibilities. In contrast, 75 percent (6 of 8) of the strategies in the  democracy assistance sector generally addressed interagency  coordination mechanisms and 63 percent (5 of 8) addressed agencies\u2019  roles and responsibilities."], "subsections": []}, {"section_title": "Strategic Integration", "paragraphs": ["As figure 6 shows, in the health sector, 50 percent (7 of 14) of the  strategies generally addressed their relationship with at least one other  strategy in the same sector and about 43 percent (6 of 14) generally  addressed their relationship with at least one higher- or lower-level  strategy. In the security sector, about 58 percent (7 of 12) of the  strategies generally addressed their relationship with at least one other  strategy in the same sector and their relationship with at least one higher-  or lower-level strategy. In the democracy assistance sector, about 75  percent (6 of 8) of the strategies we reviewed generally addressed their  relationship with at least one other strategy in the same sector, while  about 63 percent (5 of 8) generally addressed their relationship with at  least one higher- or lower-level strategy.", "Figures 7, 8, and 9 show the strategies in the health, security, and  democracy assistance sectors, respectively, that refer to higher- and  lower-level strategies as well as to other strategies in the same sector."], "subsections": []}, {"section_title": "Assessment of Progress toward Strategic Goals", "paragraphs": ["As figure 10 shows, most strategies in the health, security, and  democracy assistance sectors generally identified desired results, a  hierarchy of goals and subordinate objectives, and activities to achieve  results. However, strategies in all three sectors were less consistent in  identifying milestones and performance indicators. Specifically, 57  percent (8 of 14) of health sector strategies, 50 percent (6 of 12) of  security sector strategies, and 50 percent (4 of 8) of democracy  assistance strategies generally addressed this element. In addition, while  71 percent (10 of 14) of strategies in the health sector outlined plans for  monitoring and evaluation, 17 percent (2 of 12) of security sector  strategies and 50 percent (4 of 8) of democracy assistance sector  strategies generally addressed this element."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Millennium Challenge Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, James Michels (Assistant  Director), Gergana Danailova-Trainor (Analyst-in-Charge), Timothy  Young, Kay Halpern, Steven Putansu, Mona Sehgal, Drew Lindsey,  Judith Williams, Leslie Holen, Ming Chen, Aniruddha Dasgupta, Mark  Dowling, Giff Howland, Neil Doherty, and Reid Lowe made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Over 20 U.S. agencies provide foreign assistance for activities ranging from promoting democracy and better health to building the capacity of local security forces.", "We looked at 52 strategies used by the 6 agencies that provide most foreign assistance and found they had well-defined goals. However, they did not always address how agencies will cooperate and measure progress toward those goals. Also, the strategies\u2019 relationships to each other were sometimes unclear.", "We recommended that the Department of State lead an interagency effort to establish guidance for developing foreign assistance strategies."]}
{"id": "GAO-18-475", "url": "https://www.gao.gov/products/GAO-18-475", "title": "Workforce Innovation and Opportunity Act: States and Local Areas Report Progress in Meeting Youth Program Requirements", "published_date": "2018-06-15T00:00:00", "released_date": "2018-07-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Approximately 4.6 million youth ages 16 to 24 were neither in school nor employed in 2016. WIOA, enacted in July 2014, provides, in part, grants to states and local areas to assist youth\u2014particularly out-of-school youth\u2014in accessing employment, education, and training services. It also emphasizes the provision of work experiences to in- and out-of-school youth.", "GAO was asked to review how states and local areas are using WIOA grants to serve youth. This report examines (1) what is known about states' and local areas' progress in meeting WIOA spending requirements for serving out-of-school youth and for providing youth with work experiences; (2) how local areas are addressing WIOA's emphasis on serving out-of-school youth and any challenges, and (3) how local areas are addressing WIOA's emphasis on youth work experiences and any challenges. GAO reviewed relevant federal laws, regulations, and guidance; interviewed DOL officials; analyzed DOL state level WIOA youth program expenditure data from program years 2015 and 2016, the most recent data available; surveyed a nationally representative sample of local workforce development areas; and visited nine local workforce development areas in three states selected for their relatively large WIOA Youth funding allotments and relatively high rates of out-of-school youth.", "GAO is not making recommendations in this report. DOL and the Department of Education provided technical comments on a draft of this report, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Most states reported they were on target to meet the Workforce Innovation and Opportunity Act's (WIOA) requirement to spend 75 percent of their Program Year 2015 and 2016 youth grant funding to serve out-of-school youth, according to Department of Labor (DOL) data. Because deadlines had not arrived for the spending of state youth grant allotments for these program years, compliance could not be determined. Similarly, most local areas reported they were on track to meet the out-of-school youth spending requirement, as well as the requirement that 20 percent of local youth grant funds be spent on providing work experiences to youth. Through GAO's survey, many local areas reported it was not challenging or only slightly challenging to meet the spending requirements, but some reported experiencing greater challenges (see figure). Under WIOA, DOL does not collect local expenditure information, but states must monitor local areas' compliance while DOL monitors state oversight. DOL has taken some steps to determine whether states are carrying out their monitoring responsibilities, including limited on-site monitoring and ongoing dialogue with states. According to DOL officials, the agency's monitoring of the new requirements has thus far focused on providing technical assistance and guidance, but they reported plans for more formal compliance monitoring.", "Note: All percentage estimates in this figure have a margin of error of plus or minus 10 percentage points or fewer. Percentages do not add to 100 due to rounding and because a small number of survey respondents answered \u201cdon't know\u201d or did not respond.", "Local areas reported in GAO's survey that they used a combination of strategies to meet the WIOA spending requirement for serving out-of-school youth and to address other related challenges. For example, many local areas reported suspending enrollment of in-school-youth to help meet the requirement to spend 75 percent of youth grant funds on out-of-school youth. In addition, local areas reported having taken steps to address challenges locating, retaining, and serving out-of-school youth in their WIOA-funded programs, including increasing their recruiting efforts and strengthening partnerships with other WIOA programs, state and local government agencies, and community-based organizations.", "To meet WIOA's 20 percent spending requirement for work experiences, local areas reported expanding work experience opportunities for youth, most commonly with temporary paid employment. An estimated 81 percent of local areas reported they paid youth participants' salaries, with most paying the entire salary. Many local areas also reported challenges, including youths' lack of job-readiness and employers' reluctance to hire WIOA participants. To address these challenges, local areas reported providing job-readiness training for youth and strengthening partnerships with employers."]}], "report": [{"section_title": "Letter", "paragraphs": ["Approximately 4.6 million youth aged 16 to 24 were neither in school nor  employed in 2016. The Workforce Innovation and Opportunity Act  (WIOA), which helps job seekers access employment, education, and  training services, includes youth formula grants that have measures to  emphasize services to out-of-school youth. Primarily administered by the  U.S. Departments of Labor (DOL) and Education (Education), WIOA  superseded the Workforce Investment Act (WIA), and most provisions  became effective on July 1, 2015. WIOA includes a requirement that at  least 75 percent of youth formula grant funds be spent on services to out- of-school youth. In addition, it requires that at least 20 percent of local  youth grant funds be spent on the provision of work experiences to all  youth served by WIOA, both in- and out-of-school. Program performance  is measured by outcomes including employment rate, median earnings,  and credential attainment.", "You asked us to review how states and local areas are using WIOA  grants to serve out-of-school youth and provide youth with work  experiences. This report examines (1) what is known about states\u2019 and  local areas\u2019 progress in meeting the WIOA spending requirements for  serving out-of-school youth and providing youth with work experiences,  (2) how local areas are addressing WIOA\u2019s emphasis on serving out-of- school youth and any challenges they have encountered, and (3) how  local areas are addressing WIOA\u2019s emphasis on youth work experiences  and any challenges they have encountered.", "To answer all of our research objectives we reviewed relevant federal  laws, regulations, guidance, and data. We also conducted an online  survey of workforce development area leadership. We administered our  survey via email to a stratified, random sample of workforce development  area leaders from 130 local areas across the country. We received 106  completed surveys. Results of our survey can be generalized to the  entire population of local areas in the 50 U.S. states and the District of  Columbia. All percentage estimates in this report derived from this survey  have a margin of error of plus or minus 10 percentage points or fewer,  unless otherwise noted. In addition, we interviewed state workforce  agency officials in three states; Arizona, Michigan, and Texas. In each of  those states we visited three local workforce areas and interviewed WIOA  practitioners, including Workforce Development Board members and  staff, youth service-provider staff, community youth organizations, and  educators. We selected the three states primarily due to their relatively  high rates of disconnected youth and relatively large WIOA state youth  grant allotment for program year (PY) 2016, the most recent allotment  data available at the time of selection. Our selection of local areas within  states prioritized those with higher rates of disconnected youth and  considered population density to ensure balanced representation from  urban and rural areas.", "We also conducted interviews with DOL officials in headquarters and  three regional offices to learn more about the agency\u2019s administration of  WIOA and to identify the steps the agency is taking to monitor states\u2019 and  local areas\u2019 progress in meeting selected WIOA youth program  requirements. To assess state spending patterns, we reviewed federal  program data on WIOA youth expenditures and determined their  reliability. We found the data to be reliable for the purposes of our  reporting objectives. To assess local area spending patterns, we included  questions in our survey that asked local areas to self-report the  percentage of their WIOA youth grant that they spent on out-of-school  youth and work experiences, respectively, for PY2016. We did not  independently determine state or local expenditures. In addition, we  reviewed DOL guidance and technical assistance to identify the  measures the agency is taking to help states and local areas meet  program requirements and deliver services to out-of-school youth and  work experiences to all youth served by WIOA. We also requested and  received DOL documentation to better understand the scope of DOL\u2019s  efforts to ensure the reliability of WIOA youth program data. See  appendix I for more information on our objectives, scope, and  methodology.", "We conducted this performance audit from December 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Workforce Innovation and Opportunity Act (WIOA)", "paragraphs": ["WIOA was designed, in part, to deliver a broad array of integrated  services to customers of the public workforce system, including  individuals seeking jobs and skills training, and employers seeking skilled  workers. WIOA authorizes six core programs, including youth formula  grants, with four programs administered by DOL and two by Education,  as described in table 1. Program participants, including youth, may co- enroll in multiple WIOA core programs, such as the adult education or  vocational rehabilitation programs, if they meet eligibility requirements for  each. The core programs are generally required to report on common  performance indicators, such as how many workers entered and retained  employment, their median wages, whether they attained credentials, and  their measurable skill gains. The law also includes new requirements for  state workforce development plans to unify workforce strategies across  the six core programs.", "Most provisions of WIOA became effective on July 1, 2015, superseding  the Workforce Investment Act (WIA) of 1998. The Departments of Labor  and Education issued the final regulations in August 2016, just after the  close of the first full WIOA program year. Figure 1 shows the timing of key  actions in implementing WIOA and timeframes governing state and local  spending of initial youth grants. As illustrated, compliance is determined  over the period for which funds are available, rather than on a program  year basis. States have 3 years after the start of the program year to  expend each program year\u2019s youth funds, and local areas have 2 years.", "WIOA also emphasized improving opportunities for populations with  significant barriers to employment, including out-of-school youth. We  have previously reported that disconnected youth (those neither in school  nor employed) may experience challenges successfully transitioning to  adulthood. Disconnected youth are more likely than in-school youth to  have characteristics and/or circumstances that can pose obstacles to  employment, such as a lack of stable housing or transportation, parenting  responsibilities, disabilities, limited basic skills, criminal convictions, or  lack of adult support. In addition, WIOA emphasizes work experiences for  youth\u2014both in- and out-of-school youth\u2014including paid and unpaid work,  pre-apprenticeships, and internships.", "To ensure states and local areas emphasized services to out-of-school  youth and youth work experiences, WIOA introduced new expenditure  requirements for each. WIOA also changed the age range of eligible  youth (see table 2). However, DOL has broad authority to issue waivers  to individual states or local areas, exempting them from meeting certain  requirements, including those relating to expenditures.", "In addition to the new spending requirements and eligible age range,  WIOA changed the services local areas are required to make available to  youth, as appropriate. Specifically, 2 of WIA\u2019s 10 program services were  combined, and 5 new services were added, bringing the total to 14 (see  table 3). In general, WIOA\u2019s youth program elements support career  readiness as a youth transitions from basic educational attainment to  occupational skills training and work opportunities, then to post-secondary  education or unsubsidized employment.", "Since 2011, total youth formula grants to states\u2014under WIA and then  WIOA\u2014have fluctuated but declined overall, with $700,044,855 being  allotted to the 50 states and the District of Columbia for all WIOA youth  activities in PY2017 (see fig. 2). Under WIOA Title I, DOL administers  youth grants to states based on a formula reflecting the distribution of  unemployment and economically disadvantaged youth. In general,  states allocate funds to local areas based on a similar formula. In  addition to changes in federal grant funding, fluctuations in unemployment  and estimates of disadvantaged youth affect annual state and local  grants.", "Governors establish state Workforce Development Boards that help guide  implementation of WIOA by developing state plans, crafting statewide  WIOA policies, and assisting local boards in the planning and delivery of  WIOA services, among other duties. The state Boards must include a  majority share of leaders in the state business community as well as  representation from the state legislative and executive leadership, and  labor organizations, and may include community-based organizations and  service providers. Local Workforce Development Boards operate under  state Boards and perform several roles, including developing local WIOA  plans, contracting with service providers, providing oversight of youth  activities, and selecting American Job Center operators.", "As was the case with WIA, WIOA provides significant flexibility to states  and local areas to design and operate their WIOA programs to best suit  local needs. For example, some local Workforce Development Boards  provide direct services to youth while others contract with one or more  organizations to provide the WIOA youth program services. In addition,  services can be provided to youth at the workforce area\u2019s American Job  Center, a separate youth center, service providers\u2019 offices, other locations  in the community, or a combination of these sites. Local service providers  work with each youth participant to develop an individual service strategy,  which is a combination of services connected to a career pathways plan  and tailored to the youth\u2019s needs. Local workforce areas generally must  make available all 14 program services, though youth are not required to  participate in all services."], "subsections": []}]}, {"section_title": "States and Local Workforce Areas Report Progress in Meeting Spending Requirements", "paragraphs": [], "subsections": [{"section_title": "Most States Appear on Track to Meet Targets for Spending on Out-of- School Youth", "paragraphs": ["Complete data on the spending of youth grants allocated to states for the  first 2 program years of WIOA (PY2015 and PY2016) were unavailable  during our review, but available data states reported to DOL showed a  growing number of states were on target to expend at least 75 percent of  their youth formula grant on out-of-school youth (see fig. 3). Nationally, as  of September 30, 2017, states reported spending over 99 percent of their  WIOA youth grant program funds allotted in PY2015, and 36 states had  spent 75 percent or more of their expended funds on out-of-school youth (with an additional 13 states having spent between 70 and 75 percent).  Twenty-nine states reported having spent all of their PY2015 funds, and  of these states, 21 had spent 75 percent or more on out-of-school youth.  The remaining 8 fell short of the level generally required by statute.  However, for PY2015 specifically, DOL officials told us that the agency  used its transition authority to modify the requirement. For that program  year, DOL allowed states that could not meet the 75 percent requirement  to spend a minimum of 50 percent of funds on out-of-school youth (rather  than 75 percent) if they spent at least 10 percentage points more on  these youth than in the previous program year. Applying this standard to  DOL data on state spending, all but two states were on track to meet the  modified requirement for PY2015 funds.", "Available DOL data also suggest most states are making progress in  meeting the out-of-school youth spending requirement for their PY2016  youth funds. The rate at which states are spending their PY2016 funds  varies, but as of September 30, 2017, states had collectively spent  approximately 77 percent of their allotments. As of that date, 48 states  had spent 75 percent or more of their expended funds on out-of-school  youth. Only 4 states reported they had spent all of their PY2016 funds,  and of those 4, all had spent more than 75 percent on out-of-school  youth. States that have not yet spent all of their youth funds nor met the  requirement to spend 75 percent of their PY2015 or PY2016 funds on  out-of-school youth may still do so by the end of the 3-year period, ending  June 30, 2018 for PY2015 funds, and June 30, 2019 for PY2016 funds.  Conversely, states that are currently at or above the 75 percent level, with  substantial funds left to spend, may fall below that level by the end of the  3-year spending period.", "Past federal emphasis on serving out-of-school youth, and many states\u2019  experience in doing so, may partially account for states\u2019 progress in  meeting WIOA\u2019s higher spending targets for this population. As far back  as 2002, DOL guidance had emphasized serving out-of-school youth.  Even before WIOA went into effect, many states were exceeding the  existing WIA requirement to spend 30 percent of their WIA youth grant  funds on out-of-school youth, with nationwide levels exceeding 50 percent  since 2012 (see fig. 4). State workforce board officials in the three states  we visited reported that they did not need to make significant changes to  their youth programs to meet the new spending requirement. For  example, in Texas, officials told us that the state had anticipated the  increased focus on out-of-school youth for a number of years. In  response, in the years before WIOA, it began steering more of its WIA  youth grant funds toward serving out-of-school youth. According to this  state official, in PY2006, Texas increased the percentage of youth grant  funds that local areas must spend on out-of-school youth from 30 (the  requirement under WIA) to 45 percent, and raised the requirement again  in PY2007 to 65 percent."], "subsections": []}, {"section_title": "Local Areas Reported Being on Track to Meet WIOA Spending Requirements", "paragraphs": ["Similar to states, most local workforce areas we surveyed reported that  they were on track to meet the requirement that they spend 75 percent of  their WIOA youth grant funds on out-of-school youth. They also reported  they were making progress on the requirement that they spend 20  percent of their funds providing work experience to all youth served by  WIOA (in- and out-of-school).", "With respect to the out-of-school youth spending requirement,  approximately 76 percent of survey respondents reported spending at or  above the required level, and 3 percent reported spending below it.  The majority of local workforce areas reported that meeting the spending  requirement on out-of-school youth was not challenging or only slightly  challenging. Likewise, staff in several local workforce development  areas we visited told us that meeting the out-of-school youth spending  requirement was not a significant challenge. An estimated 15 percent of  those surveyed reported that meeting the spending target for out-of- school youth in PY2016 was very or extremely challenging.", "A majority of local workforce areas we surveyed also reported they were  on track to meet the requirement to spend 20 percent of local WIOA youth  grant funds on work experiences for both in- and out-of-school youth.  While work experience was a youth program element under WIA,  spending a specific percentage of WIOA funds on the service is a new  requirement and applies only to local areas and not to states. Based on  our survey, we estimate that approximately two-thirds of local workforce  areas reported spending 20 percent or more of their PY2016 youth funds  on work experiences (see fig. 5), but around 11 percent reported  spending less.", "In general, many local workforce areas reported that it was not  challenging or only slightly challenging to meet WIOA\u2019s spending  requirements for serving out-of-school youth and the provision of work  experiences. However, an estimated 15 percent reported that meeting the  out-of-school youth requirement was very or extremely challenging, and  around 21 percent reported the same about the work experience  requirement (see fig. 6).", "Under WIOA, states are responsible for monitoring local areas\u2019 progress  in meeting youth spending requirements. DOL officials we interviewed  told us that states collect local area expenditure data, but those data are  not transmitted to DOL except in the aggregate. The three states we  visited confirmed that they collect local expenditure data from local areas  using their own individual state reporting systems and then aggregate  those data at the state level.", "DOL takes steps to determine whether states are carrying out their  monitoring responsibilities, including conducting on-site visits to state  offices. However, DOL officials said regional offices do not have the  capacity to conduct on-site monitoring in each state every year. To make  up for this, they conduct risk-based monitoring based on quarterly desk  reviews that can alert them to expenditure issues at the state level.  According to the officials, DOL regional offices typically conduct on-site  monitoring of approximately one-third of their states each year. The  officials said that during on-site monitoring, regional office staff may elect  to review a sample of local area expenditures and the monitoring  activities the state has taken to ensure local targets are being met.", "Also, to supplement their monitoring activities, DOL officials said they rely  on regional offices\u2019 ongoing interactions with states to stay abreast of state and local experiences and challenges. They said staff from regional  offices maintain a dialogue with state officials, including periodic  conference calls. As part of this communication, they said states might  inform DOL regional officials about certain local areas experiencing  challenges. DOL officials also said they hear from some local area staff  directly during national conferences.", "As of February 2018, DOL\u2019s monitoring had thus far focused on assisting  states in overcoming challenges with WIOA requirements through  technical assistance and guidance, according to DOL officials. At that  time, the officials told us that the agency was moving to more formal  compliance monitoring and would be beginning to address state-level  non-compliance. DOL officials also told us that the agency has developed  a core monitoring guide supplement for the WIOA Youth program and  plans to publish the guide by December 2018. The tool will be used by  DOL officials in their monitoring of states, but will also be shared with  state officials to, among other things, help them organize their state-level  monitoring of localities."], "subsections": []}]}, {"section_title": "Local Areas Reported Using a Combination of Strategies to Address the Out-of- School Youth Spending Requirement and Related Challenges", "paragraphs": [], "subsections": [{"section_title": "Local Workforce Areas Restricted Enrollment of In-School Youth to Help Meet the Spending Requirement for Out-of- School Youth", "paragraphs": ["While most local areas reported that their efforts to meet the out-of-school  youth spending requirement involved serving greater numbers of that  population, they also reported the need to accommodate that increase by  significantly reducing or eliminating services provided to in-school- youth. In addition to the estimated 71 percent of local areas reporting  that the number of out-of-school youth receiving services had increased  since the enactment of WIOA, an estimated 80 percent reported that the  number of in-school youth receiving services had decreased. An  estimated 51 percent said they had reduced outreach and services to in- school youth to a great or very great extent, with another 22 percent  saying they had moderately reduced outreach or services to these youth.  Notably, an estimated 35 percent of local areas reported that they had  stopped enrolling in-school youth in their WIOA youth program entirely.", "Available DOL WIOA program participant data reflects this shift, as the  number of in-school youth served since PY2014\u2014the program year prior  to when WIOA went into effect\u2014through PY2016 has dropped from just  over 97,700 to around 38,900, or approximately 60 percent (see fig. 7).  During the same period, the levels of out-of-school youth served rose  from nearly 97,200 to around 108,800, or approximately 12 percent.  DOL officials and some local workforce area staff reported that it is  generally more expensive to serve out-of-school youth, in part because  they often require more services than other youth. Although DOL does  not have current data on cost per participant, DOL\u2019s Employment and  Training Administration\u2019s fiscal year 2017 Congressional Budget  Justification notes that WIA data indicate that out-of-school youth may  cost approximately $1,000 more per youth served than in-school youth.", "Survey respondents most frequently reported that the reduction in  services to in-school youth was the most adverse consequence they  observed as a result of the new WIOA youth requirements. Similarly,  WIOA practitioners we interviewed during our local area site visits  expressed concerns about reducing services for in-school youth. Several  told us that local in-school youth were no longer receiving the level of  services they might need and that the shift might lead to more youth  becoming disconnected from school and employment. Staff in one of  the more rural workforce areas we visited noted that there are often  insufficient services available to replace these lost WIOA services.  Without a presence in the schools, staff in one workforce area told us  they were concerned that they were not reaching youth at the right time  and that more youth might become disconnected as a result. Some  survey respondents made similar points, reporting that youth are more  likely to become disconnected without WIOA services available in  schools. In addition, workforce development board staff in one local area  we visited told us that the WIOA definition of out-of-school youth has  limited their ability to provide services to youth who need them if they  have enrolled in community college but are not yet attending classes.", "DOL has provided technical assistance identifying other federal programs  available for assistance to in-school youth, but we did not determine the  extent to which these resources were being used in the local areas we  visited. One major urban area we visited had managed the program\u2019s  transition toward serving a larger proportion of out-of-school youth  through a city-wide committee established by the mayor. According to  workforce development board staff, this committee works with the  workforce development board and other community partners (e.g., civic,  business, and philanthropic groups) and has helped develop an  overarching strategy to assist youth that did not exist prior to WIOA."], "subsections": []}, {"section_title": "To Address Challenges, Local Workforce Areas Have Increased Recruiting Efforts, Strengthened Partnerships, and Expanded Services", "paragraphs": ["As local areas have worked to meet the new out-of-school youth  spending requirement, they report applying other strategies to address  certain challenges associated with serving that population in greater  numbers. While many local areas reported that one of the main benefits  of WIOA was its focus on hard-to-serve youth and those in greatest need  of services, survey respondents and local workforce area staff and  service providers reported that it has forced them to make some  adjustments in how they administer their local youth programs,  particularly in their approach to recruitment, local partnerships, and  service offerings.", "Challenges Associated with WIOA\u2019s Shift toward Out-of-School  Youth  In response to our survey, local area staff cited a number of specific  challenges related to recruiting, retaining, and serving out-of-school youth  under WIOA (see fig. 8).", "Transportation: A lack of transportation can prevent youth from getting  to and from WIOA-funded educational programs, service providers,  training, and work, and it was among the most significant barrier to  employment cited by survey respondents. An estimated 71 percent of  local workforce areas reported that transportation barriers were  moderately or very difficult, and an additional 18 percent said they were  somewhat difficult. Local service providers also told us that the lack of  transportation could be particularly acute in rural areas without public  transportation, such as bus systems.", "Locating and Recruiting: Finding out-of-school youth to enroll in WIOA- funded services was a significant challenge cited by local workforce  areas, with an estimated 59 percent reporting that locating out-of-school  youth was moderately or very difficult and another 21 percent reporting  that it was somewhat difficult. Some local workforce area staff and service  providers told us that many out-of-school youth move frequently, making  it difficult to find and track them. In some locations, workforce area staff or  service providers reported that youth typically do not \u201cwalk-in\u201d to  American Job Centers seeking services or congregate in the same places  as in-school youth. Staff in one rural area told us that service providers  had to recruit constantly. But even in urban areas, locating and recruiting  out-of-school youth can be difficult. In fact, service providers in one urban  workforce development area we visited told us that recruiting out-of- school youth is by far their greatest challenge. \u201cLife barriers crop up once engaged and can  take the young adults off course. The system  must be flexible to allow these young adults  time to leave and come back multiple times.\u201d", "Retaining and Serving: Convincing out-of-school youth to stay in a  WIOA program is also challenging for workforce development areas and  service providers. In our survey, retaining youth was cited as moderately  or very difficult by an estimated 54 percent of workforce development  areas, with another 31 percent reporting it was somewhat difficult. Some  survey respondents and workforce development area staff and service  providers cited current low unemployment rates, which make it easier for  youth to find jobs without completing WIOA work experiences or services,  and frequent moves by out-of-school youth, sometimes far from work or  training locations, as reasons retaining these youth can be difficult. \u201cMany of the out-of-school youth have  significant barriers that they have faced their  entire life. We have to address a series of  barriers with the individual before we can  even begin to think about career, training,  education, or work experience.\u201d", "Addressing Personal Barriers: Addressing the personal barriers often  faced by out-of-school youth was also a key challenge cited by local  workforce areas. According to an estimated 44 percent of local workforce  areas, addressing obstacles faced by this population such as  homelessness or having a criminal history is moderately or very difficult,  with another 30 percent reporting that it is somewhat difficult. Multiple  survey respondents noted that because of their multiple barriers, out-of- school youth require more frequent contact and intensive case  management services. During our interviews in local workforce areas,  staff and service providers told us that out-of-school youth tend to face  more of these types of obstacles than in-school youth. They told us these  youth may have disabilities, such as diagnosed or undiagnosed mental  health needs. In addition, they may have children and lack childcare, be  involved in the child welfare or juvenile justice system, or experience  homelessness. Out-of-school youth also often lack basic academic or job  readiness (\u201csoft\u201d) skills, and sometimes are not proficient in English or  face other barriers to employment. Some survey respondents also noted  that the needs of older out-of-school youth are often different from those  of younger youth. For example, they may have multiple children or  housing needs and thus require more supportive services.", "Strategies Local Areas Have Applied to Address Challenges  To mitigate challenges in shifting spending to out-of-school youth, local  workforce area staff and service providers said that they have increased  their recruiting efforts, developed new partnerships, strengthened existing  partnerships, and in some cases, expanded services.", "Increased Recruitment Efforts to Locate Out-of-School Youth: An  estimated 51 percent of local workforce areas said they are spending a  larger percentage of their WIOA youth grant funds on recruiting compared  to what they spent under WIA. According to our survey, the top  approaches workforce development areas use to recruit out-of-school  youth involve seeking referrals from community-based organizations,  family and friends, and other agencies. They also include recruiting in  person and in places throughout the community where out-of-school  youth tend to congregate. Advertising WIOA youth programs using fliers  and social media were also cited as being used to a great or very great  extent by about 50 percent of local workforce areas (see fig. 9).", "In addition to survey respondents, those we spoke to in the local  workforce development areas we visited described how they have  increased their recruitment efforts of out-of-school youth since the  enactment of WIOA. For example, one local workforce development  board used its funds to hire an additional staff person to assist a service  provider with its recruitment efforts. Service provider staff from across the  local areas we visited said they spend time out in the community where  out-of-school youth congregate much more now than under WIA when  they served more in-school youth who were easier to find. They told us  they recruit at malls, barbershops, and other places where out-of-school  youth are likely to gather. One service provider told us they have regular  hours at a popular major-chain coffee shop where they meet with youth  and complete enrollment paperwork rather than relying on youth coming  to an American Job Center or the service provider\u2019s office.", "According to our survey, an estimated 70 percent of local workforce areas  receive referrals from parents, siblings, friends, and other community  members to a great or very great extent. These word-of-mouth and peer- to-peer recruiting strategies were also frequently cited as being very  successful by local workforce area staff and service providers we  interviewed. For example, staff in one local workforce area told us that  one of their most successful recruitment efforts has been using or  employing youth who had experienced success in the program to help  enroll others in the local community who could benefit from WIOA  services. They reported these youth recruiters knew where to find out-of- school youth in need of services and can more easily establish  relationships with these youth, both in person and via social media. Other  approaches used by the local areas we visited included seeking referrals  from other community-based organizations and agencies, placing  information fliers in high school graduation packets, attending job fairs  and other community events, using social media or radio ads, going door- to-door in public housing, using mobile recruiting units, and placing fliers  for WIOA services in grocery bags or attaching them to water bills.", "Strengthened Partnerships: Local workforce areas report strengthening  partnerships with other WIOA programs and organizations to enroll and  serve out-of-school youth. Approximately 60 percent of local workforce  areas reported developing new partnerships or strengthening  relationships with other WIOA core programs. Specifically, approximately  two-thirds reported that they are co-enrolling WIOA youth with other  WIOA core programs. Similarly, local workforce areas reported  developing new partnerships or strengthening relationships with state and  local government agencies, as well as community-based organizations.  For example, some local workforce development area staff and local  service providers we interviewed told us they had strengthened  relationships with child welfare, juvenile justice, vocational rehabilitation,  community colleges, and adult education programs.", "Some service providers focus on delivering services to a specific  population of youth, such as youth involved in the foster care or justice  system. For example, staff at one local workforce board told us that one  of its local service providers ran a program in a juvenile justice facility to  provide services to incarcerated youth. Some local workforce areas also  reported co-enrolling youth in non-WIOA programs such as Temporary  Assistance for Needy Families (TANF). In addition, an estimated 80  percent of local workforce areas reported that they had created new  partnerships or strengthened relationships with employers. Other ways  that local workforce areas reported strengthening partnerships included  strengthening coordination across youth serving programs by improving  communication (an estimated 78 percent), co-locating programs (47  percent), and integrating information technology systems (21 percent).  Several survey respondents said that new or strengthened partnerships  were one of the primary benefits of the WIOA program and that referrals  from these partners are an important way to recruit out-of-school youth for  the WIOA youth program.", "Expanding or Intensifying Services: To encourage enrollment or retain  and serve of out-of-school youth, local workforce areas reported that they  had expanded the variety or intensity of the youth services they provide.  For example, workforce areas reported that they had expanded  occupational training (59 percent), adult education (55 percent), and the  development of career pathways (63 percent). In addition, approximately  46 percent of local workforce areas reported they had expanded their  supportive services and approximately one-third of workforce areas  reported that they spent a higher percent of their youth grant funds on  supportive services than they did under WIA. For example, local  workforce area staff or service providers we interviewed in three local  areas (in two different states) told us that they had used WIOA funds to  pay for the care of children of enrolled youth. Staff at another local  workforce development area we visited reported intensified focus on staff  training in trauma-informed care and emphasized the need to assume  trauma among program participants. One WIOA service provider we  interviewed explained that keeping more transient out-of-school youth  motivated and enrolled required more intensive services and more  interaction with staff until they learn to become more self-sufficient. She  also emphasized that linking occupational training to an employer is vital  for success with out of school youth.", "Reducing Transportation Barriers: In addition to these overall  strategies, some local workforce area staff and service providers we  spoke to told us they had taken steps to address transportation obstacles,  which were widely cited as especially challenging. For example, local  workforce staff in one local area we visited reported supplying bus passes to help youth participants get to their work experience jobs or training in  areas where bus systems existed. One service provider staff member in a  more rural area told us his organization used two vans to transport youth  and another told us that his organization had provided bicycles to out-of- school youth. In one location we visited, a community college that  partners with the WIOA program provides shuttle bus services between  its various campuses and has expanded this service to include  transportation to various partners, to and from job sites, and to and from  credentialing exams. The representative from this community college told  us that this approach is working well but needs to be further expanded. A  service provider in another local area we visited told us they have  developed some portable training modules that can travel across the local  area, alleviating some of the transportation issues out-of-school youth  face. These modules help train students in more remote areas in fields  such as heating, ventilation, and air conditioning (HVAC), electrical work,  and plumbing.", "To help states and local areas implement their WIOA programs and  overcome challenges, DOL has developed and provided a significant  amount of guidance and technical assistance in the form of Training and  Employment Guidance Letters, webinars, conferences, and online  resources; all of which state and local officials generally reported as being  helpful. Officials in the three states we visited stated that DOL\u2019s  guidance and technical assistance had been helpful and that DOL\u2019s  Employment and Training Administration regional offices had been  responsive to their needs. While local workforce development board staff  we interviewed in several local areas told us that they relied primarily on  guidance from their state, they also reported using DOL guidance and  technical assistance and agreed that it was generally helpful. About half  of local workforce area survey respondents reported that DOL guidance  and technical assistance are either extremely or very helpful. When  asked what topics or issues related to WIOA youth needed additional or  clearer guidance, 54 out of 106 (approximately 51 percent) survey  respondents did not provide any examples. Of those that did respond, the  most commonly cited areas for additional guidance included performance  measures and work experiences. However, these topic areas were only  mentioned by 14 and 9 of the survey respondents, respectively."], "subsections": []}]}, {"section_title": "Local Areas Used Various Strategies to Meet the New WIOA Work Experience Requirement, Yet Many Reported Challenges", "paragraphs": [], "subsections": [{"section_title": "Local Areas Expanded Work Experience Opportunities for Youth and Frequently Paid for Youth Salaries in Order to Meet the New Work Experience Requirement", "paragraphs": ["Many local workforce areas we surveyed have increased their emphasis  on work experiences for youth under WIOA, with paid employment being  the most common type of opportunity provided to participants. While work  experience was a youth program element under WIA, since the  enactment of WIOA, an estimated 82 percent of local workforce areas  reported they had expanded work experience opportunities, and 59  percent of local workforce areas reported they provided work experiences  to a greater percentage of youth participants than in the years prior to  WIOA. Year-round paid employment and summer paid employment were  the most common work experience opportunities that local workforce  areas reported providing to a great or very great extent (an estimated 69  percent and 42 percent, respectively). In contrast, pre-apprenticeship, on- the-job training, job shadowing, and internship opportunities were less  commonly provided (see fig. 10).", "WIOA youth participated in several types of work experiences with  employers in numerous occupational fields, local workforce areas  reported, though some were more common than others. Since the  enactment of WIOA, an estimated 80 percent of local areas developed  new or strengthened existing partnerships with employers. Through  partnerships with employers youth participated in work experiences in a  wide range of fields, the most common being jobs involving retail,  customer service, and hospitality. Healthcare and medical-related jobs  were also common, as were jobs in manufacturing. These occupations  were also associated with the three most common career pathway plans  developed for participants, according to the local workforce areas we  surveyed. Several local staff members and survey respondents said they  try to align youth work experiences with the youth\u2019s interests and career  pathway plan. However, many survey respondents noted that finding a  good match can be difficult.", "Several workforce development board staff members and service  providers across the three states we visited told us they had a positive  opinion of work experiences and thought they were beneficial for youth.  They praised work experiences for reasons like helping youth learn  valuable soft skills, helping them realize the value of work, and improving  employment outcomes. An American Job Center staff member in one  local area we visited told us how important work experiences were for  letting youth explore their interests and \u201ctry out\u201d a new field before  investing program funds in a related training program, only for the youth  to decide later they did not like that field. Staff at two other centers  described similar instances where participants placed in teaching,  medical, and veterinarian positions reconsidered their decisions after the  work experience exposed them to some of less appealing aspects of the  occupations.", "Payment of participants\u2019 salary is the dominant strategy local workforce  areas said they are using to meet the new WIOA work experience  spending requirement. Specifically, based on our survey an estimated 81  percent of local areas reported that to a great or very great extent they  relied on paying a youth participant\u2019s salary to meet the requirement (see  fig. 11).", "Our survey also indicates that when local areas paid a participant\u2019s work  experience salary, 88 percent often or very often paid the entire salary  with youth program funds, far outpacing other payment structures (see  fig. 12). Although there is no limit on the length of the paid employment  experience, DOL officials told us the typical length is around 6 to 8 weeks.  In one local area, service provider staff told us that paying a youth\u2019s entire  salary encourages businesses to take a chance on a youth when they  otherwise might not. DOL officials also told us that out-of-school youth, in  particular, are a harder population to serve and many employers are not  willing to take a risk in hiring them without the full salary paid through  WIOA. However, based on our survey, an estimated 42 percent of local  areas have at least sometimes arranged an agreement that part of a  participant\u2019s salary be paid by the employer."], "subsections": []}, {"section_title": "Local Areas Have Taken Steps to Address a Variety of Challenges That Inhibit Their Ability to Provide Work Experiences to Youth", "paragraphs": ["WIOA requires local areas spend at least 20 percent of local youth funds  on work experience for in-school and out-of-school youth. Most local  workforce areas we surveyed reported meeting that requirement, with  an estimated 42 percent reporting it was slightly or not at all challenging  to meet it in PY2016. However, another 34 percent found it moderately  challenging, and 21 percent reported that it was very or extremely  challenging. As shown in figure 13, local areas reported experiencing a  variety of challenges as they attempted to meet the new spending  requirement.", "Participant Challenges: The fact that youth participants may be less  prepared for employment than older participants posed a challenge for  workforce area staff as they worked to address WIOA\u2019s new emphasis on  youth work experiences. Overall, we estimate that 38 percent of local  areas found it moderately or very difficult to meet the spending  requirement because youth were not ready for a work experience. An  estimated 31 percent of local workforce areas reported it was moderately  or very difficult to meet the new requirement as a result of youth not  completing their work experiences because they failed to live up to  employer expectations. Several local WIOA program staff members told  us that youth often have no prior work experience, can lack the soft skills  needed for work, and may face other barriers to employment that can  complicate success in a work experience. Some local staff we interviewed  noted that many youth require substantial preparation before, and support  during, a work experience in order to succeed. Perhaps as a  consequence, about half (48 percent) of local workforce areas provided  job readiness training to youth to a great or very great extent in order to  prepare them for work experiences. In addition, some local service  providers we met with told us they provided orientations to employers in  order to manage expectations and prepare them to employ WIOA youth.", "Further, local service provider staff members told us they lend ongoing  support to both youth participants and employers throughout the work  experience period. This included check-ins at employment sites,  mediating employee/employer conflicts, and addressing employer  concerns about a youth\u2019s performance to ensure youth meet employers\u2019  expectations.", "Employer Reluctance: Employers are crucial to a local workforce area\u2019s  ability to provide work experiences to youth, yet many local areas have  struggled to develop effective employer relationships that foster such  opportunities. Notably, identifying employer partners does not appear to  be the primary challenge, as an estimated 55 percent of local workforce  areas reported little or no difficulty doing so. Yet, the existence of  employers may not readily yield work experiences, as approximately 35  percent of local areas reported it was moderately or very difficult to align  youth interests with available work experiences. Nearly the same  proportion reported similar difficulty generating work experience  opportunities because employers may perceive that providing those  experiences would come with additional burdens. For example, service  provider staff in two local areas told us some employers expressed  concern about whether they would be responsible for workers\u2019  compensation should a youth be injured. Staff in other areas told us that  large companies in particular worry about potential administrative  burdens, such as getting approval from corporate headquarters for a  WIOA-sponsored work experience, or incorporating a participating youth  into their payroll system.", "Some of the additional administrative burden perceived by employers  may be associated with their general concern about the job-readiness of  youth enrolled in WIOA programs. Around 31 percent of local areas  reported it was moderately or very difficult to meet the work experience  spending requirement because employers were reluctant to work with  WIOA youth participants. One local employer we interviewed said out-of- school youth, in particular, may require additional help with  communication, professional presentation, punctuality, and interpersonal  skills, which can require additional personal attention. Many local service  provider staff and survey respondents described the numerous barriers to  employment often faced by out-of-school youth. One service provider  said, as a result of these barriers, employers may be less receptive to  provide work experiences for them. A survey respondent voiced a similar  concern, saying employers may think youth with significant barriers are  \u201ctoo difficult to manage and/or retain in employment.\u201d", "In light of employers\u2019 possible reluctance to provide work experiences for  youth, our survey shows many local workforce areas focused more  resources toward developing employer partnerships. Specifically, we  estimate that 51 percent of local areas reported that they increased their  spending on business/employer relations under WIOA. Service providers  in two local areas we visited, as well as many survey respondents,  reported they had hired new staff, or were utilizing existing staff, to  coordinate with employers. In one local area, workforce board staff told us  that even with an established community presence and decades of  experience, they still had to convince potential employer partners that  their youth program staff would do everything in their ability to make work  experiences easier for the employer.", "Other Challenges: Youth interest in work experiences may also vary  according to current life circumstances, especially the need for immediate  income. About a quarter (23 percent) of local areas reported youths\u2019 lack  of interest in obtaining WIOA-funded work experiences made meeting the  spending requirement moderately or very difficult. As one survey  respondent reported, \u201cMany youth in this program simply want and need  a job.\u201d This sentiment was echoed by service providers in all three states  we visited, who said the need for income can inhibit youths\u2019 interest in a  temporary work experience opportunity.", "Also, during our interviews with local area service providers we were told  that challenges associated with the WIOA work experience component  may be more acute in rural areas. As with other WIOA components,  such as education and training, the availability of transportation can  determine whether a youth can participate in WIOA-funded work  experiences. For example, service providers we interviewed in Texas  stressed how a lack of transportation, especially in rural areas where  employers may be more distant from a youth\u2019s home, can prevent youth  from getting to and from a work site. In addition, a lack of employers in  rural areas can hinder the creation of work experience opportunities. One  service provider we interviewed said that some rural towns in his local  area \u201chave little more than a gas station and a school,\u201d and the lack of  local employers significantly limits work experience opportunities for  youth. In such cases, arranging an opportunity in an alternate location  would also likely require that the youth have a means of transportation to  travel to the job site."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["This report does not include any recommendations. We provided a draft  of this report to the Secretaries of Labor and Education for review and  comment. Both agencies provided technical comments which we  incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretaries of Labor and Education, and  other interested parties. In addition, the report will be available at no  charge on the GAO Web site at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or gurkinc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the implementation of the Workforce Innovation and  Opportunity Act (WIOA) youth program in states and local workforce  areas with respect to the new requirements that 75 percent of youth funds  be expended on out-of-school youth and 20 percent of youth funds be  expended on work experiences. In particular, this report examines: (1)  what is known about states\u2019 and local areas\u2019 progress in meeting the  WIOA spending requirements for serving out-of-school youth and  providing youth with work experiences; (2) how local areas are  addressing WIOA\u2019s emphasis on serving out-of-school youth, and any  challenges they have encountered; and (3) how local areas are  addressing WIOA\u2019s emphasis on youth work experiences and any  challenges they have encountered.", "To answer all of our research objectives we reviewed relevant federal  laws, regulations, and guidance. We also employed other methods to  answer our audit objectives, as described below."], "subsections": [{"section_title": "Analysis of DOL Data and Documents", "paragraphs": ["To address our first objective, we analyzed Department of Labor (DOL)  state-level WIOA youth program expenditure data from program year  (PY) 2015 and PY2016, the most recent data available, for the 50 states  and the District of Columbia. We also analyzed WIA state level  expenditure data from PY2012 through PY2014. These data include the  funds allotted to each state, minus the governors\u2019 reserve for statewide  activities, which can be up to 15 percent of the total allotment. In addition,  the data include funds spent by the states on out-of-school youth, and for  PY2015 and PY2016, funds spent on work experiences. To determine  whether states appeared to be on track to meet WIOA spending  requirements, we considered the percentage of their overall funds they  had spent, as well as the percentage of their expended funds that were  spent on out-of-school youth and work experiences. Our analysis should  not be used to make conclusions about legal compliance with WIOA  requirements. To assess the reliability of these data, we interviewed DOL  officials with knowledge of the data and reviewed written responses from  the agency officials to data reliability questions. We also reviewed other  documentation related to the data. We found these data to be reliable for  the purposes of addressing our research objective. We also reviewed  DOL guidance and technical assistance materials to identify the  measures the agency is taking to help states and local areas meet  program requirements and deliver WIOA services to youth. To gather  information about the extent to which local areas are making progress in  meeting WIOA spending requirements, we collected data through our  nationally representative survey, described below."], "subsections": []}, {"section_title": "Interviews with DOL Headquarters and Regional Office Staff", "paragraphs": ["In addition, to address this research objective, we conducted semi- structured interviews with DOL headquarters and regional office officials  to gain information on DOL\u2019s role in the implementation and  administration of the WIOA youth program, the steps the agency is taking  to monitor states\u2019 and local areas\u2019 progress in meeting program  requirements, and to assess the availability and reliability of program and  expenditure data. We spoke to three of the Employment and Training  Administration\u2019s six regional offices, selected for their timely availability  and to account for a large portion of state and territorial oversight. Among  them, these regional offices were responsible for overseeing 24 states  and 3 territories. Our review of DOL\u2019s monitoring of state oversight was  limited to aspects necessary to describe DOL\u2019s general review structure  and collection of information, if any, on local spending; we did not  comprehensively assess DOL\u2019s monitoring efforts."], "subsections": []}, {"section_title": "Survey of Local Workforce Development Areas", "paragraphs": ["To address each of our research objectives, we conducted a nationally  representative web-based survey of local workforce development areas  (local workforce areas) in the 50 states and the District of Columbia. We  surveyed workforce development areas because they are responsible for  overseeing local youth workforce investment activities. Our survey results  can be generalized to the entire population of workforce development  areas. Specifically, we took a stratified random sample of workforce  development areas (130 out of a universe of 543) to create estimates  about the population of all workforce development areas. To ensure that  our survey included workforce development areas located in major  population areas, in Strata 1 we included the 23 local areas serving the  20 largest metropolitan areas in the United States with a workforce  development board within the city, as identified by U.S. Census Bureau  data. In addition, we included all 11 states in which there is only a single  workforce development board that oversees WIOA activities for the entire  state. There were 33 total workforce development areas in this strata.  Strata 2 included 97 other randomly selected workforce development  areas across the country. Each workforce development area was  weighted in the analysis so our survey would be representative of the  entire universe of workforce development areas.", "We conducted the survey from November 15, 2017 through January 31,  2018. We emailed our survey to the executive director of each workforce  development area and asked questions about changes the area has  made in response to the enactment of WIOA, challenges the workforce  area has faced in meeting WIOA requirements related to serving out-of- school youth, and the adequacy of federal guidance and technical  assistance, among other topics. The survey contained a mix of closed- ended and open-ended items. The survey\u2019s weighted response rate was  82.3 percent (81.5 percent unweighted), with 106 of 130 workforce areas  surveyed responding. A small number of items had higher non-response  rates; we note this in the text when the rate of non-response is material.  All closed-ended questions were weighted; however, open-ended  questions were analyzed without weighting. Open-ended items generally  received fewer responses than closed-ended questions.", "Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample\u2019s results as a 95 percent confidence interval (e.g., plus or minus  10 percentage points). This is the interval that would contain the actual  population value for 95 percent of the samples we could have drawn. As  a result, we are 95 percent confident that each of the confidence intervals  in this report will include the true values in the study population. All  percentage estimates in this report have a margin of error of plus or  minus 10 percentage points or fewer, unless otherwise noted."], "subsections": []}, {"section_title": "State Interviews and Local Site Visits", "paragraphs": ["To collect more detailed information about WIOA implementation at the  state and local levels than our survey allowed, we conducted semi- structured interviews of state and local officials, as well as WIOA service  providers, and partners, in three states. For our state-level interviews we  selected three states primarily based on two criteria:  1) Proportions of disconnected youth at or above the median for  all states.  2) WIOA state youth grant allotment for PY2016 at or above the  median for all states.", "Sixteen states met both criteria. From those 16 states, we selected 3 that  ensured diversity across DOL Employment and Training Administration  regions and provided a mix of states with large percentages of  disconnected youth and large state allotments. Based on this process we  selected Arizona, Michigan, and Texas. In aggregate, these 3 states  received approximately 12 percent of total PY2016 WIOA Youth funds.", "In each of the three states we selected, we visited three separate local  workforce development areas, for a total of nine local areas. For our local  workforce development area site selection we considered a number of  factors, including disconnected youth rate data, input from state officials,  and logistical feasibility. We also selected workforce development areas  that would provide a mix of urban and rural areas. Specifically, we  analyzed data on the percentage of disconnected youth at the county or  metro area level and selected local areas with relatively high percentages  of disconnect youth. To ensure that we selected workforce areas that  would provide both urban and rural perspectives, we relied on county  classifications by the U.S. Census Bureau. As we narrowed the list of site visit candidates, we reviewed the local area strategic plans published  on the state workforce board\u2019s website to gain additional insight into  youth-specific programs in these areas. We also considered state  officials\u2019 input regarding workforce development areas in their states.  Lastly, in making our final selections, we considered the logistical  feasibility of traveling between local areas.", "We held interviews with state workforce officials in these states by phone  and then conducted site visits to the three selected workforce  development areas in each of the three selected states. In the each local  area we visited, we interviewed local workforce development board staff,  including, for example, executive directors, youth program supervisors,  workforce youth specialists, community and business liaisons or business  service managers, and others. Members of the workforce development  board, in addition to board staff, participated in some of these interviews.  In addition, in these local areas we interviewed staff from American Job  Centers (one-stops), contracted youth service providers, and WIOA youth  partner organizations, such as community colleges and other educational  services providers, Job Corps, vocational rehabilitation agencies, and the  Temporary Assistance for Needy Families (TANF) program. In one of the  three states we visited, we also spoke with a small number of employers  in each local area that had provided work experiences or hired youth  through the WIOA program. These interviews were designed to obtain  information on a variety of topics related to our research objectives, such  as: how local workforce practitioners were serving out-of-school youth  through the WIOA program;  changes made as a result of the transition from WIA to WIOA;  recruitment and service delivery strategies focused on out-of-school  youth;  challenges related to implementing WIOA and meeting new WIOA  spending requirements; and  federal guidance and technical assistance.", "We conducted this performance audit from December 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Cindy Brown Barnes (Director),  Betty Ward Zukerman (Assistant Director), David Perkins (Analyst-in- Charge), David Barish, and Kelly Turner made significant contributions to  this report. In addition, key support was provided by James Ashley,  Susan Baker, James Bennett, Stephen Betsock, Holly Dye, David  Forgosh, Laura Hoffrey, Benjamin Sinoff, Almeta Spencer, and Walter  Vance."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Workforce Innovation and Opportunity Act: Federal Agencies\u2019  Collaboration Generally Reflected Leading Practices, but Could Be  Enhanced. GAO-18-171. Washington, D.C.: February 8, 2018.", "Workforce Innovation and Opportunity Act: Selected States\u2019 Planning  Approaches for Serving Job Seekers and Employers. GAO-17-31.  Washington, D.C.: November 15, 2016.", "Workforce Innovation and Opportunity Act: Information on Planned  Changes to State Performance Reporting and Related Challenges,  GAO-16-287. Washington, D.C.: March 7, 2016).", "Workforce Innovation and Opportunity Act: Performance Reporting and  Related Challenges. GAO-15-764R. Washington, D.C.: September 23,  2015.", "Transportation-Disadvantaged Populations: Federal Coordination Efforts  Could Be Further Strengthened. GAO-12-647. Washington, D.C.: June  20, 2012.", "Disconnected Youth: Federal Actions Could Address Some of the  Challenges Faced by Local Programs That Reconnect Youth to  Education and Employment. GAO-08-313. Washington, D.C.: February,  28, 2008."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-166", "url": "https://www.gao.gov/products/GAO-19-166", "title": "Climate Change: Activities of Selected Agencies to Address Potential Impact on Global Migration", "published_date": "2019-01-17T00:00:00", "released_date": "2019-01-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The effects of climate change, combined with other factors, may alter human migration trends across the globe, according to the International Organization for Migration. For example, climate change can increase the frequency and intensity of natural disasters, causing populations to move from an area. Climate change can also intensify slow-onset disasters, such as drought, crop failure, or sea level rise, potentially altering longer-term migration trends.", "GAO was asked to review how U.S. agencies address climate change as a potential driver of global migration. For State, USAID, and DOD, this report (1) describes executive branch actions related to climate change and migration from fiscal years 2014 through 2018; (2) examines the extent to which the agencies discussed the potential effects of climate change on migration in their plans and risk assessments; and (3) describes agency activities on the issue. GAO analyzed documents on administration priorities; reviewed agency plans, risk assessments, and documentation of agency activities; and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["From fiscal years 2014 through 2018, a variety of executive branch actions related to climate change\u2014such as executive orders and strategies\u2014affected the Department of State (State), the U.S. Agency for International Development (USAID), and the Department of Defense (DOD), including their activities that could potentially address the nexus of climate change and migration. For example, a fiscal year 2016 presidential memorandum\u2014rescinded in 2017\u2014required agencies to develop implementation plans to identify the potential impact of climate change on human mobility, among other things. In general, however, climate change as a driver of migration was not a focus of the executive branch actions. For example, a fiscal year 2014 executive order\u2014also rescinded in 2017\u2014requiring agencies to prepare for the impacts of climate change did not highlight migration as a particular concern.", "State, USAID, and DOD have discussed the potential effects of climate change on migration in agency plans and risk assessments. For example, State and USAID required climate change risk assessments when developing country and regional strategies, and a few of the strategies reviewed by GAO identified the nexus of climate change and migration as a risk. However, State changed its approach in 2017, no longer providing missions with guidance on whether and how to include climate change risks in their integrated country strategies. In doing so, State did not include in its 2018 guidance to the missions any information on how to include climate change risks, should the missions choose to do so. Without clear guidance, State may miss opportunities to identify and address issues related to climate change as a potential driver of migration.", "The three agencies have been involved in climate change related activities but none were specifically focused on the nexus with global migration. For example, USAID officials said that the agency's adaptation efforts, such as its Pastoralist Areas Resilience Improvement through Market Expansion project in Ethiopia, were the most likely to include activities, such as enhancing resilience, that can indirectly address the issue of climate change as a driver of migration."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that State provide missions with guidance that clearly documents its process for climate change risk assessments for country strategies. In commenting on a draft of this report, State indicated that it would update its integrated country strategy guidance and will specifically note that missions have the option to provide additional information on climate resilience and related topics."]}], "report": [{"section_title": "Letter", "paragraphs": ["Around the world, climate change is predicted to affect precipitation  levels, increase temperatures, and contribute to more frequent natural  disasters like flooding and drought, among other effects, according to the  Intergovernmental Panel on Climate Change (IPCC).  At the same time,  recent trends suggest that the number of global migrants will continue to  increase, according to the International Organization for Migration  (IOM).  While many factors, including lack of economic opportunity and  political instability, influence the decision to migrate, these international  organizations predict that climate change will further increase global  human migration, but they do not know to what extent. Nonetheless, the  potential link between climate change and migration has raised both  humanitarian and national security concerns for the U.S. government.", "As a result of the risks that climate change poses to environmental and  economic systems,  in February 2013 we placed Limiting the Federal  Government\u2019s Fiscal Exposure by Better Managing Climate Change  Risks on our High Risk List.  As we reported in February 2017, for  example, from fiscal years 2005 through 2014, the federal government  obligated at least $277.6 billion across 17 federal departments and  agencies for disaster assistance programs and activities.  Extreme weather events\u2014such as floods, drought, and hurricanes\u2014are expected  to increase or worsen because of climate change, according to the U.S.  Global Change Research Program.  In February 2017, we reported that  the federal government needs a cohesive strategic approach with strong  leadership and the authority to manage climate change risks that  encompasses the entire range of related federal activities and addresses  all key elements of strategic planning.", "You asked us to review issues related to human migration due to climate  change. In this report, we (1) describe executive branch actions related to  climate change and migration from fiscal years 2014 through 2018; (2)  examine the extent to which the Department of State (State), the U.S.  Agency for International Development (USAID), and the Department of  Defense (DOD) have discussed the potential effects of climate change on  migration in their plans and risk assessments; and (3) describe State,  USAID, and DOD activities, if any, that are related to climate change and  global migration.", "To describe executive branch actions related to climate change and  migration from fiscal years 2014 through 2018, we reviewed key  documents related to climate change that were developed during this time  period. These documents included executive orders, budget requests,  and strategies. We chose fiscal years 2014 through 2018 as our time  frame based on our review of recent executive orders related to climate  change. To examine State, USAID, and DOD discussions of the potential  effects of climate change on migration in their plans and risk  assessments, we reviewed relevant documents completed since fiscal  year 2014. These documents included agency adaptation plans and  country and regional strategies. We selected State, USAID, and DOD  because the agencies\u2019 missions of diplomacy, development, and defense  provide the foundation for promoting and protecting U.S. interests  abroad. To describe State, USAID, and DOD activities that are related to  climate change and global migration, we identified and examined agency  activities potentially related to the issue. For example, we analyzed State  and USAID data such as project descriptions for activities that received  adaptation funding from the Global Climate Change Initiative. We  determined that the USAID and State adaptation project data were  sufficiently reliable for the purposes of describing their efforts. For all  three objectives we interviewed officials from State, USAID, and DOD.  Further details on our scope and methodology can be found in appendix I.", "We conducted this performance audit from October 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Potential Impacts of Climate Change on Migration", "paragraphs": ["According to international and U.S. government sources, climate change  poses serious risks to many of the physical and ecological systems upon  which society depends, although the exact details of these impacts are  uncertain. Climate change may intensify slow-onset disasters, such as  drought, crop failure, and sea level rise. Climate change is also increasing  the frequency and intensity of extreme weather events, including sudden- onset disasters, such as floods, according to key scientific  assessments.  These effects of climate change may alter existing  migration trends across the globe, according to IOM. (See appendix II for  further discussion of climate change as a driver of migration in seven  geographic regions.) For example, sea level rise, a slow-onset disaster,  may result in the salinization of soil and drinking water, thereby  undermining a country or community\u2019s ability to sustain livelihoods and  maintain critical services, which could cause some people to migrate.  Sudden-onset disasters may also contribute to migration as people flee  natural disasters, in most cases leading to temporary displacement. For  example, people may either voluntarily migrate, or be forced to migrate, to  earn money needed to rebuild damaged homes after flooding, especially  as extreme weather events increase in intensity and number. If unable or  unwilling to migrate, people may find themselves trapped or choosing to  stay in deteriorating conditions. Sources agree that the effects of climate  change generally impact internal migration, while migration across  international borders due to climate change is less common.", "In deciding whether to migrate, people weigh multiple factors including  economic and political factors, social or personal motives, or  demographic pressures. The effects of climate change add another layer  of complexity to this decision, but there is debate about the role climate  change plays in migration. Figure 1 depicts how climate change may  influence other factors that drive the decision to migrate or stay.", "There are limitations to reliably estimating the number of people displaced  by climate change because there are no reliable global estimates for  those migrating due to slow-onset disasters, and estimates for those  migrating due to sudden-onset disasters are based on limited data,  according to IOM. The lack of reliable data is due in part to the multi- causal nature of migration. Further, IOM notes that forecasts for the  number of environmental migrants by 2050 vary from 25 million to 1  billion.  They and others have questioned the methodologies used to  arrive at even these broad estimates."], "subsections": []}, {"section_title": "Climate Change Impacts on Migration that May Affect National Security", "paragraphs": ["Migration, potentially driven by climate change, may contribute to  instability and result in national security challenges, according to some  international organizations and national governments.  For example, an  influx of migrants to a city may put pressure on existing resources,  resulting in tensions between new migrants and residents, or between the  population and its government. The U.S. Global Change Research  Program has also stated that migration, such as displacement resulting  from extreme weather events, is a potential national security issue. At  different times, the United Nations General Assembly and, in 2014, DOD  have deemed climate change to be a threat multiplier, as the effects of  climate change could increase competition for resources, reduce  government capacity, and threaten livelihoods, thereby causing instability  and migration. Further, the U.S. intelligence community considers  climate change to increase the risks of humanitarian disasters, conflict,  and migration.", "Identifying the cause of a conflict, however, is complicated, and experts  debate the connections linking climate, migration, and national security.  For example, IOM has reported that existing evidence on climate  migration and instability must be considered with caution.  Further, some  studies stress that other factors can mitigate the effects of climate change  on migration and stability, including governance and community  resilience, as the World Bank has reported."], "subsections": []}, {"section_title": "U.S. Government Agency Roles Related to Climate Change", "paragraphs": ["State, USAID, and DOD are among the U.S. government agencies with a  role in responding to issues related to climate change, including as a  driver of migration.", "State interacts with foreign governments and international  organizations focused on climate change and migration primarily  through the Bureau of Oceans and International Environmental and  Scientific Affairs (State/OES) and the Bureau of Population,  Refugees, and Migration (State/PRM).", "USAID supports a range of development programs that help to  mitigate the effects of climate change through the Bureaus for  Economic Growth, Education and Environment; Democracy, Conflict  and Humanitarian Assistance; Food Security; Asia; and Africa; and  individual USAID missions.  Additionally, USAID\u2019s Offices of U.S.  Foreign Disaster Assistance (USAID/OFDA) and Food for Peace  (USAID/FFP) lead and coordinate the U.S. government\u2019s emergency  responses to sudden- and slow-onset disasters, and complex  emergencies overseas.", "DOD assists in the United States\u2019 humanitarian response to sudden- onset disasters abroad through its six geographic combatant  commands, with support from the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict and the Joint Staff\u2019s  Office of Humanitarian Engagement."], "subsections": []}]}, {"section_title": "Executive Branch Actions Related to Climate Change and Migration from Fiscal Years 2014 through 2018", "paragraphs": ["Climate change as a driver of migration was not a focus of the policy  documents we reviewed for either the current or previous administrations  during fiscal years 2014 through 2018. Our review of executive actions,  budget requests, and executive branch strategies that affected State,  USAID, and DOD found only brief mentions of climate change as a driver  of migration. None of the documents we reviewed reflected a priority for  assessing or addressing climate change as a driver of migration, although  these documents reflect a shift in administrations\u2019 climate change  priorities more generally."], "subsections": [{"section_title": "Executive Actions", "paragraphs": ["The previous administration issued two executive orders and a  presidential memorandum related to climate change. These executive  actions had a policy of improving climate preparedness and resilience,  factoring climate-resilience considerations into agencies\u2019 international  development decisions, and creating forums for interagency coordination.  In March 2017, the current administration issued a subsequent executive  order revoking some of the previous executive actions related to climate  change. See figure 2 for a timeline of these executive actions.", "The previous administration issued three executive actions related to  climate change, which included requirements focused on agencies\u2019  considerations of the impacts of climate change and established forums  for interagency coordination. The current administration issued an  executive action related to energy independence and climate change.", "Executive Order 13653: Preparing the United States for the  Impacts of Climate Change. Executive Order 13653 stated that  agencies\u2014including State, USAID, and DOD\u2014shall, among other  things, develop, implement, and update comprehensive Agency  Adaptation Plans that integrate consideration of climate change into  agency operations and overall mission objectives.  Executive Order  13653 also established the Council on Climate Preparedness and  Resilience.", "Executive Order 13677: Climate-Resilient International  Development. Executive Order 13677 requires State, USAID, and  other U.S. government agencies with direct international development  programs and investments to incorporate climate-resilience  considerations into decision making by assessing climate-related risks  to agency strategies, and to adjust relevant strategies as appropriate,  among other things.  Executive Order 13677 also established the  Working Group on Climate-Resilient International Development as  part of the Council on Climate Preparedness and Resilience.", "2016 Presidential Memorandum on Climate Change and National  Security. The 2016 presidential memorandum required, among other  things, that agencies, including State, USAID, and DOD, develop an  agency-specific approach to address climate-related threats to  national security. It also required agencies to develop implementation  plans that would describe how they would identify the potential impact  of climate change on human mobility, including migration and  displacement, and the resulting impacts on national security, among  other requirements, and stated that the effects of climate change can  lead to population migration within and across international borders,  spur crises, and amplify or accelerate conflict in countries or regions  already facing instability.  The 2016 memorandum also established  the Climate and National Security Working Group.", "Executive Order 13783, Promoting Energy Independence and  Economic Growth. Executive Order 13783 revoked Executive Order  13653 and the 2016 presidential memorandum, among other things,  as seen in figure 2."], "subsections": []}, {"section_title": "Presidential Budget Requests for Fiscal Years 2017 and 2018", "paragraphs": ["Priorities related to climate change shifted between the past two  administrations as reflected in a recent budget request that reduced some  climate change funding affecting U.S. foreign assistance.", "2017 Presidential Budget Request. The previous administration  stated in its fiscal year 2017 budget request that \u201cthe challenge of  climate change will define the contours of this century more  dramatically than any other\u201d and that \u201cit is imperative for the United  States to couple action on climate change at home with leadership  internationally.\u201d  The fiscal year 2017 budget request sought $1.3  billion in discretionary funding to advance the goals of the Global  Climate Change Initiative, which was established in 2010 and aimed  to promote resilient, low-emission development, and integrate climate  change considerations into U.S. foreign assistance.  The $1.3 billion  in requested funding included $750 million in U.S. funding for the  Green Climate Fund, a multilateral trust fund designed to foster  resilient low-emission development in developing countries.", "2018 Presidential Budget Request. The current administration, in its  fiscal year 2018 budget request, did not include any funding for the  Global Climate Change Initiative.  In addition, the current  administration\u2019s budget request stated that it \u201cEliminate the Global  Climate Change Initiative and fulfill the President\u2019s pledge to  cease payments to United Nations\u2019 (UN) climate change programs by  eliminating U.S. funding related to the Green Climate Fund. . .\u201d"], "subsections": []}, {"section_title": "Strategy Documents Affecting State, USAID, and DOD", "paragraphs": ["Some strategies from the current and previous administrations that affect  State, USAID, and DOD, among other agencies, reflect a shift in priorities  related to climate change. For example, the previous administration cited  climate change as a \u201ctop strategic risk\u201d in its 2015 National Security  Strategy and stated that climate change is an urgent and growing threat  to U.S. national security, contributing to increased natural disasters,  refugee flows, and conflicts over basic resources like food and water.   The current administration does not discuss climate change in its 2017  National Security Strategy.  Additionally, State and USAID have a Joint  Strategic Plan to help the agencies achieve the objectives of the National  Security Strategy. The previous State-USAID Joint Strategic Plan  included a strategic goal on \u201cpromoting the transition to a low-emission,  climate-resilient world\u201d that proposed leading international actions to  combat climate change.  The current State-USAID Joint Strategic Plan  does not have a climate change goal."], "subsections": []}]}, {"section_title": "State, USAID, and DOD Have Discussed the Potential Effects of Climate Change on Global Migration, but State Does Not Provide Clear Risk Assessment Guidance", "paragraphs": ["State, USAID, and DOD were required by executive orders to assess  climate change-related risks to their missions and, for State and USAID,  to their strategies, among other things. In response to Executive Order  13653, which has since been revoked, the agencies completed  adaptation plans that integrated considerations of climate change into  agency operations and overall mission objectives. In response to  Executive Order 13677, which has not been revoked, State and USAID  developed processes for climate change risk assessments for their  country and regional planning documents.  Although these executive  orders did not require a specific assessment of climate change as a driver  of migration, all three agencies have discussed the effects of climate  change on migration in their adaptation plans and risk assessments.  However, State lacks clear guidance on its process for assessing climate  change-related risks to its integrated country strategies."], "subsections": [{"section_title": "Agencies Discussed the Effects of Climate Change on Migration in Their 2014 Adaptation Plans", "paragraphs": ["State, USAID, and DOD each completed adaptation plans in 2014 that  included limited discussions of migration as one potential effect of climate  change. Executive Order 13653 directed the agencies to develop or  continue to develop, implement, and update comprehensive Agency  Adaptation Plans that integrate consideration of climate change into  agency operations and overall mission objectives. Each adaptation plan  was to include, among other things, a description of how the agency  would consider the need to improve climate adaptation and resilience.", "State. In its 2014 adaptation plan, State included a brief discussion of  climate change as one of multiple factors that potentially will drive  migration and impact its mission. State reported that the specific  impacts of climate change on the ability of the department to promote  peace and stability in regions of vital interest to the United States  were unknown. For example, according to the plan, an increase in  heavy precipitation events around the world could damage the electric  grid and transportation and energy water infrastructure, upon which  State depends, making it difficult to maintain operations and  diplomatic relations. In its plan, State reported that climate change  impacts may threaten international peace, civil stability, and economic  growth through aggravating existing problems related to poverty and  environmental degradation. Further, environmental and poverty- related issues and regional instability could stress relationships with  some foreign governments. However, the plan noted that specific  impacts of climate change on conflict, migration, terrorism, and  complex disasters were still unknown.", "USAID. In its 2014 adaptation plan, USAID included a brief discussion  of migration as one potential effect of climate change that could also  impact security.  USAID stated that the impact of climate change on  its programs and operations, if left unaddressed, could compromise  the agency\u2019s ability to achieve its mission. Further, USAID\u2019s plan  referred to increased migration as a potential risk of climate change.  Flooding and other extreme climate events can result in increased  migration, among other impacts, that could affect existing and planned  USAID programming. In particular, programs in areas like agriculture  and food security, global health, water and sanitation, infrastructure,  and disaster readiness and humanitarian response are vulnerable to  climate change, according to USAID. In the infrastructure area,  climate change may necessitate new protective measures for coastal  homes and infrastructure, and in some cases even mass evacuations  or permanent migration. USAID stated that climate change could  further reduce or alter the distribution of already limited resources like  food and water, or force temporary or permanent migration of  communities. According to the plan, in areas with high risk factors for  conflict, climate change stresses can aggravate tensions and  contribute to conflict.", "DOD. In its 2014 adaptation roadmap, DOD included a brief  discussion of migration as one of multiple potential effects of climate  change that could impact national security. DOD referred to climate  change as a threat multiplier that can aggravate other risks around the  world, with migration being one effect that could increase requests for  DOD to provide assistance.  The roadmap stated that as climate  change affects the availability of food and water, human migration,  and competition for natural resources, the department\u2019s unique  capability to provide logistical, material, and security assistance on a  massive scale or in rapid fashion may be called upon with increasing  frequency. Furthermore, DOD stated that the impacts of climate  change may cause instability in other countries by, among other  things, impairing access to food and water, damaging infrastructure,  uprooting and displacing large numbers of people, and compelling  mass migration. These developments, according to the department,  could undermine already fragile governments that are unable to  respond effectively, or challenge currently stable governments, as well  as increase competition and tension between countries vying for  limited resources."], "subsections": []}, {"section_title": "Few of the State and USAID Risk Assessments We Reviewed Identified the Nexus of Climate Change and Migration as a Risk", "paragraphs": ["In response to Executive Order 13677, State and USAID developed  processes for climate change risk assessments for their country and  regional planning documents.  Though these assessments are not  specific to migration, a few of the assessments identified the nexus of  climate change and migration.", "State. State required climate change risk assessments for all new  integrated country strategies drafted in 2016 or later.  We reviewed  10 integrated country strategies from the two regions that were the  first to implement the climate change risk assessment requirement\u2014 Africa, and East Asia and the Pacific. All 10 of the strategies included  climate change risk assessments, one of which\u2014Cambodia\u2014 identified migration as a risk for the country.  The Cambodia strategy  states that internal migration due to climate change hinders access to  health care and the prevention of infectious diseases like malaria. We  also reviewed 10 strategies from State\u2019s functional and regional  bureaus for assessments of climate-related risks, including 3  functional bureau strategies (State/PRM, State/OES, and State\u2019s  Bureau of International Organization Affairs) and 7 regional bureau  strategies. All of the functional bureau strategies we reviewed  identified climate change as a risk and State/PRM cited the impact of  climate change on migration. Of the regional bureau strategies we  reviewed, we found that one, the Bureau for East Asian and Pacific  Affairs, identified climate change as a driver of migration as a  challenge or risk in its region. For example, the strategy states that  climate change is becoming increasingly disruptive, potentially  increasing migration due to rising sea levels. None of the other six  regional bureau strategies we reviewed identified the nexus of climate  change and migration as a risk or challenge. However, five regional  bureaus identified climate change as a risk or challenge and one  identified migration as a risk or challenge.", "USAID. USAID also requires the integration of climate risk  management into all country or regional development cooperation  strategies drafted since October 1, 2015. Missions must document  in a climate change appendix to the strategy any climate risks they  identified and how they considered climate change in their strategy.  As of August 2018, USAID had completed five country or regional  development cooperation strategy updates initiated since October 1,  2015\u2014Uganda, Tunisia, East Africa, Sri Lanka, and Zimbabwe\u2014and  all five included the required appendix.  Of the five updated  strategies, three\u2014Uganda, Tunisia, and East Africa\u2014discuss the  indirect effect of climate change on migration, among other issues.  For example, Uganda\u2019s 2016-2021 country strategy states that  increased frequency and duration of droughts is likely to be the most  significant climate\u2010related change in Uganda. The strategy also notes  that droughts have affected, and will continue to affect, water  resources, hydroelectricity production, and agriculture, among other  sectors. As agriculture, forestry, and fisheries decline in Uganda, the  strategy asserts that people will migrate to urban areas, leading to the  formation of slums. We also reviewed USAID\u2019s nine regional  development cooperation strategies, one of which\u2014East Africa\u2014had  been updated since the requirement to include climate risk  management. Of the other eight strategies that have yet to be  updated, seven identified climate change as a challenge or risk and  three identified climate change as a driver of migration as a challenge  or risk. For example, the Southern Africa regional development  cooperation strategy states that water scarcity, natural disasters, and  other climate change related events will most likely increase migration  throughout the region. Additionally, the Asia regional development  cooperation strategy discusses the risks of climate change in urban  areas. In Asia, the number of migrants seeking economic  opportunities in urban centers is likely to increase. According to the  strategy, migrants are moving into hazard-prone areas located along  coastlines, flood plains, and other low-lying areas in many Asian  primary and secondary cities\u2014areas that experts predict will  experience more frequent and intense storm surges, floods, and  coastal erosion as a result of climate change."], "subsections": []}, {"section_title": "State Lacks Clear Guidance on its Process for Assessing Climate Change-Related Risks", "paragraphs": ["The requirement in Executive Order 13677 to assess climate change- related risks to agency strategies remains unchanged; however, State  now lacks clear guidance on its process for assessing climate change- related risks to its integrated country strategies. Specifically, State\u2019s  2016 guidance for developing integrated country strategies stated that all  missions should assess the risk of climate change on their strategies\u2019  goals and objectives  and included reference to the climate risk  screening tool\u2014a method that missions could use to assess climate  change risks.  State issued new guidance to its missions in 2018, but  this guidance does not include information on the process for assessing  climate change-related risks to agency strategies. According to State  officials, the 2018 guidance for integrated country strategies does not  reference climate change risk assessments because, in September 2017,  State decided that the strategies should not single out climate change  risks in a separate appendix. State officials said this decision resulted, in  part, from the new administration\u2019s shift in priorities on climate change.  Officials also said that this decision reflects a new approach to risk  management by State and that the missions could choose to include  climate change and other potential risks in the general risk discussion  section of their strategies. Officials from State\u2019s Office of U.S. Foreign  Assistance Resources said that it is now up to each mission to decide  whether a strategic objective may have a climate challenge. However,  those missions that choose to include an assessment of climate change  risks are not provided guidance on the process for doing so and there is  no reference to the climate risk screening tool\u2014or to climate change at  all\u2014in the 2018 guidance.", "Executive Order 13677 directed State to incorporate climate-resilience  considerations into decision making by assessing climate-related risks to  agency strategies, among other things. Subsequently, a State cable from  September 2016 further explained that State would implement the  executive order\u2019s requirement by screening for climate risks as part of the  process for drafting all new integrated country strategies. Additionally, the  Standards for Internal Control in the Federal Government state that  documentation is a necessary part of an effective internal control  system. If management determines that a principle is not relevant,  management must support that determination with documentation that  includes the rationale of how, in the absence of that principle, the  associated component could be designed, implemented, and operated  effectively.", "Because State lacks clear guidance on its process for assessing climate  change-related risks to its integrated country strategies, it is less likely  that the current round of strategies will include the assessment of climate- related risks. It is also possible that those missions that choose to  conduct climate change risk assessments will not do so in a consistent  manner. Such assessments might identify climate change as a driver of  migration, as at least one previous assessment did under the 2016  guidance. Thus, without clear guidance, missions may not examine  climate change as a risk to their strategic objectives and could miss  opportunities to improve the climate resilience of foreign assistance  activities."], "subsections": []}]}, {"section_title": "State, USAID, and DOD Have Been Involved in Various Climate Change Related Activities, but None Were Focused Specifically on Migration, and Their Participation Has Declined", "paragraphs": ["For fiscal years 2014 through 2017, State, USAID, and DOD had some  activities that could potentially address climate change as a driver of  migration, although none of these activities specifically focused on the  issue. For example, USAID has climate change adaptation activities, but  to date migration has not been a focus of this programming. With the shift  in priorities related to climate change in fiscal year 2017, agencies have  reduced some of these activities."], "subsections": [{"section_title": "State Activities", "paragraphs": ["State\u2019s offices that are focused on the issues of climate change  (State/OES) and migration (State/PRM) have participated in multilateral  activities related to climate change as a driver of migration and funded  adaptation and other activities related to the issue. State officials said that  the agency does not, however, have any activities that specifically  address migration due to climate change or environmental factors."], "subsections": [{"section_title": "Multilateral Efforts", "paragraphs": ["State has participated in multilateral activities related to climate change  and migration. With the shift in priorities related to climate change in fiscal  year 2017, the United States has disengaged from some of these  multilateral activities (see table 1).", "In addition to State\u2019s participation in the multilateral activities described in  table 2, State has provided funding for activities related to climate change  and capacity building that address natural disasters. These activities may  involve efforts potentially related to migration. For example, according to  State:", "State provided about $2 million per year, between fiscal years 2014  and 2016, to the Intergovernmental Panel on Climate Change,   which analyzed the impacts of climate change on migration in its most  recent assessment report.", "State/PRM provided about $4 million, between fiscal years 2014  through 2018, for IOM\u2019s Migrants in Countries in Crisis Initiative,  which provides guidelines to protect migrants in countries  experiencing conflict or natural disasters. IOM provides training to  countries on these guidelines. State/PRM officials said that this  initiative is not specifically related to climate change and does not  focus on specific types of disasters but does mention sudden-onset  disasters. Officials also said that IOM tries to promote a climate  change perspective in its trainings.", "State/OES provided about $78 million in adaptation funding from the  Global Climate Change Initiative to eight projects during fiscal years  2014 through 2017.  (See appendix III for a description of all eight  projects.) State/OES officials said that these projects help countries  prepare for the impacts of climate change, potentially reducing the  pressure to migrate. However, to these officials\u2019 knowledge, none of  these projects directly supported activities related to migration. For  example, State/OES provided a $4 million grant to the National  Adaptation Plans Global Network. This network focuses on increasing  the capacity of governments to identify and assess climate risks,  integrate these risks in planning, develop a pipeline of projects to  address these risks, identify and secure funding for projects, and track  progress toward resilience targets. Adaptation activities occurred in  over 35 countries.", "With the shift in priorities related to climate change in fiscal year 2017,  State discontinued some of these efforts. For example, funding for the  Global Climate Change Initiative was not included in the President\u2019s  budget request for fiscal year 2018. State/OES officials said that the  agency does not plan to fund additional adaptation activities and has not  requested additional funding for the activities. According to a State  official, PRM had been in discussion with IOM to develop a project  proposal that would have assisted the governments of Small Island  Developing States in adapting their migration policies to account for  challenges and opportunities associated with environmental degradation,  ecosystem loss, climate change impacts, and natural disasters.  State/PRM stopped further development of the proposal following the  change in administrations. Additionally, according to a State official, the  department made some efforts at the end of the previous administration  to develop a formal position on the topic of climate change as a driver of  migration. For example, State drafted an internal document to help clarify  its role in responding to the humanitarian aspects of sudden-onset and  slow-onset climate events. This initial work stopped under the current  administration."], "subsections": []}]}, {"section_title": "USAID Activities", "paragraphs": ["USAID officials said that, with respect to the agency\u2019s climate-related  programming, its climate change adaptation programming was the most  likely to include activities related to migration or displacement, although a  broad swath of USAID development programming has the potential to  build host country resilience. Officials stated that, to date, migration has  not been a primary motivation for the agency\u2019s climate-related or disaster  assistance programming. However, officials said that, in a humanitarian  crisis or under some economic conditions, development programming can  reduce displacement or the pressure to migrate\u2014such as by fostering  greater resilience to drought or other adverse conditions\u2014and that this is  also true of climate-related programming. USAID also provides  humanitarian assistance in response to natural disasters that displace  people. Officials said that USAID recognizes the links between  displacement and natural disasters, but that the agency does not have  specific programs linking disaster assistance, migration, and climate  change."], "subsections": [{"section_title": "Adaptation Efforts", "paragraphs": ["USAID identified about 250 activities that received adaptation funding  from the Global Climate Change Initiative during fiscal years 2014  through 2016. Our analysis of the descriptions of these activities  determined that none directly mentioned any efforts specifically related to  migration. Officials emphasized that the connection between climate  change and migration tends to be indirect and shaped by other more  immediate factors. USAID\u2019s data on activities that received adaptation  funding identified 38 beneficiary countries, as well as activities described  generally as implemented at the regional or global level.  For activities  where USAID\u2019s data identified a specific region, most activities were  located in Africa followed by Asia and Latin America and the Caribbean.", "Examples of the types of activities that received adaptation funding from  the Global Climate Change Initiative during fiscal years 2014 through  2016 include:", "The Mali Climate Change Adaptation Activity, which aims to build  resilience to current climate variability and increase resilience to  longer-term climate change effects. This activity is also working to  strengthen the capacity of Mali\u2019s meteorological agency to provide  improved climate information as well as to incorporate climate  considerations into local-level planning. The total estimated cost is  about $13 million over 5 years.", "The activity for Climate-Resilient Ecosystems and Livelihoods, which  ended in September 2018, aimed to increase Bangladesh\u2019s resilience  to natural hazards by working with community-based organizations,  government ministries, and technical agencies. This activity provided  technical assistance to the Government of Bangladesh and local  communities to improve ecosystem conservation and resilience  capacity. The total estimated cost was about $33 million in funding  over 6 years.", "The activity for Pastoralist Areas Resilience Improvement through  Market Expansion, which aims to support pastoralists in Ethiopia via  expansion of markets and long-term behavior change (see fig. 3).  USAID officials cited this activity as an example of adaptation efforts  that indirectly address the issue of climate change as a driver of  migration. The activity has three interrelated objectives: increasing  household incomes, enhancing resilience, and bolstering adaptive  capacity to climate change among pastoral people in Ethiopia. An  evaluation of the activity found that migration is a coping strategy for  dealing with climate shocks, although participants said that drought is  becoming more frequent, placing a severe strain on traditional coping  mechanisms, such as migration and selling cattle, and that permanent  migration is not a preferred strategy. The total estimated cost is about  $60 million in funding over 6 years.", "With the shift in priorities related to climate change, funding for USAID\u2019s  climate change adaptation activities has decreased. Missions may  continue to fund their adaptation activities with discretionary funds or  other earmarked, sector funding, provided the activities further the  funding source\u2019s objective, according to USAID. For example, in some  cases, missions are using Water sector funding to continue some of their  adaptation work. USAID also said that among the agency\u2019s goals are to  increase the resilience of USAID partner countries to recurrent crises,  including climate variability and change."], "subsections": []}, {"section_title": "Humanitarian Aid and Disaster Assistance Efforts", "paragraphs": ["In addition to USAID\u2019s climate change adaptation programming,  USAID/OFDA and USAID/FFP provide emergency humanitarian  assistance to people affected by sudden-onset disasters\u2014such as  hurricanes and floods\u2014and slow-onset and extended disasters, including  droughts and conflicts. Some of this assistance helps people who have  been displaced by disaster. USAID officials stated that although disasters  cause mainly temporary displacement, the relationship among  humanitarian assistance, climate change, and migration is very complex  and depends on both climatic and non-climatic factors. USAID/OFDA  responded to 267 disasters from fiscal year 2014 through June 2018,  according to agency data. For example, USAID/OFDA responded to the  effects of Hurricane Matthew in Haiti in October 2016, as seen in figure 4,  including helping temporarily displaced people."], "subsections": []}]}, {"section_title": "DOD Activities", "paragraphs": ["DOD assists in the U.S. government response to overseas disasters,  including helping people displaced by such disasters, regardless of the  cause of the disaster. These efforts are not specific to climate change as  a driver of migration. For example, officials from DOD\u2019s geographic  combatant commands said that, to the extent they address climate  change, migration is not a focus of those efforts and they view migration  as caused by security and economic issues.", "Between fiscal years 2014 and 2018, Congress has appropriated to DOD  between $103 and $130 million per year for Overseas Humanitarian,  Disaster, and Civic Aid. Officials said that the geographic combatant  commands use most of this funding for steady state humanitarian  assistance related to health, education, basic infrastructure, and disaster  preparedness with a smaller amount set aside for immediate disaster  assistance although that varies based on emergency requirements. DOD  officials said that they have not seen any changes to this funding or  associated activities with the change of administrations in fiscal year  2017. DOD officials we spoke with also emphasized that USAID/OFDA is  the lead agency for the U.S. government\u2019s response to disasters  overseas. USAID/OFDA formally requested DOD support on about 10  percent of the foreign disaster assistance provided by USAID/OFDA,  according to USAID data for fiscal year 2014 through June 2018 and  DOD officials. DOD assistance is typically provided for the largest, most  complex disasters, according to agency officials.", "According to a July 2015 assessment conducted by the geographic  combatant commands, while their activities vary, each command works  with partner nations to increase their abilities to reduce the risks and  effects from environmental impacts and climate-related events, including  severe weather and other hazards.  For example, in the report, U.S.  Southern Command stated that it had requested funding to pre-position  assets for when a severe storm threatens Haiti to be able to respond  immediately to a potential disaster. U.S. Southern Command officials said  that they work with partner nations to encourage residents experiencing  extreme weather to remain where they are because it is easier to provide  help to people who stay in one place. Officials from U.S. Southern  Command and U.S. Africa Command also said that the major factors  driving migration in their regions are security and economic issues."], "subsections": []}, {"section_title": "Interagency Forums", "paragraphs": ["State, USAID, and DOD have participated in interagency forums  regarding climate change, which may have addressed its effects on  migration. With changes to priorities regarding climate change in fiscal  year 2017, these forums have been disbanded or are not meeting.", "The Council on Climate Preparedness and Resilience. The  Council on Climate Preparedness and Resilience, of which State,  USAID, and DOD were members, was established to facilitate the  integration of climate science in policies and planning of government  agencies, including by promoting the development of climate change  related information, data, and tools, among other things. Additionally,  the council was to develop, recommend, and coordinate interagency  efforts on priority federal government actions related to climate  preparedness and resilience. According to State officials, the council  began working with the National Security Council and other agencies  to facilitate greater interagency cooperation on adaptation. In addition,  a task force on the council was discussing the federal role in  addressing displacement related to climate change. The council was  disbanded when Executive Order 13783 revoked Executive Order  13653, which had established the council.", "The Working Group on Climate-Resilient International  Development. The Working Group on Climate-Resilient International  Development, of which State and USAID were members, was  established by Executive Order 13677 and placed under the Council  on Climate Preparedness and Resilience.  The working group\u2019s  mission includes developing guidelines for integrating considerations  of climate-change risks and climate resilience into agency strategies,  plans, programs, projects, investments, and related funding decisions,  among other things. Additionally, the working group was tasked with  facilitating the exchange of knowledge and lessons learned in  assessing climate risks to agency strategies, among other things.  USAID officials said that the working group had not discussed climate  change as a driver of migration. While the working group has not been  formally disbanded, it has not met since at least November 2017  according to USAID.", "The Climate and National Security Working Group. The Climate  and National Security Working Group, of which State, USAID, and  DOD were members, was established by the 2016 presidential  memorandum.  The chairs of the working group were to coordinate  the development of a strategic approach to identify, assess, and share  information on current and projected climate-related impacts on  national security interests and to inform the development of national  security doctrine, policies, and plans, among other things. According  to the memorandum, the working group was to provide a venue for  enhancing the understanding of the links between climate change- related impacts and national security interests and for discussing  opportunities for climate mitigation and adaptation activities to  address national security issues. This working group was disbanded  when Executive Order 13783 revoked the 2016 presidential  memorandum, which had established the working group."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["State, USAID, and DOD assessments and activities have not focused  specifically on the nexus of climate change and migration. State did  identify migration as a risk of climate change in at least one of its climate  change risk assessments for the department\u2019s country strategies.  However, State now lacks clear guidance on its process for assessing  climate change-related risks to its integrated country strategies. State\u2019s  current guidance for these country strategies no longer mentions a  climate change risk assessment and does not provide missions with  information about the climate risk screening tool that can be used to  conduct such an assessment. As such, missions are less likely to  examine climate change as a risk to their strategic objectives, or to do so  in a consistent manner, and thus may not have the information they would  need to identify migration as a risk of climate change. By clearly  documenting and providing guidance on how to assess the risk of climate  change, State would ensure that the department examines the potential  risks of climate change on its foreign assistance activities."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to State:  The Secretary of State should ensure that the Director of the Office of  U.S. Foreign Assistance Resources provides missions with guidance that  clearly documents the department\u2019s process for climate change risk  assessments for integrated country strategies. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to State, USAID, and DOD for review  and comment. State provided written comments, which we have reprinted  in appendix IV. In its comments, State did not oppose the  recommendation and noted that the agency will update its integrated  country strategy guidance by June 30, 2019 to inform missions that they  have the option to include an annex on climate resilience, as well as other  topics. However, State also indicated that the agency will begin working  with stakeholders to consider whether to recommend that the Secretary of  State ask the President to rescind Executive Order 13677: Climate- Resilient International Development.", "USAID also provided written comments, which we have reprinted in  appendix V. In its letter, USAID provided some additional information  about its programs and its proposed transformation effort. USAID and  DOD provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  requesters, Secretary of State, the Administrator of USAID, and the  Secretary of Defense. 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  David Gootnick at (202) 512-3149 or gootnickd@gao.gov, or Brian J.  Lepore at (202) 512-4523 or leporeb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes executive branch actions related to climate  change and migration from fiscal years 2014 through 2018; (2) examines  the extent to which the Department of State (State), the U.S. Agency for  International Development (USAID), and the Department of Defense  (DOD) have discussed the potential effects of climate change on  migration in their plans and risk assessments; and (3) describes State,  USAID, and DOD activities, if any, that are related to climate change and  global migration. We chose fiscal years 2014 through 2018 as our time  frame based on our review of recent executive orders related to climate  change. We selected State, USAID, and DOD because the agencies\u2019  missions of diplomacy, development, and defense provide the foundation  for promoting and protecting U.S. interests abroad.", "To describe executive branch actions related to climate change and  migration from fiscal years 2014 through 2018, we reviewed documents  that reflect priorities of the previous and current administrations.  Specifically, we reviewed budget requests and enacted appropriations  between fiscal years 2014 through 2018 for funding priorities related to  climate change and U.S. foreign assistance. In addition, we reviewed  executive actions and executive branch strategies that applied to State,  USAID, and DOD between fiscal years 2014 through 2018 for executive  and national security priorities related to climate change. For example, we  reviewed the current and previous national security strategies. strategies and seven regional bureau strategies. For USAID, we  examined the five country and regional strategies that were required to  include a climate risk assessment at the time of our review: Uganda,  Tunisia, East Africa, Sri Lanka, and Zimbabwe. We also reviewed all nine  USAID regional strategies. For both State and USAID, we reviewed the  selected strategies by searching for information related to migration and  climate change. To determine whether State clearly documents the  department\u2019s current climate risk assessment process for integrated  country strategies, we compared State\u2019s 2018 guidance for developing  integrated country strategies with standards related to documentation in  Standards for Internal Control in the Federal Government and previous  State guidance issued in 2016, which was created in response to  Executive Order 13677\u2019s requirements to assess climate change risks to  strategies, among other things. to these issues. The agency then provided us with data for about 250  activities from its annual operational plans for fiscal years 2014  through 2016, the 3 years during the period we reviewed in which it  received adaptation funding. USAID identified these activities based  on whether the agency had tagged them in its plans as having an  \u201cadaptation key issue.\u201d USAID excluded projects that had planned  attributions to the adaptation key issue of less than $250,000 in a  given fiscal year, as well as certain other activities such as those that  focused on project support. We then conducted an automated review  of the activity description fields provided by USAID for terms related to  migration and other descriptive information such as locations of  activities. Because no USAID adaptation activities specifically  mentioned migration, for the purposes of this report we chose  illustrative examples to provide context for the types of activities the  agency has funded.", "DOD officials we met with did not identify any specific activities related  to climate change as a driver of migration. DOD officials from the  Assistant Secretary of Defense for Special Operations and Low  Intensity Conflict and the geographic combatant commands generally  discussed DOD activities related to humanitarian assistance and  disaster response as most relevant to our inquiry. Because DOD  works in coordination with USAID\u2019s Office of U.S. Foreign Disaster  Assistance on disaster assistance we also reviewed USAID data on  its disaster response activities during this period.", "We determined that the USAID and State adaptation project data and  USAID disaster assistance data were sufficiently reliable for the purposes  of describing these efforts.", "State, USAID, and DOD to obtain information on whether changes in  government priorities related to climate change affected their activities.", "We conducted this performance audit from October 2017 to January 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."], "subsections": []}, {"section_title": "Appendix II: Regional Focus on Climate Change as a Driver of Global Migration", "paragraphs": ["This appendix provides a review by region of observed and projected  climate change effects, migration trends, and challenges in stability and  security. Multiple sources we used for this overview make a connection  between climate change and such events as rising sea levels, higher  temperatures, and an increase in the number and severity of extreme  weather events.  The following regions are discussed: Asia, South  America, the Arctic, Sub-Saharan Africa, the Middle East and North  Africa, Oceania, and Central America and the Caribbean. We have  provided an overview for each region and a focus on one country or  territory in the region. international and regional organizations, including a variety of  organizations within the United Nations, the World Bank, regional  development banks, the European Union, and others. Third, we reviewed  relevant public documents from U.S. government agencies, including the  Department of Defense, the U.S. Agency for International Development  (USAID), and the United States Institute of Peace (USIP). Fourth, we  reviewed academic sources, research institutions, and documents from  the relevant country\u2019s national government. population.  Economic conditions may be a factor for people deciding  whether to migrate or stay in their country of origin.", "Remittances as Percent of GDP: The money international migrants  transfer to recipients in their country of origin, expressed as a  percentage of the origin country\u2019s GDP.  Sources agree that  remittances support resilience in origin countries.", "Agriculture, Fishing, Forestry as Percent of GDP: A measure of  the value added to an economy from the agricultural sector, which  includes forestry, hunting, fishing, and the cultivation of crops and  livestock, expressed as a percentage of the country\u2019s GDP.  Countries that depend on the agricultural sector may be vulnerable to  the effects of climate change, according to the World Bank.", "Percent of Population in Cities: The population living in areas  classified as urban according to criteria each country uses.  Today,  more than half of the global population lives in cities. Migration, in  some cases due to climate change, is an important driver of urban  growth, according to IOM. Cities are also expected to face increasing  risks from rising sea levels, flooding, storms, and other climate  change effects.", "Net Migration Rate: A measure of the number of people leaving a  country compared to the number of people entering a country,  expressed as a number per 1,000 people.", "The effects of climate change in Asia may impact migration and stability  according to the Intergovernmental Panel on Climate Change (IPCC) and  the Asian Development Bank (ADB). In coastal areas, effects of climate  change include rising sea levels, storm surges, and others. Receding  glaciers in mountanous areas may also cause flooding, and monsoons in  a warmer climate may be more severe. Heat extremes and more rainfall  are a particular concern in Southeast Asia. Changes in precipitation and  drought in Asia may exacerbate food security challenges, and contribute  to people deciding to migrate. Increases in migration, partly stemming  from the effects of climate change in surrounding rural areas, may put  pressure on existing urban infrastructure. Rural migrants may settle in  informal communities on the outskirts of cities, areas that have little  resilience to natural disasters. Although the World Bank and others agree  that climate change largely causes internal migration, some evidence  shows that the impact of climate change contributes to cross-border  migration in Asia. Large numbers of migrants, along with other  destabilizing factors, may contribute to instability and conflict, according to  the IPCC. The effects of climate change on livelihoods, for example, could  increase migration, strain governance, and contribute to conflict as a  result. Bangladesh is one example where decreased yields from  agriculture and fisheries have contributed to migration to the country\u2019s  coastal cities, which face their own climate change challenges."], "subsections": [{"section_title": "Bangladesh: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Total Population 164,700,000", "paragraphs": ["Bangladesh\u2019s high population density and geography make the country  susceptible to the effects of climate change, according to the World Bank,  and others. Bangladesh\u2019s coasts and river banks are vulnerable to  sudden-onset events such as tropical cyclones and flooding. Cyclone Aila  in 2009, for example, caused widespread flooding in the southern coastal  areas of Bangladesh and impacted millions of people. The storm washed  away embankments that protected coastlines and caused severe damage  to crops and livelihoods. Tropical Cyclone Mora in 2017 damaged  thousands of homes and displaced an estimated 200,000 people.  Increases in the number and intensity of tropical cyclones, which some  predict will occur in a warmer climate, could have severe impacts on  homes, livelihoods, and food security. Bangladesh also experiences  many slow-onset climate change events, such as rising sea levels and  increasingly severe droughts, which are projected to intensify with climate  change. Bangladesh would lose an estimated 17.5 percent of its land if  the sea level rose 1 meter, as the International Organization for Migration  (IOM) has reported. Projected changes in precipitation levels could cause  drought and food insecurity in the northwest and salt-water intrusion could  reduce crop yields in the southwest."], "subsections": []}, {"section_title": "Net Migration Rate per 1000 people -3.2", "paragraphs": [], "subsections": [{"section_title": "Map of Bangladesh", "paragraphs": ["Migration is a common adaptation strategy to climate change in  Bangladesh, according to the ADB. For example, some farmers have  adapted to salt water intrusion and destroyed crops by switching to salt- tolerant rice production or shrimp cultivation. Others have migrated, often  to Bangladesh\u2019s cities to find work less dependent on agriculture. Many  new migrants to Bangladesh\u2019s cities live in informal settlements that lack  the resilience to withstand sudden-onset climate events. The capital city,  Dhaka, is a common destination for migrants displaced by salt-water  intrusion, flooding, and river erosion, according to IOM. Dhaka, like many  coastal cities in South Asia, is located on a low-lying riverbank and faces  increasing risks of extreme flooding. For example, past floods in Dhaka  have destroyed homes and contaminated drinking water, creating  significant health hazards. In some cases, individuals migrate to cities  temporarily for work and return home after the agricultural off season  ends. Bangladeshis also provide a significant number of labor migrants to  the Gulf States and Malaysia. Remittances from international migrants  represent 5.4 percent of the country\u2019s GDP, and may help to support  resilience to climate change, according to IOM, and others. These  migration trends may intensify in the future. One study estimates 9.6  million people will migrate from 2011 to 2050 due to the effects of climate  change.", "Challenges in Stability and Security  Migration due to climate change is cited as a potential destabilizing factor  in Bangladesh by ADB, and others. The low-income population in  Bangladesh is dependent on agriculture, making the effects of climate  change\u2014including impacts on food security\u2014a particular concern. By  2030, these effects on livelihoods and food security could increase the  poverty rate in Bangladesh by 15 percent, as the IPCC has reported.  Given the proximity of Bangladesh to India, some individuals may also  choose to cross the border. Increased migration to India is a potential  concern, according to some sources, as India may not have the  resources to absorb large numbers of Bangladeshi migrants.", "The CNA Corporation, National Security and the Threat of Climate Change (Alexandria,  VA: 2007); and Population Council, \u201cEffects of Future Climate Change on Cross-Border  Migration in North Africa and India,\u201d Population and Development Review, Vol. 36, No. 2  (2010).", "The effects of climate change in South America vary by region, according  to the the Intergovernmental Panel on Climate Change (IPCC) and  International Organization for Migration (IOM), as well as potentially  impacting migration and stability. On the coast, risks include sea level  rise, depletion of fisheries, and coral reef bleaching, according to IOM.  Coastal cities with growing populations are particularly vulnerable. Melting  glaciers in the Andean mountain region, and increased rainfall are  expected to change the distribution of water resources, and impact food  production as global demand for food is growing. Desertification and land  degradation, complicated by the effects of climate change, are  contributing to migration from rural areas to cities in South America, as  IOM has reported. An estimated 77 percent of people living in high risk  areas in South America are located in cities, according to IOM. IOM  predicts that as these people feel the effects of sea level rise and water  scarcity, they will migrate from the large coastal cities to smaller urban  areas. While South America has experienced economic growth in the last  decade, poverty rates remain high, and the effects of climate change,  including possible migration, may exacerbate inequalities, putting further  pressure on cities to meet the needs of their populations. Water security  in particular is expected to disproportionaly impact low-income  communities, according to the IPCC. For example, in Brazil, drought in  the northeast may increase migration to southern cities that are facing  rising sea levels and landslides, with consequences for food, water, and  energy security."], "subsections": []}]}]}, {"section_title": "Brazil: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Human Development Index High Gross Domestic Product (GDP) per Capita $14,103 Remittances as % of GDP 0.1 Agriculture, Fishing, Forestry as % of GDP 4.6 % Population in Cities 86.3 Net Migration Rate per 1000 people 0.0", "paragraphs": ["Observed and Projected Effects of Climate Change  Brazil\u2019s cities and rural regions may encounter a range of climate change  effects, according to the IPCC and IOM. Rural areas, particularly in the  northeast, could experience significant impacts from climate change partly  due to poverty rates, and historical vulnerability to drought. Higher  temperatures are expected to affect crop yields and household incomes,  especially for low-income communities. In northeastern Brazil,  temperatures are expected to increase and rainfall to decrease. The  northeast could see a 22 percent reduction in precipitation by 2100,  according to IPCC projections. Brazil\u2019s coastal areas, including cities, are  also vulnerable to rising sea levels, heavy precipitation, flooding, and  landslides. The vast majority of Brazil\u2019s population, about 86 percent, lives  in cities, many in coastal areas, according to the United Nations  Development Program. As their populations have grown, urban areas have  extended out. This urban growth in Brazil\u2019s megacities has caused further  increases in temperature, rainfall, and landslides. For example, current  levels of urbanization in the metropolitan area of Sao Paulo may already be  responsible for the 2\u00b0C warming observed in the city over the last 50 years,  as well as the rise in extreme rainfall, according to the IPCC. The  metropolitan area is expected to extend its area 38 percent by 2030.  Multiple studies of the effects of urbanization on Sao Paulo\u2019s climate  suggest higher temperatures affect convective rainfall, which occurs when  warm air rises, condenses to form clouds, and produces extreme rain.  Other concerns are the depletion of coral reefs and mangrove forests on  Brazil\u2019s coastlines, and decreases in biodiversity.", "Migration from drought in northeastern Brazil to cities has increased  urban populations, putting more people at risk of displacement from  flooding and landslides. Migration from the northeast is a historical trend  in Brazil, as economic migrants have sought seasonal jobs in more  productive agricultural regions, or moved permanently to southern cities.  Projected declines in rainfall have led some to predict further increases in  migration in northeastern Brazil, as the IPCC has reported. However,  remittances from family members who leave Brazil\u2019s northeast support  resilience for those who remain and may help to reduce migration.  Already environmental factors contribute to migration to cities, including to  favelas, informal settlements often constructed in hilly areas and  floodplains outside of Brazilian cities. A significant number of the favela  residents in Rio de Janeiro are migrants from northeastern Brazil,  according to IOM. These new migrants may be at risk of further  displacement if heavy rainfall, flooding, and other climate change effects  destroy their vulnerable homes. For example, heavy rainfall in April 2010  resulted in landslides across Rio de Janeiro, displacing an estimated  5,000 people, according to a report from the World Bank. Brazil is also a  destination for migrants from other countries in the region. Migrants from  Venezuela searching for jobs and improved food security have come in  growing numbers in recent years, as have migrants from Haiti fleeing a  series of natural disasters, as IOM has reported.", "Challenges in Stability and Security  Although Brazil ranks 106th out of 178 countries on the Fragile States  Index, the effects of climate change may contribute to challenges with  water, food, and energy access according to the IPCC. Decreased rainfall  could decrease agricultural productivity, with potential health impacts for  poor populations. These conditions are of particular concern in  northeastern Brazil, as extreme weather and low crop yields are  associated with more violence, according to the IPCC. Brazil also  receives about 70 percent of its electricity from hydroelectric power,  according the United Nations Environment Programme, and recent  droughts caused power cuts across many major cities. Although not  linked to the effects of climate change, absorbing a growing number of  migrants fleeing political and economic instability in Venezuela may  impact the broader region, according to the U.S. Department of Defense  and the National Intelligence Council. Neighboring countries, including  Brazil, may struggle to absorb the influx of migrants. On average, 800  Venezuelans are crossing the border to Brazil every day in need of urgent  humanitarian assistance, according to the UNHCR, the UN Refugee  Agency.", "The effects of climate change in the Arctic, including higher temperatures  and melting ice, have contributed to shifts in migration across the Arctic,  and may have security implications. Increasing temperatures may have a  variety of impacts in the Arctic, according to the Intergovernmental Panel  on Climate Change (IPCC). The effects of rising temperatures are  disrupting livelihoods and food security, especially for indigenous  communities, and opening up untapped natural resources to extraction.  Both trends have impacted migration flows in the Arctic. Rising  temperatures and melting ice have opened up previously inaccessible  waterways in the Arctic, with implications for national security, according  to the Department of Defense and others. Greenland, located in the Arctic  and considered part of Kingdom of Denmark, exhibits many of these  trends."], "subsections": []}]}, {"section_title": "Greenland: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Total Population 56,000", "paragraphs": ["Greenland is experiencing the effects of climate change, including glacial  and ice melt, shifts in wildlife distribution, and newly available oil and  mineral deposits, among others. The Greenland Ice Sheet covers  approximately 80 percent of Greenland\u2019s land mass. The ice sheet\u2019s  melting rate is slow, but uncertain. Increases in temperature greater than  1\u00b0C may result in the near loss of the entire ice sheet over a millennium  and significant sea level rise, according to the IPCC. In the short term,  predicting the ice sheet\u2019s melting rate is a challenge as predictions vary in  the scientific community. Accurate predictions would support mitigation  and adaptation efforts in vulnerable areas. Rising temperatures and  shrinking ice cover have shifted the distribution and migration patterns of  marine mammals and fish, and impacted food security according to the  IPCC and the Arctic Council, an intergovernmental forum for Arctic states.  For example, the economy in Paamiut, Greenland, depended primarily on  cod fisheries until changing climate conditions caused cod to disappear,  and the town was slow to adapt to newly available shrimp. Similarly,  fisheries in Disko Bay, Greenland, have struggled to adapt to new  conditions. Rising temperatures and the resulting reduction in ice cover  have required a shift to fishing from boats in open water instead of  hunting and fishing over ice cover. Lastly, warming and ice melt may  make significant oil and mineral deposits accessible for extraction in the  future. The potential expansion of extraction industries makes  environmental sustainability another possible concern. For example, an  estimated 31 billion barrels of oil and gas may exist off the coast of  Northeast Greenland, according to the Kingdom of Denmark\u2019s 2011-2020  Arctic Strategy. The strategy stresses the importance of assessing and  reducing risks to the environment resulting from the exploration and  extraction of oil and gas.", "The effects of climate change are predicted to contribute to internal and  external migration in Greenland. For example, young people are  increasingly leaving indigenous communities in rural areas for cities in  Greenland in search of work, as traditional livelihoods become  unsustainable. Greenland is home to a majority indigenous population,  primarily Inuit, whose traditional hunting and fishing practices require  travel across ice. In the past, people adapted to seasonal changes to  support livelihoods by migrating, and the practice was embedded into  indigenous social structures. With reduced ice cover, however, migrating  to hunt, fish, and maintain connections to community is more dangerous  or restricted. Government policies promoting centralized services, such  as health care and education, have also played a role in the shift away  from migration as a way of life. As a result, indigenous livelihoods are  more difficult to maintain, and young people often migrate to towns and  cities in Greenland, or to Denmark, for education. At the same time,  warmer temperatures have made mineral extraction feasible. As the  extraction industry grows, new jobs may draw migrants from outside the  Arctic region. In 2011 companies spent $100 million on the exploration of  minerals in the Artic, and the estimated number of new mines is expected  to require more workers than now live in the region.17 79Currently, more  people leave than migrate to Greenland.", "The local Inuit population in  Uummannaq, Greenland relies  heavily on ice coverage for fishing  and travel by traditional dog-sled.", "Brookings-LSE Project on Internal Displacement, A Complex Constellation:  Displacement, Climate Change and Arctic Peoples (January 30, 2013).", "Brookings-LSE Project on Internal Displacement.", "The effects of climate change on Sub-Saharan Africa vary depending on  the region and have impacts on migration and security, according to the  International Organization for Migration (IOM). Coastal areas, for  example, in West and East Africa are at risk from sea level rise that could  affect major cities. Drought and the risk of desertification in the Sahel is  cited as a concern, as is increased rainfall in parts of Central Africa  accompanied by lower agricultural yields. As desertification threatens the  livelihoods of farmers and herders, and drought makes fishing more  challenging, rural dwellers may be more likely to migrate to cities,  according to the United Nations Environment Programme (UNEP).  Urbanization and population growth across Sub-Saharan Africa is already  making densely populated cities vulnerable to flooding, storms, and  erosion, increasing the number of people at risk of displacement by  sudden-onset disasters. Climate change effects and changing migration  flows across Sub-Saharan Africa may impact access to natural resources  and contribute to existing tensions and conflicts, according to UNEP and  the Intergovernmental Panel on Climate Change (IPCC). In Nigeria, the  effects of climate change may effect a variety of livelihoods and increase  migration south, while also exacerbating existing conflicts."], "subsections": []}]}, {"section_title": "Nigeria: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Total Population 190,900,000 Fragile States Index #14 out of 178", "paragraphs": ["The effects of climate change on Nigeria may impact the country\u2019s  agriculture and economy, according to the United States Institute of  Peace (USIP). Higher temperatures and decreased rainfall have  contributed to drought in northern Nigeria. Desertification is also a  concern. Some regions in northern Nigeria have less than 10 inches of  rain a year, an amount that has decreased by 25 percent since the  1980\u2019s, according to USIP. In other areas across Nigeria flooding has  resulted in major crop losses, according to UNEP. Rising sea level, water  inundation, and erosion are concerns in Nigeria\u2019s coastal areas. Rising  sea level is predicted to pose medium to very high risks to Africa\u2019s coastal  areas by 2100, according to the IPCC. Future sea level rise could result in  the inundation of over 70 percent of the Nigerian coast. A rise of 0.2  meters in sea level could risk billions of dollars in assets, including oil  wells near the coast. Even without a rapid rise in sea level, Nigeria\u2019s  coastal areas could experience erosion and significant land loss by 2100,  as the IPCC has reported.", "The effects of climate change on livelihoods in northern Nigeria may  contribute to migration to the south according to UNEP, while conflict in  the north drives separate migration trends. As the effects of climate  change make farming and fishing more challenging elsewhere in Nigeria,  migration to southern coastal cities may increase. Traditionally, farmers,  herders, and fishery workers migrated for temporary employment during  the off season, including migration to Nigeria\u2019s cities to work in the oil  industry. Permanent migration south as well as to cities may become  more common if land suitable for farming decreases. As fish habitats like  Lake Chad dry up, fishery workers may also migrate. Larger urban  populations on the coast will put more people at risk of sea level rise,  water inundation, and erosion, according to the IPCC. A rise in sea level  of 1 meter could put over 3 million people at risk of displacement as the  IPCC has reported. Herders have also moved further south due to  increased drought in northern Nigeria, as UNEP and USIP have reported.  A 2010 survey of herdsmen in Nigeria, for example, found that nearly  one-third of them had migrated southeast as a result of changes in the  natural environment, according to the UNEP. The ongoing conflict with  Boko Haram, while not caused by climate change, has further resulted in  millions of displaced people across the Lake Chad region, including many  Nigerians who have fled to Cameroon, Chad, and Niger.", "Nigerian refugees at the Minawao  camp in Cameroon.", "Challenges in Stability and Security  The effects of climate change, migration, and conflict are interconnected  in Nigeria, as USIP has reported. The country is ranked 14th of 178  countries on the Fragile States Index. Events in northwest Africa,  including Boko Haram\u2019s attacks in Nigeria, have underscored concerns  about the region\u2019s vulnerability to the spread of violent extremism. The  effects of climate change may exacerbate these concerns, according to  USIP. Nigerians fleeing attacks from Boko Haram in the north have gone  to communities in neighboring Chad, Cameroon, and Niger that are  already experiencing food shortages due in part to climate change. These  neighboring countries as a result have fewer resources to support both  their own residents and the newer refugees. Non-state actors may also  take advantage of government inaction on the effects of climate change.  Boko Haram, for example, has justified its acts of violence by pointing to  government failures, according to the USIP. Separately, increased  drought in the north may aggravate historic tensions over land and water  use between farmers in the south and herders migrating from the north,  according to UNEP. Nigeria\u2019s oil fields on the coast, which represent a  significant part of the economy, are also at risk from sea level rise.  Potential losses in oil revenue could impact Nigeria\u2019s ability to respond to  humanitarian crises and conflict at home. Increased violence within its  borders could also affect Nigeria\u2019s ability to support regional  peacekeeping missions, such as the United Nations Mission in Liberia  from 2003 to 2018, where Nigerian troops worked to restore security after  a civil war.", "The effects of climate change in the Middle East and North Africa,  including on its desert regions, may impact water access and compound  migration and stability challenges, according to the United Nations  Environmental Programme (UNEP). Over 60 percent of the population  already experiences high or very high water stress, according to the  World Bank. Coupled with unsustainable water use, climate change may  further exacerbate challenges with water security. The region continues  to experience rising temperatures and declining annual rainfall, trends  that contribute to the severity and length of drought, land degradation,  and desertification. Decreased water security affects the livelihood and  quality of life of farmers in the region, contributing to an increase in their  migration to the cities and more urbanization, according to the World  Bank. In contrast, many people are expected to migrate away from  coastal cities as a result of sea level rise, according to UNEP. These  potential migrations would be taking place in a region that already hosts  large numbers of migrants such as those displaced by conflict and  violence, including 18 percent of the world\u2019s refugees, according to the  International Organization for Migration. Challenges in water security may  put greater pressure on unstable governments in the region, by  intensifying existing tensions and conflicts between populations and their  governments as well as between countries that share sources of water.  The conflict in Syria illustrates the complex nature of climate change,  migration, and conflict in the region, and the challenges to accurately  assessing the links among the three, as noted in a technical paper  commissioned by the U.S. Agency for International Development  (USAID)."], "subsections": []}]}, {"section_title": "Syria: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Total Population 18,300,000", "paragraphs": ["Rising temperatures and declining rainfall have contributed to recent  droughts in Syria, a trend that may continue. The country underwent an  extended drought from about 2006 until 2011. During the drought an  estimated 60 percent of Syria experienced severe crop failure, and  accompanying impacts on food security. Some studies have linked the  length and severity of the drought in Syria to climate change, as USAID  has reported. Others, however, have pointed to government land and  water use policies, combined with the effects of climate change, as  responsible for the severity of the drought. Agricultural policies, for  example, encouraged farmers to grow water intensive crops like wheat,  and supported inefficient irrigation practices, policies which further  depleted ground water and made the region more vulnerable to  decreases in rainfall linked to climate change. Across the Middle East, the  rising temperatures and declining rainfalls of recent decades may worsen,  according to the World Bank. If these trends continue, countries in the  Middle East, including Syria, could continue to experience periods of  severe drought and reduced crop yields."], "subsections": []}, {"section_title": "Net Migration Rate per 1000 people -41.8", "paragraphs": [], "subsections": [{"section_title": "Map of Syria", "paragraphs": ["Migration Trends  The ongoing conflict in Syria, in which migration due to climate change  may have been a contributing factor, has caused large-scale migration to  neighboring countries in the Middle East and to Europe. Leading up to the  civil war, prolonged drought, among other factors, had increased  migration to Syrian cities. Because of the drought, in 2009, over 800,000  Syrians lost their livelihoods in the agricultural sector, while nearly 1  million experienced food insecurity. In 2010, an estimated 200,000 people  migrated from farms in rural areas to cities, according to a UN report. The  conflict in Syria, which began in 2011, has further displaced large  numbers of people within the country and across the Middle East, as we  have previously reported.At the beginning of the conflict, Syrians, as  well as Iraqi and Palestinian refugees who had been residing in Syria, fled  mainly to Jordan, Lebanon, and Turkey. As the conflict persisted,  refugees fled in larger numbers to Turkey, with the UNHCR reporting that  nearly 1 million Syrians sought protection in that country in 2015. Starting  that year, a growing number of Syrians risked dangerous sea voyages to  reach countries in Europe, such as Greece, Germany, and Sweden. As of  June 2017, more than 5 million registered Syrian refugees were living in  neighboring countries, including more than 3 million in Turkey, and more  than 1 million in Lebanon.", "Challenges in Stability and Security  Sources agree that the Syrian conflict is a significant security challenge  that has resulted in large scale migration across the Middle East and to  Europe. Yet the link between prolonged drought, rural to urban migration,  and the current conflict in Syria is uncertain. Some academic sources  argue that the increased strain on urban infrastructure and resources due  to the rural to urban migration played a role in Syria\u2019s growing instability.  Others highlight the complex nature of the Syrian conflict, pointing to  broader political factors that exacerbated resource scarcity and inequality.  For example, as the drought intensified, the Syrian government  downplayed the severity of the humanitarian crisis, as described in  research cited in a technical report commissioned by USAID.result, appeals to the international community for emergency aid received  minimal support. Combined with existing sectarian divisions, ongoing  revolutions across the Middle East, and other factors, the government\u2019s  response to the drought may have contributed to the current conflict.  Migration and displacement are a concern in the region, according to the  Department of Defense and others. The U.S. government has provided  significant humanitarian assistance for Syrian refugees in the Middle  East, including in Lebanon and Jordan, as we have previously reported.However, a technical report commissioned by USAID has cautioned that  the ongoing conflict in Syria makes it difficult to conduct research and  draw conclusions related to climate, migration and conflict.", "As a  The effects of climate change on Oceania, particularly rising seas, may  significantly impact coastal populations and increase migration in the  future, as the Asian Development Bank (ADB) and the Intergovernmental  Panel on Climate Change (IPCC) have reported. Rising temperatures and  declining rainfall may also contribute to lower yields from fisheries and  agriculture, and a significant decrease in coral reef cover. Extreme  weather events, including higher temperatures, wind, and rainfall, have  already increased in number and intensity across the region. In the  majority of Pacific island nations, of those who migrate, more people  leave than come, according to the African, Caribbean, and Pacific  Observatory on Migration. The majority of migration in the region is  economically driven. In the future, climate change may further impact  these migration patterns across the region, according to the IPCC.  Climate change has already exacerbated challenges that aid-dependent  nations in the region face, restricting livelihoods and resources and  contributing to pressures to migrate. The costs of climate change,  including a decline in crop yields, a rise in energy demands, and a loss of  coastal land, are predicted to be significant. The ADB estimates these  costs will reach 12.7 percent of the Pacific regions\u2019 GDP by 2100.  Increased migration may also impact political stability and play a role in  geopolitical rivalries within the region, according to the IPCC. The effects  of climate change, especially rising sea levels, may result in forced  migration from the Republic of the Marshall Islands (the Marshall Islands)  and have additional impacts on the U.S. defense infrastructure on the  islands."], "subsections": []}]}]}, {"section_title": "Marshall Islands: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Total Population 100,000 Fragile States Index Not Available Human Development Index High Gross Domestic Product (GDP) per Capita $3,819 Remittances as % of GDP 14.8 Agriculture, Fishing, Forestry as % of GDP 15.9 % Population in Cities 76.7 Net Migration Rate per 1000 people Not Available", "paragraphs": ["Observed and Projected Effects of Climate Change  Rising sea levels are a grave threat to the Marshall Islands.The country  consists of islands, low-lying atolls\u2014coral caps sitting on top of  submerged volcanoes\u2014making it particularly vulnerable to rising sea  levels. On average, the Marshall Islands are 2 meters above sea level. In  Majuro, the country\u2019s most populous atoll, observed rates of sea level rise  are already twice as fast as the global average. Population centers  experience significant flooding, with damage to roads, houses, and  infrastructure, especially during La Ni\u00f1a years, which are significantly  wetter and more prone to extreme rainfall. Flooding is expected to worsen  with rising sea levels, with consequences for the availabity of drinking  water. On Roi-Namur island, for example, a 0.4 meter rise in sea level  combined with wave-driven flooding is predicted to make groundwater  undrinkable year round as early as 2055. This salt water inundation may  contaminate already limited groundwater across the Marshall Islands.  Lastly, during the 1940s and 1950s, the Marshall Islands was the site of  67 U.S. nuclear weapons tests on or near Bikini and Enewetak Atolls.  Projected increases in frequency of flooding may negatively impact efforts  to contain radioactive material stored on Runit Island.", "A number of factors have increased migration from the Marshall Islands,  including to the United States. In 1986, the United States entered into a  compact of free association with the country that allowed its citizens to  migrate to the United States, as we have previously reported. As a result,  more than 20,000 Marshallese now live in the United States.People are  more likely to migrate abroad as the effects of climate change on the  Marshall Islands\u2014including rising sea levels\u2014increasingly impact  livelihoods.The threat of mass displacement and forced migration is  also a concern, as the International Organization for Migration has  reported. However, Marshallese culture has a strong connection to the  land, which means that many view migration as a last resort. For people  still living in the Marshall Islands, they face overpopulation in urban  centers and displacement by sudden-onset disasters like cyclones and  flooding. Factors influencing people deciding to move abroad include  displacement, lack of economic opportunity\u2014sometimes exacerbated by  climate change\u2014and limited access to health care. Climate change is  likely to increase risks to public health in the country.Increased rainfall,  for instance, may expand mosquito breeding grounds, raising the risk of  diseases like dengue fever. The country\u2019s limited health care system may  further contribute to migration from the islands.", "Challenges in Stability and Security  In the future, the Marshall Islands may become uninhabitable. This  prospect threatens the existence of the Marshall Islands as a sovereign  state, as well as the United States defense facilities located on the  islands. The total loss of land could result in the Marshall Islands being  uninhabitable, which raises problems of migration, resettlement, cultural  survival, and sovereignty. Relocation of the population of the Marshall  Islands, and of other Pacific Island nations at risk of rising seas, could  cause significant geopolitical challenges.The Marshall Islands are also  of strategic importance for the United States. Under the Compact of Free  Association, the United States has permission to use several islands\u2014 including Kwajalein Atoll, the location of the Ronald Reagan Ballistic  Missile Defense Test Range\u2014until 2066. The country\u2019s proximity to the  equator makes the Marshall Islands ideal for missile defense and space  work. Yet the island\u2019s defense infrastructure and operations are at  significant risk due to rising sea levels, flooding, and diminishing supplies  of potable water. As the Department of Defense has noted, climate  change will have serious implications for the department\u2019s ability to  maintain its infrastructure and ensure military readiness in the future.", "DOD, 2014 Climate Change Adaptation Roadmap (Alexandria, VA: June 2014).", "The effects of climate change on Central America and the Caribbean  may increase migration and exacerbate poverty rates, as the National  Intelligence Council has reported. The climate in Central America and the  Caribbean is predicted to be warmer and dryer. The Caribbean\u2019s  extensive coastlines and low-lying areas are vulnerable to sea level rise  and an increase in sudden-onset disasters, including hurricanes and  storm surges. Drought is a particular concern in Central America, where  declines in rainfall have reduced crop yields and threatened livelihoods in  recent years. Some evidence shows that drought in parts of Central  America has contributed to migration north, including to the United  States. Population growth, especially in coastal cities, has increased the  number of people at risk during hurricane season, and the number and  intensity of hurricanes have grown in recent years. Some attribute the  increase in intensity to higher sea surface temperatures caused by  climate change. However, there remains debate about long term  hurricane trends. Recent hurricanes have caused displacement, and  significant losses and damages\u2014including to infrastructure\u2014across the  region. The depletion of coral reefs and mangrove trees, natural barriers  to coastal erosion and flooding, has exacerbated vulnerability to storms  in coastal areas. Climate change is likely to have negative impacts on  tourism in the Caribbean, where the industry is an important part of the  economy, according to Inter-American Development Bank. Climate  change impacts on the economy may make it increasingly difficult for  governments to reduce poverty and move towards environmental  sustainability. Haiti\u2019s geography, location, and high poverty rates make  the country especially vulnerable."], "subsections": []}]}, {"section_title": "Haiti: Climate Change, Migration, Stability and Security", "paragraphs": [], "subsections": [{"section_title": "Total Population", "paragraphs": ["Haiti is highly vulnerable to climate change effects, partly due to its long  coastline.Hurricanes routinely make landfall in the country, and  increases in rainfall and wind speeds associated with hurricanes are likely.  Severe hurricanes, including Hurricane Matthew in September 2016, have  hit Haiti in recent years. Hurricane Matthew was the first category 4 storm  in Haiti since 1964. Damage from severe flooding and severe winds during  the hurricane affected over 2 million people and created significant food  security and public health challenges. Significant deforestation has further  exacerbated Haiti\u2019s vulnerability to hurricanes, as trees previously provided  a natural barrier to the erosion that strong winds and more rainfall can  cause. Rising temperature and highly variable rainfall have led to extreme  drought and flash flooding, according to the U.S. Agency for International  Development (USAID).32 2 These trends decrease crop yields, affecting the  livelihoods of farmers, and threaten water access. Projected increase in  temperature and decreases in rainfall are likely to intensify drought in  Haiti\u2019s interior.", "USAID, Haiti: Environment and Climate Change Fact Sheet (January 2016).", "Migration Trends   Slow-onset climate events, such as drought, and rising sea levels,  and sudden-onset events, including earthquakes, affect Haiti,  according to the International Organization for Migration (IOM).  Haiti is also particularly exposed to extreme weather events, such  as hurricanes, which can lead to displacement. In January 2010, a  catastrophic earthquake in Haiti killed an estimated 230,000 people  and left close to 1.5 million people homeless. According to IOM,  the recurrence of environmental disruptions increases risks and  vulnerabilities. When Hurricane Sandy struck Haiti in October  2012, the country had still not recovered from the 2010 earthquake.  The worsening of climate change effects around the world,  particularly in low-income countries, may increase the number of  people wanting to immigrate to the United States, where  approximately 700,000 Haitians live today.Remittances from  family members living outside Haiti make up a significant portion of  the economy, at 24.7 percent of GDP. The majority of these  remittances come from the United States, as we have previously  reported.34 4Remittances may support resilience to climate change  effects as migrants send money home for disaster recovery and  adaptation.", "Challenges in Stability and Security  Haiti, the poorest country in the western hemisphere, has  experienced political instability for most of its history, and ranks  12th of 178 on the Fragile States Index. The government has a low  capacity to respond to additional challenges like those related to  climate change, according to USAID. The Ministry of Environment,  for example, is a relatively new organization within the Haitian  government, and local and regional governments have a limited  ability to enforce environmental laws and regulations. The United  States has provided substantial aid to Haiti, both in disaster  response and broader development projects. Official development  assistance for Haiti in 2015, for instance, totaled slightly more than  $1 billion. According to a January 2018 UN report, 2.8 million  people were still in need of humanitarian assistance.", "GAO, Remittances To Fragile Countries: Treasury Should Assess Risks from  Shifts to Non-Banking Channels, GAO-18-313 (Washington, D.C., March 8, 2018)."], "subsections": []}]}]}, {"section_title": "Appendix III: Department of State Global Climate Change Initiative Adaptation Activities Funded in Fiscal Years 2014 through 2017", "paragraphs": ["The Department of State\u2019s Bureau of Oceans and International  Environmental and Scientific Affairs (State/OES) provided about $78  million in adaptation funding from the Global Climate Change Initiative for  eight projects for fiscal years 2014 through 2017 (see table 2).", "The Global Climate Change Initiative was established in 2010 to promote resilient, low- emission development, and integrate climate change considerations into U.S. foreign  assistance and was divided into three main programmatic initiatives: (1) Adaptation  assistance, (2) Clean Energy assistance, and (3) Sustainable Landscapes assistance."], "subsections": [{"section_title": "Activity name", "paragraphs": ["The primary purpose of these  contributions to the LDCF was to  address the adaptation needs of the  least developed countries, which are  especially vulnerable to the adverse  impacts of climate change. The LDCF  financed the preparation and  implementation of National Adaptation  Programs of Action, which identify a  country\u2019s priorities for adaptation  actions.", "Initial grant to the National Adaptation  Plans Global Network. The network is  focused on increasing the capacity of  national and subnational governments  to identify and assess climate risks,  integrate these risk considerations in  sector planning, develop a pipeline of  projects to address risks, identify and  secure funding for projects, and track  progress toward resilience targets.", "Colombia, East Caribbean  (Guyana, Saint Lucia, Saint  Vincent and the Grenadines),  Ethiopia, Peru, South Africa,  Uganda, West Africa (C\u00f4te  d\u2019Ivoire, Ghana, Guinea,  Sierra Leone, Togo) and,  under current consideration,  East Caribbean (Dominica,  Suriname), and Pacific (Fiji,  Kiribati, Tuvalu)", "The cost amendment intensified the  technical support on National  Adaptation Plans to select countries  dependent upon specific country  adaption needs. In addition, the cost  amendment continued the learning and  progress from the initial grant.", "Implemented through the Department  of Treasury, this funding supported a  Treasury grant to the Pacific  Catastrophe Risk Assessment and  Financing Initiative Multi Donor Trust  Fund at the World Bank. This activity  established the Pacific Catastrophe  Risk Insurance Foundation and the  Pacific Catastrophe Risk Insurance  Company, among other things."], "subsections": []}, {"section_title": "Activity name", "paragraphs": ["The goal of PIER is to increase private  sector investment in resilience to  climate change in eight developing  countries. The first phase of the project  will assess and identify opportunities  for private investment in resilience, as  well as build public and private  capacity for climate risk assessment in  all the countries. In the second phase,  public and private sector partners will  develop and pilot climate risk-reduction  investment models in four of the  countries. The third phase will publicize  the piloted investment models and  lessons learned among the eight  countries.", "Implemented through the National  Oceanic and Atmospheric  Administration, this activity aims to  implement a capacity-building  partnership with India to promote  effective climate resilient decision  making at national, state, and local  levels."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "Acknowledgments", "paragraphs": ["In addition to the contacts named above, the following individuals made  key contributions to this report: Miriam Carroll Fenton (Assistant Director),  Kristy Williams (Assistant Director), Rachel Girshick (Analyst-in-Charge),  Nancy Santucci, Miranda Cohen, Aldo Salerno, Neil Doherty, and Judith  Williams. Alexander Welsh, Justin Fisher, and Joseph Thompson  provided technical and other support."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Climate Change Adaptation: DOD Needs to Better Incorporate Adaptation  into Planning and Collaboration at Overseas Installations. GAO-18-206.  Washington, D.C.: November 13, 2017.", "Compacts Of Free Association: Actions Needed to Prepare for The  Transition of Micronesia and the Marshall Islands to Trust Fund Income.  GAO-18-415. Washington, D.C.: May 17, 2018.", "Remittances to Fragile Countries: Treasury Should Assess Risks from  Shifts to Non-Banking Channels. GAO-18-313. Washington, D.C.: March  8, 2018.", "Syrian Refugees: U.S. Agencies Conduct Financial Oversight Activities  for Humanitarian Assistance but Should Strengthen Monitoring.  GAO-18-58. Washington, D.C.: October 31, 2017.", "International Food Assistance: Agencies Should Ensure Timely  Documentation of Required Market Analyses and Assess Local Markets  for Program Effects. GAO-17-640. Washington, D.C.: July 13, 2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Federal Disaster Assistance: Federal Departments and Agencies  Obligated at Least $277.6 Billion during Fiscal Years 2005 through 2014.  GAO-16-797. Washington, D.C.: September 22, 2016.", "Coast Guard: Arctic Strategy Is Underway, but Agency Could Better  Assess How Its Actions Mitigate Known Arctic Capability Gaps.  GAO-16-453. Washington, D.C.: July 12, 2016.", "Climate Information: A National System Could Help Federal, State, Local,  and Private Sector Decision Makers Use Climate Information.  GAO-16-37. Washington, D.C.: November 23, 2015.", "Hurricane Sandy: An Investment Strategy Could Help the Federal  Government Enhance National Resilience for Future Disasters.  GAO-15-515. Washington, D.C.: July 30, 2015.", "High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February  11, 2015.", "Standards for Internal Control in the Federal Government. GAO-14-704G.  Washington, D.C.: September 10, 2014.", "Combating Terrorism: U.S. Efforts in Northwest Africa Would Be  Strengthened by Enhanced Program Management. GAO-14-518.  Washington, D.C.: June 24, 2014.", "Climate Change Adaptation: DOD Can Improve Infrastructure Planning  and Processes to Better Account for Potential Impacts. GAO-14-446.  Washington, D.C.: May 30, 2014.", "Extreme Weather Events: Limiting Federal Fiscal Exposure and  Increasing the Nation\u2019s Resilience. GAO-14-364T. Washington, D.C.:  February 12, 2014.", "Climate Change: State Should Further Improve Its Reporting on Financial  Support to Developing Countries to Meet Future Requirements and  Guidelines. GAO-13-829. Washington, D.C.: September 19, 2013.", "High-Risk Series: An Update. GAO-13-283. Washington, D.C.: February  14, 2013.", "International Climate Change Assessments: Federal Agencies Should  Improve Reporting and Oversight of U.S. Funding. GAO-12-43.  Washington, D.C.: November 17, 2011.", "Climate Change Adaptation: Federal Efforts to Provide Information Could  Help Government Decision Making. GAO-12-238T. Washington, D.C.:  November 16, 2011.", "Foreign Relation: Kwajalein Atoll Is the Key U.S. Defense Interest in Two  Micronesian Nations, GAO-02-119. Washington D.C.: January 22, 2002."], "subsections": []}], "fastfact": ["Climate change may increase the frequency and intensity of natural disasters, which could drive people around the world from their homes.", "We found that, while the State Department, USAID, and DOD haven\u2019t focused on the link between climate change and migration, State identified migration as a risk in one of its climate change risk assessments in early 2017.", "However, State later changed its approach and no longer provides clear guidance to its staff on how to assess climate change risks. This may prevent it from identifying and addressing climate change as a factor in human migration.", "We recommended State provide its staff with this guidance."]}
{"id": "GAO-19-165", "url": "https://www.gao.gov/products/GAO-19-165", "title": "Defense Management: DOD Needs to Implement Statutory Requirements and Identify Resources for Its Cross-Functional Reform Teams", "published_date": "2019-01-17T00:00:00", "released_date": "2019-01-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries; establish cross-functional teams to support this strategy and provide related guidance and training; and take actions to streamline the Office of the Secretary of Defense. Further, section 921 of the NDAA for FY 2019 calls for the Secretary of Defense to reform the department's enterprise business operations.", "The NDAAs for FY 2017 and 2019 also included provisions for GAO to assess DOD's actions in response to sections 911 and 921, respectively. This report assesses the extent to which DOD has made progress in (1) addressing the requirements of section 911, and (2) reforming the department's enterprise business operations under section 921. GAO reviewed documentation on DOD's implementation of sections 911 and 921; interviewed cross-functional team leaders, members, and other DOD officials; and compared DOD's implementation of its cross-functional teams to GAO's key practices."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has implemented four statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, but has not addressed five requirements intended to support cross-functional teams and promote department-wide collaboration (see table).", "For two of these requirements, DOD has missed the statutory deadline by more than a year. GAO previously recommended that DOD take actions to improve its implementation of section 911, and DOD reported it is doing so, such as revising its draft cross-functional team guidance to address statutory requirements. Fully implementing GAO's prior recommendations and the remaining statutory requirements would better position DOD to effectively implement its cross-functional teams and advance a collaborative culture, as required by the NDAA.", "Nine cross-functional teams are driving DOD's enterprise business reform efforts under section 921 of the FY 2019 NDAA, but the teams' progress has been uneven. As of September 2018, DOD reported that these nine teams were pursuing a total of 135 business reform initiatives. However, 104 of these initiatives have not reached the implementation phase. A key challenge facing the teams is that some lack resources to fully implement their approved initiatives. For example, DOD officials stated that the department did not fulfill four of nine funding requests from the teams in fiscal year 2018 to implement their initiatives. As of September 2018, DOD officials estimated that the teams need about $6.7 billion to implement their initiatives from FYs 2018 through 2024, but DOD has not identified sources for this funding. GAO's prior work on efficiency initiatives found that up-front investments may be required to realize long-term savings. In addition, GAO's prior work on leading practices for implementing effective cross-functional teams highlights the importance of providing teams with access to resources and having well-defined team operations with established rules and procedures. However, DOD has not established a process for identifying and prioritizing available funding for implementing the teams' initiatives. Without such a process, DOD and the teams may not be able to adequately plan for and execute their reform initiatives."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD establish a process to identify and prioritize funding for implementing its cross-functional teams' business reform initiatives. DOD concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) has faced organizational,  management, and cultural challenges that can limit effective and efficient  collaboration across the department to accomplish departmental  objectives. For example, our prior work found that DOD\u2019s efforts to  implement a hierarchical, portfolio-based approach to strategically acquire  contracted services had not been successful. In part, we found that the  cultural barriers and military commanders\u2019 reluctance to give up certain  responsibilities for determining how and which services were needed to  meet their missions hindered DOD\u2019s efforts. We have highlighted these  challenges in additional reports, including our High-Risk report, which  calls attention to agencies and program areas that are high risk because  of their vulnerabilities to fraud, waste, abuse, and mismanagement, or are  most in need of transformation. Further, the National Defense Business  Operations Plan for Fiscal Years 2018-2022 highlights that collaboration  and communication among the Office of the Secretary of Defense,  military services, and combatant commands are essential to ensuring the  success of the readiness program across the department.", "Section 911 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 contained multiple requirements to help advance a more  collaborative culture within DOD. DOD\u2019s Chief Management Officer  (CMO) is leading the department\u2019s efforts to implement section 911. This  section directed the Secretary of Defense to do the following, among  other things:", "Formulate and issue an organizational strategy for DOD. The  organizational strategy, the act stated, should identify the critical  objectives and other organizational outputs that span multiple  functional boundaries and would benefit from the use of cross- functional teams to ensure collaboration and integration across the  department.", "Establish cross-functional teams that, among other things, address  the critical objectives and outputs outlined in the department\u2019s  organizational strategy.", "Issue guidance on cross-functional teams and provide training to  members of those established teams and their supervisors on  elements of successful cross-functional teams.", "Provide training on leadership, modern organizational practice,  collaboration, and the operation of cross-functional teams to  individuals who have been appointed by the President and confirmed  by the Senate to a position within the Office of the Secretary of  Defense, or to request waivers from this requirement.", "Take actions\u2014as the Secretary of Defense considers appropriate\u2014to  streamline the organizational structure and processes of the Office of  the Secretary of Defense.", "Section 911 of the NDAA for Fiscal Year 2017 also included a provision  for us\u2014every 6 months after the date of enactment on December 23,  2016, through December 31, 2019\u2014to submit a report to the defense  committees. This report is to set forth a comprehensive assessment of  the actions that DOD has taken pursuant to section 911 during each 6- month period and cumulatively since the NDAA\u2019s enactment. We have  issued three reports to date. In our first report, issued in June 2017, we  found that DOD had taken steps in several areas to begin implementing  the requirements of section 911. In our second report, issued in February  2018, we found that DOD had implemented some of the statutory  requirements outlined in section 911, but could do more to promote  department-wide collaboration, as required under the statute. We  recommended, and DOD concurred, that the CMO take four actions to  improve the department\u2019s implementation of section 911. In our third  report, issued in June 2018, we found that DOD had taken additional  steps in response to section 911, but still had not implemented several  requirements intended to support cross-functional teams and promote  department-wide collaboration. Appendix I identifies these three reports,  including the four recommendations from our February 2018 report and  the status of DOD\u2019s implementation of those recommendations.", "This report is our fourth on DOD\u2019s implementation of section 911 of the  NDAA for Fiscal Year 2017. In addition, this report addresses a new  provision related to DOD reform, contained in section 921 of the John S.  McCain NDAA for Fiscal Year 2019 (hereafter referred to as the NDAA for  Fiscal Year 2019). Section 921 requires the Secretary of Defense, acting  through the CMO, to reform the enterprise business operations of the  department through reductions, eliminations, or improvements across all  organizations and elements of DOD with respect to any activity related to  civilian resources management, logistics management, services  contracting, or real estate management to increase effectiveness and  efficiency of mission execution. We are required to submit a report by  May 2019, setting forth an assessment of DOD\u2019s actions pursuant to the  provision. Because we determined that DOD\u2019s efforts to establish cross- functional teams dedicated to improving the department\u2019s business  operations are closely linked to the section 921 requirements, we are  combining our assessment of DOD\u2019s actions related to both sections 911  and 921 in this report.", "In this report, we assess the extent to which DOD has made progress in  implementing (1) the section 911 requirements related to DOD\u2019s  organizational strategy and cross-functional teams and (2) the section  921 requirements to reform the enterprise business operations of the  department.", "For the first objective, we reviewed documentation and interviewed  OCMO and other DOD officials on the department\u2019s efforts to finalize its  draft organizational strategy; establish cross-functional teams; provide  guidance on cross-functional teams; provide training to cross-functional  team members, their supervisors, and presidential appointees; report on  the establishment of cross-functional teams; and take actions to  streamline the organizational structure and processes of the Office of the  Secretary of Defense. We evaluated DOD\u2019s efforts against the  requirements in section 911 of the NDAA for Fiscal Year 2017.", "For the second objective, we reviewed documentation and interviewed  OCMO and other DOD officials on the department\u2019s efforts to reform the  enterprise business operations of the department, as required by section  921 of the NDAA for Fiscal Year 2019. We also reviewed department- wide goals, objectives, and performance measures for business reform in  key strategic documents, including the National Defense Business  Operations Plan for Fiscal Years 2018-2022, the Fiscal Year 2019 DOD  Annual Performance Plan, and the Report to Congress on Restructuring  the DOD Acquisition, Technology, and Logistics Organization and CMO  Organization. In addition, we conducted interviews with the leaders and  members from the nine cross-functional teams dedicated to improving the  department\u2019s business operations and analyzed the information from  these meetings. We interviewed team members separately from team  leaders to encourage candid discussion about the operations of the  teams. Two GAO analysts independently reviewed interviewees\u2019  responses to our questions to code them in terms of leading practices for  implementing effective cross-functional teams that we have identified in  our prior work. The analysts then compared how they coded the  statements. Where there was disagreement in the coding, the analysts  discussed their analyses and tried to reach a consensus. In cases where  they could not reach a consensus, a third analyst decided how the  information should be coded. In addition, we reviewed OCMO\u2019s efforts to  oversee the teams\u2019 progress, including observing a demonstration of the  dashboard used to monitor the teams\u2019 metrics. We compared this  information to leading practices for implementing effective cross- functional teams and key practices for implementing efficiency initiatives  that we have identified in our prior work.", "We conducted this performance audit from May 2018 to January 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."], "subsections": [{"section_title": "DOD Has Made Limited Progress since June 2018 in Addressing Remaining Statutory Requirements and Is Reducing the Number of Cross-Functional Teams It Considers Responsive to Section 911", "paragraphs": [], "subsections": [{"section_title": "DOD Has Addressed One Statutory Requirement since June 2018, but Has Not Addressed Five Remaining Requirements", "paragraphs": ["DOD has addressed one additional statutory requirement of section 911  of the NDAA for Fiscal Year 2017 since our June 2018 report. However,  DOD has still not addressed five other requirements, including (1) issuing  its organizational strategy, (2) issuing guidance on cross-functional  teams, (3) providing training on cross-functional teams for team members  and their supervisors, (4) providing training for presidential appointees,  and (5) taking actions to streamline the Office of the Secretary of  Defense, as shown in table 1.", "DOD addressed one of the statutory requirements in section 911 by  submitting a report to Congress on the establishment of cross-functional  teams on June 21, 2018. The report described the number of cross- functional teams established to date and the design and function of those  teams, consistent with the requirements in section 911.", "OCMO officials told us that DOD plans to address three of the five  remaining requirements by March 2019. Specifically, the department  plans to take the following actions.", "Issue DOD\u2019s organizational strategy. DOD has drafted, but not issued,  its organizational strategy, which section 911 required to be issued by  September 1, 2017. In June 2018, we reported that OCMO officials  had revised the draft strategy to address the recommendation from  our February 2018 report, including identifying potential action steps  for the department that align with our leading practices for mergers  and organizational transformations. OCMO officials have again  revised the draft organizational strategy, incorporating, among other  things, the criteria that distinguish cross-functional teams established  under section 911 from other cross-functional working groups,  committees, integrated product teams, and task forces, as required by  section 918 the NDAA for Fiscal Year 2019. The officials said they  expect the Secretary of Defense to issue the strategy in March  2019\u201418 months later than required by section 911.", "Take actions to streamline the Office of the Secretary of Defense.", "OCMO officials have revised the draft organizational strategy to  identify the actions the department has taken that it views as  responsive to this requirement. For example, the draft strategy states  that DOD has delegated authority to approve certain global force  management actions to the Chairman of the Joint Chiefs of Staff and  certain acquisition oversight functions to the military departments.  Section 911 required DOD to take these actions by June 23, 2018. As  noted above, however, the organizational strategy has not been  finalized. We will assess these actions against the requirements of  section 911 after the organizational strategy has been issued.", "Issue guidance on cross-functional teams. DOD has drafted, but not  issued, guidance on cross-functional teams, which section 911  required to be issued by September 30, 2017. In June 2018, we  reported that OCMO officials had revised the draft guidance to  address the recommendation from our February 2018 report. OCMO  officials stated that they have no other planned revisions and that they  expect the Secretary of Defense to issue the guidance in March  2019\u201418 months later than required by section 911.", "Further, OCMO officials told us that DOD plans to finalize the draft  curricula and provide training to fulfill two additional section 911  requirements after the organizational strategy is issued.", "Training for cross-functional team members and their supervisors.", "OCMO has not provided the required training to cross-functional team  members and their supervisors. OCMO officials stated that they plan  to send the draft training curriculum for cross-functional team  members and their supervisors to the Secretary after they send the  strategy. In February 2018, we reported that the draft training  curriculum addressed the section 911 requirements; OCMO officials  told us they plan no further revisions to the curriculum. After the  Secretary approves the curriculum, the officials stated, they plan to  offer the training to cross-functional team members. Some cross- functional team members we met with stated that receiving training on  cross-functional teams earlier would have been helpful for them to  understand how to operate in a cross-functional team environment,  such as reporting to both the team leader and to their home  organization.", "Training for presidential appointees. OCMO has not provided the  required training to individuals filling presidentially-appointed, Senate- confirmed positions in the Office of the Secretary of Defense. Section  911 requires these individuals to complete the training within 3  months of their appointment, or for DOD to request waivers. However,  as of January 2, 2019, 23 of 35 such officials had been in their  positions for more than 3 months, and none had received the training  or been granted a training waiver. In our February 2018 report, we  found that the draft curriculum met only one of the four required  elements in section 911. We recommended, and DOD concurred,  that the CMO should either (1) provide training that includes all of the  required elements in section 911 or (2) develop criteria for obtaining a  waiver and have the Secretary of Defense request such a waiver from  the President for these required elements. In October 2018, an  OCMO official stated that OCMO had revised the draft training  curriculum for presidential appointees to include all of the required  elements in section 911. The official also stated that OCMO plans to  send the draft training curriculum to the Secretary of Defense for  review after OCMO sends the organizational strategy. Once the  curriculum is approved, the official stated that OCMO plans to  recommend to the Secretary of Defense that all presidential  appointees in the Office of the Secretary of Defense receive the  training and does not plan to request waivers.", "As described above, we have previously recommended that DOD take  actions to improve its implementation of the section 911 requirements  related to the organizational strategy, guidance, and training. As we have  reported before, addressing our recommendations and fully implementing  the remaining requirements would better position DOD to effectively  implement its cross-functional teams and advance a collaborative culture,  as required by the NDAA. We will continue to monitor DOD\u2019s progress in  addressing these statutory requirements and our related  recommendations."], "subsections": []}, {"section_title": "DOD Plans to Establish One Cross-Functional Team, Disestablish Another, and Will No Longer Consider Nine Business Reform Teams as Responsive to Section 911", "paragraphs": ["DOD is establishing a new cross-functional team to address growing  challenges in the electronic warfare mission area. Section 918 of the  NDAA for Fiscal Year 2019 requires DOD to establish this cross- functional team by November 11, 2018, to identify gaps in electronic  warfare and joint electromagnetic spectrum operations, capabilities, and  capacities within the department across personnel, procedural, and  equipment areas. In January 2019, an OCMO official stated that the  Office of the Under Secretary of Defense for Acquisition and Sustainment  had drafted the team's charter and that it had been sent to the Secretary  of Defense for review and approval.", "In addition, DOD plans to disestablish the first cross-functional team  established in response to section 911 to address challenges with  personnel vetting and background investigations. This team was  responsible for managing the transfer of background investigations for  certain DOD personnel from the Office of Personnel Management to  DOD. However, Office of the Under Secretary of Defense for  Intelligence officials stated that DOD plans to subsume the roles and  responsibilities of the team into a new Personnel Vetting Transformation  Office. According to the officials, the new office will be responsible for  managing the administration\u2019s proposed transfer of background  investigations for all executive branch personnel from the Office of  Personnel Management to DOD. As a result, the cross-functional team\u2019s  roles and responsibilities would overlap with those of the Personnel  Vetting Transformation Office, the officials stated. The officials expect to  formally disestablish the cross-functional team in the first quarter of fiscal  year 2019 after DOD issues the charter for the Personnel Vetting  Transformation Office.", "Last, DOD continues to implement its nine cross-functional teams  dedicated to reforming and improving business operations, but plans to  no longer consider these teams as responsive to section 911. The  National Defense Business Operations Plan for Fiscal Years 2018-2022,  issued in May 2018, stated that these teams were established pursuant to  section 911. As of October 2018, however, DOD\u2019s draft organizational  strategy states that these teams were not established in response to  section 911. Instead, it describes them as a second layer of cross- functional coordination that will aid in ensuring broader implementation of  collaborative and team-oriented practices in the department. We describe  these teams\u2019 efforts to improve DOD\u2019s enterprise business operations  below and in appendix III."], "subsections": []}]}, {"section_title": "DOD\u2019s Enterprise Business Reform Is Largely Driven by Nine Cross- Functional Teams, but Progress Has Been Uneven", "paragraphs": [], "subsections": [{"section_title": "Nine Cross-Functional Teams Are Key to DOD\u2019s Enterprise Business Reform", "paragraphs": ["The National Defense Business Operations Plan for Fiscal Years 2018- 2022 highlights nine cross-functional teams as key mechanisms for  implementing the plan\u2019s strategic objective to improve and strengthen  business operations through a move to enterprise or shared services.  From October 2017 through January 2018, the Deputy Secretary of  Defense, at the direction of the Secretary, established these nine teams  to implement initiatives intended to improve the quality and productivity of  the department\u2019s business operations, including moving toward more use  of enterprise services. According to memoranda appointing the team  leaders, the teams support the Secretary of Defense\u2019s focus on creating a  more lethal and effective force by allowing the department to reallocate  resources from business operations to readiness and to recapitalization of  the combat force. These nine teams\u2014hereafter referred to as business  reform teams and whose leaders report to the CMO\u2014address community  services management, financial management, health care management,  human resources, information technology and business systems, real  property management, service contracts and category management,  supply chain and logistics, and testing and evaluation. They are  described in more detail in appendix III.", "The Fiscal Year 2019 DOD Annual Performance Plan identifies  performance goals and measures to achieve the strategic goals and  objectives described in the National Defense Business Operations Plan,  including the goal of reforming the department\u2019s business practices. It  designates several business reform team leaders as responsible for  meeting the performance goals and associated performance measures.  For example, the leader of the information technology and business  systems reform team is responsible for the performance goal to transform  how the department delivers secure, stable, and resilient information  technology infrastructure in support of warfighter lethality. This goal is  consistent with the team\u2019s overarching objective to plan and execute the  transformation of all business systems affecting support areas within the  department.", "The Annual Performance Plan\u2019s objectives and timeframes related to the  business reform teams, however, do not fully align with some of the  initiatives that the teams are pursuing. For example, according to the  plan, the leader of the community services management team is  responsible for developing a strategic plan for armed forces retirement  home reform by the second quarter of 2018. However, according to a list  of the team\u2019s current initiatives as of September 2018, the team was not  pursuing this initiative. In October 2018, OCMO officials stated that  Washington Headquarters Service is currently leading the armed forces  retirement home reform effort. When we asked these officials how they  view the relationship between performance measures in the plan and  those of the business reform teams\u2019 initiatives, they acknowledged that  the teams\u2019 initiatives have evolved since the plan\u2019s development and that  the teams have identified additional initiatives that may not be reflected in  the plan. They also noted that OCMO drafted the content for the Fiscal  Year 2019 DOD Annual Performance Plan before most of the teams were  fully staffed and operational. As of October 2018, the officials stated that  OCMO was coordinating with the team leaders to review the Fiscal Year  2019 DOD Annual Performance Plan and, as appropriate, to modify or  develop new performance measures and targets for the Fiscal Year 2020  DOD Annual Performance Plan. Given DOD\u2019s efforts to address this  issue, we are not making a recommendation at this time, but will continue  to monitor their efforts as part of our ongoing work on the high-risk nature  of DOD\u2019s business transformation efforts."], "subsections": []}, {"section_title": "The Progress of the Business Reform Teams Has Been Uneven, and Some Teams Lack Resources to Fully Implement Their Initiatives", "paragraphs": ["DOD has made some progress establishing and organizing the business  reform teams, but implementation of the teams\u2019 initiatives has been  uneven. We found that implementation of the business reform teams has  demonstrated some key characteristics of leading practices for  implementing effective cross-functional teams that we have identified in  our prior work. For example, across all the teams we spoke with,  members were responsible for leading the development of their team\u2019s  initiatives and communicating with their home organizations to obtain  input, demonstrating a well-defined team structure. In addition, the  business reform teams are structured to facilitate open and regular  communication, another leading practice. For example, the teams are  generally co-located with each other, which enables direct communication  among team members and between teams, members stated. Further,  members from most of the teams we spoke with were supportive of their  team leaders and viewed them as effective in their roles, demonstrating  an inclusive team environment. Team leaders across all teams also  stated that they regularly interact with senior management, such as  through weekly one-on-one meetings with the CMO or Deputy CMO. This  engagement reflects a key characteristic that states team leaders should  regularly interact with senior management.", "However, we found that the business reform teams\u2019 efforts have not  proceeded according to early plans outlined by the department. DOD\u2019s  August 2017 report to Congress on restructuring the CMO organization  stated that the teams were intended to help modify processes to move  toward enterprise service delivery. According to the report, the  department would transition to DOD enterprise services by the end of  fiscal year 2018. In July 2018, OCMO officials acknowledged that they  were behind schedule, but told us they expected to catch up to this  deadline by the end of fiscal year 2018, as originally planned. That  deadline was not realized. According to OCMO officials, the teams are  identifying new milestones for implementing initiatives, some of which will  contribute to a move toward enterprise services.", "In addition, the business reform teams vary in the number of initiatives  they are pursuing. As of September 2018, OCMO reported that the teams  were pursuing a total of 135 initiatives and that the number of initiatives  per team ranged from 2 to 38. For example, the community services  management team was developing 2 initiatives\u20141 to examine the  feasibility of merging DOD\u2019s three military exchange services and the  Defense Commissary Agency into a single resale enterprise, and the  other to streamline the inventory of DOD lodging. In contrast, the supply  chain and logistics team was developing 21 short- and long-term  initiatives, such as reducing the footprint of underutilized warehouses and  developing better data interoperability throughout the supply chain and  logistics enterprise.", "Further, the teams\u2019 progress in advancing their initiatives to the  implementation and monitoring phase has varied. The Reform  Management Group oversees the business reform teams. The Deputy  Secretary of Defense chairs the Reform Management Group, and the  CMO facilitates regular meetings of the group. The Reform  Management Group authorizes the business reform teams to proceed  with their initiatives through five gates\u20140 through 4. These gates trace  initiatives from conception to implementation and monitoring. Before  proceeding from one gate to the next, the teams must submit certain  deliverables to the Reform Management Group for review and approval.  For example, before an initiative can proceed to gate 1, OCMO requires  the teams to submit a charter for the initiative, which can identify, among  other things, the problem or opportunity statement, the project scope,  expected outcomes and risk analysis, and preliminary performance  measures. Figure 1 provides an overview of the five gates and the  status of initiatives by gate, as of September 2018.", "As shown in figure 1, while some teams have successfully advanced  several initiatives to gate 4, others have not yet progressed initiatives past  gate 2. Specifically, as of September 2018, DOD reported that 104 of the  teams\u2019 135 initiatives had not yet reached gate 3, the implementation  phase. According to the teams we interviewed, several factors may affect  the progress of an initiative, such as its complexity or a team\u2019s approach  to developing initiatives. For example, the community services  management team leader stated that the team is primarily focused on the  consolidation of the defense commissaries and exchanges, an initiative  that is relatively large in scope and complexity. According to the team  leader, this initiative involves a number of internal stakeholders, including  all of the military services, as well as outreach to external stakeholders,  such as veterans\u2019 organizations. In addition, the leader stated that the  team would need legislative changes to fully implement the initiative. As a  result of the large scope and complexity, the leader expects the initiative  to take longer to implement than others. Some teams have pursued a  proof-of-concept approach to developing their initiatives, which involves  pilots to test initiatives to prove their value prior to department-wide  implementation. For example, the health care management team is  conducting a regional pilot to test the feasibility of consolidating the  purchasing of services across the military health system.", "DOD has asserted that some of its initiatives have produced benefits  through savings or efficiencies. For example, according to a September  2018 DOD report on the department\u2019s investments in support of the  National Defense Strategy, the department achieved $1.61 billion in  benefits by implementing private-sector best practices in purchasing  goods and service contracts in the Air Force and defense agencies. In  addition, DOD reported that the department saved $297 million through  commercial information technology solutions, department-wide network  management, and optimized data centers. Further, according to the  report, consolidating four health care enterprises improved patient care  and medical readiness, with an estimated savings of more than $2.5  billion annually by 2023. OCMO officials stated that they are still in the  process of working with the Office of the Under Secretary of Defense for  Comptroller to document savings generated from the business reform  teams\u2019 initiatives. Given that OCMO officials stated they are taking steps  to document savings generated from the teams\u2019 initiatives, we are not  making a recommendation at this time, but will continue to monitor their  efforts as part of our ongoing work on the high-risk nature of DOD\u2019s  business transformation efforts.", "One senior DOD official involved in the reform effort acknowledged that  the teams\u2019 progress has been uneven. He cited a number of factors that  can affect teams\u2019 implementation, including the degree to which the  teams have support from the highest levels of department leadership to  operate independently and advance changes that may be unpopular with  internal or external stakeholders, and the ability of teams to tackle  longstanding systemic challenges, such as inaccurate cost data  throughout the department. This official and several teams we met with  cited the importance of the team leader\u2019s commitment to driving team  success.", "We found that uncertainty with funding for initiatives may be an additional  factor inhibiting some teams\u2019 progress. In some cases, the business  reform teams need funding to further develop and implement their  initiatives, such as the supply chain and logistics team\u2019s requirement for  $2.4 million to conduct a pilot project that included conducting three site  visits for warehouse and labor assessments in support of one of its  initiatives. According to OCMO officials, the business reform teams can  request funding from OCMO to further develop their initiatives, or if  funding is not available from OCMO, the teams can seek funding from  functional organizations. However, even in the early stages of their  implementation, some teams told us that they did not have access to  sufficient funding to fully develop and implement some of their approved  initiatives or that the process for obtaining the funding was uncertain.  For example, in June 2018, one team leader told us that the team did not  have sufficient funding to implement four initiatives. The leader also  stated that the team was not alerted to the lack of funding until  immediately prior to its planned implementation of these initiatives.  Members from another team stated that the Reform Management Group  wanted the team to implement its initiatives more quickly, which increased  the amount of funding the team needed for implementation. When the  team requested additional funding, however, OCMO did not have it  available. Further, OCMO officials told us that the teams submitted nine  requests for funding in fiscal year 2018, but OCMO did not have funding  to support four of these requests as of the end of fiscal year 2018.", "As the teams continue to develop and implement their initiatives, the  number of requests for funding may increase in the future. Our prior work  on efficiency initiatives has found that up-front investments may often be  required to realize long-term efficiencies and savings. In this regard,  OCMO officials told us that, as of September 2018, the nine teams had  planned investments of about $6.7 billion to implement their initiatives  from fiscal years 2018 through 2024. OCMO officials stated that this  amount is a projection from the teams, and DOD has not yet identified  sources for this funding. In addition, officials stated that more investment  could be needed as the teams continue to develop initiatives and more  enter the implementation phase. However, according to DOD\u2019s budget  materials for fiscal year 2019, requested funding for OCMO\u2014a source  used to fund the development of some of the teams\u2019 initiatives\u2014will  decrease from about $48 million in fiscal year 2018, to about $36 million  in fiscal year 2019.", "Leading practices for implementing effective cross-functional teams  highlight the importance of senior management providing teams with  access to resources. These leading practices also state that teams  should have well-defined team operations with established rules and  procedures. Further, the findings from a study contracted by DOD in  August 2017 to determine how best to implement effective cross- functional teams identified actions for DOD to consider for supporting the  implementation of its cross-functional teams, including identifying funding  mechanisms to fully support cross-functional teams. The study  suggested that language outlining the preferred mechanisms and  authorities for this purpose can be included in cross-functional team  guidance.", "OCMO officials told us that the office maintains a list of funding requests  from the teams and prioritizes which initiatives to fund based on several  factors including estimated yield, feasibility, and available resources for  implementation. However, OCMO did not have a process for identifying  and prioritizing available funding for implementing the initiatives planned  by the business reform teams for fiscal year 2018, and has not  established one for fiscal year 2019. According to OCMO officials, the  department initially planned to use available funding from OCMO or the  savings generated by the initiatives to fund the development and  implementation of other initiatives. However, OCMO officials have since  recognized that funding is needed and they are in the early stages of  developing an approach to do so. Specifically, OCMO officials said they  are working with the Office of the Under Secretary of Defense for  Comptroller to identify funding for initiatives in fiscal year 2020. While  there will likely be initiatives that cannot be funded given limited  resources, OCMO and the reform teams could benefit from a clear  process for identifying and prioritizing available funding. Without such a  process, OCMO and the reform teams may not be able to adequately  plan for and execute their initiatives."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Section 911 of the NDAA for Fiscal Year 2017 called for organizational  and management reforms to assist DOD in addressing challenges that  have hindered collaboration and integration across the department. While  the department has taken some steps to implement the section 911  requirements, it has still not met statutory due dates for implementing key  requirements intended to support its cross-functional teams and to  advance a more collaborative culture within the department. We continue  to believe it is important for senior leadership to demonstrate their  commitment to fulfilling section 911 by addressing our prior related  recommendations and by completing the remaining requirements.", "Further, section 921 of the NDAA for Fiscal Year 2019 requires DOD to  reform its enterprise business operations to increase the effectiveness  and efficiency of mission execution. DOD has highlighted its nine cross- functional teams dedicated to improving the department\u2019s business  operations as key to achieving enterprise business reform. However, this  effort has been marked by a slow start and uneven progress, and teams  face a number of challenges. One key challenge is the teams\u2019 lack of  resources to drive their initiatives forward. OCMO has not established a  process for identifying and prioritizing available funding for the  development and implementation of the teams\u2019 initiatives, which has  hampered the success of some of the enterprise reform efforts."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of Defense should ensure that the Chief Management  Officer establishes a process for identifying and prioritizing available  funding to develop and implement initiatives from the cross-functional  reform teams. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, which are reproduced in Appendix V, DOD concurred  with our recommendation and described ongoing and planned actions to  address it.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Defense, and DOD\u2019s Acting Chief  Management Officer. In addition, the report is available at no charge on  our website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Prior GAO Reports on the Department of Defense\u2019s (DOD) Implementation of Section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017", "paragraphs": ["Section 911 of the NDAA for Fiscal Year 2017 included a provision for  us\u2014every 6 months after the date of enactment on December 23, 2016,  through December 31, 2019\u2014to submit to the defense committees a  report. Each report is to set forth a comprehensive assessment of the  actions that DOD has taken pursuant to section 911 during each 6-month  period and cumulatively since the NDAA\u2019s enactment. We issued our first  report in June 2017, and did not make recommendations. We issued our  second report in February 2018, and made four recommendations to  improve DOD\u2019s implementation of section 911. We issued our third report  in June 2018, and did not make recommendations. Table 2 identifies our  three prior reports on DOD\u2019s implementation of section 911 and the status  of the four recommendations from our February 2018 report."], "subsections": []}, {"section_title": "Appendix II: Summary of Requirements in Section 911 of the National Defense Authorization Act for Fiscal Year 2017", "paragraphs": ["Section 911 of the National Defense Authorization Act for Fiscal Year  2017 requires the Secretary of Defense to take several actions. Table 3  summarizes these requirements, the due date, and the date completed, if  applicable, as of December 2018."], "subsections": []}, {"section_title": "Appendix III: Overview of the Department of Defense\u2019s (DOD) Nine Cross-Functional Teams Implementing Business Reform Initiatives", "paragraphs": ["The Deputy Secretary of Defense has established nine cross-functional  teams since October 2017 to implement reform initiatives intended to  improve the quality and productivity of the department\u2019s business  operations, including moving toward more use of enterprise services.  According to the memoranda appointing the team leaders, these teams  support the Secretary of Defense\u2019s focus on creating a more lethal and  effective force by allowing the department to reallocate resources from  business operations to readiness and to recapitalization of the combat  force.", "As of September 2018, these nine cross-functional teams varied in size,  ranging from 5 to 31 members. According to OCMO officials, the size of  the teams can vary based on the knowledge and expertise needed to  implement the teams\u2019 initiatives. The team leaders are either presidential  appointees or members of the Senior Executive Service. In addition, the  Deputy Secretary of Defense directed the military departments and  functional organizations to appoint reform team members, and the teams  include representatives from the military departments, functional  organizations relevant to the reform topic, and external experts. At the  time we met with the teams, most reported that they were the appropriate  size and had the right skills and expertise represented on the team.  Figure 2 provides additional details on the composition of these nine  cross-functional teams, as of September 2018."], "subsections": []}, {"section_title": "Appendix IV: Leading Practices for Implementing Effective Cross-Functional Teams", "paragraphs": ["In February 2018, we reported on eight leading practices for  implementing effective cross-functional teams. Table 4 identifies these  leading practices and their related key characteristics."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Margaret Best (Assistant  Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Michael  Holland, William Lamping, Chad Johnson, Matthew Kienzle, Amie Lesser,  Ned Malone, Judy McCloskey, Sheila Miller, Sally Newman, Richard  Powelson, Daniel Ramsey, Ron Schwenn, Jared Sippel, Susan Tindall,  and Sarah Veale made key contributions to this report."], "subsections": []}]}], "fastfact": ["DOD's organizational and management challenges have made it hard for the department to find efficiencies and cut costs. To address this issue, DOD created 9 teams of experts from various DOD offices to reform the department's business processes (such as health care and financial management).", "We found that these teams identified 135 reform initiatives, such as consolidating IT systems, but 104 of these initiatives have yet to be implemented. One reason is that some teams lack resources to fully implement their initiatives.", "We recommended that DOD establish a process to identify and prioritize available funding for implementing these reforms."]}
{"id": "GAO-19-103", "url": "https://www.gao.gov/products/GAO-19-103", "title": "Foot-and-Mouth Disease: USDA's Efforts to Prepare for a Potential Outbreak Could Be Strengthened", "published_date": "2019-03-12T00:00:00", "released_date": "2019-03-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FMD is a highly contagious viral disease that causes painful lesions on the hooves and mouths of some livestock, making it difficult for them to stand or eat, thus greatly reducing meat and milk production. The United States has not had an FMD outbreak since 1929, but FMD is present in much of the world. An FMD outbreak in the United States could have serious economic impacts, in part because trade partners would likely halt all imports of U.S. livestock and livestock products until the disease was eradicated. These imports were valued at more than $19 billion in 2017.", "GAO was asked to review USDA's efforts to prepare for an FMD outbreak. This report examines (1) USDA's planned approach for responding to an FMD outbreak; (2) challenges USDA would face in pursuing its response goals; and (3) how USDA identifies, prioritizes, and monitors corrective actions to mitigate the challenges. GAO observed a USDA FMD preparedness exercise; reviewed agency documents and nongeneralizable questionnaire responses from 29 respondents from federal and state government, livestock industries, and universities; and interviewed officials from federal and state governments and representatives of livestock industries and universities."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Department of Agriculture's (USDA) planned approach for responding to an outbreak of foot-and-mouth disease (FMD) includes several strategies. These strategies generally rely on killing infected and susceptible animals, vaccinating uninfected animals, or a combination of both approaches. USDA would implement one or more of the strategies, depending on factors such as the outbreak's size and the resources available, according to agency documents.", "USDA would likely face significant challenges in pursuing its response goals of detecting, controlling, and containing FMD quickly; eradicating FMD while seeking to stabilize industry and the economy; and facilitating continuity of commerce in uninfected animals. GAO identified challenges in 11 areas\u2014including allocating a limited supply of FMD vaccine\u2014based on its review of USDA documents, responses to GAO's questionnaire, and interviews with agency officials and others with expertise on FMD. According to USDA, the agency may not have a sufficient supply of FMD vaccine to control more than a small outbreak because of limited resources to obtain vaccine. As shown below, the current vaccine supply would be sufficient to protect about 14 percent of Texas's cattle or about 4 percent of Iowa's swine; these states' cattle and swine populations are the nation's largest. The Agriculture Improvement Act of 2018 includes a provision to increase the FMD vaccine supply.", "USDA has identified dozens of corrective actions to mitigate the challenges of responding to an FMD outbreak, as called for in USDA procedures, but has not prioritized these corrective actions or monitored their completion, as also called for in its procedures. USDA has identified the corrective actions through exercises simulating FMD outbreaks, surveys, and lessons learned from other foreign animal disease outbreaks. However, USDA has not completed all of the corrective actions, including actions related to vaccination. Agency officials stated that they have not completed such corrective actions because they have been responding to outbreaks of other animal diseases and have limited resources. Without following agency procedures to prioritize and monitor corrective actions, USDA cannot ensure that it is allocating its resources to the most beneficial actions to prepare for a possible FMD outbreak."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that USDA follow its procedures to prioritize and monitor the completion of corrective actions that the agency has identified for FMD preparedness. USDA agreed with these recommendations, and described actions it will take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Foot-and-mouth disease (FMD) is a highly contagious viral disease that  causes painful lesions on the hooves and inside the mouths of some  species of livestock, making it difficult for them to stand or eat, thus  greatly reducing production of meat or milk. The virus affects domestic  and wild cloven-hoofed animals, such as cattle, swine, sheep, goats,  bison, and deer. There are no known cases of FMD in the United States  as of January 2019, but it is present in more than two-thirds of countries  in the world, so it could be introduced here either accidentally or  intentionally as an act of terrorism, according to documents from the U.S.  Department of Agriculture (USDA). An FMD outbreak in the United  States could severely harm the economy, largely because of trade  repercussions from loss of our nation\u2019s \u201cFMD-free\u201d status. If the United  States lost this status, trading partners would likely be unwilling to accept  our exports until the United States is declared FMD-free again. As a  result, USDA expects that in an FMD outbreak, all exports of cattle,  swine, sheep, goats, and uncooked products from these animals would  temporarily stop. Beef exports in 2017 were valued at about $7 billion,  and pork exports were valued at about $6 billion, according to the U.S.  Meat Export Federation. Depending on the extent and duration of an FMD  outbreak, it could have a significant effect on these exports, as well as the  larger agricultural economy.", "USDA is responsible for preparing for an outbreak of FMD in the United  States and coordinating a response if an outbreak occurs, in partnership  with the Department of Homeland Security (DHS), individual states, and  industry. USDA\u2019s goals for its FMD response are to (1) detect, control,  and contain FMD as quickly as possible; (2) eradicate FMD using  strategies to stabilize animal agriculture, the food supply, the economy,  and to protect public health; and (3) provide science- and risk-based  approaches and systems to facilitate continuity of commerce in uninfected  animals.", "Some countries have addressed FMD outbreaks in the past by killing and  disposing of infected and susceptible animals, otherwise known as  stamping out. However, South Korea and Japan stamped out millions of  swine and cattle in recent FMD outbreaks but still struggled to contain the  virus. U.S. livestock industries operate on a much larger scale than those  in either South Korea or Japan, which could make stamping out an  outbreak here more difficult. Some countries have used vaccination in  conjunction with stamping out to control FMD.", "You asked us to review USDA\u2019s efforts to prepare for an FMD outbreak.  This report (1) describes USDA\u2019s planned approach for responding to an  FMD outbreak; (2) identifies what challenges, if any, USDA would face in  pursuing its FMD response goals; and (3) examines how USDA identifies,  prioritizes, and monitors corrective actions to mitigate these challenges.", "To describe USDA\u2019s planned approach for responding to an FMD  outbreak, we reviewed relevant legislation and USDA strategy and  guidance documents. We also interviewed USDA officials at the agency\u2019s  headquarters, laboratories, center for epidemiology and animal health,  and center for veterinary biologics. We selected these officials to  interview because of their knowledge about USDA\u2019s planned approach,  their involvement in preparing for an FMD outbreak, and the roles they  would play in responding to such an outbreak.", "To identify what challenges, if any, USDA would face in pursuing its FMD  response goals, we first came up with a list of potential challenge areas.  To develop the list of potential challenge areas, we reviewed USDA  documents, reports about FMD outbreaks in other countries, and after- action reports from 41 preparedness exercises in the United States from  2007 to 2018 in which officials practiced responding to simulated FMD  outbreaks and identified emerging challenges. We also interviewed  USDA headquarters staff and field staff in Iowa (the state with the most  livestock); USDA laboratory officials; state animal health officials in  California, Colorado, Iowa, and North Carolina; representatives from four  different livestock industries; and others with expertise in this area. We  selected the individuals to interview based on their knowledge about  challenges that USDA could face in pursuing its FMD response goals,  their central role in preparing for an FMD outbreak, and recommendations  from other interviewees, as well as diversity in geographic location. We  also visited a swine farm and cattle feedlot in Iowa and interviewed the  owners. We selected a swine farm and cattle feedlot to visit because  swine and cattle were the livestock industries with the greatest  populations of animals in the United States in 2016. We identified a list of  11 potential challenge areas, including vaccination.", "To confirm the significance of the challenge areas, we sent a  questionnaire with the list of potential challenge areas to four categories  of individuals: federal government officials, state government officials,  livestock industry representatives, and academic researchers. Within the  categories, we selected individuals from relevant units within USDA and  DHS, states with relatively high livestock populations, different livestock  industries (beef cattle, dairy cattle, swine, and sheep), and academic  researchers with relevant expertise. We asked the recipients whether  USDA would face a significant challenge in each of the 11 areas and  whether they knew of other challenge areas we had not listed. We  defined significant to mean a challenge that is sufficiently great or  important enough to be worthy of USDA action. We sent the  questionnaire to 39 recipients and received responses from 29. Since we  used a nonprobability sample, the results are not generalizable to all  government officials, livestock industry representatives, or FMD experts,  but the responses helped confirm the list of 11 challenge areas and  provided illustrative information about each one.", "We reviewed challenges related to vaccination for FMD in greater depth  than other challenges because of the significant role vaccination could  play if reliance solely on stamping out is not feasible. Specifically, we  visited DHS\u2019s Plum Island Animal Disease Center on Plum Island, New  York, where we interviewed officials from USDA\u2019s Foreign Animal  Disease Diagnostic Laboratory and others about challenges related to  FMD vaccination. We also reviewed agency documents on the topic and  interviewed other officials from USDA, universities, states, and industry  groups about issues related to FMD vaccination. Further, we interviewed  officials from the vaccine company that currently produces the majority of  FMD vaccine available for use in the United States and a company that  has exclusive rights to use a modified version of the FMD virus to  produce FMD vaccine in the future.", "To determine how USDA identifies, prioritizes, and monitors corrective  actions to mitigate the challenges, we reviewed related USDA guidance  and other agency documents, observed an FMD preparedness exercise,  reviewed after-action reports from 41 previous FMD preparedness  exercises, and interviewed USDA officials. The FMD preparedness  exercises were sponsored by USDA, DHS, and state governments, and  ranged from small-scale exercises focused on narrow response tasks to  large-scale exercises in which participants practiced a wide range of  response activities in a simulated outbreak. We reviewed USDA\u2019s  procedures for evaluation and improvement planning to understand how  the agency is to identify, prioritize, and monitor corrective actions. To  determine whether USDA was consistently following these procedures,  we reviewed the 41 after-action reports for FMD preparedness exercises  and interviewed agency officials about corrective actions identified in the  reports and steps the agency has taken to prioritize and monitor progress  on the actions. We reviewed agency documents and interviewed agency  officials about examples of corrective actions that USDA has identified  and taken or not yet taken. We also reviewed USDA after-action reports  for outbreaks of highly pathogenic avian influenza (avian influenza) and  reviewed USDA\u2019s database of related corrective actions to learn how the  agency identified, prioritized, and monitored actions to mitigate  challenges for that disease. To assess the overall reliability of the  database to use information from this database in our report, we reviewed  management controls over the information systems that maintain the  data, and we interviewed USDA officials who manage the database. We  determined that the database was sufficiently reliable to allow us to  describe the contents of the database and general status of corrective  actions. For further details on our objectives, scope, and methodology,  see appendix I.", "We conducted this performance audit from May 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section provides an overview of FMD, as well as information on the  potential impact of an outbreak in the United States; USDA activities to  respond to outbreaks of diseases, including FMD; federal, state, tribal,  and industry roles in FMD control; and FMD vaccines."], "subsections": [{"section_title": "Overview of FMD", "paragraphs": ["FMD is a highly contagious viral disease that causes fever and painful  lesions on cloven-hoofed animals\u2019 hooves, mouths, and udders (see fig.  1). These debilitating effects, rather than high mortality rates, are  responsible for severe productivity losses associated with FMD. The  disease generally does not infect humans and is not considered a public  health or food safety threat. Young animals may die from the virus, while  most adult animals recover. However, livestock infected with FMD have  severely diminished meat and milk production.", "FMD virus can be found in all secretions and excretions from infected  animals, including in breath, saliva, milk, urine, feces, and semen, as well  as in the fluid from the lesions. Animals can release the virus for up to 4  days before showing visible signs of infection, and FMD can spread from  one animal species to another. The virus itself can survive in the  environment for many months and can spread when healthy animals  come into contact with infected animals or via contaminated vehicles,  equipment, clothes, feed, or animal products, as shown in figure 2.", "The United States has not had an FMD outbreak since 1929, but the  disease could be introduced here from countries in Africa, Asia, Eastern  Europe, or South America where it is present. The United States is  vulnerable to FMD transmission, given the large size and mobility of the  U.S. livestock sector. In 2018, the United States had about 94 million  head of cattle, 74 million swine, 5 million sheep, and more than 2 million  goats. Many of these livestock are concentrated in major livestock- producing states such as Texas and Iowa, but livestock are present in  every state. (See figs. 3 and 4 for the populations of cattle and swine by  state.) According to USDA documents, a large percentage of livestock in  the United States are kept on large farms, ranches, or feedlots (i.e., areas  or buildings where livestock are fed and fattened up), some with capacity  for 50,000 to 100,000 or more animals. Livestock are transported daily to  feeding facilities, markets, slaughter plants, and other farms or ranches.  For example, swine are often moved among multiple premises at different  stages of their life spans to accommodate their growth in size, among  other things. According to the swine industry, approximately 1 million  swine are on the road every day in transit to various stages of the  production process."], "subsections": []}, {"section_title": "Potential Impact of FMD Outbreak", "paragraphs": ["An FMD outbreak in the United States could have serious economic  consequences. A 2001 outbreak of FMD in the United Kingdom, for  example, resulted in the killing of more than 6 million animals, with direct  costs of more than $3 billion to the public sector and more than $5 billion  to the private sector. The extent of economic damage in the United  States would depend primarily on the duration and geographic extent of  the outbreak, the extent of trade disruptions, and how consumers reacted  to the disease and associated control measures, according to USDA. In a  large and long-lasting outbreak, control measures such as killing animals  and halting the transportation of animals could cause significant losses for  livestock operations. In addition, trade disruptions could have an  enormous impact because U.S. exports of livestock, meat, and dairy  products\u2014together valued at more than $19 billion in 2017 based on  estimates from the U.S. Meat Export Federation and the U.S. Dairy  Export Council\u2014would likely stop or be sharply reduced. In addition,  domestic consumers might be reluctant to purchase meat and animal  products such as milk during an FMD outbreak, even though the products  would be safe for people to consume, according to USDA."], "subsections": []}, {"section_title": "USDA Activities to Respond to Outbreaks", "paragraphs": ["Partly to protect the economic interests of the U.S. livestock industry, the  Animal Health Protection Act authorizes USDA to detect, control, and  eradicate diseases in livestock. USDA\u2019s Animal and Plant Health  Inspection Service (APHIS) is the lead agency for responding to  outbreaks of foreign animal diseases, including FMD. According to  APHIS, in responding to an outbreak of FMD or any foreign animal  disease, APHIS, in coordination with state and industry partners, would  conduct the following activities, among others:", "Surveillance. Observing animals for visible signs of disease and  analyzing data on locations and numbers of disease cases to detect  premises with the disease, determine the size and extent of an  outbreak, and determine whether outbreak control measures are  working.", "Epidemiologic tracing. Gathering and analyzing data on cases of a  disease, premises with such cases, movement of infected animals,  and their potential contact with uninfected animals to locate other  animals or premises with the disease, understand the outbreak\u2019s rate  and direction of spread, and investigate the source of the outbreak.", "Diagnostic testing. Conducting approved and validated assessments  of samples taken from animals to identify infected animals or to  demonstrate that healthy animals are free of disease.", "Applying quarantines and stop-movement orders. Restricting the  movement of infected or potentially infected animals, animal products,  and contaminated items to prevent the virus from spreading to healthy  animals.", "Biosecurity  Biosecurity measures, which help minimize  disease spread, include the following: placing  signs indicating precautions personnel and  visitors must follow; establishing sign-in  procedures at entry points; removing dirt from  boots and disinfecting them prior to entering a  facility; using disposable personal protective  equipment, such as Tyvek suits, gloves,  masks, and boots, when entering premises;  disposing of contaminated items properly;  designating \u201cclean\u201d and \u201cdirty\u201d storage areas  in vehicles; and controlling movement on and  off premises.", "Employing biosecurity measures. Taking steps, such as cleaning  and disinfecting trucks that travel between premises, to contain the  virus on infected premises and prevent it from spreading via objects or  equipment that can carry infection.", "Stamping out and vaccination. Killing infected animals and  vaccinating uninfected animals\u2014for example in buffer zones around  infected premises\u2014to limit the spread of the virus.", "Compensating owners. Paying owners fair market value for animals  and equipment that the government determines must be destroyed to  limit disease spread.", "To help prepare for a potential FMD outbreak, APHIS and its partners  conduct preparedness exercises in which officials practice responding to  simulated FMD outbreaks. Such exercises range from small-scale,  narrowly scoped exercises to full-scale, broadly scoped exercises. For  example, some exercises focus on specific response tasks such as  electronic messaging between laboratories or shipping response supplies  to the field, and involve relatively few people for less than a day. Other  exercises simulate a wide range of response activities that APHIS and its  partners would use in an FMD outbreak, involve dozens of people from  different agencies and industry organizations in locations across the  country, and last for multiple days.", "Multiple units within APHIS carry out these preparedness and response  activities at the agency\u2019s headquarters in Maryland; field offices in 27  states and Puerto Rico; and the National Veterinary Services  Laboratories in Ames, Iowa, and on Plum Island, New York. APHIS\u2019s  Foreign Animal Disease Diagnostic Laboratory on Plum Island, New York,  develops and performs diagnostic tests for foreign animal diseases,  including FMD."], "subsections": []}, {"section_title": "Federal, State, Tribal, and Industry Roles Related to FMD Control", "paragraphs": ["APHIS also works with federal agencies within and outside of USDA,  along with states, tribes, and academic and industry partners\u2014all of  which have roles related to FMD control, as discussed below.", "USDA\u2019s Food Safety and Inspection Service is responsible for the  safety of meat, poultry, and egg products. Agency officials assigned to  slaughter establishments examine animals before processing to look  for visible symptoms of FMD, among other things.", "USDA\u2019s Agricultural Research Service conducts research on  agricultural problems of high national priority, including the FMD virus  and FMD vaccine.", "USDA\u2019s National Institute of Food and Agriculture invests in and  conducts agricultural research, education, and extension to help solve  national challenges in agriculture, food, the environment, and  communities. The agency has funded modeling of FMD spread and  research on potential economic impacts.", "DHS has funded research on FMD vaccine and development of  response decisions tools, training, and equipment; sponsored  preparedness exercises; and developed emergency plans, among  other things. In an FMD outbreak, DHS may assume the lead for  coordination of federal resources if the Secretary of Agriculture  requests assistance from DHS. The Secretary of Homeland Security,  in coordination with the Secretaries of Agriculture, Health and Human  Services, the Attorney General, and the Administrator of the  Environmental Protection Agency, is to ensure that the combined  federal, state, and local response capabilities are adequate to  respond quickly and effectively to a major disease outbreak, among  other things, affecting the national agriculture or food infrastructure.", "The Department of the Interior carries out disease surveillance of  wild animals and coordinates surveillance activities with state fish and  wildlife agencies, among other things. The Department of the Interior\u2019s  U.S. Geological Service conducts research on wildlife diseases,  including FMD, and if needed in an FMD outbreak, would administer  diagnostic tests for wildlife.", "The Federal Bureau of Investigation coordinates the federal  investigation of criminal activities through the Joint Terrorism Task  Force. If animals, livestock, or poultry are suspected targets of a  terrorist attack, or if any evidence suggests a foreign animal disease  may have been or could be intentionally introduced, USDA notifies the  Federal Bureau of Investigation to investigate.", "State governments prepare plans for foreign animal diseases,  including FMD; conduct preparedness exercises; and would play a  key role in a response effort. In an FMD outbreak, a state animal  health official and an APHIS field official would co-lead initial response  efforts. For example, state governments might take immediate  actions, such as applying quarantines and stop-movement orders.", "Tribal governments, like state governments, would play a key role in  initial response efforts and conduct activities similar to those of state  governments.", "The National Animal Health Laboratory Network is a partnership of  59 federal, state, and university-associated animal health laboratories  throughout the United States, of which 45 are approved to administer  diagnostic tests for FMD.", "Livestock industry organizations support communication and  education efforts with their members and the public, participate in  FMD preparedness exercises, and have helped develop some FMD  planning documents."], "subsections": []}, {"section_title": "FMD Vaccines", "paragraphs": ["As part of its response to an FMD outbreak, APHIS may access vaccine  through the North American Foot-and-Mouth Disease Vaccine Bank  (vaccine bank), which is jointly administered by the United States,  Mexico, and Canada. Because finished vaccines have a short shelf life,  the vaccine bank manages a supply of vaccine concentrate, which can be  stored at extremely cold temperatures for about 5 years. Some of the  concentrate is stored at the Foreign Animal Disease Diagnostic  Laboratory on Plum Island, New York, and some at the manufacturer\u2019s  facilities in Lyon, France. During an FMD outbreak, the manufacturer  would convert the concentrate into finished vaccine and ship it to the  United States. For the concentrate stored in the United States, the  vaccine bank would need to first ship it to the manufacturer overseas.  APHIS\u2019s National Veterinary Stockpile coordinates logistics planning,  particularly for catastrophic outbreaks, and would be responsible for  delivering the finished vaccine to affected states, according to USDA  planning documents.", "The FMD virus has seven distinct variations, or serotypes, and more than  60 subtypes within the serotypes, according to USDA documents. FMD  vaccine should be as closely matched to the outbreak subtype as  possible to provide more effective protection, according to USDA officials  and a document on FMD vaccination. A vaccine for one FMD subtype  may also provide good or partial immunity to other closely related  subtypes, but it would not generally protect against other serotypes. The  vaccine bank has concentrate for a number of FMD subtypes that pose  the greatest risk to North American livestock based on recommendations  from the World Reference Laboratory for FMD.", "We have previously reported on APHIS\u2019s management of foreign animal  diseases, including FMD. For example, in May 2015, we recommended  that USDA assess and address its veterinarian workforce needs for  emergency response to an outbreak of an animal disease such as FMD.  USDA agreed, in part, with the recommendation, and in 2017 hired  additional veterinarians. The agency is currently building a model to  develop workforce estimates for a large-scale FMD outbreak, according  to agency officials."], "subsections": []}]}, {"section_title": "USDA\u2019s Planned Approach Calls for Outbreak-Specific Strategies, Using Overarching Guidance to Implement the Strategies", "paragraphs": ["USDA\u2019s planned approach for responding to an FMD outbreak relies on  several different strategies emphasizing stamping out, vaccination, or  both, depending on factors such as the size of the outbreak. To aid  agency officials in implementing the strategies, USDA has developed  overarching guidance for responding to animal disease outbreaks and  detailed procedures for many response activities."], "subsections": [{"section_title": "USDA\u2019s FMD Response Strategies Emphasize Stamping Out or Vaccination, Depending on Factors Such as Outbreak Size and Resource Availability", "paragraphs": ["USDA\u2019s APHIS has developed several different, but not mutually  exclusive, outbreak response strategies that the agency will consider to  control and eradicate FMD in an outbreak as part of its planned approach,  according to USDA documents and officials. These strategies rely on  stamping out\u2014killing and disposing of\u2014infected and susceptible animals,  vaccination of uninfected animals, or both. For strategies involving  vaccination, options include killing and disposing of vaccinated animals  (vaccinate-to-kill), allowing the animals to be slaughtered and their meat  processed (vaccinate-to-slaughter), or allowing the animals to live out  their useful lifespan (vaccinate-to-live). Response strategies would likely  change as an outbreak unfolds, and might also vary by region or type of  animal affected, according to APHIS planning documents.", "Over time, USDA\u2019s FMD planned approach has evolved from relying  solely on stamping out to including vaccination strategies as it became  apparent that in many potential scenarios, reliance on stamping out alone  would not be effective or feasible. Specifically, in 2010, USDA\u2019s Foot-and- Mouth Disease Response Plan: The Red Book (Red Book) first stated  that APHIS would consider vaccination strategies such as vaccinate-to- slaughter and vaccinate-to-live. In 2014 APHIS updated the Red Book  with the addition of a vaccinate-to-kill strategy to better distinguish what  would happen to animals if they were not eligible for slaughter. By 2016,  USDA had determined that complete stamping out of anything beyond a  small FMD outbreak was not a viable, effective, or sustainable response  strategy for the United States, according to USDA\u2019s FMD vaccination  policy.", "Experiences in preparedness exercises and foreign outbreaks of FMD  influenced a shift in USDA\u2019s planned approach toward vaccination  strategies. In 2010, Japan and South Korea both experienced FMD  outbreaks and initially relied on stamping out combined with strict  movement restrictions. Japan stamped out about 300,000 cattle and  swine, and South Korea stamped out about 150,000 cattle and 3 million  swine\u2014a third of the country\u2019s total swine population. Despite these  efforts, FMD continued to spread in both countries until they implemented  vaccination strategies, according to USDA documents. A 2007 FMD  preparedness exercise, sponsored by the Texas Animal Health  Commission and USDA, found that killing and disposing of infected  animals in a livestock-dense area like the Texas panhandle would not be  feasible in a timely manner because of the large number of animals on  infected premises (e.g., 50,000 to 75,000 head of cattle on large cattle  feedlots). USDA learned that having vaccination strategies in place would  be necessary to effectively respond to an FMD outbreak.", "If an FMD outbreak occurred, APHIS would select a response strategy or  multiple strategies, or it would modify strategies to achieve its FMD  response goals based on the unique circumstances of the outbreak,  according to agency planning documents. APHIS would do so in  consultation with affected states and tribes, and if the agency chose to  use vaccine, states would request it from USDA. According to agency  planning documents we reviewed, APHIS would consider a number of  factors when deciding on its approach, including the following:", "FMD vaccine availability;  consequences of the outbreak (e.g., trade restrictions or loss of  valuable genetic stock); public acceptance of response strategy or strategies;  scale of the outbreak (i.e., number and size of infected premises);  rate of outbreak spread;  location of initial outbreak (e.g., isolated ranch versus livestock- producing area); movement of animals (number of locations that infected or potentially  infected animals have traveled to or through); and  federal and state resources available to implement response  strategies.", "Resource needs vary among strategies and generally increase with the  scale of an outbreak, according to USDA planning documents. Having the  necessary resources available to implement a stamping-out response  strategy would include having qualified personnel to kill animals in  accordance with accepted protocols and having appropriate disposal  facilities. To implement strategies involving vaccination, APHIS would  need a sufficient quantity of vaccine, the resources for distributing and  administering the vaccine, and the diagnostic tests necessary to  distinguish between vaccinated and infected animals, according to  USDA\u2019s FMD vaccination policy. If the scale of an outbreak were small,  and APHIS had access to sufficient resources, agency officials would  likely implement a stamping-out strategy in an attempt to quickly stop the  production of virus in infected animals and limit the outbreak\u2019s spread,  according to agency planning documents. However, these planning  documents indicate that if the outbreak grew to a moderate regional, large  regional, national, or catastrophic scale, the resources required for  killing all infected and potentially infected animals, disposing of  carcasses, and paying compensation to livestock owners would quickly  multiply, and APHIS policy calls for strategies focused on vaccination,  according to USDA documents."], "subsections": []}, {"section_title": "USDA Has Developed a Range of Documents to Guide Its FMD Response Strategies", "paragraphs": ["Over time, USDA\u2019s APHIS has developed various documents to guide its  response to FMD, including overarching guidance for responding to FMD  and other foreign animal diseases, procedures with in-depth operational  details, and plans to secure the nation\u2019s food supply. To aid agency  officials in implementing FMD response strategies broadly, APHIS has  developed FMD response plans and guidance for responding to foreign  animal disease outbreaks more generally. For example, the Red Book  describes USDA\u2019s FMD response strategies; identifies the capabilities  needed to respond to an FMD outbreak; and provides guidance on the  critical activities required during the response, including time frames for  these activities. The Red Book is intended for responders at all levels of  government and industry partners. For example, if a state official or a  livestock owner wanted to know the steps to test and confirm a positive  case of FMD, the Red Book explains the process and has a flowchart to  illustrate the steps. APHIS also has developed response manuals that  provide guidance relevant to foreign animal disease outbreaks, including  FMD. For example, a manual on roles and coordination provides an  overview of USDA\u2019s framework for incident management, funding,  communication strategies, relationships, and authorities during a foreign  animal disease outbreak, including an FMD outbreak. APHIS also has  produced ready reference guides that condense guidance material from  these broader documents into short summary documents for training and  education purposes.", "In addition, APHIS has developed standard operating procedures (SOP)  for many response activities. Some SOPs are specific to an FMD  outbreak, and others provide more general instruction on activities to  respond to foreign animal diseases. The FMD biosecurity SOP, for  example, describes steps responders at all levels of government and  industry partners can take to help prevent the spread of the virus, such as  protocols for putting on and taking off personal protective equipment (e.g.,  coverall suits, boots, and gloves); standards for separating \u201cclean\u201d and  \u201cdirty\u201d zones in vehicles and on premises; and instructions for cleaning  and disinfecting vehicles before arrival at and after departure from  different premises.", "Many of the more general SOPs have proven useful during outbreaks of  other animal diseases and exercises simulating FMD outbreaks,  according to APHIS and state government officials, and APHIS has  revised them to incorporate lessons learned. For example, one state  animal health official said that during the 2014 avian influenza outbreak,  the SOP for disposing of poultry carcasses through composting was  initially insufficient because the poultry industry had not previously been  composting in all states. To improve consistency across states, APHIS  updated protocols during the outbreak and created composting protocols  for avian influenza-infected flocks and livestock to supplement the  agency\u2019s disposal SOP, which addresses carcass disposal for foreign  animal diseases generally. These composting protocols expanded on  and clarified guidance to be used in subsequent outbreaks. In addition,  APHIS held training on composting procedures for birds and on large  animal composting, which could be part of an FMD response.", "USDA, in coordination with industry, state, federal, and academic  representatives, has also developed supply plans to secure the nation\u2019s  food supply and keep businesses operating during an FMD outbreak  while managing the risk of spreading the virus, which would decrease the  economic impact of an outbreak. To date, USDA and its industry and  university partners have developed Secure Milk Supply and Secure Pork  Supply plans and have partially completed a Secure Beef Supply plan.  These plans guide industry on managing uninfected premises and  uninfected animals during an FMD or other foreign animal disease  outbreak. For example, the Secure Milk Supply plan has guidance on  what producers can do to continue moving shipments of milk during an  outbreak, including how to implement enhanced biosecurity plans to  prevent the spread of FMD to their facilities. The sheep industry is  currently developing its own secure food and wool supply plan, according  to industry representatives."], "subsections": []}]}, {"section_title": "USDA Would Likely Face Significant Challenges in Pursuing Its FMD Response Goals, Particularly regarding Vaccination", "paragraphs": ["USDA would likely face significant challenges in pursuing its FMD  response goals of detecting, controlling, and containing FMD as quickly  as possible; eradicating FMD using strategies that seek to stabilize  animal agriculture industries and the economy; and facilitating continuity  of commerce in uninfected animals. We identified 11 challenge areas,  based on our review of USDA documents, interviews with agency officials  and others with expertise with FMD, and 29 responses to our  questionnaire. A majority of respondents indicated that in 10 of the 11  areas USDA would face challenges that are significant\u2014that is, important  enough to be worthy of USDA action. (See app. I, fig. 7, for a summary of  the responses.) For the 11th area, which is communication and  coordination, opinions were split on whether the area would present  significant challenges. The 11 challenge areas, which sometimes overlap  or fall outside of USDA\u2019s direct control, are described below. Examples of  actions USDA is taking to address these challenges are described later in  this report."], "subsections": [{"section_title": "Surveillance", "paragraphs": ["USDA would likely face surveillance challenges that could delay detection  of the first cases in an FMD outbreak. A majority (22 of 29) of  respondents to our questionnaire indicated that USDA would face  significant challenges in this area. FMD can spread without detection for  the following reasons:  there is no active surveillance for FMD, animals may not have visible signs until up to 4 days after becoming  signs can be difficult to notice in some species, and  infected wild animals could go undetected and spread the virus.", "For initial detection of an FMD outbreak, USDA relies on passive  surveillance, waiting for producers or veterinarians to notice and report  visible signs. In contrast, for initial detection of other diseases, such as  bovine spongiform encephalopathy (commonly known as mad cow  disease), USDA has active surveillance programs in which animals are  routinely tested regardless of visible signs. According to USDA officials,  the cost and resources required to conduct active surveillance for initial  detection of an FMD outbreak would not be justified because the United  States has not had an FMD outbreak for decades and there is a risk that  false positives could create unnecessary disruptions. However, the  officials said the agency would likely use active surveillance during an  outbreak.", "Passive surveillance, however, may not allow for timely detection of the  initial cases of FMD, particularly in sheep. FMD infection in sheep often  causes only mild signs or symptoms, such as an elevated temperature or  loose stool, and in some cases will not cause any overt signs or  symptoms at all, even though the animal may be spreading the virus,  according to representatives of the sheep industry. Therefore, an FMD  outbreak could become widespread before USDA detects the first cases.", "Even if responders are able to detect FMD in domesticated animals  before an outbreak becomes widespread, wild animals may become  infected and spread the virus, posing additional challenges for USDA and  its partners. For example, the U.S. population of feral swine, which are  susceptible to FMD, is estimated at 6 million and is rapidly expanding,  according to APHIS. Detecting and controlling infected wild animals could  be extremely difficult, according to agency officials, and if not controlled,  these populations could serve as carriers for the disease. In addition,  limitations in diagnostic capabilities, discussed below, could hamper the  availability of data needed for surveillance, such as accurate information  on new cases of FMD."], "subsections": []}, {"section_title": "Diagnostic Capabilities", "paragraphs": ["USDA would likely face challenges related to its capability to diagnose  FMD. Such challenges include the lack of validated population-level  diagnostic tests and potentially insufficient resources to collect samples  and perform diagnostic testing in a large outbreak. A majority (24 of 29)  of respondents to our questionnaire indicated that USDA would face  significant challenges in this area. Currently, during an FMD outbreak,  USDA would rely on individual animal testing, given that it has not  validated any diagnostic tests that can be used for a group or population  of animals, according to USDA\u2019s surveillance SOP. If an FMD outbreak  expands, the ability to test a large number of animals quickly with minimal  resources would be useful for USDA. In a 2017 study of the potential  uses of a bulk milk test for FMD in dairy cattle, for example, USDA found  that 720 bulk milk tests could replace over 35,000 individual animal tests  with the same level of confidence in disease status. However, the study  identifies additional work needed to implement bulk milk tests.", "USDA and state officials investigate suspected cases of FMD on  previously uninfected premises, according to USDA documents. To do so,  USDA or state officials travel to the suspected premises\u2014sometimes  over long distances\u2014collect samples from the animal or animals, and  send them to a qualified laboratory for diagnostic testing. During an  outbreak, massive quantities of diagnostic testing may need to be  conducted, straining the capacity of federal and state laboratories that are  qualified to investigate suspected cases of FMD, and potentially causing  delays in detecting infected premises, according to both an after-action  report for a preparedness exercise and agency officials. In addition,  USDA officials we interviewed expressed concern that diagnostic kits  used for these individual animal tests would be in short supply during an  outbreak and said that they do not currently know how much time it would  take for manufacturers to produce more. In the event of a large FMD  outbreak, delays in getting diagnostic results could slow USDAs ability to  detect, control, and contain an outbreak."], "subsections": []}, {"section_title": "Information Management", "paragraphs": ["USDA would likely face challenges in the area of information  management during an outbreak, including incompatible data systems at  the state and federal levels or between diagnostic laboratories and USDA  and responders who lack familiarity with USDA data systems. A majority  (20 of 29) of respondents to our questionnaire indicated that USDA would  face significant challenges in this area.", "USDA and state data systems track information on registered livestock  premises and animals. In addition, USDA has an emergency response  database for collecting and analyzing data on disease outbreaks and  managing response resources. However, state data systems cannot  always communicate directly with USDA\u2019s data systems because they  use different software, according to two state animal health officials. Such  impediments to communication could delay information sharing about the  location of infected and susceptible animals. One industry representative  said that such delays could prolong decisions about permits for  uninfected animals to move, disrupting industries\u2019 continuity of business.  According to an academic researcher, interruptions in movement of  animals could cause processing facilities to either close, operate at a  diminished capacity, or be overwhelmed by a backlog of animals once  movement is restarted, leading to animal welfare concerns. These  disruptions could present challenges for USDA to facilitate continuity of  commerce in uninfected animals, one of its response goals.", "USDA\u2019s ability to control an outbreak could also be impaired if responders  lack familiarity with USDA data systems. For example, according to a  USDA after-action report, during the 2014 avian influenza outbreak, some  responders were unfamiliar with USDA\u2019s system for entering outbreak  response information, resulting in incorrect usage or underutilization of  the system. As a result, USDA\u2019s overall response was slower than it  would have been if timely information had been available."], "subsections": []}, {"section_title": "Animal Traceability", "paragraphs": ["USDA would likely face challenges related to the traceability of animals  (i.e., the ability to trace their locations and movements) after an outbreak  was detected. We found that these challenges result from insufficient use  of identification numbers for livestock premises (such as farms and  ranches) and individual animals to enable tracing of infected, exposed,  and susceptible animals, and from identification numbers that cannot be  easily read (e.g., because they are not electronic). A majority (25 of 29) of  respondents to our questionnaire indicated that USDA would face  significant challenges in this area. In an outbreak, responders would use  premises and animal identification numbers, if available, to trace the  location and movements of infected animals to identify other animals that  may have been exposed. They would also use the identification numbers  to locate all susceptible animals in the region, in order to notify owners  about the outbreak and any response measures in place, such as stop- movement orders. These activities would be hampered without the  identification numbers. For example, Iowa and Texas regulations do not  require producers to register all of their animals with the state. Also,  record keeping varies at individual farms and ranches, where some  producers have electronic records, but others have no written records or  rely on hand-written paper documents, according to USDA documents.  Searching through records by hand at individual farms could take days  rather than the hours that it would take if the records were electronic,  according to a USDA planning document. Without timely and accurate  tracing through the use of premises and animal identification numbers,  USDA may face challenges controlling and containing an FMD outbreak  and facilitating continuity of commerce in uninfected animals.", "In addition, some animals have identification numbers on ear tags that  must be read visually, which could slow USDA\u2019s efforts to control and  contain an outbreak. In an outbreak, responders would need to inspect  animals with such ear tags to manually read and record the identification  numbers for individual animals. In contrast, for animals with electronic  tags, responders could use electronic readers, which can accurately read  identification numbers for a group of animals from a distance of up to 12  feet, according to a 2016 USDA study on electronic identification for  livestock. One industry representative said that the beef cattle industry  has not widely implemented electronic identification because it is difficult  for many operators to justify the added cost of purchasing and attaching  an electronic tag for each animal."], "subsections": []}, {"section_title": "Biosecurity", "paragraphs": ["In an FMD outbreak, USDA would likely face biosecurity challenges  including lack of sufficient biosecurity on some premises, difficulty in  implementing biosecurity measures for certain species, and lack of  documentation (such as a written plan) specifying what measures are  currently in place. A majority (20 of 29) of respondents to our  questionnaire indicated that USDA would face significant challenges in  this area. If sufficient biosecurity measures are not consistently in place  on farms, ranches, and feedlots, people and vehicles may inadvertently  spread the FMD virus when they travel among premises, impeding  USDA\u2019s ability to control and contain an outbreak. For example during the  2001 FMD outbreak in the United Kingdom, poor biosecurity and livestock  owners\u2019 movements between scattered farms led to the introduction of FMD in previously uninfected areas, according to a 2002 report by the  United Kingdom\u2019s National Audit Office.", "Some livestock owners have not implemented extensive biosecurity  measures on their premises, in part because they have not experienced a  recent animal disease outbreak and measures may be difficult or  expensive to implement, according to an industry representative. In  addition, it may be difficult to implement biosecurity measures for certain  species. For example, cattle feedlots operate outdoors and may have  unrestricted points of entry and exit, so it can be more difficult and costly  to control access and implement other biosecurity measures.", "In addition, even if producers have biosecurity measures in place, these  measures may not be sufficiently documented to facilitate continuity of  commerce in uninfected animals. According to USDA guidance  documents, during an FMD outbreak, premises in areas with movement  restrictions will be required to obtain permits to move any animals or  animal products. To obtain such a permit, producers must show that they  are not contributing to the spread of disease or putting their animals at  risk of exposure, and producers without documented biosecurity plans  may face delays moving their animals. According to swine industry  representatives, even swine farms with biosecurity procedures do not  always document such procedures or the steps they have taken."], "subsections": []}, {"section_title": "Depopulation", "paragraphs": ["USDA would likely face depopulation challenges during an FMD  outbreak, including limited capability for killing large numbers of animals  in a timely manner and difficulties owing to the large size of some animals  affected by FMD. A majority (22 of 29) of respondents to our  questionnaire indicated that USDA would face significant challenges in  this area. For example, USDA officials said killing animals in large  feedlots\u2014which can hold 50,000 or more animals\u2014would quickly  overwhelm resources, such as the staff and equipment required to kill  animals. USDA policy calls for depopulating infected premises within 24  hours, but this may not be feasible on large livestock operations because  the animals have to be killed individually, which would be time-consuming  according to an industry representative. If infected premises are not  quickly depopulated, animals will continue producing the virus and  increase the risk of infecting animals on additional premises, hampering  USDA\u2019s ability to control and contain an outbreak. Rapid depopulation of  infected swine is particularly critical to containing the spread of an  outbreak because swine are known as amplifiers of FMD virus, producing  and excreting 3,000 times more virus than cattle or sheep, according to  USDA documents."], "subsections": []}, {"section_title": "Carcass Disposal", "paragraphs": ["USDA would likely face disposal challenges during an FMD outbreak,  including the feasibility and logistics of disposing of a large number of  animal carcasses, public concern about disposal options, and the  environmental impacts of disposal. A majority (25 of 29) of respondents to  our questionnaire indicated that USDA would face significant challenges  in this area.", "In a large FMD outbreak, millions of cattle could be affected. It is possible  that FMD can survive for several months on a frozen carcass, according  to USDA documents, so if such carcasses are not disposed of properly,  they could pose a risk for spreading FMD, hampering USDA\u2019s efforts to  control and contain an outbreak. Disposing of the carcasses of a 50,000- head herd of cattle from a large feedlot would be a massive effort: the  total weight for disposal could be as much as 30,000 tons, or about 1,500  dump truck loads to move all the animals to disposal sites, according to  an industry representative. One state animal health official stated that  disposal of one or two herds may be possible, but if an outbreak were  more widespread, the state would quickly run out of options.", "In addition, certain disposal strategies, such as incinerating large piles of  carcasses, may cause a negative public reaction, according to an industry  representative, USDA\u2019s disposal SOP, and state animal health officials.  Figure 5 illustrates carcass disposal during a 2001 FMD outbreak in the  United Kingdom, where the government implemented a policy of  stamping out all susceptible animals within 3 kilometers of known FMD  cases. In reaction to the policy, the public staged protests, and  businesses in rural areas lost customers who stayed away because of the  striking images in the media, according to a 2002 report by the University  of Newcastle.", "Finally, carcass disposal can create environmental impacts, such as  when a burial site contaminates the groundwater or incineration  contaminates the air. In general, states regulate disposal, including such  things as the timing (e.g., within 24 hours of an animal\u2019s death) and the  method of disposal (e.g., prohibiting outdoor incineration or specifying  that up to 7 cattle may be buried per acre per year). In an FMD outbreak,  large numbers of carcasses could make it difficult to comply with such  regulations."], "subsections": []}, {"section_title": "Resources", "paragraphs": ["USDA would likely face resource challenges in pursuing its FMD  response goals, including insufficient numbers of incident responders to  effectively implement USDA strategies in a medium or large outbreak, as  well as insufficient resources devoted to preparedness planning in some  states. A majority (23 of 29) of respondents to our questionnaire indicated  that USDA would face significant challenges in this area.", "During the 2014 avian influenza outbreak, there were difficulties quickly  providing response resources, such as personnel and equipment, to  rapidly stamp out affected flocks, according to a USDA after-action report.  According to an academic researcher, an FMD outbreak would be  significantly more difficult to handle than recent avian influenza outbreaks.  One state official noted that in his state there is not enough of a workforce  to adequately respond to an outbreak, and there is no assigned workforce  at the local level. For example, this official noted that his state employed  only two veterinarians and a few animal health technicians to collect  samples for testing in the event of an FMD outbreak. Other state animal  health officials expressed concern that states and counties will have  difficulty fielding adequate workforces to inspect animal transport vehicles  and implement stop-movement orders.", "Insufficient preparedness planning in some states could also hamper  response efforts, according to a response to our questionnaire from an  academic researcher with expertise in FMD preparedness. Some states  have not allocated resources to develop FMD response plans, including,  for example, the conditions that would trigger a stop-movement order.  States typically control intrastate movement under the state\u2019s authority,  and if states delay issuing stop-movement orders, it may be more difficult  for USDA to control and contain an outbreak."], "subsections": []}, {"section_title": "Communication and Coordination", "paragraphs": ["Communication and coordination may be an area where USDA could  face challenges during an FMD outbreak because of ineffective external  or internal communications and unclear roles and responsibilities.  Responses to our questionnaire in all categories (federal and state  government officials, industry representatives, and academic  researchers) were mixed about whether communication and coordination  was an area with significant challenges. Specifically, 11 respondents said  it was an area with significant challenges, 12 said it was not, and 6 were  unsure. One industry respondent who said that the area was not a  challenge cited a team of industry representatives that is working with  USDA and states to prepare for an FMD outbreak. On the other hand,  during a 2016 FMD preparedness exercise in Texas, coordination  between USDA and other participants was at times inadequate. For  example, during the exercise USDA and the Texas Animal Health  Commission shared leadership of the response effort, and some  respondents cited frustration with this top-down leadership structure  because they were accustomed to emergency management practices  and protocols designed for incidents such as natural disaster response  efforts, which are generally initiated at the local level. Participants  commented that they were confused about who did what and said that  coordination needs to be improved between USDA and local  governments, according to an after-action report. Also, communication  across participating agencies broke down. For example, information from  USDA on stop-movement orders, the size of the quarantine zone, and the  number of sites quarantined did not reach all stakeholders in a timely  manner, according to an after-action report."], "subsections": []}, {"section_title": "Appraisal and Compensation", "paragraphs": ["Compensating livestock owners for animals or equipment that the  government determines must be destroyed to limit the spread of FMD  would likely pose various challenges for the agency. USDA would provide  the owners with up to 100 percent of the expenses of purchase,  destruction, and disposition of animals or materials required to be  destroyed, based on the agency\u2019s appraisal of the fair market value.  Doing so would likely pose various challenges for the agency, according  to USDA and state government officials. A majority (19 of 29) of  respondents to our questionnaire indicated that USDA would face  significant challenges in this area. Such challenges include uncertainties  about fair appraisal methods (especially when an outbreak has caused  livestock prices to decline), owners resisting killing their animals if  compensation rates are too low, and the potentially massive scale of  compensation payments. According to USDA economists, if trade  restrictions were imposed during an FMD outbreak, the fair market value  of animals and their products would likely drop as a result of oversupply.  USDA\u2019s response to the outbreak could be slowed if producers brought  legal challenges to stop the stamping out of their herds because they  were not satisfied with compensation levels, a scenario that took place in  a 2018 USDA-led exercise simulating the first few days of an FMD  outbreak. Moreover, in a widespread FMD outbreak, the scale of federal  compensation payments could be substantial. For example, in the 2001  United Kingdom FMD outbreak, compensation costs were estimated at  over $1 billion for the killing of about 6 million animals. Given the larger  size of the livestock industry in the United States, federal compensation  costs could be much higher, depending on the number of animals killed  as part of the response."], "subsections": []}, {"section_title": "Vaccination", "paragraphs": ["USDA would likely face challenges related to vaccination, an area of  particular importance given vaccination\u2019s central role in USDA\u2019s strategies  for pursuing its response goals. All 29 respondents to our questionnaire  agreed that the challenges USDA faces related to vaccination are  significant. In particular, USDA does not have access to sufficient vaccine  to achieve its response goals under many potential outbreak scenarios,  and there is not consensus about how to allocate the limited supply,  according to USDA officials and documents. Other challenges in this area  relate to the timing and logistics of obtaining, distributing, and  administering vaccine and to scientific, procedural, and infrastructure  issues in vaccine production."], "subsections": [{"section_title": "Limited Supplies of Vaccine", "paragraphs": ["Supplies of FMD vaccine concentrate in the vaccine bank may be  sufficient to help control and eradicate a small, localized outbreak, but it is  unlikely that they would be sufficient to stop a larger outbreak, according  to USDA planning documents and officials. With a vaccine that is  matched to the appropriate FMD subtype, a single dose can protect cattle  for 6 months, and two doses are required to provide the same protection  to swine. APHIS\u2019s 2016 FMD vaccination policy states that 25 million  doses for each of 10 subtypes of the virus is an appropriate minimum  target to have available. However, the United States currently has  access to only 1.75 million doses of each subtype available in the vaccine  bank, according to USDA documents. In the United States, there are 24  states in which the number of livestock exceeds the doses available in the  vaccine bank, according to USDA documents. In a 2016 report to  Congress, USDA stated that the cost to reach its target of 25 million  doses would be about $125 million, which would be about 10 percent of  APHIS\u2019s budgetary resources in fiscal year 2016. In addition, because the  vaccine concentrate has a 5-year shelf life, USDA would incur costs to  routinely replace the supply of concentrate, according to agency officials.  The Agriculture Improvement Act of 2018 contains a provision that directs  the Secretary of Agriculture to establish a national animal vaccine and  veterinary countermeasures bank, and to prioritize the acquisition and  maintenance of sufficient quantities of FMD vaccine and accompanying  diagnostic products.", "The need for additional FMD vaccine was reinforced by a 2016 survey of  states by USDA and Iowa State University. On the basis of responses  from 32 state animal health officials, the authors estimated that in a  widespread or national outbreak, states would plan to use on average 4.2  million doses during the first 14 weeks of the outbreak. Based on these  estimates, a vaccine request from a single state could greatly exceed the  1.75 million doses available per subtype in the vaccine bank\u2019s supply.", "Moreover, if an FMD outbreak occurred in Texas or Iowa, the states with  the largest cattle and swine populations, respectively, the available  vaccine supply would provide a single dose for about 14 percent of  Texas\u2019s 12.3 million cattle or the required two doses for about 4 percent  of Iowa\u2019s 22.8 million swine. Texas\u2019s and Iowa\u2019s cattle and swine  populations together make up about 24 percent of the combined  population of cattle and swine nationwide. Figure 6 illustrates the vaccine  doses needed to protect cattle and swine in Texas and Iowa compared  with the currently available FMD vaccine bank supply of 1.75 million  doses per subtype.", "In addition, because of the large number of FMD subtypes present  around the world, and because the FMD virus is constantly mutating, it is  possible that an FMD subtype could be introduced in the United States  that is not covered by vaccines currently in the vaccine bank. According  to a representative from an FMD vaccine manufacturer, producing a  vaccine for a new subtype of FMD could take from 6 to 18 months,  depending on whether the subtype was known and other factors."], "subsections": []}, {"section_title": "Lack of Consensus on Vaccine Allocation", "paragraphs": ["Because of the limited supply of vaccine and the potentially high demand  for it, USDA would likely face the challenge of deciding how to allocate it  in an FMD outbreak. In a 2016 survey of 13 industry veterinarians, there  was no consensus within the beef, dairy, and swine industries about  priorities for the vaccine. Specifically, USDA and Iowa State University  asked the veterinarians to rank the importance of vaccinating various  populations (e.g., bull studs, lactating cows, and boar studs) within the  beef, dairy, and swine industries, assuming there was only enough  vaccine to vaccinate 25 to 50 percent of animals in a specified area. The  responses varied widely, with high and low rankings for nearly every  population of animals."], "subsections": []}, {"section_title": "Timing and Logistics", "paragraphs": ["The timing and logistics of obtaining, distributing, and administering the  FMD vaccine could also pose challenges. The timing to reformulate the  banked vaccine would pose challenges for USDA in an outbreak,  according to respondents to our questionnaire. In addition, in March 2005,  we found that USDA would not be able to deploy vaccines rapidly enough  to contain a widespread FMD outbreak. After USDA requests FMD  vaccine from the vaccine bank, vaccine manufacturers could take from 4  to 13 days to finish and ship all of the requested vaccine to the United  States, during which time the virus could spread within the livestock  population, according to USDA documents. If the vaccine bank\u2019s supply  of concentrate is exhausted during an outbreak and more is needed,  manufacturers may take several months to produce it, according to a  vaccine manufacturer.", "After obtaining the vaccine, USDA would distribute it to affected states,  and the states would distribute it to veterinarians, producers, or others  who would be responsible for administering vaccine, according to USDA  and state FMD vaccination documents. Many states do not currently have  vaccination plans in place and may not have identified the warehousing  locations, staff needs, and tracking required to efficiently distribute FMD  vaccine, according to agency and state government officials, which could  slow USDA\u2019s efforts to contain and control an outbreak. States with  vaccination plans may be able to more quickly and effectively distribute  and administer FMD vaccine during an outbreak. For example, California  has a vaccination plan that details how it would receive, distribute, and  administer FMD vaccine while maintaining the appropriate temperatures  and documentation. The plan includes details such as the supplies  needed for administering FMD vaccine to cattle."], "subsections": []}, {"section_title": "Scientific, Procedural, and Infrastructure Issues", "paragraphs": ["USDA faces challenges in obtaining vaccine and using it in a response  effort because of scientific, procedural, and infrastructure challenges  related to the vaccine and its production. There are very few vaccine  manufacturers in the world with the capacity to produce most of the FMD  vaccine subtypes and meet the quality standards required by the United  States, according to agency officials. Further, there is currently no  production capacity for FMD vaccine in the United States because  dedicated infrastructure is not in place to produce vaccines without live  virus. There is a statutory prohibition against working with live FMD virus  on the U.S. mainland, absent a permit granted by the Secretary of  Agriculture, and live virus is needed to produce conventional vaccines.  To work within this constraint, USDA\u2019s Agricultural Research Service  (ARS) and DHS developed new technologies to produce vaccine using  modified versions of the virus that are unable to cause or transmit  disease. The agencies transferred these technologies to vaccine  companies that are investing in their development, according to USDA  officials.", "In 2018, the Secretary of Agriculture announced that vaccine companies  could apply for permits to work with a specific modified, noninfectious  version of the FMD virus on the mainland. One company has exclusive  rights to use this modified version, which was developed and patented by  ARS. The company plans to produce FMD vaccine in the United States,  but it could take several years to license the initial product, complete the  necessary permitting procedures, and build manufacturing infrastructure,  according to USDA documents and a company official.", "Using FMD vaccine to respond to an outbreak presents additional  challenges that are related to limitations of FMD vaccines. Specifically,  animals may take up to 28 days after vaccination to develop protective  immunity to FMD, depending on the species, potency of vaccine, and  other factors. Even after 28 days, some vaccinated animals may not be  fully immune to FMD and may continue spreading the virus despite  having no visible signs of infection, according to USDA documents."], "subsections": []}]}]}, {"section_title": "USDA Has Identified Actions to Mitigate Challenges in Responding to FMD but Has Not Prioritized or Monitored Their Completion", "paragraphs": ["To mitigate challenges in responding to potential FMD outbreaks, USDA\u2019s  APHIS has identified corrective actions through preparedness exercises,  surveys, and lessons learned in other outbreaks, as called for in its SOPs.  However, APHIS generally does not follow its SOPs for prioritizing or  monitoring the completion of these actions."], "subsections": [{"section_title": "USDA Has Used Preparedness Exercises, Surveys, and Lessons Learned in Other Outbreaks to Identify Actions to Mitigate FMD Challenges", "paragraphs": ["A USDA SOP outlines a process for identifying corrective actions to  improve the agency\u2019s preparedness for outbreaks of foreign animal  diseases. According to the SOP, APHIS is to identify corrective actions  after preparedness exercises and animal disease incidents. Consistent  with this SOP, APHIS identifies corrective actions for FMD preparedness  through exercises simulating FMD outbreaks, surveys of agency officials  and others, and lessons learned from outbreaks of other diseases. More  specifically, see the following:", "APHIS sponsors FMD preparedness exercises and participates in  some such exercises that other federal or state agencies sponsor.  After an exercise, the sponsoring agency generally prepares an after- action report that specifies corrective actions, and may include a  responsible party for and a date for completing each action. APHIS  has after-action reports for more than 40 FMD preparedness  exercises that it sponsored or participated in from 2007 through 2018,  which include corrective actions for USDA and APHIS.", "APHIS conducts annual surveys of its staff and others\u2014including  state government officials, industry representatives, and academics\u2014 to identify corrective actions related to preparedness and response  training needs.", "APHIS identifies corrective actions for FMD preparedness based on  lessons learned after outbreaks of other diseases. For example, some  of the actions that APHIS identified after outbreaks of avian influenza,  such as improving a database used for emergency response, could  also help the agency mitigate challenges it would face in an FMD  outbreak, according to agency officials.", "APHIS has identified dozens of corrective actions in all 11 of the areas  where we identified challenges for USDA in pursuing its FMD response  goals. APHIS has taken corrective actions in each area. For example, to  help mitigate the challenge of insufficient biosecurity on some premises,  the agency partnered with Iowa State University to offer producers across  the nation training on developing enhanced biosecurity plans for  implementation during a foreign animal disease outbreak. However,  APHIS has not yet taken some other corrective actions that it has  identified.", "According to agency officials and experts we interviewed, these corrective  actions can help mitigate, but may not completely resolve, the challenges  identified. Some challenges may be outside USDA\u2019s control to fully  resolve. For example, the logistical challenges of carcass disposal could  be overwhelming in a large-scale outbreak, which could generate  thousands of tons of carcasses. A corrective action calling for training on  carcass management may help educate FMD responders about disposal  methods or preventing environmental impacts; however, such training  may not fully resolve the challenge.", "Table 1 shows examples of corrective actions identified by USDA in after- action reports, planning documents, other agency documents, or  interviews, which the agency has taken or not yet taken for the 11  challenge areas we identified.", "Some of the corrective actions that USDA has identified and taken relate  to the challenge area of vaccination. For example, to help speed access  to vaccine, in 2018, the Secretary of Agriculture announced that vaccine  companies could apply for permits to enable them to develop and  produce certain types of FMD vaccine in the United States in the future,  thereby avoiding delays from producing the vaccine overseas and  shipping it here. Also, APHIS officials have used an FMD predictive  model to evaluate the effectiveness of different vaccination schemes at  the state level, and they told us that they plan to conduct a similar  analysis at the national level. The results could help inform USDA\u2019s  vaccine prioritization decisions in advance of an outbreak, according to  the officials.", "USDA has also begun implementing other corrective actions that have  been identified related to FMD vaccination, although more work remains.  For example, in February 2009, we recommended\u2014and USDA agreed\u2014 that it should detail in a contingency response plan how a response using  vaccines would be implemented. Similarly, after-action reports for 2013  and 2016 preparedness exercises highlighted the need for procedures to  guide the implementation of FMD vaccination strategies. APHIS has  taken or planned several steps to help address this need:  In 2009, APHIS began drafting vaccine implementation procedures  but realized that the national procedures needed to be developed in  collaboration with states because of variation among states in their  predominant industries, agriculture infrastructure, and government  resources. When more states have developed vaccination  implementation procedures, APHIS may revise and finalize the  national procedures originally drafted in 2009, according to agency  officials.", "APHIS\u2019s National Veterinary Stockpile developed plans in 2009 and  2011 outlining how some aspects of a vaccination strategy would be  implemented. Specifically, in 2009 it developed a template that  states and tribes can use to develop their own plans, and in 2011 it  prepared a logistical plan for distributing FMD vaccine to the field. The  National Veterinary Stockpile also held preparedness exercises from  2008 to 2018 for states and tribes to practice requesting, receiving,  and delivering the vaccine and to obtain information that could help  APHIS develop national vaccination procedures.", "From 2011 to 2018, APHIS and the California Department of Food  and Agriculture worked together to draft detailed procedures for  implementing an FMD vaccination strategy in California. The draft  procedures and related planning documents are intended to serve as  templates to help other states develop such procedures, according to  agency officials. APHIS also piloted a workshop on FMD vaccination  planning in October 2018 and plans to hold related preparedness  exercises with states from 2019 to 2021."], "subsections": []}, {"section_title": "APHIS Does Not Consistently Follow Its Procedures for Prioritizing Corrective Actions and Monitoring Their Completion", "paragraphs": ["Although APHIS has identified dozens of corrective actions for FMD  preparedness, it has not consistently followed its SOP for prioritizing all of  the actions and monitoring progress in implementing them. Specifically,  once corrective actions have been identified, APHIS\u2019s SOP calls for  prioritizing the actions in an improvement plan, and monitoring the actions  to track their completion. APHIS has sometimes designated actions  related to FMD vaccination as high priority during annual management  meetings, but not all corrective actions have been prioritized, according to  agency officials. For example, a 2016 corrective action called for USDA to  conduct an exercise to explore roles, responsibilities, and activities  related to recovery from a large-scale animal disease outbreak. However,  as of December 2018, this action has not been prioritized in an  improvement plan, according to the after-action report and an agency  official.", "In addition, corrective actions have sometimes been identified multiple  times without being tracked to completion. For example, an after-action  report for a 2007 exercise found that a process for making vaccine- allocation decisions was needed and suggested that a vaccine advisory  group could assist with doing so. A 2014 after-action report stated that  processes governing vaccine prioritization and allocation were not clear  and identified a corrective action calling for USDA to develop a federal- level doctrine for vaccine prioritization and allocation. USDA\u2019s 2016 FMD  vaccination policy states that APHIS, in coordination with state, local, and  industry stakeholders, should consider developing processes,  procedures, and strategies for prioritizing the use of currently available  vaccine in an outbreak. However, APHIS has not developed processes,  procedures, or strategies for prioritizing and allocating its supply of FMD  vaccine, according to agency officials. The officials said they have not  developed such a process because of limited resources and competing  priorities. Also, it would require participation from state and industry  stakeholders, and given the small quantity of FMD vaccine relative to the  large number of susceptible animals in the country, the stakeholders have  had little incentive to devote the necessary time to the issue, according to  agency officials.", "More generally, agency officials told us that the agency has not prioritized  or monitored completion of some corrective actions because they have  been responding to actual outbreaks of animal and plant diseases. They  also noted that they have limited resources for FMD preparedness, which  may make it difficult for them to complete all of the corrective actions that  have been identified. However, for avian influenza preparedness, APHIS  compiled and prioritized more than 300 corrective actions in a database  and tracked more than 200 of them to completion. Through this process,  it completed nearly all of the 111 high-priority actions and over 100  moderate-priority actions, according to its database as of May 2018. For  example after the 2014 avian influenza outbreak, APHIS completed  corrective actions that improved its response to a subsequent outbreak in  2016, according to agency documents. The corrective actions addressed  such issues as how to quickly depopulate and dispose of infected poultry  and efficiently compensate affected producers. APHIS continues to  monitor its progress in implementing the remaining corrective actions for  that disease, according to agency officials.", "APHIS\u2019s SOP calls for prioritizing corrective actions to identify the most  beneficial use of resources. The SOP also calls for monitoring corrective  actions to track their completion so that APHIS can improve its response  capabilities and correct problems or deficiencies identified in exercises or  incidents. Without following its SOP to prioritize corrective actions for  FMD preparedness, APHIS cannot ensure that it is allocating its limited  resources toward implementing the most beneficial actions. And without  following its SOP for monitoring the corrective actions, APHIS cannot  ensure that the highest-priority actions are completed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["APHIS has taken important steps to prepare for an FMD outbreak and to  mitigate challenges it may face in responding to one. For example, the  agency has developed an extensive collection of strategy and guidance  documents, held FMD preparedness exercises to practice response  activities, and identified dozens of corrective actions and completed some  of these actions. However, APHIS has not yet completed other corrective  actions, including actions that have been identified multiple times, such as  developing a process for prioritizing and allocating the limited supply of  FMD vaccine.", "APHIS has an SOP for prioritizing and monitoring corrective actions. By  following this SOP for avian influenza preparedness, the agency  succeeded in prioritizing more than 300 corrective actions and tracking  over 200 corrective actions to completion, including nearly all high-priority  actions. In contrast, for FMD preparedness, APHIS has not consistently  prioritized or monitored the corrective actions it has identified. Without  following its SOP to prioritize and monitor corrective actions for FMD  preparedness, APHIS cannot ensure that it is allocating its limited  resources to the most beneficial actions to prepare for a possible FMD  outbreak."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to USDA:", "The Administrator of the Animal and Plant Health Inspection Service  should follow the agency\u2019s SOP to prioritize corrective actions for  FMD preparedness. (Recommendation 1)", "The Administrator of the Animal and Plant Health Inspection Service  should follow the agency\u2019s SOP to monitor progress and track  completion of corrective actions for FMD preparedness.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to USDA and DHS for review and  comment. USDA provided comments, reproduced in appendix II, in which  it agreed with our recommendations. In addition, USDA and DHS  provided technical comments, which we incorporated as appropriate.", "In response to our recommendations, USDA said that, starting in the  second quarter of fiscal year 2019, APHIS will implement the agency\u2019s  SOP and prioritize corrective actions to be tracked in its corrective actions  database, as we recommended. USDA also said that, starting in the third  quarter of fiscal year 2019, APHIS will assess and update the items  related to FMD in its corrective actions database, as we recommended. In  addition, USDA said that APHIS will track accomplishments it makes  under a related provision of the Agriculture Improvement Act of 2018.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, the Secretary of Homeland  Security, and other interested parties. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.", "If your or your staff have any questions about this report, please contact  me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes the U.S. Department of Agriculture\u2019s (USDA)  planned approach for responding to a foot-and-mouth disease (FMD)  outbreak; (2) identifies what challenges, if any, USDA would face in  pursuing its FMD response goals; and (3) examines how USDA identifies,  prioritizes, and monitors corrective actions to mitigate these challenges.", "To describe USDA\u2019s planned approach for responding to an FMD  outbreak, we reviewed relevant legislation and USDA strategy and  guidance documents. We also interviewed officials from USDA\u2019s Animal  and Plant Health Inspection Service (APHIS) at the agency\u2019s  headquarters in Riverdale, Maryland; laboratories on Plum Island, New  York, and in Ames, Iowa; center for epidemiology and animal health in  Fort Collins, Colorado; and center for veterinary biologics in Ames, Iowa;  and officials from the Department of Homeland Security (DHS) and the  Agricultural Research Service (ARS) at DHS\u2019s Plum Island Animal  Disease Center on Plum Island, New York. We selected these officials to  interview because of their knowledge about USDA\u2019s planned approach,  their involvement in preparing for an FMD outbreak, and the roles they  would play in responding to such an outbreak.", "To identify what challenges, if any, USDA would face in pursuing its FMD  response goals, we first came up with a list of potential challenge areas.  To develop the list of potential challenge areas, we reviewed USDA  documents, reports about FMD outbreaks in other countries, and after- action reports from 41 preparedness exercises in the United States from  2007 to 2018 in which officials practiced responding to simulated FMD  outbreaks and identified emerging challenges. The preparedness  exercises included small-scale as well as large-scale ones with a variety  of participants, durations, and response activities. We also interviewed  APHIS headquarters staff and field staff in Iowa (the state with the most  livestock); APHIS and ARS laboratory officials; state animal health  officials in California, Colorado, Iowa, and North Carolina; representatives  from the beef cattle, dairy cattle, swine, and sheep industries; and  academic researchers with expertise in this area. We selected the  individuals to interview based on their knowledge about challenges that  USDA could face in pursuing its FMD response goals, their central role in  preparing for an FMD outbreak, and recommendations from other  interviewees, as well as diversity in geographic location. We also visited a  swine farm and cattle feedlot in Iowa and interviewed the owners. We  selected a swine farm and cattle feedlot to visit because swine and cattle  were the livestock industries with the greatest populations of animals in  the United States in 2016. We identified a list of 11 potential challenge  areas.", "To confirm the significance of the challenge areas, we used a  questionnaire with the list of potential challenge areas. To select the  questionnaire recipients, we identified four categories of people who are  knowledgeable about challenges that USDA could face in pursuing its  FMD response goals, including those who could be involved in a  response effort. The four categories are (1) federal government officials,  (2) state government officials, (3) livestock industry representatives, and  (4) academic researchers with expertise in FMD preparedness. For  categories with multiple individuals, we selected individuals to represent  relevant units within APHIS, ARS, and DHS (e.g. headquarters; field  offices; laboratories; surveillance, preparedness and response services;  and science, technology, and analysis services); different livestock  industries (beef cattle, dairy cattle, swine, and sheep); and states with  relatively high livestock populations. We asked the recipients whether  USDA would face a significant challenge in each of the 11 areas and  whether they knew of other challenge areas we had not listed. We  defined significant to mean a challenge that is sufficiently great or  important enough to be worthy of USDA action to address the challenge.", "We initially sent the questionnaire with potential challenges to 39  recipients. Two federal officials had retired from their positions, so we  sent the list to their replacements. Of the 39 recipients, we received  responses from 28. We also included an additional response that APHIS  provided from an official who we had not initially contacted and who had  relevant expertise, for a total of 29 responses. Despite two follow-up  attempts, we did not receive responses from 11 recipients, including both  recipients from ARS, 5 of the 18 from APHIS, 3 of the 10 state animal  health officials, and 1 of the 2 national animal health laboratory network  officials (these are affiliated with universities). Figure 7 shows the  categories of respondents and their responses in each of the11 challenge  areas.", "Since we used a nonprobability sample, the results are not generalizable  to all government officials, livestock industry officials, or FMD experts, but  the responses helped confirm the list of 11 challenge areas and provided  illustrative information about each one.", "We reviewed challenges related to vaccination for FMD in greater depth  than other challenges because of the significant role vaccination could  play if reliance solely on stamping out is not feasible. Specifically, we  visited DHS\u2019s Plum Island Animal Disease Center on Plum Island, New  York, where we interviewed officials from USDA\u2019s Foreign Animal  Disease Diagnostic Laboratory and the Agricultural Research Service, as  well as DHS officials, about challenges related to FMD vaccination. We  also reviewed agency documents on the topic and interviewed other  officials from USDA, the North American Vaccine Bank, universities,  states, and industry groups about issues related to FMD vaccination.  Further, we interviewed officials from the vaccine company that currently  produces the majority of FMD vaccine available for use in the United  States and a company that has rights to use a modified version of the  FMD virus to produce FMD vaccine in the future.", "To determine how USDA identifies, prioritizes, and monitors corrective  actions to mitigate the challenges, we reviewed APHIS and DHS  guidance on evaluation and improvement planning and other agency  documents, observed an FMD preparedness exercise, reviewed after- action reports from 41 FMD preparedness exercises conducted from  2007 through 2018, and interviewed USDA officials. We reviewed  APHIS\u2019s and DHS\u2019s procedures for evaluation and improvement planning  to understand how APHIS is to identify, prioritize, and monitor corrective  actions. To determine whether APHIS was consistently following these  procedures, we observed the preparedness exercise at APHIS\u2019s  Riverdale, Maryland, office; reviewed a preliminary after-action report for  that exercise; and reviewed after-action reports for the 41 other  preparedness exercises. We interviewed APHIS officials about corrective  actions identified in the after-action reports and what steps the agency  has taken to prioritize the actions and monitor their progress. We  reviewed agency documents about these procedures and about actions  USDA has taken and identified but not yet taken to mitigate challenges.  To find examples of corrective actions that USDA has identified and taken  or not yet taken, we reviewed after-action reports for the 41 preparedness  exercises; APHIS\u2019s 2018-2020 training and exercise plan for its veterinary  services emergency preparedness and response unit; and other agency  documents, such as contracts and plans, and interviewed agency  officials. The examples of corrective actions in table 1 are illustrative only  and do not include or represent all of the actions that USDA has  identified. We sent a draft table of examples to APHIS officials and  incorporated their comments as appropriate.", "We also reviewed a GAO report on USDA\u2019s management of highly  pathogenic avian influenza (avian influenza) outbreaks; interviewed  agency officials; reviewed USDA after-action reports for avian influenza  outbreaks; and reviewed USDA\u2019s database of related corrective actions to  learn how the agency identifies, prioritizes, and monitors actions to  mitigate challenges for that disease. To assess the overall reliability of  that database to use information from the database in our report, we  reviewed management controls over the information systems that  maintain the data and interviewed USDA officials who manage the  database. We determined that the database was sufficiently reliable to  describe the contents of the database and general status of corrective  actions.", "We conducted this performance audit from May 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from U. S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nico Sloss (Assistant Director),  Kevin Bray, Emily Christoff, Mary Denigan-Macauley, Christine Feehan,  Jesse Lamarre-Vincent, Cynthia Norris, Anne Rhodes-Kline, and Amber  Sinclair made key contributions to this report. Ross Campbell, Barb El  Osta, Kathryn Godfrey, Hayden Huang, and Dan Royer also made  important contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Foot-and-Mouth Disease: USDA\u2019s Evaluations of Foreign Animal Health  Systems Could Benefit from Better Guidance and Greater Transparency.  GAO-17-373. Washington, D.C.: April 28, 2017.", "Avian Influenza: USDA Has Taken Actions to Reduce Risks but Needs a  Plan to Evaluate Its Efforts. GAO-17-360. Washington, D.C.: April 13,  2017.", "Emerging Animal Diseases: Actions Needed to Better Position USDA to  Address Future Risks. GAO-16-132. Washington, D.C.: December 15,  2015.", "Federal Veterinarians: Efforts Needed to Improve Workforce Planning.  GAO-15-495. Washington, D.C.: May 26, 2015.", "Homeland Security: An Overall Strategy Is Needed to Strengthen Disease  Surveillance in Livestock and Poultry. GAO-13-424. Washington, D.C.:  May 21, 2013.", "Veterinarian Workforce: Actions Are Needed to Ensure Sufficient  Capacity for Protecting Public and Animal Health. GAO-09-178.  Washington, D.C.: February 4, 2009.", "High-Containment Biosafety Laboratories: DHS Lacks Evidence to  Conclude That Foot-and-Mouth Disease Research Can Be Done Safely  on the U.S. Mainland. GAO-08-821T. Washington, D.C.: May 22, 2008.", "National Animal Identification System: USDA Needs to Resolve Several  Key Implementation Issues to Achieve Rapid and Effective Disease  Traceback. GAO-07-592. Washington, D.C.: July 6, 2007.", "Avian Influenza: USDA Has Taken Important Steps to Prepare for  Outbreaks, but Better Planning Could Improve Response. GAO-07-652.  Washington, D.C.: June 11, 2007.", "Homeland Security: Much Is Being Done to Protect Agriculture from a  Terrorist Attack, but Important Challenges Remain. GAO-05-214.  Washington, D.C.: March 8, 2005."], "subsections": []}], "fastfact": ["Foot-and-mouth disease is a highly contagious livestock disease (which rarely infects humans). Since 2001, outbreaks abroad have cost billions of dollars. A U.S. outbreak would likely halt exports of all livestock products, and could have serious economic consequences.", "USDA has learned lessons from abroad, conducted outbreak exercises, and identified the need for additional preparedness improvements, such as a better process for allocating its limited vaccine supply. However, it has not followed its procedures for prioritizing improvements and many remain incomplete.", "We recommended that USDA prioritize and monitor these improvements."]}
{"id": "GAO-19-148", "url": "https://www.gao.gov/products/GAO-19-148", "title": "VA Real Property: Clear Procedures and Improved Data Collection Could Facilitate Property Disposals", "published_date": "2019-01-09T00:00:00", "released_date": "2019-01-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA is one of the largest federal property-holding agencies, and its inventory of vacant buildings has generally increased over the last 6 years. Disposing of its excess properties has been a long-standing challenge.", "GAO was asked to review how VA manages its real property disposals. This report addresses: (1) the challenges VA faces in disposing of its vacant properties and how it is addressing those challenges and (2) the extent to which VA is tracking and monitoring the disposal of its vacant properties.", "GAO reviewed VA's policies and planning documents regarding property disposals. GAO also selected 31 properties that were either disposed of or planned for disposal in fiscal year 2017, among other selection criteria. GAO interviewed VA officials and stakeholders involved in the disposal of the 31 selected properties and familiar with VA's disposal process, including steps VA is taking to address challenges."]}, {"section_title": "What GAO Found", "paragraphs": ["Conducting required environmental and historic reviews in a timely manner is among the challenges the Department of Veterans Affairs (VA) faces in its real property disposal process. These reviews include assessing the potential effects of property disposals on the environment and historic preservation. VA is taking steps to address these ongoing challenges. For example, VA has established a working group consisting of experts in historic preservation, environmental reviews, and real property to assist facilities' managers in expediting disposals. However, other ongoing challenges remain, including the marketability of VA properties and VA's lack of clear procedures for property disposals. While VA has guidance on disposals at the broad portfolio level, GAO determined that this guidance does not contain step-by-step procedures at the project level to assist facilities' managers to plan, implement, and execute disposals for the different disposal options. (See figure.) For example, a number of managers told GAO that they were not familiar with actions to take when transferring properties to a third party or turning over excess property to the General Services Administration for disposal. VA officials commented that facilities' managers do not frequently dispose of properties, so a procedural document outlining the steps and who is responsible for taking those steps may help staff navigate more complex disposal processes and avoid missteps and delays.", "VA has enhanced its data collection on vacant properties, but the agency does not collect information needed to track and monitor disposal projects at the headquarters level. For example, VA requires facilities' managers to verify and certify the validity of vacant property data in the database used to manage real property\u2014the Capital Asset Inventory. On disposal projects, however, VA lacks certain information, such as the status of environmental or historical reviews, to monitor progress. According to VA, the Capital Asset Inventory currently does not have enough capacity to collect key information and supporting documentation. VA officials said they plan to increase the capacity, but VA has not yet included some key information in the Capital Asset Inventory that could enable VA to monitor the progress of disposals. Without information on the status of disposal projects, VA cannot readily track and monitor its progress and identify areas where facilities' managers may need additional assistance."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations. These include developing disposal procedures for facilities' managers to help plan, implement, and execute disposal projects and collecting key information on the status of disposal projects, as VA implements its plans to increase the capacity of VA's Capital Asset Inventory. VA concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Department of Veterans Affairs (VA) is one of the largest federal  real property-holding agencies, holding almost 6,300 buildings including  medical centers, outpatient clinics, community living centers, and  counseling centers. While most of these buildings are in use, VA has  many buildings that are vacant. These vacant buildings are, on average,  about 91 years old and can be costly to maintain. VA estimated spending  about $4 million in fiscal year 2017 to maintain these vacant buildings.  Further, the number of VA\u2019s vacant buildings has generally increased  over the last 6 years (see fig. 1).", "Federal management of real property\u2014including VA real property\u2014has  been on GAO\u2019s High Risk List since 2003 due to long-standing  challenges, including difficulties in effectively disposing of excess and  underutilized property. In June 2017, VA announced an initiative to begin  the process of re-using or disposing of 430 vacant buildings within 2  years to reduce the large number of vacant buildings and the cost to  maintain them. Additionally, the VA Asset and Infrastructure Review Act  of 2018 requires VA, through recommendations of an independent  commission, to realign its real property. As VA makes changes to realign  its real property, these changes may lead to more unneeded buildings  that VA may want to dispose of.", "You asked us to examine how VA manages its real property disposals.  This report addresses:  the challenges VA faces disposing of its vacant properties and how it  is addressing those challenges, and  the extent to which VA is tracking and monitoring the disposal of its  properties.", "To identify challenges that VA faces when disposing of property and how  VA is addressing them, we selected a non-generalizable sample of 31  properties and conducted semi-structured interviews with VA officials and  external stakeholders who were involved in or knowledgeable about the  disposal of those selected properties and are familiar with VA\u2019s disposal  process. These external stakeholders included officials from the General  Services Administration (GSA), veteran service organizations (e.g.,  Veterans of Foreign Wars and the American Legion), a local community  that purchased VA properties, a major commercial real estate company,  and historic preservation groups (e.g. Advisory Council on Historic  Preservation and the National Conference of State Historic Preservation  Officers). The 31 properties we selected were either disposed of in fiscal  year 2017 or planning was underway for disposal, including disposals  through GSA. Specifically, we selected properties that (1) captured a  range of disposal methods available to VA either planned or completed  and (2) represented a variety of property characteristics, including  historical status, age, and size. To examine the characteristics of VA\u2019s  vacant and disposed of properties and to select the 31 properties, we  obtained and analyzed data from VA\u2019s Capital Asset Inventory (CAI) for  fiscal years 2012 through 2017 and assessed the reliability of the data.  To assess the reliability of VA\u2019s data we:  looked for obvious data errors;  reviewed existing documentation on the data and VA\u2019s processes for  checking and validating the data; and  interviewed knowledgeable officials about the data.", "We found the data were generally reliable for the purposes of our  reporting objectives. To help identify disposal challenges VA faces, we  obtained and reviewed documents related to the 31 selected properties  and interviewed facilities\u2019 managers from VA\u2019s Veterans Integrated  Service Networks (VISN) and local facilities who were knowledgeable  about the disposal of these selected properties. The challenges faced by  these selected properties cannot be used to make inferences about all VA  properties. However, they illustrate the range of challenges that VA faces  in disposing of properties. To identify steps VA has taken to address  challenges, we reviewed documents and interviewed officials from VA\u2019s  Office of Asset Enterprise Management and Office of Construction and  Facilities Management, which have some responsibilities for demolishing  or transferring VA properties. We then assessed VA\u2019s efforts to address  these challenges against applicable federal internal-control standards.", "To determine the extent to which VA is tracking and monitoring the  disposal of its vacant properties, we reviewed the current data fields in  VA\u2019s CAI, as well as planning and guidance documents, including the  Fiscal Year 2017 Capital Asset Inventory and Disposal Plans Update.  We also interviewed VA officials in headquarters, including officials in  VA\u2019s Office of Asset Enterprise Management and Office of Construction  and Facilities Management, to determine the extent to which VA is  tracking and monitoring the disposal of its vacant properties. We obtained  and reviewed a copy of VA\u2019s data discrepancy report for fiscal year 2016  that it uses to verify data and track and monitor vacant properties and  disposals. We also reviewed VA\u2019s documents, including a tracking  spreadsheet that VA is using to monitor the disposal of vacant properties.  In addition, we interviewed VA officials, including VISNs\u2019 and local  facilities\u2019 managers, to obtain their perspectives on VA\u2019s efforts to track  and monitor disposals, specifically. We then assessed VA\u2019s efforts to  track and monitor these disposals against applicable federal internal  control standards. Additional information on our scope and methodology  can be found in appendix I.", "We conducted our work from November 2017 to December 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VA administers its services and programs through three distinct  administrations\u2014Veterans Health Administration (VHA), Veterans  Benefits Administration, and the National Cemetery Administration. VHA  is the largest property holder within VA and is responsible for overseeing  health care delivery to enrolled veterans and managing all VA medical  facilities. VHA\u2019s VISNs are responsible for overseeing medical facilities,  and VA works with the VISNs and local medical facilities to manage its  real property assets through VA\u2019s capital-planning process."], "subsections": [{"section_title": "Responsibilities for Disposing of Properties", "paragraphs": ["Various VA offices share responsibilities for managing and disposing of  real properties. Specifically:", "VISNs and local facilities are responsible for identifying, planning,  and managing underutilized and vacant properties, including  executing demolitions of buildings.", "Office of Capital Asset Management, Engineering, and Support,  within VHA, is responsible for supporting the property disposal efforts  of VISNs and local facilities, including providing funding for  demolitions (if properties are part of a minor construction project or  non-recurring maintenance project).", "Office of Construction and Facilities Management, within VA\u2019s  Office of Acquisition, Logistics and Construction, is responsible for: (1)  developing and updating policies and procedures on disposal actions  (except enhanced-use leases) and executing them; (2) coordinating  the Steward B. McKinney Homeless Assistance Act\u2019s (McKinney- Vento Act) screening process for potential homeless use prior to  disposal; (3) overseeing implementation of required federal  environmental reviews for planning and construction of major projects  and real property actions; and (4) promulgating policy related to  historic preservation, among other things.", "Office of Asset Enterprise Management (Asset Enterprise Office),  within the VA\u2019s Office of Management, is responsible for: (1) ensuring  local facility disposal requests align with VA policy; (2) reviewing real- property inventory data, including annual disposal plans; (3)  monitoring completion of disposal projects; (4) executing enhanced- use lease-related disposals; and (5) overseeing the Strategic Capital  Investment Planning process, among other responsibilities."], "subsections": []}, {"section_title": "VA\u2019s Disposal Process", "paragraphs": ["According to VA\u2019s guidance on managing underutilized properties and  disposals, the process for managing vacant properties usually begins with  VISNs and local medical facilities. Together, they are responsible for  identifying underutilized real properties and updating this information in  the CAI database, which VA uses to manage its real property.", "VA has also identified and prioritized disposal options VISNs and local  facilities have for determining what to do with vacant and underutilized  properties they have identified. As shown in figure 2, VA\u2019s first priority is  to re-use vacant and underutilized properties within the department. If  properties cannot be re-used, then VA looks at disposal options that  would remove them from its inventory. If no disposal options are feasible,  then VA may choose to close or \u201cmothball\u201d properties.", "Properties in the CAI database with utilization rates that are less than 50  percent\u2014including vacant properties\u2014are candidates for disposal, and  VISNs\u2019 and local facilities\u2019 managers are required to develop a disposal  plan for all vacant buildings or update an existing plan for these facilities  each year.", "VA may choose from several options to dispose of vacant and  underutilized properties, including: entering into an enhanced-use lease,  demolition, like-kind exchange, transfer of real properties to the state for  nursing home use, declaring excess property for disposals through GSA,  or mothball, among others. (See fig. 3.) The disposal process differs  depending on the disposal method selected.", "As part of the disposal process, VA is required to take certain actions,  including conducting environmental reviews and considering the effects of  its actions on historic properties. Accordingly, VA conducts \u201cdue  diligence\u201d reviews on vacant properties, and these reviews include  complying with selected federal requirements described in table 1 below."], "subsections": []}, {"section_title": "Number and Characteristics of Disposals", "paragraphs": ["From fiscal years 2012 through 2017, VA disposed of 577 properties  (including 471 buildings with about 5-million gross square feet), primarily  through demolition of medical facilities and enhanced-use lease  agreements (see fig. 4). These two methods accounted for the disposal  of 3.6-million gross square feet of building space. VA used other disposal  methods, such as transferring property to states for nursing home care or negotiating a sale, for the remaining 50 properties, as shown in figure 4  below. As of July 2018, VA reported initiating the disposal or re-use of  167 of the 430 vacant buildings the Secretary identified for disposal in  June 2017.", "Of the 471 building disposals from fiscal years 2012 through 2017, VA  disposed of 203 buildings in fiscal year 2012 alone in contrast to 61  building disposals in fiscal year 2017, as shown in figure 5. A VA official  attributed the decline in disposals from fiscal year 2012 to fiscal year  2013 to limitations placed on VA\u2019s enhanced-use lease authority in  2012.", "The characteristics of the 471 buildings VA disposed of varied from fiscal  years 2012 through 2017. The majority (331 out of 471) was offices,  housing quarters, service buildings, and warehouses; other buildings  included hospitals, laboratories, and outpatient healthcare facilities. VA  reported many of these buildings as historic, as shown in figure 6. More  than a third of the vacant buildings designated as non-historic were  demolished. Almost a third of the buildings\u2014primarily housing quarters\u2014 were disposed of using enhanced-use leases."], "subsections": []}]}, {"section_title": "VA Is Addressing Some of Its Ongoing Disposal Challenges but Lacks Procedures to Manage Property Disposals", "paragraphs": ["VA officials and stakeholders we spoke with said that administering both  environmental and historic reviews are key challenges for disposals. Two  other ongoing challenges\u2014the marketability of VA properties and  prioritizing funding for disposals\u2014were also mentioned as factors  impeding VA\u2019s property disposal efforts. As part of VA\u2019s initiative to begin  the re-use or disposal process for 430 vacant properties within 2 years,  VA has begun addressing its environmental and historic review  challenges. For example, VA established a working group to assist  VISNs\u2019 and local facilities\u2019 managers in conducting these reviews. While  VA is addressing challenges related to these reviews, limited interest in  purchasing or leasing VA properties and competition for funding with  other important VA projects directly related to veterans\u2019 care are ongoing  challenges that continue to hinder disposal efforts."], "subsections": [{"section_title": "VA is Taking Steps to Facilitate Environmental and Historic Reviews, but Properties\u2019 Marketability and Competing Priorities Remain Challenging", "paragraphs": [], "subsections": [{"section_title": "Environmental and Historic Reviews", "paragraphs": ["VA officials and stakeholders we spoke with cited the time it takes to  complete the required environmental and historic reviews as a challenge  in managing the disposal process. Although VA does not maintain data  on how long these reviews can take or how long it takes to dispose of its  properties, in our review of 31 selected properties, we found variation in  the timespan to conduct environmental and historic reviews. The  environmental reviews of these properties took about 2 years on average  to complete, depending on the condition of the property. For example,   an environmental review of temporary storage facilities in Biloxi took  about a year, as no environmental issues were identified. In another case,  it took about 2 years to conduct an environmental review of VA\u2019s  Cincinnati-Fort Thomas property, as asbestos and lead paint were  identified during the course of the review. For those disposals requiring  historic reviews, we found that it took about 5 years on average,  depending on the complexity of the disposal. For example, it took 5  years to complete a historic review of the St. Louis, Jefferson Barracks  property due to the need to collaborate with multiple stakeholders,  including the neighboring Army National Guard base, the state\u2019s historic  preservation office, local community council, community organizations,  and many veteran service organizations; and addressing the adverse  effects on historic properties, according to VA officials. VA officials and  stakeholders we spoke with stated that due to lack of staff expertise and  resources, VISNs\u2019 and local facilities\u2019 managers may choose to contract  out these reviews, but procuring contractors may also add time to the  disposal process, as facility managers need to define the terms of work  and identify contractors.", "Further, environmental and historic reviews can affect VA\u2019s decision- making process with regard to choosing a disposal method, potentially  lengthening the time it takes for disposal. For example, VA officials told us  that they began a historic review on the Pittsburgh-Highland Drive  property in 2012 but discontinued the review in 2013, partially due to  disagreements with historic preservation stakeholders about the proposed  demolition of some historic buildings. After 4 years, in 2017, VA decided  to declare the property as excess and turn it over to GSA for disposal.  According to VA officials, this required a different historic review, as it  entailed a different disposal method. GSA is currently administering the  additional historic review of this property.", "VA has begun taking actions to reduce the time it takes to conduct  environmental and historic reviews as part of VA\u2019s initiative to begin the  process of re-using or disposing of 430 vacant buildings within 2 years.  For example, VA worked with the Advisory Council on Historic  Preservation to obtain a program comment alternative to reduce time  spent with historic preservation stakeholders when consulting on  \u201cancillary utilitarian support buildings and structures,\u201d such as a boiler  plant or a sewage plant. VA officials also told us that they established a  headquarters-level working group consisting of experts in historic  preservation and environmental reviews as well as real property  transactions to assist VISNs\u2019 and local facilities\u2019 managers in  administering disposals, including conducting these reviews, and in  moving them forward. VA officials also told us that they awarded four  regional contracts with contractors to complete the environmental and  historic reviews and expedite the disposal process.", "VA officials and historic preservation stakeholders we spoke with also  said they can have disagreements on how to meet the historic review  requirements, and such disputes can add time to the review process. The  historic preservation stakeholders commented that VA does not consult  with them early in the disposal\u2019s decision-making process and does not  provide adequate information on the adverse effects of demolishing a  historic property as well as other potential methods through which VA  could dispose of a property. VA officials we spoke with stated that they  have been consulting with historic preservation stakeholders on all  disposal projects as required.", "To improve collaboration and communication between VA and external  stakeholders, VA developed a toolkit in June 2017 on how to effectively  communicate with stakeholders. This communications toolkit responded  to our recommendation for VA to develop and distribute guidance for  VISNs\u2019 and local facilities\u2019 managers to use when communicating with  stakeholders on facility alignment changes, and we subsequently closed  this recommendation."], "subsections": []}, {"section_title": "Competing Priorities", "paragraphs": ["VA officials and stakeholders we spoke with also pointed out that  competing priorities for VA funds is another remaining challenge. VA  officials stated that projects to demolish buildings compete for funding  with other capital projects, such as renovating inpatient units. Since VA\u2019s  mission is to provide health care services, demolishing buildings is not as  high a priority compared to other projects that may lead to providing  better health care services.", "VA officials also told us that competing priorities can affect how long it  takes to dispose of vacant properties. If a demolition project is part of a  construction project, then VA may give it a relatively high priority for  funding. For example, at VA\u2019s Dayton campus it took about a year from  when VA requested funding in 2016 to demolish two historic buildings in  2017. A VA official said that due to a $1 million donation to build a Fisher  House on VA\u2019s Dayton campus, funds were prioritized to demolish two  national historic landmark buildings to make space available for  construction of the Fisher House. However, according to other VA  officials, demolition projects in and of themselves do not rank well for  funding; such rankings can affect the time it takes for disposal.", "For example, a VA official said that VA had initially planned to demolish a  temporary building on the Cleveland Wade Park campus sometime during  the 2012-to-2013 time frame; however, VA did not demolish the  temporary building until 2017, in part due to the longer than expected time  it took for VA to allocate funds to this project. If funds are not available for  demolition, a building can remain vacant for many years. For example,  VA closed several properties on its Sepulveda Ambulatory Care Center  campus in North Hills, CA, after they sustained major damage from the  1994 Northridge earthquake. According to VA officials, competing funding  priorities, among other factors, contributed to the long wait to demolish  these vacant properties, which had not been disposed of as of October  2018 (see fig. 7). VA officials also noted that waiting for VA to allocate  funds to demolish properties can result in additional potential cost later  on. For instance, VA officials mentioned that since buildings on the  Sepulveda campus have been vacant for many years, they now qualified  for historic status, requiring them to undergo a historic review\u2014a  requirement that could have been avoided if VA had demolished them  more than 20 years ago when they were originally identified for disposal.", "VA officials and stakeholders we spoke with identified property  characteristics that affect the marketability of VA properties\u2014historic  status, deficient physical conditions, location, unusable building  configuration, and repair costs\u2014as barriers for disposal. This is a long- standing challenge that limits VA\u2019s ability to re-use or dispose of vacant  and underutilized properties. In our recent analysis of VA\u2019s CAI data, we  found that a majority of VA\u2019s vacant properties (about 78 percent) from  fiscal years 2012 through 2017 have an historic status, and the average  age of those vacant properties is about 91 years old. As discussed  earlier, historic reviews can be lengthy and can make the disposal  process challenging, according to VA officials. Also, older buildings are  likely to have configurations that are difficult to use or are in need of  significant repair.", "VA officials and stakeholders said that the location of VA properties limits  disposal options. For example, a VA official told us that demolition is  sometimes the only disposal option available when a deficient building is  located on an existing VA campus and cannot be re-used or disposed of  and removed from VA\u2019s inventory. VA officials also stated that historic  buildings are frequently located in the middle of a campus and sometimes  cannot be easily demolished due to the historic designation (see fig. 8).  In these cases, VA will close and \u201cmothball\u201d the building to minimize  maintenance and operations costs and let the buildings sit vacant as an  interim measure. VA officials commented that there are also safety and  security challenges associated with disposing of or re-using a building  located in the middle of a VA campus. For example, a local facility  manager told us that when two of its buildings on campus were leased  out to an organization on a short-term lease for use as dormitories, young  adults from the dormitories gained access to private inpatient areas,  violating patients\u2019 privacy. This is consistent with our previous findings  that many disposable VA properties located in the middle of medical  campuses draw limited private sector interest making some disposal  options challenging.", "VA officials and stakeholders we spoke with\u2014including commercial real  estate experts\u2014also indicated that it can be difficult to attract developers  for several reasons. In one instance, a VA official and a stakeholder we  spoke with told us that it took multiple years to identify developers that  would take on environmental mitigation efforts as part of the negotiated  sale and transfer of VA\u2019s properties to the City of Fort Thomas, Kentucky.  According to a stakeholder, developers were not willing to take on the  cost and risk of environmental mitigation without a title to the property and  no guaranteed income from the property. VA, however, could not transfer  the property title to a third party without first meeting federal standards for  cleaning up the environmental hazards on the properties. While the  issue was ultimately addressed, it took several years to complete the  deal."], "subsections": []}]}, {"section_title": "VA Lacks Clear Procedures to Manage Property Disposals", "paragraphs": ["Another challenge that VA officials and stakeholders raised was VA\u2019s lack  of clear disposal procedures. Several VA officials and stakeholders we  spoke with stated that it is unclear what specific steps need to be taken for disposals, what are the targeted time frames for completing those steps, and who is responsible for completing them.", "VA\u2019s guidance on managing underutilized properties and disposals  provides policies and procedures on a portfolio level, such as VA\u2019s  priorities for disposing of vacant properties and the different disposal  options available. However, VA\u2019s guidance does not specify sequential  steps and actions that need to be taken at the project level to plan,  implement, and execute property disposals for VISNs\u2019 and local facilities\u2019  managers. Further, a VA official in headquarters told us that VA does  not have formal guidance on selecting any particular disposal methods.", "While we found that documentation on policies and procedures exists for  some specific disposal methods, such as enhanced-use lease projects,  VA officials told us that policies and procedures for other disposal actions,  such as transferring or declaring property as excess and disposing of it  through GSA, are not documented. A VA official in headquarters told us  that informal guidance may exist in some VISNs, but no standardized  procedures on managing a disposal project is available. VA officials said  there are no step-by-step procedures to refer to when using a disposal  options more complex than demolishing a building. A VISN facilities\u2019  manager we spoke with further pointed out that a decision-tree to help  plan, implement, and execute for the different disposal methods does not  exists to help local facilities navigate through VA\u2019s decentralized and  complex disposal process.", "VA officials told us that its disposal process is decentralized, an approach  that can contribute to unclear procedures for disposal projects. According  to VA officials, VISNs\u2019 and local facilities\u2019 managers are responsible for  making disposal decisions, developing a disposal plan, and executing the  disposal. As previously discussed, different VA program offices are  responsible for different disposal actions, depending on the disposal  method that VISNs\u2019 and local facilities\u2019 managers are considering. VA  officials noted that this decentralized approach to managing disposals can  make it difficult for VISNs\u2019 and local facilities\u2019 managers as well as local  stakeholders to know when or how best to coordinate with the appropriate  VA offices. A real property stakeholder we spoke with also noted that  common uncertainties in working with VA, such as its lack of a clear and  timely disposal process, can hinder developers\u2019 interests in VA properties.  Specifically, the stakeholder stated that VA\u2019s decision-making process is  divided among different entities within VA, a situation that may add time  to the disposal process, and stated that having a clear and timely disposal  process may provide a level of certainty for developers.", "VA officials and stakeholders also said that in some cases, VISNs\u2019 and  local facilities\u2019 managers may lack the knowledge and experience to  manage disposals. For example, VA officials told us that while facility  managers generally know what actions are needed to demolish  properties, they are not familiar with actions that need to be taken for  transferring or selling properties to a third party or turning excess property  over to GSA for disposal. VA officials also mentioned staff turnover and  the infrequency of disposals as contributing factors to staff\u2019s lack of  knowledge on procedures for disposing of properties. For example, two  facilities\u2019 managers we spoke with said that in their many years of working  for VA they have never reported a property as excess and disposed of it  through GSA, until recently. VA officials and stakeholders further noted  that VISNs\u2019 and local facilities\u2019 managers may lack expertise conducting  historic and environmental reviews as they are usually engineers, who  are not experts on environmental and historic issues. For example, a  VISN facility manager informed us that a local facility manager was not  familiar with administering an environmental review, a lack that led to a  misstep in the review and duplication of work and added time to the  disposal process.", "While VA has policies and guidance on historic and environmental  reviews, our review of these documents showed that they do not provide  guidance on how to make decisions, what actions to take, what are the targeted time frames for taking those actions, and who should be completing those actions.", "Further, while VA officials with experience in disposals may estimate how  long these reviews can take, VA does not have documented guidance on  estimated time frames (milestones) for taking those actions.", "Federal internal controls call for documentation to help management  oversee execution of procedures by establishing and communicating the  \u201cwho, what, when, where, and why\u201d to personnel. Documentation also  provides a means to retain organizational knowledge and mitigate the risk  of having that knowledge limited to a few personnel and a means to  communicate that knowledge as needed to external parties, such as  external auditors or interested third parties. Federal internal controls also  call for management to define objectives in specific terms\u2014in this case,  disposal actions\u2014so they are understood at all levels of the entity. This  understanding involves clearly defining what is to be achieved, who is to  achieve it, how it will be achieved, and the estimated time frames for  achievement. Without procedural documentation that describes the  disposal options and the actions needed to carry out the disposal,  including estimated time frames, it is difficult for VISNs\u2019 and local facilities\u2019  managers to plan, implement, and execute the different disposal options  available and efficiently dispose of vacant properties.", "A procedural document at the project level may include information on  who is authorized to make decisions and include estimated time frames  around historic and environmental reviews to ensure timely and  appropriate disposal of VA properties. For example, VA officials with  experience in disposals estimated that it should take about 6-to-8 months  for a property disposal, if there are no environmental and historic issues  involved and funding is available. For disposals where environmental and  historic reviews are needed, those officials told us it should take about 2- to-4 years from when VA decided to dispose of a property to complete the  disposal. According to facilities managers we spoke to, additional  procedural documentation at the project level could help VISNs\u2019 and local  facilities\u2019 managers navigate through the complex disposal process and  avoid missteps or delays in the disposal of vacant properties."], "subsections": []}]}, {"section_title": "VA Enhanced Its Collection of Data on Vacant Properties but Lacks Key Information to Track and Monitor Disposals VA Has Taken Steps to Enhance How It Collects Data on Vacant Properties", "paragraphs": ["To enhance the monitoring of its real property and to meet reporting  requirements, VA officials told us VA has taken steps in the last 6 years to  improve its real property inventory and the data it collects on its vacant  properties, including properties VA has identified for disposal. These  steps include:", "Requiring VISNs\u2019 and local facilities\u2019 managers to verify and  certify the accuracy of the information in the CAI. VA\u2019s Asset  Enterprise Office sends out an annual call for facility managers to  verify and certify the validity of vacant property data for each of the  facilities.", "Requiring VISNs\u2019 and local facilities\u2019 managers to make ongoing  updates to the CAI database. VA\u2019s annual data-call memo requires  these managers to continuously update the data as they take actions.  Facility managers we spoke to stated they update this information  regularly, including when actively planning disposal projects and  individual projects are complete. One facility manager told us that  VA\u2019s Asset Enterprise Office is \u201cactively pushing\u201d local managers to  update this information, and the data in the CAI have improved as a  result.", "Generating \u201cdiscrepancy reports\u201d to identify problems with  inaccurate or outdated property data in the CAI. VA officials in  headquarters told us that facility managers review these reports and  explain any identified discrepancies regarding vacant properties,  including those identified for disposal. VA officials told us they then  correct any errors. Discrepancy reports include checks on whether  facility managers have specified a disposal method for each disposal,  estimated an associated disposal\u2019s cost, and entered a planned future  year for the disposal.", "Refining the database by, for example, adding new \u201cbusiness  rules\u201d to limit user errors. VA officials told us that since 2012 it has  implemented program changes and new business rules to the CAI  database to address inaccuracies in the data, including data that  support disposal information. For example, a VA official in  headquarters told us that to decrease the number of errors caused by  users entering data more than once, the database now limits the  number of times users may enter the same information. This prevents  multiple data entries appearing for, for example, the year a building  was built, according to VA officials. VA officials in headquarters also  told us they developed similar business rules to identify \u201cclearly  wrong\u201d data entries and duplicative data. For instance, users cannot  enter letters in numeric fields which, they told us, has led to fewer  errors."], "subsections": [{"section_title": "VA Does Not Collect Key Information to Track and Monitor Property Disposals", "paragraphs": ["Although VA has enhanced its data collection efforts for vacant  properties, we found that VA does not collect all the information  necessary for its headquarters officials to track and monitor the disposal  of VA\u2019s vacant properties. As part of its annual call for validating data, VA  requires facility managers to record certain information about disposals in  the CAI, including: which buildings are identified for disposal, whether a disposal plan is in place, when the disposal is to occur, what type of disposal method is to be used, and what are the costs associated with the disposal.", "However, VA does not have the ability in its CAI to collect detailed data  on the status of disposal projects\u2014specifically, data fields for facility  managers to input detailed information on the status of: (1) disposal  actions, (2) due diligence reviews, and (3) approvals, such as  environmental permits that are necessary to complete the disposal.  Since CAI does not have this information, VA\u2019s Asset Enterprise Office,  as part of the Secretary\u2019s initiative to begin the re-use or disposal process  of 430 buildings, developed a standalone spreadsheet to track and  monitor the disposal status of these buildings. Then, according to officials  in VA\u2019s Asset Enterprise Office, they had to ask local facility managers  what was the status of each individual disposal.", "Federal internal-control standards state that management should use  quality information to achieve an entity\u2019s objectives and establish and  operate monitoring activities to monitor the internal control system and  evaluate the results. This includes management obtaining data on a  timely basis and using it for effective monitoring, which includes controls  to achieve complete and accurate data. While the Secretary\u2019s initiative  has raised the priority of tracking and monitoring VA\u2019s real property  disposals, the CAI does not contain key information to improve VA\u2019s  routine tracking as called for in internal controls. A key official in VA\u2019s  Asset Enterprise Office told us that officials there usually leave it to local  facilities to track key information and that the CAI currently does not  collect this information. Without incorporating information needed to better  track and monitor disposals through VA\u2019s primary real property tracking  database\u2014CAI\u2014VA may not be able to efficiently track and monitor its  real property disposals going forward after the Secretary\u2019s initiative is  completed. VA officials in headquarters told us that without data on the  actions and status of disposals, including steps taken to complete  environmental and historic reviews, they are unable to track and monitor  the progress of disposal projects\u2014including the length of time these  reviews take\u2014and to identify any areas where management may assist  local facilities in disposing of properties. For instance, as previously  mentioned, VA officials in headquarters told us they used the information  gathered as part of the 430 re-use or disposal initiative to identify and  award contracts to perform environmental and historic reviews and, as a  result, more quickly expedited the disposal process.", "In addition, VA officials in headquarters do not collect documentation,  such as environmental and historical review documents, that could allow  headquarters staff to verify the status of disposal projects. As mentioned,  federal internal controls state that management should use quality  information to achieve an entity\u2019s objective, including obtaining data on a  timely basis and using these data for effective monitoring, which includes  controls to achieve complete and accurate data. Further, VA requires  VISNs\u2019 and local facilities\u2019 managers to record a planned or completed  disposal in the CAI, including updating information as changes occur.  However, a key official in VA\u2019s Asset Enterprise Office told us the CAI  database does not currently have enough space for facility managers to  upload supporting documentation, including environmental and historic  review documents. As part of the Secretary\u2019s initiative to begin the re-use  or disposal process for 430 buildings, VA\u2019s Asset Enterprise Office set up  a website to collect and exchange documents, such as environmental and  historic review documents from local facility managers. This process  allowed VA\u2019s Asset Enterprise staff to verify the disposal information of  the properties in the spreadsheet using this collected information. While  VA created a website to exchange documentation as part of the 430 re- use or disposal initiative, this website is separate from CAI and was  created because VA had not previously collected supporting documents  in CAI. However, a VA official told us that when they compared  information they collected from the website, they found the information in  CAI is not always correct and appropriately updated.", "As we have previously found, documentation provides a means to retain  organizational knowledge while mitigating the risk of having that  knowledge limited to a few personnel. Documentation can also ensure  that knowledge gets communicated to external parties, such as external  auditors. As previously mentioned, some VA staff lack expertise and  organizational knowledge to properly document a variety of disposal  options. VA also experiences frequent staff turnover. These issues,  together with the inability of facilities\u2019 managers to upload disposal-related  documents directly into CAI, puts VA at risk of losing valuable information  about the disposal process. For example, according to a stakeholder we  spoke with, VA could not readily provide information about consulting  stakeholders on historic properties, as required by historic review  requirements. A VA official told us that after contacting facility managers  for information about specific disposal projects as part of the 430  initiative, they found disposal procedures were not consistently  documented and, in some cases, documents were missing.", "VA officials in headquarters provided us with a draft proposal to enhance  the CAI in several ways, including:  to add specific data fields for dates, including completion dates for  reviews and  to increase the capacity of the CAI to allow facility managers to upload  disposal documentation, including environmental and historic review  documentation.", "However, the proposed changes do not include some key information,  such as the start dates for compliance reviews, so VA cannot monitor and  track when the reviews began and how disposals are progressing.  Additionally, a VA official we spoke with could not provide a specific time  frame for increasing the capacity of CAI, as VA is currently working on  developing space requirements that are needed to increase capacity and  help estimate a time frame."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given that the number of VA\u2019s vacant buildings has been generally  increasing in the last 6 years and the implementation of the VA Asset and  Infrastructure Review Act of 2018 could lead to more unneeded buildings,  effectively managing VA\u2019s real property disposal is crucial. Otherwise, VA  may maintain a large inventory of vacant buildings that may be costly to  secure and maintain. While effectively disposing of excess and  underutilized property has been a long-standing challenge for VA, the  agency has taken some positive actions, such as examining ways to  streamline the historic review process, having some documented  procedures, and improving data collection efforts on vacant properties.  However, without documented procedures for all the disposal options to  assist VISNs\u2019 and local facilities\u2019 managers in planning, implementing,  and executing disposals and navigating the complex property-disposal  process, VISNs and local facilities\u2014which are responsible for managing  their real property\u2014may continue to struggle to facilitate property  disposals efficiently. Also, without important information on the status of  disposal projects and supporting documents, it is unclear how VA can  monitor and track disposals, including identifying any areas where  management can assist in the disposal of its vacant properties."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the VA:  1.  The Secretary should develop clear procedures for each of VA\u2019s  disposal options to help facilities\u2019 managers plan, implement, and  execute projects to dispose of vacant and unneeded properties.  (Recommendation 1)  2.  As VA implements its plans to enhance the CAI to collect key data on  disposal projects, the Secretary should collect data on disposal status  information and time frames (e.g., environmental and historical  reviews\u2019 starting dates) to ensure VA has the information it needs to  track the length of the disposal process and identify any areas where  management may assist local facilities in implementing property  disposals. (Recommendation 2)  3.  As VA pursues its plans to enhance the CAI, the Secretary should  increase the capacity of the CAI to allow local facilities to upload  disposal-specific documentation, such as environmental- and  historical-review documents, to ensure all documentation related to a  property\u2019s disposal is available to appropriate parties, including VA  officials. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for review and comment. In  written comments, reproduced in appendix II, VA concurred with our  recommendations and stated that it has begun or is planning to take  actions to address them. VA also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Veteran\u2019s Administration, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Key contributors to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["This report examines the U.S. Department of Veterans Affairs\u2019 (VA)  efforts to dispose of properties, including the management of its real  property disposals. Specifically, we address: (1) the challenges VA faces  disposing of its vacant property and how it is addressing those challenges  and (2) the extent to which VA is tracking and monitoring the disposal of  its properties.", "To address these objectives, we reviewed relevant laws, regulations,  policies, handbooks, and other documents related to VA\u2019s real property  management, including VA\u2019s Handbook and Directive on Managing  Underutilized Real Property Assets, including Options for Reuse and  Disposal and VA\u2019s Capital Asset Inventory User Guide as well as VA\u2019s  annual budget submissions to Congress to fully understand VA\u2019s disposal  process. To examine the full scope and extent of VA\u2019s vacant and  disposed of properties, we obtained and analyzed data from VA\u2019s Capital  Asset Inventory for fiscal years 2012 through 2017 and assessed their  reliability. To assess the reliability of VA\u2019s data we: (1) looked for any  missing data, outliers, or other obvious data errors; (2) reviewed existing  documentation about the data and the system that produced them; (3)  reviewed VA\u2019s processes for checking and validating the data; and (4)  interviewed officials knowledgeable about the data. We found the data to  be reliable for our purposes of identifying the number and type of vacant  and disposed of buildings and the characteristics of those buildings.", "To identify challenges that VA faces when disposing of property and how  VA is addressing them, we selected a non-generalizable sample of 31  properties using data from VA\u2019s Capital Asset Inventory as mentioned  above. The 31 properties we selected were either completed in fiscal year  2017 or planning was under way for disposal, including through the  General Services Administration (GSA). Specifically, we selected  properties that:  captured a range of disposal methods available to VA using VA\u2019s  current process for disposal,  included both recently planned and completed disposals to observe  disposals in different phases of planning and were likely documented  by current VA staff, and  represented a variety of building and disposal characteristics,  including associated disposal costs, historic status, age, and size.", "The challenges faced by these selected properties cannot be used to  make inferences about all VA properties. However, they illustrate the  range of challenges that VA faces in disposing of properties.", "In addition, to help identify disposal challenges VA faces, including those  challenges that were identified as a lengthy time frame for disposal, we  obtained and reviewed documents related to the 31 selected properties,  including environmental review reports and historic review documents.  We used environmental and historic review documents to help estimate  the timespan for disposals, including time frames to conduct these  reviews. We also conducted semi-structured interviews with VA officials  and external stakeholders, who were involved or knowledgeable about  the disposal of these selected properties and are familiar with VA\u2019s  disposal process. These included interviews with facility managers from  VA\u2019s Veterans Integrated Service Networks (VISN) and local facilities who  were knowledgeable about the disposal of the 31 selected properties.  This group represented 7 of VA\u2019s 18 VISNs and 10 local medical facilities,  including two local medical facilities\u2014Perry Point (MD) and Sepulveda  (CA)\u2014with planned disposal projects\u2014we visited. We also interviewed  external stakeholders who included officials from the GSA; veterans  service organizations (e.g., Veterans of Foreign Wars and the American  Legion); a local community that purchased VA properties, a major  commercial real estate company; and historic preservation groups (e.g.  Advisory Council on Historic Preservation and the National Conference of  State Historic Preservation Officers) as well as selected State Historic  Preservation Officers to obtain their perspectives on VA\u2019s disposal  challenges. To identify common challenges, along with illustrative  examples and lengthy time frames, we reviewed and analyzed  documents from the 31 properties we selected as well as interviews with  VA officials and external stakeholders. This analysis included one analyst  reading through all of the documents and interviews, creating a list of  challenges mentioned, and then a subsequent analyst verifying this list.  To identify steps VA has taken to address challenges, we reviewed  documents and interviewed officials from VA\u2019s Office of Asset Enterprise  Management and its Office of Construction & Facilities Management as  well as Veterans Health Administration\u2019s Office of Capital Asset  Management and Engineering Support. We then assessed VA\u2019s efforts to  address these challenges against applicable federal internal control  standards.", "To determine the extent to which VA is tracking and monitoring the  disposal of its vacant properties, we reviewed the current data fields in  VA\u2019s Capital Asset Inventory, as well as VA\u2019s planning and guidance  documents, including the Fiscal Year 2017 Capital Asset Inventory and  Disposal Plans Updates (Annual Call Memo). In addition, we interviewed  VA officials in headquarters, including VA\u2019s Office of Asset Enterprise  Management and the Office of Construction and Facilities Management to  determine the extent to which VA is tracking and monitoring the disposal  of its vacant properties. We obtained and reviewed a copy of VA\u2019s data  discrepancy report for fiscal year 2016 that VA uses to verify data and  track and monitor vacant properties and disposals. We also reviewed  VA\u2019s planning documents, including a tracking spreadsheet that VA is  using to monitor the disposal of vacant properties. In addition, we  interviewed VA officials, including facility managers from VISNs and local  facilities, to obtain their perspective on VA\u2019s efforts to track and monitor  disposals, specifically. Subsequently, we assessed VA\u2019s plan to track and  monitor these properties against applicable federal internal controls.", "We conducted our work from November 2017 to December 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Kyle Browning; Cathy Colwell  (Assistant Director); Gina Hoover; Jennifer Kim (Analyst in Charge); Brian  Lepore; Jeff Mayhew; Nitin Rao; Malika Rice; Minette Richardson; Todd  Schartung; Michelle Weathers; and Crystal Wesco made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Veterans Affairs spent about $4 million last year to maintain hundreds of empty buildings. Federal management of real property (including VA's) has been on our High Risk List since 2003.", "We found VA has taken steps to improve how it gets rid of excess property. For example, it sought to streamline the process for reviewing historic buildings before demolishing, selling, or otherwise disposing of them.", "However, VA needs to better document its disposal procedures and track projects to help staff navigate complex federal and agency disposal rules. We made 3 recommendations to help address the issue."]}
{"id": "GAO-18-339SP", "url": "https://www.gao.gov/products/GAO-18-339SP", "title": "Homeland Security Acquisitions: Leveraging Programs' Results Could Further DHS's Progress to Improve Portfolio Management", "published_date": "2018-05-17T00:00:00", "released_date": "2018-05-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year, the DHS invests billions of dollars in a diverse portfolio of major acquisition programs to help execute its many critical missions. DHS's acquisition activities are on GAO's High Risk List, in part, because of management and funding issues.", "The Explanatory Statement accompanying the DHS Appropriations Act, 2015 included a provision for GAO to review DHS's major acquisitions. This report, GAO's fourth annual review, assesses the extent to which: (1) DHS's major acquisition programs are on track to meet their schedule and cost goals, and (2) DHS has taken actions to enhance its policies and processes to better reflect key practices for effectively managing a portfolio of investments.", "GAO reviewed 28 acquisition programs, including DHS's largest programs that were in the process of obtaining new capabilities as of April 2017, and programs GAO or DHS identified as at risk of poor outcomes. GAO assessed cost and schedule progress against baselines, assessed DHS's policies and processes against GAO's key portfolio management practices, and met with relevant DHS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["During 2017, 10 of the Department of Homeland Security (DHS) programs GAO assessed that had approved schedule and cost goals were on track to meet those goals. GAO reviewed 28 programs in total, 4 of which were new programs that GAO did not assess because they did not establish cost and schedule goals before the end of calendar year 2017 as planned. The table shows the status of the 24 programs GAO assessed. Reasons for schedule delays or cost increases included technical challenges, changes in requirements, and external factors.", "Recent enhancements to DHS's acquisition management, resource allocation, and requirements policies largely reflect key portfolio management practices (see table). However, DHS is in the early stages of implementing these policies.", "GAO identified two areas where DHS could strengthen its portfolio management policies and implementation efforts:", "DHS's policies do not reflect the key practice to reassess a program that breaches\u2014or exceeds\u2014its cost, schedule, or performance goals in the context of the portfolio to ensure it is still relevant or affordable. Acquisition management officials said that, in practice, they do so based on a certification of funds memorandum\u2014a tool GAO has found to be effective for DHS leadership to assess program affordability\u2014submitted by the component when one of its programs re-baselines in response to a breach. Documenting this practice in policy would help ensure DHS makes strategic investment decisions within its limited budget.", "DHS is not leveraging information gathered from reviews once programs complete implementation to manage its portfolio of active acquisition programs. DHS's acquisition policy requires programs to conduct post-implementation reviews after initial capabilities are deployed, which is in line with GAO's key practices. Acquisition management officials said they do not consider the results of these reviews in managing DHS's portfolio because the reviews are typically conducted after oversight for a program shifts to the components. Leveraging these results across DHS could enable DHS to address potential issues that may contribute to poor outcomes, such as schedule slips and cost growth, for other programs in its acquisition portfolio."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends DHS update its acquisition policy to require certification of fund memorandums when programs re-baseline as a result of a breach and assess programs' post-implementation reviews to improve performance across the acquisition portfolio. DHS concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year, the Department of Homeland Security (DHS) invests billions of  dollars in a diverse portfolio of major acquisition programs to help execute  its many critical missions. In fiscal year 2017 alone, DHS planned to  spend approximately $6.5 billion on these acquisition programs, and  ultimately the department will likely invest more than $207.2 billion in  them. DHS and its underlying components are acquiring systems to help  secure the border, increase marine safety, screen travelers, enhance  cybersecurity, improve disaster response, and execute a wide variety of  other operations. Each of DHS\u2019s major acquisition programs generally  costs $300 million or more and spans multiple years.", "To help manage these programs, DHS has established an acquisition  management policy that we have found to be generally sound in that it  reflects key program management practices we\u2019ve identified in prior  work. However, we have found shortfalls in executing the policy and  have highlighted DHS acquisition management issues in our high-risk  updates since 2005. Over the past decade, we have found that  department leadership has dedicated additional resources and  implemented new policies designed to improve acquisition oversight. But  our work has also identified shortcomings in the department\u2019s ability to  manage its portfolio of major acquisitions. For example, in April 2017, we  found that 14 of the 26 programs we reviewed deployed capabilities  before meeting all key performance parameters\u2014the requirements a  system must meet to fulfill its fundamental purpose\u2014which increases the  risk that end users, such as border patrol agents or first responders in a  disaster, received technologies that might not work as intended. We also  found that DHS\u2019s acquisition management policy requires programs to  establish cost, schedule, and performance baselines prior to gaining full  knowledge about the program\u2019s technical requirements, which serve as  the engineering basis for development. The order of these events is  contrary to acquisition best practices and may lead to poor outcomes,  such as schedule slips, cost increases, or inconsistent performance.", "We have made many recommendations over the past decade to help  address these challenges. For example, we previously recommended that  DHS leadership ensure all major programs fully comply with the  acquisition management policy by obtaining department-level approval for  acquisition documents before the programs are allowed to proceed and  specifically assess whether adequate funding is available during all  program reviews. In response, DHS has taken several steps to improve  acquisition management, such as strengthening implementation of its  acquisition management policy and requiring components to certify that  programs are affordable before they are approved to move through the  acquisition life cycle. Nonetheless, DHS has not fully addressed some of  our other recommendations. For example, we previously recommended  that DHS leadership prioritize major acquisition programs department- wide and ensure that the department\u2019s acquisition portfolio is consistent  with DHS\u2019s anticipated resource constraints, as well as present any  anticipated annual funding gaps for acquisition programs in the annual  funding plan submitted to Congress. DHS concurred with these  recommendations and has taken some steps to address them, such as  updating its policies and revising the format of its funding plan submission  to Congress to present anticipated acquisition funding gaps.", "The Explanatory Statement accompanying a bill to the DHS  Appropriations Act, 2015 contained a provision for GAO to develop a plan  for ongoing reviews of major DHS acquisition programs, as directed in the  Senate report. This is our fourth annual review of major DHS acquisition  programs. This report addresses the extent to which (1) DHS\u2019s major  acquisition programs are on track to meet their schedule and cost goals  and (2) DHS has taken actions to enhance its policies and processes to  better reflect key portfolio management practices.", "To answer these questions, we reviewed 28 of DHS\u2019s 79 major  acquisition programs. This included all 16 of DHS\u2019s Level 1 acquisition  programs\u2014those with life-cycle cost estimates (LCCE) of $1 billion or  more\u2014that were in the process of obtaining new capabilities at the  initiation of our audit. We also included 12 other major acquisition  programs that we or DHS management identified were at risk of not  meeting their schedules, cost estimates, or capability requirements. Eight  of these 12 programs were Level 1 acquisitions that either had not yet  begun obtaining capabilities or had entered the deployment phase of the  acquisition life cycle, while the other four programs were Level 2  acquisitions with LCCEs between $300 million and less than $1 billion.  Appendix I presents individual assessments of each of the 28 programs  we reviewed. These assessments include key information, such as the  status of programs\u2019 schedules, costs, projected funding levels, testing,  and staffing. Our objective for the 2-page assessments is to provide  decision makers a means to quickly gauge the programs\u2019 progress and  their potential cost, schedule, performance, or funding risks.", "To determine the extent to which the programs we reviewed are on track  to meet their schedule and cost goals, we analyzed available acquisition  documentation, such as acquisition program baselines (APB), which  contain information on programs\u2019 schedules and cost estimates. Since the  November 2008 update to DHS\u2019s overarching acquisition management  directive, these documents have required DHS-level approval; therefore,  we used November 2008 as the starting point for our analysis. We used  these documents to construct a data collection instrument for each  program, identifying any schedule slips and cost growth. We  subsequently shared this information with each of the program offices and  met with program officials to identify causes and effects associated with  any schedule slips and cost growth since (1) their initial baselines and (2)  January 2017\u2014the data cut-off date of the report we issued in April  2017. As of December 31, 2017\u2014the data cut-off date of this report\u201424  of the 28 programs we reviewed had one or more department-approved  APBs; therefore, we excluded the remaining 4 programs from our  assessment of whether programs are on track to meet their schedule and  cost goals. We also reviewed the Future Years Homeland Security  Program (FYHSP) report to Congress for fiscal years 2018\u20132022\u2014which  presents 5-year funding plans for each of DHS\u2019s major acquisition  programs\u2014to assess the affordability of DHS\u2019s acquisition portfolio.", "To determine the extent to which DHS has taken actions to enhance its  policies and processes to better reflect key portfolio management  practices, we compared the current policies for the department\u2019s  requirements, acquisition management, and resource allocation  processes that were issued in 2016 to key portfolio management  practices we established in September 2012 and identified any significant  gaps. We also reviewed documentation that resulted from these  processes since January 2016 to get a sense of how the department has  implemented its current policies. Lastly, we interviewed relevant  headquarters officials responsible for implementing these policies and  processes to obtain their perspectives on our analysis of DHS\u2019s current  policies and processes and to identify any current and planned initiatives  to improve management of the department\u2019s portfolio of major acquisition  programs. Appendix III provides detailed information on our scope and  methodology.", "We conducted this performance audit from March 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["To help manage its multi-billion dollar acquisition investments, DHS has  established policies and processes for acquisition management,  requirements development, test and evaluation, and resource allocation.  The department uses these policies and processes to deliver systems  that are intended to close critical capability gaps, helping enable DHS to  execute its missions and achieve its goals."], "subsections": [{"section_title": "Acquisition Management Policy", "paragraphs": ["DHS policies and processes for managing its major acquisition programs  are primarily set forth in its Acquisition Management Directive 102-01 and  Acquisition Management Instruction 102-01-001. DHS issued the initial  version of this directive in November 2008 in an effort to establish an  acquisition management system that effectively provides required  capability to operators in support of the department\u2019s missions. DHS\u2019s  Under Secretary for Management is currently designated as the  department\u2019s Chief Acquisition Officer and, as such, is responsible for  managing the implementation of the department\u2019s acquisition policies.", "DHS\u2019s Under Secretary for Management serves as the acquisition  decision authority for the department\u2019s largest acquisition programs,  those with LCCEs of $1 billion or greater. Component Acquisition  Executives\u2014the most senior acquisition management officials within each  of DHS\u2019s components\u2014may be delegated acquisition decision authority  for programs with cost estimates between $300 million and less than $1  billion. Table 1 identifies how DHS has categorized the 28 major  acquisition programs we review in this report, and table 7 in appendix III  specifically identifies the programs within each level.", "DHS acquisition management policy establishes that a major acquisition  program\u2019s decision authority shall review the program at a series of  predetermined acquisition decision events to assess whether the major  program is ready to proceed through the acquisition life-cycle phases.  Depending on the program, these events can occur within months of each  other, or be spread over several years. Figure 1 depicts the acquisition  life cycle established in DHS acquisition management policy.", "An important aspect of an acquisition decision event is the decision  authority\u2019s review and approval of key acquisition documents. See table 2  for a description of the type of key acquisition documents requiring  department-level approval before a program moves to the next acquisition  phase.", "DHS acquisition management policy establishes that the APB is the  agreement between program, component, and department-level officials  establishing how systems will perform, when they will be delivered, and  what they will cost. Specifically, the APB establishes a program\u2019s  schedule, costs, and key performance parameters. DHS defines key  performance parameters as a program\u2019s most important and non- negotiable requirements that a system must meet to fulfill its fundamental  purpose. For example, a key performance parameter for an aircraft may  be airspeed and a key performance parameter for a surveillance system  may be detection range.", "The APB schedule, costs, and key performance parameters are defined  in terms of an objective and minimum threshold value. According to DHS  policy, if a program fails to meet any schedule, cost, or performance  threshold approved in the APB, it is considered to be in breach. Programs  in breach are required to notify their acquisition decision authority and  develop a remediation plan that outlines a time frame for the program to  return to its APB parameters, re-baseline\u2014that is, establish new  schedule, cost, or performance goals\u2014or have a DHS-led program  review that results in recommendations for a revised baseline.", "In addition to the acquisition decision authority, other bodies and senior  officials support DHS\u2019s acquisition management function:", "The Acquisition Review Board reviews major acquisition programs  for proper management, oversight, accountability, and alignment with  the department\u2019s strategic functions at acquisition decision events and  other meetings as needed. The board is chaired by the acquisition  decision authority or a designee and consists of individuals who  manage DHS\u2019s mission objectives, resources, and contracts.", "The Office of Program Accountability and Risk Management  (PARM) is responsible for DHS\u2019s overall acquisition governance  process, supports the Acquisition Review Board, and reports directly  to the Under Secretary for Management. PARM develops and  updates program management policies and practices, reviews major  programs, provides guidance for workforce planning activities,  provides support to program managers, and collects program  performance data.", "Components, such as U.S. Customs and Border Protection, the  Transportation Security Administration, and the U.S. Coast Guard  sponsor specific acquisition programs. The head of each component  is responsible for oversight of major acquisition programs once the  programs complete delivery of all planned capabilities to end users.", "Component Acquisition Executives within the components are  responsible for overseeing the execution of their respective  portfolios.", "Program management offices, also within the components, are  responsible for planning and executing DHS\u2019s individual  programs. They are expected to do so within the cost, schedule,  and performance parameters established in their APBs. If they  cannot do so, programs are considered to be in breach and must  take specific steps, as noted above.", "Figure 2 depicts the relationship between acquisition managers at the  department, component, and program level."], "subsections": []}, {"section_title": "Requirements Development Process", "paragraphs": ["DHS established a Joint Requirements Council (JRC) to develop and lead  a component-driven joint requirements process for the department. The  JRC has issued policies outlining a process for analyzing and validating  capability gaps, needs, and requirements.", "The JRC consists of a chair and 14 members who are senior executives  or officers that represent key DHS headquarters offices and seven of the  department\u2019s operational components. The JRC chair rotates annually  among the seven operational components. JRC members represent the  views of their components or office leadership, endorse and prioritize  validated capability needs and operational requirements (user-defined  performance parameters outlining what a system must do), and make  recommendations that are supported by analytical rigor. Figure 3 depicts  the current headquarters and component members of the JRC.", "The JRC provides input to two senior-level entities:", "The Acquisition Review Board\u2014as a member, the JRC chair  advises the board on capability gaps, needs, and requirements at key  milestones in the acquisition life cycle.", "The Deputy\u2019s Management Action Group, which the Secretary  established in April 2014, is a decision-making body that is chaired by  the Deputy Secretary. Its membership consists of the DHS Chief of  Staff, DHS Under Secretaries, senior operational component deputies  and select support component deputies, and the Chief Financial  Officer. The group provides recommendations to the Deputy  Secretary for consideration in the annual resource allocation process  that reflects DHS\u2019s investment priorities. The group reviews JRC- validated capability needs and recommendations, provides direction  and guidance to the JRC, and endorses or directs related follow-on  JRC activities.", "The JRC is responsible for validating proposed capability needs and  requirements for all major acquisitions, as well as for programs that are  joint or of interest to the Deputy\u2019s Management Action Group, regardless  of level. See table 3 for a description of the key requirements documents  requiring JRC validation.", "In general, the DHS requirements development process moves from  broad mission needs and capability gaps to operational requirements.  See figure 4."], "subsections": []}, {"section_title": "Test and Evaluation Policy", "paragraphs": ["In May 2009, DHS established policies that describe processes for testing  the capabilities delivered by the department\u2019s major acquisition  programs. The primary purpose of test and evaluation is to provide  timely, accurate information to managers, decision makers, and other  stakeholders to reduce programmatic, financial, schedule, and  performance risks. We provide an overview of each of the 28 programs\u2019  test activities in the individual program assessments presented in  appendix I.", "DHS testing policy assigns specific responsibilities to particular  individuals and entities throughout the department:", "Program managers have overall responsibility for planning and  executing their programs\u2019 testing strategies, including scheduling and  funding test activities and delivering systems for testing. They are also  responsible for controlling developmental testing, which is used to  assist in the development and maturation of products, manufacturing,  or support processes. Developmental testing includes engineering- type tests used to verify that design risks are minimized, substantiate  achievement of contract technical performance, and certify readiness  for operational testing.", "Operational test agents are responsible for planning, conducting,  and reporting on operational test and evaluation, which is intended to  identify whether a system can meet its key performance parameters  and provide an evaluation of the operational effectiveness, suitability,  and cybersecurity of a system in a realistic environment. Operational  effectiveness refers to the overall ability of a system to provide a  desired capability when used by representative personnel.  Operational suitability refers to the degree to which a system can be  placed into field use and sustained satisfactorily. The operational test  agents may be organic to the component, another government  agency, or a contractor, but must be independent of the developer in  order to present credible, objective, and unbiased conclusions.", "The Director, Office of Test and Evaluation is responsible for  approving major acquisition programs\u2019 operational test agent and test  and evaluation master plans, among other things. A program\u2019s test  and evaluation master plan must describe the developmental and  operational testing needed to determine technical performance and  operational effectiveness, suitability, and cybersecurity. As  appropriate, the Director is also responsible for observing operational  tests, reviewing operational test agents\u2019 reports, and assessing the  reports. Prior to a program\u2019s acquisition decision event 3, the Director  provides the program\u2019s acquisition decision authority a letter of  assessment that includes an appraisal of the program\u2019s operational  test, a concurrence or non-concurrence with the operational test  agent\u2019s evaluation, and any further independent analysis.", "As an acquisition program proceeds through its life cycle, the testing  emphasis moves gradually from developmental testing to operational  testing. See figure 5."], "subsections": []}, {"section_title": "Resource Allocation Process", "paragraphs": ["DHS has established a planning, programming, budgeting, and execution  process to allocate resources to acquisition programs and other entities  throughout the department. DHS uses this process to produce the  department\u2019s annual budget request and multi-year funding plans  presented in the FYHSP, a database that contains, among other things,  5-year funding plans for DHS\u2019s major acquisition programs. According to  DHS guidance, the 5-year plans should allow the department to achieve  its goals more efficiently than an incremental approach based on 1-year  plans. DHS guidance also states that the FYHSP articulates how the  department will achieve its strategic goals within fiscal constraints.", "At the outset of the annual resource allocation process, the department\u2019s  Offices of Policy and Chief Financial Officer provide planning and fiscal  guidance, respectively, to the department\u2019s components. In accordance  with this guidance, the components should submit 5-year funding plans to  the Chief Financial Officer. These plans are subsequently reviewed by  DHS\u2019s senior leaders, including the DHS Secretary and Deputy  Secretary. DHS\u2019s senior leaders are expected to modify the plans in  accordance with their priorities and assessments, and they document  their decisions in formal resource allocation decision memorandums.  DHS submits the revised funding plans to the Office of Management and  Budget, which uses them to inform the President\u2019s annual budget  request\u2014a document sent to Congress requesting new budget authority  for federal programs, among other things. In some cases, the funding  appropriated to certain accounts in a given fiscal year can be carried over  to subsequent fiscal years. Figure 6 depicts DHS\u2019s annual resource  allocation process.", "Federal law requires DHS to submit an annual FYHSP report to Congress  at or about the same time as the President\u2019s budget request. This report  presents the 5-year funding plans in the FYHSP database at that time.", "Two offices within DHS\u2019s Office of the Chief Financial Officer support the  annual resource allocation process:", "The Office of Program Analysis and Evaluation (PA&E) is  responsible for establishing policies for the annual resource allocation  process and overseeing the development of the FYHSP. In this role,  PA&E develops the Chief Financial Officer\u2019s planning and fiscal  guidance, reviews the components\u2019 5-year funding plans, advises  DHS\u2019s senior leaders on resource allocation issues, maintains the  FYHSP database, and submits the annual FYHSP report to Congress.", "The Cost Analysis Division is responsible for reviewing, analyzing,  and evaluating acquisition programs\u2019 LCCEs to ensure the cost of  DHS programs are presented accurately and completely, in support of  resource requests. This division also supports affordability  assessments of the department\u2019s budget, in coordination with PA&E,  and develops independent cost estimates for major acquisition  programs upon request by DHS\u2019s Under Secretary for Management or  Chief Financial Officer."], "subsections": []}]}, {"section_title": "During 2017, 10 of the 24 Programs with Approved Schedule and Cost Goals Were on Track", "paragraphs": ["Of the 24 programs we assessed with approved schedule and cost goals,  10 were on track to meet those goals during 2017. The other 14 programs  were not on track because they changed or breached their schedule  goals, cost goals, or both. We found that most programs updated their  cost estimates in response to requirements DHS established in January  2016 that are intended to provide decision makers with more timely  information. These actions are in accordance with GAO\u2019s best practice to  regularly update cost estimates and we plan to use these updated  estimates to measure programs\u2019 cost changes going forward. Based on  our April 2014 recommendation, DHS revised the format of its fiscal year  2018\u20132022 FYHSP report to Congress to include acquisition affordability  tables for select major acquisition programs. However, the report  shows\u2014and our analysis of programs\u2019 current cost estimates confirms\u2014 that some programs face acquisition funding gaps in fiscal year 2018.", "We also reviewed 4 programs that were early in the acquisition process  and planned to establish department-approved schedule and cost goals in calendar year 2017. However, these programs were delayed in getting  department approval for their initial APBs for various reasons and,  therefore, we excluded them from our assessment of whether programs  were on track to meet their schedule and cost goals during 2017. DHS  leadership subsequently approved initial APBs for 2 particularly complex  and costly programs\u2014a border wall system along the southwest U.S.  border and the Coast Guard\u2019s Heavy Polar Icebreaker\u2014in January 2018.  We plan to assess these programs in next year\u2019s review, but provide  more details on all 4 additional programs we reviewed in the individual  assessments in appendix I.", "Table 4 summarizes our findings and we present more detailed  information after the table."], "subsections": [{"section_title": "Ten Programs Were on Track during 2017", "paragraphs": ["From January 2017 to January 2018, 10 of the 24 programs we assessed  with department-approved APBs were on track to meet their schedule  and cost goals. This is fewer than our last annual review in which we  found that 17 of the 26 programs we assessed were on track during  2016.", "Three of the 10 programs on track during 2017 were on track against  initial schedule and cost goals; that is, the schedule and cost estimates in  the baseline DHS leadership initially approved after the department\u2019s  acquisition management policy went into effect in November 2008. The  other 7 programs had re-baselined prior to January 2017 and were on  track against revised schedules and cost estimates that reflected past  schedule slips, cost growth, or both.", "However, some of the programs on track in 2017 identified risks that may  lead to schedule slips or cost growth in the future. For example, officials  from the Technology Infrastructure Modernization program told us that  staffing challenges may impede their ability to execute the program in  accordance with its current APB. We also identified 2 programs that are in  the process of re-baselining or plan to re-baseline in the near future to  account for significant program changes or to add capabilities. For  example, the Next Generation Networks Priority Services program plans  to update its APB to establish schedule, cost, and performance goals for  the next increment, which is intended to address landline capabilities for  providing government officials emergency telecommunication services."], "subsections": []}, {"section_title": "Fourteen Programs Were Not on Track during 2017", "paragraphs": ["During 2017, 14 of the 24 programs we assessed with department- approved APBs were not on track. Twelve of these programs had at least  one major acquisition milestone that slipped, including 6 of these  programs that also changed or breached their cost goals. Two additional  programs changed or breached only their cost goals."], "subsections": [{"section_title": "Programs with Schedule Slips during 2017", "paragraphs": ["As of January 2018, 6 of the 12 programs that experienced a schedule  slip were in breach and had not yet revised their goals. Therefore, the  magnitude of the schedule slips is unknown. For the remaining 6  programs, the change in schedule during 2017 ranged from a delay of 6  months to 66 months. Figure 7 identifies the programs that experienced  schedule slips and the extent to which their major milestones slipped in  2017, as well as\u2014for additional context\u2014in prior years.", "While there are various reasons for schedule delays, the result is that end  users may not get needed capabilities when they originally anticipated.  Examples of the reasons why these key milestones slipped in 2017  include the following:", "New requirements: For example, the Passenger Screening Program  re-baselined in May 2017 for the fifth time since its initial APB was  approved in January 2012. This latest re-baseline was to remediate a  17-month breach caused by delays in incorporating new cybersecurity  requirements in one of the program\u2019s transportation security  equipment technologies, known as the Credential Authentication  Technology. The program now plans to achieve full operational  capability for this system by December 2023\u2014more than 9 years later  than it initially planned. In another example, the Tactical  Communications Modernization program re-baselined in November  2017\u20144 months after the program notified DHS leadership that it  would not achieve full operational capability as planned. The reason  for this re-baseline was to resolve issues related to federal information  security requirements. The program now plans to achieve this  milestone by March 2019, which is more than a year later than its  initial APB threshold.", "Technical challenges: For example, the Continuous Diagnostics and  Mitigation program re-baselined in June 2017 to account for  significant coverage gaps identified during the deployment of phase 1  sensors and to establish cost, schedule, and performance goals for  phase 3 tools. The program\u2019s full operational capability date slipped  almost 4 years after this milestone was redefined as the point in time  at which phase 1\u20133 tools are available to all participating civilian  agencies. Additionally, the Automated Commercial Environment  program declared a schedule breach in April 2017\u2014its second in less  than a year\u2014after encountering difficulties developing its remaining  functionality. These difficulties have caused further delays to the  program\u2019s final acquisition milestone decision.", "External factors: Officials from the Logistics Supply Chain  Management System program notified DHS leadership in September  2017 that the program would not complete all required activities to  achieve acquisition decision event 3 and subsequent events, including  full operational capability. The primary reason for the delay was  because program staff were deployed to support response and  recovery efforts during the 2017 hurricane season. Additionally, the  Medium Lift Helicopter program experienced delays in getting key  acquisition documents approved in time to achieve its acquisition  decision event 3. These delays were attributed, in part, to DHS  leadership directing Customs and Border Protection to develop a  comprehensive border plan that included the helicopter\u2019s capabilities.", "We elaborate on the reasons for all 12 programs\u2019 schedule slips in the  individual assessments in appendix I."], "subsections": []}, {"section_title": "Programs with Cost Goal Changes or Breaches during 2017", "paragraphs": ["Of the 14 programs not on track during 2017, 8 revised or breached their  established cost goals. Four of these 8 programs revised their cost goals  when they re-baselined to address new requirements and technical  challenges, among other things.", "When the Passenger Screening Program re-baselined in May 2017,  the program\u2019s APB threshold for its life-cycle costs increased $418  million (8 percent) over its previous APB. However, the revised  threshold is $1 billion below the threshold established in the program\u2019s  initial APB, which was approved in January 2012. From 2012 to 2015,  the program\u2019s scope was reduced in response to funding constraints.  However, emerging threats drove the program to increase capability  requirements, which has subsequently increased costs.", "When the Continuous Diagnostics and Mitigation program re- baselined in June 2017, the APB threshold for life-cycle costs  decreased by $15 million (1 percent). However, the program shifted  some acquisition costs to operations and maintenance (O&M) to be  consistent with DHS\u2019s new common appropriations structure. This,  in addition to other changes, increased the APB threshold for O&M by  $631 million (3,712 percent).", "When the National Security Cutter program re-baselined in November  2017 to account for a ninth ship\u2014as directed by Congress\u2014the APB  cost thresholds for acquisition and O&M increased by $453 million (8  percent) and $123 million (1 percent), respectively.", "When the Immigration and Customs Enforcement\u2019s TECS  Modernization program re-baselined in November 2017 in preparation  for acquisition decision event 3, the APB cost thresholds increased  overall. Specifically, the acquisition cost threshold decreased by $14  million (6 percent) when the program included actual costs through  fiscal year 2016, among other things, and the O&M cost threshold  increased by $147 million (92 percent) when the program extended  the estimate by 4 years and included support costs for an additional  11 years.", "The other 4 programs breached their established cost goals during 2017.", "The Medium Lift Helicopter and Electronic Baggage Screening  programs breached certain APB cost thresholds when they shifted  costs between categories, such as O&M to acquisitions or vice versa,  to be consistent with DHS\u2019s new common appropriations structure.", "The Tactical Communications Modernization program experienced a  cost breach primarily because of increases in costs for contractor  labor and support for facilities and infrastructure. The program\u2019s APB  cost threshold for O&M increased by $110 million (23 percent) when it  re-baselined in November 2017.", "The Automated Commercial Environment program experienced a cost  breach because it had to extend its contracts to address the  development difficulties discussed above. The magnitude of the  program\u2019s cost goal changes is not yet known because the program  does not plan to revise its APB until August 2018.", "We elaborate on the reasons for all 8 programs\u2019 cost goal changes or  breaches in the individual program assessments in appendix I."], "subsections": []}]}, {"section_title": "DHS Has Taken Steps to Enhance Cost Reporting While Some Programs Still Face Funding Gaps", "paragraphs": ["In January 2016, based on several of our past recommendations, DHS  required major acquisition programs to begin submitting to headquarters  (1) detailed data on program affordability, such as updates to the  program\u2019s LCCE and funding source information, to help inform the  department\u2019s annual resource allocation process, and (2) an annual  LCCE update. These requirements are intended to provide more timely  information that may improve DHS\u2019s efforts to address acquisition  program affordability issues, as well as internal and external oversight of  programs\u2019 progress against its cost goals. These actions are in  accordance with GAO\u2019s cost estimating best practices, which state that  cost estimates should be updated with actual costs so that they are always relevant and current. As a result, we have used these sources to  provide the programs\u2019 current estimate in the individual assessments in  appendix I, as appropriate, and plan to use these data sources to  measure programs\u2019 cost changes going forward.", "According to officials from the Cost Analysis Division, a program\u2019s annual  LCCE update should inform the affordability submission to support the  annual resource allocation process and can be completed at any point  during the fiscal year leading up to this process. We examined  documentation to ascertain whether the programs we reviewed complied  with the two requirements. For the 24 programs we assessed with  department-approved APBs, we found the following:", "All 24 programs submitted the detailed data on program affordability  to headquarters by June 2017 to inform the fiscal year 2019 resource  allocation cycle. Most programs\u2019 submissions accounted for changes  since the program\u2019s last LCCE was approved by DHS\u2019s Chief  Financial Officer, except three. For example, the Long Range  Surveillance Aircraft program\u2019s submission reflected no updates from  its November 2011 LCCE because the program was in the process of  re-baselining to account for significant changes. The program began  re-baselining nearly 3 years ago and has been delayed for various  reasons, including challenges with the vendor hired to complete a  revision of the program\u2019s LCCE.", "Eighteen of the 24 programs submitted annual LCCE updates. Three  programs\u2014Automated Commercial Environment, H-65, and  Transformation\u2014did not submit an annual LCCE update because  they were in breach. The other 3 programs\u2014all within the Coast  Guard\u2014did not submit an annual LCCE because, according to Coast  Guard officials, they have limited internal cost estimating capability  and rely on outside sources for this service, which led to delays in  completing the annual LCCEs for these programs. Coast Guard  officials said they are reviewing options to resolve these delays and  improve the Coast Guard\u2019s cost estimating capability.", "Cost Analysis Division officials anticipate the Coast Guard will increase  compliance with the annual LCCE requirement in fiscal year 2018. They  also plan to update the annual LCCE template to include additional  information, such as comparisons of the updated estimates to the  program\u2019s APB cost goals and projected funding.", "In addition, DHS revised the format of its FYHSP report to Congress,  improving insight into major programs\u2019 acquisition funding, but decreasing  insight into O&M funding. In April 2014, we found that DHS could better  communicate its funding needs for acquisition programs to Congress and  recommended that DHS enhance the content for future FYHSP reports by  presenting programs\u2019 annual cost estimates and any anticipated funding  gaps, among other things. DHS concurred with the recommendation  and, for the first time, included acquisition affordability tables that  presented programs\u2019 annual acquisition cost estimates compared to  projected acquisition funding for select major acquisition programs in its  FYHSP report for fiscal years 2018\u20132022.", "However, DHS no longer reported O&M funding for individual programs.  DHS reported in the FYHSP that it focused on acquisition information  because O&M funding estimates are generally stable year-to-year and  components manage O&M in various ways, such as by individual  program or across a portfolio of programs. By removing O&M funding  information in the FYHSP for all programs, DHS presents an incomplete  picture of programs\u2019 full funding needs and affordability. In April 2018, we  assessed the extent to which DHS had accounted for O&M costs and  funding in greater detail and recommended that DHS reverse the  exclusion of O&M funding at the acquisition program level in its FYHSP  report to Congress for all components. DHS officials stated that they  plan to re-introduce O&M funding for major acquisition programs in the  FYHSP report for fiscal years 2019\u20132023 based on multiple internal  discussions about the best way to present a more comprehensive view of  programs\u2019 total costs and feedback from key stakeholders, such as the  Office of Management and Budget.", "Based on the information presented in the FYHSP report for fiscal years  2018\u20132022, DHS\u2019s acquisition portfolio is not affordable over the next 5  years. For example, the report contained acquisition affordability tables  for 18 of the 24 programs we assessed that have approved APBs. Of  these 18 programs, 9 were projected to have an acquisition affordability  gap in fiscal year 2018. However, some of these projections are  outdated since the FYHSP report\u2014which was issued in September  2017\u2014relied on cost information as of April 2016. Therefore, we updated  these tables using the programs\u2019 current acquisition cost estimate  presented in the individual assessments in appendix I.", "Based on our assessment of programs\u2019 current cost estimates, we also  found that a total of 9 programs are projected to have an acquisition  affordability gap in fiscal year 2018. However, 3 of these 9 programs were  different programs than those identified based on the FYHSP report. Of  the 9 programs we identified with a projected acquisition affordability gap  in fiscal year 2018, we found the following:", "Five programs identified other funding, such as funding from previous  fiscal years that remained available for obligation\u2014known as  carryover funding\u2014which would address their projected acquisition  funding gap. For example, in the FYHSP report, DHS projected  allocating approximately $16 million in funding for the Technology  Infrastructure Modernization program in fiscal year 2018 to cover an  estimated $16 million in acquisition costs. However, in its November  2017 annual LCCE update, this program\u2019s acquisition cost increased  to almost $30 million, resulting in a projected acquisition affordability  gap of almost 45 percent. The program plans to realign $57 million in  O&M carryover funding to cover this and any future acquisition  shortfalls.", "Four programs did not identify other funding that would address their  projected acquisition funding gap, which increases the likelihood that  they will cost more and take longer to deliver capabilities to end users  than expected. For example, in the FYHSP report, DHS projected  allocating $109 million in funding for the Non-Intrusive Inspection  Systems program in fiscal year 2018 to cover an estimated $103  million in acquisition costs. However, in its April 2017 annual LCCE  update, this program\u2019s acquisition costs increased to nearly $186  million, resulting in a projected acquisition affordability gap of 41  percent. The program identified only $2.5 million in fiscal year 2017  acquisition carryover funding.", "Further, 5 of the 24 programs we assessed were not included in the fiscal  years 2018\u20132022 FYHSP report because they were no longer expected  to receive acquisition funding. Officials from 3 of these 5 programs  projected funding gaps that could cause future program execution  challenges, such as schedule slips or cost growth. For example, the  National Bio and Agro-Defense Facility anticipates a projected funding  shortfall of approximately $90 million over the next 5 years, which officials  said could delay a number of activities to make the facility operational.  We elaborate on programs\u2019 affordability over the next 5 years in the  individual program assessments in appendix I."], "subsections": []}]}, {"section_title": "DHS\u2019s Policies Generally Reflect Key Portfolio Management Practices, but Opportunities Exist to Leverage Programs\u2019 Post-Implementation Results", "paragraphs": ["We assessed DHS\u2019s policies outlining the department\u2019s processes for  acquisition management, resource allocation, and requirements and  found that, when considered collectively, they generally reflect key  portfolio management practices. In March 2007, we examined the  practices that private sector entities use to achieve a balanced mix of new  projects and found that successful commercial companies use a  disciplined and integrated approach to prioritize needs and allocate  resources when making investments. This approach, known as portfolio  management, requires companies to view each of their investments as  contributing to a collective whole, rather than as independent and  unrelated. With this perspective, companies can effectively (1) identify  and prioritize opportunities, and (2) allocate available resources to  support the highest priority\u2014or most promising\u2014opportunities. Based on  this and other work, we identified four key practice areas for portfolio  management in September 2012.", "We previously assessed DHS\u2019s acquisition management and resource  allocation policies against our key portfolio management practices in  September 2012 and April 2014, respectively. We found that the  policies in place at the time of our reviews did not fully reflect all of the  key portfolio management practices and recommended that DHS revise  its policies to do so. DHS concurred with our recommendations and  subsequently took actions to mature and solidify the department\u2019s  portfolio management processes and policies.", "In April 2014, the Secretary of Homeland Security issued a memorandum  titled Strengthening Departmental Unity of Effort, which aimed to  strengthen DHS\u2019s structures and processes to improve departmental  cohesiveness and operational effectiveness, among other things. The  memorandum identified several initial focus areas intended to build  organizational capacity, one of which centered on improving and  integrating the department\u2019s processes for acquisition oversight, resource  allocation, and joint requirements analysis. To improve these processes,  the memorandum directed senior DHS leaders to update the existing  acquisition management and resource allocation processes, as well as  lead an expedited review to provide alternatives for developing and  facilitating a component-driven joint requirements process, which  ultimately led to the re-establishment of the JRC.", "In response to our recommendations and the Unity of Effort  memorandum, DHS issued new policies outlining the acquisition  management, resource allocation, and requirements processes in 2016.  We assessed these policies and found that, when considered collectively,  they generally reflect the key portfolio management practices, as shown  in table 5.", "Because DHS\u2019s new policies were issued in 2016, we did not specifically  assess DHS\u2019s implementation of them. However, we did review  documentation resulting from the acquisition management, resource  allocation, and requirements processes since January 2016 to get a  sense of how the department began implementation. Examples of how  DHS\u2019s policies reflect the key portfolio management practices and their  implementation status are outlined below.", "Clearly define and empower leadership: the policies identify the  roles and responsibilities for decision makers in the acquisition  management, resource allocation, and requirements processes, as  well as establish cross-functional teams to support those decision  makers. For example, to fulfill the role of acquisition decision  authority, the Under Secretary for Management is supported by the  Acquisition Review Board, which consists of key DHS senior leaders  responsible for managing the department\u2019s finances, contracts, and  testing, among other things.", "We reviewed the memorandums issued since January 2016 that  document Acquisition Review Board decisions and found that, through  this group, DHS has taken steps to manage across programs through  its acquisition management process. For example, after reviewing the  status of several individual Customs and Border Protection programs  in 2016, the Acquisition Review Board identified the need for a  comprehensive border plan that depicts the component\u2019s current land,  maritime, and air domain awareness capabilities. In October 2016, the  Deputy Under Secretary for Management\u2014who was serving as  acquisition decision authority at the time\u2014directed Customs and  Border Protection to develop such a plan. The plan is to consist of  separate analyses for each of the three domains\u2014starting with land\u2014 that reflect end users\u2019 capability requirements for systems, such as  Integrated Fixed Towers, Multi-Role Enforcement Aircraft, and  Medium Lift Helicopter, that address relevant domain threats. As of  February 2018, Customs and Border Protection had not yet  completed the analysis for land domain awareness capabilities.", "Establish standard assessment criteria and demonstrate  comprehensive knowledge of the portfolio: the policies establish  standard criteria for assessing major acquisition programs through the  acquisition management, resource allocation, and requirements  processes. For example, the updated resource allocation handbook  established that PA&E conduct annual assessments of all major  investments using standard criteria in five main categories\u2014 contribution to DHS\u2019s mission, program health, risk, resources, and  governance\u2014to assess the portfolio of investments and present  alternatives for leadership decision. PA&E officials told us they used  these criteria when assessing components\u2019 resource allocation  requests during development of the President\u2019s fiscal year 2018  budget to develop funding options for the Deputy\u2019s Management  Action Group, which is responsible for making resource allocation  recommendations for the Secretary\u2019s approval. PA&E presented its  funding options by DHS mission, which, according to officials  associated with the Deputy\u2019s Management Action Group, allowed the  group to make cross-component allocation decisions that directly  aligned with the department\u2019s strategic goals. We could not verify  these officials\u2019 assertions based on the documentation we were  provided, but will continue to monitor PA&E\u2019s assessment of major  acquisition programs against the standard criteria as the department\u2019s  implementation of its resource allocation policies matures.", "In addition, PARM formally established its Acquisition Program Health  Assessments in October 2016 after more than a year of development  and pilot efforts. These assessments are intended to monitor major  acquisition programs quarterly (both on an individual program level  and in aggregate) by rating programs against standard criteria in  several categories\u2014such as program management, financial  management, and human capital\u2014that DHS deemed important for  successful program execution. We reviewed the quarterly reports  issued from January 2016 to April 2017 and found that they primarily  focused on individual programs. The portfolio-level information  contained in these reports was limited to program results grouped in  various categories, such as by component, by acquisition life-cycle  phase, and by investment type (e.g., information technology). PARM  officials said they plan to use the health assessments as a portfolio  management tool in the future and are working to determine how to  best to analyze and present portfolio-level data. We will continue to  track PARM\u2019s implementation of the health assessment process  moving forward through GAO\u2019s High Risk work to determine DHS\u2019s  progress in demonstrating that major acquisition programs are on  track to achieve their established goals.", "Prioritize investments by integrating the requirements,  acquisition, and budget processes: the policies identify areas  where DHS\u2019s requirements, acquisition management, and resource  allocation processes are integrated and establish processes for  prioritizing investments. For example, the updated resource allocation  policies require reviews of DHS\u2019s major acquisition portfolio during  this annual process. When the portfolio faces a funding gap, programs  are to be returned to their respective components for scope or funding  adjustments, or prioritized by department leadership to identify an  affordable set of programs. For the fiscal year 2018 resource  allocation cycle, PA&E officials provided an example where DHS  leadership directed components to identify funding from alternative  sources to fund specific purposes related to DHS\u2019s mission to prevent  terrorism and enhance security. However, as previously discussed,  the resulting FYHSP report for fiscal years 2018\u20132022 showed that  DHS\u2019s portfolio of major acquisition programs is not affordable over  the next 5 years.", "In addition, the requirements policies established the Joint  Assessment of Requirements, an annual process to prioritize  emerging and existing requirements to inform the department\u2019s  resource allocation decisions. As we found in October 2016, the JRC  plans to implement the Joint Assessment of Requirements through a  3-year phased approach that is expected to be fully implemented in  time to inform DHS\u2019s fiscal year 2021 budget request. In fiscal year  2016, the JRC completed the first phase, which included (1)  developing initial criteria to evaluate emerging requirements, and (2)  evaluating and prioritizing a sample of those requirements against the  initial criteria. Based on these results, JRC officials told us in  September 2017 that they are working to develop assessment metrics  for the criteria as part of the next phase. We will continue to track the  JRC\u2019s progress through GAO\u2019s High Risk work to determine DHS\u2019s  progress to effectively operate the JRC.", "Continually make go/no go decisions to rebalance the portfolio:  the requirements policies outlining the Joint Assessment of  Requirements process also reflected the key practices to conduct  reviews (1) annually to make requirement scoping adjustments as  priorities change and (2) when new investments are identified.  However, as previously discussed, the JRC is still in the process of  implementing this process.", "We consider this overall key practice area to be partially met because  DHS\u2019s policies do not reflect the key practice (3) to reassess  programs that breach established thresholds within the context of the  portfolio to determine if the program remains relevant and affordable.  PARM officials told us that\u2014in practice\u2014DHS reassesses programs  in the context of their component\u2019s overall acquisition portfolio based  on a certification of funds memorandum submitted to DHS\u2019s Chief  Financial Officer when programs re-baseline as a result of a cost,  schedule, or performance breach. The memorandum is intended to  enable the Acquisition Review Board to discuss affordability by  certifying a program\u2019s funding levels and identifying trade-offs  necessary to address any projected funding gaps. We previously  found that the certification of funds memorandum was an effective tool  for DHS leadership to assess program affordability. However, DHS\u2019s  acquisition management policy requires components to submit this  memorandum prior to most acquisition decision events, but not when  a program re-baselines as a result of a cost, schedule, or  performance breach.", "During our review of programs\u2019 progress against schedule and cost  goals in 2017, we found one instance where a component did not  follow the practice to submit this memorandum when one of its  programs re-baselined as a result of a breach. Specifically, Customs  and Border Protection did not submit a certification of funds  memorandum when the Tactical Communications Modernization  program re-baselined in November 2017 as a result of a schedule and  cost breach. Nevertheless, DHS leadership approved the program\u2019s  revised APB and removed it from breach status, even though DHS\u2019s  Chief Financial Officer identified that the program\u2019s revised LCCE was  not affordable. PARM officials stated that this instance was an  oversight because, at the time, the department was still determining  when certification of funds memorandums should be submitted.", "According to the federal standards for internal control, documentation  of internal control practices is necessary so that they can be  implemented effectively. By amending its acquisition management  policy to require a certification when a program re-baselines as a  result of a cost, schedule, or performance breach, DHS can ensure  that leadership receives the necessary information to reassess that  program\u2019s affordability in the context of a larger portfolio. PARM  officials stated that, moving forward, components will be required to  submit a certification of funds memorandum for each program when a  new APB is submitted for DHS leadership approval.", "In contrast, the acquisition management policy does reflect the key  practice (4) to use information gathered from post-implementation  reviews to fine tune investment processes and the portfolio to achieve  strategic outcomes. For example, DHS\u2019s acquisition management  policy requires programs to conduct post-implementation reviews 6 to  18 months after initial operational capability to identify and document  any deployment or implementation and coordination issues, how they  were resolved, and how they could be prevented in the future. These  reviews are intended to help identify capability gaps that may inform  future acquisitions, among other things.", "However, PARM officials said that they do not consider the results of  the post-implementation reviews when managing the department\u2019s  current acquisition portfolio because these reviews are typically  conducted after program oversight shifts from PARM to the  component. While post-implementation reviews are conducted later in  the acquisition life cycle, the insights they provide could be leveraged  by other programs in the acquisition portfolio, not just the program  under review. For example, the Integrated Fixed Towers program  completed a post-implementation review in June 2016 after its initial  deployment of capabilities to the Arizona border. The review found  that changes in illegal traffic patterns as a result of the program\u2019s  deployment may be predicted, and other technologies may be able to  compensate for changes in these patterns. This information could  help other programs under development plan for similar outcomes or  enable DHS to change deployment plans for existing programs to  address changes in threats.", "PARM has an opportunity to use the results from programs\u2019 post- implementation reviews since it is responsible for overseeing the  department\u2019s acquisition portfolio by monitoring each investment\u2019s  cost, schedule, and performance against established baselines.  Federal standards for internal control state that management should  obtain data on a timely basis so that they can be used for effective  monitoring and that separate evaluations may provide feedback on  the effectiveness of ongoing monitoring. By leveraging the results  from post-implementation reviews in its monitoring efforts, PARM may  be better able to ensure that programs in the current acquisition  portfolio achieve their baselines. PARM officials stated they have  generally focused on leveraging information gathered from canceled  acquisition programs, such as where and why plans went wrong.  However, they agreed that they could better leverage post- implementation review information gathered from programs that  complete planned capability deployments."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["DHS\u2019s mission to safeguard the American people and homeland requires  a broad portfolio of acquisitions. However, the performance of DHS\u2019s  major acquisition portfolio during 2017 did not improve compared to our  last review because we found that more programs will require more time  and may require more money to complete than initially planned. DHS is  collecting more timely cost estimate information on its acquisition  programs to make more informed investment decisions. Yet DHS  continues to face challenges in funding its acquisition portfolio, which  highlights the need for disciplined policies that reflect best practices to  ensure that the department does not pursue more programs than it can  afford. DHS leadership has taken positive steps in recent years by  strengthening its policies for acquisition management and resource  allocation, and establishing policies related to requirements. Collectively,  these policies reflect an integrated approach to managing investments.  However, opportunities remain to further strengthen the acquisition  management policy by documenting DHS\u2019s current practice to reassess  programs that breach their established cost, schedule, or performance  thresholds to ensure they are still worth pursuing within the context of the  portfolio. Additionally, leveraging information learned once programs  complete deployment across the acquisition portfolio could help ensure  that programs stay on track against their baselines in the first place. This  is particularly relevant because DHS is initiating a number of complex and  costly acquisition programs, such as development of a wall system along  the southwest border and the Coast Guard\u2019s Heavy Polar Icebreaker,  which could benefit from this type of information."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DHS:", "The Under Secretary for Management should update DHS\u2019s  acquisition management policy to require components to submit a  certification of funds memorandum when a major acquisition program  re-baselines in response to a breach. (Recommendation 1)", "The Under Secretary for Management should require PARM to  assess the results of major acquisition programs\u2019 post-implementation  reviews and identify opportunities to improve performance across the  acquisition portfolio. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. In its  comments, reproduced in appendix IV, DHS concurred with both of our  recommendations and identified actions it planned to take to address  them. DHS also provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Program Assessments", "paragraphs": ["This appendix presents individual assessments for each of the 28  programs we reviewed. Each assessment presents information current as  of January 2018. They include standard elements, such as an image, a  program description, and summaries of the program\u2019s progress in  meeting cost and schedule goals, performance and testing activities, and  program management-related issues, such as staffing. Each assessment  also includes the following figures:", "Fiscal Years 2018\u20132022 Affordability. This figure compares the  funding plan presented in the Future Years Homeland Security  Program report to Congress for fiscal years 2018\u20132022 to the  program\u2019s current cost estimate. We use this funding plan because  the data are approved by the Department of Homeland Security  (DHS) and Office of Management and Budget, and was submitted to  Congress to inform the fiscal year 2018 budget process. The figure  only presents acquisition funding because DHS did not report  operations and maintenance (O&M) funding for individual programs in  its funding plan to Congress. In addition, the data do not account for  other potential funding sources, such as carryover.", "Acquisition Program Baseline (APB) vs. Current Estimate. This  figure compares the program\u2019s cost thresholds from the initial APB  approved after DHS\u2019s acquisition management policy went into effect  in November 2008 and the program\u2019s current DHS-approved APB to  the program\u2019s expected costs as of January 2018. The source for the  current estimate is the most recent cost data we collected (i.e., a  department-approved life-cycle cost estimate, updated life-cycle cost  estimates submitted during the resource allocation process to inform  the fiscal year 2019 budget request, or a fiscal year 2017 annual life- cycle cost estimate update).", "Schedule Changes. This figure consists of two timelines that identify  key milestones for the program. The first timeline is based on the  initial APB DHS leadership approved after the department\u2019s current  acquisition management policy went into effect. The second timeline  identifies when the program expected to reach its major milestones as  of January 2018 and includes milestones introduced after the  program\u2019s initial APB. Dates shown are based on the program\u2019s APB  threshold dates or updates provided by the program office.", "Test Status. This table identifies key recent and upcoming test  events. It also includes DHS\u2019s Director, Office of Test and  Evaluation\u2019s assessment of programs\u2019 test results, if an assessment  was conducted.", "Staffing Profile. This figure identifies the total number of staff a  program needs (measured in full time equivalents) including how  many are considered critical and how many staff the program actually  has.", "Lastly, each program assessment summarizes comments provided by the  program office and identifies whether the program provided technical  comments.", "AUTOMATED COMMERCIAL ENVIRONMENT (ACE)", "CUSTOMS AND BORDER PROTECTION (CBP)", "The ACE program is developing software that will electronically collect and process  information submitted by the international trade community. ACE is intended to  provide private and public sector stakeholders access to information, enhance the  government\u2019s ability to determine whether cargo should be admitted into the United  States, and increase the efficiency of operations at U.S. ports by eliminating manual  and duplicative trade processes, and enabling faster decision making.", "Final deployment and  operational testing of ACE  functionality delayed.", "Program plans to identify an  approach to address collections  functionality in March 2018.", "We last reported on this program  in March 2018 and April 2017  (GAO-18-271, GAO-17-346SP)."], "subsections": [{"section_title": "Not included", "paragraphs": ["CBP declared a cost and schedule breach in April 2017\u20145 months after re-baselining  the program in response to a prior breach\u2014because of difficulties developing the  collections aspect of ACE\u2019s remaining functionality, which collects and processes  duties owed on imported goods. CBP reported that its officials were not versed in  the complexities of collections in the legacy system and underestimated the level of  effort required to integrate collections capabilities into ACE. As a result, the program  delayed final deployment of ACE functionality several times and missed the deadlines  for completing the remaining milestones in its current acquisition program baseline  (APB), including achieving acquisition decision event (ADE) 3 and full operational  capability (FOC) by the revised dates of June 2017 and September 2017, respectively.  Additional coding and testing to complete ACE development also required contract  extensions that exceeded the current APB cost thresholds.", "The program subsequently decoupled collections from ACE\u2019s remaining functionality  to permit deployment of the other post-release capabilities\u2014such as liquidations and  reconciliation\u2014using a phased approach between September 2017 and February  2018. In November 2017, CBP officials estimated that efforts to decouple collections  from post-release functionality would be an additional $32 million in acquisition costs.  CBP officials plan to cover these costs with $18 million in fiscal year 2017 carryover  funding and by reprogramming $14 million from ACE disaster recovery funding.  CBP is in the process of determining a path forward for collections, which is due to  Department of Homeland Security (DHS) leadership by the end of March 2018. CBP  then plans to update the program\u2019s acquisition documentation, including APB and life- cycle cost estimate, by August 2018. Until then, the time frame for completing ACE\u2019s  remaining milestones and true cost of the program, including the cost to complete  collections development is unknown.", "The program was not included in DHS\u2019s funding plan to Congress for fiscal years 2018  to 2022 because DHS did not report operations and maintenance (O&M) funding for  individual programs. CBP officials anticipate receiving approximately $535 million in  O&M funding over this 5-year period.", "Customs and Border Protection (CBP) AUTOMATED COMMERCIAL ENVIRONMENT (ACE)"], "subsections": []}, {"section_title": "In June 2017, CBP officials reported meeting three of ACE\u2019s four KPPs, including its KPP on availability. However, DHS\u2019s Director, Office of Test and Evaluation has not assessed these results. ACE did not meet its KPP for transmitting data to a separate tracking system because, according to CBP officials, there was confusion about which data ACE was required to send. CBP officials plan to reassess this KPP in March 2018 to determine next steps.", "paragraphs": ["When DHS leadership re-baselined ACE\u2019s cost, schedule, and performance parameters  in 2013, the program adopted an agile software development methodology to  accelerate software creation and increase flexibility in the development process.  As of October 2017, the ACE program office oversees 11 agile teams that conduct  development and O&M activities. CBP officials said they extended the program\u2019s  agile development contracts in 2017 to permit further development of the collections  function. In identifying a path forward for collections, CBP officials stated there are  three main options: 1. leave collections in the legacy system, 2. continue to pursue development and deployment in ACE, or 3. move collections to a different program altogether.", "The program previously experienced a schedule breach in June 2016 because it  delayed events to address external stakeholders\u2019 concerns about transitioning to ACE. According to CBP officials, CBP has signed a memorandum of understanding with each  of the 22 partner agencies responsible for clearing or licensing cargo that provides  access to ACE. As of February 2018, 21 of the partner agencies had transitioned to ACE  and the program was piloting a solution for the remaining partner.", "In September 2017, CBP reported that ACE continued to lack a director of testing  and evaluation. CBP officials said they do not plan to fill this vacancy despite plans to  conduct further testing because existing staff have successfully covered the workload  and a large portion of testing has already been completed.", "CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "CUSTOMS AND BORDER PROTECTION (CBP)", "The Biometric Entry-Exit Program is developing capabilities to enhance traveler  identification upon departure from the U.S. at air, land, and sea ports of entries by  collecting biometric data, such as fingerprints and facial recognition. The program plans  to match this data to biometric data obtained from travelers upon their arrival into the  U.S. to identify foreign nationals that stay in the U.S. beyond their authorized periods of  admission and verify the identities of travelers leaving the U.S.", "CBP completed four biometric  pilot programs and selected a  solution for development.", "DHS has explored biometric exit capabilities since 2009, but was directed to expedite implementation in March 2017.", "GAO last reported on this  program in February 2017 (GAO- 17-170).", "In June 2017, the Department of Homeland Security\u2019s (DHS) Under Secretary for Management (USM) granted the Biometric Entry-Exit Program acquisition decision event (ADE) 1 approval after CBP completed several pilot initiatives to study the feasibility of proposed biometric exit solutions at air and land ports of entry. The USM also authorized the program to continue testing a pilot exit solution at Hartsfield-Jackson Atlanta International Airport and conduct technology demonstrations as needed, but directed the program to achieve ADE 2A prior to deploying a solution to the 20 U.S. airports with the most international flights.", "CBP officials initially planned to achieve ADE 2A approval in September 2017\u2014the point at which the program would establish cost, schedule, and performance goals in a DHS-approved acquisition program baseline (APB)\u2014and pursue separate ADE 2B decisions to initiate development of a biometric solution for each type of port of entry, starting with air. As of December 2017, the program had yet to conduct its ADE 2A because CBP officials have had to resolve several issues identified by the Joint Requirements Council that has delayed approval of the program\u2019s operational requirements document (ORD). In January 2018, CBP officials said the program plans to conduct ADE 2A in February or March 2018 and is aiming for ADE 2B for the biometric air solution in December 2018.", "In December 2015, Congress established an account to be used for the development and implementation of the biometric entry-exit system starting in 2017. Specifically, Congress provided that half the amount collected from fee increases for certain visa applications from fiscal years 2016 through 2025\u2014up to $1 billion\u2014would be available to DHS until expended. In February 2017, DHS leadership approved the program to use about $73 million of this funding in fiscal year 2017 for information technology investments and programmatic and operational support, among other things. In September 2017, DHS\u2019s Chief Financial Officer approved the program\u2019s life-cycle cost estimate (LCCE), which CBP expects to refine as the program progresses to meet the fee-funding limit. According to CBP officials, the current funding structure poses challenges because the fees will fluctuate based on immigration rates.", "Customs and Border Protection (CBP)"], "subsections": []}, {"section_title": "Since 2015, CBP has conducted a series of biometric pilot programs intended to inform the acquisition of a biometric entry-exit system that included the following types of technologies: \u2022 Facial and iris scanning technology at an outdoor land border crossing. \u2022 Mobile fingerprint readers for flights departing the U.S. \u2022 Two facial recognition matching technologies that compared a real-time photo", "paragraphs": ["of a traveler to different sources\u2014one technology compared the photo to the traveler\u2019s passport upon entrance to the U.S.; the other technology compared the photo to a gallery of photos based on the outbound flight manifest during an airline\u2019s boarding process.", "According to CBP officials, the facial recognition technology that matched photos during an airline\u2019s boarding process was the most viable approach and served as the foundation for its development of the ADE 2A acquisition documents. Officials stated a similar approach may be feasible for land border crossings, but will require further planning.", "In January 2018, CBP officials stated they were developing a test and evaluation  master plan\u2014which will outline the developmental and operational test approach\u2014for  the biometric exit air solution. DHS\u2019s Director, Office of Test and Evaluation will need  to review and approve this plan prior to the program\u2019s ADE 2B.", "Since 1996, several federal statutes have required development of an entry and exit system for foreign nationals. DHS has been exploring biometric exit capabilities since 2009 and an Executive Order issued in March 2017 directed DHS to expedite the implementation of the biometric entry-exit system.", "The Biometric Entry-Exit Program plans to develop a capability to match a traveler\u2019s biometric data against data contained in existing DHS biometric data repositories\u2014 primarily the National Protection and Program Directorate\u2019s IDENT system. DHS is in the process of replacing and modernizing IDENT through the Homeland Advanced Recognition Technology (HART) program because IDENT is at risk of failure. However, HART has experienced delays, which could affect the Biometric Entry-Exit Program\u2019s development progress.", "For the air biometric solution, CBP plans to pursue a public/private partnership in which airlines and airports invest in the equipment to collect biometric data. According to CBP officials, this approach could reduce program costs and improve the passenger boarding process. In August 2017, CBP officials told GAO that several airlines have expressed interest in partnering with the program, including one that expanded CBP\u2019s pilot of facial recognition matching for outbound flights to additional gates at the Hartsfield-Jackson Atlanta International Airport.", "CBP officials reported a staffing gap of 14 full time equivalent staff which the program plans to fill once partnerships with airlines are established.", "CBP officials stated that authorized funds are collected from visa fee increases that expire in fiscal year 2025. Beyond 2025, officials stated that additional funding will need to be appropriated or the fee increases extended to continue the program. They added that fee collections are currently below forecasted levels and may come under the current $1 billion limit. CBP officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "CUSTOMS AND BORDER PROTECTION (CBP)", "The border wall system is intended to prevent the illegal entry of people, drugs, and other contraband by enhancing and adding to the 654 miles of existing barriers  along the U.S. southwest border. CBP plans to create a border enforcement zone  between a primary barrier\u2014such as a fence\u2014and a secondary barrier. To establish  the enforcement zone, the wall system may also include detection technology,  surveillance cameras, lighting, and roads for maintenance and patrolling.", "CBP has evaluated prototypes for new barrier designs, but risks with planned detection technologies exist.", "CBP is leveraging staff and the contracting strategy from prior border fencing programs.", "GAO last reported on the existing Southwest border barriers in February 2017 (GAO-17-331)."], "subsections": []}, {"section_title": "Not included", "paragraphs": ["In April 2017, Department of Homeland Security (DHS) leadership granted CBP permission to procure barrier prototypes to inform new design standards and approved the construction of the first segment of the wall system. CBP subsequently awarded 8 task orders with a total value of over $3 million for the development of prototypes and selected San Diego as the first segment. CBP plans to replace an existing 14 miles of primary and secondary barriers in San Diego. DHS plans to use fiscal year 2017 funding for the replacement of the primary barrier, which it plans to rebuild to existing design standards. DHS has requested funding for replacement of the secondary barrier beginning in fiscal year 2018 that it plans to rebuild to new design standards once established. DHS leadership plans to approve acquisition documentation\u2014including an acquisition program baseline (APB) and a life-cycle cost estimate (LCCE)\u2014for each segment to determine affordability prior to authorizing construction. However, CBP officials said they do not plan to develop an APB for the San Diego segment because DHS already approved construction.", "In January 2018, DHS leadership approved an APB establishing cost, schedule, and performance goals for a second segment in the Rio Grande Valley (RGV), which will extend an existing barrier by 60 miles. To inform leadership\u2019s decision, DHS headquarters conducted an independent cost estimate, which CBP adopted as the program\u2019s LCCE. The LCCE includes costs for both the San Diego and RGV segments. However, DHS officials stated that the amounts in the LCCE are not releasable until CBP evaluates the prototypes, determines, and designs a final solution for the San Diego secondary barrier, and updates the LCCE\u2014which is not expected to be complete until June 2018.", "The costs presented here are only for the RGV segment. CBP reported that construction of the RGV segment would be sufficiently funded if it receives $1.3 billion of acquisition funding in fiscal year 2018. However, CBP identified a shortfall in operations and maintenance (O&M) funding from fiscal years 2019 to 2022 that it  plans to cover with existing funding from the Tactical Infrastructure program, which  will be responsible for maintenance of the wall system as segments are complete.  If funded, the program expects to achieve full operational capability for the RGV  segment in March 2023.", "Customs and Border Protection (CBP)"], "subsections": []}, {"section_title": "In December 2017, CBP completed testing of 8 barrier prototypes\u20144 constructed from concrete and 4 from other materials\u2014which are intended to help refine the requirements and identify new design standards for barriers. CBP evaluated the prototypes in five areas: breachability, scalability, constructability, design, and aesthetics. CBP officials said the prototype evaluation results are not expected until February 2018.", "paragraphs": [], "subsections": []}, {"section_title": "The Science and Technology Directorate\u2019s Office of Systems Engineering completed a technical assessment on the program in November 2017, and identified risks related to the integration and operation of enforcement zone technologies\u2014 such as cameras and sensors\u2014which had not been clearly defined or planned for within the wall system. It made several recommendations, including that the program coordinate with an ongoing CBP study of land domain awareness capabilities, which DHS leadership directed CBP to conduct in October 2016 to inform a comprehensive border plan.", "paragraphs": ["The Border Wall System Program was initiated in response to an Executive Order issued in January 2017 stating that the executive branch is to secure the southern border through the immediate construction of a physical wall on the southern border of the U.S. To expedite the acquisition planning process, CBP officials said they leveraged expertise from staff that worked on previous border fencing programs and were familiar with implementation challenges, such as land access. CBP intends to prioritize segments based on threat levels, land ownership, and geography, among other things. From fiscal years 2007 to 2015, CBP spent approximately $2.3 billion to construct pedestrian and vehicle fencing along the southwest border. CBP\u2019s Tactical Infrastructure program is responsible for sustaining this fencing and other infrastructure\u2014such as gates, roads, and bridges\u2014 over its lifetime.", "CBP plans to continue coordinating with the U.S. Army Corps of Engineers (USACE) for engineering support and for awarding and oversight of construction contracts. CBP anticipates that all contract awards issued by USACE in support of the RGV segment will be firm fixed price. If appropriations are received, the program plans to award construction contracts for the first portion of RGV in May 2018 and for the secondary barrier in San Diego in August 2018.", "In February 2018, CBP officials stated that staffing the program office is a challenge because funding has not yet been received. CBP officials said that existing work for the program is being handled by current CBP staff.", "CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "INTEGRATED FIXED TOWERS (IFT)", "CUSTOMS AND BORDER PROTECTION (CBP)", "The IFT program helps the Border Patrol detect, track, identify, and classify illegal entries in remote areas. IFT consists of fixed surveillance tower systems equipped with ground surveillance radar, daylight and infrared cameras, and communications systems linking the towers to command and control centers. CBP plans to deliver or upgrade approximately 53 IFT systems across six areas of responsibility (AoR) in Arizona: Nogales, Douglas, Sonoita, Ajo, Tucson, and Casa Grande.", "System acceptance test completed in Douglas AoR and requirements were met.", "Program is adequately staffed, but simultaneous deployments in the future may have a negative impact.", "GAO last reported on this program in November and April 2017 (GAO-18-119, GAO-17-346SP).", "In December 2017, CBP declared a schedule breach of the IFT program\u2019s current acquisition program baseline (APB) because the program did not receive the funding needed to complete planned deployments on time to achieve its full operational capability (FOC) date of September 2020. The program\u2019s FOC date previously slipped 5 years because of delays in the initial contract award process and funding shortfalls.", "CBP completed IFT deployments to the Douglas AoR in June 2017 and anticipates completing deployments to the Sonoita AoR in December 2017, as scheduled. However, in September 2017, CBP officials stated that they requested\u2014but did not receive\u2014additional funding from the Department of Homeland Security (DHS) to address new IFT requirements, including camera upgrades and replacement of existing tower systems deployed under a legacy program. In January 2015, Border Patrol requested the program prioritize replacement of the legacy systems in the Tucson and Ajo AoRs because the technology was obsolete and more expensive to maintain than the IFT technology planned for deployment in other AoRs. Without additional funding, CBP officials stated that they would be unable to exercise the contract options for the remaining AoRs on time.", "In June 2017, the program updated its life-cycle cost estimate (LCCE), which is slightly less than its current APB cost thresholds. This LCCE update includes estimated costs for the new requirements. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. CBP identified $8 million in acquisition carryover funding for fiscal year 2018 and officials anticipate receiving $126 million in O&M funding to cover $100 million in O&M costs over the next 5 years.", "The program plans to submit a revised APB to DHS leadership by June 2018. However, the FOC date may be further delayed because of land access issues. CBP officials told GAO that they have not yet reached an agreement with the Tohono O\u2019odham Nation\u2014a sovereign Native American Nation\u2014to access tribal lands, which these officials said is necessary for the construction of IFTs in the Ajo and Casa Grande AoRs.", "10/15 Initial operational  capability (Nogales)", "Customs and Border Protection (CBP)", "INTEGRATED FIXED TOWERS (IFT)"], "subsections": []}, {"section_title": "Border Patrol certified IFT capabilities met operational requirements in March 2016, but added conditions including that the program seek improvements to optimize video capability. In response, the program plans to install an upgraded high definition camera suite starting with the Sonoita AoR. However, the program has not received funding to complete these upgrades.", "paragraphs": ["When CBP initiated the IFT program, it decided to procure a non-developmental system, and it required that prospective contractors demonstrate their systems prior to CBP awarding the contract. The program awarded the contract to EFW, Inc. in February 2014, but the award was protested. GAO sustained the protest and CBP had to reevaluate the offerors\u2019 proposals before it again decided to award the contract to EFW, Inc. As a result, EFW, Inc. could not initiate work at the deployment sites until fiscal year 2015.", "According to CBP officials, the number of IFT systems deployed to a single AoR is subject to change based on assessments by the Border Patrol. DHS leadership directed CBP to develop a comprehensive border plan in October 2016 that includes IFT capabilities and\u2014when preparing for the last budget cycle\u2014the program estimated costs for expansion to the southwest border beginning in fiscal year 2019.", "In September 2017, CBP officials told GAO that they did not have any current staffing gaps. However, CBP officials added that if the program receives full funding and reaches an agreement with the Tohono O\u2019odham Nation to initiate IFT deployments to the Ajo and Casa Grande AoRs, while concurrently deploying capability to the Sonoita and Tucson sectors, they will be short on government and contracted staff.", "CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "MEDIUM LIFT HELICOPTER (UH-60)", "CUSTOMS AND BORDER PROTECTION (CBP)", "UH-60 is a medium-lift helicopter that CBP uses for law enforcement and border security operations, air and mobility support and transport, search and rescue, and other missions. CBP\u2019s UH-60 fleet consists of 20 aircraft acquired from the U.S. Army in three different models. CBP previously acquired 4 modern UH-60M aircraft and converted 6 of its older 16 UH-60A aircraft into more capable UH-60L models. CBP is replacing the remaining 10 UH-60A with reconfigured Army HH-60L aircraft.", "CBP test agent and the Army completed testing of reconfigured HH-60L prototype.", "CBP has initiated efforts to acquire additional converted HH-60L aircraft from the  Army.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "The program breached the cost and schedule goals in its acquisition program baseline (APB) and, as of December 2017, CBP officials stated they were in the process of developing the breach notification required under the Department of Homeland Security\u2019s (DHS) acquisition policy.", "In its annual life-cycle cost estimate (LCCE) update, the program shifted some operations and maintenance (O&M) costs to acquisitions to be consistent with DHS\u2019s new appropriation structure. For example, the program shifted costs for recurring upgrades from O&M to acquisition because these upgrades require development and production. As a result, the program\u2019s updated acquisition cost estimate exceeded the APB acquisition cost threshold, which constitutes a cost breach under DHS\u2019s acquisition policy. CBP officials stated that they did not initially declare a cost breach because the program\u2019s total LCCE was within the APB threshold.", "The program also did not hold its acquisition decision event (ADE) 3 by the APB deadline of September 2017. The ADE 3 is intended to approve the transfer of CBP\u2019s remaining UH-60A aircraft for reconfigured Army HH60-L aircraft based on an evaluation of a reconfigured prototype. According to CBP officials, the program did not complete the required acquisition documentation by the ADE 3 deadline, in part, because DHS leadership directed CBP to develop a comprehensive border plan in October 2016 that includes UH-60 capabilities. It is unclear when the ADE 3 will occur because, as of December 2017, several documents were pending validation by the Joint Requirements Council.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained O&M funding for individual programs. In addition, CBP officials previously told GAO that UH-60 O&M is funded through a separate, central funding account for all of CBP\u2019s air and marine assets. CBP officials stated that the projected acquisition funding gap in fiscal years 2019 and 2020 is primarily for replacing obsolete parts that were previously considered O&M. According to these officials, the Army conducts an annual obsolescence study that will help CBP identify and prioritize replacements across the UH-60 fleet based on available funding levels.", "Customs and Border Protection (CBP)", "MEDIUM LIFT HELICOPTER (UH-60)"], "subsections": []}, {"section_title": "CBP determined that the converted UH-60L and UH-60M aircraft met all five of the program\u2019s key performance parameters (KPP) through operational test and evaluation (OT&E) conducted in fiscal years 2012 and 2014. However, DHS\u2019s Director, Office of Test and Evaluation (DOT&E) did not validate these results because UH-60 was not considered a major acquisition when the tests were conducted.", "paragraphs": [], "subsections": []}, {"section_title": "In January 2016, DHS leadership directed the program to conduct acceptance functional flight checks\u2014which consist of component- and system-level tests\u2014on at least one reconfigured HH-60L prototype prior to receiving approval to proceed with the remaining transfers. According to CBP officials, the program\u2019s OTA and the Army successfully conducted the functional flight check and additional testing in October 2017. DOT&E plans to review the flight test data in support of the program\u2019s ADE 3.", "paragraphs": [], "subsections": []}, {"section_title": "CBP does not plan to conduct formal operational test and evaluation on the reconfigured UH-60L because, according to CBP officials, the reconfigured HH-60L has minimal differences from the UH-60L aircraft previously tested. CBP officials also stated that the program has been able to leverage Army test data, which reduces the risk and testing costs associated with the program. These officials noted that CBP pilots will perform additional inspections prior to accepting the aircraft, which is now anticipated to occur in January 2018\u2014up to 5 months earlier than the APB threshold date.", "paragraphs": ["CBP previously acquired UH-60 as a part of its Strategic Air and Marine Program (StAMP). In July 2016, DHS leadership designated UH-60 as a separate and distinct major acquisition program.", "CBP initially planned to convert all 16 of its UH-60A aircraft into UH-60L models, but changed its strategy once it learned the Army planned to divest several HH-60L aircraft that could more easily be converted into UH-60L aircraft for CBP missions. CBP officials anticipated the new strategy could reduce the program\u2019s costs by an estimated $70 million, accelerate its schedule, and result in newer aircraft since the Army\u2019s HH-60L airframes had fewer operating hours than CBP\u2019s existing UH-60A aircraft. In September 2017, CBP officials told GAO they had initiated efforts to acquire additional HH-60L aircraft by conducting a study of current capability gaps and drafting a mission need statement.", "As of September 2017, program officials confirmed that they maintain a consolidated program office where the same staff from StAMP continue to support all remaining acquisitions, including the UH-60. However, these officials stated that they plan to  realign staff to a dedicated asset over time. Program officials also stated that the program has hired a dedicated cost estimator and would like to hire additional staff to focus on procuring spare parts and common component issues, such as radio replacements, for CBP\u2019s air and marine assets.", "CBP officials reiterated that the changes in acquisition costs were primarily a result of cost realignment and that the program\u2019s total life-cycle cost is still within the initial APB LCCE goals. CBP officials also stated that\u2014to supplement Army test data\u2014the program\u2019s OTA participated in the flight tests and will provide a formal report on the results.", "MULTI-ROLE ENFORCEMENT AIRCRAFT (MEA)", "CUSTOMS AND BORDER PROTECTION (CBP)", "MEA are fixed-wing, multi-engine aircraft that can be configured to perform multiple missions including maritime, air, and land interdiction, as well as signals detection to support law enforcement. The current MEA configuration is equipped with marine search radar and an electro-optical/infrared sensor to support maritime and land surveillance and airborne tracking missions. MEA will replace CBP\u2019s fleet of aging C-12, PA-42, and BE-20 aircraft.", "Testing of new configuration planned for May 2018, but requirements not yet defined.", "Began retrofitting accepted MEA with new mission system in fiscal year 2017.", "GAO last reported on this  program in April 2017 (GAO-17- 346SP).", "According to CBP officials, the program is on track to meet the cost and schedule goals in its current acquisition program baseline (APB) for 16 maritime interdiction MEA and is actively pursuing additional aircraft.", "In April 2016, CBP developed a report that identified capability needs in three mission areas and proposed increasing the program\u2019s total to 38 aircraft by adding 13 air and 6 land interdiction MEA, and 3 signals detection MEA. The Joint Requirements Council endorsed CBP\u2019s findings, but recommended CBP develop a number of requirements documents\u2014including an operational requirements document\u2014to fully validate the findings. As of September 2017, CBP officials told GAO they were in the process of updating these documents to focus on air interdiction capabilities\u2014the next MEA configuration. These officials stated that completing these documents has been delayed, in part, because Department of Homeland Security (DHS) leadership directed CBP to develop a comprehensive border plan in October 2016 that includes MEA capabilities.", "Despite not yet completing all the updated documents, DHS leadership approved CBP\u2019s request to procure MEA 17 in September 2017 after the congressional conferees agreed to an additional aircraft beyond DHS\u2019s budget request. CBP anticipates delivery of MEA 17 by September 2018, which is within the program\u2019s full operational capability (FOC) date. However, if the program receives approval to acquire additional aircraft, the FOC date will be extended.", "The program completed an annual life-cycle cost estimate update, which exceeds the program\u2019s current APB cost thresholds, because it reflects costs for all 38 aircraft, among other reasons. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. In addition, CBP officials previously told GAO that MEA\u2019s O&M is funded through a separate, central funding account for all of CBP\u2019s air and marine assets. In September 2017, CBP officials said that the program was fully funded for 17 aircraft but had some affordability challenges with spare parts, which they are working with CBP and DHS headquarters to address.", "Customs and Border Protection (CBP)", "MULTI-ROLE ENFORCEMENT AIRCRAFT (MEA)"], "subsections": []}, {"section_title": "The MEA program has met all five of its key performance parameters (KPP) for the maritime interdiction configuration and plans to establish additional KPPs for future MEA configurations.", "paragraphs": ["CBP is replacing the mission system processor on the MEA with a system used by the U.S. Navy and U.S. Coast Guard that is intended to enhance operator interface and sensor management, as well as replace obsolete equipment. CBP\u2019s OTA tested a prototype of the processor during an operational assessment in July 2015. The OTA found that the MEA had resolved issues found during prior testing, but also made 29 additional recommendations and findings to improve the aircraft and new mission system\u2019s effectiveness. DHS\u2019s Director, Office of Test and Evaluation (DOT&E) concurred with the OTA\u2019s findings."], "subsections": []}, {"section_title": "The program plans to begin testing MEA air interdiction capabilities in May 2018. According to CBP officials, the only difference between the maritime and air interdiction configurations is the radar software. The program initially planned to modify and test the new configuration prior to delivery, but CBP officials stated they now plan to do so after delivery to reduce risk by allowing more time for development of the air-to-air radar software. DHS\u2019s DOT&E plans to review the test plan for the air interdiction configuration. However, completing development before finalizing KPPs for the new configuration increases the risk that the aircraft will not meet operator\u2019s requirements.", "paragraphs": ["CBP previously acquired MEA as a part of its Strategic Air and Marine Program (StAMP). In July 2016, DHS leadership designated MEA as a separate and distinct major acquisition program.", "CBP initially planned to procure 50 MEA and awarded the first production contract in September 2009. However, the aircraft did not perform well during testing. In October 2014, DHS leadership said CBP could not procure or accept transfer of additional MEA without approval. CBP procured 12 aircraft under the initial contract and\u2014with DHS approval\u2014CBP awarded a new indefinite delivery, indefinite quantity contract in September 2016 for 1 base year and four 1-year options to support procurement of additional aircraft. In December 2017, CBP officials said the program had received 12 aircraft and awarded contracts for 5 more. According to program officials, MEA 13-16 will be delivered with the new mission system and CBP began retrofitting previously delivered aircraft in fiscal year 2017.", "As of September 2017, program officials confirmed that they maintain a consolidated program office where the same staff from StAMP continue to support all remaining acquisitions, including MEA. However, these officials stated that they plan to re-align staff to a dedicated asset over time. Program officials also stated that the program has hired a dedicated cost estimator and would like to hire additional staff to focus on procuring spare parts and common component issues, such as radio replacements, for CBP\u2019s air and marine assets.", "CBP officials stated that delays in receiving approval of the program\u2019s requirements documents may pose a risk to exercising options for additional MEA on an existing contract, which could stop production and increase contract costs associated with procuring future aircraft. CBP officials added that air and marine requirements officers continue to produce documentation requested by the Joint Requirements Council to provide sufficient context for the mission need and border security. CBP officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "CUSTOMS AND BORDER PROTECTION (CBP)", "The NII Systems Program supports CBP\u2019s interdiction of weapons of mass destruction, contraband such as narcotics, and illegal aliens being smuggled into the United States, while facilitating the flow of legitimate commerce. CBP officers use large- and small-scale NII systems at air, sea, and land ports of entry; border checkpoints; and international mail facilities to examine the contents of containers, railcars, vehicles, baggage, and mail.", "CBP initiated efforts for  future NII requirements and  procurements.", "66 percent staffing gap  contributed to delays in NII  deployments.", "GAO last reported on this  program in April 2017   (GAO-17-346SP).", "The NII Systems Program is on track to meet its approved schedule and cost goals.", "The estimates in the program\u2019s annual life-cycle cost estimate (LCCE) update continued to decrease overall compared to its approved acquisition program baseline (APB) cost thresholds. Specifically, compared to the prior year\u2019s estimate, the program\u2019s acquisition costs decreased by $96 million and operations and maintenance (O&M) costs increased by $22 million. However, the LCCE update only estimated costs through fiscal year 2026\u20149 years short of the program\u2019s final year.", "The LCCE primarily decreased because of a reduction of 1,977 planned additional and replacement NII systems. CBP officials said fewer large- and small-scale systems are needed because some systems have longer estimated lives than expected, and systems procured have better capability. CBP officials do not anticipate that the reduction in quantities will have an adverse effect on operations because they stated that the new systems can provide dual purpose capabilities (i.e., one system can replace multiple separate systems).", "The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained O&M funding for individual programs. CBP officials anticipate receiving approximately $605 million of O&M funding over this 5-year period to cover about $626 million in estimated O&M costs, which includes $100 million to operate and maintain radiation detection equipment acquired by the Domestic Nuclear Detection Office. These officials also identified $37 million in carryover funding to cover the remaining $21 million of O&M estimated costs.", "However, the program is projected to have a $266 million acquisition funding gap from fiscal years 2018 to 2022.The program has a plan to address funding shortfalls but, according to CBP officials, it has not yet needed to implement the strategies in this plan because of several factors, including cost reductions achieved through combined life-cycle contracts and lower-than-expected actual technology costs in fiscal year 2016.", "Customs and Border Protection (CBP)"], "subsections": []}, {"section_title": "NII systems are commercial-off-the-shelf products, and for this reason, DHS leadership decided that the NII Systems Program does not need a test and evaluation master plan. However, the program continues to test NII systems to inform future acquisitions. For example, in calendar years 2017 and 2018, CBP officials told us they plan to conduct demonstrations and testing activities on the following type of technology: \u2022 Two NII systems\u2014one mobile, one fixed\u2014that are designed to examine moving vehicles for contraband. \u2022 Mobile systems that use high dose X-ray imaging to inspect stationary cargo vehicles at ports-of-entry. \u2022 Multi-energy portals that use different levels of X-ray imaging to inspect cargo", "paragraphs": ["trucks as they are driven through the inspection portals\u2014low dose X-ray to inspect the truck cab and high dose X-ray to inspect the cargo trailer.", "In March 2017, the Joint Requirements Council validated a capability analysis report that assessed current capability gaps in NII operations to assist with identifying potential upgrades to existing systems and developing requirements for future systems. According to program officials, CBP plans to review and update, as necessary, the mission need statement in fiscal year 2018. Additionally, program officials are preparing a consolidated acquisition plan for future procurements. These officials said CBP has not yet determined whether future procurements would be included into the current NII Systems Program of record or constitute a new acquisition program.", "CBP\u2019s ability to successfully execute the existing NII Systems Program and plan for future efforts may be at risk because of understaffing. As of January 2018, the NII Systems Program continued to face a staffing gap of approximately 66 percent, including critical vacancies such as the acquisition program manager and a logistics program manager. Officials also noted that a lack of adequate personnel to procure, test, and deploy NII systems forces the program to prioritize its acquisitions, which can result in delays of NII deployments and testing efforts. For example, one manufacturer increased its output rate of NII systems, but the program did not have the staff to accept the systems at the increased rate. Officials anticipate the program may remain understaffed until CBP completes a reorganization that started more than a year ago, in which acquisition programs are realigned from a mission-support office to their operational entity.", "CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "REMOTE VIDEO SURVEILLANCE SYSTEM (RVSS)", "CUSTOMS AND BORDER PROTECTION (CBP)", "The RVSS program helps the Border Patrol detect, track, identify and classify illegal entries across U.S borders. RVSS consists of daylight and infrared video cameras mounted on fixed towers and buildings with communications systems that link to command and control centers. From 1995 to 2005, CBP deployed approximately 310 RVSS towers along the U.S. northern and southern borders, and initiated efforts to upgrade legacy RVSS towers in Arizona in 2011.", "Program does not plan to conduct additional operational testing on future deployments.", "Once funded, program plans to award a new contract for deployments in sectors along the southwest border.", "GAO last reported on this program in November 2017 (GAO-18-119).", "In April 2016, Department of Homeland Security (DHS) leadership elevated RVSS from a level 3 program\u2014which focused on upgrading legacy RVSS in Arizona\u2014to a level 1 program after approving CBP\u2019s plan to expand deployments to the Rio Grande Valley (RGV) sector and adding an additional 6 sectors along the southwest border. At this time, DHS leadership approved the program to move forward with deployments to two RGV stations, which can be completed as options under the program\u2019s existing contract. However, the program was required to re-baseline to account for its expanded scope and conduct an acquisition decision event (ADE) to obtain approval for additional deployments.", "As of January 2018, the program had not yet conducted its ADE or obtained DHS approval for an acquisition program baseline (APB) that established cost, schedule, and performance goals for the expanded program. In September 2017, CBP officials told us that they had drafted the APB and other required documentation, such as a life-cycle cost estimate (LCCE), but were unsure when the ADE would occur because the program had not received funding for the additional deployments. In addition, the ADE may have been delayed because DHS leadership directed CBP to develop a comprehensive border plan in October 2016 that includes RVSS capabilities.", "In September 2017, DHS leadership approved the RVSS\u2019s revised LCCE which totaled nearly $4 billion for all program costs from fiscal years 2011 through 2042, including expansion along the southwest border and new initiatives such as a pilot for relocatable RVSS towers. DHS conducted an independent cost estimate for the program, which DHS cost estimating officials stated was within 2 percent of the program\u2019s LCCE.", "RVSS was not included in DHS\u2019s funding plan to Congress for fiscal years 2018 to  2022 because it had not yet been elevated to a level 1 program at the time the plan  was developed. CBP officials stated that the program has received acquisition funding  to cover the approved RGV deployments. However, CBP officials told GAO that the program may also assume responsibility for maintaining all legacy RVSS, but has not received adequate operations and maintenance funding to do so.", "Customs and Border Protection (CBP)", "REMOTE VIDEO SURVEILLANCE SYSTEM (RVSS)"], "subsections": []}, {"section_title": "CBP officials said the RVSS program initiated a pilot of relocatable RVSS towers in the RGV sector. The program plans to assess the results of the pilot by March 2018.", "paragraphs": ["In July 2013, CBP awarded a firm fixed-price contract for a commercially available, non-developmental system. This contract covered the program\u2019s initial scope to deploy upgraded RVSS in Arizona and two stations within the RGV sector, which can be completed as options. According to CBP officials, the program will need to award a new contract to cover expansion to the remaining six sectors along the southwest border. In September 2017, CBP officials said that the request for proposals for the new contract had been drafted but it cannot be released until the program receives funding.", "CBP officials told GAO that RVSS is coordinating with CBP\u2019s Border Wall System Program on some planned deployments within the RGV sector. For example, CBP is considering moving 2 of the planned RVSS towers to be co-located with the planned barrier, which officials stated may provide better surveillance. If the Border Wall System Program does not receive funding, CBP officials said the towers will be placed in the originally planned locations.", "CBP officials stated that the RVSS program requires additional staff for contracting activities, maintenance activities for legacy RVSS, and for relocatable tower pilot deployments. To mitigate the staffing gap, CBP officials said they prioritize responsibilities of current personnel to meet program execution needs.", "CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "CUSTOMS AND BORDER PROTECTION (CBP)", "The TACCOM program is intended to upgrade land mobile radio infrastructure and equipment to support approximately 95,000 users at CBP and other federal agencies. It is replacing obsolete radio systems with modern digital systems across various sectors located in 19 different service areas, linking these service areas to one another through a nationwide network, and building new communications towers to expand coverage in 5 of the 19 service areas.", "Issues related to security requirements have delayed full operational capability by more than a year.", "Program is being re-organized under Border Patrol, but still faces staffing challenges.", "GAO last reported on this program in April 2017 (GAO-17-346SP)."], "subsections": []}, {"section_title": "Not included", "paragraphs": ["In November 2017, Department of Homeland Security (DHS) leadership re-baselined the TACCOM program, removing it from breach status after the program experienced a schedule slip and cost growth. In July 2017, CBP officials notified DHS leadership that the program would not achieve full operational capability (FOC) as planned due to issues related to federal information security requirements. The program now plans to achieve FOC by March 2019\u2014more than a year later than its initial acquisition program baseline (APB) deadline. According to CBP officials, FOC will include planned upgrades to the San Diego system, which requires transitioning management of the legacy system from the Department of Justice to DHS. In August 2017, CBP officials stated that both agencies were reviewing an agreement with plans to complete the transition in fiscal year 2018.", "CBP officials stated that the program realized it would exceed its initial APB cost thresholds as it was developing its annual life-cycle cost estimate (LCCE) update and subsequently submitted a revised LCCE for DHS leadership approval. The program\u2019s costs primarily grew because of increases in costs for contractor labor and support for facilities and infrastructure. CBP officials said the program\u2019s initial estimates were immature; however, DHS leadership approved the initial LCCE in December 2015\u20144 years after the program began sustaining capabilities.", "DHS\u2019s Chief Financial Officer (CFO) approved the program\u2019s revised LCCE in November 2017, but noted that the program\u2019s estimate exceeded its available funding and requested that the program address the affordability gap before it was re-baselined. CBP officials said that they are conducting an affordability analysis, which they anticipate will be completed by March 2018. Nevertheless, DHS leadership approved the program\u2019s re-baseline in November 2017. CBP officials subsequently identified errors in the approved APB cost threshold tables and provided revised amounts, which are presented here.", "The program was not included in DHS\u2019s funding plan to Congress for fiscal years 2018 to 2022 because DHS did not report operations and maintenance (O&M) funding for individual programs. CBP officials anticipate receiving approximately $120 million in O&M funding over this 5-year period.", "Customs and Border Protection (CBP)"], "subsections": []}, {"section_title": "In July 2017, an analysis of the program\u2019s operations showed that the program was meeting mission needs, but technical issues and vulnerabilities could cause schedule delays. That same month, the program declared a schedule breach because of issues related to federal information security requirements. The TACCOM program first identified these issues in February 2016, but efforts to address them within the established APB schedule were unsuccessful. CBP officials said that, since the program\u2019s inception, they have held weekly and quarterly meetings with the vendor to identify and address any issues and that they anticipate the vendor will address all remaining issues by March 2018. They added that both the vendor and CBP will conduct security scanning and acceptance testing after deployment to each sector; however, the program does not have plans for future operational testing.", "paragraphs": ["CBP officials told GAO that in January 2018, the program will move from a mission  support office to a joint program office under Border Patrol as a part of CBP\u2019s reorganization that started more than a year ago. The goal of this move is to make CBP land mobile radio capabilities seamless by combining the mission critical voice functions of Air and Marine Operations, the Border Patrol, and the Office of Field Operations\u2014the TACCOM program\u2019s primary customers\u2014under one organizational leader, the Border Patrol Chief.", "CBP officials anticipate that the current TACCOM program structure will remain in place after this move with the exception of the program\u2019s engineers, which will move to CBP\u2019s Office of Information and Technology but be assigned to support TACCOM full time. In August 2017, CBP officials told GAO they were in the process of hiring staff to fill the program\u2019s vacant positions. They added that the fiscal year 2019 budget contains plans for additional infrastructure enhancements, which will require technical staff to assist in the planning and execution of these efforts and may put additional strain on the program\u2019s limited government technical staff. They noted that the hiring and retention of qualified land mobile radio engineers and information technology technical staff is a challenge because of competition with the private sector, among other factors.", "In addition to maintenance of the CBP Land Mobile Radio System that provides critical communication needs for CBP agents and officers protecting U.S. borders, CBP officials stated the TACCOM program is providing infrastructure, such as building an engineering lab to facilitate design, development, test, and evaluation activities, to support improvements in CBP\u2019s current and future Land Mobile Radio Systems. CBP officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "CUSTOMS AND BORDER PROTECTION (CBP)", "TECS (not an acronym) is a law-enforcement information system that has been in place since the 1980s and helps CBP officials determine the admissibility of persons entering the United States at border crossings, ports of entry, and  prescreening sites located abroad. CBP initiated efforts to modernize TECS to provide users with enhanced capabilities for accessing and managing data. Immigration and Customs Enforcement has a separate TECS Modernization program.", "System operationally effective and suitable, but cybersecurity testing needed.", "CBP working to address and prevent major system outages.", "GAO last reported on this  program in April 2017   (GAO-17-346SP).", "In July 2017, Department of Homeland Security (DHS) leadership granted the program  acquisition decision event (ADE) 3 approval, but required CBP to conduct follow-on  operational test and evaluation (OT&E) before declaring full operational capability  (FOC). This is more than a 2-year delay from CBP\u2019s initial FOC date and a 9-month  delay from its most recent revised FOC date. DHS approved the fourth version of the  program\u2019s acquisition program baseline (APB) in July 2016. In this APB, CBP split FOC  into two separate operational capability milestones at its data centers to better reflect  the program\u2019s activities.", "CBP delivered operational capability at the primary data center in Decemberas scheduled\u2014which provides redundant TECS access to minimize downtime during system maintenance or unscheduled outages. However, not all test results were available in time for the program\u2019s ADE 3 decision, which contributed to DHS leadership\u2019s decision to delay declaring FOC.  2016, which included transitioning all TECS users to the modernized system.", "CBP delivered operational capability at the secondary data center in June 2017\u2014The program updated its life-cycle cost estimate (LCCE) for ADE 3, which is within its  current APB cost thresholds. However, the LCCE only included costs through fiscal year  2021\u20147 years short of DHS\u2019s guidance that states program cost estimates should  cover at least 10 years from the FOC date. Nevertheless, DHS granted the program ADE  3 approval without an understanding of the program\u2019s full life-cycle costs, as required  by its acquisition policy. CBP officials plan to update the LCCE by the end of calendar  year 2018 to include costs for future years and other items, such as costs associated  with follow-on OT&E and moving the data centers to a cloud environment\u2014a CBP-wide  initiative.", "The program was not included in DHS\u2019s funding plan to Congress for fiscal years 2018  to 2022 because DHS did not report operations and maintenance (O&M) funding for  individual programs. CBP officials anticipate receiving approximately $205 million  in O&M funding over the next 4 years and have identified carryover for each year.  However, CBP officials said there may be a small funding gap starting in fiscal year  2020, but they expect to achieve savings by migrating the data centers to a cloud  environment.", "Customs and Border Protection (CBP)"], "subsections": []}, {"section_title": "In July 2017, DHS\u2019s Director, Office of Test and Evaluation (DOT&E) determined that the modernized TECS system was operationally effective and operationally suitable, but that the tests were not adequate to assess operational cybersecurity. The test results validated that the program had met all eight of its key performance parameters (KPP), but the test team identified several deficiencies related to mission support and CBP users identified operational considerations for system or process improvements. DOT&E recommended that CBP conduct a threat assessment, threat- based cybersecurity operational testing, and follow-on OT&E to reassess known deficiencies and user operational considerations. In August 2017, DHS leadership directed CBP to complete these actions by the end of February 2018.", "paragraphs": [], "subsections": []}, {"section_title": "In January 2018, CBP officials stated that they continue to work with the OTA to address the deficiencies and develop a plan for follow-on OT&E. They noted that completion of this plan is dependent on the scope for cybersecurity testing and they are working with DOT&E to define the scope since the requirements have been evolving. CBP officials also stated that they monitor the program\u2019s KPPs monthly and plan to conduct monthly tests and quarterly maintenance checks to ensure operational functionality is maintained at both data centers.", "paragraphs": ["Since the program has completed development, CBP is focused on ensuring that the modernized TECS system works as intended by addressing operational issues as they are identified. For example, on January 2, 2017, a primary TECS Modernization application experienced a major outage that resulted in long airport delays. In August 2017, CBP officials said they continually monitor system health through a 24/7 operations center and have established a group dedicated to addressing the issues related to the January 2, 2017, outage.", "In September 2017, DHS\u2019s Office of Inspector General (OIG) found that nearly 100 outages, periods of latency, or degraded service were reported for three TECS Modernization applications between June 2016 and March 2017. The OIG also found that CBP\u2019s monthly reports on TECS system availability did not include periods of slowness or service interruptions that were caused by external factors. For example, the January 2, 2017, incident was identified in CBP outage reports, but was not captured in the monthly report because it was caused by a change to an external feed to the TECS system. CBP officials clarified that the monthly reports only account for interruptions that result in a full loss of operations for all TECS system users. The OIG recommended that CBP develop a plan to address factors that contributed to challenges regarding availability of primary traveler screening applications, among other things. CBP concurred with the recommendations.", "On January 1, 2018, the TECS system experienced another major outage that caused long airport delays; CBP officials said this incident is under review.", "CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "LOGISTICS SUPPLY CHAIN MANAGEMENT SYSTEM  (LSCMS)", "FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA)", "LSCMS is a computer-based tracking system that FEMA officials use to track shipments during disaster-response efforts. It is largely based on commercial-off-the- shelf software. FEMA initially deployed LSCMS in 2005, and initiated efforts to enhance the system in 2009. According to FEMA officials, LSCMS can identify when a shipment leaves a warehouse and the location of a shipment after it reaches a FEMA staging area near a disaster location.", "FEMA now anticipates reaching full operational capability by June 2019, up to 6 months late.", "Recent testing shows progress, but additional operational testing delayed to May 2018.", "GAO last reported on this  program in April 2017  (GAO-17-346SP)."], "subsections": []}, {"section_title": "Not included", "paragraphs": ["In November 2017, Department of Homeland Security (DHS) leadership approved a revised acquisition program baseline (APB) after the LSCMS program experienced a schedule breach. In September 2017, FEMA officials notified DHS leadership that it would not complete all required activities\u2014including follow-on operational test and evaluation (OT&E)\u2014to achieve acquisition decision event (ADE) 3 and full operational capability (FOC) by its initial APB dates of September 2018 and December 2018, respectively. According to FEMA officials, the delay was primarily caused by the need to deploy LSCMS program personnel in support of response and recovery efforts during the 2017 hurricane season. The program now plans to achieve FOC by June  2019\u2014up to 6 months later than initially planned.", "DHS leadership authorized LSCMS to resume all development and acquisition efforts in March 2016 after a nearly 2-year program pause following program management issues. In October 2017, FEMA officials told GAO that they had completed several development efforts\u2014such as integration with DHS\u2019s asset management system\u2014and were in the process of adding Electronic Data Interchange (EDI) to allow LSCMS to interface with its partners\u2019 information systems.", "The program\u2019s annual life-cycle cost estimate (LCCE) update continued to be within its APB cost thresholds. However, the program\u2019s APB thresholds are not adjusted to account for risk, which increases the chance that the program could experience a cost breach. As of November 2017, FEMA officials did not anticipate that its schedule delays would lead to a cost breach.", "Federal Emergency Management Agency (FEMA) LOGISTICS SUPPLY CHAIN MANAGEMENT SYSTEM (LSCMS)"], "subsections": []}, {"section_title": "All seven of the KPPs will be assessed as part of follow-on OT&E, which has been delayed from January 2018 as a part of the schedule breach. FEMA officials reported that they now plan to complete follow-on OT&E by May 2018, once the addition of EDI is complete.", "paragraphs": ["The LSCMS program previously experienced significant execution challenges because of poor governance. FEMA initially deployed the enhanced LSCMS in 2013 without DHS leadership approval, a DOT&E letter of assessment, or a DHS-approved APB documenting the program\u2019s costs, schedule, and performance parameters, as required by DHS\u2019s acquisition policy. DHS\u2019s Office of Inspector General also found that neither DHS nor FEMA leadership ensured the program office identified all mission needs before selecting a solution. In response, DHS leadership paused all LSCMS development efforts in April 2014 until the program addressed these issues, among others. FEMA subsequently completed an analysis of alternatives and developed an APB based on this assessment. DHS leadership approved the APB in December 2015 and authorized FEMA to resume all LSCMS development and acquisition efforts in March 2016.", "In October 2017, FEMA officials told GAO that the LSCMS program had minimal staffing shortages and was working to recruit additional staff. Officials previously attributed the program\u2019s governance and testing challenges, in part, to staffing shortages and we previously found that it only had 7 of the 22.5 full time equivalents it needed in fiscal year 2014. Although the program has obtained more staff since then, FEMA officials noted in October 2017 that during disasters\u2014such as 2017 hurricanes Harvey, Irma, and Maria\u2014LSCMS program personnel are deployed to support response and recovery efforts, which leave program positions vacant for the duration of the deployment.", "FEMA officials stated that during the response to hurricanes Harvey, Irma and Maria in 2017, LSCMS processed supply chain transactions that exceeded the total number of transactions from the preceding 12 years\u2014which includes the response to Hurricane Katrina. They added that the program provided support for nearly 130 million meals in 2017 compared to a total of approximately 84 million from the 12 previous years. FEMA officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "IMMIGRATION AND CUSTOMS ENFORCEMENT (ICE)", "Since the 1980s, TECS (not an acronym) has provided case management, intelligence reporting, and information sharing capabilities to support ICE\u2019s mission to investigate and enforce border control, customs, and immigration laws. ICE initiated efforts to modernize TECS in 2009 to replace aging functionality and provide end users with additional functionality to meet mission needs. Customs and Border Protection (CBP) executes a separate TECS Modernization program.", "Conducted additional testing of a revised key performance parameter and cybersecurity.", "Program has improved integration with external systems.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "In November 2017, Department of Homeland Security (DHS) leadership approved a revised life-cycle cost estimate (LCCE) and acquisition program baseline (APB) in preparation for the program\u2019s acquisition decision event (ADE) 3 following deployment of final functionality. According to ICE officials, the program completed deployment of full operational capability (FOC) functionality in August 2017\u20144 months earlier than initially planned. FOC functionality included enhancements to case management capabilities, such as improved system search capabilities. The functionality was deployed in conjunction with enhancements and fixes for initial operational capability (IOC) functionality. The program achieved IOC in June 2016, which entailed delivering 80 percent of the modernized TECS functionality and successfully transitioning ICE off the legacy system.", "The overall cost thresholds in the current APB increased compared to the program\u2019s prior APB from July 2016. Specifically, the acquisition cost threshold decreased by $14 million and the operations and maintenance (O&M) cost threshold increased by $147 million. These costs changed for various reasons, such as the following:", "The acquisition cost threshold decreased when ICE included actual costs  through fiscal year 2016 and accounted for funding shortfalls. ICE officials  told GAO that the program experienced a funding shortfall in fiscal year 2017  that led it to adjust spending under multiple contracts and shift some costs to  fiscal year 2018.", "The O&M cost threshold increased when ICE extended the estimate from fiscal  years 2024 to 2028 and continued contractor and systems engineering  support for an additional 11 years.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained O&M funding for individual programs. ICE officials anticipate receiving approximately $94 million in O&M funding to cover an estimated $105 million in O&M costs over this 5-year period. ICE officials said that they are pursuing strategies to reduce future O&M costs, such as awarding a competitive contract in March 2018 for O&M activities and any future enhancements."], "subsections": []}, {"section_title": "The program\u2019s OTA completed follow-on operational test and evaluation (OT&E) in September 2017, which focused on evaluating the revised KPP, FOC functionality, and deficiencies identified during the program\u2019s initial OT&E. In March 2017, DHS\u2019s Director, Office of Test and Evaluation (DOT&E) found that the program was operationally effective and suitable with limitations, but that the test was not adequate to evaluate operational cybersecurity. DOT&E recommended that the program conduct threat-based operational cybersecurity testing, among other things. ICE officials said that the program completed threat-based cybersecurity tests in September 2017 and had begun to address identified vulnerabilities. DOT&E anticipates assessing the results from the program\u2019s cybersecurity testing and follow-on OT&E by mid-February to support the ADE 3 decision.", "paragraphs": ["ICE officials continue to work closely with CBP to provide users access to various systems through the modernized TECS system. The program previously worked to resolve technical problems with CBP support services that emerged during final integration testing of the ICE and CBP modernized TECS systems, which contributed to a 3-month delay in achieving IOC. Users reported during initial OT&E that the modernized ICE TECS system was an improvement over the legacy system but they requested better integration with external systems, such as CBP\u2019s Seized Assets and Case Tracking System (SEACATS), which they use to determine the disposition of seized assets for case management and reporting purposes.", "According to ICE officials, CBP subsequently decided to modernize SEACATS. ICE officials stated that they have coordinated closely with CBP to integrate the two modernized systems and ensure un-interrupted access to SEACATS for TECS users. For example, ICE developed a workaround so that TECS users maintain access to the latest seizure data available from the modernized SEACATS. ICE officials added that they continue to make improvements in interfaces with other external systems as prioritized by end users.", "In July 2017, ICE reported that the program was fully staffed.", "ICE officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "CONTINUOUS DIAGNOSTICS AND MITIGATION (CDM)", "NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD)", "The CDM program aims to strengthen the cybersecurity of the federal government\u2019s networks at more than 65 participating civilian agencies by providing tools and dashboards that continually monitor and report on network vulnerabilities. Tools are delivered in four phases: phase 1 and 2 tools report vulnerabilities in hardware and software, and user access controls, respectively; phase 3 tools will report on efforts to prevent attacks; and phase 4 tools will provide encryption to protect network data.", "Program revised its key performance parameters and test  and evaluation master  plan as a part of its rebaseline.", "Program plans to change its acquisition strategy and continues to face workforce challenges.", "GAO last reported on this  program in April 2017  (GAO-17-346SP).", "In June 2017, Department of Homeland Security (DHS) leadership re-baselined the CDM program for the third time to approve initiating development of phase 3 and to address challenges encountered during phase 1. Specifically, contractors previously found large gaps\u2014ranging from 19 to 384 percent\u2014in the actual number of devices needing phase 1 tools than what was originally reported by 12 agencies.", "The operations and maintenance (O&M) cost thresholds increased by $631 million when the program shifted some potential acquisition costs to beThe program\u2019s new acquisition program baseline (APB) modified the program\u2019s  cost, schedule, and performance parameters. For example: consistent with DHS\u2019s new appropriation structure, among other things. The  O&M cost thresholds previously decreased by $1.2 billion, in part, because  DHS leadership determined the program would only fund CDM tools for the   first 2 years after deployment. The acquisition costs did not increase despite   phase 1 challenges, in part, because coverage for the U.S. Postal Service\u2014", "The program\u2019s full operational capability (FOC) date slipped almost 4 years after    which had the largest gap in estimated devices\u2014will no longer be funded by the     CDM program. it was redefined from deployment of phase 1-3 tools at 5 agencies to the   availability of these tools to all participating agencies.", "However, the program\u2019s costs will increase and its FOC date may slip further once  the program establishes goals for phase 4. NPPD officials said they were unable to  complete planning efforts for phase 4 in time to incorporate it into the most recent    APB revision and, therefore, plan to re-baseline the CDM program again in 2018.", "The CDM program identified a potential acquisition affordability gap in fiscal year 2018 based on its revised life-cycle cost estimate, which it addressed by adjusting the phase 3 schedule to shift some acquisition costs out to fiscal year 2020. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained O&M funding for individual programs. However, the program anticipates receiving approximately $281 million in O&M funding over the 5-year period.", "12/16 Phase 1 initial  operational  capability (IOC)", "National Protection and Programs Directorate (NPPD) CONTINUOUS DIAGNOSTICS AND MITIGATION (CDM)"], "subsections": []}, {"section_title": "As part of its re-baselining efforts, the CDM program updated its operational requirements document and test and evaluation master plan. At the direction of DHS leadership, the program consolidated its previous 12 key performance parameters (KPP) into 5 main KPP functions\u2014identification, protection, detection, response, and recovery\u2014some of which have multiple sub-measures. The revised KPPs are intended to better align with the National Institute of Standards and Technology\u2019s Cybersecurity Framework and were developed in collaboration with key stakeholders, such as the Joint Requirements Council, DHS\u2019s Director, Office of Test and Evaluation (DOT&E), and the program\u2019s OTA.", "paragraphs": [], "subsections": []}, {"section_title": "The CDM program is only authorized to conduct testing on DHS networks, which means the other departments and agencies are responsible for testing the CDM tools and dashboards on their own networks. Under the program\u2019s revised test and evaluation master plan, the OTA plans to perform operational assessments (OA) on DHS\u2019s network to incrementally demonstrate each phase\u2019s capabilities as they are deployed and to reduce risk prior to conducting formal program-level operational test and evaluation (OT&E). NPPD officials anticipate the first OA will be completed in calendar year 2018 and will test integration of phase 1 tools and dashboard reporting. NPPD officials previously told GAO that they had observed operational testing conducted at three other agencies and, in September 2017, said they continue to work with the program\u2019s OTA to identify opportunities to observe testing at other agencies.", "paragraphs": ["The CDM program updated its acquisition plan as a part of its re-baselining efforts, which reflects a change in strategy for procuring CDM tools and integration services for participating agencies through the General Services Administration (GSA). Previously, the CDM program issued task orders for these tools and services through blanket purchase agreements established under vendors\u2019 GSA Federal Supply Schedule contracts. These agreements are set to expire in August 2018. Going forward, the program plans to use an existing GSA government-wide acquisition contract\u2014known as Alliant\u2014to obtain CDM tools and services. According to NPPD officials, the new acquisition strategy is intended to provide greater flexibility in contracting for current capabilities and to support future capabilities. It will also allow participating agencies to order additional CDM-approved products or services from GSA\u2019s schedule for information technology equipment, software, and services; however, as of September 2017, NPPD officials stated they were in the process of determining how this process will work.", "NPPD officials said that the program continues to face workforce challenges related to managing the program\u2019s change in contracts and planning for phase 4. In February 2018, NPPD officials stated that they had on-boarded 5 staff to help address the program\u2019s reported fiscal year 2017 gap of 16 full time equivalents. They noted that another 5 candidates were in the hiring process and that NPPD continues to work with officials from DHS\u2019s Office of the Chief Security Officer to reduce continued challenges in onboarding new staff due to the lengthy security clearance process.", "In addition to activities outlined in this assessment, NPPD officials stated that the CDM program continues to manage its budget to ensure program costs match available funding, and is leveraging the collective buying power of federal agencies and strategic sourcing to achieve government cost savings on CDM products. NPPD officials also stated that, as of December 2017, CDM has deployed agency dashboards to 23 agencies and was conducting and testing information exchanges of data between agency dashboards and the federal dashboard.", "HOMELAND ADVANCED RECOGNITION TECHNOLOGY  (HART)", "NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD)", "HART will replace and modernize the Department of Homeland Security\u2019s (DHS) legacy biometric identification system\u2014known as IDENT\u2014which shares information on foreign nationals with U.S. government and foreign partners to facilitate legitimate travel, trade, and immigration. NPPD plans to develop HART in four increments: increments 1 and 2 will replace and enhance IDENT functionality; increments 3 and 4 will provide additional biometric services, as well as a web portal and new tools for analysis and reporting.", "Key performance parameters will be demonstrated as capability is developed.", "Program has developed mitigation plans to address workforce risks.", "GAO last reported on this  program in April 2017  (GAO-17-346SP).", "In June 2017, NPPD declared a schedule breach when it determined the HART program would not be able to meet its initial acquisition program baseline (APB) milestones. DHS leadership approved the program\u2019s APB in April 2016 and authorized the program to initiate development efforts for increments 1 and 2 in October 2016. NPPD officials attribute the schedule slip to multiple delays in awarding the contract for increments 1 and 2 as a result of issues with the request for proposals (RFP). The program released the RFP in February 2017 and awarded the contract in September 2017\u2014approximately 9 months later than NPPD officials had planned. However, the program experienced additional delays after a bid protest to the contract award was filed with GAO in October 2017. GAO subsequently denied the protest and NPPD officials said the program plans to initiate work with the contractor in March 2018.", "HART initially planned to achieve initial operational capability (IOC) with the deployment of increment 1 in December 2018, at which point program officials anticipated beginning to transition users from IDENT to HART. However, it is unclear when this will now occur, which is a significant challenge because IDENT is at risk of failure and may be unable to fully support requirements related to new programs\u2014 such as Customs and Border Protection\u2019s Biometric Entry-Exit. As a result, delays in HART could contribute to delays in other DHS acquisition programs.", "The program updated its life-cycle cost estimate (LCCE) in June 2017 to inform the budget process. This LCCE is within its current APB cost thresholds, but does not account for the contractor\u2019s solution. The program plans to update its LCCE and other acquisition documentation, such as its APB, after initiating work with the contractor.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. However, the program anticipates receiving approximately $1.3 billion in O&M funding to cover $1.5 billion in O&M costs. NPPD officials explained that the current O&M cost estimate includes costs for maintaining IDENT. Future LCCE updates will reflect delivery of services through HART, which NPPD officials anticipate will be more cost effective.", "National Protection and Programs Directorate (NPPD)", "HOMELAND ADVANCED RECOGNITION TECHNOLOGY (HART)"], "subsections": []}, {"section_title": "HART plans to demonstrate its eight key performance parameters (KPP) as capabilities are developed. Increment 1 has two KPPs that establish requirements for system availability and a fingerprint biometric identification service. Increment 2 has four KPPs that establish requirements for multimodal biometric verification services and interoperability with a Department of Justice system. Increments 3 and 4 each have one KPP that establish requirements for web portal response time and reporting capabilities, respectively. However, NPPD officials stated they will revisit the KPPs for increments 3 and 4 as they define requirements for these increments.", "paragraphs": [], "subsections": []}, {"section_title": "S&T\u2019s Office of Systems Engineering completed a technical assessment on HART in February 2016, and concluded that the program had a moderate overall level of technical risk. In October 2016, DHS leadership directed HART to work with S&T to conduct further analysis following the program\u2019s initial contract award for increments 1 and 2. However, these efforts have also been delayed.", "paragraphs": ["NPPD officials told GAO they are currently planning for increments 3 and 4 and plan to refine the cost, schedule, and performance goals for these increments in its next APB. NPPD plans to pursue a separate contract for the development and delivery of increments 3 and 4. However, the program will require DHS leadership approval prior to initiating these development efforts.", "In September 2017, NPPD officials told GAO they had hired two staff and planned to hire additional staff to address the program\u2019s staffing gap of 5.5 full time equivalents. In response to DHS leadership\u2019s direction, the program coordinated with DHS\u2019s Chief Technology Officer to assess the skills and functions of staff necessary to execute the program and to develop the HART staffing plan. In its June 2017 staffing plan, the program identified workforce risks, including the potential for experiencing insufficient technical skillsets and inadequate resources to simultaneously execute development of HART and operate IDENT. To mitigate these risks, the program plans to develop a training plan to address the gap in skills, leverage support within the program by cross- training staff, and issue contracts for additional support as needed, among other things. However, if the program does not have adequate staff to complete these efforts, it may experience further schedule delays.", "NPPD officials stated that the program\u2019s schedule delays pose a challenge because IDENT remains at risk of failure despite incremental improvements to extend its service life and may be unable to fully support new customer requirements or requirements related to new programs. They added that the program has a risk management process, which it is using to manage a variety of identified risks\u2014including several related to workforce. They noted that these risks have not yet materialized. NPPD officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "NATIONAL CYBERSECURITY PROTECTION SYSTEM (NCPS)", "NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD)", "NCPS is intended to defend the federal civilian government from cyber threats. NCPS develops and delivers capabilities through a series of \u201cblocks.\u201d Blocks 1.0, 2.0, and  2.1 are fully deployed and provide intrusion-detection and analytic capabilities across  the government. The NCPS program is currently deploying EINSTEIN 3 Accelerated  (EA) to provide intrusion-prevention capabilities and plans to deliver block 2.2 to  improve information sharing across agencies.", "A at 95 percent of agencies and departments.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "NPPD officials said the program is on track to meet the schedule and cost goals in its current acquisition program baseline (APB), which reflected changes resulting from the adoption of some of the Department of Homeland Security\u2019s (DHS) Homeland Security Information Network (HSIN) capabilities for block 2.2 rather than developing custom solutions. However, challenges in completing test plans delayed testing:", "Initial operational test and evaluation (OT&E) for EA transition to sustainment\u2014  slipped from September 2016 to May 2017.", "The initial test event for block 2.2\u2014intended to inform the ADE 2C for deploying  additional block 2.2 capabilities\u2014slipped from March 2017 to September 2017.", "As of August 2017, NPPD officials said NCPS had adopted all planned HSIN capabilities but one because of security concerns, which HSIN is addressing by piloting a new tool.", "The program updated its life-cycle cost estimate (LCCE) in June 2017 to inform the budget process, which is within its current APB cost thresholds. However, the program plans to update the LCCE again to support the EA, and costs through fiscal year 2022.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan no longer contained O&M funding for individual programs. NPPD officials anticipate receiving $1.8 billion in O&M funding over this 5-year period. The program is also projected to have an $83 million surplus in acquisition funding over this 5-year period, which NPPD officials anticipate will be less once the LCCE revision is complete.", "National Protection and Programs Directorate (NPPD)", "NATIONAL CYBERSECURITY PROTECTION SYSTEM (NCPS)"], "subsections": []}, {"section_title": "In October 2017, the NCPS program completed the first block 2.2 operational assessment (OA), which focused on testing delivery of an information sharing portal to inform the program\u2019s ADE 2C. In January 2018, DOT&E determined that it was too soon to assess block 2.2 progress toward operational effectiveness, suitability, and cybersecurity. DOT&E also noted block 2.2 is at risk of not meeting user needs because the portal comprises a small portion of planned capabilities and alignment with the operational requirements is unclear. DOT&E made a number of recommendations, including repeating the OA before conducting initial OT&E.", "paragraphs": ["A intrusion-prevention capabilities have been primarily provided through sole source contracts with internet service providers (ISP) and a contract to provide basic intrusion-prevention services. In December 2015, Congress required DHS to make available for use by federal agencies, certain capabilities, such as those provided by NCPS\u2019s EA at approximately 93 percent of civilian federal agencies and departments and, in January 2018, NPPD officials said NCPS was up to 95 percent. According to NPPD officials, the program first focused on integrating EA for individual agencies and departments, but stated that they continue to work with all agencies and departments to provide EA services and approximately 95 percent of the federal civilian .gov user population is protected by at least one EA and an OA of NCPS block 2.2 information sharing capabilities in 2017. NPPD officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "NEXT GENERATION NETWORKS PRIORITY SERVICES  (NGN-PS)", "NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD)", "NGN-PS is intended to address an emerging capability gap in the government\u2019s emergency telecommunications service, which prioritizes select officials\u2019 phone calls when networks are overwhelmed. NPPD executes NGN-PS through commercial telecommunications service providers, which addresses the government\u2019s requirements as they modernize their own networks. NPPD is executing NGN-PS in two phases\u2014(1) voice and (2) data and video.", "Initial operational capability for voice phase wireless capabilities achieved in August 2017.", "Acquisition of data and video phase capabilities to begin in September 2021.", "GAO last reported on this  program in April 2017  (GAO-17-346SP).", "In November 2017, the Department of Homeland Security\u2019s (DHS) Chief Financial Officer approved a revised life-cycle cost estimate (LCCE) for NGN-PS, which includes costs for the entire program\u2019s voice phase and eliminates operations and maintenance (O&M) costs. The program removed O&M costs because capabilities acquired through NGN-PS are transferred to and funded through NPPD\u2019s Priority Telecommunications Service (PTS) once they become operational. NGN-PS is currently focused on delivering its voice phase, which is divided into three increments:", "Increment 1 maintains current priority service on long distance calls as     commercial service providers update their networks;", "Increment 2 delivers wireless capabilities; and", "Increment 3 is intended to address landline capabilities.", "The program\u2019s previous LCCE and current acquisition program baseline (APB) only include costs associated with increments 1 and 2. NPPD officials told GAO they plan to update the program\u2019s APB in January 2018 to include costs, schedule, and performance goals for increment 3 and expect to receive DHS leadership approval to initiate development by August 2018.", "NGN-PS remains on track to meet its cost and schedule goals for the first two increments of the voice phase. The program\u2019s full operational capability (FOC) for increment 1 previously slipped from June 2017 to March 2019, which NPPD officials attributed to funding shortfalls. NGN-PS achieved initial operational capability (IOC) for increment 2 wireless capabilities in August 2017 when priority service via cellular towers was demonstrated by the program\u2019s largest service provider.", "The program projects an acquisition affordability gap of $92 million from fiscal years 2018 to 2022. However, DHS\u2019s current funding plan does not include funding for increment 3, which accounts for the funding shortfall in fiscal years 2021 and 2022. NPPD officials said they anticipate receiving an additional $79 million in acquisition funding over this 2-year period, but will continue to prioritize capabilities if additional funding is not provided. These officials also said the program has achieved cost savings on increments 1 and 2 that will mitigate some of the projected shortfall in fiscal years 2018 and 2019.", "National Protection and Programs Directorate (NPPD)", "NEXT GENERATION NETWORKS PRIORITY SERVICES (NGN-PS)"], "subsections": []}, {"section_title": "NGN-PS capabilities are evaluated through developmental testing and operational assessments conducted by service providers on their own networks. However, NPPD officials noted that each emergency is unique and that performance can be affected by damage to telecommunications infrastructure. NPPD officials review the service providers\u2019 test plans, oversee tests to verify testing procedures are followed, and approve test results to determine when testing is complete. The OTA does not conduct a stand-alone operational test event for NGN-PS. Instead, the OTA leverages the service providers\u2019 test and actual operational data to assess program performance. NPPD officials also said that they continuously review actual NGN-PS performance and that all service providers undergo annual network service verification testing under the PTS program.", "paragraphs": ["NGN-PS was established in response to an Executive Order requiring the federal government to have the ability to communicate at all times during all circumstances to ensure national security and manage emergencies. A Presidential Policy Directive issued in July 2016 superseded previous directives requiring continuous communication services for select government officials. According to NPPD officials, the new directive validates the program\u2019s requirements for the voice phase and was used to develop requirements for the video and data phase. The program expects to begin the acquisition of the phase 2 for video and data in September 2021.", "In July 2017, NPPD reported that the program needed a systems engineer and was mitigating the vacancy with contracted support staff. The program also identified a need for an additional systems engineer and program support staff starting in fiscal year 2019 to support the start of increment 3. In August 2017, NPPD officials told GAO they continue to face challenges hiring and retaining engineers with adequate experience because of competition with the private sector. The program has historically mitigated staffing gaps by leveraging support from contracted and PTS program staff, as needed.", "In addition to activities identified in this assessment, NPPD officials stated that the program has received Joint Requirements Council validation of the phase 2 concept of operations and DHS leadership approval of the phase 2 operational requirements document. As of January 2018, the updated APB was in the approval process. NPPD officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "NATIONAL BIO AND AGRO-DEFENSE FACILITY (NBAF)", "SCIENCE AND TECHNOLOGY DIRECTORATE (S&T)", "The NBAF program is constructing a state-of-the-art laboratory in Manhattan, Kansas to replace the Plum Island Animal Disease Center. The facility will enable the Department of Homeland Security (DHS) and the Department of Agriculture (USDA) to conduct research, develop vaccines, and provide enhanced diagnostic capabilities to protect against foreign animal, emerging, and zoonotic diseases that threaten the nation\u2019s food supply, agricultural economy, and public health.", "Commissioning process underway, but performance will not be demonstrated until construction is complete.", "NBAF adequately staffed, but staffing needs will change as operational stand-up activities begin.", "GAO last reported on this  program in April 2017  (GAO-17-346SP).", "The program\u2019s annual life-cycle cost estimate (LCCE) update is within its current acquisition program baseline (APB) cost thresholds and, according to NBAF officials, the program remains on track to meet its schedule goals. In August 2017, NBAF officials said that construction activities thus far\u2014such as pouring concrete for the main laboratory and steel framing\u2014have proceeded as anticipated and will continue through December 2020. NBAF officials told GAO the program has already received full acquisition funding for facility construction efforts through federal appropriations and gift funds from the state of Kansas.", "As construction continues, the program plans to begin operational stand-up activities for the facility. However, a potential affordability gap may delay the program\u2019s ability to complete these stand-up activities, which are needed to begin conducting laboratory operations. The program was not included in DHS\u2019s funding plan to Congress for fiscal years 2018 to 2022 because DHS did not report operations and maintenance (O&M) funding for individual programs. However, NBAF officials anticipate receiving only $149 million in O&M funding to cover an estimated $239 million in O&M costs over the next 5 years, resulting in a projected shortfall of approximately $90 million.", "NBAF officials stated the O&M funding gap could delay a number of operational stand-up activities, including plans to award a management operations and research support contract in October 2018, the purchase of laboratory and information technology equipment, and hiring of operations management staff. According to NBAF officials, if operational stand-up activities are delayed, there is a risk the facility will not be fully operational by December 2022, as is currently planned. This may delay the transition from the Plum Island Animal Disease Center, which is nearing the end of its useful life. NBAF officials reported that S&T plans to communicate the program\u2019s future funding needs to DHS leadership through the annual budget process. If the program does not receive the funding it requests, these officials stated that S&T will prioritize the operational stand-up activities that best reduce the risk of schedule delays.", "Science and Technology Directorate (S&T) NATIONAL BIO AND AGRO-DEFENSE FACILITY (NBAF)"], "subsections": []}, {"section_title": "A third-party commissioning agent has been retained as a subcontractor to the prime construction management contractor, and NBAF officials stated that a commissioning plan has been in place since 2012. According to NBAF officials, the commissioning agent worked with the facility design and construction teams to develop the commissioning plan, and detailed procedures are in place to install and commission equipment in the facility. The commissioning agent will monitor and test the facility\u2019s equipment and building systems while construction is ongoing to ensure they are properly installed and functioning according to appropriate biosafety specifications. The commissioning agent will report its findings directly to program officials and coordinate with other entities involved in the commissioning process, including the NBAF program office, the construction management contractor, and end users, among others. Full commissioning of the facility is scheduled to be completed by May 2021, 6 months after the completion of construction.", "paragraphs": ["NBAF officials reported that they coordinate regularly with key stakeholders. For example, they hold regular coordination meetings with USDA officials to discuss NBAF operations, including operational stand-up activities and future procurement. The NBAF program office has also begun outreach to the federal regulators responsible for awarding the registrations needed for NBAF to conduct laboratory operations to begin planning for this authorization process.", "The NBAF program office is currently fully staffed. However, NBAF officials reported the program\u2019s staffing needs will change in the coming years, as the program progresses through construction and begins operational stand-up of the facility. For example, over the next 5 years, the program will need to hire an operations director, bio-risk manager, chief information officer, and facility manager, among others, for NBAF operations management. However, the projected O&M funding shortfall during this same period could affect the program\u2019s ability to hire new staff when needed and complete operational stand-up activities on time.", "NBAF officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "ELECTRONIC BAGGAGE SCREENING PROGRAM (EBSP)", "TRANSPORTATION SECURITY ADMINISTRATION (TSA)", "Established in response to the terrorist attacks of September 11, 2001, EBSP tests, procures, and deploys transportation security equipment, such as explosives trace detectors and explosives detection systems, across approximately 440 U.S. airports to ensure 100 percent of checked baggage is screened for explosives. EBSP is primarily focused on delivering new systems with enhanced screening capabilities and developing software upgrades for existing systems.", "Program is incorporating requirements to address cybersecurity risk for existing systems.", "EBSP plans to pursue a new procurement approach in 2018, and staffing challenges exist.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "In the program\u2019s annual life-cycle cost estimate update, its operations and maintenance (O&M) costs exceeded the acquisition program baseline (APB) cost threshold, which constitutes a breach under the Department of Homeland Security\u2019s (DHS) acquisition policy. The O&M costs increased when TSA accounted for updated maintenance costs and quantities, and shifted salaries from acquisition to O&M to align with DHS\u2019s new appropriation structure. TSA officials said they did not submit a breach notification because they considered the movement of salaries to be an administrative change. The program plans to update its APB in calendar year 2018 to reflect a new plan for procuring equipment under its current acquisition strategy. TSA officials said this APB will also reflect the cost changes.", "In May 2016, DHS leadership approved a revised APB for EBSP, which reflects its current acquisition strategy to competitively procure systems on an ongoing basis using qualified product lists. The program\u2019s revised APB cost thresholds decreased compared to its initial APB, which TSA officials attributed to various reasons, including shortening the program\u2019s end date by 3 years and lower than anticipated actual costs, among other things.", "TSA officials told GAO that one of their primary challenges is funding, and the program is projected to face a $72 million acquisition funding shortfall in fiscal year 2018. TSA identified $70 million in carryover funding to address this gap. To mitigate anticipated funding gaps in future years, TSA officials said they may shift projects from one fiscal year to another or cancel them altogether, which may result in the delay or elimination of screening capabilities. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained O&M funding for individual programs. TSA anticipates receiving $980 million in O&M funding over this 5-year period to cover $1 billion in O&M costs.", "TSA officials anticipate achieving the program\u2019s final APB milestone\u2014initial operational capability (IOC) for systems that detect additional materials and provide an advanced threat detection algorithm\u2014by its revised threshold date. Previously, EBSP planned to award contracts for these systems in September 2015 and September 2018, respectively.", "Transportation Security Administration (TSA) ELECTRONIC BAGGAGE SCREENING PROGRAM (EBSP)"], "subsections": []}, {"section_title": "TSA officials previously stated that EBSP has demonstrated that all deployed systems can meet the program\u2019s key performance parameters, including automated threat detection, throughput, and operational availability. In September 2017, TSA officials said they had identified a critical need for improved cybersecurity requirements and plan to update the program\u2019s acquisition documentation starting in 2018.", "paragraphs": [], "subsections": []}, {"section_title": "Since March 2011, DHS\u2019s Director, Office of Test and Evaluation (DOT&E) has assessed the operational test and evaluation (OT&E) results of 11 EBSP systems from multiple vendors and determined that 6 are effective and suitable. Most recently, DOT&E found that a medium-speed explosives detection system with an advanced threat detection algorithm tested in May 2017 was effective with limitations and not suitable, primarily because of the increase in manpower needed to operate the system on a long-term, continuous basis. TSA officials do not have any plans to retest this system within the next year. DOT&E also found that a reduced-size standalone explosives detection system tested in March 2017 was suitable with limitations, but not effective because of multiple factors resulting in the inability of operators to maintain control of baggage.", "paragraphs": ["As of December 2017, EBSP had deployed 1,664 explosives detection systems and 2,638 explosives trace detectors nationwide. In 2018, EBSP plans to pursue a new competitive procurement approach to replace and update existing systems that will include:", "New contract vehicles to better align EBSP procurement activities with the  program\u2019s strategic roadmap.", "Updates to EBSP\u2019s vendor qualification process to allow for vendor collaboration  before testing.", "Transitioning from procuring systems with different sizes and speeds to two  types: (1) inline systems that integrate with a baggage handling system and are  linked through a network and (2) standalone systems that may be integrated with  a baggage handling system, but not linked to a network.", "The program is in the process of updating its acquisition documentation to reflect this new procurement approach and TSA officials anticipate opening a qualified products list for new systems starting in June 2018.", "TSA officials said that staffing remains a challenge for the program because of cuts in government and contracted mission support staff and critical vacancies, including a division director. In September 2017, TSA reported that existing personnel across the program have assumed responsibilities of these positions, but workloads are unsustainable at current staffing levels.", "TSA officials stated that EBSP continues to procure, test, and deploy equipment and capabilities to recapitalize older equipment, improve security screening capability at airports, and enhance the detection capabilities of the fleet. They added that TSA employs extensive testing to verify the suitability and effectiveness of equipment to meet requirements. Moving forward, EBSP intends to establish IOC milestones for new technologies and capabilities, while allowing TSA the flexibility to make risk-based decisions. TSA officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "PASSENGER SCREENING PROGRAM (PSP)", "TRANSPORTATION SECURITY ADMINISTRATION (TSA)", "The Department of Homeland Security (DHS) established PSP in response to the terrorist attacks of September 11, 2001. PSP identifies, tests, procures, deploys, and sustains transportation security equipment across approximately 440 U.S. airports to help TSA officers identify threats concealed on people and in their carryon items. The program aims to increase threat detection capabilities, improve the efficiency of passenger screening, and balance passenger privacy and security.", "Started testing on the Credential Authentication Technology in TSA Precheck lanes during 2017.", "Critical staffing vacancies persist and may delay followon acquisition planning efforts.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "In May 2017, the DHS Under Secretary for Management (USM) approved the sixth version of the PSP acquisition program baseline (APB) and subsequently removed the program from breach status. In January 2016, TSA declared a schedule breach of a key milestone\u2014acquisition decision event (ADE) 3\u2014for the Credential Authentication Technology (CAT) because of delays in incorporating new cybersecurity requirements.", "Consistent with previous versions of the program\u2019s APB, the new baseline modified the program\u2019s cost, schedule, and performance parameters. For example, the program established the following:", "Separate CAT milestone dates for TSA Precheck and standard lanes. TSA     officials stated there is no capability difference between screening lanes,     but an initial focus on TSA Precheck lanes will assist with demonstrating CAT     requirements and resolving past testing issues that contributed to an initial 4-year     delay to CAT\u2019s full operational capability (FOC) date. PSP now plans to reach FOC     for CAT more than 5 years later than its revised target of June 2018 and more than     9 years later than initially planned.", "New FOC dates for other technologies, which TSA officials said are expected to be more realistic about delivery dates and account for changes in some FOC   quantities. For example, TSA requested and received approval in September 2017 to increase FOC quantities for second generation Advanced Technology (AT-2) TierI systems to meet increasing passenger volume and expected airport growth.", "In May 2017, the USM also directed the program to revise its life-cycle cost estimate (LCCE) in response to less-than-expected funding levels. The new LCCE also shifted some acquisition costs to operations and maintenance (O&M) to be consistent with DHS\u2019s new appropriation structure. TSA officials believe the new funding profile will be sufficient to sustain legacy PSP equipment, but will significantly limit the program\u2019s ability to enhance existing equipment capabilities and support operational needs. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained O&M funding for individual programs. TSA anticipates receiving $906 million in O&M funding over this 5-year period to cover $923 million in O&M costs.", "05/17 APB  version 6.0  approved 03/20 CAT ADE 3 (precheck  lanes)", "09/21 CAT ADE 3 (standard lanes)", "12/21 CAT FOC (precheck lanes)", "12/23 CAT FOC (standard lanes)", "Transportation Security Administration (TSA)", "PASSENGER SCREENING PROGRAM (PSP)"], "subsections": []}, {"section_title": "Since August 2010, DHS\u2019s Director, Office of Test and Evaluation (DOT&E) has assessed the test results of eight PSP systems from multiple vendors and determined that three are effective and suitable. Most recently, DOT&E reviewed the results from an assessment of automated screening lanes, which TSA began pursuing in fall 2016 in response to an urgent operational need to address increasing passenger wait times. DOT&E found that automated systems showed potential to increase passenger screening rates, but noted some adverse impact on system performance and availability.", "paragraphs": ["Automated  screening lanes  operational utility  assessment AT-2 tier II  follow-on  operational test  & evaluation  (OT&E)"], "subsections": []}, {"section_title": "Going forward, TSA plans to conduct testing on updates made to existing PSP systems, as well as complete testing of CAT. TSA initiated CAT developmental testing in TSA Precheck lanes in late fiscal year 2017 and anticipates completing operational testing by June 2019. Testing will expand to standard screening lanes shortly thereafter and is expected to be complete by September 2020. However, in November 2017, DHS leadership approved TSA\u2019s proposal to transfer requirements from the Security Technology Integrated Program, which provides critical data connectivity capabilities, to CAT to reduce the dependency between the programs. DHS leadership directed TSA to complete several actions to account for this change, including updating CAT\u2019s operational requirements document and test and evaluation master plan. In January 2018, TSA officials said that they determined CAT\u2019s current operational requirements document was still valid and anticipate updating the test and evaluation master plan by March 2018.", "paragraphs": ["TSA employs two acquisition strategies to acquire PSP systems:", "Qualified Product List (QPL) approach\u2014used for proven technologies when  capability requirements are rigid and contractors\u2019 systems are mature. Any  contractors\u2019 systems that demonstrate they meet the capability requirements are  added to the QPL. TSA has used this approach to acquire the second generation  AT-2 systems, Bottled Liquid Scanners, and Explosive Trace Detectors.", "Low Rate Initial Production (LRIP) approach\u2014used when capability requirements  are flexible and contractors\u2019 systems are evolving. Under this approach, PSP uses  a series of development contracts to enhance systems\u2019 capabilities over time. PSP  is currently using this approach to acquire CAT.", "TSA planned to initiate new acquisition programs starting in fiscal year 2018 that will replace PSP, but this effort may be at risk because of understaffing. In August 2017, TSA reported that its checkpoint screening division\u2014whose staff is concurrently responsible for PSP and its follow-on programs\u2014continued to have staffing vacancies, including project managers, analysts, and a deputy program manager. TSA is mitigating these gaps with existing staff and, according to TSA officials, the staffing challenges may decrease because the new programs may be delayed in response to funding cuts.", "TSA officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "TECHNOLOGY INFRASTRUCTURE MODERNIZATION (TIM)", "TRANSPORTATION SECURITY ADMINISTRATION (TSA)", "The TIM program was initiated to address shortfalls in TSA\u2019s threat assessment screening and vetting functions by providing a modern and centralized end-to-end credentialing system. The TIM system will manage credential applications and the review process for millions of transportation workers and travelers across three segment populations: maritime, surface, and aviation. It will support large programs, such as TSA Precheck and the Transportation Worker Identification Credential.", "Operational testing identified limitations with the system; cybersecurity has not been assessed.", "Staffing gaps in key areas, such as systems engineering and testing, are a significant program risk.", "GAO last reported on this  program in October and April  2017 (GAO-18-46, GAO-17- 346SP).", "The TIM program is on track to meet the cost and schedule goals in its current acquisition program baseline (APB). In September 2016, the Department of Homeland Security\u2019s (DHS) Under Secretary for Management approved the TIM program\u2019s revised APB\u2014which reflected a new technical approach to deploy capabilities using an agile development methodology\u2014and subsequently removed the program from breach status, authorizing TSA to resume new development after a nearly 22-month pause. DHS leadership paused new development in January 2015 after the program breached its initial APB goals for various reasons, including technical challenges, insufficient contractor performance, and the addition of new requirements after DHS leadership had approved the program\u2019s initial acquisition strategy. The program now plans to achieve full operational capability (FOC) in March 2022 and its life-cycle cost estimate (LCCE) increased to account for this 6-year schedule slip and integration with the Transportation Vetting System, among other things.", "Since the program\u2019s re-baseline, it has been developing and deploying capabilities in 2-month incremental agile releases, such as functionality to transition TSA Precheck program to the TIM system. The program updated its LCCE in November 2017 to inform a program review with DHS leadership, which is within its current APB cost thresholds. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS\u2019s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. TSA officials anticipate receiving approximately $318 million in O&M funding over this 5-year period, which includes nearly $118 million in fees from vetting programs. TSA officials plan to realign $57 million to cover the projected acquisition shortfall, and said any additional surplus funding available in fiscal year 2022 would be used to implement new system requirements identified by the program\u2019s customers.", "In November 2017, TSA officials identified several program and technical risks that could affect the program\u2019s cost, schedule, and performance. These risks include  an increase in new requirements and increased risk of system vulnerabilities and  cyberattacks if the program does not identify a provider to perform software updates  on open source code. TSA officials are working to mitigate these risks.", "Transportation Security Administration (TSA)", "TECHNOLOGY INFRASTRUCTURE MODERNIZATION (TIM)"], "subsections": []}, {"section_title": "In April 2017, DHS\u2019s Director, Office of Test and Evaluation (DOT&E) assessed the results of the program\u2019s November 2016 follow-on operational test and evaluation (OT&E) for the maritime segment and determined that the system: \u2022 met two of its four key performance parameters (KPP), \u2022 was operationally effective and suitable with limitations, and \u2022 was not cyber-secure because threat-based cybersecurity testing was deferred to November 2018, after the program completes its migration to a new production environment.", "paragraphs": [], "subsections": []}, {"section_title": "The OTA did not evaluate the program\u2019s KPP related to enforcing system user access controls because it was new to the TIM program when testing began. In addition, the OTA cannot conduct testing on the program\u2019s remaining KPP related to information reuse until the surface and aviation segments are deployed.", "paragraphs": [], "subsections": []}, {"section_title": "In March 2017, DOT&E approved a new test and evaluation master plan for the TIM program, which calls for the OTA to conduct continuous operational testing for each 2-month agile release and document the results in a dashboard. According to TSA officials, the results of each release are provided to DOT&E, but DOT&E does not provide a formal assessment of these results. DOT&E plans to assess the results of the program\u2019s cybersecurity testing in late calendar year 2018.", "paragraphs": ["Under the program\u2019s new technical approach, TSA plans to replace the TIM system\u2019s existing commercial-off-the-shelf applications with open source applications\u2014software that can be accessed, used, modified, and shared by anyone\u2014and move to a new virtual environment. The program\u2019s new agile development methodology develops, tests, and deploys capabilities using an iterative, rather than a sequential approach. Consistent with this strategy, TSA awarded task orders in 2016 and 2017 totaling $34.5 million to the program\u2019s existing contractor for agile design and development services, and plans to competitively award a new contract by May 2018.", "In October 2017, GAO found that TSA had not fully implemented several leading practices to ensure successful agile adoption. GAO also found that TSA and DHS needed to conduct more effective oversight of the TIM program to reduce the risk of repeating past mistakes. DHS concurred with all 14 recommendations made by GAO to improve program execution and oversight, and identified actions DHS and TSA can take to address them.", "TSA reported that staffing challenges are a significant risk to the program\u2019s success and identified gaps in key areas\u2014such as systems engineering, testing, and agile development. Program officials told GAO these positions cannot be filled because of a hiring freeze within TSA, which the component has imposed to assess their current workforce and restructure, if necessary. Program officials told GAO they requested waivers from the hiring freeze and, as of January 2018, they had received approval to hire 4 additional staff.", "TSA officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "FAST RESPONSE CUTTER (FRC)", "UNITED STATES COAST GUARD (USCG)", "The USCG uses the FRC to conduct search and rescue, migrant and drug interdiction, and other law enforcement missions. The FRC carries one cutter boat on board and is able to conduct operations in moderate sea conditions. The FRC replaces the USCG\u2019s Island Class patrol boat and provides improved fuel capacity, surveillance, and communications interoperability with other Department of Homeland Security (DHS) and Department of Defense assets.", "FRC found operationally effective and suitable, and all key performance parameters validated.", "Main diesel engine issues persist, which may require further retrofits.", "GAO last reported on this program in March and April 2017 (GAO-17-218, GAO-17- 346SP).", "According to USCG officials, the FRC program is on track to meet its current cost and schedule goals. The USCG plans to acquire 58 FRCs and, as of September 2017, 25 had been delivered and 19 were on contract. To inform the budget process, the program updated its life-cycle cost estimate in June 2017, which is within its current acquisition program baseline (APB) cost thresholds.", "Previously, the program\u2019s initial operational capability (IOC) date slipped after a bid protest related to the program\u2019s initial contract award\u2014now known as phase 1\u2014and the need for structural modifications. USCG officials attributed the 5-year slip in the program\u2019s full operational capability (FOC) date to a decrease in annual procurement quantities under the phase 1 contract. Specifically, in fiscal years 2010 and 2011, the quantities decreased from 6 FRCs per year to 4. In May 2014, the USCG determined that it would procure only 32 of the 58 FRCs through this contract and initiated efforts to conduct a full and open competition for the remaining 26 vessels\u2014known as phase 2.", "In May 2016, the USCG awarded the phase 2 contract for the remaining 26 FRCs, which has a potential value of $1.42 billion. Under the phase 2 contract, the USCG can procure 4 to 6 FRCs per option period. The USCG ordered 6 FRCs at the time of the phase 2 award and, in June 2017, exercised an option for an additional 6 FRCs.", "The USCG has established that the annual procurement quantity will be dictated by funding levels, and funding shortfalls could cause further schedule delays. The affordability gap from fiscal years 2018 to 2022 may be overstated because\u2014as we found in April 2015\u2014DHS\u2019s funding plan to Congress does not contain operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving $1.6 billion in O&M funding over this 5-year period. USCG officials stated that they expect to exercise an option for 4 FRCs in fiscal year 2018 and that the USCG plans to prioritize acquisition funding in fiscal years 2019 and 2020 to procure the final 10 hulls and complete procurement of all 58 FRCs.", "United States Coast Guard (USCG) FAST RESPONSE CUTTER (FRC)"], "subsections": []}, {"section_title": "DOT&E noted that these deficiencies do not prevent mission completion or present a danger to personnel, but recommended that they be resolved as soon as possible. USCG officials indicated that they plan to resolve the remaining deficiencies through engineering or other changes.", "paragraphs": ["The USCG continues to work with the contractor\u2014Bollinger Shipyards, LLC\u2014to address issues covered by the warranty and acceptance clauses for each ship. For example, 18 engines\u20149 operational engines and 9 spare engines\u2014have been replaced under the program\u2019s warranty. According to USCG documentation, 65 percent of the current issues with the engines have been resolved through retrofits; however, additional problems with the engines have been identified since our April 2017 review. For example, issues with water pump shafts are currently being examined through a root cause analysis and will be redesigned and are scheduled to undergo retrofits starting in December 2018. We previously found that the FRC\u2019s warranty resulted in improved cost and quality by requiring the shipbuilder to pay for the repair of defects. As of September 2017, USCG officials said the replacements and retrofits completed under the program\u2019s warranty allowed the USCG to avoid an estimated $104 million in potential unplanned costs\u2014of which $63 million is related to the engines.", "The FRC program does not have any critical staffing vacancies, but the USCG identified insufficient staffing for shore-side support groups as a potential risk that could affect the asset\u2019s operations. These groups provide maintenance to the FRCs while they are in port. In order to mitigate this staffing issue, the USCG is using commercial contracts for maintenance to supplement the capacity of the USCG\u2019s maintenance staff.", "USCG officials stated that the FRC program is fully funded, executable, and on track to reach FOC by March of 2027. They added that FRCs were recently delivered to locations in Mississippi, Alaska, and Hawaii. USCG officials stated that FRCs are integral to USCG operations, such as providing critical support during the recent hurricane season, and that the program office continues to work with the contractor and stakeholders to quickly and properly address issues with FRCs as they are identified. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "H-65 CONVERSION/SUSTAINMENT PROGRAM (H-65)", "UNITED STATES COAST GUARD (USCG)", "The H-65 aircraft is a short-range helicopter that the USCG uses to fulfill its missions, including search and rescue, ports and waterways security, marine safety, and defense readiness. The H-65 acquisition program increased the fleet\u2019s size by 7 aircraft, added armament capabilities, upgraded navigation systems, and replaced each of the helicopters\u2019 engines. The program is currently focused on upgrades to radar sensors, the automatic flight control system (AFCS), and avionics.", "Operational assessment of avionics upgrade planned to start in February 2018.", "Program fully staffed, but schedule slips raise risks with future staffing requirements.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "As of November 2017, the program remains in breach of its current acquisition program baseline (APB). In November 2016, the USCG notified Department of Homeland Security (DHS) leadership that it would not complete all activities required\u2014including developmental testing and an operational assessment\u2014to achieve acquisition decision event (ADE) 2C for low-rate initial production of the avionics and AFCS upgrades by its current APB threshold date of March 2017. USCG officials primarily attributed these delays to an underestimation of the technical effort necessary to meet the requirements and have subsequently worked with the contractor to continue development of avionic upgrades.", "In January 2017, DHS leadership directed the program to update its APB, life-cycle cost estimate (LCCE) and test and evaluation master plan by May 2017. However,  the USCG did not meet this deadline, in part, because it decided to add a service life  extension program (SLEP) to the H-65 program. The SLEP is expected to extend the  current 20,000 flight hour service life of each aircraft by another 10,000 flight hours  by replacing obsolete aircraft components. USCG officials stated that this will allow  the USCG to delay purchasing new aircraft to prioritize funding for the Offshore Patrol  Cutter.", "USCG officials plan to obtain approval for the SLEP when the program submits its revised APB for DHS approval, which is expected by March 2018. The program is revising its LCCE, but provided an update in June 2017 to inform the budget process. This update exceeds its current APB thresholds because it includes an initial estimate for the SLEP. The USCG estimates that the SLEP will cost $54 million for the entire fleet. USCG officials attributed the increase in operations and maintenance (O&M) costs to the additional extension of the aircraft\u2019s operational life. The program\u2019s O&M costs previously increased due to the USCG\u2019s decision to extend the aircraft\u2019s operational life from 2030 to 2039.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because\u2014 as we found in April 2015\u2014DHS\u2019s funding plan to Congress does not contain O&M funding for USCG programs. USCG officials anticipate receiving $1.6 billion in O&M funding over this 5-year period.", "United States Coast Guard (USCG)", "H-65 CONVERSION/SUSTAINMENT PROGRAM (H-65)"], "subsections": []}, {"section_title": "The program\u2019s OTA plans to conduct an operational assessment starting in February 2018 to identify areas of risk before beginning initial operational test and evaluation (OT&E) in late calendar year 2018. Initial OT&E is intended to test all of the H-65 upgrades installed throughout the life of the program to support approval for full-rate production.", "paragraphs": ["The USCG awarded new contracts to Rockwell Collins\u2014the original equipment manufacturer of the legacy AFCS and avionics\u2014to address the challenges encountered with development of the new upgrades. Specifically, the program awarded new contracts to support continued development of the AFCS and avionics upgrades in July 2016 and March 2017, respectively. As of September 2017, the combined value of both contracts totaled more than $15 million.", "The USCG cancelled development of a dedicated surface search radar capability for the H-65 in 2014, but USCG officials said a commercial off-the-shelf weather radar with surface search capability will be installed as part of the avionics upgrade.", "USCG officials said there is some risk involved with extending the aircrafts\u2019 service life beyond 20,000 flight hours since it has never been done by other agencies that operate the H-65. However, USCG officials stated that the aircraft manufacturer, Airbus, assisted the USCG\u2019s chief aeronautical engineer in identifying specific parts needing replacement and is providing support.", "In July 2017, the USCG reported that the program was fully staffed, but that the schedule slips have introduced potential risks with future staffing requirements. The program is mitigating these risks by extending some military personnel and ensuring rotating personnel are replaced by new staff with the expertise needed to complete the program\u2019s planned activities, such as testing.", "USCG officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "UNITED STATES COAST GUARD (USCG)", "The program is intended to assist the USCG in maintaining the capability to access the Arctic and Antarctic polar regions. The USCG requires its icebreaking fleet to conduct multiple missions, including defense readiness; marine environmental protection; ports, waterway, and coastal security; and search and rescue. The USCG plans to acquire three heavy icebreakers to recapitalize the only existing operational heavy icebreaker, which is nearing the end of its service life.", "Program initiated model testing of hull and propulsion systems, which will inform design decisions.", "Program office integrates USCG and Navy personnel, but funding responsibilities may cause challenges.", "GAO last reported on this program in September 2017 (GAO-17-698R).", "In June 2014, Department of Homeland Security (DHS) leadership granted the program acquisition decision event (ADE) 1 approval. The Acting Under Secretary for Management also acknowledged the USCG\u2019s need to accelerate the acquisition process to mitigate gaps in the heavy icebreaking capability because the service life of the USCG\u2019s only heavy polar icebreaker, which had already been extended, could end as early as 2020.", "In January 2018, DHS leadership approved the program\u2019s initial acquisition program baseline (APB) establishing cost, schedule, and performance goals. The USCG planned to achieve a combined ADE 2A and 2B by December 2017, which would authorize the initiation of development efforts. According to DHS officials, this milestone was delayed to February 2018 to allow for the completion of required acquisition documents to inform the decision, such as the program\u2019s life-cycle cost estimate and APB.", "The USCG is partnering with the Navy to leverage shipbuilding expertise and engaging early with potential shipbuilders through industry studies to mitigate some risks associated with the program\u2019s accelerated acquisition schedule. However, GAO previously found that the program faces challenges in implementing the accelerated schedule. For example, the first icebreaker\u2014which is preliminarily estimated to cost about $750 million to design and construct\u2014would need to be fully funded in fiscal year 2019 at the same time the USCG is expecting to prioritize funding for the Offshore Patrol Cutter.", "In fiscal year 2017, the Consolidated Appropriations Act or associated explanatory materials, reflected funding for the program, including $150 million for advance procurement of heavy polar icebreakers and $25 million to the USCG for programmatic costs, respectively. USCG officials stated that the Navy funding could cover most of the design costs but would not cover long lead items or construction costs for any of the ships. They further stated that uncertainties with the amount and source of future appropriations have made planning the icebreaker acquisition challenging.", "United States Coast Guard (USCG)", "DHS leadership approved four key performance parameters (KPP) related to the ship\u2019s ability to independently break through ice, the ship\u2019s operating duration, and communications.", "In May 2017, the USCG began model testing of potential hull designs and propulsion configurations. USCG officials explained that the hulls of icebreakers are unique from other ships because they must balance a hull design optimized for icebreaking, which are generally broad and blunt, against a hull design optimized for seakeeping, which are generally narrow and streamlined. USCG officials noted that the power demands and propulsion system for the ship are dependent on the hull design. USCG officials stated that maneuverability was identified as a challenge during model testing and explained that azimuthing propulsors\u2014propellers that sit below the ship and can rotate 360 degrees\u2014offered better maneuverability than traditional propulsion systems. USCG officials said these propulsors are widely used on commercial ships, but may need modification to meet the USCG\u2019s requirements. USCG officials anticipate results from the model testing to be completed by March 2018 and plan to use these results to inform the final specifications for the ships."], "subsections": []}, {"section_title": "In November 2017, DHS\u2019s Director, Office of Test and Evaluation approved the program\u2019s test and evaluation master plan, which calls for additional model testing to assess resistance, propulsion, and maneuverability.", "paragraphs": ["The USCG established an integrated heavy polar icebreaker program office with the Navy and in 2017, DHS, the USCG, and Navy entered into several agreements that outline oversight roles, among other things. For example, these agreements state that the program will follow DHS acquisition policies with DHS leadership serving as the acquisition decision authority for program milestones. However, the Navy will review and approve acquisition documents before the program seeks DHS approval. These agreements also state that the program\u2019s contracting actions could be funded by either USCG or Navy appropriations, and the source of the appropriations will award the contract.", "The program plans to competitively award a contract, which would include options for the detail design and construction for all three ships to a single shipbuilder by June 2019. Program officials stated they plan to award the contract under full and open competition to obtain competitive prices and include the construction of the three ships as options to accommodate the program\u2019s funding uncertainties. In February 2017, the USCG awarded contracts to five shipbuilders\u2014valued at approximately $4 million each\u2014for design studies which will inform program decisions. Program officials stated that under these design studies contracts, the shipbuilders developed several potential ship designs and preliminary costs, with a focus on alternative propulsion options and hull designs.", "In August 2017, USCG officials told GAO that the program\u2019s staffing gap was not negatively impacting program efforts.", "USCG officials stated that the program office had completed requirements for ADE 2A and 2B, and is on track to release the request for proposals for the detail design and construction contract by March 2018. These officials added that, during 2017, the program office refined the program\u2019s requirements, completed ice and open water model testing, and partnered with five industry teams to evaluate multiple design solutions. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "LONG RANGE SURVEILLANCE AIRCRAFT (HC-130H/J)", "UNITED STATES COAST GUARD (USCG)", "The USCG uses HC-130H and HC-130J aircraft to conduct search and rescue missions, transport cargo and personnel, support law enforcement, and execute other operations. Both aircraft are quad-engine propeller-driven platforms. The HC-130J is a modernized version of the HC-130H, which has advanced engines, propellers, and equipment that provide enhanced speed, altitude, range, and surveillance capabilities.", "Performance testing of new mission system processor complete.", "Transfer of HC-130H aircraft to other agencies ongoing.", "GAO last reported on this program in April 2017 (GAO-17-346SP).", "During 2017, the USCG continued a nearly 3-year effort to re-baseline the program\u2014 which includes revisions to the program\u2019s life-cycle cost estimate (LCCE) and acquisition program baseline (APB)\u2014to account for significant changes. Specifically, the USCG decided to pursue an all HC-130J fleet and, in fiscal year 2014, Congress directed the transfer of 7 HC-130H aircraft to the U.S. Air Force. The USCG was in the process of upgrading these aircraft, but cancelled further HC-130H upgrades. In September 2017, Department of Homeland Security (DHS) leadership directed the USCG to submit the revised APB by January 2018.", "According to USCG officials, the re-baseline has been delayed, in part, because Congress also directed the USCG to conduct a multi-phased analysis of its mission needs. In November 2016, the USCG submitted the results of its analysis for fixed- wing aircraft, which confirmed the planned total quantity of 22 HC-130J aircraft and an annual flight-hour goal of 800 hours per aircraft. USCG officials said the results of the analysis will be reflected in the program\u2019s revised LCCE and subsequent APB, but noted that challenges with the vendor hired to complete the LCCE revision have also contributed to delays. The program submitted cost information in June 2017 to inform the budget process, but it reflected no updates from the program\u2019s November 2011 LCCE. USCG officials previously attributed the acquisition cost growth and schedule slip from the program\u2019s initial APB to the increase in HC-130J quantities from 6 to 22. However, when the revised LCCE is complete, estimated costs may decrease since the HC-130J aircraft are less expensive to maintain.", "As of December 2017, USCG officials stated they had received 11 HC-130J aircraft and had awarded contracts for 3 more\u2014some of which were not requested. USCG officials previously stated that the program needs to acquire 1-2 HC-130J aircraft per year to meet its full operational capability (FOC) date. However, it is unclear how the USCG will meet its FOC date because it only requested funding for 1 aircraft over the next 5 years. The affordability gap from fiscal years 2018 to 2022 may be overstated because\u2014as we found in April 2015\u2014DHS\u2019s funding plan to Congress does not contain operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving approximately $1.4 billion in O&M funding over this 5- year period.", "United States Coast Guard (USCG)", "LONG RANGE SURVEILLANCE AIRCRAFT (HC-130H/J)"], "subsections": []}, {"section_title": "The HC-130J will not be able to meet two of its seven key performance parameters (KPP) until the USCG installs a new mission system processor on the aircraft\u2014an effort that is already underway. These two KPPs are related to the detection of targets and the aircraft\u2019s ability to communicate with other assets. The USCG is replacing the mission system processor on its fixed-wing aircraft\u2014including the HC-130J\u2014with a system used by the U.S. Navy and DHS\u2019s Customs and Border Protection. The new mission system processor is intended to enhance operator interface and sensor management, and replace obsolete equipment.", "paragraphs": [], "subsections": []}, {"section_title": "The USCG conducted developmental testing on a prototype of the HC-130J mission system processor. According to USCG officials, this testing was completed in June 2017 and successfully demonstrated the new mission system processor in a variety of operational environments. The USCG does not plan to operationally test the new processor on the HC-130J, in part, because the aircraft has already been tested. In 2009, DHS\u2019s Director, Office of Test and Evaluation and the USCG determined the HC-130J did not need to operationally test the airframe because the U.S. Air Force conducted operational testing on the base C-130J airframe in 2005. Instead, the USCG plans to operationally test the new mission system processor in fiscal year 2021 during operational testing on the C-27J, which is new to the USCG\u2019s fixed-wing fleet. As of November 2017, the USCG had accepted three HC-130J aircraft outfitted with the new mission system processor.", "paragraphs": ["In December 2013, Congress directed the transfer of 7 HC-130H aircraft to the U.S. Air Force for modifications\u2014which consists of upgrades and installing a fire retardant delivery system\u2014and subsequent transfer to the U.S. Forest Service. This direction factored into the USCG\u2019s decision to pursue an all HC-130J fleet. As of December 2017, the Forest Service had not yet received any modified aircraft primarily because of issues with contractors. According to USCG officials, the original contract the Air Force awarded to install the fire retardant delivery system in May 2016 was terminated 7 months later due to an unqualified vendor and a new contract has not yet been awarded. In the meantime, the Forest Service is using 2 of the 7 HC-130Hs. USCG officials said these aircraft are not modified, but outfitted with a less effective firefighting device.", "As of November 2017, the USCG plans to operate 14 of its HC-130H aircraft until the end of their service lives or until they can be replaced with new HC-130J aircraft. However, as previously discussed, the USCG has not requested funding for the additional HC-130J aircraft to support this plan.", "In October 2017, USCG officials reported that they were in the process of hiring staff to address the program\u2019s staffing gap.", "USCG officials provided technical comments on a draft of this assessment, which GAO incorporated, as appropriate.", "MEDIUM RANGE SURVEILLANCE AIRCRAFT (HC-144A/ C-27J)", "UNITED STATES COAST GUARD (USCG)", "The USCG uses HC-144A and C-27J aircraft to conduct all types of missions, including search and rescue and disaster response. All 32 aircraft\u201418 HC-144A aircraft and 14 C-27J aircraft\u2014are twin-engine propeller driven platforms. The interior of both aircraft are able to be re-configured to accommodate cargo, personnel or medical transports.", "Developmental testing of new  mission system processor is  ongoing.", "Program continues to face challenges related to purchasing spare parts and accessing technical data.", "GAO last reported on this program in April 2017 and March 2015 (GAO-17-346SP, GAO-15-325).", "USCG officials said the program is on track to meet the cost and schedule goals in its current acquisition program baseline (APB), which Department of Homeland Security (DHS) leadership approved in August 2016 to reflect the restructuring of the HC-144A acquisition program. The USCG initially planned to procure a total of 36 HC-144A aircraft, but reduced that number to the 18 it had already procured after Congress directed the transfer of 14 C-27J aircraft from the U.S. Air Force to the USCG in fiscal year 2014.", "The program\u2019s APB divides the program into two phases: phase 1 includes acceptance of the 18 HC-144A aircraft and upgrades to the aircraft\u2019s mission and flight management systems, and phase 2 includes acceptance of and modifications to the C-27J aircraft to meet the USCG\u2019s mission needs. In October 2017, USCG officials told GAO that the program had initiated phase 1 efforts to upgrade the first HC-144A aircraft. The USCG plans to complete upgrades on all HC-144As by the end of fiscal year 2021. For phase 2, the USCG has accepted all 14 C-27Js from the U.S. Air Force and plans to complete the modification of all C-27Js by March 2025 to achieve full operational capability (FOC).", "To inform the budget process, the program updated its life-cycle cost estimate (LCCE) in June 2017, which is within its current APB cost thresholds. This estimate includes C-27J modification costs, such as installation of a new sensor package and new mission system processor. The program\u2019s LCCE for the 36 HC-144A aircraft previously increased to $28.7 billion in 2012 when the USCG accounted for 5 years of additional costs, among other things. The current LCCE represents a considerable decrease, but also reflects a reduction in the number of aircraft and planned flight hours.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because\u2014as we found in April 2015\u2014DHS\u2019s funding plan to Congress does not contain operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving nearly $1.7 billion in total funding over this 5-year period to cover nearly $1.8 billion in total costs.", "United States Coast Guard (USCG)", "MEDIUM RANGE SURVEILLANCE AIRCRAFT (HC-144A/C-27J)"], "subsections": []}, {"section_title": "Neither the HC-144A nor the C-27J will be able to meet two of their seven key performance parameters (KPP) until the USCG installs a new mission system processor on the aircraft\u2014an effort that is already underway. These two KPPs are related to the detection of targets and the aircraft\u2019s ability to communicate with other assets. The USCG is replacing the mission system processor on its fixed-wing aircraft\u2014 including the HC-144A and C-27J\u2014with a system used by the U.S. Navy and DHS\u2019s Customs and Border Protection. The new mission system processor is intended to enhance operator interface and sensor management, and replace obsolete equipment.", "paragraphs": [], "subsections": []}, {"section_title": "The USCG plans to operationally assess the new mission system processor during operational testing of the C-27J, which is scheduled to begin in fiscal year 2021.", "paragraphs": ["The USCG still faces challenges in transitioning the C-27J into the USCG fleet. In March 2015, GAO found that the successful and cost-effective fielding of the C-27J aircraft is contingent on the USCG\u2019s ability to address risk areas including, purchasing spare parts and accessing technical data, among other issues.", "According to USCG officials, the program continues to face challenges purchasing spare parts and accessing technical data. The program is reliant on the aircraft original equipment manufacturer for about 35 percent of spare C-27J parts. For other  parts, USCG officials said that the USCG continues to look for ways to provide the same  or similar parts for the aircraft at a faster rate and the USCG plans to award contracts to  two additional manufacturers in calendar year 2018.", "USCG officials stated that retrieving technical data for the C-27J aircraft remains a challenge, but the USCG is working with the Department of Defense to obtain rights to data currently owned by the original equipment manufacturer. Once the USCG receives appropriate rights to C-27J technical data, the USCG officials said they can begin modification of the aircraft. The USCG also plans to purchase the same surface search radar used on the HC-144A or the HC-130J for the C-27J, which will give the USCG some commonality in maintenance, logistics, and training for this aspect of the aircraft.", "In October 2017, USCG officials told GAO that the program\u2019s staffing is adequate and the gap has not negatively affected the program.", "USCG officials stated that the program remains on track to meet the cost, schedule, and performance goals outlined in its current APB and that they monitor APB key parameters in accordance with DHS guidance. These officials added that market research continues to increase supply chain sources and to identify products for new mission systems. USCG officials also provided technical comments, which GAO incorporated as appropriate.", "NATIONAL SECURITY CUTTER (NSC)", "UNITED STATES COAST GUARD (USCG)", "The USCG uses the NSC to conduct search and rescue, migrant and drug interdiction, environmental protection, and other missions. The NSC replaces and provides improved capabilities over the USCG\u2019s High Endurance Cutters. The NSC carries helicopters and cutter boats, provides an extended on-scene presence at forward deployed locations, and operates worldwide.", "Follow-on operational testing began in October 2017, but cybersecurity testing delayed.", "The USCG is conducting a study to determine root cause of propulsion system issues.", "GAO last reported on this program in March and April 2017 (GAO-17-218, GAO-17- 346SP).", "In November 2017, Department of Homeland Security (DHS) leadership approved a revised acquisition program baseline (APB), which accounted for the addition of a ninth NSC to the program of record. The USCG originally planned to acquire only eight NSCs; however, in the Consolidated Appropriations Act of 2016, Congress directed that not less than $640 million be immediately available and allotted to contract for the production of a ninth NSC. In December 2016, the USCG awarded a contract to produce the ninth NSC and, as of November 2017, six NSCs had been delivered and three were under construction.", "The USCG anticipates delivery of the ninth NSC in September 2020, which coincides with the program\u2019s prior APB threshold date for full operational capability (FOC). However, the revised APB extends this date by 1 year to account for any risks in delivering the additional ship. The program\u2019s FOC date previously slipped 4 years, which USCG officials attributed to funding shortfalls, among other things.", "The ninth NSC contributed to a $453 million and $123 million increase in the  program\u2019s APB cost thresholds for acquisition and operations and maintenance (O&M), respectively. However, the program\u2019s revised life-cycle cost estimate (LCCE) is still lower than its initial estimate for eight ships, which USCG officials attribute to more accurate estimates. The revised LCCE also included costs for several design changes the USCG has had to implement on equipment with known issues. As of September 2017, 12 equipment systems required design changes, which totaled an estimated cost of over $260 million. This work includes structural enhancement work on the first two NSCs and the replacement of the gantry crane, which aids in the deployment of cutter boats.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because\u2014 as we found in April 2015\u2014DHS\u2019s funding plan to Congress does not contain O&M funding for USCG programs. USCG officials anticipate receiving approximately $2.1 billion in O&M funding over this 5-year period to cover the NSC\u2019s estimated $1.8 billion in O&M costs, but stated it will refine its annual budget request based on the program\u2019s needs each year. The USCG also identified carryover funding to cover the projected acquisition funding shortfall in fiscal year 2018.", "United States Coast Guard (USCG)", "NATIONAL SECURITY CUTTER (NSC)"], "subsections": []}, {"section_title": "The DHS USM also directed the USCG to complete a study to determine the root cause of the NSC\u2019s propulsion system issues by December 2017; however, as of January 2018, the study was not yet complete. GAO previously reported on these issues\u2014including high engine temperatures, cracked cylinder heads, and overheating generator bearings that were impacting missions\u2014in January 2016.", "paragraphs": ["The NSC program does not have any critical staffing vacancies. However, in July 2017, the program reported that the greatest staffing challenge is a potential extension to the program\u2019s end date if the USCG acquires more than 9 NSCs. If this occurs, the program office must reassess future staffing requirements to ensure adequate program oversight continues until the last NSC completes post-delivery activities.", "In addition, the USCG has made changes to its staffing model for operating the NSCs. The USCG initially planned to implement a crew rotational concept in which crews would rotate while NSCs were underway to achieve a goal of 230 days away from the cutter\u2019s homeport. In February 2018, USCG officials told GAO they abandoned the crew rotational concept because the concept did not provide the USCG with the expected return on investment. Instead, USCG officials said a new plan has been implemented that does not rotate crew and is anticipated to increase the days away from home port from the current capability of 185 days to 200 days.", "USCG officials stated that NSCs had a record year of narcotics seizures in 2017. In addition to the test activities identified in this assessment, USCG officials stated that the first follow-on OT&E event was completed in December 2017 and the first cybersecurity test event is scheduled for February 2018. They also noted that the shipbuilder continues to show improving cost performance and is completing construction within budget. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "OFFSHORE PATROL CUTTER (OPC)", "UNITED STATES COAST GUARD (USCG)", "The USCG plans to use the OPC to conduct patrols for homeland security, law enforcement, and search and rescue operations. The OPC is being designed for long-distance transit, extended on-scene presence, and operations with deployable aircraft and small boats. It is intended to replace the USCG\u2019s aging Medium Endurance Cutters (MEC) and bridge the operational capabilities provided by the Fast Response Cutters and National Security Cutters (NSC).", "Program plans to refine the ship\u2019s design, as needed, based  on early operational assessment  results.", "Program\u2019s acquisition strategy incorporated some best practices.", "GAO last reported on this program in April and June 2017 (GAO-17-346SP, GAO-17-654T).", "According to USCG officials, the OPC program is on track to meet its cost and schedule  goals. In September 2014, Department of Homeland Security (DHS) leadership  approved the program\u2019s current acquisition program baseline (APB), which accounts  for schedule slips resulting from delays in awarding the program\u2019s initial contracts and  a subsequent bid protest. The USCG expects to start construction of the first OPC in  fiscal year 2019 and procure a total of 25 ships. The USCG plans to initially fund one  OPC per year and eventually two OPCs per year until all 25 OPCs are delivered. USCG  officials have stated that additional OPC delays will decrease the USCG\u2019s operational  capacity because the MECs will likely require increased downtime for maintenance  and other issues, reducing their availability.", "In January 2016, DHS leadership directed the USCG to revise the OPC life-cycle cost  estimate (LCCE) and submit it for approval within 6 months of awarding the detailed  design and construction contract for the ships\u2014which the USCG subsequently  awarded in September 2016. In June 2017, the program submitted an updated LCCE  to inform the budget process that\u2014while not approved by DHS leadership\u2014accounts  for the contract award and the program\u2019s schedule slips. As of December 2017,  the program\u2019s revised LCCE still had not been approved. It is unclear whether it will  address other issues, such as an increase in the estimated weight of each ship. The  OPC\u2019s initial LCCE was based in large part on the estimated weight of each ship.  However, in November 2017, USCG officials said the ship is expected to weigh up to  35 percent more than originally estimated. Nevertheless, USCG officials expect to  procure all 25 OPCs for the program\u2019s APB objective cost of $10.5 billion because the  contractor identified cost efficiencies to compensate for the increased weight.", "GAO previously raised questions about the OPC\u2019s affordability and its effect on other USCG acquisition programs, such as the Heavy Polar Icebreaker. Specifically, GAO noted that the OPC procurement will consume about two-thirds of the USCG\u2019s planned acquisition budget between fiscal years 2018 and 2032 based on recent funding history. The program\u2019s affordability gap from fiscal years 2020 to 2022 may be overstated because\u2014as we found in April 2015\u2014DHS\u2019s funding plan to Congress does not report operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving $103 million in O&M funding over this 5-year period.", "United States Coast Guard (USCG)", "OFFSHORE PATROL CUTTER (OPC)"], "subsections": []}, {"section_title": "The USCG plans to conduct initial operational test and evaluation (OT&E) on the first OPC in fiscal year 2023. However, the test results from initial OT&E will not be available to inform key decisions. For example, the results will not be available to inform the decision to build 2 OPCs per year\u2014which USCG officials said is scheduled to begin in fiscal year 2021. Without test results to inform these key decisions, the USCG must make substantial commitments prior to knowing how well the ship will meet its requirements.", "paragraphs": ["The USCG is in the process of completing the design of the OPC before starting construction, which is in-line with GAO shipbuilding best practices. In addition, USCG officials stated that the program is using state-of-the-market technology that has been proven on other ships as opposed to state-of-the-art technology, which lowers the risk of the program.", "The USCG used a two-phased down-select strategy to select a contractor to deliver the OPC. For phase 1, the USCG conducted a full and open competition and selected three contractors to perform preliminary design work. For phase 2, the USCG selected one of the phase 1 contractors\u2014Eastern Shipbuilding\u2014to develop a detailed design of the OPC and construct no more than the first 11 ships. The contract\u2014worth approximately $110 million\u2014includes separate options for each ship. The options for ships 10 and 11 were unpriced and included in the solicitation as an incentive to convert the contract type from fixed price incentive to firm fixed price. These options will be included in a repricing proposal submitted by the contractor for ships 6-9 after delivery of the first ship. USCG officials have stated the USCG will decide whether to exercise the option for ships 10 and 11 based on the contractor\u2019s re-pricing proposal for ships 6-9. The USCG plans to re-compete the contract for the remaining 14-16 ships.", "The OPC program continued to increase its required staffing level and the USCG reported that adjustments to staffing will continue as the program matures. The program faces shortages including engineers, a logistics manager, and a technical director, but USCG officials said they are hiring staff to address these gaps.", "USCG officials stated that the OPC program is fully funded, executable, and on track to award construction for the first OPC in September 2018. These officials said design efforts are on track and the contractor is meeting the milestones to deliver the first OPC in 2021. USCG officials noted that they are continuing to increase staff at the contractor\u2019s facility to prepare for the start of construction for the first OPC. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate.", "UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES (USCIS)", "The Transformation program was established in 2006 to transition USCIS from a fragmented, paper-based filing environment to a consolidated, paperless environment for processing immigration and citizenship applications. The program developed a new system architecture and delivers capability through releases that correspond to new product lines within four lines of business: Citizenship, Immigrant, Non-Immigrant, and Humanitarian.", "Revision of key performance parameters and test and  evaluation master plan in  progress.", "Program is reorganizing to leverage expertise within USCIS and revise its approach.", "GAO last reported on this program in April 2017 and July 2016 (GAO-17-346SP, GAO-16- 467).", "The program remains in breach of its current acquisition program baseline (APB). In  September 2016, the Transformation program experienced a schedule breach when it  failed to complete deployment of all the product lines associated with the Citizenship  line of business. The deployment was delayed because of challenges processing new  product lines on the new system architecture and other technical issues with the case  management system. Prior to the breach, the program deployed six product lines,  which supported approximately 24 percent of the total workload processed by USCIS  in fiscal year 2016. Department of Homeland Security (DHS) leadership previously re- baselined the program in April 2015 after USCIS determined that it could not use any  of the architecture delivered under its initial strategy, despite having invested more  than $475 million in its development.", "In December 2016, DHS leadership directed USCIS to stop planning and   development for new product lines, develop a breach remediation plan, and update its  acquisition documentation. In February 2017, DHS leadership approved the program\u2019s  remediation plan and the program has since made progress in implementing this  plan. However, DHS leadership elected to continue with the program\u2019s pause in new  development following program reviews in March 2017, July 2017, and October 2017.", "USCIS officials said they are revising the program\u2019s acquisition documents\u2014including  its APB and life-cycle cost estimate (LCCE)\u2014and plan to re-baseline by March 2018.  The program updated the total costs in its LCCE to inform the budget process, but  these costs do not reflect the program\u2019s re-baselining plans. As a result, the status of  the program against its cost and schedule goals is unclear. However, the program is  more than 3 years past its original full operational capability (FOC) date.", "The affordability gap from fiscal years 2018 to 2022 may be overstated because  DHS\u2019s funding plan to Congress no longer contained operations and maintenance  funding for individual programs. USCIS uses revenue from premium processing fees to  fund the Transformation program and routinely collects more fees than the program\u2019s  estimated costs."], "subsections": []}, {"section_title": "In September 2017, USCIS officials told GAO that the program is updating its key performance parameters (KPP) and test and evaluation master plan as part of its re-baselining efforts because the program continues to struggle to meet its requirements.", "paragraphs": [], "subsections": []}, {"section_title": "DHS leadership previously approved a revised set of eight KPPs for the program in April 2015. However, USCIS could not fully demonstrate these KPPs until it achieved FOC. In the interim, the program\u2019s OTA conducted operational assessments (OA) of new product lines as capability was deployed. The OTA completed two OAs since the program updated its KPPs, but DHS\u2019s Director, Office of Test and Evaluation (DOT&E) did not verify all of the results. DOT&E reviewed the results of the first OA and concluded that the system met 6 of the 7 tested KPPs, but noted that the capability assessed was a minor subset of the system\u2019s FOC.", "paragraphs": [], "subsections": []}, {"section_title": "The OTA subsequently initiated an OA intended to inform DHS leadership\u2019s acceptance of the Citizenship line of business. However, in December 2017, USCIS officials reported that the assessment had not yet been completed.", "paragraphs": ["USCIS officials told GAO that the program office underwent a reorganization in  January 2017 to help address the program\u2019s recent challenges. This effort included  dismantling the program office and repositioning Transformation under the USCIS Office  of Information Technology so the program could leverage expertise in areas such as  engineering within USCIS. USCIS officials reported that the program no longer plans  to deliver capability by product lines because this strategy focused too narrowly on  the automation of forms associated with the lines of business. Going forward, USCIS  officials said the program plans to develop capabilities that will address broader  objectives, such as reducing the time it takes to process applications and decisions.", "The program previously made significant changes after it experienced a 5-month delay  with its first release, which was deployed in May 2012. DHS attributed this delay to  weak contractor performance and pursuing an unnecessarily complex system, among  other things. To address these issues, the Office of Management and Budget, DHS, and  USCIS determined the program should implement a new acquisition strategy, which  allowed for an agile software development methodology and increased competition for  development work. This strategy was reflected in the program\u2019s April 2015 re-baseline.", "USCIS officials told GAO that they plan to address the Transformation program\u2019s staffing  gap now that the reorganization is complete.", "USCIS officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate."], "subsections": []}]}, {"section_title": "Appendix II: Key Portfolio Management Practices", "paragraphs": ["To help determine the extent to which the Department of Homeland  Security (DHS) has taken actions to enhance its policies and processes  to better reflect key portfolio management practices, we assessed the  department\u2019s requirements, acquisition management, and resource  allocation policies using key practices we established in September  2012. These key practices are based on our past work, in which we  examined the practices that private sector entities use to achieve a  balanced mix of new projects and found that successful commercial  companies use a disciplined and integrated approach to prioritize needs  and allocate resources. As a result, these organizations can avoid  pursuing more projects than their resources can support and better  optimize the return on their investments. This approach, known as  portfolio management, requires companies to view each of their  investments as contributing to a collective whole, rather than as  independent and unrelated."], "subsections": []}, {"section_title": "Appendix III: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this audit were designed to provide congressional  committees insight into the Department of Homeland Security\u2019s (DHS)  major acquisition programs. We assessed the extent to which (1) DHS\u2019s  major acquisition programs are on track to meet their schedule and cost  goals and (2) DHS has taken actions to enhance its policies and  processes to better reflect key portfolio management practices. To  answer these questions, we reviewed 28 of DHS\u2019s 79 major acquisition  programs. We reviewed all 16 of DHS\u2019s Level 1 acquisition programs\u2014 those with life-cycle cost estimates (LCCE) of $1 billion or more\u2014that had  at least one project, increment, or segment in the Obtain phase\u2014the  stage in the acquisition life cycle when programs develop, test, and  evaluate systems\u2014at the initiation of our audit. Additionally, we reviewed  12 other major acquisition programs\u2014including 8 Level 1 programs that  either had not yet entered or were beyond the Obtain phase, and 4 Level  2 programs that have LCCEs between $300 million and less than $1  billion\u2014that we identified were at risk of not meeting their cost estimates,  schedules, or capability requirements based on our past work and  discussions with DHS officials. Specifically, we met with representatives  from DHS\u2019s Office of Program Accountability and Risk Management  (PARM)\u2014DHS\u2019s main body for acquisition oversight\u2014as a part of our  scoping effort to determine which programs (if any) were facing difficulties  in meeting their cost estimates, schedules, or capability requirements.  The 28 selected programs were sponsored by eight different components,  and they are identified in table 7, along with our rationale for selecting  them.", "To determine the extent to which DHS\u2019s major acquisition programs are  on track to meet their schedule and cost goals, we collected key  acquisition documentation for each of the 28 programs, such as all  LCCEs and acquisition program baselines (APB) approved at the  department level since DHS\u2019s current acquisition management policy  went into effect in November 2008. DHS policy establishes that all major  acquisition programs should have a department-approved APB, which  establishes a program\u2019s critical cost, schedule, and performance  parameters, before they initiate efforts to obtain new capabilities. Twenty  four of the 28 programs had one or more department-approved LCCEs  and APBs between November 2008 and December 31, 2017. We used  these APBs to establish the initial and current cost and schedule goals for  the programs. We then developed a data collection instrument to help  validate the information from the APBs and collect similar information  from programs without department-approved APBs. Specifically, for each  program, we pre-populated a data collection instrument to the extent  possible with the schedule and cost information we had collected from the  APBs and our 2017 assessment (if applicable) to identify schedule and  cost goal changes, if any, since (a) the program\u2019s initial baseline was  approved and (b) January 2017\u2014the data cut-off date of the report we  issued in April 2017. We shared our data collection instruments with  officials from the program offices to confirm or correct our initial analysis  and to collect additional information to enhance the timeliness and  comprehensiveness of our data sets. We then met with program officials  to identify causes and effects associated with any identified schedule and  cost goal changes. Subsequently, we drafted preliminary assessments for  each of the 28 programs, shared them with program and component  officials, and gave these officials an opportunity to submit comments to  help us correct any inaccuracies, which we accounted for as appropriate  (such as when new information was available).", "Additionally, in July 2017, we collected copies of the detailed data on  affordability that programs submitted to inform the fiscal year 2019  resource allocation process. We also collected copies of any annual  LCCE updates programs submitted in fiscal year 2017. For each of the 24  programs with a department-approved APB, we compared (a) the most  recent cost data we collected (i.e., a department-approved LCCE, the  detailed LCCE information submitted during the resource allocation  process, a fiscal year 2017 annual LCCE update, or an update provided  by the program office) to (b) DHS\u2019s funding plan presented in the Future  Years Homeland Security Program (FYHSP) report to Congress for fiscal  years 2018\u20132022, which presents 5-year funding plans for DHS\u2019s major  acquisition programs, to assess the extent to which a program was  projected to have an acquisition funding gap in fiscal year 2018. Through  this process, we determined that our data elements were sufficiently  reliable for the purpose of this engagement.", "The FYHSP reports information by the department\u2019s new common appropriation  structure, which created standard appropriation fund types including (1) procurement,  construction, and improvements and (2) operations and support. We refer to these types  of funding as (1) acquisition and (2) operations and maintenance throughout this report. which are listed in appendix II\u2014and identified any significant shortfalls.  Specifically, we assessed the joint requirements directives and instruction  manual; DHS\u2019s Acquisition Management Directive 102-01, Acquisition  Management Instruction 102-01-001, and other related guidance; and  DHS\u2019s resource allocation directive, instruction, and handbook. First, we  assessed each group of policies against the key practices using the  following ratings:", "Met\u2014the documents fully reflected the key practice.", "Partially met\u2014the documents reflected some, but not all parts of the  key practice.", "Not met\u2014the documents did not reflect the key practice.", "We shared our preliminary analysis for each group of policies with the  DHS officials responsible for implementing them\u2014specifically, the Joint  Requirements Council (JRC), PARM, and the Office of Program Analysis  and Evaluation (PA&E)\u2014to discuss our findings, identify relevant sections  of the documents we had not yet accounted for, and solicit their thoughts  on those key practices that were not reflected in the policies. Second, we  used the scores for each group of policies to develop a department-wide  rating for each key practice. When applicable, we weighted the  department-wide rating based on the intent of the key practice. For  example, the department-wide rating for the key practice related to  resource allocation across the portfolio was based more heavily on the  rating for the resource allocation policies, rather than the ratings for the  requirements or acquisition management policies. Third, we rolled-up the  ratings for all the key practices in a particular area\u2014as identified in  appendix II\u2014to establish a department-wide overall rating for each key  practice area. We concluded that a key practice area was met if all ratings  for the individual key practices in that area were met; partially met if the  ratings for the individual key practices in that area were all partially met or  a mix of met and not met; or not met if the ratings for the individual key  practices in that area were all not met.", "In addition, we reviewed documentation that resulted from DHS\u2019s  requirements, acquisition management, and resource allocation  processes since January 2016 to get a sense of how the department has  implemented its current policies. For example, we reviewed JRC- validated requirements documents; acquisition decision memorandums;  Acquisition Program Health Assessment reports; and documentation  related to the development of DHS\u2019s fiscal year 2018 budget request and  the fiscal year 2018\u20132022 FYHSP report, including resource allocation  guidance, presentations to DHS leadership, and preliminary decisions.  We also interviewed officials from the JRC, PARM, PA&E, and the  Deputy\u2019s Management Action Group to identify any current and planned  initiatives to improve management of the department\u2019s portfolio of major  acquisition programs. We then compared our assessment of DHS\u2019s  current policies, practices, and planned initiatives to our previous findings  and the Standards for Internal Control in the Federal Government.", "We conducted this performance audit from March 2017 through May  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact listed above, Rick Cederholm (Assistant  Director), Aryn Ehlow (Analyst-in-Charge), Pete Anderson, Lorraine  Ettaro, Helena Johnson, TyAnn Lee, Alexis Olson, Sylvia Schatz,  Roxanna Sun, and Lindsay Taylor made key contributions to this report.  Other contributors included Mathew Bader, Carissa Bryant, Andrew  Burton, Erin Butkowski, Lisa Canini, Jenny Chow, John Crawford, Lindsey  Cross, Laurier R. Fish, Betsy Gregory-Hosler, Claire Li, Sarah Martin,  Marycella Mierez, Erin O\u2019Brien, Katherine Pfeiffer, John Rastler, Ashley  Rawson, Andrew Redd, Jill Schofield, Charlie Shivers III, and Jeanne  Sung."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["DHS Program Costs: Reporting Program-Level Operations and Support  Costs to Congress Would Improve Oversight. GAO-18-344. Washington,  D.C.: April 25, 2018.", "Homeland Security Acquisitions: Identifying All Non-Major Acquisitions  Would Advance Ongoing Efforts to Improve Management. GAO-17-396.  Washington, D.C.: April 13, 2017.", "Homeland Security Acquisitions: Earlier Requirements Definition and  Clear Documentation of Key Decisions Could Facilitate Ongoing  Progress. GAO-17-346SP. Washington, D.C.: April 6, 2017.", "Coast Guard Cutters: Depot Maintenance Is Affecting Operational  Availability and Cost Estimates Should Reflect Actual Expenditures.  GAO-17-218. Washington, D.C.: March 2, 2017.", "Homeland Security Acquisitions: Joint Requirements Council\u2019s Initial  Approach Is Generally Sound and It Is Developing a Process to Inform  Investment Priorities. GAO-17-171. Washington, D.C.: October 24, 2016.", "Homeland Security Acquisitions: DHS Has Strengthened Management,  but Execution and Affordability Concerns Endure. GAO-16-338SP.  Washington, D.C.: March 31, 2016.", "National Security Cutter: Enhanced Oversight Needed to Ensure  Problems Discovered during Testing and Operations Are Addressed.  GAO-16-148. Washington, D.C.: January 12, 2016.", "TSA Acquisitions: Further Actions Needed to Improve Efficiency of  Screening Technology Test and Evaluation. GAO-16-117. Washington,  D.C.: December 17, 2015.", "Homeland Security Acquisitions: Major Program Assessments Reveal  Actions Needed to Improve Accountability. GAO-15-171SP. Washington,  D.C.: April 22, 2015.", "Coast Guard Aircraft: Transfer of Fixed-Wing C-27J Aircraft Is Complex  and Further Fleet Purchases Should Coincide with Study Results.  GAO-15-325. Washington, D.C.: March 26, 2015.", "Homeland Security Acquisitions: DHS Should Better Define Oversight  Roles and Improve Program Reporting to Congress. GAO-15-292.  Washington, D.C.: March 12, 2015.", "Coast Guard Acquisitions: Better Information on Performance and  Funding Needed to Address Shortfalls. GAO-14-450. Washington, D.C.:  June 5, 2014.", "Homeland Security Acquisitions: DHS Could Better Manage Its Portfolio  to Address Funding Gaps and Improve Communications with Congress.  GAO-14-332. Washington, D.C.: April 17, 2014.", "Homeland Security: DHS Requires More Disciplined Investment  Management to Help Meet Mission Needs. GAO-12-833. Washington,  D.C.: September 18, 2012.", "Department of Homeland Security: Assessments of Selected Complex  Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010.", "Department of Homeland Security: Billions Invested in Major Programs  Lack Appropriate Oversight. GAO-09-29. Washington, D.C.: November  18, 2008."], "subsections": []}], "fastfact": ["Each year, the Department of Homeland Security invests billions of dollars in major acquisitions such as aircraft and surveillance technology.", "We reviewed DHS's portfolio of major acquisitions and found that, in 2017, more than half of its programs needed more time and money than initially planned\u2014an increase from 2016.", "DHS has strengthened its policies for managing acquisitions as a portfolio\u2014a practice that emphasizes prioritization of the most promising programs. This could help ensure that DHS does not pursue more programs than it can afford. We recommended DHS take steps to further improve its portfolio management."]}
{"id": "GAO-18-528", "url": "https://www.gao.gov/products/GAO-18-528", "title": "Medicaid Managed Care: Improvements Needed to Better Oversee Payment Risks", "published_date": "2018-07-26T00:00:00", "released_date": "2018-07-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal spending on services paid for under Medicaid managed care was $171 billion in 2017, almost half of the total federal Medicaid expenditures for that year. Federal and state program integrity efforts have largely focused on Medicaid fee-for-service delivery where the state pays providers directly, rather than managed care, where it pays MCOs. As a result, less is known about the types of payment risks under managed care.", "GAO was asked to examine payment risks in Medicaid managed care. In this report, GAO (1) identified payment risks; (2) identified any challenges to state oversight and strategies to address them; and (3) assessed CMS efforts to help states address payment risks and oversight challenges. To do this work, GAO reviewed findings on managed care payment risks and oversight challenges from federal and state audits and other sources. GAO also interviewed 49 state program integrity stakeholders in 10 states selected based on size, the percent of population in managed care, and geography. Stakeholders included the state Medicaid managed care office, state Medicaid program integrity unit, state auditor, Medicaid Fraud Control Unit, and an MCO."]}, {"section_title": "What GAO Found", "paragraphs": ["Under Medicaid managed care, managed care organizations (MCO) receive a periodic payment per beneficiary in order to provide health care services. Managed care has the potential to help states reduce Medicaid program costs and better manage the use of health care services. However, managed care payments also have the potential to create program integrity risks. GAO identified six types of payment risks associated with managed care, including four related to payments that state Medicaid agencies make to MCOs, and two related to payments that MCOs make to providers. Of the six payment risks GAO identified, state stakeholders responsible for ensuring Medicaid program integrity more often cited the following two as having a higher level of risk:", "incorrect fee-for-service payments from MCOs, where the MCO paid providers for improper claims, such as claims for services not provided; and", "inaccurate state payments to MCOs resulting from using data that are not accurate or including costs that should be excluded in setting payment rates.", "GAO also identified multiple challenges to program integrity oversight for managed care programs. Stakeholders most frequently cited challenges related to (1) appropriate allocation of resources, (2) quality of the data and technology used, and (3) adequacy of state policies and practices. Some stakeholders offered strategies to address these challenges, including collaborating with other entities to identify problem providers and fraud schemes, as well as having effective data systems to better manage risks.", "The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, has initiated efforts to assist states with program integrity oversight for managed care. However, some of these efforts have been delayed, and there are also gaps in oversight.", "CMS's planned Medicaid managed care guidance to states has been delayed due to the agency's internal review of the regulations; as of May 2018, no issuance date had been set for the guidance.", "CMS established a new approach for conducting managed care audits beginning in 2016. However, only a few audits have been conducted, with none initiated in the past 2 years. In part, this is due to certain impediments identified by states, such as the lack of some provisions in MCO contracts.", "CMS has updated standards for its periodic reviews of the state capitation rates set for MCOs. However, overpayments to providers by MCOs are not consistently accounted for in determining future state payments to MCOs, which can result in states' payments to MCOs being too high.", "Lack of guidance and gaps in program integrity oversight are inconsistent with federal internal control standards, as well as with CMS's goals to (1) improve states' oversight of managed care; (2) use audits to investigate fraud, waste, and abuse of providers paid by MCOs; and (3) hold MCOs financially accountable. Without taking action to address these issues, CMS is missing an opportunity to develop more robust program integrity safeguards that will help mitigate payment risks in Medicaid managed care."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS (1) expedite issuing planned guidance on Medicaid managed care program integrity, (2) address impediments to managed care audits, and (3) ensure states account for overpayments in setting future MCO payment rates. The Department of Health and Human Services concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal spending on services delivered and paid for under Medicaid  managed care totaled $171 billion in 2017, almost half of the total $364  billion in federal Medicaid expenditures for that year. Under Medicaid  managed care, states pay a set periodic amount per beneficiary to  managed care organizations (MCO) for each enrolled beneficiary, and  MCOs pay health care providers for the services delivered to enrollees.  Used effectively, managed care may help states reduce Medicaid  program costs and better manage utilization of health care services.", "The Centers for Medicare & Medicaid Services (CMS)\u2014an agency within  the Department of Health and Human Services (HHS)\u2014and the states  have implemented program integrity policies and processes in an effort to  address payment risks in Medicaid, such as those related to fraud, waste,  and abuse. However, these program integrity efforts have remained  largely focused on fee-for-service arrangements, where states pay health  care providers directly for services rendered. Payments for these services  provided under fee-for-service arrangements are audited by multiple entities and reviewed for incorrect or fraudulent patterns at the federal  and state levels. In contrast, under managed care, states do not pay  providers directly, but rather pay MCOs, which are responsible for  providing services through their provider networks; MCOs are responsible  for overseeing the appropriateness of the payments they make to  providers. Less is known about the types of Medicaid payment risks and  the program integrity process and challenges under managed care. We  recently reported on certain payment risks in Medicaid managed care that  are not adequately accounted for in determining the scope of Medicaid  improper payments to MCOs. This lack of knowledge is of particular  concern, given the recent rapid growth in enrollment in Medicaid  managed care. Between 2013 and 2016 (the most recent year for which  data are available), Medicaid enrollment in comprehensive, risk-based  managed care increased by 56 percent, or from 35.0 million beneficiaries  to 54.6 million beneficiaries.", "You asked us to identify payment risks and oversight challenges  associated with Medicaid managed care. In this report, we  1.  identify any potential payment risks that exist in Medicaid managed  2.  identify any potential oversight challenges associated with identified  payment risks, and the strategies states use to address them; and  3.  assess CMS\u2019s efforts to assist states in addressing these payment  risks and associated oversight challenges.", "To address the first two objectives, we first reviewed reports resulting  from federal and state audits and investigations, regarding payment risks  and improper payments in Medicaid managed care and managed care in  general. Through a literature search and outreach to state auditing  organizations, we identified and reviewed audit reports of Medicaid  managed care programs\u2014such as those issued by HHS\u2019s Office of  Inspector General (HHS-OIG) and state audit agencies\u2014as well as  investigations involving payments to MCOs and MCO providers. We also  reviewed our prior work and reports related to Medicaid program integrity.  Based on this review, we identified different types of payment risks, as  well as reported challenges to program integrity oversight of these risks.  We next interviewed officials from a non-generalizable sample of 10  states regarding their views about the level of risk of each type of  payment risk; the extent they experienced the challenges to oversight;  and whether they had used any oversight strategies to address Medicaid  managed care payment risks. We selected states that had a significant  share of their Medicaid populations enrolled in MCOs, and to provide a  mix of population sizes and geographic locations. Within each state, we  conducted structured interviews with a total of 49 stakeholders from the  following five entities that have oversight responsibilities related to  Medicaid program integrity: (1) the state Medicaid managed care office;  (2) the state Medicaid program integrity unit; (3) the state auditor; (4) the  state Medicaid Fraud Control Unit (MFCU); and (5) an MCO.", "To assess CMS\u2019s efforts to assist states in addressing these payment  risks and associated oversight challenges, we reviewed CMS\u2019s managed  care regulations and guidance; current program integrity plan; and  documents relating to training, technical assistance, monitoring and  oversight. We conducted interviews with CMS officials and CMS audit  contractors regarding their roles, responsibilities, and oversight activities.  Additionally, we reviewed our prior work related to program integrity risks  in Medicaid managed care and identified applicable federal internal  control standards\u2014specifically those related to communicating guidance  and to conducting effective monitoring\u2014that we could use to assess  CMS\u2019s efforts.", "We conducted this performance audit from October 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Medicaid is jointly financed by the federal government and the states, with  the federal government reimbursing states for a share of their  expenditures for Medicaid covered services provided to eligible  beneficiaries. The federal share of spending is based on a statutory  formula that determines a federal matching rate for each state."], "subsections": [{"section_title": "Medicaid Service Delivery Models", "paragraphs": ["States may provide Medicaid services under either or both a fee-for- service model and a managed care model. Under a fee-for-service  delivery model, states make payments directly to providers for services  provided, and the federal government reimburses the state its share of  spending based on these payments. Under a managed care service  delivery model, states pay MCOs a capitation payment, which is a fixed  periodic payment per beneficiary enrolled in an MCO\u2014typically, per  member per month. The federal government reimburses its share of  spending based on the capitation payments states made to the MCO. In  return for the capitated payment, each MCO is responsible for arranging  for and paying providers\u2019 claims for all covered services provided to  Medicaid beneficiaries. For example, MCOs may pay providers on a fee- for-service basis or with a monthly capitation payment per beneficiary, or  through some other payment approach in which the provider assumes  some risk for providing covered services. In either case, MCOs are  required to report to the states information on services utilized by  Medicaid beneficiaries\u2014information typically referred to as encounter  data. Figure 1 illustrates these models."], "subsections": []}, {"section_title": "State and MCO Program Integrity Responsibilities", "paragraphs": ["Program integrity refers to the proper management and function of the  Medicaid program to ensure that quality and efficient care is being  provided, while Medicaid payments are used appropriately and with  minimal waste. Program integrity efforts encompass a variety of  administrative, review, and law enforcement strategies.", "State stakeholders\u2014Medicaid managed care offices, state Medicaid  program integrity units, Medicaid Fraud Control Units (MFCUs), and in  many cases state auditors\u2014and MCO stakeholders\u2014MCOs that contract  with states to deliver Medicaid services\u2014play important roles in the  oversight of managed care payment risks and have a variety of program  integrity responsibilities. A stakeholder\u2019s program integrity responsibilities  can be specialized\u2014such as for MFCUs, which focus on fraudulent  behavior\u2014or varied\u2014such as for state Medicaid managed care offices  and MCOs, which are responsible for monitoring fraud and other issues,  such as compliance with quality standards or ensuring MCOs meet  contract requirements. (See table 1.)", "Two of the stakeholders\u2014state Medicaid managed care offices and  MCOs\u2014have responsibilities for program operation in addition to program  integrity oversight responsibilities. For example, state Medicaid managed  care offices\u2019 program operations responsibilities include enrolling  beneficiaries, negotiating contracts with MCOs, developing capitation  rates, and making monthly capitation payments to MCOs. MCOs\u2019  program operation responsibilities include establishing contracts with  providers, creating provider networks, ensuring that enrollees have an  ongoing source of primary care and timely access to needed services,  and processing and paying provider claims.", "In a previous report, we found that state Medicaid program integrity  efforts focus primarily on payments and services delivered under fee-for- service, and do not closely examine program integrity in managed care.  For example, officials from five of seven states that we spoke to for that  report said that they primarily focused their program integrity efforts on  fee-for-service claims. They also noted that program integrity in Medicaid  managed care was more complex than for fee-for-service."], "subsections": []}, {"section_title": "CMS\u2019s Program Integrity Responsibilities", "paragraphs": ["CMS\u2019s program integrity responsibilities take a variety of forms. CMS  issues program requirements for states through regulations and  guidance; for example, regulations requiring states to establish actuarially  sound capitation rates and to ensure that MCOs have an adequate  network of providers, as well as to ensure that all covered services are  available and accessible to beneficiaries in a timely manner. CMS also  requires states to submit MCO contracts and capitation rates to CMS for  review and approval, and report key information such as encounter data  collected from MCOs. The agency provides technical assistance and  educational support to states, including having staff available to help  states with specific issues or questions, and providing courses on  program integrity issues. The agency also conducts periodic reviews to  assess state program integrity policies, processes, and capabilities. In  addition, CMS has engaged audit contractors to help states audit  providers receiving Medicaid payments, including payments made by  MCOs to providers."], "subsections": []}]}, {"section_title": "Six Types of Payment Risks Exist for Managed Care, with Stakeholders Viewing Some Risks as Greater than Others", "paragraphs": ["We identified six types of payment risks through our review of Medicaid  audit reports and other sources. Most of the stakeholders we spoke to  agreed that these payment risks exist in Medicaid managed care. Four of  these risks relate to the payments state Medicaid agencies make to  MCOs, and two relate to payments that MCOs make to providers. (See  figs. 2 and 3.)", "In terms of the relative importance of these payment risks, two payment  risks were more frequently cited by stakeholders as having a higher level  of risk than other types\u2014incorrect MCO fee-for-service payments to  providers and inaccurate state capitation rates. The remaining four  payment risks were more frequently cited as having lower or unknown  levels of risk: improper state capitation payments, state payments to  noncompliant MCOs, incorrect MCO capitation payments, and duplicate  state payments. (See fig. 4.) When we asked stakeholders to designate a  level of risk, stakeholders whose primary responsibility is program  integrity\u2014state auditors, MFCU officials, and state Medicaid program  integrity staff\u2014were more likely to assign a higher level of risk for certain  types of payment risks than state Medicaid managed care officials and  MCO officials. (See app. I for additional information on risk level  designation by stakeholder group.)", "Stakeholders provided the following examples of payment risks that they  rated as having \u201csome\u201d or \u201chigh\u201d risk in the state. (See table 2.) See  appendix II for further examples of payment risks identified as part of our  review of audits and other reports."], "subsections": [{"section_title": "Multiple Challenges Exist for Effective Program Integrity Oversight and Stakeholders Identified Strategies to Address Them Key Challenges to Oversight Included Resource Allocation, the Quality of Data and Technology, and the Adequacy of State Policies and Practices", "paragraphs": ["We identified six challenges to effective program integrity oversight in  Medicaid managed care based on our review of Medicaid audit reports  and other sources. Among these six challenges, stakeholders most  frequently cited allocation of resources, quality of data and technology,  and adequacy of state policies and practices as key challenges. Some  stakeholders also described strategies to address these challenges.", "Through our research on examples of payment risks in Medicaid  managed care, we identified six areas that can present challenges to  program integrity oversight, including (1) availability and allocation of  resources; (2) access to and quality of data and technology; (3) state  policies and practices; (4) provider compliance with program  requirements; (5) MCO management of program integrity; and (6) federal  regulations, guidance, and review. Allocation of resources, quality of data  and technology, and state policies and practices were the three most  commonly cited challenges to program integrity oversight by  stakeholders. (See fig. 5.)", "Stakeholders described the following examples of challenges to program  integrity oversight they had observed. See appendix III for more  information on the particular challenges for each of the payment risks.", "Availability and allocation of resources. Stakeholders who cited  resource allocation as an oversight challenge to managed care cited  several key issues, such as the number of staff allocated to an activity,  the expertise needed, and the ability to retain and replace staff. (See  table 3.) Some stakeholders identified resource issues within their own  organizations, while some identified resource issues they said existed in  other organizations.", "Access to and quality of data and technology. Stakeholders who cited  the quality of data and technology as oversight challenges to managed  care provided examples related to timely access to data, inaccurate and  unreliable data, and problems with information systems and interfaces.  (See table 4.)", "State policies and practices. Stakeholders who cited state policies and  practices as an oversight challenge to managed care described  insufficient contract requirements, lack of state monitoring, and problems  with state oversight. (See table 5.) Stakeholders from the state program  integrity office, the MFCU, and the state auditor\u2019s office more frequently  identified state policies and practices as a challenge than stakeholders  from the state Medicaid managed care agency.", "MCO management of program integrity. Stakeholders who cited MCO  management as an oversight challenge to managed care described how  inadequate MCO oversight and monitoring\u2014as well as incomplete MCO  reporting to the state agency\u2014can increase the risk of different types of  payment risks. (See table 6.) Stakeholders from the state Medicaid  managed care agency, the state program integrity office, and the MFCU  were more likely than MCO stakeholders to cite these issues as  challenges. In particular, a few state officials noted that there was  variation in size and resources among the MCOs in their respective  states.", "Provider compliance with program requirements. Stakeholders who  cited provider compliance as a challenge to oversight indicated that  providers are the primary source of inaccurate payments, because of  improper billing, which may include fraudulent billing. These stakeholders  also stated that some types of providers presented a higher risk than  others in their state. Several stakeholders pointed out that certain  providers intentionally commit fraud, while others may be unaware of  changes in policies or procedures and therefore unintentionally submit  inaccurate claims. Several stakeholders noted that it is the responsibility  of providers to bill correctly, while a few others pointed out that because  the payment process is complicated, MCOs and state agencies may not  identify inaccurate payments. Stakeholders also selected from a list of 19  types of providers the 3 or 4 that in their view represented the highest  payment risks in the state. The two most frequently mentioned health  care providers or services were (1) durable medical equipment, and (2)  psychiatric and behavioral health care providers. (See table 7.)", "Federal regulations, guidance, and review. Over half of the  stakeholders who identified federal regulations, guidance, and review as  oversight challenges to managed care cited the complexity of federal  regulations and the lack of federal guidance as key issues. For example,  one stakeholder said that there needed to be more clarity about the new  regulations for setting capitation rates for MCOs, while another said that  there was a lack of clarity about the respective roles of states and MCOs  in program integrity oversight. One stakeholder noted that most of the  responsibility for operating the Medicaid program lies with the state, not  with the federal government."], "subsections": []}, {"section_title": "Strategies Identified by Stakeholders to Address Managed Care Oversight Challenges Included Ensuring High Quality Data and Collaboration among State Agencies and MCOs", "paragraphs": ["Some stakeholders we interviewed identified strategies, controls, or best  practices to address the challenges to oversight of Medicaid managed  care payment risks. As shown in table 8, they identified a variety of  strategies such as ensuring high quality data, collaboration among state  agencies and MCOs, imposing sanctions on noncompliant MCOs,  enhancing contract requirements, and conducting regular monitoring."], "subsections": []}]}, {"section_title": "CMS Has Assisted States in Addressing Payment Risks, but Some Efforts Have Been Delayed and There Are Gaps in Oversight", "paragraphs": ["CMS has taken important steps to address payment risks in Medicaid  managed care, issuing a final rule, increasing guidance, and conducting  oversight activities. However, some efforts are incomplete, and there are  gaps in key oversight activities."], "subsections": [{"section_title": "CMS Issued a Final Rule, Provided Additional Guidance, and Updated Certain Oversight Activities Related to Managed Care Program Integrity", "paragraphs": ["In May 2016, CMS issued a final rule on Medicaid managed care.  According to CMS, the rule is intended to enhance regulatory provisions  related to program integrity and payment risks, among other things.  These regulatory provisions varied in terms of when the requirements  were applicable. For example, for contracts beginning on or after July 1,  2017, the rule requires  state contracts with MCOs to require MCOs to promptly report all  overpayments made to providers, and to specify the  overpayments due to potential fraud;   states to account for overpayments when setting capitation  payment amounts;  and  states to establish procedures and quality assurance protocols to  ensure that MCOs submit encounter data that is complete and  accurate.", "These requirements have the potential to enhance MCO and state  oversight of managed care, and address payment risks involving incorrect  MCO payments to providers and inaccurate state capitation rates for  MCOs. CMS is currently reviewing the rule for possible revision of its  requirements and an announcement on the results of the review is  expected in 2018.", "Most stakeholders we spoke to identified ways in which the managed  care rule could have a positive impact on managed care program integrity oversight. Of the 49 stakeholders we spoke to, 28 made positive  statements about the rule\u2019s potential impact on program integrity  oversight of payment risks in managed care, 9 stakeholders said they  were not familiar enough with the managed care rule to comment on it,  and the remaining 12 stakeholders provided a range of comments about  the rule. The 28 stakeholders with positive comments identified a variety  of ways in which they said the managed care rule would help, including establishing transparency in setting state capitation rates; providing clear guidelines for MCO reporting, and clear authority  for states to require reporting; obtaining information on overpayments identified and collected by holding MCO leadership accountable for meeting program  reducing medical costs, despite additional short-term  administrative costs.", "Comments by the other 12 stakeholders who were familiar with  the rule included statements that the rule  should have been more aggressive in requiring MCOs to  implement efforts related to program integrity; would have limited impact for them, because many of its  requirements were already in place in their state; and  set time frames for implementation that were hard to meet.", "In addition to issuing the rule, CMS has sought to increase guidance  available to states through training, technical assistance, and other  educational resources. (See table 9.)", "Lastly, CMS efforts have included updating the requirements used in  capitation rate setting reviews, contract oversight, and other types of  audits and reviews, as described below.", "Review of state capitation rates for Medicaid MCOs. CMS  reviews states\u2019 capitation rates at least once every year, and in  2017 made revisions to its rate review guidance to states,  incorporating new requirements from the managed care rule.  According to CMS officials, the agency typically conducts between  250 and 300 rate reviews annually to determine whether states\u2019  rate development methodologies meet generally accepted  actuarial principles, as well as federal laws and requirements.", "Review of state Medicaid MCO contracts. CMS regularly  reviews state contracts with MCOs to ensure that contract  provisions meet federal requirements. In 2017, CMS updated its  criteria for Medicaid managed care contract review and approval,  and revised the guide that it provides to states to help them  develop effective MCO contracts.", "CMS contracted audits. In 2016, CMS began to transition and  consolidate audits of providers to a type of contractor called  Unified Program Integrity Contractors (UPIC). This transition is  intended to integrate contracted audit activities across CMS health  care programs, such as Medicaid and Medicare, according to  CMS. Additionally, UPIC audits can include health care providers  who participate in multiple federal programs. Within the Medicaid  program, UPICs may conduct audits with states interested in  pursuing what are called \u201ccollaborative audits.\u201d CMS\u2019s contract  with UPICs allows for audits of providers in MCO networks.", "Focused program integrity reviews. CMS officials said that in  2016, the agency updated the review guide used to conduct  focused program integrity reviews of state Medicaid managed  care programs. CMS program integrity reviews have identified  some common issues, such as a low number of investigations of  overpayments conducted by managed care plans and a low  amount of recoveries by plans. However, CMS officials stated  these reviews are not focused primarily on assessing specific  payment risks. For example, these reviews do not involve an  actual review or audit of MCO payments to providers to assess  the extent that inaccurate payments were made. Instead, they  review program integrity policies and processes, such as whether  and how the state monitors overpayments, and whether MCOs  comply with state requirements."], "subsections": []}, {"section_title": "CMS Efforts to Address Payment Risks Have Been Delayed and Gaps Exist in Key Oversight Activities.", "paragraphs": ["Despite CMS\u2019s efforts to improve oversight of program integrity in  Medicaid managed care, there have been delays in issuing guidance, and  gaps in key auditing and monitoring activities. These delays and gaps are  inconsistent with the agency\u2019s current program integrity plan, which  established goals for improving state oversight of program integrity in  Medicaid managed care, as well as the financial accountability of  Medicaid MCOs."], "subsections": [{"section_title": "Delays in the Development and Issuance of Guidance", "paragraphs": ["Publication of CMS guidance that would assist states in oversight of  payment risks has been delayed. CMS officials told us in April 2017 that  they planned to issue a compendium of guidance related to the managed  care rule\u2019s program integrity regulations. The compendium is intended to  provide guidance on (1) MCO program integrity requirements, (2) state  audits of MCO encounter data that must be conducted at least every 3  years, and (3) MCO overpayments to providers. However, in September  2017, CMS officials told us that although they had a draft of the  compendium, they did not have a timeline for issuing it, because the  managed care rule was under review. As of May 2018, no issuance date has been set for the guidance. Over half of the stakeholders we  interviewed who identified federal responsibilities as an oversight  challenge to managed care cited the complexity of federal regulations and  the lack of federal guidance as key issues. The lack of available federal  guidance resulting from delays in issuing such guidance is inconsistent  with federal internal control standards that call for federal agencies to  communicate quality information to those responsible for program  implementation for the purposes of achieving program objectives and  addressing program risks. Until such guidance is issued, stakeholders\u2019  ability to effectively address challenges to payment risks in Medicaid  managed care will continue to be hindered."], "subsections": []}, {"section_title": "Gaps in Auditing", "paragraphs": ["Although audits of providers that bill and are paid by MCOs can provide  important information about payment risks and are included in the UPIC  statement of work, only 14 of the 762 audits initiated by CMS contractors  during the period of fiscal year 2014 through 2017 were managed care  audits. Our review of three CMS contracted managed care audits  indicated that the amount of inaccurate MCO payments to providers\u2014as  well as MCO and provider noncompliance with contracts\u2014can be  significant. For example, one audit of an MCO\u2019s payments to selected  providers found that 8.94 percent of payments were in error, representing  over $4 million in overpayments for a 6-month period. This audit also  identified a lack of provider compliance with requirements to provide  preventive care services and care coordination to members, and a lack of  MCO compliance with requirements to monitor member enrollment,  resulting in the MCO paying providers for individuals who were not  enrolled.", "CMS officials shared plans to increase collaborative audits in managed  care in the future. CMS officials said the agency is in the early planning  stages to pilot an audit of MCO providers in one state, with the goal of  addressing challenges encountered in prior managed care audits. CMS is  also in discussions with states and audit contractors to conduct potential  audits and investigations in fiscal years 2018 and 2019.", "However, CMS and audit contractor officials identified several  circumstances related to states\u2019 contracts with MCOs that they said have  created gaps in their auditing activity.", "According to CMS officials, states have reported a reluctance to  conduct provider audits when states\u2019 contracts with MCOs (1)  allow the MCO to retain identified overpayments, or (2) do not  explicitly discuss how identified overpayments are addressed.", "Officials with the two operating UPICs told us that CMS\u2019s general  guidance to them was to restrict their audits to states with MCO  contracts where the states can recoup overpayments from the  MCOs.  According to one contractor, because few states have  such contracts, the vast majority of the contractors\u2019 audits are of  providers paid on a fee-for-service basis. However, overpayments  to providers can affect state and federal expenditures regardless  of a state\u2019s particular recoupment policy, because if they are not  accounted for, they may increase future capitation rates paid to  MCOs.", "Audit contractor officials also said the lack of access to MCO  coverage and policy materials, and the inability to directly access  encounter or claims data, prevent them from doing analyses to  identify potential provider fraud, abuse, and waste for  investigation.", "While CMS officials said they encourage states to participate in additional  collaborative audits of managed care, they did not identify steps the agency  is taking to address the circumstances that limit collaborative audits  conducted. The lack of sufficient auditing in managed care is inconsistent  with federal internal control standards that require federal agencies to identify  risks through such activities as auditing."], "subsections": []}, {"section_title": "Gaps in Monitoring", "paragraphs": ["CMS has incomplete information on the scope and extent of MCO  overpayments to providers, which results in a gap in monitoring MCO  payments. Gaps in monitoring also exist because CMS lacks a process  for consistently collecting information about overpayments and  documenting that states account for overpayments when setting  capitation rates. A few examples of these issues include the following:", "While CMS regularly reviews states\u2019 proposed capitation rates, it  lacks a process to consistently ensure any overpayments are  accounted for by the states. According to an official with CMS\u2019s  Office of the Actuary, their review of state capitation rates does  not require documentation of the amount of overpayments that  occurred the prior year, how they were determined, or how they  were incorporated into setting capitation rates. According to this  official, issues between states and MCOs\u2014such as contractual  issues related to how overpayments are handled\u2014are beyond the  scope of their review and responsibilities. However, such  information could be important to program integrity oversight; for  example, 11 stakeholders we interviewed said that state capitation  rates did not account for overpayments, because they had  observed that overpayments were not reported by MCOs, were  not monitored by the state, or both.", "Although some of CMS\u2019s focused program integrity reviews have  suggested that there is under-reporting of MCO overpayments to  providers, CMS officials explained that these reviews are intended  to assess state compliance with regulations, and not to determine  the extent of under-reporting or why overpayments are under- reported.", "States\u2019 and CMS\u2019s contracted auditors have conducted only a few  collaborative audits in managed care, even though such audits  can identify overpayments made by MCOs to providers.", "These gaps in monitoring of overpayments are inconsistent with federal  internal control standards that require federal agencies to monitor  operating effectiveness through audits and reviews. Without more  complete information on the extent of overpayments and a process to  ensure they are accounted for in state capitation rates, CMS is unable to  ensure that MCOs are effectively identifying overpayments and  documenting that they are accounted for when reviewing and approving  state capitation rates. As a result, CMS cannot be sure that states are  holding MCOs financially accountable for making proper payments, that  states are paying accurate capitation payments to MCOs, or that the  federal government\u2019s share of Medicaid expenditures is accurate."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Managed care has the potential to help states reduce Medicaid program  costs and better manage utilization of health care services. However,  oversight of managed care is critical to achieving these goals. Payment  risks are not eliminated under managed care; in fact, they are more  complex and difficult to oversee. While CMS has taken important steps to  improve program integrity in managed care\u2014including strengthening  regulations, developing guidance for states on provider enrollment in  Medicaid managed care, and beginning to include managed care in the  monitoring and auditing process\u2014the efforts remain incomplete, because  of delays and limited implementation. To date, CMS has not issued its  planned compendium with guidance on program integrity in Medicaid  managed care, taken steps to address known factors limiting  collaborative audits, or developed a process to help ensure that  overpayments to providers are identified by the states. Without taking  actions to address these issues, CMS is missing an opportunity to  develop more robust program integrity safeguards that will best mitigate  payment risks in managed care."], "subsections": []}, {"section_title": "Recommendations For Executive Action", "paragraphs": ["We are making the following three recommendations to CMS:", "The Administrator of CMS should expedite the planned efforts to  communicate guidance, such as its compendium on Medicaid  managed care program integrity, to state stakeholders related to  Medicaid managed care program integrity. (Recommendation 1)", "The Administrator of CMS should eliminate impediments to  collaborative audits in managed care conducted by audit  contractors and states, by ensuring that managed care audits are  conducted regardless of which entity\u2014the state or the managed  care organization\u2014recoups any identified overpayments.  (Recommendation 2)", "The Administrator of CMS should require states to report and  document the amount of MCO overpayments to providers and  how they are accounted for in capitation rate-setting.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the Department of Health and  Human Services for comment.  HHS concurred with these  recommendations, stating that it is committed to Medicaid program  integrity.  HHS also cited examples of activities underway to improve  oversight of the Medicaid program, such as training offered through the  Medicaid Integrity Institute, and guidance provided in the Medicaid  Provider Enrollment Compendium. The full text of HHS\u2019s comments is  reproduced in appendix IV.  HHS also provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the Secretary of Health and  Human Services and the Administrator of CMS. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7114 or at yocomc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff that made key contributions to  this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Risk Level Designations by Stakeholder Group", "paragraphs": ["We asked stakeholders involved in program integrity oversight to assign a  level of risk\u2014either low, some, or high\u2014to six types of payment risks in  Medicaid managed care. We interviewed officials in the following five  organizations in each of 10 states: state Medicaid managed care office,  state program integrity unit, Medicaid Fraud Control Unit (MFCU), state  auditor\u2019s office, and a managed care organization (MCO). (See table 1  for a description of each of these entities.) Figures 6 through 9 below  illustrate the risk level stakeholders assigned to the four types of payment  risk that are associated with states\u2019 periodic capitation payments to  MCOs. Figures 10 and 11 illustrate the risk level stakeholders assigned  the two types of payment risks associated with MCO payments to  providers. In some cases, stakeholders said they did not have enough  information to assign a level of risk (\u201cDon\u2019t know\u201d) or that one of the  payment risks did not apply in their state (\u201cNot applicable\u201d).", "For some payment risks, the stakeholders whose primary responsibility is  program integrity\u2014state auditors, MFCU officials, and state Medicaid  program integrity staff\u2014were more likely to assign a higher level of risk  than state Medicaid managed care officials and MCO officials who have  responsibilities both for program operation and program integrity. For  example, some of the risk levels cited in our interviews by state auditors,  MFCU officials, and state Medicaid program integrity staff included the  following:", "State auditors most frequently cited improper state capitation  payments as high risk in the state.", "Three state auditors identified duplicate state payments as high  risk.", "Just over half of all state auditors, MFCU officials, and state  Medicaid program integrity staff identified inaccurate state  capitation rates as some or high risk.", "In contrast, state Medicaid managed care officials and MCO officials were  less likely to assign high risk to payment types. Some examples include  the following:", "No state Medicaid managed care officials cited a high level of risk  for any of the six payment types.", "Two MCO officials cited a high level of risk for incorrect MCO fee- for-service payments. No other MCO officials cited a high level of  risk for any of the other payment types.", "Stakeholder views on the risk level of different payment risks are outlined  in the figures that follow.", "Improper state capitation payments may occur when the state makes  monthly capitation payments to an MCO for beneficiaries who are  ineligible for or not enrolled in Medicaid, or who have died. (See fig. 6.)", "Inaccurate state capitation rates occur when a state established a  capitation rate that is inaccurate primarily due to issues with the data  used to set the rates. Data issues could include inaccurate encounter  data, unallowable costs, overpayments that are not adjusted for in the  rate, or older data that do not reflect changes in care delivery practices  that affect MCO costs. (See fig. 7.)", "State payments to noncompliant MCOs occur when a state pays MCOs a  periodic capitation per beneficiary even though the MCO has not fulfilled  state contract requirements. Examples of unfulfilled contract requirements  include an MCO failing to establish an adequate provider network,  reporting inaccurate encounter data for services, or failing to report the  amount of overpayments the MCO has made to providers. (See fig. 8.)", "Duplicate state payments to an MCO occur when a health care provider  submits a fee-for-service claim to the state Medicaid program for services  that were covered under the MCO contract. (See fig. 9.)", "Incorrect MCO fee-for-service payments occur when the MCO pays  providers for improper claims, such as claims for services (1) not  provided, or provided by ineligible providers; or (2) that represent  inappropriate billing, such as billing individually for bundled services or for  a higher intensity of services than needed. (See fig. 10.)", "Incorrect MCO capitation payments occur when MCOs pay providers a  periodic fixed payment without assurances they have provided needed  services. (See fig. 11.)"], "subsections": []}, {"section_title": "Appendix II: Examples of Different Types of Payment Risks in Medicaid Managed Care", "paragraphs": ["To identify examples of payment risks in Medicaid managed care, we  reviewed Department of Health and Human Services\u2019 (HHS) Office of  Inspector General (HHS-OIG) publications and our prior work; obtained  input from the National State Auditor\u2019s Association; and conducted  literature searches and key word searches of online databases, which  identified additional state audits and investigations involving Medicaid  managed care payment. We grouped these examples of payment risks  into six broad categories or types based on similar key characteristics.  Tables 10 through 15 provide examples of each of the six types of  payment risks we identified: (1) improper state capitation payments,  which are state capitation payments to MCOs for ineligible or deceased  individuals; (2) inaccurate state capitation rates; (3) state payments to  non-compliant managed care organizations (MCO); (4) duplicate state  payments to MCOs and providers; (5) incorrect MCO fee-for-service  payments to providers; and (6) incorrect MCO capitation payments to  providers that have not complied with program requirements."], "subsections": []}, {"section_title": "Appendix III: Challenges to Effective Program Integrity Oversight in Medicaid Managed Care", "paragraphs": ["We asked 49 stakeholders involved in program integrity oversight to  consider the following six challenges to effective program integrity  oversight: (1) availability and allocation of resources; (2) access to and  quality of data and technology; (3) state policies and practices; (4)  provider compliance with program requirements; (5) managed care  organization (MCO) management of program integrity; and (6) federal  regulations, guidance, and review. Stakeholders were asked whether  any of these presented a challenge to each of six types of payment risks  in Medicaid managed care in their state, including (1) improper state  capitation payments to MCOs for ineligible or deceased individuals; (2)  inaccurate state capitation rates; (3) state payments to MCOs that have  not fulfilled contract requirements; (4) state duplicate payments to MCOs  and providers; (5) incorrect MCO fee-for-service payments to providers  for improper claims; and (6) incorrect MCO capitation payments to  providers that have not complied with program requirements.", "Figure 12 illustrates the number of times stakeholders cited a particular  challenge for each of the payment risks. The frequency with which each  of the challenges was identified differed to some extent for different  payment risks. Some examples include the following:", "Quality of data and technology was the most cited challenge for  duplicate state payments.", "State policies and practices was the most cited challenge for  inaccurate state capitation rates.", "Provider compliance with program requirements was the most  cited challenge for two payment types: (1) incorrect MCO fee-for- service payments to providers, and (2) incorrect MCO capitation  payments to providers.", "Resource allocation was the second most cited challenge for five  of the six payment risk types, although it was not the most cited  challenge for any one payment risk type."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Tim Bushfield (Assistant Director),  Mary Giffin (Analyst-in-Charge), Arushi Kumar, Julie Flowers, Drew Long,  Vikki Porter, Katie Thomson made key contributions to this report. Other  staff who made contributions to the report were Jessica Broadus, Barbie  Hansen and Erika Huber."], "subsections": []}]}], "fastfact": ["Almost half\u2014$171 billion\u2014of Medicaid spending in 2017 went to managed care organizations (MCO). In Medicaid managed care, states pay a set periodic amount to MCOs for each enrollee, and MCOs pay health care providers for the services delivered to enrollees.", "Used effectively, managed care can help states reduce Medicaid costs. However, managed care still is at risk of making incorrect payments, such as duplicate payments or payments for ineligible patients.", "We identified 6 types of payment risks: 4 related to state payments to MCOs, and 2 related to MCO payments to providers.", "We recommended ways to improve oversight of managed care payments."]}
{"id": "GAO-18-558", "url": "https://www.gao.gov/products/GAO-18-558", "title": "DEFENSE INFRASTRUCTURE: Guidance Needed to Develop Metrics and Implement Cybersecurity Requirements for Utilities Privatization Contracts", "published_date": "2018-09-04T00:00:00", "released_date": "2018-09-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since Congress provided statutory authority in 1997 for the privatization of utility systems at military installations, the military departments have privatized nearly 600 utility systems. According to DOD officials, utilities privatization enables military installations to obtain safe, reliable, and technologically current utility systems at a relatively lower cost than they would under continued government ownership.", "The Senate report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review DOD's utilities privatization program. This report assesses the extent to which DOD has (1) tracked utilities privatization contract performance and developed measureable performance standards, and (2) implemented cybersecurity guidance for industrial control systems associated with privatized utility systems. GAO reviewed relevant policies and internal control standards, analyzed a non-generalizable sample of utilities privatization contract documents, and interviewed DOD and selected military installation officials and privatized utility system owners."]}, {"section_title": "What GAO Found", "paragraphs": ["The military departments have some types of information about privatized utility systems, but they have not tracked contract performance or developed measurable performance standards for these contracts. Specifically:", "Costs for Utility Infrastructure Improvements: The military departments estimated the cost avoidance at the time of contract award; however, none of the military departments have determined whether the utilities privatization contracts are on track to achieve those estimates.", "Costs for Utility Commodities: Military department officials stated that they have observed reduced usage of commodity utilities, such as water usage, and thus decreased commodity costs, through utilities privatization; however, the officials have not tracked the data and any associated savings. Furthermore, the officials have not determined whether any savings were fully attributable to utilities privatization, recognizing that other factors may have affected commodity usage.", "System Reliability: Military department officials stated that they have perceived improvements in utility system reliability since utilities privatization and have access to contractor-provided data to assess reliability; however, the military departments have not used this data to determine reliability trends over time.", "Contractor Performance Evaluations: The military departments use the Contractor Performance Assessment Reporting System to evaluate each utility system owner's performance; however, based on GAO's review of the evaluations associated with the contracts in its sample, the evaluations were anecdotal and varied in frequency and quality.", "Department of Defense (DOD) guidance does not require the development of metrics and associated measurable performance standards to track utilities privatization contract performance. Without a requirement to develop these metrics and standards, DOD will lack information on the performance of utilities privatization contracts and thus may not be able to perform effective program management and oversight for these long-term contracts.", "DOD has taken steps to add a cybersecurity clause to its utilities privatization contracts that requires contractors take steps to ensure safeguards are put in place to protect covered defense information, which is defined as information that is processed, stored, or transmitted on the contractor's information system or industrial control systems. To implement the clause, DOD first must identify what, if any, covered defense information is provided to or developed by the contractor in performance of the contract. However, the Defense Logistics Agency (DLA) and military department officials stated that they have not begun to implement the clause because they need DOD to issue procedures concerning how the military departments are to determine what, if any, covered defense information associated with utilities privatization contracts is provided or developed by the contractor in performance of the contract. Without these procedures, the military departments and DLA will not have assurance that such information is being safeguarded."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD issue guidance requiring the military departments and DLA to develop metrics to track utilities privatization contract performance, and issue procedures concerning how the military departments are to determine what constitutes covered defense information as it relates to utilities privatization contracts. DOD concurred with both recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since Congress provided statutory authority in 1997 for the privatization  of utility systems at military installations, the Department of Defense  (DOD) has privatized nearly 600 of about 2,600 utility systems on military  installations worldwide, including electric, water, wastewater, natural gas,  and thermal systems. According to the Office of the Assistant Secretary  of Defense for Energy, Installations, and Environment (ASD (EI&E)),  utilities privatization enables military installations to obtain safe, reliable,  technologically current, and environmentally sound utility systems at a  relatively lower cost than they would under continued government  ownership. Utilities privatization gets DOD out of the business of owning,  managing, and operating utility systems so that it can focus on its core  missions and benefit from reliable utility systems owned and operated at  industry standards.", "DOD installations rely on the use of utilities, such as electricity and water,  to accomplish their missions. Thus, DOD must be prepared for and adapt  to changing conditions and withstand and recover rapidly from  disruptions. This includes disruptions caused by deliberate attacks, such  as cyberattacks on industrial control systems (ICS), accidents, and  equipment failure, or naturally occurring events, such as severe weather.  According to DOD officials, such threats are a risk to ensuring the reliable  provision of utility services to its installations. DOD has issued policies to  its installations, including those with privatized utilities, to enhance energy  resilience, which the department defines as the ability to recover from energy disruptions that impact mission assurance on its installations.  Various efforts can contribute to an installation\u2019s ability to achieve utility  resilience, including upgrading and replacing utility infrastructure or  equipment, which could be achieved through utilities privatization.", "In our prior work since 2005, we identified multiple challenges with DOD\u2019s  utilities privatization efforts and utilities resilience. In 2005, we identified  several management weaknesses in DOD\u2019s implementation of the utilities  privatization program. We made eight recommendations to help ensure  the reliability of economic analyses and improve the utilities privatization  guidance and procedures. DOD non-concurred with seven  recommendations and partially concurred with one recommendation in its  response to the report; however, DOD has since implemented all but one  recommendation. In 2006, we reported that DOD\u2019s progress in  implementing the utilities privatization program had been slower than  expected and management concerns remained. We made seven  recommendations to improve DOD\u2019s management of utilities privatization,  and DOD generally concurred with and implemented six  recommendations. In 2015, we identified that DOD faces challenges in  implementing utility resilience efforts, such as collecting and reporting  comprehensive utility disruption data, and developing cybersecurity  policies for its ICS. We made four recommendations to clarify utility  disruption reporting guidance, improve data validation steps, and address  challenges to addressing cybersecurity ICS guidance, and DOD  concurred or partially concurred with all but one recommendation and  implemented three recommendations.", "The Senate Armed Services Committee report accompanying a bill for the  National Defense Authorization Act for Fiscal Year 2018 included a  provision that we review DOD\u2019s utilities privatization efforts. In this report,  we examined the extent to which the department has (1) tracked utilities  privatization contract performance and developed measureable  performance standards, and (2) implemented cybersecurity guidance for  ICS associated with privatized utility systems.", "For both objectives, we selected a non-generalizable sample of 9 utilities  privatization contracts, which privatized 11 utility systems, as case studies  to review. To select the case studies, we analyzed data maintained by  ASD (EI&E) and the military departments to identify the universe of utility  systems that were privatized using the legislative authority first granted by  Congress in 1997. We determined that the data were sufficiently reliable  for our objectives by comparing ASD (EI&E) data with the military  department\u2019s data and interviewing military department officials about the  data sources. Using this data, we selected contracts that had been  awarded in 2007 or later, since we had previously reviewed the  department\u2019s privatization efforts in 2005 and 2006. From this group of  contracts, we then selected at least three utility systems from each military department and at least one utility system of each type that was  privatized\u2014electric, water, wastewater, and natural gas in order to try and  broadly capture the range of contracts. For each of these contracts, we  gathered detailed information from installation officials and  representatives of the privatized utility system owner. In addition, we  interviewed officials in ASD (EI&E) and the military departments\u2019 utilities  privatization program management offices. Since our methodology was  based on reviewing a select number of utilities privatization contracts in  depth, we are unable to generalize the results from our review to the  universe of DOD\u2019s utilities privatization contracts. Instead, this report  highlights examples collected from the case studies identified above.  Further information on the selected characteristics of the nine utilities  privatization contracts included in our review can be found in appendix I.", "For objective one, we reviewed DOD guidance on installation energy  management and documentation from each military department on the  performance of utilities privatization contracts. We also reviewed  documentation describing any metrics and processes the military  departments use to measure the performance of privatized utilities,  including assessments of utility system owner performance. For each  utility system and associated contract included in our sample, we  reviewed the original contract and any subsequent modifications to the  contract, as well as the associated documentation describing the metrics  and processes used to measure progress and assess performance for  each contract. We examined the modifications for each contract to  calculate the changes in contract value over time. In presenting changes  in contract value, we used constant dollars using a Gross Domestic  Product deflator based on the year the contract was initially awarded.  We also interviewed military department officials and utility system  owners associated with each privatized utility system in our sample on  performance metrics and on any challenges they experience in assessing  the performance of privatized utilities. Because our scope was limited to  utilities privatization contracts, we did not attempt to compare whether the  reported performance results of utilities privatization might have been  achieved through an alternative approach, such as continued government  ownership or other alternative financing arrangements such as energy  savings performance contracts. We compared ASD (EI&E) and military  department efforts to monitor utilities privatization performance with  Standards for Internal Control in the Federal Government and our prior  work on strategic planning to determine whether ASD (EI&E) or the  military departments have implemented controls, such as the  establishment of performance metrics, which may be necessary to  achieve department objectives efficiently and to gauge progress toward  meeting department objectives.", "For objective two, we reviewed DOD guidance and documentation to  identify and describe policies regarding requirements for cybersecurity of  ICS associated with privatized utility systems, including requirements in  the Defense Federal Acquisition Regulation Supplement. We  interviewed officials from ASD (EI&E) and the military departments\u2019  utilities privatization program management offices about policies  regarding requirements for cybersecurity of ICS and the implementation  of these policies. In addition, we examined the utilities privatization  contracts included in our sample to identify and describe the extent to  which the contracts characterize any requirements for cybersecurity. We  interviewed military department officials, Defense Logistics Agency (DLA)  officials, and contractors associated with each privatized utility system  included in our sample to determine how these officials have  implemented cybersecurity for ICS associated with privatized utility  systems. We also compared the department\u2019s utilities privatization  policies on cybersecurity with Standards for Internal Control in the  Federal Government requirements for management to evaluate security  threats to information technology, including ICS, which can come from  both internal and external sources, and periodically review policies and  procedures for continued relevance and effectiveness in addressing  related risks facing the entity as it seeks to achieve its objectives.", "We conducted this performance audit from July 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Utilities Privatization Authorities and Intent", "paragraphs": ["Congress provided statutory authority in 1997 for the privatization of utility  systems on military installations to address DOD\u2019s need to supply  reliable, safe, and efficient utility services to its installations. In defining  a utility system, the authority includes systems for the generation and  supply of electric power; the treatment or supply of water; the collection or  treatment of wastewater; the generation or supply of steam, hot water,  and chilled water; the supply of natural gas; and the transmission of  telecommunications. Included in a utility system are the associated  equipment, fixtures, structures, and other improvements, as well as real  property, easements, and rights-of-way. The authority states that the  Secretary of a military department may convey a utility system to a  municipal, private, regional, district, or cooperative utility company or  other entity. DOD\u2019s policy permits the military departments to maintain  ownership of utility systems and not privatize them for unique security  reasons, such as installations with highly sensitive missions, or when  privatization is uneconomical."], "subsections": []}, {"section_title": "Utilities Privatization Roles and Responsibilities", "paragraphs": ["ASD (EI&E) oversees DOD\u2019s utilities privatization program, which is part  of the department\u2019s installation energy management portfolio. In this  capacity, ASD (EI&E) is responsible for developing policies and  overseeing the program. There are two main sources of guidance for  utilities privatization\u2014 a DOD instruction on energy management at the  installation level, DOD Instruction 4170.11, Installation Energy  Management, and a series of memorandums specific to utilities  privatization. The instruction and memorandums direct the military  departments to attempt to privatize all utility systems, unless the  Secretary of the military department determines that the system is exempt  from privatization for security or economic reasons. Some of the  memorandums were issued to provide the military departments with  guidance to implement certain changes to the statutory authority related  to utilities privatization. For example, the congressional authority was  amended in 2006 to require the Secretary of Defense\u2019s (or a designee\u2019s)  approval for utilities privatization contracts with terms longer than 10  years, but not to exceed 50 years. The subsequent guidance memo  delegated the approval from the Secretary of Defense to the Secretaries  of the military departments and the Director of the DLA.", "The military departments have the responsibility for program  implementation, as the statutory authority to privatize utility systems is  granted to the Secretaries of the military departments. As such, the  military departments determine which systems will be privatized and  which systems may be exempted from privatization due to economic or  security reasons. According to military department officials, each military  department considers utilities privatization as an option for the  recapitalization of utility infrastructure. The Army views utilities  privatization as the preferred option, while the Navy and the Air Force  consider utilities privatization to be one option among others. Specifically,", "Army officials stated that they follow the statute and ASD EI&E  program guidance documents. Those documents state that utilities  privatization is the preferred method for recapitalizing utility  infrastructure and officials stated that the Army plans to assess all of  its utility systems for privatization. The Army prioritizes systems in the  worst condition and systems with important missions for  privatization. According to Army officials, in cases where the utility  system is in poor condition and the installation performs important  missions, the Army may privatize utility systems even if the costs in  the contractor\u2019s proposal exceed the costs in the government\u2019s  \u201cshould cost\u201d estimate by as much as 15 percent.", "The Air Force\u2019s utilities privatization policy states that the program\u2019s  goal is to permanently convey utility systems on Air Force active,  reserve, and guard installations to private or public utility  companies in conjunction with an award of a long-term utility  services contract for the operation and maintenance of those  systems. The purpose of privatizing a utility system is to restore  utility infrastructure to industry standards for operations,  maintenance, recapitalization, health, and safety while achieving a  monetary savings over the cost of continued Air Force ownership.", "According to Navy officials, the Navy has not pursued utilities  privatization in recent years but is currently in the process of  assessing utility systems for potential conveyance. Any decisions to  convey utility systems will be based on a business case analysis for  total ownership cost and the ability to improve reliability, resilience,  and efficiency for priority missions. Navy officials noted that the Navy  follows DOD policy for utility conveyance authority.", "DLA works with the military departments to plan for utilities privatization  and procures and administers 61 utilities privatization contracts for the  Departments of the Army and Air Force from the pre-solicitation phase  and into the post-award phase. According to DLA officials, the entire pre- award process takes approximately 915 days, based on the assumption  that the solicitation receives 1 to 6 proposals from contractors. Once an  award decision is made, privatization involves two transactions with the  successful contractor\u2014the conveyance of the utility system infrastructure  and the acquisition of utility services for upgrades, operations, and  maintenance under a long-term contract of up to 50 years. According to  DLA officials, the contract term can be up to 50 years because it allows  the military departments the opportunity to spread the high costs to repair  and replace existing utility infrastructure over a long period of time. The  Department of the Navy administers its own utilities privatization contracts  for Navy and Marine Corps installations."], "subsections": []}, {"section_title": "DOD\u2019s Privatization of Utility Systems Since 1988", "paragraphs": ["As of January 2017, the military departments have privatized  approximately 23 percent (601 of 2,574) of their utility systems. As  shown in table 1, the Army has privatized the most systems (369),  followed by the Air Force (174), and then the Navy (58). In addition, table  1 shows the number of utility systems the military departments have  exempted for either economic or security reasons. As of January 2017,  the military departments have 600 systems that have not been privatized  or exempted from privatization. The Army and the Air Force have plans to  privatize more systems in the coming years."], "subsections": []}, {"section_title": "Industrial Control System Vulnerabilities and Cybersecurity Policies and Guidance", "paragraphs": ["According to an ASD (EI&E) official, information residing on ICS  associated with privatized utilities systems, and more broadly, information  on any ICS, may be used by adversaries to gain insights into operations  on installations or to conduct a cyberattack. According to U.S. Cyber  Command, DOD\u2019s ICS are a potential target and an adversary could gain  unauthorized access and attack DOD in a variety of ways, including  removing data from an ICS, inserting false data to corrupt the monitoring  and control of utility infrastructure through ICS, and physically destroying  utility infrastructure controlled by an ICS. As such, DOD\u2019s 2015 Cyber  Strategy recognizes the need to protect DOD information regardless of  where it resides\u2014on DOD\u2019s own information systems and ICS or on  contractor-owned information systems and ICS\u2014 so that DOD  capabilities are not exploited, misdirected, countered, or cloned. Figure 1  illustrates a potential cyberattack using false data in an ICS.", "In addition, there have been reports of successful attacks using ICS  associated with infrastructure. Specifically, the Office of the Director of  National Intelligence issued a report in 2017 describing several of these  attacks. For example, the report noted that in 2010, Stuxnet was the first  computer virus specifically targeting ICS, and it allowed attackers to take  control of the systems and manipulate real-world equipment without the  operators knowing. The attacker targeted certain equipment at the Natanz  uranium enrichment plant in Iran, manipulated computer systems that  control and monitor the speed of the centrifuges, and reportedly  destroyed roughly one-fifth of Iran\u2019s nuclear centrifuges by causing them  to spin out of control. The attacker increased the pressure on spinning  centrifuges while showing the control room that everything appeared  normal by replaying recordings of the plant\u2019s protection system values  during the attack. In another example, the report noted that in 2012, a  U.S. power utility\u2019s ICS was infected with a virus when a third-party  technician used an infected USB drive to upload software to the systems.  The virus resulted in downtime for the systems and delayed plant restart  by approximately 3 weeks.", "In recognition of these threats, DOD has developed cybersecurity policies  and guidance for ICS that apply to both DOD-owned ICS and contractor- owned ICS. Specifically,", "For DOD-owned ICS, the department has issued several policies and  guidance for the cybersecurity of ICS. For example, in 2016, in  response to one of our prior recommendations that ASD (EI&E)  address challenges the military services faced in implementing the  risk management framework guidance, ASD (EI&E) directed the  services to develop plans identifying the goals, milestones, and  resources needed to identify, register and implement cybersecurity  controls on DOD facility-related ICS. Further, DOD issued additional  guidance that was intended to assist the military services in  developing implementation plans to meet these requirements. In  2016, DOD issued guidance, in the form of Unified Facilities Criteria,  which provides criteria for the inclusion of cybersecurity in the design  of control systems in order to address appropriate security controls  during design and subsequent construction. Also, in 2016, the U.S.  Cyber Command and the Office of the Secretary of Defense issued  guidance that identifies device anomalies that could indicate a cyber  incident, specific detection procedures to assess the anomaly, and  procedures to recover electronic devices, including removing and  replacing the device.", "For contractor-owned ICS, including ICS owned by privatized utility  system owners, DOD has a Defense Federal Acquisition Regulation  Supplement clause to require that contractors take steps to ensure  safeguards are put in place to protect covered defense information,  which is defined as unclassified controlled technical information or  other information that is processed, stored, or transmitted on the  contractor\u2019s information system or ICS. Controlled unclassified  information is information that requires safeguarding or dissemination  controls pursuant to and consistent with law, regulations, and  government-wide policies. The clause also requires the contractor to  report cyber incidents."], "subsections": []}]}, {"section_title": "Military Departments Have Some Types of Information on Their Privatized Utility Systems, but Have Not Tracked Contract Performance or Developed Measurable Performance Standards", "paragraphs": ["The military departments have information about utility systems that have  been privatized, but they have not tracked utilities privatization contract  performance or developed measurable performance standards for these  contracts. Specifically, for the systems in our sample the military  departments have some information on the costs for utility infrastructure  improvements and commodities, system reliability, and contractor  performance evaluations.", "Costs for Utility Infrastructure Improvements: The military departments  have information on the estimated cost avoidance at the time of  contract award for utility infrastructure improvements; however, none  of the military departments have determined whether the utilities  privatization contracts are on track to achieve those cost avoidance  estimates. For example, officials at Fort Bragg, North Carolina,  estimated at the time of contract award that it would have cost the  Army $61.4 million to provide natural gas utility services over the life  of the utilities privatization contract, while the successful proposal  from the contractor estimated a cost of $52.3 million for the same  services. Therefore, the Army initially projected that it would avoid an  estimated cost of $9.1 million for natural gas utility services at Fort  Bragg over the life of the contract.", "However, the estimate at the time of contract award used by each  military department does not account for changes in the cost of the  contract over time. Moreover, none of the military departments  measure actual cost avoidance over time, and some utilities  privatization contracts have experienced cost increases. Specifically,  we found that six of the nine utilities privatization contracts in our  sample included modifications, which increased the original cost of  the contract by more than 5 percent after adjusting for inflation. For  example, the contract to privatize electric and water services at  Tyndall Air Force Base, Florida, had 59 modifications, which have  increased the total estimated contract value by 36 percent ($42  million) to $159 million since it was awarded in September 2010. In  addition, the water and wastewater privatization contract at Fort Bragg  had 219 modifications, which has increased the total estimated  contract value by 96 percent ($552 million) to about $1.1 billion since  it was awarded in September 2007.", "According to military department and DLA officials, there are limitations to  using the information in the modifications to analyze changes in cost over  time associated with the utilities privatization contracts because some  cost changes may have occurred even if the government had retained  ownership of the utility system. DLA officials stated that the modifications  are made for a number of different reasons, including changes in mission  requirements, changes to the utility service requirements, and capital  upgrade projects on the installation. According to military department  officials, cost changes associated with changes in the installation\u2019s  mission would likely have occurred had the military department retained  ownership and would not be a cost increase due to privatization. Thus, it  is difficult to determine the extent to which cost increases affect the cost  avoidance estimated at the time of contract award.", "In 2006, we reported that cost growth in DOD\u2019s utilities privatization  contracts may become a concern because once a utility system is  privatized, the government enters into a sole-source relationship with the  privatized utilities system owner, which may put the government at a  disadvantage when negotiating prices for utility system changes. To  mitigate this disadvantage, DLA and Air Force officials stated that they  use experts who review proposals from the privatized utility system  owners to help ensure that costs are fair and reasonable.", "Costs for Utility Commodities: Military department officials stated that  they have observed reduced usage of the commodity provided by the  utility, such as water usage, and thus decreased commodity costs  through utilities privatization; however, installation officials have not  tracked the data and associated savings. Furthermore, the officials  have not determined whether any savings were fully attributable to  utilities privatization, recognizing that other factors may have affected  commodity usage. For example, officials at Tyndall Air Force Base,  Florida, stated that repairs to their privatized water system  infrastructure have resulted in less water usage, and that there has  been a decrease in the number of leaks. An Army official estimated  commodity cost savings by comparing commodity costs prior to  utilities privatization with commodity costs after utilities privatization.  This approach was based on the assumption that any such savings  were primarily due to utilities privatization. However, an Army official  stated that the commodity cost savings the Army estimated could be  attributed to other factors outside of utilities privatization, such as  decreases in base population or execution of Energy Savings  Performance Contracts. Air Force and Navy officials stated they did  not estimate commodity cost savings.", "System Reliability: Military department officials stated that they have  perceived improvements in utility system reliability since utilities  privatization and have access to contractor-provided data to assess  reliability; however, the military departments have not used the  contractor-provided data to determine reliability trends over time. For  example, Army officials at Arlington National Cemetery, Virginia,  stated that they could not recall an unscheduled outage since the  privatization of the electric system in 2015. In addition, officials at  Tyndall Air Force Base, Florida, stated that there was a significant  drop in outages after the electric system was privatized in 2010.  However, we found that none of the military departments have  formally measured improvements in reliability due to utilities  privatization, because, according to military installation officials, they  did not track reliability statistics prior to utilities privatization nor were  they required to do so. In addition, we found that not all installations in  our sample of cases have analyzed contractor-provided outage data,  which includes information on the number of scheduled and  unscheduled outages and the causes of the outages, to verify  perceived reliability improvements. However, officials at Hill Air Force  Base, Utah, stated that the system owner provides reports that track  reliability over time and trends could be determined through this data  collection. As we previously reported, there are benefits to collecting  utility disruption information since it can be used to identify repairs and  to prioritize funding for those repairs.", "Contractor Performance Evaluations: The military departments use  the Contractor Performance Assessment Reporting System to  subjectively evaluate each utility system owner\u2019s performance across  several categories, including management, schedule, and cost  control, among others; however, based on our review of the  evaluations associated with the nine contracts in our sample, we  found that the evaluations were anecdotal and varied in frequency  and quality. While we found that the assessing officials generally  reported satisfactory system owner performance, the performance  periods in the evaluations varied. For example, one evaluation for the  water privatization contract at Naval Air Station Key West, Florida,  covered 4 years, while the subsequent evaluation for the same  contract covered 1 year. Another evaluation for the natural gas  privatization contract at Fort Bragg, North Carolina, covered a  performance period of 1 year and 4 months. Guidance for these  contractor assessments indicates that agencies should conduct  contractor performance evaluations on an interim annual basis and  upon final completion of the contract. In addition, evaluation  information supporting ratings varied. In one evaluation for the electric  and water privatization contract at Tyndall Air Force Base, Florida, an  assessing official cited multiple concerns in the supporting narrative  for an evaluation area and rated it as \u201cunsatisfactory,\u201d while the  subsequent evaluation for the same contract provided an  \u201cexceptional\u201d rating for the same evaluation area with no explanation  of how previous concerns were addressed.", "The military departments have not tracked utilities privatization contract  performance and have not developed measurable performance standards  because ASD (EI&E) has not issued guidance requiring the military  departments to develop metrics and measurable performance standards.  Standards for Internal Control in the Federal Government state that  management should design control activities\u2014such as the establishment  of performance measures and indicators\u2014to achieve objectives. In  addition, our prior work has shown that an element of sound planning  focuses on developing a set of metrics that will be applied to gauge  progress toward attainment of the plan\u2019s long-term goals. The metrics  can be used to evaluate the plan through objective measurement and  systematic analysis to determine the manner and extent to which  privatized utility systems meet measurable performance standards.  According to our prior work, performance measurement focuses on  whether a program has achieved its objectives, expressed as measurable  performance standards. Moreover, DOD\u2019s guidebook for the acquisition  of services states that services acquisition is about acquiring performance  results that meet performance requirements needed to successfully  execute an organization\u2019s mission. Those performance requirements and  how the government will assess the contractor\u2019s performance must be  determined before the contract is awarded.", "DOD has guidance that requires the military departments to conduct a  post-conveyance review for each privatized utility system. That guidance  states that the military departments shall compare utilities privatization  costs after the contract award to projected costs to identify whether there  is a problem with cost growth. The guidance does not require the  development of metrics and associated measurable performance  standards to report on the performance of utilities privatization contracts.", "ASD (EI&E) officials stated that performance metrics are needed to  improve DOD\u2019s oversight of utilities privatization efforts. According to  Standards for Internal Control in the Federal Government, it is important  for management to design performance metrics and standards because  they help the entity achieve its goals. For example, ASD (EI&E) officials  stated that they issued a data call to the military departments in January  2017 requesting information about the performance of utilities  privatization contracts. Officials noted that they received different  information from each military department and did not believe that the  information would enable the department to determine whether the  privatized utilities systems are improving reliability or achieving the cost  savings originally estimated. For example, these officials stated that some  installations provided contractor performance evaluation ratings, but  these ratings were anecdotal and could not be used to determine  improved reliability or estimated cost savings. Air Force officials also  stated that they needed performance metrics to improve their  management of utilities privatization. Officials explained that the  information they receive from contracting officers and contracting officer  representatives specific to privatized utilities is anecdotal and qualitative,  and they have no metrics in place that allow the Air Force to track the  performance of utilities privatization contracts over time or to identify  trends and issues that would enable the Air Force to take steps to  improve utilities privatization. However, Air Force officials stated that the  Air Force is working on developing a standardized reporting template,  called the Monthly System Performance Report, which will enable the Air  Force to track reliability for its privatized utility systems and to identify  reliability trends over time.", "DOD\u2019s utilities privatization program has been in place for 21 years and  some information, such as the contractor-provided reliability data, is  available that could be used to track performance over time. Performance  metrics and standards would help ASD (EI&E) track the outcomes of the  utilities privatization program. In addition, the life of utilities privatization  contracts can extend to 50 years, producing a long-term, one-to-one  relationship between the utility system owner and the government. The  ability of ASD (EI&E), DLA, and the military departments to track  performance over the life of utilities privatization contracts may help  mitigate the risks of being in a one-to-one relationship with the utility  system owner. Without issuing guidance that requires the military  departments and DLA to develop and implement metrics and measurable  performance standards to track contract performance for future utilities  privatization contracts and to develop similar guidance for current utilities  privatization contracts, the department will lack information on the  performance of utilities privatization contracts. As a result, ASD (EI&E),  the military departments, and DLA may not be able to perform effective  program management and oversight for these long-term utilities  privatization contracts."], "subsections": []}, {"section_title": "DOD Has Cybersecurity Requirements for Industrial Control Systems, but Has Not Begun to Implement Those Requirements for Utilities Privatization Contracts", "paragraphs": [], "subsections": [{"section_title": "DOD Has Cybersecurity Requirements for Industrial Control Systems", "paragraphs": ["In November 2013, DOD issued guidance in the form of a Defense  Federal Acquisition Regulation Supplement clause to establish minimum  requirements for safeguarding covered defense information on a  contractor\u2019s ICS. The clause requires contractors to implement a  minimum set of security controls on contractor information technology and  ICS, to report cyber incidents, and to support DOD damage assessments  as needed. According to DOD, the Defense Federal Acquisition  Regulation Supplement clause for safeguarding covered defense  information is required to be added to all new solicitations and contracts  as of November 2013. The clause is not required to be incorporated  retroactively into DOD contracts awarded prior to 2013, but that does not  preclude a contracting officer from modifying existing contracts to  incorporate the clause.", "To implement the clause for safeguarding covered defense information,  the contractor must apply a minimum set of security controls on its ICS.  For the contractor to know what the appropriate security controls are,  DOD first must identify what, if any, covered defense information is  provided to or developed by the contractor in performance of the contract.  If the requiring activity determines that covered defense information is  provided to or developed by the contractor, then the contracting officer  notifies the contractor by documenting what information is considered  covered defense information. Then, to secure DOD\u2019s covered defense  information, the contractor must apply adequate security to its ICS on  which that information resides and document, in a system security plan,  how the requirements were met or how the contractor plans to meet the  requirements. When requested by the requiring activity, the system  security plan should be submitted to demonstrate that adequate security  has been implemented. Figure 2 shows the responsibilities for identifying,  marking, and securing DOD\u2019s covered defense information on contractor  information and industrial control systems."], "subsections": []}, {"section_title": "DOD Has Not Begun to Implement Cybersecurity Requirements for Utilities Privatization Contracts", "paragraphs": ["DOD officials stated that while they have taken steps to incorporate the  clause requiring the safeguarding of covered defense information into  many of their utilities privatization contracts, they have not begun to  implement the cybersecurity requirement in the clause to ensure that  covered defense information is appropriately safeguarded for those  contracts. DLA, Army, and Air Force officials stated that they have added  cybersecurity requirements to some of the utilities privatization contracts  they administer, but the Navy has not. Specifically:", "DLA: According to DLA officials, of the 61 privatized utility contracts  DLA manages on behalf of the Army and Air Force, officials have  incorporated the clause requiring the safeguarding of DOD covered  defense information into 60 contracts, and are in the process of  modifying one contract to incorporate the clause. According to DLA  officials, beginning in June 2015, they determined that the utilities  privatization contracts needed to be modified to incorporate the  cybersecurity requirements to safeguard DOD covered defense  information associated with its utilities privatization contracts for two  reasons. First, DLA officials stated that they interpreted DLA- contracting guidance issued in 2015 to direct them to incorporate the  clause into all contracts. Second, DLA officials stated that the clause  should be applied to all utilities privatization contracts so that there  was consistency across the program. Since the issuance of the DLA  contracting guidance in 2015, DLA officials stated that they have  provided direction to the utilities privatization contracting officers on  multiple occasions to incorporate the clause into all contracts and plan  to ensure that the remaining contracts are modified to include the  clause. DLA officials stated that most of the contract modifications to  include this clause were completed in 2015 and 2016; however, some  modifications occurred as late as 2017.", "Army: Army officials who manage the Army\u2019s other utilities  privatization contracts stated that the clause requiring the  safeguarding of covered defense information has been added to some  contracts, but could not state definitively that the clause was added to  all of the utilities privatization contracts that the Army manages. Army  officials stated that Army contracting guidance issued in 2015 did not  specifically address utilities privatization; however, the guidance did  require that the clause be added to several different types of  contracts, including all contracts for programs where officials expect  covered defense information to be furnished by the government or  developed by the contractor, and contracts that were active in fiscal  year 2016 and later, among other contracts, or provide a rationale for  not including the clause. Army officials stated that they did not know  if their utilities privatization contracts contained covered defense  information. However, Army officials determined that the guidance  required the clause to be added to utilities privatization contracts  because these contracts fell into the category of contracts that were  active in fiscal year 2016 and later. Another contracting officer for  several Army privatization contracts stated that he does not recall how  information about the guidance to incorporate the clause into utilities  privatization contracts was shared. However, he stated that the issue  was discussed at utilities privatization meetings, and he believed that  it was implied at these meetings that the clause should be  incorporated into existing utilities privatization contracts.", "Air Force: The Air Force official who manages the Air Force\u2019s utilities  privatization program stated that two of the nine contracts managed  by the Air Force included the clause, and the clause was being added  to two additional contracts at the time of our review. Further, the Air  Force stated that it was planning on adding the clause to the  remaining five contracts. An Air Force official stated that it was not  clear whether the clause was required to be incorporated into all  existing utilities privatization contracts. However, since DLA added the  clause across all of the utilities privatization contracts it managed, the  Air Force official assumed that all non-DLA managed utilities  privatization contracts should do the same.", "Navy: Navy officials stated that they have not taken steps to  incorporate the requirement into any of their utilities privatization  contracts. According to Navy officials, they have not added the  cybersecurity clause to the Navy\u2019s utilities privatization contracts  because they are waiting for guidance from ASD (EI&E) regarding  whether the clause is necessary for all utilities privatization contracts  and, if so, additional guidance on how to implement the clause.", "DLA, Army, and Air Force officials stated that while they have taken steps  to incorporate the clause requiring the safeguarding of covered defense  information into many of their utilities privatization contracts, they have  not begun to implement the cybersecurity requirement for those contracts.  As previously discussed, DOD acquisition guidance states that the  requiring activity, which in the case of utilities privatization contracts is the  military departments, must identify what information is considered  covered defense information and provide that information to the  contractor. However, before officials can fully implement these  requirements, they must first identify what information is considered  covered defense information.", "According to an ASD (EI&E) official, information residing on ICS  associated with privatized utility systems could be considered covered  defense information because it could be used by adversaries to gain  insights into operations on installations or to conduct a cyberattack. For  example, information about energy or other commodity usage, water or  gas pressure in pipes, or the amount of chemicals that need to be added  during water treatment processes might be useful information to an  adversary seeking to disrupt operations on a military installation. In one  example of a cyber incident on an ICS associated with the operation of a  dam in New York, a threat actor repeatedly obtained information on the  status and operation of the dam, including information about the water  levels, temperature, and status of the gate that controls water levels and  flow rates. This access would allow the attacker to remotely operate and  manipulate the dam\u2019s gate. However, in this instance, the gate had been  manually disconnected for maintenance at the time of the intrusion. In  another example, threat actors obtained control-level access to a water  treatment ICS and altered settings that controlled the amount of  chemicals used to treat tap water and water flow rates, disrupting water  distribution. The activity triggered an alert within the ICS, notifying the  water treatment utility to quickly identify and reverse the chemical and  flow changes, largely minimizing the impact on customers. Had the threat  actors been more familiar with the flow control system, the attack could  have been far more consequential.", "However, DLA officials stated that there are currently no procedures that  state what, if any, information associated with utilities privatization  contracts is considered covered defense information. DLA officials stated  that they conferred with Army and Air Force officials, and DLA\u2019s own  policy division, and reached out to ASD (EI&E) to obtain a clear definition  on what information associated with DOD\u2019s utilities privatization contracts  might be considered covered defense information.", "DLA\u2019s efforts to obtain clarification from ASD (EI&E) on how to implement  the clause for utilities privatization contracts began in 2016. For example,  in 2016, DLA officials stated they met with ASD (EI&E) officials to discuss  the issue of covered defense information specific to the utilities  privatization program, discussing what, if any, information on ICS  associated with privatized utilities should be identified as covered defense  information. Further, DLA officials asked for procedures regarding what  steps to take to evaluate a contractor\u2019s compliance with the provision. In  addition, DLA officials asked privatized utilities system owners to conduct  a self-assessment of the cybersecurity controls they currently use for their  ICS. DLA officials stated that they provided this information to ASD  (EI&E) to aid decision making on how to approach cybersecurity for these  systems. However, DLA officials stated that they did not receive a clear  response from ASD (EI&E). DLA officials stated that because there are  no procedures that definitively state which, if any, utilities privatization- related information should be categorized as covered defense  information, they have been unable to provide clear procedures to the  utilities privatization contractors who must implement the clause to  safeguard any such information. Moreover, according to DLA officials,  some of the utilities privatization contractors were reluctant to modify the  contract to incorporate the clause for safeguarding DOD covered defense  information because it was unclear how it was to be implemented. Also,  Navy officials stated that they have not yet incorporated the clause into  any of their utilities privatization contracts because they are waiting for  procedures from ASD (EI&E). In addition, DLA and military department  officials stated that the current costs associated with implementing the  clause are unknown.", "Standards for Internal Control in the Federal Government require  management to evaluate security threats to information technology, which  can come from both internal and external sources, and periodically review  policies and procedures for continued relevance and effectiveness in  addressing related risks. Information technology refers to processes that  are enabled by technology, including ICS, which are computer-controlled  systems that monitor or operate physical utility infrastructure, among  other things. DLA and military department officials stated they have not  begun to implement the requirements in the clause because they are  waiting for ASD (EI&E) officials to issue procedures concerning how the  military departments are to determine what, if any, covered defense  information associated with utilities privatization contracts is provided or  developed by the contractor in performance of the contract. Such  procedures are needed to help the military departments and DLA take the  appropriate steps to implement the defense acquisition regulation clause  for their utilities privatization contracts and safeguard covered defense  information. An ASD (EI&E) official acknowledged that specific  procedures concerning how the military departments are to determine  what, if any, information associated with utilities privatization contracts is  considered covered defense information are lacking and the office plans  to update the policies. However, at the time of our review, it was not clear  what that guidance will require.", "In the absence of a clear understanding of how to implement the clause  requiring the safeguarding of covered defense information, both  installation officials and some system owners reported having taken  various actions to address and enhance the cybersecurity of ICS  associated with privatized utility systems. For example,", "An Air Force installation official stated that he and an employee of the  privatized utility system worked closely with the installation\u2019s office  that handles cybersecurity and followed service guidance to try to  ensure mitigation of risks to and the security of the ICS. For  example, officials ensured that the ICS could not be accessed  remotely and that authorized users are required to use strong  passwords. The Air Force official stated that the privatized utility  system owner may be required to apply additional cybersecurity  measures in the future, depending on what decisions are made  regarding the provision to safeguard covered defense information.", "A Navy installation official stated that he had no knowledge of what, if  any, cybersecurity practices the privatized utility system owner had  implemented for the ICS it uses to help operate an electrical  distribution system. However, an official from the privatized utility  system owner stated that the company has adopted some  cybersecurity practices, which have been audited by an independent  organization for 3 of the last 4 years, and the company plans to make  this a standard part of business operations.", "Army officials stated that the installation relies on the privatized utility  system owner to employ industry practices for cybersecurity efforts.  Officials from the privatized utility system owner stated that the  company has robust cybersecurity practices and the ability to  continuously monitor the system to detect any unusual activities.", "While installation officials and some system owners reported having taken  some steps to address and enhance the cybersecurity of ICS associated  with privatized utility systems, the lack of procedures may result in  uncertainty as to whether covered defense information across utilities  privatization contracts is safeguarded by the military departments and  DLA. As previously reported, vulnerabilities in ICS can be exploited by  various methods, causing loss of data, denial of service, or the physical  destruction of infrastructure. Without procedures concerning how the  military departments are to determine what, if any, covered defense  information is provided to or developed by the contractor in the  performance of the utilities privatization contract, the military departments  and DLA may not be able to take steps to adequately and consistently  protect DOD\u2019s information associated with utilities privatization contracts."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As of January 2017, the military departments have privatized over 600  utility systems, and the Army and the Air Force have plans to privatize  more systems in the coming years. While the military departments have  some types of information on their privatized utilities, they have not  tracked utilities privatization contract performance or developed  measurable performance standards, as asked for in the Standards for  Internal Control in the Federal Government. In addition, while military  department officials stated that they have perceived improvements in  utility system reliability since utilities privatization, the military departments  have not used contractor-provided data to determine reliability trends over  time. Without issuing guidance that requires the military departments and  DLA to develop and implement metrics and measurable performance  standards to track contract performance for future utilities privatization  contracts and to develop similar guidance for current utilities privatization  contracts, the department will lack information on the performance of  utilities privatization contracts. As a result, ASD (EI&E), the military  departments, and DLA may not be able to perform effective program  management and oversight for these long-term utilities privatization  contracts.", "DOD officials stated that they have taken steps to incorporate the clause  requiring the safeguarding of covered defense information into many of  their utilities privatization contracts, but they have not begun to implement  the cybersecurity requirement for those contracts. DLA, Army, and Air  Force officials stated they have not begun to implement the cybersecurity  requirement for those contracts that include the clause because ASD  (EI&E) has not issued specific procedures regarding how the military  departments are to determine whether covered defense information is  provided to or developed by the contractor in the performance of the  utilities privatization contract. The lack of procedures may result in  uncertainty as to whether covered defense information across utilities  privatization contracts is safeguarded by the military departments and  DLA. As previously reported, vulnerabilities in ICS can be exploited by  various methods, causing loss of data, denial of service, or the physical  destruction of infrastructure. Without procedures concerning how the  military departments are to determine what, if any, types of information  are considered covered defense information and are provided to or  developed by the contractor in the performance of the utilities privatization  contract, the military departments and DLA will not be able to adequately  and consistently protect DOD\u2019s information associated with utilities  privatization contracts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to the Secretary of Defense.", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Energy, Installations, and Environment, in consultation with  the military departments, issues guidance requiring the military  departments and DLA to develop and implement performance metrics  and measurable performance standards to track utilities privatization  contract performance for future utilities privatization contracts, and  develops similar guidance for current utilities privatization contracts.  (Recommendation 1)", "The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Energy, Installations, and Environment (a) issues procedures  concerning how the military departments are to determine what  constitutes covered defense information and what, if any, of this  information is provided to or developed by the contractor in the  performance of utilities privatization contracts, and (b) takes appropriate  steps to protect such information. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In  written comments, DOD concurred with both of our recommendations.  DOD\u2019s comments are reprinted in their entirety in appendix II. DOD also  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretaries of the military  departments. In addition, the report is available at no charge on our  website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact Brian Lepore at (202) 512-4523 or LeporeB@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Selected Characteristics of the Department of Defense\u2019s (DOD) Utilities Privatization Contracts Included in GAO\u2019s Review", "paragraphs": ["This appendix provides information on the nine utilities privatization  contracts that we selected as case studies to review. Each of seven  contracts privatized one utility system, and each of two contracts  privatized two utility systems, for a total of 11 utility systems covered by  the nine contracts. Table 2 lists selected characteristics of each contract."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kristy Williams (Assistant  Director), Michael Armes, John Bauckman, Emily Biskup, Vincent  Buquicchio, C\u0430roly\u1e47n C\u0430van\u0430ugh, Desiree Cunningham, Michael  Gilmore, Simon Hirschfeld, Gina Hoover, Kush Malhotra, Richard  Powelson, and Jack Wang made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Infrastructure: Actions Needed to Strengthen Utility Resilience  Planning. GAO-17-27. Washington, D.C., November 14, 2016.", "Defense Infrastructure: Improvements in DOD Reporting and  Cybersecurity Implementation Needed to Enhance Utility Resilience  Planning. GAO-15-749. Washington, D.C., July 23, 2015.", "GAO, Defense Infrastructure: Actions Taken to Improve the Management  of Utility Privatization, but Some Concerns Remain. GAO-06-914.  Washington, D.C.: September 5, 2006.", "Defense Infrastructure: Management Issues Requiring Attention in Utility  Privatization. GAO-05-433. Washington, D.C.: May 12, 2005."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-248", "url": "https://www.gao.gov/products/GAO-18-248", "title": "Social Security Disability Insurance: Information on Potential Implications of Expanding Private Disability Insurance", "published_date": "2018-04-10T00:00:00", "released_date": "2018-04-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SSDI, which is administered by SSA, provides financial and other assistance to qualifying individuals who are unable to work due to their disabilities. SSDI is primarily funded by employee and employer payroll taxes that are placed in the Disability Insurance Trust Fund, which is currently projected to not be able to pay full benefits starting in 2028. While there are a number of ways to address the fiscal condition of the Disability Insurance Trust Fund, some researchers have proposed expanding employer-provided PDI. GAO was asked to review whether expanding PDI could result in potential savings to the Disability Insurance Trust Fund.", "This report examines (1) what is known about how coverage and key features of SSDI and PDI compare, and (2) the potential implications of three distinct proposals to expand employer-sponsored PDI on the Disability Insurance Trust Fund and various stakeholders.", "GAO analyzed data on SSDI and PDI coverage from SSA and BLS for 2016 and 2017; reviewed relevant federal laws, regulations, and guidance; reviewed three PDI policies that three large insurers we selected described as typical for their companies; reviewed three distinct proposals to expand PDI identified through a literature review; and interviewed SSA and Department of Labor officials, authors, researchers, and representatives of insurance, employer, employee, and disability groups for a range of perspectives."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's analysis found that coverage and key features of Social Security Disability Insurance (SSDI) and long-term employer-sponsored private disability insurance (PDI) differ in a number of ways. Key differences include the number of workers covered; characteristics of covered workers; and eligibility, benefits, and return to work assistance. For example:", "According to GAO's analysis of Bureau of Labor Statistics and Social Security Administration (SSA) data, SSDI covers an estimated 96 percent of workers, while 33 percent of workers have PDI coverage through their employers. Also, PDI coverage is more prevalent among workers with higher wages (e.g., management positions) and in certain business sectors (e.g., finance).", "GAO's review of SSDI and PDI policies found that some PDI policies may pay benefits for medical conditions that SSDI would not. However, these PDI policies may time limit payments for mental health and musculoskeletal disorders, while SSDI does not. In addition, while both SSDI and PDI policies include features designed to help beneficiaries return to work, PDI policies may provide such supports more quickly than SSDI.", "GAO's review of the literature identified three distinct proposals for expanding PDI that the proposals' authors believe would address SSDI's fiscal challenges. Specifically, all three proposals suggest that cost savings for the Disability Insurance Trust Fund could be expected by expanding PDI. According to the proposals, this would happen because expanding PDI would provide workers earlier access to cash and employment supports, which would reduce the number of SSDI claims or the length of time SSDI benefits are paid to claimants. However, GAO's review of the three proposals noted that none of them provide enough information to assess how SSDI enrollment and costs might be affected with an expansion of PDI. Therefore, it is unclear whether cost savings to the Disability Insurance Trust Fund would actually be realized. For example, the proposals do not provide information on the type and timing of return-to-work services that would be provided under expanded PDI, nor do they take into account the differences in the populations served by SSDI and PDI policies. Moreover, stakeholders that GAO interviewed about these proposals raised a number of issues about other implications of PDI expansion that the proposals do not explicitly or fully address. For example:", "Insurers told GAO that is was unclear how expanding PDI would affect PDI premiums and the impact this would have on enrollment.", "Employers told GAO they were concerned about potential additional requirements or administrative burdens that would be placed on them if PDI were expanded.", "Employee and disability advocacy groups told GAO they were concerned about whether PDI expansion would provide standard services or employee protections currently available under SSDI, especially with respect to PDI expansion proposals that would replace SSDI for 2 years."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Disability Insurance Trust Fund, primarily funded by employers and  workers through payroll taxes and administered by the Social Security  Administration (SSA), is used to provide cash benefits to people no longer  able to work as a result of their disabilities and to their dependents. In  calendar year 2016, SSA paid $142.7 billion in Social Security Disability  Insurance (SSDI) benefits to more than 10.6 million beneficiaries. Over  time, demographic and other factors have reduced the Disability  Insurance Trust Fund\u2019s reserves and the fund\u2019s projected depletion in  2016 was delayed when Congress passed a law that temporarily  reallocated a share of payroll tax revenues from the trust fund for the Old- Age and Survivors Insurance (OASI) to the Disability Insurance Trust  Fund. As of July 2017, the Social Security Board of Trustees projects that  the Disability Insurance Trust Fund will be depleted in 2028, at which time  incoming payroll tax revenues may not be sufficient to support paying full  benefits.", "In prior work, we identified various types of proposals made by  researchers and others to address the fiscal condition of the Disability  Insurance Trust Fund and related challenges, including proposals to slow  the flow of people applying for SSDI; target finite resources more  efficiently and effectively; and better align SSDI eligibility criteria with  changes in the labor market, advances in medicine and technology, and  modern concepts of disability. We also previously reported that some  researchers have suggested that one way to help address the fiscal  condition of the Disability Insurance Trust Fund is to expand employer- sponsored private disability insurance (PDI). We reported that to the  extent PDI expansion options encourage workers to forgo applying for  SSDI or limit the amount of time workers receive SSDI, they also have the  potential to reduce the number of SSDI beneficiaries and program costs.  You requested that we review the potential savings to the Disability  Insurance Trust Fund and other implications associated with proposals to  expand PDI coverage.", "This report describes: (1) what is known about how coverage and key  features of SSDI and PDI compare, and (2) the potential implications of  three distinct proposals to expand employer-sponsored PDI on the  Disability Insurance Trust Fund and various stakeholders.", "To compare access to and features of SSDI and PDI, we reviewed  relevant federal laws, regulations, and guidance; analyzed SSDI data and  Bureau of Labor Statistics data on disability insurance coverage; and  reviewed insurance industry surveys on PDI coverage. Our work mainly  focused on employer-sponsored, long-term PDI\u2014which we refer to as  PDI in this report\u2014because it most closely mirrors the SSDI program.  We requested and reviewed PDI policies from three large insurance  companies, which company representatives told us were typical policies  for their companies, and we interviewed SSA and Department of Labor  (DOL) officials, as well as representatives of an association and a non- profit organization that conduct insurance industry surveys, and insurance  associations and insurance companies.", "To understand the potential implications of expanding PDI, we conducted  a literature search to identify any proposals to expand PDI and that  evaluated the potential effect of expansion on the number of SSDI  beneficiaries and the amount of SSDI expenditures. We identified three  proposals that evaluated long-term, employer-provided PDI. We  interviewed the authors of the proposals and assessed the proposals for  the soundness of their methodologies, the reliability of any data used, and  limitations. We also spoke with SSA and DOL officials, as well as other  researchers in the disability field to get their views on the identified  proposals. To understand the potential implications of the three proposals  to expand PDI for stakeholders, we spoke with representatives of groups  that might be affected by such proposals, including insurance  associations and insurance companies, employer associations and  employers, unions and employee/disability advocacy groups, a states\u2019  insurance association and organization, and DOL and SSA officials.", "This report does not examine the extent to which the provisions in  pension plan disability benefits or other disability protections may promote  work and help lower SSDI take-up rates or costs. Rather, we focus on the  relationship between SSDI and long-term employer-sponsored PDI, which  were the focus of the proposals we examined and because PDI most  closely mirrors the SSDI program.", "We conducted this work from November 2016 to April 2018 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Social Security Disability Insurance (SSDI)", "paragraphs": ["In recent decades, economic and demographic factors have contributed  to an increase in the number of SSDI beneficiaries and increased  program costs, which has reduced the size of the Disability Insurance  Trust Fund reserves from a peak of $215.8 billion in 2008 to $46.3 billion  in 2016. Over the past 26 years, the total number of SSDI beneficiaries  more than doubled, from 4.2 million in calendar year 1990 to nearly 11  million in calendar year 2016. By contrast, during that same time, the  number of workers covered by SSDI increased by less than a third\u2014from  133 million to 171 million. In calendar year 2016, around 8.8 million  workers with disabilities and 1.8 million dependents (spouses and  children) received SSDI payments, totaling $142.7 billion, of which $133.6  billion was paid to the workers and $9.1 billion to their dependents."], "subsections": []}, {"section_title": "Private Disability Insurance (PDI)", "paragraphs": ["In most cases, long-term employer-sponsored private disability insurance  (PDI) is paid for by the employer and provided as part of a package of  benefits for employees, although sometimes employees are required to  pay some of or the entire PDI premium. According to one industry survey  (the most recent available), in 2013, 19 PDI companies covering about 75  percent of the PDI market policies provided PDI benefits to around  653,000 individuals, with annual payments totaling around $9.8 billion.", "Another industry survey estimated that the five largest insurers in the PDI  market held about half of the market share of premiums paid. PDI  policies can be offered either on an opt-in basis, in which employees who  choose to pay for PDI receive it, or on an opt-out basis, where employees  are automatically enrolled in PDI, but can decline (opt-out of) the  insurance."], "subsections": []}, {"section_title": "Other Disability Protections for Workers", "paragraphs": ["Beyond the insurance market for PDI, workers may be eligible for other  types of disability protection through their employment. For example, 38  percent of workers have employer-sponsored short-term disability  coverage according to BLS, but unlike SSDI, this coverage typically lasts  6 months. In addition, state workers\u2019 compensation programs generally  provide payments and assistance to individuals who are injured on the  job, while both SSDI and PDI are designed to replace lost income from  the onset of any disability regardless of whether it was work-related.  Also, some workers may be eligible for disability payments through  defined benefit pension plans. These benefits, commonly known as  disability retirement benefits, provide eligible workers with early retirement  payments if they can no longer work because of the onset of a disability.  According to BLS data, many workers covered by defined benefit pension  plans are state and local workers, though these data do not show what  portion of them are not covered by SSDI."], "subsections": []}, {"section_title": "Proposals to Expand PDI", "paragraphs": ["From our literature review, we identified three distinct proposals for  expanding PDI in order to potentially alleviate financial challenges facing  the SSDI program. These proposals were made in studies authored by:  David Babbel and Mark Meyer (Babbel and Meyer) of Charles River  Associates, Rachel Greszler (Greszler) of The Heritage Foundation, and  David Autor and Mark Duggan (Autor and Duggan) for The Center for  American Progress and the Hamilton Project. While the proposals  differed in how PDI expansion might be achieved, each proposal  assumes or requires that PDI coverage would provide vocational  assistance, workplace accommodations, and partial income replacement  to employees with work-limiting disabilities. Each proposal assumed that  PDI expansion would result in the provision of effective return\u2013to-work  assistance earlier than would occur under SSDI. According to the  authors, their proposals would slow the growth of the SSDI program by  increasing work attachment of potential applicants or beneficiaries of  SSDI and reversing the decline in employment rates of work-capable  adults with disabilities, thereby improving the long-term solvency of the  Social Security system. Two of the proposals suggested piloting the  approaches to assess potential savings and implementation issues."], "subsections": []}]}, {"section_title": "SSDI Covers a Much Larger Portion of the Workforce than PDI, and Features of Coverage Differ", "paragraphs": [], "subsections": [{"section_title": "SSDI Covers Almost All Workers, Whereas PDI Covers About One-Third of Workers, Who Are Generally Higher-Paid", "paragraphs": ["According to our analysis of SSA and BLS data, nearly all American  workers pay Social Security taxes and are potentially covered by SSDI,  while only a third of workers have PDI coverage. For SSDI, an estimated  96 percent of American workers, along with their employers, pay Social  Security payroll taxes, a portion of which are used to fund SSDI. Of  individuals aged 20 or older in 2016, 87 percent met the SSA work  requirements to be eligible for benefits in the event of a disability.", "By contrast, as of March 2017, the Bureau of Labor Statistics (BLS)  estimates that approximately 33 percent of the workforce is insured by  employer-sponsored PDI where the employer pays at least some of the  premium. Employees may also pay the entire premium of employer- sponsored PDI\u2014and researchers we interviewed from three private  sector organizations that survey the PDI market told us that these plans  are a minority of the PDI market. However, neither BLS nor industry  surveys comprehensively track the extent of PDI coverage where  employees pay 100 percent of the premium cost.", "In addition, while SSDI coverage is higher across all industries and  income levels, PDI coverage is much more prevalent at higher wage  levels and in certain occupations and industries than others. In particular,  as of March 2017, 60 percent of those in the highest 10 percent of wage  earners had PDI, whereas 4 percent of those in the lowest 10 percent did  (see fig. 1).", "Our analysis of BLS data found that differences in PDI coverage also  exist by occupation and industry. Specifically, 60 percent of workers in  business and financial operations occupations have PDI coverage,  compared to 16 percent of workers in construction, extraction, farming,  fishing, and forestry occupations that have PDI (see fig. 2). Broad  differences in PDI coverage also exist by industry; for example, 83  percent of workers in utilities have PDI, but only 5 percent of workers in  leisure and hospitality have PDI (see fig. 3). According to researchers  from one organization with whom we spoke, the higher rates of PDI  coverage reflect areas where labor markets are more competitive, leading  employers to offer PDI to attract employees."], "subsections": []}, {"section_title": "SSDI and PDI Differ in Many Respects, Including Eligibility, Benefit Level, and Approach to Return to Work", "paragraphs": [], "subsections": [{"section_title": "Eligibility", "paragraphs": ["Our review of SSDI program rules and PDI policies indicates that  eligibility for PDI is similar in some ways to eligibility for SSDI. For  example, both allow individuals with many types of disabilities to receive  benefits until retirement, recovery, or death. However, there are also  some significant differences, as SSDI and PDI have different definitions  and employment requirements. According to SSDI program rules, to meet  SSDI\u2019s definition of disability, an individual must have a medically  determinable physical or mental impairment that (1) has lasted or is  expected to last at least 1 year or to result in death and (2) prevents the  individual from engaging in substantial gainful activity. SSA uses a list of  medical conditions\u2014established in regulations\u2014that it considers severe  enough to entirely prevent an individual from working. Benefits can also  be provided for medical conditions that are not on the list if the medical  condition or combination of medical conditions meets or equals the  severity of those on the list. SSA also considers additional factors\u2014 such as an individual\u2019s residual functional capacity, relevant past work,  age, education, and work experience. SSA can determine that the  medical conditions combined with the applicable factors preclude the  individual from performing his or her prior work or any other work in the  national economy. Eligibility for granted SSDI benefits continues until  retirement or death, or until SSA deems that the underlying medical  conditions have sufficiently improved or that the individual has become  gainfully employed.", "In contrast, typical PDI policies have provisions related to inability to work  that may compensate workers in a wider range of circumstances than  SSDI does, although these provisions become more strict after 2 years.  For the first 2 years of PDI benefits, policies generally define disability as  the inability of an individual to work his or her own occupation. For  disabilities that last for more than 2 years, a typical PDI policy changes  how it defines disability from the inability to work in one\u2019s previous  occupation, to the inability to work in any occupation offering a  reasonable income, which was 60 percent of pre-disability earnings in the  three sample policies we examined. Similar to SSDI, PDI benefit  payments generally continue for the length of the disability or until  retirement; however, unlike SSDI, benefits paid for certain conditions,  such as mental health conditions, are generally limited to 2 years. Also  unlike SSDI, PDI policies typically include a pre-existing condition  provision, whereby benefits are not paid if the applicant received  treatment, services, or consultation or took medication for the condition in  the 3 months prior to being insured.", "The requisite time period between the onset of a disability and when  benefits can begin is comparable between SSDI and PDI, according to  our review of SSDI program rules and PDI policies; however, the time it  takes to process and make decisions on claims may run longer for SSDI.  For both SSDI and PDI, benefits do not usually start immediately upon  disability onset. SSDI and PDI applicants must apply for benefits and  usually wait for a period of time\u2014known as a waiting period for SSDI and  as an elimination period for PDI\u2014for payments to begin. The waiting  period for SSDI benefits is 5 months after disability onset. For the PDI  policies we examined, the elimination period ranged from 3 to 6 months  after onset. Another factor affecting the time to receipt of benefits is the  time it takes to award the benefit. For PDI, federal regulations under the  Employee Retirement Income Security Act of 1974 (ERISA) that govern  claims in ERISA-covered plans, including disability claims, generally  require initial claims to be decided within 45 days after receipt of the claim  by the plan, with some ability to extend for two 30 day periods based on  reasons beyond the plan\u2019s control. PDI claimants may also appeal the  initial decision. On the other hand, based on our review of SSDI  program rules, claims for SSDI are not subject to timing requirements  established by law. Further, denied claimants may appeal the initial  decisions. The average decision time for appeals before Administrative  Law Judges in fiscal year 2017 was 605 days, according to SSA\u2019s fiscal  year 2017 performance report.", "Our review of SSDI program rules and PDI policies also indicates that  individuals are required to have longer employment periods for SSDI  eligibility than for PDI, but PDI is generally not portable if the individual  leaves the employer offering PDI. According to SSA guidance, individuals  become eligible to receive SSDI payments after they have paid the Social  Security payroll tax long enough\u2014about 10 years for many\u2014and recently  enough to accumulate the required number of credits. In contrast, the  three sample PDI policies we reviewed contained 30-day waiting periods  for coverage to begin. Further, part-time status and job changes affect  PDI more than SSDI eligibility. SSDI\u2019s program rules generally allow for  the work credits that an individual has accumulated to continue to count  toward SSDI eligibility even if the individual is working part-time, changes  jobs, or becomes unemployed or otherwise leaves the workforce. In  comparison, PDI coverage, which is offered at the discretion of  employers, is not generally portable, and may exclude part-time workers  altogether\u2014as was the case for the three \u201ctypical\u201d PDI policies we  reviewed. Nationally, PDI coverage is much more prevalent among full- time workers than part-time workers. According to BLS data, 42 percent  of full-time workers and 5 percent of part-time workers have PDI where  the employer pays for all or part of the premiums. See Table 1 for a  comparison of SSDI and PDI eligibility features.", "Our review of SSDI program rules and PDI policies indicates that SSDI  benefit levels for individuals are generally lower than PDI but are  designed to provide more income replacement for low-income workers  than higher-income workers. Under federal law, SSA determines benefit  amounts using a progressive formula, whereby low-income beneficiaries  receive relatively higher benefit payments based on their average monthly  earnings over the course of their career. For calendar year 2018, the  formula pays 90 percent of the first $896 of the individual\u2019s average  monthly earnings, plus 32 percent of the earnings between $896 and  $5,399, plus 15 percent of earnings over $5,399. (See fig. 4 for the  amount of benefits SSA paid in 2018 according to prior income levels.)  Using the formula, we calculated that at an average indexed annual  earnings of $44,000, the monthly benefit would be $1,693, which is 46  percent of prior average monthly earnings. Under the formula, workers  earning less would receive a higher proportion of their prior average,  while workers earning the taxable maximum (set at $128,400 for 2018) or  more would be eligible to receive $3,042 per month, which is at most 28  percent of their earnings. Under federal law, disabled workers with  qualifying dependents may receive additional SSDI payments, up to 50  percent of their individual benefit amount. Therefore, according to our  calculations, the maximum family benefit for average annual indexed  earnings of $44,000 would be $2,540, which is 69 percent of prior  average monthly earnings.", "By contrast, up to certain income levels, PDI policies typically replace 60  percent of an employee\u2019s current salary if the employee is unable to  continue working his or her prior job. Therefore, a worker earning  $44,000 annually in their prior job would receive $2,200 per month. For  high-income workers, PDI policies typically have a monthly maximum  payment. In one PDI policy we reviewed, this monthly maximum was  $5,000. Employers and employees pay for SSDI through payroll taxes on  employees\u2019 wages and salaries, so the cost to employers and employees  only varies based on employees\u2019 wages and salaries. Federal law also  determines the part of the payroll tax that is allocated for SSDI, half of  which is contributed by the employee and half by the employer. For PDI,  either employers, employees, or a combination of the two make premium  payments, depending on the policy negotiated between the insurer and  the employer. According to industry representatives with whom we spoke,  premiums may vary based on many factors, such as wages and salaries,  the length of the elimination period, rate of income replacement, type of  industry, and a company\u2019s prior claim experience.", "Another difference between SSDI and PDI benefit levels is their treatment  of partial benefits or partial disability determinations. SSDI program rules  do not provide partial payments to individuals who have lost some but not  all of their ability to earn income in the national economy. In contrast,  some PDI policies may pay benefits for a partial disability. For example, in  one of three policies we examined, workers could qualify for partial  benefits, at lower levels, if they were partially unable to achieve their  previous earnings because of a disability.", "PDI policies generally require beneficiaries to apply for SSDI and, if found  eligible, PDI payments are typically adjusted downward (offset) by the  amount of SSDI payments. There is no similar requirement or payment  adjustment for SSDI beneficiaries. In cases where PDI beneficiaries are  not required to or do not apply for SSDI, PDI policies we reviewed would  still reduce their PDI payment by the SSDI amount that the beneficiaries  may have been entitled to receive. The PDI payments would be reduced  for the full amount of the SSDI payments, including any SSDI payments  for the worker\u2019s spouse and dependents, but will typically maintain a  minimum PDI benefit. The three PDI policies we reviewed provide a  minimum $100 monthly benefit when the SSDI offset would otherwise  totally eliminate the PDI benefit or reduce it below $100 a month.  According to insurers we interviewed and PDI policies we reviewed,  insurers will assist PDI beneficiaries with their SSDI applications, and if  necessary, provide legal assistance for SSDI appeals processes.  According to one industry survey, 72 percent of PDI beneficiaries also  qualified for SSDI. PDI benefits may also be reduced by the amount of  income from other sources such as workers\u2019 compensation payments,  sick leave, or severance pay from an employer.", "Additionally, under federal law, SSDI confers Medicare eligibility after 2  years. In contrast, insurance associations and our review of PDI policies  indicate that PDI policies do not typically provide health care benefits.  Table 2 provides a summary of SSDI and PDI benefit features.", "Both SSDI and PDI policies include incentives to return to work, such as  allowing beneficiaries to retain some earnings when they return to work,  but PDI policies may provide return-to-work services sooner than SSDI.  As long as they continue to meet SSDI\u2019s eligibility criteria, beneficiaries  can earn up to the substantial gainful activity amount each month, without  any impact on their SSDI benefit, according to SSDI program rules.  SSDI program rules also provide work incentives in the form of a trial  work period, which allows the beneficiary to receive full disability benefits  while potentially earning more than the substantial gainful activity amount,  for up to 9 months. SSDI beneficiaries who earn above the substantial  gainful activity threshold after 9 months of a trial work period will no  longer receive SSDI cash benefits, but will continue to receive Medicare  coverage, if enrolled, for up to 7 years and 9 months. After the trial work  period ends, the 36-month extended period of eligibility begins, during  which SSDI beneficiaries are entitled to receive benefits so long as they  continue to meet the definition of disability and their earnings are below  the substantial gainful activity monthly earnings limit. Moreover,  individuals whose benefits stopped due to work may have their benefits  reinstated under an expedited reinstatement if for medical reasons they  are unable to work again at some point within 5 years. Under this  expedited reinstatement, beneficiaries receive up to 6 months of temporary cash benefits while SSA conducts a medical review. Despite  these SSDI provisions, participants of a 2013 Social Security Advisory  Board Forum have criticized the SSDI program for having poorly  structured work incentives, and we have previously reported that  complex SSDI rules related to these work incentives may result in  overpayments to beneficiaries.", "PDI policies we reviewed also provide for continued payments while  beneficiaries participate in the insurer\u2019s return-to-work program or find  other employment. However, in contrast to what is referred to as SSDI\u2019s  \u201ccash cliff,\u201d PDI payments are gradually reduced in some ways to account  for the beneficiaries\u2019 earnings. For example, in one policy we reviewed, if  the beneficiary participates in the insurer\u2019s return-to-work program, the  beneficiary may continue receiving benefit payments in addition to any  employment earnings. However, unlike SSDI, the combination of the  employment earnings plus the PDI payment would be capped at 110  percent of the beneficiary\u2019s pre-disability earnings. Under this same  policy, after the first 12 months that the beneficiary is disabled and  working at a reduced capacity, the partial PDI payment decreases  proportionally as the employment earnings increase until the beneficiary  earns 80 percent of their pre-disability earnings, at which point they are  no longer considered to be disabled. The other two policies we reviewed  provided pro-rated PDI payments as soon as a beneficiary had some  work earnings, until those earnings reach a threshold, such as 80 or 100  percent of their pre-disability earnings.", "Both SSDI and PDI policies offer services and supports to beneficiaries to  help them return to work, but PDI policies may focus more on early  provision of services and, depending on the policy, earlier intervention  and case management. SSDI program rules allow beneficiaries access to  return-to-work services and supports through the Ticket to Work (TTW)  program, which helps interested beneficiaries transition to self-sufficiency  through work. When individuals become eligible for SSDI, SSA  guidance calls for sending them information about public or private  employment networks or state vocational rehabilitation agencies.  According to SSA\u2019s guidance, beneficiaries can choose to work with one  of these service providers and develop a plan for work goals that may  involve services such as training, career counseling, vocational  rehabilitation, and job placement. The TTW program then pays for those  services and ensures that participating beneficiaries will not be subject to  a review of their disability while they continue to work with the service  provider. However, the SSA Office of the Inspector General reported that  fewer than 3 percent of beneficiaries were participating in TTW in 2015.  In addition, SSA-funded evaluations have found that TTW has had limited  success in returning SSA beneficiaries to work and reducing their  dependence on SSDI.", "In addition to return-to-work services through TTW, SSA officials told us  that beneficiaries may use services provided through or by other federal, state, and local programs or provider networks, such as the Department  of Labor\u2019s Stay-at-Work/Return-to-Work initiative. However, we have  previously reported that the large number of federal agencies and  programs providing employment supports to individuals with disabilities  represents a fragmented system of services, and little is known about  their effectiveness.", "In contrast, according to insurance representatives and the three PDI  policies we reviewed, PDI policies may provide early interventions,  funding for workplace accommodations, and case management to help  beneficiaries return to work. For example, one policy we reviewed  explicitly offered an early intervention program to covered employees  even when the PDI insurer was not also the short-term disability insurer,  to identify workers who might benefit from vocational analyses and  rehabilitation services before they are eligible for long-term disability  benefits. Separately, this policy also had a return-to-work program with  case managers who coordinate services and refer beneficiaries to clinical  specialists, such as nurse consultants, psychiatric clinical specialists or  vocational rehabilitation consultants. According to this policy, if the insurer  determined that beneficiaries were capable of participating in the return- to-work program, but did not, their benefits could cease.", "Information on how many PDI beneficiaries receive work assistance, such  as worksite modifications, and insurers\u2019 aggregate expenditures for such  assistance is also generally unknown. While participation in and the  impact of SSA\u2019s TTW program has been extensively evaluated, the  insurance representatives and researchers with whom we spoke could  not provide us with data or studies showing the extent or cost of work  assistance provided by PDI insurers, so the impact of these investments  is not publicly known. See Table 3 for a comparison of SSDI and PDI  policies\u2019 work incentives and assistance."], "subsections": []}]}]}, {"section_title": "Implications of Proposals to Expand Private Disability Insurance Cannot Be Assessed Due to Incomplete Information", "paragraphs": ["Our literature review identified three distinct proposals to expand PDI\u2014 through some type of federal action\u2014as a way to provide savings for  SSDI; however, we were unable to assess the implications of these  proposals on SSDI. Based on our review, there is an array of complex  factors that could influence PDI expansion and SSDI cost savings\u2014 factors for which data, methods, and assumptions for projecting SSDI  savings are either unreliable and unsupported, or unavailable. In addition,  insurer, employer, and employee stakeholders we spoke with identified  other implications of expanding PDI\u2014but these implications cannot be  ascertained because the proposals are not sufficiently detailed."], "subsections": [{"section_title": "PDI Expansion Proposals Foresee Savings", "paragraphs": ["The three distinct PDI expansion proposals we identified include the  following:", "David Babbel and Mark Meyer (Babbel and Meyer) of Charles River  Associates proposed that voluntary employer-sponsored PDI  coverage could be extended to more working Americans through  congressional action and the federal government facilitating education  and outreach efforts. Specifically, they recommended the enactment  of legislation to make it clear to employers that automatic enrollment  with \u201copt-out\u201d arrangements under employer-sponsored group  disability plans is legal. The authors believe this will address  confusion and uncertainty that is holding employers back from  providing PDI.", "Rachel Greszler (Greszler) of The Heritage Foundation proposed  encouraging employers to voluntarily provide PDI in exchange for a  payroll tax credit. Under this proposal, participating employers would  qualify for the tax credit by covering the first 2 or 3 years of PDI  benefits at least equivalent to SSDI benefits to employees. Workers  awarded benefits under the employers\u2019 PDI would transfer to the  SSDI program if their disability continued beyond the first 2 or 3 years  and they qualified for SSDI. PDI would then cease to provide benefits,  unless employers chose to extend the PDI policies. According to the  author, if an individual is denied PDI benefits, the individual could  apply for SSDI.", "David Autor and Mark Duggan (Autor and Duggan) proposed  extending coverage of PDI to all workers through a statutory  mandate. Employers would be required to provide PDI benefits for 2 years to individuals with disabilities who are unable to work. At the  end of this period, PDI benefits would cease and SSDI would provide  benefits for individuals qualifying for SSDI. Under the proposal,  individuals with extremely disabling conditions with very limited  prospects of returning to work (e.g. stroke, late stages of certain  cancers, etc.) would be eligible to apply for SSDI at the onset of their  disability, in lieu of PDI.", "Table 4 summarizes key features of the three proposals to expand PDI  that we identified."], "subsections": []}, {"section_title": "Many Unknowns Make An Assessment of the Potential for SSDI Savings Uncertain Differences in Covered Populations", "paragraphs": ["Existing differences in the SSDI and PDI covered populations may play a  role in determining the potential impacts of expanding PDI. As previously  noted, SSDI covers almost all workers, whereas PDI coverage tended to  be for those with higher wages and was more prevalent in certain  industries. Based on our review of BLS data, in order to expand  significantly, PDI would need to cover more lower-wage workers and  other occupations and industries where it is currently less common, such  as in retail and construction. However, as indicated in the Autor and  Duggan proposal, expanding PDI to workers currently not covered could  affect PDI premiums, based on the type of industry and wage levels.  According to various stakeholder groups we interviewed, changes in PDI  premiums would, in turn, have implications for the attractiveness of PDI to  employers and employees under voluntary proposals.", "The overlap in PDI with the SSDI beneficiary population also plays a role  in determining any potential impact of expanding PDI. As previously  noted, one industry survey reported that 72 percent of PDI beneficiaries  of its member companies also received SSDI. One insurer told us that the  longer PDI beneficiaries remain on PDI, the more likely they will also  receive SSDI. In fact, for beneficiaries on PDI for 2 years, 58 percent also  get SSDI benefits; and for beneficiaries on PDI for more than 5 years,  more than 90 percent also receive SSDI. Our review of these data  suggests that for those receiving both SSDI and PDI benefits, it may be  difficult to attribute return to work and other changes in circumstances,  such as changes in health, to either PDI or SSDI. For example, it is  possible that any differences in return-to-work outcomes for SSDI  beneficiaries who receive PDI versus those who do not may have more to  do with the specific characteristics and circumstances of the beneficiaries  than as a result of having PDI coverage."], "subsections": [{"section_title": "Types and Timing of Return-to- Work Assistance Offered", "paragraphs": ["To achieve SSDI cost savings, the three proposals assume that insurers  will provide or reimburse employers for providing vocational rehabilitation,  workplace accommodation, and return-to-work services, but the  proposals provide few, if any details about how this would occur. For  example, the two proposals that describe voluntary PDI enrollment do not  explicitly require that such services be provided through PDI. The Autor  and Duggan proposal, which includes a mandate for enrollment, requires  that PDI provide workplace accommodations consistent with the  Americans with Disabilities Act (ADA) and vocational rehabilitation  services. The proposal includes a list of vocational rehabilitation services  that insurers could provide, but the authors acknowledge that in practice it  is not always \u201cclear-cut\u201d when a \u201creasonable accommodation\u201d under the  ADA is required and what the accommodation should be. As noted  previously, we were unable to find public data on the extent to which PDI  policies currently provide such services and insurance representatives  and researchers we contacted that collect and report PDI data said that  they do not collect such data from insurance companies. According to our  review of PDI policy provisions that allow for rehabilitation and workplace  accommodation services, the decision of what assistance will be provided  through the PDI policy, if any, and the extent of such assistance the  insurer provides or helps the employer provide, is at the discretion of the  insurer. It is also possible that insurers would make less of an  investment in return-to-work services for PDI beneficiaries under the two  time-limited proposals because the insurers are only responsible for 2 to  3 years of disability payments, compared to traditional PDI policies where  the employer may have financial responsibility to make payments to  beneficiaries until they reach retirement age, unless insurers can help  them return to work.", "Several stakeholders said that additional uncertainty exists with respect to  effectiveness or attractiveness of PDI expansion proposals for  populations currently not covered by PDI, such as low-wage workers and  those with physically demanding jobs. BLS data show that PDI is  currently less prevalent among these workers, and therefore less is  known about the type and effectiveness of return-to-work services that  would be offered to them under PDI expansion. For example,  researchers report that lower-wage workers may have jobs that offer  limited opportunities to adjust work schedules\u2014a flexibility that one  research group said could assist workers in the case of disability. In  addition, researchers stated that lower paying jobs tend to not offer sick  leave and other key benefits, and the absence of such benefits may  present another potential obstacle for successful rehabilitation and  workplace accommodation efforts. According to various stakeholder  groups we interviewed, employers in low-paying industries or who  otherwise do not offer these benefits would have less of an incentive to  offer PDI or other supports to help retain their workers compared to  employers who compete for skilled employees that are also typically more difficult to replace. These factors\u2014in combination with previously  discussed unknowns related to the cost of PDI in non-traditional sectors\u2014 reflect complexity and uncertainty about the extent to which PDI may be  expanded through a voluntary system.", "The proposals assert that expanded PDI would provide financial support,  accommodations, and rehabilitation services much sooner than SSDI.  However, based on our review, it is not clear if this would happen for two  of the proposals. As previously noted, the SSDI elimination period is 5  months, after which SSDI beneficiaries become eligible for return-to-work  assistance through the TTW program and financial incentives, but lengthy  SSA decision times may significantly delay when individuals receive  return-to-work supports. The Autor and Duggan mandatory proposal  has PDI benefits commencing within 3 months of disability onset, which is  sooner than SSDI, and therefore, depending on the circumstances, may  allow for the provision of return-to-work services sooner than under SSDI.  The Babbel and Meyer and Greszler voluntary proposals do not specify  the length of elimination periods. While the Babbel and Meyer and  Greszler proposals indicate PDI will provide return-to-work services  sooner than SSDI, it is unclear whether or how the timing of return-to- work services might evolve under the two voluntary proposals. Moreover,  while data exist on SSDI initial and appeal decision times, we were  unable to find current industry-wide data on the average decision period  for PDI, or on the extent of appeals and how long on average these take  to decide."], "subsections": []}, {"section_title": "Other Factors That Could Affect PDI Enrollment and SSDI Cost Savings", "paragraphs": ["Based on our review of the PDI expansion proposals and interviews with  stakeholder groups, we identified several additional factors that could  affect the extent to which the PDI proposals could increase PDI coverage  and result in SSDI cost savings, especially under the two voluntary  proposals (Babbel and Meyer and Greszler). Such factors include the  likelihood that efforts to encourage PDI enrollment might be successful,  the effect of policy premiums and tax credits on employers\u2019 willingness to  offer PDI policies, and whether expanded PDI might lead to more people  also going on to SSDI.", "Babbel and Meyer asserted that congressional action and federal  outreach would clarify for employers that automatic enrollment with opt- out arrangements is legally permissible and thereby result in voluntary  PDI expansion. According to the authors, their approach was motivated  by the success of similar automatic enrollment provisions in the Pension  Protection Act of 2006 in raising the participation and savings rates in  401(k) defined contribution savings programs. However, since PDI  automatic enrollment is already available, it is not clear how their proposal  for congressional action and federal outreach would result in more  employers adopting it and employees participating. The Babbel and  Meyer proposal is also based on requiring employees to pay part or all of  the insurance premiums. According to employee advocacy groups,  workers at the lowest end of the wage spectrum in particular may have  little, if any, disposable income to pay for PDI, and also little incentive to participate when SSDI already replaces a relatively high proportion of  their wages. Further, in an employer discussion session we heard that  employees willing to contribute in part or the entire premium may also  have a greater risk of needing PDI benefits, and adverse selection could  result in higher premiums, which in turn, fewer workers may be willing to  pay.", "The Greszler proposal anticipates potential significant savings for SSDI  assuming that employers who had not previously offered PDI to their  employees would opt to offer PDI in exchange for a payroll tax credit.  According to an employer association, in making this choice, employers  would need to compare the financial benefit of a payroll tax credit with the  cost of PDI premiums, among other things\u2014which may evolve under the  proposal, according to insurers in a discussion group we held. According  to insurance industry representatives, the direction of possible premium  changes under the Greszler proposal is unclear because the proposal  reduces employers\u2019 financial responsibility to 2 to 3 years of potential  disability benefit costs. This shorter benefit period could reduce premiums  typical for longer term policies. However, since persons would not  generally be able to receive SSDI benefits during this period under the  proposal, there would be no offset of SSDI benefits against PDI benefits  (as discussed earlier). According to an industry association and an  insurer discussion group we held, the absence of the SSDI offset could  increase premiums, possibly substantially.", "Another consideration raised by SSA officials is whether PDI expansion  would increase SSDI applications and benefits paid, which would reduce  potential SSDI savings from the proposals and could increase the cost of  the SSDI program. Typical PDI policies may effectively require PDI  beneficiaries to apply for SSDI, and PDI insurers may assist beneficiaries  with SSDI applications. Insurance association representatives told us  that in addition to helping keep PDI premiums attractively low, such  practices benefit those who become eligible for SSDI benefits by  providing health care benefits that they might not otherwise be able to  access. One insurance association further noted that by helping PDI  beneficiaries complete SSDI applications, SSA may receive well- supported applications that are more efficient to process. On the other  hand, researchers and SSA officials indicated that such PDI practices  may result in some individuals applying for and receiving SSDI who would  not have otherwise done so."], "subsections": []}, {"section_title": "Cost Saving Estimates Are Unreliable or Unsupported", "paragraphs": ["Each proposal states that expanding PDI would reduce SSDI costs. The  proposals indicate that this would be achieved mainly through PDI early  intervention after employees\u2019 onset of disabilities and a resulting  reduction in the number of SSDI claimants or duration of SSDI  beneficiaries\u2019 status. Only the Babbel and Meyer proposal developed an  estimate of potential savings. In forecasting SSDI savings,", "The Babbel and Meyer proposal estimated cost savings by assuming  that automatic enrollment would result in PDI coverage increasing  from 33 percent to just over 50 percent of private sector employees.  Comparing PDI disability termination rates from the Society of  Actuaries with SSDI termination rates, Babbel and Meyer estimated  that PDI expansion would save the federal government an additional  $500 million to $700 million per year, with a 10-year cumulative  savings of $5 billion to $7 billion. They said that because they were  unable to conduct a rigorous and comprehensive study of disability,  recovery, and reemployment, their proposal \u201cquantifies the benefits of  group disability insurance indirectly, using publicly available data that  are sparse, aggregated, and often difficult to interpret.\u201d", "The Greszler proposal relied on the Babbel and Meyer analysis in  concluding that there would be significant SSDI savings. According to  Greszler, early intervention would keep individuals on the job and  reduce the number of potential SSDI beneficiaries. Further, Greszler  assumes that the loss of tax revenue from the proposed payroll tax  credit would be made up by lower SSDI expenditures incurred during  the 2 \u2013 3 years that employees are covered by PDI instead of SSDI.", "However, the Greszler proposal did not quantify the magnitude of the  tax credit or the overall savings to SSDI.", "The Autor and Dugan proposal noted that SSDI expenditures would  be lower because mandated PDI policies would pay the first 2 years  of benefits, instead of SSDI. The authors also noted that, over the  longer-term, 2-year mandated PDI for employees has the potential to  pay for itself and generate SSDI savings if the proposed mandate  succeeds in allowing 1 in 11 would-be SSDI beneficiaries to remain  gainfully employed. However, Autor and Duggan\u2019s proposal did not  include an explanation of how, or data or evidence supporting that,  the proposed PDI mandate would achieve employment for 1 in 11  would-be SSDI beneficiaries.", "Our analysis of the Babbel and Meyer proposal found that the available  data used to develop the SSDI cost savings estimates due to PDI  expansion were not comparable and therefore did not result in a reliable  estimate of the financial impact of current or expanded PDI on SSDI. In  their proposal, Babbel and Meyer estimated cost savings by comparing  SSDI\u2019s and PDI\u2019s recovery rates. For SSDI, Babbel and Meyer used an  SSDI work termination rate that includes the number of SSDI  beneficiaries terminated during the year due to having earnings that  exceeded the substantial gainful activity amount, divided by the total  number of SSDI beneficiaries during the year. For PDI, Babbel and Meyer  used a PDI recovery rate that includes the number of PDI benefit awards  terminated during the year for multiple reasons, divided by the cumulative  number of months all PDI benefits were received by PDI beneficiaries  who received PDI benefits during the year.", "However, we found that the numerators and denominators used to  compare SSDI and PDI recovery rates are not comparable. For example,  the PDI numerator reflects a much broader definition of recovery than the  SSDI numerator, which may contribute to overestimating PDI\u2019s relative  recovery rate. Specifically, the SSDI numerator is limited to those  terminated from SSDI for earnings exceeding SGA, whereas the PDI  numerator includes terminations for reasons besides return to work, such  as medical improvement (even if an individual did not return to work),  failure to submit required documents to continue receiving benefits,  changes in coverage from inability to perform own occupation to any  occupation coverage, and other non-specified terminations. The  denominator used in the comparison also differs. For SSDI, it is the  number of people receiving SSDI benefits during the year. For PDI, it is  the cumulative number of months of all PDI benefits that were received by  PDI beneficiaries who received PDI benefits during the year. Because the  denominators are different, we were unable to determine whether they  contributed to an under- or overestimate of PDI\u2019s relative recovery rate.  Regardless, we determined that the non-comparable rates in Babbel and  Meyer\u2019s proposal affect the reliability of its cost savings estimate. SSA\u2019s  Office of the Chief Actuary also reviewed the proposal at our request and  concluded that the SSDI and PDI termination rates shown in the proposal  were comparable neither in concept nor in unit of analysis. Even with  common units of analysis in SSDI and PDI termination rates, estimates of  the impact of PDI on SSDI would also need to consider the other  differences that we described above, such as differences in covered  populations."], "subsections": []}, {"section_title": "Authors Suggested Proposals Be Pilot Tested", "paragraphs": ["The authors of two proposals we spoke to suggested that any proposal to  expand PDI should be pilot tested before being implemented nationwide  due to the number and complexity of factors involved and their potential  effect on SSDI. For example, in their proposal, Autor and Duggan noted  that, given the inevitable challenges and uncertainties associated with  rolling out a major program innovation, it would be desirable to phase in  such a plan and to run pilot programs in a limited number of states.  They also suggested that pilot programs could be targeted, such as to  larger firms. In discussing the Greszler proposal with the author, she told  us that a pilot test of her proposal might help show if the program works better in some industries or occupations than others, as well as determine  how employers respond to the tax incentive and if employees feel they  are treated fairly by private insurers.", "Similarly, we have previously reported that changes affecting the SSDI  program may raise particular implementation challenges, given the  program\u2019s inherent complexity; any changes may require pilot testing to  evaluate the potential effects or unintended consequences that the  Congress, the administration, SSA, and the broader public will need to  know to make an informed decision about whether to implement program  changes nationwide. SSA and DOL have funded and overseen pilot  programs to test other proposals to help individuals with disabilities  participate in the workforce."], "subsections": []}]}, {"section_title": "Missing Details Make Identifying the Implications of the Proposals for Stakeholders Uncertain", "paragraphs": ["Employee advocacy groups, employers, and insurance companies we  spoke with raised various questions and concerns about the potential  impacts of expanding PDI\u2014implications that the proposals did not  explicitly or fully address and therefore remain uncertain. The proposals  also provided few details on any oversight role that would be needed by  federal or state governments."], "subsections": [{"section_title": "Potential Impacts on Employees", "paragraphs": ["The proposals assert that employees could potentially benefit in the event  of a disability from PDI cash benefits that may be higher than SSDI  benefits; however this outcome is not certain. Based on our review of  SSDI and PDI policies and interviews with employee and advocacy  groups, whether or not workers would opt for PDI benefits under voluntary  expansion would depend on the attractiveness of PDI relative to SSDI  and other benefits. For example, an employee benefits survey and  several stakeholder groups we spoke with suggested that employees  tend to value other benefits, such as health insurance, more than  disability insurance. According to employee groups, lower-wage workers,  in particular, may opt-out of PDI under the Babbel and Meyer proposal in  favor of paying for other benefits, or forgo benefits entirely, especially if  premiums are high. In addition, based on our review, PDI may not provide  much additional benefit for lower-wage workers, and employee groups  told us that, given a choice, lower-wage workers might choose not to  participate in PDI since SSDI benefits replace a relatively high share of  their wages. Based on our review of SSDI and PDI policies, current PDI  policies typically do not include dependent and spousal benefits offered  by SSDI, and unlike SSDI have exclusions and pre-existing condition  provisions, as well as have time limits on benefit payments for some  conditions, which may result in workers finding SSDI more attractive than  PDI. To the extent that employees see PDI benefits as less attractive than  SSDI and their willingness to participate in PDI declines, cost savings to  SSDI resulting from voluntary PDI proposals would likely be affected.", "Two employee advocacy groups also expressed concern that all three  proposals focus on employer-provided PDI, and two of three proposals do  not explicitly address self-employed and part-time workers. As we have  previously noted, an increasing number of people are part of the  contingent workforce, with limited access to employer-sponsored  benefits. Other individuals may have already left the workforce or  otherwise be unemployed and thus have no connection to an employer.  Further, two employee advocacy groups explained that individuals who  will eventually be unable to work due to a disability initially experience  symptoms that may cause them to work part-time or take a different  position or job, which may affect their access to PDI through their current  or new employer. On the other hand, the proposals allow for persons not  covered under the proposals to apply for SSDI.", "Two employee advocacy groups also expressed concern that workers  who are auto-enrolled under the Babbel and Meyer proposal may not  make an informed choice about participating due to the complexity of  disability contracts. One employee advocacy group was particularly  concerned for low-wage workers who may be struggling financially and  cannot afford disability insurance, but do not initially opt-out of coverage  because of inertia, language barriers, or not understanding the product,  including the tradeoffs involved in choosing to keep it or opt out.", "Employee advocacy groups told us that more needs to be done to get  SSDI beneficiaries back to work, but noted a range of concerns about  using PDI to do this. Their concerns included the following:", "Employers are moving away from providing other key employee  benefits, such as health care benefits (which may be more important  to workers than PDI and without which PDI would be less effective).", "Employers are moving away from full-time employment (which is  usually a stipulation of PDI policies).", "Employers might discriminate in not hiring individuals at higher risk of  disability under proposals that make employers responsible for the  first few years of providing disability assistance.", "The transition from receiving PDI to qualifying and getting approved  for SSDI under the proposals might delay receipt of SSDI.", "Insurers might not actually provide rehabilitative and accommodation  services.", "There would not be standardization of PDI eligibility determination,  coverage, and appeal processes to ensure fair and equitable  treatment of workers.", "All employee advocacy groups we spoke to emphasized the need for  consumer protections and strong oversight under the PDI proposals. One  employee advocacy group said that there are too many problems, gaps,  and concerns with the proposals to expand PDI, when SSDI already  provides near universal coverage and is a system that is up and running.  Moreover, the employee advocacy group said that SSA could identify the  key reasons that PDI has had success in getting people back to work and  incorporate those lessons into SSDI, because more effort needs to be  spent improving SSDI and increasing its return-to-work efforts."], "subsections": []}, {"section_title": "Potential Impact on Employers", "paragraphs": ["Individual employers and employer associations we spoke to said that  more details would be needed to determine how they might be impacted  by the proposals.", "Regarding the Babel and Meyer proposal (which as previously  discussed, cites the need for congressional action to address potential  legal uncertainties regarding automatic enrollment) one employer  association representative expressed concern about whether state  garnishment laws would prohibit employers from making automatic  deductions for PDI premiums from employees\u2019 pay without their  permission.", "Regarding the Greszler proposal, employers and representatives of  an employer association we spoke to indicated they would need to  know more details, such as the exact amount of the tax credits and  how insurance premiums might be affected.", "Regarding the Autor and Duggan proposal, representatives of the two  employer associations stated that their members would oppose a  mandate. One employer association said there are often additional  requirements that come along with any mandates, even for actions  that employers are already taking, such as offering PDI. The employer  association also expressed concern that doing more than is required  under any mandate generally exposes employers to liability, which  could result in employers providing only the minimum benefits and  assistance required by law. One employer said that mandated PDI  could crowd out the amount of other benefits an employer is willing to  provide, such as the amount of medical coverage that it offers to  employees.", "In addition, one employer association we spoke with was concerned  about the potential administrative burdens associated with expanding  PDI, particularly for small employers. They noted that administering any  benefit requires financial resources to provide, monitor, and maintain the  benefit, stating that once employers provide a benefit to employees, they  are generally reluctant to take it away. Employers in one discussion group  we held were also concerned that providing disability assistance through  a PDI policy for 2 to 3 years under two of the proposals would require that  they retain employees and provide benefits even when employees are  unable to continue work. Employers in a discussion group and an  employer association we spoke to also wanted to know how the PDI  plans would be overseen at the state and federal levels under the  proposals, and what additional requirements that would entail."], "subsections": []}, {"section_title": "Potential Impact on Insurance Companies", "paragraphs": ["Insurance companies and associations we spoke to generally supported  efforts to expand PDI, but also expressed some concerns about related  unknowns. In particular, insurers in one of our discussion groups and both  insurance associations we spoke with supported the Babbel and Meyer  proposal to encourage employers to automatically enroll employees, with  an opt-out provision, which came out of a study funded by America\u2019s  Health Insurance Plans (AHIP) and the American Council of Life Insurers  (ACLI). One insurance association said that, relative to the other  proposals that provide a tax credit or mandate coverage, the Babbel and  Meyer proposal to expand PDI would not be a problem for insurers\u2019  capacity. Representatives from this insurance association suggested first  taking initial steps proposed by Babbel and Meyer through encouraging  automatic enrollment before considering a more major restructuring of  PDI that would supplant SSDI for 2 to 3 years. On the other hand, two  insurance associations expressed concerns about the potential for  additional requirements that could result from implementing the Babbel  and Meyer proposal, for example in relation to employee consent or the  quality of coverage offered.", "Insurance associations and insurers we spoke with also raised concerns  about the other two proposals (Autor and Duggan, and Greszler),  especially related to how they would fundamentally and unpredictably  change the PDI market. On the one hand, one insurance association  pointed out that these proposals would eliminate the SSDI offset from PDI  payments for the 2 to 3 year period, which could lead insurance  companies to significantly increase PDI premiums for such policies. On  the other hand, if the insurance company is only liable for 2-3 years of  benefit payments and services, this could reduce insurers\u2019 costs.", "In addition, in one insurer discussion group that we held, insurers said  that if there was not an SSDI offset of PDI benefits during the 2 to 3 year  period, the industry would be more aggressive about return to work  efforts. However, in another insurer discussion group we heard that they  would do less for return to work under such policies, because future  savings to the insurance company are not as great under a 2 to 3 year  policy as if the insurance company is liable for paying benefits until an  individual reaches normal SSA retirement age, as with current policies.  Finally, representatives from one insurance association said that the  Greszler and Autor and Duggan proposed PDI expansions would create  extreme capacity problems for insurers. Under the Autor and Duggan  proposal nearly all employees would need to be covered.", "One insurance association also noted its view that SSDI might benefit  under the proposals to expand PDI. Specifically, the insurance  association said that after someone goes through the PDI claim process,  a subsequent claim for SSDI may be of higher quality, potentially  reducing the administrative costs of a subsequent SSDI determination."], "subsections": []}, {"section_title": "Potential Impact on Federal and State Governments Oversight", "paragraphs": ["The three proposals we reviewed did not specify the government\u2019s role in  overseeing the expanded PDI market. Babbel and Meyer proposed a  stronger federal role in encouraging automatic enrollment by passing a  law to clarify its permissibility, but the proposal did not provide details on  implementation and oversight. Greszler proposed that participating  employers provide benefits at least equivalent to SSDI benefits, but  provided no other details on how compliance would be overseen. Neither  the Autor and Duggan nor the Greszler proposals addressed whether  individuals denied PDI could apply for SSDI within the 2 to 3 year period  covered by their proposals.", "Stakeholders we spoke to expressed divergent perspectives on whether  federal and state governments would need to provide additional  regulation, supervision, and/or oversight related to expanded PDI  markets. One insurance association said that insurance providers are  already very well regulated by ERISA and by states, and a major insurer  said that there already exists an array of federal and state laws governing  employer-sponsored PDI coverage that establishes a robust regulatory  framework for protecting participants. In contrast, representatives from all  employee advocacy groups we spoke with cited problems identified with  private insurance company practices and stressed the need for additional  consumer protections and government oversight. We found instances of  federal and state enforcement actions regarding disability insurance  improper practices in the past potentially affecting hundreds of thousands  of people over many years, as well as more recent rulemaking by DOL  that said that \u201cdisability cases dominate the ERISA litigation landscape.\u201d  These actions suggest that expanding PDI or including new PDI  requirements, in lieu of SSDI, would likely involve some degree of  additional federal and state oversight.", "Any costs associated with expanded state and federal roles would reduce  potential cost savings from the proposals, although the extent to which  this might affect the Disability Insurance Trust Fund is unclear. According  to DOL officials, an expansion in the number of private disability benefit  plans and an increase in the complexity in the legal requirements  governing the design and operation of such plans would require DOL to  provide proportionally more interpretive guidance, compliance assistance,  and enforcement and oversight activities. Estimating the potential impact  of the proposals on DOL\u2019s functions and capabilities would require more  specific information on the statutory and regulatory changes envisioned  by the proposals and the likely impact of those changes on the private  disability plan marketplace. SSA officials said that whether or not SSA  would experience an expanded role would depend on any changes in law  regarding the proposals."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review and comment to SSA and  DOL. Neither SSA nor DOL provided written comments, although both  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Commissioner of Social Security, Secretary of Labor,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7215 or curdae@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 I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, key contributors to this report  included Michele Grgich (Assistant Director), Dan Meyer (Analyst-in- Charge), Lucas Alvarez, and Seyda Wentworth. Other contributors  include: James Bennett, Ramona Burton, Holly Dye, Sarah Gilliland, Emei  Li, Dan Meyer, Carol Petersen, Monica Savoy, Almeta Spencer, and  Adam Wendel."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-627", "url": "https://www.gao.gov/products/GAO-18-627", "title": "Federal Acquisitions: Congress and the Executive Branch Have Taken Steps to Address Key Issues, but Challenges Endure", "published_date": "2018-09-12T00:00:00", "released_date": "2018-09-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2017, federal agencies obligated more than $500 billion to acquire products and services. These products and services included military aircraft, information technology software, and maintenance services.", "Amid this large spending, the federal government has taken steps to reform federal acquisitions, increase efficiencies, and improve results. For example, in the Services Acquisition Reform Act of 2003, Congress established the Acquisition Advisory Panel to review federal acquisition laws, regulations, and policies; and identify opportunities for improvement. The Panel issued its final report in 2007, addressing topics that span all three phases of the contracting life cycle identified by GAO: pre-contract award, contract award, and post-contract award.", "GAO was asked to follow up on the Panel's report and identify progress made since 2007. This report identifies the actions the federal government has taken to address key issues raised in the Panel's report, and the challenges that remain. GAO reviewed documentation and interviewed personnel from federal agencies and the private sector. These personnel included staff from OMB that are responsible for federal procurement policy, as well as staff supporting a panel addressing DOD's acquisition regulations and processes, known as the Section 809 Panel. GAO also leveraged its large body of work on federal acquisitions."]}, {"section_title": "What GAO Found", "paragraphs": ["Congress and the executive branch have taken numerous actions to address key issues the Acquisition Advisory Panel (Panel) identified in its 2007 report, but these actions have not eliminated some enduring challenges. The figure below presents the key issues the Panel addressed in relation to the life cycle of a typical contract as identified by GAO.", "Three of the key issues, and the corresponding challenges, align with specific phases in the contracting life cycle:", "Requirements Definition: The Panel found that fully identifying requirements before a contract is awarded is key to achieving the benefits of competition. GAO has found that unrealistic requirements have contributed to poor program outcomes at the Department of Defense (DOD), and that the Army's requirements development workforce decreased by 22 percent from 2008 to 2017.", "Competition and Pricing: The Panel said that competition can help reduce prices. GAO's work shows that competition rates have remained steady government-wide, and declined at DOD. See figure below.", "GAO has also found that agencies are sometimes using bridge contracts\u2014which GAO has generally defined as either extensions to existing contracts or new short-term, sole-source contracts\u2014to avoid a lapse in service caused by delay of a follow-on contract award. In some instances, bridge contract awards delay opportunities for competition and can place the government at risk of paying higher prices for multiple years. The figure below depicts how an Army bridge contract for computer support services planned for 12 months was extended to 42 months.", "Contractor Oversight: The Panel raised questions about the capacity of federal agencies to oversee contractors. GAO has found that agencies continue to award contracts warranting increased management attention at a steady rate, such as contracts for management support services. With contracts like those for management support services, there is an increased risk that contractors may perform tasks reserved for the government. Additionally, GAO found that heavy workloads at the Department of Veterans Affairs have made it difficult for officials who oversee contractors to ensure contractors adhere to contract terms.", "Three of the key issues, and the corresponding challenges, cut across all the phases of the contracting life cycle:", "Acquisition Workforce: The Panel found that the federal acquisition workforce faces workload and training challenges. GAO's work has shown that DOD has enhanced its workforce, but some workforce gaps endure at DOD and across agencies.", "Federal Procurement Data: The Panel found that the government's primary repository for acquisition data contained some unreliable data. Also, GAO has found that the system has demonstrated limitations. For example, guidance from the Office of Management Budget (OMB) required that agencies collect specific contract award data, but the system did not have the capability to do so.", "Small Business Participation: The Panel found a number of challenges hindering agencies' efforts to meet small business goals. GAO has found small business participation has increased, but many agencies are not in full compliance with requirements governing Offices of Small and Disadvantaged Business Utilization (OSDBUs). For example, the directors of these offices should report directly to agency heads or their deputies, but not all agencies have established this type of direct reporting relationship."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any new recommendations in this report, but it has made numerous recommendations in the past. The agencies have agreed with many of GAO's recommendations, and have implemented some of them but not others. For example, GAO has made the following recommendations.", "The Army should assess the resources needed for the requirements development process. The Army agreed, but it has not yet done so.", "OMB should provide guidance for agencies to manage bridge contracts. OMB agreed and has drafted management guidance but has not yet finalized it.", "Certain federal agencies should take steps to document how they conduct market research. The agencies agreed and did so.", "The Department of Veterans Affairs should develop tools to help oversee contracts. The department agreed and did so.", "DOD should have issued an updated acquisition workforce plan in fiscal year 2016. DOD agreed and issued the plan.", "OMB should take steps to improve how agencies collect certain procurement data. OMB generally agreed, but has not yet addressed the recommendation.", "Certain federal agencies should take steps to comply with OSDBU-related requirements. Most agencies that provided comments agreed or partially agreed. Two agencies\u2014the National Aeronautics and Space Administration, and the U.S. Agency for International Development\u2014have addressed the recommendations.", "GAO continues to believe the agencies should implement all of these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies obligated more than $500 billion through contracts for  products and services in fiscal year 2017. These products and services  included military aircraft, information technology software, and  maintenance services. Amid this large spending, the federal government  has taken steps to reform the federal acquisition process, increase  efficiencies, and improve outcomes. For example, the Services  Acquisition Reform Act of 2003 authorized the establishment of the  Acquisition Advisory Panel (Panel) in order to review laws and regulations  relating to various acquisition issues government-wide. The Panel issued  its final report in 2007, in which it identified numerous acquisition  challenges facing the federal government, and suggested actions to  address those challenges.", "You asked us to review the progress the federal government has made  since the Panel issued its final report. Our report identifies actions the  federal government has taken to address the key issues in the Panel\u2019s  report, and some of the acquisition challenges that remain. To frame the  key issues the Panel identified, we reviewed the Panel report, categorized  its findings by higher-order issue areas, and organized these issue areas  according to the phases of the contracting life cycle identified by GAO:", "Pre-award phase activities generally include defining requirements,  acquisition planning, and preparing the solicitation.", "Award phase activities generally involve the evaluation of offers, price  negotiations and discussions with offerors, and the selection of  awardees.", "Post-award phase activities generally involve contract administration,  agency oversight of contractor performance, and closeout of the  contract.", "Figure 1 depicts how the six key issue areas identified by the Panel align  with the contracting life cycle. Three of the issue areas\u2014requirements  definition, competition and pricing, and contractor oversight\u2014align with  specific phases of the contracting life cycle. The other three issue areas\u2014 acquisition workforce, federal procurement data, and small business  participation\u2014cut across all phases of the life cycle.", "To identify actions the federal government has taken to address  challenges in these key issue areas, and challenges that remain, we  reviewed prior GAO reports, relevant legislation, and acquisition guidance  issued by the Office of Management and Budget\u2019s (OMB) Office of  Federal Procurement Policy (OFPP), the Department of Defense (DOD),  the General Services Administration (GSA), and the Small Business  Administration (SBA). We also interviewed officials from these agencies  and the Section 809 Panel, which was recently established by the  Secretary of Defense, as required by Congress, to focus on acquisition  issues at the Department of Defense. We reviewed reports the Section  809 panel issued in May 2017, January 2018, and June 2018 to identify  commonalities with the Acquisition Advisory Panel\u2019s 2007 report. Finally,  we obtained comments on our preliminary findings from members of the  Chief Acquisition Officer\u2019s Council\u2014a group of senior acquisition leaders  which OMB established to monitor and improve the federal acquisition  system\u2014and two groups representing companies that sell products and  services to federal agencies. We focused our review on actions taken  from 2007, when the Panel issued its final report, to 2018. See appendix I  for more information on our objective, scope and methodology.", "We conducted this performance audit from July 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Services Acquisition Reform Act of 2003 required the Administrator  for Federal Procurement Policy to establish an acquisition advisory panel  (referred to as the Panel) to review federal acquisition laws, regulations,  and policies; and identify opportunities to enhance how agencies award  and administer contracts for the acquisition of goods and services. The  Administrator for Federal Procurement Policy appointed the Panel  members in February 2005, and the Panel issued its final report in 2007."], "subsections": [{"section_title": "Our Work in Federal Acquisitions", "paragraphs": ["We have a long history of reporting on the key issue areas that the Panel  addressed in 2007. In 2007, we reported that the Panel\u2019s findings were  largely consistent with our prior work. For example, the Panel found that  defining requirements is key to achieving the benefits of competition.  Similarly, we have issued numerous reports that address the importance  of robust requirements definition. Panel members also recognized a  significant mismatch between the demands placed on the acquisition  workforce and the personnel and skills available to meet those demands.  In 2006, we testified that DOD\u2019s acquisition workforce, the largest  component of the government\u2019s acquisition workforce, remained relatively  unchanged while the amount and complexity of contract activity had  increased.", "Since then, we have issued many reports and testimonies on topics  ranging from requirements development at DOD, government-wide  competition rates, small business, and the acquisition workforce, among  others. We also track a number of key acquisition issues\u2014such as DOD  contract management and weapons systems acquisitions\u2014through our  high-risk program. Our high-risk program identifies government  operations with greater vulnerabilities to fraud, waste, abuse, and  mismanagement."], "subsections": []}, {"section_title": "Section 809 Panel", "paragraphs": ["Twelve years after the Services Acquisition Reform Act of 2003 required  the Administrator for Federal Procurement Policy to establish the Panel,  Congress required the establishment of another advisory panel by the  Secretary of Defense in section 809 of the National Defense Authorization  Act (NDAA) for Fiscal Year 2016 (referred to as the Section 809 Panel),  and tasked it with reviewing applicable defense acquisition regulations  and finding ways to streamline and improve the defense acquisition  process, among other things. The Section 809 Panel is reporting on a  number of topics related to areas covered by the 2007 Acquisition  Advisory Panel report, including competition, acquisition workforce and  small business participation. The Section 809 Panel issued an interim  report in May 2017. Volumes I and II of its final report were issued in  January 2018 and June 2018, respectively. Its final volume is expected in  January 2019."], "subsections": []}]}, {"section_title": "Key Issue Area 1: Requirements Definition", "paragraphs": ["Issue Area Context  Acquisition requirements describe the government\u2019s needs when agencies procure  products (such as major weapon systems) and services (such as engineering support)  from contractors. Federal statute, policy and best practices emphasize the need for valid,  clear, and achievable requirements early in the acquisition process. An example of a  requirement for a major weapon system could include the range that a missile must be  able to travel, while a requirement for a service acquisition could include an engineer\u2019s  experience and education.   In 2007, the Panel found that defining requirements is key to achieving the benefits of  competition because procurements with clear requirements are far more likely to  produce competitive, fixed-price offers that meet customer needs. The Panel also found  that the government invested in requirements definition less than the private sector, and  that better requirements definition would help facilitate implementation of performance- based acquisition (PBA). PBA is a preferred acquisition approach that focuses on  contractors\u2019 deliverables rather than how they perform the work.", "We have found that federal agencies continue to face challenges  involving acquisition requirements definition.", "Congress passed a defense acquisition reform law with requirements- related provisions in 2009, but our work shows that DOD often begins  programs with unrealistic requirements.", "Agencies have not consistently complied with OMB\u2019s requirements  relating to key provisions from an information technology (IT)  acquisition reform law.", "Numerous efforts have been made to improve and encourage  commercial item procurements in an attempt to take advantage of  market innovations and reduce acquisition costs.", "DOD and GSA have taken steps to improve how personnel define  requirements for service acquisitions, and to focus more on  contractors\u2019 deliverables than on how the contractors perform the  work, but officials told us that some acquisition officials are reluctant  to cede control of the acquisition to contractors.", "We elaborate on these points below."], "subsections": [{"section_title": "2009 Defense Acquisition Reform Law Included Provisions Related to Requirements Definition, but DOD Still Faces Challenges", "paragraphs": ["The 2009 Weapon Systems Acquisition Reform Act (WSARA) included  provisions related to requirements definition for major defense acquisition  programs. In December 2012, we found that WSARA was helping  program offices identify and mitigate requirements-related risks earlier in  the acquisition process based on our analysis of 11 weapon acquisition  programs.", "Section 809 Panel  In its June 2018 report, the Section 809 Panel  suggested that the Department of Defense  better align its acquisition, requirements, and  budget processes.   It also suggested that the requirements  system focus on capabilities needed to  achieve strategic objectives instead of  predefined systems.", "However, we have also observed and reported that DOD has struggled to  adequately define requirements for its largest acquisition programs. For  example, in 2014, we found that cost and schedule growth in major  acquisition programs can, in part, be traced to a culture in which the  military services begin programs with unrealistic requirements. This cost  and schedule growth decreases DOD\u2019s buying power, reducing the  aggregate military capability the department can deliver over time.", "In 2017, we found that the Army\u2019s requirements development workforce  had decreased by 22 percent since 2008, with some requirements  development centers reporting more significant reductions. We recommended that the Secretary of the Army conduct a comprehensive  assessment to better understand the resources necessary for the  requirements development process and determine the extent to which the  shortfalls can be addressed given other funding priorities. While the Army  agreed with the recommendation, it remains unaddressed.", "WSARA also required that DOD use competitive prototyping, which we  generally define as two or more competing vendors producing prototypes  for weapon systems before a design is selected for further development,  in major defense acquisition programs as applicable. We have found  that prototyping has benefited acquisition programs by, among other  things, helping programs understand their requirements, and we have  found that competitive prototyping has generated additional benefits, such  as improving the quality of systems offered. Even though Congress  repealed WSARA\u2019s competitive prototyping requirement in 2015,  Congress simultaneously codified a preference for prototyping\u2014including  competitive prototyping\u2014as a risk mitigation technique, which has been  implemented in DOD policy. Further, the fiscal year 2017 and 2018  NDAAs included several new prototyping-related provisions.", "As of 2018, DOD Weapons System Acquisitions remains on our High  Risk list. Among other things, we reported that DOD needs to build on  existing reforms intended to improve requirements definition and,  specifically, examine best practices to better integrate critical  requirements."], "subsections": []}, {"section_title": "Agencies Have Not Consistently Complied with a Key IT Acquisition Reform Law", "paragraphs": ["The 2014 Federal Information Technology Acquisition Reform Act  (commonly referred to as FITARA) expanded the role of certain agency  Chief Information Officers (CIOs) to improve acquisitions of information  technology (IT) products and services. Several aspects of FITARA  target requirements definition and OMB has expanded upon and  reinforced these aspects in a number of ways through government-wide  guidance. However, as of 2018, Improving the Management of IT  Acquisitions and Operations remains on our High Risk List because  agencies have not completely implemented certain FITARA requirements  as implemented by OMB or addressed a number of our  recommendations, including several that target requirements definition."], "subsections": [{"section_title": "CIO Responsibilities", "paragraphs": ["FITARA includes a provision generally requiring that agency heads  ensure CIOs review and approve all IT contracts prior to award, unless  that contract is associated with a non-major investment. Additionally,  OMB\u2019s implementing guidance states that CIOs\u2014or other authorized  officials, as appropriate\u2014should review and approve IT acquisition plans  or strategies as applicable. These reviews can provide CIOs greater  insight into IT acquisition requirements. However, in January 2018, we  found that officials at 14 of 22 selected agencies did not identify, or help  identify, IT acquisitions for CIO review as required by OMB\u2019s guidance.  The same number of agencies did not fully satisfy OMB\u2019s requirement  that the CIO or other appropriate parties review and approve IT  acquisition plans or strategies. As a result, agencies increased the risk  that they were awarding IT contracts that were duplicative, wasteful, or  poorly conceived."], "subsections": []}, {"section_title": "Incremental Development", "paragraphs": ["FITARA requires that CIOs certify that their agencies are adequately  implementing incremental IT development, as defined in capital planning  guidance issued by OMB. We previously reported that OMB has  emphasized the need to deliver investments in smaller parts, or  increments, to reduce risk, deliver capabilities more quickly, and facilitate  the adoption of emerging technologies. We have previously reported  that a key step in implementing incremental development methods can  include defining requirements appropriately, such as by involving end  users and stakeholders.", "We have found that agencies have struggled to adhere to FITARA\u2019s  incremental development requirements, as implemented in OMB\u2019s capital  planning guidance. In 2017, we found less than 65 percent of major IT  software development investments were reported as being certified by the  agency CIO for implementing adequate incremental development."], "subsections": []}, {"section_title": "Software Licenses", "paragraphs": ["FITARA also includes provisions addressing government software license  management, calling for the identification and development of a strategic  sourcing initiative to enhance government-wide acquisition, shared use,  and dissemination of software. In May 2014, we found that 22 of 24  major agencies did not have comprehensive license policies and only 2  had comprehensive license inventories. Without comprehensive policies  and inventories, agencies are poorly positioned to understand their  requirements for software licenses. We recommended that OMB issue a  directive to help guide agencies in managing licenses and that the 24  agencies improve their policies and practices for managing licenses. As  of July 2018, OMB had addressed our recommendation, but many of the  recommendations to other agencies remained unaddressed."], "subsections": []}]}, {"section_title": "Congress and DOD Have Worked to Encourage Commercial Item Procurements", "paragraphs": ["Purchasing commercial items helps an agency take advantage of market  innovations, increase its supplier base, and reduce acquisition costs. The  commercial item definition includes items customarily used by and sold  (or offered) to the general public, including products with minor  modifications. Federal agencies can purchase commercial items to  meet many requirements, from the relatively simple, such as office  furnishings and housekeeping services, to the more complex, such as  maintenance services and space vehicles. Further, contracting officers  can use streamlined solicitation procedures\u2014which can reduce the time  needed to solicit offers from vendors\u2014if they determine that the product  or service being procured is commercial.  We reported that federal  agencies used commercial item procedures for over $100 billion of goods  and services in 2015.", "The issue of commercial item procurements has been a concern of  Congress for a number of years. In the fiscal year 2018 NDAA, and four  of its predecessor acts, Congress specified how DOD is to define and  purchase commercial items. For example, a fiscal year 2017 provision  set a preference for certain commercial services, such as facilities-related  or knowledge-based services, by prohibiting defense agencies from  entering into non-commercial contracts above $10 million to meet those  requirements without a written determination that no commercial services  can meet the agency\u2019s needs.", "Section 809 Panel  In its January 2018 report, the Section 809  Panel proposed a new approach for using  commercial items to meet requirements. The  panel proposed that Congress and the  Department of Defense (DOD) tailor the  department\u2019s acquisition approach based on  the level of customization a given product  entails. For readily available commercial  items, or those requiring minor customization,  the panel stated that DOD should be willing  and able to reduce management and  oversight to capitalize on the nondefense  marketplace.  In its June 2018 report, the Section 809 Panel  suggested additional statutory and regulatory  changes to simplify commercial item  procurements.", "In January 2018, DOD revised its regulations and corresponding  procedures, guidance, and information related to the procurement of  commercial items to reflect recent legislative changes. DOD also  updated its acquisition regulations to provide guidance to contracting  officers for making price reasonableness determinations, promoting  consistency in making commercial item determinations, and expanding  opportunities for nontraditional defense contractors to do business with  DOD. The Department also updated its Guidebook for Acquiring  Commercial Items, which includes information on how to define,  determine, and price commercial items, to reflect the regulatory  changes.", "DOD has also created six commercial item Centers of Excellence to  provide analytical support and assist in both the timeliness and  consistency of commercial item determinations. The centers are staffed  with engineers and price/cost analysts to help contracting officers with  market analysis, commercial item reviews and determinations, and  commercial pricing analysis. The centers also provide training and  assistance to the DOD acquisition community on various techniques and  tools used to evaluate commercial items and commercial item pricing.", "Finally, the fiscal year 2018 NDAA directed GSA to establish a program to  procure commercial items through commercial e-commerce portals,  which can generally be described as online marketplaces. OMB was  charged with carrying out the program\u2019s implementation phases. GSA  issued the initial implementation plan in March 2018, and the next phase  of implementation will entail market analysis and consultation with  industry and agencies."], "subsections": []}, {"section_title": "Efforts to Improve Service Acquisition Requirements Have Not Fully Overcome Cultural Resistance", "paragraphs": ["In 2017, we found that federal agencies procured over $272 billion in  services in fiscal year 2015, which was approximately 60 percent of total  contract obligations for that year. We\u2019ve also previously reported that  services contracts are sometimes awarded for professional and  management support services that can put contractors in a position to  inappropriately influence government decisionmaking if proper oversight  is not provided. As we previously reported, in 2009, DOD\u2019s Defense  Acquisition University introduced a Services Acquisition Workshop to  provide training and guidance on developing service acquisition  requirements. The workshop brings together the key personnel  responsible for an acquisition to discuss the requirements and how they  will know if a contractor has met those requirements. During the  workshop, the teams develop the language that will articulate the  requirements, and by the end of the process, the goal is to have draft  acquisition documents. We reported in 2013 that DOD mandated the use  of the workshop for service acquisitions valued at $1 billion and above,  and encouraged its use for acquisitions valued at $100 million or more.", "Performance-based acquisition (PBA) is, as the Panel reported in 2007, a  preferred commercial technique. PBA focuses on contractors\u2019  deliverables rather than how they perform the work. Rather than using  traditional statements of work that define requirements in great detail,  PBA uses performance work statements (PWS) that define requirements  more generally based on desired outcomes. We have reported that  defining requirements this way has been a struggle for DOD for several  years. Additionally, we have found that implementing PBA can be  particularly challenging when acquiring certain services. Services differ  from products in several aspects and can offer challenges when  attempting to define requirements and establish measurable,  performance-based outcomes.", "In 2012, we found that the Defense Acquisition University developed an  Acquisition Requirements Roadmap Tool, which is an online resource  designed to help personnel write requirements for PBA and create pre- award documents, including requirements documents, using a  standardized template. Additionally, in 2018, GSA updated its Steps to  Performance-Based Acquisition guidance for managing PBAs and made  sample PBA planning documents available to contracting officers across  the federal government. The updated PBA guidance is a start-to-finish set  of instructions for planning and executing a PBA, and the planning  documents include examples of requirements documents, such as  performance work statements, which set forth the contractor\u2019s expected  outcomes for the acquisition.", "During the course of this review, we identified that some cultural  resistance to PBA has endured. Under PBA, which is structured around  the results to be achieved as opposed to the manner in which the work is  to be performed, a PWS may be prepared by a contractor in response to  an agency\u2019s statement of objectives. A PWS is a type of statement of  work that describes the required results in clear, specific and objective  terms with measurable outcomes. While some DOD and GSA officials  reported that PBA has become an increasingly standard approach, other  DOD officials told us that some acquisition officials are still reluctant to  give contractors control over how agencies\u2019 requirements will be met  under PBA because they fear that they may not get what they need. The  officials we spoke with asserted it is difficult to overcome decades of  conducting federal acquisition using government-drafted statements of  work that outline\u2014often in precise detail\u2014how an agency expects a  contractor to perform work."], "subsections": []}]}, {"section_title": "Key Issue Area 2: Competition and Pricing", "paragraphs": ["Issue Area Context  Federal regulations generally require that agencies determine that the prices proposed  by contractors are fair and reasonable before purchasing goods or services. Agencies  normally establish a fair and reasonable price through competitions where multiple  offerors submit proposals. Competition is considered the cornerstone of a sound  acquisition process and a critical tool for the government. It helps agencies achieve the  best prices and return on investment for taxpayers.   Federal statutes and regulations permit agencies to award contracts noncompetitively  in certain circumstances. Under those circumstances, agencies may obtain other types  of data\u2014for example via market research\u2014to determine whether prices proposed by  contractors are fair and reasonable.   In 2007, the Panel found that the private sector relied heavily on competition and  rigorous market research to effectively and efficiently buy products and services. The  Panel also found the federal government could improve competition and pricing through  greater adoption of commercial practices. Further, the Panel cited our prior findings  about interagency contracting\u2014a contracting approach in which an agency either  places an order directly against another agency\u2019s indefinite-delivery contract, or uses  another agency\u2019s contracting operation to obtain goods or services. This approach can  reduce the prices the government pays for goods and services, but we had found that  interagency contracts did not always adhere to federal procurement laws, regulations,  and sound contracting practices.", "We have found that federal agencies\u2019 efforts to increase competition and  improve pricing have had limited success.", "OFPP and DOD have taken steps to increase competition rates, but  the government-wide competition rate has remained steady, while  DOD\u2019s rate has declined over the past 5 years.", "Agencies facing acquisition planning obstacles are sometimes using  bridge contracts, which we have generally defined as extensions to  existing contracts or new short-term, sole-source contracts to avoid a  lapse in service caused by a delay in awarding a follow-on contract. In  some instances, bridge contract awards delay opportunities for  competition and can place the government at risk of paying higher  prices for multiple years.", "In response to our recommendations, several agencies have taken  steps to improve how they conduct market research and determine  price reasonableness.", "GSA has developed new pricing tools, but is not collecting pricing  data as it had planned. GSA officials told us pricing data helps  contracting officers conduct market research and negotiate prices.", "OFPP has promoted consolidated purchasing approaches to improve  pricing, but low adoption rates diminish potential savings.", "The federal government has made significant progress addressing  challenges related to interagency contracting, where one agency uses  another\u2019s contract or contracting support to obtain goods or services.", "We elaborate on these points below."], "subsections": [{"section_title": "The Government-wide Competition Rate Has Remained Steady while DOD\u2019s Rate Has Declined", "paragraphs": ["Despite the existence of OFPP memoranda directing agencies to  increase competition, we found that competition rates\u2014the percentage of  total obligations reported for competitive contracts versus noncompetitive  contracts\u2014have remained largely unchanged. We previously reported  that, in 2009, OFPP directed agencies to increase competition and  reduce their spending on sole-source contracts. However, in 2017, we  found that the government-wide competition rates had remained relatively  steady, at just below two-thirds of all contract obligations from fiscal years 2013 through 2017. Furthermore, during the same time period, DOD\u2019s  rate declined by over 4 percent, and civilian agency rates increased by  1.6 percent. See figure 2.", "We have previously identified various factors that affect competition rates,  including the government\u2019s preference for a specific vendor, inadequate  acquisition planning, and overly restrictive government requirements.  We have also identified a number of reasons why DOD\u2019s competition  rates have been particularly low:  In 2017, we found that some companies that had not done business  with DOD reported several barriers preventing them from competing  for DOD contracts, including the complexity of DOD\u2019s contracting  process.", "In 2014, we found that that 7 of the 14 justifications in a non- generalizable sample of non-competitive DOD contracts cited the  \u201clack of data rights\u201d as a barrier to competition. Obtaining adequate  data rights, such as unlimited rights in technical data, for instance, can  allow the government to use, modify, and release the technical data  used to design, produce, support, maintain, or operate an item,  among other things. A long-standing factor impacting DOD\u2019s  competition rate has been its reliance on original equipment  manufacturers throughout the life cycle of a program because of a  previous decision not to purchase adequate data rights.", "In 2013, we found that DOD may be missing opportunities to  effectively facilitate competition in future acquisitions for products and  services previously acquired non-competitively. We reviewed  justifications for why awards were non-competitive and found that  some of them provided limited insight into reasons for the  noncompetitive award, or did not fully describe actions that the  agency could take to bring about competitive awards in future  acquisitions of the same goods or services. We recommended that  DOD identify, track, and consider the specific factors that affect  competition when setting competition goals and develop guidance to  apply lessons learned from past procurements to help achieve  competition in the future. We also recommended DOD collect reliable  data on one-offer awards. DOD agreed with these recommendations,  and implemented them in 2014.", "Between 2010 and 2015, DOD\u2019s then-Under Secretary for Acquisition,  Technology and Logistics issued a series of Better Buying Power memos  intended to promote competition, among other things. For example,  some memos provide guidance on the effective management of technical  data rights, which can include acquiring rights in data, as appropriate, to  avoid future reliance on original equipment manufacturers. In 2017, we  found that more large DOD weapon system programs were implementing  \u201cBetter Buying Power\u201d initiatives among other reforms, which led to better  acquisition outcomes for some programs. In 2018, we further found that  DOD programs initiated after 2010, and therefore subject to Better Buying  Power guidance, gained nearly $5 billion in buying power\u2014which is the  amount of goods or services that can be purchased given a specified  level of funding. The fiscal year 2018 NDAA directed the Secretary of  Defense to ensure that DOD negotiates prices for technical data to be  delivered under development or production contracts before selecting a  contractor to engineer and manufacture a major weapon system, among  other things."], "subsections": []}, {"section_title": "Some Agencies Are Using Non-Competitive Bridge Contracts When Facing Acquisition Planning Obstacles", "paragraphs": ["When an existing contract is set to expire but the follow-on contract is not  ready to be awarded, the government may simply extend the existing  contract beyond the period of performance (including option years).  Alternatively, an agency may award a new short-term sole-source  contract to the incumbent contractor to avoid a gap in service caused by a  delay in awarding a follow-on contract. These contract extensions and  short-term sole-source contracts are often referred to as \u201cbridge  contracts\u201d. Bridge contracts can be necessary tools, but they can also  delay opportunities for competition, which we and others have noted is  the cornerstone of a sound acquisition process.", "Additionally, bridge contracts are typically envisioned as short-term, but  we found in 2015 that some bridge contracts spanned multiple years,  potentially undetected by agency management. For example, of the 29  contracts we reviewed in-depth in 2015, six were longer than three years.  As figure 3 illustrates, an Army bridge contract for computer support  services was initially planned as a 12-month bridge, but because of  subsequent bridges, ultimately spanned 42 months.", "Obstacles during the pre-award phase, including poor acquisition  planning, delayed completion of requirements documents, bid protests,  and an inexperienced and overwhelmed acquisition workforce largely  drove the use of bridge contracts in the cases we studied. We further  found that in the sample we reviewed, increased periods of performance  sometimes corresponded to increased contract values, and that\u2014 consistent with best practices\u2014agencies paid lower prices in several  instances after subsequent contracts were competed. We recommended  that OFPP take steps to amend acquisition regulations to incorporate a  definition of bridge contracts, and, in the interim, provide guidance for  agencies to track and manage their use. OFPP agreed with the  recommendation to provide guidance for managing bridge contracts, and  has drafted management guidance, but has not yet finalized it as of July  2018. This guidance includes a definition of bridge contracts."], "subsections": []}, {"section_title": "Some Agencies Have Taken Steps to Improve How They Determine Price Reasonableness, but More Can Be Done", "paragraphs": ["Market research helps agencies obtain knowledge about pricing that can  be critical to the government\u2019s ability to determine that prices are fair and  reasonable. Market research can include:", "Contacting knowledgeable government and industry officials,", "Obtaining information about similar items from other agencies,", "Querying government-wide databases for contract prices, and", "Reviewing the results of recent market research undertaken to meet  similar requirements.", "However, in 2014, we found that four agencies\u2014DOD, the Department of  Homeland Security, the Department of Transportation, and the Federal  Aviation Administration\u2014did not leverage many available market  research techniques on lower dollar contracts, and, as a result, may have  missed opportunities to promote competition. We recommended that the  Secretaries of Defense and Homeland Security take action to ensure their  acquisition personnel more clearly document the market research  activities they conduct, and that the Secretary of Transportation (the  Federal Aviation Administration falls under this department) update its market research guidance to include more detail on which elements of  market research should be documented. All three agencies agreed with  and addressed our recommendations.", "In July 2018, we issued a report on DOD\u2019s efforts to determine whether  prices are fair and reasonable for commercial items, and we have found  that dealing with a limited marketplace and limited price data can be a  challenge. Limited market information can hinder contracting officers\u2019  ability to make commercial item and price reasonableness  determinations. Additionally, the inability to obtain contractor data can  make it difficult for acquisition staff to make commercial item and price  reasonableness determinations. We also found that better information  sharing efforts could address some of the challenges, and recommended  that DOD develop a strategy to better share commerciality and price  reasonableness information across the department. DOD agreed with our  recommendation."], "subsections": []}, {"section_title": "GSA has Developed New Pricing Tools, but Some Agencies and Contractors Are Not Providing GSA Key Data", "paragraphs": ["GSA has developed a number of web-based tools that, according to GSA  officials, are intended to enhance contracting officers\u2019 understanding of  the basis of contractors\u2019 proposed prices, improve contracting officers\u2019  leverage during contract negotiations, and ultimately reduce the cost of  some government contracts. These tools are housed under GSA\u2019s  Acquisition Gateway, a website intended to provide federal contracting  professionals with access to tools and resources.", "GSA has developed the Contract-Awarded Labor Category (CALC)  tool that is intended to help federal contracting officers find awarded  prices to use in negotiations for labor contacts. It currently contains  pricing data from professional services and IT contracts.", "GSA has developed an independent cost estimate tool that is  intended to help contracting personnel develop cost estimates prior to  contract award.", "GSA has developed a Prices Paid Portal to capture how much the  government has previously paid for certain goods and services.", "Additionally, in 2016, GSA issued a Transactional Data Reporting Rule  that requires contractors to report more granular transactional data,  including pricing information, to the government. GSA officials told us  they anticipate that the collection of this transactional pricing data will  greatly enhance the government\u2019s price analyses, and provide pricing  data for the Prices Paid Portal. GSA officials also told us that  transactional data reporting will provide contracting officers real-time,  prices-paid information that should help them conduct market research  and negotiate prices faster and easier.", "However, GSA officials told us that agencies do not collect and share  pricing data in a standardized manner, and that this makes pricing  analysis challenging. Furthermore, the Transactional Data Rule may  provide less data than initially expected since GSA has decided to make  reporting these data optional for contractors under certain circumstances.  According to OMB staff, GSA is also collecting transactional data from all  \u201cbest-in-class\u201d contracting vehicles\u2014those that are recommended for  agency use as part of the OMB-directed category management effort. We  will continue to monitor GSA\u2019s efforts to collect pricing data."], "subsections": []}, {"section_title": "Agency Adoption of Consolidated Purchasing Approaches Has Been Limited, Diminishing Potential Savings", "paragraphs": ["As we have reported, category management is a multi-pronged  acquisition approach that includes a broad set of strategies such as  consolidated purchasing, supplier management, and improving data  analysis and information sharing. Federal category management efforts  are intended to manage entire categories of spending across the federal  government for commonly purchased goods and services in order to  maximize the government\u2019s buying power and improve pricing for all  federal buyers. In December 2014, OFPP issued a memo that directed  GSA to develop guidance to provide agencies with consistent standards  for the development and execution of category management. Category  management follows a similar government-wide effort known as strategic  sourcing, which also strove to consolidate purchasing activities.  According to OMB and GSA guidance, a tenet of strategic sourcing is that  higher volume generally translates to lower prices. As we have reported,  a key characteristic of strategic sourcing is the use of tiered pricing,  where unit prices are reduced as cumulative sales volume increases.  Table 1 illustrates an example of a tiered pricing model.", "As we have reported, it is unclear whether the government will fully  realize consolidated purchasing approaches\u2019 potential to reduce prices.  We have found that agencies\u2019 adoption of strategic sourcing has  historically been low, and that tiered price discounts negotiated with  vendors were not reached in most instances. For example, we reported  in 2016 that, in fiscal year 2015, federal agencies spent an estimated $6.9  billion on the types of commodities\u2014goods and services\u2014available  through federal strategic sourcing initiatives, but they only saved $129  million because of low adoption rates. We estimated the government  could have saved $1.3 billion if agencies had directed more spending to  strategic sourcing initiatives. See figure 4.", "In our 2016 report, we found that agencies\u2019 adoption of the federal  strategic sourcing initiatives was low, in part, because individual agencies  were not held accountable for complying with their own commitment  letters. In these commitment letters, agencies identified how much  spending they planned to direct to strategic sourcing vehicles.", "Additionally, agencies were not held accountable for implementing  transition plans that specified timelines for redirecting their relevant  spending to strategic sourcing vehicles.", "In 2016, we made six recommendations to OMB\u2019s OFPP and GSA in  order to better promote agency accountability for implementing the  strategic sourcing initiatives and category management effort. OMB and  GSA have taken actions to address all six recommendations, including a  recommendation for OFPP to report on agency-specific targets for the  use of category management that.", "Although agency adoption of strategic sourcing initiatives has been low,  we reported in 2012 and 2016 that strategic sourcing has still achieved  significant savings for the government, and resulted in savings rates that  are comparable to those reported by leading companies. For example,  GSA officials reported that federal agencies directed almost $2 billion of  spending through strategic sourcing contracts between fiscal years 2011  and 2015, and achieved an estimated $470 million in savings\u2014which  represents an overall savings rate of about 25 percent. By comparison,  leading companies typically achieved savings rates between 10 and 20  percent by using strategic sourcing.", "Since our 2016 analysis of savings under strategic sourcing, category  management efforts have continued. OMB staff told us that statistics  show early progress in category management."], "subsections": []}, {"section_title": "Progress Made Addressing Interagency Contracting Challenges", "paragraphs": ["Interagency contracting refers to instances when an agency either places  an order directly against another agency\u2019s indefinite-delivery contract, or  uses another agency\u2019s contracting operation to obtain goods or  services. Interagency contracting can leverage the government\u2019s buying  power and allow agencies to meet the demands for goods and services  efficiently. This method of contracting can reduce the prices the  government pays for goods and services when properly managed, but it  also poses a variety of risks.", "In 2005 we reported that DOD used a Department of the Interior contract  for information technology to obtain interrogation services quickly during the Iraq War, and, as a result, six task orders for interrogation, screening,  and other intelligence-related services were placed on an information  technology contract. Our additional work found that interagency  contracting deficiencies stemmed from increasing demands on the  acquisition workforce, insufficient training, and\u2014in some cases\u2014 inadequate guidance; as well as questionable lines of responsibility for  key functions such as requirements definition, contract negotiation, and  contractor oversight. For these reasons, we added the management of  interagency contracts to our High Risk list in 2005.", "In 2013, we found that the federal government had made significant  progress in addressing challenges involving interagency contracting.  Specifically, we found that agencies had adopted new oversight  requirements for interagency contracts, and that OMB and GSA had  taken steps to improve the reliability of data on interagency contracts,  increasing transparency into how agencies used them. Therefore, we  removed interagency contracting from our High Risk list in February 2013."], "subsections": []}]}, {"section_title": "Key Issue Area 3: Contractor Oversight", "paragraphs": ["Issue Area Context    The government uses contracts to procure a wide range of services, some of which  warrant increased management attention because there is an increased risk that the  contractors may perform tasks reserved for the government. The responsibility for  overseeing contractors often falls to contracting officers\u2019 representatives, who are  expected to help ensure contractors perform their work in accordance with contractual  requirements. Additionally, the Federal Acquisition Regulation (FAR) contains a  prohibition on using personal services contracts, which are characterized by the  employer-employee relationships they create.   In 2007, the Panel found that uncertainty about inherently governmental functions led to  confusion about the necessary amount of contractor oversight, and it raised questions  about federal agencies\u2019 capacity to oversee contractors. Additionally, the Panel  asserted that the FAR prohibition on personal services contracts should be removed  and that new guidance should be provided to define where, to what extent, under what  circumstances, and how agencies may procure personal services by contract.", "We have found that contracts requiring increased management attention  have posed contractor oversight challenges for federal agencies.", "Agencies across the federal government award contracts requiring  increased management attention, such as contracts for professional  and management support services.", "DOD is not leveraging its annual reports to Congress on its portfolio of  contracted services to systematically identify contracts requiring  increased management attention.", "DOD has taken steps to improve the reliability of data on personal  services contracts, which could help ensure contractors are  supervised appropriately.", "We elaborate on these points below."], "subsections": [{"section_title": "Federal Agencies Are Awarding Contracts Warranting Increased Management Attention at a Steady Rate", "paragraphs": ["There are benefits to using contractors to provide services, such as  addressing surge capacity needs and providing needed expertise. But we  and OFPP have identified the need for increased management attention  on certain types of contracted services. These contracted services  include professional and management support services, such as  intelligence services and policy development. Additionally, some of  these services can be closely associated with inherently governmental  functions. In 2009, we found that federal agencies introduce the risk that  contractors may inappropriately influence government authority when  performing contracts for services \u201cclosely associated\u201d with inherently  governmental functions.", "In 2017, we found that agencies continued to award service contracts  warranting increased management attention at a steady rate. See figure  5. From fiscal years 2013 through 2017, the share of government-wide  obligations for these services remained consistent for civilian agencies at  around 20 percent, and grew for DOD from about 18 percent to 20  percent.", "OMB has taken steps to help agencies reduce some of the risks  associated with contracts warranting increased management attention. In  2011, OMB emphasized the importance of adequate management by  government employees when contractors perform work that is closely  associated with inherently governmental functions. For example, OMB  directed agencies to employ and train a sufficient number of qualified  government personnel to provide active and informed management and  oversight of contractor performance where contracts have been awarded  for functions closely associated with the performance of inherently  governmental functions.", "We have found that some agencies face other challenges overseeing  their contractors. In 2010 and 2012, we reported that DOD lacked  sufficient numbers of adequately trained personnel, including contracting  officer\u2019s representatives (CORs), to oversee contractors in contingency  operations like those in Afghanistan and Iraq. In 2013, at the  Department of Veterans Affairs, we found that heavy workloads and  competing demands made it difficult for CORs to effectively monitor  contractors and ensure they were executing their work in accordance with  contract terms. In addition, we have found that these CORs often lacked  the technical knowledge and training needed to effectively oversee  certain technical aspects of a contractor\u2019s performance. We  recommended that the Department of Veterans Affairs develop tools to  help the officials oversee contracts. The department agreed and did so."], "subsections": []}, {"section_title": "DOD Is Not Using Available Information to Inform Contractor Oversight Efforts", "paragraphs": ["In 2008 and again in 2009, Congress mandated that defense and certain  civilian agencies start providing annual reports on certain service contract  actions. These inventories can improve agency insight into the number  of contractor personnel providing services and the functions they are  performing, among other things, and help agencies determine whether  any of these functions require increased management attention. Despite  the increased reporting requirements, we have found that DOD has not  always used available inventory information to improve contractor  oversight. In March 2018, for example, we found that the military  departments generally had not developed plans to use the inventory to  inform management decisions as required. We did not make any new  recommendations at the time, noting that seven of our 18 prior  recommendations related to the inventory remained open, including a  recommendation for DOD to identify officials at the military departments  responsible for developing plans and enforcement mechanisms to use the  inventory. In its comments on our March 2018 report, DOD stated it was  committed to improving its inventory processes."], "subsections": []}, {"section_title": "DOD Has Taken Steps to Improve the Reliability of Data on Personal Services Contracts", "paragraphs": ["A personal services contract is one that creates an employer-employee  relationship between the government and contractor personnel. Because  such contracts could be used to circumvent the competitive hiring  procedures of the civil service laws, the use of personal services  contracts requires specific statutory authority.", "Section 809 Panel  In its June 2018 report, the Section 809 Panel  suggested eliminating statutory and regulatory  distinctions between personal services  contracts and non-personal services contracts  to increase managerial flexibility in  determining how to fulfill requirements.", "As of July 2017, we could not verify how often DOD awarded personal  services contacts because more than one third (17 of 45) of the contracts  we reviewed that had been designated personal services contracts in the  government\u2019s primary acquisition-data repository (the Federal  Procurement Data System-Next Generation) were incorrectly recorded.  DOD concurred with our recommendation to address this issue and has  taken steps to do so. As we found in 2017, agencies need accurate  information about their personal services contracts in order to ensure that  they are supervising contractors work appropriately."], "subsections": []}]}, {"section_title": "Key Issue Area 4: Acquisition Workforce", "paragraphs": ["Issue Area Context    The federal acquisition workforce manages and oversees billions of dollars in  acquisition programs and contracts to help federal agencies get what they need at the  right time and at a reasonable price. The acquisition workforce consists of contracting  officers, contracting officer\u2019s representatives, program and project managers; and may  include others such as, engineers, logisticians, and cost estimators. A number of  governmental organizations play critical roles in assisting agencies in building and  sustaining their acquisition workforces. Among these agencies, OFPP provides  government-wide guidance on acquisition workforce issues, GSA\u2019s Federal Acquisition  Institute promotes the development of the civilian acquisition workforce, and the  Defense Acquisition University provides training for DOD\u2019s acquisition workforce.   In 2007, the Panel found the federal acquisition workforce was understaffed,  overworked, and undertrained. The Panel also found that most agencies were not  carrying out appropriate workforce planning activities and had not assessed the skills of  their current acquisition workforce or the number of individuals with relevant skills that  would be needed in the future.", "We found that steps have been taken to address acquisition workforce  issues, but workforce gaps endure.", "Congress established the Defense Acquisition Workforce  Development Fund (DAWDF) in 2008 which helps DOD recruit, train,  and retain acquisition personnel. It has helped DOD close some  staffing gaps.", "The acquisition workforce faces skill gaps due to the increasing  complexity of acquisitions, particularly IT acquisition.", "OFPP, GSA, and DOD have introduced new training programs to help  improve the skills of the federal acquisition workforce.", "Congress and OMB have taken several actions intended to ensure  agencies conduct adequate workforce planning, but agencies have  not done so consistently.", "We elaborate on these points below."], "subsections": [{"section_title": "The Defense Acquisition Workforce Development Fund Has Helped DOD Close Some Staffing Gaps", "paragraphs": ["In 2008, Congress established the Defense Acquisition Workforce  Development Fund (DAWDF), which provides resources for the  recruitment, training, and retention of DOD acquisition personnel. In  2017 we reported that, as of September 2016, DOD obligated more than  $3.5 billion for these purposes and that DAWDF had helped increase the  total size of the DOD acquisition workforce by about 24 percent from  2008 to 2016, among other things.", "However, DOD did not achieve its growth targets for each of its  acquisition career fields. In December 2015, we reported that DOD had  exceeded its planned growth for seven career fields by about 11,300  personnel, including the priority career fields of auditing and program  management. However, DOD had not reached its growth targets for six  other career fields, falling about 4,400 personnel short. These included  the additional priority career fields of contracting, business, and  engineering. We recommended that DOD issue an updated acquisition  workforce plan that includes revised career field goals as a guide to  ensure that the most critical acquisition needs are being met. Since that  time, DOD has continued to hire more people in its acquisition workforce,  including the contracting and engineering career fields. It also issued an  updated strategic plan in October 2016. However, as we reported in  2017, the plan does not include workforce targets for each career field, so  the sizes of DOD\u2019s current staffing shortfalls, if any, are unclear. DOD  officials stated that determining which career fields were a priority was  most appropriately determined by the components rather than at the  department level.", "Section 809 Panel  In its June 2018 report, the Section 809 Panel  made recommendations to improve the  resourcing, allocation, and management of  the Defense Acquisition Workforce  Development Fund (DAWDF).", "In 2017, we also reported on the amount of unobligated balances in the  DAWDF account that have been carried over from one fiscal year to the  next. According to DOD officials, these balances\u2014which totaled $875  million at the beginning of fiscal year 2016\u2014were the result of several  factors. For example, DOD officials generally did not begin the process of  collecting and distributing DAWDF funds before DOD received its annual  appropriations. Other factors that affected DAWDF execution included  hiring freezes and imbalances between DOD\u2019s DAWDF requirements and  the minimum amount that DOD was required to put into DAWDF. In order  to improve fund management, we recommended that DOD officials clarify  whether and under what conditions DAWDF funds could be used to pay  for personnel to help manage the fund. DOD indicated that it planned to  address the recommendation.", "We continue to highlight DOD acquisition workforce issues in our High- Risk List, through the DOD Contract Management area, because  agencies continue to face challenges in maintaining sufficient staff levels  and monitoring the competencies of their acquisition workforce. In our  2017 High Risk report, we determined that DOD should continue efforts to  ensure that its acquisition workforce is appropriately sized and trained to  meet the department\u2019s needs, among other actions."], "subsections": []}, {"section_title": "Increasingly Complex Acquisitions Are Creating Skill Gaps", "paragraphs": ["The acquisition workforce faces skill gaps due to the increasing  complexity of acquisitions, particularly IT acquisitions, according to  officials we spoke with for this review. Officials from DOD, GSA, and one  industry group indicated that a lack of technical knowledge presents  challenges for effectively planning and executing complex IT acquisitions.  Additionally, we have reported that the government\u2019s ability to respond to  evolving cybersecurity threats depends in part on the skills and abilities of  the IT acquisition workforce.", "Cross-functional or multidisciplinary teams may help to address the  acquisition skill gaps because they can provide a broad range of  specialized skills. In 2014, Congress included provisions in FITARA to  ensure timely progress by federal agencies toward developing,  strengthening and deploying IT acquisition cadres consisting of personnel  with highly specialized skills in IT acquisitions. This legislation followed  an initiative OMB started in 2010 when OMB\u2019s United States Chief  Information Officer issued a 25 point implementation plan requiring each  major IT investment to establish an integrated program team to include, at  a minimum, a dedicated, full-time program manager and an IT acquisition  specialist. In 2016, we reported on three characteristics that contribute  to the creation and operation of a comprehensive integrated program  team. We also found that shortfalls in these characteristics\u2014 leadership, team competition and team processes\u2014had contributed to  significant problems in major IT acquisitions."], "subsections": []}, {"section_title": "New Training Opportunities Help Address Skill Gaps", "paragraphs": ["Over the past 10 years, OFPP, GSA and DOD have introduced new  training programs to help improve the skills of the federal acquisition  workforce.", "In fiscal year 2007, OFPP launched two new certification programs for  civilian agencies: (1) the program/project managers\u2019 certification, and  (2) the contracting officers\u2019 representatives\u2019 certification.", "In 2011, GSA introduced the Federal Acquisition Institute Training  Application System, which includes continuous learning modules,  certification modules, and a learning management system. In 2013,  OFPP issued a memo requiring all civilian federal agencies to  increase use of the system.", "In 2015, OFPP and the United States Digital Service jointly developed  the Digital Information Technology Acquisition Professional Training  Program to help make acquisition personnel better IT buyers.", "In 2015, GSA established the Center for Acquisition Professional  Excellence to improve training for GSA\u2019s own acquisition personnel.", "In 2016, DOD reported that, since 2008, its Defense Acquisition  University increased its capacity with a 28 percent increase in  classroom graduates and a 15 percent increase in online training  graduates. In addition, DOD reports that its overall acquisition  workforce certification level increased from 58.3 percent in fiscal year  2008 to 76 percent in fiscal year 2017.", "In 2018, OFPP established a new certification program for digital  services as part of the overall effort to increase expertise in buying  technology."], "subsections": []}, {"section_title": "Gaps Persist in Agency Workforce Planning Efforts", "paragraphs": ["Workforce planning involves identifying critical occupations, skills, and  competencies; analyzing workforce gaps; building the capabilities needed  to support workforce strategies; and monitoring and evaluating progress  toward achieving workforce planning and strategic goals, among other  things. Since 2009, Congress and OMB have taken several steps  involving agencies\u2019 acquisition workforce planning efforts.", "In the fiscal year 2009 NDAA, Congress directed OMB to prepare a 5- year Acquisition Workforce Development Strategic Plan for civilian  agencies to increase the size of the federal acquisition workforce,  among other things. In response, OMB issued the plan in October  2009.", "From 2011 to 2016, Congress required DOD to develop biennial plans  to improve the defense acquisition workforce. However, DOD did  not always meet this biennial requirement, issuing an acquisition  strategic plan in 2010 and then not issuing another until October  2016. In 2016, we reported that DOD officials cited budget  uncertainties as the primary reason for the delay.", "In July 2016, OMB released its Federal Cybersecurity Workforce  Strategy, which cited the need for agencies to examine specific IT,  cybersecurity, and cyber-related work roles, and to identify personnel  skills gaps. We have ongoing work reviewing federal agencies\u2019 IT  and cybersecurity workforce planning.", "Nonetheless, we have found gaps in agency workforce planning efforts.  In December 2015, we found that DOD had assessed workforce  competencies for 12 of its 13 career acquisition fields, but had not  established a timeline for reassessing competencies in 10 of those fields  to gauge progress in addressing previously identified gaps. We made  four recommendations to DOD as a result. DOD concurred with all four  recommendations, including the recommendation that the department  issue an updated acquisition workforce plan in fiscal year 2016, which  DOD implemented. The other three recommendations remain  unaddressed as of June 2018, including the recommendation to establish  a timeframe for reassessment.", "Similarly, in 2017, we found that the Department of Homeland Security  was continuing to refine its acquisition workforce planning efforts. In  April 2017, we reported that the department\u2019s 2016 staffing assessments  did not take into account all acquisition-related positions, which could limit  its insight into the size and nature of potential staffing shortfalls.", "Additionally, in November 2016, we found that the five departments in our  review\u2014the Departments of Defense, Commerce, Health and Human  Services, Transportation, and the Treasury\u2014had not fully implemented  key workforce planning steps and activities for IT acquisitions. For  example, four of these agencies had not demonstrated an established IT  workforce planning process, which should include training for acquisition  personnel. In addition, none of these agencies had fully developed  strategies and plans to address IT workforce gaps. We recommended  that the selected departments implement IT workforce planning practices  to facilitate (1) more rigorous analyses of gaps between current skills and  future needs, and (2) the development of strategies for filling the gaps. As  of June 2018, all five recommendations remain open."], "subsections": []}]}, {"section_title": "Key Issue Area 5: Federal Procurement Data", "paragraphs": ["Issue Area Context    The Federal Procurement Data System-Next Generation (FPDS-NG) is the federal  government\u2019s primary repository for procurement data. Government officials and others  use FPDS-NG for a variety of analytical and reporting purposes, such as examining  data across government agencies, providing managers a mechanism for determining  where contract dollars are being spent, and populating USASpending.gov, a website  that contains data on federal awards. The General Services Administration, with  guidance from the Office of Federal Procurement Policy, established and administers  FPDS-NG.  In 2007, the Panel found that FPDS-NG contained unreliable data at the granular level,  didn\u2019t have appropriate validation rules in place, and lacked appropriate administration.", "We found that OMB, GSA, and federal agencies have taken steps to  improve data reliability, but the government\u2019s primary repository for  acquisition data still faces capability limitations.", "OMB and GSA have taken steps to improve FPDS-NG data quality.", "FPDS-NG\u2019s current capabilities face limitations.", "OMB\u2019s IT Dashboard provides detailed information on major IT  acquisitions at 26 agencies, but accuracy and reliability issues  endure.", "We elaborate on these points below."], "subsections": [{"section_title": "Some FPDS-NG Data Reliability Concerns Endure", "paragraphs": ["From 2008 to 2011, OMB repeatedly directed agencies to take specific  actions to improve the quality of the data they report in FPDS-NG.", "In May 2008, OMB provided agencies guidance on how to verify,  validate, and certify their FPDS-NG data.", "In October 2009, OMB directed agencies to explicitly describe their  data quality improvement and validation activities.", "In May 2011, OMB directed agencies to verify that they have the  policies, procedures, and internal controls in place to monitor and  improve procurement data quality generally, and that they have  similar controls for ensuring that contractors comply with their  reporting requirements.", "Since 2007, GSA has reported improvements in FPDS-NG data quality.  Agencies are responsible for developing a process and monitoring results  to ensure timely and accurate reporting of contractual transactions in  FPDS-NG and are required to submit certifications about the accuracy of  contract reporting to GSA. In 2017, GSA reported that these certifications  collectively demonstrate that the data in FPDS-NG have an overall  accuracy rate of 95 percent. GSA also reports that the overall  completeness rate for FPDS-NG data has increased from 98.0 percent in  fiscal year 2009 to 99.2 percent in fiscal year 2016.", "Nonetheless, our work has recently identified data reliability challenges  with FPDS-NG data. For example, in 2017 we found that FPDS-NG did  not accurately identify some indefinite delivery contracts. And in March 2016, we identified some FPDS-NG data limitations, including the  misclassification of some contractors as small businesses, and some  incorrect obligations data."], "subsections": []}, {"section_title": "FPDS-NG Capabilities Have Expanded, but Limitations Remain", "paragraphs": ["GSA has updated the FPDS-NG system to expand its capabilities several  times since the Panel issued its 2007 report. The most recent version was  released in October 2017, and it increased the type of data that could be  collected. For example, FPDS-NG now collects more detailed information  on women-owned business types, inherently governmental services, and  legislative mandates. A previous update in 2009 standardized how FPDS- NG tracks and reports competition data.", "Despite these changes, FPDS-NG has limitations in the type of  acquisition data it can track. For example, in November 2017, we  reported that agencies were unable to use FPDS-NG to track and report  specific contract award data elements in accordance with OMB guidance  because the required data had no corresponding data-entry field in  FPDS-NG. We recommended that OMB take steps to improve how  agencies collect certain procurement data. OMB generally agreed, but  has not yet addressed the recommendation. Similarly, in 2014 we found  limitations in FPDS-NG with regard to tracking small business  subcontractors. Specifically, we found that FPDS-NG did not contain  data on subcontracts, and was not designed to identify the type of  subcontracting plan used or to link small business subcontractors to  particular prime contracts.", "In fiscal year 2020, GSA plans to fully integrate FPDS-NG with nine other  legacy systems operated by the agency\u2019s Integrated Award Environment  (IAE). IAE was initiated in 2001 to bring together 10 different acquisition  data systems into a unified system. GSA, DOD, and OMB staff expect  that the IAE will contribute to improved FPDS-NG data reliability and  better system governance. Integration with other systems will reduce the  need to input the same data multiple times, which creates opportunities  for errors. DOD and OMB staff also stated that FPDS-NG is currently  managed through the IAE governance model, which offers a clear  governance structure, including strategic planning, conflict resolution, and  decision-making."], "subsections": []}, {"section_title": "OMB\u2019s IT Dashboard Enhances Transparency and Oversight, but Accuracy and Reliability Issues Persist", "paragraphs": ["In 2009, OMB deployed a public website, known as the IT Dashboard, to  provide detailed information on major IT acquisitions at 26 agencies,  including ratings of the IT acquisitions\u2019 performance against cost and  schedule targets. Among other things, agencies are to submit investment  risk ratings from their CIOs.", "For more than 6 years, we have issued a series of reports about the IT  Dashboard, noting the significant steps OMB has taken to enhance the  oversight, transparency, and accountability of federal IT acquisitions. We  have also reported concerns about the accuracy and reliability of IT  Dashboard data. We have made 47 recommendations to OMB and  federal agencies to help improve the accuracy and reliability of this data  and to increase its availability. As of March 2018, 19 of the  recommendations remain open, including recommendations that  agencies factor active risks into their IT Dashboard ratings, and ensure  that major IT investments are included on the Dashboard."], "subsections": []}]}, {"section_title": "Key Issue Area 6: Small Business Participation", "paragraphs": ["Issue Area Context    The federal government has a long-standing policy to maximize contracting  opportunities for small businesses. Congress has established, and the Small Business  Administration (SBA) maintains, goals for small business participation in federal  contracting. SBA also manages several programs targeted at increasing participation  by particular business types, including: Small Disadvantaged Businesses, Service- Disabled Veteran-Owned Small Businesses, Women-Owned Small Businesses, and  those in Historically Underutilized Business Zones (HUBZone). Agency-specific goals  are established through negotiation between SBA and the respective agency.   In 2007, the Panel found a number of challenges hindering agencies\u2019 efforts to achieve  small business participation goals. In particular, the Panel made recommendations  focused on a lack of parity across small business types (identifying that some statutes  appeared to prioritize certain small business programs over others), consolidation or  bundling of contract requirements, and how small businesses are prioritized under  multiple award contracts (contracts awarded to two or more contractors under a single  solicitation).", "We found that small business participation in government contracting has  increased over the past few years, but small business advocates report  emerging concerns, and agencies struggle with policy compliance.", "Executive branch agencies have increased small business  participation over time.", "Small business advocates have expressed concerns that category  management will reduce the number of small businesses eligible for a  given opportunity; the executive branch has taken some steps to  address such concerns.", "Most agencies did not demonstrate that they are in full compliance  with requirements involving their small business offices.", "SBA has improved how it assesses firms\u2019 eligibility for small business  programs, but we found it should do more to oversee its women- owned small business program and its HUBZone program.", "We elaborate on these points below."], "subsections": [{"section_title": "Agencies Have Met More Small Business Goals Over Time", "paragraphs": ["Section 809 Panel  Federal agencies continue to address  challenges related to small business  participation. For example, the Department of  Defense (DOD) did not meet all of its small  business goals in 2017. In its January 2018  report, the Section 809 Panel recommended  that DOD refocus its small business policies  and programs to prioritize the department\u2019s  mission, among other things.", "Since the Panel issued its report in 2007, Congress and executive branch  agencies have continued efforts to encourage small business  participation, with improved results over time. In the 2010 Small  Business Jobs Act, Congress addressed the three primary small business  issues raised by the Panel. These issues included taking action on issues  of parity, requiring justifications and reporting for contract bundling, and  addressing small business concerns about multiple award contracts,  among other things.", "Meanwhile, executive branch agencies have also taken steps to  encourage small business participation. For example:", "GSA strongly supports small business participation in its Federal  Supply Schedules program. The schedule program provides federal  agencies a simplified method of purchasing commercial products and  services at prices associated with volume buying. GSA set aside  some specific schedule categories\u2014such as photographic services  and library furniture\u2014for small businesses. GSA also developed a  forecasting tool in 2016, intended to give small businesses a preview  of upcoming federal contracting opportunities.", "In a 2013 rule, SBA clarified how contracting officers should assign  small business codes under multiple award contracts. North  American Industry Classification System (NAICS) codes are the basis  for SBA\u2019s size standards; therefore, the NAICS code that a  contracting officer assigns determines whether a firm is eligible for  small business set-asides. In its rule, SBA observed that when NAICS  codes are assigned to a multiple award contract solicitation, a  business concern may be small for one or some of the NAICS codes,  but not all. In that situation, an agency could receive small business  credit on an order for an award to a \u201csmall business\u201d where a firm  qualifies as small for any NAICS code assigned to the contract, even  though the business is not small for the NAICS code that was  assigned or that should have been assigned to that particular order.  SBA\u2019s rule stated that, to ensure small businesses receive the awards  that are intended for them, contracting officers should assign NAICS  codes to discrete components of a contract in certain circumstances.  The contracting officers we interviewed stated that assigning a NAICS  code can be challenging when one or more codes could apply to a  contract and we noted that SBA\u2019s rule may further clarify code  assignment for these officials. However, updates to the FAR are  required to fully implement SBA\u2019s final rule. This FAR rule-making  process is ongoing.", "In fiscal year 2017, the federal government met three of its five  government-wide small business participation goals. This is progress  compared to fiscal year 2007, when the government met just one of its  five small business goals. While individual agencies\u2019 success varied,  there was significant improvement in the number of agencies meeting  service-disabled veteran-owned and women-owned small business goals.  Additionally, the number of agencies meeting all of their small business  goals increased from two to seven. Meanwhile, HUBZone goals have  remained unmet for a majority of agencies. See figure 6."], "subsections": []}, {"section_title": "Small Business Advocates Have Concerns About Category Management", "paragraphs": ["According to OMB guidance, under category management the federal  government should \u201cbuy as one.\u201d Specifically, agencies are expected to  move away from making numerous individual procurements to purchasing  through a broader aggregate approach.", "Small business advocates we spoke with have reported a number of  concerns to us about the government-wide category management effort.  Because category management includes streamlining the number of  available contracts, small business advocates\u2014including officials at DOD  and SBA\u2014have told us that they worry the initiative will reduce the  number of small businesses eligible for a given opportunity, and that the  number of small businesses awarded federal contracts may fall.", "The executive branch has taken some steps to provide small businesses  with contracting opportunities through category management. For  example, the category management effort includes a set of cross-agency  priority goals that include small business utilization. Another element of  category management identifies best-in-class contracting vehicles that  are recommended for agency use. Some best-in-class vehicles under  category management focus on small business providers, including  GSA\u2019s Alliant Small Business vehicle that provides IT solutions.  Additionally, in 2015, we found that DHS\u2019s \u201con-ramp/off-ramp\u201d  mechanisms offered an option to help maintain a pool of eligible small  businesses by reopening an indefinite-delivery, indefinite-quantity  vehicle\u2019s solicitation to new small business vendors after participating  businesses outgrew their small size status and left the program. GSA  recently reported that two of its small business interagency contracts\u2014 OASIS Small Business and 8(a) Stars II\u2014used on-ramp procedures in  2017 and 2018.", "However, in 2014 we analyzed small business participation in strategic  sourcing, a predecessor to category management, and found that  agencies had not implemented OMB requirements to develop  performance measures to determine how strategic sourcing initiatives had  affected small business participation. As of June 2018, four of the six  contracting agencies we reviewed had implemented our recommendation  to do so."], "subsections": []}, {"section_title": "Most Agencies Did Not Demonstrate Full Compliance With Small Business Office Requirements", "paragraphs": ["In the Small Business Act, Congress required certain agencies to create  and appropriately staff Offices of Small and Disadvantaged Business  Utilization (OSDBUs) to advocate for small businesses. Throughout the  years, Congress amended the requirements on multiple occasions,  generally expanding the areas for the OSDBU to maintain involvement in,  and providing details on how the OSDBU office should function.  However, among other results, we have found that many agencies have  not demonstrated that they are in full compliance with a number of  requirements related to the functions and duties of these offices, such as  establishing a direct reporting relationship between the OSDBU director  and the agency head or deputy head, and specifying that the director  must have supervisory authority over staff performing certain duties. As  we reported in August 2017, noncompliance with these legislative  requirements may limit the extent to which an office can advocate for  small businesses, and we made recommendations to 19 agencies to  come into full compliance with these OSDBU requirements or report to  Congress on why they have not. Most agencies that provided comments  agreed or partially agreed with the recommendations. As of June 2018,  two of the 19 agencies\u2014the National Aeronautics and Space  Administration and the U.S. Agency for International Development\u2014had  implemented our recommendations."], "subsections": []}, {"section_title": "SBA Has Improved How It Assesses Firms\u2019 Eligibility for Small Business Programs, but Work Remains", "paragraphs": ["Over the past decade, we have identified a number of weaknesses in the  processes SBA uses to certify and recertify businesses as being eligible  to participate in its selected programs\u2014specifically HUBZone and  women-owned programs, and the 8(a) program for small disadvantaged  businesses\u2014and made recommendations to SBA to address them.  SBA has taken steps to address these weaknesses, but some remain. In  March 2010, we made six recommendations to improve how SBA  assesses the continuing eligibility of firms to participate in the 8(a)  program, and we have closed all six recommendations as  implemented. In 2014, we made two recommendations to improve  SBA\u2019s oversight of firms\u2019 participation in its women-owned small business  program. We had found that SBA had not yet developed procedures that  provided reasonable assurance that only eligible businesses obtained  set-aside contracts. Then in 2015, we made two recommendations to  improve SBA\u2019s oversight of firms\u2019 participation in the HUBZone program.  We had found that SBA lacked an effective way to communicate program  changes to small businesses as well as key oversight controls over the  process that small businesses used to recertify that they are eligible to  participate. The four recommendations in these two reports remained  open as of May 2018."], "subsections": []}]}, {"section_title": "Agency Comments and Third Party Views", "paragraphs": ["We provided a draft of this report to OMB, DOD, GSA and SBA for review  and comment. We received written comments from DOD, which are  reprinted in appendix II, and one technical comment via e-mail. OMB and  GSA provided technical comments via e-mail. We addressed OMB\u2019s,  DOD's and GSA's comments as appropriate. SBA told us that they had  no comments on the draft report.", "We also offered three third party organizations\u2014two industry groups and  the Section 809 Panel\u2014the opportunity to provide their views on sections  of the report that relate to them. They confirmed these sections of the  report are accurate.", "We are sending copies of this report to the appropriate congressional  committees, the Director of the Office of Management and Budget, the  Secretary of Defense, the Administrator of General Services, the  Administrator of the Small Business Administration, and other interested  parties. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or WoodsW@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["This report identifies actions the federal government has taken to address  the key issues the Acquisition Advisory Panel (the Panel) raised in its  2007 report, and some of the acquisition challenges that remain.", "To frame the key issues the Panel identified in its 2007 report, we worked  with internal subject matter experts and officials from the Office of  Management and Budget\u2019s (OMB) Office of Federal Procurement Policy  (OFPP), Department of Defense (DOD), General Services Administration  (GSA), and Small Business Administration (SBA) to categorize the  Panel\u2019s 89 recommendations into six higher-level issue areas:", "Competition and pricing,", "Federal procurement data, and", "Small business participation.", "To identify progress made and challenges that remain in each of these  issue areas, we reviewed relevant GAO reports and testimonies; key  legislation such as the Weapon Systems Acquisition Reform Act of 2009,  and the Small Business Jobs Act of 2010;  acquisition guidance issued  by OMB, DOD, GSA, and SBA; and interim reports from the Section 809  Panel, which is addressing acquisition challenges at DOD, and plans to  issue its final report in January 2019. We also interviewed officials from  OMB, DOD, GSA, and SBA; and Section 809 Panel staff. Further, we  collected input from members of the Chief Acquisition Officers Council  and two industry groups: the Professional Services Council and the  Coalition for Government Procurement.", "The GAO reports cited throughout this report include detailed information  on the scope and methodology from our prior reviews. For findings based on analyses of data from the Federal Procurement Data System-Next  Generation (FPDS-NG) in our prior work, we updated the previous  analyses to include the most recent years available. We reviewed current  documentation for FPDS-NG in order to identify any changes that might  impact our analyses. We determined that the FPDS-NG data were  sufficiently reliable for the purpose of updating previous analyses.", "We conducted this performance audit from July 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objective."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nathan Tranquilli (Assistant  Director), Betsy Gregory-Hosler (Analyst-in-Charge), Holly Williams,  George Bustamante, and Brandon Voss made key contributions to this  report. Ted Alexander, Cheryl Andrew, Peter Del Toro, Brenna Derritt,  Alexandra Dew Silva, Tim DiNapoli, Jennifer Dougherty, Kathleen  Drennan, Lorraine Ettaro, Stephanie Gustafson, Dave Hinchman, Javier  Irizarry, Justin Jaynes, Julia Kennon, Sherrice Kerns, Emily Kuhn,  Heather B. Miller, Angie Nichols-Friedman, Shannin O\u2019Neill, Miranda  Riemer, William Russell, Bill Shear, Roxanna T. Sun, and Katherine  Trimble also made contributions to the report."], "subsections": []}]}], "fastfact": ["In 2007, a congressional advisory panel identified a number of ways the government could buy goods and services more effectively and save money in the process. While Congress and the executive branch did a lot to address the panel\u2019s recommendations, we found that some challenges endure over a decade later.", "For example:", "The use of competitive contracts to buy things, a practice that should lower prices, declined at the Defense Department. Across all of government, however, use remained about the same", "Despite improvements in the acquisition workforce, finding workers with the technical knowledge for complex IT purchases is still difficult"]}
{"id": "GAO-18-504T", "url": "https://www.gao.gov/products/GAO-18-504T", "title": "Supplemental Nutrition Assistance Program: Observations on Employment and Training Programs and Efforts to Address Program Integrity Issues", "published_date": "2018-05-09T00:00:00", "released_date": "2018-05-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SNAP is the largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $63 billion in benefits. USDA and the states jointly administer SNAP and partner to address issues that affect program integrity, including improper payments and fraud. GAO has previously reported on various aspects of SNAP, including state SNAP E&T programs, improper payment rates, recipient fraud, and retailer trafficking.", "This testimony discusses GAO's prior and ongoing work on (1) SNAP E&T programs, including program participants, design, and USDA oversight, and (2) USDA's efforts to address SNAP program integrity, including improper payments, as well as recipient and retailer fraud. As part of its ongoing work on SNAP E&T programs, GAO analyzed E&T expenditures and participation data from fiscal years 2007 through 2016, the most recent data available; reviewed relevant research from USDA; and interviewed USDA and selected state and local officials. The prior work discussed in this testimony is based on four GAO products on E&T programs (GAO-03-388), improper payments (GAO-16-708T), recipient fraud (GAO-14-641), and retailer trafficking (GAO-07-53). Information on the scope and methodology of our prior work is available in each product."]}, {"section_title": "What GAO Found", "paragraphs": ["Overseen by the U.S. Department of Agriculture (USDA) and administered by states, Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T) programs served about 0.5 percent of the approximately 43.5 million SNAP recipients in an average month of fiscal year 2016, according to the most recent USDA data available. These programs are generally designed to help SNAP recipients increase their ability to obtain regular employment through services such as job search and training. Some recipients may be required to participate. According to USDA, about 14 percent of SNAP recipients were subject to work requirements in an average month of fiscal year 2016, while others, such as children and the elderly, were generally exempt from these requirements. States have flexibility in how they design their E&T programs. Over the last several years, states have 1) increasingly moved away from programs that mandate participation, 2) focused on serving able-bodied adults without dependents whose benefits are generally time-limited unless they comply with work requirements, and 3) partnered with state and local organizations to deliver services. USDA has taken steps to increase support and oversight of SNAP E&T since 2014, including collecting new data on participant outcomes from states. GAO has ongoing work reviewing SNAP E&T programs, including USDA oversight.", "USDA and the states partner to address issues that affect program integrity, including improper payments and fraud, and USDA has taken some steps to address challenges in these areas, but issues remain.", "Improper Payments. In 2016, GAO reviewed SNAP improper payment rates and found that states' adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. Although USDA reported improper payment estimates for SNAP in previous years, USDA did not report an estimate for benefits paid in fiscal years 2015 or 2016 due to data quality issues in some states. USDA has since been working with the states to improve improper payment estimates for the fiscal year 2017 review.", "Recipient Fraud. In 2014, GAO made recommendations to USDA to address challenges states faced in combatting recipient fraud. For example, GAO found that USDA's guidance on the use of transaction data to uncover potential trafficking lacked specificity and recommended USDA develop additional guidance. Since then, USDA has provided technical assistance to some states, including on the use of data analytics. GAO has ongoing work reviewing states' use of data analytics to identify SNAP recipient fraud.", "Retailer Trafficking. In 2006, GAO identified several ways in which SNAP was vulnerable to retailer trafficking\u2014a practice involving the exchange of benefits for cash or non-food items. For example, USDA had not conducted analyses to identify high-risk retailers and target its resources. Since then, USDA has established risk levels for retailers based on various factors. GAO has ongoing work assessing how USDA prevents, detects, and responds to retailer trafficking and reviewing the usefulness of USDA's estimates of the extent of SNAP retailer trafficking."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making new recommendations. USDA generally concurred with GAO's prior recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for inviting me here today to discuss our work on the U.S.  Department of Agriculture\u2019s (USDA) Supplemental Nutrition Assistance  Program (SNAP)\u2014the largest federally-funded  nutrition assistance  program. Jointly administered by USDA\u2019s Food and Nutrition Service  (FNS) and the states, SNAP helps low-income households obtain a better  diet by providing them with benefits to purchase food from authorized  retailers. In fiscal year 2017, SNAP provided approximately $63 billion in  benefits to about 42 million individuals in over 20 million households.", "To receive SNAP benefits, individuals must apply in their state of  residence and meet the program\u2019s eligibility requirements, such as  income limits. To be eligible for benefits, SNAP recipients must also  generally comply with the program\u2019s work requirements, such as  registering for work and participating in certain work programs if required  by the state agency. For example, SNAP recipients may be required by  the state to participate in state-operated SNAP Employment and Training  (E&T) programs. First federally required in the 1980s, SNAP E&T  programs are intended to help individuals in SNAP households acquire  skills, training, employment, or experience that will increase their ability to  obtain regular employment.", "The federal government pays the full cost of SNAP benefits and shares  the costs and responsibility of administering the program and ensuring  program integrity with the states. Most SNAP benefits are used for the  intended purpose, according to FNS. However, improper payments\u2014 payments to individuals that were made in an incorrect amount of should  not have been made at all\u2014may result from unintentional errors by SNAP  recipients or staff administering the program or may result from intentional  errors or misuse of benefits, practices which are considered fraud. For  example, individuals may misrepresent their household\u2019s circumstances  to state agencies in order to obtain benefits. Further, some recipients sell  their benefits for cash, often at a loss, to a retailer\u2014a practice known as trafficking. FNS is responsible for authorizing and monitoring retailers  from which recipients may purchase food, and states are responsible for  determining applicant eligibility and investigating possible program  violations by recipients. As we have reported in our prior work, both FNS  and states face challenges in addressing recipient and retailer fraud.", "In response to requests from the Chairman and other members of this  Committee, we currently have work underway on SNAP E&T programs,  as well as on SNAP recipient and retailer fraud. Today I will provide  information from our ongoing and prior work, focusing on (1) SNAP E&T  programs, including program participants, design, and FNS oversight, and  (2) FNS\u2019s efforts to address program integrity, including improper  payments and SNAP recipient and retailer fraud.", "To address the areas discussed in this testimony statement, we drew on  our ongoing work on SNAP E&T programs, recipient fraud, retailer  trafficking, as well as our prior work on improper payments. Specifically,  for our discussion of SNAP E&T programs, we analyzed data on SNAP  E&T expenditures and participation collected by FNS from the states for  fiscal year 2007 through fiscal year 2016, the most recent data available.  In addition, we analyzed published FNS Quality Control data on SNAP  recipients and work registrants for fiscal year 2008 through fiscal year  2016. To assess the reliability of the data included in this statement, we  interviewed FNS and state officials knowledgeable about the data, and  determined the data are sufficiently reliable for the purposes of this  statement. We also reviewed relevant federal laws and regulations;  reviewed guidance and research from FNS; interviewed FNS officials, as  well as select state and local SNAP E&T staff from five states; and  reviewed our prior work on SNAP E&T programs. For our discussion of  FNS\u2019s efforts to address improper payments and SNAP recipient and  retailer fraud, we drew on our 2016 review of SNAP improper payment  rates and reviewed relevant USDA reports. We also drew on our 2014  analysis of SNAP replacement card and transaction data, in which we  conducted tests of FNS-recommended automated tools and interviewed  program stakeholders, including federal and select state officials. We  also obtained relevant documentation from FNS in April 2018 on steps  the agency has taken to address our 2014 recommendations. We also  drew on our 2006 work on retailer trafficking, in which we reviewed FNS  reports on trafficking estimates; visited FNS field offices; analyzed FNS  retailer data; and interviewed federal officials, among others. We also  assessed FNS reports on trafficking estimates covering calendar years  2006 through 2014 (the most recent data available), reviewed FNS  policies and reports, and interviewed FNS officials. More complete  information on the scope and methodology of our prior work is available in  each published report. Our current work on SNAP E&T programs,  recipient fraud, and retailer trafficking is still ongoing.", "The work upon which this statement is based was conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["USDA\u2019s Food and Nutrition Service (FNS) is responsible for promulgating  SNAP program regulations, ensuring that state officials administer the  program in compliance with program rules, and authorizing and  monitoring retailers from which recipients may purchase food. States are  responsible for determining applicant eligibility, calculating the amount of  their benefits, issuing benefits on Electronic Benefit Transfer (EBT)  cards\u2014which can be used like debit cards to purchase food from  authorized retailers\u2014and investigating possible program violations by  recipients."], "subsections": [{"section_title": "SNAP Work Requirements", "paragraphs": ["SNAP recipients are subject to various work requirements. Generally, all  SNAP recipients ages 16 through 59, unless exempted by law or  regulation, must comply with work requirements, including registering for  work, reporting to an employer if referred by a state agency, accepting a  bona fide offer of a suitable job, not voluntarily quitting a job or reducing  work hours below 30 hours a week, and participating in a SNAP E&T  program or a workfare program\u2014in which recipients perform work on  behalf of the state\u2014if assigned by the state agency. SNAP recipients are  generally exempt from complying with these work requirements if they are  physically or mentally unfit, responsible for caring for a dependent child  under age 6 or an incapacitated person, employed for 30 or more hours  per week or receive weekly earnings which equal the minimum hourly  rate set under federal law multiplied by 30, or are a bona fide student  enrolled half-time or more in any recognized school training program, or  institution of higher education, amongst other exemptions. SNAP  recipients subject to the work requirements\u2014known as work registrants\u2014 may lose their eligibility  for benefits if they fail to comply with these  requirements without good cause.", "One segment of the work registrant population, SNAP recipients ages 18  through 49 who are \u201cable-bodied,\u201d not responsible for a dependent child,  and do not meet other exemptions\u2014able-bodied adults without  dependents (ABAWDs)\u2014are generally subject to additional work  requirements. In addition to meeting the general work requirements,  ABAWDs must work or participate in a work program 20 hours or more  per week, or participate in workfare, in which ABAWDs perform work to  earn the value of their SNAP benefits. Participation in SNAP E&T, which  is a type of work program, is one way for ABAWDs to meet the 20 hour  per week ABAWD work requirement, but other work programs are  acceptable as well. Unless ABAWDs meet these work requirements or  are determined to be exempt, they are limited to 3 months of SNAP  benefits in a 36-month period.", "At the request of states, FNS may waive the ABAWD time limit for  ABAWDs located in certain areas of a state or an entire state under  certain circumstances. A waiver may be granted if the area has an  unemployment rate of over 10 percent or there are an insufficient number  of jobs to provide employment for these individuals. If the time limit is  waived, ABAWDs are not required to meet the ABAWD work requirement  in order to receive SNAP for more than 3 months in a 36-month period yet  they must still comply with the general work requirements."], "subsections": []}, {"section_title": "SNAP Employment and Training Programs", "paragraphs": ["Federal requirements for state SNAP E&T programs were first enacted in  1985 and provide state SNAP agencies with flexibility  in how they design  their SNAP E&T programs, including who to serve and what services to  offer. The state has the option to offer SNAP E&T services on a voluntary  basis to some or all SNAP recipients, an approach commonly referred to  as a voluntary program. Alternatively,  the state can require some or all  SNAP work registrants to participate in the SNAP E&T program as a  condition of eligibility,  an approach commonly referred to as a mandatory  program. Further, states determine which service components to provide  participants through their SNAP E&T programs, although they must  provide at least one from a federally determined list. This list includes job  search programs, job search training programs, workfare, programs  designed to improve employability through work experience or training,  education programs to improve basic skills and employability, job  retention services, and programs to improve self-sufficiency through self- employment. Total federal expenditures on SNAP E&T programs were  more than $337 million in fiscal year 2016. States are eligible to receive  three types of federal funding available for state SNAP E&T programs:  100 percent funds\u2014formula grants for program administration, 50  percent federal reimbursement funds, and ABAWD pledge funds\u2014grants  to states that pledge to serve all of their at-risk ABAWDs."], "subsections": []}, {"section_title": "SNAP Program Integrity", "paragraphs": ["The Office of Management and Budget has designated SNAP as a high- priority program due to the estimated dollar amount in improper  payments\u2014any payments that should not have been made or were made  in an incorrect amount (including overpayments and underpayments)  under statutory, contractual, administrative, or other legally applicable  requirements. According to USDA\u2019s fiscal year 2015 agency financial  report, $2.6 billion, or 3.66 percent, of all SNAP benefits paid in fiscal year  2014 were improper, the most recent year for which data are available.  SNAP improper payments are caused by variances in any of the key  factors involved in determining SNAP eligibility  and benefit amounts, and,  according to USDA, household income was the most common primary  cause of dollar errors. States review the accuracy of SNAP payments to  recipients on an ongoing basis, and FNS assesses the accuracy of state  reviews and determines a national improper payment rate annually.", "FNS and states share responsibility for addressing SNAP fraud, which  can occur through the eligibility  process and when benefits are being  used. Specifically, recipients may commit eligibility fraud when they  misrepresent their household size, income, or expenses in order to  fraudulently obtain SNAP benefits. Another type of fraud\u2014trafficking\u2014 occurs when recipients exchange benefits with authorized retailers or  other individuals for cash or non-food items (e.g. rent or transportation). In a typical retailer trafficking situation, for example, a retailer may charge  $100 to a recipient\u2019s EBT card and give the recipient $50 in cash instead  of $100 in food. The federal government reimburses the retailer $100,  which results in a fraudulent $50 profit to the retailer.", "State agencies are directly responsible for preventing, detecting,  investigating, and prosecuting recipient fraud, including eligibility  fraud  and trafficking by SNAP recipients, under the oversight and guidance of  FNS. States play a key role in preventing fraud when determining  eligibility  for SNAP. State agencies collect applicant information, such as  household income and employment, and verify it through data matches  with other information sources. After benefits are issued, the agencies  may monitor EBT transaction data to identify spending patterns that may  indicate trafficking. If an individual or household intentionally  violates  SNAP rules, such as by trafficking or making false or misleading  statements in order to obtain benefits, states conduct administrative  disqualification hearings or, in some cases, refer the case for criminal  prosecution.", "FNS is responsible for authorizing and overseeing retailers who  participate in the program\u2014totaling more than 263,000 in fiscal year  2017\u2014including investigating potential retailer trafficking. In order to  participate in SNAP, a retailer applies to FNS and demonstrates that they  meet program requirements, such as those on the amount and types of  food that authorized stores must carry. FNS verifies a retailer\u2019s  compliance with these requirements and generally authorizes retailers for  5 years. FNS then monitors retailers\u2019 continued compliance with program  requirements and administratively disqualifies, or assesses money  penalties on, those who are found to have trafficked benefits. To this end,  FNS officials collect and monitor EBT transaction data to detect irregular  patterns of transactions that may indicate trafficking and also conduct  undercover investigations. If found to be trafficking, retailers are generally  permanently disqualified from SNAP or incur a monetary penalty in lieu of  permanent disqualification."], "subsections": []}]}, {"section_title": "A Small Percentage of SNAP Recipients Participate in SNAP E&T Programs, Which Have Experienced Changes in Characteristics and FNS Oversight", "paragraphs": [], "subsections": [{"section_title": "A Small Percentage of SNAP Recipients Participate in SNAP E&T", "paragraphs": ["According to FNS data, about 14 percent of SNAP recipients, or about 6.1  million, were work registrants who were subject to work requirements,  and about 0.5 percent of SNAP recipients, or about 200,000, participated  in state SNAP E&T programs, in an average month of fiscal year 2016.  (See fig. 1.) According to FNS, most SNAP recipients are exempt from  work requirements. For example, according to FNS, almost two-thirds of  SNAP recipients were children, elderly, or adults with a disability in an  average month of fiscal year 2016\u2014groups that are generally exempt.  Further, adults who are already working at least 30 hours a week are also  exempt from SNAP work requirements, and according to FNS data, more  than 31 percent of non-elderly adult SNAP recipients were employed in  an average month of fiscal year 2016. SNAP work registrants who are  not participating in SNAP E&T programs may be participating in other  activities to meet work requirements or eligible for other exemptions.  FNS officials told us that the state data reported to FNS on SNAP E&T  participants are the best and most recent data available on this group, yet  they also have limitations, which we will continue to explore in our  ongoing work.", "In recent years, the number and percentage of SNAP recipients and work  registrants participating in SNAP E&T programs appears to have  decreased, according to FNS data. From fiscal year 2008 through fiscal  year 2016, the average monthly number of SNAP E&T participants  decreased from about 256,000 to about 207,000, or by 19 percent,  according to state data on SNAP E&T participants reported to FNS. (See  fig. 2.) However, over the same time period, the average monthly number  of SNAP recipients appears to have increased from about 27.8 million to  about 43.5 million, and work registrants appears to have increased from  about 3 million to about 6.1 million, according to FNS data. As a result,  the percentage of total SNAP recipients participating in SNAP E&T  programs decreased from about 0.9 to about 0.5 percent, and the  percentage of SNAP work registrants participating in these programs  decreased from approximately 8.1 percent to 3.4 percent, from fiscal year  2008 through fiscal year 2016.", "Available  information suggests the characteristics of SNAP E&T  participants are generally similar to those of SNAP work registrants who  do not participate in these programs. A recent FNS study, which surveyed  SNAP E&T participants and SNAP work registrants who had not  participated in SNAP E&T, found that members of the two groups had  similar demographic characteristics, including age and gender, and  received similar monthly SNAP benefit amounts. Further, at the time they were surveyed, about one third of each group were employed, and  their average wage rates were similar, at about $10 per hour."], "subsections": []}, {"section_title": "State SNAP E&T Programs Have Changed in Several Ways", "paragraphs": ["State SNAP agencies have broad flexibility in how they design their  SNAP E&T programs, and the characteristics of these programs have  changed in several ways over the last decade. For example, states have  increasingly moved from mandatory to voluntary programs, focused on  serving ABAWDs, and partnered with state and local organizations to  deliver services."], "subsections": [{"section_title": "States Have Increasingly Moved from Mandatory to Voluntary Programs", "paragraphs": ["According to FNS data, states have increasingly moved from mandatory  to voluntary SNAP E&T programs in recent years. In fiscal year 2010,  17 states operated voluntary programs; however, by fiscal year 2017, 35  states operated voluntary programs, according to FNS data. (See fig. 3.)  FNS officials told us that they have been actively encouraging states to  provide more robust employment and training services, such as  vocational training or work experience, through voluntary programs. They  said that they believe these types of robust services are more effective in  moving participants toward self-sufficiency, but that funding may not be  sufficient to provide these to the large numbers of participants served in  mandatory programs. In addition, FNS officials told us that voluntary  programs are less administratively burdensome than mandatory  programs, as they allow states to focus on serving motivated participants  rather than sanctioning non-compliant individuals.", "According to FNS officials, when states move to a voluntary program,  they generally experience a decline in SNAP E&T participation\u2014a trend  consistent with our analysis of FNS data\u2014which may have contributed to  the decline in overall SNAP E&T participation. Of the 22 states or  territories that changed from a mandatory to a voluntary program from  fiscal year 2010 through fiscal year 2016, according to FNS data, 13  experienced a decrease in SNAP E&T participation\u2014ranging from a 21  percent decrease to a 93 percent decrease. Overall, voluntary programs  are generally smaller than mandatory programs, according to our analysis  of FNS data. In fiscal year 2016, for example, the 32 states or territories  operating voluntary programs together served less than half of the total  number of SNAP E&T participants served by the 21 states or territories  operating mandatory programs, although these two groups of states had  similar numbers of new work registrants. Furthermore, states operating  voluntary programs served an average of nearly 7,000 SNAP E&T  participants per state, while states operating mandatory programs served  an average of 23,000 SNAP E&T participants per state."], "subsections": []}, {"section_title": "Focus on ABAWDs Has Increased as Waivers Have Expired", "paragraphs": ["Evidence suggests that states have increased their focus on serving  ABAWDs\u2014a sub-population of SNAP recipients subject to benefit time  limits and additional work requirements\u2014through SNAP E&T, as related  waivers have expired in recent years, according to FNS data. During and  after the 2007-2009 recession, the majority of states operated under  statewide waivers of the ABAWD time limit due to economic conditions.  However, as the economy recovered, most statewide waivers expired,  and the ABAWD time limit was reinstated. For example, according to FNS  data, in fiscal year 2011, 45 states or territories had a statewide waiver  and 7 states had a partial waiver\u2014one applying to certain localities. By  fiscal year 2017, the number of states or territories with a statewide  waiver had decreased to 9, while 27 states had partial waivers. FNS  officials and state SNAP agency officials we spoke with in some states  told us that, as the waivers have ended, state SNAP E&T programs have  become increasingly focused on serving ABAWDs.", "Although state data on SNAP E&T programs reported to FNS suggest a  greater percentage of ABAWDs have been participating in these  programs in recent years, according to FNS officials, these data have  limited usefulness in assessing state trends in serving ABAWDs for  several reasons. For example, in recent years, FNS officials learned that  there was widespread confusion among states regarding the need to  track ABAWDs when waivers were in place, and that as a result, some  states had not been tracking ABAWDs or properly documenting SNAP  recipients\u2019 ABAWD status. This is consistent with what some of the  selected states we spoke with reported. As part of our ongoing work, we  are continuing to explore the availability  and reliability of data on  ABAWDs."], "subsections": []}, {"section_title": "States Increasingly Developed Partnerships to Deliver SNAP E&T Services", "paragraphs": ["State SNAP agencies have increasingly partnered with other state and  local organizations, such as workforce agencies, community-based social  service providers, and community colleges, to provide services to SNAP  E&T participants in recent years, according to FNS and states we  selected for our review. In fiscal year 2018, nearly all states partnered  with at least one other organization to deliver SNAP E&T services, with  the majority partnering with more than one, according to an analysis by  FNS.", "In recent years, FNS has urged states to make use of the broad network  of American Job Centers. The American Job Centers, also known as one- stop centers, are funded through the Department of Labor\u2019s Employment  and Training Administration and designed to provide a range of  employment-related services, such as training referrals, career  counseling, job listings, and similar employment-related services, to job  seekers under one roof. Our prior work has highlighted the value of  coordination between federally funded employment and training programs  to ensure the efficient and effective use of resources. Despite  encouraging such partnerships, FNS officials said that American Job  Centers typically provide lighter touch services to SNAP E&T participants,  such as job search and job search training, and they therefore may not be  well suited for SNAP E&T participants who have multiple barriers to  employment. In our 2003 work on SNAP E&T, we found that while  workforce system programs offered some of the activities needed by  SNAP E&T participants, officials from 12 of the 15 states we contacted  said that most participants were not ready for these activities, in part,  because they lacked basic skills, such as reading and computer literacy,  that would allow them to successfully participate.", "An alternative service delivery strategy that FNS has promoted is the  development of third party partnerships with community-based social  service providers, community colleges, and other entities to help states  enhance their SNAP E&T programs. According to FNS, in this model,  third party organizations use non-federal funding to provide allowable  SNAP E&T services and supports, which are then eligible for 50 percent  federal reimbursement funds through the state\u2019s SNAP E&T program.  According to FNS officials, third party partnerships enable states to  leverage additional resources, grow their SNAP E&T programs, and  reach more SNAP participants. In addition, FNS officials said that these  partnerships allow states to improve their program outcomes by tapping  into providers currently serving communities that include SNAP  recipients. Federal 50 percent reimbursement funds expended increased  from nearly $182 million to more than $223 million, or by 23 percent, from  fiscal year 2007 to fiscal year 2016."], "subsections": []}]}, {"section_title": "FNS Has Taken Steps to Increase Support and Oversight of SNAP E&T", "paragraphs": ["FNS has taken steps to increase federal support of states\u2019 SNAP E&T  programs by increasing the number of federal staff responsible for SNAP  E&T and providing additional technical assistance to states. Specifically,  FNS officials said that in 2014, they created the Office of Employment  and Training to provide support and oversight for the SNAP E&T program  and expanded SNAP E&T staff in FNS headquarters from one to five  fulltime employees. FNS has also taken steps to increase technical  assistance to states. For example, they have developed tools, including  the SNAP E&T Operations Handbook, intended to help states implement  and grow their program, and by adding a dedicated SNAP E&T official in  each of FNS\u2019s seven regional offices. According to FNS, regional officials  have targeted technical assistance to states on, for example, developing  third-party partnerships, and they have emphasized evidence-based  approaches to administering the program, such as providing skills-based  training for in-demand occupations.", "FNS officials rely on various information sources to oversee states\u2019 SNAP  E&T programs, including participant outcome data reported by states for  the first time in January 2018. For example, FNS officials conduct  management evaluation reviews of states, annually review states\u2019 SNAP  E&T plans for compliance, and collect data from states on program  participation and expenditures. In addition, as of January 2018, FNS has  begun receiving new data on SNAP E&T program participants and  outcomes from states. These data include employment outcomes, such  as the number of SNAP E&T participants in unsubsidized employment  after participation in the program, and participant characteristics, such as  the number of participants entering the program with a high school  degree or equivalent. FNS officials said that although states generally  submitted the new data on time, states experienced challenges that likely  affected the accuracy of the data. For example, some states needed to  manually collect data on participant characteristics due to the limited  capacity of their data systems. Further, according to FNS officials, some  states did not correctly interpret certain reporting definitions or time  periods. To address these challenges, FNS officials have been providing  technical assistance to states to help them refine their participant and  outcome data reports. Officials told us that they expect the states to  submit revised reports by May 2018; we will examine these data and  related issues in our ongoing work."], "subsections": []}]}, {"section_title": "FNS Has Taken Steps to Address SNAP Program Integrity Issues, but Concerns Remain", "paragraphs": ["FNS and the states partner to address issues that affect program  integrity, including improper payments and fraud, and FNS has taken  some steps to address challenges in these areas, but concerns remain.  For example, regarding SNAP recipient and retailer fraud, FNS has taken  some steps to address challenges identified in our 2006 and 2014 reports  related to fraud committed by SNAP recipients and authorized retailers,  but more remains to be done. We currently have ongoing work to assess  the steps FNS and states have taken to address our recommendations  related to recipient and retailer fraud and other program vulnerabilities."], "subsections": [{"section_title": "SNAP Improper Payments", "paragraphs": ["In 2016, we reviewed SNAP improper payment rates and found that  states\u2019 adoption of program flexibilities and changes in federal SNAP  policy in the previous decade, as well as improper payment rate  calculation methods, likely affected these rates. For example, when  states adopted available SNAP policy flexibilities that simplified or  lessened participant reporting requirements, these changes reduced the  opportunity for error and led to a decline in the improper payment rate,  according to a USDA study. In addition, we found that the methodology  SNAP used to calculate its improper payment rate was generally similar  to the methodologies used for other large federal programs for low- income individuals, including Medicaid, Earned Income Tax Credit, and  Supplemental Security Income. However, we also found that some of the  procedural and methodological differences in the rate calculation among  these programs likely affected the resulting improper payment rates, such  as how cases with insufficient information or certain kinds of errors were  factored into the improper payment rate.", "In 2014, USDA identified SNAP improper payment data quality issues in  some states and has since been working with the states to improve  improper payment estimates. Although USDA reported national SNAP  improper payment estimates for benefits paid through fiscal year 2014,  USDA did not report a national SNAP improper payment estimate for  benefits paid in fiscal years 2015 or 2016. In response to a report from  USDA\u2019s Office of Inspector General that identified concerns in the  application of SNAP\u2019s quality control process, which is used to identify  improper payments, USDA began a review of state quality control  systems in all states in 2014. According to USDA, due to the data  quality issues uncovered in 42 of 53 states during the reviews, the  improper payment rates for those states could not be validated, and the  department was unable to calculate a national improper payment rate for  benefits paid in fiscal year 2015. To address the data quality concerns,  USDA updated guidance, provided training to relevant state and federal  staff, and worked with states to update their procedures to ensure  consistency with federal guidelines. According to USDA, the department  also required individual states to develop corrective action plans to  address issues identified and monitored progress to ensure states took  identified actions. On June 30, 2017, USDA notified the states that the  department would not release a national SNAP improper payment rate for  benefits paid in fiscal year 2016 and remained focused on conducting the  fiscal year 2017 review."], "subsections": []}, {"section_title": "SNAP Recipient Fraud", "paragraphs": ["FNS has increased its oversight of state anti-fraud activities in recent  years by developing new guidance and providing training and technical  assistance to states on detecting fraud by SNAP recipients and reporting  on anti-fraud activities to FNS. In 2014, we reported on 11 selected  states\u2019 efforts to combat SNAP recipient fraud and made several  recommendations to FNS to address the challenges states faced.  We  found that FNS and states faced challenges in the following areas:", "Guidance on use of data tools to detect fraud: States faced  challenges using FNS-recommended data tools to detect fraud, and  FNS is in the process of developing improved guidance to address  this concern. Specifically, FNS\u2019s guidance on the use of EBT  transaction data to uncover potential patterns of benefit trafficking  lacked the specificity states needed to uncover such activity, and we  recommended FNS develop additional guidance. Since then, FNS  contracted with a private consulting firm to provide 10 states with  technical assistance in recipient fraud prevention and detection, which  included exploring the use of data analytics to analyze and interpret  eligibility  and transaction data to identify patterns or trends and create  models that incorporate predictive analytics. FNS officials also  recently told us that the agency is developing a SNAP Fraud  Framework to provide guidance to states on improving fraud  prevention and detection. FNS officials anticipated releasing the  framework in mid- 2018.", "Tools for monitoring e-commerce websites: We also found FNS- recommended tools for automatically monitoring potential SNAP  trafficking on e-commerce websites to be of limited use and less  effective than manual searches, and FNS has developed but not  finalized guidance on using such tools. We recommended that FNS  reassess the effectiveness of its current guidance and tools for states  to monitor e-commerce and social media websites. In August 2017,  FNS officials told us that they had developed revised guidance for  states on using social media in detection of SNAP trafficking.  According to FNS, the guidance will be incorporated into the SNAP  Fraud Framework.", "Staff levels: During the time of our 2014 work, most of our 11  selected states reported difficulties conducting fraud investigations  due to reduced or stagnant staff levels while numbers of SNAP  recipients had greatly increased, but FNS decided not to make  changes to address this issue. Specifically, 8 of the 11 states we  reviewed reported inadequate staffing due to attrition, turnover, or lack  of funding. Some states suggested changing the financial incentive  structure to promote fraud investigations because agencies were not  rewarded for cost-effective, anti-fraud efforts that could prevent  ineligible people from receiving benefits. Specifically, when fraud by a  SNAP recipient is discovered, a state may generally retain 35 percent  of any recovered overpayments. However, there are no recovered  funds when a state detects potential fraud by an applicant and denies  the application. To help address states\u2019 concerns about resources  needed to conduct investigations, we recommended in our 2014  report that FNS explore ways that federal financial incentives could be  used to better support cost-effective anti-fraud strategies. FNS  reported that it took some steps to explore alternative financial  incentives, through a review of responses to a Request for Information  in the Federal Register. However, FNS decided not to pursue bonus  awards for anti-fraud and program integrity activities. Given that FNS  has not made changes in this area, state SNAP fraud agencies may  continue to report resource concerns in addressing fraud.", "Reporting guidance: We also found that FNS did not have  consistent and reliable data on states\u2019 activities because of unclear  reporting guidance, and FNS has since revised its data collection form  and provided training on the changes. To improve FNS\u2019s ability to  monitor states and obtain information about more efficient and  effective ways to combat recipient fraud, we recommended in 2014  that FNS take steps, such as providing guidance and training, to  enhance the consistency of what states report on their anti-fraud  activities. In response, FNS revised the form used to collect recipient  integrity information and changed the reporting frequency from annual  to quarterly, effective fiscal year 2017. FNS officials also reported  providing training to approximately 400 state agency and FNS  regional office personnel on the updates to the form and related  instructions.", "In our ongoing work, we are further reviewing states\u2019 use of data analytics  to identify SNAP recipient fraud, including that which may be occurring  during out-of-state transactions. Because transactions that may appear  suspicious\u2014such as those made out-of-state\u2014may in fact be legitimate,  states may use data analytic techniques to include additional factors that  may help them better target their efforts to identify potential fraud.  However, states may have different levels of capacity for using data  analytics to detect fraud. We are examining how 7 selected states are  using data analytics and identifying the advantages and challenges states  have experienced in doing so. We are also assessing FNS\u2019s efforts to  assist states in implementing GAO\u2019s leading practices for data analytics  outlined in GAO\u2019s Framework for Managing Fraud Risks in Federal  Programs outlined in GAO\u2019s Framework for Managing Fraud Risks in  Federal Programs. In addition, we are conducting our own analysis of  EBT out-of-state SNAP transaction data. We expect to report on our  findings later this year."], "subsections": []}, {"section_title": "SNAP Retailer Trafficking", "paragraphs": ["FNS has taken some steps to prevent, detect, and respond to retailers  who traffic SNAP benefits since our last report on the issue in 2006, but  trafficking continues to be a problem. For example, in February 2018, a  federal jury convicted a grocery store operator in Baltimore on charges of  wire fraud in connection with a scheme to traffic more than $1.6 million in  SNAP benefits for food sales that never occurred. The grocery store  operator paid cash for SNAP benefits, typically paying the recipient half  the value of the benefits and keeping the other half for himself. In our  2006 report, we found that SNAP was vulnerable to retailer trafficking in  several areas, including:", "Requirements for food that retailers must stock to participate in  SNAP: In 2006, we found that FNS had minimal requirements for the  amounts of food that retailers must stock, which could allow retailers  more likely to traffic into the program, although the agency has since  taken steps to increase these requirements. In our 2006 report, FNS  officials said that they authorized stores with limited food stock to  provide access to food in low-income areas where large grocery  stores were scarce. At that time, retailers were generally required to  stock a minimum of 12 food items (at least 3 varieties of 4 staple food  categories, such as fruits and vegetables), but FNS rules did not  specify how many items of each variety would constitute sufficient  stock. FNS officials told us that a retailer that only carries small  quantities of food, such as a few cans of one kind of vegetable, may  intend to traffic. In 2016, FNS promulgated a final rule increasing food  stock requirements. FNS officials told us that these new rules are  designed to encourage stores to provide more healthy food options for  recipients and discourage trafficking. According to FNS, retailers are  now generally required to stock at least 36 food items (a certain  variety and quantity of staple foods in each of the 4 staple food  categories).", "Focus on high-risk retailers: We also found in 2006 that FNS had  not conducted analyses to identify characteristics of retailers at high  risk of trafficking and to target its resources\u2014a shortcoming FNS has  since taken some steps to address. For example, we reported that  some stores may be at risk of trafficking because one or more  previous owners had been found trafficking at the same location.  However, FNS did not have a system in place to ensure that these  retailers were quickly targeted for heightened attention. In addition,  once a store was authorized to participate in the program, FNS staff  typically would not inspect the store again until it applied for  reauthorization 5 years later. We recommended that FNS identify  the stores most likely to traffic and provide earlier, more targeted  oversight to those stores. In 2009, FNS began establishing risk levels  for each authorized retailer, identifying high-risk stores as those with a  prior permanent disqualification at that location or a nearby location.  In 2013, FNS required all high-risk retailers to go through  reauthorization and to provide additional documentation regarding  store ownership. That same year, FNS also consolidated its retailer  management functions, including those for authorizing stores and  analyzing EBT transaction data, into a single national structure known  as the Retailer Operations Division. FNS officials told us that this  structure enables the agency to identify and deploy their investigative  resources to the areas of highest risk nationally, rather than within a  given region.", "Penalties to deter retailer trafficking: We also found in our 2006  report that FNS\u2019s penalties for retailer trafficking may be insufficient to  deter traffickers, and since then, FNS has proposed\u2014but not  finalized\u2014rules to increase them. FNS imposes administrative  penalties for retailer trafficking\u2014generally a permanent  disqualification from the program or a monetary penalty. FNS relies  on the USDA Office of Inspector General (OIG) and other law  enforcement entities to conduct investigations that can lead to criminal  prosecutions. In our 2006 report, we recommended that FNS  develop a strategy to increase penalties for trafficking. The Food,  Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill)  gave USDA authority to impose higher monetary penalties, and the  authority to impose both a monetary penalty and program  disqualification on retailers found to have violated relevant law or  regulations (which includes those found to have trafficked). In 2012,  FNS proposed regulatory changes to implement these authorities.  However, FNS has not finalized these rules, and as of fall 2017, the  rules were considered \u201cinactive.\u201d", "In our ongoing work, we are continuing to assess FNS\u2019s efforts to  prevent, detect, and respond to retailer trafficking, as well as examining  what is known about the extent of retailer trafficking nationwide. As part of  this work, we are continuing to review FNS\u2019s response to our prior  recommendations, as well as related recommendations made by USDA\u2019s  OIG. We are also studying FNS\u2019s periodic estimates of the rate of  retailer trafficking, expressed as the dollar value and percentage of all  SNAP benefits that were trafficked and the percentage of retailers  involved. These data suggest an increase in the estimated rate of retailer  trafficking since our 2006 report. However, we and others, including a  group of experts convened by FNS, have identified some limitations with  the retailer trafficking estimates. For example, the trafficking rate is  calculated based on a sample of retailers that FNS considers most likely  to traffic. Although FNS adjusts the data to better represent the broader  population of authorized retailers, it is uncertain whether the resulting  estimates accurately reflect the extent of trafficking nationwide. We are  reviewing these limitations and FNS\u2019s efforts to address them in our  ongoing work.", "Chairman Jordan, Chairman Palmer, Ranking Member Krishnamoorthi,  Ranking Member Raskin, and Members of the Subcommittees, this  completes my prepared statement. I would be pleased to respond to any  questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Kathryn Larin, Director, Education, Workforce, and Income  Security Issues at (202) 512-7215 or LarinK@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this testimony include Rachael Chamberlin, Celina Davidson, Swati  Deo, Rachel Frisk, Alexander Galuten, Danielle Giese, Kristen Jones,  Morgan Jones, Lara Laufer, Monica Savoy, and Kelly Snow.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-29", "url": "https://www.gao.gov/products/GAO-18-29", "title": "Personnel Security Clearances: Additional Actions Needed to Ensure Quality, Address Timeliness, and Reduce Investigation Backlog", "published_date": "2017-12-12T00:00:00", "released_date": "2017-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["A high-quality personnel security clearance process is necessary to minimize the risks of unauthorized disclosures of classified information and to help ensure that security-relevant information is identified and assessed. The passage of IRTPA initiated an effort to reform the security clearance process government-wide.", "This report assesses the extent to which (1) executive branch agencies made progress reforming the security clearance process; (2) executive branch agencies completed timely initial clearances from fiscal years 2012-2016, and reported on timeliness; and (3) NBIB has taken steps to improve the background investigation process and address the backlog. GAO reviewed documentation; analyzed timeliness data; and interviewed officials from the four PAC Principals and NBIB. This is a public version of a sensitive report that GAO issued in December 2017. Information that the DNI and OPM deemed sensitive has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["Executive branch agencies have made progress reforming the security clearance process, but long-standing key initiatives remain incomplete. Progress includes the issuance of common federal adjudicative guidelines and updated strategic documents to help sustain the reform effort. However, agencies face challenges in implementing certain aspects of the 2012 Federal Investigative Standards\u2014criteria for conducting background investigations\u2014including establishing a continuous evaluation program, and the issuance of a reciprocity policy to guide agencies in honoring previously granted clearances by other agencies remains incomplete. Executive branch agencies have taken recent steps to prioritize over 50 reform initiatives to help focus agency efforts and facilitate their completion. In addition, while agencies have taken steps to establish government-wide performance measures for the quality of investigations, neither the Director of National Intelligence (DNI) nor the Security, Suitability, and Credentialing Performance Accountability Council (PAC) have set a milestone for their completion. Without establishing such a milestone, completion may be further delayed and agencies will not have a schedule against which they can track progress or to which they are accountable.", "The number of executive branch agencies meeting established timeliness objectives for initial security clearances decreased from fiscal years 2012 through 2016, and reporting has been limited. For example, 59 percent of the executive branch agencies reviewed by GAO reported meeting investigation and adjudication timeliness objectives for initial top secret clearances in fiscal year 2012, compared with 10 percent in fiscal year 2016. The Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) required the executive branch to submit an annual report, through 2011, to appropriate congressional committees on, among other things, the time required to conduct investigations, adjudicate cases, and grant clearances. Since the requirement ended, reporting has been limited to a portion of the intelligence community. Without comprehensive reporting, Congress will not be able to monitor agencies' progress in meeting timeliness objectives, identify corrections, or effectively execute its oversight role.", "The National Background Investigations Bureau (NBIB), within the Office of Personnel Management (OPM), has taken steps to improve the background investigation process, but it faces operational challenges in addressing the investigation backlog and increasing investigator capacity. While NBIB has taken positive steps to improve its oversight of background investigation contracts, it faces operational challenges in reducing the investigation backlog\u2014which grew from 190,000 cases in August 2014 to more than 709,000 in September 2017. To increase capacity NBIB has hired additional federal investigators and increased the number of its investigative fieldwork contracts, but it has not developed a plan for reducing the backlog or established goals for increasing total investigator capacity. Without such a plan and goals, the backlog may persist and executive branch agencies will continue to lack the cleared personnel needed to help execute their respective missions. The bill for the National Defense Authorization Act for Fiscal Year 2018, passed by Congress in November 2017, would authorize DOD to conduct its own background investigations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider reinstating the IRTPA requirement for clearance timeliness reporting. GAO is also making six recommendations, including that the DNI and other PAC Principals set a milestone for establishing measures for investigation quality, and that NBIB develop a plan to reduce the backlog and establish goals for increasing total investigator capacity. NBIB concurred with the recommendations made to it. The DNI did not concur with GAO's conclusions and recommendations. GAO continues to believe they are valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The enactment of the Intelligence Reform and Terrorism Prevention Act  of 2004 (IRTPA) initiated a reform effort that includes goals and  requirements for improving the personnel security clearance process  government-wide. A high-quality personnel security clearance process is  necessary to minimize the risks of unauthorized disclosures of classified  information and to help ensure that information about individuals with  criminal histories or other questionable behavior is identified and  assessed. In 2014, emphasis on security clearance reform was renewed  following high-profile events. These events included the June 2013  disclosure of classified documents by a former National Security Agency  contractor, and the September 2013 shooting at the Washington Navy  Yard by an individual who had both access to the facility and a security  clearance. However, these reform efforts immediately faced significant  challenges. In 2014, the Office of Personnel Management (OPM)   experienced issues with respect to its largest background investigation  contractor, and it did not exercise an option to extend the contract.  According to OPM, it conducts about 95 percent of the federal  government\u2019s background investigations. Additionally, in 2015, OPM was  subjected to a massive security breach of its information technology (IT)  systems. Moreover, OPM reports that it has a significant backlog of  background investigations, which has raised congressional concerns  about delays in processing security clearances and risks to national  security.", "Executive Order 13467 established the Security, Suitability, and  Credentialing Performance Accountability Council (PAC) as the  government-wide structure responsible for driving the implementation of  and overseeing security and suitability reform efforts. The Executive  Order also designated the Deputy Director for Management of the Office  of Management and Budget (OMB) as the Chair of the PAC, and the  Director of National Intelligence as the Security Executive Agent  responsible for developing consistent policy and procedures for, among  other matters, timely investigations and adjudications.", "We have issued numerous reports highlighting issues related to  personnel security clearances. For example, in 2017, we reported on  challenges related to the implementation of an executive branch-wide  continuous evaluation program, and in 2015 we reported on the need to  take steps to improve the reciprocity of security clearances among  executive branch agencies. Appendix I provides the status of  recommendations we have made to improve the personnel security  clearance process. Moreover, in our 2015 and 2017 updates to our High- Risk series, we identified the Department of Defense\u2019s (DOD) personnel  security clearances as a previous high-risk area that we continue to  monitor to determine whether the improvements we have noted are  sustained and whether any new issues have emerged.", "We began our work under the authority of the Comptroller General to  conduct evaluations on his own initiative. The Ranking Member of the  Senate Committee on Homeland Security and Governmental Affairs, the  Vice Chairman of the Senate Select Committee on Intelligence, and  Senator Jon Tester subsequently submitted requests to be addressees  for this review. Additionally, Senate Report 114-280 included a provision  that we review the transition, oversight, and operation of the newly  established National Background Investigations Bureau (NBIB), within  OPM. This report assesses the extent to which: (1) executive branch  agencies have made progress in reforming the security clearance  process; (2) executive branch agencies met established timeliness  objectives for initial personnel security clearances from fiscal year 2012  through fiscal year 2016, and reported on their timeliness; and (3) NBIB  has taken steps to improve the background investigation process and  address the investigation backlog.", "This report is a public version of a sensitive report that we issued on  December 7, 2017. ODNI and OPM deemed some of the information in  our December report to be sensitive, which must be protected from public  disclosure. Therefore, this report omits sensitive information. Although the  information provided in this report is more limited, the report addresses  the same objectives as the sensitive report and uses the same  methodology.", "To address our first objective, we compared the PAC\u2019s strategic  framework for fiscal years 2017 through 2021 and quarterly progress  updates against recommendations from the PAC\u2019s 120-day and 90-day  reviews and PAC-identified reform milestones. Additionally, we  interviewed PAC Program Management Office officials as well as officials  from OMB, OPM, the Office of the Director of National Intelligence  (ODNI), and DOD, due to their roles as principal members of the PAC.  We also interviewed officials from the Departments of Homeland Security,  Justice, and State with regard to their plans to implement continuous  evaluation\u2014a key reform effort. We compared this information against  Standards for Internal Control in the Federal Government related to the  identification of risks and monitoring activities; criteria for assessing high- risk areas, such as leadership commitment; and best practices for  comprehensive and effective IT strategies identified in our prior work.  We also reviewed the executive branch\u2019s guide for quality standards and  tools, and we identified and applied criteria developed from our body of  work on using results-oriented management tools to help achieve desired  program outcomes.", "To address our second objective, we reviewed relevant statutes and  ODNI guidance addressing the timeliness of background investigations  and adjudications as well as reporting requirements. We also reviewed  available executive branch reports on timeliness. We obtained data from  ODNI on the timeliness of initial personnel security clearances for fiscal  years 2012 through 2016 for specific executive branch agencies. We  excluded the data reported by State to ODNI from our analysis due to a  July 2017 report by the State Office of Inspector General, which identified  a number of errors in the department\u2019s security clearance timeliness  data. As such, we reported on the timeliness of the remaining executive  branch agencies for which ODNI provided data. To assess the reliability  of the data for the remaining executive branch agencies, we reviewed  relevant documentation and interviewed officials about data quality  control procedures. Based on these steps, we determined that the data  were sufficiently reliable for the purposes of this report. For that reason,  we did not independently test the accuracy of the agencies\u2019 databases.", "We selected the fiscal year 2012 through 2016 timeframe for our analysis  because the executive branch has not publicly reported on the timeliness  of individual executive branch agencies since fiscal year 2011. We  analyzed the data to determine the extent to which agencies are meeting  IRTPA timeliness objectives for completing the fastest 90 percent of initial  secret clearance determinations within 60 days (40 days to investigate and 20 days to adjudicate). Appendix II provides additional details on  IRTPA as it relates to personnel security clearances. We also analyzed  the extent to which agencies are meeting ODNI revised timeliness  objectives for completing the fastest 90 percent of initial top secret  clearance determinations. In addition, we reviewed relevant ODNI and  PAC reports for information regarding the timeliness of investigations and  compared it against criteria for assessing high-risk areas such as  monitoring and demonstrated progress. Finally, we interviewed PAC,  ODNI, and NBIB officials regarding timeliness challenges, efforts to  improve timeliness, and the reporting of timeliness information.", "To address our third objective, we analyzed studies, organizational  charts, plans, and other documents related to the establishment,  transition, oversight, and operation of NBIB. We compared these  documents against key principles of strategic workforce planning that we  have identified in prior work, such as determining the critical skills and  competencies needed to achieve current and future programmatic results  and developing strategies that are tailored to address gaps in numbers of  people, skills and competencies, and deployment of the workforce;  selected OPM workforce planning best practices; OMB policy that  requires agencies to take actions to ensure that they have sufficient  internal capability to maintain control over functions that are core to the  agency\u2019s mission and operations; and criteria for assessing high-risk  areas such as leadership commitment, capacity, action plans, monitoring,  and demonstrated progress. Additionally, given the OPM data breach in  2015 and a decision to shift security clearance IT functions to a new  DOD-developed and -operated National Background Investigation  System (NBIS), we examined efforts to operationalize the new system  and leveraged our recent work examining IT security at OPM. Further,  we reviewed and analyzed current and former NBIB/ Federal Investigative  Services (FIS) background investigation fieldwork services contracts to  determine investigative capacity and steps taken to improve timeliness.  FIS is the prior entity within OPM that conducted background  investigations for the federal government. We interviewed NBIB officials  to determine how NBIB was providing oversight of investigative contracts  and how that process changed in the wake of the 2014 issues related to a  major investigative service provider. We also interviewed NBIB, PAC, and  DOD officials regarding the transition, oversight, and operation of NBIB.", "The performance audit upon which this report is based was conducted  from July 2016 through December 2017 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with ODNI and OPM from November  2017 to December 2017 to prepare this report for public release. This  public version was also prepared in accordance with these standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Personnel Security Clearances", "paragraphs": ["Personnel security clearances are required for access to certain national  security information. National security information may be classified at  one of three levels: confidential, secret, or top secret. The level of  classification denotes the degree of protection required for information  and the amount of damage that unauthorized disclosure could reasonably  be expected to cause to national security. Specifically, unauthorized  disclosure could reasonably be expected to cause (1) \u201cdamage,\u201d in the  case of confidential information; (2) \u201cserious damage,\u201d in the case of  secret information; and (3) \u201cexceptionally grave damage,\u201d in the case of  top secret information. As part of the security clearance process,  individuals granted security clearances are investigated periodically\u2014for  as long as they remain in a position requiring access to classified  information\u2014to ensure their continued eligibility. As of October 1, 2015,  the latest date for which data are available, approximately 4.2 million  government and contractor employees, at nearly 80 executive branch  agencies, were eligible to hold a security clearance."], "subsections": []}, {"section_title": "IRTPA, Executive Orders, and Recent Legislation", "paragraphs": ["IRTPA. As noted earlier, IRTPA initiated a reform effort that includes  goals and requirements for improving the personnel security clearance  process government-wide. For example, IRTPA established specific  objectives for the timeliness of security clearance processing. It also  required that all security clearance background investigations and  determinations completed by an authorized investigative agency or  authorized adjudicative agency be accepted by all agencies (known as  reciprocity), subject to certain exceptions. Appendix II provides  additional details on IRTPA as it relates to personnel security clearances.", "Relevant Executive Orders. The personnel security clearance process  and reform efforts are governed by various executive orders. Key  executive orders affecting personnel security clearance reform include  Executive Orders 12968, 13467, 13741, and 13764, which, among other  things, provide definitions, processes, responsibilities, and authorities  related to eligibility for access to classified information, suitability and  fitness for government employment, and security clearance reform.", "Aspects of the reform effort covered by the Executive Orders include the  establishment of the PAC and NBIB, the transfer of IT responsibilities to  DOD, the definition of continuous evaluation, and the addition and  amendment of certain roles and responsibilities.", "Recent legislation. Section 951 of the National Defense Authorization  Act for Fiscal Year 2017 requires, among other things, the Secretary of  Defense to develop an implementation plan for the Defense Security  Service to conduct background investigations for certain DOD  personnel\u2014presently conducted by OPM\u2014after October 1, 2017. The  Secretary of Defense was to submit the plan to the congressional defense  committees by August 1, 2017. DOD provided the plan to the  congressional defense committees on August 25, 2017. Section 951 also  requires the Secretary of Defense and the Director of OPM to develop a  plan by October 1, 2017, to transfer investigative personnel and  contracted resources to DOD in proportion to the workload if the plan for  the department to conduct background investigations were  implemented.", "In November 2017, after the conclusion of our audit work, Congress  passed a bill for the National Defense Authorization Act for Fiscal Year  2018. The bill includes a provision that, among other things, would  authorize DOD to conduct its own background investigations and would  require DOD to begin carrying out the implementation plan required by  section 951 of the National Defense Authorization Act for Fiscal Year  2017 by October 1, 2020. It would also require the Secretary of Defense,  in consultation with the Director of OPM, to provide for a phased  transition."], "subsections": []}, {"section_title": "Governance Structure for Security Clearance Reform Effort", "paragraphs": ["To help guide the personnel security clearance reform effort, in June  2007, the Director of National Intelligence and the Under Secretary of  Defense for Intelligence established the Joint Reform Team through a  memorandum of agreement to execute joint reform efforts to achieve  IRTPA timeliness objectives and improve the processes related to  granting security clearances and determining suitability for government  employment. The team consisted of cognizant entities within OMB, OPM,  ODNI, and DOD. The team worked on improving the security clearance  process governmentwide, including providing progress reports on the  reform effort, recommendations for research priorities, and oversight of  the development and implementation of an information technology  strategy, among other things.", "In June 2008, Executive Order 13467 established the PAC as the  government-wide governance structure responsible for driving the  implementation of and overseeing security and suitability reform efforts.  Its specific responsibilities include ensuring the enterprise-wide alignment  of suitability, security, credentialing, and, as appropriate, fitness  processes; working with agencies to implement continuous performance  improvement programs, policies, and procedures; establishing annual  goals and progress metrics; and preparing annual reports on results. In  addition, the PAC is to develop and continuously reevaluate and revise  outcome-based metrics that measure the quality, efficiency, and  effectiveness of the vetting enterprise, among other things. As noted  above, the Deputy Director for Management of OMB serves as the Chair  of the PAC and has authority, direction, and control over its functions.", "In addition to the Deputy Director for Management of OMB, the PAC has  three additional principal members: the Director of National Intelligence,  the Director of OPM, and the Under Secretary of Defense for Intelligence.", "Director of National Intelligence: The Director of National  Intelligence serves as the Security Executive Agent and is responsible  for, among other things, developing and issuing uniform and  consistent policies and procedures to ensure the effective, efficient,  timely, and secure completion of investigations, polygraphs, and  adjudications related to determinations of eligibility for access to  classified information or eligibility to hold a sensitive position. In this  role, the Director of National Intelligence is also to direct the oversight  of such investigations, reinvestigations, and adjudications.", "Director of OPM: The Director of OPM serves as the Suitability and  Credentialing Executive Agent and is responsible for, among other  things, prescribing suitability standards and minimum standards of  fitness for employment.", "Under Secretary of Defense for Intelligence: The Under Secretary  of Defense for Intelligence became the fourth principal member of the  PAC with the issuance of Executive Order 13741 in September  2016. Additionally, Executive Order 13467, as amended, assigns  DOD responsibility for designing, developing, operating, defending,  and continuously updating and modernizing, as necessary, IT  systems that support all background investigation processes  conducted by NBIB.", "In addition, in April 2014, the PAC established the Program Management  Office to implement personnel security clearance reforms. This office  includes subject-matter experts with knowledge of personnel security  clearances and suitability determinations from OMB, ODNI, OPM, DOD,  the Department of Homeland Security, the Department of Justice, the  Department of the Treasury, and the Federal Bureau of Investigation.  Prior to the establishment of the Program Management Office, the PAC  was supported by the Joint Reform Team as well as various  subcommittees that addressed specific tasks, such as investigator and  adjudicator training and the development of performance measures."], "subsections": []}, {"section_title": "Key Efforts to Reform the Personnel Security Clearance Process", "paragraphs": ["Since 2014, there have been a number of key efforts to reform the  personnel security clearance process. For example, following the  September 2013 shooting at the Washington Navy Yard, the PAC  conducted a 120-day interagency review to assess risks inherent in the  federal government\u2019s security, suitability, and credentialing processes.  The February 2014 report resulting from that review highlighted 37  recommendations to improve, among other things, the federal  government\u2019s processes for granting security clearances. Some of the  recommendations address longstanding issues of the reform effort\u2014such  as improving data sharing between local, state, and federal law  enforcement; and others are consistent with previous GAO  recommendations\u2014such as reporting measures for the quality of  background investigations. The status of the implementation of these  recommendations is discussed later in this report.", "In addition, in March 2014, OMB established Insider Threat and Security  Clearance Reform as a government-wide, cross-agency priority goal in  part to improve interagency coordination and implementation within the  area of personnel security clearances. Through this goal, the PAC and  executive-branch agencies are to work to improve oversight to ensure  that investigations and adjudications meet government-wide quality  standards. From the second quarter of fiscal year 2014 to the fourth  quarter of fiscal year 2016, the PAC has reported quarterly on, among  other things, the status of key milestones and the timeliness of initial  investigations and periodic reinvestigations for the executive branch as a  whole. As part of the cross-agency priority goal, the PAC identified  various sub goals on which to focus its work. The sub goals were  originally based on recommendations from the 120-day review and,  according to PAC Program Management Office officials, were later  updated to reflect the PAC\u2019s strategic plans. The current sub goals are as  follows: trusted workforce, modern vetting, secure and mission-capable  IT, and continuous process improvement.", "Further, in 2015, in response to the OPM data breach and at the request  of the President, the PAC conducted a second review\u2014a 90-day  review\u2014of the government\u2019s suitability and security processes. In the  January 2016 summary of the review, the administration identified four  actions to create a more secure and effective federal background  investigations infrastructure. Specifically, it identified the need to: (1)  establish NBIB as the new federal entity to strengthen how the  government performed background investigations; (2) leverage IT  expertise at DOD for processing background investigations and protecting  against threats; (3) update governance authorities, roles, and  responsibilities; and (4) drive continuous performance improvement to  address evolving threats. The status of these actions is discussed later in  this report."], "subsections": []}, {"section_title": "NBIB\u2019s Use of Contract Investigators to Conduct Background Investigations", "paragraphs": ["NBIB maintains an in-house federal investigator workforce, but according  to NBIB, as of July 2017, it relied on contract investigators to conduct  about 60 percent of the background investigations it provides to customer  agencies, such as DOD. In 2011, OPM awarded three indefinite  delivery/indefinite quantity contracts to three contractors to conduct  investigation fieldwork services\u2014CACI Premier Technology, Inc.,  KeyPoint Government Solutions, Inc., and U.S. Investigations Services,  LLC (USIS). According to NBIB, USIS was responsible for about 65  percent of the contractor workload.", "In September 2014, OPM decided not to exercise the option for the USIS  contract for fiscal year 2015. Eleven months prior, in October 2013, the  Department of Justice had announced that the government would  intervene in a civil suit against USIS, filed by a former employee under  the False Claims Act. The government alleged that the contractor had  circumvented contractually required quality reviews of completed  background investigations to increase the company\u2019s revenues and  profits. In August 2015, the Department of Justice announced that USIS  and its parent company had agreed to a $30 million settlement in  exchange for a release of liability under the False Claims Act;  accordingly, the claims resolved by the settlement agreement were  allegations only, and there was no determination of liability. In June 2015,  OPM conducted a review of USIS cases and found that the investigations  for which USIS did not conduct the quality review were generally less  complex cases. In addition, these cases had a lower return rate from  OPM reviewers.", "In September 2016, OPM awarded new indefinite delivery/indefinite  quantity contracts for investigation fieldwork services to four companies\u2014 CACI Premier Technology, Inc., KeyPoint Government Solutions, Inc.,  CSRA LLC, and Securitas Critical Infrastructure Services, Inc. The 2-year  base period for these contracts runs to the end of fiscal year 2018, and  OPM may exercise three 1-year option periods for each contract, with the  first beginning on October 1, 2018."], "subsections": []}]}, {"section_title": "Executive Branch Agencies Have Made Progress Reforming the Security Clearance Process, but Long-Standing Key Initiatives Remain Incomplete", "paragraphs": ["Executive branch agencies have made progress in reforming the  personnel security clearance process by, for example, issuing guidance,  such as Quality Assessment Standards to guide background  investigations, updated strategic documents to sustain the momentum of  the reform effort, and adjudicative guidelines to establish single, common  adjudicative criteria for security clearances. However, agencies face  challenges in implementing certain aspects of the 2012 Federal  Investigative Standards, including full implementation of continuous  evaluation, and the issuance of a reciprocity policy remains incomplete. In  addition, while the executive branch has taken steps toward establishing  performance measures for the quality of government-wide personnel  security clearance investigations, there is no milestone for their  completion."], "subsections": [{"section_title": "The PAC Has Made Progress Reforming the Personnel Security Clearance Process", "paragraphs": ["The PAC has made progress in reforming the personnel security  clearance process, as demonstrated through actions taken in response to  recommendations and milestones outlined in four key reform effort  documents: (1) the February 2014 120-day review; (2) the 2015 90-day  review; (3) the Insider Threat and Security Clearance Reform cross- agency priority goal quarterly progress updates; and (4) the PAC\u2019s  strategic framework for fiscal years 2017 through 2021.  120-day review. According to PAC documentation, as of August 2017,  the PAC had implemented 73 percent of the 120-day review  recommendations. For example, in response to a recommendation from  the review, ODNI and OPM jointly issued Quality Assessment Standards  in January 2015, which establish federal guidelines for assessing the  quality of national security and suitability investigations. The  establishment of the standards is intended to facilitate the measurement  and continued improvement of investigative quality across the executive  branch. In response to another related recommendation, ODNI developed  the Quality Assessment Reporting Tool (QART), through which agencies  will report on the completeness of investigations. According to ODNI  officials, the QART was implemented in October 2016, and full  implementation is expected by the end of calendar year 2017.  90-day review. By January 2017, the PAC had taken steps to implement  all of the actions identified in the January 2016 summary of the 90-day  review. Specifically, Executive Order 13741, issued in September 2016,  established NBIB, within OPM, to replace FIS as the primary executive  branch service provider for background investigations. It also identified  DOD as the entity responsible for designing, developing, operating, and  securing IT systems that support NBIB\u2019s background investigations.  Additionally, the Executive Order elevated the Under Secretary of  Defense for Intelligence to a full principal member of the PAC and  directed the PAC to review and update governance, authorities, roles,  and responsibilities. Subsequently, Executive Order 13764, issued in  January 2017, further clarified relevant authorities, roles, and  responsibilities, among other things. Further, according to PAC Program  Management Office officials, the PAC has taken steps to implement  continuous process improvements, such as developing a research and  innovation program through which it has undertaken a number of projects  aimed at improving the personnel security clearance process. In addition,  the PAC established a continuous performance improvement initiative to  develop mechanisms to improve the quality and efficiency of the end-to- end security, suitability, and credentialing vetting processes. As of July  2017, the PAC had identified seven categories of performance measures  for the end-to-end security, suitability, and credentialing processes\u2014such  as timeliness, volume, and cost-efficiency\u2014which it planned to implement  in a phased approach.", "Cross-agency priority goal. From the second quarter of fiscal year 2014  through the fourth quarter of fiscal year 2016, the PAC reported quarterly  on the status of key initiatives, among other things, as part of the Insider  Threat and Security Clearance Reform cross-agency priority goal. For  each initiative, the PAC reported the milestone due date, the milestone  status\u2014on track, complete, at risk, missed, or not started\u2014and the  responsible agencies. As of the PAC\u2019s last publicly reported quarterly  update, for the fourth quarter of fiscal year 2016, 8 of 33 initiatives were  listed as complete. According to PAC Program Management Office  officials, they have continued to track the status of these milestones  internally, and almost half of the initiatives\u201416 of 33\u2014were listed as  complete as of the third quarter of fiscal year 2017. These initiatives  include the establishment of a Federal Background Investigations Liaison  Office within NBIB to oversee and resolve issues between federal, state,  and local law enforcement entities when collecting criminal history record  information for background investigations, and developing plans to  implement improved investigator and adjudicator training.", "Strategic framework. The PAC has issued three documents that serve  as its updated strategic framework for the next 5 years. In July 2016, it  issued its Strategic Intent for Fiscal Years 2017 through 2021, which  identifies the overall vision, goals, and 5-year business direction to  achieve an entrusted workforce. In October 2016, it issued an updated  PAC Enterprise IT Strategy, which provides the technical direction to  provide mission-capable and secure security, suitability, and credentialing  IT systems. According to PAC Program Management Office officials, the  third document\u2014the PAC Strategic Intent and Enterprise IT Strategy  Implementation Plan (Implementation Plan)\u2014was distributed to executive  branch agencies in February 2017. The Implementation Plan documents  the key initiatives, targets, and measures for achieving the strategic  vision.", "In March 2009, the Joint Reform Team issued an Enterprise IT Strategy,  but the PAC\u2019s own February 2014 120-day review found that this strategy  stopped short of actions needed to develop enterprise-wide IT capabilities  to modernize, integrate, and automate agency capabilities and retire  legacy systems. It further stated that absent a strategy for integrated IT  capabilities, agencies created disparate tools designed only to meet their specific requirements and recommended the development and execution  of an enterprise reform IT strategy to ensure interoperability and improved  sharing of relevant information. We compared the PAC\u2019s 2016 Enterprise  IT Strategy against leading practices for comprehensive and effective IT  strategies and found that it generally aligns with such practices. For  example, it contains results-oriented goals and strategies for agencies to  achieve desired results, and describes interdependencies within and  across projects.", "In addition to these four key areas, PAC members noted additional  progress in reforming the personnel security clearance process.  Specifically, ODNI officials highlighted the development of seven Security  Executive Agent Directives, five of which have been issued as of August  2017, related to the use of polygraphs and social media in the  investigative process, among other things. For example, in December  2016, the Director of National Intelligence issued Security Executive  Agent Directive 4, National Security Adjudicative Guidelines. Effective in  June 2017, the directive is meant to establish the single, common  adjudicative criteria for all covered individuals who require initial or  continued eligibility for access to classified information or eligibility to hold  a sensitive position. DOD officials stated that having standardized  adjudicative criteria such as these guidelines constitutes an important  step in helping to ensure reciprocity. Additionally, a senior PAC Program  Management Office official noted that the PAC has designated eight  executive branch-wide IT shared service capabilities, such as the  electronic adjudication of certain background investigations and a new  electronic questionnaire for national security positions. According to this  official, the latter two shared services are expected to be rolled out in  2017, with the remaining six shared services being rolled out as they  become available."], "subsections": []}, {"section_title": "Key Aspects of the 2012 Federal Investigative Standards and the Development of a Reciprocity Policy Remain Incomplete", "paragraphs": ["While the PAC has reformed many parts of the personnel security  clearance process, implementing certain key aspects of the 2012 Federal  Investigative Standards, including changing the frequency of periodic  reinvestigations for certain clearance holders and establishing a  continuous evaluation program, remain incomplete. In addition, the  issuance of ODNI\u2019s draft reciprocity policy has been delayed.  2012 Federal Investigative Standards. These standards outline criteria  for conducting background investigations to determine eligibility for a  security clearance and are intended to ensure cost-effective, timely, and  efficient protection of national interests and to facilitate reciprocal  recognition of the resulting investigations. In April 2015, we reported  that executive branch agencies with responsibilities for security  clearances and suitability determinations had twice approved updated  Federal Investigative Standards to replace the 1997 Standards, but that  progress in implementing the updated standards had been limited.  Specifically, as part of the reform effort that began after the passage of  IRTPA, the Director of National Intelligence and the Acting Director of  OPM, in their roles as Security and Suitability Executive Agents, signed  new Federal Investigative Standards on December 13, 2008, and stated  that the anticipated initial deployment of the standards was to begin in the  third quarter of fiscal year 2009. However, the 2008 Federal Investigative  Standards were not implemented, according to ODNI officials, because  key terms were not clearly defined and required further clarification.", "In December 2012, the Director of National Intelligence and Director of  OPM approved updated Federal Investigative Standards. Among other  things, the 2012 Federal Investigative Standards identify five investigative  tiers. According to OPM Federal Investigations Notice 16-02, tier 3  investigations are required for eligibility for access to secret and  confidential information, or for noncritical sensitive positions, or \u201cL\u201d  access. OPM Federal Investigations Notice 16-07 indicates that tier 5  investigations are required for eligibility for access to top secret or  Sensitive Compartmented Information, or for critical sensitive or special  sensitive positions, or \u201cQ\u201d access. The updated standards also changed  the frequency of periodic reinvestigations for certain clearance holders.  The Federal Investigative Standards milestone for full operating capability  is the end of fiscal year 2017. Specific details on this topic were omitted  because the information is sensitive. See figure 1 for a timeline of efforts  made since 1997 to implement updated Federal Investigative Standards.", "The 2012 standards include continuous evaluation as a new requirement  for certain clearance holders. This is a key executive branch initiative to  more frequently identify and assess security-relevant information between  periodic reinvestigations. Efforts to implement a continuous evaluation  program were included in the implementation documents from the prior  reform effort following approval of the 2008 Federal Investigative  Standards, including an operational milestone for implementing a  continuous evaluation program by the fourth quarter of fiscal year 2010.  ODNI has adjusted the milestones for implementing the program and  issuing a Security Executive Agent Directive for continuous evaluation  several times. For example, in April 2015, we reported that ODNI planned  to issue a continuous evaluation policy by September 2016 and to  implement a continuous evaluation capability for certain clearance  holders by December 2016. However, in November 2017 we found that  while ODNI has taken an initial step to implement continuous evaluation  in a phased approach across the executive branch, it has not yet issued a  Security Executive Agent Directive for continuous evaluation or  determined when the future phases of implementation will occur.  According to ODNI officials, as of August 2017, this directive was  undergoing interagency coordination and would be issued upon  completion of that process. As of August 2017, continuous evaluation had  not yet been fully implemented and ODNI had not set a new milestone for  when it would occur. In November 2017, we recommended, among other  things, that the Director of National Intelligence issue a continuous  evaluation directive and develop an implementation plan. ODNI generally  concurred with those recommendations. Figure 2 provides an overview  of the adjusted executive branch milestones for issuing a continuous  evaluation policy and implementing a continuous evaluation program,  including developing a technical capability.", "Reciprocity policy. In 2004, IRTPA required that all security clearance  background investigations and determinations completed by an  authorized investigative agency or authorized adjudicative agency be  accepted by all agencies, subject to certain exceptions. As reported in a  cross-agency priority goal quarterly update in fiscal year 2016, the  milestone for ODNI to issue and promulgate an updated national security  reciprocity policy was September 2016. Security clearance reciprocity is  statutorily required by IRTPA, subject to certain exceptions, and it is  currently implemented by executive orders and guidance across  executive-branch agencies. To consolidate existing reciprocity guidance,  ODNI planned to issue a comprehensive, national-level security  clearance reciprocity policy intended to resolve challenges associated  with consistent, timely reciprocity processing across the executive branch.  However, the issuance date has been postponed multiple times\u2014the  original milestone was September 2013\u2014and as of July 2017, ODNI had  not yet issued a reciprocity policy or identified a new milestone for its  issuance. In July 2017, ODNI officials stated that a draft reciprocity policy  was pending entry into the formal interagency coordination process and  would be issued upon completion of that process. However, ODNI  officials were unable to provide an estimated issuance date because,  according to the officials, the length of the interagency coordination  process can vary. PAC Program Management Office officials noted that  issuance delays are due, in part, to the development of related personnel  security policies, including continuous evaluation, with which the  reciprocity policy must be aligned. Figure 3 shows milestones for the  issuance of the reciprocity policy.", "In November 2010, we found that although executive-branch agency  officials stated that reciprocity is regularly granted, agencies did not have  complete records on the extent to which previously granted security  clearance investigations and adjudications are honored government- wide. Further, we found that agencies lacked a standard metric for  tracking reciprocity. We recommended that the Deputy Director for  Management, OMB, in the capacity as chair of the PAC, develop  comprehensive metrics to track when reciprocity is granted and report the  findings from the expanded tracking to Congress. OMB concurred with  our recommendation. However, in April 2015, we found that executive  branch agencies still did not consistently track when reciprocity is or is not  granted, nor did they have metrics in place to measure how often  reciprocity occurs. ODNI officials stated that they planned to develop  them by 2016. Although the Director of National Intelligence had  requested Intelligence Community elements take steps to begin capturing  reciprocity data in December 2014, such baseline data needed to support  measures for reciprocity were not being collected government-wide. We  recommended, in 2015, that the Director of National Intelligence require  the development of baseline data to support measures for reciprocity.", "These data would help to identify and monitor changes in reciprocity  government-wide. ODNI did not state whether it concurred with the  recommendation, and as of November 2017, it had not been  implemented.", "PAC officials stated that the greatest challenge of the reform effort is the  breadth and complexity of the issues it is trying to resolve, noting that the  reform effort involves nearly every executive branch agency. In addition,  these officials stated that sometimes agencies focus on short-term high- visibility issues instead of longer-term efforts, which are needed for  systemic change. ODNI officials also noted the complexities of reforming  the personnel security clearance process and working toward a whole-of- government solution. These officials noted that the reform efforts involve  coordination among a number of agencies across the executive branch,  which is both time and resource intensive. Both PAC Program  Management Office and ODNI officials also identified limited agency  resources and competing priorities\u2014across executive branch agencies\u2014 as additional challenges.", "The PAC has taken recent steps to help address some of these  challenges to continued progress, which could facilitate the completion of  the key initiatives discussed above. For example, in its Implementation  Plan the PAC has identified approximately 50 initiatives on which it will  focus its work over the next 5 fiscal years and has aligned those activities  with its four strategic categories of initiatives\u2014trusted workforce, modern  vetting, secure and modern mission-capable IT, and continuous  performance improvement. However, according to ODNI officials, during  their review of a draft of the Implementation Plan, they raised concerns  about the number of initiatives and highlighted the need to provide greater  prioritization of the initiatives to help better focus efforts. For example,  some agencies are assigned as a primary owner of multiple initiatives.  Specific details of the number of initiatives to which agencies are  assigned were omitted because the information is sensitive.", "PAC Program Management Officials stated that, to alleviate these  concerns, they subsequently identified two to four priority initiatives within  each of the four categories to help focus agency efforts. These officials  further stated that the PAC intends to update and reissue a condensed  version of its Implementation Plan annually so that it can make revisions  as issues that affect these priorities, such as reduced budgets, occur.  These 11 priority initiatives are identified in the PAC\u2019s Implementation  Plan which, according to PAC Program Management Office officials, the  PAC finalized and circulated to executive branch agencies in February  2017. For example, establishing a continuous evaluation capability and  strengthening and aligning guidelines for the reciprocal recognition of  existing vetting decisions are listed among the PAC\u2019s priority initiatives.  Given the limited agency resources cited by ODNI and PAC Program  Management Office officials and other key competing efforts, such as  improving investigation timeliness, the PAC\u2019s prioritization of initiatives  could help to refocus efforts on the most critical areas of the reform effort,  and could provide agencies with a manageable number of initiatives on  which to prioritize their efforts."], "subsections": []}, {"section_title": "Executive Branch Has Taken Steps to Establish Government-wide Performance Measures for the Quality of Background Investigations, but It Is Unclear When This Effort Will Be Completed", "paragraphs": ["Our prior work on personnel security clearances has identified concerns  about the quality of background investigations and has highlighted the  need to build quality throughout the process for almost 20 years.  Additionally, we found that executive branch reports on the personnel  security clearance process contained limited information on quality in the  process. In May 2009, we recommended, among other things, that the  Deputy Director for Management of OMB, in the capacity as Chair of the  PAC, include in an IRTPA-required report to Congress quality metrics to  provide more transparency on personnel security clearances. OMB  concurred with that recommendation. However, the 2010 report to  Congress did not include quality metrics, and the IRTPA reporting  requirement expired in 2011. Appendix III provides an overview of our  work in this area and of executive branch efforts to establish government- wide performance measures for the quality of background investigations.", "According to Executive Order 13467, the PAC is to establish annual goals  and progress metrics related to security and suitability processes and  continuous performance improvement. This focus on performance  measures is consistent with our body of work on using results-oriented  management tools to help achieve desired program outcomes\u2014derived  from our work on how to effectively implement the Government  Performance and Results Act (GPRA) and the GPRA Modernization Act of 2010. This body of work provides agencies with a framework for  effectively managing program performance to achieve desired outcomes,  including establishing performance measures. In addition, Standards for  Internal Control in the Federal Government states that management  should establish and review performance measures and monitor internal  control systems. Further, we found in previous work that interim  milestones can be used to show progress toward implementing efforts or  to make adjustments when necessary. Developing and using specific  milestones and timelines to guide and gauge progress toward achieving  an agency\u2019s desired results informs management of the rate of progress  toward achieving goals, and whether adjustments need to be made in  order to maintain progress within given timeframes.", "As of July 2017, the executive branch had taken two of three steps to  establish government-wide measures for the quality of investigations.  First, as previously discussed, ODNI and OPM issued Quality  Assessment Standards for background investigations in January 2015 to  establish standard criteria for agencies to consistently evaluate complete  investigations. The standards were developed through an interagency  effort chaired by ODNI, OPM, and DOD. These standards define  complete investigations as those in which all required components were  obtained in full and any known issues\u2014such as criminal activity\u2014were  resolved per the standards. DOD officials highlighted issue resolution\u2014 having enough useful information about the circumstances surrounding a  given issue to make an adjudicative determination\u2014as a persistent  challenge with background investigations for personnel security  clearances, and as key to determining investigation quality.", "Second, ODNI developed the QART, through which agencies will be able  to report on the completeness of investigations, to include whether  adjudicators considered issues identified during an investigation to have  been sufficiently resolved. According to ODNI officials, they began to  implement the QART in October 2016, and full implementation is  expected by the end of calendar year 2017.", "ODNI officials stated that they are collecting sufficient data from the  QART in order to develop measures for the quality of investigations. In  ODNI\u2019s review of a draft of this report, officials stated that it is premature  to set a milestone for completing government-wide performance  measures for the quality of investigations and that ODNI will set such a  milestone when the QART data have been fully analyzed. Specific details  on this topic were omitted because the information is sensitive. Figure 4  provides an overview of the timeline for the executive branch\u2019s three-step  process to develop measures for the quality of investigations.", "Although ODNI has developed the QART, and ODNI and OPM have  issued the Quality Assessment Standards, there are still challenges to  resolve as measures for the quality of investigations are established. For  example, DOD officials stated that they do not intend for all of their  adjudicators to use the QART, and that they have not developed an  interface between their Rapid Assessment of Incomplete Security  Evaluations system and the QART. DOD officials also stated that they  will continue to use their tool until the QART is automated for use in a  new Defense Information System for Security. If DOD investigations\u2014 which represent the majority of the background investigations conducted  by NBIB\u2014are not captured by the QART, it is unclear how ODNI will have  sufficient data to develop government-wide measures for the quality of  investigations. Further, NBIB officials noted that if their largest customer  is not utilizing the QART, they are not positioned to receive  comprehensive feedback.", "In April 2015 we recommended, among other things, that the Director of  National Intelligence, in his capacity as Security Executive Agent,  develop, implement, and report to Congress on government-wide, results- oriented performance measures for security clearance background  investigation quality. ODNI did not state whether it concurred with that  recommendation, and the recommendation has not been implemented.  We continue to believe that measures for the quality of background  investigations are needed to provide decision-makers, including OMB and  Congress, with information on the quality of personnel security clearance  background investigations, and to help ensure the quality of  investigations. Without establishing a milestone for the completion of  government-wide performance measures for the quality of investigations,  their completion may be further delayed, and executive branch agencies  will not have a schedule against which they can track progress or to  which they are accountable."], "subsections": []}, {"section_title": "Agencies Meeting Timeliness Objectives for Initial Clearances Decreased Since Fiscal Year 2012; a Government-wide Approach Has Not Been Developed to Improve Timeliness; and Reporting Has Been Limited The Number of Executive Branch Agencies Meeting Established Timeliness Objectives for Investigations and Adjudications for Initial Secret and Top Secret Clearances Decreased from Fiscal Years 2012 through 2016", "paragraphs": ["Executive branch agencies have experienced challenges in meeting  timeliness objectives for investigation and adjudication of initial personnel  security clearances, and their reporting on timeliness has been limited.  The number of executive branch agencies meeting established timeliness  objectives for both initial secret and initial top secret clearances  decreased from fiscal year 2012 through fiscal year 2016. While ODNI  has taken steps to address timeliness challenges, it has not developed a  government-wide approach to help agencies improve the timeliness of  initial personnel security clearances. In addition, the executive branch\u2019s  reporting on timeliness has been limited, which inhibits both transparency  and oversight of the personnel security clearance process.", "Our analysis of timeliness data for specific executive branch agencies  showed that the percent of agencies meeting established investigation  and adjudication timeliness objectives for initial secret and top secret  personnel security clearances decreased from fiscal year 2012 through  2016. Specifically, in fiscal year 2012, 27 percent of the agencies for  which we obtained data met investigation and adjudication objectives for  at least three of four quarters for initial secret clearances, and 59 percent  met those objectives for initial top secret clearances. By fiscal year 2016,  that decreased to 2 percent and 10 percent, respectively. IRTPA  established an objective for each authorized adjudicative agency to make  a determination on at least 90 percent of all applications for a personnel  security clearance within an average of 60 days after the date of receipt  of the completed application by an authorized investigative agency\u2014not  longer than 40 days to complete the investigative phase, and 20 days to  complete the adjudicative phase. In assessing timeliness under these  objectives, executive branch agencies exclude the slowest 10 percent  and report on the average of the remaining 90 percent (referred to as the  fastest 90 percent). In 2012, ODNI, in coordination with interagency  participation, modified the timeliness goals for certain background  investigations and established new timeliness goals.", "As part of the Insider Threat and Security Clearance Reform cross- agency priority goal, from the second quarter of fiscal year 2014 until the  fourth quarter of fiscal year 2016, the PAC reported quarterly on the  average number of days to initiate, investigate, adjudicate, and complete  the end-to-end process for initial secret and initial top secret cases for the  executive branch as a whole. It reported this information as compared  with the IRTPA-established timeliness objectives for initial secret  clearances and ODNI\u2019s revised timeliness objectives for initial top secret  clearances. For fiscal year 2016, the PAC reported that the government- wide average for executive branch agencies:", "Did not meet the 40-day investigation objective for the fastest 90  percent of initial secret clearances for any quarter. The averages  ranged from 92 days to 135 days.", "Did not meet ODNI\u2019s revised investigation objective for the fastest 90  percent of initial top secret clearances for any quarter. The averages  ranged from 168 days to 208 days.", "With regard to the timeliness of investigations, our analysis of timeliness  data reported by specific executive branch agencies showed that the  percent of agencies that met timeliness objectives decreased from fiscal  year 2012 through 2016. Specifically, our analysis showed:", "While 27 percent of the agencies met the 40-day IRTPA-established  investigation objective for at least three of four quarters for the fastest  90 percent of initial secret cases in fiscal year 2012, only 2 percent  met the objective for at least three of four quarters in fiscal year  2016.", "While 78 percent of the agencies met ODNI\u2019s revised investigation  objective for at least three of four quarters for the fastest 90 percent of  initial top secret cases in fiscal year 2012, only 12 percent met the  objective for at least three of four quarters in fiscal year 2016.", "Across the agencies we reviewed, the average number of days to  complete the investigation phase of the fastest 90 percent of initial top  secret cases for the fourth quarter of fiscal year 2016 ranged from 26  days to 459 days.", "Furthermore, our analysis showed that, for the executive branch agencies  included in our review, the time required to investigate initial personnel  security clearances increased from fiscal year 2012 through fiscal year  2016, often exceeding the investigation phase objective established by  IRTPA. In addition, we found that both agencies with delegated  authority to conduct their own investigations and those that used FIS  (now NBIB) as their investigative service provider experienced challenges  in meeting established investigation timeliness objectives. However, the  only agencies that met investigation timeliness objectives for at least  three of four quarters of fiscal year 2016\u2014for the fastest 90 percent of  initial secret and initial top secret clearances\u2014have delegated authority to  conduct their own investigations.", "The executive branch\u2019s challenges in meeting investigation timeliness  objectives for initial personnel security clearances have contributed to a  significant backlog of background investigations at the primary entity  responsible for background investigations, NBIB. NBIB documentation  shows that its backlog of pending investigations increased from about  190,000 in August 2014 to more than 709,000 investigations, as of  September 2017. NBIB officials stated that more than 70 percent of the  bureau\u2019s pending background investigations had been pending for longer  than the established timeliness objectives, as of June 2017. Additional  details about NBIB\u2019s investigation backlog and actions the bureau is  taking to address it are discussed later in this report.", "With regard to the timeliness of adjudications, our analysis showed:", "While 51 percent of the agencies met the 20-day adjudication  objective for at least three of four quarters for the fastest 90 percent of  initial secret cases in fiscal year 2012, only 35 percent met the  objective for at least three of four quarters in fiscal year 2016.", "While 65 percent of the agencies met the 20-day adjudication  objective for at least three of four quarters for the fastest 90 percent of  initial top secret cases in fiscal year 2012, only 43 percent met the  objective for at least three of four quarters in fiscal year 2016.", "Across the executive branch agencies included in our review, the  average number of days to adjudicate the fastest 90 percent of initial  top secret cases for the fourth quarter of fiscal year 2016 ranged from  3 days to 175 days.", "Table 1 shows the percent of agencies meeting the investigation and  adjudication objectives for the fastest 90 percent of initial secret and initial  top secret cases for at least three of four quarters from fiscal years 2012  through 2016.", "In November 2017, we reported that the percent of executive branch  agencies meeting established timeliness goals for completing periodic  reinvestigations also decreased from fiscal years 2012 through 2016.  Appendix IV provides information on executive branch agency periodic  reinvestigations from fiscal years 2012 through 2016."], "subsections": []}, {"section_title": "ODNI Has Taken Steps to Address Timeliness Challenges but Has Not Developed a Government- wide Approach to Help Improve Timeliness", "paragraphs": ["ODNI has taken steps to address challenges in meeting established  timeliness objectives, such as revising the timeliness objective for top  secret investigations in 2012; however, it has not developed a  government-wide approach to help agencies improve the timeliness of  initial personnel security clearances. ODNI officials stated that several  significant events contributed to agency challenges in meeting timeliness  objectives over the past 5 fiscal years, including a government shutdown,  the 2015 OPM data breach, a loss of OPM contractor support, and OPM\u2019s  review of the security of its IT systems, which resulted in the temporary  suspension of the web-based platform used to complete and submit  background investigation forms. In addition, executive branch agencies  noted the increased investigative requirements stemming from the 2012  Federal Investigative Standards as a further challenge to meeting  established timeliness objectives in the future.", "Standards for Internal Control in the Federal Government states that  management evaluates and, if necessary, revises defined objectives so  that they are consistent with requirements and expectations. In addition,  the standards state that management should use quality information to  achieve the entity\u2019s objectives, including relevant data from internal and  external sources.", "As previously discussed, ODNI, in coordination with interagency  participation, modified the timeliness goals for certain background  investigations and established new timeliness goals. Since then, meeting  timeliness objectives has become even more challenging due, for  example, to updated investigation standards.", "However, since 2012, ODNI has not revisited the investigation or  adjudication timeliness objectives for secret and top secret clearances.  Specifically, ODNI has not conducted an evidence-based review, using  relevant data, to ensure that these objectives are appropriate, given  changes to the investigative requirements and other stated challenges. In  addition, while ODNI and interagency partners modified certain timeliness  goals in 2012, the number of executive branch agencies able to  consistently meet the revised objectives also decreased over the past 5  fiscal years. Without conducting an evidence-based review of the  investigation and adjudication timeliness objectives for both secret and  top secret clearances to ensure that they are appropriate, agencies may  experience further timeliness challenges and delays in determining  eligibility.", "According to ODNI officials, they are aware of each agency that does not  meet timeliness objectives and, in the capacity as Security Executive  Agent, the Director of National Intelligence has taken steps to help these  agencies improve their timeliness. Specifically, ODNI officials stated that  the Director of National Intelligence issues annual agency performance  letters to heads of agencies when security clearance timeliness objectives  are not met. In the letters, the Director of National Intelligence requests  that the agency submit an action plan, within 60 days of the date of the  letter, identifying the factors that prevented the agency from meeting  established timeliness objectives and the actions the agency will take to  remedy those impediments. Officials stated that since the letter comes  directly from the Director, this helps to attract the maximum amount of  attention possible.", "In addition to establishing the current timeliness objectives for initial  security clearances, IRTPA also established a 5-year timeframe and an  interim milestone for the executive branch to implement those objectives.  Specifically, the act required the development of a plan to reduce the  length of the personnel security clearance process, including the IRTPA- established timeliness objectives described above. The plan was to be  developed in consultation with appropriate committees of Congress and  each authorized adjudicative agency, and to take effect 5 years after the  date of enactment. Beginning no later than 2 years after the enactment  of IRTPA and ending on the date the plan took effect, authorized  adjudicative agencies were to make a determination on at least 80  percent of all applications within an average of 120 days after receipt by  an authorized investigative agency\u2014not longer than 90 days to  investigate and 30 days to adjudicate. In November 2005, the executive  branch submitted a plan to improve the timeliness of personnel security  clearance processes government-wide. The Joint Reform Team  submitted its first reform plan to the President on April 30, 2008, which  proposed a new process for determining clearance eligibility.", "Standards for Internal Control in the Federal Government establishes that  management should define objectives clearly to enable the identification  of risks and define risk tolerances. In our prior work on interagency  collaboration, we found that overarching plans can help agencies  overcome differences in missions, cultures, and ways of doing business,  and help agencies better align their activities, processes, and resources  to collaborate effectively to accomplish a commonly defined outcome.  Additionally, to help sustain and enhance collaboration among federal  agencies, we found that agencies that create a means to monitor,  evaluate, and report the results of collaborative efforts can better identify  areas for improvement. Further, we have found in previous work,  including our prior work on personnel security clearances, that interim  milestones can be used to show progress toward implementing efforts or  to make adjustments when necessary. Developing and using specific  milestones to guide and gauge progress toward achieving an agency\u2019s  desired results informs management of the rate of progress toward  achieving goals, and whether adjustments need to be made in order to  maintain progress within given time frames.", "While ODNI requests individual corrective action plans from agencies not  meeting security clearance timeliness objectives, the executive branch  has not developed a government-wide plan, with goals and interim  milestones, to meet established timeliness objectives for initial security  clearances that takes into consideration increased investigative  requirements and other stated challenges. A coordinated approach, in  addition to the ODNI-requested agency-specific plans, could help to  improve timeliness, given that: (1) both agencies that use NBIB as their  investigative service provider and those that have delegated authority to  conduct their own investigations have experienced challenges in meeting  established investigation and adjudication timeliness objectives over the  past 5 fiscal years; and (2) timeliness challenges include government- wide challenges, such as the increased requirements stemming from the  2012 Federal Investigative Standards and past challenges in relation to  OPM contractor support, as discussed above, and not just agency- specific challenges, such as staffing shortfalls. While the individual  agency action plans represent a positive step toward helping to improve  timeliness, agencies across the executive branch continue to experience  timeliness challenges. A government-wide plan would better position  ODNI to identify and address any systemic issues. Without a government- wide plan, including goals and interim milestones, for achieving timeliness  objectives for initial secret and top secret investigations and  adjudications\u2014similar to the plan previously required by IRTPA\u2014there  could be continued delays in determining individuals\u2019 eligibility for access  to classified information. Ultimately, such delays may leave agencies  unable to fill critical positions that require a security clearance."], "subsections": []}, {"section_title": "Current Timeliness Reporting Provides Limited Transparency and Oversight of the Reform Effort", "paragraphs": ["Since 2011, the executive branch\u2019s reporting on the timeliness of  personnel security clearances has provided limited transparency and  oversight of the overall reform effort. Specifically, IRTPA required the  executive branch to submit an annual report, through 2011, to the  appropriate congressional committees on the progress made toward  meeting the act\u2019s requirements, including timeliness data and a  discussion of any impediments to the smooth and timely functioning of its  requirements. With respect to timeliness data, the act required that those  reports include the periods of time required by the authorized  investigative agencies and authorized adjudicative agencies for  conducting investigations, adjudicating cases, and granting clearances,  from date of submission to ultimate disposition and notification to the  subject and the subject\u2019s employer.", "In response to this requirement, the executive branch provided a series of  reports from 2006 through 2011 on the timeliness of executive branch  agencies\u2019 initial investigations and periodic reinvestigations. For example,  ODNI\u2019s IRTPA Title III Annual Report for 2010 specified the average  number of days by quarter it took for selected individual agencies to  initiate, investigate, adjudicate, and complete the end-to-end process for  the fastest 90 percent of security clearances. The report also included  average timeliness data for the executive branch as a whole.", "However, since the IRTPA requirement ended in 2011, executive branch  reporting has been limited. For example, as previously discussed, the  PAC did not begin its quarterly reporting on the timeliness of executive  branch agencies\u2019 personnel security clearances until the second quarter  of fiscal year 2014 through the Insider Threat and Security Clearance  Reform cross-agency priority goal. In addition, while these reports include  the timeliness of both initial investigations and periodic reinvestigations,  they provide the average timeliness of the executive branch as a whole  and not the timeliness of individual executive branch agencies\u2014as was  provided under the prior IRTPA reporting\u2014which makes it difficult to  identify specific agencies that may be experiencing challenges.", "Additionally, the Intelligence Authorization Act for Fiscal Year 2010  requires the President to submit an annual report on security clearance  determinations to Congress. Among other things, the report is to include,  for the preceding fiscal year, the number of federal and contractor  employees who held a security clearance at each level and the number of  employees who were approved for a security clearance at each level, as  well as in-depth security clearance determination timeliness information  for each element of the intelligence community. However, the annual  reports that ODNI provides to the congressional intelligence committees  in response to this requirement include only limited data as compared  with reports that were completed in response to IRTPA. Specifically, the  Intelligence Authorization Act for Fiscal Year 2010 requires information on  the total amount of time for the longest and shortest determinations, and  the age of pending investigations, not average timeliness. The reports are  also limited in that they capture data for only a portion of the intelligence community. Specifically, ODNI\u2019s 2015 Annual Report on Security  Clearance Determinations states that the report includes information for 7  of 15 elements of the intelligence community and that the other 8  elements reported that collecting the information would be a manual,  resource-intensive process that was not viable due primarily to  technology restrictions.", "Standards for Internal Control in the Federal Government states that  management should externally communicate the necessary quality  information to achieve the entity\u2019s objectives through reporting lines so  that external parties can help the entity achieve its objectives and address  related risks. In addition, our high-risk criteria for monitoring and  demonstrated progress call for agencies to report on program progress  and related risks as well as show that issues are being effectively  managed.", "However, since the IRTPA annual reporting requirement ended in 2011,  the executive branch has provided limited reporting on the timeliness of  individual agencies\u2019 initial investigations or periodic reinvestigations for  personnel security clearances. In addition, while the PAC had regularly  reported publicly on timeliness for the executive branch as a whole on a  quarterly basis, it has not provided a public quarterly status update since  the fourth quarter of fiscal year 2016. According to performance.gov, the  website through which the PAC distributes its quarterly updates, the  content\u2014including the PAC\u2019s quarterly updates\u2014is undergoing an  overhaul as agencies develop updated goals and objectives for release in  February 2018 with the President\u2019s next budget submission to  Congress. It is unclear whether the new administration will continue to  designate personnel security clearance reform as a cross-agency priority  goal. PAC Program Management Office officials stated that they continue  to track and report this information internally within the executive branch.  These officials stated that they were uncertain as to whether  performance.gov would remain a vehicle by which they would report on  the status of the reform effort, including executive branch-wide timeliness.  However, the officials also stated that it is important for the information to  be reported in order to maintain transparency and the momentum of the  reform effort.", "Without transparent reporting by the executive branch on investigation  and adjudication timeliness for both initial investigations and periodic  reinvestigations, Congress will not be able to effectively execute its  oversight role and monitor individual executive branch agency progress in  meeting timeliness objectives. In addition, the absence of comprehensive  reporting on personnel security clearance timeliness limits the ability of  congressional decision makers to thoroughly evaluate and precisely  identify where and why delays exist within the process, as well as to  identify corrections as necessary. In addition, should the PAC\u2019s quarterly  progress updates be suspended indefinitely, Congress and the public will  have limited transparency into the status of key reform effort initiatives,  which may delay the timely identification of problems, and ultimately  disrupt the momentum of the reform effort as a whole."], "subsections": []}]}, {"section_title": "NBIB Has Taken Steps to Improve the Background Investigation Process but Faces Operational Challenges in Addressing the Investigation Backlog and Workforce Planning", "paragraphs": ["The transition from FIS to NBIB has involved organizational changes  intended to improve the background investigation process, but the bureau  faces operational challenges in addressing the investigation backlog and  associated workforce planning. NBIB\u2019s organizational changes include  the creation of some new departments, and DOD is now responsible for  designing, developing, and maintaining a new IT system for the bureau,  but must contend with risks posed by vulnerabilities in OPM\u2019s legacy IT  systems, which NBIB still utilizes. As NBIB transitions, it has taken steps  to improve its oversight of background investigations contracts and  measure the completeness of background investigations; however, it  faces operational challenges in developing a plan to reduce the size of  the investigation backlog to a manageable level and in ensuring that its  overall workforce is sized and structured to meet its mission."], "subsections": [{"section_title": "Establishment of NBIB Involved Organizational Changes, the Designation of Oversight Roles, and Transfer of IT Responsibilities to DOD", "paragraphs": ["The transition from FIS to NBIB involved some organizational changes,  such as the creation of new departments designed to enhance  information sharing and contract oversight, among other things. NBIB  also made changes to existing departments, such as enhancing its  counterintelligence division to foster greater collaboration with the  intelligence community. In addition, NBIB is subject to oversight from  multiple entities, such as OPM, ODNI, and the PAC. Further, DOD is now  responsible for designing, developing, and maintaining a new IT system  for NBIB that can provide increased security. However, vulnerabilities in  OPM\u2019s legacy systems pose risks to the security of the new system and  could delay its implementation."], "subsections": [{"section_title": "Transition from FIS to NBIB Involved Changes to Organizational Structure", "paragraphs": ["NBIB was established to replace FIS, and the transition has involved  changes to the organizational structure. In response to the results of 90- day review that were announced in January 2016, in September 2016,  Executive Order 13741 amended Executive Order 13467 to establish the  roles and responsibilities of NBIB within OPM and made the Director of  NBIB a member of the PAC. According to Executive Order 13467, as  amended, NBIB is to serve as the primary executive branch service provider for background investigations for, among other things, eligibility  for access to classified information; eligibility to hold a sensitive position;  suitability or fitness for government employment; and authorization to be  issued a federal credential for logical and physical access to federally  controlled facilities or information systems. Among other things, the  bureau is to also provide effective, efficient, and secure personnel  background investigations for the federal government.", "When announcing the establishment of NBIB, in January 2016, the  administration reported the intention to create a dedicated transition team  headquartered in Washington, D.C., to develop and implement a  transition plan to: (1) stand up the bureau; (2) ensure that the transition  timeline fully aligns with business needs; (3) transition the management of  FIS IT systems to DOD; (4) migrate the existing mission, functions,  personnel, and support structure of FIS to NBIB; and (5) provide  continuity of service to customer agencies during the transition. According  to its charter, the transition team was composed of current OPM  employees, and federal employees detailed or assigned to OPM or DOD  from other executive branch agencies and departments. NBIB officials  noted that employees from across the executive branch with relevant  experience and qualifications were recruited to ensure that stakeholder  agencies\u2019 equities were represented, and that the transition team leader  was recruited from outside of OPM and reported directly to the OPM  Director throughout the transition process.", "OPM reported that NBIB became operational on October 1, 2016, but that  the complete transition will take some time. For example, the transition  plan specifies activities throughout fiscal year 2017 and into fiscal year  2018 to implement the transition from FIS to NBIB. NBIB officials said  they expect that the bureau will have migrated to the new organizational  structure substantially by mid-2018. The transition also involved some  organizational changes intended to streamline certain business  processes or more effectively manage background investigations as the  organization has continued to evolve. NBIB officials stated that the  transition team established the organizational structure by assessing essential FIS functions in coordination with key community  stakeholders\u2014including new and external customers\u2014through the PAC  as well as FIS personnel. The officials said that the transition team then  linked similar functions and interdependencies to establish each of the  offices. Additionally, NBIB officials stated that the 2015 90-day review  helped to determine the organizational structure because it identified a  need for a business process reengineering analysis.", "Through its establishment, NBIB absorbed FIS and assumed its mission.  NBIB\u2019s organizational structure has several changes from the structure of  FIS, to include the establishment of the following four new departments:  1.  Federal Investigative Records Enterprise. The functions of this  department include a new law enforcement and records outreach  group to improve outreach and more effectively collect information  with state and local law enforcement offices.  2.  Policy, Strategy and Business Transformation. The functions of  this department include expanding existing performance reporting to  incorporate metrics regarding effectiveness; and researching and  identifying systemic issues in workload, processes, and products to  determine where process improvement could be achieved.  3.  Contracting and Business Solutions. The functions of this  department include enhancing and consolidating administration of  NBIB contracts to provide consistent oversight.  4.  Information Technology Management Office. The functions of this  department include supporting the delivery and enhancement of  quality IT systems to NBIB in a timely and effective manner, gathering  and communicating needs and requirements for new applications, and  coordinating implementation of changes to current systems.", "In addition to the creation of these new departments, NBIB also made  changes to several other departments from FIS. For example, according  to NBIB documents, the Field Operations department added a \u201cField  Contracts\u201d division that is designed to oversee and monitor the contractor  workforce performing background investigations, to ensure quality and  timely products. This department also enhanced its counterintelligence  division to focus on counterintelligence and insider threat support and to  foster greater collaboration with the intelligence community. Further, NBIB  created a new financial office to oversee budgeting, pricing and funding  models, financial reporting, data accuracy, and internal controls  monitoring. Moreover, NBIB created a new Integrity Assurance,  Compliance, and Inspection division by merging the FIS Integrity  Assurance and Inspection divisions to streamline similar functions and  improve processes and efficiencies.", "Executive Order 13741 provided some guidelines governing the structure  and location of NBIB. Specifically, it required that NBIB be headquartered  in or near Washington, D.C., and that NBIB have dedicated resources,  including but not limited to a senior privacy official. NBIB\u2019s headquarters  is located in Washington, D.C., but according to NBIB officials, as of July  2017, only 48\u2014including both occupied and vacant positions\u2014of NBIB\u2019s  3,260 positions, or about 1.5 percent, were located in Washington, D.C.  In addition, although the position of the senior privacy official has been  established in the NBIB organization chart, according to NBIB officials,  this position had not been filled as of July 2017. NBIB officials explained  that they work closely with OPM\u2019s senior privacy officer, and so they  decided to prioritize filling other leadership positions within NBIB."], "subsections": []}, {"section_title": "NBIB Subject to Oversight from OPM, ODNI, and the PAC", "paragraphs": ["NBIB is subject to oversight from multiple entities, such as OPM, ODNI,  and the PAC. Executive Order 13741 provided that the bureau would be  established within OPM. NBIB officials stated that the bureau is part of  OPM and is governed in a manner consistent with its other operational  components. They also said that although the structure of NBIB is  different from that of FIS, its general relationship with OPM and its  leadership reporting chain are similar. Specifically, comparing the  organizational charts of FIS and NBIB, FIS was led by an Associate  Director who reported to the Director of OPM, while NBIB is led by a  Director who reports to the Director of OPM.", "According to NBIB, the OPM Director has delegated certain authorities to  NBIB; additionally, the OPM Senior Procurement Executive delegated to  NBIB certain administrative and acquisition authorities. NBIB officials said that this makes its structure more flexible. NBIB officials said that where  support is provided from other OPM offices\u2014such as communications,  legislative affairs, legal, procurement, security, facilities, and the office of  the Chief Information Officer\u2014there is continual dialogue between that  office\u2019s leadership and the staff directly supporting the bureau. The  officials also noted a variety of regular meetings, such as a weekly  meeting between the Acting Director of OPM and the NBIB Director and  Chief of Staff, attendance at daily OPM senior staff meetings, and  briefings every other month with the OPM Inspector General, among  others.", "In addition, as previously discussed, as the Security Executive Agent, the  Director of National Intelligence is responsible for various matters related  to security clearance investigation oversight, programs, policies, and  processes. Executive Order 13467, as amended by Executive Orders  13741 and 13764, provides that NBIB, through the Director of OPM, is  subject to the oversight of the Security Executive Agent with respect to  the conduct of investigations for eligibility for access to classified  information or to hold a sensitive position. Similarly, Executive Order  13467, as amended, provides that NBIB is responsible for conducting  background investigations in accordance with policies, procedures,  standards, and requirements established by the Security Executive Agent  and Suitability Executive Agent. In February 2017, the Acting Director  of OPM testified that the bureau has been working closely with ODNI to  identify policy and process changes to address the investigation  backlog. NBIB officials stated that the bureau and ODNI are active  partners, and that the bureau participates in many of ODNI\u2019s working  groups in the development of policies or processes related to personnel  security clearances. In addition, the officials said that the bureau reports  timeliness, quality, and performance metrics to ODNI on no less than a quarterly basis, and that its personnel collaborate with ODNI on reviews  of processes, such as those related to social media, continuous  evaluation, insider threat, and counterintelligence. ODNI officials told us  that in its oversight role of NBIB, ODNI collects quarterly timeliness data  and requests that agencies using NBIB as their investigative service  provider enter the investigations into the QART to assess the quality of  the investigations.", "Further, Executive Order 13467, as amended by Executive Order 13741,  describes an oversight relationship between the PAC and NBIB. It  requires the PAC to hold NBIB accountable for the fulfillment of the  bureau\u2019s responsibilities set out in the Executive Order. It further provides  that NBIB is to provide the PAC with information, to the extent permitted  by law, on matters of performance, timeliness, capacity, IT modernization,  continuous performance improvement, and other relevant aspects of  NBIB operations. PAC Program Management Office officials told us  that they worked with NBIB during the transition from FIS and answered a  lot of questions, and have helped to fill in staffing and organization holes  that were identified by the transition team."], "subsections": []}, {"section_title": "DOD Is Building and Managing a New Security Clearance IT System for NBIB, but Security Concerns May Delay Planned Milestones for the New System", "paragraphs": ["Executive Order 13467, as amended, assigns the Secretary of Defense  the role of developing and securely operating IT systems that support all  background investigation processes conducted by NBIB. According to  officials from the Office of the DOD Chief Information Officer (CIO), NBIS  will be built to NBIB specifications, and OPM will remain the owner of the  data and processes. In testimony before the House Oversight and  Government Reform Committee in February 2017, the DOD CIO  estimated that NBIS would have several \u201cprototype\u201d capabilities by the  end of fiscal year 2017, and an initial capability covering the full  investigative process sometime in the fourth quarter of 2018. According  to DOD officials, full capability for NBIS is scheduled for some time in  2019. However, a NBIB official noted the existence of challenges regarding the IT infrastructure and stated that it is more realistic for NBIS  to be fully operational in 2020.", "According to DOD CIO officials, unexpected complications have arisen  since beginning development of NBIS. Specifically, these officials stated  that they have discovered that NBIS may require many more inter- connections to OPM legacy systems than originally planned. According to  these officials, NBIB will continue to rely on OPM legacy systems for  investigations of any complexity until NBIS becomes fully operational.", "Further, according to DOD CIO officials, when the executive branch  begins to use NBIS, complex background investigations would begin in  NBIS\u2019s electronic application, but would then need to pass through or  draw data from multiple OPM legacy systems before returning to NBIS for  adjudication. According to DOD CIO officials, since OPM has 43 back- office functions fed by various systems that are often inter-related, a  simple one-to-one system swap of NBIS for an OPM legacy system is not  feasible. DOD CIO officials stated that the project management team  building NBIS is currently working to fully understand how OPM\u2019s various  back-office functions are tied together, and also evaluating the cyber- security risks inherent in connecting to OPM\u2019s legacy systems. DOD CIO  officials explained that this connection, as well as logistical challenges  associated with data migration from the legacy systems to NBIS, raises  concerns about risks to NBIS. Until these risks are properly evaluated,  any connection to the legacy systems could present vulnerabilities,  according to DOD CIO officials. OPM officials disagreed, stating that  OPM and DOD already have IT connection points with the OPM legacy  systems, and that the security of OPM\u2019s systems and data continues to  be an OPM priority.", "Securing the legacy systems will be a joint effort by DOD and OPM,  according to an October 2016 Memorandum of Agreement between the  two agencies regarding the roles, responsibilities, and expectations of  each party throughout the entire lifecycle of OPM\u2019s use of DOD\u2019s IT  systems in support of the background investigation process. Under the  agreement, OPM will retain ownership and responsibility for the operation  and performance of all system authorization activities for OPM legacy  systems throughout their lifecycle. The agreement provides that OPM will  maintain security documentation and information and interconnection  exchange agreements, own control selection and security role  assignment processes, and perform risk executive functions. The  memorandum further states that the security of the legacy OPM IT  environment will be a joint effort between OPM and DOD, with DOD  assisting in a comprehensive security assessment of all OPM legacy IT  systems and related infrastructure on a reimbursable basis. According to  DOD CIO and NBIB officials, there is close coordination on a technical  level between the two agencies on securing the OPM legacy systems  used by NBIB. The officials said that weekly coordination meetings are  held between the two agencies, and that DOD has embedded staff at  OPM who are under the direct supervision of the OPM CIO.", "Both GAO and the OPM Inspector General have raised concerns on  multiple occasions about various aspects of IT security at OPM, including  OPM legacy systems used by NBIB. For example, in August 2017, we  reported on OPM\u2019s progress in implementing 19 recommendations made  by the United States Computer Emergency Readiness Team to bolster its  information security practices and controls in the wake of the 2015  breaches. We found that, as of May 2017, OPM had fully implemented  11 of the recommendations. For the remaining 8 recommendations,  actions for 4 were still in progress, and for the other 4, OPM indicated it  had completed actions to address them, but we noted further  improvements were needed.", "We further reported that since the 2015 data breaches, which included a  compromise of OPM\u2019s systems and files related to background  investigations for 21.5 million individuals, OPM has made progress in  improving its security to prevent, mitigate, and respond to data breaches  involving sensitive personal records and background investigations  information. However, we also found that OPM did not effectively  monitor actions taken to remediate identified weaknesses. OMB requires  agencies to create a Plan of Action and Milestones to track efforts to  remediate identified weaknesses, such as those leading to the 19  recommendations made by the United States Computer Emergency  Readiness Team. In addition, OPM\u2019s policy requires that scheduled  completion dates be included in the plan. The policy also requires a  system\u2019s Information System Security Officer to develop a weakness  closure package containing evidence of how an open Plan of Action and  Milestones has been remediated before the issue, or recommendation in  this case, can be closed. Although OPM has a Plan of Action and  Milestones to address the 19 recommendations, we found that it had not  validated actions taken in a timely manner or updated completion dates in  the plan. Because the United States Computer Emergency Readiness  Team recommendations are intended to improve the agency\u2019s security  posture, we recommended that more timely validation of the effectiveness  of the actions taken is warranted. Until closure packages are created and  the evidence of such actions is validated, OPM has limited assurance that  the actions taken have effectively mitigated vulnerabilities that can  expose its systems to cybersecurity incidents.", "Additionally, in May 2016 we reported on the implementation of OPM\u2019s  information security program and the security of selected high-impact  systems. We found that OPM, one of four agencies reviewed, had  implemented numerous controls to protect selected systems, but that  access controls had not always been implemented effectively. We  reported that weaknesses also existed in patching known software  vulnerabilities and planning for contingencies, and that an underlying  reason for these weaknesses was that OPM had not fully implemented  key elements of its information security program. We recommended that  OPM fully implement key elements of its program, including addressing  shortcomings related to its security plans, training, and system testing.  According to OPM officials, the agency is taking actions to address these  recommendations. In August 2016, we issued a restricted version of our  May 2016 report that identified vulnerabilities specific to each of the two  systems we reviewed and made recommendations to resolve access  control weaknesses in those systems. In December 2016, OPM indicated its concurrence with the recommendations and provided  timeframes for implementing them. OPM officials expressed concern that  the information from our 2016 reports was now dated, stating that it no  longer reflects the current security posture at OPM, and said that they  had taken actions to address these recommendations. However, all of the  recommendations directed to OPM from the two reports remained open  as of November 2017. We had not received any documentation regarding  these actions as of November 2017 and thus could not validate the extent  that any of these recommendations have been addressed.", "OPM\u2019s Office of the Inspector General has also raised related concerns,  most recently in its October 2017 report on OPM\u2019s security program and  practices. Overall, the OPM Inspector General found that OPM\u2019s  cybersecurity maturity level was measured at a level 2, \u201cDefined\u201d,  meaning that its policies, procedures and strategy were formalized and  documented but were not consistently implemented. According to the  report, OPM has made improvements in its security assessment and  authorization program, and its previous material weakness related to  authorizations is now considered a significant deficiency for fiscal year  2017. The report noted that there are still widespread issues related to  system authorizations, primarily related to documentation inconsistencies  and incomplete or inadequate testing of the systems\u2019 security controls. In  addition, the report identified a significant deficiency in OPM\u2019s information  security management structure, and found that OPM was not making  substantial progress in implementing prior Inspector General  recommendations. The report noted that OPM had only closed 34 percent  of its findings issued in the past 2 years.", "In addition to these IT security concerns, funding uncertainties have also  complicated the development of NBIS. The President\u2019s fiscal year 2017  budget included $95 million for the development of the system; however,  according to DOD CIO officials, of the $95 million that was appropriated,  DOD had provided only $31 million for NBIS as of June 2017.  According to DOD CIO officials, the fiscal year 2017 continuing resolution  had complicated decisions about the funding and disbursement schedule  with consequences for planning and the apportioning of resources. A draft  funding profile covering fiscal years 2017-2023 estimates funding needs  of $175.7 million for research, development, test and evaluation, and  $709.4 million for operation and maintenance, over this 7-year period, for  a total of $885.2 million."], "subsections": []}]}, {"section_title": "NBIB Has Taken Steps to Improve Operations but Faces Workforce Challenges", "paragraphs": ["As NBIB transitions, it has taken steps to improve its operations but  continues to face workforce challenges that may hinder its ability to  address the backlog of investigation cases and strengthen the  background investigation process. The bureau has taken positive steps to  improve its oversight of background investigation contracts, including  changing contract oversight processes and measuring the completeness  of background investigations. However, it faces operational challenges in  developing a plan to reduce the size of the investigation backlog and in  ensuring that its overall workforce is sized and structured to address it."], "subsections": [{"section_title": "OPM Has Taken Steps to Improve Oversight of Background Investigation Contracts", "paragraphs": ["Contractors are responsible for about 60 percent of NBIB\u2019s background  investigation fieldwork, according to NBIB officials. Since 2014, OPM has  taken steps to improve its oversight of contracts. NBIB officials stated that  changes were made in response to OPM Inspector General  recommendations, and that some others were made in response to  lessons learned after issues that led to the loss of OPM\u2019s largest fieldwork  contractor in 2014. These changes included (1) having federal employees  review all background investigation reports, (2) increasing the number of  individuals responsible for monitoring contractors\u2019 compliance with  contractually established requirements, and (3) establishing a contracting  activity within NBIB.", "Since February 2014, federal employees have reviewed 100 percent of  background investigation reports produced by contractors. In contrast,  prior to February 2014, federal employees at FIS or a support contractor  would review a subset of all of the investigations before releasing them to  the respective customer agencies for adjudication. As currently  structured, NBIB officials stated that there are now about 350 federal  employees within NBIB\u2019s Quality Oversight department who conduct  these reviews for both contractor- and federal investigator-conducted  cases to determine whether an investigation meets investigative  standards for completeness before being released to the customer  agency for adjudication.", "Using an internal database, OPM reviewers identify what, if any, elements  of the investigative reports are incomplete and do not meet standards,  and they return cases to the investigators for rework as necessary. When  OPM reviewers determine that a case meets investigative standards, they  close the case and submit it to an adjudicator. Contractors are evaluated  for quality performance based on the number of times a case is returned  by OPM reviewers for rework as a percentage of the total number of  cases completed. According to NBIB data from its internal quality  database, the percentage of cases conducted by contractors requiring  rework decreased between the last quarters of fiscal years 2014 and  2016 from about 6 percent to 3.2 percent.", "According to NBIB officials, in 2014, OPM established an independent  inspections branch to help the agency\u2019s contracting officer\u2019s  representatives (CORs) oversee the background investigation fieldwork  contracts. CORs, who are designated in writing by contracting officers,  assist in the technical monitoring or administration of a contract. Under  NBIB\u2019s current background investigation fieldwork contracts, the COR  provides technical direction and control during contractor performance,  monitors contract progress, and determines for payment approval  purposes whether performance is acceptable with respect to content,  quality of services and materials, cost, and timeliness. NBIB officials  stated that prior to the establishment of the inspections branch, the CORs  were responsible for monitoring all aspects of contract compliance as well  as a range of administrative duties, such as tracking performance data, IT  support, and billing. Under the current NBIB structure, 16 inspectors in  the Integrity Assurance, Compliance and Inspections division focus on  contract oversight, according to NBIB officials. In addition to the  inspectors, the officials said that there are 17 CORs\u2014one in the Integrity  Assurance, Compliance and Inspections division and 16 in the Field  Operations department.", "Additionally, according to NBIB officials, FIS, NBIB\u2019s predecessor, did not  have its own contracting division, and instead relied on OPM\u2019s centralized  Office of Procurement Operations for contracting support. NBIB\u2019s new  organizational structure includes a Contracting and Business Solutions  department. According to NBIB officials, they filled the new Head of  Contracting Activity position in January 2017. NBIB officials stated that  OPM established this new position and department in an effort to  strengthen the bureau\u2019s contracting function by creating dedicated  positions more narrowly focused on overseeing the contracting function  for background investigations and support services."], "subsections": []}, {"section_title": "NBIB Has Taken Steps to Measure Completeness of Background Investigations", "paragraphs": ["NBIB has developed quality assurance processes and tools to measure  the completeness of its investigations. Specifically, NBIB has developed  an internal quality database through which federal case reviewers can  determine the completeness of investigations, in accordance with  investigative standards, that are being produced by both its federal and  contract investigators, and can rate cases as either \u201cmeets standards\u201d or  \u201cbelow standards.\u201d Cases that are marked as \u201cbelow standards\u201d are  returned to the contractor for rework prior to being finalized and sent to  the customer for adjudication. NBIB then monitors, through its Key  Performance Indicators, the percentage of investigations that are returned  by customer agencies and that NBIB agrees require additional work. Our  prior work found that relying on agencies to provide information on  investigation quality, by itself, may not provide an accurate reflection of  the quality of background investigations. We have reported in the past  that officials from several agencies have stated that to avoid further costs  or delays, agencies often choose to perform additional steps internally to  obtain missing information, clarify or explain issues identified in  investigative reports, or gather evidence for issue resolution or  mitigation. As recently as July 2017, DOD officials stated that issue  resolution was still a concern for them. However, NBIB officials stated that  they conduct background investigations in accordance with the Federal  Investigative Standards, and that while adjudicators may want more or  different details, these are considered outside the scope of background  investigations, but can be provided on a case-by-case basis."], "subsections": []}, {"section_title": "NBIB Leadership Has Not Developed a Plan to Reduce the Investigation Backlog", "paragraphs": ["NBIB leadership has not developed a plan to reduce the size of the  investigation backlog to a manageable level. NBIB\u2019s Key Performance  Indicators report states that a \u201chealthy\u201d inventory of work, representing  approximately 6 weeks of work and allowing NBIB to meet timeliness  objectives, is around 180,000 pending investigations. According to NBIB,  the backlog of pending investigations increased from about 190,000 in  August 2014, before OPM decided not to exercise subsequent option  periods for its largest investigative fieldwork contract at the time, to more  than 709,000 investigations as of September 2017, as shown in figure  5. NBIB estimated the backlog grew at an average rate of about 3,600  investigations each week from October 2016 through July 2017.", "As we reported when placing DOD\u2019s personnel security clearance  program on the high-risk list, problems related to backlogs and the  resulting delays in determining clearance eligibility and issuing initial  clearances can result in millions of dollars of additional costs to the  federal government, longer periods of time needed to complete national  security-related contracts, lost opportunity costs if prospective employees  decide to work elsewhere rather than wait to get a clearance, and  diminishing quality of the work because industrial contractors may be  performing government contracts with personnel who have the necessary  security clearances but are not the most experienced and best-qualified  personnel for the positions involved. Delays in renewing previously- issued clearances can lead to heightened risk of national security  breaches because the longer individuals hold a clearance, the more likely  they are to be working with critical information and systems.", "As the backlog has grown, NBIB has taken steps to increase its capacity  to conduct background investigations by increasing its own investigator  staff as well as awarding new contracts, effective in December 2016, to  four contractors for investigation fieldwork services. NBIB officials said  that NBIB has a goal to increase its total number of investigators\u2014federal  employees and contractors\u2014to about 7,200 by the end of fiscal year  2017. Specifically, to help address the backlog, NBIB officials reported  that NBIB increased its authorized federal investigator workforce by  adding 400 federal investigator positions in fiscal year 2016 and 200  positions in fiscal year 2017\u2014an increase from 1,375 to 1,975 authorized  positions. As of July 2017, NBIB had filled 1,620 of the 1,975 positions,  and 1,513 of its federal investigators were fully trained. NBIB officials  explained that they do not plan to increase the federal investigator  capacity beyond the currently approved 1,975 because they do not have  the ability to absorb more staff. According to the officials, new  investigators must be trained by experienced investigators which reduces  the amount of time the experienced investigators have to conduct  investigative work. When estimating federal investigator capacity, NBIB  assumes it will have 277 full-time equivalent vacancies at any given time  due to high attrition rates. Further, NBIB officials could not project the  federal investigator workforce past April 2018 due to high attrition rates.", "Given challenges with increasing its federal investigative staff, NBIB  continues to rely on contractors to conduct the majority of investigations.  NBIB officials noted that contractors perform about 60 percent of NBIB\u2019s  total investigative cases. OPM awarded four new investigative fieldwork  services contracts that became effective in December 2016\u2014two to  incumbent contractors and two to new vendors. In July 2017, OPM  officials told us that the contractor and federal staff capacity they currently  possess enables them to complete a sufficient number of investigations to  prevent the number of pending investigations from increasing further.  However, they acknowledged that the four contracts and federal  investigator staff do not currently provide OPM enough capacity to reduce  the pending number of investigations to the \u201chealthy\u201d inventory level of  180,000 cases.", "NBIB officials have conducted analyses to determine how changes in the  total number of investigators could affect the backlog over time,  accounting for current and projected investigator capacity, prior time  studies, historical data, geographic location, and other factors.  Specifically, NBIB officials assessed four scenarios, from the status quo\u2014 assuming no additional contractor or federal investigator hires\u2014to an  aggressive contractor staffing plan beyond January 2018, but in July 2017  they determined that the aggressive plan was not feasible. The two  scenarios that NBIB identified as most feasible would not result in a  \u201chealthy\u201d inventory level until fiscal year 2022 at the earliest. For example,  under one scenario, each contractor would increase investigator capacity  under current staffing projections through early 2018. Assuming that the  contractors adhere to these projections, NBIB would have the capacity to  address incoming cases and begin to reduce the backlog, but the backlog  would not reach a \u201chealthy\u201d inventory level until sometime after fiscal year  2022. However, NBIB leadership has not determined whether the costs  and benefits of any one scenario are preferable to the costs and benefits  of the others.", "Standards for Internal Control in the Federal Government establishes that  management should clearly define objectives to enable the identification  of risks and define risk tolerances. In addition, our high-risk criteria for  capacity call for agencies to ensure they have the capacity, in terms of  people and resources, to address and resolve risks. We have also  found in previous work that milestones can be used to show progress  toward implementing efforts, or to make adjustments when necessary.  Developing and using specific milestones to guide and gauge progress  toward achieving an agency\u2019s desired results informs management of the  rate of progress toward achieving goals or whether adjustments need to  be made in order to maintain progress within given timeframes. However,  NBIB leadership has not established goals or milestones for reducing the  size of the investigation backlog, or goals for increasing total investigator  capacity\u2014for both federal employees and contractor personnel. As a  result, the value of NBIB\u2019s backlog analysis is limited, because it is not  part of a broader plan to address the backlog and achieve timeliness  objectives. Further, the extent to which NBIB should adjust its investigator  capacity in the future remains unclear, as the currently projected capacity  levels are not tied to any established goals or milestones to address the  backlog or achieve the timeliness objectives.", "In addition to increasing investigative capacity, NBIB personnel are  attempting to decrease the backlog by making the background  investigation process more effective and efficient. To do so, NBIB  conducted a business process reengineering effort that was intended to  identify challenges in the process and their root causes. This effort  identified 57 challenges, which were divided into five main categories that  affected multiple phases of the background investigation process. NBIB  then developed five portfolios, with 21 initiatives, to address the identified  challenges. For example, one of the categories of challenges was poor  data quality at the start of the investigation, which was described as  related to issues such as no auto-validation of information, no pre- population of forms, and variable quality of submissions. NBIB developed  four initiatives related to automation and digitization to improve the quality  of this information. NBIB officials said that this business process  reengineering effort is working to reduce the investigative level of effort  across the community. Specifically, NBIB officials cited efforts that have  been implemented to reduce the number of personnel hours necessary to  complete an investigation, such as centralizing interviews and using  video-teleconferencing for overseas investigations (to decrease travel  time), automated record checks, and focused writing (to make reports  more succinct and less time-consuming to prepare). However, NBIB has  not identified how the implementation of the business process  reengineering effort will affect the backlog or the need for additional  investigators in the future.", "Without a plan, including goals and milestones, for reducing the backlog,  which includes a determination of the effect of the business process  reengineering efforts on the backlog, NBIB will lack the information and a  course of action needed to effectively manage the inventory of pending  investigations it conducts on behalf of other executive branch agencies.  Further, without establishing goals for increasing total investigator  capacity\u2014for both federal employees and contractor personnel\u2014in  accordance with the plan for reducing the backlog, NBIB may not be  positioned to achieve the goals and milestones outlined in that plan.  Ultimately, if NBIB is unable to reduce the backlog, executive branch  agencies will continue to lack the cleared personnel needed to help  execute their respective missions, which could decrease the agencies\u2019  overall effectiveness and efficiency, and pose risks to national security."], "subsections": []}, {"section_title": "NBIB Has Identified Some Workforce Needs but Does Not Have a Strategic Workforce Plan", "paragraphs": ["Our review of NBIB planning and workforce documents indicates that it  has taken workforce planning steps. For example, the bureau developed  a transition plan to help guide the transition from FIS to NBIB. This plan  includes a request for a personnel study for its new Contracting and  Business Solutions department to determine any needs or realignment of  resources, skills, or qualification gaps; however, the transition plan does  not mention a personnel study to address the needs of any other  departments within NBIB. NBIB officials stated that the bureau conducted  this study in early fiscal year 2017, and those results are being used to  build the Contracting and Business Solutions department. NBIB officials  said that NBIB plans to conduct a personnel study for its other  departments once there is greater clarity and direction regarding the  conduct of background investigations as a result of the plan developed by  DOD to conduct its own investigations and any subsequent direction from  Congress and the Administration. The officials stated that the personnel  study was needed for the contracting department because this work had  not been done in NBIB before and so they needed to establish a baseline  for staffing it.", "As previously discussed, section 951 of the National Defense  Authorization Act for Fiscal Year 2017 required, among other things, the  Secretary of Defense to develop an implementation plan for the Defense  Security Service to conduct background investigations for certain DOD  personnel\u2014presently conducted by OPM\u2014after October 1, 2017.   Additionally, in November 2017, as this report was in its final stages,  Congress passed a bill for the National Defense Authorization Act for  Fiscal Year 2018, which includes a provision that, among other things,  would authorize DOD to conduct its own background investigations.  It  would also require DOD to begin carrying out the implementation plan  developed in response to section 951 by October 1, 2020. The  legislation would further require the Secretary of Defense, in consultation  with the Director of OPM, to provide for a phased transition of the conduct  of investigations from NBIB to the Defense Security Service. Moreover,  this legislation would require the Secretary of Defense to conduct a  comprehensive assessment of workforce requirements for both DOD and  NBIB as part of planning for the transfer of certain functions from OPM to  DOD.", "In addition, the NBIB transition team developed a talent acquisition  strategy for the establishment of the bureau; however, this strategy was  focused solely on filling nine key leadership positions (according to NBIB  officials, four positions are senior executive service positions, and five are  general schedule grade 14 and 15 positions). As of July 2017, NBIB  officials said that six of these positions had been filled, and that another  position was in the process of being staffed. The only mention of other  positions in this strategy was a statement that once these key leadership  positions have been filled, executives should build their respective  departments consistent with mission needs and aligned with the NBIB  strategic plan, and that NBIB use current FIS leadership for field  operations, engagements and customer service, and integrity assurance.  According to NBIB officials, NBIB has 3,260 positions authorized by OPM  but had 495 vacancies as of July 1, 2017\u2014approximately a 15 percent  vacancy rate. NBIB officials said that most positions were not affected by  the recent executive-branch hiring freeze, including investigators and  investigative assistants, because they qualified for national security  waivers; however, some positions, such as administrative support, were  not covered by the waivers.", "The greatest total number of vacancies within NBIB is in its field  operations department, which as of July 2017 had almost 400 vacancies,  or a vacancy rate of about 17 percent. The Field Operations department  provides contractor oversight, including program and project managers  for fieldwork and CORs; it also includes federal investigator staff. NBIB  officials stated that their greatest challenge in filling vacancies has been  with their investigative workforce, and that as they fill their investigator  positions, they will be able to better perform their mission of delivering  completed background investigations in a timely manner due to having  greater capacity. NBIB officials told us that they plan to hire another 200  federal investigators in fiscal year 2017 to help address the backlog of  investigations; however, hiring 200 new federal investigator positions was  not listed as a step on the transition plan for the Field Operations  department, and these new investigator positions also are not included in  the planned new hires listing of personnel hiring priorities. NBIB officials  said that these new investigator positions were not included in the  transition plan because the decision to hire for these positions had  already been made and the hiring was being executed when the transition  plan was developed.", "Furthermore, NBIB has developed detailed plans to hire new personnel.  NBIB\u2019s listing of personnel hiring priorities showed that NBIB initially  planned to hire 155 new personnel. NBIB officials explained that in  developing this initial hiring plan, organizational leaders assessed OPM  legacy resources that would align with NBIB\u2019s mission, roles and  responsibilities, and identified gaps. These officials stated that at a  leadership offsite held in December 2016, small groups identified existing  and notional resources, prioritized resource gaps for identified programs,  and briefed out their assessment of priorities. These officials said that the  offsite participants then selected the top priorities for fiscal years 2017  and 2018, and that NBIB leadership subsequently developed  individualized proposals outlining revisions and changes to personnel  requirements and organization of each of the program areas. NBIB  officials said that they subsequently refined these plans and reduced the  number of planned new hires. The officials stated that in 2017, NBIB  established a transitional hiring committee to further prioritize and select  the final NBIB personnel structure, and that through a series of meetings  in March, May, and June 2017, they refined their plans to reduce the  number of planned new positions. As of July 2017, they said that NBIB  planned to create and fill 49 new positions. According to NBIB officials, 13  of the new positions would involve an increase to the budget. Of those  49 new positions, they said that 21 had been filled as of July 2017.", "In addition, NBIB uses contractor support to fill some positions in its Field  Operations, Federal Investigative Records Enterprise, and customer  service departments, but NBIB officials did not provide documentation  explaining the determinations for which tasks should be performed by  contractors versus federal employees. NBIB officials stated that they  followed a deliberative process requiring a thoughtful assessment of the  personnel resource skills and competencies required to address the new  NBIB objectives, but they could not provide any supporting  documentation to that effect.", "A key principle of strategic workforce planning is determining the critical  skills and competencies needed to achieve current and future  programmatic results, such as identifying how the agency will obtain the  workforce skills and competencies that are critical to achieving its  strategic goals. In addition, OPM\u2019s workforce planning best practices  include forecasting the optimal headcount and competencies needed to  meet the needs of the organization in the future, and a gap analysis to  identify headcount surpluses and deficiencies for current and future  demand levels. Further, OMB policy requires agencies to take actions  to ensure they have sufficient internal capability to maintain control over  functions that are core to the agency\u2019s mission and operations.", "However, NBIB officials were unable to provide us with documentation  that identified any of the gaps or explained the rationale for its  determinations about the specific number and positions of additional staff  needed. The documents they did provide appeared to be summaries of  the revisions and changes decided upon, and included detailed  information about the identified staffing requirements, such as information  about the number of positions, position titles and types, grade levels, and  hiring priority. While this information reflects detailed planning and  thought, it does not illuminate whether the quantities and types of  positions identified are the appropriate positions with the right critical skills  and competencies needed to address any gaps in the bureau\u2019s  workforce. NBIB officials said that the hiring plans were originally  determined at the leadership offsite, where the rationale for the specific  number and positions of additional staff was discussed orally, and then  further refined at a series of meetings beginning in March 2017. The  officials told us that extensive review went into determining the rationale  for the requests for new staff, and that these requests were the subject of  robust and sometimes contentious debate, after which the requests were  voted on by senior leadership.", "Although NBIB has taken some steps to develop and implement certain  strategic workforce planning elements, it has not created a  comprehensive, formal workforce plan that is focused on workforce needs  to reduce the backlog. Such a plan should include the workforce skills  and competencies that are critical to achieving NBIB\u2019s strategic goals. As  we previously reported, the most important consideration in identifying  needed skills and competencies is that they are clearly linked to the  agency\u2019s mission and long-term goals developed jointly with key  congressional and other stakeholders during the strategic planning  process. If an agency identifies staff needs without linking the needs to  strategic goals, or if the agency has not obtained agreement from key  stakeholders on the goals, the needs assessment may be incomplete and  premature. In addition, a strategic workforce plan could enable NBIB to  (1) develop hiring, training, staff development, succession planning,  performance management, use of flexibilities, and other human capital  strategies and tools that could be implemented with the resources that  can be reasonably expected to be available; and (2) eliminate gaps and  improve the contribution of critical skills and competencies that they have  identified between the future and current skills and competencies needed  for mission success. NBIB officials explained that a strategic workforce  plan is something they should create, but that as a new organization the  bureau was focused on other priorities, such as hiring a director, selecting  the headquarters location, addressing the backlog, and filling vacant  positions. However, after being operational for almost a year, NBIB still  lacks a comprehensive workforce plan.", "While it has taken several other steps intended to strengthen the  background investigation process, without a formal strategic workforce  plan, NBIB does not know whether the identified needs in its new hires,  transition plan, and overall workforce vacancies will provide the  appropriate mix of personnel. Specifically, it does not know whether it has  the appropriate mix of federal employees and contractors, with the right  critical skills and competencies, to address any staffing gaps and better  enable the bureau to fulfill its mission. A comprehensive strategic  workforce plan that focuses on the workforce and organizational elements  needed and addresses capacity issues related to its vacancies would  better position NBIB to address its investigation backlog. Additionally, a  comprehensive strategic workforce plan would better position the bureau  to execute its roles and responsibilities related to overseeing the  background investigations for DOD and other executive branch agencies  that rely on NBIB as their investigative service provider."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The PAC has made progress in reforming the personnel security  clearance process. However, 13 years after the passage of IRTPA, it is  now at a crossroads. The backlog of background investigations totaled  over 700,000 cases as of September 2017 and while the executive  branch is taking actions to help address it, there are no indications that  the government can readily do so.", "We have noted in prior work concerns about the quality of background  investigations and have emphasized the need to build quality throughout  the personnel security clearance process for nearly two decades. Even  though it has made significant attempts, the executive branch has still not  established government-wide performance measures for the quality of  background investigations to help ensure that critical security-relevant  information is identified and mitigated when granting a security clearance.  Over the past 2 years, the executive branch has taken steps toward  establishing such measures. However, ODNI, as the Security Executive  Agent, and the PAC have not prioritized setting a milestone for their  completion. Without a milestone for establishing government-wide  performance measures for the quality of investigations, their completion  may be further delayed, and executive branch agencies will not have a  schedule against which they can track progress or to which they are  accountable.", "Executive branch timeliness in completing initial secret and initial top  secret clearances has declined over the past 5 years. While ODNI has  taken some steps to correct this downward trend on an agency-by- agency basis, neither ODNI nor the PAC have led a government-wide  approach to improve the timeliness of initial personnel security  clearances. While ODNI requests that agencies submit corrective action  plans when they are not meeting timeliness objectives, it has not  developed a comprehensive, government-wide plan with goals and  milestones. A government-wide plan would help position ODNI, as the  Security Executive Agent, as well as the PAC, to better identify and  address systemic issues across the executive branch that affect the  ability of agencies to meet timeliness objectives.", "IRTPA also created greater transparency and oversight of the overall  reform effort by mandating annual reports to the appropriate  congressional committees on the progress made toward meeting the act\u2019s  requirements, including reporting timeliness data. However, since the  IRTPA reporting requirement ended in 2011, executive branch reporting  has been limited, which makes it difficult to thoroughly evaluate and  precisely identify where and why delays exist within the process, as well  as to direct corrections as necessary. Without transparent reporting on  investigation and adjudication timeliness, for both initial investigations and  periodic reinvestigations, Congress will not be able to effectively execute  its oversight role and monitor individual executive branch agency  progress in meeting timeliness objectives.", "The establishment of NBIB in 2016, to strengthen the background  investigation process, involved a number of organizational changes and  efforts to improve the process. While NBIB has taken steps to increase its  investigative capacity, it faces challenges in developing a comprehensive  plan, with goals and milestones, to address the investigation backlog.  Without such a plan, NBIB lacks a necessary course of action to reduce  the backlog to a manageable level. Relatedly, NBIB has not established  goals for increasing total investigator capacity. Establishing such goals, in  accordance with the plan for reducing the backlog, may better position  NBIB to achieve the goals and milestones outlined in that plan. Ultimately,  if NBIB is unable to reduce the investigation backlog, executive branch  agencies will continue to lack the cleared personnel needed to help  execute their respective missions, which poses potential risks to national  security. Demonstrated leadership from ODNI, in the capacity as the  Security Executive Agent, and the PAC, by assisting NBIB as it works to  reduce the investigation backlog could better position NBIB to reach a  manageable level of investigations.", "Additionally, NBIB faces operational challenges related to workforce  planning. While the bureau has taken a number of workforce planning  steps, such as identifying specific hiring needs, it has not developed a  strategic workforce plan. As a result, it may not know whether it has  planned for the appropriate mix of personnel, with the right critical skills  and competencies, and it has experienced delays in addressing its hiring  needs. A comprehensive strategic workforce plan that focuses on the  workforce and organizational elements needed and addresses capacity  issues related to its vacancies would better position NBIB to address its  investigation backlog and strengthen the investigation process."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider reinstating the Intelligence Reform and  Terrorism Prevention Act of 2004\u2019s requirement for the executive branch  to report annually to appropriate committees of Congress on the amount  of time required by authorized investigative and adjudicative agencies to  conduct investigations, adjudicate cases, and grant initial personnel  security clearances. Congress should also consider adding to this  reporting requirement the amount of time required to investigate and  adjudicate periodic reinvestigations and any other information deemed  relevant, such as the status of the investigation backlog and implementing  government-wide measures for the quality of investigations or other  reform efforts. (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of six recommendations, including three to ODNI,  in coordination with the PAC, and three to NBIB. Specifically,", "The Director of National Intelligence, in his capacity as Security  Executive Agent, and in coordination with the other Security,  Suitability, and Credentialing Performance Accountability Council  Principals\u2014the Deputy Director for Management of OMB in his  capacity as Chair of the PAC, the Director of OPM, and the Under  Secretary of Defense for Intelligence\u2014should take the following three  actions: establish a milestone for the completion of government-wide  performance measures for the quality of investigations;  (Recommendation 1)  conduct an evidence-based review of the investigation and  adjudication timeliness objectives for completing the fastest 90  percent of initial secret and initial top secret security clearances,  and take action to adjust the objectives if appropriate;  (Recommendation 2) and develop a government-wide plan, including goals and interim  milestones, to meet those timeliness objectives for initial  personnel security clearance investigations and adjudications.  (Recommendation 3)", "The Director of NBIB, in coordination with the Deputy Director for  Management of OMB, in the capacity as Chair of the PAC, and the  Director of National Intelligence, in the capacity as Security Executive  Agent, should take the following two actions: develop a plan, including goals and milestones, that includes a  determination of the effect of the business process reengineering  efforts for reducing the backlog to a \u201chealthy\u201d inventory of work,  representing approximately 6 weeks of work; (Recommendation 4)  and establish goals for increasing total investigator capacity\u2014federal  employees and contractor personnel\u2014in accordance with the plan  for reducing the backlog of investigations. (Recommendation 5)", "The Director of NBIB should build upon NBIB\u2019s current workforce  planning efforts by developing and implementing a comprehensive  strategic workforce plan that focuses on what workforce and  organizational needs and changes will enable the bureau to meet the  current and future demand for its services. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OMB, ODNI, OPM, DOD, the  Department of Justice, and the Department of Homeland Security for  review and comment. OMB provided its comments via email, and the  comments are summarized below. Written comments from ODNI and  OPM are reprinted in their entirety in appendixes V and VI, respectively.  OMB, ODNI, OPM, and the Department of Homeland Security provided  additional technical comments, which we incorporated in the report as  appropriate. DOD and the Department of Justice did not provide  comments. OMB and OPM concurred with the recommendations directed  to them. ODNI stated that it did not concur with the report\u2019s conclusions  and recommendations, but did not specifically state with which  recommendations it did not concur.", "In comments e-mailed to us on November 9, 2017, the Acting Deputy  Director for Management of OMB concurred with the report\u2019s findings,  conclusions, and recommendations. The comments also stated that the  administration is committed to renewing public reporting of security  clearance timeliness, once the government-wide reform initiatives are  announced in early 2018, either as one of the administration\u2019s cross- cutting priority goals or via another approach. While the PAC\u2019s prior public  reporting on the status of security clearance reform efforts was beneficial  and helped to provide for transparency of the process, we believe that  security clearance timeliness information should be reported\u2014whether  publicly or via reporting to Congress\u2014broken out by individual executive  branch agency and not only as an executive branch-wide average, as  noted in our Matter for Congressional Consideration. As discussed in the  report, such detailed reporting could help congressional decision-makers  and OMB to thoroughly evaluate and precisely identify where and why  delays exist within the process, as well as to direct corrections as  necessary. In addition, OMB stated that the PAC is committed to ensuring  that its Implementation Plan is continually updated to reflect the current  status of reform efforts and that it incorporates any new initiatives arising  from our review.", "In its written comments, ODNI stated that the report appears to draw  negative inferences from the facts and that the conclusions do not  present an accurate assessment of the current status of the personnel  security clearance process. ODNI also stated that the conclusions do not  include the significant progress ODNI has achieved in coordination with  executive branch agencies. We disagree with these statements. The  report discusses in detail the progress that the PAC\u2014of which ODNI is a  Principal member\u2014has made to reform the personnel security clearance  process, including the implementation of recommendations and  milestones from the 120-day and 90-day reviews, and cross-agency  priority goal updates. The report also discusses areas of progress  highlighted by ODNI officials, such as the development of seven Security  Executive Agent Directives, the issuance of Quality Assessment  Standards for background investigations, and the implementation of the  QART.", "In its comments, ODNI further stated that while it generally concurred with  the factual observations in the report, it did not concur with our  recommendations. While ODNI did not specifically state with which  recommendations it disagreed, it discussed each of the three  recommendations addressed to it. In addition, ODNI stated that it did not  concur with our conclusions, and provided specific observations in the  following three areas, which lead to the three recommendations.", "First, ODNI disagreed with our conclusion that it has not prioritized setting  a milestone for the completion of government-wide performance  measures for the quality of background investigations. ODNI also stated  that the report ignores significant progress that ODNI has made in this  area; specifically, the approval of Quality Assessment Standards for  background investigations and the implementation of the QART. We  disagree with ODNI\u2019s position, as the report discusses in detail both the  Quality Assessment Standards and the QART, and identifies these as the  two steps toward the development of performance measures for the  quality of background investigations. Additionally, ODNI stated that it has  the ability to determine trends in background investigative quality from the  data collected by the QART. However, as we note in the report, DOD  background investigations\u2014which represent the majority of the  investigations conducted by NBIB\u2014are not captured by the QART. We  further noted that according to NBIB officials, they are not positioned to  receive comprehensive feedback if their largest customer, DOD, is not  utilizing the QART. Therefore, as we concluded in the report, it is unclear  how ODNI will have sufficient data to develop government-wide measures  for the quality of investigations since it will lack data for a significant  portion of the executive branch\u2019s background investigations.", "Regarding our recommendation that the Director of National Intelligence,  in coordination with the other PAC Principals, establish a milestone for  the completion of government-wide performance measures for the quality  of investigations, ODNI stated that it is premature to do so and that it will  set a milestone once the QART metrics discussed above have been fully  analyzed. However, in its written comments, ODNI did not state when it  anticipates the QART metrics will be fully analyzed. We recognize that  fully analyzing the QART data may take time and that initial performance  measures may be refined as ODNI collects and assesses data regarding  the quality of background investigations. However, setting a milestone\u2014 that takes into consideration the amount of time needed to analyze QART  data\u2014will help to ensure that the analysis is completed, that initial  performance measures are developed, and that agencies will have a  greater understanding of what they are being measured against. We  identify in the report that the executive branch previously set a milestone  for the completion of government-wide performance measure for quality,  which was adjusted over time and most recently set as October 2015. We  further identify that the PAC has set milestones for the completion of  nearly 50 other initiatives in its Implementation Plan, and that in the  aftermath of the 2013 Washington Navy Yard shooting, the PAC (which  includes ODNI) issued a 120-day review report that, among other things,  recommended reporting on measures for quality. We continue to believe  that setting a milestone could help to prevent further delays to their  completion and provide the executive branch with a schedule against  which it would be accountable.", "Second, ODNI did not agree with our conclusion that neither ODNI nor  the PAC have led a government-wide approach to improve timeliness of  initial personnel security clearances. In its written comments, ODNI  discusses actions it has taken to improve timeliness since the passage of  IRTPA, including resetting timeliness goals for certain clearances in 2012,  in coordination with interagency stakeholders, issuing annual  memorandums to agencies on their performance, and requesting that  agencies develop agency-specific corrective action plans. We discuss all  of these actions in the report and while we agree that they are positive  actions, the executive branch would further benefit from a more  coordinated approach. For example, even with the cited actions, the  executive branch is experiencing significant challenges related to the  timely processing of initial personnel security clearances. Specifically, as  discussed in the report, in fiscal year 2016, only 2 percent of the agencies  for which ODNI provided timeliness data met the 40-day IRTPA- established investigation objective for at least three of four quarters for  the fastest 90 percent of initial secret cases; and only 12 percent met  ODNI\u2019s revised investigation objective for at least three of four quarters  for the fastest 90 percent of initial top secret cases. In addition, as  discussed in the report, timeliness challenges are not only an issue for  agencies that use NBIB as their investigative service provider. Agencies  with delegated authority to conduct their own investigations have also  experienced timeliness challenges over the past 5 fiscal years. Further,  the timeliness challenges cited by agencies to GAO include government- wide challenges, such as the increased investigative requirements\u2014not  just agency-specific challenges, such as staffing shortfalls. A government- wide plan would better position ODNI to identify and address any  systemic government-wide issues.", "Regarding our recommendation that the Director of National Intelligence,  in coordination with the other PAC Principals, conduct an evidence-based  review of the timeliness objectives for completing initial secret and initial  top secret security clearances, and take action to adjust the objectives if  appropriate, ODNI stated that it is premature to revise the existing  timeliness goals until NBIB\u2019s backlog is resolved. In its written comments,  ODNI states that while timeliness has exceeded the established  standards, this is not necessarily an indication of a flaw in timeliness  goals, but an indicator of the impact of the backlog and that as such, the  current challenge in meeting timeliness should not serve as the sole basis  for modifying existing goals. Our recommendation is to conduct an  evidence-based review of the timeliness objectives, through which ODNI  could determine whether there are any issues with the timeliness goals  or, as ODNI suggests, whether the timeliness challenges are just a  reflection of the backlog. At the conclusion of that review, ODNI can  determine if it is appropriate to adjust the timeliness objectives, and take  action if necessary. We do not suggest that ODNI should immediately  revise the timeliness objectives without first determining if there is an  evidence-based need to do so. ODNI further notes that other agencies  that are not supported by NBIB are still achieving or very close to  achieving current standards. However, as discussed in the report, even  agencies with delegated authority to conduct their own investigations are  experiencing challenges meeting established timeliness objectives.", "ODNI further stated in response to our recommendation that the Director  of National Intelligence will continue to assess the impact of the  implementation of the 2012 Federal Investigative Standards and modify  the timeliness goals as appropriate. Given that ODNI has not  comprehensively revisited the investigation or adjudication timeliness  objectives for initial security clearances since 2012 despite the increased  investigative requirements stemming from the implementation of the 2012  Federal Investigative Standards, we continue to believe that our  recommendation to conduct an evidence-based review, using relevant  data, is valid.", "Third, ODNI disagreed with our conclusion that demonstrated leadership  from ODNI, in the capacity as the Security Executive Agent, and the PAC,  by assisting NBIB as it works to reduce the investigation backlog could  better position NBIB to reach a manageable level of investigations. ODNI  stated that it has demonstrated leadership in this area and has worked  closely as the Security Executive Agent with NBIB to reduce its  investigation backlog and noted recent efforts by the Director of National  Intelligence and the other PAC Principals to help reduce the backlog. We  believe that these recent actions, which have taken place since the  completion of our review, are positive steps that, along with our  recommendations to NBIB, could help to reduce the backlog of  background investigations. However, as discussed in the report, prior to  these recent actions, ODNI had not demonstrated the leadership  necessary to improve executive branch timeliness, as evidenced by the  decrease in the number of agencies meeting timeliness objectives from  fiscal years 2012 through 2016 and a backlog of over 700,000  investigations as of September 2017. Additionally, while the recent  actions could help to reduce the backlog, sustained demonstrated  leadership by the Director of National Intelligence and the other PAC  Principals will be crucial to maintaining and increasing momentum, and  ultimately critical to comprehensively addressing the current timeliness  challenges and reducing the investigation backlog.", "Regarding our recommendation that the Director of National Intelligence  develop a government-wide plan, including goals and interim milestones,  to meet timeliness objectives for initial personnel security clearances,  ODNI stated that it has already established timeliness goals for the  security clearance process and that prior to the investigation backlog,  which was created, in part, due to a loss of OPM investigator capacity,  the executive branch met those goals. ODNI further stated that until NBIB  reduces its backlog, departments and agencies that use NBIB cannot  accurately predict budgetary requirements for the phases of the security  clearance process under their control, which complicates the  development of a government-wide plan at this time. However, as  discussed in the report, the most feasible date by which NBIB could  reduce the backlog of background investigations to a \u201chealthy\u201d inventory  level is fiscal year 2022 at the earliest. Given the significant timeliness  challenges that the executive branch is currently experiencing, agencies  would benefit from developing a government-wide plan now, rather than  waiting at least 5 years for the reduction of the backlog to do so. In  addition, through the development of a government-wide plan, ODNI  could help to identify additional actions to more quickly reduce the  investigation backlog. Without such a plan, continued delays in  processing clearances may leave agencies unable to fill critical positions  that require a security clearance. Ultimately, developing a government- wide plan, including goals and interim milestones, will better ensure timely  determinations of individuals\u2019 eligibility for access to classified  information. As such, we continue to believe that the recommendation is  valid.", "In its written comments, OPM concurred with the three recommendations  directed to NBIB, and described some actions it plans to take to address  them. Separate from the recommendations, OPM also provided  comments related to the discussion in the draft report regarding DOD\u2019s  development of NBIS and the security of OPM\u2019s IT systems and data.  Specifically, OPM expressed concerns about some of the statements by  DOD officials, stating that they were unverified opinions. We agree that  including the countering views of OPM officials could provide some  helpful context. As a result, we have added language to the report to  include OPM\u2019s perspectives on the statements made by the DOD CIO  officials.", "In addition, OPM stated that the prior GAO and OPM Inspector General  audits referenced in the IT discussion were outdated audit assessments.  We agree that some information in the draft report from the prior audits  was based on reports from 2016 or earlier in 2017, and we understand  that circumstances may have changed since those reports were issued.  Specifically, the OPM Inspector General released a new audit report in  October 2017, when this report was with the agency for comment,  regarding the state of security of OPM IT systems. Accordingly, we  replaced the discussion of the older OPM Inspector General reports in the  draft report with a discussion of the OPM Inspector General\u2019s October  2017 report. This latest OPM Inspector General report found, among  other things, that OPM had made improvements in its security  assessment and authorization program, and its previous \u201cmaterial  weakness\u201d related to authorizations has been upgraded to a \u201csignificant  deficiency\u201d for fiscal year 2017. Overall, the OPM Inspector General  found that OPM\u2019s cybersecurity maturity level was measured at a level 2,  \u201cDefined\u201d, meaning that its policies, procedures and strategy were  formalized and documented, but were not consistently implemented. We  also added language to emphasize the date of the 2016 GAO reports,  and added information about the status of the recommendations from  those two reports, because none of the recommendations directed to  OPM from the two 2016 GAO reports had been closed as implemented  as of November 2017.", "OPM further stated that it has implemented critical enhancements to  strengthen the security of OPM\u2019s networks and has improved its security  and assessment authorization process. In the draft report, we stated that  OPM has strengthened the security of its networks, and we noted that\u2014 as stated in our 2017 report\u2014OPM has made progress in improving its  security to prevent, mitigate, and respond to data breaches involving  sensitive personal records and background investigations information.  However, as we noted our 2017 report, we also found that OPM did not  effectively monitor actions taken to remediate identified weaknesses, and  we continue to believe that discussion of the deficiencies we identified in  our prior reports is appropriate in this report.", "In November 2017, after the conclusion of our audit work, Congress  passed a bill for the National Defense Authorization Act for Fiscal Year  2018. Among other things, the bill includes a provision that would  authorize DOD to conduct its own background investigations and require  DOD to begin carrying out the implementation plan required by section  951 of the National Defense Authorization Act for Fiscal Year 2017 by  October 1, 2020. It would also require the Secretary of Defense, in  consultation with the Director of OPM, to provide for a phased  transition.  While this pending legislation may affect how some  background investigations are conducted, we believe that our  recommendations remain important points on which the executive branch  should focus in order to help improve the security clearance process as  these legislative changes are implemented.", "We are sending copies of this report to the appropriate congressional  committees, the Director of National Intelligence, the Secretary of  Defense, the Director of OMB, the Secretary of Homeland Security, the  Director of OPM, the Director of NBIB, the Attorney General of the United  States, the Director of the Federal Bureau of Intelligence, and the Director  of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. In addition,  this report will also be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your members of your staff have any questions regarding this  report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made significant  contributions to this report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Status of Prior GAO Personnel Security Clearance Recommendations to Executive Branch Agencies as of November 2017", "paragraphs": ["Since May 2009, we have made 37 recommendations to appropriate  executive branch agencies\u2014the Office of Management and Budget  (OMB), Office of Personnel Management (OPM), Office of the Director of  National Intelligence (ODNI), Department of Defense (DOD), and  Department of Homeland Security (DHS)\u2014to improve the personnel  security clearance process. As of November 2017, these agencies had  implemented 12 of those recommendations; we closed 4 due to the  inaction of the responsible agencies; and 21 remained open. Examples of  implemented recommendations include DOD\u2019s issuance of adjudication  guidance related to incomplete investigative reports, ODNI and OPM\u2019s  jointly proposed chapter and part to the Code of Federal Regulations  clarifying, among other things, the position sensitivity designation of  national security positions, and DHS\u2019s issuance of new standards for  tracking information on security clearance revocations and appeals.", "The 21 recommendations that remain open as of November 2017  focused on different aspects of the personnel security clearance process.  First, in February 2012, we reported on background investigation pricing  and costs, and we found, among other things, that the Performance  Accountability Council had not provided the executive branch with  guidance on cost savings. Second, in September 2014, we reported on  the security clearance revocation processes at DHS and DOD. We found  that DHS and DOD data systems did not track complete revocation  information; there was inconsistent implementation of the requirements in  the governing executive orders by DHS, DOD, and some of their  components; and there was limited oversight over the revocation process,  among other things. Third, in April 2015, we reported on the status of  government-wide security clearance reform efforts. We found, among  other things, that limited progress had been achieved in implementing  updated Federal Investigative Standards, and that the extent to which  reciprocity is granted government-wide was unknown. Fourth, in  November 2017, we found that ODNI had taken an initial step to  implement continuous evaluation across the executive branch, but it had  not yet determined key aspects of the program; and it lacked plans for  implementing, monitoring, and measuring program performance. See  table 2 for the 21 open recommendations from these four reports as of  November 2017."], "subsections": []}, {"section_title": "Appendix II: Overview of Selected Personnel Security Clearance Provisions in the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA)", "paragraphs": ["Appendix II: Overview of Selected Personnel  Security Clearance Provisions in the  Intelligence Reform and Terrorism Prevention  Act of 2004 (IRTPA)", "The 2004 enactment of IRTPA initiated a reform effort that includes goals  and requirements for improving the personnel security clearance process  government-wide. Specifically, among other things, IRTPA required that:", "The President select a single entity\u2014currently designated as the  Office of the Director of National Intelligence\u2014to be responsible for,  among other things, the development and implementation of uniform  and consistent policies and procedures to ensure the effective,  efficient, and timely completion of security clearances.", "The President, in consultation with the head of the entity above, select  a single agency\u2014currently designated as the National Background  Investigations Bureau within the Office of Personnel Management  (OPM)\u2014tasked with conducting, to the maximum extent practicable,  security clearance investigations of federal employees and contractor  personnel, among other things. It also required this entity to ensure  that investigations are conducted in accordance with uniform  standards and requirements.", "All security clearance background investigations and determinations  completed by an authorized investigative agency or authorized  adjudicative agency be accepted by all agencies (known as  reciprocity), subject to certain exceptions.", "Not later than 12 months after the date of enactment of the act, the  Director of OPM in cooperation with the heads of the entities selected  above, establish and commence operating and maintaining an  integrated, secure database of personnel security clearance  information.", "The executive branch evaluate the use of available information  technology and databases to expedite investigative and adjudicative  processes and to verify standard information submitted as part of an  application for a security clearance and, not later than 1 year after  enactment, submit a report to the President and the appropriate  committees of Congress on the results of that evaluation.", "The executive branch submit an annual report, through 2011, to the  appropriate congressional committees on the progress made toward  meeting IRTPA requirements, including timeliness data and a  discussion of any impediments to the smooth and timely functioning of  IRTPA requirements.", "IRTPA also established specific objectives for the timeliness of security  clearance processing. Specifically, the act required the entity selected  under section 3001(b) to develop a plan to reduce the length of the  personnel security clearance process, in consultation with appropriate  committees of Congress and each authorized adjudicative agency. To the  extent practical, the plan was to require that each authorized adjudicative  agency make a determination on at least 90 percent of all applications for  a personnel security clearance within an average of 60 days after the  date of receipt of the completed application by an authorized investigative  agency\u2014not longer than 40 days to complete the investigative phase and  20 days to complete the adjudicative phase. IRTPA required the plan to  take effect December 17, 2009."], "subsections": []}, {"section_title": "Appendix III: GAO Work on Personnel Security Clearance Quality and Executive Branch Efforts to Establish Government-wide Measures for the Quality of Investigations", "paragraphs": ["Since 1999 we have reported on issues related to investigative quality at  the Department of Defense and the Office of Personnel Management and  have issued recommendations to help ensure the personnel security  clearance reform effort results in the development of metrics to track  quality. Figure 6 provides an overview of our work in this area and  executive branch efforts to establish government-wide performance  measures for investigation quality."], "subsections": []}, {"section_title": "Appendix IV: Timeliness of Executive Branch Periodic Reinvestigations", "paragraphs": ["In November 2017, we reported on the timeliness of the executive  branch\u2019s periodic reinvestigations for fiscal years 2012 through 2016,  among other things. Our analysis of timeliness data for select executive  branch agencies showed that the percent of agencies meeting timeliness  goals decreased from fiscal year 2012 through 2016. The timeliness  goals for periodic reinvestigations are outlined in a 2008 Joint Security  and Suitability Reform Team report to the President entitled Security and  Suitability Process Reform. Specifically, the report includes Office of  Management and Budget-issued interim government-wide processing  goals for security clearances for calendar year 2008. The calendar year  2008 government-wide goal for the fastest 90 percent of periodic  reinvestigations is the same as the goal currently in place: 15 days to  initiate a case, 150 days to conduct the investigation, and 30 days to  adjudicate\u2014totaling 195 days to complete the end-to-end processing of  the periodic reinvestigation. Table 3 shows the percent of executive  branch agencies meeting the timeliness goals for investigating,  adjudicating, and completing the fastest 90 percent of periodic  reinvestigations for at least three of four quarters from fiscal years 2012  through 2016.", "Specific details of the timeliness of initial secret and initial top secret  clearances for select individual executive branch agencies were omitted  because the information is sensitive."], "subsections": []}, {"section_title": "Appendix V: Comments from the Office of the Director of National Intelligence", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kimberly Seay (Assistant  Director), Nathan Tranquilli (Assistant Director), Renee S. Brown, Chris  Businsky, Molly Callaghan, Jenny Chanley, Katheryn Hubbell, Saida  Hussain, Jeffrey L. Knott, James Krustapentus, Caryn E. Kuebler,  Michael Shaughnessy, Rachel Stoiko, Paul Sturm, John Van Schaik,  Cheryl Weissman, and Jina Yu made significant contributions to this  report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Personnel Security Clearances: Additional Actions Needed to Address  Quality, Timeliness, and Investigation Backlog. GAO-18-26SU.  Washington, D.C.: December 7, 2017 (FOUO).", "Personnel Security Clearances: Additional Planning Needed to Fully  Implement and Oversee Continuous Evaluation of Clearance Holders.  GAO-18-159SU. Washington, D.C.: November 21, 2017 (FOUO).", "Personnel Security Clearances: Plans Needed to Fully Implement and  Oversee Continuous Evaluation of Clearance Holders. GAO-18-117.  Washington, D.C.: November 21, 2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Personnel Security Clearances: Funding Estimates and Government- Wide Metrics Are Needed to Implement Long-Standing Reform Efforts.  GAO-15-179SU. Washington, D.C.: April 23, 2015.", "Personnel Security Clearances: Additional Guidance and Oversight  Needed at DHS and DOD to Ensure Consistent Application of Revocation  Process. GAO-14-640. Washington, D. C.: September 8, 2014.", "Personnel Security Clearances: Actions Needed to Ensure Quality of  Background Investigations and Resulting Decisions. GAO-14-138T.  Washington, D.C.: February 11, 2014.", "Personnel Security Clearances: Actions Needed to Help Ensure Correct  Designations of National Security Positions. GAO-14-139T. Washington,  D.C.: November 20, 2013.", "Personnel Security Clearances: Opportunities Exist to Improve Quality  Throughout the Process. GAO-14-186T. Washington, D.C.: November  13, 2013.", "Personnel Security Clearances: Full Development and Implementation of  Metrics Needed to Measure Quality of Process. GAO-14-157T.  Washington, D.C.: October 31, 2013.", "Personnel Security Clearances: Further Actions Needed to Improve the  Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June  20, 2013.", "Managing for Results: Agencies Should More Fully Develop Priority Goals  under the GPRA Modernization Act. GAO-13-174. Washington, D.C.:  April 19, 2013.", "Security Clearances: Agencies Need Clearly Defined Policy for  Determining Civilian Position Requirements. GAO-12-800. Washington,  D.C.: July 12, 2012.", "Personnel Security Clearances: Continuing Leadership and Attention Can  Enhance Momentum Gained from Reform Effort. GAO-12-815T.  Washington, D.C.: June 21, 2012.  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue.  GAO-12-342SP. Washington, D.C.: February 28, 2012.", "Background Investigations: Office of Personnel Management Needs to  Improve Transparency of Its Pricing and Seek Cost Savings.  GAO-12-197. Washington, D.C.: February 28, 2012.", "GAO\u2019s 2011 High-Risk Series: An Update. GAO-11-394T. Washington,  D.C.: February 17, 2011.", "High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February  16, 2011.", "Personnel Security Clearances: Overall Progress Has Been Made to  Reform the Governmentwide Security Clearance Process. GAO-11-232T.  Washington, D.C.: December 1, 2010.", "Personnel Security Clearances: Progress Has Been Made to Improve  Timeliness but Continued Oversight Is Needed to Sustain Momentum.  GAO-11-65. Washington, D.C.: November 19, 2010.", "DOD Personnel Clearances: Preliminary Observations on DOD\u2019s  Progress on Addressing Timeliness and Quality Issues. GAO-11-185T.  Washington, D.C.: November 16, 2010.", "Personnel Security Clearances: An Outcome-Focused Strategy and  Comprehensive Reporting of Timeliness and Quality Would Provide  Greater Visibility over the Clearance Process. GAO-10-117T.  Washington, D.C.: October 1, 2009.", "Personnel Security Clearances: Progress Has Been Made to Reduce  Delays but Further Actions Are Needed to Enhance Quality and Sustain  Reform Efforts. GAO-09-684T. Washington, D.C.: September 15, 2009.", "Personnel Security Clearances: An Outcome-Focused Strategy Is  Needed to Guide Implementation of the Reformed Clearance Process.  GAO-09-488. Washington, D.C.: May 19, 2009.", "DOD Personnel Clearances: Comprehensive Timeliness Reporting,  Complete Clearance Documentation, and Quality Measures Are Needed  to Further Improve the Clearance Process. GAO-09-400. Washington,  D.C.: May 19, 2009.", "High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January  2009.", "Personnel Security Clearances: Preliminary Observations on Joint  Reform Efforts to Improve the Governmentwide Clearance Eligibility  Process. GAO-08-1050T. Washington, D.C.: July 30, 2008.", "Personnel Clearances: Key Factors for Reforming the Security Clearance  Process. GAO-08-776T. Washington, D.C.: May 22, 2008.", "Employee Security: Implementation of Identification Cards and DOD\u2019s  Personnel Security Clearance Program Need Improvement.  GAO-08-551T. Washington, D.C.: April 9, 2008.", "Personnel Clearances: Key Factors to Consider in Efforts to Reform  Security Clearance Processes. GAO-08-352T. Washington, D.C.:  February 27, 2008.", "DOD Personnel Clearances: DOD Faces Multiple Challenges in Its Efforts  to Improve Clearance Processes for Industry Personnel. GAO-08-470T.  Washington, D.C.: February 13, 2008.", "DOD Personnel Clearances: Improved Annual Reporting Would Enable  More Informed Congressional Oversight. GAO-08-350. Washington, D.C.:  February 13, 2008.", "DOD Personnel Clearances: Delays and Inadequate Documentation  Found for Industry Personnel. GAO-07-842T. Washington, D.C.: May 17,  2007.", "High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January  2007.", "DOD Personnel Clearances: Additional OMB Actions Are Needed to  Improve the Security Clearance Process. GAO-06-1070. Washington,  D.C.: September 28, 2006.", "DOD Personnel Clearances: New Concerns Slow Processing of  Clearances for Industry Personnel. GAO-06-748T. Washington, D.C.:  May 17, 2006.", "DOD Personnel Clearances: Some Progress Has Been Made but Hurdles  Remain to Overcome the Challenges That Led to GAO\u2019s High-Risk  Designation. GAO-05-842T. Washington, D.C.: June 28, 2005.", "High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January  2005."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-271", "url": "https://www.gao.gov/products/GAO-18-271", "title": "Customs and Border Protection: Automated Trade Data System Yields Benefits, but Interagency Management Approach Is Needed", "published_date": "2018-03-14T00:00:00", "released_date": "2018-03-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CBP began work on ACE in 1994 to update the agency's existing electronic trade processing system. In 2006, Congress broadened this effort by mandating creation of a \u201csingle portal\u201d International Trade Data System to, among other things, efficiently regulate the flow of commerce and more effectively enforce laws and regulations relating to international trade. Performance problems halted implementation of ACE from 2010 to 2013. In 2014, the President set a deadline of December 31, 2016, for completing the system.", "The Trade Facilitation and Trade Enforcement Act of 2015 included a provision for GAO to report on issues related to ACE implementation. In this report, GAO examines (1) CBP efforts to complete core ACE capabilities since 2013; (2) agencies' access to ACE and use of the system to process imports; (3) any cost savings and trade enforcement benefits from using ACE; and (4) the approach that will be used to manage ACE after core capabilities are completed. GAO reviewed information from 22 agencies as well as importers, exporters, and brokers and interviewed agency and trade community representatives."]}, {"section_title": "What GAO Found", "paragraphs": ["Since renewing efforts to implement the Automated Commercial Environment (ACE) in 2013, U.S. Customs and Border Protection (CBP) has deployed a number of key ACE activities, processes, and functions that it terms core capabilities. After several delays, CBP reported that it had finished implementing these capabilities\u2014other than a capability for revenue collections\u2014in February 2018. CBP expects to decide how to proceed with collections by the end of March 2018, according to agency officials.", "The 22 agencies CBP identified as requiring documentation to clear or license cargo are all authorized to access ACE, although GAO found considerable variation in their use of the system for import processing. For example, the Food and Drug Administration has integrated its systems with ACE and uses ACE data to review imports under its jurisdiction and target public health risks. In contrast, the Fish and Wildlife Service has not yet integrated ACE into its operations.", "ACE users at CBP and partner agencies and in the trade community told GAO that using ACE has reduced costs by making trade processing more efficient and has strengthened enforcement of trade laws and regulations. CBP has developed metrics for itself and the trade community and estimated savings that could result from the increased efficiency of some processes in ACE. CBP also reported efforts to expand its metrics to capture more ACE benefits\u2014for example, to estimate the value of increased efficiencies for partner agencies.", "CBP has not yet established an approach for the management of ACE after February 2018. The agency plans to enhance ACE to address shortcomings ACE users have identified\u2014such as difficulty in transmitting messages and required information \u2014but has not established a process for prioritizing all suggested enhancements. CBP also has not identified funding for continued ACE development, including enhancements, after fiscal year 2018. CBP is leading an interagency effort to develop an ACE management approach that includes processes for prioritizing enhancements and sharing costs, but this approach has not been finalized. Federal guidance calls for establishing the organizational structure necessary to operate effectively and for examining efforts as needed to adopt coordinated approaches. Until processes for prioritizing ACE enhancements and sharing costs are finalized, agencies and the trade community will not realize the system's full potential benefits."]}, {"section_title": "What GAO Recommends", "paragraphs": ["The Secretary of Homeland Security should ensure that the Commissioner of CBP, in collaboration with partner agencies, finalizes an interagency approach to managing ACE that includes processes for prioritizing enhancements and sharing system costs. CBP concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["U.S. Customs and Border Protection (CBP)\u2014an agency of the  Department of Homeland Security (DHS)\u2014enforces the customs and  trade laws of the United States. According to CBP, the agency  processes about $3 trillion in trade and collects about $44 billion in  revenue each year from import duties, taxes, and fees. CBP carries out  its work in coordination with a variety of other U.S. government agencies.  For example, the Fish and Wildlife Service works to monitor international  trade in wildlife and wildlife products and to prevent the illegal import or  export of species regulated under international and U.S. wildlife laws,  while the Consumer Product Safety Commission works to ensure that  imported products comply with U.S. consumer product safety rules and  regulations.", "In 1994, CBP initiated planning and development of an information  system, known as the Automated Commercial Environment (ACE), to  ensure proper assessment and collection of customs duties.  Subsequently, the Security and Accountability For Every Port Act of 2006  (SAFE Port Act) mandated the creation of a \u201csingle portal\u201d International  Trade Data System (ITDS). The stated purpose of ITDS included, among  other things, eliminating redundant information requirements, efficiently  regulating the flow of commerce, and more effectively enforcing laws and  regulations relating to international trade (in this report, \u201ctrade  enforcement\u201d). According to CBP, ACE is intended to provide this single  portal. The act also stated that all agencies requiring documentation to clear or license imported or exported cargo must participate in the  system. After a series of unsuccessful efforts to complete ACE, CBP  began a renewed effort in 2013 to complete the implementation of key  activities, processes, and functions in ACE that CBP defines as core  capabilities.", "The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA)  includes a provision for GAO to review issues related to the  implementation and use of ACE. In this report, we examine (1) the status  of CBP\u2019s efforts to implement core capabilities since 2013; (2) CBP  partner agencies\u2019 access to ACE and use of the system for import  processing; (3) available information about any cost savings and trade  enforcement benefits that have resulted from using ACE; and (4) the  approach that will be used to manage ACE after core capabilities have  been completed.", "To examine CBP\u2019s efforts since 2013 to implement core capabilities, we  obtained information from CBP\u2019s Office of Information Technology and  Office of Trade, which have been responsible for developing and  administering ACE. We also obtained information from the Department of  the Treasury, which has responsibility under the SAFE Port Act for  coordinating interagency participation in ITDS. While ACE is designed to  permit management of both exports and imports, we focused on the  implementation of ACE capabilities to manage imports, because recent  CBP efforts to complete and improve ACE functionality have focused  primarily on imports.", "To examine other agencies\u2019 progress in accessing and using ACE data  for import processing, we obtained summary information about CBP\u2019s 49  partner agencies, focusing our analysis on the 22 partner agencies that  CBP identified as requiring documentation for clearing or licensing cargo  for import or export. We selected 5 of these agencies for case studies: the  Department of Health and Human Services\u2019 Food and Drug  Administration (FDA), the Department of Transportation\u2019s National  Highway Traffic Safety Administration (NHTSA), the Consumer Product  Safety Commission (CPSC), the Department of Agriculture\u2019s Animal and  Plant Health Inspection Service (APHIS), and the Department of the  Interior\u2019s Fish and Wildlife Service (FWS). We based our selection of  these 5 agencies on their size and on the extent to which they require  documentation for clearing and licensing cargo, among other factors.", "To examine available information about actual and potential cost savings  and enforcement benefits from using ACE, we obtained information on  efforts by CBP, other agencies, and companies engaged in international  trade to estimate such savings and benefits. We also obtained  information on efforts by CBP and other agencies to assess any cost  savings and other benefits that could result from CBP\u2019s future  implementation of enhancements to the system. We examined metrics  that CBP has developed to measure cost savings from ACE and  determined that data generated from these metrics are sufficiently reliable  to be included in this report. In addition, we interviewed CBP and agency  officials in Washington, D.C., and at the ports of New York, N.Y., and  Newark, N.J., about benefits and challenges associated with using ACE.  We selected these ports because they allowed us to interview CBP  officials charged with processing a large volume of diverse imported  goods\u2014both air and sea cargo\u2014and provided an opportunity to interview  field staff representing four of our five case-study agencies. We also  discussed these issues with 16 trade community representatives (i.e.,  representatives of companies that buy and sell internationally traded  products as well as customs brokers and shippers that work for and with  these companies), many of whom had participated in organizations that  advise CBP regarding its operations.", "To examine factors related to CBP\u2019s management of ACE after  implementation of core capabilities is complete, we obtained information  on CBP processes for reviewing, assessing, and prioritizing required and  suggested changes to enhance ACE. We also obtained information from  CBP about projected budgetary needs for its \u201cpost-core\u201d management of  ACE (i.e., after implementation of core capabilities is complete). In  addition, we interviewed and obtained documentation from CBP regarding  interagency dialogue on post-core management of ACE. See appendix I  for more information about our objectives, scope, and methodology.", "We conducted this performance audit from January 2017 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "CBP and Partner Agency Processing of Imported Goods", "paragraphs": ["Imported goods flow into the U.S. market through a process that CBP  facilitates and enforces, in collaboration with other federal agencies and  with companies, including customs brokers, engaged in international  trade. Imported goods enter the United States at more than 300 ports by  air, land, or sea. The processing of imported goods includes three stages:  pre-arrival, arrival/cargo release, and post-release.", "Pre-arrival. Before goods leave their country of origin, importers and  shipping companies file paperwork and provide required advance  electronic information for CBP to review.", "Arrival/cargo release. Importers or brokers file entry documents  when goods reach a U.S. port of entry. At the ports, CBP and other  agencies with regulatory responsibilities review documents and may  examine the goods for import security and trade enforcement  purposes. Some goods selected for examination may be deemed  nonadmissible because of trade law or other violations. Admissible  goods are released from the port and enter into U.S. commerce.", "Post-release. After goods are released from a port, importers or  brokers file additional entry summary documents, which CBP reviews  to ensure compliance with trade laws. CBP verifies importers\u2019 cargo  classifications and calculation of customs duties, taxes, and fees  owed, taking action when needed. CBP and other agencies may  determine that entered goods are noncompliant, thus triggering post- release enforcement action.", "Figure1 summarizes agency roles at these three stages of import  processing."], "subsections": []}, {"section_title": "ACE Development and Implementation, 1994\u2013 2013", "paragraphs": ["CBP initiated planning and preliminary development of ACE in 1994,  following the enactment of the North American Free Trade Agreement  Implementation Act. Title VI of the act required the creation of a national  customs automation program that would allow electronic processing of  commercial imports. According to CBP, its existing electronic system for  processing imports\u2014the Automated Commercial System (ACS), which  became operational in 1984\u2014used antiquated hardware and software  and, because of limited processing capability, was increasingly difficult  and expensive to operate. In addition, despite ACS\u2019s availability, CBP  continued to rely heavily on paper documents.", "The following year, a multi-agency task force launched an effort to  develop the International Trade Data System\u2014a government-wide  system for reporting data used to clear imports and exports\u2014and efforts  to develop ITDS and ACE were subsequently integrated. The 2006 SAFE  Port Act mandated the creation of ITDS to provide a \u201csingle portal\u201d trade  data system, to be implemented no later than the date when ACE is fully  implemented. CBP initially planned to deploy ACE incrementally from  1998 through 2005. According to CBP officials, after substantial  difficulties, CBP awarded a contract to begin implementing ACE in 2001  and began deploying ACE capabilities in 2003. However, continued  slow progress led DHS to halt all new ACE development in 2010. A CBP  acquisition decision memorandum issued at that time stated that the  scope and complexity of ACE projects had been consistently  underestimated during the period leading up to this decision.", "DHS authorized CBP to renew work on ACE in 2013, after CBP had  completed a revision of ACE\u2019s schedule, cost, and performance goals.  This \u201crebaselining\u201d of ACE included adopting the agile approach to  system development, which involves segmenting development and  deployment into small consecutive stages, with frequent opportunities to  test new capabilities and confirm that they meet requirements. CBP\u2019s new  plan called for completing core ACE capabilities to allow CBP and partner  agencies to employ the system in all phases of import and export  processing by November 2016, 11 years later than initially planned. A  February 2014 Executive Order, as well as provisions in TFTEA,  subsequently reinforced this commitment to complete the system before  the end of 2016.", "In rebaselining ACE, CBP consulted with partner agencies and trade  community representatives to identify the core trade processing  capabilities needed for the system to achieve full operational capacity,  according to CBP officials. CBP officials stated that these capabilities are  laid out in an internal 2013 CBP document describing, in general terms,  key activities, processes, and functions that must be performed to  automate import and export processing and improve targeting and  security. We use \u201ccore ACE capabilities\u201d to refer to activities, processes,  and functions that CBP has defined as core."], "subsections": []}]}, {"section_title": "CBP Has Implemented Core ACE Capabilities but Delayed Completion Several Times", "paragraphs": ["After revising its schedule, cost, and performance goals for ACE in 2013,  CBP developed and deployed most of the capabilities that it defined as  core ACE. On February 27, 2018, CBP announced that it had deployed  the last of the major scheduled core trade processing capabilities.  However, CBP delayed completion of these capabilities several times and  has deferred deployment of collections\u2014a capability for collecting import  duties, taxes, and fees\u2014while it considers alternative approaches to  make this capability operational.", "Using the agile approach, CBP began deploying new ACE capabilities in  November 2013, introducing elements iteratively every few months. For  example, the November 2013 deployment included functions related to  the pre-arrival and arrival/cargo release phases of import processing,  initial steps to support two agencies in pilot testing ACE participation, and  a number of efforts to resolve technical problems. By mid-2016, CBP had  deployed all core pre-arrival and arrival/cargo release capabilities, but  several post-release capabilities remained to be deployed. In June 2016,  CBP officials reported that the program would not complete several key  events by November 2016 as planned and declared a cost and schedule  breach; in November 2016, CBP rebaselined ACE again. CBP  subsequently reported that it expected to finish deploying post-release  core ACE capabilities by January 2017, but the agency was unable to  complete this deployment as planned. In April 2017, CBP officials  reported that the program was again in breach, and CBP subsequently  moved the target date for completing deployment of remaining core  capabilities to July 2017.", "Reconciliation, Liquidation, and Drawback  During reconciliation, preliminary data on  import transactions provided to CBP at the time  of entry (such as the dollar value of imported  goods) may be updated.  During liquidation, import transactions are  finalized and duty, taxes, and fees due to CBP  are determined.   During drawback, exporters may be able to  claim and recover certain duties, taxes, or fees  upon the exportation or destruction of imported  merchandise under CBP supervision.", "February 2018. The February 2018 deployment completed most core  capabilities for post-release, including reconciliation, liquidation, and  drawback\u2014functions related to the final determination and payment of  duties to CBP (see sidebar).", "CBP initially intended to implement collections in ACE along with other  post-release core capabilities. However, CBP officials told us that after a  series of unsuccessful attempts to move collections from ACS to ACE,  the agency decided in July 2017 to decouple collections from the other  remaining post-release capabilities. Agency officials explained that this  would allow deployment of other post-release capabilities by the end of  February 2018. CBP officials observed that technical challenges involved  in moving the current collections function\u2014which is needed to complete  post-release functions such as liquidation\u2014from ACS into ACE primarily  accounted for CBP\u2019s inability to finish deploying core ACE capabilities in  2017.", "CBP officials stated that the agency will continue to link the newly  deployed post-release capabilities to collections in ACS while deciding  how to proceed. According to CBP officials, the agency expects to select  one of three options for collections by the end of March 2018: (1) add a  collections capability to ACE, (2) retain collections in ACS, or (3) develop  a separate collections system. CBP officials stated that the agency would  revise its estimate of the overall cost of completing and maintaining ACE  through the system\u2019s expected life cycle after reaching this decision.", "The timeline in figure 2 summarizes CBP\u2019s efforts to develop and deploy  core ACE capabilities since 2013."], "subsections": []}, {"section_title": "Partner Agencies That Clear or License Cargo Have Access to ACE, but Extent of Use Varies", "paragraphs": ["All partner agencies that CBP identified as bearing responsibility for  clearing or licensing goods for import or export have been granted some  access to ACE data. However, as our case studies of five partner  agencies illustrate, the extent to which these agencies use the system  varies, and agencies are continuing efforts to enhance their use of ACE."], "subsections": [{"section_title": "All Agencies with Responsibility for Clearing and Licensing Cargo Have Been Granted Access to ACE Data", "paragraphs": ["Each of the 22 partner agencies with responsibility for clearing or  licensing cargo has signed a memorandum of understanding with CBP  that allows access to ACE and details the information the agency will  receive through the system, according to CBP officials. Table 1 lists the  22 partner agencies CBP identified as having responsibility for clearing or  licensing cargo and as having signed a memorandum of understanding  with CBP  According to CBP, each memorandum of understanding specifies data  that the partner agency may access in accordance with its responsibilities  and as allowed by statute. Agencies may obtain these data through  ACE in the following ways:", "Agencies may specify data elements to be included in the ACE  partner government agency message set\u2014that is, the consolidated  set of data that importers and exporters submit electronically. In many  cases, the message set includes data elements formerly collected  through paper forms, according to CBP officials.", "Agencies may require submission of supporting documents (e.g.,  cargo manifests) as image files through the ACE Document Image  System.", "Agencies may access these data directly through ACE or may establish  web linkages between ACE and their own data processing systems that  will allow their systems to receive automatic transmissions of ACE data.  CBP documents show that among the 22 agencies CBP identified as  having responsibility for clearing or licensing cargo,", "16 have established web linkages between ACE and their own data", "14 obtain agency-specific data through the ACE message set, and", "17 receive document image files from importers through ACE.", "In addition, 15 of the 22 agencies have completed, or are conducting,  pilots to initiate or expand their participation in ACE."], "subsections": []}, {"section_title": "Case Studies Show Variation in Use of ACE among Agencies That Clear or License Cargo", "paragraphs": ["While all of the 22 agencies that CBP identified as having responsibility  for clearing or licensing cargo have access to ACE data, our case studies  of 5 agencies found considerable variation in the extent to which they use  ACE for import processing. As table 2 shows, 4 of these agencies (FDA,  NHTSA, CPSC, and APHIS) have established linkages between ACE and  their own import data analysis systems, apply ACE data in those systems,  and have completed pilots to begin or expand their use of ACE. Agency  staff also may access ACE directly to obtain additional information that is  not available in their agencies\u2019 systems. Nonetheless, we found  significant differences in the agencies\u2019 use of ACE to obtain agency- specific data from importers: While FDA and NHTSA have largely  transitioned to using ACE for this purpose, CPSC and APHIS use it to a  more limited extent, and FWS continues to obtain data on imported goods  largely without using ACE. All five agencies reported ongoing efforts to  resolve difficulties related to using ACE and make greater use of the  system.", "According to CBP documents, several of these 27 other agencies have not concluded  an ACE memorandum of understanding with CBP and do not appear to be accessing  ACE\u2014in some cases because ACE does not generate information that serves an agency  need, according to CBP and Treasury Department officials."], "subsections": [{"section_title": "FDA Uses ACE Data to Review and Target Imports for Health Risks", "paragraphs": ["Food and Drug Administration (FDA)  FDA applies health and safety standards to a  variety of imported products, including food,  drugs, cosmetics, medical devices, biologics,  tobacco, and radiation-emitting electronic  products. To carry out these functions, FDA  maintains a nationwide network of port-based  staff with authority to review and, if  necessary, refuse entry to goods that do not  comply with pertinent laws and regulations  that it enforces. FDA maintains two internal  information technology systems to assist  these efforts: the Operational and  Administrative System for Import Support, for  admissibility review of imports, and the  Predictive Risk Evaluation for Dynamic Import  Targeting system, a risk-based screening tool  that performs an initial electronic screening of  import entries containing FDA regulated  articles to target those items with potentially  higher public health risk for a manual  admissibility review.", "FDA has integrated its internal systems with ACE and uses ACE data to  review imports under its jurisdiction, targeting FDA-regulated imports that  pose higher public health risks for manual review to determine the  imports\u2019 admissibility, according to FDA officials. FDA has worked with  CBP to establish bilateral transmission of import entry data between CBP  and FDA since 1997, when the two agencies linked FDA\u2019s earlier import  operations system with CBP\u2019s ACS, according to FDA. Consequently,  FDA officials described the transition to ACE as an upgrade, substantially  expanding the information available to the agency, rather than a new  approach to processing imports.", "FDA officials stated that they coordinated with the trade community and  CBP to complete the transition to using ACE. For example, the officials  said that they consulted with the trade community to develop FDA\u2019s ACE  message set, with the goal of improving the clearance process. According  to FDA officials, the data that the agency required through the message  set included more information than it had previously required from  importers through ACS. FDA officials explained that their intent in adding  data elements was to facilitate the automated admissibility review of low- risk FDA-regulated articles and thus focus agency resources on articles  associated with a higher public health risk. Additionally, FDA worked with  the trade community to develop recommendations for technical  enhancements to ACE. Finally, FDA tested the new systems and the  viability of the message set in a pilot that it successfully concluded in  2016.", "According to agency officials, in November 2016, FDA issued a final rule  requiring that the trade community, when electronically submitting an  entry in ACE, provide certain information on all incoming cargo that is  subject to FDA regulation. In most cases, FDA finds this information  sufficient to determine admissibility. However, in about 3 percent of  cases, FDA requests additional information directly from importers, using  the agency\u2019s Import Trade Auxiliary Communications System. FDA  officials stated that the agency is pursuing improvements in its ability to  communicate with importers via ACE."], "subsections": []}, {"section_title": "NHTSA Uses ACE Data to Review Motor Vehicle Imports", "paragraphs": ["National Highway Safety Transportation  Administration (NHTSA)  NHTSA works to ensure that imported motor  vehicles and equipment (e.g., tires) meet U.S.  safety standards. According to agency  officials, because NHTSA does not have  independent authority to hold incoming cargo  and does not have any staff at U.S. ports, it  relies on U.S. Customs and Border Protection  officials to hold and inspect cargo and to take  enforcement action if indicated (e.g., seizing  goods or denying entry) in consultation with  NHTSA. To fulfill its tasks, NHTSA uses its  Motor Vehicle Importation Information  database to assist in admissibility and  targeting decisions.", "NHTSA is using ACE data to review and clear imported motor vehicles  and equipment for entry into the U.S. market and works with CBP to  assess the compliance of certain products offered for importation. NHTSA  established an electronic link between its internal system and CBP\u2019s ACS  in 1992. At that time, NHTSA and CBP arranged for importers to submit  NHTSA\u2019s required paper form electronically through ACS. In 2015,  NHTSA began transitioning to ACE by pilot-testing submission of data for  a large ACE message set. According to NHTSA officials, the testing  process revealed significant technical problems. Prior to the pilot testing,  the trade community expressed concern about the number of data  elements that NHTSA asked CBP to collect from the trade community.  The Office of Management and Budget determined that certain proposed  requirements were burdensome for the trade community and asked  NHTSA to eliminate some of these requirements. Subsequently, in March  2016, NHTSA completed its transition to ACE with fewer data  requirements.", "In addition to using ACE data, NHTSA continues to obtain information  directly from importers, when necessary, through its Motor Vehicle  Importation Information system. For example, according to NHTSA  officials, the agency requests information through its system when it  identifies reporting errors in ACE or when additional information is needed  for certain temporary imports, such as vehicles or equipment imported for  research or demonstration purposes. NHTSA officials stated that they are  working with CBP to overcome a major challenge to efficient  collaboration: NHTSA uses vehicle identification numbers to track  imported vehicles, while ACE does not. According to NHTSA officials,  NHTSA has developed a database to provide public access to  manufacturer identification and vehicle identification number-deciphering  information submitted by manufacturers. According to NHTSA, CBP port  staff have begun accessing the database but it has not yet been linked to  ACE."], "subsections": []}, {"section_title": "CPSC Uses ACE Data to Target Imported Consumer Products", "paragraphs": ["Consumer Product Safety Commission  (CPSC)  CPSC protects the public from unreasonable  risk of injury or death associated with  consumer products, including over two-thirds  of all categories of imported goods, such as  toys, children\u2019s sleepwear, and household  electronics. CPSC expanded examination of.  imported goods in 2008 following passage of  the Consumer Product Safety Improvement  Act of 2008, which required the agency to  develop a risk-assessment methodology for  certain imports. CPSC maintains a limited  presence at U.S. ports and has independent  authority to hold incoming cargo for  inspection. The agency employs its Risk  Assessment Methodology targeting system to  assist in its import oversight responsibilities  by generating potential targets for inspection.", "CPSC uses only ACE data collected under CBP authority to support its  oversight of consumer product imports and is considering expanding the  information it receives from ACE. CPSC\u2019s internal Risk Assessment  Methodology targeting system focuses on 300 high-risk categories of  imports listed by CPSC, using U.S. Harmonized Tariff Schedule codes,  and currently receives the standard data that CBP obtains via ACE on all  imported goods under the agency\u2019s jurisdiction, according to CPSC  officials. After launching an initial pilot version of its system in 2011,  CPSC initiated discussion with the trade community in 2014 about  expanding its electronic data reporting requirements to add certain data  elements to the ACE message set that would assist the agency in  determining whether incoming products meet applicable standards.  However, CPSC reduced the scope of the proposed expansion of  reporting requirements after trade community representatives expressed  concerns. In 2016, CPSC concluded an initial, limited pilot test of  electronic filing of several additional data elements. According to CPSC  officials, the agency plans to study the benefits of adding these elements  before it initiates a second pilot and has not reached a final decision  about requiring importers to submit any additional information through  ACE.", "CPSC staff continue to rely primarily on the agency\u2019s internal targeting  system to target incoming shipments for review and possible inspection,  with contributions from CPSC staff at CBP\u2019s Commercial Targeting and  Analysis Center and at ports, according to CPSC officials. These officials  stated that the agency\u2019s representative at the Commercial Targeting and  Analysis Center employs CBP and CPSC resources to generate about 30  percent of the targeting orders disseminated to CPSC staff at ports.  Agency staff at two New York ports told us that ACE can be a useful  source of additional information for their local targeting efforts."], "subsections": []}, {"section_title": "APHIS Makes Limited Use of ACE Data to Review Imports for Agricultural Risks", "paragraphs": ["Animal and Plant Health Inspection  Service (APHIS)  APHIS collaborates with Customs and Border  Protection agricultural specialists to keep  agricultural pests and diseases out of the  United States. In pursuit of this mission, the  agency maintains Plant Protection and  Quarantine and Veterinary Services units at  some ports of entry and operates its own data  analysis system, the Agriculture Risk  Management system. APHIS also implements  a requirement to file a plant and plant produce  import declaration on arrival in the United  States, as mandated under the 2008 Lacey  Act. Importers may file the declaration in ACE  or in APHIS\u2019s Lacey Act Web Governance  System.", "APHIS\u2019s use of ACE data remains limited while the agency works to  expand linkages between its data processing systems and ACE.  According to APHIS officials, the agency did not establish an electronic  link to ACS, ACE\u2019s precursor system, and instead used paper forms in its  import review processes. In 2016, the agency pilot-tested electronic  submission of APHIS-specific partner agency message set data through  ACE and subsequently announced that data could be submitted through  ACE for APHIS compliance review. However, trade community  participation remains voluntary except for Lacey Act\u2013covered imports.  According to APHIS officials, companies that import APHIS-regulated  products have been slow to invest the resources required to transition to  reporting through ACE and, as a result, use paper forms to submit  information about most shipments of such products. However, APHIS  officials observed that reporting through ACE occurs for a small but  growing share of all imports subject to APHIS regulation.", "APHIS has been collaborating with CBP to provide for the effective flow of  information between ACE and APHIS\u2019s systems, but these efforts remain  incomplete. While staff of APHIS\u2019s Veterinary Services unit may access  ACE data directly to complete their import review processes, APHIS  intends for its Plant Protection and Quarantine staff to access ACE data  through the agency\u2019s Agriculture Risk Management system, according to  APHIS officials. However, these officials informed us that the functionality  required for accessing ACE data through that system is still under  development. They explained that Plant Protection and Quarantine staff  will use ACE to receive and reply to inquiries from, and provide  assistance to, CBP agricultural specialists regarding incoming cargo  requiring inspection and that significant coordination is required to fully  integrate the two agencies\u2019 data processing systems.", "APHIS officials observed that a CBP requirement for partner agencies to  complete extensive background checks of staff before they can receive  access to ACE has presented another obstacle to greater use of the  system by staff of both Plant Protection and Quarantine and Veterinary  Services. In November 2017, APHIS officials informed us that more  than 100 agency staff had completed these background checks and thus  had access to ACE but that the current number of users remained  insufficient to process many APHIS-regulated goods in ACE."], "subsections": []}, {"section_title": "Fish and Wildlife Service Makes Little Use of ACE Data", "paragraphs": ["Fish and Wildlife Service (FWS)  FWS monitors wildlife trade and works to  prevent the illegal importation or exportation  of species (including parts and products  thereof) that are regulated under the  Convention on International Trade in  Endangered Species of Wild Fauna and Flora  and U.S. wildlife laws and regulations,  according to  U.S. Customs and Border  Protection (CBP). Virtually all wildlife imports  and exports must be declared to FWS and  cleared by FWS wildlife officers, according to  CBP. To carry out its responsibilities, FWS  maintains staff at 38 U.S. ports and generally  requires that all internationally traded wildlife  and wildlife products be routed through  designated ports. FWS staff are able to place  holds on, to inspect, and to deny entry or exit  to incoming or outgoing cargo, according to  agency officials. FWS staff obtain information  about incoming or outgoing cargo from data  filed by the trade community in the agency\u2019s  own data analysis and targeting system, the  Law Enforcement Management Information  System.", "FWS use of ACE data in its import review and regulation activities has  been minimal, in part because of technical challenges. According to FWS  officials, the agency attempted during the 1990s to integrate its activities  with ACS. After concluding that ACS did not meet FWS needs, the  agency discontinued these efforts in 2000 and developed its own  Electronic Declarations system for the trade community to submit data to  the agency\u2019s data analysis and targeting system. Agency officials told us  that FWS port staff may access ACE and that some find it a useful source  of additional information on incoming cargo. However, FWS has not yet  integrated ACE into FWS operations.", "FWS officials told us that lack of alignment between the Harmonized  Tariff Schedule codes that CBP uses to organize its work and FWS\u2019s  regulatory responsibilities constitutes a significant challenge in integrating  ACE into FWS operations. For example, the tariff schedule may indicate  only that an import is leather footwear, while FWS operations may also  require additional information about the leather\u2019s source, such as the type  of animal, its nation of origin, and its domestication status. According to  FWS and CBP officials, FWS has so far been unable to overcome this  difficulty.", "According to FWS officials, the agency pilot-tested participation in ACE  during 2016 but suspended the test in January 2017 in light of trade  community concerns about expanded reporting requirements, lack of  clarity in the requirements, and uncertainty regarding FWS\u2019s authority to collect data electronically. According to FWS officials, the agency  subsequently began efforts to reach agreement with trade community  representatives and CBP on an approach to data collection through ACE  that will meet the needs of both FWS and the trade community. FWS  officials stated in November 2017 that these discussions had produced an  interim solution and were continuing and that FWS and CBP planned to  resume pilot testing in March or April 2018."], "subsections": []}]}]}, {"section_title": "ACE Users Report Cost Savings and Enforcement Benefits", "paragraphs": ["CBP and partner agency officials and trade community representatives  told us that their use of ACE has reduced costs by increasing the  efficiency of trade processing. CBP and partner agency officials also  reported that the system has strengthened their ability to enforce trade  laws and regulations. CBP has developed metrics for itself and the trade  community that estimate savings associated with the increased efficiency  of some processes in ACE. According to CBP documents and officials,  the agency plans to expand its metrics for capturing ACE benefits\u2014for  example, to estimate the value of increased efficiencies for partner  agencies and to measure any savings associated with the remaining core  ACE capabilities after they are implemented."], "subsections": [{"section_title": "ACE Users Report the System Has Improved Efficiency, Reduced Costs, and Enhanced Enforcement", "paragraphs": [], "subsections": [{"section_title": "Agencies and Trade Community Report Improved Efficiency and Associated Savings", "paragraphs": ["CBP, partner agencies, and trade community representatives who use  ACE to conduct their work told us that the use of ACE had improved the  efficiency of import processing and brought associated cost savings.", "Fewer paper records. According to CBP officials at the Port of New  York, the use of ACE for electronic data submission has significantly  reduced reliance on paper forms in processing imports. The officials  noted that before ACE was implemented, their reception area was  typically filled with couriers delivering large volumes of paper for  manual processing. CBP officials told us that electronic data  submission through ACE had allowed CBP and partner agencies to  automate over 250 paper forms. In addition, one trade community  representative we spoke with said that elimination of paper records  had been the primary benefit realized through ACE implementation.", "CBP has estimated, on the basis of an informal poll survey of private  companies, that eliminating document delivery to CBP offices would  save $25 per courier trip.", "Faster processing. According to CBP and partner agency officials,  ACE\u2019s automated review of data submitted by importing companies  speeds the agencies\u2019 processing and clearing of eligible shipments for  release. CBP officials at the Port of New York commented that  although reviewing and clearing incoming cargo for release through  ACS required approximately 24 hours, performing this process  through ACE takes only a few minutes if data are complete and  properly formatted and if the cargo does not require inspection. For  example, CBP officials stated that the Environmental Protection  Agency formerly took an average of about 4 days to clear cargo for  release into the U.S. market but now takes only seconds to clear  nonproblematic shipments. CBP officials further observed that the  reduction in document processing and the elimination of manual data  review for nonproblematic imports increases the time available for  CBP officials at ports to engage in tasks such as examining cargo that  may violate U.S. trade and customs laws. In addition, NHTSA officials  stated that ACE had substantially speeded their review and clearance  process. Further, FDA reported that since the agency\u2019s cargo review  and clearance process had been linked to ACE, the portion of  incoming FDA-regulated cargo receiving an automated \u201cmay proceed\u201d  had increased from 26 to 62 percent and processing time for these  entries averaged less than 2 minutes. According to trade community  representatives and CBP officials, ACE has also dramatically reduced  the time required to file bond applications, from several days to a few  seconds.", "Reduced labor and storage costs. CBP officials and trade  community representatives reported that efficiency improvements  resulting from the use of ACE can lead to substantial labor- and  storage-cost savings for the trade community. CBP officials observed  that expedited processing can reduce storage and demurrage costs  for importers. For example, CBP officials commented that  companies in the Newark, N.J., area could be charged $250 to $300  per day to store a container awaiting clearance to enter the U.S.  market.", "Fewer supply chain disruptions. CBP and trade community  representatives reported that ACE had reduced the negative impacts  that import processing delays can have on company supply chains.  For example, a pharmaceutical company representative stated that  ACE had reduced delays in processing incoming cargo that, before  ACE was implemented, sometimes lasted for 10 days or longer,  resulting in costly supply chain failures. According to this  representative, a longer-than-expected delay of an imported material  that is a vital ingredient in a time-sensitive clinical trial or a treatment  could result in significant material losses."], "subsections": []}, {"section_title": "CBP and Partner Agencies Report ACE Has Improved Enforcement", "paragraphs": ["While ACE is not a targeting system, the data that ACE provides has  improved CBP\u2019s and partner agencies\u2019 ability to identify and examine  incoming cargo for inspection, according to CBP and partner agency  officials. For example, ACE, in addition to other sources, provides data  that CBP uses in its Automated Targeting System and that most of the  partner agencies we examined use in their data analysis and targeting  systems to flag relatively high-risk cargo for possible inspection by port  officials. (See text box for examples of CBP\u2019s and partner agencies\u2019  targeting efforts.)", "Examples of CBP and Partner Agency Efforts to Target High-Risk Imports U.S. Customs and Border Protection (CBP) and its partner agencies perform targeting of  imports at the national and local levels. For example:", "CBP. At the national level, CBP maintains the Automated Targeting System, which  compares traveler, cargo, and conveyance information against law enforcement,  intelligence, and other enforcement data, using risk-based targeting scenarios and  assessments to identify relatively high-risk cargo. CBP also operates the Commercial  Targeting and Analysis Center, which facilitates targeting and enforcement  information sharing among partner agencies involved in clearing or licensing cargo. In  addition, CBP maintains five National Targeting and Analysis Groups, each targeting  higher-risk imports related to one of the CBP\u2019s priority trade issues. For instance, the  National Targeting and Analysis Group for Trade Agreements targets shipments for  which the country of origin has been misrepresented to avoid import duties. CBP  officials at ports of entry also conduct locally focused targeting efforts.", "Partner agencies. All five of the partner agencies we selected for our review\u2014the  Food and Drug Administration, the National Highway Traffic Safety Administration,  the Consumer Product Safety Commission, the Animal and Plant Health Inspection  Service, and the Fish and Wildlife Service\u2014work with CBP in the Commercial  Targeting and Analysis Center while also employing their own import data analysis  and targeting systems. In addition, agencies with personnel at U.S. ports of entry may  conduct locally focused targeting efforts.", "CBP officials indicated that ACE had improved their trade enforcement  efforts. For example:", "CBP officials stated that ACE\u2019s streamlining of import processing  helps to better ensure compliance with trade laws and regulations.  CBP port staff stated that reduction in the time required to process  paper forms has allowed them to devote more time to higher value- added activities such as inspecting incoming cargo. In addition, CBP  officials at the Commercial Targeting and Analysis Center said that it  was easier to access and generate reports in ACE than in ACS.", "CBP officials observed that ACE\u2019s collection of additional information  facilitates trade enforcement. Officials in the agency\u2019s National  Targeting and Analysis Groups explained that ACE functions as a  valuable system of record that can be employed to refine and focus  targeting efforts, as the results of each examination undertaken are  recorded in ACE for future reference. Similarly, CBP officers in the  New York area said that ACE was a valuable source of additional  information\u2014for example, data on particular products or importing  companies\u2014that helped them in their local targeting efforts.", "In addition, partner agency officials at ports indicated that ACE data were  indirectly or directly useful in their enforcement efforts. For example, FDA  officials in the New York area told us that, while they do not access ACE  directly, FDA\u2019s targeting system, on which they primarily rely, does  access ACE data. FDA headquarters officials noted that ACE provides  the agency\u2019s targeting system with more data elements than it received  through ACS and that this has led to greater processing efficiency. A  CPSC port official stated that he found ACE a very useful source of  information that helped him to refine his local targeting efforts.", "CBP expects the use of ACE to also yield indirect, economy-wide benefits  by improving the targeting of shipments that violate U.S. trade policy,  according to a CBP official and a CBP analysis. For example, according  to a CBP official we interviewed, more-thorough enforcement of U.S. anti- dumping and countervailing duty orders would reduce the entry of  products that unfairly compete with U.S. producers. Similarly, a cost- benefit analysis that CBP conducted in 2002 cited reduced predatory or  unfair trade practices as a potential benefit of ACE. In addition, the CBP  official observed that the use of ACE for targeting shipments could help to  prevent injuries to American consumers by reducing the number of  unsafe foreign products that enter the U.S. market."], "subsections": []}]}, {"section_title": "CBP Has Developed, and Plans to Expand, Metrics to Estimate the Value of Process Efficiencies Gained through ACE", "paragraphs": [], "subsections": [{"section_title": "CBP Has Developed Some Metrics to Value Efficiency Gains for Itself and the Trade Community", "paragraphs": ["CBP has developed metrics to estimate the value of efficiency gains  associated with the use of some of the implemented ACE capabilities for  itself and the trade community. CBP\u2019s metrics capture reductions in the  time required for CBP staff to complete certain import processes now  included in ACE and translate these efficiency gains into dollar values.  CBP performs similar calculations for the trade community, using survey  data from companies on the savings they estimate are realized when  import processes are transitioned into ACE. For fiscal year 2017, CBP  estimated that efficiencies gained through the implemented core ACE  capabilities for which it had developed metrics had a total value of nearly  $28 million for itself and about $52 million for the trade community. These  metrics estimate potential cost savings associated with efficiency gains  resulting from the use of ACE, according to CBP officials; the estimates  do not account for CBP\u2019s costs for developing and maintaining ACE,  which, according to CBP, amounted to about $118 million in fiscal year  2017. In addition, the estimates do not account for costs that the trade  community has sustained in adapting to ACE. For example, one  representative of a large company estimated that the total cost of  developing appropriate software had exceeded $12 million.", "CBP\u2019s metrics capture increased efficiency gains in a number of areas.  For example, ACE includes a feature that allows members of the trade  community to submit corrections to data on incoming shipments after the  data have been summarized and presented to, and accepted by, CBP.", "Importers formerly requested such \u201cpost summary corrections\u201d by  submitting a paper form for CBP\u2019s review. To capture the value of this  procedural change for CBP, the agency surveys CBP officials to  determine their time savings on each post summary correction and  multiplies the average per-transaction time saved by the number of  summaries submitted and the CBP officials\u2019 average hourly compensation  rate. To capture the value of the change for members of the trade  community, CBP surveys importers, brokers, and shippers to determine  their average savings for each transaction and multiplies the reported  savings by the number of summaries submitted. CBP\u2019s metrics also  capture reductions in the time that CBP officers devote to completing  primary processing for incoming cargo, the time that trucks must spend  waiting at border crossings for clearance to enter the United States, and  the time that CBP and members of the trade community devote to  processing applications for customs bonds, among other things.", "CBP\u2019s estimate of the value of efficiencies resulting from the use of ACE  has grown over time. For example, for fiscal year 2014, CBP estimated  the total value of these efficiencies for CBP and the trade community at  about $33 million\u2014about 40 percent of the total value of such efficiencies  CBP reported for fiscal year 2017. This increase reflects CBP\u2019s progress  in deploying core capabilities and in developing and applying metrics to  capture the capabilities\u2019 value to CBP and the trade community. The  increase in the estimated value also reflects growing use of ACE by  partner agencies and members of the trade community. For example, the  number of import entry summaries that partner agencies filed in ACE  increased fourfold in the 3-year period from January 2014 through  January 2017.", "According to CBP officials, CBP and partner agencies are unable to  develop metrics to quantify trade enforcement benefits that may have  resulted from their use of ACE, in part because of a lack of baseline  information and the difficulty of isolating such impacts. For example, an  increase in seizures may reflect increased efforts, increased efficiency in  those efforts, or an increase in the volume of imports subject to seizure.  Similarly, according to a CBP official, a lack of baseline information  makes it difficult to assess any broader impacts of improved trade  enforcement resulting from the use of ACE, such as prevention of injuries  to American consumers through better targeting of harmful foreign  products."], "subsections": []}, {"section_title": "CBP Plans to Expand Its Metrics for Savings and Other Benefits", "paragraphs": ["CBP reported that it is working to expand its metrics for estimating cost  savings associated with improved trade processing efficiencies and other  benefits resulting from the use of ACE.", "CBP officials stated that they expect to have collected sufficient data  in the near future to begin reporting on the estimated dollar value of  efficiencies that partner agencies are realizing through ACE. While  CBP measures efficiency improvements and associated savings  resulting from CBP and the trade community\u2019s use of ACE, CBP and  most partner agencies currently do not collect or report information  about efficiency improvements or associated savings that the partner  agencies may have realized.", "CBP has prepared baseline information that will allow it to measure  efficiency improvements and estimate any savings associated with  several post-release core ACE capabilities, including reconciliation,  liquidation, and drawback, after they are implemented. For example,  on the basis of an internal study completed in late 2016, CBP has  determined that agency officials take about 1.8 hours, on average, to  process a drawback entry summary. Comparing this average time  with the average time required after this post-release capability is  implemented in ACE will allow CBP to calculate the average time  saved per transaction. CBP plans to obtain comparable information  from the trade community to allow similar calculations of efficiency  improvements for importing companies.", "CBP officials stated that, while the agency does not currently measure  any improvement in revenue collection that may have resulted from  the implemented capabilities, CBP plans to undertake efforts to better  understand the current revenue collection environment and to explore  ways to collect baseline information on revenue collections. The  officials said that CBP intends to identify revenue collection metrics  that are quantifiable and reportable after it deploys the liquidation and  reconciliation capabilities in ACE and completes deployment of  collections.", "According to CBP documents, CBP\u2019s Office of Trade has outlined a  strategy for improving the agency\u2019s ability to measure benefits  resulting from the use of ACE. CBP documents indicate that this  strategy will include efforts to measure, to the extent that data are  available, the impact of any enhancements to the system after  implementation of core capabilities is complete, including  enhancements identified as critical components in improving import or  export operations."], "subsections": []}]}]}, {"section_title": "Approach to Managing ACE after Implementation of Core Capabilities Has Not Been Established", "paragraphs": ["CBP does not have a process in place to manage the continued  development of ACE after February 2018, when it finished implementing  most of the capabilities it identified as core. ACE users in CBP, partner  agencies, and the trade community have identified a number of  shortcomings in ACE and have suggested enhancements to address  them. CBP has identified a small number of enhancements suggested by  CBP and the trade community as near-term priorities and identified a  number of others to consider for priority status. However, a substantial  number of additional suggested enhancements, including submissions  from partner agencies, remain unaddressed. Further, a process for  prioritizing all suggested enhancements has not been established.  Moreover, funding for the continued development of ACE after fiscal year  2018\u2014including funding to address most of the suggested  enhancements\u2014has not been identified. CBP and its partner agencies  are working to establish a management approach that includes processes  for prioritizing and funding enhancements from all sources, but it is  unclear when these discussions will conclude or the extent to which they  will resolve outstanding issues. Federal guidance calls for establishing the  organizational structure necessary to achieve objectives, including  compatible means of operating across agency boundaries."], "subsections": [{"section_title": "ACE Users Have Identified Shortcomings in ACE and Suggested Enhancements to Address Them", "paragraphs": ["ACE users in CBP, the trade community, and partner agencies have  identified a variety of shortcomings in ACE and have suggested  enhancements to address them. Examples of reported shortcomings  include the following:", "CBP officials tasked with validating data in ACE to assess compliance  with trade laws and with processing importers\u2019 protests of duty  assessments told us that performing those tasks in ACE is labor  intensive and cumbersome.", "CBP and agency officials noted that ACE has not yet been updated to  respond to a number of legal requirements, including several TFTEA  provisions and agency regulations necessitating certain  enhancements to ACE.", "Some partner agency officials cited capabilities that were included in  ACS but, despite being needed by the agencies for their import review  and enforcement responsibilities, had not been deployed in ACE.", "CBP agriculture specialists identified a number of shortcomings in  ACE capabilities for processing imported agricultural goods. ACE  contains a \u201cworkspace\u201d specifically designed for agricultural goods,  but it is incomplete.", "Trade community officials highlighted the need for a variety of  improvements in the arrival/cargo-release and post-release phases of  the import process, such as improving the ability of agency officials  and the trade community to send messages in ACE and increasing  the size of files that the trade community can submit.", "A 2016 CBP survey of ACE users, including trade community  representatives and partner agency officials, found that while the  majority of respondents were satisfied with the ease of using ACE,  substantial minorities (29 percent of CBP respondents, 36 percent of  partner agency respondents, and 31 percent of trade community  respondents) were dissatisfied, citing concern with navigation and  functional limitations.", "In response to such shortcomings, ACE users have submitted a large  number of suggestions for enhancements to ACE. According to a CBP  document, as of July 2017, 671 enhancements had been submitted since  the early 2000s and many of these had been addressed; however, a  third of those submitted (223) remained to be addressed. Of the  unaddressed enhancements, nearly three-quarters were submitted by  trade community representatives (see fig. 3). According to CBP officials,  funding constraints, as well as the effort required to complete deployment  of core ACE capabilities within established time frames, largely precluded  efforts to address enhancements over the last year. CBP officials stated  that, because ACE is not funded to support enhancements, funding for  enhancements suggested by CBP or the trade community must be  provided by a CBP unit and funding for enhancements suggested by a  partner agency must be provided by that agency.", "While postponing action on these suggestions, as of November 2017  CBP had prioritized seven enhancements suggested by CBP staff or the  trade community to be implemented in the near term, most of them in  response to legal or technical requirements. CBP also had identified 22  additional enhancements suggested by CBP staff or the trade community  for consideration as priorities.", "Prioritized enhancements. CBP\u2019s seven prioritized ACE enhancements  include two that had been scheduled for implementation in fiscal year  2017 and five that were scheduled for implementation as post-core  activities begin. According to CBP officials, the agency prioritized three  of the seven enhancements in response to provisions in TFTEA; one of  these three, pertaining to drawback processes, was necessitated by  changes in the act, and the other two were intended to support changes  in CBP procedure mandated by the act, according to CBP officials (see  table 3). The CBP officials said that a fourth enhancement was required  to comply with a new electronic filing rule by the U.S. Court of  International Trade and that a fifth was needed to correct technical  obsolescence. As table 3 shows, the information that CBP officials  provided identified in general terms the enforcement or other benefits that  could be realized through addressing these prioritized enhancements. As  the table shows, as of September 2017, CBP had identified funding for  three of these seven priorities.", "Accepted but unprioritized enhancements. CBP officials also provided  us with a list of 22 unprioritized enhancements suggested by CBP staff  and the trade community that had been presented to CBP\u2019s Product  Management Committee for assessment and possible prioritization.  Several of these enhancements are aimed at strengthening ACE  provisions for processing agricultural imports. For example, one  enhancement would improve the interface between ACE and various  Department of Agriculture subsystems, reducing the need to manually  enter data in multiple systems. Another enhancement would integrate the  ACE agricultural workspace and CBP\u2019s Automated Targeting System,  strengthening targeting for agricultural imports. The list of unprioritized  enhancements also includes initiatives to simplify several import  processing steps for the trade community, allowing faster processing and  associated cost savings."], "subsections": []}, {"section_title": "Process for Prioritizing Enhancements from All Sources Has Not Been Established", "paragraphs": ["While CBP has a process for prioritizing enhancements suggested by its  own staff or by members of the trade community (see text box), no  process has been established for prioritizing enhancements suggested by  partner agencies or for making priority decisions among all suggested  enhancements, including those submitted by partner agencies.  Enhancements suggested by partner agencies are provided to the Border  Interagency Executive Council (BIEC) for prioritization. The BIEC, which  CBP chairs, was created to improve coordination among ITDS partner  agencies. The BIEC\u2019s responsibilities extend to reviewing and prioritizing  partner agency suggestions for enhancing ACE, according to CBP  officials. However, CBP officials told us in September 2017 that the BIEC  did not have explicit criteria for prioritizing partner agency suggestions  and had not yet agreed on a cost-sharing strategy that would allow  multiple agencies to share the cost of enhancements that might benefit  those agencies. In the absence of such a process, CBP has been  evaluating partner agency\u2013suggested enhancements on a first-come,  first-served basis, and partner agencies requesting such enhancements  are required to pay for them on a fee-for-service basis, according to CBP  officials.", "CBP\u2019s Documented Process for Prioritizing ACE Enhancements Suggested by CBP  Staff or the Trade Community", "CBP policy offices consider six criteria to decide whether to accept or reject  enhancements suggested by CBP and the trade community: (1) completion of  technical requirements to assess the required level of effort; (2) legal and regulatory  provisions; (3) overlap with, or connection to, other enhancements in development or  already deployed; (4) availability of funding and contract vehicles; (5) possible  burden on trade, especially on existing coding or business processes; and (6)  possible burden on CBP. CBP adds accepted enhancements to a list of  \u201cunprioritized initiatives.\u201d", "CBP\u2019s Product Management Committee considers four criteria in assessing  unprioritized initiatives for placement on the agency\u2019s \u201cshort list\u201d of priorities: (1) the  enhancement aligns with a CBP mission priority, (2) the enhancement meets a  legislative or regulatory requirement, (3) the enhancement is associated with a  security protocol or gap, and (4) funding for the enhancement is available. According  to CBP officials, an affirmative response to one or more of these criteria yields a  higher probability that the enhancement will be deemed a priority.  To prepare enhancements for development and deployment, CBP estimates the  level of effort required, gathers high-level requirements, and conducts impact  assessments. Once planning is complete, the CBP policy office sponsoring the  priority develops a business case for initiatives on the \u201cshort list\u201d of priorities,  including budget justification and information on potential benefits/return on  investment."], "subsections": []}, {"section_title": "Funding for ACE Development after Fiscal Year 2018 Has Not Been Identified", "paragraphs": ["Although CBP identified funding to complete the implementation of core  ACE capabilities as defined by CBP in fiscal year 2018, officials of CBP  and its partner agencies stated that they have not identified funding for  the continued development of ACE, including most of the enhancements  that have been suggested by CBP, the trade community, or partner  agencies. Through fiscal year 2017, CBP maintained separate accounts  to support ACE operations and maintenance and ACE acquisitions\u2014that  is, development and deployment of new ACE capabilities. According to  CBP officials, the agency\u2019s ACE acquisition funds were used exclusively  to develop and deploy ACE capabilities that the agency defined as core.  Neither acquisition funds nor operations and maintenance funds were  available for enhancements to the core system, according to the officials.", "However, CBP officials told us in November 2017 that, beginning in fiscal  year 2018, the agency\u2019s planned annual budgets for ACE would include  funds only for operations and maintenance and would no longer include  funds to support acquisitions. CBP officials stated that the agency had  identified additional funding to complete core ACE capabilities, other than  collections, in fiscal year 2018 and to ensure that these capabilities  operate in concert with ACS, which the agency uses for collections.  However, the agency had not yet identified funding for several  enhancements that CBP considered near-term priorities (see table 3) or  for the longer list of accepted but unprioritized enhancements suggested  by CBP staff or the trade community. CBP officials estimated that  supporting post-core development will require about $7 million in  additional funds in fiscal year 2019 and slightly more than $14 million  annually in additional funds in the succeeding 3 years. Figure 4  summarizes CBP\u2019s anticipated ACE funding requirements for fiscal years  2019 through 2022, as identified by CBP in November 2016 and  September 2017."], "subsections": []}, {"section_title": "Approach to Managing ACE after Completion of Core Capabilities Has Not Been Finalized", "paragraphs": ["CBP is working with its partner agencies in the BIEC to reach agreement  on an approach to managing ACE\u2019s continued development after  completing the implementation of core capabilities, but this approach has  not been finalized. According to CBP officials and some partner agency  officials, the BIEC is seeking agreement on processes for prioritizing all  suggested enhancements and for sharing the costs of maintaining and  enhancing the system.", "Process for prioritizing enhancements. According to CBP officials,  the BIEC is developing a process for prioritizing enhancements,  including criteria to be applied and a governance process to guide  decision making. CBP officials stated that this process would be  applied to all suggested enhancements, regardless of their source.", "Process for sharing costs. According to CBP officials, the BIEC  agreed in early 2016 to begin working toward consensus among CBP  and its partner agencies on an approach to sharing future ACE  operations and maintenance and development costs. This consensus  is to include an agreement on criteria for classifying suggested  enhancements as operations and maintenance or as new capabilities  and on funding arrangements for both categories. Additionally, the  Office of Management and Budget requested the Department of  Homeland Security and CBP to develop a cost-sharing framework,  according to CBP.", "However, the BIEC has not yet finalized a management approach to  address these tasks. According to CBP, in early December 2017 the  BIEC produced a document, titled \u201cBIEC Principals Single Window  Sustainment Decision Memorandum,\u201d proposing a \u201csustainment model\u201d  for ACE and received partner agency comments on this document later  that month. CBP did not provide us with copies of the memorandum or  the partner agencies\u2019 comments but stated that the comments covered  the following areas: acceptance of a proposed definition of operations and  maintenance and a \u201cpay as you go\u201d funding model, evaluation criteria for  prioritizing suggested enhancements, and an overall process for making  prioritization decisions. According to CBP officials, a draft cost-sharing  and prioritization process plan was distributed to the BIEC principals and  discussed in detail at a principals meeting on January 30, 2018, and work  on refining and finalizing this plan is continuing. CBP officials estimated  that this process would be completed by October 31, 2018.", "In light of funding constraints and the need for broad interagency  agreement to adopt processes such as those reportedly under discussion  in the BIEC, it is unclear whether these discussions will conclude within  the specified time frame or whether the sustainment model will resolve all  outstanding issues in a manner satisfactory to participating agencies. For  example, according to FDA and Treasury officials, some partner agencies  maintain that certain improvements to ACE suggested by partner  agencies should be regarded as part of the core system\u2014traditionally  supported by CBP acquisition funds\u2014rather than treated as  enhancements that must be supported by the agencies that suggest  them. It remains unclear how such enhancements will be categorized or  funded, since CBP has indicated that it will no longer allocate funds to  ACE acquisition and that operations and maintenance funds have  traditionally not been used for such purposes.", "The solutions to these unresolved issues will affect both CBP and its  partner agencies, according to agency officials. FDA officials observed  that CBP will not fund or implement additional capabilities without funding  for these efforts, whether through its own budget or from partner  agencies. Treasury officials observed that interagency coordination and  transfers of funding are cumbersome, costly processes. FDA officials also  commented that, rather than try to arrange cost sharing with other  agencies that may have funding constraints, partner agencies might  develop alternative systems to compensate for capabilities lacking in  ACE. FDA officials observed that this could result in multiple agencies\u2019  developing separate systems to meet similar needs.", "According to Standards for Internal Control in the Federal Government,  management should establish an appropriate organizational structure and  communicate effectively to achieve agency objectives. In addition, key  practices to enhance and sustain interagency collaboration include  articulating a common outcome, establishing mutually reinforcing or joint  strategies, and establishing compatible means of operating across  agency boundaries. Until CBP, in collaboration with partner agencies,  finalizes its management approach to ACE, including processes for  prioritizing, and sharing costs for, critical enhancements, U.S. agencies  and the trade community will not realize the system\u2019s full potential  benefits."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The need for an international trade data system to enhance U.S.  agencies\u2019 efficiency and effectiveness in processing cargo and enforcing  U.S. trade laws has long been clear. Indeed, information available from  CBP, partner agencies, and the trade community points to savings and  enforcement benefits resulting from the implemented core ACE  capabilities, including faster import processing; improved targeting; and  other benefits to partner agencies, the trade community, and consumers.  However, realization of the full benefits of transitioning to ACE continues  to be hampered by a variety of functional shortcomings\u2019.", "CBP and its partner agencies recognize the need to agree on an  approach to maintaining and continuing to develop the system after core  ACE is completed. While CBP recently completed deployment of most of  the capabilities that it identified as core, CBP and its partner agencies in  the BIEC have not yet agreed on processes for prioritizing  enhancements\u2014including those that ACE users have suggested to  improve the system\u2014and for sharing the costs of operating and  enhancing the system. Until CBP, in collaboration with its partner  agencies, finalizes an approach to post-core management of ACE that  includes such processes, as well as time frames for implementing them,  CBP, its partner agencies, and the trade community will not realize the full  potential benefits of the substantial investment ACE represents."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to DHS:  The Secretary of Homeland Security should ensure that the  Commissioner of CBP, in collaboration with partner agencies, finalizes an  interagency approach to the post-core management of ACE that includes  (1) processes for prioritizing enhancements to ACE and for sharing ACE  operations and maintenance and development costs, including the costs  of suggested enhancements among partner agencies that may benefit,  and (2) time frames for implementing such processes. (Recommendation  1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS; the Departments of Agriculture,  Health and Human Services, the Interior, the Treasury, and  Transportation; and CPSC. DHS provided substantive comments, which  are reproduced in appendix III. In addition, DHS; the Departments of  Health and Human Services, the Interior, Transportation, and the  Treasury; and CPSC provided technical comments, which we  incorporated as appropriate. The Department of Agriculture did not  provide comments.", "In its substantive comments, DHS concurred with our recommendation.  DHS also reported that some steps toward developing an interagency  approach to post-core management of ACE had been taken after we  distributed our draft report for agency comment. DHS estimated that the  process would be completed by the end of October 2018. We updated  our report accordingly.", "We are sending copies of this report to the appropriate congressional  committees, the Commissioner of CBP, the Secretaries of the  Departments of Agriculture, Health and Human Services, the Interior, the  Treasury, and Transportation. 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) 512-8612 or gianopoulosk.gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we examine (1) the status of U.S. Customs and Border  Protection\u2019s (CBP) efforts to implement core Automated Commercial  Environment (ACE) capabilities since 2013, (2) CBP partner agencies\u2019  access to ACE and use of the system for import processing, (3) available  information about any cost savings and trade enforcement benefits that  have resulted from using ACE, and (4) the approach that will be used to  manage ACE after core capabilities have been completed.", "To examine CBP\u2019s efforts to implement ACE since 2013, we obtained  information from CBP\u2019s Office of Information Technology and Office of  Trade, which have been responsible for developing and administering  ACE. CBP documents reviewed include ACE deployment schedules,  acquisition decision memos, remediation plans, cost estimates, and a  staff post mortem report on the ACE acquisition process. We also  interviewed officials from CBP and five partner agencies regarding the  ACE acquisition process since 2013: the Department of Health and  Human Services\u2019 Food and Drug Administration (FDA), the Department of  Transportation\u2019s National Highway Traffic Safety Administration (NHTSA),  the Consumer Product Safety Commission (CPSC), the Department of  Agriculture\u2019s Animal and Plant Health Inspection Service (APHIS), and  the Department of the Interior\u2019s Fish and Wildlife Service (FWS). We  selected these five agencies on the basis of their size (to include both  large and small agencies), the degree to which they require  documentation for clearing or licensing cargo, and recommendations from  officials of CBP and the Department of the Treasury regarding agencies  that would provide a range of experience in transitioning to ACE. We also  reviewed prior GAO reports on ACE acquisition. While ACE is designed  to permit management of both exports and imports, we focused on the  implementation of ACE capabilities to manage imports, because CBP\u2019s  efforts to complete and improve ACE functionality are currently focused  primarily on import trade.", "To examine other agencies\u2019 progress in accessing and using ACE data,  we obtained summary information on ACE usage for CBP\u2019s 49 partner  agencies, including information such as whether an agency had a  memorandum of understanding with CBP regarding ACE access, whether  it accessed trade data through ACE data and how it did so. While we  collected information on all 49 partner agencies, we focused our analysis on the 22 partner agencies that CBP identified as requiring  documentation for clearing or licensing cargo for import or export. To  collect this information, we identified and reviewed Federal Register  notices posted by the agencies. We obtained documentation on agency  participation in ACE from CBP officials and from the Department of the  Treasury. We also discussed the documentation and our descriptions  with CBP officials and partner agency officials. To understand how the  five selected agencies used ACE, we conducted case studies that  included reviewing CBP user guidance documents and documents from  the respective agencies on their transitions and interviewing agency  officials in Washington, D.C., and at the ports of New York and Newark.", "To examine available information about actual and potential cost savings  and enforcement benefits from using ACE, we obtained information on  efforts by CBP, partner agencies, and companies involved in international  trade to identify and measure efficiency gains and potential cost savings.  The CBP documents we reviewed included listings and definitions of  metrics for determining efficiency gains and CBP\u2019s method for using  those to calculate potential cost savings, and also documentation of  CBP\u2019s process for determining the reliability of the data and measures. In  addition, we reviewed a 2015 report on CBP\u2019s ACE metrics by the DHS  Office of the Inspector General, which recommended that CBP strengthen  its metrics; the Inspector General subsequently closed those  recommendations as implemented. On the basis of our review of the  available information, we determined that CBP\u2019s metrics were sufficiently  reliable for the purpose of conveying the estimated value of these  efficiency gains. To understand earlier CBP estimates of potential cost  savings from ACE, we reviewed a cost-benefit analysis conducted and  revised by CBP during 2002-2004. We also reviewed a more recent cost  benefit analysis conducted by FDA. In addition, we interviewed officials at  CBP and the 5 case study partner agencies regarding information on  potential cost savings and other benefits from ACE, including officials in  CBP\u2019s Office of Enforcement who discussed challenges with developing  metrics to measure enforcement benefits. In addition, to obtain  information on observed and potentials benefits and cost savings of ACE  to importers and exporters, and related companies, we interviewed  representatives of these companies. We also obtained information from  CBP regarding their preparations to assess the benefits of enhancements  to ACE after core ACE capabilities are completed. We interviewed CBP  and agency officials in Washington, D.C., and at the ports of New York,  N.Y., and Newark, N.J., concerning benefits and challenges associated  with using ACE. We selected these ports because they allowed us to  interview CBP officials charged with processing a large volume of diverse  imported goods, representing both air and sea cargo. These ports also  afforded an opportunity to interview field staff representing four of our five  case-study agencies (APHIS, CPSC, FDA, and FWS). We also discussed  these issues with CBP officials with the agency\u2019s Center for Commercial  Targeting and Analysis, each of CBP\u2019s five National Targeting and  Analysis Groups, and six of the agency\u2019s 10 Centers of Excellence and  Expertise (national-level CBP units responsible for processing imported  goods associated with designated industry sectors), which we  judgmentally selected. We also discussed these issues with 16 trade  community representatives\u2014that is, representatives of companies that  buy and sell internationally traded products as well as brokers and  shippers that work for and with these companies\u2014some of whom  participate in organizations that advise CBP regarding its operations.  These 16 representatives included members of the Trade Support  Network, a private sector group created to provide input to CBP on its  business processes, including ACE; the Commercial Customs Operations  Advisory Committee, a private sector group created to advise the  Departments of the Treasury and Homeland Security on CBP\u2019s  commercial operations; and the National Customs Brokers and Freight  Forwarders Association.", "To analyze the approach that will be used to manage ACE after core  capabilities have been completed, we obtained information on CBP  processes to identify, evaluate, and operationalize changes to enhance  ACE. We also obtained information from CBP about its projected \u201cpost- core\u201d budgetary needs. In addition, we reviewed documentation from  CBP regarding interagency dialogue on post-core management of ACE  and interviewed officials from CBP and other agencies to obtain their  views on the challenges to be addressed and progress toward addressing  them.", "We conducted this performance audit from January 2017 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Partner Agency Participation in ACE", "paragraphs": ["Table 4 provides information about participation in U.S. Customs and  Border Protection\u2019s (CBP) Automated Commercial Environment (ACE) by  the 22 partner agencies that CBP identified as requiring documentation to  clear or license cargo. Table 5 provides information about participation in  ACE by the 27 partner agencies that CBP did not identify as requiring  such documentation."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Celia Thomas (Assistant  Director), Michael McAtee (Analyst-in-Charge), Marybeth Acac, Ryan  Deloughry, Philip Farah, Reid Lowe, Scott McClinton, Maria Stattel,  Bryant Torres, and Alex Welsh made key contributions to this report. Neil  Doherty and Justine Lazaro provided technical assistance."], "subsections": []}]}], "fastfact": ["Customs and Border Protection coordinates with 22 other agencies to process imports, ensuring that they comply with U.S. laws. In 1994, CBP began developing an information system, the Automated Commercial Environment, to better coordinate and streamline import processing.", "After delays, most key functions of the system are in use and yielding benefits. But users report problems, such as limits on messaging and file size, that can make it difficult to work within the system.", "We recommended that CBP, with other agencies, finalize a plan to improve and maintain the system."]}
{"id": "GAO-18-178", "url": "https://www.gao.gov/products/GAO-18-178", "title": "Aviation Security: TSA Strengthened Foreign Airport Assessments and Air Carrier Inspections, but Could Improve Analysis to Better Address Deficiencies", "published_date": "2017-12-04T00:00:00", "released_date": "2017-12-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Approximately 300 foreign airports offer last point of departure flights to the United States. TSA is the federal agency with primary responsibility for securing the nation's civil aviation system and assesses foreign airports and inspects air carriers to ensure they have in place effective security measures. While TSA is authorized under U.S. law to conduct foreign airport assessments, it does not have authority to impose or otherwise enforce security requirements at foreign airports. TSA is authorized to impose and enforce requirements on air carriers. The Aviation Security Act of 2016 includes a provision for GAO to review TSA's effort to enhance security at foreign airports.", "This report addresses (1) steps TSA has taken to enhance foreign airport assessments and air carrier inspections since 2011, (2) the results of TSA's foreign airport assessments and air carrier inspections, and (3) steps TSA takes to address any deficiencies identified during foreign airport assessments and air carrier inspections. GAO reviewed TSA program data, interviewed TSA officials, and conducted site visits to TSA field locations that manage assessments and inspections."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration (TSA) has taken steps to enhance its foreign airport assessments and air carrier inspections since 2011, including aligning resources based on risk, resolving airport access issues, making evaluations more comprehensive, and creating operational efficiencies. For example, TSA has implemented targeted foreign airport assessments in locations where risk is high and developed the Global Risk Analysis and Decision Support System to strengthen data analysis. In addition, TSA has increased the number of joint airport assessments with the European Commission. Specifically, TSA officials GAO met with indicated that TSA's strong relationship with the European Commission has afforded the agency excellent access to foreign airports in Europe and a better understanding of vulnerabilities at these locations, which has resulted in more comprehensive assessments.", "In its analysis of TSA foreign airport assessment results, GAO found that during fiscal years 2012 through 2016 there was considerable regional variation among last point of departure airports in the level of compliance with select International Civil Aviation Organization security standards and recommended practices. TSA attributed this regional variation to lack of airport resources or technical knowledge, among other factors. TSA officials also stated that while these challenges are not easy to overcome, agency efforts, such as training host country staff, can help foreign airports reduce their vulnerability scores over time. GAO's analysis of TSA's foreign airport assessment data confirmed that point by demonstrating that most foreign airports categorized with poor vulnerability ratings in fiscal year 2012 improved their vulnerability score in at least one follow-up assessment during fiscal years 2012 through 2016.", "Meanwhile, U.S. and foreign-flagged air carriers providing last point of departure service to the United States from foreign airports complied with all TSA security requirements in most inspections, and TSA was able to resolve the majority of security deficiencies it identified with on-the-spot counseling. In some cases, TSA inspectors submitted violations for investigation because the violations were considered serious enough to potentially warrant an enforcement action.", "TSA addresses identified deficiencies at foreign airports through capacity development, such as training and on-the-spot counseling. However, GAO found that TSA's database for tracking the resolution status of security deficiencies did not have comprehensive data on security deficiencies' root causes and corrective actions. In addition, the database lacked adequate categorization mechanisms. For example, while it captures three broad categories of root causes (e.g., lack of knowledge) it does not capture subcategories (e.g., supervision) that would better explain the root causes of security deficiencies. Fully collecting these data and improving the specificity of categorization would help TSA strengthen analysis and decision making. For example, TSA would be better positioned to determine the extent to which airports that received particular types of capacity development assistance were able to close security vulnerabilities. This is a public version of a sensitive report issued in October 2017. Information that TSA deemed to be sensitive is omitted from this report."]}, {"section_title": "What GAO Recommends", "paragraphs": ["To help strengthen TSA's analysis and decision making, GAO recommends that TSA fully capture and more specifically categorize data on the root causes of security deficiencies that it identifies and corrective actions. TSA concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The April 2012 plot to detonate a bomb aboard a flight bound for the  United States, which U.S. intelligence officials foiled in the Arabian  Peninsula, and the October 2015 downing of a flight over the Sinai  Peninsula illustrate that civil aviation, including U.S.-bound flights,  remains a target of coordinated terrorist activity. Moreover, the threat has  become more diverse and terrorists are continually developing new  tactics to attack the aviation system, including advanced concealment of  improvised explosive devices in baggage and personal electronic  devices. Since approximately 300 airports in foreign countries offer last  point of departure flights to the United States, efforts to evaluate the  security of foreign airports and air carriers that service the United  States\u2014and mitigating any identified security risks\u2014are of vital  importance in ensuring the security of the aviation system.", "The Transportation Security Administration (TSA), within the U.S.  Department of Homeland Security (DHS), is the federal agency with  primary responsibility for securing the nation\u2019s civil aviation system and  has programs in place to help ensure the security of U.S.-bound flights.  Through its foreign airport assessment program, TSA determines whether  foreign airports that provide service to the United States are maintaining  and carrying out effective security measures. Although TSA is authorized  under U.S. law to conduct foreign airport assessments at intervals it  considers necessary, it may not perform an assessment of security  measures at a foreign airport without permission from the host  government. TSA also does not have authority to impose or otherwise  enforce security requirements at foreign airports and, therefore, seeks to  address security deficiencies it identifies through capacity building, such  as training of foreign airport staff and onsite consultation, and working  with U.S. and foreign-flagged air carriers (i.e., air carriers) to implement  security measures, among other things. In contrast, TSA is authorized  under U.S. law to place security requirements on air carriers that service  the United States and to take enforcement actions through its air carrier  inspection program if carriers fail to comply with the requirements. For  example, in June 2017, DHS announced new security requirements,  including heightened screening of personal electronic devices, for air  carriers operating last point of departure flights to the United States from  foreign airports.", "In 2007, we recommended that TSA take steps to improve oversight of its  foreign airport assessment and air carrier inspection programs. In 2011,  we reported on TSA\u2019s efforts to assess the security at foreign airports and  made several recommendations to enhance program efficiency and  effectiveness, among other things. DHS concurred with the  recommendations and has since taken a number of steps to address  them and improve the program. We discuss these and other actions TSA  has taken since 2011 later in this report.", "The Aviation Security Act of 2016 includes a provision for GAO to review  the efforts, capabilities, and effectiveness of TSA to enhance security  capabilities at foreign airports and determine if the implementation of such  efforts and capabilities effectively secures international-inbound aviation.  This report (1) describes steps TSA has taken to enhance foreign airport  assessments and air carrier inspections since 2011, (2) describes the  results of TSA\u2019s foreign airport assessments and air carrier inspections,  and (3) examines steps TSA takes to address any deficiencies identified  during foreign airport assessments and air carrier inspections.", "This report is a public version of a sensitive report that we issued in  October 2017. TSA deemed some of the information in our October  report to be Sensitive Security Information, which must be protected from  public disclosure. Therefore, this report omits sensitive information about  TSA\u2019s risk methodology, the standards that TSA uses to assess foreign  airports, and the specific results of TSA\u2019s foreign airport assessments and  air carrier inspections. Although the information provided in this report is  more limited, the report addresses the same objectives as the sensitive  report and uses the same methodology.", "To address these objectives, we reviewed the relevant laws and  regulations pursuant to which TSA conducts foreign airport assessments  and air carrier inspections. We reviewed various TSA documents on  program management and strategic planning. Specifically, we reviewed  TSA\u2019s 2016 Foreign Airport Assessment Program Standard Operating  Procedures (SOP), which prescribes program and operational guidance  for assessing security measures at foreign airports and informs TSA  personnel at all levels of what is expected of them in the implementation  of the program. We also reviewed the job aids that TSA inspectors use  during each assessment and inspection, which are intended to ensure  that the TSA-specified International Civil Aviation Organization (ICAO)  aviation security standards and recommended practices (referred to  collectively in this report as ICAO standards unless otherwise noted) and  air carrier security program requirements are fully evaluated during each  assessment. In addition, we interviewed senior TSA officials, inspectors,  and country and industry liaisons located at TSA headquarters and in the  field. Specifically, we conducted site visits to a non-generalizable  selection of three of the six TSA regional operations centers (ROC)  located in Reston, Miami, and Frankfurt. We based our site visit  selections on the number and type of staff available at each location and  geographic dispersion. During our interviews with TSA staff, we  discussed TSA\u2019s efforts to enhance foreign airport assessments and air  carrier inspections, the results of these evaluations, and the extent to  which TSA uses information at its disposal to inform capacity  development efforts for airports and air carriers. We also interviewed  other stakeholders, such as the Department of State (State) and the  European Commission (EC) to discuss efforts these organizations have in  place to enhance international aviation security and their experiences  coordinating with TSA.", "To obtain a greater understanding of TSA\u2019s foreign airport assessment  and air carrier inspection processes, including how TSA works with host  nation officials and air carrier representatives, we accompanied a team of  TSA inspectors during an air carrier inspection at an airport in Europe,  and we spoke with airport officials and representatives from two air  carriers at a separate European airport. We based our site selection on  several factors, including the air carrier locations TSA had plans to  inspect during the course of our audit work and host government  willingness to allow us to accompany TSA.", "To describe the results of TSA\u2019s foreign airport assessments and air  carrier inspections, we obtained and analyzed the results of TSA\u2019s foreign  airport assessments and air carrier inspections from fiscal years 2012  through 2016, the five-year period since our previous review. Specifically,  we analyzed the frequency with which foreign airports and air carriers  complied with select ICAO standards that TSA uses and TSA  requirements, such as passenger screening, baggage screening, and  access controls, among others. To assess the reliability of TSA\u2019s  assessment and inspection data, we reviewed program documentation on  system controls, interviewed knowledgeable officials from the Office of  Global Strategies (OGS), and checked TSA\u2019s data for any potential gaps  and errors. We concluded that TSA\u2019s data on foreign airport assessments  and air carrier inspections were sufficiently reliable for the purposes of our  review. Finally, we compared TSA\u2019s efforts to leverage information for  capacity development to the Foreign Airport Assessment Program SOP  and criteria for obtaining and processing information in federal internal  control standards.", "The performance audit upon which this report is based was conducted  from August 2016 to October 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with TSA from September 2017 to December 2017  to prepare this nonsensitive version of the original sensitive report for  public release. This public version was also prepared in accordance with  these standards. More details about the scope and methodology of our  work are contained in appendix I."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DHS Responsibilities for Ensuring the Security of U.S.-Bound Flights from Foreign Countries", "paragraphs": ["Shortly after the September 11, 2001, terrorist attacks, Congress passed  and the President signed into law the Aviation and Transportation  Security Act (ATSA), which established TSA and gave the agency  responsibility for securing all modes of transportation, including the  nation\u2019s civil aviation system, which includes the operations of U.S. and  foreign-flagged air carriers to, from, and within the United States, as well  as the foreign point-to-point operations of U.S.-flagged carriers.  Consistent with ATSA and in accordance with existing statutory  requirements, TSA is to assess the effectiveness of security measures at  foreign airports (1) served by a U.S. air carrier, (2) from which a foreign  air carrier serves the United States, (3) that pose a high risk of introducing  danger to international air travel, and (4) that are otherwise deemed  appropriate by the Secretary of Homeland Security. In carrying out this  function, the statute identifies measures that the Secretary must take in  the event that he or she determines that an airport is not maintaining and  carrying out effective security measures based on TSA assessments. In  addition, consistent with ATSA and in accordance with existing statutory  requirements, TSA is to conduct inspections of U.S. air carriers and  foreign air carriers servicing the United States from foreign airports to  ensure that they meet applicable security requirements, including those  set forth in an air carrier\u2019s TSA-approved security program.", "The Secretary of DHS delegated to the TSA Administrator the  responsibility for conducting foreign airport assessments but retained  responsibility for making the determination that a foreign airport does not  maintain and carry out effective security measures. Currently, the  Global Compliance Directorate, within OGS, is responsible for conducting  foreign airport assessments and air carrier inspections. Table 1 highlights  the roles and responsibilities of certain TSA positions within OGS that are  responsible for implementing the foreign airport assessment and air  carrier inspection programs."], "subsections": []}, {"section_title": "TSA\u2019s Process for Conducting Foreign Airport Assessments and Air Carrier Inspections", "paragraphs": ["TSA assesses the effectiveness of security measures at foreign airports  using select aviation security standards and recommended practices  adopted by ICAO, a United Nations organization representing 191  countries. ICAO standards and recommended practices (referred to  collectively in this report as ICAO standards unless otherwise noted)  address operational issues at an airport, such as ensuring that  passengers and baggage are properly screened and that unauthorized  individuals do not have access to restricted areas of an airport. ICAO  standards also address non-operational issues, such as whether a foreign  government has implemented a national civil aviation security program for  regulating security procedures at its airports and whether airport officials  implementing security controls are subject to background investigations,  are appropriately trained, and are certified according to a foreign  government\u2019s national civil aviation security program. TSA utilizes the 44  ICAO standards it sees as most critical in conducting its foreign airport  assessments, which cover the following areas: airport operations; quality  control; access control; aircraft security; passenger and cabin baggage  screening; hold baggage screening; security measures relating to cargo,  mail and other goods; security measures relating to special categories of  passengers; prevention; and security measures relating to the landside.", "TSA uses a risk-informed approach to schedule foreign airport  assessments by categorizing airports into three risk tiers, with high risk  airports assessed more frequently than medium and low risk airports.  TSA\u2019s assessments of foreign airports are conducted by a team of  inspectors, which generally includes one team leader and one team  member. According to TSA, it generally takes 3 to 7 days to complete a  foreign airport assessment. However, the amount of time and number of  team members required to conduct an assessment varies based on  several factors, including the size of the airport, the number of air carrier  inspections to be conducted at the airport, and the threat level to civil  aviation in the host country.", "TSA uses a multistep process to plan, conduct, and record assessments  of foreign airports. Specifically, the TSAR must obtain approval from the  host government to allow TSA to conduct an airport assessment, and  schedule the date for the on-site assessment. After conducting an entry  briefing with State, host country officials, and airport officials, the team  conducts an on-site visit to the airport. During the assessment, the team  of inspectors uses several methods to determine a foreign airport\u2019s level  of compliance with ICAO standards, including conducting interviews with  airport officials, examining documents pertaining to the airport\u2019s security  measures, and conducting a physical inspection of the airport. For  example, inspectors are to examine the integrity of fences, lighting, and  locks by walking the grounds of the airport. Inspectors also make  observations on access control procedures, such as examining employee  and vehicle identification methods in secure areas, as well as monitoring  passenger and baggage screening procedures in the airport. At the close  of an airport assessment, inspectors brief foreign airport and government  officials on the results. TSA inspectors also prepare a report detailing  their findings on the airport\u2019s overall security posture and security  measures, which may contain recommendations for corrective action and  must be reviewed by the TSAR, the ROC manager, and TSA  headquarters officials. Afterward, a summary of the results is shared with  the foreign airport and host government officials. In some cases, TSA  requires air carriers to adopt security procedures, such as additional  passenger screening, to compensate for deficiencies that TSA identified  during a foreign airport assessment.", "Along with conducting airport assessments, the same TSA inspection  team also conducts air carrier inspections when visiting a foreign airport  to ensure that air carriers are in compliance with TSA security  requirements. The frequency of air carrier inspections at each airport  depends on a risk-informed approach and is influenced, in part, by the  airport\u2019s vulnerability to security breaches, since the security posture of  each airport varies. In general, TSA procedures require TSA to inspect all  air carriers at each airport annually or semi-annually depending on the  vulnerability level of the airport, with some exceptions. For example, TSA  may elect to inspect all air carriers at a particular airport on an 18-month  cycle if the airport has no documented vulnerabilities for the three  previous visits and all air carriers at that location have demonstrated full  compliance over the past five years. When conducting inspections, TSA  inspectors examine compliance with applicable security requirements,  including TSA-approved security programs, security directives, and  emergency amendments to the security programs.", "As in the case of airport assessments, air carrier inspections are  conducted by a team of inspectors, which generally includes one team  leader and one team member. An inspection of an air carrier typically  takes 1 or 2 days, but can take longer depending on the extent of service  by the air carrier. Inspection teams may spend several days at a foreign  airport inspecting air carriers if there are multiple carriers serving the  United States from that location. During an air carrier inspection,  inspectors are to review applicable security manuals, procedures, and  records; interview air carrier station personnel; and observe air carrier  employees processing passengers from at least one flight from  passenger check-in until the flight departs the gate to ensure that the air  carrier is in compliance with applicable requirements. Inspectors evaluate  a variety of security measures, such as passenger processing (e.g., use  of No Fly and Selectee lists), checked baggage acceptance and control,  aircraft security, passenger screening, cargo and mail screening, and  catering security. Inspectors record inspection results into TSA\u2019s  Performance and Results Information System (PARIS), a database  containing security compliance information on TSA-regulated entities. If  an inspector finds that an air carrier is violating any applicable security  requirements, additional steps are to be taken to record those specific  violations and, in some cases, pursue them with further investigation."], "subsections": []}, {"section_title": "GAO\u2019s 2011 Review of TSA Foreign Airport Assessment Program", "paragraphs": ["In 2011, we reported on TSA\u2019s foreign airport assessment program,  including TSA\u2019s steps taken to enhance its program, the results of TSA\u2019s  foreign airport assessments, and opportunities for TSA to make program  improvements in several key areas, such as developing criteria and  guidance for determining foreign airport vulnerability ratings. We  reported that TSA had not taken steps to evaluate its assessment results  to identify regional and other trends over time. In addition, we found that  TSA had not developed criteria or guidance for determining foreign airport  vulnerability ratings. We also reported that there were opportunities for  TSA to increase program efficiency and effectiveness by, for example,  conducting more targeted foreign airport assessments and systematically  compiling and analyzing security best practices. As a result, we  recommended that TSA (1) develop a mechanism for trend analysis, (2)  establish criteria and guidance to help decision makers with vulnerability  ratings, and (3) consider the feasibility of conducting more targeted  foreign airport assessments and compiling best practices. DHS concurred  with the three recommendations and has since taken several actions to  address them all, including developing a mechanism to compile and  analyze best practices."], "subsections": []}]}, {"section_title": "Since 2011, TSA Has Taken Various Steps to Strengthen its Foreign Airport Assessment and Air Carrier Inspection Programs", "paragraphs": [], "subsections": [{"section_title": "TSA Has Taken Steps to Better Target Program Resources Based on Risk", "paragraphs": ["TSA established the Northern Virginia ROC. In 2012, TSA created a  dedicated ROC in Northern Virginia to oversee North Africa and the  Middle East given the high risk associated with many airports in the  region. The creation of the Northern Virginia ROC alleviated resource  burdens on the Frankfurt ROC, which previously had oversight for both  the Europe and Africa-Middle East regions. In addition, the Northern  Virginia ROC Manager stated that the small size of the ROC has  facilitated strong working relationships because foreign airport officials in  the region tend to meet with the same inspectors more frequently.", "TSA created the Analysis and Risk Mitigation (ARM) Directorate. In  2013, TSA established a working group to evaluate ways to better  integrate risk management in the foreign airport assessment and air  carrier inspection programs. This working group developed a risk  framework, which, according to TSA documentation, provides a  systematic approach for analyzing risk at international airports, supports  OGS decision making, and informs efforts to mitigate security  deficiencies. In 2015, OGS created the ARM Directorate, which  formalized the risk mitigation responsibilities of the working group and  serves as the data analysis and evaluation arm of OGS. OGS officials  stated that ARM helps the program focus its resources based on risk. For  example, ARM analyzes and prioritizes activities, such as training, that  are designed to mitigate security vulnerabilities at foreign airports.", "TSA conducts more targeted foreign airport assessments. Based on  a recommendation in our 2011 report, TSA has taken actions to conduct  more targeted foreign airport assessments. For example, TSA developed  the Pre-Visit Questionnaire, which host foreign airport officials fill out prior  to TSA\u2019s visit. This information enables each TSA foreign airport  assessment team to tailor the on-site assessment at each airport and  focus TSA\u2019s assessment efforts on specific areas of concern. Additionally,  TSA implemented more focused airport assessments, known as targeted  risk assessments, in locations where risk is high or there are other factors  that require a more focused evaluation of the site\u2019s security posture. For  the focused assessments, inspection teams place emphasis on  observations, interviews, document reviews, and thorough analysis of  specific ICAO standards.", "TSA implemented cross-directorate reviews. In 2015, TSA  implemented cross-directorate reviews, which bring together experts  across the OGS components, such as inspectors and TSARs, to identify  critical vulnerabilities at foreign airports and outline an initial plan to  mitigate those vulnerabilities. Overall, TSA completed 28 cross- directorate reviews in 2015 and 2016."], "subsections": []}, {"section_title": "TSA Has Taken Steps to Strengthen Foreign Airport Access and the Comprehensiveness of Its Evaluations", "paragraphs": ["TSA took steps to resolve foreign airport access issues. Since our  2011 review, TSA has faced delays in scheduling some foreign airport  assessments and obstacles in obtaining full access to airport operations  at certain locations. According to TSA officials, TSA has used several  tactics to resolve access issues, including deploying the same inspectors  over multiple assessments to build rapport with foreign airport officials.  For example, in one country in the Western Hemisphere region, TSA\u2019s  access to airport operations was initially limited by the host government.  However, over time, TSA used a small pool of inspectors who officials  said were able to build trust with the host government and gain better  access, including the ability to conduct interviews of airport officials and  take photographs of the security environment. Additionally, in 2011, we  reported on TSA\u2019s challenges in obtaining access to airports in  Venezuela. Specifically, we reported that TSA had not been able to  assess airports in Venezuela or conduct TSA compliance inspections for  air carriers, including U.S. carriers, flying from Venezuela to the United  States since 2006. According to TSA officials, in 2014, TSA regained  access in Venezuela after establishing dialogue with the new government  in place and emphasizing the benefits of the evaluation process.", "TSA increased the number of joint airport assessments in Europe. In  2011, we reported that TSA took a number of actions to assess foreign  airports in Europe, including conducting joint assessments with the EC,  performing bi-lateral assessments, and executing table-top reviews in  place of on-site airports visits. According to EC officials, the main goal  under this arrangement was to better leverage resources and reduce the  number of TSA visits per year to European airports because of concerns  from EU member states about the frequency of visits from EC and U.S.  audit teams. However, since our previous review, TSA has limited the use  of table-top reviews and now primarily assesses foreign airports in  Europe through joint assessments with the EC. Frankfurt ROC officials  we met with indicated that TSA\u2019s strong relationship with the EC has  afforded the agency excellent access to foreign airports in Europe and a  better understanding of vulnerabilities at these locations, which has  resulted in more comprehensive assessments. For example, according to  TSA, through the joint assessments, inspectors have better access to  airport training documents, the ability to observe tests conducted by EC  inspectors, and more time at checkpoints to observe screening  operations.", "TSA developed airport assessment and air carrier inspection job  aids. In 2012, TSA developed job aids that provide inspectors with a set  of detailed areas to assess for each ICAO standard. For example, a job  aid for passenger and cabin baggage screening includes several prompts  related to screening roles and responsibilities, the resolution process if a  suspicious item is detected, and alternative procedures if screening  equipment is not working as intended. TSA also developed job aids for  the air carrier inspection process to better ensure that inspectors cover all  requirements associated with air carrier security programs. According to  OGS officials, these actions have led to more comprehensive evaluations  and a better understanding of foreign airport and air carrier vulnerabilities."], "subsections": []}, {"section_title": "TSA Has Worked to Create Operational Efficiencies", "paragraphs": ["TSA established the Honolulu ROC. In 2012, TSA eliminated the Los  Angeles ROC and established the Honolulu ROC given its proximity to  the Pacific Islands, which allowed the agency to reduce costs and travel  time to airports in these locations. Specifically according to TSA  documentation, inspectors in the Los Angeles ROC often spent more than  20 hours traveling to and from sites in the Asia-Pacific region because of  in-flight transit time and connection requirements. With the creation of the  Honolulu ROC, TSA officials told us that inspectors have been better able  to meet deadlines for completing foreign airport assessment reports and  conduct follow-up visits to resolve noted issues.", "TSA developed the Global Risk Analysis and Decision Support  System. In 2012, TSA developed the Global Risk Analysis and Decision  Support System (GRADS) to streamline the assessment report writing  process and strengthen OGS\u2019s data analysis capabilities of its foreign  airport assessment results. According to TSA officials, GRADS has  provided OGS personnel with a number of benefits, including the ability to  run standardized reports, extract and analyze key data, and manage  airport operational information, such as data on security screening  equipment. According to TSA documentation, prior to 2012, the agency  captured the results of its foreign airport assessments in narrative form  that often amounted to more than 80 pages, hampering the ability to  perform data analysis.", "TSA standardized processes. Between 2012 and 2016, TSA deployed  standardization teams, called Standardization Effort Teams, to help  ensure more consistency among inspectors when conducting air carrier  inspections and airport assessments, and to identify and develop best  practices in areas such as training, among others. For example, in 2016,  a team developed a tool to facilitate performance evaluations of  inspectors."], "subsections": []}]}, {"section_title": "TSA Foreign Airport Assessment Data Showed Variations in Compliance by Region and Across ICAO Standards, while Air Carrier Inspection Data Showed That Most Inspections Were Fully Compliant", "paragraphs": [], "subsections": [{"section_title": "Foreign Airports Differed in Level of Compliance by Region and Across ICAO Standards", "paragraphs": ["TSA assesses the overall vulnerability level at each foreign airport using a  rating system, ranging from a category \u201c1,\u201d which represents full  compliance with ICAO standards, to a \u201c4\u201d or \u201c5,\u201d which involve more  serious or egregious issues. Based on our analysis of TSA\u2019s foreign  airport assessment data, we found that compliance with ICAO standards  varied by region. For example, our analysis showed that some regions of  the world had a higher percentage of airports in vulnerability categories 4  and 5. Our analysis also showed that there are differences in compliance  across the ICAO standards. Specific information related to TSA\u2019s airport  assessment results is deemed Sensitive Security Information.", "According to TSA officials, it is difficult to draw conclusions about the  cumulative foreign airport assessment results\u2014such as whether the  results are generally positive or negative\u2014because the primary concern  is not whether security deficiencies are identified, but whether foreign countries are capable and willing to address security deficiencies.  Specifically, there is considerable regional variation in the level of  compliance because some foreign countries face challenges due to lack  of resources or technical knowledge, among other factors. TSA officials  stated that while these challenges are not easy to overcome, agency  efforts, such as training host country staff, can help foreign airports  reduce their vulnerability scores over time. Our analysis of TSA\u2019s foreign  airport assessment data confirms that point. Specifically, we found that of  the foreign airports categorized with a vulnerability rating of 4 of 5 in fiscal  year 2012, the majority of these airports improved their vulnerability score  in at least one follow-up assessment during fiscal years 2012 through  2016. According to TSA documentation, in some cases, foreign airports  are able to take immediate measures to resolve security deficiencies. On  the other hand, there are situations in which foreign airports may struggle  to take corrective actions or sustain the improvements over time.  Accordingly, TSA\u2019s regulatory authority over air carriers is an important  tool. TSA officials indicated that the agency commonly requires air  carriers to adopt security procedures, such as passenger screening, to  compensate for foreign airport security deficiencies. Moreover, if  appropriate, DHS can take secretarial action, which includes the option to  prohibit air carriers operating at a foreign airport from providing last point  of departure flights to the United States."], "subsections": []}, {"section_title": "Most Air Carrier Inspections Were Fully Compliant and TSA Used On-the-Spot Counseling to Resolve the Majority of Deficiencies", "paragraphs": ["According to air carrier inspection data maintained by TSA, between fiscal  years 2012 and 2016, air carriers providing last point of departure service  to the United States from foreign airports complied with all TSA security  requirements in most inspections. For those inspections that identified  noncompliance, data from TSA showed that the majority of violations  were corrected or addressed immediately through on-the-spot counseling.  Inspectors submitted a certain number of violations for investigation  because the violations were considered serious enough to potentially  warrant an enforcement action. TSA can impose two general types of  enforcement actions on air carriers that violate security requirements\u2014an  administrative action, such as a warning notice, or a monetary civil  penalty. Based on information included in TSA\u2019s investigation module  within PARIS, TSA took administrative action in the majority of cases and  levied 44 fines during fiscal years 2012 through 2016, which totaled about  $575,000 and ranged from $1,000 to $40,500. According to TSA officials,  they rely on a system of progressive enforcement and carefully consider  whether a civil penalty is warranted based on the compliance history of an  air carrier, among other factors."], "subsections": []}]}, {"section_title": "TSA Addresses Security Deficiencies through Various Capacity Development Efforts, but Enhanced Data Management Could Strengthen Analysis and Decision Making", "paragraphs": [], "subsections": [{"section_title": "TSA Assists Foreign Airports and Air Carriers in Addressing Identified Security Deficiencies in Various Ways", "paragraphs": [], "subsections": [{"section_title": "Foreign Airports", "paragraphs": ["As part of assisting foreign airports, inspectors work to transfer  knowledge on how to mitigate identified airport security deficiencies to  foreign airport officials and provide TSA program officials with  suggestions for capacity development that could be effective in  addressing these deficiencies. Specifically, TSA capacity development  assistance to foreign airports includes on-the-spot counseling, training,  technical assistance and consultation, and provision of security  equipment.", "Inspectors counsel foreign airport staff on-the-spot. According to  TSA officials, inspectors typically offer counseling during airport  assessments when they discover deficiencies, usually of an infrequent,  less serious, or technical nature, that can be addressed immediately. For  example, during a 2013 assessment of an airport in the Europe region,  inspectors observed a total of 53 employees within the restricted area, of  which one was not displaying his badge. Airport officials immediately  requested that the individual display his badge and informed the TSA  inspection team that they will remind all staff to properly display their  airport media while in the restricted area. For the remainder of the airport  visit, no badge display issues were noted. In another example, during an  assessment in the Western Hemisphere region, inspectors observed  persons entering a restricted area without undergoing screening. The  inspectors counseled the airport\u2019s security officials on the importance of  adhering to the airport\u2019s security program, and observed the airport  officials take immediate action by implementing escort and screening  procedures.", "TSA provides security training. TSA may provide training to foreign  airport staff to address deeper problems with staff security knowledge or  to strengthen staff knowledge in an evolving threat environment. Training  may take several forms, including traditional classroom courses or  interactive workshops, and can range in length from one or two days to  more than one week. Course topics include risk management, screening  operations, and airport security, with a broad variety of sub-topics, such  as insider risk, cargo security, and inspection techniques. According to  TSA, new courses are in development to meet the changing security  landscape. New course topics include landside security, behavioral  awareness, and the effective use of canines.", "TSA arranges for technical assistance and consultation. TSA assists  foreign governments in securing technical assistance and consultation  provided by TSA and other U.S. and foreign government agencies to help  improve security at foreign airports, particularly after security incidents or  at airports in developing countries. For example, after the 2016 terrorist  attack on Brussels Airport, TSA was invited by airport officials to provide  on-site consultation during the reconstitution of the airport facilities. In  another example, TSA provided a country in the Africa-Middle East region  with on-site technical assistance for configuring and testing explosives  detection equipment at baggage screening checkpoints. In addition,  State\u2019s Anti-Terrorism Assistance Program augments TSA\u2019s resources in  building the aviation security capacity of foreign governments. For  instance, State provides recipient nations with courses focused on airport  security management, quality control, and fraudulent document  recognition as well as multi-day passenger and cargo security  consultations. In addition, with regard to capacity development TSA  collaborates with other countries. Partners may promote common aviation  security goals to other countries when political considerations preclude  TSA from doing so, or combine resources with TSA for joint efforts. For  example, in one collaboration, a country in the Asia-Pacific region  provided resources and facilities, while TSA provided staff so that  neighboring countries could attend aviation security training.", "TSA loans and donates security equipment. TSA may loan or donate  security equipment such as explosives detection devices and metal  detection hand wands to lower-income countries. Since fiscal year 2012,  TSA has loaned X-ray screening equipment and explosives detection  devices to five countries. Enacted in July 2016, the Aviation Security Act  expressly authorizes TSA to donate security screening equipment to a  foreign last point of departure airport if such equipment can be reasonably  expected to mitigate a specific vulnerability to the security of the United  States or U.S. citizens. TSA may also provide staff at foreign airports  with demonstrations for using equipment that has been loaned or donated  by TSA, as well as equipment otherwise acquired by host governments.  For instance, in 2016 TSA provided operator training and maintenance  assistance to a country in the Africa-Middle East region that had procured  passenger body scanners."], "subsections": []}, {"section_title": "Air Carriers", "paragraphs": ["TSA also takes steps to help air carriers address security deficiencies  identified during air carrier inspections. TSA primarily offers capacity  development support to air carriers through on-the-spot counseling and  consultation with IIRs.", "Inspectors counsel air carrier representatives on-the-spot. TSA  assists air carrier representatives in addressing security deficiencies  identified during air carrier inspections. According to TSA, since carriers  have TSA-approved security programs, additional training may not be  necessary to correct small issues. Rather, officials said that counseling air  carrier staff on the proper procedures and follow up observations of them  practicing the procedures may suffice. TSA data show that of the  instances in which inspectors identified noncompliance with TSA security  requirements during fiscal years 2012 through 2016, the majority of  instances were resolved through counseling\u2014that is, the security  deficiencies were resolved with on-site assistance or consultation  provided by TSA. For example, during an air carrier inspection in the  Europe region, inspectors observed that a passenger wearing sandals  was not screened properly. TSA counseled the screening staff that  footwear screening requirements apply to all shoes, including sandals.  The inspectors then observed proper rescreening of the passenger. TSA  also discussed the matter with airline security representatives, who  concurred with TSA.", "IIRs assist air carriers with compliance. In addition to counseling  provided by inspectors when deficiencies are identified, TSA assigns  each air carrier to a representative who assists the carriers in complying  with TSA security requirements. Although these representatives, called  IIRs, do not participate in air carrier inspections, they do receive  inspection results for the carriers with whom they work. IIRs counsel the  air carriers and provide clarification regarding TSA security requirements  when necessary. For example, they provide air carriers with clarification  on the requirements contained in security directives and emergency  amendments issued by TSA. In other instances, when an air carrier  cannot comply with a TSA security requirement\u2014such as when  complying with a TSA security requirement would cause the air carrier to  violate a host government security requirement\u2014the air carrier works with  its IIR to develop alternative security procedures in a manner consistent  with TSA regulations. With alternative procedures, air carriers can deviate  from their TSA-approved security program while still meeting the intent of  TSA requirements. According to some IIRs with whom we spoke, these  alternative procedures are intended to provide a level of security that is  equivalent to the level of security provided by TSA\u2019s standard  requirements while also affording air carriers with some flexibility in how  they achieve the intended security benefit of the TSA requirement.  Alternative security procedures are reviewed by the IIR, who submits  them to TSA headquarters and field officials for final review and approval."], "subsections": []}]}, {"section_title": "TSA Has Taken Steps to Leverage Information for Capacity Development, but Could Enhance Data Management", "paragraphs": [], "subsections": [{"section_title": "Leveraging Information for Capacity Development", "paragraphs": ["TSA has taken a number of steps to strengthen its analytical processes  and better understand the impact of the foreign airport assessment and  air carrier inspection programs. According to OGS officials, the  establishment and evolution of the ARM Directorate has facilitated better  data analysis and enhanced decision making pertaining to capacity  development. Specifically, TSA now conducts regional strategy meetings,  produces regional risk reports, and approves requests for assistance  based on risk.", "OGS conducts regional strategy meetings. Since fiscal year 2012,  OGS has held strategy meetings to address aviation security threats and  vulnerabilities within each region. During these meetings, OGS officials  examine trend data for both airport assessments and air carrier  inspections, including vulnerability ratings over a multi-year period,  identify common areas of non-compliance, and develop capacity building  approaches customized to each region. According to agency  documentation, these meetings led OGS to recognize that each  geographic region faces its own particular challenges and risks and  requires unique mitigation approaches, such as at the country or airport  level.", "ARM develops regional risk reports. In 2016, the ARM Directorate  began producing regional risk reports for use by other teams within OGS.  The purpose of these reports is to provide OGS personnel operating  within each of the four regions with an understanding of known  vulnerabilities in the region and their associated risk in order to inform  mitigation planning efforts. These reports include such information as key  risks at each location and region-wide trends on vulnerabilities. For  example, the reports show patterns in noncompliance related to critical  ICAO standards. In addition, the reports compare airports by risk level  and examine how individual airports compare to a regional average.  According to ARM staff, one of the top priorities this year is to centralize  analysis results within a web portal that allows users across OGS to sort  and filter data. ARM expects the portal to include comprehensive airport  profiles that capture the primary details for each location, such as the  largest carriers and main risks.", "OGS approves requests for assistance based on risk. Requests for  capacity development assistance are submitted by OGS personnel,  including TSARs and inspectors. TSA\u2019s Capacity Development Branch  (CDB) in ARM assesses these requests according to a standardized  criterion that includes an airport\u2019s past and present vulnerabilities, the root  causes of these vulnerabilities, the timing of the assistance delivery, and  the suitability of the intended recipient. For instance, TSA assesses the  capabilities of the government or airport that would receive the  assistance, and considers such factors as whether the intended recipient  has the commitment necessary to institutionalize TSA-sponsored training  and the technical expertise to use any equipment that may be loaned or  donated by TSA. In addition, according to TSA officials, TSA considers  the extent to which the intended recipient has been a cooperative partner  in the past and implemented TSA\u2019s previous security recommendations.  After CDB\u2019s risk-based assessment of assistance requests, OGS  management makes a final determination regarding the provision of  assistance."], "subsections": []}, {"section_title": "TSA Could Enhance Data Management", "paragraphs": ["While TSA has taken steps to leverage the results of foreign airport  assessments and air carrier inspections to monitor system-wide  vulnerabilities and inform capacity development, TSA lacks key  information for decision making. For instance, we found that the Open  Standards and Recommended Practices Findings Tool (OSFT) \u2014 a  database for tracking the resolution status of identified foreign airport  deficiencies \u2014 has gaps and its system for categorization does not result  in sufficient specificity of information related to security deficiencies\u2019 root  causes and corrective actions.", "Root causes represent the underlying reason why an airport is not  meeting an ICAO standard and, according to TSA documentation, fall into  three general categories: lack of knowledge, lack of infrastructure, and  lack of will. For example, a foreign airport might fail to meet an ICAO  standard because of lack of knowledge stemming from insufficient  training programs or a high rate of staff turnover. According to OGS  officials, an understanding of root causes is important because the  challenges to addressing security deficiencies at foreign airports vary  extensively from country to country and corrective actions need to be  tailored to addressing the unique root causes of deficiencies that TSA  identifies. Corrective actions are efforts to mitigate security deficiencies  and might include training and other capacity building efforts. Corrective  actions can be designed to help a foreign airport add a new security  capability, enhance an existing capability, or increase the deployment of  security measures.", "Although root causes and corrective actions are important variables for  decision making, we found that the OSFT has gaps in this information.  TSARs\u2014the primary liaisons between the U.S. government and foreign  governments on transportation security issues\u2014are responsible for  following up on progress made by foreign officials in addressing security  deficiencies identified during TSA assessments. Specifically, the Foreign  Airport Assessment Program SOP states that, for each foreign airport  assessed, the assigned TSAR is responsible for entering and updating  key information in the OSFT, including root cause and corrective action  information. According to the SOP, a thorough understanding of the  underlying reasons for each deficiency is critical to selecting the  appropriate mitigation activities. However, we found that around two  thirds of fiscal year 2016 records in the OSFT exhibited empty fields  pertaining to root cause or recommended corrective action. More  specifically, root cause data and recommended corrective action data  were each not recorded for 70 percent of findings.", "During our interviews with TSARs, half (4 out of 8) indicated that they  believed the OSFT to be a cumbersome tool that has limitations for  recording status updates, among other issues, or that they preferred to  use other mechanisms, such as spreadsheets stored locally, in order to  avoid using the OSFT for certain functions. TSA headquarters officials  indicated that OGS began requiring staff to record root cause and  corrective action information in 2015 and that institutionalizing this  requirement to facilitate consistent data entry will take time. However,  complete data on root causes and corrective actions would help TSA  systematically monitor airport performance in addressing deficiencies and  leverage information for decision making regarding capacity development.  For example, with complete information TSA would be in a better position  to determine the extent to which airports were able to effectively close  security vulnerabilities based on TSA\u2019s capacity building efforts, as well as conduct trend analysis within and across its four regions, including  identifying potential linkages between root causes and corrective actions.  Specifically, TSA could determine the extent to which corrective actions  seem to align best with certain root causes. For example, while training  might be an appropriate remedy if foreign airport personnel lack  knowledge, it might not be an appropriate solution for lack of will.", "We also found that the OSFT has limitations related to the categorization  of root causes and corrective actions. The Foreign Airport Assessment  Program SOP indicates that root causes may relate to three broad  categories, as explained earlier, and twelve subcategories: aviation  security infrastructure, communication, cultural factors, human factors,  management systems, physical infrastructure, procedures, quality control,  resources, supervision, technology, and training. However, the OSFT  does not include a field to categorize root causes according to these  subcategories or other more specific areas. As a result, it does not  capture more granular information that would better explain the specific  root cause of an identified security issue.", "Moreover, information on recommended corrective actions is stored  entirely in OSFT narrative fields without a drop-down list or other type of  categorization mechanism. For example, according to OSFT data, in one  Western Hemisphere region country, inspectors observed insufficient  employee screening and access control. The recommended corrective  action\u2014\u201dFencing around the terminal area will be enhanced and airport  personnel counseled about employee screening\u201d\u2014would be difficult to  include in quantitative analysis without manual intervention. The OSFT  also includes a field for the final corrective action\u2014how an airport  ultimately resolved a security issue. However, the categories in the OSFT  for final corrective action do not account for many key types of TSA\u2019s  mitigation efforts (e.g., training, loaning or donating equipment, and  directing an air carrier to mitigate an airport vulnerability). Specifically, for  fiscal year 2016, we found that the OSFT only included data for three  high-level categories of final corrective actions: \u201cairport authorities  resolved,\u201d \u201cnational authorities resolved,\u201d and \u201cother.\u201d", "ARM staff stated that they recognize that the classification of data  currently contained in the OSFT could be improved, but that they have  not had an opportunity to address the issues because they have been  focused on developing the newest release of GRADS. TSA staff also  indicated that they are exploring opportunities to better classify data in  future releases of GRADS. However, according to the Foreign Airport  Assessment Program SOP, a thorough understanding of the underlying  reasons for each deficiency is critical to properly selecting the appropriate  mitigation activities. Moreover, federal internal control standards suggest  that agencies should design information systems to obtain and process  information to meet each operational process\u2019s data requirements and to  respond to the entity\u2019s objectives and risks. By classifying information  on root causes and corrective actions with additional specificity, and  through a standard system of categorization that would allow for system- wide analysis, TSA would be better positioned to assure that corrective  actions accurately address the specific, underlying reasons for security  vulnerabilities."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["TSA\u2019s foreign airport assessment and air carrier inspection programs play  a vital role in ensuring the security of the aviation system. TSA has taken  a number of steps to enhance foreign airport assessments and air carrier  inspections since 2011, including targeting resources based on risk,  strengthening access to foreign airports and the comprehensiveness of its  assessments and inspections, and creating operational efficiencies. While  TSA does not have authority to impose or otherwise enforce security  requirements at foreign airports, the agency makes a concerted effort to  help foreign airports improve their security posture and address security  deficiencies identified during assessments. Moreover, TSA is commonly  able to resolve air carrier security deficiencies with on-the-spot  counseling.", "While TSA uses various mechanisms for capacity building, better data  management would help strengthen analysis and decision making.  Specifically, fully capturing and more specifically categorizing data on the  root causes of security deficiencies that TSA identifies and the associated  corrective actions would provide the agency with a more comprehensive  understanding of the security environment at foreign airports. For  example, TSA could leverage this information for trend analysis, including  evaluating potential linkages between root causes and corrective actions,  and determining the extent to which airports that received specific types  of capacity development services were able to close security  vulnerabilities. Accordingly, TSA would have better visibility over the  different types of capacity development that the agency offers and the  overall return on investment for these efforts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to TSA:", "The Assistant Administrator for the Office of Global Strategies should  ensure that data regarding the root causes of security deficiencies  and corrective actions are consistently captured in accordance with  TSA guidance. (Recommendation 1)", "The Assistant Administrator for the Office of Global Strategies should  update TSA\u2019s data systems to include more specific categories for  TSA\u2019s data on the root causes and corrective actions related to  security deficiencies. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of our report to DHS for its review and comment.  DHS provided written comments, which are noted below and reproduced  in full in appendix II. DHS concurred with both recommendations in the  report and described actions underway or planned to address them. With  regard to the first recommendation that TSA ensure that data regarding  the root causes of security deficiencies and corrective actions are  consistently captured in accordance with TSA guidance, DHS concurred  and stated that TSA will use a new tool, the Vulnerability Resolution Tool  (VRT), to capture and categorize root causes and corrective actions.  During the next fiscal year, TSA plans to train its staff in the use and  importance of the VRT, and estimates that it will complete this process by  October 31, 2018. If TSA consistently captures root causes and corrective  actions in the new tool, TSA\u2019s planned actions would address the intent of  the recommendation. With regard to the second recommendation that  TSA update TSA\u2019s data systems to include more specific categories for  TSA\u2019s data on the root causes and corrective actions related to security  deficiencies, DHS concurred and stated that TSA plans to include more  specific categories for root causes and corrective actions in a future  iteration of GRADS, and expects to complete the updates by October 31,  2018. If fully implemented, these actions should address the intent of the  recommendation.", "We are sending copies of this report to interested congressional  committees and the Secretary of Homeland Security, the Secretary of  State, the Administrator of the Transportation Security Administration, and  the TSA Assistant Administrator for the Office of Global Strategies. In  addition, the report is available at no charge on the GAO website at  http://gao.gov.", "If you or your staff members have any questions about this report, please  contact Jennifer Grover at (202) 512-7141 or groverj@gao.gov, or  Jessica Farb at (202) 512-6991 or farbj@gao.gov. Key contributors to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Aviation Security Act of 2016 includes a provision for GAO to review  the efforts, capabilities, and effectiveness of TSA to enhance security  capabilities at foreign airports and determine if the implementation of such  efforts and capabilities effectively secures international-inbound aviation.  This report (1) describes steps TSA has taken to enhance foreign airport  assessments and air carrier inspections since 2011, (2) describes the  results of TSA\u2019s foreign airport assessments and air carrier inspections,  and (3) examines steps TSA takes to address any deficiencies identified  during foreign airport assessments and air carrier inspections.", "To collectively address all three objectives, we reviewed the relevant laws  and regulations pursuant to which TSA conducts foreign airport  assessments and air carrier inspections. We reviewed various TSA  documents on program management and strategic planning and  interviewed TSA officials located at TSA headquarters and in the field.  We interviewed other federal and nonfederal stakeholders, such as the  Department of State (State), the European Commission (EC), and airport  and air carrier representatives. We outline the specific steps taken to  answer each objective below.", "To obtain a greater understanding of the foreign airport assessment and  air carrier inspection processes, including how TSA works with host  nation officials and air carrier representatives, we accompanied a team of  TSA inspectors during an air carrier inspection at an airport in Europe.  We based our site selection on several factors, including the air carrier  locations TSA had plans to inspect during the course of our audit work  and host government willingness to allow us to accompany TSA. In  addition, we spoke with officials at a separate European airport, including  the airport operator and representatives from two air carriers.", "To understand how TSA assesses and manages its foreign airport and air  carrier risk information, we obtained and reviewed documents on TSA\u2019s  methodology for assigning individual risk rankings (called tier rankings) to  each foreign airport it assesses. TSA\u2019s rankings are based on the  likelihood of a location being targeted, the protective measures in place at  that location, and the potential impact of an attack on the international  transportation system. Airports are then categorized as high, medium, or  low risk. We also reviewed TSA\u2019s methodology for grouping air carriers  based on risk, which is influenced by the foreign airport risk tiers.", "To describe the steps that TSA has taken to enhance foreign airport  assessments and air carrier inspections since 2011, we reviewed various  TSA documents on program management and strategic planning.  Specifically, we reviewed TSA\u2019s 2016 Foreign Airport Assessment  Program Standard Operating Procedures (SOP), which prescribes  program and operational guidance for assessing security measures at  foreign airports, and informs TSA personnel at all levels of what is  expected of them in the implementation of the program. We also reviewed  the job aids that TSA inspectors use during each assessment and  inspection, which ensure that the TSA-specified International Civil  Aviation Organization (ICAO) aviation security standards and  recommended practices (referred to collectively in this report as ICAO  standards unless otherwise noted) and air carrier security program  requirements are fully evaluated during each assessment. In addition, we  reviewed TSA\u2019s Office of Global Strategies (OGS) Strategic Plan for fiscal  years 2014 through 2018, and documents describing changes to the OGS  organizational structure since 2011.", "To obtain stakeholder views and perspectives on steps TSA has taken to  enhance its foreign airport assessment program since 2011, we  interviewed and obtained information from various federal stakeholders.  Specifically, we interviewed OGS officials located in the Global  Compliance (GC), Global Affairs, and Analysis and Risk Mitigation (ARM)  directorates. In addition, we also conducted site visits to three of the six  TSA regional operations centers (ROC), located in Reston, Miami, and  Frankfurt, where we met with ROC managers, transportation security  specialists (henceforth referred to as inspectors) who conduct TSA\u2019s  foreign airport assessments and air carrier inspections, TSARs who follow  up on host governments\u2019 progress in addressing identified security  deficiencies, international industry representatives (IIR) who liaise with air  carriers, and regional directors (RD). We based our site visit selections on  the number and type of staff available at each location and geographic  dispersion. We also conducted telephone interviews with personnel from  the Honolulu ROC and other OGS staff stationed worldwide. In total, we  interviewed 4 of the 6 ROC managers, 19 of the 94 inspectors, 8 of the 29  TSARs, 8 of the 16 IIRs, and all 4 RDs. During these interviews, we  discussed these officials\u2019 responsibilities related to the assessment and  inspection programs.", "To describe the results of TSA\u2019s foreign airport assessments and air  carrier inspections, we interviewed TSA officials on the results of its  evaluations, obtained and reviewed relevant program documents, and  conducted our own independent analysis of TSA\u2019s assessment and  inspection results. Specifically, we obtained and reviewed TSA\u2019s foreign  airport assessment program vulnerability results tracking sheet used by  GC to compile and track current and prior-year assessment results. This  tracking sheet included records of TSA\u2019s compliance assessments for  each airport that TSA assessed from fiscal years 2012 through 2016.  Specifically, the tracking sheet recorded assessment results for each of  the ICAO standards used in the airport assessments, as well as an  overall vulnerability score of 1 through 5 assigned after each assessment.  This overall vulnerability score is a representation of compliance or  noncompliance with all the ICAO standards against which TSA assesses  foreign airports. We interviewed OGS officials on the steps taken to  develop the tracking sheet, including how TSA manages and updates  data. In addition, we conducted our own independent analysis of TSA\u2019s  assessment results from fiscal years 2012 through 2016, the five-year  period since our previous review. Specifically, we analyzed data from  TSA\u2019s foreign airport assessment program vulnerability results tracking  sheet to identify the number of airports in each vulnerability category by  region. We also analyzed TSA assessment results data to determine the  frequency with which foreign airports complied with particular ICAO  standards, such as access control, quality control, passenger screening,  and baggage screening, among others.", "For air carrier inspection results, we analyzed data from PARIS on each  air carrier that TSA inspected from fiscal years 2012 through 2016. Our  analysis included the overall level of compliance, as well as the frequency  with which each air carrier complied with particular security program  requirements, such as aircraft search and passenger screening. We also  interviewed TSA managers, inspectors, and TSARs about their roles and  responsibilities in determining and documenting assessment and  inspection results. To assess the reliability of TSA\u2019s assessment and  inspection data, we reviewed program documentation on system controls,  interviewed knowledgeable officials from OGS and checked TSA\u2019s data  for any potential gaps and errors. Based on our overall analysis of the  data, we determined that the data were sufficiently reliable to provide a  general indication, by type or category, of the standards TSA assesses  against and the level of compliance, and frequency of compliance, for  TSA\u2019s foreign airport assessments and air carrier inspections over the  period of our analysis.", "To examine the steps TSA takes to address deficiencies identified during  foreign airport assessments and air carrier inspections, we interviewed  ARM and other TSA staff. Specifically, we discussed the full range of  options that are available to TSA for addressing airport and air carrier  security deficiencies, including a variety of capacity development tools  and collaboration with domestic agencies, such as State, and foreign  partners, such as Australia, Canada, Chile, New Zealand, Singapore,  South Africa, and the United Kingdom. During these interviews, we  discussed the circumstances in which each option is typically used and  the factors determining when an option is used. We also reviewed  program management tools TSA uses to track and manage the status of  foreign airport security deficiencies and records pertaining to capacity  development assistance deliveries from fiscal years 2012 through 2016,  including equipment loaned or donated, training courses provided, and  technical assistance delivered.", "To obtain information on the extent to which TSA provided oversight of its  assessment and inspection efforts, we obtained and reviewed various  TSA program management documents and tools that TSA uses to track  and manage information for the programs. Specifically, we reviewed the  fiscal year 2017 Global Compliance Master Work Plan, which TSA uses  to track its foreign airport assessment schedule, including when various  airports are due to be assessed. We also reviewed the Open Standards  and Recommended Practices Findings Tool, which the TSA  Representatives (TSAR) use to monitor and track a foreign airport\u2019s  progress in resolving security deficiencies identified by TSA inspectors  during previous assessments. In addition, we reviewed the tracking sheet  TSA uses to compile and track airport assessment results, including  individual airport vulnerability scores and information on which specific  ICAO standards were in noncompliance. Finally, we reviewed the results  of air carrier inspections that are contained in the inspections and  investigations modules of TSA\u2019s Performance and Results Information  System (PARIS).", "To identify challenges affecting TSA\u2019s foreign airport assessment  program, we interviewed TSA officials, such as TSA\u2019s Director of Global  Compliance, and field officials located at the TSA ROCs about the  challenges they experience obtaining access to foreign airports to  conduct assessments, the performance of data management systems,  and the provision of aviation security capacity development assistance to  foreign governments. We also obtained their perspectives on foreign  governments that have been reluctant to allow TSA inspectors to visit  their airports. We also interviewed TSA\u2019s Director of Global Compliance  and headquarters and field staff on the agency\u2019s use of databases and  other tracking mechanisms to manage assessment and inspection  results. In addition, we obtained the perspective of TSARs on challenges  to ensuring that foreign airports address security deficiencies. We also  interviewed officials within TSA\u2019s Capacity Development Branch to better  understand the scope and types of requests for assistance that they  receive from foreign countries, the challenges that they experience in  attempting to provide assistance, and their experience collaborating with  State.", "We met with State officials to better understand how they coordinate with  TSA through their Office of Anti-Terrorism Assistance and other related  efforts aimed at assisting foreign partners\u2019 capacity to secure their  airports. In addition, we met with officials from the EC and the  International Air Transport Association to discuss efforts and programs  these organizations have in place to enhance international aviation  security.", "In addition, during our interviews with ARM staff, we discussed the extent  to which TSA uses information at its disposal to inform capacity  development efforts. We also compared these efforts to criteria for  obtaining and processing information in federal internal control  standards. To identify opportunities for TSA to better leverage  information to inform capacity development, we reviewed relevant  program management documentation and tools that TSA uses to track  and analyze assessment results. Specifically, we reviewed the 2016  Foreign Airport Assessment Program SOP and program management  tools TSA uses to track and manage the status of foreign airport security  deficiencies. We also reviewed our prior work concerning how risk- informed and priority driven decisions can help inform agency decision  makers in allocating finite resources to the areas of greatest need.", "Information from our interviews with government officials and members of  the aviation industry provide insight into their perspectives on TSA\u2019s  foreign airport assessment and air carrier inspection programs. However,  this information cannot be generalized beyond those with whom we spoke  because we did not use statistical sampling techniques in selecting  individuals to interview.", "The performance audit upon which this report is based was conducted  from August 2016 to October 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with TSA from September 2017 to December 2017  to prepare this nonsensitive version of the original sensitive report for  public release. This public version was also prepared in accordance with  these standards."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts above, Jason Bair and Chris Ferencik  (Assistant Directors); Anthony C. Fernandez (Analyst-in-Charge); Bryan  Bourgault; Elizabeth Dretsch; Jesse Elrod; Eric Hauswirth; Christopher  Lee; Tom Lombardi; Amanda Miller; and Adam Vogt made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-11", "url": "https://www.gao.gov/products/GAO-18-11", "title": "Southwest Border Security: Actions Needed to Enhance CBP's Maintenance of Roads Used for Its Operations", "published_date": "2017-10-04T00:00:00", "released_date": "2017-10-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To secure the southwest border between ports of entry, Border Patrol uses approximately 5,200 miles of roads, most of which are owned by other entities, both private and public. CBP estimates spending $12.5 million in fiscal year 2016 to maintain and repair roads Border Patrol uses for its operations, including roads CBP does not own.", "GAO was asked to review Border Patrol's use and maintenance of roads for its border security operations. This report examines the extent to which (1) CBP has processes and authorities to access and maintain roads for its security operations and (2) CBP's operations are affected by its use of public roads it cannot maintain, and options CBP could consider to address any needed maintenance. GAO selected three southwest border sectors to visit based on the sectors' total mileage of non-owned roads and number of apprehensions of illegal border crossers. GAO interviewed officials from Border Patrol, and from selected federal, state, local, tribal, and private and community organizations. The information collected from these entities is not generalizable, but provides valuable insights."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. Border Patrol, within the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP), generally has access to public roads and has certain processes and authorities to use other federal, state, local, tribal, and private owned roads for its operations. CBP may enter into arrangements or agreements to address maintenance of certain federal, state, local, and private roads, but CBP has not consistently documented these arrangements, or shared them with all relevant Border Patrol sector officials. This could hinder maintenance efforts and, therefore, Border Patrol's access to the roads. Six of the nine southwest Border Patrol sectors reported that they do not document all road maintenance arrangements and agreements. Developing a policy and guidance for documenting maintenance arrangements and agreements, as needed, could help all sectors more consistently work with landowners to address road maintenance. CBP has two categories for the roads it maintains: (1) roads that CBP owns and has a right to maintain (owned operational roads) and (2) roads that CBP does not own, but may maintain through a license or permit (non-owned operational roads). Border Patrol has established a process for prioritizing maintenance of owned operational roads, but it has not clearly documented the process and criteria for non-owned operational roads, or shared this information with sector officials. Moreover, no sector official GAO spoke with reported being aware of the process and criteria. By clearly documenting and communicating the process and criteria it uses to prioritize non-owned operational roads, Border Patrol could enable sectors to more adequately plan for and better anticipate funding to meet road maintenance needs.", "Border Patrol sector officials reported negative effects from using public roads in poor condition that they cannot maintain, such as limited road access and poor relations with local governments and border communities that attribute the poor road conditions to Border Patrol's regular use. However, the full extent of these effects is unknown due to lack of data on Border Patrol's use of non-owned roads. While CBP officials discussed options for addressing maintenance of non-federal public roads, including a specific appropriation or a grant program, it has not assessed the feasibility of these or other options. Assessing the feasibility of options, including a review of data needed to show Border Patrol's reliance on non-owned roads, including public roads, could lead to a possible solution for enhancing Border Patrol's operations and its community relationships."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CBP develop policy and guidance for documenting arrangements with landowners, as needed, and share the arrangements with its sectors; document and communicate the process and criteria for prioritizing funding of non-owned operational roads; and assess the feasibility of options, including data needs, for addressing the maintenance of non-federal public roads. DHS concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Border Patrol (Border Patrol), within the Department of  Homeland Security\u2019s (DHS) U.S. Customs and Border Protection (CBP),  is responsible for securing U.S. borders between ports of entry to prevent  acts of terrorism and the unlawful movement of people, illegal drugs, and  other contraband across U.S. borders. Border Patrol\u2019s 2012\u20132016  Strategic Plan, its most recent strategic plan, calls for rapid response\u2014an  immediate planning or action taken to mitigate emerging threats\u2014as one  of three core pillars of a risk-based approach for securing the border.  Border Patrol agents must travel each day on roads from their respective  stations to border areas to mitigate threats such as individuals trying to  cross the border illegally. For example, CBP reported that on average,  U.S. Border Patrol agents apprehended 1,140 individuals along the  nation\u2019s borders on a typical day in fiscal year 2016, and encountered  12,842 criminal aliens throughout the fiscal year.", "To conduct its security operations along the southwest border, Border  Patrol agents use roads owned by CBP, as well as those owned by other  federal agencies, states, counties, localities, and private citizens. CBP  classifies the roads it uses for its operations differently, depending on the  extent of its possessory or ownership interest. Owned-operational roads  are those that CBP owns, is leasing, or for which CBP has signed an  agreement providing it with an irrevocable interest. Non-owned  operational roads are those roads that CBP may maintain through a  license or permit, though the landowner may revoke the license or permit  at any time. As classified by CBP, both categories of roads may be  owned by federal, state, local, and private entities. CBP estimates that it  uses approximately 5,200 miles of roads to conduct its operations, the  majority of which are not owned by CBP, but by other entities such as  other federal agencies and private landowners. In particular, of the  approximately 5,200 miles of roads used by Border Patrol to conduct its  operations, 71 percent are considered non-owned operational. The  remaining 29 percent CBP considers owned-operational. State and local  public roads\u2014roads under the jurisdiction of and maintained by a public  authority and open to public travel\u2014are not considered owned or non- owned operational roads, and therefore, are not included in the  approximately 5,200 miles by CBP. Maintenance of these public roads is  the responsibility of the state and local entities that have jurisdiction over  them; however, Border Patrol may be the predominant user of certain of  these public roads. CBP estimates spending approximately $12.5 million  on maintenance and repair of owned and non-owned operational roads in  fiscal year 2016.", "Our prior work on private property damage and on border fencing and  the deployment of tactical infrastructure (TI) highlighted some of the  challenges Border Patrol faces in using private land and addressing  maintenance and repair of non-owned operational roads along the  southwest border. Specifically, in April 2015, we found that landowners  may file an administrative tort claim to seek compensation for private road  and land damage allegedly caused by the Border Patrol; however, a  landowner may only be eligible for compensation if certain criteria are  satisfied, including that the damage is caused by an agent acting within  the scope of his or her employment. In February 2017 we reported that,  according to Border Patrol sector officials, the time it may take to secure  an agreement providing for road maintenance, and having to negotiate  with multiple landowners where portions of a single road have different  possessors, may hinder CBP\u2019s ability to address the maintenance of  these roads in a timely manner. We also reported that, according to CBP  officials in one sector, maintenance prioritization of certain roads deemed  critical to border security operations can result in the degradation of roads  considered noncritical to border security operations, and that the use of  degraded roads increases the wear and tear on patrol vehicles, and the  cost of vehicle maintenance. In addition, we found that Border Patrol had  not developed written guidance for its newly implemented Requirements  Management Process, intended to facilitate planning for funding and  deployment of TI assets, including roads. As a result, we recommended  that Border Patrol develop and implement written guidance to include  roles and responsibilities for its requirements process for identifying,  funding, and deploying TI assets. CBP concurred with our  recommendation and has actions underway to address it.", "To better understand how Border Patrol\u2019s use and ability to maintain  roads along the southwest border may affect its operations, as well as  any processes and agreements in place to use and maintain roads owned  by other federal, state, local, tribal, and private landowners, you  requested that we review Border Patrol\u2019s use of roads to conduct its  security operations, and the extent to which Border Patrol is addressing  maintenance of these roads. This report examines the extent to which (1)  CBP has authorities and processes, including landowner agreements, to  facilitate its access to, and maintenance of, roads for its border security  operations and (2) CBP\u2019s operations are affected by its use of public  roads it cannot maintain, and the options that could be considered for  addressing any needed maintenance of these roads. We also provide  information in appendix I on selected federal agencies\u2019 authorities,  policies, and procedures for addressing maintenance of the roads these  agencies use for their operations but do not own.", "To determine the authorities and processes CBP has for using and  maintaining roads for its operations, we reviewed relevant legislation  related to CBP\u2019s access to and ability to maintain roads owned by other  federal agencies and private landowners, as well as prior Comptroller  General Opinions on public road improvement. We also analyzed CBP  road improvement policy documents, such as the 2015 \u201cNew Owned and  Non-Owned Operational Requirements in the Comprehensive Tactical  Infrastructure Maintenance and Repair (CTIMR) Contracts\u201d (Roads Policy  Memo). In addition, we interviewed headquarters officials with CBP Office  of Chief Counsel (OCC), Facilities Management and Engineering Office  (FM&E), and Border Patrol\u2019s Operational Requirements Management  Division (ORMD), as well as officials from each of Border Patrol\u2019s nine  southwest border sectors, to determine CBP\u2019s authorities and policies for  using and maintaining roads owned by other federal, state, local, tribal,  and private entities. To determine the type and status of the  arrangements Border Patrol has for addressing non-owned operational  road maintenance, in January and February 2017 we visited three of the  nine Border Patrol sectors where, in addition to interviewing Border Patrol  officials, we interviewed officials from other federal agencies, the Texas  and Arizona Departments of Transportation, and local and tribal  governments, as well as selected private landowners along the southwest  border. The private landowners we selected were identified by Border  Patrol and local agency officials, as well as by organizations representing  landowners along the southwest border, as owners of roads Border Patrol  uses for its operations. Information we obtained from the Texas and  Arizona Departments of Transportation, local and tribal government  officials, and private landowners cannot be generalized, but provided us  with perspectives on CBP\u2019s authority and processes for addressing  maintenance of public and private roads. We also reviewed a  nonrepresentative sample of agreements that Border Patrol has with  other federal, state, local, tribal, and private entities for use and  maintenance of their roads along the southwest border. We selected the  sectors we visited based on factors such as the sectors\u2019 total mileage of  non-CBP owned roads and the number of apprehensions of illegal border  crossers at each sector. We assessed CBP\u2019s efforts to document and  communicate agreements, as well as its processes and criteria for  prioritizing funding to address maintenance of the roads it uses for its  operations, against criteria in Standards for Internal Control in the Federal  Government.", "To determine the effects, if any, of CBP\u2019s use of public roads, we  interviewed headquarters officials with CBP FM&E and Border Patrol  ORMD, as well as field officials from all nine Border Patrol southwest  border sectors. At the three southwest border sectors we visited, we also  interviewed federal, state, county, city, tribal, and private landowners, and  observed the condition of some of the public roads Border Patrol uses but  cannot maintain. To determine options, if any, that could be considered to  address Border Patrol\u2019s maintenance of the public roads it is unable to  maintain, we reviewed relevant legislation and interviewed CBP FM&E  and OCC officials to determine the extent of CBP\u2019s authority and  appropriation for addressing maintenance of such roads. During our  interviews with these CBP officials, as well as with Border Patrol ORMD  and southwest border sector officials, we obtained perspectives on  actions CBP could take to address its inability to maintain public roads.  At the three sectors we visited along the southwest border, we also  interviewed federal and local officials who identified available  mechanisms, including sources of funding, they have used or that could  be used to address maintenance of public roads Border Patrol uses.", "We also interviewed CBP and Border Patrol officials responsible for  maintaining road maintenance data systems such as the Enterprise  Geospatial Information Services (eGIS) and Facility and Infrastructure  Tracking Tool (FITT), to determine whether data were available for  establishing the extent of Border Patrol\u2019s use of non-owned roads. Border  Patrol sector officials also provided us examples of nonfederal public  roads in poor condition that Border Patrol southwest border sectors use  but are unable to maintain and information on how Border Patrol\u2019s  operations are impacted by use of the roads. Information we obtained on  the roads used by Border Patrol agents along the southwest border  cannot be generalized, but provided us with insights into how Border  Patrol agents\u2019 ability to patrol certain areas of the southwest border may  be hindered by poor road conditions. We examined CBP and Border  Patrol\u2019s ongoing and planned initiatives to collect vehicle and agent  location data that could be used to establish the extent of Border Patrol\u2019s  use of non-owned roads. We assessed the extent to which CBP has  evaluated options for addressing maintenance of the roads it uses but is  legally unable to maintain against leading project management practices  identified by the Project Management Institute.", "To determine the authorities, appropriations, policies, and practices other  federal agencies have for addressing maintenance of non-owned roads  and their applicability to CBP described in appendix I, we interviewed  officials from the Department of Defense, the Department of the Interior  (DOI), and the U.S. Department of Agriculture. We identified and selected  these agencies because, according to officials, they routinely use roads  they do not own for conducting their operations.", "We conducted this performance audit from September 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "CBP and Border Patrol Operations along the Southwest Border", "paragraphs": ["Securing U.S. borders is the responsibility of DHS, in collaboration with  other federal, state, local, and tribal entities. CBP, a component within  DHS, is the lead agency for U.S. border security, and one of its top  priorities is preventing, detecting, and apprehending illegal border  crossers, and interdicting other illicit cross-border activity. The U.S.  Border Patrol is the CBP component charged with ensuring security along  border areas between ports of entry. To secure the nearly 2,000-mile  southwest border, Border Patrol divides responsibility for border security  operations geographically among nine sectors, as shown in figure 1.  Within each sector, Border Patrol agents at stations are responsible for  patrolling and responding to emerging threats within defined geographic  areas, using CBP-owned roads and a network of roads owned by other  federal, state, local, tribal, and private landowners. Agents are to identify  and report any needed maintenance and repair requirements of the roads  they use to patrol and respond to threats, according to CBP officials.", "Within CBP, the Office of Facilities and Asset Management and Border  Patrol each have offices that oversee the maintenance and repair of  roads and other TI that Border Patrol agents need to conduct operations.  Office of Facilities and Asset Management\u2019s FM&E oversees the  necessary environmental and real estate plans, maintenance and repair  contracts, and funding distribution. Within Border Patrol, ORMD oversees  operational planning by collecting and managing maintenance  requirements identified by sectors. ORMD also collaborates with FM&E in  determining the amount of funding and resources each sector needs to  address identified TI maintenance needs. Within ORMD, the Director of TI  and support staff oversee all TI requirements and programs across all  Border Patrol sectors."], "subsections": []}, {"section_title": "Southwest Border Road Ownership and Type", "paragraphs": ["The area along the southwest border is composed of federal, state, local,  tribal, and private lands. Federal and tribal lands make up 632 miles, or  approximately 33 percent, of the nearly 2,000 total border miles. State,  local, and private lands constitute the remaining 67 percent of the border.", "Each of these entities, including CBP, owns and maintains roads that  Border Patrol may use to patrol or to access TI along the border;  however, Border Patrol\u2019s ability to use these roads depends on various  factors, including its statutory authorities. Border Patrol may access public  roads\u2014i.e., roads under the jurisdiction of a public authority such as a  federal, state, local, or tribal entity, and open to public travel\u2014to the same  extent as other users. CBP may seek permission of the owner in order  to use nonpublic roads (roads owned by a public entity but not open to  the public) or private roads (roads owned by a private entity) located  beyond 25 miles of the border. In addition, Border Patrol generally  makes arrangements with landowners in order to address maintenance of  their roads.", "As mentioned previously, owned operational roads are those roads that  CBP owns, leases, or has an irrevocable interest in, and therefore has a  right to maintain. Non-owned operational roads are roads that CBP may  maintain through a license or permit, though the landowner may revoke  the license or permit at any time. Therefore, CBP is not obligated to  maintain these non-owned operational roads; any work to maintain and  repair these roads is based on Border Patrol\u2019s operational requirements.  Certain authorities allow federal agencies to enter into agreements with  other federal agencies for various goods and services. Under such  authorities, CBP may be able to use its appropriated funds to contribute  to the maintenance of public roads owned by other federal agencies, but  not to the maintenance of public roads owned by state and local entities.", "State and local public roads, which CBP is under no obligation to maintain  regardless of use, are not considered owned or non-owned operational  roads, and therefore, are not included in the approximately 5,200 miles of  roads used by CBP.", "Figure 2 shows an example of a CBP owned operational road providing  direct access to CBP fencing, and figure 3 shows an example of a road  owned by U.S. Fish and Wildlife Service and used by Border Patrol for  patrolling."], "subsections": []}, {"section_title": "CBP Road Maintenance", "paragraphs": ["CBP received $25 million in fiscal year 2016 for necessary repairs to  border fencing and border roads. For fiscal year 2017, CBP received an  additional appropriation for operations and support, of which $22.4 million  is for border road maintenance. CBP uses Comprehensive Tactical  Infrastructure Maintenance and Repair (CTIMR) contracts to address  maintenance of TI assets along the southwest border, including owned  and non-owned operational roads. CTIMR contracts provide a  mechanism for CBP to address both routine and urgent maintenance and  repair of the roads Border Patrol uses for its operations by providing  funds to contractors who perform the required maintenance. Routine  maintenance and repair include work that is required due to normal wear  and tear, deterioration due to age, and other damage not caused by  severe weather events or suspected intentional sabotage. Urgent repair  requirements are typically the result of severe weather events or  suspected intentional damage.", "For the purposes of maintenance requirements and funding distribution,  CBP divides the nine southwest border sectors into four work areas, with  each work area operating under a separate CTIMR contract. The four  work areas consist of the following sector groupings: (1) San Diego and  El Centro sectors; (2) Yuma and Tucson sectors; (3) El Paso and Big  Bend sectors; and (4) Del Rio, Laredo, and Rio Grande Valley sectors.  CBP\u2019s FM&E determines the contract amount for each work area over a  5-year contract period. Table 1 provides a breakdown of the cost incurred  by CBP for road maintenance and repair by work area and sector for  fiscal year 2016."], "subsections": []}]}, {"section_title": "CBP Has Various Authorities and Arrangements for Using and Maintaining Roads, but Documentation and Communication of Its Processes and Criteria for Distributing Maintenance Funding Are Limited", "paragraphs": [], "subsections": [{"section_title": "CBP Has Authorities and Arrangements for Using and Maintaining Roads", "paragraphs": ["Border Patrol generally has access to public roads to the same extent as  other users, and has certain authorities to use other federal, state, local,  tribal, and private owned roads. According to local, tribal, and Border  Patrol sector officials, CBP uses and is sometimes the primary user of  roads owned by states, counties, cities, and localities, but does not have  a specific appropriation to engage in public improvements, including the  maintenance and repair of such roads it uses for border security  operations.", "Public roads. Border Patrol has access to public roads\u2014those under the  jurisdiction of and maintained by a public authority (federal, state, local, or  tribal entity) and open to public travel\u2014to the same extent as other users  of such public routes. While Border Patrol has authority to use such  public roads for border security operations, CBP is statutorily prohibited  from maintaining and repairing nonfederal (state, local, county, and city)  public roads because performing such work without a specific  appropriation could violate the Anti-Deficiency Act and 41 U.S.C. \u00a7 6303  which prohibits the U.S. government from making or authorizing an  expenditure exceeding available appropriated funds. To ensure access  to TI in proximity to the border by way of lands that are owned by public  entities but not open to public use, Border Patrol uses various different  arrangements, including easements, special use permits, and multiple  use agreements, to gain access to such property. For example, Border  Patrol obtained various easements from a city located at the border,  granting it access to strategic locations to conduct surveillance of high  illegal traffic areas, according to the city\u2019s public works director.", "Other federal agency roads. CBP may obtain a special use permit or  enter into interagency agreements with other federal agencies to address  maintenance and repair of federal roads and land. CBP may also enter  into informal cooperative and undocumented arrangements with other  federal agencies to access certain roads the agencies use for conducting  their operations but that are not open to the public (e.g., administrative  roads). For example, Bureau of Land Management (BLM) officials in  Tucson, Arizona, told us that Border Patrol uses BLM administrative  roads that are open to other law enforcement agencies in the area, but  not to the public. According to these BLM officials, maintenance  agreements or reimbursements are not needed from Border Patrol or the  other agencies that use the roads. Further, Border Patrol has access to  all federal lands, as necessary, under a January 2017 Executive Order  that requires the Secretary of Homeland Security, the Secretary of the  Interior, and other relevant agency heads to grant Border Patrol, as well  as authorized state and local officers, access to such lands.", "Private roads. Border Patrol has statutory authority to, without a warrant,  access private lands (i.e., privately owned or otherwise nonpublic roads  and land), but not dwellings, within 25 miles of the international border to  prevent illegal entry of foreign nationals. According to CBP FM&E  officials, no further real estate action is required to access these roads;  however, this authority does not permit CBP to maintain and repair such  private roads. Access to private roads and land beyond 25 miles from  the border generally requires a warrant or permission of the landowner,  and all maintenance would be provided for in an arrangement with the  landowner. CBP may seek to establish mutually beneficial relationships,  including through various arrangements with private landowners, to use,  and as appropriate, maintain and repair certain private roads based on  Border Patrol\u2019s operational requirements, such as to enhance Border  Patrol\u2019s ability to perform operations. These arrangements include, but are not limited to licenses and permits, which are written and revocable  consent from landowners for CBP\u2019s specified use of their land. CBP  may seek to maintain and repair the privately owned roads leading to TI  located in proximity to the border. To do so, CBP secures land rights to  maintain and repair these access roads through fee interests, easements,  and leases.", "Border Patrol leverages various mechanisms to ensure access to the  privately owned roads it needs to conduct its operations on the southwest  border. For example, Border Patrol officials told us that they cultivate and  maintain good relations with private landowners to ensure access to  roads."], "subsections": []}, {"section_title": "CBP Does Not Consistently Document and Communicate Its Arrangements with Landowners", "paragraphs": [], "subsections": [{"section_title": "CBP Uses CTIMR Contracts to Address Road Maintenance", "paragraphs": ["CBP addresses maintenance of roads, as well as all other TI it uses for its  operations, through CTIMR contracts and agreements. CTIMR road  maintenance involves a collaborative process that uses a prioritization  scheme which, according to CBP\u2019s 2015 Roads Policy Memo, ensures  that in an environment of limited funding, CBP would fund maintenance  and repair of owned operational roads first, followed by non-owned  operational roads, where permitted. According to CBP officials, this  process entails the following three steps:", "Step 1: Border Patrol stations identify road maintenance requirements  on an ongoing basis and provide those requirements to sector and  headquarters leadership for approval.", "Step 2: Once approved, sector road maintenance requirements are  forwarded to FM&E for real estate and environmental clearance.", "Step 3: Environmentally cleared sector road maintenance  requirements are prioritized and added to quarterly CTIMR  maintenance work plans as the plans are developed.", "According to CBP FM&E officials, in order for sectors\u2019 requested road  maintenance to occur, three criteria must be met. First, CBP must obtain  an agreement from the landowner (for non-owned operational roads)  authorizing maintenance of the road. Second, the road must undergo an  environmental analysis and obtain environmental clearance. Third,  appropriated funds must be available for the maintenance. If all three  criteria are met, CBP places the road requirement in its Work  Management System\u2014a database CBP uses to track and oversee all TI  maintenance and repair work for its work plans, which are prioritized and  executed every 90 days. Sector officials are responsible for reviewing  each work plan and prioritizing maintenance and repair that are critical to  border security operations, and communicating any updates to CBP  officials for execution. Road requirements that are not funded in a given  period are pushed to the next work plan, according to CBP officials."], "subsections": []}, {"section_title": "CBP Has Not Consistently Documented Arrangements with Landowners or Communicated Such Arrangements with Border Patrol Sectors", "paragraphs": ["CBP enters into various arrangements with federal, state, and local  agencies and with some private landowners to maintain the roads it uses  for its operations; however, it has not consistently documented its  arrangements with these landowners or shared the arrangements it has  documented with Border Patrol sector officials. Officials of six of the nine  southwest Border Patrol sectors we contacted indicated that they do not  document all arrangements for private road maintenance, while officials of  one sector said they were unsure if all such arrangements were  documented.", "Federal, state, and local agencies. CBP has documented arrangements  with federal, state, and local agencies, including, but not limited to,  interagency agreements and memorandums of understanding (MOU) with  other federal agencies, and easements with state and local agencies. For  example, CBP has an agreement with the U.S. Forest Service, through  which it allocates $1.5 million to the U.S. Forest Service annually to  maintain roads the Border Patrol Tucson sector uses in the Coronado  National Forest. Tucson sector officials said that providing the funding to  the U.S. Forest Service to do the actual road maintenance was less  expensive than paying a private contractor to do the maintenance. This  process is also more efficient because U.S. Forest Service employees  are more familiar with the roads and forest area, according to sector  officials. CBP also entered into an MOU with the National Park Service in  2012 that authorizes CBP to maintain and repair certain roads that Border  Patrol uses for its operations in the Organ Pipe Cactus National  Monument in southern Arizona.", "Although CBP has arrangements with some landowners to address road  maintenance, it has not consistently documented arrangements with all  such owners. Further, CBP has not shared documented arrangements  with all relevant Border Patrol sector officials, including officials  responsible for prioritizing sector road maintenance funding needs, which  could hinder efforts to maintain roads. Officials of six of the nine  southwest Border Patrol sectors we contacted indicated that they do not  document all arrangements for private road maintenance while officials of  one sector said they were unsure if all such arrangements were  documented. Tucson sector officials told us that their sector works with  other federal, state, local, tribal, and private landowners to address road  maintenance; however, such maintenance is not always addressed  through written arrangements. For example, the sector has documented  agreements with the Arizona Department of Transportation for  maintenance of 11 checkpoints Border Patrol has established on its  roads. Conversely, it does not have a written agreement with the  Tohono O\u2019odham Nation, a federally recognized tribe, whose reservation  straddles the border. Rather, sector officials have had informal  arrangements with the tribe and the Bureau of Indian Affairs (BIA) for  several years on maintenance of several of the tribe\u2019s roads, including  two frontage roads which BIA manages and Border Patrol uses routinely  for its operations.", "Border Patrol sector officials cited various reasons for using and  addressing non-owned operational road maintenance without  documenting arrangements with the road owners. For instance, officials  noted that maintaining roads can facilitate good relations with landowners  thereby enabling Border Patrol\u2019s access to roads. Officials also explained  that keeping roads in good working condition, even in the absence of a  documented agreement, is mutually beneficial to both Border Patrol and  landowners. For example, according to Yuma sector officials, the sector  addresses maintenance of the Marine Corps roads it uses for its  operations although it does not have a documented agreement for  maintenance. Yuma sector officials said that CBP FM&E drafted an MOU  between CBP and the Marine Corps in 2013 that would allow Border  Patrol maintenance personnel (or personnel contracted by Border Patrol)  to access border roads for maintenance; however, the Department of  Navy, on behalf of the Marine Corps, has not yet signed the MOU. In the  absence of a written agreement, a CBP employee at Yuma sector  performs maintenance on Marine Corps roads, at Marine Corps\u2019 request,  because according to officials, Border Patrol agents benefit from  accessible roads.", "In some instances, CBP has documented arrangements with federal  agencies, but has not shared those arrangements with all relevant Border  Patrol sector officials, particularly those responsible for planning for and  prioritizing sector road maintenance needs. For example, road  maintenance planning officials at Big Bend sector told us that they do not  have a documented agreement with the Big Bend National Park in  western Texas to address maintenance and do not contribute toward  maintenance of any of the park\u2019s roads which Border Patrol uses  routinely. They added that FM&E is working on a current project to  determine how CBP and the National Park Service could share  maintenance costs for their joint use of the park\u2019s roads\u2014an agreement  that could extend to other parks in other sectors. However, CBP later  provided us with a copy of an agreement it entered into with Big Bend  National Park in July 2016. The agreement was effective from October  2016 through September 2017; however, Big Bend sector officials were  not aware of this agreement at the time of our March 2017 meeting with  them. Similarly, Yuma sector officials said that Border Patrol also helps  maintain a DOI-owned road the sector uses routinely for its operations  without a written agreement, because it is mutually beneficial and helps  maintain good relations with DOI. However, CBP officials later provided  us with a copy of an agreement with BLM, a component of DOI, which  addresses maintenance of the BLM roads in question. The agreement,  which was effective from September 2016 through September 2017, was  executed in August 2016, 6 months prior to our March 2017 interview with  Yuma officials; however, sector officials were not aware of the agreement  at the time of our interview.", "In addition to CBP not consistently sharing documented arrangements  with relevant Border Patrol sector officials, we identified instances where  written maintenance agreements between CBP and the federal  landowners had expired, despite Border Patrol\u2019s continued need to  access the roads covered by the expired agreements. For example, the  U.S. International Boundary and Water Commission entered into a  maintenance agreement with CBP in December 2005 for the resurfacing  of approximately 100 miles of a levee road the Rio Grande Valley sector  uses along the Rio Grande River. While this agreement expired in  September 2015, the commission was allowing Rio Grande Valley sector  officials to continue using the levee road at the time of our January 2017  visit to the sector, while a new MOU was being negotiated. International  Boundary and Water Commission officials characterized the  undocumented agreement Border Patrol was operating under as a verbal  \u201cgentleman\u2019s agreement.\u201d Similarly, El Centro sector officials told us that  the sector does not have a documented agreement with BLM for use and  maintenance of certain BLM roads and land. According to sector officials,  agents work to maintain good relations with BLM even though Border  Patrol can and does leverage its statutory authority and law enforcement  mission to access BLM roads and land. CBP officials later provided us  with a copy of an agreement with BLM that addresses maintenance of  BLM roads in El Centro sector; however, the agreement had expired in  December 2016, 3 months prior to our meeting with El Centro sector  officials.", "Private landowners. CBP has obtained licenses from some, but not all,  of the private owners whose roads the agency maintains. Also, it has not  consistently shared the documented road maintenance arrangements it  has with private landowners with Border Patrol sector officials. For  example, CBP obtained a revocable license in July 2015 from a private  gravel company that allows the Laredo Border Patrol sector to maintain  and repair roadways on the company\u2019s property for use in patrolling the  border area. Laredo sector officials stated that sometimes they receive  pushback from landowners regarding Border Patrol accessing their land,  but in general, most landowners want Border Patrol on their property.  Conversely, El Centro and El Paso sector officials reported that they do  not have documented license agreements with private landowners  regarding the maintenance of privately owned roads. In the El Centro  sector, officials stated that they typically have verbal and not documented  agreements with private landowners for maintenance. These officials  stated, however, that documenting agreements would provide a clearer  understanding of how privately owned roads are to be maintained.", "A number of factors contribute to the lack of documented road  maintenance arrangements between Border Patrol and private  landowners. First, some landowners choose not to pursue a license  agreement with Border Patrol to address maintenance of their roads as a  condition of access to the roads because they support Border Patrol\u2019s  mission and need the security provided by the agency. In these  instances, landowners have no concerns about Border Patrol agents  accessing their land without a documented agreement. For example, five  private landowners we met with individually, as well as others we met with  in three separate community group meetings, told us they did not have a  documented license agreement with Border Patrol; but some of them  nonetheless allow Border Patrol to continue using their roads without  addressing maintenance. However, one private landowner we interviewed  told us that regardless of whether a ranch owner wants Border Patrol  agents on his or her property for the security they provide, the additional  money the owner must spend to maintain his or her roads used by Border  Patrol is a financial burden. Second, some landowners are not aware that  Border Patrol can enter into arrangements with them to address  maintenance of their roads. For example, two of the five landowners who  lack documented license agreements with Border Patrol told us this.  Third, some landowners are interested in maintenance agreements but  have not received them. For example, three landowners told us they had  requested an agreement to address maintenance of their roads; however,  Border Patrol had not worked with them on such an agreement. Two of  these landowners said they generally incur an additional maintenance  cost due to Border Patrol\u2019s regular use and lack of maintenance of their  roads. For example, on our site visit to the Tucson sector, one landowner  told us that Border Patrol uses approximately 37 miles of road on his  ranch without a written license agreement to maintain the roads, although  he had requested one from Border Patrol. He estimated that he spends  approximately $3,000 per mile annually to repair the roads that Border Patrol predominantly uses. He, as well as two other landowners we  interviewed, told us they have considered preventing Border Patrol from  using their roads. Fourth, some private landowners do not want a  documented maintenance agreement with Border Patrol. According to  Border Patrol sector officials, some of these landowners would rather not  have to be in compliance with any environmental regulations that may  come with signing a formal license agreement with a federal agency and  instead prefer a \u201chandshake agreement.\u201d", "In addition to not consistently documenting arrangements, Border Patrol  sectors were not consistently aware of the documented arrangements  CBP has with private landowners. For example, Big Bend sector officials  told us that CBP does not have a documented license agreement with  any private landowner in their sector. According to sector officials, the  sector consists predominantly of private land, a vast majority of which is  located beyond 25 miles of the border and therefore outside the area for  which Border Patrol does not need a warrant to access private land. As  such, to prevent these owners from denying access to their roads, sector  officials told us they try to maintain good relationships with the owners of  the roads Border Patrol uses but does not maintain, by addressing  damage agents cause to their roads. Big Bend sector officials added that  they discuss and verbally agree with landowners on any required road  maintenance, relying on the relationships agents have established with  those landowners to come to agreement. However, CBP headquarters  officials subsequently provided us copies of five license agreements, all  executed in August 2016, that CBP has with private landowners in the Big  Bend sector. CBP officials also told us that an additional two license  agreements were in the process of being finalized. They added that  Border Patrol\u2019s ranch liaisons, who serve as Border Patrol\u2019s conduits to  landowners, are typically aware of these and other license agreements  with landowners in their sectors, and are responsible for making other  sector officials aware of the existence of the agreements.", "We asked CBP FM&E and Border Patrol officials why arrangements for  road maintenance are not consistently documented or shared with Border  Patrol sectors. Officials from CBP FM&E, the office primarily responsible  for managing documented road maintenance arrangements, including  license agreements, said that agreements are documented based on  operational need by Border Patrol and added that FM&E works with  Border Patrol sectors to determine which roads need licensees. They also  stated that all licenses and agreements are held in the FITT system and  tracked in the eGIS. Officials from ORMD provided the following  rationales regarding documenting and sharing agreements. First, ORMD  officials stated that license agreements for road maintenance with private  landowners are managed on a case-by-case basis, depending on the  needs of the landowners and the Border Patrol sector. The standard is  that a road must have both real estate and environmental clearance prior  to receiving maintenance and repair. Second, according to these officials,  not every legacy road license agreement has been transitioned over to  CBP\u2019s new system for documenting road maintenance, which may  explain why neither the owner (especially of land that has been passed  on from one generation to the next) nor sector officials know it exists and  seek to renew it. In other instances, some historical use agreements have  yet to be formally documented. According to ORMD officials, the  operational impact to Border Patrol of undocumented agreements can be  determined only on a case-by-case basis and will likely depend on the  location of the road and the ability to use adjacent alternate roads. They  added, however, that in general, the lack of documentation can slow  Border Patrol\u2019s access to some roads. ORMD officials stated that in the  absence of documented agreements, Border Patrol takes great effort in  maintaining relationships with landowners to ensure continued access to  the roads it needs. In cases where landowners are apprehensive about  entering into formal license agreements with the government, Border  Patrol\u2019s ranch liaisons continue to work with landowners to further engage  the landowners about entering into a documented agreement.", "Standards for Internal Control in the Federal Government requires that  agencies clearly document and communicate all transactions and other  significant events, and make the documentation readily available for  examination. According to these standards, the documentation may  appear in management directives, administrative policies, or operating  manuals and may be in paper or electronic form. Those standards also  require that management internally communicate the necessary quality  information throughout an agency, using established reporting lines to  achieve the agency\u2019s objectives. Without documenting and  communicating the arrangements it has with landowners, Border Patrol  has no record of what was agreed to with owners in terms of maintenance  of roads, which could hinder Border Patrol efforts to access and maintain  certain roads. Developing a policy and related guidance for documenting  arrangements with landowners, as needed, and ensuring that the  documented agreements are shared with all relevant Border Patrol sector  officials could help Border Patrol work with road and land owners more  consistently to address road maintenance. Such a policy could also better  provide opportunities to owners who want formalized arrangements, and  enhance the sectors\u2019 ability to plan for road maintenance requirements."], "subsections": []}]}, {"section_title": "Border Patrol Has Not Clearly Documented or Shared Its Processes and Criteria Used to Distribute Road Maintenance Funding to Its Sectors", "paragraphs": ["Border Patrol uses any funding that remains after owned operational road  requirements are addressed to maintain non-owned operational roads;  however, Border Patrol has not clearly documented or shared the process  and criteria it uses for prioritizing maintenance of the non-owned  operational requirements with sector officials. After distributing CTIMR  funds to address its owned operational road maintenance, there are  thousands of miles of non-owned operational roads that do not receive  funding for maintenance. CBP FM&E officials explained that there is not a  dedicated budget for non-owned operational roads, and therefore, not  sufficient funding to address all the roads in need of maintenance. Also,  because CBP does not collect data on the frequency of its road use, CBP  is limited in its ability to effectively dedicate funding for road maintenance.  The funding to address maintenance and repair of non-owned operational  roads is derived from two main sources. First, CBP has the option of  redistributing excess funding from any unneeded owned operational road  maintenance project, among the sectors. For example, if the roads in  Tucson sector are not damaged as much as anticipated during the annual  monsoon season, CBP can redistribute funds originally designated for  Tucson sector for other road maintenance projects in other sectors within  the same work areas. The redistribution of such funds is determined by  Border Patrol\u2019s Director of TI. Second, officials said that if funding from an  additional appropriation is made available, as was the case in fiscal year  2016, they can use it to address non-owned operational road  maintenance.", "Border Patrol makes decisions on how to prioritize maintenance of non- owned operational roads; however, the process and criteria it uses for  making such funding decisions are not clearly documented and are not  shared with Border Patrol sector officials. During the course of our review,  we requested that ORMD provide a description of its prioritization process  both verbally and in writing. ORMD officials provided us with a written  description that included the following six steps for prioritizing non-owned  road maintenance:", "Step 1: Review sectors\u2019 past year priorities utilizing a road  requirements working group composed of representatives of all  divisions of the three Border Patrol directorates.", "Step 2: Receive and review planning guidance from Border Patrol  senior leadership.", "Step 3: Identify current and emerging threats.", "Step 4: Review State of the Border Risk Methodology for updated risk  levels.", "Step 5: Draft priority lists, utilizing the road requirements working  group.", "Step 6: Brief, adjust, and obtain concurrence for priority lists utilizing  the road requirements working group and executive governance.", "The document ORMD prepared for us also cites various criteria for  making funding decisions about non-owned roads, including whether  each proposed road requirement is considered a vulnerability. If it is  considered a vulnerability, ORMD determines whether it is documented in  the Capability Gap Analysis Process, and how the vulnerability ranks  among other identified vulnerabilities within the station and sector where  the road is located, and in the nation as a whole, to inform leadership.  Further, according to the document, ORMD officials determine the  urgency of funding the road requirement and whether it can be funded  given available resources.", "ORMD officials identified various other factors that go into the decision- making process for prioritizing non-owned road maintenance. However,  these factors were different from those criteria included in the document  they prepared for us. For example, ORMD officials said that when  prioritizing sectors\u2019 non-owned road maintenance, planners must first  consider sectors\u2019 ranking on Border Patrol\u2019s annual investment  prioritization list, which is based on intelligence, threat level, and other  information pertaining to each sector. ORMD officials stated that this list  serves as a starting point for the decision-making process to prioritize  sectors\u2019 non-owned operational road maintenance requirements. Officials  added that the investment prioritization list is intended to help them with  the six-step maintenance prioritization process described above;  however, not all factors they consider when making the decision as to  which non-owned operational roads to maintain in each sector are  documented. They explained that the majority of their personnel have  been trained on the road maintenance planning process and are familiar  with all factors that go into the decision-making process.", "ORMD officials said that sectors\u2019 investment prioritization rankings are not  shared with the sectors. They explained that they prefer to not share the  list or sectors\u2019 ranking with the sectors because this information is  intended to guide their decision-making, but is not the only factor they use  in determining sectors that should receive remaining funding for non- owned operational road maintenance.", "None of the nine sector officials we contacted reported that they were  aware of the process and criteria ORMD uses to prioritize and fund  maintenance of non-owned operational roads. Rio Grande Valley sector  officials told us that funding of maintenance requirements for the Rio  Grande Valley sector takes priority over funding of other sectors\u2019 non- owned operational road requirements. However, these officials stated that  they were unsure why this was the case, primarily because Border Patrol  had not shared the process and criteria it uses for non-owned operational  road maintenance decision-making. Standards for Internal Control in the  Federal Government requires that agencies clearly document all  transactions and other significant events, and make the documentation  readily available for examination. According to these standards, the  documentation may appear in management directives, administrative  policies, or operating manuals and may be in paper or electronic form.  Those standards also require that management internally communicate  the necessary quality information throughout an agency, using  established reporting lines to achieve the agency\u2019s objectives. By clearly  documenting and communicating the process and criteria it uses for  making decisions on funding non-owned operational requirements,  ORMD could better ensure that sector officials are aware of the process  and criteria, and can therefore better plan for and anticipate funding to  meet their sector road maintenance needs. Moreover, documenting and  communicating the process and criteria by which it makes non-owned  operational road requirements funding decisions would ensure Border  Patrol has a record of the process not dependent on the persons with  current knowledge of the process being in the same positions."], "subsections": []}]}, {"section_title": "Border Patrol Operations May Be Affected by CBP\u2019s Inability to Maintain Certain Public Roads That Are in Poor Condition, but CBP Has Not Assessed Maintenance Options", "paragraphs": [], "subsections": [{"section_title": "Border Patrol Officials Reported That Certain Public Roads in Poor Condition Affect Border Security Operations", "paragraphs": ["Border Patrol sector officials we interviewed reported that poorly  maintained public roads negatively affect their ability to conduct security  operations. Officials from six of the nine southwest border sectors  reported that poorly maintained public roads negatively affect their ability  to respond to threats because of limited road access or increased  response times, and cause additional wear and tear on vehicles. For  example, El Paso sector officials said that a 14-mile stretch of a public,  county road they use to access a forward operating base is severely  rutted, limiting agents\u2019 ability to access the southernmost points of their  patrol area. In addition, officials from Laredo sector told us that a 40- mile county-owned road in the western part of the sector is in such poor  condition agents cannot always use it. The alternative route agents take  adds approximately 90 minutes to their patrol time. Laredo sector officials also said that when agents do use roads like this one, it results in wear  and tear on vehicles. Laredo sector officials reported that they had to  contract for outside mechanics as a result of additional demands for  vehicle repairs. Figure 4 documents the poor condition of the county road  in Laredo sector.", "The extent to which Border Patrol operations are negatively affected by  the poor conditions of certain public roads is unknown because,  according to CBP and Border Patrol officials, Border Patrol does not  collect or maintain data on the extent of its use of any non-owned roads,  including public roads. According to officials, Border Patrol does not  collect such data because it does not make road maintenance decisions  based on how frequently it uses a road, but rather, on how critical the  road is to its operations. Border Patrol officials said that they have  assessed various ongoing or planned CBP data collection initiatives that  Border Patrol could leverage to collect data that could identify how often it  uses non-owned roads. For example, officials with CBP Enforcement  Systems Division\u2014the office responsible for integrating technology  initiatives with operations in support of Border Patrol\u2019s mission\u2014said that  CBP\u2019s Blue Force initiative\u2014a method, usually using Global Positioning  System (GPS), of tracking the locations in real time of operational assets,  including vehicles and agents, to better coordinate operations\u2014would  collect GPS tracking data. However, Border Patrol officials stated the  Blue Force initiative and other GPS tracking initiatives have not received  all planned funding amounts.", "As CBP and Border Patrol officials said they do not have data that identify  the extent of Border Patrol\u2019s use of non-owned roads, we gathered  examples from each of the nine southwest Border Patrol sectors of state,  county, city, and tribal public roads in poor condition that CBP is unable to  maintain and that sector officials said negatively affect their ability to  conduct operations. Table 2 provides examples of the public roads sector  officials identified, including a description of the roads, and how the road  conditions negatively affect Border Patrol\u2019s operations."], "subsections": []}, {"section_title": "CBP Officials Reported That the Inability to Maintain Certain Public Roads That Are in Poor Condition May Be Impeding Border Patrol\u2019s Relations with Local Governments and Communities", "paragraphs": ["CBP\u2019s inability to address the maintenance of certain public roads Border  Patrol regularly uses can negatively affect Border Patrol\u2019s relations with  local governments, according to CBP officials. Officials from two counties  and one tribe we spoke with told us that in certain rural areas along the  border, Border Patrol uses some public roads heavily or is the primary  user, and its use creates more wear and tear on the roads than would  ordinarily be caused by general public use. These officials said that their  agencies are responsible for fully funding required maintenance of the  roads they own; however, they may not address needed maintenance for  two reasons. First, their agencies do not have sufficient funding because  they do not have the necessary tax base to generate funds for extensive  road maintenance. Second, with limited funding, agencies may prioritize  roads the general public uses more frequently over rural roads used  regularly by Border Patrol. These county officials and Border Patrol sector  officials told us that CBP\u2019s inability to offer any maintenance assistance  for public roads Border Patrol needs for operations makes collaboration  with local governments challenging and hurts Border Patrol\u2019s credibility.  For example, officials we met with in an Arizona county identified a 5-mile  stretch of road within their county that Border Patrol uses frequently  because it provides access to the border. County officials told us they  currently spend $23,000 more each year to maintain the 5-mile road than  they would typically spend on a similar stretch of road as a result of the  wear and tear they attribute to Border Patrol\u2019s use. Figure 5 shows  potholes and deteriorating shoulders on the county road.", "In addition, officials from the Tohono O\u2019odham Nation told us they do not  have sufficient BIA funding to maintain a 28-mile, major, public  thoroughfare leading to a Border Patrol forward operating base and the  border. Tucson sector officials said they are likely the primary user of the  southern end of the road and may create heavy wear and tear. These  officials reported that BIA would require approximately $14.5 million to  repair the 28-mile road; however, BIA receives approximately $26 million  for road repairs annually to cover 29,000 miles of roads under its  jurisdiction. Figure 6 shows the eroded condition of this tribal road.  Officials from the Arizona county and tribe have requested Border Patrol\u2019s  assistance in maintaining public roads. As of July 2017, however, Border  Patrol had not provided such assistance.", "Border Patrol sector officials also said relations between Border Patrol  and local border communities can be negatively affected by poor road  conditions, because the communities attribute the conditions to Border  Patrol\u2019s use. These relations are important as Border Patrol relies on  good relations with communities to access roads owned by private  landowners in the community to conduct operations, according to Border  Patrol officials. Members of a community coalition in Arizona that meets  regularly to discuss options for addressing maintenance of a poorly  maintained public road that Border Patrol uses routinely told us that  Border Patrol\u2019s use of the public road creates conditions that negatively  affect the local community and damage relations with Border Patrol.  Similar to the negative effects Border Patrol officials reported, members  of this community coalition told us they experience slower response times  by emergency response vehicles and damage to vehicles from poor road  conditions, resulting in higher vehicle maintenance costs. In addition,  these private landowners told us poor road conditions have negatively  affected the local economy. For example, residents of a town we met with  that is located near recreational amenities reported a decline in tourism  revenue. They stated that, in their view, the poor condition of roads  Border Patrol routinely uses has contributed to declines in tourism."], "subsections": []}, {"section_title": "CBP Has Not Assessed Options for Addressing Maintenance of Nonfederal Public Roads in Poor Condition", "paragraphs": ["CBP and Border Patrol officials have discussed two options that, if  implemented, could offer possible mechanisms for addressing  maintenance of nonfederal public roads. However, officials also  discussed challenges each option would present to CBP, and CBP has  not assessed these or other options for addressing maintenance of the  state, county, city, and other local roads it uses for its operations.", "First, CBP officials told us they have considered seeking a specific  appropriation to maintain state and local (i.e., nonfederal) public roads  through financial or labor assistance. However, CBP officials said that  involvement in public road maintenance may raise liability considerations  and potential conflicts with the agency\u2019s primary mission. For example,  CBP officials indicated that if CBP maintained nonfederal public roads, it  could be subject to negligence claims in relation to the repairs it conducts.  Additionally, CBP would require additional resources to negotiate  necessary contracts with public authorities to ensure they spend money  appropriately and to oversee the network of their roads that could be  necessary for CBP\u2019s operations, according to officials. In addition, the  time and resources spent on road maintenance could divert Border Patrol  from its primary mission of securing the borders, according to CBP  officials.", "Second, CBP and local officials we met with discussed two grant options  that could be informative in considering options to address the  maintenance of public roads Border Patrol uses routinely. While the  specific grants discussed may not apply to CBP or road maintenance, the  officials provided them as examples of grants that promote cooperation  between federal agencies and local governments.", "First, after securing necessary legal authorities, CBP could establish a  grant program, which would allow CBP to provide funding to state and  local entities for road maintenance. Officials suggested that such a  program could also allow the public entities that own the roads to  conduct the maintenance themselves, alleviating Border Patrol\u2019s  liability and resources concerns. For example, Border Patrol officials  discussed the success they have experienced using Operation  Stonegarden to leverage state and local resources for border security  while building relations with local law enforcement. Operation  Stonegarden provides funds for joint CBP, Border Patrol, and federal,  state, local, and tribal law enforcement agency efforts to secure U.S.  borders. These officials offered that a similar program could enable  CBP to provide funding to public entities to maintain certain roads.", "Second, CBP and local officials identified federal funding for road  maintenance available to public agencies and executed through other  federal agencies that CBP may be able to contribute to. For example,  officials of a public water drainage district and town we met with said  they had previously applied for a Federal Lands Access grant. The  Federal Lands Access Program supplements state and local  resources for public roads, among other transportation related  infrastructure, with an emphasis on high-use recreation sites and  economic generators. The Federal Lands Access Program requires  applicants to provide at least a 20 percent match of the project cost.  Officials from the public water drainage district and town said another  local public entity planned to help it with the match for this grant. If  Border Patrol had an appropriation for non-owned road maintenance,  it could potentially help public entities, like the water drainage district,  meet the match for federal grants.", "As of July 2017, CBP and Border Patrol have not assessed or  implemented any of the options described above for two predominant  reasons. First, CBP officials said the options each have accompanying  challenges, in addition to the liability and management issues discussed  above. For example, an appropriation to maintain public roads would not  likely be sufficient to cover all road maintenance for state, local, and tribal roads Border Patrol uses, according to CBP officials. They added that  limited funding to maintain the roads would put CBP in a position to  prioritize some public roads over others, which may further strain relations  with some public entities. Second, as discussed above, CBP officials told  us they do not currently have data that demonstrate the extent to which  Border Patrol relies on all non-owned roads, including public roads, to  conduct its operations. CBP officials also said they do not keep data on  the condition of roads owned by public entities. Without data on CBP\u2019s  use of non-owned roads, determining a maintenance solution that uses  an appropriate amount of resources would be challenging.", "Standards for program management call for program managers to assess  programs on an ongoing basis. To ensure continued success, program  managers can use feasibility studies to determine whether implementing  program changes could help mitigate any negative impacts. Assessing  the feasibility of options to ensure adequate maintenance of nonfederal  public roads, where necessary, including data needs for determining the  extent of its reliance on non-owned roads for border security operations,  could lead to a possible solution for enhancing Border Patrol\u2019s operations  and its community relationships."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["Border Patrol\u2019s access to roads plays a key role in its ability to secure the  nation\u2019s land borders from terrorism and other threats. While Border  Patrol has entered into maintenance arrangements with the federal, state,  and private landowners whose roads it uses for its operations, CBP and  Border Patrol officials told us they have not consistently documented  these arrangements because the need for an agreement with a  landowner is determined on a case-by-case basis. By not documenting  the arrangements it has with landowners, Border Patrol has no record of  what was agreed to with owners in terms of maintenance of roads, which  could hinder Border Patrol efforts to access and maintain certain roads.  Similarly, Border Patrol has not clearly documented or shared its process  and criteria for determining which non-owned roads to maintain with its  limited funding. By not clearly documenting and communicating the  process and criteria it uses for making decisions on funding non-owned  operational requirements, ORMD cannot reasonably ensure that sector  officials are aware of the process and criteria, and therefore cannot  ensure adequate planning for and anticipation of funding to meet sectors\u2019  road maintenance needs requirements.", "In addition, Border Patrol generally has access to public roads and has  certain authorities to use other nonpublic federal, tribal, and private  owned roads; however, it does not have a specific appropriation for public  improvements. Border Patrol agents reported experiencing negative  effects to their operations, such as delayed response times, from using  public roads that are generally in poor condition due to Border Patrol\u2019s  use and inability to maintain the roads; however, CBP has not assessed  options for maintaining these roads, partly because it does not collect  data that indicates the extent of its reliance on all non-owned roads.  Without assessing options, including data needs, that may exist for  addressing maintenance of nonfederal public roads, CBP may be missing  feasible opportunities for addressing maintenance of the roads, thereby  foregoing an opportunity to enhance Border Patrol\u2019s ability to rapidly  respond to threats at the border."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to CBP:", "The Commissioner of CBP should develop and implement a policy  and related guidance for documenting arrangements with landowners,  as needed, on Border Patrol\u2019s maintenance of roads it uses to  conduct its operations, and share these documented arrangements  with its sectors. (Recommendation 1)", "The Commissioner of CBP should clearly document the process and  criteria for making decisions on funding non-owned operational  requirements and communicate this process to Border Patrol sectors.  (Recommendation 2)", "The Commissioner of CBP should assess the feasibility of options for  addressing the maintenance of nonfederal public roads. This should  include a review of data needed to determine the extent of its reliance  on non-owned roads for border security operations.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS, DOD, DOI, and USDA for  review and comment. DHS agreed with our three recommendations. The  department\u2019s response is reprinted in appendix II. DHS and DOI also  provided technical comments that we incorporated, as appropriate. In  response to our first recommendation that CBP develop and implement a  policy and related guidance for documenting road maintenance  arrangements with landowners, and share these documented  arrangements with its sectors, DHS concurred, stating that FM&E will  issue updated guidance on addressing maintenance of assets on private  land to Border Patrol and FM&E personnel located at the sectors. The  updated guidance, according to DHS, will reference the agency\u2019s 2011  and 2015 policy and procedures for owned and non-owned road  maintenance, as well as points of contact for additional information on  landowner maintenance agreements. DHS also concurred with our  second recommendation that CBP clearly document the process and  criteria for making decisions on funding non-owned operational  requirements and communicate this process to Border Patrol sectors.  DHS stated that Border Patrol will outline the process and criteria for  making these funding decisions and communicate the process to Border  Patrol sectors. DHS concurred with our third recommendation that CBP  assess the feasibility of options for addressing the maintenance of non- federal public roads, including a review of data needed to determine the  extent of its reliance on non-owned roads. DHS stated that Border Patrol,  in collaboration with CBP FM&E, will review data on the extent of Border  Patrol's use of non-owned roads for border security operations and  develop a strategy that outlines options and assesses the feasibility for  maintaining roads, as appropriate. These actions, if implemented  effectively, should address the intent of our three recommendations.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Homeland Security, Agriculture, Defense,  and the Interior, 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, please contact me at (202) 512- 8777 or gamblerr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made significant contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Selected Federal Agencies\u2019 Programs for Addressing Maintenance of Roads the Agencies Use but Do Not Own", "paragraphs": ["We reviewed relevant authorities, policies, and procedures of three  selected departments that maintain roads owned by others (non-owned  roads) for conducting their operations\u2014the Department of Defense  (DOD), the U.S. Department of Agriculture (USDA), and the Department  of the Interior (DOI). DOD addresses maintenance of all non-owned roads  through its Defense Access Roads (DAR) program. The U.S. Forest  Service (Forest Service) is a USDA component we identified that  addresses maintenance of non-owned roads. While DOI officials stated  that DOI is not authorized to directly address maintenance of the non- owned roads it uses for its operations, the Bureau of Indian Affairs (BIA),  a component of DOI, partners with public agencies to address  maintenance of non-owned roads that provide access to or within tribal  lands, through the Tribal Transportation Program.", "We discuss the authorities, policies, and procedures utilized by the DAR  program, the Forest Service, and BIA in more detail in the following  sections. These authorities, policies, and procedures are specific to the  respective programs, and therefore are not applicable to the U.S. Border  Patrol (Border Patrol). In addition, U.S. Forest Service and BIA officials  said that unlike the U.S. Forest Service and the BIA, Border Patrol is not  a public road agency\u2014a federal, state, local, or Indian government or  instrumentality with jurisdiction over, and authority to finance, build,  operate, or maintain, public roads. Further, Border Patrol has various  authorities including the ability to access private land, and therefore roads  on such land, located within 25 miles of the border, without a warrant.  The information presented below is intended to illustrate how other  selected federal departments and agencies address maintenance of non- owned roads."], "subsections": [{"section_title": "Department of Defense: Defense Access Roads (DAR) Program", "paragraphs": [], "subsections": [{"section_title": "Background", "paragraphs": ["DOD and the Department of Transportation are jointly responsible for  administering the DAR program. Established in 1956, the DAR program  authorizes the Secretary of Transportation to use funds appropriated for  the Department of Defense to fully or partially fund public road  improvements and maintenance that are certified as important to national  defense. The program provides a means for the military to pay its \u201cfair  share\u201d of the cost of public road improvements and maintenance needed  in response to sudden and unusual defense-generated traffic or road  surface impacts, such as a significant increase in personnel at a military  installation, or use of a road by an oversized or overweight military  vehicle, and to help ensure adequate transportation capacity is in place  when needed. According to DOD officials, the DAR program is primarily  used to fund road construction to provide installation access and alternate  routes to reduce congestion caused by an installation and for the  maintenance of roads to support transportation of specialized military  equipment traveling on public roads."], "subsections": []}, {"section_title": "Authority", "paragraphs": ["Through the DAR program, DOD is authorized to address the  construction and maintenance of certain defense access roads which are  certified to the Secretary of Transportation as important to the national  defense. To implement its authorities, in 1978 DOD and the Federal  Highway Administration (FHWA) together developed a set of DAR  program eligibility criteria that specifies the types of roads DOD can  improve. These roads include (1) a replacement road; (2) a public road  that creates new access to a military facility; (3) a road on which traffic  has doubled as a result of the military\u2019s use; and (4) a rural county road  that has limited carrying capacity and requires upgrade to sustain  consistent movements of military equipment. DOD officials said that they  use public roads like everyone else in the general public\u2014that is, DOD  components use the roads while the public owners (for example, a state,  county, or city) maintain the roads\u2014and are not authorized to address  maintenance of a public road unless the road is determined by the DAR  program to be a defense access road. DOD officials said they were not  aware of any instances involving DOD\u2019s use of private roads. If there is  any such use, DOD officials stated that there would be an agreement in  place for addressing maintenance of the private roads.", "DAR projects are funded from two sources\u2014Military Construction funds  and Operation and Maintenance funds. The particular source used for a  project depends on the project\u2019s work classification and dollar amount.  Projects for new construction that exceed $1 million are submitted as line  item requests in the President\u2019s budget for authorization and  appropriation in the Military Construction program. Maintenance and  repair of existing roads under the DAR program is funded with Operation  and Maintenance funds. Minor military construction projects costing $1  million or less may also be funded with Operation and Maintenance  funds. DOD officials said that because there is not a dedicated funding  for the DAR program, it competes with every other military requirement  (including on-base construction requirements). Ultimately, funding is  based on a project\u2019s merit to meet a military mission."], "subsections": []}, {"section_title": "Policies and Procedures", "paragraphs": ["Under DAR program regulations, military installation commanders can  initiate a request for assistance from DAR if there is a defense-related  transportation need affecting the surrounding community. To initiate a  DAR project, the local military base identifies the access or mobility  requirement and submits a DAR needs report to the U.S. Army Military  Surface Deployment and Distribution Command (SDDC). SDDC will then  either conduct a DAR needs evaluation or request FHWA to make an  evaluation of improvements that may be necessary, determine the scope  of work to address the deficiencies, and develop a cost estimate.  According to a document DOD officials provided on the DAR program,  SDDC will determine if the proposed work meets the DAR program  qualification criteria and if so, certify the road as important to national  defense, thereby making it eligible for DOD funds. The military service  operating the base is then responsible for submitting the budget request  for the project funds through its normal planning, programming, and  budgeting process. Once programmed by the military service, if the work  is classified as new construction and exceeds $1 million, the funds must  be authorized and appropriated by Congress. After Congressional  approval, the funds are transferred to FHWA and allocated to the agency  administering the project (federal, state, county or other local  transportation authority). A project memorandum of agreement (MOA)  establishes specific roles and responsibilities for the officials involved in  the DAR project. Upon completion, long-term maintenance of the  improvement becomes the responsibility of the owning highway authority.", "According to DOD officials, the most common DAR program maintenance  projects involve maintenance and repair of rural county roads used by the  Department of the Air Force to transport intercontinental ballistic missiles  from their main base to remote locations. These roads are often gravel  roads, but also include portions of paved roads. For operational reasons,  missile equipment cannot be transported over roads that are rutted or  washboarded; therefore, DOD is forced to maintain these roads to its  standards, which are typically higher than the standards of the counties  that own them, to ensure access and safety. DOD missile engineers  coordinate with state and county transportation departments, as well as  the FHWA, to execute the maintenance requirements. There are  approximately 1,500 miles of gravel roads to be kept at missile  transporter standards used by DOD. There is another 1,500 miles of  paved roads used by DOD for the missile transporter mission; however,  DOD does not generally maintain these roads, except in cases of an  emergency (e.g., surface washout or extreme snow removal).", "In support of the missile transport requirement, DOD has an MOA with  each county and state it works with under the DAR program. These  MOAs are general in nature, outlining mostly the roles and responsibilities  of DOD, as well as those of the state or county. DOD officials explained  that if paved roads fall into disrepair, DAR missile engineers are generally  in close contact with state and local officials and have a very good  relationship with them to ensure the state or county maintains the road.  Typically, the state and local transportation officials adequately maintain  paved roads, while DOD generally maintains the unpaved roads. If the  responsible state and local agencies do not have the necessary funds to  maintain paved roads, DOD will look into using alternate routes for  transporting the missiles, or other alternatives, but would not generally  provide funding for the maintenance of paved roads, according to DOD  officials."], "subsections": []}]}, {"section_title": "Department of Agriculture: U.S. Forest Service", "paragraphs": [], "subsections": [{"section_title": "Background", "paragraphs": ["The mission of the U.S. Forest Service, a component of USDA, is to  sustain the health, diversity, and productivity of the nation\u2019s forests and  grasslands to meet present and future needs. To accomplish this mission,  the Forest Service manages and protects 154 national forests and 20  national grasslands in 43 states and Puerto Rico. The Forest Service  uses a wide variety of roads to access national forest system lands. A  large portion of these roads are owned and managed by the Forest  Service; however, the agency also relies on roads which cross land  managed and owned by other federal, state, local, and private  landowners authorized by various types of easements, road use permits,  or road rental agreements, to conduct its operations."], "subsections": []}, {"section_title": "Authority", "paragraphs": ["According to Forest Service officials, the Forest Service is a public road  agency and therefore operates and maintains roads that are open to the  public. In addition to these roads, Forest Service uses public roads like  the general public\u2014with the relevant public road agency bearing  responsibility for maintenance of such roads. However, if traveling on a  public road with a vehicle that is not standard for the particular road type,  Forest Service would generally need to obtain a special-use permit as  required by the relevant public road agency. Forest Service must also  enter into agreements to use and maintain private roads. Conversely, if a  road is located on an existing right of way that is owned by the Forest  Service, and through private property, Forest Service does not need  additional permission to access and maintain the road. Also, according to  Forest Service officials, in the event of an emergency (fire, pursuit),  Forest Service can access a private road without permission.", "Forest Service addresses maintenance of the owned and non-owned  roads it uses for its operations using allocated funding used for most road  restoration, maintenance, and repair, as well as funding from the FHWA  (funding to address maintenance of a smaller subset of roads). Forest  Service can enter into agreements with other public agencies for use and  maintenance of the agency\u2019s roads or land under various authorities.  Funds available for forest development roads and trails are to be used by  the Secretary of Agriculture to cover costs of construction and  maintenance of such roads and trails, including those on experimental  and other areas under Forest Service administration. A set formula is  used to allocate Roads, Capital Improvement, Maintenance (CMRD)  funding to each of nine Forest Service regions, and then to each forest.  While CMRD funds can be shifted from one region to another, as needed,  officials said that there are restrictions on how funding from the Federal  Highway Administration can be distributed and spent. In the case of  either funding source, each forest determines how to spend the funding it  receives for road maintenance. The criteria used for making this road  maintenance decision takes into account, among other things, other road  construction and maintenance plans for the region where the forest is  located, according to Forest Service officials."], "subsections": []}, {"section_title": "Policies and Procedures", "paragraphs": ["According to Forest Service officials, the agency predominantly maintains  its own roads and expects other entities, such as counties, to maintain  their own roads, regardless of how frequently Forest Service uses a  particular road. Forest Service\u2019s policy is to enter into road maintenance  agreements with public agencies where there is a sufficient reason and  available funding to do so. Forest Service meets annually with public road  agencies and landowners to discuss existing and new road use  agreements and maintenance plans, as well as shared road maintenance  responsibilities, activities, and scheduled maintenance events. According  to Forest Service officials, as of July 2017, the agency had issued 5,854  Forest Road and Trail Act Easements to public road agencies and  landowners nationwide. These easements have clauses which direct  the Forest Service and the grantees to enter into agreements to use and  maintain each other\u2019s roads. Individual forests are responsible for forming  any agreements they need for road maintenance. The specific terms of  these agreements are economically driven, primarily based on beneficial  need to the Forest Service and the availability of funding, according to  Forest Service officials. Officials said that Forest Service will maintain a  public road if it enables needed access. Officials said they can execute  MOUs with entities, such as counties, to share road maintenance costs.  Forest Service also partners with other federal agencies on use of federal  highways. The roads Forest Service typically uses are public-use and  multi-use roads. According to Forest Service officials, there are not many  instances in which Forest Service needs to access private roads. In  instances where it does, Forest Service\u2019s policy is to obtain a perpetual,  motorized, public use easement; however, most private owners are  hesitant to grant ownership interest. Officials said that they use one-time  agreements on a small subset of roads to address wear and tear in  specific instances and based upon the Forest Service commensurate  road use. For example, officials said if Forest Service acquires land, but  has not yet acquired the roads leading to the property, Forest Service will  enter into a short-term agreement to maintain the roads until it acquires  ownership of the roads. All agreements are made on a case-by-case  basis, according to officials, but the focus for Forest Service is always on  the needs of the agency.", "According to Forest Service officials, maintenance agreements are rare  because most of the roads the Forest Service needs are already  maintained at the level it needs them to be. There are not many examples  of Forest Service needing the roads to be maintained at a higher standard  than they already are. Forest Service officials also told us that the agency  prioritizes maintenance of the roads it owns over maintenance of roads  that are owned by others. Given the large network of roads under Forest  Service\u2019s jurisdiction, there is rarely excess funding available to contribute  to the maintenance of roads owned by local government agencies,  officials said. To compensate for its limited funding, officials added that  Forest Service has helped local government agencies address  maintenance of their roads by providing a funding match to help qualify  these agencies for federal road maintenance grants. However, they said  that they do this only on a case-by-case basis, and only when Forest  Service and the local government agencies\u2019 priorities align.", "Forest Service officials said that a lot of collaboration occurs between the  Forest Service and other federal, state, and local agencies in order to  finance road improvements and maintenance. Most of its collaboration is  with states and counties. Forest Service collaborates with FHWA because  the latter grants the necessary easements to states for forest highways  which the Forest Service uses. Because counties get FHWA funds as  well to maintain forest highways along with county road intersections,  Forest Service works with counties on these roads to meet forest needs."], "subsections": []}]}, {"section_title": "Department of the Interior: Bureau of Indian Affairs Background", "paragraphs": ["DOI\u2019s Bureau of Indian Affairs (BIA) is responsible for the administration  and management of approximately 56 million acres of land held in trust by  the United States for American Indians, Indian tribes, and Alaska Natives.  BIA provides services, including transportation services, directly or  through contracts, cooperative agreements, and grants, to approximately  1.9 million American Indians and Alaska Natives from the 567 federally  recognized tribes. One of BIA\u2019s mechanisms for addressing maintenance  of non-tribal and non-BIA owned public roads is the Tribal Transportation  Program (TTP). Through the TTP, the Secretaries of Transportation and  the Interior pay the costs of eligible transportation projects involving tribal  transportation facilities, and other appropriate public road facilities, among  other activities. Public roads whose maintenance is addressed through  the TTP include roads owned by states, cities, counties, and other federal  agencies. The TTP is jointly administered by the BIA Division of  Transportation and the FHWA Federal Lands Highway Office."], "subsections": [{"section_title": "Authority", "paragraphs": ["According to BIA officials, BIA and tribal governments are public  authorities and are authorized to enter into agreements with other public  agencies to maintain non-owned roads that meet the definition of  transportation facilities that are eligible for assistance under the TTP.  The responsibility to maintain roads owned by another public authority  belongs to such authority with jurisdiction over the route (unless otherwise  provided for in an agreement or other usage permit). According to BIA  officials, a tribe or BIA may use TTP funds to maintain roads owned by  others, but only in accordance with an agreement allowing the tribe or BIA  to carry out maintenance activities on the roads and provided the public  authority that owns the road cannot or will not use its funds to maintain its  own road."], "subsections": []}, {"section_title": "Policies and Procedures", "paragraphs": ["BIA is organized into 12 regions, each of which has a TTP component  that provides engineering, construction, and road maintenance services  for highways, roads, bridges, trails, or transit systems that are located on  or provide access to tribal land and appear on the National Tribal  Transportation Facility Inventory. The 12 regions can enter into  agreements with state and local governments to provide funding to  maintain public roads the state and local governments own and that  provide access to tribal lands when tribes have not assumed  responsibility for administering the TTP. BIA enters into and administers  these agreements for those tribes which do not have an agreement with  BIA for transportation funding, known as \u201cdirect service tribes.\u201d Tribes  that have such an agreement with BIA, or FHWA, are responsible for  administering the TTP and would enter into and administer agreements  with state and local governments for maintenance of the roads they own  that provide access to tribal lands. According to BIA officials, of the  approximately 160,000 miles of roads that are eligible for TTP funding,  BIA owns approximately 29,000 miles. The amount of funding distributed  via the TTP is determined by a statutory formula based on several factors  including historic funding, miles of roads in the National Tribal  Transportation Facility Inventory in 2004 and 2012, population, and a  supplemental takedown designed to assist certain tribes with small  shares of funding relative to their fiscal year 2011 funding base. Prior to  2012, BIA allocated funding based on a regulatory formula that included  needs data continuously updated by tribes. TTP funding can be used as  the funding match state and local agencies need to qualify for federal  transportation improvement grants, depending on the transportation  needs of tribal governments. According to 23 U.S.C \u00a7 202(f), TTP funding  is not intended to replace the funding state and local governments receive  for planning, design, construction, and maintenance for their public roads."], "subsections": []}]}]}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Meg Ullengren (Assistant  Director), Edith Sohna, and Colleen Corcoran made key contributions to  this report. Also contributing to the report were David Alexander, Eric  Hauswirth, Terence Lam, John Mingus, Sasan J. \u201cJon\u201d Najmi, Claire  Peachey, and Adam Vogt."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-678", "url": "https://www.gao.gov/products/GAO-18-678", "title": "Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need to Be Clarified", "published_date": "2018-09-10T00:00:00", "released_date": "2018-09-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD spends billions of dollars annually to sustain its weapon systems to support current and future operations. The Air Force and Navy are operating many of their fixed-wing aircraft well beyond their original designed service lives and therefore are confronted with sustainment challenges.", "House Report 114-537 included a provision for GAO to evaluate the sustainment of major weapon systems. This report, among other things, (1) examines the trends in availability and O&S costs for selected Air Force and Navy fixed-wing aircraft since fiscal year 2011, including whether they met availability goals, and (2) assesses the extent that the departments documented sustainment strategies, reviewed sustainment metrics, and implemented plans to improve aircraft availability. GAO selected a nongeneralizable sample of 12 fixed-wing aircraft by considering a variety of factors, such as the type, age, and manufacturer of the aircraft, among other factors, and analyzed condition and availability data, O&S costs, and sustainment challenges from fiscal year 2011 through March 2017 for each aircraft in a \u201cSustainment Quick Look.\u201d GAO also analyzed policies, strategies, and plans, and interviewed Navy and Air Force officials in program offices, squadrons, and maintenance depots."]}, {"section_title": "What GAO Found", "paragraphs": ["Between fiscal years 2011 and 2016, the Air Force and Navy generally did not meet aircraft availability goals, and operating and support (O&S) cost trends for GAO's selected fixed-wing aircraft varied. Specifically, GAO found that", "availability declined for 6 of 12 aircraft\u20143 from each service\u2014between fiscal years 2011 and 2016;", "availability fell short of goals for 9 of 12 aircraft in fiscal year 2016; and", "O&S costs increased for 5 of the aircraft, and maintenance costs\u2014the largest share\u2014increased for 8 of 12 aircraft.", "GAO found, and officials agreed, that these aircraft face similar challenges.", "a Obsolescence means a part is unavailable due to its lack of usefulness or it is no longer current or available for production.", "b Diminishing manufacturing sources is a loss or impending loss of manufacturers or suppliers.", "The Air Force and Navy have documented sustainment strategies for some aircraft, regularly reviewed sustainment metrics, and implemented improvement plans. The Air Force has documented sustainment strategies for all aircraft GAO reviewed; however, the Navy has not documented or updated its sustainment strategies for four aircraft. Specifically, the Navy does not have a documented sustainment strategy for the C-2A, and has not updated the strategies for the E2C, EA-18G, and F/A-18A-D since before 2012. The Navy is in the process of documenting its strategies, but Department of Defense (DOD) policy is unclear on whether a sustainment strategy is required and has to be updated every 5 years for weapon systems that are in the operations and support phase of their life cycle (i.e., legacy systems). Also, Navy guidance does not specify a requirement for legacy systems, although Air Force guidance does. Clarifying the requirements to document sustainment strategies for legacy systems, and documenting those strategies, would add additional visibility over the availability and O&S costs of DOD aircraft and any associated sustainment risks.", "This is a public version of a sensitive report issued in April 2018. Information on aircraft availability and other related information was deemed to be sensitive and has been omitted from this report."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that DOD and the Navy update or issue new policy and guidance clarifying the requirements for documenting sustainment strategies for legacy weapon systems. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) spends tens of billions of dollars  annually to sustain its weapon systems in an effort to ensure that these  systems are available to simultaneously support today\u2019s military  operations and maintain the capability to meet future defense  requirements. Operating and support (O&S) costs historically account for  approximately 70 percent of a weapon system\u2019s total life-cycle cost\u2014 costs to operate and sustain the weapon system from initial operations  through the end of its life\u2014and include costs for repair parts, depot and  field maintenance, contract services, engineering support, and personnel,  among other things. Weapon systems are costly to sustain in part  because they often incorporate a complex array of technical subsystems  and components and need expensive repair parts and logistics support to  meet required readiness levels. In addition, as we reported in 2014,   military operations have increased the wear and tear on many weapon  systems, including fixed-wing aircraft, and escalated their O&S costs  beyond peacetime levels.", "The Departments of the Air Force and Navy are operating many of their  fixed-wing aircraft well beyond their original designed service lives, and  some of these legacy systems are confronted with sustainment  challenges that affect aircraft availability. The Air Force and Navy  forecast needed aircraft availability and associated goals to ensure that  fixed-wing aircraft can meet operational and training requirements. In  2017, senior Air Force, Navy, and Marine Corps officials testified before  the House Armed Services Committee regarding, among other things, the  maintenance and sustainment issues relating to aging aircraft that are  affecting the readiness of their forces. Additionally, over the past several  years, we have conducted work on a number of issues that affect the  ability of DOD to sustain its weapon systems, an overview of which can  be found in appendix I.", "We conduct annual assessments of DOD\u2019s major defense acquisition  programs and report on the cost, schedule, and performance of those  programs. To complement our acquisition-related work on major weapon  systems, the House Armed Services Committee in House Report 114-537  accompanying a bill for the National Defense Authorization Act for Fiscal  Year 2017 included a provision for us to evaluate the sustainment,  availability, and costs of major weapon systems, among other things.  This report (1) examines trends in aircraft availability and O&S costs for  selected Air Force and Navy fixed-wing aircraft since fiscal year 2011,  including whether the aircraft met availability goals; (2) describes the  sustainment challenges that affect aircraft availability and O&S costs  across the selected fixed-wing aircraft; and (3) assesses the extent that  the Air Force and Navy have documented sustainment strategies,  reviewed sustainment metrics, and implemented plans to improve aircraft  availability for the selected fixed-wing aircraft. Additionally, in appendixes  II\u2013XIII we provide \u201cSustainment Quick Looks\u201d for each of the fixed-wing  aircraft we reviewed. These \u201cSustainment Quick Looks\u201d include additional  information for each of the fixed wing aircraft we reviewed.", "This report is a public version of a sensitive report that we issued on April  25, 2018. The sensitive report included an objective related to the trends  in aircraft availability. DOD deemed some of the information, such as  aircraft availability, not mission capable status, number of aircraft in  depots, and budgeted and executed flight hours, to be sensitive (i.e., For  Official Use Only), which must be protected from public disclosure. This  public report omits the information that DOD deemed to be sensitive.  Although the information provided in this report is more limited, it  addresses the same objectives and uses the same methodology as the  sensitive report.", "For objective one, we selected a nongeneralizable sample of 12 types of  fixed-wing aircraft managed by the Air Force and Navy and reviewed  aircraft availability and other sustainment data calculated based on the  number of aircraft and period of time and O&S costs from fiscal years  2011 through 2016, the last fiscal year for which complete data were  available at the time of our work. We selected this period so we could  identify and obtain insight on historical data trends regarding aircraft  availability and O&S costs for the selected fixed-wing aircraft. We  compared the availability data over this period to Air Force and Navy availability goals associated with each aircraft fleet. To select the fixed- wing aircraft for our review, we considered a number of factors, such as  the type of aircraft (fighters, bombers, cargo, etc.), the size and age of the  inventory, and whether the aircraft were sustained organically by DOD or  through contract arrangements, such as public-private partnerships or  performance-based logistics contracts. For the Air Force, we selected  five fixed-wing aircraft\u2014the B-52 Stratofortress, C-17 Globemaster III, F- 16 Fighting Falcon, F-22 Raptor, and E-8C Joint Surveillance and Target  Attack Radar System (JSTARS). For the Navy, including the Marine  Corps, we selected seven fixed-wing aircraft: the AV-8B Harrier, C-2A  Greyhound Logistics Aircraft, E-2C Hawkeye Early Warning and Control  Aircraft, E-2D Advanced Hawkeye Early Warning and Control Aircraft,  EA-18G Growler, F/A-18A-D Hornet Strike Fighter, and F/A-18E-F Super  Hornet. For the selected aircraft, we obtained and reviewed the aircraft  availability, sustainment, and O&S data for accuracy and completeness,  interviewed officials regarding their data-collection processes, and  reviewed available related policies and procedures associated with the  collection of the data. We found the information to be sufficiently reliable  for the purposes of presenting sustainment metrics, such as aircraft  availability and O&S costs.", "For objective two, we reviewed sustainment metrics, performance  briefings, and other relevant documentation to identify specific challenges  for each of the 12 aircraft in our review. We also reviewed ongoing and  planned actions to address those challenges. We interviewed program  officials, depot officials, field maintainers, and squadrons to obtain their  views on the challenges they face in sustaining the aircraft and the  actions they take to mitigate those challenges. In some instances, we  visited depots and squadrons to observe aircraft undergoing  maintenance, discuss the respective maintenance processes, and  discuss challenges and mitigation actions with officials.", "For objective three, we obtained and analyzed the sustainment strategies,  performance management frameworks (i.e., sustainment metrics  collected and monitored as well as the levels of management review), and improvement plans for each of the 12 selected fixed-wing aircraft. We  also identified and reviewed DOD, Air Force, and Navy guidance to  analyze the departments\u2019 efforts in sustaining these aircraft. Specifically,  we reviewed the Air Force and Navy guidance to determine whether it  was consistent with DOD policy and federal standards for internal control  that deal with management defining objectives in specific terms.  Additionally, we identified whether the Air Force and Navy had  documented sustainment strategies for each selected fixed-wing aircraft,  including a life-cycle sustainment plan, postproduction support plan, or an  in-service support plan, among other types of documented strategies.  Further, we determined whether the sustainment strategy for each  selected fixed-wing aircraft had been updated within time frames  identified in DOD policy. Appendix XIV provides further information on our  scope and methodology.", "The performance audit upon which this report is based was conducted  from September 2016 to April 2018 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate, evidence  to provide a reasonable basis for our findings and conclusions based on  our audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with DOD from April 2018 to  September 2018 to prepare this unclassified version of the original  sensitive report for public release. This public version was also prepared  in accordance with these standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Information on Selected Air Force and Navy Fixed- Wing Aircraft", "paragraphs": ["The inventories of the selected Air Force and Navy fixed-wing aircraft in  our review totaled 2,823 aircraft and required approximately $20 billion to  operate and support in fiscal year 2016. The inventory, aircraft status,  initial operational capability, and service life forecast for each of the 12  selected fixed-wing aircraft are shown in figure 1."], "subsections": []}, {"section_title": "Policy and Guidance for the Sustainment of Fixed- Wing Aircraft", "paragraphs": ["Sustainment of fixed-wing aircraft and other weapon systems comprises  the logistics and personnel services required to maintain and prolong  operations, and DOD policy provides direction to service components on  sustainment planning across the life cycle of the weapon system.  Specifically, DOD policy requires the services to develop and implement a  sustainment strategy, such as a Life-cycle Sustainment Plan, for  sustaining its weapon systems. According to DOD\u2019s policy, this strategy  should be the basis for all sustainment efforts, including sustainment  metrics mapped to key performance parameters and key system  attributes, such as aircraft availability, to manage sustainment  performance. The policy states that, after initial operating capability,  programs should update the sustainment plan whenever there are major  changes to its strategy for sustaining the weapon system, or every 5  years, whichever occurs first. The Air Force and the Navy also have  guidance that implements the requirements of the DOD guidance.  These services\u2019 guidance include sustainment-planning requirements for  life-cycle sustainment and assurance of affordability."], "subsections": []}, {"section_title": "Roles and Responsibilities for the Sustainment of Fixed-Wing Aircraft", "paragraphs": ["There are a variety of DOD offices that have roles and responsibilities  related to sustaining fixed-wing aircraft. For instance, the Under Secretary  of Defense for Acquisition and Sustainment (USD ), is the principal  staff assistant and advisor to the Secretary of Defense for all matters  concerning acquisition and sustainment. Specifically, USD (A&S) is  responsible for establishing policies for logistics, maintenance, and  sustainment support for all elements of DOD, including fixed-wing aircraft.  The Assistant Secretary of Defense for Logistics and Materiel Readiness  (ASD ) serves as the principal staff assistant and advisor to the  USD (A&S) on logistics and materiel readiness within DOD. Specifically,  the ASD (L&MR) is responsible for (1) establishing DOD policies and  procedures for logistics, maintenance, materiel readiness, strategic  mobility, and sustainment support; (2) providing related guidance to the  Secretaries of the military departments, including developing the Life- cycle Sustainment Plan outline; and (3) monitoring and reviewing  programs associated with these areas, among other duties and  responsibilities.", "For the Air Force, the Air Force Materiel Command develops, acquires,  and sustains weapon systems through research, development, testing,  evaluation, acquisition, maintenance, and program management of the  systems and their components. This command provides acquisition and  life-cycle management services and logistics support, among other  things. The Air Force Life Cycle Management Center within the Air Force  Materiel Command is responsible for the life-cycle management of  weapon systems from inception to retirement. A Program Executive  Officer\u2014responsible for managing a specific portfolio of weapon  systems\u2014is responsible for each of the selected fixed-wing aircraft. The  Program Executive Officer oversees the program office that manages  each weapon system.", "For the Navy and Marine Corps, the Naval Air Systems Command is  responsible for providing the full life-cycle support of naval aviation  aircraft, weapons, and systems. This support includes research, design,  development and systems engineering; acquisition; test and evaluation;  training facilities and equipment; repair and modification; and in-service  engineering and logistics support. As with the Air Force, Program  Executive Officers oversee their assigned program managers.", "DOD relies on program managers to lead the development, delivery, and  sustainment of individual weapon systems through their life cycles. The  program managers are the designated individuals with responsibility for  and authority to accomplish the program\u2019s sustainment objectives to meet  the users\u2019 operational needs. Product support managers, who work within  the program offices, are responsible for developing and implementing  support strategies for weapon systems that maintain readiness and  control life-cycle costs. Weapon systems are sustained under various  arrangements that may include contractors, DOD organic facilities, or  some combination of the two. For example, the Air Force Sustainment  Center provides depot maintenance through its Air Logistics Complexes  for weapon systems. Naval Air Systems Command is responsible for  the Navy Fleet Readiness Centers, which provide depot-level  maintenance for Navy and Marine Corps fixed-wing aircraft.  Additionally, the Air Force Sustainment Center and the Navy Supply  Systems Command, as well as the Defense Logistics Agency, manage  inventories of repair parts, and individual weapon systems programs are  typically supported by a complex supplier network that includes a prime  contractor, subcontractors, and various tiers of parts suppliers. On the  other hand, sustainment responsibilities\u2014in their entirety or particular  elements\u2014may be contracted out as part of a public-private partnership  or a performance-based logistics agreement, such as with the F-22  Raptor."], "subsections": []}, {"section_title": "Key Sustainment Metrics for Fixed-Wing Aircraft", "paragraphs": ["The Air Force and Navy monitor the readiness status of selected fixed- wing aircraft through numerous performance metrics. Specifically, the Air  Force measures how well a fleet is performing by calculating the  availability of the fleets\u2019 aircraft, which is the number of aircraft that are  available for flight operations. The Navy measures its aircraft availability  through two metrics: (1) Ready-Basic-Aircraft (RBA)\u2014the number of  aircraft that are able to safely fly\u2014and (2) Ready-for-Tasking (RFT)\u2014the  number of aircraft that are able to conduct specific missions. Both the Air  Force and Navy have established goals associated with aircraft  availability.", "In addition to measuring the availability of the aircraft against the  associated goals, the Air Force and Navy track the reasons for aircraft not  being available or able to conduct missions. Specifically, the Air Force  and Navy track the following:", "Aircraft in depot: Aircraft unavailable to conduct missions because of  scheduled or unscheduled depot maintenance or modification.", "Not mission capable maintenance: Aircraft that are not in depot and  not capable of performing any of their assigned missions because of  maintenance.", "Not mission capable supply: Aircraft that are not in depot and not  capable of performing any of their assigned missions because of the  lack of a repair part.", "In addition to these three metrics, the Air Force also tracks the following:", "Not mission capable for both supply and maintenance: Aircraft  that are not in depot and not capable of performing any of their  assigned missions because of both maintenance and the lack of a  repair part.", "Units possessed not reported: Aircraft that are not available for use  for reasons other than depot and not mission capable status, but  possessed by the squadron."], "subsections": []}, {"section_title": "Operating and Support Costs for Major Weapon Systems", "paragraphs": ["There are various costs associated with operating and supporting weapon  systems. DOD\u2019s Operating and Support Cost-Estimating Guide provides  direction to the service components on developing estimates to support  various analyses and reviews throughout the program life cycle.  According to the guide, as a program matures, it remains necessary to  continue to track and assess O&S costs and trends to ensure that the  program remains sustainable, affordable, and properly funded. Each  military department maintains a database that collects historical data on  the O&S costs for major fielded weapon systems. DOD\u2019s Office of Cost  Assessment and Program Evaluation provides policy guidance on this  requirement, known as the Visibility and Management of Operating and  Support Costs program; specifies the common format in which the data  are to be reported; and monitors its implementation by each of the military  departments. O&S costs are categorized using the following six  overarching elements: unit level manpower\u2014cost of operators, maintainers, and other  support manpower assigned to operating units; unit operations\u2014cost of unit operating materiel such as fuel, and  training material, unit support services, and unit travel; maintenance\u2014cost of system maintenance including depot- and  sustaining support\u2014cost of system support activities that are provided  by organizations other than the system\u2019s operating units;  continuing system improvements\u2014cost of system hardware and  software modifications; and  indirect support\u2014cost of activities that provide general services that  lack the visibility of actual support to specific force units or systems."], "subsections": []}]}, {"section_title": "Air Force and Navy Fixed-Wing Aircraft Availability and O&S Costs Have Varied, and Aircraft Availability Goals Generally Were Not Met", "paragraphs": ["For the selected Air Force and Navy fixed-wing aircraft in our review,  aircraft availability and O&S cost trends varied over the 6-year period  between fiscal years 2011 and 2016, and the aircraft generally did not  meet availability goals. We found that 6 of 12 fixed-wing aircraft\u20143 from  each service\u2014experienced decreased aircraft availability between fiscal  years 2011 and 2016. One aircraft met availability goals each year  between fiscal year 2011 and 2016. Conversely, six aircraft met the goals  in some years but not others, and five aircraft did not meet the goals in  any year. In the latest year included in our review\u2014fiscal year 2016\u20149 of  12 of the fixed-wing aircraft did not meet their associated availability  goals. With respect to O&S costs, the overall O&S total for all 12 aircraft  was about $20 billion annually over the 6-year period; some aircraft  experienced increases while the costs to operate and support others  decreased. The reasons for changes in costs included increases in  maintenance costs for 8 of 12 fixed-wing aircraft. Below we summarize  these trends, and the \u201cSustainment Quick Looks\u201d in appendices II\u2013XIII  provide detailed information on the trends associated with each of the 12  fixed-wing aircraft and appendix XV provides additional information on  operating and support cost per aircraft."], "subsections": [{"section_title": "Air Force Aircraft Availability and O&S Cost Trends Varied across the Selected Fixed-Wing Aircraft", "paragraphs": [], "subsections": [{"section_title": "Air Force Aircraft Availability Trends Varied, and Three of Five Aircraft Did Not Meet Availability Goals since 2011", "paragraphs": ["Our analysis found that: between fiscal years 2011 and 2016, aircraft availability for two of five  selected Air Force fixed-wing aircraft fluctuated and for three  decreased; between fiscal 2011 and 2016, two aircraft met availability goals in  some years, and three aircraft did not meet availability goals in any of  the years; and  in fiscal year 2016, four of the five aircraft did not meet availability  goals.", "Specific details regarding aircraft availability and not mission capable  status for maintenance, supply, and both maintenance and supply were  omitted because DOD deemed this information as sensitive (i.e., For  Official Use Only).", "According to officials, when aircraft availability goals are not met, training  and operational missions may not be fulfilled as timely as needed. For  example, F-22 squadron officials explained that the lack of available  aircraft creates a shortage of trained pilots. F-22 pilots need extensive  training to fulfill their air-superiority role. Further, command officials  explained that when aircraft availability goals are not met, there may not  be enough aircraft to respond to contingency requirements. Officials  expressed concern that, given the capability and expectation of the F-22  to be available to create air superiority in any operation, missions may not  be met. Additionally, E-8C program office officials stated that missions are  often limited to top priority, which means supported combatant commands  may not obtain all needed capabilities, such as the E-8C not being able to  provide surveillance capability to particular combatant commands."], "subsections": []}, {"section_title": "Air Force O&S Cost Trends Have Varied, and Maintenance Costs Generally Increased since 2011", "paragraphs": ["From fiscal years 2011 through 2016, O&S costs for the Air Force aircraft  in our review totaled about $13 billion annually. These costs decreased  for the C-17, F-16, and the F-22, but increased for the B-52 and E-8C, as  shown in figure 2. For example, the F-16\u2019s total annual O&S costs  decreased by about $943 million (or about 19 percent) because of  decreases in all cost elements\u2014the largest decrease being unit  operations\u2014except sustaining support. According to officials, the  decrease in unit operations can be attributed to the retiring of aircraft and  the consolidation of squadrons. The C-17\u2019s and F-22\u2019s O&S costs  decreased mainly because of decreases in two cost elements: continuing  system improvements and unit operations. In contrast, the B-52\u2019s and the  E-8C\u2019s O&S costs increased, by $76 million (or about 6 percent) and $41  million (or about 6 percent), respectively. The increases occurred  because two of the cost elements\u2014continuing system improvements and  maintenance costs\u2014increased more than the other costs elements  decreased.", "Based on our analysis of the O&S cost elements, maintenance cost  generally is one of the largest portions\u2014on average about 36 percent\u2014of  total O&S costs for each aircraft. As shown in figure 3, maintenance costs  for four of the five aircraft generally have increased from fiscal years 2011  through 2016. Specifically, maintenance costs for the C-17, E-8C, and F- 22 increased because of additional depot maintenance needs. B-52  maintenance costs fluctuated year to year, but increased overall during  this period. The overall maintenance costs for the F-16 decreased by  approximately $140 million. According to our analysis, even though there  was an increase in some of the F-16 maintenance cost elements, the  fleet\u2019s executed flying hours decreased. Therefore, the flying hour depot- level reparable costs decreased by approximately $123 million and  engine repair decreased by $115 million, causing the overall maintenance  cost to decrease."], "subsections": []}]}, {"section_title": "Navy Aircraft Availability Trends and O&S Cost Trends Varied across the Selected Fixed-Wing Aircraft", "paragraphs": [], "subsections": [{"section_title": "Navy Aircraft Availability Trends Varied, and Five of Seven Aircraft Generally Did Not Meet Availability Goals since 2011", "paragraphs": ["Our analysis found that: between fiscal years 2011 and 2016, aircraft availability increased for  three of the seven Navy fixed-wing aircraft, fluctuated for one, and  decreased for the remaining three aircraft; between fiscal 2011 and 2016, one aircraft met aircraft availability  goals in each year, and four aircraft met goals in some years, while  two aircraft did not meet goals in any of the years; and  in fiscal year 2016, the Navy did not meet aircraft availability goals for  five of the seven aircraft.", "Specific details regarding aircraft availability and not mission capable  status for maintenance and supply were omitted because DOD deemed  this information as sensitive (i.e., For Official Use Only).", "To address decreases in aircraft availability, the Navy has moved  available aircraft between squadrons to help ensure deploying squadrons  are fully equipped for their assigned missions. In November 2017, the  Commander of Naval Air Forces testified before the House Armed  Services Committee that to equip the air wings with the required number  of mission capable aircraft for the deployment of three aircraft carriers in  2017, the Navy had to transfer 94 strike fighters to and from the  maintenance depots or between squadrons. This transfer included  pulling aircraft from fleet replacement squadrons, where the focus should  be on training new aviators.", "The Commander of Naval Air Forces, in his November 2017 testimony,  summarized the issue: \u201cThat strike fighter inventory management, or shell  game, leaves non-deployed squadrons well below the number of jets  required to keep aviators proficient and progressing toward their career  qualifications and milestones, with detrimental impacts to both retention  and future experience levels.\u201d Furthermore, based on our analysis, F/A- 18A-D squadrons have underexecuted their flight hours by an average of  4 percent from fiscal years 2011 through 2016. According to officials, this  is largely due to low aircraft availability. Additionally, placing further strain  on aircraft availability, the F/A-18A-D inventory has decreased from 581  aircraft in fiscal year 2011 to 537 aircraft in fiscal year 2016."], "subsections": []}, {"section_title": "The Navy\u2019s O&S and Maintenance Cost Trends Varied", "paragraphs": ["From fiscal years 2011 through 2016, O&S costs for the Navy\u2019s seven  selected fixed-wing aircraft totaled about $7 billion annually. Also, the  Navy has experienced varying O&S and maintenance costs since fiscal  year 2011 for these aircraft. Specifically, annual O&S costs decreased for  the AV-8B, C-2A, E-2C, and F/A-18A-D, and increased for the E-2D, EA- 18G, and F/A-18E-F, as shown in figure 4.", "We found that O&S costs for the F/A-18A-D decreased by about 22  percent from about $3.1 billion in fiscal year 2011 to about $2.4 billion in  fiscal year 2016. According to officials, this decrease can be attributed to  the decrease in inventory as aircraft are retired and squadrons transition  to the F-35 Joint Strike Fighter. In another example, O&S costs for the E- 2D increased from about $1.6 million in fiscal year 2012 to about $125  million in fiscal year 2016. The size of the fleet has increased by 17  aircraft\u2014from 3 to 20 since fiscal year 2011. According to officials, this  aircraft remains in production with a projected fleet size of 75; as  inventory increases, so will O&S costs.", "Based on our analysis of the O&S cost elements, maintenance cost  generally is one of the largest portions\u2014about 42 percent\u2014of total O&S  costs for the seven aircraft in our review. Annual maintenance costs have  increased for the C-2A, E-2D, EA-18G, and F/A-18E-F, and decreased for  the AV-8B, E-2C, and F/A-18A-D, as shown in figure 5.", "We found that maintenance cost for the C-2A increased by about 7  percent from about $89 million in fiscal year 2011 to about $95 million in  fiscal year 2016. According to officials, the increase in maintenance cost  can be attributed to increased demand for outer wing panels, which  resulted in a $16 million increase in depot-level repair costs and a more  than 10 percent increase in executed flight hours, among other things. In  another example, maintenance cost for the AV-8B decreased by about 9  percent from about $375 million in fiscal year 2011 to about $341 million  in fiscal year 2016. According to officials, these decreases can be  attributed to the AV-8B no longer being used in Operation Enduring  Freedom in 2012, the loss of six aircraft, and the transition of AV-8B  squadrons to the F-35 Joint Strike Fighter."], "subsections": []}]}]}, {"section_title": "The Air Force and Navy Face Similar Sustainment Challenges That Affect Aircraft Availability and O&S Costs across the Selected Fixed-Wing Aircraft", "paragraphs": ["The Air Force and Navy face similar sustainment challenges that relate to  aging, maintenance, and supply support that affect aircraft availability and  O&S costs for the 12 aircraft selected in our review, as shown in figure 6.", "Specifically, 10 of 12 aircraft are experiencing sustainment challenges  related to aging; all 12 are experiencing challenges related to  maintenance; and all 12 are also experiencing challenges related to  supply support. Below is a brief overview of these challenges:", "Aging: A number of these aircraft are aging and operating beyond  their planned service life, partly because of delays in replacement  aircraft. Specifically, the Air Force and Navy plan to replace the F-16,  AV-8B, and F/A-18A-D with the F-35 Joint Strike Fighter. The Navy is  expected to transition the F/A-18A-D through 2030 and the Marine  Corps is planning to use the F/A-18A-D beyond 2030 (although these  time frames have been extended several times already). The Navy  plans to retire the AV-8B in 2026. On the other hand, the Air Force is  not expected to retire the F-16 until at least 2040. Because of aging,  according to officials, there are parts on some aircraft that need to be  repaired and replaced that were not accounted for during initial  sustainment analysis. To mitigate some challenges associated with  the age of the fixed-wing aircraft, the Air Force and Navy program  officials have decided to extend the service life of some aircraft by  repairing and overhauling airframes and components, as well as  developing the engineering specifications for parts that were never  planned to be repaired or replaced.", "Maintenance: Delays in getting aircraft into and through depot  maintenance, as well as shortages of skilled maintainers, are  contributing to some aircraft missing their availability goals. Both  services reported losing experienced maintainers, either to retirement  or to other programs such as the F-35 Joint Strike Fighter. To address  maintenance challenges, program offices for the selected aircraft  have improved the efficiency and speed of depot maintenance, as  well as are working to ensure there are sufficient numbers of trained  maintainers.", "Supply Support: Some aircraft are encountering supply shortages as  a result of parts not being available, in some cases due to  obsolescence issues or diminishing manufacturer sources.  Overcoming part shortages through either searching for replacement  parts or reengineering parts takes time, which can contribute to  aircraft being unavailable for longer periods. To mitigate supply  challenges, officials have proactively upgraded aircraft before  obsolescence occurs or located available parts and reengineered  parts that are no longer in production, as well as identified suitable  manufacturers in advance, among other things.", "For more specific information on sustainment challenges related to aging  aircraft, maintenance, and supply support for each of the fixed-wing  aircraft, see the \u201cSustainment Quick Looks\u201d in appendixes II\u2013XIII."], "subsections": []}, {"section_title": "Sustainment Strategies Were Documented for Some but Not All Aircraft, and the Air Force and Navy Have Other Efforts to Review and Improve Aircraft Availability", "paragraphs": ["The Air Force has documented sustainment strategies for its five selected  aircraft in our review, but the Navy has not documented sustainment  strategies or updated the strategies for four of seven of its aircraft in our  review. The Air Force and Navy also regularly reviewed sustainment  metrics and have implemented plans to improve aircraft availability."], "subsections": [{"section_title": "The Air Force Has Documented Sustainment Strategies, but Some of the Navy\u2019s Strategies Are Not Documented or Up-to- Date", "paragraphs": ["The Air Force has documented sustainment strategies for the five  selected fixed-wing aircraft and updated them in accordance with Air  Force guidance. However, the Navy has not documented a sustainment  strategy or updated the strategies for four of the seven aircraft in our  review since 2012. See figure 7 for the year of the most recent update to  the sustainment strategy for the aircraft in our review.", "While sustainment strategies do not guarantee successful outcomes, they  serve as a tool to guide operations as well as support planning and  implementation of activities through the life-cycle of the aircraft.  Specifically, at a high-level the strategy is aimed at integrating  requirements, product support elements, funding, and risk management  to provide oversight of the aircraft. For example, these sustainment  strategies can be documented in a life-cycle sustainment plan,  postproduction support plan, or an in-service support plan, among other  types of documented strategies. Additionally, program officials stated that  an aircraft\u2019s sustainment strategy is an important management tool for the  sustainment of the aircraft by documenting requirements that are known  by all stakeholders, including good practices identified in sustaining each  aircraft. For example:", "The strategy for the Air Force B-52 has been updated several times in  recent years because of several major modifications. For example, in  2014 the Air Force issued an updated sustainment plan within the life- cycle management plan to update the combat network  communications technology program because the B-52\u2019s  communications system is still the original from the 1950s and has  limitations related to making mission or target changes in flight. The  plan addresses the testing, resource management, and numerous  program performance indicators and requirements of the system.", "The strategy for the Air Force F-16 outlines plans for the aircraft\u2019s  service life extension and includes proactive measures and data  forecasting to bundle depot modifications in order to minimize fleet- wide effects on aircraft availability. The service life extension for the F- 16 is designed to extend the service life of 300 F-16 aircraft from  8,000 to 13,856 flight hours at an estimated cost of $740 million (as of  June 2016).", "The strategy for the Navy E-2D provides a systematic approach to  ensure that a comprehensive support package is in place to support  the sustainment of the aircraft. Also, it describes the overall plan for  the management and execution of the product support package by  communicating the sustainment strategy to stakeholders in the  acquisition, engineering, and logistics communities.", "However, the Navy had not documented a sustainment strategy for the C- 2A because a strategy was not required when the aircraft, now a legacy  system, was going through the acquisition process prior to 1965.  According to Navy officials, while they have not documented a strategy  for the C-2A, they are undertaking efforts, such as updating technical  publications, performing maintenance analysis on the landing gear, and  evaluating depot tasks to decrease turnaround time, among other efforts,  to sustain the aircraft. However, a documented sustainment strategy for  the C-2A would help guide the planning and implementation of these  efforts, as well as serve as a management tool by documenting these  requirements that are known by all stakeholders.", "In addition, the Navy\u2019s sustainment strategies for the E-2C (2011), EA- 18G (2006), and F/A-18A-D (2001) were developed prior to 2012 and  thus have not been updated in over 5 years. With respect to the EA-18G,  Navy officials told us that the sustainment strategy should be updated in  accordance with DOD\u2019s acquisition policy\u2014DOD Instruction 5000.02\u2014 since the EA-18G is still in the acquisition process, as it continues to be  produced. For the E-2C and F/A-18A-D, Naval Air Systems Command  officials and program office officials told us that they were not required to  document sustainment strategies because these aircraft were legacy  systems at the time the requirement to develop and maintain a  sustainment strategy was implemented. Therefore, according to these  officials, the DOD requirements to document and update sustainment  strategies every 5 years in DOD Instruction 5000.02 were not applicable.", "DOD Instruction 5000.02 requires weapon systems to have some form of  a sustainment strategy that is not older than 5 years; however, it is  unclear whether this policy is applicable to legacy weapon systems.  Specifically, the policy states that program managers for all programs are  responsible for developing and maintaining a sustainment strategy, such  as a Life-cycle Sustainment Plan, beginning at the risk-reduction decision  point (i.e., Milestone A of the acquisition process). However, based on  our discussions with Navy program officials for our selected aircraft and  our review of the policy, it is unclear whether the policy\u2014as currently  written\u2014is applicable to legacy systems that were no longer in production  and thus had completed the risk-reduction decision point (or Milestone A)  prior to the requirement to update a sustainment strategy every 5 years.  According to DOD officials, the intent of the policy is for all programs,  including legacy weapon systems, to develop and maintain a sustainment  strategy; however, the policy does not explicitly state that legacy systems  are expected to fulfill this requirement.", "In May 2017, the Air Force updated its sustainment guidance to require  sustainment strategies for legacy systems and for those strategies to be  updated every 5 years. Air Force officials told us that they did this  because the DOD policy was unclear whether it was applicable to legacy  systems and it was a good practice to ensure the guidance was explicit  for all weapon systems to document and update a sustainment strategy.  This instruction explicitly states that the requirement to document a  sustainment strategy and update it every 5 years is applicable to all  weapon systems, including legacy systems that are in the O&S phase of  their life cycles. Additionally, the Air Force Instruction states that these  legacy systems are not required to retroactively meet requirements  identified for previous phases of the acquisition life-cycle, but should meet  the requirements needed for continued operations of the system.", "However, the Navy has not made the requirement explicit for legacy  systems in its guidance. Specifically, Navy guidance does not explicitly  state that documenting a sustainment strategy and updating that strategy  every 5 years is a requirement for legacy systems. While Navy guidance  requires the development and use of sustainment metrics for legacy  systems and requires the Naval Air Systems Command be responsible  for aviation weapon systems in sustainment, the Navy does not address  any requirement for sustainment strategies for legacy systems.", "The lack of clarity in DOD Instruction 5000.02 and the Navy guidance  regarding whether legacy systems are required to document a  sustainment strategy and update that strategy every 5 years has resulted  in confusion regarding sustainment planning requirements among Navy  program offices and could cause confusion with other weapon system  program offices across DOD. Standards for Internal Control in the Federal  Government state that management should define objectives in specific  terms so they are understood at all levels of the entity. The standards  also state that guidance should clearly define what is to be achieved, who  is to achieve it, how it will be achieved, and the time frames for  achievement. As indicated by the Air Force\u2019s 2017 update to its  sustainment guidance, clarifying DOD and Navy guidance and the  applicability of sustainment strategy requirements to legacy systems  could be done through very small additions and clarifications to the  applicable guidance documents. Until DOD and the Navy update or issue  new guidance clarifying the requirements for documenting sustainment  strategies for legacy systems, weapon system program offices, such as  those for fixed-wing aircraft, as well as Naval Air Systems Command and DOD may not have full visibility of necessary requirements to achieve  program objectives or any related risks associated with the sustainment  of these weapon systems.", "While the DOD policy and Navy guidance is unclear, Naval Air Systems  Command and Navy program offices for the four aircraft\u2014C-2A, E-2C,  EA-18G, and F/A-18A-D\u2014that either do not have a sustainment strategy  or have not updated the strategy within the last 5 years are taking actions  to document or update the sustainment strategies for these aircraft.  According to Naval Air Systems Command officials, once it was brought  to their attention that the intent of DOD Instruction 5000.02 was for legacy  systems to have an updated documented sustainment strategy, they  began to take action to develop or update the respective sustainment  strategies. Specifically, according to C-2A, E-2C, and E-2D program  officials, they are currently updating the E-2D strategy for its 5-year  update, which is due in fiscal year 2018, and it will include updates for the  C-2A and E-2C since the airframe for all three aircraft are very similar.  Also, program officials for the EA-18G and F/A-18A-D told us that they  are currently updating the strategies for these aircraft and are expected to  complete the process in fiscal year 2018. Given that the Navy is already  taking action to update its sustainment strategies and has established  timelines for these updates, we are not making any recommendations to  the Navy regarding updating the respective sustainment strategies."], "subsections": []}, {"section_title": "The Air Force and Navy Regularly Reviewed Sustainment Metrics and Implemented Improvement Plans to Address Aircraft Availability", "paragraphs": ["The Air Force and the Navy have (1) regularly reviewed sustainment  metrics for fixed-wing aircraft and (2) implemented improvement plans to  address aircraft availability."], "subsections": [{"section_title": "The Air Force and Navy Have Conducted Regular Reviews of Sustainment Metrics", "paragraphs": ["The Air Force and Navy have regularly monitored the condition of their  fixed-wing aircraft, which includes measuring aircraft availability against  planned goals as well as monitoring other sustainment metrics.  Specifically, the Air Force Materiel Command monitors aircraft availability  and other sustainment metrics through quarterly Weapon System  Enterprise Review (WSER) briefings. The program office in conjunction  with the Air Force Life Cycle Management Center generates the WSER,  which is briefed through Air Force Materiel Command and the Program  Executive Offices to the Air Force Chief of Staff. The WSER delivers  insight into the comprehensive health of a system by flagging gaps in  performance and identifying mitigating actions, which is used to conduct  crosscutting enterprise analysis and provide input into readiness reviews.  In addition to the WSER, the program offices manage their performance  through their Health of the Fleet briefs. These briefs\u2014conducted monthly  or quarterly depending upon the aircraft\u2014include readiness assessments  that provide insight on maintenance and management practices. The  assessment is delivered by the program\u2019s maintenance group, and  includes aircraft performance metrics, issues, actions, and schedules to  inform program leadership on fleet status and to help prioritize and make  decisions concerning the issues.", "The Navy monitors aircraft availability through its aircraft status  dashboard for each aircraft, which provides specific information, such as  goals, actual availability, and gaps between the two. More specifically, the  Navy tracks the status of each of its aircraft through the dashboard,  including those aircraft that are available (i.e., Ready-Basic-Aircraft  ), are in depot maintenance, or are not mission capable due to  maintenance or supply, among other metrics. The dashboard is updated  monthly, and there are weekly meetings with key stakeholders, including  Naval Air Systems Command officials, industry partners, and depot  officials, to monitor the performance of each aircraft and make  adjustments to improve aircraft availability. Additionally, all program  offices have processes in place to manage the fleet within their portfolios,  including semiannual or annual program reviews such as Program  Management Reviews and Executive Steering Reviews. These reviews  focus on readiness, cost drivers, and initiatives to address program risk  and ways to resolve issues affecting each aircraft. Further, the Marine  Corps Commandant for Aviation leads biannual Executive Steering  Summits to assess readiness issues affecting Marine Corps aircraft."], "subsections": []}, {"section_title": "The Air Force and Navy Have Implemented Improvement Plans to Address Aircraft Availability", "paragraphs": ["The Air Force and Navy have implemented improvement plans to address  aircraft availability for each of the selected fixed-wing aircraft. Air Force  program offices for the fixed-wing aircraft in our review have plans for  improving availability. Since 2005, the Air Force Materiel Command has  had an annual process to improve aircraft availability, which is known as  the Aircraft Availability Improvement Program. The process enables the  program offices to assess and limit risk, incorporate available support  funding, and specifically address where there are effects on availability,  such as aircraft in depot. This process also incorporates projecting  historical and goal rates in order to leverage scheduled and  modernization maintenance. Program offices create plans, known as  aircraft availability improvement plans, based on these projections to  forecast improvements that can facilitate increased availability and  reduction of costs, among other things. The Air Force provides guidance  in the form of a template to ensure consistency amongst the plans, which  typically must include improvement initiatives with milestone goals. This  information includes projected aircraft availability rates for mission  capable, units possessed not reported, not mission capable for supply,  not mission capable for maintenance, and depot possession. Officials  noted that the program office creates an improvement plan each year,  regardless of whether it is short of its availability goal, since the plan  serves as a forecasting measure. The program is designed to ensure  the program offices have plans in place to meet target goals, and the  information and milestones laid out in the plans feed into the WSER  briefings to senior management. For example:", "The B-52 plan for fiscal year 2017 discusses the process and  milestones for replacing actuator seals for the fleet, the costs of the  repair, and the expected benefit to B-52 availability\u20141.05 percent  improvement to the not mission capable supply metric.", "The C-17 plan for fiscal year 2017 identifies the current and future  modifications, timelines for beginning and completion, and the effect  on availability. For example, the future replacement of a legacy  computer system with a modernized system and display is set to  begin in fiscal year 2019 with an estimated completion date of 2026.  This replacement is planned to be done concurrently with other  maintenance, and to prevent future declines in the C-17\u2019s availability.", "The F-22 plan for fiscal year 2017 identifies several projects taking  place between 2016 and 2021 that are expected to improve  availability by almost 2 percent.", "Further, officials said they are currently working with the Assistant  Secretary of the Air Force (Acquisition) to develop an Air Force manual  that would make developing an Aircraft Availability Improvement Plan a  requirement. This manual will become a supplement to Air Force  Instruction 63-101/20-101, according to the officials.", "Navy program offices for all seven fixed-wing aircraft in our review also  have plans for improving availability. According to Navy officials, they  started preparing \u201csummary playbooks,\u201d which is the Navy\u2019s term for  improvement plans, in late 2015 and started implementing these plans in  early 2016 to increase aircraft availability. Officials told us that there was  a limitation in funding because of sequestration prior to fiscal year 2017,  which hampered their ability to fully implement the playbooks. At a broad  level, the Navy\u2019s playbooks include efforts such as maintenance planning,  supply support, aircraft material condition and management, and  technical data, among other things. These efforts are linked to specific  initiatives such as working with the manufacturer and contractors to  provide maintenance support, identifying obsolete parts, conducting  aircraft fatigue analysis, and updating technical publications, among other  things, which have been identified by the program office as ways to  improve aircraft availability. Additionally, these playbooks include the  extent to which these initiatives are funded, underfunded, or partially  funded and the appropriation account that would fund each initiative. The  playbooks include the status of each initiative, and some of the playbooks  also provide an approximate time frame for implementing each initiative.  For example:", "The playbook for the C-2A has a fatigue analysis initiative focused on  analyzing the landing gear to update its design, provide a depot repair  manual, and increase its service life, among other things. This  initiative is considered funded, is expected to improve aircraft  availability, and has an estimated time frame for implementation  between fiscal years 2017 and 2021.", "The playbook for the E-2D contains a maintenance initiative focused  on improving the maintenance planning process of the C-2A, E-2C,  and E-2D aircraft by completing elements of the product support  package, such as training, publications, support equipment, and tools,  among others. This initiative is considered partially funded, is  expected to improve aircraft availability by decreasing the not mission- capable rates related to maintenance and supply and decreasing  maintenance down time, and has an estimated time frame for  implementation between fiscal years 2017 through 2019.", "The playbook for the F/A-18A-D includes a product improvement  initiative to conduct a case study to assess the condition of the wiring  of the aircraft in the fleet. This initiative is considered funded and is  expected to help to sustain aircraft availability. However, there is no  time frame for implementing this initiative.", "The playbook for the F/A-18E-F contains a service life modification  initiative focused on extending the service life of the aircraft through  modifications. According to officials, this initiative is considered  partially funded, is expected to help to sustain aircraft availability, and  is expected to help the fleet realize an 80 percent cost avoidance  because the Navy will not have to pay the cost to replace these  aircraft. Also, this initiative has an estimated time frame for  implementation between fiscal years 2018 through 2040."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The Departments of the Air Force and Navy spend tens of billions of  dollars each year to sustain their fixed-wing aircraft, which need  expensive logistics support, including maintenance and repair, to meet  goals for availability. The departments spent at least $20 billion annually  since 2011 to sustain the 12 aircraft that we examined. The Air Force and  Navy share a variety of sustainment challenges, including the age of their  aircraft as well as maintenance and supply support issues. These  challenges have led to half (6 of 12) of the aircraft in our review  experiencing decreasing availability and to the aircraft in general not  being able to meet aircraft availability goals. For example, 9 of 12 aircraft  did not meet availability goals in fiscal year 2016. These trends are  occurring even though the Air Force and Navy regularly review  sustainment metrics for the aircraft and are implementing plans for  improving aircraft availability. However, DOD\u2019s policy and the Navy\u2019s  guidance are not clear on whether the services should have a current  sustainment strategy for legacy weapon systems, including fixed-wing  aircraft, and on whether the strategies are required to be updated every 5  years. Without clarity about whether the DOD instruction and the Navy  guidance apply to legacy systems, program officials will not know whether  they are required to have a sustainment strategy or are required to  update the plan for their respective fixed-wing aircraft. Furthermore, the  program offices, the services, and DOD may not have full visibility of  necessary requirements to document program objectives, related risks,  and the effectiveness of the program, ultimately jeopardizing the  sustainability and affordability of each of the programs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to DOD:  The Secretary of Defense should ensure that the Under Secretary of  Defense for Acquisition and Sustainment updates or issues new policy  clarifying the requirements for documenting sustainment strategies for  legacy weapon systems, including fixed-wing aircraft. (Recommendation  1)", "The Secretary of the Navy should update or issue new guidance clarifying  the requirements for documenting sustainment strategies for legacy  weapon systems, including fixed-wing aircraft. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the sensitive report to DOD for review and  comment. In written comments that are reproduced in appendix XVI, DOD  concurred with our recommendations and noted planned actions to  address each recommendation. The Air Force and Navy also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Navy and  Air Force; the Commandant of the Marine Corps; the Under Secretary of  Defense for Acquisition and Sustainment; and the Director, Defense  Logistics Agency.", "In addition, the report is available at no charge on the GAO website at  http://www.gao.gov. If you or your staff have questions about this report,  please contact me at merrittz@gao.gov or (202) 512-5257. GAO staff  who made key contributions to this report are listed in appendix XVII."], "subsections": []}]}, {"section_title": "Appendix I: GAO\u2019s Recent Prior Work on Sustainment Issues within the Department of Defense", "paragraphs": ["Over the past several years, we have conducted work on a number of  issues that affect the ability of the Department of Defense (DOD) to  sustain its weapon systems. In September 2017, we found that several  factors were important to the success of Product Support Managers.  These factors included teamwork and collaboration, early implementation  of the Product Support Manager position, and organizational support and  emphasis on sustainment. We also found that in response to our 2014  recommendations regarding the implementation of the Product Support  Manager position, DOD had developed a comprehensive career path and  associated guidance to develop, train, and support future Product Support  Managers. Additionally, DOD revised guidance to define roles,  responsibilities, and reporting relationships between support staff and  Product Support Managers. However, DOD was still in the process of  implementing our other three recommendations, such as issuing clear,  comprehensive, centralized guidance regarding the roles and  responsibilities of PSMs and collecting and evaluating information on the  effects, if any, that Product Support Managers are having on life-cycle  sustainment decisions for their assigned weapon systems.", "In September 2017, we also found that DOD does not have complete  information to identify and manage single-source-of-supply risks.  Specifically, some parts are provided by a single source of supply (e.g.,  one manufacturing facility), and if that single source were no longer able  to provide the part, DOD could face challenges in maintaining weapon  systems. DOD concurred with our six recommendations focused on  improving the completeness of information for single-source-of-supply  risks, including issuing department-wide policy that clearly defines  requirements of Diminishing Manufacturing Sources and Material  Shortages management, and details responsibilities and procedures to be  followed to implement the policy. DOD is in the process of taking action  to implement these recommendations.", "In June 2016, we found that the Defense Logistics Agency and the  military services have not adopted metrics to measure the accuracy of  planning factors, such as the accuracy of part lists, or the costs created  by backorders. As a result, depot maintenance may not be efficient or  cost-effective, resulting in unnecessary delays in the repair of weapon  systems. DOD concurred with our six recommendations to develop  metrics to monitor the accuracy of demand planning factors and  disruption costs created by the lack of parts at depot maintenance sites  and is in the process of taking action to implement these  recommendations. For a listing of relevant past GAO work, see the  Related GAO Products list at the end of this report.", "Sustainment: Depot maintenance  conducted organically at the  designated air logistics complex  and contractually for some depot- level repairs at contractor facilities.", "The B-52 is a long-range, heavy bomber that can perform a variety of  missions, including strategic attack, close air support, air interdiction,  maritime operations, and offensive counter-air missions. It can carry nuclear  or precision-guided conventional ordnance with worldwide precision  navigation capability. However, the B-52s are some of the oldest aircraft in  the Air Force\u2019s fleet, and will continue to operate until at least 2040 (see fig.  8). Operating and support (O&S) costs for the B-52s have remained relatively  steady, generally fluctuating around $1.2 billion\u2013$1.3 billion per year. As a  predominantly military-maintained system, most of that O&S cost is related to  maintenance and manpower, with depot maintenance and depot-level  reparables\u2014direct labor and materials for item repairs, transportation, and  storage, among other things\u2014accounting for most of the maintenance cost."], "subsections": [{"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": ["Technology Program (2014) is focused on upgrading outdated  communications technology. The communications modification requires  7,000 hours of work and is estimated to be complete by 2020. The fleet  has active sustainment plans for other components of the aircraft, such  as the B-52 Anti-skid Replacement Life Cycle Sustainment Plan (2015),  which is estimated to cost over $40 million and be completed by 2019.", "The B-52 faces sustainment  challenges related to its age and,  according to officials, replacement  parts are difficult to obtain. Several  modernization efforts are under  way (communications, engines,  etc.), and is working with vendors  and its own service engineers to  identify problem areas and plan  ahead so that replacement parts  will be available.", "Depot maintenance on the B-52 is managed by the program office and  conducted at Oklahoma City Air Logistics Complex depot.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["The C-17 is a long-range, heavy logistic transport aircraft powered by four  F-117 turbofan engines with air-refueling capability that was first  manufactured in 1987 (see fig. 10). It is capable of rapid strategic delivery of  troops and all types of cargo to main operating bases or to bases in any  forward deployment area. The C-17 can perform tactical airlift and airdrop  missions and can transport ambulatory patients during aeromedical  evacuations, when required. The C-17 can carry virtually all air-transportable  equipment. Total operating and support (O&S) costs for the C-17 have  decreased from about $5.3 billion in fiscal 2011 to about $4.0 billion in fiscal  year 2016. Specifically, unit operations decreased, while maintenance costs  have generally increased during this period due to contractor logistics  support because the C-17 is a predominantly contractor-managed aircraft."], "subsections": []}, {"section_title": "Average number of flying hours: 13,141 hours per aircraft", "paragraphs": [], "subsections": []}, {"section_title": "Depot maintenance activity and squadron locations:", "paragraphs": ["The C-17 Enterprise Life Cycle Management Plan and Life Cycle  Sustainment Plan (2014) documents current and future acquisition,  sustainment, and integration efforts of the aircraft. It also addresses  contractual arrangements and partnership support agreements between  Air Force, Boeing, and other service providers for aircraft sustainment.", "Boeing provides continued sole-source life-cycle support for the C-17  under the terms of the Globemaster Integrated Sustainment Program  (2013). Under this program, Boeing is responsible for sustainment, to  include material management and depot maintenance support.", "The C-17 participates in a virtual fleet arrangement, a global network of  43 additional C-17 aircraft, which allows participants total aircraft parts  access from any fleet participant worldwide."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": ["The C-17 is an aircraft being  modified to meet its requirements  as well as to address maintenance  and supply issues. The Air Force\u2019s  actions to mitigate these  challenges include processes to  increase the service life of the  aircraft, allowing managers to  quickly hire skilled workers for  critical positions, and locating other  vendor source for parts.", "Logistics Complex, and at its facility in San Antonio; landing gear  overhaul occurs at Ogden Air Logistics Complex, and engine overhaul  occurs at Oklahoma City Air Logistics Complex in partnership with Pratt &  Whitney, the original equipment manufacturer on the F-117 turbofan  engine.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["Sustainment: Depot maintenance  conducted by Northrop Grumman,  and field maintenance conducted  organically, by the National Guard.", "The E-8C Joint Surveillance Target Attack Radar System (E-8C) was first  manufactured in 1967 (see fig. 12). Its primary mission is to provide theater  ground and air commanders with ground surveillance to support attack  operations and targeting that contributes to the delay, disruption, and  destruction of enemy forces. Total operating and support (O&S) costs for the  E-8C have generally increased from about $686 million in fiscal year 2011 to  about $734 million in fiscal year 2016. Specifically, maintenance cost has  increased partly because of increases in contractor logistics support since  the E-8C is maintained by Northrop Grumman."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": ["E-8C aircraft were formerly used as commercial airliners and purchased  by the Air Force. Therefore, the exact usage of the aircraft was unknown  with any degree of specificity. The program office has utilized new  analysis conducted by Boeing to develop an improved method of  determining and tracking service life for the E-8C aircraft. The new  method uses a quantitative analysis capability to identify safety of flight  structural concerns, allowing for planning and execution of risk mitigation.", "The E-8C is an aircraft with  significant maintenance and supply  issues according to Air Force  officials. The Air Force\u2019s actions to  mitigate these challenges include  updating the Maintenance Plan and  the Corrosion Plan for the E-8C  (formerly a commercial airframe) to  bring them in line with military  standards.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}, {"section_title": "Operating and Support (O&S) Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["Sustainment: Depot maintenance  conducted organically at the  designated air logistics complex,  and field maintenance conducted  organically and by contractors.", "The F-16 Fighting Falcon is a compact, single-engine, multirole fighter  aircraft first manufactured in 1978 (see figure 14). It is highly maneuverable  and participates in air-to-air combat and air-to-surface attack. There are four  versions of the F-16: A, single-seat model; B, two-seat model with tandem  cockpits; C and D, single- and two-seat models, respectively, incorporating  newer capabilities. Total operating and support (O&S) cost for the F-16  decreased from about $5 billion in fiscal year 2011 to about $4 billion in  fiscal year 2016 because of a 6 percent reduction of inventory. Specifically,  maintenance cost has generally decreased during this same period as a  result of a decrease in cost of depot maintenance."], "subsections": []}]}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "Manufacturer: Lockheed Martin and Boeing", "paragraphs": ["Sustainment: Performance-based  logistics contract with depot  maintenance subcontracted to  Ogden Air Logistics Complex,  Utah, and field maintenance  performed organically. and is designed to project air dominance, rapidly and at great distances, and  defeat threats. Overall operating and support costs (O&S) for the F-22 have  decreased about $248 million overall since fiscal year 2011. Maintenance  issues continue to be an area of concern for the aircraft, and these costs  increased approximately $255 million from fiscal years 2011 to 2016, due to  increases in contractor logistics costs."], "subsections": []}, {"section_title": "Depot maintenance activity and squadron locations:", "paragraphs": [], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": ["maintaining a comprehensive diminishing manufacturing sources  program and proactively supporting the continued sustainment of  component parts of the aircraft through various replacement programs,  such as the F-22 Reliability and Maintainability Maturation. This initiative  is an ongoing effort to drive continuous improvement in availability.", "The F-22 faces issues with its low- observable coating and supply  funding. Actions to mitigate these  challenges include contracting a  repair facility to conduct coating  reversion repair and securing  additional spares funding.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "The program office provided technical comments, which were incorporated as appropriate. The program noted the following: The Air Force and supporting industry are aggressively addressing sustainment challenges by investing in improvements to improve durability and maintainability, to include the low-observable coating. Additionally, for fiscal year 2017, 14.5 percent of not mission capable for maintenance aircraft have been available for pilots to fly. Also, supply chains are built on a network of partnerships that optimally thrive on consistent and predictable workflows. When unplanned changes occur in budgets, the forecasted flying hours, or major target objectives like AA, it creates major effects on the supply networks and there is rarely a quick fix. Another challenge affecting F-22 sustainment cost-effectiveness and responsiveness is the exit of many second- and third-tier suppliers driven by a lower business demand due to a significantly reduced fleet size (186 from the original 750 planned). The program office expects sustainment costs to stabilize as investments in fleet-wide repair processes and improved materials come to fruition.", "paragraphs": ["The AV-8B Harrier (AV-8B) is a Vertical/Short Take-off and Landing attack  aircraft first manufactured in 1984 (see fig. 18).  The AV-8B has the capability  of conducting close air support using conventional weapons for intermediate  range intercept and attack missions. The AV-8B is capable of deploying and  operating on aircraft carriers and other suitable seagoing platforms,  advanced bases, expeditionary airfields, and remote tactical landing sites.  Total operating and support (O&S) costs for the AV-8B have decreased from  about $815 million in fiscal year 2011 to about $646 million in fiscal year  2016. Specifically, unit-level manpower and operations as well as  maintenance costs have decreased partly because the inventory is  decreasing as AV-8B squadrons transition to the F-35 Joint Strike Fighter.", "Average number of flying hours:  4,711 hours per aircraft  Operating and support cost:  $646 million  Depot maintenance activity and  squadron locations:", "AV-8B Program Strategic Sustainment and Warfighting Relevance Plan  (2013) addresses strategic sustainment and warfighting requirements to  ensure relevance, reliability, safety, and sustainability through five pillars:  recruit and retain high-quality people, develop a comprehensive  readiness and sustainment plan, meet combatant commander  requirements, retain and sustain government and industry agencies to  support engineering and logistics requirements, and integrate capabilities  to remain tactically relevant and operationally effective.", "AV-8B is maintained organically at Navy Fleet Readiness Centers under  planned maintenance intervals occurring every 1,500 flight hours; supply  support is provided organically by Naval Supply Systems Command and  Defense Logistics Agency; contractor support services are provided by  Boeing."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": [], "subsections": [{"section_title": "The AV-8B is operating beyond its planned service life with maintenance and supply issues. The Marine Corps\u2019 actions to mitigate these challenges include moving aircraft to deploying squadrons, upgrading aircraft components, and locating other vendor sources for parts.", "paragraphs": ["This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}]}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["Manufacturer:  Grumman  Corporation (acquired by Northrop  Grumman)", "The C-2A Greyhound Logistics Aircraft (C-2A) is a high-wing, twin-engine  monoplane cargo aircraft first manufactured in 1965 (see fig. 20). It is  designed to land on aircraft carriers, with a primary mission of providing  critical logistics support to Carrier Strike Groups by transporting high-priority  cargo, mail, and passengers between carriers and shore bases. The original  C-2A aircraft were overhauled to extend their operational life in 1973 and  again from 2004 through 2011. Total operating and support (O&S) costs for  the C-2A have generally decreased from about $233 million in fiscal year  2011 to about $207 million in fiscal year 2016. Specifically, unit-level  manpower, unit operations, and continuing system improvements have  decreased, while maintenance costs have increased."], "subsections": []}]}, {"section_title": "Fiscal Year 2016 Data Average age: 29 years", "paragraphs": [], "subsections": [{"section_title": "Average number of flying hours: 10,117 hours per aircraft", "paragraphs": [], "subsections": []}, {"section_title": "Operating and support cost: $207 million", "paragraphs": [], "subsections": []}, {"section_title": "Depot maintenance activity and squadron locations:", "paragraphs": ["landing gear, and avionics system, among others. The Navy will include  an appendix for the C-2A when it updates the sustainment strategy for  the E 2D for its 5-year update.", "C-2A completed a service life extension program from 2004 through 2011  to increase flight hours from 10,000 to 15,000 and landings from 16,020  to 36,000, among other things.", "Aircraft are maintained organically by field maintainers and at Navy Fleet  Readiness Centers under a planned maintenance interval cycle with  three planned maintenance interval events occurring consecutively every  24 months, and supply support is provided organically by the Naval  Supply Systems Command and Defense Logistics Agency."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": [], "subsections": [{"section_title": "The C-2A is operating beyond its planned service life with maintenance and supply issues. The Navy\u2019s actions to mitigate these challenges include moving aircraft to deploying squadrons, training maintainers to transition to vacated positions, and locating other vendor sources for parts.", "paragraphs": ["This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}]}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["The E-2 Hawkeye (E-2C) is the Navy\u2019s all-weather, carrier-based tactical  battle management, surface surveillance coordination and airborne early  warning, command and control aircraft, with a planned sunset in 2026 when  the last E-2D is delivered (see fig. 22). The E-2 is a twin-engine, five- crewmember, high-wing turboprop aircraft with a 24-foot diameter radar  rotodome attached to the upper fuselage. Total operating and support (O&S)  costs for the E-2 have decreased from about $536 million in fiscal year 2011  to about $345 million in fiscal year 2016. Specifically, unit manpower and  maintenance costs have decreased, partly because E-2C inventory is  decreasing as E-2C squadrons transition to the E-2D fleet."], "subsections": []}]}, {"section_title": "Fiscal Year 2016 Data Average age: 16 years", "paragraphs": [], "subsections": [{"section_title": "Average number of flying hours: 5,839 hours per aircraft", "paragraphs": [], "subsections": []}, {"section_title": "Operating and support cost: $345 million", "paragraphs": [], "subsections": []}, {"section_title": "Depot maintenance activity and squadron locations:", "paragraphs": ["comprehensive sustainment logistics, engineering programs, and financial  resources necessary to ensure continued platform sustainment and  attainment of readiness and safety operations. The Navy will include an  appendix for the E-2C when it updates the sustainment strategy for the E-2D  for its 5-year update.", "E-2C is maintained organically by field maintainers and at Navy Fleet  Readiness Centers under a planned maintenance interval cycle: initial  planned maintenance interval is performed by field maintainers at 42 months  and the second cycle is performed at a Fleet Readiness Center 46 months  after the initial planned maintenance interval. Supply support is provided  organically by the Naval Supply Systems Command and Defense Logistics  Agency; contractor support services are provided by General Dynamics and  Wyle Labs."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": [], "subsections": [{"section_title": "The E-2C is operating beyond its planned service life with maintenance and supply issues. The Navy\u2019s actions to mitigate these challenges include transitioning E-2C squadrons to the E-2D fleet, conducting studies to identify maintenance tasks to mitigate potential failures, and waiting for parts to be available.", "paragraphs": ["This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}]}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["The E-2 Advanced Hawkeye (E-2D) is the newest variant of the E-2 aircraft  platform, expecting to reach full operational capability by 2027 (see fig. 24).  Using the same configuration as the E-2C, the E-2D aircraft is used for  surface-surveillance coordination and airborne early warning, and command  control. Its mission is to provide advanced warning of approaching enemy  surface units, and cruise missiles and aircraft, among other things. Total  operating and support (O&S) costs for the E-2D have increased consistently  since fiscal year 2011 to about $125 million in fiscal year 2016. This increase  is driven by the addition of aircraft to the inventory as the Navy continues to  produce E-2D aircraft through 2026."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": [], "subsections": [{"section_title": "As a new aircraft, the E-2D is experiencing maintenance and supply issues. The Navy\u2019s actions to mitigate these challenges include troubleshooting component failures, and cannibalizing parts\u2014 moving parts from one aircraft to another.", "paragraphs": ["This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}]}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["The EA-18G Growler is the fourth major variant of the F/A-18 family of  aircraft manufactured in 2007 to replace the EA-6B Prowler (see fig. 26). The  EA-18G is the first newly designed electronic warfare aircraft produced in  more than 35 years and combines the proven F/A-18 Super Hornet platform  with a sophisticated electronic warfare suite. Total O&S costs for the EA-18G  have consistently increased from about $334 million in fiscal year 2011 to  about $868 million in fiscal year 2016. Specifically, unit manpower and  maintenance costs have increased partly because the inventory is  increasing, as EA-18Gs are still in production."], "subsections": []}]}, {"section_title": "Fiscal Year 2016 Data Average age: 5 years", "paragraphs": [], "subsections": [{"section_title": "Average number of flying hours: 1,489 hours per aircraft", "paragraphs": [], "subsections": []}, {"section_title": "Inventory: 115 aircraft", "paragraphs": [], "subsections": []}, {"section_title": "Depot maintenance activity and squadron locations:", "paragraphs": ["design, development, and fielding of the aircraft. Some of the key support  program elements include developing support equipment and technical  data, testing requirements for avionics, and facilities requirements,  among others. The Navy is updating this plan and expects to finalize it in  2018.", "The aircraft are maintained organically at Navy Fleet Readiness Centers  under planned maintenance intervals, which typically occur every 72  months. Also, the Navy partners with Boeing to provide wholesale supply  and depot repair support for major components, such as the engine.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": [], "subsections": []}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["The F/A-18A-D Hornet Strike Fighter is a twin-engine, mid-wing, multimission  tactical aircraft initially fielded in the 1980s (see fig. 28). In its fighter mode, it  is used primarily as a fighter escort and for air defense; in its attack mode, it  is used for force projection, interdiction, and air support. Total operating and  support (O&S) costs for the F/A-18A-D have decreased consistently from  about $3.1 billion in fiscal year 2011 to about $2.4 billion in fiscal year 2016.  Specifically, unit manpower, operations, and maintenance costs have  decreased, partly because the F/A-18A-Ds are being permanently  transitioned out of service to be replaced by the F-35 Joint Strike Fighter.."], "subsections": []}, {"section_title": "Operating and support cost: $2.4 billion", "paragraphs": ["and financial resources necessary to ensure continued readiness and  supportability for the remainder of the aircraft\u2019s service life. The Navy is  currently updating this plan and expects to finalize it in 2018."], "subsections": []}, {"section_title": "Depot maintenance activity and squadron locations:", "paragraphs": ["The aircraft are maintained organically at Navy Fleet Readiness Centers  under planned maintenance intervals, which typically occur every 48  months for carrier-deploying aircraft, and every 72 months for land-based  aircraft.", "The Navy implemented the High-Flight-Hour program in 2006 to extend  the service life from 8,000 to 10,000 flight hours by inspecting and  repairing airframes, and replacing major components and parts. The  High-Flight-Hour program, along with other factors, has led to  maintenance carryover (i.e., into the next fiscal year) due to maintenance  events taking longer than planned."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": ["In 1999, the Navy entered into a contract with Boeing for engineering  support to leverage resources within the technology and industrial base  to improve efficiency of the maintenance process and address the  maintenance backlog.", "The F/A-18A-D is operating beyond  its planned service life with  maintenance and supply issues.  The Navy\u2019s actions to mitigate  these challenges include extending  the service life of the aircraft,  allowing maintainers to work  overtime to reduce backlog, and  cannibalizing parts\u2014moving parts  from one aircraft to another.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": [{"section_title": "In commenting on a draft of this assessment, the program office provided technical comments, which were incorporated where appropriate.", "paragraphs": ["The F/A-18E-F Super Hornet was first manufactured in 1998 (see fig. 30).  The F/A-18E-F is highly capable across the full mission spectrum: air  superiority, fighter escort, reconnaissance, aerial refueling, close air support,  air defense suppression, and day/night precision strike. The F/A-18E-F  provides aircrew the capability and performance necessary to face 21st  century threats. Total operating and support (O&S) costs for the F/A-18E-4  have increased from about $2.2 billion in fiscal year 2011 to about $3.1 billion  in fiscal year 2016. Specifically, unit manpower, maintenance, and continuing  system support have increased, partly because the inventory is increasing,  as the F/A-18E-F is still in production."], "subsections": []}]}, {"section_title": "Sustainment Challenges and Mitigation Actions", "paragraphs": ["the Navy is conducting an assessment to determine the number of flight  hours the aircraft can safely continue to fly, and then extend the service  life of the program through inspections, repairs, and modifications,  among other things. The Navy contracted with Boeing to potentially begin  these efforts by fiscal year 2018.", "The F/A-18E-F is a high  operational tempo aircraft  supporting contingency operations  with maintenance and supply  issues. The Navy\u2019s actions to  mitigate these challenges include  plans to extend the service life of  the aircraft, training maintainers to  transition to vacated positions, and  cannibalizing parts\u2014removing  parts from one aircraft to another.", "This report is a public version of a sensitive report that we issued on April 25,  2018. DOD deemed some of the information, such as aircraft availability, not  mission capable rates, number of aircraft in depots, and budgeted and  executed flight hours to be sensitive (i.e., For Official Use Only). This public  report omits the information that DOD deemed to be sensitive."], "subsections": []}, {"section_title": "Operating and Support Costs", "paragraphs": [], "subsections": []}, {"section_title": "Program Office Comments", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix XIV: Scope and Methodology", "paragraphs": ["To examine the trends in aircraft availability and operating and support  (O&S) costs for selected Air Force and Navy fixed-wing aircraft, including  whether the aircraft met availability goals, we selected a nongeneralizable  sample of 12 fixed-wing aircraft managed by the Departments of the Air  Force and the Navy. These included two Marine Corps aircraft that are  managed by the Department of the Navy. This nongeneralizable sample  was selected to ensure a mix of aircraft, including type of aircraft (fighter,  bomber, cargo, etc.), age of the aircraft, and size of inventory, and  whether the aircraft were sustained organically by the Department of  Defense (DOD) or through contract arrangements, such as public-private  partnerships or performance-based logistics, among other factors.", "For the Air Force, we selected five fixed-wing aircraft\u2014the B-52  Stratofortress, C-17 Globemaster III, E-8C Joint Surveillance and Target  Attack Radar System (JSTARS), F-16 Fighting Falcon, and F-22 Raptor.  For the Navy, including the Marine Corps, we selected seven fixed-wing  aircraft\u2014the AV-8B Harrier, C-2A Greyhound Logistics Aircraft, E-2  Hawkeye Early Warning and Control Aircraft, E-2 Advanced Hawkeye  Early Warning and Control Aircraft, EA-18G Growler, F/A-18 Hornet  Strike Fighter A-D, and F/A-18 Super Hornet E-F. The Marine Corps uses  the AV-8B Harrier and also uses a variant of the F/A-18A-D. For the  selected aircraft, we obtained and reviewed the aircraft availability,  sustainment, and O&S data for accuracy and completeness, interviewed  officials regarding their data-collection processes, and reviewed available  related policies and procedures associated with the collection of the data.  As a result, we found the information to be sufficiently reliable for the  purposes of presenting sustainment metrics, such as aircraft availability  and O&S costs. status due to maintenance, supply, and both. With respect to O&S costs,  we collected and analyzed data from fiscal years 2011 through 2016.", "We conducted data-reliability assessments for the data provided by the  Air Force and the Navy. To do this, we sent data-reliability questionnaires  to both departments requesting information on the sources that generated  the data. For the Air Force, we conducted data-reliability assessments on  the Air Force Total Ownership Cost system and the Logistics Installation  and Mission Support system. For the Navy, we conducted data-reliability  assessments on the Aviation Management Supply and Readiness  Reporting\u2014Type Model Series Integrated Database, the Decision  Knowledge Programming for Logistics Analysis and Technical Evaluation  system, the Flying Hour Projection System / Cost Adjustment and  Visibility Tracking System, and the Visibility and Management of  Operating and Support Costs system. We reviewed responses from both  departments on these sources as well as documentation\u2014such as  guidance, user manuals, and data dictionaries\u2014provided to corroborate  questionnaire responses, and interviewed knowledgeable officials to  discuss the data. We concluded that the data provided by the Air Force  and the Navy were sufficiently reliable for the purposes of reporting  condition metrics such as aircraft availability; not mission capable status  due to maintenance, supply, and both; depot inductions; budgeted and  executed flight hours; and O&S costs for the selected fixed-wing aircraft  in our review.", "To identify the sustainment challenges and mitigation actions for the  selected aircraft, we reviewed sustainment metrics data, performance  briefings, and other relevant documentation to identify specific challenges  for each of the 12 aircraft in our review. We also reviewed ongoing and  planned actions to address those challenges. Additionally, we interviewed  program officials, depot officials, field maintainers, and squadron  personnel to obtain their views on the challenges they face in sustaining  the aircraft and the actions they take to mitigate those challenges. In  some instances, we visited depots and squadrons to observe aircraft  undergoing maintenance, discuss the respective maintenance processes,  and discuss challenges and mitigation actions with officials. We then  grouped the identified challenges into categories and represented them in  a table to demonstrate which aircraft are experiencing specific  challenges.", "To assess the extent to which the Air Force and the Navy have  sustainment strategies, regularly review sustainment metrics, and have  plans to improve aircraft availability for the selected fixed-wing aircraft, we  obtained and analyzed sustainment strategies, performance management  frameworks (i.e., sustainment metrics collected and monitored as well as  the levels of management review), and improvement plans for each of the  selected 12 fixed-wing aircraft.", "We also identified and reviewed DOD, Air Force, and Navy guidance to  analyze the departments\u2019 efforts in sustaining these aircraft and to  determine whether these were consistent with federal standards for  internal control that deal with management defining objectives in specific  terms. Specifically, we reviewed DOD Instruction 5000.02, Operation of  the Defense Acquisition System, which provides management principles  and mandatory policies for defense acquisition systems such as fixed- wing aircraft. These policies incorporate decision processes and  assessing of readiness, which includes the creation of and requirements  for a Life-cycle Sustainment Plan. We also reviewed Air Force Instruction  63-101/20-101, Integrated Life Cycle Management, which implements  various Air Force and DOD policy directives, including DOD Instruction  5000.02. It establishes the integrated life-cycle management guidelines  and procedures for Air Force personnel who develop, review, approve, or  manage the systems, subsystems, end-items, services, and activities  procured by the Air Force. For the Navy, we reviewed Secretary of the  Navy M-5000.2, Department of the Navy Acquisition and Capabilities  Guidebook, which provides guidance for the operation of the defense  acquisition system and the joint capabilities integration and development  system. It also implements DOD Instruction 5000.02 for the Navy and  Marine Corps, including guidance on the management and execution of a  sustainment strategy. and service guidance. We also reviewed the Air Force\u2019s and the Navy\u2019s  performance metric briefings and improvement plans to determine  whether the departments regularly reviewed sustainment metrics and had  plans aimed at improving aircraft availability. We interviewed DOD, Air  Force, and Navy officials knowledgeable about sustainment of these  selected fixed-wing aircraft to discuss DOD\u2019s and the departments\u2019 efforts  in sustaining these aircraft, including historical information on each  aircraft, applicability of policy and guidance for legacy aircraft, and  overviews of performance management frameworks identified by the  departments to monitor and improve aircraft availability.", "To develop the fixed-wing aircraft sustainment summary documents (i.e.,  \u201cSustainment Quick Looks\u201d) in appendixes II\u2013XIII we obtained historical  and current information including background on aircraft capabilities,  manufacturer, sustainment strategy, depot maintenance and squadron  locations, and key dates in the life cycle of each aircraft (i.e., first  manufactured, initial and full operational capability, last production, and  planned sunset year). We collected and analyzed the following metrics: aircraft availability, not mission capable maintenance, not mission  capable supply, and not mission capable aircraft from fiscal year 2011  through March 2017;  the number of aircraft in depots for fiscal years 2011 through 2016; budgeted and executed flight hours from fiscal years 2011 through overall O&S and maintenance costs for fiscal years 2011 through  2016.", "We compared availability actuals to goals, aircraft in depots to availability  trends, and budgeted and executed flight hours to availability trends. We  analyzed O&S cost by reviewing its six elements and compared them to  availability trends. We also analyzed the subcategories of the  maintenance costs element. Through interviews with knowledgeable  officials and reviewing documentation, we identified sustainment  challenges (i.e., aging, maintenance and supply support) and mitigation  actions to address these challenges for each selected fixed-wing aircraft.  DOD deemed some of the information, such as aircraft availability, not  mission capable status, number of aircraft in depots, and budgeted and  executed flight hours, to be sensitive (i.e., For Official Use Only), which  must be protected from public disclosure. This public report omits the  information that DOD deemed to be sensitive.", "Additionally, to support our work for each objective we conducted site  visits and interviewed officials to discuss data trends and identify specific  sustainment challenges such as aging, maintenance, and supply support,  among other challenges affecting aircraft availability, and mitigation  actions to address these challenges. For the Air Force, we met with the  following entities:", "Headquarters\u2014Secretary of the Air Force, Logistics and Product  Support and Deputy Assistant Secretary for Cost and Economics, Air  Force Cost Analysis Agency;", "Materiel Commands\u2014Air Force Materiel Command and Air Force  Life Cycle Management Center;", "Program Offices\u2014B-52 Program Office, C-17 Program Office, E-8C  Program Office, F-16 Program Office, and F-22 Program Office;", "Depots\u2014Tinker Air Force Base at Oklahoma City, Oklahoma (B-52);  Robins Air Force Base at Warner Robbins, Georgia (C-17); Northrop  Grumman facility at Lake Charles, Louisiana (E-8C); Ogden Air  Logistics Center / Hill Air Force Base at Ogden, Utah (F-16 and F-22);  and", "Squadrons\u2014437th Maintenance Group, Joint Base Charleston,  South Carolina (C-17); 461st Air Control Wing, Robins Air Force Base  Georgia (E-8C); 20th Fighter Wing, Shaw Air Force Base, South  Carolina (F-16); and 325th Maintenance Group, Tyndall Air Force  Base, Florida (F-22).", "For the Navy, we met with the following entities:", "Headquarters\u2014Deputy Assistant Secretary of the Navy\u2014 Expeditionary Programs and Logistics Management, Marine Corps  Aviation Plans and Policy Branch, and Air Warfare Division;", "Materiel Commands\u2014Commander, Fleet Readiness Center; Naval  Air Systems Command; and Naval Supply Systems Command;", "Program Offices\u2014Program Manager\u2013Air (PMA)-231 (C-2A, E-2C,  and E-2D); PMA- 257 (AV-8B); and PMA-265 (F/A-18A-F, and EA- 18G);", "Depots\u2014Fleet Readiness Center\u2013East at Cherry Point, North  Carolina; Fleet Readiness Center\u2013Mid Atlantic at Naval Air Station  Norfolk, Virginia, and Naval Air Station Oceana, Virginia;", "Squadrons\u2014Marine Corps Air Station Cherry Point, North Carolina;  Marine Corps Air Station Miramar, California; Naval Air Station  Norfolk, Virginia; and Naval Air Station Oceana, Virginia; and", "Other\u2014Naval Center for Cost Analysis.", "The performance audit upon which this report is based was conducted  from September 2016 to April 2018 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate, evidence  to provide a reasonable basis for our findings and conclusions based on  our audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with DOD from April 2018 to  September 2018 to prepare this unclassified version of the original  sensitive report for public release. This public version was also prepared  in accordance with these standards."], "subsections": []}, {"section_title": "Appendix XV: Air Force and Navy Average Operating and Support Cost per Aircraft for Selected Fixed-Wing Aircraft", "paragraphs": ["For fiscal year 2016, total operating and support (O&S) costs for the five  Air Force fixed-wing aircraft selected in our review were about $12 billion,  and the average O&S cost per aircraft across all five fleets was about $96  million, as shown in figure 32. Each of the C-17 and F-16 fleets  accounted for about 33 percent of the total O&S cost, and the E-8C\u2019s  average cost per aircraft accounted for about 48 percent of the total  average cost per aircraft.", "For fiscal year 2016, total O&S costs for the seven Navy fixed-wing  aircraft selected in our review were about $7.7 billion, and the average  O&S cost per aircraft across all seven fleets was about $44 million, as  shown in figure 33. The F/A-18E-F fleet accounted for about 40 percent of  the total O&S cost, and the E-2C\u2019s average cost per aircraft accounted for  about 19 percent of the total average cost per aircraft."], "subsections": []}, {"section_title": "Appendix XVI: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XVII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, John Bumgarner (Assistant  Director), Clarine Allen, Ron Aribo, Vincent Buquicchio, Amie Lesser,  Richard Powelson, Steven Putansu, Matt Spiers, and Natasha Wilder  made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Defense Supply Chain: DOD Needs Complete Information on Single  Sources of Supply to Proactively Manage the Risks. GAO-17-768.  Washington, D.C.: September 27, 2017.", "Weapon Systems Management: Product Support Managers\u2019 Perspectives  on Factors Critical to Influencing Sustainment-Related Decisions.  GAO-17-744R. Washington, D.C.: September 12, 2017.", "Defense Acquisitions: Assessments of Selected Weapon Programs.  GAO-17-333SP. Washington, D.C.: March 30, 2017.", "Depot Maintenance: Executed Workload and Maintenance Operations at  DOD Depots. GAO-17-82R. Washington, D.C.: February 3, 2017.", "Defense Inventory: Further Analysis and Enhanced Metrics Could  Improve Service Supply and Depot Operations. GAO-16-450.  Washington, D.C.: June 9, 2016.", "Weapon Systems Management: DOD Has Taken Steps to Implement  Product Support Managers but Needs to Evaluate Their Effects.  GAO-14-326. Washington, D.C.: April 29, 2014."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-60", "url": "https://www.gao.gov/products/GAO-18-60", "title": "Offshore Seismic Surveys: Additional Guidance Needed to Help Ensure Timely Reviews", "published_date": "2017-12-11T00:00:00", "released_date": "2018-01-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Offshore seismic surveys provide federal agencies and other entities with a wide range of data, from research on fault zones to geology that may indicate the presence of oil and gas. Companies seeking to conduct such surveys to find oil and gas resources in the OCS must obtain a permit from BOEM\u2014which oversees offshore oil and gas activities. Man-made sources of ocean noise, such as seismic surveys, may harm marine mammals. Entities whose activities may cause the taking of marine mammals, which includes harassing or injuring an animal, may obtain incidental take authorizations for seismic surveys from NMFS or FWS, depending on the potentially affected species.", "GAO was asked to provide information on the seismic permitting process. This report examines (1) BOEM's review process, the number of permit applications reviewed from 2011 through 2016, and its review time frames; and (2) NMFS's and FWS's review process, the number of incidental take authorization applications reviewed from 2011 through 2016, and their review time frames, among other objectives. GAO reviewed laws and regulations and agency documents, analyzed data on applications to BOEM, NMFS, and FWS, and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of the Interior's Bureau of Ocean Energy Management's (BOEM) process and time frames for reviewing seismic survey applications differ by region along the Outer Continental Shelf (OCS). From 2011 through 2016, BOEM reviewed 297 applications and issued 264 seismic survey permits, and the reviews' time frames differed by region (see table). As part of the process, BOEM may require approved \u201cincidental take\u201d authorizations from the Department of Commerce's National Marine Fisheries Service (NMFS) or Interior's U.S. Fish and Wildlife Service (FWS), given the possibility such surveys may disturb or injure marine mammals. BOEM does not have statutory review time frame requirements for issuing permits, and officials said the agency starts its formal review once it determines that an application is complete. In some cases, the agency issued a permit on the same day it determined an application was complete.", "NMFS and FWS follow a similar general process for reviewing incidental take authorization applications related to seismic survey activities. From 2011 through 2016, NMFS and FWS reviewed 35 and approved 28 such applications across the three OCS regions, including some authorizations related to BOEM permits as well as research seismic surveys not associated with BOEM permits. NMFS was unable to provide accurate data for the dates the agency determines an application is adequate and complete\u2014and FWS does not record this date. For example, based on GAO's review of NMFS data, in at least two cases, the date NMFS recorded the application had been determined adequate and complete was after the date when the proposed authorization was published in the Federal Register . Federal internal control standards call for agencies to use quality information. Without guidance on how to accurately record review dates, agencies and applicants will continue to have uncertainty around review time frames. Further, under the Marine Mammal Protection Act, the agencies are to review one type of incidental take authorization application\u2014incidental harassment authorization applications\u2014within 120 days of receiving an application for such authorizations. NMFS and FWS have not conducted an analysis of their review time frames. Not conducting such an analysis is inconsistent with federal internal control standards that call for agency management to design control activities to achieve objectives and respond to risks. Without analyzing the review time frames for incidental harassment authorization applications and comparing them to statutory review time frames, NMFS and FWS are unable to determine whether they are meeting their objectives to complete reviews in the 120-day statutory time frame."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that both NMFS and FWS develop guidance clarifying how and when staff should record review dates of incidental take authorization applications and analyze how long the reviews take. NMFS agreed and FWS partially agreed with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Offshore oil and natural gas are important sources of energy and revenue  for the United States\u2014constituting about 18 percent of our nation\u2019s total  oil production and about 4 percent of our total gas production\u2014and  providing the federal government with about $2.8 billion in revenue in  fiscal year 2016, according to data from the Department of Energy\u2019s  Energy Information Administration and the Department of the Interior\u2019s  (Interior) Office of Natural Resources Revenue. Federal agencies and  private companies use information about potential oil, gas, and other  resources in the Outer Continental Shelf (OCS) to make regulatory,  funding, and development decisions, respectively. Oil and gas  companies conduct offshore seismic surveys in the OCS to collect data  on the geology that may indicate the presence of hydrocarbons; e.g., oil and gas. Seismic surveys\u2014which can be conducted onshore and  offshore\u2014use mechanically generated sound waves from an acoustic  source to transmit energy into the subsurface of the ocean floor. Various  other entities, including the National Science Foundation, use offshore  seismic surveys for other purposes, such as to identify possible  earthquake fault zones.", "Entities seeking to conduct geological and geophysical surveys,  including seismic surveys, to identify oil, gas, and other mineral resources  in the OCS must obtain a permit from Interior\u2019s Bureau of Ocean Energy  Management (BOEM)\u2014the federal agency responsible for the oversight  of most offshore oil and gas leasing and exploration activities. Given the  possibility that seismic surveys may disturb or injure marine mammals,  referred to as \u201ctaking\u201d marine mammals, entities may also need to obtain  an incidental take authorization under the Marine Mammal Protection Act  (MMPA) from the Department of Commerce\u2019s National Marine Fisheries  Service (NMFS) or Interior\u2019s Fish and Wildlife Service (FWS), depending  on the species that might be affected, to avoid potential liability for any  illegal take of a marine mammal due to the activity. To assess whether to  authorize the taking of small numbers of marine mammals, NMFS and  FWS must make certain findings, based on the best scientific evidence  available, as to the impacts of such activities on marine mammals and,  when applicable, certain subsistence hunters. Several industry  stakeholders and a research organization that applied for incidental take  authorizations have raised questions about the timeliness of the federal seismic survey permitting process and incidental take authorization  application reviews.", "You asked us to review the federal seismic survey permitting process in  each of the four OCS regions\u2014Alaska, the Atlantic, the Gulf of Mexico,  and the Pacific. In our preliminary review of all four OCS regions, we  determined that there had been no new oil and gas and related seismic  activity in the Pacific OCS region for the last two decades; as a result,  we excluded the Pacific OCS region from our review. This report  examines\u2014for the Alaska, the Atlantic, and the Gulf of Mexico OCS  regions from 2011 through 2016, (1) BOEM\u2019s process for reviewing  seismic survey permit applications in each OCS region, the number of  applications reviewed from 2011 through 2016, and its review time  frames; (2) NMFS and FWS processes for reviewing incidental take  authorization applications related to seismic surveys in each OCS region,  the number of such applications reviewed by the agencies from 2011  through 2016, and their review time frames; and (3) the status of pending  seismic survey permit applications and related incidental take  authorization applications in the Atlantic OCS region.", "To examine the agencies\u2019 processes for reviewing seismic survey permit  applications and related incidental take authorization applications, we  analyzed relevant laws and regulations that govern the processes and  reviewed and analyzed agency guidance, such as process flowcharts,  and other documents, including Federal Register notices. We also  interviewed BOEM, NMFS, and FWS agency officials in their  headquarters and regional offices responsible for overseeing seismic  permitting and incidental take authorization reviews in each of the three  selected OCS regions. In addition, we identified and interviewed a range  of knowledgeable stakeholders selected to reflect a range of industry  groups, a research institution, and environmental organizations to obtain  their views on the seismic survey permit and incidental take authorization  application processes. Because this was a nonprobability sample of  stakeholders, their views are not generalizable beyond those groups but  provide illustrative examples of the views of such stakeholders.", "To examine the number of seismic survey permit applications and related  incidental take authorization applications reviewed by BOEM, NMFS, and  FWS from 2011 through 2016, we obtained data from BOEM, NMFS, and  FWS on the number of permit and incidental take authorization  applications each agency reviewed and the number of permits and  authorizations the agencies issued in each of the three selected OCS  regions. To assess the reliability of the data, we used publicly available  information on the number of permit and authorization applications to  check the data provided by BOEM, NMFS, and FWS. We found the data  on the number of permits and authorizations to be sufficiently reliable for  our purposes.", "To examine the agencies\u2019 time frames for reviewing seismic survey  permit applications and related incidental take authorization applications  from 2011 through 2016, including applications whose reviews are  pending, and the extent to which NMFS and FWS are meeting their  statutory time frames for reviewing incidental harassment authorization  applications related to seismic survey permits, we obtained and analyzed  agency review time frame data from BOEM, NMFS, and FWS. We  focused our review of pending applications on the Atlantic OCS region  because it was the only region with applications that had been pending  review for several years. To assess the reliability of the data, we  interviewed agency officials knowledgeable about the data and analyzed  the data to determine the range of review time frames by agency and by  the three OCS regions. We found BOEM\u2019s data on review time frames to  be sufficiently reliable for our purposes (see app. I for information on  NMFS and FWS data on review time frames). We also examined agency  guidance, agency communication with applicants, and data-recording  procedures. We also interviewed agency officials as well as industry  stakeholders.", "We conducted this performance audit from July 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section includes information about seismic surveys, oil and gas  activities in the four OCS regions, and the potential effects of seismic  activities on the environment and marine mammals as well as related  requirements."], "subsections": [{"section_title": "Seismic Surveys", "paragraphs": ["Seismic surveys use mechanically generated sound waves from an  acoustic source such as an airgun to transmit energy into the subsurface.  Some of this energy is reflected or refracted back to recording sensors,  and data are transformed into representative images of the layers in the  subsurface of the earth. Entities use seismic surveys for several  purposes. For example, oil and gas companies use both onshore and  offshore seismic surveys to collect data on geology that may indicate the  presence of oil and gas. Other entities, such as research institutions, use  seismic surveys for a variety of purposes, such as helping to detect  groundwater, identifying archaeological resources and fault zones, and  conducting other research.", "There are two main types of seismic surveys used on the OCS: (1) deep- penetration and (2) high-resolution seismic surveys. Deep-penetration  seismic surveys are conducted by vessels towing an array of airguns that  use a low frequency source and emit high-energy acoustic pulses into the  seafloor over long durations. Deep-penetration seismic surveys can  penetrate several thousand meters into the subsurface and are then  reflected and recorded by receivers to image deep geological features.  Deep-penetration seismic surveys are often acquired prior to the drilling  phase of oil and gas exploration. High-resolution seismic surveys typically  use high-frequency acoustic signals to image the sea bottom and shallow  parts right below the ocean bottom with a higher level of detail. Seismic  surveys vary in technologies used, as well as in their size and scope, with  towed gear in some cases spanning several miles (see fig. 1)."], "subsections": []}, {"section_title": "Activities in the Outer Continental Shelf (OCS) Regions", "paragraphs": ["The OCS refers to the submerged lands outside the territorial jurisdiction  of all 50 states but that appertain to the United States and are under its  jurisdiction and control. State submerged lands generally extend from the  shore to 3 geographical miles offshore. Federal submerged lands, which are lands under the jurisdiction of the federal government\u2014generally  extend from 3 geographical miles to 200 nautical miles offshore. With  certain exceptions, waters and submerged lands beyond 200 nautical  miles offshore are considered international.", "The OCS is divided into four regions managed by BOEM\u2014Alaska,  Atlantic, Gulf of Mexico, and Pacific\u2014each with its own histories and  concerns and levels of commercial activities, including oil and gas  development and history of using seismic surveys. The Gulf of Mexico  OCS region has had the most oil and gas activity. The Alaska OCS  encompasses the Arctic submerged lands, Cook Inlet planning area, and  the Gulf of Alaska. The Arctic waters of the Alaska OCS include the  Beaufort and Chukchi planning areas and the Bering Sea. In the last 25  years, seismic activities in the Alaska OCS have generally taken place in  the Cook Inlet and the Chukchi and Beaufort Seas. The Atlantic OCS  region is divided into four areas for administrative purposes under  BOEM\u2019s oil and gas leasing program: the North Atlantic, Mid-Atlantic,  South Atlantic, and the Straits of Florida. At present, no active OCS oil  and gas leases exist in any of these four planning areas. The most recent  geological and geophysical seismic data for the Mid- and South Atlantic  OCS were gathered more than 30 years ago. The Gulf of Mexico\u2019s central  and western planning areas\u2014offshore Texas, Louisiana, Mississippi and  Alabama\u2014remain the United States\u2019 primary offshore source of oil and  gas, generating about 97 percent of all OCS oil and gas production.", "BOEM oversees offshore oil and gas resource-management activities,  including preparing the 5-year OCS oil and gas leasing program,  conducting lease sales and issuing leases, and receiving, reviewing, and  approving oil and gas exploration and development and production plans.  As part of its role, BOEM also issues permits for geological and  geophysical data acquisition on the OCS, including seismic surveys,  under the Outer Continental Shelf Lands Act and regulations under the  act. BOEM does not have statutory review time frame requirements for  issuing geological and geophysical seismic survey permits. Entities  seeking to conduct geological and geophysical scientific research related  to oil and gas but not associated with oil and gas exploration and  development, including seismic surveys, generally do not need to obtain a  permit from BOEM, but they are generally required to file a Notice of  Scientific Research with the Regional Director of BOEM at least 30 days  before beginning such research."], "subsections": []}, {"section_title": "Environmental Impacts of Seismic Surveys", "paragraphs": ["Man-made sources of ocean noise\u2014such as from commercial shipping,  marine pile driving, sonar, and seismic activities\u2014may have a variety of  impacts on marine mammals ranging from minor disturbance to injury or  death. Effects of noise on marine mammals depend on a variety of factors  including the species and behavior, as well as the frequency, intensity,  and duration of the noise. NMFS and FWS evaluate the potential effects  of activities, such as seismic surveys, on marine mammals in determining  whether to authorize incidental take under the MMPA when such  authorization is requested by entities engaging in those activities.  Agencies are required to evaluate potential environmental effects of their  actions, such as approval of seismic survey permits, under the National  Environmental Policy Act (NEPA), and in cases where Endangered  Species Act listed species may be affected, conduct Endangered Species  Act section 7 consultations."], "subsections": [{"section_title": "Marine Mammal Protection Act", "paragraphs": ["The MMPA was enacted in 1972 to ensure that marine mammals are  maintained at or restored to their optimum sustainable population.  NMFS and FWS implement the MMPA, which generally prohibits the  \u201ctaking\u201d of marine mammals. However, the MMPA provides a  mechanism for NMFS and FWS, upon request, to authorize the incidental  take of small numbers of marine mammals by U.S. citizens engaging in a  specified activity, other than commercial fishing, within a specified  geographic region. Specifically, NMFS and FWS issue incidental take  authorizations after finding that the activities will cause the taking of only  small numbers of marine mammals of a species or stock, the taking will  have a negligible impact on such marine mammal species or stocks, and  the taking will not have an unmitigable adverse impact on the availability  of the species or stock for taking for subsistence uses. Entities whose  seismic survey activities may result in incidental take of marine mammals  obtain an incidental take authorization from NMFS or FWS, or both,  depending on the affected species. If operators incidentally take a marine  mammal and do not have authorization to cover the incidental take, they  would be in violation of the MMPA. By statute, incidental take  authorizations must also include permissible methods of taking and  means of affecting the least practicable adverse impact on affected  species and stocks and their habitat, monitoring requirements, and  reporting requirements."], "subsections": []}, {"section_title": "National Environmental Policy Act", "paragraphs": ["Under NEPA, federal agencies are required to evaluate the potential  environmental effects of actions they propose to carry out, fund, or  approve (e.g., by permit). NEPA and implementing regulations set out  an environmental review process that has two principal purposes: (1) to  ensure that an agency carefully considers information concerning the  potential environmental effects of proposed actions and alternatives to  proposed actions and (2) to ensure that this information will be made  available to the public. Under NEPA, before approving any oil and gas  leasing, exploration, geological and geophysical permits, or development  activities, BOEM must evaluate the potential environmental effects of  approving or permitting those activities. NMFS and FWS also must  evaluate potential environmental effects under NEPA of issuing the  MMPA incidental take authorization as part of their review of the  proposed authorizations. Generally, the scope of the proposed permit or  authorization\u2014that is, the federal action\u2014determines whether the federal  agency prepares either an environmental assessment or a more detailed  environmental impact statement. Agencies may prepare an  environmental assessment to determine whether a proposed action is  expected to have a potentially significant impact on the human  environment. If the agency determines that the action will not have  significant environmental impacts following the environmental  assessment, the agency will issue a Finding of No Significant Impact. If  prior to or during the development of an environmental assessment, the  agency determines that the action may cause significant environmental  impacts, an environmental impact statement should be prepared.", "In implementing NEPA, federal agencies may rely on \u201ctiering\u201d, in which  prior broader, earlier NEPA reviews are incorporated into subsequent  site-specific analyses. Tiering is used to avoid duplication of analysis as  a proposed activity moves through the NEPA process, from a broad  assessment to a site-specific analysis. If an agency would like to evaluate  the potential significant environmental impacts of multiple similar or  recurring activities, the agency can prepare a programmatic  environmental assessment or environmental impact statement. Because  BOEM prepares a site specific environmental analysis for each geological  and geophysical permit application, to increase efficiency, BOEM uses  this tiering process and tiers from either an existing environmental impact  statement or environmental assessment during its site specific  environmental analysis review."], "subsections": []}, {"section_title": "Endangered Species Act", "paragraphs": ["The Endangered Species Act provides programs for conserving  threatened and endangered species. Under section 7 of the act, federal  agencies must ensure that any action they authorize, fund, or carry out is  not likely to jeopardize the continued existence of any endangered or  threatened species or result in the destruction or adverse modification of  its critical habitat. To fulfill this responsibility, federal agencies must consult with NMFS or FWS, depending on the affected species, to assess  the potential effects of proposed actions, including approval of seismic  survey permits and authorization of incidental take under the MMPA, on  threatened and endangered species. The Endangered Species Act allows  NMFS and FWS to exempt incidental takings from the taking prohibition  for endangered and threatened species as provided through an incidental  take statement. The statement is to include the amount or extent of  anticipated take, reasonable and prudent measures to minimize the  effects of incidental take, and the terms and conditions that must be  observed. Formal consultations between federal agencies and NMFS or  FWS are required where a proposed action could have an adverse effect  on listed species or designated critical habitat and are concluded with  issuance by NMFS or FWS of biological opinions. The biological opinion  is to discuss in detail the effects of the proposed action on listed species  and their critical habitat and contain NMFS\u2019s or FWS\u2019s opinion on whether  the proposed action is likely to jeopardize the continued existence of the  species or destroy or adversely modify any designated critical habitat. For  consultations involving marine mammals, an Endangered Species Act  section 7 incidental take statement cannot be issued until the incidental  take has been authorized under the MMPA.", "Agencies may informally consult with NMFS or FWS, and if it is  determined by the federal agency during such informal consultation that  the proposed action is not likely to adversely affect endangered or  threatened species or critical habitat, the informal consultation process is  concluded upon written concurrence of NMFS or FWS, and no further  action is necessary. If an action agency would like to evaluate the impacts  of multiple similar or recurring activities on endangered and threatened  species, NMFS or FWS can prepare a programmatic biological opinion for  the OCS region."], "subsections": []}]}]}, {"section_title": "BOEM\u2019s Process Differs by OCS Region, and BOEM Reviewed 297 Seismic Survey Permit Applications from 2011 through 2016", "paragraphs": [], "subsections": [{"section_title": "BOEM\u2019s Process for Reviewing Seismic Survey Permit Applications Differs by Selected OCS Region", "paragraphs": ["BOEM has a documented process for reviewing seismic survey  applications in each of the three selected OCS regions that differs at the  final step (see fig. 2), depending on the region. For the Alaska and  Atlantic regions, the applicant generally submits an application to BOEM  for a seismic survey permit at the same time that the applicant submits an  application to NMFS or FWS for an incidental take authorization. For the  Gulf of Mexico region, the applicant has generally only submitted an  application to BOEM for a seismic survey permit.", "In all three regions, BOEM is required to conduct environmental reviews  under NEPA, and Endangered Species Act Section 7 consultations as  necessary to help ensure agency actions, such as permit approvals, do  not jeopardize the continued existence of a species or destroy or  adversely modify critical habitat. In all three regions, when appropriate,  BOEM is also to coordinate with relevant stakeholders, such as state  officials, the Department of Defense and the National Aeronautics and  Space Administration, if proposed activities have the potential to interfere  with defense or civil aerospace activities in the same area.", "The final step in BOEM\u2019s process for reviewing seismic survey permit  applications differs among the three selected OCS regions. In the Atlantic  region, prior to issuing a permit, BOEM intends to require incidental take  authorizations related to the seismic survey activities proposed in the  permit application to be in place before issuing permits, but BOEM  issues conditional permits while waiting for incidental take authorizations  in the Alaska region. In the Gulf of Mexico region, BOEM generally issues  permits without requiring incidental take authorizations to be in place.", "Stakeholders from industry groups and BOEM officials we interviewed  stated that differences in the review process were the natural result of the  process adapting to the three different OCS regions and their history of oil  and gas exploration. For example, agency officials stated that, in terms of  oil and gas activity, the Atlantic is a \u201cfrontier region,\u201d and, according to a  stakeholder group, has vocal coastal communities that are uncomfortable  with offshore energy development and, relatedly, the potential impacts of  seismic surveys on marine mammals and commercial fishing. If certain  activities are considered controversial or have more vocal public  opponents, they may result in an increased number of public comments  the agency must review, which in turn may result in BOEM taking extra  time to review applications for permits or NMFS requiring more time to  review incidental take authorization applications, agency officials said. For  example, in the Atlantic OCS, there was a large vocal public opposition to  the seismic surveys proposed. Specifically, 126 municipalities, 1,200  officials, and over 40,000 businesses representing Republicans and  Democrats opposed seismic surveying, according to testimony at a July  2017 hearing of the House Committee on Natural Resources.", "By contrast, according to BOEM officials and industry stakeholders we  interviewed, the Gulf of Mexico region has a long history of offshore  energy development and seismic survey activity. BOEM has issued  permits in the Gulf of Mexico region without requiring an applicant to  already have an incidental take authorization in place. According to two  industry stakeholders we interviewed, obtaining permits in the Gulf of  Mexico has been a fairly routine process. BOEM has made a policy  decision to generally require an incidental take authorization in Alaska  and the Atlantic but not in the Gulf of Mexico, agency officials said.", "While historically, BOEM has not required incidental take authorizations in  the Gulf of Mexico to be in place prior to issuing seismic survey permits,  around 2002, ocean noise emerged as an environmental concern in the  region, according to BOEM officials. At that time, BOEM requested  incidental take regulations from NMFS for the Gulf of Mexico at the  request of NMFS and on behalf of the industry and submitted revised  requests in 2004, 2011, and 2016. According to BOEM officials we  interviewed, the agency has been working with NMFS since 2002 to get  incidental take regulations in place. According to NMFS officials, BOEM\u2019s  2002 request only addressed 1 of the 21 species present in the Gulf of  Mexico, so NMFS requested that BOEM revise its request. The 2004  request included all marine mammals present in the area, according to  NMFS officials. BOEM and NMFS agreed to require mitigation measures  on all deep penetration seismic surveys in lieu of the formal authorization  until completion of the pending rulemaking, according to BOEM officials.", "Meanwhile, in 2010, a consortium of environmental organizations sued  Interior, alleging that BOEM permitted seismic activities in the Gulf of  Mexico in violation of NEPA. In correspondence with BOEM, plaintiffs  also alleged that seismic activities permitted by BOEM in the Gulf of  Mexico resulted in the unauthorized take of marine mammals in violation  of the MMPA. In June 2013, the parties reached an agreement providing  for a temporary stay of all proceedings in the lawsuit until Final Action, as  defined in the settlement agreement, with respect to BOEM\u2019s application  for incidental take regulations or until the expiration of 30 months,  whichever occurs first. In addition, BOEM agreed to consider the  appropriateness of prescribing additional mitigation measures for industry  applicants related to seismic survey permits during the stay, including  seasonal restrictions for coastal waters and certain monitoring and  reporting requirements; the plaintiffs agreed not to challenge such permits  for surveys implementing the mitigations during the stay. In February  2016, the parties agreed to extend the stay through September 25, 2017,  subject to BOEM\u2019s consideration of certain additional conditions on  seismic surveys permitted in the Gulf of Mexico. In October 2016, BOEM  submitted a revised request to NMFS for incidental take regulations  governing geophysical surveys in the Gulf of Mexico. In December 2016,  NMFS published in the Federal Register a notice of receipt and request  for comments and information in response to BOEM\u2019s revised request for  incidental take regulations. According to NMFS officials, the agency is  currently working on developing incidental take regulations for the Gulf of  Mexico region. In September 2017, the parties agreed to extend the  stay through November 1, 2018.", "From 2011 through 2016, BOEM Reviewed 297 Applications for Seismic  Survey Permit Applications and Issued 264 Permits  Based on our review of agency data, from 2011 through 2016, BOEM  reviewed 297 applications for seismic survey permits. Of the 297 seismic  survey permit applications reviewed, BOEM issued 264 permits during  this period, and the number of applications reviewed and permits issued  varied by OCS region (see table 1). For the Gulf of Mexico region, which  has had the most oil and gas activity, BOEM reviewed the most permit  applications (268) and issued the most permits (250)."], "subsections": []}, {"section_title": "From 2011 through 2016, BOEM Time Frames for Issuing Seismic Survey Permit Applications Varied by OCS Region", "paragraphs": ["BOEM does not have statutory review time frame requirements for  issuing geological and geophysical seismic survey permits. The range of  BOEM\u2019s review time frames\u2014from the date the agency determined that  an application was complete to when BOEM issued a seismic survey  permit\u2014varied by OCS region (see table 2 and fig. 3).", "This table does not include pending, denied, or withdrawn applications or  Notices of Scientific Research. This table also does not include the  Pacific Outer Continental Shelf region because the Bureau of Ocean  Energy Management did not issue any seismic survey permits there from  2011 through 2016. The six permits issued in the Atlantic region were for  high-resolution seismic surveys for non-oil and gas mineral resources.", "Internally, according to BOEM officials, BOEM\u2019s goal in the Gulf of Mexico  OCS region is to issue high-resolution seismic survey permits within 40  days and to issue deep penetration (airgun) permits within 70 days. Our  analysis of BOEM data on seismic survey permits found that, in the Gulf  of Mexico OCS region, for high-resolution seismic survey permits, the  agency issued 103 permits out of 108 permits (95 percent) within 40  days; for deep penetration permits, the agency issued 90 permits out of  142 permits (63 percent) within 70 days."], "subsections": []}]}, {"section_title": "NMFS and FWS Follow a Similar Process for Incidental Take Authorization Reviews, but Guidance Does Not Sufficiently Describe How to Record Certain Review Dates", "paragraphs": ["NMFS and FWS follow a similar application review process for reviewing  incidental take authorization applications, and from 2011 through 2016,  the agencies reviewed a total of 35 applications. However, neither agency  was able to provide accurate data for the dates on which it began its  formal processing of these applications because neither agency\u2019s  guidance sufficiently describes how to record certain review dates. As a  result, it is not possible to determine whether the agencies were meeting  their statutory time frames for the type of incidental take authorization  application that has such time frames\u2014the incidental harassment  authorizations."], "subsections": [{"section_title": "NMFS and FWS Follow a Similar General Process to Review Incidental Take Authorization Applications", "paragraphs": ["Based on our review of agency guidance, NMFS and FWS follow a  similar general process in reviewing applications for incidental take  authorizations\u2014both incidental harassment authorizations and letters of  authorization with associated incidental take regulations\u2014related to  seismic survey activities (see fig. 4).", "According to NMFS and FWS officials we interviewed, the incidental take  authorization process is concurrent with, but separate from, BOEM\u2019s  process for issuing seismic survey permits, and entities seeking to  conduct seismic surveys apply separately with each agency, as  appropriate. When applicants apply for an incidental take authorization,  they are first to decide which type of authorization they need\u2014an  incidental harassment authorization or a letter of authorization associated  with incidental take regulations, depending on the expected effect on  marine mammals. Specifically, if the proposed activity has the potential to  result in the taking of marine mammals by harassment only, applicants  can request an incidental harassment authorization. Incidental  harassment authorizations can be issued for up to 1 year. The MMPA  provides that NMFS or FWS shall issue incidental harassment  authorizations within 120 days of receiving an application. If an activity  has the potential to result in serious injury to marine mammals, the  applicant would request incidental take regulations, which can be issued  for up to 5 years. Letters of authorization are required to conduct activities  pursuant to incidental take regulations. Once incidental take regulations  are finalized, the applicant can submit a request for a letter of  authorization, which is issued under the incidental take regulations.", "Once NMFS or FWS initially receives an application for an incidental  harassment authorization or incidental take regulation, agency officials  said that they begin their review and determine whether the application is  adequate and complete. They also work with the applicant to obtain any  additional required or clarifying information, according to agency officials  we interviewed. According to agency regulations and guidance, once the  agency deems an application to be adequate and complete, it begins to  formally process the application and may initiate several review actions,  including a NEPA environmental review and, if appropriate, an  Endangered Species Act Section 7 consultation. In the case of NMFS, the  agency publishes a notice of receipt of a request for incidental take  regulations in the Federal Register. The agencies then publish in the  Federal Register a proposed incidental harassment authorization or  proposed incidental take regulations.", "For incidental harassment authorizations, the MMPA provides that NMFS  or FWS, or both, are to publish a proposed incidental harassment  authorization and request public comment in the Federal Register no later  than 45 days after receiving an application. Following a 30-day public  comment period for proposed incidental harassment authorizations, the  agencies would make their final determination on the authorization, based  on:  the findings of their NEPA review,  the Endangered Species Act consultation, an assessment of whether the proposed activity is consistent with the  requirements of other statutes, as necessary, an analysis of the applicant\u2019s ability to implement any necessary  mitigation measures to reduce potential effects on marine mammals,  and a review of the formal public comments submitted regarding the  proposed application.", "Not later than 45 days after the close of the public comment period,  NMFS and/or FWS is to, under the MMPA, issue an incidental  harassment authorization, including any appropriate conditions. In order  to issue an incidental harassment authorization, the relevant agency must  make the required findings that the activity will result in a taking by  harassment only of small numbers of marine mammals, that the  anticipated take will have a negligible impact on the species or stock, and  the anticipated take will not have an unmitigable adverse impact on the  availability of the species or stock for subsistence uses.", "For incidental take regulations, the agencies are to publish proposed  regulations in the Federal Register and generally provide a public  comment period of 30-to-60 days, depending on the type of authorization  requested and circumstances that may warrant a shorter or longer period.  The agencies then publish a final rule in the Federal Register, which  includes the agencies\u2019 response to public comments received. Generally,  30 days after the final rule is published, an approved incidental take  regulation becomes effective. Once the regulation becomes effective,  the agencies may issue letters of authorization, the applications for which  may have been received at the same time as the submission of the  incidental take regulation request or following the implementation of the  regulations, and then determine whether the activities in the letter of  authorization application are within the scope of the activities analyzed in  the regulations. The relevant agency can issue a letter of authorization  based on a determination under the agency\u2019s regulations that the level of  any incidental takings will be consistent with the findings used to  determine the total taking allowable under the specific regulations."], "subsections": []}, {"section_title": "NMFS Reviewed and Approved Incidental Take Authorizations in Three OCS Regions, and FWS Reviewed and Approved Authorizations in the Alaska OCS", "paragraphs": ["From 2011 through 2016, based on our analysis of agency data, NMFS  reviewed 28 applications for incidental take authorizations and issued 21  incidental take authorizations across the Alaska, Atlantic, and Gulf of  Mexico OCS regions, and FWS reviewed and issued 7 authorizations  only in the Alaska OCS, in part because the marine species under FWS\u2019  jurisdiction do not tend to occur in waters of the OCS in the other  regions. Of the 28 applications NMFS reviewed, it reviewed the most  applications (18) and issued the most authorizations (16) related to  seismic surveys in the Alaska region (see table 3).", "With regard to incidental take regulations, NMFS reviewed and issued  one set of incidental take regulations related to seismic surveys in Alaska  but did not receive applications for\u2014and as a result has not issued\u2014any  letters of authorization associated with the incidental take regulations,  agency officials said. There were no requests for incidental take  regulations related to seismic surveys in the Atlantic region, and NMFS is  currently developing incidental take regulations for the Gulf of Mexico, in  response to BOEM\u2019s request, as noted previously.", "From 2011 through 2016, FWS reviewed applications for and issued  incidental take authorizations related to seismic surveys only in the  Alaska region, in part because the species under FWS\u2019 jurisdiction do not  tend to occur in waters of the OCS in the other regions or there has not  been industry interest in applying for incidental take authorizations in  those regions, according to agency officials. Specifically, FWS reviewed  and issued two incidental harassment authorizations and two incidental  take regulations, which had five associated letters of authorization, for  seismic activities in the Alaska OCS."], "subsections": []}, {"section_title": "Both NMFS and FWS Did Not Accurately Record Certain Review Dates Because Neither Agency\u2019s Guidance Sufficiently Describes How to Record Such Dates", "paragraphs": ["From 2011 through 2016, NMFS did not accurately record the dates on  which it determined applications to be adequate and complete, and FWS  did not record those dates at all; therefore, it is not possible to determine  NMFS and FWS time frames for reviewing incidental take authorization  applications. As noted previously, both agencies, per their guidance and  regulations, are to begin their formal processing of a request for an  incidental take authorization once an application is determined to be  \u201cadequate and complete.\u201d NMFS has general guidance on what  constitutes an adequate and complete incidental take authorization  application\u2014for both incidental harassment authorization and incidental  take regulation applications, as well as associated letter of authorization  applications. Specifically, NMFS\u2019 regulations and website outline 14  sections of information required in an incidental take authorization  application, such as the anticipated impact of the activity to the species or  stock of marine mammal. The agency\u2019s website also notes that  adequate and complete means \u201cwith enough information for the agency to  analyze the potential impacts on marine mammals, their habitats, and on  the availability of marine mammals for subsistence uses.\u201d", "FWS also has general guidance on what constitutes an adequate and  complete incidental take authorization application, for both incidental  harassment authorization and incidental take regulations, as well as  associated letters of authorization. Specifically, FWS regulations and  guidance specify that all applications must include certain pieces of  information and note that if an application is determined to be incomplete,  FWS staff are to notify the applicant within 30 days of receiving the  application that information is lacking.", "However, neither NMFS nor FWS guidance sufficiently describes how  agency staff should record the date on which an application is determined  to be adequate and complete, which would start the time frame for  reviewing incidental take authorization applications. Specifically, NMFS\u2019  guidance provides information on what should be included in an adequate  and complete application but does not include information on how or  when staff should record the date an application is determined to be  adequate and complete. NMFS officials we interviewed told us that while  they generally record these dates, they are not sufficiently accurate to be  used for an analysis of review time frames. These officials said that  determinations of whether an application is adequate and complete have  historically varied by staff member, with some staff waiting until all  outstanding questions are resolved with an applicant before deeming the  application adequate and complete, and others considering an application  to be adequate and complete if more substantive questions are answered  (e.g., the dates, duration, specified geographic region of, and estimated  take for the proposed activity), even if some less substantive questions  are still outstanding (e.g., contact information). In addition, NMFS officials  told us that, in some cases, staff might not enter into their system the date  they determine an application to be adequate and complete and might  instead enter the information in batches once they have a few  applications that are ready for data entry. This might mean that, in cases  where a staff member waits until an application is done being processed  and reviewed, the date recorded for the determination of adequate and  complete, and the date the incidental take authorization is published, may  be zero to a few days apart. Based on our review of NMFS data, in at  least two cases, the date NMFS recorded for the determination of  adequacy and completeness of an application was after the date when  the proposed incidental take authorization was published in the Federal  Register.", "While FWS has guidance on what applicants should include in an  incidental take authorization application, the guidance does not specify  how or when staff should record the date on which they determine an  application is adequate and complete. One FWS official we interviewed  told us that the agency does not record this date in the spreadsheet for  tracking incidental take authorization applications. According to this FWS  official, agency officials do not record this date because they do not wait  until the application is considered adequate and complete to begin their  review. Instead, they begin processing the application while working with  applicants to provide missing information and clarifications. By the time  FWS officials consider an application to be adequate and complete, the  officials said that they usually have a well-developed draft incidental take  authorization and are typically finalizing details with the applicant.  According to FWS officials, recording an adequate and complete date  would have little meaning.", "NMFS\u2019s and FWS\u2019s guidance does not specify how or when staff should  record the date an application is determined to be adequate and complete  to help ensure that such a date is recorded consistently. As a result, the  agencies are either not accurately recording the date an application is  adequate and complete or not recording that date. Thus, the agencies are  not able to determine how long their formal processing takes. This  outcome is inconsistent with federal internal control standards, which call  for management to use quality information to achieve agency objectives  and design control activities, such as accurate and timely recording of  transactions, to achieve objectives and respond to risk. Officials we  interviewed at both agencies told us that they work to help meet  applicants\u2019 project timelines\u2014for example, applicants might need an  incidental harassment authorization to be in place when their seismic  survey vessel becomes available to begin operations. Until NMFS and  FWS develop guidance that clarifies how and when staff should record  the date on which the agency determines the \u201cadequacy and  completeness\u201d of an application, the agencies and applicants will  continue to have uncertainty around review time frames for incidental take  authorizations.", "Further, NMFS and FWS do not know if they are meeting their statutory  time frames for reviewing one type of incidental take authorization  application\u2014incidental harassment authorization applications\u2014because  they do not assess the time it takes their agencies to review applications  and make authorization decisions. As noted previously, the MMPA  provides that NMFS or FWS shall issue incidental harassment  authorizations within 120 days of receiving an application. Industry  representatives, scientific researchers, and agency officials we  interviewed noted, however, that the agencies often take longer than 120  days to make a decision about whether to issue an incidental harassment  authorization. For example, NMFS and FWS officials we interviewed told  us they often do not complete incidental harassment authorization  reviews within the 120-day statutory time frame. According to NMFS and  FWS officials, reviews may take longer than 120 days in cases where the  agency determines that a threatened or endangered species under the  Endangered Species Act may be affected, because the agency generally  must request the initiation of a section 7 consultation, which by regulation  can take up to 135 days.", "More specifically, NMFS and FWS officials we interviewed were unable to  provide accurate estimates of how long it takes their agency to review  incidental harassment authorization applications because they said that  they do not conduct analyses of their review time frames. This practice is  inconsistent with federal standards for internal control, which call for  agency management to design control activities to achieve objectives and  respond to risks, including by comparing actual performance to planned  or expected results throughout the organization and analyzing significant  differences. Without analyzing how long it takes to review incidental  harassment authorization applications, from the date the agency  determines that an application is adequate and complete until the date an  application is approved or denied, and comparing it to the statutory review  time frame, NMFS and FWS will be unable to determine whether they are  meeting their objectives of completing reviews within the statutory time  frame of 120 days."], "subsections": []}]}, {"section_title": "For Several Years, BOEM and NMFS Have Been Reviewing Certain Seismic Survey Permit and Incidental Take Authorization Applications in the Atlantic OCS", "paragraphs": ["As of October 2017, in addition to the six permits BOEM issued in the  Atlantic OCS from 2011 through 2016, another six permits were pending  a decision. Five related incidental harassment authorizations have also  been pending a decision by NMFS, as of October 2017."], "subsections": [{"section_title": "BOEM Has Been Reviewing Six Seismic Survey Permit Applications in the Atlantic OCS Region for Several Years", "paragraphs": ["As of October 2017, in addition to the six permits BOEM issued in the  Atlantic OCS from 2011 through 2016, another six permits were pending  a decision. From March to May 2014, BOEM received these six  applications for seismic survey permits in the Atlantic region (see fig. 5).  Of the six applicants that applied to BOEM during that time, five also  applied to NMFS for incidental harassment authorizations related to their  seismic survey permit applications, from August 2014 to January 2016.  The sixth applicant that applied to BOEM for a seismic survey permit in  the Atlantic OCS region did not apply for an incidental harassment  authorization with NMFS, according to NMFS officials.", "BOEM officials we interviewed stated that beginning in August 2014, the  agency began conducting outreach to Atlantic state officials to explain the  geological and geophysical permitting process and the seismic  technologies involved in the applications. In addition, according to BOEM  officials, the agency began coordinating with the Department of Defense  and the National Aeronautics and Space Administration to ensure that the  proposed seismic surveys did not interfere with any of their activities.  According to BOEM data we reviewed, the agency had determined that  all six applications to be \u201caccepted,\u201d or complete in late April to early June  2014.", "In March 2015, BOEM made the applications available for public  comment for 10 or 30 days, depending on the type of activity proposed.  According to BOEM officials, while the agency does not generally provide  a similar public comment period for the Gulf of Mexico or Alaska OCS  regions, once the Atlantic applications were considered \u201caccepted,\u201d  BOEM decided to provide a public comment period for them because the  region is considered a \u201cfrontier area\u201d\u2014a region without a long history of  oil and gas development\u2014and local communities in Atlantic states are  less familiar with the impacts of seismic surveys than communities in the  Gulf states. From March 2015 until January 2017, BOEM had no further  data on its review activities that took place. BOEM officials we interviewed  told us that their seismic survey permit reviews were complete, but the  agency did not issue the seismic survey permits because it had made a  policy decision to wait for NMFS to issue incidental harassment  authorizations before doing so.", "In January 2017, BOEM denied the six applications for deep-penetration  seismic survey permits in the Atlantic OCS region after reviewing the  applications for 948 to 982 days. In May 2017, BOEM announced it  would reconsider the six applications for seismic survey permits in the  Atlantic region, after the new administration rescinded the permit denials.  As of August 2017, BOEM officials we interviewed were unable to provide  estimates of when the agency\u2019s reviews would be completed."], "subsections": []}, {"section_title": "NMFS Has Been Reviewing Incidental Harassment Authorization Applications Related to Seismic Survey Permits in the Atlantic OCS for Several Years", "paragraphs": ["In addition to the four incidental harassment authorizations NMFS  approved in the Atlantic OCS region from 2011 through 2016, there are  five authorization applications related to seismic survey permits that are  pending a decision by NMFS, as of October 2017. NMFS received three  incidental harassment authorization applications related to seismic  surveys in the Atlantic OCS region from August to September 2014, a  fourth in March 2015, and a fifth in January 2016 (see fig. 6).", "In fall 2014, NMFS redirected staff reviewing the Atlantic incidental  harassment authorization applications to work on issues related to the  agency\u2019s Fisheries Science Center, according to a NMFS official we  interviewed. According to this official, review of the Atlantic applications  resumed in February 2015. In spring 2015, NMFS became aware of some  academic studies concerning the impacts of seismic surveys on marine  mammals that they felt would be important to consider with the Atlantic  OCS applications under review, according to agency officials we  interviewed. According to these officials, NMFS notified applicants of  these studies, and one applicant voluntarily revised its impact estimates based on the studies. In summer 2015, NMFS officials said they  determined the three applications were sufficiently complete to begin  processing. The agency also published a formal notice of receipt and  request for comments in the Federal Register. According to NMFS  officials we interviewed, this procedure is not a required step in the  incidental harassment authorization review process, but NMFS officials  thought it was important to solicit the input, given potential local  community concern over the surveys in the Atlantic OCS region. Also  according to NMFS officials, based on comments received during the  public comment period, NMFS determined one application had been  erroneously considered complete and returned the application to the  applicant.", "In fall 2015, NMFS officials informed applicants that NMFS would need  revised applications based on the new academic studies. In addition to  the applicant noted above who updated its application in spring 2015, one  additional applicant chose to update its application in fall 2015, and  NMFS updated two additional remaining applications. NMFS officials  told us they received the last major revisions to the applications in May  2016 and were reviewing and drafting mitigation and monitoring  proposals throughout 2016. In November 2016, according to NMFS  officials, the five proposed incidental harassment authorizations were  ready to be published in the Federal Register, but internal leadership  placed the process on hold due to uncertainty regarding BOEM\u2019s actions  on the permits.", "Following BOEM\u2019s denials in January 2017, NMFS suspended the five  incidental harassment authorization applications related to the denied  seismic survey permits; according to NMFS officials, NMFS determined  there was no longer a valid basis for any proposed activity following  BOEM\u2019s denial of permits for the actual activity. Agency officials informed  applicants that NMFS may resume its incidental harassment authorization  review if BOEM resumed its permit review at some point in the future.  Once BOEM announced it would reconsider the six applications for  seismic survey permits in the Atlantic region, NMFS published five  proposed incidental harassment authorizations related to the permits  being reconsidered by BOEM in June 2017. In July 2017, NMFS  extended the public comment period an additional 15 calendar days for a  total of 45 days. After the close of the public comment period, under the  MMPA, NMFS is to finalize its decision regarding the applications and  either publish the final incidental harassment authorizations or deny the  applications. As of October 2017, officials we spoke with at NMFS were  unable to provide estimates of when the agency\u2019s reviews would be  completed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Offshore seismic surveys provide federal agencies and commercial  entities with a wide range of information, including data on fault zones  and geology that may indicate the presence of oil and gas. This  information can help inform regulatory and resource development  decisions. In reviewing applications for seismic survey permits, BOEM  records the date on which an application for a seismic survey permit is  \u201caccepted\u201d, or complete, which may be weeks or months after an  application is received. NMFS and FWS, however, were unable to provide  accurate data on the dates that they determined applications for  incidental take authorizations were adequate and complete because the  agencies\u2019 guidance does not specify how or when staff should record this  date. Until NMFS and FWS develop guidance that clarifies how and when  staff should record the date the agency determines the \u201cadequacy and  completeness\u201d of an application, the agencies and applicants will  continue to have uncertainty around review time frames for incidental take  authorizations. Moreover, NMFS and FWS officials we interviewed said  that they do not analyze their review time frames, a practice that is  inconsistent with federal standards for internal control. Without analyzing  how long it takes to review incidental harassment authorization  applications and comparing time frames to the statutory review time  frame, NMFS and FWS will be unable to determine whether they are  meeting their statutory review time frame of 120 days."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations, including two to  NMFS and two to FWS. Specifically:  The Assistant Administrator for Fisheries of NMFS should develop  guidance that clarifies how and when staff should record the date on  which the agency determines the \u201cadequacy and completeness\u201d of an  incidental take authorization application. (Recommendation 1).", "The Principal Deputy Director of FWS should develop guidance that  clarifies how and when to record the date on which the agency  determines the \u201cadequacy and completeness\u201d of an incidental take  authorization application. (Recommendation 2).", "The Assistant Administrator for Fisheries of NMFS should analyze the  agency\u2019s time frames for reviewing incidental harassment authorization  applications\u2014from the date the agency determines that an application is  adequate and complete until the date an application is approved or  denied\u2014and compare the agency\u2019s review time frames to the statutory  review time frame. (Recommendation 3).", "The Principal Deputy Director of FWS should analyze the agency\u2019s time  frames for reviewing incidental harassment authorization applications\u2014 from the date the agency determines that an application is adequate and  complete until the date an application is approved or denied\u2014and  compare the agency\u2019s review time frames to the statutory review time  frame. (Recommendation 4)."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a copy of this report to the Departments of Commerce and  the Interior for review and comment.", "The Department of Commerce provided comments on behalf of the  National Marine Fisheries Service (NMFS). NMFS agreed with our  recommendations but recommended changes to some of the terms used  in our report and stated that our characterization of the statutory and  mandated requirements did not fully describe the extent of review and  analysis required during their review. While we believe that our  description of the extent and complexity of NMFS\u2019 review and analysis,  including the terms we use to describe NMFS\u2019 process, was sufficient for  this report, we revised the report as appropriate. In its letter, NMFS  acknowledged that it does not consistently record the date that an  application is deemed \u201dadequate and complete,\u201d and agreed with our  recommendations, including describing the steps it plans to take to  address them. The Department of Commerce also provided technical  comments, which we incorporated throughout our report as appropriate.  The Department of Commerce\u2019s letter can be found in appendix II.", "The Department of the Interior provided comments on behalf of the  Bureau of Ocean Energy Management (BOEM) and the U.S. Fish and  Wildlife Service (FWS). The FWS partially concurred with our first  recommendation and fully concurred with our second. Regarding the first  recommendation, FWS noted that it plans to develop guidance for  recording the \u201cadequate and complete\u201d date of incidental harassment  authorization applications; however, it did not indicate that it would  develop such guidance for the other type of incidental take  authorization\u2014the incidental take regulations. We believe that FWS  should develop guidance for both. Such guidance is necessary to  maintain consistency with federal internal control standards, which call for  management to use quality information to achieve agency objectives and  design control activities, such as accurate and timely recording of  transactions, to achieve objectives and respond to risk. The Department  of the Interior also provided technical comments, which we incorporated  throughout our report as appropriate. The Department of the Interior\u2019s  letter can be found in appendix III.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Acting Director of BOEM, the Assistant  Administrator for Fisheries of NMFS, and the Principal Deputy Director of  FWS.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@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 members who made significant  contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) BOEM\u2019s process for reviewing seismic survey  permit applications in each OCS region, the number of applications  reviewed from 2011 through 2016, and BOEM\u2019s review time frames; (2)  NMFS\u2019s and FWS\u2019s processes for reviewing incidental-take authorization  applications related to seismic surveys in each OCS region, the number  of such applications reviewed by the agencies from 2011 through 2016,  and their review time frames; and (3) the status of pending seismic survey  permit applications and related incidental take authorizations in the  Atlantic OCS region. In our preliminary review of all four OCS regions\u2014 Alaska, the Atlantic, the Gulf of Mexico, and the Pacific\u2014we determined  that there had been no new oil and gas and related seismic activity in the  Pacific OCS region for the last two decades; as a result, we excluded the  Pacific OCS region from our review.", "To examine BOEM\u2019s, NMFS\u2019s, and FWS\u2019s processes for reviewing  seismic survey permit applications and related incidental take  authorizations, we analyzed relevant laws and regulations that govern the  processes and reviewed and analyzed agency guidance, such as process  flowcharts, and other documents, including Federal Register notices. We  also interviewed BOEM, NMFS, and FWS agency officials, in their  headquarters and regional offices, responsible for overseeing seismic  permitting and incidental take authorization reviews in each selected OCS  region. In addition, we interviewed a range of stakeholders, identified and  selected because of their knowledge of the seismic survey permit and  incidental take authorization application processes, to obtain their views.  Specifically, we interviewed representatives from 10 stakeholder groups,  which included industry groups, a research institution, and environmental  organizations. Because this was a nonprobability sample of stakeholders,  the views of stakeholders we spoke with are not generalizable beyond  those groups that we interviewed.", "To examine the number of seismic survey permit applications and related  incidental take authorizations that BOEM, NMFS, and FWS reviewed  from 2011 through 2016, we obtained data from BOEM, NMFS, and FWS  on the number of permit and authorization applications each agency reviewed and the number of permits and authorizations the agencies  issued in each selected OCS region. We asked the agencies to  categorize their data with different types of seismic survey technologies  (e.g., deep-penetration seismic surveys, high-resolution seismic surveys,  or other seismic survey technology such as vertical seismic profile  technology). As a result, we identified the number of relevant permits and  authorizations that were identified by these agencies as having used  seismic survey technologies. We used publicly available information on  the number of permit and authorization applications on agency websites  to check the reliability of BOEM, NMFS, and FWS data and found the  data on the number of permits and authorizations to be sufficiently  reliable for our purposes.", "To examine the review time frames for seismic survey permit applications  and related incidental take authorizations from 2011 through 2016, as  well as pending applications, and the extent to which NMFS and FWS are  meeting their statutory time frames for reviewing incidental harassment  authorization applications related to seismic survey permits, we obtained  data from BOEM, NMFS, and FWS. We also interviewed agency officials  knowledgeable about the data and analyzed the data to determine the  range of review time frames by agency and by selected OCS region. We  focused our review of pending applications on the Atlantic OCS region  because it was the only region with applications that had been pending  review for several years. We used information on the dates applications  were received and issued as listed in the Federal Register or publicly  available documentation to check the reliability of BOEM, NMFS, and  FWS data. For BOEM, we found the dates the agency gave us generally  were consistent with the dates listed in the Federal Register. As a result,  we used BOEM\u2019s dates from the time an application was deemed  \u201caccepted,\u201d or adequate and complete, until the permit was issued. We  found the data to be sufficiently reliable for our purposes. For NMFS and  FWS, we found errors between the dates the agencies gave us and the  dates listed in the Federal Register. In addition, the agencies told us they  did not have reliable information on the dates that applications were  determined to be adequate and complete. We also examined NMFS and  FWS guidance on review time frames, agency communication with  applicants, and data- recording procedures. We also interviewed agency  officials as well as industry stakeholders to learn more about time frames  for seismic survey permit applications and related incidental take  authorizations."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Christine Kehr (Assistant  Director), Nirmal Chaudhary, Maggie Childs, John Delicath, Marissa  Dondoe, Cindy Gilbert, Jessica Lewis, Greg Marchand, Patricia Moye,  Katrina Pekar-Carpenter, Caroline Prado, Dan Royer, and Kiki  Theodoropoulos made key contributions to this report."], "subsections": []}]}], "fastfact": ["Ships conduct seismic surveys by shooting soundwaves into the ocean floor to collect data, including geology that might indicate oil and gas.", "Applicants wishing to conduct oil and gas surveys must first get a permit from the Bureau of Ocean Energy Management and, if the survey could harm marine mammals, they must obtain authorization from one or two federal wildlife agencies. Some applicants have questioned the speed of the permit process.", "We examined the permit process and time frames in different regions. We recommended that federal wildlife agencies clarify their review processes to ensure the agencies meet statutory review deadlines."]}
{"id": "GAO-18-89", "url": "https://www.gao.gov/products/GAO-18-89", "title": "Natural Gas Storage: Department of Transportation Could Take Additional Steps to Improve Safety Enforcement Planning", "published_date": "2017-11-22T00:00:00", "released_date": "2017-12-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Natural gas storage is important for ensuring that natural gas is available when demand increases. There are 415 storage sites\u2014including underground caverns and depleted aquifers and oil and gas reservoirs\u2014located in 31 states, often near population centers (see fig.). Leaks from these sites, such as one near Los Angeles that led to the temporary relocation of about 8,000 families in 2015, can result in environmental and economic damage. Until 2016, states set standards for 211 sites, but there were no standards for 204 sites connected to interstate pipelines subject to federal jurisdiction. With passage of the PIPES Act of 2016, PHMSA, an agency within DOT that sets and enforces standards for energy pipelines, among other things, was tasked with issuing minimum standards for all gas storage sites.", "GAO was asked to review natural gas storage safety standards. This report examines (1) PHMSA's efforts to implement the requirement to issue minimum safety standards for natural gas storage sites and (2) the extent to which PHMSA has planned strategically to enforce its safety standards for these sites. GAO reviewed PHMSA documents and plans, compared them to leading planning practices, and interviewed PHMSA officials."]}, {"section_title": "What GAO Found", "paragraphs": ["To meet its requirement under the Protecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016, the Department of Transportation's (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) issued minimum safety standards in an interim rule and plans to finalize them by January 2018. Under the interim standards, site operators are to follow industry-developed best practices to detect and prevent leaks and plan for emergencies, among other things. Since the interim rule went into effect in January 2017, the minimum safety standards apply to all 415 natural gas storage sites, and the rule will be subject to further revision before it is final.", "To enforce its safety standards, PHMSA has taken steps to establish a natural gas storage safety enforcement program. For example, PHMSA has started developing a training program for its inspectors. PHMSA also has identified a strategic goal for its program\u2014to promote continuous improvement in safety performance\u2014and is developing a performance goal for its training program.", "However, PHMSA has not yet followed certain leading strategic planning practices. For example, PHMSA has not yet defined the level of performance to be achieved, fully addressed all core program activities, or used baseline data to develop its performance goal. GAO has previously reported that requirements under the Government Performance and Results Act (GPRA) and GPRA Modernization Act of 2010\u2014which include establishing performance goals to define the level of performance\u2014can serve as leading practices for lower levels of an agency, such as PHMSA. GAO also has found that successful performance goals address all core program activities. PHMSA's goal focuses on training and does not address other core program activities, such as conducting effective inspections. For example, a goal to evaluate whether PHMSA's inspections are effective could be to annually reduce, by a certain percentage, the number of sites not meeting minimum standards. PHMSA officials told GAO that they will strive to add and refine performance goals as the program evolves. As they do so, ensuring that these goals define the level of performance, address all core program activities, and use baseline data could help PHMSA better track progress toward its strategic goal."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, which are that PHMSA (1) define levels of performance and address all core program activities and (2) use budget data to refine performance goals for its gas storage program. DOT concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Natural gas storage sites are key elements in our nation\u2019s energy system,  helping ensure that natural gas, which is used for a range of applications  such as heating homes and as a fuel to produce electricity, is available  when demand peaks. There are 415 active natural gas storage sites  located in 31 states. These sites store natural gas in underground  geologic formations such as caverns, depleted aquifers, and depleted oil  and gas reservoirs.", "Major leaks from these sites can result in serious economic disruption  and environmental damage. Natural gas leaks can cause explosions or  fires and, according to the Environmental Protection Agency (EPA),  natural gas is considered to be a significant greenhouse gas which, if  released, can pose significant environmental harm. One such leak  occurred in 2015 at the Aliso Canyon Underground Storage Facility near  the neighborhood of Porter Ranch in suburban Los Angeles, California.  This leak released 5.4 billion cubic feet of natural gas into the atmosphere  over the course of almost 4 months, which caused the temporary  relocation of more than 8,000 families. In addition, the accident disrupted  the ability of the Aliso Canyon site to deliver stored gas to electrical power  plants, which in turn posed risks to the stability of California\u2019s electrical  grid. Like the Aliso Canyon facility, many of the nation\u2019s natural gas  storage sites are located within 3 miles of a city, town, or other populated  area, according to the Department of Energy (DOE).", "Until 2016, states had sole responsibility for overseeing the safety of the  intrastate natural gas storage sites within their states, but states\u2019 safety  standards for these sites varied and applied only to the intrastate sites  that were wholly within their borders. In contrast, interstate natural gas  storage sites were not covered by state regulations. These interstate  sites are subject to state and local permitting and federal licensing  requirements, but they were not regulated for safety. Existing Department of Transportation (DOT) safety regulations, which had been in place for  more than 30 years, applied to conventional surface pipelines and above- ground equipment at all natural gas storage sites. However, these  existing regulations did not apply to the underground portions of the sites,  such as wells, wellbore tubing, and casing. In June 2016, the Protecting  Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016  directed DOT to develop and issue minimum safety standards for all  natural gas storage sites. DOT\u2019s Pipeline and Hazardous Materials  Safety Administration (PHMSA) develops and enforces these standards.", "You asked us to review the development and enforcement of natural gas  storage safety standards. This report examines (1) the status of PHMSA\u2019s  efforts to implement the requirement under the PIPES Act to issue  minimum safety standards for natural gas storage sites and (2) the extent  to which PHMSA has planned strategically to enforce its safety standards  for natural gas storage sites.", "To examine the status of PHMSA\u2019s efforts to implement the requirement  under the PIPES Act to issue minimum safety standards for natural gas  storage sites, we interviewed agency officials and examined laws,  regulations, and agency documents that describe the authority, time  frames, and enforcement goals for implementing new federal standards  under the PIPES Act. To examine the extent to which PHMSA has  planned strategically to enforce its safety standards for natural gas  storage sites, we examined PHMSA\u2019s policies, guidance, and plans and  interviewed agency officials about their plans for oversight. We compared  PHMSA\u2019s plans with leading practices for strategic planning identified by  our prior work. Strategic planning is a systematic process for defining  desired outcomes and translating this vision into goals and steps to  achieve them. For more information on our objectives, scope, and  methodology, see appendix I.", "We conducted this performance audit from November 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section discusses the purpose, types, and locations of natural gas  storage sites; leaks from such sites; safety enforcement prior to 2017;  and the PIPES Act."], "subsections": [{"section_title": "Purpose, Types, and Locations of Natural Gas Storage Sites", "paragraphs": ["Natural gas storage sites\u2014geologic formations where natural gas is  stored deep underground and retrieved for later use\u2014are key parts of our  energy system. Natural gas provides about 30 percent of U.S. energy  needs, is used to generate a third of the nation\u2019s electricity, is widely used  for heating homes and businesses, and is used in a variety of industrial  processes, according to Energy Information Administration (EIA)  information. Natural gas storage sites provide a way to meet peak energy  needs\u2014such as during a cold spell in the winter or during periods of high  electricity demand in the summer\u2014more quickly than would be possible if  relying solely on pipelines that transport natural gas from distant  production fields. Natural gas storage sites are privately owned and  operated by a variety of companies in the energy industry, including local  utilities, independent companies that store gas for sale at peak times to  other companies, and interstate pipeline companies.", "There are three major types of underground geologic formations where  natural gas storage sites are found: (1) underground salt caverns,  (2) depleted aquifers, and (3) depleted oil and gas reservoirs. The wells  that inject or withdraw natural gas from the underground formations can  extend thousands of feet underground. The 415 natural gas storage sites  in the United States contain about 17,000 wells, ranging from a few wells  per site to over a hundred wells at some larger sites. Figure 1 illustrates  the types of geologic formations where natural gas storage sites are  constructed and operated.", "Natural gas storage sites are found in 31 states across the country,  according to EIA data. Over 300 cities, towns, and other populated areas  are located near a natural gas storage site, according to a DOE analysis.  Operators often locate natural gas storage sites near major population  centers or large gas pipelines to improve their ability to deliver natural gas  when needed. Figure 2 shows the approximate location of natural gas  storage sites located within counties populated by 100,000 or more  people."], "subsections": []}, {"section_title": "Leaks from Natural Gas Storage Sites", "paragraphs": ["Leaks from natural gas storage sites can be caused by a variety of  factors\u2014such as underground fissures or inadequately designed or  damaged wells\u2014and have the potential to affect human health, cause  economic disruption, and harm the environment. For example, natural  gas poses the risk of explosion and asphyxiation within enclosed spaces.  In addition, other components of natural gas can cause short-term  neurological, gastrointestinal, and respiratory symptoms, according to the  Los Angeles County Department of Public Health. Moreover, if a large  gas storage facility unexpectedly goes offline due to a major leak, it can  disrupt the natural gas supply system, which in turn may affect the flow of  gas to heat homes and businesses or may cause electrical blackouts due  to the loss of fuel for gas-fired electrical generators. According to a DOE  report, the natural gas stored in geologic formations is under high  pressure and may find its way to the surface if underground fissures or  unplugged oil and gas wells allow the geologic formation to be breached.  Leaks can also occur if the wells used to inject and withdraw natural gas  from geologic formations lose integrity due to cracking of cement used to  seal the well or other factors. Older wells used for natural gas storage  were often drilled for other reasons, such as oil and gas production, and  are more likely to have age-related degradation, according to DOE. About  half of the about 17,000 wells that inject and withdraw natural gas from  storage sites are more than 50 years old, and many wells are more than  100 years old, according to DOE. In addition, DOE reported that other  factors may contribute to leaks, such as earthquake activity, nearby  drilling activity, or other mechanical stresses and undetected corrosion  that may not be known by the natural gas storage site operators. Further,  DOE has reported that operators can sustain safety by regularly  maintaining site equipment, monitoring and repairing leaks, keeping  records about the site, and planning for possible emergencies, among  other things.", "Leaks from natural gas storage sites can result in significant and harmful  effects on public health and safety, the environment, and the energy  system. DOE, PHMSA, and others have identified three major leaks from  natural gas storage sites since 2000 that illustrate these potential  negative effects:", "The Aliso Canyon leak, which was detected in October 2015 and  continued for nearly 4 months, focused national attention on natural  gas storage safety. As of August 2017, the cause of the leak had not  been conclusively determined. However, the leak occurred in a well  that, at the time, was about 60 years old, according to DOE. The  operator of the Aliso Canyon site unsuccessfully attempted to stop the  leak several times over the 4-month event and eventually was able to  do so in February 2016 by permanently sealing the well. According to  the private operator, it temporarily relocated about 8,000 neighboring  families until the leak was abated. Also, the leak disrupted the Aliso  Canyon site\u2019s ability to supply natural gas to electricity generating  plants. Because the Aliso Canyon site supplies gas for nearly 10  gigawatts of electricity in the Los Angeles basin, the leak led to  concerns that there may not be enough gas to serve the electricity  needs of the surrounding region during peak times. In July 2017,  California state regulators announced that the operator had conducted  a comprehensive safety review and that the regulators would allow  Aliso Canyon to reopen at a greatly reduced capacity in order to  prevent energy shortages.", "In August 2004, the Moss Bluff natural gas storage site in Liberty  County, Texas, experienced a major leak due to a damaged well. The  leaking gas caught fire and burned for over 6 days, according to DOE  and PHMSA documents. As a result, the gas was released into the  atmosphere as carbon dioxide, which, according to an EPA analysis,  is a less potent greenhouse gas than natural gas, which was released  by the Aliso Canyon leak.", "In January 2001, the Yaggy natural gas storage site leaked through  underground fissures from the site\u2019s salt caverns into the nearby city  of Hutchinson, Kansas, eventually causing an explosion in the city\u2019s  downtown business district, DOE reported. Two people were killed,  and several businesses were damaged or destroyed by the explosion."], "subsections": []}, {"section_title": "Safety Enforcement for Natural Gas Storage Sites Prior to 2017", "paragraphs": ["Before 2017, many natural gas storage sites were subject to varied, state- by-state safety enforcement. States were responsible for regulating and  enforcing safety at sites that were located solely within their boundaries  and only linked to pipelines within the state. Agencies representing  26 state governments licensed 211 such sites, which amounted to about  half of the 415 active sites in the United States. Prior to 2017, these state  governments applied various safety standards that addressed  underground conditions, such as the integrity of the geologic formations  that store natural gas, or the construction and maintenance of wells that  inject and withdraw gas. For example, according to a DOE report, some  states\u2019 standards specified how site operators should safely construct the  wells. Other states\u2019 standards specified how wells were to be maintained  during their useful life, or how they were to be safely plugged and  abandoned after their useful life ended.", "Prior to 2017, the remaining 204 interstate natural gas storage sites were  subject solely to federal oversight. However, the federal government had  not issued safety standards for them. The Federal Energy Regulatory  Commission (FERC) licenses storage sites that serve the interstate  natural gas market\u2014a market regulated by FERC. However, according to  FERC, its licensing process focuses on whether a proposed site serves  an economic need, and it does not review the safety conditions of a site  when reviewing whether to grant a license. In this role, FERC has  licensed 204 sites in 24 states. As part of its mission to ensure the safety  of the interstate natural gas pipeline system\u2014of which natural gas  storage sites are a part\u2014PHMSA had the regulatory authority to issue  and enforce safety standards for interstate natural gas storage sites.  However, PHMSA\u2019s interstate pipeline safety regulations did not extend to  underground natural gas storage facilities, even when connected to  interstate pipelines. Moreover, because interstate sites were under  federal jurisdiction, state safety standards could not be applied to such  sites.", "Other federal agencies had responsibilities that addressed limited aspects  of safety at natural gas storage sites. DOE provided technical assistance  to California during the Aliso Canyon incident, and has researched the  effects of natural gas storage leaks on the reliability of the electricity grid.  The Bureau of Land Management (BLM), within the Department of the  Interior, manages public lands that overlap, either partially or fully, with  33 natural gas storage sites. EPA provides funding and oversight to  help states and local pollution control agencies meet their responsibility to  monitor air quality within their jurisdictions, according to EPA officials.  EPA can also provide its expertise and support to states and local  communities in the event of natural gas storage leaks, as it did during the  leak at Aliso Canyon. However, EPA does not regulate underground  conditions at gas storage sites."], "subsections": []}, {"section_title": "The PIPES Act", "paragraphs": ["In June 2016, Congress passed and the President signed the PIPES Act,  which, among other things, directed DOT to establish minimum safety  standards for all natural gas storage sites by June 2018 after considering  recommendations from a federal task force and industry standards.  PHMSA sets and enforces these standards.", "The PIPES Act also directed DOE to establish and lead the task force,  which was charged with analyzing the Aliso Canyon incident and making  recommendations to reduce the occurrence of similar incidents in the  future. The task force published its report in October 2016. The report  included findings in three areas\u2014well integrity, environmental and health  protection, and energy reliability. The report also made  44 recommendations to enhance natural gas storage safety, including 3  key recommendations:", "Operators of natural gas storage sites should make advance  preparations with appropriate federal, state, and local governments to  mitigate potential future leaks.", "Electrical grid operators should prepare for the risks that potential gas  storage disruptions create for the electric system.", "Operators of natural gas storage sites should begin a rigorous  program to evaluate the status of the wells, establish risk  management planning, and, in most cases, phase out old wells with  single-point-of-failure designs.", "The PIPES Act directed DOT to consider industry consensus standards to  the extent practicable in establishing its minimum safety standards.  Consensus standards for the oil and gas industry\u2014including those for  natural gas storage\u2014are issued by various entities, including the  American Petroleum Institute (API). API consensus standards describe  how to safely perform technical procedures, such as drilling wells for oil  and gas production, refining produced natural gas into usable gas for  heating and electricity generation, and conducting \u201cworkover\u201d operations  to refurbish existing wells. API develops its consensus standards  involving industry, manufacturers, engineering firms, the public,  academia, and government, and API\u2019s recommended practices are  frequently adopted by a majority of the industry, according to API and  PHMSA. Following several years of study and discussion by industry  experts and government officials, including participation by PHMSA, API  issued two documents outlining recommended practices for the  development and operations of natural gas storage sites. These  recommended practices describe the procedures for designing, locating,  constructing, and operating natural gas storage sites, and include such  activities as inspecting and testing the wells used to inject and withdraw  gas from natural gas storage sites and monitoring the integrity of the  underground formations where natural gas is stored. The API documents  also recommend that operators prepare for emergencies and train the  personnel who operate the sites.", "Under the PIPES Act, state governments also have a continuing role in  enforcing natural gas storage safety for the sites in their states. The act  allows states to certify with PHMSA that they have adopted state  standards that meet or exceed the federal standards and can enforce  these standards. Once a state certifies that it has met these conditions,  the state is responsible for enforcing safety standards on state-regulated  intrastate natural gas underground storage sites through inspections  conducted by state employees, according to PHMSA officials. In addition,  PHMSA officials told us that they would periodically assess whether  states are meeting these conditions. PHMSA officials told us that PHMSA  will have direct responsibility for inspecting federally-licensed interstate  facilities for the next few years because federal safety standards are still  being established, but officials noted that state inspectors could  eventually seek permission from PHMSA to assume the role of inspecting  interstate natural gas storage sites on behalf of PHMSA in the future.  PHMSA officials also noted that PHMSA does not force states to  participate in their pipeline safety program, and so in cases where a state  chooses not to certify its safety enforcement program, PHMSA has stated  that it will assign its own inspectors and staff to enforce federal natural  gas storage safety standards in that state. The PIPES Act also requires  PHMSA to set and charge user fees to operators that it can use for  activities related to underground natural gas storage facility safety,  subject to the expenditure of these fees being provided in advance in an  appropriations act."], "subsections": []}]}, {"section_title": "PHMSA Has Issued Interim Safety Standards and Plans to Finalize Them by January 2018", "paragraphs": ["Citing an urgent need to improve safety at natural gas storage sites,  PHMSA issued an interim final rule that includes minimum safety  standards based largely on API recommended practices in December  2016. The rule took effect in January 2017 and provided that existing  facilities (and those constructed by July 18, 2017) must meet the  standards by January 18, 2018. PHMSA is now considering public  comments on its interim standards, and it plans to finalize them by issuing  a final rule by January 2018. PHMSA also has stated that it will delay  enforcement of certain standards in the interim final rule until 1 year after  issuance of the final rule."], "subsections": [{"section_title": "PHMSA Has Issued Minimum Standards in an Interim Final Rule", "paragraphs": ["To meet the requirement under the PIPES Act, PHMSA issued minimum  safety standards for natural gas storage through an interim final rule in  December 2016, which took effect in January 2017. PHMSA issued  the interim final rule\u2014which allowed the safety standards to take effect  more quickly than under the conventional regulatory process\u2014and stated  that any delay in adopting the standards would jeopardize the public interest through risks to public safety and the environment. As a result, all  415 natural gas storage sites are for the first time subject to federal  regulation, including minimum safety standards as set forth in the interim  final rule, and subject to revision in a final rule.", "To develop the minimum safety standards, PHMSA considered industry  consensus standards, as required by the PIPES Act. PHMSA had already  advised operators to follow industry-recommended practices published by  API, which develops consensus standards for the oil and gas industry.  Specifically, in February 2016, before the passage of the PIPES Act,  PHMSA issued a bulletin encouraging operators to follow the API  recommended practices to update their safety programs. The API  recommended practices contain many provisions that are mandatory, and  other provisions that are nonmandatory. The interim final rule provides  that the nonmandatory provisions of the recommended practices that are  incorporated by reference in the rule are adopted as mandatory.  PHMSA\u2019s interim final rule requires operators of existing natural gas sites,  and those constructed by July 18, 2017, to meet the requirements of  certain sections of the API recommended practices identified in the rule  by January 18, 2018. The API recommended practices address, among  other things, general operations, monitoring the sites for potential leaks,  and emergency response and preparedness. For new storage sites  starting construction after July 18, 2017, the rule requires operators to  meet all sections of the applicable API recommended practices.", "According to PHMSA officials, PHMSA considered the recommendations  of the task force in developing its minimum safety standards, as required  by the PIPES Act, and continues to do so. PHMSA\u2019s minimum safety  standards addressed certain recommendations made by the task force,  according to an analysis performed by PHMSA. However, PHMSA did not  require operators to implement one key recommendation of the task force  report with its minimum standards, according to PHMSA officials. In  particular, the October 2016 task force report recommended that  operators phase out most storage wells with single-point-of-failure  designs\u2014where the failure of a single component, such as a well casing,  could lead to a large release of gas\u2014by installing multiple points of  control at each well. According to an API official, its recommended  practices do not direct operators to phase out such wells because this  practice may not significantly improve safety in all cases; for example, this  practice may not have prevented the leak at Aliso Canyon. The API  official and PHMSA officials noted that API recommended practices direct  operators to assess the risks at their sites and to take steps to address  these risks. According to PHMSA officials, assessing the risks of a site  could include identifying wells with a single point of failure and developing  steps to mitigate this risk. Mitigating the risk could include installing  multiple points of control for certain wells, among other possible mitigation  steps. Neither PHMSA nor API officials could tell us how many of the  approximately 17,000 wells at the nation\u2019s 415 natural gas storage sites  have single-point-of-failure designs, because this information has not  been centrally gathered to date. However, PHMSA plans to gather  information about how many storage wells have single-point-of-failure  designs by asking operators to provide this information as part of a  required annual report.", "To fund its enforcement of its minimum safety standards, PHMSA also  issued a notice to set the user fees that PHMSA charges operators, as  required by the PIPES Act. In November 2016, PHMSA published a  notice of agency action and request for comment, describing its user fee  structure. PHMSA collected public comments, evaluated them, and  finalized its user fee structure in April 2017. As set forth in this notice,  PHMSA will charge each operator based on the size of the operator\u2019s  storage sites as measured by working gas capacity range. The notice  stated that PHMSA plans to collect a total of up to $8 million annually in  fees from all operators combined; however, PHMSA may seek authority  to increase or decrease the amount it charges operators if it finds that the  cost of inspection and enforcement is more or less than it initially  estimated, according to PHMSA officials. Following enactment of an  appropriations act provision, PHMSA is authorized to use the fees it  collects to fund its enforcement activities and plans to use a portion of the  fees to reimburse states for enforcing its minimum safety standards,  according to PHMSA officials.", "Table 1 provides a timeline of key events in the development of PHMSA\u2019s  minimum safety standards."], "subsections": []}, {"section_title": "PHMSA Is Considering Comments on Its Interim Final Rule and Plans to Issue Final Safety Standards in January 2018", "paragraphs": ["Since issuing its interim final rule, PHMSA has been collecting public  comments and plans to adjust some aspects of the rule in response to  comments from the public, industry representatives, and others. PHMSA  plans to finalize its minimum safety standards by replacing its interim final  rule with a final rule in January 2018, and has delayed some dates for  when it expects operators to comply with some aspects of its standards.  PHMSA\u2019s interim final rule states that, with respect to incorporation by  reference of the standards, the nonmandatory provisions it adopted are  adopted as mandatory provisions. API and two other organizations  representing natural gas utilities and transmission companies submitted  comments asking PHMSA to reconsider how it used the API  recommended practices in its minimum safety standards. While API and  the other industry representatives agreed that it was appropriate for  PHMSA to use API recommended practices for its minimum safety  standards, they stated that making all portions mandatory would make the  standards burdensome. In June 2017, PHMSA published a notice in the  Federal Register stating that it would consider these comments as it  finalized its minimum safety standards, which it stated it expects to issue  by January 2018. The notice stated further that PHMSA will not issue any  enforcement citations to operators for failure to meet any standards that  were nonmandatory but that were converted to mandatory by provisions  of the interim final rule until 1 year after it issues the final rule.", "PHMSA also provided additional guidance and clarifications to operators  about scheduling and its plans for enforcement. During the development  of its interim final rule, PHMSA noted that some of the provisions in the  minimum safety standards may take operators several years to fully  implement. According to PHMSA officials, these provisions recommend  that operators carefully inspect their natural gas storage sites, identify any  conditions that do not meet industry-recommended practices, and then  improve conditions at the sites by prioritizing the greatest risks and  implementing preventative measures to mitigate and remediate these  risks over a number of years. As a result, PHMSA published guidance on  its website stating that it expects operators to make and implement plans  to inspect and remediate risks found at their sites within 3 to 8 years  following the effective date of the interim final rule."], "subsections": []}]}, {"section_title": "PHMSA Has Taken Steps to Establish an Enforcement Program but Has Not Yet Followed Certain Leading Practices of Strategic Planning", "paragraphs": ["To enforce PHMSA\u2019s safety standards, the agency\u2019s officials have taken  a variety of steps to establish a safety enforcement program for natural  gas storage sites, but they have not yet followed certain leading practices  of strategic planning in starting PHMSA\u2019s natural gas storage program.  Specifically, PHMSA officials have started developing a training program  for natural gas storage inspectors. They also have established a strategic  goal and begun developing a training performance goal for their natural  gas safety enforcement program. However, they have not yet followed  certain leading practices for strategic planning\u2014the systematic process  for defining desired outcomes and translating this vision into goals and  steps to achieve them. For example, PHMSA\u2019s training performance goal  does not define the level of performance officials hope to achieve or  address all core program activities, such as conducting effective  inspections. In addition, PHMSA has not used baseline data or budgetary  information to inform the development of performance goals. PHMSA  officials explained that they are still developing performance goals for  their new program and collecting relevant data."], "subsections": [{"section_title": "PHMSA Has Taken Steps to Establish a Natural Gas Storage Safety Enforcement Program", "paragraphs": ["To enforce the agency\u2019s safety standards, PHMSA officials have taken a  variety of steps to establish a safety enforcement program for natural gas  storage sites by January of 2018. For example, PHMSA officials have  started developing a training program for natural gas storage inspectors.  They have identified learning objectives for the program and have begun  developing learning materials. According to PHMSA officials, developing  a training program for inspectors is central to safety enforcement efforts,  in part because PHMSA has a limited number of staff members with  expertise in natural gas storage. For example, PHMSA had 10 employees  with natural gas storage experience as of August 2017, according to  PHMSA officials. In addition, PHMSA officials have completed eight  safety assessments of selected natural gas storage operators to  document the initial condition of gas storage sites and safety practices.  According to PHMSA officials, their methodology for conducting these  assessments involved visiting a cross section of operators, including  operators of interstate and intrastate sites and multiple types of facilities.", "PHMSA officials also have developed workload and budget estimates for  their new program, according to PHMSA documentation. In recent years,  the Office of Pipeline Safety, which will be responsible for natural gas  storage inspections in addition to pipeline inspections and other activities,  has initiated about 1,100 inspections annually, according to PHMSA data.  When natural gas storage site inspections begin, PHMSA officials  estimate that the Office of Pipeline Safety\u2019s inspection workload could  increase 14 percent due to their new responsibilities. They reached this  estimate by dividing the 203 new natural gas storage units they anticipate  needing to inspect by the total number of inspection units they currently  inspect. To meet the demands of this increased workload, officials  estimate that PHMSA will need $2 million annually to fund 6 new  inspector positions, training, travel, and other expenses associated with  managing the natural gas storage safety enforcement program. With this  number of inspectors, PHMSA officials believe that they can inspect all  203 natural gas storage units within about 4 years. Because PHMSA  officials expect that many states that have previously conducted similar  inspections will help PHMSA conduct inspections, officials also estimate  that PHMSA will need to provide $6 million annually to states. However,  PHMSA officials noted that their estimates may change as they gain  additional information about the program. Specifically, after PHMSA  begins initial inspections in early 2018, officials will have more information  about the time it takes to inspect natural gas storage sites. By the end of  fiscal year 2018, they will have even more information with which to  develop more precise workload and budget estimates for the program,  according to these officials.", "To ensure that the states assisting PHMSA are fully qualified to enforce  the federal government\u2019s minimum safety standards, PHMSA officials  have begun developing a state certification program. This has involved  drafting certification documents and contacting potential state partners.  As of June 2017, PHMSA officials expected all states with intrastate  natural gas storage sites to pursue certification. However, officials  explained that they may not know until the end of fiscal year 2017 exactly  how many states will pursue certification. If some states choose not to  pursue certification or are not approved by PHMSA, PHMSA will be  responsible for inspecting natural gas storage sites in those states, which  could increase its inspection workload beyond the level it has estimated.  For states that choose certification and are approved, PHMSA plans to  use grants to fund up to 80 percent of state inspection costs. However,  PHMSA officials told us that PHMSA may not be able to fund states to  this level, depending on the approved costs requested by all states and  levels of funding PHMSA receives through the appropriations process. In  either circumstance, PHMSA\u2019s grant program for certified state partners  leverages state dollars, since it requires states to fund the portions of their  programs not covered by grant funding."], "subsections": []}, {"section_title": "PHMSA Has Established a Strategic Goal but Has Not Yet Followed Certain Leading Practices of Strategic Planning", "paragraphs": ["PHMSA also has established a strategic goal for its natural gas safety  enforcement program, but it has not yet followed other leading practices  for strategic planning. Specifically, PHMSA officials told us that their  new enforcement program will be guided by one of PHMSA\u2019s existing  strategic goals\u2014to promote continuous improvement in safety  performance. PHMSA officials also told us that they are developing a  performance goal for their training program and that other performance  goals are still being identified and developed. The Government  Performance and Results Act of 1993 (GPRA), as amended\u2014which  seeks to improve the effectiveness of federal programs by establishing a  system for agencies to set goals for program performance and measure  results\u2014defines a performance goal as the target level of performance  expressed as a tangible, measurable objective against which actual  achievement is to be compared. For example, in the area of weather  forecasting, we have previously reported that such a goal could be to  increase the lead time for predicting tornadoes from 7 to 9 minutes.", "PHMSA has not yet followed certain leading practices for strategic  planning, as it has not: (1) defined the level of performance or fully  addressed core program activities with its existing performance goal; or  (2) used baseline data and other data or budget information to inform and  refine performance goals."], "subsections": [{"section_title": "Defining Level of Performance and Addressing All Core Program Activities", "paragraphs": ["Our prior work has identified several leading practices for strategic  planning that PHMSA has not yet followed, such as setting goals that  define a certain level of performance and address all core program  activities. Some of this prior work has examined requirements under  GPRA and the GPRA Modernization Act of 2010. GPRA, which was  significantly enhanced by the GPRA Modernization Act of 2010, requires  agencies to develop annual performance plans that, among other things,  establish performance goals to define the level of performance to be  achieved. We have previously reported that requirements under these  acts can serve as leading practices for planning at lower levels of the  agency. As one of several operating administrations within DOT,  PHMSA would be considered a lower level of the agency. In addition, we  have found that a key attribute of successful performance measures is  that they reflect the full range of core program activities. Moreover, we  have found that a key practice for helping federal agencies enhance and  sustain collaborative efforts with other agencies is to define and articulate  a common outcome or purpose they are seeking to achieve.", "While PHMSA has taken some steps to plan strategically for its new  program, it has not followed certain leading practices of strategic  planning. For example, PHMSA has developed a performance goal for its training program, and agency officials told us that they plan to review the  number of students who pass their gas storage training course as a  measure of the agency\u2019s training performance goal. However, with this  measure PHMSA has not defined the level of performance to be  achieved. An example of a measure of the agency\u2019s training performance  goal that defines the level of performance could be one that specifies that  a certain percentage of students will pass the course on their first attempt.  In addition, PHMSA has not yet developed performance goals for other  core program activities, such as conducting effective inspections.  According to PHMSA subject-matter experts, one of the critical tasks  associated with inspecting a gas storage site will be determining whether  the operator has met all well monitoring requirements specified in API\u2019s  Recommended Practice 1171, which addresses the functional integrity of  gas storage in depleted hydrocarbon reservoirs and aquifers. An  example of a performance goal that could indicate whether PHMSA\u2019s  inspections are effective could be to annually reduce, by a certain  percentage, the number of operators that do not meet the well monitoring  requirements of Recommended Practice 1171. Another critical task  identified by PHMSA\u2019s subject-matter experts will be to determine  whether the operator has followed its own risk management plan for gas  storage sites\u2014another area where PHMSA has not developed a  performance goal. An example of a performance goal in this area could  be to annually reduce, by a certain percentage, the number of gas  storage operators that have not followed their own risk management  plans.", "PHMSA officials acknowledged that their performance goals are not yet  complete and said that they would strive to refine performance goals as  they continue developing the program; however, PHMSA has not yet  done so. As they do so, ensuring that their performance goals define the  level of performance to be achieved and address core program activities  could help them ensure that they effectively track progress toward their  strategic goal and make adjustments to activities and resources, if  needed, to better meet the goal. In addition, because PHMSA plans to  leverage state resources to oversee gas storage sites, the success of its  gas storage program will depend, in part, on collaboration with state  partners. Establishing performance goals for the program could help  PHMSA coordinate efforts and resources with the states that are  expected to assist PHMSA with inspections."], "subsections": []}, {"section_title": "Using Baseline Data to Inform Performance Goals", "paragraphs": ["Another leading practice of strategic planning involves using baseline and  trend data to inform performance goals, according to our prior work.  Baseline data\u2014data collected about operations before oversight begins\u2014 can serve as a basis for comparison with subsequently collected trend  data. We have previously reported that baseline and trend data can  provide a context for drawing conclusions about whether performance  goals are reasonable and appropriate. For example, we found in 1999  that the Department of Education was able to use such information to  gauge the appropriateness of its goals for reducing the default rate on  student loans provided through the Federal Family Education Loan  program. The program\u2019s annual plan provided baseline and trend data  for the default rate, which indicated that the rate declined from 22.4  percent to 10.4 percent from fiscal years 1990 to 1995. According to  Education\u2019s analysis of the data, future declines were likely to be steady  but smaller because of the large number of high-default schools that had  already been eliminated from the program. For fiscal year 1999,  Education set a goal of reducing the default rate to 10.1 percent of  borrowers.", "For PHMSA\u2019s natural gas storage program, PHMSA will have access to  baseline data\u2014and eventually trend data\u2014over time that could inform the  development of performance goals and subsequent refinement of them.  PHMSA officials told us that they have not yet used such data to inform  the development of their performance goal because they are still in the  process of collecting relevant data. For example, officials told us that,  over time, they will have access to data about operators\u2019 facilities,  functional integrity work, and operations and maintenance procedures  starting in early 2018. These data will likely include the number of wells  that have leaked and been repaired during the last calendar year. As  specified in PHMSA\u2019s minimum safety standards, PHMSA also plans to  collect safety and incident reports to track gas releases, deaths, and  injuries resulting in hospitalizations. In addition, in August of 2017,  PHMSA officials completed eight industry safety assessments, which  involved visiting natural gas storage sites and studying sites\u2019 safety  procedures. As previously mentioned, these assessments aimed, in part,  to document the initial condition of gas storage sites and safety practices.  Agency officials told us that they had planned to use the data they collect  from these assessments to inform the agency\u2019s state certification and  inspection programs. They did not specify whether or how they intend to  use these data to inform their performance goals. As PHMSA continues  developing performance goals for its natural gas storage program, using  available data to inform and refine these goals could help the agency  ensure that its goals are reasonable and appropriate."], "subsections": []}, {"section_title": "Using Budgetary Information to Inform Performance Goals", "paragraphs": ["We also have reported that comparing information about budgetary  resources with information about performance goals can help  decisionmakers determine whether their performance goals are  achievable. Specifically, we have reported that decisionmakers can better  compare planned levels of accomplishment with the resources requested  if they have information about how funding levels are expected to achieve  a discrete set of performance goals. For example, we reported in a best  practices report about strategic planning that the Internal Revenue  Service (IRS) included in its performance plan for 1999 the budget  amounts that corresponded with past performance levels. Table 2  illustrates how IRS used this information to inform proposed performance  levels for the upcoming year. Moreover, GPRA requires agencies to  prepare an annual performance plan covering each program activity set  forth in the budget and, among other things, describe the resources  required to meet performance goals. As previously mentioned, we have  found that GPRA requirements can serve as leading practices for  planning at lower levels of the agency.", "Assessing whether the new program\u2019s performance goals are achievable  given budgetary resources is important at a time when PHMSA officials  are managing other new resources and responsibilities. For example, in  addition to requiring DOT to establish minimum safety standards for  natural gas storage sites, the PIPES Act of 2016 also requires DOT to  update minimum safety standards for small-scale liquefied natural gas  pipeline facilities. To carry out its responsibilities, PHMSA has received  additional resources in recent years. As shown in figure 3, PHMSA\u2019s  Pipeline Safety Program has seen its total budgetary resources available  increase from about $95 million in fiscal year 2007 to about $175 million  in fiscal year 2016. In addition, the Consolidated Appropriations Act for  fiscal year 2017 included a provision allowing for the obligation of up to  $8 million from fees collected in fiscal year 2017 from operators for  PHMSA\u2019s natural gas storage program. These fees will be deposited in  an Underground Natural Gas Storage Facility Safety account within  PHMSA\u2019s Pipeline Safety Fund and will be added to the Pipeline Safety  Program\u2019s total budgetary resources available for fiscal year 2017.", "PHMSA is not yet in a position to use budget information to inform or  refine performance goals for its natural gas storage program because  PHMSA officials are still developing these goals and PHMSA lacks key  data, such as data on the time it takes\u2014and therefore the budgetary  resources required\u2014to inspect natural gas storage sites. As previously  mentioned, PHMSA will begin inspections in early 2018, and officials will  have a better understanding of how long it takes to inspect natural gas  storage sites by the end of fiscal year 2018. As PHMSA officials continue  developing performance goals and finish collecting relevant data, using  information about budgetary resources to inform and refine these goals  may help PHMSA ensure that its goals are achievable."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Natural gas storage sites are key elements of our nation\u2019s energy system,  helping ensure that natural gas is available when demand peaks. As  evidenced by the large-scale leak of natural gas outside Los Angeles that  started in 2015 and extended into 2016, leaks from these sites can cause  economic disruptions and environmental damage. These sites recently  became subject to national safety standards, which are subject to further  revision.", "PHMSA has taken a variety of steps to meet its new responsibilities for  overseeing natural gas storage sites, such as developing a training  program for inspectors and a performance goal for training. However,  PHMSA has not yet followed certain leading practices of strategic  planning in starting PHMSA\u2019s new safety enforcement program. For  example, PHMSA\u2019s only current performance goal does not define the  level of performance officials are working to achieve, and PHMSA does  not currently have goals that address other core program activities, such  as conducting effective inspections. PHMSA also has not yet used the  baseline data it is collecting to develop its performance goals. PHMSA  officials explained that they are still developing performance goals for  their new program and collecting data. As the agency continues to  develop these goals, ensuring that performance goals define the level of  performance and address all core program activities could help the  agency better track progress toward its strategic goal and adjust activities  and resources, if needed, to better meet the goal. Using baseline data to  develop these goals could help PHMSA ensure that its goals are  reasonable and appropriate. Finally, once PHMSA finalizes performance  goals for the program and collects relevant data over time as well as  budgetary information, using these data and information when available  to inform and refine performance goals may help PHMSA ensure that its  goals are achievable."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to PHMSA.", "The Administrator of PHMSA should ensure that PHMSA defines levels of  performance, addresses core program activities, and uses baseline data  as it continues developing performance goals for its natural gas storage  program. (Recommendation 1)", "The Administrator of PHMSA should ensure that PHMSA uses other data  and information about budgetary resources as they become available to  inform and refine its performance goals. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOT for review and comment. In  written comments, DOT concurred with the report\u2019s recommendations  and provided additional information on steps they are taking or plan to  take as part of their oversight of natural gas storage sites. In addition,  DOT stated that it would provide a detailed response to each  recommendation within 60 days of our final report\u2019s issuance. The  complete comment letter is reproduced in appendix III.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Transportation,  and other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or members of your staff have any questions about this report,  please contact us at (202) 512-3841, gomezj@gao.gov, or  ruscof@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in   appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we examine (1) the status of the Pipeline and Hazardous  Materials Administration\u2019s (PHMSA) efforts to implement the requirement  under the Protecting Our Infrastructure of Pipelines and Enhancing Safety  (PIPES) Act of 2016 to issue minimum safety standards for natural gas  storage sites, and (2) the extent to which PHMSA has planned  strategically to enforce its safety standards for natural gas storage sites.", "To examine the status of PHMSA\u2019s efforts to implement the requirement  to issue minimum safety standards for natural gas storage sites, we  examined laws, regulations, and agency documents that describe the  authority, time frames, and enforcement goals for implementing new  federal rules under the PIPES Act. Specifically, we reviewed the PIPES  Act to identify requirements that the act directed to the Department of  Transportation (DOT), or PHMSA. To understand PHMSA\u2019s  implementation of DOT\u2019s requirements under the act, we reviewed  PHMSA notices and regulations as presented in the Federal Register and  discussed the information in these documents with agency officials. We  also reviewed guidance documents on the PHMSA website intended to  provide natural gas storage operators with more detailed guidance and  discussed the documents with agency officials. We reviewed an October  2016 report, mandated by the act, which was issued by a task force led  by the Department of Energy (DOE). We also obtained and reviewed  copies of recommended practices issued by the American Petroleum  Institute (API), which issues industry consensus standards for the oil and  gas industry, and interviewed API officials to better understand these  recommended practices.", "We also interviewed agency officials. Specifically, we interviewed officials  with PHMSA, the Federal Energy Regulatory Commission, the Bureau of  Land Management within the Department of the Interior, and the  Environmental Protection Agency, to understand how they participated in  the task force and to what degree they have responsibilities related to  natural gas storage safety enforcement.", "In addition, we obtained data from PHMSA and DOE\u2019s Energy  Information Administration about natural gas storage sites to gain an  estimate of the number and regulatory status of various natural gas  storage sites, their locations, and other details. We assessed the  reliability of these data by (1) corroborating these data with other sources,  (2) reviewing existing information about the data and the system that  produced them, and (3) interviewing agency officials knowledgeable  about the data. We determined that these data were sufficiently reliable  for the purposes of this report. We also interviewed agency officials at  DOT and PHMSA, including discussing agency requirements under the  PIPES Act and how PHMSA planned to implement its responsibilities. To  better understand the operation and control of natural gas storage sites,  we conducted a site visit to the Aliso Canyon Gas Storage Facility in  California and spoke to officials representing the operator of the site, and  state government officials responsible for safety enforcement at the site.", "To examine the extent to which PHMSA has planned strategically to  enforce safety standards for natural gas storage sites, we compared  information we gathered from PHMSA officials and documents with  leading practices for strategic planning identified by our prior work, which  were identified by examining requirements under the Government  Performance and Results Act (GPRA) of 1993. We have previously  reported that requirements under GPRA and the GPRA Modernization  Act of 2010 can serve as leading practices for planning at lower levels of  the agency. We also interviewed PHMSA officials\u2014including budgetary,  policy, and programmatic officials\u2014about their planning efforts for the  natural gas storage program. In addition, we reviewed regulations and  documents that reflect agency planning efforts, including: PHMSA\u2019s  interim final rule on the safety of underground natural gas storage  facilities; agency guidance, such as frequently asked questions for  operators of natural gas storage sites; and agency planning documents,  such as the Training Implementation Plan for Natural Gas Underground  Storage Regulation Training, PHMSA 2021 Business Plan - 2017, and  workload and budget estimates for the program. Using information  obtained from these sources about PHMSA\u2019s efforts to plan for its natural  gas storage program, we compared PHMSA\u2019s planning efforts with  leading practices for strategic planning identified in our prior reports.", "We conducted this performance audit from November 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Number of Active Natural Gas Storage Sites as of January 2016 by State and Jurisdiction", "paragraphs": ["Table 3 identifies the 415 natural gas storage sites active as of January  2016, by state and jurisdiction. The number of natural gas storage sites  that fall under federal or state jurisdiction in each state is presented, along  with the total storage capacity of the sites. A natural gas storage site is  considered to be under federal jurisdiction\u2014also known as \u201cinterstate\u201d\u2014if  the site is linked to a federally-regulated interstate pipeline permitted by  the Federal Energy Regulatory Commission. Otherwise, sites are under  state jurisdiction.", "The sites represented in this table were compiled by the Department of  Energy\u2019s Energy Information Administration in 2016, and provided by the  Department of Transportation\u2019s Pipeline and Hazardous Materials Safety  Administration (PHMSA). EIA collects these data using a survey of  natural gas storage site operators. According to a PHMSA document,  PHMSA used these data to, among other things, identify natural gas  storage sites and calculate the amount of user fees that it charged  operators in 2017 (the first year PHMSA collected these user fees) to  fund its inspection and enforcement programs. PHMSA plans to update  its information about natural gas storage sites using data submitted by  operators, as required by its interim final rule. This rule requires natural  gas storage site operators to submit these data on or before July 18,  2017. PHMSA plans to require operators to annually submit this  information using a form. According to PHMSA officials, the Office of  Management and Budget recently approved this form. As a result,  PHMSA will begin collecting data that reflect calendar year 2017 by its  due date of March 15, 2018. PHMSA officials told us that it will take about  5 to 6 months to develop a website that will allow PHMSA to efficiently  collect these data from operators for all sites this year and in future years."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individuals named above, Mike Hix and Jon Ludwigson  (Assistant Directors), Richard Burkard, Lee Carroll, Nirmal Chaudhary,  Ellen Fried, Cindy Gilbert, Carol Henn, Mary Koenen, Jessica Lemke,  Ben Licht, Greg Marchand, John Mingus, Katrina Pekar-Carpenter, Sara  Sullivan, and Kiki Theodoropoulos made important contributions to this  report."], "subsections": []}]}], "fastfact": ["Natural gas is stored underground, often in old oil fields near cities. This proximity helps meet peak demand quickly but also makes leaks more problematic. One near Los Angeles in 2015 led 8,000 families to leave their homes for weeks.", "A 2016 law called for minimum federal safety standards for storage sites, and the Department of Transportation has issued interim standards while working on final ones.", "The department's efforts have not yet followed some of our leading practices for strategic planning. For example, it has not set a goal to measure improved safety at storage sites. We recommended steps to improve planning efforts."]}
{"id": "GAO-18-231", "url": "https://www.gao.gov/products/GAO-18-231", "title": "Military Bases: DOD Should Address Challenges with Communication and Mission Changes to Improve Future Base Realignment and Closure Rounds", "published_date": "2018-03-30T00:00:00", "released_date": "2018-04-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The 2005 BRAC round was the costliest and most complex BRAC round ever. In contrast to prior rounds, which focused on the goal of reducing excess infrastructure, DOD's goals for BRAC 2005 also included transforming the military and fostering joint activities.", "GAO was asked to review DOD's performance outcomes from BRAC 2005. This report examines the extent to which DOD has (1) measured the achievement of its goals for BRAC 2005 and (2) implemented prior GAO recommendations on BRAC 2005 and addressed any additional challenges to improve performance for any future BRAC round. GAO reviewed relevant documents and guidance; met with a nongeneralizable selection of 26 military organizations and 12 communities involved with BRAC 2005; and interviewed DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) components generally did not measure the achievement of goals\u2014reducing excess infrastructure, transforming the military, and promoting joint activities among the military departments\u2014for the 2005 Base Realignment and Closure (BRAC) round. In March 2013, GAO recommended that, for any future BRAC round, DOD identify measures of effectiveness and develop a plan to demonstrate achieved results. DOD did not concur and stated that no action is expected. Without a requirement for DOD to identify measures of effectiveness and track achievement of its goals, Congress will not have full visibility over the expected outcomes or achievements of any future BRAC rounds.", "Of the 65 recommendations GAO has made to help DOD address challenges it faced in BRAC 2005, as of October 2017 DOD had implemented 33 of them (with 18 pending DOD action).", "DOD has not addressed challenges associated with communication and monitoring mission-related changes. Specifically:", "Some military organizations stated that they could not communicate to BRAC decision makers information outside of the data-collection process because DOD did not establish clear and consistent communications. For example, Army officials at Fort Knox, Kentucky, stated that there was no way to communicate that excess facilities were ill-suited for relocating the Human Resources Command and moved forward without full consideration of alternatives for using better-suited excess space at other locations. As a result, DOD spent about $55 million more than estimated to construct a new building at Fort Knox.", "DOD implemented BRAC recommendations that affected units' ability to carry out their missions because DOD lacked specific guidance to monitor and report on mission-related changes. For example, DOD spent about $27.7 million on a landing field for a Marine Corps F-35 training squadron at Eglin Air Force Base, Florida, even though it had been previously decided to station the F-35 aircraft and personnel at another base.", "By addressing its communication and monitoring challenges, DOD could better inform decision making, better ensure that its infrastructure meets the need of its force structure, and better position itself to achieve its goals in any future BRAC round."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider requiring DOD to identify and track appropriate measures of effectiveness in any future BRAC round. Also, GAO recommends that in any future BRAC round DOD (1) take steps to establish clear and consistent communications while collecting data and (2) provide specific guidance to the military departments to monitor and report on mission-related changes during implementation. GAO also continues to believe that DOD should fully implement GAO's prior recommendations on BRAC 2005. DOD objected to Congress requiring DOD to identify and track performance measures, but GAO continues to believe this to be an appropriate action for the reasons discussed in the report. Lastly, DOD concurred with the two recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense\u2019s (DOD) 2005 round of Base Realignment  and Closure (BRAC) was the largest, costliest, and most complex of the  five BRAC rounds since 1988. In contrast to prior rounds, which focused  on the goal of reducing excess infrastructure, DOD\u2019s goals for BRAC  2005 also included transforming the military and fostering joint activities  across the military departments. In the department\u2019s BRAC 2005 report,  the Secretary of Defense stated that BRAC 2005 provided DOD a unique  opportunity to address new challenges posed by international terrorism,  the proliferation of weapons of mass destruction, ungoverned areas,  rogue states, and nonstate actors. By implementing the 198  recommendations approved by the 2005 BRAC Commission, DOD closed  23 major bases, realigned 24 major bases, combined 26 installations into  12 joint bases, and eliminated about 12,000 civilian positions. After  implementing these BRAC 2005 recommendations, in 2017 DOD  estimated that it continued to have significant excess capacity remaining.  To address remaining excess capacity, between 2013 and 2017 DOD  requested additional BRAC rounds and, in February 2018, stated that it  would work with Congress to find common areas where reforms and  changes could be made. Congress has not authorized additional BRAC  rounds to date.", "Since 2005, we have issued more than 40 reports and testimonies on  BRAC 2005 planning, implementation, costs, and savings; this work  highlights information DOD can use to improve its process for developing  and implementing BRAC recommendations. For example, in our March  2013 report on lessons learned from the BRAC 2005 round, we found that  DOD\u2019s process for providing the BRAC Commission with cost and  savings estimates was hindered by underestimating requirements.  Additionally, we found that DOD did not fully anticipate information  technology requirements for many of the BRAC recommendations. Our  report made several recommendations designed to improve any future  BRAC rounds and suggested legislative changes that Congress should  consider to enhance its oversight of any future BRAC rounds. Of the 10  recommendations in the March 2013 report, DOD generally concurred  with 5. According to DOD officials, DOD has not taken any actions  because these recommendations can only be implemented if another  round of BRAC is conducted.", "Since 1997, we have designated DOD infrastructure as a high-risk area,  noting that reducing the cost of DOD\u2019s excess infrastructure activities is  critical to the department making use of scarce resources and maintaining  high levels of military capabilities. In GAO\u2019s 2017 high-risk update, we  reported on DOD\u2019s need for improvement in reducing excess  infrastructure, which included disposing of and consolidating facilities  under the BRAC process and improving how DOD uses its facilities. We  noted that DOD has demonstrated leadership by requesting more rounds  of BRAC\u2014its primary method for reducing excess infrastructure.  However, we stated that DOD needs to take additional action on some of  our recommendations related to implementing any future BRAC rounds,  such as improving DOD\u2019s ability to estimate potential liabilities and  savings to achieve desired outcomes. The Related GAO Products page  at the end of this report provides a list of our BRAC reports and  testimonies.", "We were asked to review DOD\u2019s performance outcomes from BRAC  2005. In this report, we assess the extent that DOD (1) measured the  achievement of its goals for reducing excess infrastructure, transforming  the military, and promoting jointness for BRAC 2005 and (2) implemented  prior GAO recommendations and addressed any additional challenges  faced in BRAC 2005 to improve performance for any future BRAC round.", "In addition, we describe how current economic indicators for the  communities surrounding the 23 closed bases in BRAC 2005 compare to  national averages; we report on this issue in appendix I.", "To conduct our work, we reviewed the 2005 BRAC Commission\u2019s  September 2005 report to the President, policy memorandums and  guidance on conducting BRAC 2005, and other relevant documentation  such as supporting BRAC analyses prepared by the military services or  other units related to the development of BRAC 2005 recommendations.  We interviewed officials with the Office of the Assistant Secretary of  Defense for Energy, Installations, and Environment (ASD )\u2014the  element within the Office of the Secretary of Defense that oversees  BRAC; the Army; the Navy; the Air Force; the Marine Corps; the U.S.  Army Reserve Command; and the National Guard Bureau. We also  conducted site visits to Connecticut, Indiana, Kentucky, Massachusetts,  North Carolina, Rhode Island, and South Carolina. We met with 26  military units or organizations, such as Air Force wings and Army and  Navy installations\u2019 Departments of Public Works, and 12 communities  involved with BRAC 2005 recommendations. These interviews provide  examples of any challenges faced by each individual party, but  information obtained is not generalizable to all parties involved in the  BRAC process. We selected locations for site visits based on ensuring  geographic diversity and a mix of types of BRAC recommendations  (closures, transformation, or jointness), and having at least one  installation from or community associated with each military department.", "To assess the extent that DOD measured the achievement of goals for  reducing excess infrastructure, transforming the military, and promoting  jointness for BRAC 2005, we met with officials to discuss measurement of  goals and requested any related documentation. We compared DOD\u2019s  efforts to Standards for Internal Control in the Federal Government, which  emphasizes that an agency\u2019s management should track major agency  achievements and compare these to the agencies\u2019 plans, goals, and  objectives. To calculate the excess infrastructure disposed of as a result  of BRAC 2005, we reviewed the square footage and plant replacement  value data from DOD\u2019s Cost of Base Realignment Actions model.  However, DOD\u2019s data were incomplete, and we determined they were not  sufficiently reliable to conduct this calculation, as discussed later in this  report.", "To assess the extent that DOD implemented prior GAO recommendations  on BRAC 2005 and addressed any additional challenges faced in BRAC  2005 to improve performance for any future BRAC round, we reviewed  our prior reports and testimonies to identify recommendations made. We  then identified whether DOD implemented recommendations we made by  discussing the status of recommendations with agency officials and  obtaining copies of agency documents supporting the recommendations\u2019  implementation. We also met with officials to identify what additional  challenges they faced from BRAC 2005 and what opportunities exist to  improve any future BRAC round. For the purposes of this report, we used  DOD documentation and interviews to identify and divide our assessment  of the BRAC 2005 process into three phases: the analysis phase from  2001 to 2005, the implementation phase from 2005 to 2011, and the  disposal phase from 2005 to the present. For the analysis phase, we  reviewed available military departments\u2019 lessons-learned documents. For  the implementation phase, we reviewed business plans supporting the  implementation of the BRAC 2005 recommendations and other applicable  documentation, such as a workforce planning study and an environmental  impact statement affecting the implementation of some  recommendations. For the disposal phase, we analyzed DOD\u2019s caretaker  costs for closed bases that it has not yet transferred. We compared  information about challenges in the analysis, implementation, and  disposal phases to criteria for communications, monitoring, and risk  assessments in Standards for Internal Control in the Federal  Government.", "To describe how current economic indicators for the communities  surrounding the 23 closed bases in BRAC 2005 compare to national  averages in appendix I, we collected and analyzed unemployment data  and per capita income growth. Specifically, we collected and analyzed  calendar year 2016 unemployment data from the U.S. Bureau of Labor  Statistics and calendar year 2006 through 2016 per capita income growth  data, along with data on inflation, from the U.S. Bureau of Economic  Analysis, which we used to calculate annualized real per capita income  growth rates. Calendar year 2016 was the most current year for which  local area data were available from these databases. We assessed the  reliability of these data by reviewing U.S. Bureau of Labor Statistics and  U.S. Bureau of Economic Analysis documentation regarding the methods  used by each agency in producing their data and found the data to be  sufficiently reliable to report the 2016 annual unemployment rate and  2006 through 2016 real per capita income growth. Appendix II provides  further information on our scope and methodology.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "BRAC 2005 Goals", "paragraphs": ["The Secretary of Defense established goals for BRAC 2005 in a  November 2002 memorandum issuing initial guidance for BRAC 2005  and again in a March 2004 report to Congress certifying the need for a  BRAC round. Specifically, the Secretary reported that the BRAC 2005  round would be used to (1) dispose of excess facilities, (2) promote force  transformation, and (3) enhance jointness. Although DOD did not  specifically define these three goals, we have generally described them in  prior reports as follows.", "Dispose of excess facilities: Eliminating unneeded infrastructure to  achieve savings.", "Promote force transformation: Correlating base infrastructure to the  force structure and defense strategy. In the late 1990s, DOD  embarked on a major effort to transform its business processes,  human capital, and military capabilities. Transformation is also seen  as a process intended to provide continuous improvements to military  capabilities. For example, the Army used the BRAC process to  transform the Army\u2019s force structure from an organization based on  divisions to more rapidly deployable, brigade-based units and to  accommodate rebasing of overseas units.", "Enhance jointness: Improving joint utilization to meet current and  future threats. According to DOD, \u201cjoint\u201d connotes activities,  operations, and organizations, among others, in which elements of  two or more military departments participate."], "subsections": []}, {"section_title": "BRAC Phases", "paragraphs": ["Congress established clear time frames in the BRAC statute for many of  the milestones involved with base realignments and closures. The BRAC  2005 process took 10 years from authorization through implementation.  Congress authorized the BRAC 2005 round on December 28, 2001. The  BRAC Commission submitted its recommendations to the President in  2005 and the round ended on September 15, 2011\u20146 years from the  date the President submitted his certification of approval of the  recommendations to Congress. The statute allows environmental cleanup  and property caretaker and transfer actions associated with BRAC sites  to exceed the 6-year time limit and does not set a deadline for the  completion of these activities. Figure 1 displays the three phases of the  BRAC 2005 round\u2014analysis, implementation, and disposal\u2014and key  events involving Congress, DOD, and the BRAC Commission.", "During the analysis phase, DOD developed selection criteria, created a  force structure plan and infrastructure inventory, collected and analyzed  data, and proposed recommendations for base realignments and  closures. The BRAC statute authorizing the BRAC 2005 round directed  DOD to propose and adopt selection criteria to develop and evaluate  candidate recommendations, with military value as the primary  consideration. The BRAC statute also required DOD to develop a force  structure plan based on an assessment of probable threats to national  security during a 20-year period beginning with fiscal year 2005. Based  on the statute\u2019s requirements, the selection criteria were adopted as final  in February 2004, and the force structure plan was provided to Congress  in March 2004.", "To help inform its decision-making process during the analysis phase, the  three military departments and the seven joint cross-service groups  collected capacity and military value data that were certified as accurate  by senior leaders. In testimony before the BRAC Commission in May  2005, the Secretary of Defense said that DOD collected approximately 25  million pieces of data as part of the BRAC 2005 process. Given the  extensive volume of requested data, we noted in July 2005 that the data- collection process was lengthy and required significant efforts to help  ensure data accuracy, particularly from joint cross-service groups that  were attempting to obtain common data across multiple military  components. We reported that, in some cases, coordinating data  requests, clarifying questions and answers, controlling database entries,  and other issues led to delays in the data-driven analysis DOD originally  envisioned. As time progressed, however, these groups reported that  they obtained the needed data, for the most part, to inform and support  their scenarios. We ultimately reported that DOD\u2019s process for conducting  its analysis was generally logical, reasoned, and well documented.", "After taking these plans and accompanying analyses into consideration,  the Secretary of Defense was then required to certify whether DOD  should close or realign military installations. The BRAC Commission  assessed DOD\u2019s closure and realignment recommendations for  consistency with the eight selection criteria and DOD\u2019s Force Structure  Plan. Ultimately, the BRAC Commission accepted over 86 percent of  DOD\u2019s proposed internal recommendations; rejected, modified, or added  additional recommendations; and adjusted some costs of BRAC  recommendations."], "subsections": [{"section_title": "Implementation Phase", "paragraphs": ["After the BRAC Commission released its recommendations, and the  recommendations became binding, the implementation phase started.  During this phase, which started on November 9, 2005, and continued to  September 15, 2011 (as required by the statute authorizing BRAC), DOD  took steps to implement the BRAC Commission\u2019s 198 recommendations.  Also during this phase, the military departments were responsible for  completing environmental impact studies to determine how to enact the  BRAC Commission\u2019s relevant recommendations. The military  departments implemented their respective recommendations to close and  realign installations, establish joint bases, and construct new facilities.", "The large number and variety of BRAC actions resulted in DOD requiring  BRAC oversight mechanisms to improve accountability for  implementation. The BRAC 2005 round had more individual actions (813)  than the four prior rounds combined (387). Thus, in the BRAC 2005  round, the Office of the Secretary of Defense for the first time required the  military departments to develop business plans to better inform the Office  of the Secretary of Defense of the status of implementation and financial  details for each of the BRAC 2005 recommendations. These business  plans included: (1) information such as a listing of all actions needed to  implement each recommendation, (2) schedules for personnel relocations  between installations, and (3) updated cost and savings estimates by  DOD based on current information. This approach permitted senior-level  intervention if warranted to ensure completion of the BRAC  recommendations by the statutory completion date."], "subsections": []}, {"section_title": "Disposal Phase", "paragraphs": ["The disposal phase began soon after the BRAC recommendations  became binding and has continued to today. During the disposal phase,  DOD\u2019s policy was to act in an expeditious manner to dispose of closed  properties. Such disposal actions included transferring the property to  other DOD components and federal agencies, homeless-assistance  providers, or local communities for the purposes of job generation, among  other actions. In doing so, DOD has incurred caretaker and environmental  cleanup costs. For example, DOD reported to Congress that, as of  September 2016, the military departments had spent $735 million on  environmental cleanup associated with BRAC 2005 sites, and had $482  million left to spend on BRAC 2005 sites. Overall, the military  departments reported that they had disposed of 59,499 acres and still  needed to dispose of 30,239 acres from BRAC 2005 as of September 30,  2016."], "subsections": []}]}]}, {"section_title": "DOD Components Generally Did Not Measure the Achievement of BRAC 2005 Goals", "paragraphs": ["ASD (EI&E), the military services, and 25 of the 26 military units or  organizations we met with did not measure the achievement of the BRAC  2005 goals\u2014reducing excess infrastructure, transforming the military, and  promoting jointness. Specifically, a senior ASD (EI&E) official stated that  no performance measures existed to evaluate the achievement of goals  and the office did not create baselines to measure performance. Air Force  officials stated that they did not measure the achievement of goals but  that it would have been helpful to have metrics to measure success,  especially as DOD had requested from Congress another BRAC round.  Army officials similarly stated it did not measure the achievement of  goals, noting that measuring excess capacity would have been important  to help DOD get authorization for another BRAC round. Navy and Marine  Corps officials said that they did not track performance measures or  otherwise measure the achievement of the BRAC 2005 goals. Moreover,  25 of the 26 military units or organizations we met with stated that they  did not measure the achievement of BRAC 2005 goals. The one  exception in our selected sample was the command at Joint Base  Charleston, which stated that it measured jointness through common  output or performance-level standards for installation support, as required  for installations affected by the BRAC 2005 recommendation on joint  basing. By measuring jointness, officials were able to identify that the  base met 86 percent of its common output level standards in the second  quarter of fiscal year 2017, and it has identified recommendations to  improve on those standards not met.", "Instead of measuring the achievement of BRAC 2005 goals, officials with  ASD (EI&E) and the military departments stated that they tracked  completion of the BRAC recommendations by the statutory deadline of  September 2011 and measured the cost savings associated with the  recommendations. Senior ASD (EI&E) officials stated that the primary  measure of success was completing the recommendations as detailed by  the implementation actions documented in the business plans. In  addition, officials from the Army, Navy, and Air Force stated that they  measured the savings produced as a result of BRAC 2005. For example,  Army officials stated that closing bases in BRAC 2005 significantly  reduced base operations support costs, such as by eliminating costs for  trash collection, utilities, and information technology services. However,  tracking completion of the recommendations and measuring savings did  not enable the department to determine the success of the BRAC round  in achieving its goals. For example, tracking completion of the  recommendations establishing joint training centers did not give DOD  insight into whether the military departments achieved the jointness goal  by conducting more joint activities or operations. Similarly, measuring  savings did not allow DOD to know whether it achieved the goal of  reducing excess infrastructure, and in reviewing DOD\u2019s data we found  that the department ultimately did not have the needed data to calculate  excess infrastructure disposed of during BRAC 2005. Key practices on  monitoring performance and results highlight the importance of using  performance measures to track an agency\u2019s progress and performance,  and stress that performance measures should include a baseline and  target; should be objective, measurable, and quantifiable; and should  include a time frame. The Standards for Internal Control in the Federal  Government emphasizes that an agency\u2019s management should track  major agency achievements and compare these to the agencies\u2019 plans,  goals, and objectives.", "During BRAC 2005, DOD was not required to identify appropriate  measures of effectiveness and track achievement of its goals. As a result,  in March 2013, we recommended that, in the event of any future BRAC  round, DOD identify appropriate measures of effectiveness and develop a  plan to demonstrate the extent to which the department achieved the  results intended from the implementation of the BRAC round. DOD did  not concur with our recommendation, stating that military value should be  the key driver for BRAC. However, we noted at the time that our  recommendation does not undermine DOD\u2019s reliance on military value as  the primary selection criteria for DOD\u2019s base realignment and closure  candidate recommendations, and DOD can still prioritize military value  while identifying measures that help determine whether DOD achieved  the military value that it seeks. As of October 2017, DOD officials stated  that no action to implement our recommendation is expected.", "We continue to believe that, if any future BRAC round is authorized, the  department would benefit from measuring its achievement of goals.  Further, this information would assist Congress in assessing the  outcomes of any future BRAC rounds. Given that DOD did not concur  with our 2013 recommendation and does not plan to act upon it, DOD is  not currently required to identify appropriate measures of effectiveness  and track achievement of its BRAC goals in future rounds. Without a  requirement to identify and measure the achievement of goals for a  BRAC round, DOD cannot demonstrate to Congress whether the  implementation of any future BRAC round will improve efficiency and  effectiveness or otherwise have the effect that the department says its  proposed recommendations will achieve. If Congress would like to  increase its oversight for any future BRAC round, requiring DOD to  identify appropriate measures of effectiveness and track achievement of  its goals would provide it with improved visibility over the expected  outcomes."], "subsections": []}, {"section_title": "DOD Has Addressed Many but Not All Prior GAO Recommendations on BRAC 2005 and Has Further Opportunities to Improve Communications and Monitoring in Any Future BRAC Round", "paragraphs": ["DOD has implemented 33 of the 65 prior recommendations that we  identified in our work since 2004, and it has the opportunity to address  additional challenges regarding communications and monitoring to  improve any future BRAC round. Specifically, for the BRAC analysis  phase, DOD implemented 1 of 12 recommendations, and it has agreed to  implement another 7 recommendations should Congress authorize any  future BRAC round. Additionally, we found that DOD can improve its  communications during the analysis phase. For the implementation  phase, DOD implemented 28 of 39 recommendations, and it has agreed  to implement another 3 recommendations. Further, we found it can  improve monitoring of mission-related changes. For the disposal phase,  DOD implemented 4 of 14 recommendations, and it has agreed to  implement another 8 recommendations."], "subsections": [{"section_title": "DOD Plans to Address Some Prior GAO Recommendations about BRAC\u2019s Analysis Phase, but Can Improve Communication during Data Collection", "paragraphs": [], "subsections": [{"section_title": "DOD Plans to Address Some Prior GAO Recommendations If Congress Authorizes a Future BRAC Round", "paragraphs": ["Of the 12 recommendations we made from 2004 to 2016 to help DOD  improve the BRAC analysis phase, DOD generally agreed with 6 of them  and, as of October 2017, DOD had implemented 1. Specifically, DOD  implemented our May 2004 recommendation to provide a more detailed  discussion on assumptions used in its May 2005 report on BRAC  recommendations. In addition, DOD stated it would address seven  recommendations\u2014the other five recommendations it agreed with and  two it had previously nonconcurred with\u2014affecting BRAC\u2019s analysis  phase in the event of any future BRAC round. These recommendations  included better estimating information technology costs and improving  ways of describing and entering cost data. DOD reported that the  department is awaiting authorization of a future BRAC round prior to  implementing these recommendations. Appendix III provides more  information on our recommendations, DOD\u2019s response, and DOD\u2019s  actions to date concerning the BRAC analysis phase."], "subsections": []}, {"section_title": "DOD Officials Cited Challenges with Communications during Data Collection", "paragraphs": ["DOD officials cited an additional challenge with communications during  the BRAC 2005 analysis phase. Specifically, some military organizations  we met with stated that they could not communicate to BRAC decision  makers information outside of the data-collection process, which  ultimately hindered analysis. For example:", "Officials from the Army Human Resources Command in Fort Knox,  Kentucky, said that facilities data submitted during the data-collection  process did not convey a complete picture of excess capacity at the  installation, and officials at Fort Knox were unable to share the  appropriate context or details because nondisclosure agreements  prevented communication. Specifically, they stated that the data  showed an overall estimate of Fort Knox\u2019s excess capacity, but the  data did not detail that the excess was not contiguous but rather  based on space at 40 buildings spread throughout the installation.  The officials stated that there was no way to communicate to decision  makers during the data collection process that the facilities were ill- suited for relocating the Human Resources Command and would  require significant renovation costs to host the command\u2019s information  technology infrastructure. The officials said that, because the needed  details on the facility data were not communicated, the relocation  moved forward without full consideration of alternatives for using  better-suited excess space at other locations that would not require  significant costs to renovate. As a result, the Army ultimately  constructed a new headquarters building for the Human Resources  Command at Fort Knox and DOD spent approximately $55 million  more than estimated to complete this action.", "Officials at the Naval Consolidated Brig Charleston, South Carolina,  told us that the lack of communication outside of the data-collection  process resulted in decision makers not taking into account declining  numbers of prisoners, leading to the construction of a new, oversized  building in which to house prisoners. The officials said that the  decision makers analyzing the facilities data did not consider the  current correctional population; rather, the decision makers  considered a correctional model based on the type of military fielded  in World War II and the Korean and Vietnam wars\u2014a force comprised  of conscripted personnel that served longer tours and had higher  correctional needs. Further, the officials said the decision makers did  not consider that, in the 2000 to 2005 period, DOD increased the use  of administrative separations from military service rather than  incarcerate service members convicted of offenses, such as drug- related crimes or unauthorized absence, further reducing correctional  needs. The officials said they did not have a mechanism to  communicate this information outside of the data-collection process  when decision makers were analyzing the facilities data. As a result,  the BRAC Commission recommendation added 680 beds throughout  the corrections system, increasing the Navy\u2019s total confinement  capacity to 1,200 posttrial beds. Specifically at Naval Consolidated  Brig Charleston, the BRAC recommendation added 80 beds at a cost  of approximately $10 million. However, the facility already had excess  capacity prior to the 2005 BRAC recommendation, and its excess  capacity further increased after adding 80 beds (see fig. 2).", "Air National Guard officials said that the lack of communication  outside of the data-collection process in the BRAC analysis phase  meant that they could not identify the specific location of excess  facilities. Specifically, they said the facilities data showed that  Elmendorf Air Force Base, Alaska, had sufficient preexisting space to  accept units relocating from Kulis Air Guard Station, Alaska, a base  slated for closure. However, without communicating with base  officials, Air National Guard officials did not know that the space was  not contiguous. As a result, officials stated that DOD ultimately  needed to complete additional military construction to move the  mission from Kulis Air Guard Station. The BRAC Commission  increased the Air Force\u2019s initial cost estimate by approximately $66  million in additional funds to implement the BRAC recommendation.", "U.S. Army Central officials stated that there was no communication  outside of the data-collection process to allow DOD to fully consider  workforce recruitment-related issues in deciding to move the U.S.  Army Central headquarters to Shaw Air Force Base, South Carolina.  While other criteria, such as military value, enhancing jointness, and  enabling business process transformation, were considered in  developing the recommendation, the officials stated that they were  unable to communicate concerns regarding civilian hiring and military  transfers. The officials said that since the headquarters\u2019 move to  Shaw Air Force Base from Fort McPherson, Georgia, they have had  difficulties recruiting civilian employees, such as information  technology personnel, to their facility because of its location. They  also said that it has been harder to encourage Army personnel to  move to Shaw Air Force Base due to a perception that there is a lack  of promotional opportunities at an Army organization on an Air Force  base. As a result, U.S. Army Central officials said morale surveys  have indicated that these workforce issues have negatively affected  mission accomplishment.", "The military departments and organizations we met with said that these  concerns regarding the BRAC 2005 analysis phase were because DOD  did not establish clear and consistent communications throughout  different levels of authority in the department during data collection.  According to Standards for Internal Control in the Federal Government,  management should use relevant data from reliable sources and process  these data into quality information that is complete and accurate.  Further, management should communicate quality information down,  across, up, and around reporting lines to all levels of the department.", "Given the unclear and inconsistent communications in the department  during data collection, DOD decision makers had data that may have  been outdated or incomplete. Additionally, the outdated and incomplete  data hindered the BRAC 2005 analysis and contributed to additional costs  and recruitment problems at some locations affected by BRAC 2005, as  previously discussed. Officials stated that clear and consistent  communications would have improved the flow of information between  on-the-ground personnel and decision makers and could have better  informed the BRAC decision-making process. For example, Army officials  said that nondisclosure agreements hindered their ability to call personnel  at some installations to confirm details about buildings and facilities in  question. The Air Force\u2019s Lessons Learned: BRAC 2005 report stated  that site surveys could have communicated additional detail and  generated more specific requirements than those generated in an  automated software tool that the Air Force used for BRAC-related  analysis. Navy officials said that, with limited communication, there were  shortfalls in the decision-making process. Overall, officials from ASD  (EI&E) and the military departments agreed that communication could be  improved in the analysis phase of any future BRAC round. They also  cited improved technology, such as geographic information system  software and a new base stationing tool, as well as an increase in the  amount of data collected as factors that may mitigate any effects of  reduced communication if Congress authorizes any future BRAC round.  Without taking steps to establish clear and consistent communication  throughout the department during data collection, DOD risks collecting  outdated and incomplete data in any future BRAC rounds that may hinder  its analysis and the achievement of its stated goals for BRAC."], "subsections": []}]}, {"section_title": "DOD Has Addressed the Majority of Prior GAO Recommendations Affecting the BRAC Implementation Phase but Can Improve Monitoring", "paragraphs": [], "subsections": [{"section_title": "DOD Has Implemented 28 of 39 Recommendations to Address Challenges", "paragraphs": ["To improve the implementation phase of the BRAC 2005 round, we made  39 recommendations between 2005 and 2016. DOD generally agreed  with 32 and did not concur with 7 recommendations. As of October 2017,  DOD had implemented 28 of these recommendations. DOD stated that it  does not plan on implementing 8 of the recommendations, and action on  3 of the recommendations is pending. Our previous recommendations  relate to issues including providing guidance for consolidating training,  refining cost and performance data, and periodic reviews of installation- support standards, among others. Appendix IV provides more information  on our recommendations, DOD\u2019s response, and DOD\u2019s actions to date  concerning the BRAC implementation phase."], "subsections": []}, {"section_title": "DOD Officials Cited Challenges with Monitoring Mission-Related Changes during Implementation", "paragraphs": ["DOD officials identified challenges related to monitoring mission-related  changes during the implementation of the BRAC 2005 recommendations,  specifically when unforeseen circumstances developed that affected  units\u2019 ability to carry out their missions following implementation or added  difficulties to fulfilling the intent of the recommendation. For example:", "During the implementation process, a final environmental impact  statement at Eglin Air Force Base, Florida, contributed to the decision  that only a portion of the initial proposed aircraft and operations would  be established to fulfill the Joint Strike Fighter Initial Joint Training Site  recommendation. Marine Corps officials stated that as a result of this  environmental impact statement and the subsequent limitations, the  Marine Corps decided to eventually move its training from Eglin Air  Force Base to Marine Corps Air Station Beaufort, South Carolina.  Despite these limitations, the Air Force constructed infrastructure for  the Marine Corps\u2019 use at Eglin Air Force Base in order to fulfill the  minimum legal requirements of the recommendation. Specifically, the  BRAC 2005 recommendation realigned the Air Force, Navy, and  Marine Corps portions of the F-35 Joint Strike Fighter Initial Joint  Training Site to Eglin Air Force Base. The Air Force\u2019s goal and the  initial proposal for the Joint Strike Fighter Initial Joint Training Site at  Eglin Air Force Base was to accommodate 107 F-35 aircraft, with  three Air Force squadrons of 24 F-35 aircraft each, one Navy  squadron with 15 F-35 aircraft, and one Marine Corps squadron of 20  F-35 aircraft. In 2008, after the implementation phase began, DOD  completed an environmental impact statement for the proposed  implementation of the BRAC recommendations at Eglin Air Force  Base. Based on the environmental impact statement and other  factors, a final decision was issued in February 2009, stating that the  Air Force would only implement a portion of the proposed actions for  the recommendation, with a limit of 59 F-35 aircraft and reduced  planned flight operations due to potential noise impacts, among other  factors. This decision stated that the subsequent operational  limitations would not be practical for use on a long-term basis but  would remain in place until a supplemental environmental impact  statement could be completed. After the final supplemental  environmental impact statement was released, in June 2014 DOD  decided to continue the limited operations established in the February  2009 decision.", "Marine Corps officials stated that, as a result of the February 2009  decision, the Marine Corps decided that it would eventually move its  F-35 aircraft from Eglin Air Force Base to Marine Corps Air Station  Beaufort. According to Marine Corps officials, by September 2009  the Marine Corps had developed a concept to prepare Marine Corps  Air Station Beaufort to host its F-35 aircraft. A September 2010 draft  supplemental environmental impact statement included updated  operational data and found that the Marine Corps total airfield  operations at Eglin Air Force Base would be reduced by 30.7 percent  from the proposals first assessed in the 2008 final environmental  impact statement. However, to abide by the BRAC recommendation,  Marine Corps officials stated that the Marine Corps temporarily  established an F-35 training squadron at Eglin Air Force Base in April  2010. Using fiscal year 2010 military construction funding, DOD spent  approximately $27.7 million to create a landing field for use by the  new Marine Corps F-35 training squadron mission at Eglin Air Force  Base. Marine Corps officials stated that this construction occurred  during the same period as the decision to relocate the F-35 training  squadron to Marine Corps Air Station Beaufort. However, ASD  (EI&E) officials stated that they did not know about this mission- related change, adding that they expected any change to be reported  from the units to the responsible military department through the chain  of command. However, the military departments did not have  guidance to report in the business plans to ASD (EI&E) these mission- related changes during implementation; without this guidance, the  changes related to the Marine Corps F-35 mission were not relayed to  ASD (EI&E) through the Air Force. Officials from the Joint Strike  Fighter training program at Eglin Air Force Base stated that this  construction was finished in June 2012 and that it was never used by  the Marine Corps. In February 2014, the Marine Corps F-35 training  squadron left Eglin Air Force Base and was established at Marine  Corps Air Station Beaufort. The Marine Corps does not plan on  returning any F-35 aircraft from Marine Corps Air Station Beaufort to  Eglin Air Force Base for joint training activities.", "Additionally, officials from the Armed Forces Chaplaincy Center stated  that studies undertaken during the implementation phase determined  that it would be difficult to fulfill the intent of a recommendation  creating a joint center for religious training and education, yet the  recommendation was implemented and included new construction  with significantly greater costs than initial estimates. The BRAC 2005  recommendation consolidated Army, Navy, and Air Force religious  training and education at Fort Jackson, South Carolina, establishing a  Joint Center of Excellence for Religious Training and Education. Prior  to the construction of facilities to accommodate this recommendation,  the Interservice Training Review Organization conducted a study  published in November 2006 that assessed the resource  requirements and costs of consolidating and colocating the joint  chaplaincy training at Fort Jackson. This study identified limitations in  the feasibility of consolidating a joint training mission for the chaplains,  including differences within the services\u2019 training schedules and the  limited availability of specific administrative requirements for each  service, as well as limited instructors and curriculum development  personnel. Despite the results of this study, in 2008 an  approximately $11.5 million construction project began to build  facilities for the Joint Center of Excellence for Religious Training and  Education. However, ASD (EI&E) officials stated that they did not  know about the results of the study. The military departments did not  have guidance to report these mission-related changes, which  ultimately were not relayed from the units to ASD (EI&E). Officials  from the Armed Forces Chaplaincy Center stated that following the  start of construction to accommodate the recommendation, the  services completed additional studies in 2008 and 2011 that further  identified limitations to the feasibility of joint training for the services\u2019  chaplains. Overall, the services discovered that 95 percent of the  religious training could not be conducted jointly. Moreover, the military  departments have faced additional impediments to their respective  missions for religious training and education. For example, the Army  stated it could not house its junior soldiers alongside the senior Air  Force chaplaincy students, and both the Navy and Air Force had to  transport their chaplains to other nearby bases to receive service- specific training. Due to these challenges, officials from the Armed  Forces Chaplaincy Center stated that the Air Force chaplains left Fort  Jackson and returned to Maxwell Air Force Base, Alabama, in 2017,  and the Navy has also discussed leaving Fort Jackson and returning  to Naval Station Newport, Rhode Island.", "Standards for Internal Control in the Federal Government emphasizes the  importance of monitoring the changes an entity faces so that the entity\u2019s  internal controls can remain aligned with changing objectives,  environment, laws, resources, and risks. During the implementation  phase of BRAC 2005, DOD did not have specific guidance for the military  services to monitor mission-related changes that added difficulties to  fulfilling the intent of BRAC recommendations. The Office of the Secretary  of Defense required BRAC recommendation business plans to be  submitted every 6 months and include information such as a listing of all  actions needed to implement each recommendation, schedules for  personnel movements between installations, updated cost and savings  estimates based on better and updated information, and implementation  completion time frames. In addition, in November 2008, the Deputy Under  Secretary of Defense (Installations and Environment) issued a  memorandum requiring the military departments and certain defense  agencies to present periodic status briefings to the Office of the Secretary  of Defense on implementation progress and to identify any significant  issues impacting the ability to implement BRAC recommendations by the  September 15, 2011, statutory deadline. The 6-month business plan  updates and the memorandum on periodic briefings focused primarily on  changes affecting the ability to fully implement the BRAC  recommendations and on meeting the statutory deadline, but they did not  provide specific guidance to inform ASD (EI&E) of mission-related  changes that arose from unforeseen challenges during the  implementation phase.", "According to a senior official with ASD (EI&E), if the organization  responsible for a business plan identified a need to change the plan to  fulfill the legal obligation of the recommendation by the statutory deadline,  ASD (EI&E) reviewed any proposed changes through meetings with  stakeholders involved in implementation. According to this official, the  office typically only got involved with the implementation if the business  plan was substantively out of line with the intent of the recommendation  or if there was a dispute between two DOD organizations, such as two  military departments. The official stated that any installation-level  concerns had to be raised to the attention of ASD (EI&E) through the  responsible military department\u2019s chain of command. If a mission-related  change was not raised through the military department\u2019s chain of  command, then ASD (EI&E) officials were not always aware of the details  of such changes. ASD (EI&E) officials acknowledged that they did not  know about all mission-related changes during implementation, such as  with the Joint Strike Fighter recommendations, and they stated that there  was no explicit guidance informing the military departments to report  challenges and mission-related changes to ASD (EI&E). Senior officials  from ASD (EI&E) stated that additional guidance would be appropriate in  the event of any future BRAC round. This lack of specific guidance to  monitor and report mission-related changes that arose during BRAC 2005  implementation ultimately resulted in inefficient use of space and extra  costs for DOD. Without providing specific guidance to monitor and report  mission-related changes that require significant changes to the  recommendation business plans, DOD will not be able to effectively  monitor the efficient use of space and the costs associated with  implementing any future BRAC recommendations. Furthermore, DOD  may not be able to effectively make adjustments in its plans to ensure  that the department achieves its overall goals in any future BRAC rounds."], "subsections": []}]}, {"section_title": "DOD Has Addressed Some Prior Recommendations Related to the BRAC Disposal Phase and Plans to Address More Recommendations If Congress Authorizes a Future BRAC Round", "paragraphs": ["Of the 14 recommendations we made from 2007 to 2017 to help DOD  address challenges affecting BRAC\u2019s disposal phase, DOD generally  agreed with 12 of them. As of October 2017, DOD had implemented 4 of  the recommendations, with actions on 8 others pending. Our previous  recommendations relate to three primary issues: guidance for  communities managing the effects of the reduction or growth of DOD  installations, the environmental cleanup process for closed properties,  and the process for reusing closed properties for homeless assistance.  Appendix V provides more information on our recommendations, DOD\u2019s  response, and DOD\u2019s actions to date concerning the BRAC disposal  phase.", "During our review, we identified an additional example of challenges in  the disposal phase related to the environmental cleanup process.  Specifically, officials representing Portsmouth, Rhode Island, stated that  the city had issues with the environmental cleanup process resulting from  BRAC 2005 changes at Naval Station Newport, Rhode Island. According  to the site\u2019s environmental impact statement, the land Portsmouth is to  receive is contaminated and requires cleanup prior to transfer, and  officials from the community stated that the Navy has not provided them  with a clear understanding of a time frame for the environmental cleanup  process needed to transfer the property. However, a senior official from  the Navy stated that uncertainties in available funds and unforeseen  environmental obstacles are common and prevent the Navy from  projecting specific estimates for environmental cleanup time frames. The  officials representing Portsmouth stated that, due to the lack of  information from the Navy on a projected time frame for cleaning and  transferring the property, representatives in the community have begun to  discuss not wanting to take over the land and letting the Navy hold a  public sale. We had previously recommended in January 2017 that DOD  create a repository or method to record and share lessons learned about  how various locations have successfully addressed environmental  cleanup challenges. DOD concurred and actions are pending.", "Moreover, during our review we identified additional examples of  challenges in the disposal phase related to the homeless assistance  program. For example, officials representing the community of  Wilmington, North Carolina, stated that they had issues with the  homeless-assistance process regarding a closed Armed Forces Reserve  Center. According to the officials, they did not know that there were legal  alternatives to providing on-base property for homeless assistance.  Wilmington officials stated that the city would have been willing to  construct a homeless-assistance facility in a nonbase location, and use  the closed property for a different purpose, which would have expedited  the overall redevelopment process. According to the officials, the  organization that took over the property for homeless-assistance  purposes lacks the financial means to complete the entire project plan,  and as of July 2017 it remains unfinished. We had previously  recommended that DOD and the Department of Housing and Urban  Development\u2014which, with DOD, develops the implementing regulations  for the BRAC homeless-assistance process\u2014include information on legal  alternatives to providing on-base property to expedite the redevelopment  process, but DOD did not concur and stated no action is expected.  Additionally, officials from New Haven, Connecticut, stated that the  process of finding land suitable for a homeless assistance provider and  converting an Army Reserve Center into a police academy took an  undesirably long amount of time to complete. The officials stated that the  process of preparing its redevelopment plan and transferring the property  from DOD to the community lasted roughly 5 years from 2008 to 2013,  and they suggested streamlining or expediting this process.", "As a result of these types of delays, many properties have not yet been  transferred from DOD to the communities, and undisposed properties  continue to increase caretaker costs. As of September 30, 2016, DOD  had received approximately $172 million in payments for transfers, and it  had spent approximately $275 million for caretaker costs of buildings and  land prior to transferring property on closed installations during BRAC  2005. Implementing our prior recommendations related to the BRAC  environmental cleanup and homeless-assistance process could help  DOD expedite the disposal of unneeded and costly BRAC property,  reduce its continuing fiscal exposure stemming from continuing to hold  these properties, and ultimately improve the effectiveness of the disposal  phase."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD has long faced challenges in reducing unneeded infrastructure, and  on five different occasions DOD has used the BRAC process to reduce  excess capacity and better match needed infrastructure to the force  structure and to support military missions. In addition to using BRAC to  reduce excess capacity, DOD also sought to promote jointness across  the military departments and realign installations in the 2005 round,  making the round the biggest, costliest, and most complex ever. While  DOD finished its implementation of BRAC 2005 in September 2011 and  continues to prepare some remaining sites for disposal, it did not  measure whether and to what extent it achieved the round\u2019s goals of  reducing excess infrastructure, transforming the military, and promoting  jointness. Because it did not measure whether the BRAC actions  achieved these goals, DOD cannot demonstrate whether the military  departments have improved their efficiency or effectiveness as a result of  the BRAC 2005 actions. In October 2017, DOD officials stated the  department does not plan to take action on our March 2013  recommendation to measure goals for any future BRAC round. Congress  can take steps to improve its oversight of any future BRAC round,  specifically by requiring DOD to identify and track appropriate measures  of effectiveness. Congress would have enhanced information to make  decisions about approving any future BRAC rounds, while DOD would be  in a stronger position to demonstrate the benefits it achieves relative to  the up-front implementation costs incurred for holding any future BRAC  rounds.", "In addition, challenges in the analysis, implementation, and disposal  phases of BRAC 2005 led to unintended consequences, such as  increases in costs, workforce recruitment issues, and delayed disposal of  closed properties. Limited or restricted communications throughout  different levels of authority in the department during data collection  hampered the ability of decision makers to receive as much relevant  information as possible during BRAC 2005. If Congress authorizes any  future BRAC round, ASD (EI&E) can encourage clear and consistent  communication throughout DOD during the analysis phase, thereby  helping personnel to address any potential problems that may arise. In  addition, without specific guidance to monitor mission-related changes  during the BRAC implementation phase, DOD did not fulfill the intent of  some recommendations and spent millions of dollars to build  infrastructure that was ultimately unused or underutilized. This lack of  specific guidance meant that ASD (EI&E) was not aware of all mission- related changes. By instituting improvements to the analysis,  implementation, and disposal phases in any future BRAC round, DOD  could better inform decision making, better ensure that its infrastructure  meets the needs of its force structure, and better position itself to gain  congressional approval for additional rounds of BRAC in the future."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider, in any future BRAC authorization, a  requirement for DOD to identify appropriate measures of effectiveness  and to track the achievement of its goals. (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Secretary of  Defense.", "In the event of any future BRAC round, the Secretary of Defense should  ensure that ASD (EI&E) and the military departments take steps to  establish clear and consistent communications throughout the department  during data collection. (Recommendation 1)", "In the event of any future BRAC round, the Secretary of Defense should  ensure that ASD (EI&E) provides specific guidance for the military  departments to monitor and report on mission-related changes that  require significant changes to the recommendation business plans.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DOD. In  written comments, DOD objected to our matter for congressional  consideration and concurred with both recommendations. DOD\u2019s  comments are summarized below and reprinted in their entirety in  appendix VI.  DOD also provided technical comments, which we  incorporated as appropriate.", "DOD objected to our matter for congressional consideration that  Congress should consider, in any future BRAC authorization, a  requirement for DOD to identify appropriate measures of effectiveness  and to track the achievement of its goals. DOD stated that, as advised by  BRAC counsel, it believes this requirement would subvert the statutory  requirement that military value be the priority consideration. However, as  we noted when we originally directed this recommendation to the  department in March 2013, our recommendation does not undermine  DOD\u2019s reliance on military value as the primary selection criteria for  DOD\u2019s BRAC candidate recommendations, and DOD can still prioritize  military value while identifying measures that help determine whether  DOD achieved the military value that it seeks. Congress enacting a  requirement for DOD to identify appropriate measures of effectiveness  and to track the achievement of its goals, alongside the requirement to  prioritize military value, would address DOD\u2019s concern about subverting a  statutory requirement related to military value. Moreover, the department  will likely have a better understanding of whether it achieved its intended  results while still continuing to enhance military value.", "DOD concurred with our first recommendation that, in the event of any  future BRAC round, the Secretary of Defense should ensure that ASD  (EI&E) and the military departments take steps to establish clear and  consistent communications throughout the department during data  collection. In its letter, however, DOD stated it did not agree with our  assertion that the perceptions of lower-level personnel are necessarily  indicative of the process as a whole. We disagree with DOD\u2019s statement  that we relied on the perceptions of lower-level personnel. We obtained  perceptions from senior personnel in the various military organizations  deemed by DOD leadership to be the most knowledgeable. We then  corroborated these perceptions with those from senior officials from the  military departments, along with evidence obtained from the Air Force and  Army lessons-learned reports. Moreover, DOD stated that the ability to  gather data was not limited by the nondisclosure agreements or an  inability to communicate with those participating in the BRAC process.  While DOD concurred with our recommendation, we continue to believe it  should consider the perceptions obtained from knowledgeable personnel  that data gathering was limited by nondisclosure agreements or an  inability to communicate throughout different levels of authority in the  department during data collection.", "DOD also concurred with our second recommendation that, in the event  of any future BRAC round, the Secretary of Defense should ensure that  ASD (EI&E) provides specific guidance for the military departments to  monitor and report on mission-related changes that require significant  changes to the recommendation business plans. In its letter, DOD stated  it would continue to provide guidance, as it did in the 2005 BRAC round,  to encourage resolution at the lowest possible level, with Office of the  Secretary of Defense involvement limited to review and approval of any  necessary changes to the business plans. However, as we reported, if a  mission-related change was not raised through the military department\u2019s  chain of command, ASD (EI&E) officials stated that they were not always  aware of the details of such changes, hence the need for our  recommendation. By providing specific guidance to monitor and report  mission-related changes that require significant changes to the  recommendation business plans, DOD may be able to more effectively  make adjustments in its plans to ensure that the department achieves its  overall goals in any future BRAC rounds.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 15 days from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Secretary of Defense; the Secretaries of  the Army, Navy, and Air Force; and the Commandant of the Marine  Corps. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Selected Local Economic Data for Communities Affected by the 2005 BRAC Round Closures", "paragraphs": ["Selected economic indicators for the 20 communities surrounding the 23  Department of Defense (DOD) installations closed in the 2005 Base  Realignment and Closure (BRAC) round vary compared to national  averages. In our analysis, we used annual unemployment and real per  capita income growth rates compiled by the U.S. Bureau of Labor  Statistics and the U.S. Bureau of Economic Analysis as broad indicators  of the economic health of those communities where installation closures  occurred. Our analyses of the U.S. Bureau of Labor Statistics annual  unemployment data for 2016, the most recent data available, showed that  11 of the 20 closure communities had unemployment rates at or below  the national average of 4.9 percent for the period from January through  December 2016. Another seven communities had unemployment rates  that were higher than the national average but at or below 6.0 percent.  Only two communities had unemployment rates above 8.0 percent (see  fig. 3). Of the 20 closure communities, Portland-South Portland, Maine  (Naval Air Station Brunswick) had the lowest unemployment rate at 3.0  percent and Yukon-Koyukuk, Alaska (Galena Forward Operating  Location) had the highest rate at 17.2 percent.", "We also used per capita income data from the U.S. Bureau of Economic  Analysis between 2006 and 2016 to calculate annualized growth rates  and found that 11 of the 20 closure communities had annualized real per  capita income growth rates that were higher than the national average of  1.0 percent (see fig. 4). The other 9 communities had rates that were  below the national average. Of the 20 communities affected, Yukon- Koyukuk, Alaska (Galena Forward Operating Location) had the highest  annualized growth rate at 4.6 percent and Gulfport-Biloxi-Pascagoula,  Mississippi (Mississippi Army Ammunition Plant and Naval Station  Pascagoula) had the lowest rate at -0.1 percent."], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to assess the extent that the  Department of Defense (DOD) (1) measured the achievement of goals for  reducing excess infrastructure, transforming the military, and promoting  jointness for the 2005 Base Realignment and Closure (BRAC) round and  (2) implemented prior GAO recommendations and addressed any  additional challenges faced in BRAC 2005 to improve performance for  any future BRAC round. In addition, we describe how current economic  indicators for the communities surrounding the 23 closed bases in BRAC  2005 compare to national averages.", "For all objectives, we reviewed the 2005 BRAC Commission\u2019s September  2005 report to the President, policy memorandums, and guidance on  conducting BRAC 2005. We also reviewed other relevant documentation  such as supporting BRAC analyses prepared by the military services or  units related to the development of BRAC 2005 recommendations. We  interviewed officials with the Office of the Assistant Secretary of Defense  for Energy, Installations, and Environment; the Army; the Navy; the Air  Force; the Marine Corps; the U.S. Army Reserve Command; and the  National Guard Bureau. We also conducted site visits to Connecticut,  Indiana, Kentucky, Massachusetts, North Carolina, Rhode Island, and  South Carolina. We met with 26 military units or organizations, such as  Air Force wings and Army and Navy installations\u2019 Departments of Public  Works, and 12 communities involved with BRAC 2005 recommendations.  These interviews provide examples of any challenges faced by each  individual party, but information obtained is not generalizable to all parties  involved in the BRAC process. We selected locations for site visits based  on ensuring geographic diversity and a mix of types of BRAC  recommendations (closures, transformation, or jointness), and having at  least one installation from or community associated with each military  department.", "To assess the extent that DOD measured the achievement of goals for  reducing excess infrastructure, transforming the military, and promoting  jointness for BRAC 2005, we met with officials to discuss measurement of  goals and requested any related documentation. We compared DOD\u2019s  efforts to Standards for Internal Control in the Federal Government, which  emphasizes that an agency\u2019s management should track major agency  achievements and compare these to the agencies\u2019 plans, goals, and  objectives. We also tried to calculate the excess infrastructure disposed  of during BRAC 2005; however, DOD\u2019s data were incomplete.  Specifically, in reviewing the square footage and plant replacement value  data from DOD\u2019s Cost of Base Realignment Actions model, we found that  data from several bases were not included. Additionally, a senior official  with the Office of the Assistant Secretary of Defense for Energy,  Installations, and Environment stated the data provided were not the most  current data used during BRAC 2005 and the office did not have access  to the complete data. We also tried to corroborate the square footage and  plant replacement value data from the Cost of Base Realignment Actions  model to DOD\u2019s 2005 Base Structure Report, but we found the data to be  incomparable. As such, we determined that the incomplete and outdated  data were not sufficiently reliable to calculate the excess infrastructure  disposed of during BRAC 2005.", "To assess the extent that DOD implemented prior GAO recommendations  on BRAC 2005 and addressed any additional challenges faced in BRAC  2005 to improve performance for any future BRAC round, we reviewed  our prior reports and testimonies on BRAC 2005 to identify  recommendations made and determined whether those  recommendations applied to the analysis, implementation, or disposal  phase of BRAC 2005. We then identified whether DOD implemented  recommendations we made by discussing the status of recommendations  with agency officials and obtaining copies of agency documents  supporting the recommendations\u2019 implementation. We also met with  officials to identify what challenges, if any, continue to be faced and what  opportunities exist to improve the analysis, implementation, and disposal  phases for any future BRAC round. For the analysis phase, we reviewed  military service lessons-learned documents. For the implementation  phase, we reviewed business plans supporting the implementation of the  BRAC 2005 recommendations and other applicable documentation, such  as a workforce planning study and an environmental impact statement  affecting the implementation of some recommendations. For the disposal  phase, we analyzed DOD\u2019s caretaker costs for closed bases that it has  not yet transferred. We compared information about challenges in the  analysis, implementation, and disposal phases to criteria for  communications, monitoring, and risk assessments in Standards for  Internal Control in the Federal Government.", "To describe how current economic indicators for the communities  surrounding the 23 closed bases in BRAC 2005 compare to national  averages, we collected economic indicator data on the communities  surrounding closed bases from the Bureau of Labor Statistics and the  Bureau of Economic Analysis in order to compare them with national  averages. To identify the communities surrounding closed bases, we  focused our review on the 23 major DOD installations closed in the BRAC  2005 round and their surrounding communities. For BRAC 2005, DOD  defined major installation closures as those that had a plant replacement  value exceeding $100 million. We used information from our 2013 report,  which identified the major closure installations. We then defined the  \u201ccommunity\u201d surrounding each major installation by (1) identifying the  economic area in DOD\u2019s Base Closure and Realignment Report, which  linked a metropolitan statistical area, a metropolitan division, or a  micropolitan statistical area to each installation, and then (2) updating  those economic areas based on the most current statistical areas or  divisions, as appropriate. Because DOD\u2019s BRAC report did not identify  the census area for the Galena Forward Operating Location in Alaska or  the Naval Weapons Station Seal Beach Detachment in Concord,  California, we identified the town of Galena as within the Yukon-Koyukuk  Census Area and the city of Concord in the Oakland-Hayward-Berkeley,  CA Metropolitan Division, and our analyses used the economic data for  these areas. See table 1 for a list of the major DOD installations closed in  BRAC 2005 and their corresponding economic areas.", "To compare the economic indicator data of the communities surrounding  the 23 major DOD installations closed in the BRAC 2005 round to U.S.  national averages, we collected and analyzed calendar year 2016  unemployment data from the U.S. Bureau of Labor Statistics and  calendar year 2006 through 2016 per capita income growth data, along  with data on inflation, from the U.S. Bureau of Economic Analysis which  we used to calculate annualized real per capita income growth rates.  Calendar year 2016 was the most current year for which local area data  were available from these databases. We assessed the reliability of these  data by reviewing U.S. Bureau of Labor Statistics and U.S. Bureau of  Economic Analysis documentation regarding the methods used by each  agency in producing their data and found the data to be sufficiently  reliable to report 2016 annual unemployment rates and 2006 through  2016 real per capita income growth. We used unemployment and  annualized real per capita income growth rates as key performance  indicators because (1) DOD used these measures in its community  economic impact analysis during the BRAC location selection process  and (2) economists commonly use these measures in assessing the  economic health of an area over time. While our assessment provides an  overall picture of how these communities compare with the national  averages, it does not isolate the condition, or the changes in that  condition, that may be attributed to a specific BRAC action.", "We conducted this performance audit from April 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: GAO Reviews Related to the BRAC 2005 Analysis Phase, Related Recommendations, and DOD Actions", "paragraphs": ["To improve the analysis phase of the 2005 Base Realignment and  Closure (BRAC) round, we made 12 recommendations between 2004  and 2016. The Department of Defense (DOD) fully concurred with 4,  partially concurred with 2, and did not concur with 6 recommendations. It  implemented 1 of the 12 recommendations (see table 2). According to  DOD officials, DOD will be unable to take actions on 7 recommendations  unless Congress authorizes any future BRAC round."], "subsections": []}, {"section_title": "Appendix IV: GAO Reviews Related to the BRAC 2005 Implementation Phase, Related Recommendations, and DOD Actions", "paragraphs": ["To improve the implementation phase of the 2005 Base Realignment and  Closure (BRAC) round, we made 39 recommendations between 2005  and 2016. The Department of Defense (DOD) fully concurred with 17,  partially concurred with 15, and did not concur with 7 recommendations.  DOD implemented 28 of them (see table 3)."], "subsections": []}, {"section_title": "Appendix V: GAO Reviews Related to the BRAC 2005 Disposal Phase, Related Recommendations, and DOD Actions", "paragraphs": ["To improve the disposal phase of the 2005 Base Realignment and  Closure (BRAC) round, we made 14 recommendations between 2007  and 2017. The Department of Defense (DOD) fully concurred with 7,  partially concurred with 5, and did not concur with 2 recommendations.  DOD implemented 4 of them with 8 recommendations pending further  action (see table 4). According to DOD officials, DOD will be unable to  take actions on 5 of the 8 pending recommendations until another BRAC  round is authorized."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Gina Hoffman (Assistant  Director), Tracy Barnes, Irina Bukharin, Timothy Carr, Amie Lesser, John  Mingus, Kevin Newak, Carol Petersen, Richard Powelson, Clarice  Ransom, Jodie Sandel, Eric Schwab, Michael Silver, and Ardith Spence  made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Military Base Realignments and Closures: DOD Has Improved  Environmental Cleanup Reporting but Should Obtain and Share More  Information. GAO-17-151. Washington, D.C.: January 19, 2017.", "Military Base Realignments and Closures: More Guidance and  Information Needed to Take Advantage of Opportunities to Consolidate  Training. GAO-16-45. Washington, D.C.: February 18, 2016.", "Military Base Realignments and Closures: Process for Reusing Property  for Homeless Assistance Needs Improvements. GAO-15-274.  Washington, D.C.: March 16, 2015.", "DOD Joint Bases: Implementation Challenges Demonstrate Need to  Reevaluate the Program. GAO-14-577. Washington, D.C.: September 19,  2014.", "Defense Health Care Reform: Actions Needed to Help Realize Potential  Cost Savings from Medical Education and Training. GAO-14-630.  Washington, D.C: July 31, 2014.", "Defense Infrastructure: DOD\u2019s Excess Capacity Estimating Methods  Have Limitations. GAO-13-535. Washington, D.C.: June 20, 2013.", "Defense Infrastructure: Communities Need Additional Guidance and  Information to Improve Their Ability to Adjust to DOD Installation Closure  or Growth. GAO-13-436. Washington, D.C.: May 14, 2013.", "Military Bases: Opportunities Exist to Improve Future Base Realignment  and Closure Rounds. GAO-13-149. Washington, D.C.: March 7, 2013.", "DOD Joint Bases: Management Improvements Needed to Achieve  Greater Efficiencies. GAO-13-134. Washington, D.C.: November 15,  2012.", "Military Base Realignments and Closures: The National Geospatial- Intelligence Agency\u2019s Technology Center Construction Project.  GAO-12-770R. Washington, D.C.: June 29, 2012.", "Military Base Realignments and Closures: Updated Costs and Savings  Estimates from BRAC 2005. GAO-12-709R. Washington, D.C.: June 29,  2012.", "Military Base Realignments and Closures: Key Factors Contributing to  BRAC 2005 Results. GAO-12-513T. Washington, D.C.: March 8, 2012.", "Excess Facilities: DOD Needs More Complete Information and a Strategy  to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.:  September 19, 2011.", "Military Base Realignments and Closures: Review of the Iowa and Milan  Army Ammunition Plants. GAO-11-488R. Washington, D.C.: April 1,  2011.", "Defense Infrastructure: High-Level Federal Interagency Coordination Is  Warranted to Address Transportation Needs beyond the Scope of the  Defense Access Roads Program. GAO-11-165. Washington, D.C.:  January 26, 2011.", "Military Base Realignments and Closures: DOD Is Taking Steps to  Mitigate Challenges but Is Not Fully Reporting Some Additional Costs.  GAO-10-725R. Washington, D.C.: July 21, 2010.", "Defense Infrastructure: Army Needs to Improve Its Facility Planning  Systems to Better Support Installations Experiencing Significant Growth.  GAO-10-602. Washington, D.C.: June 24, 2010.", "Military Base Realignments and Closures: Estimated Costs Have  Increased While Savings Estimates Have Decreased Since Fiscal Year  2009. GAO-10-98R. Washington, D.C.: November 13, 2009.", "Military Base Realignments and Closures: Transportation Impact of  Personnel Increases Will Be Significant, but Long-Term Costs Are  Uncertain and Direct Federal Support Is Limited. GAO-09-750.  Washington, D.C.: September 9, 2009.", "Military Base Realignments and Closures: DOD Needs to Update Savings  Estimates and Continue to Address Challenges in Consolidating Supply- Related Functions at Depot Maintenance Locations. GAO-09-703.  Washington, D.C.: July 9, 2009.", "Defense Infrastructure: DOD Needs to Periodically Review Support  Standards and Costs at Joint Bases and Better Inform Congress of  Facility Sustainment Funding Uses. GAO-09-336. Washington, D.C.:  March 30, 2009.", "Military Base Realignments and Closures: DOD Faces Challenges in  Implementing Recommendations on Time and Is Not Consistently  Updating Savings Estimates. GAO-09-217. Washington, D.C.: January  30, 2009.", "Military Base Realignments and Closures: Army Is Developing Plans to  Transfer Functions from Fort Monmouth, New Jersey, to Aberdeen  Proving Ground, Maryland, but Challenges Remain. GAO-08-1010R.  Washington, D.C.: August 13, 2008.", "Defense Infrastructure: High-Level Leadership Needed to Help  Communities Address Challenges Caused by DOD-Related Growth.  GAO-08-665. Washington, D.C.: June 17, 2008.", "Defense Infrastructure: DOD Funding for Infrastructure and Road  Improvements Surrounding Growth Installations. GAO-08-602R.  Washington, D.C.: April 1, 2008.", "Military Base Realignments and Closures: Higher Costs and Lower  Savings Projected for Implementing Two Key Supply-Related BRAC  Recommendations. GAO-08-315. Washington, D.C.: March 5, 2008.", "Defense Infrastructure: Realignment of Air Force Special Operations  Command Units to Cannon Air Force Base, New Mexico. GAO-08-244R.  Washington, D.C.: January 18, 2008.", "Military Base Realignments and Closures: Estimated Costs Have  Increased and Estimated Savings Have Decreased. GAO-08-341T.  Washington, D.C.: December 12, 2007.", "Military Base Realignments and Closures: Cost Estimates Have  Increased and Are Likely to Continue to Evolve. GAO-08-159.  Washington, D.C.: December 11, 2007.", "Military Base Realignments and Closures: Impact of Terminating,  Relocating, or Outsourcing the Services of the Armed Forces Institute of  Pathology. GAO-08-20. Washington, D.C.: November 9, 2007.", "Military Base Realignments and Closures: Transfer of Supply, Storage,  and Distribution Functions from Military Services to Defense Logistics  Agency. GAO-08-121R. Washington, D.C.: October 26, 2007.", "Defense Infrastructure: Challenges Increase Risks for Providing Timely  Infrastructure Support for Army Installations Expecting Substantial  Personnel Growth. GAO-07-1007. Washington, D.C.: September 13,  2007.", "Military Base Realignments and Closures: Plan Needed to Monitor  Challenges for Completing More Than 100 Armed Forces Reserve  Centers. GAO-07-1040. Washington, D.C.: September 13, 2007.", "Military Base Realignments and Closures: Observations Related to the  2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007.", "Military Base Closures: Projected Savings from Fleet Readiness Centers  Likely Overstated and Actions Needed to Track Actual Savings and  Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29,  2007.", "Military Base Closures: Management Strategy Needed to Mitigate  Challenges and Improve Communication to Help Ensure Timely  Implementation of Air National Guard Recommendations. GAO-07-641.  Washington, D.C.: May 16, 2007.", "Military Base Closures: Opportunities Exist to Improve Environmental  Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property.  GAO-07-166. Washington, D.C.: January 30, 2007.", "Military Bases: Observations on DOD\u2019s 2005 Base Realignment and  Closure Selection Process and Recommendations. GAO-05-905.  Washington, D.C.: July 18, 2005.", "Military Bases: Analysis of DOD\u2019s 2005 Selection Process and  Recommendations for Base Closures and Realignments. GAO-05-785.  Washington, D.C.: July 1, 2005.", "Military Base Closures: Observations on Prior and Current BRAC  Rounds. GAO-05-614. Washington, D.C.: May 3, 2005.", "Military Base Closures: Assessment of DOD\u2019s 2004 Report on the Need  for a Base Realignment and Closure Round. GAO-04-760. Washington,  D.C.: May 17, 2004."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-14", "url": "https://www.gao.gov/products/GAO-19-14", "title": "Improper Payments: Additional Guidance Needed to Improve Oversight of Agencies with Noncompliant Programs", "published_date": "2018-12-07T00:00:00", "released_date": "2018-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Government-wide estimated improper payments totaled almost $1.4 trillion from fiscal year 2003 through fiscal year 2017. IPERA requires IGs to annually assess and report on whether executive branch agencies complied with the six criteria to (1) publish an agency financial report or performance accountability report, (2) conduct program-specific improper payment risk assessments, (3) publish improper payment estimates, (4) publish corrective action plans, (5) publish and meet annual improper payment reduction targets, and (6) report a gross improper payment rate of less than 10 percent.", "This report examines the extent to which", "1. CFO Act agencies complied with IPERA criteria for fiscal years 2016 and 2017, and the trends evident since 2011, as reported by their IGs;", "2. CFO Act agencies addressed requirements for programs reported as noncompliant with IPERA criteria for 3 or more consecutive years, as of fiscal year 2016, and communicated their strategies to Congress for reducing improper payments and achieving compliance; and", "3. OMB made determinations regarding whether additional funding would help CFO Act agency programs reported as noncompliant with IPERA criteria for 2 consecutive years, as of fiscal years 2016 and 2017, come into compliance.", "GAO analyzed the IGs' fiscal years 2016 and 2017 IPERA compliance reports; reviewed prior GAO reports on agencies' IPERA compliance; reviewed agency information submitted to Congress; and made inquiries to OMB, applicable agencies, and IGs; and assessed such information based on relevant IPERA provisions and OMB and other guidance."]}, {"section_title": "What GAO Found", "paragraphs": ["Over half of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies were reported by their inspectors general (IG) as noncompliant with one or more criteria under the Improper Payments Elimination and Recovery Act of 2010 (IPERA) for fiscal years 2016 and 2017. Nine CFO Act agencies have been reported as noncompliant in one or more programs every year since the implementation of IPERA in fiscal year 2011, totaling 7 consecutive years of noncompliance.", "The IGs of the 14 noncompliant agencies reported that a total of 58 programs were responsible for the identified instances of noncompliance in fiscal year 2017. Further, 18 of the 58 programs at 9 agencies were reported as noncompliant for 3 or more consecutive years. Fourteen of these 18 programs accounted for an estimated $74.4 billion of the $141 billion total estimated improper payments for fiscal year 2017; the other 4 programs did not report improper payment estimates. This sum may include estimates that are of unknown reliability. The $74.4 billion is primarily composed of estimates reported for two noncompliant programs, the Department of Health and Human Services' Medicaid program and the Department of the Treasury's (Treasury) Earned Income Tax Credit program; estimated improper payments for these two programs are also a central part of certain high-risk areas in GAO's 2017 High-Risk List.", "Agencies with any program reported as noncompliant for 3 or more consecutive years are required to notify Congress of their program's consecutive noncompliance and submit a proposal for reauthorization or statutory change to bring that program into compliance. GAO found that three agencies with one or more programs reported as noncompliant for 3 or more consecutive years, as of fiscal year 2016, did not notify Congress or submit the required proposals. The Departments of Labor and the Treasury submitted proposed legislative changes in response to their programs being previously reported as noncompliant, but did not notify Congress of the programs' continued noncompliance as of fiscal year 2016. The U.S. Department of Agriculture (USDA) has not notified Congress despite prior GAO and USDA IG recommendations to do so. To address these issues, in June 2018 the Office of Management and Budget (OMB) updated its guidance to clarify the notification requirements for each consecutive year a program is reported as noncompliant.", "GAO found that five agencies did notify Congress as required, and included additional quality information that is not specifically required, but could be useful in updating Congress on their compliance efforts. For example, all five agencies provided information on the root causes, risks, changes, or issues affecting their efforts and corrective actions or strategies to address them; three agencies provided other quality information on accountability mechanisms, designated senior officials, and measurable milestones.", "In June 2018, OMB updated its guidance to clarify agency reporting requirements for programs reported as noncompliant for 3 or more consecutive years. However, the updated guidance does not direct agencies to include the types of quality information included in these five agencies' notifications for fiscal year 2016. GAO's Standards for Internal Control in the Federal Government emphasizes the importance of communicating quality information, such as significant matters affecting agencies' efforts to achieve compliance objectives. Such information could be useful in understanding the current challenges of these programs and is essential for assessing agency efforts to address high-risk and other issues. As a result, Congress could have more complete information to effectively oversee agency efforts to address program noncompliance for 3 or more consecutive years.", "When programs are reported as noncompliant for 2 consecutive years, IPERA gives OMB authority to determine whether additional funding is needed to help resolve the noncompliance. In April 2018, OMB staff stated that they determined that no additional funding was needed for the 15 programs that were reported as noncompliant for 2 consecutive years, as of fiscal year 2016, and that they primarily rely on the IGs' recommendations in their annual IPERA compliance reports when making funding determinations. OMB staff subsequently stated that they no longer need to conduct a detailed review of the IGs' IPERA compliance reports to identify recommendations related to additional funding needs. Instead, OMB updated its guidance in June 2018 to direct agencies to submit proposals to OMB regarding additional funding needs to help address IPERA noncompliance and clarified that the funding determination process will unfold as part of the annual development of the President's Budget. As of September 2018, OMB was in the process of making funding determinations for 12 programs that were reported as noncompliant as of fiscal year 2017 and stated that any determinations made would be developed in the President's Budget for fiscal year 2020."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that OMB update its guidance to specify other types of quality information that agencies with programs noncompliant for 3 or more consecutive years should include in their notifications to Congress, such as significant matters related to risks, issues, root causes, measurable milestones, designated senior officials, accountability mechanisms, and corrective actions or strategies planned or taken by agencies to achieve compliance.", "GAO provided a draft of this report to OMB and requested comments, and OMB said that it had no comments. GAO also provided a draft of this report to the 24 CFO Act agencies and their IGs and requested comments. In its written comments, the Social Security Administration (SSA) stated that it provided information on measurable milestones, designated senior officials, and accountability mechanisms in its agency financial report. However, SSA did not provide this information in its notifications to Congress for programs reported as noncompliant under IPERA as of fiscal year 2016. GAO believes that OMB should take steps to update OMB's guidance to help ensure that agencies report such significant information and include it in their notifications to Congress. In addition, several agencies and IGs provided technical comments, which were incorporated in the report as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Improper payments\u2014payments that should not have been made or were  made in incorrect amounts\u2014have been estimated to total almost   $1.4 trillion government-wide from fiscal years 2003 through 2017.  Estimates of total improper payments have increased over the years\u2014 from $35 billion for 27 programs in fiscal year 2003 to approximately   $141 billion for 90 programs in fiscal year 2017. It is important to note that  these estimates themselves may not be accurate, reliable, or complete,  because, as we have reported, the federal government is unable to  determine the full extent to which improper payments occur and  reasonably assure that appropriate actions are taken to reduce them. In  addition, certain inspectors general (IG) have reported issues with their  agencies\u2019 reported improper payment estimates that were caused by  insufficient sampling methods and flawed estimation methodologies for  calculating and reporting improper payment estimates.", "Fiscal year 2017 marked the seventh year of the implementation of the  Improper Payments Elimination and Recovery Act of 2010 (IPERA),  which, among other things, requires federal agencies\u2019 IGs to annually  assess and report on whether the agencies under their jurisdiction have  complied with six IPERA criteria. The IGs\u2019 annual IPERA compliance  reports serve a key function to reasonably assure that improper payment  estimates are accurate, reliable, and complete and that Congress has  information on agencies\u2019 efforts to address improper payments. We  previously reported on agencies\u2019 IPERA compliance for fiscal years 2011  through 2015, as reported by the IGs.", "We performed our work under the authority of the Comptroller General to  conduct evaluations on his own initiative and to assist Congress with its  oversight responsibilities. We conducted this audit to summarize and  evaluate agency compliance under IPERA for fiscal years 2016 and 2017,  as reported by their IGs. Specifically, this report discusses the extent to  which (1) agencies listed in the Chief Financial Officers Act of 1990, as  amended, (CFO Act) complied with the six criteria listed in IPERA for  fiscal years 2016 and 2017, and the trends evident since fiscal year 2011,  as reported by their IGs; (2) CFO Act agencies addressed the  requirements for programs and activities reported as noncompliant with  IPERA criteria for 3 or more consecutive years, as of fiscal year 2016, and communicated their strategies to Congress for reducing improper  payments and achieving compliance; and (3) the Office of Management  and Budget (OMB) made determinations regarding whether additional  funding would help CFO Act agency programs and activities reported as  noncompliant with IPERA criteria for 2 consecutive years to come into  compliance, as of fiscal years 2016 and 2017. We focused on the 24  agencies listed in the CFO Act because estimates of their improper  payments represent over 99 percent of the total reported estimated  improper payments for fiscal years 2016 and 2017.", "To determine the extent to which CFO Act agencies were reported as  compliant with the six criteria listed in IPERA for fiscal years 2016 and  2017, and trends evident since fiscal year 2011, we reviewed the IGs\u2019  IPERA compliance reports issued for fiscal years 2016 and 2017 and  identified trends in agencies\u2019 compliance, and their respective programs\u2019  and activities\u2019 compliance, since fiscal year 2011 based on results  summarized in our prior reports.", "To determine the extent to which CFO Act agencies addressed the  requirements for programs and activities reported as noncompliant for 3  or more consecutive years as of fiscal year 2016, we requested and  reviewed the applicable agencies\u2019 notifications to Congress provided by  the respective agencies. In addition, we reviewed the content of  agencies\u2019 notifications to evaluate their efforts to communicate quality  information to Congress, consistent with Principle 15 of Standards for  Internal Control in the Federal Government, which emphasizes the need  for an entity\u2019s management to externally communicate the necessary,  quality information\u2014such as significant matters related to risks, changes,  or issues concerning their strategies for achieving compliance. We did  not evaluate the sufficiency and completeness of the agency-provided  information.", "To determine the extent to which OMB made determinations regarding  whether additional funding would help CFO Act agency programs and  activities reported as noncompliant for 2 consecutive years come into  compliance, as of fiscal years 2016 and 2017, we interviewed key OMB  staff on their process for determining additional funding needs for  noncompliant programs and activities and reviewed the applicable  agencies\u2019 IG compliance reports that OMB staff stated they relied on  when making such determinations. Lastly, we corroborated our findings  with OMB, the 24 CFO Act agencies, and their IGs. Appendix I provides  additional information on our scope and methodology.", "We conducted this performance audit from November 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In November 2002, Congress passed and the President signed the  Improper Payments Information Act of 2002 (IPIA), which was later  amended by IPERA and the Improper Payments Elimination and  Recovery Improvement Act of 2012 (IPERIA). The amended legislation  requires executive branch agencies to (1) review all programs and  activities and identify those that may be susceptible to significant  improper payments (commonly referred to as a risk assessment),   (2) publish improper payment estimates for those programs and activities  that the agency identified as being susceptible to significant improper  payments, (3) implement corrective actions to reduce improper payments  and set reduction targets, and (4) report on the results of addressing the  foregoing requirements.", "In addition to the agencies\u2019 identifying programs and activities that are  susceptible to significant improper payments, OMB designates as high  priority the programs with the most egregious cases of improper  payments. Specifically, under a provision added to IPIA by IPERIA, OMB  is required to annually identify a list of high-priority federal programs in  need of greater oversight and review. In general, for fiscal years 2014  through 2017, OMB implemented this requirement by designating high- priority programs based on a threshold of $750 million in estimated  improper payments for a given fiscal year. OMB also plays a key role in  implementing laws related to improper payment reporting. Specifically,  OMB is directed by statute to provide guidance to federal agencies on  estimating, reporting, reducing, and recovering improper payments.", "IPERA also requires executive agencies\u2019 IGs to annually determine and  report on whether their respective agencies complied with certain IPERA- related criteria. If an agency does not meet one or more of the six IPERA  criteria for any of its programs or activities, the agency is considered  noncompliant overall. The six criteria are as follows:  1.  publish a report in the form and content required by OMB\u2014typically  an agency financial report (AFR) or a performance and accountability  report (PAR)\u2014for the most recent fiscal year, and post that report on  the agency website;  2.  conduct a program-specific risk assessment, if required, for each  program or activity that conforms with IPIA as amended;  3.  publish improper payment estimates for all programs and activities  deemed susceptible to significant improper payments under the  agency\u2019s risk assessments;  4.  publish corrective action plans for those programs and activities  assessed to be at risk for significant improper payments;  5.  publish and meet annual reduction targets for all programs and  activities assessed to be at risk for significant improper payments; and  6.  report a gross improper payment rate of less than 10 percent for  each program and activity for which an improper payment estimate  was published.", "Under IPERA, agencies reported by their IG as not in compliance with  any of these criteria in a fiscal year are required to submit a plan to  Congress describing the actions they will take to come into compliance,  and such plans shall include measureable milestones, the designation of  senior accountable officials, and the establishment of accountability  mechanisms to achieve compliance. OMB guidance states that agencies  are required to submit these plans to Congress and OMB in the first year  of reported noncompliance.", "When agency programs are reported as noncompliant for consecutive  years, IPERA and OMB guidance requires agencies and OMB to take  additional actions. Specifically, an agency with a program reported as  noncompliant for 3 or more consecutive years is required to submit to  Congress within 30 days of the IG\u2019s report either (1) a reauthorization  proposal for the program or (2) the proposed statutory changes  necessary to bring the program or activity into compliance. We  previously recommended that when agencies determine that  reauthorization or statutory changes are not necessary to bring the  programs into compliance, the agencies should state so in their  notifications to Congress. Effective starting with fiscal year 2018  reporting, OMB updated its guidance to instruct agencies with programs  reported as noncompliant for 3 consecutive years to explain what the  agency is doing to achieve compliance if a reauthorization proposal or  proposed statutory change will not bring a program into compliance with  IPERA. The updated guidance also instructs agencies with programs  reported as noncompliant for 4 or more consecutive years to submit a  report to Congress and OMB (within 30 days of the IG\u2019s determination of  noncompliance) detailing the activities taken and still being pursued to  prevent and reduce improper payments.", "If agency programs are reported as noncompliant under IPERA for 2  consecutive years, and the Director of OMB determines that additional  funding would help the agency come into compliance, the head of the  agency must obligate additional funding in the amount determined by the  Director to intensify compliance efforts. IPERA directs the agency to  exercise any reprogramming or transfer authority that the agency may  have to provide additional funding to meet the level determined by OMB  and, if necessary, submit a request to Congress for additional  reprogramming or transfer authority to meet the full level of funding  determined by OMB. Table 1 summarizes agency and OMB requirements  related to agency programs that are noncompliant under IPERA, as  reported by their IGs."], "subsections": []}, {"section_title": "Over Half of the CFO Act Agencies Were Reported as Noncompliant under IPERA for Fiscal Years 2016 and 2017, and Consecutive Years of Noncompliance Continue for Certain Programs", "paragraphs": [], "subsections": [{"section_title": "Over Half of the Agencies Were Reported as Noncompliant for Fiscal Years 2016 and 2017", "paragraphs": ["Seven years after the initial implementation of IPERA, over half of the 24  CFO Act agencies were reported as noncompliant by their IGs for fiscal  years 2016 and 2017. Specifically, 13 agencies were reported as  noncompliant with one or more IPERA criteria for fiscal year 2016, and 14  agencies were reported as noncompliant for fiscal year 2017 (see fig. 1).  Nine of these agencies have been reported as noncompliant in one or  more programs every year since IPERA was implemented in 2011 (see  app. II for additional details on CFO Act agencies\u2019 compliance under  IPERA for fiscal years 2011 through 2017, as reported by their IGs).", "Although the number of agencies reported as noncompliant under IPERA  has varied slightly since fiscal year 2011, the total instances of  noncompliance for all six criteria substantially improved after fiscal year  2011, when IPERA was first implemented. As shown in figure 2, the total  instances decreased from 38 instances (for 14 noncompliant agencies)  for fiscal year 2011 to 26 instances (for 14 noncompliant agencies) for  fiscal year 2017.", "Also, for fiscal year 2017, 7 of 14 agencies were reported as  noncompliant for only one criterion per noncompliant program. Of these, 6  agencies\u2014the Departments of Homeland Security (DHS), Education  (Education), Commerce, and Transportation; the General Services  Administration; and the Social Security Administration (SSA)\u2014were only  reported as noncompliant with the IPERA criterion that requires agencies  to publish and meet reduction targets. In addition, the Department of the  Treasury (Treasury) was only reported as noncompliant with the IPERA  criterion that requires agencies to report improper payment rates below  10 percent.", "Furthermore, the programs reported as noncompliant for fiscal year 2017  accounted for a significantly smaller portion of the total reported  estimated improper payments as compared to the noncompliant  programs for fiscal year 2015. Specifically, we previously reported that 52  noncompliant programs accounted for $132 billion (or about 96 percent)  of the $137 billion total reported estimated improper payments for fiscal  year 2015, whereas 58 noncompliant programs accounted for $80 billion  (or about 57 percent) of the $141 billion total reported estimated improper  payments for fiscal year 2017. Although improper payment estimates  associated with noncompliant programs vary from year to year, this  decrease (approximately $52 billion) was primarily due to two programs.  Specifically, the Department of Health and Human Services\u2019 (HHS)  Medicare Fee-for-Service (Parts A and B) and Medicare Part C programs  were reported as noncompliant and accounted for approximately   $43 billion and $14 billion, respectively, of estimated improper payments  for fiscal year 2015. These programs were reported as compliant for fiscal  year 2017 and accounted for approximately $36 billion and $14 billion,  respectively, or about 36 percent of the $141 billion total reported  improper payments for fiscal year 2017."], "subsections": []}, {"section_title": "Certain Programs Continue to Be Reported as Noncompliant for Consecutive Years", "paragraphs": ["Almost a third (18 programs) of the 58 programs that contributed to 14  CFO Act agencies\u2019 noncompliance under IPERA, as of fiscal year 2017,  were reported as noncompliant for 3 or more consecutive years. The  number of programs noncompliant for 3 or more consecutive years has  continually increased since fiscal year 2015, as shown in figure 3.  Specifically, 12 programs (associated with 7 agencies) were reported as  noncompliant for 3 or more consecutive years, as of fiscal year 2015, and  the number increased to 14 programs (associated with 8 agencies) and  18 programs (associated with 9 agencies), as of fiscal years 2016 and  2017, respectively.", "These programs accounted for a substantial portion of the $141 billion  total estimated improper payments for fiscal year 2017. As shown in table  2, 14 of the 18 programs that were reported as noncompliant for 3 or  more consecutive years reported improper payment estimates that  accounted for an estimated $74.4 billion (about 53 percent) of the   $141 billion, while the other 4 programs did not report improper payment  estimates for fiscal year 2017 and were reported by their respective IGs  as noncompliant with the IPERA criterion to publish improper payment  estimates. The $74.4 billion is primarily composed of estimates reported  for 2 noncompliant programs\u2014HHS\u2019s Medicaid program ($36.7 billion)  and Treasury\u2019s Earned Income Tax Credit program ($16.2 billion)\u2014 totaling $52.9 billion (or approximately 71 percent of the $74.4 billion).  Improper payments associated with these two noncompliant programs  are also a central part of two areas included in our 2017 High-Risk List,  which includes federal programs and operations that are especially  vulnerable to waste, fraud, abuse, and mismanagement, or that need  transformative change.", "Eight of the 18 noncompliant programs have been reported as  noncompliant since the implementation of IPERA in fiscal year 2011, for a  total of 7 consecutive years, as shown in table 2. Reported compliance for  Treasury\u2019s Earned Income Tax Credit improved from being reported as  noncompliant with multiple IPERA criteria in fiscal year 2013 to  noncompliance with only one criterion for the last 4 years (fiscal years  2014 through 2017)."], "subsections": []}]}, {"section_title": "CFO Act Agencies Did Not Always Notify Congress, and They Provided Varying Information on Programs Reported as Noncompliant for 3 or More Consecutive Years", "paragraphs": ["Eight CFO Act agencies\u2019 programs were reported as noncompliant under  IPERA for 3 or more consecutive years, as of fiscal year 2016. Three of  these agencies did not notify Congress of their program\u2019s continued  noncompliance as required. In addition to submitting the required  notifications for their noncompliant programs, the other five agencies also  included additional information in their notifications\u2014such as measurable  milestones, designation of senior officials, and accountability  mechanisms\u2014useful for assessing their efforts to achieve compliance. In  June 2018, OMB updated its guidance to clarify agency reporting  requirements for each consecutive year a program is reported as  noncompliant. However, OMB\u2019s updated guidance did not direct agencies  to include other types of quality information in their notifications for  programs reported as noncompliant for 3 or more consecutive years that  could help Congress to more effectively assess their efforts to address  long-standing challenges and other issues affecting these programs and  to achieve compliance."], "subsections": [{"section_title": "CFO Act Agencies with Programs Reported as Noncompliant for 3 or More Consecutive Years Did Not Always Notify Congress", "paragraphs": ["Of the eight agencies with programs reported as noncompliant under  IPERA for 3 or more consecutive years as of fiscal year 2016, we found  that five agencies notified Congress of their noncompliance as required.  Specifically, the Department of Defense (DOD), Education, HHS, DHS,  and SSA notified Congress of their programs\u2019 reported noncompliance for  3 or more consecutive years as of fiscal year 2016 as required by IPERA  and OMB guidance. The remaining three agencies\u2014the U.S. Department  of Agriculture (USDA), the Department of Labor (DOL), and Treasury\u2014 did not notify Congress as required.", "Additional information regarding the three agencies that did not submit  their required notifications to Congress is summarized below:", "USDA: In May 2017, the USDA IG reported that four USDA Food and  Nutrition Service programs\u2014Child and Adult Care Food Program;  National School Lunch Program; School Breakfast Program; and  Special Supplemental Nutrition Program for Women, Infants, and  Children\u2014had been noncompliant for 6 consecutive years, as of fiscal  year 2016. However, USDA has not notified Congress of these  programs\u2019 continued noncompliance with IPERA as of fiscal year  2016, despite prior recommendations that we, and the USDA IG,  made to USDA to do so. USDA staff stated in May 2018 that USDA  drafted, but had not submitted, a letter to Congress regarding these  programs\u2019 noncompliance.", "DOL: In June 2017, the DOL IG reported that the Unemployment  Insurance Benefit program had been noncompliant for 6 consecutive  years, as of fiscal year 2016. In October 2016, DOL included  proposed legislation in its last notification to Congress regarding this  program, approximately 8 months prior to the DOL IG\u2019s IPERA  compliance report. However, because the requirement for agencies to  notify Congress is triggered by IG reporting of programs that are  noncompliant for 3 or more consecutive years, DOL should have also  notified Congress regarding the program\u2019s continued noncompliance  in fiscal year 2016 after the IG\u2019s report was issued in June 2017. DOL  staff stated in August 2018 that the proposed legislation included in its  October 2016 notification had not been enacted and that DOL is  currently working to develop a new report to Congress and OMB  detailing corrective actions taken to bring the program into  compliance.", "Treasury: In May 2017, the Treasury IG reported that the Earned  Income Tax Credit (EITC) program had been noncompliant for 6  consecutive years, as of fiscal year 2016. We previously reported that  Treasury submitted proposed statutory changes to Congress for this  program in August 2014 and in June 2015. As stated in the Treasury  IG\u2019s fiscal year 2016 IPERA compliance report, the proposed statutory  changes would help prevent the improper issuance of billions of  dollars in refunds as it would provide the Internal Revenue Service  (IRS) with expanded authority to systematically correct erroneous  claims that are identified when tax returns are processed and allow  IRS to deny erroneous EITC refund claims before they are paid.  Further, Treasury stated that IRS has repeatedly requested authority  to correct such errors in subsequent fiscal year budgets, including its  fiscal year 2019 budget submission. In June 2018, Treasury staff  stated that the Consolidated Appropriations Act, 2016 provided IRS  with additional tools for reducing EITC improper payments; however,  the act did not expand IRS\u2019s authority to systematically correct the  erroneous claims that are identified when tax returns are processed.", "Treasury staff also stated that the department has continued to  coordinate with OMB on required reporting for the EITC program  because of the program\u2019s complexity, and that OMB has not  requested additional actions or documentation regarding the  program\u2019s noncompliance. Although continued coordination with OMB  is important, Treasury did not notify Congress regarding the EITC  program\u2019s continued noncompliance as required.", "In summary, despite reporting requirements in IPERA and OMB  guidance, one agency (USDA) has not notified Congress about four  programs being reported as noncompliant for 6 consecutive years, as of  fiscal year 2016. The remaining two agencies (DOL and Treasury) that  did not notify Congress of their programs\u2019 consecutive noncompliance, as  of fiscal year 2016, submitted notifications to Congress prior to their  respective IGs\u2019 fiscal year 2016 compliance results. However, IPERA  requires agencies to notify Congress when programs are reported as  noncompliant for more than 3 consecutive years and thus DOL and  Treasury should have also notified Congress about their programs\u2019 being  reported as noncompliant for 6 consecutive years, as of fiscal year 2016.", "It is important that agencies continue to notify Congress of their programs\u2019  consecutive noncompliance each year after the third consecutive year as  the information related to their proposals or regarding their IPERA  compliance efforts included in prior years\u2019 notifications to Congress may  significantly change over time. Unless agencies continue to notify  Congress in subsequent years, Congress may lack the current and  relevant information needed to effectively assess agencies\u2019 proposals or  monitor their efforts to address problematic programs in a timely manner.  OMB updated its guidance in June 2018 to provide more clarity regarding  the notification requirements for each consecutive year a program is  reported as noncompliant. Effective implementation of this guidance may  help ensure that agencies consistently provide required information to  Congress on these programs in future years."], "subsections": []}, {"section_title": "Certain Agencies Provided Additional Quality Information on IPERA Compliance Efforts in Their Notifications to Congress", "paragraphs": ["We found that the five agencies\u2014DOD, DHS, Education, HHS, and  SSA\u2014that notified Congress regarding their programs\u2019 reported  noncompliance for 3 or more consecutive years, as of fiscal year 2016,  also included additional information about their efforts to achieve IPERA  compliance. Although IPERA does not specifically require that agency  proposals for reauthorization or other statutory change provide such  information, including it could help Congress to better assess the  agencies\u2019 proposals included in these notifications and to oversee agency  efforts to address long-standing challenges and compliance issues  associated with these programs.", "In many instances, the types of additional information provided by these  agencies are similar to information that agencies are required to provide  to Congress or OMB in other required notifications or other reports, such  as annual AFRs or PARs. For example, all improper payment estimates  reported under IPIA, as amended, must be accompanied by information  on what the agency is doing to reduce improper payments, including a  description of root causes and the steps the agency has taken to ensure  accountability. Further, IPERA and OMB guidance require agencies to  provide corrective action plans to Congress for programs reported as  noncompliant for 1 year. Such plans should include actions planned or  taken to address the program\u2019s noncompliance, measurable milestones,  a senior official designated to oversee progress, and the accountability  mechanisms in place to hold the senior official accountable.", "In addition, GAO\u2019s Standards for Internal Control in the Federal  Government emphasizes the importance of communicating quality  information, such as significant matters related to risks, changes, or  issues affecting agencies\u2019 efforts to achieve compliance objectives, to  external parties\u2014such as legislators, oversight bodies, and the general  public. Furthermore, in our fiscal year 2017 High-Risk Update, we also  highlight the importance of these types of information when assessing  agency efforts to address issues associated with programs included on  our High-Risk List. Examples of such information include (1) action  plans that are accessible and transparent with clear milestones and  metrics, including established goals and performance measures to  address identified root causes; (2) leadership commitment of top (or  senior) officials to establish long-term priorities and goals and continued  oversight and accountability; (3) monitoring progress against goals,  assessing program performance, or reporting potential risks; and   (4) demonstrated progress, through recommendations implemented,  actions taken for improvement, and effectively addressing identified root  causes and managing high-risk issues.", "Table 3 summarizes the types of additional information described above  that the five agencies provided in their fiscal year 2016 notifications to  Congress to address programs with 3 or more consecutive years of  noncompliance. All five agencies informed Congress of (1) root causes  that directly lead to improper payments or hindered the program\u2019s ability  to achieve compliance; (2) certain risks, significant changes, or issues  affecting their efforts; and (3) their corrective actions or strategies to  achieve compliance. Three of the five agencies\u2014DOD, Education, and  DHS\u2014also included the other types of additional information described  above in their notifications, including measurable milestones, designated  senior officials to oversee progress, and accountability mechanisms  established to help achieve compliance. For example, all three agencies  designated their chief financial officers (CFO) to oversee progress toward  achieving measurable milestones and expanded their official roles and  responsibilities to hold them accountable. Education and DHS stated that  these responsibilities were added to their respective CFOs\u2019 individual  performance plans.", "Although OMB updated its guidance in June 2018 to clarify agency  reporting requirements related to programs reported as noncompliant for  3 or more consecutive years, the updated guidance did not direct  agencies to include other types of quality information in their notifications,  such as those described above. In addition, information related to  measurable milestones, corrective actions, risks, issues, or other items  affecting agencies\u2019 efforts may change significantly over time. With this  additional information, Congress could have more complete information to  effectively oversee agency efforts to address long-standing challenges  and other issues that have contributed to programs being reported as  noncompliant for 3 or more consecutive years."], "subsections": []}]}, {"section_title": "OMB Updated Guidance for Determining Additional Funding Needs for Programs Reported as Noncompliant for 2 Consecutive Years", "paragraphs": ["Fifteen programs in seven agencies and 12 programs in six agencies  were reported as noncompliant for 2 consecutive years as of fiscal years  2016 and 2017, respectively. For agencies reported as noncompliant  under IPERA for 2 consecutive years for the same program, IPERA gives  the Director of OMB the authority to determine whether additional funding  would help the agencies come into compliance. If the OMB Director  determines that such funding would help, the agency is required to use  any available reprogramming or transfer authority to meet the funding  level that the OMB Director specified and, if such authorities are not  sufficient, submit a request to Congress for additional reprogramming or  transfer authority. According to OMB staff, OMB determined that no  additional funding was needed for programs reported as noncompliant for  2 consecutive years as of fiscal year 2016. As of September 2018, OMB  was in the process of making funding determinations for 12 programs that  were reported as noncompliant as of fiscal year 2017 and stated that any  determinations made would be developed in the President\u2019s Budget for  fiscal year 2020.", "The 12 programs reported as noncompliant for 2 consecutive years, as of  fiscal year 2017, accounted for approximately $3 billion (2 percent) of the  $141 billion total improper payment estimate for that year. Of these 12  programs, more than half (or 7 of the 12) were attributable to DOD;  however, Education\u2019s Pell Grant program accounted for $2.2 billion (or 74  percent) of the $3 billion in improper payment estimates for programs  reported as noncompliant programs for 2 consecutive years, for fiscal  year 2017. In addition, as shown in table 4, the 12 programs reported as  noncompliant for 2 consecutive years, as of fiscal year 2017, were  primarily noncompliant with the IPERA criteria that required agencies to  publish information in their PAR or AFR or publish and meet reduction  targets.", "As noted previously, IPERA gives OMB authority to determine whether  additional funding for intensified compliance efforts would help the agency  come into compliance under IPERA. Therefore, an established process  for making timely, well-informed funding determinations is an essential  part of ensuring that agencies have sufficient resources and take steps to  intensify their compliance efforts in a timely manner. In April 2018, OMB  staff stated that when making funding determinations, they primarily rely  on the IGs\u2019 recommendations in their annual IPERA compliance reports.  OMB staff also stated that for its fiscal year 2016 determinations, OMB  determined that additional funding was not needed because the IGs\u2019  recommendations did not specify that additional funding was needed to  help resolve the programs\u2019 noncompliance.", "The IGs\u2019 annual reports provide information on agencies\u2019 IPERA  compliance and may be useful to OMB as a tool to help them make  determinations for additional funding. However, IPERA does not require  IGs to address funding levels in their annual compliance reports, and  OMB\u2019s guidance does not inform the IGs that their work might be relied  upon in this manner. We reviewed the IGs\u2019 fiscal years 2016 and 2017  IPERA compliance reports for the agencies with programs reported as  noncompliant for 2 consecutive years and found that the IGs did not make  any recommendations regarding additional funding needed to bring these  programs into compliance. In addition, as specifically stated by the IGs for  Education and USDA in their IPERA reports, OMB has the statutory  responsibility to make these funding determinations. Education IG\u2019s fiscal  year 2017 IPERA compliance report stated that \u201cIf OMB recommends that  the Department needs additional funding or should take any other actions  to become compliant with IPERA, we recommend that the Department  implement OMB\u2019s recommendations.\u201d Also, the USDA IG\u2019s fiscal year  2016 IPERA compliance report stated, \u201cFor agencies that are not  compliant for 2 consecutive years for the same program, the Director of  OMB will determine if additional funding would help these programs come  into compliance.\u201d As a result, OMB\u2019s reliance on IG recommendations as  the source of information to support additional funding determinations  may not provide sufficient information to effectively assess agencies\u2019  funding needs to address noncompliance.", "OMB staff subsequently stated that they no longer need to conduct a  detailed review of the IGs\u2019 IPERA compliance reports to identify  recommendations related to additional funding needs. Instead, OMB  Memorandum M-18-20, issued in June 2018, updated OMB Circular No.  A-123, Appendix C, and clarified that the funding determination process  will unfold as part of the annual development of the President\u2019s Budget,  as described in OMB Circular No. A-11. This updated guidance also  directs agencies to submit proposals to OMB regarding additional funding  needs that may help them address IPERA noncompliance.", "To illustrate, under this new guidance, the IGs\u2019 fiscal year 2018 IPERA  compliance reports will be due in May 2019, and any funding needs to  address noncompliance would be incorporated in the next annual budget  preparation process, the results of which are due to be submitted to  Congress in February 2020 for the President\u2019s Budget for fiscal year  2021. Once OMB\u2019s determinations have been made and communicated  to agencies, agencies would respond by performing the required  reprogramming and making transfers under existing authority, where  available. Any requests for additional transfer authority may be  incorporated into subsequent appropriations legislation."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Estimated improper payments reported government-wide total almost  $1.4 trillion from fiscal year 2003 through fiscal year 2017. The number of  programs reported as noncompliant under IPERA for 3 or more  consecutive years has continued to increase, from 12 programs  (associated with 7 agencies) to 18 programs (associated with 9 agencies)  as of fiscal years 2015 and 2017, respectively. Including additional useful,  up-to-date information\u2014such as measurable milestones, risks, or other  issues affecting agency efforts to achieve compliance\u2014in notifications to  Congress, which are required when programs are reported as  noncompliant for 3 or more consecutive years, could help Congress  better assess agency efforts to address long-standing challenges and  other issues associated with them. Although certain agencies included  certain types of additional information in their notifications as of fiscal year  2016, OMB guidance does not require agencies to include such  information in their notifications. As a result, Congress may lack sufficient  information to effectively oversee agency efforts and take prompt action  to help address long-standing challenges or other issues associated with  these programs."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Director of OMB should take steps to update OMB guidance to  specify other types of quality information that agencies with programs  noncompliant for 3 or more consecutive years should include in their  notifications to Congress, such as significant matters related to risks,  issues, root causes, measurable milestones, designated senior officials,  accountability mechanisms, and corrective actions or strategies planned  or taken by agencies to achieve compliance. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OMB and requested comments, and  OMB said that it had no comments. We also provided a draft of this report  to the 24 CFO Act agencies and their IGs and requested comments. We  received letters from the DHS Office of Inspector General (OIG), SSA,  and the United States Agency for International Development. These  letters are reproduced in appendixes V through VII. We also received  technical comments from DOL, the Department of Veterans Affairs, the  General Services Administration, HHS, the Department of Housing and  Urban Development, and the Treasury OIG, which we incorporated in the  report as appropriate. The remaining agencies and OIGs either did not  provide comments or notified us via email that they had no comments.", "In its comments, SSA stated that it provided information to Congress on  measurable milestones, designated senior officials, and accountability  mechanisms in its AFR. In the report, we acknowledge that these types of  additional information are similar to information that agencies are required  to provide to Congress or OMB in other reports, such as annual AFRs.  However, our analysis was based on SSA\u2019s fiscal year 2016 notifications  to Congress for programs reported as noncompliant under IPERA, in  which this specific information was not reported. As such, we continue to  believe that OMB should take steps to update OMB guidance to help  ensure that agencies report such significant information and include it in  their notifications to Congress.", "We are sending copies of this report to the appropriate congressional  committees, the Director of the Office of Management and Budget, and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions on matters discussed in this report,  please contact me at (202) 512-2623 or davisbh@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine the following:  1.  The extent to which the 24 agencies listed in the Chief Financial  Officers Act of 1990, as amended (CFO Act), complied with the six  criteria listed in the Improper Payments Elimination and Recovery Act  of 2010 (IPERA), for fiscal years 2016 and 2017, and the trends  evident since 2011, as reported by their inspectors general (IG).  2.  The extent to which CFO Act agencies addressed requirements for  programs and activities reported as noncompliant with IPERA criteria  for 3 or more consecutive years, as of fiscal year 2016, and  communicated their strategies to Congress for reducing improper  payments and achieving compliance.  3.  The extent to which the Office of Management and Budget (OMB)  made determinations regarding whether additional funding would help  CFO Act programs and activities reported as noncompliant with  IPERA criteria for 2 consecutive years, as of fiscal years 2016 and  2017, come into compliance.", "Although the responsibility for complying with provisions of improper  payment-related statutes rests with the head of each executive agency,  we focused on the 24 agencies listed in the CFO Act because estimates  of their improper payments represent over 99 percent of the total reported  estimated improper payments for fiscal years 2016 and 2017. Our work  did not include validating or retesting the data or methodologies that the  IGs used to determine and report compliance. We corroborated all of our  findings with OMB and all 24 CFO Act agencies and IGs.", "To address our first objective, we identified the requirements that  agencies must meet by reviewing the Improper Payments Information Act  of 2002 (IPIA), IPERA, and OMB guidance. We reviewed the CFO Act  agency IGs\u2019 IPERA compliance reports for fiscal years 2016 and 2017,  which were the most current reports available at the time of our review.", "We summarized the overall agency and program-specific compliance  determinations with the six IPERA criteria, as reported by the IGs. For  fiscal years 2011 through 2015, we relied on and reviewed prior year  supporting documentation and analyses of CFO Act agencies\u2019 IPERA  compliance, as reported in our prior reports, in order to identify  compliance trends since 2011, as reported by the IGs. Based on these  reports, we summarized the programs and the number of consecutive  years that they were reported as noncompliant. For each IG report that  did not specifically state that the agency had programs noncompliant for  consecutive years, we compared the list of programs reported as  noncompliant for fiscal years 2016 and 2017 to the list of programs  reported as noncompliant for fiscal years 2014 and 2015 in our prior  reports. Lastly, we corroborated our findings with OMB and all 24 CFO  Act agencies and IGs.", "To address our second objective, we determined if the agencies  responsible for programs and activities reported as noncompliant for 3 or  more consecutive years as of fiscal year 2016 had submitted the required  proposals (reauthorizations or statutory changes) to Congress by  requesting and reviewing documentation of the required submissions and  relevant notifications to Congress obtained from each applicable agency.  Further, we reviewed the content of each agency notification to evaluate  agencies\u2019 efforts to communicate quality information to Congress  concerning their strategies for achieving compliance consistent with  Standards for Internal Control in the Federal Government. Principle 15 of  these standards emphasizes the need for an entity\u2019s management to  communicate necessary quality information, such as significant matters  related to risks, changes, or issues affecting agencies\u2019 efforts, to achieve  compliance objectives, to external parties\u2014such as legislators, oversight  bodies, and the general public. To identify other types of information  useful for this purpose, we reviewed IPIA, as amended; IPERA; and OMB  guidance for information agencies are required to provide to Congress or  OMB in other notifications and reports, such as their corrective action  plans or strategies, measurable milestones, designated senior officials,  and accountability mechanisms for achieving compliance. We also  reviewed information used to assess agency efforts to address issues  associated with programs on our High-Risk List.", "To determine the extent to which agencies\u2019 notifications to Congress  included these additional types of useful information for their applicable  program(s), we used a data collection instrument to document our  determinations regarding the additional types of quality information  included in each notification. In addition, two GAO analysts independently  reviewed each agency\u2019s notification and documented their determinations  regarding the types of information included in the notifications.  Differences between the analysts\u2019 determinations were identified and  resolved to ensure that the types of additional information were  consistently identified and categorized. We did not evaluate the  sufficiency and completeness of the agency-provided information. Lastly,  we corroborated our findings with the respective agencies and IGs.", "To address our third objective, we identified provisions in IPIA, IPERA,  and OMB guidance that are applicable to OMB for programs reported as  noncompliant for 2 consecutive years. To determine if OMB made  additional funding determinations for agency programs and activities  reported as noncompliant for 2 consecutive years as of fiscal years 2016  and 2017, we requested relevant information and communications from  OMB and the applicable agencies and IGs. We also interviewed key OMB  staff on their process for determining additional funding needs for  noncompliant programs and activities as of fiscal years 2016 and 2017  and related results. In addition, we reviewed the applicable fiscal years  2016 and 2017 CFO Act agency IG IPERA compliance reports, which  OMB staff stated they relied on for determining whether noncompliant  programs and activities required additional funding. We also asked the  agencies whether they coordinated with OMB regarding their need for  additional funding for programs and activities reported as noncompliant  for 2 consecutive years as of fiscal years 2016 and 2017. Lastly, we  corroborated our findings with OMB and the respective agencies and IGs.", "We conducted this performance audit from November 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: CFO Act Agencies\u2019 Overall IPERA Compliance for Fiscal Years 2011 through 2017, as Reported or Acknowledged by Their IGs", "paragraphs": ["Figure 4 details the 24 Chief Financial Officers Act of 1990 (CFO Act)  agencies\u2019 overall compliance under the Improper Payments Elimination  and Recovery Act of 2010 (IPERA), as reported by their inspectors  general, for fiscal years 2011 through 2017. We previously reported on  CFO Act agencies\u2019 overall reported compliance for fiscal years 2011  through 2015."], "subsections": []}, {"section_title": "Appendix III: CFO Act Agencies and Programs Reported as Noncompliant with IPERA for Fiscal Years 2016 and 2017", "paragraphs": ["Tables 5 and 6 detail the Chief Financial Officers Act of 1990 (CFO Act)  agencies and programs reported by their inspectors general as  noncompliant with the six criteria specified by the Improper Payments  Elimination and Recovery Act of 2010 (IPERA), for fiscal years 2016 and  2017. We previously reported on CFO Act agencies\u2019 reported compliance  with the six IPERA criteria for fiscal year 2015."], "subsections": []}, {"section_title": "Appendix IV: CFO Act Agencies with Programs Reported by Their IGs as Noncompliant for 2 or More Consecutive Years, as of Fiscal Years 2016 and 2017", "paragraphs": ["Table 7 details the Chief Financial Officers Act of 1990 (CFO Act)  agencies and programs reported by their inspectors general as  noncompliant under the Improper Payments Elimination and Recovery  Act of 2010 (IPERA) for 2 or more consecutive years, as of fiscal years  2016 and 2017. We previously reported on CFO Act agencies\u2019 reported  compliance for fiscal year 2015."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security Office of Inspector General", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the United States Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michelle Philpott (Assistant  Director), Matthew Valenta (Assistant Director), Vivian Ly (Auditor in  Charge), Juvy Chaney, John Craig, Caitlin Cusati, Francine DelVecchio,  Patrick Frey, Maria Hasan, Maxine Hattery, Jason Kelly, Jim Kernen,  Jason Kirwan, Sharon Kittrell, Lisa Motley, Heena Patel, Anne Rhodes- Kline, and Kailey Schoenholtz made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-158", "url": "https://www.gao.gov/products/GAO-19-158", "title": "Dodd-Frank Regulations: Consumer Financial Protection Bureau Needs a Systematic Process to Prioritize Consumer Risks", "published_date": "2018-12-21T00:00:00", "released_date": "2018-12-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Dodd-Frank Act created CFPB to regulate the provision of consumer financial products and services. Congress included a provision in statute for GAO to study financial services regulations annually, including CFPB\u2019s related activities. This eighth annual report examines steps CFPB has taken to (1) identify, monitor, and report on risks to consumers in support of its rulemakings and other functions and (2) retrospectively assess the effectiveness of certain rules within 5 years of their effective dates.", "GAO reviewed CFPB policies and procedures, internal and public reports, and memorandums documenting key decisions, assessment plans, and requests for public comment. GAO also interviewed officials from CFPB, three federal agencies with which it coordinated, and representatives of consumer and industry groups."]}, {"section_title": "What GAO Found", "paragraphs": ["In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Consumer Financial Protection Bureau (CFPB) has routinely monitored the consumer financial markets to identify potential risks to consumers related to financial products and services. CFPB monitors consumer complaints, analyzes market data, and gathers market intelligence from external groups (see figure for sources of CFPB\u2019s monitoring). CFPB has used risk-monitoring findings to inform its rulemakings, supervision, and other functions. In 2015, CFPB initiated a bureau-wide process for using market data and other information to set policy priorities related to addressing risks to consumers. However, CFPB has not yet decided whether it will continue to use this process to set priorities. CFPB currently lacks a systematic, bureau-wide process for prioritizing financial risks to consumers and considering how it will use its tools\u2014such as rulemaking, supervision, and consumer education\u2014to address them. Federal internal control standards state that management should use quality information to achieve agency objectives and that it should also identify, analyze, and respond to risks related to achieving those objectives. Implementing a bureau-wide prioritization process could help to ensure that CFPB effectively focuses its resources on the most significant financial risks to consumers and enhances its ability to meet its statutory consumer protection objectives.", "CFPB has taken steps to retrospectively assess its significant rules within 5 years of these rules becoming effective, as required by the Dodd-Frank Act. CFPB developed and applied criteria to identify three rules as significant and requiring a retrospective assessment. For these three rules, CFPB created assessment plans, issued public requests for comment and information, and reached out to external parties for additional data and evidence. In October 2018, CFPB issued its first assessment report on a rule related to cross-border money transfers. Among other things, the report found that certain trends, such as increasing volume of these transfers, continued after the rule took effect. CFPB expects to complete the other two assessments by the January 2019 deadline."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CFPB implement a systematic process for prioritizing risks to consumers and considering how to use its available policy tools\u2014such as rulemaking, supervision, enforcement, and consumer education\u2014to address these risks. CFPB did not agree or disagree with the recommendation but agreed with the importance of having processes in place to prioritize and address consumer financial risks."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act) created the Bureau of Consumer Financial Protection (also  known as the Consumer Financial Protection Bureau, or CFPB) to  regulate the offering and provision of financial products or services under  federal consumer financial laws. The act consolidated many of the  consumer financial protection authorities previously shared by seven  federal agencies into one. It also provided CFPB additional authorities  related to supervising for compliance with and enforcing federal consumer  financial laws, handling consumer complaints, promoting financial  education, and monitoring the functioning of consumer financial products  markets for risks to consumers.", "The Dodd-Frank Act set forth deadlines for CFPB to complete  rulemakings in certain areas and also granted CFPB authority to take  additional actions needed to carry out the purpose and objectives of  federal consumer financial laws. Section 1022 of the act contained  requirements related to CFPB\u2019s rulemaking authority. Among other  requirements, it directed CFPB to monitor consumer financial markets for  risks to consumers in the offering or provision of consumer financial  products or services in support of its rulemaking and other functions. It  also required CFPB to retrospectively assess, among other things, the  effectiveness of its significant rules or orders and publish a report of such  assessment within 5 years of the rule or order\u2019s effective date.", "Section 1573(a) of the Department of Defense and Full-Year Continuing  Appropriations Act of 2011 amended the Dodd-Frank Act and included a  provision for us to annually review financial services regulations, including  those of CFPB. We have previously issued seven reports under this  mandate. This report examines steps CFPB has taken to (1) identify,  monitor, and report on risks to consumers in support of its rulemakings  and other functions and (2) retrospectively assess the effectiveness of  certain rules within 5 years of their effective dates.", "To evaluate how CFPB identifies, monitors, and reports on risks to  consumers, we reviewed CFPB policies, procedures, and other  documentation of its processes. These documents included the values  statement for the offices that conduct market monitoring and policies on  data governance, information sharing, and advisory groups. We also  reviewed CFPB\u2019s public reports, such as its semiannual reports to  Congress; its rulemaking agendas; and more than 100 internal market  intelligence reports from July 2016 through July 2018.", "To evaluate the steps CFPB has taken to retrospectively assess certain  rules, we reviewed internal CFPB memorandums and presentations from  early 2015 to mid-2018 documenting key decisions about the process, as  well as the assessment plans and requests for public comment for the  three rules CFPB has chosen to retrospectively assess. In addition, we  reviewed CFPB\u2019s retrospective assessment report on its Remittance  Rule\u2014the only assessment report to be issued within our reporting time  frames. For both objectives, we compared CFPB\u2019s efforts to Dodd-Frank  Act requirements and federal internal control standards. We also  interviewed officials from CFPB and three federal agencies with which  CFPB coordinated for its risk-monitoring or retrospective assessment  efforts\u2014the Federal Housing Finance Agency, Board of Governors of the  Federal Reserve System (Federal Reserve), and Office of the Comptroller  of the Currency. Finally, we interviewed representatives of three  consumer groups and four industry groups about their communication  with CFPB regarding these efforts.", "We conducted this performance audit from April 2018 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CFPB\u2019s Research, Markets, and Regulations Division has primary  responsibility for CFPB\u2019s efforts to monitor market developments and  risks to consumers and to retrospectively assess rules. As shown in  figure 1, the division is composed of the Office of Research, the Office of  Regulations, and the following four offices (collectively known as the  \u201cMarkets Offices\u201d), which are focused on different consumer financial  markets:", "The Office of Card, Payment, and Deposit Markets monitors credit  cards, deposit accounts, prepaid cards, and remittances, as well as  other emerging forms of payment and related technologies, such as  mobile payments and virtual currencies. It also monitors data  aggregation services.", "The Office of Consumer Lending, Reporting, and Collection Markets  monitors debt collection, debt relief, and consumer reporting and  scoring, as well as student, auto, and the small-dollar and personal  lending markets.", "The Office of Mortgage Markets monitors the mortgage markets,  including originations, servicing, and secondary markets.", "The Office of Small Business Lending Markets monitors credit to small  businesses, including traditional lenders, specialty financing, and  emerging technologies.", "The four Markets Offices are responsible for collecting and sharing  market intelligence, helping to shape CFPB policy (including through  participation on rulemaking teams), and helping to inform the marketplace  through research and outreach. The Office of Research is responsible for  conducting research to support the design and implementation of CFPB\u2019s  consumer protection policies, including developing and writing any  required cost-benefit analyses for rulemakings. Among other things, these  offices research, analyze, and report on consumer financial markets  issues. These offices also help inform the work of the Office of  Regulations, which supports and provides strategic direction for CFPB\u2019s  rulemaking, guidance, and regulatory implementation functions.", "The Markets Offices and the Office of Research contribute to CFPB\u2019s  efforts to address the Dodd-Frank Act requirement that CFPB monitor for  certain risks to consumers in support of its rulemaking and other  functions. This provision states that CFPB may consider a number of  factors in allocating its resources for risk-monitoring efforts with regard to  consumer financial products and the markets for those products, such as  consumers\u2019 understanding of a type of product\u2019s risks, the extent to which  existing law is likely to protect consumers, and any disproportionate  effects on traditionally underserved consumers. Further, the Dodd-Frank  Act gives CFPB authority in connection with such monitoring to gather  information from time to time regarding the organization, business  conduct, markets, and activities of covered persons or service providers  from a variety of sources, including several sources specified in the act.  Finally, this provision requires CFPB to issue at least one report of  significant findings from its risk monitoring each calendar year.", "The Office of Research has led CFPB\u2019s efforts to address the Dodd-Frank  Act requirement that CFPB conduct assessments of each significant final  rule or order it adopts and publish a report of the assessment no later  than 5 years after the rule or order\u2019s effective date. Before publishing a  report of its assessment, CFPB must invite public comment on whether  the rule or order should be modified, expanded, or eliminated. In addition,  the Dodd-Frank Act provides CFPB authority to require covered persons  or service providers to provide information to help support these  assessments, as well as to support its risk-monitoring activities.", "In addition to the Research, Markets, and Regulations Division, other  CFPB divisions and offices conduct outreach to help inform CFPB policy  making. For example, CFPB\u2019s External Affairs Division facilitates  conversation with stakeholders, such as Congress, financial institutions,  state governments, and the public. In addition, in the Consumer  Education and Engagement Division, the Office of Consumer Response  manages the intake of and response to complaints about consumer  financial products and services. All of the divisions report to the Director.  In November 2017, the President designated a new Acting Director of  CFPB, and in December 2018, the Senate voted to confirm a new  Director of the bureau."], "subsections": []}, {"section_title": "CFPB Monitors Consumer Financial Markets to Inform Policy but Does Not Systematically Prioritize Consumer Risks", "paragraphs": [], "subsections": [{"section_title": "CFPB Routinely Monitors Market Trends and Collects Targeted Information for Rulemaking and Other Purposes", "paragraphs": ["To address the Dodd-Frank Act consumer risk-monitoring requirement,  CFPB routinely monitors consumer financial markets through a variety of  methods. It also conducts more targeted market monitoring to support  rulemaking and other agency functions."], "subsections": [{"section_title": "Routine Monitoring", "paragraphs": ["CFPB collects and monitors routine market data and other market  intelligence through a combination of internal and external data sources  and outreach (see fig. 2). Markets Offices staff use information from these  sources to analyze market trends and identify emerging risks that may  require greater attention. Staff produce monthly and quarterly reports that  summarize or analyze observed market developments and trends, and  they distribute them bureau-wide.", "CFPB internal data and research. Staff in CFPB\u2019s Markets Offices use  CFPB data and research to identify and monitor risks. For example, in our  review of CFPB\u2019s market intelligence reports from July 2016 through July  2018, we observed the following frequently cited internal CFPB data  sources:", "Consumer complaints submitted to CFPB. Markets Offices staff  monitor consumer complaints to track trends and potential problems  in the marketplace. For example, monthly mortgage trend reports we  reviewed cited changes in total numbers of mortgage complaints, as  well as in complaints related to private mortgage insurance, escrow  accounts, and other mortgage-related topics.", "Consumer Credit Trends tool. This tool is based on a nationally  representative sample of commercially available, anonymized credit  records. Markets Offices staff use this tool to monitor conditions and  outcomes for specific groups of consumers in markets for mortgages,  credit cards, auto loans, and student loans. For example, CFPB  monthly auto market trend reports cited the tool as a source for  information on changes in the volume of auto loans by neighborhood  income.", "Home Mortgage Disclosure Act data. CFPB maintains loan-level  data that mortgage lenders report pursuant to the Home Mortgage  Disclosure Act. According to CFPB, Markets Offices staff use the  data for their market monitoring, which can include analysis to  determine whether lenders are serving the housing needs of their  communities and to identify potentially discriminatory lending patterns.", "External data and research. In addition to its internal databases, CFPB  obtains external market data from a number of public and proprietary data  sources. The market intelligence reports we reviewed included the  following commonly cited external sources, among others:  federal databases and research, such as the Federal Reserve Bank of  New York\u2019s Quarterly Report on Household Debt and Credit; publicly available information from sources such as industry websites,  mainstream news publications, and publicly traded companies\u2019  financial statements. proprietary data from sources such as data analytics services and  credit reporting agencies.", "Engagement with industry representatives. CFPB also gathers market  intelligence from engagement with industry representatives. Market  intelligence reports we reviewed cited several meetings with industry  representatives and regular CFPB attendance at industry conferences.  Representatives of two trade groups we interviewed told us that CFPB  had sometimes proactively reached out to them regarding areas of  potential risk. According to CFPB, in fiscal year 2018, Markets Offices  staff conducted an average of about 50 meetings with industry per month  and held intelligence-gathering meetings across various consumer  financial markets throughout the year.", "Engagement with consumer organizations. CFPB\u2019s External Affairs  Division, which is responsible for engagement with the nonprofit sector,  facilitates most communication between Markets Offices staff and  consumer organizations to help inform staff\u2019s risk monitoring efforts.  According to CFPB, between January and September 2018, staff from the  External Affairs and Research, Markets, and Regulation divisions held an  average of about four meetings per month with consumer organizations  and nonprofit stakeholders, and Markets Offices staff said these meetings  provided information useful in monitoring markets. Two of the three  consumer organizations we interviewed noted that their communication  with CFPB had decreased since late 2017. However, one group noted  that external engagement has typically been greater when CFPB is going  through a rulemaking and that rulemaking activity had slowed in the last  year.", "Advisory committees and other formal outreach. CFPB obtains  information on consumer financial issues and emerging market trends  from various advisory groups and other formal outreach. In 2012, CFPB  established a consumer advisory board, in accordance with a Dodd-Frank  Act requirement. It also established three additional advisory councils  (community bank, credit union, and academic) to obtain external  perspectives on issues affecting its mission. The groups, which include  subgroups focused on various consumer financial market areas or issues,  met regularly through 2017. CFPB dismissed the existing members of the  consumer advisory board and community bank and credit union advisory  councils in June 2018 and reconstituted the groups with new, smaller  memberships that resumed meeting in September 2018. In addition,  from July 2016 to mid-November 2018, CFPB solicited public input  through public field hearings and town hall meetings on issues such as  debt collection, consumer access to financial records, and elder financial  abuse, among other issues.", "Coordination with other regulators. CFPB engages with the federal  prudential regulators and other federal and state agencies to inform its  routine market-monitoring efforts. This engagement can occur through  mechanisms such as working groups, task forces, and information- sharing agreements. For example, CFPB is a member of a working group of federal housing agencies, whose members share market intelligence  and discuss risks they have observed in the mortgage markets. Markets  Offices staff also receive quarterly, publicly available bank and credit  union call report data through the Federal Financial Institutions  Examination Council and the National Credit Union Administration, with  which it has information-sharing agreements."], "subsections": []}, {"section_title": "Targeted Monitoring", "paragraphs": ["CFPB has supplemented its routine monitoring by conducting targeted  research and data collection to inform rulemaking efforts, meet statutory  reporting requirements, and learn more about a particular market for  consumer financial products. As noted earlier, the Dodd-Frank Act  authorizes CFPB to collect certain data from covered persons and service  providers.", "Since July 2016, to support bureau rulemaking efforts, Markets Offices  staff have augmented their routine monitoring with targeted use of  supervisory data collected through CFPB\u2019s examinations of covered  persons and service providers. The Research, Markets, and Regulations  Division has a formal information-sharing agreement with CFPB\u2019s  Supervision, Enforcement, and Fair Lending Division. Under this  agreement, staff in the Office of Small Business Lending Markets used  supervisory information on common data terminology used by business  lenders to inform recommendations on data elements that should be  included in a potential small business data collection rule. In addition, as  discussed below, Markets Offices staff reviewed aggregated and  anonymized supervisory information from CFPB\u2019s examinations of  payday lenders for research that informed the November 2017 Payday,  Vehicle Title, and Certain High-Cost Installment Loans Rule, also referred  to as the Payday Rule.", "In addition to rulemaking, CFPB has conducted targeted risk-monitoring  activities to support certain statutory reporting requirements. For its  mandated biennial credit card study, CFPB used its data-collection  authorities under the Dodd-Frank Act to make four mandatory information  requests to a total of 15 credit card issuers. According to CFPB officials,  this study and other statutory reporting efforts\u2014such as the bureau\u2019s  annual report on the Fair Debt Collection Practices Act\u2014also support  their market-monitoring efforts under the Dodd-Frank Act. CFPB notified  the relevant federal and state regulators of its impending requests to the  credit card issuers under those regulators\u2019 supervision.", "Finally, CFPB has sometimes engaged in targeted data collection to learn  more about specific areas of potential consumer financial risk. In some  cases, CFPB has used its Dodd-Frank Act data collection authority under  Section 1022 to require a company to provide data. For example, to  understand developments with respect to person-to-person payments,  CFPB required a payment processing company to provide certain  information regarding its system. In other cases, CFPB has obtained  targeted data through voluntary agreements with other regulators. For  instance, in January 2018, CFPB reached an agreement with the Federal  Reserve to obtain supervisory data on bank holding companies\u2019 and  intermediate holding companies\u2019 mortgage and home equity loan  portfolios. According to CFPB officials, they plan to use the data to  monitor trends and risks in the mortgage market and inform bureau policy  making."], "subsections": []}]}, {"section_title": "Monitoring of Consumer Risks Has Informed CFPB\u2019s Rulemaking and Other Efforts", "paragraphs": ["The market monitoring conducted by CFPB\u2019s Markets Offices staff  contributes to bureau rulemaking and other functions, such as  supervision, guidance to industry, consumer education, and reporting.", "Rulemaking. Since July 2016, CFPB\u2019s market-monitoring efforts have  informed certain rulemaking efforts. For example, Markets Offices  analysis of the small-dollar lending market informed CFPB\u2019s November  2017 Payday Rule, according to staff and the proposed and final rules.  Staff said they had found that some borrowers were caught in a cycle of  using payday loan products without the ability to repay the loans. Under  the final rule, lenders for certain loans must reasonably determine up front  that borrowers can afford to make the payments on their loans without  needing to re-borrow within 30 days, while still meeting their basic living  and other expenses. In addition, CFPB\u2019s November 2016 Prepaid  Accounts Rule reflected market-monitoring information and other  research that staff helped collect on prepaid accounts. The rule  incorporated findings from CFPB\u2019s 2014 analysis of prepaid account  agreements, which CFPB conducted to understand the potential costs  and benefits of extending existing regulatory provisions\u2014such as error  resolution protections\u2014to such agreements. Further, CFPB\u2019s market  intelligence reports we reviewed from 2017 and 2018 reflected Markets  Offices staff\u2019s communication with industry regarding a debt-collection  rule\u2014a topic that has been on CFPB\u2019s public rulemaking agenda since  2013, based in part on market-monitoring findings.", "Industry supervision and policy positions. Markets Offices staff\u2019s  market-monitoring findings have informed CFPB\u2019s efforts to supervise  institutions and communicate policy positions to industry participants.  Staff assist the Supervision, Enforcement, and Fair Lending Division in its  annual risk-based prioritization process. In 2018, for example, staff  provided information on market size and risk for more than a dozen  market areas, which helped the supervision division prioritize its coverage  of those market areas in its examination schedule. Markets Offices staff  told us they also have met frequently with supervision staff to share  issues identified through monitoring and determine whether supervisory  guidance or related actions would be appropriate to address them.  Further, according to CFPB, market-monitoring information supported  bureau leadership\u2019s public statements on selected market developments  and informed policy documents, such as consumer protection principles  on financial technology.", "Consumer education. CFPB\u2019s risk monitoring has informed its broader  consumer education efforts. CFPB\u2019s Consumer Education and  Engagement Division provides financial education tools, including blogs  and print and online guides on financial topics such as buying a home,  choosing a bank or credit union, or responding to debt collectors. Markets  Offices staff provided us with several examples of consumer education  materials for which they had contributed subject-matter expertise since  July 2016. Examples included a consumer advisory on credit repair  services and blog posts on mortgage closing scams and tax refund  advance loans.", "Public reports. CFPB\u2019s market-monitoring findings have informed  several of its public reports since July 2016. According to CFPB officials,  when Markets Offices staff identify risks they think could be mitigated by  public communications to consumers, they work with the Consumer  Education and Engagement Division, as well as other divisions, to publish  relevant material. As noted earlier, the Dodd-Frank Act requires CFPB  to issue at least one report annually of significant findings from its  monitoring of risks to consumers in the offering or provision of consumer  financial products or services. CFPB officials stated that this requirement  is addressed by the first section of CFPB\u2019s semiannual reports to  Congress, which discusses significant problems consumers face in  shopping for or obtaining consumer financial products and services.  CFPB officials further noted that other public CFPB reports include  information related to risks to consumers and may also respond to the  annual Dodd-Frank Act reporting requirement. For example, CFPB\u2019s  December 2017 biennial report on the consumer credit card market  discussed credit card debt collection and persistent indebtedness faced  by some consumers, among other consumer financial risks. In addition,  CFPB\u2019s quarterly consumer credit trend reports have discussed risks  related to consumers financing auto purchases with longer-term loans."], "subsections": []}, {"section_title": "CFPB Lacks a Systematic Bureau-Wide Process for Prioritizing Which Consumer Financial Risks to Address", "paragraphs": ["CFPB currently lacks a systematic, bureau-wide process for prioritizing  financial risks facing consumers\u2014using information from its market  monitoring, among other sources\u2014and for considering how it will use its  tools to address those risks. In 2015, CFPB initiated such a process, but  CFPB officials said that the most recent round of this process was  completed in 2017 and that its leadership has not yet decided whether to  continue using the process. In a February 2016 public report, CFPB  described this process (which CFPB refers to internally as \u201cOne Bureau\u201d)  for deploying shared bureau-wide resources to address some of the most  troubling problems facing consumers. According to the report, through  this One Bureau process, CFPB prioritized problems that pose risks to  consumers based on the extent of the consumer harm CFPB had  identified and its capacity to eliminate or mitigate that harm. The report  identified near-term priority goals in nine areas where CFPB hoped to  make substantial progress within 2 years. It provided evidence of the  nature or extent of risks facing consumers and described how CFPB  planned to use its tools\u2014such as rulemaking, supervision, enforcement,  research, and consumer education\u2014to address the priority goals.", "As part of the One Bureau process, CFPB created several cross-bureau  working groups, which were focused on specific market areas and tasked  with helping ensure progress toward CFPB\u2019s near-term priority goals,  among other responsibilities. The bureau revisited its stated priorities in  June 2017 to guide its work through fiscal year 2018. However, officials  said that while the working groups continue to facilitate communication,  informal collaboration, and strategy-setting across the bureau, CFPB has  not decided whether to engage in a third round of prioritization under the  One Bureau process. The bureau was without a permanent Director from  November 2017 until December 2018, when the Senate confirmed a new  Director. CFPB officials told us that CFPB may revise its approach to  prioritization under new leadership.", "Federal internal control standards state that management should use  quality information to achieve agency objectives, such as by using quality  information to make informed decisions. In addition, the standards state  that management should identify, analyze, and respond to risks related to  achieving the defined objectives. Through One Bureau, CFPB had a  process to use the large amount of data and market intelligence it  collected on consumer risks to make informed decisions about its bureau- wide policy priorities and how it would address them. CFPB has mechanisms in place for the Markets Offices to inform the work of  individual divisions. For example, as noted, Markets Offices staff  contribute to rulemaking efforts (including through participation on  rulemaking teams) and to the annual setting of supervisory priorities.  However, although the Markets Offices continue to collect market  intelligence and contribute to cross-bureau working groups, CFPB  currently lacks a process for systematically prioritizing risks or problems  facing consumers and identifying the most effective tools to address  those risks.", "CFPB officials noted that the bureau issued 12 requests for information in  early 2018 to seek public input to inform its priorities. Topics covered by  these requests for public input have included the bureau\u2019s rulemaking  process and its inherited and adopted rules. In an October 2018  statement, CFPB announced that it expected to publish an updated  statement of rulemaking priorities by spring 2019 based on consideration  of various activities, including its ongoing market monitoring and its  analysis of the public comments from the requests for information.  However, this prioritization effort focuses on setting rulemaking priorities  and does not incorporate all of CFPB\u2019s other tools to respond to  consumer financial risks.", "While CFPB has continued to take steps to consider information to inform  its policy priorities, a systematic, bureau-wide process to prioritize risks to  consumers and consider how CFPB will use its full set of tools to address  them could help to ensure that CFPB effectively focuses its resources on  the most significant risks to consumers. This, in turn, could enhance  CFPB\u2019s capacity to meet its statutory consumer protection objectives."], "subsections": []}]}, {"section_title": "CFPB Has Taken Steps to Meet Statutory Requirements for Retrospectively Assessing Significant Rules", "paragraphs": [], "subsections": [{"section_title": "CFPB Developed Criteria to Identify and Assess Relevant Rules", "paragraphs": ["In two internal memorandums, CFPB documented an initial process for  meeting the Dodd-Frank Act requirement to retrospectively assess  significant rules or orders and issue reports of such assessments within 5  years of the rule or order\u2019s effective date. According to CFPB officials,  the bureau may modify the process for future work after it has completed  its first three assessments. The assessments will be in addition to other  regulatory reviews conducted by CFPB.", "To determine which of its final rules were significant for purposes of the  Dodd-Frank Act retrospective assessment requirement, CFPB created a  four-factor test. In applying this test, CFPB analyzes the rule\u2019s  1.  cumulative annual cost to covered persons of over $100 million,  2.  effects on the features of consumer financial products and services,  3.  effects on business operations of providers that support the product or  4.  effects on the market, including the availability of consumer financial  products and services.", "The memorandums recommended weighing the first factor more heavily  and considering factors two through four cumulatively, so that high-cost  rules tend to be considered significant. If a rule\u2019s cumulative annual costs  exceed $100 million, CFPB may consider the rule to be significant even if  the cumulative effect from factors two through four is small. If the rule\u2019s  costs do not exceed $100 million, there must be a large cumulative effect  from factors two through four for the rule to be considered significant.", "After applying the test to nine rules in early 2017, CFPB determined that  three were significant for retrospective assessment purposes:", "Remittance Rule. This rule covers remittances, which are a cross- border transfer of funds.", "Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule). This  rule covers consumers\u2019 ability to repay mortgage loans and categories  of mortgage loans that meet the ability-to-repay requirement (qualified  mortgages).", "Real Estate Settlement Procedures Act (RESPA) Servicing Rule.", "This rule covers loan servicing requirements under RESPA.", "CFPB staff told us that in the future they plan to apply the four-factor test  to rules not already subject to an assessment within 3 years of the rules\u2019  effective dates, pending new leadership\u2019s review of the test. As of  November 2018, staff told us they had not yet formally applied the test to  any additional rules. However, they told us that they plan to apply the test  to the TILA-RESPA Integrated Disclosure Rule in 2019. If CFPB  determines that the rule is significant, CFPB officials said they plan to  complete an assessment in late 2020.", "In addition to outlining the four-factor test, a March 2016 memorandum  documented CFPB\u2019s decision to generally focus any significant new data  collection efforts on a rule\u2019s effects on consumer and market-wide  outcomes rather than effects on businesses. In the memorandum, CFPB  noted that the objectives of many of its rules focus on improved consumer  experiences and outcomes, such as reductions in loan-default risk and  improved access to financial product information and credit. However, the  memorandum also noted that CFPB would assess outcomes for  businesses when data were available at minimal cost. In addition, the  memorandum explained that CFPB would consider spending additional  resources to collect data on business outcomes under certain conditions,  such as when unfavorable outcomes for businesses could meaningfully  affect significant numbers of consumers. Although CFPB stated in its  March 2016 memorandum that it did not plan to formally assess the  previously mentioned three rules\u2019 costs or benefits to providers, it stated  in its October 2018 Remittance Rule Assessment Report that it may  reconsider that decision for future rule assessments.", "In the March 2016 memorandum, CFPB also documented a decision to  not make specific policy recommendations in the final reports for the  retrospective assessments. CFPB expects the findings from its final  assessment reports to inform its policy development process, through  which it makes decisions about future rulemaking efforts. In the March  2016 memorandum, CFPB explained that separating the assessments  from policy recommendations would keep the assessments focused on  evidence-based descriptions. As previously described, CFPB also issued  requests for information to obtain public input on effects of its inherited  and adopted rules, in addition to the required retrospective assessments.", "CFPB staff stated that they plan to use the lessons learned from the initial  assessment process to inform their procedures for future assessments.  According to CFPB, a future procedures document is to outline its  process for the retrospective assessments required by the Dodd-Frank  Act as well as for similar assessments CFPB may conduct pursuant to  other statutes or executive orders."], "subsections": []}, {"section_title": "CFPB Has Made Progress toward Completing Its First Three Assessments", "paragraphs": ["For each of the three rules it determined to be significant, CFPB created  detailed assessment plans and a timeline for completion (see table 1).  Each plan defined which aspects of the rules the assessment would focus on; outlined the scope and methodology, including challenges for the  assessment and potential limitations of methodology; and  identified data CFPB planned to gather and compile, including CFPB\u2019s own and third-party data, and explained how the data will be used to evaluate the effects of the rule.", "CFPB issued requests for information between March and June of 2017  to collect public input on each assessment and created plans for  incorporating the comments in each assessment report. As required by  the Dodd-Frank Act, these requests solicited comments on modifying,  expanding, or eliminating the rules. In addition, CFPB requested  comments on the assessment plans and invited suggestions on other  data that might be useful for evaluating the rules\u2019 effects. In a document  provided to us, CFPB described its preliminary plan to summarize  comments received from the public and use the information received.  CFPB staff told us they adjusted their research questions and data  sources on all three assessments in response to comments. For example,  based on comments, they added a question to an industry survey about a  provision of the Remittance Rule and incorporated a new data source into  the ATR/QM Rule and RESPA Servicing Rule assessments.", "Other data sources used for the assessments include federal and state  agencies, voluntary surveys of providers of consumer financial products,  and loan data from servicers. For example, for the Remittance Rule  assessment, CFPB sent a voluntary industry survey to 600 money  transmitters, banks, and credit unions on how the rule has affected their  business practices and costs, as well as potential problems in specific  market segments. For the RESPA Servicing Rule assessment, CFPB  conducted qualitative structured interviews with mortgage servicers to  learn about changes servicers had to make in response to the rule.", "CFPB published its Remittance Rule Assessment Report in October  2018. The report analyzed trends in the volume of remittance transfers,  the number of providers, and the price of transfers. For example, CFPB  found that declining remittance prices and an increase in the volume of  remittances\u2014trends that had begun before the rule\u2019s effective date\u2014 continued afterward. However, CFPB was unable to conclude whether  these trends would have changed without the rule. In addition, the report  noted that new technology has increased access to remittances but has  also complicated CFPB\u2019s attempts to measure the effects of the  Remittance Rule on consumers. The report also estimated the rule\u2019s  initial and continued compliance costs for businesses, estimating that  they added between 30 and 33 cents for the one-time cost in 2014 and  between 7 and 37 cents in continuing costs per remittance in 2017. In  addition, the report summarized comments and information CFPB  received from a request for information in March 2017."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In monitoring risks of financial products and services to consumers, CFPB  has drawn from a wide range of sources, and its findings have informed  its key consumer protection tools, such as rulemakings and consumer  education materials. In 2016 and 2017, CFPB\u2019s One Bureau process  allowed it to consider the market information it collected to prioritize the  most important risks to consumers and determine how to most effectively  address those risks on a bureau-wide basis. However, CFPB has not yet  decided whether to use the One Bureau process to reexamine its  priorities and has instead relied on prioritization mechanisms that focus  on its use of individual policy tools, such as its processes for setting  rulemaking and supervision priorities. Putting a systematic bureau-wide  prioritization process in place could help CFPB ensure that it focuses on  the most significant risks to consumers and effectively meets its statutory  consumer protection objectives."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Director of CFPB should implement a systematic process for  prioritizing risks to consumers and considering how to use the bureau\u2019s  available policy tools\u2014such as rulemaking, supervision, enforcement,  and consumer education\u2014to address these risks. Such a process could  incorporate principles from the prior One Bureau process, such as an  assessment of the extent of potential harm to consumers in financial  markets, to prioritize the most significant risks. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to CFPB for comment. We also  provided the relevant excerpts of the draft report to the Federal Housing  Finance Agency, the Federal Reserve, and the Office of the Comptroller  of the Currency for their review and technical comments. CFPB provided  oral and written comments, which are summarized below. CFPB\u2019s written  comments are reproduced in appendix I. In addition, CFPB and the  Federal Housing Finance Agency provided technical comments, which we  incorporated as appropriate. The Federal Reserve and the Office of the  Comptroller of the Currency had no comments.", "In oral comments provided on November 29, 2018, CFPB\u2019s Acting Deputy  Director and other CFPB officials clarified the status of the One Bureau  process. The officials clarified that while CFPB officials had previously  told us that the One Bureau process was on hold, work on One Bureau  priorities has continued with support from a set of cross-bureau working  groups. The officials noted that CFPB had not yet determined whether to  engage in another round of the One Bureau priority-setting process. In  addition, in its written comments, CFPB highlighted the role of the cross- bureau working groups in its market monitoring and other efforts. In  response to these comments, we made edits to clarify the status of the  One Bureau process and describe the role of the cross-bureau working  groups.", "In its written comments, CFPB did not agree or disagree with our  recommendation but stated that it will endeavor to improve its processes  for identifying and addressing consumer financial risks. CFPB stated that  it recognizes the importance of having processes in place to prioritize and  address risks to consumers in the financial marketplace. CFPB cited  examples of existing processes\u2014such as its processes for setting its  rulemaking agenda and supervisory priorities\u2014that were designed to  ensure that its risk monitoring informs its work. In the oral comments,  CFPB officials expressed concern that the draft report\u2019s characterization  of a lack of a systematic process for prioritizing risks to consumers might  suggest that CFPB entirely lacks processes in this regard. We note that  the draft report described CFPB\u2019s existing processes for setting  rulemaking and supervisory priorities. While we agree that these  processes help CFPB to prioritize work in these areas, we maintain that  these processes do not reflect a systematic, bureau-wide process for  prioritizing risks to consumers and determining how to most effectively  address them. We made minor edits to the report to clarify that the  process CFPB lacks is a bureau-wide process that considers how it will  use its full set of tools to address risks to consumers. We maintain that  having such a process would help to ensure that CFPB focuses its  resources on the most significant consumer risks and is well positioned to  meet its consumer protection objectives.", "We are sending copies of this report to CFPB, the Federal Housing  Finance Agency, the Federal Reserve, the Office of the Comptroller of the  Currency, the appropriate congressional committees and members, 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 concerning this report, please  contact me at (202) 512-8678 or clementsm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Consumer Financial Protection Bureau", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, John Fisher (Assistant Director), Lisa  Reynolds (Analyst-in-Charge), Bethany Benitez, Joseph Hackett, Marc  Molino, Jennifer Schwartz, and Tyler Spunaugle made key contributions  to this report."], "subsections": []}]}], "fastfact": ["Some companies that offer financial products and services\u2014such as credit cards and loan servicing\u2014may engage in practices that pose financial risks to consumers. For example, companies may obscure the costs of a product or use lending practices that can trap consumers in a cycle of debt.", "The Consumer Financial Protection Bureau (CFPB) is responsible for watching out for consumers. CFPB monitors complaints, analyzes market data, and conducts outreach to inform its regulations and other functions.", "While CFPB collects a wide range of market intelligence, we made a recommendation to help it identify the most significant risks to consumers."]}
{"id": "GAO-18-260T", "url": "https://www.gao.gov/products/GAO-18-260T", "title": "VA Health Care: Improved Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns", "published_date": "2017-11-29T00:00:00", "released_date": "2017-11-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's November 2017 report, entitled VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns ( GAO-18-63 )."]}, {"section_title": "What GAO Found", "paragraphs": ["Department of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers\u2014physicians and dentists who are approved to independently perform specific services\u2014after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges.", "GAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that", "selected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and", "none of these nine providers had been reported to SLBs.", "GAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent report on provider  quality and safety concerns at the Department of Veterans Affairs (VA).  VA\u2019s Veterans Health Administration (VHA) operates one of the largest  health care systems in the nation, and nearly 40,000 providers hold  privileges at its 170 VA medical centers. Like other health care facilities,  VA medical centers are responsible for ensuring that their providers  deliver safe care to patients. As part of this responsibility, VA medical  centers are required to investigate and, if warranted, address any  concerns that may arise about the clinical care their providers deliver.  Concerns about a provider\u2019s clinical care can be raised for many reasons,  ranging from providers not adequately documenting information about a  patient\u2019s visit to practicing in a manner that is unsafe or inconsistent with  industry standards of care. If VA medical centers fail to properly review  and address concerns that have been raised about their providers, they  may be exposing veterans to unsafe care.", "Depending on the nature of the concern and the findings from their  review, VA medical center officials may take adverse privileging actions  against providers that either limit the care the providers are allowed to  deliver at the facility or prevent the providers from delivering care  altogether. VA medical center officials are required to report the providers  against whom they take adverse privileging actions to the National  Practitioner Data Bank (NPDB). The NPDB is used by other VA medical  centers, non-VA hospitals, and other health care entities to obtain  information on a provider\u2019s history of substandard care and misconduct.  VA medical center officials are also required to report providers to state  licensing boards when there are serious concerns about the providers\u2019  clinical care. State licensing boards can then investigate and determine if  the providers\u2019 conduct or ability to deliver care warrants action against the  providers\u2019 medical license.", "My testimony today summarizes the findings from the report, which  analyzed the implementation and oversight of VHA processes for  reviewing and reporting providers after quality and safety concerns have  been raised at selected VA medical centers. Accordingly, this testimony  addresses:  1.  VA medical centers\u2019 reviews of providers\u2019 clinical care after concerns  are raised and VHA\u2019s oversight of these reviews, and  2.  VA medical centers\u2019 reporting of providers to the NPDB and state  licensing boards and VHA\u2019s oversight of these processes.", "To conduct our work, we reviewed VHA policies and guidance related to  reviewing and reporting clinical care concerns about providers and  interviewed relevant VHA officials. We also visited a nongeneralizable  selection of five VA medical centers, selected based on the complexity of  the medical services they offer veterans and to achieve variation in  geography. At each VA medical center we reviewed documentation and  interviewed medical center staff to 1) identify providers whose clinical  care was reviewed after a concern was raised about that care and 2)  determine whether the VA medical center took an adverse privileging  action against any of these identified providers. In addition, we evaluated  the extent to which each medical center adhered to applicable VHA  policies from October 2013 through the time we completed our site visits  in March 2017. We also interviewed officials from the five Veterans  Integrated Service Networks (networks) that oversee the five selected  medical centers. We compared VHA and the networks\u2019 oversight of the  VA medical centers\u2019 reviewing and reporting of providers to VHA\u2019s related  policy requirements and to federal standards for internal control related to  monitoring. Further details on our scope and methodology are included  in our report. The work this statement is based on was performed in  accordance with generally accepted government auditing standards."], "subsections": [{"section_title": "Selected VA Medical Centers\u2019 Reviews of Providers\u2019 Clinical Care Were Not Always Documented or Timely", "paragraphs": ["We found that from October 2013 through March 2017, the five selected  VA medical centers required reviews of a total of 148 providers\u2019 clinical  care after concerns were raised about their care, but officials at these  medical centers could not provide documentation to show that almost half  of these reviews were conducted. We found that all five VA medical  centers lacked at least some documentation of the reviews they told us  they conducted, and in some cases, we found that the required reviews  were not conducted at all. Specifically, across the five VA medical  centers, we found the following:", "The medical centers lacked documentation showing that one type of  review\u2014focused professional practice evaluations (FPPE) for  cause\u2014had been conducted for 26 providers after concerns had been  raised about their care. FPPEs for cause are reviews of providers\u2019  care over a specified period of time, during which the provider  continues to see patients and has the opportunity to demonstrate  improvement. Documentation of these reviews is explicitly required  under VHA policy. Additionally, VA medical center officials confirmed  that FPPEs for cause that were required for another 21 providers  were never conducted.", "The medical centers lacked documentation showing that retrospective  reviews\u2014which assess the care previously delivered by a provider  during a specific period of time\u2014 had been conducted for 8 providers  after concerns had been raised about their clinical care.", "One medical center lacked documentation showing that reviews had  been conducted for another 12 providers after concerns had been  raised about their care. In the absence of any documentation, we  were unable to identify the types of reviews, if any, that were  conducted for these 12 providers.", "We also found that the five selected VA medical centers did not always  conduct reviews of providers\u2019 clinical care in a timely manner. Specifically,  of the 148 providers, the VA medical centers did not initiate reviews of 16  providers for 3 months, and in some cases, for multiple years, after  concerns had been raised about the providers\u2019 care. In a few of these  cases, additional concerns about the providers\u2019 clinical care were raised  before the reviews began.", "We found that two factors were largely responsible for the inadequate  documentation and untimely reviews of providers\u2019 clinical care we  identified at the selected VA medical centers.", "First, VHA policy does not require VA medical centers to document all types of reviews of providers\u2019 clinical care, including retrospective reviews, and VHA has not established a timeliness requirement for initiating reviews of providers\u2019 clinical care.", "Second, VHA\u2019s oversight of the reviews of providers\u2019 clinical care is  inadequate. Under VHA policy, networks are responsible for  overseeing the credentialing and privileging processes at their  respective VA medical centers. While reviews of providers\u2019 clinical  care after concerns are raised are a component of credentialing and  privileging, we found that none of the network officials we spoke with  described any routine oversight of such reviews. This may be in part  because the standardized tool that VHA requires the networks to use  during their routine audits does not direct network officials to ensure  that all reviews of providers\u2019 clinical care have been conducted and  documented. Further, some of the VISN officials we interviewed told  us they were not using the standardized audit tool as required.", "Without adequate documentation and timely completion of reviews of  providers\u2019 clinical care, VA medical center officials lack the information  they need to make decisions about providers\u2019 privileges, including  whether or not to take adverse privileging actions against providers.  Furthermore, because of its inadequate oversight, VHA lacks reasonable  assurance that VA medical center officials are reviewing all providers  about whom clinical care concerns have been raised and are taking  adverse privileging actions against the providers when appropriate. To  address these shortcomings, we recommended that VHA 1) require  documentation of all reviews of providers\u2019 clinical care after concerns  have been raised, 2) establish a timeliness requirement for initiating such  reviews, and 3) strengthen its oversight by requiring networks to oversee  VA medical centers to ensure that such reviews are documented and  initiated in a timely manner. VA concurred with these recommendations  and described plans for VHA to revise existing policy and update the  standardized audit tool used by the networks to include more  comprehensive oversight of VA medical centers\u2019 reviews of providers\u2019  clinical care after concerns have been raised."], "subsections": []}, {"section_title": "Selected VA Medical Centers Did Not Report All Providers to the NPDB or to State Licensing Boards as Required", "paragraphs": ["We found that from October 2013 through March 2017, the five VA  medical centers we reviewed had only reported one of nine providers  required to be reported to the NPDB under VHA policy. These nine  providers either had adverse privileging actions taken against them or  resigned or retired while under investigation before an adverse privileging  action could be taken. None of these nine providers were reported to  state licensing boards as required by VHA policy.", "The VA medical centers documented that these nine providers had  significant clinical deficiencies that sometimes resulted in adverse  outcomes for veterans. For example, the documentation shows that one  provider\u2019s surgical incompetence resulted in numerous repeat surgeries  for veterans. Another provider\u2019s opportunity to improve through an FPPE  for cause had to be halted and the provider was removed from providing  care after only a week due to concerns that continuing the review would  potentially harm patients.", "In addition to these nine providers, one VA medical center terminated the  services of four contract providers based on deficiencies in the providers\u2019  clinical performance, but the facility did not follow any of the required  steps for reporting providers to the NPDB or relevant state licensing  boards. This is concerning, given that the VA medical center documented  that one of these providers was terminated for cause related to patient  abuse after only 2 weeks of work at the facility.", "Two of the five VA medical centers we reviewed each reported one  provider to the state licensing boards for failing to meet generally  accepted standards of clinical practice to the point that it raised concerns  for the safety of veterans. However, we found that the medical centers\u2019  reporting to the state licensing board took over 500 days to complete in  both cases, which was significantly longer than the 100 days suggested in  VHA policy.", "Across the five VA medical centers, we found that providers were not  reported to the NPDB and state licensing boards as required for two  reasons.", "First, VA medical center officials were generally not familiar with or  misinterpreted VHA policies related to NPDB and state licensing board  reporting. For example, at one VA medical center, we found that  officials failed to report six providers to the NPDB because they were  unaware that they had been delegated responsibility for NPDB  reporting. Officials at two other VA medical centers incorrectly told us  that VHA cannot report contract providers to the NDPB. At another VA  medical facility, officials did not report a provider to the NPDB or to any  of the state licensing boards where the provider held a medical license  because medical center officials learned that one state licensing board  had already found out about the issue independently. Therefore, VA  officials did not believe that they needed to report the provider. This  misinterpretation of VHA policy meant that the NPDB and the state  licensing boards in other states where the provider held licenses were  not alerted to concerns about the provider\u2019s clinical practice.", "Second, VHA policy does not require the networks to oversee whether VA medical centers are reporting providers to the NPDB or state licensing boards when warranted. We found, for example, that network officials were unaware of situations in which VA medical center officials failed to report providers to the NPDB. We concluded that VHA lacks reasonable assurance that all providers who should be reported to these entities are reported.", "VHA\u2019s failure to report providers to the NPDB and state licensing boards  as required facilitates providers who provide substandard care at one  facility obtaining privileges at another VA medical center or at hospitals  outside of VA\u2019s health care system. We found several cases of this  occurring among the providers who were not reported to the NPDB or  state licensing boards by the five VA medical centers we reviewed. For  example, we found that two of the four contract providers whose contracts  were terminated for clinical deficiencies remained eligible to provide care  to veterans outside of that VA medical center. At the time of our review,  one of these providers held privileges at another VA medical center, and  another participated in the network of providers that can provide care for  veterans in the community. We also found that a provider who was not  reported as required to the NPDB during the period we reviewed had their  privileges revoked 2 years later by a non-VA hospital in the same city for  the same reason the provider was under investigation at the VA medical  center. Officials at this VA medical center did not report this provider  following a settlement agreement under which the provider agreed to  resign. A committee within the VA medical center had recommended that  the provider\u2019s privileges be revoked prior to the agreement. There was no  documentation of the reasons why this provider was not reported to the  NPDB under VHA policy.", "To improve VA medical centers\u2019 reporting of providers to the NPDB and  state licensing boards and VHA oversight of these processes, we  recommended that VHA require its networks to establish a process for   overseeing VA medical centers to ensure they are reporting to the NPDB  and to state licensing boards and to ensure that this reporting is timely.  VA concurred with this recommendation and told us that it plans to  include oversight of timely reporting to the NPDB and state licensing  boards as part of the standard audit tool used by the networks."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact me at (202) 512-7114 (williamsonr@gao.gov).  Contact points for our Office of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other individuals  who made key contributions to this testimony include Marcia A. Mann  (Assistant Director), Kaitlin M. McConnell (Analyst-in-Charge), Summar  C. Corley, Krister Friday, and Jacquelyn Hamilton.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["The Department of Veterans Affairs requires its medical centers to review a doctor\u2019s care if quality or safety concerns arise. If the concerns are substantiated, medical center officials are required to inform hospitals and other health care entities by reporting the doctors to a national database and to the states where the doctor is licensed.", "However, we visited 5 VA medical centers and found that their reviews were not always timely and that VA officials did not report 8 of the 9 doctors who should have been reported.", "In the report on which this testimony is based we recommended VA improve oversight of clinical care reviews and reporting."]}
{"id": "GAO-18-557", "url": "https://www.gao.gov/products/GAO-18-557", "title": "Defense Logistics: DOD Needs to Improve Budget Estimates and Accuracy of Forecasts for Airlift Services", "published_date": "2018-09-04T00:00:00", "released_date": "2018-09-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TRANSCOM reported spending about $81 billion flying personnel and cargo worldwide in fiscal years 2007-2017. TRANSCOM manages the Transportation Working Capital Fund (TWCF) to provide air, land, and sea transportation for the Department of Defense (DOD). TRANSCOM sets some rates it charges below costs to be competitive with commercial air service providers. The Air Force generally pays for expenses not covered by TWCF rates through the ARA.", "A House Report accompanying the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the ARA and the TWCF. GAO's report discusses the extent to which (1) ARA funds were requested, allotted, and expended for airlift activities; (2) the Air Force provided ARA information in its budget requests and informed its requests with information from TRANSCOM; and (3) TRANSCOM has implemented a rate-setting process for airlift services and uses workload forecasts to estimate the annual ARA funding request. GAO analyzed ARA funds and costs and revenues for airlift services for fiscal years 2007-2017; interviewed officials about the ARA budget preparation process; and analyzed TRANSCOM rate-setting and forecasting guidance and results."]}, {"section_title": "What GAO Found", "paragraphs": ["For fiscal years 2007 through 2017, the Air Force requested $2.8 billion from Congress for Airlift Readiness Account (ARA) requirements, as part of its annual Operations and Maintenance appropriation. The Air Force allotted $2.8 billion (i.e., directed the use of the appropriated funds) and expended $2.4 billion of these funds for the ARA. U.S. Transportation Command (TRANSCOM) uses ARA funds to support airlift operations. Specifically, the Air Force requests ARA funds in its annual Operations and Maintenance budget request and subsequently provides these funds to TRANSCOM to assist in paying for airlift services (see figure). Amounts requested, allotted, and expended varied from year-to-year, in some cases by hundreds of millions of dollars, in part due to changes in the amount of airlift services provided by TRANSCOM.", "The Air Force has not been including specific ARA information in its budget requests since fiscal year 2010. For fiscal years 2007 through 2009, Air Force budget requests explicitly stated ARA amounts. Air Force officials stated their budget presentation was changed to reduce the overall number of budget line items. In addition, TRANSCOM has not been providing cost estimates in time to support Air Force budget preparations. Specifically, TRANSCOM has been providing this information 2 months later than the Air Force needs it to support budget deliberations. The Air Force and TRANSCOM have taken some initial steps to address this issue, but these efforts lack substantive details regarding formalizing the necessary processes to ensure timely information. Until the Air Force and TRANSCOM resolve this issue, Congress will not have sufficient and complete information to inform its decisions on appropriating funds for ARA.", "TRANSCOM has a rate-setting process, but faces challenges producing accurate workload forecasts. To provide information to its customers during the annual budget development process, TRANSCOM sets airlift rates in advance of the fiscal year of expenditure. Workload forecasts influence the rate-setting process. Inaccurate forecasts can lead to unreliable budget requests and hinder effective and efficient operational planning. GAO found that forecast inaccuracy (i.e., the variance between the forecast and the actual workload) averaged 25 percent and was becoming increasingly inaccurate since fiscal year 2007. GAO found that TRANSCOM has several workload forecasting challenges. Specifically, TRANSCOM lacks an effective process to gather workload projections from customers. It also no longer uses forecasting accuracy metrics and has not established forecast accuracy goals to monitor its performance. Furthermore, TRANSCOM does not have an action plan to improve its increasingly inaccurate workload forecasts. Taking steps to address these issues would enable TRANSCOM to improve the accuracy of workload forecasts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations to DOD, including improving the clarity and completeness of budget estimates, and taking steps to improve the accuracy of airlift workload forecasts. DOD concurs with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For fiscal years 2007 through 2017, the United States Transportation  Command (TRANSCOM) reported spending about $81 billion on airlift  services to fly military and non-military personnel and cargo around the  world. TRANSCOM manages the Transportation Working Capital Fund  (TWCF) to provide airlift, sealift, and ground transportation in times of  peace and war in support of overseas operations, global security events,  and natural disasters. The TWCF conducts businesslike activities to  generate revenue from the sale of goods or services to customers, such  as the military services or combatant commands, to cover costs  expended in support of those services. The military services\u2019 Operations  and Maintenance appropriations support their transportation needs, such  as airlift services provided by TRANSCOM. In fiscal year 2017, the TWCF  incurred costs of about $5 billion for airlift services, with the Air Force as  its largest customer.", "TRANSCOM generally sets the rates it charges for airlift services at a  level lower than the costs it incurs. It does this to be competitive with  commercial air service providers and assure that the military services and  combatant commands use government-owned and contracted aircraft  and facilities to the greatest extent possible. According to TRANSCOM  officials, the use of government owned aircraft allows TRANSCOM to be  sure that mobilization capacity is maintained, helps air crews meet  training requirements, and supports readiness. When revenue is  insufficient to support the costs of maintaining airlift capability, the Air  Force provides additional appropriated funds through the Airlift Readiness  Account (ARA). The Air Force allots (i.e., directs the use of these funds)  to the ARA from its Operations and Maintenance funding appropriated by  Congress. According to TRANSCOM and Air Force officials,  TRANSCOM records the ARA amount as a funded order (i.e., the amount  to be paid by the Air Force is agreed to before the order is recorded).  The Air Force then provides appropriated funds to pay for airlift services.  A simplified depiction of this process is shown in figure 1 below.", "House Report 115-200, which accompanied a bill for the National  Defense Authorization Act for Fiscal Year 2018, included a provision for  GAO to review the Airlift Readiness Account in conjunction with the  Transportation Working Capital Fund. Our report examines the extent to  which (1) Airlift Readiness Account funds were requested, allotted, and  expended by the Air Force from fiscal years 2007 through 2017, (2) the  Air Force provided Airlift Readiness Account information in its budget  request to Congress and informed its request with information from  TRANSCOM, and (3) TRANSCOM has implemented a process to set  rates for airlift services and use workload forecasts to estimate the annual  Airlift Readiness Account funding request.", "To address the first objective, we analyzed Air Force budget request  documents and underlying supporting documentation, and information  from the Air Force\u2019s Automated Budget Interactive Data Environment  Systems to determine the appropriated amounts allotted for ARA  activities. We also analyzed summary-level documents provided by  TRANSCOM detailing expenditures from TRANSCOM for fiscal years  2007 through 2017 to establish trends. Further, we reviewed  TRANSCOM\u2019s procedures and supporting documentation for billing the  Air Force for payment of the ARA. Lastly, we interviewed DOD, Air  Force and TRANSCOM officials to gain an understanding of general  reasons for variances from year to year or between the requested and  expended amounts.", "To address the second objective, we analyzed Air Force Operations and  Maintenance budget justification documents to determine the type of ARA  information (i.e. total amounts, changes from year to year, and other  information) provided in the President\u2019s budget requests for fiscal years  2007 through 2017. To understand the differences, if any, between the  ARA information provided from year to year, we interviewed Air Force  budget officials to obtain an explanation for changes in the reported  information. Further, we analyzed Air Force Operations and Maintenance  budget justification documents, and TWCF budget documents to  determine the extent to which the ARA amount was based on available  information. We also discussed with Air Force and TRANSCOM officials  plans to change their procedures and the information considered in the  development of the ARA amount. Further, we compared TRANSCOM\u2019s  processes and procedures against Standards for Internal Controls in the  Federal Government, specifically controls related to internal and external  reporting and mechanisms to enforce management directives.", "To address the third objective, we analyzed the processes TRANSCOM  used to set rates it charges customers in various airlift workload  categories for fiscal years 2007 through 2017. We also reviewed  forecasting procedures and supporting documents provided by  TRANSCOM; interviewed TRANSCOM officials to gain an understanding  of how they implement rate setting and forecasting procedures; and  analyzed forecast and actual workload data provided by TRANSCOM for  the same timeframe. We compared TRANSCOM\u2019s processes against  rate-setting and forecasting guidance and reviewed whether  TRANSCOM used quality information to establish workload projections,  established performance measures and goals for forecasting its workload,  and developed efforts to improve its forecasting of workload. In addition,  we interviewed TRANSCOM and Air Mobility Command officials and  reviewed supporting documentation to gain an understanding of  challenges that exist to producing accurate workload forecasts and the  relationship with the rate-setting and budgeting process.", "We obtained revenue, cost, workload, and ARA data for this report from  budget documents, financial reports, and Air Force and TRANSCOM  records for fiscal years 2007 through 2017. We assessed the reliability of  the data by (1) interviewing Air Force and TRANSCOM officials to gain an  understanding of the processes used to estimate the cash, revenue, cost,  workload, and ARA data; (2) reviewing our prior work to determine if there  were reported concerns with TRANSCOM\u2019s financial or budgetary data;  (3) comparing cash, revenue, costs and workload data provided by  TRANSCOM to the same data presented in the Air Force Working Capital  Fund budgets for fiscal years 2007 through 2017; and (4) comparing ARA  data to Air Force and TRANSCOM supporting documentation, or to Air  Force Operations and Maintenance budget execution reports to validate  ARA amounts for fiscal years 2007 through 2017. Based on our  assessment, these data were sufficiently reliable for the purposes of this  report.", "We conducted this performance audit from August 2017 through  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. For more detail  regarding our scope and methodology see appendix I."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Working Capital Funds", "paragraphs": ["DOD uses working capital funds to focus management\u2019s attention on the  total costs of carrying out critical business operations and encourage  DOD support organizations to provide quality goods and services at the  lowest cost. The ability of working capital funds to operate on a break- even basis depends on accurately projecting workload, estimating costs,  and setting rates to recover the full costs of producing goods and  services. Generally, customers use appropriated funds to finance orders  placed with working capital funds.", "DOD sets the rates charged for goods and services during the budget  preparation process, which generally occurs approximately 18 months  before the rates go into effect. To develop rates, working capital fund  managers review projected costs such as labor and materials, as well as  projected customer requirements. The rates are intended to remain fixed  during the fiscal year in accordance with DOD policy. DOD\u2019s stabilized  price policy serves to protect customers from unforeseen inflationary  increases and other cost uncertainties and better assures customers that  they will not have to reduce programs to pay for potentially higher-than- anticipated prices. Because working capital fund managers base rates  charged on assumptions formulated in advance of rates going into effect,  some variance is expected between projected and actual costs and  revenues."], "subsections": []}, {"section_title": "Transportation Working Capital Fund", "paragraphs": ["The TWCF is dedicated to TRANSCOM\u2019s mission to provide air, land,  and sea transportation for DOD in times of peace and war, with a primary  focus on wartime readiness. Specifically, TWCF is used to provide air  transportation and services for passengers or cargo in support of DOD  operations or along established routes. The TWCF is also used to finance  Air Force and joint training requirements. Examples of joint capabilities  supported by the TWCF are depicted in figure 2.", "The TWCF uses rates for airlift services that do not cover the full cost of  airlift operations. The military services may choose between TRANSCOM  and commercial service providers along established routes. Thus, fund  managers set rates for some airlift services to remain competitive with  commercial airlift carriers, which historically, do not result in revenue  sufficient to cover the full cost of airlift operations. DOD must maintain  airlift capacity and must remain ready and available to support  mobilization for war and contingencies. Providing an incentive for  customers to use DOD airlift capacity helps TRANSCOM maintain military  airlift capabilities not available from commercial providers.", "TWCF cash balances are managed as a component of the Air Force  Working Capital Fund. Although the TWCF is managed on a day-to-day  basis by TRANSCOM, it is part of the Air Force Working Capital Fund for  cash management purposes. The relationship of the TWCF to the Air  Force Working Capital Fund provides a cash management benefit.  According to Air Force officials, retaining the TWCF within the Air Force  Working Capital Fund for cash management purposes provides flexibility  while minimizing the need for additional funding. According to month-end  cash balance data, the TWCF has been able to operate using cash  available in the Air Force Working Capital Fund when no funds were  available in the TWCF. For example, the TWCF month-end cash balance  was negative fifteen times during fiscal years 2007-2017, but there was  sufficient cash in the Air Force Working Capital Fund to allow the TWCF  to continue to operate and execute its missions. For more information on  the cash balances of the Air Force Working Capital Fund and the TWCF  see appendix II."], "subsections": []}, {"section_title": "Roles and Responsibilities for Managing the Transportation Working Capital Fund", "paragraphs": ["Multiple DOD organizations have roles in managing various aspects of  the TWCF:", "The Office of the Under Secretary of Defense (Comptroller)/Chief  Financial Officer is generally responsible for coordinating DOD budget  preparation, issuing guidance, issuing working capital fund annual  financial reports, and overseeing the implementation of working  capital funds across DOD. The Office of the Under Secretary of  Defense (Comptroller)/Chief Financial Officer is also responsible for  approving rates developed for the budget process and charged to the  military services.", "The Air Force assumed responsibility for TWCF cash management in  fiscal year 1998 and the TWCF cash balance is included in the Air  Force Working Capital Fund cash balance. The Air Force is also  responsible for developing Operations and Maintenance budget  requests that include requests for funds to pay TRANSCOM for airlift  services financed through the TWCF and the ARA. The Assistant  Secretary of the Air Force (Financial Management and Comptroller) is  responsible for directing and managing all comptroller, programming,  and financial management functions, activities, and operations of the  Air Force.", "TRANSCOM is responsible for the day-to-day financial management  of the TWCF and has financial reporting responsibility for the TWCF,  including setting rates for airlift services. TRANSCOM is also  responsible for providing defense components with transportation  services to meet national security needs; providing guidance for  forecasting; and providing guidance for the standardization of rates,  regulations, operational policies, and procedures.", "Air Mobility Command is a major Air Force command and is  responsible to TRANSCOM for providing airlift services paid for by the  TWCF. To fulfill its responsibility for providing airlift services to  defense components, TRANSCOM and Air Mobility Command use a  combination of military and commercial aircraft."], "subsections": []}]}, {"section_title": "Billions of Dollars Were Requested, Allotted, and Expended for the Airlift Readiness Account for Fiscal Years 2007-2017, and Annual Amounts Varied", "paragraphs": ["The Air Force requested, allotted, and expended billions of dollars for  ARA for fiscal years 2007 through 2017. These amounts varied annually,  in some cases, by hundreds of millions of dollars. Our analysis of Air  Force and TRANSCOM budget and financial information showed that for  fiscal years 2007 through 2017, the Air Force requested $2.8 billion from  Congress for ARA requirements, as part of its annual Operations and  Maintenance appropriation. The Air Force allotted $2.8 billion (i.e.,  directed the use of the appropriated funds) and expended $2.4 billion of  the ARA appropriated funds). During this period, the total allotted  amount was about $400 million dollars more than the expended amount.  According to Air Force officials, this $400 million was used to pay for  other Air Force readiness priorities. ARA amounts requested, allotted,  and expended for fiscal years 2007 through 2017 are shown in figure 3.", "In five fiscal years (2008-2009, 2013-2014, and 2017) the Air Force  allotted less than the amount ultimately expended for the ARA. In these  fiscal years, Air Force officials stated that they used available Operations  and Maintenance appropriations to support the ARA. For example, in  fiscal year 2013, the Air Force requested and allotted less than a million  dollars for the ARA. However, the Air Force expended $294 million for the  ARA in fiscal year 2013. According to Air Force officials, the Air Force  used Air Force Operation and Maintenance mobilization funding to  provide the ARA funds to the TWCF to cover this gap.", "Furthermore, in five fiscal years (2010-2012 and 2015-2016) the Air Force  did not expend the total amounts allotted for the ARA, because the  allotments exceeded ARA funding needs. According to Air Force officials,  they expended amounts initially allotted for ARA requirements to support  other readiness priorities, such as training and sustainment requirements.  For additional information related to TWCF costs and revenues for airlift  services see appendix III.", "Based on our analysis and interviews with Air Force and TRANSCOM  officials, we determined that the Air Force\u2019s ARA budget request, the ARA  amount allotted, and the amount expended by the Air Force can vary for a  number of reasons. For example,", "Workload variations occurred due to changes in the global  security environment, natural disasters, and force structure  changes: For example, in fiscal year 2010, airlift services workload  increased 8 percent over the previous year\u2019s level and 39 percent  over budgeted levels as a result of force structure changes in Iraq and  Afghanistan. This occurred because during fiscal year 2010 the  number of U.S. armed forces personnel in Iraq declined by about  81,000, and the number of U.S. armed forces personnel in  Afghanistan increased by about 34,000. These changes required  additional airlift services, and resulted in more revenue than was  originally estimated for the TWCF. The TWCF also received additional  funding from the military services to offset increased fuel costs. As a  result, TRANSCOM did not issue a bill for the ARA for fiscal year  2010, and the Air Force used the $262 million allotted for ARA  requirements for other readiness priorities.", "ARA budget requests and subsequent expenditures in the fiscal  year of availability may be affected by other revenue sources:  From fiscal years 2007 through 2017, the TWCF received $6.5 billion  from other revenue sources, such as amounts from cash recovery  charges, fuel supplement charges, and cash transfers from the Air  Force. For example, cash recovery charges were paid by the  military services, including the Air Force, using Overseas Contingency  Operations funding to cover cash shortages in the TWCF in the early  part of the Global War on Terrorism. TRANSCOM charged its  customers cash recovery charges in fiscal years 2007 through 2014,  with the exception of 2010.", "ARA expenditures in the fiscal year of availability may be more  or less than budgeted: For example, in fiscal year 2015,  TRANSCOM did not receive revenue from other sources, resulting in  the Air Force expending $404 million dollars more from its Operations  and Maintenance funds than requested to cover the ARA bill for that  fiscal year. On the other hand, in the fiscal year 2016 Air Force  Operations and Maintenance budget request, the Air Force requested  $657 million for the ARA, and subsequently allotted $406 million to the  ARA\u2014about $251 million less than requested. This occurred because  the cost of fuel declined in fiscal year 2016, and TRANSCOM did not  bill the Air Force for the full amount allotted for ARA by the Air Force.  As a result, the Air Force contributed $122 million of the $406 million  to the TWCF and used the remaining available amount for other  readiness priorities. DOD and its components have considerable  flexibility in using Operation and Maintenance funds and can  redesignate funds appropriated among activity and subactivity groups  in various ways."], "subsections": []}, {"section_title": "Since Fiscal Year 2010, Air Force Budget Requests Have Omitted Complete Airlift Readiness Account Information and Have Not Been Informed by Estimates", "paragraphs": [], "subsections": [{"section_title": "Air Force Budget Requests Include Some Information on the Airlift Readiness Account but Omit Details Provided In Budget Requests Prior to Fiscal Year 2010", "paragraphs": ["Air Force budget requests include some information on the ARA but omit  details provided in budget requests prior to fiscal year 2010. Air Force  budget officials stated the ARA budget information that was included for  fiscal years 2007 through 2009 was changed for the fiscal year 2010  budget request as part of a DOD initiative to reduce the overall number of  budget line items. For fiscal years 2007 through 2009 Air Force  Operations and Maintenance budget requests, the amounts requested by  the Air Force for the ARA were explicitly stated in the budget justification  documents as part of a separate subactivity group line item. For fiscal  years 2010 through 2017, the ARA amount was bundled with funding  requests for other training requirements in the Air Force Operations and  Maintenance budget justification documents, thus omitting specific details  with respect to the ARA.  Specifically, Air Force budget justification  materials included the amount the ARA changed from one fiscal year to  the next, but did not include the total ARA amount.", "In the annual President\u2019s budget request submission, DOD requests  specific amounts for Operations and Maintenance activities and includes  information about (1) amounts for the next fiscal year for which estimates  are submitted, (2) revisions to the amounts for the fiscal year in progress,  and (3) reports on the actual amounts allotted to a particular activity or  subactivity for the last completed fiscal year. The Standards for Internal  Control in the Federal Government state that management should  communicate the necessary quality information (internally and  externally).", "According to Air Force budget officials there is no requirement from the  Office of the Under Secretary of Defense (Comptroller)/Chief Financial  Officer to separately identify the ARA amount and related details in the Air  Force Operations and Maintenance annual budget requests.  Nevertheless, officials from the Air Force and the Office of the Under  Secretary of Defense (Comptroller)/Chief Financial Officer agreed that it  would be helpful to include additional information in the budget, because  of DOD and congressional interest. Without establishing specific  requirements to present detailed ARA information in the annual Air Force  Operations and Maintenance budget request, DOD and congressional  decision-makers do not have sufficient information to make informed  decisions about the level of funding necessary to cover airlift costs not  recovered by the rates charged by TRANSCOM."], "subsections": []}, {"section_title": "U.S. Transportation Command Has Not Provided Airlift Readiness Account Estimates in Time to Inform Air Force Budget Requests", "paragraphs": ["TRANSCOM has not provided ARA estimates in time to inform Air Force  budget requests. Air Force officials stated that they need to have  TRANSCOM\u2019s estimates by mid-June to be able to conduct analysis to  strengthen confidence in the ARA budget request and obtain senior  leadership approval. The Air Force submits its Operations and  Maintenance annual budget request to DOD in early July. However,  TRANSCOM was not providing its ARA estimate until August. As a result,  Air Force officials stated they have been developing their own ARA  estimate based on historical average trends because they have not  received information from TRANSCOM on time. TRANSCOM and Air  Force officials agree that TRANSCOM\u2014as the provider of transportation  services\u2014is in the best position to understand transportation workload  demands.", "The Standards for Internal Control in the Federal Government state that  management should use quality information that is appropriate, current,  complete, accurate, accessible, and provided on a timely basis to achieve  the entity\u2019s objectives. Furthermore, management should use quality  information to make informed decisions and evaluate the entity\u2019s  performance in achieving key objectives and addressing risks and should  design control activities, such as policies, procedures, techniques, and  mechanisms as needed to enforce management\u2019s directives.", "In October 2017, Air Force and TRANSCOM officials told us they were  working on a memorandum of understanding to improve the timing and  communication of budgetary information from TRANSCOM to support the  Air Force ARA budget request. Officials stated that the memorandum of  understanding is expected to be completed by the end of fiscal year 2018.  However, in May 2018, the draft memorandum that the Air Force provided  for our review consisted of a 2-page template with a list of potential  topics, and no substantive details regarding formalizing processes.  Without developing sufficient detail on the formal processes and  subsequently finalizing the memorandum of understanding, the Air Force  and TRANSCOM will not be able to reasonably assure that the timing and  communication of budgetary information from TRANSCOM are sufficient  to support the Air Force Operations and Maintenance ARA annual budget  request."], "subsections": []}]}, {"section_title": "TRANSCOM Has a Rate-Setting Process for Airlift Services, but Producing Accurate Workload Forecasts Is Challenging", "paragraphs": ["TRANSCOM has a rate-setting process for airlift services, but producing  accurate workload forecasts is challenging. Our analysis of TRANSCOM  data showed that the airlift forecasting process produced increasingly  inaccurate projections of actual workload. Producing accurate forecasts is  challenging because TRANSCOM has not fully implemented: (1) an  effective process to gather workload projections from customers, (2)  forecasting goals and metrics and the review of its performance, and (3)  an action plan to improve workload forecasts."], "subsections": [{"section_title": "U.S. Transportation Command Has a Rate- Setting Process for Airlift Services", "paragraphs": ["TRANSCOM has a rate-setting process for airlift services that is generally  established to be competitive with commercial airlift services, according to  DOD guidance. Specifically, TRANSCOM operates five categories of  airlift services, and according to documents and TRANSCOM officials the  rate-setting process for each category is as follows:", "Channel Cargo rates apply to military air cargo along established  routes. The rates for this category generally cover about 65 percent of  the cost to provide airlift cargo services, and do not vary based on the  type of aircraft used. Rates are benchmarked against commercial  prices based on the weight of cargo using the following step-by-step  process. Initially, International Heavyweight Air Tender price data from  the prior year are checked for commercial rates on various routes. If  no data are available for some routes, data from the closest country  are used to develop average country-to-country rates or a weighted  average when there is more than one country-to-country combination.  Once rates are developed they are adjusted based on budget  exhibits. The TRANSCOM Operations and Plans directorate is  responsible for Channel Cargo forecasts to inform rate-setting for this  category of service.", "Channel Passenger rates apply when military and civilian passengers  are flying on established routes. The rates are benchmarked against  commercial prices, recover about 85 percent of costs, and do not vary  based on the type of aircraft used. Channel passenger rate-setting  guidance also uses a step-by-step process. General Services  Administration city pairs are checked for comparable prices. If no  General Services Administration rate is found, the Defense Travel  System is checked. If the Defense Travel System does not have a  rate, online travel websites are checked. If the online travel sites do  not have a rate, then a prior standard rate per mile for that route is  adjusted based on budget exhibits. The TRANSCOM Strategic Plans,  Policy, and Logistics directorate is responsible for channel passenger  forecasts to inform rate-setting.", "Special Assignment Airlift Missions/Contingency rates apply for the  use of full-plane charters performing and providing exclusive services  for specific users. Rates are generally determined by the type of  aircraft and those rates recover about 91 percent of costs for military  aircraft and 100 percent of costs for commercial aircraft. Flight hour  rates for military aircraft, flight length (miles), and capacity used for  commercial aircraft are considered in the rate determinations. The  TRANSCOM Operations and Plans Directorate is responsible for  Special Assignment Airlift Missions/Contingency workload forecasts to  inform rate-setting for this category of service.", "Joint Exercise Transportation Program rates apply to airlift services in  support of realistic operational joint training. Rates are generally set in  the same manner as the rates for the Special Assignment Airlift  Missions/Contingency category, except that the TRANSCOM  Operations and Plans Directorate is responsible for workload  forecasting for the Joint Exercise Transportation Program.", "Training rates apply to those activities used to conduct programmed  flying training, which generally includes a required number of sorties,  flying hours, and aircrew training to support readiness. Rates are set  to recover 100 percent of the recorded costs because the Air Force is  the sole customer for these missions, according to TRANSCOM and  Air Force officials. Training rates are generally based on the type of  aircraft, and the cost per flight hour. According to TRANSCOM  officials, the Air Mobility Command Air, Space and Information  Operations Directorate is responsible for the flying hour model that  determines requirements for this category of airlift services."], "subsections": []}, {"section_title": "Producing Accurate Workload Forecasts Is Challenging, and TRANSCOM Improvement Efforts Have Not Been Sustained", "paragraphs": ["TRANSCOM produces a forecast of its airlift workload to inform the  development of the ARA budget request. According to TRANSCOM\u2019s  guidance, workload forecasts are to be developed using future demand  derived from a combination of statistical methods and necessary  adjustments for expected operational conditions. The basic principles  used for workload forecasting are generally the same for all five  categories of airlift services. According to TRANSCOM officials,  forecasting methods are applied with some variation. This practice is  allowed under the forecasting instruction, depending on the category, and  which TRANSCOM or Air Mobility Command entity is responsible for  developing the forecast. For example, forecasts for the Joint Exercise  Transportation Program and Training are affected more by requirements to support readiness and funding constraints. On the other hand, the  basic forecasting process for Channel Cargo, Channel Passenger, and  Special Assignment Airlift Missions/Contingency are affected by the  transportation needs of the military services and combatant commands  and generally based on historical workload.", "Based on our analysis, workload forecasts have been increasingly  inaccurate for fiscal years 2007 through 2017. Specifically, we found that  forecast inaccuracy (i.e., the variance between the forecast and the actual  workload amounts aggregated across all five workload categories)  averaged about 25 percent and was trending upward in absolute value for  fiscal years 2007 through 2017, as shown in figure 4.", "In addition to the aggregate workload forecast being increasingly  inaccurate, the accuracy of the workload forecasts across each of the five  categories varies from year to year. For example,  In fiscal year 2008, channel cargo actual workload was about 17  percent lower than the forecast, and Special Assignment Airlift  Missions/Contingency actual workload was about 12 percent higher  than the forecast; and  In fiscal year 2016 Special Assignment Airlift Missions/Contingency  actual workload was about 116 percent higher than the forecast and  the Joint Exercise Transportation Program actual workload was about  45 percent lower than forecasts.", "For fiscal years 2007 through 2017, the workload categories with the  largest absolute forecast inaccuracy include Special Assignment Airlift  Missions/Contingency, Channel Cargo, and the Joint Exercise  Transportation Program. Two of these categories (Special Assignment  Airlift Missions/Contingency and Channel Cargo) also have the largest  share of airlift services. However, all five workload categories had  forecast inaccuracy of more than 15 percent in at least three of the eleven  years we reviewed. The variance of forecasted workload from actual  workload by airlift service category is presented in figure 5 below.", "Based on our analysis and discussions with TRANSCOM officials,  TRANSCOM has not taken sustained actions to improve forecasting  accuracy. Specifically, we found that TRANSCOM has not fully  implemented (1) an effective process to collect projected airlift workload  information from its customers (i.e., military services) to inform its  forecasts, (2) metrics and goals for measuring and reviewing forecast  accuracy, and (3) an action plan to improve workload forecasting.  Specifically,", "TRANSCOM has not implemented an effective process for  collecting projected airlift workload information: TRANSCOM  officials told us they use historic workload data to establish a baseline,  and perform statistical analysis to estimate averages and trends  according to their instructions. Next, forecasters use information  from the military services and combatant commands that may affect  each category of workload, if available, and adjust workload estimates  as needed.", "However, according to TRANSCOM officials, personnel conducting  forecasts have limited visibility over factors that may influence  forecasts, such as demand for transportation services, due to the lack  of information obtained from their customers (i.e., the military services  and Combatant Commands). Attempts to collect information from the  military services and combatant commands have been made on an ad  hoc basis. For example, in April 2016 TRANSCOM\u2019s Commander  solicited information from the military services\u2019 senior leadership  regarding their future transportation requirements, including airlift  needs. The message emphasized the importance of forecasting to  inform budget requests and management decisions to improve  operational efficiency. However, according to TRANSCOM officials,  the Air Force\u2014who is TRANSCOM\u2019s largest customer for airlift  services\u2014was the only military service that provided the requested  information in response to the TRANSCOM\u2019s Commander\u2019s one-time  request. According to TRANSCOM officials, the other military services  have not provided the requested information for workload projections  because the services do not understand how they would benefit from  providing the information and TRANSCOM\u2019s terminology and  processes are not familiar to the services. As a result, TRANSCOM\u2019s  ad hoc approach has not obtained quality information from its  customers to use in forecasting workload.", "Standards for Internal Control in the Federal Government state that  management should use quality information that is appropriate,  current, complete, accurate, accessible, and provided on a timely  basis to achieve the entity\u2019s objectives. Furthermore, we found other  defense organizations have provided a mechanism for customers to  routinely communicate projected workload information. For example,  the Defense Logistics Agency and their customers work together to  evaluate historical demand data for spare parts and tailor forecast  plans for those spare parts based on projected future usage. To this  end, communications with customers are expected to be consistent  and to use terminology shared in common with customers. Options  are presented in a manner that is readily understood by customers in  a format determined by customers\u2019 needs to encourage the most  efficient and effective solutions available.", "TRANSCOM no longer uses forecast accuracy metrics and has  not established forecast accuracy goals: In 2012, TRANSCOM  developed a forecasting process, and according to officials started  providing forecast performance metric briefings to TRANSCOM senior  leadership on a quarterly basis in fiscal year 2014. TRANSCOM\u2019s  overall forecast accuracy improved slightly in 2015. However,  according to TRANSCOM officials, these forecast briefings were  canceled after the first quarter of fiscal year 2016 because they were  viewed as minimally useful for budgeting, and were not used to  position airlift capacity to meet operational needs. In addition,  TRANSCOM officials stated that they no longer measure forecast  performance. We found that overall forecast inaccuracy was higher for  fiscal years 2016 and 2017 than any other year we reviewed, as  indicated above in figure 4.", "However, TRANSCOM\u2019s January 2015 forecasting instruction  requires forecast accuracy metrics to be developed to support  management decisions and forecast variance from actual workload to  be reviewed. Furthermore, the Standards for Internal Control in the  Federal Government state that management should define objectives  in specific and measurable terms to enable the design of internal  control for related risks, establish activities to monitor performance  measures and indicators, and assess performance against plans,  goals, and objectives set by the entity.", "TRANSCOM does not have a corrective action plan for improving  workload forecasts: TRANSCOM officials acknowledge that workload  forecasting needs improvement, and told us that TRANSCOM does not  have an action plan to improve its forecasting processes to inform  budgetary and operational decisions. In October 2013, TRANSCOM  considered, but did not adopt, a process designed to help ensure senior  management has visibility over issues, including forecasting, known as  Sales and Operations Planning (S&OP). We reported that the Army  implemented this process in 2013 after Army officials concluded that they  could leverage commercial best practices to improve logistics  performance (see sidebar). We discussed the S&OP process with  TRANSCOM officials, and they told us that the possibility of adapting the  process to military logistics was not readily accepted at TRANSCOM  because of organizational resistance to change. Initial organizational  resistance to change was also experienced by the Army, as discussed in  our prior report. However, according to the Army, the benefits of  implementing S&OP resulted in a 50 percent reduction in forecast error,  and a decision was made to deploy the S&OP process for use across all  Army depots and arsenals by the end of fiscal year 2018. Adopting a  corrective action plan, or approach such as S&OP can help TRANSCOM  focus and improve planning efforts resulting in improved and more  accurate workload forecasting.", "Furthermore, according to TRANSCOM\u2019s January 2015 forecasting  instruction, opportunities to improve forecasts should be assessed.  Additionally, Standards for Internal Control in the Federal Government  state that management should complete and document corrective actions  to remediate internal control deficiencies on a timely basis to achieve  established objectives. Our prior work has also shown that organizations  benefit from corrective action plans for improvement.", "TRANSCOM officials told us that producing accurate workload forecasts  is challenging, and we agree that there are some inherent difficulties in  accurately forecasting airlift workload on an annual basis. However, our  prior work on aviation forecasting has noted that forecasting is inherently  uncertain, but managing the risk related to that uncertainty is essential to  making informed decisions. Improved forecasting by addressing the  weaknesses identified could allow for more effective financial planning  and enable more efficient airlift operations. For example, TRANSCOM  estimated needing an ARA amount of $772 million for fiscal year 2016.  However, according to our analysis of TRANSCOM financial records, the  TWCF did not require support from ARA funds because actual revenue  from airlift services exceeded its costs by $148 million in fiscal year 2016.", "Inaccurate forecasts can lead to unreliable budget requests and hinder  effective and efficient operational planning necessary to provide  customers with the service they need. For example, according to a 2017  Air Force Audit Agency report, flying channel passenger flights at 85  percent of capacity may result in estimated savings of about $30 million  over a 6-year period. Our past work also shows that underutilization of  cargo airlift capacity is a longstanding issue. Improving forecast  accuracy would help TRANSCOM manage airlift services more efficiently,  make better use of budgetary resources to maximize airlift capacity more  effectively, and result in an ARA budget estimate that is more accurate. In  response to our findings and discussions, TRANSCOM officials stated  they plan to begin reviewing TRANSCOM\u2019s workload forecasting process  and determine a path ahead in June 2018. However, the outcome and  timeframes for this review are uncertain. Furthermore, TRANSCOM  leadership still must approve and fully implement changes to forecasting  processes, metrics, and goals.", "Unless TRANSCOM fully implements an effective process to obtain  projected workload requirements from its customers on a routine basis,  uses forecast accuracy metrics and establishes goals, and develops an  action plan, airlift workload forecasting will not improve. We acknowledge  that eliminating volatility entirely in the ARA budget request is unlikely  given that there will be unexpected and unpredictable workload  adjustments due to changes in the global security environment or natural  disasters. We also understand improving workload forecasts through  the use of goals, metrics, and an action plan for improvement will not  eliminate the inherent volatility associated with the ARA budget request  amount. However, these improvements would allow TRANSCOM to  better manage the inherent risks associated with the accuracy of  forecasts and improve ARA estimates used to inform future Air Force  Operations and Maintenance budget requests."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Each year DOD spends billions of dollars on airlift services flying  personnel and cargo worldwide. The clarity of budget estimates and the  accuracy of forecasts for airlift services are essential for Congress and  DOD to make informed decisions. Accordingly, Congress would benefit  from detailed ARA information in its budget requests, and this information  would be improved by TRANSCOM providing timely information on the  annual ARA estimate to the Air Force. Additionally, TRANSCOM  continues to face challenges in forecasting its workload, which is a key  factor in estimating the ARA. Until TRANSCOM establishes a process to  collect projected workload information from its customers, uses forecast  accuracy metrics and goals to monitor its performance, and implements a  corrective action plan, forecast accuracy and ARA estimates are not likely  to improve."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations to DOD.", "The Secretary of Defense should ensure that the Undersecretary of  Defense (Comptroller)/Chief Financial Officer establishes requirements to  present details related to the ARA in the annual Air Force Operations and  Maintenance budget request including (1) amounts for the next fiscal year  for which estimates are submitted, (2) revisions to the amounts for the  fiscal year in progress, and (3) the actual amounts allotted for the last  completed fiscal year. (Recommendation 1)", "The Secretary of Defense should ensure that the Secretary of the Air  Force and the Commander, U.S. Transportation Command, in  collaboration, develop sufficient detail on the formal processes and  finalize their memorandum of understanding to improve the timing and  communication of budgetary information to support the Air Force  Operations and Maintenance Airlift Readiness Account annual budget  request. (Recommendation 2)", "The Secretary of Defense should ensure that the Commander, U.S.  Transportation Command, fully implements a process to obtain projected  airlift workload from the military services and Combatant Commanders on  a routine basis to improve the accuracy of its workload forecasts.  (Recommendation 3)", "The Secretary of Defense should ensure that the Commander, U.S.  Transportation Command, uses forecast performance metrics and  establishes forecast accuracy goals for the airlift workload.  (Recommendation 4)", "The Secretary of Defense should ensure that the Commander, U.S.  Transportation Command, develops a corrective action plan to improve  the accuracy of its workload forecasting. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In  written comments, which are reprinted in appendix IV, DOD concurred  with our recommendations and stated that it plans to take specific actions  in response to our recommendations. DOD also provided technical  comments, which we incorporated as appropriate.", "We are sending copies of this report to appropriate congressional  committees. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Diana Maurer at (202) 512-9627 or maurerd@gao.gov, or Asif Khan at  (202) 512-9869, or khana@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made key contributions to this report are  listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To determine the extent to which ARA funds were requested, allotted,  and expended by the Air Force from fiscal years 2007 through 2017, we  analyzed Air Force budget request documents and underlying support  documentation. We also analyzed information from the Air Force\u2019s  Automated Budget Interactive Data Environment Systems to determine  the appropriated amounts allotted for ARA activities. Furthermore, we  analyzed summary-level documents detailing expenditures from the Air  Force and TRANSCOM for fiscal years 2007 through 2017 to establish  trends. Moreover, we reviewed TRANSCOM\u2019s procedures and  supporting documentation for billing the Air Force for payment of the  ARA. Lastly, we interviewed DOD, Air Force and TRANSCOM officials to  gain an understanding of general reasons variances from year to year  occurred or between the requested and expended amounts.", "To determine the extent to which the Air Force provided ARA information  in its budget request to Congress and informed its request with  information from TRANSCOM, we analyzed Air Force Operations and  Maintenance budget justification documents to determine the type of ARA  information (i.e., total budget request amount, changes from year to year,  and other information) provided in the fiscal years 2007 through 2017  President budget submissions. To understand the differences, if any,  between the ARA information provided from year to year, we interviewed  Air Force budget officials to obtain an explanation for changes in the  reported information. In addition, we analyzed Air Force Operations and  Maintenance budget justification documents, and Transportation Working  Capital Fund budget documents to determine if the ARA was based on  available information. We also discussed with Air Force and TRANSCOM  officials future plans to change their procedures and the information  considered in the development of the ARA estimate. Further, we  compared the Air Force and TRANSCOM processes and procedures  against Standards for Internal Controls in the Federal Government,  specifically standards regarding internal and external reporting and  mechanisms to enforce management directives.", "To determine the extent to which TRANSCOM has implemented a  process to set rates for airlift services and use workload forecasts to  estimate the annual ARA funding request, we analyzed the processes  TRANSCOM used to set rates it charges customers in various airlift  workload categories for fiscal years 2007 through 2017. We also  reviewed forecasting procedures and analyzed supporting documents  provided by TRANSCOM; interviewed TRANSCOM officials to gain an  understanding of how they implement these rate setting and forecasting  procedures; and analyzed forecast and actual workload data provided by  TRANSCOM for the same timeframe. We compared TRANSCOM\u2019s  processes against rate-setting and forecasting guidance and reviewed  whether TRANSCOM used quality information to establish workload  projections, established any performance measures and goals for  forecasting its workload, and developed any efforts to improve its  forecasting of workload. In addition, we interviewed TRANSCOM and Air  Mobility Command officials and reviewed supporting documentation to  gain an understanding of challenges that exist to producing accurate  workload forecasts, and the relationship with the rate-setting and  budgeting process.", "We obtained revenue, cost, workload, and ARA data in this report from  budget documents, accounting reports, and Air Force and TRANSCOM  records for fiscal years 2007 through 2017. We assessed the reliability of  the data by (1) interviewing Air Force and TRANSCOM officials to gain an  understanding of the processes used to produce the cash, revenue, cost,  workload and ARA data; (2) reviewing prior work to determine if there  were reported concerns with TRANSCOM\u2019s data; (3) comparing cash  balances, revenue, costs and workload data provided by TRANSCOM to  the same data presented in the Air Force Working Capital Fund budgets  for fiscal years 2007 through 2017; and (4) comparing ARA data to Air  Force and TRANSCOM supporting documentation, or to Air Force  Operations and Maintenance budget execution reports to support ARA  reported amounts for fiscal years 2007 through 2017. On the basis of  these procedures, we have concluded that these data were sufficiently  reliable for the purposes of this report.", "To address all of our objectives, we conducted a site visit to U.S.  Transportation Command Headquarters and Air Mobility Command at  Scott Air Force Base, Illinois, and interviewed officials with the Office of  the Undersecretary of Defense (Comptroller)/Chief Financial Officer, the  Assistant Secretary of the Air Force (Financial Management and  Comptroller), the U.S. Transportation Command, and the Air Mobility  Command.", "We conducted this performance audit from August 2017 through  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Air Force Working Capital Fund and Transportation Working Capital Fund Monthly Cash Balances for Fiscal Years 2007-2017", "paragraphs": ["The Air Force Working Capital Fund maintained a positive monthly cash  balance throughout fiscal years 2007 through 2017. The Transportation  Working Capital Fund (TWCF) is a part of the Air Force Working Capital  Fund for cash management purposes. DOD working capital funds are  authorized to charge amounts necessary to recover the full costs of  goods and services provided. However, the TWCF is authorized to  establish airlift customer rates to be competitive with commercial air  carriers. Due to mobilization requirements, the resulting revenue does not  always cover the full costs of airlift operations provided through the  TWCF. To the extent customer revenue is insufficient to support the costs  of maintaining airlift capability the Air Force shall provide appropriated  funds. The Air Force Working Capital Fund and TWCF monthly cash  balances are depicted in figure 6 below."], "subsections": []}, {"section_title": "Appendix III: Transportation Working Capital Fund Costs and Revenues for Airlift Services", "paragraphs": ["Total costs for airlift services for fiscal years 2007 through 2017 were less  than revenue collected for airlift services. Revenue came from rates  charged to customers for services performed (workload related revenue),  the Airlift Readiness Account (ARA), and other revenue sources. For  seven of the eleven years we reviewed, revenues exceeded costs, and  for four of the eleven years, costs exceeded revenue. For the eleven year  period we reviewed, workload related revenue ($73 billion) was not  sufficient to pay for the full costs of airlift services. The remaining revenue  included $2 billion from the ARA and $7 billion from other revenue  sources."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": ["Diana Maurer, (202) 512-9627 or maurerd@gao.gov, or Asif A. Khan, at  (202) 512-9869, or khana@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, John Bumgarner (Assistant  Director), Doris Yanger (Assistant Director), John E. \u201cJet\u201d Trubey (Analyst  In Charge), Pedro Almoguera, John Craig, Jason Kirwan, Amie Lesser,  Felicia Lopez, Keith McDaniel, Clarice Ransom, and Mike Silver made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-171", "url": "https://www.gao.gov/products/GAO-19-171", "title": "Emergency Communications: Office of Emergency Communications Should Take Steps to Help Improve External Communications", "published_date": "2018-12-12T00:00:00", "released_date": "2018-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Public-safety communications systems are used by thousands of federal, state, and local jurisdictions. It is vital that first responders have communications systems that allow them to connect with their counterparts in other agencies and jurisdictions. OEC offers written guidance, governance planning, and technical assistance to help ensure public-safety entities have the necessary plans, resources, and training to support emergency communications. FirstNet, an independent authority within the Department of Commerce, is establishing a public-safety network.", "GAO was asked to review OEC's efforts related to interoperable emergency communications. This report examines (1) OEC's and FEMA's collaborative efforts to develop grant guidance; (2) how OEC incorporates FirstNet's network and other emerging technologies into its plans and offerings; and (3) the extent to which OEC has assessed its methods of communication. GAO evaluated OEC's and FEMA's coordination against GAO's leading practices for interagency collaboration; surveyed all 54 state-designated SWICs; evaluated OEC's communications efforts against federal internal control standards; and interviewed officials that represented various areas of public safety."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security's (DHS) Office of Emergency Communications (OEC) and the Federal Emergency Management Agency (FEMA) collaborate on grant guidance to help public-safety stakeholders use federal funds for interoperable emergency communications. GAO found that OEC's and FEMA's efforts generally align with GAO's leading practices for effective interagency collaboration. For example, OEC's and FEMA's memorandum of agreement and standard operating procedures articulate their agreement in formal documents, define their respective responsibilities, and include relevant participants. During this review, the agencies established a process to monitor and assess grantees' compliance with the grant guidance. However, because the grants for 2018 were not yet awarded at the time of GAO's review, GAO was unable to assess the effectiveness of the new process.", "OEC incorporates the First Responder Network Authority's (FirstNet) nationwide public-safety broadband network and other emerging technologies into various offerings such as written guidance, governance planning, and technical assistance. Public-safety organizations GAO interviewed and statewide interoperability coordinators (SWIC) GAO surveyed were generally satisfied with OEC's communication efforts.", "OEC has not assessed its methods for communicating with external stakeholders. According to federal internal control standards, management should externally communicate the necessary quality information to achieve the entity's objectives and periodically assess its methods of communication so that the organization has the appropriate tools to communicate quality information on a timely basis. Some SWIC survey respondents and public-safety representatives identified an opportunity for OEC to improve its methods of communication. For example, 26 of the 54 SWICs responded that OEC could use additional tools or approaches, such as social media, for improving communication with its stakeholders. In addition, public-safety officials reported that they have missed training because they were unaware of opportunities. Because OEC has not assessed its methods of communication, OEC may not be using the best tools and approaches to provide timely information on training opportunities, workshops, and other emergency communications information to the public-safety community."]}, {"section_title": "What GAO Recommends", "paragraphs": ["OEC should assess its methods of communication to help ensure it is using the appropriate tools in communicating with external stakeholders. DHS concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Public-safety communications systems are used by first responders\u2014 such as police officers and firefighters\u2014in thousands of federal, state,  and local jurisdictions. It is vital for first responders to have:  sufficient capacity to handle the communications, and  interoperable communications systems that enable first responders to  connect with their counterparts in other agencies and jurisdictions,  even if their counterparts\u2019 systems or equipment vendors differ.", "The Office of Emergency Communications (OEC)\u2014located within the  Department of Homeland Security\u2019s (DHS) National Protection and  Programs Directorate (NPPD)\u2014was created in 2007 to promote  interoperable emergency communications, among other things. OEC  offers written guidance, governance planning, and technical assistance to  help ensure federal, state, local, tribal, and territorial agencies have the  necessary plans, resources, and training they need to support operable  and interoperable emergency communications. OEC coordinates with  other DHS agencies that have responsibilities for emergency  communications, such as the Federal Emergency Management Agency  (FEMA), which awarded over $50 billion in preparedness grants funding  to state, local, tribal, and territorial governments from fiscal years 2002  through 2018. According to OEC, its guidance, governance planning,  and technical assistance have changed to reflect changes in technology,  including the creation of the First Responder Network Authority (FirstNet).  FirstNet was created to establish a nationwide, interoperable, wireless  broadband network for use by federal, state, tribal, and local public-safety  personnel. According to FirstNet, the nationwide network will transform  the future of public-safety communications for first responders.", "You asked us to obtain information on OEC\u2019s and FEMA\u2019s grant guidance  efforts as well as OEC\u2019s plans and offerings for emergency  communications. This report examines:", "OEC\u2019s and FEMA\u2019s collaborative efforts to develop and implement  emergency communications grant guidance; how OEC incorporates FirstNet\u2019s nationwide public-safety broadband  network and other emerging technologies into its plans and offerings,  and stakeholders\u2019 views regarding those efforts; and  the extent to which OEC has assessed its methods of communication.", "To address these objectives, we reviewed OEC and FEMA  documentation on their collaborative efforts related to grants, including  memorandums of agreement and standard operating procedures. We  also interviewed OEC and FEMA staff to obtain information on their  collaboration efforts. We assessed whether the agencies\u2019 actions align  with the seven key features of interagency collaboration that we have  previously identified. We also reviewed OEC documents and technical  assistance offerings, including the 2014 National Emergency  Communications Plan. We conducted semi-structured interviews with 6  of the 10 OEC coordinators. We selected these OEC coordinators to  achieve variety across geography, population density, tribal presence,  and territory representation; their views do not represent OEC\u2019s official  agency position.", "Additionally, we surveyed the statewide interoperability coordinators  (SWIC) from 48 states, the District of Columbia, and 5 territories. We  surveyed SWICs from May 2018 to July 2018 and received responses  from all 54 SWICs. We conducted semi-structured interviews with  officials from 10 public-safety organizations that are members of both the SAFECOM committee and the Public Safety Advisory Committee  (PSAC). We selected organizations that represent various areas of  public safety (e.g., law enforcement, public works, and fire and  emergency medical services) and different levels of jurisdiction (i.e.,  federal, state, local, or tribal). We also assessed OEC\u2019s efforts for  communicating with public-safety stakeholders against pertinent federal  standards for internal control. Additional details about our scope and  methodology can be found in appendix I, and a copy of our survey results  can be found in appendix II.", "We conducted this performance audit from December 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Effective communication is vital to first responders\u2019 ability to respond to  emergencies and to ensure their safety. For example, first responders  use public-safety communications systems to gather information,  coordinate a response, and request additional resources and assistance  from neighboring jurisdictions and the federal government. OEC has  taken a number of steps aimed at supporting and promoting the ability of  public-safety officials to communicate in emergencies and work toward  operable and interoperable emergency communications nationwide. OEC  develops policy and guidance supporting emergency communications  across all levels of government and across various types of emerging  technologies such as broadband, Wi-Fi, and NextGen 911, among others.  OEC also provides technical assistance\u2014including training, tools, and  online and on-site assistance\u2014for federal, state, local, and tribal first  responders. First responders use different communications systems,  such as land mobile radio (LMR), commercial wireless services, and  FirstNet\u2019s network.", "LMR: These systems are the primary means for first responders to  use voice communications to gather and share information while  conducting their daily operations and coordinating their emergency  response efforts. LMR systems are intended to provide secure,  reliable voice communications in a variety of environments, scenarios,  and emergencies. Across the nation, there are thousands of  separate LMR systems.", "Commercial wireless services: Public-safety entities often pay for  commercial wireless services to send data transmissions such as  location information, images, and video. Some jurisdictions also use  commercial wireless services for voice communications.", "Nationwide dedicated-broadband network: Consistent with the law,  FirstNet is working to establish a nationwide dedicated network for  public-safety use that is intended to foster greater interoperability,  support important data transmissions, and meet public-safety officials\u2019  reliability needs. In creating FirstNet in 2012, Congress provided it  with $7 billion in federal funds for the network\u2019s initial build-out and  valuable spectrum for the network to operate on. Unlike current LMR  systems, the devices operating on FirstNet\u2019s network will use the  same radio frequency band nationwide. It is expected that these  devices will be interoperable among first responders using the  network because the devices will be built using the same open, non- proprietary, commercially available standards.", "Communications systems must work together, or be interoperable, even  though the systems or equipment vendors may differ. The interoperability  of emergency communications enables first responders and public-safety  officials to use their radios and other equipment to communicate with  each other across agencies and jurisdictions when needed and as  authorized, as shown in figure 1.", "OEC is tasked with developing and implementing a comprehensive  national approach to advance interoperable communications  capabilities. For example, according to OEC, it supports and promotes  communications used by emergency responders and government officials  and leads the nation\u2019s operable and interoperable public-safety and  national security/emergency preparedness communications efforts. OEC  notes that it plays a key role in ensuring federal, state, local, tribal, and  territorial agencies have the necessary plans, resources, and training  needed to support operable and interoperable emergency  communications. To help in this effort, OEC instituted a coordination  program that established regional coordinators across the nation.  According to OEC, its coordinators work to build trusted relationships,  enhance collaboration, and stimulate the sharing of best practices and  information between all levels of government, critical infrastructure  owners and operators, and key non-government organizations.", "OEC developed the National Emergency Communications Plan in 2008  and worked with federal, state, local, and tribal jurisdictions to update it in  2014 to reflect an evolving communications environment. The long-term  vision of the plan\u2014which OEC views as the nation\u2019s current strategic plan  for emergency communications\u2014is to enable the nation\u2019s emergency- response community to communicate and share information across all  levels of government, jurisdictions, disciplines, and organizations for all  threats and hazards, as needed and when authorized.", "To help it accomplish this mission, OEC works with three emergency  communications advisory groups: SAFECOM, the Emergency  Communications Preparedness Center (ECPC), and the National Council  of Statewide Interoperability Coordinators (NCSWIC). These  organizations promote the interoperability of emergency communications  systems by focusing on technologies including, but not limited to, LMR  and satellite technology.", "SAFECOM: According to the 2018 SAFECOM Strategic Plan,  SAFECOM develops products and completes a range of activities  each year in support of its vision and mission, including providing a  national view of public-safety priorities and challenges, developing  resources and tools aligned to the 2014 National Emergency  Communications Plan, and collaborating with partner organizations to  promote the interoperability of emergency communications. One of  the products developed by SAFECOM each year is the Guidance on  Emergency Communications Grants. SAFECOM consists of more  than 50 members that represent local, tribal, and state governments;  federal agencies; state emergency responders; and intergovernmental  and national public-safety organizations.", "ECPC: The ECPC is an interagency collaborative group that provides  a venue for coordinating federal emergency-communications efforts.  The ECPC works to improve coordination and information sharing  among federal emergency-communications programs. The ECPC  does this by serving as the focal point for emergency communications  issues across the federal agencies; supporting the coordination of  federal programs, such as grant programs; and serving as a clearing  house for emergency communications information, among other  responsibilities. The ECPC has 14 member agencies that are  responsible for setting its priorities.", "NCSWIC: This council consists of SWICs and their alternates from 50  states, 5 territories, and the District of Columbia. According to  SAFECOM, NCSWIC develops products and services to assist the  SWICs with leveraging their relationships, professional knowledge,  and experience with public-safety partners involved in interoperable  communications at all levels of government.", "Additionally, in 2013, FirstNet established the PSAC to provide advice to  FirstNet. The committee is composed of members who represent local,  tribal, and state public-safety organizations; federal agencies; and  national public-safety organizations.", "FEMA is responsible for coordinating government-wide disaster response  efforts, including on-the-ground emergency communications support and  some technical assistance. For example, FEMA\u2019s regional emergency- communications coordinator is responsible for providing emergency  communications assistance on an as-needed basis and coordinating  FEMA\u2019s tactical communications support during a disaster or emergency.  FEMA also provides a range of grant assistance to state, local, tribal, and  territorial entities, including preparedness grants that can be used for  emergency communications.", "As noted above, in November 2018, legislation was signed into law that  reorganized and renamed NPPD and OEC. Previously, OEC was one of  five divisions under the Office of Cyber Security and Communications  which in turn was one of five divisions within NPPD. However, NPPD has  been renamed the Cybersecurity and Infrastructure Security Agency, and  OEC was renamed the Emergency Communications Division and was  elevated to one of three direct reporting divisions within the new agency.  See figure 2 for an illustration of changes made to OEC\u2019s organizational  placement."], "subsections": []}, {"section_title": "OEC\u2019s and FEMA\u2019s Joint Efforts for Emergency Communications Grants Generally Follow Key Features for Effective Interagency Collaboration", "paragraphs": ["OEC and FEMA have responsibilities for developing and implementing  grant guidance for grantees using federal funds for interoperable  emergency communications. Specifically, OEC and FEMA officials told us  FEMA is responsible for administering the grants, and OEC coordinates  emergency communications grant guidance annually through  SAFECOM\u2019s Guidance on Emergency Communications Grants. We  reviewed OEC\u2019s and FEMA\u2019s collaborative efforts related to grant  guidance and found that their efforts generally follow our previously  identified leading practices for effective interagency collaboration, as  described below.", "Written Guidance and Agreements. Agencies that formally  document their agreements can strengthen their commitment to  working collaboratively. OEC and FEMA formalized their  coordination efforts for interoperable emergency communications  grants in a memorandum of agreement in 2014. This memorandum  assigned OEC and FEMA responsibilities and established a joint  working group to develop standard operating procedures, which OEC  said were drafted the following year but not formally approved by  FEMA, that govern coordination between the agencies. We also  reported that written agreements are most effective when the  collaborators regularly monitor and update them. When we started  our review, OEC and FEMA officials told us that they had not updated  the memorandum of agreement, which included the draft standard  operating procedures as an appendix. However, the agencies  approved an updated memorandum of agreement and standard  operating procedures, and OEC provided them to us in July 2018.", "Leadership. When buy-in is required from multiple agencies,  involving leadership from each can convey the agencies\u2019 support for  the collaborative effort. According to OEC and FEMA officials, their  grants coordination efforts include high-level leadership. Specifically,  senior leaders from both agencies signed the 2014 and 2018  memorandums of agreement. Also, OEC officials told us that their  leaders in the grants program office are responsible for overseeing  the collaborative effort.", "Bridging Organizational Culture. Collaborating agencies should  establish ways to operate across agency boundaries and address  their different organizational cultures. OEC and FEMA operate  across agency boundaries in several ways. First, both agencies told  us that they participate in the ECPC Grants Focus Group, whose  members coordinate across federal grant programs to support  interoperable emergency communications. The group reviews  SAFECOM guidance and, according to FEMA officials, meets on a  quarterly basis. Second, OEC officials said the agencies foster open  lines of direct communication via conference calls, e-mail  correspondence, and in-person meetings. OEC and FEMA officials  told us their communications include sharing and reviewing language  in FEMA\u2019s notices that announce grant opportunities and OEC\u2019s  SAFECOM guidance. Third, the agencies said that OEC officials  conduct emergency-communications-related trainings and briefings  for FEMA at least once a year. According to OEC officials, these  trainings have included a discussion on the movement toward  broadband and FirstNet. Finally, FEMA officials told us that their  program analysts have attended conferences with OEC to speak to  the SWICs about grant programs. They said the program analysts  explained how the grant money can be leveraged to support projects  within the individual states and answered questions about the grants.  OEC officials said having FEMA attend conferences to discuss  specific grant information is useful for public-safety stakeholders.", "Clarity of Roles and Responsibilities. Collaborating agencies can  get clarity when they define and agree upon their respective roles and  responsibilities. As part of the 2014 and 2018 memorandums of  agreement, OEC and FEMA established clear responsibilities for how  each agency will support the grants coordination effort. For example,  both offices were responsible for assigning experienced program staff  and contributing to the development of standard operating procedures  by attending meetings and conducting research. Also, the standard  operating procedures clarify how OEC and FEMA will share  information, solicit input on grants guidance language, and review  grant applications.", "Participants. Including relevant participants helps ensure individuals  with the necessary knowledge, skills, and abilities will contribute to the  collaborative effort. OEC and FEMA identify points of contact in their  memorandums of agreement. According to OEC officials, they did not  always work with the correct FEMA staff before the 2014  memorandum was developed. Also, FEMA officials told us that their  grants program staff who participate in the coordination effort with  OEC perform those specific responsibilities as a collateral duty on an  as needed basis. According to OEC officials, OEC\u2019s performance  plans outline coordination with FEMA and areas related to the  agencies\u2019 memorandum of agreement for the staff who handle grant  issues. OEC and FEMA officials said participants\u2019 responsibilities  include serving as technical subject matter experts and reviewing  language for grants guidance and notices of funding opportunities.", "Resources. Collaborating agencies should identify the human,  financial, and technological resources they need to initiate or sustain  their efforts. OEC and FEMA staff their collaborative effort with  employees from their grants offices to address their human resource  needs. These employees perform work related to emergency  communications grants as outlined in their performance plans or as a  collateral duty. The agencies also provide OEC access to FEMA\u2019s  non-disaster grants system to share grantee information. According to  OEC and FEMA officials, their collaboration efforts do not require  either agency to obligate funds or use special technology, such as  online information-sharing tools.", "Outcomes and Accountability. Collaborating agencies that create a  means to monitor and evaluate their efforts can better identify areas  for improvement. According to OEC and FEMA documentation, the  primary goal of the draft standard operating procedures was to  prevent grantees from improperly using federal funds, such as  purchasing equipment that is not interoperable. OEC officials said the  biggest gap in those standard operating procedures was that they did  not include a monitoring program to ensure grantees were compliant  with grant guidance, which include requirements for interoperability.  OEC\u2019s and FEMA\u2019s July 2018 standard operating procedures  established a process to track and monitor grantee compliance. They  also identified a process for assessing the information they collect and  how it will be shared among OEC and FEMA, and when appropriate,  other stakeholders. At the time of our review, OEC and FEMA officials  told us they had not implemented the monitoring procedures because  the grants for the 2018 grant cycle were not yet awarded. Accordingly,  we could not evaluate the effectiveness of the new procedures to  monitor and assess grantee compliance, and without conducting such  an evaluation, we could not determine whether OEC\u2019s and FEMA\u2019s  efforts align with the key practice in this area. Senior officials from  both agencies said the monitoring procedures would be updated if  they do not work as intended."], "subsections": []}, {"section_title": "OEC Incorporates FirstNet\u2019s Network and Emerging Technologies into Its Plans and Offerings", "paragraphs": ["After being established in 2007, OEC initially focused on enhancing the  interoperability and continuity of LMR systems. However, according to  OEC officials, its programs, products, and services have adapted and  evolved to incorporate new modes of communications and technologies.  Additionally, OEC\u2019s technical assistance offerings for emergency  communications technology have evolved over time as new technologies  have come into use. For example, OEC\u2019s technical assistance catalog  contains new or enhanced offerings on topics related to broadband issues  such as FirstNet\u2019s network, Next Generation 911, alerts and warnings,  and incident management.", "In 2014, DHS released its second National Emergency Communications  Plan, which identified the need to focus on broadband technologies,  including FirstNet\u2019s nationwide public-safety broadband network. One of  the plan\u2019s top priorities is \u201censuring emergency responders and  government officials plan and prepare for the adoption, integration, and  use of broadband technologies, including the planning and deployment of  the nationwide public-safety broadband network.\u201d To meet this priority,  OEC officials told us that they provide stakeholders with a wide range of  products and services to help prepare for the adoption, integration, and  use of broadband. For instance, officials said that they leverage OEC\u2019s  governance groups\u2014SAFECOM, NCSWIC, and ECPC\u2014to develop  products and services and to identify specific challenges and  requirements regarding broadband. Additionally, OEC officials told us that  they coordinate regularly with FirstNet staff and invite FirstNet to meet  and brief the stakeholder community on the latest deployment  information. However, OEC officials told us that FirstNet\u2019s network is one  option available to public-safety and government officials to access  broadband communications and information sharing and explained that  OEC maintains a neutral position for all technologies and vendors.  Accordingly, OEC is not responsible for promoting any vendor solutions,  including FirstNet\u2019s network, and there is no requirement for OEC to do  so. Additionally, five of six OEC coordinators we interviewed told us that  FirstNet\u2019s network is only one of several emergency-communications  technology options and that OEC should continue to provide information  to public-safety stakeholders regarding other providers. For example,  there are commercial carriers that provide wireless broadband services,  and we have previously reported that these commercial carriers could  choose to compete with FirstNet.", "According to OEC officials, prior to the start of each fiscal year, OEC  engages with stakeholders to gather feedback on new or revised  technical assistance offerings, as well as updates to existing plans and  documents. OEC officials told us that they expect an increase in technical  assistance requests that focus on issues related to mobile data use,  broadband governance, standard operating procedures, and policies and  procedures. According to OEC officials, OEC has delivered more than  2,000 technical-assistance-training courses and workshops since 2007,  and OEC will continually update its technical assistance offerings to  incorporate new modes of communications and technologies into training,  exercises, and standard operating procedures for its stakeholders.", "The majority (7 of 10) of public-safety organizations that we interviewed  told us that OEC sufficiently incorporates information regarding FirstNet\u2019s  network into its guidance and offerings. For example, officials from 6 of 10  organizations that we interviewed told us that OEC must strike a balance  between FirstNet\u2019s network and other emerging technologies, and that  OEC has successfully accomplished this task. Additionally, the majority of  SWICs responded to our survey that it is at least moderately important for  OEC to incorporate the FirstNet network and emerging technologies into  its written guidance, technical assistance offerings, training opportunities,  workshops, and grant guidance, Furthermore, in most cases, SWICs  responded that OEC has incorporated FirstNet\u2019s network and emerging  technologies into these areas, as follows:", "FirstNet network. In our survey, the majority of SWICs responded  that OEC has incorporated, to a large or moderate extent, FirstNet\u2019s  network into its written guidance (65 percent) and technical assistance  offerings (59 percent), and half of SWICs said the same for OEC\u2019s  workshops. However, fewer SWICs reported that OEC incorporated  FirstNet\u2019s network, to a large or moderate extent, into its training  opportunities (39 percent) and grant guidance (33 percent).", "Emerging technologies. The majority of SWICs reported that OEC  has incorporated, to a large or moderate extent, emerging  technologies into its written guidance (87 percent); technical  assistance offerings (81 percent); training opportunities (74 percent);  workshops (78 percent); and grant guidance (56 percent).", "See figure 3 for complete survey data regarding SWICs\u2019 views on the  extent that OEC has incorporated FirstNet\u2019s network and emerging  technologies into its offerings.", "In surveying SWICs on the usefulness of OEC\u2019s efforts to incorporate  FirstNet\u2019s network and emerging technologies into its offerings, we found  the following:", "FirstNet network. The majority of SWICs reported that OEC\u2019s efforts  to incorporate FirstNet\u2019s network into its written guidance (67 percent),  technical assistance offerings (59 percent), and workshops (59  percent) have been very or moderately useful. However, less than a  majority of SWICs reported that OEC\u2019s efforts to incorporate FirstNet\u2019s  network into its training opportunities (46 percent) and grant guidance  (40 percent) have been very or moderately useful.", "Emerging technologies. The majority of SWICs reported that OEC\u2019s  efforts to incorporate emerging technologies into its written guidance  (93 percent), technical assistance offerings (85 percent), training  opportunities (74 percent), workshops (85 percent), and grant  guidance (72 percent) have been very or moderately useful.", "See figure 4 for complete survey data regarding SWICs\u2019 views on the  usefulness of OEC\u2019s efforts to incorporate FirstNet\u2019s network and  emerging technologies into its offerings.", "Even following the implementation of FirstNet, public-safety stakeholders  told us they expect OEC will play an important role in ensuring  interoperable emergency communications, both regarding the FirstNet  network and other technologies. For example, 45 of 54 (83 percent) of  SWICs we surveyed reported that OEC will likely have a large or  moderate role for ensuring interoperable emergency communications  once FirstNet\u2019s network is fully operational. Additionally, nearly all (9 of  10) of public-safety organizations we interviewed said that they believe  OEC will continue to play an important role in ensuring interoperable  emergency communications after the implementation of FirstNet\u2019s  network."], "subsections": []}, {"section_title": "OEC Has Not Assessed Its Methods for Communicating with External Stakeholders", "paragraphs": ["OEC is required to conduct extensive nationwide outreach to support and  promote interoperable emergency-communications capabilities by state,  regional, local, and tribal governments and public-safety agencies in the  event of natural disasters and acts of terrorism and other man-made  disasters. According to federal standards for internal control,  management should externally communicate the necessary quality  information to achieve the entity\u2019s objectives. This includes  communicating with external parties and using the appropriate methods  of communication. The federal standards state that management should  periodically assess the entity\u2019s methods of communication so that the  organization has the appropriate tools to communicate quality information  throughout and outside of the entity on a timely basis.", "Most public-safety organizations we interviewed told us that OEC  communicates with their organization frequently through committee  meetings and other means. For example, 9 of the 10 organizations told us  that a key form of communication between their organization and OEC is  participation in emergency-communications advisory groups such as  SAFECOM, NCSWIC, and PSAC. Furthermore, OEC officials reported  that OEC\u2019s guidance documents, plans, tools, and technical assistance  offerings are formally provided to the public-safety community through the  SAFECOM, NCSWIC, and ECPC distribution lists. Governing body  representatives then distribute the information to their organizations and  stakeholders. These documents are also available on DHS\u2019s website.  Furthermore, 4 of the 10 organizations told us that they regularly have  direct communications with OEC staff. The large majority of SWICs  responded that they are very or moderately satisfied with the  communication efforts from both OEC headquarters (81 percent) and  OEC coordinators (93 percent).", "However, some stakeholders identified communication challenges as well  as opportunities for OEC to improve communication. For example,  approximately one quarter (26 percent) of SWICs said that OEC does not  communicate training well, and these SWICs reported that they are either  unaware of OEC training opportunities related to FirstNet\u2019s network and  other emerging technologies, or that they mostly learn about OEC training  opportunities from other sources. See figure 5 below for additional survey  information regarding SWICs\u2019 views on how well OEC communicates  training opportunities related to FirstNet\u2019s network and other emerging  technologies.", "Also with respect to OEC\u2019s communication efforts with stakeholders, four  of six OEC coordinators and 3 of 10 public-safety organizations we  interviewed, along with 26 of 54 (48 percent) of the SWICs we surveyed,  identified the need for OEC to use additional tools or approaches for  improving communication with SWICs and the public-safety community.  For example, one coordinator said that there are public-safety  stakeholders who are unaware of OEC. Similarly, representatives from a  public-safety organization we interviewed told us that OEC should help  public-safety stakeholders better understand what OEC does. Both the  OEC coordinator and public-safety stakeholders in these examples  identified the need for OEC to use social media to improve public-safety  stakeholders\u2019 understanding of OEC and its offerings. Additionally, an  OEC coordinator told us that each region is different, and unless there is  an OEC coordinator who is proactive about communicating information to  the public-safety community, then important information does not get out  to the appropriate people. The coordinator also said that it is difficult to  communicate information to all of the needed stakeholders because he is  solely responsible for communicating with many public-safety entities and  jurisdictions within multiple states. Furthermore, a SWIC reported that  other organizations use social media for communicating during disasters  and for notifying interested parties about events and trainings, and that  OEC should do the same. OEC officials told us that NPPD recently  established a Twitter account that OEC has used to increase awareness  of programs, products, and services. However, since the establishment of  the account in February 2018 through September 2018, only 23 of  NPPD\u2019s 280 tweets and retweets (8.2 percent) made mention of OEC, 15  of which occurred in March 2018.", "In addition to social media, some public-safety organizations and SWICs  identified additional tools or approaches that OEC could use to improve  communication with the public-safety community. These tools and  approaches include designating an intergovernmental specialist or liaison  within OEC to coordinate with public-safety stakeholders, developing  additional regional-focused meetings such as conferences and  workshops, and creating online or distance-learning opportunities (e.g.,  online training, webinars, online chat or bulletin board services, etc.).", "Although OEC officials told us that they employ mechanisms to  understand the effectiveness of OEC\u2019s programs, products, and services,  we found OEC has not specifically assessed its methods of  communication. For example, OEC analyzes feedback forms provided at  meetings and stakeholder engagements, gathers direct input from  stakeholders through in-person and phone discussions and e-mail, tracks  the open rate of e-mails and website and blog post traffic, and reviews  social media analytics for specific event campaigns. At the time of our  review, OEC officials told us that they were developing a formal  performance-management program to measure the impact of OEC\u2019s  programs on the public-safety and national security/emergency  preparedness communities. However, these broad efforts aimed at  reviewing the overall programs are not designed for the specific purpose  of assessing OEC\u2019s methods of communication, and OEC does not have  any plans in place for doing so.", "Lacking an assessment of its methods of communication, OEC may be  missing opportunities to learn which tools and approaches are the most  effective and to use those to deliver timely information to public-safety  stakeholders. As noted above, this can result in public-safety officials  missing trainings or not receiving other helpful information. Furthermore,  not using additional methods of communication or tools could contribute  to uncertainty among the public-safety community about OEC\u2019s mission  and its efforts to improve the interoperability of emergency  communications."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["OEC has multiple efforts supporting interoperable emergency  communications that the public-safety community relies on to better  respond to emergency situations. Although public-safety stakeholders we  contacted were generally satisfied with OEC\u2019s communications efforts,  OEC could be missing opportunities to use additional tools and  approaches, such as social media, to improve communication with public- safety officials. Absent an assessment of its methods of communication,  OEC cannot ensure it is using the best methods to provide relevant and  timely information on training opportunities, workshops, technical  assistance offerings, and other emergency-communications information  to the public-safety community."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["OEC should assess its methods of communication to help ensure it has  the appropriate tools and approaches to communicate quality information  to public-safety stakeholders, and as appropriate, make adjustments to its  communications strategy. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DHS for review and comment. In  response, DHS provided written comments, which are reprinted in  appendix III. DHS concurred with our recommendation and provided an  attachment describing the actions it would take to implement the  recommendation.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, 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) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the Office of Emergency Communications\u2019  (OEC) and the Federal Emergency Management Agency\u2019s (FEMA)  collaborative efforts to develop and implement guidance for grantees  using federal grants for interoperable emergency communications; (2)  how OEC incorporates FirstNet\u2019s nationwide public-safety broadband  network and other emerging technologies into its plans and offerings, and  stakeholders\u2019 views regarding those efforts; and (3) the extent to which  OEC has assessed its methods of communication.", "To evaluate OEC\u2019s and FEMA\u2019s collaborative efforts to develop and  implement grant guidance, we collected and reviewed documentation  relevant to the collaborative effort, including memorandums of  agreements, standard operating procedures, and meeting agendas. We  assessed OEC\u2019s and FEMA\u2019s actions against the seven key  considerations for interagency collaborations. We also interviewed OEC  and FEMA Grant Programs Directorate officials who have responsibilities  for Department of Homeland Security (DHS) grants. We asked them to  discuss their approach to interagency collaboration, including the process  to jointly develop grant guidance language. We asked agency officials  questions that were based on the key considerations for implementing  interagency collaborative mechanisms that we identified in a prior report.", "To determine how OEC has incorporated FirstNet\u2019s network and other  emerging technologies into its plans and offerings, we reviewed relevant  OEC documentation, including fact sheets and technical assistance  guides. We also reviewed the 2014 National Emergency Communications  Plan (NECP) and OEC\u2019s March 2017 biennial report to Congress on the  progress toward meeting NECP goals. We interviewed OEC  headquarters officials about the agency\u2019s efforts to date, including how  OEC develops its offerings and workshops and communicates this  information to the public-safety community. We also interviewed 6 of 10  OEC coordinators using a semi-structured interview format to get on-the- ground perspectives from OEC staff who serve as points of contact for  public-safety stakeholders. We selected OEC coordinators to achieve  variety across geography, population density, tribal presence, and  territory representation. We interviewed OEC coordinators to obtain their  perspectives as subject matter experts, but their views should not be  attributed to OEC\u2019s official agency position.", "In addition, to obtain stakeholders\u2019 views on OEC\u2019s efforts to incorporate  FirstNet\u2019s network and other emerging technologies into plans and  offerings, we surveyed all 54 statewide interoperability coordinators  (SWIC) from 48 states, five territories, and the District of Columbia. We  obtained a list of SWICs from DHS and confirmed additional contact  information via e-mail. We conducted a web-based survey to learn  SWICs\u2019 perspectives on issues including the importance of incorporating  FirstNet\u2019s network and other emerging technologies into OEC\u2019s plans and  offerings, OEC\u2019s communication with the public-safety community, and  SWICs\u2019 level of satisfaction with OEC\u2019s efforts. To ensure the survey  questions were clear and accurately addressed the relevant terms and  concepts, we pretested the survey with SWICs from three states: Illinois,  Massachusetts, and Texas. These SWICs were selected to get  perspectives from officials who have served in the role for at least several  years and SWICs who are new to the position. We administered our  survey from May 2018 to July 2018 and received 54 responses for a 100  percent response rate.", "We also used a semi-structured interview format to obtain views from  representatives from 10 public-safety organizations who have expertise in  public-safety and federal emergency-communications efforts (see table  1). To identify relevant organizations, we reviewed our prior report that  identified 34 organizations that are members of both OEC\u2019s SAFECOM  advisory group and FirstNet\u2019s Public Safety Advisory Committee (PSAC).  We researched the members to help determine the extent to which each  organization is involved in issues related to our review. We selected 10  public-safety organizations to interview on the basis of: (1) this research,  (2) information from DHS, and (3) a literature review. Because one  association declined our request for an interview, we contacted and  interviewed another relevant organization from the original list of 34  member organizations. The views shared by the representatives we  interviewed are not generalizable to all public-safety organizations that  interact with OEC; however, we were able to secure the participation of  organizations that focus on various public-safety issues across federal,  state, local, and tribal jurisdictions and thus believe their views provide a  balanced and informed perspective on the topics discussed.", "To evaluate the extent that OEC has assessed its methods of  communication, we reviewed OEC\u2019s documentation for collecting  stakeholders\u2019 feedback. We also reviewed the interview responses from  OEC officials and the public-safety organizations listed in table 1 and the  SWIC survey data pertaining to OEC\u2019s communications efforts. We  assessed OEC\u2019s efforts against federal standards for internal control  regarding external communications and periodic evaluation of its methods  of communication."], "subsections": []}, {"section_title": "Appendix II: Survey of Statewide Interoperability Coordinators", "paragraphs": ["The questions we asked in our survey of statewide interoperability  coordinators (SWIC) and the aggregate results of responses to the  closed-ended questions are shown below. We do not provide results for  the open-ended questions. We surveyed all SWICs from 48 states, five  territories, and the District of Columbia. We administered our survey from  May 2018 to July 2018 and received 54 responses for a 100 percent  response rate. Due to rounding, the aggregated results for each closed- ended question may not add up to exactly 100 percent. For a more  detailed discussion of our survey methodology see appendix I."], "subsections": [{"section_title": "Governance", "paragraphs": ["1. What best describes the Statewide Interoperability Coordinator (SWIC) in your  state?", "1a. If you selected \u201cOther,\u201d please explain.  (Written responses not included)", "2. Does the SWIC also serve in the role of the FirstNet State Point of Contact  (SPOC)?", "0%  2a. If no, how often does the SWIC coordinate with the SPOC on FirstNet\u2019s  nationwide public safety broadband network?", "2b. If you selected \u201crarely or never,\u201d please explain.  (Written responses not included)"], "subsections": []}, {"section_title": "OEC Coordination Support - FirstNet\u2019s Nationwide Public Safety Broadband Network", "paragraphs": ["The questions in this section ask your opinion about OEC\u2019s efforts to help  the public safety community improve interoperable emergency  communications capabilities. This section will be about FirstNet\u2019s  nationwide public safety broadband network.", "3. In your opinion, how important is it for OEC to incorporate FirstNet\u2019s nationwide public safety broadband network into the  following areas?", "Please specify the other area in the box below.  (Written responses not included)", "4. To what extent has OEC incorporated FirstNet\u2019s nationwide public safety broadband network into the following areas?", "Please specify the other area in the box below.  (Written responses not included)", "5. In your opinion, how useful have OEC\u2019s efforts to incorporate FirstNet\u2019s nationwide public safety broadband network into  the following areas been in helping your state address challenges with its emergency communications?", "Please specify the other area in the box below.  (Written responses not included)  6. Please provide any additional comments you have on OEC\u2019s efforts to  address FirstNet\u2019s nationwide public safety broadband network as part of  interoperable emergency communications.  (Written responses not included)  7. What, if anything, could OEC do to further address FirstNet\u2019s  nationwide public-safety broadband network in its interoperable  emergency communications efforts?  (Written responses not included)", "8. In your opinion, to what extent will OEC have a role for ensuring interoperable  emergency communications once FirstNet\u2019s nationwide public-safety broadband  network is fully operational?", "8a. Please explain your response to question 8 in the box below.  (Written responses not included)"], "subsections": []}, {"section_title": "OEC Coordination Support - Emerging Technologies", "paragraphs": ["The questions in this section ask your opinion about OEC\u2019s efforts to help  the public safety community improve interoperable emergency- communications capabilities. This section will be about other emerging  technologies.", "9. Should OEC address the following emerging technologies in its interoperable emergency communications efforts?", "Wireless Local Area Networks (e.g., Wi-Fi)", "9a. If you responded \u201cYes\u201d to other, please specify in the box below.  (Written responses not included)", "10. In your opinion, how important is it for OEC to incorporate emerging technologies into the following areas?", "Please specify the other area in the box below.  (Written responses not included)", "11. To what extent has OEC incorporated emerging technologies into the following areas?", "Please specify the other area in the box below.  (Written responses not included)", "12. In your opinion, how useful have OEC\u2019s efforts to incorporate emerging technologies into the following areas been in  helping your state address challenges with its emergency communications?", "Please specify the other area in the box below.  (Written responses not included)  13. Please provide any additional comments you have on the usefulness  of OEC\u2019s efforts to incorporate emerging technologies into interoperable  emergency communications.  (Written responses not included)  14. What, if anything, could OEC do to further incorporate emerging  technologies into its interoperable emergency communications efforts?  (Written responses not included)"], "subsections": []}, {"section_title": "OEC Communication Efforts", "paragraphs": ["The following questions are about OEC\u2019s communication efforts with  SWICs and the public safety community.", "15. In your opinion, how well does OEC communicate to SWICs training opportunities in the following areas?", "Emerging technologies (i.e., Wi-Fi, NextGen  911, etc.)", "15a. If you responded to other, please specify in the box below.  (Written responses not included)", "16. How satisfied or dissatisfied are you with the communication efforts from the following OEC organizational levels?", "16a. If you responded to other, please specify in the box below.  (Written responses not included)", "17. In your opinion, are there additional tools or approaches that OEC could use to  improve communication with SWICs and the public-safety stakeholder community?", "17a. Please identify and describe additional tools and approaches in the  box below.  (Written responses not included)", "18. In your opinion, does OEC face any challenges that affect its ability to meet the  needs of the public safety community?", "18a. Please explain in the box below.  (Written responses not included)"], "subsections": []}, {"section_title": "SAFECOM Grant Guidance", "paragraphs": ["The following questions ask your opinion about SAFECOM grant  guidance for interoperable emergency communications equipment. OEC  develops annual SAFECOM guidance in an effort to provide current  information on emergency communications policies, eligible costs, best  practices, and technical standards for state, local, tribal, and territorial  grantees investing federal funds in emergency communications projects.", "19. In your opinion, how clear are the following aspects of the SAFECOM grant guidance for interoperable emergency  communications equipment?", "19a. If you responded to other, please specify in the box below.  (Written responses not included)", "20. In the past 2 years, has your state developed supplemental statewide guidance  to clarify the SAFECOM grant guidance for interoperable emergency  communications equipment?", "20a. Please explain in the box below, why your state developed  supplemental statewide guidance.  (Written responses not included)", "21. In your opinion, is there a need to improve the SAFECOM grant guidance for  interoperable emergency communications equipment?", "21a. If yes, please explain in the box below.  (Written responses not included)"], "subsections": []}, {"section_title": "Closing", "paragraphs": ["22. If you would like to expand upon any of your responses to the  questions above, or if you have any other comments about OEC\u2019s  interoperable emergency communications efforts, please write them in  the box below.  (Written responses not included)"], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Sally Moino (Assistant  Director); Ray Griffith (Analyst in Charge); Josh Ormond; Cheryl  Peterson; Kelly Rubin; Andrew Stavisky; Sarah Veale; Michelle Weathers;  and Ralanda Winborn made key contributions to this report."], "subsections": []}]}], "fastfact": ["In an emergency, it's vital that first responders can communicate with their counterparts in other agencies and jurisdictions. The Office of Emergency Communications (OEC) offers a range of services and assistance to first responders to support interoperable communications systems and technologies.", "First responders and other public safety officials we surveyed were generally satisfied with OEC\u2019s work. However, some would like more information about OEC and its offerings.", "We recommended that OEC ensure it is using the best communication tools to share information on training opportunities, workshops, and other emergency communications efforts."]}
{"id": "GAO-18-406", "url": "https://www.gao.gov/products/GAO-18-406", "title": "Federal Judiciary: The Administrative Office of the U.S. Courts Should Ensure Financial Disclosure Redaction Reports Are Submitted to Congress Annually", "published_date": "2018-05-31T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Under the Ethics in Government Act of 1978, as amended, federal judges and certain judicial employees must file financial disclosure reports that can be made available to the public. Federal law accounts for the potential security risks of the judiciary and authorizes the redaction of information from judicial officials' reports if the Judicial Conference, in consultation with the United States Marshals Service (USMS), finds that revealing certain information could endanger judicial officials or members of their families.", "This report addresses the following for calendar years 2012 through 2016, the most recent years for which full data were available: (1) Actions taken by the Judicial Conference to ensure judicial officials file financial disclosure reports, and the number of reports filed; (2) The judiciary's compliance with procedures for responding to requests for financial disclosure reports and the number of reports released; and (3) The number of redaction requests made, the types of information requested to be redacted, and the judiciary's consistency in reporting results to Congress in a timely manner.", "GAO interviewed AOUSC and USMS officials, reviewed relevant laws and guidance, and analyzed data on redaction requests."]}, {"section_title": "What GAO Found", "paragraphs": ["The Judicial Conference, the federal judiciary's principle policy-making body, developed an electronic filing system, guidance, and a compliance process to help ensure judicial officials file financial disclosure reports that adhere to applicable laws and regulations, and data provided by the Administrative Office of the U.S. Courts (AOUSC) show that more than 4,000 reports were required to be filed annually from 2012 through 2016. According to AOUSC officials, as of March 2018, all financial disclosure reports required to be filed from 2012 through 2016 were filed, except for one in 2015 and one in 2016. AOUSC officials are working with the filers to ensure these reports will be filed.", "The Judicial Conference established procedures for responding to requests for copies of financial disclosure reports, and the number of reports released has varied. From 2012 through 2016, AOUSC annually received, on average, about 70 requests for copies of judicial officials' reports and released approximately 16,000 reports during this time. Each request can vary\u2014from a request for a single judicial official's report to a request for multiple judicial officials' reports.", "From 2012 through 2016, a small percentage of judicial officials requested redactions from their financial disclosure reports. On average, 3.2 percent of financial disclosure reports filed included a redaction request and about 85 percent of those requests were granted. Of the information requested to be redacted, about 76 percent was related to the unsecured location of a judicial official's spouse, child, or residence. AOUSC is required by federal law to submit annual reports to Congress on use of the judicial redaction authority, such as the number of reports with redactions and types of information redacted, but AOUSC has not consistently submitted the reports on an annual basis in recent years. GAO found that AOUSC does not have a formal process for preparing and submitting the reports to Congress. Implementing a more formal process, with specified steps and timeframes, would better position AOUSC to provide Congress with more timely reports."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that AOUSC develop and implement a formal process, with steps and timeframes, to better ensure that required annual reports are submitted to Congress within the following year. AOUSC concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Under the Ethics in Government Act of 1978, as amended, federal judges  and certain judicial employees, like similar officials in the legislative and  executive branches of government, must file annual financial disclosure  reports that can be made available to the public. These reports help  preserve and promote the integrity of public officials and institutions by  disclosing financial information, but may also include information that  could compromise the safety of these officials and their families.  According to the United States Marshals Service (USMS), judicial officials  received 2,357 threats and inappropriate communications in fiscal year  2016 alone.", "Federal law accounts for the potential security risks faced by members of  the federal judiciary (judiciary) and authorizes the redaction of personal  and sensitive information from financial disclosure reports that could  endanger these officials or members of their families. Potential risks to  judicial officials could be general or specific. General risks include  revealing the unsecured location of a judicial official, a spouse\u2019s place of  employment, or a child\u2019s school. Specific threats could include the  potential for kidnapping or extortion, or a threat of violence against a  judge by a former defendant or litigant. For example, in 2012, a federal  judge requested that certain information be redacted from his financial  disclosure report after an inmate convicted of threatening to kill the judge  was released from prison and requested a copy of the judge\u2019s report, as  well as information on the judge\u2019s home security system. The law that  authorizes the judiciary to redact financial disclosure reports also requires  it to submit annual reports on the operation of its redaction authority to  specified congressional committees. Reports should include information  on the total number of financial disclosure reports with redactions and the  types of information redacted, among other things.", "The Judicial Conference of the United States, the federal judiciary\u2019s  principle policy-making body, is responsible for implementing the  judiciary\u2019s redaction authority in a manner that provides the intended  safety measures without compromising timely public access to judicial  officials\u2019 financial disclosure reports. In light of the importance of  balancing these goals, you asked us to review the process for filing  financial disclosure reports and requesting redactions of information from  those reports, and to provide data on the numbers and types of  information being redacted. This report addresses the following  questions:  (1) What actions has the Judicial Conference taken to ensure that judicial  officials are complying with the requirement to file financial disclosure  reports and how many reports have been filed each year from 2012  through 2016?  (2) Is the judiciary complying with procedures for responding to requests  for judicial officials\u2019 financial disclosure reports and how many reports has  the judiciary released each year from 2012 through 2016?  (3) During the period from 2012 through 2016, how many redaction  requests did judicial officials make, what types of information did they  request be redacted, and did the judiciary consistently report the results  of judicial officials\u2019 redaction requests to Congress in a timely manner?", "To examine the actions the Judicial Conference has taken on financial  disclosure report filing and the reports filed, we interviewed officials from  the Administrative Office of the U.S. Courts (AOUSC) on their processes  for ensuring that judicial officials file financial disclosure reports, and the  extent to which reports required to be filed were, in fact, filed. We  reviewed key policy and guidance documents related to these processes,  including Guide to Judiciary Policy, Filing Instructions for Judicial Officers  and Employees, and a Step by Step Guide for the Preparation and  Electronic Filing of Financial Disclosure Reports; and we reviewed  relevant laws related to financial disclosure reports, such as the Ethics in  Government Act of 1978 and the Ethics Reform Act of 1989. We also  reviewed data included in AOUSC\u2019s annual redaction request reports and  data provided to us by AOUSC on the number of reports required to be  filed and the number of reports filed every year for calendar years 2012  through 2016\u2014the 5 most recent years for which full data were available  at the time of our review.", "To examine the judiciary\u2019s compliance with procedures for responding to  requests for financial disclosure reports and the number of reports  released each year from 2012 through 2016, we interviewed AOUSC  officials on their processes for responding to requests and the numbers of  requests received each year. We reviewed relevant documentation, such  as the guidance that dictates the process for responding to requests. We  reviewed data included in AOUSC\u2019s annual redaction request reports and  data provided by AOUSC on the number of requests received per year for  calendar years 2012 through 2016.", "To determine how many and what types of information judicial officials  requested be redacted from 2012 through 2016, and whether the judiciary  has consistently reported results of judicial officials\u2019 redaction requests to  Congress in a timely manner, we interviewed AOUSC officials on the  redaction request process. We also interviewed USMS officials on the  security consultation process and how they coordinate with AOUSC on  redaction requests. Additionally, we requested documentation for all  redaction requests made by judicial officials during the two months of  September and October for each year from 2012 through 2016, of which  there were 45 such requests. In return, AOUSC provided us with all  relevant documentation for these 45 redaction requests that were made during this time period. We also requested and received the AOUSC  database that contains data on all redaction requests received from  calendar years 2012 through 2016. We reviewed and analyzed the 45  redaction requests and compared the data in these case files to the  information contained in AOUSC\u2019s redaction database and we  determined that the data were sufficiently reliable for our reporting  purposes. We then analyzed data from the AOUSC database on  redaction requests to determine the number of redaction requests that  were granted (in whole or in part) or denied; as well as the type of  information that judicial officials requested be redacted from their financial  disclosure reports from calendar years 2012 through 2016. In order to  categorize the type of information requested to be redacted from judicial  officials\u2019 financial disclosure reports, two GAO analysts independently  reviewed the description of the redaction requests and the related section  of the financial disclosure reports as contained in the AOUSC database  and reached consensus on which of seven different categories to place  the redaction requests\u2014full report; unsecured location of spouse, child, or  residence; asset names; asset value; gifts; reimbursement; or other. In  those cases where the description of the information redacted was too  vague, or did not easily fit into one of the remaining categories, we placed  it in the \u201cother\u201d category. Using the AOUSC redaction request database  and data provided on the total number of reports required to be filed, we  also determined the percentage of judges and other judicial employees  who had requested redactions from their financial disclosure reports each  year, as well as the types of information requested to be redacted, by  percent. Finally, to determine whether the judiciary consistently reported  results of judicial officials\u2019 redaction requests to Congress in a timely  manner, we interviewed relevant AOUSC staff, reviewed available  guidance on the procedures for gathering information and producing the  annual reports, and requested copies of the annual redaction reports for  2012 through 2016. AOUSC staff could not locate annual reports for  calendar years 2013 and 2014. We contacted staff from two  congressional committees of jurisdiction to request copies of the missing  reports and they also could not locate the reports.", "We conducted this performance audit from May 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Purpose and Structure of the Judicial Conference and AOUSC", "paragraphs": ["The Judicial Conference of the United States is the national policy-making  body of the federal courts. The Chief Justice of the United States is the  presiding officer of the Judicial Conference. The Conference operates  through a network of 20 committees, including the Committee on  Financial Disclosure. The Judicial Conference delegated authority to  redact information from a financial disclosure report to the Committee on  Financial Disclosure. Upon request from a judicial official, the committee,  in consultation with the USMS, redacts the information when it decides  that revealing such personal or sensitive information could endanger the  judicial official or a member of his or her family. Responsibilities of the  Committee on Financial Disclosure include reviewing reports filed,  adjudicating requests for redactions of information from the report,  approving and modifying reporting forms and instructions, and monitoring  the release of reports to ensure compliance with statute and the  committee\u2019s guidance. The Judicial Conference of the United States is  responsible for implementing the judiciary\u2019s redaction authority in a  manner that provides judicial officials with the intended security measures  without compromising timely public access to judicial officials\u2019 financial  disclosure reports.", "AOUSC is the agency within the judicial branch that provides a broad  range of legislative, legal, financial, technology, management,  administrative, and program support services to federal courts. It is  responsible for carrying out Judicial Conference policies, and one of its  primary responsibilities is to provide staff support and counsel to the  Judicial Conference and its committees, including the Committee on  Financial Disclosure. The Director of AOUSC serves as the Secretary to  the Judicial Conference and is an ex officio member of the Executive  Committee."], "subsections": []}, {"section_title": "Legislative Basis for Filing Financial Disclosure Reports", "paragraphs": ["The Ethics in Government Act of 1978, as amended, requires specified  judicial, legislative, and executive branch officials to file annual financial  disclosure reports in the spring of each year. These reports include  financial information for the previous calendar year. Financial disclosure  reports are made up of nine parts\u2014positions, agreements, non- investment income, reimbursements, gifts, liabilities, investments and  trusts, explanatory comments, and certification and signature. (See  appendix I for a copy of a blank annual financial disclosure report).", "In addition to filing an annual report, covered judicial officials are required  to file financial disclosure reports when nominated (nomination report);  within 30 days of taking office (initial report); and within 30 days of leaving  their position (final report)\u2014see table 1.", "Federal law also requires that copies of judicial officials\u2019 financial  disclosure reports be made available, upon written request, to members  of the public. Judicial officials may request that certain information be  redacted before their financial disclosure reports are sent to the  requesting individuals."], "subsections": []}, {"section_title": "Legislative Basis for Judicial Redaction Authority", "paragraphs": ["The judiciary\u2019s authority to redact information from financial disclosure  reports was established in 1998 and was initially authorized for a 3-year  period. That legislation also instituted an annual congressional reporting  requirement for the judiciary on the operation of the redaction authority.  Over the past 20 years, the judiciary\u2019s redaction authority and reporting  requirement have been successively reauthorized for various periods of  time, but have lapsed on occasion. The authority was most recently  reauthorized on March 23, 2018 through the end of 2027.", "According to AOUSC officials, while the redaction authority lapsed, the  Committee on Financial Disclosure did not grant any new redaction  requests, but it did grant requests to continue redactions that were  approved prior to December 31, 2017."], "subsections": []}, {"section_title": "The Judiciary\u2019s Process for Adjudicating Redaction Requests and Responding to Requests for Copies of Financial Disclosure Reports", "paragraphs": ["The Judicial Conference, through its Committee on Financial Disclosure,  has developed a multistep process for reviewing federal judges\u2019 requests  for redactions of information from their financial disclosure reports and  requests for copies of these reports, as shown in figure 1. While the  committee encourages judicial officials to request redactions at the time  they file their financial disclosure reports, AOUSC officials stated that  most redaction requests were made after judicial officials were notified  that copies of their reports had been requested.", "A judicial official may request a redaction of information when his or her  financial disclosure report is filed or after receiving a notification of a  request for a copy of his or her financial disclosure report. When  requesting a redaction, the judicial official must state specifically what  information is sought to be redacted and the justification for the redaction.  The Committee on Financial Disclosure will determine, in consultation  with the USMS, if the information could endanger the judicial official or an  immediate family member. For redaction requests involving information  pertaining to the unsecured location of (1) a spouse\u2019s employer, (2) a  child\u2019s school, or (3) a primary or secondary residence, a separate  security consultation is not required based on an agreement AOUSC  reached with the USMS memorialized in a 2004 letter that, in essence,  serves as a security consultation. For all other types of information  requested to be redacted, a further USMS security consultation is  required.", "Taking into account the information provided by the judicial officials, as  well as results from the USMS security consultations, members of the  Subcommittee on Public Access and Security, a subcommittee under the  Committee on Financial Disclosure, decide\u2014by majority vote\u2014to either  grant (in whole or in part) or deny each redaction request. Such  redactions are good until the end of the calendar year in which they are  granted. The Committee on Financial Disclosure notifies the judicial  official if the information requested to be redacted has been granted,  granted in part, or denied. Judicial officials can appeal a redaction  decision; however, according to AOUSC officials, there were no appeals  from 2012 through 2016, the time period covered by our review."], "subsections": []}]}, {"section_title": "The Judicial Conference Has Developed Procedures to Ensure Judicial Officials File Financial Disclosure Reports, and More Than 4,000 Reports Are Filed Annually", "paragraphs": ["The Judicial Conference\u2019s Committee on Financial Disclosure has  developed an electronic report filing system, written guidance, and a  compliance process to help ensure judicial officials file their financial  disclosure reports. Specifically, in 2011, AOUSC switched from having  judicial officials file financial disclosure reports in hard copy to electronic  filing through an online electronic depository, Financial Disclosure Online  Filing System (FiDO). AOUSC also uses a separate internal electronic  database (LEGO) to track compliance with financial disclosure report  filings. LEGO contains the entire database of judicial filers, including  what reports should be filed, the dates financial disclosure reports are  due, and which are in process. The Committee on Financial Disclosure  stated in September 2014 that FiDO had been upgraded, but committee  members continued to experience limitations with the system. For  example, according to AOUSC officials, FiDO does not keep track of  which reports are in process or when they are due. Accordingly, the  committee members authorized an assessment to look for an alternative  system that would meet their needs and, by 2016, had selected software  currently being used by the government to be customized for the  judiciary. According to AOUSC officials, the plan is for the Judiciary  Electronic Filing System (JEFS) to replace both FiDO and LEGO and be  used for filing financial disclosure reports and tracking compliance with  filing requirements beginning in 2019.", "The Committee on Financial Disclosure also provides guidance to judicial  officials to ensure that financial disclosure reports are filed correctly. The  types of guidance provided include the Guide to Judiciary Policy, Filing  Instructions for Judicial Officers and Employees, and a Step by Step  Guide for the Preparation and Electronic Filing of Financial Disclosure  Reports. Additionally, members of the Committee on Financial Disclosure  are to review each filed financial disclosure report to confirm that required  items have been sufficiently reported and that the filer is in compliance  with applicable laws and regulations. In addition, for some sections,  members of the committee will compare information provided in a filed  report with what was reported in a prior year\u2019s report to ensure the  information reported is accurate and consistent.", "The Committee on Financial Disclosure also provides guidance on the  process to be followed if a judicial official fails to file a required financial  disclosure report. Specifically, the Guide to Judiciary Policy states that a  late filing fee of $200 will be assessed if a report is filed more than 30  days after the report is due. Further, the Chairman of the Committee on  Financial Disclosure is to write a letter to any noncompliant filer.", "In addition to the guidance described above, in 2013, the Committee on  Financial Disclosure reported that it would establish specific procedures  for securing filer compliance with all reporting requirements and the late  filing assessments. In 2014, the Committee reported on the successful  implementation of these new policies. Part of this effort included  developing templates for three successive communications that are to be  provided to a noncompliant filer. The communications reflect a  progressively increasing level of urgency in language and content,  culminating in explicit warnings that if a noncompliant filer does not  comply, the matter can be referred to the Attorney General.", "From calendar years 2012 through 2016, more than 4,000 financial  disclosure reports were required to be filed each year by judicial officials,  as shown in table 2. Most of the reports filed were annual reports.", "According to AOUSC officials, as of March 2018, all annual financial  disclosure reports required to be filed from calendar years 2012 through  2016 were filed, except for one for calendar year 2015. Additionally, all  nominee and initial financial disclosure reports required to be filed during  this time period were filed, and all but one final financial disclosure report,  for calendar year 2016, were filed. The AOUSC officials stated that the  remaining final report is still pending and the compliance process is being  followed to ensure the report will be filed."], "subsections": []}, {"section_title": "The Judiciary is Complying with Procedures for Responding to Requests for Financial Disclosure Reports and the Number of Reports Released Has Varied from 2012 through 2016", "paragraphs": ["The judiciary is complying with the Judicial Conference\u2019s Guide to  Judiciary Policy (Volume 2, Part D, Chapters 3-4), which sets forth the  process for releasing financial disclosure reports. First, members of the  public may request financial disclosure reports by submitting Form AO  10A (see appendix II for a blank copy of the Form AO 10A). The  Committee on Financial Disclosure notifies the judicial official that a Form  AO 10A has been received and provides the official with a copy. At that  time, the judicial official has up to 10 days to decide whether or not to  request that information from the financial disclosure report be redacted.  Once the members of the Subcommittee on Public Access and Security  have reviewed any redaction requests and any accompanying USMS  security consultation results, the members vote on whether or not to grant  redactions and then forward the results to AOUSC staff for final  processing. In March 2017, the Judicial Conference approved the release  of financial disclosure reports by electronic storage device free of charge  in order to expedite the release of requested reports. As a result, once  AOUSC staff receive the redaction decisions from the Subcommittee,  AOUSC staff are to ensure that approved redactions are made to the  financial disclosure reports, and then download the reports to electronic  storage devices to mail to the requesting parties.", "The AOUSC received, on average, about 70 requests for copies of  judicial officials\u2019 financial disclosure reports each year from calendar  years 2012 through 2016 using the AO 10A request form. The form can  include a request for the financial disclosure report of one judicial official,  or for multiple judicial officials. Additionally, the form could include a  request for multiple years of financial disclosure reports. Based on the AO  Form 10As received from calendar years 2012 through 2016, AOUSC  released approximately 16,000 financial disclosure reports. The number  of financial disclosure reports released each year varied during this time  period, as shown in table 3.", "According to AOUSC officials, the number of financial disclosure reports  released each year varies based on the number of requests received and  the time of year the requests are submitted. For example, a requester  might submit a Form AO 10A late in the calendar year and the requested  reports could be released the following calendar year based on how long  it takes to process the request. AOUSC officials noted that there are two  organizations that have requested copies of the financial disclosure  reports for all federal judges every year. In 2016 AOUSC received the  requests late in the year and, therefore, were not able to release the  reports until 2017."], "subsections": []}, {"section_title": "Few Judicial Officials Requested Redactions and They Pertained Mostly to the Unsecured Location of Family Members, but the Judiciary Has Not Reported Redaction Results to Congress in a Timely Manner", "paragraphs": [], "subsections": [{"section_title": "On Average, 3.2 Percent of Judicial Officials Requested Redactions from 2012 through 2016", "paragraphs": ["The number of judicial officials who requested redactions represents a  small percentage of the total number of financial disclosure reports filed in  recent years. As shown in table 4, the number of redaction requests  ranged from a low of 112 in 2014 to a high of 162 in 2012 and 2015.", "For calendar years 2012 through 2016, there were a total of 716 requests  for redaction of information from judicial officials\u2019 financial disclosure  reports\u2014711 from judges and 5 from judicial employees\u2014with a yearly  average of about 143 redaction requests. In particular, for calendar years  2012 through 2016, judicial officials\u2019 redaction requests accounted for, on  average, 3.2 percent of the total financial disclosure reports filed during  this time period, as shown in table 5. When we segregated the results by  judges and judicial employees, we found that, on average, 5.8 percent of  judges requested redactions compared to 0.1 percent of judicial  employees over the 5 year time period.", "Of the 3.2 percent of financial disclosure reports that included redaction  requests made from 2012 through 2016, on average, about 85 percent  were granted, 3 percent were partially granted, and 12 percent were  denied, as seen in figure 2."], "subsections": []}, {"section_title": "Most Redaction Requests Pertained to the Unsecured Location of a Judicial Official or Immediate Family Member", "paragraphs": ["We analyzed AOUSC data on redaction requests made from calendar  years 2012 through 2016 by type of information requested to be redacted  and found that the majority (about 76 percent) of the requested redactions  pertained to information related to the unsecured location of a judicial  official or an immediate family member. The next biggest category of  information requested to be redacted was the \u201cother\u201d category, with 10.4  percent. Three categories\u2014asset value, gifts, and reimbursement\u2014each accounted for less than 1 percent of the redaction requests, as  shown in Figure 3."], "subsections": []}, {"section_title": "AOUSC Has Not Submitted Required Annual Redaction Reports to Congress in a Timely Manner", "paragraphs": ["We requested copies of the annual redaction reports submitted to  Congress for calendar years 2012 through 2016 and determined that  AOUSC had not submitted the annual redaction reports to congressional  committees of jurisdiction in a timely manner. Specifically, we found that  AOUSC submitted the annual report covering 2012 in May 2014 and  submitted four annual reports (for calendar years 2013 through 2016) in  February and August of 2017, as shown in table 6. For the 2013 and  2014 annual reports, AOUSC prepared and submitted them to the  congressional committees of jurisdiction after we asked for them.", "AOUSC officials told us that they could not find evidence that they had  submitted the annual reports for calendar years 2013 and 2014 to the  committees of jurisdiction in a timely manner. However, AOUSC staff sent  a 5-year report to congressional committees of jurisdiction in March 2017  that included information on redaction requests and results for calendar  years 2012 through 2016. Thus, the congressional committees of  jurisdiction had received no reports from AOUSC on redaction requests  and results from May 2014 to February 2017. While the Ethics in  Government Act of 1978, as amended, does not set a specific submission  date, it requires that AOUSC submit an annual report (i.e., occurring once  every year) to congressional committees of jurisdiction on the operation of  the judiciary\u2019s redaction authority. As shown in table 8 above, AOUSC did  not submit an annual report every year, and there was an interval of  almost three years (from May 2014 to February 2017) in which there is no  record of AOUSC providing any annual redaction reports to Congress.", "AOUSC officials stated that although there are no reporting time frames  specified in legislation for preparing and submitting the reports to the  congressional committees of jurisdiction (other than annual submission),  beginning in 2016, AOUSC staff began to work on preparing the redaction  report for the previous year by February of the following year. The  AOUSC officials acknowledged, though, that they have not implemented  a formal process, with designated steps and time frames, to ensure they  consistently produce the annual redaction reports in a timely manner. The  AOUSC officials also stated that since 2013, the Financial Disclosure  Office\u2014the office responsible for preparing the reports\u2014had experienced  a series of changes in management, as well as staff turnover in key  positions, which contributed to the inconsistent process for developing  and completing the annual redaction reports in a timely manner. Given  that AOUSC experienced staff turnover in the past, and could experience  it in the future, it is important that AOUSC has the necessary controls in  place to overcome staffing issues and ensure that it consistently prepares  and submits the annual redaction reports to the committees in a timely  manner.", "Standards for Internal Control in the Federal Government state that  management should implement control activities by documenting  responsibilities through policies for each unit. With guidance from  management, each unit determines the policies necessary to achieve the  desired objectives. Management should also define objectives in specific  terms so they are understood at all levels. This involves clearly defining  what is to be achieved, who is to achieve it, how it will be achieved, and  the time frames for achievement. AOUSC officials stated that the annual  reports cannot be compiled until after the close of the previous calendar  year and after all data have been reviewed. While this is true, without a  formal process for ensuring that staff complete the reports in a timely  manner, there are no assurances that the process will consistently occur  on a regular schedule, or at all. Implementing a more formal process, with  specified steps and time frames, would ensure staff are fully informed of  their responsibilities and allow AOUSC to be better positioned to provide  the congressional committees of jurisdiction with timely redaction reports  that can be used to conduct oversight of the federal judiciary\u2019s use of its  redaction authority."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Ethics in Government Act of 1978, as amended, serves the public  interest by providing access to selected information from financial  disclosure reports filed by judicial officials that could represent conflicts of  interest for these officials. At the same time, the law accounts for the  security threats faced by judicial officials and grants the judiciary authority  to redact personal and sensitive information from their financial disclosure  reports if a finding is made that the release of the information could  endanger these officials or members of their families. Thus, the Judicial  Conference has a responsibility to balance the goals of safeguarding  judicial officials\u2019 information and providing timely public access. The  Judicial Conference developed a compliance process to ensure judicial  officials were filing financial disclosure reports that adhere to applicable  laws and regulations, and also had procedures in place to ensure the  public had access to copies of judicial officials\u2019 financial disclosure reports  when requested. While the Ethics in Government Act of 1978, as  amended, provides the Judicial Conference with authority to redact  information that could pose a security threat to judicial officials, this  authority has been used sparingly. From 2012 through 2016, about 3.2  percent of financial disclosure reports included a redaction request and  about 85 percent of those were approved. Nevertheless, the law requires  AOUSC to submit an annual report to congressional committees of  jurisdiction on the operation of the judiciary\u2019s redaction authority, including  information on the total number of reports with redactions and the types of  information redacted. Our review of available guidance and  documentation shows that AOUSC has not implemented a formal process  for producing annual redaction reports and has not submitted these  reports to Congress in a timely manner. Implementing a more formal  process, with specified steps and timeframes, would allow AOUSC to be  better positioned to provide congressional committees of jurisdiction with  the required annual redaction reports that can be used to conduct  oversight of the federal judiciary\u2019s use of its redaction authority. This is  particularly important given that Congress recently passed an extension  to the judiciary\u2019s redaction authority through the end of 2027."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Director of AOUSC should develop and implement a formal process,  with specified steps and associated time frames, to better ensure that  required annual redaction reports are completed and submitted to  Congress within the following year."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["In April 2018, we requested comments on a draft of this report from DOJ,  USMS, and AOUSC. Neither DOJ nor USMS had any comments.   AOUSC provided technical comments, which we have incorporated into  the report, as appropriate. In particular, based on AOUSC comments, we  amended the report title to provide greater clarity into the subject matter  of the report and added additional text to the conclusions section to better  address all aspects of the report\u2019s findings. In addition to its technical  comments, AOUSC provided an official letter for inclusion in the report,  which can be seen in appendix III. In its letter, AOUSC stated it concurred  with the recommendation and will determine how best to implement a  more formalized process to better ensure it can submit annual redaction  reports to Congress in a timely manner.", "We are sending copies of this report to the Administrative Office of the  U.S. Courts, the Attorney General, the United States Marshals Service,  selected congressional committees, and other interested parties. In  addition, this report is also available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any further questions about this report, please  contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributions to this reported are listed  in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Administrative Office of the U.S. Courts Form AO 10: Blank Financial Disclosure Report for Calendar Year 2016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Administrative Office of the U.S. Courts Form AO 10A Used for Requesting Copies of Judicial Officials\u2019 Financial", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Administrative Office of the U.S. Courts", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Christopher Conrad (Assistant  Director) and Valerie Kasindi (Analyst-in-Charge) managed this  assignment. Kristiana Moore, Dominick Dale, Melissa Hargy, Eric  Hauswirth, Amanda Miller, Jerry Sandau, and Janet Temko-Blinder made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-3", "url": "https://www.gao.gov/products/GAO-19-3", "title": "VA Education Benefits: VA Needs to Ensure That It Can Continue to Provide Effective School Oversight", "published_date": "2018-11-14T00:00:00", "released_date": "2018-11-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2017, VA provided about $11 billion in education benefits to about 14,460 schools to help eligible veterans and their beneficiaries pay for postsecondary education and training. VA typically contracts with state agencies to help it provide oversight of schools participating in this education benefit program.", "The Harry W. Colmery Veterans Educational Assistance Act of 2017 included a provision for GAO to review VA's and states' oversight of schools receiving VA education benefits. This report examines (1) how, if at all, the available level of funding to state agencies has affected states' and VA's ability to carry out their oversight responsibilities, (2) to what extent VA and state agencies use risk-based approaches to oversee schools, and (3) to what extent VA coordinates and shares information with the states to support their oversight activities. GAO reviewed VA documents; assessed VA funding data for fiscal years 2003-2018; interviewed VA and selected state agency officials; and reviewed correspondence between these officials. GAO interviewed officials from eight state agencies who were past or present officials at the association representing state agencies, and officials from three other states, including one that did not renew its contract with VA in fiscal year 2018."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) is responsible for overseeing schools nationwide that provide VA education benefits to veterans. To help provide this oversight, VA contracts with state agencies to oversee schools in their states and provide outreach and training to school officials and allocates them funding to cover the cost of oversight, outreach, and training activities. However, since fiscal year 2006, funding for oversight, outreach, and training has remained at about $19 million, and only recently increased in fiscal year 2018 to $21 million. State agency officials told GAO that the limited level of funding they have received from VA has been a long-standing problem that has strained their ability to (1) adequately cover staff costs, (2) pay for travel for school visits, and (3) provide needed technical assistance and training to the schools about VA education benefit requirements. As a result, a few states, such as New Mexico, have chosen to withdraw from their school oversight roles. When this happens, VA must take over the state agencies' oversight responsibilities. GAO found that assuming additional oversight responsibilities is likely to stretch VA's staff resources, especially in large states, where schools are geographically dispersed and school visits are time consuming and costly. VA has begun but has not completed an assessment of the risks that potential future state agency withdrawals could have on its ability to provide school oversight. Moreover, VA has not developed a contingency plan for how it will oversee more schools if additional states do not renew their oversight contracts. Federal standards for internal control state that agencies should identify and assess risks related to achieving objectives, and define contingency plans for assigning responsibilities if key roles are vacated. Until VA takes these steps, the agency runs the risk of being unprepared to conduct effective oversight in the event that more state agencies withdraw from their contracts in the future.", "VA and state agencies use certain risk factors to select schools for oversight. VA officials said that they prioritize schools for annual reviews of compliance with program requirements based on findings from prior reviews as well as other risk factors, such as schools with a history of VA benefit payment errors. GAO found that VA and state agencies have recently begun a joint effort to explore a new strategy that they expect will strengthen the school review selection and prioritization process. According to VA officials, as of mid-October 2018, VA used this strategy to select five schools to undergo risk-based reviews. VA officials said they expect these five reviews to be completed by late December 2018.", "VA and state agencies coordinate and share information about their oversight activities in a variety of ways. For example, VA has shared information with the state agencies on how to conduct annual reviews of schools in their states. However, according to officials at the association representing state agencies, VA has not provided specific direction on conducting targeted reviews in response to complaints. VA officials acknowledged that the procedures they currently have in place are outdated and said that they are being revised to provide state agencies with more details. As of late October 2018, VA officials said these procedures were undergoing internal review. Once implemented, VA's new procedures have the potential to enhance VA's and state agencies' efforts to conduct reviews at those schools for which they have received complaints."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VA complete the identification and assessment of oversight risks, and prepare a contingency plan for overseeing schools if additional states do not renew their oversight contracts. VA concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) provided about $11 billion in  education benefits (VA education benefits) in fiscal year 2017 to about  14,460 schools to provide approved programs of education and training to  eligible veterans and their beneficiaries and help them afford  postsecondary education. Eligible individuals can use these payments to  cover education costs\u2014including up to the amount of in-state tuition and  fees at public institutions of higher learning, or up to $22,805 at private  institutions\u2014in the 2017-2018 academic year. VA contracts with State  Approving Agencies (state agencies) to help VA oversee postsecondary  schools\u2019 compliance with program requirements to ensure they are  appropriately using VA education benefits for their eligible students. The  Harry W. Colmery Veterans Educational Assistance Act of 2017 (Colmery  Act), enacted on August 16, 2017, included a provision for GAO to review  and report to the Veterans\u2019 Affairs Committees on several issues related  to veterans\u2019 education benefits. This report answers the following  questions:  1.  How, if at all, has the available level of funding to state agencies  affected states\u2019 and VA\u2019s ability to carry out their responsibilities in  overseeing schools receiving VA education benefits?  2.  To what extent do VA and state agencies use risk-based approaches  to oversee these schools?  3.  To what extent does VA coordinate and share information with the  states to support their oversight activities?", "We reviewed VA policies, procedures, practices, and applicable federal  laws and regulations. In addition, we interviewed VA officials and eight  officials from the National Association of State Approving Agencies  (NASAA), the organization that represents the interests of state agencies  overseeing schools receiving VA education benefits. These selected  NASAA officials have held a variety of leadership positions within the  organization, including on the NASAA Executive Board as well as on  select NASAA committees. During these interviews, we obtained NASAA  officials\u2019 perspectives about state agencies in general, and about their  specific experiences as directors or members of their own state agencies.  NASAA officials we interviewed represented the views of state agencies  across all four NASAA regions (East, South, Central, and West), and  were from states that received both recent increases and decreases in  VA funding, and with a varied number of schools and beneficiaries that  received VA education benefits. We also interviewed officials from three  additional states selected to provide more in-depth information at the  state level. These included a state with a recent decrease in VA funding  (New Hampshire), a state with a recent increase in funding (California),  and a state that did not renew its contract with VA in fiscal year 2018  (New Mexico). We chose these states to obtain different perspectives on  how the level of funding affected their ability to carry out school oversight.  For all three questions, we also reviewed VA documents and written  correspondence between VA, NASAA, and the state agencies in fiscal  years 2014 to 2018 related to VA education benefits. In addition, we  reviewed a 2016 report from VA\u2019s Office of Inspector General (Inspector  General) and a 2017 study conducted by an external contractor hired by  VA that discuss VA\u2019s use of risk factors in selecting schools for its annual  reviews.", "We obtained VA data on the amount of funding allocated by the agency to  the state agencies in fiscal years 2003 to 2018. We assessed the  reliability of these data by reviewing key documents and written  responses from knowledgeable officials. We determined the data to be  sufficiently reliable for our purposes. We used as criteria federal  standards for internal control regarding (1) identifying, assessing, and  responding to risks related to achieving objectives and (2) defining  contingency plans if key roles are vacated to help the entity continue to  achieve its objectives.", "We conducted this performance audit from November 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient and 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."], "subsections": [{"section_title": "Background", "paragraphs": ["VA provides education benefits to eligible veterans and their beneficiaries  enrolled in approved programs of education and training to help them  afford postsecondary education. VA staff conduct oversight of schools  receiving these benefits. In addition, each year, VA contracts with state  agencies to help provide this school oversight. In fiscal year 2017, there  were about 14,460 schools receiving VA education benefits for about  750,000 veterans and their beneficiaries across the country.", "State agencies\u2019 core oversight functions, as generally required by statute,  VA regulations, and their VA contracts, include approval of schools to  receive VA education benefits, annual compliance surveys of schools\u2014 which are reviews to ensure schools\u2019 compliance with program  requirements\u2014and technical assistance to schools, among other things  (see fig. 1). VA and state agencies both conduct annual compliance  surveys of selected schools, which generally entail a visit to the school.  For veterans to receive the education benefits, school employees must  certify to VA that they are enrolled in classes and notify VA of any  changes in enrollment.", "NASAA was founded to coordinate the efforts of state agencies and is  managed and administered by an executive board and several leadership  committees, such as a contract committee and a legislative committee. All  members of NASAA leadership are also either directors or have other  roles at individual state agencies. VA\u2019s Education Service is led by a  Director and is under the Veterans Benefits Administration. This office  works with NASAA to prepare annual contracts to allocate federal funding  and specify workload requirements for each state agency."], "subsections": []}, {"section_title": "Limited Funding Has Impacted States\u2019 Oversight Abilities, Leading State Agencies to Withdraw from This Role, and VA Has Not Assessed How It Will Respond to Future State Withdrawals", "paragraphs": [], "subsections": [{"section_title": "Funding Has Remained Relatively Constant Over a Decade and VA Recently Revised Its Allocation Method", "paragraphs": ["For over a decade, funding provided by VA to state agencies remained at  the same level of $19 million. In fiscal year 2018, VA allocated $21 million  for state agencies\u2014the first increase in funds allocated to states since  fiscal year 2006 (see fig. 2).", "Each year, state agencies can also request supplemental funding from  VA if their costs exceed their allocated funding amount. VA has the  discretion to approve an agency\u2019s request based on its justification of  need and the amount of VA funding available for supplemental requests.  NASAA officials said that supplemental funding is helpful, but that it is not  a reliable funding source because there is no guarantee that VA will be  able to provide states with the requested amount. According to NASAA  officials, some state agencies also receive additional funding from their  state governments if they request these funds, but many states do not  provide this additional funding. NASAA officials also noted that in some  cases, states do not want to provide their own funds to state agencies  because their view is that the agencies already receive VA funding  through their federal contracts.", "VA recently changed its method of allocating funding to state agencies.  VA hired an external contractor to develop a new funding allocation  method. Before fiscal year 2017, VA funded state agencies primarily  based on the number of schools in the state with at least one veteran  student receiving VA education benefits in the previous year. In fiscal  year 2017, VA implemented a new funding allocation method. VA  officials told us this new method was a significant improvement over the  previous method they used, which was very limited. For example, VA  officials said the prior funding method did not estimate how long it took  state agencies to perform certain oversight activities. The officials said  this limitation was a key reason they decided to develop a new funding  method. VA\u2019s new method to fund states more equitably is based on their  work requirements, i.e., their school oversight activities and the amount of  time needed to complete them. The new funding method factors in,  among other things:  the number of staff needed to complete a state\u2019s workload in  overseeing schools; national salary averages ($80,000 for professional and $50,000 for  support staff), including benefits; a national travel allowance based on the number of professional staff  required to complete work requirements;  the number of schools receiving VA education benefits in the state;  and  the estimated time needed to review different school types, the type of  review (such as approvals vs. compliance surveys), and the number  of student veterans enrolled."], "subsections": []}, {"section_title": "State Agencies Identified Impacts of Limited Funding on Their Ability to Fulfill Oversight Responsibilities", "paragraphs": ["VA, NASAA, and selected state agency officials we spoke with said that  limited funding before and after the recent changes to the funding method  has impacted state agencies\u2019 ability to fulfill their oversight responsibilities  in three areas: (1) ability to pay and train oversight staff, (2) ability to visit  geographically dispersed schools due to travel costs, and (3) ability to  provide technical assistance and training to schools. Under their contracts  with VA, state agencies have been meeting their core school oversight  functions, according to NASAA officials. VA and NASAA officials we  interviewed, however, said state agencies have been underfunded for  many years. They said states\u2019 funding concerns and challenges existed  prior to the new method to allocate funds to state agencies and remain  despite a total funding increase to state agencies from about $19 million  to $21 million in fiscal year 2018.", "NASAA officials we interviewed said some state agencies have difficulty  paying for the number of staff they need because there is a mismatch  between VA\u2019s average salary and benefits used to calculate states\u2019  funding and the actual salaries and benefits some state agencies are  required to pay under state laws. VA officials acknowledged that some  states have required salary and benefit levels that exceed the average  levels used in VA\u2019s new funding allocation method. VA\u2019s new funding  method uses an average salary of $80,000 (including benefits) for  professional staff. VA officials noted that some states have annual  salaries for professional staff of over $100,000 excluding benefits. A state  agency official we spoke with said the salary and benefit costs for  professional staff in her state average $130,000, with some salary and  benefits costing up to about $150,000. The official said this can make it  difficult for the state agency to be able to pay a sufficient number of staff,  which hinders its ability to fulfill its VA-contracted oversight. In another  case, a NASAA official said his state agency did not have enough funds  to pay for a second full-time employee because the state\u2019s required salary  and benefits were higher than VA\u2019s $80,000 allotment for professional  staff.", "Limited funding for state agency oversight staff has led to state requests  for additional funds, as well as higher turnover and less training of the  staff. VA officials said that the primary reason that some state agencies  requested supplemental funding from VA in fiscal years 2016 and 2017  was that their initial allocation was not sufficient to cover salary, benefits,  and travel expenses. Some state governments have had to cover those  costs, hoping that VA would reimburse the state at the end of the fiscal  year, according to VA officials. In addition, some state agencies have had  significant turnover due, in part, to the uncertainty about the amount of  annual VA funding, according to NASAA officials. NASAA officials also  said that funding amounts limit the professional development provided to  state agency staff, including travel to conferences. VA officials said that  they support professional development and routinely provide funding for  travel to conferences. However, according to VA officials, VA has denied  requests from state agencies for travel to additional, repetitious  conferences during the same year.", "NASAA officials said limited VA funding also makes it difficult for state  agencies in geographically large states to pay travel expenses to visit  schools as part of their oversight responsibilities. For example, NASAA  officials said state agencies in Alaska, Montana, and Washington find it  difficult to afford mileage and hotel costs for school visits that require  travelling long distances\u2014sometimes over mountain ranges\u2014and  overnight stays. NASAA officials also said VA\u2019s new funding method does  not allocate sufficient funding for travel.", "Officials we interviewed at selected state agencies have had mixed  experiences with travel costs. One state agency official told us her  agency selected schools to visit that were physically near her office  because of insufficient travel funds. In contrast, a state agency official in a  geographically small state said the agency has sufficient funding to travel  throughout the state to visit schools, mainly because overnight stays are  unnecessary. VA and NASAA officials said some state agencies have  been able to address travel costs by stationing agency staff in different  parts of the state. VA officials, however, acknowledged that this is not  possible in all states because some states require agency staff to be  located in a central office.", "VA\u2019s new funding allocation method calculates a national travel allowance  for all states based on the total number of professional staff it estimates  would be required to complete work requirements in all states. VA officials  explained that this travel allowance does not account for individual  differences in geographic size among states. VA officials said that in  developing the new funding method, the contractor reviewed the historical  travel costs of states and determined that a distinction by the geographic  size of a state did not need to be factored into the funding method. The  contractor based this decision on several factors, including that some  state agencies: (1) paid their travel costs using state funds, not VA funds;  (2) have located their staff in offices across the state and, as a result,  their travel costs were lower than in other states; and (3) planned their  travel so they visited schools within a short timeframe, which reduced  travel costs.", "When faced with funding difficulties, many state agencies reduce their  technical assistance to schools and outreach activities because they need  to use available funds on salaries, benefits, and travel related to  compliance survey and approval workloads, according to NASAA officials.  For example, one state agency official told us her agency has significantly  reduced its technical assistance to schools because it does not have the  funds to travel across the large, rural state to provide it. A NASAA official  said available funding has reduced his state agency\u2019s ability to conduct  outreach, such as connecting veterans with education and benefit  resources, or holding in-person meetings to educate employers on  providing apprenticeships to veterans using VA education benefits.", "NASAA officials also said that many state agencies have reduced the  number of visits to train school employees on VA education benefits  requirements. They noted that this training is important because it helps  reduce over- and under-payments and the misuse of VA education  benefits. A 2016 report from VA\u2019s Inspector General estimated that VA  makes $247.6 million in improper payments of VA education benefits  annually, mostly over-payments. The Inspector General found that many  of the improper payments occurred because school employees provided  VA incorrect or incomplete information on student enrollment."], "subsections": []}, {"section_title": "VA Plans to Revise the New Funding Method to Address Ongoing Concerns by States", "paragraphs": ["NASAA officials told us that they continue to have concerns that the new  funding method\u2019s time estimates for completing certain oversight activities  are inaccurate and, as a result, this method does not allocate sufficient  funds. For example, NASAA officials said the funding method does not  properly estimate the time it takes state officials to travel to schools and  carry out oversight functions, including conducting certain school  approvals, and providing schools with technical assistance and training.  NASAA officials said the time estimates used to fund approvals are  inaccurate and need to be revised because different types of schools and  education programs\u2014including flight schools, degree programs, and non- degree programs\u2014take different amounts of time to review and approve.  For example, NASAA officials said that state agencies need less time to  conduct an approval for an on-the-job training program than for a large  public university.", "VA officials said they are aware of the concerns that NASAA and state  agencies have raised that the time estimates for oversight in the new  funding method are inaccurate\u2014with some being too high and others too  low. They are also aware that NASAA and state agencies believe that the  analysis to develop these estimates should have more accurately  factored in the time needed to approve and review different types of  schools and education programs.", "To address the concerns states have raised about its new funding  allocation method, VA provided documentation to us of its plans to hire a  contractor in fiscal year 2018 to improve and update its funding method.  In September 2018, VA hired a contractor to carry out a contract with a 6- month period of performance. VA reported that the contractor would  review the new funding allocation method to determine if any specific  changes are needed to more equitably distribute funding across state  agencies. Specifically, VA officials said the contractor would review the  accuracy of the funding method\u2019s allowances for state agencies\u2019 salary,  benefits, and travel costs, and its time estimates for states to conduct  oversight activities to determine if changes are needed. VA officials  reiterated that allowances for salaries and travel, and the time estimates  are critical factors in the funding method. VA officials noted, however, that  regardless of how VA divides the funding up among the state agencies,  the total amount of program funding to these agencies will remain the  same within any one fiscal year."], "subsections": []}, {"section_title": "Two State Agencies Have Discontinued Their Oversight Contracts, but VA Has Not Assessed These Impacts or How It Will Address Future Withdrawals", "paragraphs": ["States have the option of not renewing their school oversight contracts  with VA, and two have exercised this option in recent years, citing  insufficient funding levels from VA to fulfill their responsibilities. When this  happens and the state withdraws from its school oversight role, VA must  perform all oversight responsibilities for VA education benefits in that  state. New Mexico\u2014which currently has 4,754 veteran students and 107  schools receiving VA education benefits\u2014did not renew its contract with  VA in fiscal year 2018 because funding was not sufficient to cover its  costs for salaries, travel, and technical assistance to schools, according  to VA officials (see text box).", "New Mexico Did Not Renew Department of Veterans Affairs (VA) Contract Due to  Lack of Funding  New Mexico\u2019s state agency began to face significant funding difficulties starting in fiscal  year 2015, according to a state official, and it did not renew its VA contract to oversee  schools receiving VA education benefits in fiscal year 2018. Although the state agency  was able to conduct the oversight activities required by its VA contract in fiscal year  2017, the official said the agency had to reduce its staff, and the one remaining  employee was frequently required to work long hours and weekends to meet contract  requirements. Further, New Mexico did not receive adequate funding for travel costs to  visit schools in its geographically large, rural state, the state official noted. As a result,  the official said the state agency opted not to renew its VA contract in fiscal year 2018.  VA and New Mexico officials have differing views on how well VA staff will be able to  provide effective oversight of schools receiving veterans\u2019 education benefits in the  state. In January 2018, New Mexico state officials stated that although VA regional staff  have assumed the former state agency\u2019s oversight responsibilities, they are unlikely to  be able to provide the same level of oversight the state agency did because the VA  staff are also responsible for overseeing schools in three other states in addition to New  Mexico. As a result, state agency officials said schools in New Mexico would likely  receive fewer oversight visits. VA officials, on the other hand, believe that their regional  staff are handling oversight of schools in New Mexico effectively, although they  acknowledged the staff may be conducting fewer compliance surveys and providing  schools less technical assistance.", "Other states have also expressed concerns about their ability to conduct  oversight given available funding levels. For example, Alaska\u2014which  currently has 4,011 veteran students and 53 schools receiving VA  education benefits\u2014also chose not to contract with VA for about 5\u00bd  years (fiscal year 2012 through January 2017), according to VA officials  and the director of Alaska\u2019s veterans affairs office. Alaska\u2019s director also  said that a major reason that Alaska did not renew its contract was limited  VA funding. During this time, regional VA staff based in Oklahoma  handled Alaska\u2019s oversight, which VA officials said often had to be  conducted remotely given that schools are spread throughout the state,  and travel to those areas can be expensive as well as challenging given  weather conditions. VA officials said that VA\u2019s presence was not as  strong in Alaska as in other states because VA staff overseeing Alaska  are located in another state and in a different time zone. Further,  according to VA data for fiscal years 2014 and 2015, VA staff were  unable to complete all the compliance surveys they were assigned in  Alaska. In addition, California officials told us they almost did not renew  their oversight contract in fiscal year 2018 due in part to funding  concerns. California has the largest number of veteran students (86,926)  and schools receiving VA education benefits (1,091) of any state, yet  state agency officials told us that they lacked sufficient funding to pay  salaries for staff to conduct necessary oversight of these schools,  including approvals and technical assistance visits. VA officials noted,  however, that California receives the most funding of any state and has  received the greatest increases of any state in the last two years.", "Although VA stepped in to provide oversight of schools in New Mexico  and Alaska, the agency does not have a plan for how it will oversee  additional schools if other states choose not to renew their oversight  contracts. VA officials told us their current approach is to assign the state  agency\u2019s workload to regional VA staff who already have their own school  oversight responsibilities. However, providing oversight in states without a  contract in addition to VA staffs\u2019 existing workload is likely to stretch  agency resources. For example, existing VA regional staff may not be  able to oversee all schools in states with a large number of schools. In  addition, VA staff may be strained in providing oversight in geographically  large states where schools are widely dispersed because school visits  would be time consuming and costly.", "VA has begun some initial steps to identify and assess how it would  handle additional oversight. In August 2017, VA began working with its  Office of General Counsel regarding what options the agency has when a  state agency chooses not to contract with VA, and the Office issued a  legal opinion in September 2017. In April 2018, VA formed a workgroup,  which also met a few times in May and once in July, to prepare a draft  paper of possible scenarios and response options based on this legal  opinion. In August 2018, the workgroup followed up with the field  supervisor responsible for approval, compliance, and liaison and  produced a new draft paper of scenarios and options. As of September  2018, VA\u2019s Education Service Director is holding discussions with VA  leadership regarding assessing the options and developing a formal plan.  However, VA has not completed an assessment to ensure the agency  can handle additional school oversight responsibilities in states that do  not renew their contracts and has yet to prepare a contingency plan.", "Federal standards for internal control state that agencies should identify,  assess, and respond to risks related to achieving objectives. After  identifying risks, the agency should assess the significance\u2014or effect on  achieving the objective\u2014of these risks, which provides a basis for  responding to the risks. Then, in responding to these risks, the standards  state that agencies should define contingency plans for assigning  responsibilities if key roles are vacated to help the entity continue to  achieve its objectives. Specifically, if the agency relies on a separate  organization to fulfill key roles, then the agency should assess whether  this organization can continue in these key roles, identify others to fill  these roles as needed, and implement knowledge sharing with  replacement personnel. Without fully identifying and assessing the risks  of additional state withdrawals, and without a contingency plan to address  how VA can oversee additional schools, the agency runs the risk that if  more states withdraw from their oversight responsibilities, then VA will be  unprepared to oversee the schools in these states."], "subsections": []}]}, {"section_title": "VA and State Agencies Use Certain Risk Factors to Select Schools for Review, and Have Taken Steps toward a New Oversight Approach", "paragraphs": [], "subsections": [{"section_title": "VA and State Agencies Use Payment Errors and Other Risk Factors to Select Schools for Compliance Surveys", "paragraphs": ["Each year, VA uses findings from prior compliance surveys and other  information to develop a strategy for prioritizing a sample of schools to  receive annual reviews, according to VA officials. VA is generally required  by statute to conduct an annual compliance survey of schools with 20 or  more enrolled veterans at least once every 2 years. VA officials said  with the help of state agencies, VA uses these surveys to determine if  schools are meeting legal requirements and are using VA education  benefits funds appropriately, including whether they are making over- or  under-payments on students\u2019 education expenses. According to a VA  document, in conducting the surveys, VA and state agencies review  various statutory and regulatory requirements, such as the accuracy of a  school\u2019s student enrollment records, tuition payments, and whether a  school has corrected deficiencies identified in previous compliance  surveys.", "According to VA officials, the agency has taken steps to incorporate risk  factors into its compliance survey strategy in response to  recommendations from our prior work and recent VA studies. The  examples below show how VA has responded to recommendations to  use risk in overseeing schools.", "In 2011, we recommended that VA adopt risk-based approaches to  ensure proper oversight of schools. As part of the agency\u2019s official  response to this recommendation, VA reported to us that in fiscal year  2012 the agency began prioritizing compliance surveys at for-profit  schools. Further, VA officials said that the agency added this focus  to its written annual compliance survey strategy for fiscal years 2016  and 2017 based on prior years\u2019 compliance survey findings and  congressional priorities.", "In a 2016 report, VA\u2019s Inspector General recommended that VA  consider particular risk factors in selecting schools for compliance  surveys. Specifically, the report recommended that VA prioritize  schools at risk of payment errors including (1) making errors resulting  in over- or under-payments of VA education benefits, and (2)  neglecting to recover unspent VA education benefit funds, such as  when students receive funds but then reduce their course loads or  repeat classes. In response, VA officials stated that the agency began  using data on these payment errors to prioritize schools with high  error rates. For example, VA officials said that when data revealed  that flight schools were particularly prone to such errors\u2014along with  charging high tuition and fees and failing to meet some VA education  benefits criteria, among other issues\u2014VA decided to prioritize these  schools for compliance surveys in its fiscal year 2018 strategy (see  text box).", "VA\u2019s Compliance Survey Strategy for Schools Receiving VA Education Benefits for  Fiscal Year 2018  The Department of Veterans Affairs (VA) is generally required by statute to conduct an  annual compliance survey of schools receiving VA education benefits and that have 20 or  more enrolled veterans at least once every 2 years. For its fiscal year 2018 compliance  survey strategy, VA prioritized the following types of schools for review:  100 percent of schools with flight programs;  100 percent of schools with fewer than 20 veterans, with priority to those  that had not received surveys for the longest time period;  100 percent of federal on-the-job training and apprenticeship programs;  schools with serious deficiencies identified in previous compliance surveys;  schools newly approved for the program with enrolled VA beneficiaries;  schools that have never received a compliance survey (for example, VA officials said  some schools have not received a compliance survey due to a shortage of VA  oversight staff or due to the fact that in prior years, the statute did not require VA to  conduct compliance surveys at schools with fewer than 300 veterans); and  a sample of foreign schools receiving VA education benefits for students from the  United States (conducted by VA via remote survey).", "An August 2017 study, conducted by an external contractor hired by  VA, reviewed ways to strengthen VA\u2019s compliance survey process  and outcomes. The report found that VA has not placed enough  emphasis on improving school compliance over time. For example,  VA has historically prioritized completing a certain number of surveys  each year rather than ensuring that schools are actually  demonstrating compliance. Among other recommendations, the report  identified the need for VA to more effectively use data to measure  schools\u2019 compliance over time and to establish priorities to select  schools for compliance surveys based on their risk level. As of July  2018, VA officials said that the agency has begun analyzing the  study\u2019s recommendations to improve its compliance survey process  and that its new compliance survey strategy for fiscal year 2019 and  future years will address many of these study recommendations."], "subsections": []}, {"section_title": "VA Conducts Reviews in Response to Complaints at Schools", "paragraphs": ["VA officials said that in 2014 they began conducting targeted reviews of  schools in response to complaints received from students, government  officials, or others. VA\u2019s policies and procedures state that, in addition to  complaints, other factors that could trigger a targeted review include  compliance survey results, management mandates, and a school self- reporting a violation, among others. VA officials said, however, that VA  has not initiated a targeted review in response to anything other than a  complaint.", "To determine whether to conduct a targeted review, VA officials said they  review each complaint and may corroborate it with other sources of  information, such as compliance survey data on that school and input  from states or other agencies. According to VA\u2019s policies and procedures,  the focus of targeted reviews varies based on the nature of the complaint,  and VA assigns a higher priority to complaints that are higher risk, i.e.,  those that allege fraud, waste, or abuse (see table 1). As of July 2018, VA  and state agencies have conducted about 160 targeted reviews of  schools in response to complaints since 2014, resulting in the withdrawal  of program approval for 21 schools, according to data provided by VA  officials."], "subsections": []}, {"section_title": "VA Has Taken Steps to Adopt a New Risk-Based Oversight Approach", "paragraphs": ["VA has taken steps to adopt a new risk-based approach to overseeing  schools receiving VA education benefits, including selecting schools  based on risk factors such as those identified in the Colmery Act. Among  other things, the Colmery Act explicitly authorizes VA to use the state  agencies for risk-based surveys and other oversight based on a school\u2019s  level of risk, and identifies specific risk factors that can be used for school  oversight (see text box).", "Risk Factors Identified in the Harry W. Colmery Veterans Educational Assistance  Act of 2017  The Colmery Act explicitly authorizes the Department of Veterans Affairs (VA) and state  agencies to use risk-based surveys (reviews) in oversight of schools receiving VA  education benefits. The Colmery Act identifies specific risk factors that can be used for  school oversight, but does not require VA or state agencies to use these risk factors in  their oversight of these schools:  rapid increases in veteran enrollment,  increases in the amount of VA education benefits a school receives per veteran  student,    volume of student complaints,  rates of federal student loan defaults of veterans,  veteran completion rates,   deficiencies identified by accreditors and other state agencies, and   deficiencies in VA program administration compliance.", "VA officials told us that they have not yet used the risk factors cited in the  Colmery Act in conducting their compliance surveys. VA officials  acknowledged, however, that adopting a more risk-based oversight  approach could help prevent problems, such as some schools\u2019 use of  deceptive practices in recruiting veterans and receipt of overpayments  from VA. VA officials said that the agency is exploring risk factors to  consider in developing its compliance survey strategy for selecting  schools in fiscal years 2019 to 2021.", "State agency officials we spoke to said that they use the risk factors cited  in the Colmery Act to varying degrees in their oversight of schools  receiving VA education benefits. For example, one state agency official  said that he tracks all of the risk factors cited in the Colmery Act except  the rates of veterans\u2019 student loan defaults. On the other hand, a NASAA  official said that her state agency tracks the volume of student complaints  and deficiencies identified by accreditors and other state agencies. States  generally have limited opportunities to select specific schools for  compliance surveys, because VA develops the annual priorities for  compliance surveys, according to NASAA officials. In some cases,  NASAA officials told us, state agency staff work with regional VA staff to  select schools for visits based on VA\u2019s priorities.", "VA has recently taken steps to explore a new risk-based approach to  oversee schools receiving VA education benefits that would be in addition  to compliance surveys, according to VA officials. Specifically, VA officials  told us that VA has participated in a joint working group with NASAA  officials focused on developing a new type of school review in which VA  would select schools based on specific risk factors, including those  identified in the Colmery Act. NASAA officials told us they were  supportive of VA\u2019s efforts in this area. As of February 2018, NASAA  officials had drafted a possible approach to state agencies\u2019 oversight to  monitor one risk factor\u2014rapid increases in veteran enrollment for VA\u2019s  consideration. VA officials told us the working group plans to build on this  effort in reviewing other risk factors. In May 2018, VA prepared a draft  charter for the working group, which, among other things, outlines the  potential scope and implementation of new risk-based surveys, and  provided it to NASAA for review. Documentation we reviewed from a VA  and NASAA working group meeting held in May 2018 stated that in its  upcoming meetings, the working group plans to continue developing the  charter, including agreeing to roles and responsibilities, establishing the  risk factors to be used, and identifying data sources related to these risk  factors. VA officials said that at an August 2018 joint working group  meeting, the charter was deemed to have served its purpose and the  decision was made to establish a risk-based review policy and  procedures moving forward. According to VA officials, as of mid-October  2018, VA used this strategy to select five schools to undergo risk-based  reviews. VA officials said they expect these five reviews to be completed  by late December 2018."], "subsections": []}]}, {"section_title": "VA and State Agencies Have Approaches to Coordinate Oversight Activities and VA Is Developing Additional Guidance for States on Targeted Reviews", "paragraphs": [], "subsections": [{"section_title": "VA and State Agencies Identified Various Ways They Coordinate on Oversight Activities", "paragraphs": ["VA and state agencies coordinate to divide responsibility for who will  conduct compliance surveys of schools receiving VA education benefits in  a variety of ways, according to VA and NASAA officials. After VA provides  state agencies information about its annual strategy for selecting schools  for these surveys, VA regional staff work with state agency staff to select  the specific schools for that year, according to these officials. NASAA  officials we interviewed said their working relationships with regional VA  staff are excellent\u2014they have good communication and understand and  help each other. For example, one state official we interviewed said the  state agency and regional VA staff in the state coordinate to make sure  they alternate who visits which schools to obtain multiple perspectives.  They also have discussions before and after each visit, the official said. In  some cases, VA officials said, VA and state agency officials collaborate to  conduct compliance surveys together.", "VA also provides information to states on how to conduct and report on  compliance surveys, including a checklist to help guide the states\u2019 review  of items tied to specific statutory requirements, as well as a template for  reporting compliance survey results. VA leadership also holds  conferences twice a year that NASAA and state agency staff can attend,  and communicates throughout the year on school oversight issues,  according to officials from these entities.", "In addition, VA officials told us they collaborate with NASAA on providing  training for state agency staff that NASAA provides through the National  Training Institute. According to NASAA\u2019s website, the Institute provides  an overview of state agency responsibilities and activities, including  information on public laws, accreditation, VA education benefits approval  criteria, and compliance surveys. New state agency staff must attend this  training, according to NASAA officials."], "subsections": []}, {"section_title": "VA Is Developing New Guidance for States on Targeted Complaint-Based Reviews", "paragraphs": ["NASAA officials told us that VA has not provided state agencies with  sufficient information on how to conduct targeted school reviews in  response to complaints, and as a result it is difficult for states to conduct  these types of reviews. VA officials acknowledged this lack of information.  NASAA officials reported that many state agencies want more direction  on how to conduct and report on targeted school reviews in response to  complaints. A policy and procedures document on targeted school  reviews that VA developed in 2014 describes the criteria to use in  determining when to conduct targeted, complaint-based reviews,  including what issues to prioritize. VA officials acknowledged, however,  that the document is outdated and does not provide sufficient detail. VA  officials said the agency is in the process of revising the document to  provide more clarity. In July 2018, VA provided a draft document to us  showing the changes it plans to make in its policy and procedures on  targeted, complaint-based school reviews, which includes specific  information about how state agencies should conduct and report on these  reviews. As of late October 2018, VA officials said these procedures were  undergoing internal review. VA officials said they are open to state  agency feedback on the new procedures. In addition, VA officials said  they are currently updating their database for complaint-based reviews to  add specific, standard data fields for states to use in reporting the results  of these reviews. VA officials told us that the revised database and  procedures will allow state agencies to develop their own template to  electronically report information collected during these reviews in a  standardized way. We believe that when implemented, VA\u2019s new  procedures could help enhance VA\u2019s and state agencies\u2019 efforts in  responding to complaints about schools receiving VA education benefits."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["It is critical for VA to ensure that schools receiving VA education benefits  are complying with program requirements and that veterans receive the  education they have been promised. Because funding concerns have led  to states withdrawing from their oversight roles, decisions by other states  to not renew their school oversight contracts could result in VA taking on  additional school oversight responsibilities. However, VA has neither  completed identification nor assessment of the risks posed by any future  state withdrawals that could leave VA unprepared to conduct oversight in  these states. Further, VA\u2019s lack of a contingency plan for assuming the  responsibilities of state agencies in these cases raises the risk that  schools receiving VA education benefits would not be overseen and  student veterans could be adversely affected."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Secretary of Veterans Affairs direct the Under  Secretary for Benefits to:  (1) Complete efforts to identify and assess risks related to future  withdrawals by state agencies in overseeing schools and (2) address  these risks by preparing a contingency plan for how VA will oversee  additional schools if more states choose not to renew their oversight  contracts. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to VA for review and comment. VA\u2019s  comments are reproduced in appendix I. VA agreed with our  recommendation. VA also provided technical comments, which we  considered and incorporated as appropriate.", "In addition, we provided relevant excerpts from a draft of this report to  NASAA leadership for review and comment. NASAA provided technical  comments, which we considered and incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Veterans Affairs and Education; and other  interested parties. In addition, the report is available at no charge on  GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on   the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Elizabeth Sirois (Assistant  Director), Linda L. Siegel (Analyst-in-Charge), Jessica Ard, and Rachel  Pittenger made key contributions to this report. Also contributing to this  report were Susan Aschoff, James Bennett, Deborah Bland, Sheila R.  McCoy, Jean McSween, Benjamin Sinoff, and Sarah Veale."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-612", "url": "https://www.gao.gov/products/GAO-18-612", "title": "Foreign Assistance: U.S. Assistance for the West Bank and Gaza, Fiscal Years 2015 and 2016", "published_date": "2018-08-08T00:00:00", "released_date": "2018-08-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 1993, the U.S. government has committed more than $5 billion in bilateral assistance to the Palestinians in the West Bank and Gaza. According to the Department of State, this assistance to the Palestinians promotes U.S. economic and political foreign policy interests by supporting Middle East peace negotiations and financing economic stabilization programs. USAID is primarily responsible for administering ESF assistance to the West Bank and Gaza.", "Appropriations acts for fiscal years 2015 and 2016 included provisions for GAO to review the treatment, handling, and uses of funds provided through the ESF for assistance to the West Bank and Gaza. This report examines (1) the status of ESF assistance and projects provided to the West Bank and Gaza for fiscal years 2015 and 2016, including project assistance and payments to PA creditors, and (2) the extent to which USAID conducted required vetting of PA creditors to ensure that this assistance would not support entities or individuals associated with terrorism and assessed PA ministries' capacity to use ESF assistance as intended. GAO reviewed relevant laws and regulations and USAID financial data, policies, procedures, and documents. GAO also interviewed USAID and State Department officials."]}, {"section_title": "What GAO Found", "paragraphs": ["As of March 2018, the U.S. Agency for International Development (USAID) had allocated about $545 million of funding appropriated to the Economic Support Fund (ESF) for assistance in the West Bank and Gaza for fiscal years 2015 and 2016. USAID obligated about $544 million (over 99 percent) and expended about $351 million (over 64 percent) of the total allocations. Project assistance accounted for approximately $399 million of the obligated funds, while payments to Palestinian Authority (PA) creditors accounted for $145 million (see figure). USAID's obligations for project assistance in the West Bank and Gaza for fiscal years 2015 and 2016 supported three development objectives\u2014Economic Growth and Infrastructure ($239 million), Investing in the Next Generation ($107 million), and Governance and Civic Engagement (about $25 million). In fiscal years 2015 and 2016, USAID made payments directly to PA creditors\u2014two Israeli fuel companies, to cover debts for petroleum purchases, and a local Palestinian bank, to pay off a line of credit used for PA medical referrals to six hospitals in the East Jerusalem Hospital network.", "USAID vetted PA creditors to ensure that the program assistance would not provide support to entities or individuals associated with terrorism and also conducted external assessments and financial audits of PA ministries of Health and Finance and Planning. USAID documentation showed that, as required, officials checked the vetting status of each PA creditor within 12 months before USAID signed its debt relief grant agreements with the PA. In addition, although USAID determined that it was not legally required to assess the PA Ministry of Health's medical referral services and the Ministry of Finance and Planning's petroleum procurement system, the agency commissioned external assessments of both ministries. These assessments found some weaknesses in both ministries' systems; however, USAID mission officials stated that these weaknesses did not affect USAID debt relief payments to the PA creditors. Nevertheless, USAID took additional steps to mitigate the identified weaknesses. For example, a USAID contractor worked with the Ministry of Health to update, revise, and approve guidelines for medical referrals. In addition, USAID commissioned financial audits of the debt relief grant agreements between USAID and the PA for direct payments to PA creditors in fiscal year 2015 and 2016. The audits did not identify any ineligible costs, reportable material weaknesses in internal control, or material instances of noncompliance with the terms of the agreements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The West Bank and Gaza cover about 2,400 square miles and have a  combined population of about 4.6 million people. The Palestinian  Authority (PA) and Israel administer areas in the West Bank, and Hamas- controlled de facto authorities control Gaza. According to the Department  of State (State), U.S. economic and humanitarian assistance to the  Palestinians promotes the economic and political foreign policy interests  of the United States by supporting Middle East peace negotiations and  financing economic stabilization programs. The U.S. Agency for  International Development (USAID) has primary responsibility for  administering assistance for the West Bank and Gaza, most of which is  appropriated through the Economic Support Fund (ESF). In addition to  providing project assistance to the Palestinians in the West Bank and  Gaza, USAID entered into debt relief grant agreements with the PA using  fiscal year 2015 and 2016 funds. Under these agreements, according to  USAID, it agreed to pay PA creditors who provided goods and services to  the PA rather than to transfer cash directly to the PA for this purpose.", "Appropriations acts for fiscal years 2015 and 2016 included provisions for  GAO to review the treatment, handling, and uses of funds provided  through the ESF\u2014in this report, \u201cESF assistance\u201d\u2014for the West Bank  and Gaza. This report examines (1) the status of ESF assistance to the  West Bank and Gaza for fiscal years 2015 and 2016, including project  assistance and payments to PA creditors, and (2) the extent to which  USAID conducted required vetting of PA creditors to ensure that  assistance would not support entities or individuals associated with  terrorism and assessed PA ministries\u2019 capacity to use ESF assistance as  intended.", "To address our objectives, we reviewed appropriations legislation, related  budget justification documents, and fiscal year 2015 and 2016 financial  data, including expenditures as of March 31, 2018, that USAID provided.  We also reviewed relevant USAID documents, including notifications to  Congress, regarding the obligation of allocated funds. In addition, we  interviewed USAID and State officials in Washington, D.C., and  conducted telephone interviews with USAID West Bank and Gaza  mission officials in Tel Aviv, Israel. In addition, we reviewed statutory  requirements and relevant USAID documentation, such as USAID\u2019s  antiterrorism policies and procedures, for vetting PA creditors to ensure  that assistance does not support entities or individuals associated with  terrorism. See appendix I for more information on our scope and  methodology.", "We conducted this performance audit from September 2017 to August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Since 1993, USAID has obligated more than $5 billion in bilateral  assistance to the Palestinians in the West Bank and Gaza, primarily using  funds appropriated through the ESF. According to State officials, through  the ESF, USAID provides project assistance and debt relief payments to  PA creditors. USAID, with overall foreign policy guidance from State,  implements most ESF programs, including programs related to private  sector development, health, water and road infrastructure, local  governance, civil society, rule of law, education, and youth development.  According to USAID officials, this assistance to the West Bank and Gaza  contributes to building a more democratic, stable, prosperous, and secure  Palestinian society\u2014a goal that USAID described as being in the interest  of the Palestinians, the United States, and Israel. Figure 1 shows the  location of the West Bank and Gaza relative to surrounding countries.", "USAID assistance to the West Bank and Gaza is conducted under  antiterrorism policies and procedures outlined in an administrative policy  document known as Mission Order 21. The stated purpose of the  mission order, as amended, is to describe policies and procedures to  ensure that the mission\u2019s program assistance does not inadvertently  provide support to entities or individuals associated with terrorism.", "We have previously reported on the status of ESF assistance to the  Palestinians and USAID\u2019s antiterrorism policies and procedures in the  West Bank and Gaza."], "subsections": []}, {"section_title": "Status of ESF Assistance to the West Bank and Gaza for Fiscal Years 2015 and 2016, Including Project Assistance and Payments to PA Creditors", "paragraphs": ["As of March 31, 2018, USAID had obligated about $544.1 million (over 99  percent) and expended about $350.6 million (over 64 percent) of  approximately $544.5 million in ESF assistance allocated for the West  Bank and Gaza in fiscal years 2015 and 2016 (see table 1). USAID  obligated portions of the allocated funds for direct payments to PA  creditors\u2014specifically, payments to two Israeli fuel companies, to cover  debts for petroleum purchases, and to a local Palestinian bank, to pay off  a line of credit used for PA medical referrals to six hospitals in the East  Jerusalem Hospital network.", "Project assistance obligated for fiscal years 2015 and 2016 accounted for  about $215 million (74 percent) and $184 million (72 percent),  respectively, of USAID\u2019s obligations of ESF assistance for the West Bank  and Gaza for those fiscal years (see fig. 1). Payments to the PA\u2019s  creditors accounted for the remaining obligations\u2014about $75 million (26  percent) of fiscal year 2015 obligations and about $70 million (28 percent)  of fiscal year 2016 obligations.", "According to USAID documents, ESF project assistance for the West  Bank and Gaza for fiscal years 2015 and 2016 was obligated for three  USAID development objectives: Economic Growth and Infrastructure  (about $239 million), Investing in the Next Generation (about $107  million), and Governance and Civic Engagement (about $25 million).  Program support\u2014which sustains all development objectives, according  to USAID\u2014accounted for about $29 million (see table 2).", "Economic Growth and Infrastructure. The largest share\u2014about 60  percent\u2014of USAID\u2019s ESF project assistance for the West Bank and  Gaza for fiscal years 2015 and 2016 supported the agency\u2019s  Economic Growth and Infrastructure development objective.  According to USAID documents, as of March 31, 2018, the agency  had obligated about $239 million and expended approximately $89  million (about 37 percent) for projects under this objective. USAID  officials stated that the agency funded these projects under the  following standard State-budgeted program areas: health (including  water), infrastructure, private sector competiveness, and stabilization  operations and security sector reform. The largest project\u2014the  Architecture and Engineering Services project\u2014received about $20  million of fiscal year 2015 ESF assistance and $17 million of fiscal  year 2016 ESF assistance. The purpose of the project was to  rehabilitate and construct infrastructure through the procurement of  infrastructure services, including engineering design and construction  management, among other things. The contractor was required to  coordinate with relevant PA and Israeli entities, as well as with  USAID, to assist in the selection of PA water and wastewater projects  and in the planning and design of water projects such as small- to  large-scale water distribution systems, water treatment systems, and  institutional capacity building.", "Investing in the Next Generation. The second-largest share\u2014about  27 percent\u2014of USAID\u2019s fiscal years 2015 and 2016 ESF project  assistance for the West Bank and Gaza supported the agency\u2019s  Investing in the Next Generation development objective. According to  USAID documents, as of March 31, 2018, the agency had obligated  about $107 million and expended approximately $79 million (about 74  percent) for projects under this objective. Program areas funded  included education, health, social and economic services and  protection of vulnerable populations. The largest project funded under  this objective\u2014a grant to the World Food Program for assistance to  vulnerable groups\u2014received $12 million in fiscal year 2015 and $15  million in fiscal year 2016 ESF assistance. The project focused on  ensuring food security, including meeting food needs, of the  nonrefugee population; increasing food availability and dietary  diversity for the most vulnerable and food-insecure nonrefugee  population; and establishing linkages with the Palestinian private  sector (shopkeepers, farms, and factories) to produce and deliver the  aid being provided to Palestinians. For example, the project directly  distributed a standard food ration through both direct food distribution  and electronic food vouchers to vulnerable nonrefugee families.", "Governance and Civic Engagement. The smallest share\u2014about 6  percent\u2014of USAID\u2019s fiscal years 2015 and 2016 ESF project  assistance for the West Bank and Gaza supported the agency\u2019s  Governance and Civic Engagement development objective. According  to USAID documents, as of March 31, 2018, USAID had obligated  about $24.6 million and expended approximately $14.5 million (about  60 percent) for projects in program areas that included civil society,  good governance, and rule of law. The largest project funded under  this objective\u2014a contract for the Communities Thrive Project\u2014 received about $5.2 million and $8 million in fiscal years 2015 and  2016 ESF assistance, respectively. The project aimed to help 55 West  Bank municipalities improve fiscal management, fiscal accountability  and transparency, and delivery and management of municipal  services, among other things.", "Under debt relief grant agreements with the PA, USAID made direct  payments of ESF assistance to PA creditors totaling about $75 million  from fiscal year 2015 funds and $70 million from fiscal year 2016 funds.  USAID paid about $40 million from fiscal year 2015 funds and $45 million  from fiscal year 2016 funds to two oil companies to cover debts for  petroleum purchases. In addition, USAID paid about $35 million from  fiscal year 2015 funds and $25 million from fiscal year 2016 funds to the  Bank of Palestine, to pay off a PA line of credit that was used to cover PA  medical referrals to six hospitals in the East Jerusalem Hospital network."], "subsections": []}, {"section_title": "USAID Vetted PA Creditors and Conducted External Assessments and Financial Audits of PA Ministries", "paragraphs": ["Before using fiscal years 2015 and 2016 ESF assistance to pay PA  creditors, USAID vetted the creditors to ensure that the assistance would  not provide support to entities or individuals associated with terrorism, as  required by its policies and procedures. USAID determined that certain  legal requirements, including the requirement for an assessment of the  PA Ministry of Finance and Planning, were not applicable for direct  payments of these funds to PA creditors. Nevertheless, USAID continued  to commission external assessments and financial audits of the PA  Ministries of Health and Finance and Planning."], "subsections": [{"section_title": "USAID Vetted PA Creditors as Required by Its Policies and Procedures for Direct Payments to Creditors", "paragraphs": ["USAID documentation for payments to creditors shows that before  signing debt relief agreements with the PA, mission officials checked, as  required by Mission Order 21, the vetting status of PA creditors who  would receive direct payments under the agreements, to ensure their  eligibility before any payment was made. USAID Mission Order 21  requires that before payments to PA creditors are executed, the creditors  must be vetted\u2014that is, the creditors\u2019 key individuals and other identifying  information must be checked against the federal Terrorist Screening  Center database and other information sources to determine whether  they have links to terrorism. According to USAID policies and  procedures, each PA creditor must be vetted if more than 12 months  have passed since the last time the creditor was vetted and approved to  receive ESF payments. We found that for payments made to PA creditors  using fiscal years 2015 and 2016 ESF assistance, USAID vetted each PA  creditor that received payments and completed the vetting during the 12-  month period before the debt relief agreements with the PA were signed  (see table 3)."], "subsections": []}, {"section_title": "USAID Determined Certain Legal Requirements Were Not Applicable to Payments to PA Creditors", "paragraphs": ["USAID determined that certain legal requirements applicable to cash  transfers to the PA were not applicable to direct payments to PA creditors  of fiscal years 2015 and 2016 ESF assistance. In September 2015, we  reported that USAID ceased making cash payments directly to the PA in  2014 and began making payments of ESF assistance directly to PA  creditors. In reviewing USAID\u2019s compliance with key legal requirements,  we found that USAID had complied with the requirements when making  cash transfers to the PA in fiscal year 2013. However, USAID had  determined that some requirements were not applicable to direct  payments made to PA creditors in fiscal year 2014, because no funds  were being provided directly to the PA.", "After fiscal year 2015, USAID further defined the scope of statutory  requirements it deemed applicable to payments to PA creditors using  fiscal years 2015 and 2016 ESF assistance, under the rationale that  these payments do not constitute direct payments to the PA.  Specifically, according to USAID, the agency determined that the  following statutory requirements discussed in our prior report were not  applicable to direct payments to PA creditors.", "A requirement to notify the Committees on Appropriations 15 days  before obligating funds for a cash transfer to the PA", "A requirement for the PA to maintain cash transfer funds in a separate  account", "A requirement for the President to waive the prohibition on providing  funds to the PA and to submit an accompanying report to the  Committees on Appropriations", "A requirement for the Secretary of State to provide a certification and  accompanying report to the Committees on Appropriations when the  President waives the prohibition on providing funds to the PA", "Requirements for direct government-to-government assistance,  including an assessment of the PA Ministry of Finance and Planning  According to USAID officials, they currently do not plan to resume cash  payments to the PA, because making direct payments to creditors  minimizes the misuse of funds and assures full transparency and  appropriateness of transfers."], "subsections": []}, {"section_title": "USAID Commissioned External Assessments and Financial Audits of PA Creditors before Executing Payments", "paragraphs": ["Although USAID concluded that the statutory requirement mandating  assessments of the PA Ministry of Finance and Planning did not apply to  direct payments to PA creditors, the West Bank and Gaza mission  commissioned external assessments of the PA Ministry of Health\u2019s  medical referral services and Ministry of Finance and Planning\u2019s  petroleum procurement system. According to a USAID document, while  the payments to the creditors did not constitute direct budget support to  the PA, the agency chose to commission external assessments to  determine whether the PA\u2019s financial systems were sufficient to ensure  adequate accountability for USAID funds consistent with legislative  requirements for direct budget support funds. These external  assessments identified weaknesses in both systems.", "Ministry of Health medical referrals. The assessment report stated  that the ministry did not have approved policies and procedures for  the medical referral process, a list of medical services covered by the  referral system, and written criteria for selecting referral hospitals in  the medical referral systems. In response, in a January 2016  internal memorandum, the West Bank and Gaza mission officials  concluded, among other things, that the findings did not pose a  significant risk to USAID funds. They also stated that the Ministry of  Health\u2019s medical referral system had adequate policies and  procedures for referrals to local hospitals. However, after the  assessment report was issued, a USAID contractor worked with the  Ministry of Health to update, revise, and approve guidelines for  medical referrals.", "Ministry of Finance and Planning petroleum procurements. The  assessment report stated that the ministry lacked specific policies and  procedures to prevent or detect fraud in the petroleum procurement  systems. In the West Bank and Gaza mission\u2019s January 2016  memorandum, USAID mission officials disagreed with the  assessment\u2019s findings regarding the petroleum procurement system,  stating that the assessment did not take into account sufficient and  adequate internal controls at the ministry as a first line of defense  against fraud. The memorandum also stated that the finding did not  affect USAID debt relief payments to the PA creditors.", "USAID officials told us that, while they did not believe the external  assessments\u2019 findings affected the integrity of USAID\u2019s debt relief  payment process, they took four additional steps to mitigate findings  noted in the assessment of the Ministry of Finance and Planning\u2019s fuel  procurement processes. According to USAID officials, they (1) confirmed  that the fuel companies had controls and systems to ensure an objective  and transparent system in receiving and recording PA orders, (2)  dispatched orders with official and properly signed shipping delivery and  receipt documents, (3) obtained written confirmation from the fuel  companies of the costs of the fuel provided to the PA, and (4) confirmed  the PA\u2019s petroleum debt with the fuel companies before initiating the  payments and after making the payments.", "In addition, in 2016, USAID commissioned two routine financial audits of  the debt relief grant agreed to by USAID and the PA for the use of fiscal  year 2015 ESF assistance to make direct payments to PA creditors.  According to USAID officials, the auditors were to examine the PA  Ministry of Finance and Planning\u2019s recording of USAID payments to PA  creditors in its financial records as well as the ministry\u2019s and USAID\u2019s  compliance with the terms of the grant agreement and related  implementation letters. The audits did not identify any questioned or  ineligible costs, reportable material weaknesses in internal control, or  material instances of noncompliance with the terms of the debt relief  grant. Also, in 2017, USAID contracted for a financial audit of the fiscal  year 2016 debt relief grant agreed to by USAID and the PA. According to  a USAID document, in May 2018, USAID held an entrance conference  with the PA Ministry of Finance and Planning for the audit of the fiscal  year 2016 grant. In July 2018, USAID sent the final audit report to the  Regional Inspector General for review. According to the USAID  document, the report did not identify any questioned or ineligible costs,  reportable material weaknesses in internal controls, or material instances  of noncompliance with the terms of the grant."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to USAID and State for review and  comment. USAID provided comments, which we have reproduced in  appendix II, as well as technical comments, which we incorporated as  appropriate. State did not provide comments.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of USAID, and the Secretary of State. 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) 512-3149 or gootnickd@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 contributed to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Appropriations acts for fiscal years 2015 and 2016 included provisions for  GAO to review the treatment, handling, and uses of funds provided  through the ESF for assistance to the West Bank and Gaza. This report  examines (1) the status of ESF assistance and projects provided to the  West Bank and Gaza for fiscal years 2015 and 2016, including payments  to PA creditors, and (2) the extent to which USAID conducted required  vetting of PA creditors to ensure that assistance would not support  entities or individuals associated with terrorism and assessed PA  ministries\u2019 capacity to use ESF assistance as intended.", "To address our first objective, we reviewed appropriations legislation,  related budget justification documents, and financial data for fiscal years  2015 and 2016, including expenditures as of March 31, 2018, provided by  USAID\u2019s West Bank and Gaza mission in Tel Aviv, Israel. We reviewed  data that USAID provided on obligations and expenditures of all ESF  assistance for the West Bank and Gaza as of March 31, 2018, from  annual allocations for fiscal years 2015 and 2016. We also reviewed  relevant USAID documents, including notifications to Congress regarding  the use of appropriated funds. In addition, we interviewed USAID and  State officials in Washington, D.C., and Tel Aviv.", "To determine whether the data were sufficiently reliable for the purposes  of this report, we requested and reviewed information from USAID  officials about their procedures for entering contract and financial  information into USAID\u2019s data system. We determined that the USAID  data were sufficiently reliable. For the project information included in this  report, we relied on data that USAID provided, showing its obligations and  expenditures of fiscal year 2015 and 2016 ESF assistance for West Bank  and Gaza. For illustrative purposes, we requested and obtained from  USAID descriptions of projects that, according to USAID officials,  represented the largest financial obligations for each development  objective in fiscal years 2015 and 2016.", "To address our second objective, we identified and reviewed relevant  legal requirements as well as USAID policies and procedures to comply with those requirements. USAID Mission Order 21 is the primary  document that details USAID procedures to ensure that the mission\u2019s  assistance program does not provide support to entities or individuals  associated with terrorism, consistent with the prohibition on such support  found in relevant laws and executive orders. In addition, we reviewed 27  USAID determinations of compliance for payments to PA creditors and  discussed with USAID mission officials their efforts to comply with the  policies and procedures in Mission Order 21 before executing payments  to hospitals, companies, and banks that facilitated the payments. We also  reviewed the timing of USAID\u2019s vetting of each PA creditor that received  payments, to ensure that, as required by Mission Order 21, the vetting  occurred within 12 months before USAID signed the relevant debt relief  grant agreement with the PA. Further, we reviewed external assessments  of the PA Ministries of Health and Finance and Planning and financial  audits of the PA Ministry of Finance and Planning, and we discussed the  assessments\u2019 and audits with USAID officials responsible for payments to  PA creditors.", "We conducted this performance audit from September 2017 to August  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Judith McCloskey (Assistant  Director), Tom Zingale (Analyst-in-Charge), Eddie Uyekawa, Jeff Isaacs,  and Nicole Willems made significant contributions to this report. David  Dornisch, Neil Doherty, Reid Lowe, and Roger Stoltz also contributed to  the report."], "subsections": []}]}], "fastfact": ["The United States provides economic and humanitarian assistance to Palestinians in the West Bank and Gaza to promote Middle East peace and stability.", "In 2015 and 2016, the U.S. Agency for International Development provided about $545 million for projects such as water treatment systems and to pay Palestinian Authority creditors directly for fuel and health services. USAID is required to ensure no support goes to people or entities linked to terrorism.", "We found that USAID carried out the required vetting of Palestinian Authority creditors."]}
{"id": "GAO-19-35", "url": "https://www.gao.gov/products/GAO-19-35", "title": "Federal Workforce: Opportunities Exist for OPM to Further Innovation in Performance Management", "published_date": "2018-11-20T00:00:00", "released_date": "2018-11-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Managing employee performance has been a long-standing government-wide issue and the subject of numerous reforms since the beginning of the modern civil service. Without effective performance management, agencies risk not only losing the skills of top talent, they also risk missing the opportunity to effectively address increasingly complex and evolving mission challenges.", "GAO was asked to examine federal non-Senior Executive Service performance management systems. This report examines (1) government-wide trends in employee perceptions of performance management as measured by the results of selected FEVS statements, (2) practices that selected agencies use to improve performance management, and (3) OPM's guidance and resources to support agency efforts to improve performance management government-wide.", "GAO analyzed responses to selected FEVS statements related to the five performance management phases from 2010 through 2017; selected four agencies based on the highest average scores for the five phases, among other criteria, to identify practices which may contribute to improved performance management; reviewed OPM documents; and interviewed OPM and other agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that from 2010 through 2017, surveyed employees generally demonstrated positive responses to selected Federal Employee Viewpoint Survey (FEVS) statements related to four of the Office of Personnel Management's (OPM) five performance management phases, including: planning and setting expectations, monitoring performance, developing the capacity to perform, and rating performance. Employees responded least positively to statements related to rewarding performance, with only 39 percent of employees, on average, agreeing with statements regarding this phase.", "Of the four agencies with among the highest average scores for the performance management phases (Bureau of Labor Statistics, Centers for Disease Control and Prevention, Drug Enforcement Administration, and Office of the Comptroller of the Currency), GAO identified practices that may contribute to improved performance management including strong organizational culture and dedication to mission; use of FEVS and other survey data; and a focus on training.", "OPM provides guidance and opportunities for agencies to share promising practices on performance management; however, some of this information is not easily accessible on its performance management website. In addition, OPM does not leverage its leadership position to formally identify and share emerging performance management research and innovation with agencies. As a result, agencies, and therefore their employees, may not benefit from the best information available."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that OPM improve its website and share innovations in performance management with agencies. OPM agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government is in a period of profound transition. It faces an  array of mission challenges and opportunities to enhance performance,  ensure accountability, and position the nation for the future. As part of a  broader effort to help modernize government and improve the ability of  agencies to deliver on their missions, in March 2018, the Office of  Management and Budget (OMB) released the President\u2019s Management  Agenda (PMA). Among other things, the PMA noted the important role  that federal employees play in ensuring the smooth functioning of our  democracy, but acknowledged that the government needs to do a better  job in actively managing the workforce to better align employees\u2019 skills  with evolving mission needs.", "Consistent with this approach, in our past work, we have noted how an  organization\u2019s workforce defines its character, affects its capacity to  perform, and represents its knowledge base. Additionally, an agency\u2019s  workforce plays a central role in transforming an agency into a high- performing organization. High-performing organizations have attributes  such as: an effective employee performance management system that includes  expectation setting, coaching, and feedback; a clear \u201cline of sight\u201d between individual performance and an engaged workforce that feels a sense of connection to both the  agency and its mission.", "However, managing employee performance has been a long-standing  government-wide challenge and the subject of numerous reforms since  the beginning of the modern civil service. Without effective performance  management, agencies risk not only losing (or failing to utilize) the skills  of top talent, they also risk missing the opportunity to effectively address  increasingly complex and rapidly evolving challenges.", "You asked us to examine federal non-Senior Executive Service (SES)  performance management systems. This report (1) describes federal  employee perceptions of performance management as measured by the  results of selected statements from the Office of Personnel  Management\u2019s (OPM) annual survey of federal employees, the Federal  Employment Viewpoint Survey (FEVS); (2) identifies practices that  selected agencies use to develop and implement strategies to improve  performance management; and (3) evaluates OPM\u2019s guidance and  resources to support agency efforts to improve performance management  government-wide. The report is the latest of several studies we have  done in recent years examining how agencies can better address  employee performance and misconduct. A complete list is included at the  end of this report.", "To describe government-wide trends in employee perceptions of  performance management as measured by the results of FEVS, we  selected 15 FEVS statements that generally align with OPM\u2019s description  of an agency\u2019s performance management cycle. We consulted with our  internal human capital (HC) experts as well as external HC experts at  OPM who concurred, as well as the Merit Systems Protection Board, to  determine the appropriateness of our FEVS statement selection and  categorization. Using the selected statements, we analyzed FEVS data,  including supervisory level, for the 24 Chief Financial Officers Act (CFO  Act) departments and agencies for the years 2010 through 2017\u2014the  most recent data available at the time of our review. To assess the  reliability of the FEVS data, we examined descriptive statistics and data  distribution, and reviewed missing data. We also reviewed FEVS  technical documentation. On the basis of these procedures, we believe  the data were sufficiently reliable for use in the analysis presented in this  report.", "To identify practices used by selected agencies to develop and implement  strategies to improve performance management, we used the results of  our government-wide analysis of FEVS data for 2015 (the most recent  data available at the time) to select four agencies as illustrative case  studies. Among other attributes, these agencies had the highest levels of  employee agreement with FEVS statements dealing with their  performance management processes. We also considered such factors  as the number of respondents, agency size, mission, and types of  employees. As such, we selected the Bureau of Labor Statistics (BLS),  Department of Labor; Centers for Disease Control and Prevention (CDC),  Department of Health and Human Services; Drug Enforcement  Administration (DEA), Department of Justice; and the Office of the  Comptroller of the Currency (OCC), Department of the Treasury. We  reviewed documents and interviewed officials from the four case study  agencies.", "To evaluate the guidance and resources OPM provides to agencies to  improve performance management government-wide, we analyzed both  OPM\u2019s performance management website and the Chief Human Capital  Officers (CHCO) Council\u2019s website to identify available guidance,  resources, and tools. We compared these documents to OMB\u2019s  memorandum on federal agency public websites, OPM\u2019s strategic plan for  fiscal years 2018 through 2022, and internal controls. We also reviewed  agency documentation and other OPM-referenced websites that  contained performance management-related information. To supplement  the documentary evidence obtained, we also interviewed officials from  OPM, the CHCO Council, and the four selected case study agencies to  describe the extent to which OPM provides assistance to agencies on  performance management. For further information on our scope and  methodology, see appendix I.", "We conducted this performance audit from December 2016 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Performance management systems can be powerful tools in helping an  agency achieve its mission and ensuring employees at every level of the  organization are working toward common ends. According to OPM  regulations, performance management is a systematic process by which  an agency involves its employees, both as individuals and members of a  group, in improving organizational effectiveness in the accomplishment of  agency mission and goals.", "An agency\u2019s performance management system defines policies and  parameters established by an agency for the administration of  performance appraisal programs. Under federal law and corresponding  regulations, agencies are required to develop at least one employee  performance appraisal system. OPM is required to review and approve an  agency\u2019s performance appraisal system(s) to ensure it is consistent with  the requirements of applicable law, regulation, and OPM policy, and  defines the general policies and parameters the agency will use to rate  employees. Once the appraisal system is approved, the agency  establishes a performance appraisal program. The agency\u2019s performance  appraisal program\u2014which does not require OPM review or approval\u2014 defines the specific procedures, methods, and requirements for planning,  monitoring, and rating employee performance. The program is tailored  to the agency\u2019s needs.", "OPM policy identifies five phases to the performance management cycle:  (1) planning work and setting expectations; (2) continually monitoring  performance; (3) developing the capacity to perform; (4) rating  periodically to summarize performance; and (5) rewarding good  performance (see table 1).", "According to OPM, performance management is a continuous cycle in  which an agency involves its employees, both, as individuals and  members of a group, in improving organizational effectiveness in  accomplishing agency mission and goals (see figure 1). Each phase of  the performance management cycle plays an important part in helping to  provide structure and focus to an employee\u2019s roles and responsibilities  within the organization. Within each phase of the cycle, employees are  given the opportunity to provide input, ask questions, and request  feedback from their supervisors on their performance.", "One of the tools agencies can use to determine the effectiveness of their  performance management cycle is data from OPM\u2019s annual FEVS. To  help understand federal employees\u2019 opinions about what matters most to  them and how they feel about their jobs, their supervisors, and their  agencies, FEVS scores can help agencies identify challenges and  improve guidance. FEVS measures employees\u2019 perceptions of whether,  and to what extent, conditions characterizing successful organizations are  present in their agencies. According to OPM, the federal workforce is  the backbone of the government. Employee opinions shared through  FEVS provide an essential catalyst to achieving effective government."], "subsections": []}, {"section_title": "Employees Responded Most Positively to Statements Related to Planning and Setting Expectations Phase; Least Positively to Those Related to Rewarding Performance", "paragraphs": ["From 2010 through 2017, surveyed employees generally demonstrated  positive responses to FEVS statements related to four of OPM\u2019s five  performance management phases, including: planning and setting  expectations, monitoring performance, developing the capacity to  perform, and rating performance (as shown in figure 2). Employees had  the lowest levels of agreement with statements related to rewarding  performance (or an estimated 39 percent positive response)."], "subsections": [{"section_title": "Phase 1: Planning Work and Setting Expectations", "paragraphs": ["We have previously reported that an explicit alignment of daily activities  with broader results is one of the defining features of effective  performance management systems in high-performing organizations.  These organizations use their performance management systems to  improve performance by helping individuals see the connection between  their daily activities and organizational goals, a line of sight, and  encouraging individuals to focus on their roles and responsibilities to help  achieve these goals. Such organizations continuously review and revise  their performance management systems to support their strategic and  performance goals, as well as their core values and transformational  objectives.", "Based on surveyed employees\u2019 responses, agencies were more  successful at planning and setting expectations, which includes how an  employee\u2019s work relates to the agency\u2019s goals and priorities, than at all  other phases of performance management. The response to these  statements highlights the role agencies have in providing information to  employees about their responsibilities within the organization. Of the  three selected FEVS statements for this phase, \u201cI know how my work  relates to the agency\u2019s goals and priorities,\u201d was the statement with the  highest percent of employees who agreed or strongly agreed across all of  our selected FEVS statements from 2010 to 2017 (see figure 3)."], "subsections": []}, {"section_title": "Phase 2: Continually Monitoring Performance", "paragraphs": ["Performance management and feedback should be used to help  employees improve so that they can do the work or\u2014in the event they  cannot do the work\u2014so management can take appropriate action for  unacceptable performance. The first opportunity a supervisor has to  observe and correct poor performance is in day-to-day performance  management activities. We have previously reported that, in general,  agencies have three means to address employees\u2019 poor performance,  with dismissal as a last resort: (1) day-to-day performance management  activities (which should be provided to all employees, regardless of their  performance levels); (2) dismissal during probationary periods; and (3)  use of formal procedures to dismiss employees. We have also reported  that supervisors who take performance management seriously and have  the necessary training and support can help poorly performing employees  either improve or realize they are not a good fit for the position.  However, some supervisors may lack experience and training in  performance management, as well as the understanding of the  procedures for taking corrective actions against poor performers. We  previously recommended that OPM, in conjunction with the Chief Human  Capital Officers (CHCO) Council, assess the adequacy of leadership  training that agencies provide to supervisors to help ensure supervisors  obtain the skills needed to effectively conduct performance management  responsibilities. In response, OPM conducted a survey to assess the  adequacy of leadership training that agencies provide to supervisors.  Based on the survey results, OPM issued a memorandum in May 2018  recommending a number of actions agencies should take to improve the  accessibility, adequacy, and effectiveness of supervisory training.", "Of the FEVS statements we analyzed, the statement, \u201cIn my work unit,  steps are taken to deal with a poor performer who cannot or will not  improve,\u201d had the lowest percent positive agreement by surveyed  employees each year from 2010 to 2017 government-wide. However,  the other two statements selected for this phase were viewed much more  positively by surveyed employees (see figure 4).", "When we further analyzed the responses to the statement on poor  performance, employee responses differed in agreement based on the  respondent\u2019s supervisory level. On average, an estimated 25 percent of  surveyed employees who identified themselves as nonsupervisors and  team leaders agreed with this statement from 2010 through 2017,  compared with an estimated average of 54 percent of surveyed  employees who identified themselves as managers (see figure 5)."], "subsections": []}, {"section_title": "Phase 3: Developing the Capacity to Perform", "paragraphs": ["According to OPM guidance, the capacity to perform means having the  competencies, the resources, and the opportunities available to complete  the job. We have previously reported that the essential aim of training  and development programs is to assist an agency in achieving its mission  and goals by improving individual and, ultimately, organizational  performance. In addition, constrained budgets and the need to address  gaps in critical federal skills and competencies make it essential that  agencies identify the appropriate level of investment and establish  priorities for employee training and development. This allows the most  important training needs to be addressed first. However, fewer surveyed  employees agreed with the statement, \u201cMy training needs are assessed,\u201d  than with the other statements in this phase (see figure 6)."], "subsections": []}, {"section_title": "Phase 4: Rating Periodically to Summarize Performance", "paragraphs": ["Supervisors should establish performance standards that clearly express  what is expected of the employee. An average estimated 82 percent of  surveyed employees agreed or strongly agreed with the statement, \u201cI am  held accountable for achieving results,\u201d from 2010 to 2017 (see figure 7).  Overall, this statement had the second highest level of agreement of the  15 statements selected for our review. According to OPM\u2019s website for  performance management, while accountability means being held  answerable for accomplishing a goal or assignment, the guidance  cautions against using accountability only for punishing employees as  fear and anxiety may permeate the work environment. This may prevent  employees from trying new methods or proposing new ideas for fear of  failure. According to OPM\u2019s website for performance management, if  approached correctly, accountability can produce positive, valuable  results."], "subsections": []}, {"section_title": "Phase 5: Rewarding Good Performance", "paragraphs": ["According to OPM guidance, rewards are used often and well in an  effective organization. We have previously reported that high-performing  organizations seek to create effective incentive and reward systems that  clearly link employee knowledge, skills, and contributions to  organizational results. Rewarding means recognizing employees,  individually and as members of groups, for their performance and  acknowledging their contributions to the agency\u2019s mission. According to  OPM\u2019s website for performance management, the types of awards  include: cash; honorary recognition; informal recognition; or time off  without charge to leave or loss of pay.", "From 2010 to 2017, an estimated 39 percent of surveyed employees  consistently agreed when asked statements related to how their agency  rewards performance (see figure 8). Of the five phases of performance  management, the statements related to this phase consistently had the  least positive agreement of surveyed employees.", "We have previously reported that effective performance management  requires the organization\u2019s leadership to make meaningful distinctions  between acceptable and outstanding performance of individuals.  Approximately one-third of surveyed employees agreed or strongly  agreed with the statement, \u201cIn my work unit, differences in performance  are recognized in a meaningful way.\u201d Meaningful distinctions in  performance ratings are the starting point for candid and constructive  conversations between supervisors and staff. These distinctions also add  transparency to the ratings and rewards process. In addition, such  distinctions help employees better understand their relative contributions  to organizational success, areas where they are doing well, and areas  where improvements are needed."], "subsections": [{"section_title": "Employees in Supervisory Roles Responded More Positively to Statements Related to Rewarding Performance than Other Employees", "paragraphs": ["We also found that, across our selected statements, many of the largest  gaps between supervisors and other employees were related to  rewarding performance. Specifically, the responses to the statement,  \u201cPromotions in my work unit are based on merit,\u201d varied the most based  upon the supervisory status of the employee (see figure 9). Senior  leaders agreed or strongly agreed with this statement at an average  estimated 40 percentage points more than employees in a  nonsupervisory role. We have previously reported that agencies must  design and administer merit promotion programs to ensure a systematic  means of selection for promotion based on merit. We have also  previously reported that perceptions of favoritism, particularly when  combined with unclear guidance, a lack of transparency, and limited  feedback, negatively impact employee morale.", "Senior leaders and managers agreed or strongly agreed with the  statement, \u201cIn my work unit, differences in performance are recognized in  a meaningful way,\u201d more frequently than surveyed employees who  identified themselves as nonsupervisors (see figure 10). Those who  identified themselves as team leaders and nonsupervisors agreed with  the statement less frequently than all of the other categories of  supervisory status. For example, in 2017, an estimated 69 percent of  senior leaders agreed or strongly agreed with the statement, compared to  an estimated 48 percent of supervisors and an estimated 33 percent of  nonsupervisors and team leaders.", "Finally, senior leaders and managers agreed or strongly agreed with the  statement, \u201cEmployees are recognized for providing high quality products  and services,\u201d more frequently than nonsupervisors (see figure 11)."], "subsections": []}]}]}, {"section_title": "Selected Agencies Implement Some Similar Practices That May Help Improve Employee Performance Management", "paragraphs": ["An effective performance management system can be a strategic tool to  improve employee engagement and achieve an agency\u2019s desired results.  We found that selected agencies demonstrated some similar practices.  This may have been a contributing factor in having relatively high scores  on FEVS performance management related statements. Specifically,  employees at the Bureau of Labor Statistics (BLS), the Centers for  Disease Control and Prevention (CDC), the Drug Enforcement  Administration (DEA), and the Office of the Comptroller of the Currency  (OCC) consistently agreed or strongly agreed to selected FEVS  statements related to the five phases of OPM\u2019s performance  management cycle. While these agencies developed different  performance management systems to reflect their specific structures and  priorities, we found a number of practices common to all four agencies  that are intended to help reinforce effective employee performance  management and improve agency performance (see figure 12). All four  agencies agreed that these practices helped contribute to their  employees\u2019 responses to the selected FEVS statements and improved  performance management."], "subsections": [{"section_title": "Strong Organizational Culture and Dedication to Agency Mission", "paragraphs": ["We have previously reported that organizations with more constructive  cultures generally perform better and are more effective. Within  constructive cultures, employees exhibit a stronger commitment to  mission focus, accountability, coordination, and adaptability. According  to OPM FEVS guidance, climate assessments like FEVS are,  consequently, important to organizational improvement largely because of  the key role culture plays in directing organizational performance. Each of  the agencies in our review cited a strong organizational culture that was  based on and tied to their agency\u2019s mission. Table 2 highlights examples  from CDC and DEA."], "subsections": []}, {"section_title": "Data Driven Using FEVS and Other Survey Data", "paragraphs": ["Each of the four selected agencies in our review demonstrated a focus on  analyzing FEVS data to identify areas of improvement and create action  plans around the analysis. According to OPM guidance on FEVS, the  results from the survey can be used by agency leaders to assist in  identifying areas in need of improvement as well as highlight important  agency successes. FEVS findings allow agencies to assess trends by  comparing earlier results with the 2017 results to (1) compare agency  results with the government-wide results, (2) identify current strengths  and challenges, and (3) focus on short- and long-term action targets that  will help agencies reach their strategic human resource management  goals. The recommended approach to assessing and driving change in  agencies utilizes FEVS results in conjunction with other resources, such  as results from other internal surveys, administrative data, focus groups,  exit interviews, and so on. We have previously reported that for  agencies to attain the ultimate goal of improving organizational  performance, they must take a holistic approach\u2014analyzing data,  developing and implementing strategies to improve engagement, and  linking their efforts to improved performance.", "We have also previously reported that OPM stated that agencies are  increasingly using FEVS as a management tool to help them understand  issues at all levels of an organization, and to take specific action to  improve employee engagement and performance. Further, OPM officials  noted that if agencies, managers, and supervisors know that their  employees will have the opportunity to provide feedback each year, they  are more likely to take responsibility for influencing positive change. We  found that all four of the selected agencies were building a culture of  analyzing their FEVS results to identify areas of improvement, and  develop action plans to achieve results, including improving performance  management (see table 3).", "In addition, three of the four selected agencies also used other practices.  These practices include using other available survey results to  corroborate identified action plans and identify additional areas needing  support to create a more complete picture of the employee perspective.  We have previously reported that an agency\u2019s FEVS scores should be  used as one of several data sources as leaders attempt to develop a  comprehensive picture of engagement within an organization, and better  target their engagement efforts, particularly in times of limited  resources. The key is identifying what practices to implement and how  to implement them. This can and should come from multiple sources.  Three of four of the case study agencies\u2014BLS, CDC, and DEA\u2014use  supplemental survey data to help focus agency efforts to improve  performance management. For example, DEA developed its own internal  survey\u2014Leadership Engagement Survey\u2014in 2016 because it identified  leadership as a key driver for organizational climate and employee  engagement. According to agency officials, there was a strong internal  push to use the survey results to identify areas of improvement. The  fourth agency, OCC, had administered a separate internal engagement  survey from 2013 to 2016. According to agency officials, however, they  discontinued this effort to focus exclusively on FEVS as the primary  survey data source, and to reduce the redundancy of two surveys.  However, OCC emphasized the need to consider FEVS data as only one  source of data, at a point in time, and to use a diversity of other data  (quantitative and qualitative) to inform the survey results."], "subsections": []}, {"section_title": "Focus on Training", "paragraphs": ["As we have previously reported, agencies invest significant time and  resources in recruiting potential employees, training them, and providing  them with institutional knowledge that may not be easily or cost-effectively  replaceable. Therefore, effective performance management\u2013which  consists of activities such as expectation-setting, coaching, and  feedback\u2014can help sustain and improve employee performance  management. We have also reported that good supervisors are key to the  success of any performance management system. Supervisors provide  the day-to-day performance management activities that can help sustain  and improve the performance of more talented staff, and can help  marginal performers to become better. However, agencies may not be  providing supervisors with the appropriate training that prepares them for  success, such as having difficult performance management  conversations. Moreover, we have previously reported that mission- critical skills gaps across the federal government pose a high risk  because they impede the government from cost effectively serving the  public and achieving results. Strategies to address these gaps include training and development activities focused on improving employees\u2019  skills needed for mission success.", "All four selected agencies had taken steps in identifying appropriate  training for not only supervisors, but also all employees. For example,  BLS conducted a general training needs assessment (TNA) for all  employees in 2016. The officials stated that the purpose of the TNA was  to give employees an avenue to express their interests in various kinds of  training. Employee responses were used to inform elements of the BLS  training plan for fiscal year 2017. As a result of the TNA, BLS is  conducting a training evaluation of its vendor-provided writing courses.  During this evaluation, BLS hopes to determine if the techniques and  material taught in these courses have actually resulted in expected  improvements in the writing of those employees who have taken the  course as observed by their supervisors and managers. TNA results  showed that managers also expressed a strong interest in additional  training on employee leave, labor relations, and employee relations. BLS  officials stated that courses on these topics were provided as part of the  agency\u2019s fiscal year 2017 training plan.", "As another example, CDC recently developed two onboarding checklists  for new executives in 2017 for training purposes. The intent was to  provide a comprehensive, consistent onboarding experience so that new  executives are more engaged and knowledgeable. In addition, within the  last year, the agency developed a mentoring circle for new supervisors  that meets monthly. The purpose of the circle is to provide new  supervisors with insider help from their peers, such as how to handle  difficult situations. Supervisors are also provided assistance through the  agency\u2019s performance management appraisal working group. This group  meets quarterly to discuss how to better assist supervisors and  employees with performance management related questions."], "subsections": []}, {"section_title": "Improved Internal Communication from Agency Management", "paragraphs": ["We have previously reported that successful organizations empower and  involve their employees to gain insights about operations from a frontline  perspective, increase their understanding and acceptance of  organizational goals and objectives, and improve motivation and  morale. We have also previously reported that what matters most in  improving engagement levels is valuing employees\u2014that is, an authentic  focus on their performance, career development, and inclusion and  involvement in decisions affecting their work.", "Each of the selected agencies in our review stated that they had made  efforts over the last few years to improve internal communication between  management and employees, as well as increase the transparency of  actions taken and decisions made by management. For instance, BLS  hosts quarterly breakfast sessions with the BLS Commissioner in which  employees have access to agency leadership where they can offer  suggestions or feedback. BLS also provides agency information through  its intranet website, which is updated almost daily. Examples include  features such as the BLS Daily Report, What\u2019s Up at BLS, and BLS  tweets. Specifically, the What\u2019s Up at BLS feature of the BLS intranet is  an internal communications hub that includes four sections, including  \u201cEmployee and Team Spotlight\u201d\u2014highlighting the work of employees and  teams across the agency\u2014and \u201cChanging Lanes,\u201d which features stories  about employees who decided to switch their career paths by changing  occupations or programs within BLS.", "According to OCC officials, the agency has increased the frequency of  agency-wide communications and those from middle management that  cascade priorities, decisions, and organizational changes to employees.  OCC has also executed enterprise change management to manage the  people side of change, including building awareness, knowledge, and  ability through stakeholder analysis and communications planning. It also  maintains an engagement portal for teams to document action plans  related to employee engagement\u2014of which there are more than 200  action items related to improved communications using a top-down and  two-way approach."], "subsections": []}, {"section_title": "OPM Provides Performance Management Resources to Agencies, but Some Information is Not Easily Accessible or Routinely Shared OPM Provides Performance Management Resources for Agencies on Its Website but Some Information is Not Easily Accessible or Regularly Updated", "paragraphs": ["As the government\u2019s chief human resources agency and personnel policy  leader, OPM\u2019s role in the federal government is to, among other things,  design and promulgate regulations, policy, and guidance covering all  aspects of the employee life cycle from hire to retire, including  performance management. OPM provides such performance  management guidance and resources to agencies on its website, as  shown in figure 13, as well as in a new Performance Management Portal  (portal) accessible through the Office of Management and Budget\u2019s  (OMB) MAX Information System (MAX).", "Examples of guidance and resources include information for the five  phases of the performance management cycle, descriptions on the how  to write performance standards, critical components of effective and  timely feedback, answers to performance management frequently asked  questions, and a list of the various award programs open to employees  from all federal agencies. In addition, the Chief Human Capital Officers  (CHCO) Council\u2019s website includes information provided by OPM on  performance management as well as various OPM memorandums to  CHCOs, human resource directors, and agency leaders.", "According to OPM officials, information on the performance management  website is reserved for policy guidance based on current and applicable  law and regulation. As such, only minor updates have been made to the  website because the law and regulatory requirements for performance  management have not recently changed. However, there is no date  included on the website that indicates when it was last updated. OPM  officials stated that the last update made to the website was in June 2016  when an external entity requested that a public service award be added to  OPM\u2019s awards list page.", "However, OPM has issued training, guidance, and other performance  management related resources since the last website update in June  2016. Specifically, we examined more than 100 performance  management related online links on both OPM\u2019s and the CHCO Council\u2019s  websites, and found that in some instances, the CHCO Council\u2019s website  included more up-to-date information issued by OPM that was not found  on OPM\u2019s performance management website. Some examples include:", "The release of OPM\u2019s web-based training course, \u201cBasic Employee  Relations: Your Accountability as a Supervisor or Manager,\u201d dated  October 12, 2016;", "Management Tools for Maximizing Employee Performance, dated  January 11, 2017;", "Performance Management Guidance and Successful Practices in  Support of Agency Plans for Maximizing Employee Performance,  dated July 17, 2017;", "The release of OPM\u2019s web-based training course, \u201cPerformance  Management Plus\u2014Engaging for Success,\u201d dated October 6, 2017;", "Federal Supervisory Training Program Survey Results, dated May 21,", "Guidance for Implementation of Executive Order 13839 - Promoting  Accountability and Streamlining Removal Procedures Consistent with  Merit System Principles, dated July 5, 2018.", "According to OPM officials, the agency does not coordinate with the  CHCO Council on its website postings. However, OPM officials stated  that performance management guidance approved by OPM is provided to  the CHCO Council. We did not find any reference to the CHCO Council\u2019s  website using OPM\u2019s internal search engine with the term \u201cperformance  management\u201d (see figure 14). As a result, agency officials and federal  employees who are looking for comprehensive information on  performance management using OPM\u2019s website may be unable to easily  find or access related performance management guidance or resources.", "A 2016 Office of Management and Budget memorandum on federal  agency public websites and digital services states that federal agency  public websites and digital services are the primary means by which the  public receives information from and interacts with the federal  government, provides government information or services to a specific  user group across a variety of delivery platform and devices, and  supports the proper performance of an agency function. The  memorandum states that, \u201cFederal websites and digital services should  provide quality information that is readily accessible to all.\u201d In addition,  federal internal control standards state that management should use  quality information to achieve the entity\u2019s objective. Quality information  should be appropriate, current, complete, accurate, accessible, and  timely. However, OPM does not have a process for regularly updating  its performance management website with new guidance and resources  to ensure that the information is readily available. Agency employees,  such as human capital specialists, who visit OPM\u2019s performance  management website may be unable to find or access the most recent  guidance and training available.", "In addition to its website, OPM officials stated that the agency recently  launched the Performance Management Portal (portal) in September  2017 on OMB MAX to communicate with agencies and provide  information and resources related to non-SES performance management,  as highlighted earlier. OPM officials said that the portal will be updated  with information regarding announcements or updated guidance as  needed, or when it is released and becomes available.", "Although not as comprehensive as the information included on OPM\u2019s  performance management website, the portal included slides from OPM\u2019s  semiannual facilitated performance management forums and updated  information on awards guidance for non-SES employees for fiscal year  2017\u2014neither of which were on OPM\u2019s website. As the government\u2019s  chief human resources agency, agencies may see OPM as their primary  source of performance management guidance. By establishing a process  to ensure that information on the performance management website is regularly updated to include the most recent guidance, agencies would  have access to the most current information."], "subsections": []}, {"section_title": "OPM Could Better Lead Efforts to Identify and Share Emerging Performance Management Research and Innovation", "paragraphs": ["OPM provides opportunities for agencies to share promising practices.  For example, OPM has several efforts in place that allow agencies to  share promising information with each other such as at its semiannual  Performance Management Forums (forums), annual Performance  Management Steering Committee meetings, and through the previously  mentioned portal. According to OPM, the forums provide agencies with  updated information, guidance, and support to encourage performance  excellence amongst employees.", "In 2017, OPM began holding annual steering committee meetings which  allow interagency representatives to discuss the needs of the federal  performance management community, to identify and/or request potential  content for future forums, and to share promising practices and lessons  learned regarding performance management, according to OPM officials.  However, there is no formal process in place or mechanism for agencies  to routinely and independently share their own experiences and lessons  learned in implementing performance management efforts. For instance,  the portal does not currently allow for agencies to post and share their  own promising practices with each other in a centralized location. Instead,  agencies must rely on OPM to post such information on the portal. OPM  officials stated that, although permission to view the portal is granted to all  users in the executive branch with a MAX account, OPM is the only  agency that has permission to make edits to the portal. OPM officials said  they are exploring options to allow for an interactive experience with other  agencies. Federal internal control standards state that management  should externally communicate the necessary quality information to  achieve the entity\u2019s objective. Additionally, our prior work on  collaboration practices has shown that agencies can enhance and sustain  collaborative efforts, and identify and address needs by leveraging  resources, such as through sharing information. Establishing a  mechanism to allow agencies to routinely share promising practices and  lessons learned from their experiences could assist agencies that are  undertaking or considering similar efforts and help inform agencies\u2019  decision-making related to performance management.", "In addition to driving modernization, OPM identified innovation as one of  its five values in its most recent strategic plan for fiscal years 2018  through 2022. Specifically, OPM stated that the agency \u201cconstantly  seeks new ways to accomplish its work and generate extraordinary  results. OPM is dedicated to delivering creative and forward-looking  solutions and advancing the modernization of human resources  management.\u201d OPM officials stated that innovation was included as one  of OPM\u2019s values because the agency seeks to embrace forward-leaning  policies and practices within all aspects of human capital management.", "While OPM officials told us that they maintain a constant scan of the  environment to identify and follow promising practices\u2014which could  include innovative concepts\u2014in the private sector and other sources to  include performance management and performance management  systems, they did not specifically identify which promising practices they  incorporated into guidance or training. In addition, when we asked OPM  to identify innovative performance management practices based on its  own research, officials provided us with articles from leading experts that  focused on eliminating performance ratings, using a growth mindset  concept, and the SCARF model\u2014status, certainty, autonomy,  relatedness, and fairness\u2014for collaborating with and influencing others.  They also provided references and their notes on new performance  management system programs at three corporations. OPM officials said  they have not placed these articles, references, or notes on their  performance management website or shared them with agencies, and  have no plans to do so at this time.", "Instead, OPM officials stated they were monitoring the progress of these  new practices to assess if the methods were effective in maximizing  employee and organizational outcomes, in addition to stimulating  collaboration and innovation. However, OPM provided no criteria in use to  determine when the results would be considered effective or when they  could be shared with agencies. Without OPM sharing their research  results, agencies may be unaware of current practices in the performance  management field because they may not be conducting their own  research. Including innovation as an agency value is not sufficient to  change an organization\u2019s culture for it to become innovative; it is  necessary to also introduce, for example, a strategy to identify and  address emerging research and promising practices in performance  management. Such a strategic approach could include criteria that  identify what research results to share with agencies, when to share  them, and by which process (for example, by website). It would also  enable OPM to increase transparency and consistency in identifying  emerging innovations.", "One of our case study agencies told us that in the absence of OPM  providing research results, the agency used its own resources to research  and identify leading practices in the private sector that could potentially  apply to their own performance management system, such as focusing on  ongoing performance conversations and recognition to increase  engagement and performance, while reducing burdensome administrative  requirements that do not add value. Officials at this agency stated that  OPM\u2019s guidance was not modernized to the extent that the human capital  and performance management industry was changing. Without OPM  taking the lead to share emerging and innovative research, agencies, and  therefore their employees, may not benefit from the best information  available.", "Although OPM identified innovation as one of its five values, we were  unable to find any recent information on innovation for performance  management in the government on OPM\u2019s website. Specifically, we used  \u201cinnovation performance management\u201d as a search term on the website  and found the \u201cPromoting Innovation in Government\u201d web page, which  included archived material and was no longer being updated (see figure  15). As a result, agencies that use OPM\u2019s website as a source of  performance management guidance would be unable to find any current  resources on performance management innovation. OPM officials  explained that older material is archived based on the current leadership\u2019s  vision. The officials also confirmed that OPM did not have other active  websites that contained innovative performance management practices  gathered from external sources, which could be shared with other federal  agencies. Implementing a strategic approach to sharing innovation in  performance management would then allow OPM to provide relevant and  updated information that agencies could use to modernize their  performance management systems."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Managing employee performance has been a long-standing government- wide issue. As the current administration moves to reform the federal  government to become leaner, accountable, and efficient, an effective  performance management system is necessary to increase productivity,  sustain transformation, and foster a culture of engagement that enables  high performance. Federal agencies have a primary responsibility for  managing their employees\u2019 performance, but OPM maintains a key role in  developing and overseeing human resources programs and policies that  support the needs of federal agencies. As the government\u2019s chief human  resources agency and personnel policy leader, OPM is responsible for  designing and promulgating regulations, policy, and guidance covering all  aspects of the employee life cycle, including performance management.  While OPM provides performance management resources on its website,  some information is not regularly updated and can be challenging to find.  Establishing a process to provide agencies with current, accurate, and  easy access to guidance and resources would provide them with the most  recent guidance and resources available.", "To be at the forefront of innovation, OPM must consistently challenge  traditional performance management practices, and identify opportunities  to present and promote new and creative solutions to agencies. Although  OPM has identified potential innovative and promising practices for  performance management through its own research, OPM has not  actively shared these practices with agencies. In addition, agencies do  not have access to a common forum by which they could routinely and  independently share their own promising practices and lessons learned to  avoid common pitfalls. In times of limited resources, developing a  strategic approach to identify and share emerging research and  innovations in performance management would help agencies inform  and, as needed, reform their performance management approaches. As a  result, federal employees may have more opportunities to maximize their  performance."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to OPM.  Specifically:  1.  The Director of OPM, in consultation with the CHCO Council, should  establish and implement a process for regularly updating the  performance management website to include all available guidance  and resources, making this information easily accessible, and  providing links to other related websites. (Recommendation 1)  2.  The Director of OPM, in consultation with the CHCO Council, should  develop and implement a mechanism for agencies to routinely and  independently share promising practices and lessons learned, such  as through allowing agencies to post such information on OPM\u2019s  Performance Management portal. (Recommendation 2)  3.  The Director of OPM, in consultation with the CHCO Council, should  develop a strategic approach for identifying and sharing emerging  research and innovations in performance management.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretaries of the Departments of  Health and Human Services (Centers for Disease Control and  Prevention), Labor (Bureau of Labor Statistics), and Treasury (Office of  the Comptroller of the Currency), the Acting Attorney General (Drug  Enforcement Administration) and the Acting Director of OPM. In its written  comments, reproduced in appendix II, OPM agreed with our findings and  concurred with our recommendations. It added that it would establish and  implement a process for regularly updating its performance management  website, among other things. OPM and the Departments of Health and  Human Services, Labor, and Treasury also provided technical comments  that we incorporated, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of the Departments of Health and Human  Services, the Department of Labor, the Department of the Treasury, the  Acting Attorney General, the Acting Director of OPM, 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) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes federal employee perceptions of performance  management as measured by the results of selected statements from the  Office of Personnel Management\u2019s (OPM) annual survey of federal  employees, the Federal Employment Viewpoint Survey (FEVS); (2)  identifies practices that selected agencies use to develop and implement  strategies to improve performance management; and (3) evaluates  OPM\u2019s guidance and resources to support agency efforts to improve  performance management government-wide.", "FEVS provides a snapshot of employees\u2019 perceptions about how  effectively agencies manage their workforce. Topic areas are employees\u2019  (1) work experience, (2) work unit, (3) agency, (4) supervisor, (5)  leadership, (6) satisfaction, (7) work-life, and (8) demographics. OPM has  administered FEVS annually since 2010. From 2002 to 2010, OPM  administered the survey biennially. FEVS includes a core set of  statements. Agencies have the option of adding questions to the surveys  sent to their employees. FEVS is based on a sample of full- and part-time,  permanent, non-seasonal employees of departments and large, small,  and independent agencies. According to OPM, the sample is designed to  ensure representative survey results would be reported by agency,  subagency, and senior leader status as well as for the overall federal  workforce. Once the necessary sample size is determined for an agency,  if more than 75 percent of the workforce would be sampled, OPM  conducts a full census of all permanent, nonseasonal employees.", "To describe government-wide trends in employee perceptions of  performance management, we selected 15 FEVS statements that  generally align with OPM\u2019s five phases of performance management  cycle: (1) planning and setting expectations; (2) continually monitoring  performance; (3) developing the capacity to perform; (4) rating  periodically to summarize performance; and (5) rewarding good  performance (see table 4). We used indexes such as the Employee  Engagement Index, the Human Capital Assessment and Accountability  Framework Results-Oriented Performance Culture Index, and the Public  Partnership for Public Service\u2019s Best Places to Work categories to help  guide our selection process of three FEVS statements per OPM  performance management phase. We did not look at how surveyed  employees responded to the statements when considering which ones to  select. Upon selection of our statements, we consulted with our internal  human capital (HC) experts as well as external HC experts at OPM and  the Merit Systems Protection Board to determine the appropriateness of  our FEVS statement selection and categorization. They generally agreed  that these statements aligned with the phases. However, FEVS was not  designed to measure performance management and, although these  statements all provide useful insights, they do not necessarily represent  all key aspects of performance management.", "In addition, we analyzed the 15 FEVS performance management-related  questions by supervisory status for the 24 Chief Financial Officers Act  (CFO Act) departments and agencies for the years 2010 through 2017.  We conducted this analysis because our prior work had shown that  supervisory status was the employee population variable that displayed  the greatest degree of difference in responses between the categories of  respondents in it. For this report, we did not analyze the extent of  differences in responses in the performance management questions by  other employee population groups, such as age or gender, because that  was outside the scope of our engagement. We examined the results for  the 15 FEVS questions by supervisory groups, and report the 4 that had  the greatest degree of differences by supervisory levels. All of these 4  had differences of at least 28 percentage points between the most and  least favorable categories of respondents while the remaining 11 had  differences in the range of 2 to 25 percentage points between the views  of senior leaders and nonsupervisory employees.", "We calculated the average percent of employees who agreed or strongly  agreed with the three statements comprising the phase for those who  answered all three statements to identify trends. Survey respondents who  did not answer one or more of the phase statements were not included.  Because OPM followed a probability procedure based on random  selections for most agencies, the FEVS sample is only one of a large  number of samples that could have been drawn. Since each sample  could have provided different estimates, we express our confidence in the  precision of the FEVS statement estimates using the margin of error at  the 95 percent level of confidence. This margin of error is the half-width of  the 95 percent confidence interval for a FEVS estimate. A 95 percent  confidence interval is the interval that would contain the actual population  value for 95 percent of the samples that OPM could have been drawn.", "To assess the reliability of the FEVS data, in addition to assessing the  sampling error associated with the estimates we examined descriptive  summary statistics and the distribution of both the survey data and the  human capital framework indexes, and assessed the extent of item- missing data. We also reviewed FEVS technical documentation. On the  basis of these procedures, we believe the data were sufficiently reliable  for use in the analysis presented in this report.", "To identify practices used by selected agencies to develop and implement  strategies to improve performance management, we complemented our  government-wide analysis with an additional analysis of agencies (those  agencies and units within 1 of the 24 CFO Act departments). Specifically,  we analyzed agency results for the same 15 statements in 2015 (the most  recent data available at the time) to select a nongeneralizable sample of  four agencies to obtain illustrative examples of how they approached  performance management and their strategies to improve performance  within their agencies. We calculated averages for the agencies based on  their scores for our selected statements, and rank ordered them based on  these averages. Among other attributes, these agencies had the highest  levels of employee agreement with FEVS statements dealing with their  performance management processes.", "We selected agencies that had the highest average scores for the  performance management phases. In addition to the FEVS data, we also  used secondary factors such as the number of respondents, agency size,  mission, and types of employees to identify the following agencies: (1)  Bureau of Labor Statistics, Department of Labor; (2) Centers for Disease  Control and Prevention, Department of Health and Human Services; (3)  Drug Enforcement Administration, Department of Justice; and the (4)  Office of the Comptroller of the Currency, Department of the Treasury.  We developed a set of standard questions that asked about agency  strategies to improve performance management and relevant successes,  which we administered to human resources/human capital officials and  other officials responsible for performance management at the agencies.  We reviewed and analyzed the responses the agencies provided, and  identified and reported examples of practices that all four described,  which are intended to improve performance management. We also asked  agencies about the types of guidance and resources they obtained from  OPM. The four common practices we identified do not represent the only  practices these agencies employ to improve performance management at  their agency. In addition, the practices are not intended to be  representative of all those employed by all other federal agencies.", "To evaluate the guidance and resources OPM provides to agencies to  improve performance management government-wide, we reviewed both  OPM\u2019s performance management website and the Chief Human Capital  Officers (CHCO) Council\u2019s website to identify available guidance,  resources, and tools. We compared these documents to OMB\u2019s  memorandum on federal agency public websites, OPM\u2019s strategic plan for  fiscal years 2018 through 2022, and internal controls. We observed the  Performance Management Portal, hosted on OMB\u2019s MAX website, in July  2018 with an OPM official as we did not have access to the portal. We  also reviewed agency documentation and other OPM-referenced  websites that contained performance management-related information.  We used OPM\u2019s internal site search engines and search terms, such as  \u201cperformance management\u201d and \u201cperformance management innovation,\u201d  to identify relevant guidance. During the course of our review, we  compared performance management guidance posted on the OPM and  CHCO websites as well as the portal, and identified discrepancies  between what we found on the respective websites. We discussed the  discrepancies with OPM officials and included their responses within the  report. To supplement the documentary evidence obtained, we also  interviewed officials from OPM, the CHCO Council, and selected case  study agencies to describe the extent to which OPM assists agencies on  performance management.", "We conducted this performance audit from December 2016 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Thomas Gilbert, Assistant  Director; Dewi Djunaidy, Analyst-in-Charge; Jehan Chase; Martin  DeAlteriis; Krista Loose; and Susan Sato made major contributions to this  report. Also contributing to this report were Carl Barden; Won Lee; Robert  Robinson; and Stewart Small."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Federal Employee Misconduct: Actions Needed to Ensure Agencies Have  Tools to Effectively Address Misconduct. GAO-18-48. Washington, D.C.:  July 16, 2018.", "Federal Workforce: Distribution of Performance Ratings Across the  Federal Government, 2013. GAO-16-520R. Washington, D.C.: May 9,  2016.", "Federal Workforce: Additional Analysis and Sharing of Promising  Practices Could Improve Employee Engagement and Performance.  GAO-15-585. Washington, D.C.: July 14, 2015.", "Federal Workforce: Improved Supervision and Better Use of Probationary  Periods Are Needed to Address Substandard Employee Performance.  GAO-15-191. Washington, D.C.: February 6, 2015.", "Results-Oriented Management: OPM Needs to Do More to Ensure  Meaningful Distinctions Are Made in SES Ratings and Performance  Awards. GAO-15-189. Washington, D.C.: January 22, 2015.", "Federal Workforce: OPM and Agencies Need to Strengthen Efforts to  Identify and Close Mission-Critical Skills Gaps. GAO-15-223. Washington,  D.C.: January 30, 2015.", "Federal Workforce: Human Capital Management Challenges and the  Path to Reform. GAO-14-723T. Washington, D.C.: July 15, 2014.", "Office of Personnel Management: Agency Needs to Improve Outcome  Measures to Demonstrate the Value of Its Innovation Lab. GAO-14-306.  Washington, D.C.: March 31, 2014.", "Federal Employees: Opportunities Exist to Strengthen Performance  Management Pilot. GAO-13-755. Washington, D.C.: September 12, 2013.", "Results-Oriented Cultures: Creating a Clear Linkage between Individual  Performance and Organizational Success. GAO-03-488. Washington,  D.C.: March 14, 2003."], "subsections": []}], "fastfact": ["Agencies need effective performance management systems to hold employees accountable for results and achieve their missions. Although the Office of Personnel Management\u2014the government\u2019s central human resources agency\u2014has identified potentially innovative performance management practices, it needs to do a better job of sharing them with agencies.", "We recommended, among other things, steps OPM should take to make this information more accessible."]}
{"id": "GAO-18-658", "url": "https://www.gao.gov/products/GAO-18-658", "title": "VA Health Care: Pharmacy Inventory Management Could Benefit from System-Wide Oversight", "published_date": "2018-09-27T00:00:00", "released_date": "2018-09-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA provides health care services, including pharmacy services, to approximately 9 million veterans each year. Since 2000, VAMCs have faced recurring challenges in managing their pharmacy inventories, including difficulties with accurately accounting for and updating inventory totals through their pharmacy systems.", "GAO was asked to review VA pharmacy inventory management. This report (1) describes approaches selected VAMCs use to manage their pharmacy inventories and (2) assesses the extent to which VA oversees VAMCs' efforts to manage their pharmacy inventories.", "To conduct this work, GAO visited a non-generalizable selection of five VAMCs chosen for the complexity of services offered and variation in location. GAO also reviewed VA national policies and local polices for the selected VAMCs and interviewed VA officials at the headquarters, regional, and local levels. GAO assessed VA's oversight of pharmacy management in the context of federal internal control standards."]}, {"section_title": "What GAO Found", "paragraphs": ["Selected Department of Veterans Affairs' (VA) medical centers (VAMC) use generally similar approaches for managing their pharmacy inventories. For example, all VAMCs store certain medications in secured areas. However, GAO found that VAMCs have also taken unique approaches for procuring and tracking medications, as allowed under VA policy. For example, to better address medication shortages, one VAMC pharmacy GAO visited established a shortage committee that meets on a weekly basis. Another VAMC pharmacy uses an automated dispensing machine together with compatible software that allows the pharmacy to track the location of most inpatient medications in real-time (see figure).", "GAO also found that VA's oversight of VAMCs' pharmacy inventory management is limited as VA lacks a comprehensive inventory management system or a focal point for system-wide oversight. In May 2018, VA signed a contract for a new electronic health records system that should allow VA to monitor VAMCs' inventories; however, VA officials expect implementation of this system to take up to 10 years. Based on a review of VA policies and interviews with VA officials, GAO found that VA has not designated a focal point with defined responsibilities for system-wide oversight of VAMCs' pharmacy inventory management. This is inconsistent with federal internal control standards for monitoring and establishing structure and authority to achieve an entity's objectives. Without a focal point for system-wide oversight, VA has limited awareness of the unique approaches that VAMCs use to manage their inventories and is missing an opportunity to evaluate these approaches. Additionally, VA cannot effectively share and standardize inventory management best practices as appropriate. Having a focal point is especially important given that VAMCs have historically had challenges in managing their inventories and a comprehensive pharmacy inventory management system may not be available for the foreseeable future."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that VA designate a focal point for overseeing VAMCs' pharmacy inventory management efforts system-wide and define the focal point's responsibilities. VA concurred in principle with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) provides health care services,  including pharmacy services, to approximately 9 million veterans each  year. Veterans can receive a range of services at the approximately 170  VA medical centers (VAMC) throughout the nation, including traditional  hospital-based services such as surgery, critical care, and mental health  care. As a significant part of delivering health care to veterans, VAMCs  also provide medications, prescription refills, and other pharmacy  services. These VAMCs are generally responsible for managing their  own pharmacy inventories\u2014that is, for procuring, storing, tracking, and  dispensing medications to veterans.", "Managing pharmacy inventories effectively to provide pharmacy services  to veterans can be challenging. In 2000, a VA Office of Inspector General  (OIG) audit found that VAMC pharmacies carried excess inventory due to  a reliance on informal inventory methods and identified the need for  VAMCs to use modern inventory techniques and automated pharmacy  inventory management systems. Subsequent OIG and GAO reports  have identified some of the technological challenges VA faces in  overseeing its VAMC pharmacies. For example, a 2009 VA OIG report  found that VA could not accurately account for the medications at VAMC  pharmacies because VA lacked reliable information to do so. Similarly, in  2017 we reported that VA does not have the systems that would allow it  to keep a perpetual inventory and monitor VAMC pharmacy inventory  levels in real time. These reports have raised broader concerns about  how VA oversees its VAMCs\u2019 pharmacies.", "You asked us to review the management and oversight of VAMC  pharmacy inventories. In this report, we describe how selected VAMCs manage their pharmacy inventories; assess the extent to which VA oversees VAMCs\u2019 efforts to manage  their pharmacy inventories.", "To describe how selected VAMCs manage their pharmacy inventories,  we identified their approaches for procuring, storing, tracking, dispensing,  and disposing of medications, the main process that all pharmacies  generally use to manage their pharmacy inventories. Our review focused  on pharmacy inventory of all medications\u2014including controlled and non- controlled substances\u2014dispensed within the VAMCs\u2019 inpatient wards or  at their outpatient pharmacies. Our review focused on VAMCs\u2019  management of their inpatient and outpatient pharmacy inventories; as  such we did not review pharmacy inventory management at the  consolidated mail outpatient pharmacies. We conducted site visits at a  non-generalizable sample of five VAMCs that we selected based on  diversity in geographic regions, differences in facility complexity, and  variation in pharmacy operations efficiency determined by comparing  expected and observed pharmacy expenditures by VAMC for fiscal year  2016. Although VA officials identified limitations in the pharmacy  expenditures data, we found that the data were sufficiently reliable to use  as one criterion for selecting VAMCs to visit. The five VAMCs we visited  are located in Cheyenne, Wyoming; Danville, Illinois; Philadelphia,  Pennsylvania; Richmond, Virginia; and San Francisco, California. At each  of these five VAMCs, we toured inpatient and outpatient pharmacy  operations and conducted semi-structured interviews with VAMC officials  and staff responsible for managing pharmacy inventory\u2014including VAMC  Executives, the Chief and Associate Chief of Pharmacy Services,  pharmacy staff, and nursing staff. We also observed the information  technology (IT) systems and automated medication dispensing machines  and software that each VAMC uses to manage pharmacy inventory. In  addition, we reviewed relevant national VA and local VAMC policies and  guidance for managing pharmacy inventory.", "To examine the extent to which VA oversees VAMCs\u2019 efforts to manage  their pharmacy inventories, we assessed the extent to which VA Central  Office (VACO) and the Veterans Integrated Service Networks (VISN)  oversee the five selected VAMCs\u2019 management of pharmacy inventory.  The VISNs report to VACO and are responsible for managing and  overseeing VAMCs within their geographic area. To conduct our work, we  reviewed VA policies, procedures, and guidance pertaining to the  management and oversight of pharmacy inventory to determine the  extent of VACO\u2019s and the VISNs\u2019 oversight responsibilities. This included  a review of meeting minutes from regularly scheduled calls between  VACO and VISN officials. We also interviewed VACO officials from the  Pharmacy Benefits Management Service (PBM), the National Acquisition  Center (NAC), and the Office of Information and Technology (OIT) to  determine their roles in overseeing VAMC pharmacy inventory. In  addition, we interviewed the five VISN Pharmacy Executives (VPE)  responsible for assisting the selected VAMCs with pharmacy-related  tasks. We examined VA\u2019s oversight in the context of federal standards for  internal controls related to establishing structure and authority to achieve  the entity\u2019s objectives and internal controls related to monitoring. To  better understand other integrated health systems\u2019 best practices for  managing pharmacy inventory, we also interviewed representatives from  the American Society of Health-System Pharmacists, the Mayo Clinic,  and the Cleveland Clinic. We also reviewed our previous work and the VA  OIG\u2019s work that is related to VAMC\u2019s pharmacy inventory management.", "We conducted this performance audit from September 2017 to  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "General Process for Managing Pharmacy Inventories in Hospital Settings", "paragraphs": ["In general, the process for managing inventories of medications at  VAMCs and non-VA pharmacies in hospital settings is similar. The steps  of the process are (1) procuring medications from vendors or other  suppliers, (2) receiving and storing medications, (3) tracking medications  to account for all items and prevent diversion, (4) dispensing medications  to patients, and (5) disposing of expired or wasted medications. Hospital  settings include both inpatient and outpatient pharmacies.", "Procurement. Pharmacies use a procurement process to order  medications for pharmacy inventory, which includes activities such as  medication selection, cost analysis, purchasing procedures, and record  keeping. As part of medication selection, pharmacies may use a  formulary, which is a list of medications that have been approved for  prescription within a hospital or health care system.", "A prime vendor or wholesaler is one of the most commonly used sources  to obtain medications for the pharmacy. Prime vendors order large  quantities of medications from manufacturers, allowing pharmacies to  purchase various products from many drug manufacturers at once.  Orders for products that are not carried by the prime vendor may need to  be ordered through another source, such as directly from the  manufacturer.", "Receipt and storage. When medications are delivered to the pharmacy,  staff are to take several steps to properly receive and store the shipment.  For example, to ensure there is segregation of duties, the person  responsible for ordering and purchasing the medications is supposed to  be different than the person receiving and stocking pharmacy inventory.  Additionally, any delivered products that require special storage  conditions, such as freezing or refrigeration, are to be checked in first to  maintain the stability of the medication.", "Tracking. Once in storage, pharmacies use a variety of tools to account  for the filling, dispensing, and removal of medications in both inpatient  and outpatient settings. Some pharmacies have software that allows them  to track inventory in real time, an ability known as maintaining perpetual  inventory. A perpetual inventory system is a method of recording the  quantity of a particular medication continuously as prescriptions are filled  and dispensed. After each prescription is filled and dispensed to the  patient, the amount of medication used for the prescription is removed  from the inventory to ensure the quantity on hand recorded by the  software is always current.", "Many medications have barcodes on their packaging to allow for easy  identification of the medication in a computer system. The barcode  generally includes the product\u2019s National Drug Code, which indicates the  name and package size of the medication. In the hospital setting,  medications can be scanned out of the pharmacy and into machines for  storage on hospital wards.", "Dispensing. In both inpatient wards and outpatient pharmacies,  automated dispensing machines and barcode technology can assist staff  in maintaining and dispensing medications to patients. Automated  dispensing machines generally include several drawers and cabinets that  have pockets or trays that hold preset levels of a variety of common  medications. They may also be used to hold controlled substances,  generally in locked boxes or cubes within the machine. On hospital wards  medication in automated dispensing machines is often packaged in unit  doses\u2014individually packaged medications for patient use. Barcodes can  help verify a prescription before nurses give medication to a patient.  Hospitals that do not have automatic dispensing machines use carts with  drawers filled with each patient\u2019s medication. Outpatient pharmacies use  automated dispensing machines to assist with filling prescriptions.  Depending on the type of automated dispensing machine, the capabilities  can include label printing, pill counting, pouring pills into prescription  bottles, and applying the label to the prescription bottle.", "Return or disposal. Medication waste and expired medications are to be  pulled from pharmacy inventory and either returned to a reverse  distributor or manufacturer for credit or, if not eligible for return, disposed  of by the pharmacy or sent to an outside company for destruction.  Reverse distributors charge a fee, which is generally a percentage of the  refund that is automatically deducted from the final refund amount.", "Figure 1 provides an overview of the steps of the pharmacy inventory  management process."], "subsections": []}, {"section_title": "VA Organizational Structure and Pharmacy Policies", "paragraphs": ["VA\u2019s health care system is organized into entities at the headquarters,  regional, and local levels. At the headquarters level, PBM is responsible  for supporting VISNs and VAMCs with a broad range of pharmacy  services, such as promoting appropriate drug therapy, ensuring  medication safety, providing clinical guidance to pharmacists and other  clinicians, and maintaining VA\u2019s formulary of medications and supplies  VAMCs use to deliver pharmacy benefits. VA\u2019s OIT is responsible for  providing technology services across the department, including the  development and management of all IT assets and resources. As such,  the office supports VA\u2019s health care system in planning for and acquiring  IT capabilities within VA\u2019s health care system network of hospitals,  outpatient facilities, and pharmacies. VA\u2019s NAC is responsible for  administering various health care-related acquisition and logistics  programs across VA.", "At the regional level, VAMCs are located in one of 18 VISNs. Each VISN  is responsible for overseeing VAMC pharmacies within a defined  geographic region. At the local level, there are approximately 170  VAMCs. Each VAMC is responsible for implementing VA\u2019s pharmacy  policies and programming.", "VA policy establishes parameters for VAMCs to follow when managing  their pharmacy inventories. These policies address various aspects of  pharmacy services, including inpatient and outpatient pharmacy services,  general pharmacy requirements, supply chain management, controlled  substances management, and the formulary management process. For  example, the Supply Chain Inventory Management directive states that all  VAMC pharmacies should use the prime vendor inventory management  software to calculate the amount of each inventory item they need to  reorder. However, the directive also states that there are additional  pharmacy inventory tools available to VAMC pharmacies and that each  pharmacy has the option to use its own automated inventory  management systems to generate orders for its prime vendor. VA policy  does not specify minimum quantities to order; instead, VAMC  procurement staff is authorized to use their expertise to determine the  appropriate quantity to order."], "subsections": []}]}, {"section_title": "Selected VAMCs Have Generally Similar Approaches for Managing Their Pharmacy Inventories, with Some Unique Approaches", "paragraphs": ["In general, all five of the selected VAMCs we reviewed take similar  approaches for the various steps included in the pharmacy inventory  management process\u2014that is, procuring medications from vendors or  other suppliers, receiving and storing these medications, tracking  medications at the pharmacy to account for all items and prevent  diversion, dispensing medications to patients, and disposing of expired  medications. (See fig. 2).", "We found that while the five selected VAMCs have similar approaches for  receiving and storing, dispensing, and disposing of medications, some  VAMCs have also taken unique approaches in implementing two steps of  the pharmacy inventory management process: procurement and tracking.  VA policy outlines parameters for VAMCs to manage their pharmacy  inventories, and VA officials told us that VAMC pharmacy staff can use  discretion to implement their own approaches for managing their  pharmacy inventories."], "subsections": [{"section_title": "Procurement", "paragraphs": ["All five of the selected VAMC pharmacies we reviewed use several  sources of information to inform future orders\u2014including past purchase  order history reports from VA\u2019s prime vendor, manual inventory counts by  pharmacy staff, and automated dispensing machine inventory  information. VA officials told us that all VAMCs also track procurement  spending and its impact on the VAMCs\u2019 budget and spending. However,  pharmacy officials at one of the selected VAMCs we visited told us they  use VA\u2019s health information system\u2014Veterans Health Information  Systems and Technology Architecture (VistA)\u2014and additional prime  vendor reports to identify specific information regarding 1) expiring  medications that may need to be re-purchased, 2) medications that  account for the top 80 percent of pharmacy costs, and 3) all medications  that are purchased daily. VAMC officials told us these reports help them  to better manage pharmacy inventory and track pharmacy spending.", "To better anticipate and address potential medication shortages, officials  at another selected VAMC pharmacy told us they established a shortage  committee that meets on a weekly basis. Established in September 2017,  the committee includes the Director of Pharmacy and other pharmacy  staff. Our review of meeting notes shows that the committee discusses  which medications could experience or are experiencing shortages and  how the VAMC could adjust to these shortages by, for example,  developing clinical and logistical solutions to help maintain optimal patient  care. According to the officials at the selected VAMC pharmacy, the  committee has been an effective resource to help manage pharmacy  inventory problems should they occur.", "Several VAMC officials also told us that the procurement technicians, who  are responsible for ordering pharmacy inventory, are very important  because they possess valuable institutional knowledge based on many  years of experience and training. However, VAMC officials told us the  salaries and potential career advancement opportunities for procurement  technicians can be limited, and the officials expressed concern that these  technicians could find better opportunities within the VAMC or with  external employers. To help retain procurement technicians, two of the  selected VAMC pharmacies we visited have created higher paying  procurement technician positions (General Schedule level 8   positions, instead of GS-6 or GS-7)."], "subsections": []}, {"section_title": "Tracking", "paragraphs": ["To better identify potential instances of diversion, two of the selected  VAMC pharmacies use enhanced analytics software on the automated  dispensing machines in their inpatient wards to track how frequently  controlled substances and other frequently utilized medications are  prescribed. For example, one of the pharmacies uses data from these  reports to identify how often individual staff members are accessing  automated dispensing machines. Additionally, officials at a third VAMC  recently deployed automated dispensing machines that are equipped with  an enhanced analytics program that can identify trends associated with  diversion. The remaining two VAMCs we visited do not have enhanced  analytic software that could help them to identify instances of potential  diversion.", "Across all 5 selected VAMCs, we observed several different IT systems  used to help manage non-controlled inpatient inventory. One of the  selected VAMC pharmacies uses a modular automated dispensing  machine together with inventory management software that maintains a  perpetual inventory for most non-controlled substances stored in its  inpatient pharmacy. (See fig. 3). According to officials, this software has  allowed the pharmacy to reduce waste and improve staff workflow, as  staff do not have to spend time tracking down inventory. None of the  other VAMC pharmacies we visited have the capability to track non- controlled substances in real time.", "Additionally, to more efficiently identify medication lot numbers during  recalls, one VAMC pharmacy we visited was in the process of  implementing a technology that allows pharmacy staff to scan a case of  medication with the same national drug code, lot number, and expiration  date and then print and attach a radio frequency identification tag to each  medication bottle. The tag allows for quick electronic identification of the  medication for disposal. Other selected VAMC pharmacies manually  identify recalled medications from inventory based on the name of the  medication and lot number."], "subsections": []}]}, {"section_title": "Oversight of Pharmacy Inventory Management Is Limited, as VA Lacks a Comprehensive Inventory Management System or a Focal Point for System-Wide Oversight", "paragraphs": ["VA does not yet have a VA-wide pharmacy inventory management  system in place that would allow it to monitor VAMC pharmacy inventory  in real time and provide better oversight of how VAMC pharmacies  manage their inventories. We found that VACO and the five VISNs we  reviewed provide some oversight related to VAMC pharmacy inventory  management. However, that oversight is limited, as no entity has been  assigned responsibility for overseeing system-wide performance of VAMC  pharmacies in managing their inventories."], "subsections": [{"section_title": "VA\u2019s Oversight of VAMCs\u2019 Pharmacy Inventory Management Is Limited, in Part Because VA Has Not Yet Implemented a Comprehensive Inventory Management System", "paragraphs": ["VA\u2019s oversight of VAMC pharmacy inventory management is limited in  part because VA currently lacks a comprehensive system that would  allow the department and its VAMCs to monitor pharmacy inventory in  real time. According to PBM officials, the lack of a VA-wide system makes  it difficult to oversee VAMC pharmacy inventory management, and PBM  has recognized the lack of such a system as a material weakness for  several years. PBM officials said that implementation of a VA-wide  pharmacy inventory management system would allow them to monitor  each VAMC\u2019s pharmacy inventory in real time, which would, in turn, allow  them to better manage inventory and help alleviate shortages at the  national level by facilitating transfers of inventory between VAMCs as  needed. Additionally, officials said that such a system would lead to better  planning and projections for purchasing decisions, allow PBM to track  medication expiration dates and lot numbers more effectively, and  improve VAMC staff response to medication recalls.", "Although VA has acknowledged the need for a VA-wide pharmacy  inventory management system, such a system may not be available for  the foreseeable future. PBM officials told us they have requested this  system since the early 2000s. However, despite the documented  technological challenges VA faces in overseeing its VAMC pharmacies,  changing IT priorities, funding challenges, and the narrowing of the scope  of a Pharmacy Re-engineering Project have prevented the system\u2019s  development. In 2017, we reported that VA\u2019s pharmacy systems could  not maintain a real-time inventory across the VAMCs, and we  recommended that VA assess the priority for establishing an inventory  management system capable of monitoring medication inventory levels  and indicating when medications needed to be reordered. VA concurred  with our recommendation. In June 2017, VA announced its intention to  replace VistA\u2014 VA\u2019s health information system\u2014with an off-the-shelf  electronic health record system. VA officials told us that the new system  will have the capability to monitor pharmacy inventory in real time across  VA. VA signed the contract for this new system in May 2018; however, full  implementation is expected to take up to 10 years. In the interim, VA  officials told us that while they will maintain current pharmacy systems,  they do not plan to build any new systems\u2014including a VA-wide  pharmacy inventory management system\u2014so they can efficiently  manage resources in preparation for the transition to the new system."], "subsections": []}, {"section_title": "VACO and VISNs Provide Some Limited Oversight, but VA Lacks a Focal Point for System-Wide Oversight of Pharmacy Inventory Management", "paragraphs": ["VACO and the five VISNs we spoke with provide some limited oversight  related to VAMC pharmacy inventory management, but no entity has  system-wide responsibility for overseeing the performance of VAMC  pharmacies in managing their inventories. Instead, responsibility for  overseeing pharmacy inventory management is largely delegated to each  VAMC\u2019s leadership. (See fig. 4 for a description of VACO headquarters,  VISN, and VAMCs\u2019 roles and responsibilities in managing pharmacy  inventory.)", "In absence of a VA-wide inventory management system, PBM officials  told us that they have employed manual workaround mechanisms to  oversee pharmacy management processes. Specifically, PBM requires  VAMC pharmacies to conduct an annual inventory of all medications and  a quarterly inventory of 5 selected high-value non-controlled medications  at risk of diversion. PBM officials told us they remind VAMCs of the  requirement to conduct these inventories, collect and aggregate the data  from these inventories, and make summary reports from these data  available as a resource to the VPEs and VAMC Chiefs of Pharmacy. PBM  officials acknowledged that these manual workarounds are inefficient,  increase labor costs, and leave the agency with an inability to see on- hand inventory across the system in real time. Additionally, the manual  workarounds may be implemented differently at each VAMC, resulting in  varying degrees of data reliability and limited opportunities for high-level  oversight and data consolidation. PBM officials said that they do not  independently analyze these data to identify trends, and they  acknowledged that both the quarterly and annual inventories have limited  usefulness for overseeing inventory management system-wide.  Additionally, officials at some of the selected VAMCs told us they found  the quarterly and annual inventories to have limited usefulness for  managing their pharmacy inventories.", "PBM officials told us they also hold regular meetings with VPEs and  VAMCs, which provide the opportunity for discussion of pharmacy  inventory management issues. However, our review of the minutes of the  meetings between PBM and VPEs found that, over the past 3 years,  pharmacy inventory management was rarely a topic of discussion. PBM  officials noted that there is always an opportunity for open discussion at  these meetings for VPEs to raise any issues, including issues related to  pharmacy inventory management, but these discussions may or may not  be captured in the meeting minutes. PBM officials said they also  regularly discuss various topics with the VAMC Chiefs of Pharmacy and  other staff, but none of these calls are directly related to pharmacy  inventory management.", "Officials from VACO\u2019s NAC and OIT told us that they provide some  assistance related to pharmacy inventory management but do not take  part in the day-to-day management at the VAMC level and also do not  have any oversight responsibilities. For example, a NAC official said the  office coordinates with PBM on medication shortage issues and  establishes national contracts for medications. NAC also sends out a  weekly shortages report to various pharmacy groups as a tool to help  them with known or expected shortages. Additionally, NAC\u2019s  Pharmaceutical Prime Vendor team is responsible for administering the  contract with the prime vendor through daily monitoring of issues and  quarterly reviews with the prime vendor and PBM. OIT develops  pharmacy-related applications for VistA based on requirements from  PBM, and officials said that the majority of OIT\u2019s support to VAMCs  consists of assisting them with issues related to VistA.", "At the VISN level, VPEs we interviewed also said they conduct some  pharmacy inventory management oversight activities for the VAMCs  within their network. While in general VA policy does not outline any  specific roles for VPEs related to oversight of pharmacy inventory  management, all five VPEs told us that they review the results of their  VAMCs\u2019 annual inventories and discuss any issues that arise from this  exercise with VAMCs as needed. VPEs told us that they also review the  results of the quarterly inventory of five selected high-value, non- controlled substances and may follow-up with the VAMCs if their actual  inventory of the medications is inconsistent with expected levels.  Additionally, some VPEs reported that they have undertaken additional  oversight activities apart from reviewing results of the mandatory  inventories. For example, one VPE told us he has developed a dashboard  with 53 measures that, while focused on formulary management, also  have inventory management implications. Additionally, this VPE said that  a VISN-wide procurement work group meets on a monthly basis and  serves as a venue for procurement technicians to share inventory  management best practices. Such additional activities may be helpful, but  since VPEs only have responsibility for VAMC pharmacies within their  network, they may not be aware of pharmacy inventory management  approaches being used at other VAMCs across VA.", "Although VA offices at the headquarters and regional levels provide some  assistance and oversight of how VAMCs manage pharmacy inventory at  the local level, VA has not designated a focal point with defined  responsibilities for system-wide oversight; instead they rely on local  leadership to oversee pharmacy inventory management at the VAMCs.  As a result, VA cannot assess the overall performance of VAMCs\u2019  management of their pharmacy inventories. The lack of a focal point with  defined oversight responsibilities is inconsistent with federal internal  control standards for establishing structure and authority to achieve the  entity\u2019s objectives and internal controls related to monitoring.  Specifically, internal controls state that management should establish an  organizational structure, assign responsibility, and delegate authority to  achieve the entity\u2019s objectives. Also, internal controls state that  management should establish and operate monitoring activities to monitor  the internal control system and evaluate the results. VA\u2019s actions are also  inconsistent with the Office of Management and Budget\u2019s guidance for  enterprise risk management and internal control in managing an  agency. Enterprise risk management is intended to yield an \u201centerprise- wide,\u201d strategically aligned portfolio view of organizational challenges that  provides better insight about how to most effectively prioritize resource  allocations to ensure successful mission delivery. Without a focal point for  system-wide oversight of VAMC pharmacy inventory management, VA  has limited awareness of the unique approaches that VAMCs use to  manage their inventories and is missing an opportunity to evaluate these  approaches. Additionally, VA cannot effectively share and standardize pharmacy inventory management best practices as appropriate. Having a  focal point for system-wide oversight could allow VA to identify potential  best practices that could be disseminated more widely across its facilities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Due to the decentralized nature of VA\u2019s organization, VA policy gives  VAMC pharmacies latitude in managing their pharmacy inventories.  Several of the VAMCs we visited have taken unique approaches to  procuring or tracking their inventory. However, because VA does not have  a focal point to systematically oversee VAMCs\u2019 pharmacy management  efforts, VA is missing opportunities to evaluate the effectiveness of these  efforts, as well as share best practices and standardize them across VA  as appropriate. PBM officials told us that the lack of a VA-wide pharmacy  inventory management system limits their ability to oversee VAMC  pharmacy inventory management. However, our review shows that even  without this system there are existing mechanisms that a focal point could  leverage to more systematically oversee how VAMC pharmacies manage  their inventories. For example, a focal point could ensure that PBM  officials, the VPEs, and VAMC pharmacy staff devote time to discussing  pharmacy inventory management approaches and related issues during  regularly scheduled telephone meetings. Leveraging these existing  mechanisms is especially important given that VAMCs have historically  had challenges in managing their inventories, and also because a VA- wide pharmacy inventory management system may not be available for  the foreseeable future."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to the Department of  Veterans Affairs:  The Secretary of the VA should direct the Undersecretary for Health to  designate a focal point for overseeing VAMCs\u2019 pharmacy inventory  management system-wide and define the focal point\u2019s responsibilities.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to VA for review and comment. In its  written comments, reproduced in appendix I, VA stated that it concurred  in principle with our recommendation. VA also provided technical  comments, which we incorporated as appropriate.", "In response to our recommendation, VA stated it plans to establish by  December 31, 2018, a committee of internal stakeholders and subject  matter experts to provide options for overseeing VAMCs\u2019 pharmacy  inventory management. However, it was unclear from VA\u2019s response  whether the planned committee will recommend or designate an entity or  focal point with system-wide oversight responsibilities. VA noted in its  general comments that it does have entities or individuals\u2014referred to as  focal points by VA\u2014responsible for specific functions. However, these  entities do not provide system-wide oversight that could allow the  department to better understand VAMCs\u2019 approaches to pharmacy  inventory management. As we noted in our report, without a focal point  for system-wide oversight, VA has limited awareness of the unique  approaches that VAMCs use to manage their inventories and is missing  an opportunity to evaluate these approaches and standardize them  across VA as appropriate.", "Additionally, in its general comments, VA raised concerns regarding our  characterization in the draft report of medication shortages and the use of  automated dispensing units in the context of controlled substances. In  response, we updated the report to include more information about one  VAMC\u2019s use of a committee to address medication shortages. We also  clarified that three VAMCs are using (or will soon have the capability to  use) enhanced analytic software to better leverage data generated  through their automated dispensing machines, which allows them to more  easily identify potential diversion. Finally, VA noted that we did not  discuss PBM\u2019s multiple requests for an enterprise-management system  since the early 2000s; however, this information was included as part of  the draft report sent to VA for review and remains in our final report on  page 14 as part of our finding on the lack of a VA-wide pharmacy  inventory management system.", "We are sending copies of this report to the Secretary of the Department  of Veterans Affairs and appropriate congressional committees. The report  is also available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff has any questions regarding this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rashmi Agarwal, Assistant  Director; Nick Bartine, Analyst-in-Charge; Muriel Brown; Kaitlin  Farquharson; Krister Friday; Sandra George; Courtney Liesener; Diona  Martyn; and Michelle Paluga made key contributions to this report."], "subsections": []}]}], "fastfact": ["The VA, which provides health care for 9 million veterans, has faced challenges in managing inventory at its pharmacies. For example, VA medical centers have struggled to accurately account for and update information on medications in stock.", "In this report, we found that VA cannot fully oversee management of pharmacy inventories system-wide because VA lacks", "a comprehensive system to manage pharmacy inventory\u2014a new system will not be implemented for up to10 years", "a focal point for system-wide oversight.", "We recommended that VA designate a focal point to oversee system-wide pharmacy inventory management."]}
{"id": "GAO-18-213", "url": "https://www.gao.gov/products/GAO-18-213", "title": "Community Banks and Credit Unions: Regulators Could Take Additional Steps to Address Compliance Burdens", "published_date": "2018-02-13T00:00:00", "released_date": "2018-02-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In recent decades, many new regulations intended to strengthen financial soundness, improve consumer protections, and aid anti-money laundering efforts were implemented for financial institutions. Smaller community banks and credit unions must comply with some of the regulations, but compliance can be more challenging and costly for these institutions. GAO examined (1) the regulations community banks and credit unions viewed as most burdensome and why, and (2) efforts by depository institution regulators to reduce any regulatory burden. GAO analyzed regulations and interviewed more than 60 community banks and credit unions (selected based on asset size and financial activities), regulators, and industry associations and consumer groups. GAO also analyzed letters and transcripts commenting on regulatory burden that regulators prepared responding to the comments."]}, {"section_title": "What GAO Found", "paragraphs": ["Interviews and focus groups GAO conducted with representatives of over 60 community banks and credit unions indicated regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers were the most burdensome. Institution representatives said these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes. However, regulators and others noted that the regulations were essential to preventing lending discrimination and use of the banking system for illicit activity, and they were acting to reduce compliance burdens. Institution representatives also said that the new mortgage disclosure regulations increased compliance costs, added significant time to loan closings, and resulted in institutions absorbing costs when others, such as appraisers and inspectors, changed disclosed fees. The Consumer Financial Protection Bureau (CFPB) issued guidance and conducted other outreach to educate institutions after issuing these regulations in 2013. But GAO found that some compliance burdens arose from misunderstanding the disclosure regulations\u2014which in turn may have led institutions to take actions not actually required. Assessing the effectiveness of the guidance for the disclosure regulations could help mitigate the misunderstandings and thus also reduce compliance burdens.", "Regulators of community banks and credit unions\u2014the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration\u2014conduct decennial reviews to obtain industry comments on regulatory burden. But the reviews, conducted under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), had the following limitations:", "CFPB and the consumer financial regulations for which it is responsible were not included.", "Unlike executive branch agencies, the depository institution regulators are not required to analyze and report quantitative-based rationales for their responses to comments.", "Regulators do not assess the cumulative burden of the regulations they administer.", "CFPB has formed an internal group that will be tasked with reviewing regulations it administers, but the agency has not publicly announced the scope of regulations included, the timing and frequency of the reviews, and the extent to which they will be coordinated with the other federal banking and credit union regulators as part of their periodic EGRPRA reviews. Congressional intent in mandating that these regulators review their regulations was that the cumulative effect of all federal financial regulations be considered. In addition, sound practices required of other federal agencies require them to analyze and report their assessments when reviewing regulations. Documenting in plans how the depository institution regulators would address these EGRPRA limitations would better ensure that all regulations relevant to community banks and credit unions were reviewed, likely improve the analyses the regulators perform, and potentially result in additional burden reduction."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes a total of 10 recommendations to CFPB and the depository institution regulators. CFPB should assess the effectiveness of guidance on mortgage disclosure regulations and publicly issue its plans for the scope and timing of its regulation reviews and coordinate these with the other regulators' review process. As part of their burden reviews, the depository institution regulators should develop plans to report quantitative rationales for their actions and addressing the cumulative burden of regulations. In written comments, CFPB and the four depository institution regulators generally agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Within the past two decades, financial regulators have implemented many  new regulations in the aftermath of events such as the September 2001  terrorist attacks and the financial crisis in 2007\u20132009, These regulations  were intended to address the risks and problematic practices that  contributed or led to the events, and included provisions that ranged from  strengthening financial institutions\u2019 anti-money laundering (AML)  programs to prevent terrorism financing to creating additional protections  for mortgage lending. For example, in 2010 Congress passed the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank  Act), which includes numerous reforms to strengthen oversight of  financial institutions. As a result of this act and other actions taken by  financial regulators, additional regulatory requirements were placed on  financial institutions, including community banks and credit unions. These  institutions historically have played an important role in serving their local  customers, including providing credit to small businesses.", "We previously reported that representatives of community banks and  credit unions expressed concerns about the burden that additional  regulations create for them. For example, some credit union, community  bank, and industry association representatives told us in 2015 that  several mortgage-related rules increased their overall compliance burden.  In turn, some said this had begun to adversely affect some lending activities, such as mortgage lending to customers not typically served by  larger financial institutions, although the regulations provided exemptions  or other provisions to reduce such impacts. But surveys conducted by  regulators, industry associations, and academics on the impact of the  Dodd-Frank Act on small banks suggested that credit availability had  been reduced by moderate to minimal amounts among those responding  to the various surveys, and regulatory data up to that point had not  confirmed a negative impact on mortgage lending.", "You asked us to examine the impact of regulation on community banks  and credit unions. This report examines (1) what regulations institutions  regarded as most burdensome and why, and (2) what actions the  regulators of these institutions have taken to address any burdens  associated with financial regulations. In addition to this report, we will  provide a separate report that addresses the effect of regulatory burden  on lending activities by community banks and credit unions, the rate of  formation of new institutions, and potential impacts of regulations that we  expect to issue to you in spring 2018.", "To identify regulations that community banks and credit unions viewed as  most burdensome, we obtained opinions from a non-probability selection  of selected community banks and credit unions. We drew our sample  from institutions whose characteristics (such as asset size and activities)  were typical of traditional community banking activities. The asset  thresholds we used for our sample were $1.2 billion for banks (which  represented 90 percent of banks as of March 2016) and $860 million for  credit unions (which represented 95 percent of credit unions as of March  2016). We excluded institutions that were primarily conducting activities  that were not typical of community banking, including institutions  functioning primarily as credit card banks or institutions with headquarters  outside the United States. From this group, we used additional criteria to  select institutions that were located in various regions of the country and  whose lending asset levels indicated they would have experience with  complying with relevant regulations. The sample also included institutions  overseen by each of the depository institution regulators\u2014the Board of  Governors of the Federal Reserve (Federal Reserve), the Federal  Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the  Currency (OCC), and the National Credit Union Administration (NCUA).", "Using this sample, we obtained opinions from representatives 64  institutions during individual interviews, focus groups, and a site visit.", "More specifically, we interviewed 10 community banks and 7 credit  unions.", "After the interviews demonstrated considerable consensus existed  among institutions about the most burdensome regulations, we held  six focus groups with an additional 46 banks and credit unions to  identify the characteristics of the regulations that made them  burdensome.", "We also reviewed 28 reports of examinations conducted by the  regulators of banks and credit unions we selected for our interviews to  identify the extent to which these examinations addressed regulations  from which the banks were exempted.", "To determine what actions regulators took to address regulatory burden,  we reviewed the reports the depository institution regulators issued for the  2007 and 2017 Economic Growth and Regulatory Paperwork Reduction  Act of 1996 (EGRPRA) reviews. We analyzed over 200 comment letters  that the regulators received from community banks, credit unions, their  trade associations, and others; and reviewed transcripts of all six public  forums regulators held as part the 2017 EGRPRA regulatory review they  conducted. We analyzed the extent to which they addressed the issues  raised in comments received for the reviews. We also interviewed the  depository institution regulators and the Consumer Financial Protection  Bureau (CFPB) about their actions to address burden when creating rules  and thereafter. We discussed issues that banks and credit unions  identified with specific regulations with the depository institution  regulators, CFPB, and the Financial Crimes Enforcement Network  (FinCEN), which has delegated authority from the Secretary of the  Treasury to implement, administer, and enforce compliance with anti- money laundering and terrorist financing regulations. We also interviewed  associations representing consumers with knowledge of relevant activities  to understand the benefits of these regulations and the Small Business  Administration\u2019s Office of Advocacy, which reviews and comments on  burdens of regulations, including those issued by banking regulators.", "For more information on our scope and methodology, see appendix I. We  conducted this performance audit from March 2016 to February 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["While no commonly accepted definition of a community bank exists, they  are generally smaller banks that provide banking services to the local  community and have management and board members who reside in the  local community. In some of our past reports, we often defined community  banks as those with under $10 billion in total assets. However, many  banks have assets well below $10 billion as data from the financial  condition reports that institutions submit to regulators (Call Reports)  indicated that of the more than 6,100 banks in the United States, about 90  percent had assets below about $1.2 billion as of March 2016.", "Based on our prior interviews and reviews of documents, regulators and  others have observed that small banks tend to differ from larger banks in  their relationships with customers. Large banks are more likely to  engage in transactional banking, which focuses on the provision of highly  standardized products that require little human input to manage and are  underwritten using statistical information. Small banks are more likely to  engage in what is known as relationship banking in which banks consider  not only data models but also information acquired by working with the  banking customer over time. Using this banking model, small banks may  be able to extend credit to customers such as small business owners who  might not receive a loan from a larger bank.", "Small business lending appears to be an important activity for community  banks. As of June 2017, community banks had almost $300 billion  outstanding in loans with an original principal balance of under $1 million  (which banking regulators define as small business lending), or about 20  percent of these institutions\u2019 total lending. In that same month, non- community banks had about $390 billion outstanding in business loans  under $1 million representing 5 percent of their total lending.", "Credit unions are nonprofit member-owned institutions that take deposits  and make loans. Unlike banks, credit unions are subject to limits on their  membership because members must have a \u201ccommon bond\u201d\u2014for  example, working for the same employer or living in the same community.  Financial reports submitted to NCUA (the regulator that oversees  federally-insured credit unions) indicated that of the more than 6,000  credit unions in the United States, 90 percent had assets below about  $393 million as of March 2016.", "In addition to providing consumer products to their members, credit  unions are also allowed to make loans for business activities subject to  certain restrictions. These member business loans are defined as a loan,  line of credit, or letter of credit that a credit union extends to a borrower  for a commercial, industrial, agricultural, or professional purpose, subject  to certain exclusions. In accordance with rules effective January 2017,  the total amount of business lending credit unions can do is not to  generally exceed 1.75 times the actual net worth of the credit union."], "subsections": [{"section_title": "Overview of Federal Financial Regulators for Community Banks and Credit Unions", "paragraphs": ["Federal banking and credit union regulators have responsibility for  ensuring the safety and soundness of the institutions they oversee,  protecting federal deposit insurance funds, promoting stability in financial  markets, and enforcing compliance with applicable consumer protection  laws. All depository institutions that have federal deposit insurance have a  federal prudential regulator. The regulator responsible for overseeing a  community bank or credit union varies depending on how the institution is  chartered, whether it is federally insured, and whether it is a Federal  Reserve member (see table 1).", "Other federal agencies also impose regulatory requirements on banks  and credit unions. These include rules issued by CFPB, which has  supervision and enforcement authority for various federal consumer  protection laws for depository institutions with more than $10 billion in  assets and their affiliates. The Federal Reserve, OCC, FDIC, and NCUA  continue to supervise for consumer protection compliance at institutions  that have $10 billion or less in assets. Although community banks and  credit unions with less than $10 billion in assets typically would not be  subject to CFPB examinations, they generally are required to comply with  CFPB rules related to consumer protection.", "In addition, FinCEN also issues requirements that financial institutions,  including banks and credit unions, must follow. FinCEN is a component of  Treasury\u2019s Office of Terrorism and Financial Intelligence that supports  government agencies by collecting, analyzing, and disseminating financial  intelligence information to combat money laundering. It is responsible for  administering the Bank Secrecy Act, which, with its implementing  regulations, generally requires banks, credit unions, and other financial  institutions, to collect and retain various records of customer transactions,  verify customers\u2019 identities in certain situations, maintain AML programs,  and report suspicious and large cash transactions. FinCEN relies on  financial regulators and others to examine U.S. financial institutions to  determine compliance with these requirements. In addition, financial  institutions also have to comply with requirements by Treasury\u2019s Office of  Foreign Asset Control to review transactions to ensure that business is  not being done with sanctioned countries or individuals."], "subsections": []}, {"section_title": "Recent Regulatory Changes", "paragraphs": ["In response to the 2007-2009 financial crisis, Congress passed the Dodd- Frank Act, which became law on July 21, 2010. The act includes  numerous reforms to strengthen oversight of financial services firms,  including consolidating consumer protection responsibilities within CFPB.  Under the Dodd-Frank Act, federal financial regulatory agencies were  directed to or granted authority to issue hundreds of regulations to  implement the act\u2019s reforms. Many of the provisions in the Dodd-Frank  Act target the largest and most complex financial institutions, and  regulators have noted that much of the act is not meant to apply to  community banks.", "Although the Dodd-Frank Act exempts small institutions, such as  community banks and credit unions, from several of its provisions, and  authorizes federal regulators to provide small institutions with relief from  certain regulations, it also contains provisions that impose additional  restrictions and compliance costs on these institutions. As we reported in  2012, federal regulators, state regulatory associations, and industry  associations collectively identified provisions within 7 of the act\u2019s 16 titles  that they expected to affect community banks and credit unions. The  provisions they identified as likely to affect these institutions included  some of the act\u2019s mortgage reforms, such as those requiring institutions  to ensure that a consumer obtaining a residential mortgage loan has the  reasonable ability to repay the loan at the time the loan is  consummated;  comply with a new CFPB rule that combines two different mortgage  loan disclosures that had been required by the Truth-in-Lending Act  and the Real Estate Settlement Procedures Act of 1974; and ensure that property appraisers are sufficiently independent.", "In addition to the regulations that have arisen from provisions in the  Dodd-Frank Act, we reported that other regulations have created potential  burdens for community banks. For example, the depository institution  regulators also issued changes to the capital requirements applicable to  these institutions. Many of these changes were consistent with the  Basel III framework, which is a comprehensive set of reforms to  strengthen global capital and liquidity standards issued by an international  body consisting of representatives of many nations\u2019 central banks and  regulators. These new requirements significantly changed the risk-based  capital standards for banks and bank holding companies. As we reported  in November 2014, officials interviewed from community banks did not  anticipate any difficulties in meeting the U.S. Basel III capital  requirements but expected to incur additional compliance costs.", "In addition to regulatory changes that could increase burden or costs on  community banks, some of the Dodd-Frank Act provisions have likely  resulted in reduced costs for these institutions. For example, revisions to  the way that deposit insurance premiums are calculated reduced the  amount paid by banks with less than $10 billion in assets by $342 million  or 33 percent from the first to second quarter of 2011 after the change  became effective. Another change reduced the audit-related costs that  some banks were incurring in complying with provisions of the Sarbanes- Oxley Act."], "subsections": []}, {"section_title": "Prior Studies on Regulatory Burden Generally Focused on Costs", "paragraphs": ["A literature search indicated that prior studies by other entities, including  regulators, trade associations or others, which examined how to measure  regulatory burden generally focused on direct costs resulting from  compliance with regulations, and our analysis of them identified various  limitations that restrict their usefulness in assessing regulatory burden.  For example, researchers commissioned by the Credit Union National  Association, which advocates for credit unions, found costs attributable to  regulations totaled a median of 0.54 percent of assets in 2014 for a non- random sample of the 53 small, medium, and large credit unions  responding to a nationwide survey. However, one of the study\u2019s  limitations was its use of a small, non-random sample of credit unions. In  addition, the research was not designed to conclusively link changes in  regulatory costs for the sampled credit unions to any one regulation or set  of regulations.", "CFPB also conducted a study of regulatory costs associated with specific  regulations applicable to checking accounts, traditional savings accounts,  debit cards, and overdraft programs. Through case studies involving  200 interviews with staff at seven commercial banks with assets over $1  billion, the agency\u2019s staff determined that the banks\u2019 costs related to  ongoing regulatory compliance were concentrated in operations,  information technology, human resources, and compliance and retail  functions, with operations and information technology contributing the  highest costs. While providing detailed information about the case study  institutions, reliance on a small sample of mostly large commercial banks  limits the conclusions that can be drawn about banks\u2019 regulatory costs  generally. In addition, the study notes several challenges to quantifying  compliance costs that made their cost estimates subject to some  measurement error, and the study\u2019s design limits the extent to which a  causal relationship between financial regulations and costs could be fully  established. Researchers from the Mercatus Center at George Mason  University used a nongeneralizable survey of banks to find that  respondents believed they were spending more money and staff time on  compliance than before due to Dodd-Frank regulations. From a universe  of banks with less than $10 billion of assets, the center\u2019s researchers  used a non-random sample to collect 200 responses to a survey sent to  500 banks with assets less than $10 billion about the burden of complying  with regulations arising from the Dodd-Frank Act. The survey sought  information on the respondents\u2019 characteristics, products, and services  and the effects various regulatory and compliance activities had on  operations and decisions, including those related to bank profitability,  staffing, and products. About 83 percent of the respondents reported  increased compliance costs of greater than or equal to 5 percent due to  regulatory requirements stemming from the Dodd-Frank Act. The study\u2019s  limitations include use of a non-random sample selection, small response  rate, and use of questions that asked about the Dodd-Frank Act in  general. In addition, the self-reported survey items used to capture  regulatory burden\u2014compliance costs and profitability\u2014have an increased  risk of measurement error and the causal relationship between Dodd- Frank Act requirements and changes in these indicators is not well- established."], "subsections": []}]}, {"section_title": "Institutions Cited Mortgage and Anti- Money Laundering Regulations as Most Burdensome, although Others Noted Their Significant Public Benefits", "paragraphs": ["Community bank and credit union representatives that we interviewed  identified three sets of regulations as most burdensome to their  institutions: (1) data reporting requirements related to loan applicants and  loan terms under the Home Mortgage Disclosure Act of 1975 (HMDA); (2)  transaction reporting and customer due diligence requirements as part of  the Bank Secrecy Act and related anti-money laundering laws and  regulations (collectively, BSA/AML); and (3) disclosures of mortgage loan  fees and terms to consumers under the TILA-RESPA Integrated  Disclosure (TRID) regulations. In focus groups and interviews, many of  the institution representatives said these regulations were time- consuming and costly to comply with, in part because the requirements  were complex, required preparation of individual reports that had to be  reviewed for accuracy, or mandated actions within specific timeframes.  However, federal regulators and consumer advocacy groups said that  benefits from these regulations were significant."], "subsections": [{"section_title": "HMDA Requirements Deemed Time Consuming by Institutions but Critical to Others", "paragraphs": ["Representatives of community banks and credit unions in all our focus  groups and in most of our interviews told us that HMDA\u2019s data collection  and reporting requirements were burdensome. Under HMDA and its  implementing Regulation C, banks and credit unions with more than $45  million in assets that do not meet regulatory exemptions must collect,  record, and report to the appropriate federal regulator, data about  applicable mortgage lending activity. For every covered mortgage  application, origination, or purchase of a covered loan, lenders must  collect information such as the loan\u2019s principal amount, the property  location, the income relied on in making the credit decision, and the  applicants\u2019 race, ethnicity, and sex. Institutions record this on a form  called the loan/application register, compile these data each calendar  year, and submit them to CFPB. Institutions have also been required to  make these data available to the public upon request, after modifying  them to protect the privacy of applicants and borrowers.", "Representatives of many community banks and credit unions with whom  we spoke said that complying with HMDA regulations was time  consuming. For example, representatives from one community bank we  interviewed said it completed about 1,100 transactions that required  HMDA reporting in 2016, and that its staff spent about 16 hours per week  complying with Regulation C. In one focus group, participants discussed  how HMDA compliance was time consuming because the regulations  were complex, which made determining whether a loan was covered and  should be reported difficult. As a part of that discussion, one bank  representative told us that it was not always clear whether a residence  that was used as collateral for a commercial loan was a reportable  mortgage under HMDA. In addition, representatives in all of our focus  groups in which HMDA was discussed and in some interviews said that  they had to provide additional staff training for HMDA compliance. Among  the 28 community banks and credit unions whose representatives  commented on HMDA in our focus groups, 61 percent noted having to  conduct additional HMDA-related training.", "In most of our focus groups and three of our interviews, representatives of  community banks and credit unions also expressed concerns about how  federal bank examiners review HMDA data for errors. When regulatory  examiners conducting compliance examinations determine that an  institution\u2019s HMDA data has errors above prescribed thresholds, the  institution has to correct and resubmit its data, further adding to the time  required for compliance. While regulators have revised their procedures  for assessing errors as discussed later, prior to 2018, if 10 percent or  more of the loan/application registers that examiners reviewed had errors,  an institution was required to review all of their data, correct any errors,  and resubmit them. If 5 percent or more of the reviewed loan/application  registers had errors in a single data field, an institution had to review all  other registers and correct the data in that field. Participants in one  focus group discussed how HMDA\u2019s requirements left them little room for  error and that they were concerned that examiners weigh all HMDA fields  equally when assessing errors. For example, representatives of one  institution noted that for purposes of fair lending enforcement, errors in  fields such as race and ethnicity can be more important than errors in the  action taken date (the field for the date when a loan was originated or  when an application not resulting in an origination was received).  Representatives of one institution also noted that they no longer have  access to data submission software that allowed them to verify the  accuracy of some HMDA data, and this has led to more errors in their  submissions. Representatives of another institution told us that they had  to have staff conduct multiple checks of HMDA data to ensure the data  met accuracy standards, which added to the time needed for compliance.", "Representatives of many community banks and credit unions with whom  we spoke also expressed concerns that compliance requirements for  HMDA were increasing. The Dodd-Frank Act included provisions to  expand the information institutions must collect and submit under HMDA,  and CFPB issued rules implementing these new requirements that mostly  became effective January 2018. In addition to certain new data  requirements specified in the act, such as age and the total points and  fees payable at origination, CFPB\u2019s amendments to the HMDA reporting  requirements also added additional data points, including some intended  to collect more information about borrowers such as credit scores, as well  as more information about the features of loans, such as fees and  terms. In the final rule implementing the new requirements, CFPB also  expanded the types of loans on which some institutions must report  HMDA data to include open-ended lines of credit and reverse mortgages.  Participants in two of our focus groups with credit unions said reporting  this expanded information will require more staff time and training and  cause them to purchase new or upgraded computer software.", "In most of our focus groups, participants said that changes should be  made to reduce the burdens associated with reporting HMDA data. For  example, in some focus groups, participants suggested raising the  threshold for institutions that have to file HMDA reports above the then  current $44 million in assets, which would reduce the number of small  banks and credit unions that are required to comply. Representatives of  two institutions noted that because small institutions make very few loans  compared to large ones, their contribution to the overall HMDA data was  of limited value in contrast to the significant costs to the institutions to  collect and report the data. Another participant said their institution  sometimes make as few as three loans per month. In most of our focus  groups, participants also suggested that regulators could collect mortgage  data in other ways. For example, one participant discussed how it would  be less burdensome for lenders if federal examiners collected data on  loan characteristics during compliance examinations.", "However, staff of federal regulators and consumer groups said that  HMDA data are essential for enforcement of fair lending laws and  regulations. Representatives of CFPB, FDIC, NCUA, and OCC and  groups that advocate for consumer protection issues said that HMDA  data has helped address discriminatory practices. For example, some  representatives noted a decrease in \u201credlining\u201d (refusing to make loans to  certain neighborhoods or communities). CFPB staff noted that HMDA  data provides transparency about lending markets, and that HMDA data  from community banks and credit unions is critical for this purpose,  especially in some rural parts of the country where they make the majority  of mortgage loans. While any individual institution\u2019s HMDA reporting  might not make up a large portion of HMDA data for an area, CFPB staff  told us that if all smaller institutions were exempted from HMDA  requirements, regulators would have little or no data on the types of  mortgages or on lending patterns in some areas.", "Agency officials also told us that few good alternatives to HMDA data  exist and that the current collection regime is the most effective available  option for collecting the data. NCUA officials noted that collecting  mortgage data directly from credit unions during examinations to enforce  fair lending rules likely would be more burdensome for the institutions.  CFPB staff and consumer advocates we spoke with also said that HMDA  provides a low-cost data source for researchers and local policy makers,  which leads to other benefits that cannot be directly measured but are  included in HMDA\u2019s statutory goals\u2014such as allowing local policymakers  to target community investments to areas with housing needs.", "While representatives of some community banks and credit unions  argued that HMDA data were no longer necessary because practices  such as redlining have been reduced and they receive few requests for  HMDA data from the public, representatives of some consumer advocate  groups responded that eliminating the transparency that HMDA data  creates could allow discriminatory practices to become more common.  CFPB staff and representatives of one of these consumer groups also  said that before the financial crisis of 2007\u20132009, some groups were not  being denied credit outright but instead were given mortgages with terms,  such as high interest rates, which made them more likely to default. The  expanded HMDA data will allow regulators to detect such problematic  lending practices for mortgage terms. CFPB and FDIC staff also told us  that while lenders will have to collect and report more information, the  new fields will add context to lending practices and should reduce the  likelihood of incorrectly flagging institutions for potential discrimination.  For example, with current data, a lender may appear to be denying  mortgage applications to a particular racial or ethnic group, but with  expanded data that includes applicant credit scores, regulators may  determine that the denials were appropriate based on credit score  underwriting.", "CFPB staff acknowledged that HMDA data collection and reporting may  be time consuming, and said they have taken steps to reduce the  associated burdens for community banks and credit unions.", "First, in its final rule implementing the Dodd-Frank Act\u2019s expanded  HMDA data requirements, CFPB added exclusions for banks and  credit unions that make very few mortgage loans. Effective January  2018, an institution will be subject to HMDA requirements only if it has  originated at least 25 closed-end mortgage loans or at least 100  covered open-end lines of credit in each of the 2 preceding calendar  years and also has met other applicable requirements. In response to  concerns about the burden associated with the new requirement for  reporting open-end lines of credit, in 2017. CFPB temporarily  increased the threshold for collecting and reporting data for open-end  lines of credit from 100 to 500 for the 2018 and 2019 calendar  years. CFPB estimated that roughly 25 percent of covered  depository institutions will no longer be subject to HMDA as a result of  these exclusions.", "Second, the Federal Financial Institutions Examination Council  (FFIEC), which includes CFPB, announced the new FFIEC HMDA  Examiner Transaction Testing Guidelines that specify when agency  examiners should direct an institution to correct and resubmit its  HMDA data due to errors found during supervisory examinations.  CFPB said these revisions should greatly reduce the burden  associated with resubmissions. Under the revised standards,  institutions will no longer be directed to resubmit all their HMDA data if  they exceeded the threshold for HMDA files with errors, but will still be  directed to correct specific data fields that have errors exceeding the  specified threshold. The revised guidelines also include new  tolerances for some data fields, such as application date and loan  amount.", "Third, CFPB also introduced a new online system for submitting  HMDA data in November 2017. CFPB staff said that the new system,  the HMDA Platform, will reduce errors by including features to allow  institutions to validate the accuracy and correct the formatting of their  data before submitting. They also noted that this platform will reduce  burdens associated with the previous system for submitting HMDA  data. For example, institutions no longer will have to regularly  download software, and multiple users within an institution will be able  to access the platform. NCUA officials added that some credit unions  had tested the system and reported that it reduced their reporting  burden.", "Finally, on December 21, 2017, CFPB issued a public statement  announcing that, for HMDA data collected in 2018, CFPB does not  intend to require resubmission of HMDA data unless errors are  material, and does not intend to assess penalties for errors in  submitted data. CFPB also announced that it intends to open a rule  making to reconsider various aspects of the 2015 HMDA rule, such as  the thresholds for compliance and data points that are not required by  statute."], "subsections": []}, {"section_title": "Institutions Found BSA/AML Regulations Burdensome and Regulators Have Been Considering Steps to Reduce Burden", "paragraphs": ["In all our focus groups and many of our interviews, participants said they  found BSA/AML requirements to be burdensome due to the staff time and  other costs associated with their compliance efforts.  To provide  regulators and law enforcement with information that can aid in pursuing  criminal, tax, and regulatory investigations, BSA/AML statutes and  regulations require covered financial institutions to  file Currency Transaction Reports (CTR) for cash transactions  conducted by a customer for aggregate amounts of more than  $10,000 per day and Suspicious Activity Reports (SAR) for activity  that might signal criminal activity (such as money laundering or tax  evasion); and establish BSA/AML compliance programs that include efforts to  identify and verify customers\u2019 identities and monitor transactions to  report, for example, transactions that appear to violate federal law.", "Participants in all of our focus groups discussed how BSA/AML  compliance was time-consuming, and in most focus groups participants  said this took time away from serving customers. For example,  representatives of one institution we interviewed told us that completing a  single SAR could take 4 hours, and that they might complete 2 to 5 SARs  per month. However, representatives of another institution said that at  some times of the year it has filed more than 300 SARs per month. In a  few cases, representatives of institutions saw BSA/AML compliance as  burdensome because they had to take actions that seemed unnecessary  based on the nature of the transactions. For example, one institution\u2019s  representatives said that filing a CTR because a high school band  deposited more than $10,000 after a fundraising activity seemed  unnecessary, while another\u2019s said that it did not see the need to file SARs  for charitable organizations that are well known in their community.  Representatives of institutions in most of our focus groups also noted that  BSA/AML regulations required additional staff training. Some of these  representatives noted that the requirements are complex and the  activities, such as identifying transactions potentially associated with  terrorism, are outside of their frontline staff\u2019s core competencies.", "Representatives in all focus groups and a majority of interviews said BSA  imposes financial costs on community banks and credit unions that must  be absorbed by those institutions or passed along to customers. In most  of our focus groups, representatives said that they had to purchase or  upgrade software systems to comply with BSA/AML requirements, which  can be expensive. Some representatives also said they had to hire third  parties to comply with BSA/AML regulations. Representatives of some  institutions also noted that the compliance requirements do not produce  any material benefits for their institutions.", "In most of our focus groups, participants were particularly concerned that  the compliance burden associated with BSA/AML regulations was  increasing. In 2016, FinCEN\u2014the bureau in the Department of the  Treasury that administers BSA/AML rules\u2014issued a final rule that  expanded due-diligence requirements for customer identification. The  final rule was intended to strengthen customer identification programs by  requiring institutions to obtain information about the identities of the  beneficial owners of businesses opening accounts at their institutions.  The institutions covered by the rule are expected to be in compliance by  May 11, 2018. Some representatives of community banks and credit  unions that we spoke with said that this new requirement will be  burdensome. For example, one community bank\u2019s representatives said  the new due-diligence requirements will require more staff time and  training and cause them to purchase new or upgraded computer systems.  Representatives of some institutions also noted that accessing beneficial  ownership information about companies can be difficult, and that entities  that issue business licenses or tax identification numbers could perform  this task more easily than financial institutions.", "In some of our focus groups, and in some comment letters that we  reviewed that community banks and credit unions submitted to bank  regulators and NCUA as part of the EGRPRA process, representatives of  community banks and credit unions said regulators should take steps to  reduce the burdens associated with BSA/AML. Participants in two of our  focus groups and representatives of two institutions we interviewed said  that the $10,000 CTR threshold, which was established in 1972, should  be increased, noting it had not been adjusted for inflation. One participant  told us that if this threshold had been adjusted for inflation over time, it  likely would be filing about half of the number of CTRs that it currently  files. In several focus groups, participants also indicated that transactions  that must be checked against the Office of Foreign Assets Control list  also should be subject to a threshold amount. Representatives of one  institution noted that they have to complete time-consuming compliance  work for even very small transactions (such as less than $1).  Representatives of some institutions suggested that the BSA/AML  requirements be streamlined to make it easier for community banks and  credit unions to comply. For example, representatives of one institution  that participated in the EGRPRA review suggested that institutions could  provide regulators with data on all cash transactions in the format in  which they keep these records rather than filing CTRs. Finally,  participants in one focus group said that regulators should better  communicate how the information that institutions submit contributes to  law enforcement successes in preventing or prosecuting crimes.", "Staff from FinCEN told us that the reports and due-diligence programs  required in BSA/AML rules are critical to safeguarding the U.S. financial  sector from illicit activity, including illegal narcotics and terrorist financing  activities. They said they rely on CTRs and SARs that financial institutions  file for the financial intelligence they disseminate to law enforcement  agencies, and noted that they saw all BSA/AML requirements as  essential because activities are designed to complement each other.  Officials also pointed out that entities conducting terrorism, human  trafficking, or fraud all rely heavily on cash, and reporting frequently made  deposits makes tracking criminals easier. They said that significant  reductions in BSA/AML reporting requirements would hinder law  enforcement, especially because depositing cash through ATMs has  become very easy.", "FinCEN staff said they utilize a continuous evaluation process to look for  ways to reduce burden associated with BSA/AML requirements, and  noted actions taken as a result. They said that FinCEN has several  means of soliciting feedback about potential burdens, including through  its Bank Secrecy Act Advisory Group that consists of industry, regulatory,  and law enforcement representatives who meet twice a year, and also  through public reporting and comments received through FinCEN\u2019s  regulatory process. FinCEN officials said that based on this advisory  group\u2019s recommendations, the agency provided SAR filing relief by  reducing the frequency of submission for written SAR summaries on  ongoing activity from 90 days to 120 days. FinCEN also has recognized  that financial institutions do not generally see the beneficial impacts of  their BSA/AML efforts, and officials said they have begun several different  feedback programs to address this issue.", "FinCEN staff said they have been discussing ways to improve the CTR  filing process, but in response to comments obtained as part of a recent  review of regulatory burden they noted that the staff of law enforcement  agencies do not support changing the $10,000 threshold for CTR  reporting. FinCEN officials said that they have taken some steps to  reduce the burden related to CTR reporting, such as by expanding the  ability of institutions to seek CTR filing exemptions, especially for low-risk  customers. FinCEN is also utilizing its advisory group to examine aspects  of the CTR reporting obligations to assess ways to reduce reporting  burden, but officials said it is too early to know the outcomes of the effort.  However, FinCEN officials said that while evaluation of certain reporting  thresholds may be appropriate, any changes to them or other CTR  requirements to reduce burden on financial institutions, must still meet the  needs of regulators and law enforcement, and prevent misuse of the  financial system.", "FinCEN staff also said that some of the concerns raised about the  upcoming requirements on beneficial ownership may be based on  misunderstandings of the rule. FinCEN officials told us that under the final  rule, financial institutions can rely on the beneficial ownership information  provided to them by the entity seeking to open the account. Under the  final rule, the party opening an account on behalf of the legal entity  customer is responsible for providing beneficial ownership information,  and the financial institution may rely on the representations of the  customer unless it has information that calls into question the accuracy of  those representations. The financial institution does not have to confirm  ownership; rather, it has to verify the identity of the beneficial owners as  reported by the individual seeking to open the account, which can be  done with photocopies of identifying documents such as a driver\u2019s  license. FinCEN issued guidance explaining this aspect of the final rule in  2016."], "subsections": []}, {"section_title": "Institutions Found New Mortgage Term Disclosure Rules Burdensome, but Some May Be Misinterpreting Requirements", "paragraphs": ["In all of our focus groups and many of our interviews, representatives of  community banks and credit unions said that new requirements  mandating consolidated disclosures to consumers for mortgage terms  and fees have increased the time their staff spend on compliance,  increased the cost of providing mortgage lending services, and delayed  the completion of mortgages for customers. The Dodd Frank Act directed  CFPB to issue new requirements to integrate mortgage loan disclosures  that previously had been separately required by the Truth-in-Lending Act  (TILA) and the Real Estate Settlement Procedures Act (RESPA), and  their implementing regulations, Regulation Z and X, respectively.  Effective in October 2015, the combined TILA-RESPA Integrated  Disclosure (known as TRID) requires mortgage lenders to disclose certain  mortgage terms, conditions, and fees to loan applicants during the  origination process for certain mortgage loans and prescribe how the  disclosures should be made. The disclosure provisions also require lenders, in the absence of specified exceptions, to reimburse or refund to  borrowers portions of certain fees that exceed the estimates previously  provided in order to comply with the revised regulations.", "Under TRID, lenders generally must provide residential mortgage loan  applicants with two forms, and deliver these documents within specified  time frames (as shown in fig. 1).", "Within 3 business days of an application and at least 7 business days  before a loan is consummated, lenders must provide the applicant  with the loan estimate, which includes estimates for all financing costs  and fees and other terms and conditions associated with the potential  loan. If circumstances change after the loan estimate has been  provided (for example, if a borrower needs to change the loan  amount), a new loan estimate may be required.", "At least 3 days before a loan is consummated, lenders must provide  the applicant with the closing disclosure, which has the loan\u2019s actual  terms, conditions, and associated fees. If the closing disclosure is  mailed to an applicant, lenders must wait an additional 3 days for the  applicant to receive it before they can execute the loan, unless they  can demonstrate that the applicant has received the closing  disclosure.", "If the annual percentage rate or the type of loan change after the  closing disclosure is provided, or if a prepayment penalty is added, a  new closing disclosure must be provided and a new 3-day waiting  period is required. Other changes made to the closing disclosure  require the provision of a revised closing disclosure, but a new 3-day  waiting period is not required.", "If the fees in the closing disclosure are more than the fees in the loan  estimate (subject to some exceptions and tolerances discussed later in  this section), the lender must reimburse the applicant for the amount of  the increase in order to comply with the applicable regulations.", "In all of our focus groups and most of our interviews, representatives of  community banks and credit unions said that TRID has increased the time  required to comply with mortgage disclosure requirements and increased  the cost of mortgage lending. In half of our focus groups, participants  discussed how they have had to spend additional time ensuring the  accuracy of their initial estimates of mortgage costs, including fees  charged by third parties, in part because they are now financially  responsible for changes in fees during the closing process. Some  participants also discussed how they have had to hire additional staff to  meet TRID\u2019s requirements. In one focus group of community banks,  participants described how mortgage loans frequently involve the use of  multiple third parties, such as appraisers and inspectors, and obtaining  accurate estimates of the amounts these parties will charge for their  services within the 3-day period prescribed by TRID can be difficult. The  community banks we spoke with also discussed how fees from these  parties often change at closing, and ensuring an accurate estimate at the  beginning of the process was not always possible. As a result, some  representatives said that community banks and credit unions have had to  pay to cure or correct the difference in changed third-party fees that are  outside their control. In most of our focus groups and some of our  interviews, representatives told us that this TRID requirement has made  originating a mortgage more costly for community banks and credit  unions.", "Community banks and credit unions in half of our focus groups and some  of our interviews also told us that TRID\u2019s requirements are complex and  difficult to understand, which adds to their compliance burden.  Participants in one focus group noted that CFPB\u2019s final rule implementing  TRID was very long\u2014the rule available on CFPB\u2019s website is more than  1,800 pages including the rule\u2019s preamble\u2014and has many scenarios that  require different actions by mortgage lenders or trigger different  responsibilities as the following examples illustrate.", "Some fees in the loan estimate, such as prepaid interest, may be  subsequently changed provided that the estimates were in good faith.", "Other fees, such as for third-party services where the charge is not  paid to the lender or the lender\u2019s affiliate, may be changed by as  much as 10 percent in aggregate before the lender becomes liable for  the difference.", "However, for some charges the lender must reimburse or refund to  the borrower portions of subsequent increases, such as fees paid to  the creditor, mortgage broker, or a lender affiliate, without any  percentage tolerance.", "Based on a poll we conducted in all six focus groups, 40 of 43  participants said that they had to provide additional training to staff to  ensure that TRID\u2019s requirements were understood, which takes additional  time from serving customers.", "In all of our focus groups and most of our interviews, community banks  and credit unions also said that TRID\u2019s mandatory waiting periods and  disclosure schedules increased the time required to close mortgage  loans, which created burdens for the institutions and their customers.  Several representatives we interviewed told us that TRID\u2019s waiting  periods led to delays in closings of about 15 days. The regulation  mandates that mortgage loans generally cannot be consummated sooner  than 7 business days after the loan estimate is provided to an applicant,  and no sooner than 3 business days after the closing disclosure is  received by the applicant. If the closing disclosure is mailed, the lender  must add another 3 business days to the closing period to allow for  delivery. Representatives in some of our focus groups said that when  changes needed to be made to a loan during the closing period, TRID  requires them to restart the waiting periods, which can increase delays.  For example, if the closing disclosure had been provided, and the loan  product needed to be changed, a new closing disclosure would have to  be provided and the applicant given at least 3 days to review it. Some  representatives we interviewed said that their customers are frustrated by  these delays and would like to close their mortgages sooner than TRID  allows. Others said that TRID\u2019s waiting periods decreased flexibility in  scheduling the closing date, which caused problems for homebuyers and  sellers (for instance, because transactions frequently have to occur on the  same day).", "However, CFPB officials and staff of a consumer group said that TRID  has streamlined previous disclosure requirements and is important for  ensuring that consumers obtaining mortgages are protected. CFPB  reported that for more than 30 years lenders have been required by law to  provide mortgage disclosures to borrowers, and CFPB staff noted that  prior time frames were similar to those required by TRID and Regulation  Z. CFPB also noted that information on the disclosure forms that TRID  replaced was sometimes overlapping, used inconsistent terminology, and  could confuse consumers. In addition, CFPB staff and staff of a consumer  group said that the previous disclosures allowed some mortgage-related  fees to be combined, which prevented borrowers from knowing what  charges for specific services were. They said that TRID disclosures better  highlight important items for home buyers, allowing them to more readily  compare loan options. Furthermore, CFPB staff told us that before TRID,  lenders and other parties commonly increased a mortgage loan\u2019s fees  during the closing process, and then gave borrowers a \u201ctake it or leave it\u201d  choice just before closing. As a result, borrowers often just accepted the  increased costs. CFPB representatives said that TRID protects  consumers from this practice by shifting the responsibility for most fee  increases to lenders, and increases transparency in the lending process.", "CFPB staff told us that it is too early to definitively identify what impact  TRID has had on borrowers\u2019 understanding of mortgage terms, but told us  that some information they have seen indicated that it has been helpful.  For example, CFPB staff said that preliminary results from the National  Survey of Mortgage Originations conducted in 2017 found that consumer  confidence in mortgage lending increased. While CFPB staff said that  this may indicate that TRID, which became effective in October 2015, has  helped consumers better understand mortgage terms, they noted that the  complete survey results are not expected to be released until 2018. CFPB  staff said that these results should provide valuable information on how  well consumers generally understood mortgage terms and whether  borrowers were comparison shopping for loans that could be used to  analyze TRID\u2019s effects on consumer understanding of mortgage products.", "CFPB staff also told us that complying with TRID should not result in  significant time being added to the mortgage closing process. Based on  the final rule, they noted that TRID\u2019s waiting periods should not lead to  delays of more than 3 days. CFPB staff also pointed out that the overall  7-day waiting period and the 3-day waiting period can be modified or  waived if the consumer has a bona fide personal financial emergency,  and thus should not be creating delays for those consumers. To waive the  waiting period, consumers have to provide the lender with a written  statement that describes the emergency. CFPB staff also said that  closing times are affected by a variety of factors and can vary  substantially, and that the delays that community banks and credit unions  we spoke with reported may not be representative of the experiences of  other lenders. A preliminary CFPB analysis of industry-published  mortgage closing data found that closing times increased after it first  implemented TRID, but that the delays subsequently declined. CFPB staff  also said that they plan to analyze closing times using HMDA data now  that they are collecting these data, and that they expect that delays that  community banks and credit unions may have experienced so far would  decrease as institutions adjusted to the new requirements.", "Based on our review of TRID\u2019s requirements and discussions with  community banks and credit unions, some of the burden related to TRID  that community banks and credit unions described appeared to result  from institutions taking actions not required by regulations, and  community banks and credit unions told us they still were confused about  TRID requirements. For example, representatives of some institutions we  interviewed said that they believed TRID requires the entire closing  disclosure process to be restarted any time any changes were made to a  loan\u2019s amount. CFPB staff told us that this is not the case, and that  revised loan estimates can be made in such cases without additional  waiting periods. Representatives of several other community banks and  credit unions cited 5- and 10-day waiting periods not in TRID  requirements, or believed that the 7-day waiting period begins after the  closing disclosure is received by the applicant, rather than when the loan  estimate is provided. Participants in one focus group discussed that they  were confused about when to provide disclosures and what needs to be  provided. Representatives of one credit union said that if they did not  understand a requirement, it was in their best interest to delay closing to  ensure they were in compliance.", "CFPB staff said that they have taken several steps to help lenders  understand TRID requirements. CFPB has published a Small Entity  Compliance Guide and a Guide to the Loan Estimate and Closing  Disclosure Forms. As of December 2017, these guides were accessible  on a TRID implementation website that has links to other information  about the rule, as well as blank forms and completed samples. CFPB  staff told us that the bureau conducted several well-attended, in-depth  webinars to explain different aspects of TRID, including one with more  than 20,000 participants, and that recordings of the presentations  remained available on the bureau\u2019s TRID website. CFPB also encourages  institutions to submit questions about TRID through the website, and the  staff said that they review submitted questions for any patterns that may  indicate that an aspect of the regulation is overly burdensome.", "However, the Mortgage Bankers Association reported that CFPB\u2019s  guidance for TRID had not met the needs of mortgage lenders. In a  2017 report on reforming CFPB, this association stated that timely and  accessible answers to frequently asked questions about TRID were still  needed, noting that while CFPB had assigned staff to answer questions,  these answers were not widely circulated. The association also reported  that it had made repeated requests for additional guidance related to  TRID, but the agency largely did not respond with additional materials in  response to these requests.", "Although we found that misunderstandings of TRID requirements could  be creating unnecessary compliance burdens for some small institutions,  CFPB had not assessed the effectiveness of the guidance it provided to  community banks and credit unions. Under the Dodd-Frank Act, CFPB  has a general responsibility to ensure its regulations are not unduly  burdensome, and internal control standards direct federal agencies to  analyze and respond to risks related to achieving their defined objectives.  However, CFPB staff said that they have not directly assessed how well  community banks and credit unions have understood TRID requirements  and acknowledged that some of these institutions may be applying the  regulations improperly. They said that CFPB intends to review the  effectiveness of its guidance, but did not indicate when this review would  be completed. Until the agency assesses how well community banks and  credit unions understand TRID requirements, CFPB may not be able to  effectively respond to the risk that some smaller institutions have  implemented TRID incorrectly, unnecessarily burdening their staff and  delaying consumers\u2019 home purchases."], "subsections": []}, {"section_title": "Community Banks and Credit Unions Appeared to Be Receiving Applicable Regulatory Exemptions, but Expressed Concerns about Examiner Expectations", "paragraphs": ["We did not find that regulators directed institutions to comply with  regulations from which they were exempt, although institutions were  concerned about the appropriateness of examiner expectations. To  provide regulatory relief to community banks and credit unions, Congress  and regulators have sometimes exempted smaller institutions from the  need to comply with all or part of some regulations. Such exemptions are  often based on the size of the financial institution or the level of particular  activities. For example, CFPB exempted institutions with less than $45  million in assets and fewer than 25 closed-end mortgage loans or 500  open-end lines of credit from the expanded HMDA reporting  requirements. In January 2013, CFPB also included exemptions for some  institutions in a rule related to originating loans that meet certain  characteristics\u2014known as qualified mortgages\u2014in order for the  institutions to receive certain liability protections if the loans later go into  default. To qualify for this treatment, the lenders must make a good faith  effort to determine a borrower\u2019s ability to repay a loan and the loan must  not include certain risky features (such as interest-only or balloon  payments). In its final rule, CFPB included exemptions that allow small  creditors to originate loans with certain otherwise restricted features (such  as balloon payments) and still be considered qualified mortgage loans.", "Concerns expressed to legislators about exemptions not being applied  appeared to be based on misunderstandings of certain regulations. For  example, in June 2016, a bank official testified that he thought his bank  would be exempt from all of CFPB\u2019s requirements. However, CFPB\u2019s  rules applicable to banks apply generally to all depository institutions,  although CFPB only conducts compliance examinations for institutions  with assets exceeding $10 billion. The depository institution regulators  continue to examine institutions with assets below this amount (the  overwhelming majority of banks and credit unions) for compliance with  regulations enacted by CFPB.", "Although not generalizable, our analysis of select examinations did not  find that regulators directed institutions to comply with requirements from  which they were exempt. In our interviews with representatives from 17  community banks and credit unions, none of the institutions\u2019  representatives identified any cases in which regulators required their  institution to comply with a regulatory requirement from which they should  have been exempt. We also randomly selected and reviewed examination  reports and supporting material for 28 examinations conducted by the  regulators to identify any instances in which the regulators had not  applied exemptions. From our review of the 28 examinations, we found  no instances in the examination reports or the scoping memorandums  indicating that examiners had required these institutions to comply with  the regulations covered by the eight selected exemptions. Because of the  limited number of the examinations we reviewed, we cannot generalize  our findings to the regulatory treatment of all institutions qualifying for  exemptions.", "Although not identifying issues relating to exemptions, representatives of  community banks and credit unions in about half of our interviews and  focus groups expressed concerns that their regulators expected them to  follow practices they did not feel corresponded to the size or risks posed  by their institutions. For example, representatives from one institution we  interviewed said that examiners directed them to increase BSA/AML  activities or staff, whereas they did not see such expectations as  appropriate for institutions of their size. Similarly, in public forums held by  regulators as part of their EGRPRA reviews (discussed in the next  section) a few bank representatives stated that regulators sometimes  considered compliance activities by large banks to be best practices, and  then expected smaller banks to follow such practices. However, institution  representatives in the public forums and in our interviews and focus  groups that said sometimes regulators\u2019 expectations for their institutions  were not appropriate, but did not identify specific regulations or practices  they had been asked to consider following when citing these concerns.", "To help ensure that applicable exemptions and regulatory expectations  are appropriately applied, federal depository institution regulators told us  they train their staff in applicable requirements and conduct senior-level  reviews of examinations to help ensure that examiners only apply  appropriate requirements and expectations on banks and credit unions.  Regulators said that they do not conduct examinations in a one-size-fits- all manner, and aim to ensure that community banks and credit unions  are held to standards appropriate to their size and business model. To  achieve this, they said that examiners undergo rigorous training. For  example, FDIC staff said that its examiners have to complete four core  trainings and then receive ongoing on-the-job instruction. Each of the four  regulators also said they have established quality assurance programs to  review and assess their examination programs periodically. For example,  each Federal Reserve Bank reviews its programs for examination  inconsistency and the Federal Reserve Board staff conducts continuous  and point-in-time oversight reviews of Reserve Banks\u2019 examination  programs to identify issues or problems, such as examination  inconsistency.", "The depository institution regulators also said that they have processes  for depository institutions to appeal examination findings if they feel they  were held to inappropriate standards. In addition to less formal steps,  such as contacting a regional office, each of the four regulators have an  ombudsman office to which institutions can submit complaints or  concerns about examination findings. Staffs of the various offices are  independent from the regulators\u2019 management and work with the  depository institutions to resolve examination issues and concerns. If the  ombudsman is unable to resolve the complaints, then the institutions can  further appeal their complaints through established processes."], "subsections": []}]}, {"section_title": "Reviews of Regulations Resulted in Some Reduction in Burden, but the Reviews Have Limitations", "paragraphs": ["Federal depository institution regulators address regulatory burden of  their regulated institutions through the rulemaking process and also  through retrospective reviews that may provide some regulatory relief to  community banks. However, the retrospective review process has some  limitations that limit its effectiveness in assessing and addressing  regulatory burden on community banks and credit unions."], "subsections": [{"section_title": "Mechanisms for Regulators to Address Regulatory Burden Include Mandated Decennial Reviews", "paragraphs": ["Federal depository institution regulators can address the regulatory  burden of their regulated institutions throughout the rulemaking process  and through mandated, retrospective or \u201clook back\u201d reviews. According to  the regulators, attempts to reduce regulatory burden start during the initial  rulemaking process. Staff from FDIC, Federal Reserve, NCUA, and OCC  all noted that when promulgating rules, their staff seek input from  institutions and others throughout the process to design requirements that  achieve the goals of the regulation at the most reasonable cost and effort  for regulated entities. Once a rule has been drafted, the regulators  publish it in the Federal Register for public comment. The staff noted that  regulators often make revisions in response to the comments received to  try to reduce compliance burdens in the final regulation.", "After regulations are implemented, banking regulators also address  regulatory burdens by periodically conducting mandated reviews of their  regulations. The Economic Growth and Regulatory Paperwork Reduction  Act of 1996 (EGRPRA) directs three regulators (Federal Reserve, FDIC,  and OCC, as agencies represented on the Federal Financial Institutions  Examination Council) to review at least every 10 years all of their  regulations and through public comment identify areas of the regulations  that are outdated, unnecessary or unduly burdensome on insured  depository institutions. Under the act, the regulators are to categorize  their regulations and provide notice and solicit public comment on all the  regulations for which they have regulatory authority. The act also includes  a number of requirements on how the regulators should conduct the review, including reporting results to Congress. The first EGRPRA review  was completed in 2007. The second EGRPRA review began in 2014 and  the report summarizing its results was submitted to Congress in March  2017.", "While NCUA is not required to participate in the EGRPRA review  (because EGRPRA did not include the agency in the list of agencies that  must conduct the reviews), NCUA has been participating voluntarily.  NCUA\u2019s assessment of its regulations appears in separate sections of the  reports provided to Congress for each of the 2007 and 2017 reviews."], "subsections": [{"section_title": "Bank Regulators\u2019 2017 EGRPRA Review Process and Results", "paragraphs": ["Regulators began the most recent EGRPRA review by providing notice  and soliciting comments in 2014\u20132016. The Federal Reserve, FDIC, and  OCC issued four public notices in the Federal Register seeking  comments from regulated institutions and interested parties on 12  categories of regulations they promulgated. The regulators published a  list of all the regulations they administer in the notices and asked for  comments, including comments on the extent to which regulations were  burdensome. Although not specifically required under EGRPRA, the  regulators also held six public meetings across the country with several  panels of banks and community groups. At each public meeting, at least  three panels of bank officials represented banks with assets of generally  less than $5 billion and a large number of the panels included banks with  less than $2 billion in assets. Panels were dedicated to specific  regulations or sets of regulations. For example, one panel covered  capital-related rules, consumer protection, and director-related rules, and  another addressed BSA/AML requirements. Although panels were  dedicated to specific regulations or sets of regulations, the regulators  invited comment on all of their regulations at all public meetings.", "The regulators then assessed the public comments they received and  described actions they intended to take in response. EGRPRA requires  that the regulators identify the significant issues raised by the comments.  The regulators generally deemed the issues that received the most public  comments as significant. For the 2017 report, representatives at the  Federal Reserve, FDIC, and OCC reviewed, evaluated, and summarized  more than 200 comment letters and numerous oral comments they  received. For interagency regulations that received numerous  comments, such as those relating to capital and BSA/AML requirements,  the comment letters for each were provided to staff of one of the three  regulators or to previously established interagency working groups to  conduct the initial assessments.", "The regulators\u2019 comment assessments also included reviews by each  agency\u2019s subject-matter experts, who prepared draft summaries of the  concerns and proposed agency responses for each of the rules that  received comments. According to one bank regulator, the subject-matter  experts assessed the comments across three aspects: (1) whether a  suggested change to the regulation would reduce bank burdens; (2) how  the change to the regulation would affect the safety and soundness of the  banking system; and (3) whether a statutory change would be required to  address the comment. The summaries drafted by the subject-matter  experts then were shared with staff representing all three regulators and  further revised. The staff of the three regulators said they then met jointly  to analyze the merits of the comments and finalize the comment  responses and the proposed actions for approval by senior management  at all three regulators.", "In the 2017 report summarizing their assessment of the comments  received, the regulators identified six significant areas in which  commenters raised concerns: (1) capital rules, (2) financial condition  reporting (Call Reports), (3) appraisal requirements, (4) examination  frequency, (5) Community Reinvestment Act, and (6) BSA/AML. Based  on our analysis of the 2017 report, the Federal Reserve, FDIC, and OCC  had taken or pledged to take actions to address 11 of the 28 specific  concerns commenters had raised across these six areas. We focused our  analysis on issues within the six significant issues that affected the  smaller institution and defined an action taken by the regulators as a  change or revision to a regulation or the issuance of guidance.", "Capital rules. The regulators noted in the 2017 EGRPRA report that they  received comment letters from more than 30 commenters on the recently  revised capital requirements. Although some of the concerns commenters  expressed related to issues affecting large institutions, some commenters  sought to have regulators completely exempt smaller institutions from the  requirements. Others objected to the amounts of capital that had to be  held for loans made involving more volatile commercial real estate.", "In response, the regulators stated that the more than 500 failures of  banks in the recent crisis, most of which were community banks, justified  requiring all banks to meet the new capital requirements. However, they  pledged in the report to make some changes, and have recently proposed  rules that would alter some of the requirements. For example, on  September 27, 2017, the regulators proposed several revisions to the  capital requirements that would apply to banks not subject to the  advanced approach requirements under the capital rules (generally,  banks with less than $250 billion in assets and less than $10 billion in  total foreign exposure). For example, the proposed rule simplifies the  capital treatment for certain commercial acquisition, development, and  construction loans, and would change the treatment of mortgage  servicing assets.", "Call Reports. The regulators also received more than 30 comments  relating to the reports\u2014known as Call Reports\u2014that banks file with the  regulators outlining their financial condition and performance. Generally,  the commenters requested relief (reducing the number of items required  to be reported) for smaller banks and also asked that the frequency of  reporting for some items be reduced.", "In response to these concerns, the regulators described a review of the  Call Report requirements intended to reduce the number of items to be  reported to the regulators. The regulators had started this effort to  address Call Report issues soon after the most recent EGRPRA process  had begun in June 2014. In the 2017 EGRPRA report, the regulators  noted that they developed a new Call Report form for banks with assets  of less than $1 billion and domestic offices only. For instance, according  to the regulators, the new form reduced the number of items such banks  had to report by 40 percent. Staff from the regulators told us that about  3,500 banks used the new small-bank reporting form in March 2017,  which represented about 68 percent of the banks eligible to use the new  form. OCC officials told us that an additional 100 federally chartered  banks submitted the form for the 2017 second quarter reporting period.  After the issuance of the 2017 EGRPRA report, in June 2017 the  regulators issued additional proposed revisions to the three Call Report  forms that banks are required to complete. These proposed changes are  to become effective in June 2018. For example, one of the proposed  changes to the new community bank Call Report form would change the  frequency of reporting certain data on non-accrual assets\u2014 nonperforming loans that are not generating their stated interest rate\u2014 from quarterly to semi-annually. In November 2017, the agencies issued  further proposed revision to the community bank Call Report that would  delete or consolidate a number of items and add a new, or raise certain  existing, reporting thresholds. The proposed revision would take effect as  of June 2018.", "Appraisals. The three bank regulators and NCUA received more than  160 comments during the 2017 EGRPRA process related to appraisal  requirements. The commenters included banks and others that sought to  raise the size of the loans that require appraisals, and a large number of  appraisers that objected to any changes in the requirements According to  the EGRPRA report, several professional appraiser associations argued  that raising the threshold could undermine the safety and soundness of  lenders and diminish consumer protection for mortgage financing. These  commenters argued that increasing the thresholds could encourage  banks to neglect collateral risk-management responsibilities.", "In response, in July 2017, the regulators proposed raising the threshold  for when an appraisal is required from $250,000 to $400,000 for  commercial real estate loans. The regulators indicated that the appraisal  requirements for 1-4 family residential mortgage loans above the current  $250,000 would not be appropriate at the this time because they believed  having such appraisals for loans above that level increased the safety of  those loans and better protected consumers and because other  participants in the housing market, such as the Department of Housing  and Urban Development and the government-sponsored enterprises, also  required appraisals for loans above that amount. However, the depository  institution regulators included in the proposal a request for comment  about the appraisal requirements for residential real estate and what  banks think are other factors that should be included when considering  the threshold for these loans. As part of the 2017 EGRPRA process, the  regulators also received comments indicating that banks in rural areas  were having difficulty securing appraisers. In the EGRPRA report, the  regulators acknowledged this difficulty and in May 2017, the bank  regulators and NCUA issued agency guidance on how institutions could  obtain temporary waivers and use other means to expand the pool of  persons eligible to prepare appraisals in cases in which suitable appraiser  staff were unavailable. The agencies also responded to commenters who  found the evaluation process confusing by issuing an interagency  advisory on the process in March 2016. Evaluations may be used  instead of an appraisal for certain transactions including those under the  threshold.", "Frequency of safety and soundness examinations. As part of the  2017 EGRPRA process, the agencies also received comments  requesting that they raise the total asset threshold for an insured  depository institution to qualify for the extended 18-month examination  cycle from $1 billion to $2 billion and to further extend the examinations  cycle from 18 months to 36 months.", "During the EGRPRA process, Congress took legislative action to reduce  examination frequency for smaller, well-capitalized banks. In 2015, the  FAST Act raised the threshold for the 18-month examination cycle from  less than $500 million to less than $1 billion for certain well-capitalized  and well-managed depository institutions with an \u201coutstanding\u201d composite  rating and gave the agencies discretion to similarly raise this threshold for  certain depository institutions with an \u201coutstanding\u201d or \u201cgood\u201d composite  rating. The agencies exercised this discretion and issued a final rule in  2016 making qualifying depository institutions with less than $1 billion in  total assets eligible for an 18-month (rather than a 12-month) examination  cycle. According to the EGRPRA report, agency staff estimated that the  final rules allowed approximately 600 more institutions to qualify for an  extended 18-month examination cycle, bringing the total number of  qualifying institutions to 4,793.", "Community Reinvestment Act. The commenters in the 2017 EGRPRA  process also raised various issues relating to the Community  Reinvestment Act, including the geographic areas in which institutions  were expected to provide loans to low- and moderate-income borrowers  and whether credit unions should be required to comply with the act\u2019s  requirements.", "The regulators noted that they were not intending to take any actions to  revise regulations relating to this act because many of the revisions the  commenters suggested would require changes to the statute (that is,  legislative action). The regulators also noted that they had addressed  some of the concerns by revising the Interagency Questions and Answers  relating to this act in 2016. Furthermore, the agencies noted that they  have been reviewing their existing examination procedures and practices  to identify policy and process improvements.", "BSA/AML. The regulators also received a number of comments as part of  the 2017 EGRPRA process on the burden institutions encounter in  complying with BSA/AML requirements. These included the threshold for  reporting currency transactions and suspicious activities. The regulators  also received comments on both BSA/AML examination frequency and  the frequency of safety and soundness examinations generally.", "Agencies typically review BSA/AML compliance programs during safety  and soundness examinations. As discussed previously, regulators  allowed more institutions of outstanding or good composite condition to  be examined every 18 months instead of every 12 months. Institutions  that qualify for less frequent safety-and-soundness examinations also will  be eligible for less frequent BSA/AML examinations. For the remainder of  the issues raised by commenters, the regulators noted they do not have  the regulatory authority to revise the requirements but provided the  comments to FinCEN, which has authority for these regulations. A letter  with FinCEN\u2019s response to the comments was included as an appendix of  the EGRPRA report. In the letter, the FinCEN Acting Director stated that  FinCEN would work through the issues raised by the comments with its  advisory group consisting of regulators, law enforcement staff, and  representatives of financial institutions.", "Additional Burden Reduction Actions. In addition to describing some  changes in response to the comments deemed significant, the regulators\u2019  2017 report also includes descriptions of additional actions the individual  agencies have taken or planned to take to reduce the regulatory burden  for banks, including community banks.", "The Federal Reserve Board noted that it changed its Small Bank  Holding Company Policy Statement that allows small bank holding  companies to hold more debt than permitted for larger bank holding  companies. In addition, the Federal Reserve noted that it had made  changes to certain supervisory policies, such as issuing guidance on  assessing risk management for banks with less than $50 billion in  assets and launching an electronic application filing system for banks  and bank holding companies.", "OCC noted that it had issued two final rules amending its regulations  for licensing/chartering and securities-related filings, among other  things. According to OCC staff, the agency conducted an internal  review of its agency-specific regulations and many of the changes to  these regulations came from the internal review. The agency also  noted that it integrated its rules for national banks and federal savings  associations where possible. In addition, OCC noted that it removed  redundant and unnecessary information requests from those made to  banks before examinations.", "FDIC noted that it had rescinded enhanced supervisory procedures  for newly insured banks and reduced the consumer examination  frequency for small and newly insured banks. Similarly to OCC, FDIC  is integrating its rules for both non-state member banks and state- chartered savings and loans associations. In addition, FDIC noted it  had issued new guidance on banks\u2019 deposit insurance filings and  reduced paperwork for new bank applications."], "subsections": []}, {"section_title": "NCUA 2017 EGRPRA Process and Results", "paragraphs": ["The 2017 report also presents the results of NCUA\u2019s concurrent efforts to  obtain and respond to comments as part of the EGRPRA process. NCUA  conducts its review separately from the bank regulators\u2019 review. In four  Federal Register notices in 2015, NCUA sought comments on 76  regulations that it administers. NCUA received about 25 comments  raising concerns about 29 of its regulations, most of which were  submitted by credit union associations. NCUA received no comments on  47 regulations.", "NCUA\u2019s methodology for its regulatory review was similar to the bank  regulators\u2019 methodology. According to NCUA, all comment letters  responding to a particular notice were collected and reviewed by NCUA\u2019s  Special Counsel to the General Counsel, an experienced, senior-level  attorney with overall responsibility for EGRPRA compliance. NCUA staff  told us that criteria applied by the Special Counsel in his review included  relevance, depth of understanding and analysis exhibited by the  comment, and degree to which multiple commenters expressed the same  or similar views on an issue. The Special Counsel prepared a report  summarizing the substance of each comment. The comment summary  was reviewed by the General Counsel and circulated to the NCUA Board  and reviewed by the Board members and staff.", "NCUA identified in its report the following as significant issues relating to  credit union regulation: (1) field of membership and chartering; (2)  member business lending; (3) federal credit union ownership of fixed  assets; (4) expansion of national credit union share insurance coverage;  and (5) expanded powers for credit unions. For these, NCUA took various  actions to address the issues raised in the comments. For example,  NCUA modified and updated its field of credit union membership by  revising the definition of a local community, rural district and underserved  area, which provided greater flexibility to federal credit unions seeking to  add a rural district to their field of membership. NCUA also lessened  some of the restrictions on member lending to small business; and raised  some of the asset thresholds for what would be defined as a small credit  union so that fewer requirements would apply to these credit unions. Also,  in April 2016, the NCUA Board issued a proposed rule that would  eliminate the requirement that federal credit unions must have a plan by  which they will achieve full occupancy of premises within an explicit time  frame. The proposal would allow for federal credit unions to plan for and  manage their use of office space and related premises in accordance with  their own strategic plans and risk-management policies."], "subsections": []}, {"section_title": "Bank Regulators and NCUA 2007 EGRPRA Review Process and Results", "paragraphs": ["The bank and credit union regulators\u2019 process for the 2007 EGRPRA  review also began with Federal Register notices that requested  comments on regulations. The regulators then reviewed and assessed  the comments and issued a report in 2007 to Congress in which they  noted actions they took in some of the areas raised by commenters.", "Our analysis of the regulators\u2019 responses indicated that the regulators  took responsive actions in a few areas. The regulators noted they already  had taken action in some cases (including after completion of a pending  study and as a result of efforts to work with Congress to obtain statutory  changes). However, for the remaining specific concerns, the four  regulators indicated that they would not be taking actions.", "Similar to its response in 2017, NCUA discussed its responses to the  significant issues raised about regulations in a separate section of the  2007 report. Our analysis indicated that NCUA took responsive actions in  about half of the areas. For example, NCUA adjusted regulations in one  case and in another case noted previously taken actions. For comments  related to three other areas, NCUA took actions not reflected in the 2007  report because the actions were taken over a longer time frame (in some  cases, after 8 years). In the remaining areas, NCUA deemed actions as  not being desirable in four cases and outside of its authority in two other  cases."], "subsections": []}, {"section_title": "Other Retrospective Reviews", "paragraphs": ["The bank regulators do not conduct other retrospective reviews of  regulations outside of the EGRPRA process. We requested information  from the Federal Reserve, FDIC, and OCC about any discretionary  regulatory retrospective reviews that they performed in addition to the  EGRPRA review during 2012\u20132016. All three regulators reported to us  they have not conducted any retrospective regulatory reviews outside of  EGRPRA since 2012. However, under the Regulatory Flexibility Act  (RFA), federal agencies are required to conduct what are referred to as  section 610 reviews. The purpose of these reviews is to determine  whether certain rules should be continued without change, amended, or  rescinded consistent with the objectives of applicable statutes, to  minimize any significant economic impact of the rules upon a substantial  number of small entities. Section 610 reviews are to be conducted  within 10 years of an applicable rule\u2019s publication. As part of other work,  we assessed the bank regulators\u2019 section 610 reviews and found that the  Federal Reserve, FDIC, and OCC conducted retrospective reviews that  did not fully align with the Regulatory Flexibility Act\u2019s requirements.  Officials at each of the agencies stated that they satisfy the requirements  to perform section 610 reviews through the EGRPRA review process.  However, we found that the requirements of the EGRPRA reviews differ  from those of the RFA-required section 610 reviews, and we made  recommendations to these regulators to help ensure their compliance  with this act in a separate report issued in January 2018.", "In addition to participating in the EGRPRA review, NCUA also reviews  one-third of its regulations every year (each regulation is reviewed every  3 years). NCUA\u2019s \u201cone-third\u201d review employs a public notice and  comment process similar to the EGRPRA review. If a specific regulation  does not receive any comments, NCUA does not review the regulation.  For the 2016 one-third review, NCUA did not receive comments on 5 of  16 regulations and thus these regulations were not reviewed. NCUA  made technical changes to 4 of the 11 regulations that received  comments.", "In August 2017, NCUA staff announced they developed a task force for  conducting additional regulatory reviews, including developing a 4-year  agenda for reviewing and revising NCUA\u2019s regulations. The primary  factors they said they intend to use to evaluate their regulations will be  the magnitude of the benefit and the degree of effort that credit unions  must expend to comply with the regulations. Because the 4-year reviews  will be conducted on all of NCUA\u2019s regulations, staff noted that the annual  one-third regulatory review process will not be conducted again until  2020."], "subsections": []}]}, {"section_title": "Limitations of Reviews of Burden Include CFPB Exclusion and Lack of Quantitative Analysis", "paragraphs": ["Our analysis of the EGRPRA review found three limitations to the current  process."], "subsections": [{"section_title": "CFPB Not Included and Significant Mortgage Regulations Not Assessed", "paragraphs": ["First, the EGRPRA statute does not include CFPB and thus the significant  mortgage-related regulations and other regulations that it administers\u2014 regulations that banks and credit unions must follow\u2014were not included  in the EGRPRA review. Under the Dodd-Frank Act, CFPB was given  financial regulatory authority, including for regulations implementing the  Home Mortgage Disclosure Act (Regulation C); the Truth-in-Lending Act  (Regulation Z); and the Truth-in-Savings Act (Regulation DD). These  regulations apply to many of the activities that banks and credit unions  conduct; the four depository institution regulators conduct the large  majority of examinations of these institutions\u2019 compliance with these  CFPB-administered regulations. However, EGRPRA was not amended  after the Dodd-Frank Act to include CFPB as one of the agencies that  must conduct the EGRPRA review.", "During the 2017 EGRPRA review, the bank regulators only requested  public comments on consumer protection regulations for which they have  regulatory authority. But the banking regulators still received some  comments on the key mortgage regulations and the other regulations that  CFPB now administers. Our review of 2017 forum transcripts identified  almost 60 comments on mortgage regulations, such as HMDA and  TRID.", "The bank regulators could not address these mortgage regulation-related  comments because they no longer had regulatory authority over these  regulations; instead, they forwarded these comment letters to CFPB staff.  According to CFPB staff, their role in the most recent EGRPRA process  was very limited. CFPB staff told us they had no role in assessing the  public comments received for purposes of the final 2017 EGRPRA report.  According to one bank regulator, the bank regulators did not share non- mortgage regulation-related letters with CFPB staff because those  comment letters did not involve CFPB regulations. Another bank regulator  told us that CFPB was offered the opportunity to participate in the  outreach meetings and were kept informed of the EGRPRA review during  the quarterly FFIEC meetings that occurred during the review. Before the  report was sent to Congress, CFPB staff said that they reviewed several  late-stage drafts, but generally limited their review to ensuring that  references to CFPB\u2019s authority and regulations and its role in the  EGRPRA process were properly characterized and explained. As a  member of FFIEC, which issued the final report, CFPB\u2019s Director was  given an opportunity to review the report again just prior to its approval by  FFIEC.", "CFPB must conduct its own reviews of regulations after they are  implemented. Section 1022(d) of the Dodd-Frank Act requires CFPB to  conduct an assessment of each significant rule or order adopted by the  bureau under federal consumer financial law. CFPB must publish a  report of the assessment not later than 5 years after the effective date of  such rule or order. The assessment must address, among other relevant  factors, the rule\u2019s effectiveness in meeting the purposes and objectives of  title X of the Dodd-Frank Act and specific goals stated by CFPB. The  assessment also must reflect available evidence and any data that CFPB  reasonably may collect. Before publishing a report of its assessment,  CFPB must invite public comment on recommendations for modifying,  expanding, or eliminating the significant rule or order.", "CFPB announced in Federal Register notices in spring 2017 that it was  commencing assessments of rules related to Qualified Mortgage/Ability- to-Repay requirements, remittances, and mortgage servicing  regulations. The notices described how CFPB planned to assess the  regulations. In each notice, CFPB requested comment from the public on  the feasibility and effectiveness of the assessment plan, data, and other  factual information that may be useful for executing the plan;  recommendations to improve the plan and relevant data; and data and  other factual information about the benefits, costs, impacts, and  effectiveness of the significant rule. Reports of these assessments are  due in late 2018 and early 2019. According to CFPB staff, the requests  for data and other factual information are consistent with the statutory  requirement that the assessment must reflect available evidence and any  data that CFPB reasonably may collect. The Federal Register notices  also describe other data sources that CFPB has in-house or has been  collecting pursuant to this requirement.", "CFPB staff told us that they have not yet determined whether certain  other regulations that apply to banks and credit unions, such as the  revisions to TRID and HMDA requirements, will be designated as  significant and thus subjected to the one-time assessments. CFPB staff  also told us they anticipate that within approximately 3 years after the  effective date of a rule, it generally will have determined whether the rule  is a significant rule for section 1022(d) assessment purposes.", "In tasking the bank regulators with conducting the EGRPRA reviews,  Congress indicated its intent was to require these regulators to review all  regulations that could be creating undue burden on regulated institutions.", "According to a Senate committee report relating to EGRPRA, the purpose  of the legislation was to minimize unnecessary regulatory impediments for  lenders, in a manner consistent with safety and soundness, consumer  protection, and other public policy goals, so as to produce greater  operational efficiency. Some in Congress have recognized that the  omission of CFPB in the EGRPRA process is problematic, and in 2015  legislation was introduced to require that CFPB\u2014and NCUA\u2014formally  participate in the EGRPRA review.", "Currently, without CFPB\u2019s participation, key regulations that affect banks  and credit unions may not be subject to the review process. In addition,  these regulations may not be reviewed if CFPB does not deem them  significant. Further, if reviewed, CFPB\u2019s mandate is for a one-time, not  recurring, review. CFPB staff told us that they have two additional  initiatives designed to review its regulations, both of which have been  announced in CFPB\u2019s spring and fall 2017 Semiannual Regulatory  Agendas. First, CFPB launched a program to periodically review  individual existing regulations\u2014or portions of large regulations\u2014to  identify opportunities to clarify ambiguities, address developments in the  marketplace, or modernize or streamline provisions. Second, CFPB  launched an internal task force to coordinate and bolster their continuing  efforts to identify and relieve regulatory burdens, including with regard to  small businesses such as community banks that potentially will address  any regulation the agency has under its jurisdiction. Staff told us the  agency has been considering suggestions it received from community  banks and others on ways to reduce regulatory burden. However, CFPB  has not provided public information specifically on the extent to which it  intends to review regulations applicable to community banks and credit  unions and other institutions or provided information on the timing and  frequency of the reviews. In addition, it has not indicated the extent to  which it will coordinate the reviews with the federal depository institution  regulators as part of the EGRPRA reviews. Until CFPB publicly provides  additional information indicating its commitment to periodically review the  burden of all its regulations, community banks, credit unions, and other  depository institutions may face diminished opportunities for relief from  regulatory burden."], "subsections": []}, {"section_title": "Regulators Have Not Conducted or Reported Quantitative Analyses", "paragraphs": ["Second, the federal depository institution regulators have not conducted  or reported on quantitative analyses during the EGRPRA process to help  them determine if changes to regulations would be warranted. Our  analysis of the 2017 report indicated that in responses to comments in  which the regulators did not take any actions, the regulators generally  only provided their arguments against taking actions and did not cite  analysis or data to support their narrative. In contrast, other federal  agencies that are similarly tasked with conducting retrospective regulatory  reviews are required to follow certain practices for such reviews that could  serve as best practices for the depository institution regulators. For  example, the Office of Management and Budget\u2019s Circular A-4 guidance  on regulatory analysis notes that a good analysis is transparent and  should allow qualified third parties reviewing such analyses to clearly see  how estimates and conclusions were determined. In addition, executive  branch agencies that are tasked under executive orders to conduct  retrospective reviews of regulations they issue generally are required  under these orders to collect and analyze quantitative data as part of  assessing the costs and benefits of changing existing regulations.", "However, EGRPRA does not require the regulators to collect and report  on any quantitative data they collected or analyzed as part of assessing  the potential burden of regulations. Conducting and reporting on how they  analyzed the impact of potential regulatory changes to address burden  could assist the depository institution regulators in conducting their  EGRPRA reviews. For example, as discussed previously, Community  Reinvestment Act regulations were deemed a significant issue, with  commenters questioning the relevance of requiring small banks to make  community development loans and suggesting that the asset threshold for  this requirement be raised from $1 billion to $5 billion. The regulators told  us that if the thresholds were raised, then community development loans  would decline, particularly in underserved communities. However,  regulators did not collect and analyze data for the EGRPRA review to  determine the amount of community development loans provided by  banks with assets of less than $1 billion; including a discussion of  quantitative analysis might have helped show that community  development loans from smaller community banks provided additional  credit in communities\u2014and thus helped to demonstrate the benefits of not  changing the requirement as commenters requested.", "By not performing and reporting quantitative analyses where appropriate  in the EGRPRA review, the regulators may be missing opportunities to  better assess regulatory impacts after a regulation has been  implemented, including identifying the need for any changes or benefits  from the regulations and making their analyses more transparent to  stakeholders. As the Office of Management and Budget\u2019s Circular A-4  guidance on the development of regulatory analysis noted, sound  quantitative estimates of costs and benefits, where feasible, are  preferable to qualitative descriptions of benefits and costs because they  help decision makers understand the magnitudes of the effects of  alternative actions. By not fully describing their rationale for the  analyses that supported their decisions, regulators may be missing  opportunities to better communicate their decisions to stakeholders and  the public."], "subsections": []}, {"section_title": "Reviews Have Not Considered Cumulative Effects of Regulations", "paragraphs": ["Lastly, in the EGRPRA process, the federal depository institution  regulators have not assessed the ways that the cumulative burden of the  regulations they administer may have created overlapping or duplicative  requirements. Under the current process, the regulators have responded  to issues raised about individual regulations based on comments they  have received, not on bodies of regulations. However, congressional  intent in tasking the depository institution regulators with the EGRPRA  reviews was to ensure that they considered the cumulative effect of  financial regulations. A 1995 Senate Committee on Banking, Housing,  and Urban Affairs report stated while no one regulation can be singled out  as being the most burdensome, and most have meritorious goals, the  aggregate burden of banking regulations ultimately affects a bank\u2019s  operations, its profitability, and the cost of credit to customers. For  example, financial regulations may have created overlapping or  duplicative regulations in the areas of safety and soundness. One primary  concern noted in the EGRPRA 2017 report was the amount of information  or data banks are required to provide to regulators. For example, the  cumulative burden of information collection was raised by commenters in  relation to Call Reports, Community Reinvestment Act, and BSA/AML  requirements. But in the EGRPRA report, the regulators did not examine  how the various reporting requirements might relate to each other or how  they might collectively affect institutions.", "In contrast, the executive branch agencies that conduct retrospective  regulatory reviews must consider the cumulative effects of their own  regulations, including cumulative burdens. For example, Executive  Order 13563 directs agencies, to the extent practicable, to consider the  costs of cumulative regulations. Executive Order 13563 does not apply  to independent regulatory agencies such as the Federal Reserve, FDIC,  OCC, NCUA, or CFPB. A memorandum from the Office of Management  and Budget provided guidance to the agencies required to follow this  order for assessing the cumulative burden and costs of regulations. The  actions suggested for careful consideration include conducting early  consultations with affected stakeholders to discuss potential interactions  between rulemaking under consideration and existing regulations as well  as other anticipated regulatory requirements. The executive order also  directs agencies to consider regulations that appear to be attempting to  achieve the same goal. However, other researchers often acknowledge  that cumulative assessments of burden are difficult. Nevertheless, until  the Federal Reserve, FDIC, OCC, and NCUA identify ways to consider  the cumulative burden of regulations, they may miss opportunities to  streamline bodies of regulations to reduce the overall compliance burden  among financial institutions, including community banks and credit  unions. For example, regulations applicable to specific activities of banks, such as lending or capital, could be assessed to determine if they have  overlapping or duplicative requirements that could be revised without  materially reducing the benefits sought by the regulations."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["New regulations for financial institutions enacted in recent years have  helped protect mortgage borrowers, increase the safety and soundness of  the financial system, and facilitate anti-terrorism and anti-money  laundering efforts. But the regulations also entail compliance burdens,  particularly for smaller institutions such as community banks and credit  unions, and the cumulative burden on these institutions can be significant.  Representatives from the institutions with which we spoke cited three sets  of regulations\u2014HMDA, BSA/AML, and TRID\u2014as most burdensome for  reasons that included their complexity. In particular, the complexity of  TRID regulations appears to have contributed to misunderstandings that  in turn caused institutions to take unnecessary actions. While regulators  have acted to reduce burdens associated with the regulations, CFPB has  not assessed the effectiveness of its TRID guidance. Federal internal  control standards require agencies to analyze and respond to risks to  achieving their objectives, and CFPB\u2019s objectives include addressing  regulations that are unduly burdensome. Assessing the effectiveness of  TRID guidance represents an opportunity to reduce misunderstandings  that create additional burden for institutions and also affect individual  consumers (for instance, by delaying mortgage closings).", "The federal depository institution regulators (FDIC, Federal Reserve,  OCC, as well as NCUA) also have opportunities to enhance the activities  they undertake during EGRPRA reviews. Congress intended that the  burden of all regulations applicable to depository institutions would be  periodically assessed and reduced through the EGRPRA process. But  because CFPB has not been included in this process, the regulations for  which it is responsible were not assessed, and CFPB has not yet  provided public information about what regulations it will review, and  when, and whether it will coordinate with other regulators during EGPRA  reviews. Until such information is publicly available, the extent to which  the regulatory burden of CFPB regulation will be periodically addressed  remains unclear. The effectiveness of the EGRPRA process also has  been hampered by other limitations, including not conducting and  reporting on depository institution regulators\u2019 analysis of quantitative data  and assessing the cumulative effect of regulations on institutions.  Addressing these limitations in their EGRPRA processes likely would  make the analyses the regulators perform more transparent, and  potentially result in additional burden reduction."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We make a total of 10 recommendations, which consist of 2  recommendations to CFPB, 2 to FDIC, 2 to the Federal Reserve, 2 to  OCC, and 2 to NCUA.", "The Director of CFPB should assess the effectiveness of TRID  guidance to determine the extent to which TRID\u2019s requirements are  accurately understood and take steps to address any issues as  necessary. (Recommendation 1)", "The Director of CFPB should issue public information on its plans for  reviewing regulations applicable to banks and credit unions, including  information describing the scope of regulations the timing and  frequency of the reviews, and the extent to which the reviews will be  coordinated with the federal depository institution regulators as part of  their periodic EGRPRA reviews. (Recommendation 2)", "The Chairman, FDIC, should, as part of the EGRPRA process,  develop plans for their regulatory analyses describing how they will  conduct and report on quantitative analysis whenever feasible to  strengthen the rigor and transparency of the EGRPRA process.  (Recommendation 3)", "The Chairman, FDIC, should, as part of the EGRPRA process,  develop plans for conducting evaluations that would identify  opportunities for streamlining bodies of regulation. (Recommendation  4)", "The Chair, Board of Governors of the Federal Reserve System,  should, as part of the EGRPRA process develop plans for their  regulatory analyses describing how they will conduct and report on  quantitative analysis whenever feasible to strengthen the rigor and  transparency of the EGRPRA process. (Recommendation 5)", "The Chair, Board of Governors of the Federal Reserve System,  should, as part of the EGRPRA process, develop plans for conducting  evaluations that would identify opportunities to streamline bodies of  regulation. (Recommendation 6)", "The Comptroller of the Currency should, as part of the EGRPRA  process, develop plans for their regulatory analyses describing how  they will conduct and report on quantitative analysis whenever  feasible to strengthen the rigor and transparency of the EGRPRA  process. (Recommendation 7)", "The Comptroller of the Currency should, as part of the EGRPRA  process, develop plans for conducting evaluations that would identify  opportunities to streamline bodies of regulation. (Recommendation 8)", "The Chair of NCUA should, as part of the EGRPRA process, develop  plans for their regulatory analyses describing how they will conduct  and report on quantitative analysis whenever feasible to strengthen  the rigor and transparency of the EGRPRA process.  (Recommendation 9)", "The Chair of NCUA should, as part of the EGRPRA process, develop  plans for conducting evaluations that would identify opportunities to  streamline bodies of regulation. (Recommendation 10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to CFPB, FDIC, FinCEN, the Federal  Reserve, NCUA, and OCC. We received written comments from CFPB,  FDIC, the Federal Reserve, NCUA, and OCC that we have reprinted in  appendixes II through VI, respectively. CFPB, FDIC, FinCEN, the Federal  Reserve, NCUA, and OCC also provided technical comments, which we  incorporated as appropriate.", "In its written comments, CFPB agreed with the recommendation to  assess its TRID guidance to determine the extent to which it is  understood. CFPB stated it intends to solicit public input on how it can  improve its regulatory guidance and implementation support. In addition,  CFPB agreed with the recommendation on issuing public information on  its plan for reviewing regulations. CFPB committed to developing  additional plans with respect to their reviews of key regulations and to  publicly releasing such information and in the interim, CFPB stated it  intends to solicit public input on how it should approach reviewing  regulations.", "FDIC stated that it appreciated the two recommendations and stated that  it would work with the Federal Reserve and OCC to find the most  appropriate ways to ensure that the three regulators continue to enhance  their rulemaking analyses as part of the EGRPRA process. In addition,  FDIC stated that as part of the EGRPRA review process, it would  continue to monitor the cumulative effects of regulation through for  example, a review of the community and quarterly banking studies and  community bank Call Report data.", "The Federal Reserve agreed with the two recommendations pertaining to  the EGRPRA process. Regarding the need conduct and report on  quantitative analysis whenever feasible to strengthen and to increase the  transparency of the EGRPRA process, the Federal Reserve plans to  coordinate with FDIC and OCC to identify opportunities to conduct  quantitative analyses where feasible during future EGRPRA reviews. With  respect to the second recommendation, the Federal Reserve agreed that  the cumulative impact of regulations on depository institutions is important  and plans to coordinate with FDIC and OCC to identify further  opportunities to seek comment on bodies of regulations and how they  could be streamlined.", "NCUA acknowledged the report\u2019s conclusions as part of their voluntary  compliance with the EGRPRA process; NCUA should improve its  qualitative analysis and develop plans for continued reductions to  regulatory burden within the credit union industry. In its letter, NCUA  noted it has appointed a regulatory review task force charged with  reviewing and developing a four-year plan for revising their regulations  and the review will consider the benefits of NCUA\u2019s regulations as well as  the burden they have on credit unions.", "In its written comments, OCC stated that it understood the importance of  GAO\u2019s recommendations. They stated they OCC will consult and  coordinate with the Federal Reserve and FDIC to develop plans for  regulatory analysis, including how the regulators should conduct and  report on quantitative analysis and also, will work with these regulators to  increase the transparency of the EGRPRA process. OCC also stated it  will consult with these regulators to develop plans, as part of the  EGRPRA process, to conduct evaluations that identify ways to decrease  the regulatory burden created by bodies of regulations.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to CFPB, FDIC, FinCEN, the  Federal Reserve, NCUA, and OCC. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the burdens that regulatory compliance places on  community banks and credit unions and actions that federal regulators  have taken to reduce these burdens; specifically:   (1) the financial  regulations that community banks and credit unions reported viewing as  the most burdensome, the characteristics of those regulations that make  them burdensome, and the benefits are associated with those regulations  and (2) federal financial regulators\u2019 efforts to reduce any existing  regulatory burden on community banks and credit unions.", "To identify the regulations that community banks and credit unions  viewed as the most burdensome, we first constructed a sample frame of  financial institutions that met certain criteria for being classified as  community banks or community-focused credit unions for the purposes of  this review. These sample frames were then used as the basis for  drawing our non-probability samples of institutions for purposes of  interviews, focus group participation, and document review. Defining a  community bank is important because, as we have reported, regulatory  compliance may be more burdensome for community banks and credit  unions than for larger banks because they are not as able to benefit from  economies of scale in compliance resources. While there is no single  consensus definition for what constitutes a community bank, we reviewed  criteria for defining community banks developed by the Federal Deposit  Insurance Corporation (FDIC), officials from the Independent Community  Bankers Association, the Office of the Comptroller of the Currency  (OCC). Based on this review, we determined that institutions that had the  following characteristics would be the most appropriate to include in our  universe of institutions, (1) fewer total assets, (2) engage in traditional  lending and deposit taking activities, have limited geographic scope, and  (3) did not have complex operating structures.", "To identify banks that met these characteristics, we began with all banks  that filed a Consolidated Reports of Condition and Income (Call Report)  for the first quarter of 2016 (March 31, 2016) and are not themselves  subsidiaries of another bank that filed a Call Report. We then excluded banks using an asset-size threshold, to ensure we are including only  small institutions. Based on interviews with regulators and our review of  the FDIC\u2019s community bank study, we targeted institutions around the $1  billion in assets as the group that could be relatively representative of the  experiences of many community banks in complying with regulations.  Upon review of the Call Reports data, we found that the banks in the 90th  percentile by asset size were had about $1.2 billion, and we selected this  to be an appropriate cutoff for our sample frame. In addition we excluded  institutions with characteristics suggesting they do not engage in typical  community banking activities like such as deposit-taking and lending; and  those with characteristics suggesting they conduct more specialized  operations not typical of community banking, such as credit card banks.  In addition to ensure that we excluded banks whose views of regulatory  compliance might be influenced by being part of a large and/or complex  organization, we also excluded banks with foreign offices and banks that  are subsidiaries of either foreign banks or of holding companies with $50  billion or more in consolidated assets. Finally, as a practical matter, we  excluded banks for which we could not obtain data on one or more of the  characteristics listed below.", "We also relied on a similar framework to construct a sample frame for  credit unions. We sought to identify credit unions that were relatively  small, engaged in traditional lending and deposit taking activities, and had  limited geographic scope. To do this, we began with all insured credit  unions that filed a Call Report for the first quarter of 2016 (March 31,  2016). We then excluded credit unions using an asset-size threshold of  $860 million, which is the 95th percentile of credit unions, to ensure we  are including only smaller institutions. The percentile of credit unions was  higher than the percentile of banks because there are more large banks  than there are credit unions. We then excluded credit unions that did not  engage in activities that are typical of community lending, such as taking  deposits, making loans and leases, and providing consumer checking  accounts, as well as those credit unions with headquarters outside of the  United States.", "We assessed the reliability of data from FFIEC, FDIC, the Federal  Reserve Bank of Chicago, and NCUA by reviewing relevant  documentation and electronically testing the data for missing values or  obvious errors, and we found the data from these sources to be  sufficiently reliable for the purpose of creating sample frames of  community banks and credit unions. The sample frames were then used  as the basis for drawing our nonprobability samples of institutions for  purposes of interviews and focus groups.", "To identify regulations that community banks and credit unions viewed as  among the most burdensome, we conducted structured interviews and  focus groups with a sample of a total of 64 community banks and credit  unions. To reduce the possibility of bias, we selected the institutions to  ensure that banks and credit unions with different asset sizes and from  different regions of the country were included. We also included at least  one bank overseen by each of the three primary federal depository  institution regulators, Federal Reserve, FDIC, NCUA, and OCC in the  sample. We interviewed 17 institutions (10 banks and 7 credit unions)  about which regulations their institutions experienced the most  compliance burden. On the basis of the results of these interviews, we  determined that considerable consensus existed among these institutions  as to which regulations were seen as most burdensome, including those  relating to mortgage fees and terms disclosures to consumers, mortgage  borrower and loan characteristics reporting, and anti-money laundering  activities. As a result, we determined to conduct focus groups with  institutions to identify the characteristics of the regulations identified in our  interviews that made these regulations burdensome. To identify the  burdensome characteristics of the regulations identified in our preliminary  interviews, we selected institutions to participate in three focus groups of  community banks and three focus groups of credit unions.", "For the first focus group of community banks, we randomly selected  20 banks among 647 banks between $500 million and $1 billion  located in nine U.S. census geographical areas using the sample  frame of community banks we developed, and contacted them asking  for their participation. Seven of the 20 banks agreed to participate in  the first focus group. However, mortgages represented a low  percentage of the assets of two participants in the first focus group, so  we revised our selection criteria because two of the regulations  identified as burdensome were related to mortgages.", "For the remaining two focus groups with community banks, we  randomly selected institutions with more than $45 million and no more  than $1.2 billion in assets to ensure that they would be required to  comply with the mortgage characteristics reporting and with at least a  10 percent mortgage to asset ratio to better ensure that they would be  sufficiently experienced with mortgage regulations. After identifying  the large percentage of FDIC regulated banks in the first 20 banks we  contacted, we decided to prioritize contact with banks regulated by  OCC and the Federal Reserve for the institutions on our list. When  banks declined or when we determined an institution merged or was  acquired, we selected a new institution from that state and  preferenced institutions regulated by OCC and the Federal Reserve.", "The three focus groups totaled 23 community banks with a range of  assets. We used a similar selection process for three focus groups of  credit unions consisting of 23 credit unions. We selected credit unions  with at least $45 million in assets so that they would be required to  comply with the mortgage regulations and with at least a 10 percent  mortgage-to-asset ratio.", "During each of the focus groups, we asked the representatives from  participating institutions what characteristics of the relevant regulations  made them burdensome with which to comply. We also polled them about  the extent to which they had to take various actions to comply with  regulations, including hiring or expanding staff resources, investing in  additional information technology resources, or conducting staff training.  During the focus groups, we also confirmed with the participants that the  three sets of regulations (on mortgage fee and other disclosures to  consumers, reporting of mortgage borrower and loan characteristics, and  anti-money laundering activities) were generally the ones they found most  burdensome.", "To identify in more detail the steps a community bank or credit union may  take to comply with the regulations identified as among the most  burdensome, we also conducted an in-depth on-site interview with one  community bank. We selected this institution by limiting the community  bank sample to only those banks in the middle 80 percent of the  distribution in terms of assets, mortgage lending, small business lending,  and lending in general that were no more than 70 miles from Washington,  D.C. We limited the sample in this way to ensure that the institution was  not an outlier in terms of activities or size, and to limit the travel resources  needed to conduct the site visit.", "We also interviewed associations representing consumers to understand  the benefits of these regulations. These groups were selected using  professional judgement of their knowledge of relevant banking  regulations. We interviewed associations representing banks and credit  unions.", "To identify the requirements of the regulations identified as among the  most burdensome, we reviewed the Home Mortgage Disclosure Act  (HMDA) and its implementing regulation, Regulation C; Bank Secrecy Act  and anti-money laundering (BSA/AML) regulations, including those  deriving from the Currency and Foreign Transactions Reporting Act,  commonly known as the Bank Secrecy Act (BSA), and the 2001 USA  PATRIOT Act; and the Integrated Mortgage Disclosure Rule Under the  Real Estate Settlement Procedures Act (RESPA) with the implementing  Regulation X; and the Truth-in-Lending Act (TILA) with implementing  Regulation Z. We reviewed the Consumer Financial Protection Bureau\u2019s  (CFPB) small entity guidance and supporting materials on the TILA- RESPA Integrated Disclosure (TRID) regulation and HMDA to clarify the  specific requirements of each rule and to analyze the information included  in the CFPB guidance.", "We interviewed staff from each of the federal regulators responsible for  implementing the regulations, as well as from the federal regulators  responsible for examining community banks and credit unions. To identify  the potential benefits of the regulations that were considered burdensome  by community banks and credit unions, we interviewed representatives  from four community groups to document their perspectives on the  benefits provided by the identified regulations.", "To determine whether the bank regulators had required banks to comply  with certain provisions from which the institutions might be exempt, we  identified eight exemptions from the Dodd-Frank Wall Street Reform and  Consumer Protection Act of 2010 from which community banks and credit  unions should be exempt and reviewed a small group of the most recent  examinations to identify instances in which a regulator may not have  applied an exemption for which a bank was eligible. We reviewed 20  safety and soundness and consumer compliance examination reports of  community banks and eight safety and soundness examination reports of  credit unions. The bank examination reports we reviewed were for the  first 20 community banks we contacted requesting participation in the first  focus group. The bank examination reports included examinations from  all three bank regulators (FDIC, Federal Reserve, and OCC). The NCUA  examination reports we reviewed were for the eight credit unions that  participated in the second focus group of credit unions. Because of the  limited number of the examinations we reviewed, we cannot generalize  whether regulators extended the exemptions to all qualifying institutions.", "To assess the federal financial regulators\u2019 efforts to reduce the existing  regulatory burden on community banks and credit unions, we identified  the mechanisms the regulators used to identify burdensome regulations  and actions to reduce potential burden. We reviewed laws and  congressional and agency documentation. More specifically, we reviewed  the Economic Growth and Regulatory Paperwork Reduction Act of 1996  (EGRPRA) that requires the Federal Reserve, FDIC, and OCC to review  all their regulations every 10 years and identify areas of the regulations  that are outdated, unnecessary, or unduly burdensome and reviewed the  1995 Senate Banking Committee report, which described the intent of the  legislation. We reviewed the Federal Register notices that bank regulators and NCUA published requesting comments on their  regulations. We also reviewed over 200 comment letters that the  regulators had received through the EGRPRA process from community  banks, credit unions, their trade associations, and others, as well as the  transcripts of all six public forums regulators held as part the 2017  EGRPRA regulatory review efforts they conducted. We analyzed the  extent to which the depository institutions regulators addressed the issues  raised in comments received for the review. In assessing the 2017 and  2007 EGRPRA reports sent to Congress, we reviewed the significant  issues identified by the regulators and determined the extent to which the  regulators proposed or took actions in response to the comments relating  to burden on small entities.", "We compared the requirements of Executive Orders 12866, 13563, and  13610 issued by Office of Management and Budget with the actions taken  by the regulators in implementing their 10-year regulatory retrospective  review. The executive orders included requirements on how executive  branch agencies should conduct retrospective reviews of their  regulations.", "For both objectives, we interviewed representatives from CFPB, FDIC,  Federal Reserve, Financial Crimes Enforcement Network, NCUA, and  OCC to identify any steps that regulators took to reduce the compliance  burden associated with each of the identified regulations and to  understand how they conduct retrospective reviews. We also interviewed  representatives of the Small Business Administration\u2019s Office of  Advocacy, which reviews and comments on the burdens of regulations  affecting small businesses, including community banks.", "We conducted this performance audit from March 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Consumer Financial Protection Bureau", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Board of Governors of the Federal Reserve System", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Federal Deposit Insurance Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the National Credit Union Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Office of the Comptroller of the Currency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Cody J. Goebel (Assistant  Director); Nancy Eibeck (Analyst in Charge); Bethany Benitez; Kathleen  Boggs; Jeremy A. Conley; Pamela R. Davidson; Courtney L. LaFountain;  William V. Lamping; Barbara M. Roesmann; and Jena Y. Sinkfield made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-43", "url": "https://www.gao.gov/products/GAO-19-43", "title": "Export-Import Bank: Enhancements Needed in Credit Program Underwriting Policies and Procedures", "published_date": "2019-05-14T00:00:00", "released_date": "2019-05-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["EXIM serves as the official export credit agency of the United States, providing a range of financial products to support the export of U.S. goods and services. Following the 2007\u20132009 financial crisis, demand for EXIM support increased. However, from July 2015 to May 2019, EXIM lacked a quorum on its Board of Directors and, as a result, was unable to approve medium- and long-term transactions greater than $10 million.", "The Export-Import Bank Reauthorization Act of 2012 includes a provision for GAO to evaluate EXIM's underwriting process. This report discusses the extent to which EXIM's (1) process for updating its underwriting policies and procedures is properly designed and implemented and (2) underwriting policies and procedures for loan and loan guarantee transactions are consistent with guidance for managing federal credit programs. To address these objectives, GAO evaluated EXIM's underwriting policies and procedures against federal guidance and discussed the underwriting process with EXIM officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that Export-Import Bank's (EXIM) process for updating its underwriting policies and procedures was properly designed and implemented. EXIM's Loan, Guarantee and Insurance Manual (Manual) describes EXIM's underwriting policies and procedures for its short-, medium-, and long-term loans and loan guarantees. The Manual describes the responsibilities of divisions and loan officers involved in the underwriting process and is required to be updated at least annually, except for material changes (e.g., changes resulting from legislative actions or compliance with sanctions), which are required to be made as soon as possible.", "EXIM has initiated a process to streamline the Manual, which consists of over 1,400 pages, by separating the policies and procedures, thus allowing for continuous reviews. The underwriting sections of the Manual are tentatively scheduled for review in 2019.", "The primary guidance for designing and managing federal credit programs is Office of Management and Budget Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables . GAO found that EXIM\u2018s policies and procedures were consistent with three of five areas of federal guidance; two areas related to lender and servicer eligibility and risk sharing practices were partially consistent with federal guidance.", "Applicant screening. EXIM's policies and procedures were consistent with guidance in that they require applicants to provide relevant financial information and assessments of applicant eligibility and creditworthiness.", "Loan documentation. EXIM's process was consistent with guidance in that it requires the preparation of loan files, which include the application, credit reports, and related analyses, as well as collateral documentation and loan agreements.", "Collateral requirements. EXIM's process was consistent with guidance in that it requires a security interest in the financed export items.", "Lender and servicer eligibility. EXIM established eligibility and decertification procedures for short-term delegated authority lenders that were consistent with guidance. However, it did not establish similar procedures for medium-term delegated authority lenders.", "Risk sharing practices. EXIM's process was generally consistent with guidance in that EXIM provides loan guarantee terms that officials stated were necessary to achieve program purposes. However, federal guidance also calls for an agency to periodically review programs in which the government bears more than 80 percent of any loss. While EXIM prepares various program reviews, it has not developed procedures to help ensure that its risk sharing practices are routinely reviewed.", "Without enhancements to its policies and procedures, EXIM may allow lenders that are not qualified to underwrite transactions and runs the risk that it will not effectively review its programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations to enhance EXIM's policies and procedures related to (1) the use of medium-term delegated authority lenders and (2) periodic program reviews. EXIM concurred with GAO's recommendations and described actions planned to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The mission of the Export-Import Bank of the United States (EXIM) is to  support the export of U.S. goods and services through loans, loan  guarantees, and insurance, thereby supporting U.S. jobs. Following the  financial crisis of 2007\u20132009, EXIM\u2019s outstanding financial commitments,  or risk exposure, grew to about $112 billion in 2014, primarily in its long- term loans and loan guarantees. However, EXIM\u2019s risk exposure  subsequently decreased to about $61 billion in 2018 primarily because of  two factors. First, from July 1, 2015 to December 4, 2015, EXIM\u2019s  authority to incur new obligations lapsed. Second, from July 20, 2015 to  May 8, 2019, EXIM lacked a quorum on its Board of Directors, and as a  result, it was unable to approve transactions greater than $10 million.", "EXIM is governed by a charter, which requires the transactions it  authorizes to have a reasonable assurance of repayment. To comply  with this requirement, EXIM must manage multiple risks when it extends  export financing, including credit, political, market, and operational risks.  EXIM uses a number of risk-management techniques throughout the  different stages of a transaction, including underwriting, monitoring and  restructuring, and recovering on defaulted transactions.", "The Export-Import Bank Reauthorization Act of 2012 included a provision  for GAO to evaluate, among other things, EXIM\u2019s underwriting process for  its loan and loan guarantee transactions. This is our second report in  response to the act, and it examines the extent to which EXIM\u2019s (1)  process for updating its underwriting policies and procedures is properly  designed and implemented and (2) underwriting policies and procedures  for loan and loan guarantee transactions are consistent with guidance for  managing federal credit programs.", "To assess the extent to which EXIM\u2019s process for updating its  underwriting policies and procedures is properly designed and  implemented, we reviewed EXIM\u2019s policies and procedures for updating  the Loan, Guarantee and Insurance Manual (Manual), discussed the  process with EXIM officials, and assessed the process based on  Standards for Internal Control in the Federal Government. We did not  evaluate EXIM\u2019s compliance with its process for updating its underwriting  policies and procedures or assess its operating effectiveness.", "To assess the extent to which EXIM\u2019s underwriting policies and  procedures governing loan and loan guarantee transactions were  consistent with guidance for managing federal credit programs, we  reviewed relevant requirements and guidance, including the Office of  Management and Budget\u2019s (OMB) Circular A-129 Policies for Federal  Credit Programs and Non-Tax Receivables and the Department of the  Treasury (Treasury) Bureau of the Fiscal Service\u2019s Managing Federal  Receivables: A Guide for Managing Loans and Administrative Debt, to  identify key guidance for managing federal credit programs, including  standards for extending credit, managing and overseeing credit  programs, and managing guaranteed loan lenders and servicers.", "We compared EXIM\u2019s Manual\u2014which describes, among other things,  procedures for assessing loan and loan guarantee applications and  preparing loan documentation\u2014to federal guidance for managing federal  credit programs. As part of this comparison, we assessed whether  policies and procedures included in EXIM\u2019s Manual were consistent with  federal guidance. However, because of EXIM\u2019s limited lending authority  during the period of our audit, we did not verify EXIM\u2019s compliance with its  underwriting policies and procedures or assess their operating  effectiveness. In areas where we found EXIM\u2019s policies and procedures  to be consistent with federal guidance, there may still be opportunities to  improve operating effectiveness.", "We also reviewed EXIM\u2019s Office of Inspector General (OIG) reports since  2014 related to underwriting issues, various laws applicable to EXIM, and  GAO reports related to EXIM. We discussed underwriting requirements  and the due diligence process with EXIM officials. We also discussed  export credit financing and risk sharing practices with an official from the  Organisation for Economic Co-operation and Development (OECD).", "We conducted this performance audit from January 2017 to May 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix I provides more  information on our scope and methodology."], "subsections": [{"section_title": "Background", "paragraphs": ["EXIM is an independent executive branch agency and a wholly owned  U.S. government corporation. EXIM is the official export credit agency  (ECA) of the United States, and its mission is to support the export of  U.S. goods and services, thereby supporting U.S. jobs. EXIM\u2019s charter  states that it should not compete with the private sector. Rather, EXIM\u2019s  role is to assume the credit and country risks that the private sector is  unable or unwilling to accept, while still maintaining a reasonable  assurance of repayment. EXIM must operate within the parameters and  limits authorized by law, including, for example, statutory mandates that it  support small business and promote sub\u2013Saharan African and  environmentally beneficial exports. In addition, EXIM is authorized to  provide financing on a competitive basis with other ECAs and must  submit annual reports to Congress on its actions.", "EXIM operates under the leadership of a president who also serves as  Chairman of EXIM\u2019s Board of Directors. The board is structured to include  five members. All positions are appointed for 4-year terms by the  President of the United States with the advice and consent of the Senate.  The board is responsible for adopting and amending bylaws for the  proper management and functioning of EXIM. Furthermore, the board  approves EXIM\u2019s financing either directly or through delegated authority.  On May 8, 2019, the Senate confirmed a new president and two other  board members, ending the lack of a quorum needed to approve  transactions over $10 million that had existed since July 20, 2015.", "EXIM\u2019s organizational structure includes various offices and divisions  operating under its president. The Office of Board Authorized Finance is  subdivided into business divisions that are responsible for underwriting  related to loans and loan guarantees, including processing applications,  evaluating the compliance of transactions with credit and other policies,  performing financial analyses, negotiating financing terms, coordinating  and synthesizing input to credit recommendations from other divisions,  and presenting credit recommendations for approvals.", "EXIM facilitates support for U.S. exports through three major products: (1)  loans; (2) loan guarantees, which include working capital guarantees; and  (3) export credit insurance. All EXIM obligations carry the full faith and  credit of the U.S. government. Based on its mission to support U.S.  employment, EXIM currently requires a certain amount of U.S. content for  an export contract to receive EXIM financing. EXIM\u2019s loans generally  carry fixed-interest rate terms under the Arrangement on Officially  Supported Export Credits negotiated among OECD members. EXIM\u2019s  loan guarantees cover loans disbursed by private lenders by committing  to pay the lenders if the borrower defaults. Both loans and loan  guarantees may be classified as short-, medium-, or long-term.", "From fiscal year 2008 to fiscal year 2017, EXIM was \u201cself-financing\u201d for  budgetary purposes\u2014financing its operations from receipts collected from  its customers\u2014and operating within the parameters and limits authorized  by Congress. However, according to EXIM, because of the lack of  quorum on the Board of Directors, in fiscal year 2018 it was unable to  approve transactions over $10 million and, as a result, was not able to  generate sufficient cash inflows to fully self-finance program and  administrative costs. EXIM reported that when it is back to being fully  operational, it plans to regain full self-financing status. See figure 1 for  additional details on EXIM\u2019s loans and loan guarantees.", "Short-term loans and loan guarantees: Short-term financing  consists of all transactions with repayment terms of less than 1 year,  while Working Capital Guarantee program short-term financing may  be approved for a single loan or a revolving line of credit that can be  renewed for up to 3 years. In general, if the financed eligible product  contains at least 50 percent U.S. content, then the entire transaction  value is eligible for a working capital guarantee. Generally, for working  capital guarantees, EXIM guarantees 90 percent of the loan\u2019s  principal and interest if the borrower defaults. Therefore, the lender  maintains the risk of the remaining 10 percent. EXIM\u2019s payment of  working capital claims is conditional upon transaction participants\u2019  compliance with EXIM requirements such as underwriting policies,  deadlines for filing claims, payment of premiums and fees, and  submission of proper documentation. EXIM has reported that over 80  percent of its working capital guarantee transactions are approved by  lenders with delegated authority, which means that commercial  lenders approve the guaranteed loans in accordance with agreed- upon underwriting requirements without first obtaining EXIM  approval. If a lender does not have delegated authority, EXIM  performs its own underwriting procedures and approves the  guaranteed loans.", "Medium- and long-term loans and loan guarantees: For medium-  and long-term loan and loan guarantee transactions, EXIM provides  up to 85 percent financing with the remaining 15 percent paid by the  borrower or financed separately. The financing could be less than 85  percent depending on the U.S. content. EXIM\u2019s medium- and long- term loan guarantees generally cover 100 percent of the financed  amount if the borrower defaults. EXIM\u2019s guarantee to the lender is  transferable and unconditional, meaning that EXIM must pay  submitted claims regardless of the cause of default. EXIM generally  underwrites medium- and long-term loans and loan guarantees for  $10 million and less, and EXIM officials with delegated authority  approve the transactions. Further, EXIM has provided certain lenders  delegated authority to underwrite and approve these guarantees.  EXIM underwrites long-term loans and loan guarantees greater than  $10 million, and its Board of Directors approves the transactions."], "subsections": [{"section_title": "EXIM\u2019s Credit Authorizations", "paragraphs": ["As noted earlier, EXIM\u2019s authority to approve transactions lapsed from  July 1, 2015, to December 4, 2015. Further, from July 20, 2015 to May 8,  2019, EXIM\u2019s Board of Directors lacked a quorum, and, as a result, EXIM  was unable to approve transactions greater than $10 million.  Consequently, EXIM\u2019s annual authorizations for loans, loan guarantees,  and export credit insurance decreased from about $20 billion in 2014 to  about $3 billion in 2018, a decrease of about 83 percent. See figure 2  for EXIM\u2019s total authorizations by type and length of term for 2014  through 2018."], "subsections": []}, {"section_title": "EXIM\u2019s Policies and Procedures for Extending Credit", "paragraphs": ["EXIM\u2019s Manual describes EXIM\u2019s underwriting policies and procedures  for each of its products offered, including short-, medium-, and long-term  loans and loan guarantees. The Manual describes the responsibilities of  EXIM\u2019s divisions (e.g., Transportation, Structured and Project Finance, or  Working Capital Finance) involved in the underwriting process.", "EXIM\u2019s Office of Board Authorized Finance is in the process of  streamlining the Manual, which is over 1,400 pages. A goal of this  process is to separate procedures from policies, thus allowing for policies  and procedures to be continuously reviewed. An EXIM official told us that  these steps should improve the agency\u2019s efficiency, transparency, and  accountability. The underwriting sections of the Manual are tentatively  scheduled for review in 2019."], "subsections": []}, {"section_title": "Overview of EXIM\u2019s Underwriting Process", "paragraphs": ["EXIM loan officers perform the underwriting for loans and long-term loan  guarantees. The underwriting of medium-term or working capital loans  guaranteed by EXIM is performed by either EXIM loan officers or qualified  lenders with delegated authority, which allows the lender to authorize a  loan that EXIM guarantees in accordance with agreed-upon underwriting  requirements without first obtaining EXIM approval. When the  underwriting and credit decision is delegated to approved lenders, EXIM  does not perform the underwriting procedures.", "EXIM\u2019s underwriting process calls for thorough credit assessments by  subject matter experts and loan officers. These assessments evaluate  key transactional risks, such as the borrower\u2019s industry, competitive  position, operating performance, liquidity position, leverage, and ability to  service debt obligations. Frequently, credit enhancements are included in  the structure of long-term financing (often in the form of collateral) in order  to decrease the risk of a borrower default but also to increase the  recovery in the event of a default. A risk rating is assigned to the  transaction based on this evaluation which, in turn, determines the  transaction fee that a borrower pays and assists in establishing the level  of loss reserves EXIM must set aside. The credit assessments undergo  multiple levels of internal review.", "All transactions of EXIM carry some risk; however, transactions approved  through delegated authority lenders potentially carry a higher level of  inherent risk because third-party financial institutions make the decisions.  To mitigate the risk, EXIM reviews medium-term transactions approved  by delegated authority lenders before the transactions are executed to  assure compliance with EXIM\u2019s delegated authority lending policies. For  working capital guarantee delegated authority, EXIM conducts periodic  examinations of the lenders, reviewing ongoing transactions and lender  compliance with the delegated authority program. The examinations are  intended to identify lenders that are not satisfactorily managing the  requirements of the delegated authority program.", "To mitigate the risk for its internal credit process, EXIM developed and  documented underwriting processing steps from the time the application  is received through the approval of the appropriate credit structure. These  steps serve to (1) establish a framework for sound credit decisions, (2)  communicate to EXIM employees the requirements governing the  extension of credit, and (3) encourage documentation and the consistent  application of EXIM\u2019s credit policies and procedures. According to EXIM  officials, the underwriting process also serves as EXIM\u2019s primary method  for preventing fraud because of the due diligence performed on the  proposed transaction. Figure 3 summarizes EXIM\u2019s underwriting process.", "Application intake. When an application is initially received, it is  screened for basic completeness, follow-up on incomplete or  unacceptable applications is performed, and it is assigned to a processing  division.", "Application screening. After an application is determined to be  complete, it is assigned to the applicable EXIM division that oversees the  applicable type of project. For example, an application for the purchase of  an aircraft would be assigned to the Transportation Division. Once  assigned, a loan officer in that division is to assess the eligibility of the  transaction. To ensure compliance with laws and regulations, the loan  officer is to obtain and assess various certifications from transaction  participants. Loan officers are also required to submit the corporate and  individual names and addresses of lenders, borrowers, guarantors, and  other transaction participants to the EXIM Library. Library staff are then to  conduct a Character, Reputational, and Transaction Integrity (CRTI)  review\u2014a procedure designed to provide a level of due diligence over  various risks and to help prevent fraud by checking loan participants\u2019  information against 28 databases.", "Risk assessment and due diligence. Once the transaction is  considered minimally eligible for EXIM support, the loan officer is required  to perform a series of due diligence activities to determine (1) whether the  transaction provides a reasonable assurance of repayment, (2) any  potential material issues regarding the transaction or the participants that  would preclude EXIM support, and (3) the appropriate risk level and  pricing for the transaction. As part of the financial evaluation of the  transaction, the loan officer is required to obtain and analyze the  borrower\u2019s financial statements, credit reports or rating agency  reports, financial projections, and other relevant information. As  applicable, the loan officer is required to obtain input from other EXIM  staff, such as attorneys or engineers, to conclude on the legal, technical,  economic, or environmental risks of the transaction. Based on this due  diligence, the loan officer is to assess the transaction for risk and assign  an overall risk rating. This rating is used to calculate the exposure fee  EXIM will charge the borrower for guaranteeing the transaction. Greater  perceived risks result in higher fees.", "Credit structure. After the risk assessment and due diligence is  performed, the loan officer determines the financing terms and conditions  to be recommended. The loan officer is generally required to structure the  transaction to include a security interest (collateral) in the financed goods  or other assets of the borrower. If it is determined that collateral is not  necessary, the loan officer is to document the explanation and mitigating  factors (e.g., EXIM support is small relative to a borrower\u2019s size). For all  aircraft transactions, the loan officer is required to perform an assessment  and loan-to-value analysis of the collateral, and the financing terms must  include requirements for the borrower to maintain ownership and  condition of the collateral.", "Credit decision. The loan officer is to document the due diligence in a  credit or board memo, which includes the loan officer\u2019s recommendation  to approve or decline the transaction. These memos and applicable  supporting documentation are then to be forwarded to the approving  party. The credit memo applicable to working capital or medium-term  transactions is to be provided to EXIM officials with individual delegated  authority to approve transactions of $10 million and less. Board memos  for long-term transactions or transactions greater than $10 million are to  be provided to the EXIM Board of Directors for approval. From July 2015  to May 2019, EXIM lacked a quorum on its Board of Directors, and as a  result, EXIM was unable to approve new transactions greater than $10  million."], "subsections": []}, {"section_title": "Management of Federal Credit Programs", "paragraphs": ["Government-wide guidance for federal agencies to follow for the  management and operation of federal credit programs, such as loan and  loan guarantee programs, include the following:", "OMB Circular A-129, Policies for Federal Credit Programs and Non- Tax Receivables, revised in January 2013, describes policies and  procedures for designing and managing federal credit programs. The  guidance addresses various standards for applicant screening, loan  documentation, collateral requirements, determining and monitoring  lender and servicer eligibility, and lender and borrower stake in full  repayment. In addition, it details risk sharing practices that agencies  should follow, such as ensuring that lenders and borrowers who  participate in federal credit programs have a substantial stake in full  repayment in accordance with the loan contract.", "Treasury\u2019s Bureau of the Fiscal Service\u2019s Managing Federal  Receivables provides federal agencies with an overview of standards,  guidance, and procedures for successful management of credit  activities, including screening applicants for creditworthiness and  financial responsibility, and managing, processing, evaluating and  documenting loan applications and awards for loan assistance.  Furthermore, it details how federal agencies should manage lenders  and servicers that participate in federally insured guaranteed loan  programs."], "subsections": []}]}, {"section_title": "EXIM\u2019s Process for Updating Its Underwriting Policies and Procedures Was Properly Designed and Implemented", "paragraphs": ["We found that EXIM\u2019s process for updating its underwriting policies and  procedures was properly designed and implemented. Standards for  Internal Control in the Federal Government states that management  should design control activities to achieve objectives and respond to risks.  Management\u2019s design of internal control establishes and communicates  the who, what, when, where, and why of internal control execution to  personnel. Management should clearly document internal control in a  manner that allows the documentation to be readily available and properly  managed and maintained. Further, management should also implement  control activities through policies and periodically review policies,  procedures, and related control activities for continued relevance and  effectiveness in achieving the entity\u2019s objectives or addressing related  risks.", "Underwriting policies and procedures are documented in EXIM\u2019s Manual,  which consists of 26 chapters, covering various topics by product (e.g.,  long-term loans and loan guarantees) or process (e.g., application intake  or credit structure). We found that the Manual provides EXIM\u2019s divisions  involved in the underwriting process with direction and guidance for  making credit decisions and is to be updated at least annually, except for  material changes, which are required to be incorporated as soon as  possible. The Credit Policy Division (Credit Policy) maintains and  manages the process for updating of the Manual and relies on EXIM\u2019s  divisions for additions, updates, and revisions to it.", "Credit Policy maintains an assignment list of the primary officer, the  primary reviewer, and the Office of General Counsel (OGC) reviewer,  who are responsible for each chapter in the Manual. Each year, the  process calls for Credit Policy to send an email to the primary officer and  two reviewers assigned to each chapter. This communication requests  that the officer review the assigned chapters for any needed changes.  After the assigned officer has reviewed the chapter, if there are no  contemplated changes, the primary officer assigned to the chapter is  required to notify Credit Policy of this determination by email with the  concurrence of the respective primary and OGC reviewers. If changes are  needed, the assigned officer is required to provide the updated chapter to  Credit Policy by email with the concurrence of the primary and OGC  reviewers.", "According to EXIM\u2019s process, when material changes to the Manual are  needed, the necessary revisions do not wait for the annual update.  Instead, the responsible division is required to incorporate such changes  into the applicable chapter(s) of the Manual and submit them to Credit  Policy as soon as possible. EXIM officials stated that examples of  material changes that would be addressed immediately include  recommendations from oversight bodies, such as the EXIM OIG or GAO,  and changes resulting from legislative actions, such as updates to EXIM\u2019s  charter or changes in compliance procedures related to sanctions."], "subsections": []}, {"section_title": "EXIM\u2019s Underwriting Policies and Procedures Were Mostly Consistent with Federal Guidance, but Could Be Enhanced", "paragraphs": ["The underwriting policies and procedures in EXIM\u2019s Manual for its loan  and loan guarantee transactions were mostly consistent with OMB and  Treasury guidance for managing federal credit programs. We evaluated  these policies and procedures for (1) applicant screening, (2) loan  documentation, (3) collateral requirements, (4) lender and servicer  eligibility, and (5) risk sharing practices. As shown in table 1, EXIM\u2019s  underwriting policies and procedures for the loan and loan guarantee  programs were consistent with 12 of 15 applicable standards for  managing federal credit programs and were partially consistent with  three. Three other standards were not applicable to EXIM\u2019s  underwriting."], "subsections": [{"section_title": "EXIM\u2019s Policies and Procedures Were Consistent with Federal Guidance Related to Applicant Screening", "paragraphs": ["Applicant screening refers to determining an applicant\u2019s eligibility and  creditworthiness for a loan or loan guarantee. Federal guidance for  applicant screening includes specific standards related to the applicant\u2019s  (1) program eligibility, (2) delinquency on federal debt, (3)  creditworthiness, (4) delinquent child support, and (5) taxpayer  identification number (TIN). As shown in table 2, EXIM\u2019s underwriting  policies and procedures were consistent with federal guidance for  applicant screening.", "For all loan and loan guarantee applications, EXIM requires applicants to  provide identifying information, such as name, address, phone number,  and Dun & Bradstreet Data Universal Numbering System (DUNS)  number. Applicants are also required to provide relevant financial  information, such as income, assets, cash flows, liabilities, financial  statements, and credit reports.", "EXIM\u2019s underwriting process requires screening of applicants for  eligibility, which is partly completed through the CRTI review. As part of  the CRTI review, EXIM screens the corporate and individual names and  addresses of lenders, borrowers, guarantors, and other transaction  participants against 28 databases that include various U.S. government  and international debarment and sanctions lists for red flags. If a match  is identified, EXIM\u2019s Credit Review and Compliance Division works with  the loan officers to determine the legitimacy of the match and, as  necessary, works with OGC to determine what additional due diligence  measures may be required and whether to continue the underwriting  process.", "In addition to the CRTI review process, loan officers must obtain and use  credit reports to assess creditworthiness and identify whether transaction  applicants are delinquent on federal tax or nontax debts, including  judgment liens against property for a debt to the federal government, and  are therefore not eligible to receive federal loans and loan guarantees.  EXIM\u2019s policies and procedures contain instructions to suspend  application processing and contact OGC for further guidance upon finding  federal debt delinquencies or other insufficient or negative information on  applicant credit reports. Loan officers must document any issues  encountered on applicant credit reports and explain why a transaction is  creditworthy if they recommend it for approval.", "Lastly, OMB Circular A-129 requires agencies to obtain the TIN of all  persons doing business with the agency. The working capital guarantee  application form requests the TIN for transaction applicants, which an  EXIM official stated are used to obtain applicant credit reports. EXIM does  not require the TIN for medium- and long-term applications. EXIM officials  stated that applicants for medium- and long-term transactions are likely  foreign entities and thus would not have federal TINs. However, all  applications request the DUNS number which EXIM must use to perform  the credit review and CRTI due diligence procedures."], "subsections": []}, {"section_title": "EXIM\u2019s Policies and Procedures Were Consistent with Federal Guidance Related to Loan Documentation", "paragraphs": ["Federal guidance calls for the maintenance of loan files containing key  information used in loan underwriting. As shown in table 3, EXIM\u2019s  underwriting policies and procedures were consistent with the federal  guidance related to loan documentation.", "EXIM\u2019s underwriting policies and procedures state that loan officers must  maintain a loan file on the transaction applicant and other participants,  which includes the completed application, credit bureau reports, credit  analysis, certifications, verifications and other legal documents, and loan  or service agreements with the debtor, as appropriate. EXIM\u2019s process  calls for obtaining debt collection certification statements for the working  capital guarantee applications because the applicants are domestic  entities. While the debt collection certification statement is not  applicable for medium- and long-term applications, because the  applicants are foreign entities, EXIM\u2019s executed credit agreements and  promissory notes define the terms of the transactions, including defaults  and the remedies EXIM may take, such as declaring default and  accelerating debt repayment, and pursuing restructuring or recovery  actions, including possible litigation."], "subsections": []}, {"section_title": "EXIM\u2019s Policies and Procedures Were Consistent with Federal Guidance Related to Collateral", "paragraphs": ["Collateral refers to the assets used to secure a loan. For many types of  loans, the government can reduce its risk of default and potential losses  through well-managed collateral requirements. However, several of the  collateral requirements contained in federal guidance relate specifically to  real property. Since EXIM\u2019s mission is to support U.S. exports, it does not  finance real property and, accordingly, does not accept real property as  the primary collateral. As a result, three of the four federal guidance  standards were not applicable to EXIM\u2019s underwriting. As shown in table  4, EXIM\u2019s underwriting policies and procedures were consistent with the  applicable federal guidance related to collateral.", "EXIM\u2019s underwriting policies and procedures state that it should have a  security interest in the financed export items. The loan officer and a  transaction engineer will evaluate the export sales contracts, and this  evaluation will be used as the assessment of collateral for the transaction.  If using the financed export items as collateral is not possible, the loan  officer should secure the EXIM financing with other assets owned by the  primary source of repayment that are at least of comparable value to the  financed items. Collateral that could be considered includes fixed assets,  inventory, accounts receivable, or a third-party guarantee.", "While OMB Circular A-129 requires a real property appraisal and contains  specific criteria defining acceptable appraisals, the standard was not  applicable to EXIM\u2019s loans and loan guarantees. According to EXIM  officials, EXIM rarely takes real property as collateral because the primary  collateral for EXIM\u2019s transactions is the asset financed, and EXIM does  not finance real property. Further, EXIM officials stated that the U.S.  appraisal standards cannot be applied to foreign real property. However,  if real property is taken as collateral, it would be as secondary or  additional collateral. When EXIM accepts real property as additional  collateral for a transaction, EXIM officials stated that an independent  third-party appraisal in accordance with regional practices is obtained."], "subsections": []}, {"section_title": "EXIM\u2019s Policies and Procedures Were Not Fully Consistent with Federal Guidance Related to Lender and Servicer Eligibility", "paragraphs": ["Federal guidance calls for policies and procedures related to lender and  servicer eligibility, monitoring, and recertification. As shown in table 5,  EXIM\u2019s policies and procedures were consistent with three and partially  consistent with two of five federal standards for lender and servicer  eligibility.", "OMB Circular A-129 calls for agencies to establish specific procedures to  continuously review lender and servicer eligibility and decertify lenders  and servicers that fail to meet the agency\u2019s standards for continued  participation. EXIM\u2019s policies and procedures related to requirements for  working capital guarantee delegated authority lenders were consistent  with federal guidance.", "However, for medium-term delegated authority lenders, EXIM has not  established documented policies and procedures for (1) determining their  eligibility for continued participation in the program and (2) decertifying or  taking other appropriate actions for those that do not meet compliance or  eligibility standards. EXIM officials told us that currently EXIM has only  three medium-term delegated authority lenders: two were renewed for  continued participation and one became inactive in 2018. Further,  according to EXIM officials, since 2009 only 2.3 percent of all medium- term guarantee authorizations have been delegated authority  authorizations ($71 million out of $3.1 billion).", "EXIM reviews the performance of its primary medium-term lenders  quarterly. In these reviews, EXIM officials evaluate the lenders\u2019 portfolio  performance, underwriting capabilities, and a set of qualitative factors.  However, without documented policies and procedures for determining  the eligibility of the medium-term delegated authority lenders\u2019 continued  participation in the program and for decertifying such lenders, as  appropriate, EXIM may allow lenders who are not qualified to underwrite  transactions, thus increasing the risk for improper underwriting and  defaults. EXIM officials stated that they are in the process of updating and  enhancing the Manual and will include procedures for medium-term  delegated authority lender reviews and the consequences of an  unfavorable assessment."], "subsections": []}, {"section_title": "EXIM\u2019s Policies and Procedures Were Not Fully Consistent with Federal Guidance Related to Risk Sharing Practices", "paragraphs": ["OMB Circular A-129 calls for lenders and borrowers who participate in  federal credit programs to have a substantial stake in full repayment but  also states that the level of guarantee should be no more than necessary  to achieve program purposes. As shown in table 6, EXIM\u2019s underwriting  policies and procedures were generally consistent with the federal  guidance related to certain risk sharing practices for lenders and  borrowers to have a stake in full repayment and were partially consistent  with the federal guidance related to periodic program reviews.", "Although OMB Circular A-129 calls for lenders who extend credit to have  substantial stake in full repayment and bear at least 20 percent of any  loss from a default, it also states that the level of guarantee should be no  more than necessary to achieve program purposes. However, consistent  with its charter, EXIM is authorized to provide terms that are competitive  with those of other ECAs, such as up to 100 percent loan guarantee  coverage. EXIM does not require lenders to bear 20 percent of the risk of  default. For working capital guarantees, EXIM offers 90 percent  guarantee coverage and lenders retain 10 percent risk. For medium- and  long-term loan guarantees, EXIM provides up to 85 percent financing with  the remaining 15 percent paid by the borrower or financed separately.  EXIM financing could be less than 85 percent depending on the U.S.  content. According to EXIM, guaranteeing 100 percent of the amount it  finances permits it to explore capital markets and is more desirable to  banks for large and long-term projects. As a result, the lender may not  retain any risk of default in the transaction. According to an OECD official,  guaranteeing 100 percent of the financed amount is consistent with other  ECAs. For example, the ECAs of Canada, Germany, and the United  Kingdom also provide guarantees up to 100 percent of the financed  amount on certain products.", "OMB Circular A-129 states that borrowers should have equity interest in  assets financed with credit assistance and substantial capital or equity at  risk in their business. However, consistent with its charter, EXIM is  authorized to provide terms that are competitive with those of other ECAs.  EXIM does not specifically require borrowers to have an equity interest in  the transaction or to contribute the minimum cash payment. EXIM\u2019s  policies and procedures state that in practice, buyers often secure  alternative financing for the cash payment, which is permissible as long  as the financing is not officially supported by EXIM or another U.S.  government agency. EXIM officials noted that during the analysis of  creditworthiness, loan officers examine supporting documents for the  alternative financing to assure that it is not guaranteed by EXIM or  another U.S. government agency.", "OMB Circular A-129 states that the agency should periodically review  programs in which the government bears more than 80 percent of any  loss. The review is intended to evaluate the extent to which credit  programs achieve intended objectives and whether the private sector has  become able to bear a greater share of the risk. EXIM officials stated that  EXIM performs program reviews through annual budget justifications  submitted to OMB and annual competitiveness reports submitted to  Congress. EXIM officials also stated that there are established timelines  for preparing these reviews that must be followed to ensure that EXIM  meets deadlines for submitting its budget documentation and the June 30  deadline for the annual competitiveness report. In addition, EXIM employs  a detailed summary of the products and terms that other countries\u2019 official  ECAs offer. However, EXIM does not have documented policies or  procedures related to performing periodic program reviews. As a result,  EXIM runs the risk that it will not effectively review its programs to  determine whether the private sector could bear a greater share of the  risk."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["EXIM\u2019s Manual provides a framework for making credit decisions so that  only qualified applicants that demonstrate reasonable assurance of  repayment are provided loans or loan guarantees. This framework helps  ensure consistent application of procedures for assessing an applicant\u2019s  creditworthiness and for overseeing certain delegated authority lenders.  However, EXIM\u2019s underwriting process could be improved by additional  procedures. For example, the Manual did not address medium-term  delegated authority lenders\u2019 eligibility requirements for continued  participation and decertification procedures for lenders who fail to meet  agency\u2019s standards. Further, EXIM has not documented its process for  periodic program reviews to determine whether the private sector could  bear a greater share of the risk. Improvements in these areas could help  enhance the oversight of lenders and the usefulness of program reviews."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to EXIM:", "The Chief Operating Officer of EXIM should consider establishing  documented policies and procedures for (1) determining medium-term  delegated authority lenders\u2019 eligibility for continued participation in  EXIM\u2019s programs and (2) decertifying or taking other appropriate  actions for such lenders that do not meet compliance or eligibility  standards. (Recommendation 1)", "The Chief Operating Officer of EXIM should establish documented  policies and procedures for periodically reviewing credit programs in  which the government bears more than 80 percent of any loss to  determine whether private sector lenders should bear a greater share  of the risk. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to EXIM for review and comment. In  written comments on a draft of this report, which are reproduced in  appendix II, EXIM concurred with our two recommendations. EXIM also  provided technical comments that we incorporated into the final report, as  appropriate.", "In its written comments, EXIM described planned actions to address our  recommendations. Specifically, EXIM stated that it will consider  establishing documented policies and procedures for determining  medium-term delegated authority lenders' eligibility for continued  participation in EXIM's programs and decertifying or taking other  appropriate actions for such lenders that do not meet compliance or  eligibility standards. Further, EXIM will establish documented policies and  procedures for periodically reviewing credit programs in which the  government bears more than 80 percent of any loss to determine whether  private sector lenders should bear a greater share of the risk. If  implemented effectively, EXIM\u2019s planned actions should address the  intent of our recommendations.", "We are sending copies of this report to appropriate congressional  committees, the Chairman of the Export-Import Bank, and the EXIM  Inspector General. 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) 512-3133 or dalkinj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine the extent to which Export-Import  Bank\u2019s (EXIM) (1) process for updating its underwriting policies and  procedures is properly designed and implemented and (2) underwriting  policies and procedures for loan and loan guarantee transactions are  consistent with guidance for managing federal credit programs.", "To assess the extent to which EXIM\u2019s process for updating its  underwriting policies and procedures was properly designed and  implemented, we reviewed EXIM\u2019s policies and procedures for updating  its Loan, Guarantee and Insurance Manual (Manual) and interviewed  EXIM officials. We assessed EXIM\u2019s process to determine whether it  sufficiently communicated the procedures to be performed and  documentation to be prepared and was consistent with Standards for  Internal Control in the Federal Government. We did not evaluate EXIM\u2019s  compliance with its process for updating its underwriting policies and  procedures or assess their operating effectiveness.", "To assess the extent to which EXIM\u2019s underwriting policies and  procedures for loan and loan guarantee transactions were consistent with  guidance for managing federal credit programs, we reviewed relevant  requirements and guidance, including the Office of Management and  Budget\u2019s (OMB) Circular A-129, Policies for Federal Credit Programs and  Non-Tax Receivables, and the Department of the Treasury\u2019s Bureau of  the Fiscal Service\u2019s Managing Federal Receivables: A Guide for  Managing Loans and Administrative Debt.", "Specifically, we focused on OMB Circular A-129\u2019s Section II (C)(1)(a)  through (c), Section III (A)(1) through (3), and Section III (C)(1)(a) through  (e)), which contain standards pertinent to risk management for loan and  loan guarantee programs, including standards for (1) applicant screening  (program eligibility, delinquency on federal debt, creditworthiness,  delinquent child support, and taxpayer identification number); (2) loan  documentation; (3) collateral (appraisal of real property, loan-to-value  ratio, liquidation of real property collateral, and asset management  standards and systems for real property disposal); (4) lender and servicer  eligibility (participation criteria, review of eligibility, fees, decertification,  and loan servicers); and (5) risk sharing practices (private lenders stake  in full repayment, borrowers stake in full repayment, and program  reviews). From the Bureau of the Fiscal Service\u2019s Managing Federal  Receivables, we identified key guidance related to credit extension (ch. 3)  and management of guaranteed lenders and servicers (ch. 5).", "We reviewed EXIM\u2019s policies and procedures related to underwriting for  the loan and loan guarantee programs contained in its Manual and other  documentation, such as its charter. We also discussed EXIM\u2019s policies  and procedures related to underwriting with EXIM officials. We compared  EXIM\u2019s underwriting processes to federal guidance for managing federal  credit programs. As part of this comparison, we assessed whether  policies and procedures included in EXIM\u2019s Manual were consistent with  federal guidance. However, because of EXIM\u2019s limited lending authority  during the period of our audit, we did not verify EXIM\u2019s compliance with its  underwriting policies and procedures or assess their operating  effectiveness. In areas where we found EXIM\u2019s policies and procedures  to be consistent with federal guidance, there may still be opportunities to  improve operating effectiveness. Further, guidance for managing federal  credit programs includes additional requirements not related to  underwriting, which we did not assess.", "In addition, we reviewed EXIM\u2019s Office of Inspector General (OIG) reports  since 2014 related to underwriting issues, various laws applicable to  EXIM, and GAO reports related to EXIM. We also reviewed EXIM\u2019s  annual reports and competitiveness reports. We also discussed EXIM  underwriting process with EXIM OIG officials and export credit financing  and risk sharing practices with an official from the Organisation for  Economic Co-operation and Development.", "We conducted this performance audit from January 2017 to May 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Export- Import Bank of the United States", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia Carlsen (Assistant  Director), Dragan Matic (Analyst in Charge), Sarah Lisk, Erika Szatmari,  and Jingxiong Wu made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Export-Import Bank helps finance U.S. companies' exports when private lenders are unable or unwilling to do so. The Bank is backed by the U.S. government\u2014so taxpayers could be responsible for financial losses.", "We reviewed the Bank's process to approve financing for exports and found that it appropriately assesses applicants' creditworthiness prior to approval. However, the Bank could improve how it oversees certain lenders authorized to make loans it guarantees, and how it conducts periodic program reviews.", "We made two recommendations to enhance these processes."]}
{"id": "GAO-18-15", "url": "https://www.gao.gov/products/GAO-18-15", "title": "Prescription Opioids: Medicare Needs to Expand Oversight Efforts to Reduce the Risk of Harm", "published_date": "2017-10-06T00:00:00", "released_date": "2017-11-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Misuse of prescription opioids can lead to overdose and death. In 2016, over 14 million Medicare Part D beneficiaries received opioid prescriptions, and spending for opioids was almost $4.1 billion. GAO and others have reported on inappropriate activities and risks associated with these prescriptions, such as receiving multiple opioid prescriptions from different providers.", "GAO was asked to describe what is known about CMS\u2019s oversight of Medicare Part D opioid use and prescribing. This report examines (1) CMS oversight of beneficiaries who receive opioid prescriptions under Part D, and (2) CMS oversight of providers who prescribe opioids to Medicare Part D beneficiaries.GAO reviewed CMS opioid utilization and prescriber data, CMS guidance for plan sponsors, and CMS\u2019s strategy to prevent opioid misuse. GAO also interviewed CMS officials, the six largest Part D plan sponsors, and 12 national associations selected to represent insurance plans, pharmacy benefit managers, physicians, patients, and regulatory and law enforcement authorities."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS) provides guidance on the monitoring of Medicare beneficiaries who receive opioid prescriptions to plan sponsors\u2014private organizations that implement the Medicare drug benefit, Part D\u2014but lacks information on most beneficiaries at risk of harm.", "CMS provides plan sponsors guidance on how they should monitor opioid overutilization among Medicare Part D beneficiaries and requires them to implement drug utilization review systems that use criteria similar to CMS's. CMS's criteria focus on beneficiaries who (1) receive prescriptions of high doses of opioids, (2) receive prescriptions from four or more providers, and (3) fill the prescriptions at four or more pharmacies. According to CMS officials, this approach allows plan sponsors to focus their actions on those beneficiaries it determined to have the highest risk of harm from opioid use.", "CMS\u2019s criteria, including recent revisions, do not provide sufficient information about the larger population of potentially at-risk beneficiaries. CMS estimates that while 33,223 beneficiaries would have met the revised criteria in 2015, 727,016 would have received high doses of opioids regardless of the number of providers or pharmacies. In 2016, CMS began to collect information on some of these beneficiaries using a higher dosage threshold for opioid use. This approach misses some who could be at risk of harm, based on Centers for Disease Control and Prevention guidelines. As a result, CMS is limited in its ability to assess progress toward meeting the broader goals of its Opioid Misuse Strategy, which includes activities to reduce the risk of harm from opioid use.", "CMS Estimates of 2015 Part D Beneficiaries with High Opioid Doses and Those Who Would Have Met Revised Overutilization Monitoring Criteria", "CMS oversees the prescribing of drugs at high risk of abuse through a variety of projects, but does not analyze data specifically on opioids. According to CMS officials, CMS and plan sponsors identify providers who prescribe large amounts of drugs with a high risk of abuse, and those suspected of fraud or abuse may be referred to law enforcement. However, GAO found that CMS does not identify providers who may be inappropriately prescribing large amounts of opioids separately from other drugs, and does not require plan sponsors to report actions they take when they identify such providers. As a result, CMS is lacking information that it could use to assess how opioid prescribing patterns are changing over time, and whether its efforts to reduce harm are effective."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS (1) gather information on the full number of at-risk beneficiaries receiving high doses of opioids, (2) identify providers who prescribe high amounts of opioids, and (3) require plan sponsors to report to CMS on actions related to providers who inappropriately prescribe opioids. HHS concurred with the first two recommendations, but not with the third. GAO continues to believe the recommendation is valid, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Misuse of prescription opioids, which are used to treat both acute and  chronic pain, has become a serious public health problem for the U.S.  population, including Medicare beneficiaries. The Centers for Disease  Control and Prevention (CDC) reported that from 1999 to 2013 the rate of  drug poisoning deaths from prescription opioids nearly quadrupled from  1.4 to 5.1 per 100,000 people. In addition, the Department of Health and  Human Services (HHS) Office of Inspector General (HHS-OIG) reported  that 14.4 million people (about one-third) who participate in Medicare Part  D received at least one prescription for opioids in 2016, and that Part D  spending for opioids in 2016 was almost $4.1 billion. GAO and the HHS- OIG have previously reported on inappropriate activities that can be  associated with such prescriptions, including \u201cdoctor shopping\u201d to receive  multiple opioid prescriptions from different providers, the diversion of  prescription drugs for uses other than intended, and questionable  prescribing practices, including those in Medicare. Additionally, a staff  report issued in 2016 by the Senate Permanent Subcommittee on  Investigations outlined concerns associated with opioid abuse in both  Medicare and private health insurance.", "In March 2015, HHS announced plans to make addressing opioid abuse  a high priority through two broad goals: (1) decreasing opioid overdoses  and overall overdose deaths, and (2) decreasing the prevalence of opioid  use disorder. Further, in January 2017, the Centers for Medicare &  Medicaid Services (CMS), the HHS agency that administers Medicare,  issued its Opioid Misuse Strategy for the Medicaid and Medicare  programs, including Part D. One of the four priority areas outlined in the  strategy is implementing activities to reduce the risk of opioid use  disorders, overdoses, inappropriate prescribing, and drug diversion. For  this priority, the strategy includes the agency\u2019s plans to address concerns  about beneficiary use of opioids and the prescribing of opioids by  providers, such as educating and providing feedback to beneficiaries and providers concerning effective pain management and appropriate opioid  prescribing, as well as use of evidence-based prescribing guidelines. The  strategy also outlines attempts to identify providers with a high risk of  fraud, waste, and abuse in prescribing opioids and other drugs. CMS  contracts with the National Benefit Integrity Medicare Drug Integrity  Contractor (NBI MEDIC) to monitor and analyze data to detect potential  fraud, waste, and abuse, and to investigate such potential fraud, waste,  and abuse in Medicare Parts C and D, among other activities.", "You asked us for information on CMS\u2019s activities related to reducing the  misuse and overprescribing of opioids. We examined  1.  how CMS oversees beneficiaries who receive opioid prescriptions  under Medicare Part D, and  2.  how CMS oversees providers who prescribe opioids to Medicare Part  D beneficiaries.", "To examine CMS oversight of beneficiaries who receive opioid  prescriptions under Medicare Part D, we analyzed CMS documents, such  as CMS\u2019s Opioid Misuse Strategy as well as letters, guidance, and other  documents on the operation of the Part D program; and CMS data about  the number of beneficiaries at risk of opioid overutilization. We also  reviewed CDC guidelines for prescribing opioids. Further, we interviewed  CMS officials involved in these efforts. This information helped us  understand CMS procedures for identifying beneficiaries at risk of  overuse of opioids, as well as to assess trends in such use. We also  interviewed plan sponsors\u2014private organizations under contract with  CMS that provide the Part D drug benefit to Medicare beneficiaries\u2014 about their oversight role and the compliance programs they operate to  safeguard the Part D program from fraud, waste, and abuse. In addition,  we interviewed other stakeholders involved in opioid use and prescribing,  including organizations that represent providers, pharmacies,  beneficiaries, and others to further understand issues related to opioid  use.", "To examine CMS oversight of providers who prescribe opioids to  Medicare Part D beneficiaries, we analyzed CMS and NBI MEDIC  documents, such as Part D program guidance, and documents sent to  plan sponsors about opioid prescribing patterns, as well as data about  providers who prescribe a large amount of opioids. We also interviewed  CMS officials and officials from NBI MEDIC about monitoring opioid  prescribing. We used this information to understand CMS\u2019s and NBI  MEDIC\u2019s procedures for identifying and addressing opioid  overprescribing. We also interviewed the same plan sponsors and  stakeholders identified above about issues related to opioid prescribing  and CMS\u2019s role in addressing opioid overprescribing.", "For both objectives, we compared the information we collected to CMS\u2019s  stated goals and relevant federal internal control standards. We  assessed the reliability of CMS and NBI MEDIC data by reviewing  documents for potential inconsistencies and discussing the  methodologies used to gather the data with officials from both CMS and  NBI MEDIC. We determined that these data were sufficiently reliable for  the purposes of our objectives.", "We conducted this performance audit from October 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Opioids, such as hydrocodone, oxycodone, morphine, and methadone,  can be prescribed to treat both acute and chronic pain. Because many  opioids have a high potential for abuse and may lead to severe  psychological or physical dependence, many of them are classified as  Schedule II drugs under the Controlled Substances Act. The abuse of  opioids has been associated with serious consequences, including  addiction, overdose, and death."], "subsections": [{"section_title": "Responsibilities of Medicare Part D Plan Sponsors, CMS, and NBI MEDIC", "paragraphs": ["Medicare Part D plan sponsors are private organizations, such as health  insurance companies and pharmacy benefit managers, contracted by  CMS to provide outpatient drug benefit plans to Medicare beneficiaries.  CMS provides guidance to plan sponsors that are responsible for  establishing reasonable and appropriate drug utilization review (DUR)  programs that assist in preventing misuse of prescribed medications in  general, including the unsafe use of opioid pain medications. In 2013,  CMS implemented the Medicare Part D opioid overutilization policy  intended to improve medication safety. Through the Overutilization  Monitoring System (OMS), CMS seeks to ensure that plan sponsors  establish reasonable and appropriate DUR programs to prevent  overutilization of opioids. CMS uses criteria in the OMS to identify high- risk use of opioids. Plan sponsors may, but are not required to, use these  guidelines as part of their DUR.", "CMS\u2019s Center for Program Integrity (CPI) oversees Part D program  integrity and coordinates with other parts of CMS that monitor plan  sponsor compliance with the Part D program. CPI has primary  responsibility for overseeing NBI MEDIC, which is responsible for  identifying and investigating potential Part D fraud, waste, and abuse, in  general. NBI MEDIC handles complaints from beneficiaries and others, as  well as requests from law enforcement; investigates providers and refers  them to law enforcement as appropriate; and analyzes Part D program  prescription drug event records and other data to identify patterns that  may indicate fraud, waste, or abuse. NBI MEDIC\u2019s responsibilities are  for all Part D drugs and are not opioid-specific."], "subsections": []}, {"section_title": "Drug Diversion", "paragraphs": ["One concern associated with prescribed opioids is their diversion\u2014that is,  the redirection of prescription drugs for an illegal purpose such as  recreational use or resale. Diversion can include selling prescription drugs  that were obtained legally, transferring a legitimately prescribed opioid to  family or friends who may be trying to self-medicate, or pretending to be  in pain to obtain a prescription opioid due to an addiction. It is often  associated with \u201cdoctor shopping,\u201d the attempt to obtain large amounts of  opioids through multiple providers, or from multiple pharmacies. Doctor  shopping can be used to help support an individual\u2019s addiction or to  obtain opioids for resale on the black market. Drug diversion can also  include illicit prescribing, whereby providers\u2014commonly known as \u201cpill  mills\u201d\u2014write unnecessary prescriptions or prescribe larger quantities than  are medically necessary. Opioids are among the drugs with the highest  potential for drug diversion."], "subsections": []}, {"section_title": "CDC Guidelines for Prescribing Opioids", "paragraphs": ["In 2016, CDC issued guidelines with recommendations for prescribing  opioids in outpatient settings for chronic pain, based on consultation with  experts and a review of scientific evidence. CDC noted in the guidelines  that primary care physicians have reported concerns about opioid misuse  and addiction, and find managing patients with chronic pain a challenge,  possibly because of insufficient training in prescribing opioids. According  to the guidelines, most experts agreed that long-term opioid dosage of 50  milligrams (mg) morphine equivalent dose (MED) per day or more  generally increases overdose risk without necessarily adding benefits for  pain control or function. Experts also noted that daily opioid dosages  close to or greater than 100 mg MED per day are associated with  significant risks. The guidelines therefore recommended that providers  use caution when prescribing opioids at any dose, carefully reassess evidence of individual benefits and risks when increasing the dosage to  50 mg MED per day or more, and either avoid or carefully justify dosage  at 90 mg MED or more. In making these recommendations, CDC noted  that there is not a dosage threshold below which the risk of overdose is  eliminated, but found that dosages less than 50 mg MED would reduce  the risk for a large portion of patients. CDC also noted that providers  should use additional caution in prescribing opioids to patients aged 65  and older, because the drugs can accumulate in the body to toxic levels."], "subsections": []}]}, {"section_title": "CMS Delegates Monitoring of Beneficiaries who Receive Opioid Prescriptions to Plan Sponsors, but Does Not Have Sufficient Information on Most Beneficiaries at Risk for Harm CMS Delegates Monitoring of Individual Beneficiaries\u2019 Opioid Prescriptions to Plan Sponsors", "paragraphs": ["CMS provides guidance to plan sponsors on how they should monitor  opioid overutilization problems among Part D beneficiaries. The agency  includes this guidance in its annual letters to plan sponsors, known as call  letters; it also provided a supplemental memo to plan sponsors in 2012.  Among other things, these guidance documents instructed plan sponsors  to implement a retrospective drug utilization review (DUR) system to  monitor beneficiary utilization starting in 2013. As part of the DUR  systems, CMS requires plan sponsors to have methods to identify  beneficiaries who are potentially overusing specific drugs or groups of  drugs, including opioids.", "Also in 2013, CMS created the Overutilization Monitoring System (OMS),  which outlines criteria to identify beneficiaries with high-risk use of opioids  and to oversee sponsors\u2019 compliance with CMS\u2019s opioid overutilization  policy. Plan sponsors may use the OMS criteria for their DUR systems,  but they have some flexibility to develop their own targeting criteria, within  CMS guidance. The OMS considers beneficiaries to be at a high risk of  opioid overuse when they meet all three of the following criteria: (1)  receive a total daily MED greater than 120 mg for 90 consecutive days,  (2) receive opioids prescriptions from four or more providers in the  previous 12 months, and (3) receive opioids from four or more  pharmacies in the previous 12 months. The criteria exclude  beneficiaries with a cancer diagnosis and those in hospice care, for whom  higher doses of opioids may be appropriate.", "Officials from all six plan sponsors we interviewed confirmed they have a  DUR system that specifically looks at opioids. In addition, to be consistent  with CMS, all of the plan sponsors adopted criteria similar to the OMS,  with some minor modifications\u2014typically involving the number of months  in which they measured beneficiaries\u2019 opioid prescriptions.", "Through the OMS, CMS generates quarterly reports that list beneficiaries  who meet all of the criteria and who are identified as high-risk and then  distributes the reports to the plan sponsors. Plan sponsors are expected  to review the list of identified beneficiaries, determine appropriate action,  and then respond to CMS with information on their actions within 30 days.  According to CMS officials, the agency also expects that plan sponsors  will share any information with CMS on beneficiaries that they identify  through their own DUR systems. Some actions plan sponsors may take  include", "Case management. After plan sponsors identify beneficiaries with  patterns of inappropriate opioid use and possible coordination of care  issues through their DUR analysis, they may conduct case  management. Case management may include an attempt to improve  coordination issues, and often involves provider outreach, whereby  the plan sponsor will contact the providers associated with the  beneficiary to let them know that the beneficiary is receiving high  levels of opioids and may be at risk of harm. In addition to outreach,  officials from two of the six plan sponsors we interviewed told us they  focus on provider education and one plan sponsor said they may  direct the providers to the CDC guidelines or other information to help  reduce overutilization. Officials from two plan sponsors reported that  they also reach out to beneficiaries to let them know they are  receiving high levels of opioids and may be at risk of harm.", "Beneficiary-specific point-of-sale (POS) edits. When plan sponsors  determine that a beneficiary is at risk for opioid harm, they may  choose to implement a beneficiary-specific POS edit to prevent  overutilization. Beneficiary-specific POS edits are restrictions that limit  these beneficiaries to certain opioids and amounts. Pharmacists  receive a message when a beneficiary attempts to fill a prescription  that exceeds the limit in place for that beneficiary. CMS expects plan  sponsors to report on the POS edits they use through CMS\u2019s  Medicare Advantage and Prescription Drug System for information  sharing and monitoring purposes. That way, if a beneficiary changes  plans, the new plan sponsor will receive an alert about the  beneficiary\u2019s record of POS edits. From February 2014 through March  10, 2016, there were 2,693 POS edits reported in that system for  2,520 beneficiaries.", "Formulary-level POS edits. CMS expects plan sponsors to use  formulary-level POS edits to prospectively prevent opioid  overutilization. These edits alert providers who may not have been  aware that their patients are receiving high levels of opioids from other  doctors. CMS recommends these formulary-level edits to be used  when a beneficiary has a cumulative opioid MED of at least 90 mg.", "Referrals for investigation. According to the six plan sponsors we  interviewed, the referrals can be made to NBI MEDIC or to the plan  sponsor\u2019s own internal investigative unit, if they have one. After  investigating a particular case, if a plan sponsor or NBI MEDIC  determines that a beneficiary is suspected of diverting opioids, they  may refer the case to the HHS-OIG, or a law enforcement agency,  according to CMS, NBI MEDIC, and one plan sponsor.", "Pharmacy lock-ins. Beginning in 2019, Medicare Part D plan  sponsors will be able to restrict certain beneficiaries identified as at- risk for prescription drug abuse to a single pharmacy for all their  opioid prescriptions, known as a pharmacy \u201clock in.\u201d Some plan  sponsors explained that they use pharmacy lock-ins for their  commercial and Medicaid lines of business, and generally found them  to be a useful tool for controlling opioid use.", "Based on CMS\u2019s use of the OMS and the actions taken by plan sponsors,  CMS reported a decrease in the number of beneficiaries meeting the  OMS criteria of high-risk\u2014which agency officials consider an indication of  success toward its goal of decreasing opioid use disorder. From calendar  years 2011 through 2016, there was a 61 percent decrease in the number  of beneficiaries meeting the OMS criteria. (See table 1.)", "In addition to using the OMS as a monitoring tool to oversee plan  sponsors\u2019 compliance with their DUR system requirements, CMS relies  on patient safety measures to assess how well Part D plan sponsors are  monitoring beneficiaries and taking appropriate actions. Specifically, CMS  tracks data on plan sponsors\u2019 performance for 15 measures related to  Part D patient safety that are developed and maintained by the Pharmacy  Quality Alliance, and CMS communicates with plan sponsors about their  performance. In 2016, CMS started tracking plan sponsors\u2019  performance on three Pharmacy Quality Alliance-approved patient safety  measures that are directly related to opioids, which were  1.  The proportion of beneficiaries that use opioids at high dosages (more  than 120 mg MED for 90 days or longer) in persons without cancer or  not in hospice care.  2.  The proportion of beneficiaries that use opioids from multiple  providers (four or more providers and four or more pharmacies) in  persons without cancer or not in hospice care.  3.  The proportion of beneficiaries that use opioids at high dosage and  from multiple providers in persons without cancer or not in hospice  care, and that meet both of the other measures.", "The three measures are similar to the OMS criteria in that they identify  beneficiaries with high dosages of opioids (120 mg MED) from multiple  providers and pharmacies (four or more of each). However, there are a  number of differences between these measures and the OMS. For  example, the OMS counts actual beneficiaries, while the patient safety  measures report member-years, which are adjusted to account for  beneficiaries who are enrolled in a plan for only part of a year. In  addition, these measures separately identify beneficiaries who fulfill each  of those criteria individually. For example, data gathered on the first  measure indicate that about 285,119 beneficiaries, counted as member- years across all Part D plans, received high doses (more than 120 mg  MED) of opioids for 90 days or longer during calendar year 2016. CMS  also uses these data in different ways from how it uses OMS data. The  OMS criteria were developed and maintained by CMS to identify patients  at risk for harm who may warrant case management and to examine  opioid use trends across the Part D program, including progress toward  its goal of decreasing opioid use disorder. In contrast, CMS officials told  us that the agency uses the patient safety measures to assess plan  sponsor performance. The patient safety measures also serve as a tool  for Part D sponsors to compare their performance to overall averages,  and to track progress in improving these measures over time. CMS also  tracks sponsors\u2019 progress in improving the measures, according to  agency officials. Each quarter, CMS contacts plan sponsors who have the  lowest performance on each measure and expects them to respond about  actions they take to improve performance. Beginning in April 2017, the  agency began distributing to plan sponsors the beneficiary-level files for  the patient safety measures. CMS officials said that these files provide a  complete list of beneficiaries included in each of the measures."], "subsections": [{"section_title": "CMS Does Not Have Sufficient Information on Most Beneficiaries Potentially at Risk for Harm", "paragraphs": ["While CMS tracks the total number of beneficiaries who meet all three  OMS criteria as part of its opioid overutilization oversight across the Part  D program, it does not have comparable information on most  beneficiaries who may be at risk for harm. CMS has goals to reduce the  risk of opioid use disorders, overdoses, inappropriate prescribing, and  drug diversion in its Opioid Misuse Strategy, but OMS does not track the  number of beneficiaries with prescriptions for high doses of opioids unless  those beneficiaries are also receiving them both from four or more  providers and from four or more pharmacies; and agency officials told us  that CMS has no plans for OMS to begin doing so. According to CDC  guidelines, long-term use of high opioid dosages\u2014those above a MED of  90 mg per day\u2014are associated with significant risk of harm and should  be avoided if possible.", "Based on the CDC guidelines, outreach to Part D plan sponsors, and  CMS analyses of Part D data, CMS has revised its current OMS criteria to  include more at-risk beneficiaries beginning in 2018. The new OMS  criteria define a high user as having an average daily MED greater than  90 mg for any duration, and who receives opioids from four or more  providers and four or more pharmacies, or from six or more providers  regardless of the number of pharmacies, for the prior 6 months.  According to CMS officials, the revised OMS criteria, like the current  criteria, are intended to identify the beneficiaries it determined are at the  greatest risk of harm: those who may lack coordinated care as a result of  using multiple pharmacies and providers. CMS officials also noted that  the revised criteria are intended to limit the increase in the number of  beneficiaries for whom plan sponsors are expected to take action, such  as case management, to avoid overburdening plan sponsors with  unreasonable workload levels.", "While the revised criteria will help identify beneficiaries who CMS  determined are at the highest risk of opioid misuse and therefore may  need case management by plan sponsors, they will not provide  information on most Part D beneficiaries who may also be at risk of harm.  In developing the revised criteria, CMS conducted a one-time analysis  that estimated there were 727,016 beneficiaries with an average MED of  90 mg or more, for any length of time during a 6 month measurement  period in 2015, regardless of the number of providers or pharmacies  used. These beneficiaries may be at risk of harm from opioids, according  to CDC guidelines, and therefore tracking the number of these  beneficiaries over time could help CMS to determine whether it is making  progress toward meeting the goals specified in its Opioid Misuse  Strategy. However, CMS officials told us that the agency does not keep  track of these beneficiaries, and does not have plans to do so as part of  OMS. Instead, CMS uses the number of beneficiaries who meet the OMS  criteria as an indicator of progress toward its goals. CMS estimated that  33,223 beneficiaries would have met its revised criteria based on 2015  data, which is a much smaller number than the estimated 727,016  beneficiaries at risk of harm from opioids. (See fig. 1.)", "In 2016, CMS began to gather information from its patient safety  measures on the number of beneficiaries who use more than 120 mg  MED of opioids for 90 days or longer, regardless of the number of  providers and pharmacies. However, this information does not include all  at-risk beneficiaries, because the threshold is more lenient than indicated  in CDC guidelines and CMS\u2019s new criteria for OMS. Specifically, CMS\u2019s  one-time analysis of 2015 data indicated that 727,016 beneficiaries  received prescriptions with an average MED of 90 mg or more for any  length of time during a 6-month measurement period. In contrast, the  2016 patient safety measures reports identified significantly fewer  beneficiaries, 285,119, in its most comparable measure\u2014member years  for opioid prescriptions at 120 mg MED for 90 consecutive days or longer.", "According to CMS officials, CMS shared feedback with the Pharmacy  Quality Alliance to consider updating the threshold to 90 mg MED to align  with CDC guidelines and the revised OMS criteria. CMS officials said the  agency will consider adopting these updates once complete. In addition,  while CMS monitors the patient safety measure data, these data are  relatively new. CMS officials told us that, as a result, the agency does not  yet have enough data to report changes over time toward its goals to  reduce the risk of opioid use disorders, overdoses, and inappropriate  prescribing.", "Neither the data gathered as part of OMS, nor patient safety measures  gathered so far are adequate to provide CMS with the information  necessary to track progress toward meeting its goal of reducing harm  from opioids. While tracking a smaller number of beneficiaries in OMS is  useful for targeting resource-intensive plan sponsor actions, keeping track  of the larger number of beneficiaries at risk of harm from high doses of  opioids\u2014greater than 90 mg MED for any duration regardless of the  number of providers and pharmacies\u2014could provide CMS with  information on progress toward its goals without additional monitoring by  plan sponsors. Doing so would also be consistent with federal internal  control standards, which require agencies to use quality information to  achieve objectives and address risks. Without tracking the number of  beneficiaries who receive potentially dangerous levels of opioids  regardless of the number of providers or pharmacies, and then examining  changes in that number over time, CMS lacks key information that would  be useful to determine if it is making progress toward reducing the risk of  opioid harm for Part D beneficiaries."], "subsections": []}, {"section_title": "CMS Oversees Providers through its Contractor and Plan Sponsors, but Efforts Do Not Specifically Monitor Opioid Prescriptions CMS\u2019s Contractor and Plan Sponsors Seek to Identify Inappropriate Prescribing of Drugs with High Potential for Abuse, Including Opioids NBI MEDIC\u2019s Data Analyses to Identify Outlier Providers", "paragraphs": ["CMS oversees providers who prescribe opioids to Medicare Part D  beneficiaries through its contractor, NBI MEDIC, and the Part D plan  sponsors.", "CMS requires NBI MEDIC to identify providers who prescribe high  amounts of drugs classified as Schedule II under the Controlled  Substances Act, which indicates a high potential for abuse and includes  many opioids. Using prescription drug event data, NBI MEDIC conducts a  peer comparison of providers\u2019 prescribing practices to identify outlier  providers\u2014the highest prescribers of Schedule II drugs, which include,  but are not limited to, opioids. NBI MEDIC\u2019s initial analyses focuses on  providers associated with at least 100 prescription drug event records or  at least $100,000 in total Part D payments for Schedule II drugs over the  course of one year. These providers are then classified as outliers if  they are listed as high in both the number of prescription drug records per  prescriber and prescriptions per beneficiary by specialty within each  state. NBI MEDIC reports to CMS on the providers with the highest  number of prescriptions identified by the analysis. Beginning with the  October 2016 report, CMS began sharing NBI MEDIC\u2019s prescriber outlier report with the plan sponsors quarterly to supplement their own  investigations of potential fraud, waste, and abuse. According to data  from NBI MEDIC, the number of outlier providers identified has generally  remained stable except for an increase in 2015. NBI MEDIC and CMS  officials said this increase occurred when a commonly used opioid,  hydrocodone, was added to the analysis after it was reclassified as a  Schedule II drug."], "subsections": [{"section_title": "NBI MEDIC\u2019s Other Projects", "paragraphs": ["NBI MEDIC gathers data on Medicare Part C and Part D and uses its  Predictive Learning Analytics Tracking Outcome (PLATO) system to  conduct a number of data analysis projects. According to NBI MEDIC  officials, these PLATO projects seek to identify potential fraud by  examining data on provider behaviors. In addition, according to officials,  PLATO is capable of allowing NBI MEDIC to share information on  providers with plan sponsors. NBI MEDIC officials stated there are two  current PLATO projects that include a focus on some opioids.", "The TRIO data project identifies providers who prescribe  beneficiaries a combination of an opioid, a benzodiazepine, and the  muscle relaxant Carisoprodol. This well-known combination of drugs  is used to increase the effects of opioids.", "The Pill Mill data project identifies providers with abnormal  prescribing behavior in authorizing controlled substances, including  opioids, absent medical necessity. To identify providers potentially  operating a pill mill, 17 risk factors are considered, including the  number of beneficiaries for whom a provider prescribed controlled  substances, the quantity of these medications, the number of  beneficiaries who travel long distances to receive medications, and  the number of beneficiaries treated for drug abuse or misuse at  emergency rooms.", "Another analysis that NBI MEDIC conducts, according to its officials, is  the Transmucosal Immediate Release Fentanyl project, which identifies  potential improper payments for medicines containing fentanyl, a  prescription opioid pain reliever. NBI MEDIC looks for instances of this  drug being prescribed to beneficiaries who do not have cancer combined  with breakthrough pain, the only approved use for this drug."], "subsections": []}, {"section_title": "NBI MEDIC\u2019s Investigations to Identify Fraud, Waste, and Abuse", "paragraphs": ["NBI MEDIC officials said they conduct investigations to assist CMS in  identifying cases of potential fraud, waste, and abuse among providers for  Medicare Part C and Part D. The investigations are prompted by  complaints from plan sponsors, calls to NBI MEDIC\u2019s call center, NBI  MEDIC\u2019s analysis of outlier providers, or from one of its other data  analysis projects. As part of its investigations, NBI MEDIC officials said  they may access data from Medicare Part B, which includes coverage for  doctors\u2019 services and outpatient care, to determine whether providers\u2019  diagnoses coincide with their prescriptions. Officials added that they  investigate inappropriate prescribing by reviewing Part D prescription  records, medical records, or PLATO data; or by conducting background  checks, interviewing beneficiaries, or conducting site visits, among other  activities. NBI MEDIC data indicates that the total number of its  investigations decreased from 2013 to 2016, which, according to NBI  MEDIC officials, occurred because it increased activities related to data  analysis and collaboration with plan sponsors."], "subsections": []}, {"section_title": "NBI MEDIC\u2019s Referrals", "paragraphs": ["After identifying providers engaged in potential fraudulent overprescribing,  NBI MEDIC officials said they may refer cases to agencies for further  investigation and potential prosecution, such as the HHS-OIG, state and  local law enforcement, the Federal Bureau of Investigations, or the Drug  Enforcement Administration. In 2016, NBI MEDIC data showed that it  referred a total of 119 cases to the HHS-OIG and 48 to agencies within  the Department of Justice, including the Federal Bureau of Investigations  and the Drug Enforcement Agency. CMS officials told us that they do not  routinely track the results of individual cases referred by NBI MEDIC to  other agencies. A 2016 Senate committee report indicated that the HHS- OIG declined and returned more than half of the cases referred to it from  2013 through 2015. According to NBI MEDIC officials, cases may be  rejected for reasons such as not meeting prosecutorial thresholds for  evidence, or HHS-OIG does not having enough staff to take on the  workload. NBI MEDIC officials told us that HHS-OIG does not always  inform NBI MEDIC of its reasons for declining the referrals."], "subsections": []}, {"section_title": "Plan Sponsor Monitoring of Providers", "paragraphs": ["CMS requires all plan sponsors to adopt and implement an effective  compliance program, which must include measures to prevent, detect,  and correct Part C or Part D program noncompliance, as well as fraud,  waste, and abuse. CMS communicates guidance for plan sponsor\u2019s  compliance programs through Chapter 9 of CMS\u2019s Prescription Drug  Benefit Manual and in annual letters. CMS\u2019s guidance focuses broadly  on prescription drugs, and does not specifically address opioids.", "To detect fraud, waste, and abuse among providers, plan sponsors told  us they use their own data analysis and criteria, as well as NBI MEDIC\u2019s  list of outlier providers. For example, plan sponsors identify providers  suspected of fraud, waste, or abuse by looking for certain characteristics,  such as providers who have a large number of beneficiaries traveling  from a different zip code to receive prescriptions, or providers who  prescribe large quantities of commonly abused drugs with no associated  medical claims to support the prescriptions. Once the suspected  providers are identified, plan sponsors said that they conduct their own  investigations to determine if there is sufficient evidence of inappropriate  prescribing.", "Plan sponsors told us they may choose to take a number of actions  based on these investigations, including choosing to refer the case to NBI  MEDIC. Additionally, if appropriate, plan sponsors can educate providers  about prescribing guidelines and best practices, or notify them that their  patients may be doctor shopping, in order to improve coordination of care.  They may also terminate a provider from their plan if they find evidence of  fraud or abuse."], "subsections": []}]}, {"section_title": "CMS Lacks Information Necessary for Oversight of Opioid Prescribing and Plan Sponsors\u2019 Monitoring Activities", "paragraphs": ["CMS lacks the information necessary to adequately determine the  number providers potentially overprescribing opioids, and therefore  cannot determine the effectiveness of efforts to achieve the agency\u2019s  goals of reducing the risk of opioid use disorders, overdoses,  inappropriate prescribing, and drug diversion. CMS\u2019s oversight actions  focus broadly on Schedule II drugs rather than specifically on opioids. For  example, NBI MEDIC\u2019s analyses to identify outlier providers do not  indicate the extent to which they may be overprescribing opioids  specifically. According to CMS officials, they direct NBI MEDIC to focus  on Schedule II drugs, because they have a high potential for abuse,  whether they are opioids or other drugs. However, without specifically  identifying opioids in these analyses\u2014or an alternate source of data\u2014 CMS lacks data on providers who prescribe high amounts of opioids, and  therefore cannot assess progress toward meeting its goals related to  opioid use.", "CMS also lacks key information necessary for oversight of opioid  prescribing, because it does not require plan sponsors to report to NBI  MEDIC or CMS cases of fraud, waste, and abuse; cases of  overprescribing; or any actions taken against providers. Plan sponsors  collect information on cases of fraud, waste, and abuse, and can choose  to report this information to NBI MEDIC or CMS. PLATO, a voluntary  reporting system, is one way that plan sponsors can report information to  NBI MEDIC or CMS, and share with other plan sponsors about providers  they investigate and about actions they take. While CMS receives some  information from plan sponsors who voluntarily report their actions, it does  not know the full extent to which plan sponsors have identified providers  who have prescribed high amounts of opioids and taken action to reduce  overprescribing. Without this information, CMS cannot determine the  extent to which plan sponsors are taking action to reduce overprescribing,  making it difficult to assess progress in this area. CMS officials told us  that they receive reports on what information plan sponsors enter into  PLATO. However, according to these officials, they do not have  information on all actions taken by plan sponsors; therefore, CMS does  not know how often plan sponsors use PLATO or what proportion of  actions they report.", "A 2015 HHS-OIG report recommended that CMS require plan sponsors  to report all potential fraud and abuse to CMS and/or NBI MEDIC. CMS  disagreed with this recommendation, and stated that plan sponsors  currently have several options for referring incidents, that CMS has  worked with plan sponsors to improve organizational performance, and  that plan sponsors regularly share information on best practices for  prevention and detection of fraud. The HHS-OIG continues to recommend  that CMS require reporting due to the lack of a comprehensive set of data  needed to monitor providers\u2019 inappropriate prescribing.", "Without specifically monitoring providers\u2019 overprescribing of opioids, CMS  cannot determine if its efforts, or the efforts of NBI MEDIC and plan  sponsors, are helping to contribute to its goals related to opioid use.  Federal internal control standards require agencies to conduct monitoring  activities and to use quality information to achieve objectives and address  risks. Without adequate information on providers\u2019 opioid prescribing  patterns in Part D, CMS is unable to determine whether its related  oversight efforts\u2014including such efforts by NBI MEDIC or Part D plan  sponsors\u2014are effective or should be adjusted."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["A large number of Medicare Part D beneficiaries use prescription opioids,  and reducing the inappropriate prescribing of these drugs is a key part of  CMS\u2019s strategy to decrease the risk of opioid use disorder, overdoses,  and deaths. Despite working to identify and decrease egregious opioid  use behavior\u2014such as doctor shopping\u2014among beneficiaries in  Medicare Part D, CMS lacks the necessary information to effectively  determine the full number of beneficiaries at risk of opioid harm. CMS  recently expanded the number of beneficiaries for whom it expects plan  sponsors to conduct intervention efforts, such as case management, and  has begun to collect additional patient safety measure data on  beneficiaries at risk of harm from opioids. However, these efforts have not  yet provided CMS with sufficient data to track how many beneficiaries are  receiving large doses of opioids, and therefore are at risk of harm.  Without expanding and enhancing its data collection efforts to include  information on more at-risk beneficiaries, CMS cannot fully assess  whether it is making sufficient progress toward its goals of reducing opioid  use disorders, overdoses, inappropriate prescribing, and drug diversion.", "CMS\u2019s efforts to oversee opioid prescribing specifically are also  inadequate. CMS directs NBI MEDIC to focus its analyses on providers  who prescribe any drugs with a high risk of abuse, but NBI MEDIC does  not specifically track those providers who prescribe opioids. Absent  opioid-specific monitoring, CMS cannot assess whether its efforts to  reduce opioid overprescribing are effective, or if opioid prescribing  patterns are changing over time. In addition, neither CMS nor NBI MEDIC  can be sure they have complete information about providers potentially  overprescribing opioids to Part D beneficiaries, because plan sponsors  are not required to report to CMS or NBI MEDIC all potential fraud and  abuse incidents or actions sponsors have taken against providers. As a  result, CMS lacks information about plan sponsors\u2019 monitoring of  providers who overprescribe opioids, and is therefore unable to determine  if the agency\u2019s and plan sponsors\u2019 efforts are successful in achieving  CMS\u2019s goals."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following three recommendations to CMS.", "The Administrator of CMS should gather information over time on the  number of beneficiaries at risk of harm from opioids, including those  who receive high opioid morphine equivalent doses regardless of the  number of pharmacies or providers, as part of assessing progress  over time in reaching the agency\u2019s goals related to reducing opioid  use. (Recommendation 1)", "The Administrator of CMS should require its contractor, NBI MEDIC,  to identify and conduct analyses on providers who prescribe high  amounts of opioids separately from providers who prescribe high  amounts of any Schedule II drug. (Recommendation 2)", "The Administrator of CMS should require plan sponsors to report to  CMS on investigations and other actions taken related to providers  who prescribe high amounts of opioids. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for comment. HHS provided  written comments, which are reprinted in appendix I, and technical  comments, which we incorporated as appropriate. In its written  comments, HHS described its efforts to reduce opioid overutilization in  Medicare Part D. HHS noted that these efforts include a medication  safety approach to improve care coordination for high-risk beneficiaries  using opioids, quality metrics for plan sponsors, and data analysis of  prescribing patterns to target potential fraud, waste, and abuse. For  example, HHS noted that CMS adopted a Medicare Part D opioid  overutilization policy in 2013 that provided specific guidance to Part D  plans on effective drug utilization review programs to reduce  overutilization of opioids. As described in our report, CMS\u2019s opioid  overutilization policy requires sponsors to implement retrospective drug  utilization review programs to identify beneficiaries who are potentially  overusing opioids. Among other things, sponsors may choose to  implement beneficiary-specific edits that limit high-risk beneficiaries to  certain opioids and amounts, and CMS expects them to use formulary- level edits to alert providers when their patients are receiving high levels  of opioids from other doctors.", "HHS also concurred with two of our three recommendations.", "HHS concurred with our recommendation that CMS gather  information over time on the number of beneficiaries at risk of harm  from opioids, as part of assessing progress toward agency goals.  HHS commented that CMS tracks beneficiaries who meet these  criteria through the patient safety measures. However, while these  patient safety measures are a potential source of this information,  they currently do not include all at-risk beneficiaries, because the  opioid use threshold they use (120 mg MED for 90 days or longer) is  more lenient than indicated in CDC guidelines or in CMS\u2019s revised  OMS criteria. In addition, while CMS uses the patient safety measures  to assess plan sponsor performance, the data are relatively new, and  CMS has not yet used them to report progress over time toward its  goals.", "HHS concurred with our recommendation that CMS require NBI  MEDIC to gather separate data on providers who prescribe high  amounts of opioids, and HHS noted that it intends to work with NBI  MEDIC to identify trends in outlier prescribers of opioids.", "HHS did not concur with our recommendation that CMS require plan  sponsors to report on investigations and other actions taken related to  providers who prescribe high amounts of opioids. HHS noted that plan  sponsors have the responsibility to detect and prevent fraud, waste,  and abuse and that CMS reviews cases when it conducts audits. HHS  also stated that it seeks to balance requirements on plan sponsors  when considering new regulatory requirements. As noted in our  report, plan sponsors conduct investigations and take actions against  providers, and some plan sponsors report actions to CMS and NBI  MEDIC. However, without complete reporting, such as reporting from  all plan sponsors on the actions they take to reduce overprescribing,  CMS is missing key information that could help assess progress in  this area. Due to the importance of this information, we continue to  believe that CMS should require plan sponsors to report on the  actions they take.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of HHS and  the Administrator of CMS. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or CurdaE@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Will Simerl (Assistant Director),  Carolyn Feis Korman (Analyst-in-Charge), Amy Andresen, Samantha  Pawlak, and Patricia Roy made key contributions to this report. Also  contributing were Muriel Brown, Drew Long, and Emily Wilson."], "subsections": []}]}], "fastfact": ["More than 14 million people received opioid prescriptions in 2016 through the Medicare drug benefit program, Part D.", "The Centers for Medicare & Medicaid Services delegate monitoring of these beneficiaries to the private organizations that implement the Medicare Part D benefit. These organizations follow CMS monitoring criteria.", "While these criteria identify beneficiaries at the greatest risk of harm from opioid use, we found that it does not capture data on an even larger population of beneficiaries potentially at risk of harm from high doses of opioids. We recommended three actions to improve oversight.", "On November 19, 2018, GAO posted an HTML version of this report."]}
{"id": "GAO-18-30", "url": "https://www.gao.gov/products/GAO-18-30", "title": "Disaster Assistance: Opportunities to Enhance Implementation of the Redesigned Public Assistance Grant Program", "published_date": "2017-11-08T00:00:00", "released_date": "2017-11-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FEMA, an agency of the Department of Homeland Security (DHS), has obligated more than $36 billion in PA grants to state, local, and tribal governments to help communities recover and rebuild after major disasters since 2009. Further, costs are rising with disasters, such as Hurricanes Harvey, Irma, and Maria in 2017. FEMA recently redesigned how the PA program delivers assistance to state and local grantees to improve operations and address past challenges identified by GAO and others. FEMA tested the new delivery model in selected disasters and announced implementation in September 2017.", "GAO was asked to assess the redesigned PA program. This report examines, among other things, the extent to which FEMA's new delivery model addresses (1) past workforce management challenges and assesses future workforce needs; and (2) past information sharing challenges and key IT management controls. GAO reviewed FEMA policy, strategy, and implementation documents; interviewed FEMA and state officials, PA program applicants, and other stakeholders; and observed implementation of the new model at one test location following Hurricane Matthew in 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Emergency Management Agency (FEMA) redesigned the Public Assistance (PA) grant program delivery model to address past challenges in workforce management, but has not fully assessed future workforce staffing needs. GAO and others have previously identified challenges related to shortages in experienced and trained FEMA PA staff and high turnover among these staff. These challenges often led to applicants receiving inconsistent guidance and to PA project delays. As part of its new model, FEMA is creating consolidated resource centers to standardize and centralize PA staff responsible for managing grant applications, and new specialized positions, such as hazard mitigation liaisons, program delivery managers, and site inspectors, to ensure more consistent guidance to applicants. However, FEMA has not assessed the workforce needed to fully implement the new model, such as the number of staff needed to fill certain new positions, or to achieve staffing goals for supporting hazard mitigation on PA projects. Fully assessing workforce needs will help to ensure that FEMA has the people and the skills needed to fully implement the new PA model and help to avoid the long-standing workforce challenges the program encountered in the past.", "FEMA designed a new PA information and case management system\u2014called the FEMA Applicant Case Tracker (FAC-Trax)\u2014to address past information sharing challenges, such as difficulties in sharing grant documentation among FEMA, state, and local officials and tracking the status of PA projects, but additional actions could better ensure effective implementation. Both FEMA and state officials involved in testing of the new model stated that the new information system allows them to better manage and track PA applications and documentation, which could lead to greater transparency and efficiencies in the program. Further, GAO found that this new system fully addresses two of four key information technology (IT) management controls\u2014project planning and risk management\u2014that are necessary to ensure systems work effectively and meet user needs. However, GAO found that FEMA has not fully addressed the other two controls\u2014requirements development and systems testing and integration. By better analyzing progress on high-level user requirements, for example, FEMA will have greater assurance that FAC-Trax will meet user needs and achieve the goals of the new delivery model."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations, including that FEMA assess the workforce needed for the new delivery model and improve key IT management controls for its new information sharing and case management system, FAC-Trax. DHS concurred with all recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In August 2017, Hurricane Harvey caused catastrophic and  unprecedented flooding across southeast Texas and into Louisiana.  While federal agencies support the evacuation, rescue, and relief to  hundreds of thousands of residents, projections of damages exceed $50  billion. In the weeks that followed, Hurricanes Irma and Maria brought  winds and storm surge, which caused damage across the U.S. Virgin  Islands, Puerto Rico, and the southeast United States, adding to the  projected disaster costs. These events are emblematic of a trend of rising  costs from natural disasters. In both 2016 and 2017, 15 separate U.S.  disasters resulted in losses exceeding $1 billion each. Each year, the  federal government obligates billions of dollars to programs and activities  that provide assistance to state and local governments, tribes, certain  nonprofit organizations, and individuals that have suffered injury or  damages from major disaster or emergency incidents, such as  hurricanes, tornados, or fires. We reported in 2016 that the federal  government obligated at least $277.6 billion in disaster assistance during  fiscal years 2005 through 2014 and have recognized the rise in the  number\u2014and the increase in severity\u2014of disasters as a key source of  federal fiscal exposure.", "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. FEMA\u2019s Public Assistance (PA) grant program provides  financial assistance to state, tribal, territorial, and local governments for  debris removal; emergency protective measures; and the repair,  replacement, or restoration of disaster-damaged, publicly owned facilities.", "For example, flooding across northern and central California in early  February 2017 resulted in substantial property and infrastructure damage,  including severe damage to the Oroville Dam spillway. Shortly thereafter,  the governor of California requested federal assistance, and the President  subsequently issued an emergency declaration that made funding  available for repairs to the spillway through the PA program. PA is  FEMA\u2019s largest disaster assistance grant program and from fiscal years  2009 through 2016, the agency obligated more than $36 billion in grants  for such projects.", "PA is a complex and multistep grant program administered through a  partnership between FEMA and the state grantee, which provides funding  to local officials who are the subrecipients of a PA grant award. Thus, it  entails an extensive paperwork and review process between FEMA and  grantee officials based on specific eligibility rules that outline the types of  damage that can be reimbursed by the federal government and steps that  federal, state, and local governments must take in order to document  eligibility. Due in part to the complexity of the process, we identified a  number of past challenges in various aspects of the program. Specifically,  we assessed the PA program in 2008 during the Gulf Coast states\u2019  recovery from Hurricanes Katrina and Rita. We identified a number of  challenges related to FEMA\u2019s management of its PA workforce, including  lack of training and high turnover among PA staff, which led to project  delays and other problems. We also identified challenges related to  information sharing between FEMA and PA grant applicants, which led to  problems in tracking the status of projects, among other things. Moreover,  in 2015 we identified challenges in effectively incorporating mitigation into  PA projects and grant guidance during the recovery from Hurricane  Sandy in the northeastern United States. To address these various  challenges, we have made a number of recommendations, and FEMA  has taken or is taking various actions to address them, as we discuss  later in this report.", "In recent years, FEMA has taken steps to redesign the PA program to  address past challenges and make the program easier for FEMA and  grantee officials to manage. As part of this effort, FEMA redesigned  processes for developing, reviewing, and approving grant applications.  The agency is also developing new PA staff positions; implementing a  centralized and standardized grant processing approach; and developing  a new information system to better maintain and share grant  documentation. FEMA officials also report taking steps to better  incorporate hazard mitigation during the PA grant process. Taken  together, these efforts represent FEMA\u2019s \u201cnew delivery model\u201d for  managing project development in the PA program, which we refer to as  the preaward process. FEMA has been testing the new delivery model at  certain disaster locations since 2015, in preparation for implementing it  nationwide for all new disasters.", "In light of past challenges and recent changes to the PA program  preaward process, you asked us to assess FEMA\u2019s progress in  addressing these challenges and implementing the new delivery model.  Specifically, this report addresses the extent to which FEMA designed the  new delivery model to address previously identified challenges related to  1.  managing its PA program workforce and the extent that FEMA  assessed the workforce needed to fully implement the new delivery  model;  2.  information sharing between FEMA and grant applicants and the  extent that FEMA\u2019s new information sharing system satisfies key  information technology (IT) management controls; and  3.  incorporating hazard mitigation into the PA grant process.", "To address all three objectives, we reviewed prior reports from GAO, the  DHS Office of the Inspector General (OIG), and FEMA\u2019s own internal  assessments identifying past PA program management challenges  related to workforce management, information sharing, and hazard  mitigation. We compared information from these reports to information  and documentation of FEMA\u2019s efforts to implement the new PA delivery  model to determine the extent that the new model is being designed to  address these challenges. We also reviewed program documentation,  such as after-action reports that FEMA developed after testing the new  model in disaster locations. We conducted 62 semistructured interviews  with FEMA officials at headquarters and in two selected regions out of the  10 FEMA regional offices, including interviews with members of FEMA\u2019s  PA workforce at the centralized processing center in Denton, Texas, and  the Joint Field Office (JFO) in Savannah, Georgia, for Hurricane Matthew  recovery efforts in the state. We identified relevant officials based on job  title, responsibilities, and referrals from other officials. We asked  questions to identify their role in the implementation of the new delivery  model, their experiences with implementation, and their assessment of  the benefits and challenges of the model as it relates to our objectives  and scope. We also conducted 11 semistructured interviews with selected  state officials responsible for PA operations, to include those with and  without new delivery model experience. Lastly, we conducted three semistructured interviews with randomly selected applicants who applied  for PA funding after the Hurricane Matthew disaster in Georgia.  Although their responses are not generalizable across all applicants, they  helped inform our understanding of the experiences of recipients using  the new delivery model for the first time.", "To address our first objective, we reviewed FEMA documentation,  including the 2014 PA Program Realignment report, the PA Cadre  Training Plan, and after-action reports from different tests of the new  delivery model implementation to identify key workforce management  changes under the new model. We also reviewed position descriptions,  job aids, and training materials developed by FEMA to support new  workforce roles and responsibilities under the new model. As part of the  interviews previously described, we interviewed officials managing  workforce activities under the new delivery model, including a PA  program coordinator for workforce. We compared FEMA\u2019s workforce  management efforts under the new model to leading practices we have  identified for business process reengineering and strategic workforce  management.", "To address our second objective, we reviewed documents related to  FEMA\u2019s acquisition and development of the new information system for  the PA program. We interviewed program staff, stakeholders, and officials  from FEMA\u2019s Recovery Technology Programs Division that are  responsible for developing the new system, to understand changes to  information sharing under the new model. We then compared FEMA\u2019s  development efforts to key IT management control practices in the areas  of risk management, requirements development, project planning, and  systems testing and integration to determine the extent to which FEMA\u2019s  efforts met these practices. We drew these key control practices from the  Software Engineering Institute\u2019s Capability Maturity Model\u00ae Integration for  Acquisition and Development, the Project Management Institute\u2019s Guide  to the Project Management Body of Knowledge (PMBOK\u00ae Guide), and  the Institute of Electrical and Electronics Engineers\u2019 (IEEE) Standard for  Software and System Test Documentation.", "To address our third objective, we reviewed documentation such as  FEMA PA policies and operations guidance related to incorporating  hazard mitigation into PA projects, as well as process guides, job aids,  and training materials developed under the new delivery model, to better  understand how mitigation is addressed. In addition, we interviewed PA  program officials; officials from FEMA\u2019s Federal Insurance and Mitigation  Administration (FIMA), who assist PA officials to incorporate mitigation  into the recovery process; and state officials involved with the second and  third test implementations of the new model in Oregon and Georgia. We  also reviewed after-action reports from the second and third test  implementations of the new model and new delivery model performance  measures in the PA New Delivery Model Assessment Plan. We then  compared the information derived from the documentation and interviews  to the goals and objectives identified in FEMA strategic plans, the  National Disaster Recovery Framework, the National Mitigation  Framework, and Standards for Internal Control in the Federal  Government, to determine the extent that FEMA\u2019s new delivery model  incorporates hazard mitigation planning into the PA process and includes  goals aligned with broader FEMA mitigation goals. Also, we obtained  data from FEMA\u2019s existing PA information system\u2014the Emergency  Management Mission Integrated Environment (EMMIE)\u2014on the number  of PA projects that incorporated hazard mitigation in the third test  implementation of the new delivery model in Georgia. We interviewed PA  program officials, reviewed OIG reviews of the EMMIE system, and  reviewed related documentation and determined this EMMIE data was  reliable for describing the rate of hazard mitigation in PA projects.", "We conducted this performance audit from July 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FEMA\u2019s Public Assistance Grant Program", "paragraphs": ["Major disaster declarations can trigger a variety of federal response and  recovery programs for government and nongovernmental entities,  households, and individuals. FEMA\u2019s Office of Response and Recovery  manages the PA grant program, providing funds to states, territorial  governments, local government agencies, Indian tribes, authorized tribal  organizations, and certain private nonprofit organizations in response to  presidentially declared disaster declarations to repair damaged public  infrastructure such as roads, schools, and bridges. Figure 1 shows the  total amount of PA funds obligated by county from January 2009 through  February 2017 for federal disaster declarations.", "To implement the PA program, FEMA\u2019s staff includes a mix of temporary,  reservist, and permanent employees under two authorities, the Stafford  Act and Title 5. Reservists make up the largest share of the PA  workforce, which consisted of 1,852 employees\u2013\u20131,041 reservists, 634  full-time equivalents, and 177 temporary Cadre of On-Call  Response/Recovery Employees\u2013\u2013as of June 2017, according to PA  officials. Figure 2 summarizes the key characteristics for each type of  employee.", "After a disaster, FEMA sends PA program staff to the affected area to  work with state and local officials to assess the damage prior to a disaster  declaration. FEMA officials establish a temporary Joint Field Office (JFO)  to house staff who will manage response and recovery functions after a  declared disaster (including operations, emergency response and support  teams, planning, administration, finance, and logistics). Once the  President has declared a disaster, PA staff work with grant applicants to  help them document damages, identify eligible costs and work, and  prepare requests for PA grant funds by developing project proposals.  These proposals may include proposals for hazard mitigation if the  hazard mitigation work is related to the repair of damaged facilities,  referred to as permanent work projects. Immediate emergency measures,  such as debris removal, are not eligible for hazard mitigation. Officials  then review and obtain approval of the projects prior to FEMA obligating  funds to state grantees. Figure 3 describes the process used to develop,  review, and obligate PA projects."], "subsections": []}, {"section_title": "Hazard Mitigation in the PA Program", "paragraphs": ["In addition to rebuilding and restoring infrastructure to its predisaster  state, the PA program can be used to fund hazard mitigation measures  that will reduce future risk to the infrastructure in conjunction with the  repair of disaster-damaged facilities. There is no preset limit to the  amount of PA funds a community may receive; however, PA hazard  mitigation measures must be determined to be cost effective. Some  examples of hazard mitigation measures that FEMA has predetermined to  be cost effective, if they meet certain requirements, include  installing shut-off valves on underground pipelines so that damaged  sections can be isolated during or following a disaster;  securing a roof using straps, clips, or other anchoring systems in  locations subject to high winds; and  installing shutters on windows or replacing glass with impact-resistant  material.", "Applicants can also propose mitigation measures that are separate from  the damaged portions of a facility, such as constructing floodwalls around  damaged facilities to avoid future flooding. FEMA evaluates these  proposals, considering how the proposed measure protects damaged  portions of a facility and whether the measure is reasonable based on the  extent of the damage, and determines eligibility on a case-by-case  basis.", "FEMA\u2019s Federal Insurance and Mitigation Administration (FIMA) deploys  a cadre of mitigation staff to help coordinate and implement hazard  mitigation activities during disaster recovery, including PA hazard  mitigation. A primary task of these staff is to identify and assess  opportunities to incorporate hazard mitigation into PA projects. Generally,  if an applicant seeks to incorporate hazard mitigation measures into a PA  project, FIMA\u2019s hazard mitigation staff develop a hazard mitigation  proposal."], "subsections": []}, {"section_title": "Previous Challenges and Recommendations Related to the PA Program", "paragraphs": ["We, the DHS OIG, and others have reported past challenges with  FEMA\u2019s management of the PA program related to workforce  management, information sharing, and hazard mitigation. For example,  we reported in 2008 that the PA program had a shortage of experienced  and knowledgeable staff, relied on temporary rotating staff, and provided  limited training to their workforce, which impaired PA program delivery  and delayed recovery efforts after Hurricanes Katrina and Rita. We  found that staff turnover, coupled with information sharing challenges,  delayed projects when applicants had to provide the same information  each time FEMA assigned new staff and that poorly trained staff provided  incomplete and inaccurate information during their initial meetings with  applicants or made inaccurate eligibility determinations, which also  caused processing delays. We recommended that FEMA strengthen  continuity among staff involved in administering the PA program by  developing protocols to improve information and document sharing  among FEMA staff. In response, in 2013 FEMA instituted a PA  Consistency Initiative, which included hiring new managers for FEMA  regional offices, stakeholder training on PA program administration, and  using a newly developed internal website to allow staff to post and share  information to address continuity and knowledge sharing concerns during  disaster operations. FEMA also developed the Public Assistance Program  Delivery Transition Standard Operating Procedure to facilitate the transfer  of responsibility for PA program activities during cases of staff turnover  during recovery operations. Despite FEMA\u2019s efforts to implement our  recommendations, the DHS-OIG, in 2016, found continuing challenges  after Hurricane Sandy with workforce levels, skills, and performance of  reservists, who make up the majority of the PA workforce.", "Regarding information sharing, in 2008, we also identified difficulties  sharing documents among federal, state, and local participants in the PA  process and difficulties tracking the status of projects. We recommended  that FEMA improve information sharing within the PA process by  identifying and disseminating practices that facilitate more effective  communication among federal, state, and local entities. In response,  FEMA proceeded with the implementation of a grant tracking and  management system, called EMMIE, which was used previously in 2007.  However, in subsequent years we found weaknesses in how FEMA  developed the system and the DHS-OIG found that information sharing  problems similar to the ones identified in our 2008 report persisted.", "Regarding hazard mitigation, we reported in 2015 that state and local  officials experienced challenges in using PA hazard mitigation during the  Hurricane Sandy recovery efforts because PA officials did not consistently  prioritize hazard mitigation, and in some cases discouraged mitigation  projects during the PA grant application process, among other  challenges. We recommended that FEMA assess the challenges state  and local officials reported, including the extent to which they can be  addressed, and implement corrective actions, as needed. In response to  our recommendation, FEMA developed a corrective action plan that  included actions and milestones for reviewing, updating, and  implementing PA hazard mitigation policy. FEMA also identified the PA  new delivery model as a solution for some of the challenges state and  local officials reported. Previously, the OIG also reported that PA program  officials did not consistently identify eligible PA hazard mitigation projects,  and that PA officials did not prioritize the identification of PA hazard  mitigation opportunities at the onset of recovery efforts after the 2005 Gulf  Coast hurricanes. See appendix I for a summary of findings and the  status of our past recommendations on challenges with workforce  management, information sharing, and hazard mitigation related to the  PA program since our last review in December 2008.", "FEMA\u2019s own internal reviews and outreach efforts have also identified  similar challenges. For example, at FEMA\u2019s request the Homeland  Security Studies and Analysis Institute assessed the effectiveness and  efficiency of the PA program in 2011. The institute\u2019s report outlined 3  key findings and 23 recommendations relating to the PA preaward  process. For example, the report found that FEMA could enhance training  programs to develop a skilled and experienced workforce; utilize  technology and employ web-based tools to support centralized  processing, transparency, and efficient decision making; and identify and  address potential special considerations, such as hazard mitigation  proposals, as early as possible in the preaward process to improve  consistency. In 2014, PA program officials analyzed the PA grant process  and used input from agency staff and officials involved in various aspects  of the program to identify potential improvements. The resulting Public  Assistance Program Realignment report found that challenges in  workforce management, information sharing, and hazard mitigation  continued, and included recommendations for improvement. For example,  the report concluded that a shortage of qualified staff, high turnover,  unclear organizational responsibilities, and inconsistent training were  long-standing and continuing challenges that impaired the PA pre-award  process. In addition, from January 2015 to April 2015, FEMA conducted  extensive outreach with more than 260 stakeholders across FEMA  headquarters, all 10 regions, 43 states, and 4 tribal nations to discuss  challenges in the PA program and opportunities for improvement. For  example, stakeholders identified challenges with ineffective information  collection during the preaward process and suggested identifying special  considerations, such as hazard mitigation, earlier in the PA process as an  idea for improvement. In response, FEMA began redesigning the PA  preaward process to operationalize the results of its 2014 report and  address areas for improvement identified through its outreach efforts."], "subsections": []}, {"section_title": "The PA New Delivery Model", "paragraphs": ["FEMA awarded a contract for program support to help PA officials  implement a redesigned PA program in 2015. This included a new  process to develop and review grant applications, and obligate PA funds  to states affected by disasters; new positions, such as a new program  delivery manager who is the single point of contact throughout the grant  application process; a new Consolidated Resource Center (CRC) to  support field operations by supplementing project development,  validation, and review of proposed PA project applications; and a new  information system to maintain and share PA grant application  documents. As part of the new process, PA program officials identified  the need to ensure that staff emphasize special considerations, such as  hazard mitigation, earlier in the process. Taken together, these efforts  represent FEMA\u2019s \u201cnew delivery model\u201d for awarding PA program grants.  Enhancements in the PA program under the new delivery model are  presented in figure 4.", "Regarding the new delivery model process, FEMA introduced several  changes to enhance outreach to applicants during the \u201cexploratory call\u201d\u2014 the first contact between FEMA and local officials\u2014and during the first in- person meeting, called the \u201crecovery scoping meeting.\u201d FEMA also  revised decision points during the process, when program officials can  request more information from applicants, and applicants can review and  approve the completion of project development steps. FEMA also  incorporated special considerations, such as hazard mitigation, earlier in  the new process during the exploratory calls and recovery scoping  meetings. The changes and enhancements to the PA grant award  process in the new delivery model are presented in figure 5.", "The new process divides proposed PA projects based on complexity and  type of work into three categories\u2014100 percent completed, standard, and  specialized\u2014that PA staff manage to expedite review or assign skilled  staff to technical projects as needed. If the applicant has already  completed work following a disaster, such as debris removal, it is  considered \u201c100 percent completed\u201d and JFO staff collect the necessary  documents and provide the information to the CRC staff who complete  the development of project applications, validate the information, and  complete all necessary reviews. Projects that require repairs and further  assistance from PA program staff at the JFO include \u201cstandard\u201d and  \u201cspecialized\u201d projects, which include a site inspection to document  damages, before the JFO staff provide the information to the CRC.  Further, PA program officials assign PA staff based on their skills and  experience to standard projects, which are less technically complex to  develop, and specialized projects, which are more technically complex  and costly. We discuss the new workforce positions FEMA developed for  JFOs and CRCs, the new information system FEMA developed to  maintain and share PA grant documents with applicants, and FEMA\u2019s  efforts to incorporate hazard mitigation into PA projects later in this report."], "subsections": []}, {"section_title": "Testing the New Delivery Model Prior to Full Implementation", "paragraphs": ["Since 2015, FEMA has invested almost $9 million to redesign the PA  program through the reengineering and implementation of the new  delivery model, including about $4.7 million for contract support for  implementation, and $4 million for acquisition of the new information  system. FEMA tested the new delivery model in a series of selected  disasters, using a continuous process improvement approach to assess  and improve the process, workforce changes, and information system  requirements, prior to implementing the new model for all future  disasters. For example, FEMA first tested the new process in Iowa in  July 2015 and, in February 2016, PA program officials expanded their test  to include all of the new staff positions. In October 2016, PA program  officials added the new information system to achieve a comprehensive  implementation of all of the elements of the new delivery model for the  agency\u2019s response to Hurricane Matthew in Georgia, two additional  disasters in Georgia in January 2017, and in Missouri, North Dakota,  Wyoming, Vermont, and two disasters in New Hampshire from June  through August 2017. The timeline for PA\u2019s implementation of the new  delivery model is shown in figure 6.", "According to program officials, FEMA planned to implement the new  model for all future disasters beginning in January 2018. However,  historic disaster activity during the 2017 hurricane season accelerated full  implementation. As a result, on September 12, 2017, FEMA officials  announced that, unless officials determined it would be infeasible in an  individual disaster, the program would use the new delivery model in all  future disasters."], "subsections": []}]}, {"section_title": "FEMA Designed the New PA Delivery Model to Address Workforce Management Challenges, but Efforts to Support Full Implementation Could Be Enhanced", "paragraphs": [], "subsections": [{"section_title": "PA\u2019s New Delivery Model Was Designed to Respond to Previously Identified Workforce Challenges", "paragraphs": ["According to FEMA\u2019s 2014 PA Program Realignment report and other  program documents, PA officials designed the new delivery model to  respond to persistent workforce management challenges related to  identifying the required number of staff and needed skills and training,  among other things, to improve the efficiency and effectiveness of the PA  preaward process. To address these challenges, PA program officials  centralized much of the responsibility for processing PA projects in the  CRCs, created additional new positions with specialized roles and  responsibilities in JFOs, and established training and mentoring programs  to help build the new staffs\u2019 skills."], "subsections": [{"section_title": "Centralized Roles at CRCs", "paragraphs": ["In 2016, PA program officials centralized some of the project activities  that otherwise were being carried out at individual JFOs at FEMA\u2019s first  new CRC in Denton, Texas. Officials did so by establishing 18 new  positions, many of which directly correlated with positions that FEMA  deployed to individual JFOs in the legacy PA delivery model. According to  PA officials, centralizing positions will improve standardization in project  processing, and result in a higher quality work product. As part of the new  delivery model, PA program officials created a new hazard mitigation  liaison position for PA program staff at the CRC that did not previously  exist at individual JFOs. The other new positions that PA program officials  either created or centralized at the CRC included two specialized  positions responsible for costing and validating PA projects. Previously,  the PA project specialist deployed to the JFO would complete these tasks  and others; however, the consistency of project development varied  across the regions and disasters. In contrast, CRC staff are full-time  employees who receive training to specialize in completing standardized  project development steps for PA projects from multiple disasters on an  ongoing basis.", "Program officials anticipate that centralizing new specialized staff at the  CRCs will also reduce PA administrative costs and staffing levels at the  JFOs. For example, staff at the CRCs, such as the new hazard mitigation  liaisons and insurance and costing specialists, could support project  development for multiple disasters and regions simultaneously, whereas  PA previously needed to deploy staff to each JFO to fulfill these roles. In  addition, once JFOs operating under the new model send projects to the  CRCs for processing and review, FEMA can more rapidly close its JFOs,  reducing associated administrative costs. For example, following  Hurricane Matthew, FEMA credited the new delivery model, in part, with  its ability to close the JFO in Georgia sooner than several other JFOs in  neighboring states not involved in the implementation of the new delivery  model."], "subsections": []}, {"section_title": "Specialized Roles at JFOs", "paragraphs": ["PA program officials created new positions with more specialized roles  and responsibilities to help PA staff at JFOs provide more consistency in  the project development process and guidance to applicants. Program  officials split the broad responsibilities previously managed at the JFOs  by PA crew leaders and project specialists, into two new, specialized  positions\u2014the program delivery manager and site inspector. The program  delivery manager serves as the applicant\u2019s single point-of-contact  throughout the preaward process, manages communication with the  applicant, and oversees document collection. All three PA grant  applicants we spoke to following Hurricane Matthew in Georgia greatly  appreciated the knowledge and assistance provided by their program  delivery managers. Site inspectors are responsible for conducting the site  inspection to document all disaster-related damages; determining the  applicant\u2019s plans for recovery, coordinating with other specialists, and  verifying the information collected with the applicant. Officials expect  deployed staff at JFOs can complete the fieldwork faster and provide  greater continuity of service to applicants. Further, program officials  believe that specializing roles will enable them to provide more targeted  training, and improve employee satisfaction."], "subsections": []}, {"section_title": "New Training Courses and Mentoring", "paragraphs": ["Site inspection, hazard mitigation, and  environmental and historic preservation  specialists, along with a new Public  Assistance program mentor, conduct a site  inspection with the applicant to document  damages to a historic cemetery in Savannah,  Georgia, following Hurricane Matthew in  2016.", "PA program officials designed new training and mentoring programs for  the new positions at the CRCs and JFOs and used a continuous  feedback process to update and improve the training, position guides,  and task books throughout the implementation of the new delivery model,  according to PA officials. According to a June 2017 update of the PA  Cadre Training Plan, training for the new model has five major focuses:  required training and skills for position qualification; on-site refresher  training; mentor training; regional-based state, local, tribal, and territorial  training; and training on the new information system. Specifically, officials  developed six new training courses, and identified which are required for  each position under the new delivery model. For example, a program  delivery manager at the JFO is required to complete both the program  delivery manager and site inspector specialist courses. As of June  2017, PA program officials had provided at least one new model training  course to 93 percent of their cadre (including program delivery manager  training to 366 individuals and site inspector training to 1,172 individuals)  and planned to provide 28 additional courses through September 2017 to  the PA cadre. According to regional and CRC officials, the training  courses and mentoring from experienced staff helped maximize new  staff\u2019s capabilities in the new process."], "subsections": []}]}, {"section_title": "PA Officials Planned Additional Training to Address Issues Identified during Implementation", "paragraphs": ["Throughout the third implementation of the new delivery model, JFO and  CRC staff, as well as regional PA staff, stakeholders, and applicants,  identified staff skills and training as a key area that needed more attention  for full implementation of the new delivery model. Our work and FEMA\u2019s  after-action reports from the third test in Georgia identified problems with  site inspector skills, which affected the timeliness and accuracy of  projects. Specialists and managers at the CRC noted that poorly trained  site inspectors did not consistently provide the necessary information  from the field, which resulted in delays for the CRC staff to process  projects, and after-action reports also identified challenges with site  inspector skills. According to a PA applicant in Georgia, the inconsistency  of skills and experience of their site inspector resulted in the need to  conduct a \u201cdo-over\u201d site inspection on one of the applicant\u2019s projects,  causing delays. PA staff and state officials attribute much of the site  inspectors\u2019 skill gaps to their lack of training and experience in the  program. According to PA Region officials, providing timely training will be  a resource-intensive challenge for implementing the new delivery model  for all future disasters. For example, it can be difficult to train reservists  before FEMA deploys them to disasters, and many of the program\u2019s  experienced reservists have retired or resigned, resulting in few mentors  for the program and a high need to provide training to inexperienced and  newly hired staff.", "PA officials and stakeholders also emphasized the need for FEMA to  provide additional training for state and local officials to build capacity and  support the goals of the new delivery model. For example, according to  JFO officials at the third implementation, the new delivery model  increases responsibilities for applicants, who will require more applicant  training than FEMA currently provides. According to state officials,  applicant capabilities vary, and FEMA should provide training to state and  local officials on the new delivery model and the information system  before a disaster. Skill gaps among applicants could result in inconsistent  implementation of the new process, according to PA staff and  stakeholders, and PA staff said that training was important to prevent  applicants from reverting back to the legacy PA grant application process.", "To support full implementation of the new delivery model for all disasters,  PA program officials have updated training courses for PA staff and  applicants, and planned additional training to address these challenges  and other lessons learned through the test implementation. For example,  PA officials told us they updated the site inspector training program in  May 2017 and scheduled a new site inspector training session in August  2017 to include more hands-on training to help address the skill gaps  identified for site inspectors. PA officials created a new training course for  FEMA\u2019s regional offices, in part to enable regional PA staff to provide new  delivery model training to state and local officials. PA officials also  planned to develop a self-paced, online course for state and local officials  by the end of 2017."], "subsections": []}, {"section_title": "Opportunities Exist to Enhance Workforce Assessment in the New Delivery Model", "paragraphs": ["PA officials have not fully assessed the workforce needed for JFO field  operations, CRC staff, or FIMA\u2019s hazard mitigation staff to support  implementation of the new delivery model for all future disasters. PA  program officials developed an initial assessment of the total number of  staff needed in the field and the CRCs in 2016 to estimate cost savings  associated with consolidating and specializing positions at the CRCs and  deploying fewer staff to JFOs. However, the assessment did not identify  the number of staff required to fill specific positions, including program  delivery managers and hazard mitigation specialists, needed to support  the new delivery model for full implementation. In reviewing the test  implementations of the new delivery model, we found that inadequate  staffing levels at the JFOs and CRCs, and with FIMA\u2019s hazard mitigation  staff, affected staffs\u2019 ability to achieve the goals of the new delivery  model.", "Staff levels at the JFO. We identified challenges with having the right  number of program delivery managers and site inspection specialists  to achieve program goals for customer satisfaction, efficiency, and  quality in test implementations of the new delivery model. For  example, in the second test implementation of the new delivery model  in Oregon in 2016, PA did not deploy enough program delivery  managers to the disaster, which resulted in unmanageable caseloads  for program delivery managers, according to state and PA officials.  PA program officials assigned program delivery managers an average  caseload of 12 PA applicants, which was more than they could  effectively manage, according to PA staff, and program officials aim  for a caseload of 8 to 10 applicants. According to state officials, local  officials reported they did not always receive the support they needed  from program delivery managers who managed caseloads consisting  of dozens of projects at multiple sites for each applicant during the  Oregon implementation. As a result of overwhelmed program delivery  managers, local officials faced challenges understanding their  responsibilities, such as recognizing when they needed to provide  information for the project development to proceed, according to state  officials. PA staff involved with the third test implementation in  Georgia in 2016 and 2017 said there were not enough site inspectors  or program delivery managers to fully manage the workload at the  JFO. Because of the specialization of roles, projects could not move  forward when there were not enough staff to execute the next step in  the process. For example, PA staff at the JFO said program delivery  managers completed recovery scoping meetings rapidly, but faced a  bottleneck in scheduling site inspections because there were more  applicants awaiting site inspections than could be fulfilled by the  number of site inspection specialists available.", "Staff levels at the CRC. Staff at the CRC reported challenges with  staffing levels during the Oregon and Georgia test implementations,  and expressed concerns about when PA officials will staff the CRCs  to support full implementation of the new model for all disasters.  During the Oregon test implementation, a CRC specialist said there  were not enough technical specialists to manage the workload and, as  a result, PA program officials had to redeploy site inspectors from  their JFO field operations to the CRC to complete costing estimates.  During the third test in Georgia, quality assurance specialists said that  their workload resulted in added stress trying to complete the work in  time while adhering to quality standards. According to CRC specialists  in Denton, Texas, PA officials had not determined required staff levels  for full implementation, but agreed that workload was too high and  program officials needed to determine the appropriate staff levels for  each CRC to support full implementation. PA officials were still  evaluating CRC processing times and workload management from the  Oregon and Georgia test implementations to determine staffing  needs, according to PA officials. Further, PA program officials plan to  establish a second CRC in Winchester, Virginia, before the end of  2017, but have not determined the number of additional permanent  full-time staff needed to support the CRCs for full implementation of  the new delivery model.", "Staff levels for the hazard mitigation specialists. PA officials have  not identified the number of hazard mitigation specialists in FIMA\u2019s  hazard mitigation cadre needed for full implementation of the new  delivery model. According to JFO staff, current hazard mitigation staff  levels are insufficient to provide the desired in-person participation of  hazard mitigation staff on all recovery scoping meetings to share  information on hazard mitigation with applicants and help them  identify potential mitigation opportunities. A PA program official said  officials missed opportunities to pursue hazard mitigation during the  test implementation after Hurricane Matthew in Georgia due to lack of  hazard mitigation specialists. In addition, for the test implementation in  Oregon, there were not enough hazard mitigation specialists to cover  all site inspections and implement their new delivery model  responsibilities, according to FEMA\u2019s after-action reports. The  absence of hazard mitigation specialists in the early stages of PA  project development may cause delays in officials\u2019 identifying hazard  mitigation opportunities, according to a FIMA official. PA program  officials said they did not work with FIMA to determine the appropriate  levels of hazard mitigation staff under the new delivery model  because they were refining the new process, but as of June 2017  were working with FIMA to do so.", "One of the key implementation activities in our Business Process  Reengineering Assessment Guide includes addressing workforce  management issues. Specifically, this includes identifying how many and  which employees will be affected by the position changes and  retraining. Further, our prior work has found that high-performing  organizations identify their current and future workforce needs\u2014including  the appropriate number and deployment of staff across the organization\u2014 and address workforce gaps, to improve the contribution of critical skills  and competencies needed for mission success.", "According to a PA program official, their initial workforce assessment was  not comprehensive because they were still collecting data required to  make informed decisions. PA officials agreed that updating their  workforce assessments prior to full implementation could be helpful, and  acknowledged that program officials needed to be more proactive  applying the lessons learned as they pivot from testing to full  implementation of the new delivery model in 2018. FEMA also conducts a  standard agency wide workforce structure review every 2 to 3 years,  which helps officials determine the appropriate disaster workforce levels.  As of June 2017, PA officials were working with other offices within FEMA  to expedite the agency-wide assessment of the PA and FIMA hazard  mitigation cadres, but did not know when they would complete the  assessment. PA officials also acknowledged that they faced an  aggressive schedule to complete various planned activities for workforce  management, training, and other efforts, in support of full implementation,  and that they may not be able to complete all efforts as thoroughly as  they would like in order to expedite the transition of the PA program to the  new delivery model.", "The gaps in PA workforce assessment in the JFOs, CRCs, and for  FIMA\u2019s hazard mitigation cadre present a risk that PA program managers  will not have a sufficient workforce to support the goals of the new  delivery model. In addition, the timing and implementation of the hiring  and training activities for new PA program staff could take multiple  months, and program officials will need to know what staff levels are  necessary for full implementation of the new delivery model to inform  resource decisions for the program in coordination with other agency  offices. According to PA program officials, workforce assessment efforts  have been delayed as a result of disaster response and recovery efforts  related to Hurricanes Harvey, Irma, and Maria. Completing a workforce  assessment will help program officials identify gaps in their workforce and  skills, which could help PA program officials minimize the effects of long- standing workforce staffing and training challenges on the PA program  delivery and inform full implementation for all disasters."], "subsections": []}]}, {"section_title": "FEMA Designed the New PA Information System to Resolve Past Challenges, but Opportunities Exist to Fully Implement Key Management Controls", "paragraphs": [], "subsections": [{"section_title": "FEMA\u2019s New PA Information System Is Designed to Resolve Long-Standing Information Sharing Challenges", "paragraphs": ["costs. For example, EMMIE does not collect information on all of the  preaward activities that are part of the PA grant application process. As a  result, PA program officials said they, and applicants, must use ad hoc  reports and personal tracking documents to manage and monitor the  progress of grant applications. PA officials added that EMMIE is not user- friendly and applicants often struggle to access the system. In response  to these ongoing challenges, PA program officials developed FAC-Trax\u2014 a separate information system from EMMIE\u2014with new capabilities  designed to improve transparency, efficiency, and management of the PA  program.", "Specifically, FAC-Trax allows FEMA staff (PA Grants Manager) and  applicants (PA Grants Portal), to review, manage, and track current PA  project status and documentation. For example, applicants can use FAC- Trax to submit requests for public assistance, upload required project  documentation, approve grant application items, and send and receive  notifications on grant progress and activities. In addition, the FAC-Trax  system includes standardized forms, as well as required fields and tasks  that PA program staff and applicants must complete before moving on to  the next steps in the PA preaward process. According to PA officials,  these capabilities increase transparency, encourage greater applicant  involvement, and enhance collaboration and communication between  FEMA and grant applicants, to improve efficiency in processing and  awarding grant applications and enhance the quality of project  development. Further, PA officials said that FAC-Trax could reduce  challenges associated with staff turnover during the project development  process because the system stores and maintains applicant information  and project documentation, making it easier for transitioning staff to assist  an applicant. They also said they use FAC-Trax to gather and analyze  data that supports management of the PA process, including measuring  the timeliness of the grant application process. For example, during the  test implementation of the new delivery model in Georgia following  Hurricane Matthew, officials were able to document that, on average,  program delivery managers took 5 days to conduct the exploratory call  and 14 days to hold the recovery scoping meeting with applicants, and  CRC officials took 33 days to develop and review grant proposals.  Managers use this data to assess staffing needs and identify bottlenecks  in the PA process, according to PA officials."], "subsections": []}, {"section_title": "Opportunities Exist to More Fully Implement Two of Four Key IT Management Controls for FEMA\u2019s New PA Information System", "paragraphs": ["FAC-Trax is critical to the new PA delivery model and will be a primary  means of sharing grant application documents, tracking ongoing PA  projects, and ensuring that FEMA staff and applicants follow PA grant  policies and procedures. Given the importance of developing and testing  this new information sharing system, we evaluated its development  against four key IT management controls\u2014(1) project planning; (2) risk  management; (3) requirements development; and (4) systems testing and  integration. When implemented effectively, these controls provide  assurance that IT systems will be delivered within cost and schedule and  meet the capabilities needed by its users. We found that FEMA\u2019s  development of FAC-Trax fully satisfied best practices for project planning  and risk management, but additional steps are needed to fully satisfy the  areas of requirements development and systems testing and integration,  as discussed below. See appendix II for the full assessment of each IT  management control."], "subsections": [{"section_title": "Project Planning", "paragraphs": ["PA program officials fully satisfied all five practices in the project planning  control area, according to our assessment. Key project planning practices  are (1) establishing and maintaining the program\u2019s acquisition strategy,  (2) developing and maintaining the overall project plan and obtaining  commitment from relevant stakeholders, (3) developing and maintaining  the program\u2019s cost estimate, (4) establishing and maintaining the  program\u2019s schedule estimate, and (5) identifying the necessary  knowledge and skills needed to carry out the program. To address the  first and second practices, program officials established detailed plans  that describe the acquisition strategy and objectives, the program\u2019s  scope, and its framework for using an Agile software development  approach, among other key actions. Agile is a method of software  development that utilizes an iterative process and constantly improves  software based on user needs and feedback. Program officials also  developed a plan detailing the program\u2019s approach to deploy and  maintain FAC-Trax and established stakeholder groups and an integrated  product team to support and oversee the development of FAC-Trax. To  address the third and fourth practices, they developed and maintained a  master schedule of all implementation tasks and milestones through  project completion, and developed a life-cycle cost estimate of over $19  million. Additionally, FAC-Trax\u2019s acquisition performance baseline  describes the system\u2019s minimum acceptable and desired baselines for  performance, schedule, and cost. Lastly, in regards to the fifth practice,  program officials identified the knowledge and skills needed to carry out  the program in the FAC-Trax Request for Proposal and FAC-Trax  Capability Development Plan."], "subsections": []}, {"section_title": "Risk Management", "paragraphs": ["PA program officials fully satisfied all four practices in the risk  management control area, according to our assessment. Key risk  management practices are (1) identifying risks, threats, and vulnerabilities  that could negatively affect work efforts, (2) evaluating and categorizing  each identified risk using defined risk categories and parameters, (3)  developing risk mitigation plans for selected risks, and (4) monitoring the  status of each risk periodically and implementing the risk mitigation plan  as appropriate. To address the first and second practices, program  officials identified key risks that could negatively affect FAC-Trax in a \u201crisk  register\u201d\u2014an online site used to track risks, issues, and mitigating  actions. As of May 2017, officials had identified 13 risks in the risk  register\u2014four open and nine closed\u2014and evaluated and categorized the  identified risks based on the probability of occurrence and scope,  schedule, and cost impacts. For example, program officials reported that  two of its open risks have a \u201cmedium\u201d risk rating\u2014meaning the risk has  the potential to slightly affect project cost, schedule, or performance. To  address the third and fourth practices, program officials developed and  documented risk mitigation plans for all identified risks. For example, program officials planned to mitigate the risk of limited engagement of  subject matter experts by identifying and engaging with appropriate  experts through workshops, and monitoring the capability development  process to identify any issues that may cause project delays. In addition,  PA program officials documented the responsible officials, reevaluation  date, and risk status, among other things, for each risk in the register, and  reviewed and updated risks during weekly and monthly program reviews  with stakeholders throughout FEMA."], "subsections": []}, {"section_title": "Requirements Development", "paragraphs": ["PA program officials fully satisfied four out of five practices in the  requirements development control area, according to our assessment.  Key requirements development practices are (1) eliciting stakeholder  needs, expectations, and constraints, and transforming them into  prioritized customer requirements; (2) developing and reviewing  operational concepts and scenarios to refine and discover requirements;  (3) analyzing requirements to ensure that they are complete, feasible, and  verifiable; (4) analyzing requirements to balance stakeholder needs and  constraints; and (5) testing and validating the system as it is being  developed. To address the first and second practices, program officials  developed a requirements management plan outlining how officials  capture, assess, and plan for FAC-Trax enhancements, and established a  change control process to review, prioritize, and verify user requests for  changes to the system and feedback. As of May 2017, the PA program  office received 734 change requests related to FAC-Trax, of which  program officials completed 420 changes and planned to address an  additional 277 entries. Program officials also developed a functional  requirements document outlining the high-level requirements for FAC- Trax and detailed operational concepts and scenarios for each phase of  the preaward process in the system\u2019s concept of operations. To address  the fourth practice, program officials created a standard template to  analyze and document the user needs and acceptance criteria for  planned system capabilities in March 2017. In addition, PA program  officials identified risks and dependencies for recommended changes to  FAC-Trax, and balanced the cost and priority of system enhancements as  part of the change control process. Lastly, regarding the fifth practice,  program officials tested and evaluated FAC-Trax during development,  which included validating system enhancements through user acceptance  testing.", "However, program officials did not fully address the third practice\u2014 analyzing requirements to ensure they are complete, feasible, and  verifiable\u2014because they did not ensure detailed user requirements were  necessary and sufficient by tracking them back to higher-level  requirements. For example, although program officials reviewed change  requests for completeness and followed up with users to verify  requirements, officials did not track system enhancements, made in  response to detailed user requirements (e.g., allowing users to search PA  projects by project number), back to the high-level requirements (e.g.,  storing data and information provided by the applicant) identified in the  FAC-Trax functional requirements document and performance work  statement. Officials did not track system enhancements back to high-level  requirements because they did not have a complete understanding of  basic user needs and system requirements at the beginning of the FAC- Trax effort, according to the PA program manager. A PA official also said  the change control process was a way to identify the basic capabilities  FAC-Trax needed to have and that tracking enhancements back to high- level requirements could have made the change control process more  difficult to manage, and reduced user participation if, for example, users  needed to understand how their change requests related to high-level  requirements. However, program officials could have tracked  enhancements back to high-level requirements themselves using the  change control process without putting any additional burden on users.  Despite not having a complete understanding of user needs and system  requirements at the beginning of the FAC-Trax effort, analyzing whether  users\u2019 change requests satisfy higher-level requirements identified in key  design and planning documents would have provided officials with a basis  for more detailed and precise requirements throughout project  development and helped them better manage the project, according to IT  management controls. Further, according to the PMBOK\u00ae Guide,  tracking or measuring system capabilities against approved requirements  is a key process for managing a project\u2019s scope, measuring project  completion, and ensuring the project meets user needs and  expectations.", "Program officials acknowledged the importance of tracking system  enhancements back to documented system requirements. Ensuring that  FAC-Trax meets user needs and expectations is especially important  because the information system is key to the success of the new delivery  model, according to PA officials. By analyzing progress made on  documented, high-level requirements, a step that reflects a key IT  management control for requirements development, the PA program will  have greater assurance that FAC-Trax will provide functionality that  meets user needs and expectations."], "subsections": []}, {"section_title": "Systems Testing and Integration", "paragraphs": ["PA program officials did not fully satisfy either of the two practices in the  systems testing and integration control area, according to our  assessment. Key systems testing and integration practices are (1)  developing test plans and test cases, which include a description of the  overall approach for system testing, the set of tasks necessary to prepare  for and perform testing, the roles and responsibilities for individuals or  groups responsible for testing, and criteria to determine whether the  system has passed or failed testing; and (2) developing a systems  integration plan to identify all systems to be integrated, describe how  integration problems are to be documented and resolved, define roles  and responsibilities of all relevant participants, and establish a sequence  and schedule for every integration step.", "In regards to the first practice, PA program officials and the FAC-Trax  contractor established a test plan that identifies the method and strategy  to perform testing, including the necessary tasks, such as responding to  user feedback and testing errors, and incorporating necessary resolutions  into future work, testing parameters, and the roles and responsibilities of  the individuals responsible for testing. However, program officials have  not developed system testing criteria to evaluate FAC-Trax, which would  align with the practice described above of using criteria to determine  whether the system has passed or failed testing. A key feature of Agile  software development is the \u201cdefinition of done\u201d\u2014a set of clear,  comprehensive, and objective criteria, that the government should use to  evaluate software after each iteration of development. PA program  officials said they did not establish a definition of done because officials  initially managing the FAC-Trax effort lacked familiarity with system  development in the Agile environment. Officials acknowledged the  importance of establishing a definition of done and said they are planning  to develop one, but have not identified how or when to incorporate it into  the development process. According to the TechFAR\u2014the government\u2019s  handbook for procuring digital services using Agile processes\u2014the  government and vendor should establish this definition after contract  award at the beginning of each cycle of software development. By  establishing criteria, such as a definition of done, to evaluate the  system\u2014a step that reflects a key IT management control for system  testing and is an effective practice for applying Agile to software  development\u2014the PA program will have greater assurance that FAC- Trax is usable and responsive to specified requirements.", "In regards to the second practice, PA program officials developed a  systems integration plan in June 2017 that identified the potential for  integration of FAC-Trax with four FEMA systems, including EMMIE. In  addition, program officials included a description of how staff should  document integration problems and the resolution of problems in FAC- Trax development and test plans. However, the systems integration plan  does not define roles and responsibilities of all participants for system  integration activities or establish a sequence and schedule for every  integration step for the four FEMA systems. PA officials said that system  integration planning for FAC-Trax is in the early stages, but  acknowledged the importance of these elements of system integration  planning. Officials plan to define roles and responsibilities of all  participants for system integration activities and develop the sequence  and schedule for every integration step as they add new systems to the  FAC-Trax development plan and obtain funding needed for their  integration. Nonetheless, FEMA has used FAC-Trax for selected PA  disasters since October 2016 and plans to use FAC-Trax for all future  disasters. According to IT management controls, agencies should  establish the systems integration plan early in the project and revise it to  reflect evolving and emerging user needs. By ensuring that the FAC- Trax systems integration plan defines the roles and responsibilities of  relevant participants for all integration relationships and establishes a  sequence and schedule for every integration step, the PA program will  have greater assurance that FAC-Trax functions properly with other  systems and meets user needs."], "subsections": []}]}]}, {"section_title": "FEMA\u2019s New PA Model Enhances Hazard Mitigation Staff Participation, but Opportunities Exist to Further Promote Mitigation", "paragraphs": [], "subsections": [{"section_title": "Changes under the New Model Include Enhanced Participation of Hazard Mitigation Staff", "paragraphs": ["FEMA\u2019s new delivery model enhances participation of hazard mitigation  staff with the goal of identifying opportunities for mitigation earlier in the  PA preaward process, according to PA officials. Two key changes related  to hazard mitigation under the new model include (1) an emphasis on  engaging with hazard mitigation specialists at the JFO earlier in the PA  process and involving them in specific PA preaward activities and (2) the  establishment of the PA program\u2019s hazard mitigation liaison at the CRC.  For example, position guides direct program delivery managers to  coordinate with FIMA\u2019s hazard mitigation specialists prior to recovery  scoping meetings, and site inspectors to coordinate with hazard mitigation  specialists prior to site inspections to discuss a PA grant applicant\u2019s  damages and any potential mitigation opportunities. PA program officials  also developed guidance for conducting the exploratory call and the  recovery scoping meeting with applicants, which include questions for PA  staff to ask on the applicant\u2019s interest in or plans for incorporating hazard  mitigation into potential projects. In addition, a new hazard mitigation  liaison at the CRC is responsible for reviewing PA projects for hazard  mitigation opportunities and serving as a mitigation subject matter expert  for the PA program.", "According to data provided by FEMA, PA grant applicants incorporated  hazard mitigation into approximately 18 percent of permanent work  projects for all disasters nationwide from 2012 to 2015. During test  implementation of the new delivery model, state, PA, and FIMA officials  all reported an increase in the number of hazard mitigation activities on  PA permanent work projects. For example, state officials who participated  in the second new model test in Oregon said that effective communication  and coordination between PA and hazard mitigation staff resulted in  applicants incorporating hazard mitigation into over 60 percent of  permanent work projects. Furthermore, PA officials reported an increase  in hazard mitigation during the third test implementation of the new model  in Georgia following Hurricane Matthew, where approximately 16 percent  of permanent work projects included mitigation, as of June 2017. This  represents an increase compared to the PA program\u2019s estimate for the  proportion of projects that incorporate hazard mitigation among previous  PA hurricane disasters in Georgia, which was about 3 percent, according  to PA officials. While PA officials are trying to increase hazard mitigation  through the new delivery model, not all disasters present the same  number of opportunities to incorporate hazard mitigation. First, the PA  program only incorporates hazard mitigation measures for permanent  work projects, such as repairs to roads, bridges, and buildings. For  example, as of June 2017, approximately 60 percent of the projects  FEMA funded in Georgia for the third test implementation after Hurricane  Matthew were for emergency work, which is not eligible for hazard  mitigation measures. Second, the PA program only funds mitigation  measures that officials determine to be cost-effective. In addition, we  have previously reported on other factors that affect whether applicants  incorporate hazard mitigation into PA projects, such as their capacity to  manage and ability to fund hazard mitigation projects."], "subsections": []}, {"section_title": "Opportunities to Better Promote Hazard Mitigation under the New Model", "paragraphs": [], "subsections": [{"section_title": "Hazard Mitigation Planning and Prioritization", "paragraphs": ["National Planning for Hazard  Mitigation  In our 2015 report on disaster resilience  following Hurricane Sandy, we noted that  disaster affected areas have different threats  and vulnerabilities, and local stakeholders  make the ultimate determination whether or  not to incorporate hazard mitigation into a  project. Further, without a strategic approach  to making disaster resilience investments, the  federal government and its nonfederal  partners may be unable to fully capitalize on  opportunities for mitigation on the greatest  known threats and hazards. We  recommended that the Mitigation Framework  Leadership Group develop an investment  strategy to help ensure that federal funds  expended to enhance disaster resilience  achieve the goal of reducing the nation\u2019s fiscal  exposure because of climate change and the  rise in the number of federal major disaster  declarations as effectively and efficiently as  possible. In response, the Federal Emergency  Management Agency (FEMA) plans to issue a  final National Mitigation Investment Strategy  in 2018. The goals of this strategy include  increasing the effectiveness of investments in  reducing disaster losses and increasing  resilience, and improving coordination of  disaster risk management among federal,  state, local, tribal, territorial, and private  entities.", "Although the new model establishes hazard mitigation activities for PA  and FIMA staff in the preaward process, it does not standardize and  prioritize hazard mitigation planning at JFOs in the way FEMA has done  with prior PA program policy. Specifically, FEMA\u2019s 2007 PA program  policy standardized planning for hazard mitigation across PA recovery  efforts by stating that agency and state officials should issue a  memorandum of understanding (MOU) early in the disaster, outlining how  PA hazard mitigation will be addressed for the disaster, including what  mitigation measures will be emphasized, and identifying applicable codes  and standards, and any potential integration with other mitigation grant  programs. However, PA program officials did not include guidance that  standardizes planning for hazard mitigation, such as encouraging the use  of an MOU, in FEMA\u2019s 2010 PA program policy, the most recent update  to the Public Assistance Program and Policy Guide in April 2017, or the  New Delivery Model Operations Manual. As a result, FIMA officials said  FEMA and state officials do not consistently issue MOUs that outline how  FEMA and the state plan to promote PA hazard mitigation during the  recovery effort, explaining that the use of the MOU is based on the  preferences and priorities of the FEMA officials involved. When not  issuing an MOU, FIMA hazard mitigation staff and PA officials at the JFO  meet to determine the extent which hazard mitigation staff interact directly  with applicants regarding PA hazard mitigation during the recovery  process, according to a FIMA official.", "Having a consistent approach to planning for and prioritizing hazard  mitigation across all disasters is important for FEMA, given that FEMA  experienced challenges consistently prioritizing and integrating hazard  mitigation across PA recovery efforts, according to GAO and others. For  example, in our 2015 report on resilience in the Hurricane Sandy  recovery, we found that state and local officials experienced challenges  maximizing disaster resilience in the recovery effort because PA officials  did not consistently prioritize hazard mitigation during project  development.", "According to FEMA\u2019s National Mitigation Framework, planning is vital for  mitigation efforts during disaster recovery, and federal, state, and local  officials should establish procedures that emphasize a coordinated  delivery of mitigation activities and capitalize on opportunities to reduce  future disaster losses. Similarly, the Recovery Federal Interagency  Operational Plan, which supports FEMA\u2019s National Disaster Recovery  Framework, identifies planning as a key task for identifying mitigation  opportunities and integrating risk reduction considerations into decisions  and investments during the recovery process. FIMA officials agreed that  including the development of a formal plan, such as the historical 2007  PA program policy regarding the use of MOUs, for PA hazard mitigation  in operations guidance would help program officials plan for and prioritize  hazard mitigation. They noted that FIMA\u2019s hazard mitigation field  operations guide includes procedures for implementing proposed MOUs  to achieve mitigation goals. PA program officials said that, in light of  changes to the PA process under the new model and subsequent  updates to program policies, the MOU policy from the 2007 PA program  policy was outdated. But officials agreed that planning for and prioritizing  hazard mitigation at the operational level is important and said they were  examining additional ways to incorporate these activities early in the PA  process. As FEMA continues to implement the new model, establishing  procedures to standardize hazard mitigation planning for each disaster,  as it did through prior policy, could improve the prioritization of hazard  mitigation in PA recovery efforts and increase the effectiveness of  mitigation for reducing disaster losses and increasing resilience."], "subsections": []}, {"section_title": "New Delivery Model Performance Objectives and Measures Could Better Align with FEMA\u2019s Strategic Goal for Hazard Mitigation", "paragraphs": ["PA program officials developed performance objectives and measures for  hazard mitigation in the new delivery model, but could add measures to  better align performance assessment for the PA program with FEMA\u2019s  broader strategic goals for hazard mitigation. In its strategic plan for  2014\u20132018, FEMA established an agency-wide goal to increase the  percentage of FEMA-funded disaster projects, such as those under the  PA program, that provide mitigation above local, state, and federal  building code requirements by 5 percentage points by the end of fiscal  year 2018. For example, local building codes may require measures for  new construction to mitigate against future damage. To align with FEMA\u2019s  strategic goal, PA officials would also need to measure the number of PA  projects that included mitigation measures that bring any repaired  infrastructure to a level above applicable building codes. However,  under the new model, FEMA officials developed performance objectives  (and associated measures) to increase the number of projects that  include hazard mitigation by 5 percent, and increase the total dollars  spent on hazard mitigation by 2 percent. While these measures could  help to incentivize mitigation, they are not tied to building codes and do  not include specific information that FEMA could use to continually  assess the PA program\u2019s contributions to meeting the agency\u2019s strategic  goal.", "According to Standards for Internal Control in the Federal Government,  agency management should design control activities, such as  establishing and reviewing performance measures, to achieve the agency\u2019s objectives. In addition, our work on leading public sector  organizations has found that such organizations assess the extent to  which their programs and activities contribute to meeting their mission  and desired outcomes, and strive to establish clear hierarchies of  performance goals and measures. A clear connection between  performance measures and program offices helps to both reinforce  accountability and ensure that, in their day-to-day activities, managers  keep in mind the outcomes their organization is striving to achieve.  FEMA\u2019s ability to evaluate and report on PA hazard mitigation data is  constrained, but officials are addressing this challenge through the  development of data reporting and analytics capabilities for the PA  program\u2019s new information system, according to PA officials. PA program  officials developed measures they could use to evaluate the new model  during test implementation and compare new model performance to the  legacy PA process, and agreed that aligning PA program hazard  mitigation goals with FEMA\u2019s agency-wide strategic goals would be  helpful. As FEMA continues to develop and implement the new model,  developing performance measures and objectives to better inform and  support the agency\u2019s broader strategic goals could help to ensure that  FEMA capitalizes on hazard mitigation opportunities in PA recovery  efforts."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["FEMA\u2019s Public Assistance grant program is a complicated, multi-billion  dollar program that is critical to helping state and local communities  rebuild and recover after a major disaster. In recent years, FEMA has  undertaken a major reengineering effort to make the PA preaward  process simpler and more efficient for applicants and to address  challenges encountered during recovery from past disasters. FEMA\u2019s new  delivery model represents a significant opportunity to strengthen the PA  program and address these past challenges, and growing pains are to be  expected when implementing any large reengineering effort. Further,  FEMA officials work to implement these changes while supporting  response and recovery following disasters, including the catastrophic  flooding from Hurricane Harvey in August 2017 and widespread damages  from Hurricanes Irma and Maria in September 2017. As such, it is critical  that feedback obtained and lessons learned while testing the new model  inform decisions and actions as FEMA proceeds with full implementation for all disasters, including the complex recovery efforts in the states and  territories affected by Hurricanes Harvey, Irma, and Maria.", "FEMA has redesigned the PA delivery model to address various  challenges related to workforce management, information sharing with  state and local grantees, and incorporating hazard mitigation into PA  projects. FEMA has developed new workforce processes, training, and  positions to address past challenges, but completing a workforce  assessment that identifies the number of staff needed will inform  workforce management and resource allocation decisions to help FEMA  ensure a more successful implementation. This is particularly important  as FEMA is using the new model for the long-term recovery from the  2017 hurricanes, and FEMA faces capacity challenges as its workforce is  stretched thin. Further, FEMA\u2019s new FAC-Trax information sharing  system provides FEMA and state and local applicants and grantees with  better capabilities to address past challenges in managing and tracking  PA projects. In developing FAC-Trax, FEMA implemented many of the  key IT management controls that can help ensure that new IT systems  are implemented effectively. However, additional steps are needed to fully  satisfy the areas of requirements development and systems testing and  integration. Finally, FEMA has taken some actions to better promote  hazard mitigation as part of its new PA model. However, more consistent  planning for hazard mitigation following a PA disaster and developing  specific performance measures and objectives that better align with and  support the agency\u2019s broader strategic goals related to hazard mitigation  could help to ensure that mitigation is incorporated into recovery efforts,  which presents an opportunity to encourage disaster resilience and  reduce federal fiscal exposure from recurring catastrophic natural  disasters."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to FEMA\u2019s Assistant  Administrator for Recovery:", "The FEMA Assistant Administrator for Recovery should complete a  workforce staffing assessment that identifies the appropriate number  of staff needed at joint field offices, Consolidated Resource Centers,  and in FIMA\u2019s hazard mitigation cadre to implement the new delivery  model nationwide. (Recommendation 1)", "The FEMA Assistant Administrator for Recovery should establish  controls for tracking FAC-Trax capabilities to the system\u2019s functional  and operational requirements to more fully satisfy requirements  development controls and ensure that the new information system  provides capabilities that meets users\u2019 needs and expectations.  (Recommendation 2)", "The FEMA Assistant Administrator for Recovery should establish  system testing criteria, such as a \u201cdefinition of done,\u201d to assess FAC- Trax as it is developed; define the roles and responsibilities of all  participants; and develop the sequence and schedule for integration  of other systems with FAC-Trax to more fully satisfy systems testing  and integration controls. (Recommendation 3)", "The FEMA Assistant Administrator for Recovery, in coordination with  the Associate Administrator of the Federal Insurance and Mitigation  Administration, should implement procedures to standardize planning  for addressing PA hazard mitigation at the joint field offices, for  example, by requiring FEMA and state officials to develop a  memorandum of understanding outlining how they will prioritize and  address hazard mitigation following a disaster as it did through prior  policy. (Recommendation 4)", "The FEMA Assistant Administrator for Recovery, in coordination with  the Associate Administrator of the Federal Insurance and Mitigation  Administration, should develop performance measures and  associated objectives for the new delivery model to better align with  FEMA\u2019s strategic goal for hazard mitigation in the recovery process.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS and FEMA for review and  comment. DHS provided written comments, which are reproduced in  appendix III. In its comments, DHS concurred with our recommendations  and described actions planned to address them. FEMA also provided  technical comments, which we incorporated as appropriate.", "With regard to our first recommendation, that FEMA complete a workforce  staffing assessment that identifies the number of staff needed at joint field  offices, Consolidated Resource Centers, and FIMA\u2019s hazard mitigation  cadre, DHS stated that PA, in coordination with the Field Operations  Directorate and FIMA, will continue to refine and evaluate staffing needs  and update the cadre force structures under the new delivery model. DHS  estimated that this effort would be completed by June 28, 2019. This  action, if fully implemented, should address the intent of the  recommendation.", "With regard to our second recommendation, that FEMA establish controls  for tracking FAC-Trax capabilities to ensure the new information system  meets users\u2019 needs, DHS stated that Recovery program managers will  update the FAC-Trax Requirements Management Plan and the FAC-Trax  Release Plan to ensure the tracking and traceability of FAC-Trax  functional and operational requirements. DHS estimated that this effort  would be completed by January 31, 2018. This action, if fully  implemented, should address the intent of the recommendation.", "With regard to our third recommendation, that FEMA establish systems  testing criteria to assess the development of FAC-Trax; and define the  roles and responsibilities, and sequence and schedule for system  integration, DHS stated that Recovery program managers will update the  FAC-Trax System Integration Plan to include integration with the  Deployment Tracking System, Enterprise Data Warehouse, Preliminary  Damage Assessment interface, and State Grants Management system  interface. DHS estimated that this effort would be completed by June 29,  2018. This action, if fully implemented, should address the intent of the  recommendation.", "With regard to our fourth recommendation, that FEMA implement  procedures to standardize planning for addressing PA hazard mitigation  at the JFO, DHS stated that PA will update current process documents or  develop new documents to better incorporate mitigation into the  operational planning phase of the new delivery model. DHS estimated  that this effort would be completed by July 31, 2018. This action, if fully  implemented, should address the intent of the recommendation.", "With regard to our fifth recommendation, that PA coordinate with FIMA to  develop performance measures and associated objectives for the new  delivery model that better align with FEMA\u2019s strategic goals for hazard  mitigation in the recovery process, DHS stated that PA will reconvene the  PA-Mitigation working group to develop and refine PA related hazard  mitigation performance measures. DHS estimated that this effort would  be completed by June 29, 2018. This action, if fully implemented, should  address the intent of the recommendation.", "We are sending copies of this report to the Secretary of Homeland  Security and interested congressional committees.", "If you or your staff have any questions about this report, 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 IV."], "subsections": []}]}, {"section_title": "Appendix I: Selected Prior Work Related to Federal Emergency Management Agency\u2019s (FEMA) Public Assistance (PA) Program", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Assessment of Information Technology Management Controls for the FEMA Applicant Case Tracker (FAC-Trax)", "paragraphs": ["Appendix II: Assessment of Information  Technology Management Controls for the  FEMA Applicant Case Tracker (FAC-Trax)", "Table 2 shows details on the Federal Emergency Management Agency  (FEMA) Public Assistance (PA) program office\u2019s implementation of key  practices across four information technology (IT) management control  areas for its new information system, the FEMA Applicant Case Tracker  (FAC-Trax). PA developed FAC-Trax as a web-based project tracking  and case management system to supplement the Emergency  Management Mission Integrated Environment (EMMIE) and help resolve  long-standing information sharing challenges. To determine the extent to  which the FAC-Trax program office implemented IT management  controls, we reviewed documentation from the FAC-Trax program and  compared it to key management best practices, including the Software  Engineering Institute\u2019s Capability Maturity Model\u00ae Integration for  Acquisition and Development, the Project Management Institute\u2019s Guide  to the Project Management Body of Knowledge (PMBOK\u00ae Guide), and  the Institute of Electrical and Electronics Engineers\u2019 Standard for  Software and System Test Documentation. We assessed the program as  having fully implemented a practice if the agency provided evidence that it  fully addressed the practice; partially implemented if the agency provided  evidence that it addressed some, but not all, portions of the practice; and  not implemented if the agency did not provide any evidence that it  addressed the practice.", "Table 2. Public Assistance (PA) Program Office\u2019s Implementation of Key Information Technology Management Controls for  FAC-Trax  PA program officials developed an acquisition plan for FAC-Trax identifying the  capabilities the system is intended to deliver, the acquisition approach, and acquisition  objectives. Additionally, program officials developed a capability development plan  outlining a strategy for the program to obtain approval to acquire FAC-Trax. Lastly,  program officials developed a systems engineering plan describing the program\u2019s  scope and its framework for using an Agile development approach, as well as a  deployment, support, and maintenance plan for FAC-Trax.", "PA program officials developed an acquisition program baseline detailing FAC-Trax\u2019s  cost parameters and a life-cycle cost estimate for the system. As of May 2017, the life- cycle cost estimate for FAC-Trax through fiscal year (FY) 2023 is approximately $19.3  million. PA program officials updated the life-cycle cost estimate for FYs 2016 and  2017 after price negotiations with the FAC-Trax contractor, and will continue to update  the estimate as annual budgets are approved, according to the Integrated Logistic  Support Plan. The contracting officer\u2019s representative for FAC-Trax performs a cost  review at the end of each month, according to program officials. Furthermore, the  contractor\u2019s weekly status report includes information on the number of hours worked  and the percent of contract value spent. Program officials also review program costs  with Office of Response and Recovery, PA, Office of the Chief Information Officer  (OCIO), and other program office stakeholders during a weekly program review.", "PA program officials developed an acquisition program baseline detailing FAC-Trax\u2019s  schedule parameters, as well as an integrated master schedule for the system. The  integrated master schedule identifies tasks, major milestones, and task dependencies.  The PA program manager reviews and updates the integrated master schedule on a  weekly basis. Program officials also review FAC-Trax\u2019s schedule with Office of  Response and Recovery, PA, OCIO, and other program office stakeholders during a  weekly program review.", "PA program officials identified the knowledge and skills needed to carry out the  program in FAC-Trax contract documentation and the capability development plan.  Specifically, program officials included an attachment to the FAC-Trax contract listing  the required labor categories and corresponding functional position descriptions.  Program officials also described the role, position type, minimum grade, and minimum  certification for required personnel resources for the acquisition, development, and  implementation of FAC-Trax.", "PA program officials developed, reviewed, and maintained project planning documents  and obtained commitment from relevant stakeholders. For example, program officials  reviewed and updated the integrated master schedule and costs on a weekly and  monthly basis, respectively. Further, program officials reviewed the status of project  elements, such as the schedule, quality and technical issues, stakeholders, staffing,  cost, and risks, with Office of Response and Recovery, PA, OCIO, and other program  office stakeholders during a weekly program review. PA program officials also  established tactical, functional, and stakeholder groups, as well as an Integrated  Product Team to support and oversee the development of FAC-Trax.", "FEMA\u2019s Recovery Technology Programs Division (RTPD) has a division-level risk  management plan that serves as guidance for all Recovery systems, including FAC- Trax. Program officials identified key risks that could negatively affect FAC-Trax work  efforts in RTPD\u2019s \u201crisk register\u201d\u2014an online site used to track risks, issues, and  mitigating actions for the division and each program office. Program officials also  identified five technical, cost, and schedule risks in the FAC-Trax acquisition plan.  Program officials included one of these risks in the risk register, while the remaining  four were managed outside of the register. As of May 2017, program officials had  identified 13 risks in its risk register\u2014four open and nine closed. The four open risks  were (1) limited subject matter expert engagement during requirements development,  (2) vacancies in program management office support positions, (3) unresolved service  level agreement support and funding issues, and (4) the loss of the authority to  operate due to a Trusted Internet Connection that is not compliant with Department of  Homeland Security security policy.", "Program officials evaluated and categorized the identified risks based on the  probability of occurrence and scope, schedule, and cost impacts. These four points of  measurement are used to calculate an overall risk score. The risk score helps program  officials determine a risk\u2019s risk rating\u2014low, medium, or high. For example, program  officials reported that two of its open risks have a \u201cmedium\u201d risk rating\u2014meaning the  risk has the potential to slightly impact project cost, schedule, or performance. In  addition, program officials detailed the risk category, probability, and impact for the five  risks identified in the FAC-Trax acquisition plan.", "Program officials developed risk mitigation and contingency plans for each risk in the  risk register. For example, program officials planned to mitigate the open risk  concerning subject matter expert engagement, by identifying and engaging with  appropriate subject matter experts through requirements development workshops  scheduled in advance of the sprint they are to support, and monitoring the  development of user stories to identify any issues that may cause delays. In addition,  program officials described the risk management plan and responsible officials for the  five risks identified in the FAC-Trax acquisition plan.", "PA program officials review and update program risks during a monthly program  meeting. Program officials also review program risks with Office of Response and  Recovery, PA, OCIO, and other program office stakeholders during a weekly program  review. Furthermore, the FAC-Trax contractor provides a weekly status update which  includes a section on identified risks. Program officials established re-evaluation dates  and recorded updates, including any actions taken, for each risk in the risk register. In  addition, program officials were able to provide updates on the four risks identified in  the FAC-Trax acquisition plan and managed outside of the register. According to PA  officials, these risks were addressed and closed by the approval of program planning  documents, such as the mission needs statement, concept of operations, and  operational requirements document, following the solutions engineering review, which  demonstrates the readiness of the program to proceed with the procurement, in  September 2016.", "Program officials established a requirements management plan outlining how it  captures, assesses, and plans for FAC-Trax enhancements, and established a change  control process to review, prioritize, and verify user requests for changes to the system  and feedback. As of May 2017, the PA program office received 734 change requests  related to FAC-Trax, of which program officials completed 420 changes and planned  to address an additional 277 entries. PA program officials also facilitated workshops to  gather requirements for specific user groups and obtained additional requirements for  FAC-Trax through customer feedback on a temporary technology tool\u2014 an Access  database referred to as the Public Assistance Recovery Information System\u2014used to  support an early stage of the new model implementation. Further, program officials  developed a functional requirements document outlining the high-level functional and  operational requirements for FAC-Trax.", "PA program officials developed a concept of operations for FAC-Trax detailing  operating concepts and scenarios for each phase of the PA preaward process.  Program officials also detailed the workflow, phases, business functions, and data  inputs and outputs for the re-engineered PA process in FAC-Trax\u2019s functional  requirements document. In March 2017, program officials developed a standard  template to describe the process, tasks, and data inputs and outputs for specific  system capabilities.", "As part of the change control process, PA program officials meet three times a week to  discuss and prioritize change requests. Specifically, program officials review  submissions to the change control form to ensure completeness, validate impacts and  root cause, and research details for incoming requests. PA program officials also  follow up with users to understand and verify requirements. In March 2017, program  officials developed a standard template to capture acceptance criteria for specific  requirements. However, PA program officials do not track system enhancements back  to the high-level requirements identified in FAC-Trax\u2019s operational and functional  requirements documentation and performance work statement.", "PA program officials identified system requirements and constraints in the FAC-Trax  concept of operations and functional and operational requirements documents.  Further, through its change control process, program officials collect suggestions,  issues, and feedback on FAC-Trax and system enhancements from stakeholders,  identify risks for change requests, and balance prioritized requirements and estimated  level of efforts with projected costs prior to each sprint. In March 2017, program  officials developed a standard template to analyze and document the urgency and  need for specific requirements.", "PA program officials and the FAC-Trax contractor established a testing and evaluation  plan for the system, developed acceptance criteria for user stories, and obtained  feedback from users during and after testing. The testing process concludes with user  acceptance testing (UAT). If a change request fails during UAT or a new requirement  is discovered during development, the PA program will capture the failed request or  new requirement in the product backlog for implementation in a future product release.", "Key practices  Systems testing and integration  Developing test plans and test cases  PA program officials and the FAC-Trax contractor tested and evaluated the system  during development. The FAC-Trax test plan identifies the method and strategy to  perform the testing, including the necessary tasks, testing parameters, and the roles  and responsibilities of the individuals responsible for testing. However, program  officials did not develop system testing criteria to evaluate FAC-Trax. A key feature of  Agile software development is the \u201cdefinition of done\u201d\u2014a set of clear, comprehensive,  and objective criteria, that the government should use to evaluate software after each  iteration of development.", "PA program officials developed a systems integration plan in June 2017 that identifies  potential integration of FAC-Trax and four FEMA systems, including the Emergency  Management Mission Integrated Environment. Specifically, the plan includes data  requirements and standards; descriptions of the four systems FEMA plans to integrate  with FAC-Trax and the proposed relationship for each connection; and security and  access management requirements. In addition, program officials included a description  of how integration problems are to be documented and resolved in FAC-Trax  development and test plans. However, the systems integration plan does not define  roles and responsibilities of all participants for system integration activities or establish  a sequence and schedule for every integration step for the four FEMA systems. \u25cf Fully implemented: The agency provided evidence that it fully addressed this practice.  \u25d0 Partially implemented: The agency provided evidence that it addressed some, but not all, portions of this practice.  \u25cc Not implemented: The agency did not provide any evidence that it addressed this practice."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Chris Keisling (Assistant  Director), Amanda R. Parker (Analyst-in-Charge), Mathew Bader, Allison  Bawden, Anthony Bova, Eric Hauswirth, Susan Hsu, Rianna Jansen,  Justin Jaynes, Tracey King, Matthew T. Lowney, Heidi Nielson, Claire  Peachey, Brenda Rabinowitz, Ryan Siegel, Martin Skorczynski, Niti  Tandon, Walter K. Vance, James T. Williams, and Eric Winter made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-313", "url": "https://www.gao.gov/products/GAO-18-313", "title": "Remittances to Fragile Countries: Treasury Should Assess Risks from Shifts to Non-Banking Channels", "published_date": "2018-03-08T00:00:00", "released_date": "2018-03-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States is the largest source of remittances, with an estimated $67 billion sent globally in 2016, according to the World Bank. Many individuals send remittances through money transmitters, a type of business that facilitates global money transfers. Recent reports found that some money transmitters have lost access to banking services due to derisking\u2014the practice of banks restricting services to customers to, in part, avoid perceived regulatory concerns about facilitating criminal activity.", "GAO was asked to review the possible effects of derisking on remittances to fragile countries. This report examines (1) what stakeholders believe are the challenges facing money transmitters in remitting funds from the United States to selected fragile countries, (2) actions U.S. agencies have taken to address identified challenges, and (3) U.S. efforts to assess the effects of such challenges on remittance flows to fragile countries. GAO selected four case-study countries\u2014Haiti, Liberia, Nepal, and Somalia\u2014based on factors including the large size of U.S. remittance flows to them. GAO interviewed U.S.-based money transmitters, banks, U.S. agencies, and individuals remitting to these countries and also surveyed banks."]}, {"section_title": "What GAO Found", "paragraphs": ["Stakeholders, including money transmitters, banks, and U.S. Department of the Treasury (Treasury) officials, reported a loss of banking access for money transmitters as a key challenge, although remittances continue to flow to selected fragile countries. All 12 of the money transmitters GAO interviewed, which served Haiti, Liberia, Nepal, and particularly Somalia, reported losing some banking relationships during the last 10 years. As a result, 9 of the 12 money transmitters reported using channels outside the banking system (hereafter referred to as non-banking channels), such as cash couriers, to move funds domestically or, in the case of Somalia, for cross-border transfer of remittances (see figure). Several banks reported that they had closed the accounts of money transmitters because of the high cost of due diligence actions they considered necessary to minimize the risk of fines under Bank Secrecy Act regulations. Treasury officials noted that despite some money transmitters losing bank accounts, they see no evidence that the volume of remittances is falling.", "Example of a Cash-to-Cash Remittance Transfer Using a Cash Courier", "U.S. agencies have taken steps that may mitigate money transmitters' loss of banking access. For example, several agencies have issued guidance to clarify expectations for providing banking services to money transmitters. In addition, Treasury is implementing projects to strengthen financial institutions in some fragile countries. However, U.S. agencies disagreed with other suggestions, such as immunity from enforcement actions for banks serving money transmitters, since those actions could adversely affect goals related to preventing money laundering and terrorism financing.", "Treasury cannot assess the effects of money transmitters' loss of banking access on remittance flows because existing data do not allow Treasury to identify remittances transferred through banking and non-banking channels. Remittance data that U.S. agencies collect from banks do not include transfers that banks make on behalf of money transmitters. Additionally, the information Treasury collects on transportation of cash from U.S. ports of exit does not identify remittances sent as cash. Therefore, Treasury cannot assess the extent to which money transmitters are shifting from banking to non-banking channels to transfer funds due to loss of banking access. Non-banking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and terrorism financing."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Treasury should assess the extent to which shifts in remittance flows to non-banking channels for fragile countries may affect Treasury's ability to monitor for financial crimes and, if necessary, should identify corrective actions. GAO requested comments from Treasury on the recommendation, but none were provided."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States is the largest source of remittances to other countries,  with an estimated $67 billion sent globally in 2016. Remittances are the  largest source of foreign currency for many receiving countries, often  exceeding official development assistance from developed countries,  according to the World Bank. Remittances can be sent through money  transmitters as well as depository institutions, such as banks and credit  unions, among other methods.", "In recent years, the World Bank and others have reported that some  money transmitters have been losing access to banking services with  depository institutions due to derisking. In a prior report, we identified  derisking as the practice of banks limiting certain services or ending their  relationships with customers to, among other things, avoid perceived  regulatory concerns about facilitating money laundering, or other criminal  activity, such as financing to terrorist groups. Further, the International  Monetary Fund has raised concerns that large depository institutions may  be reducing correspondent banking relationships due to fear of risk  exposure, which in turn may limit the ability of smaller depository  institutions to provide remittance transfer services to their customers,  including money transmitters. According to Oxfam America, constraints  on money transmitters\u2019 access to banking services may have significant  humanitarian, economic, and security implications, effectively cutting off a  stable source of funds and isolating communities from the global financial  system.", "Financial institutions that provide international money transfers are  subject to regulations to prevent financial crimes such as money  laundering or terrorist financing. In a 2016 report, we described money  laundering risks related to remittances, including risks involving agents,  customers, geographic location, and products. Remittances can be used  to launder proceeds from different types of criminal activities, including  drug trafficking, human smuggling, and consumer fraud. Money  transmitters and depository institutions are subject to the Bank Secrecy  Act (BSA), an important tool in federal law enforcement efforts to detect  and deter the use of financial institutions (including those that send  remittances) for criminal activity, including money laundering and terrorist  financing. In another 2016 report, we found that from January 2009 to  December 2015 the U.S. government collected over $5 billion in  penalties, fines, and forfeitures for various BSA violations, including the  failure to identify or report suspicious activity.", "This is one of four reports addressing your request that we review the  various effects of derisking, including on remittance senders in the United  States. This report examines (1) what stakeholders believe are the  challenges facing money transmitters in remitting funds from the United  States to selected fragile countries, (2) what actions U.S. agencies have  taken to address identified challenges, and (3) U.S. efforts to assess the  effects of such challenges on remittance flows to fragile countries.", "To address our objectives, we identified four case-study countries: Haiti,  Liberia, Nepal, and Somalia. We selected these countries based on their  inclusion in the Organisation for Economic Co-operation and  Development\u2019s States of Fragility reports from 2013 to 2015. In addition,  we limited our selection to countries that have a foreign-born population  of 50,000 or more living in the United States. Finally, we considered the  size of estimated total remittances from the United States relative to the  recipient countries\u2019 gross domestic product (GDP). We rank ordered the  17 countries that met these criteria and selected the top four.", "To identify what stakeholders believe are the challenges facing money  transmitters in remitting funds from the United States to fragile countries,  we interviewed officials from the U.S. Department of the Treasury  (Treasury) and held semi-structured interviews with six small groups of  remittance senders in the United States who remit to our case-study  countries. The results of our interviews are not generalizable to all  remittance senders to these countries. We interviewed 12 of the 18  money transmitters that the World Bank\u2019s Remittance Prices Worldwide  database indicates account for about at least 80 percent of the market  transfers from the United States to each of our case-study countries.  Eight of the 12 money transmitters we interviewed provided remittance  services from the United States to one of our case study countries. Four  larger money transmitters we interviewed provided remittance services  from the United States to three or more of our case-study countries.", "In addition, we used two methods\u2014a web-based survey instrument and  semi-structured interviews\u2014to collect information to evaluate the extent  to which banks are terminating accounts for money transmitters serving  fragile countries, among other things. We administered the survey to a  nationally representative sample of banks. We also interviewed  representatives of eight banks considered to be extra-large by asset size.  These banks reported about 47 percent of all remittances by U.S. banks  in their 2016 Consolidated Reports of Condition and Income (Call  Reports). In addition, we interviewed representatives of two credit  unions that had terminated accounts of at least one of the money  transmitters we interviewed.", "To determine what actions U.S. agencies have taken to address identified  challenges, we analyzed pertinent U.S. agency information, including  relevant documentation and public statements, and interviewed officials  from the Federal Deposit Insurance Corporation (FDIC), the Board of  Governors of the Federal Reserve System (Federal Reserve), the U.S.  Department of State, the U.S. Agency for International Development, and  key offices in Treasury including the Office of Financial Crimes  Enforcement Network (FinCEN), the Office of the Comptroller of the  Currency (OCC), and the Office of Technical Assistance (OTA).  Additionally, we interviewed officials from the World Bank, as well as  nongovernmental organizations including the Center for Global  Development and Oxfam America.", "To examine U.S agencies\u2019 efforts to assess the effects of such challenges  on remittance flows to fragile countries, we analyzed data on remittances  and interviewed relevant agency officials. Specifically, for available data  on remittance flows through the banking channel, we analyzed Call  Report data from the Federal Financial Institutions Examination Council.  For data on remittance flows through non-banking channels, we  obtained and analyzed data from filings of FinCEN\u2019s Form 105 \u2013 Report  of International Transportation of Currency or Monetary Instruments  (CMIR). We obtained the tabulated data from FinCEN by arrival country,  state of U.S. exit port, and calendar year for 2006 through 2016. We also  interviewed officials from FDIC, the Federal Reserve, OCC, and FinCEN.  See appendix I for additional details about our scope and methodology.", "We conducted this performance audit from September 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Remittance Transfer Methods", "paragraphs": ["Remittances can be sent through money transmitters and depository  institutions, among other organizations. A typical remittance sent  through a bank may be in the thousands of dollars, while the typical  remittance sent by money transmitters is usually in the hundreds of  dollars. International remittances through money transmitters and banks  may include cash-to-cash money transfers, international wire transfers,  some prepaid money card transfers, and automated clearinghouse  transactions.", "Transfers through money transmitters. Historically, many consumers  have chosen to send remittances through money transmitters due to  convenience, cost, familiarity, or tradition. Money transmitters typically  work through agents\u2014separate business entities generally authorized  to, among other things, send and receive money transfers. Most  remittance transfers are initiated in person at retail outlets that offer  these services. Money transmitters generally operate through their  own retail storefronts, or through grocery stores, financial services  outlets, convenience stores, and other retailers that serve as agents.  In one type of common money transmitter transaction\u2014known as a  cash-to-cash transfer\u2014a sender walks into a money transmitter agent  location and provides cash to cover the transfer amount and fees.  Generally, for transfers at or above $3,000, senders must provide  basic information about themselves (typically a name and address,  among other information) at the time of the transfer request. The  agent processes the transaction, and the money transmitter\u2019s  headquarters screens it for BSA compliance. The money is then  transferred to a recipient, usually through a distributor agent in the  destination country. The money may be wired through the money  transmitter\u2019s bank to the distributor agent\u2019s bank (see fig. 1), or  transferred by other means to a specified agent in the recipient\u2019s  country. The distributor agent pays out cash to the recipient in either  U.S. dollars or local currency.", "Money transmitters also offer other transfer methods, including online or  mobile technology, prepaid money cards or international money orders  sent by U.S. Postal Service, cash courier services, or informal value  transfer systems such as hawala.", "Transfers through banks. Another method which remittance senders  use to send funds is through bank to bank transfers. Figure 2 is an  example of a simple funds transfer between two customers with only  the remittance sender\u2019s and remittance recipient\u2019s banks involved.", "If a remittance sender\u2019s bank does not have a direct relationship with the  remittance recipient\u2019s bank, the bank-to-bank transfer scenario becomes  more complicated. In such cases, one or more financial institutions may  rely upon correspondent banking relationships to complete the  transaction, as illustrated in figure 3."], "subsections": []}, {"section_title": "Federal and State Oversight of Money Transmitters and Banks", "paragraphs": ["Both federal and state agencies oversee money transmitters and banks.  In general, money transmitters must register with FinCEN and provide  information on their structure and ownership. According to Treasury, in  all states except one, money transmitters are required to obtain licenses  from states in which they are incorporated or conducting business.  Banks are supervised by state and federal banking regulators according  to how they are chartered, and the banks provide related information  when obtaining their charter. The key federal banking regulators include  OCC, FDIC, the Federal Reserve, and National Credit Union  Administration (NCUA).", "FinCEN often works with federal and state regulators. For example, as  administrator of the BSA, FinCEN issues BSA regulations and has  delegated examination authority for BSA compliance to the federal  banking regulators for banks within their jurisdictions. Further, the federal  banking regulators have issued regulations requiring institutions under  their supervision to establish and maintain a BSA compliance program.  FinCEN has also delegated examination authority for BSA compliance for  money transmitters to the Internal Revenue Service (IRS). Money  transmitters are subject to the BSA but are not examined by federal  regulators for safety and soundness.", "To ensure consistency in the application of BSA requirements, in 2005  the federal banking regulators collaborated with FinCEN on a BSA  examination manual that was issued by the Federal Financial Institutions  Examination Council for federal bank examiners conducting BSA  examinations of banks. Similarly, in 2008 FinCEN issued a BSA examination manual to guide reviews of money transmitters, including  reviews by the IRS and state regulators. The manual for BSA  examinations of banks was updated in 2014 to further clarify supervisory  expectations and regulatory changes.", "FinCEN has authority for enforcement and compliance under the BSA  and may impose civil penalties and seek injunctions to compel  compliance. In addition, each of the federal banking regulators has the  authority to initiate enforcement actions against supervised institutions for  violations of law and also impose civil money penalties for BSA  violations. Under the BSA, the IRS also has authority for investigating  criminal violations. The U.S. Department of Justice prosecutes  violations of federal criminal money laundering statutes and violations of  the BSA, and several law enforcement agencies can conduct BSA-related  criminal investigations."], "subsections": []}, {"section_title": "Components of Anti- Money Laundering Compliance Programs for Money Transmitters and Banks under the Bank Secrecy Act", "paragraphs": ["Money transmitters and banks are subject to requirements under the  BSA. They are generally required to design and implement a written anti- money laundering (AML) program, report certain transactions to Treasury,  and meet recordkeeping and identity documentation requirements for  funds transfers of $3,000 or more. All financial institutions subject to the  BSA\u2014including banks and money transmitters\u2014are required to establish  an anti-money laundering program. At a minimum, each AML program  must establish written AML compliance policies, procedures, and internal designate an individual to coordinate and monitor day-to-day provide training for appropriate personnel; and provide for an independent audit function to test for compliance.", "Bank Secrecy Act anti-money laundering (BSA/AML) regulations require  that each financial institution tailor a compliance program that is specific  to its own risks based on factors such as the products and services  offered, customers, and locations served. BSA/AML compliance  programs are expected to address the following:", "Customer Identification Program. Banks must have written procedures  for opening accounts and must specify what identifying information  they will obtain from each customer. At a minimum, the bank must  obtain the following identifying information from each customer before  opening the account: name, date of birth, address, and identification  number. In addition, banks\u2019 Customer Identification Programs must  also include risk-based procedures for verifying the identity of each  customer to the extent reasonable and practicable.", "Customer Due Diligence. These procedures enable banks to predict,  with relative certainty, the types of transactions in which a customer is  likely to engage, which assists banks in determining when  transactions are potentially suspicious. Banks must document their  process for performing Customer Due Diligence.", "Enhanced Due Diligence. Customers who banks determine may pose  a higher risk for money laundering or terrorist financing are subject to  these procedures. Enhanced Due Diligence for higher-risk customers  helps banks understand these customers\u2019 anticipated transactions  and implement an appropriate suspicious activity monitoring system.  Banks review higher-risk customers and their transactions more  closely at account opening and more frequently throughout the term of  their relationship with the bank.", "Suspicious Activity Monitoring. Banks and money transmitters must  also have policies and procedures in place to monitor and identify  unusual activity. They generally use two types of monitoring systems  to identify or alert staff of unusual activity: manual transaction  monitoring systems, which involve manual review of transaction  summary reports to identify suspicious transactions, and automated  monitoring systems that use computer algorithms to identify patterns  of unusual activity. Large-volume banks typically use automated  monitoring systems.", "Banks and money transmitters also must comply with certain reporting  requirements, including:", "Currency Transaction Report. Banks and money transmitters must  electronically file this type of report for each transaction in currency\u2014 such as a deposit, withdrawal, exchange, or other payment or  transfer\u2014of more than $10,000.", "Suspicious Activity Report. Banks and money transmitters are  required to electronically file this type of report when (1) a transaction  involves or aggregates at least $5,000 in funds or other assets (for  banks) or at least $2,000 in funds or other assets (for money  transmitters), and (2) the institution knows, suspects, or has reason to  suspect that the transaction is suspicious."], "subsections": []}, {"section_title": "Remittances to Case- Study Countries", "paragraphs": ["Remittances from the United States are an important source of funds for  our case-study countries\u2014Haiti, Liberia, Nepal, and Somalia. The  Organisation for Economic Co-operation and Development identified  these countries as fragile states because of weak capacity to carry out  basic governance functions, among other things, and their vulnerability to  internal and external shocks such as economic crises or natural disasters.", "Haiti. Currently the poorest country in the western hemisphere, Haiti  has experienced political instability for most of its history. In January  2010, a catastrophic earthquake killed an estimated 300,000 people  and left close to 1.5 million people homeless. Haiti has a population of  approximately 11 million, of which roughly 25 percent live on less than  the international poverty line of $1.90 per day. Nearly 701,000  Haitians live in the United States. In 2015, estimated remittances  from the United States to Haiti totaled roughly $1.3 billion, or about 61  percent of Haiti\u2019s overall remittances. Official development assistance  for Haiti in 2015 totaled slightly more than $1 billion.", "Liberia. In 2003, Liberia officially ended a 14-year period of civil war  but continued to face challenges with rebuilding its economy,  particularly following the Ebola epidemic in 2014. Liberia has a  population of nearly 5 million people, of which roughly 39 percent live  on less than $1.90 per day. There are roughly 79,000 Liberians in the  United States. In 2015, remittances from the United States to Liberia  were estimated to be roughly $328 million, which represented over  half of that country\u2019s estimated total remittances. In 2015, Liberia  reported roughly $1.1 billion in official development assistance.", "Nepal. In 2006, Nepal ended a 10-year civil war between Maoist and  government forces, which led to a peace accord, and ultimately a  constitution that came into effect 9 years later. In April 2015, Nepal  was struck by a 7.8 magnitude earthquake, which resulted in  widespread destruction and left at least 2 million people in need of  food assistance from the World Food Programme 6 weeks following  the earthquake. Nepal has a population of nearly 29 million people, of  which 15 percent live on less than $1.90 per day. In 2015, the foreign- born population of Nepalese in the United States was nearly 125,000,  and roughly $320 million in remittances flowed from the United States  to Nepal. For 2015, Nepal received over $1.2 billion in official  development assistance.", "Somalia. Since 1969, Somalia has endured political instability and civil  conflict, and is the third largest source of refugees, after Syria and  Afghanistan. According to a 2017 State report, Somalia remained a  safe haven for terrorists who used their relative freedom of movement  to obtain resources and funds to recruit fighters, and plan and mount  operations within Somalia and neighboring countries. Somalia has  an estimated population of over 11 million people, of which about half  the population live on less than $1.90 per day, and roughly 82,000  Somalis reside in the United States. Oxfam estimated global  remittances to Somalia in 2015 at $1.3 billion, of which $215 million  originated from the United States. In 2015, Somalia received nearly  $1.3 billion in official development assistance.", "Figure 4 shows the estimated U.S. remittances to each of our case-study  countries as a total amount in U.S. dollars and as a percentage of the  country\u2019s GDP."], "subsections": []}]}, {"section_title": "Stakeholders Identified Money Transmitters\u2019 Loss of Banking Access as a Key Challenge, Although Remittances to Fragile Countries Continue to Flow", "paragraphs": ["Money transmitters serving Haiti, Liberia, Nepal, and especially Somalia  reported losing bank accounts or having restrictions placed on them,  which some banks confirmed. As a result, some money transmitters have  relied on non-banking channels, such as cash couriers, to transfer  remittances. All of the 12 money transmitters we interviewed reported  losing some banking relationships in the last 10 years. Some money  transmitters, including all 4 that served Somalia, said they relied on non- banking channels, such as moving cash, to transfer funds, which  increased their operational costs and exposure to risks. Further, in our  interviews some banks reported that they had closed the accounts of  money transmitters because of the high cost of due diligence actions they  considered necessary to minimize the risk of fines under BSA/AML  regulations. Treasury officials noted that despite information that some  money transmitters have lost banking accounts, Treasury sees no  evidence that the volume of remittances is falling or that costs of sending  remittances are rising. In addition, U.S.-based remittance senders who  send money to our case-study countries reported no significant difficulties  in using money transmitters to remit funds."], "subsections": [{"section_title": "All Money Transmitters We Interviewed Had Lost Bank Accounts, Which for Many Resulted in Higher Costs and a Shift to Non- Banking Channels", "paragraphs": ["All 12 money transmitters we interviewed reported that they or their  agents had lost accounts with banks during the last 10 years. All 4 Somali  money transmitters and many agents of the 2 Haitian money transmitters  we spoke with had lost bank accounts and were facilitating remittance  transfers without using bank accounts. Additionally, all 4 large money  transmitters that process transfers globally (including to our case-study  countries of Haiti, Liberia, and Nepal) also reported that their agents had  lost accounts. Almost all of the money transmitters said they also faced  difficulties in getting new accounts. Somali money transmitters were most  affected by the loss of bank accounts, as 2 of the 4 Somali money  transmitters had lost all corporate accounts. While some money  transmitters said the banks that closed their accounts did not provide a  reason, in other cases, money transmitters said the banks told them that  they had received pressure from regulators to terminate money  transmitter accounts.", "As a result of losing access to bank accounts, several money  transmitters, including all of the Somali money transmitters, reported that  they were using non-banking channels to transfer funds. In some cases  the money transmitter was forced to conduct operations in cash, which  has increased the risk of theft and forfeitures, and led to increased risk for  agents and couriers. Nine of the money transmitters that we interviewed,  including 3 of the 4 Somali money transmitters, some agents of one  Haitian money transmitter, and some agents of the 4 larger money  transmitters, rely on couriers or armored trucks to transport cash  domestically (to the money transmitter\u2019s main offices or bank) or  internationally (see fig. 5). Money transmitters use cash couriers either  because the money transmitter or their agents had lost bank accounts or  because it was cheaper to use armored trucks than banks to move funds.  In addition to the safety risks money transmitters face when they only  accept cash, customers who remit large sums of money also face safety  risks because they must transport cash to the money transmitter. For  example, in our interviews with remittance senders to Somalia, some of  them shared concerns about having to carry cash to money transmitters.", "Money transmitters we interviewed reported increased costs associated  with moving cash and bank fees. For example, one Haitian money  transmitter reported that use of couriers and trucks has increased its cost  of moving money from its agents to its primary bank account by about  $75,000 per month (increasing from approximately $15,000 per month  using bank transfers to move funds, to $90,000 per month with the  addition of couriers and trucks). Two of the money transmitters we spoke  to stated that they did not have options other than to pay any fees the  bank required due to the difficulty in finding new bank accounts. Money  transmitters with access to bank accounts reported that bank charges for  services such as cash counting, wire transfers, and monthly compliance  fees had in some cases doubled or tripled, or were so high that it was  less expensive to use a cash courier. For example, some money  transmitters stated that their banks charged a monthly fee for compliance  related costs that ranged from $100 a month to several thousand dollars  a month.", "Over half of the money transmitters we interviewed said the loss of bank  accounts limits their growth potential. The 4 larger money transmitters  reported that in some cases, the relationship between the agent and  money transmitter was terminated, either by the agent or the money  transmitter, if the agent no longer had a bank account. In other cases,  some large money transmitters compensated for their agents\u2019 lost bank  accounts by using armored vehicles to transfer cash from the agents\u2019  locations to the bank. However, the agents need to have a high volume of  transactions in order to make the expense of a cash courier worthwhile.", "The money transmitters that we spoke with said that they have not  passed their increased operational and banking costs on to remittance  senders. Most said that they have not increased their fees for sending  remittances or have increased fees only slightly. Some of the money  transmitters said that they have compensated for higher costs by finding  cost-savings in other areas or that they have reduced their profit margin."], "subsections": []}, {"section_title": "Some Banks Reported Closing or Denying Accounts for Money Transmitters and Foreign Correspondent Banks, Citing Insufficient Profit to Offset Risks and Costs", "paragraphs": ["Most of the banks we interviewed expressed concerns regarding account  holders who are money transmitters because they tend to be low-profit,  high-risk clients. Some banks in our survey reported that constraints in  accessing domestic and foreign correspondent banks were also a reason  for restricting the number or percentage of money transmitter accounts.", "Banks have closed accounts of money transmitters serving our case- study countries. Some banks we surveyed reported terminating  accounts of money transmitters who transfer funds to Haiti, Nepal,  and Somalia. While 7 of the 193 banks that responded to our survey  noted that during the 3-year period from 2014 to 2016 they provided  services to money transmitters that facilitated transfers to at least one  of our case-study countries, 3 of these 7 banks also reported closing  at least one account of a money transmitter serving at least one of the  case-study countries. Risks associated with the countries or regions  that the money transmitter served was given as one reason (among  others) for the closure of the account by 2 out of the 3 banks.", "Money transmitters are generally low-profit clients for banks. Most of  the banks we interviewed that currently offer money transmitter  services stated that BSA/AML compliance costs have significantly  increased in the last 10 years due to the need to hire additional staff  and upgrade information systems to conduct electronic monitoring of  all transactions that are processed through their system. Some banks  indicated in our survey and interviews that the revenue from money  transmitter accounts was at times not sufficient to offset the costs of  BSA/AML compliance, leading to terminations and restrictions on  money transmitter accounts. A few banks we interviewed stated that  they do not allow money transmitters to open accounts because of the  BSA/AML compliance resources they require. Moreover, according to  one credit union we interviewed, money transmitters require labor- intensive banking services\u2014such as counting cash and processing  checks\u2014that are more expensive for the banks than providing basic  services to businesses that are not cash intensive.", "Banks expressed concerns over the adequacy of money transmitters\u2019  ability to conduct due diligence on the money transmitter\u2019s customers.  In our survey, one bank stated that being unable to verify the identity  of beneficiaries, the source of the funds, or the subsequent use of the  funds was a challenge the bank faced in managing accounts for  money transmitters that remit to fragile countries such as Haiti,  Liberia, Nepal, and Somalia. Another bank in our survey noted that it  closed some money transmitter accounts because it was unable to  get any detail on the purpose of individual remittances. In addition,  another bank noted that unlike bank clients, money transmitters\u2019  customers may not have ongoing relationships with them, so money  transmitters tend to know less about their customers than banks know  about theirs. A few banks we interviewed expressed concern that they  would be held responsible if, despite the bank carrying out due  diligence, authorities detect an illicit transaction has been processed  through the bank on behalf of a money transmitter. In addition, one  extra-large bank indicated that differences in state regulators\u2019  assessments of money transmitters are a challenge for the bank.", "Banks we surveyed reported reduced access to correspondent banks.", "Banks responding to our survey cited reduced access to  correspondent banks as a reason for restricting the number of money  transmitter accounts. Out of the 193 banks that answered our survey,  30 indicated they have relied on a correspondent bank to transfer  funds to our case-study countries (25 to Haiti, 16 to Liberia, 23 to  Nepal, and 9 to Somalia). While not specific to our case-study  countries, of the 29 banks in our survey that said they had restricted  the number or percentage of money transmitter accounts, 8 said that  they did so because of difficulty in maintaining correspondent banking  relationships, while 3 said they did so due to loss of a correspondent  banking relationship.", "The absence of direct relations with foreign banks can cause electronic  money transfers to take longer to process or in some cases to be  rejected. One bank official told us that the reduction in correspondent  banking relations may not stop funds from being transferred but may  increase the cost or time to process the transfer. However, one bank that  responded to our survey identified multiple transactions with our case- study countries in recent years that were terminated because a  correspondent bank could not be located or had closed.", "Customer due diligence is a challenge for correspondent banks.", "Some banks told us that exposure to risk related to the customers of  banks they serve was a key challenge to providing foreign  correspondent banking services. Some banks expressed concern that  violations of anti-money laundering and terrorism financing guidelines  by a customer\u2019s customer may result in fines for the bank even when  the bank has conducted enhanced due diligence and monitoring of  transactions. Two extra-large banks that do not provide foreign  correspondent banking services cited due diligence concerns as one  reason they choose not to offer such services. Some of the banks that  provide correspondent banking services said they conduct more due  diligence on the customers of the banks they serve than regulatory  guidance requires. Several of the correspondent banks noted that this  additional due diligence was challenging to conduct due to the  distance between the correspondent bank and the customers of the  banks they serve. For example, one bank told us that the farther  removed a customer is from being its direct customer, the greater the  risk to the bank due to a lack of confidence in the originating  institution\u2019s procedures to conduct due diligence on its customers.", "Banks identified country-level risk as a factor. For banks that  responded to our survey, country-level risk was noted as a factor in  account closures. Two out of the three banks that had closed  accounts for money transmitters serving at least one of our case- study countries noted that risks associated with the countries or  regions that the money transmitter served was a contributing reason  for the account closures.", "Additionally, in our interviews with extra-large banks that serve as a  correspondent bank for foreign banks all said that they consider risk  related to the country served by a foreign bank when deciding whether to  allow the foreign bank to open and maintain accounts. However, most of  these extra-large banks also said that the country or region where a  foreign bank is located is only one of several factors in determining  whether the foreign bank is considered high risk. One of the extra-large  banks noted that Somalia was an exception because the lack of a  banking infrastructure, which compounded concerns that money  transmitters serving Somalia pose a higher risk to the bank.", "While banks in general told us that they did not make exit decisions  regarding correspondent banking at the country level, seven of the eight  extra-large banks we interviewed did not currently have correspondent  banking relationships with any of our case-study countries, and the one  remaining bank served only one country (Haiti). Two of the extra-large  banks mentioned closing correspondent banking relationships during the  last 10 years in Haiti, Nepal, or Somalia. One extra-large bank indicated  that, with the exception of Somalia, funds can still be sent to foreign  countries with limited correspondent banking access through banking  channels; however, the transaction may need to be routed through  multiple banks in order to be processed."], "subsections": []}, {"section_title": "According to Treasury Officials, Remittance Flows to Fragile Countries Have Not Declined; U.S.- Based Remittance Senders Report Being Generally Satisfied with Their Ability to Remit", "paragraphs": ["Treasury officials reported that remittances continue to flow to fragile  countries even though money transmitters face challenges, including  some evidence of money transmitter bank account closures. Furthermore,  U.S.-based individuals we interviewed who send remittances to Haiti,  Liberia, Nepal, and Somalia told us that they are still able to send funds to  these countries using money transmitters.", "Treasury reported money transmitters\u2019 banking access difficulties  have not affected the estimated volume of remittance flows to fragile  countries. Treasury has collected information through engagement  with money transmitters and banks about closures of money  transmitter bank accounts and foreign correspondent banking  relationships. Treasury officials indicated that remittance flows to  fragile countries have not been impacted by such account closures.  According to Treasury officials, World Bank estimates of remittance  flows show that the volume of international transfers from the United  States has continued to increase. At the same time, World Bank  data indicate that the global average cost of sending remittances has  continued to decrease. In regards to our case study countries,  Treasury officials noted that they were not aware of any decrease in  remittance volume to any of these fragile countries. Citing these  trends, and anecdotal evidence from Treasury\u2019s engagement with  banks, the officials stated that there are no clear systemic impacts on  the flow of remittances from closures of money transmitter bank  accounts and correspondent banking relations.", "Treasury officials added that the scope of money transmitter bank  account closures is largely unknown, but they acknowledged that such  closures can be a significant challenge for money transmitters that serve  certain regions or countries, including Somalia. Regarding a possible  reduction in the number of correspondent banks, which can make it more  challenging to transfer remittances, Treasury officials noted that to the  extent there has been consolidation in this sector, it could be a natural  process unrelated to correspondent banking risk management processes.  Moreover, if consolidation results in stronger banking institutions and  lower compliance costs, that would be a positive development for the  sector, according to these officials.", "Treasury officials noted unique challenges in remitting funds to  Somalia. Officials acknowledged that U.S.-based money transmitters  transferring funds to Somalia have lost accounts with U.S.-based  banks. According to Treasury, Somalia\u2019s financial system is uniquely  underdeveloped, as the country has not had a functioning government  for about 20 years, and the terrorist financing threat is pronounced.  Officials said that some Somali money transmitters have in the past  moved money to assist al-Shabaab, a terrorist organization,  increasing the need for stringent controls specific to anti-money  laundering and combating terrorist financing efforts. As a result of  these and other factors, Treasury officials stated that difficulties  remitting to Somalia are not generalizable to other countries.", "Further, Treasury officials said they were aware that some Somali money  transmitters have resorted to non-banking channels by carrying cash  overseas. They noted that although physically moving cash is risky, it is  not unlawful. Additionally, Treasury officials stated that the use of cash  couriers to remit funds has not been a concern for regulators because this  practice has not increased the remittance fees that money transmitters  charge their consumers.", "Reasons Senders Reported General  Satisfaction with Money Transmitters  The remittance senders for Haiti, Liberia,  Nepal, and Somalia told us that they are  generally satisfied using money transmitters  over other methods to transfer money abroad  because money transmitters quickly deliver the funds to recipients;  are cheaper than banks;  can be used even if the recipient lacks a  bank account; and  tend to have more locations in recipient  countries compared to banks.  specialized Somali money transmitters  cost less than transmitters that serve  many countries, and  overseas agents of the Somali money  transmitters are knowledgeable about  the communities where they operate and  have earned the trust of the community  members.", "U.S.-based remittance senders we interviewed are generally satisfied  with their money transmitters. The U.S.-based remittance senders we  spoke with from each of our case-study countries reported that they  frequently use money transmitters and have not encountered major  difficulties in sending remittances. In general, these senders  expressed satisfaction with their money transmitters and stated that  they had not experienced major problems in sending money via  money transmitters. Senders told us that they generally preferred  using money transmitters because money transmitters were cheaper  than banks and were quicker in delivering the funds. In addition,  money transmitters were often more accessible for recipients  collecting the remittances because the money transmitters had more  locations than banks in recipient countries. However, some remittance  senders told us that they experienced delays or were unable to send  large amounts of money through money transmitters. In addition,  some Somali senders told us that they were dissatisfied with being  unable to use personal checks or online methods due to a  requirement to pay in cash.", "U.S. agencies, including Treasury, Federal Deposit Insurance  Corporation (FDIC), the Federal Reserve, and National Credit Union  Administration (NCUA), have issued guidance to the financial institutions  they regulate to clarify expectations for providing banking services to  money transmitters. In addition, Treasury\u2019s Office of Technical Assistance  (OTA) is engaged in long-term capacity building efforts in Haiti, Liberia,  and Somalia to improve those countries\u2019 weak financial institutions and  regulatory mechanisms, factors that may cause banks to consider money  transmitters remitting to these countries to be more risky clients.  However, agency officials disagreed with some suggestions for  government action proposed by banks and others because such actions  would contravene agencies\u2019 Bank Secrecy Act anti-money laundering  (BSA/AML) compliance goals."], "subsections": []}, {"section_title": "Agencies Have Taken Certain Steps That May Address Money Transmitters\u2019 Difficulties in Maintaining Banking Access", "paragraphs": [], "subsections": [{"section_title": "Treasury and Other Agencies Have Issued Guidance Intended to Prevent Widespread Termination of Banking Services for Money Transmitters, Among Other Goals", "paragraphs": ["Treasury, including FinCEN and OCC, as well as FDIC, the Federal  Reserve, and NCUA have issued various guidance documents intended  to ensure BSA/AML compliance while mitigating negative impacts on  money transmitter banking access. Since 2011, Group of Twenty (G20)  leaders, including the U.S. government, have committed to increasing  financial inclusion through actions aimed at reducing the global average  cost of sending remittances to 5 percent. According to Treasury officials,  financial inclusion and BSA/AML compliance are complementary goals. In published statements, Treasury has affirmed that money transmitters  provide essential financial services, including to low-income people who  are less likely or unable to make use of traditional banking services to  support family members abroad. Treasury has also acknowledged that  leaving money transmitters without access to banking channels can lead  to an overall reduction in financial sector transparency to the extent that  money transmitters resort to non-banking channels for transferring funds.", "Nonetheless, Treasury officials we spoke to noted that in implementing  BSA/AML regulations, banks retain the flexibility to make business  decisions such as which clients to accept, since banks are in the best  position to know whether they are able to implement controls to manage  the risk associated with any given client. These officials indicated that  Treasury pursues market-driven solutions and cannot order banks to  open or maintain accounts. Treasury officials noted that Treasury works  through existing multilateral bodies to promote policies that will support  market driven solutions to banking access challenges and deepen  financial inclusion globally.", "To clarify how banks assess BSA/AML risks posed by money transmitters  and foreign banks, Treasury and other regulators have issued various  guidance documents that, among other things, describe best practices for  assessing such risks (see table 1). Some of the guidance emphasizes  that risk should be assessed on a case-by-case basis and should not be  applied broadly to a class of customers when making decisions to open or  close accounts.", "The agencies issuing these guidance documents have taken some steps  to assess the impact of guidance on bank behavior. For example,  Treasury officials told us that Treasury periodically engages with banks  and money transmitters on an ad hoc basis to learn their views and gain  insight into their concerns. According to Federal Reserve officials,  anecdotal information suggests that some money transmitters lost bank  accounts after issuance of the 2005 joint guidance summarized above in  table 1, and that outcome was contrary to the regulators\u2019 intent. To  address concerns about the guidance, according to these officials,  Treasury held several public discussions on money transmitter account  terminations. OCC officials stated that they have not conducted a  separate assessment of the effects of their October 2016 correspondent  banking guidance on banks\u2019 risk assessment practices. However, they  noted that OCC examiners evaluate banks\u2019 policies, procedures, and  processes for risk reevaluation, including processes for assessing  individual foreign correspondent bank customer risks, as a part of OCC\u2019s  regular bank examination process.", "Bank officials we spoke to noted that while the guidance from regulators  provides broad direction for banks\u2019 risk assessments of foreign banks and  money transmitter clients, the guidance does not provide specific details  to clarify how banks can ensure BSA/AML compliance for specific higher- risk clients."], "subsections": []}, {"section_title": "Treasury Is Providing Technical Assistance to Build Financial Capacity in Haiti, Liberia, and Somalia", "paragraphs": ["According to Treasury officials, there is no feasible short-term solution to  address the loss of banking services facing money transmitters involved  in transferring funds to certain fragile countries, especially Somalia.  These officials explained that U.S. banks may be reluctant to transfer  funds to fragile countries because key governmental and financial  institutions in these countries have weak oversight and therefore may  face difficulties in detecting and preventing money laundering and  terrorism financing. As of September 2017, Treasury\u2019s OTA is providing  capacity building support to fragile countries, including Haiti, Liberia,  and Somalia, with some of its efforts aimed at addressing long-term  factors affecting these countries\u2019 BSA/AML supervisory capability.", "Table 2 identifies and describes the status of OTA projects in our case- study countries of Haiti, Liberia, and Somalia. OTA does not currently  have a project in Nepal."], "subsections": []}]}, {"section_title": "U.S. Agency Officials Disagreed with Several Actions Proposed by Banks and Others, for Reasons Including Agencies\u2019 BSA/AML Compliance Goals", "paragraphs": ["Banks, money transmitters, trade associations, and state regulators we  interviewed, as well as third parties such as the World Bank and Center  for Global Development, have proposed several actions to address  banking access challenges money transmitters face in transferring funds  through banks from the United States to fragile countries.", "Use of public sector transfer methods. Most banks we spoke to  mentioned regulatory risk as a challenge to creating or maintaining  money transmitter accounts. These banks stated that the ultimate risk  for conducting transactions for money transmitter accounts falls on the  bank, and that banks face substantial risk of regulatory action for such  transactions. Therefore, one extra-large bank and one credit union we  spoke to suggested using public sector transfer methods such as the  Fedwire Funds Service (Fedwire) or FedGlobal Automated Clearing  House Payments (FedGlobal) to process remittances to fragile  countries, thereby mitigating the regulatory risk posed to banks that  transfer such funds.", "Providing regulatory immunity, given appropriate oversight. To  mitigate the regulatory risk to banks posed by money transmitter  clients that send remittances to fragile countries, one extra-large  bank, one credit union, and several money transmitters we spoke to  suggested that regulators provide forms of regulatory immunity or  regulator assurances that banks would not face enforcement actions if  they carried out a specified level of due diligence to process  remittances to fragile countries.", "Issuing more specific guidance. About half of the banks we spoke to  mentioned fear of regulatory scrutiny due to ambiguities in regulatory  agencies\u2019 guidance or examiner practices. This fear of regulatory  scrutiny served as a disincentive for these banks to maintain money  transmitter accounts. While officials from about half of the banks we  spoke to stated that additional guidance issued by Treasury and other  agencies was helpful to clarify regulatory expectations and that  examiner practices were consistent with guidance, others stated that  they were uncertain about how much due diligence constituted  enough for regulatory purposes, because regulations incorporated  ambiguous language or because examiner practices exceeded  regulations. These bank officials suggested that regulators could  provide more specific guidance for banks on risk management, for  instance, by including example scenarios and answers to frequently  asked questions. The World Bank recommended in 2015 that  regulators provide banks with additional guidance on assessing the  risk of different money transmitter clients.", "U.S. agency officials stated that they disagreed with implementing these  proposals for reasons specific to each one, as discussed below.", "Use of public sector transfer methods. Treasury officials told us that  they prefer market-based solutions to the challenges of transferring  remittances to fragile countries, rather than a solution in which the  U.S. government assumes the risk in transferring these remittances,  such as using the Federal Reserve to directly transfer payments from  money transmitters. Federal Reserve officials told us that Fedwire is  reserved for domestic wire transfers, and while the Federal Reserve  continues to evaluate the scope of the FedGlobal service, no  decisions have been made to expand the service to additional  countries at this time. Federal Reserve officials told us they seek to  increase remittance flows to the countries the program already  serves.", "Providing regulatory immunity, given appropriate oversight. Treasury  officials told us that while they would need to see the suggested  duration and conditions pertaining to any proposal for regulatory  immunity or exemptions in order to judge its feasibility, implementing  this suggestion could raise a number of legal and policy concerns.  Officials told us that while Treasury has the authority to provide  regulatory exemptions, creating particular conditions for regulatory  immunity would stray from Treasury\u2019s intended risk-based approach  to BSA/AML compliance, and bad actors might take advantage of any  such exemptions for criminal activity.", "Issuing more specific guidance. OCC informed us that it is not  currently considering implementing more specific guidance. Treasury  officials told us that existing guidance clarifies that Treasury does not  have a zero tolerance approach to BSA/AML compliance and that  Treasury does not expect banks to know their customers\u2019 customers.  These officials told us that they prefer not to issue further amplifying  guidance with very specific examples as to what constitutes  \u201ccompliance\u201d by financial institutions, because Treasury does not wish  to institute a \u201ccheck the boxes\u201d approach to regulatory compliance."], "subsections": []}]}, {"section_title": "Existing U.S. Agency Information on Remittances Does Not Allow Treasury to Assess the Effects of Money Transmitters\u2019 Loss of Banking Access on Remittance Flows to Fragile Countries", "paragraphs": ["Treasury cannot assess the effects of money transmitters\u2019 loss of banking  access on remittance flows because existing data do not allow Treasury  to identify remittances transferred through banking and non-banking  channels. Recent efforts to collect international remittance data from  banks and credit unions do not include transfers these institutions make  on behalf of money transmitters. Since these data collection efforts are  designed to protect U.S. consumers, the remittance data that banks and  credit unions report are limited to remittances individual consumers send  directly through these institutions. Additionally, a few state regulators  recently began requiring money transmitters to report remittance data by  destination country, but these data do not distinguish money transmitters\u2019  use of banking and non-banking channels to transfer funds. Finally, while  Treasury has a long-standing effort to collect information on travelers  transporting cash from U.S. ports of exit, this information does not to  identify cash transported for remittances. Without information on  remittances sent through banking and non-banking channels, Treasury  cannot assess the effects of money transmitter and foreign bank account  closures on remittances, especially shifts in remittance transfers from  banking to non-banking channels for fragile countries. Non-banking  channels are generally less transparent than banking channels and thus  more susceptible to the risk of money laundering and other illicit financial  transactions."], "subsections": [{"section_title": "Remittance Data from Financial Institutions Do Not Capture Money Transmitters\u2019 Use of Banking Channels to Transfer Funds", "paragraphs": [], "subsections": [{"section_title": "Banks and Credit Unions Do Not Report on Remittances They Transfer for Money Transmitters", "paragraphs": ["Federal regulators recently began collecting data on international  remittances from banks and credit unions by requiring these institutions to  provide more information in pre-existing routine reports. However, these  reports do not require banks and credit unions to include information on  remittance transfers these institutions make on behalf of money  transmitters, among other business clients. According to officials from the  Office of the Comptroller of the Currency (OCC) and from the Consumer  Financial Protection Bureau, the additional reporting requirements for  remittances were intended to help regulators monitor compliance with  rules aimed at protecting U.S. consumers who use remittance services  offered by banks and credit unions. Furthermore, banks and credit unions  are not required to report on destination countries for remittance flows.  Specifically:", "Beginning in 2014, Federal banking regulators\u2014FDIC, the Federal  Reserve, and OCC\u2014 required banks to provide data on international  remittances in regular reporting known as the Consolidated Reports of  Condition and Income (Call Reports). These reports, which are  required on a quarterly basis from FDIC-insured banks, generally  include banks\u2019 financial information such as assets and liabilities, and  are submitted through the Federal Financial Institutions Examination  Council, a coordinating body. Specifically, the agencies required  banks to indicate whether they offered consumers mechanisms,  including international wire transfers, international automated  clearinghouse transactions, or other propriety services, to send  international remittances. The Consumer Financial Protection Bureau  uses the remittance data in Call Reports to better understand the  effects of its rules regarding remittance transfers including its rules on  disclosure, error resolution, and cancellation rights. Additionally,  according to bureau officials, they also use the data for other  purposes, for example, to monitor markets and to identify banks for  remittance exams and, if needed, additional supervision.", "The Call Reports do not require a bank to report remittances for which the  bank is providing such service to business customers, including money  transmitters. According to OCC officials, because the remittance  regulation that the Consumer Protection Financial Bureau enforces  originated in response to consumer-focused legislation, a bank is required  to report only those remittances for which the bank is the direct service  provider to the individual consumer. Consequently, remittances reported  in the Call Reports do not include remittances for which the banks served  as a correspondent bank or as a provider for a money transmitter.  Furthermore, banks are not required to report remittance data by  destination country.", "In 2013, the National Credit Union Administration (NCUA) began  requiring credit unions to provide data on the number of remittance  transactions, but not data on the dollar amount transferred, in their  Call Reports to NCUA. Similarly, and consistent with its treatment of  banks, the Consumer Financial Protection Bureau uses the remittance  data submitted by credit unions in Call Reports, for example, to better  understand the effects of its rules and for market monitoring. The  credit unions are also not required to include transactions they  process on behalf of business clients, such as money transmitters,  and do not provide remittance data by destination country."], "subsections": []}, {"section_title": "Money Transmitters Are Not Required to Report Whether the Remittances they Transfer are Through Banking or Other Channels", "paragraphs": ["In 2017 some states began collecting remittance data from money  transmitters by state and destination country through the Money Services  Business Call Report. The purpose of these reports is to enhance and  standardize the information available to state financial regulators  concerning the activities of their Money Services Business licensees to  effectively supervise these organizations. However, money transmitters  are not required to distinguish whether the remittances they transferred  were sent through banking or other channels. Additionally, while these  reports collect remittance data by destination country, these data are not  comprehensive because, according to the Nationwide Multistate Listing  System, as of the first quarter of 2018, about half the states (24) had  adopted the reports for money transmitters and of these 12 states had  made it mandatory to report the remittances by destination country.", "Due to a lack of reporting on money transmitters\u2019 use of banking channels  to transfer remittances, Treasury cannot assess the extent of the decline  in money transmitters\u2019 use of banking channels to transfer remittances to  fragile countries, including the four we selected as case-study countries:  Haiti, Liberia, Nepal, and Somalia."], "subsections": []}]}, {"section_title": "U.S. Agency Efforts to Collect Data on Physical Transportation of Cash Are Not Designed to Track Flow of Remittances through Non-Banking Channels", "paragraphs": ["While Treasury has a long-standing effort to collect information on  travelers transporting cash from U.S. ports of exit, this information is not  designed to enable Treasury to identify cash transported for remittances  or the intended final destination of the cash. For financial transfers  through non-banking channels, Treasury requires persons or businesses  to report the export of currency and monetary instruments at ports of exit,  which include remittances sent through money transmitters carried out in  cash. Specifically, Treasury requires persons or businesses, including  money transmitters, who physically transport currency or other monetary  instruments exceeding $10,000 at one time, from the United States to any  place outside of the United States, to file a Report of International  Transportation of Currency or Monetary Instruments (CMIR) with U.S.  Customs and Border Protection at the port of departure. The CMIR  collects information such as the name of the person or business on  whose behalf the importation or exportation of funds was conducted, the  date, the amount of currency, U.S. port or city of arrival or departure, and  country of origin or destination, among other information. The forms are  filled out manually by individuals carrying cash. U.S. Customs and Border  Protection officers collect the forms at ports of exit, and that agency\u2019s  contractors manually enter the data reported on these forms into a central  database.", "Money transmitters and their agents who carry cash in excess of $10,000  from the United States are required to submit the CMIR to U.S. Customs  and Border Protection upon departure. Thus, to some extent, CMIR data  include data on remittances transferred by money transmitters in cash;  however, the CMIR is not intended to capture information specific to  remittances, and thus its usefulness is limited for agencies in tracking the  flow of remittances through non-banking channels. First, the destination  country reported on the CMIR may not be the final destination of the cash  or other monetary instrument being transported. For example, money  transmitters we interviewed told us that they use cash couriers to transfer  funds to Somalia via the United Arab Emirates, where the funds may  enter a clearinghouse that can transfer the funds to Somalia. While the  ultimate destination of the remittances is Somalia, the CMIR may list the  United Arab Emirates as the destination because it is the first destination  out of the United States. Second, FinCEN officials acknowledged they do  not know the extent of underreporting in general with regard to the CMIR;  however, money transmitters we interviewed indicated that they have  incentives to file CMIR for their own protection in case they have to file an  insurance claim. Finally, CMIR does not ask if the currency or monetary  instruments are remittances, which makes it difficult if not impossible to  separate out the data on remittances from the overall data.", "Existing data do not enable Treasury to identify remittances transferred  by money transmitters through banking and non-banking channels. Non- banking channels are generally less transparent than banking channels  and thus more susceptible to the risk of money laundering and terrorist  financing. FinCEN\u2019s mission is to safeguard the financial system from  illicit use, combat money laundering, and promote national security by,  among other things, receiving and maintaining financial transactions data  and analyzing that data for law enforcement purposes. Additionally,  federal standards for internal control state that agency managers should  comprehensively identify risks and analyze them for their possible  effects.", "A lack of data on remittances sent through banking and non-banking  channels limits the ability of Treasury to assess the effects of money  transmitter and foreign bank account closures on remittances, in  particular shifts of remittances to non-banking channels for fragile  countries. The risks associated with shifts of remittances to non-banking  channels may vary by country and are likely greater for fragile countries  such as Somalia where the United States has concerns about terrorism  financing."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Remittances continue to flow to fragile countries, but the loss of banking  services for money transmitters, as well as a decline in foreign banking  relationships, has likely resulted in shifts to non-banking channels for  remittances to some of these countries. While money transmitters who  have lost bank accounts may adapt by moving remittances in cash or  other non-banking channels, the lack of a bank account presents  operational risks for these organizations. Moreover, the flow of funds such  as remittances from banking to non-banking channels decreases the  transparency of these transactions. While U.S. regulators have issued  guidance to banks indicating that they should not terminate accounts of  money transmitters without a case-by-case assessment, several banks  we contacted remain apprehensive and are reluctant to incur additional  costs for low-profit customers such as money transmitters. At the same  time, senders of remittances still prefer to use money transmitters to send  funds, which the senders regard as a critical lifeline for family and friends  in fragile countries. Although federal and state regulators have  undertaken recent efforts to obtain remittance data from financial  institutions such as banks and money transmitters, these efforts are  designed for consumer protection and the regulatory supervision of  financial institutions, rather than to track remittances sent by money  transmitters using banking channels. As a result, the available data are  not sufficient for the purposes of tracking changes in money transmitters\u2019  use of banks to transfer funds. Similarly, while Treasury has a long- standing effort to collect information on large amounts of cash physically  transported by travelers at U.S. ports of exit, this information collection is  not intended to track the flow of remittances through non-banking  channels. Consequently, to the extent money transmitters losing banking  access switch to non-bank methods to transport remittances, Treasury  may not be able to monitor these remittance flows. This, in turn could  increase the risk of terrorism financing or money laundering, especially for  remittances to fragile countries where risks related to illicit use of funds  are considered higher."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making one recommendation to Treasury.", "The Secretary of Treasury should assess the extent to which shifts in  remittance flows from banking to non-banking channels for fragile  countries may affect Treasury\u2019s ability to monitor for money laundering  and terrorist financing and, if necessary, should identify corrective  actions."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product for comment to Treasury, FDIC, the  Federal Reserve, CFPB, U.S. Customs and Border Protection,  Commerce, NCUA, State, and USAID. Treasury, FDIC, the Federal  Reserve, CFPB, and U.S. Customs and Border Protection, provided  technical comments, which we have incorporated, as appropriate. We  requested that Treasury provide a response to our recommendation, but  Treasury declined to do so. Commerce, NCUA, State, and USAID, did not  provide comments on the draft of this report.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of the Treasury; the Chairman of the Federal  Deposit Insurance Corporation; the Chair of the Board of Governors of  the Federal Reserve System; the Acting Director of the Consumer  Financial Protection Bureau; the Secretaries of Commerce, Homeland  Security, and State; the Administrators of the U.S. Agency for  International Development and the National Credit Union Administration;  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 questions about this report, please contact me at  (202) 512-9601, or melitot@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what stakeholders believe are the challenges  facing money transmitters in remitting funds from the United States to  selected fragile countries, (2) what actions U.S. agencies have taken to  address identified challenges, and (3) U.S. efforts to assess the effects of  such challenges on remittance flows from the United States to fragile  countries.", "To address the objectives, we identified four case-study countries: Haiti,  Liberia, Nepal, and Somalia. We selected these countries based on their  inclusion in the Organisation for Economic Co-operation and  Development\u2019s States of Fragility reports from 2013 to 2015. In addition,  we limited our selection to countries that have a foreign-born population  of 50,000 or more living in the United States. Finally, we considered the  size of estimated total remittances from the United States relative to the  recipient countries\u2019 gross domestic products (GDP). We rank ordered the  17 countries that met these criteria and selected the top four.", "For our first objective, to understand the challenges that stakeholders  believe money transmitters face in remitting funds from the United States  to fragile countries, we surveyed banks and interviewed U.S. agency  officials, money transmitters, banks, credit unions, and remittance  senders. To obtain insights from U.S agency officials, we interviewed and  received written responses from officials of the Department of the  Treasury (Treasury)\u2014including the Office of Technical Assistance (OTA),  the Financial Crimes Enforcement Network (FinCEN), the Office of  Terrorism and Financial Intelligence, and the Office of the Comptroller of  the Currency (OCC).", "To obtain insights from money transmitters, we used the World Bank\u2019s  Remittance Prices Worldwide database to select U.S.-based money  transmitters serving our case-study countries. The World Bank database  includes a sample of money transmitters, which the World Bank reported  it selected to cover the maximum remittance market share possible and  survey a minimum aggregated market share of 80 percent for each  country. We attempted to contact the 18 money transmitters that the  World Bank identified as the major service providers for our case-study  countries. We interviewed 12 of these 18 money transmitters, of which 8  provided services to only one of our case-study countries (2 money  transmitters provided services to Haiti, 4 provided services to Somalia,  and 2 provided services to Nepal) and 4 provided remittance services  from the United States to at least three of our case-study countries.", "To obtain insights from individuals that remit to fragile states, we  conducted six small-group interviews, and one additional interview, of  individuals that remit to our selected case-study countries. From 3 to 6  individuals participated in our small group interviews. We interviewed one  Haitian small group, one Liberian small group, one Nepali small group,  and three Somali small groups.", "To set up these interviews, we identified community-based organizations  (CBOs) and other groups that work with remittance senders to these  countries and obtained contact information for these groups. We identified  the CBOs through searching Internal Revenue Service (IRS) lists of tax- exempt community organizations for the names of our case-study  countries or their populations. To focus our search efforts, we  concentrated on the five areas in the United States with the largest  populations of immigrants from each case-study country. The five areas  were identified using information on immigrant populations from the U.S.  Census Bureau\u2019s 2015 American Community Survey 1-year Public Use  Microdata Samples. We sent emails outlining our research goals and  soliciting interest in participating in interviews to 287 CBOs and related  groups and obtained positive responses from 46. Of the 46 that  responded positively, we were able to schedule meetings with seven  CBOs covering the four case-study countries. The groups that agreed to  participate in our interviews cannot be considered representative of all  CBOs and remittance senders to the four selected countries, and their  views and insights are not generalizable to those of all individuals that  remit to these four countries. We asked the CBO points-of-contact to  invite individuals with experience remitting funds to the case-study  countries to participate in telephone interviews.", "We pre-tested our methodology by emailing contacts at the CBOs and  requesting they provide feedback on the questions. We also pre-tested  the questions with a group located in Virginia because the location was  close to the GAO headquarters and allowed for in-person testing. In the  interviews, we asked semi-structured questions about the ease or  difficulty of remitting funds to the participants\u2019 home countries, the costs  of remitting, and any recent changes they had noticed. We asked the  participants to provide us with their personal experiences rather than to  speak for their CBO, group, or community.", "We used two methods\u2014a web-based survey of a nationally  representative sample of banks and semi-structured interviews of bank  officials\u2014to examine what banks identify as challenges, if any, in offering  bank accounts for money transmitters and correspondent banks serving  fragile countries. In the survey, we asked banks about limitations and  terminations of accounts related to BSA/AML risk, the types of customer  categories being limited or terminated, and the factors influencing these  decisions. We administered the survey from July 2017 to September  2017, and collected information for the 3-year time period of January 1,  2014 to December 31, 2016. Aggregate responses for the close-ended  survey questions that are related to this report are included in appendix II.  The survey also collected information for two additional GAO reports: one  reviewing closure of bank branches along the southwest border of the  United States, and another assessing the causes of bank account  terminations involving money transmitters.", "To identify the universe of banks, we used the bank asset data from  FDIC\u2019s Statistics on Depository Institutions database. Our initial  population list contained 5,922 banks downloaded from FDIC\u2019s Statistics  on Depository Institutions database as of December 31, 2016. We  stratified the population into five sampling strata, and used a stratified  random sample. In order to meet the sampling needs of related reviews,  we used a hybrid stratification scheme. First, banks that did not operate  in the Southwest border region were stratified into four asset sizes (small,  medium, large, and extra-large). Next, by using FDIC\u2019s Summary of  Deposit database we identified 115 Southwest border banks as of June  30, 2016.", "Our initial sample size allocation was designed to achieve a stratum-level  margin of error no greater than plus or minus 10 percentage points for an  attribute level at the 95 percent level of confidence. Based upon prior  surveys of financial institutions, we assumed a response rate of 75  percent to determine the sample size for the asset size strata. Because  there are only 17 extra-large banks in the population, we included all of  them in the sample. We also included the entire population of 115  Southwest border banks as a separate certainty stratum. We reviewed  the initial population list of banks in order to identify nontraditional banks  not eligible for this survey. We treated nontraditional banks as out-of- scope. In addition, during the administration of our survey, we identified  27 banks that were either no longer in business or that had been bought  and acquired by another bank, as well as 2 additional banks that were  nontraditional banks and, therefore, not eligible for this survey. We  treated these sample cases as out-of-scope; this adjusted our population  of banks to 5,805 and reduced our sample size to 406. We obtained a  weighted survey response rate of 46.5 percent.", "Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample\u2019s results as a 95 percent confidence interval (for example, plus or  minus 7 percentage points). This is the interval that would contain the  actual population value for 95 percent of the samples we could have  drawn. Confidence intervals are provided along with each sample  estimate in the report. For survey questions that are not statistically  reliable, we present only the number of responses to each survey  question and the results are not generalizable to the population of banks.", "The practical difficulties of conducting any survey may introduce errors,  commonly referred to as nonsampling errors. For example, difficulties in  interpreting a particular question or sources of information available to  respondents can introduce unwanted variability into the survey results.  We took steps in developing the questionnaire, collecting the data, and  analyzing the results to minimize such nonsampling error. We conducted  pretests with four banks. We selected these banks to achieve variation in  geographic location and asset size (small, medium, large, extra-large).  The pretests of the survey were conducted to ensure that the survey  questions were clear, to obtain any suggestions for clarification, and to  determine whether representatives would be able to provide responses to  questions with minimal burden.", "To supplement the results of the survey, we conducted interviews with  eight extra-large banks regarding correspondent banking and money  transmitter accounts and with two credit unions regarding money  transmitter accounts. We selected the eight banks to interview using the  following criteria: (1) the bank was in the extra-large asset size group  (banks with greater than $50 billion in assets), and (2) the bank was  mentioned by at least one of the money transmitters that we interviewed  as terminating accounts with them or the bank was listed in an internal  Treasury study on correspondent banking. Of the banks in the extra- large asset size group, 7 were mentioned in our interviews with money  transmitters as having closed accounts with them. Nearly all of these  banks, plus one additional bank were also mentioned as correspondent  banks in the Treasury study. In addition, we selected two credit unions to  interview based on information from our interviews with money  transmitters. Money transmitters identified four credit unions in our  interviews; of these, we selected for interviews two that were mentioned  as closing accounts with money transmitters. We did not contact the other  two credit unions that currently have money transmitter accounts. The  results of the survey and the interviews only provide illustrative examples  and are not generalizable to all banks or credit unions.", "For our second objective, we analyzed U.S. agency information and  documentation about relevant projects and activities. We also interviewed  officials and obtained relevant guidance documents from Treasury,  including OCC, OTA, FinCEN, and Terrorism and Financial Intelligence;  the Federal Deposit Insurance Corporation (FDIC); the U.S. Department  of State; the U.S. Agency for International Development; the Board of  Governors of the Federal Reserve System (Federal Reserve); and the  National Credit Union Administration (NCUA). Additionally, we also  interviewed officials from the World Bank and International Monetary  Fund to understand the data, methodology, and findings contained within  reports by those organizations, as well as to understand the International  Monetary Fund\u2019s role in technical assistance in our case-study countries.  To gather information on solutions proposed by banks and others to  address challenges money transmitters face in transferring funds through  banks from the United States to fragile countries, we interviewed banks  and credit unions as noted above. We also reviewed reports by the World  Bank, the Center for Global Development, and Oxfam to gather  recommendations addressing challenges in transferring remittances to  fragile countries. We interviewed officials from Treasury, FDIC, the  Federal Reserve, and the U.S. Agency for International Development to  gain their perspectives on these proposed solutions.", "For our third objective on U.S. agencies\u2019 efforts to assess the effects of  challenges facing U.S. money transmitters on remittance flows to fragile  countries, we interviewed agency officials and analyzed available data on  flows going through banking and non-banking channels. For available  data on flows through the banking channel, we analyzed the Consolidated  Reports of Condition and Income (Call Report) data from the Federal  Financial Institutions Examination Council, which started collecting these  data in 2014. These remittance data are reported on a semiannual basis.  We also reviewed Call Report data on remittances for credit unions,  which started to be collected in 2013, as well as data collected from  Money Service Businesses, which some states started collecting in 2017.  For data on remittance flows through non-banking channels, we obtained  and analyzed data on filings of FinCEN\u2019s Form 105 \u2013 Report of  International Transportation of Currency or Monetary Instruments. This  report is required of individuals who physically transport currency or other  monetary instruments exceeding $10,000 at one time from the United  States to any place outside the United States, or into the United States  from any place outside the United States. The paper form is collected by  the Department of Homeland Security\u2019s U.S. Customs and Border  Protection at the port of entry or departure. We obtained the tabulated  Form 105 data from FinCEN by arrival country, state of U.S. exit port, and  for calendar years 2006 through 2016. We also interviewed officials and  obtained written responses from FinCEN and the Federal Financial  Institutions Examination Council. We compared the results of our data  analysis and information from interviews with agency officials against  FinCEN\u2019s mission to safeguard the financial system from illicit use by,  among other things, obtaining and analyzing financial transactions data.  Additionally, we also compared the results of our analysis and information  obtained from agencies against the federal standards for internal control,  which state that agency managers should comprehensively identify risks  and analyze them for their possible effects.", "We conducted this performance audit from September 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Selected Results from the GAO Survey of Banks on Money Transmitter Account Terminations", "paragraphs": ["From July 2017 to September 2017, we administered a web-based  survey to a nationally representative sample of banks. In the survey, we  asked banks about the number of account terminations for reasons  related to Bank Secrecy Act anti-money laundering (BSA/AML) risk;  whether banks are terminating, limiting, or not offering accounts to certain  types of customer categories; and the factors influencing these decisions.  We collected information for the 3-year period from January 1, 2014, to  December 31, 2016. We obtained a weighted survey response rate of  46.5 percent. The survey included 44 questions, 16 of which were  directly applicable to the research objectives in this report.", "Responses to the questions that were directly applicable to the research  objectives in this report are shown below (see tables 3 through 16).  When our estimates are from a generalizable sample, we express our  confidence in the precision of our particular estimates as 95 percent  confidence intervals. Survey results presented in this appendix are  aggregated for banks of all asset sizes, unless otherwise noted. Results  for some of the survey questions were not statistically reliable. In those  cases we present only the number of responses to each survey question.  These results are not generalizable to the population of banks. Our  survey included closed- and open-ended questions. We do not provide  information on responses provided to the open-ended questions. For a  more detailed discussion of our survey methodology, see appendix I.", "The following open-ended question was only asked to banks that  responded \u201cYes\u201d to question 33: Please provide any additional comments  or challenges the bank may face in managing accounts for money  transmitters that remit to fragile countries such as Haiti, Liberia, Nepal or  Somalia. (Question 36)", "The following open-ended question was only asked to banks that  responded \u201cYes\u201d to question 37: Please provide any additional comments  on how changes (increase or decrease) in correspondent banking  services facilitating the transfer of funds to Haiti, Liberia, Nepal or  Somalia has impacted your bank\u2019s ability to provide services to money  transmitters. (Question 41)", "The following open-ended question was only asked to banks that  responded \u201cYes\u201d to using a correspondent bank to facilitate the transfer of  funds Somalia (question 38, response d): If your bank relied on a  respondent bank to facilitate the transfer of funds to Somalia, in what  country was the respondent bank located? (Question 39)"], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Thomas Melito, (202) 512-9601, or melitot@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mona Sehgal (Assistant  Director), Kyerion Printup (Analyst-in-Charge), Sushmita Srikanth,  Madeline Messick, Ming Chen, Lilia Chaidez, Natarajan Subramanian,  Carl Barden, James Dalkin, David Dayton, Martin De Alteriis, Mark  Dowling, Rebecca Gambler, Tonita Gillich, Stefanie Jonkman,  Christopher Keblitis, Jill Lacey, Michael Moran, Verginie Tarpinian, and  Patricia Weng made key contributions to this report."], "subsections": []}]}], "fastfact": ["People who send money from the United States to their families\u2014especially to those in poor countries\u2014see these \"remittances\" as a lifeline. However, remittances and other global payments can be used to hide money laundering and other financial crimes.", "Money transfer companies have used banks to transfer money worldwide. But some banks want to limit their exposure to the risk of financial crimes, and refuse or restrict transfer companies' accounts.", "Now, some transfer companies are bypassing the bank by taking cash over borders. We recommended that Treasury assess the risks of these transfers, which are harder to monitor for criminal activity."]}
{"id": "GAO-19-13", "url": "https://www.gao.gov/products/GAO-19-13", "title": "VA Disability Exams: Improved Performance Analysis and Training Oversight Needed for Contracted Exams", "published_date": "2018-10-12T00:00:00", "released_date": "2018-11-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2016, VBA awarded 12 contracts to five private firms for up to $6.8 billion lasting up to 5 years to conduct veterans' disability medical exams. Both VBA contracted medical examiners and medical providers from the Veterans Health Administration perform these exams, with a growing number of exams being completed by contractors. Starting in 2017, VBA contracted examiners conducted about half of all exams. GAO was asked to review the performance and oversight of VBA's disability medical exam contractors.", "This report examines (1) what is known about the quality and timeliness of VBA contracted exams; (2) the extent to which VBA monitors contractors' performance; and (3) how VBA ensures that its contractors provide qualified and well-trained examiners. GAO analyzed the most recent reliable data available on the quality and timeliness of exams (January 2017 to February 2018), reviewed VBA and selected contract documents and relevant federal laws and regulations, and interviewed agency officials, exam contractors, an audit firm that checks examiners' licenses, and selected veterans service organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Veterans Benefits Administration (VBA) has limited information on whether contractors who conduct disability compensation medical exams are meeting the agency's quality and timeliness targets. VBA contracted examiners have completed a growing number of exams in recent years (see figure). VBA uses completed exam reports to help determine if a veteran should receive disability benefits. VBA reported that the vast majority of contractors' quality scores fell well below VBA's target\u201492 percent of exam reports with no errors\u2014for the first half of 2017. Since then, VBA has not completed all its quality reviews, but has hired more staff to do them. VBA officials acknowledged that VBA also does not have accurate information on contractor timeliness. VBA officials said the exam management system used until spring 2018 did not always retain the initial exam report completion date, which is used to calculate timeliness. In spring 2018, VBA implemented a new system designed to capture this information.", "VBA monitoring has addressed some problems with contractors, such as reassigning exams from contractors that did not have enough examiners to those that did. However, the issues GAO identified with VBA's quality and timeliness information limit VBA's ability to effectively oversee contractors. For example, VBA officials said they were unable to track the timeliness of exam reports sent back to contractors for corrections, which is needed to determine if VBA should reduce payment to a contractor. The new system implemented in spring 2018 tracks more detailed data on exam timeliness. However, VBA has not documented how it will ensure the data are accurate or how it will use the data to track the timeliness and billing of corrected exam reports. VBA also has no plans to use the new system to analyze performance data to identify trends or other program-wide issues. Without such plans, VBA may miss opportunities to improve contractor oversight and the program overall.", "A third-party auditor verifies that contracted examiners have valid medical licenses, but VBA does not verify if examiners have completed training nor does it collect information to assess training effectiveness in preparing examiners. While VBA plans to improve monitoring of training, it has not documented plans for tracking or collecting information to assess training. These actions could help ensure that VBA contractors provide veterans with high-quality exams and help VBA determine if additional training is needed."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends VBA (1) develop a plan for using its new data system to monitor contractors' quality and timeliness performance, (2) analyze overall program performance, (3) verify that contracted examiners complete required training, and (4) collect information to assess the effectiveness of that training. The Department of Veterans Affairs agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the Department of Veterans Affairs (VA) paid about  $72.4 billion to about 4.5 million veterans to compensate them for  disabilities caused or aggravated by their military service. In that same  fiscal year, the Veterans Benefits Administration\u2019s (VBA) 57 regional  offices processed more than 1.2 million veterans\u2019 disability compensation  claims to determine eligibility for benefits. To help determine this  eligibility, VBA staff may request that the veteran undergo a medical  examination to provide evidence of disabilities and their connection to  military service. Medical providers who work for the Veterans Health  Administration (VHA) often conduct these exams. VBA also contracts with  private firms to perform these exams. According to VA officials, the  demand for exams sometimes exceeds VHA\u2019s capacity to perform them,  and in these cases VBA assigns a contractor to perform the exam to  avoid delays in processing the claim.", "In 2016, VBA awarded 12 exam contracts to five private firms for up to  $6.8 billion lasting up to 5 years. The contracts cover exams conducted in  both the United States and overseas, and cover benefit claims processed  by VBA regional offices. In fiscal year 2017, VA spent $765 million on  exams conducted by these VBA contractors. About 767,000 veterans  received a total of about 1 million exams from VBA contracted examiners  from January 1, 2017 to April 2018, which is about half of all disability  exams during this time.", "You asked us to review VA\u2019s oversight of the contract disability exam  program to ensure the quality of disability exams for veterans. This report  examines (1) what is known about the quality and timeliness of VBA  contracted exams; (2) the extent to which VBA monitors contractors\u2019  performance to ensure that they provide high quality and timely exams;  and (3) how VBA ensures that its contractors provide qualified and well- trained examiners.", "To describe the quality of VBA contracted exams, we reviewed available  scores and results of VBA\u2019s quarterly quality reviews of exam reports  completed in calendar year 2017 for each contract. VBA has not finalized  contractors\u2019 quality scores and results for exam reports completed in  calendar year 2017\u2014particularly for reports completed in the last two  quarters of that year. To describe the timeliness of contracted exams, we  analyzed VBA data on exams completed between February 2017 and  January 2018. VBA\u2019s timeliness data were sufficient for our purpose of  calculating the total time it took to complete exams (see appendix I for  additional details on our methodology). In addition, we reviewed VBA  aggregate data on the number of exam requests that had been accepted  by contractors but not yet completed as of late June 2018. For context,  we also reviewed VHA aggregate data on the quality and timeliness of  exams conducted by VHA examiners during calendar year 2017. We  reviewed VBA and VHA documentation of methodology and data  collection procedures, and interviewed officials knowledgeable about the  systems used to collect and maintain the data. For example, we spoke  with officials about how VBA uses available data to assess contractor performance against timeliness targets outlined in the contracts. We  assessed the reliability of the data we collected through electronic testing  for missing data and obvious errors, and by conducting interviews with  VBA and VHA officials, and determined that the data were sufficiently  reliable for our purposes.", "To evaluate VBA monitoring of contractor performance and VBA  oversight of contracted examiners\u2019 qualifications and training, we  reviewed relevant federal laws, regulations, and VA guidance on the use  of contracted examiners. To identify relevant contract provisions and  requirements related to contractor performance, monitoring of such  performance, licensing, and training, among other areas, we reviewed  selected provisions of selected versions of 1) the 12 current VA Medical  Disability Examination contracts originally awarded in 2016; 2) the 5  short-term contracts VA awarded in early 2017; and 3) 2 short-term  contracts VA awarded in December 2017. For more information about  the methodology used to identify relevant contract provisions and  requirements, see appendix I.", "We also reviewed related contract documents and reports to determine  how contract provisions were implemented by VBA and contractors. We  assessed VA monitoring against federal internal control standards on  quality information and monitoring, and federal contracting guidance. In  addition, we assessed VBA oversight of contracted examiners\u2019  qualifications and training against GAO\u2019s guide for assessing training and  development. For context, we also reviewed relevant documents on  training, licensing, and credentialing requirements for VHA providers who  conduct disability compensation exams. We also interviewed officials of  VBA\u2019s Mandatory Contract Examination Program Office (exam program  office), including Contracting Officer\u2019s Representatives (COR); VA\u2019s  Strategic Acquisition Center in Frederick, Maryland, including the contract  exam program Contracting Officer; VHA\u2019s Office of Disability and Medical  Assessment; each of the five contractors; a private firm that performs  audits of VBA contracted examiners\u2019 licenses; and three national veterans  service organizations.", "We conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "VBA Disability Benefits Process", "paragraphs": ["VA pays monthly disability compensation to veterans with service- connected disabilities according to the severity of the disability. VA\u2019s  disability compensation claims process starts when a veteran submits a  claim to VA (see fig. 1). A claims processor then reviews the claim and  helps the veteran gather the relevant evidence needed to evaluate the  claim. Such evidence includes the veteran\u2019s military service records,  medical exams, and treatment records from VHA medical facilities and  private medical service providers. If necessary to provide support to  substantiate a claim, VA will also provide a medical exam for the veteran,  either through a provider at a VHA medical facility or through a VBA  contractor. According to VBA officials, VBA monitors a VHA facility\u2019s  capacity to conduct exams and in instances when the facility may not  have capacity to conduct a timely exam, VBA will send an exam request  to one of its contractors instead.", "For exams assigned to a VBA contractor, VBA sends an exam request to  the contractor, who then rejects or accepts the exam request. Once the  contractor accepts the exam, it assigns a contracted examiner to conduct  the exam and complete an exam report designed to capture essential  medical information for purposes of determining entitlement to disability  benefits. The contractors send the completed report to VBA, which uses  the information as part of the evidence to evaluate the claim and  determine whether the veteran is eligible for benefits. According to  contractor officials, if they need clarification on an exam request, they might reject the request and send it back to VBA who, in turn, will revise  the request before sending it back to the contractor."], "subsections": []}, {"section_title": "Use of Contracts to Complete Disability Compensation Exams", "paragraphs": ["VA has used contracted examiners\u2014through VBA and VHA contracts\u2014to  supplement VHA-provided exams for at least two decades. VBA began  using contractors to conduct disability compensation exams at 10 VBA  regional offices in the late 1990s through a pilot program authorized  under federal law. In 2014, federal law authorized VBA to expand the  pilot to all its regional offices starting in fiscal year 2017.", "Before fiscal year 2017, VHA and VBA both administered disability exam  contracts. However, since fiscal year 2017, all such contracts have been  administered by VBA and none have been administered by VHA. VBA  awarded 12 contracts to five contractors to begin providing exams in  2016. According to VA officials, performance under 10 of these contracts  was delayed until late September 2017 due, in part, to multiple contract  bid protests. During this delay, VA officials told us that the agency  awarded short-term contracts to allow existing contractors to perform  exams until the bid protests were resolved. VBA\u2019s current contracts cover  exams for veterans in five U.S. geographic districts, one district for  overseas exams, and one district for servicemembers participating in  special programs, such as the Benefits Delivery at Discharge and  Integrated Disability Evaluation System programs (see fig. 2). VBA  awarded two contracts in each of its five U.S. geographic districts and  one contract each in districts 6 and 7, which include special programs and  overseas exams, respectively. VBA also awarded two additional short- term contracts in December 2017 to help address workload issues in  districts 1-5. With the addition of these two contracts, VBA has a total of  14 contracts currently in place.", "According to agency officials, because VBA wanted to update  performance measures for its contractors, VA issued a Request for  Proposals in May 2018 with plans to award new contracts in fall 2018 for  its U.S. geographic districts. Until it awards the new contracts, VBA will  continue to use the current contracts. According to VBA officials, VA  plans to continue using VBA contractors in the long term to conduct  exams that exceed VHA\u2019s capacity. In recent years, VBA contractors  have completed an increasing number of exams, from roughly 178,000 in  fiscal year 2012 to almost 600,000 in fiscal year 2017, according to VBA- provided data. VA estimates that in fiscal year 2019, contractors will  complete over 1.8 million exam reports for almost 800,000 veterans.  However, VBA officials noted that future projections for contracted exams  might change based on the need to supplement VHA capacity to ensure  timely exams."], "subsections": []}, {"section_title": "VBA Contract Exam Office and Requirements for Contractors", "paragraphs": ["In 2016, VBA established an exam program office to manage and  oversee contractors, monitor their performance, and ensure that they  meet contract requirements. For example, the contracts require that  contractors develop plans outlining how they will ensure examiners are  adequately trained. Contractors are also required to provide VBA with  monthly exam status reports, which include the number of canceled,  rescheduled, and completed exams, among other things. VBA also has  an office dedicated to completing quality reviews of contractors\u2019 exam  reports, which are used to assess contractor performance. The contracts  require that VBA conduct quality reviews of a sample of contractors\u2019 exam  reports. According to VA documents and officials, the results of these  quality reviews, and contractor timeliness scores in completing exams,  are included in quarterly performance reports. The contracts require that  VBA provide these performance reports to the contractors. VBA holds  quarterly meetings with the contractors to discuss their quarterly  performance based on these reports."], "subsections": [{"section_title": "VBA Licensing and Training Requirements for Contracted Examiners", "paragraphs": ["VBA contracts require that contracted examiners have full, current, valid,  and unrestricted licenses, and current and valid State Medical Board  certifications, before conducting any exams\u2014the same requirements that  apply to VHA medical providers. According to agency officials, VBA also  requires that contracted examiners complete the same training that VHA  providers must take before they can conduct any disability medical  exams. The required training consists of a set of online courses  developed by VHA\u2019s Disability Medical Assessment Office, such as  courses on VA\u2019s disability claims process and one on completing exam  reports. In addition, examiners who provide some specialized exams,  such as posttraumatic stress disorder exams and traumatic brain injury  exams, are required to take additional courses. In addition to VHA- developed training, VBA contracts require that contractors provide  examiners with a basic overview of VA programs."], "subsections": []}, {"section_title": "VBA Quarterly Contractor Performance Targets for Quality and Timeliness", "paragraphs": ["The contracts also outline quality and timeliness performance targets that  VBA uses to assess contractor performance (see table 1). VBA can use  contractors\u2019 performance in meeting these targets to determine financial  incentives. VBA\u2019s performance measures are as follows:", "Contractor quality: VBA calculates quality scores for each contractor  based on a sample of exam reports that VBA\u2019s quality office selects  for review on a quarterly basis for each contract. According to VBA  documents, the quality score represents the percentage of exam  reports reviewed that had no errors as measured against specific  criteria. Errors identified in quality reviews could range from  incomplete information (e.g., an examiner\u2019s medical specialty  information is not listed on exam report) to completing the wrong  exam report for a given condition.", "Contractor timeliness: VBA calculates timeliness scores for each  contractor based on the average timeliness of all exams completed in  a given quarter for each contract. VBA measures timeliness as the  number of calendar days between the date the contractor accepts an  exam request and the date the contractor initially sends the completed  exam report to VBA."], "subsections": []}]}]}, {"section_title": "VBA Reported Contractors Missed Exam Quality Targets, and VBA Could Not Accurately Measure Performance On Timeliness Targets", "paragraphs": [], "subsections": [{"section_title": "Contractors Missed Quality Targets in First Half of 2017; More Recent Data Are Not Yet Available for Most Districts", "paragraphs": ["VBA reported that almost all contractors missed VBA\u2019s quality target of 92  percent in the first half of calendar year 2017, and more recent data are  not yet available for most districts. More specifically, VBA-determined  quarterly quality scores\u2014the percentage of disability compensation exam  reports with no errors as measured against VBA criteria\u2014for the seven  contracts used by VBA in calendar year 2017 showed that contractors  were frequently well below the quality target. Quarterly quality scores  ranged from 62 percent to 92 percent (see fig. 3). According to VBA  data, only one contractor\u2019s quality score in one quarter met VBA\u2019s target  of 92 percent while the vast majority of contractors\u2019 scores were classified  by VBA as \u201cunsatisfactory\u201d performance.", "VBA has not yet completed all of the quality reviews used to calculate  contractor quality scores, particularly for exams that were completed in  the second half of 2017. VBA is hiring and training additional quality  review staff to complete these reviews and help manage the workload  moving forward. According to VBA officials, staff will complete the  remaining quality reviews and finalize the quality scores for 2017 by  December 2018."], "subsections": []}, {"section_title": "VBA Could Not Accurately Measure Contractor Timeliness Against Targets, but Our Aggregate Analysis Shows About Half of Exams Were Completed Within 20 Days", "paragraphs": ["According to agency officials, VBA has not calculated contractor  timeliness as it is outlined in the contracts. VBA measures timeliness as  the number of days between the date the contractor accepts an exam  request and the date the contractor initially sends the completed exam  report to VBA. According to officials, this measure does not include any  time contractors may spend correcting an exam report returned to them  by VBA. Returned exam reports are few in number, VBA officials said.  However, once a contractor submitted a corrected or clarified exam  report, VBA officials said the exam management system did not preserve  the date the exam was initially completed. At that point, the system only  tracked the date VBA received the corrected or clarified report. As a  result, the number of days in VBA\u2019s system could include time contractors  took to correct any issues identified by VBA after submitting the initial  report.", "While VBA\u2019s data does not allow it to reliably assess contractor  performance against the targets in the contracts, VBA\u2019s data can be used  to measure timeliness in other ways. For example, we were able to use  the data to calculate the entire amount of time it took to complete exams,  which includes time contractors took to correct any issues identified by  VBA. As such, the results of our analysis should not be interpreted as  reflecting contractor compliance with timeliness targets under the  contracts. However, to provide timeframes that are similar to VBA\u2019s  targets, we chose 20 days for districts 1-5 and 30 days for districts 6-7 as  timeframes for our analysis. Moreover, we analyzed timeliness across  all contractors rather than for individual contractors. In particular, we  analyzed VBA data on 646,005 contracted exams completed from  February 2017 to January 2018, which included 575,739 exams in  districts 1-5 and 70,266 exams in districts 6-7.", "Our analysis of VBA data shows that 53 percent of exams were  completed within 20 days for districts 1-5, and 56 percent were completed  within 30 days for districts 6-7. However, some exams took at least twice  as long to complete. For example, 12 percent of exams in districts 1-5  took more than 40 days to complete (see fig. 4). Contractor officials  described a number of reasons why exams might take longer in some  cases. For example, they said that scheduling delays might occur due to  a veteran\u2019s availability or severe weather, and that it can be challenging  to find specialists for certain exam types in rural locations.", "Our analysis of timeliness focused on exams that were completed, and it  did not include exams that have been requested and not yet completed  by a contractor. For example, a contractor may have accepted an exam  request from VBA, but not yet scheduled an appointment with the  veteran. Alternatively, a contractor may have conducted an exam with the  veteran, but not yet sent the exam report to VBA. As of late June 2018,  VBA-calculated data showed that 87,768 requested exams had not yet  been completed, including 37,077 exams that had already exceeded  VBA\u2019s timeliness targets. Tracking these exams is important because a  large volume of such exams could ultimately increase the amount of time  veterans have to wait for their claims to be processed. VBA officials  stated that the agency closely monitors contractors\u2019 workloads and helps  expedite requested exams that have exceeded VBA\u2019s targets for  completing exams. In addition, VBA included a performance measure in  its May 2018 Request for Proposals to track the percentage of requested  exams that have been with a contractor for more than seven days. Such a  measure could help VBA identify whether contractors have a backlog of  exams and better assess whether veterans are receiving timely exams."], "subsections": []}]}, {"section_title": "Delayed Quality Reviews and Performance Reports, and Data Limitations, Hinder VBA\u2019s Monitoring of Contractors", "paragraphs": [], "subsections": [{"section_title": "VBA Identified Some Contractor Performance Problems but Was Delayed in Completing Quality Reviews and Performance Reports", "paragraphs": [], "subsections": [{"section_title": "VBA Identification of Performance Problems", "paragraphs": ["VBA\u2019s contract exam program office, primarily through its Contracting  Officer\u2019s Representatives (COR), has identified some contractor  performance problems, such as delays in completing specific exams,  through its oversight of contractor performance. This oversight includes  day-to-day monitoring of contractor workloads and frequent contact with  contractor officials. Through such contact and reviews of contractors\u2019  daily and weekly exam status updates, the CORs work with contractor  officials to identify ways to expedite disability compensation exams for  veterans who have been waiting longer than VBA\u2019s 20-day or 30-day  targets. In addition, VBA contract quality staff who review samples of  contractor exam reports hold teleconferences with the CORs and  contractor officials to provide feedback and discuss issues arising from  their reviews, such as specific types of errors.", "The VBA contract exam program office also oversees and manages  contractors through supplemental guidance memos, contractor site visits,  and reviews of veteran customer satisfaction surveys. For example, in  November 2017, VBA sent a supplemental guidance memo to all  contractors to clarify guidance on conducting and documenting hearing  loss exams. Further, VBA has conducted site visits to all five contractors\u2019  headquarters or clinic sites since September 2017. Headquarters visits  include reviews of contractors\u2019 procedures, such as those for assigning  exam requests, and contractors\u2019 information systems, such as those for  tracking the status of exams. VBA visits to contractor clinics focus on  facility issues, such as accessibility and safety. According to VBA  officials, the CORs also review reports on satisfaction surveys completed  by veterans after their exam appointments to identify veterans\u2019 concerns  regarding contractors and to follow up with contractors, when needed.  For example, in response to one veteran\u2019s survey comment regarding a  contracted examiner who did not show up to conduct a scheduled exam,  VBA officials told us they followed up with the contractor and learned that  the examiner\u2019s car broke down. According to VBA, it reimbursed the  veteran for round-trip transportation costs to the clinic.", "Additionally, VBA\u2019s contract quality review staff have conducted special  focused reviews to investigate concerns raised by veterans and by staff in  VBA regional offices and VHA medical facilities. For example, VBA  conducted a review of one contracted examiner who had high rates of  diagnosing severe posttraumatic stress disorder. After reviewing this  examiner\u2019s reports, VBA found their overall quality to be poor. As a result,  VBA requested that the contractor no longer use this examiner.", "In addition to identifying and addressing problems with individual exams  and examiners, VBA has identified broader challenges faced by  contractors in meeting VBA\u2019s demand for exams and providing timely  reports. For example, VBA identified two contractors who were not  prepared to perform all of their assigned exams because they did not  have enough examiners, particularly in rural locations, which led to delays  and a backlog of exam requests, according to VBA officials. VBA officials  described how they worked with these contractors over several months to  adjust and closely monitor the volume of exams sent to the contractors to  address the backlog. However, according to VBA officials, by December  2017, VBA determined that one of the contractors was not able to meet  the demand for exams, and the agency stopped sending new exam  requests to this contractor. According to VBA, by late June 2018, it had  discontinued all work with this contractor. VA officials said that to obtain  additional exam capacity to make up for the two contractors\u2019 shortages,  they awarded short-term contracts in December 2017 to two other  contractors who were providing exams in other VBA districts."], "subsections": []}, {"section_title": "VBA Delays in Assessing Quality and Completing Reports", "paragraphs": ["VBA has not completed all required quarterly quality reviews and  accompanying quarterly performance reports on contractors, according to  VBA officials. These reviews and reports are key components to  effectively assessing contractor performance in a timely manner.  Specifically, in late June 2018, VBA officials said that they had conducted  almost all their quality reviews for contracted exams completed in districts  1-5 during the second half of 2017, but that they needed to finalize the  quality scores. They also said that they were beginning their quality  reviews for contracted exams completed in 2018. At the time of our  review, VBA had released one quarterly performance report for the fourth  quarter of calendar year 2017, and officials said they were drafting  others. VBA officials attributed delays in completing quality reviews and  quarterly performance reports primarily to a lack of VBA quality review  staff. The quarterly performance reports provide contractors with  information on their performance against VBA quality and timeliness  targets. For example, prior reports included detailed breakouts of quality  errors by type and suggestions for performance improvements. As  officials of one contractor said, delays in receiving quarterly performance  reports limit VBA\u2019s ability to provide contractors with timely and valuable  feedback they can use to improve the quality of their exams.", "The delay in completing the quarterly reviews and reports also has  implications for VBA\u2019s ability to allocate exam requests across contractors  and administer potential financial incentives across contractors. More  specifically, VBA can use performance data to help determine how to  allocate exams in each district that has two contractors, as outlined in the  contracts. For example, VBA can decide to allocate more exams to the  contractor with higher performance results. Further, the contracts outline  how VBA can use performance data to administer financial incentives  linked to performance targets. For example, VA is to provide a bonus to a  contractor who meets or exceeds the 92 percent quality standard for a  quarter, and meets or exceeds the 20- or 30-day timeliness standard.  However, because of its delays in completing quality reviews and the lack  of reliable data on contractor timeliness, VA has not yet administered  these incentives. VA officials told us that the agency will determine if it will  administer the 2017 incentives after it completes its performance  assessments of contractors.", "VBA officials said they are currently hiring more staff to address the lag in  quality reviews and subsequent reports to contractors, as well as to  provide more oversight of contractors. At the time of our review, VBA did  not have its authorized level of 15 quality analysts and 2 senior quality  reviewers, but VBA officials said that they expected to complete hiring to  bring the quality reviewer staff up to 17 full-time positions by the end of  fiscal year 2018. In addition, VBA officials acknowledged that they did not  have enough CORs in VBA\u2019s exam program office to oversee the 14  exam contracts (including the two short-term contracts). As of April  2018, VBA officials said the office had 3 CORs, but hiring was expected  to bring the number up to 14 by the end of fiscal year 2018. VBA officials  said that they determined staffing levels for VBA\u2019s contract exam program  office\u2014including CORs and exam quality reviewers\u2014based on an  assessment of the resources needed to expand the program, among  other factors. Although VBA did not provide documentation outlining how it determined its workforce needs, the agency provided us with updated  organizational charts in June 2018 demonstrating increased staff levels  for the exam program office."], "subsections": []}]}, {"section_title": "VBA\u2019s Data Limitations Hinder Its Ability to Oversee Certain Contract Provisions, and VBA Has Not Conducted Comprehensive Performance Analysis", "paragraphs": ["VBA\u2019s lack of reliable data on the status of exams, including insufficient  exams\u2014exam reports that VBA returns to contractors to be corrected or  clarified\u2014limits its ability to effectively oversee certain contract  provisions. VBA officials acknowledged that they could not calculate the  number of completed exams that were once marked as insufficient or how  long they had remained in that status due to the data limitations of the  exam management system the agency used until spring 2018. The  contracts require that contractors correct insufficient exams within a  certain number of days and bill VBA for these exams at half price.  However, VBA\u2019s lack of complete and reliable information on insufficient  exams hinders its ability to ensure that either of these requirements is  met. VBA officials also indicated that they were unable to fully assess  individual contractor timeliness against VBA\u2019s performance targets  because the exam management system did not include the date the initial  exam report was submitted to VBA, which is needed to calculate  timeliness as outlined in the contracts.", "In March 2018, VBA began implementing a new exam management  system designed to collect more comprehensive and accurate information  on the status of exams. VA documentation on the new system shows that  it will include detailed data on insufficient exams, which, according to VBA  officials, should allow VBA to track whether contractors are properly  discounting their invoices for those exams. However, in June 2018, VBA  stated that three of its five contractors did not have complete functionality with VBA\u2019s new exam management system. As a result, VBA officials  said the agency still did not have complete data in the new system that  would allow it to track insufficient exams. Officials said they were working  to address these issues.", "More broadly, as described in VA system documents, the new system is  designed to allow VBA to track more detailed data on exam completion  dates and on other points throughout the exam process, such as dates for  initial requests for clarification from contractors, and dates when  appointments are scheduled. However, VBA is in the early stage of this  transition, and agency officials stated that unexpected technical issues  have affected communication between the new exam management  system and other VBA systems. While they work to resolve the issues,  VBA officials said that they have been manually moving some exam  requests through the system each day. Further, VBA has not documented  how it plans to ensure the additional data is accurate and use it to  oversee contractor performance as outlined in the contracts, particularly  for insufficient exams. Federal internal control standards state that  management should use quality information to achieve key objectives.  In addition, management should formulate plans to achieve those  objectives. For example, agencies should assess collected data and  ensure it is accurate so that it can be used to provide quality information  to evaluate performance. In the absence of a plan for how it will capture  and use data in its new exam management system to assess  performance, VBA risks overpaying contractors for insufficient exams and  continuing to inaccurately measure contractor timeliness.", "Further, according to agency officials, VBA has not conducted  comprehensive analyses of performance data that would allow it to  identify and address higher-level trends and program-wide challenges  across contractors, geographic districts, exam types, or other relevant  factors. Agency officials told us they have no plans to conduct such  analyses. Federal internal control standards state that management  should establish and operate monitoring activities and evaluate the  results of those activities. In addition, management should evaluate  deficiencies both at the individual and aggregate level. While VBA officials  acknowledged that higher-level analyses could improve program  oversight, they explained that analyzing performance data has been  challenging due to the limitations of the exam management system. Thus,  VBA has prioritized addressing contractor-specific problems and resolving  long-standing pending exams over in-depth analysis of the performance  data.", "However, with the expected improvements provided by VBA\u2019s new exam  management system and increased staff to manage the program and  conduct quality reviews, VBA should be better positioned to conduct  analyses of performance data in the future. By conducting higher-level  analyses across contractors, geographic districts, exam types, or other  relevant factors, VBA could make a more informed assessment of the  challenges contractors and examiners face and where additional  workload capacity and training may be needed. In addition, better  analyses would allow VBA to determine if the contract exam program is  achieving its quality and timeliness goals in a cost effective manner."], "subsections": []}]}, {"section_title": "Auditor Verifies Contracted Examiner Licenses, but VBA Does Not Verify Training Completion or Collect Information on Training Effectiveness", "paragraphs": [], "subsections": [{"section_title": "VBA Uses a Third-Party Auditor to Verify Contracted Examiner Licenses", "paragraphs": ["VBA has a third-party auditor who verifies that all active contracted  examiners have a current, valid, and unrestricted medical license in the  state where they examined a veteran. The auditor provides regular  reports of its audits to VBA. Specifically, the auditor verifies the license  numbers of all active contracted examiners in the states where they  perform VA disability compensation exams; National Provider Identifiers;  and any prior or current sanctions or restrictions resulting in a revoked or  suspended license at the time of a VA exam. In addition, contractors  send VBA monthly reports of examiners\u2019 medical license, specialty, and  accreditation based on the contractors\u2019 verification of this information.  Every 2 months, VBA sends the auditor a consolidated report of this  information covering all five contractors. The auditor verifies examiners\u2019  information in that report before sending a final audit report to VBA, noting  if the auditor was or was not able to verify examiners\u2019 licenses. After  reviewing the report, VBA contacts the contractors to gather additional  information to resolve any issues, and in cases in which licensing  requirements are not met, VBA stops using the examiner and offers new  exams to veterans who have been seen by the examiner.", "VBA and auditing firm officials noted that audit results show that almost  all examiners have current and valid licenses, and contractors are  required to stop using those who do not meet licensing requirements.  VBA and auditing firm officials said that issues identified in the audits are  usually due to typos or differences in how information is captured across  different licensing databases. However, based on an audit, VBA provided  an example of an examiner with a restricted medical license who had  completed exams for one contractor. In this case, VBA notified the  contractor, who then stopped using the examiner and said it was taking  action to prevent errors in its license verification process from occurring  again. In addition, the contractor reimbursed VBA for the cost of exams  conducted by the examiner and also offered new exams to veterans who  had been seen by the examiner."], "subsections": []}, {"section_title": "VBA Relies on Exam Contractors to Verify Training is Completed and Does Not Review Training Records for Accuracy", "paragraphs": ["VBA relies on contractors to verify that their examiners complete required  training, and agency and contractor officials told us that VBA does not  review contractors\u2019 self-reported training reports for accuracy or request  supporting documentation, such as training certificates, from  contractors. As required by the contracts, contractors must track and  maintain records demonstrating each examiner has completed required  training. Each of VBA\u2019s five contractors has its own process for ensuring  that required training is provided to and completed by their examiners, but  generally, contractors export the courses from VA\u2019s online training system  into their own online training systems for their examiners to access. The  contractors, rather than VBA, access the contractor training systems to  verify that examiners have completed the required training before they  are approved to conduct exams. When requested by VBA, contractors  are required to send VBA reports demonstrating that their examiners  have met training requirements. As stated in the latest version of the  contracts, contractors must immediately stop using any examiner found to  have not completed required training, notify VBA, and re-examine the  involved veterans at no cost to VBA, if requested by the agency.", "Although VBA currently does not verify the accuracy of training self- reported by contractors to the agency, VBA officials said that they plan to  enhance monitoring through spot checks of training records and a new  training system. Specifically, in fiscal year 2019, VBA officials said they  plan to start conducting spot checks of some examiners\u2019 training records  for accuracy and compliance during site visits to contractor headquarters  and clinics. However, VBA has not provided details or documentation on  these planned checks, such as how it will determine which records to  review or the steps it will take to verify the accuracy of training records.  VBA officials also said they are planning to develop an online system that  would allow VBA to certify that examiners have completed required  training, rather than relying on contractors for this information. However,  as of July 2018, VBA had yet to determine when this system would be  developed and had not documented plans to do so in order to use such  information for monitoring training. VBA also said it would hire staff to  manage contractor training, but has yet to do so.", "GAO\u2019s prior work has emphasized tracking and other control mechanisms  to ensure that all employees receive appropriate training. While VBA  said it would enhance its monitoring of training records, documenting and  implementing a plan and processes to verify training could help ensure  examiners have met training requirements. Without such a plan, VBA  risks using contracted examiners who are unaware of the agency\u2019s  process for conducting exams and reporting the results, which could lead  to delays for veterans as a result of poor-quality exams that need to be  redone and insufficient exam reports that need to be corrected."], "subsections": []}, {"section_title": "VBA Does Not Collect Information to Determine if Training Effectively Prepares Examiners", "paragraphs": ["VBA does not collect information from contractors or examiners to help  determine if required training effectively prepares examiners to conduct  high quality exams and complete exam reports. VBA has provided  additional guidance to contractors for some specialty exams. However,  VBA identified these issues after some contractors requested guidance in  monthly meetings, rather than through VBA efforts to proactively or  regularly collect information from contractors or examiners to inform  potential changes to training. VBA is considering including a component  in the online training system that would collect information on the  effectiveness of required training. However, VBA has not outlined  additional details on collecting such information. VBA officials said that  VBA did not collect such information in the past, in part, because staff  were focused on program oversight.", "To assess progress toward achieving results and to make changes to  training if needed, GAO has found that evaluation is a key component of  any training program. Given that VBA officials told us that the agency  plans to issue new contracts in fall 2018, the number of contracted  examiners who are new to VA processes may increase. Thus, collecting  and assessing regular feedback on training from contractors and  examiners, such as through surveys, discussion groups, or interviews,  could help VBA determine if training effectively prepares examiners to  conduct exams and complete exam reports. Further, information on the  effectiveness of training could supplement data on contractor  performance and results from VBA\u2019s quality reviews to help assess if  additional training courses are needed across contractors or for specific  exam types."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As VBA increasingly relies on contractors to perform veterans\u2019 disability  compensation exams, it is important that the agency ensures proper  oversight of these contractors. VBA\u2019s lack of accurate and up-to-date data  and reports on contractor performance hampers its ability to oversee the  quality and timeliness of exams provided through contractors. VBA\u2019s new  exam management system provides opportunities to improve oversight  through more comprehensive and accurate data. These improvements  might be limited, however, without a plan to use the data to produce the  quality information needed by VBA to monitor insufficient exams, ensure it  pays contractors the correct amount for those exams, and help it  accurately calculate contractor timeliness.", "Further, the new system provides an opportunity for VBA to conduct  analyses that could identify high-level trends and challenges facing the  program across contractors and districts, such as delays in completing  exams in specific parts of the country or contractor performance issues  related to specific exam types. Despite these capabilities, VBA has not  outlined plans for using improved information in this manner. Without  doing so, the agency may miss opportunities to improve the program and,  ultimately, its service to veterans.", "VBA could better prepare contracted examiners for their role by taking  actions to ensure required training has been completed and by collecting  information to assess and improve training. Such actions could help  improve the quality of exams and exam reports, which could mitigate the  need for exam rework and, ultimately, delays in determining veterans\u2019  benefits. With VBA planning to award new contracts and potentially more  new contracted examiners coming on board, verifying that required  training is completed and collecting information on the effectiveness of  training are critical. As VA continues to rely on contracted examiners, it is  important that the agency is well positioned to carry out effective  oversight of contractors to help ensure that veterans receive high-quality  and timely exams."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations regarding contracted  disability compensation exams to VA.", "The Under Secretary for Benefits should develop and implement a plan  for how VBA will use data from the new exam management system to  oversee contractors, including how it will capture accurate data on the  status of exams and use it to (1) assess contractor timeliness, (2) monitor  time spent correcting inadequate and insufficient exams, and (3) verify  proper exam invoicing. (Recommendation 1)", "The Under Secretary for Benefits should regularly monitor and assess  aggregate performance data and trends over time to identify higher-level  trends and program-wide challenges. (Recommendation 2)", "The Under Secretary for Benefits should document and implement a plan  and processes to verify that contracted examiners have completed  required training. (Recommendation 3)", "The Under Secretary for Benefits should collect information from  contractors or examiners on training and use this information to assess  training and make improvements as needed. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of our report to the Department of Veterans Affairs  (VA) for its review and comment. VA provided written comments, which  are reproduced in appendix II. VA concurred with all our  recommendations and described the Veterans Benefits Administration\u2019s  (VBA) plans for taking action to address them. Regarding our first  recommendation, VA outlined improvements in the information collected  through VBA\u2019s new exam management system, and said that VBA is  currently testing a mechanism to validate exam invoices submitted by  contractors.  We noted these improvements to the system in our draft  report sent to the agency for comment. We maintain that it will be  important for VBA to take the next step of developing and implementing a  plan for how it will use information from the new system to ensure both  accurate timeliness data and proper exam invoicing. Regarding our  second recommendation, VA stated that VBA will use improved data in  the new exam management system to regularly monitor and assess  aggregate performance data, identify error trends, and monitor contractor  performance and program-wide challenges.", "Regarding our third and fourth recommendations, VA stated that VBA  plans to develop and implement a training plan for contractors that will  include a mechanism to validate that required training has been  completed and to assess the effectiveness of this training through  feedback from trainees, contractors, and quality review staff in VBA\u2019s  contract exam program office. VA stated that VBA will use this data to  improve the implementation and content of training. VA requested that  GAO combine these two recommendations into one. However, we believe  they are two distinct recommendations and have kept them as such. VBA  could meet the intent of each recommendation with the development and  implementation of one plan that covers both training verification and  assessment, as outlined in its comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Veterans Affairs, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions, please contact me at (202) 512- 7215 or curdae@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made significant contributions to this report are listed in  Appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Additional Information on Selected Methodologies", "paragraphs": [], "subsections": [{"section_title": "Review of VBA Contracts", "paragraphs": ["To evaluate VBA monitoring of contractor performance and VBA  oversight of contracted examiners\u2019 qualifications and training, we  reviewed relevant federal laws, regulations, and VA guidance on the use  of contracted examiners for disability compensation exams. To identify  relevant contract provisions and requirements related to contractor  performance, monitoring of such performance, licensing, and training,  among other areas, we reviewed selected provisions of selected versions  of the 12 current VA Medical Disability Examination contracts originally  awarded in 2016, of 5 short-term contracts VA awarded in early 2017,  and of 2 short-term contracts VA awarded in December 2017. With  regard to the 12 current contracts, we reviewed the selected provisions in  the originally awarded contract from 2016 and in the most recently  amended version of the contract (as provided to us by VBA officials).  Based on our review of these two versions of the contract, the selected  provisions appeared to remain in place, unless noted otherwise in this  report. However, we did not review the various contract modifications  that, according to VBA, occurred in the interim period to confirm whether  the selected provisions we focused on in our review actually remained in  place during the period between the original contract and the most recent  amendment. With regard to the 2 short-term contracts awarded in  December 2017, we reviewed the selected provisions in the original  December contract. According to VBA officials, there have been no  subsequent modifications to these short-term contracts.", "With regard to the 5 short-term contracts awarded in early 2017, we only  reviewed selected provisions relating to contractor quality and timeliness  performance. Thus, any statements in this report relating to other aspects  of the contracts are not based on these short-term contracts. Further, we  only reviewed such provisions in the originally awarded short-term  contract, and we did not review the various contract modifications that,  according to VBA, occurred subsequently, to confirm that those  provisions remained in place over time. However, we found that those  selected provisions were generally in place in all of the various contracts  we reviewed."], "subsections": []}, {"section_title": "Analysis of VBA Data on the Timeliness of Contracted Exams", "paragraphs": ["To answer what is known about the timeliness of VBA contracted exams,  we analyzed VBA data on disability compensation exams completed by  five contractors between February 2017 and January 2018. VBA\u2019s Office  of Performance Analysis and Integrity provided exam-level data that it  maintains in the agency\u2019s Enterprise Data Warehouse, including data on  the exam request date, the date the contractor accepted the request, the  date the contractor completed the exam, and the VBA district where the  exam was conducted, among other information. These data were  created from data originally collected in VBA\u2019s Centralized Administrative  Accounting Transaction System (CAATS), which is the system that VBA  used to request exams from contractors until spring 2018.", "According to VBA officials, the status of exam requests (e.g., pending,  completed, cancelled) was not always accurate in CAATS. To create  more reliable data and identify the most current information on the status  of exams, the Office of Performance Analysis and Integrity identified and  replaced missing or incorrect data in CAATS by running checks against  other VBA systems, including the Veterans Benefits Management  System, which maintains veterans\u2019 benefits claims records. We assessed  the reliability of the data we received from VBA by conducting electronic  testing for missing data and errors, and by interviewing VBA officials  about their data collection and quality control procedures. We determined  that the data were sufficiently reliable for our purposes of reporting the  time it took to complete exams within districts.", "Our analysis included 646,005 contracted exams completed between  February 2017 and January 2018. We selected February 2017 as our  starting point because it was the first full month of data available that  covered most of VBA\u2019s current contractors. To allow for 12 full months of  data, we selected January 2018 as our ending point. In addition, we  limited our population to include exams that were requested on or after  January 13, 2017 in districts 1-5 or on or after April 1, 2016 in districts 6- 7, based on the periods of performance in the contracts for those  districts.", "We calculated timeliness at the level of the exam request. We calculated  the number of days between the date an exam request was accepted by  the contractor and the date the exam report was completed by the  contractor. The timeliness values we calculated may include additional  time needed to request and receive contractors\u2019 corrections or  clarifications on previously submitted exam reports. In our report, we refer  to these exams as \u201cinsufficient exams.\u201d VBA officials acknowledged that  due to data limitations the new exam management system is intended to  resolve, VBA\u2019s CAATS system did not retain data on the number of  exams that were once marked as insufficient or how long they remained  in that status. While VBA officials acknowledged that this data limitation  affects the agency\u2019s ability to assess individual contractor timeliness on  VBA\u2019s performance targets outlined in the contracts, the limitation did not  prevent us from analyzing the timeliness of contracted exams overall. The  overall timeliness values we calculated represent the total time taken to  complete exams regardless of whether additional time was needed for  corrections.", "To put the timeliness values we calculated in context, we calculated the  percentage of exams that were completed within VBA\u2019s timeliness targets  of 20 days for districts 1-5 and 30 days for districts 6-7 for the entire 12- month period of our analysis. We also calculated the percentage of  exams that were completed within other timeframes (e.g., 21-40 days,  more than 40 days). According to the contracts, contractors are not  expected to complete all exams within the timeliness target, but rather  should meet the timeliness target on average in a given quarter, so our  analysis was different from one that VBA might conduct in order to  determine contract compliance. Because VBA does not retain detailed  data on exam completion dates necessary to assess contractor  performance against VBA\u2019s timeliness targets, and because we  calculated timeliness across contractors, the percentages we calculated  do not represent an assessment of whether contractors met VBA\u2019s  timeliness targets. GAO did not conduct a legal analysis of the various  contractors\u2019 compliance with the contract requirements."], "subsections": [{"section_title": "Alternate Timeliness Values", "paragraphs": ["Given that the start of VBA\u2019s timeliness measure is the date the  contractor accepts the exam request (rather than the date VBA requests  the exam), we calculated alternate timeliness values to account for  potential delays in accepting exam requests. VBA officials stated that  VBA requests contractors accept or reject exam requests within 3 days.  For all exam requests that contractors took more than 3 days to accept,  we calculated alternate totals that included the additional days. For  example, if a contractor took 5 days to accept the exam request and  completed the exam 20 days later, we calculated an alternate total of 22 days to complete the exam. We used these alternate values to calculate  adjusted percentages for each category presented in Figure 4 of our  report. For example, using the alternate timeliness values, about 50  percent of exams in districts 1-5 would have been completed in 20 days  and 53 percent in districts 6-7 would have been completed within 30  days, rather than the respective 53 percent and 56 percent shown in  Figure 4. Moreover, we found that about 82 percent of exam requests  during our period of analysis were accepted within 3 days."], "subsections": []}, {"section_title": "Pending Exams", "paragraphs": ["To report more recent data on exams that were accepted but not yet  completed by contractors\u2014pending contracted exams\u2014VBA provided  aggregate data on the number of pending exams as of June 25, 2018.  For example, for districts 1-5, it provided data on the number of exams  that had been pending for 20 days or fewer, 21-40 days, 41-60 days, 61- 100 days, and more than 100 days. We calculated percentages based on  the VBA-provided totals."], "subsections": []}]}]}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Elizabeth Curda, (202) 512-7215 or curdae@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nyree Ryder Tee (Assistant  Director); Teresa Heger (Analyst-in-Charge); Alex Galuten; Justin  Gordinas; and Greg Whitney made key contributions to this report. Also  contributing to this report were James Bennett, Matthew T. Crosby,  Teague Lyons, Sheila R. McCoy, Jessica Orr, Claudine Pauselli, Samuel  Portnow, Monica Savoy, Almeta Spencer, and April Van Cleef."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-221", "url": "https://www.gao.gov/products/GAO-18-221", "title": "Defense Budget: Actions Needed to Improve the Management of Foreign Currency Funds", "published_date": "2018-04-03T00:00:00", "released_date": "2018-04-03T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD requested about $60 billion for fiscal years 2009 - 2017 to purchase goods and services overseas and reimburse service-members for costs incurred while stationed abroad. DOD uses foreign currency exchange rates to budget and pay (that is, disburse amounts) for these expenses. It also manages the FCFD account to mitigate a loss in buying power that results from foreign currency rate changes.", "GAO was asked to examine DOD's processes to budget for and manage foreign currency fluctuations. This report (1) describes DOD's revision of its foreign currency budget rates since 2009 and the relationship between the revised rates and projected O&M and MILPERS funding needs; (2) evaluates the extent to which DOD has taken steps to reduce costs in selecting foreign currency rates to disburse funds to liquidate O&M obligations, and determined whether opportunities exist to gain additional savings; and (3) assesses the extent to which DOD has effectively managed the FCFD account balance. GAO analyzed data on foreign currency rates, DOD financial management regulations, a non-generalizable sample of foreign currency disbursement data, and FCFD account balances."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) revised its foreign currency exchange rates (\u201cbudget rates\u201d) during fiscal years 2014 through 2016 for each of the nine foreign currencies it uses to develop its Operation and Maintenance (O&M) and Military Personnel (MILPERS) budget request. These revisions decreased DOD's projected O&M and MILPERS funding needs. DOD's revision of the budget rates during these years also decreased the expected gains (that is, buying power) that would have resulted from an increase in the strength of the U.S. Dollar relative to other foreign currencies. DOD did not revise its budget rates in fiscal years 2009 through 2013. For fiscal year 2017, DOD changed its methodology for producing budget rates, resulting in rates that were more closely aligned with market rates. According to officials, that change made it unnecessary to revise the budget rates during the fiscal year.", "DOD has taken some steps to reduce costs in selecting foreign currency rates used to pay (that is, disburse amounts) for goods and services, but DOD has not fully determined whether opportunities exist to achieve additional savings. The Army has estimated potential savings of up to $10 million annually by using a foreign currency rate available 3 days in advance of paying for goods or services rather than a more costly rate available up to 5 days in advance. The Army has converted to the use of a 3-day advanced rate. GAO's analysis suggests that DOD could achieve cost savings if the services reviewed and consistently selected the most cost-effective foreign currency rates when paying for their goods and services. Absent a review, DOD is at risk for paying more than it would otherwise be required to conduct its transactions.", "DOD used the Foreign Currency Fluctuations, Defense (FCFD) account to cover losses (that is, less buying power) due to unfavorable foreign currency fluctuations in 6 of the 8 years GAO reviewed. Since 2012, DOD has maintained the FCFD account balance at the statutory limit of $970 million, largely by transferring unobligated balances before they are cancelled from certain DOD accounts into the FCFD. However, DOD has not identified the appropriate FCFD account balance needed to maintain program operations by routinely analyzing projected losses and basing any transfers into the account on those expected losses. Thus, DOD may be maintaining balances that are hundreds of millions of dollars higher than needed, and that could have been used for other purposes or returned to the Treasury Department (see figure)."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that DOD review opportunities to achieve cost savings by more consistently selecting the most cost-effective foreign currency rates used for the payment of goods and services, and analyze projected losses to manage the FCFD account balance. DOD generally concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) requested about $60 billion for fiscal  years 2009 through 2017 in Operation and Maintenance (O&M) and  Military Personnel (MILPERS) appropriations to purchase foreign goods  and services overseas and to reimburse service-members for certain  costs incurred while stationed abroad. As part of the annual budget  formulation process, DOD selects exchange rates for each of the nine  foreign currencies it uses to develop its O&M and MILPERS funding  requirements. Budget formulation for a particular fiscal year starts  approximately 18 months prior to the beginning of that fiscal year. DOD refers to foreign currency exchange rates established during the budget  formulation process as the budget rates.", "During each fiscal year, DOD\u2019s O&M and MILPERS appropriations incur  new obligations for overseas expenditures at the budget rate for a  particular foreign currency. The fiscal year during which an appropriation  may incur new obligations is known as the period of availability. DOD  liquidates those obligations through disbursements at the foreign currency  market rates available at the time the disbursements are made. DOD  typically disburses funds to liquidate its MILPERS obligations during the  fiscal year of availability because MILPERS appropriations fund service- member salaries, which are paid on a regular basis throughout the fiscal  year. However, O&M appropriations are generally obligated for the  provision of goods and services, and the liquidation of those obligations  may not always occur within the fiscal year of availability. Disbursements  to liquidate O&M obligations also commonly occur during an  appropriation\u2019s 5-year period of expiration, particularly during the first year  of expiration, during which amounts are available only for limited  purposes, such as disbursement (see figure 1). Differences between the  foreign currency budget rate applied when an obligation is incurred and  the foreign currency market rate applied at the time of disbursement will  result in either a gain or a loss in the amount of appropriations available  to DOD for its planned overseas expenditures.", "In fiscal year 1979, Congress appropriated $500 million to establish the  Foreign Currency Fluctuations, Defense (FCFD) account for purposes of  maintaining the budgeted level of operations in the MILPERS and O&M  accounts by eliminating substantial gains or losses to the appropriations  caused by foreign currency rate fluctuations that vary from rates used in  preparing budget submissions. DOD may replenish FCFD amounts by  transferring MILPERS and O&M appropriations, under certain  circumstances. Congress has not provided the FCFD account with  annual appropriations since the account\u2019s inception. Unobligated FCFD  account balances are available until expended, carrying over from one  fiscal year to the next. We have previously reported that an examination  of balances in federal accounts carried forward into future fiscal years  (carryover balances) provides an opportunity to identify areas where the  federal government can improve and maximize the use of its resources.", "You asked us to examine DOD\u2019s processes and methodologies to budget  for and manage foreign currency fluctuations. Specifically, this report (1)  describes DOD\u2019s revision of its foreign currency budget rates since 2009  and the relationship between the revised budget rates and DOD\u2019s  projected O&M and MILPERS funding needs; (2) evaluates the extent to  which DOD has taken steps to reduce costs in selecting foreign currency  rates to disburse funds to liquidate O&M obligations, and has determined  whether opportunities exist to gain additional savings; and (3) assesses  the extent to which DOD has effectively managed the FCFD account  balance to cover losses due to foreign currency fluctuations and  maintained quality information to manage these funds.", "To address our first objective, we reviewed DOD\u2019s foreign currency  budget rates for the period of fiscal years 2009 through 2017, and we  identified any years during which DOD revised the initial budget rates. We  discussed with DOD officials the process for reviewing the rates and the  factors considered in determining whether to revise the rates.  Additionally, to understand the effects that revising the budget rates had  on DOD\u2019s O&M and MILPERS funding estimates, and the potential for  gains or losses due to foreign currency fluctuations, we compared DOD\u2019s  initial foreign currency budget rates and revised foreign currency budget  rates against rates published by the U.S. Treasury Department (Treasury)  for fiscal years 2009 through 2017. This period corresponded with the  data available to us on DOD\u2019s initial and revised rates, and it allowed for  use of the most current data available, because while we were conducting  our audit work DOD had not yet decided whether or not to revise the  fiscal year 2018 budget rates. We chose rates published by Treasury for  this comparison because Treasury has the sole authority to establish for  all foreign currencies or credits the exchange rates at which such  currencies are to be reported by all agencies of the government.", "For our second objective, we reviewed accounting standards and  disbursement guidelines such as DOD\u2019s Financial Management  Regulation, which mirrors the FCFD account\u2019s statutory authority by  directing that MILPERS and O&M obligations be liquidated and amounts  be disbursed at the foreign currency market rate that is current at the  time. We discussed with DOD officials the foreign currency rates used  to liquidate DOD\u2019s obligations; any analysis and ongoing efforts to identify  options for selecting more cost-effective disbursement rates; and whether  there is guidance that may be considered in selecting a disbursement  rate. We also analyzed a non-generalizable selection of data from  Treasury for disbursements made during the months of June and July  2017 to determine what foreign currency rates were used and what  savings may have been possible using alternate rates. We chose these  two months because they were the most recent data available on  disbursements at the time Treasury provided the data for our review.", "For our third objective, we analyzed DOD data for fiscal years 2009  through 2016 on foreign currency gains and losses reported by each of  the services that resulted from differences between the foreign currency  budget rate applied when incurring obligations and the rates applied when  those obligations were liquidated; transfers of amounts between the  FCFD account and the services\u2019 O&M and MILPERS appropriations  accounts; and the end-of-year FCFD account balances. We chose this  time period in order to capture years in which both gains and losses were  experienced, and for which DOD had complete data on gains and losses,  fund transfers, and end-of-year balances for the FCFD account. We  compared the end-of-year FCFD account balances and the use of the  FCFD account against guidelines on the importance of examining  unobligated carryover balances established in our prior work.  Additionally, we reviewed and analyzed DOD financial reports on foreign  currency gains or losses and compared the reports, including any  identified discrepancies, against standards for accurate reporting and  maintaining quality information, such as those identified in GAO\u2019s  Standards for Internal Control in the Federal Government and the Federal  Accounting Standards Advisory Board\u2019s Handbook of Federal Accounting  Standards and Other Pronouncements.", "To determine the reliability of the data used in addressing these  objectives, we analyzed DOD and Treasury foreign currency rates, data  on DOD foreign currency disbursements, and DOD financial reporting  data on foreign currency gains and losses to identify any missing or  inaccurate information; and we discussed with agency officials any  identified data abnormalities and how the data were extracted from  systems, when appropriate. We found the data to be sufficiently reliable  for the purposes of our reporting objectives, with the exception of the  financial reporting on financial gains and losses. Specifically, based on  problems with the completeness and accuracy of DOD\u2019s financial  reporting on foreign currency gains and losses, we found that these data  were not sufficiently reliable for the purpose of computing exact totals for  the gains and losses DOD experienced. However, because DOD uses  these data as the basis for decisions related to management of the FCFD  account, we included the data in our analysis to provide insight into the  general scope of gains and losses experienced. We also spoke with  Office of the Under Secretary of Defense (Comptroller) (OUSD(C)),  military service, and Treasury officials regarding the process and systems  used to input the data and generate the foreign currency reports we  reviewed. More details on our objectives, scope, and methodology can be  found in appendix I.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Establishing Foreign Currency Budget Rates", "paragraphs": ["As part of the annual budget formulation process for each fiscal year,  DOD establishes for each of nine foreign currencies, a foreign currency  budget rate (units of foreign currency per one United States (U.S.) Dollar)  to use when developing O&M and MILPERS funding requirements for  overseas expenditures. Foreign currency budget rates for a particular  fiscal year are established approximately 18 months prior to the fiscal  year when overseas obligations will be incurred and disbursements  made. For example, in June 2015, OUSD(C) issued guidance to, in part,  instruct the services on the foreign currency rates to use in building their  fiscal year 2017 budgets. In February 2016, as part of the President\u2019s  budget, DOD submitted its proposed fiscal year 2017 budget to  Congress, and it began incurring obligations against subsequently  appropriated amounts on October 1, 2016.", "DOD has used various methodologies for establishing the foreign  currency budget rates. In 2005, we reviewed DOD\u2019s methodology for  developing its foreign currency budget rates and reported that DOD\u2019s  approach for estimating its foreign currency requirements for the fiscal  year 2006 budget was a reasonable approach for forecasting foreign  currency rates that could produce a more realistic estimate than its  historical approach. In its fiscal year 2006 through 2016 budget  requests, DOD used a centered weighted average model that combined  both a 5-year average of exchange rates and an average of the most  recently observed 12 months of exchange rates.", "For its fiscal year 2017 request, DOD adjusted its methodology to  establish the foreign currency budget rates. Specifically, DOD established  its foreign currency rates by calculating a 6-month average of Wall Street  Journal rates published every Monday from May 25, 2015, to November  16, 2015. According to an OUSD(C) official, the 6-month average more  closely represented foreign currency exchange rates experienced by the  department during budget formulation, and it accounted for the strength of  the U.S. Dollar, which had increased as compared with its historical 5- year average. DOD\u2019s analysis found that the use of the 5-year historical  average would have resulted in substantial gains when compared with  gains expected from application of the 6-month average. More  specifically, DOD projected gains of about $1 billion using the 5-year  average of rates."], "subsections": []}, {"section_title": "Obligating and Disbursing Amounts Using Foreign Currency Rates", "paragraphs": ["During the fiscal year for which a budget is developed, DOD incurs  obligations for its overseas O&M and MILPERS activities. Those  obligations are recorded using the foreign currency budget rates. DOD  uses various methods for selecting foreign currency rates to liquidate  those obligations through disbursements, which may differ from the  budget rates. DOD\u2019s preferred payment method for foreign currency  transactions is the Department of Treasury\u2019s (Treasury) comprehensive  international payment and collection system\u2014the International Treasury  Services (ITS.gov) system\u2014which serves federal agencies making  payments in nearly 200 countries. ITS.gov offers a number of rates,  including advanced rates available up to 5 days in advance of  disbursement, and the spot rate. The spot rate is the price for foreign  currencies for delivery in 2 business days. While advanced rates, like spot  rates, are based on the current market rate, advanced rates at the time  they are selected are generally higher than the spot rate, with the 5-day  advanced rate being the highest, because the rates are locked in ahead  of the actual value date. While the spot rate can be more cost-effective,  it requires immediate transaction processing, which may not be feasible  for all disbursements.", "Differences between obligations incurred at the foreign currency budget  rates and the amounts that DOD actually disburses drive gains or losses  in the appropriated amounts DOD has available for its planned overseas  expenditures. For example, if DOD budgeted for the U.K. Pound at a rate  of .6289 (that is, 1 U.S. Dollar buys .6289 U.K. Pounds) as it did in fiscal  year 2016, and the rate experienced at the time of disbursement was  .6845, then DOD would have requested more funds than were actually  needed for transactions involving the U.K. Pound. That would have  resulted in a gain from the transaction\u2014meaning that DOD would need  less funds than were budgeted for the transaction. Conversely, a current  rate that is lower than what was budgeted will result in a loss\u2014and DOD  would require more funds than were budgeted for the transaction."], "subsections": []}, {"section_title": "Foreign Currency Accounts", "paragraphs": ["Within each of the services\u2019 O&M and MILPERS appropriations accounts,  amounts are available for overseas activities. Amounts obligated for  overseas activities, along with associated foreign currency gains and  losses, are managed by the services as part of the overall management  of their O&M and MILPERS appropriations accounts. Service  components use foreign currency fluctuation accounts within their O&M  and MILPERs appropriations to manage realized gains and losses in  direct programs due to fluctuations in foreign exchange rates. The  service-level foreign currency fluctuation accounts are maintained at  various budgetary levels within the service components.", "In fiscal year 1979, Congress appropriated $500 million to establish the  FCFD account for purposes of maintaining the budgeted level of  operations in the MILPERS and O&M appropriation accounts by  mitigating substantial gains or losses to those appropriations caused by  foreign currency rate fluctuations.", "FCFD appropriations are different from the O&M and MILPERS  appropriations in two ways. First, FCFD account amounts are no-year  amounts, meaning that they are available until expended, while in  general, O&M and MILPERS appropriations are 1-year amounts and  expire at the end of the fiscal year for which they were appropriated.  Expired O&M and MILPERS amounts remain available only for limited  purposes for 5 additional fiscal years. At the end of the 5-year expired  period, any remaining O&M or MILPERS amounts, obligated or  unobligated, are canceled and returned to Treasury. Second, FCFD  account amounts may be used only to pay obligations incurred because  of fluctuations in currency exchange rates of foreign countries, while O&M  amounts are available for diverse expenses necessary for the operation  and maintenance of the services and MILPERS amounts are available for  service personnel-related expenses, such as pay, permanent changes of  station travel, and expenses of temporary duty travel, among other  purposes.", "Amounts from the FCFD account may be transferred to service-level  foreign currency fluctuation accounts within O&M and MILPERS  appropriation accounts to offset losses in buying power due to  unfavorable differences between the budget rate and the foreign currency  exchange rate prevailing at the time of disbursement. The FCFD account  may be replenished in several ways. Amounts transferred from the FCFD  to O&M and MILPERS appropriations may be returned when not needed  to liquidate obligations because of subsequent favorable foreign currency  rates in relation to the budget rate, or because other amounts have  become available to cover obligations. A transfer back to the FCFD of  unneeded amounts must be made before the end of the second fiscal  year of expiration following the fiscal year of availability of the O&M or  MILPERS appropriation to which the funds were originally transferred.", "Amounts may also be transferred to the FCFD account even if they did  not originate there. Specifically, DOD may transfer to the FCFD account  any unobligated O&M and MILPERS amounts unrelated to foreign  currency exchange fluctuations so long as the transfers are made not  later than the end of the second fiscal year of expiration of the  appropriation. While multiple transfers of these unobligated amounts may  be made during a fiscal year, any such transfer is limited so that the  amount in the FCFD account does not exceed the statutory maximum of  $970 million at the time of transfer. When the FCFD account balance is  at the maximum balance, the services normally retain in their service- level O&M and MILPERs foreign currency fluctuation accounts any gains  resulting from favorable foreign currency rates. Finally, any amounts  transferred, whether from the FCFD account to an O&M or MILPERS  account, or from an O&M or MILPERS account to the FCFD, are merged  with the account and assume the characteristics of that account, including  the period of availability of the funds contained in the account.", "Visibility of service-level foreign currency fluctuation account and FCFD  transactions is maintained through the services\u2019 accounting systems and  execution reports. DOD uses the following reports to track its foreign  currency funds:", "Foreign Currency Fluctuations, Defense Report (O&M): provides data  on O&M foreign currency gains and losses for each service, by  currency, including data on projected gains or losses for any  remaining obligations that have not yet been liquidated and disbursed  at the time of the report.", "Foreign Currency Fluctuation, Defense Report (MILPERS): provides  data on MILPERS foreign currency gains and losses for each service,  by currency, including data on projected gains or losses for any  remaining obligations that have not yet been disbursed at the time of  the report."], "subsections": []}, {"section_title": "GAO\u2019s Prior Work on Management of Federal Funds", "paragraphs": ["In 2013 we analyzed and reported on carryover balances in federal  accounts, which amounted to $2.2 trillion in fiscal year 2012, and we  found that greater examination of carryover balances by an agency  provides opportunities for enhanced oversight of their management of  federal funds and may help identify opportunities for potential budgetary  savings. Carryover balances are composed of both obligated and  unobligated amounts. Only accounts with multi-year or no-year amounts,  such as the FCFD, may carry over amounts that remain legally available  for new obligations from one fiscal year to the next. DOD\u2019s carryover  balances would include FCFD account balances carried from one year to  the next. DOD\u2019s FCFD account is composed of unobligated carryover  amounts that accumulate when unneeded for transfer to O&M and  MILPERS accounts to cover foreign currency fluctuations. FCFD  unobligated carryover balances include any expired, unobligated  balances from the military services\u2019 O&M and MILPERS accounts, which  can include any gains due to favorable foreign currency fluctuations that  are not used to cover other losses and that are transferred into the FCFD."], "subsections": []}]}, {"section_title": "DOD Revised Its Foreign Currency Budget Rates in Fiscal Years 2014 through 2016, Decreasing Its Projected Funding Needs and Potential Foreign Currency Gains and Losses", "paragraphs": ["DOD revised its foreign currency budget rates in fiscal years 2014  through 2016, which resulted in budget rates in these years that were  more closely aligned with rates published by Treasury. Furthermore, the  revised budget rates in fiscal years 2014 through 2016 decreased DOD\u2019s  projected O&M and MILPERS funding needs. The revised budget rates  also decreased potential gains and losses in the amount of funds that  DOD had available for its planned overseas expenditures."], "subsections": [{"section_title": "DOD Revised Its Foreign Currency Budget Rates in Fiscal Years 2014 through 2016, Resulting in Rates More Closely Aligned with Treasury Rates", "paragraphs": ["DOD revised its foreign currency budget rates in fiscal year 2014 and  continued to do so in fiscal years 2015 and 2016 before making  adjustments to its methodology in fiscal year 2017. According to an  OUSD(C) official, the methodology developed in 2017 resulted in budget  rates that were more closely aligned with market rates than in previous  years, making revision of the 2017 budget rates unnecessary. DOD\u2019s  revisions to its foreign currency budget rates in fiscal years 2014 through  2016 resulted in rates that more closely aligned with those published by  Treasury. Further, they decreased the expected gains that would have  otherwise resulted from a substantial increase in the strength of the U.S.  Dollar, in fiscal years 2014 through 2016, relative to other foreign  currencies from the time the budget rates were set as compared with the  rates available once the fiscal year began. Prior to fiscal year 2014,  DOD did not revise its foreign currency budget rates. DOD officials did not  provide an explanation for why the budget rates for fiscal years 2009  through 2013 were not revised.", "DOD developed, in November 2015, a set of standard operating  procedures that describe the methodology it used for formulating budget  rates for the nine foreign currencies included in its budget submission.  These procedures also state that DOD is required to update the budget  rates once an appropriation is enacted for the fiscal year. For example, if  Congress reduces DOD\u2019s appropriations due to favorable foreign  currency rates, such as the $1.5 billion reduction in DOD\u2019s total fiscal year  2016 appropriations, OUSD(C) then revises the budget rates to absorb  the reduced funding levels.", "OUSD(C) officials stated that other factors are also considered when  determining whether to revise the foreign currency budget rates, and that  the department communicates the revised budget rates to the DOD  components and Congress. For example, OUSD(C) assesses the value  of each of the nine foreign currencies used to develop the budget request  relative to the strength of the U.S. Dollar during the fiscal year. An  OUSD(C) official also noted that the effects that the rate changes would  have across these foreign currencies are also considered prior to  submitting recommended rate revisions to the OUSD(C) leadership for  approval. The official stated that one currency may be experiencing a  loss, while another is experiencing a gain, which can affect whether to  revise the rates and what those revisions should be.", "Additionally, the OUSD(C) official stated that \u201csignificant\u201d projected gains  or losses could drive a revision to the foreign currency budget rates, and  that an informal $10 million threshold for projected gains and losses is  used to determine when the foreign currency budget rates are revised.  According to OUSD(C) officials, DOD components and Congress were  notified when the budget rates were revised during fiscal years 2014  through 2016, including an explanation for why the rates were revised.  OUSD(C) also includes the budget rates for each of the nine foreign  currencies on its website and identifies any instances in which the budget  rates were revised with the effective date of any rate revisions.", "Our analysis of DOD\u2019s use of revised budget rates during fiscal years  2014 through 2016 found that the revised budget rates for those years  were more closely aligned with rates published by Treasury. More  specifically, for the nine foreign currencies included in DOD\u2019s budget, our  analysis comparing DOD\u2019s initial and revised budget rates for fiscal years  2009 through 2017 with average Treasury rates for these years found that  DOD\u2019s budget rates differed from Treasury rates by less than 10 percent  in about 64 percent of the total 162 occurrences we examined. While we  are unaware of any criteria that suggest how closely DOD\u2019s foreign  currency budget rates should align with market rates, we used 10 percent  as a basis for our analysis because Treasury\u2019s guidance states that  amendments to its published exchange rates are required if rates differ  from current rates by 10 percent or more.", "We further examined these occurrences to determine what the  differences were between the DOD and Treasury rates before and after DOD began revising its budget rates in fiscal year 2014. Of the 162  occurrences we reviewed, there were 90 occurrences included in our  comparison for fiscal years 2009 through 2013, and 72 occurrences were  included in our comparison for fiscal years 2014 through 2017. Our  analysis shows the following:", "For fiscal years 2014 through 2017, DOD\u2019s budget rates for its nine  foreign currencies differed from Treasury rates by less than 10  percent in about 71 percent of the occurrences. This increased from  about 59 percent of the occurrences for the period of fiscal years 2009  through 2013, before DOD began revising its rates after the fiscal year  began.", "For fiscal years 2014 through 2017, DOD\u2019s budget rates differed from  Treasury\u2019s rates by 10 percent or more after DOD began revising its  rates in fiscal year 2014 in about 29 percent of the occurrences, which  is a decrease from about 41 percent of the occurrences prior to fiscal  year 2014.", "Figure 2 below shows the number of occurrences in which DOD\u2019s initial  and revised rates differed from Treasury rates by less than 10 percent,  and the occurrences in which DOD\u2019s rates differed from Treasury rates by  10 percent or more. The occurrences that are less than 10 percent of  Treasury rates are most closely aligned with Treasury rates.", "According to DOD officials, the differences between DOD\u2019s foreign  currency budget rates and Treasury rates are driven primarily by market  volatility (that is, the differences in the foreign currency rates from when  DOD formulates its budget rates, prior to the fiscal year, and the foreign  currency rates determined by Treasury when obligated amounts are  liquidated through disbursements during the fiscal year). According to the  OUSD(C) official responsible for formulating and revising the foreign  currency budget rates, the delay that occurs between the time when a  budget rate is set (approximately 18 months prior to the beginning of a  particular fiscal year) and the actual fiscal year is a major factor for why  the budget rate may be revised. According to the official, the market rates  experienced during fiscal years 2014 through 2016 were substantially  different from those expected when the budget rates for those years were  developed. Therefore, DOD revised its budget rates during these years to  more closely align with market rates experienced.", "Specifically, this official stated that DOD revised its budget rates during  fiscal years 2014 through 2016 to decrease the expected gains that would  have otherwise resulted during these fiscal years from a substantial  increase in the strength of the U.S. Dollar relative to other foreign  currencies from the time the budget rates were set as compared with  more favorable rates available once the fiscal year began. In order to  more closely align its budget rates with market rates, DOD introduced a  new methodology to establish the foreign currency budget rates for fiscal  year 2017 because DOD anticipated approximately $1 billion in projected  gains if it used the prior methodology. As a result of this change in the  methodology, according to the OUSD(C) official, DOD did not experience  substantial gains or losses in fiscal year 2017. Therefore, DOD did not  revise its foreign currency budget rates during fiscal year 2017. However,  as previously stated, the official did not provide an explanation as to why  the budget rates for fiscal years 2009 through 2013 were not revised."], "subsections": []}, {"section_title": "Revised Foreign Currency Budget Rates Decreased the Estimate of DOD\u2019s O&M and MILPERS Funding Needs and Potential Gains and Losses That Would Have Occurred Due to Foreign Currency Fluctuations", "paragraphs": ["DOD\u2019s use of revised foreign currency budget rates decreased DOD\u2019s  projected O&M and MILPERS funding needs and any potential gains and  losses that would have occurred due to foreign currency fluctuations  during fiscal years 2014 through 2016. Because DOD uses its budget  rates to establish its projected annual O&M and MILPERS funding  requirements for planned overseas expenditures, any revisions to the  budget rates affect DOD\u2019s estimate of its funding needs. For example, our  analysis shows that as a result of revising its budget rates during fiscal  years 2014 through 2016, DOD\u2019s projected funding needs for the period  of fiscal years 2009 through 2017 decreased from about $60.2 billion to  about $57.5 billion\u2014a decrease of about $2.7 billion.", "To further show the effect that changing foreign currency rates could have  on DOD\u2019s projected funding for planned overseas expenditures for fiscal  years 2009 through 2017, we also compared DOD\u2019s projected O&M and  MILPERS funding needs, based on its initial and revised foreign currency  budget rates, against projected funding needs based on the use of foreign  currency rates published by Treasury during the fiscal year. Our  analysis shows that DOD\u2019s projected O&M and MILPERS foreign  currency funding needs using Treasury rates would have been about  $58.4 billion, or about $885 million more than the $57.5 billion that DOD  had projected using its initial and revised budget rates.", "DOD also uses foreign currency budget rates to calculate gains or losses  attributable to foreign currency fluctuations. Specifically, DOD determines  gains and losses due to foreign currency fluctuations by comparing the  budget rate (that is, initial or revised budget rate) used to incur obligations  against a more current market rate at the time it liquidates its obligations  through disbursements. Therefore, revisions to the budget rates not only  change DOD\u2019s projected O&M and MILPERS funding requirements for  the fiscal year in which the revisions occur, but also change the baseline  from which the potential gains or losses would result when DOD  liquidates its overseas O&M and MILPERS obligations through  disbursements. For example, in fiscal year 2016, Congress reduced  DOD\u2019s total appropriations by $1.5 billion. As a result of this reduction and  favorable foreign currency rates, DOD revised its fiscal year 2016 budget  rates in February 2016 and applied the revised foreign currency budget  rates in its calculations of gains and losses due to foreign currency  fluctuations since the beginning of the fiscal year to absorb the reduced  funding level. In applying the revised budget rates, a $30 million gain  DOD had previously projected became a projected loss of about $186.2  million. The use of revised budget rates also affects the movement of  funds from the FCFD account. For example, if the use of the revised  budget rate creates a loss and DOD is unable to cover the increased  costs to its O&M or MILPERS appropriations, funds from the FCFD  account may be used to cover its planned overseas expenditures."], "subsections": []}]}, {"section_title": "DOD Has Taken Some Steps to Reduce Costs, but Has Not Fully Explored Additional Opportunities to Achieve Savings When Selecting Foreign Currency Rates", "paragraphs": ["DOD has taken some steps to reduce costs in selecting foreign currency  rates to liquidate its obligations through disbursements. However, DOD  organizations are not always selecting the most cost-effective rates to  convert U.S. Dollars, and DOD has not determined whether opportunities  exist to achieve additional efficiencies when making disbursements. DOD  liquidates its obligations through disbursements for overseas  expenditures using Treasury\u2019s ITS.gov system, which provides DOD  organizations with a choice of foreign currency rates to apply when  making disbursements in a foreign currency. The foreign currency rate  chosen determines how many U.S. Dollars must be paid for the  transaction. Treasury officials explained that customers may choose  either the spot rate or an advanced rate. The spot rate is the price for  foreign currencies for delivery in 2 business days. Treasury officials  explained that advanced rates are exchange rates that are \u201clocked in\u201d and  guaranteed by the bank processing the disbursement 5, 4, or 3 days in  advance of payment processing, which is known as the \u201cvalue date\u201d of a  disbursement. Normally, the cost of the rate increases the further from the  date of disbursement that it is locked in.", "While DOD often uses a 5-day advanced rate to make its disbursements,  the other rate options available, such as a 3-day advanced and a spot  rate, can be more cost-effective. We analyzed data provided by Treasury  from its ITS.gov system and found that for disbursements made during  the period of June and July 2017, the 5-day advanced rate was more  costly than the 3-day advanced rate. In instances where the spot rate was  available, we found that it was also more cost-effective than either the 3- day or 5-day advanced rates. For example, for those transactions  processed through ITS.gov on June 13, 2017, DOD would have paid 1  U.S. Dollar for .881 European Euros if using the 5-day advanced rate;  .883 European Euros if using the 3-day advanced rate; and .889  European Euros if using the spot rate.", "In the case of the Army, an Army Financial Management Command  official provided us information indicating that the service has estimated  potential cost savings that would result from more consistently selecting  3-day advanced rates through the ITS.gov system to make overseas  disbursements of amounts, rather than the 5-day advanced rate. More  specifically, the Army estimated between $8 million and $10 million in  annual savings by transitioning from a 5-day to a 3-day advanced rate  when selecting foreign currency rates. According to officials, the Army  has transitioned all paying locations to the 3-day advanced rate. The  Army estimates that these locations have produced $6.04 million in  savings through February 2018. Although the Army indicated that it also  planned to analyze whether use of the spot rate was feasible, it had not  conducted this review at the time of our review.", "Data provided to us by Treasury from its ITS.gov system indicate that in  June and July of 2017, the Air Force used the 5-day advanced rate  exclusively for its disbursements, while the Navy and Marine Corps relied  on both the 5-day and the 3-day advanced rates. Our analysis of these  data show the Air Force would have achieved total savings for those 2  months of about $258,000 if it had made its disbursements using the 3- day versus the 5-day advanced rate. The savings resulting from each  transaction varied based on the amount of the transaction. For example,  on June 13, 2017, the Air Force disbursed a payment exceeding $3.7  million and would have saved more than $9,000 for that transaction if the  3-day advanced rate had been used. For the same single transaction, if  the spot rate had been used instead of the 5-day advanced rate, the Air  Force would have saved more than $31,000. The savings associated with  the Navy\u2019s and Marine Corps\u2019 disbursements for the same 2-month  period showed the potential for less dramatic savings of less than $100  because the Navy and Marine Corps used the 3-day advanced rate as  opposed to the 5-day advanced rate for most of its disbursements. Where  information on the spot rate was available, its use, as opposed to either  the 5-day or 3-day advanced rate, would have resulted in additional  savings opportunities for those 2 months. While these examples are  illustrative of cost savings opportunities in June and July 2017, Treasury  data show that in fiscal year 2016, DOD disbursed more than $11.8 billion  through ITS.gov and, as of July 2017, had disbursed more than $9.6  billion through ITS.gov.", "Our analysis suggests that DOD could achieve further cost savings by  more consistently selecting cost-effective foreign currency rates, such as  the 3-day advanced or spot rates, with which to make disbursements. In  selecting foreign currency rates, DOD\u2019s Financial Management  Regulation states that disbursements should be computed to avoid gains  or deficiencies (losses) due to fluctuations in rates of exchange to the  greatest extent possible. If there is no rate of exchange established by  agreement between the U.S. government and the foreign country, then  foreign currency transactions are to be conducted at the prevailing rate.", "The prevailing rate of exchange is the most favorable rate legally  available for acquisition of foreign currency for official disbursement and  other exchange transactions. Additionally, GAO\u2019s Standards for Internal  Control in the Federal Government calls for management to periodically  review policies, procedures, and related control activities for continued  relevance and effectiveness in achieving the entity\u2019s objectives or  addressing related risks.", "DOD disbursement organizations have flexibility in selecting foreign  currency rates to use when making disbursements using ITS.gov. There  is no DOD-wide requirement for the services to review the rates used to  make disbursements and, except for the Army, the services have not  conducted such a review. This step is necessary to determine whether  there are opportunities for savings by more consistently selecting cost- effective foreign currency rates. We discussed disbursement processes  with DOD and Air Force, Navy, and Marine Corps financial management  officials, including the factors considered when selecting foreign currency  rates. In addition, a Defense Finance and Accounting Service official  noted that currencies can have criteria specifying when a payment is  made and provided us the ITS.gov user\u2019s guide, which addresses \u201cspecial  currency requirements,\u201d such as those that would drive advanced  payment for a currency. For example, the user\u2019s guide indicates that  payment for transactions involving the Afghanistan Afghani must be made  2 days in advance of the value date, and cannot be made on a Friday.  However, information that is contained in the ITS.gov user\u2019s guide and  that we received from a Treasury official indicate that none of the nine  foreign currencies for which DOD budgets place restrictions on when  payment must be made; and therefore, this consideration should not drive  the use of a specific rate at disbursement.", "Marine Corps financial management officials told us that the foreign  currency rate selected at disbursement is at the discretion of the  disbursing officer based on operational requirements, with the  understanding that the most favorable rate for the government is the  preference, while balancing mission requirements and the time necessary  to process the transaction. These officials acknowledged that the 3-day advanced rate can be more cost-effective to the government but indicated  that there are occasions when the 5-day advanced rate should be used  because it provides more time to process the payments from deployed  locations operating in different time zones or with limited communication  capabilities.", "However, we found that OUSD (C) officials and financial management  officials with the headquarters of the Air Force, Navy, and Marine Corps  were not involved in disbursement, were unaware of what rates were  being used at disbursement, and had not reviewed the rationale for  selecting one rate over another. For example, Air Force and Navy  headquarters officials we spoke with were unable to provide insight as to  what drives the decision to use one rate over another. One Navy financial  management official told us that he was unaware of any Navy policy that  directs a specific rate to be used when disbursing funds, and suggested  that the absence of such a policy provides the flexibility for officials to  determine which approach is best. Headquarters, Marine Corps officials  also stated that they did not monitor foreign currency rates used for  disbursements or the reasons why one rate was selected over another.  Based on our inquiry, officials indicated that they would analyze the  foreign currency rates used for disbursements in 2017 and whether  opportunities existed to achieve savings by using other rates available  through ITS.gov. A Marine Corps official subsequently provided us with  information that showed that two of three disbursing offices that currently  utilize ITS.gov for disbursements use the 3-day advanced rate exclusively  and one uses the 5-day advanced rate. The official noted that a technical  issue within ITS.gov has restricted the disbursing office currently using  the 5-day advanced rate from choosing any other rate, but that the  service was further assessing options to correct the issue.", "In our conversations with an official in OUSD(C) about why the other  services had not reviewed the foreign currency rates used for  disbursements to determine what was being paid through ITS.gov and  whether there was an opportunity for savings, the official commented that  OUSD(C) had not directed the services to conduct any reviews in this  area. This official was unaware that different foreign currency rates were  used to make disbursements, and assumed that the military services all  make disbursements in the same way. However, as discussed above, the  services are using different rates resulting in inconsistency across the  department. The official further indicated that DOD could perform a  review to determine the cost differences of using one disbursement rate  over another. Absent a review of the rates the services are using in  making disbursements and whether cost savings could be achieved by  more consistently selecting the most cost-effective foreign currency rates  available for use at disbursement, DOD is at risk for paying more to  convert U.S. Dollars for overseas expenditures than would otherwise be  required."], "subsections": []}, {"section_title": "DOD Has Used the FCFD Account to Cover Losses Due to Foreign Currency Fluctuations, but Does Not Manage the Account Balance Based on Projected Losses or Quality Data", "paragraphs": ["In fiscal years 2009 through 2016, DOD used the FCFD account to cover  losses that the services experienced due to foreign currency fluctuations  in 6 of the 8 years we reviewed. However, DOD does not effectively  manage the FCFD account balance based on projected gains or losses.  Transfers of expired unobligated balances from MILPERS and O&M  accounts into the FCFD account have been made to replenish the  account balance to the statutory limit of $970 million, without  consideration of projected losses due to foreign currency fluctuations.  Furthermore, DOD\u2019s financial reporting on foreign currency fluctuations  for fiscal years 2009 through 2016 contains incomplete and inaccurate  information."], "subsections": [{"section_title": "DOD Has Used the FCFD Account to Cover Losses and Has Maintained the Account at the Maximum Level since Fiscal Year 2012", "paragraphs": ["In fiscal years 2009 through 2016, DOD transferred approximately $1.92  billion out of the FCFD account to cover losses that the services  experienced due to foreign currency fluctuations in 6 of the 8 years we  reviewed. For these years, DOD transferred funds from the FCFD  account to the services\u2019 MILPERS and O&M accounts during the fiscal  year in which the funds were obligated for overseas expenses. The  transfer amounts were based on both losses realized from actual  disbursements and projected losses for any remaining obligations to be  liquidated. The projected losses were calculated based on the current  foreign currency market rates as of the time of the calculation. Based on  the service-level data we reviewed, all of the services reported that they  experienced losses in at least 5 of the fiscal years we reviewed. For  example, the Army reported that it experienced losses in its MILPERS  account for 5 of 8 years, while the Marine Corps reported that it  experienced losses in its O&M and MILPERS accounts in each of the 8  years. In addition to the transfers to cover losses within the services\u2019  MILPERS and O&M accounts, in fiscal year 2013 DOD transferred an  additional $969 million to the Defense Working Capital Fund to offset fuel  cost losses.", "Since fiscal year 2012, DOD has maintained the FCFD end-of-year  account balance at $970 million\u2014the maximum allowed by statute. To  replenish the funds that were transferred out of the FCFD account, DOD  transferred unobligated balances to the FCFD account from the services\u2019  O&M and MILPERS accounts. While DOD can also replenish the FCFD  account or absorb foreign currency losses in certain currencies by  transferring to the FCFD account any gains experienced by the services,  our analysis found that DOD did not transfer any gains into the FCFD  account for fiscal years 2009 through 2016. Figure 3 shows the transfers  into and out of the FCFD account and the end-of-year FCFD account  balance for fiscal years 2009 through 2016.", "Our analysis also shows that DOD transferred funds to maintain the  FCFD account at its maximum balance since 2012, despite experiencing  fewer losses due to foreign currency fluctuations than it had experienced  in fiscal years 2009 to 2011. Of the $1.92 billion transferred from the  FCFD account to the services\u2019 MILPERS and O&M accounts to cover  losses, $464.5 million was transferred since fiscal year 2012, when DOD  began maintaining its FCFD account at the maximum level. During that  time, some of the services experienced foreign currency gains, while  others experienced losses. For example, at the end of fiscal year 2013  the Navy reported a total realized and projected cumulative gain for its  O&M and MILPERS accounts of about $98.6 million. In that same year,  the Marine Corps reported a cumulative realized and projected loss for its  O&M and MILPERS accounts of approximately $12.7 million. Had DOD  not transferred unobligated funds back into the FCFD account, it would  have retained a positive balance of approximately $505.5 million.  However, DOD maintained the account balance at $970 million by  transferring approximately $495.3 million in unobligated balances into the  account."], "subsections": []}, {"section_title": "DOD Analyzes Projected Losses to Inform Transfers out of the FCFD Account, but Does Not Consider Similar Information When Making Transfers into the FCFD Account", "paragraphs": ["As part of its management of the FCFD account balance, DOD analyzes  data on realized and projected losses as the basis for transferring funds  from the FCFD account to the services\u2019 MILPERS and O&M accounts to  cover losses. However, DOD does not consider projected losses when  making transfers of unobligated O&M and MILPERS balances into the  FCFD account. Figure 4 below shows the FCFD account balance that  DOD has maintained in relation to the transfers out of the account to  cover losses.", "Specifically, according to the OUSD(C) official responsible for managing  the FCFD account, DOD maintains the FCFD account balance at $970  million to maximize unobligated balances within the military services\u2019  O&M and MILPERS accounts before they are canceled and are no longer  available to DOD. In addition, this official stated that DOD prefers to  maintain the maximum balance in case it is needed due to sudden,  unfavorable swings in foreign currency exchange rates.", "Our review of the documentation used to make transfers into and out of  the FCFD account corroborates that DOD maintains the FCFD account  balance to maximize the retention of unobligated balances. Specifically,  we found instances in which the documentation states that the transfers  of unobligated balances into the FCFD account were made for the  purpose of replenishing the account balance to the statutory limit. For  example, DOD transferred $89 million from the FCFD account to the  Army for losses it had realized and projected in fiscal year 2014, and later  transferred unobligated balances of the same amount back into the  account. DOD\u2019s documentation states that this transfer of unobligated  balances was made for the purpose of replenishing the account to $970  million in order to finance estimated foreign currency losses resulting from  the decline in value of the U.S. Dollar. However, the transfer to the Army  already covered the realized losses and projected losses for any  remaining disbursements. In other words, estimated foreign currency  losses had already been accounted for at the time of the transfer to the  Army.", "In addition, based on data reported by the Air Force, Marine Corps, and  Navy, DOD had an estimated cumulative gain of about $30 million for  fiscal year 2014 based on the other services\u2019 gains and losses, which  could have been transferred to the FCFD account to absorb any  additional foreign currency losses elsewhere. However, DOD did not  transfer those gains to the FCFD account. Similarly, based on data  reported by these services, DOD experienced cumulative realized and  projected gains of more than $200 million in fiscal year 2013 and about  $92.6 million in fiscal year 2015, but it did not transfer any gains to the  FCFD account because the account balance had already reached its  maximum using transferred unobligated balances.", "Despite replenishing the account balance to the maximum amount for the  purpose of covering additional losses, the FCFD transfers have not been  made to fully offset losses in some years, further raising questions about  the need to maintain the balance at the statutory cap of $970 million  annually. Specifically, in 3 of the 6 years in which DOD transferred funds  from the FCFD account to the services\u2019 MILPERS and O&M accounts,  DOD did not use the FCFD account to fully cover the losses that the Air  Force, Marine Corps, and Navy experienced. In fiscal year 2011, for  example, DOD\u2019s transfers out of the FCFD account to these services  covered about 88 percent of the reported MILPERS and O&M losses that  these services had realized and projected to lose by the end of the fiscal  year. In fiscal year 2012, FCFD transfers covered almost 72 percent of  the MILPERS and O&M realized and projected losses reported by the Air  Force, Marine Corps, and Navy, as of the end of the fiscal year. In fiscal  year 2016, DOD FCFD transfers to these services covered approximately  55 percent of their reported MILPERS and O&M realized and projected  losses by the end of the fiscal year.", "The OUSD(C) official we spoke with stated that FCFD transfers to cover  losses begin with a request from the services, and the OUSD(C) office  and the services then coordinate on the final transfer amount. In addition,  some service officials told us that they try to cover their losses using each  service\u2019s available funding before reaching out for assistance from the  FCFD account. Therefore, based on a service\u2019s ability to cover the loss, it  may not always request an FCFD transfer to cover the full amount of  realized and projected losses. Further, according to an OUSD(C) official,  the timing of a service\u2019s request for an FCFD transfer may also affect any  differences between the amount transferred and the actual losses  experienced. Specifically, if a service requests a transfer early in the fiscal  year based on realized and projected losses, actual losses experienced  as of the end of the fiscal year may be greater than or less than the  transfer amount due to foreign currency fluctuations.", "Using transfers of unobligated balances, DOD has maintained its FCFD  account balance at the maximum level allowed by statute because it has  not analyzed realized and projected losses to determine what size  account balance is necessary to meet the intended purpose of the  account. In our prior work, we have developed key questions for  evaluating federal account balances that agencies may use to identify the  amount of the balance necessary to maintain agency or program  operations. Through examination of carryover balances, oversight of  agencies\u2019 management of federal funds may be enhanced. Specifically,  we reported that understanding an agency\u2019s processes for estimating and  managing carryover balances provides information to assess how  effectively agencies anticipate program needs, and ensure the most  efficient use of resources. To estimate and manage carryover balances,  agencies may consider such factors as future needs of the account,  economic indicators, and historical data. If an agency does not have a  robust strategy in place to manage carryover balances or is unable to  adequately explain or support the reported carryover balance, then a  more in-depth review is warranted. In those cases, balances may either  fall too low to efficiently manage operations or rise to unnecessarily high  levels, producing potential opportunities for those funds to be used more  efficiently elsewhere.", "When asked about maintaining the balance at a level necessary to cover  losses, rather than at the maximum level allowed by statute, the  OUSD(C) official indicated that the OUSD(C) takes a cautious approach  and prefers to have the additional flexibility allowed by the higher balance.  Further, the official stated that it would be difficult for DOD to attempt to  base its unobligated balance transfers and the FCFD account balance on  analysis and evaluation, given the unpredictable nature and constant  volatility of foreign currency rates. Our guidelines on evaluating carryover  balances acknowledge that external events beyond an agency\u2019s control  can dramatically affect carryover balances. However, the challenges that  are inherent in predicting foreign currency rates do not preclude DOD  from conducting analysis to glean insight as to the appropriate size for the  balance of the account and what potential opportunities for savings might  exist. Specifically, our guidelines suggest that agencies would benefit  from considering the sources and fiscal characteristics of an account with  carryover balances. In this case, the FCFD account can receive funds  from transfers of unobligated balances and realized foreign currency  gains. In addition, DOD can make multiple transfers throughout a fiscal  year and can transfer funds from the FCFD to and from the services\u2019  O&M and MILPERS accounts simultaneously, if necessary.", "These characteristics of the FCFD account already provide the  department with flexibility, indicating that DOD may be positioned to  manage the FCFD balance in a more analytical manner based on any  projected losses. Without analyzing any realized or projected losses to  determine what balance may be needed to meet the FCFD account\u2019s  intended purpose, the account balance may be kept at a higher level than  is necessary. As a result, although an exact amount is unknown, DOD  may be maintaining balances in the FCFD account that are hundreds of  millions of dollars higher than needed to cover any losses it has  experienced, and these funds may have been more efficiently used in  supporting other defense activities or returned to Treasury after the  account is canceled by law."], "subsections": []}, {"section_title": "DOD Lacks Quality Data to Support Management of the FCFD Account", "paragraphs": ["DOD prepares financial reports to monitor the status of its foreign  currency funds, but some of DOD\u2019s financial reporting on foreign currency  fluctuations for fiscal years 2009 through 2016 is incomplete and  inaccurate. DOD\u2019s Financial Management Regulation establishes  reporting requirements specifically for tracking all transactions that  increase or decrease the FCFD. In accordance with that guidance, the  services provide data from their accounting systems to the Defense  Finance and Accounting Service to generate reports that are used as a  tool with which the services and OUSD(C) can monitor how they are  expending funds appropriated for overseas expenditures. For O&M  appropriations, the Foreign Currency Fluctuations, Defense (O&M) report  provides data on foreign currency gains and losses for each service, by  currency, including data on projected gains or losses for any remaining  obligations that have not yet been disbursed at the time of the report. The  Foreign Currency Fluctuations, Defense Report (MILPERS) provides  similar information for the MILPERS appropriation.", "We reviewed end-of-year Foreign Currency Fluctuations, Defense (O&M)  and (MILPERS) reports for fiscal years 2009 through 2016 and found that  some of the reporting for O&M was incomplete and inaccurate, which  hampers the quality of information available to manage the FCFD  account. For instance, we found the following:  Incomplete data in the Foreign Currency Fluctuations Defense  (O&M) reports: In our review of the end-of-year Foreign Currency  Fluctuations Defense (O&M) and (MILPERS) reports we observed  several instances of incomplete data in the O&M reports, and these  affect managers\u2019 ability to make sound decisions to manage foreign  currency gains and losses. First, for the Navy, we found that the  report data showed, for multiple currencies across fiscal years 2011  through 2016, values in the realized variance column, indicating that  the service had experienced a gain or loss in a particular currency;  however, the reports showed values of zero in other columns that are  necessary for calculating the gain or loss. Second, the Air Force data  for the Turkey Lira, in fiscal year 2012, showed a gain or loss without  any data indicating what would have driven the gain or loss. Third, in  one instance, Marine Corps data on obligations for fiscal year 2011  were missing from the end-of-year reports until 2014. Missing  obligation data for these end-of-year reports indicate a limitation in  using these reports for tracking actual gains and losses.", "Inaccurate data in the Army\u2019s Foreign Currency Fluctuations  Defense (O&M) reports: The Army\u2019s Foreign Currency Fluctuation  Defense (O&M) reports are inaccurate and cannot be used to reliably  track gains or losses, and this hinders managers from making sound  decisions regarding the Army\u2019s foreign currency gains and losses.  The reports are inaccurate in that the Army\u2019s accounting system  charges disbursements to the current fiscal year appropriation rather  than to the fiscal year appropriation that incurred the obligation, as  required by the Financial Management Regulation. According to  officials from the Army Budget Office, the Army designed its General  Fund Enterprise Business System (GFEBS) to record disbursements  to the current fiscal year based on differing interpretations of a  previous version of the Regulation. Because the Army is not recording  its disbursements to the fiscal year appropriation as the other services  are, Army data are inaccurate and cannot be used by the OUSD(C)  official responsible for overseeing DOD\u2019s foreign currency program to  track the Army\u2019s foreign currency transactions and maintain full  visibility of DOD\u2019s overall gains and losses in a given fiscal year. Army  Budget Office officials acknowledged that the Army will need to modify  its system to record disbursements consistent with Financial  Management Regulation guidance, but it has not developed a plan or  timeline for doing so. Without accurate reporting of the Army\u2019s foreign  currency transactions, DOD lacks information for tracking and helping  to manage the Army\u2019s foreign currency gain and losses.", "DOD\u2019s Financial Management Regulation specifies the data that must be  included in the Foreign Currency Fluctuations Defense (O&M) and  (MILPERS) reports and the roles and responsibilities of the services as  well as the Defense Finance and Accounting Service for ensuring the  quality of those data. However, we identified data issues in our analysis  that indicate that quality is inconsistent. For example, officials from the  Navy stated that they had observed the incomplete data for some  currencies and speculated that the incompleteness was attributable to  data entry errors. Similarly, according to an OUSD(C) official, the Defense  Finance and Accounting Service is notified when discrepancies are found  in the reports and the Defense Finance and Accounting Service officials  coordinate with the services to correct the data. However, neither Navy  nor the Defense Finance and Accounting Service officials have corrected  the data. Although DOD\u2019s Financial Management Regulation specifies the  data that are to be included, as well as roles and responsibilities of the  services and the Defense Finance and Accounting Service, it does not  identify who is responsible for correcting erroneous or missing data.  According to an OUSD(C) official, correcting reporting issues is an area  that OUSD(C), the Defense Finance and Accounting Service, and the  services can improve on, and they would benefit from guidance in the  Financial Management Regulation that establishes the steps that should  be taken for making such corrections.", "Further, GAO\u2019s Standards for Internal Control in the Federal Government  and the Federal Accounting Standards Advisory Board\u2019s Handbook of  Federal Accounting Standards and Other Pronouncements, as Amended,  both establish the importance of using reliable and complete information  for making decisions. In addition, DOD\u2019s Financial Management  Regulation establishes responsibilities for both the DOD components and  the Defense Finance and Accounting Service to establish appropriate  internal controls to ensure that financial reporting data are complete,  accurate, and supportable, in order for managers to make sound  decisions and exercise proper stewardship over these resources.", "Effectively managing foreign currency gains and losses as well as any  projected gains or losses for any remaining obligations that have not yet  been liquidated through disbursement requires complete and accurate  data. OUSD(C) and service officials recognize the importance of reliable  data, as well as the need to take steps to improve the quality of the  foreign currency gains and losses data. Without OUSD(C) establishing  guidance to ensure that the Foreign Currency Fluctuation Defense (O&M)  report data that tracks foreign currency gains and losses are complete,  DOD and Congress do not have information to make sound decisions and  exercise proper stewardship over resources due to foreign currency  fluctuations. Furthermore, until the Army establishes a plan and timeline  for modifying its system to record foreign currency disbursements in an  accurate manner, the Army and DOD will lack quality information for  tracking and helping to manage the Army\u2019s and DOD\u2019s foreign currency  gain and losses."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Congress provides DOD with a significant amount of funding each year to  purchase goods and services overseas and to pay service-members  stationed abroad. DOD develops and can revise foreign currency budget  rates to determine its funding needs and calculate any gains or losses  that result from DOD\u2019s overseas expenditures. The Army has estimated  potential cost savings that would result from more consistently selecting a  more cost-effective foreign currency rate for making disbursements to  liquidate its overseas O&M obligations. However, DOD has not fully  determined whether additional cost-saving opportunities exist because  the services have not reviewed the rates used for foreign currency  disbursements. Absent a review of the foreign currency rates the services  are using at disbursement, including whether cost-saving opportunities  exist, by more consistently selecting cost-effective foreign currency rates,  DOD risks paying more than would be required otherwise. Further, while  DOD has used the FCFD account to cover losses that resulted from  foreign currency fluctuations, it has not managed the FCFD account  balance by basing the transfers of unobligated balances into the FCFD  account on an analysis of realized and projected losses. Without basing  its FCFD account balance on such analyses, DOD may be maintaining  balances in the FCFD account that are hundreds of millions of dollars  higher than needed to cover any losses it has experienced, and these  amounts may have been more efficiently used supporting other defense  activities or ultimately returned to Treasury, once expired. Moreover, DOD  has not established guidance and other procedures to ensure that  complete and accurate data are included in financial reporting on foreign  currency funds, and this limits the quality of information available to  effectively manage the FCFD account."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DOD. The  Secretary of Defense ensures that:  The Under Secretary of Defense (Comptroller), in coordination with the  U.S. Army, Air Force, Navy, and Marine Corps, should conduct a review  of the foreign currency rates used at disbursement to determine whether  cost-saving opportunities exist by more consistently selecting cost- effective rates at disbursement. (Recommendation 1)", "The Under Secretary of Defense (Comptroller) should analyze realized  and projected losses to determine the necessary size of the FCFD  account balance and use the results of this analysis as the basis for  transfers of unobligated balances to the account. (Recommendation 2)", "The Under Secretary of Defense (Comptroller) should revise the Financial  Management Regulation to include guidance on ensuring that data are  complete and accurate, including assignment of responsibility for  correcting erroneous data in its Foreign Currency Fluctuations Defense  (O&M) reports. (Recommendation 3)", "The Secretary of the Army should develop a plan with timelines for  implementing changes to its General Fund Enterprise Business System to  accurately record its disbursements, consistent with DOD Financial  Management Regulation guidance. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix II, DOD concurred with our  first, third, and fourth recommendations and outlined its plan to address  them. DOD partially concurred with our second recommendation that the  Under Secretary of Defense (Comptroller) analyze realized and projected  losses to determine the necessary size of the FCFD account balance and  use the results of the analysis as the basis for transfers of unobligated  balances to the account. DOD also provided technical comments, which  we incorporated in the report, where appropriate.", "In partially concurring with our second recommendation, DOD stated that  projecting foreign currency gains or losses can be difficult given that  foreign currency rates can be volatile due to various factors, such as  trade balances, money supply, and national income, as well as arbitrary  disturbances that affect foreign currency rates that cannot be predicted or  forecasted, such as the departure of the United Kingdom from the  European Union. DOD noted that because of the risk and volatility  associated with foreign currency rates, the Congress established the  FCFD account.", "We agree that forecasting foreign currency rates is challenging due to  market volatility and include examples in our report of the effect of foreign  currency rate fluctuations on DOD\u2019s planned foreign currency obligations.  Our report also describes the relationship between gains and losses and  foreign currency fluctuations, and the movement of funds from the FCFD  account to offset any losses. As our report also discusses, DOD  calculates actual and projected losses due to foreign currency fluctuations  and uses those projections as the basis, at least in part, for any transfers  out of the FCFD account to cover losses experienced in the military  services\u2019 O&M and MILPERS appropriations. However, our report also  notes that DOD does not consider its calculations of actual and future  projected losses when making transfers of unobligated O&M and  MILPERS balances to replenish the FCFD account. Instead, since fiscal  year 2012, DOD has kept the FCFD account balance at the maximum  level allowed by statute by using unobligated balances before they are  canceled and are no longer available to DOD, regardless of whether the  funds were needed in the account to offset any projected losses.", "DOD\u2019s comments also stated that projecting gains or losses for foreign  currency to determine the size of the FCFD account opens the door to  greater uncertainty and risk at a time when the department is working to  rebuild readiness and implement the National Defense Strategy. Our  report describes the characteristics of the FCFD account that provide  DOD with flexibility to manage market volatility, thereby helping to  address uncertainty and reduce risk. For example, DOD can make  multiple transfers of funds to the FCFD account throughout a fiscal year in  response to unforeseen foreign currency fluctuations. The FCFD account  can also receive funds from transfers of actual foreign currency gains  and/or unobligated balances. As we also noted, DOD made use of its  authority to transfer expired unobligated MILPERS and O&M amounts  into the FCFD account in the event that actual losses exceeded the  projected amounts and additional transfers were deemed necessary.", "We continue to believe that by analyzing actual and projected losses and  basing the transfer of any unobligated balances on these losses, DOD  would be better positioned to determine the size of the FCFD account  balance that is necessary to meet its intended purpose. Further, such  analyses would provide opportunities to more efficiently use unobligated  balances for other defense activities or return the balances to Treasury.", "We are sending copies of this report to the Secretary of Defense, the  Under Secretary of Defense (Comptroller), the Secretary of the Army, the  Secretary of the Navy, the Secretary of the Air Force, the Commandant of  the Marine Corps, and appropriate congressional committees. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To describe the Department of Defense\u2019s (DOD) revised foreign currency  budget rates since 2009 and the relationship between the revised budget  rates and DOD\u2019s projected Operation and Maintenance (O&M) and  Military Personnel (MILPERS) funding needs, we reviewed DOD\u2019s foreign  currency budget rates for the period of fiscal years 2009 through 2017,  and we identified any years during which DOD revised the initial budget  rates. We compared DOD\u2019s initial foreign currency budget rates and  revised foreign currency budget rates with rates published by the U.S.  Treasury Department (Treasury) for fiscal years 2009 through 2017. This  period corresponded with data available to us on DOD\u2019s initial and  revised rates and allowed for use of the most current data available, since  DOD had not yet decided whether or not to revise the fiscal year 2018  budget rates, while we were conducting our audit work. We chose rates  published by Treasury for this comparison because Treasury has the sole  authority to establish for all foreign currencies or credits the exchange  rates at which such currencies are to be reported by all agencies of the  government.", "Because Treasury rates are issued quarterly, we averaged Treasury\u2019s  first and second quarter rates for each currency and compared the  Treasury average with DOD\u2019s initial budget rates. Similarly, we computed  an average of the third and fourth quarter Treasury rates for each  currency and compared them with the DOD initial or revised budget rates,  where applicable. These comparisons are meant to show the difference  between DOD\u2019s budget rates and Treasury rates for the first 6 months of  the fiscal year, and the difference between DOD\u2019s revised exchange rates  and Treasury rates for the last 6 months of the fiscal year. Further, we  analyzed the extent to which DOD\u2019s budget rates were within 10 percent  of Treasury rates during these same years. We chose 10 percent as the  basis for our analysis because Treasury\u2019s guidance states that  amendments to the quarterly rates will be published during the quarter to  reflect significant changes in the quarterly data, such as rate changes of  10 percent or more.", "Additionally, to understand the effect that revising the budget rates had on  DOD\u2019s O&M and MILPERS funding estimates and on potential gains or  losses due to foreign currency fluctuations, we used a three-step  approach. First, we identified the amount of O&M and MILPERS funds DOD requested for each currency. We converted the U.S. Dollars  requested to the total amount of foreign currency needed by multiplying  the U.S. Dollars requested by DOD\u2019s initial budget rate. Second, we  determined the total amount of U.S. Dollars required using the revised  rates by dividing the total amount of foreign currency needed using  DOD\u2019s initial budget rate by DOD\u2019s revised budget rate. We used this  same approach to determine the total amount of U.S. Dollars required  using the average Treasury rates. Third, we computed the differences in  DOD\u2019s O&M and MILPERS foreign currency funding needs by subtracting  the U.S. Dollars required to meet its foreign currency needs based on the  average Treasury rates from the amounts required based on DOD\u2019s initial  budget rates and DOD\u2019s revised budget rates, respectively. We discussed  further with officials from the Office of the Under Secretary of Defense,  Comptroller (OUSD(C)) the factors considered in revising the rates and  whether those factors are communicated within and outside of the  department.", "To evaluate the extent to which DOD has taken steps to reduce costs in  selecting foreign currency rates at which to make disbursements and  determine whether opportunities exist to gain additional savings, we  reviewed accounting standards and any guidelines that exist regarding  disbursements and calculations of foreign currency gains and losses,  such as DOD\u2019s Financial Management Regulation 7000.14-R, which calls  for the use of prevailing foreign currency rates to make disbursements.  We also discussed with agency officials how those guidelines are being  carried out, and whether DOD or the services have developed guidance  that instructs the services in selecting rates used for disbursements in  foreign currencies. Additionally, we examined a non-generalizable  selection of data for DOD disbursements made during the months June  and July 2017 from Treasury\u2019s International Treasury Service (ITS.gov)  system to determine which rates DOD used during this period and what  savings might be achievable from using alternate rates. We chose data  from those 2 months because it was the most recent data available on  disbursements at the time Treasury provided the data for our review.  Additionally, we discussed with officials from OUSD(C) and the services  any analysis and ongoing efforts to transition to more cost-effective rates,  including savings that may result.", "To assess the extent to which DOD has effectively managed the Foreign  Currency Fluctuations, Defense (FCFD) account to cover losses, and  maintained quality information to manage these funds, we analyzed DOD  data for fiscal years 2009 through 2016 on foreign currency gains and  losses reported by each of the services as reported in their Foreign  Currency Fluctuation, Defense (O&M) and (MILPERS) reports;  movements of funds between the FCFD account and the services\u2019 O&M  and MILPERS accounts; and the end-of-year FCFD account balances.  We chose this time period in order to capture years in which both gains  and losses were experienced, and for which DOD had complete data on  gains and losses, fund transfers, and end-of-year balances for the FCFD  account. Because the Army charges disbursements to the current fiscal  year appropriation instead of the fiscal year appropriation that incurred  the obligation, we requested that the Army adjust its reported data on  foreign currency gains and losses and provide information consistent with  how the other services report them, and with DOD\u2019s Financial  Management Regulation. However, the Army was unable to provide us  with data that were consistent with what was provided by the other  services at the time of our review. We, therefore, were unable to use  Army data for purposes of comparison with data provided by the other  services. We compared the end-of-year FCFD account balances and the  use of the account with guidelines established in our prior work on the  importance of examining unobligated balances. Additionally, we  reviewed and analyzed DOD financial reports on foreign currency gains  or losses and compared the reports, including any identified  discrepancies, against best practices and standards on accurate reporting  and maintaining quality information, such as those in GAO\u2019s Standards  for Internal Control in the Federal Government, and the Federal  Accounting Standards Advisory Board\u2019s Handbook of Federal Accounting  Standards and Other Pronouncements, as Amended.", "To determine the reliability of the data used in addressing these  objectives, we analyzed DOD and Treasury foreign currency rates, data  on DOD foreign currency disbursements, and DOD financial reporting  data on foreign currency gains and losses to identify any missing or  inaccurate information, and we discussed with agency officials any  identified abnormalities and how the information was extracted from  systems, when appropriate. We found the data to be sufficiently reliable  for the purposes of our reporting objectives, with the exception of the  financial reporting on financial gains and losses. Specifically, based on  problems with the completeness and accuracy of DOD\u2019s financial  reporting on foreign currency gains and losses, we found that these data  were not sufficiently reliable for the purpose of computing exact totals for  the gains and losses DOD experienced. However, because DOD uses  these data as the basis for decisions related to management of the FCFD  account, we included the data in our analysis to provide insight into the  scope of gains and losses experienced. We also spoke with OUSD(C),  military service, and Treasury officials regarding the process and systems  used to input the reviewed data and generate the foreign currency reports  we reviewed.", "We conducted this performance audit from February 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Matt Ullengren, Assistant  Director; and Tulsi Bhojwani, Justin Bolivar, Carol Bray, Amie Lesser,  Kelly Liptan, Felicia Lopez, Leah Nash, Randy Neice, Jacqueline McColl,  Mike Silver, Roger Stoltz, Susan Tindall, John Trubey, Elaine Vaurio, and  Cheryl Weissman made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-42", "url": "https://www.gao.gov/products/GAO-19-42", "title": "Arctic Planning: Navy Report to Congress Aligns with Current Assessments of Arctic Threat Levels and Capabilities Required to Execute DOD's Strategy", "published_date": "2018-11-08T00:00:00", "released_date": "2018-11-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Navy is responsible for providing ready forces for current operations and contingency response in the Arctic Ocean. According to data from the National Snow and Ice Data Center, the coverage of sea ice in the Arctic has diminished significantly since 1981. This could potentially increase maritime activities there, leading to a need for a greater U.S. military and homeland security presence in the region.", "Public Law 115-91 required the Navy to report to Congress on the Navy's capabilities in the Arctic, including any capability gaps and requirements for ice-hardened vessels. It also included a provision for GAO to review the Navy's report. This report (1) assesses the extent to which the Navy's report aligns with current assessments of Arctic threat levels and capabilities required to execute DOD's 2016 Arctic Strategy and (2) describes any current requirements for ice-hardened vessels and DOD's approach for evaluating the capabilities needed as Arctic requirements evolve.", "GAO reviewed the Navy's report along with DOD's assessments of Arctic threats and naval capabilities. GAO also reviewed the 2016 DOD Arctic Strategy\u2014 the most current strategy, DOD and Department of State information on the freedom of navigation program as well as DOD's processes for developing capabilities and assessing Arctic capability gaps.", "GAO is not making any recommendations in this report. DOD provided written technical comments which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The Navy's June 2018 report aligns with Department of Defense (DOD) assessments that the Arctic is at low risk for conflict and that DOD has the capabilities to execute the 2016 DOD Arctic Strategy . The June 2018 report also aligns with assessments of Arctic capabilities and gaps in the Navy's 2014 roadmap for implementing the strategy. The June 2018 report states that the Navy can execute the strategy with subsurface, aviation, and surface assets. The report notes the significant limitations for operating surface ships in the Arctic, but states that the Navy has the capabilities required for executing the strategy , and so has no plan to design ice-hardened surface ships. In addition, DOD officials stated that the United States has options other than Navy surface ships for demonstrating the U.S. right to operate in the Arctic, including using Coast Guard vessels, Navy submarines, or military aircraft.", "Navy officials said that the Navy does not have a specific requirement for ice-hardening existing vessels or constructing new ones. The Navy plans to continue to use DOD's established process, the Joint Capabilities Integration and Development System to reassess Arctic-related requirements as conditions evolve (see fig.). In October 2017, the Joint Requirements Oversight Council validated U.S. Northern Command's initial capabilities document identifying three gaps in the ability to exercise/deploy, position, and conduct deterrence/decisive operations in ice-diminished Arctic waters. At the time of GAO's review, the Joint Staff had validated the capability gaps, which will now compete for resources with other issues designated for further study. Officials said additional study may identify alternative solutions such as adding capabilities to Coast Guard ships or partnering with allies to achieve common strategic goals in the Arctic."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to data from the National Snow and Ice Data Center, the  coverage of sea ice in the Arctic has diminished significantly since 1981.  This change could potentially increase commercial and other maritime  activities there and, combined with competing sovereignty claims, lead to  a need for a greater U.S. military and homeland security presence in the  Arctic. The United States, along with Canada, Denmark, Norway, and  Russia, borders the Arctic Ocean. In 2018, the Department of Defense  (DOD) updated its National Defense Strategy emphasizing the need to  deter aggression from Russia or China, both of which have expressed  interest in the Arctic.", "DOD\u2019s last Arctic Strategy was published in 2016 and defines the desired  end-state for the Arctic: a secure and stable region where U.S. national  interests are safeguarded, the U.S. homeland is defended, and nations  work cooperatively to address challenges. Multiple DOD entities are  involved in supporting Arctic operations. DOD\u2019s 2016 Arctic Strategy  states that the Commander of the U.S. Northern Command is to advocate  for the DOD capabilities required to operate in the Arctic environment,  supporting DOD Arctic stakeholders in identifying capability requirements  and shortfalls. According to the Navy\u2019s Arctic Roadmap for 2014 to 2030,  the Navy has global leadership responsibilities to provide ready forces for  current operations and contingency response that include the Arctic  Ocean. The Naval Sea Systems Command\u2019s mission includes, among  other things, providing materiel support to the Navy, such as ships and  shipboard combat systems and components; coordinating shipbuilding  and repair; and performing research, development, and test and  evaluation for submarines and other undersea warfare. The Coast Guard  stated in its 2013 Arctic Strategy that, to advance the U.S. interests in the  Arctic region, the Coast Guard must work with stakeholders to promote  maritime safety, security, and environmental responsibility in the region.", "The National Defense Authorization Act for Fiscal Year 2018 included a  provision for the Navy to report on its Arctic capabilities. The act also  included a provision that we review the Navy\u2019s report, which we refer to  as the June 2018 report, within 90 days of the report\u2019s issuance. This  report (1) assesses the extent to which the Navy\u2019s June 2018 report  aligns with current Arctic threat level assessments and the capabilities  required to execute DOD\u2019s 2016 Arctic Strategy and (2) describes any  current requirements for ice-hardened vessels and DOD\u2019s approach for  evaluating the capabilities needed as Arctic requirements evolve.", "We focused our review on the naval capabilities needed to execute  DOD\u2019s 2016 Arctic Strategy, with a focus on surface capabilities. For  objective one, two analysts independently assessed the June 2018 report  against the capabilities needed to execute DOD\u2019s 2016 Arctic Strategy  and the five elements required by the National Defense Authorization Act  for Fiscal Year 2018. A third analyst reviewed these assessments and  reconciled any discrepancies. We conducted interviews with DOD and  Navy officials to identify current naval capabilities used to meet Arctic  requirements and attended threat briefings and conducted interviews at  the U.S. Northern Command and at the Office of Naval Intelligence to  identify the current threat status in the Arctic region. We assessed the  June 2018 report against the current naval capabilities and threat status  identified in those interviews and briefings. We reviewed The United  States Navy Arctic Roadmap for 2014 to 2030 that the Office of the Chief  of Naval Operations issued in 2014 to provide guidance to prepare the  Navy to respond effectively to future Arctic region contingencies,  delineate the Navy\u2019s leadership role, and articulate the Navy\u2019s support to  achieve national priorities in the Arctic. We reviewed information from  DOD and the Department of State about the freedom of navigation  program established in 1979 to maintain the global mobility of U.S. forces  and unimpeded commerce. We also interviewed officials about the need  for that program in the Arctic and about the program\u2019s benefits and risks.  We reviewed a Navy technical document on operating ships in polar  environments, and interviewed Naval Sea Systems Command and Coast  Guard officials on what is known about the cost and feasibility of \u201cice- hardening\u201d existing ships for Arctic operations.", "For objective two, to determine how DOD identifies its evolving  capabilities and the requirements of the Arctic, we reviewed the Chairman  of the Joint Chiefs of Staff Instruction 3170.01I, Joint Capabilities  Integration and Development System (JCIDS), which establishes the  process for identifying, assessing, validating, and prioritizing joint military  capability requirements. We also reviewed the U.S. Northern  Command\u2019s fiscal year 2017 assessment of capability gaps related to the  Arctic and discussed with U.S. Northern Command officials the capability  gaps identified using this process. We did not validate the underlying data  or assess the methodologies used in DOD\u2019s models and predictions. For  a list of organizations we contacted for this review, see appendix I.", "We conducted this performance audit from January 2018 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Scientific research on and projections of the changes taking place in the  Arctic vary, but there is a general consensus that the Arctic is warming  and that its sea ice is diminishing. For example, scientists at the  National Snow and Ice Data Center reported that for 2018 the minimum  amount of sea ice coverage in the Arctic\u2014typically occurring in  September each year\u2014was the sixth lowest in the satellite record and  656,000 square miles fewer than the mean for the 1981 through 2010  time frame. Further, the scientists found that the 12 lowest recordings of  September ice coverage on satellite record have all occurred in the past  12 years. Figure 1 shows the sea ice coverage (i.e., extent) in the Arctic  for September 2018 compared with the median ice edge for 1981 through  2010.", "While much of the Arctic Ocean remains ice-covered for the majority of  the year, most scientific estimates predict there will be a continued  decrease in sea ice coverage in the Arctic Ocean in the summer  sometime in the next 20 to 40 years. According to the Navy\u2019s Arctic  Roadmap for 2014 to 2030, while there may be less sea ice there in the  future, the ice that remains will continue to be a challenge to those  operating in the area.", "Most commercial ship activity in the Arctic is regional\u2014shipping into or  out of the Arctic, mainly in support of commercial activity\u2014not trans- Arctic. However, according to the official Navy estimate from 2013, the  decreasing coverage of sea ice will result in more open water allowing  increased maritime activity along three trans-Arctic routes from 2012  through 2030: the Northern Sea Route, the Northwest Passage, and the  Trans-Polar Route (see fig. 2). This development could, for example,  reduce by thousands of miles and by several days of travel the shipping  of goods between countries in Asia and North America.", "Increased economic activity in the Arctic could potentially increase the  need for military capabilities there to safeguard U.S. interests. For  example, estimates of significant oil, gas, and mineral deposits in the  Arctic have increased the interest in exploration opportunities in the  region. These resources include an estimated 13 percent of the world\u2019s  undiscovered oil; 30 percent of the world\u2019s undiscovered gas; and  approximately $1 trillion of minerals including gold, zinc, nickel, and  platinum. According to information provided by the Department of State,  the vast majority of these resources are within the undisputed continental  shelf of the respective coastal states. Officials from the Department of  State stated that disputed claims related to the small remaining portions  of the Arctic seabed may be addressed within the international framework  established by the United Nations Convention on the Law of the Sea.", "However, as we reported in 2015, even with the changing climate and  growing interest in the region, several enduring characteristics will  continue to provide challenges to surface navigation in the Arctic for the  foreseeable future. These include large amounts of winter ice and  increased movement of ice from spring to fall. Increased movement of  sea ice makes its location less predictable, a situation that increases the  risk that ships can become trapped or damaged by ice impacts. In  addition, the lack of infrastructure in the Arctic region affects the reliability  of shipping through the area. Economic factors such as risk costs, as well  as changes in the shipping market resulting from the Panama Canal  expansion may also affect the amount of shipping along these routes. As  figure 3 shows, even as the seasonal ice decreases over time, the Navy  has projected that the Arctic will remain impassable for most commercial  ships for most of the year from 2012 through 2030. These factors  combined are likely to affect the pace at which commercial activity will  increase.", "We have previously examined emerging issues and challenges for the  United States in the Arctic. See figure 4 for a timeline of our prior reports  related to Arctic issues. We also include a list of our prior work related to  the Arctic at the end of this report."], "subsections": []}, {"section_title": "The Navy\u2019s Report Aligns with Current Assessments of Arctic Threat Levels and Capabilities Required to Execute DOD\u2019s Arctic Strategy", "paragraphs": ["The Navy\u2019s June 2018 report aligns with DOD\u2019s assessments that the  Arctic threat level remains low and that DOD has the capabilities required  to execute its 2016 DOD Arctic Strategy. Specifically, the June 2018  report and the information it provides for each of the reporting elements  discusses how the department can execute the 2016 DOD Arctic  Strategy.", "The strategy contains two overarching objectives: to (1) ensure security,  support safety, and promote defense cooperation and (2) prepare to  respond to a wide range of challenges and contingencies to maintain  stability in the region. These objectives reflect DOD\u2019s assessment that  there is a low level of military threat in the Arctic, as well as the stated  commitment of the Arctic nations to work within a common framework of  diplomatic engagement. In the strategy, DOD identifies the types of  investments that will need to be made over time as activity in the region  increases; however, DOD also discusses the importance of assessing the  needs in the Arctic and of balancing potential Arctic-specific capabilities  investments against other national security priorities and fiscal realities.  The Arctic threat assessment briefings we received from officials at the  U.S. Northern Command and the Office of Naval Intelligence also  reflected the low risk for conflict in the Arctic referenced in the Navy\u2019s  June 2018 report. Below, we summarize the Navy\u2019s response to each  reporting element, and our evaluation of whether the response aligns with  current assessments of Arctic threat levels and capabilities required to  execute DOD\u2019s 2016 Arctic Strategy."], "subsections": [{"section_title": "Report Provides Information on Current Naval Capabilities in the Arctic That Align with DOD\u2019s Strategy", "paragraphs": ["Reporting Element One: The Navy was required to report on the current naval  capabilities of the Department of Defense in the Arctic region, with a particular  emphasis on surface capabilities.", "The June 2018 report provides information on this required element, with  the Navy stating that it relies on the submarine force as well as on  aviation assets and surface operations when necessary to operate in the  Arctic. These capabilities in the Arctic region are consistent with those  identified in The United States Navy Arctic Roadmap for 2014 to 2030 to  execute the 2016 DOD Arctic Strategy, and as corroborated in our  discussions with U.S. Northern Command and Navy officials.", "In addition, the Navy discusses the significant limitations of its surface  ships for Arctic operations in the June 2018 report. The limitations  identified are consistent with information contained in the U.S. Navy Cold  Weather Handbook for Surface Ships and with information we discussed  with Naval Sea Systems Command officials who oversee modifications to  the fleet and the acquisition of new ships. For example, Navy officials told  us that top-side icing has detrimental effects on ships. As sea spray  accumulates on a ship deck and freezes, a ship can lose some of the  capabilities of its external sensors and radars and a ship\u2019s stability in the  water decreases as the ship\u2019s center of gravity becomes top heavy. Navy  and Coast Guard officials told us that while the Coast Guard regularly  operates in the Arctic given its ice-breaking and maritime safety missions,  among others, Navy surface ships have not been designed to maneuver  and operate in icy waters. Although some of the Navy\u2019s T-class ships  have some capability to operate in light or broken first-year ice due to the  inherent strength of their hulls, traditional surface combatant ships (e.g.,  Cruisers, Destroyers, or Frigates) are not designed to operate in icy  waters."], "subsections": []}, {"section_title": "Report Provides Information on the Gaps between Current Naval Capabilities and the Ability to Execute DOD\u2019s Strategy", "paragraphs": ["Reporting Element Two: The Navy was required to report on any gaps that exist  between the current naval capabilities and the ability of the department to fully execute  its updated strategy for the Arctic region.", "The June 2018 report provides information on this required element, with  the Navy stating that the department can execute the 2016 DOD Arctic  Strategy with current naval capabilities. The June 2018 report is similarly  aligned with Navy assessments of Arctic capabilities and gaps contained  in its plan, The United States Navy Arctic Roadmap for 2014 to 2030 that  the Office of the Chief of Naval Operations issued in February 2014. This  plan provides guidance to prepare the Navy to respond effectively to  future Arctic Region contingencies, delineates the Navy\u2019s leadership role,  and articulates the Navy\u2019s support to achieve national priorities in the  region. At the time of our review, DOD was in the process of drafting  another report\u2014on DOD arctic capability and resource gaps\u2014as required  by section 1054 of the National Defense Authorization Act for Fiscal Year  2018. In addition, according to Navy officials, the Navy was also drafting  its Arctic Strategic Outlook, which is a follow-up to The United States  Navy Arctic Roadmap for 2014 to 2030. According to DOD and Navy  officials, both forthcoming reports will focus on contextualizing Arctic  needs within the framework of the 2018 National Defense Strategy.  Because these efforts were not complete at the time of our review, we  were unable to determine whether the Navy\u2019s June 2018 report aligns  with these assessments."], "subsections": []}, {"section_title": "Report Provides Information on Any Gaps in Naval Capabilities Requiring the Ice- Hardening of Existing Vessels or the Construction of New Vessels to Achieve DOD\u2019s Strategy", "paragraphs": ["Reporting Element Three: The Navy was required to report on any gaps in the current  naval capabilities that require ice-hardening of existing vessels or the construction of  new vessels to preserve freedom of navigation in the Arctic region whenever and  wherever necessary.", "The June 2018 report provides information on this required element, with  the Navy stating that there are currently no validated capability gaps that  require the Navy to ice-harden existing vessels or construct new ice- capable vessels to preserve freedom of navigation in the Arctic.  Furthermore, the Navy stated that its current assets are sufficient to  execute the 2016 DOD Arctic Strategy. As noted above, freedom of  navigation operations are undertaken to, among other things, promote  maritime stability and to challenge excessive sovereignty claims. In  addition, DOD officials stated that the United States already has options  other than Navy surface ships for demonstrating the United States\u2019  freedom to operate in the Arctic, including using Coast Guard vessels,  Navy submarines, or military aircraft."], "subsections": []}, {"section_title": "Report Provides Information on Navy\u2019s Analysis and Recommendation for Ice- Hardening Vessels to Achieve DOD\u2019s Strategy", "paragraphs": ["Reporting Elements Four and Five: The Navy was required to provide an analysis and  recommendation of which Navy vessels could be ice-hardened to effectively preserve  freedom of navigation in the Arctic region when and where necessary, in all seasons  and weather conditions, and an analysis of any cost increases or schedule adjustments  that may result from ice-hardening existing or new Navy vessels.", "The June 2018 report provides some information on these required  elements, with the Navy stating that it is not pursuing ice-hardening or the  winterization of surface ships. According to the Navy, because there is no  specific capability requirement for the Navy to ice-harden ships, the report  does not list or name potential ice-hardening candidates among existing  vessels or provide cost or schedule estimates for ice-hardening vessels.  Officials with the Naval Sea Systems Command, which develops cost and  schedule estimates for ship modifications and new construction, told us  that they had not conducted life-cycle cost studies for ice-hardening  existing ships because there is no capability requirement for an ice- hardened ship and, therefore, no ship design on which to base such a  study or estimate.", "Furthermore, the June 2018 report states that the Navy is leveraging  cooperative research with international partner-nations such as Canada,  Denmark, Finland, and Norway, to better understand how other Arctic  nations are meeting additional requirements for Arctic operations. Navy  officials from the Naval Sea Systems Command stated that ships built to  operate in ice and extreme cold environments have unique features,  including stronger, thicker construction of all portions of the hull that  would come into contact with ice; different hull form design; redesigned  propellers constructed of higher than traditional strength material;  increased strength ship parts, such as rudders and seawater intakes and  discharges designed to resist the formation or accumulation of ice; and  more powerful heating and ventilation to accommodate sustained  operations in extreme cold environments, among other things. They also  noted that research completed to date has advanced the Navy\u2019s  knowledge in several of these areas including hull form and propeller  design.", "Navy officials estimated that a new ship design might require 20 years to  reach initial operational capability. They noted the process might take  only 10 years if the Navy can leverage an ongoing program, such as the  DDG-51 Class program. Navy officials cautioned that the combination of  features that enable ice-capable ships to sustain operating in extreme  cold environments could compromise other performance areas such as  speed, range, and ship motion. Officials told us that this would add to the  Navy\u2019s already strained efforts to maintain existing global naval presence  requirements.", "Although the June 2018 report did not discuss any cost and schedule  adjustments that might arise from ice-hardening or new ship construction,  we have previously reported that the Navy has faced challenges meeting  its shipbuilding cost, schedule, and performance goals over the past  decade. Specifically, we found that the 11 lead ships most recently  delivered to the Navy cost $8 billion more to construct than initially  budgeted for. Navy officials stated that the Navy contractor construction  yards currently lack expertise in the design for construction of winterized,  ice-capable surface combatant and amphibious warfare ships.  Accordingly ice-hardening and winterization design practices could  introduce cost and schedule risk, challenging the execution of an ice- hardened new construction ship building program for an ice-capable ship.  If the Navy executes this potential program without the requisite  knowledge at key points it could be at risk of cost and schedule growth  that we have seen in recent Navy shipbuilding programs. The Navy has  faced these challenges in part because the department has proceeded  with construction prior to completing technology development and ship  design. We have found that successful ship building programs are based  on sound business cases, starting with the lead ship, and on the  attainment of critical levels of knowledge at key points in the process prior  to making significant investments."], "subsections": []}]}, {"section_title": "The Navy Does Not Have a Capability Requirement to Ice- Harden Existing Vessels or Construct New Ones and Is Evaluating Arctic- Related Capabilities Using the Established DOD Process", "paragraphs": ["Navy officials said that the Navy does not currently have a specific  capability requirement for ice-hardening existing vessels or for the  construction of new ones, and stated that the Navy or Joint Force is  unlikely to produce such a requirement in the near term. Navy officials  told us that the Navy will continue to use DOD\u2019s established process, the  Joint Capabilities Integration and Development System (JCIDS), which  governs the department\u2019s requirements process, to assess Arctic-related  capability requirements in the near and long term (see fig. 5). All DOD  components use the JCIDS process or variations of the process within  their organizations to identify, assess, validate, and prioritize joint military  requirements.", "Before starting the JCIDS process, the military services, combatant  commanders, and other DOD components conduct capabilities-based  assessments or other studies to assess capability requirements and  associated capability gaps and the associated risks. In October 2017, the  Joint Requirements Oversight Council (JROC) validated U.S. Northern  Command\u2019s initial capabilities document identifying three gaps in the  ability to exercise/deploy, position, and conduct deterrence/decisive  operations in ice-diminished Arctic waters. At the time of our review, the  JROC had reviewed and validated the U.S. Northern Command\u2019s Arctic  initial capabilities document and designated it for further study by the  Navy. The validation of an initial capabilities document by the JROC is  an early part of the JCIDS process, and informs updates to capability  requirement documents related to specific materiel and nonmateriel  capability solutions to be pursued.", "A Navy official stated that the capability gaps identified in the U.S.  Northern Command\u2019s validated initial capabilities document will now  compete for resources with other issues designated for study across the  Navy. According to a Navy official, whenever the Navy initiates a study,  this triggers the analysis of alternatives phase of the JCIDS process.  Under this process, each alternative would need to be specifically  evaluated for its costs and benefits. DOD officials noted that there are  several analytical steps in the JCIDS process during which potential  solutions for any identified gaps are analyzed. They told us that potential  solutions might also include alternatives other than ice-hardening or new  ship construction, such as adding capabilities to Coast Guard ships or  partnering with allies to achieve common strategic goals in the Arctic.", "Even as the seasonal ice decreases over time, according to Navy  officials, the Arctic will remain impassable for most commercial ships for  most of the year. For these reasons, projections of increased Arctic sea  activity remain uncertain. DOD, U.S. Northern Command, Navy, and  Coast Guard officials told us that even as Arctic maritime activity is  expected to increase, several enduring characteristics will continue to  provide challenges to surface navigation in the Arctic for the foreseeable  future. These challenges include large amounts of winter ice and  increased movement of ice from spring to fall. As mentioned earlier, the  increased movement of sea ice makes its location less predictable, a  situation that is likely to increase the risk that ships can become trapped  or damaged by ice impacts. Coast Guard officials noted that a  challenging environment like the Arctic may result in a higher likelihood of  incidents occurring. Further, responding to incidents with search and  rescue operations are riskier to execute than in non-polar environments.  In addition, the lack of infrastructure and logistical support in the Arctic  affects maritime activities through that region."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We are not making any recommendations in this report. We provided a  draft of our report to DOD, Department of Homeland Security, and the  Department of State for comment. DOD, Department of Homeland  Security, and Department of State provided technical comments, which  we incorporated into this report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees. We are also sending copies to the Secretary of Defense,  Secretary of State, and the Secretary of Homeland Security. In addition,  this report will be available at no charge on our website at  http://www.gao.gov.", "If you or your staff have questions about this report, please contact me at  (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Organizations We Interviewed", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Suzanne Wren (Assistant  Director), Delia Zee (Analyst-in-Charge), John Beauchamp, Mae Jones,  Amie Lesser, Ned Malone, and Shahrzad Nikoo made key contributions  to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Coast Guard Acquisitions: Polar Icebreaker Program Needs to Address  Risks before Committing Resources. GAO-18-600. Washington, D.C.:  September 4, 2018.", "Navy Shipbuilding: Past Performance Provides Valuable Lessons for  Future Investments. GAO-18-238SP. Washington, D.C.: June 6, 2018.", "Coast Guard Acquisitions: Status of Coast Guard\u2019s Heavy Polar  Icebreaker Acquisition. GAO-18-385R. Washington, D.C.: April 13, 2018.", "Coast Guard: Status of Polar Icebreaking Fleet Capability and  Recapitalization Plan. GAO-17-698R. Washington, D.C.: September 25,  2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Arctic Planning: DOD Expects to Play a Supporting Role to Other Federal  Agencies and Has Efforts Under Way to Address Capability Needs and  Update Plans. GAO-15-566. Washington, D.C.: June 19, 2015.", "Climate Change Adaptation: DOD Can Improve Infrastructure Planning  and Processes to Better Account for Potential Impacts. GAO-14-446.  Washington, D.C.: May 30, 2014.", "Arctic Issues: Better Direction and Management of Voluntary  Recommendations Could Enhance U.S. Arctic Council Participation.  GAO-14-435. Washington, D.C.: May 16, 2014.", "Maritime Infrastructure: Key Issues Related to Commercial Activity in the  U.S. Arctic over the Next Decade. GAO-14-299. Washington, D.C.: March  19, 2014.", "Managing for Results: Implementation Approaches Used to Enhance  Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.:  February 14, 2014.", "Managing for Results: Key Considerations for Implementing Interagency  Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September  27, 2012.", "Arctic Capabilities: DOD Addressed Many Specified Reporting Elements  in Its 2011 Arctic Report but Should Take Steps to Meet Near- and Long- term Needs. GAO-12-180. Washington, D.C.: January 13, 2012.", "Coast Guard: Efforts to Identify Arctic Requirements Are Ongoing, but  More Communication about Agency Planning Efforts Would Be  Beneficial. GAO-10-870. Washington, D.C.: September 15, 2010.", "Alaska Native Villages: Limited Progress Has Been Made on Relocating  Villages Threatened by Flooding and Erosion. GAO-09-551. Washington,  D.C.: June 3, 2009."], "subsections": []}], "fastfact": []}
{"id": "GAO-17-784T", "url": "https://www.gao.gov/products/GAO-17-784T", "title": "Low-Income Housing Tax Credit: Actions Needed to Strengthen Oversight and Accountability", "published_date": "2017-08-01T00:00:00", "released_date": "2017-08-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The LIHTC program, established under the Tax Reform Act of 1986, is the largest source of federal assistance for developing affordable rental housing and will represent an estimated $8.5 billion in forgone revenue in 2017. LIHTC encourages private-equity investment in low-income rental housing through tax credits. The program is administered by IRS and allocating agencies, which are typically state or local housing finance agencies established to meet affordable housing needs of their jurisdictions. Responsibilities of allocating agencies (in Section 42 of the Internal Revenue Code and regulations of the Department of the Treasury) encompass awarding credits, assessing the reasonableness of project costs, and monitoring projects.", "In this testimony, GAO discusses (1) how allocating agencies implement federal requirements for awarding LIHTCs, assess reasonableness of property costs, and monitor properties' ongoing compliance; and (2) IRS oversight of the LIHTC program. This statement is based primarily on three reports GAO issued in July 2015 ( GAO-15-330 ), May 2016 ( GAO-16-360 ), and February 2017 ( GAO-17-285R ). GAO also updated the status of recommendations made in these reports by reviewing new or revised IRS policies, procedures, and reports and interviewing IRS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In its May 2016 report on the Low-Income Housing Tax Credit (LIHTC) program of the Internal Revenue Service (IRS), GAO found that state and local housing finance agencies (allocating agencies) implemented requirements for allocating credits, reviewing costs, and monitoring projects in varying ways. Moreover, some allocating agencies' day-to-day practices to administer LIHTCs also raised concerns. For example,", "qualified allocation plans (developed by 58 allocating agencies) that GAO analyzed did not always mention all selection criteria and preferences that Section 42 of the Internal Revenue Code requires; and", "allocating agencies could increase (boost) the eligible basis used to determine allocation amounts for certain buildings if needed for financial feasibility. However, they were not required to document the justification for the increases. The criteria used to award boosts varied, with some allocating agencies allowing boosts for specific types of projects and one allowing boosts for all projects in its state.", "In its 2015 and 2016 reports, GAO found IRS oversight of the LIHTC program was minimal. Additionally, IRS collected little data on or performed limited analysis of compliance in the program. Specifically, GAO found that", "Since 1986, IRS conducted seven audits of the 58 allocating agencies we reviewed. Reasons for the minimal oversight may include LIHTC being viewed as a peripheral program in IRS in terms of its mission and priorities for resources and staffing.", "IRS had not reviewed the criteria allocating agencies used to award discretionary basis \u201cboosts,\u201d which raised concerns about oversubsidizing projects (and reducing the number of projects funded).", "IRS guidance to allocating agencies on reporting noncompliance was conflicting. As a result, allocating agencies' reporting of property noncompliance was inconsistent.", "IRS had not participated in and leveraged the work of the physical inspection initiative of the Rental Policy Working Group\u2014established to better align the operations of federal rental assistance programs\u2014to augment its databases with physical inspection data on LIHTC properties that the Department of Housing and Urban Development (HUD) maintains.", "In its prior reports, GAO made a total of four recommendations to IRS. As of July 2017, IRS had implemented one recommendation to include relevant IRS staff in the working group. IRS has not implemented the remaining three recommendations, including improving the data quality of its LIHTC database, clarifying guidance to agencies on reporting noncompliance, and evaluating how the information HUD collects could be used for identifying noncompliance issues. In addition, because of the limited oversight of LIHTC, in its 2015 report GAO asked that Congress consider designating certain oversight responsibilities to HUD because the agency has experience working with allocating agencies and has processes in place to oversee the agencies. As of July 2017, Congress had not enacted legislation to give HUD an oversight role for LIHTC."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our work on the Low-Income  Housing Tax Credit (LIHTC) program administered by the Internal  Revenue Service (IRS) and allocating agencies, which typically are state  or local authorities established to meet the affordable housing needs of  the residents of their states. LIHTC, established under the Tax Reform  Act of 1986, is the largest source of federal assistance for developing  affordable rental housing. Each state receives an annual allocation of  LIHTCs, determined by statutory formula. Allocating agencies then  competitively award the tax credits to owners of qualified rental housing  projects that reserve all or a portion of their units for low-income tenants.  In 2017, LIHTC will represent an estimated $8.5 billion in forgone revenue  to the federal government.", "My statement today will focus on (1) how allocating agencies implement  federal requirements for awarding LIHTCs, assess reasonableness of  property costs, and monitor properties\u2019 ongoing compliance; and (2) IRS\u2019s  oversight of the LIHTC program. This statement is based primarily on  three reports we issued in July 2015, May 2016, and February 2017. To  conduct the work for the three reports, among other methodologies, we  reviewed IRS regulations and guidance, including how allocating  agencies and taxpayers are selected for review. We also conducted a  structured analysis of 58 Qualified Allocation Plans (QAP), which outline  processes for awarding LIHTCs and compliance monitoring  responsibilities. We selected a nonprobability, nongeneralizable sample  of nine allocating agencies for site visits, and during these visits, we  reviewed files for randomly selected housing developments to determine  how each agency addressed federal requirements for awarding LIHTCs,  assessed the reasonableness of development costs, and monitored  properties\u2019 compliance with program requirements. We also interviewed officials from IRS, the Department of the Treasury (Treasury), the  Department of Housing and Urban Development (HUD), the National  Council of State Housing Agencies (NCSHA), and selected allocating  agencies. For our 2017 report, we gathered data for 32 syndicators in  total\u201431 through a no-cost contract with CohnReznick, a national  accounting firm\u2014and one survey response directly from a syndicator.  More detailed information on our scope and methodology can be found in  each of the reports cited throughout this testimony. To update the status  of recommendations from our 2015 and 2016 reports, we reviewed new  or revised IRS policies, procedures, and reports and interviewed IRS  officials.", "We performed the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of IRS Administration of LIHTC Program", "paragraphs": ["IRS administration of the LIHTC program involves overseeing compliance  on the part of allocating agencies and taxpayers and developing and  publishing regulations and guidance. IRS is responsible for reviewing  LIHTC information on three IRS forms that are the basis of LIHTC  program reporting and then determining whether program requirements  have been met. Taxpayer noncompliance with LIHTC requirements may  result in IRS denying claims for the credit in the current year or  recapturing\u2014taking back\u2014credits claimed in prior years.", "Published guidance may include revenue rulings and procedures, notices,  and announcements. Other guidance for the program includes an Audit  Technique Guide for Completing Form 8823 that includes specific  instructions for allocating agencies, including when site visits and file  reviews are to be performed, and guidelines for determining  noncompliance in areas such as health and safety standards, rent  ceilings, income limits, and tenant qualifications."], "subsections": []}, {"section_title": "Role of Allocating Agencies", "paragraphs": ["State and local allocating agencies are responsible for day-to-day  administration of the LIHTC program based on Section 42 of the Internal  Revenue Code and Treasury regulations. More specifically, allocating  agencies are responsible for  Awarding tax credits. Each state receives an annual allocation of  LIHTCs, determined by statutory formula. Allocating agencies then  competitively award the tax credits to owners of qualified rental housing  projects that reserve all or a portion of their units for low-income tenants,  consistent with the agencies\u2019 QAPs. Developers typically attempt to  obtain funding for their projects by attracting third-party investors willing to  contribute equity to the projects; the project investors then can claim the  tax credits.", "Monitoring costs. Section 42 states that allocating agencies must  consider the reasonableness of costs and their uses for proposed LIHTC  projects, allows for agency discretion in making this determination, and  also states that credits allocated to a project may not exceed the amount  necessary to assure its feasibility and its viability as a low-income housing  project. However, Section 42 does not provide a definition or offer  guidance on determining how to calculate these amounts.", "Monitoring compliance. After credits are awarded, Treasury regulations  state that allocating agencies must conduct regular site visits to physically  inspect units and review tenant files for eligibility information. The  agencies also have reporting and notification requirements. For example,  allocating agencies must notify IRS of any noncompliance found during  inspections and ensure that owners of LIHTC properties annually certify  they met certain requirements for the preceding 12-month period."], "subsections": []}, {"section_title": "Role of Investors and Syndicators", "paragraphs": ["Developers of awarded projects typically attempt to obtain funding for  their projects by attracting third-parties willing to invest in the project in  exchange for the ability to claim tax credits. The developer sells an  ownership interest in the project to one or more investors, or in many  instances, to a fund managed by a syndicator who acts as an  intermediary between the developer and investors.", "Investors and syndicators play several roles in the LIHTC market. For  example, syndicators help initially connect investors and developers and  oversee acquisition of projects. Once a project is acquired, syndicators  perform ongoing monitoring and asset management to help ensure the  project complies with LIHTC requirements and is financially sound.  Syndicators attempt to identify potential problems and intercede if  necessary, such as replacing under- or nonperforming general partners,  and may use their own reserves to help resolve problems. In exchange  for these services, syndicators typically are compensated through an  initial acquisition fee\u2014usually a percentage of the gross equity raised\u2014 and an annual asset management fee.", "Syndicators that we surveyed for our 2017 report were nonprofit or for- profit entities, generally had multistate operations, and averaged more  than 20 years of experience with the LIHTC program. Of the 32  syndicators we surveyed, the syndicators collectively had raised more  than $100 billion in LIHTC equity since 1986, helping to fund more than  20,000 properties and about 1.4 million units placed-in-service through  2014. Projects for which these syndicators raised equity in 2005\u20132014  represented an estimated 75 percent of all LIHTC properties placed-in- service in that period."], "subsections": []}]}, {"section_title": "Selected Allocating Agencies Implemented Differing Practices for Key LIHTC Requirements", "paragraphs": ["As we reported in 2016, allocating agencies implemented requirements  for QAPs in varying ways and had processes in place to meet  requirements for credit awards. Allocating agencies also had procedures  to assess costs, but determined award amounts for projects differently,  used various cost limits and benchmarks to determine reasonableness of  costs, and used widely varying criteria for basis boosts. Agencies also  had processes in place to monitor compliance. However, some of these  practices raised concerns."], "subsections": [{"section_title": "Agencies Implemented Requirements for Allocation Plans and Award Credits in Varying Ways", "paragraphs": ["In our 2016 report, we generally found that allocating agencies  implemented requirements for QAPs in varying ways and had processes  in place to meet requirements for awarding the tax credit.", "Based on our 2016 review of 58 QAPs and our nine site visits, we  found the QAPs did not always contain, address, or mention  preferences and selection criteria required in Section 42. Rather,  some allocating agencies incorporated the information into other  LIHTC program documents, or implemented the requirements in  practice.", "While Section 42 specifies some selection criteria (such as project  location or tenant populations with special housing needs), it also  more broadly states that a QAP set forth selection criteria \u201cappropriate  to local conditions.\u201d As a result, allocating agencies have the flexibility  to create their own methods and rating systems for evaluating  applicants. We found that nearly all the allocating agencies that we  reviewed used points or a threshold system for evaluating applicants.  They used criteria such as qualifications of the development team,  cost effectiveness, or leveraging of funds from other federal or state  programs.", "According to Section 42, allocating agencies must notify the chief  executive officer (or the equivalent) of the local jurisdiction in which  the project is to be located. However, some agencies imposed an  additional requirement of letters of support from local officials.  Specifically, as of 2013, we found that of the 58 agencies in our  review,12 agencies noted that their review or approval of applications  was contingent on letters of support, and another 10 agencies  awarded points for letters of local support. HUD officials have cited  fair housing concerns in relation to any preferences or requirements  for local approval or support because of the discriminatory influence  these factors could have on where affordable housing is built. In  December 2016, IRS issued a revenue ruling that clarified that  Section 42 neither requires nor encourages allocating agencies to  reject all proposals that do not obtain the approval of the locality  where the project developer proposes to place the project.", "Allocating agencies we visited for our 2016 report had processes in place  to meet other Section 42 requirements, including awarding credit to  nonprofits and long-term affordability of projects. Allocating agencies  must allocate at least 10 percent of the state housing credit ceiling to  projects involving qualified nonprofit organizations. All nine allocating  agencies we visited had a set-aside of at least 10 percent of credits to be  awarded to projects involving nonprofits. Section 42 also requires  allocating agencies to execute an extended low-income housing  commitment of at least 30 years before a building can receive credits. For  example, one allocating agency we visited required developers to sign  agreements for longer extended-use periods, while some agencies  awarded points to applications whose developers elect longer periods."], "subsections": []}, {"section_title": "Agencies We Reviewed Had Procedures to Assess Costs and Used Widely Varying Criteria for Basis Boosts", "paragraphs": ["Allocating agencies we reviewed for our 2016 report had procedures to  assess costs, but determined award amounts for projects differently and  used various cost limits and benchmarks to determine reasonableness of  costs. All nine allocating agencies we visited required applicants to submit  detailed cost and funding estimates, an explanation of sources and uses,  and expected revenues as part of their applications. These costs were  then evaluated to determine a project\u2019s eligible basis (total allowable  costs associated with depreciable costs in the project), which in turn  determined the qualified basis and ultimately the amount of tax credits to  be awarded.", "Reasonableness of costs. We found that allocating agencies had  different ways for determining the reasonableness of project costs. Based  on our analysis of 58 QAPs and our nine site visits, agencies had  established various limits against which to evaluate the reasonableness  of submitted costs, such as applying limits on development costs, total  credit awards, developer fees, and builder\u2019s fees. Section 42 does not  provide a definition of reasonableness of costs, giving allocating agencies  discretion on how best to determine what costs are appropriate for their  respective localities.", "Discretionary basis boosts. Allocating agencies commonly \u201cboosted\u201d  the basis for projects, but used widely varying criteria for doing so.  Section 42 notes that an increase or \u201cboost\u201d of up to 130 percent in the  eligible basis can be awarded by an allocating agency to a housing  development in a qualified census tract or difficult development area.", "According to our QAP analysis, 44 of 58 plans we reviewed included  criteria for awarding discretionary basis boosts, with 16 plans explicitly  specifying the use of basis boosts for projects as needed for financial or  economic feasibility. The discretionary boosts were applied to different  types of projects and on different scales (for example, statewide or  citywide).", "For example, we found one development that received a boost to the  eligible basis for having received certain green building certifications,  although the applicant did not demonstrate financial need or request  the boost. The allocating agency told us that all projects with specified  green building certifications received the boost automatically, as laid  out in its QAP. At the time of our review, agency officials said that the  agency had changed its practices to prevent automatic basis boosts  from being applied and required additional checks for financial need.", "In another QAP we reviewed, one agency described an automatic 130  percent statewide boost for all LIHTC developments. According to the  officials, the automatic statewide boost remained in effect because  officials made the determination that nearly all projects would need it  for financial feasibility.", "Section 42 requires that allocating agencies determine that \u201cdiscretionary  basis boosts\u201d were necessary for buildings to be financially feasible  before granting them to developers. Section 42 does not require  allocating agencies to document their analysis for financial feasibility (with  or without the basis boost). However, legislative history for the Housing  and Economic Recovery Act of 2008 included expectations that allocating  agencies would set standards in their QAPs for which projects would be  allocated additional credits, communicate the reasons for designating  such criteria, and publicly express the basis for allocating additional  credits to a project. In addition, NCSHA (a nonprofit advocating for state  allocating agencies) recommends that allocating agencies set standards  in their QAPs to determine eligibility for discretionary basis boosts and  make the determinations publicly available."], "subsections": []}, {"section_title": "Agencies We Visited Had Processes for Monitoring Compliance", "paragraphs": ["In our 2016 report we found that the allocating agencies we visited had  processes for and conducted compliance monitoring of projects  consistent with Section 42 and Treasury regulations. Treasury regulations  require allocating agencies to conduct on-site physical inspections for at  least 20 percent of the project\u2019s low-income units and file reviews for the  tenants in these units at least once every 3 years. In addition, allocating  agencies must annually review owner certifications that affirm that  properties continue to meet LIHTC program requirements.", "Allocating agencies we visited followed regulatory requirements on  when to conduct physical inspections and tenant file reviews.", "Allocating agencies we visited generally used electronic databases to  track the frequency of inspections, file reviews, and certifications,  although most of these agencies documented these reviews on paper.", "All the allocating agencies we visited had inspection and review  processes in place to monitor projects following the 15-year  compliance period, as required under Section 42. Allocating agencies  must execute an extended low-income housing commitment to remain  affordable for a minimum of 30 years before a tax credit project can  receive credits. After the compliance period is over, the obligation for  allocating agencies to report to IRS on compliance issues ends and  investors are no longer at risk for tax credit recapture."], "subsections": []}]}, {"section_title": "IRS Oversight of LIHTC Has Been Minimal", "paragraphs": ["Our prior reports found IRS conducted few reviews of allocating agencies  and had not reviewed how agencies determined basis boosts. Data on  noncompliance were not reliable and IRS used little of the reported  program information. IRS had not directly participated in an interagency  initiative to augment HUD\u2019s databases with LIHTC property inspection  data. Both our 2015 and 2016 reports concluded that opportunities  existed to enhance oversight of the LIHTC program, specifically by  leveraging the knowledge and experience of HUD."], "subsections": [{"section_title": "IRS Conducted Few Reviews of Allocating Agencies and Had Not Reviewed How Agencies Determined Basis Boosts", "paragraphs": ["Few reviews of allocating agencies. In our 2015 report, we found that  IRS had conducted seven audits (reviews) of allocating agencies from  1986 (inception of the program) through May 2015. In the audits, IRS  found issues related to QAPs, including missing preferences and  selection criteria.", "But in both our 2015 and 2016 reports, IRS officials stated that they did  not regard a regular review of QAPs as part of their responsibilities as  outlined in Section 42 and therefore did not regularly review the plans.  IRS officials said that allocating agencies have primary responsibility to  ensure that the plans meet Section 42 preferences and selection criteria.  IRS officials noted that review of a QAP to determine if the plan  incorporated the elements specified in Section 42 could occur if IRS were  to audit an allocating agency.", "No review of agencies\u2019 discretionary basis boosts. In our 2016 report,  we found IRS had not reviewed the criteria allocating agencies used to  award discretionary basis boosts. The use of basis boosts has  implications for LIHTC housing production because of the risk of  oversubsidizing projects, which would reduce the amount of the  remaining allocable subsidies and yield fewer LIHTC projects overall  within a state.", "IRS also had not provided guidance to agencies on how to determine the  need for the additional basis to make projects financially feasible. IRS  officials told us that Section 42 gives allocating agencies the discretion to  determine if projects receive a basis boost and does not require  documentation of financial feasibility. Additionally, IRS officials explained  that because the overall amount of subsidies allocated to a state is  limited, the inherent structure of the program discourages states from  oversubsidizing projects. However, during our 2016 review, we observed  a range of practices for awarding discretionary basis boosts, including a  blanket basis boost that could result in fewer projects being subsidized  and provide more credits than necessary for financial feasibility. We  concluded that because IRS did not regularly review QAPs, many of  which list criteria for discretionary basis boosts, IRS was unable to  determine the extent to which agency policies could result in  oversubsidizing of projects."], "subsections": []}, {"section_title": "Some Program Data Were Not Reliable and IRS Used Little of Reported Program Information", "paragraphs": ["Unreliable data. We reported in 2015 that IRS had not comprehensively  captured information reported for the program in its Low-Income Housing  Credit database and the existing data were not complete and reliable. IRS  guidance requires the collection of data on the LIHTC program in an IRS  database, which records information submitted by allocating agencies  and taxpayers on three forms. The forms include", "Credit allocation and certification (Form 8609). The two-part form  is completed by the allocating agency and the taxpayer. Agencies  report the allocated amount of tax credits available over a 10-year  period for each building in a project. The taxpayer reports the date on  which the building was placed-in-service (suitable for occupancy).", "Noncompliance or building disposition (Form 8823). Allocating  agencies must complete and submit this form to IRS if an on-site  physical inspection of a LIHTC project finds any noncompliance. The  form records any findings (and corrections of previous findings) based  on the inspection of units and review of the low-income tenant  certifications.", "Annual report (Form 8610). IRS staff review the reports to ensure  allocations do not exceed a statutorily prescribed ceiling for that year.", "Based on our analysis of the information in the database, we found in  2015 that the data on credit allocation and certification information were  not sufficiently reliable to determine if basic requirements for the LIHTC  program were being achieved. For example, we could not determine how  often LIHTC projects were placed-in-service within required time frames.  We concluded that without improvements to the data quality of credit  allocation and certification information, it was difficult to determine if credit  allocation and placed-in-service requirements had been met by allocating  agencies and taxpayers, respectively. Thus, we recommended that IRS  should address weaknesses identified in data entry and programming  controls to ensure reliable data are collected on credit allocations.", "At the time of our 2015 report, IRS acknowledged the need for  improvements in its controls and procedures (including data entry and  quality reviews). IRS officials agreed that these problems should be  corrected and data quality reviews should be conducted on an ongoing  basis. As of March 2017, in response to our recommendation, IRS  officials said that they had explored possibilities to improve the database,  which not only houses credit allocation information, but also data from  noncompliance and building disposition forms. Specifically, IRS is working  to move the database to a new and updated server, which will address  weaknesses identified in data entry and programming controls. IRS  expects to complete the data migration step by early fall of 2017. Until  IRS implements its plan to improve the data, this recommendation will  remain open.", "Limited noncompliance data, analysis, and guidance on reporting.  We found in our 2015 and 2016 reports that IRS had done little with the  information it collects on noncompliance. IRS had captured little  information from the Form 8823 submissions in its database and had not  tracked the resolution of noncompliance issues or analyzed trends in  noncompliance. As of April 2016, the database included information from  about 4,200 of the nearly 214,000 Form 8823s IRS received since 2009  (less than 2 percent of forms received).", "For our 2015 report, officials told us the decision was made during the  2008\u20132009 timeframe to input information only from forms that indicated  a change in building disposition, such as a foreclosure. IRS focused on  forms indicating this change for reasons including the serious nature of  the occurrence for the program and impacts on taxpayers\u2019 ability to  receive credit. Officials also stated it was not cost effective to input all the  form information and trend analysis on all types of noncompliance was  not useful for purposes of ensuring compliance with the tax code.", "In addition, as we reported in both 2015 and 2016, IRS had assessed  little of the noncompliance information collected on the Form 8823 or  routinely used it to determine trends in noncompliance. Because little  information was captured in the Low-Income Housing Credit database,  IRS was unable to provide us with program-wide information on the most  common types of noncompliance. Furthermore, IRS had no method to  determine if issues reported as uncorrected had been resolved or if  properties had recurring noncompliance issues.", "In our 2016 report, we also found inconsistent reporting on the  noncompliance forms, the reasons for which included conflicting IRS  guidance, different interpretations of the guidance by allocating agencies,  and lack of IRS feedback about agency submissions.", "IRS developed guidelines for allocating agencies to use when  completing the Form 8823, the \u201cfundamental purpose\u201d of which was  identified as providing standardized operational definitions for the  noncompliance categories listed on the form. The IRS guide adds that  it is important that noncompliance be consistently identified,  categorized, and reported and notes that the benefits of consistency  included enhanced program administration by IRS.", "Allocating agencies we visited had various practices for submitting  Form 8823 to IRS, including different timing of submissions, reporting  on all violations (whether minor or corrected during inspections) or  not, and amounts of additional detail provided. Partly because of  these different practices, the number of forms each of the nine  agencies told us they sent to IRS in 2013 varied from 1 to more than  1,700.", "We concluded that without IRS clarification of when to send in the Form  8823, allocating agencies will continue to submit inconsistent  noncompliance data to IRS, which will make it difficult for IRS to efficiently  distinguish between minor violations and severe noncompliance, such as  properties with health and safety issues. We recommended that IRS  should clarify what to submit and when\u2014in collaboration with the  allocating agencies and Treasury\u2014to help IRS improve the quality of the  noncompliance information it receives and help ensure that any new  guidance is consistent with Treasury regulations.", "In August 2016, IRS stated it would review the Form 8823 Audit  Technique Guide to determine whether additional guidance and  clarification were needed for allocating agencies to report noncompliance  information on the form. If published legal guidance is required, IRS  stated that it will submit a proposal for such guidance for prioritization.  IRS indicated an expected implementation date by November 2017. In  addition, in March 2017, officials stated that IRS Counsel attended an  industry conference with allocating agencies at which issues related to  the Form 8823 were discussed.", "Lack of participation in data initiative. Moreover, in our 2016 report we  found IRS had not taken advantage of the important progress HUD made  through the Rental Policy Working Group (working group)\u2014which was  established to better align the operation of federal rental policies across  the administration\u2014to augment its databases with LIHTC property  inspection data. This data collection effort created opportunities for HUD  to share inspection data with IRS that could improve the effectiveness of  reviews for LIHTC noncompliance. However, the IRS Small  Business/Self-Employed Division managing the LIHTC program had not  been involved in the working group. We concluded that such involvement  would allow IRS to leverage existing resources, augment its information  on noncompliance, and better understand the prevalence of  noncompliance.", "We recommended that staff from the division participate in the physical  inspection initiative of the working group and also recommended that the  IRS Commissioner evaluate how IRS could use HUD\u2019s real estate  database, including how the information might be used to reassess  reporting categories on Form 8823 and reassess which categories of  noncompliance information to review for audit potential. As of March  2017, IRS had implemented our recommendation to include the  appropriate staff at the working group meetings. However, IRS officials  stated that since HUD\u2019s database with property inspection data was not  complete as of March 2017 and contained data from 30 states, it was  unclear how the database could be used. IRS officials said they would  continue exploring the HUD database if the data for all LIHTC properties  were included and it was possible to isolate the LIHTC property data from  other rental properties in the HUD database."], "subsections": []}, {"section_title": "Leveraging Experience of HUD May Augment IRS\u2019s Capacity to Oversee Program", "paragraphs": ["Both our 2015 and 2016 reports found that opportunities existed to  enhance oversight of the LIHTC program, specifically by leveraging the  knowledge and experience of HUD. We found in 2015 that while LIHTC is  the largest federal program for increasing the supply of affordable rental  housing, LIHTC is a peripheral program in IRS in terms of resources and  mission. Oversight responsibilities for the program include monitoring  allocating agencies and taxpayer compliance. However, as we have  discussed previously, IRS oversight has been minimal and IRS has  captured and used little program information. As we previously stated,  such information could help program managers and congressional  decision makers assess the program\u2019s effectiveness.", "HUD\u2500which has a housing mission\u2500collects and analyzes information on  low-income rental housing, including LIHTC-funded projects. As we  reported in 2015, HUD\u2019s role in the LIHTC program is generally limited to  the collection of information on tenant characteristics (mandated by the  Housing and Economic Recovery Act of 2008). However, it has voluntarily  collected project-level information on the program since 1996 because of  the importance of LIHTC as a source of funding for affordable housing.  HUD also has sponsored studies of the LIHTC program that use these  data. HUD\u2019s LIHTC databases, the largest federal source of information  on the LIHTC program, aggregates project-level data that allocating  agencies voluntarily submit and information on tenant characteristics that  HUD must collect. Since 2014, HUD also has published annual reports  analyzing data it must collect on tenants residing in LIHTC properties. As  part of this report, HUD compares property information in its tenant  database to the information in its property database to help assess the  completeness of both databases.", "In our 2015 report, we also discussed HUD\u2019s experience in working with  allocating agencies. While multiple federal agencies administer housing- related programs, HUD is the lead federal agency for providing affordable  rental housing. Much like LIHTC, HUD\u2019s rental housing programs rely on  state and local agencies to implement programs. HUD is responsible for  overseeing these agencies, including reviewing state and local  consolidated plans for the HOME Investment Partnership and Community  Development Block Grant programs\u2014large grant programs that also are  used to fund LIHTC projects. HUD also has experience in directly  overseeing allocating agencies in their roles as contract administrators for  project-based Section 8 rental assistance. HUD has processes,  procedures, and staff in place for program evaluation and oversight of  state and local agencies that could be built upon and strengthened.", "In our 2015 report, we concluded that significant resource constraints  affected IRS\u2019s ability to oversee taxpayer compliance and precluded  wide-ranging improvement to such functions, but that IRS still had an  opportunity to enhance oversight of LIHTC. We also concluded that  leveraging the experience and expertise of another agency with a housing  mission, such as HUD, might help offset some of IRS\u2019s limitations in  relation to program oversight. HUD\u2019s existing processes and procedures  for overseeing allocating agencies could constitute a framework on which  further changes and improvements in LIHTC could be effected. However,  enhancing HUD\u2019s role could involve additional staff and other resources.  An estimate of potential costs and funding options for financing enhanced  federal oversight of the LIHTC program would be integral to determining  an appropriate funding mechanism.", "We asked that Congress consider designating HUD as a joint  administrator of the program responsible for oversight. As part of the  deliberation, we suggested that Congress direct HUD to estimate the  costs to monitor and perform the additional oversight responsibilities,  including a discussion of funding options. Treasury agreed that it would  be useful for HUD to receive ongoing responsibility for, and resources to  perform, research and analysis on the effectiveness of LIHTCs in  increasing the availability of affordable rental housing. Treasury noted  that such research and analysis are not part of IRS\u2019s responsibilities or  consistent with its expertise in interpreting and enforcing tax laws.  However, Treasury stated that responsibility for interpreting and enforcing  the code should remain entirely with IRS. Our report noted that if program  administration were changed, IRS could retain certain key responsibilities  consistent with its tax administration mission.", "In our 2016 report, we concluded that IRS oversight of allocating  agencies continued to be minimal, particularly in reviewing QAPs and  allocating agencies\u2019 practices for awarding discretionary basis boosts. As  a result, we reiterated the recommendation from our 2015 report that  Congress should consider designating HUD as a joint administrator of the  program responsible for oversight due to its experience and expertise as  an agency with a housing mission.", "In response to our 2016 report, HUD stated it remains supportive of  mechanisms to use its significant expertise and experience administering  housing programs for enhanced effectiveness of LIHTC. HUD also stated  that enhanced interagency coordination could better ensure compliance  with fair housing requirements and improve alignment of LIHTC with  national housing priorities. As of July 2017, Congress had not enacted  legislation to give HUD an oversight role for LIHTC.", "Chairman Hatch, Ranking Member Wyden, and Members of the  Committee, this concludes my prepared statement. I would be happy to  respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information about this testimony, please contact me at   202-512-8678 or garciadiazd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  include Nadine Garrick Raidbard, Assistant Director; Anar N. Jessani,  Analyst in Charge; William R. Chatlos; Farrah Graham; Daniel Newman;  John McGrail; Barbara Roesmann; and MaryLynn Sergent.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-153T", "url": "https://www.gao.gov/products/GAO-18-153T", "title": "Information Technology: Management Attention Is Needed to Successfully Modernize Tax Processing Systems", "published_date": "2017-10-04T00:00:00", "released_date": "2017-10-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The IRS, a bureau of the Department of the Treasury, relies extensively on IT to annually collect more than $3 trillion in taxes, distribute more than $400 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. For fiscal year 2016, IRS expended approximately $2.7 billion for IT investments, 70 percent of which was allocated for operational systems.", "GAO has long reported that the effective and efficient management of IT acquisitions and operational investments has been a challenge in the federal government. Accordingly, in February 2015, GAO introduced a new government-wide high-risk area, Improving the Management of IT Acquisitions and Operations. GAO has also reported on challenges IRS has faced in managing its IT acquisitions and operations, and identified opportunities for IRS to improve the management of these investments.", "In light of these challenges, GAO was asked to testify about IT management at IRS. To do so, GAO summarized its prior work regarding IRS's IT management, including the agency's management of operational, or legacy, IT systems."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO has issued a series of reports in recent years which have identified numerous opportunities for the Internal Revenue Service (IRS) to improve the management of its major acquisitions and operational, or legacy, information technology (IT) investments. For example,", "In June 2016, GAO reported that IRS had developed a structured process for allocating funding to its operations activities, consistent with best practices; however, GAO found that IRS did not have a similarly structured process for prioritizing modernization activities to which the agency allocated hundreds of millions of dollars for fiscal year 2016. Instead, IRS officials stated that they held discussions to determine the modernization efforts that were of highest priority to meet IRS's future state vision and technology roadmap, and considered staffing resources and lifecycle stage. However, they did not use formal criteria for making final determinations. GAO concluded that establishing a structured process for prioritizing modernization activities would better assist Congress and other decision makers in ensuring that the right priorities are funded. Accordingly, GAO recommended that IRS establish, document, and implement policies and procedures for prioritizing modernization activities. IRS agreed with the recommendation and has efforts underway to address it.", "In the same report, GAO noted that IRS could improve the accuracy of reported performance information for key development investments to provide Congress and other external parties with pertinent information about the delivery of these investments. This included investments such as Customer Account Data Engine 2, which IRS is developing to replace its 50-year old repository of individual tax account data, and the Return Review Program, IRS's system of record for fraud detection. GAO recommended that IRS take steps to improve reported investment performance information. IRS agreed with the recommendation, and has efforts underway to address it.", "In a May 2016 report on legacy IT systems across the federal government, GAO noted that IRS used assembly language code to program key legacy systems. Assembly language code is a computer language initially used in the 1950s that is typically tied to the hardware for which it was developed; it has become difficult to code and maintain. One investment that used this language is IRS's Individual Master File which serves as the authoritative data source for individual taxpayer accounts. GAO noted that, although IRS has been working to replace the Individual Master File, the bureau did not have time frames for its modernization or replacement. Therefore, GAO recommended that the Department of Treasury identify and plan to modernize and replace this legacy system, consistent with applicable guidance from the Office of Management and Budget. The department had no comments on the recommendation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made a number of recommendations to IRS to improve its management of IT acquisitions and operations. IRS has generally agreed with the recommendations and is in various stages of implementing them."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent work related to the  Internal Revenue Service\u2019s (IRS) management of information technology  (IT). IRS relies extensively on IT systems to annually collect more than $3  trillion in taxes, distribute more than $400 billion in refunds, and carry out  its mission of providing service to America\u2019s taxpayers in meeting their tax  obligations. For fiscal year 2016, IRS expended approximately $2.7 billion  for IT investments, including $1.9 billion, or 70 percent, for operational  systems, and approximately $800 million, or 30 percent, for development  and modernization.", "As you know, however, the effective and efficient acquisition and  management of IT investments has been a long-standing challenge in the  federal government. IRS, in particular, has faced challenges in managing  its acquisitions and operations, and we have reported on opportunities for  the agency to improve the management of its IT investments.", "My statement today summarizes our prior reports that have addressed  IRS\u2019s IT management, including the management of its operational, or  legacy, systems. A more detailed discussion of the objectives, scope,  and methodology for the work conducted is included in these reports.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The mission of IRS, a bureau within the Department of the Treasury, is to  (1) provide America\u2019s taxpayers top quality service by helping them  understand and meet their tax responsibilities and (2) enforce the law with  integrity and fairness to all. In carrying out its mission, IRS annually  collects over $3 trillion in taxes from millions of taxpayers, and manages  the distribution of over $400 billion in refunds. To guide its future  direction, the agency has two strategic goals: (1) deliver high quality and  timely service to reduce taxpayer burden and encourage voluntary  compliance; and (2) effectively enforce the law to ensure compliance with  tax responsibilities and combat fraud."], "subsections": [{"section_title": "IRS Relies on Major IT Investments for Tax Processing", "paragraphs": ["Effective management of IT is critical for agencies to achieve successful  outcomes. This is particularly true for IRS, given the role of IT in enabling  the agency to carry out its mission and responsibilities. For example, IRS  relies on information systems to process tax returns; account for tax  revenues collected; send bills for taxes owed; issue refunds; assist in the  selection of tax returns for audit; and provide telecommunications  services for all business activities, including the public\u2019s toll-free access to  tax information.", "For fiscal year 2016, IRS was pursuing 23 major and 114 non-major IT  investments to carry out its mission. According to the agency, it expended  approximately $2.7 billion on these investments during fiscal year 2016,  including $1.9 billion, or 70 percent, for operations and maintenance  activities, and approximately $800 million, or 30 percent, for development,  modernization, and enhancement. We have previously reported on a  number of the agency\u2019s major investments, to include the following  investments in development, modernization, and enhancement:", "The Affordable Care Act investment encompasses the planning,  development, and implementation of IT systems needed to support  tax administration responsibilities associated with key provisions of  the Patient Protection and Affordable Care Act. IRS expended $253  million on this investment in fiscal year 2016.", "Customer Account Data Engine 2 is being developed to replace the  Individual Master File investment, IRS\u2019s authoritative data source for  individual tax account data. A major component of the program is a  modernized database for all individual taxpayers that is intended to  provide the foundation for more efficient and effective tax  administration and help address financial material weaknesses for  individual taxpayer accounts. Customer Account Data Engine 2 data  is also expected to be made available for access by downstream  systems, such as the Integrated Data Retrieval System for online  transaction processing by IRS customer service representatives. IRS  expended $182.6 million on this investment in fiscal year 2016.", "The Return Review Program is IRS\u2019s system of record for fraud  detection. As such, it is intended to enhance the agency\u2019s capabilities  to detect, resolve, and prevent criminal and civil tax noncompliance. In  addition, it is intended to allow analysis and support of complex case  processing requirements for compliance and criminal investigation  programs during prosecution, revenue protection, accounts  management, and taxpayer communications processes. According to  IRS, as of May 2017, the system has helped protect over $4.5 billion  in revenue. IRS expended $100.2 million on this investment in fiscal  year 2016.", "We have also reported on the following investments in operations and  maintenance:", "Mainframes and Servers Services and Support provides for the  design, development, and deployment of server; middleware; and  large systems and enterprise storage infrastructures, including  supporting systems software products, databases, and operating  systems. This investment has been operational since 1970. IRS  expended $499.4 million on this investment in fiscal year 2016.", "Telecommunications Systems and Support provides for IRS\u2019s network  infrastructure services such as network equipment, video conference  service, enterprise fax service, and voice service for over 85,000  employees at about 1,000 locations. According to IRS, the investment  supports the delivery of services and products to employees, which  translates into service to taxpayers. IRS expended $336.4 million on  this investment in fiscal year 2016.", "Individual Master File is the authoritative data source for individual  taxpayer accounts. Using this system, accounts are updated, taxes  are assessed, and refunds are generated as required during each tax  filing period. Virtually all IRS information system applications and  processes depend on output, directly or indirectly, from this data  source. IRS expended $14.3 million on this investment in fiscal year  2016."], "subsections": []}, {"section_title": "GAO, Congress, and the Administration Have Highlighted the Need for Government-wide Improvements for IT Acquisitions and Operations", "paragraphs": ["In fiscal year 2017, the federal government planned to spend more than  $89 billion for IT that is critical to the health, economy, and security of the  nation. However, we have reported that prior IT expenditures have often  resulted in significant cost overruns, schedule delays, and questionable  mission-related achievements. In light of these ongoing challenges, in  February 2015, we added improving the management of IT acquisitions  and operations to our list of high-risk areas for the federal government.  This area highlights several critical IT initiatives in need of additional  congressional oversight, including (1) reviews of troubled projects; (2)  efforts to increase the use of incremental development; (3) efforts to  provide transparency relative to the cost, schedule, and risk levels for  major IT investments; (4) reviews of agencies\u2019 operational investments;  (5) data center consolidation; and (6) efforts to streamline agencies\u2019  portfolios of IT investments. We noted that implementation of these  initiatives has been inconsistent and more work remains to demonstrate  progress in achieving acquisitions and operations outcomes. Between  fiscal years 2010 and 2015, we made about 800 recommendations  related to this high-risk area to the Office of Management and Budget and  agencies. As of September, 2017, about 54 percent of these  recommendations had been implemented.", "The Federal Information Technology Acquisition Reform provisions  (commonly referred to as FITARA), enacted as a part of the Carl Levin  and Howard P. \u2018Buck\u2019 McKeon National Defense Authorization Act for  Fiscal Year 2015, aimed to improve federal IT acquisitions and operations  and recognized the importance of the initiatives mentioned above by  incorporating certain requirements into the law. For example, among  other things, the act requires the Office of Management and Budget to  publicly display investment performance information and review federal  agencies\u2019 IT investment portfolios.", "The current administration has also initiated additional efforts aimed at  improving federal IT. Specifically, in March 2017, the administration  established the Office of American Innovation, which has a mission to,  among other things, make recommendations to the President on policies  and plans aimed at improving federal government operations and  services and modernizing federal IT. Further, in May 2017, the  administration established the American Technology Council, which has a  goal of helping to transform and modernize federal agency IT and how  the federal government uses and delivers digital services. Recently this  council worked with several agencies to develop a draft report on  modernizing IT in the federal government. The council released the draft  report for public comment in August 2017."], "subsections": []}]}, {"section_title": "GAO Reviews Have Identified Weaknesses with IRS\u2019s Management of Its Modernization Activities and Legacy Systems", "paragraphs": ["In reviews that we have undertaken over the past several years, we have  identified various opportunities for the IRS to improve the management of  its IT investments. These reviews have identified a number of  weaknesses with the agency\u2019s reporting on the performance of its  modernization investments to Congress and other stakeholders. In this  regard, we have pointed out that information on investments\u2019 performance  in meeting cost, schedule, and scope goals is critical to determining the  agency\u2019s progress in completing key IT investments. We have also  stressed the importance of the agency addressing weaknesses in its  process for prioritizing modernization activities. Accordingly, we have  made a number of related recommendations, which IRS is in various  stages of implementing.", "In our June 2012 report on IRS\u2019s performance in meeting cost,  schedule, and scope goals for selected investments, we noted that,  while IRS reported on the cost and schedule of its major IT  investments, the agency did not have a quantitative measure of  scope\u2014a measure that shows whether these investments delivered  planned functionality. We stressed that having such a measure is a  good practice as it provides information about whether an investment  has delivered the functionality that was paid for. Accordingly, we  recommended that the agency develop a quantitative measure of  scope for its major IT investments, to have more complete information  on the performance of these investments. In response, IRS started  developing a quantitative measure of scope for selected investments  in December 2015 and has been working to gradually expand the  measure to other investments.", "In April 2013, based on another review of IRS\u2019s performance in meeting  cost, schedule, and scope goals, we reported that there were  weaknesses, to varying degrees, in the reliability of IRS\u2019s investment  performance information. Specifically, we found that IRS had not  updated investment cost and schedule variance information with actual  amounts on a timely basis (i.e., within the 60-day time frame required by  the Department of Treasury) in about 25 percent of the activities  associated with the investments selected in our review. In addition, the  agency had not specified how project managers should estimate the cost  and schedule performance of ongoing projects.", "As a result of these findings, we recommended that IRS ensure that its  projects consistently follow guidance for updating performance  information 60 days after completion of an activity and develop and  implement guidance that specifies best practices to consider when  estimating ongoing projects\u2019 progress in meeting cost and schedule  goals. IRS agreed with, and subsequently addressed, the  recommendation related to updating performance information on a timely  basis. However, the agency partially disagreed with the recommendation  to develop guidance on estimating progress in meeting cost and schedule  goals for ongoing projects. In this regard, we had suggested the use of  earned value management data as a best practice to determine projected  cost and schedule amounts. IRS did not agree with the use of the  technique, stating that it was not part of the agency\u2019s current program  management processes and that the cost and burden to use earned  value management would outweigh the value added.", "We disagreed with the agency\u2019s view of earned value management  because best practices have found that its value generally outweighs the  cost and burden of its implementation (although we suggested it as one of  several examples of practices that could be used to determine projected  amounts). We also stressed that implementing our recommendation  would help improve the reliability of reported cost and schedule variance  information, and that IRS had flexibility in determining which best  practices to use to calculate projected amounts. For those reasons, we  maintained that our recommendation was warranted. However, IRS has  yet to address the recommendation.", "We reported in April 2014, that the cost and schedule performance  information that IRS reported for its major investments was for the  fiscal year only. We noted that this reporting would be more  meaningful if supplemented with cumulative cost and schedule  performance information in order to better indicate progress toward  meeting goals. In addition, we noted that the reported variances for  selected investments were not always reliable because the estimated  and actual cost and schedule amounts on which they depended had  not been consistently updated in accordance with Department of  Treasury reporting requirements as we had previously recommended.", "We recommended that IRS report more comprehensive and reliable cost  and schedule information for its major investments. The agency agreed  with our recommendation and said it believed it had addressed the  recommendation in its quarterly reports to Congress. We disagreed with  IRS\u2019s assertion, however, noting that, while the report includes cumulative  costs, they are cumulative for the fiscal year, not for the investment or  investment segment as we recommended and they therefore do not  account for cost variances from prior fiscal years. We therefore  maintained our recommendation.", "In February 2015, after assessing the status and plans of the Return  Review Program and Customer Account Data Engine 2, we reported  that these investments had experienced significant variances from  initial cost, schedule, and scope plans; yet, IRS did not include these  variances in its reports to Congress because the agency had not  addressed our prior recommendations. Specifically, IRS had not  addressed our recommendation to report on how delivered scope  compared to what was planned, and it also did not address guidance  for determining projected cost and schedule amounts, or the reporting  of cumulative cost and schedule performance information. We  stressed that implementing these recommendations would improve  the transparency of congressional reporting so that Congress has the  appropriate information needed to make informed decisions. We  made additional recommendations for the agency to improve the  reliability and reporting of investment performance information and  management of selected major investments. IRS agreed with the  recommendations and has since addressed them.", "In our most recent report in June 2016, we assessed IRS\u2019s process  for determining its funding priorities for both modernization and  operations. We found that the agency had developed a structured  process for allocating funding to its operations activities consistent  with best practices, which specify that an organization should  document policies and procedures for selecting new and reselecting  ongoing IT investments, and include criteria for making selection and  prioritization decisions.", "However, IRS did not have a similarly structured process for prioritizing its  modernization activities, to which the agency allocated hundreds of  millions of dollars for fiscal year 2016. Agency officials stated that  discussions were held to determine the modernization efforts that were of  highest priority to meet IRS\u2019s future state vision and technology roadmap.  The officials reported that staffing resources and lifecycle stage were  considered, but there were no formal criteria for making final  determinations. Senior IRS officials said they did not have a structured  process for the selection and prioritization of business systems  modernization activities because the projects were established; and there  were fewer competing activities than for operations support.", "Nevertheless, we stressed that, while there may have been fewer  competing activities, a structured, albeit simpler, process that is  documented and consistent with best practices would provide  transparency into the agency\u2019s needs and priorities for appropriated  funds. We concluded that such a process would better assist Congress  and other decision makers in carrying out their oversight responsibilities.  Accordingly, we recommended that IRS develop and document its  processes for prioritizing IT funding. The agency agreed with the  recommendations and has taken steps to address them.", "Further, we found that IRS had reported complete performance  information for two of the six selected investments in our review, to  include a measure of progress in delivering scope, which we have been  recommending since 2012. However, the agency did not always use best  practices for determining the amount of work completed by its own staff,  resulting in inaccurate reports of work performed. Consequently, we  recommended that IRS modify its processes for determining the work  performed by its staff. The agency disagreed with the recommendation,  stating that the costs involved would outweigh the value provided.  Specifically, IRS stated that modifying the use of the level of effort  measure would equate to a certified earned value management system,  which would add immense burden on IRS\u2019s programs on various fronts  and would outweigh the value it provides. However, we did not specify the  use of an earned value management system in our report and believe  other methods could be used to more reliably measure work performed..  In addition, we believed that it is a reasonable expectation for IRS to  reliably determine the actual work completed, as opposed to assuming  that work is always completed as planned since, as noted in our report,  22 to 100 percent of the work for selected projects was performed by IRS  staff. Accordingly, we maintained that the recommendation was still  warranted."], "subsections": [{"section_title": "IRS Faces Challenges with Managing Its Aging Legacy Systems", "paragraphs": ["Our work has also emphasized the importance of IRS more effectively  managing its aging legacy systems. For example, in November 2013, we  reported on the extent to which 10 of the agency\u2019s large investments had  undergone operational analyses\u2014a key performance evaluation and  oversight mechanism required by the Office of Management and Budget  to ensure investments in operations and maintenance continue to meet  agency needs. We noted that IRS\u2019s Mainframe and Servers Services  and Support had not had an operational analysis for fiscal year 2012. As  a result, we recommended that the Secretary of Treasury direct  appropriate officials to perform an operational analysis for the investment,  including ensuring that the analysis addressed the 17 key factors  identified in the Office of Management and Budget\u2019s guidance for  performing operational analyses. The department did not comment on  our recommendation but subsequently implemented it.", "In addition, we previously reported on legacy IT systems across the  federal government, noting that these systems were becoming  increasingly obsolete and that many of them used outdated software  languages and hardware parts that were unsupported. As part of that  work, we noted that the Department of the Treasury used assembly  language code\u2014a computer language initially used in the 1950s and  typically tied to the hardware for which it was developed\u2014and Common  Business Oriented Language (COBOL)\u2014a programming language  developed in the late 1950s and early 1960s\u2014to program its legacy  systems.", "It is widely known that agencies need to move to more modern,  maintainable languages, as appropriate and feasible. For example, the  Gartner Group, a leading IT research and advisory company, has  reported that organizations using COBOL should consider replacing the  language and, in 2010, noted that there should be a shift in focus to using  more modern languages for new products. The use of COBOL presents  challenges for agencies such as IRS given that procurement and  operating costs associated with this language will steadily rise, and  because fewer people with the proper skill sets are available to support  the language.", "Further, we reported that IRS\u2019s Individual Master File was over 50 years  old and, although IRS was working to modernize it, the agency did not  have a time frame for completing the modernization or replacement.  Thus, we recommended that the Secretary of the Treasury direct the  Chief Information Officer to identify and plan to modernize and replace  legacy systems, as needed, and consistent with the Office of  Management and Budget\u2019s draft guidance on IT modernization, including  time frames, activities to be performed, and functions to be replaced or  enhanced. The department had no comments on our recommendation.  We will continue to follow-up with the agency to determine the extent to  which this recommendation has been addressed. In addition, we have  ongoing work identifying risks associated with IRS\u2019s legacy IT systems,  and the agency\u2019s management of these risks.", "In summary, IRS faces longstanding challenges in managing its IT  systems. While effective IT management has been a prevalent issue  throughout the federal government, it is especially concerning at IRS  given the agency\u2019s extensive reliance on IT to carry out its mission of  providing service to America\u2019s taxpayers in meeting their tax obligations.  Thus, it is important that the agency establish, document, and implement  policies and procedures for prioritizing its modernization efforts, as we  have recently recommended, and provide Congress with accurate  information on progress in delivering such modernization efforts. In  addition, we have emphasized the need for IRS to address the inherent  challenges associated with aging legacy systems so that it does not  continue to maintain investments that have outlived their effectiveness  and are consuming resources that outweigh their benefits. Continued  attention to implementing our recommendations will be vital to helping  IRS ensure the effective management of its efforts to modernize its aging  IT systems and ensure its multibillion dollar investment in IT is meeting  the needs of the agency.", "Chairman Buchanan, Ranking Member Lewis, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact me at (202) 512-9286 or at pownerd@gao.gov. Individuals who  made key contributions to this testimony are Sabine Paul (Assistant  Director), Rebecca Eyler, and Bradley Roach (Analyst in Charge)."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["IRS 2013 Budget: Continuing to Improve Information on Program Costs  and Results Could Aid in Resource Decision Making, GAO-12-603  (Washington, D.C.: June 8, 2012)", "Information Technology: Consistently Applying Best Practices Could Help  IRS Improve the Reliability of Reported Cost and Schedule Information,  GAO-13-401 (Washington, D.C.: April 17, 2013)", "Information Technology: Agencies Need to Strengthen Oversight of  Multibillion Dollar Investments in Operations and Maintenance,   GAO-14-66 (Washington, D.C.: Nov. 6, 2013)", "Information Technology: IRS Needs to Improve the Reliability and  Transparency of Reported Investment Information, GAO-14-298  (Washington, D.C.: April 2, 2014)", "Information Technology: Management Needs to Address Reporting of  IRS Investments\u2019 Cost, Schedule, and Scope Information, GAO-15-297  (Washington, D.C.: February 25, 2015)", "Information Technology: Federal Agencies Need to Address Aging  Legacy Systems, GAO-16-468 (Washington, D.C.: May 25, 2016)", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-414", "url": "https://www.gao.gov/products/GAO-18-414", "title": "2020 Census: Actions Needed to Improve In-Field Address Canvassing Operation", "published_date": "2018-06-14T00:00:00", "released_date": "2018-07-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The success of the decennial census depends in large part on the Bureau's ability to locate every household in the United States. To accomplish this monumental task, the Bureau must maintain accurate address and map information for every location where a person could reside. For the 2018 End-to-End Test, census workers known as listers went door-to-door to verify and update address lists and associated maps in selected areas of three test sites\u2014Bluefield-Beckley-Oak Hill, West Virginia; Pierce County, Washington; and Providence County, Rhode Island.", "GAO was asked to review in-field address canvassing during the End-to-End Test. This report determines whether key address listing activities functioned as planned during the End-to-End Test and identifies any lessons learned that could inform pending decisions for the 2020 Census. To address these objectives, GAO reviewed key documents including test plans and training manuals, as well as workload, productivity and hiring data. At the three test sites, GAO observed listers conducting address canvassing."]}, {"section_title": "What GAO Found", "paragraphs": ["The Census Bureau (Bureau) recently completed in-field address canvassing for the 2018 End-to-End Test. GAO found that field staff known as listers generally followed procedures when identifying and updating the address file; however, some address blocks were worked twice by different listers because the Bureau did not have procedures for reassigning work from one lister to another while listers work offline. Bureau officials told GAO that they plan to develop procedures to avoid duplication but these procedures have not been finalized. Duplicating work decreases efficiency and increases costs.", "GAO also found differences between actual and projected data for workload, lister productivity, and hiring.", "For the 2020 Census, the Bureau estimates it will have to verify 30 percent of addresses in the field. However, at the test sites, the actual workload ranged from 37 to 76 percent of addresses. Bureau officials told GAO the 30 percent was a nationwide average and not site specific; however, the Bureau could not provide documentation to support the 30 percent workload estimate.", "At all three test sites listers were significantly more productive than expected possibly because a design change provided better quality address and map data in the field, according to the Bureau.", "Hiring, however, lagged behind Bureau goals. For example, at the West Virginia site hiring was only at 60 percent of its goal. Bureau officials attributed the shortfall to a late start and low unemployment rates.", "Workload and productivity affect the cost of address canvassing. The Bureau has taken some steps to evaluate factors affecting its estimates, but continuing to so would help the Bureau refine its assumptions to better manage the operation's cost and hiring.", "Listers used laptops to connect to the Internet and download assignments. They worked offline and went door-to-door to update the address file, then reconnected to the Internet to transmit their completed assignments. Bureau officials told GAO that during the test 11 out of 330 laptops did not properly transmit address and map data collected for 25 blocks. Data were deleted on 7 laptops. Because the Bureau had known there was a problem with software used to transmit address data, it created an alert report to notify the Bureau staff if data were not properly transmitted. However, Bureau officials said that either responsible staff did not follow procedures to look at the alert reports or the reports were not triggered. The Bureau is working to fix the software problem and develop new alert reports, but has not yet determined and addressed why these procedures were not followed.", "The Bureau's data management reporting system did not always provide accurate information because of a software issue. The system was supposed to pull data from several systems to create a set of real-time cost and progress reports for managers to use. Because the data were not accurate, Bureau staff had to rely on multiple systems to manage address canvassing. The Bureau agreed that not only is inaccurate data problematic, but that creating workarounds is inefficient. The Bureau is developing new requirements to ensure data are accurate but these requirements have not been finalized."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations to the Department of Commerce and Bureau including to: (1) finalize procedures for reassigning work, (2) continue to evaluate workload and productivity data, (3) fix software problem, or determine and address why procedures were not followed, and (4) finalize report requirements to ensure data are accurate. The Department of Commerce agreed with GAO's recommendations, and the Bureau provided technical comments that were incorporated, as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government is constitutionally mandated to undertake the  decennial census, a complex and costly activity\u2014estimated at $15.6  billion (dollars inflated to the current 2020 Census time frame fiscal years  2012-2023) for the 2020 Census. The data that the census produces are  used to apportion the seats of the U.S. House of Representatives; realign  the boundaries of the legislative districts of each state; allocate hundreds  of billions of dollars in federal financial assistance; and provide a social,  demographic, and economic profile of the nation\u2019s people to guide policy  decisions at each level of government.", "The success of the census depends largely on the ability of the Census  Bureau (Bureau) to locate every person residing in the United States. To  accomplish this monumental task, the Bureau must maintain accurate  address and map information for every person\u2019s residence. If the  Bureau\u2019s address list and maps are inaccurate, people can be missed,  counted more than once, or included in the wrong location. In an effort to  help control costs, the Bureau is using new procedures to build its  address list for 2020. As these procedures have not been used in prior  decennials, the Bureau has conducted several tests in the last few years  to help ensure the new approach will function as planned and produce a  complete and accurate address database. The 2018 End-to-End Test is  the last opportunity to demonstrate census technology and procedures\u2014 including new methods for building the address list\u2014across a range of  geographic locations, housing types, and demographic groups under  census-like conditions before the 2020 Census.", "On August 28, 2017, the Bureau began what it calls the \u201cin-field\u201d address  canvassing operation for the End-to-End Test where temporary census  employees known as listers walked the streets of designated census  blocks. In three test sites\u2014Bluefield-Beckley-Oak Hill, West Virginia;  Pierce County, Washington; and Providence County, Rhode Island\u2014 listers knocked on doors and, using laptops connected to the internet,  verified the address and geographic location of assigned housing units  and identified any additions, deletions, and any other changes that need  to be made to the address list. For example, they would add converted  basements, attics, and other \u201chidden\u201d housing units to the list.", "You asked us to review how the address canvassing operation performed  as part of the 2018 End-to-End Test. This report (1) determines the extent  to which key \u201cin-field\u201d address listing activities functioned as planned and  (2) identifies any lessons learned that could potentially affect pending  decisions for the 2020 Census.", "To address these objectives, we reviewed key documents including the  2018 End-to-End Test plan that discussed the goals and objectives for  the test, as well as training manuals and other related documents for  address canvassing. We interviewed Bureau staff at the three 2018  Census test sites including census field supervisors (CFS), address  listers, and office personnel to discuss what went well and what  challenges they faced during address canvassing. At each test site, the  Bureau selected Census field staff for us to interview and observe from  among those working on the days of our visits. At all three test sites, we  observed listers conduct address canvassing. In addition, we used the  training manuals to determine whether listers collected address  information as prescribed by the Bureau. In total we conducted 18 in-field  observations of listers and used a data collection instrument to document  our observations. These observations are not generalizable. We also  interviewed Bureau headquarters officials to discuss the use of  management reports for monitoring and overseeing the operation.", "We reviewed workload estimates, address lister productivity rates, and  hiring information for each test site in order to report how many housing  units were included at each test site, how many addresses the Bureau  expected to canvass per hour, and how many people they needed to hire.  To assess the reliability of these data, we reviewed available  documentation and interviewed knowledgeable officials. We found the  data to be sufficiently reliable for the purposes of our reporting objectives.  We also met periodically with Bureau headquarters staff to discuss  progress of the operation.", "We conducted this performance audit from July 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Bureau\u2019s address canvassing operation updates its address list and  maps, which are the foundation of the decennial census. An accurate  address list both identifies all households that are to receive a notice by  mail requesting participation in the census (by Internet, phone, or mailed- in questionnaire) and serves as the control mechanism for following up  with households that fail to respond to the initial request. Precise maps  are critical for counting the population in the proper locations\u2014the basis  of congressional apportionment and redistricting.", "Our prior work has shown that developing an accurate address list is  challenging\u2014in part because people can reside in unconventional  dwellings, such as converted garages, basements, and other forms of  hidden housing. For example, as shown in figure 1, what appears to be a  single-family house could contain an apartment, as suggested by its two  doorbells.", "During address canvassing, the Bureau verifies that its master address  list and maps are accurate to ensure the tabulation for all housing units  and group quarters is correct. For the 2010 Census, the address  canvassing operation mobilized almost 150,000 field workers to canvass  almost every street in the United States and Puerto Rico to update the  Bureau\u2019s address list and map data\u2014and in 2012 reported the cost at  nearly $450 million. The cost of going door-to-door in 2010, along with the  emerging availability of imagery data, led the Bureau to explore an  approach for 2020 address canvassing that would allow for fewer boots  on the ground.", "Traditionally, the Bureau went door-to-door to homes across the country  to verify addresses. This \u201cin-field address canvassing\u201d is a labor-intensive  and expensive operation. To achieve cost savings, in September 2014  the Bureau decided to use a reengineered approach for building its  address list for the 2020 Census and not go door-to-door (or \u201cin-field\u201d)  across the country, as it has in prior decennial censuses. Rather, some  areas (known as \u201cblocks\u201d) would only need a review of their address and  map information using computer imagery and third-party data sources\u2014 what the Bureau calls \u201cin-office\u201d address canvassing procedures.", "According to the Bureau\u2019s address canvassing operational plan, in-office  canvassing had two phases:", "During the first phase, known as \u201cInteractive Review,\u201d Bureau  employees use current aerial imagery to determine if areas have  housing changes, such as new residential developments or  repurposed structures, or if the areas match what is in the Bureau\u2019s  master address file. The Bureau assesses the extent to which the  number of housing units in the master address file is consistent with  the number of units visible in the current imagery. If the housing  shown in the imagery matches what is listed in the master address  file, then those areas are considered to be resolved or stable and  would not be canvassed in-field.", "During the second phase, known as \u201cActive Block Resolution,\u201d  employees would try to resolve coverage concerns identified during  the first phase and verify every housing unit by virtually canvassing  the entire area. As part of this virtual canvass, the Bureau would  compare what is found in imagery to the master address file data and  other data sources in an attempt to resolve any discrepancies. If  Bureau employees still could not reconcile the discrepancies, such as  housing unit count or street locations with what is on the address list,  then they would refer these blocks to in-field address canvassing.", "However, in March 2017, citing budget uncertainty the Bureau decided to  discontinue the second phase of in-office review for the 2020 Census.  According to the Bureau, in order to ensure that the operations  implemented in the 2018 End-to-End Test were consistent with  operations planned for the 2020 Census, the Bureau added the blocks  originally resolved during the second phase of in-office review back into  the in-field workload for the test. The cancellation of Active Block  Resolution is expected to increase the national workload of the in-field  canvassing workload by 5 percentage points (25 percent to 30 percent).", "During in-field address canvassing, listers use laptop computers to  compare what they see on the ground to what is on the address list and  map. Listers confirm, add, delete, or move addresses to their correct map  positions. At each housing unit, listers are trained to speak with a  knowledgeable resident to confirm or update address data, ask about  hidden housing units, confirm the housing unit location on the map,  (known as the map spot) and collect a map spot using global positioning  systems (GPS). If no one is available, listers are to use house numbers  and street signs to verify the address data. The data are transmitted  electronically to the Bureau.", "The Census Bureau expects that the End-to-End Test for address  canvassing will identify areas for improvement and changes that need to  be made for the 2020 Census. Our prior work has shown the importance  of robust testing. Rigorous testing is a critical risk mitigation strategy  because it provides information on the feasibility and performance of  individual census-taking activities, their potential for achieving desired  results, and the extent to which they are able to function together under  full operational conditions.", "In February 2017, we added the 2020 Census to GAO\u2019s High-Risk List  because operational and other issues are threatening the Bureau\u2019s ability  to deliver a cost-effective enumeration. We reported on concerns about  the Bureau\u2019s capacity to implement innovative census-taking methods,  uncertainties surrounding critical information technology systems, and the  quality of the Bureau\u2019s cost-estimates. Underlying these issues are  challenges in such essential management functions as the Bureau\u2019s  ability to:  collect and use real-time indicators of cost, performance, and  schedule;  follow leading practices for cost estimation; scheduling; risk  management; IT acquisition, development, testing, and security; and  cost-effectively deal with contingencies including, for example, fiscal  constraints, potential changes in design, and natural disasters."], "subsections": []}, {"section_title": "The Listers Generally Followed Procedures, but the Bureau Experienced Some Issues Reassigning Work, Estimating Workload and Lister Productivity, and Managing to Staffing Goals", "paragraphs": ["The Bureau completed in-field address canvassing as scheduled by  September 29, 2017, canvassing approximately 340,400 addresses. Most  of the listers we observed generally followed procedures. For example, 15  of 18 listers knocked on doors, and 16 of 18 looked for hidden housing  units, which is important for establishing that address lists and maps are  accurate and for identifying hard-to-count populations. Those procedures  include taking such steps as:  comparing the housing units they see on the \u201cground\u201d to the housing  units on the address list,  knocking on all doors so they could speak with a resident to confirm  the address (even if the address is visible on the mailbox or house)  and to confirm that there are no other living quarters such as a  basement apartment,  looking for \u201chidden housing units\u201d,  looking for group quarters such as group homes or dormitories, and  confirming the location of the housing unit on a map with GPS  coordinates collected on the doorstep.", "To the extent procedures were not followed, it generally occurred when  listers did not go up to the door and speak with a resident or take a map  spot on the doorstep. Failure to follow procedures could adversely affect  a complete count, as addresses could be missed or a group quarter could  be misclassified as a residential address. After we alerted the Bureau to  our observations, the Bureau agreed moving forward, to emphasize the  importance of following procedures during training for in-field address  canvassing."], "subsections": [{"section_title": "Some Listers Duplicated Each Other\u2019s Work Due to a Lack of Operational Procedures for Reassigning Work", "paragraphs": ["Address canvassing has tight time frames, so work needs to be assigned  efficiently. Sometimes this means the Bureau needs to reassign work  from one lister to another. During address canvassing, the Bureau  discovered that reassigned census blocks sometimes would appear in  both the new and the original listers\u2019 work assignments. In some cases,  this led to blocks being worked more than once, which decreased  efficiency, increased costs, and could create confusion and credibility  issues when two different listers visit a house.", "According to Bureau procedures, listers were instructed to connect to the  Bureau\u2019s Mobile Case Management (MCM) system to download work  assignments (address blocks) and to transmit their completed work at the  beginning and end of the work day but not during the work day. Thus  during the work day, they were unaware when unworked blocks had been  reassigned to another lister. Bureau officials also told us that the Listing  and Mapping Application (LiMA) software used to update the address file  and maps was supposed to have the functionality to prevent blocks from  being worked more than once, but this functionality was not developed  because of budget cuts.", "For 2020, Bureau officials told us they plan to create operational  procedures for reassigning work. According to Bureau officials, they plan  to require supervisors to contact the original lister when work is  reassigned. We have requested a copy of those procedures; however,  the Bureau has not finalized them. Standards for Internal Control in the  Federal Government (Standards for Internal Control) call for management  to design control activities, such as policies and procedures to achieve  objectives. Finalizing these procedures should help prevent blocks from  being canvassed more than once."], "subsections": []}, {"section_title": "The Bureau Has Not Evaluated Workload, Productivity Rates, and Staffing Assumptions for Address Canvassing", "paragraphs": ["The Bureau conducts tests under census-like conditions, in part, to verify  2020 Census planning assumptions, such as workload, how many  houses per hour a lister can verify (also known as a lister\u2019s productivity  rate), and how many people the Bureau needs to hire for an operation.  Moreover, one of the objectives of the test is to validate that the  operations being tested are ready at the scale needed for the 2020  Census. For the 2018 End-to-End Test, the Bureau completed in-field  address canvassing on time at two sites and early at one site; despite  workload increases at all three test sites and hiring shortfalls at two sites.  The Bureau credits this success to better than expected productivity. As  the Bureau reviews the results of address canvassing, evaluating the  factors that affected workload, productivity rates, and staffing and making  adjustments to its estimates, if necessary, before the 2020 Census would  help the Bureau ensure that address canvassing has the appropriate  number of staff and equipment to complete the work in the required time  frame."], "subsections": [{"section_title": "Workload", "paragraphs": ["For the 2020 Census, the Bureau estimates it will have to send 30  percent of addresses to the field for listers to verify. However, at the three  test sites, the workload was higher than this estimate (see table 1). At one  test site, the percent of addresses verified through in-field address  canvassing was 76 percent or 46 percentage points more than the  Bureau\u2019s expected 2020 Census in-field address canvassing workload  estimate of 30 percent.", "Bureau officials told us that the 30 percent in-field workload estimate is a  national average and is not specific to any of the three test sites. Prior to  the test, officials said that the Bureau also knew that the West Virginia  site was assigning new addresses to some of the test site\u2019s housing units  due to local government emergency 911 address conversion and that the  in-field workload would be greater in West Virginia when compared to the  other test sites.", "We requested documentation for the Bureau\u2019s original estimate that 30  percent of the 133.8 million expected addresses would be canvassed in- field for the 2020 Census. However, the Bureau was unable to provide us  with documentation to support how they arrived at the 30 percent  estimate. Instead, the Bureau provided us with a November 2017  methodology document that showed three in-field address canvassing  workload scenarios, whereby, between 41.9 and 45.1 percent of housing  units would need to go to the field for address canvassing. The three  scenarios consider a range of stability in the address file as well as  different workload estimates for in-field follow-up. At 30 percent the  Bureau would need to canvass about 40.2 million addresses; however, at  41.9 and 45.1 percent the Bureau would need to canvass between 56  million and 60.4 million addresses, respectively. According to Bureau  officials, they are continuing to assess whether changes to its in-office  address canvassing procedures would be able to reduce the in-field  address canvassing workload to 30 percent, while at the same time  maintaining address quality. However, Bureau officials did not provide us  with documentation to show how the in-field address canvassing  workload would be reduced because the proposed changes were still  being reviewed internally.", "Workload for address canvassing directly affects cost \u2013 the greater the  workload the more people as well as laptop computers needed to carry  out the operation. We found that the 30 percent workload threshold is  what is reflected in the December 2017 updated 2020 Census cost  estimate that was used to support the fiscal year 2019 budget request.  Thus, if the 30 percent threshold is not achieved then the in-field  canvassing workload will likely increase for the 2020 Census and the  Bureau would be at risk of exceeding its proposed budget for the address  canvassing operation.", "Standards for Internal Control call for organizations to use quality  information to achieve their objectives. Thus, continuing to evaluate and  finalize workload estimates for in-field address canvassing with the most  current information will help ensure the Bureau is well-positioned to  conduct addressing canvassing for the 2020 Census. For example,  according to Bureau officials, preliminary workload estimates will need to  be delivered by January 2019 for hiring purposes and the final in-field  workload numbers for address canvassing will need to be determined by  June 2019 for the start of address canvassing, which is set to begin in  August 2019. Moreover, by February 2019 the Bureau\u2019s schedule calls for  it to determine how many laptops will be needed to conduct 2020 Census  address canvassing."], "subsections": []}, {"section_title": "Lister Productivity", "paragraphs": ["At the test sites, listers were substantially more productive than the  Bureau expected. The expected production rate is defined as the number  of addresses expected to be completed per hour, and it affects the cost of  the address canvassing operation. This rate includes time for actions  other than actually updating addresses, such as travel time. In the 2010  Census the rates reflected different geographic areas, and the country  was subdivided into three areas: urban/suburban, rural, and very rural.  According to Bureau officials, for the 2020 Census the Bureau will have  variable production rates based on geography, similar to the design used  in the 2010 Census. The Bureau told us they have not finalized the 2020  Census address canvassing production rates.", "Table 2 shows the expected and actual productivity rates (addresses per  hour) for the in-field address canvassing operation at all three test sites.", "To ensure address canvassing for the test was consistent with the 2020  Census, Bureau officials told us they included the blocks resolved during  the now discontinued second phase of in-office review, into the in-field  workload for the test. The Bureau attributed the greater productivity to this  discontinued second phase. Bureau officials told us that they believe that  listers spent less time updating those blocks because they had already  been resolved, and any necessary changes were already incorporated.  Moreover, while benefitting from the second phase of in-office address  canvassing may be one explanation for why listers were more productive.  Bureau officials told us that they are unable to evaluate the differences in  expected versus actual productivity for blocks added to the workload as a  result of the discontinued second phase because of limitations with the  data. However, there could be other reasons as well such as travel time  and geography. Standards for Internal Control require that organizations  use quality information to achieve their objectives. Therefore, continuing  to evaluate other factors from the 2018 End-to-End Test that may have  increased or could potentially decrease productivity will be important for  informing lister productivity rates for 2020, as productivity affects the  number of listers needed to carry out the operation, the number of staff  hours charged to the operation, and the number of laptops to be  procured."], "subsections": []}, {"section_title": "Hiring", "paragraphs": ["For the 2018 End-to-End Test address canvassing operation, the Bureau  hired fewer listers than it assumed it needed at two sites and hired more  at the other site. In West Virginia, 60 percent of the required field staff  was hired and in Washington, 74.5 percent of the required field staff was  hired. Nevertheless, the operation finished on schedule at both these  sites. In contrast in Rhode Island the Bureau hired 112 percent of the  required field staff and finished early.", "According to Bureau officials, both the West Virginia and Washington  state test sites started hiring field staff later than expected because of  uncertainty surrounding whether the Bureau would have sufficient funding  to open all three test sites for the 2018 End-to-End Test. When a decision  was made to open all three sites for the address canvassing operation  only, that decision came late, and Bureau officials told us that once they  were behind in hiring and were never able to catch up because of low  unemployment rates and the short duration of the operation. According  to Bureau officials, their approach to hiring for the 2018 End-to-End Test  was similar to that used for the 2010 and 2000 Censuses. In both  censuses the Bureau\u2019s goal was to recruit and hire more workers than it  needed because of immutable deadlines and attrition.", "After the 2010 Census we reported that the Bureau had over recruited;  conversely, for the 2000 Census the Bureau had recruited in the midst of  one of the tightest labor markets in three decades. Thus we  recommended, and the Bureau agreed to evaluate current economic  factors that are associated with and predictive of employee interest in  census work, such as national and regional unemployment levels, and  use these available data to determine the potential temporary workforce  pool and adjust its recruiting approach. The Bureau implemented this  recommendation, and used unemployment and 2010 Census data to  determine a base recruiting goal at both the Los Angeles, California and  Houston, Texas 2016 census test sites. Specifically, the recruiting goal for  Los Angeles was reduced by 30 percent.", "Bureau officials told us that it continues to gather staffing data from the  2018 End-to-End Test that will be important to consider looking forward to  2020. Although address canvassing generally finished on schedule even  while short staffed, Bureau officials told us they are carefully monitoring  recruiting and hiring data to ensure they have sufficient staff for the test\u2019s  next census field operation non-response follow-up, when census  workers go door-to-door to follow up with housing units that have not  responded. Non-response follow-up is set to begin in May 2018.  According to test data as of March 2018, the Bureau is short of its  recruiting goal for this operation which is being conducted in Providence  County, Rhode Island. The Bureau\u2019s goal is to recruit 5,300 census  workers and as of March 2018, the Bureau had only recruited 2,732  qualified applicants to fill 1,166 spots for training and deploy 1,049 census  workers to conduct non-response follow-up. Bureau officials told us they  believe that low unemployment is making it difficult to meet its recruiting  goals in Providence County, Rhode Island, but they are confident they will  be able to hire sufficient staff without having to increase pay rates.", "Recruiting and retaining sufficient staff to carry out operations as labor- intensive as address canvassing and nonresponse follow-up for the 2020  Census is a huge undertaking with implications for cost and accuracy.  Therefore, striking the right staffing balance for the 2020 Census is  important for ensuring deadlines are met and costs are controlled."], "subsections": []}]}]}, {"section_title": "Resolving Challenges from the Address Canvassing Test Will Better Position the Bureau for the 2020 Census", "paragraphs": [], "subsections": [{"section_title": "The Bureau Does Not Have Procedures to Ensure All Collected Address Canvassing Data Are Retained", "paragraphs": ["Bureau officials told us that during the test 11 out of 330 laptop computers  did not properly transmit address and map data collected for 25 blocks.  The lister-collected address file and map data are supposed to be  electronically transmitted from the listers\u2019 laptops to the Bureau\u2019s data  processing center in Jeffersonville, Indiana. The data are encrypted and  remain on the laptop until the laptops are returned to the Bureau where  the encrypted data are deleted. Prior to learning that not all data had  properly transmitted off the laptops, data on seven of the laptops was  deleted. Data on the remaining four laptops were still available. In  Providence, Rhode Island, where the full test will take place, the Bureau  recanvassed blocks where data were lost to ensure that the address and  map information for nonresponse follow-up was correct. Recanvassing  blocks increases costs and can lead to credibility problems for the Bureau  when listers visit a home twice.", "Going into address canvassing for the End-to-End Test, Bureau officials  said they knew there was a problem with the LiMA software used to  update the Bureau\u2019s address lists and maps. Specifically, address and  map updates would not always transfer when a lister transmitted their  completed work assignments from the laptop to headquarters. Other  census surveys using LiMA had also encountered the same software  problem. Moreover, listers were not aware that data had not transmitted  because there was no system-generated warning. Bureau officials are  working to fix the LiMA software problem, but told us that the software  problem has been persistent across other census surveys that use LiMA  and they are not certain it will be fixed.", "Bureau officials told us that prior to the start of address canvassing they  created an alert report to notify Bureau staff managing the operation at  headquarters if data were not properly transmitted. When transmission  problems were reported, staff was supposed to remotely retrieve the data  that were not transmitted. This workaround was designed to safeguard  the data but according to officials was not used. Bureau officials told us  that they do not know whether this was because the alert reports were not  viewed by responsible staff or whether the alert report to notify the  Bureau staff managing the operation was not triggered. Bureau officials  told us they recognize the importance of following procedures to monitor  alert reports, and acknowledge that the loss of data on seven of the  laptops may have been avoided had the procedures that alert reports get  triggered and monitored been followed; however, officials did not know  why the procedures were not followed.", "For 2020, if the software problem is not resolved, then officials said the  Bureau plans to create two new alert reports to monitor the transmission  of data. One report would be triggered when the problem occurs and a  second report would capture a one-to-one match between data on the  laptop and data transmitted to the data center so that discrepancies  would be immediately obvious. While these new reports should help  ensure that Bureau staff are alerted when data has not properly  transmitted, the Bureau has not determined and addressed why the  procedures that required an alert report get triggered and then reviewed  by Bureau staff did not work as intended. Standards for Internal Control  require that organizations safeguard data and follow policies and  procedures to achieve their objectives. Thus, either fixing the LiMA  software problem, or if the software problem cannot be fixed, then  determining and addressing why procedures that alert reports get  triggered and monitored were not followed would position the Bureau to  help prevent future data losses."], "subsections": []}, {"section_title": "More Useful and Accurate Monitoring Data for Field Supervisors Would Strengthen Management of Operations", "paragraphs": ["To effectively manage address canvassing, the Bureau needs to be able  to monitor the operation\u2019s progress in near real time. Operational issues  such as listers not working assigned hours or falling behind schedule  need to be resolved quickly because of the tight time frames of the  address canvassing and subsequent operations. During the address  canvassing test, the Bureau encountered several challenges that  hindered its efforts to efficiently monitor lister activities as well as the  progress of the address canvassing operation."], "subsections": [{"section_title": "System Alerts Were Not Consistently Used by Supervisors", "paragraphs": ["The Bureau provides data-driven tools for the census field supervisors to  manage listers, including system alerts that identify issues that require the  supervisor to follow-up with a lister. For the address canvassing  operation, the system could generate 14 action codes that covered a  variety of operational issues such as unusually high or low productivity  (which may be a sign of fraud or failure to follow procedures) and  administrative issues such as compliance with overtime and completion of  expense reports and time cards.", "During the operation, over 8,250 alerts were sent to CFSs or about 13  alerts were sent per day per CFS. Each alert requires the CFS to take  action and then record how the alert was resolved. CFSs told us and the  Bureau during debriefing sessions that they believed many of the  administrative alerts were erroneous and they dismissed them. For  example, during our site visit one CFS showed us an alert that incorrectly  identified that a timecard had not been completed. The CFS then showed  us that the lister\u2019s timecard had indeed been properly completed and  submitted. CFSs we spoke to said that they often dismissed alerts related  to expense reports and timecards and did not pay attention to them or  manage them. Bureau officials reported that one CFS was fired for not  using the alerts to properly manage the operation.", "To assist supervisors, these alerts need to be reliable and properly used.  Bureau officials said that they examined alerts for errors after we told  them about our observation. They reported that they did not find any  errors in the alerts. They believe that CFSs may not fully understand that  the alerts stay active until they are marked as resolved by the CFS. For  example, if a CFS gets an alert that a lister has not completed a timecard  the alert will remain active until the CFS resolves the alert by stating the  time card was completed. The Bureau\u2019s current CFS manual does not  address that by the time a CFS sees the alert a lister may have already  taken action to resolve it. Because this was a reoccurring situation, CFSs  told us they had a difficult time managing the alerts.", "Standards for Internal Control call for an agency to use quality information  to achieve objectives. Bureau officials acknowledge that it is a problem  that some CFSs view the alerts as erroneous and told us they plan to  address the importance of alerts in training. We spoke to Bureau officials  about making the alerts more useful to CFSs, such as by differentiating  between critical and noncritical alerts and streamlining alerts by perhaps  combining some of them. Bureau officials told us they would monitor the  alerts during the 2018 End-to-End Test\u2019s nonresponse follow-up  operation and make adjustments if appropriate. However, while the  Bureau told us it will monitor alerts for the non-response follow-up  operation, the Bureau does not have a plan for how it will examine and  make alerts more useful.", "Ensuring alerts are properly followed up on is critical to the oversight and  management of an operation. If the CFSs view the alerts as unreliable,  they could be likely to miss key indicators of fraud such as unusually high  or low productivity or an unusually high or low number of miles driven.  Moreover, monitoring overtime alerts and the submission of daily time  cards and expense reports is also important to ensure that overtime is  appropriately approved before worked and that listers get paid on time."], "subsections": []}, {"section_title": "The Bureau\u2019s Management Dashboard Did Not Always Display Accurate Information", "paragraphs": ["Another tool the Bureau uses to monitor operations is its Unified Tracking  System (UTS), a management dashboard that combines data from a  variety of Census systems, bringing the data to one place where the  users can run or create reports. It was designed to track metrics such as  the number and percentage of blocks assigned and blocks completed as  well as the actual expenditures of an operation compared to the budgeted  expenditures. However, information in UTS was not always accurate  during address canvassing. For example UTS did not always report the  correct number of addresses assigned and completed by site. As a result,  Bureau managers reported they did not rely on UTS and instead used  data from the source systems that fed into it. Bureau officials agreed that  inaccurate data is a problem and that this workaround was inefficient as  users had to take extra time to go to multiple systems to get the correct  data.", "Bureau officials reported problems importing information from the feeder  systems into UTS because of data mismatches. They said that address  canvassing event codes were not processed sequentially, as they should  have been, which led to inaccurate reporting. Bureau officials told us  that they did not specify that the codes needed to be processed in  chronological order as part of the requirements for UTS. Bureau officials  said UTS passed the requisite readiness reviews and tests. However,  Bureau officials also acknowledged that some of these problems could  have been caught by exception testing which was not done prior to  production.", "To resolve this issue for 2020, Bureau officials stated they are developing  new requirements for UTS to automatically consider the chronological  order of event codes. The Bureau told us they are working on these UTS  requirements and will provide us with documentation when they are  complete. They also said the Bureau plans to implement a process which  compares field management reports with UTS reports to help ensure that  the reports have the same definitions and are reporting accurate  information. Standards for Internal Control call for an organization\u2019s data  be complete and accurate and processed into quality information to  achieve their objectives. Thus, finalizing UTS requirements for the  address canvassing reporting should help increase efficiency for the 2020  Census by avoiding time consuming workarounds."], "subsections": []}]}, {"section_title": "The Bureau Does Not Have Documented Procedures to Address Broadband Internet Service Coverage Gaps", "paragraphs": ["The Bureau has taken significant steps to use technology to reduce  census costs. These steps include using electronic systems to transmit  listers\u2019 assignments and address and map data. However, during the  address canvassing test, several listers and CFSs at the three test sites  experienced problems with Internet connections primarily during training.  The West Virginia site, which was more rural than the other sites,  experienced the most problems with Internet connectivity. All six West  Virginia CFSs reported Internet connectivity problems during the  operation. As a work around, CFSs told us that a couple of their listers  transmitted their work assignments from libraries where they could  access the Internet.", "Bureau officials stated that the laptops in the 2018 End-to-End Test only  used two broadband Internet service providers, which may have  contributed to some of the Internet access issues. Bureau officials added  that despite the reported Internet connectivity issues, the 2018 End-to- End Test for address canvassing finished on schedule and without any  major problems. While this might be true for the test, we have previously  reported that minor problems can become big challenges when the  census scales up to the entire nation. Therefore, it is important that  these issues get resolved before August 2019 when in-field address  canvassing for the 2020 Census is set to begin.", "The Bureau is analyzing the cellular network coverage across all 2020  Census areas using coverage maps and other methods to determine  which carrier is appropriate (including a backup carrier) for geographic  areas where network coverage is limited. According to Bureau officials,  they anticipate identifying the cellular carriers for each of its 248 area  census offices by the summer of 2018. The officials said they are  considering both national and regional carriers to provide service in some  geographic areas because the best service provider in a certain  geographic area may not be one of the national providers, but a regional  provider. In those cases, listers and other staff in those areas will receive  devices with the regional carrier. According to Bureau officials, for the  2020 Census, the ability to access multiple carriers should provide field  staff with better connectivity around the country.", "We also found that there was no guidance for listers and CFSs on what to  do if they experienced Internet connectivity problems and were unable to  access the Internet. Bureau officials told us that staff in the field can use  different methods to access the Internet, such as using home wireless  networks or mobile hotspots located at libraries, or coffee shops to  transmit data. However, the Bureau did not provide such instructions to  listers. In addition, the Bureau also does not define what constitutes a  secure Internet public connection. Ensuring data are safeguarded is  important because census data are confidential. Bureau officials told us  that the Bureau plans to provide instructions to field staff on what to do if  they are unable to access census systems and what constitutes a secure  Internet connection for the next 2018 End-to-End Test field operation,  non-response follow-up. However, the Bureau has not finalized or  documented these instructions. Standards for Internal Control call for  management to design control activities, such as providing instructions to  employees to achieve objectives. Finalizing these instructions to field staff  will help ensure listers have complete information on how to handle  problems with Internet connectivity and that data are securely transmitted."], "subsections": []}, {"section_title": "The Bureau Has Not Identified Alternative Sites for Listers to Take Online Training When Access to the Internet is Unavailable", "paragraphs": ["Some listers had difficulty accessing the Internet to take online training for  address canvassing. This is the first decennial census that the Bureau is  using online training, in previous decennials training was instructor-led in  a class room. According to the Bureau, in addition to the Bureau provided  laptop, listers also needed a personal home computer or laptop and  Internet access at their home in order to complete the training. However,  while the Bureau reported that listers had access to a personal computer  to complete the training, we found some listers did not have access to the  Internet at their home and were forced to find workarounds to access the  training.", "According to American Community Survey data from 2015, among all  households, 77 percent had a broadband Internet subscription. Bureau  officials told us they are aware that not all households have access to the  Internet and that the Bureau\u2019s field division is working on back-up plans  for accessing online training. Specifically, Bureau officials told us for 2020  they plan to identify areas of the country that could potentially have  connectivity issues and plan to identify alternative locations such as  libraries or community centers where Internet connections are available to  ensure all staff has access to training. However, they have not finalized  those plans to identify locations for training sites. Standards for Internal  Control call for management to design control activities, such as having  plans in place to achieve objectives. Finalizing these plans to identify  alternative training locations will help ensure listers have a place to  access training."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Bureau\u2019s re-engineered approach for address canvassing shows  promise for controlling costs and maintaining accuracy. However, the  address canvassing operation in the 2018 End-to-End test identified the  need to reexamine assumptions and make some procedural and  technological improvements. For example, at a time when plans for in- field address canvassing should be almost finalized, the Bureau is in the  process of evaluating workload and productivity assumptions to ensure  sufficient staff are hired and that enough laptop computers are procured.  Moreover, Bureau officials have not finalized (1) procedures for  reassigning work from one lister to another to prevent the unnecessary  duplication of work assignments, (2) instructions for using the Internet  when connectivity is a problem to ensure listers have access to training  and the secure transmission of data to and from the laptops, and (3)  plans for alternate training locations. To ensure address and map data  are not lost during transmission, Bureau officials will also need to either  (1) fix the problem with the LiMA software used to update the address  and map files or (2) determine and address why procedures that alert  reports be triggered and monitored were not followed.", "Finally, the Bureau has made progress in using data driven technology to  manage address canvassing operations. However, ensuring data used by  supervisors to oversee and monitor operations are both useful and  accurate will help field supervisors take appropriate action to address  supervisor alerts and will help managers monitor the real-time progress of  the address canvassing operation. With little time remaining it will be  important to resolve these issues. Making these improvements will better  ensure address canvassing for the actual enumeration, beginning in  August 2019, fully functions as planned and achieves desired results."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following seven recommendations to the Department  of Commerce and the Census Bureau:", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau continues to evaluate and finalize workload estimates  for in-field address canvassing as well as evaluates the factors that  impacted productivity rates during the 2018 End-to-End Test and, if  necessary, make changes to workload and productivity assumptions  before the 2020 Census in-field address canvassing operation to help  ensure that assumptions that impact staffing and the number of  laptops to be procured are accurate. (Recommendation 1)", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau finalizes procedures for reassigning blocks to prevent  the duplication of work. (Recommendation 2)", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau finalizes backup instructions for the secure  transmission of data when the Bureau\u2019s contracted mobile carriers are  unavailable. (Recommendation 3)", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau finalizes plans for alternate training locations in areas  where Internet access is a barrier to completing training.  (Recommendation 4)", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau takes action to either fix the software problem that  prevented the successful transmission of data, or if that cannot be  fixed, then determine and address why procedures that alert reports  be triggered and monitored were not followed. (Recommendation 5)", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau develops a plan to examine how to make CFS alerts  more useful so that CFSs take appropriate action, including alerts a  CFS determines are no longer valid because of timing differences.  (Recommendation 6)", "Secretary of Commerce should ensure the Director of the U.S.", "Census Bureau finalizes UTS requirements for address canvassing  reporting to ensure that the data used by census managers who are  responsible for monitoring real-time progress of address canvassing  are accurate before the 2020 Census. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Commerce. In its  written comments, reproduced in appendix I the Department of  Commerce agreed with our recommendations. The Census Bureau also  provided technical comments that we incorporated, as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we are sending copies of this report to the  Secretary of Commerce, the Under Secretary of Economic Affairs, the  Acting Director of the U.S. Census Bureau, and interested congressional  committees. The report also will be available at no charge on GAO\u2019s  website at http://www.gao.gov.", "If you have any questions about this report please contact me at (202)  512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made major contributions to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Lisa Pearson, Assistant Director;  Kate Wulff, Analyst-in-Charge; Mark Abraham; Devin Braun; Karen  Cassidy; Robert Gebhart; Richard Hung; Kirsten Lauber; Krista Loose; Ty  Mitchell; Kayla Robinson; Kate Sharkey; Stewart Small; Jon Ticehurst;  and Timothy Wexler made key contributions to this report."], "subsections": []}]}], "fastfact": ["The success of the census depends in large part on the Census Bureau's ability to record every location where a person resides. An ever-changing housing inventory and \"hidden\" housing\u2014such as a converted attic or shed that may not show up in records\u2014make this huge task even more difficult.", "As part of a test run, census workers went door-to-door to try to record each housing unit in selected areas in 3 states. We reviewed this effort and found the workers generally followed procedures but software problems sometimes kept them from transmitting data they collected.", "We made 7 recommendations for the 2020 Census."]}
{"id": "GAO-18-241", "url": "https://www.gao.gov/products/GAO-18-241", "title": "Hanford Waste Treatment Plant: DOE Needs to Take Further Actions to Address Weaknesses in Its Quality Assurance Program", "published_date": "2018-04-24T00:00:00", "released_date": "2018-04-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOE and its contractor are building the WTP\u2014which consists of multiple facilities\u2014to treat a large portion of nuclear waste at Hanford. The project has faced persistent challenges, including quality assurance problems that have delayed it by decades and more than tripled its costs, to nearly $17 billion. DOE's quality assurance framework aims to ensure that all problems are identified and do not recur.", "Senate Report 114-49 accompanying the National Defense Authorization Act for Fiscal Year 2016 included a provision for GAO to carry out an ongoing evaluation of the WTP. This first report examines (1) the actions DOE has taken to identify and address WTP quality assurance problems, (2) the extent to which DOE has ensured that quality assurance problems have been identified and do not recur, and (3) the extent to which DOE's organizational structure at ORP provides the Quality Assurance Division with independence to effectively oversee the contractor's quality assurance program. GAO reviewed DOE documents and obtained the insights of ORP's internal experts on WTP quality assurance efforts and outcomes."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy (DOE) has taken several actions to identify and address quality assurance problems at the Waste Treatment and Immobilization Plant (WTP) at its Hanford site in Washington. Among the actions taken is the implementation of the Managed Improvement Plan by DOE's Office of River Protection (ORP) and the WTP contactor. The plan is intended to ensure that the WTP can operate in compliance with DOE-approved safety and quality requirements. The contractor has stated that the plan is fully implemented, but GAO found that a number of key activities may be incomplete and ORP officials will not be able to verify the extent of implementation until December 2018.", "According to DOE documents that GAO reviewed and ORP quality assurance experts GAO spoke with, ORP has not ensured that all WTP quality assurance problems have been identified and some previously identified problems are recurring. For example, a 2016 DOE report found quality assurance problems, such as engineering errors and construction deficiencies, that neither ORP nor the contractor had identified when the work was conducted. ORP quality assurance experts GAO spoke with reiterated the issues identified in reports. In addition, DOE audits have found that previously identified quality assurance problems have recurred in key areas, such as the procurement of items that do not meet requirements or perform as specified. These problems were also raised by several of the ORP quality assurance experts GAO interviewed. According to these experts, such recurring problems may lead to significant rework at WTP facilities in the future if work is not stopped and the issues addressed. ORP's quality assurance framework requires the contractor to determine the extent to which quality assurance problems exist in all WTP structures, systems, and components when such problems are identified, and allows ORP to stop work at a facility if recurring issues arise. However, ORP has neither directed the contractor to make this determination nor stopped work when problems recur because it has confidence in the Managed Improvement Plan.", "ORP's organizational structure may not provide its Quality Assurance Division with sufficient independence from the office's upper management to oversee the contractor's quality assurance program effectively. GAO has previously found that an oversight organization should be structurally distinct and separate from program offices responsible for cost and schedule performance to avoid conflict between mission objectives and safety. However, a 2017 DOE headquarters assessment found that ORP's Quality Assurance Division's effectiveness has been limited. This is because in some cases ORP upper management had mischaracterized its findings, and in other instances, ORP upper management had not used this division to evaluate the extent of potential quality assurance problems. ORP quality assurance experts GAO spoke to were also concerned that ORP's organizational structure does not always ensure the independence of the division. For example, two of these experts described instances when ORP upper management had downgraded the division's findings so that the contractor could take less stringent corrective measures. By providing the Quality Assurance Division adequate independence, DOE can better ensure that compliance with nuclear safety requirements will not be subordinated to other project management goals, such as meeting cost and schedule targets."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOE direct the WTP contractor to determine the extent of problems in WTP structures, systems, and components and order work stops when problems recur, and DOE should direct ORP to revise its organizational structure to ensure the independence of the Quality Assurance Division. DOE generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Energy (DOE) is responsible for one of the world\u2019s  largest environmental cleanup programs: the treatment and disposal of  millions of gallons of radioactive and hazardous waste at its 586-square- mile Hanford Site in southeastern Washington State. This waste was  created as a by-product of producing plutonium and other special nuclear  materials for nuclear weapons, starting during World War II and  continuing until the late 1980s. The most hazardous and radioactive  waste is stored in 177 large underground tanks. However, as of January  2017, none of the tank waste had been treated for disposal because the  facilities intended to treat a significant portion of this waste\u2014known  collectively as the Waste Treatment and Immobilization Plant (WTP)\u2014 have faced persistent technical and management challenges that have  increased the project\u2019s cost by billions of dollars and added decades to  the waste treatment schedule. Among these challenges, DOE has had  difficulty ensuring that WTP engineering, procurement, and construction  work meets nuclear safety and quality requirements.", "In 2000, DOE awarded a contract to Bechtel National, Incorporated, to  design, construct, and commission the WTP. The WTP is a complex, first- of-a-kind project and is being constructed under a design-build contract.  In the design-build approach, technology development activities, plant  design, and construction occur simultaneously rather than sequentially.", "DOE no longer allows the use of the design-build approach for complex,  first-of-a-kind facilities but has continued to use it for the WTP.", "In December 2012, the WTP Engineering Division of DOE\u2019s Office of  River Protection (ORP) issued a memorandum that recommended that all  activities affecting engineering design, construction, and installation of  structures, systems, and components be stopped because the division  had found that it could not verify that completed work met nuclear safety  and quality requirements. According to the memorandum, stopping work  would help the department avoid future nuclear safety and quality  compromises and substantial rework. Instead of stopping all work at the  WTP, ORP management stopped work only on those facilities that faced  the most significant technical challenges. Around this time, ORP issued  nine \u201cPriority Level One\u201d findings\u2014findings reflecting problems that if  uncorrected could have serious effects on safety, quality, and operability  of a nuclear facility, as well as on the environment, according to ORP\u2019s  quality assurance guidance. Seven of the nine findings were issued by  ORP\u2019s WTP Engineering Division in 2012 and focused on engineering  and nuclear safety. The other two were issued by ORP\u2019s Quality  Assurance Division in 2013 and focused on the contractor\u2019s quality  assurance program.", "Federal regulations require DOE contractors to establish DOE-approved  quality assurance programs. Under an approved quality assurance  program, the contractor must establish and implement processes to  detect and prevent quality problems; identify, control, and correct items,  services, and processes that do not meet established requirements;  identify the causes of problems and work to prevent recurrence as a part  of correcting the problems; and plan and conduct independent  assessments to measure the adequacy of work performance and to  promote improvement. ORP\u2019s two Priority Level One findings related to  quality assurance deficiencies found that the contractor\u2019s quality  assurance program did not effectively ensure that work was being  completed to meet these requirements. Significantly, one of the two  findings concluded that the contractor\u2019s overall quality assurance program  was not fully effective. The other finding concluded that the contractor\u2019s  Corrective Action Program to address quality assurance problems was  not fully effective. Overall, ORP determined that the deficiencies in the  contractor\u2019s quality assurance program were the most serious type\u2014 those that could result in a systemic breakdown in safety or quality or that  could have a serious effect on worker health and safety, the public and  environment, and facility operations. In addition, the report stated that the  deficiencies warranted immediate attention by the contractor and required  corrective measures and a high degree of ORP oversight.", "We have reported on the need for effective oversight of nuclear safety\u2014 including quality assurance programs\u2014across the DOE complex, finding  in 2008 that a strong management and oversight program is needed to  ensure that DOE\u2019s nuclear operations are carried out in a safe and  environmentally acceptable manner. Also in 2008, we identified key  elements that any nuclear safety oversight organization should have in  order for it to provide effective independent oversight. For example, we  found that the organization should be structurally distinct and separate  from DOE program offices to avoid management interference or conflict  between program office mission objectives, such as cost and schedule  performance, and safety.", "Senate Report 114-49 accompanying the Senate version of the National  Defense Authorization Act for Fiscal Year 2016 includes a provision for  GAO to carry out an ongoing evaluation of issues related to the WTP.  This first report (1) describes the actions DOE has taken to identify and  address quality assurance problems at the WTP, (2) examines the extent  to which DOE has ensured that all quality assurance problems have been  identified and will not recur, and (3) examines the extent to which DOE\u2019s  organizational structure at ORP provides the independence to effectively  oversee the WTP contractor\u2019s quality assurance program.", "To describe the actions DOE has taken to identify and address quality  assurance problems at the WTP, we obtained and reviewed DOE  documents and reports that describe ORP and contractor actions,  including the contractor\u2019s root cause analyses of quality assurance  problems at the WTP. In addition, we reviewed DOE orders, ORP  procedures, and documents that describe the requirements DOE is to  follow to ensure that work meets quality assurance requirements and that  the contractor has implemented corrective measures for identified quality  assurance problems.", "To examine the extent to which DOE has ensured that all quality  assurance problems have been identified and will not recur, we reviewed  internal and external assessments, audits, and reviews of ORP\u2019s and the  contractor\u2019s quality assurance programs. In addition, we reviewed  technical and management issues that were reported to the contractor\u2019s  Corrective Action Management Program database from January 1, 2014,  when the contractor started to implement corrective measures, to  September 31, 2017, to identify significant quality assurance problems  and issues.", "To examine the extent to which DOE\u2019s organizational structure at ORP  provides the independence to effectively oversee the WTP contractor\u2019s  quality assurance program, we obtained and reviewed internal and  external reports and assessments conducted by ORP, DOE\u2019s Office of  Environmental Management\u2019s Office of Standards and Quality Assurance,  DOE\u2019s Office of Enterprise Assessment, DOE\u2019s Office of Inspector  General, and the Defense Nuclear Facilities Safety Board, on the portions  of WTP engineering, procurement, and construction that have been  subject to review and examination for adherence to quality assurance  requirements. In addition, we examined ORP\u2019s record of implementing  DOE headquarters office\u2019s audit and assessment recommendations  designed to improve the WTP quality assurance program dating back to  January 2012.", "To address all of our objectives, we also conducted semi-structured  interviews, which we used to obtain information from staff with ORP\u2019s  Quality Assurance, WTP Construction Oversight and Assurance, and  WTP Engineering Divisions who are involved in the oversight of the  contractor\u2019s quality assurance program. The group consisted of all nine  subject matter experts that ORP management identified as employees  primarily responsible for WTP quality assurance oversight. In this report,  we refer to this group as ORP quality assurance experts. During the semi- structured interviews, we asked a series of questions on DOE\u2019s and the  contractor\u2019s compliance with quality assurance requirements, as well as  questions on the resolution of problems with the contractor\u2019s quality  assurance program and DOE\u2019s oversight of the program. In several  cases, all nine ORP quality assurance experts were not able to answer  our questions for various reasons, such as not having recent experience  working in a particular quality assurance area. In addition to conducting  semi-structured interviews, for all objectives we interviewed DOE officials  with ORP; the Inspector General\u2019s Office at Hanford; and DOE  headquarters offices, including the Office of Environmental  Management\u2019s Office of Standards and Quality Assurance and the Office  of Enterprise Assessments. We also interviewed WTP contractors,  officials from the Washington State Department of Ecology, and officials  from the Defense Nuclear Facilities Safety Board.", "We conducted this performance audit from February 2016 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes DOE\u2019s tank waste treatment approach at Hanford  and DOE\u2019s quality assurance framework and requirements."], "subsections": [{"section_title": "DOE\u2019s Tank Waste Treatment Approach", "paragraphs": ["Cleanup of the Hanford Site is governed by two main compliance  agreements: (1) the 1989 Hanford Federal Facility Agreement and  Consent Order, or Tri-Party Agreement, an agreement between DOE, the  Washington State Department of Ecology, and the Environmental  Protection Agency, and (2) a 2010 consent decree. The Tri-Party  Agreement was signed in May 1989 and lays out a series of legally  enforceable milestones for completing major activities in Hanford\u2019s waste  treatment and cleanup process. The Tri-Party Agreement has been  amended a number of times to establish additional enforceable  milestones for certain WTP construction and tank waste retrieval  activities, among other things. Under the Tri-Party Agreement, DOE must  complete waste treatment at the Hanford Site by 2047.", "The overall mission of the WTP is to treat and immobilize a large part of  54 million gallons of radioactive and chemical waste stored in 177  underground storage tanks. The WTP is the most technically complex  and largest construction project within DOE\u2019s Office of Environmental  Management, occupying 65 acres of the Hanford Site. Some of DOE\u2019s  tank waste is highly radioactive material\u2014known as high-level waste\u2014 mixed with hazardous waste. Under current law, this waste must be  vitrified\u2014a process in which the waste is immobilized in glass\u2014prior to  disposal. Low-activity waste is DOE\u2019s term for the portion of the tank  waste at Hanford with low levels of radioactivity. Low-activity waste is  primarily the liquid portion of the tank waste that remains after as much  radioactive material as technically and economically practical has been  removed.", "The WTP consists of the following set of facilities that are designed to  separate waste into low-activity and high-level waste streams and, once  completed, treat these waste streams in separate facilities using  vitrification.", "Pretreatment Facility. This facility is to receive the waste from the  tanks and separate it into high-level and low-activity waste streams.", "Low-Activity Waste Facility. This facility is to receive the low-activity  waste from the Pretreatment facility and immobilize it by vitrification.  The canisters of vitrified waste will be permanently disposed of at  another facility at Hanford.", "High-Level Waste Facility. This facility is to receive the high-level  waste from the Pretreatment Facility and immobilize it by vitrification.  The canisters of vitrified waste will be stored on-site until a final  repository is established.", "Effluent Management Facility. The Effluent Management Facility is  being built to evaporate much of the secondary waste produced  during low-activity waste processing and vitrification at the Low- Activity Waste Facility.", "Analytical Laboratory. This facility will conduct analyses as needed,  such as testing samples of the vitrified waste to ensure that it meets  certain criteria and regulatory requirements for disposal.", "Balance of Facilities. These facilities consist of the 22 support facilities  that make up the plant infrastructure, such as cooling water systems  and silos that hold vitrifying materials.", "In part because of the 2012 work stoppage at the WTP\u2019s Pretreatment  and High-Level Waste Facilities, in 2012 DOE adopted a phased waste  treatment strategy through which the department aims to begin treating  some of the low-activity waste before resolving all WTP technical  issues. During the first phase of this strategy, DOE plans to implement a  Direct Feed Low-Activity Waste (DFLAW) approach to transfer some low- activity waste from the tanks to the WTP\u2019s Low-Activity Waste Facility for  vitrification before the Pretreatment Facility is completed. The approach  relies on construction of a new facility\u2014the Low-Activity Waste  Pretreatment System\u2014designed to remove highly radioactive particles  from liquid tank waste before sending the waste stream to the Low- Activity Waste Facility. During later phases, DOE intends to complete the  WTP Pretreatment Facility and High-Level Waste Facilities. DOE also  plans to construct a Tank Waste Characterization and Staging Facility  under a different contract to stage, mix, sample, and characterize high- level waste from the tanks prior to delivery to the Pretreatment Facility.  Figure 1 illustrates WTP and other facilities planned for Hanford tank  waste treatment."], "subsections": []}, {"section_title": "DOE\u2019s Quality Assurance Framework and Requirements", "paragraphs": ["A set of federal regulations, DOE orders, and ORP procedures  collectively make up DOE\u2019s quality assurance framework that aims to  ensure that all WTP quality assurance problems can be identified and that  identified problems do not recur. DOE\u2019s quality assurance regulations  require DOE contractors to establish DOE-approved quality assurance  programs. The regulations specify that under an approved program, the  contractor\u2019s quality assurance program must, among other things, (1)  establish and implement processes to detect and prevent quality  problems; (2) identify, control, and correct items, services, and processes  that do not meet established requirements; (3) procure items and services  that meet established requirements and perform as specified; (4) plan  and conduct independent assessments to measure item and service  quality, to measure the adequacy of work performance, and to promote  improvement; and (5) maintain items to prevent damage, loss, or  deterioration. In addition, DOE Order 226.1B requires that DOE\u2019s  organizations and contractors implement oversight processes that ensure  that relevant quality assurance problems are evaluated and corrected on  a timely basis to prevent recurrence.", "The WTP contract requires compliance with these regulations and  requirements. The WTP contract specifies that as the owner of the WTP  project, DOE is responsible for providing quality assurance oversight of  the WTP. ORP\u2019s Quality Assurance Division provides such oversight,  for example, by doing the following:", "Reviewing a sampling of the contractor\u2019s documentation on the WTP\u2019s  engineering, procurement, and construction.", "Conducting audits and assessments to ensure that the contractor\u2019s  work complies with applicable quality assurance requirements.", "Assessing the effectiveness of the contractor\u2019s Corrective Action  Management Program, which involves identifying, documenting,  planning, addressing, and tracking actions required to resolve or  correct problems.", "Both the contractor\u2019s and ORP\u2019s quality assurance programs require that  corrective actions to address significant problems with the quality of the  work must include a determination of the extent to which the problematic  conditions exist (known as an extent-of-condition review) as well as the  underlying causes of those conditions. If corrective actions do not  address the conditions, ORP\u2019s quality assurance policy allows the office  to call for a suspension of work. ORP\u2019s stop work procedure includes  the process ORP is to follow when the Quality Assurance Division  Director, in consultation with ORP management, determines that work  needs to be suspended as a result of the occurrence or reoccurrence of  significant quality assurance problems. ORP updated this procedure in  February 2016 to describe the type of quality assurance deficiencies that  should trigger consideration of work stoppage. According to the updated  procedure, characteristics of a deficiency that can trigger an order to stop  work include, but are not limited to, problems that will result in $25 million  or more in loss of productivity, construction rework, or environmental  damage or a significant quality problem that if left uncorrected can result  in construction delays or create adverse safety conditions. Until February  2016, ORP did not have precise criteria describing the conditions under  which it should evaluate work for possible stoppage, according to a DOE  headquarters report."], "subsections": []}]}, {"section_title": "ORP Has Taken Several Actions to Identify and Address Quality Assurance Problems at the WTP, but All Planned Actions Have Not Been Completed", "paragraphs": ["ORP has taken several actions to identify and address quality assurance  problems at the WTP, but all planned actions have not been completed.  In 2013 ORP conducted a comprehensive audit, which resulted in several  actions, including when the office had the contractor begin implementing  a Managed Improvement Plan (MIP) in 2014. The MIP is intended to  ensure that the WTP could operate in compliance with DOE-approved  safety and quality requirements. Implementation of the MIP was to be  completed by April 2016. Although the contractor reported that the  implementation was complete, some of the plan\u2019s corrective measures  have not been fully implemented, according to contractor documents we  reviewed and quality assurance experts we spoke to. In addition, ORP\u2019s  effort to verify the extent to which the contractor has implemented MIP  corrective measures is not scheduled to be complete until at least  December 2018."], "subsections": [{"section_title": "Actions Taken to Identify and Address Quality Assurance Problems at the WTP", "paragraphs": ["ORP has taken several actions to identify and address quality assurance  problems at the WTP. After the partial work stoppage in 2012, ORP  conducted an audit in 2013 to evaluate the adequacy, implementation,  and effectiveness of the contractor\u2019s quality assurance program. The  audit found that the contractor\u2019s quality assurance program was generally  adequate. However, it also found that the contractor\u2019s quality assurance  program was not fully effective in several areas. In response to the  audit, ORP and the WTP contractor took the following actions:", "Developed compensatory measures. At ORP\u2019s request, in 2013, the  contractor started implementing \u201ccompensatory measures\u201d to ensure  that ongoing WTP work during a 2-year performance improvement  period would meet DOE quality and safety requirements. For  example, in September 2013, the contractor implemented a measure  requiring senior management review of all condition reports and their  associated levels of significance. According to ORP officials, the  compensatory measures were intended to be additional, temporary  internal controls to ensure that work at the WTP did not result in new  or recurring quality assurance problems.", "Initiated the MIP. To systematically integrate compensatory  measures, the contractor developed the MIP to address all quality  assurance problems identified in the two Priority Level One findings  and the seven Priority Level One findings associated with engineering  and nuclear safety. In August 2014, the contractor started  implementing the MIP. The MIP is a set of 52 corrective measures  intended to establish processes, procedures, and metrics to produce  an overall quality program that ensures that the WTP can safely  operate in compliance with DOE-approved nuclear safety  requirements, according to the contractor. The measures include the  following:", "Actions to enhance external independent oversight. This measure  calls for the contractor to conduct assessments using external  subject matter experts to evaluate the ability of the contractor\u2019s  quality assurance program to identify precursors to potential  problems and their causes. This measure responds to the 2013  audit in which DOE concluded that the contractor\u2019s quality  assurance program could not ensure compliance with  requirements. Specifically, the audit found that the contractor\u2019s  quality assurance program was not fully effective in several areas,  including, but not limited to, design, software quality, procurement,  and ensuring that identified problems are corrected.", "Actions to ensure that procured items and services meet  requirements and perform as specified. This measure is intended  to ensure that the contractor\u2019s processes and procedures to  identify and ensure the quality of technical products meet  requirements. The nuclear industry uses \u201ccommercial grade  dedication\u201d to refer to the process by which the contractor or  subcontractor verifies that an item (e.g., an electric switch) or  service (e.g., design of an electrical system) can meet commercial  quality and safety requirements and be approved for use in a  nuclear facility. It requires the contractor to perform source  verification, perform inspections and tests, and assess the  processes that control the quality of purchased items and services  to help ensure that critical components of procured items and  services are designed, fabricated, assembled, installed, and  tested with appropriate documentation to support their compliance  with WTP safety requirements. This measure also responds to  DOE\u2019s 2013 audit, which found that the contractor had inadequate  control over the quality of purchased items and services.", "Actions to control and correct items and processes that do not  meet requirements. This measure is intended to allow the  contractor to identify and ensure that materials and equipment that  have been received, and that will be received in the future, meet  requirements. The contractor is to conduct comprehensive  reviews of previously received material and equipment, as well as  all future deliveries, to help ensure the verification, accuracy, and  completeness of documentation for materials and equipment  received from suppliers. This measure also responds to DOE\u2019s  2013 audit, which found that the contractor had received  components that did not comply with safety requirements.", "Performed targeted audits to test compensatory measures and the  implementation of the MIP. To assess the effectiveness of the  compensatory measures and the MIP, ORP performed targeted  audits. For example, to assess the extent to which the contractor has  addressed quality assurance program deficiencies, in early 2017  ORP\u2019s Quality Assurance Division conducted a \u201cvertical slice audit.\u201d  This audit reviewed engineering, procurement, and construction of a  key system that will be needed for initial WTP operations.", "Because of the long-standing quality assurance problems at the WTP,  DOE required ORP to closely monitor the contractor\u2019s implementation of  the MIP. Specifically, as a result of a DOE Office of Enforcement  investigation into the contractor\u2019s quality assurance and corrective action  management programs, DOE entered into a Consent Order with the  contractor in 2015. The Consent Order required the contractor to  complete the actions identified in the MIP to the extent necessary to  restore quality assurance program to full effectiveness by April 30,  2016. The Consent Order does not preclude DOE from reopening the  investigation or issuing an enforcement action if there is a recurrence of  nuclear safety deficiencies similar to those identified in the Consent Order  or the if contractor fails to complete actions required by the Consent  Order in a timely and effective manner to prevent recurrence of the  identified issues."], "subsections": []}, {"section_title": "Corrective Measures to Address Quality Assurance Problems at the WTP Have Not Been Fully Implemented", "paragraphs": ["The contractor has not fully implemented corrective measures for all  identified quality assurance problems, according to contractor documents  we reviewed. In August 2017, the contractor reported that it had finished  its actions to implement the MIP. However, according to the contractor\u2019s  MIP status update accompanying the contractor\u2019s report, 13 of the 52  corrective measures specified in the MIP had not been fully implemented.  Our review of these 13 MIP corrective measures we found that 9 were  intended to exclusively or partially address weaknesses in the  contractor\u2019s quality assurance program. For example, the two corrective  measures to ensure that WTP facilities\u2019 computer software meets  requirements were not complete, according to the MIP status update.  These corrective measures included improving the software procurement  process and revising the quality assurance manual.", "In addition, of the 39 measures that the contractor considers complete,  some do not appear to be fully implemented, according to one ORP  quality assurance expert that we spoke to. For example, one ORP quality  assurance expert disagreed with the contractor\u2019s assessment that a  corrective measure for documentation pertaining to radiographic film\u2014 which is needed for conducting quality assurance reviews of certain  equipment\u2014was fully implemented. This corrective measure calls for the  contractor to review purchase orders for radiographic film and then store  the radiographic film as documentation of compliance with nuclear quality  standards. According to the expert, radiographic film reviews are still not  consistently conducted, and radiographic film documentation is still not  consistently stored. In cases where such documentation is incomplete or  missing, the contractor is at times forced to re-create the documentation  at considerable cost to DOE. According to ORP\u2019s MIP oversight plan, it  will take the office until at least December 2018 to verify the extent to  which the contractor has implemented each of the 52 MIP corrective  measures."], "subsections": []}]}, {"section_title": "ORP Has Not Ensured That All Quality Assurance Problems Have Been Identified, and Some Previously Identified Problems Are Recurring", "paragraphs": ["According to DOE documents we reviewed and ORP quality assurance  experts we spoke with, ORP\u2019s actions have not ensured that all quality  assurance problems have been identified at the WTP, and some  previously identified problems are recurring. Specifically, according to  DOE documents and the experts we spoke with, ORP\u2019s oversight has not  ensured that the contractor has identified all quality assurance problems  in structures, systems, and components that were completed and  installed before the 2012 work stoppage or identified all such problems in  newer structures, systems, and components needed for initial WTP  operations. In addition, according to the documents we reviewed and  experts we interviewed, previously identified quality assurance problems  are recurring."], "subsections": [{"section_title": "ORP Oversight Has Not Ensured That the Contractor Has Identified All Quality Assurance Problems", "paragraphs": ["Recent DOE reviews have found that ORP has not ensured that all  quality assurance problems have been identified at the WTP. First, a  2016 DOE Office of Enterprise Assessment report found quality  assurance deficiencies that neither ORP nor the contractor had identified  at the time the work was conducted.  The report identified numerous  construction deficiencies, procurement and supplier deficiencies,  engineering errors, maintenance issues, and materials with expired shelf  lives. For example, the report identified welding deficiencies on tanks  designed to hold nuclear waste that were identified in a WTP facility  several years after the tanks were installed. The report concluded that the  contractor is aware that significant quality assurance problems likely exist  in older structures, systems, and components. This report noted that  much of the equipment in older structures, systems, and components was  manufactured and delivered to the project from 5 to 10 years ago\u2014and  some of this equipment was supplied by vendors or manufacturers that  are no longer in business\u2014which could lead to costly rework.", "Second, a 2015 DOE Inspector General report found that the contractor  had procured $4 billion in parts and materials through fiscal year 2014,  but ORP and the contractor had not always identified problems with the  quality of procured items in a timely manner. For example, the report  found that in about 45 percent of the nearly 1,400 procurement problems  reviewed, the contractor did not identify the problems until at least 2 years  after the items arrived on site. The report also found that in many cases  the contractor canceled its efforts to recover the costs to resolve the  problems because of the length of time that had passed. The report  concluded that these problems were caused by weaknesses in the  contractor\u2019s quality assurance program and that the contractor\u2019s  procedures to prevent or identify problems with procured items were not  always followed effectively.", "The findings of these reports are consistent with the views of ORP quality  assurance experts we spoke with who stated that ORP oversight has not  ensured that the contractor has identified all quality assurance problems  in structures, systems, and components\u2014particularly those that were  completed and installed before the 2012 work stoppage. These quality  assurance experts said that because quality assurance problems have  not been identified, they expect significant rework will be needed for work  that was completed before 2012. Specifically, most of the ORP quality  assurance experts (seven of the nine) told us that they expect rework will  be needed for existing WTP facilities, such as the Pretreatment and High- Level Waste Facilities. One of these seven quality assurance experts  noted that the contractor does not have a complete record of the  documentation for key systems and equipment, which is required for  demonstrating compliance with nuclear safety standards and eventual  permitting of WTP facilities for operation. According to this expert, the  extent of this shortcoming is not known, but fixing it\u2014that is, creating a  complete record of required documentation\u2014may lead to years of delays.", "ORP Quality Assurance Division officials told us that because ORP\u2019s  focus is on ensuring that facilities needed for initial operations will be  ready to operate by December 2023, they have not been directed by ORP  management to focus on identifying all quality assurance problems for  work completed before 2012 for facilities needed for later phases of WTP  operations, such as structures, systems, and components of the  Pretreatment and High-Level Waste Facilities. In addition, they stated that  there may be significant changes to these facilities needed for the WTP\u2019s  later phases, making it unnecessary for them to review the extent of  quality assurance problems until it is known what parts of the facilities will  remain and which parts will not.", "However, similar problems appear to exist in WTP facilities needed for  initial operations. ORP quality assurance experts that we interviewed also  stated that ORP oversight has not always ensured that all quality  assurance problems in facilities needed for the initial WTP operations, or  DFLAW, have been identified. Five experts told us that issues such as  identifying problematic items, services, and processes had not been fully  resolved. Specifically, these ORP quality assurance experts told us that  when quality assurance problems are identified in structures, systems, or  components needed for DFLAW, ORP does not always ensure that the  contractor identifies the extent to which such problems may exist in other  areas affected by the same structures, systems, or components. For  example, an ORP quality assurance expert cited an instance in which an  ORP quality assurance team reviewed a sample of 25 procurement  \u201cpackages\u201d (out of thousands) for a DFLAW facility and identified 143  problems\u2014significantly more problems than the team expected for such a  small sample. Consistent with ORP quality assurance requirements, this  ORP quality assurance expert recommended to ORP upper management  that the contractor determine the extent to which such problems could  affect other structures, systems, and components needed for DFLAW.  However, according to an ORP memo, ORP upper management did not  require the contractor to implement this recommendation, instead citing  \u201cextenuating circumstances\u201d and requiring a lesser corrective action than  what was recommended. Three ORP quality assurance experts told us  that they believe that because problems have not been comprehensively  assessed, there may be equipment and systems within DFLAW that will  fail to meet their intended functions.", "We also found that although ORP conducted its vertical slice audit in  2017 to test its compensatory measures and the MIP to improve quality  assurance, the audit report notes that it was focused on only one system  within the Low-Activity Waste Facility. According to ORP officials, there  are numerous structures, systems, and components in facilities needed  for DFLAW that have not been audited or reviewed in a manner similar to  the vertical slice audit. Both the contractor\u2019s and ORP\u2019s quality assurance  programs require that corrective actions to address significant problems  with the quality of the work include a determination of the extent to which  the problematic conditions exist as well as the underlying causes of those  conditions. Until ORP requires the WTP contractor to determine the full  extent to which problems exist in all WTP structures, systems, and  components, DOE lacks a comprehensive understanding of all potential  quality assurance problems at all WTP facilities."], "subsections": []}, {"section_title": "Previously Identified Quality Assurance Problems Are Recurring", "paragraphs": ["DOE requires its program offices, such as ORP, and contractors to have  oversight processes to ensure that quality assurance problems are  evaluated and corrected in a timely basis to prevent recurrence. However,  several DOE documents we reviewed show that previously identified  quality assurance problems have recurred in recent years, including the  following:  In 2015, an ORP audit report identified recurring weaknesses in  quality assurance for the contractor\u2019s process for procuring  commercial items for use in a nuclear facility. For example, ORP  found that the contractor\u2019s internal controls for this process were not  consistently performed; did not consistently comply with procedural  requirements; and, in many cases, did not establish reasonable  assurance that procured systems, services, and components acquired  from 2010 to 2014 would perform their intended safety functions.", "In a 2015 report on the design and operability of key systems and  components for the Low-Activity Waste Facility, ORP found that the  quality of computer systems software was not in full compliance with  DOE requirements, leading to conditions where personnel and the  environment may not be adequately protected. ORP had identified a  similar problem in 2008, when it found that the contractor\u2019s computer  programs used in engineering calculations were not always verified to  show that they produced correct solutions within defined limits for all  parameters, as required by the contractor\u2019s quality assurance manual.  ORP had also previously identified WTP computer software quality  problems in 2010 when it issued a Priority Level Two finding on  software procedures and another Priority Level Two finding on  software testing.", "In 2017, ORP\u2019s Quality Assurance Division issued a report that  examined the contractor\u2019s quality assurance program and found  problems in quality assurance areas that had been previously  identified. The report noted that in 6 of 19 quality assurance  program areas, the contractor\u2019s performance was marginal\u2014and in  need of improvement\u2014or indeterminate. These 6 areas included  identifying, controlling, and correcting items, services, and processes  that do not meet established requirements; maintaining items to  prevent damage, loss, or deterioration; and procuring items and  services that meet established requirements and perform as specified.", "ORP quality assurance experts that we spoke with also stated that  previously identified quality assurance problems are recurring, including  some in areas where the contractor had implemented corrective  measures. These quality assurance experts told us that quality assurance  problems are recurring in several key areas, including those areas  identified in the documents described above: (1) procurement of items  and services that do not meet established requirements or perform as  specified; (2) software that does not meet established requirements; and  (3) a maintenance program that does not prevent damage, loss, or  deterioration of WTP structures, systems, and components. For example,  see the following.", "Procurement of items and services that do not meet requirements or  perform as specified. Four out of the five ORP quality assurance  experts we interviewed who had recent experience with the  procurement of items and services told us that problems with  procured items and services that do not meet established  requirements or perform as specified are not fully resolved. One of  these ORP quality assurance experts stated that an ORP team  recently reviewed a random sample of 45 of the roughly 30,000  procurements the contractor had made for the WTP and identified a  number of instances where materials did not meet requirements,  which resulted in one Priority Level Two finding\u2014which represents a  serious issue that indicates an adverse condition, such as a  noncompliance or breakdown of a management system\u2014and five  Priority Level Three findings. The expert noted that this was many  more deficiencies than the team expected for such a small sample.", "Settlement of Allegations of Contractors  Knowingly Mischarging Costs at the Waste  Treatment and Immobilization Plant (WTP)  In November 2016, the WTP contractor and  certain subcontractors agreed to pay $125  million to resolve allegations under the False  Claims Act that they made false statements  and claims to the Department of Energy (DOE)  by charging DOE for deficient nuclear quality  materials, services, and testing that were  provided to the WTP at DOE\u2019s Hanford Site.  The contract required materials, testing, and  services to meet certain nuclear quality  standards. The Department of Justice alleged  that the defendants violated the False Claims  Act by charging the government the cost of  complying with these standards when they  failed to do so. In particular, the Department of  Justice alleged that the defendants improperly  billed the government for materials and  services from vendors that did not meet quality  control requirements, for piping and waste  vessels that did not meet quality standards,  and for testing from vendors that did not have  compliant quality programs. As part of the  settlement, the contractors admitted no  wrongdoing, and the United States did not  concede that its claims were not well founded.", "Software that does not meet requirements. ORP quality assurance  experts told us that problems are recurring in certain areas where  items and processes do not meet requirements, such as computer  software quality assurance, despite the contractor developing two MIP  corrective measures in this area. Two ORP quality assurance experts  reported that problems with software quality are recurring. One ORP  quality assurance expert added that the contractor often fails to  develop software quality documentation that is needed to demonstrate  compliance with quality requirements when permitting facilities for  operation. As a result, the contractor will have to re-create this  documentation at some cost.", "A maintenance program that does not prevent damage, loss, or  deterioration. Each of the three ORP quality assurance experts with  knowledge in this area told us that the contractor had not established  a fully effective WTP maintenance program, particularly for the  Pretreatment and High-Level Waste Facilities, and as a result,  structures, systems, and components at these facilities have  deteriorated and been damaged. Such statements are consistent  with findings of the Defense Nuclear Facilities Safety Board, which  reported in April 2016 that systems and components stored in an  outdoor storage yard were not properly covered and showed signs of  being affected by water, sand, or animals. In March 2016, ORP  reported significant water intrusion into several areas of the High- Level Waste Facility. As a result, some of the facility\u2019s structures,  systems, and components had deteriorated and will require costly  rework. The contractor notified DOE in April 2017 that because DOE\u2019s  focus is on completing facilities needed for initial WTP operations, it  would submit a proposal to change the WTP contract to account for  the increased scope, cost, and schedule of long-term maintenance,  storage, and management of procured and partially installed  structures, systems, and components at those facilities not needed for  initial WTP operations.", "Consistent with its quality assurance procedures, ORP can use its  authorities\u2014such as those under the Consent Order and its quality  assurance policy\u2014to stop work if corrective measures do not prevent  quality assurance problems from recurring. However, ORP has not used  such authorities. ORP senior officials told us that they did not consider it  necessary to stop work because of the recurrence of problems in certain  areas because they plan to evaluate the extent of the contractor\u2019s  implementation of MIP corrective measures over the next year and have  allowed work to continue because they believe that the contractor\u2019s  quality assurance program is generally adequate. Without directing ORP  to use its authorities to stop work in areas where quality assurance  problems are recurring until it can verify that the problems are corrected  and will not recur, DOE may face future rework that could increase costs  and schedule delays for the WTP."], "subsections": []}]}, {"section_title": "ORP\u2019s Organizational Structure May Not Provide Sufficient Independence for Effective Oversight of the WTP Contractor\u2019s Quality Assurance Program", "paragraphs": ["A 2017 assessment from DOE headquarters and our interviews with nine  ORP quality assurance experts suggest that ORP\u2019s organizational  structure does not provide the quality assurance function with sufficient  independence from upper management\u2014which includes the ORP  Manager and the WTP Federal Project Director\u2014to effectively oversee  the contractor\u2019s quality assurance program. Our prior work has found that  to be independent, an oversight organization should be structurally  distinct and separate from program offices responsible for achieving the  program\u2019s mission to avoid management interference or conflict between  program office mission objectives and safety. At ORP, however, the  Quality Assurance Division is not fully separate and independent from the  upper management of the WTP project, which manages cost and  schedule performance. We believe that such a structure has the potential  to create a conflict of interest.", "Specifically, we found that ORP\u2019s Quality Assurance Division performs  assessments of the contractor\u2019s quality assurance program, among other  things, and reports its findings to ORP upper management, including the  ORP Manager, who has the discretion to determine whether and to what  extent to require the contractor to take action in response to findings.  When quality assurance issues are identified, ORP upper management  must balance its mission of meeting cost and schedule targets with its  responsibility to ensure that nuclear safety and quality standards are met.  However, these are two potentially conflicting responsibilities because  meeting WTP cost and schedule targets may be threatened if serious  quality assurance problems are identified.", "A February 2017 external assessment from DOE headquarters noted that  ORP\u2019s Quality Assurance Division\u2019s effectiveness has been limited  because, in some instances, its findings have been mischaracterized by  ORP upper management, and in others, ORP upper management has not  used this division effectively to evaluate the extent of potential quality  assurance problems. This assessment found that ORP had not  performed adequate oversight of the contractor\u2019s MIP and that some  critical quality assurance areas were not receiving the necessary scrutiny  from ORP. Further, the assessment found that ORP management  sometimes mischaracterized the seriousness of the Quality Assurance  Division\u2019s findings and, as a result, did not require the contractor to  conduct extent-of-condition review for significant quality assurance  problems. While this assessment stated that ORP had an effective quality  assurance program, it concluded that three of the eight quality assurance  areas the assessment team reviewed were not fully effective, including  ORP\u2019s ability to conduct assessments of the contractor\u2019s quality  assurance program.", "A Cautionary Tale: Quality Assurance  Problems Doom Commercial Nuclear  Power Plant  In the commercial nuclear industry, there is a  notable example of a construction project that  faced significant quality assurance challenges.  In the 1970s and early 1980s, Cincinnati Gas  & Electric attempted to construct a commercial  nuclear power plant, known as the Zimmer  Plant, near Moscow, Ohio. After 10 years of  construction and more than $2 billion spent,  the company abandoned its effort to construct  the plant. An independent review mandated by  the Nuclear Regulatory Commission in 1982  concluded that several issues impeded  successful construction of the Zimmer Plant as  a commercial nuclear power plant. These  issues included (1) the company\u2019s failure to  elevate its commitment to quality and quality  assurance to an equal status with cost and  schedule, (2) the regulator\u2019s failure to hold the  company accountable for quality in design and  construction, and (3) the company\u2019s  inadequate quality assurance procedures. To  recoup some of the $2 billion spent in  attempting to construct this commercial  nuclear power plant, Cincinnati Gas & Electric  later converted facilities built at the site for use  in a coal-fired power plant. management and the contractor place cost and schedule performance  above identifying and resolving quality assurance issues. One quality  assurance expert specified that ORP\u2019s culture does not encourage  staff to identify quality assurance problems or ineffective corrective  measures. This expert said that people who discover problems are  not rewarded; rather, their findings are met with resistance, which has  created a culture where quality assurance staff are hesitant to identify  quality assurance problems or problems with corrective measures.  This expert added that quality assurance is subordinate to cost and  schedule\u2014that is, senior managers responsible for approving quality  assurance findings are more concerned with whether WTP  construction meets schedule milestones than identifying and resolving  quality assurance issues. This expert compared the WTP to the  Zimmer Power Plant\u2014a power plant in Ohio that was designed to be  a nuclear power plant but that was never licensed because of  unresolved quality assurance problems and a focus on schedule over  construction quality.", "As stated earlier, in October 2008, we identified key elements that any  nuclear safety oversight organization should have in order for it to provide  effective independent oversight. For example, we found that an  organization should be structurally distinct and separate from DOE  program offices to avoid management interference or conflict between  program office mission objectives, such as cost and schedule  performance and safety. We also found that the organization should have  sufficient authority to require program offices to effectively address its  findings and recommendations.", "ORP\u2019s Assistant Manager for Technical and Regulatory Support and ORP  senior quality assurance staff told us that ORP\u2019s organizational structure  ensures that the quality assurance function is sufficiently independent of  ORP management. These officials and the ORP Quality Assurance  Program Description state that the Quality Assurance Division is  structured to report directly to the ORP Assistant Manager for Technical  and Regulatory Support and the ORP Manager. They also cited the ORP  Quality Assurance Program policy, which states that the Quality  Assurance Division has the authority and overall responsibility to  independently audit the contractor\u2019s quality assurance program to verify  the achievement of quality. According to these officials, this organizational  structure ensures independence from cost and schedule considerations  and ensures objectivity in quality assurance evaluations, and they added  that the ORP Manager evaluates differing opinions without any  hindrances or organizational bias.", "Given that some previously identified problems are recurring at the WTP,  including some in areas where the contractor had implemented corrective  measures, and given the findings of the 2017 headquarters assessment  and the statements of ORP\u2019s quality assurance experts outlined above,  we are concerned that ORP\u2019s organizational structure may not entirely  ensure that the Quality Assurance Division meets key elements for a  nuclear safety oversight organization to provide effective independent  oversight. According to ORP reports and officials, in ORP\u2019s current  organizational structure, upper level management retains discretion in  how to resolve quality assurance problems. As a result, the Quality  Assurance Division does not have sufficient authority to ensure that its  findings are addressed and its recommendations are implemented. By  revising ORP\u2019s organizational structure so that the quality assurance  function is independent of ORP upper-level management, DOE can have  better assurance that compliance with nuclear safety requirements will  not be subordinated to meeting cost and schedule targets."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["For years DOE has faced quality assurance problems at the WTP. Upon  learning in 2012 that it could not verify that engineering, procurement, and  construction at the WTP met nuclear safety and quality requirements,  ORP directed the contractor to implement quality assurance corrective  measures to ensure that problems would be identified and prevented from  recurring. However, 5 years later, the contractor has not fully  implemented all planned corrective measures. Moreover, in some areas  where the contractor has stated that corrective measures are now in  place, ORP continues to encounter quality assurance problems similar to  those it encountered in the past. When and where problems have  recurred, ORP has not always required the contractor to determine the  extent to which the problems may affect all parts of the WTP. By directing  ORP to require the WTP contractor, where quality assurance problems  have been identified, to determine the full extent to which problems exist  in all WTP structures, systems, and components, DOE will gain a  comprehensive understanding of all quality assurance problems at all  WTP facilities. In addition, ORP has not always used its authorities to  stop work when problems are detected before they are fully corrected.  Without directing ORP to use its authorities to stop work in areas where  quality assurance problems are recurring until it can verify that the  problems are corrected and will not recur, DOE may face future rework  that could increase costs and schedule delays for the WTP.", "Also of concern is the potential lack of sufficient independence of ORP\u2019s  Quality Assurance Division from ORP\u2019s upper management. This has  resulted in ORP upper management not always allowing its own experts  to fully examine the contractor\u2019s work even when problems have recurred.  At other times, this has resulted in the significance of identified  problems\u2014and strength of associated corrective measures\u2014being  reduced. DOE\u2019s ability to effectively self-regulate a high-hazard nuclear  facility not only depends on vigorous oversight of the contractor by the  program office but also on active oversight by an independent group. The  WTP is the largest and most technically complex cleanup project  managed by DOE, and we recognize that meeting its cost and schedule  targets places immense pressure on ORP upper management. However,  meeting those targets is further threatened when quality assurance  problems are downgraded. By revising ORP\u2019s organizational structure so  that the quality assurance function is independent of ORP upper  management, DOE can have better assurance that compliance with  nuclear safety requirements will not be subordinated to meeting cost and  schedule targets."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DOE:  The Secretary of Energy should direct ORP to require the WTP contractor  to determine the full extent to which problems exist in all WTP structures,  systems, and components.", "The Secretary of Energy should direct ORP to use its authorities to stop  work in areas where quality assurance problems are recurring until ORP\u2019s  Quality Assurance Division can verify that the problems are corrected and  will not recur.", "The Secretary of Energy should revise ORP\u2019s organizational structure so  that the quality assurance function is independent of ORP upper  management."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided DOE with a draft of this report for its review and comment. In  its written comments, reproduced in appendix I, DOE generally agreed  with the findings in the report and its recommendations. DOE agreed with  our first two recommendations and described actions it has under way  and planned to address them. In addition, DOE agreed with our third  recommendation\u2014to revise ORP\u2019s organizational structure so that the  quality assurance function is independent of ORP upper management\u2014in  principle. While DOE states that it believes that the current ORP quality  assurance reporting relationship meets all established requirements, it  also states that the report identifies instances that indicate that ORP  could be strengthened to improve the effectiveness and independence of  its quality assurance functions. In response to our recommendation, DOE  plans to direct ORP to assess the quality assurance functional reporting  lines, responsibilities, and processes to enhance the independence of the  quality function from cost and schedule influences and to strengthen and  clarify quality assurance reporting to the ORP Manager. This planned  action is a positive first step toward implementing our recommendation.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Energy; and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff members who made major  contributions to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nathan Anderson (Assistant  Director), Mark Braza, Scott Fletcher, Ellen Fried, Richard Johnson, Paul  Kazemersky, and Peter Ruedel made key contributions to this report."], "subsections": []}]}], "fastfact": ["The nuclear waste treatment plant DOE and its contractor are building at DOE\u2019s Hanford site in Washington has faced persistent challenges, and the cost of the project has more than tripled to nearly $17 billion.", "We found that DOE's quality assurance efforts did not always ensure detection of problems such as engineering errors and construction deficiencies, and some problems are recurring.", "We recommended that DOE direct the contractor to determine the full extent of plant problems, stop work when problems recur, and establish a more independent quality assurance effort."]}
{"id": "GAO-18-28", "url": "https://www.gao.gov/products/GAO-18-28", "title": "NASA Human Space Exploration: Integration Approach Presents Challenges to Oversight and Independence", "published_date": "2017-10-19T00:00:00", "released_date": "2017-10-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NASA is undertaking a trio of closely related programs to continue human space exploration beyond low-Earth orbit. All three programs (SLS, Orion, and EGS) are working toward a launch readiness date of no earlier than October 2019 for the first test flight. Each program is a complex technical and programmatic endeavor. Because all three programs must work together for launch, NASA must integrate the hardware and software from the separate programs into a working system capable of meeting its goals for deep space exploration.", "The House Committee on Appropriations report accompanying H.R. 2578 included a provision for GAO to assess the progress of NASA's human space exploration programs. This report assesses (1) the benefits and challenges of NASA's approach for integrating these three programs and (2) the extent to which cross-program risks could affect launch readiness. GAO examined NASA policies, the results of design reviews, risk data, and other program documentation and interviewed NASA and other officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The approach that the National Aeronautics and Space Administration (NASA) is using to integrate its three human spaceflight programs into one system ready for launch offers some benefits, but it also introduces oversight challenges. To manage and integrate the three programs\u2014the Space Launch System (SLS) vehicle; the Orion crew capsule; and supporting ground systems (EGS)\u2014NASA's Exploration Systems Development (ESD) organization is using a more streamlined approach than has been used with other programs, and officials GAO spoke with believe that this approach provides cost savings and greater efficiency. However, GAO found two key challenges to the approach:", "The approach makes it difficult to assess progress against cost and schedule baselines. SLS and EGS are baselined only to the first test flight. In May 2014, GAO recommended that NASA baseline the programs' cost and schedule beyond the first test flight. NASA has not implemented these recommendations nor does it plan to; hence, it is contractually obligating billions of dollars for capabilities for the second flight and beyond without establishing baselines necessary to measure program performance.", "The approach has dual-hatted positions, with individuals in two programmatic engineering and safety roles also performing oversight of those areas. As the image below shows, this presents an environment of competing interests.", "These dual roles subject the technical authorities to cost and schedule pressures that potentially impair their independence. The Columbia Accident Investigation Board found in 2003 that this type of tenuous balance between programmatic and technical pressures was a contributing factor to that Space Shuttle accident.", "NASA has lowered its overall cross-program risk posture over the past 2 years, but risk areas\u2014related to software development and verification and validation, which are critical to ensuring the integrated body works as expected\u2014remain. For example, delays and content deferral in Orion and SLS software development continue to affect ground systems software development and could delay launch readiness. GAO will continue to monitor these risks."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider directing NASA to establish baselines for SLS and EGS's missions beyond the first test flight. NASA's ESD organization should no longer dual-hat officials with programmatic and technical authority responsibilities. NASA partially concurred with our recommendation and plans to address it in the next year. But NASA did not address the need for the technical authority to be independent from programmatic responsibilities for cost and schedule. GAO continues to believe that this component of the recommendation is critical."]}], "report": [{"section_title": "Letter", "paragraphs": ["The National Aeronautics and Space Administration (NASA) is nearing  the point when billions of dollars invested should begin to pay off with the  first launch of systems needed to support deep space exploration by  humans. This deep space exploration requires the capability to transport  crew and large masses of cargo beyond low Earth orbit to distant  destinations including the moon and eventually Mars. The Exploration  Systems Development (ESD) organization within NASA\u2019s Human  Exploration and Operations Mission Directorate is responsible for  managing and integrating the three programs developing the specific  capabilities needed.", "The Space Launch System (SLS) program is developing a vehicle to  launch a crew capsule and cargo beyond low-Earth orbit.", "The Orion Multi-Purpose Crew Vehicle (Orion) program is developing  a crew capsule to transport humans beyond low-Earth orbit.", "The Exploration Ground Systems (EGS) program is developing  systems and infrastructure to support assembly, test, and launch of  the SLS and Orion crew capsule, and recovery of the Orion crew  capsule.", "This portfolio of three programs is estimated to cost almost $24 billion\u2014to  include two Orion flights and one each for SLS and EGS\u2014and constitute  more than half of NASA\u2019s planned development budget. All three  programs are necessary for the first integrated test flight, Exploration  Mission 1 (EM-1), and are working to a launch readiness date of no  earlier than October 2019.", "NASA intends for ESD\u2019s portfolio of programs\u2014SLS, Orion, and EGS\u2014to  provide an important capability for human exploration missions. Each of  these programs represents a large, complex technical and programmatic  endeavor. In addition, since all three programs must work together for  launch, NASA faces the additional challenge of integrating the hardware  and software from the separate programs into a working system capable  of effectively meeting its goals for deep space exploration. Our prior work  has shown that the integration and test phase often reveals unforeseen  challenges leading to cost growth and schedule delays.", "GAO has designated NASA\u2019s management of acquisitions as a high-risk  area for more than two decades. In February 2017, we found that the  agency has continued to make progress in reducing risk on major projects  after previously struggling with poor cost estimation, weak oversight, and  risk underestimation. We also found that the Orion, SLS, and EGS  programs are generally better positioned for success than past crewed  vehicle efforts that were canceled after facing acquisitions problems and  funding-related issues. Nevertheless, as we have reported, management  weaknesses\u2014including overly ambitious schedules, unreliable cost  estimating, limited reserves, and operating for extended periods of time  without definitized contracts\u2014have increased the likelihood that the  programs will incur schedule delays and cost overruns, particularly when  coupled with the technical risks that are inherent in any human spaceflight  development. In April 2017, we found that it was unlikely that the ESD  programs would achieve the planned November 2018 launch readiness  date and recommended that NASA reassess the date. NASA agreed with  this recommendation and stated that it would establish a new launch  readiness date in fall 2017. Subsequently, in June 2017, NASA sent  notification to Congress that EM-1\u2019s recommended launch date would be  no earlier than October 2019.", "The House Committee on Appropriations included a provision in its 2015  report for GAO to review the acquisition progress of NASA\u2019s human  exploration programs, including Orion, SLS, and EGS. This report is the  latest in a series of reports addressing the mandate. This report assesses  (1) the benefits and challenges of NASA\u2019s approach for integrating and  assessing the programmatic and technical readiness of Orion, SLS, and  EGS; and (2) the extent to which ESD is managing cross-program risks  that could affect launch readiness.", "To assess the benefits and challenges of NASA\u2019s approach for  integration, we obtained and analyzed NASA program policies governing  program and technical integration, including cost, schedule, and risk. We  obtained and analyzed ESD implementation plans to assess the role of  ESD in cross program integration of SLS, Orion, and EGS and reviewed  briefings explaining ESD\u2019s approach to programmatic and technical  integration, including implementation of systems engineering and  integration. In addition, we assessed the scope of NASA\u2019s funding  estimates for the second exploration mission and beyond against best  practices criteria outlined in GAO\u2019s cost estimating guidebook. We  reviewed the 2003 Columbia Accident Investigation Board Report\u2019s  findings and recommendations related to culture and organizational  management of human spaceflight programs as well as the Constellation  program\u2019s lessons learned report. We met with the technical authorities  and other representatives from the NASA Office of the Chief Engineer,  Office of Safety and Mission Assurance, Crew Health and Safety, and  addressed cost and budgeting issues with the Chief Financial Officer, and  discussed and documented their roles in executing and overseeing the  ESD programs. We also interviewed outside subject matter experts to  gain their insight of ESD\u2019s implementation of NASA\u2019s program  management policies on the independent technical authority structure.", "To assess the extent to which ESD is managing cross-program risks that  could affect launch readiness, we obtained and reviewed NASA and ESD  risk management policies, detailed monthly and quarterly briefings and  documentation from Cross-Program Systems Integration and  Programmatic and Strategic Integration teams explaining ESD\u2019s approach  to identifying, tracking, and mitigating cross-program risks. We conducted  an analysis of ESD\u2019s risk dataset and the programs\u2019 detailed risk reports  which list program risks and their potential schedule impacts, including  mitigation efforts to date. We examined risk report data from Design to  Synchronization (Design to Sync) to Build to Synchronization (Build to  Sync) and focused our analyses to identify risks with current mitigation  plans to determine if risk mitigation plans are proceeding on schedule.  We supplemented this analysis with interviews of responsible ESD  officials. For more information on our scope and methodology, see  appendix I.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Human spaceflight at NASA began in the 1960s with the Mercury and  Gemini programs leading up to the Apollo moon landings. After the last  lunar landing, Apollo 17, in 1972, NASA shifted its attention to low earth  orbit operations with human spaceflight efforts that included the Space  Shuttle and International Space Station programs through the remainder  of the 20th century. In the early 2000s, NASA once again turned its  attention to cislunar and deep space destinations, and in 2005 initiated  the Constellation program, a human exploration program that was  intended to be the successor to the Space Shuttle. The Constellation  program was canceled, however, in 2010 due to factors that included cost  and schedule growth and funding gaps.", "Following Constellation, the National Aeronautics and Space  Administration Authorization Act of 2010 directed NASA to develop a  Space Launch System, to continue development of a crew vehicle, and  prepare infrastructure at Kennedy Space Center to enable processing  and launch of the launch system. To fulfill this direction, NASA formally  established the SLS program in 2011. Then, in 2012, the Orion project  transitioned from its development under the Constellation program to a  new development program aligned with SLS. To transition Orion from  Constellation, NASA adapted the requirements from the former Orion  plan with those of the newly created SLS and the associated ground  systems programs. In addition, NASA and the European Space Agency  agreed that it would provide a portion of the service module for Orion.  Figure 1 provides details about the heritage of each SLS hardware  element and its source as well as identifies the major portions of the  Orion crew vehicle.", "The EGS program was established to modernize the Kennedy Space  Center to prepare for integrating hardware from the three programs as  well as processing and launching SLS and Orion and recovery of the  Orion crew capsule. EGS is made up of nine major components,  including: the Vehicle Assembly Building, Mobile Launcher, Launch  Control Center and software, Launch Pad 39B, Crawler-Transporter,  Launch Equipment Test Facility, Spacecraft Offline Processing, Launch  Vehicle Offline Processing, and Landing and Recovery. See figure 2 for  pictures of the Mobile Launcher, Vehicle Assembly Building, Launch Pad  39B, and Crawler-Transporter.", "NASA\u2019s Exploration Systems Development (ESD) organization is  responsible for directing development of the three individual human  spaceflight programs\u2014SLS, Orion, and EGS\u2014into a human space  exploration system. The integration of these programs is key because all  three systems must work together for a successful launch. The integration  activities for ESD\u2019s portfolio occur at two levels in parallel throughout the  life of the programs: as individual efforts to integrate the various elements  managed within the separate programs and as a joint effort to integrate  the three programs into an exploration system.", "The three ESD programs support NASA\u2019s long term goal of sending  humans to distant destinations, including Mars. NASA\u2019s approach to  developing and demonstrating the technologies and capabilities to  support their long term plans for a crewed mission to Mars includes three  general stages of activities\u2014Earth Reliant, Proving Ground, and Earth  Independent.", "Earth Reliant: From 2016 to 2024, NASA\u2019s planned exploration is  focused on research aboard the International Space Station. On the  International Space Station, NASA is testing technologies and  advancing human health and performance research that will enable  deep space, long duration missions.", "Proving Ground: From the mid-2020s to early-2030s, NASA plans to  learn to conduct complex operations in a deep space environment  that allows crews to return to Earth in a matter of days. Primarily  operating in cislunar space\u2014the volume of space around the moon  featuring multiple possible stable staging orbits for future deep space  missions\u2014NASA will advance and validate capabilities required for  humans to live and work at distances much farther away from our  home planet, such as on Mars.", "Earth Independent: From the early-2030s to the mid-2040s, planned  activities will build on what NASA learns on the space station and in  deep space to enable human missions to the vicinity of Mars, possibly  to low-Mars orbit or one of the Martian moons, and eventually the  Martian surface.", "The first launch of the integrated ESD systems, EM-1, is a Proving  Ground mission. EM-1 is planned as an uncrewed test flight currently  planned for no earlier than October 2019 that will fly about 70,000  kilometers beyond the moon. The second launch, Exploration Mission 2  (EM-2), which will utilize an evolved SLS variant with a more capable  upper stage, is also a Proving Ground mission planned for no later than  April 2023. EM-2 is expected to be a 10- to 14-day crewed flight with up  to four astronauts that will orbit the moon and return to Earth to  demonstrate the baseline Orion vehicle capability. NASA eventually plans  to develop larger and more capable versions of the SLS to support  Proving Ground and Earth Independent missions after EM-2.", "As noted above, in April 2017 we found that given the combined effects of  ongoing technical challenges in conjunction with limited cost and  schedule reserves, it was unlikely that the ESD programs would achieve  the November 2018 launch readiness date. We recommended that NASA  confirm whether the EM-1 launch readiness date of November 2018 was  achievable, as soon as practicable but no later than as part of its fiscal  year 2018 budget submission process. We also recommended that NASA  propose a new, more realistic EM-1 date if warranted. NASA agreed with  both recommendations and stated that it was no longer in its best interest  to pursue the November 2018 launch readiness date. Further, NASA  stated that, in fall 2017, it planned to establish a new launch readiness  date. Subsequently, in June 2017, NASA sent notification to Congress  that EM-1\u2019s recommended launch date would be no earlier than October  2019.", "The life cycle for NASA space flight projects consists of two phases\u2014 formulation, which takes a project from concept to preliminary design, and  implementation, which includes building, launching, and operating the  system, among other activities. NASA further divides formulation and  implementation into pre-phase A through phase F. Major projects must  get approval from senior NASA officials at key decision points before they  can enter each new phase. The three ESD programs are completing  design and fabrication efforts prior to beginning Phase D system  assembly, integration and test, launch and checkout. Figure 3 depicts  NASA\u2019s life cycle for space flight projects."], "subsections": []}, {"section_title": "NASA\u2019s Integration Approach Offers Some Benefits but Complicates Oversight and Impairs Independence", "paragraphs": ["NASA\u2019s approach for integrating and assessing programmatic and  technical readiness, executed by ESD, differs from prior NASA human  spaceflight programs. This new approach offers some cost and potential  efficiency benefits. However, it also brings challenges specific to its  structure. In particular, there are oversight challenges because only one  of the three programs, Orion, has a cost and schedule estimate for EM-2.  NASA is already contractually obligating money on SLS and EGS for EM- 2, but the lack of cost and schedule baselines for these programs will  make it difficult to assess progress over time. Additionally, the approach  creates an environment of competing interests because it relies on dual- hatted staff to manage technical and safety aspects on behalf of ESD  while also serving as independent oversight of those same areas."], "subsections": [{"section_title": "Integration Approach Differs from Past Human Spaceflight Programs", "paragraphs": ["NASA is managing the human spaceflight effort differently than it has in  the past. Historically, NASA used a central management structure to  manage human spaceflight efforts for the Space Shuttle and the  Constellation programs. For example, both the Shuttle and Constellation  programs were organized under a single program manager and used a  contractor to support integration efforts. Additionally, the Constellation  program was part of a three-level organization\u2014the Exploration Systems  Mission Directorate within NASA headquarters, the Constellation  program, and then projects, including the launch vehicle, crew capsule,  ground systems, and other lunar-focused projects, managed under the  umbrella of Constellation. Figure 4 illustrates the three-level structure  used in the Constellation program.", "In the Constellation program, the programmatic workforce was distributed  within the program and projects. For example, systems engineering and  integration organizations\u2014those offices responsible for making separate  technical designs, analyses, organizations and hardware come together  to deliver a complete functioning system\u2014were embedded within both the  Constellation program and within each of the projects.", "NASA\u2019s current approach is organized with ESD, rather than a contractor,  as the overarching integrator for the three separate human spaceflight  programs\u2014SLS, Orion, and EGS. ESD manages both the programmatic  and technical cross-program integration, and primarily relies on personnel  within each program to implement its integration efforts. Exploration  Systems Integration, an office within ESD, leads the integration effort  from NASA headquarters. ESD officials stated that this approach is  similar to that used by the Apollo program, wherein the program was also  managed out of NASA headquarters. Within Exploration Systems  Integration, the Cross-Program Systems Integration sub-office is  responsible for technical integration and the Programmatic and Strategic  Integration sub-office is responsible for integrating the financial, schedule,  risk management, and other programmatic activities of the three  programs. The three programs themselves perform the hardware and  software integration activities. This organizational structure that consists  of two levels is shown in figure 5.", "ESD is executing a series of six unique integration-focused programmatic  and technical reviews at key points within NASA\u2019s acquisition life cycle,  as shown in figure 6, to assess whether NASA cost, schedule, and  technical commitments are being met for the three-program enterprise.", "These reviews cover the life cycle of the integrated programs to EM-1,  from formulation to readiness to launch. Some of these reviews are  unique to ESD\u2019s role as integration manager, For example, ESD  established two checkpoints\u2014Design to Sync in 2015 and Build to Sync  in 2016. The purpose of Design to Sync was to assess the ability of the  integrated preliminary design to meet system requirements, similar to a  preliminary design review and the purpose of Build to Sync was to assess  the maturity of the integrated design in readiness for assembly,  integration, and test, similar to a critical design review (CDR). At both  events, NASA assessed the designs as ready to proceed. Key  participants in these integration reviews include ESD program personnel  and the Cross-Program Systems Integration and Programmatic and  Strategic Integration staff that are responsible for producing and  managing the integration activities."], "subsections": []}, {"section_title": "ESD\u2019s Integration Approach Offers Some Cost Avoidance and Potential Efficiency Gains", "paragraphs": ["ESD\u2019s integration approach offers some benefits in terms of cost  avoidance relative to NASA\u2019s most recent human spaceflight effort, the  Constellation program. NASA estimated it would need $190 million per  year for the Constellation program integration budget. By comparison,  between fiscal years 2012 and 2017, NASA requested an average of  about $84 million per year for the combined integration budgets of the  Orion, SLS, EGS, and ESD. This combined average of about $84 million  per year represents a significant decrease from the expected integration  budget of $190 million per year under the Constellation program. In  addition, as figure 7 shows, NASA\u2019s initial estimates for ESD\u2019s required  budget for integration are close to the actuals for fiscal years 2012-2017.  NASA originally estimated that ESD\u2019s budget for integration would require  approximately $30 million per year. ESD\u2019s integration budget was less  than $30 million in fiscal years 2012 and 2013 and increased to about $40  million in fiscal year 2017\u2014an average of about $30 million a year.", "According to NASA officials, some of the cost avoidance can be attributed  to the difference in workforce size. The Constellation program\u2019s systems  engineering and integration workforce was about 800 people in 2009, the  last full year of the program; whereas ESD\u2019s total systems engineering  and integration workforce in 2017 was about 500 people, including staff  resident in the individual programs.", "ESD officials also stated that, in addition to cost avoidance, their  approach provides greater efficiency. For example, ESD officials said that  decision making is much more efficient in the two-level ESD organization  than Constellation\u2019s three-level organization because the chain of  command required to make decisions is shorter and more direct. ESD  officials also indicated that the post-Constellation elimination of redundant  systems engineering and integration staff at program and project levels  contributed to efficiency. Additionally, they stated that program staff are  invested in both their respective programs and the integrated system  because they work on behalf of the programs and on integration issues  for ESD. Finally, they said another contribution to increased efficiency  was NASA\u2019s decision to establish SLS, Orion, and EGS as separate  programs, which allowed each program to proceed at its own pace.", "One caveat to this benefit, however, is that ESD\u2019s leaner organization is  likely to face challenges to its efficiency in the integration and test phases  of the SLS, Orion, and EGS programs. We analyzed the rate at which  ESD has reviewed and approved the different types of launch operations  and ground processing configuration management records for integrated  SLS, Orion, and EGS operations, and found that the process is  proceeding more slowly than ESD anticipated. For example, as figure 8  illustrates, ESD approved 403 fewer configuration management records  than originally planned in the period from March 2016 through June 2017.  According to an ESD official, the lower-than-planned approval rate  resulted from the time necessary to establish and implement a new  review process as well as final records being slower to arrive from the  programs for review than ESD anticipated. Additionally, the official stated  that the records required differing review timelines because they varied in  size and scope.", "As figure 8 shows, ESD originally expected the number of items that  needed review and approval to increase and create a \u201cbow wave\u201d during  2017 and 2018. In spring 2017, ESD re-planned its review and approval  process and flattened the bow wave. The final date for review completion  is now aligned with the new planned launch readiness date of no earlier  than October 2019, which added an extra year to ESD\u2019s timeframe to  complete the record reviews. While the bow wave is not as steep as it  was under the original plan, ESD will continue to have a large number of  records that require approval in order to support the launch readiness  date. An ESD official stated that NASA had gained experience managing  such a bow wave as it prepared for Orion\u2019s 2014 exploration flight test  launch aboard a Delta IV rocket and as part of the Constellation  program\u2019s prototype Ares launch in 2009, but acknowledged that ESD will  need to be cautious that its leaner staff is not overwhelmed with  documentation, which could slow down the review process."], "subsections": []}, {"section_title": "ESD\u2019s Approach Complicates Oversight Because There Is No Mechanism to Assess Affordability beyond First Mission", "paragraphs": ["ESD is responsible for overall affordability for SLS, Orion, and EGS, while  each of the programs develops and maintains an individual cost and  schedule baseline. The baseline is created at the point when a program  receives NASA management approval to proceed into final design and  production. In their respective baselines, as shown in table 1, SLS and  EGS cost and schedule are baselined to EM-1, and Orion\u2019s are baselined  to EM-2. NASA documentation indicates that Orion\u2019s baselines are tied to  EM-2 because that is the first point at which it will fulfill its purpose of  carrying crew. Should NASA determine it is likely to exceed its cost  estimate baseline by 15 percent or miss a milestone by 6 months or  more, NASA is required to report those increases and delays\u2014along with  their impacts\u2014to Congress. In June 2017, NASA sent notification to  Congress that the schedule for EM-1 has slipped beyond the allowed 6- month threshold, but stated that cost is expected to remain within the 15  percent threshold.", "NASA has not established EM-2 cost baselines or expected total life- cycle costs for SLS and EGS, including costs related to the larger and  more capable versions of SLS needed to implement the agency\u2019s plans to  send crewed missions to Mars. GAO\u2019s Cost Estimating and Assessment  Guide, a guidebook of cost estimating best practices developed in concert  with the public and private sectors, identifies baselines as a critical means  for measuring program performance over time and addresses how a  baseline backed by a realistic cost estimate increases the probability of a  program\u2019s success. In addition, prior GAO work offers insight into the  benefits of how baselines enhance a program\u2019s transparency. For  example, we found in 2009 that costs for the Missile Defense Agency\u2019s  (MDA) ballistic missile defense system had grown by at least $1 billion,  and that lack of baselines for each block of capability hampered efforts to  measure progress and limited congressional oversight of MDA\u2019s work.  MDA responded to our recommendation to establish these baselines and,  in 2011, we reported that MDA had a new process for setting detailed  baselines, which had resulted in a progress report to Congress more  comprehensive than the one it provided in 2009.", "To that end, we have made recommendations in the past on the need for  NASA to baseline the programs\u2019 costs for capabilities beyond EM-1;  however, a significant amount of time has passed without NASA taking  steps to fully implement these recommendations. Specifically, in May  2014, we recommended that, to provide Congress with the necessary  insight into program affordability, ensure its ability to effectively monitor  total program costs and execution, and to facilitate investment decisions,  NASA\u2019s Administrator should direct the Human Exploration and  Operations Mission Directorate to:", "Establish a separate cost and schedule baseline for work required to  support the SLS for EM-2 and report this information to the Congress  through NASA\u2019s annual budget submission. If NASA decides to fly the  SLS configuration used in EM-2 beyond EM-2, establish separate life  cycle cost and schedule baseline estimates for those efforts, to  include funding for operations and sustainment, and report this  information annually to Congress via the agency\u2019s budget submission;  and", "Establish separate cost and schedule baselines for each additional  capability that encompass all life cycle costs, to include operations  and sustainment, because NASA intends to use the increased  capabilities of the SLS, Orion, and ground support efforts well into the  future and has chosen to estimate costs associated with achieving the  capabilities.", "As part of the latter recommendation, we stated that, when NASA could  not fully specify costs due to lack of well-defined missions or flight  manifests, the agency instead should forecast a cost estimate range\u2014 including life cycle costs\u2014having minimum and maximum boundaries and  report these baselines or ranges annually to Congress via the agency\u2019s  budget submission.", "In its comments on our 2014 report, NASA partially concurred with these  two recommendations, noting that much of what it had already done or  expected to do would address them. For example, the agency stated that  establishing the three programs as separate efforts with individual cost  and schedule commitments met GAO\u2019s intent as would its plans to track  and report development, operations, and sustainment costs in its budget  to Congress as the capabilities evolved. In our response, we stated that  while NASA\u2019s prior establishment of three separate programs lends some  insight into expected costs and schedule at the broader program level, it  does not meet the intent of the two recommendations because cost and  schedule identified at that level is unlikely to provide the detail necessary  to monitor the progress of each block against a baseline. Further,  reporting the costs via the budget process alone will not provide  information about potential costs over the long term because budget  requests neither offer all the same information as life-cycle cost estimates  nor serve the same purpose. Life-cycle cost estimates establish a full  accounting of all program costs for planning, procurement, operations and  maintenance, and disposal and provide a long-term means to measure  progress over a program\u2019s life span.", "In 2016, NASA requested closure of these recommendations, citing,  among other factors, changes to the programs\u2019 requirements, design,  architecture, and concept of operations. However, NASA\u2019s request did not  identify any steps taken to meet the intent of these two recommendations,  such as establishing cost and schedule baselines for EM-2, baselines for  each increment of SLS, Orion, or ground systems capability, or  documentation of life cycle cost estimates with minimum and maximum  boundaries. Further, a senior level ESD official told us that NASA does  not intend to establish a baseline for EM-2 because it is not required to do  so. The limited scope that NASA has chosen to use as the basis for  formulating the programs\u2019 cost baselines does not provide the  transparency necessary to assess long-term affordability. Plainly,  progress cannot be assessed without a baseline that serves as a means  to compare current costs against expected costs; consequently, it  becomes difficult to assess program affordability and for Congress to  make informed budgetary decisions.", "NASA\u2019s lack of action in regards to our 2014 recommendations means  that it is now contractually obligating NASA to spend billions of dollars in  potential costs for EM-2 and beyond without a baseline against which to  assess progress. For example:  in fiscal year 2016, the SLS program awarded two contracts to Aerojet  Rocketdyne: a $175 million contract for RL-10 engines to power the  exploration upper stage during EM-2 and EM-3 and a $1.2 billion  contract to restart the RS-25 production line required for engines for  use beyond EM-4, and to produce at least 4 additional RS-25  engines;  in 2017, SLS modified the existing Boeing contract upwards by $962  million for work on the exploration upper stage that SLS will use  during EM-2 and future flights; and on a smaller scale, in fiscal year 2016 the EGS program obligated  $4.8 million to support the exploration upper stage and EM-2.", "As illustrated by these contracting activities, the SLS program is  obligating more funds for activities beyond EM-1 than Congress directed.  Specifically, of approximately $2 billion appropriated for the SLS program,  the Consolidated Appropriations Act, 2016 directed that NASA spend not  less than $85 million for enhanced upper stage development for EM-2.  NASA has chosen to allocate about $360 million of its fiscal year 2016  SLS appropriations towards EM-2, including enhanced upper stage  development, additional performance upgrades, and payload adapters,  without a baseline to measure progress and ensure transparency. The  NASA Inspector General (IG) also recently reported that NASA is  spending funds on EM-2 efforts without a baseline in place and  expressed concerns about the need for EM-2 cost estimates. Because  NASA has not implemented our recommendations, it may now be  appropriate for Congress to take action to require EM-2 cost and  schedule baselines for SLS and EGS, and separate cost and schedule  baselines for additional capabilities developed for Orion, SLS, and EGS  for missions beyond EM-2. These baselines would be important tools for  Congress to make informed, long-term budgetary decisions with respect  to NASA\u2019s future exploration missions, including Mars."], "subsections": []}, {"section_title": "Organizational Structure Impairs Independence of Engineering and Safety Technical Oversight", "paragraphs": ["NASA\u2019s governance model prescribes a management structure that  employs checks and balances among key organizations to ensure that  decisions have the benefit of different points of view and are not made in  isolation. As part of this structure, NASA established the technical  authority process as a system of checks and balances to provide  independent oversight of programs and projects in support of safety and  mission success through the selection of specific individuals with  delegated levels of authority. The technical authority process has been  used in other parts of the government for acquisitions, including the  Department of Defense and Department of Homeland Security. ESD is  organizationally connected to three technical authorities within NASA.", "The Office of the Chief Engineer technical authority is responsible for  ensuring from an independent standpoint that the ESD engineering  work meets NASA standards,", "The Office of Safety and Mission Assurance technical authority is  responsible for ensuring from an independent standpoint that ESD  products and processes satisfy NASA\u2019s safety, reliability, and mission  assurance policies, and", "The Office of Chief Health and Medical technical authority is  responsible for ensuring from an independent standpoint that ESD  programs meet NASA\u2019s health and medical standards.", "These NASA technical authorities have delegated responsibility for their  respective technical authority functions directly to ESD staff. According  to NASA\u2019s project management requirements, the program or project  manager is ultimately responsible for the safe conduct and successful  outcome of the program or project in conformance with governing  requirements and those responsibilities are not diminished by the  implementation of technical authority.", "ESD has established an organizational structure in which the technical  authorities for engineering and safety and mission assurance (S&MA) are  dual hatted to also serve simultaneously in programmatic positions. The  chief engineer technical authority also serves as the Director of ESD\u2019s  Cross Program System Integration Office and the S&MA technical  authority also serves as the ESD Safety and Mission Assurance  Manager. In their programmatic roles for ESD, the individuals manage  resources, including budget and schedule, to address engineering and  safety issues. In their technical authority roles, these same individuals are  to provide independent oversight of programs and projects in support of  safety and mission success. Having the same individual simultaneously  fill both a technical authority role and a program role creates an  environment of competing interests where the technical authority may be  subject to impairments in their ability to impartially and objectively assess  the programs while at the same time acting on behalf of ESD in  programmatic capacities. This duality makes them more subject to  program pressures of cost and schedule in their technical authority roles.  Figure 9 describes some of the conflicting roles and responsibilities of  these officials in their two different positions.", "The concurrency of duties leaves the positions open to conflicting goals of  safety, cost, and schedule and increases the potential for the technical  authorities to become subject to cost and schedule pressures. For  example:  the dual-hatted engineering and S&MA technical authorities serve on  decision-making boards both in technical authority and programmatic  capacities, making them responsible for providing input on technical  and safety decisions while also keeping an eye on the bottom line for  ESD\u2019s cost and schedule; and  the technical authorities are positioned such that they have been the  reviewers of the ESD programmatic areas they manage\u2014in essence,  \u201cgrading their own homework.\u201d For example, at ESD\u2019s Build to Sync  review in 2016, the engineering and S&MA technical authorities  evaluated the areas that they manage in their respective capacities as  ESD Director of Cross Program System Integration and ESD Safety  and Mission Assurance Manager. This process relied on their abilities  as individuals to completely separate the two hats\u2014using one hand to  put on the ESD hat and manage technical and safety issues within  programmatic cost and schedule constraints and using the other hand  to take off that hat and assess the same issues with an independent  eye.", "NASA officials identified several reasons why the dual-hat structure works  for their purposes. Agency officials stated that one critical factor to  successful dual-hatting is having the \u201cright\u201d people in those dual-hat  positions\u2014that is, personnel with the appropriate technical knowledge to  do the work and the ability to act both on behalf of ESD and independent  of it. Officials also indicated that technical authorities retain independence  because their technical authority reporting paths and performance  reviews are all within their technical authority chain of command rather  than under the purview of the ESD chain of command.", "Additionally, agency officials said that dual-hat roles are a commonplace  practice at NASA and cited other factors in support of the approach,  including that:  it would not be an efficient use of resources to have an independent  technical authority with no program responsibilities because that  person would be unlikely to have sufficient program knowledge to  provide useful insight and could slow the program\u2019s progress; a technical authority that does not consider cost and schedule is not  helpful to the program because it is unrealistic to disregard those  aspects of program management; a strong dissenting opinion process is in place and allows for issues to  be raised through various levels to the Administrator level within  NASA; and", "ESD receives additional independent oversight through three NASA  internal organizations\u2014the independent review teams that provide  independent assessments of a program\u2019s technical and programmatic  status and health at key points in its life cycle; the NASA Engineering  and Safety Center that conducts independent safety and mission  success-related testing, analysis, and assessments of NASA\u2019s high- risk projects; and the Aerospace Safety Advisory Panel (ASAP) that  independently oversees NASA\u2019s safety performance.", "These factors that NASA officials cite in support of the dual-hat approach  minimize the importance of having independent oversight and place ESD  at risk of fostering an environment in which there is no longer a balance  between preserving safety with the demands of maintaining cost and  schedule. The Columbia Accident Investigation Board (CAIB) report\u2014the  result of an in-depth assessment of the technical and organizational  causes of the Columbia accident\u2014concluded that NASA\u2019s organization  for the Shuttle program combined, among other things, all authority and  responsibility for schedule, cost, safety, and technical requirements and  that this was not an effective check and balance. The CAIB report  recommended that NASA establish a technical authority to serve  independently of the Space Shuttle program so that employees would not  feel hampered to bring forward safety concerns or disagreements with  programmatic decisions. The Board\u2019s findings that led to this  recommendation included a broken safety culture in which it was difficult  for minority and dissenting opinions to percolate up through the hierarchy;  dual Center and programmatic roles vested in one person that had  confused lines of authority, responsibility, and accountability and made  the oversight process susceptible to conflicts of interest; and oversight  personnel in positions within the program, increasing the risk that these  staffs\u2019 perspectives would be hindered by too much familiarity with the  programs they were overseeing.", "ESD officials stated that they had carefully and thoughtfully implemented  the intent of the CAIB; they said they had not disregarded its finding and  recommendations but instead established a technical authority in such a  way that it best fit the context of ESD\u2019s efforts. These officials did  acknowledge, though, that the dual hat approach does not align with the  CAIB report\u2019s recommendation to separate programmatic and technical  authority or with NASA\u2019s governance framework. Further, over the course  of our review, we spoke with various high-ranking officials outside and  within NASA who expressed some reservations about ESD\u2019s dual hat  approach. For example:", "The former Chairman of the CAIB stated that, even though the ESD  programs are still in development, he believes the technical authority  should be institutionally protected against the pressures of cost and  schedule and added that NASA should never be lulled into dispensing  of engineering and safety independence because human spaceflight  is an extremely risky enterprise.", "Both NASA\u2019s Chief Engineer and Chief of S&MA acknowledged there  is inherent conflict in the concurrent roles of the dual hats, while also  expressing great confidence in the ESD staff now in the dual roles.", "NASA\u2019s Chief of S&MA indicated that the dual-hat S&MA structure is  working well within ESD, but he believes these dual-hatted roles may  not necessarily meet the intent of the CAIB\u2019s recommendation  because the Board envisioned an independent safety organization  completely outside the programs.", "NASA\u2019s Chief Engineer stated that he believes technical authority  should become a separate responsibility and position as ESD moves  forward with integration of the three programs and into their operation  as a system.", "As these individuals made clear, ensuring the ESD engineering and  S&MA technical authorities remain independent of cost and schedule  conflicts is key to human spaceflight success and safety. Along these  lines, the ASAP previously conveyed concerns about NASA\u2019s  implementation of technical authority that continue to be valid today. In  particular, the ASAP stated in a 2013 report that NASA\u2019s technical  authority was working at that time in large measure due to the well- qualified, strong personnel that had been assigned to the process. The  panel noted, however, that should there be a conflict or weakening of the  placement of strong individuals in the technical authority position, this  could introduce greater risk into a program. Although a current ASAP  official stated she had no concerns with ESD\u2019s present approach to  technical authority, the panel\u2019s prior caution remains applicable, and the  risk that the ASAP identified earlier could be realized if not mitigated by  eliminating the potential for competing interests within the ESD  engineering and S&MA positions.", "NASA is currently concluding an assessment of the implementation of the  technical authority role to determine how well that function is working  across the agency. According to the official responsible for leading the  study, the assessment includes examining the evolution of the technical  authority role over the years and whether NASA is spending the right  amount of funds for those positions. NASA expects to have  recommendations in 2017 on how to improve the technical authority  function, but does not expect to address the dual hat construct. A  principle of federal internal controls is that an agency should design  control activities to achieve objectives and respond to risks, which  includes segregation of key duties and responsibilities to reduce the risk  of error, misuse, or fraud. By overlapping technical authority and  programmatic responsibilities, NASA will continue to run the risk of  creating an environment of competing interests for the ESD engineering  and S&MA technical authorities."], "subsections": []}]}, {"section_title": "ESD Risk Posture Has Improved, but Key Risk Areas Remain for the Integration Effort", "paragraphs": ["Despite the development and integration challenges associated with a  new human spaceflight capability, ESD has improved its overall cross- program risk posture over the past 2 years. Nonetheless, it still faces key  integration risk areas within software development and verification and  validation (V&V). Both are critical to readiness for EM-1 because software  acts as the \u201cbrain\u201d that ties SLS, Orion, and EGS together in a functioning  body, while V&V ensures the integrated body works as expected. The  success of these efforts forms the foundation for a launch, no matter the  date of EM-1."], "subsections": [{"section_title": "ESD\u2019s Cross-Program Risk Posture Has Improved", "paragraphs": ["We have previously reported on individual SLS, Orion, and EGS program  risks that were contributing to potential delays within each program. For  example, in July 2016, we found that delays with the European Service  Module\u2014which will provide services to the Orion crew module in the form  of propulsion, consumables storage, and heat rejection and power\u2014could  potentially affect the Orion program\u2019s schedule. Subsequently, in April  2017, we found that those delays had worsened and were contributing to  the program likely not making a November 2018 launch readiness date.  All three programs continue to manage such individual program risks,  which is to be expected of programs of this size and complexity. The  programs may choose to retain these risks in their own risk databases or  elevate them to ESD to track mitigation steps. A program would elevate a  risk to ESD when decisions are needed by ESD management, such as a  need for additional resources or requirement changes. Risks with the  greatest potential for negative impacts are categorized as top ESD risks.  In addition to these individual programs risks that are elevated to ESD,  ESD is also responsible for overseeing cross-program risks that affect  multiple programs. An example of a cross-program risk is the potential for  delayed delivery of data from SLS and Orion to affect the EGS software  development schedule.", "ESD has made progress reducing risks over the last 2 years, from the  point of the Design to Sync preliminary design review equivalent for the  integrated programs to the Build to Sync critical design review equivalent.  As figure 10 illustrates, ESD has reduced its combined total of ESD and  cross program risks from 39 to 25 over this period, and reduced the  number of high risks from about 49 percent of the total to about 36  percent of the total.", "The ESD risk system is dynamic, with risks coming into and dropping out  of the system over time as development proceeds and risk mitigation is  completed. A total of 29 of the 39 risks within the ESD risk portfolio were  removed from the register and 15 risks were added to the register  between November 2014, prior to Design to Sync, and March 2017, after  Build to Sync. Examples of risks removed over this time period include  risks associated with late delivery of Orion and SLS ground support  equipment hardware to EGS and establishing a management process to  identify risks stemming from the programs being at differing points in  development.", "Nine risks remained active in the system over the 2-year period we  analyzed, and NASA experienced delays in the length of time it  anticipated it would take to complete mitigation of the majority of these  nine risks. Three of these nine risks that have remained active in the risk  system since before Design to Sync are still classified as high risk; the  remaining six are classified as medium risk. Mitigation is an action taken  to eliminate or reduce the potential severity of a risk, either by reducing  the probability of it occurring, by reducing the level of impact if it does  occur, or both. ESD officials indicated a number of reasons why risks  could take longer to mitigate. For instance, risks with long-term mitigation  strategies may go for extended periods of time without score changes. In  addition, ESD may conduct additional risk assessments and determine  that certain risks need to be reprioritized over time and that resources  should be focused towards higher risks. In addition, some risk mitigation  steps are tied to hardware delivery and launch dates, and as those delay,  the risk mitigation steps will as well. As illustrated in table 2, we found that  six of these nine risks were related to software and V&V and represented  some of the primary causes in terms of estimated completion delays. On  average, the estimated completion dates for these six risks were delayed  about 16 months. In addition, the two V&V risks that have remained  active since before Design to Sync were still considered top ESD risks as  of March 2017 when we completed this analysis."], "subsections": []}, {"section_title": "Software Development Is a Key Risk Area Facing the Integration Effort", "paragraphs": ["Software development is one of the top cross-program technical issues  facing ESD as the programs approach EM-1. Software is a key enabling  technology required to tie the human spaceflight systems together.  Specifically, for ESD to achieve EM-1 launch readiness, software  developed within each of the programs has to be able to link and  communicate with software developed in other programs in order to  enable a successful launch. Furthermore, software development  continues after hardware development and is often used to help resolve  hardware deficiencies discovered during systems integration and test.", "ESD has defined six critical paths\u2014the path of longest duration through  the sequence of activities that determines the program\u2019s earliest  completion date\u2014for its programs to reach EM-1, and three are related to  software development. These three software critical paths support  interaction and communication between the systems the individual  programs are developing\u2014SLS to EGS software, Orion to EGS software,  and the Integrated Test Laboratory (ITL) facility that supports Orion  software and avionics testing as well as some SLS and EGS testing. The  other critical paths are development of the Orion crew service module,  SLS core stage, and the EGS Mobile Launcher. Because of software\u2019s  importance to EM-1 launch readiness, ESD is putting a new method in  place to measure how well these software efforts are progressing along  their respective critical paths. To that end, it is currently developing a set  of \u201cKey Progress Indicators\u201d milestones that will include baseline and  forecast dates. Officials indicated that these metrics will allow ESD to  better track progress of the critical path software efforts toward EM-1  during the remainder of the system integration and test phase. ESD  officials have indicated, however, that identifying and establishing  appropriate indicators is taking longer than expected and proving more  difficult than anticipated.", "One of the software testing critical paths, the ITL, has already  experienced delays that slipped completion of planned software testing  from September 2018 until March 2019, a delay of 6 months. Officials told  us that this delay was primarily due to a series of late avionics and  software deliveries by the European Space Agency for Orion\u2019s European  Service Module. The delay in the Orion testing in turn affects SLS and  EGS software testing and integration because those activities are  informed by the completion of the Orion software testing. Furthermore,  some EGS and SLS software testing scheduled to be conducted within  the ITL has been re-planned as a result of the Orion delays.", "The Orion program indicates that it has taken action to mitigate ITL issues  as they arise. For example, the European Service Module avionics and  software delivery delay opened a 125-day gap between completion of  crew module testing and service module testing. Orion officials indicated  that the program had planned to proceed directly into testing of the  integrated crew module and service module software and systems, but  the integrated testing cannot be conducted until the service module  testing is complete.", "As illustrated by figure 11, to mitigate the impact of the delay, Orion  officials indicated that the program filled this gap by rescheduling other  activities at the ITL such as software integration testing and dry runs for  the three programs. These adjustments narrowed the ITL schedule gap  from 125 days to 24 days. The officials stated that they will continue to  adjust the schedule to eliminate gaps.", "The other two software critical paths\u2014SLS to EGS and Orion to EGS  software development\u2014are also experiencing software development  issues. In July 2016, for example, we found that delays in SLS and Orion  requirements development, as well as the programs\u2019 decisions to defer  software content to later in development, were delaying EGS\u2019s efforts to  develop ground command and control software and increasing cost and  schedule.", "Furthermore, ESD reports show that delays and content deferral in the  Orion and SLS software development continue to affect EGS software  development and could delay launch readiness. For example, the EGS  data throughput risk that both ESD and EGS are tracking is that the  ground control system software is currently not designed to process the  amount of telemetry it will receive and provide commands to SLS and  ground equipment as required during launch operations. EGS officials  stated that, if not addressed, the risk is that if there is a SLS or Orion  failure, the ground control system software may not display the necessary  data to launch operations technicians. EGS officials told us that the  reason for the mismatch between the data throughput being sent to the  ground control software and how much is it designed to process is that no  program was constrained in identifying its data throughput. These officials  stated that retrospectively, they should have established an interface  control document to manage the process. The officials also stated that  the program is taking steps to mitigate this risk, including defining or  constraining the data parameters and buying more hardware to increase  the amount of data throughput that can be managed, but will not know if  the risk is fully mitigated until additional data are received and analyzed  during upcoming tests. For example, EGS officials stated that the green  run test will provide additional data to help determine if the steps they are  taking address this throughput risk. If the program determines the risk is  not fully mitigated and additional software redesign is required, it could  lead to schedule delays.", "ESD officials overseeing software development acknowledged that  software development for the integrated systems is a difficult task and  said they expect to continue to encounter and resolve software  development issues during cross-program integration and testing. As we  have found in past reviews of NASA and Department of Defense  systems, software development is a key risk area during system  integration and testing. For example, we found in April 2017 that software  delivery delays and development problems with the U.S. Air Force\u2019s F-35  program experienced during system integration and testing were likely to  extend that program\u2019s development by 12 months and increase its costs  by more than $1.7 billion."], "subsections": []}, {"section_title": "Verification and Validation Will Remain Key Risk Area to Monitor as NASA Establishes and Works towards New Launch Readiness Date", "paragraphs": ["Verification and validation (V&V) is acknowledged by ESD as a top cross- program integration risk that NASA must monitor as it establishes and  works toward a new EM-1 launch readiness date. V&V is a culminating  development activity prior to launch for determining whether integrated  hardware and software will perform as expected. V&V consists of two  equally important aspects:  verification is the process for determining whether or not a product  fulfills the requirements or specifications established for it at the start  of the development phase; and  validation is the assessment of a planned or delivered system ability  to meet the sponsor\u2019s operational need in the most realistic  environment achievable during the course of development or at the  end of development.", "Like software development and testing, V&V is typically complex and  made even more so by the need to verify and validate how SLS, Orion,  and EGS work together as an integrated system.", "ESD\u2019s V&V plans for the integrated system have been slow to mature. In  March 2016, leading up to ESD\u2019s Build to Sync review, ESD performed  an audit of V&V-related documentation for the program CDRs and ESD  Build to Sync. The audit found that 54 of 257 auditable areas (21 percent)  were not mature enough to meet NASA engineering policy guidance for  that point in development. According to ESD documentation, there were  several causes of this immaturity, including incomplete documentation  and inconsistent requirements across the three programs. NASA officials  told us that our review prompted ESD to conduct a follow-up and track the  status of these areas. As of June 2017, 53 of the 54 auditable areas were  closed, which means these areas are at or have exceeded CDR level of  maturity\u20146 months after Build to Sync was completed. NASA officials  indicated that the remaining one auditable area, which is related to the  test plan for the integrated communication network, was closed in August  2017.", "Nevertheless, other potential V&V issues still remain. According to ESD  officials, distributing responsibility for V&V across the three programs has  created an increased potential for gaps in testing. If gaps are discovered  during testing, or if integrated systems do not perform as planned, money  and time for modifications to hardware and/or software may be  necessary, as well as time for retesting. This could result in delayed  launch readiness. As a result, mature V&V plans are needed to ensure  there are no gaps in planned testing. ESD officials indicated that a NASA  Engineering and Safety Center review of their V&V plans, requested by  ESD\u2019s Chief Engineer to address concerns about V&V planning, would  help define the path forward for maturing V&V plans. V&V issues add to  cost and schedule risk for the program because they may take more time  and money to resolve than ESD anticipates. In some cases, they may  have a safety impact as well. For example, if the structural models are not  sufficiently verified, it increases flight safety risks. Each of the programs  bases its individual analyses on the models of the other programs. As a  result, any deficiencies discovered in one can have cascading effects  through the other systems and programs. We will continue to monitor  ESD\u2019s progress mitigating risks as NASA approaches EM-1."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["NASA is at the beginning of the path leading to human exploration of  Mars. The first phase along that path, the integration of SLS, Orion, and  EGS, is likely to set the stage for the success or failure of the rest of the  endeavor. Establishing a cost and schedule baseline for NASA\u2019s second  mission is an important initial step in understanding and gaining support  for the costs of SLS, Orion, and EGS, not just for that one mission but for  the Mars plan overall. NASA\u2019s ongoing refusal to establish this baseline is  short-sighted, because EM-2 is part of a larger conversation about the  affordability of a crewed mission to Mars. While later stages of the Mars  mission are well in the future, getting to that point in time will require a  funding commitment from the Congress and other stakeholders. Much of  their willingness to make that commitment is likely to be based on the  ability to assess the extent to which NASA has met prior goals within  predicted cost and schedule targets.", "Furthermore, as ESD moves SLS, Orion, and EGS from development to  integrated operations, its efforts will reach the point when human lives will  be placed at risk. Space is a severe and unforgiving environment; the  Columbia accident showed the disastrous consequences of mistakes. As  the Columbia Accident Investigation Board report made clear, a  program\u2019s management approach is an integral part of ensuring that  human spaceflight is as safe and successful as possible. The report also  characterized independence as key to achieving that safety and success.  ESD\u2019s approach, however, tethers independent oversight to program  management by vesting key individuals to wear both hats at the same  time. As a result, NASA is relying heavily on the personality and capability  of those individuals to maintain independence rather than on an  institutional process, which diminishes lessons learned from the Columbia  accident."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration.", "Congress should consider requiring the NASA Administrator to direct the  Exploration Systems Development organization within the Human  Exploration and Operations Mission Directorate to establish separate cost  and schedule baselines for work required to support SLS and EGS for  Exploration Mission 2 and establish separate cost and schedule baselines  for each additional capability that encompass all life cycle costs, to  include operations and sustainment. (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to the Exploration Systems  Development organization.", "Exploration Systems Development should no longer dual-hat individuals  with both programmatic and technical authority responsibilities.  Specifically, the technical authority structure within Exploration Systems  Development should be restructured to ensure that technical authorities  for the Offices of the Chief Engineer and Safety and Mission Assurance  are not fettered with programmatic responsibilities that create an  environment of competing interests that may impair their independence.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["NASA provided written comments on a draft of this report. These  comments are reprinted in appendix II. NASA also provided technical  comments, which were incorporated as appropriate.", "In responding to a draft of our report, NASA partially concurred with our  recommendation that the Exploration Systems Development (ESD)  organization should no longer dual-hat individuals with both programmatic  and technical authority responsibilities. Specifically, we recommended  that the technical authority structure within ESD should be restructured to  ensure that technical authorities for the Offices of Chief Engineer and  Safety and Mission Assurance are not fettered with programmatic  responsibilities that create an environment of competing interests that  may impair their independence. In response to this recommendation,  NASA stated that it created the technical authority governance structure  after the Columbia Accident Investigation Board report and that the dual- hat technical authority structure has been understood and successfully  implemented within ESD. NASA recognized, however, that as the  program moves from the design and development phase into the  integration and test phase, it anticipates that the ESD environment will  encounter more technical issues that will, by necessity, need to be quickly  evaluated and resolved. NASA asserted that within this changed  environment it would be beneficial for the Engineering Technical Authority  role to be performed by the Human Exploration and Operations Chief  Engineer (who reports to the Office of the Chief Engineer). NASA stated  that over the next year or so, it would solicit detailed input from these  organizations and determine how to best support the program while  managing the transition to integration and test and anticipated closing this  recommendation by September 30, 2018.", "We agree that NASA should solicit detailed input from key organizations  within the agency as it transitions away from the dual hat technical  authority structure to help ensure successful implementation of a new  structure. In order to implement this recommendation, however, NASA  needs to assign the technical authority role to a person who does not  have programmatic responsibilities to ensure they are independent of  responsibilities related to cost and schedule performance. To fulfill this,  this person may need to reside outside of the Human Exploration and  Operations Mission Directorate and NASA should solicit input from the  Office of the Chief Engineer when making this decision to ensure that  there are no competing interests for the technical authority. Moreover, in  its response, NASA does not address the dual-hat technical authority role  for Safety and Mission Assurance. We continue to believe that similar  changes for this role would be appropriate as well.", "Further, in response to this recommendation, NASA makes two  statements that require additional context.  First, NASA stated that GAO\u2019s  recommendation was focused on overall Agency technical authority  management. While this review involved meeting with the heads of the  Office of Chief Engineer and the Office of Safety and Mission Assurance,  the scope of this review and the associated recommendation are limited  to ESD. Second, NASA stated \u201cAs you found, we agree that having the  right personnel in senior leadership positions is essential for a Technical  Authority to be successful regardless of how the Technical Authority is  implemented.\u201d To clarify, this perspective is attributed to NASA officials in  our report and does not represent GAO\u2019s position.", "We are sending copies of this report to NASA\u2019s Administrator and to  appropriate congressional committees. In addition, the report is available  at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report assesses (1) the benefits and challenges of the National  Aeronautics and Space Administration\u2019s (NASA) approach for integrating  and assessing the programmatic and technical readiness of Orion, SLS,  and EGS; and (2) the extent to which the Exploration Systems  Development (ESD) organization is managing cross-program risks that  could affect launch readiness.", "To assess the benefits and challenges of NASA\u2019s approach for integrating  and assessing the programmatic and technical readiness of its current  human spaceflight programs relative to other selected programs, we  reviewed and analyzed NASA policies governing program and technical  integration, including cost, schedule, and risk. We obtained and analyzed  ESD implementation plans to assess the role of ESD in cross program  integration of the three programs. We reviewed the 2003 Columbia  Accident Investigation Board\u2019s Report\u2019s findings and recommendations  related to culture and organizational management of human spaceflight  programs as well as the Constellation program\u2019s lessons learned report.  We reviewed detailed briefings and documentation from Cross-Program  Systems Integration and Programmatic and Strategic Integration teams  explaining ESD\u2019s approach to programmatic and technical integration,  including implementation of systems engineering and integration. We  interviewed NASA officials to discuss the benefits and challenges of  NASA\u2019s integration approach and their roles and responsibilities in  managing and overseeing the integration process. We met with the  technical authorities and other representatives from the NASA Office of  the Chief Engineer, Office of Safety and Mission Assurance, Crew Health  and Safety, addressed cost and budgeting issues with the Chief Financial  Officer and discussed and documented their roles in executing and  overseeing the ESD programs. We also interviewed outside subject  matter experts to gain their insight of ESD\u2019s implementation of NASA\u2019s  program management policies on the independent technical authority  structure. Additionally, we compared historical budget data from the now- cancelled Constellation program to ESD budget data and quantified  systems engineering and integration budget savings through preliminary  design review, the point at which the Constellation program was  cancelled. In addition, we assessed the scope of NASA\u2019s funding  estimates for the second exploration mission and beyond against best  practices criteria outlined in GAO\u2019s cost estimating guidebook. We  assessed the reliability of the budget data obtained using GAO reliability  standards as appropriate. We compared the benefits and challenges of  NASA\u2019s integration approach to that of other complex, large-scale  government programs, including NASA\u2019s Constellation and the  Department of Defense\u2019s Missile Defense Agency programs.", "To determine the extent to which ESD is managing cross-program risks  that could affect launch readiness, we obtained and reviewed NASA and  ESD risk management policies; detailed monthly and quarterly briefings;  and documentation from Cross-Program Systems Integration and  Programmatic and Strategic Integration teams explaining ESD\u2019s approach  to identifying, tracking, and mitigating cross-program risks. We reviewed  Cross-Program Systems Integration systems engineering and systems  integration areas as well as Programmatic and Strategic Integration risks,  cost, and schedule to determine what efforts presented the highest risk to  cross program cost and schedule. We conducted an analysis of ESD\u2019s  risk dataset and the programs\u2019 detailed risk reports, which list program  risks and their potential schedule impacts, including mitigation efforts to  date. We examined risk report data from Design to Sync to Build to Sync  and focused our analyses to identify risks with current mitigation plans to  determine if risk mitigation plans are proceeding on schedule. We did not  analyze risks that were categorized under \u201cAccept,\u201d \u201cCandidate,\u201d  \u201cResearch,\u201d \u201cUnknown,\u201d or \u201cWatch\u201d because these risks were not  assigned an active mitigation plan by ESD. To assess the reliability of the  data, we reviewed related documentation and interviewed knowledgeable  agency officials. We determined the data was sufficiently reliable for  identifying risks and schedule delays associated with those risks. We  examined ESD integrated testing facility schedules to determine the  extent to which they can accommodate deviation in ESD\u2019s planned  integrated test schedule. We also interviewed program and contractor  officials on technical risks, potential impacts, and risk mitigation efforts  underway and planned.", "We conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Molly Traci (Assistant Director),  LaTonya Miller, John S. Warren Jr., Tana Davis, Laura Greifner, Roxanna  T. Sun, Samuel Woo, Marie P. Ahearn, and Lorraine Ettaro made key  contributions to this report."], "subsections": []}]}], "fastfact": ["NASA is developing 3 programs to put astronauts into space\u2014the Orion crew vehicle, Space Launch System, and Exploration Ground Systems. All 3 programs must work together.", "We found challenges in NASA's approach to integrating these programs. For example, the technical authorities for engineering and safety also have program roles that include managing resources. When technical authorities must also deal with cost and schedule pressures, it can potentially impair their independence. A review board concluded this type of tension contributed to the 2003 Columbia shuttle accident.", "We made recommendations to strengthen oversight and independence."]}
{"id": "GAO-18-177", "url": "https://www.gao.gov/products/GAO-18-177", "title": "Homeland Defense: Urgent Need for DOD and FAA to Address Risks and Improve Planning for Technology That Tracks Military Aircraft", "published_date": "2018-01-18T00:00:00", "released_date": "2018-01-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD has until January 1, 2020, to equip its aircraft with ADS-B Out technology that would provide DOD, FAA, and private citizens the ability to track their flights in real-time and track flight patterns over time. This technology is a component of NextGen, a broader FAA initiative that seeks to modernize the current radar-driven, ground-based air transportation system into a satellite-driven space-based system.", "Senate Report 114-255 included a provision for GAO to assess the national defense implications of FAA's implementation of ADS-B. This report assesses the extent to which (1) DOD and FAA have identified operations and security risks and approved solutions to address these risks to ADS-B Out -equipped military aircraft; and (2) DOD has implemented key tasks in the 2007 memorandum on implementing NextGen.", "GAO analyzed risks identified by DOD and FAA related to ADS-B vulnerabilities, and how they could affect current and future air defense and air traffic missions. GAO also reviewed the tasks in the 2007 NextGen Memorandum and assessed whether the eight tasks specifically related to ADS-B were implemented."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2008, the Department of Defense (DOD) and the Department of Transportation's Federal Aviation Administration (FAA) have identified a variety of risks related to Automatic Dependent Surveillance-Broadcast (ADS-B) Out technology that could adversely affect DOD security and missions. However, they have not approved any solutions to address these risks. Compared with other tracking technology, ADS-B Out provides more information, such as an aircraft's precise location, velocity, and airframe dimensions, and better enables real-time and historical flight tracking. Individuals\u2014including adversaries\u2014could track military aircraft equipped with ADS-B Out technology, presenting risks to physical security and operations. This readily available public information allowed GAO to track various kinds of military aircraft. ADS-B Out is also vulnerable to electronic warfare and cyber-attacks. Since FAA is planning to divest radars as part of ADS-B implementation, homeland defense could also be at risk, since the North American Aerospace Defense Command relies on information from FAA radars to monitor air traffic. DOD and FAA have drafted a memorandum of agreement that focuses on equipping aircraft with ADS-B Out but does not address specific security risks. Unless DOD and FAA focus on these risks and approve one or more solutions in a timely manner, they may not have time to plan and execute actions that may be needed before January 1, 2020\u2014when all aircraft are required to be equipped with ADS-B Out technology.", "Of the eight tasks associated with the implementation of ADS-B Out technology in the 2007 DOD NextGen memorandum\u2014issued by the Deputy Secretary of Defense to ensure that the NextGen vision for the future national airspace system met DOD's requirements and the appropriate management of DOD's resources\u2014DOD has implemented two, has partially implemented four, and has not implemented two. DOD has established a joint program office and identified a lead service, but it has only partially validated ADS-B Out requirements, developed a directive, issued an implementation plan, and incorporated NextGen into the planning, budgeting, and programming process. DOD has not taken significant action to integrate the needs and requirements of DOD components related to ADS-B into cohesive plans and policies for inclusion in NextGen joint planning and development, and has not provided periodic and recurring NextGen progress reports to the Deputy Secretary of Defense. As a result of DOD not fully implementing the 2007 NextGen memorandum, DOD components have lacked direction and cohesion while trying to address FAA's requirement to equip military aircraft.", "This is a public version of a classified report GAO issued in January 2018."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that DOD and FAA approve one or more solutions to address ADS-B -related security risks; and that DOD implement key tasks to facilitate consistent, long-term planning and implementation of NextGen. DOD and the Department of Transportation generally concurred and described planned actions to implement the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2010, the Federal Aviation Administration (FAA) issued a final rule that  requires all aircraft\u2014including military aircraft\u2014flying in specified airspace  within the national airspace system as of January 1, 2020, to be equipped  with technology that would transmit flight information to an enabled  receiver. This technology\u2014known as Automatic Dependent Surveillance- Broadcast (ADS-B) Out\u2014is a key component of the FAA\u2019s Next  Generation Air Transportation System (NextGen), which seeks to  modernize the current ground-based radar system to a satellite-derived  system for automated aircraft position reporting, navigation, and digital  communications. ADS-B Out uses an aircraft\u2019s avionics equipment to  broadcast the aircraft\u2019s position, altitude, and velocity to any ground, air,  or space-based receiver.", "Over the years, the Department of Defense (DOD) has expressed  concern about the operations security risk of openly transmitting flight  data from military aircraft. For example, in DOD\u2019s 2008 comments about  FAA\u2019s draft rule requiring ADS-B Out technology, the department  informed FAA that it was possible to identify and potentially compromise  DOD aircraft conducting sensitive missions in the United States due to  ADS-B Out technology. The North American Aerospace Defense  Command (NORAD) and DOD have also expressed concerns about the  FAA\u2019s plan to decommission FAA legacy radar systems on which NORAD  relies to conduct aerospace warning and aerospace control missions, and  on which DOD relies to conduct its air traffic missions. In addition, a  number of assessments conducted by DOD, FAA, and others have  identified security concerns inherent in ADS-B Out technology that could  leave aircraft, tactical air traffic control systems, and FAA radars  vulnerable to electronic warfare- and cyber-attacks by individuals, groups,  or nation-state actors (hereinafter referred to as \u201cadversaries\u201d) and other  types of interference. In addition, according to these assessments,  adversaries could create false signals (that is, \u201cspoofing\u201d) or jam signals  from ADS-B Out technology to obscure air traffic control and surveillance  visibility.", "Recognizing the importance of participating in the NextGen interagency  partnership, the Deputy Secretary of Defense issued a memorandum in  2007 designating the Air Force as the lead service responsible for  representing DOD in the partnership, including leading and coordinating  associated efforts across the department. In addition, the memorandum  identified key tasks to help ensure and enhance the department\u2019s ability  to operate seamlessly with civil aviation in both national and international  airspace.", "Senate Report 114-255, accompanying a bill for the National Defense  Authorization Act of Fiscal Year 2017, included a provision that we  assess the national defense implications of FAA\u2019s implementation of ADS-B as part of the agency\u2019s NextGen modernization effort. This report  assesses the extent to which (1) DOD and FAA have identified security  and operations risks and approved solutions to address these risks to  military aircraft equipped with ADS-B Out technology; and (2) DOD has  implemented key tasks in the 2007 Deputy Secretary of Defense  memorandum on implementing NextGen (hereinafter referred to as the  2007 NextGen memorandum). This is a public version of a classified  report that we issued in January 2018. This report does not identify  specific classified details of DOD assessments, security risks, and other  actions DOD is taking to address security risks related to ADS-B Out or  the NextGen system that DOD deemed to be sensitive. Although the  information provided in this report is less detailed, it addresses the same  objectives as our classified report. In addition, the overall methodology  used for both reports is the same.", "To assess the extent to which DOD and FAA have identified risks and  approved solutions to address these risks to military aircraft equipped  with ADS-B Out technology, we reviewed policies, procedures, guidance,  assessments, and other relevant documents from NORAD, DOD, and  FAA. These documents address ADS-B implementation, acquisition,  operations, cybersecurity, risk management and mitigation, and any other  issues that may be pertinent to identifying and addressing operations and  security risks resulting from ADS-B. We also reviewed publicly available  literature discussing potential ADS-B cybersecurity vulnerabilities. We  interviewed officials from NORAD, DOD, and FAA about potential risks,  vulnerabilities, and mitigation strategies. We also reviewed classified  intelligence reports that assessed the vulnerabilities of ADS-B technology.  While military aircraft and existing radar systems may be equipped with  other devices (such as Mode S transponders) that could also pose  security risks, this report focused primarily on risks and potential solutions  associated with ADS-B Out technology that FAA mandated DOD to install  on its aircraft by January 1, 2020. To understand DOD and FAA  coordination, we reviewed laws, guidance, and directives related to  agency cooperation for the NextGen system and implementation of ADS- B technology. This included the 2010 FAA final rule published in the  Federal Register that provided guidelines and requirements for  coordination between agencies and the 2007 NextGen memorandum on  implementing NextGen.", "To assess the extent to which DOD has implemented key tasks in the  2007 NextGen memorandum, we compared the actions taken, if any, to  implement eight tasks directed by the Deputy Secretary of Defense. We  selected these eight from the list of twenty tasks in the memorandum. We  selected these eight tasks because, if completed, these eight tasks would  be significant to the development of plans and policies related to the  implementation of the FAA\u2019s ADS-B Out technology requirement. To  evaluate completion of the selected tasks, we reviewed documents and  interviewed DOD officials to determine the degree to which DOD has  implemented the tasks identified by the 2007 NextGen memorandum.  Further details on our scope and methodology can be found in appendix I.", "We conducted this performance audit from June 2016 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FAA Next Generation Air Transportation System", "paragraphs": ["In December 2003 Congress enacted the Century of Aviation  Reauthorization Act, laying the foundation for NextGen. The intent of  NextGen is to increase air transportation-system capacity, enhance  airspace safety, reduce delays experienced by airlines and passengers,  lower fuel consumption, and lessen adverse environmental effects from  aviation, among other benefits. This effort is a multi-year, incrementally  iterative transformation that will introduce new technologies and leverage  existing technologies to affect every part of the national airspace system.  These new technologies will use an Internet Protocol-based network to  communicate. NextGen consists of components that provide digital  communications between controllers and pilots, and that also use  satellite-based surveillance to aid in airspace navigation. Because of  these new communication methods, NextGen increases reliance on  integrated information systems and distribution of information, digital  communication methods, and global positioning system (GPS) technology  that may put the air traffic control system at greater risk for intentional or  unintentional information-system failures and breaches. We have  previously reported on progress that FAA has made in implementing  NextGen. For example, in 2015 we found that FAA faces cybersecurity  challenges in at least three areas: (1) protecting air-traffic control  information systems, (2) protecting aircraft avionics used to operate and  guide aircraft, and (3) clarifying cybersecurity roles and responsibilities  among multiple FAA offices. Among other recommendations, we  recommended\u2014and FAA concurred\u2014that the agency should assess  developing a cybersecurity threat model."], "subsections": []}, {"section_title": "Evolution of Tracking Military Aircraft in the National Airspace", "paragraphs": ["Historically, FAA and DOD capabilities have allowed both agencies\u2014as  well as NORAD\u2014to monitor and track military aircraft flying in the national  airspace. For example, FAA maintains two layers of radar\u2014primary  surveillance radar and secondary surveillance radar\u2014to track and identify  aircraft flying in the national airspace system. Primary surveillance radar  identifies the location of aircraft flying in the national airspace by  transmitting a signal and calculating the amount of time that passes until  that signal bounces off the aircraft and returns to the radar. FAA also  uses secondary surveillance radar that transmits an interrogation signal to  aircraft flying in the national airspace. A receiver on the aircraft receives  the interrogation signal and then transmits a broadcast back to this radar  with flight information. Table 1 shows the evolution and capabilities of  different transponders that broadcast aircraft information to receivers.  The fields identified in the table are critical for identifying and tracking  aircraft. Of the different transponder modes and technology, ADS-B Out  provides the most precise and comprehensive data. ADS-B Out makes it  easier for third parties to identify and track aircraft, as ADS-B Out  broadcasts include registration number, precise location, aircraft  dimensions, and other information. This additional information reduces  the need to identify aircraft using private databases and to determine  aircraft location by comparing time difference of arrival among receivers.", "The content of these aircraft broadcasts varies depending on the type of  transmitter providing the information from the aircraft. For example, earlier  broadcast systems, including the Mode 3/A and Mode C systems,  transmit a temporary four-digit transmit code (commonly referred to as a  squawk code) assigned by air traffic control that facilitates aircraft tracking  during a single flight. Since FAA was the sole source of flight data for  systems preceding Mode S, the agency could filter out military aircraft  flight information for security reasons before providing information to the  public about other aircraft flying in the national airspace."], "subsections": [{"section_title": "Mode S Transponder", "paragraphs": ["Mode S transponders provide more information than do the Mode 3/A and  Mode C transponders. For example, the Mode S transponder broadcast  identifies an aircraft-specific, 24-bit fixed address (commonly known as  the ICAO address) assigned under International Civil Aviation  Organization (ICAO) standards. An aircraft retains this fixed address  based on its registration, and thereby facilitates aircraft identification until  the aircraft is reregistered and receives a new ICAO address.", "FAA and aviation groups have reported that with the proliferation of  commercial and amateur receivers, the public can now track individual  aircraft by receiving the aircraft\u2019s ICAO address, squawk code, and  altitude. In addition, these entities have reported that since aviation  groups and hobbyists have connected the receivers, the networked  receivers can calculate and identify the latitude and longitude of the  aircraft they are tracking. In addition, according to these reports, some  groups maintain aircraft information databases and receiver networks that  can identify aircraft by ICAO address and can locate aircraft by comparing  the time difference of arrival of Mode S signals between three or more  receivers. Using data derived from this work, interested parties\u2014 including adversaries (for example, foreign intelligence entities, terrorists,  and criminals)\u2014can identify military aircraft by type and registration  number, and can track the aircraft while in flight through Mode S fixed  address broadcasts. Using this readily available public information, we  were able to track various kinds of military aircraft that were equipped  with Mode S transponders."], "subsections": []}, {"section_title": "ADS-B Technology", "paragraphs": ["ADS-B consists of two distinct aircraft information services, ADS-B Out  and ADS-B In. As previously stated, ADS-B Out technology is one of the  main components of FAA\u2019s NextGen effort. It is a performance-based  surveillance technology using GPS-enabled satellites to produce flight  information, such as an aircraft\u2019s location and velocity, and according to  FAA, it is more precise than radar. These precise data provide air traffic  controllers and pilots with more accurate information to keep aircraft  safely separated in the national airspace. This technology combines  aircraft avionics, a positioning capability, and ground infrastructure to  enable accurate transmission of information from aircraft to the air traffic  control system. This technology periodically transmits information without  a pilot or operator involved (that is, Automatic); collects information from  GPS or other suitable navigation systems (that is, Dependent); provides a  method of determining 3-dimensional position and identification of aircraft,  vehicles, or other assets (that is, Surveillance); and transmits the  information available to anyone with the appropriate receiving equipment  (that is, Broadcast). Using this readily available public information, we  were able to track various kinds of military aircraft that were equipped  with ADS-B transponders. ADS-B In is the technology that enables  receivers to have direct access to information broadcasted through ADS- B Out transponders.", "FAA\u2019s final rule requiring all aircraft that fly in certain categories of  airspace to equip with ADS-B by January 1, 2020, applies to the ADS-B  Out technology. FAA has not issued a rule or requirement for aircraft to  equip with the ADS-B In technology, as of July 2017. However, according  to representatives from Airlines for America, an airline industry advocacy  organization, airlines have begun to install the ADS-B In capability on  commercial aircraft due to the benefits they anticipate from the capability  (for example, the ability of passenger airliners to reduce separation  standards to save time and reduce fuel consumption). In addition,  according to Air Force officials, the Air Force plans to install ADS-B In on  future KC-46 transport/tanker aircraft. This report focuses on the ADS-B  Out requirement when referencing ADS-B technology unless otherwise  noted.", "According to DOD and FAA documents and officials, FAA has identified  ADS-B implementation as providing an opportunity to save costs by  divesting a number of secondary-surveillance radars. According to FAA  officials, as of April 2017 the agency was re-evaluating its original ADS-B  backup strategy and the need for retaining additional secondary- surveillance radars. According to these officials, FAA plans to maintain all  high-altitude secondary-surveillance radars and the low-altitude  secondary-surveillance radars around 30 or more of the busiest airports."], "subsections": []}]}, {"section_title": "Relationship between FAA and DOD in Managing National Airspace", "paragraphs": ["The FAA and DOD are to cooperate in order to regulate airspace use.  Specifically, the FAA is responsible for providing air navigation services,  including air traffic control across most of the United States, and is  leading the overall NextGen efforts in the United States. The FAA\u2019s air  traffic control system works to prevent collisions involving aircraft  operating in the national airspace system, while also facilitating the flow of  air traffic and supporting national security and homeland defense  missions. In addition, in accordance with International Civil Aviation  Organization guidelines, the FAA has categorized airspace as controlled,  uncontrolled, or not used in the United States. According to the ADS-B  Out rule, after January 1, 2020, no person may operate an aircraft in  certain categories of airspace defined by the rule unless otherwise  authorized by air traffic control authorities.", "DOD conducts its missions within the national airspace system as both an  aircraft operator and, as delegated by the FAA, as provider of air traffic  control and other air navigation services. DOD has the authority to certify  its own aircraft, manage airspace, and provide air traffic control-related  services in accordance with FAA requirements. DOD also provides  guidance to FAA concerning security matters pertaining to the national  airspace system. DOD is responsible for ensuring that DOD components,  such as the military services, have sufficient access to airspace to meet  security requirements, and that civilian and military aircraft can operate  safely both domestically and abroad. DOD also releases airspace to the  FAA when it does not need the space for military purposes.", "The FAA also works with DOD to ensure aviation safety between civil and  military aircraft. The FAA designates airspace over certain parts of the  United States as Special Use Airspace, because the areas may have  prohibited airspace, restricted airspace, warning areas, or alert areas. It  might be hazardous for civil aircraft to operate in that restricted airspace  due to these designations. Special Use Airspace allows military aircraft to  operate safely in separate, clearly defined airspace in order to conduct  missions in support of the National Security Strategy and the National  Military Strategy. The FAA also issues safety briefings that could identify  military-protected, temporarily flight-restricted areas, to prevent civil pilots  from flying into the airspace. These briefings also include information  such as flight safety advice and information on air traffic technology, such  as ADS-B. The FAA also shares radar information with NORAD to  support the defense of North America over areas such as the National  Capital Region surrounding Washington, D.C."], "subsections": []}, {"section_title": "Roles and Responsibilities", "paragraphs": ["The FAA is responsible for providing airspace navigation services within  the United States and has a particular entity\u2014the FAA Office of  NextGen\u2014that directs its NextGen requirements. In 2007 the Deputy  Secretary of Defense designated the Air Force as the lead service for  representing DOD and for leading and coordinating efforts across DOD.  To accomplish this responsibility, the Air Force established a Lead  Service Office, hereinafter referred to as the DOD Lead Service Office.  These and numerous other entities have a role in implementing NextGen  and ADS-B, as shown in table 2 below."], "subsections": []}]}, {"section_title": "DOD and FAA Have Identified Security and Mission Risks Related to ADS-B Out Technology but Have Not Approved Any Solutions to Mitigate Them", "paragraphs": ["Since 2008, DOD and FAA have identified a variety of ADS-B- related  risks that could adversely affect military security and missions. While  DOD and FAA have identified some potential mitigations for these risks,  the departments have not approved any solutions."], "subsections": [{"section_title": "DOD and FAA Have Identified Risks to DOD Security and Missions Related to ADS-B Technology", "paragraphs": ["Documents we reviewed and officials we met with identified a variety of  operations and physical security risks that could adversely affect DOD  missions. These risks arise from information broadcast by ADS-B itself,  as well as from potential ADS-B vulnerabilities to electronic warfare- and  cyber-attacks, and from the potential divestment of secondary- surveillance radars."], "subsections": [{"section_title": "ADS-B Information Presents Operations and Physical Security Risks", "paragraphs": ["Information broadcasted from ADS-B transponders poses an operations  security risk for military aircraft. For example, a 2015 assessment that  RAND conducted on behalf of the U.S. Air Force stated that the  broadcasting of detailed and unencrypted position data for fighter aircraft,  in particular for a stealth aircraft such as the F-22, may present an  operations security risk. The report noted that information about the F- 22\u2019s precise position is classified Secret, which means that unauthorized  disclosure of this information could reasonably be expected to cause  serious damage to the national security. Similarly, in 2012 MITRE issued  a report on behalf of the DOD Lead Service Office that identified a  number of risks\u2014including the ability to track movement in and out of  restricted airspaces and changes in operations\u2014to ADS-B-equipped  aircraft.", "In addition to these documents, DOD officials identified a number of  increased operations and physical security risks associated with aircraft  equipped with ADS-B technology. In DOD\u2019s 2008 comments about  FAA\u2019s draft rule requiring ADS-B Out technology, the department  informed FAA that DOD aircraft could be identified conducting special  flights for sensitive missions in the United States and potentially  compromised due to ADS-B technology. Such sensitive missions could  include low-observable surveillance, combat air patrol, counter-drug,  counter-terrorism, and key personnel transport. While some military  aircraft are currently equipped with Mode S transponders that provide  individuals who have tracking technology the altitude of the aircraft, ADS- B poses an increased risk. Specifically, according to documents we  reviewed and officials we met with, a confluence of the following three  issues has led to ADS-B technology presenting more risks to DOD  aircraft, personnel, equipment, and operations:", "Additional information. The additional information provided through  ADS-B technology\u2014 including the aircraft\u2019s precise location, velocity,  and airframe dimensions\u2014increases both direct physical risks to DOD  aircraft, personnel, and equipment, and long-term risks to DOD air  operations.", "Accessibility of information. ADS-B technology also introduces  risks to aircraft, personnel, equipment, and operations, because it  provides information to the public that was not previously accessible.  FAA filters information about DOD\u2019s flights so that the information is  not available to the public via any FAA data feed. According to FAA  officials, this filtering was effective for protecting such information for  Mode-S equipped DOD aircraft until the 2012 timeframe, when the  capability of third-party networked receivers started to allow position  determination for such aircraft. With ADS-B, aircraft location and other  information is broadcast from the aircraft, where FAA cannot filter it.  While individuals and groups could obtain additional information about  DOD flights operating with Mode S, such as an aircraft\u2019s fixed  address, information such as geographic location and velocity was not  included in broadcasts. Individuals could estimate location and  velocity of DOD flights by locating the signal through privately owned  receiver networks. By equipping military aircraft with ADS-B  technology, individuals and groups would receive additional  identifiers, location information, and airframe information through  aircraft broadcasts and, as a result, could identify and track aircraft  without the use of fixed address databases and with less receiver  infrastructure.", "Historical data. ADS-B technology better enables individuals and  groups to track flights in real time and use computer programs to log  ADS-B transmissions over time. Therefore, individuals or groups  could observe flight paths in detail, identify patterns-of-life, or counter  or exploit DOD operations."], "subsections": []}, {"section_title": "ADS-B Could Affect Current and Future Air Defense and Air Traffic Missions", "paragraphs": ["While NORAD and DOD officials told us that they will benefit from  information provided by ADS-B technology, NORAD, DOD, and  professional organizations\u2019 documents and officials also noted that  electronic warfare- and cyber-attacks\u2014and the potential divestment of  secondary-surveillance radars as a result of reliance on ADS-B\u2014could  adversely affect current and future air operations.", "For example, a 2015 Institute of Electrical and Electronics Engineers  article about ADS-B stated that ADS-B is vulnerable to an electronic- warfare attack\u2014such as a jamming attack\u2014whereby an adversary can  effectively disable the sending and receiving of messages between an  ADS-B transmitter and receiver by transmitting a higher power signal on  the ADS-B frequencies. The article notes that while jamming is a  problem common to all wireless communication, the effect is severe in  aviation due to the system\u2019s inherently wide-open spaces, which are  impossible to control, as well as to the importance and criticality of the  transmitted data. As a stand-alone method, jamming could create  problems within the national airspace. Jamming can also be used to  initiate a cyber-attack on aircraft or ADS-B systems. According to the  article in the 2015 Institute of Electrical and Electronics Engineers  publication, adversaries could use a cyber-attack to inject false ADS-B  messages (that is, create \u201cghost\u201d aircraft on the ground or air); delete  ADS-B messages (that is, make an aircraft disappear from the air traffic  controller screens); and modify messages (that is, change the reported  path of the aircraft). The article states that jamming attacks against ADS- B systems would be simple, and that ADS-B data do not include  verification measures to filter out false messages, such as those used in  spoofing attacks.", "FAA officials stated that the agency is aware of these possible attacks,  and that it addresses such vulnerabilities by validating ADS-B data  against primary- and secondary-surveillance radar tracks. Both FAA and  DOD have identified a potential solution to address this vulnerability.  However, this solution has not been tested and as of November 2017, no  testing has been scheduled.", "In addition to electronic warfare- and cyber-attacks, both NORAD and  DOD officials expressed concerns that the air defense and military air  traffic control missions would be affected if FAA were to divest secondary- surveillance radars following ADS-B implementation. According to DOD  and FAA documents and officials, FAA has identified ADS-B  implementation as an opportunity to save costs by divesting a number of  secondary-surveillance radars. However, according to NORAD and DOD  officials, in those locations where FAA divests of radars, the missions  would be at higher risk if an aircraft operator were to turn off the aircraft\u2019s  ADS-B technology; if an adversary were to conduct an electronic or  cyber-attack on the ADS-B system; or if the ADS-B system were to  experience a technical failure.", "According to NORAD command officials, the command relies on  information from FAA radars to monitor air traffic in the national airspace  system. If an aircraft is operating without ADS-B, if a GPS or ADS-B  system fails, or if an adversary has jammed an aircraft\u2019s GPS signal or  ADS-B transmissions, then the command will have to rely on primary- and  secondary-surveillance radar to track the aircraft\u2019s location.", "FAA officials stated that FAA is chiefly responsible for air safety, while  NORAD and DOD are chiefly responsible for air defense, and that they  believe there will be sufficient radar coverage for DOD to conduct its  missions. FAA officials stated that they will maintain sufficient backup  systems to ensure air traffic safety for all flights, and will maintain radar in  excess of their needs to support NORAD\u2019s missions. FAA officials stated  that they will maintain all primary-surveillance radar, all high-altitude  secondary-surveillance radar, and low-altitude secondary-surveillance  radar near at least thirty major flight terminals. However, according to  NORAD and DOD officials, FAA has not proposed an updated legacy  primary- and secondary-surveillance radar divestment plan since 2012 for  use by NORAD and DOD in assessing potential effects on the mission.  NORAD is a bi-national command that requires support from U.S. federal  agencies\u2014not just DOD\u2014and relies on FAA radar to support its mission,  and it will need to ensure that sufficient air surveillance resources are in  place."], "subsections": []}]}, {"section_title": "DOD and FAA Have Not Approved Any Solutions to Address ADS-B Risks", "paragraphs": ["Although DOD, FAA, and other organizations have identified risks to  military security and missions since 2008, DOD and FAA have not  approved any solutions to address these risks. This is because DOD and  FAA have focused on equipping military aircraft with ADS-B technology  and have not focused on solving or mitigating security risks from ADS-B.  The approach being taken by FAA and DOD will not address key security  risks that have been identified, and delays in producing an interagency  agreement have significantly reduced the time available to implement any  agreed-upon solutions before January 1, 2020, when the full deployment  of ADS-B Out is required. Federal internal control standards state that  federal agencies should make risk-based decisions in a timely manner.  Specifically, OMB Circular A-123 states that management should  evaluate and document internal control issues and determine appropriate  corrective actions for internal control deficiencies on a timely basis. In  the case of equipping military aircraft with ADS-B technology and  addressing any risks associated with it, DOD and FAA have shared  responsibility.", "In 2008 DOD informed FAA that military aircraft would need special  accommodations to the ADS-B Out rule due to national security concerns,  such as sensitive missions and electronic warfare vulnerabilities. In  2010 FAA responded to DOD\u2019s comments to the draft ADS-B Out rule  stating that the agency would collaborate with departments or agencies,  including DOD and the Department of Homeland Security, to develop  memorandums of agreement to accommodate their national defense  mission requirements while supporting the needs of all other national  airspace system users. Since that time, DOD components have  identified actions that could mitigate some of the risks. For example, DOD  and others have identified such mitigations as masking DOD aircraft  identifiers, maintaining current inventory of primary-surveillance radars,  allowing pilots to turn off ADS-B broadcasts, and seeking an exemption  from installing ADS-B technology on select military aircraft (for example,  fighter and bomber aircraft). However, as of June 2017\u2014almost 7 years  after FAA acknowledged that it would address DOD\u2019s concerns (and less  than 3 years before full deployment of ADS-B Out is required)\u2014DOD and  FAA have not approved any solutions to these risks. The DOD\u2019s Lead  Service Office and FAA have focused on developing a memorandum of  agreement that they hope will create a framework for future collaboration  at the local level. However, our work and that of NORAD and other DOD  components identified a number of limitations to DOD\u2019s Lead Service  Office and FAA\u2019s dependence on this draft memorandum of agreement.  For example, the draft memorandum does not address the following:  the details necessary to establish solutions or mitigations between  DOD and FAA for identified security risks. The draft memorandum  focuses on equipage of ADS-B technology on military aircraft, cost  estimates, and agency and office responsibilities. DOD acknowledges  that it will equip military aircraft with ADS-B technology and operate to  the greatest extent possible by the January 1, 2020, compliance date.  However, the draft memorandum does not identify solutions for the  identified operations and physical security risks.  the electronic warfare and cyber-attack concerns and the effect on  sensitive defense missions that DOD has identified.  the flexibility required by NORAD to support freedom of movement  within the continental United States, Alaska, and Canada airspace for  military missions. The draft memorandum would place negotiating  accommodations for NORAD\u2019s bi-national mission at the local level\u2014 an act that NORAD officials characterized as unfeasible because  military aircraft supporting NORAD missions require uninhibited  airspace access throughout the United States and Canada, as a  response may be required anywhere and at any time. According to  NORAD officials, the command would incur a significant burden to  finalize memorandums of agreement with more than 600 air traffic  control facilities and ensure commonality with all facilities in the  continental United States and Alaska. Furthermore, NORAD officials  stated that these missions should not be limited by local restrictions  created by the ADS-B Out rule. For example, DOD aircraft flying over  one state while supporting an Operation Noble Eagle mission could  be stationed at a military base in another state and thus not have an  agreement with local FAA controllers. potential mission risks associated with the divestment of secondary- surveillance radars.", "Delays in the completion of a memorandum of agreement have  exacerbated uncertainty as to whether security issues will be addressed  in any manner. DOD and FAA have met to discuss the existing draft  memorandum of agreement since December 2016. In April 2017 officials  from DOD Lead Service Office told us that they expected DOD and FAA  to finalize the memorandum of agreement by June 2017; however, in May  2017 DOD officials informed us that the estimated completion date had  slipped to February 2018.", "A significant amount of work will likely need to be accomplished between  the eventual approval of the memorandum and implementation in a timely  manner. For example, FAA officials acknowledged that the agency would  need to issue, update, or both issue and update internal guidance once  the memorandum is signed prior to local FAA officials being able to  negotiate and agree to arrangements with local military commanders.  Similarly, the draft memorandum, if approved, would place a significant  burden on local DOD entities to negotiate agreements. For example, the  Army expressed concerns that local negotiations\u2014at 76 locations,  according to Army estimates\u2014would take from 1 to 2 years to complete  after FAA and DOD have signed the memorandum of agreement. Army  officials also highlight concerns that local FAA air traffic controllers may  not enter into agreements with Army units, or that local agreements will  be contingent upon the density of local air traffic or the personalities of  those negotiating the agreements. Additionally, assuming that actions are  agreed upon among the key stakeholders\u2014DOD, FAA, and NORAD\u2014to  resolve or mitigate the identified security risks, DOD, FAA and NORAD  will need sufficient time to implement these actions. This is due to the  complexity of the ADS-B vulnerabilities and potential mitigations for  operations and physical security, electronic warfare, cyber-attack, and  potential effects of secondary-radar divestment.", "As of June 2017, DOD and FAA had not identified any other solutions that  could address the risks and concerns identified by DOD and others since  2008. Unless FAA and DOD approve one or more solutions that address  all the risks associated with ADS-B technology, DOD security and military  missions could face unmitigated risks. These include physical, cyber- attack, and electronic warfare security risks, as well as risks associated  with divesting secondary-surveillance radars. Furthermore, unless FAA  and DOD focus on the security risks of ADS-B and approve one or more  solutions in a timely fashion, they may not have time to plan for and  execute any technical, programmatic, or policy actions that may be  necessary before all of DOD\u2019s aircraft are required to be equipped with  ADS-B technology on January 1, 2020."], "subsections": []}]}, {"section_title": "DOD Has Achieved Mixed Implementation of Key ADS-B Tasks Directed in 2007", "paragraphs": ["Of the eight tasks associated with the implementation of ADS-B Out  technology in the 2007 DOD NextGen memorandum\u2014issued by the  Deputy Secretary of Defense to ensure that the NextGen vision for the  future national airspace system met DOD\u2019s requirements and the  appropriate management of DOD\u2019s resources\u2014DOD has implemented  two, has partially implemented four, and has not implemented two.  Specifically, we found that DOD has implemented the following two tasks:", "Establishing a Joint Program Office. The Deputy Secretary of  Defense directed the Secretary of the Air Force to establish and  provide administrative support for a DOD Joint Program Office for  NextGen. According to the 2007 NextGen memorandum, the office is  responsible for coordinating DOD activities related to the NextGen  effort, facilitating technology transfer for those research and  development activities with potential NextGen application, and  advocate for DOD interests, requirements, and capabilities in  NextGen. The Air Force established a Joint Program Office to  provide services to the entire military aviation community on  communication navigation surveillance/air traffic management issues  in various capacities. Officials from the DOD Joint Program Office told  us that the office has tested various avionic systems for methods of  meeting ADS-B requirements. The office has also established an  Internet portal for the services to order avionics, including those  associated with ADS-B technology.", "Appointing a DOD representative to the FAA\u2019s interagency Joint  Planning and Development Office. The 2007 NextGen  memorandum directed that the Secretary of the Air Force appoint a  DOD representative to the Joint Planning and Development Office\u2019s  board of directors responsible for assisting in the development and  coordination of DOD-wide policies and decisions concerning  NextGen. In March 2012 DOD\u2019s Lead Service Office appointed an Air  Force officer who also manages the DOD Lead Service Office as the  DOD representative to the FAA\u2019s interagency Joint Planning and  Development Office.", "DOD partially implemented the following four tasks:", "Validating NextGen program requirements. The 2007 NextGen  memorandum directed that the Secretary of the Air Force document  and seek validation for NextGen program requirements through the  Joint Capabilities Integration Development System process. The Air  Force took the initial step in having its NextGen program requirements  validated through DOD\u2019s Joint Capabilities Integration Development  System process in October 2014. However, the focus of the  assessment was on the Air Force\u2019s requirements and not that of other  military services or components. This is not fully consistent with the  2007 memo, which states that the Air Force\u2014as the lead service\u2014 should integrate the needs and requirements of the DOD components  into cohesive plans and policies for inclusion in NextGen joint  planning and development.", "Establishing guidance on DOD NextGen responsibilities and  objectives. The 2007 NextGen memorandum directed the Assistant  Secretary of Defense for Homeland Defense and Global Security, the  DOD Chief Information Officer, and the Director of Administration, in  consultation with the DOD Lead Service, to submit a proposed DOD  directive within 180 days specifying the department\u2019s objectives with  respect to NextGen and the continuing roles and responsibilities of the  Lead Service and the DOD Policy Board on Federal Aviation. In  2013, about 5 years after the original due date for the180-day  requirement, DOD updated its DOD Directive 5030.19, DOD  Responsibilities on Federal Aviation. While the updated directive  references the responsibilities of the DOD Policy Board on Federal  Aviation and the Secretary of the Air Force, per the 2007 NextGen  memorandum, the directive does not specify DOD\u2019s objectives with  respect to NextGen, as required by the memorandum.", "Developing an initial plan defining actions, responsibilities, and  milestones for DOD\u2019s NextGen efforts: The 2007 NextGen  memorandum required DOD\u2019s Lead Service, in coordination with the  principal members of the DOD Policy Board on Federal Aviation, to  develop an initial plan defining actions, responsibilities, and  milestones for DOD\u2019s participation in the NextGen efforts and FAA\u2019s  Joint Planning and Development Office. This initial plan was to include  an implementation plan for the NextGen Joint Program Office and was  to be updated semiannually. In 2013 the Air Force, in executing its  responsibilities as Lead Service, issued a DOD NextGen  Implementation Plan to describe the strategy, principles, and actions  for the transition of DOD aviation operations (air and ground) to the  national airspace system environment defined by FAA in its NextGen  Implementation Plan. We found that the 2013 plan identified  responsibilities of DOD components and established indicators meant  to give a sense of progress made in NextGen implementation.  However, the plan did not include detailed transition planning for ADS- B and was not updated semiannually, as required.", "Incorporating NextGen into the planning, budgeting, and  programming process: According to the 2007 NextGen  memorandum, the Secretary of the Air Force is to coordinate DOD- wide NextGen planning, budgeting, and programing guidance in  conjunction with the Under Secretary of Defense for Policy and the  Director of Program Analysis and Evaluation for consideration in the  formulation of planning and programming guidance documents. The  memorandum also directed DOD components to coordinate with the  Air Force on NextGen programs they agreed to support using inter- service memorandums of understanding, and to fund procurement  through service annual program objective memorandum processes.  DOD provided evidence that the military departments used the  program objective memorandum process to fund ADS-B Out.  However, the DOD Lead Service Office did not provide department- wide planning, budgeting, and programming guidance for ADS-B or  any other NextGen elements to DOD components. Similarly, DOD did  not provide any inter-service memorandums of understanding that  would document NextGen programs that the services agreed to fund.  According to officials from the DOD Lead Service Office, this office is  not responsible for planning, budgeting, and programming because  the office is organizationally located within the Air Force Headquarters  Office of the Deputy Chief of Staff for Operations. However, while the  office may not be responsible for planning, budgeting, and  programming within the Air Force, the office can issue\u2014or coordinate  the issuance\u2014of such guidance, as directed by the Deputy Secretary  of Defense.", "DOD had not taken significant action or fully implemented the following  two actions:  Integrating NextGen requirements into plans and policies: The  Secretary of the Air Force, in executing the service\u2019s responsibilities  as Lead Service, did not integrate the needs and requirements of  DOD components related to ADS-B into cohesive plans and policies  for inclusion in NextGen joint planning and development, as directed  by the Deputy Secretary of Defense in 2007. According to officials  from the DOD Lead Service Office, they met the intent of these tasks  through the 2012 United States Air Force Next Generation Air  Transportation System Keystone Document, the 2013 Department of  Defense (DOD) Mid-Term NextGen Concept of Operations, and the  2013 Department of Defense (DOD) Mid-Term Next Generation  (NextGen) Implementation Plan. However, the Air Force NextGen  Keystone Document applies to the Air Force and not to NORAD or  other DOD components. In addition, the DOD Mid-Term NextGen  Concept of Operations and the DOD Mid-Term NextGen  Implementation Plan do not discuss planning for ADS-B Out  requirements, which are critical to NextGen.", "Providing periodic and recurring NextGen progress reports: The  Assistant Secretary of Defense for Homeland Defense and Global  Security did not provide periodic and recurring NextGen progress  reports to the Deputy Secretary of Defense, as instructed in the 2007  NextGen memorandum. According to the memorandum, the  Assistant Secretary was designated as the principal staff assistant for  NextGen and was responsible for oversight, support, and advocacy  for the lead service with respect to the interagency and Joint Planning  and Development Office. Officials from the Office of the Deputy  Assistant Secretary of Defense for Homeland Defense Integration and  from Defense Support to Civil Authorities acknowledged that the  Office of the Assistant Secretary of Defense for Homeland Defense  and Global Security had not tracked ADS-B implementation or  provided progress reports to the Deputy Secretary of Defense\u2014with  the exception of advocating for ADS-B installation exemptions for  aircraft that could not comply with the mandate\u2014for retention of  ground-based radars, and some minimal advocacy related to  compliance with the FAA ADS-B Out rule.", "DOD could not provide a clear explanation with regard to those  requirements that we determined not to have been fully implemented.  Officials from the DOD Lead Service Office provided a number of  potential reasons to explain why the memorandum\u2019s tasks might not have  been fully implemented. For example, as noted earlier, officials stated that  other documents captured those requirements. Further, officials told us  they believe that implementation of many of the preceding tasks was  accomplished through other means, although our analysis concluded that  the task was either not implemented or was partially implemented, as  noted previously. These officials also noted that\u2014although there is no  expiration date on the 2007 NextGen memorandum\u2014many DOD officials  consider such memorandums to be applicable for 12 to 18 months. In  addition, DOD Lead Service Office officials noted that many DOD  components had not assigned a high level of priority to NextGen  implementation.", "As a result of DOD\u2019s not fully implementing the 2007 NextGen  memorandum\u2014including developing or revising a DOD directive that  specifies DOD\u2019s objectives with respect to NextGen, issuing an  implementation plan that includes detailed transition planning for ADS-B  and is updated semiannually, and providing recurring progress reports to  the Deputy Secretary of Defense\u2014DOD components have lacked  direction and cohesion while trying to address FAA\u2019s requirement to equip  military aircraft. For example:", "Officials from the Air Force Life Cycle Management Center\u2019s Fighters  and Bombers Directorate told us that they have not been provided any  guidance. The directorate does not intend to install ADS-B technology  on Air Force fighters or bombers until they receive DOD guidance.  Yet, the deadline to equip DOD aircraft that will fly in the national  airspace remains January 1, 2020.", "DOD does not have a coordinated or accurate schedule for equipping  ADS-B technology on military aircraft. Although DOD submitted a  schedule to Congress in June 2015, officials from the DOD Lead  Service Office told us that the timeframes for that plan were no longer  accurate, and that the plan would be updated as part of the  memorandum of agreement in February 2018.", "Some DOD components have installed or plan to install civilian GPS  receivers on their aircraft to meet FAA\u2019s ADS-B technical  requirements. According to DOD officials, DOD aircraft that equip with  commercial GPS receivers will not be as protected from GPS security  issues as they would have been had they used a military GPS  receiver. According to officials from the Office of the DOD Chief  Information Officer, the office with primary responsibility for GPS  receiver security policy, no one within DOD\u2014including the DOD Lead  Service Office or other DOD components\u2014had made them aware that  DOD components were installing civilian receivers on aircraft.", "Since\u2014according to an official within the DOD Lead Service Office\u2014 neither the Office of the Assistant Secretary of Defense for Homeland  Defense and Global Security nor any other elements of the Office of  the Under Secretary of Defense for Policy were engaged in discussion  regarding the draft memorandum of agreement with the DOD Lead  Service Office and FAA, the Secretary of Defense\u2019s senior policy  advisor may not be aware of provisions that may be incorporated in  the agreement. For example, the draft memorandum of agreement  contains a provision that could result in the department\u2019s being  financially responsible for sharing the costs of sustaining secondary- surveillance radars. According to a 2007 FAA document, it will cost  FAA approximately $442 million to maintain these radars from fiscal  years 2017 to 2035.", "If DOD components do not fully implement key tasks that would facilitate  assurance of DOD requirements in the future NextGen system and  appropriate management of DOD resources\u2014such as those tasks that  the Deputy Secretary of Defense originally directed in 2007, or any tasks  that the Secretary deems appropriate\u2014DOD may risk having less  efficient and less effective implementation of NextGen requirements,  increased costs of implementation, or missed opportunities to address  operations risks."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The NextGen system has the potential to increase the efficiency and  effectiveness of the nation\u2019s expanding air traffic. As with many such  procedural and technological innovations, DOD stands to benefit from  NextGen\u2019s vision. As is the case with all such electronic and cyber  systems in the information age, this must be balanced with sufficient  consideration of the operations and security effects for DOD. DOD and  FAA have not approved any solutions that address risks resulting from  ADS-B on DOD aircraft\u2014including operations, physical, cyber, and  electronic warfare security risks, as well as risks associated with divesting  secondary-surveillance radars. Unless DOD and FAA focus their efforts  on the security aspects of ADS-B on DOD aircraft and produce one or  more solutions to these risks, DOD aircraft and missions will be exposed  to unmitigated risks that could jeopardize safety, security, and mission  success. Also, unless DOD fully implements the tasks that would facilitate  consistent, long-term planning and implementation of NextGen  throughout the department, DOD\u2019s full integration into the NextGen  system and the integrity and security of DOD\u2019s forces and missions will  be hindered. Given the amount of time that has transpired since DOD  initially raised security concerns in 2008 and the amount of time it will  take to formalize, operationalize, and train employees to implement any  agreements prior to the January 1, 2020, deadline, it is critical that both  DOD and FAA make this a high priority."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations, including one to the Secretaries of  Defense and Transportation, and one to the Secretary of Defense:  We recommend that the Secretaries of Defense and of Transportation  address ADS-B Out security concerns by approving one or more  solutions that address ADS-B Out -related security risks or incorporating  mitigations for security risks into the existing draft memorandum of  agreement. These approved solutions should address operations,  physical, cyber-attack, and electronic warfare security risks; and risks  associated with divesting secondary-surveillance radars. The solution or  mitigations should be approved as soon as possible in order to allow  sufficient time for implementation.", "We recommend that the Secretary of Defense direct DOD components to  implement key tasks that would facilitate consistent, long-term planning  and implementation of NextGen\u2014such as those tasks that the Deputy  Secretary of Defense originally directed in 2007, or any tasks that the  Secretary deems appropriate based on a current assessment of the  original tasks."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the report to DOD and the Department of  Transportation for review and comment. Written comments from DOD on  the classified draft and from the Department of Transportation on this  report are reprinted in their entirety in appendixes II and III, respectively,  and summarized below. DOD and the Department of Transportation also  provided technical comments, which we incorporated as appropriate.", "The Department of Transportation concurred and DOD partially concurred  with the first recommendation to approve one or more solutions that  address ADS-B Out security risks or incorporating mitigations for security  risks into the existing draft memorandum of agreement and that these  solutions should address operations, physical, cyber-attack, and  electronic warfare security risks as well as risks associated with divesting  secondary-surveillance radar. In its written comments, the Department of  Transportation stated that it has recently developed and is now in the  process of validating military flight tracking risk mitigation solutions that  are technologically viable and operationally effective. Both the  Department of Transportation and DOD stated that they would approve  one or more solutions to address ADS-B Out related security risks. For  example, both departments stated that among other actions, they would  complete a memorandum of agreement between FAA and DOD that  would incorporate security concerns identified in the report. DOD  estimated that the memorandum of agreement will be signed in February  2018. We believe the steps identified by both the Department of  Transportation and DOD, if implemented as planned, would meet the  intent of our recommendation.", "DOD partially concurred with the second recommendation to implement  key tasks that would facilitate consistent, long-term planning and  implementation of NextGen\u2014such as those tasks that the Deputy  Secretary of Defense originally directed in 2007 or any tasks that the  Secretary deems appropriate based on a current assessment of the  original tasks. DOD stated the Secretary of the Air Force would identify  within the next 120 days which relevant key tasks would facilitate the  implementation of NextGen to include assessing the status of tasks that  were directed in the Deputy Secretary of Defense memorandum,  \u201cImplementation of the Next Generation Air Transportation within the  Department of Defense 2007.\u201d DOD stated that the assessment would  include a comprehensive review of modernization efforts regarding  NextGen and other global initiatives and that includes suitable security  and cybersecurity mitigation measures. DOD also stated that the Policy  Board for Federal Aviation would track key task implementation in  coordination with the Secretary of the Air Force and other appropriate  DOD officials. This would also include periodic updates to the Deputy  Secretary of Defense. We believe these steps would meet the intent of  our recommendation if implemented as planned.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretary of Homeland  Security; the Secretary of Transportation; and the commander of NORAD.  We are also sending copies to the Under Secretary of Defense for Policy;  the Under Secretary of Defense for Acquisition, Technology, and  Logistics; the Chairman of the Joint Chiefs of Staff; the Secretaries of the  military departments; and the Administrator of FAA. In addition, the report  is available at no charge on the GAO website http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9971 or kirschbaumj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Senate Report 114-255, accompanying a bill for the National Defense  Authorization Act of Fiscal Year 2017, included a provision that we  assess issues related to the defense implications of implementation of the  Federal Aviation Administration\u2019s (FAA) Next Generation Air  Transportation System (NextGen) and Automatic Dependent  Surveillance\u2014Broadcast (ADS-B), a main component of NextGen. This  report assesses the extent to which (1) the Department of Defense (DOD)  and the FAA have identified security and operations risks and approved  solutions to address these risks to military aircraft equipped with ADS-B  Out technology; and (2) DOD has implemented key tasks in the 2007  Deputy Secretary of Defense memorandum on implementing NextGen.", "The scope of our review included all DOD and Department of  Transportation offices responsible for oversight or administration of ADS- B implementation by DOD as part of the NextGen program. Our review  also included Airlines for America, as it represented a significant portion  of the civil aviation industry in negotiations with FAA on ADS-B  implementation. Table 3 contains a list of the organizations and offices we  contacted during the course of our review.", "To assess the extent to which DOD and FAA have identified security and  operations risks and approved solutions to address these risks to military  aircraft equipped with ADS-B Out technology, we reviewed policies,  procedures, guidance, assessments, and other relevant documents from  DOD, FAA, and NORAD that address ADS-B Out implementation,  acquisition, operations, and cybersecurity risk management and  mitigation, and any other issues that might be pertinent to identifying and  addressing operations and security risks resulting from ADS-B Out. We  also reviewed publicly available literature discussing potential ADS-B Out  cybersecurity vulnerabilities. Specifically, we conducted a literature review  of work related to vulnerabilities in ADS-B technology. To identify studies  that potentially highlighted vulnerabilities that we could discuss with  agency officials, we conducted key-word searches of government and  private databases to identify public, private, academic, and other  professional research related to ADS-B vulnerabilities. The government  databases we searched included those of GAO, the Congressional  Research Service, the Congressional Budget Office, and agency  Inspectors General. The private databases searched include Web of  Science, ProQuest, and ProQuest Professional. To determine relevance  to our review, we assessed whether article subjects were related to  vulnerabilities or vulnerability mitigations for ADS-B systems. We  reviewed those studies cited in our report and found their methodologies  to be sufficient. To further address our objective, we interviewed officials  from NORAD, DOD, the military services, and FAA on potential risks,  vulnerabilities, and mitigation strategies. We did not conduct independent  security and vulnerability assessments of ADS-B technology to  corroborate or validate security risks identified by NORAD, DOD, FAA,  and others. While military aircraft and existing radar systems may be  equipped with devices (including Mode S transponders) that could also  pose security risks, this report focused on risks and potential solutions  associated with ADS-B Out technology that FAA mandated DOD to install  on its aircraft by January 1, 2020.", "We also visited multiple public websites to understand the extent to which  the public could track current military flights over the United States. We  met with a representative from one of these websites to understand the  underlying sources of information and how the information was used to  compile the images.", "To understand DOD and FAA coordination, we reviewed laws, guidance,  and directives related to agency cooperation for the NextGen system and  implementation of ADS-B technology. This included the 2010 FAA  Federal Register entry that provided guidelines and requirements for  coordination between agencies and the 2007 Deputy Secretary of  Defense memorandum on implementing NextGen, which states that DOD  components must develop cohesive plans and policies.", "To assess the extent to which DOD has implemented key tasks in the  2007 Deputy Secretary of Defense memorandum on implementing  NextGen, we reviewed the Deputy Secretary of Defense\u2019s 2007 NextGen  memorandum and identified 20 tasks that were directed by the Deputy  Secretary for the purpose of ensuring that NextGen meets DOD  requirements, and that DOD\u2019s resources are appropriately focused and  managed. We focused on the 8 tasks wherein the accomplishment of the  task would be significant to the development of plans and policies related  to the implementation of the FAA\u2019s ADS-B Out technology requirement.  To evaluate the implementation status of these 8 tasks, we collected  relevant documentation, interviewed officials from DOD, and reviewed  this information. Initially, two analysts separately reviewed this information  to determine whether each of the 8 tasks was implemented or not  implemented. Later, a panel of four analysts collectively reviewed both  sets of analyses completed for each task and determined whether a task  would be better categorized as partially implemented, instead of  implemented, or as not implemented.", "We conducted this performance audit from June 2016 to January 2018, in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": [{"section_title": "This report (GAO-18-177) is an unclassified version of GAO-18-176C\u2014which had report number GAO-17-509C at the time it was transmitted to DOD for comment.", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tommy Baril (Assistant Director),  Tracy Barnes, David Beardwood, Virginia Chanley, Benjamin Emmel,  Kevin Newak, Joshua Ormond, Matthew Sakrekoff, Amanda Weldon, and  Edwin Yuen made major contributions to this report.", "Colleen Candrl, Mark Canter, Raj Chitikila, Tracy Harris, Kirk Kiester,  Amie Lesser, Nicholas Marinos, Madhav Panwar, John Shumann, James  Tallon, and Cheryl Weissman also made contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Next Generation Air Transportation System: Improved Risk Analysis  Could Strengthen FAA\u2019s Global Interoperability Efforts. GAO-15-608.  Washington, D.C.: July 29, 2015  Air Traffic Control: FAA Needs a More Comprehensive Approach to  Address Cybersecurity As Agency Transitions to NextGen. GAO-15-370.  Washington D.C.: April 14, 2015.", "National Airspace System: Improved Budgeting Could Help FAA Better  Determine Future Operations and Maintenance Priorities. GAO-13-693.  Washington, D.C.: August 22, 2013.", "NextGen Air Transportation System: FAA Has Made Some Progress in  Midterm Implementation, but Ongoing Challenges Limit Expected  Benefits, GAO-13-264. Washington D.C.: April 8, 2013.", "Next Generation Air Transportation System: FAA Faces Implementation  Challenges. GAO-12-1011T. Washington, D.C.: September 12, 2012.", "Next Generation Air Transportation: Collaborative Efforts with European  Union Generally Mirror Effective Practices, but Near-Term Challenges  Could Delay Implementation, GAO-12-48. Washington, D.C.: November  3, 2011."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-66", "url": "https://www.gao.gov/products/GAO-19-66", "title": "VA Health Care: Improvements Needed in Suicide Prevention Media Outreach Campaign Oversight and Evaluation", "published_date": "2018-11-15T00:00:00", "released_date": "2018-12-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Veterans suffer a disproportionately higher rate of suicide than the civilian population. VA has estimated that an average of 20 veterans die by suicide per day, and in 2018, VA identified suicide prevention as its highest clinical priority. VHA's suicide prevention media outreach campaign\u2014its collective suicide prevention outreach activities\u2014helps raise awareness among veterans and others in the community about suicide prevention resources. VHA has contracted with an outside vendor to develop suicide prevention media outreach content.", "GAO was asked to examine VHA's suicide prevention media outreach campaign. This report examines the extent to which VHA (1) conducts activities for its suicide prevention media outreach campaign, and (2) evaluates the effectiveness of its campaign. GAO reviewed relevant VHA documents and data on the amount, type, and cost of suicide prevention outreach activities since fiscal year 2013. GAO also reviewed VHA's contract for developing suicide prevention outreach content and interviewed VA and VHA officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) conducts national suicide prevention media outreach on various platforms to raise awareness about VHA's suicide prevention resources. The primary focus of this campaign since 2010 has been to raise awareness of the Veterans Crisis Line (VCL), VHA's national hotline established in 2007 to provide support to veterans in emotional crisis. GAO found that VHA's suicide prevention media outreach activities declined in recent years due to leadership turnover and reorganization. For example, the amount of suicide prevention content developed by VHA's contractor for social media decreased in fiscal years 2017 and the first 10 months of 2018 after increasing in each of the 4 prior years.", "VHA officials reported not having leadership available for a period of time to make decisions about the suicide prevention media outreach campaign. GAO found that VHA did not assign key leadership responsibilities or establish clear lines of reporting, and as a result, its ability to oversee the outreach campaign was hindered. Consequently, VHA may not be maximizing its reach with suicide prevention media content to veterans, especially those who are at-risk.", "VHA evaluates the effectiveness of its suicide prevention media outreach campaign by collecting data on metrics, such as the number of people that visit the VCL website. However, VHA has not established targets for the majority of these metrics. Officials said they have not established targets because, apart from one industry-wide target they use, they lack meaningful targets for evaluating the campaign. However, VHA could use information about how its metrics performed in the past to develop reasonable and meaningful targets for future performance. Without established targets for its metrics, VHA is missing an opportunity to better evaluate the effectiveness of its suicide prevention media outreach campaign."]}, {"section_title": "What GAO Recommends", "paragraphs": ["VHA should (1) establish an approach to oversee its suicide prevention media outreach campaign that includes clear delineation of roles and responsibilities, and (2) establish targets for its metrics to improve evaluation efforts. VA concurred with GAO's recommendations and described steps it will take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Suicide is a public health problem facing all populations, particularly  veterans. After military service, veterans suffer a disproportionately higher  rate of suicide than the civilian population. According to the Department of  Veterans Affairs (VA), veterans accounted for 14.3 percent of all deaths  by suicide among United States adults in 2015, despite constituting only  8.3 percent of the adult population. VA reported in June 2018 that an  average of 20 veterans died by suicide each day in 2015, and that an  average of 6 of these 20 veterans (30 percent) were recent users of VA\u2019s  Veterans Health Administration\u2019s (VHA) health care services. Suicide is  not unique to veterans; the Centers for Disease Control and Prevention  (CDC) reports that suicide was the tenth leading cause of death in the  United States in 2015. However, according to VA, the rate of suicide is  higher for veterans than non-veterans (see figure 1).", "VHA conducts national outreach to veterans and others in the community  to raise awareness about suicide prevention and services available  through VA, as one of several VHA initiatives to help reduce suicides in  the veteran community. Since 2010, VHA has awarded multiple contracts  to the same vendor to develop content for suicide prevention media  outreach. Questions have been raised about the effectiveness of VHA\u2019s  collective suicide prevention media outreach activities, also referred to as  its suicide prevention media outreach campaign. You asked us to review  VHA\u2019s suicide prevention media outreach activities and related oversight.  In this report, we examine:  1.  the extent to which VHA conducts activities for its suicide prevention  media outreach campaign; and  2.  the extent to which VHA evaluates the effectiveness of its suicide  prevention media outreach campaign.", "To examine the extent to which VHA conducts activities for its suicide  prevention media outreach campaign, we reviewed VHA\u2019s contract to  develop suicide prevention outreach content from fiscal years 2013  through 2016 and its contract to develop suicide prevention and mental  health outreach content in fiscal years 2017 and 2018. VHA\u2019s first such  contract began in 2010; however, the Federal Acquisition Regulation only  requires federal agencies to maintain contract documentation for a period  of 6 years after the last payment. Therefore, we did not include the initial  contract or associated outreach in our review due to the lack of available  documentation. We also requested and reviewed data on the amount and  type of outreach content that VHA\u2019s contractor developed from fiscal year  2013 through fiscal year 2018. We interviewed VHA officials responsible  for implementation and oversight of the contract about the data. We also  obtained written responses from the contractor about the steps it took to  compile and ensure the accuracy of the data. On the basis of these  actions, we found these data to be sufficiently reliable for the purpose of  our reporting objective.", "We also reviewed documentation and interviewed VHA officials who  worked on the campaign about VHA\u2019s suicide prevention media outreach  campaign, outreach activities, and VHA leadership officials\u2019 involvement  in the campaign, and plans moving forward. We compared VHA\u2019s  outreach campaign and related activities with federal internal control  standards related to control environment and monitoring. We also  interviewed relevant other VHA and VA officials who played a role in the  suicide prevention media outreach campaign, including officials in VA\u2019s  Office of Acquisitions, Logistics, and Construction and VHA\u2019s Office of  Communications.", "To examine the extent to which VHA evaluates the effectiveness of its  suicide prevention media outreach campaign, we reviewed  documentation of VHA\u2019s evaluation efforts, including monthly monitoring  reports, to identify any performance metrics VHA monitors and any  targets established for those metrics. We also reviewed the 2016 contract  to identify any requirements for the contractor to monitor and report on  the effectiveness of the campaign. Additionally, we interviewed VHA  officials responsible for monitoring and evaluating the campaign and  reviewed supporting documentation. Specifically, we asked officials about  the extent to which they had evaluated the campaign\u2019s effectiveness  since fiscal year 2013, their evaluation processes and tools, and any  plans for completing future evaluations. We then compared VHA\u2019s  evaluation efforts to criteria we developed in previous bodies of work for  designing program evaluations, as well as to federal internal control  standards for monitoring.", "We conducted this performance audit from December 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "VA Suicide Prevention", "paragraphs": ["VA has undertaken a number of initiatives to help prevent veteran suicide,  including identifying suicide prevention as VA\u2019s highest clinical priority in  its strategic plan for fiscal years 2018 through 2024 (see fig. 2).", "VA uses CDC\u2019s research on risk factors and prevention techniques to  inform its approach to suicide prevention in the veteran community. There  is no single determining cause for suicide; instead, suicide occurs in  response to biological, psychological, interpersonal, environmental, and  societal influences, according to the CDC. Specifically, suicide is  associated with risk factors that exist at the individual level (such as a  history of mental illness or substance abuse, or stressful life events, such  as divorce or the death of a loved one), community level (such as barriers  to health care), or societal level (such as the way suicide is portrayed in  the media and stigma associated with seeking help for mental illness).  According to VA, veterans may possess risk factors related to their  military service, such as a service-related injury or a difficult transition to  civilian life. CDC reports that protective factors\u2014influences that help  protect against the risk for suicide\u2014include effective coping and problem- solving skills, strong and supportive relationships with friends and family,  availability of health care, and connectedness to social institutions such  as school and community.", "VA\u2019s 2018 National Strategy for Suicide Prevention identifies four focus  areas: (1) healthy and empowered veterans, families, and communities;  (2) clinical and community preventative services; (3) treatment and  support services; and (4) surveillance, research, and evaluation.  Collectively, these four areas encompass 14 goals for preventing veteran  suicide, one of which is implementing communication designed to prevent  veteran suicide by changing knowledge, attitude, and behaviors.", "VHA\u2019s suicide prevention media outreach campaign is just one of its  initiatives intended to reduce veteran suicide. For example, in 2007, VHA  established the Veteran\u2019s Crisis Line (VCL), a national toll-free hotline  that supports veterans in emotional crisis. Veterans, as well as their  family and friends, can access the VCL by calling a national toll-free  number\u20141-800-273-8255\u2014and pressing \u201c1\u201d to be connected with a VCL  responder, regardless of whether these veterans receive health care  through VHA. VHA added the option to communicate with VCL  responders via online chat in 2009, followed by text messaging in 2011.  Another VHA suicide prevention initiative is the Recovery Engagement and Coordination for Health \u2013 Veterans Enhanced Treatment initiative, or  REACH VET. Established in 2016, REACH VET uses predictive modeling  to analyze existing data from veterans\u2019 health records to identify veterans  at increased risk for adverse outcomes, such as suicide, hospitalization,  or illness."], "subsections": []}, {"section_title": "VHA\u2019s Suicide Prevention Media Outreach Campaign", "paragraphs": ["Suicide prevention officials within VHA\u2019s Office of Mental Health and  Suicide Prevention (OMHSP) are responsible for implementing the  suicide prevention media outreach campaign. Since 2010, VHA has used  a contractor to develop suicide prevention media outreach content and  monitor its effectiveness. In September 2016, VHA awarded a new  contract to the same contractor to provide both suicide prevention and  mental health media outreach. Under the 2016 contract, the suicide  prevention and mental health outreach campaigns remain separate and  are overseen by separate suicide prevention and mental health officials,  both within OMHSP. VHA officials told us that beginning in fiscal year  2019, VHA will separate the contract for suicide prevention and mental  health media outreach. Specifically, VHA will utilize an existing agreement  with a different contractor for suicide prevention media outreach while the  existing contractor will continue to provide mental health media  outreach.", "According to VHA, the purpose of its suicide prevention media outreach  campaign is to raise awareness among veterans, their families and  friends, and the general public about VHA resources that are available to  veterans who may be at risk for suicide. The primary focus of the  outreach campaign since 2010 has been to raise awareness of the  services available through the VCL.", "VHA\u2019s suicide prevention media outreach falls into two main categories:  unpaid and paid. Unpaid media outreach content is typically displayed on  platforms owned by VA or VHA, or is disseminated by external  organizations or individuals that share VHA suicide prevention content at  no cost, as discussed below (see fig. 3).", "Social media. VA and VHA each maintain national social media  accounts on platforms such as Facebook, Twitter, and Instagram,  and post content, including suicide prevention content developed  by VHA\u2019s contractor. VHA also works with other federal  agencies, non-governmental organizations, and individuals that  post its suicide prevention content periodically.", "Public service announcements (PSA). VHA\u2019s contractor  typically develops two PSAs per year, which various local and  national media networks display at no cost to VHA.", "Website. VHA\u2019s contractor maintains the content displayed on the  VCL website (veteranscrisisline.net), including much of the  content it develops for other platforms, such as PSAs and social  media content. Visitors to the website can both view the content  on the website and share it on their own platforms.", "Paid digital media. An example of paid digital media includes  online keyword searches, in which VHA pays a search engine a  fee for its website to appear as a top result in response to selected  keywords, such as \u201cveterans crisis line\u201d or \u201cveteran suicide.\u201d Paid  digital media also includes social media posts for which VHA pays  a fee to display its content to a widespread audience, such as  users with a military affiliation.", "Paid \u201cout-of-home\u201d media: \u201cOut-of-home\u201d refers to the locations  where this type of content is typically displayed. Examples include  billboards, bus and transit advertisements, and local and national  radio commercials.", "VHA recognizes September as Suicide Prevention Month each year.  During this month, VHA establishes a theme and increases its outreach  activities, including a combination of both paid and unpaid media  outreach. According to VHA, it typically incorporates additional outreach  techniques during this month, such as enlisting the support of celebrities  or hosting live chat sessions on social media platforms, including  Facebook and Twitter."], "subsections": []}]}, {"section_title": "VHA\u2019s Suicide Prevention Media Outreach Activities Declined in Recent Years Due to Leadership Turnover and Reorganization VHA\u2019s Suicide Prevention Media Outreach Activities Declined in Fiscal Years 2017 and 2018", "paragraphs": ["VHA\u2019s suicide prevention media outreach activities declined in fiscal  years 2017 and 2018 compared to earlier years of the campaign. We  identified declines in social media postings, PSAs, paid media, and  suicide prevention month activities, as discussed below.", "Social media. The amount of social media content developed by  VHA\u2019s contractor decreased in 2017 and 2018, after increasing in  each of the prior four years. Specifically, VHA reported that its  contractor developed 339 pieces of social media content in fiscal  year 2016, compared with 159 in fiscal year 2017, and 47 during  the first 10 months of fiscal year 2018 (see fig. 5.).", "PSAs. VHA\u2019s contractor is required to develop two suicide  prevention PSAs in each fiscal year. VHA officials said that the  development of the two PSAs was delayed in fiscal year 2018.  Specifically, as of August 2018, VHA reported that one PSA was  completed, but had not yet aired, and another PSA was in  development. As a result of this delay, VHA had not aired a  suicide prevention PSA on television or radio in over a year; this is  the first time there has been a gap of more than a month since  June 2012.", "Paid media. VHA had a total budget of $17.7 million for its suicide  prevention and mental health media outreach for fiscal year 2018,  of which $6.2 million was obligated for suicide prevention paid  media. As of September 2018, VHA said it had spent $57,000 of  its $6.2 million paid media budget. VHA officials estimated that  they would spend a total of $1.5 million on suicide prevention paid  media for fiscal year 2018 and indicated that the remaining funds  would be de-obligated from the contract at the end of the fiscal  year and not used for suicide prevention media outreach. VHA  officials indicated that the reason they did not spend the remaining  funds on suicide prevention paid media in fiscal year 2018 was  that the approval of the paid media plan was delayed due to  changes in leadership and organizational realignment of the  suicide prevention program. As a result, VHA officials said they  limited the paid media outreach in fiscal year 2018 to activities that  were already in place, including 25 keyword search  advertisements, and 20 billboards and 8 radio advertisements in  selected cities across the United States.", "In prior fiscal years, VHA conducted a variety of digital and out-of- home suicide prevention paid media. For example, in fiscal year  2015, with a suicide prevention paid media budget of more than  $4 million, VHA reported that it ran 58 advertisements on Google,  Bing, and Facebook, and ran 30 billboards, 180 bus  advertisements, more than 19,000 radio advertisements, 252 print  advertisements, and 39 movie theatre placements in selected  cities across the United States. VHA ran similar types of paid  media in fiscal years 2013, 2014, and 2016 with variation in  quantities based on the approved budget in each of these years.  In fiscal year 2017, VHA had a budget of approximately $1.7  million to spend on paid media for both the suicide prevention and  mental health outreach campaigns. However, VHA spent less than  10 percent of the funds (approximately $136,000) to run paid  advertisements on Google and Bing for suicide prevention in fiscal  year 2017; the remainder was spent on mental health outreach.", "Suicide Prevention Month. VHA documentation indicated that  Suicide Prevention Month 2017 was a limited effort. VHA officials  said that this was because they did not begin preparing early  enough. In May 2018, VHA officials indicated that they were  similarly behind schedule for planning Suicide Prevention Month  2018, though they told us in August 2018 that they had caught up."], "subsections": [{"section_title": "VHA Leadership Turnover and Reorganization Resulted in the Decline in Suicide Prevention Media Outreach Activities", "paragraphs": ["VHA officials told us that the decrease in suicide prevention media  outreach activities was due to leadership turnover and reorganization  since 2017. For example, VHA officials said the National Director for  Suicide Prevention position was vacant from July 2017 through April  2018. VHA filled the role temporarily with a 6-month detail from another  agency from October 2017 through March 2018 and then hired this  individual as the permanent director on April 30, 2018. VHA officials that  worked on the campaign told us they did not have leadership available to  make decisions about the suicide prevention campaign during this time.  For example, VHA officials said they did not have a kick-off meeting  between VHA leadership and VHA\u2019s contractor at the beginning of fiscal  year 2018\u2014a requirement of the contract\u2014because there was no  leadership available to participate in this meeting.", "The officials also reported that suicide prevention leadership was not  available for weekly meetings to discuss suicide prevention outreach  activities, even after the suicide prevention program obtained an acting  director on detail from another agency. VHA staff said that at that time,  they focused their suicide prevention media outreach efforts on areas that  did not require leadership input, such as updating the VCL website. The  absence of leadership available to provide direction and make decisions  on the suicide prevention media outreach campaign is inconsistent with  federal internal control standards for control environment, which require  agencies to assign responsibilities to achieve its objectives. If a key role  is vacant, management needs to determine by whom and how those  responsibilities will be fulfilled in order to meet its objectives.", "Officials that worked on the campaign told us they shifted their focus  away from the suicide prevention media outreach campaign toward the  mental health outreach campaign due to reorganization of the offices  responsible for suicide prevention activities in 2017. Specifically, under  the new organization, and in the absence of suicide prevention program  leadership, the officials began reporting directly to mental health program  leadership and became more focused on the mental health outreach  aspects of the contract. Following the reorganization, officials that  worked on the campaign did not have a clear line of reporting to the  suicide prevention program. This is also inconsistent with federal internal  control standards for control environment, which require agencies to  establish an organizational structure and assign responsibilities, such as  establishing lines of reporting necessary information to management.", "VHA officials told us that one of the highest priorities for the suicide  prevention program since the beginning of fiscal year 2018 was to  establish a national strategy for preventing veteran suicides. The national  strategy, issued in June 2018, includes suicide prevention outreach as  one of the strategy\u2019s 14 goals. The national strategy also emphasizes  VHA\u2019s plans to shift to a public health approach to suicide prevention  outreach. The public health approach focuses less on raising awareness  of the VCL and more on reaching veterans before the point of crisis.  VHA officials told us they have been trying to shift to a public health  approach since 2016. Some of the campaign themes and messages have  reflected this shift; for example, the \u201cBe There\u201d campaign theme that was  adopted in fiscal year 2016\u2014and has remained the theme since\u2014 emphasizes the message that everyone has a role in helping veterans in  crisis feel less alone and connecting them to resources. However, VHA  officials told us in May 2018 that they were just beginning to  conceptualize what the suicide prevention outreach campaign should look  like moving forward. Leadership officials also said that while they were  developing the national strategy, they delegated the responsibility for  implementing the suicide prevention outreach campaign to other officials  working on the campaign.", "The decline in VHA\u2019s suicide prevention media outreach activities over  the past 2 fiscal years is inconsistent with VA\u2019s strategic goals, which  identify suicide prevention as the agency\u2019s top clinical priority for fiscal  years 2018 through 2024. Further, VHA has continued to obligate  millions of dollars to its suicide prevention media outreach campaign each  year. Since fiscal year 2017, VHA has obligated $24.6 million to the  contract for media outreach related to both suicide prevention and mental  health.", "By not assigning key leadership responsibilities and clear lines of  reporting, VHA\u2019s ability to oversee the suicide prevention media outreach  activities was hindered and these outreach activities decreased. As a  result, VHA may not have exposed as many people in the community,  such as veterans at risk for suicide, or their families and friends, to its  suicide prevention outreach content. Additionally, without establishing  responsibility and clear lines of reporting, VHA lacks assurance that it will  have continuous oversight of its suicide prevention media outreach  activities in the event of additional turnover and reorganization in the  future, particularly as VHA begins implementing the suicide prevention  media outreach campaign under its new agreement that begins in fiscal  year 2019."], "subsections": []}]}, {"section_title": "VHA Monitors Metrics for Its Suicide Prevention Media Outreach Campaign, but Has Not Established Targets against Which to Evaluate the Campaign\u2019s Effectiveness VHA Monitors Metrics for Its Suicide Prevention Media Outreach Campaign", "paragraphs": ["VHA works with its contractor to create and monitor metrics to help gauge  the effectiveness of its suicide prevention media outreach campaign in  raising awareness among veterans and others about VHA services, such  as the VCL. The metrics primarily focus on the number of individuals who  were exposed to or interacted with VHA\u2019s suicide prevention content  across various forms of outreach, including social media, PSAs, and  websites. According to VHA, the metrics are intended to help VHA  ensure that its media outreach activities achieve intended results, such as  increasing awareness and use of the resources identified on the VCL  website. Examples of metrics monitored by VHA and its contractor  include those related to (1) social media, such as the number of times a  piece of outreach content is displayed on social media; (2) PSAs, such as  the total number of markets and television stations airing a PSA; and (3)  the VCL website, such as the total traffic to the website, as well as the  average amount of time spent on a page and average number of pages  viewed per visit.", "VHA\u2019s contractor is required to monitor the metrics and report results on a  monthly basis. Specifically, the contractor provides monthly monitoring  reports to VHA that summarize how outreach is performing, such as the  number of visits to the VCL website that were driven from paid media  sources. Officials noted these reports are key sources of information for  VHA on the results of its outreach. VHA officials also told us they  informally discuss certain metrics during weekly meetings with VHA\u2019s  contractor. In addition, VHA works with its contractor to conduct a more  in-depth analysis of outreach efforts during and after Suicide Prevention  Month each year."], "subsections": [{"section_title": "VHA Lacks Metric Targets to Evaluate the Effectiveness of Its Suicide Prevention Media Outreach Campaign", "paragraphs": ["VHA has not established targets for the majority of the metrics it uses to  help gauge the effectiveness of its suicide prevention media outreach  campaign. As a result, VHA does not have the information it needs to fully  evaluate the campaign\u2019s effectiveness in raising awareness of VHA\u2019s  suicide prevention resources among veterans, including the VCL. For  example, we found that VHA\u2019s contractor\u2019s monitoring reports\u2014a  summary of key metrics that VHA uses to routinely monitor information  regarding the campaign\u2014generally focused on outreach \u201chighlights\u201d and  positive results. The reports did not set expectations based on past  outreach or targets for new outreach, and lacked more comprehensive  information on whether outreach performed against these expectations.  For example:", "A monitoring report from 2018 showed that during one month,  there were 21,000 social media mentions of keywords specific to  VA suicide prevention, such as \u201cVCL\u201d or \u201cveteran suicide,\u201d across  social media platforms. These mentions earned 120 million  impressions; however, there was no indication of the number of  keyword mentions or impressions that VHA expected based on its  media outreach activities. In addition, the report did not indicate  the proportion of mentions that VHA believed were specifically  driven by its outreach activities, and there also was no indication  of whether these mentions were positive or negative, or what  actions to take based on this information.", "Another monitoring report from January 2017 showed that paid  advertising drove 39 percent of overall website traffic during one  month, while unpaid sources drove the remaining 61 percent.  However, there was no information indicating the amounts of paid  advertising that VHA conducted during this monitoring period, and  whether this amount of website traffic from paid advertising met  expectations.", "VHA\u2019s 2016 Suicide Prevention Month summary report showed  that there were 194,536 visits to the VCL website, roughly an 8  percent increase from the Suicide Prevention Month in 2015.  However, the report did not indicate whether this increase from  the prior year met expectations, or a different result was expected.", "VHA officials told us that they have not established targets for most of the  suicide prevention media outreach campaign because they lack  meaningful targets for the metrics to help evaluate the campaign. VHA  officials said that the only target they have established is for each PSA to  rank in the top 10 percent of the Nielsen ratings because this is the only  meaningful target available that is accepted industry-wide. VHA officials  stated that using any other targets would be arbitrary. For the remaining  metrics, VHA officials told us they assess the outcomes of their campaign  by comparing data from year to year, and examining any changes in the  outcomes over time. However, VHA could set targets that capture the  number of people who viewed or interacted with its outreach content,  similar to its Nielsen target set for television viewership. Doing so would  help VHA evaluate whether the campaign has been effective in raising  awareness of VHA\u2019s suicide prevention resources. Further, creating  targets for these additional metrics need not be arbitrary, because VHA  could use information about how its metrics performed in the past to  develop reasonable and meaningful targets for future performance. VHA  could also adjust the targets over time to reflect changes in its metrics or  approach to the campaign, such as changes to its paid media budget  each year.", "Federal internal control standards for monitoring require agencies to  assess the quality of its performance by evaluating the results of  activities. Agencies can then use these evaluations to determine the  effectiveness of its programs or need for any corrective actions. Further,  VA\u2019s June 2018 National Strategy for Preventing Veteran Suicide also  emphasizes the importance of the agency evaluating the effectiveness of  its outreach. The absence of established targets leaves VHA without a  framework to effectively evaluate its campaign. Our prior work has shown  that establishing targets allows agencies to track their progress toward  specific goals. In particular, we have developed several key attributes of  performance goals and measures including, when appropriate, the  development of quantifiable, numerical targets for performance goals and  measures. Such targets can facilitate future evaluations of whether  overall goals and objectives were achieved by allowing for comparisons  between projected performance and actual results. Further, establishing  targets for its outreach metrics will enable VHA officials to determine  whether outreach performed as expected and raised awareness of VHA  resources such as the VCL, including identifying outreach efforts that  worked particularly well and those that did not. In doing so, VHA officials  will have the opportunity to make better informed decisions in their suicide  prevention media outreach campaign to support VA\u2019s overall goal of  reducing veteran suicides."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["VA has stated that preventing veteran suicide is its top clinical priority; yet  VHA\u2019s lack of leadership attention to its suicide prevention media  outreach campaign in recent years has resulted in less outreach to  veterans. While VHA identifies the campaign as its primary method of  raising suicide prevention awareness, it has not established an effective  oversight approach to ensure outreach continuity. This became  particularly evident during a recent period of turnover and reorganization  in the office responsible for the suicide prevention outreach campaign.  Moving forward, VHA has an opportunity to improve its oversight to  ensure that its outreach content reaches veterans and others in the  community to raise awareness of VHA\u2019s suicide prevention services,  particularly as VHA begins working with a new contractor beginning in  fiscal year 2019.", "VHA is responsible for evaluating the effectiveness of its suicide  prevention media outreach campaign in raising awareness about VHA  services that are available to veterans who may be at risk for suicide. To  do so, VHA collects and monitors data on campaign metrics to help  gauge the effectiveness of its suicide prevention media outreach  campaign in raising such awareness, but has not established targets for  the majority of these metrics because officials reported that there are no  meaningful, industry-wide targets for them. We disagree with VHA\u2019s  assertion that other targets would not be meaningful; VHA collects data  on its metrics that it can use to develop reasonable and meaningful  targets for future performance. In the absence of established targets,  VHA cannot evaluate the effectiveness of the campaign, and make  informed decisions about which activities should be continued to support  VA\u2019s overall goal of reducing veteran suicides."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to VA:  1.  The Under Secretary for Health should establish an approach for  overseeing its suicide prevention media outreach efforts that includes  clear delineation of roles and responsibilities for those in leadership  and contract oversight roles, including during periods of staff turnover  or program changes. (Recommendation 1)  2.  The Under Secretary for Health should require officials within the  Office of Suicide Prevention and Mental Health to establish targets for  the metrics the office uses to evaluate the effectiveness of its suicide  prevention media outreach campaign. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to VA for review and comment. In its  written comments, summarized below and reprinted in Appendix I, VA  concurred with our recommendations. VA described ongoing and planned  actions and provided a timeline for addressing our recommendations. VA  also provided technical comments, which we incorporated as appropriate.", "In response to our first recommendation, to establish an oversight  approach that includes delineation of roles and responsibilities, VA  acknowledged that organizational transitions and realignments within  OMHSP contributed to unclear roles and responsibilities in 2017 and  2018. VA said that OMHSP has made organizational improvements,  including hiring a permanent Director for Suicide Prevention and  establishing a new organizational structure. In its comments, VA  requested closure of the first recommendation based on these actions.", "However, to fully implement this recommendation, VA will need to provide  evidence that it has established an oversight approach for the suicide  prevention media outreach campaign. This would include providing  information about the roles and responsibilities, as well as reporting  requirements, for contract and leadership officials involved in the suicide  prevention media outreach campaign under the new organizational  structure and the new contract. VA will also need to demonstrate that it  has a plan in place to ensure continued oversight of the suicide  prevention media campaign in the event of staff turnover or program  changes.", "In response to our second recommendation, to establish targets against  which to evaluate suicide prevention metrics, VA said it has plans to work  with communications experts to develop metrics, targets, and an  evaluation strategy to improve its evaluation of its suicide prevention  program efforts, including outreach. VA expects to complete these actions  by April 2019.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of Veterans Affairs. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at DraperD@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix I."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia A. Mann (Assistant  Director), Kaitlin McConnell (Analyst-in-Charge), Kaitlin Asaly, and Jane  Eyre made key contributions to this report. Also contributing were Jennie  Apter, Emily Bippus, Valerie Caracelli, Lisa Gardner, Jacquelyn Hamilton,  Teague Lyons, Vikki Porter, and Eden Savino."], "subsections": []}]}], "fastfact": ["Preventing veteran suicide is one of the Department of Veterans Affairs' highest priorities. VA reports that an average of 20 veterans die by suicide each day. Since 2010, VA has conducted national outreach to raise awareness about suicide prevention resources for veterans.", "However, we found that VA's outreach activities dropped off in 2017 and 2018, and the office responsible for these activities lacked consistent leadership. We also found that VA did not have clear goals for evaluating the effectiveness of its outreach activities.", "We recommended VA improve its oversight and evaluation of its suicide prevention outreach activities."]}
{"id": "GAO-19-209", "url": "https://www.gao.gov/products/GAO-19-209", "title": "Defense Acquisitions: Information on Workforce, Organizational Structure, and Budgeting for Selected Programs", "published_date": "2019-03-25T00:00:00", "released_date": "2019-03-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2018, DOD estimated that its 82 major defense acquisition programs would cost over $1.69 trillion in total to acquire. DOD relies on program offices\u2014composed of civilian, military and contractor support personnel\u2014to manage and oversee these technically complex programs.", "GAO was asked to review factors affecting DOD's personnel needs for its acquisition programs and how DOD budgets for the costs associated with these personnel.", "This report describes (1) factors affecting the workforce size, composition, and mix of contractor and government personnel, as well as organizational structure for selected programs; and (2) how personnel costs associated with those selected programs are included in DOD's budget justification documents.", "GAO reviewed DOD acquisition, workforce, and financial management policies and regulations and identified a non-generalizable sample of 11 major defense acquisition programs, including programs from each military department that were recently approved to enter into system development. GAO requested information from each of these programs to identify the number and type of personnel supporting the program, reviewed program documentation, and interviewed program officials. GAO also reviewed DOD's budget justification documents for fiscal years 2018 and 2019."]}, {"section_title": "What GAO Found", "paragraphs": ["The workforce size, composition, and mix, as well as the organizational structure of the 11 Department of Defense (DOD) major defense acquisition programs GAO reviewed were influenced by several interrelated factors. These factors include the government's role in developing and integrating key technologies, the availability of government personnel to provide the skills needed, and whether the program was managed as part of a portfolio of related programs or as a stand-alone program. For example, programs that assumed more responsibility for developing and integrating key technologies generally had a larger workforce, which was primarily composed of engineering and technical personnel. Program officials GAO met with stated that they generally prefer to use government personnel, but use contractor support when the number of government personnel allocated to the program is not sufficient to meet their needs, the technical skills are not available or are limited within the government, or to fulfill short-term tasks that are too brief to justify hiring government personnel. GAO also found that DOD structured the 11 programs to allow them to leverage available personnel with the necessary skills. Two programs were structured as standalone programs because they were new, high priority, and complex. The other nine programs were managed as a part of a portfolio of related programs. For example, the Air Force's F-15 program office manages a number of programs that add capabilities to the existing system.", "DOD's Financial Management Regulation, which governs the formulation and presentation of DOD's budget request, gives DOD flexibility in how it submits program personnel costs. Consequently, the personnel costs for the 11 programs GAO reviewed were not separately and distinctly identified from other costs. For example, costs for civilian and military personnel are often centrally funded through appropriations categories that support many DOD activities and do not provide information on specific program personnel costs. GAO also found that costs for contractor support are often combined with other costs in individual program budget exhibits."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year the Department of Defense (DOD) spends billions of dollars to  develop, produce, and field its weapon systems. In 2018, DOD estimated  that its 82 major defense acquisition programs would cost over $1.69  trillion to develop and procure. These programs range from adding new  capabilities to older platforms, like the B-2 bomber, to developing new  weapon systems, such as the Columbia Class Ballistic Missile  Submarine. DOD establishes program offices to manage and oversee the  development, production, and sustainment of these technically complex  acquisition programs. To support its programs, DOD relies on a workforce  consisting of military and civilian personnel, such as program managers,  contracting officers, and engineers. These government personnel are also  supported by contractor personnel and other organizations.", "You asked us to review issues related to how military departments meet  program personnel needs and how DOD budgets for the costs associated  with these personnel. This report describes (1) factors affecting the  workforce size, composition, and mix, as well as organizational structure  for selected major defense acquisition programs and (2) how personnel  costs associated with those selected programs are included in DOD\u2019s  budget justification documents. For the purposes of this report, we refer to  the group of government and contractor support personnel dedicated to  and responsible for managing and supporting system acquisitions as a  \u201cprogram,\u201d rather than a program office.", "To address both objectives, we used data collected as part of our annual  assessment of DOD weapon programs to identify major defense  acquisition programs that were at similar phases in DOD\u2019s acquisition  process. DOD Instruction 5000.02, the overarching policy governing the  operation of the defense acquisition system, requires that programs  entering the system development phase of the acquisition process  provide an estimate, among other things, of their personnel needs. We  selected 11 programs, representing each military department, that were  most recently approved to enter system development as of March 2018.  The 11 programs we selected follow:", "Department of the Air Force", "F-15 Eagle Passive Active Warning and Survivability System  (EPAWSS)", "B-2 Defensive Management System Modernization (DMS-M)", "Military Global Positioning System User Equipment (MGUE)", "Department of the Army", "Armored Multi-Purpose Vehicle (AMPV)", "Paladin Integrated Management (PIM)", "Common Infrared Countermeasure (CIRCM)", "Joint Air-to-Ground Missile (JAGM)", "Department of the Navy", "Next Generation Jammer Mid-Band (NGJ Mid-Band)", "Joint Precision Approach and Landing System (JPALS)", "John Lewis Class Fleet Replenishment Oiler (T-AO)", "The results from these 11 case studies are not generalizable to all 82  major defense acquisition programs, but we used them to better  understand and illustrate the factors that influence a program\u2019s size,  composition, and mix, as well as organizational structure.", "We used a standardized data collection instrument to obtain program  personnel data on three workforce characteristics for each of the 11  programs:", "Size\u2014the overall number of full-time equivalent personnel, including  military, civilian, contractor support, and Federally Funded Research  and Development Center (FFRDC) personnel supporting the  program.", "Composition\u2014the acquisition functions performed by personnel  supporting the program and the resulting skill mix. We grouped these  functions into four categories: (1) program management; (2)  engineering and technical; (3) logistics; and (4) contracting, business,  and support.", "Mix\u2014the type of personnel supporting the program, including military,  civilian, contractor and FFRDC personnel. For the purposes of this  report, \u201ccontractor\u201d refers to the support contractors who provide  technical and administrative services to DOD\u2019s major defense  acquisition programs rather than prime contractors that develop and  produce those weapon systems or products.", "For additional information on these programs, see GAO-18-360SP.", "DOD officials stated that program personnel often change over time;  therefore, the associated data we collected are not static. The data  reported to us by the 11 selected programs provided a snapshot\u2014as  reported between December 2017 and June 2018\u2014of the personnel  supporting the program. To assess the consistency and reliability of these  data, we interviewed officials from each of the 11 programs to determine  how the data were derived and compared the data with available program  documentation that addressed workforce requirements, such as  acquisition strategies, cost analysis documents, and organizational  charts. Based on these steps, we determined that the data were  sufficiently reliable to identify and compare the programs\u2019 workforce size,  composition, and mix.", "To describe the organizational structure of the selected programs, we  reviewed some of the documentation required to proceed to the system  development phase of the defense acquisition process. We also reviewed  organizational charts and interviewed officials representing each of the  selected programs. To identify the factors affecting workforce size,  composition, and mix of the selected programs, we obtained and  reviewed program documentation, including acquisition strategies. We  interviewed officials from each of the selected programs as well as the  following DOD organizations that were involved in the policy and process  of manpower planning for acquisition programs:", "Office of the Under Secretary of Defense for Personnel and", "Office of the Assistant Secretary of the Army for Acquisition, Logistics,", "Army Program Executive Office Ground Combat Systems;", "Army Program Executive Office Intelligence, Electronic Warfare and", "Army Program Executive Office Missiles and Space;", "Air Force Life Cycle Management Center;", "Air Force Space and Missile Systems Center;", "Naval Sea Systems Command; and", "Naval Air Systems Command.", "Based on the discussions with program officials and review of acquisition- related documents, we identified the overarching factors that affected the  workforce size, composition, and mix, as well as the organizational  structure of the selected programs.", "To identify how personnel costs for the 11 selected programs are  included in DOD\u2019s budget justification documents, we reviewed the DOD  Financial Management Regulation that governs DOD input to the  President\u2019s annual budget request, among other things. We reviewed  relevant DOD portions of the fiscal years 2018 and 2019 President\u2019s  Budget and the specific budget exhibits for each of the 11 programs. We  also interviewed officials from Office of the Under Secretary of Defense  (Comptroller), the military departments, and Program Executive Office  (PEO), and program officials responsible for developing the budget  request for the 11 selected programs to obtain information on how military  departments budget for their personnel.", "We conducted this performance audit from November 2017 to March  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD acquires new weapons for its warfighters through a management  process known as the defense acquisition process. This process has  multiple phases, including: (1) technology maturation and risk reduction,  (2) engineering and manufacturing development, and (3) production and  deployment. In this report we refer to these three phases as concept development, system development, and production. Programs typically  complete a series of milestone reviews and other key decision points that  authorize entry into a new acquisition phase.", "DOD Instruction 5000.02 delegates responsibility for developing and  procuring weapon systems to the military departments and other defense  agencies. This policy does not specify a standard organizational  structure\u2014or program structure\u2014to manage acquisition programs, but  rather states that programs are to be tailored as much as possible to the  characteristics of the product being acquired, and to the totality of  circumstances associated with the program including operational urgency  and risk factors. In addition, DOD\u2019s guidance for managing its workforce  states that the approach should be flexible, adaptive to program changes,  and responsive to new management strategies.", "DOD decides how many personnel and how much program funding to  request for each military department through the Planning, Programming,  Budgeting, and Execution (PPBE) process. DOD programming policy  requires the military departments and defense agencies to develop a  program objective memorandum that identifies and prioritizes  requirements and total funding needs for the current budget year and 4  additional years into the future. As a part of this process, the  departments also estimate the personnel requirements and program  funding needed to execute their mission, including support for the  commands and PEOs that are responsible for managing acquisition  programs. The results of the PPBE process, including proposed funding  levels for programs, are captured in the President\u2019s annual budget  request to Congress. For example, in its budget request, DOD identifies  and requests the total number of civilian full-time equivalent personnel,  among other things. Congress then authorizes and appropriates the  funding to pay for civilian personnel for each military department. When  budgeting for contracted services, DOD estimates the cost of the tasks to  be performed but not the number of individuals that may perform those  tasks. The military departments, commands and PEOs then distribute  approved funding (which, in part, is used to pay for civilian personnel and  contractor support) to the various organizations including the programs  that are responsible for managing and supporting defense acquisitions.", "Each military department has a different approach to developing its  budget request, and program budgets may be spread across multiple  types of appropriations that are organized into various categories based  on their purpose such as research, development, testing and evaluation,  or procurement. Similarly, the military departments fund their personnel  through several different types of appropriations, including (1) operation  and maintenance; (2) military personnel; and (3) research, development,  test, and evaluation. Requests for funding are included in different  documents and often presented in multiple volumes that can be hundreds  of pages long. DOD\u2019s Financial Management Regulation provides  instructions for the formulation and presentation of the budget request to  Congress, including general categories of costs that might be included in  program specific budgets. In addition, the regulation requires DOD  components to include specific budget exhibits for certain acquisition  programs to provide more insight into those programs\u2019 funding needs."], "subsections": []}, {"section_title": "Several Factors Affect the Workforce Size, Composition, and Mix, As Well As the Organizational Structure of Selected DOD Acquisition Programs", "paragraphs": ["Several interrelated factors influenced the workforce size, composition,  and mix, as well as the organizational structure of the 11 major defense  acquisition programs we reviewed. We found the following:", "Program workforce size and composition were influenced by the  degree to which the program assumed responsibility for technical  development and integration, as well as the program\u2019s stage within  the acquisition life cycle.", "Program workforce mix varied depending on the use of contractor  personnel, which was based on the workload requirements and the  availability of government personnel to provide the skills needed.", "Programs were generally structured as either stand-alone\u2014new, high  priority, complex weapon system platforms with dedicated  personnel\u2014or as part of a portfolio of related programs to share  personnel across programs."], "subsections": [{"section_title": "Factors Affecting Selected Programs\u2019 Workforce Size and Composition", "paragraphs": ["The number and composition of personnel that supported the selected  major defense acquisition programs varied considerably. As shown in  figure 1, the total number of personnel supporting the 11 selected  programs ranged from 30 to 397, and the composition of those personnel  varied based on the needs of the program.", "While program officials cited a number of factors that influenced the  selected programs\u2019 workforce size and composition, including department  priority and complexity, we identified two overarching factors\u2014(1) the  level of program responsibility for technical development and integration,  and (2) the stage of the acquisition life cycle.", "First, we found programs that assume more responsibility for technical  development and integration have more personnel\u2014primarily those that  perform engineering as well as test and evaluation functions. The two  largest of the selected programs we reviewed, the Navy\u2019s Next- Generation Jammer Mid-Band (NGJ Mid-Band) and Columbia Class  Ballistic Missile Submarine (Columbia), assumed significant responsibility  for system development and integration, activities a prime contractor  often undertook for the other programs we reviewed. For example,", "NGJ Mid-Band officials explained that the program is responsible for  overseeing software integration and other efforts directly. In this case,  in addition to personnel assigned to the program office, the Navy  relies on personnel from other organizations such as the Naval Air  Warfare Center Aircraft Division instead of a prime contractor to  develop the software needed to operate the system, conduct system  testing, and manage integration into the platform.", "Similarly, the Columbia program maintains responsibility for many  aspects of development and integration of the submarine including  most hull, mechanical, and electrical components. As a result, about  two-thirds of the 309 personnel supporting the program are  performing engineering and technical tasks.", "In contrast, two programs with fewer personnel, the Air Force\u2019s B-2  Defensive Management System Modernization program (DMS-M) and  Navy\u2019s John Lewis Class Fleet Replenishment Oiler (T-AO), assigned  significant responsibility for development and integration to their  respective prime contractors. The Defensive Management System  Modernization program reported to us that it has a total of 11 engineering  and technical personnel, and T-AO reported that it has 35 engineering  and technical personnel.", "Secondly, we found that program workforce size and composition  changed in response to the amount and nature of the work programs  perform at different stages of the acquisition life cycle. For example,  officials from our selected programs stated they generally planned to  increase in size as they progressed from concept development to system  development and also planned to concurrently increase the proportion of  engineering and technical personnel. Program officials stated that as the  program progresses into the logistics support stage, the number of  personnel supporting the program generally decreases as programs  release some personnel to other assignments while retaining enough  personnel to manage the logistics support stage. Figure 2 shows how the  size and composition of Army\u2019s Joint-Air-to-Ground Missile (JAGM)  program changed from concept development into production.", "A program\u2019s total development and procurement cost was not necessarily  related to the number of personnel supporting the program for the 11  programs we reviewed. All 11 selected programs are classified as major  defense acquisition programs and ranged in total acquisitions cost from  $1.5 billion to $103.2 billion. Our analysis, shown in table 1 below,  indicates that total cost did not significantly influence the number of  personnel supporting these programs."], "subsections": []}, {"section_title": "Selected Programs Used Contractor Support to Help Meet Workload Requirements", "paragraphs": ["All 11 selected programs used contractors to help meet workload  requirements, but the level of contractor support varied from  approximately 5 percent to 72 percent of total program personnel, as  shown in figure 3.", "Program officials told us that while they generally try to use civilian or  military personnel to meet workload requirements, they use contractor  support when the number of government personnel allocated to the  program is not sufficient to meet their needs, the technical skills are not  available or are limited within the government, or to fulfill short-term tasks  that are too brief to justify hiring government personnel.", "Program officials stated the extent to which their programs use  contractor support often depends on the number civilians allocated to  the program by the command or PEO. In the case of the three  selected programs with the fewest personnel, the officials stated that  the number of personnel authorizations allocated to the program by  their respective command or PEO did not meet their estimated  workload requirements. For example, the B-2 Defensive Management  System Modernization program estimated it needed 82 personnel in  fiscal year 2018, but was only allocated 13 personnel. As a result,  program officials stated that they used program funds to pay for  contractor support personnel to partially offset the government civilian  staffing shortfalls. Officials at the Air Force Life Cycle Management  Center, the organization that allocated personnel to the B-2 program  office, told us that civilian personnel are allocated based on the risk  associated with each program.", "Program officials told us that contractor support personnel are used to  augment civilian and military personnel by providing skills or technical  expertise that are limited or not available in the government. We found  that over two-thirds of the contractors that supported the 11 selected  programs we reviewed were performing engineering and technical  functions. For example, the John Lewis Class Fleet Replenishment  Oiler (T-AO) is a commercially-derived ship design. As such, program  officials stated that the required engineering expertise resides in the  commercial sector, which resulted in contracted engineers comprising  about 77 percent of the program\u2019s total engineering personnel.", "Program officials also stated that it is more effective to use contractor  support personnel to perform tasks that are relatively short in duration  than to go through the lengthy process of hiring government  personnel. Contracting for support allows the program to grow and  shrink to meet personnel requirements as they change. For example,  Joint Air-to-Ground Missile program officials stated they contracted for  support to execute tasks that are not recurring, such as developing  the required documents to get approval to start production.", "Among the 11 programs we reviewed, the Air Force\u2019s Military Global  Positioning System User Equipment (MGUE) program has a unique  workforce mix. Twenty-four percent of MGUE\u2019s program personnel were  military, and MGUE was the only one of the 11 selected programs that  had FFRDC personnel. Program officials stated that the challenge of  obtaining civilian personnel with the required technical skills in a high  cost-of-living area around Los Angeles, California required the program to  rely more heavily on military personnel and contractors to support the  program. Program officials stated this is in part because it is easier to  assign military personnel in high cost-of-living areas than it is to hire  civilian personnel. In addition, programs in the Air Force\u2019s Space and  Missile Systems Center often rely on FFRDC personnel from Aerospace  Corporation, which is located in the Los Angeles area and provides  technical expertise that is specific to space systems. Program officials  from the other 10 programs we reviewed reported that they did not have  FFRDC personnel."], "subsections": []}, {"section_title": "Military Departments Structured Selected Acquisition Programs to Leverage Available Personnel with the Necessary Skills", "paragraphs": ["While differences existed in the organizational structure of the 11  programs we reviewed, we identified factors that affected which of the two  common approaches the military departments used to leverage available  personnel with the necessary skills:", "New, high priority, complex weapon system platforms that require a  significant amount of development and integration, such as the Navy\u2019s  Columbia and the Army\u2019s Armored Multi-Purpose Vehicle, are  structured as distinct standalone program offices with dedicated  program personnel.", "Nine of the 11 selected programs were managed in a portfolio-based  program structure which included multiple related acquisition  programs. For these portfolio-based programs, personnel were  shared across the related programs to help meet fluctuating workload  requirements and maximize personnel resources.", "Figure 4 compares the structure of a standalone program to the structure  of a portfolio-based program with multiple acquisition programs managed  under it. The figure also illustrates how the Air Force\u2019s MGUE program  was situated within the Air Force\u2019s Global Positioning Systems portfolio of  programs.", "In both types of organizational structures illustrated above, the PEO and  the program office have personnel that oversee and support the  programs. These personnel may be dedicated to one program or may  split time between multiple portfolio-based programs. For example, the Air  Force PEO for Space has more than 5,000 military, civilian, and  contractor personnel and is responsible for managing 41 programs, the  responsibility for which is distributed among multiple program offices. One  of these program offices, the Global Positioning Systems program office,  has 628 personnel. This program office is responsible for overseeing and  supplementing the staff of several programs, including the Military Global  Positioning System User Equipment Program, which has about 70  personnel.", "According to PEO and program officials, acquisition programs may be  managed within portfolios for several different reasons:", "Programs are part of the same weapon system platform. The B-2  Defensive Management System Modernization program and the F-15  Eagle Passive Active Warning Survivability System program are  examples of upgrades to existing systems on mature aircraft and are  managed within a portfolio of programs within the B-2 and F-15  system program offices, respectively.", "Programs have interrelated technologies. The Air Force\u2019s MGUE  program is managed within the GPS program office, which also  manages other GPS satellite and ground system programs.", "Programs have related acquisition strategies. The Navy\u2019s John  Lewis Class Fleet Replenishment Oiler (T-AO) program is managed  within a portfolio of commercially designed and developed ships. This  program is managed within a program office that oversees  approximately 85 types of commercially derived auxiliary ships, boats,  service craft, and special mission ships.", "Regardless of how the acquisition program is structured, other DOD  organizations also provide personnel to support a program\u2019s workload  requirements. There are various specialized DOD organizations that  support programs and provide specific acquisition functions or skill sets,  such as contracting, cost estimating, and engineering. For the 11 selected  programs we reviewed, these organizations supported multiple programs  and were either structured (1) within the PEO that was responsible for the  programs we reviewed or (2) external to the PEO. These external support  organizations include contracting commands, warfare centers, and  engineering organizations that are intended to provide the program  specialized technical expertise from across the military department.  Program officials stated that these organizations may share personnel  with a program on a full or part-time basis, and the shared personnel may  or may not be co-located with the program. Figure 5 is a notional  representation of the way that programs are supported by different  organizations.", "The major defense acquisition programs we reviewed used different  approaches to organizing and leveraging support organizations. For  example:", "The Navy programs we reviewed relied on naval warfare centers to  provide the engineering expertise necessary to design, build,  maintain, and repair the Navy\u2019s aircraft, ships, and submarines. For  example, the Navy\u2019s NGJ Mid-Band relies heavily on warfare centers,  including the Naval Air Warfare Center Weapons Division and the  Naval Air Warfare Center Aircraft Division, to support the program.  We found that about 60 percent of the total number of personnel  supporting the program office were from these organizations.", "The Army programs we reviewed relied on support organizations such  as the Army Contracting Command for contracting functions, the  Aviation and Missile Research Development and Engineering Center  for engineering expertise, and others to provide life cycle  management support.", "The Air Force programs we reviewed relied on support organizations  established within their command. For example, Air Force\u2019s Life Cycle  Management Center has organizations dedicated to supporting all of  its programs. These organizations provide support, such as  contracting and cost estimating expertise, to programs managed  under the Air Force\u2019s Life Cycle Management Center. Personnel  within these organizations are not staffed to one particular program,  but share their time among many of the programs the Center is  responsible for managing."], "subsections": []}]}, {"section_title": "Personnel Costs for Selected DOD Acquisition Programs Are Included in Multiple Parts of the Budget Justification Documents and Are Not Specifically Identified for Individual Programs", "paragraphs": ["The personnel costs for each major defense acquisition program we  reviewed are included in different parts of the President\u2019s annual budget  request, including budget justification documents, but are not always  clearly identifiable due to different approaches used to report such costs.  The DOD Financial Management Regulation gives the military  departments flexibility in how they submit program personnel costs. For  example, it suggests the use of \u201ctypical\u201d personnel cost categories for  research, development, test, and evaluation programs to include in their  individual program budget exhibits, but it also allows the departments to  use the personnel cost categories they deem to be the most appropriate  when formulating the budget request. In reviewing DOD\u2019s budget  requests for fiscal years 2018 and 2019 associated with the 11 selected  programs, we found that personnel costs are budgeted for in two main  ways\uf8e7centrally by the military department, or by an individual  program\uf8e7depending on whether the requests are for military, civilian, or  contractor support services. Personnel costs that are program-funded are  included in individual program budget justification requests, whereas  personnel costs that are centrally funded by the military departments are  aggregated into one or more line items in the military department\u2019s  specific appropriation request. Table 2 shows how each military  department funds military and civilian personnel and contractor support  services for major defense acquisition programs.", "Each military department centrally budgets for military personnel through  its respective Military Personnel appropriation requests, which aggregate  personnel funding. These requests include funding for pay, travel, and  other personnel-related costs. As these costs are combined and not  associated with a specific program, we could not determine the costs of  the military personnel supporting the 11 selected programs by reviewing  DOD\u2019s budget justification documentation. In contrast, support contractor  costs were included in each program\u2019s individual budget request.", "The military departments also centrally budget for some civilian  personnel, but there are differences between the departments regarding  which appropriations categories they use to request these funds.  Regardless of the appropriation, we found that the budget requests do not  identify civilian personnel costs by specific program; therefore, we could  not determine the costs of the centrally funded civilian personnel  supporting the 11 programs we selected. For example, in fiscal year  2019, the Air Force requested funding for the civilian personnel  supporting its acquisition programs in development through the Research,  Development, Test, and Evaluation appropriation. It grouped the costs  into eight categories that represent various missions such as Cyber,  Network, and Business Systems; Global Battle Management; and Nuclear  Systems. The Air Force budget request indicates the total amount of  funds requested, but does not identify the estimated number of personnel  that these funds will support. Figure 6 illustrates how the Air Force  requested funds for its civilian acquisition workforce in fiscal year 2019.", "The Navy and Army request funds for civilian personnel primarily through  their respective operation and maintenance appropriations. This  appropriation is used to fund a wide range of costs necessary to manage,  operate and maintain worldwide facilities and military operations. These  operation and maintenance budgets are divided into numerous categories  related to various missions, functions, or activities. For example, the  Navy\u2019s Operation and Maintenance budget requests funding for civilian  personnel in several categories, such as \u201cShip Operational Support and  Training\u201d and \u201cAdministration.\u201d The Army Operation and Maintenance  budget requests funding for civilian acquisition personnel in one  combined category labeled as \u201cOther Service Support.\u201d", "Apart from the portions of the budget described above, certain DOD  programs have specific budget exhibits that identify its funding  requirements. In reviewing the exhibits for the 11 selected programs, we  found that individual program requests include personnel costs that are  not funded centrally such as contractor support services costs, but these  costs are generally not specifically identified as personnel costs. For  example, according to program officials, the Air Force\u2019s B-2 Defensive  Management Modernization program requested funds in its exhibit  accompanying the fiscal year 2019 Research Development, Test, and  Evaluation budget request labeled \u201cPMA,\u201d which stands for Program  Management Administration. According to program officials, PMA  includes costs for contractor support services, government travel, and  other costs but does not include civilian personnel costs (see figure 7).", "In reviewing and discussing the budget exhibits for the 11 selected  programs with program officials, we found that personnel costs, including  civilian, contractor, and FFRDC, were generally spread across multiple  budget request lines that were associated with various tasks but were not  specifically identified as personnel costs. These include the following:", "Development Test & Evaluation  For example, the Navy\u2019s Joint Precision Approach and Landing System\u2019s  fiscal year 2019 Research Development, Test and Evaluation budget  exhibit included personnel costs across seven lines that represented  various efforts including ship integration, test and evaluation, systems  engineering, and program management support, as shown in figure 8.", "Of the 11 program\u2019s fiscal year 2019 budgets we reviewed, one identified  personnel costs on a single line, and the remaining 10 programs included  personnel costs in two or more budget lines."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. DOD provided  technical comments that we incorporated into this report as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Acting Secretary of Defense and the Secretaries of the  Army, Navy, and Air Force, as well as the Under Secretary of Defense for  Personnel and Readiness. In addition, the report is available at no charge  on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@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."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Justin Jaynes (Assistant  Director); Bradley Terry (Analyst-in-Charge); Matthew T. Crosby;  Stephanie Gustafson; Heather B. Miller; Karen Richey; Miranda Riemer;  Robin Wilson; and Chris Zakroff made significant contributions to this  review."], "subsections": []}]}], "fastfact": ["DOD relies on a mix of government personnel and contractors to carry out its multi-billion dollar major acquisition programs for new ships, planes, and more.", "We reviewed, among other things, the number and type of personnel working at 11 major programs. DOD does not specify one way for structuring programs and they varied widely. Programs:", "Had staff sizes ranging from 30 to 397", "Generally had more personnel, especially in engineering, if they were developing key technologies for their projects", "Generally preferred to use government personnel, but sometimes used contractors to meet workload needs or fulfill short-term tasks"]}
{"id": "GAO-18-336T", "url": "https://www.gao.gov/products/GAO-18-336T", "title": "Prescription Opioids: Medicare Should Expand Oversight Efforts to Reduce the Risk of Harm", "published_date": "2018-01-17T00:00:00", "released_date": "2018-01-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Misuse of prescription opioids can lead to overdose and death. In 2016, over 14 million Medicare Part D beneficiaries received opioid prescriptions, and spending for opioids was almost $4.1 billion. GAO and others have reported on inappropriate activities and risks associated with these prescriptions.", "This statement is based on GAO's October 2017 report (GAO-18-15) and discusses (1) CMS oversight of beneficiaries who receive opioid prescriptions under Part D, and (2) CMS oversight of providers who prescribe opioids to Medicare Part D beneficiaries. For the October 2017 report, GAO reviewed CMS opioid utilization and prescriber data, CMS guidance for plan sponsors, and CMS's strategy to prevent opioid misuse. GAO also interviewed CMS officials, the six largest Part D plan sponsors, and 12 national associations selected to represent insurance plans, pharmacy benefit managers, physicians, patients, and regulatory and law enforcement authorities."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS), within the Department of Health and Human Services (HHS), provides guidance on the monitoring of Medicare beneficiaries who receive opioid prescriptions to plan sponsors\u2014private organizations that implement the Medicare drug benefit, Part D\u2014but lacks information on most beneficiaries at risk of harm from opioid use.", "CMS provides guidance to plan sponsors on how they should monitor opioid overutilization among Medicare Part D beneficiaries, and requires them to implement drug utilization review systems that use criteria similar to CMS's. CMS's criteria focused on beneficiaries who do all the following: (1) receive prescriptions of high doses of opioids, (2) receive prescriptions from four or more providers, and (3) fill prescriptions at four or more pharmacies. According to CMS, this approach focused actions on beneficiaries the agency determined to have the highest risk of harm.", "CMS's criteria, including recent revisions, do not provide sufficient information about the larger population of potentially at-risk beneficiaries. CMS estimates that while 33,223 beneficiaries would have met the revised criteria in 2015, 727,016 would have received high doses of opioids regardless of the number of providers or pharmacies. In 2016, CMS began to collect information on some of these beneficiaries using a higher dosage threshold for opioid use. This approach misses some who could be at risk of harm, based on Centers for Disease Control and Prevention guidelines. As a result, CMS is limited in its ability to assess progress toward meeting the broader goals of its Opioid Misuse Strategy for the Medicare and Medicaid programs, which includes activities to reduce the risk of harm to beneficiaries from opioid use.", "CMS oversees the prescribing of drugs at high risk of abuse through a variety of projects, but does not analyze data specifically on opioids. According to CMS officials, CMS and plan sponsors identify providers who prescribe large amounts of drugs with a high risk of abuse, and those suspected of fraud or abuse may be referred to law enforcement. However, GAO found that CMS does not identify providers who may be inappropriately prescribing large amounts of opioids separately from other drugs, and does not require plan sponsors to report actions they take when they identify such providers. As a result, CMS is lacking information that it could use to assess how opioid prescribing patterns are changing over time, and whether its efforts to reduce harm are effective."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In the October 2017 report, GAO made three recommendations that CMS (1) gather information on the full number of at-risk beneficiaries receiving high doses of opioids, (2) identify providers who prescribe high amounts of opioids, and (3) require plan sponsors to report to CMS on actions related to providers who inappropriately prescribe opioids. HHS concurred with the first two recommendations, but not with the third. GAO continues to believe the recommendation is valid, as discussed in the report and in this statement."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here to discuss our recently released report on  oversight of opioid prescribing in the Medicare program. Misuse of  prescription opioids, which are used to treat both acute and chronic pain,  has become a serious public health problem for the U.S. population,  including Medicare beneficiaries. The Centers for Disease Control and  Prevention (CDC) reported that from 1999 to 2013 the rate of drug  poisoning deaths from prescription opioids nearly quadrupled from 1.4 to  5.1 per 100,000 people. In addition, the Department of Health and  Human Services (HHS) Office of Inspector General (HHS-OIG) reported  that 14.4 million people (about one-third) who participate in Medicare Part  D received at least one prescription for opioids in 2016, and that Part D  spending for opioids in 2016 was almost $4.1 billion. GAO and the HHS- OIG have previously reported on inappropriate activities that can be  associated with such prescriptions, including \u201cdoctor shopping\u201d to receive  multiple opioid prescriptions from different providers; the diversion of  prescription drugs for uses other than what was intended; and  questionable prescribing practices by providers, including those in  Medicare.", "In March 2015, HHS announced plans to make addressing opioid abuse  a high priority through two broad goals: (1) decreasing opioid overdoses  and overall overdose deaths, and (2) decreasing the prevalence of opioid  use disorder. In 2016, CDC issued guidelines with recommendations for  prescribing opioids in outpatient settings for chronic pain.  The guidelines  recommended that providers use caution when prescribing opioids at any  dose, carefully reassess evidence of individual benefits and risks when  increasing opioid dosage to 50 mg morphine-equivalent dose (MED) per  day or more, and either avoid or carefully justify dosage at 90 mg MED or  more. CDC guidelines also noted that providers should use additional  caution in prescribing opioids to patients aged 65 and older, because the  drugs can accumulate in the body to toxic levels. Further, in January  2017, the Centers for Medicare & Medicaid Services (CMS), the HHS  agency that administers Medicare, issued its Opioid Misuse Strategy for  the Medicaid and Medicare programs, including Medicare Part D. The  strategy includes the agency\u2019s plans to address concerns about  beneficiary use of opioids and the prescribing of opioids by providers.", "My remarks today discuss the findings and recommendations from our  report on CMS efforts to oversee prescription opioids. Accordingly, this  testimony focuses on (1) how CMS oversees beneficiaries who receive  opioid prescriptions under Medicare Part D, and (2) how CMS oversees  providers who prescribe opioids to Medicare Part D beneficiaries. For our  report, we reviewed CMS opioid utilization and prescriber data, CMS  guidance for plan sponsors, and CMS\u2019s strategy to prevent opioid misuse.  We also interviewed officials from CMS, the six largest Part D plan  sponsors\u2014private organizations, such as health insurance companies,  contracted by CMS to provide outpatient drug benefit plans to Medicare  beneficiaries\u2014and 12 national associations selected to represent  insurance plans, pharmacy benefit managers, physicians, patients, and  regulatory and law enforcement agencies. More detailed information on  our objectives, scope, and methodology for that work can be found in the  issued report. We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "CMS Delegates Monitoring of Beneficiaries who Receive Opioid Prescriptions to Plan Sponsors, but Does Not Have Sufficient Information on Those Most at Risk for Harm", "paragraphs": [], "subsections": [{"section_title": "CMS Delegates Monitoring of Individual Beneficiaries\u2019 Opioid Prescriptions to Plan Sponsors", "paragraphs": ["Our October 2017 report found that CMS provides guidance to Medicare  Part D plan sponsors on how the plan sponsors should monitor opioid  overutilization problems among Part D beneficiaries. The agency includes  this guidance in its annual letters to plan sponsors, known as call letters;  it also provided a supplemental memo to plan sponsors in 2012. Among  other things, these guidance documents instructed plan sponsors to  implement a retrospective drug utilization review (DUR) system to monitor  beneficiary utilization starting in 2013. As part of the DUR systems,  CMS requires plan sponsors to have methods to identify beneficiaries  who are potentially overusing specific drugs or groups of drugs, including  opioids.", "Also in 2013, CMS created the Overutilization Monitoring System (OMS),  which outlines criteria to identify beneficiaries with high-risk use of opioids  and to oversee sponsors\u2019 compliance with CMS\u2019s opioid overutilization  policy. Plan sponsors may use the OMS criteria for their DUR systems,  but they have some flexibility to develop their own targeting criteria within  CMS guidance. At the time of our review, the OMS considered  beneficiaries to be at a high risk of opioid overuse when they met all three  of the following criteria:  1.  received a total daily MED greater than 120 mg for 90 consecutive  2.  received opioid prescriptions from four or more providers in the  previous 12 months, and  3.  received opioids from four or more pharmacies in the previous 12  months.", "The criteria excluded beneficiaries with a cancer diagnosis and those in  hospice care, for whom higher doses of opioids may be appropriate.", "Through the OMS, CMS generates quarterly reports that list beneficiaries  who meet all of the criteria and who are identified as high-risk, and then  distributes the reports to the plan sponsors. Plan sponsors are expected  to review the list of identified beneficiaries, determine appropriate action,  and then respond to CMS with information on their actions within 30 days.  According to CMS officials, the agency also expects that plan sponsors  will share any information with CMS on beneficiaries that they identify  through their own DUR systems. We found that some actions plan  sponsors may take include", "Case management. Case management may include an attempt to  improve coordination issues, and often involves provider outreach,  whereby the plan sponsor will contact the providers associated with  the beneficiary to let them know that the beneficiary is receiving high  levels of opioids and may be at risk of harm.", "Beneficiary-specific point-of-sale (POS) edits. Beneficiary-specific  POS edits are restrictions that limit these beneficiaries to certain  opioids and amounts. Pharmacists receive a message when a  beneficiary attempts to fill a prescription that exceeds the limit in place  for that beneficiary.", "Formulary-level POS edits. These edits alert providers who may not  have been aware that their patients are receiving high levels of  opioids from other doctors.", "Referrals for investigation. According to the six plan sponsors we  interviewed, the referrals can be made to CMS\u2019s National Benefit  Integrity Medicare Drug Integrity Contractor (NBI MEDIC), which is  responsible for identifying and investigating potential Part D fraud,  waste, and abuse, or to the plan sponsor\u2019s own internal investigative  unit, if they have one. After investigating a particular case, they may  refer the case to the HHS-OIG or a law enforcement agency,  according to CMS, NBI MEDIC, and one plan sponsor.", "Based on CMS\u2019s use of the OMS and the actions taken by plan sponsors,  CMS reported a 61 percent decrease from calendar years 2011 through  2016 in the number of beneficiaries meeting the OMS criteria of high  risk\u2014from 29,404 to 11,594 beneficiaries\u2014which agency officials  consider an indication of success toward its goal of decreasing opioid use  disorder.", "In addition, we found that CMS relies on separate patient safety  measures developed and maintained by the Pharmacy Quality Alliance to  assess how well Part D plan sponsors are monitoring beneficiaries and  taking appropriate actions. In 2016, CMS started tracking plan sponsors\u2019  performance on three patient safety measures that are directly related to  opioids. The three measures are similar to the OMS criteria in that they  identify beneficiaries with high dosages of opioids (120 mg MED),  beneficiaries that use opioids from multiple providers and pharmacies,  and beneficiaries that do both. However, one difference between these  approaches is that the patient safety measures separately identify  beneficiaries who fulfill each criterion individually."], "subsections": []}, {"section_title": "CMS Does Not Have Sufficient Information on Most Beneficiaries Potentially at Risk for Harm", "paragraphs": ["Our October 2017 report also found that while CMS tracks the total  number of beneficiaries who meet all three OMS criteria as part of its  opioid overutilization oversight across the Part D program, it does not  have comparable information on most beneficiaries who receive high  doses of opioids\u2014regardless of the number of providers and pharmacies  used\u2014and who therefore may be at risk for harm, according to CDC  guidelines. These guidelines note that long-term use of high doses of  opioids\u2014those above a MED of 90 mg per day\u2014are associated with  significant risk of harm and should be avoided if possible.", "Based on the CDC guidelines, outreach to Part D plan sponsors, and  CMS analyses of Part D data, CMS has revised its current OMS criteria to  include more at-risk beneficiaries beginning in 2018. The new OMS  criteria define a high user as having an average daily MED greater than  90 mg for any duration, and who receives opioids from four or more  providers and four or more pharmacies, or from six or more providers  regardless of the number of pharmacies, for the prior 6 months. Based  on 2015 data, CMS found that 33,223 beneficiaries would have met these  revised criteria. While the revised criteria will help identify beneficiaries  who CMS determined are at the highest risk of opioid misuse and  therefore may need case management by plan sponsors, OMS will not  provide information on the total number of Part D beneficiaries who may  also be at risk of harm. In developing the revised criteria, CMS conducted  a one-time analysis that estimated there were 727,016 beneficiaries with  an average MED of 90 mg or more, for any length of time during a 6  month measurement period in 2015, regardless of the number of  providers or pharmacies used. These beneficiaries may be at risk of harm  from opioids, according to CDC guidelines, and therefore tracking the  total number of these beneficiaries over time could help CMS to  determine whether it is making progress toward meeting the goals  specified in its Opioid Misuse Strategy to reduce the risk of opioid use  disorders, overdoses, inappropriate prescribing, and drug diversion.  However, CMS officials told us that the agency does not keep track of the  total number of these beneficiaries, and does not have plans to do so as  part of OMS. (See fig. 1.)", "We also found that in 2016, CMS began to gather information from its  patient safety measures on the number of beneficiaries who use more  than 120 mg MED of opioids for 90 days or longer, regardless of the  number of providers and pharmacies. The patient safety measures  identified 285,119 such beneficiaries\u2014counted as member-years\u2014in  2016. However, this information does not include all at-risk  beneficiaries, because the threshold is more lenient than indicated in  CDC guidelines and CMS\u2019s new OMS criteria. Because neither the OMS  criteria nor the patient safety measures include all beneficiaries potentially  at risk of harm from high opioid doses, we recommended that CMS  should gather information over time on the total number of beneficiaries  who receive high opioid morphine equivalent doses regardless of the  number of pharmacies or providers, as part of assessing progress over  time in reaching the agency\u2019s goals related to reducing opioid use. HHS  concurred with our recommendation."], "subsections": []}]}, {"section_title": "CMS Oversees Providers through its Contractor and Plan Sponsors, but Efforts Do Not Specifically Monitor Opioid Prescriptions", "paragraphs": ["Our October 2017 report found that CMS oversees providers who  prescribe opioids to Medicare Part D beneficiaries through its contractor,  NBI MEDIC, and the Part D plan sponsors.", "NBI MEDIC\u2019s data analyses to identify outlier providers. CMS requires  NBI MEDIC to identify providers who prescribe high amounts of  Schedule II drugs, which include but are not limited to opioids. Using  prescription drug data, NBI MEDIC conducts a peer comparison of  providers\u2019 prescribing practices to identify outlier providers\u2014the  highest prescribers of Schedule II drugs. NBI MEDIC reports the  results to CMS.", "NBI MEDIC\u2019s other projects. NBI MEDIC gathers and analyzes data  on Medicare Part C and Part D, including projects using the Predictive  Learning Analytics Tracking Outcome (PLATO) system. According  to NBI MEDIC officials, these PLATO projects seek to identify  potential fraud by examining data on provider behaviors.", "NBI MEDIC\u2019s investigations to identify fraud, waste, and abuse. NBI  MEDIC officials conduct investigations to assist CMS in identifying  cases of potential fraud, waste, and abuse among providers for  Medicare Part C and Part D. The investigations are prompted by  complaints from plan sponsors; suspected fraud, waste, or abuse  reported to NBI MEDIC\u2019s call center; NBI MEDIC\u2019s analysis of outlier  providers; or from one of its other data analysis projects.", "NBI MEDIC\u2019s referrals. After identifying providers engaged in potential  fraudulent overprescribing, NBI MEDIC officials said they may refer  cases to law enforcement agencies or the HHS-OIG for further  investigation and potential prosecution.", "Plan sponsors\u2019 monitoring of providers. CMS requires all plan  sponsors to adopt and implement an effective compliance program,  which must include measures to prevent, detect, and correct Part C or  Part D program noncompliance, as well as fraud, waste, and abuse.  CMS\u2019s guidance focuses broadly on prescription drugs, and does not  specifically address opioids.", "Our report concluded that although these efforts provide valuable  information, CMS lacks all the information necessary to adequately  oversee opioid prescribing. CMS\u2019s oversight actions focus broadly on  Schedule II drugs rather than specifically on opioids. For example, NBI  MEDIC\u2019s analyses to identify outlier providers do not indicate the extent to  which they may be overprescribing opioids specifically. According to CMS  officials, they direct NBI MEDIC to focus on Schedule II drugs, because  these drugs have a high potential for abuse, whether they are opioids or  other drugs. However, without specifically identifying opioids in these  analyses\u2014or an alternate source of data\u2014CMS lacks data on providers  who prescribe high amounts of opioids, and therefore cannot assess  progress toward meeting its goals related to reducing opioid use, which  would be consistent with federal internal control standards. Federal  internal control standards require agencies to conduct monitoring  activities and to use quality information to achieve objectives and address  risks. As a result, we recommended that CMS require NBI MEDIC to  gather separate data on providers who prescribe high amounts of opioids.  This would allow CMS to better identify those providers who are  inappropriately and potentially fraudulently overprescribing opioids. HHS  agreed, and noted that it intends to work with NBI MEDIC to identify  trends in outlier prescribers of opioids.", "Our report also found that CMS also lacks key information necessary for  oversight of opioid prescribing, because it does not require plan sponsors  to report to NBI MEDIC or CMS cases of fraud, waste, and abuse; cases  of overprescribing; or any actions taken against providers. Plan  sponsors collect information on cases of fraud, waste, and abuse, and  can choose to report this information to NBI MEDIC or CMS. While CMS  receives information from plan sponsors who voluntarily report their  actions, it does not know the full extent to which plan sponsors have  identified providers who prescribe high amounts of opioids, or the full  extent to which sponsors have taken action to reduce overprescribing.  We concluded that without this information, it is difficult for CMS to assess  progress in this area, which would be consistent with federal internal  control standards. In our report, we recommended that CMS require plan  sponsors to report on investigations and other actions taken related to  providers who prescribe high amounts of opioids. HHS did not concur  with this recommendation. HHS noted that plan sponsors have the  responsibility to detect and prevent fraud, waste, and abuse, and that  CMS reviews cases when it conducts audits. HHS also stated that it  seeks to balance requirements on plan sponsors when considering new  regulatory requirements. However, without complete reporting\u2014such as  reporting from all plan sponsors on the actions they take to reduce  overprescribing\u2014we believe that CMS is missing key information that  could help assess progress in this area. Due to the importance of this  information for achieving the agency\u2019s goals, we continue to believe that  CMS should require plan sponsors to report on the actions they take to  reduce overprescribing.  - - - - -  In conclusion, a large number of Medicare Part D beneficiaries use  potentially harmful levels of prescription opioids, and reducing the  inappropriate prescribing of these drugs is a key part of CMS\u2019s strategy to  decrease the risk of opioid use disorder, overdoses, and deaths. Despite  working to identify and decrease egregious opioid use behavior\u2014such as  doctor shopping\u2014among Medicare Part D beneficiaries, CMS lacks the  necessary information to effectively determine the full number of  beneficiaries at risk of harm, as well as other information that could help  CMS assess whether its efforts to reduce opioid overprescribing are  effective. It is important that health care providers help patients to receive  appropriate pain treatment, including opioids, based on the consideration  of benefits and risks. Access to information on the risks that Medicare  patients face from inappropriate or poorly monitored prescriptions, as well  as information on providers who may be inappropriately prescribing  opioids, could help CMS as it works to improve care.", "Chairman Jenkins, Ranking Member Lewis, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgements", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact me at (202) 512-7114 or CurdaE@gao.gov.  Contact points for our Office of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other individuals  who made key contributions to this testimony include Will Simerl  (Assistant Director), Carolyn Feis Korman (Analyst-in-Charge), Amy  Andresen, Drew Long, Samantha Pawlak, Vikki Porter, and Emily Wilson.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["What can Medicare do to help address the nation's opioid crisis?", "We've previously found problems such as \"doctor shopping\" and questionable prescribing practices in Medicare's prescription drug benefits. With 14.4 million people receiving at least one opioid prescription through Medicare in 2016, reducing opioid overprescribing could make a difference.", "We looked at Medicare's efforts to reduce inappropriate opioid prescribing, and we revisit our analysis in this testimony. We suggested ways to help Medicare collect information on doctor investigations and at-risk beneficiaries that could help it determine whether its efforts are working."]}
{"id": "GAO-17-789", "url": "https://www.gao.gov/products/GAO-17-789", "title": "Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training", "published_date": "2017-09-26T00:00:00", "released_date": "2017-09-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Navy and Marine Corps have identified a need to improve their ability to conduct amphibious operations\u2014an operation launched from the sea by an amphibious force.", "Senate and House reports accompanying bills for the National Defense Authorization Act for Fiscal Year 2017 included provisions for GAO to review Navy and Marine Corps training. This report examines the extent to which (1) the Navy and Marine Corps have completed training for amphibious operations priorities and taken steps to mitigate any training shortfalls, (2) these services' efforts to improve naval integration for amphibious operations incorporate leading collaboration practices, and (3) the Marine Corps has integrated selected virtual training devices into operational training. GAO analyzed training initiatives; interviewed a nongeneralizable sample of officials from 23 units that were selected based on their training plans; analyzed training completion data; and selected a nongeneralizable sample of six virtual training devices to review based on factors such as target audience.", "This is a public version of a classified report GAO issued in August 2017. Information that DOD deemed classified has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["Navy and Marine Corps units that are deploying as part of an Amphibious Ready Group and Marine Expeditionary Unit (ARG-MEU) completed their required training for amphibious operations, but other Marine Corps units have been limited in their ability to conduct training for other amphibious operations\u2013related priorities. GAO found that several factors, to include the decline in the fleet of the Navy's amphibious ships from 62 in 1990 to 31 today limited the ability of Marine Corps units to conduct training for other priorities, such as recurring training for home-station units (see figure). As a result, training completion for amphibious operations was low for some but not all Marine Corps units from fiscal years 2014 through 2016. The services have taken steps to address amphibious training shortfalls, such as more comprehensively determining units that require training. However, these efforts are incomplete because the services do not have an approach to prioritize available training resources, evaluate training resource alternatives, and monitor progress towards achieving priorities. Thus, the services are not well positioned to mitigate any training shortfalls.", "The Navy and Marine Corps have taken some steps to improve coordination between the two services, but have not fully incorporated leading collaboration practices to improve integration of the two services\u2014naval integration\u2014for amphibious operations. For example, the Navy and Marine Corps have not defined and articulated common outcomes for naval integration that would help them align efforts to maximize training opportunities for amphibious operations.", "The Marine Corps has taken steps to better integrate virtual training devices into operational training, but gaps remain in its process to develop and use them. GAO found that for selected virtual training devices, the Marine Corps did not conduct front-end analysis that considered key factors, such as the specific training tasks that a device would accomplish; consider device usage data to support its investment decisions; or evaluate the effectiveness of existing virtual training devices because of weaknesses in the service's guidance. As a result, the Marine Corps risks investing in devices that are not cost-effective and whose value to operational training is undetermined."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Navy and Marine Corps develop an approach for amphibious operations training and define and articulate common outcomes for naval integration; and that the Marine Corps develop guidance for the development and use of its virtual training devices. The Department of Defense concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Navy and the U.S. Marine Corps (collectively referred to as U.S.  naval forces) maintain forces that are capable of conducting an  amphibious operation\u2014a military operation that is launched from the sea  by an amphibious force, embarked in ships or craft, with the primary  purpose of introducing a landing force ashore to accomplish the assigned  mission. According to the Department of Defense (DOD), the future  security environment will require forces to train across the full range of  military operations\u2014including types of operations that have not been  prioritized in recent years, such as amphibious operations. However, over  the last 15 years, deployments to the Middle East and Afghanistan have  required U.S. naval forces to focus training on preparing for success in  stability and counterinsurgency operations, while limiting training in  amphibious operations, among other areas. To reinvigorate the ability of  U.S. naval forces to fight effectively in an amphibious environment,  among other areas, strategic guidance such as the Navy\u2019s A Design for  Maintaining Maritime Superiority and the Marine Corps Operating  Concept has established goals to better integrate and sufficiently train  forces for amphibious operations.", "Preparing to train forces for amphibious operations requires integration  between the Navy and Marine Corps, and significant resources. For  example, the services must schedule amphibious ships to be used for  training, develop operational concepts, and design and execute  exercises. Training for amphibious operations also requires resources,  including access to Navy ships and support craft, as well as an adequate  amount of range space to realistically portray force movements and to  conduct live-fire training exercises. However, certain resources for  amphibious training are constrained. For example, the number of  amphibious ships in the Navy\u2019s fleet has been in decline, dropping from  62 in 1990 to 31 today.", "The Marine Corps has stated that the use of live, virtual, and constructive  training could help overcome some of the limitations of training in a live- only environment, while sufficiently replicating a complex operational  environment. However, we have previously reported on several factors  that have affected DOD\u2019s ability to efficiently and effectively integrate  virtual training devices into training plans. In 2013, for example, we found  that the Marine Corps lacked key performance and cost information that  would enhance its ability to determine the optimal mix of live and virtual  training and prioritize related investments. We recommended that the  Marine Corps develop metrics and a methodology to compare the costs  of live versus virtual training. In response, the Marine Corps conducted an  assessment to identify which of its virtual training devices could support  unit-level training. We discuss this and other actions the Marine Corps  has taken related to virtual training later in this report.", "Additionally, in 2016 we reported that the Army and the Air Force had not  fully integrated the development and sustainment of their respective  virtual training devices with service-wide training requirements and  strategies because their management approaches are fragmented. We  recommended that the Army update its policies for virtual training devices  to conduct additional front-end planning; define the process for analyzing  the effectiveness of its devices; and better integrate the devices into  training strategies. We also recommended that the Air Force develop a  risk-based investment strategy that identifies and prioritizes capability  needs and includes a timeline for addressing them. In response, DOD  has identified some actions the Army and Air Force are taking that would  improve the management of virtual training programs and address our  recommendations once fully implemented.", "Both the Senate and House reports accompanying bills for the National  Defense Authorization Act for Fiscal Year 2017 included provisions for us  to review Navy and Marine Corps training requirements. This report  examines the extent to which (1) the Navy and Marine Corps have  completed training for amphibious operations priorities and taken steps to  mitigate any training shortfalls, (2) the Navy\u2019s and Marine Corps\u2019 efforts to  improve naval integration for amphibious operations incorporate leading  collaboration practices, and (3) the Marine Corps has integrated selected  virtual training devices into its operational training.", "This report is a public version of a classified report that we issued in  August 2017. DOD deemed some of the information in our August report  to be classified, which must be protected from loss, compromise, or  inadvertent disclosure. Therefore, this report omits classified information  on select Marine Corps units\u2019 ability to complete training for amphibious  operations. Although the information provided in this report is more  limited, the report addresses the same objectives as the classified report  and uses the same methodology.", "To determine the extent to which the Navy and Marine Corps have  completed training for amphibious operations priorities and taken steps to  mitigate any training shortfalls, we analyzed unit-level readiness data and  deployment certification reports over the most recent 3-year period\u2014from  fiscal years 2014 through 2016\u2014and compared those data against the  services\u2019 training requirements. We analyzed 3 years of training data  because training requirements for Marine Corps units are reviewed and  updated on a 3-year cycle. We performed data-reliability procedures on  the unit-level readiness data by comparing the data against related  documentation and surveying knowledgeable officials on controls over  reporting systems, and determined that the data presented in our findings  were sufficiently reliable for the purposes of this report. We interviewed  Navy and Marine Corps officials to discuss amphibious operations  training priorities and any factors that limited training for amphibious  operations. We selected a nongeneralizable sample of Marine Corps  units to speak with in order to interview geographically dispersed units.  We analyzed data on requests for amphibious ships to support Marine  Corps training and assessed the reliability of data by speaking with  knowledgeable officials, and determined they were sufficiently reliable for  the purposes of presenting the number of actual requests submitted and  fulfilled. In addition, we reviewed processes and initiatives established by  the Navy and Marine Corps to identify and assess training shortfalls for  amphibious operations and evaluated these processes and initiatives  against practices identified in our prior work on strategic training, such as  the need to prioritize available resources to support an agency\u2019s mission  and goals; and risk management, such as evaluating and selecting  alternatives, and monitoring the progress made and the results achieved,  in an effort to address operational capability gaps.", "To determine the extent to which the Navy\u2019s and Marine Corps\u2019 efforts to  improve naval integration for amphibious operations incorporate leading  collaboration practices, we reviewed Navy and Marine Corps documents,  including A Cooperative Strategy for 21st Century Seapower and the  Marine Corps Operating Concept, that discuss the goal of improving  naval integration. We also reviewed mechanisms that have been  established to coordinate training, observed a working group focused on  amphibious operations, and interviewed officials across both services to  discuss efforts to improve naval integration. We assessed the extent to  which the Navy\u2019s and Marine Corps\u2019 efforts to improve naval integration  have followed applicable leading practices for collaboration that we have  identified in our prior work. Specifically, we have identified eight practices  described in our prior work that can help enhance and sustain  collaboration. We selected seven of the eight practices most relevant to  the Navy\u2019s and Marine Corps\u2019 collaborative efforts to improve naval  integration.", "To determine the extent to which the Marine Corps has integrated  selected virtual training devices into its operational training, we collected  information on the development, use, and evaluation of virtual training  devices and their integration into training strategies. We focused on the  Marine Corps\u2019 integration of virtual training devices into operational  training because the Navy does not have virtual training devices that  simulate amphibious operations, including ship-to-shore movement,  according to Navy officials. We selected a nongeneralizable sample of  six virtual training devices that support command and ground-based units  based on factors such as the device\u2019s applicability to amphibious  operations training, location, and type of training tasks (individual or  collective training) for which the devices are used. We reviewed  documentation on actions the Marine Corps has taken to incorporate the  selected devices into operational training and assessed the extent to  which these actions followed DOD training strategy and our leading  practices for managing strategic training. Further details on our scope  and methodology can be found in appendix I.", "The performance audit upon which this report is based was conducted  from May 2016 to August 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DOD from August 2017 to September 2017 to  prepare this unclassified version of the original classified report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Naval Forces Involved in Amphibious Operations", "paragraphs": ["An amphibious operation is a military operation launched from the sea by  an amphibious force, embarked in ships or craft, with the primary purpose  of introducing a landing force ashore to accomplish an assigned  mission. An amphibious force is comprised of an (1) amphibious task  force and (2) landing force together with other forces that are trained,  organized, and equipped for amphibious operations. The amphibious task  force is a group of Navy amphibious ships, most frequently deployed as  an Amphibious Ready Group (ARG). The landing force is a Marine Air- Ground Task Force\u2014which includes certain elements, such as command,  aviation, ground, and logistics\u2014embarked aboard the Navy amphibious  ships. A Marine Expeditionary Unit (MEU) is the most-commonly  deployed Marine Air-Ground Task Force. Together, this amphibious force  is referred to as an ARG-MEU.", "The Navy\u2019s amphibious ships are part of its surface force. An ARG  consists of a minimum of three amphibious ships, typically an amphibious  assault ship, an amphibious transport dock ship, and an amphibious dock  landing ship. Figure 1 shows the current number of amphibious ships by  class and a description of their capabilities.", "The primary function of amphibious ships is to provide transport to  Marines and their equipment and supplies. The ARG includes an  amphibious squadron that is comprised of a squadron staff, tactical air  control squadron detachment, and fleet surgical team. This task  organization also includes a naval support element that is comprised of a  helicopter squadron for search and rescue and antisurface warfare, two  landing craft detachments for cargo lift, and a beachmaster unit  detachment to control beach traffic.", "An MEU consists of around 2,000 Marines, their aircraft, their landing  craft, their combat equipment, and about 15 days\u2019 worth of supplies. The  MEU includes a standing command element; a ground element  consisting of a battalion landing team; an aviation element consisting of a  composite aviation squadron of multiple types of aircraft; and a logistics  element consisting of a combat logistics battalion. Figure 2 provides an  overview of the components of a standard ARG-MEU.", "An amphibious force can be scaled to include a larger amphibious task  force, such as an Expeditionary Strike Group, and a larger landing force,  such as a Marine Expeditionary Brigade or Marine Expeditionary Force (MEF) for larger operations. A Marine Expeditionary Brigade is comprised  of 3,000 to 20,000 personnel and is organized to respond to a full range  of crises, such as forcible entry and humanitarian assistance. A MEF is  the largest standing Marine Air-Ground Task Force and the principal  Marine Corps warfighting organization. Each MEF consists of 20,000 to  90,000 Marines. MEFs are used in major theater war and other missions  across the range of military operations. There are three standing MEFs\u2014I  MEF at Camp Pendleton, California; II MEF at Camp Lejeune, North  Carolina; and III MEF in Okinawa, Japan."], "subsections": []}, {"section_title": "Navy and Marine Corps Training for Amphibious Operations", "paragraphs": ["Navy ships train to a list of mission-essential tasks that are assigned  based on the ship\u2019s required operational capabilities and projected  operational environments. Most surface combatants, including cruisers,  destroyers, and all amphibious ships, have mission-essential tasks  related to amphibious operations. The Navy uses a phased approach to  training, known as the Fleet Response Training Plan. The training plan  for amphibious ships is broken up into five phases: maintenance, basic,  advanced, integrated, and sustainment. The maintenance phase is  focused on the completion of ship maintenance, with a secondary focus  on individual and team training. The basic phase focuses on development  of core capabilities and skills through the completion of basic-level  inspections, assessments, and training requirements, among other things.  This phase can include certification in areas such as mobility,  communications, amphibious well-deck operations, aviation operations,  and warfare training. The basic phase of training requires limited Marine  Corps involvement\u2014mainly to certify amphibious ships for well-deck and  flight-deck operations. The advanced phase focuses on advanced  tactical training, including amphibious planning. The integrated phase is  where individual units and staffs are aggregated into an Amphibious  Ready Group (ARG) and train with an embarked MEU or other combat  units. The sustainment phase includes training to sustain core skills and  provides an additional opportunity for training with Marine Corps units,  when possible.", "Marine Corps units train to accomplish a set of mission-essential tasks for  the designed capabilities of the unit. For example, the mission-essential  tasks for a Marine Corps infantry battalion include amphibious operations,  offensive operations, defensive operations, and stability operations. Many  Marine Corps units within the command, aviation, ground, and logistics  elements have an amphibious-related mission-essential task. The Marine  Corps uses a building-block approach to accomplish training, progressing  from individual through collective training. For example, an assault  amphibian vehicle battalion will progress through foundational, individual,  and basic amphibious training\u2014such as waterborne movement and ship  familiarization\u2014to advanced amphibious training, such as live training  involving ship-to-shore movement conducted under realistic conditions.", "Marine Corps unit commanders use Training and Readiness manuals to  help develop their training plans. Training and Readiness manuals  describe the training events, frequency of training required to sustain  skills, and the conditions and standards that a unit must accomplish to be  certified in a mission-essential task. To be certified in the mission- essential task of amphibious operations, Marine Corps units must train to  a standard that may require the use of amphibious ships. For example,  ground units with amphibious-related mission-essential tasks will not be  certified until live training involving sea-based operations and ship-to- shore movement has been conducted under realistic conditions. Similarly,  for aviation squadrons, training for amphibious operations (called sea- based aviation operations) will not be certified until live training involving  sea-based operations has been conducted under realistic conditions,  including aviation operations from an amphibious platform. Similar types  of units, such as all infantry battalions, may train on the same mission- essential tasks. However, unit commanders are ultimately responsible for  their units\u2019 training, and a variety of factors can lead commanders to  adopt different approaches to training, such as the units\u2019 assigned  missions or deployment locations.", "Marine Corps units that are scheduled to deploy as part of an ARG-MEU  will follow a standardized 6-month predeployment training program that  gradually builds collective skill sets over three phases, as depicted in  figure 3."], "subsections": []}, {"section_title": "Marine Corps\u2019 Use of Virtual Training Devices", "paragraphs": ["The Marine Corps\u2019 use of virtual training devices has increased over time.  Virtual training devices were first incorporated into training for the aviation  community, which has used simulators for more than half a century. The  Marine Corps\u2019 ground units did not begin using simulators and  simulations until later. Specifically, until the 1980s, training in the ground  community was primarily live training. Further advances in technology  resulted in the acquisition of simulators and simulations with additional  capabilities designed to help individual Marines and units acquire and  refine skills through more concentrated and repetitive training. For  example, the Marine Corps began using devices that allowed individual  Marines to conduct training in basic and advanced marksmanship and  weapons employment tactics. More recently, during operations in Iraq  and Afghanistan, the Marine Corps introduced a number of new virtual  training devices to prepare Marines for conditions on the ground and for  emerging threats. For example, to provide initial and sustainment driver  training, the Marine Corps began using simulators that can be  reconfigured to replicate a variety of vehicles. In addition, in response to  an increase in vehicle rollovers, the Marine Corps began using egress  trainers to train Marines to safely evacuate their vehicles. The Marine  Corps has also developed virtual training devices that can be used to  train Marines in collective training, such as amphibious operations. For  example, the Marine Air-Ground Task Force Tactical Warfare Simulation  is a constructive simulation that provides training on planning and tactical  decision making for the Marine Corps\u2019 command element. See figure 4 for  a description of examples of Marine Corps devices that can be used for  individual through collective training."], "subsections": []}]}, {"section_title": "Navy and Marine Corps Units Completed Training for Certain Amphibious Operations Priorities but Not Others, and Efforts to Mitigate Training Shortfalls Are Incomplete", "paragraphs": ["Navy and Marine Corps units that are deploying as part of an ARG-MEU  completed their required training for amphibious operations, but several  factors have limited the ability of Marine Corps units to conduct training  for other amphibious operations\u2013related priorities. The Navy and Marine  Corps have taken steps to identify and address amphibious training  shortfalls, but their efforts to mitigate these shortfalls have not prioritized  available training resources, systematically evaluated among potential  training resource alternatives to accomplish the services\u2019 amphibious  operations training priorities, or monitored progress toward achieving the  priorities."], "subsections": [{"section_title": "Navy and Marine Corps ARG-MEU Deploying Units Completed Required Training for Amphibious Operations, but Several Factors Have Limited Training for Other Marine Corps Amphibious Operations Priorities", "paragraphs": ["Navy and Marine Corps units deploying as part of ARG-MEUs have  completed required training for amphibious operations, but the Marine  Corps has been unable to consistently accomplish training for other  service amphibious operations priorities. We found that Navy amphibious  ships have completed training for amphibious operations. Specifically,  based on our review of deployment certification messages from 2014  through 2016, we found that each deploying Navy ARG completed  training for the amphibious operations mission in accordance with training  standards. Similarly, we found that each MEU completed all of its  mission-essential tasks that are required during the predeployment  training program. These mission-essential tasks cover areas such as  amphibious raid, amphibious assault, and noncombatant evacuation  operations, among other operations.", "However, while the Marine Corps has completed amphibious operations  training for the MEU, based on our review of unit-level readiness data  from fiscal year 2014 through 2016 we found that the service has been  unable to fully accomplish training for its other amphibious operations  priorities, which include home-station unit training to support contingency  requirements, service-level exercises, and experimentation and concept  development for amphibious operations. Specific details of these  shortfalls were omitted because the information is classified.", "Additionally, Marine Corps officials cited shortfalls in their ability to  conduct service-level exercises that train individuals and units on  amphibious operations-related skills, as well as provide opportunities to  conduct experimentation and concept development for amphibious  operations. In particular, officials responsible for planning and executing  these exercises told us that one of the biggest challenges is aligning  enough training resources, such as amphibious ships, to accurately  replicate a large-scale amphibious operation. For example, officials from  III MEF told us that the large-scale amphibious exercise Ssang Yong is  planned to be conducted every other year, but that the exercise requires  the availability and alignment of two ARG-MEUs in order to have enough  forces to conduct the exercise. These officials stated that this alignment  may only happen every 3 years, instead of every other year, as planned.  In addition, officials from I MEF and II MEF told us that their large-scale  amphibious exercises are intended to be a Marine Expeditionary  Brigade\u2013level training exercise, however, these exercises are typically  only able to include enough amphibious ships to support a MEU, while  the other forces must be simulated. Despite these limitations, Navy and  Marine Corps officials have identified these service-level exercises as a  critical training venue to support training for the Marine Expeditionary  Brigade command element and to rebuild the capability to command and  control forces participating in amphibious operations.", "Based on our analysis of interviews with 23 Marine Corps units, we found  that all 23 units cited the lack of available amphibious ships as the  primary factor limiting training for home-station units. The Navy\u2019s fleet of  amphibious ships has declined by half in the last 25 years, from 62 in  1990 to 31 today, with current shipbuilding plans calling for four additional  amphibious ships to be added by fiscal year 2024, increasing the total  number of amphibious ships to 35 (see fig. 5).", "Navy and Marine Corps officials noted a number of issues that can affect  the amount of training time that is available with the current amphibious  fleet. In particular, the current fleet of ships is in a continuous cycle of  maintenance, ARG-MEU predeployment training, and sustainment  periods, leaving little additional time for training with home-station units  and participation in service-level exercises. Navy officials told us that the  Optimized Fleet Response Plan may provide additional training  opportunities for Marine Corps units during the amphibious ships\u2019  sustainment periods. Given the availability of the current inventory of  amphibious ships, Marine Corps requests to the Navy for amphibious  ships and other craft have been difficult to fulfill. For example, data from I  MEF showed that the Navy was unable to fulfill 293 of 314 (93 percent) of  I MEF requests for Navy ship support for training in fiscal year 2016.  Similarly, data from II MEF showed that in fiscal year 2016 the Navy was  unable to fulfill 19 of 40 requests for ship services. We identified issues  with the completeness of this request data. Specifically, we found that the  data may not fully capture the Marine Corps\u2019 demand for amphibious  ships. As a result, this information may overstate the ability of the Navy to  fulfill these requests. We discuss these data-reliability issues further  below.", "Marine Corps officials from the 23 units we interviewed also cited other  factors that limit opportunities for amphibious operations training, such as  the following:", "Access to range space: Seventeen of 23 Marine Corps units we  interviewed identified access to range space as a factor that can limit  their ability to conduct amphibious operations training. Unit officials  told us that priority for training resources, including range access, is  given to units that will be part of a MEU deployment, leaving little  range time available for other units. In addition, unit officials told us  that the amount of range space available can affect the scope and  realism of the training that they are able to conduct. Training for  amphibious operations can require a large amount of range space,  because the operational area extends from the offshore waters onto  the landing beach and further inland. A complete range capability  requires maneuver space, tactical approaches, and air routes that  allow for maneuverability and evasive actions. However, officials from  II MEF told us that the size of the landing beach near Camp Lejeune,  North Carolina makes conducting beach-clearing operations  infeasible. Adequate ranges have been identified as a challenge  across DOD. For example, according to DOD\u2019s 2016 Report to  Congress on Sustainable Ranges, some Marine Corps installations  lack fully developed maneuver corridors, training areas, and airspace  to adequately support ground and air maneuver inland from landing  beaches.", "Maintenance delays, bad weather, and transit time: Ten of 23  Marine Corps units told us that changes to an amphibious ship\u2019s  schedule resulting from maintenance overruns or bad weather can  also reduce the time available for a ship to be used for training. In  addition, the transit time a ship needs to reach Marine Corps units can  further reduce the time available for training. This is a particular  challenge for II MEF units stationed in North Carolina and South  Carolina that train with amphibious ships stationed in Virginia and  Florida. According to II MEF officials, transit time to Marine Corps  units can take up to 18 hours in good weather, using up almost a full  day of available training time for transit.", "High pace of deployments: Five of 23 Marine Corps units told us  that the high pace of deployments and need to prepare for upcoming  deployments limited their opportunity to conduct training for  amphibious operations. For example, II MEF officials told us that an  infantry battalion that is scheduled to deploy as part of a Special  Purpose Marine Air-Ground Task Force to Africa generally does not  embark on an amphibious ship or have amphibious operations as part  of its assigned missions. As a result, the unit will likely not conduct  amphibious operations during its predeployment training."], "subsections": []}, {"section_title": "Efforts to Identify and Address Amphibious Training Shortfalls Lack Strategic Training and Risk-Management Practices", "paragraphs": ["The Navy and Marine Corps have taken some steps to mitigate the  training shortfall for their amphibious operations priorities, but these  efforts are incomplete because they have not prioritized available training  resources, systematically evaluated among potential training resource  alternatives to accomplish the services\u2019 amphibious operations training  priorities, or monitored progress toward achieving the priorities. The Navy  and Marine Corps are in the process of identifying (1) the amount of  amphibious operations capabilities and capacity that are needed to  achieve the services\u2019 wartime requirements, and (2) the training  resources and funding required to meet the amphibious operations- related training priorities. First, in December 2016, the Navy conducted a  force structure assessment that established a need for a fleet of 38  amphibious ships. Based on the assessment, the Chief of Naval  Operations and the Commandant of the Marine Corps determined that  increasing the Navy\u2019s amphibious fleet from a 31-ship to a 38-ship  amphibious fleet would allow the Marine Corps to meet its wartime needs  of having enough combined capacity to transport two Marine  Expeditionary Brigades. Specifically, a 38-ship fleet would provide 17  amphibious ships for each Marine Expeditionary Brigade, plus four  additional ships to account for ships that are unavailable due to  maintenance. According to Navy and Marine Corps officials, an increase  in the number of amphibious ships should create additional opportunities  for the Navy and Marine Corps to accomplish amphibious operations  training.", "Second, the Marine Corps has also recognized a need to improve the  capacity and experience of its forces to conduct amphibious operations  and is taking steps to identify the training resources and funding required  to meet its amphibious operations\u2013related training priorities. To  accomplish this task, in 2016 the Marine Corps initiated the Amphibious  Operations Training Requirements review. As a part of this review, the  Marine Corps has comprehensively determined units that require  amphibious operations training and is in the process of refining the  training and readiness manuals for each type of Marine Corps unit to  include an amphibious-related mission-essential task as appropriate, and  better emphasizing the types of conditions and standards for amphibious  training in the manuals. According to officials, as of May 2017, Marine  Corps Forces Command has reviewed the mission-essential tasks for 60  unit types and found 31 unit types already had a mission-essential task  for amphibious operations, while another 5 unit types required that an  amphibious-related mission-essential task be added. The review further  found that the other 24 unit types do not require a mission-essential task  for amphibious operations. In addition, the Marine Corps Training and  Education Command noted in its review that certain training standards  within the training manuals are being refined in order to distinguish  between levels of training accomplished. For example, for ground-based  units, such as infantry battalions, an additional training standard was  added for all amphibious-related mission-essential tasks that a unit would  not be considered both trained and certified unless live training using  amphibious ships has been conducted under realistic conditions.", "The Amphibious Operations Training Requirements review is also  intended to accomplish other actions to better define the services\u2019  amphibious operations training priorities, but these actions were  incomplete at the time of our review. Specifically, the review will also  establish an objective for the number of Marine Corps forces that must be  trained and ready to conduct amphibious operations at a given point in  time, and the amount of funding for ship steaming days that is required to  provide training for the services\u2019 amphibious operations priorities.  According to officials responsible for the Amphibious Operations Training  Requirements review, an outcome of the review is expected to be a  combined Navy and Marine Corps directive signed by the Chief of Naval  Operations and the Commandant of the Marine Corps that should provide  guidance to better define a naval objective for amphibious readiness and  required ship steaming days. Marine Corps officials estimated that the  issuance of the directive will be in the summer of 2017.", "With these two efforts, the Navy and Marine Corps have been proactive in  identifying the underlying problems with training for amphibious  operations, and their ongoing efforts indicate that addressing this training  shortfall is a key priority for the two services. In particular, the proposed  Navy and Marine Corps directive that will result from the Amphibious  Operation Training Requirements review should help establish a naval  objective for amphibious readiness with the corresponding units that need  to be trained and ready in amphibious operations, as well as a basis for  estimating the required amount of training resources, such as ship  steaming days, to meet amphibious operations training priorities. When  completed, the development of this directive is an important first step to  clearly identify the total resources needed for amphibious operations  training.", "However, the Navy\u2019s and Marine Corps\u2019 current approach for amphibious  operations training does not incorporate strategic training and leading  risk-management practices. Specifically, we found the following:", "The Marine Corps does not prioritize all available training  resources: Based on our prior work on strategic training, we found  that agencies need to align their training processes and available  resources to support outcomes related to the agency\u2019s missions and  goals, and that those resources should be prioritized so that the most- important training needs are addressed first. For certain units that  are scheduled to deploy as part of an ARG-MEU, the Navy and  Marine Corps have a formal training program that specifies the timing  and resource needs across all phases of the training, including the  number of days embarked on amphibious ships that the Navy and  Marine Corps need to complete their training events. Officials stated  that available training resources, including access to amphibious  ships for training, are prioritized for these units.", "However, for other Marine Corps units not scheduled for a MEU  deployment, officials described an ad hoc process to allocate any  remaining availabilities of amphibious ship training time among home- station units. Specifically, officials stated that the current process  identifies units that are available for training when an amphibious ship  becomes available rather than a process that aligns the next highest- priority units with available training resources. For example, officials at  Headquarters Marine Corps told us that the Navy will identify training  opportunities with amphibious ships at quarterly scheduling  conferences. The Marine Corps will fill these training opportunities  with units that are available to accomplish training during that period,  but not based on a process that identifies its highest-priority home- station units for training. Similarly, a senior officer with First Marine  Division told us that he would prioritize home-station units that have  gone the longest without conducting amphibious-related training,  which may not be the units with the highest priority for amphibious  operations training.", "The Navy and Marine Corps have recognized the need for  reinstituting a recurring training program for home-station units, but  efforts to implement such a program have not been started at the time  of our review. According to Navy officials, the Navy and Marine Corps  have had a recurring training program in the past to provide home- station units with amphibious operations training called the Type  Commander Amphibious Training series, or TCAT, but this program  was phased out 15 years ago with the implementation of the Fleet  Response Training Plan that is more focused on ARG-MEU training.  Navy and Marine Corps officials told us that reinstituting a similar  training program would allow the services to better prioritize training  resources and align units to achieve the services\u2019 proposed naval  objective for amphibious readiness. Without establishing a process to  prioritize available training resources for home-station units, the Navy  and Marine Corps cannot be certain that scarce training opportunities  are being aligned with their highest-priority needs.", "The Navy and Marine Corps do not systematically evaluate a full  range of training resource alternatives to achieve amphibious  operations training priorities: Our prior work on risk management  has found that evaluating and selecting alternatives are critical steps  for addressing operational capability gaps. Based on our interviews  with officials across the Marine Expeditionary Forces and review of  documentation, we identified a number of alternatives that could help  mitigate the risk to the services\u2019 amphibious capability due to limited  training opportunities. These alternatives include utilizing additional  training opportunities during an amphibious ship\u2019s basic phase of  training; using alternative platforms for training, such as Marine  Prepositioning Force ships, or the amphibious ships of allies; utilizing  smaller Navy craft or pier-side ships to meet training requirements;  and leveraging developmental and operational test events.", "However, the Navy and Marine Corps have not developed a  systematic approach to explore and incorporate selected training  resource alternatives into home-station training plans. Specifically,  officials told us that the combined Navy and Marine Corps directive  that is expected to be completed later this year will better define a  naval objective for amphibious readiness and the required training  resources to achieve it, and will provide guidance to the two services  to better identify training resource alternatives for home-station  training. Based on our review of briefing materials on the Amphibious  Operations Training Requirements review, however, we found that the  services have discussed using some training resource alternatives to  mitigate amphibious operations training shortfalls, such as pier-side  ships to minimize the required number of ship steaming days, but the  services have not systematically evaluated potential alternatives.  Marine Corps officials told us that fully evaluating resource  alternatives, particularly the use of simulated training and pier-side  ships, could allow for more amphibious training without the need for  additional steaming days. Fully exploring alternatives, such as utilizing  alterative platforms and pier-side ships, and incorporating a broader  range of training resource alternatives into training will be important as  the Navy and Marine Corps try to achieve their training priorities and  could help bridge the time gap until more amphibious ships are  introduced into the fleet.", "The Navy and Marine Corps have not developed a process or set  of metrics to monitor progress toward achieving its amphibious  operations training priorities and mitigating existing shortfalls:  Our prior work on risk management has found that monitoring the  progress made and results achieved are other critical steps for  addressing operational capability gaps. Marine Corps officials told  us that the service uses the readiness reporting system (Defense  Readiness Reporting System\u2014Marine Corps) to measure the  capabilities and capacity of its units to perform amphibious  operations. While this reporting system allows the Marine Corps to  assess the current readiness of units to perform the amphibious  operations mission-essential task\u2014an important measure\u2014the  system does not provide other information. For example, it does not  allow officials to assess the status of service-wide progress in  achieving its amphibious operations priorities or monitor efforts by the  Marine Expeditionary Forces in establishing comprehensive  amphibious operations training programs.", "Marine Corps officials told us that they may need to capture and track  additional information, such as the number of amphibious training  events scheduled and completed. However, as noted above, we  found that the Marine Corps does not capture complete data that  could be used for these assessments, such as demand for training  time with amphibious ships. For example, officials from I MEF told us  they do not capture the full demand for training time with Navy ships  because unit commanders will not always submit a request that they  believe is unlikely to be filled. In addition, these officials stated that  their requests are prescreened before being submitted to the Navy to  ensure that the requests align with known periods of available ship  time. As a result, requests for amphibious ships and crafts are supply- driven, instead of demand-driven, which could affect the services\u2019  ability to monitor progress in accomplishing unit training because an  underlying metric is incomplete. Establishing a process to monitor  progress in achieving amphibious operations training priorities will  better enable the Navy and Marine Corps to ensure that their efforts  are accomplishing the intended results and help assess the extent to  which the services have mitigated any amphibious operations training  shortfalls."], "subsections": []}]}, {"section_title": "More Comprehensively Incorporating Collaboration Practices Would Further Naval Integration Efforts for Amphibious Operations", "paragraphs": ["The Navy and Marine Corps have taken some steps to improve  coordination between the two services, but the services have not fully  incorporated leading collaboration practices that would help drive efforts  to improve naval integration for amphibious operations. Our prior work on  interagency collaboration has found that certain practices can help  enhance and sustain collaboration among federal agencies. These key  practices include (1) defining and articulating a common outcome; (2)  establishing mutually reinforcing or joint strategies; (3) identifying and  addressing needs by leveraging resources; (4) agreeing on roles and  responsibilities; (5) establishing compatible policies, procedures, systems,  and other means to operate across agency boundaries; (6) developing  mechanisms to monitor, evaluate, and report on results; and (7)  reinforcing agency accountability for collaborative efforts through plans  and reports, among others.", "Common outcomes and joint strategy: The Navy and Marine Corps  have issued strategic documents that discuss the importance of  improving naval integration, but the services have not developed a joint  strategy that defines and articulates common outcomes to achieve naval  integration. We have found that collaborative efforts require agency staff  working across agency lines to define and articulate the common  outcome or purpose they are seeking to achieve that is consistent with  their respective agency goals and mission. In addition, collaborating  agencies need to develop strategies that work in concert with those of  their partners. These strategies can help in aligning the partner agencies\u2019  activities, processes, and resources to accomplish common outcomes.  Further, joint strategies can benefit from establishing specific objectives,  related actions, and subtasks with measurable outcomes, target  audiences, and agency leads.", "Based on our review of Navy and Marine Corps strategic-level  documents, both services identify the importance of improving naval  integration, but these documents do not define and articulate outcomes  that are common among the services or identify actions and time frames  to achieve common outcomes that would be included a joint strategy.  Instead, the documents describe naval integration in varying ways,  including as a means to improve the capabilities of naval forces to  perform essential functions, such as sea control and maritime security;  exercise command and control for large-scale operations, including  amphibious operations; and establish concepts to conduct naval  operations in contested environments, among other areas. For example,  strategic documents developed by the Navy only broadly discuss naval  integration. In March 2015, the Department of the Navy issued an  updated version of A Cooperative Strategy for 21st Century Seapower.  This document discusses building the future naval force, including the  need to organize and equip the Marine Expeditionary Brigade to exercise  command and control of joint and multinational task forces for larger  operations and enable the MEF for larger operations. In January 2016,  the Department of the Navy published A Design for Maintaining Maritime  Superiority, stating the need to deepen operational relationships with  other services to include current and future planning, concept and  capability development, and assessment.", "Marine Corps strategic documents provide a more-detailed and  expansive list of areas for improved integration with the Navy, but do not  provide guidance on how to achieve those areas. For example, in March  2014, the Marine Corps issued Expeditionary Force 21, which describes  the need to increase naval integration, including operational integration  between the Marine Expeditionary Brigade and the Navy\u2019s Expeditionary  Strike Group. Further, in September 2016 the Marine Corps issued a  Marine Corps Operating Concept that establishes five tasks needed for  the Marine Corps to build its future force, including integrating the naval  force to fight at and from the sea.", "According to Navy and Marine Corps officials, naval integration is a broad  term, has different meanings across various service organizations, and is  not commonly understood. For example, officials told us that the services  have identified the need to develop more-precise language around the  term naval integration and articulate common outcomes to create a more- integrated approach to develop naval capabilities. Another senior Marine  Corps training official told us that clear guidance is needed on how to  define outcomes for naval integration for Navy and Marine Corps  command-level staff. In particular, the official stated that without guidance  it is unclear how an integrated staff should be composed\u2014whether as two  separate Navy and Marine Corps command staffs that should work  together, or as one staff composed of both Navy and Marine Corps  personnel. The continuing lack of common outcomes and a joint strategy  could limit the Navy and Marine Corps ability to achieve their goals for  naval integration. Further, joint strategies for improving naval integration  could help ensure that services efforts are aligned to maximize available  training opportunities and resources.", "Compatible policies, procedures, and systems: The Navy and Marine  Corps have established several mechanisms to better coordinate their  respective capabilities for amphibious operations training, but have not  fully established compatible policies, procedures, and systems to foster  and build naval integration. We have found that agencies need to address  the compatibility of standards, policies, procedures, and data systems  that will be used in the collaborative effort. These policies can be used  to provide clarity about roles and responsibilities, including how the  collaborative effort will be led.", "The Marine Corps has established a working group that provides a forum  for collaboration for amphibious operations. Specifically, Marine Corps  Forces Command established a Maritime Working Group to develop and  manage a continuing Navy\u2013Marine Corps quarterly collaborative process  that is comprised of officials from the services\u2019 headquarters,  components, and operating forces. According to its mission statement,  the Maritime Working Group is intended to align naval amphibious  exercise planning to inform force development, war games,  experimentation, and coalition participation in order to advance concepts;  influence doctrine; inform naval exercise design and sourcing; inform  capabilities development; and increase naval warfighting readiness.  Based on our observation of the Maritime Working Group in September  2016, we found that the forum covered a broad range of topics including  exercise prioritization, experimentation, and planning for future Navy  exercises. Following the meeting, a summary of the topics discussed was  provided to all participants as well as follow-on actions to be completed.", "However, we found that the Navy and Marine Corps have not fully  established compatible policies and procedures, such as common training  tasks and standards and agreed-upon roles and responsibilities, to  ensure their efforts to achieve improved naval integration are consistent  and sustained. For example, on the West Coast, the Navy and Marine  Corps organizations 3rd Fleet and I MEF have issued guidance that  formalizes policies that assign 1st Marine Expeditionary Brigade and  Expeditionary Strike Group 3 with the responsibilities to conduct joint  training. This guidance addresses the importance of Navy and Marine  Corps interoperability by formalizing procedures, assigning responsibility,  and providing general policy regarding training certification standards for  these units. Officials from Fleet Forces Command noted that there is not  similar guidance for East Coast\u2013based units for the 2nd Marine  Expeditionary Brigade and Expeditionary Strike Group 2. According to a  Navy inspection report, Fleet Forces Command officials stated that they  did not institute a deployment certification program for Expeditionary  Strike Group 2 because of changing priorities at the command. As a  result, the services lack clarity on the roles and responsibilities for these  organizations\u2014another key collaboration practice\u2014that is needed to  ensure these improvements are prioritized to further and sustain the  collaborative effort.", "Both the Navy and Marine Corps have also identified areas where more- compatible training is needed to improve the skills and abilities of naval  forces to perform certain missions. For example, Marine Corps training  guidance from III MEF identifies a number of areas where Marine Corps  units could improve collective naval capabilities by expanding training  with the Navy, including areas such as joint maneuver, seizure and  defense of forward naval bases, and facilitating maritime maneuver,  among others. The Marine Corps Operating Concept also identifies other  areas where integration with the Navy should be enhanced, including for  intelligence, surveillance, and reconnaissance; operating in a distributed  or disaggregated environment; and employment of fifth-generation  aviation, such as the F-35. However, the services have been limited in  their efforts to improve naval integration in these areas because they  have not established compatible training tasks and standards that would  institutionalize Navy and Marine Corps unit-level training requirements.  Marine Corps officials told us that without compatible training tasks and  standards, there is not a mechanism to force continued integration  between the services outside of forces deploying as part of an ARG-MEU  to help develop integrated naval capabilities.", "We also found that some of the Navy and Marine Corps\u2019 systems for  managing and conducting integrated training are incompatible, leading to  inefficiencies in the process to manage training events involving Navy and  Marine Corps units. For example, the Marine Corps has developed a  system called Playbook to help align Navy and Marine Corps resources  for training exercises that have been scheduled through the Force  Synchronization process. At the time of our review, the Marine Corps  was in the process of inputting data for all of its scheduled training  exercises, including experiments and war games, into the system in order  to align training resources and capabilities to its highest priority exercises  and help build a training and exercise plan through 2020. However, the  Navy uses several other data systems to track and capture its training  resource requirements, and these systems are incompatible with  Playbook. The lack of interface requires the Marine Corps to manually  input and reconcile Navy information into its system. This can cause  certain inefficiencies in arranging training. For example, officials from III  MEF told us that adjustments to the Navy\u2019s maintenance schedule for  amphibious ships are not always communicated in advance, which can  create a misalignment in the availability of amphibious ships and Marine  Corps units to conduct training exercises. The Marine Corps has  identified the need to define the Navy\u2019s use of Playbook and explore a  potential interface with Navy systems, but, as of May 2017, officials said  that any evaluation, including potential cost-benefit analyses for  addressing the interoperability issues, had not yet taken place. By having  incompatible systems to schedule training, the services remain at risk of  missing opportunities to maximize training opportunities for amphibious  operations.", "Leverage resources to maximize training opportunities: The Navy  and Marine Corps have identified certain opportunities where the two  services can better leverage resources to conduct additional amphibious  operations training together, but these opportunities have not been fully  maximized. We have found that collaborating agencies should look for  opportunities to address needs by leveraging each other\u2019s resources,  thus obtaining additional benefits that would not be available if they were  working separately. Marine Corps Forces Command and Fleet Forces  Command, as well as Marine Corps Forces Pacific and Pacific Fleet,  have each established a Campaign Plan for Amphibious Operations  Training. The purpose of these plans is to align resources for larger,  service-level exercises for amphibious operations over a 5-year period.  The goal of these exercises is to develop operational proficiency for a  Marine Expeditionary Brigade\u2013level contingency or crisis, but the specific  focus of the exercise can change from year to year. For example, in 2017  the Bold Alligator exercise will focus on joint forcible entry operations and  anti-access / area denial, whereas in prior years the focus has been on  other operational areas, such as crisis response. We found that the Navy  and Marine Corps also use mechanisms, such as scheduling  conferences, to coordinate and prioritize requests for ship services for  these exercises, as well as for other training events.", "The services are looking to better leverage available training resources  for amphibious operations, but enhancing their collaborative efforts could  take greater advantage of potential training opportunities. For example,  Navy officials have stated that the Surface Warfare Advanced Tactical  Training initiative could provide an additional training opportunity for  Marine Corps units to train with Navy ships. This initiative is intended to  provide amphibious ships with a period of training focused on advanced  tactical training, such as defense of the amphibious task force, and  multiunit ship-to-shore movement, among other objectives. According to a  Navy official responsible for the development of this initiative, its primary  focus is on advanced tactical training for Navy personnel, but greater  integration with the Marine Corps may be needed to accomplish certain  training objectives, such as air defense. Further, it would provide an  opportunity for the Marine Corps to achieve additional amphibious  operations training. However, according to this official, the Marine Corps  did not provide input into how its capabilities could be fully incorporated  into the Navy\u2019s advanced tactics training or identify potential opportunities  to maximize amphibious operations training for both services.", "Further, the Marine Corps officials told us that there are opportunities to  use transit time during Navy community-relations events, such as port  visits, to conduct amphibious training for home-station units, but these  events are not always identified with enough lead time to take full  advantage of the training opportunity. According to officials at II MEF,  Marine Corps units typically need at least 6 months of advance notice to  align their forces and equipment for the potential training opportunity.  Further, Marine Corps officials told us that the Navy does not always have  a fully trained staff with the amphibious ship during these events, which  can limit the comprehensiveness of the training that Marine Corps units  are able to accomplish. These officials also stated that the flight deck or  well deck may not be certified for use at the time of these community- relations events, further limiting their utility for Marine Corps training.  Despite these limitations, Marine Corps officials have told us that these  events can still provide training benefits, such as ship familiarization for  Marines, but that these opportunities still require advanced notice. By  improving coordination over its training resources, the services will be  better positioned to take full advantage of these scarce training  opportunities.", "Mechanisms to monitor results and reinforce accountability: The  Navy and Marine Corps have processes to evaluate and report on the  results of specific training exercises, but have not developed mechanisms  to monitor, evaluate, and report on results nor jointly reinforced  accountability for their naval integration efforts through agency plans and  reports. We have found that agencies need to monitor and evaluate their  efforts to enable them to identify areas for improvement and help decision  makers obtain feedback for improving operational effectiveness.  Further, agency plans and reports can reinforce accountability by aligning  goals and strategies with the collaborative effort.", "For large-scale exercises, such as Bold Alligator, the Marine Corps  conducts reviews that identify actions that should be sustained moving  forward, as well as areas that should be improved in future exercises,  including issues related to naval integration. However, the services have  not established other processes or mechanisms to monitor, evaluate, and  report on results that are needed to measure progress in achieving  service-level goals for naval integration and to align efforts to maximize  training opportunities for amphibious operations. For example, the Marine  Corps does not have a process to monitor and report on results for the  critical tasks identified in its Marine Corps Operating Concept, including  those tasks related to naval integration, such as integrating command  structures, developing concepts for littoral operations in a contested  environment, and conducting expeditionary advanced base operations.  Monitoring progress against these tasks, as well as common outcomes,  once defined, should help the Navy and Marine Corps track progress  toward achieving improved naval integration.", "While the Navy and Marine Corps have taken some steps to improve  naval integration in recent years, these efforts are still in the early stages.  In particular, Navy and Marine Corps officials stated that the services  have not yet defined or articulated common outcomes needed to achieve  naval integration because they have not determined who would be  responsible for this effort or when to begin its development. Defining and  articulating common outcomes for naval integration would allow the  services to more effectively incorporate other leading collaboration  practices aimed at those common outcomes, to the extent deemed  appropriate, such as developing a joint strategy, establishing compatible  policies, leveraging resources, and monitoring results."], "subsections": []}, {"section_title": "The Marine Corps Has Not Fully Integrated Its Virtual Training Devices into Operational Training", "paragraphs": ["The Marine Corps has taken some steps to better integrate virtual training  devices into its operational training. However, the Marine Corps\u2019 process  to manage the development and use of its virtual training devices in  operational training plans has gaps."], "subsections": [{"section_title": "The Marine Corps Has Taken Some Steps to Integrate Virtual Training Devices into Operational Training", "paragraphs": ["The Marine Corps has taken some steps to integrate virtual training  devices into operational training and has other efforts under way. In 2013,  we reported that the Marine Corps did not have information on the  performance and cost of virtual training that would assist the service in  assessing and comparing the benefits of virtual training as it sought to  optimize the mix of live and virtual training to meet requirements and  prioritize training investments. We also found that the Marine Corps had  not developed overall metrics or indicators to measure how the use of  virtual training devices had contributed to improving the effectiveness of  training, or identified a methodology to identify the costs associated with  using virtual training. We recommended that the Marine Corps develop  outcome-oriented performance metrics for assessing the effect of virtual  training on improving performance or proficiency and develop a  methodology to identify the costs of virtual training in order to compare  the costs of using live and virtual training. Further, in 2015 the  Commandant of the Marine Corps issued guidance that stated the service  will focus on better leveraging virtual training technology and that all types  of Marine Corps forces should make extensive use of virtual training  where appropriate.", "In response to our recommendations and the Commandant\u2019s guidance, in  2015 the Marine Corps Training and Education Command created a  Simulation Assessment Working Group with stakeholders from across the  Marine Corps to identify training events that could be supported by virtual  training devices and incorporate those devices into Training and  Readiness manuals. The working group found that over 7,000 of the  12,000 training events reviewed could use a virtual training device to  either fully or partially meet the training standard of that event. The group  also identified 135 events that may only be performed using the virtual  training device or must be performed with the device as a prerequisite to  live training. Based on the results of the working group, Training and  Education Command updated the corresponding unit-specific Training  and Readiness manuals to identify where a training event could be  completed using a virtual training device. While this action represents  some progress toward better incorporating virtual training devices into  operational training, our recommendations remain open because the  Marine Corps\u2019 efforts to develop specific outcome-oriented performance  metrics to assess virtual training or a methodology to make more- informed comparisons between the costs of live and virtual training are  not yet complete. According to a senior Training and Education  Command official, the Marine Corps is working to update its training  information management system to better capture this information.", "In 2015, the Marine Corps also issued a Concept of Operations  (CONOPS) for the United States Marine Corps Live, Virtual, and  Constructive \u2013 Training Environment (LVC-TE) (hereafter referred to as  Concept of Operations) that is intended to describe the live, virtual, and  constructive training environment based on operational requirements in  sufficient detail to continue the development of this training capability.  According to the Concept of Operations, the goal in implementing the live,  virtual, and constructive training environment is to expand training  opportunities, reduce training costs, improve safety, and maintain high  levels of proficiency and readiness. The Concept of Operations estimates  that the live, virtual, and constructive training environment will be  implemented in 2022.", "Lastly, the Marine Corps has an ongoing effort to better inform users of  the availability of virtual training devices that support ground-based units.  Specifically, the Marine Corps Training and Education Command is  developing a Ground Training Simulations Implementation Plan that is  intended to provide a framework for the use of current and future virtual  training devices for ground units. The Ground Training Simulations  Implementation Plan is modeled after the processes used by the Marine  Corps\u2019 aviation community to integrate simulators into aviation training.  The Marine Corps estimates that the plan will be finalized in the summer  of 2017. According to a Training and Education Command official  involved in the plan\u2019s development, the plan will help address a challenge  the Marine Corps has faced in educating commanders on the availability  and capabilities of available virtual training devices. This challenge is  consistent with information we gathered during our visit to selected  Marine Corps installations. Officials at the two Battle Simulation Centers  we visited, for example, told us that unit commanders do not always know  what virtual training devices are available and how they can be used to  meet training requirements."], "subsections": []}, {"section_title": "Marine Corps Process to Manage the Development and Use of Virtual Training Devices in Operational Training Plans Has Gaps", "paragraphs": ["The Marine Corps process to manage the development and use of virtual  training devices in operational training plans has gaps due to a lack of  guidance. Specifically, the Marine Corps does not (1) include  consideration of critical factors for integrating virtual training devices into  operational training in its front-end planning to support the acquisition of  its virtual training devices, (2) consistently consider expected and actual  usage data for virtual training devices to support its investment decisions,  or (3) consistently evaluate the effectiveness of its virtual training devices  for operational training."], "subsections": [{"section_title": "Front-End Planning", "paragraphs": ["The Marine Corps\u2019 process for conducting front-end planning and  analysis to support the acquisition of its virtual training devices does not  include consideration of critical factors for integrating virtual training  devices into operational training, such as the specific training tasks the  device is intended to address, how the device would be used to meet  proficiency goals, or available time for units to train with the device.  DOD\u2019s Strategic Plan for the Next Generation of Training for the  Department of Defense states that the right mix of live, virtual, and  constructive training capabilities will depend on training tasks and  objectives, required proficiency, and available training time, among other  factors. In addition, we have previously found that part of the front-end  analysis process for training and development programs should include a  determination of the skills and competencies in need of training and how  training will build proficiency for those skills and competencies.", "Based on our analysis of the Marine Corps\u2019 front-end planning documents  (called system development documents) for the six virtual training devices  included in our review, we found that documentation for five of the six  devices did not include specific training tasks. In addition, the  documentation for two devices specified that specific training tasks would  be identified during the verification and validation phase, which is a type  of analysis that typically takes place after the device has already been  acquired, according to a senior Training and Education Command  official. While the documentation for all of the devices included a high- level discussion of relevant mission areas, documentation for five out of  six devices did not identify specific training tasks, such as specific training  events in a unit\u2019s Training and Readiness manual, that the device was  intended to address. For example, documentation for the Combined Arms  Command and Control Training Upgrade System includes a high-level  discussion of mission areas that the device supports, such as force  application, command and control, and battlespace awareness. It also  states that the device is to support training events, but it does not specify  what those events are. In addition, none of the system development  documents we reviewed identified proficiency goals or considered  available training time for the units to use the device.", "According to officials at Training and Education Command, many virtual  training devices in the Marine Corps\u2019 inventory were developed based on  urgent needs to meet capability gaps identified by warfighters and were  not based on training requirements. Of the six devices included in our  review, three of the devices were acquired to meet urgent warfighter  needs\u2014the Family of Egress Trainers\u2014Modular Amphibious Egress  Trainer, the Operator Driver Simulator, and the Supporting Arms Virtual  Trainer. However, the system development documents we reviewed for  those three devices were completed after the devices had been fielded to  meet the urgent needs, but still did not identify specific training tasks or  proficiency goals, or consider available training time for the units to use  the device. Moreover, the system development documents for two of the  remaining three devices we reviewed did not contain this information.", "While the Marine Corps did not identify and assess these factors in the  front-end planning process, the Marine Corps has begun taking steps to  identify these factors through efforts such as the Simulation Assessment  Working Group. However, these efforts are occurring after the devices  have already been acquired and fielded, leading to decisions that have  potential cost implications. For example, in its analysis, the Simulation  Assessment Working Group did not fully consider alternative devices that  could be used to achieve specific training tasks because its methodology  was to identify the one virtual training device that was considered the  \u201cbest in breed\u201d simulator for conducting each training event rather than  considering all devices that could be used for the event, including those  that might be more cost-effective. Officials at II MEF told us that this  methodology did not include an evaluation of the device\u2019s cost compared  to other devices that could achieve similar training outcomes. For  example, these officials told us that the Supporting Arms Virtual Trainer  was identified as a \u201cbest in breed\u201d device for a number of training events,  including calls for fire and close air support. However, these officials  stated that the Deployable Virtual Training Environment device is a lower- cost alternative that could achieve similar outcomes for many of the  training events that do not require the level of realism provided by the  Supporting Arms Virtual Trainer. Based on information provided by  Training and Education Command, the acquisition cost for the Supporting  Arms Virtual Trainer is about $4.5 million per system while the acquisition  cost for the Deployable Virtual Training Environment laptop is around  $3,700 (see fig. 6).", "The Marine Corps\u2019 front-end planning process to support the acquisition  of virtual training devices has gaps because the service does not have  specific policies to ensure the process considers key factors. Specifically,  Navy and Marine Corps acquisition policies we reviewed do not require  that front-end planning consider specific training tasks the device is  intended to address, how the device would be used to meet proficiency  goals, or available time for units to train with the device. Training and  Education Command officials acknowledged the gaps in the Marine  Corps\u2019 process and stated that the front-end process for future device  acquisitions would identify specific training tasks that a device will  address. However, without guidance that specifically addresses these  factors, the Marine Corps does not have a reasonable basis to ensure  that it is acquiring the right number and type of virtual training devices to  meet its operational training needs."], "subsections": []}, {"section_title": "Expected and Actual Usage Data", "paragraphs": ["The Marine Corps does not consistently consider expected and actual  usage data for virtual training devices to support its investment decisions.  Our prior work has found that agencies should establish measures that  they can use in assessing training programs, such as expected training  hours, which reflect the usage rates of the training program. However,  the Marine Corps did not establish expected usage rates in its system  development documents for five of the six virtual training devices included  in our review, and a senior Training and Education Command official said  it also has not established expected usage rates since acquiring the  devices. For example, the system development document for the  Supporting Arms Virtual Trainer stated that the usage of the device could  replace up to 33 percent of the live-fire missions required to retain annual  currency, but the document does not specify that units are expected to  use the device to replace that high of a percentage of the live-fire  missions. As a result, the Marine Corps does not have a baseline against  which to assess actual usage of the device. Only the system development  document for the Marine Air-Ground Task Force Tactical Warfare  Simulation included usage targets, stating that usage is expected to be  extensive and estimates that the device will be used for 700 hours per  system per year. However, the system development documents for the  other four devices we reviewed did not include any information on  expected usage rates.", "Additionally, the Marine Corps has not consistently collected actual usage  data for its virtual training devices, which could be used to inform  continued investments in existing virtual training devices. During our  review, a senior Marine Corps Training and Education Command official  told us that Training and Education Command collects data for about two- thirds of the Marine Corps\u2019 total inventory of virtual training devices, but usage data are not available for certain devices. More specifically, the  Marine Corps provided usage data for three of the six devices that were  included in our review, but it was unable to provide usage data for certain  systems, such as the Marine Air-Ground Task Force Tactical Warfare  Simulation and the Combined Arms Command and Control Training  Upgrade System. This official stated that contractors collect data on these  devices, but there is no Marine Corps\u2019 system to collect data on the  number of Marines or hours trained. Specifically, contractors submit  spreadsheets on a monthly basis showing the number of Marines who  have used the device, but these data are not included in any formal  reports and there is no standard database for collecting or evaluating  them.", "The Marine Corps has not considered actual usage data in its decision  making for additional investments in certain virtual training devices,  despite low usage rates for a number of those devices. For example,  according to available contractor data, actual usage for the Operator  Driver Simulator was significantly lower than the current available hours.  Based on data provided by Training and Education Command, the  Operator Driver Simulator was used for approximately 7,600 hours in  fiscal year 2015 and 5,600 hours in fiscal year 2016, but was available for  use for approximately 192,000 hours. However, based on the results of  the Simulation Assessment Working Group, Training and Education  Command estimated that to accomplish all training events linked to the  Operator Driver Simulator would require about 570,000 available training  hours. As a result, the Simulator Assessment Working Group  recommended various investment options for the Operator Driver  Simulator that ranged from $56 million to $121 million, despite the current  low utilization and excess capacity. Officials from Training and Education  Command told us that they anticipate an increase in user demand for the  Operator Driver Simulator based on guidance from the Commandant of  the Marine Corps to make driver certification more rigorous. However,  officials from Marine Corps Systems Command stated that current  Operator Driver Simulators have deficiencies in supporting driver training  and, therefore, Marines choose to drive live vehicles instead.", "The Marine Corps has not considered expected and actual usage of its  virtual training devices to support investment decisions due to a lack of  guidance on establishing and collecting usage data. Marine Corps  training guidance for ground units states that virtual training devices shall  be used, as applicable, when constraints limit the use of realistic training  conditions, but it does not identify the extent to which virtual training  devices are expected to be used. Without guidance on setting usage- rate expectations and assessing actual usage, the Marine Corps risks  sustained investment in virtual training devices that do not meet  operational training needs."], "subsections": []}, {"section_title": "Evaluate the Effectiveness of Devices", "paragraphs": ["We also found that the Marine Corps was not consistently evaluating the  effectiveness of its virtual training devices to accomplish operational  training. Our prior work has shown that agencies need to develop  processes that systematically plan for and evaluate the effectiveness of  their training and development efforts. These evaluations should include  data measures, both quantitative and qualitative, to assess training  results in areas such as increased user proficiency. Further, evaluations  of training effectiveness should be used to make decisions on whether  resources should be reallocated or redirected.", "The Marine Corps uses the verification and validation report process as  its primary assessment of a virtual training device after it has been  fielded, according to the senior Training and Education Command official  with whom we spoke. However, based on our review of postfielding  analyses for the virtual training devices included in our review, we found  that the Marine Corps does not have a consistent process for selecting  devices for which to complete these analyses or how the analysis should  be conducted. More specifically, we were provided with verification and  validation reports for only three of the six devices in our review\u2014the  Supporting Arms Virtual Trainer, the Family of Egress Trainers\u2014Modular  Amphibious Egress Trainer, and the Operator Driver Simulator\u2014as well  as plans to complete these reports for two other devices. According to a  senior Training and Education Command official, Training and Education  Command considers certain factors to prioritize the completion of verification and validation reports, such as planned investments for major  upgrades on a device. The official also stated that Training and Education  Command prioritized completing reports for these virtual training devices  to specifically align with recommendations made by the Simulation  Assessment Working Group. However, the Simulation Assessment  Working Group does not take place on a recurrent basis, and therefore  the recommendations from the group do not establish a process for  prioritizing future verification and validation reports. Officials from Marine  Corps Systems Command told us that program managers are now trying  to perform verification and validation reports for future acquisitions prior to  full acceptance of the training systems, but that this step is not  mandatory.", "Additionally, there is not a consistent process to include training  effectiveness evaluations within the verification and validation report itself.  The verification and validation process is not required to include an  evaluation of effectiveness based on current guidance, but as noted in  the verification and validation report for the Family of Egress Trainers\u2014 Modular Amphibious Egress Trainer, such an evaluation is essential to  determine whether the capabilities of a virtual training device satisfy  requirements to improve training performance and combat readiness. In  two instances, the verification and validation reports for the Operator  Driver Simulator and Family of Egress Trainers\u2014Modular Amphibious  Egress Trainer both included evaluations of the effectiveness of the  devices in improving user proficiency, which concluded that the devices  enabled Marines to successfully pass related training courses. In another  instance, the Marine Corps did not conduct a training effectiveness  analysis as part of the verification and validation process. Specifically, for  the Supporting Arms Virtual Trainer, Marine Corps Systems Command  attempted to conduct a training effectiveness evaluation, but training  activity data for a statistically significant sampling of the target training  audience were unavailable, which suggests the need for improved data  on device usage.", "We further found that the training effectiveness evaluations that the  Marine Corps did complete differed in how they were conducted, which  can affect the quality of the information the evaluations provide. For  example, the training effectiveness evaluation for the Operator Driver  Simulator was conducted to determine whether the device effectively  trained Marines to perform tasks required for one specific training and  readiness event. The methodology included collecting training activity  data from 1 fiscal year in one location and for one of the Operator Driver  Simulator vehicle variants. The report noted that conducting a more- complete evaluation, along with additional data collection, would better  identify opportunities to improve and enhance training. In contrast, the  training effectiveness evaluation for the Family of Egress Trainers\u2014 Modular Amphibious Egress Trainer also collected training activity data,  but collected data from multiple training sites and for all training courses  conducted during the 1-year period used for the evaluation. According to  officials from Marine Corps Systems Command, the effectiveness  evaluation methods may vary based on the type of training being  executed and how well the training requirements are defined. These  officials stated that when the device\u2019s training requirements have been  more thoroughly defined, the effectiveness evaluation can be more  targeted.", "The Navy and Marine Corps acquisition policy and guidance documents  we reviewed do not establish a process to consistently evaluate the  training effectiveness of virtual training devices, including identifying the  devices to be evaluated and determining what data should be collected  and assessed. According to a senior Training and Education Command  official, evaluating effectiveness is not a required part of the verification  and validation process and is an area that needs to be addressed. The  Marine Corps\u2019 Concept of Operations also identified a lack of guidance for  conducting effectiveness analyses. Specifically, the Concept of  Operations identifies a lack of policy guiding live, virtual, and constructive  training capabilities and benefits. It also identifies a training gap on the  linkages between live, virtual, and constructive training, as well as a  policy gap around the lack of guidance on analysis of virtual training  devices after they have been fielded. Without guidance establishing a  well-defined process to consistently evaluate the effectiveness of virtual  training devices for training\u2014including the selection of devices, guidelines  on conducting the analysis, and the data that should be collected and  assessed\u2014the Marine Corps risks investing in devices whose value to  operational training is undetermined."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The Navy and Marine Corps have identified the need to rebuild the  capability to conduct amphibious operations and to reinvigorate naval  integration between the services toward that end. However, the Navy and  Marine Corps have not completed efforts needed to mitigate their training  shortfalls for amphibious operations. Specifically, the services have not  developed an approach to prioritize available training resources,  systematically evaluate among training resource alternatives to achieve  amphibious operations priorities, and monitor progress toward achieving  them. Without such an approach, the services are not well positioned to  mitigate existing amphibious operations training shortfalls and begin to  rebuild their amphibious capability as the services await the arrival of  additional amphibious ships into the fleet. In addition, while the Navy and  Marine Corps have taken a number of positive steps to improve  coordination between the two services, they need to define and articulate  common outcomes for naval integration. This first critical step will enable  them to fully incorporate other leading collaboration practices aimed at a  common purpose, such as developing a joint strategy; more fully  establishing compatible policies, procedures, and systems; better  leveraging resources; and establishing mechanisms to monitor results  that are needed to achieve service-level goals for naval integration and to  align efforts to maximize training opportunities for amphibious operations.  Further, the Marine Corps\u2019 process to integrate virtual training devices  into operational training has gaps. Developing guidance for the  development and use of virtual training devices would help close these  gaps, which is critical as virtual training will become increasingly  important to the development of the capability of Marines, including the  capability for conducting amphibious operations, among other mission  areas."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To better mitigate amphibious operations training shortfalls, we  recommend the Secretary of Defense direct the Secretary of the Navy, in  coordination with the Chief of Naval Operations and Commandant of the  Marine Corps, to develop an approach, such as building upon the  Amphibious Operations Training Requirements review, to prioritize  available training resources, systematically evaluate among training  resource alternatives to achieve amphibious operations priorities, and  monitor progress toward achieving them.", "To achieve desired goals and align efforts to maximize training  opportunities for amphibious operations, we recommend the Secretary of  Defense direct the Secretary of the Navy, in coordination with the Chief of  Naval Operations and Commandant of the Marine Corps, to clarify the  organizations responsible and time frames to define and articulate  common outcomes for naval integration, and use those outcomes to develop a joint strategy; more fully establish compatible policies, procedures, and systems; better leverage training resources; and establish mechanisms to monitor results.", "To more effectively and efficiently integrate virtual training devices into  operational training, we recommend that the Secretary of Defense direct  the Commandant of the Marine Corps to develop guidance for the  development and use of virtual training devices that includes developing requirements for virtual training devices that consider and  document training tasks and objectives, required proficiency, and  available training time;  setting target usage rates and collecting usage data; and  conducting effectiveness analysis of virtual training devices that  defines a consistent process for performing the analysis, including the  selection of the devices to be evaluated, guidelines on conducting the  analysis, and the data that should be collected and assessed."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of the classified report to DOD for review and  comment. The department\u2019s comments on the classified report are  reprinted in Appendix II. In its comments, DOD concurred with all three  recommendations. DOD stated that it will review the status of actions the  Navy and Marine Corps plan to take in response to all three  recommendations within the next twelve months.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Office of the Under Secretary  of Defense for Personnel and Readiness, the Secretary of the Navy, and  the Commandant of the Marine Corps. In addition, the report is available  at no charge on the GAO website at http://www.gao.gov.", "If you have any questions about this report or need additional information,  please contact me at (202) 512-5431 or russellc@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. Key contributors to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report are to determine the extent to which (1) the  Navy and Marine Corps have completed training for amphibious  operations priorities and taken steps to mitigate any training shortfalls, (2)  the Navy\u2019s and Marine Corps\u2019 efforts to improve naval integration for  amphibious operations incorporate leading collaborative practices, and  (3) the Marine Corps has integrated selected virtual training devices into  its operational training.", "This report is a public version of a classified report that we issued in  August 2017. DOD deemed some of the information in our August report  to be classified, which must be protected from loss, compromise, or  inadvertent disclosure. Therefore, this report omits classified information  on select Marine Corps units\u2019 ability to complete training for amphibious  operations. Although the information provided in this report is more  limited, the report addresses the same objectives as the classified report  and uses the same methodology.", "We focused our review on Navy and Marine Corps organizations and  units that have a role in the development and execution of training  requirements for amphibious operations. For the Navy, we focused on  the training requirements and accomplished training for amphibious ships.  For the Marine Corps, we focused on selected active-component units  that have identified training requirement for amphibious operations,  including Marine Expeditionary Units (MEU) and other units with a  mission-essential task for amphibious operations. We selected a  nongeneralizable sample of 23 Marine Corps units to speak with in order  to interview geographically dispersed units under each Marine  Expeditionary Force, as well as units across all elements of the Marine  Air-Ground Task Force (i.e., command, ground combat, aviation combat,  and logistics combat forces). See below for the list of 23 Marine Corps  units. We focused on the Marine Corps\u2019 integration of virtual training  devices into operational training because the Navy does not have virtual  training devices that simulate amphibious operations, including ship-to- shore movement, according to Navy officials. In addition, we focused on  Marine Corps virtual training devices that are used to support the  command and ground elements of the Marine Air-Ground Task Force. We  selected a nongeneralizable sample of six virtual training devices based  on the target training audience, applicability to amphibious operations  training, location, and type of training events (individual or collective  training) for which the devices are used. The devices included in our  review are the Combined Arms Command and Control Training Upgrade  System, Marine Air-Ground Task Force Tactical Warfare Simulation,  Supporting Arms Virtual Trainer, Amphibious Assault Vehicle Turret  Trainer, Family of Egress Trainers\u2014Modular Amphibious Egress Trainer,  and Operator Driver Simulator.", "To determine the extent to which the Navy and Marine Corps have  completed training for amphibious operations priorities and taken steps to  mitigate any training shortfalls, we analyzed deployment certification  reports for all Amphibious Ready Group (ARG)\u2014Marine Expeditionary  Unit (MEU) deployments over the most-recent 3-year period. We also  analyzed unit-level readiness data for all Marine Corps\u2019 infantry  battalions, assault amphibian vehicle battalions, Osprey tilt-rotor aircraft  squadrons, and Marine Expeditionary Brigades over the most-recent 3- year period\u2014from fiscal years 2014 through 2016\u2014and compared those  data against unit-level training requirements for amphibious operations.  We analyzed 3 years of training data because training requirements for  Marine Corps units are reviewed and updated on a 3-year cycle. We  performed data-reliability procedures on the unit-level readiness data by  comparing the data against related documentation and surveying  knowledgeable officials on controls over reporting systems and  determined that the data presented in our findings were sufficiently  reliable for the purposes of this report. We interviewed Navy and Marine  Corps officials to discuss any factors that limited their ability to conduct  training for amphibious operations. We assessed the reliability of data on  amphibious ship requests by speaking with knowledgeable officials and  determined the data were sufficiently reliable for the purposes of  presenting the number of actual requests submitted and fulfilled. In  addition, we reviewed processes and initiatives established by the Navy  and Marine Corps to identify and assess training shortfalls for amphibious  operations, including the Marine Corps\u2019 Amphibious Operations Training  Requirements review, and evaluated these processes and initiatives  against our prior work on strategic training and risk management.", "To determine the extent to which the Navy\u2019s and Marine Corps\u2019 efforts to  improve naval integration for amphibious operations incorporate leading  collaboration practices, we reviewed the Navy and Marine Corps  documents, including A Cooperative Strategy for 21st Century Seapower  and the Marine Corps Operating Concept, that discuss the goal of  improving naval integration. We also reviewed mechanisms that have  been established to coordinate training, including campaign plans for  amphibious operations; observed a working group focused on amphibious  operations; and interviewed officials with both services to discuss efforts  to improve naval integration. We assessed the extent to which the Navy\u2019s  and Marine Corps\u2019 efforts toward improving naval integration have  followed leading practices for collaboration that we have identified in our  prior work. Specifically, we have identified eight practices described in  our prior work that can help enhance and sustain collaboration. We  selected seven of the eight practices most relevant to issues we identified  in our prior work on collaboration to assess the status of Navy and Marine  Corps collaborative efforts to improve naval integration. Based on our  analysis, we selected the following seven practices: define and articulate  a common outcome; establish mutually reinforcing or joint strategies;  identify and address needs by leveraging resources; agree on roles and  responsibilities; establish compatible policies, procedures, and other  means to operate across agency boundaries; develop mechanisms to  monitor, evaluate, and report on results; and reinforce agency  accountability for collaborative efforts through agency plans and reports.", "To determine the extent to which the Marine Corps has integrated  selected virtual training devices into its operational training, we collected  information on the development, usage, and evaluation of virtual training  devices, and their integration into operational training plans. We reviewed  documentation on actions the Marine Corps has taken to integrate its  virtual training devices into operational training, including documentation  on the Simulation Assessment Working Groups and the Ground Training  Systems Plan. We reviewed DOD and Marine Corps acquisition policies  and interviewed Marine Corps officials responsible for the acquisition and  oversight of virtual training devices at Training and Education Command  and Marine Corps Systems Command and officials responsible for  management of the virtual training devices at the Battle Simulation  Centers at Camp Lejeune, North Carolina, and Camp Pendleton,  California. We reviewed acquisition documents for each of the selected  devices, including Capability Production Documents and Capability  Development Documents, and assessed the extent to which these  documents included key information as identified in leading practices for  managing strategic training and DOD\u2019s Strategic Plan for the Next  Generation of Training for the Department of Defense. We also reviewed  documentation on the Marine Corps process to include expected and  actual usage data for virtual training devices to support investment  decisions. Further, we reviewed analyses conducted after the selected  devices had been fielded through Verification and Validation Reports and  evaluated the extent these documents assessed the effectiveness of the  virtual training devices for improving user proficiency.", "The performance audit upon which this report is based was conducted  from May 2016 to August 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate, evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with DOD from August 2017 to September 2017 to  prepare this unclassified version of the original classified report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": [{"section_title": "Navy", "paragraphs": [], "subsections": []}, {"section_title": "Marine Corps", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Matthew Ullengren, Assistant  Director; Russell Bryan; William Carpluk; Ron La Due Lake; Joanne  Landesman; Kelly Liptan; Shahrzad Nikoo; and Roxanna Sun made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-176", "url": "https://www.gao.gov/products/GAO-19-176", "title": "Internal Revenue Service: Strategic Human Capital Management is Needed to Address Serious Risks to IRS's Mission", "published_date": "2019-03-26T00:00:00", "released_date": "2019-03-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IRS faces a number of challenges that pose risks to meeting its mission if not managed effectively. Key to addressing IRS's challenges is its workforce. Cultivating a well-equipped, diverse, flexible, and engaged workforce requires strategic human capital management.", "GAO was asked to review IRS's enterprise-wide strategic workforce planning efforts. GAO assessed (1) how IRS defines its workforce needs and develops strategies for shaping its workforce; (2) the extent to which IRS identified the critical skills and competencies it will require to meet its goals, and its strategy to address skills gaps in its workforce; and (3) the extent to which IRS's Human Capital Office has the capacity to hire employees in hard to fill positions.", "GAO analyzed trends in staffing across IRS and in selected mission critical occupations; compared IRS strategic workforce management processes, practices, and activities with federal regulations and leading practices; analyzed IRS documents and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service (IRS) has scaled back strategic workforce planning activities in recent years. IRS officials told GAO that resource constraints and fewer staff with strategic workforce planning skills due to attrition required IRS to largely abandon strategic workforce planning activities.", "However, a number of indicators, such as increasing rates of retirement eligible employees and declining employee satisfaction, led IRS to determine that continuing to make short-term, largely nonstrategic human capital decisions was unsustainable. One way IRS sought to address these issues was to develop a strategic workforce plan and associated workforce planning initiative. Initiative implementation, however, is behind schedule and on hold. IRS attributed the delay to a combination of: 1) personnel resources redirected to implement Public Law 115-97\u2014commonly referred to as the Tax Cuts and Jobs Act, 2) lack of workforce planning skills within its Human Capital Office, and 3) delayed deployment at the Department of the Treasury (Treasury) related to a new workforce planning system. As a result, IRS lacks information about what mission critical skills it has on board, where skills gaps exist, and what skills will be needed in the future.", "IRS staffing has declined each year since 2011, and declines have been uneven across different mission areas. GAO found the reductions have been most significant among those who performed enforcement activities, where staffing declined by around 27 percent (fiscal years 2011 through 2017). IRS attributed staffing declines primarily to a policy decision to strictly limit hiring. Agency officials told GAO that declining staffing was a key contributor in decisions to scale back activities in a number of program and operational areas, particularly in enforcement, where the number of individual returns audited from fiscal years 2011 through 2017 declined by nearly 40 percent.", "IRS has skills gaps in mission critical occupations, and the agency's efforts to address these skills gaps do not target the occupations in greatest need, such as tax examiners and revenue officers. However, the results of an interagency working group effort that began in 2011, and was intended to address skill gaps among IRS revenue agents and other occupations with skills gaps across the government, may hold important lessons for addressing skills gaps in other mission critical occupations at IRS.", "IRS's Human Capital Office has limited staffing capacity to hire employees in hard to fill positions, which holds risks for the agency's ability to implement the Tax Cuts and Jobs Act. IRS is undertaking a variety of activities to improve its hiring capacity, but has not determined how each activity will be evaluated and will contribute to increased hiring capacity or associated outcomes. In addition, changes in the agency's hiring processes have been confusing to managers and contributed to hiring delays. Clear guidance on hiring request requirements would better position IRS to avoid the risk of hiring delays for mission critical occupations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations to IRS that include implementing its delayed workforce planning initiative, evaluate actions to improve the agency's hiring capacity, and address changes in its processes that have contributed to hiring delays. IRS agreed with GAO's recommendations. GAO also recommends Treasury clarify guidance to IRS on a forthcoming workforce planning system. Treasury agreed with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Internal Revenue Service\u2019s (IRS) mission is to \u201cprovide America\u2019s  taxpayers with top-quality service by helping them understand and meet  their tax responsibilities as well as enforce the law with integrity and  fairness to all.\u201d For fiscal year 2017, IRS reported that it:  collected more than $3.4 trillion in gross taxes; processed more than 245.4 million federal tax returns and  supplemental documents and issued almost 122 million refunds  amounting to almost $437 billion; provided taxpayer assistance through almost 495.6 million visits to assisted more than 63.2 million taxpayers through correspondence, its  toll-free telephone helpline, or at Taxpayer Assistance Centers; and audited almost 1.1 million tax returns.", "At the same time, IRS faces a number of challenges that pose risks to  meeting its mission if not managed effectively. IRS\u2019s budget has declined  by about $2.1 billion (15.7 percent) from fiscal years 2011 through 2018,  after adjusting for inflation. Concurrent with declining resources are  increasing responsibilities, including implementing relevant aspects of the  Foreign Account Tax Compliance Act; Patient Protection and Affordable  Care Act; and Public Law 115-97\u2014commonly referred to as the Tax Cuts  and Jobs Act\u2014which included significant changes to corporate and  individual tax law. In addition to these new mandates, we have previously reported IRS faces a number of ever-evolving and significant  challenges protecting taxpayer information, preventing identity theft and  fraud, and modernizing an aging technology infrastructure. For these  reasons and others, IRS\u2019s enforcement of tax laws has been on our High- Risk List since we first established the list in 1990.", "Key to addressing IRS\u2019s challenges is its workforce. In our past work, we  have noted how an organization\u2019s workforce defines its character, affects  its capacity to perform, and represents its knowledge base. An agency\u2019s  workforce, including its human capital office, can play a central role in  transforming an agency into a high-performing organization. Cultivating a  well-equipped, diverse, flexible, and engaged workforce requires strategic  workforce planning. Strategic workforce planning addresses two critical  needs: (1) aligning an organization\u2019s human capital program with its  current and emerging mission and programmatic goals; and (2)  developing long-term strategies for acquiring, developing, and retaining  staff to achieve those programmatic goals.", "You asked us to review IRS\u2019s enterprise-wide strategic workforce  planning efforts. In this report, we assess (1) how IRS defines its  workforce needs and develops strategies for shaping its workforce; (2)  the extent to which IRS identified the critical skills and competencies it will  require to meet its goals, and describe its strategy to address skills gaps  in its workforce; and (3) the extent to which IRS\u2019s Human Capital Office  has the capacity to hire employees in hard to fill positions.", "To address objective 1, we reviewed IRS\u2019s implementation of strategic  workforce planning practices by comparing legal, regulatory, and policy  requirements; standards for internal controls; and leading practices in  strategic workforce planning with IRS practices and processes. We  analyzed documents that explain IRS\u2019s programs, policies, and practices  designed to help the agency recruit, develop, and retain the critical staff  needed to achieve program goals, and interviewed IRS officials. We met  with Department of the Treasury (Treasury) and Taxpayer Advocate  Service officials to understand their role and responsibilities for  coordinating with and providing oversight of IRS activities. We compared  IRS\u2019s practices for monitoring and evaluating progress toward human  capital goals, including bi-monthly reporting, with requirements articulated  in Office of Personnel Management (OPM) regulations and leading  practices we have previously identified for monitoring and measuring  program performance. We analyzed results from the 2011 through 2017  Federal Employee Viewpoint Survey (FEVS) and compared them with  IRS activities to determine how well those activities meet staff needs. We  analyzed OPM\u2019s Enterprise Human Resources Integration (EHRI) data to  determine retirement eligibility of senior and nonsenior IRS staff and staff  across the federal government.", "To address objective 2, in addition to activities we performed to address  objective 1, we analyzed Office of Management and Budget data to  determine trends in the number of full-time equivalents (FTE). We  interviewed IRS business division officials and reviewed documents  related to IRS tax examiners and revenue officers. We selected these two  mission critical occupations from a nongeneralizable sample based on a  number of factors, including the results of a Treasury risk assessment, to  illustrate how IRS has implemented strategies, policies, and processes for  identifying and addressing skills gaps, among other purposes. We  interviewed Treasury, OPM, and IRS officials to determine how they  identified and addressed skills gaps among another mission-critical  occupation, IRS revenue agents. To determine staffing trends within  these occupations, we analyzed data from EHRI. We interviewed IRS  officials to understand how its Human Capital Office (HCO) conducts  skills and competency assessments. We analyzed IRS\u2019s audit rate of  individual and corporate returns for fiscal years 2011 through 2017 based  on data reported by IRS in its annual Data Book.", "To address objective 3, we reviewed documentation related to IRS  human resources (HR) hiring requirements, including the Internal  Revenue Manual (IRM) and policies explaining the exception hiring  process. We interviewed officials from each of IRS\u2019s major business  divisions\u2014Wage and Investment, Large Business and International, Tax  Exempt and Government Entities, and Small Business/Self-Employed\u2014to  further understand their hiring experience and impressions of time-to-hire  and candidate quality results. We reviewed the results of skills and  competency assessments previously conducted of IRS\u2019s HR workforce.  We interviewed senior officials responsible for IRS\u2019s hiring function. We  also reviewed the purpose of systems used to process and onboard new  hires. To examine how staffing changed for hiring human resource  managers from fiscal years 2011 through 2017, we analyzed EHRI data.  To assess data reliability, we reviewed our past data reliability  assessments of systems we used and conducted electronic testing to  evaluate the accuracy and completeness of the data used in our  analyses. For EHRI and FEVS, we also conducted interviews with  knowledgeable agency officials. We determined the data from these  systems were sufficiently reliable for our purposes.", "We conducted this performance audit from August 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The mission of IRS\u2019s HCO includes providing \u201chuman capital strategies  and tools for recruiting, hiring, developing, retaining, and transitioning a  highly-skilled and high-performing workforce to support IRS mission  accomplishments,\u201d and developing and implementing \u201ctechnology- enabled systems and processes to improve human capital planning and  management and empower employees to achieve their potential.\u201d HCO is headed by the Human Capital Officer who reports to the Deputy  Commissioner for Operations Support and is to \u201cprovide executive  leadership and direction in all matters relating to the Service\u2019s employees,  overseeing the design, development, and delivery of comprehensive,  agency-wide human capital management and development programs that  contribute to the Service\u2019s vision and mission.\u201d", "Worklife Benefits and Performance (WBP) and Employment, Talent and  Security (ETS) are two subdivisions within HCO responsible for  supporting many of IRS\u2019s strategic human capital management activities.  Among WBP\u2019s responsibilities are: agency-wide strategic workforce planning; workforce planning consultation and support;", "OPM/Treasury/IRS workforce planning pilots, projects, and initiatives;  IRS workforce data reporting; analyzing workforce projections; and attrition analysis.", "ETS is responsible for providing policies, products, and services that  support business efforts to identify, recruit, hire, and advance a workforce  with the competencies necessary to achieve current and future  organizational performance goals. In particular, ETS \u201cpartners with  business units to develop strategic hiring plans that drive the hiring  decision by planning, executing and evaluating the type of position to be  filled based on agency-wide workforce, attrition and workload needs.\u201d"], "subsections": [{"section_title": "Strategic Human Capital Management \u2013 High-Risk Area", "paragraphs": ["Strategic human capital management, which includes workforce planning  activities, is a persistent challenge across the federal government. We  designated strategic human capital management across the government  as a high-risk issue in 2001 because of the federal government\u2019s long- standing lack of a consistent strategic approach to human capital  management. In February 2011, we narrowed the focus of this high-risk  issue to the need for agencies to close skills gaps in mission-critical  occupations. Agencies can have skills gaps for different reasons: they  may have an insufficient number of employees or their employees may  not have the appropriate skills or abilities to accomplish mission-critical  work. Moreover, current budget and long-term fiscal pressures, the  changing nature of federal work, and a potential wave of employee  retirements that could produce gaps in leadership and institutional  knowledge threaten to aggravate the problems created by existing skills  gaps. Mission-critical skills gaps both within federal agencies and across  the federal workforce continue pose a high risk to the nation because they  can impede the government from cost-effectively serving the public and  achieving results."], "subsections": []}, {"section_title": "IRS Budget", "paragraphs": ["IRS\u2019s budget declined by about $2.1 billion (15.7 percent) from fiscal  years 2011 through 2018 (see figure 1). The President\u2019s fiscal year  2019 budget request was $11.135 billion. This amount is less than the  fiscal year 2000 level for IRS, after adjusting for inflation. IRS requested  an additional $397 million to cover implementation expenses for Tax Cuts  and Jobs Act over the next 2 years and received $320 million for  implementation pending submission of a spending plan, which IRS  provided in June 2018. We previously reported IRS would direct the  majority of the money toward technological updates.", "The Tax Cuts and Jobs Act made a number of significant changes to the  tax law affecting both individuals and corporations. For example, for  individual taxpayers, for tax years 2018 through 2025, tax rates were  lowered for nearly all income levels, personal exemptions were eliminated  while the standard deduction was increased, and certain credits, such as  the child tax credit, were expanded. To implement the changes, IRS  must (1) interpret the law; (2) create or revise hundreds of tax forms,  publications, and instructions; (3) publish guidance and additional  materials; (4) reprogram return processing systems; and (5) hire  additional staff and train its workforce to help taxpayers understand the  law. IRS\u2019s HCO estimated that the agency would need to hire and train  new staff to fill approximately 1,100 positions requiring a variety of  competencies, and provide additional training on tax law changes for  current employees. HCO will be responsible for recruiting and hiring  new employees with the needed skills."], "subsections": []}]}, {"section_title": "IRS is in the Early Stages of Defining and Addressing its Workforce Needs", "paragraphs": [], "subsections": [{"section_title": "IRS Strategic Workforce Planning Is Fragmented and Activities to Address Skills Needs Are Not Routinely Performed", "paragraphs": ["IRS has scaled back strategic workforce planning activities in recent  years. Prior to 2011, IRS staff within its HCO or other dedicated program  office conducted and coordinated agency-wide strategic workforce  planning efforts. IRS officials told us that resource constraints and fewer  staff with strategic workforce planning skills due to attrition since 2011  required HCO to largely abandon strategic workforce planning activities.  Instead, HCO generally focused its efforts on completing HR transactions,  such as retirements and benefits processing, meeting legal compliance  activities, and facilitating hiring of seasonal employees.", "Since 2011, key human capital activities\u2014such as developing an  inventory of skills, identifying skills gaps, and attrition forecasting\u2014 became increasingly fragmented and shifted to the individual business  divisions and program offices. IRS officials cited management familiarity  of programmatic needs, challenges, processes, and culture as a benefit  of workforce planning autonomy at business divisions and program  offices. However, the officials told us these activities were often  performed only to the extent those divisions had the time, resources, and  top management interest. As a result, the quality of key human capital  activities was uneven across the agency, if performed at all. In addition,  HCO officials told us the lack of an agency-wide strategy and HCO  authority to manage and coordinate strategic workforce planning efforts  put the agency at greater risk for unnecessary duplication of effort in HR activities; development of redundant and generally noninteroperable systems  used to maintain human capital information; and  failure to effectively identify and retain personnel with critical skills and  experience across the agency.", "IRS\u2019s Information Technology (IT) is an example of an individual program  office that has taken steps to address skills needs. IT developed a skills  and competency inventory of its workforce. IRS officials told us  maintaining and updating the inventory has been particularly helpful to  informing IT hiring and training decisions, given the rapid nature of  change in the technology industry and competition for top talent from the  private sector. In June 2018, we found IRS had not fully implemented any  of the key IT workforce planning practices we have previously identified.  We recommended IRS should fully implement IT workforce planning  practices, including (1) setting the strategic direction for workforce  planning; (2) analyzing the workforce to identify skills gaps; (3) developing  strategies and implementing activities to address skills gaps; and (4)  monitoring and reporting on progress in addressing skills gaps. IRS  agreed with our recommendation, but stated its efforts to address these  issues were limited solely due to diversion of IT resources to  implementation of the Tax Cuts and Jobs Act. We concluded that until the  agency fully implemented these practices, it would continue to face  challenges in assessing and addressing the gaps in knowledge and skills  that are critical to the success of its key IT investments.", "A number of indicators led IRS to determine that continuing to make  short-term, largely nonstrategic human capital decisions was  unsustainable, according to IRS officials. For example, IRS has relatively  high rates of employees eligible to retire. Nearly half of IRS\u2019s Senior  Executive Service (SES) is eligible to retire (see figure 2). Retirement  eligibility rates among both SES and non-SES employees is not only  greater than the rate at other federal agencies, but are also trending  higher according to our analysis of OPM data.", "We have previously reported that the high rate of federal employees  eligible for retirement creates both an opportunity and a challenge for  agencies. If accompanied with appropriate strategic and workforce  planning, it may create an opportunity for agencies to align their  workforce with needed skills and leadership levels to meet their existing  and evolving mission requirements. However, it means agencies will need  succession planning efforts as well as effective sources and methods for  recruiting and retaining candidates to avoid the loss of technical expertise  in mission-critical skills. IRS is trying to mitigate the loss of institutional  memory and meet its current obligations by re-employing recently retired  employees (also known as re-employed annuitants). However, according  to HCO officials, as of October 2018, the agency is struggling to bring  recently retired employees back in part because many had taken other  employment. HCO is focusing on other activities, such as contract staffing  services, to meet workload demands. As we discuss later in this report,  IRS is taking a number of actions to address staffing shortages, but the  effectiveness of those efforts are not yet known.", "IRS\u2019s FEVS results also indicate the agency is at risk of losing employees  with critical skills. For example, IRS\u2019s results for the Global Satisfaction  Index\u2014a measure generated by OPM that combines employees\u2019  responses about satisfaction with their job, pay, the organization, and  their willingness to recommend their organization as a good place to  work\u2014fell below the government-wide average in 2013. Relatedly, our  analysis of fiscal year 2016 IRS exit survey results found 32 percent of  separating employees indicated poor office morale strongly influenced  their decision to leave. Though improving since 2015, IRS continued to  lag behind the government-wide average as of 2017, the most recent  year of data available at the time of this study (see figure 3)."], "subsections": []}, {"section_title": "Key Initiative Delay Has Hampered IRS\u2019s Ability to Fully Address Its Workforce Needs", "paragraphs": ["In 2016, IRS determined the agency needed to develop a strategic  workforce plan and conduct related workforce planning activities to help  mitigate the risks associated with fragmented human capital activities as  discussed above, according to HCO officials. IRS provided authority to  HCO to be the central coordinating body to lead that effort, hereafter  referred to as the workforce planning initiative. In March 2018, IRS issued  an update to its Internal Revenue Manual stating HCO\u2019s responsibilities.  For example, IRS provided HCO authority to:  conduct strategic workforce planning annually that is aligned with  Treasury\u2019s mission, goals, and objectives; perform data analysis of the current and future workforce, identify  gaps, and submit solutions that will enable the organization to meet its  mission, goals, and objectives; ensure the existence and integration of human capital planning  functions into the workforce planning process, including skills  assessments, competency models, recruitment planning, training and  development, and retention and succession planning; provide guidance and direction for IRS-wide workforce planning ensure the implementation of an agency-wide skills assessment and  competency model framework; and  communicate commitment for a consistent, repeatable, and  systematic workforce planning process to enable improved and  integrated management of human capital initiatives.", "The IRM also describes IRS\u2019s workforce planning process, which includes  a five-phase strategic workforce planning model that is intended to align  with OPM\u2019s workforce planning model (see figure 4).", "Implementing the strategic workforce planning model and conducting  related initiative activities could help the agency ensure its human capital  programs align with its mission, goals, and objectives through analysis,  planning, investment, and measurement, as required in federal  regulation. Furthermore, we determined elements of the initiative  addressed key principles we have previously identified for effective  workforce planning. For example, the model includes steps to analyze  the workforce to determine the critical skills and competencies the agency  needs to achieve current and future programmatic results, and to monitor  and evaluate the agency\u2019s progress toward its human capital goals. As a  result, the initiative could position IRS to systematically identify the  workforce needed for the future, develop strategies for identifying and  closing skills gaps, and shape its workforce.", "However, IRS\u2019s implementation of its workforce planning initiative has  been delayed. Phase 1 (Enterprise Strategy and Planning) of the  workforce planning initiative was underway as of the first quarter of fiscal  year 2018, and IRS was scheduled to complete this phase by the second  quarter of fiscal year 2018. IRS reports show the agency originally  anticipated completing all five phases by June 2018. According to IRS  officials, however, IRS now anticipates Phase 1 activities to resume after  the opening of the 2020 tax filing season and, as of November 2018,  could not estimate a completion date for any of the five phases.", "The workforce planning initiative has been delayed for three primary  reasons, according to IRS documents and officials:  1.  Redirection of resources to Tax Cuts and Jobs Act  implementation. IRS granted extensions at the request of business  divisions and commissioner-level organizations that needed to  redirect resources to support the implementation of Tax Cuts and  Jobs Act. To implement the 119 provisions of the Tax Cuts and Jobs  Act, we reported that IRS would need to (1) interpret the law; (2)  create or revise nearly 500 tax forms, publications, and instructions;  (3) publish guidance and additional materials; (4) reprogram 140  interrelated return processing systems; (5) hire additional staff and  train its workforce to help taxpayers understand the law and how it  applies to them; and (6) conduct extensive taxpayer outreach. In  addition to redirecting staff, IRS has used overtime and compensatory  hours to complete necessary activities in time for the 2019 filing  season.  2.  Lack of workforce planning skills. As part of a Treasury pilot, IRS  conducted a self-assessment of key competencies within HCO as well  as within business division-based HR offices. The assessment found  competency around workforce planning was among the lowest ranked  skills within HCO. According to HCO officials, IRS lacks training and  resources available to help its human capital staff develop  competency in workforce planning. HCO officials told us they plan to  leverage IRS\u2019s Workforce Planning Council to develop strategic  workforce planning skills. HCO officials told us the council has  training designed to help the HR staff understand how to gather data,  use technology, and perform other activities that contribute to IRS\u2019s  strategic workforce planning efforts. In addition to a lack of strategic  workforce planning skills, a number of key HCO personnel with  strategic workforce planning expertise have recently separated from  IRS, according to HCO officials.  3.  Information system deployment delay. Treasury is developing the  Integrated Talent Management system (ITM). Treasury intends ITM to  provide the agency with greater visibility of its total workforce, and  help its bureaus, including IRS, with workforce planning activities such  as succession planning and competency management. Treasury  officials told us as of November 2018, ITM is still in development and  its deployment has been delayed for a number of reasons, including  the need for Treasury to complete system implementation plans and  user guides, and address system administration issues at the  bureaus.", "IRS HCO officials told us they opted to wait on ITM rather than  moving forward with a number of Phase 2 (Workforce Analysis)  activities. IRS HCO officials said they needed this, or a similar  software tool, to ensure reliable data capture, make analysis more  efficient, and help managers conduct routine updates of workforce  planning efforts rather than static, one-time data calls. HCO also  opted to wait for ITM to avoid potentially redundant reprogramming of  existing systems. However, HCO officials noted that even when ITM is  eventually deployed, IRS would need to train business divisions on its  use, further lengthening the time needed before conducting Phase 2  activities. Treasury officials told us that ITM would complement rather  than replace existing systems and processes.", "Our analysis of Treasury documents and interviews with Treasury and  IRS HCO officials found it was unclear when an ITM module related to  talent management and strategic workforce planning will be deployed  and available for IRS\u2019s use, the functions it will include, and how IRS\u2019s  existing systems and processes would be affected. As a result, IRS  lacks the information needed to make staffing and technology  decisions related to the workforce planning initiative, putting the  initiative at risk of further delay."], "subsections": []}, {"section_title": "IRS Could Improve Reporting on the Status of its Workforce Planning Initiative", "paragraphs": ["Treasury is required to conduct data-driven reviews via HRstat. HRStat  is a strategic human capital performance evaluation process that  identifies, measures, and analyzes human capital data to inform the  impact of an agency\u2019s human capital management on organizational  results with the intent to improve human capital outcomes. HRstat is also  a proven leadership strategy that can help agency officials monitor their  progress towards addressing important human capital efforts, such as  closing skills gaps.", "Treasury uses HRstat to monitor the progress of its bureaus in meeting  their human capital goals, including IRS\u2019s implementation of the  workforce planning initiative. In preparation for the data-driven reviews,  each bureau, including IRS, submits HRStat information to Treasury.  Treasury and bureau officials discuss the results and make related  strategic decisions during bi-monthly Human Capital Advisory Council  meetings. Our review of IRS HRstat reports, however, found additional  information is needed to more fully reflect the status of the workforce  planning initiative and related challenges. For example:  in the January, March, May and July 2018 HRstat submissions, IRS 1)  reported a status of green (on schedule) for \u201cIncreased efforts for  development of long-term IRS workforce staffing plan\u201d, and 2)  indicated under Key Issues/Challenges that completing the initiative  was dependent on ITM deployment;  in the July 2018 HRstat submission, IRS moved several milestones to  future fiscal years, and identified ITM delays as a significant risk to the  workforce planning initiative schedule;  in the September 2018 HRstat submission, IRS reported the status of  the workforce planning initiative was no longer on schedule. The  report identified ITM delays as the cause, but did not include other  reasons for the delay, specifically the redirection of resources to Tax  Cuts and Jobs Act implementation and a lack of strategic workforce  planning skills within HCO.", "Federal strategic human capital standards state agencies are to  communicate in an open and transparent manner to facilitate cross- agency collaboration to achieve mission objectives. In addition, agency  leaders should hold managers accountable for knowing the progress  being made in achieving goals and, if progress is insufficient, understand  why and having a plan for improvement. More complete HRStat  information could help IRS and Treasury take fuller advantage of a key  opportunity to discuss and address workforce planning initiative delays at  Human Capital Advisory Council meetings."], "subsections": []}]}, {"section_title": "IRS is Not Fully Addressing Skills Gaps in Its Workforce", "paragraphs": [], "subsections": [{"section_title": "Strict Hiring Limits Contributed to Annual Declines in IRS Full-Time Equivalents Since 2011", "paragraphs": ["IRS full-time equivalents (FTE) have declined each year since 2011, and  declines have been uneven across different mission areas (see figure 5).  From fiscal years 2011 through 2017, IRS FTEs declined from 95,501 to  an estimated 77,685, an 18.7 percent reduction. Our analysis of the  President\u2019s Budget data produced by OMB found the reductions have  been most significant within IRS Enforcement, where staffing declined by  27 percent (fiscal years 2011 through 2017). In comparison, staff  supporting Taxpayer Service activities declined by 8.2 percent, while staff  within Operations Support declined by 12.7 percent (fiscal years 2011  through 2017.) IRS estimated FTEs would continue to decline across the  three areas in fiscal year 2018.", "IRS attributed staffing declines primarily to a policy decision to strictly limit  hiring. According to IRS, declining budgets over multiple years  necessitated decisions for how to reduce and control labor and labor- related costs, which accounted for around 74 percent of its budget  allocations in fiscal year 2017. One way IRS sought to control costs was  its decision to implement the Exception Hiring Process beginning in fiscal  year 2011. The process effectively froze replacement of employees lost to  attrition in most program areas, placed limits on external (nonseasonal)  hiring, added additional approval steps for new hires, and placed priority  on acquiring information technology and cybersecurity staff, according to  IRS officials. The Exception Hiring Process remains in place, but as we  discuss later, has evolved over time because IRS has received  supplemental funding and other priority areas have emerged. IRS also  limited overtime and training as a means of controlling costs."], "subsections": []}, {"section_title": "Declining Staffing Contributed to IRS Decisions to Scale Back Enforcement Activities", "paragraphs": ["Available staff was a key factor in decisions to scale back a number of  program activities, most predominantly in enforcement, according to IRS  officials. IRS officials told us that, unlike other areas where the agency is  legally required to perform certain functions, the agency has flexibility to  curtail many enforcement activities when attrition rates increase. Auditing  tax returns, for example, is a critical part of IRS\u2019s strategy to ensure tax  compliance and address the tax gap, or the difference between taxes  owed and those paid on time. Our analysis of IRS data shows the number  of individual returns audited has declined each year between fiscal years  2011 through 2017, a 40 percent decline (see figure 6).", "Reduced audit rates were not limited to individual returns. IRS data show  that audit rates of large corporations with assets $10 million or greater  declined from 17.7 percent in fiscal year 2011 to 7.9 percent in fiscal year  2017.", "We have previously reported on other areas in which staffing declines  affected IRS operations, including fewer nonfiler investigations, private  letter rulings, elimination of a bankruptcy program, and increases in the  time needed to close innocent spouse appeals. In addition, we have  made recommendations to IRS to better target its limited enforcement  resources so it can, for example, 1) maximize revenue yield of the income  tax, and 2) more effectively audit large partnerships. IRS agreed with the  recommendations and took some action to close them. As of October and  July 2018, respectively, those recommendations have not been fully  addressed."], "subsections": []}, {"section_title": "IRS Has Skills Gaps in Key Occupations", "paragraphs": ["As previously discussed, IRS is in the initial stages of implementing a  strategic workforce planning model, which could provide IRS with  information needed to understand what critical skills and competencies  are needed to meet its mission. However, according to IRS officials, the  agency has not used such a framework in recent years, making it difficult  to determine where skills gaps exist.", "Nonetheless, our analysis of Treasury documents, Enterprise Human  Resources Integration data, and interviews with agency officials found  IRS currently has skills gaps in key occupations. In fiscal year 2017,  Treasury conducted a department-wide analysis of mission critical  occupations (MCO) at risk of skills gaps. Treasury analyzed four factors  to determine and rank MCOs at highest risk for skills gaps: 1) 2-year  retention rate, 2) quit rate, 3) retirement rate, and 4) applicant quality.  Analysis of these factors can help build the predictive capacity of  agencies to identify mission critical skills gaps as they emerge. The  following are the MCOs relevant to IRS that Treasury determined to be at  medium or moderate risk for skills gaps, in order of risk: human resources specialist,  tax law specialist.", "In light of staff attrition since 2011, particularly within enforcement  occupations, we selected tax examiners and revenue officers to  demonstrate how IRS has implemented strategies, policies, and  processes for identifying and addressing skills gaps, and to identify critical  instances where those efforts have affected IRS\u2019s ability to identify and  close critical skills gaps."], "subsections": [{"section_title": "Tax Examiners", "paragraphs": ["Tax examiners are responsible for responding to taxpayer\u2019s inquiries  regarding preparation of a variety of tax returns, related schedules and  other documentation; resolving account inquiries; advising taxpayers of  enforcement actions; and managing sensitive case problems designated  as requiring special case handling. In addition, tax examiners analyze and  resolve tax-processing problems; adjust taxpayer accounts; prepare and  issue manual refunds; and compute tax, penalty, and interest.", "IRS documents note that the level of supervision, complexity, contacts,  and the scope of assigned workload varies for tax examiners across  performance levels. At the entry level, tax examiners are responsible for  receiving and initiating contacts with taxpayers to gather information and  resolve issues, and to gain compliance with laws and regulations while  dealing with taxpayers that may be evasive under sensitive situations. At  the intermediate level, tax examiners are responsible for handling a wide  variety of the most difficult or sensitive tax processing problems. Their  work products affect the taxpayer\u2019s filing status and tax liability for current,  prior, and future reporting requirements. At the senior\u2014or expert\u2014level,  tax examiners serve as a work leader over employees engaged in  accomplishing tax examining work, as well as perform a full range of  examination duties that include adjusting tax, penalty, and interest on  taxpayers\u2019 accounts and closing cases.", "Our analysis of OPM data found that, from fiscal years 2011 through  2017, the agency lost 18 percent of its total tax examiner workforce (see  figure 7). Additionally, the number of tax examiners in the intermediate  level declined by 34 percent during that same period. IRS officials told us  replacing tax examiners is particularly difficult not only because of the  general hiring restrictions affecting the entire IRS, but also because of the  significant amount of specialized expertise that must be developed to  perform in a specific area of tax law.", "According to IRS officials, in 2018 and in response to declining tax  examiner personnel, IRS doubled the dollar amount thresholds tax  examiners use to select refunds for additional audit. IRS officials told us  this means thousands of refunds that would have received additional  scrutiny due to errors or anomalies are no longer considered for follow-up  review by tax examiners, and the government is potentially missing  significant opportunities to collect revenue and enforce tax laws.", "Three of the four business divisions within IRS identified skill gaps among  its tax examiners.", "Large Business and International (LB&I). According to LB&I  officials, long-term vulnerability with their tax examiners is a major  concern, in part because LB&I has been unable to replenish its tax  examiner workforce given external hiring constraints and internal  promotion concerns (i.e., internal promotions can leave staffing gaps  at the lower ranks putting them at risk for skills gaps). According to  LB&I officials, having fewer tax examiners\u2014specifically fewer tax  examiners in key geographic locations\u2014is affecting its mission. For  example, LB&I reviews tax returns of foreign nationals and overseas  taxpayers, which are predominantly paper-based returns and have to  be processed manually. LB&I officials told us manual paper return  processing is time intensive and, with fewer tax examiners, puts IRS  at greater risk of having to pay interest to taxpayers for withholding  refunds due to processing delays.", "Small Business/Self-Employed (SB/SE). According to SB/SE  officials, gaps among tax examiners are evident and, as a result,  SB/SE has reduced work plans and increased the use of overtime.  Within SB/SE\u2019s Campus Exam/Automated Underreporter program,  officials identified staffing gaps that they attributed to the general  inability to hire behind attrition. According to SB/SE officials, as  managers and lead vacancies arise, tax examiners are often detailed  to fill the positions, which reduce the number of tax examiners  available to perform the work.", "Wage and Investment (W&I). According to W&I officials, they have  identified tax examiner skills gaps within their Accounts Management,  Submission Processing, and Return Integrity and Compliance  Services programs. To address identified skills gaps within W&I,  officials said they conduct annual Strategic Hiring Summits bringing  together stakeholders and business partners to jointly address filing  season staffing needs, staffing barriers and gaps, and hiring lessons  learned from prior filing seasons. According to W&I officials, these  efforts continue to improve their targeted hiring and timeliness of its  onboarding efforts. Other strategies that W&I plans to implement are  to bring in tax examiners earlier and provide them with the full  spectrum of training upfront rather than spreading the training out over  months or years. Additionally, they said tax examiners are going to be  cross trained on multiple types of inventory to increase their skills and  to address inventory backlogs."], "subsections": []}, {"section_title": "Revenue Officers", "paragraphs": ["Revenue officers are IRS civil enforcement employees who are trained to  conduct face-to-face contact with business and individual taxpayers who  have not resolved their tax obligations in response to prior  correspondence or contact. The role of revenue officers involves  explaining to taxpayers why they are not in compliance, advising them of  their financial obligation, and when necessary, taking appropriate  enforcement action. According to IRS, the goal is voluntary taxpayer  compliance through payment arrangements or compromises. However,  for taxpayers that remain noncompliant, revenue officers are trained to  take civil enforcement actions, such as filing a notice of lien to protect the  government\u2019s interest, including and up to seizing personal and business  property.", "According to IRS officials, it takes 4 to 5 years to train a new hire to  become an experienced senior or expert revenue officer. The senior or  expert levels are of particular importance to IRS\u2019s enforcement efforts. An  internal IRS study completed in June 2018 found that 84 percent of all  successful fraud referrals came from revenue officers at the senior/expert  skill level. Senior revenue officers also serve as classroom instructors and  perform on-the-job training of intermediate and entry-level staff. According  to IRS officials, this additional responsibility directly affects senior revenue  officers\u2019 ability to work fraud cases.", "Our analysis of OPM data shows that the total number of revenue officers  at IRS declined by nearly 40 percent from fiscal years 2011 through 2017,  and entry-level revenue officers declined by 86 percent during that same  period (see figure 8). IRS officials told us the declines were due to a  combination of attrition, limited hiring, and promotions.", "IRS decided to scale back nonfiler investigations in light of declining  staffing, according to IRS officials. We reported in tax year 2010 that IRS  started 3.5 million individual nonfiler cases and 4.3 million business  nonfiler cases. In tax year 2014, nonfiler cases dropped to 2 million for  individuals and 1.8 million for businesses, a reduction of 43 percent and  58 percent, respectively. More recently in fiscal year 2018, IRS data  show nonfiler investigations declined to 0.8 million for individuals and 0.4  million for businesses."], "subsections": []}]}, {"section_title": "IRS Collaborated with OPM and Treasury to Address Skills Gaps among Revenue Agents", "paragraphs": ["Since we designated addressing agencies\u2019 mission critical occupation  skills gaps as a high-risk area in 2011, OPM and agencies have launched  a number of initiatives to close skills gaps. For example, in 2011, OPM  and the Chief Human Capital Officer Council established an interagency  working group to identify mission critical occupations (MCO) at high risk  for skills gaps. The working group, also known as the Federal Agency  Skills Team (FAST), identified skills gaps in six government-wide  occupations, such as cybersecurity, human resources (HR) specialists,  and acquisition. The FAST also identified agency-specific MCOs at high  risk for skills gaps, which included IRS revenue agents. Subsequently,  Treasury was designated leader of a FAST subteam to develop a plan for  closing skills gaps among revenue agents. Treasury convened a group of  revenue agents from each of IRS\u2019s business divisions, IRS human  resource specialists with workforce planning expertise, and members of  IRS\u2019s training group. Table 1 shows the process the subteam used to  identify and address the causes of revenue agent skills gaps.", "The FAST brainstormed potential causes for skills gaps among revenue  agents (see figure 9). According to FAST documents, this process helped  the team understand the range of contributing factors that led to lower  than acceptable 2-year retention rates and a high quit rate among  revenue agents.", "Now that FAST identified the potential causes for the two indicators,  Treasury officials told us IRS is responsible for developing and  implementing strategies to close skills gaps among its revenue agents  and reporting on its progress. According to IRS documents, as of July  2018, the agency established communications with revenue agents to  increase awareness about detail and developmental opportunities that  are posted on IRS\u2019s Service-wide Detail Opportunities web page, and is  developing a plan for more effectively including revenue agents in  management training. Related IRS performance measures show that  posted detail opportunities for revenue agents have increased from 24 in  fiscal year 2016 to 69 in fiscal year 2018."], "subsections": []}, {"section_title": "IRS\u2019s HCO Provides Services to Help Address Skills Gaps, but Does Not Have the Capacity to Fully Meet Needs", "paragraphs": ["For a limited number of mission critical occupations, HCO provides  support to business divisions and program offices that need help  addressing workforce capacity concerns. For example, HCO conducts  competency assessments when a business division or program is  seeking to identify the top candidates for hire or promotion. Determining  critical competencies can help agencies effectively meet demographic,  technological, and other forces that are challenging government agencies  to change activities they perform and the goals that they must achieve,  how they do their business, and even who does the government\u2019s  business. HCO also conducts skills assessments when a division or  program office needs to determine the skill level of their existing  employees for the purposes of training, hiring, retention, or staffing  decisions. Agencies can use both competency and skills assessments to  help identify and address skills gaps.", "For competency assessments, HCO officials told us they develop annual  work plans that prioritize assessment scheduling for certain occupations  based on factors including available funding, business division, or  program office staff availability to assist HCO with subject matter  expertise, and the age of the competency model or assessment. For  example, in 2017, HCO supported a competency assessment for special  agents within its Criminal Investigations (CI) division. CI special agents  are forensic accountants searching for evidence of criminal conduct. HCO  officials told us competency assessments for special agents are a priority  due to rapidly evolving sophistication of schemes to defraud the  government and increasing use of automated financial records. IRS used  information resulting from the competency assessment to revamp the  special agent hiring process. According to HCO officials, results from the  competency assessment have helped IRS reduce the cost and time to  assess applicants while improving the overall candidate pool.", "Skills assessments supported by HCO have been used in some limited  cases to help IRS identify and address skills gaps among certain MCOs.  According to HCO officials, they provide skills assessments upon request  by a business division and program office, assuming personnel and  funding resources are available. IRS business divisions or program  offices cover costs associated with large-scale assessments where  contractor support is needed to supplement HCO\u2019s staff. Skills  assessments among occupations with smaller populations usually do not  incur costs to the divisions. HCO has supported requested skills  assessments of information technology specialists, revenue agents, and  human resources specialists in recent years. IRS documents show these  assessments were used in part to identify and address skills gaps within  these occupations.", "Unlike competency assessments, however, IRS does not create a work  plan or otherwise prioritize skills assessments to address those  occupations most in need. As discussed above, Treasury has identified  MCOs at moderate to high risk for skills gaps, yet skills assessments  have not addressed all the occupations identified as highest risk. Leading  practices in strategic workforce management state that agencies should  determine the critical skills and competencies its workforce needs to  achieve current and future agency goals and missions, and identify gaps,  including those that training and development strategies can help  address. A work plan for addressing skills gaps could help IRS  remediate gaps on a timely basis. Without a plan, IRS risks having to  continue scaling back mission-critical activities as it has done in recent  years."], "subsections": []}]}, {"section_title": "IRS Faces Challenges in Its Ability to Hire Key Employees", "paragraphs": [], "subsections": [{"section_title": "HCO Has Limited Staffing Capacity to Hire New Employees", "paragraphs": ["As previously discussed, Treasury found IRS is at risk of skills gaps  among its mission critical occupations, including its HR specialists. In light  of related agency-wide hiring limits, IRS offered early retirement  incentives for eligible hiring specialists and did not backfill other  specialists when they left the agency. HCO has lost more than half of its  hiring specialists since 2011. According to HCO, the hiring skills of  remaining specialists atrophied as those specialists were redirected to  other priority HR areas.", "Many of HCO\u2019s hiring and other HR responsibilities, however, have  remained constant or increased. For example, in fiscal year 2017, IRS  hired around 6,700 seasonal employees to assist with the filing season  and HCO expects that number to increase in future fiscal years. HCO  officials told us the pace of internal hiring (i.e., promotions) remained  constant over the past several years. IRS has recently prioritized hiring to  address information technology and cybersecurity areas, as well as  implementation of the Tax Cuts and Jobs Act. As a result of the  combination of fewer hiring specialists and new hiring requirements, HCO  officials said its capacity to hire and carry out other important human  capital and HR functions is highly strained.", "In 2018, HCO identified improving hiring capacity as its top priority and is  exploring a variety of options, including:", "HCO surge contracting: Contractors will be used in locations across  the employment offices to assist with hiring and personnel security.", "Leverage Administrative Resource Center (ARC) services. ARC is  part of Treasury and provides administrative services, including HR  support for various federal agencies. HCO engaged ARC in May 2018  to assist with developing hiring qualifications.", "OPM shared services. IRS is exploring use of OPM shared services  for help in the hiring process.", "Business-based HR teams: Teams within the divisions have been  given authority to post internal merit promotion supervisory vacancy  announcements, which will reduce HCO\u2019s workload for this function.", "HCO will retain responsibility for building positions, setting pay, and  processing personnel actions, and will provide a dedicated point of  contact for questions and quality review.", "Federal Executive Board team: A group of Interagency Agreement  detailees supported by Wage and Investment (W&I) to work W&I  vacancy announcement backlogs. IRS officials told us that, as of  November 2018, this option had not been successful.", "HCO interagency detail opportunity: Employees detailed from other  federal agencies into HR positions throughout HCO using interagency  agreements.", "HCO officials told us they are generally monitoring the status of these  activities, but cited competing priorities as a reason they have not  determined how each activity will be evaluated in achieving increased  hiring capacity and associated outcomes. Periodic measurement of an  agency\u2019s progress toward human capital goals and the extent that human  capital activities contributed to achieving programmatic goals provides  information for effective oversight by identifying performance shortfalls  and appropriate corrective actions. Without a means for gauging the  relative success of its capacity-building activities, IRS risks spending its  limited HCO resources on activities that may not help the agency meet its  desired hiring outcomes."], "subsections": []}, {"section_title": "IRS Has Identified Hiring Risks Related to Tax Cuts and Jobs Act Implementation", "paragraphs": ["IRS established a risk register as part of efforts to identify, prioritize, and  mitigate risks to IRS\u2019s implementation of the Tax Cuts and Jobs Act,  including a number of risks related to its ability to hire. A risk register is  used to identify the source of risks, owners to manage the treatment of  those risks, and track the success of risk mitigation strategies over time.  Risk registers or other comprehensive risk reports are an essential  element of a successful enterprise risk management program.", "The risk register shows that a lack of strategic workforce planning in  recent years is contributing to a number of risks IRS has faced in  implementing the Tax Cuts and Jobs Act. For example:", "Large Business and International (LB&I) is having difficulty hiring  senior advisors needed to develop training and compliance strategies.  The risk register indicates mitigation efforts in this area, such as  extending detail opportunities, have failed and there are potential  major impacts to the program. According to LB&I officials, staffing  declines in related skills prior to the Tax Cuts and Jobs Act have  exacerbated difficulties in this area.", "Business units have been unable to identify critical hiring needs for  the Tax Cuts and Jobs Act. As of October 2018, HCO is coordinating  with business units to help determine hiring needs so that it can  prioritize agency hiring efforts.", "In a related risk, IRS determined the lack of personnel and resources  within W&I may hinder its ability to identify hiring needs for the fiscal  year 2019 filing season. According to IRS, \u201cthe  filing season  may be impacted by significant resource constraints largely due to  onboarding concerns, resulting in lost revenue, increased cost, and  significant reputational impact to the IRS.\u201d As of October 2018, IRS  stated it has completed necessary hiring plans and determined this  risk has minimal to no impact to IRS\u2019s ability to carry out the upcoming  filing season.", "Table 2 shows additional examples of risks related to hiring identified by  IRS, steps the agency is taking to mitigate those risks, and the status as  of October 2018.", "In September 2018, the Treasury Inspector General for Tax  Administration (TIGTA) reviewed IRS\u2019s information technology readiness  for implementing Tax Cuts and Jobs Act. TIGTA reported IRS used  standard position descriptions for hiring efforts and had not defined  specific knowledge, skills, abilities, and other requirements necessary for  positions it expects to hire for Tax Cuts and Jobs Act implementation,  and/or back-filling existing positions due to personnel performing related  activities. We did not review position descriptions for the purposes of this  report. However, as previously discussed, without information about what  skills and skills gaps exist across the agency, IRS lacks important  information needed to inform hiring and training resource decisions."], "subsections": []}, {"section_title": "Changes to IRS\u2019s Hiring Process Have Contributed to Hiring Delays", "paragraphs": ["It can take a year or longer from the time when a supervisor notifies his or  her division of a staffing need to the time the employee is on board,  according to IRS documents and our interviews. HCO officials attributed  much of this time to gathering required information and approvals  associated with IRS\u2019s \u201cException Hiring Process.\u201d", "In fiscal year 2011, IRS instituted the process in part to help the agency  prioritize hiring decisions in a highly constrained budget environment. The  Exception Hiring Process added approval layers to IRS\u2019s regular hiring  requirements, including direct approval from the Deputy Commissioner for  Operations Support, the Deputy Commissioner for Services and  Enforcement, or the Chief of Staff for direct reports to the Commissioner.  Also as part of this process, the Chief Financial Officer performs a cost  assessment to determine the affordability of any requested new hire, and  HCO determines if multiple hiring requests can be consolidated into a  smaller number of positions.", "Our review of IRS budget operating guidance and interviews found  Exception Hiring Process requirements have changed over time. Initially  in 2011, every new hire was subject to the Exception Hiring Process.  Since 2011, hiring requirements have eased in some circumstances. For  example, in 2014, business division directors were given authority to  approve internal hires (i.e., promotions) within their own business division.  More recently, new hires in cybersecurity, information technology, or  those needed to implement the Tax Cuts and Jobs Act were not subject  to the same requirements as hiring requests in other occupations.", "According to HCO officials, easing hiring requirements in certain  circumstances was necessary to help the agency bring on critical hires  more quickly. However, based on their interactions with managers in the  business divisions, HCO officials said the evolving and nonuniform  Exception Hiring Process requirements has been confusing to managers  requesting new hires. Business divisions and program offices often  submitted hiring requests without required information or approvals. This  has resulted in hiring delays, according to HCO officials. HCO officials  told us that issuing clearer guidance to business managers would help  ensure business divisions submit hiring requests that are complete, which  would reduce the risk of hiring delays."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In light of declining resources and increasing requirements, IRS is taking  the initial steps to reinstate a strategic approach to workforce planning  that the agency scaled back in recent years. IRS has recently provided its  HCO with authority to lead and coordinate agency-wide strategic  workforce planning efforts. However, full implementation of an IRS  initiative to conduct agency-wide strategic workforce planning has been  put on hold as other activities have taken priority, and a key workforce  planning system being developed by Treasury has been delayed. As a  result, these efforts remain fragmented, and IRS lacks an inventory of its  current workforce, has neither developed the competency and staffing  requirements nor conducted agency-wide activities associated with  analyzing the workforce to identify skills gaps, or developed strategies to  address skills gaps. Additionally, IRS could improve reporting of its  progress in addressing skills gaps. This critical information will help  provide assurance that its fragmented human capital activities are well  managed or that resources are being effectively allocated.", "High attrition among IRS employees, particularly in complex enforcement  occupations and lower-than-average employee satisfaction rates, puts  IRS at continued risk of skills gaps. These skills gaps have already been  a significant contributor to IRS\u2019s decisions to scale back important  enforcement activities that are critical to promoting voluntary compliance  and closing the tax gap. However, IRS has not targeted its limited  resources to addressing issues among the mission critical occupations  most at risk of skills gaps. Instead, activities such as skills gaps  assessments are only conducted to the extent business divisions and  program offices make resources available, and management is aware of  and inclined to seek assistance from IRS\u2019s HCO. Reporting on the results  of efforts to close skills gap and developing a work plan or other  mechanism for prioritizing assessments would better position IRS to  address key gaps. Additionally, the results of an interagency working  group effort intended to address skill gaps among IRS revenue agents  and other occupations with skills gaps across the government may hold  important lessons for addressing skills gaps among mission critical  occupations at IRS.", "Each of these issues is exacerbated by limited capacity within HCO,  which has redirected its resources to implementing the Tax Cuts and  Jobs Act and meeting other routine transactional human resource  requirements. HCO is leveraging a range of activities intended to help the  agency meet immediate hiring needs. Measuring the extent to which each  of activities is effective would help HCO target resources to the most  effective activities as it seeks to improve its capacity for hiring employees  in hard to fill positions in the future. In addition, issuing clear guidance on  hiring request requirements would better position IRS to avoid hiring  delays for mission-critical occupations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making seven recommendations, six to IRS and one to Treasury.  Specifically:  The Commissioner of the IRS should fully implement the workforce  planning initiative, including taking the following actions: (1) conducting  enterprise strategy and planning, (2) conducting workforce analysis, (3)  creating a workforce plan, (4) implementing the workforce plan, and (5)  monitoring and evaluating the results. (Recommendation 1)", "The Secretary of the Treasury should issue clarifying guidance to IRS  about the Integrated Talent Management system, including when the  workforce planning and talent management modules will be deployed and  available for IRS\u2019s use, the functions it will include, and how IRS\u2019s  existing systems and processes within business divisions and program  offices will be affected. (Recommendation 2)", "The Commissioner of IRS should ensure the Human Capital Officer  improves reporting for its workforce planning initiative in its bi-monthly  HRstat information submissions to Treasury. The submissions should  include the original implementation schedule, changes to the original  schedule, delays in implementation and each of their causes, and IRS\u2019s  strategy to address the causes of those delays. (Recommendation 3)", "The Commissioner of IRS should ensure the Human Capital Officer and  Deputy Commissioner for Services and Enforcement report the results of  efforts to close skills gaps among revenue agents, including lessons  learned, that may help inform strategies for conducting skills gap  assessment efforts for other mission critical occupations.  (Recommendation 4)", "The Commissioner of IRS should ensure the Human Capital Officer and  Deputy Commissioner for Services and Enforcement collaborate to  develop a work plan or other mechanism that prioritizes and schedules  skills assessments for mission critical occupations at highest risk of skills  gaps, such as those identified by Treasury or where key activities have  been scaled back, for the purposes of developing a strategy to close the  gaps. (Recommendation 5)", "The Commissioner of IRS should direct the Human Capital Officer to  measure the extent to which each of its activities for improving hiring  capacity are effective in producing desired hiring capacity outcomes,  including strategies used to mitigate hiring risks associated with Tax Cuts  and Jobs Act implementation hiring. (Recommendation 6)", "The Commissioner of IRS should direct the Human Capital Officer and  Chief Financial Officer to issue clarifying guidance on the current  Exception Hiring Process, including clarifying areas where hiring  limitations that were used in previous years are no longer applicable.  (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Commissioner of the Internal  Revenue Service, the Secretary of the Treasury, and the Acting Director  of the Office of Personnel Management for review and comment. In a  letter from IRS\u2019s Deputy Commissioner for Operations Support,  reproduced in appendix II, IRS agreed with our six recommendations  directed to it. The letter states there is room for improvement in  implementing its strategic workforce plan and the associated workforce  planning initiative, and IRS will provide a detailed corrective action plan in  their 180-day response to Congress. IRS also provided technical  comments, which we incorporated as appropriate.", "For Treasury, the Acting Director, Human Capital Strategic Management,  the Office of the Deputy Assistant Secretary for Human Resources and  Chief Human Capital Officer, emailed comments stating Treasury agreed  with the one recommendation directed to it. In the comments, Treasury  wrote, \u201cthe [Deputy Assistant Secretary for Human Resources and Chief  Human Capital Officer] will continue to provide guidance, policy and  direction on how the ITM is used to meet Workforce Planning objectives.\u201d  Treasury provided technical comments on the recommendation directed  to it, and we revised the recommendation as appropriate to recognize that  bureaus, not Treasury, implement the ITM.", "OPM did not have comments.", "We are sending copies of this report to interested congressional  committees, the Commissioner of IRS, the Secretary of the Treasury, and  other interested parties. This report will also be available at no charge on  our website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512- 9110 or McTigueJ@gao.gov. Contact points for our  offices of Congressional Relations and Public Affairs are on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["You asked us to review the Internal Revenue Service\u2019s (IRS) enterprise- wide strategic workforce planning efforts. In this report, we assess (1)  how IRS defines its workforce needs and develops strategies for shaping  its workforce; (2) the extent to which IRS identified the critical skills and  competencies it will require to meet its goals, and describe its strategy to  address skills gaps in its workforce; and (3) the extent to which IRS\u2019s  Human Capital Office has the capacity to hire employees in hard to fill  positions.", "For our first objective, to determine how IRS defines its workforce needs,  we conducted a review of IRS\u2019s implementation of its strategic workforce  planning process. We compared IRS\u2019s strategic workforce planning  guidance, policies, and procedures, as well as the Department of the  Treasury\u2019s (Treasury) guidance and policies to (1) Office of Personnel  Management (OPM) regulations and guidance on strategic workforce  planning, (2) our reports on key principles for effective strategic workforce  planning, and (3) standards for internal controls. To describe how IRS  workforce planning process aligns with standards, we reviewed IRS\u2019s  documentation of its programs, policies, and practices for recruiting,  developing, and retaining the staff needed to achieve program goals. We  compared that information with requirements articulated in OPM  regulations and best practices we has identified. To include prior actions  and concerns previously identified as related to IRS\u2019s strategic human  capital planning, we reviewed our prior relevant reports and those from  the Treasury Inspector General for Tax Administration.", "We also used several databases to examine IRS\u2019s workforce trends. To  analyze trends in IRS\u2019s full-time equivalent employment, we used the  Office of Management and Budget\u2019s (OMB) budget database, MAX  Information System (MAX), for fiscal years 2011 through 2017. To  analyze employee engagement and employee global satisfaction at IRS,  we analyzed IRS results from OPM\u2019s fiscal years 2011 through 2017 Federal Employee Viewpoint Survey (FEVS). To determine retirement  eligibility of SES and non-SES IRS staff, we analyzed data in OPM\u2019s  Enterprise Human Resources Integration (EHRI) database. To assess  the reliability of EHRI, OMB Max, and FEVS data, we reviewed our past  data reliability assessments and conducted electronic testing to evaluate  the accuracy and completeness of the data used in our analyses. For  EHRI and FEVS, we also interviewed knowledgeable agency officials. We  determined the data used from these three systems to be sufficiently  reliable for our purposes.", "We supplemented our review of documentation by interviewing relevant  IRS, Treasury, and OPM officials. We interviewed IRS officials from the  Human Capital Office including the Human Capital Officer, Large  Business & International (LB&I), Small Business Self Employed (SB/SE),  Tax Exempt and Government Entities (TE/GE), and Wage & Investment  (W&I) business divisions to understand how IRS assesses its workforce  needs and develops strategies for shaping its workforce. We interviewed  OPM officials about regulatory requirements and their perspective on  strategic human capital planning requirements, as well as their  experience working with Treasury and IRS. We met with Treasury and  Taxpayer Advocate Service officials to understand their role and  responsibilities for coordinating with and providing oversight of IRS  activities. We reviewed IRS\u2019s practices and related documentation for  monitoring and evaluating progress toward human capital goals, including  Treasury\u2019s HRStat reports.", "For objective 2, to assess the extent IRS identified and described critical  skills required to meet its goals, in addition to activities performed to  address objective 1, we selected a nongeneralizable sample of  occupations identified by IRS as mission critical to illustrate how IRS has  implemented strategies, policies, and processes for identifying and  addressing skills gaps, and to identify critical instances where those  efforts have affected IRS\u2019s ability to identify and close critical skills gaps.  Because IRS\u2019s workforce planning efforts are generally conducted by  mission critical occupations (MCO), we selected MCOs as our unit of  analysis. We excluded MCOs with characteristics that made them unlikely  to yield new or useful information for the purposes of our report. MCOs  were excluded from our analysis if they (1) were under review as part of  our recent or ongoing work, (2) had small numbers of staff (less than  100), or (3) were assessed by Treasury to be at low risk for skills gaps.  The Treasury assessment ranked MCOs in order of risk for skills gaps  based on", "2-year retention rate, applicant quality.", "Based on these criteria, we selected revenue officers and tax examiners  as occupational case illustrations representing tax enforcement activities.  These two occupations, in tandem with discussion of Treasury\u2019s efforts to  close skills gaps among revenue agents, while not generalizable,  provided illustrative examples for this objective. We analyzed IRS\u2019s audit  rate of individual and corporate returns to show a change in the number  of audits for fiscal years 2011 through 2017 based on data reported by  IRS in its annual Data Book.", "To obtain information to illustrate the current state of the selected MCOs  located within the four business divisions, we sent the business divisions  a semistructured set of written questions coupled with a request to  provide corroborating documents to support their responses. We asked  each business division for information about related MCOs, including: hiring data and retirement eligibility rates for MCOs;  skills, competency, or staffing gaps identified among its MCOs; and any resource tradeoff decisions made as a result of skills gaps.", "To supplement the information we gathered from responses to our written  question responses, we also reviewed IRS and Treasury documents for  addressing skills gaps for revenue agents that were conducted after we  identified mission critical skills gaps as a government-wide high-risk issue  in 2011.", "For objective 3, to assess the extent IRS\u2019s Human Capital Office has the  capacity to hire employees in hard to fill positions, we reviewed  documentation related to IRS hiring requirements, including the Internal  Revenue Manual and policy explaining the Exception Hiring Process. We  interviewed division directors from each of IRS\u2019s major business divisions  (W&I, LB&I, TE/GE, and SBSE) to understand their hiring experience and  impressions of time-to-hire and candidate quality results related to the  exception hiring process. We interviewed senior officials responsible for  IRS\u2019s hiring function. We reviewed documentation related to systems  used to process and onboard new hires.", "We conducted this performance audit from August 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Tom Gilbert (Assistant Director),  Shea Bader (Analyst-in-Charge), Crystal Bernard, Jacqueline Chapin,  James Andrew Howard, Meredith Moles, Steven Putansu, and Robert  Robinson made major contributions to this report. Devin Braun, Regina  Morrison, Erin Saunders-Rath, and Sarah Wilson provided key  assistance."], "subsections": []}]}], "fastfact": ["Fewer individual and corporate tax returns have been audited in recent years, largely because IRS doesn't have the people it needs to enforce existing tax laws while implementing new laws. As a result, billions of dollars in taxes go unpaid every year. Enforcing tax laws, a High Risk area, is critical to promoting voluntary compliance and collecting unpaid taxes.", "IRS's workforce is the key to addressing its challenges. Cultivating a well-equipped and engaged workforce requires strategic human capital management that will help IRS focus its current and future hiring needs.", "We made 6 recommendations to improve IRS's human capital management."]}
{"id": "GAO-18-56", "url": "https://www.gao.gov/products/GAO-18-56", "title": "Forest Service: Improvements Needed in Internal Controls over Budget Execution Processes", "published_date": "2018-01-31T00:00:00", "released_date": "2018-01-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Forest Service, an agency within USDA, performs a variety of tasks as steward of 193 million acres of public forests and grasslands. Its budget execution process for carrying out its mission includes (1) allotments, which are authorizations by an agency to incur obligations within a specified amount, and (2) unliquidated obligations, which represent budgetary resources that have been committed but not yet paid. Deobligation refers to an agency's cancellation or downward adjustments of previously incurred obligations, which may result in funds that may be available for reobligation.", "GAO was asked to review the Forest Service's internal controls over its budget execution processes. This report examines the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) review and certification of unliquidated obligations.", "GAO reviewed the Forest Service's policies, procedures, and other documentation and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In fiscal years 2015 and 2016, the Forest Service received discretionary no-year appropriations of $5.1 billion and $5.7 billion, respectively. It is critical for the Forest Service to manage its budgetary resources efficiently and effectively. While the Forest Service had processes over certain of its budget execution activities, GAO found the following internal control deficiencies:", "Budgetary resources . The purpose statute requires that amounts designated in appropriations acts for specific purposes are used as designated. The Forest Service did not have an adequate process and related control activities to reasonably assure that amounts were used as designated. In fiscal year 2017, GAO issued a legal opinion that the Forest Service had failed to comply with the purpose statute with regard to a $65 million line-item appropriation specifically provided for the purpose of acquiring aircraft for the next-generation airtanker fleet. Further, the Forest Service lacked a process and related control activities to reasonably assure that unobligated no-year appropriation balances from prior years were reviewed for their continuing need; did not have a properly designed system for administrative control of funds, which keeps obligations and expenditures from exceeding limits authorized by law; and had not properly designed control activities for fund transfers to its Wildland Fire Management program. These deficiencies increase the risk that the Forest Service may make budget requests in excess of its needs.", "Reimbursable agreements . To carry out its mission, the Forest Service enters into reimbursable agreements with agencies within the U.S. Department of Agriculture (USDA), other federal agencies, state and local government agencies, and nongovernment entities. The Forest Service (1) did not have adequately described processes and related control activities in manuals and handbooks for its reimbursable agreement processes and (2) lacked control activities related to segregating incompatible duties performed by line officers and program managers. For example, line officers may be responsible for initiating cost sharing agreements, modifying cost settlement packages, and changing or canceling the related receivable, which represent incompatible duties. As a result, programs and resources may not be protected from waste, fraud, and mismanagement.", "Unliquidated obligations . The Forest Service's processes and control activities over the review and certification of unliquidated obligations were not properly designed to reasonably assure the best use of funds and that unliquidated obligations would be efficiently and effectively deobligated and made available for other program needs. Further, the current process, as designed, was inconsistent with USDA and Forest Service policy.", "In addition, the Forest Service's manuals and handbooks, which provide directives for the areas that GAO reviewed, had not been reviewed by management in accordance with the Forest Service's 5-year review policy. Further, standard operating procedures and desk guides prepared by staff to supplement the manuals and handbooks were not issued as directives and therefore were not considered official policy. This increases the risk that control activities may not be consistently performed across the agency."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 11 recommendations to improve processes and related internal control activities over the management of the Forest Service's budgetary resources, reimbursable receivables and collections, and its process for reviewing unliquidated obligations. The Forest Service generally agreed with the report and stated that it has made significant progress to address the report findings."]}], "report": [{"section_title": "Letter", "paragraphs": ["As steward of a reported 193 million acres of public forests and  grasslands, the Forest Service, an agency within the U.S. Department of  Agriculture (USDA), performs a variety of tasks, such as fighting wildland  fires, restoring forest landscapes and rivers, and patrolling and  maintaining the national forests\u2019 remote recreational trails. In fiscal years  2015 and 2016, the Forest Service received discretionary appropriations  of $5.1 billion and $5.7 billion, respectively, to carry out its mission at  national forests, national grasslands, and research stations across the  country. For fiscal year 2016, the Forest Service\u2019s largest program, the  Wildland Fire Management program, received $2.4 billion or 42 percent of  the fiscal year\u2019s discretionary appropriated funds, of which about   $1.9 billion was for preparedness and fire suppression subprograms.", "With geographically widespread operations and a diverse portfolio of  work, it is critical for the Forest Service to manage its budgetary  resources efficiently and effectively. Specifically, this includes (1) making  budgetary resources available to program activities timely, (2) allotting  resources to programs for the purposes provided in applicable  appropriations acts, (3) timely deobligating funds from unliquidated  obligations that the agency determined are no longer needed, and   (4) efficiently and effectively managing unobligated balances.", "You asked us to review the Forest Service\u2019s internal control practices  over its budget execution processes. This report examines the extent to  which the Forest Service properly designed control activities over   (1) allotments of budgetary resources, its system for administrative  control of funds, and any fund transfers between Forest Service  appropriations; (2) reimbursables and related collections; and (3) reviews  and certification of unliquidated obligations.", "To assess the design of the Forest Service\u2019s control activities over its  budget execution processes, we obtained an understanding of entity-level  controls at the Forest Service related to its (1) allotments of budgetary  resources, its system for administrative control of funds, and any related  fund transfers between Forest Service appropriations; (2) reimbursables  and related collections; and (3) reviews and certification of unliquidated  obligations. We interviewed agency officials to gain an understanding of  the Forest Service\u2019s business processes. We reviewed Forest Service  documents, which included a list of control objectives with applicable  control activities and policies and procedures related to its budget  execution processes. We reviewed these documents to determine  whether the control activities were clearly described and whether the roles and responsibilities associated with the ownership and operation of  the controls were clearly defined to help ensure that the control activities  would achieve the applicable control objective(s). Appendix I provides a  more detailed description of our scope and methodology, and appendix II  provides additional details on standards for internal control in the federal  government.", "While our audit focused on control activities over the three areas of the  Forest Service\u2019s budget execution processes discussed, we did not  evaluate the control environment, risk assessment, information and  communications, and monitoring components of internal control. Had we  done so, additional deficiencies may or may not have been identified as  part of our audit.", "We conducted this performance audit from August 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Forest Service Mission and Structure", "paragraphs": ["The Forest Service\u2019s mission includes sustaining the nation\u2019s forests and  grasslands; managing the productivity of those lands for the benefit of  citizens; conserving open space; enhancing outdoor recreation  opportunities; and conducting research and development in the biological,  physical, and social sciences. The agency carries out its responsibilities  in three main program areas: (1) managing public lands, known  collectively as the National Forest System, through nine regional offices,  154 national forests, 20 national grasslands, and over 600 ranger  districts; (2) conducting research through its network of seven research  stations, multiple associated research laboratories, and 81 experimental  forests and ranges; and (3) working with state and local governments,  forest industries, and private landowners and forest users in the  management, protection, and development of forest land in nonfederal  ownership, largely through its nine regional offices. According to the  Forest Service, it employs a workforce of over 30,000 employees across  the country. However, this number grows by thousands in the summer  months, when the agency hires seasonal employees to conduct fieldwork,  respond to wildland fires, and meet the visiting public\u2019s needs.", "The Office of the Chief of the Forest Service is located in Washington,  D.C., with 27 offices reporting directly to the Office of the Chief, as  illustrated in figure 1.", "The nine national forest regions, each led by a regional forester, oversee  the national forests and grasslands located in their respective regions.  Each national forest or grassland is headed by a supervisor, the seven  research stations are each led by a station director, and a state and  private forestry area is headed by an area director. The Forest Service  collectively refers to its forest regions, research stations, and area as  RSAs. The RSAs are organized differently according to their operations,  and comparable operations within the RSAs, such as collections from  reimbursable agreements, may be processed differently in the various  regions and stations, resulting in highly decentralized operations. In  addition, the offices of the Chief Financial Officer (CFO); Deputy Chief of  Business Operations (includes the budget office); and eight other offices  located in the Washington, D.C., headquarters also report directly to the  Office of the Chief of the Forest Service."], "subsections": []}, {"section_title": "Forest Service Budget and Control Activities", "paragraphs": ["The Forest Service receives appropriations for its various programs and  for specific purposes to meet its mission goals. Prior to fiscal year 2017,  the Forest Service\u2019s budgetary resources consisted primarily of no-year  funds. Its budget office in Washington, D.C., initiates apportionment  requests and monitors the receipt of Department of the Treasury  (Treasury) warrants. Upon receipt of the warrant, the apportionment is  recorded in the financial system and then the budget office develops an  allocation summary detailing the allocation of its budget authority by fund,  programs within the funds, and distribution of funds at the regional,  station, and area levels. The Forest Service may also transfer funds from  other appropriations to the appropriations account that funds its fire  suppression activities when available funds appropriated for fire  suppression and the Federal Land Assistance, Management, and  Enhancement (FLAME) fund will be exhausted within 30 days.", "The Forest Service\u2019s administrative policies, practices, and procedures  are issued in its Directive System, which provides a unified system for  issuing, storing, and retrieving internal direction that governs Forest  Service programs and activities. The Directive System consists of the  Forest Service\u2019s manuals and handbooks. The manuals contain  management objectives, policies, and responsibilities and provide general  direction to Forest Service line officers and staff directors for planning and  executing their assigned programs and activities. The handbooks provide  detailed direction to employees and are the principal source of  specialized guidance and instruction for carrying out directions issued in  the manuals. Line officers at the national and RSA levels have authority  to issue directives in the manuals and handbooks under their respective  jurisdictions. The Forest Service\u2019s policy states that the Directive System  is the only place where Forest Service policy and procedures are  issued. In addition to the Directive System, Forest Service staff have  also developed standard operating procedures (SOP) and desk guides to  supplement guidance provided in directives. However, the SOPs and  desk guides are not part of the Forest Service Directive System and  therefore are not official policy and procedures."], "subsections": []}]}, {"section_title": "Forest Service Did Not Properly Design Control Activities for Its Allotments Process, Administrative Control of Funds, and Fund Transfers", "paragraphs": ["While the Forest Service had documented processes for allotting its  budgetary resources, it did not have an adequate process and related  control activities for reasonably assuring that (1) amounts designated in  appropriations acts for specific purposes are used as designated and   (2) unobligated no-year appropriation balances from prior years were  reviewed for their continuing need. In addition, the Forest Service did not  have a properly designed and documented system for administrative  control of funds. Finally, the Forest Service had not properly designed  control activities for fund transfers for fire suppression activities under its  Wildland Fire Management program."], "subsections": [{"section_title": "Forest Service Does Not Have an Adequate Process and Related Control Activities for Reasonably Assuring That Appropriated Amounts Are Used for the Purposes Designated", "paragraphs": ["While the Forest Service had documented processes for allotting its  budgetary resources, it did not have an adequate process and related  control activities to reasonably assure that amounts designated in  appropriations acts for specific purposes are used as designated\u2014as  required by the purpose statute, which states that \u201cappropriations shall be  applied only to the objects for which the appropriations were made except  as otherwise provided by law.\u201d We reviewed Forest Service documents  about its budget authority processes, which included control objectives,  related control activities, and processes over the allotment of its  budgetary resources. We found that these documents, including  manuals and handbooks, did not include an adequate process and  related control activities for assuring that appropriated amounts are used  for the purposes designated. For example, such a process would include  the Forest Service allotting appropriated funds for specific programs or  objects as provided in the applicable appropriation act, by either using specific budget line items already defined in the Forest Service\u2019s financial  system or creating new budget line items, as needed.", "Standards for Internal Control in the Federal Government states that  management should define objectives clearly to enable the identification  of risks and design appropriate control activities to achieve objectives and  respond to the risks identified.", "As a result of the Forest Service not having an adequate process and  related control activities for assuring that appropriated amounts are used  for the purposes designated, the Forest Service did not properly allocate  certain funds for specific purposes detailed in the appropriations acts for  fiscal years 2015 and 2016. For example, in fiscal year 2015, the Forest  Service did not set aside in its financial system the $65 million specified in  the fiscal year 2015 appropriations act for acquiring aircraft for the next- generation airtanker fleet. According to Forest Service documents, as of  January 6, 2016, $35 million of the designated funds was used for other  purposes. In February 2017, we issued a legal opinion, related to the  Forest Service\u2019s use of the $65 million, which concluded that the Forest  Service had failed to comply with the purpose statute. According to  USDA\u2019s Office of General Counsel, \u201cthis lack of any separate  apportionment or account for the next-generation airtanker fleet was due to the fact that it was a new item, not included in the agency\u2019s budget  request, and added late in the appropriations process.\u201d Similarly, in fiscal  year 2016, the Forest Service did not create new budget line items to  reserve in its financial system $75 million for the Forest Inventory and  Analysis Program specified in the fiscal year 2016 appropriations act.  Rather than creating a new budget line item for the program specified in  the appropriations act, the funds were combined with an existing budget  line item, making it difficult to track related budget amounts and actual  expenditures. The lack of an adequate process and related control  activities to reasonably assure that appropriated amounts are used for the  purpose designated also increases the risk that the Forest Service may  violate the Antideficiency Act."], "subsections": []}, {"section_title": "Forest Service Lacked a Process and Related Control Activities over the Review of Unobligated No- Year Funds from Prior Years", "paragraphs": ["The Forest Service did not have a process and related control activities to  reasonably assure that unobligated, no-year funds from prior years were  reviewed for continuing need. We reviewed the Forest Service\u2019s budget  authority process document and related manuals and handbooks, which  documented control objectives and procedures over its budgetary  resources and the guidance for administrative control of funds. We found  that these documents did not include a process for reviewing the Forest  Service\u2019s unobligated, no-year funds from prior years and related control  activities to reasonably assure that such funds were reviewed for  continuing need. Such reviews, if performed, may identify unneeded  funds that could be reallocated to other programs needing additional  budgetary resources, if consistent with the purposes designated in  appropriations acts.", "The USDA Budget Manual states as a department policy that \u201cagencies  of the Department have a responsibility to review their programs  continually and recommend, when appropriate, deferrals or rescissions.\u201d  The USDA Budget Manual further states the following:  \u201cAgency officials should remain alert to this responsibility since the  establishment of reserves is an important phase of budgetary  administration. If it becomes evident during the fiscal year that any  amount of funds available will not be needed to carry out foreseeable  program requirements, it is in the interest of good management to  recommend appropriate actions, thereby maintaining a realistic  relationship between apportionments, allotments, and obligations.\u201d", "However, the Forest Service did not develop a directive addressing the  control objectives, related risks, and control activities for implementing  this USDA policy.", "Up until fiscal year 2017, Forest Service budgetary resources consisted  primarily of no-year funds. At the beginning of each fiscal year,  unobligated balances of no-year funds are carried forward and  reapportioned to become part of budget authority available for obligation  in the new fiscal year. Unobligated balances can increase during the  fiscal year due to deobligation of prior years\u2019 unliquidated obligations that  the Forest Service determines it no longer needs. These resources are  immediately available to the Forest Service to the extent authorized by  law without further legislation or action from Office of Management and  Budget (OMB) unless the apportionment states otherwise. According to Forest Service officials, unobligated funds reported in the Forest Service\u2019s  September 30, 2016, Statement of Budgetary Resources included   $351 million in discretionary unobligated no-year funds, appropriated as  far back as fiscal year 1999.", "The Forest Service did not identify and define a process and control  objectives related to its review of unobligated no-year funds from prior  years for continuing need. As a result, the Forest Service did not have  reasonable assurance that prior no-year unobligated balances were  properly managed and considered in its annual budget requests. This  increased the risk that the Forest Service may make budget requests in  excess of its needs. Additionally, the Forest Service could miss  opportunities to use its prior year unobligated no-year funds more timely  and effectively, for example, using these funds for other Forest Service  program needs, if consistent with the purposes designated in  appropriations acts. During our work, we brought this issue to  management\u2019s attention, and in response, Forest Service officials stated  that the Forest Service is planning to develop a quarterly process to  review available balances and, as needed, redirect funds to agency  priorities. However, as of July 2017, the Forest Service had not yet  developed this review process. Further, Congress rescinded about   $18 million of the Forest Service\u2019s prior year unobligated balances and  required it to report unobligated balances quarterly within 30 days after  the close of each quarter and appropriated multi-year funds instead of no- year funds to the Forest Service for fiscal year 2017."], "subsections": []}, {"section_title": "Forest Service Did Not Have a Properly Designed Comprehensive System for Administrative Control of Funds", "paragraphs": ["The Forest Service issued guidance related to administrative control of  funds in manuals and handbooks, which USDA did not review and  approve prior to their issuance. Based on our review of these documents,  we found that the processes and related control activities over the  administrative control of funds were dispersed in numerous manuals and  handbooks, which may hamper a clear understanding of the overall  system. Further, the system lacked key elements that would allow it to  serve as an adequate system of administrative control of funds. For  example, in its manuals and handbooks the Forest Service did not  identify, by title or office, those officials with the authority and  responsibility for obligating the service\u2019s appropriated funds, such as  funds for contracts, travel, and training. As a result, the responsibility for  obligating funds was not clearly described and properly assigned in  Forest Service policy as required by the USDA Budget Manual and OMB  Circular No. A-11.", "OMB Circular No. A-11 states that the Antideficiency Act requires that the  agency head prescribe, by regulation, a system of administrative control  of funds, and OMB provided a checklist in appendix H to the circular that  agencies can use for drafting their fund control regulations. This  requirement is consistent with those in the USDA Budget Manual, which  prescribes budgetary administration through a system of administrative  controls for its component agencies, including the Forest Service. The  USDA Budget Manual states that to the extent necessary for effective  administration, (1) the heads of USDA component agencies may delegate  to subordinate officials responsibilities in connection with the  administrative distribution of funds within apportionments and allotments  and the monitoring, control, and reporting of the occurrence of obligations  and expenditures under apportionments and allotments and (2) the chain  of such responsibility shall be clearly defined. In addition, USDA requires  its component agencies to promulgate and maintain administrative control  of funds regulation and to send such regulation to USDA\u2019s Office of  Program and Budget Analysis for review and approval prior to issuance.", "Because the Forest Service has not developed and issued a  comprehensive system for administrative control of funds that considers  all aspects of the budget execution processes, it cannot reasonably  assure that (1) programs will achieve their intended results; (2) the use of  resources is consistent with the agency\u2019s mission; (3) programs and  resources are protected from waste, fraud, and mismanagement; and   (4) laws and regulations are followed.", "We also found that the Forest Service had not reviewed and updated  most of its administrative control of funds guidance in the manuals and  handbooks for over 5 years. The USDA Budget Manual requires each  component to periodically review its funds control system for overall  effectiveness and to assure that it is consistent with its agency programs  and organizational structures. Further, Forest Service policy also requires  routine review, every 5 years, of policies and procedures in its Directive  System. According to Forest Service officials, when directives are up for  review and update, a staff from the Office of Regulatory and Management  Services (ORMS) sends an e-mail reminder to notify responsible  personnel that updates to applicable directives are needed. However, we  found that the Forest Service does not have adequate controls in place to  monitor the reviews and any updates of the manuals and handbooks in its  Directive System to reasonably assure that their efforts resulted in timely  updates. As a result, the Forest Service is at risk that guidance for its  system for administrative control of funds may lose relevance as  processes change over time and control activities may become  inadequate."], "subsections": []}, {"section_title": "Forest Service Control Activities for Wildland Fire Suppression Related Fund Transfers Were Not Properly Designed", "paragraphs": ["The Forest Service did not have properly designed control activities over  its process for fund transfers related to wildland fire suppression activities.  The Forest Service receives appropriations for necessary expenses for  (1) fire suppression activities on National Forest System lands,   (2) emergency fire suppression on or adjacent to such lands or other  lands under fire protection agreement, (3) hazardous fuels management  on or adjacent to such lands, and (4) state and volunteer fire assistance.  Transfer of funds from other Forest Service programs to its fire  suppression activities occurs when the Forest Service has exhausted all  available funds appropriated for the purpose of fire suppression and the  FLAME fund. A key aspect of this process is assessing the FLAME  forecast, which the Forest Service uses to predict the costs of fighting  wildland fires for a given season, and developing a strategy to identify  specific programs and the amounts that may be transferred to pay for fire  suppression activities when needed. The process for reviewing the  FLAME forecast and strategizing the fund transfers was documented in  the Basic Budget Desk Guide created by staff in the Forest Service\u2019s  Strategic Planning and Budget Analysis Office. However, the desk guide  did not contain evidence of review by responsible officials. As a result, the  Forest Service lacked reasonable assurance that the desk guide was  complete and appropriate for its use.", "The Basic Budget Desk Guide included a listing of actions to be  performed by the analyst for reviewing the FLAME forecast report and  developing a strategy for fund transfer from other programs. However, the  desk guide did not specify the factors to be considered when developing  the strategy. For example, it did not call for documentation addressing the  rationale for the strategy or an assessment of the risk that the fund  transfer could have on the programs from which the funds would be  transferred. The desk guide also did not describe the review and approval  of the strategy by a responsible official(s) prior to the fund transfer  request sent to the Chief of the Forest Service.", "According to Standards for Internal Control in the Federal Government,  management should design control activities to achieve objectives and  respond to risks and that such control activities should be designed at the  appropriate levels in the organizational structure. Further, management  may design a variety of transaction control activities for operational  processes, which may include verifications, authorizations and approvals,  and supervisory control activities.", "The lack of properly designed control activities for supervisory review of  the desk guide and strategy to identify the amounts for fund transfers  does not provide the Forest Service reasonable assurance that the  objectives of the fund transfers\u2014including mitigating the risk of a shortfall  of funding for other critical Forest Service program activities, such as  payroll or other day-to-day operating costs\u2014will be efficiently and  effectively achieved."], "subsections": []}]}, {"section_title": "Forest Service Did Not Have Properly Designed Processes and Related Control Activities for Reimbursable Receivables and Collections", "paragraphs": ["The Forest Service enters into various reimbursable agreements with  agencies within USDA, other federal agencies, state and local  government agencies, and nongovernment entities to carry out its mission  for public benefit. The reimbursable agreements may be for the Forest  Service to provide goods and services to a third party or to receive goods  and services from a third party, or may be a partnership agreement with a  third party for a common goal. According to Forest Service officials, the  two distinct types of Forest Service reimbursable agreements are (1) fire  incident cooperative agreements and (2) reimbursable and advanced  collection agreements (RACA).", "The Forest Service did not have documented processes and related  control activities for its fire incident cooperative agreements to reasonably  assure the effectiveness and efficiency of its related fire incident  operations. In addition, processes and related control activities applicable  to RACAs were not adequately described in applicable manuals and  handbooks in the Directive System, to reasonably assure that control  activities could be performed consistently and effectively. Further, certain  RACA processes in the Directive System had not been timely reviewed  by management and did not reflect current processes. Moreover, as  previously discussed, SOPs and desk guides developed in field offices  related to RACA processes were not in the Forest Service\u2019s Directive  System. Finally, the Forest Service lacked control activities segregating  incompatible duties performed by line officers and program managers in  creating reimbursable agreements and the final disposition of related  receivables."], "subsections": [{"section_title": "Forest Service Did Not Have Documented Processes and Related Control Activities for Fire Incident Cooperative Agreements", "paragraphs": ["The Forest Service did not have documented processes and related  control activities for its fire incident cooperative agreements to reasonably  assure the effectiveness and efficiency of its related fire incident  operations and reliable reporting internally and externally.", "As part of the service\u2019s mission objective to suppress wildland fires,  Forest Service officials stated that they enter into 5-year agreements  referred to as master cooperative agreements with federal, state, and  other entities. These agreements document the framework for commitment and support efficient and effective coordination and  cooperation among the parties in suppressing fires, when they occur. The  master cooperative agreements do not require specific funding  commitments as amounts are not yet known. These agreements vary  from region to region because of the differing laws and regulations  pertaining to the participating states and other entities. These variations  can also result in different billing and collection processes between  regions. When a fire occurs, supplemental agreements, which are based  on the framework established in the applicable master cooperative  agreements, are signed by relevant parties for each fire incident. These  agreements establish the share of fire suppression costs incurred by the  Forest Service and amounts related to entities that benefitted from those  fire suppression efforts. These supplemental agreements require  commitment and obligation of funds. As indicated in figure 2, the Forest  Service\u2019s obligations for fire suppression activities ranged from   $412 million to $1.4 billion over the 10-year period from fiscal years 2007  through 2016.", "In response to our request for documentation of processes and related  control activities over its fire incident cooperative agreements, Forest  Service officials stated that processes and related control activities over  reimbursable agreements were applicable to both fire incident  cooperative agreements and RACAs. However, based on our review of  the Forest Service\u2019s processes and related control activities over its  reimbursable agreements, we found that the unique features of fire  incident cooperative agreements (as compared to features of RACAs)  were not addressed in the processes and related controls for  reimbursable agreements. For example, there was no process and  related control activities over the negotiation and review of (1) a fire  incident master cooperative agreement, which is developed before a fire  occurs, and (2) supplemental agreements, which are signed by all  relevant parties after the start of a fire incident. These supplemental  agreements detail, among other things, the terms for (1) fire department  resource use, (2) financial arrangements, and (3) specific cost-sharing  agreements.", "Another unique feature of fire incident cooperative agreements, which  was not covered in process documents for its reimbursable agreements,  was the preparation of the Cost Settlement Package. The preparation of  this package does not start until after the fire has ended and the Forest  Service has received and paid all bills. According to Forest Service  officials, a fire incident is deemed to have ended when there are no more  resources (firefighters and equipment) on the ground putting out the fire.  However, this definition was not documented in the Forest Service\u2019s  manuals and handbooks in the Directive System. Based on our review of  documentation that the Forest Service provided for four fire incidents, we  found that for these incidents the Cost Settlement Packages and the  billings took several months to years to complete after the fire incident.  According to Forest Service officials, delays in preparing the Cost  Settlement Package in many cases were due to parties involved in  suppressing the fires taking a long time to submit their invoices to the  Forest Service for payment. Because the preparation of Cost Settlement Packages was not included in the process documents, the Forest Service  did not have a defined time frame for when, in relation to the end of the  fire, the Cost Settlement Package must be completed. For example, in  one case we reviewed, the bill for a cost settlement was sent 9 months  after the fire occurred, and in another case, settlement occurred  approximately 2 years after the fire occurred. For both fire incidents,  based on the reports we reviewed, the fires were contained within a week  or two, but the Forest Service does not have a policy for documenting the  date when the fire incident is deemed to have ended.", "Because of the complexity of the process for negotiating and determining  the reimbursable amounts from all the costs that the Forest Service pays  for a fire incident, the reimbursable amounts may take time to negotiate,  and subsequent billing to and collection from parties may take much  longer. Forest Service officials stated that some receivables that were  not going to be collected until after its financial system\u2019s aging process for  receivables deemed such receivables uncollectible and a bad debt are  tracked in a spreadsheet outside its financial system. We found that the  Forest Service did not have a documented process and related control  activities to reasonably assure that its Budget Office was informed of  these older receivables being tracked in a spreadsheet and the related  progress of collection activities that local program managers and line  officers perform, which could affect the reliability of the reported  reimbursable receivable amounts.", "According to Standards for Internal Control in the Federal Government,  management should internally communicate the necessary quality  information to achieve the entity\u2019s objectives. Without proper  communication, important information, such as amounts that the Forest  Service will receive from fire incident cost settlement negotiations, may  not be considered in the Forest Service\u2019s strategy for the effective and  efficient management of fund transfers for fire suppression activities."], "subsections": []}, {"section_title": "Forest Service Manuals and Handbooks for RACAs Did Not Adequately Describe the Processes and Related Control Activities and Were Not Timely Reviewed", "paragraphs": ["Processes and related control activities applicable to RACAs were not  adequately described in Forest Service manuals and handbooks in its  Directive System. RACAs, which may be for research or other  nonemergency purposes, are billed and collected based on previously  agreed upon billing and collection terms. In accordance with the Forest  Service\u2019s Directive System, policies related to business processes, such  as RACAs, are documented in its manuals while procedures for  performing specialized activities are documented in its handbooks. We  found that the manuals and handbooks in the Directive System did not  adequately describe the processes and related control activities over the  RACA processes to enable efficient and effective performance of the  work by appropriate and responsible personnel. The manuals and  handbooks related to RACAs state that a manager review the  documentation to ensure that the funding supports the objective of the  agreement, the agreement is the correct instrument for funding the  project, all relevant terms and conditions have been included in the  agreement, the entity\u2019s financial strength and capability are acceptable,  and all applicable regulations and OMB circulars have been addressed.  However, there was no discussion in the manuals and handbooks about  when the manager needs to perform the reviews and how these reviews  were to be documented. Further, in response to our inquiry regarding  procedures performed to assess the entity\u2019s financial strength and  capability are acceptable before a RACA is signed, Forest Service  officials stated that there is currently no formal process for determining  financial capability for RACAs. For reimbursable agreements, the Forest  Service\u2019s process documented in its handbook consisted of completing a  creditworthiness checklist. However, the handbook did not describe  procedures for (1) completing the checklist and (2) documenting  responsible personnel\u2019s review and approval of an entity\u2019s acceptable  financial capability.", "Standards for Internal Control in the Federal Government states that  management should design control activities to achieve objectives and  respond to risks. Management\u2019s design of internal control establishes  and communicates the who, what, when, where, and why of internal  control execution to personnel. Documentation also provides a means to  retain organizational knowledge and mitigate the risk of having that  knowledge limited to a few personnel. Further, the standards also explain  that management clearly document internal control in a manner that  allows the documentation to be readily available and properly managed  and maintained.", "In addition, the manuals and handbooks applicable to the RACAs have  not been timely reviewed by management, and had not been updated to  reflect current processes. For example, the document that serves as  direction for Forest Service personnel on how to enter into RACAs  referred to an outdated financial system that was replaced in fiscal year  2013. Further, the manuals and handbooks for the RACA processes had  no indication that they had been reviewed within the past 5 years. Forest  Service policy requires routine review, every 5 years, of policies and  procedures in its Directive System. According to Forest Service officials,  a staff member from ORMS sends an e-mail to officials responsible for  updating these policies and procedures. However, appropriate control  activities have not been designed to reasonably assure that updates were  made, reviewed, approved, and issued as needed for continued  relevance and effectiveness.", "Without adequate descriptions of processes and related control activities  in its manuals and handbooks over RACAs, the Forest Service is at risk  that processes and related control activities may not be properly,  consistently, and timely performed. Further, because it lacks a process  and related controls for monitoring and reviewing the updates of the  guidance and various process documents in the Directive System, the  Forest Service is at risk that its policies and procedures may not provide  appropriate agency-wide direction in achieving control objectives,  particularly when financial systems change and old processes may no  longer be applicable."], "subsections": []}, {"section_title": "Forest Service Standard Operating Procedures and Desk Guides for RACA Processes Were Not in the Directive System and Lacked Sufficient Details", "paragraphs": ["SOPs and desk guides related to RACA processes were not in the  Directive System and are not considered official Forest Service policy and  procedures. Forest Service field staff responsible for various processes  generally developed SOPs and desk guides to document day-to-day  procedures for employees in carrying out RACA processes to supplement  the manuals and handbooks. However, the SOPs and desk guides did  not reference the applicable manuals and handbooks they supplemented.  Further, the SOPs and desk guides did not provide descriptions of   (1) review procedures for authorization, completeness, and validity of  RACAs and related receivables; (2) detailed review procedures to be  performed and by whom; (3) timing of review procedures; and (4) how to  document the completion of the review procedures. Finally, SOPs and  desk guides did not have evidence that responsible officials reviewed and  approved them to authorize their use. These SOPs and desk guides are  only available in the field office where these were developed, and if  similar SOPs and desk guides were developed in other field offices,  control activities and how they are performed could vary. We also noted  that these SOPs and desk guides were not timely updated to reflect  processes and systems currently in use. For example, there were many  instances where the SOPs and desk guides referred to systems that the  Forest Service no longer used.", "Standards for Internal Control in the Federal Government states that  management should establish an organizational structure, assign  responsibility, and delegate authority to achieve the entity\u2019s objectives.  Effective documentation assists in management\u2019s design of internal  control by establishing and communicating the who, what, when, where,  and why of internal control execution to personnel. Documentation also  provides a means to retain organizational knowledge and mitigate the risk  of having that knowledge limited to a few personnel and to achieve the  entity\u2019s objectives. Management assigns responsibility and delegates  authority to key roles throughout the entity.", "As a result of the issues discussed above, the Forest Service is at risk  that control activities may not be properly and consistently performed and  its related control objectives may not be achieved efficiently and  effectively. In addition, the Forest Service is at risk that knowledge for  performing the control activities may be limited to a few personnel or lost  altogether in the event of employee turnover."], "subsections": []}, {"section_title": "Forest Service Lacked Adequate Segregation of Duties over Reimbursable Agreements", "paragraphs": ["The Forest Service lacked control activities over the segregation of  incompatible duties performed by line officers and program managers for  reimbursable agreements and any adjustments affecting the final  disposition of related receivables. Field offices manage the majority of  Forest Service projects, including authorizing the agreements and  monitoring related collection. The Forest Service line officer for fire  incident cooperative agreements and program managers for RACA at the  RSA, unit, or field levels initiate and develop the terms of the agreements  and are also responsible for any subsequent negotiation of the  agreements. In the process of negotiating and settling costs, the line  officer or program manager has the authority to cancel or change related  receivables that they deemed uncollectible. For example, in a fire  incident, the line officer at the region or field level is involved in both  developing a Cost Share Agreement and after the fire incident has ended,  negotiating the Cost Settlement Package with parties involved in the  agreement to determine the final settlement amount that the Forest  Service will be reimbursed for expenses paid in suppressing the fire  incident. Therefore, the line officer is responsible for initiating the Cost  Share Agreement, modifying the Cost Settlement Package, and changing  or canceling the related receivable, which represent conflicting duties. We  also found that the Forest Service did not have any mitigating controls,  such as independent approval of any adjustments affecting the final  disposition of receivables, to mitigate the risk of these incompatible  duties.", "Standards for Internal Control in the Federal Government states that  management should design control activities to achieve objectives and  respond to risks. Segregation of duties contributes to the design,  implementation, and operating effectiveness of control activities. To  achieve segregation of key functions, management can divide  responsibilities among different people to reduce the risk of error, misuse,  or fraud. This may include separating the responsibilities for authorizing  or approving transactions, processing and recording them, and reviewing  the transactions so that no one individual controls all key aspects of a  transaction or event.", "Forest Service officials stated they did not consider segregating the  conflicting duties related to reimbursable agreements because these line  officers and program managers were most familiar with the terms of the  agreement and the activities performed. However, a lack of adequate  segregation of conflicting duties or proper monitoring and review of  conflicting duties for receivables from reimbursable agreements could  result in receivables not being collected, and an increased risk of fraud."], "subsections": []}]}, {"section_title": "Forest Service Did Not Have Properly Designed Processes and Related Control Activities for Reviewing Unliquidated Obligations", "paragraphs": ["The Forest Service\u2019s processes and related control activities over review  of unliquidated obligations were not properly designed to reasonably  assure optimum utilization of funds and were inconsistent with USDA and  Forest Service policy. Further, Forest Service manuals and handbooks  related to the review of unliquidated obligations did not clearly describe  control activities and were not timely reviewed by management. The  Forest Service reported unliquidated obligations of approximately   $2.6 billion and $2.5 billion in its financial statements as of September 30,  2015, and 2016, respectively. In fiscal year 2016, the Forest Service  deobligated about $319 million of its unliquidated obligations from prior  years."], "subsections": [{"section_title": "Forest Service Processes and Control Activities for Review and Certification of Unliquidated Obligations Were Not Properly Designed", "paragraphs": ["The Forest Service\u2019s procedures related to the review of unliquidated  obligations were not properly designed and were inconsistent with USDA  and Forest Service policy. In accordance with USDA Departmental  Regulation (Regulation 2230-001) and related Forest Service policy, the  Forest Service identifies and reviews unliquidated obligations that have  been inactive for at least 12 months to determine whether delivery or  performance of goods or services is still expected to occur. Once a  determination has been made that an unliquidated obligation can be  deobligated, program or procurement personnel are to notify finance  personnel, in writing, within 5 days of the determination to process the  deobligation. Within 15 days of receipt of the written notification, the  unliquidated obligations are to be adjusted in the financial management  system. The Forest Service CFO is then to be notified in writing that the  deobligation was processed. Within 1 month of the close of each quarter,  the Forest Service CFO is to submit to USDA\u2019s Associate CFO for  Financial Operations a certification stating that the Forest Service has  performed reviews of its unliquidated obligations and taken appropriate  actions, such as promptly deobligating an unliquidated obligation that is  no longer needed. However, the Forest Service\u2019s quarterly certifications  are inconsistent with USDA and Forest Service policy because the  months included in each quarterly review do not line up with the months  outlined in policy. For example, as shown in table 1, based on policy the  certification due on October 31, covers the months July through  September. However in practice, the certification that the Forest Service  prepared for October 31 covers May through July. As a result, the review  and certification for August and September would be delayed an entire  quarter.", "According to Forest Service officials, it takes considerable time to  produce accurate unliquidated obligations reports from USDA\u2019s financial  system and then distribute them to field offices. Therefore, there is not  sufficient time for the field offices to review and deobligate amounts not  needed from the unliquidated obligations balances to meet USDA\u2019s  certification timing and requirements. However, the Forest Service has  not developed other processes and control activities that could help meet  USDA and Forest Service policy and reasonably assure that unliquidated  obligations are reviewed timely and appropriate actions are taken. As a  result, there is an increased risk that the Forest Service may not achieve  its control objectives of optimum utilization of funds and timely  adjustments of obligated balances."], "subsections": []}, {"section_title": "Forest Service Processes and Control Activities for Reviewing Unliquidated Obligations in Manuals and Handbooks Were Not Adequately Described and Timely Reviewed", "paragraphs": ["The Forest Service\u2019s process and related control activities over its review  of unliquidated obligations and resulting certifications were not adequately  described in manuals and handbooks in its Directive System. Further, the  manuals and handbooks were not timely reviewed and updated to reflect  processes and systems currently in use.", "In accordance with the Forest Service\u2019s Directive System, policies are  documented in its manuals while procedures for performing specialized  activities are documented in its handbooks. However, we found that the  Forest Service\u2019s processes and related control activities for reviewing  unliquidated obligations were not adequately described and documented  in such manuals and handbooks. Although parts of the applicable  section of the handbook referred to procedures, there were no detailed  descriptions of the processes, and only references to objectives of the  procedures for reviewing unliquidated obligations were listed. For  example, in identifying unliquidated obligations for review, the narrative  description of the procedures in the handbook states that the responsible  obligating official must review each selected unliquidated obligation to  determine whether (1) delivery or performance of goods or services has  occurred or is expected to occur and (2) accounting corrections to the  obligation data in the accounting system are necessary. The handbook  also refers to an unliquidated obligations report listing the unliquidated  obligations that must be reviewed. The narrative does not provide any  detailed procedures that obligating officials or responsible personnel need  to perform, how to perform those procedures, and how those control  activities are to be documented. The guidance in the handbook was  supplemented by two desk guides. However, the desk guides are outside  the Forest Service\u2019s Directive System and, as previously noted, the Directive System is the only place where the Forest Service\u2019s policy and  procedures are issued. In addition, these desk guides did not reference  the applicable guidance in the Directive System that they were  supplementing. Further, the process and related control activities for  adjusting unliquidated obligations within 15 days of receipt of written  notification, as stated in USDA\u2019s policy, were not described in either the  handbooks or the desk guides.", "Standards for Internal Control in the Federal Government states that  management should design control activities to achieve objectives and  respond to risks to achieve an effective internal control system.  Management\u2019s design of internal control establishes and communicates  the who, what, when, where, and why of internal control execution to  personnel. Documentation also provides a means to retain organizational  knowledge and mitigate the risk of having that knowledge limited to a few  personnel. Further, the standards also explain that management clearly  document internal control in a manner that allows documentation to be  readily available and that documentation be properly managed and  maintained.", "In addition, manuals and handbooks for processes related to review and  certification of unliquidated obligations had no evidence that they had  been reviewed within the past 5 years for ongoing relevance and  effectiveness. According to a Forest Service manual, all service-wide  directives, except interim directives, shall be reviewed at least once every  5 years. The Forest Service does not have an effective process in place  to monitor the reviews and any updates of the manuals and handbooks in  its Directive System. As previously discussed, while ORMS sends an e- mail requesting that the applicable officials review and update the  guidance in the manuals and handbooks, there is no follow-up process to  help ensure that documents were reviewed and updated as needed.", "Because the Forest Service\u2019s process and related control activities over  its review and certification of unliquidated obligations were not adequately  described in its manuals and handbooks, the Forest Service is at risk that  its control activities may not reasonably assure that control objectives  provide (1) optimum utilization of funds and (2) for unliquidated  obligations that are no longer needed to be efficiently and effectively  deobligated and made available for other program needs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Adequate processes and related control activities over the Forest  Service\u2019s budgetary resources are critical in reasonably assuring that  these resources are timely and effectively available for its mission  operations, including fire suppression. However, we identified deficiencies  in the Forest Service\u2019s processes and related controls over allotments,  unobligated no-year funds from prior years, administrative control of  funds, fund transfers, reimbursable agreements, and available funds from  deobligation of unliquidated obligations. Deficiencies ranged from a lack  of processes to control activities that were not properly designed,  resulting in an increased risk that Forest Service funds may not be  effectively and efficiently monitored and used. In addition, the Forest  Service\u2019s manuals and handbooks, which provide the directives for the  areas we reviewed, had not been reviewed by management in  accordance with the Forest Service\u2019s 5-year review policy. Further, Forest  Service staff prepared SOPs and desk guides that documented control  activities, but they were not issued as official policy and had not been  reviewed and approved by responsible officials. As a result, the Forest  Service is at increased risk that the control activities may not be  consistently performed across the agency and that the guidance in the  SOPs and desk guides may not comply with agency policy in the  Directive System."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To improve internal controls over the Forest Service\u2019s budget execution  processes, we are making the following 11 recommendations:  The Chief of the Forest Service should (1) revise its process and   (2) design, document, and implement related control activities to  reasonably assure that amounts designated in appropriations acts for  specific purposes are properly used for the purposes specifically  designated. (Recommendation 1)", "The Chief of the Forest Service should (1) develop a process and   (2) design, document, and implement related control activities to  reasonably assure that unobligated no-year funds from prior years are  reviewed for continuing need. (Recommendation 2)", "The Chief of the Forest Service should (1) design, document, and  implement a comprehensive system for administrative control of funds  and (2) submit it for review and approval by USDA before issuance, as  required by the USDA Budget Manual. (Recommendation 3)", "The Chief of the Forest Service should design, document, and implement  control activities over the preparation and approval of a fire suppression  fund transfers strategy, to specify all appropriate factors to be considered  in developing and documenting the strategy, and incorporate these  control activities into the Directive System. (Recommendation 4)", "The Chief of the Forest Service should design, document, and implement  processes and related control activities for its fire incident cooperative  agreements to reasonably assure efficient and effective operations and  timely and reliable reporting of reimbursable receivables related to fire  incident cooperative agreements, and incorporate them in the Directive  System. (Recommendation 5)", "The Chief of the Forest Service should update the RACA manuals and  handbooks to adequately describe the processes and related control  activities applicable to RACAs to reasonably assure that staff will know  (1) how and when to perform processes and control activities and (2) how  to document their performance. (Recommendation 6)", "The Chief of the Forest Service should design, document, and implement  segregation of duties or mitigating control activities over reimbursable  agreements and any adjustments affecting the final disposition of related  receivables. (Recommendation 7)", "The Chief of the Forest Service should modify, document, and implement  control activities consistent with USDA and Forest Service policy to  reasonably assure that unliquidated obligations are reviewed timely and  appropriate actions are taken. (Recommendation 8)", "The Chief of the Forest Service should adequately describe the  processes and related control activities for unliquidated obligations review  and certification processes in manuals and handbooks within the  Directive System. (Recommendation 9)", "The Chief of the Forest Service should develop, document, and  implement a process and related control activities to reasonably assure  that manuals and handbooks for allotments, reimbursable agreements,  and review of unliquidated obligations are reviewed and updated every 5  years, consistent with Forest Service policy. (Recommendation 10)", "The Chief of the Forest Service should develop, document, and  implement a process and related control activities to reasonably assure  that SOPs and desk guides (1) clearly refer to guidance in the Directive  System for allotments, reimbursable agreements, and review of  unliquidated obligations and (2) are reviewed and approved by  responsible officials prior to use. (Recommendation 11)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to USDA for comment. In its comments,  reproduced in appendix III, the Forest Service stated that it generally  agreed with the report and that it has made significant progress to  address the report\u2019s findings. Specifically, the Forest Service stated that  its financial policies concerning budget execution have been revised to  address our concerns with allotments, unliquidated obligations,  commitments, and administrative control of funds as prescribed by OMB  Circular No. A-11. Further, the Forest Service stated that it has  undertaken an in-depth review of its unliquidated obligations and modified  the certification process to comply with the USDA requirement.", "We are sending copies of this report to the appropriate congressional  committees and to the Secretary of Agriculture and the Chief of the Forest  Service. In addition, this report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-9869 or khana@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 members who made key  contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine the extent to which the Forest Service  properly designed control activities over (1) allotments of budgetary  resources, its system for administrative control of funds, and any fund  transfers between Forest Service appropriations; (2) reimbursables and  related collections; and (3) unliquidated obligations.", "We reviewed the Forest Service\u2019s process documents and control  activities, policies and procedures from its manual and handbooks in its  Directive System, and other guidance in the form of standard operating  procedures (SOP) and desk guides to obtain an understanding of internal  controls at the Forest Service related to our three objectives. We  reviewed the control activities that the Forest Service identified to  determine whether the activities would achieve the control objectives that  the service identified and whether the activities were consistent with  Standards for Internal Control in the Federal Government. We also  reviewed recent relevant GAO and U.S. Department of Agriculture  (USDA) Office of Inspector General reports to obtain background  information related to the Forest Service\u2019s budget execution processes.  We evaluated the design of the Forest Service\u2019s control activities based  on data for fiscal year 2016.", "To address our first objective, we reviewed Forest Service process  documents related to allotments and budget authority to obtain an  understanding of control activities over the allotments of budgetary  resources, its system for administrative control of funds, and any related  fund transfers between Forest Service appropriations. The process  documents included a list of control objectives and related control  activities that the Forest Service had used to assess its internal controls.  We also reviewed the related guidance in appendix H to Office of  Management and Budget Circular No. A-11, Preparation, Submission,  and Execution of the Budget for Administrative Control of Funds, to  identify requirements that agencies must meet to ascertain whether their  controls over funds management are properly designed. We interviewed  key officials from the Forest Service\u2019s Strategic Planning, Budget and  Accountability Office to gain an understanding of their processes for  allotments of budgetary resources, its system for administrative control of  funds, and fund transfers between Forest Service appropriations for  wildland fire suppression activities, including how each of their risk  assessments were performed and their plans to mitigate the risks. We  reviewed and analyzed the processes documented in the manuals and  handbooks collectively referred to as directives to determine whether the  processes and control activities were designed to achieve the Forest  Service\u2019s stated objectives. Specifically, we examined the Forest  Service\u2019s control activities to determine whether these sufficiently  communicated the procedures to be performed and the documentation to  be prepared. We also reviewed USDA Budget Manual to determine  whether Forest Service guidance was consistent with USDA\u2019s  requirements for all of its component agencies, specifically requirements  related to the administrative control of funds.", "To address our second objective, we reviewed the Forest Service\u2019s  policies, procedures, and other documentation and interviewed agency  officials to develop an understanding of its processes related to  reimbursable agreements and related collection activities. We first  identified, through interviews with Forest Service officials, the different  kinds of reimbursable agreements that the Forest Service enters into with  other USDA components, other federal agencies, state and local  government agencies, and nongovernment entities to carry out its mission  for the benefit of the public. Two distinct types of reimbursable  agreements include (1) fire incident cooperative agreements and   (2) reimbursable and advanced collection agreements. We reviewed  Forest Service process documents and templates related to these two  types of reimbursable agreements provided to obtain an understanding of  control activities over reimbursable processes. We reviewed the list of  control objectives and related control activities that the Forest Service  identified to determine whether the control activities were designed to  achieve the applicable control objectives.", "To address our third objective, we reviewed the Forest Service\u2019s policies,  procedures, and other documentation related to and interviewed agency  officials about unliquidated obligations to develop an understanding of the  Forest Service\u2019s review and certification processes for unliquidated  obligations balances. We reviewed the Forest Service\u2019s control activities  related to its process for reviewing unliquidated obligations to obtain an  understanding of control activities around its process and to determine  whether the control activities were designed to achieve the applicable  control objectives.", "Based on the results of our evaluation of the Forest Service\u2019s design of  internal control activities over the budget execution processes, we did not  evaluate the implementation of the control activities or whether they were  operating as designed.", "While our audit objectives focused on certain control activities related to  (1) allotments of budgetary resources, the Forest Service\u2019s system for  administrative control of funds, and related fund transfers;   (2) reimbursables and related collections for reimbursable agreements;  and (3) unliquidated obligations, we did not evaluate all control activities  and other components of internal control. If we had done so, additional  deficiencies may or may not have been identified that could impair the  effectiveness of the control activities evaluated as part of this audit.", "We conducted this performance audit from August 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Standards for Internal Control in the Federal Government", "paragraphs": ["Standards for Internal Control in the Federal Government provides the  overall framework for establishing and maintaining internal control.  Internal control represents an agency\u2019s plans, methods, policies, and  procedures used to fulfill its mission, strategic plan, goals, and objectives.  Internal control is a process by an entity\u2019s oversight body, management,  and other personnel to provide reasonable assurance that the objectives  of the entity will be achieved. When properly designed, implemented,  and operating effectively, it provides reasonable assurance that the  following objectives are achieved: (1) effectiveness and efficiency of  operations, (2) reliability of internal and external reporting, and   (3) compliance with applicable laws and regulations. Internal control is not  one event, but a series of actions that occur throughout an entity\u2019s  operations. The five components of internal control are as follows:", "Control Environment - The foundation for an internal control system  that provides the discipline and structure to help an entity achieve its  objectives.", "Risk Assessment - Assesses the risks facing the entity as it seeks to  achieve its objectives and provides the basis for developing  appropriate risk responses.", "Control Activities - The actions management establishes through  policies and procedures to achieve objectives and respond to risks in  the internal control system, which includes the entity\u2019s information  system.", "Information and Communication - The quality information  management and personnel communicate and use to support the  internal control system.", "Monitoring - Activities management establishes and operates to  assess the quality of performance over time and promptly resolve the  findings of audits and other reviews.", "An effective internal control system has each of the five components of  internal control effectively designed, implemented, and operating with the  components operating together in an integrated manner. In this audit, we  assessed the design of control activities at the Forest Service related to its (1) allotments of budgetary resources and any related fund transfers  between Forest Service appropriations, (2) reimbursables and related  collections, and (3) review of unliquidated obligations."], "subsections": []}, {"section_title": "Appendix III: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following individuals made  key contributions to this report: Roger Stoltz (Assistant Director),   Meafelia P. Gusukuma (Auditor-in-Charge), Tulsi Bhojwani, Cory Mazer,  Sabrina Rivera, and Randy Voorhees."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-268", "url": "https://www.gao.gov/products/GAO-18-268", "title": "U.S. Ports of Entry: CBP Public-Private Partnership Programs Have Benefits, but CBP Could Strengthen Evaluation Efforts", "published_date": "2018-03-15T00:00:00", "released_date": "2018-03-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["International trade and travel to the United States is increasing. On a typical day in fiscal year 2016, CBP officers inspected nearly 1.1 million passengers and pedestrians and over 74,000 truck, rail, and sea containers at 328 U.S. land, sea, and air ports of entry, according to CBP. To help meet the increased demand for these types of CBP services, since 2013, CBP has entered into public-private partnerships under RSP and DAP. The RSP allows partners to reimburse CBP for providing services that exceed CBP's normal operations, such as paying overtime for CBP personnel that provide services at ports of entry outside normal business hours. The DAP enables partners to donate property or provide funding for port of entry infrastructure improvements.", "The Cross-Border Trade Enhancement Act of 2016 included a provision for GAO to review the RSP and DAP. This report examines: (1) how CBP approves and administers RSP and DAP agreements, (2) the status of RSP and DAP agreements, including the purposes for which CBP has used funds and donations, and (3) the extent to which CBP monitors and evaluates program implementation. GAO reviewed partnership agreements and data on program usage. GAO also interviewed CBP and partner officials at 11 ports of entry selected based on a mix of port of entry and agreement types."]}, {"section_title": "What GAO Found", "paragraphs": ["Within the Department of Homeland Security, U.S. Customs and Border Protection (CBP) uses criteria and follows documented procedures to evaluate and approve public-private partnership applications and administer the Reimbursable Services Program (RSP) and Donations Acceptance Program (DAP). For example, RSP applications undergo an initial review by CBP officials at the affected ports of entry before they are scored by an expert panel of CBP officials at headquarters. The panel evaluates RSP applications against seven criteria, such as impact on CBP operations. Similarly, DAP proposals are evaluated by CBP officials against seven operational and six technical criteria, such as real estate implications. Further, if the proposal involves real estate controlled by the General Services Administration (GSA), CBP and GSA officials collaborate on DAP selection decisions and project implementation. To administer the RSP and DAP, CBP has documented policies and procedures, such as standard operating procedures and implementation frameworks. For example, CBP uses a standard procedure to guide the process for RSP partners to request services and to provide reimbursement. For DAP projects, CBP, GSA (if applicable), and partners follow an implementation framework that includes a project planning and design phase.", "The number of public-private partnerships is increasing, and partnerships provide a variety of additional services and infrastructure improvements at ports of entry. From fiscal years 2013 through 2017, CBP selected over 100 partners for RSP agreements that could impact 112 ports of entry and other CBP-staffed locations, and the total number of RSP partnerships doubled from fiscal year 2016 to 2017. According to CBP, since partners began requesting reimbursable services in 2014, CBP has provided its partners nearly 370,000 officer overtime hours of services, which led to over $45 million in reimbursed funds. As a result, CBP inspected an additional 8 million travelers and over 1 million personal and commercial vehicles at ports of entry. Similar to the RSP, the number of DAP partnerships more than doubled from fiscal year 2016 to 2017, and totals 16 projects that impact 13 ports of entry as of November 2017. The donations include improvements, such as the installation of new inspection booths and equipment and removal of traffic medians, and are intended to support over $150 million in infrastructure improvements.", "CBP uses various processes to monitor and evaluate its partnerships, but could benefit from establishing an evaluation plan to assess overall program performance. For example, CBP conducts regular audits of RSP records to help ensure that CBP bills and collects funds from its partners accurately, and uses guidance, such as the DAP Implementation Roadmap, to identify and monitor project milestones and tasks. However, as of November 2017, CBP had not developed an evaluation plan\u2014which could include, among other things, measurable objectives, performance criteria, and data collection plans\u2014to assess the overall performance of the RSP and DAP, consistent with Office of Management and Budget guidance and leading practices. Given CBP's staffing challenges and anticipated growth of the RSP and DAP, an evaluation plan could better position CBP to further integrate evaluation activities into program management."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CBP develop an evaluation plan to assess the overall performance of the RSP and DAP. DHS concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["On a typical day in fiscal year 2016, nearly 1.1 million passengers and  pedestrians and over 74,000 truck, rail, and sea containers worth  approximately $6.3 billion entered the United States through 328 U.S.  land, sea, and air ports of entry (POE), according to U.S. Customs and  Border Protection (CBP). Within the Department of Homeland Security  (DHS), CBP is the lead federal agency charged with a dual mission of  keeping terrorists and their weapons, criminals and their contraband, and  inadmissible aliens out of the country while facilitating the flow of  legitimate international travel and trade through the nation\u2019s POEs.  CBP\u2019s Office of Field Operations is responsible for enforcing passenger  and cargo processing activities related to security, trade, immigration, and  agricultural inspection at the nation\u2019s POEs. In April 2016, the CBP  Human Resources Management Assistant Commissioner and Office of  Field Operations Deputy Assistant Commissioner testified before  Congress that the agency continues to face significant challenges in  meeting its staffing goals due to hiring and retention challenges;  meanwhile, the amount of international travel and trade to the United  States continues to increase. For example, from fiscal years 2014 to  2016, the number of international travelers entering the United States  increased about 4 percent, and the number of cargo containers entering  the country increased about 6 percent. Further, in 2015, CBP conducted  a study on its POEs that identified the need for $5 billion to meet its  infrastructure and technology requirements.", "Since 2013, CBP has entered into public-private partnerships with  stakeholders, such as port authorities or local municipalities that own or  manage the ports or private companies that conduct business through the  ports, under its Reimbursable Services Program (RSP) to cover CBP\u2019s  cost of providing certain services at POEs. Such services include those  supporting customs, agricultural processing, border security, or  immigration inspection matters. For example, the RSP enables entities to  pay the overtime costs of CBP personnel who may provide such services  outside normal business hours. A second public-private partnership  program\u2014the Donations Acceptance Program (DAP)\u2014enables entities,  such as local municipalities, to donate personal or real property,  nonpersonal services, or provide funding related to land acquisition,  design, construction, repair or alteration, and operations and maintenance  to CBP and the General Services Administration (GSA) at POEs. The  Office of Field Operations\u2019 Alternative Funding Programs (AFP) office  manages and oversees both programs at the headquarters level for CBP.  GSA\u2019s Public Building Services office manages and oversees the DAP at  the headquarters level for GSA.", "The Cross-Border Trade Enhancement Act of 2016 included a provision  for GAO to review the agreements and funds and donations that CBP and  GSA have received under the RSP and DAP. This report examines: (1)  how CBP approves and administers public-private partnership  agreements under its RSP and DAP, (2) the status of RSP and DAP  agreements, including the purposes for which CBP has used the funds  and donations from these agreements, and (3) the extent to which CBP  has processes in place to monitor and evaluate the implementation of  these programs.", "To examine how CBP approves and administers public-private  partnership agreements under its RSP and DAP, we collected and  reviewed CBP\u2019s criteria for evaluating and approving applications and  standard operating procedures, as well as policy documents for  administering the RSP and DAP. We attended an RSP application  evaluation review panel in September 2017 to observe how CBP officials  deliberate the merits of RSP applications and apply RSP selection  criteria. We also attended an AFP office visit to the Baltimore Field Office in October 2017 where we observed AFP officials train local CBP officials  and meet with new partner officials. We also interviewed CBP and partner  officials at 11 POEs\u2014to reflect a range of POE types (land, air, and sea),  type of partnerships, and geographic diversity\u2014and conducted site visits  at 10 of these POEs to observe local operations. We used a non- probability sample for our site visit selections and thus cannot generalize  our findings to all POEs with an RSP or DAP agreement; however, the  site visits provided insight into how these agreements are working at the  POEs. We also interviewed CBP and GSA officials at headquarters to  learn about how headquarters officials administer the programs.", "To examine the status of RSP and DAP agreements, including the  purposes for which CBP uses funds and donations from these  agreements, we collected and analyzed all Reimbursable Services  Agreements, Donations Acceptance Agreements, and Memoranda of  Understanding (MOU) for both the RSP and DAP from fiscal year 2013  through 2017. As mentioned above, we interviewed CBP, GSA, and  partner officials at 11 POEs and conducted site visits at 10 of these POEs  to observe local operations and gain insights on how CBP is  administering the programs at the POEs. We also interviewed CBP  officials at headquarters, GSA officials at headquarters and in regional  offices, and officials from four travel and trade industry associations  selected based on the nature of the associations to gain insights on  public-private partnerships agreements. We collected and analyzed data  on the actual use of RSP agreements, such as the number of travelers  processed and cargo containers inspected since the program started, as  well as the amount that partners have reimbursed CBP through each  agreement. We reviewed existing information about the data and the  system that produced them and interviewed agency officials  knowledgeable about the data. We determined that these data were  sufficiently reliable for the purposes of our reporting objectives.", "To examine the extent to which CBP has processes in place to monitor  and evaluate the implementation of these agreements, we collected and  reviewed CBP\u2019s documentation for evaluating the programs, including  standard operating procedures, among other documents. We collected  and analyzed a selection of work ticket and billing data for the RSP from  fiscal years 2014 through 2017. We assessed the reliability of these data  by performing electronic testing for obvious errors in accuracy and  completeness, reviewing existing information about the data and the  system that produced them, and interviewing agency officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for the purposes of this report. In October 2017 we  also received demonstrations on the systems that CBP uses to document  and audit work ticket and billing data. We interviewed officials at CBP and  GSA headquarters to gain insights on how the agencies use qualitative  information to monitor program performance and share best practices.  We assessed whether CBP\u2019s efforts were consistent with Office of  Management and Budget guidance for making program expansion  decisions and leading practices for program evaluation from the American  Evaluation Association.", "We conducted this performance audit from March 2017 to March 2018, in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "CBP Staffing and Infrastructure", "paragraphs": ["In fiscal year 2017, approximately 24,000 CBP officers performed a  variety of functions at over 300 air, land, and sea POEs, including  inspecting travelers and cargo containers, among other activities.  According to CBP, increases in passenger and cargo volumes are  outpacing CBP\u2019s staffing resources, resulting in increased passenger wait  times and cargo backups, among other things. For example, in fiscal year  2017, CBP identified a need for an additional 2,516 CBP officers across  all POEs. Further, as of 2017, CBP estimated that it needed  approximately $5 billion to meet infrastructure and technology  requirements at about 167 land POEs. To help identify and mitigate  resource challenges, CBP developed its Resource Optimization Strategy,  an integrated, long-term plan to improve operations at all POEs. The  Strategy consists of three components:", "Business transformation: utilize new technology, such as  Automated Passport Control kiosks, or new processes, such as  trusted traveler programs, to increase CBP operational efficiencies;", "Workload Staffing Model: utilize modeling techniques to help ensure  that existing staffing resources are appropriately aligned with threat  environments while maximizing cost efficiencies; and", "Alternative funding strategies: utilize public-private partnership  agreements, such as RSP and DAP, to supplement regular  appropriated resources."], "subsections": []}, {"section_title": "Overview and Evolution of the RSP", "paragraphs": ["The RSP enables partnerships between CBP and private sector or  government entities, allowing CBP to provide new or additional services  upon the request of partners. These services can include customs,  immigration, or agricultural processing; border security and support at any  facility where CBP provides, or will provide, services; and may cover  costs such as salaries, benefits, overtime expenses, administration, and  transportation costs. According to authorizing legislation, RSP  agreements are subject to certain limitations, including that they may not  unduly and permanently impact existing services funded by an  appropriations act or fee collection. According to AFP officials, the  purpose of the RSP is to provide new or additional CBP services at POEs  that the component would otherwise not have been able to provide. From  2013 to 2017, the number of RSP agreements has increased as new  authorizing legislation has expanded participant eligibility and made the  program permanent. Table 1 below outlines the evolution of RSP through  its different legislative authorities."], "subsections": []}, {"section_title": "Overview and Evolution of the DAP", "paragraphs": ["The DAP permits CBP and GSA to accept donations from private and  public sector entities, such as private or municipally-owned seaports or  land border crossings. Donations may include real property, personal  property, money, and non-personal services, such as design and  construction services. Donated resources may include improvements to  existing facilities, new facilities, equipment and technology, and  operations and maintenance costs, among other things. In terms of the  types of locations that may accept donations, donations may be used for  activities related to land acquisition, design, construction, repair,  alteration, operations, and maintenance, including installation or  deployment of furniture, fixtures, equipment or technology, at an existing  CBP-owned land POE; a new or existing space at a CBP air or sea POE;  or a new or existing GSA-owned land POE. CBP and GSA may not  accept donations at a leased land POE, nor is CBP able to accept a  donation at or for a new land POE if the combined fair market value of the  POE and donation exceeds $50 million. Additionally, CBP may not use  monetary donations accepted under the DAP to pay salaries of CBP  employees performing inspection services. Finally, CBP may not accept  donations on foreign soil. Table 2 below depicts the evolution of DAP  authorizing legislation since the program\u2019s inception in 2014.", "Figures 1 and 2 depict the location and number of RSP and DAP  agreements in place through fiscal year 2017."], "subsections": []}]}, {"section_title": "CBP Uses Criteria and Documented Procedures to Evaluate and Approve Public-Private Partnership Applications and Administer Programs", "paragraphs": [], "subsections": [{"section_title": "CBP Uses Criteria and Procedures to Approve Public-Private Partnership Applications and Coordinate with Partners", "paragraphs": [], "subsections": [{"section_title": "RSP Application Process", "paragraphs": ["CBP has developed detailed guidance on the RSP application process,  including application timeframes, requirements, and evaluation criteria,  and this guidance is on CBP\u2019s website. According to this guidance, in  2017, CBP expanded the RSP application submission period. Whereas in  prior years applications were accepted during a single one-month  window, prospective partners may now submit applications throughout  the year. Under this new process, CBP evaluates submissions three  times per year\u2014beginning in March, July, and November. According to  CBP, the submission period was expanded in part because new  legislative authorities removed previous restrictions on the number of  RSP agreements CBP can enter into each year. The overarching RSP  application process\u2014from application submission through CBP  evaluation and applicant notification\u2014is depicted in figure 3.", "According to CBP\u2019s procedures for accepting and reviewing applications,  potential partners first submit a letter of application that includes a variety  of logistical information concerning the stakeholders, services to be  requested, location of services to be requested, available facilities, and  funding. For example, in submitting a letter of application, an applicant is  to estimate how many hours of services it may request per month and  identify the applicant\u2019s available budget for the first fiscal year of the  partnership, among other things. According to the application guidance,  prospective applicants are encouraged to work with local CBP officials at  individual POEs to develop letters of application. After submission, CBP  officials at the affected POEs, including affected CBP Field Offices,  review applications and communicate their findings and  recommendations to the AFP office. In addition, the CBP Office of Chief  Counsel reviews the applications for legal sufficiency and may suggest  that CBP request additional information from applicants.", "Next, CBP convenes an expert panel consisting of two senior CBP  officials who are not part of the AFP office to consider POE and legal  comments on the applications, among other information provided by AFP  officials. The panel deliberates and scores each proposal based on seven  criteria, and all proposals that achieve a certain minimum score are  accepted. The seven evaluation criteria used to weigh the merits of  potential new partnership agreements are listed in table 3.", "The scoring scale ranges from -5 to 5, and the 7 criteria are weighted  based on potential impact. For example, impact to CBP operations is  weighted more heavily than other agency support. In September 2017,  we observed an RSP application review panel. Among other things, we  observed senior CBP officials, who were independent from the AFP  office, score 31 RSP applications that impacted 46 CBP Field Office  locations. The panel members based their deliberations on set criteria  and reached consensus on which applications to approve. Finally,  Congress and approved partners are notified of the selections. Where  CBP denies a proposal for an agreement, it is to provide the reason for  denial unless such reason is law enforcement sensitive or withholding the  reason for denial is in the national security interests of the United  States.", "Once CBP approves an application, CBP and its prospective new  partners follow documented procedures to formalize the agreements and  prepare all involved stakeholders, including new partners and local CBP  officials, for Reimbursable Services Agreement implementation. The  process to establish new RSP partnerships at specific POEs is depicted  in figure 4 below.", "After CBP notifies the applicant of its selection, officials from the AFP  office schedule a site visit to meet with local CBP officials at the POEs  and the new partners. According to CBP program requirements, the  purpose of the site visit is to discuss workload and services, and to verify  that the POE facilities and equipment meet CBP\u2019s required specifications.  AFP officials also provide program training to CBP Field Office and POE  officials, as well as to new partners on the processes to request and fulfill  RSP service requests, among other things. We attended an AFP office  visit to CBP\u2019s Baltimore Field Office in October 2017 and observed AFP  officials sharing best practices with local CBP officials and new RSP  partners. According to CBP\u2019s procedures, before any RSP services can  be provided, CBP and the prospective partners must sign a legally  binding Reimbursable Services Agreement. Among other things, the  Reimbursable Services Agreement establishes that the partner will  reimburse CBP for the costs of services provided under the RSP  authorizing legislation, including the officer overtime rates, benefits, and a  15 percent administrative fee. Further, the partner agrees to reimburse  CBP for these services within 15 days of billing through a Department of  the Treasury system. Finally, local CBP Field Office and partner officials  negotiate a local MOU that outlines the services, schedules, and other  conditions for the POE location(s) covered by the Reimbursable Services  Agreement."], "subsections": []}, {"section_title": "DAP Application Process", "paragraphs": ["Similar to the RSP application process, CBP, in conjunction with GSA,  utilizes criteria and documented processes to evaluate DAP proposals  and implement the program. More specifically, in alignment with the  most recent DAP authorizing legislation, CBP and GSA developed the  Section 482 Donation Acceptance Authority Proposal Evaluation  Procedures & Criteria Framework (Framework) for receiving, evaluating,  approving, planning, developing, and formally accepting donations under  the program. The initial steps of the Framework, which encompass the  DAP application process, are depicted in figure 5.", "In prior years, CBP accepted large-scale proposals, defined by CBP as  $5 million or more, during one application and evaluation cycle per year.  Beginning in fiscal year 2017, CBP accepts large-scale proposals on a  rolling basis, using a streamlined process for expedited review. CBP also  accepts small-scale proposals, defined by CBP as less than $5 million, on  a rolling basis. According to AFP officials, CBP undertakes considerable  effort to provide early education about the program to potential partners  who plan to apply for a DAP agreement, including discussing CBP\u2019s  operational needs at the POEs. The Framework notes that this outreach  helps prospective donors gauge their willingness and ability to work  cooperatively with CBP and GSA on potential POE improvements and  also helps applicants enhance the viability of their submissions.", "After a DAP proposal is submitted and checked for completeness, CBP  and GSA subject matter experts evaluate the proposal against seven  operational and six technical criteria (see table 4 below). The evaluators  reach consensus on proposed recommendations and submit their  evaluation results to CBP and GSA senior leadership for consideration.  Leadership reviews the recommendations and other pertinent information  and determines whether or not to select proposals.", "In accordance with legislative requirements, CBP must notify DAP  applicants of the determination to approve or deny a proposal not later  than 180 days after receiving the completed proposal. Figure 6 depicts  all three phases of the DAP Framework from selecting a proposal to  signing a formal Donations Acceptance Agreement.", "Phase 2 of the Framework begins shortly after CBP notifies new partners  of DAP selections. CBP officials then initiate a series of biweekly calls  with GSA officials, if applicable, and the partner. AFP officials provide  partners with documentation in the form of a high-level roadmap which  contains a sequence of activities and deliverables CBP expects from the  partners, and all stakeholders convene to track progress against planned  activities and milestones. CBP, GSA, and the partner also meet to  discuss the technical implementation of the donation.", "AFP and GSA officials conduct a site visit to meet with new partners;  obtain a visual understanding of how CBP, GSA, and the partner will  implement the donation; and help the partner begin the planning and  development phase. CBP, GSA, and the partner negotiate a MOU on  roles and responsibilities and terms and conditions of the donation. CBP  then provides the partner with its technical standards and other  operational requirements, such as space and staffing needs, under a non- disclosure agreement. The partner then begins to plan and develop its  conceptual proposal into an executable project in close coordination with  CBP and GSA. By the end of Phase 2, CBP, GSA, as applicable, and the  partner confirm that all pre-construction development activities are  complete, no outstanding critical risks exist, and that the appropriate  agencies are prepared to request future funding, as applicable.", "Finally, stakeholders move to Phase 3 of the Framework to formalize the  terms and conditions under which either CBP, GSA, or both, may accept  the proposed donation. After CBP, GSA and the partner agree to the  provisions of the project plan, they sign the legally binding Donations  Acceptance Agreement, and stakeholders proceed to project execution."], "subsections": []}]}, {"section_title": "CBP Administers the Public-Private Partnerships Using Documented Policies and Procedures, and Implementation of the Programs Can Vary by Port", "paragraphs": ["CBP has documented standard operating procedures, roadmaps, and  other formally documented policies and procedures to administer the RSP  and DAP. In addition, as mentioned above, AFP officials conduct site  visits to the POEs with new RSP and DAP agreements, and provide  formal training for CBP personnel at Field Offices and POEs.", "The general process for administering RSP\u2013from requesting and fulfilling  services to billing and collecting payments\u2013is dictated by standard  operating procedures, as shown in figure 7.", "In general, RSP partners submit a formal request for services by  completing an electronic form and calendar access via CBP\u2019s Service  Request Portal. Once the partner submits the request, the portal sends  an electronic copy of the request to the partner\u2019s email and the port\u2019s  RSP email inbox. CBP supervisors at the POE access the Service  Request Portal to review, edit, approve, deny, or cancel requests. The  system tracks and requires CBP officials to comment on any requests  that CBP edits, denies, or cancels, and sends an email notification of  CBP\u2019s decision to the partner. If CBP approves the request, the Service  Request Portal creates a line item with information about the request,  such as codes for the location and partner, as well as the hours CBP  officers will work.", "Next, CBP officers enter line item information\u2014information on accounting  codes for the location and partner and the actual hours CBP officers  worked to fulfill the request\u2014into CBP\u2019s overtime management system.  At the end of every shift, CBP supervisors review and approve the  amount of overtime and other data entered into the overtime  management system. In addition, data from this system is checked for  accuracy and certified weekly by both CBP POE and AFP officials. After  the overtime and request information is checked, payroll data generated  from the overtime management system, including salary and benefits  information for each officer that worked RSP overtime, uploads to CBP\u2019s  financial accounting system at the end of each pay period, or every 14  days. CBP bills its partners for two full pay periods, and the partner has  15 days to make a full payment through the partner\u2019s account with the  Department of the Treasury. After the partner makes the payment through  the Department of the Treasury collection system, CBP National Finance  Center officials reimburse the CBP annual Operations & Support account  initially used to pay its officers for all of the RSP overtime worked during  that pay cycle by moving the expenses to the RSP officer payroll fund.", "Although the general request and billing processes for RSP services are  the same across all POEs regardless of location or mode\u2014air, land, or,  sea\u2014CBP and its partners have flexibility to tailor RSP implementation  based on local conditions or needs. Some of this implementation variation  is documented in locally negotiated MOUs. For example, CBP\u2019s partner at  Miami International Airport in Florida relies on CBP to schedule RSP  overtime daily based on CBP expertise. CBP officials at the airport  developed their own software templates to plan, track, and manage CBP  officers for RSP overtime for a given amount of available overtime funding. At the Pharr land POE in Texas, CBP staff at the POE submit  recommended RSP overtime request proposals to the partner based on  local conditions, including staffing, and the partner decides whether to  submit a formal request to CBP. In all of these instances, RSP partners  and CBP Field Office and POE officials expressed satisfaction with their  more customized administration processes.", "CBP and its partners also noted some challenges to implementing RSP  and DAP agreements, but partners generally agreed that the program  benefits outweighed the challenges. For example, some DAP partners we  met with mentioned that navigating GSA requirements was difficult and  sometimes caused delays. GSA officials we met with noted that they are  educating partners on GSA building standards and the GSA approvals  process for donations, among other things, to help partners manage their  timelines and expectations. GSA officials noted that they are working with  CBP and partner officials to manage and learn from these early  implementation challenges.", "CBP, GSA, and DAP partners also acknowledged a lack of clarity about  which entity or entities are responsible for the long-term operations and  maintenance costs of DAP infrastructure projects, although CBP has  taken steps to address this issue. GSA pricing procedures dictate that  once a POE receives an improvement, it charges the customer (CBP) for  the additional operating costs, such as utilities. CBP officials  acknowledged that the long term sustainability of donations, specifically  the costs of operations, maintenance, and technology for infrastructure- based donations, needs to be addressed, and officials reported taking  initial steps. For example, once CBP and its partner complete the  planning of a project and GSA has calculated the project\u2019s estimated  operating expenses, the AFP office begins working with the CBP Office of  Facilities & Asset Management to budget for such costs with the goal of  reaching a mutually acceptable partnership for donations that will have  long-term sustainability.", "CBP officials noted that the agency cannot commit to funding that is not  guaranteed for the future. To mitigate budget uncertainty, CBP now  includes language in its MOU and Donations Acceptance Agreement  templates stating that upon project completion, the partner will be  responsible for all costs and expenses related to the operations and  maintenance of the donation until the federal government has the  available funding and resources to cover such costs. According to AFP  officials, CBP also makes efforts to educate its DAP partners on the  budgeting process and associated timeframes with project completion.", "CBP officials noted that the majority of projects are in the early stages of  development, and it will be years before the projects are complete.  Furthermore, GSA officials stated that the actual operating and  maintenance costs associated with DAP projects will not be known until  about 1 year after the projects are completed."], "subsections": []}]}, {"section_title": "Public-Private Partnerships Are Increasing and Provide a Variety of Additional Services and Infrastructure Improvements", "paragraphs": [], "subsections": [{"section_title": "RSP Partnerships are Increasing and Provide a Variety of Additional Services at POEs", "paragraphs": ["As noted previously, as CBP\u2019s authorities to enter into new RSP  agreements expanded to an unlimited number of agreements per year,  and in total, for all types of POEs in 2017, the number of applications that  CBP has selected has also increased. For example, in fiscal year 2013,  CBP received 16 applications from interested stakeholders and selected  five of these applications for partnerships, while in fiscal year 2017 cycle  2, CBP received 31 applications from interested stakeholders and  tentatively selected 30 for partnerships. From fiscal year 2013 through  fiscal year 2017 cycle 2, CBP has tentatively selected over 100 partners  for RSP agreements. This figure includes RSP agreements under the  authorities provided in Section 481 that allow CBP to enter into  agreements with small airports to pay for additional CBP officers above  the number of officers assigned at the time the agreement was reached.  Figure 8 details this information for each application cycle.", "As mentioned above, once CBP selects an application for a new  reimbursable services partnership, CBP and its partner sign a legally  binding Reimbursable Services Agreement. From fiscal years 2013  through 2017 cycle 2, CBP selected 114 applications and entered into 69  Reimbursable Services Agreements with partners. As mentioned  previously, local CBP officials also work with the partner to negotiate the  terms of an MOU, which outlines how the partnership will work at the  POE. As of November 2017, CBP and its partners were implementing 54  MOUs from partnerships that they entered into from fiscal years 2013  through 2017. Of those 54 MOUs, 10 cover agreements at land POEs, 22  cover agreements at sea POEs, and 23 cover agreements at air POEs.   According to AFP officials, during the process of negotiating the MOUs  with its partners, CBP and the partner often agree to include a variety of  services that the partner can request, so that if a need arises, there is a  record that CBP has agreed to provide those services under the MOU.  CBP and its partners also negotiate a variety of other terms for the  agreements in the MOUs, including the types of requests for services the  partner can make, expectations for how often CBP and its partners  communicate, and how to amend the MOU, among others terms. Table 5  provides details about the existing 54 MOUs.", "As noted in the above table, MOUs detail a variety of services that CBP  officers can provide at the POEs, and the types of services vary by POE  type. For example, most MOUs across land, air, and sea POEs allow  partners to request services for freight or cargo processing, while a  majority of the MOUs at air POEs allow CBP to provide services for  traveler processing and to address unanticipated irregular operations or  diversions. In addition, all MOUs allow partners to submit ad-hoc requests  that partners make for services in advance. Most of these MOUs also  allow partners to make urgent requests for immediate services.", "In examining the MOUs, we found that 44 of the 54 MOUs, or 81 percent,  indicate that CBP and its partner meet at least quarterly to discuss how  the partnership is going. Further, CBP and some of its partners meet  more often. For example, CBP and its partners agreed to meet monthly in  accordance with 23 MOUs, while CBP and its partners agreed to meet  weekly according to 3 MOUs. All partners we interviewed that have  utilized their RSP agreements reported that maintaining strong  communication between CBP and the partner is important to  implementing the RSP agreements at the POEs. Appendix I has  additional information about each of the 54 current MOUs.", "Tables 6 and 7 provide the amount that partners reimbursed CBP for  overtime services, the total number of overtime hours that CBP officers  worked for each fiscal year from 2014 through 2017, and the total number  of travelers and vehicles that CBP officers inspected during RSP partner  requests for services from fiscal years 2014 through 2017 respectively."], "subsections": []}, {"section_title": "DAP Partnerships Provide for Infrastructure Improvements at POEs", "paragraphs": ["Similar to the RSP, the number of DAP partnerships more than doubled in  fiscal year 2017. In fiscal years 2015 and 2016, CBP selected seven DAP  proposals. In fiscal year 2017, CBP selected 9 DAP proposals.  Combined, these 16 DAP projects affect 13 POEs.", "The donations that partners will provide CBP and GSA, as applicable,  include a variety of POE improvements such as the installation of new  inspection booths and equipment, removal of traffic medians, and new  cold inspection facilities, as well as smaller items such as a high-capacity  perforating machine, which reduces document processing time and  allows CBP officers to focus on more critical operational duties, among  other donations. According to CBP, these 16 donation proposals  combined are intended to support over $150 million in infrastructure  improvements at U.S. POEs. CBP also expects a variety of benefits from  these donations, including support for local and regional trade industries  and tourism, reductions in border wait times, and increased border  security and officer safety, among others. Table 8 provides information on  the scope and status of DAP projects that CBP and GSA have selected  since CBP established the DAP in fiscal year 2015.", "As noted in the table above, CBP has fully accepted six donations,  including the donation of a high capacity perforating machine to facilitate  the processing of titles and other documents at the Freeport Sea POE in  fiscal year 2016, the removal of traffic medians at the Ysleta Land POE,  and recurring luggage donations in fiscal year 2017. Figure 9 is a photo of  the high capacity perforating machine that CBP accepted at the Port of  Freeport Sea POE from its partner Red Hook Terminals in 2016.", "As mentioned above, once CBP selects an application for a new donation  partnership, CBP, GSA, if applicable, and partner officials negotiate the  terms of a MOU, which outlines intentions of the partnerships for projects  that require coordinated planning and development. CBP currently has  MOUs for 9 of its 16 DAP projects. The MOUs contain a variety of project- specific information, including the scope of the project, a list of documents  that CBP and GSA may request to determine whether the project is ready  for execution, and details on donor warranty and continuing financial  responsibility after CBP and GSA accepts the donation. As mentioned  previously, CBP classifies donations under the DAP into two categories:  small-scale donations, which are reviewed on an expedited basis, and  large-scale donations. For example, the Salvation Army\u2019s recurring  donation of six to nine pieces of luggage per year to support Office of  Field Operations canine training activities is a small-scale donation.  Large-scale donations are donations with an estimated value of $5 million  or more and are moderate to significant in size, scope, and complexity.  For example, the City of Laredo\u2019s donation for construction of four  additional commercial vehicle lanes and booths, roadways and  infrastructure, and exit booths and related technologies is a large-scale  donation."], "subsections": []}]}, {"section_title": "CBP Uses Various Processes to Monitor and Evaluate Its Partnerships, but Could Benefit from Establishing an Evaluation Plan to Assess Overall Program Performance", "paragraphs": [], "subsections": [{"section_title": "CBP Has Various Processes to Monitor and Evaluate the Implementation and Benefits of Its Public- Private Partnership Programs", "paragraphs": [], "subsections": [{"section_title": "RSP Audits, Metric Reports, and Partner Satisfaction Surveys", "paragraphs": ["Given that partner requests for RSP services are predominately for the  purposes of CBP officer overtime, CBP primarily monitors the RSP  through audits. Specifically, CBP conducts regular audits using  information from its Service Request Portal, its overtime management  system, and its internal accounting system to ensure partners  appropriately reimburse CBP for the overtime services officers provide  under the RSP. Figure 10 describes how and when CBP uses these tools  to conduct audits as part of the RSP request, fulfillment, and billing  processes.", "As noted previously, CBP officers who work RSP overtime enter  information from the Service Request Portal, such as the partner code  and POE code, into CBP\u2019s overtime management system for the actual  hours that the officer worked to complete the request. At the end of every  shift, CBP supervisors review and approve the information entered into  the overtime management system, which contains the information needed  for CBP to bill its RSP partner for the services that it performed, such as  the number of hours each CBP officer worked to fulfill RSP requests and  the salary and benefits information for those officers. POE supervisors  then update the Service Request Portal records so that they reflect what  CBP officers actually worked. On Mondays, AFP officials and CBP POE  supervisors conduct concurrent audits of weekly overtime management  system reports and reconcile these data with the information from the  Service Request Portal to ensure that CBP will bill the partner  appropriately. At the end of two pay period cycles, or every 28 days,  officials at CBP\u2019s National Finance Center review the payroll and benefits  information that was uploaded from the overtime management system  into CBP\u2019s financial management system to confirm that it matches the  appropriate partner code. This ensures that the correct partner is billed for  the reimbursable services that CBP provided.", "Generally, CBP and partner officials we met with did not have any  problems with the billing and payment process, and CBP officials noted  that any discrepancies in the billing information between the Service  Request Portal, the overtime management system, or the financial  accounting system, such as the partner code or the number of hours that  CBP officers worked, are usually identified and corrected during the  weekly audits. Further, in October 2017, we received a demonstration of  how partners and CBP manage requests for services in the Service  Request Portal, how CBP officers and supervisors at the POEs enter and  review overtime information, and how CBP runs reports in its financial  accounting system during the audit process. In addition, we conducted a  test of the data from the overtime management system and the billing  information from the financial accounting system for a selection of  partners across eight pay periods from fiscal years 2014 through 2017 to  determine if CBP billed its partners appropriately. Specifically, for each of  the eight selected pay periods, we randomly selected one RSP partner  from the universe of partners who used RSP services during the period.  We then compared the number of RSP overtime hours logged in CBP\u2019s  overtime management system for the selected partners and pay periods  with the number of hours on the corresponding partner bills. In all eight  cases, the amount of RSP overtime hours logged by CBP officials  matched the overtime hours billed to the partners. Our observations,  review of applicable documentation, and testing provided reasonable  assurance that CBP is being appropriately reimbursed by partners for the  services that it provided under the RSP.", "To evaluate the benefits of RSP services, the AFP office develops metrics  reports on the services that CBP performed while fulfilling RSP requests  throughout the billing cycle that it provides its partners. These metrics  reports include data, such as the number of overtime hours CBP officers  worked, the number of travelers CBP processed, the number of  containers CBP inspected, and the average wait times CBP recorded  during RSP overtime services, among other data. According to AFP  officials, this information about the impact of reimbursable services helps  partners make informed decisions when assessing their future requests.  The AFP office works with partners to ensure that the information CBP  provides in these reports is useful and will provide additional data upon  the partners\u2019 request, as applicable.", "CBP also conducts annual RSP partner satisfaction surveys to obtain  feedback and evaluate overall satisfaction with program implementation.  In 2015 and 2016, RSP partners expressed high levels of satisfaction  about the level of services CBP provided, the request and fulfilment  process, the billing and payment process, the monthly and annual metrics  reports that CBP provides its partners, and the program\u2019s ability to meet  partner goals. Additionally, partners generally responded that the program  allowed them to achieve their goals, which primarily focused on reducing  wait times and increasing their own customer satisfaction levels."], "subsections": []}]}, {"section_title": "Monitoring and Evaluation of DAP Implementation and Benefits", "paragraphs": ["CBP has guidance that it follows to monitor and evaluate the  implementation of DAP projects, and CBP and its partners use tools such  as implementation roadmaps and other policy documents, such as  standard operating procedures, to administer and monitor the progress of  DAP projects at the POEs. For example, CBP develops project roadmaps  for all donation projects in close collaboration with its partner, GSA (as  applicable), and other entities involved in the project, and shares them  with project participants. The roadmap identifies a variety of project  milestones and tasks, such as drafting the MOU and completing the  technical requirements package, among other things. The roadmap also  tracks the number of days that CBP expects will be required to complete  each task, which helps CBP to ensure that all stakeholders meet project  milestones.", "CBP also monitors overall DAP implementation by collecting quantitative  data on the efficiency of DAP processes to inform program and process  improvements. For example, from 2015 to 2016, CBP consolidated  certain elements of its application evaluation process to reduce the  number of days it takes to evaluate and approve applications from an  average of 144 days to 75 days for large-scale donations. Similarly, from  2015 to 2016, CBP determined that it could gain efficiencies by  establishing a separate application evaluation and approval process for  small-scale donation applications to better accommodate small-scale  donations, and delegated approval and acceptance authority to the Office  of Field Operations Executive Assistant Commissioner. This new  process expedited the proposal evaluation timeline for small-scale  donations from approximately 27 days to 14 days. In addition, GSA  implemented a similar delegation authority for approval and acceptance  of small-scale donations in fiscal year 2017, which decreased GSA\u2019s  application evaluation process from approximately 57 days to 25 days  from fiscal year 2016 to 2017.", "In addition to monitoring the implementation of the overall program and  the progress of specific DAP projects, CBP works with its partners to  evaluate the benefits of each project. Specifically, during the planning and  development phase of a donation, AFP officials coordinate with local CBP  officials and DAP partners to develop a plan for identifying, measuring,  and reporting on the local benefits to be derived from accepted donations  upon project completion. CBP has completed its evaluation of the benefits  of one completed small-scale project. For example, CBP estimated that  the donated perforating machine at the Freeport Sea POE will save CBP  166 officer hours and approximately $7,450 in salary and maintenance  costs per year. For large-scale projects, CBP is working with its partners  to develop these evaluation plans, but it is too early for CBP to evaluate  the benefits given that most of these projects are in the early planning  and development phases. CBP shares its findings on benefits with its  partners to help them assess their return on investment and so that they  can share that information with their own local stakeholders."], "subsections": []}, {"section_title": "CBP Is Taking Steps to Plan for the Expansion of Its RSP and DAP, but Could Benefit from Establishing an Evaluation Plan to Assess Overall Program Performance", "paragraphs": ["CBP is taking steps to monitor the existing use and impacts of RSP and  DAP and to plan for further expansion of these programs. For example, in  addition to the monthly metrics reports that CBP provides its RSP  partners, AFP officials told us that they monitor the fulfillment rates of  formal partner requests for RSP services. The current fulfillment rate  across all of CBP\u2019s RSP agreements is over 99 percent. In addition, as  noted previously, AFP officials coordinate with local CBP officials and  DAP partners to develop a plan for identifying, measuring, and reporting  on the local benefits to be derived from accepted donations upon project  completion. Furthermore, with regard to planning for future program  expansion, CBP has taken steps to plan for the additional oversight  activities that it expects at the headquarters level as the RSP expands.  For example, CBP is hiring new staff members and contractors for the  AFP office, as well as reimbursing the Office of Finance for one staff  position and embedding one staff member in the Budget Office to help  complete the increased number of financial transactions and audits. In  addition, the AFP office is considering the future impact of DAP projects  on staffing and other resources at the affected POEs, and is working with  Field Office, POE, and partner officials to identify and budget for  anticipated operational needs, with assistance from CBP\u2019s Workload  Staffing Model and Planning, Program Analysis and Evaluation offices.", "These efforts to monitor and evaluate the impacts of the programs and  plan for further expansion are positive steps that should help position  CBP to manage anticipated increases in the number of agreements going  forward. Furthermore, prior to Sections 481 and 482 authorities, in  accordance with the report of the Senate Appropriations Committee  accompanying the Department of Homeland Security Appropriations Act,  2013, CBP submitted semiannual reports to Congress on its Section 560 partnerships for fiscal years 2014 through 2016. CBP included  information in these reports on the benefits of RSP services. For  example, CBP compared baseline traveler and vehicle volume and wait  times at participating POEs from previous years to the traveler and  vehicle volume and wait times during time periods when CBP provided  reimbursable services.", "Subsequently, in accordance with the Consolidated Appropriations Act,  2014, CBP developed an evaluation plan with objectives, criteria,  evaluation methodologies, and data collection plans to be used to  evaluate RSP and DAP performance on an annual and aggregated  basis. However, the provision requiring that an evaluation plan be  established for the section 559 pilot program was repealed by the Cross- Border Trade Enhancement Act of 2016. This Act requires that CBP  report to Congress annually to identify the activities undertaken and the  agreements entered into under the RSP and DAP but does not require  that CBP develop or report on an evaluation plan for these programs.  As of November 2017, CBP had not decided whether it will use a  performance evaluation plan going forward. However, in December 2017,  AFP officials acknowledged that such a plan\u2014that examines RSP and  DAP performance at the programmatic level\u2014could benefit program  management and augment evaluation activities already conducted by the  AFP office. We reviewed draft versions of CBP\u2019s fiscal year 2017 reports  to Congress on new Section 481 fee agreements and new Section 482  donation agreements. Both reports detailed how CBP responded to  changes in legislative authorities for the RSP and DAP and listed its fiscal  year 2017 selections for public-private partnership agreements, but did  not include an evaluation plan or identify measures for tracking program  performance going forward.", "Further, while the AFP office tracks the fulfillment rates of requests for  RSP services and is working with its partners and other CBP components  to monitor and plan for program expansion, CBP could benefit from a  more robust assessment of possible impacts of staffing challenges on  program expansion. As mentioned above, as of fiscal year 2017, CBP  has an overall staffing shortage of 2,516 officers, according to CBP\u2019s  Workload Staffing Model analysis, and CBP officer hiring remains an  agency-wide challenge. We identified some staffing challenges that could  affect CBP\u2019s management and implementation of its RSP and DAP  programs, which roughly doubled in the number of agreements from fiscal  year 2016 to 2017. As of November 2017, public-private partnership  agreements were in place at approximately one-third of all U.S. POEs.  With the removal of the limit on the number of air agreements that CBP  can enter each year, some POEs have or are anticipated by CBP to have  more than one RSP agreement in place. According to AFP officials, if  there are multiple RSP partnerships at the same POE, CBP will try to  accommodate all partner requests. Generally, the AFP office expects the  POEs to handle requests on a first-come, first-serve basis. As the number  of RSP partners increase across POEs, requests for services are likely to  also increase, according to CBP officials. While it is too soon for CBP to  assess the extent to which fulfillment rates may change over time, if at all,  with the expansion of the program, officials noted that RSP agreements  do not guarantee that CBP will be able provide all services that partners  request, and that RSP services are above and beyond what CBP would  normally provide. According to CBP, the recent increase in the mandated  cap on officer overtime pay from $35,000 to $45,000 has allowed CBP  officers to work more RSP overtime. Nevertheless, it is unclear how  CBP will evaluate and address any increase in RSP agreements that may  outpace the staff available to fulfill service requests.", "As noted previously, new authorities for the RSP also allow CBP to enter  into agreements that allow partners to reimburse CBP for up to five  additional officers, above the number assigned at the time the agreement  was reached, at small airports. In fiscal year 2017, CBP selected four  partners for this type of reimbursable services agreement. For its  agreement with the Rhode Island Airport Corporation, CBP relocated  three officers from the Boston-Logan International Airport, one of the  busiest U.S. international airports, to T.F. Green State International  Airport, which inspects less than 100,000 international travelers annually.  AFP officials noted that, in accordance with legislation, the Port Director  overseeing the port of origin for the CBP officer(s) added to small airports  must determine that the movement of the officer(s) from one POE to  another in fulfilling RSP agreements for additional CBP officers does not  permanently affect operations at any other POE, including the POE that  the officer(s) depart. However, CBP has not planned for how individual  POEs or the agency more broadly would make these determinations or  how CBP would evaluate any longer term impacts on overall CBP officer  staffing resulting from the movement of officers among POEs.", "Office of Management and Budget guidance for making program  expansion decisions indicates that agencies should evaluate cost- effectiveness in a manner that presents facts and supporting details  among competing alternatives, including relative costs, benefits, and  performance tradeoffs. Further, in September 2016 we developed a list  of leading practices for evaluation based on the American Evaluation  Association\u2019s An Evaluation Roadmap for a More Effective Government,  including development of an evaluation plan or agenda, a description of  methods and data sources in evaluation reports, procedures for assuring  evaluation quality, and tracking the use of evaluation findings in  management or reforms, among others. CBP is taking steps to monitor  its RSP and DAP and plan for program expansion. However, given its  staffing challenges, CBP could benefit from developing and implementing  an evaluation plan for assessing overall RSP and DAP performance.  Such a plan could further integrate evaluation activities into program  management and could better position CBP to assess relative costs,  benefits, and performance trade-offs as CBP expands its RSP and DAP,  and consider the extent to which any future program changes may be  needed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The amount of legitimate travel and trade entering through the nation\u2019s  POEs continues to increase each year. To date, CBP and its partners  have utilized public-private partnerships to help meet an increased  demand for CBP services and infrastructure improvements at POEs, and  agency officials and program partners have generally concurred that the  RSP and DAP have been effective in helping to bridge CBP resource  gaps and improve partner operations. However, given CBP\u2019s officer hiring  and retention challenges and its finite resources for addressing  infrastructure needs at POEs, CBP\u2019s ability to monitor and evaluate the  implementation of its public-private partnership programs is essential to  ensuring that CBP leaders have the information that they need to make  program decisions and identify and respond to challenges as the  programs expand. As CBP continues to expand its public-private  partnership programs, evaluating the RSP and DAP at the program level  could better position CBP leaders to assess the relative costs, benefits,  and performance trade-offs of continuing to expand the programs. It could  also better position CBP to identify and respond to expansion challenges,  such as CBP officer staffing."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The CBP Commissioner should develop and implement an evaluation  plan to be used to assess the overall performance of the RSP and DAP,  which could include, among other things, measurable objectives,  performance criteria, evaluation methodologies, and data collection plans  to inform future program decisions. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS and GSA for their review and  comment. GSA indicated that it did not have any comments on the draft  report via e-mail. DHS provided written comments, which are noted below  and reproduced in full in appendix II, and technical comments, which we  incorporated as appropriate.", "DHS concurred with our recommendation and described the actions it  plans to take in response. Specifically, DHS stated that CBP will develop  and implement a plan to assess the overall performance of the RSP and  DAP to inform future program decisions. The plan will evaluate current  partnerships, including but not limited to: service denial rate; trend  analysis of frequency and type of requests; annual stakeholder survey  results; impact of multiple stakeholders in one port location on levels of  service provided; impact of unanticipated operations and maintenance  costs associated with property donations; and staffing implications on  donations of upgraded port infrastructure. If implemented effectively,  these planned actions should address the intent of our recommendation.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Administrator of the  General Services Administration, 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) 512-8777 or gamblerr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Details of U.S. Customs and Border Protection Reimbursable Services Program Agreement Memoranda of Understanding", "paragraphs": ["Since 2013, U.S. Customs and Border Protection (CBP) has entered into  public-private partnerships with private sector or government entities  under its Reimbursable Services Program (RSP) to cover CBP\u2019s cost of  providing certain services at U.S. ports of entry (POE) upon the request of  partners. As of the end of fiscal year 2017, CBP approved 114  applications for reimbursable fee agreements. These services can include  customs, immigration, agricultural processing, border security and  support at any facility where CBP provides, or will provide services and  may cover costs such as salaries, benefits, overtime expenses,  administration, and transportation costs. Once CBP selects an  application for a new reimbursable services partnership, CBP and its  partner sign a legally binding Reimbursable Services Agreement, which is  a standard legal form that CBP uses for all new RSP agreements. Local  CBP officials then work with the partner to negotiate the terms of a  Memorandum of Understanding (MOU), which outlines how the  partnership will work at the POE.", "In the following table, we provide select details from the 54 existing MOUs  between CBP and its partners in the RSP.", "In addition to the partners listed in the table above, CBP has also signed  Reimbursable Services Agreements with the following partners, but has  not completed negotiating the terms of an MOU as of the end of fiscal  year 2017.", "Fiscal year 2016 partners:  1.  City of Charlotte Aviation Department  2.  Dole Fresh Fruit Company (Port of Wilmington, Delaware; Port  Everglades; and Port of Freeport)", "3.  GT USA LLC  4.  Port of Galveston  5.  Presidio Port Authority Local Government Corporation  6.  Red Hook Container Terminal, LLC  7.  United Parcel Service Co."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kirk Kiester (Assistant Director),  Dominick Dale, Michele Fejfar, Eric Hauswirth, Stephanie Heiken, Susan  Hsu, Elizabeth Leibinger, David Lutter, and Sasan J. \u201cJon\u201d Najmi made  significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-267T", "url": "https://www.gao.gov/products/GAO-18-267T", "title": "Veterans Affairs Information Technology: Historical Perspective on Health System Modernization Contracts and Update on Efforts to Address Key FITARA-Related Areas", "published_date": "2017-12-07T00:00:00", "released_date": "2017-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The use of IT is crucial to helping VA effectively serve the nation's veterans and, each year, the department spends billions of dollars on its information systems and assets. However, VA has faced challenges spanning a number of critical initiatives related to modernizing its major systems. To improve all major federal agencies' acquisitions and hold them accountable for reducing duplication and achieving cost savings, in December 2014 Congress enacted federal IT acquisition reform legislation (commonly referred to as the Federal Information Technology Acquisition Reform Act , or FITARA).", "GAO was asked to summarize its previous and ongoing work regarding VA's history of efforts to modernize VistA, including past use of contractors, and the department's recent effort to acquire a commercial electronic health record system to replace VistA. GAO was also asked to provide an update on VA's progress in key FITARA-related areas, including (1) data center consolidation and optimization, (2) incremental system development practices, and (3) software license management. VA generally agreed with the information upon which this statement is based."]}, {"section_title": "What GAO Found", "paragraphs": ["For nearly two decades, the Department of Veterans Affairs (VA) has undertaken multiple efforts to modernize its health information system\u2014the Veterans Health Information Systems and Technology Architecture (known as VistA). Two of VA's most recent efforts included the Integrated Electronic Health Record (iEHR) program, a joint program with the Department of Defense (DOD) intended to replace separate systems used by VA and DOD with a single system; and the VistA Evolution program, which was to modernize VistA with additional capabilities and a better interface for all users. VA has relied extensively on assistance from contractors for these efforts. VA obligated over $1.1 billion for contracts with 138 contractors during fiscal years 2011 through 2016 for iEHR and VistA Evolution. Contract data showed that the 15 key contractors that worked on both programs accounted for $741 million of the funding obligated for system development, project management, and operations and maintenance to support the two programs (see figure). VA recently announced that it intends to change its VistA modernization approach and acquire the same electronic health record system that DOD is implementing.", "With respect to key FITARA-related areas, the department has reported progress on consolidating and optimizing its data centers, although this progress has fallen short of targets set by the Office of Management and Budget. VA has also reported $23.61 million in data center-related cost savings, yet does not expect to realize further savings from additional closures. In addition, VA's Chief Information Officer (CIO) certified the use of adequate incremental development for 10 of the department's major IT investments; however, VA has not yet updated its policy and process for CIO certification as GAO recommended. Finally, VA has issued a software licensing policy and has generated an inventory of its software licenses to inform future investment decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made multiple recommendations to VA aimed at improving the department's IT management. VA has generally agreed with the recommendations and begun taking responsive actions."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to participate in today\u2019s hearing on the  information technology (IT) efforts of the Department of Veterans Affairs  (VA). As you know, the use of IT is crucial to helping VA effectively serve  the nation\u2019s veterans and, each year, the department spends billions of  dollars on its information systems and assets.", "Over many years, however, VA has experienced challenges in managing  its IT projects and programs, which, in turn, has contributed to questions  about the efficiency and effectiveness of the department\u2019s operations.  These challenges have spanned a number of critical initiatives related to  modernizing major systems within the department, including its electronic  health information system\u2014the Veterans Health Information Systems and  Technology Architecture (VistA). We have previously reported on the  challenges that the department has faced in managing this system, as  well as other aspects of its IT.", "Further, given the challenges that federal agencies, including VA, have  long encountered in managing IT acquisitions, in December 2014  Congress enacted federal IT acquisition reform legislation (commonly  referred to as the Federal Information Technology Acquisition Reform Act,  or FITARA). This law was intended to improve agencies\u2019 acquisitions  and enable Congress to hold agencies accountable for reducing  duplication and achieving cost savings.", "At your request, my testimony today summarizes our work that has  examined VA\u2019s history of efforts to modernize its health information  system, VistA, including past uses of contractors across multiple  modernization initiatives, and the department\u2019s plan to acquire a  commercial electronic health record system to replace VistA. In addition,  the testimony provides an update on VA\u2019s progress in key FITARA- related areas, including (1) data center consolidation and optimization, (2)  incremental system development practices, and (3) software license  management.", "In developing this testimony, we relied on our previously published  reports that discussed the history of the department\u2019s VistA modernization  efforts, as well as the department\u2019s efforts regarding data center  consolidation and optimization, incremental system development  practices, and software license management. We also considered  information provided by the department on its actions in response to our  previous recommendations in these areas. The reports cited throughout  this statement include detailed information on the scope and methodology  for our prior reviews.", "Further, the statement summarizes key findings from a draft report that is  based on our ongoing review of selected VistA modernization contracts  and the department\u2019s recent efforts to acquire a commercial electronic  health record system. This draft report is currently with VA for its  comments. We anticipate issuing the final report in January 2018.", "For our ongoing review of the VistA modernization efforts, we obtained  available data from VA on the associated contracts, related dollar  obligations, and expected contractor activities for modernization tasks. In  this regard, VA was able to provide the requested data for two  modernization initiatives with activities that spanned the time period from  fiscal year 2011 through fiscal year 2016.", "To determine the key contractors for the two modernization initiatives, we  first identified all of the contractors that worked on the initiatives. We then  ranked the contractors according to the total dollars obligated for  contracts that each contractor had been awarded. We designated the top  15 ranked contractors, in terms of dollars obligated, as key contractors.  We assessed the reliability of the contract data we received from VA and  determined that the data were sufficiently reliable for the purposes of our  review.", "To determine VA\u2019s current plans for modernizing VistA, we reviewed draft  program schedules, organization charts, congressional testimonies of the  VA Secretary, a White House press conference transcript, departmental  press releases, and the department\u2019s justification for awarding a non- competitive contract for a commercial off-the-shelf (COTS) electronic  health record system. We also met with senior VA officials to obtain  updated information on the efforts.", "The work upon which this statement is based is being or was conducted  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audits 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."], "subsections": [{"section_title": "Background", "paragraphs": ["VA\u2019s mission is to promote the health, welfare, and dignity of all veterans  in recognition of their service to the nation by ensuring that they receive  medical care, benefits, social support, and lasting memorials. In carrying  out this mission, the department operates one of the largest health care  delivery systems in America, providing health care to millions of veterans  and their families at more than 1,500 facilities.", "The department\u2019s three major components\u2014the Veterans Health  Administration (VHA), the Veterans Benefits Administration (VBA), and the National Cemetery Administration (NCA)\u2014are primarily responsible  for carrying out its mission. More specifically, VHA provides health care  services, including primary care and specialized care, and it performs  research and development to improve veterans\u2019 needs. VBA provides a  variety of benefits to veterans and their families, including disability  compensation, educational opportunities, assistance with home  ownership, and life insurance. Further, NCA provides burial and memorial  benefits to veterans and their families.", "Collectively, the three components rely on approximately 340,000  employees to provide services and benefits. These employees work in  VA\u2019s Washington, D.C. headquarters, as well as 170 medical centers,  approximately 750 community-based outpatient clinics, 300 veterans  centers, 56 regional offices, and more than 130 cemeteries situated  throughout the nation."], "subsections": [{"section_title": "VA Relies Extensively on IT", "paragraphs": ["The use of IT is critically important to VA\u2019s efforts to provide benefits and  services to veterans. As such, the department operates and maintains an  IT infrastructure that is intended to provide the backbone necessary to  meet the day-to-day operational needs of its medical centers, veteran- facing systems, benefits delivery systems, memorial services, and all  other systems supporting the department\u2019s mission. The infrastructure is  to provide for data storage, transmission, and communications  requirements necessary to ensure the delivery of reliable, available, and  responsive support to all VA staff offices and administration customers,  as well as veterans.", "According to department data as of October 2016, there were 576 active  or in-development systems in VA\u2019s inventory of IT systems. These  systems are intended to be used for the determination of benefits,  benefits claims processing, and access to health records, among other  services. VHA is the parent organization for 319 of these systems. Of the 319 systems, 244 were considered mission-related and provide  capabilities related to veterans\u2019 health care delivery. For example, VHA\u2019s  systems provide capabilities to establish and maintain electronic health  records that health care providers and other clinical staff use to view  patient information in inpatient, outpatient, and long-term care settings.", "VistA serves an essential role in helping the department to fulfill its health  care delivery mission. Specifically, VistA is an integrated medical  information system for all veterans\u2019 health information. It was developed  in-house by the department\u2019s clinicians and IT personnel and has been in  operation since the early 1980s. As such, the system has long been vital  to helping ensure the quality of health care received by the nation\u2019s  veterans and their dependents.", "VistA is comprised of more than 200 applications that assist in the  delivery of health care and perform other important functions within the  department, including financial management, enrollment, and registration.  Some of these applications have been in operation for over 30 years and,  according to VA, have become increasingly difficult and costly to  maintain. As such, the department has expended extensive resources to  modernize the system and increase its ability to allow for the viewing or  exchange of patient information with the Department of Defense (DOD)  and private sector health providers. In addition, as we recently reported,  VHA has unaddressed needs that indicate its current health IT systems,  including VistA, do not fully support the organization\u2019s business  functions. Specifically, about 39 percent of all requests related to health  IT needs have remained unaddressed after more than 5 years.", "Electronic health records are particularly crucial for optimizing the health  care provided to veterans, many of whom may have health records  residing at multiple medical facilities within and outside the United States.  Taking steps toward interoperability\u2014that is, collecting, storing, retrieving,  and transferring veterans\u2019 health records electronically\u2014is significant to  improving the quality and efficiency of care. One of the goals of  interoperability is to ensure that patients\u2019 electronic health information is  available from provider to provider, regardless of where it originated or  resides."], "subsections": []}, {"section_title": "VA Manages IT Resources Centrally", "paragraphs": ["Since 2007, VA has been operating a centralized organization, the Office  of Information and Technology (OI&T), in which most key functions  intended for effective management of IT are performed. This office is led  by the Assistant Secretary for Information and Technology\u2014VA\u2019s Chief  Information Officer (CIO). The office is responsible for providing strategy  and technical direction, guidance, and policy related to how IT resources  are to be acquired and managed for the department, and for working  closely with its business partners\u2014such as VHA\u2014to identify and prioritize  business needs and requirements for IT systems. Among other things,  OI&T has responsibility for managing the majority of VA\u2019s IT-related  functions, including the maintenance and modernization of VistA. As of  2016, OI&T was comprised of more than 15,000 staff, with more than half  of these positions filled by contractors."], "subsections": []}, {"section_title": "VA Requested Nearly $4.1 Billion for Fiscal Year 2018", "paragraphs": ["For fiscal year 2018, the department\u2019s budget request included nearly  $4.1 billion for IT. The department requested approximately $359 million  for new systems development or modernization efforts, approximately  $2.5 billion for maintaining existing systems, and approximately $1.2  billion for payroll and administration. For example, in its fiscal year 2018  budget submission, the department requested appropriations to support  five IT portfolios, including the development and operations and  maintenance for programs and projects related to the:", "Medical portfolio, which provides technology solutions to deliver  modern, high-quality medical care capabilities to veterans ($944.2  million);", "Benefit portfolio, which addresses the technology needs managed by  the Veterans Benefit Administration ($296.9 million);", "Memorial Affairs portfolio, which provides support for the  modernization of applications and services for National Cemeteries at  133 locations nationwide ($24.5 million);", "Corporate portfolio, which consists of back office operations  supporting the major business lines and department management  ($270.6 million); and", "Enterprise IT, which provides the underlying infrastructure to enable  the other portfolios to operate and includes such things as  cybersecurity, data centers, cloud services, telephony, enterprise  software, and data connectivity ($1.289 billion)."], "subsections": []}, {"section_title": "VA\u2019s Management of IT Has Contributed to High- Risk Designations", "paragraphs": ["In 2015, we designated VA Health Care as a high-risk area for the federal  government and, currently, we continue to be concerned about the  department\u2019s ability to ensure that its resources are being used cost- effectively and efficiently to improve veterans\u2019 timely access to health  care. In part, we identified limitations in the capacity of VA\u2019s existing  systems, including the outdated, inefficient nature of certain systems and  a lack of system interoperability\u2014that is, the ability to exchange and use  electronic health information\u2014as contributors to the department\u2019s IT  challenges related to health care. These challenges present risks to the  timeliness, quality, and safety of the health care. While we recently  reported that the department has begun to demonstrate leadership  commitment to addressing IT challenges, more work remains.", "Also, in February 2015, we added Improving the Management of IT  Acquisitions and Operations to our list of high-risk areas. Specifically,  federal IT investments too frequently fail or incur cost overruns and  schedule slippages while contributing little to mission-related outcomes.  We have previously testified that the federal government has spent  billions of dollars on failed IT investments, including, for example, VA\u2019s  Scheduling Replacement Project, which was terminated in September 2009 after spending an estimated $127 million over 9 years; and its  Financial and Logistics Integrated Technology Enterprise program, which  was intended to be delivered by 2014 at a total estimated cost of $609  million, but was terminated in October 2011 due to challenges in  managing the program.", "This high-risk area highlighted several critical IT initiatives in need of  additional congressional oversight, including (1) reviews of troubled  projects; (2) efforts to increase the use of incremental development; (3)  efforts to provide transparency relative to the cost, schedule, and risk  levels for major IT investments; (4) reviews of agencies\u2019 operational  investments; (5) data center consolidation; and (6) efforts to streamline  agencies\u2019 portfolios of investments. We noted that agencies\u2019  implementation of these initiatives was inconsistent and that more work  remained to demonstrate progress in achieving IT acquisition and  operation outcomes.", "We also recently issued an update to our high-risk report and noted that,  while progress has been made in addressing the high-risk area of IT  acquisitions and operations, significant work remains to be completed.  For example, we noted, among other things, that additional work was  needed to establish action plans for federal agencies to modernize or  replace obsolete systems. Specifically, we pointed out that many federal  systems use outdated software languages and hardware, which has  increased spending on operations and maintenance of technology  investments.", "VA was among a handful of departments with one or more archaic legacy  systems. As discussed in our recent report on legacy systems used by  federal agencies, we identified 2 of the department\u2019s systems as being  over 50 years old, and among the 10 oldest investments and/or systems  that were reported by 12 selected agencies.", "Personnel and Accounting Integrated Data (PAID)\u2014This 53-year old  system automates time and attendance for employees, timekeepers,  payroll, and supervisors. It is written in Common Business Oriented  Language (COBOL), a programming language developed in the late  1950s and early 1960s, and runs on IBM mainframes.", "Benefits Delivery Network (BDN)\u2014This 51-year old system tracks  claims filed by veterans for benefits, eligibility, and dates of death. It is  a suite of COBOL mainframe applications.", "Ongoing uses of antiquated systems, such as PAID and BDN, contribute  to agencies spending a large, and increasing, proportion of their IT  budgets on operations and maintenance of systems that have outlived  their effectiveness and are consuming resources that outweigh their  benefits. Accordingly, we have recommended that VA identify and plan to  modernize or replace its legacy systems. The department concurred with  our recommendation and stated that it plans to retire and replace PAID  with the Human Resources Information System Shared Service Center in  2017. The department also stated that it has general plans to roll the  capabilities of BDN into another system and to retire BDN in 2018."], "subsections": []}, {"section_title": "FITARA Is Intended to Help VA and Other Agencies Improve Their Acquisitions of IT", "paragraphs": ["Congress enacted federal IT acquisition reform legislation (commonly  referred to as the Federal Information Technology Acquisition Reform Act,  or FITARA) in December 2014. This legislation was intended to improve  agencies\u2019 acquisitions of IT and enable Congress to monitor agencies\u2019  progress and hold them accountable for reducing duplication and  achieving cost savings. The law applies to VA and other covered  agencies. It includes specific requirements related to seven areas, including data center consolidation and optimization, agency CIO  authority, and government-wide software purchasing.", "Federal data center consolidation initiative (FDCCI). Agencies are  required to provide the Office of Management and Budget (OMB) with  a data center inventory, a strategy for consolidating and optimizing  their data centers (to include planned cost savings), and quarterly  updates on progress made. The law also requires OMB to develop a  goal for how much is to be saved through this initiative, and provide  annual reports on cost savings achieved.", "Agency CIO authority enhancements. CIOs at covered agencies  are required to (1) approve the IT budget requests of their respective  agencies, (2) certify that IT investments are adequately implementing  incremental development, as defined in capital planning guidance  issued by OMB, (3) review and approve contracts for IT, and (4)  approve the appointment of other agency employees with the title of  CIO.", "Government-wide software purchasing program. The General  Services Administration is to develop a strategic sourcing initiative to  enhance government-wide acquisition and management of software.  In doing so, the law requires that, to the maximum extent practicable,  the General Services Administration should allow for the purchase of  a software license agreement that is available for use by all executive  branch agencies as a single user. Expanding upon FITARA, the  Making Electronic Government Accountable by Yielding Tangible  Efficiencies Act of 2016, or the \u201cMEGABYTE Act,\u201d further enhanced  CIOs\u2019 management of software licenses by requiring agency CIOs to  establish an agency software licensing policy and a comprehensive  software license inventory to track and maintain licenses, among  other requirements.", "In June 2015, OMB released guidance describing how agencies are to  implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls that will meet the  law\u2019s requirements, while providing agencies with flexibility to adapt to  unique agency processes and requirements;  clarify the CIO\u2019s role and strengthen the relationship between agency  CIOs and bureau CIOs; and  strengthen CIO accountability for IT costs, schedules, performance,  and security."], "subsections": []}]}, {"section_title": "VA Has Pursued Four VistA Modernization Initiatives Since 2001, with About a Billion Dollars Obligated for Contractors\u2019 Activities During Fiscal Years 2011 through 2016", "paragraphs": ["In our draft report that is currently with VA for comments, we discuss the  history of VA\u2019s efforts to modernize its health information system, VistA.  These four efforts\u2014HealtheVet, the integrated Electronic Health Record  (iEHR), VistA Evolution, and the Electronic Health Record Modernization  (EHRM)\u2014reflect varying approaches that the department has considered  to achieve a modernized health care system over the course of nearly two  decades. The modernization efforts are described as follows.", "In 2001, VA undertook its first VistA modernization project, the  HealtheVet initiative, with the goals of standardizing the department\u2019s  health care system and eliminating the approximately 130 different  systems used by its field locations at that time. HealtheVet was scheduled  to be fully implemented by 2018 at a total estimated development and  deployment cost of about $11 billion. As part of the effort, the department  had planned to develop or enhance specific areas of system functionality  through six projects, which were to be completed between 2006 and  2012. Specifically, these projects were to provide capabilities to support  VA\u2019s Health Data Repository and Patient Financial Services System, as  well as the Laboratory, Pharmacy, Imaging, and Scheduling functions.", "In June 2008, we reported that the department had made progress on the  HealtheVet initiative, but noted issues with project planning and  governance. In June 2009, the Secretary of Veterans Affairs announced  that VA would stop financing failed projects and improve the management  of its IT development projects. Subsequently, in August 2010, the  department reported that it had terminated the HealtheVet initiative.", "In February 2011, VA began its second modernization initiative, the iEHR  program, in conjunction with DOD. The program was intended to replace  the two separate electronic health record systems used by the two  departments with a single, shared system. Moreover, because both  departments would be using the same system, this approach was  expected to largely sidestep the challenges that had been encountered in  trying to achieve interoperability between their two separate systems.", "Initial plans called for the development of a single, joint system consisting  of 54 clinical capabilities to be delivered in six increments between 2014  and 2017. Among the agreed-upon capabilities to be delivered were  those supporting laboratory, anatomic pathology, pharmacy, and  immunizations. According to VA and DOD, the single iEHR system had  an estimated life cycle cost of $29 billion through the end of fiscal year  2029.", "However, in February 2013, the Secretaries of VA and DOD announced  that they would not continue with their joint development of a single  electronic health record system. This decision resulted from an  assessment of the iEHR program that the secretaries had requested in  December 2012 because of their concerns about the program facing  challenges in meeting deadlines, costing too much, and taking too long to  deliver capabilities. In 2013, the departments abandoned their plan to  develop the integrated system and stated that they would again pursue  separate modernization efforts.", "In December 2013, VA initiated its VistA Evolution program as a joint  effort of VHA and OI&T that was to be completed by the end of fiscal year  2018. The program was to be comprised of a collection of projects and  efforts focused on improving the efficiency and quality of veterans\u2019 health  care by modernizing the department\u2019s health information systems,  increasing the department\u2019s data exchange and interoperability with DOD  and private sector health care partners, and reducing the time it takes to  deploy new health information management capabilities. Further, the  program was intended to result in lower costs for system upgrades,  maintenance, and sustainment. According to the department\u2019s March  2017 cost estimate, VistA Evolution was to have a life cycle cost of about  $4 billion through fiscal year 2028.", "Since initiating VistA Evolution in December 2013, VA has completed a  number of key activities that were called for in its plans. For example, the  department delivered capabilities, such as the ability for health providers  to have an integrated, real-time view of electronic health record data  through the Joint Legacy Viewer, as well as the ability for health care  providers to view sensitive DOD notes and highlight abnormal test results  for patients. VA also initiated work to standardize VistA across the 130  VA facilities and released enhancements to its legacy scheduling,  pharmacy, and immunization systems. In addition, the department  released the enterprise Health Management Platform, which is a web- based user interface that assembles patient clinical data from all VistA  instances and DOD.", "Although VistA Evolution is ongoing, VA is currently in the process of  revising its plan for the program as a result of the department recently  announcing its pursuit of a fourth VistA modernization program  (discussed below). For example, the department determined that it would  no longer pursue additional development or deployment of the enterprise  Health Management Platform\u2014a major VistA Evolution component\u2014 because the new modernization program is envisioned to provide similar  capabilities.", "In June 2017, the VA Secretary announced a significant shift in the  department\u2019s approach to modernizing VistA. Specifically, rather than  continue to use VistA, the Secretary stated that the department plans to  acquire the same electronic health record system that DOD is  implementing. In this regard, DOD has contracted with the Cerner  Corporation to provide a new integrated electronic health record system.  According to the Secretary, VA has chosen to acquire this same product  because it would allow all of VA\u2019s and DOD\u2019s patient data to reside in one  system, thus enabling seamless care between the department and DOD  without the manual and electronic exchange and reconciliation of data  between two separate systems.", "The VA Secretary added that this fourth modernization initiative is  intended to minimize customization and system differences that currently  exist within the department\u2019s medical facilities, and ensure the  consistency of processes and practices within VA and DOD. When fully  operational, the system is intended to be the single source for patients to  access their medical history and for clinicians to use that history in real  time at any VA or DOD medical facility, which may result in improved  health care outcomes. According to VA\u2019s Chief Technology Officer,  Cerner is expected to provide integration, configuration, testing,  deployment, hosting, organizational change management, training,  sustainment, and licenses necessary to deploy the system in a manner  that meets the department\u2019s needs.", "To expedite the acquisition, in June 2017, the Secretary signed a  \u201cDetermination and Findings,\u201d which noted a public interest exception to  the requirement for full and open competition, and authorized VA to issue  a solicitation directly to the Cerner Corporation. According to the  Secretary, VA expects to award a contract to Cerner in December 2017,  and deployment of the new system is anticipated to begin 18 months after  the contract has been signed.", "VA\u2019s Executive Director for the Electronic Health Records Modernization  System stated that the department intends to incrementally deploy the  new system to its medical facilities. Each facility is expected to continue  using VistA until the new system has been deployed at that location. All  VA medical facilities are anticipated to have the new system implemented  within 7 to 8 years after the first deployment.", "Figure 1 shows a timeline of the four efforts that VA has pursued to  modernize VistA since 2001."], "subsections": [{"section_title": "VA Obligated about $1.1 Billion for VistA Modernization Contracts During Fiscal Years 2011 through 2016", "paragraphs": ["For iEHR and VistA Evolution, the two modernization initiatives for which  VA could provide contract data, the department obligated approximately  $1.1 billion for contracts with 138 different contractors during fiscal years  2011 through 2016. Specifically, the department obligated  approximately $224 million and $880 million, respectively, for contracts  associated with these efforts. Of the 138 contractors, 34 of them  performed work supporting both iEHR and VistA Evolution. The remaining  104 contractors worked exclusively on either iEHR or VistA Evolution.", "Funding for the 34 contractors that worked on both iEHR and VistA  Evolution totaled about $793 million of the $1.1 billion obligated for  contracts on the two initiatives. Obligations for contracts awarded to the  top 15 of these 34 contractors (which we designated as key contractors)  accounted for about $741 million (about 67 percent) of the total obligated  for contracts on the two initiatives. The remaining 123 contractors were  obligated about $364 million for their contracts.", "The 15 key contractors were obligated about $564 million and $177  million for VistA Evolution and iEHR contracts, respectively. Table 1  identifies the key contractors and their obligated dollar totals for the two  efforts.", "Additionally, we determined that, of the $741 million obligated to the key  contractors, $411 million (about 55 percent) was obligated for contracts  supporting the development of new system capabilities, $256 million  (about 35 percent) was obligated for contracts supporting project  management activities, and $74 million (about 10 percent) was obligated  for contracts supporting operations and maintenance for iEHR and VistA  Evolution. VA obligated funds to all 15 of the key contractors for system  development, 13 of the key contractors for project management, and 12  of the key contractors for operations and maintenance. Figure 2 shows  the amounts obligated for each of these areas.", "Further, based on the key contractors\u2019 documentation, for the iEHR  program, VA obligated $102 million for development, $65 million for  project management, and $10 million for operations and maintenance.  For the VistA Evolution Program, VA obligated $309 million for  development, $191 million for project management, and $64 million for  operations and maintenance. Figure 3 shows the amounts obligated for  contracts on the VistA Evolution and iEHR programs for development,  project management, and operations and maintenance.", "In addition, table 2 shows the amounts that each of the 15 key contractors  were obligated for the three types of contract activities performed on  iEHR and VistA Evolution."], "subsections": []}, {"section_title": "VA Is in the Process of Developing Plans for Its Latest VistA Modernization Initiative", "paragraphs": ["Industry best practices and IT project management principles stress the  importance of sound planning for system modernization projects. These  plans should identify key aspects of a project, such as the scope,  responsible organizations, costs, schedules, and risks. Additionally,  planning should begin early in the project\u2019s lifecycle and be updated as  the project progresses.", "Since the VA Secretary announced that the department would acquire the  same electronic health record system as DOD, VA has begun planning  for the transition from VistA Evolution to EHRM. However, the department  is still early in its efforts, pending the contract award. In this regard, the  department has begun developing plans that are intended to guide the  new EHRM program. For example, the department has developed a  preliminary description of the organizations that are to be responsible for  governing the EHRM program. Further, the VA Secretary announced in  congressional testimony in November 2017, a key reporting responsibility  for the program\u2014stating that the Executive Director for the Electronic  Health Records Modernization System will report directly to the  department\u2019s Deputy Secretary. In addition, the department has  developed a preliminary timeline for deploying its new electronic health  record system to VA\u2019s medical facilities, and a 90-day schedule that  depicts key program activities. The department also has begun  documenting the EHRM program risks.", "Beyond the aforementioned planning activities undertaken thus far, the  Executive Director stated that the department intends to complete a full  suite of planning and acquisition management documents to guide the  program, including a life cycle cost estimate and an integrated master  schedule to establish key milestones over the life of the project. To this  end, the Executive Director told us that VA has awarded two program  management contracts to support the development of these plans to  MITRE Corporation and Booz Allen Hamilton.", "According to the Executive Director, VA also has begun reviewing the  VistA Evolution Roadmap, which is the key plan that the department has  used to guide VistA Evolution since 2014. This review is expected to  result in an updated plan that is to prioritize any remaining VistA  enhancements needed to support the transition from VistA Evolution to  the new system. According to the Executive Director, the department  intends to complete the development of its plans for EHRM within 90 days  after award of the Cerner contract, which is anticipated to occur in  December 2017.", "Further, beyond the development of plans, VA has begun to staff an  organizational structure for the modernization initiative, with the Under  Secretary of Health and the Assistant Secretary for Information and  Technology (VA\u2019s Chief Information Officer) designated as executive  sponsors. It has also appointed a Chief Technology Officer from OI&T,  and a Chief Medical Officer from VHA, both of whom are to report to the  Executive Director.", "VA\u2019s efforts to develop plans for EHRM and to staff an organization to  manage the program encompass key aspects of project planning that are  important to ensuring effective management of the department\u2019s latest  modernization initiative. However, the department remains early in its  modernization planning efforts, many of which are dependent on the  system acquisition contract award, which has not yet occurred. The  department\u2019s continued dedication to completing and effectively executing  the planning activities that it has identified will be essential to helping  minimize program risks and guide this latest electronic health record  modernization initiative to a successful outcome\u2014one which VA, for  almost two decades, has yet to achieve."], "subsections": []}]}, {"section_title": "VA\u2019s Progress toward Consolidating and Optimizing Data Centers and Addressing Other Key FITARA-Related Area Falls Short of Performance Targets", "paragraphs": ["Beyond managing its system modernization efforts, such as VistA, VA  has to ensure the effective implementation of the IT acquisition  requirements called for in FITARA. Pursuant to FITARA, in August 2016,  the Federal CIO issued a memorandum that announced the Data Center  Optimization Initiative (DCOI). According to OMB, this new initiative  supersedes and builds on the results of FDCCI, and is also intended to  improve the performance of federal data centers in areas such as facility  utilization and power usage.", "Among other things, DCOI requires 24 federal departments and agencies,  including VA, to develop plans and report on strategies (referred to as  DCOI strategic plans) to consolidate inefficient infrastructure, optimize  existing facilities, improve security posture, and achieve costs savings.  Further, the memorandum establishes a set of five data center  optimization metrics and performance targets intended to measure  agency\u2019s progress in the areas of (1) server utilization and automated  monitoring, (2) energy metering, (3) power usage effectiveness, (4) facility  utilization, and (5) virtualization. The guidance also indicates that OMB  is to maintain a public dashboard that will display consolidation-related  costs savings and optimization performance information for the agencies.", "However, in a series of reports that we issued from July 2011 through  August 2017, we noted that, while data center consolidation could  potentially save the federal government billions of dollars, weaknesses  existed in several areas, including agencies\u2019 data center consolidation  plans, data center optimization, and OMB\u2019s tracking and reporting on  related cost savings. Further, we previously reported that VA\u2019s progress  toward closing data centers, and realizing the associated cost savings,  lagged behind that of other covered agencies.", "More recently, VA reported a total inventory of 415 data centers, of which  39 had been closed as of August 2017. While the department  anticipates another 10 data centers will be closed by the end of fiscal year  2018, these closures fall short of the targets set by OMB. Specifically,  even if VA meets all of its planned targets for closure, it will only close  about 9 percent of its tiered data centers and about 18.7 percent of its  non-tiered data centers by the end of fiscal year 2018, which is short of  the respective 25 and 60 percent targets set by OMB. Further, while VA  has reported $23.61 million in data center-related cost savings and  avoidances for 2012 through August 2017, the department does not  expect to realize further savings from the additional 10 data center  closures in the next year.", "In addition, in August 2017 we reported that agencies needed to address  challenges in optimizing their data centers in order to achieve cost  savings. Specifically, we noted that, according to the 24 agencies\u2019 data  center consolidation initiative strategic plans as of April 2017, most  agencies were not planning to meet OMB\u2019s optimization targets by the  end of fiscal year 2018.", "As of February 2017, VA reported meeting one of the five data center  optimization metrics related to power usage effectiveness. Also, the  department\u2019s data center optimization strategic plan indicates that the  department plans to meet three of the five metrics by the end of fiscal  year 2018. Further, while OMB directed agencies to replace manual collection and reporting of metrics with automated tools no later than  fiscal year 2018, VA had only implemented automated tools at 6 percent  of its data centers."], "subsections": [{"section_title": "VA\u2019s CIO Has Certified Adequate Incremental Development for Its Major IT Investments for Fiscal Year 2017, but Needs to Update Related Policy", "paragraphs": ["OMB has emphasized the need to deliver investments in smaller parts, or  increments, in order to reduce risk, deliver capabilities more quickly, and  facilitate the adoption of emerging technologies. In 2010, it called for  agencies\u2019 major investments to deliver functionality every 12 months and,  since 2012, every 6 months. Subsequently, FITARA codified a  requirement that agency CIOs certify that IT investments are adequately  implementing incremental development, as defined in the capital planning  guidance issued by OMB. Later OMB guidance on the law\u2019s  implementation\u2014issued in June 2015\u2014directed agency CIOs to define  processes and policies for their agencies which ensure that they certify  that IT resources are adequately implementing incremental  development.", "Between May 2014 and November 2017, we reported on agencies\u2019 efforts  to utilize incremental development practices for selected major  investments. In November 2017, we noted that agencies reported that  62 percent of major IT software development investments were certified  by the agency CIO as using adequate incremental development in fiscal  year 2017, as required by FITARA. VA\u2019s CIO certified the use of  adequate incremental development for all 10 of its major IT investments.  However, VA had not yet updated the department\u2019s policy and process for  the CIO\u2019s certification of major IT investments\u2019 adequate use of  incremental development, in accordance with OMB\u2019s guidance on the  implementation of FITARA as we recommended. The department stated  that it plans to address our recommendation to establish a policy and that  the policy is targeted for completion in 2017."], "subsections": []}, {"section_title": "VA Has Made Progress in Developing and Using a Comprehensive Inventory of Software Licenses", "paragraphs": ["Federal agencies engage in thousands of licensing agreements annually.  Effective management of software licenses can help organizations avoid  purchasing too many licenses that result in unused software. In addition,  effective management can help avoid purchasing too few licenses, which  results in noncompliance with license terms and causes the imposition of  additional fees. Federal agencies are responsible for managing their IT  investment portfolios, including the risks from their major information  system initiatives, in order to maximize the value of these investments to  the agency.", "OMB developed a policy that requires agencies to conduct an annual,  agency-wide IT portfolio review to, among other things, reduce  commodity IT spending. Such areas of spending could include software  licenses. We previously identified seven elements that a comprehensive  software licensing policy should address:  identify clear roles, responsibilities, and central oversight authority  within the department for managing enterprise software license  agreements and commercial software licenses; establish a comprehensive inventory (at least 80 percent of software  license spending and/or enterprise licenses in the department) by  identifying and collecting information about software license  agreements using automated discovery and inventory tools;  regularly track and maintain software licenses to assist the agency in  implementing decisions throughout the software license management  life cycle; analyze software usage and other data to make cost-effective provide training relevant to software license management; establish goals and objectives of the software license management  consider the software license management life-cycle phases (i.e.,  requisition, reception, deployment and maintenance, retirement, and  disposal phases) to implement effective decision making and  incorporate existing standards, processes, and metrics.", "We previously made recommendations to VA to (1) develop an agency- wide comprehensive policy for the management of software licenses that  includes guidance for using analysis to better inform investment decision  making, (2) employ a centralized software license management approach  that is coordinated and integrated with key personnel, (3) establish a  comprehensive inventory of software licenses using automated tools, (4)  track and maintain a comprehensive inventory of software licenses using  automated tools and metrics, (5) analyze agency-wide software license  data to identify opportunities to reduce costs and better inform investment  decision making, and (6) provide software license management training to  appropriate personnel.", "Consistent with our recommendation, in July 2015, VA issued a  comprehensive software licensing policy that addressed weaknesses we  previously identified. The department also issued a directive that  documents VA\u2019s software license management policy and responsibilities  for central management of agency-wide software licenses, consistent with  our recommendations. By implementing our recommendations, VA should  be better positioned to consistently and cost-effectively manage software  throughout the agency.", "In August 2017, the department also provided documentation showing  that it had generated a comprehensive inventory of software licenses  using automated tools for the majority of agency software license  spending or enterprise-wide licenses. This inventory can serve to reduce  redundant applications and help identify other cost saving opportunities.", "Further, the department implemented a solution to analyze agency-wide  software license data, including usage and costs. This solution should  allow VA to identify cost saving opportunities and inform future investment  decisions. In addition, the department has provided information indicating  that appropriate personnel receive software license management training.", "In conclusion, VA has made extensive use of numerous contractors and  has obligated more than $1 billion for contracts that supported two of four  VistA modernization programs that the department has initiated. VA has  recently begun the fourth modernization program in which it plans to  replace VistA with the same commercially available electronic health  record system that is used by DOD. However, the department\u2019s latest  modernization effort is in the early stages of planning and is dependent  on the system acquisition contract award in December 2017. VA\u2019s  completion and effective execution of plans will be essential to guiding  this latest electronic health record modernization initiative to a successful  outcome.", "Beyond VistA, the department continues to make progress on key  FITARA-related initiatives. Although the department has made progress  in the area of software licensing, additional actions in the areas of data  center consolidation and optimization, as well as incremental system  development can better position VA to effectively manage its IT. We plan  to continue to monitor the department\u2019s progress on these important  activities.", "Chairman Hurd, Ranking Member Kelly, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact David A. Powner at (202) 512-9286 or pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this testimony statement. GAO  staff who made key contributions to this statement are Mark Bird  (Assistant Director), Jacqueline Mai (Analyst in Charge), Justin Booth,  Chris Businsky, Rebecca Eyler, Paris Hawkins, Valerie Hopkins, Brandon  S. Pettis, Jennifer Stavros-Turner, Eric Trout, Christy Tyson, Eric Winter,  and Charles Youman.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-136", "url": "https://www.gao.gov/products/GAO-18-136", "title": "Democracy Assistance: State Should Improve Accountability Over Funding; USAID Should Assess Whether New Processes Have Improved Award Documentation", "published_date": "2017-12-14T00:00:00", "released_date": "2017-12-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Supporting efforts to promote democracy has been a foreign policy priority for the U.S. government. In recent years, USAID and State have allocated about $2 billion per year toward democracy assistance overseas. Congress required USAID and State to each establish guidelines for and report on the use of contracts, grants, and cooperative agreements for certain democracy programs.", "GAO was asked to review U.S. democracy assistance. This report (1) examines funding USAID, NED, and State obligated for democracy assistance primarily through contracts, grants, and cooperative agreements and (2) evaluates documentation of USAID award-type decisions, among other objectives.", "GAO analyzed USAID, NED, and State democracy assistance award data for fiscal years 2012\u20132016. GAO also reviewed relevant regulation and agency policies and analyzed documentation for a nongeneralizable sample of USAID awards selected based on factors such as award type, program area, and country."]}, {"section_title": "What GAO Found", "paragraphs": ["In fiscal years 2012\u20132016, the U.S. Agency for International Development (USAID) obligated $5.5 billion and the National Endowment for Democracy (NED) obligated $610.2 million in democracy assistance funding. The total funding the Department of State (State) obligated for democracy assistance could not be reliably determined. One-third of all USAID obligations were provided through public international organizations (PIOs), which under USAID guidance are composed principally of countries or other organizations designated by USAID; 94 percent of PIO obligations were provided to the World Bank for democracy assistance projects in Afghanistan. The remaining two-thirds of USAID obligations were provided through contracts, grants (excluding PIOs), and cooperative agreements. Of the 10 State bureaus providing democracy assistance, 3 were unable to provide reliable funding data for fiscal years 2012\u20132016. Data from these bureaus were incomplete, nonstandard, or inaccurate. Federal internal control standards call for agencies to use quality information from reliable sources to achieve intended objectives and to monitor activities. Without such data, State cannot effectively monitor its democracy assistance programming and report reliable data externally.", "For the awards GAO sampled, USAID generally did not document decisions about whether to award a contract, grant, or cooperative agreement (known as award-type decisions) in a complete and timely manner. According to applicable USAID guidance, agency officials were required to (1) document the final award-type decision with their written determination, including a rationale based on the requirements of the Federal Grant and Cooperative Agreement Act, and (2) complete this documentation before award solicitation occurs or, for noncompetitive awards, before USAID initiated communications with a potential sole-source awardee. However, USAID provided both complete and timely documentation of the award-type decision for 5 of the 41 awards GAO sampled. For the remaining 36 awards, the documentation was either incomplete, not timely or timeliness was indeterminate, or both (see table). While USAID has taken steps to improve documentation for award-type decisions by updating its guidance and templates, it has not assessed whether these updates have resulted in complete and timely documentation. It is important that USAID document these decisions in advance of solicitation because the selection of an award type may affect requirements for administering the award, including competition and oversight requirements and whether or not profit is permissible."]}, {"section_title": "What GAO Recommends", "paragraphs": ["State should improve the reliability and completeness of its democracy assistance funding data, and USAID should assess whether steps taken are resulting in complete and timely documentation of democracy assistance award-type decisions. State and USAID concurred with GAO's recommendations and described actions planned or under way to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Supporting efforts to promote democracy throughout the world has been  a long-standing foreign policy priority for the U.S. government. In fiscal  years 2012 through 2016, the U.S. Agency for International Development  (USAID) and the U.S. Department of State (State) have allocated about  $2 billion per year toward democracy assistance activities related to rule  of law and human rights, good governance, political competition and  consensus-building, and civil society. USAID, the National Endowment  for Democracy (NED), and State are largely responsible for providing this  assistance. These agencies carry out this responsibility through a variety  of implementing partners, including for-profit and nonprofit organizations.", "USAID, NED, and State provide democracy assistance primarily through  three types of awards: contracts, grants, and cooperative agreements.  One of the stated purposes of the Federal Grant and Cooperative  Agreement Act of 1977 was to promote increased discipline in the  selection and use of types of contracts, grants, and cooperative  agreements. Nevertheless, award-type decisions by federal agencies have been the subject of litigation in federal court in the past. Recently,  Congress required USAID and State to each establish guidelines for  clarifying program design and objectives for democracy programs,  including the use of contracts versus grants and cooperative agreements  in the conduct of certain democracy programs. Congress also required  USAID and State to report on their use of these three award types for  democracy programs.", "You asked us to review U.S. democracy assistance provided through  various types of awards. This report (1) examines funding USAID, NED,  and State obligated for democracy assistance primarily through contracts,  grants, and cooperative agreements; (2) evaluates documentation of  USAID award-type decisions; and (3) compares USAID contracts with  grants and cooperative agreements across selected award elements.", "To examine funds obligated by USAID, NED, and State for democracy  assistance by award type, we obtained and analyzed data on awards that  USAID, NED, and State administered during fiscal years 2012 through  2016 under the Democracy, Human Rights, and Governance (DRG)  portfolio. We assessed the reliability of these data by reviewing related  documentation; interviewing knowledgeable officials; and conducting  electronic or manual data testing for missing, nonstandard, or duplicative  data; among other things. We determined that data provided by USAID,  NED, and State, except for data from State\u2019s Bureau of International  Narcotics and Law Enforcement Affairs (INL), State\u2019s Bureau of European  and Eurasian Affairs (EUR), and State\u2019s Bureau of South and Central  Asian Affairs (SCA), were sufficiently reliable for the purposes of our  report. For the USAID, NED, and State data that were sufficiently  reliable, we analyzed the amount of funding by award type, among other  variables. We assessed State\u2019s data reliability challenges against criteria  for using quality information in federal internal control standards.", "To evaluate USAID\u2019s award-type decisions, we reviewed relevant  regulations and agency policies. We also selected a roughly  proportional, random, nongeneralizable sample of 41 awards\u201413  contracts, 5 grants, and 23 cooperative agreements\u2014from USAID\u2019s  total population of 1,733 contracts, grants, and cooperative agreements.  We selected these 41 awards based on key characteristics such as  award type, DRG program area, and place of performance. The sample  was drawn from awards for the 14 countries for which USAID obligated  the most democracy funding. Democracy assistance projects in these  countries received over 70 percent of USAID\u2019s democracy assistance  funding. For the selected awards, we obtained and analyzed  documentation relevant to the award-type decision.", "To compare USAID contracts with grants and cooperative agreements,  we selected key award elements\u2014competition, cost sharing and profit,  scope of work, and oversight requirements\u2014to examine based on  consultations with acquisition and assistance subject matter experts. We  conducted a review of documentation associated with the same sample of  41 USAID awards we reviewed to evaluate award-type decisions. Using  information collected from the documentation, we analyzed the selected  awards\u2019 competition (if any), cost sharing and profit (if allowed), scope of  work, and selected oversight activities. For more details on our scope and  methodology, see appendix I, and for more information on the 14  countries for which USAID obligated the most democracy funding, see  appendix II. We conducted this performance audit from July 2016 to  December 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Democracy Assistance Program Areas", "paragraphs": ["The U.S. government supports various types of democracy assistance  activities, which USAID and State categorize under the DRG portfolio.  USAID and State use their Updated Foreign Assistance Standardized  Program Structure and Definitions to categorize and define DRG program  areas. As updated in April 2016, this document defines the aims of DRG  as \u201cto advance freedom and dignity by assisting governments and  citizens to establish, consolidate, and protect democratic institutions,  processes, and values, including participatory and accountable  governance, rule of law, authentic political competition, civil society,  human rights, and the free flow of information.\u201d Prior to the 2016 update,  DRG program areas were (1) rule of law and human rights, (2) good  governance, (3) political competition and consensus-building, and (4) civil  society. Each program area features different program elements, as  shown in table 1."], "subsections": []}, {"section_title": "USAID, NED, and State Roles and Responsibilities Related to Democracy Assistance Overseas", "paragraphs": ["Multiple bureaus and offices in USAID and State, as well as NED, provide  funding for democracy assistance programs, as shown in table 2. USAID  provides democracy assistance through contracts, grants, and  cooperative agreements, while NED provides democracy assistance only  through grants. INL was the only State bureau that reported providing a  significant amount of democracy assistance through contracts in addition  to grants and cooperative agreements, while other bureaus primarily use  grants and cooperative agreements."], "subsections": []}, {"section_title": "USAID, NED, and State Democracy Assistance Funding during Fiscal Years 2012 through 2016", "paragraphs": ["Combined allocations for democracy assistance administered by USAID  and State ranged from about $2 billion to about $3 billion per year, and  NED funding ranged from about $100 million to about $170 million  annually during fiscal years 2012 through 2016, as shown in figure 1.", "USAID\u2019s and State\u2019s combined allocations for democracy assistance  varied by account in fiscal years 2012 through 2016. Economic Support  Fund was the largest account ranging from 50 to 63 percent of the total in  fiscal years 2012 through 2016, as shown in figure 2."], "subsections": []}, {"section_title": "Laws, Regulations, and Polices Relevant to Award- Type Decisions", "paragraphs": ["The following laws, regulations, and policies are related to agencies\u2019  decisions to use a contract, grant, or cooperative agreement to implement  democracy assistance programming:", "According to the Federal Grant and Cooperative Agreement Act of  1977, one of the purposes of the act is to promote a better  understanding of government expenditures and help eliminate  unnecessary administrative requirements on recipients of government  awards by characterizing the relationship between executive agencies  and contractors, states, local governments, and other recipients in  acquiring property and services and in providing government  assistance. The act provides agencies with criteria to be considered  when making award-type decisions, including the intended nature of  the relationship between the agency and recipient, as well as whether  the principal purpose of the award is to benefit the federal government  or to transfer a thing of value to a recipient to carry out a public  purpose of support or stimulation authorized by law.", "The Competition in Contracting Act of 1984 requires agencies to  obtain full and open competition for contracts through the use of  competitive procedures in procurements unless otherwise authorized  by law.", "The Federal Acquisition Regulation (FAR) establishes uniform policies  and procedures for all executive agencies for acquisition through  contracts. For example, the FAR includes policies and procedures to  promote the requirement to obtain full and open competition for  contracts. It defines the circumstances under which it is permissible  for agencies to limit competition for contracts, including when there is  an unusual or compelling urgency or when doing so is necessary for  reasons of public interest or national security.", "The Office of Management and Budget\u2019s \u201cUniform Administrative  Requirements, Cost Principles, and Audit Requirements for Federal  Awards,\u201d as codified in the Code of Federal Regulations (C.F.R.),  establishes government-wide requirements for federal agencies  administering grants and cooperative agreements with nonfederal  entities.  This regulation includes policies and procedures for award  elements, including monitoring and reporting as well as cost sharing.", "USAID established agencywide guidance for making award-type  decisions in its Automated Directives System (ADS), Chapter 304  (ADS 304). In addition to referencing the criteria established in the  Federal Grant and Cooperative Agreement Act, this ADS guidance  lists indications for when a specific award type should be used and  also identifies factors that should not be primary considerations in  making award-type decisions. According to USAID guidance,  agreement officers and contract officers are individuals representing  the U.S. government who are responsible for documenting the final  determination of award-type decisions. USAID further outlines policies  and procedures for administration of grants and cooperative  agreements in ADS Chapter 303 (ADS 303) and for contracts in ADS  Chapter 302 (ADS 302).", "State also established agencywide guidance for making award-type  decisions in its Federal Assistance Directive. It references relevant  legislation and instructs contracting and agreement officers to consult  with State\u2019s Office of the Procurement Executive if disagreements  regarding award-type decisions arise.", "The Consolidated Appropriations Act, 2016, required USAID and  State to each establish guidelines for clarifying program design and  objectives for democracy programs, including the use of contracts  versus grants and cooperative agreements, for programs carried out  with funds appropriated by the act. For more information on USAID  and State guidance related to award-type decisions, see appendix III."], "subsections": []}, {"section_title": "USAID\u2019s Award Process and Award Life Cycle", "paragraphs": ["USAID officials are to make award-type decisions based on applicable  laws, regulations, and policies, some of which are described above.  Figure 3 provides an overview of the considerations in making this  determination based on USAID guidance.", "ADS 304 provides the following definitions and guidance to USAID  personnel as to what award type to select:", "A contract is a mutually binding legal instrument in which the principal  purpose is the acquisition, by purchase, lease, or barter, of property or  services for the direct benefit or use of the federal government, or in  the case of a host country contract, the host government agency that  is a principal, signatory party to the instrument. According to ADS 304,  USAID personnel shall use a contract when the principal purpose of  this legal relationship is the acquisition of property or services for the  direct benefit of a federal government agency.", "A grant is a legal instrument used when the principal purpose is the  transfer of money, property, services or anything of value to a  recipient in order to accomplish a public purpose of support or  stimulation authorized by Federal statute and when substantial  involvement by USAID is not anticipated. USAID personnel are  instructed to use a grant when the principal purpose of the  relationship with an awardee is to transfer money, property, services,  or anything of value to that awardee to carry out a public purpose of  support or stimulation authorized by federal statute; and the agency  does not anticipate substantial involvement between itself and the  awardee during the performance of the activity.", "A cooperative agreement is a legal instrument used when the  principal purpose is the transfer of money, property, services, or  anything of value to a recipient in order to accomplish a public  purpose of support or stimulation authorized by federal statute and  when substantial involvement by USAID is anticipated. According to  ADS 304, USAID personnel must use a cooperative agreement when  the principal purpose of the relationship with an awardee is to transfer  a thing of value to that awardee in order to carry out a public purpose;  and the agency anticipates substantial involvement between itself and  the awardee during the performance of the activity. The active  engagement of USAID officials with awardees in certain programmatic  elements of a project constitutes substantial involvement. Such  activities include approval of the awardee\u2019s implementation plan and  of specified key personnel.", "In addition to awarding contracts, grants and cooperative agreements  to private organizations (such as a for-profit business or a  nongovernmental organization), USAID makes awards to federal  agencies and public international organizations. Under USAID  guidance, a public international organization is an international  organization composed principally of countries or other related  organizations designated by USAID. USAID maintains a list of public  international organizations and international agricultural research  centers that are considered public international organizations. These  organizations include the United Nations and related organizations,  such as the Food and Agriculture Organization, and international  financial institutions, such as the World Bank Group. USAID officials  noted that public international organizations normally receive grants.", "Under USAID guidance, awards to public international organizations  and interagency agreements do not require the same award-type  decisions as those required by ADS 304 for contracts, grants, and  cooperative agreements. Awards made to public international  organizations are governed by USAID guidance separate from the  guidance that applies to awards to other types of organizations, and  interagency agreements are governed by guidance separate from  contracts, grants, and cooperative agreements.", "According to USAID\u2019s guidance, the award-type decision should occur  early in the preaward stage within the life cycle of an award. Award type- decisions impact other elements of awards because different regulations  and guidance are applicable based on award type. For example,  competition and oversight requirements differ for contracts compared with  grants and cooperative agreements. Similarly, award-type decisions  affect whether the recipient of an award is eligible to make a profit. The  award life cycle contains preaward and award implementation stages, as  shown in figure 4."], "subsections": []}]}, {"section_title": "USAID Obligated $5.5 Billion and NED Obligated $610.2 Million in Democracy Assistance Funding; Total Funding State Obligated Cannot Be Reliably Determined", "paragraphs": ["During fiscal years 2012 through 2016, USAID obligated $5.5 billion and  NED obligated $610.2 million in democracy assistance funding, and the  total such funding that State obligated cannot be reliably determined. In  providing democracy assistance, USAID obligated more through grants  and cooperative agreements combined than contracts, but its obligations  through different award types varied by fiscal year and DRG program  area. NED provided democracy assistance only through grants, and its  obligations remained generally constant by fiscal year but varied by DRG  program area. State bureaus that were able to provide reliable data  provided democracy assistance primarily through grants and cooperative  agreements. INL was the only State bureau that reported providing a  significant amount of democracy assistance through contracts in addition  to grants and cooperative agreements, but INL was one of the three State  bureaus unable to provide reliable data."], "subsections": [{"section_title": "USAID Obligated $5.5 Billion in Democracy Assistance through Contracts, Grants, and Cooperative Agreements", "paragraphs": [], "subsections": [{"section_title": "USAID Obligated About Two- Thirds of Its Democracy Assistance Funding through Contracts and Cooperative Agreements, and One-Third through Grants to Public International Organizations", "paragraphs": ["USAID obligated $5.5 billion in democracy assistance funding during  fiscal years 2012 through 2016, about 31 percent through contracts;  about 33 percent through cooperative agreements; about 4 percent  through grants, excluding grants to public international organizations  (PIO); and about 32 percent through grants to PIOs. Of the $5.5 billion in  democracy assistance, USAID obligated over $1.7 billion of all its  democracy assistance through grants to PIOs. The three countries for  which USAID obligated the most funds for democracy assistance projects  were Afghanistan, Iraq, and South Sudan. Democracy assistance  projects in Afghanistan received over $2 billion or 37 percent of USAID\u2019s  total democracy assistance obligations during fiscal years 2012 through  2016. Moreover, two grants to the World Bank for the Afghanistan  Reconstruction Trust Fund totaling $1.5 billion during fiscal years 2012  through 2016 accounted for 85 percent of the total democracy assistance  funds USAID obligated through grants to PIOs during that period.", "For both total obligations and number of awards, USAID awarded more of  its democracy assistance through grants and cooperative agreements  combined than through contracts, as shown in figure 5.", "Contracts and cooperative agreements each accounted for roughly one- third of total obligations, while grants, excluding those to PIOs, accounted  for 4 percent of total obligations during fiscal years 2012 through 2016.  Excluding grants to PIOs, the number of grants and obligations for grants  on average were significantly less than cooperative agreements, as  shown in table 3.", "USAID\u2019s democracy assistance obligations through contracts, grants, and  cooperative agreements have varied during fiscal years 2012 to 2016,  with significant increases in USAID\u2019s obligations through grants to the  World Bank in fiscal years 2012 and 2015, as shown in figure 6. These  increases were driven by two large grants to the World Bank for the  Afghanistan Reconstruction Trust Fund. Specifically, the World Bank  received more than $820 million in fiscal year 2012 and more than $360  million in fiscal year 2015. During fiscal years 2012 to 2016, the World  Bank accounted for 93 percent of grants to PIOs. For more details on  USAID obligations through different award types by fiscal year and DRG  program area, see appendix IV.", "USAID\u2019s democracy assistance obligations for good governance varied  the most compared with the other three DRG program areas, rule of law  and human rights, political competition and consensus-building, and civil  society, as shown in figure 7. This variation was again due to two large  grants to the World Bank for the Afghanistan Reconstruction Trust Fund,  which were categorized under good governance.", "As shown in figure 8, USAID provided more democracy assistance in the  area of good governance, over $2 billion more than the next largest  program area. Excluding USAID obligations through grants to PIOs,  USAID obligated more democracy assistance through contracts than  through grants and cooperative agreements combined for the two  program areas of good governance and rule of law and human rights. For  the two other program areas\u2014civil society and political competition and  consensus-building\u2014USAID obligated less through contracts."], "subsections": []}]}, {"section_title": "NED Obligated Over $610.2 Million in Democracy Assistance Funding through Grants", "paragraphs": ["NED obligated over $610.2 million in democracy assistance funding  through a single award type\u2014grants\u2014during fiscal years 2012 through  2016. The three countries for which NED obligated the most funds for  democracy assistance are in Eurasia and Asia. NED\u2019s obligations  remained generally constant in the past few fiscal years, as shown in  figure 9.", "NED\u2019s approved funding varied across the four DRG program areas.  According to NED officials, NED does not maintain obligations data for  awards by DRG program areas, as defined by USAID and State.  Therefore, NED categorized its grants into DRG program areas for  projects when funds were approved rather than when funds were  obligated to provide a general sense of funding by DRG program area.  NED approved the most funding in the area of good governance followed  closely by political competition and consensus-building and then by civil  society. NED\u2019s approved funding in all program areas, except for civil  society, increased over the years, as shown in figure 10."], "subsections": []}, {"section_title": "State Reported Obligating About $3 Billion in Democracy Assistance through Grants, Cooperative Agreements, and Contracts, but Data for Roughly Half of State\u2019s Obligations Were Unreliable", "paragraphs": ["State reported obligating approximately $3 billion in democracy  assistance funding during fiscal years 2012 through 2016 primarily  through grants and cooperative agreements, but also through contracts.  Seven of 10 State bureaus that were able to provide reliable data  obligated $1.7 billion primarily through grants and cooperative  agreements; the remaining three bureaus that were unable to provide  reliable data reported obligating about $1.4 billion through all three award  types."], "subsections": [{"section_title": "Seven State Bureaus Providing Reliable Data Obligated $1.7 Billion in Democracy Assistance Funding Primarily through Grants and Cooperative Agreements", "paragraphs": ["The seven State bureaus that were able to provide reliable data  collectively obligated $1.7 billion for fiscal years 2012 through 2016  primarily through grants and cooperative agreements, as shown in table  4. Of these State bureaus, the Bureau of Democracy, Human Rights,  and Labor obligated the most with about $1.2 billion in democracy  assistance through 547 grants and 56 cooperative agreements for that  period. The three regions for which the Bureau of Democracy, Human  Rights, and Labor obligated the most funds for democracy assistance  were the Near East, East Asia and Pacific, and the Western Hemisphere.", "Three State bureaus\u2014INL, EUR, and SCA\u2014were unable to provide  reliable data on democracy assistance obligations for fiscal years 2012  through 2016. Collectively, these three bureaus reported obligating about  $1.4 billion in democracy assistance during this period: INL, about $1.1  billion; EUR, about $150 million; and SCA, about $160 million. INL was  the only State bureau that reported providing a significant amount of  democracy assistance through contracts in addition to grants and  cooperative agreements.", "We deemed data from these three bureaus unreliable because the data  were incomplete, nonstandard, or inaccurate. For example, INL did not  provide democracy assistance data for Colombia, Egypt, and Kenya until  we identified these countries as potentially missing based on our  comparison of INL data with USAID data. According to data INL  subsequently provided, the democracy assistance projects in these three  countries received about $49 million of the approximately $1.1 billion in  democracy assistance obligated by INL in fiscal years 2012 through 2016.  According to INL officials, the initial data INL provided did not include  records of awards for these countries because awards were miscoded  when the data were entered; for example, some awards were coded  under the broad category of law enforcement rather than under specific  DRG program areas. According to INL officials, this erroneous law  enforcement code was used for all of Colombia\u2019s programs and for some  programs in other countries such as Egypt and Kenya. According to INL  officials, for two additional countries, Tunisia and Morocco, the regional  post did not always use codes associated with DRG program areas or  personnel entered incorrect codes.", "INL also provided incomplete data for multiple data fields, including the  dates for periods of performance. INL was missing the start date for 74  percent of records and the end date for almost 75 percent of records for  fiscal years 2012 through 2015. A September 2014 State Office of  Inspector General report on INL found, among other things, that because  State\u2019s budgeting and accounting systems are not designed to manage  foreign assistance, INL staff were required to engage in time-consuming,  inefficient, and parallel processes to track the bureau\u2019s finances.  According to INL officials, INL has made improvements in its data since  the Inspector General report was published. However, INL was missing  the start date for 69 percent of records and the end date for almost 71  percent of records for fiscal year 2016. According to INL, data fields such  as these were incomplete because contract officers and agreement  officers were not required to enter values for these data fields into State  systems until October 2016.", "EUR and SCA also initially provided incomplete, inaccurate, or  nonstandard data for multiple data fields. According to State officials, this  was due to manual data entry and transfer errors. For example, dates  were in various formats and recipient names were sometimes listed in the  field intended for recipient categories, which did not allow for the  systematic analysis of records. While EUR generally provided more  complete and standard data for fiscal year 2016 compared with fiscal  years 2012 through 2015, EUR still provided nonstandard codes to  identify award subtype for 5.3 percent of its fiscal year 2016 records. For  example, \u201cESF,\u201d an abbreviation for the Economic Support Fund, was  listed as the award subtype for multiple contracts.", "Furthermore, we identified 145 duplicate EUR records. EUR officials in  Washington, D.C., noted that some of the duplicates resulted from their  efforts to validate the data they had collected from staff in each country.  Subsequently, these officials\u2014who manually merged, analyzed, and  validated data to correct it\u2014identified additional duplicates beyond the  145 that we had identified. According to EUR officials, the bureau\u2019s  obligation data for democracy assistance awards were maintained in separate databases at posts, rather than in a centralized database. In  validating the data they had collected, EUR officials identified duplicate  records amounting to at least 5 percent of the records during fiscal years  2012 through 2016. On the basis of our independent analysis of the same  dataset, we were able to confirm that about 4 percent of the EUR records  were duplicate records. Data on democracy assistance awards are  maintained in the countries where the awards are made. To obtain award  level data, EUR headquarters personnel had to ask staff in each country  to manually compile and report award data.", "In addition, SCA did not initially provide data for Afghanistan and  Pakistan, including award-type data. Records associated with these two  countries accounted for about 92 percent of SCA\u2019s total democracy  assistance funding. We identified these countries as potentially missing  based on our comparison of SCA data with USAID data. SCA  subsequently provided the missing data on democracy assistance awards  made in Afghanistan and Pakistan; the data resided within a separate  database.", "SCA democracy assistance awards are allocated across three offices  within SCA and EUR, and information regarding democracy assistance  programs is not currently managed through a centralized database.  According to SCA officials, due to the lack of a centralized database, they  would need to carefully coordinate across the three offices. However,  despite the coordination efforts of these offices, SCA did not include  Afghanistan and Pakistan in their initial submission of data to us, and the  additional data SCA subsequently submitted through EUR for Central  Asia still contained nonstandard and missing values.", "A June 2017 State Office of Inspector General report determined that  State cannot obtain timely and accurate data necessary to provide central  oversight of foreign assistance activities and meet statutory and  regulatory reporting requirements. For example, the report said that  State cannot readily analyze its foreign assistance by country or  programmatic sector. Similarly, we found that State cannot readily  analyze its foreign assistance agencywide by country or for its DRG  portfolio since INL, EUR, and SCA did not provide reliable DRG award  data, including incomplete or duplicative data associated with certain  countries. According to the report, this lack of data hinders State\u2019s  leadership from strategically managing foreign assistance resources,  identifying whether programs are achieving their objectives, and  determining how well bureaus and offices implement foreign assistance  programs. In September 2014, State began the Foreign Assistance Data  Review to better understand and document issues with its agencywide  data and multiple budget, financial, and program management systems,  but State does not plan to complete its Foreign Assistance Data Review  until fiscal year 2021. The Consolidated Appropriations Act, 2016,  requires State to report on its use of the various award types, and the  Office of Management and Budget\u2019s Bulletin No. 12-01 requires State to  report quarterly on its foreign assistance activities. Given these  reporting requirements, State would not be able to provide accurate and  complete data on democracy assistance unless INL, EUR, and SCA took  immediate steps to address their data deficiencies. Federal internal  control standards call for agencies to use quality information from reliable  sources to achieve intended objectives and to effectively monitor  activities. Without reliable democracy assistance data from all relevant  bureaus, State cannot effectively monitor its democracy assistance  programming and report reliable data externally."], "subsections": []}]}]}, {"section_title": "USAID Generally Lacked Complete and Timely Documentation of Award-Type Decisions", "paragraphs": ["USAID generally did not document award-type decisions in a complete  and timely manner for the awards in our sample. Specifically, USAID  provided complete and timely documentation of the award-type decision  for 5 of the 41 awards we reviewed. For the remaining 36 awards, the  documentation was either incomplete, not timely, or both. According to  ADS 304, contract and agreement officers must determine whether to use  a contract, grant, or cooperative agreement, including a rationale based  on criteria outlined in the Federal Grant and Cooperative Agreement Act."], "subsections": [{"section_title": "USAID Did Not Have Complete Documentation of Award-Type Decisions for 14 of the 41 Awards in Our Sample", "paragraphs": ["Consistent with the requirements of ADS 304, USAID personnel  documented the rationale for using a contract, grant, or cooperative  agreement for 27 of the 41 awards we reviewed. As table 5 shows, the  number of awards in our sample with complete and incomplete  documentation of the award-type decision varies by award type.", "ADS 304 requires contract and agreement officers to document the  selection of an award type, including the rationale for the award-type  decisions based on the requirements of the Federal Grant and  Cooperative Agreement Act. USAID provided documentation of the  award-type decision for 31 of the awards in our sample but lacked such  documentation for 10 awards. However, for 4 of the 31 awards with  documentation of the award-type decision, the documentation was not  complete because it did not include a rationale for choosing between  grants, cooperative agreements, and contracts on the basis of criteria in  the Federal Grant and Cooperative Agreement Act, as required by USAID  guidance.", "The documentation of the award-type decision for these 4 awards, which  were all contracts, outlined the rationale for selecting a particular type of  contract, information that is required by the FAR. However, the  documentation for these 4 awards did not address the decision to use a  contract rather than a grant or cooperative agreement, including a  rationale based on the requirements outlined in the Federal Grant and  Cooperative Agreement Act, as required by ADS 304. For example,  documentation for one contract provided a rationale for selecting a firm- fixed-price contract based on the level of risk, which is in accordance with  requirements of the FAR. However, the documentation did not indicate  the rationale for deciding to use a contract rather than a grant or  cooperative agreement as required by ADS 304. Without documentation  of the rationale for award-type decisions as required under USAID  guidance, USAID cannot demonstrate that award-type decisions are  made based on the requirements outlined in the Federal Grant and  Cooperative Agreement Act."], "subsections": []}, {"section_title": "USAID Lacked Timely Documentation of Award- Type Decisions for 25 of the 31 Awards for Which It Provided Documentation", "paragraphs": ["For the 31 awards in our sample for which USAID provided  documentation of the award-type decision, 6 met the timeliness standard  set by USAID guidance, and 25 did not, as shown in table 6. While 5  award-type decisions were both timely and complete, one award that met  the timeliness standard lacked a required component.", "According to ADS 304, contract and agreement officers must document  the final award-type decision before a solicitation is issued or before  USAID initiates communications with a potential sole source recipient.  We found that 25 awards lacked timely documentation of the award-type  decision because the decision was documented after the solicitation was  issued or timeliness was indeterminate because the documentation  lacked a date or other indication of when in the process this determination  was documented. Without this, we could not determine whether the  award-type decisions were documented prior to solicitation or before  USAID initiated communications with a potential sole source recipient.  Instances in which final award-type decisions were documented after the  issuance of a solicitation or communication with a potential sole source  recipient include the following:", "Solicitation for one of the contracts in our sample occurred in 2011,  but the award-type decision was not documented until 2013.", "The award-type decision for one of the grants in our sample was  documented after the grant was awarded, which occurs after the  solicitation is issued.", "Solicitation for one cooperative agreement in our sample occurred in  2010, but the award-type decision was not documented until 2012.", "According to USAID officials, the agency\u2019s practice prior to October 2016  was to include award-type decisions in a comprehensive document that  was intended to record all key decisions made throughout the award  process. This document was finalized at the end of the award process.  However, USAID officials also stated that they have introduced new  processes and procedures, including making updates to relevant  guidance, templates, and instructions that they believe will result in more  timely and complete documentation of award-type decisions. Specifically,  in 2016 USAID issued an update to ADS 304 that includes examples of  when to use contracts, grants, and cooperative agreements and provides  additional information about the legal framework for making award-type  decisions. In 2017, USAID also issued revised templates to guide the  documentation of award-type decisions. According to USAID officials, in  addition to clarifying the ADS 304 guidance and developing new  templates, USAID is also developing specific guidance for DRG programs  that it expects to release at a future date. For additional information about  this DRG-specific guidance, see app. III.", "USAID has taken steps to improve documentation for award-type  decisions by updating its guidance and templates but has not assessed  whether these updates have resulted in timely and complete  documentation of award-type decisions. USAID officials stated that  assessments are conducted at the sub-bureau or mission level, rather  than by specific sectors, such as for DRG programs. As a result, USAID  officials do not have plans to assess whether the newly updated  processes and procedures have resulted in more timely documentation of  DRG award-type decisions. It is important that USAID document the  award-type decision before it publishes a solicitation for the award  because award-type decisions impact other award elements, such as the  requirements for competition and oversight and whether profit is  permissible under the award. Until USAID assesses its updated  processes and procedures, it cannot know if the steps it has taken have  resulted in complete and timely documentation of award-type decisions  as required by USAID guidance."], "subsections": []}]}, {"section_title": "USAID Contracts Differed from Grants and Cooperative Agreements for Selected Award Elements", "paragraphs": ["For the awards in our sample, contracts generally differed from grants  and cooperative agreements in terms of competition, scope of work, cost  sharing and profit, and oversight requirements, among other  characteristics. We identified differences in three award elements\u2014 competition, cost sharing and profit, and oversight requirements\u2014that  were generally consistent with the unique requirements provided for in  procurement regulations and agency guidance. We also identified  differences between the award types with regard to scope of work, and  found certain activities were conducted under all three award types."], "subsections": [{"section_title": "USAID Used Competition Procedures for a Greater Proportion of Contracts than for Grants and Cooperative Agreements in Our Sample, due to Differences in Award Types\u2019 Applicable Legal Frameworks", "paragraphs": ["USAID awarded most, but not all, of the contracts in our sample using full  and open competition, according to USAID data. Different federal and  USAID requirements are in place regarding the use of competition  procedures to award contracts than apply to grants and cooperative  agreements. In accordance with the FAR, executive agencies such as  USAID are required to promote and provide for full and open competition  in awarding contracts, with only limited exemptions.", "USAID did not require full competition for any of the grants in our sample  and required it for only about one-third of the cooperative agreements,  according to USAID data. For the 41 awards in our sample, table 7 shows  how many of each award type used full competition, limited competition,  or no competition, based on USAID data.", "Below are examples of the rationale USAID provided for limiting  competition for selected contracts, grants, and cooperative agreements:", "USAID limited competition for one of the contracts in our sample  because of potential impairment to a foreign aid program, and another  contract was limited to local competitors. This exemption to full and  open competition is based on a unique statutory authority available to  USAID and other agencies operating foreign assistance programs,  which has been implemented in the USAID Supplement to the FAR.  USAID also exempted one of the contracts in our sample from full and  open competition using a provision in the FAR that allows for  solicitation from a single source when the purchase falls below a  threshold of $150,000. However, USAID officials indicated that they  erroneously cited FAR 13.106-1(b), which permits sole source awards  for acquisitions not exceeding the simplified acquisition threshold if  only one source is reasonably available, when they should have cited  FAR 13.501(a)(2)(i), which permits sole source acquisitions of  commercial items (including brand-name items) for acquisitions  greater than $150,000.", "For two of the grants in our sample, USAID limited the awards to local  competition, according to USAID officials.", "For one cooperative agreement in our sample, competition was  limited, according to USAID data, but USAID did not provide  additional information on how the award competition was limited. The  recipient of this award had submitted an unsolicited application, which  under ADS 303, may be included in a relevant competition for an  award, if USAID finds that the unsolicited application reasonably fits  an existing program. USAID found that this unsolicited application was  responsive to an existing solicitation and thus provided no additional  justification.", "For more information on the rationales USAID used to exempt contracts,  grants, and cooperative agreements in our sample from full and open  competition, see appendix V."], "subsections": []}, {"section_title": "Contracts More Often Included a Greater Number of Activities Working with Host-Country Governments or Other National Institutions, While Grants and Cooperative Agreements More Often Included a Greater Number of Activities Working with Civil Society Organizations", "paragraphs": ["We found that the scope of work for contracts, grants, and cooperative  agreements included similar types of activities. We also found that  contracts more often included a greater number of activities working with  the host-country government or other major national institutions, and  grants and cooperative agreements more often included a greater  number of activities working with civil society organizations.", "Seven of the 13 contracts in our sample included more activities focused  on engaging with host-country governments and national institutions,  while only 2 of the 13 contracts included more activities focused on  engaging civil society organizations. Grants and cooperative  agreements, by contrast, more often included a greater number of  activities to support civil society organizations and media organizations  than government or major national institutions of the country of  performance. Three of the 5 grants in our sample included more  objectives or activities focused on engaging civil society organizations,  rather than engaging with host government or other major national  institutions, while none of the grants included more objectives or activities  related to the host government or other major national institutions.  Cooperative agreements slightly more often included a greater number of  objectives or activities to engage civil society organizations than they did  to work with host government and national institutions, with 9 cooperative  agreements including more objectives or activities focused on engaging  civil society organizations and 7 with more objectives or activities focused  on engaging host governments or other national institutions.", "Below are some examples of the activities and types of parties engaged  with as stated in the awards in our sample:", "One contract in our sample provided various advisors to assist the  government of a foreign country in implementing transparent policies,  laws, and systems to strengthen public financial management and  provide for a well-regulated financial sector, among other things. For  more information on program objectives for selected democracy  assistance awards by contract type, see appendix VI.", "A grant in our sample sought to increase the capacity of civil society  organizations and the media to promote transparent democratic  elections and political processes, among other things. Activities under  the scope of work for this award included building alliances with  stakeholders, conducting election-day observations, and analyzing  electoral results.", "A cooperative agreement in our sample was intended to support a  political transition through, among other things, organizational  capacity development and grant-making opportunities for civil society  organizations working to raise awareness about electoral events.", "In addition, for our award sample, we found that activities such as  technical assistance, training, and local capacity building were conducted  under grants, cooperative agreements, and contracts."], "subsections": []}, {"section_title": "Estimated Profits Ranged from 1 to 6 Percent of Estimated Contract Cost; Cost Sharing Ranged from Less Than 1 to 74 Percent of Total Value of Grants and Cooperative Agreements", "paragraphs": ["Eight of the 13 contracts in our sample were cost-plus-fixed-fee contracts,  under which the contractor is reimbursed its costs in implementing the  program in addition to a fee (profit) that is fixed at the outset. For these  8 contracts, the estimated percentage of profit ranged from about 1 to 6  percent of the estimated contract cost. According to the FAR, under  cost-plus-fixed-fee contracts, the fee cannot exceed 10 percent of the  contract\u2019s estimated cost excluding fee. The average estimated fixed fee  percentage for these contracts was about 5 percent of the estimated  contract cost.", "While USAID contracts may be structured to provide for contractor profit  in accordance with the FAR, USAID guidance does not allow profit under  grants and cooperative agreements. For the grants and cooperative  agreements in our sample, the awards did not specifically provide any fee  (profit), and the awardees often agreed to contribute to the cost of the  program through cost sharing. In addition, USAID guidance identifies  cost sharing\u2014whereby an awardee contributes to the total cost of an  agreement\u2014as an important element of the USAID-awardee relationship  for grants and cooperative agreements. According to this guidance,  although there is no general requirement for the awardees of grants and  cooperative agreements to share in providing the costs of programs, cost  sharing can be a mechanism to help awardees build their organizational  capacity. For the awards in our sample, USAID included provisions for  cost sharing in 3 of the 5 grants, and the awardees agreed to contribute  about 11 percent, 13 percent, and 74 percent of the respective total  award funding, including the cost share amount. USAID also included  cost sharing provisions in 10 of the 23 cooperative agreements, with the  awardee contribution ranging from less than 1 percent to 36 percent of  the total award funding, including the cost share amount. All of the grants  and cooperative agreements that included cost sharing provisions were  awarded to nonprofit organizations, according to USAID data. Some of  these awardees agreed to contribute to cost sharing by covering in-kind  costs, such as donated time from volunteer legal specialists, and others  agreed to contribute cash to cover some of the direct costs of  implementing programs, such as personnel and benefits.", "According to USAID officials, cost sharing is rarely used under USAID  contracts because under a cost sharing contract the contractor agrees to  absorb a portion of its costs in expectation of substantial compensating  benefits, such as certain research and development efforts, and these  circumstances rarely occur under USAID\u2019s programming. USAID did not  include cost sharing provisions in any of the 13 contracts in our sample.  For additional information about profit in our sample, see table 8.", "Table 9 provides additional information about cost sharing under the  awards in our sample.", "Below are some examples of profit and cost sharing arrangements  included in contracts, grants, and cooperative agreements in our sample:", "A contract in our sample sought to, among other things, improve the  access of vulnerable and disadvantaged populations to the country\u2019s  legal system by engaging in activities such as working to build the  capacity of government and civil society organizations to be more  responsive to the needs of these populations. Under this award, the  contractor was to receive approximately $1.7 million in profit, which  was 4 percent of the estimated value of the award.", "The awardee for a grant in our sample agreed to provide $2.1 million  of the program costs, about 74 percent of the total cost of the  program, which sought to develop public opinion survey research  capacity in the host country, among other things. USAID\u2019s grant to this  awardee funded additional support for the program, which the  awardee was already executing prior to USAID assistance.", "A cooperative agreement in our sample included a requirement for the  awardee to contribute about 9 percent of program expenditures, or  about $3 million, for a program that sought to improve access to  health services, as well as strengthen health delivery systems and  health governance."], "subsections": []}, {"section_title": "Contracts Had Different Oversight and Evaluation Requirements Than Grants and Cooperative Agreements, due to Differences in Award Types\u2019 Applicable Legal Frameworks", "paragraphs": ["We found that USAID oversight requirements differed for contracts  compared with grants and cooperative agreements for the awards in our  sample. This is because contracts (1) at times required more frequent  reporting and (2) more often required evaluations of the contractor\u2019s  performance.", "Reporting requirements: We found that while most awards in our  sample required quarterly financial and performance reporting, some  contracts required these reports to be submitted monthly. USAID  required quarterly financial and performance reporting for the majority of  grants and cooperative agreements in our sample. None of the grants or  cooperative agreements in our sample included requirements for financial  reporting more frequently than quarterly, and no grants and only one  cooperative agreement included a more frequent performance reporting  requirement.", "According to Title 2 of the Code of Federal Regulations (C.F.R.), Section  200.327, under grants and cooperative agreements, financial reports  must be collected by agencies with the frequency required by the award,  but no less frequently than annually and no more frequently than  quarterly, except in unusual circumstances, such as where more  frequent reporting is necessary for effective monitoring of the award.  USAID officials confirmed that there would have to be a reason to justify  quarterly or more frequent reporting requirements for grants or  cooperative agreements. For example, considerations related to risk  could result in the need for more frequent reporting for grants and  cooperative agreements.", "Table 10 shows the financial and performance reporting requirements for  the contracts, grants, and cooperative agreements in our sample.", "Evaluations of performance: For the majority of contracts in our  sample, USAID included provisions for evaluation of the contractor\u2019s  performance at the conclusion of performance. According to the FAR,  evaluations of a contractor\u2019s performance shall be prepared at the time  the work under the contract is completed, and, for contracts longer than 1  year, interim evaluations should be prepared at least annually. USAID  officials indicated that there is no similar government-wide or USAID  requirement for grants and cooperative agreements. None of the grants  and only a few of the cooperative agreements in our sample included  such evaluation provisions. However, USAID officials noted that, in  accordance with USAID policy, the past performance of a potential  awardee is considered in conducting risk assessments for grants and  cooperative agreements.", "Table 11 shows the number of USAID contracts, grants, and cooperative  agreements in our sample that included provisions for evaluation of the  contractor or awardee\u2019s performance.", "For most of the contracts in our sample, award documentation indicated  that the contractor\u2019s performance would be assessed on a variety of  factors such as quality of service, cost control, timeliness of performance,  and effectiveness of key personnel. These evaluations form the basis of  the contractor\u2019s performance record for the contract. Only one contract in  our sample had no requirement for a performance evaluation of the  contractor, and that award was for the rental of a hotel ballroom and  related services for an event.", "For three of the cooperative agreements in our sample that included  provisions for the evaluation of the awardee\u2019s performance, the award  documentation indicated that USAID officials were to ensure prudent  management of the award and to make the achievement of program  objectives easier by, among other things, evaluating the awardee and its  performance. One cooperative agreement included a provision that  USAID will fund or conduct an external midterm evaluation during the  second year of the project. For the one remaining cooperative agreement  with an evaluation provision, documentation indicated that the evaluation  would be used to inform a decision about a potential follow-on award."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Democracy assistance has been a key component of U.S. foreign  assistance, supporting activities related to rule of law and human rights,  good governance, political competition and consensus-building, and civil  society. USAID and State together have allocated about $2 billion  annually for democracy assistance in fiscal years 2012 through 2016.  USAID\u2019s information systems enable it to track and report the amount of  democracy assistance funding through contracts, grants, and cooperative  agreements. However, State lacks the ability to provide comparable  agencywide data. The quality of democracy assistance award data  provided by 10 State bureaus and offices varied, and three of these  bureaus were unable to provide reliable data. Of the State bureaus, INL is  the only bureau that regularly makes use of contracts, and it provided  unreliable data. Without reliable data from INL, State cannot accurately  report on its use of the various award types. In addition, since EUR\u2019s and  SCA\u2019s award data are maintained across embassies, offices, and the two  bureaus, opportunities for data errors may increase when regional data  needs to be compiled. Without reliable data from all relevant bureaus,  State cannot be sure that it is fully and accurately reporting on democracy  assistance awards, which limits, among other things, congressional  oversight of democracy assistance funding.", "While USAID requirements for complete and timely documentation of  award-type decisions have existed since at least 2011, for our sample of  41 USAID awards for which an award-type decision was required, only 5,  or about 12 percent, had both complete and timely documentation of the  award-type decision. USAID recently introduced processes and  procedures to improve the documentation of these decisions. However,  until USAID assesses its updated processes and procedures, it cannot  know if the changes resulted in award-type decisions being documented  in a complete and timely manner, as required by its guidance, or if  additional steps are needed."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making three recommendations, two to State and one to USAID.", "The Secretary of State should direct the Bureau of International Narcotics  and Law Enforcement Affairs to identify and address factors that affect  the reliability of its democracy assistance data, such as miscoded or  missing data. (Recommendation 1)", "The Secretary of State should direct the Director of the Office of U.S.  Foreign Assistance Resources to implement a process to improve the  reliability, accessibility, and standardization of democracy assistance data  across the geographic regions of the Bureaus of European and Eurasian  Affairs and South and Central Asian Affairs, such as utilizing a centralized  database for award data. (Recommendation 2)", "The USAID Administrator should direct the Office of Acquisition and  Assistance to assess whether current processes and procedures as  outlined in revised guidance result in complete and timely documentation  of award-type decisions for democracy assistance. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State, USAID, and NED for review  and comment. State, USAID, and NED provided technical comments on  the draft, which we incorporated as appropriate. State and USAID also  provided written comments in letters that are reproduced in appendices  VII and VIII, respectively. In their written comments, both State and  USAID concurred with our recommendations. State also requested that  the report provide more information about its commitment and efforts to  improve accountability of foreign assistance under its Foreign Assistance  Data Review process. We have added more details about these efforts,  including a discussion of State\u2019s recent report to Congress on the  outcomes of Phases One and Two of its four-phase review, which is  expected to be completed in fiscal year 2021. State\u2019s letter also described  other efforts to improve the quality and accessibility of data at the bureau- level and at posts.", "In its written comments, USAID stated that it will take steps to assess  documentation of award-type decisions and planned to complete this  assessment by September 30, 2018. USAID also underscored certain  details regarding required documentation of award-type decisions for  some awards in our sample of 41 USAID democracy assistance awards.  USAID noted that three contracts in our sample consisted of task orders,  which do not require award-type decision documentation separate from  their base awards under USAID guidance, according to agency officials.  The draft report included these details, and we added more information to  the report to further clarify them.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Administrator of the U.S. Agency  for International Development, and the President of the National  Endowment for Democracy. 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) 512-3149 or gootnickd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) examines funding that the U.S. Agency for International  Development (USAID), National Endowment for Democracy (NED), and  U.S. Department of State (State) obligated for democracy assistance  through contracts, grants, and cooperative agreements; (2) evaluates  USAID documentation of award-type decisions; and (3) compares USAID  contracts with grants and cooperative agreements across selected award  elements.", "To examine funds obligated by USAID, NED, and State for democracy  assistance by award types, we obtained data on awards that USAID,  NED, and State administered during fiscal years 2012 through 2016  under the Democracy, Human Rights, and Governance (DRG) portfolio.  The data we obtained included awards to public international  organizations (PIO). However, awards to PIOs are governed by USAID  guidance separate from the guidance that applies to awards to other  types of organizations. The data we obtained also included interagency  agreements. However, interagency agreements are governed by  separate USAID guidance that does not require the same award-type  decision as when agencies obligate funds to entities through contracts,  grants, and cooperative agreements. We analyzed the award data for  fiscal years 2012 through 2016 but did not include fiscal year 2011 data in  our analysis because State did not consistently track obligations data at  the award level prior to fiscal year 2012, according to State officials. We  assessed the reliability of these data by reviewing related documentation;  interviewing knowledgeable officials; and conducting electronic or manual  data testing for missing, nonstandard, or duplicative data; among other  things. We determined that data provided by USAID, NED, and State,  except for data from State\u2019s Bureau of International Narcotics and Law  Enforcement Affairs (INL), Bureau of European and Eurasian Affairs  (EUR), and Bureau of South and Central Asian Affairs (SCA), were  sufficiently reliable for the purposes of our report. For the USAID, NED,  and State data that were sufficiently reliable, we analyzed the amount of  funding by award type, among other variables. We assessed State\u2019s data  reliability challenges against federal internal control standards.", "To evaluate USAID\u2019s award-type decisions, we reviewed relevant  regulations and agency policies, and we interviewed knowledgeable  agency officials about these polices. State and NED were not included in  our sample because most State bureaus did not regularly use all three  types of awards and NED only provides assistance through grants. In  addition, three State bureaus were unable to provide reliable data from  which to select a sample. We also selected a roughly proportional,  random, nongeneralizable sample of 41 awards\u201413 contracts, 5 grants,  and 23 cooperative agreements. These awards were selected based on  characteristics, such as award type, DRG program area, and place of  performance. The sample focused on the 14 countries for which USAID  obligated the most democracy funding. Democracy assistance projects in  these 14 countries received over 70 percent of USAID\u2019s democracy  assistance funding. The sample was also limited to contracts, grants,  and cooperative agreements that were awarded by USAID in fiscal years  2012 through 2015 because fiscal year 2015 was the most recent fiscal  year for which data were available at the time of our sample selection. We  excluded (1) grants made to PIOs because these awards are governed  by USAID guidance separate from the guidance that applies to awards to  other types of organizations; (2) interagency agreements because  engaging other federal agencies through interagency agreements does  not require the same award-type decision under USAID guidance as  when agencies obligate funds to entities through contracts, grants, and  cooperative agreements; and (3) awards that fell below the simplified  acquisition threshold, which is $150,000, because there are different  acquisition procedures allowable for awards that fall below the threshold.  For the selected awards, we obtained and analyzed preaward  documentation relevant to the award-type decision and evaluated this  documentation against the relevant regulations and agency guidance. To  ensure accuracy, we cross-checked information from the documentation  for the selected awards with USAID\u2019s award data.", "In collaboration with subject-matter experts, we selected four award  elements\u2014competition, cost sharing and profit, scope of work, and  oversight requirements\u2014for a comparison of contracts with grants and  cooperative agreements. To compare USAID contracts with grants and  cooperative agreements across selected award elements, we obtained  and conducted a review of documentation associated with the same  sample of 41 USAID awards. Additionally, we obtained information about  award recipients from a public database maintained at SAM.gov. Using  information collected from the documentation, we analyzed the selected  awards\u2019 competition, cost sharing and profit, scope of work, and oversight  activities. Subsequently, we reviewed the documentation and applicable  legal frameworks, including federal regulations and guidance pertaining to  the award elements we selected, to compare differences between award  types. We also interviewed relevant agency officials as well as the leading  industry organizations that represent implementers of foreign assistance  programs to better understand the use of various award types.", "We conducted this performance audit from July 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: USAID\u2019s Use of Various Award Types for Democracy Assistance by Place of Performance during Fiscal Years 2012 through 2015", "paragraphs": ["Our nongeneralizable sample of U.S. Agency for International  Development (USAID) awards was limited to fiscal years 2012 through  2015 and to the 14 countries for which USAID obligated the most  democracy funding, which accounted for over 70 percent of USAID\u2019s  democracy assistance funding. Total USAID democracy assistance  funding for projects in Afghanistan was greater than for any other country,  amounting to almost 39 percent of USAID\u2019s total democracy assistance  obligations during fiscal years 2012 through 2015. The total USAID  democracy assistance funding for projects in Afghanistan included  obligations to public international organizations (PIOs) of more than $827  million in fiscal year 2012, more than $55 million in fiscal year 2013, more  than $48 million in fiscal year 2014, and more than $369 million in fiscal  year 2015. USAID\u2019s use of award types for democracy assistance varied  across these 14 countries during fiscal years 2012 through 2015, as  shown in figure 11."], "subsections": []}, {"section_title": "Appendix III: USAID and State Guidance in Response to the Consolidated Appropriations Act, 2016", "paragraphs": ["The Consolidated Appropriations Act, 2016, states that not later than 90  days after enactment of the act, the U.S. Department of State (State) and  U.S. Agency for International Development (USAID), following  consultation with democracy program implementing partners, shall each  establish guidelines for clarifying program design and objectives for  democracy programs, including the use of contracts versus grants and  cooperative agreements in the conduct of democracy programs carried  out with funds appropriated by the act. The joint explanatory statement  accompanying the act further elaborated that the act requires the  development of guidelines for the use of contracts versus grants and  cooperative agreements for the unique objectives of democracy  programs, and that the guidelines should assist contracting and  agreement officers in selecting the most appropriate mechanism for  democracy programs, among other things.", "In 2016, USAID released its revised agencywide guidance, Automated  Directives System (ADS) Chapter 304 (ADS 304), on how to make award- type decisions between contracts, grants, and cooperative agreements.  According to USAID officials, USAID expects to release guidance further  clarifying ADS 304 at a future date. USAID intends to issue the guidance  after it completes final consultations with implementing partners, the  Congress, and other stakeholders. It includes scenarios and examples to  further clarify existing government-wide and agencywide guidance.  According to USAID officials, in drafting its guidance to further clarify ADS  304, USAID pursued multiple rounds of review within USAID, and with  implementing partners, the Congress, and other stakeholders.", "According to State, it met the requirement to establish additional  guidelines for democracy assistance through State\u2019s release of a  Program Design and Performance Management Toolkit in fall 2016 and  State\u2019s updating of its Federal Assistance Directive in May 2017. The aim  of the Program Design and Performance Management Toolkit was to  clarify program design and objectives for foreign assistance programs  broadly. The Federal Assistance Directive combined both policies and  procedures from the Federal Assistance Policy Directive and the  Procedural Desk Guide into one document and clarified appropriate  mechanisms for all programs. Although applicable to democracy  programs, neither of these actions was specific to democracy programs.  According to State, the Bureau of Democracy, Human Rights, and Labor;  the Bureau of International Narcotics and Law Enforcement; and other  relevant State bureaus that work closely with democracy assistance  implementing partners consult regularly with and provide guidance to  implementing partners on the use of the guidelines."], "subsections": []}, {"section_title": "Appendix IV: USAID Obligations through Different Award Types by Fiscal Year and Democracy, Human Rights, and Governance (DRG) Program Area", "paragraphs": ["U.S. Agency for International Development (USAID) democracy  assistance obligations through different award types varied by fiscal year  and DRG program area, as shown in tables 12, 13, and 14."], "subsections": []}, {"section_title": "Appendix V: Regulations and Policy Allowing USAID to Limit Competition for Contracts, Grants, and Cooperative Agreements", "paragraphs": ["Regulations, law, and policy enable the U.S. Agency for International  Development (USAID) to limit competition in awarding contracts, grants,  and cooperative agreements under certain circumstances. One source of  USAID\u2019s authority to limit competition for contracts is the Competition in  Contracting Act of 1984, as implemented in the Federal Acquisition  Regulation (FAR), which outlines policies and procedures for acquisition  by all federal agencies, including policies and procedures pertaining to  exemptions from competition. In addition, for contracts awarded under  USAID programs, the FAR, among other regulations and legislation,  contains specific provisions on exemptions from competition. For grants  and cooperative agreements, USAID\u2019s Automated Directives System  Chapter 303 outlines circumstances under which competition can be  limited.", "In accordance with applicable policies, procedures, and guidance, USAID  can use some exemptions from competition only for contracts and others  only for grants and cooperative agreements. For example, USAID can  limit competition for contracts for the sake of public interest or when  circumstances are such that competition would compromise U.S. national  security; however, according to USAID officials, they rarely have cause to  use these grounds for limiting competition. USAID guidance outlines  some unique exemptions to competition for grants and cooperative  agreements. For example, USAID can exempt follow-on awards, which  are the same or substantively similar to recently completed awards, if the  awardee will be the same, or can exempt awards from competition in  certain instances when USAID has received an unsolicited application.", "For the awards in our sample, USAID limited competition for only 3 of the  13 contracts, based on USAID data. However, for one of these contracts,  USAID officials indicated that they erroneously cited FAR 13.106-1(b),  which permits sole source awards for acquisitions not exceeding the  simplified acquisition threshold if only one source is reasonably available,  when they should have cited FAR 13.501(a)(2)(i), which permits sole  source acquisitions of commercial items (including brand-name items) for  acquisitions greater than $150,000. For the exemptions from competition  that USAID used for these awards, see table 15.", "USAID exempted from full competition all five of the grants and 15 of the  23 cooperative agreements in our sample. Table 16 outlines exemptions  from competition that USAID may use for grants and cooperative  agreements in our sample."], "subsections": []}, {"section_title": "Appendix VI: Program Objectives of Selected USAID Democracy Assistance Awards by Contract Type", "paragraphs": ["For the contracts in our sample, we found that program objectives varied  by type of contract. For example, the firm fixed price award and three of  the four indefinite quantity awards in our sample procured goods and  services with specific deliverables that were directly for the U.S. Agency  for International Development\u2019s (USAID) benefit. Nearly all of the cost- plus-fixed-fee contracts sought to achieve improvements in the public  sector of the country of performance through activities such as supporting  developments in public policy or strengthening national institutions. For  examples of differences in program objectives by contract type in our  sample, see table 17."], "subsections": []}, {"section_title": "Appendix VII: Comments from the U.S. Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mona Sehgal (Assistant  Director), Justine Lazaro (Analyst-in-Charge), Lindsey Cross, Christopher  Hayes, Carl Barden, Karen Cassidy, David Dayton, Timothy DiNapoli,  Justin Fisher, Alexandra Jeszeck, Heather Latta, Madeline Messick,  Natarajan Subramanian, Alex Welsh, and Bill Woods made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Promoting democracy abroad has been a long-standing U.S. priority.", "We examined how much money U.S. agencies pledged for democracy assistance in fiscal 2012-2016 and how they awarded the funds.", "We found USAID obligated $5.5 billion, but we could not determine a total for the State Department because some of its bureaus could not provide reliable data. In addition, in our sample we found USAID seldom documented award-related decisions in a complete and timely manner.", "We recommended that State improve data reliability and that USAID assess whether its new processes are improving award documentation."]}
{"id": "GAO-18-341", "url": "https://www.gao.gov/products/GAO-18-341", "title": "Medicare: CMS Should Take Actions to Continue Prior Authorization Efforts to Reduce Spending", "published_date": "2018-04-20T00:00:00", "released_date": "2018-05-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CMS required prior authorization as a demonstration in 2012 for certain power mobility devices, such as power wheelchairs, in seven states. Under the prior authorization process, MACs review prior authorization requests and make determinations to approve or deny them based on Medicare coverage and payment rules. Approved requests will be paid as long as all other Medicare payment requirements are met.", "GAO was asked to examine CMS's prior authorization programs. GAO examined 1) the changes in expenditures and the potential savings for items and services subject to prior authorization demonstrations, 2) reported benefits and challenges of prior authorization, and 3) CMS's monitoring of the programs and plans for future prior authorization. To do this, GAO examined prior authorization program data, CMS documentation, and federal internal control standards. GAO also interviewed CMS and MAC officials, as well as selected provider, supplier, and beneficiary groups."]}, {"section_title": "What GAO Found", "paragraphs": ["Prior authorization is a payment approach used by private insurers that generally requires health care providers and suppliers to first demonstrate compliance with coverage and payment rules before certain items or services are provided to patients, rather than after the items or services have been provided. This approach may be used to reduce expenditures, unnecessary utilization, and improper payments. The Centers for Medicare & Medicaid Services (CMS) has begun using prior authorization in Medicare through a series of fixed-length demonstrations designed to measure their effectiveness, and one permanent program. According to GAO's analyses, expenditures decreased for items and services subject to a demonstration. GAO's analyses of actual expenditures and estimated expenditures in the absence of the demonstrations found that estimated savings from all demonstrations through March 2017 could be as high as about $1.1 to $1.9 billion. While CMS officials said that prior authorization likely played a large role in reducing expenditures, it is difficult to separate the effects of prior authorization from other program integrity efforts. For example, CMS implemented a durable medical equipment competitive bidding program in January 2011, and according to the agency, it resulted in lower expenditures.", "Many provider, supplier, and beneficiary group officials GAO spoke with reported benefits of prior authorization, such as reducing unnecessary utilization. However, provider and supplier group officials reported that providers and suppliers experienced some challenges. These include difficulty obtaining the necessary documentation from referring physicians to submit a prior authorization request, although CMS has created templates and other tools to address this concern. In addition, providers and suppliers reported concerns about whether accessories deemed essential to the power wheelchairs under the permanent durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) program are subject to prior authorization. In practice, Medicare Administrative Contractors (MAC) that administer prior authorization programs review these accessories when making prior authorization determinations, even though they are not technically included in the program and therefore cannot be provisionally affirmed. As a result, providers and suppliers lack assurance about whether Medicare is likely to pay for these accessories. This is contrary to a CMS stated benefit of prior authorization\u2014to provide assurance about whether Medicare is likely to pay for an item or service\u2014and to federal internal control standards, which call for agencies to design control activities that enable an agency to achieve its objectives.", "CMS monitors prior authorization through various MAC reports. CMS also reviews MAC accuracy and timeliness in processing prior authorization requests and has contracted for independent evaluations of the demonstrations. Currently, prior authorization demonstrations are scheduled to end in 2018. Despite its interest in using prior authorization for additional items, CMS has not made plans to continue its efforts. Federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving objectives. CMS risks missed opportunities for achieving its stated goals of reducing costs and realizing program savings by reducing unnecessary utilization and improper payments."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS (1) subject accessories essential to the power wheelchairs in the permanent DMEPOS program to prior authorization and (2) take steps, based on results from evaluations, to continue prior authorization. The Department of Health and Human Services neither agreed nor disagreed with GAO's recommendations but said it would continue to evaluate prior authorization programs and take GAO's findings and recommendations into consideration in developing plans or determining appropriate next steps."]}], "report": [{"section_title": "Letter", "paragraphs": ["Prior authorization is a payment approach used by private insurers that  generally requires health care providers and suppliers to first demonstrate  compliance with coverage and payment rules before certain items or  services are provided to patients, rather than after the items or services  have been provided. This approach may be used to reduce expenditures,  unnecessary utilization, and improper payments. The Centers for  Medicare & Medicaid Services (CMS)\u2014the agency within the Department  of Health and Human Services (HHS) that administers the Medicare  program\u2014has begun using prior authorization to help ensure program  integrity for selected items and services with high levels of unnecessary  utilization and improper payments. In fiscal year 2017, the federal  government made an estimated $36.2 billion in improper payments for the  Medicare fee-for-service program. Since 1990, we have designated  Medicare a high-risk program because of its size, complexity, and  susceptibility to mismanagement and improper payments.", "CMS required prior authorization as a demonstration in 2012 for certain  power mobility devices in seven states. CMS conducts demonstrations to  test or measure the effect of program changes, such as new or innovative  payment approaches. Since that time, CMS has expanded this  demonstration to additional states and implemented three additional  demonstrations for other items or services, such as non-emergency  hyperbaric oxygen therapy, and established a permanent program for  certain types of power wheelchairs. For the purposes of our report, we  refer to the demonstrations and the permanent program collectively as  prior authorization programs unless otherwise noted.", "You asked us to review CMS\u2019s use of prior authorization in Medicare,  including findings from current programs, benefits and challenges, and  any opportunities for expansion. This report examines  1.  the changes in expenditures and the potential savings for items  and services subject to prior authorization demonstrations.  2.  the reported benefits and challenges of prior authorization.  3.  CMS\u2019s monitoring of prior authorization programs and its plans for  future prior authorization.", "To determine changes in expenditures and the potential savings for items  and services subject to prior authorization demonstrations, we analyzed  Medicare monthly expenditure data. We did not analyze expenditure data  for the permanent program because it was implemented in March 2017.  We calculated monthly expenditures for each demonstration for 2 time  periods: 1) the 6 months prior to implementation of each demonstration  and 2) the start of implementation of each demonstration through March  2017, the month for which the most recent reliable data were available at  the time of our analysis. We analyzed these data separately for three  groups of states: initial demonstration states (states that were part of the  initial implementation), expansion demonstration states (states added  after the initial implementation of the demonstration), and non- demonstration states (states that were never part of the demonstration).  We calculated average monthly expenditures by state for each of the  three groups of states. We then estimated potential savings by comparing  average monthly expenditures before and after implementation in initial  and expansion demonstration states. For the power mobility device  demonstration, we also estimated potential savings from reduced  expenditures in non-demonstration states, since CMS officials stated that  savings may occur in all states\u2014even those not part of the  demonstration\u2014in part because they think that larger nationwide  suppliers could have improved their compliance with CMS policies in all  states based on their experiences with prior authorization. Finally, we  analyzed the effect of prior authorization over time by determining the  percentage of the total reduction in expenditures that took place in the  first 6 months of implementation for each demonstration. We did not  independently verify the accuracy of these data on CMS\u2019s Medicare  expenditures; however, we checked these data for obvious errors and  omissions, compared analyses results to CMS\u2019s publicly reported  information about expenditures, and interviewed CMS officials to resolve  any identified discrepancies. On the basis of these actions, we  determined that these data were sufficiently reliable for the purpose of our  reporting objectives. We also interviewed CMS officials and reviewed  CMS documents, such as CMS\u2019s annual program integrity report, to  identify other program integrity efforts that may have affected  expenditures.", "To identify reported benefits and challenges of prior authorization, we  interviewed multiple stakeholders. First, we interviewed a non- generalizable sample of officials from nine Medicare beneficiary and  provider and supplier groups to learn about their experiences with  Medicare prior authorization, including challenges they faced and their  views on program benefits. Second, we interviewed officials from CMS  and the six Medicare Administrative Contractors (MAC) that administer  the Medicare prior authorization programs about program benefits and  challenges implementing and conducting the programs. When possible,  we reviewed relevant documentation, such as the prior authorization  programs\u2019 operational guides, to corroborate information reported by  stakeholders. Third, we interviewed a sample of four private health  insurers and two associations that represent health insurers about their  experiences with prior authorization. To identify private health insurers,  we considered which insurers had the greatest market share among large  group insurers in states with Medicare prior authorization programs and  which offered Medicare Advantage plans, as well as whether the insurer  had been discussed in stakeholder interviews as having particularly  relevant experience. We then compared CMS\u2019s efforts to mitigate  reported challenges to federal standards for internal controls related to  control activities.", "To determine the monitoring CMS conducts of prior authorization and its  plans for future prior authorization, we obtained and reviewed CMS and  Medicare contractor documents including Federal Register notices,  proposed and final rules, and CMS prior authorization demonstration  status updates. We interviewed CMS officials regarding the agency\u2019s  monitoring of prior authorization and the extent to which the agency has  plans for future prior authorization. We also interviewed private health  insurers about their prior authorization programs and the evaluations they  conduct, including how they determine whether to add or remove items  and services from prior authorization. We then compared CMS\u2019s efforts in  these areas to identified federal standards for internal control related to  risk assessment.", "We conducted this performance audit from November 2016 through April  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Since September 2012, CMS has subjected selected items and services  to prior authorization and pre-claim reviews\u2014a process similar to prior  authorization where review takes place after services have begun\u2014 through four fixed-length demonstrations and a permanent program.  The prior authorization demonstrations are for certain power mobility  devices, repetitive scheduled non-emergency ambulance services, non- emergency hyperbaric oxygen therapy, and home health services; while  the permanent program is for certain durable medical equipment,  prosthetics, orthotics, and supplies (DMEPOS) items. By using prior  authorization, CMS generally seeks to reduce expenditures, unnecessary  utilization, and improper payments, although specific objectives for the  programs vary based on the statutory authority CMS used to initiate each."], "subsections": [{"section_title": "Medicare Prior Authorization Programs", "paragraphs": ["Power mobility devices demonstration: In September 2012, CMS  implemented prior authorization for certain scooters and power  wheelchairs, items the agency has identified with historically high levels of  fraud and improper payments, for Medicare beneficiaries in seven states:  California, Florida, Illinois, Michigan, New York, North Carolina, and  Texas. The demonstration, established under Section 402(a) of the Social  Security Amendments of 1967, is intended to develop or demonstrate  improved methods for the investigation and prosecution of fraud in  providing care or services under Medicare. In October 2014, CMS  expanded the demonstration to 12 additional states: Arizona, Georgia,  Indiana, Kentucky, Louisiana, Maryland, Missouri, New Jersey, Ohio,  Pennsylvania, Tennessee, and Washington. CMS also extended the  program, which was originally scheduled to end in 2015, until August  2018.", "CMS officials reported that since the prior authorization programs\u2019 implementation, the  agency made more than 100 referrals to its contractors that investigate fraud. However,  due to the length of time fraud investigations typically take, results from these referrals are  not yet available. extended the program, which was originally scheduled to end in 2017,  through November 2018.", "Non-emergency hyperbaric oxygen therapy demonstration: In March  2015, CMS implemented prior authorization for non-emergency  hyperbaric oxygen therapy in three states the agency has identified with  high utilization and improper payment rates, based on the therapy  facility\u2019s location: Illinois, Michigan, and New Jersey. Medicare covers  hyperbaric oxygen therapy for certain conditions, such as diabetic  wounds of the lower extremities, after there have been 30 days of no  measurable signs of healing during standard wound care treatment.  According to CMS, previous experience indicates that hyperbaric oxygen  therapy has a high potential for improper payments and raises concerns  about beneficiaries receiving medically unnecessary care. The  demonstration, established under Section 1115A of the Social Security  Act, is intended to reduce expenditures while preserving or enhancing  quality of care. The demonstration ended in February 2018.", "Home health services demonstration: In August 2016, CMS  implemented prior authorization for home health services in Illinois. The  demonstration, established under Section 402(a) of the Social Security  Amendments of 1967, is intended to develop or demonstrate improved  methods for the investigation and prosecution of fraud in providing care or  services under Medicare. The demonstration was originally scheduled to  incorporate other states the agency has identified with high rates of fraud  and abuse: Florida, Massachusetts, Michigan, and Texas. However, as of  April 2017, CMS paused the demonstration while it considered making  improvements. As of February 2018, the demonstration has not resumed.", "Permanent DMEPOS program: In December 2015, CMS established a  permanent prior authorization program for certain DMEPOS items under  Section 1834(a)(15) of the Social Security Act. This program aims to  reduce unnecessary utilization for certain DMEPOS items. To select the  items that would be subject to prior authorization, CMS compiled a Master  List of items that 1) appear on the DMEPOS Fee Schedule list, 2) have  an average purchase fee of $1,000 or greater (adjusted annually for  inflation) or an average rental fee schedule of $100 or greater (adjusted  annually for inflation), and 3) meet one of these two criteria: the item was  identified in a GAO or HHS Office of Inspector General report that is  national in scope and published in 2007 or later as having a high rate of  fraud or unnecessary utilization, or the item is listed in the 2011 or later  published Comprehensive Error Rate Testing program\u2019s annual report.  CMS may choose specific items from this Master List to include on the  required prior authorization list, and there is no set end date for requiring  prior authorization for those items. CMS may suspend prior authorization  for those items at any time. (See app. I for the items on the Master List.)  In March 2017, CMS began requiring prior authorization for two types of  group 3 power wheelchairs from the Master List for beneficiaries with a  permanent address in selected states (Illinois, Missouri, New York, and  West Virginia) and expanded the program nationwide in July 2017. As  of February 2018, CMS has not identified any other items from the Master  List for prior authorization. See figure 1 for each prior authorization  program\u2019s implementation and end dates."], "subsections": []}, {"section_title": "Medicare Prior Authorization Process", "paragraphs": ["MACs that administer the prior authorization programs review prior  authorization requests for items and services, along with supporting  documentation, to determine whether all applicable Medicare coverage  and payment rules have been met. CMS expects requests for prior  authorization to include all documentation necessary to show that  coverage requirements have been met, for example face-to-face  examination documentation or the detailed product description. The  referring physician\u2014or the physician who conducts the face-to-face  examination of the beneficiary and orders the item or service\u2014provides  this documentation to a provider or supplier who subsequently furnishes  the item or service. According to multiple MACs\u2019 officials, the provider or  supplier who furnishes the item or service typically submits the prior  authorization request. CMS has specified that MACs review initial prior  authorization requests and make a determination within 10 business  days. MACs make one of the following decisions:", "Provisionally affirm (approve) \u2013 Documentation submitted meets  Medicare\u2019s coverage and payment rules. A prior authorization  provisional affirmation is a preliminary finding that a future claim  submitted to Medicare for the item or service meets Medicare\u2019s  coverage and payment requirements and will likely be paid.", "Non-affirm (deny) \u2013 Documentation submitted does not meet  Medicare rules or the item or service is not medically necessary.  However, a non-affirmed request may be revised and resubmitted for  review an unlimited number of times prior to the submission of the  claim for payment. CMS has specified that MACs make a  determination on a resubmission within 20 business days.", "For the demonstrations, claims that are submitted without a prior  authorization provisional affirmation are subject to prepayment review,  which is medical review before the claim is paid. In addition, for the  home health services and power mobility devices demonstrations, claims  submitted without a prior authorization provisional affirmation that are  determined payable during the medical review will be subject to a 25  percent reduction in payment. For the permanent program, claims that  are submitted without a prior authorization provisional affirmation are  denied. (See fig. 2 for the prior authorization process.)", "As of March 31, 2017, MACs had processed over 337,000 prior  authorization requests\u2014about 264,000 initial requests and about 73,000  resubmissions, as shown in table 1.", "MACs\u2019 provisional affirmation rates for both initial and resubmitted prior  authorization requests rose in each demonstration between their  implementation and March 2017, often by 10 percentage points or more.  For example, the provisional affirmation rate for initial submissions for  repetitive scheduled non-emergency ambulance services rose from 28  percent in the first 6 months after implementation (December 2014  through May 2015) to 66 percent in the most recent 6 months for which  data are available (October 2016 through March 2017). Some MAC  officials attributed this rise in part to provider and supplier education,  which improved documentation being submitted."], "subsections": []}]}, {"section_title": "Medicare Expenditures Decreased After Prior Authorization Began in Four Demonstrations", "paragraphs": [], "subsections": [{"section_title": "Expenditures Decreased After Prior Authorization Began and Estimated Savings May be as High as About $1.1 to $1.9 Billion, with Most Occurring Soon After Implementation", "paragraphs": ["According to our analysis, expenditures decreased for items and services  subject to prior authorization in four demonstrations. For example,  expenditure decreases in initial demonstration states from implementation  through March 2017 ranged from 17 percent to 74 percent. Figure 3  shows the average monthly expenditures per state from 6 months prior to  the start of each demonstration through March 2017 for each of three  groups of states: states that were part of the initial demonstration, states  that were part of the demonstration expansion, and non-demonstration  states. (See app. II for monthly expenditures for items and services  covered under each demonstration from their implementation through  March 2017.)", "Our analysis also shows potential savings for items and services subject  to prior authorization, based on the difference between actual  expenditures and estimates of what expenditures would have been in the  absence of the demonstrations. For each demonstration, we estimated  expenditures had the demonstration not been implemented by assuming  that expenditures would have remained at their average for the 6 months  prior to the demonstration starting in each state. We then compared  actual expenditures to these estimated expenditures and found that  potential savings could be as high as about $1.1 to $1.9 billion.", "Estimated potential savings in states that were part of the  demonstrations since either their initial implementation or expansion  may be as high as $1.1 billion. For items and services subject to prior  authorization in these states, estimated expenditures in the absence  of the demonstrations would have been over $2.1 billion, while actual  expenditures were about $1.0 billion.", "Estimated potential savings may be as high as about $1.9 billion if, for  the power mobility device demonstration, we estimate savings in both  demonstration states and non-demonstration states since  implementation. With this method, estimated savings since the power  mobility device demonstration\u2019s implementation change from over  $600 million in demonstration states since each state\u2019s  implementation to about $1.4 billion in all states since the  demonstration began in September 2012, a nearly $800 million  increase. This increase is due to including non-demonstration states  in the analysis and changing the assumptions for expanded  demonstration states in the analysis. CMS officials have reported  that certain power mobility device expenditures have declined  significantly in both demonstration states and non-demonstration  states in part because they think that larger nationwide suppliers  improved their compliance with CMS policies in all states based on  their experiences with prior authorization. CMS did not make a similar  statement for the other demonstrations, and in December 2017, CMS  officials said that the agency has not analyzed expenditures in non- demonstration states for the other demonstrations. See table 2 for  estimated potential savings for prior authorization demonstrations  from implementation through March 2017.", "According to our analysis, more than half of the reduction in monthly  expenditures took place within the first 6 months of each demonstration.  We calculated the average monthly expenditures for the 6 months prior to  the start of each demonstration, the monthly expenditures in the 6th  month after implementation, and the monthly expenditures in March 2017  for initial demonstration states in the power mobility device, repetitive  scheduled non-emergency ambulance services, and non-emergency  hyperbaric oxygen therapy demonstrations. We compared these  expenditures and found that 58, 99, and 91 percent of the reduction in  monthly expenditures during this time took place during the first 6 months  of each demonstration, respectively."], "subsections": []}, {"section_title": "Other CMS Efforts May Have Contributed to Expenditure Reductions", "paragraphs": ["CMS had other program integrity efforts underway before implementing  prior authorization, and these efforts may have also contributed to the  reduction in expenditures for items and services subject to prior  authorization in these demonstrations. CMS officials said that it is likely  that prior authorization played a large role in the expenditure reduction for  those select items and services. However, CMS officials also reported  that it is difficult to separate the effects of prior authorization from other  program integrity efforts, and the agency has not developed a  methodology for determining the independent effect of prior authorization  on expenditures. We found that some of these other program integrity  efforts have addressed provider screening and enrollment and certain  durable medical equipment, and these may have contributed to the  reductions in Medicare expenditures.", "Provider screening and enrollment: CMS has taken steps to keep  potentially fraudulent providers and suppliers from billing Medicare. For  example,  in September 2011, CMS began revalidating providers\u2019 and suppliers\u2019  enrollment in Medicare to ensure that they continue to be eligible to  bill Medicare. Revalidation involves confirming that the provider or  supplier continues to meet Medicaid program requirements, including  ensuring that a provider or supplier does not employ or contract with  individuals who have been excluded from participation in federal  health care programs. We previously reported that screening all  providers and suppliers\u2014not just the ones subject to prior  authorization\u2014resulted in over 23,000 new applications being denied  or rejected and over 703,000 existing enrollment records being  deactivated or revoked from March 2011 through December 2015.  We also reported that CMS estimated the revised process avoided  $2.4 billion in total Medicare payments to ineligible providers and  suppliers from March 2011 to May 2015, some of which may have  been payments for items and services subject to prior authorization.  in July 2013, CMS implemented moratoria on enrollment of new  providers for home health services and for repetitive, scheduled non- emergency ambulance transport in select counties. As of January  2018, CMS had extended the home health services moratoria  statewide to Florida, Illinois, Michigan, and Texas and the repetitive,  scheduled non-emergency ambulance transport moratoria statewide  to Pennsylvania and New Jersey. During a moratorium, no new  applications to enroll as a billing provider of the affected service types  are reviewed or approved. In October 2017, CMS officials said that  home health and non-emergency ambulance services\u2019 expenditures  may have been affected by provider enrollment moratoria.", "Certain durable medical equipment pricing, payments, and  education and outreach: CMS has taken steps to change how certain  durable medical equipment is paid for and to provide ongoing durable  medical equipment education and outreach. For example,  in January 2011, CMS implemented a DMEPOS competitive bidding  program required by the Medicare Prescription Drug, Improvement,  and Modernization Act of 2003. Under the program, only  competitively selected contract suppliers can furnish certain durable  medical equipment items at competitively determined prices to  Medicare beneficiaries in designated areas. CMS began the program  in 9 of the largest metropolitan areas, and in July 2013 expanded to  an additional 100 large metropolitan areas. In January 2016, CMS  implemented competitive bidding program-based adjusted prices for  non-designated areas for durable medical equipment items that were  previously, or are currently, included in the competitive bidding  program. According to CMS, the program\u2014which generally results in  lower competitively bid prices\u2014is reducing expenditures for  approximately half of the beneficiaries receiving power mobility  devices nationwide. We have previously reported that prices  decreased for power mobility devices in the competitive bidding  program; some of these devices are also subject to prior  authorization.  in January 2011, CMS eliminated the lump sum purchase option for  standard power wheelchairs. This change reduced expenditures for  power wheelchairs used on a short-term basis because payments for  short-term rentals are lower than for the purchase of these items. durable medical equipment MACs and CMS provide continuous  DMEPOS education and outreach. According to CMS, the education  and outreach may have contributed to reducing expenditures for  power mobility devices by helping providers and suppliers to  understand how to bill correctly and to submit fewer claims that do not  meet Medicare coverage and payment requirements."], "subsections": []}]}, {"section_title": "Providers and Suppliers Reported that Prior Authorization Is an Effective Tool, but They Face Difficulty Obtaining Documentation, and Concerns Exist for One Program", "paragraphs": [], "subsections": [{"section_title": "Many Providers and Suppliers Reported Prior Authorization Benefits, and CMS Has Addressed Some of Their Initial Concerns", "paragraphs": ["Many of the officials we interviewed representing provider, supplier, and  beneficiary groups, as well as CMS and MACs, reported benefits to prior  authorization. Officials from some of these groups said that prior  authorization is an effective tool to reduce unnecessary utilization and  improper payments. Some officials who reported benefits said that prior  authorization helps educate providers and suppliers about allowable  items and services under Medicare and improves providers\u2019 and  suppliers\u2019 documentation. Some officials also said that providers and  suppliers appreciate the assurance of knowing that Medicare is likely to  pay for these items and services. Officials from three provider and  supplier groups said that by getting provisional prior authorization, their  claims will likely not be denied, and they can thus avoid the appeals  process, for which there are significant delays. In addition, officials from  two provider and supplier groups believe that prior authorization may  deter fraudulent suppliers from participating in Medicare. Because of  these benefits, these provider and supplier group officials recommended  that CMS expand its use of prior authorization.", "In addition, CMS has improved the prior authorization programs by  responding to some of the providers\u2019 and suppliers\u2019 initial concerns. For  example, for the power mobility device demonstration, CMS and MAC  officials that process DMEPOS claims reported that providers and  suppliers were initially confused about whether beneficiaries with  representative payees\u2014persons or organizations authorized to accept  payment on a beneficiary\u2019s behalf\u2014were exempt from the prior  authorization program. To address this issue, CMS revised and clarified  its guidance related to representative payees. In addition, for the non- emergency hyperbaric oxygen therapy demonstration, officials from CMS  and a MAC administering the demonstration said that providers and  suppliers raised concerns that a Medicare-covered condition  (compromised skin grafts) included in the demonstration required  immediate care and therefore should not be subject to prior authorization.  In response, CMS removed the condition from the list of conditions  subject to prior authorization."], "subsections": []}, {"section_title": "Providers and Suppliers Report Difficulty Obtaining Documentation for Prior Authorization Requests, and CMS Is Taking Steps to Address This Challenge", "paragraphs": ["Some provider and supplier group officials we interviewed reported that  obtaining the documentation necessary to submit a prior authorization  request can be difficult. For example, some of these officials told us that  providers and suppliers may spend 3 to 7 weeks obtaining necessary  documentation from referring physicians and other relevant parties before  submitting a prior authorization request. While CMS\u2019s documentation  requirements did not change under prior authorization, officials from a  provider and supplier group we spoke with said that prior authorization  exacerbates existing documentation challenges because they must obtain  all required documentation before providing items and services to  beneficiaries. As we noted in a previous report, two durable medical  equipment MACs said that referring physicians may lack financial  incentives to submit proper documentation since they are unaffected if a  durable medical equipment or home health claim is denied due to  insufficient documentation, while the provider or supplier submitting the  claim loses the payment.", "Furthermore, according to some provider and supplier group  representatives, CMS\u2019s documentation requirements can be difficult to  meet. Representatives from one supplier and provider group said that  there is a high standard of proof to meet the information needed to  support their medical necessity requirements. For example,  documentation in the medical record is required to show whether the  referring physician considered other options. Also, representatives from  another provider and suppler group said that, unlike private insurers,  CMS has more requirements that providers and suppliers consider  administrative. For instance, MACs deny prior authorization requests for  missing physician signatures.", "In addition, representatives from a provider and supplier group said it may  be necessary to collect documentation from multiple providers that  treated the beneficiary in order to meet CMS\u2019s medical necessity  requirements. However, officials from one private insurer said that their  medical necessity requirements for certain items and services may  necessitate receiving documentation from several providers as well,  although this does not occur often.", "CMS officials acknowledged that the agency\u2019s requirements may be more  difficult to meet than those of private health insurers. However, this  scrutiny may be beneficial because, unlike private insurers, Medicare  must pay for health care delivered by any eligible physician willing to  accept Medicare payment and follow Medicare requirements.", "We found that CMS and the MACs have taken some steps to assist  providers and suppliers in obtaining documentation from referring  physicians. For example, CMS has created e-clinical templates for home  health services and power mobility devices that can be incorporated into  progress notes to help ensure physicians meet medical necessity  requirements. CMS and the MACs have also created documentation  checklists, prior authorization coversheets, and other tools to assist  providers and suppliers in verifying that they have obtained the  documentation necessary to meet CMS\u2019s documentation requirements.  Agency officials have stated that they are working on additional changes  to reduce provider and supplier burden, for example, developing e-clinical  templates for additional items and services.", "Furthermore, representatives from each of the MACs said that they call  providers and suppliers that receive certain prior authorization non- affirmations to ensure suppliers and providers understand what  information is required to obtain a provisional affirmation. Some MAC  representatives said that having a phone conversation with suppliers  allows them to resolve non-affirmations more expediently and reduces the  number of resubmissions. Representatives from one MAC estimated that  when they call providers and suppliers, they are able to resolve 50 to 80  percent of the issues that led to the non-affirmations. Several MAC  representatives also said calling helps providers and suppliers gain a  better understanding of CMS\u2019s documentation requirements, which will  increase their likelihood of having future requests provisionally affirmed.  In addition, CMS officials said that the agency encourages MACs to call  referring physicians directly, when necessary, to remedy curable errors or  obtain additional documentation needed to affirm a request because non- affirmation may be resolved faster without providers and suppliers serving  as intermediaries."], "subsections": []}, {"section_title": "Providers and Suppliers Report Concerns about Whether the Permanent DMEPOS Program Includes Essential Accessories", "paragraphs": ["Providers and suppliers reported concerns about whether accessories  deemed essential to group 3 power wheelchairs are subject to prior  authorization and can be provisionally affirmed under the permanent  DMEPOS program. According to CMS, the permanent DMEPOS program  requires prior authorization for power wheelchair bases, but not for their  accessories. CMS officials said this is because accessories do not meet  the criteria for inclusion on the Master List. However, according to CMS,  the MACs must review these accessories when they make prior  authorization determinations because their decision to provisionally affirm  a wheelchair base is based in part on their view of the medical necessity  of the accessories. Therefore, if an essential accessory does not meet  medical necessity requirements, a MAC will deny a prior authorization  request for a power wheelchair base. In other words, in practice these  accessories are subject to prior authorization, even though they are not  technically included in the permanent DMEPOS program and therefore  cannot be provisionally affirmed. As a result, providers and suppliers lack  assurance about whether Medicare is likely to pay for these accessories.", "In December 2017, CMS officials stated that there have been preliminary  discussions regarding the feasibility and effect of subjecting accessories  essential to the group 3 power wheelchairs in the permanent DMEPOS  program to prior authorization. However, CMS officials did not provide a  timeframe for reaching a decision about whether they would do so.  Federal internal control standards state that agencies should design  control activities that enable an agency to achieve its objectives and  should respond to any risks related to achieving those objectives. By not  including essential accessories in prior authorization so they can be  provisionally affirmed as appropriate, CMS may hinder its ability to  achieve one of the stated benefits of the prior authorization program\u2014to  allow providers and suppliers to know prior to providing the items whether  Medicare will likely pay for them."], "subsections": []}]}, {"section_title": "CMS Monitors Prior Authorization But Has Not Made Plans for Prior Authorization in the Future", "paragraphs": [], "subsections": [{"section_title": "CMS Monitors Prior Authorization and Has Contracted for Evaluations of the Demonstrations", "paragraphs": ["We found that CMS monitoring includes reviewing MAC reports of the  results of prior authorization requests, examining MAC timeliness and  accuracy, and contracting for independent evaluations of the prior  authorization demonstrations.", "CMS officials told us that they review weekly, monthly, and annual  MAC reports that include information such as numbers of requests  received, completed, approved, denied, and resubmitted.", "According to CMS officials, they monitor MAC timeliness through  these reports and separately have a contractor review MAC accuracy  in processing requests. According to these officials, they have not  identified any issues with MAC timeliness, as the MACs currently  meet the standards for processing initial requests within 10 business  days and resubmissions within 20 business days. In addition, CMS  officials said that a sample of MACs\u2019 prior authorization decisions is  reviewed each month for accuracy for each of the prior authorization  demonstrations, and the reviews have not identified any issues with  these decisions.", "CMS officials said that they meet with providers and supplier groups  regularly to solicit feedback, to identify issues that need to be  addressed, and to determine whether there are any problems, such  as reduced beneficiary access to care. According to CMS officials,  they have not identified any negative impact on beneficiary access to  care as a result of implementing prior authorization.", "CMS has contracted for independent evaluations of the power mobility  device, repetitive scheduled non-emergency ambulance services, and  non-emergency hyperbaric oxygen demonstrations. In December  2017, CMS officials told us that evaluations will be completed and  results available after the demonstrations end. In December 2017,  officials told us that they also plan to contract for an evaluation of the  permanent program after more time has passed."], "subsections": []}, {"section_title": "Although Most Prior Authorization Is Scheduled to End in 2018, CMS Does Not Have Plans to Continue Efforts", "paragraphs": ["Most prior authorization programs are scheduled to end in 2018, with all  the demonstrations concluding and only the limited permanent program  remaining.", "The non-emergency hyperbaric oxygen demonstration ended in  February 2018, the power mobility device demonstration in August  2018, and the repetitive scheduled non-emergency ambulance  services demonstration in November 2018.", "The home health services demonstration has been on pause since  April 2017 with no plans to resume as of February 2018, although  CMS stated that they are considering improvements to the  demonstration.", "The permanent program, which currently consists of two group 3  power wheelchairs, is the only prior authorization program that will  remain. According to CMS officials, these wheelchairs are very low  volume, and the HHS Office of the Inspector General reported that  these wheelchairs represent just a small percentage of all durable  medical equipment claims.", "CMS has not made plans for continuing expiring or paused prior  authorization programs or expanding prior authorization. However,  officials told us that they would like to see prior authorization for additional  items. For example, CMS officials said that they have considered prior  authorization for items such as hospital beds and oxygen concentrators,  because these have high utilization or improper payment rates. In  addition, in December 2017, CMS officials said that the agency is  evaluating whether it has met the requirements for nationwide expansion  of the repetitive scheduled non-emergency ambulance services  demonstration established by the Medicare Access and CHIP  Reauthorization Act of 2015. However, CMS officials also said that have  not yet determined the next steps for the use of prior authorization.  Federal internal control standards state that agencies should identify,  analyze, and respond to risks related to achieving objectives. By not  taking steps, based on results from the evaluations, to continue prior  authorization, CMS risks missed opportunities for achieving its stated  goals of reducing costs and realizing program savings by reducing  unnecessary utilization and improper payments."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since September 2012, CMS has begun using prior authorization to  ensure that Medicare coverage and payment rules have been met before  the agency pays for selected items and services. During this time,  expenditures for items and services subject to prior authorization have  been reduced. We estimate potential savings may be as high as about  $1.1 to $1.9 billion, although other CMS program integrity efforts may  have contributed to these reductions. Many stakeholders, including  providers, suppliers, and MAC officials, support prior authorization, citing  benefits such as reduced unnecessary utilization. However, providers and  suppliers report concerns about whether accessories deemed essential to  group 3 power wheelchairs are subject to prior authorization and can be  provisionally affirmed. By not including essential accessories in prior  authorization, CMS may hinder its ability to achieve one of the stated  benefits of the prior authorization program\u2014to allow providers and  suppliers to know prior to providing the items whether Medicare will likely  pay for them.", "All four prior authorization demonstrations are either paused or will end in  2018, and CMS does not have plans to extend these programs or expand  the use of prior authorization to additional items and services with high  rates of unnecessary utilization or improper payments. By not taking  steps, based on results from the evaluations, to continue prior  authorization, CMS risks missed opportunities for achieving its stated  goals of reducing costs and realizing program savings by reducing  unnecessary utilization and improper payments."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to CMS.", "The Administrator of CMS should subject accessories essential to the  group 3 power wheelchairs in the permanent DMEPOS program to  prior authorization. (Recommendation 1)", "The Administrator of CMS should take steps, based on results from  evaluations, to continue prior authorization. These steps could  include:  resuming the paused home health services demonstration; extending current demonstrations; or,  identifying new opportunities for expanding prior authorization to  additional items and services with high unnecessary utilization and  high improper payment rates. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for comment, and its comments  are reprinted in appendix III. HHS also provided technical comments,  which we incorporated as appropriate.", "HHS neither agreed nor disagreed with the recommendations but said it  would continue to evaluate prior authorization programs and take our  findings and recommendations into consideration in developing plans or  determining appropriate next steps. In addition, in response to our  recommendation to take steps to continue prior authorization, HHS noted  that the President\u2019s fiscal year 2019 budget for HHS included a legislative  proposal to extend its statutory authority to permanently require prior  authorization for specified Medicare fee-for-service items and services to  all Medicare fee-for-service items and services.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, the Administrator of the Centers for Medicare &  Medicaid Services, 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 A.  Nicole Clowers at (202) 512-7114 or clowersa@gao.gov or Kathleen M.  King at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Major contributors to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: List of Items That May Be Selected for Prior Authorization", "paragraphs": ["In December 2015, the Centers for Medicare & Medicaid Services (CMS)  established a permanent prior authorization program for certain durable  medical equipment, prosthetics, orthotics, and supplies (DMEPOS). To  select the items subject to prior authorization, CMS compiled a Master  List of items that 1) appear on the DMEPOS Fee Schedule list, 2) have  an average purchase fee of $1,000 or greater (adjusted annually for  inflation) or an average rental fee schedule of $100 or greater (adjusted  annually for inflation), and 3) meet one of these two criteria: the item was  identified in a GAO or Department of Health and Human Services Office  of Inspector General report that is national in scope and published in  2007 or later as having a high rate of fraud or unnecessary utilization, or  the item is listed in the 2011 or later published Comprehensive Error Rate  Testing program\u2019s annual report. The information presented in this  appendix was reprinted from information in a December 2015 final rule.  We did not edit it in any way, such as to spell out abbreviations. (See  table 3 for the Master List.)"], "subsections": []}, {"section_title": "Appendix II: Expenditure Data for Items and Services Subject to Prior Authorization", "paragraphs": ["Tables 4 through 7 present monthly expenditures for items and services  subject to prior authorization in initial demonstration states, expansion  demonstration states, and non-demonstration states from 6 months prior  to each demonstration\u2019s implementation through March 2017, the most  recent month for which reliable data is available."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Martin T. Gahart (Assistant  Director), Lori Achman (Assistant Director), Peter Mangano (Analyst-in- Charge), Sylvia Diaz Jones, and Mandy Pusey made key contributions to  this report. Also contributing were Sam Amrhein, Muriel Brown, Eric  Wedum, and Jennifer Whitworth."], "subsections": []}]}], "fastfact": ["In an effort to reduce improper payments and reduce expenses, the Medicare program has experimented with requiring prior authorization. This means beneficiaries need approval before they can receive certain services or items like powered wheelchairs.", "We found this approach, which started in 7 states in 2012, reduced spending on these items and services by as much as $1.9 billion. Providers and suppliers reported benefits from the approach, but also had concerns about uncertainties created over what is covered.", "Most prior authorization programs are slated to end. We recommended Medicare take steps to continue prior authorization.", "Prior Authorization Programs\u2019 Implementation and End Dates"]}
{"id": "GAO-18-180", "url": "https://www.gao.gov/products/GAO-18-180", "title": "Transportation Security Administration: Surface Transportation Inspector Activities Should Align More Closely With Identified Risks", "published_date": "2017-12-14T00:00:00", "released_date": "2017-12-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The global terrorist threat to surface transportation \u2013 freight and passenger rail, mass transit, highway, maritime and pipeline systems \u2013 has increased in recent years, as demonstrated by the 2017 London vehicle attacks and a 2016 thwarted attack on mass transit in the New York area. TSA is the primary federal agency responsible for securing surface transportation in the United States.", "GAO was asked to review TSA surface inspector activities. This report addresses (1) how TSA surface inspectors implement the agency's surface transportation security mission, and (2) the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities. GAO analyzed TSA data on surface inspector activities from fiscal year 2013 through March 24, 2017, reviewed TSA program and risk documents and guidance, and observed surface inspectors conducting multiple activities. GAO also interviewed TSA officials in 17 of 49 surface field offices and 15 industry stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["Transportation Security Administration (TSA) surface transportation security inspectors\u2014known as surface inspectors\u2014conduct a variety of activities to implement the agency's surface security mission, including:", "Regulatory Inspections: Surface inspectors enforce freight rail, passenger rail, and maritime security regulations. GAO found that, according to TSA data, surface inspectors reported spending approximately 20 percent of their time on these activities from fiscal years 2013 to 2017.", "Non-regulatory assessments and assistance: Surface inspectors conduct voluntary assessments and provide training to surface transportation entities, among other things. GAO found that, according to TSA data, inspectors reported spending approximately 80 percent of their time on these activities.", "In addition to mission-related activities, surface inspectors can assist with aviation-related activities. However, GAO found that TSA has incomplete information on the total time surface inspectors spend on these activities because of limitations in TSA's data system. Addressing these limitations would provide TSA with complete information when making decisions about inspector activities.", "GAO also found that TSA prioritized inspector activities in the surface transportation mode with the lowest risk because TSA did not incorporate risk assessment results when planning and monitoring activities. Specifically, in fiscal year 2016, the last full year for which data on inspectors' activities in the surface modes was available, surface inspectors reported spending more than twice as much time on the lowest risk surface transportation mode according to TSA risk assessments than on the highest risk surface transportation mode. Incorporating risk assessment results when prioritizing inspector activities would help TSA ensure that its surface security resources address the highest risks.", "In fiscal year 2017, TSA fully implemented a new risk mitigation program\u2014Risk Mitigation Activities for Surface Transportation (RMAST)\u2014intended to focus time and resources on high-risk surface transportation entities and locations. However, GAO found that TSA has not identified or prioritized these high-risk entities and locations, or defined the RMAST program's objectives and associated activities in a measurable and clear way. According to TSA officials, they have not done so because there are too many potential entities to list them all for prioritization and TSA has not identified an approach for determining the effectiveness of activities under the program. However, prioritizing high-risk entities, such as by type, characteristics, or location does not require a complete list of entities. By identifying and prioritizing high-risk entities and locations for RMAST, and clearly defining the program's activities and objectives, TSA would be better able to implement RMAST activities in a risk-based manner and measure their effectiveness.", "This is a public version of a sensitive report that GAO issued in October 2017. Information that TSA deemed sensitive has been omitted."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that TSA (1) address limitations in its data system to collect complete information, (2) ensure inspector activities more closely align with the results of risk assessments, (3) identify and prioritize entities and locations for its risk mitigation program, and (4) define measurable and clear objectives for the program. TSA concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Mass transit bombings and vehicle attacks in cities such as Brussels,  London and St. Petersburg, as well as planned attacks in the New York  area and other U.S. cities demonstrate terrorist persistence in targeting  surface transportation. The surface transportation network includes  passenger rail, mass transit, freight rail, highway, pipeline, and maritime  modes. Surface transportation systems generally rely on an open  infrastructure that is difficult to monitor and secure due to its multiple  access points, hubs serving multiple carriers, and in some cases, lack of  access barriers. Securing these systems is further complicated by the  number of private and public stakeholders involved in operating and  protecting the system and the need to balance security with the  expeditious flow of people and goods. According to the Mineta Institute  for Transportation, terrorist attacks against surface transportation are  becoming more frequent and the overall risk for a surface transportation  attack has increased over the past 40 years. According to the  Transportation Security Administration (TSA), an attack on a surface  transportation system in the United States could potentially lead to  significant casualties and economic damage and disruption worth billions  of dollars.", "TSA, within the U.S. Department of Homeland Security (DHS), is the  primary U.S. federal agency responsible for securing all four general  modes of land-based transportation \u2013 mass transit and passenger rail,  freight rail, highway and motor carrier, and pipeline \u2013 and supports  maritime security efforts by deploying 222 surface transportation security  inspectors, known as surface inspectors, in 49 locations throughout the  country. TSA\u2019s surface domain includes nearly 140,000 miles of railroad  track, over 2.5 million miles of pipeline, and 4 million miles of roads, that  facilitate 10 billion annual passenger trips on mass transit systems,  school bus transport for 24 million students riding school buses each day,  and nearly 800,000 daily shipments of hazardous material. TSA has an  annual surface security operating budget of around $111 million, which  represents approximately 3 percent of TSA\u2019s total budget, while the  remainder of the budget is dedicated primarily to aviation operations,  according to TSA. TSA\u2019s role in surface transportation security varies by  mode. For example, TSA plays a regulatory role in freight rail, passenger  rail, and maritime facility security. TSA also provides guidance and  encourages voluntary implementation of security best practices to surface  transportation entities, and relies on cooperation from system operators,  and local, state, and federal security partners.", "DHS and TSA officials have stated that they use risk-based security to  deliver the most effective security in the most efficient manner. We have  previously reviewed TSA surface transportation initiatives, and in March  2009 reported that TSA had not conducted a comprehensive risk  assessment for securing mass transit and passenger rail. We  recommended that TSA conduct a risk assessment that included all  elements of risk, and TSA took actions to implement the  recommendation, including developing the Transportation Sector Security  Risk Assessment (TSSRA) in 2010, which examines and assesses the  terrorism risk for all transportation modes for which TSA is responsible.", "You asked us to review the activities that TSA surface inspectors perform  in support of TSA\u2019s surface security mission. This report examines (1)  how TSA surface inspectors implement the agency\u2019s surface  transportation security mission and (2) the extent to which TSA has used  a risk-based approach to prioritize and implement surface inspector  activities.", "This report is a public version of a prior sensitive report that we issued in  October 2017. TSA deemed some of the information in the prior report  sensitive security information, which must be protected from public  disclosure. Therefore, this report omits sensitive information regarding  the specific risks facing particular surface transportation modes as  determined by TSA. However, the report addresses the same questions  as the sensitive report and the overall methodology used for both reports  is the same.", "To collectively address these objectives, we reviewed relevant statutes,  regulations, and strategic documents, such as provisions in the  Implementing Recommendations of the 9/11 Commission Act of 2007  (9/11 Commission Act), TSA surface security and related regulations, and  TSA\u2019s National Strategy for Transportation Security 2016, among others.  We also analyzed TSA data from the surface module of TSA\u2019s  Performance and Results Information System (PARIS) from fiscal years  2013 through March 24, 2017, the most recent data available, to identify  the time surface inspectors reported spending on regulatory and non- regulatory activities and in each transportation mode. We analyzed data  from fiscal years 2013 through March 2017 to compare multiple years of  data for purposes of identifying any trends or variances in the data over  time, as well as to capture data after program reorganizations.", "We assessed the reliability of data from the surface module of PARIS by,  for example, interviewing TSA officials responsible for entering, reviewing,  or using PARIS data and electronically testing the data, among other  steps. We determined that PARIS surface module data on inspector  activities were sufficiently reliable for our purposes \u2013 to describe how  surface inspectors reported spending their time using summary-level data  \u2013 with some limitations. Specifically, the aviation data we report from the  surface module represents the minimum aviation activities surface  inspectors conducted, and the inspection counts and compliance rates we  report for fiscal year 2013 represent partial year data. See appendix I for  more information on how we assessed the reliability of these data and the  limitations we identified.", "Additionally, we conducted interviews with TSA officials in 17 of 49  surface field offices, selected based on a variety of factors including their  unique surface transportation environments; all 6 TSA Regional Security  Inspectors (RSIs) and 15 industry stakeholders in the freight rail,  passenger rail/mass transit, highway, and maritime modes. For more  information on how we selected field offices and industry stakeholders for  our interviews, see appendix I. Our interviews with TSA officials and  industry stakeholders are not generalizable, but provided us with  important insights into the implementation of TSA surface transportation  security programs, the challenges surface inspectors may face, and the  transportation industry\u2019s interaction with TSA surface inspectors.", "To further address our first objective and describe how TSA surface  inspectors implemented the agency\u2019s surface transportation security  mission, we examined TSA strategic and program documents. We also  observed inspectors conducting program activities including a Baseline  Assessment for Security Enhancement (BASE) review, a regional  Intermodal \u2013 Security Training and Exercise Program (I-STEP) exercise,  and an Exercise Information System (EXIS) exercise. We used the results  of our analysis of PARIS data to describe the number of each type of  regulatory inspection surface inspectors conducted from fiscal years 2013  to 2017, regulatory compliance rates for those inspections, and how  surface inspectors reported spending their time on all activities in the  surface module of PARIS. To evaluate the effects of this limitation on  TSA\u2019s implementation of its surface activities, we compared the results of  our data analysis and our interviews with TSA officials to Standards for  Internal Control in the Federal Government.", "To further address our second objective, we analyzed TSA risk guidance  and examined TSA\u2019s cross-modal risk assessments in the TSSRA from  fiscal years 2013 to 2016. To evaluate the extent to which TSA  considered risk when it staffed TSA surface inspectors, we reviewed  TSA\u2019s fiscal year 2017 surface inspector staffing model\u2014the only model  TSA used during the period we examined\u2014and interviewed TSA officials  responsible for developing and executing staffing, and compared that  process to TSA risk guidance. To determine the extent to which TSA  prioritized surface inspector activities based on risk we compared surface  inspector work plan requirements and the work plan development  process, as described by TSA officials, to risk information, including  results from the TSSRA and TSA risk guidance. See appendix I for more  information on the risk information we used to assess the surface  inspector work plans. To determine the extent to which TSA\u2019s  implementation of surface inspector activities aligned with risk, we  compared the results of our analysis of PARIS surface module data on  the time surface inspectors spent in each surface mode to the results of  the TSSRA cross-modal risk assessments from fiscal years 2013 to 2017.  We also identified the types of information TSA used in its fiscal year  2015 analysis of surface inspector time and activities to determine what  TSA considered when it monitored how surface inspector activities were  implemented. Furthermore, to evaluate the extent to which TSA\u2019s Risk  Mitigation Activities for Surface Transportation (RMAST) program was  risk-based and TSA had established measurable goals for the program,  we compared the results of our analysis of PARIS surface module data,  program descriptions, and interviews with TSA officials responsible for  planning and implementing the program to TSA\u2019s risk guidance and  Standards for Internal Control in the Federal Government.", "The performance audit upon which this report is based was conducted  from April 2016 to October 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with TSA from September 2017 to December 2017  to prepare this nonsensitive version of the original report for public  release. This public version was also prepared in accordance with these  standards. More details about the scope and methodology of our work are  contained in appendix I."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "TSA Roles and Responsibilities", "paragraphs": ["The Aviation and Transportation Security Act designated TSA as the  primary federal agency responsible for securing all modes of  transportation. In fiscal year 2005, Congress appropriated funds for  surface transportation security, and the accompanying conference report  directed that some of those funds go to rail compliance inspectors, the  predecessors to today\u2019s surface transportation security inspectors\u2014 referred to as surface inspectors.", "Public and private transportation entities have the principal responsibility  to carry out safety and security measures for their services. As such, TSA  coordinates with public and private transportation entities to identify  vulnerabilities, share intelligence information, and work to mitigate  security risks to the system. See table 1 for examples of the entities TSA  works with to secure the various surface transportation modes."], "subsections": []}, {"section_title": "TSA Surface Security Budget and Regulations", "paragraphs": ["In fiscal year 2005, $10 million of TSA\u2019s surface transportation security  appropriation was to hire and deploy up to 100 rail compliance inspectors.  TSA assigned inspectors to oversee security and provide oversight and  assistance to railroads, and subsequently, other surface transportation  modes, including mass transit and passenger rail, freight rail, highway,  and pipeline sectors. TSA has since increased the number of surface  inspectors, and since 2013 has maintained more than 200 Full Time  Equivalent (FTE) positions. See table 2 for additional details on the  number of TSA surface inspector FTEs from fiscal years 2013 through  2017.", "In August 2007, the 9/11 Commission Act was signed into law and  required TSA to issue security regulations for freight and passenger rail,  among other requirements. TSA also issued regulations governing  surface transportation security on its own initiative. As of July 2017, TSA  has issued the following regulations related to surface transportation:", "Rail Inspections: Issued in November 2008, 49 C.F.R. part 1580  requires certain freight railroad carriers and passenger rail operations  (passenger railroad carriers and rail transit systems) to designate a  rail security coordinator, notify the Transportation Security Operations  Center regarding any significant security concerns, and, if applicable,  ensure a secure chain of custody of rail cars containing certain  hazardous materials, and be able to provide location and shipping  information for certain rail cars, among other things. The hazardous  materials subject to this regulation include certain explosives, toxic  inhalation hazardous materials (TIH), and radioactive materials. See  appendix II for additional details.", "Maritime Inspections: TSA also partners with the U.S. Coast Guard  (USCG) in securing maritime ports, facilities and vessels. TSA\u2019s  responsibilities include enrolling Transportation Worker Identification  Credential (TWIC) applicants, conducting background checks to  assess the individual\u2019s security threat, and issuing TWICs. In  addition, TSA is authorized to conduct inspections of persons using  TWIC to access the secured area of a regulated maritime facility."], "subsections": []}, {"section_title": "TSA Organizational Structure for Managing Its Surface Inspectors", "paragraphs": ["Surface inspectors work under the direct command authority of the  Federal Security Director (FSD) in the field. As of fiscal year 2017, TSA  used a staffing model to allocate surface inspector staff to 49 different  field offices, separated into seven geographic regions around the country.  According to TSA, all but one surface field office locations are at or near  major airports. Figure 1 depicts surface field office locations by region.", "Surface inspector policies and procedures, and operational oversight are  managed separately.", "Program Guidance: Within TSA\u2019s Office of Security Operations, the  Surface Compliance Branch plans surface transportation security  activities and programs, and develops an annual work plan that lays  out the minimum required activities to be completed for surface  inspectors in the field. The Office of Security Policy and Industry  Engagement (OSPIE) collects and analyzes data on certain surface  inspector activities such as the Baseline Assessment for Security  Enhancement (BASE) program, TIH attendance rates, and freight rail  compliance rates; coordinates with industry stakeholders, and;  develops strategic plans, among other things.", "Operational oversight: The Assistant Federal Security Director for  Inspections (ASFD-I) in each field office manages surface inspectors  on a day-to-day basis, oversees the scheduling of surface inspector  work plan activities, and reviews inspectors\u2019 documentation of  activities in PARIS, TSA\u2019s system of record. FSDs are ultimately  responsible for ensuring that surface inspectors complete their annual  work plan requirements.", "In 2010, TSA created the Regional Security Inspector (RSI) position in an  effort to improve oversight of surface inspectors in the field and  standardize inspections across field offices. One RSI is assigned to each  of the seven geographic regions and serves as a liaison between TSA  headquarters staff and surface inspectors in the field. Each RSI is also  assigned to be the lead liaison between TSA and the Class I railroads  within their assigned geographic region. See figure 2 for surface  inspectors\u2019 command structure as of 2017."], "subsections": []}, {"section_title": "TSA Risk-Based Security for Surface Transportation", "paragraphs": ["TSA documents state that it employs a risk-based approach for securing  transportation modes and identifies managing risk as one of its strategic  goals to help identify and plan security priorities and activities. According  to TSA officials, TSA uses the National Infrastructure Protection Plan  (NIPP) risk management framework and the DHS Risk Management  Fundamentals as its primary risk guidance. In June 2006, DHS issued  the NIPP which established a six-step risk management framework to  establish national priorities, goals and requirements. Most recently  updated in 2013, the NIPP defines risk as a function of three elements:  threat, vulnerability and consequence. Threat is an indication of the  likelihood that a specific type of attack will be initiated against a specific  target or class of targets. Vulnerability is the probability that a particular  attempted attack will succeed against a particular target or class of  targets. Consequence is the effect of a successful attack. TSA uses the  TSSRA, a bi-annual risk assessment that considers the three elements of  risk to measure the risk of various terrorist attack scenarios, evaluate  transportation modes, and identify surface security priorities."], "subsections": []}]}, {"section_title": "Surface Inspectors Conduct Regulatory Inspections and Voluntary Security Assessments but TSA Has Incomplete Information on Their Activities", "paragraphs": [], "subsections": [{"section_title": "Surface Inspectors Enforce Regulations through Inspections and Assist Surface Transportation Entities on a Voluntary Basis", "paragraphs": ["Surface inspectors conduct a variety of activities to implement TSA\u2019s  surface transportation security mission, including (1) regulatory  inspections for freight and passenger rail systems, (2) regulatory TWIC  inspections, and (3) non-regulatory security assessments and training  which surface transportation entities participate in on a voluntary basis.  Surface inspector activities are, in part, determined by an annual surface  work plan that lays out the minimum required number of surface inspector  activities to be completed by each field office. Specifically, the work plan  requirements are designed to take up about one-third of inspectors\u2019  available working hours, with the expectation that the other two-thirds of  inspectors\u2019 time will be used for related activities, such as documentation  and follow-up, or other tasks as determined by local AFSD-Is and FSDs in  the field.", "To develop the annual surface work plan, officials from Office of Security  Operation\u2019s Surface Compliance Branch and OSPIE meet with each of  the RSIs once a year to determine the requirements for each office.  According to TSA officials, they rely on the previous year\u2019s requirements  as well as data on surface inspectors\u2019 past activities as logged in PARIS  as a starting point to develop the requirements, and adjust the work plan  based on their professional judgment of the unique environment in each  field office\u2019s area of responsibility. TSA officials stated that they consider  variables such as the compliance rates for inspections, the amount of TIH  materials being shipped through an area, and any other relevant risk- related information when they develop the work plan."], "subsections": [{"section_title": "Regulatory Rail Inspections", "paragraphs": ["Surface inspectors conduct inspections to enforce several freight and  passenger rail security requirements. Table 3 provides descriptions of  these inspections and appendix II provides a complete listing of TSA\u2019s  regulatory activities.", "TSA also tracks the rate at which the inspected entities comply with the  regulations discussed in table 3. According to TSA data, on average,  overall compliance rates for inspections have remained relatively high,  and the compliance rates have generally improved over the years as  entities have become more familiar with the processes and expectations  of each type of inspection."], "subsections": []}, {"section_title": "Regulatory Maritime Inspections", "paragraphs": ["Surface inspectors work with the USCG to conduct inspections of TWIC  card holders attempting to access the secured area of maritime facilities  regulated by the Maritime Transportation Security Act of 2002 (MTSA).  TSA first issued the TWIC regulation in 2007 in cooperation with the  USCG, and according to TSA officials, began nationwide implementation  of TSA inspection of TWICs at maritime facilities in fiscal year 2017.  Surface inspectors scan cards using a TWIC card reader to verify that the  card presented is valid and belongs to the card holder. TSA may pursue  civil enforcement and can refer violators for criminal proceedings through  the USCG. TSA officials stated they set the total minimum required TWIC  inspections at 1,315 combined across all surface inspector field offices for  fiscal year 2017 as a starting point, and would modify the requirements in  subsequent years, as discussed below. According to TSA, it is too soon  to determine compliance rates for TWIC inspections."], "subsections": []}, {"section_title": "Non-regulatory Security Activities", "paragraphs": ["Surface inspectors perform a variety of non-regulatory surface-related  activities, such as various types of assessments, which require surface  entities\u2019 voluntary participation. Table 4 provides a list of key non- regulatory activities surface inspectors perform. For a full list of activities  surface inspectors perform see appendix II."], "subsections": []}]}, {"section_title": "TSA Has Taken Steps to Expand the BASE Review Program and Address Implementation Challenges", "paragraphs": ["Since 2006, TSA has made adjustments to the BASE program to expand  its use to more surface modes and address implementation challenges.  To conduct a BASE review, surface inspectors use a standardized  checklist to evaluate and score an entity\u2019s security policies and  procedures for areas such as employee security training, cybersecurity,  and facility access control, among other items. According to TSA officials,  the results of the BASE reviews are intended to help track the entity\u2019s  progress in implementing specific security measures over time and  improve overall security posture among surface transportation entities, as  well as inform transportation security grant funding. Surface inspectors  also use entities\u2019 BASE review scores to help inform Exercise Information  System (EXIS) training programs inspectors facilitate for transportation  entities.", "Initially, the BASE program was designed to assess large mass transit  entities in major metropolitan areas that transported 60,000 riders or more  daily. TSA officials stated in 2017 that TSA has completed initial and  follow up BASE reviews for the top 100 mass transit agencies in the  country which comprise approximately 80 percent of the ridership in the  United States. In 2012, TSA expanded the BASE reviews to the highway  mode to include trucking, motor coach, and school bus operators.", "Additionally, TSA has taken steps to address challenges related to the  implementation of the BASE reviews, including an initial lack of training  and guidance for surface inspectors in conducting and evaluating the  BASE reviews and difficulty applying the BASE template for smaller mass  transit entities and highway entities. For example, surface inspectors we  interviewed at six field offices indicated that they received limited to no  training to conduct the initial BASE reviews. Office of Security Operations  officials acknowledged that the BASE program initially lacked scoring  guidance to allow surface inspectors to make objective evaluations.  Additionally, two industry entities we spoke with stated that some BASE  questions, as initially developed, seemed inappropriate or irrelevant given  the scope of their operation, and that their scores reflected areas that  they were not able to modify based on their limited size and resources.  Further, in 2010, the DHS Office of Inspector General reported that TSA  needed to provide increased training and guidance for inspectors to  ensure that BASE assessments gather effective, objective data.", "In response, officials from TSA\u2019s Surface Compliance Branch stated that  they established a BASE Advisory Panel and held a series of training  workshops throughout the country on how to conduct BASE  assessments. Specifically, in fiscal year 2014, TSA established a panel  comprised of mass transit experts to adjust the BASE tool by modifying  topics and removing outdated questions in an effort to improve the quality  and applicability of the assessments for the industry stakeholders. TSA  has also modified the BASE template over time to include areas such as  cybersecurity and active shooter training, among others. TSA reported  that it held a series of 16 workshops in 2015 around the country where  headquarters officials met with inspectors to train them on how to conduct  BASE assessments and correctly apply scoring guidance to help ensure  inspectors applied the BASE criteria consistently. Moreover, in fiscal year  2016, TSA developed a targeted BASE that focuses only on an entity\u2019s  areas of concern as identified by surface inspectors in a previous BASE  review. Further, TSA is piloting a modified BASE template in fiscal year  2017 that eliminates questions that may not apply for smaller mass transit  and highway entities. According to Surface Compliance Branch and  OSPIE officials, these changes have led to more consistent and more  reliable results in the BASE scores. We believe that TSA efforts to  improve training and guidance as well as establishing the BASE Advisory  Panel will help address the agency\u2019s previous concerns related to the  implementation of the BASE review."], "subsections": []}, {"section_title": "TSA Has Incomplete Data on Surface Inspector Activities because It Cannot Account for All Aviation-related Activities", "paragraphs": ["According to TSA headquarters and field officials, in addition to surface  inspection activities, surface inspectors are tasked, to varying degrees,  with aviation activities. However, TSA officials told us that they are unable  to identify the total time surface inspectors spend on aviation activities  because of data limitations. For example, surface inspectors may perform  aviation activities on a regular basis as a \u201cduty agent,\u201d or on an as- needed basis as determined by their local manager\u2014their AFSD-I. TSA  guidance directs surface inspectors to report the time they spend on all  activities into TSA\u2019s PARIS database. TSA officials responsible for  managing PARIS told us that it has two independent modules \u2013 aviation  and surface \u2013 and that surface inspectors enter aviation-related activities  in both the aviation and surface modules. Specifically, TSA guidance  directs surface inspectors to document their time serving as \u201cduty agent\u201d  in the surface module of PARIS, but to document time spent on aviation  inspections, incidents, or investigations \u2013 including those that take place  during an inspector\u2019s time serving as the duty agent \u2013 into the aviation  module of PARIS. See table 5 for examples of the types of aviation  activities surface inspectors record in each separate PARIS module.", "TSA officials told us that it is not possible to identify the time surface  inspectors document in the aviation module of PARIS because there is no  efficient, reliable way to distinguish surface inspectors from aviation or  cargo inspectors in the data.", "Since TSA cannot reliably identify activities surface inspectors have  entered into the aviation module of PARIS, TSA is only aware of the  portion of time surface inspectors spent on aviation activities that was  logged in the surface module. As a result, TSA does not have complete  information on how surface inspector resources are being used or the  extent to which surface inspectors are being used to perform aviation  activities. According to some surface inspectors we spoke to, these  resources can be substantial. Surface inspectors we interviewed at 16 of  the 17 TSA field offices contacted stated that they perform aviation duties.  One inspector stated she had received calls to respond to 12 different  aviation incidents in one shift as duty inspector, and other inspectors  stated that each incident report could subsequently take between 2 and  12 hours to complete. Surface inspectors from another office located near  a major airport told us they have to work overtime to complete aviation  incident reports and still meet their required surface activities. Further, we  met with surface inspectors stationed at four different major airports who  each estimated spending 20 percent, 25 percent, 30 percent, and 50  percent of their total working hours on aviation tasks, respectively.", "Standards for Internal Control in the Federal Government states that  agencies should use complete information to make informed decisions  and evaluate the agency\u2019s performance in achieving key objectives. As  stated previously, one of TSA\u2019s key objectives is to employ a risk-based  approach to all operations to identify, manage, and mitigate risk.  Standards for Internal Control in the Federal Government also states that  agencies should clearly document all activities in a manner that allows the  documentation to be readily available for examination. Without having  access to complete information on all inspector activities, including  aviation activities, TSA cannot monitor how frequently surface inspectors  are being used to support aviation. In addition, by not using complete  information on how much time surface inspectors spend working in  support of aviation, TSA is limited in its ability to make informed future  decisions on annual resource needs for surface inspectors, which will be especially important as TSA takes steps to expand its inspection activities  with the promulgation of new surface security regulations. By addressing  the limitations in the aviation module of PARIS, TSA would be able to  more reliably access complete information on all inspector activities. Also,  it would have the information it needs to make fully informed decisions  about surface inspector resources and activities, and to evaluate surface  inspectors\u2019 performance in achieving key surface security objectives.", "Since there is no way to identify surface inspectors in the aviation module  of PARIS at the aggregate level, we were unable to conduct our own  analysis of all surface inspector activities. However, we were able to  analyze data on how surface inspectors reported spending their time in  the surface module of PARIS, including time spent on aviation activities  as documented in this particular module. Our analysis showed that from  fiscal years 2013 to 2017, surface inspectors reported spending  approximately 80 percent of their time on non-regulatory activities, while  spending approximately 20 percent on regulatory inspections. Figure 3  shows a breakdown of the time surface inspectors recorded spending in  the surface module of PARIS for fiscal year 2016, the most recent  complete year of data available. See appendix III for similar breakdowns  for each fiscal year from 2013 to 2017."], "subsections": []}]}, {"section_title": "TSA Used a Risk- Informed Process to Allocate Surface Inspector Staff, But Inspector Activities Did Not Align With Risk", "paragraphs": [], "subsections": [{"section_title": "TSA Used a Risk-Informed Model to Allocate Surface Inspectors to Field Offices", "paragraphs": ["In fiscal year 2017, TSA\u2019s Surface Compliance Branch implemented an  updated staffing model to redistribute 222 surface-funded positions  across its 49 surface field offices based on the factors described in table  6 below.", "TSA considered four of these factors \u2013 HTUA/Urban Area Security  Initiative (UASI), Mass Transit, TWIC, and TIH \u2013 to be related to risk. For  example, TSA derived its list of HTUAs based on risk assessments  conducted under the UASI program. We have previously reported that the  UASI methodology for determining risk scores and distributing grant funds  is reasonable, and that UASI grant allocations are strongly associated  with a city\u2019s current relative risk score. Additionally, according to TSA,  inspectors focus on entities within surface transportation modes or  shipments of certain hazardous materials the agency determines could  pose the greatest security vulnerability and which could potentially be  more likely to be targeted by terrorists.", "The DHS Risk Lexicon 2010 and the 2013 NIPP risk management  framework, which are TSA\u2019s primary risk guidance, define risk-informed  decision-making as the determination of a course of action predicated on  the assessment of risk, the expected impact of that course of action on  that risk, as well as other relevant factors. The DHS Risk Lexicon 2010  further states that risk-informed decision-making may also take into  account multiple sources of information not included specifically in the  assessment of risk. Because TSA considered multiple risk factors in  addition to other information, such as the number of regulated entities in  an area and the number of required activities, in its staffing model, we  determined that TSA used a risk-informed model to allocate surface  inspector staff to its 49 offices."], "subsections": []}, {"section_title": "Between Fiscal Years 2013 and 2017 Surface Inspector Activities Did Not Align With Identified Risks for Surface Transportation Modes", "paragraphs": ["TSA surface inspectors perform a wide range of regulatory and non- regulatory activities to fulfill the agency\u2019s objective of employing risk- based security, but we found that between fiscal years 2013 and 2017  surface inspector activities did not align with the risks TSA identified for  surface transportation. To inform its security strategy, TSA assesses risk  within and across the aviation, freight rail, passenger rail/mass transit,  highway, and pipeline modes approximately every 2 years using the  TSSRA. According to the TSSRA\u2019s cross-modal risk assessments  between fiscal years 2013 and 2017, one particular surface mode  consistently posed the highest risk, and another consistently posed the  lowest risk out of all surface transportation modes. For example, in fiscal  year 2016, TSA found that the lowest risk mode posed approximately 6  percent of domestic total risk while the highest risk mode posed 27  percent of domestic total risk. However, our analysis of data from the  surface module of PARIS showed that inspectors reported spending  between 35 and 45 percent of their time on the lowest risk mode between  fiscal year 2013 and fiscal year 2016 \u2013 the most time spent on any  surface mode. Of the time reported in the surface module of PARIS in  fiscal year 2016, surface inspectors reported spending 38 percent of their  time on the lowest risk transportation mode while they reported spending  approximately 16 percent of their time on the highest risk surface mode  according to the TSSRA. See figure 4 for a comparison between the  percent of time inspectors recorded spending on each mode and the  percent of risk identified in the TSSRA.", "We found that TSA did not use the results of risk assessments that  measure threat, vulnerability, and consequence, like the TSSRA, when it  developed surface inspector work plans, or when it monitored activities  inspectors conducted, including those in addition to the minimum work  plan requirements. While TSA officials told us that they considered the  results of the TSSRA, TSA officials could not provide evidence that they  incorporated the results of the TSSRA or other risk assessments when  developing the work plan and monitoring inspector activities, as required  by DHS risk management guidance. For example, TSA officials could not  provide documentation of how and why they selected certain work plan  activities to address lower risk modes, or how they monitored the extent  to which implemented activities aligned with or addressed risks."], "subsections": [{"section_title": "Monitoring Activity Implementation", "paragraphs": ["We found that TSA did not incorporate the results of the TSSRA or other  risk assessments when it monitored how surface inspector activities were  implemented beyond the minimum requirements laid out in the work plan.  Specifically, we found that between fiscal years 2013 and 2017,  inspectors spent about half their working hours fulfilling work plan  requirements. Surface Compliance Branch officials told us that they  reviewed PARIS data on all surface inspector activities, as reported in the  surface module of PARIS, annually to inform staffing decisions and  conducted detailed analysis of surface inspector time starting in fiscal  year 2015. However, this analysis did not evaluate the extent to which  surface inspector time beyond the work plan requirements corresponded  to surface transportation risks as identified by the TSSRA or other risk  assessments. Further, TSA officials told us that they did not think surface  inspector time should be compared to risks identified in cross-modal risk  assessments like the TSSRA because required regulatory inspections are  unpredictable and can take a significant amount of time. However, as  previously discussed, we found that, of the time reported in the surface  module of PARIS, inspectors reported spending approximately 20 percent  of their time on regulatory inspections, with the remaining 80 percent  spent on non-regulatory activities.", "More than half of the industry representatives we spoke to (9 of 15)  identified benefits from inspectors\u2019 activities in surface transportation  modes other than freight rail. For example, two of the three  representatives of MTSA-regulated companies we spoke to said that  TSA\u2019s TWIC inspections had significant benefits for the security of their  facilities, and stated that they wanted more TWIC inspections and civil  enforcement activities from inspectors because these activities  discourage misuse of TWICs at their facilities. Representatives from two  maritime companies, one highway company, and three public  transportation systems told us that they wanted TSA surface inspectors to  do more. Additionally, a representative for one national industry  organization stated that his organization was concerned that TSA is  mainly focused on freight rail when the principal threat resides in the  passenger and mass transit modes, and suggested that TSA deploy  inspection resources from the freight rail mode to support more non- regulatory initiatives in the passenger rail/mass transit mode.", "According to TSA, the agency employs a risk-based approach \u2013 which  the DHS Risk Lexicon defines as using the assessment of risk as the  primary decision driver \u2013 to all operations to identify, manage, and  mitigate risk in all TSA lines of business. One TSA risk strategy document  specifically emphasizes the importance of linking the TSSRA, among  other risk assessments, to the identification of risk-reduction activities as  part of a risk-based approach to security. Moreover, the NIPP risk  management framework and the DHS Risk Management Fundamentals  Doctrine, which TSA officials told us are TSA\u2019s primary risk management  guidance documents, also state that entities should systematically  prioritize and implement activities and resources to mitigate and manage  risks identified in risk assessments. These documents also state that  monitoring implemented decisions and comparing observed and expected  effects to influence subsequent risk management decisions are key steps  in the homeland security risk management process. The DHS Risk  Management Fundamentals Doctrine further states that agencies should  document the development and selection of alternative risk management  actions, including assumptions and risk strategies such as the decision to  not take action and accept risk, in order to provide decision-makers with a  clear picture of the benefits of each action. It also explains that the risk  management process allows organizations to clearly explain the rationale  behind resource decisions.", "TSA did not use the results of risk assessments \u2013 such as the TSSRA \u2013  or other risk information when it developed its surface inspector work plan  requirements. Instead, TSA prioritized the lowest-risk surface  transportation mode, reducing the amount of surface security resources  available to address identified risks in other, higher-risk surface  transportation modes. As a result, TSA\u2019s limited surface transportation  security resources were not used in a risk-based way. By incorporating  the results of its risk assessments when it plans and monitors surface  inspector activities, including those not required by the work plan, TSA  would be better able to ensure that its limited surface transportation  security resources are being used to effectively and efficiently address  the highest risks to surface transportation, especially as risks evolve.  Incorporating risk assessment results in planning and monitoring surface  inspector activities will also allow TSA to ensure that its surface  inspectors are making progress toward achieving TSA\u2019s objective of risk- based security. Additionally, by documenting its risk mitigation decisions  and strategies, TSA would be able to more clearly explain the rationale  for its resource decisions, including when TSA decides to accept risk or  prioritize lower-risk activities for any reason."], "subsections": []}]}, {"section_title": "TSA Cannot Ensure That New Risk Mitigation Efforts Address High-Risk Entities and Locations", "paragraphs": ["In fiscal year 2012, TSA began developing the Risk Mitigation Activities  for Surface Transportation (RMAST) program in support of TSA\u2019s risk- based security initiative. According to TSA\u2019s fiscal year 2017 work plan,  the RMAST program incorporates specific risk reduction measures and  focuses time and resources on high-risk locations through (1) public  observation, (2) site security observations, and (3) stakeholder  engagement activities. Though TSA field officials told us that inspectors  have been conducting these activities in some format in the past, TSA  began piloting this particular program in fiscal year 2014 and made  RMAST a work plan requirement for each office starting in fiscal year  2017.", "In addition to TSA demonstrating its commitment to the RMAST program  by adding it as a required work plan activity, we found that inspectors  reported spending an increasing amount of time conducting RMASTs  since fiscal year 2014, and that RMASTs now comprise a larger  percentage of inspector time (see table 7).", "Although surface inspectors reported spending an increasing amount of  time on RMAST activities, we found that TSA has not identified or  prioritized the high-risk entities and locations on which the RMAST  program is intended to focus time and resources. For example, the fiscal  year 2017 surface inspector work plan states that the required number of  RMASTs each office should conduct was developed based on the  presence of applicable stakeholders in each office\u2019s area, but we found  that TSA did not identify any such stakeholders in its work plan.  Specifically, while the work plan guidance directed surface inspectors to  conduct RMASTs with entities that fit \u201clisted\u201d criteria, this list consisted of  all surface modes of transportation for which TSA has authority and did  not include any criteria surface inspectors could use to identify the  highest-risk and most critical locations, such as by type, characteristics,  or location of high-risk entities. TSA officials told us that they have not  identified high-risk entities for RMAST because there are too many  potential entities and stated that there is no way to provide a full list of all  entities in each office\u2019s area. However, the intent of the RMAST program  is to focus time and resources on high-risk entities and locations, which  precludes the need to provide a complete list of all surface transportation  entities in each area. Further, TSA officials told us that TSA has not  provided any guidance to the field beyond the work plan on how to  identify appropriate entities for RMASTs, but that they rely on surface field  offices to identify the highest-risk entities in their own areas. Officials from  three field offices told us that inspectors try to conduct RMASTs based on  threat information or previous BASE scores, but inspectors in one of  those offices said that the intelligence information they receive from TSA  is insufficient to help them identify threats and conduct outreach for  RMASTs. As previously discussed, the NIPP risk management framework  and the DHS Risk Management Fundamentals Doctrine both state that  entities should identify and assess risks and prioritize resources to  mitigate those risks. If TSA identified and prioritized the types of high-risk  entities and locations it intends the RMAST program to reach, surface  inspectors would have information that would enable them to implement  these activities in a more risk-based manner."], "subsections": [{"section_title": "Defining Measurable and Clear Objectives", "paragraphs": ["While TSA has identified broad objectives for the RMAST program, it has  not defined these objectives \u2013 and associated program activities \u2013 in a  measurable and clear way. Specifically, in its description of RMAST in the  fiscal year 2017 work plan implementation guidance, TSA stated that the  RMAST program will be risk-based, intelligence-driven, and mitigate  current threats and vulnerabilities, but did not provide further information  that would allow TSA to measure progress toward achieving these  objectives. Similarly, in its budget justifications for fiscal years 2014,  2015, and 2016 TSA stated that RMAST is intended to improve security  and reduce the need for stakeholders to stretch limited resources to  harden security at their most critical and high-risk locations, but TSA did  not describe how it would measure whether security had improved, or if  stakeholders\u2019 resource needs were reduced. While our review of the fiscal  year 2017 work plan guidance showed that TSA identified general  categories of activities \u2013 public observation, site security observation, and  stakeholder engagement \u2013 TSA did not identify what specific activities  within each of these categories constitute an RMAST, or describe how  those activities would help TSA achieve its objectives for the RMAST  program. Some inspectors told us that the purpose of RMAST was  unclear, that they had not been given the tools to perform RMAST in an  effective and efficient way, or that the observation component of RMAST  was not a valuable activity. TSA has not defined the RMAST program\u2019s  objectives and associated activities in a measurable and clear way  because, according to TSA officials, TSA has not identified an approach  for determining the effectiveness of activities conducted under the  program.", "Standards for Internal Control in the Federal Government states that  management should establish proper controls \u2013 including the  establishment and review of clearly defined objectives and performance  measures \u2013 so that program objectives and processes are understood at  all levels and progress toward achieving objectives can be assessed. By  defining the program\u2019s objectives and associated activities in a  measurable and clear way, TSA would be better positioned to measure  progress toward achieving the program\u2019s goal of mitigating current threats  and vulnerabilities, and surface inspectors may better understand how to  effectively carry out the program."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["TSA has employed surface inspectors for a variety of regulatory and non- regulatory activities intended to mitigate risks to surface transportation  and enhance the security of the United States\u2019 surface transportation  systems and networks. Working with surface transportation entities, who  have the primary responsibility for securing their respective entities, TSA  surface inspectors enforce security regulations for the freight and  passenger rail modes, but spend the majority of their time conducting  non-regulatory activities such as security assessments, exercises, and  observations. While TSA uses information on some surface inspector  activities to monitor and make decisions on these activities, limitations in  the PARIS data system prevent TSA from readily accessing complete  information on how much time inspectors spend working in support of  aviation. Without addressing these limitations TSA is limited in its ability to  make informed future decisions on annual resource needs for surface  inspectors, which will be especially important as TSA take steps to  expand its inspection activities with the promulgation of new surface  security regulations. Given that TSA spends only about 3 percent of its  budget on surface activities, it is crucial that the agency have complete  information on how resources are being used in order to best allocate  these limited federal surface transportation security resources.", "According to TSA, the agency implements risk-based security \u2013 security  activities that are driven primarily by the assessment of risk \u2013 to deliver  the most effective security in the most efficient manner. While TSA has  implemented a risk-informed process to allocate surface inspectors to its  field offices, it has not taken steps to ensure that surface inspector  activities align more closely to the risks TSA has identified in its risk  assessments. As a result TSA could continue to prioritize its limited  resources to lower risk surface modes, leaving fewer resources available  for higher risk modes. By using the results of risk assessments like the  TSSRA when it plans and monitors surface inspector activities, TSA  would be better able to ensure that limited surface transportation security  resources are used to effectively and efficiently address the highest  surface transportation security risks. Additionally, by documenting its risk  mitigation decisions and strategies, TSA would be able to more clearly  explain the rationale for its resource decisions, including when TSA  decides to accept risk or prioritize lower-risk activities for any reason.", "Furthermore, by identifying and prioritizing highest risk entities and  locations for its new RMAST program, surface inspectors would have  information that would enable them to implement risk mitigation activities  in more of a risk-based way. In addition, by clearly defining the program\u2019s  goals and activities, TSA would be better able to measure whether  RMAST activities are achieving the program\u2019s goal of increasing surface  transportation security."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to TSA:  The Administrator of TSA should address limitations in TSA\u2019s data  system, such as by adding a data element that identifies individuals as  surface inspectors, to facilitate ready access to information on all surface  inspector activities. (Recommendation 1)", "The Administrator of TSA should ensure that surface inspector activities  align more closely with higher-risk modes by incorporating the results of  surface transportation risk assessments, such as the TSSRA, when it  plans and monitors surface inspector activities, and that TSA documents  its rationale for decisions to prioritize activities in lower-risk modes over  higher-risk ones, as applicable. (Recommendation 2)", "The Administrator of TSA should identify and prioritize high-risk entities  and locations for TSA\u2019s Risk Mitigation Activities for Surface  Transportation (RMASTs). (Recommendation 3)", "The Administrator of TSA should define clear and measurable objectives  for the RMAST program. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for their review and comment.  DHS provided written comments, which are noted below and reproduced  in full in appendix IV, and technical comments, which we incorporated as  appropriate.", "DHS concurred with all four recommendations in the report and described  actions underway or planned to address them. With regard to the first  recommendation that TSA address limitations in its data system to  facilitate ready access to information on all surface inspector activities,  DHS concurred and stated TSA\u2019s Compliance Division will maintain a  staffing tool that identifies the modal assignments of transportation  security inspectors that can be used to more effectively analyze all  surface inspector activities. If fully implemented, such that data on all  activities surface inspectors perform are readily accessible, this system  should address the intent of the recommendation.", "With regard to the second recommendation that TSA align surface  inspector activities more closely with higher-risk modes by incorporating  the results of surface transportation risk assessments, such as the  TSSRA, when it plans inspector activities, and document its rationale for  decisions to prioritize activities in lower-risk modes, TSA concurred and  stated relevant risk information would be more clearly incorporated into  the Surface Work Plan development process. Further, TSA plans to  explain decisions and rationale for deviating surface inspector planned  activities from mirroring the TSSRA in its program guidance  documentation. TSA estimates it will complete this process by January  31, 2018. If TSA is able to fully incorporate risk assessment results, such  as the TSSRA, into its decisions for assigning surface inspector tasks  across surface transportation modes, and document its rationale if  planned inspector activities do not align with risk assessment results,  TSA\u2019s planned actions would address the intent of the recommendation.", "With regard to the third recommendation to identify and prioritize high-risk  entities and locations for TSA\u2019s Risk Mitigation Activities for Surface  Transportation (RMAST), TSA concurred and stated the Surface  Compliance Branch will prioritize entities for RMAST activities within the  Surface Work Plan or other applicable program guidance documents  using results from the TSSRA and using high threat urban area  designations. TSA estimates this process will be completed by January  31, 2018 and if fully implemented, this process should address the intent  of the recommendation.", "With regard to the fourth recommendation that TSA define clear and  measurable objectives for the RMAST program, TSA concurred and  stated the Surface Compliance Branch has clarified in program guidance  documents how to apply and measure certain security outcomes resulting  from RMAST activities to security vulnerabilities identified from a previous  BASE assessment or other security assessment program. Documentation  corroborating these actions was not provided to GAO before the issuance  of this report. However, if TSA is able to clearly state the purpose and  objectives of RMAST activities, and track the extent to which these  objectives have been met, this additional program guidance should  address the intent of the recommendation.", "We are sending copies of this report to interested congressional  committees, the Secretary of Homeland Security, and the Administrator of  the Transportation Security Administration. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) how Transportation Security  Administration (TSA) surface inspectors implement the agency\u2019s surface  transportation security mission, and (2) the extent to which TSA has used  a risk-based approach to prioritize and implement surface inspector  activities.", "This report is a public version of a prior sensitive report that we issued in  October 2017. TSA deemed some of the information in the prior report  sensitive security information, which must be protected from public  disclosure. Therefore, this report omits sensitive information regarding  the specific risks facing particular surface transportation modes as  determined by TSA. However, the report addresses the same questions  as the sensitive report and the overall methodology used for both reports  is the same.", "To obtain background information and answer both questions we (1)  reviewed background documents, including TSA strategic documents and  previous GAO and Department of Homeland Security (DHS) Inspector  General reports, (2) analyzed TSA data on surface inspector activities,  and (3) conducted non-generalizable interviews of surface inspectors,  their supervisors, and industry stakeholders.", "To understand TSA\u2019s roles and responsibilities for surface security, as  well as its mission, we examined statutes and regulations, including the  Aviation and Transportation Security Act, the Implementing  Recommendations of the 9/11 Commission Act of 2007, and TSA surface  security and related regulations. We also reviewed DHS and TSA  strategic documents including TSA\u2019s National Strategy for Transportation  Security 2016, the DHS National Infrastructure Protection Plan (NIPP)  2013, and the fiscal years 2016 to 2018 strategic plans for TSA\u2019s Office of  Security Operations and the Office of Security Policy and Industry  Engagement. Additionally, we reviewed previous GAO and DHS Office  of Inspector General reports on TSA\u2019s surface security efforts and surface  inspector programs.", "To evaluate how surface inspectors implemented TSA\u2019s surface security  mission and the extent to which this implementation was based on risk,  we analyzed data from the surface module of the Performance and  Results Information System (PARIS) on the activities of surface  inspectors from fiscal year 2013 through March 24, 2017, the most recent  data available. Based on TSA documents, regulations, and interviews  with TSA data and program officials, we categorized surface inspector  activities according to regulatory and non-regulatory activities and by  mode, and calculated the total time surface inspectors reported spending  for each category. We analyzed data from fiscal years 2013 through  2017 to ensure that we could compare several years of data and analyze  data obtained after reorganizations of the surface inspector command  structure in fiscal year 2010 and offices in mid-fiscal year 2013. We did  not review data from the aviation module of PARIS because, as  discussed below, it was not feasible to identify the data surface inspectors  entered into this module, and, based on our interviews with TSA data  officials and our review of related documentation, we determined that all  other surface inspector activities were documented in the surface module  of PARIS.", "To determine the reliability of data from the surface module of PARIS we  (1) reviewed related documentation such as data dictionaries, schema,  PARIS reliability assessments from previous GAO audits, TSA analyses  of PARIS data, and data entry guidance, (2) interviewed TSA officials  responsible for entering, reviewing, or using PARIS data, including  headquarters officials, field office supervisors, and surface inspectors, (3)  electronically and manually tested the data for completeness and obvious  errors, such as duplicates and consistency with secondary sources, and  (4) conducted internal logic tests on certain time-related fields in the data.  Through these steps, we identified some inconsistencies in the data  including incomplete data on surface inspectors\u2019 aviation activities and  non-specific data elements for inspection activities in fiscal year 2013,  among others. However, we determined that for our purposes \u2013 to  describe how surface inspectors reported spending their time at the  summary-level \u2013 these inconsistencies did not affect the reliability of the  PARIS surface module data and these data were reliable with some  limitations.", "Specifically, based on interviews with TSA data officials and our review of  TSA data entry guidance, we determined that the data in the surface  module of PARIS did not represent the complete activities conducted by  surface inspectors because they enter some aviation activities separately  in the aviation module of PARIS. Further, we determined that it was not  feasible to distinguish aviation activities documented by surface  inspectors in the aviation module from aviation activities documented by  cargo or aviation inspectors in this module at the aggregate level.  However, based on our testing, review of related documentation, and interviews with TSA data officials, we determined that the data surface  inspectors entered into the surface module of PARIS, including data on  some aviation activities, were reliable for our purposes. As a result, we  reported data on surface inspectors\u2019 aviation activities as documented in  the surface module of PARIS, with the limitation that these data represent  the minimum aviation activities surface inspectors actually conducted.", "Additionally, through our analysis of PARIS data on regulatory inspections  surface inspectors conducted in fiscal year 2013 and interviews with TSA  data officials, we found that 25 percent of the total inspections in fiscal  year 2013 (1,990 of 8,083) were documented under data elements that  did not specify the type of inspection conducted. According to TSA  officials, there are no additional data elements that would allow us to  identify the specific type of inspection surface inspectors conducted for  these 1,990 inspections. As a result, we determined that this portion of  the fiscal year 2013 data was not reliable for our purposes of identifying  the number of specific inspection types surface inspectors conducted.  However, we found that the remaining 78 percent of inspection data for  fiscal year 2013 was reliable for our purposes. As a result, the inspection  counts and compliance rates we reported for fiscal year 2013 represent  partial year data.", "To obtain the perspectives of a wide sample of TSA officials on both  surface inspector activities and TSA\u2019s use of risk, we conducted semi- structured interviews with surface inspectors and/or their supervisors in  17 of 49 field offices. We also interviewed the 6 Regional Security  Inspectors (RSIs), who cover all seven TSA regions. We interviewed  inspectors and supervisors from at least 2 offices in each region and  selected the offices based on a variety of factors including geographic  dispersion, staff level, surface transportation environment, and whether  the office was co-located with a major airport. We physically visited 6  offices and conducted the remainder of our interviews remotely. We  selected the offices we traveled to based on the location of GAO staff, the  availability of industry representatives in the area, and the opportunity to  observe surface inspector assessments, tabletop exercises, and other  activities. The results of our interviews are not generalizable, but provide  insight into how surface inspectors and their supervisors implement TSA  surface programs and the challenges they may face, if any.", "To gain insight into the experience surface transportation industry  stakeholders have had with TSA surface inspectors, we interviewed 15  industry stakeholders in four surface modes including 3 freight rail  stakeholders, 3 maritime stakeholders, 3 highway stakeholders, and 6  passenger rail/mass transit stakeholders. We selected industry  stakeholders based on their involvement and familiarity with TSA surface  inspectors, the surface mode in which they operate, their ridership, and  TSA recommendation. Three of these stakeholders consisted of national  trade associations representing the highway, freight rail, and mass transit  modes of transportation. As with our interviews with TSA surface  inspectors and supervisors, our interviews with industry stakeholders are  not generalizable but provided us with valuable information on the  transportation industry\u2019s interaction with TSA surface inspectors.", "To further address our first objective and describe how TSA surface  inspectors implemented the agency\u2019s surface transportation security  mission, we examined TSA strategic and program documents including  surface inspector work plans and implementation guidance from fiscal  years 2013 to 2017, the TSA Inspector Compliance Manual, and TSA  surface security regulations, and reviewed public testimony by TSA  leadership. To understand how TSA has implemented the Baseline  Assessment for Security Enhancement (BASE) program in particular, we  reviewed TSA program documents and guidance for the BASE program,  including the BASE workbook, and observed a BASE review on a mass  transit entity. We also observed a regional Intermodal \u2013 Security Training  Exercise Program (I-STEP) exercise and an Exercise Information System  (EXIS) exercise, and interviewed TSA officials in headquarters, and  inspectors and supervisors in the field.", "We used the results of our analysis of PARIS surface module data,  specifically the number of each type of regulatory inspection TSA  inspectors conducted from fiscal years 2013 to 2017, and PARIS data on  the violations found during those inspections, to calculate regulatory  compliance rates. We also used the results of our analysis of PARIS  surface module data to describe how surface inspectors reported  spending their time. As previously stated, we found the PARIS surface  module data to be reliable for this purpose, with the limitation that TSA  data on the time surface inspectors reported spending on aviation  activities was incomplete because we could not identify surface inspector  activities entered into the aviation module of PARIS. To evaluate the  effects of this limitation, we compared the results of our data analysis, our  reviews of PARIS documentation, and our interviews with TSA officials to  Standards for Internal Control in the Federal Government.", "To further address our second objective, the extent to which TSA has  used a risk-based approach to prioritize and implement surface inspector  activities, we analyzed TSA\u2019s risk guidance as contained in the NIPP risk  management guidance, the DHS 2010 Risk Lexicon, and the DHS Risk  Management Fundamentals to understand how TSA should assess and  use risk information. To understand the risks TSA has identified for  surface transportation modes during the time period we examined, we  analyzed TSA\u2019s cross-modal risk assessments in three Transportation  Security Sector Risk Assessments (TSSRA) published between May  2013 and July 2016.", "We reviewed TSA\u2019s fiscal year 2017 surface inspector staffing model and  supporting documents and data and interviewed TSA officials responsible  for developing and executing staffing. We compared that process to TSA  risk guidance to evaluate the extent to which TSA considered risk when it  staffed TSA surface inspectors for fiscal year 2017. We assessed only the  fiscal year 2017 staffing model because TSA\u2019s previous staffing model  was last used in fiscal year 2011, which is outside our scope.", "To determine the extent to which TSA prioritized surface inspector  activities based on risk when it planned these activities, we identified,  compiled and analyzed activity requirements from surface inspector work  plans and associated implementation guidance from fiscal years 2013 to  fiscal year 2017. We (1) compared them to each other to identify changes  in planned surface inspector activities over time and (2) compared them  to results from the TSSRA, as well as other risk information including  unattended rates for Toxic Inhalation Hazard (TIH) rail cars and the  presence of Maritime Transportation Security Act of 2002-regulated  facilities in each office\u2019s area. We also interviewed TSA officials in  headquarters and the field who were responsible for developing the  surface inspector work plan about the process and information they  considered during work plan development, and compared this information  to TSA risk guidance.", "To determine the extent to which TSA\u2019s implementation of surface  inspector activities aligned with risk, we compared the results of our  analysis of PARIS surface module data on the time surface inspectors  spent in each surface mode to the results of the TSSRA cross-modal risk  assessments from fiscal years 2013 to 2017. As previously discussed,  we determined the data to be reliable for our purposes. We also  compared the results of our analysis of PARIS surface module data to our  analysis of work plan requirements to identify the amount of time surface  inspectors reported spending on work plan activities. In addition, we  identified the types of information TSA used in its fiscal year 2015  analysis of surface inspector time and activities to determine what TSA  considered when it monitored how surface inspector activities were  implemented.", "Additionally, we used the results of our analysis of PARIS surface module  data to determine the percent of total time surface inspectors reported  spending on Risk Mitigation Activities for Surface Transportation  (RMAST) between fiscal years 2013 and 2017. To understand TSA\u2019s  objectives for the RMAST program, we analyzed program descriptions in  TSA congressional budget justifications and TSA\u2019s fiscal year 2017 work  plan and work plan implementation guidance. We also conducted  interviews with TSA officials in headquarters, and inspectors and  supervisors in the field, and observed an RMAST activity to understand  how TSA has implemented the program. We compared the results of our  analysis and interviews to TSA\u2019s risk guidance and Standards for Internal  Control in the Federal Government to evaluate the extent to which the  program was risk-based and to which TSA had established measurable  goals for the program.", "The performance audit upon which this report is based was conducted  from April 2016 to October 2017 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  subsequently worked with TSA from September 2017 to December 2017  to prepare this nonsensitive version of the original report for public  release. This public version was also prepared in accordance with these  standards."], "subsections": []}, {"section_title": "Appendix II: Surface Inspector Activities", "paragraphs": ["Appendix II: Surface Inspector Activities 2005  High-visibility activities, such as patrols, passenger and baggage screening, and  canine activities to introduce unpredictability, increase security, and deter potential  terrorist actions on multiple modes of transportation. Managed by the U.S. Federal  Air Marshal Service and conducted by TSA personnel, which may include surface  inspectors.  2006  A voluntary review in which surface inspectors evaluate the security programs of  transportation entities, offer technical assistance, and share best practices. TSA  uses BASE to, among other things, determine priorities for allocating mass transit  and passenger rail security grants, such as those provided through the  Transportation Security Grant Program.  2006  Local field assessments of critical infrastructure, station and other facilities for mass  transit, passenger rail, and commuter rail and bus systems. Station profiles provide  detailed information of specific station-related intelligence, such as the locations of  exits, telephones, CCTV, electrical power, station mangers etc.   2007  Inspectors verify that Toxic Inhalation Hazard (TIH) rail cars at rail yards within high- threat urban areas that transport TIH on a regular and reoccurring basis are being  attended by railroad personnel. Inspectors also conduct \u201cwildcard\u201d RRS, during  which they observe locations which do not normally handle TIH on a regular and  recurring basis to determine if TIH cars are present, and if they are being attended  by railroad personnel.   2008  Detailed assessments that focus on the vulnerabilities of high-population areas  where TIH materials are moved by rail in significant quantities, and that provide site- specific mitigation strategies and lessons learned.  2008  I-STEP, which is managed through the Office of Security Policy and Industry  Engagement, consists of contractor-facilitated exercises designed to help multimodal  surface transportation entities closely examine their security programs and  operational efforts. TSA facilitates I-STEP exercises across all surface transportation  modes to help operators, law enforcement, first responders, and related entities test  and evaluate their security plans, including prevention and preparedness  capabilities, ability to respond to threats, and interagency coordination. TSA updates  I-STEP scenarios as new threats emerge, helping industry partners prepare to  implement the most appropriate countermeasures.  2014  Quality assurance assessments of Transportation Worker Identification Credential  (TWIC) enrollment centers to, according to TSA officials, review contractor  performance.  2015  EXIS consists of exercises facilitated by surface inspectors that utilize software  developed by TSA for stakeholder use, generally focus on one entity, and are  intended to build on the findings of a previously completed BASE assessment."], "subsections": [{"section_title": "Start Date (fiscal year)", "paragraphs": ["2017  A program intended to focus time and resources on high-risk and critical assets,  facilities and other infrastructure through the following activities: (1) public  observation to identify suspicious activities, security vulnerabilities and/or suspicious  behaviors that could be indicative of pre-operational planning related to terrorism; (2)  site security observation to determine if the physical security measures and  operational deterrence components are in place to effectively mitigate risk, and (3)  stakeholder engagement including TSA\u2019s public security awareness programs and  improvised explosive device (IED) and intelligence briefings.", "In this table, passenger rail and rail transit systems consist of: each passenger railroad carrier,  including each carrier operating light rail or heavy rail transit service on track that is part of the  general railroad system of transportation, each carrier operating or providing intercity passenger train  service or commuter or other short-haul railroad passenger service in a metropolitan or suburban  area (as described by 49 U.S.C. \u00a7 20102), and each public authority operating passenger train  service; (b) each passenger railroad carrier hosting an operation described in paragraph (a) of this  section; (c) each tourist, scenic, historic, and excursion rail operator, whether operating on or off the  general railroad system of transportation; (d) each operator of private cars, including business/office  cars and circus trains, on or connected to the general railroad system of transportation, and (e) each  operator of a rail transit system that is not operating on track that is part of the general railroad  system of transportation, including heavy rail transit, light rail transit, automated guideway, cable car,  inclined plane, funicular, and monorail systems. 49 C.F.R. \u00a7 1580.200."], "subsections": []}]}, {"section_title": "Appendix III: Surface Inspector Time Spent on Activities Reported in the Surface Module of PARIS for Fiscal Years 2013 to 2017", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the U.S Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Jennifer Grover (202) 512-7141 or groverj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Christopher E. Ferencik,  Assistant Director; Brendan Kretzschmar, Analyst in Charge; Nanette  Barton, and Katherine Blair made key contributions to this report. Also  contributing to the report were, Charles Bausell, Katherine Davis, Eric  Erdman, Anthony Fernandez, Eric D. Hauswirth, Paul Hobart, Tracey  King, Christopher Lee, Mara McMillen, Amanda Miller, Claudia  Rodriguez, Christine San, McKenna Storey, Natalie Swabb, Michelle  Vaughn, Adam Vogt, Johanna Wong."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-348", "url": "https://www.gao.gov/products/GAO-18-348", "title": "Military Personnel: DOD Should Improve Its Oversight of the Exceptional Family Member Program", "published_date": "2018-05-08T00:00:00", "released_date": "2018-05-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Military families with special medical and educational needs face unique challenges because of their frequent moves. To help assist these families, DOD provides services plans, which document the support a family member requires. The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to review the Services' EFMPs, including DOD's oversight of these programs.", "This report examines the extent to which (1) each Service provides family support and (2) the Services monitor and DOD evaluates assignment coordination and family support.", "GAO analyzed DOD and Service-specific EFMP guidance and documents; analyzed fiscal year 2016 EFMP data (the most recent available); visited seven military installations, selected for their large numbers of military-connected students; and interviewed officials responsible for implementing each Service's EFMP, as well as officials in OSN that administer DOD's EFM policy."]}, {"section_title": "What GAO Found", "paragraphs": ["The support provided to families with special needs through the Department of Defense's (DOD) Exceptional Family Member Program (EFMP) varies widely for each branch of Military Service. Federal law requires DOD's Office of Special Needs (OSN) to develop a uniform policy that includes requirements for (1) developing and updating a services plan for each family with special needs and (2) resources, such as staffing, to ensure an appropriate number of family support providers. OSN has developed such a policy, but DOD relies on each Service to determine its compliance with the policy. However, Army and Navy officials said they have not received feedback from OSN about the extent to which their Service-specific guidance complies. Federal internal control standards call for developing clear policies to achieve agency goals. In addition, DOD's most recent annual reports to Congress do not indicate the extent to which each Service provides services plans or allocates sufficient resources for family support providers. According to GAO's analysis, the Military Services have developed relatively few services plans, and there is wide variation in the number of family support providers employed, which raises questions about potential gaps in services for families with special needs (see table).", "Each Service uses various mechanisms to monitor how servicemembers are assigned to installations (assignment coordination) and obtain family support, but DOD has not established common performance measures to assess these activities. DOD has taken steps to better support families with special needs, according to the DOD officials GAO interviewed. For example, DOD established a working group to identify gaps in services. However, OSN officials said that DOD lacks common performance measures for assignment coordination and family support because the Services have not reached consensus on what those measures should be. In addition, OSN does not have a process to systematically evaluate the results of the Services' monitoring activities. Federal internal control standards call for assessing performance over time and evaluating the results of monitoring activities. Without establishing common performance measures and assessing monitoring activities, DOD will be unable to fully determine the effect of its efforts to better support families with special needs and the adequacy of the Services' EFMPs as required by federal law."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes a total of three recommendations to DOD. DOD should assess and report to Congress on the extent to which each Service provides sufficient family support personnel and services plans, develop common performance metrics for assignment coordination and family support, and evaluate the results of the Services' monitoring activities. DOD agreed with these recommendations and plans to develop performance metrics for assignment coordination and develop plans to evaluate the Services' monitoring activities."]}], "report": [{"section_title": "Letter", "paragraphs": ["Military families with special medical or educational needs face a unique  set of challenges due to their frequent moves within the United States and  to overseas installations. With each move, a family with special needs  often must find new specialized medical care providers or a new school  that can provide appropriate special education services. Recent executive  branch, congressional, and advocacy group initiatives have focused on  increasing support for these families, which the White House deemed a  top national security policy priority in 2011. As of February 2018, the  Services\u2019 Exceptional Family Member Programs (EFMP) collectively  serve more than 132,500 enrolled military family members with special  needs.", "The National Defense Authorization Act (NDAA) for Fiscal Year 2017  included a provision for GAO to assess the effectiveness of the Services\u2019  EFMPs, including the Department of Defense\u2019s (DOD) role in providing  guidance for these programs. These programs include, among other  things, family support services, such as referrals to military or community  resources for families with special needs; and a process for considering  the medical or educational needs of these families before they are  relocated (known as assignment coordination.) This report examines (1)  the extent to which each Service has provided family support as required  by DOD and (2) the extent to which the Services monitor and DOD  evaluates assignment coordination and family support.", "To address the first objective, we obtained and reviewed documentation  to assess how the Air Force, Army, Marine Corps, and Navy provide  family support services in the continental United States (CONUS). In  addition, we visited seven installations in five states to learn more about  how service-specific guidance for the EFMP is implemented. We  selected these installations because they serve a large segment of the  total population of families with special needs enrolled in the Services\u2019  EFMPs, including high concentrations of military-connected children  attending local schools and children attending U.S. DOD schools. At each  installation we visited, we conducted group interviews with a self-selected  group of military family members and caregivers enrolled in the EFMP  that have used family support services (see app. III for more information  about these interviews, which provide illustrative examples of issues  raised by families with special needs regarding the EFMP). We also  obtained program data from the Air Force, Army, Marine Corps, and Navy  and interviewed representatives from each Service about the data to  determine that the selected data variables from each service are  sufficiently reliable for the purposes of providing summary results about  family support for fiscal year 2016. Finally, we spoke with  representatives from advocacy groups at the national level selected for  their expertise on military families with special needs and the EFMP.", "To address the second objective, we reviewed each service\u2019s procedures  for monitoring assignment coordination and family support, as well as  DOD\u2019s efforts to monitor these EFMP components across the Services.  Specifically, we reviewed policies and procedures included in Service- specific guidance related to monitoring, including DOD-required  certifications for family support services and related quality assurance  activities for assignment coordination, such as site-visits from each  Service\u2019s headquarters. In addition, we discussed required monitoring  activities with personnel from each Service\u2019s headquarters and EFMP  managers at each installation we visited. Finally, we assessed these  monitoring activities against DOD\u2019s monitoring requirements; standards  for internal control in the federal government; and GAO\u2019s body of work on  leading practices in performance measurement, which help federal  agencies determine if their goals are being achieved.", "For both objectives, we interviewed agency officials and reviewed  relevant federal laws and regulations. A more detailed discussion of our  scope and methodology can be found in appendix I.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The EFMP provides support to families with special needs at their current  and proposed locations. Servicemembers relocate frequently, generally  moving every 3 years if in the Army, Marine Corps, and Navy, and every  4 years if in the Air Force. In fiscal year 2016, the Military Services  relocated approximately 39,000 servicemembers enrolled in the EFMP to  CONUS installations.", "To implement DOD\u2019s policy on support for families with special needs,  DOD requires each Service to establish its own EFMP for active duty  servicemembers. EFMPs are to have three components\u2014identification  and enrollment, assignment coordination, and family support.", "Identification and enrollment: Medical and educational personnel at  each installation are responsible for identifying eligible family  members with special medical or educational needs to enroll in the  EFMP. Once identified by a qualified medical provider, active duty  servicemembers are required to enroll in their service\u2019s EFMP.  Servicemembers are also required to self-identify when they learn a  family member has a qualifying condition.", "Assignment coordination: Before finalizing a servicemember\u2019s  assignment to a new location, DOD requires each Military Service to  consider any family member\u2019s special needs during this process,  including the availability of required medical and special educational  services at a new location.", "Family support: DOD requires each Military Service\u2019s EFMP to  include a family support component through which it helps families  with special needs identify and gain access to programs and services  at their current, as well as proposed, locations. Servicemembers  assigned to a joint base would receive family support from the Service  that is responsible for leading that installation. For example, an  Airman assigned to a joint base where the Army is the lead would  receive family support from the Army installation\u2019s EFMP.", "As required by the NDAA for Fiscal Year 2010, DOD established the  Office of Community Support for Military Families with Special Needs  (Office of Special Needs or OSN) to develop, implement, and oversee a  policy to support these families. Among other things, this policy must (1)  address assignment coordination and family support services for families  with special needs; (2) incorporate requirements for resources and  staffing to ensure appropriate numbers of case managers are available to  develop and maintain services plans that support these families; and (3)  include requirements regarding the development and continuous updating  of a services plan for each military family with special needs. OSN is  also responsible for collaborating with the Services to standardize EFMP  components as appropriate and for monitoring the Services\u2019 EFMPs.  OSN has been delegated the responsibility of implementing DOD\u2019s policy  for families with special needs by the Undersecretary of Defense for  Personnel and Readiness through the Assistant Secretary for Manpower  and Reserve Affairs according to DOD officials. Currently, OSN is  administered under the direction of the Deputy Assistant Secretary of  Defense for Military Community and Family Policy through the Office of  Military Family Readiness Policy. In addition, each Military Service has  designated a program manager for its EFMP who is also responsible for  working with OSN to implement its EFMP (see fig. 1).", "DOD\u2019s guidance for the EFMP (1) identifies procedures for assignment  coordination and family support services; (2) designates the Assistant  Secretary of Defense for Manpower and Reserve Affairs as being  responsible for monitoring overall EFMP effectiveness; (3) assigns the  OSN oversight responsibility for the EFMP, including data review and  monitoring; and (4) directs each Service to develop guidance for  overseeing compliance with DOD requirements for their EFMP. Table 1  provides an overview of the procedures each Service must establish for  the assignment coordination and family support components of the  EFMP.", "As a part of its guidance for monitoring military family readiness  programs, DOD also requires each Military Service to certify or accredit  its family readiness services, including family support services provided  through the EFMP. In addition, DOD states that each Service must  balance the need for overarching consistency across EFMPs with the  need for each Service to provide family support that is consistent with  their specific mission. To accomplish this, each Service is required to  jointly work with DOD to develop a performance strategy, which is a plan  that assesses the elements of cost, quality, effectiveness, utilization,  accessibility, and customer satisfaction for family readiness services. In  addition, each Military Service is required to evaluate their family  readiness services using performance goals that are linked to valid and  reliable measures such as customer satisfaction and cost. DOD also  requires each Service to use the results of these evaluations to inform  their assessments of the effectiveness of their family readiness services  for families with special needs."], "subsections": []}, {"section_title": "Key Aspects of Support for Families with Special Needs Vary Widely Across the Services, Leading to Potential Gaps in Assistance for Families with Special Needs", "paragraphs": ["According to DOD officials, each Military Service provides family support  services in accordance with DOD guidance as well as Service-specific  guidance. However, we found wide variation in each Service\u2019s  requirements for family support personnel as well as the practices and  expectations of EFMP staff. As a result the type, amount, and frequency  of assistance enrolled families receive varies from Service to Service and  when a servicemember from one Service is assigned to a joint base led  by another Service (see table 2).", "For example, in terms of a minimum level of contact for families with  special needs enrolled in the EFMP, the Services vary in the frequency  with which they require family support providers to contact families with  special needs:", "The Marine Corps specifies a frequency (quarterly) with which families  with special needs should be contacted by their family support  providers.", "The Air Force has each installation obtain a roster of families with  special needs enrolled in the EFMP on a monthly basis, but it does  not require family support providers to, for example, use this  information to regularly contact these families.", "The Navy assigns one of three service levels to each family member  enrolled in the EFMP. These service levels are based on the needs of  each family with special needs; family support providers are  responsible for assigning a \u201cservice level\u201d that directs the frequency  with which the family must be contacted.", "The Army has no requirements for how often families with special  needs should be contacted.", "The Services also vary as to whether they offer legal assistance to  families with special needs as follows:", "The Marine Corps employs two attorneys who can represent families  with special needs who fail to receive special education services from  local school districts, as specified in their children\u2019s individualized  education programs (IEP). They can also advise EFMP-enrolled  families on their rights and options if a family believes their child  needs special education services from a local school district (e.g., an  IEP).", "The Air Force, Army, and Navy choose not to employ special  education attorneys. Officials with whom we spoke said families with  special needs in these Services can receive other types of assistance  that may help them resolve special education legal issues. For  example, Air Force officials said servicemembers and their families  can receive support from attorneys that provide general legal  assistance on an installation, Army officials said installation EFMP  managers can refer families with special needs to other organizations  that provide legal support, and Navy officials said families can find  support through working with their installation\u2019s School Liaison  Officers."], "subsections": [{"section_title": "Services Plans", "paragraphs": ["The NDAA for Fiscal Year 2010 requires DOD\u2019s policy to include  requirements regarding the development and continuous updating of a  services plan (SP) for each family with special needs, and DOD has  specifically required these plans as part of the provision of family support  services. These plans describe the necessary services and support for  a family with special needs and document and track progress toward  meeting related goals. According to DOD guidance, these plans should  also document the support provided to the family, including case notes.  In addition, the DOD reference guide for family support providers  emphasizes that timely, up-to-date documentation is especially important  each time a family relocates, as military families regularly do. Therefore,  SPs are an important part of providing family support during the relocation  process, and provide a record for the gaining installation. Requiring timely  and up-to-date documentation is consistent with federal internal control  standards, which state that agencies should periodically review policies,  procedures, and related control activities for continued relevance and  effectiveness in achieving their objectives. SPs follow families with  special needs each time they relocate and without timely and up-to-date  documentation, DOD cannot ensure that all families continue to receive  required medical and/or special educational services once they relocate  to another installation.", "For every Service the number of SPs was relatively few when compared  to the number of servicemembers (known as sponsors) or the number of  family members enrolled in the EFMP (see table 3).", "The Services and OSN provided a range of reasons as to why the  Services do not develop and maintain a SP for each family with special  needs. For example, Air Force officials said their family support providers  consider the needs of each family with special needs before determining  whether a SP will help them receive the required services. In addition,  Army and Marine Corps officials said they may not develop these plans if  families do not request them. Further, according to a Navy official, some  families lack the required SPs because installations may not have the  staff needed to develop them\u2014even though DOD requires the Services to  maintain sufficient staff and certify their EFMPs. OSN officials with whom  we spoke also said that the Services may not have developed many SPs  during fiscal year 2016 because DOD had not yet approved a  standardized form that could be used to meet this requirement. Finally,  OSN officials also said that each family with special needs enrolled in the  EFMP may not need a SP because their condition does not require this  type of family support."], "subsections": []}, {"section_title": "Resources", "paragraphs": ["To meet requirements of the NDAA for Fiscal Year 2010, in April 2017,  DOD issued to the Services guidance that directed them to \u201crogram,  budget, and allocate sufficient funds and other resources, including  staffing,\u201d to meet DOD\u2019s policy objectives for the EFMP. According to  OSN officials, DOD relies on each Service to determine what level of  funds and resources is sufficient and what constitutes an appropriate  number of family support personnel. To determine family support  providers and related personnel staffing levels, the Service officials with  whom we spoke said they consider a number of factors, including the  number of families with special needs enrolled in the EFMP at any given  installation (see app. II for more information about the EFMP data by  installation). See Table 4 for a summary of EFMP family support  providers and other key personnel at CONUS installations.", "As required by DOD, all of the Services employ family support providers  to assist families with special needs. In addition, some Services employ  additional personnel to support implementation of the EFMP (see  sidebar). For example, the Air Force employs family support  coordinators to administer its EFMP and no other personnel are  dedicated to assisting these coordinators or enrolled families. The Army  employs \u201csystem navigators\u201d who provide individualized support to  families with special needs at selected installations through its EFMP, as  well as other personnel to administer the EFMP. workers at most of its CONUS  installations to administer individualized  support to families with special needs. In  addition, the Marine Corps employs  program managers, administrative  assistants, as well as training and  education outreach specialists.", "The Navy contracts regional case liaisons  and case liaisons at selected CONUS  installations to administer individualized  support to families with special needs. In  addition, the Navy employs collateral duty  case liaisons who assist with the delivery  of family support services at all other  CONUS installations.", "Senior OSN officials said they rely on each Service to determine the  extent to which its EFMP complies with DOD\u2019s policy for families with  special needs because they consider OSN to be a policy-making  organization that is not primarily responsible for assessing compliance. In  addition, these officials said the Services need flexibility to implement  DOD\u2019s policy for families with special needs because they each have  unique needs and the number of enrolled families in the EFMP is  constantly changing. However, DOD has not developed a standard for  determining the sufficiency of funding and resources each Service  allocates for family support. Air Force officials at one of the installations  we visited said the Air Force identified the lack of staff and funding to  provide individualized support to most families with special needs as an  issue. In addition, officials from the Army and Navy said they have not  received any guidance from OSN officials about their Service-specific  guidance, including requirements for resources and services plans.  Further, the Services may not know the extent to which their Service- specific guidance complies with DOD\u2019s policy for families with special  needs.", "The NDAA for Fiscal Year 2010 requires DOD to identify and report  annually to the congressional defense committees on gaps in services for  military families with special needs and to develop plans to address these  gaps. However, DOD\u2019s most recent reports to the congressional defense  committees did not address the relatively few SPs being created for  families with special needs, or whether the Services are providing  sufficient resources to ensure an appropriate number of family support  providers. Federal internal control standards require that agencies  establish control activities, such as developing clear policies, in order to  accomplish agency objectives such as those of the Services\u2019 EFMPs.  Without fully identifying and addressing potential gaps in family support  across these programs, some families with special needs may not get the  assistance they require, particularly when they relocate."], "subsections": []}]}, {"section_title": "Each Service Has Mechanisms to Monitor EFMP Assignment Coordination and Family Support Activities, but DOD Lacks Common Performance Measures and a Process to Fully Evaluate These Activities Each Service Has Mechanisms to Monitor Assignment Coordination and Family Support", "paragraphs": ["Each Service monitors EFMP assignment coordination and family support  using a variety of mechanisms, such as regularly produced internal data  reports. However, DOD has not yet established common performance  measures to track the Services\u2019 progress in implementing its standard  procedures over time or developed a process to evaluate the overall  effectiveness of each Service\u2019s assignment coordination and family  support procedures.", "DOD requires each Service to monitor implementation of their EFMP,  including their procedures for assignment coordination and family  support. To comply with this requirement, each Service has developed  guidance that establishes monitoring protocols and assigns oversight  responsibilities. Officials from each Service told us they use internal data  reports from each installation to monitor assignment coordination and  family support.", "To monitor assignment coordination, officials from each Service told  us their headquarters reviews proposed assignment locations for  families with special needs enrolled in the EFMP. These officials said  monitoring proposed assignment locations helps ensure that enrolled  families will be able to access required services at their new  installations. In addition, Army officials said each Army unit  commander is responsible for tracking the number of families with  special needs that have expired enrollment paperwork because it  affects assignment coordination worldwide. Several years ago, the  Army determined that 25 percent of soldiers (over 13,000) enrolled in  the EFMP had expired enrollment paperwork, complicating the task of  considering each enrolled family\u2019s special medical or educational  needs as part of proposed relocations. In response, in August 2011,  the Army revised its policies and procedures for updating enrollment  paperwork which would help ensure a family member\u2019s special needs  are considered during the assignment coordination process.", "To monitor family support provided by installations worldwide, each  Military Service told us they use a variety of mechanisms (see table  5).", "The Marine Corps pays particular attention to customer satisfaction.  Marine Corps officials told us that every three years Marine Corps  headquarters administers a survey of family members enrolled in the  EFMP. We previously reported that organizations may be able to increase  customer satisfaction by better understanding customer needs and  organizing services around those needs. This survey is one of the  primary ways Marine Corps headquarters measures customer satisfaction  with family support services at installations worldwide. Marine Corps  officials also said this survey helps ensure its EFMP is based on the  current needs of families with special needs."], "subsections": [{"section_title": "DOD Has Not Developed Common Performance Measures or Fully Developed a Process for Evaluating the Results of the Services\u2019 Monitoring Activities", "paragraphs": ["To improve its oversight of the EFMP and implement its policy for families  with special needs, DOD, through OSN, has several efforts under way to  standardize the Services\u2019 procedures for assignment coordination and  family support. However, DOD has not developed common performance  measures to monitor its progress toward these efforts and has not  developed a process for assessing the Services\u2019 related monitoring  activities. Federal internal control standards emphasize the importance of  assessing performance over time and evaluating the results of monitoring  activities."], "subsections": [{"section_title": "DOD Has Begun to Standardize Procedures", "paragraphs": ["To help improve family member satisfaction by addressing gaps in  support that may exist between Services, OSN has begun to standardize  procedures for assignment coordination and family support. To date,  OSN\u2019s efforts have focused on ensuring each Service\u2019s EFMP considers  the needs of family members during the assignment process and helps  family members identify and gain access to community resources.  According to OSN\u2019s April 2017 Report to Congress, the long-term goal of  these efforts is to help ensure that all families with special needs enrolled  in the EFMP receive the same level of service regardless of their Military  Service affiliation or geographic location. In addition, OSN officials told  us its standardized procedures will also help DOD perform required  oversight by improving its access to Service-level data and its ability to  validate each Service\u2019s monitoring activities.", "To date, efforts to standardize assignment coordination and family  support have included efforts such as developing new family member  travel screening forms which will be the official documents used during  the assignment coordination process and completing a DOD-wide  customer service satisfaction survey on EFMP family support (see table  6).", "Despite its efforts to begin standardizing assignment coordination and  family support services, DOD is unable to measure its progress in  standardizing assignment coordination and family support procedures for  families with special needs and assessing the Services\u2019 performance of  these processes because it has not yet developed common metrics for  doing so. Federal internal control standards emphasize the importance of  agencies assessing performance over time. We have also reported on  the importance of federal agencies engaging in large projects using  performance metrics to determine how well they are achieving their goals  and to identify any areas for improvement. By using performance  metrics, decision makers can obtain feedback for improving both policy  and operational effectiveness. Additionally, by tracking and developing a  baseline for all measures, agencies can better evaluate progress made  and whether or not goals are being achieved\u2014thus providing valuable  information for oversight by identifying areas of program risk and causes  of risks or deficiencies to decision makers. Through our body of work on  leading performance management practices, we have identified several  attributes of effective performance metrics relevant to OSN\u2019s work (see  table 7).", "OSN officials said each Service is currently responsible for assessing the  performance of its own EFMP, including the development of Service- specific goals and performance measures. OSN officials said that they  recognize the need to continually measure the department\u2019s progress  overall in implementing its policy for families with special needs, and are  considering ways to do so. They also said they have encountered  challenges to developing common performance measures. In addition,  OSN officials said its efforts to reach consensus among the Services  about performance measures for the overall EFMP are still ongoing  because each Service wants to maintain its own measures, and DOD has  not required them to reach a consensus. Absent common performance  measures, DOD is unlikely to fully determine whether its long-standing  efforts to improve support for families with special needs are being  implemented as intended."], "subsections": []}, {"section_title": "DOD Does Not Systematically Review the Services\u2019 Monitoring Activities", "paragraphs": ["DOD requires each Service to monitor its own family readiness programs,  including procedures for assignment coordination and family support  through the EFMP, but lacks a systematic process to evaluate the results  of these monitoring activities. To monitor family readiness services, as  required by DOD, each Service must accredit or certify its family support  services, including the EFMP, using standards developed by a national  accrediting body not less than once every 4 years. In addition,  personnel from each Service\u2019s headquarters are required to periodically  visit installations as a part of their monitoring activities for assignment  coordination, among other things. The Services initially had the Council  on Accreditation accredit family support services provided through their  installations\u2019 EFMPs using national standards developed for military and  family readiness programs, according to the officials with whom we  spoke. However, by 2016, each Service was certifying installations\u2019  family support services using standards that meet those of a national  accrediting body, Service-specific standards, and best practices.  According to officials from each Service with whom we spoke, this  occurred due to changes in the funding levels allocated to this activity.  Table 8 provides an overview of the certification process currently being  used by each Service.", "OSN officials said they do not have an ongoing process to systematically  review the results of the Services\u2019 activities, including the certification of  EFMPs because they choose to rely on the Services to develop their own  monitoring activities and ensure they provide the desired outcomes. In  doing so, DOD allows each Service to develop its own processes for  certifying installations\u2019 family support services, including the selection of  standards. In addition, OSN officials told us that efforts to standardize  certification of EFMPs are ongoing because the Military Services have not  been able to reach consensus on a set of standards that can be used  across DOD for installations\u2019 family support services. Further, OSN has  not established a process to assess the results of the Services\u2019 processes  for certifying installations\u2019 family support services. Federal standards for  internal control state that management should evaluate the results of  monitoring efforts\u2014such as those the Services are conducting on their  own\u2014to help ensure they meet their strategic goals. The lack of such a  process hampers OSN\u2019s ability to monitor the Services\u2019 EFMPs and  determine the adequacy of such programs as required by the NDAA for  Fiscal Year 2010."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["OSN\u2019s job of developing a policy for families with special needs that will  work across DOD\u2019s four Services is challenging given the size,  complexity, and mission of the U.S. military. It has had to consider,  among other things, the Services\u2019 mission requirements, resource  constraints, and the myriad demands on servicemembers and their  families during their frequent relocations. Anything that further  complicates a relocation\u2014such as not receiving the required family  support services for family members with special needs\u2014potentially  affects readiness or, at a minimum, makes an already stressful situation  worse. By providing little direction on how the Services should provide  family support or what the scope of family support services should be,  some servicemembers get more\u2014or less\u2014from the EFMP each time  they relocate, including when a servicemember from one Service is  assigned to a joint base led by another Service.", "By largely deferring to the Services to design, implement, and monitor  their EFMPs\u2019 performance, DOD cannot, as required by the NDAA for  Fiscal Year 2010, fully determine the adequacy of the Services\u2019 EFMPs in  serving families with special needs, including any gaps in services these  families receive, because it has not built a systematic process to do so.  Instead, it relies on the Services to self-monitor and address, within each  Service, the results of monitoring activities. However, because  servicemembers relocate frequently and often depend on the EFMP of a  Service other than their own, a view of EFMP performance across all of  the Services is essential to ensuring, for example, that relocating  servicemembers get consistent EFMP service delivery no matter where  they are stationed. Evaluating and developing program improvements  based on the results of the Services\u2019 monitoring would help DOD ensure  the Services\u2019 EFMPs achieve the desired outcomes and improve its  ability to assess the overall effectiveness of the program."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DOD:  We recommend the Secretary of Defense direct the Office of Special  Needs (OSN) to assess the extent to which each Service is (1) providing  sufficient resources for an appropriate number of family support  providers, and (2) developing services plans for each family with special  needs, and to include these results as part of OSN\u2019s analysis of any gaps  in services for military families with special needs in each annual report  issued by the Department to the congressional defense committees.  (Recommendation 1)", "We recommend that the Secretary of Defense direct the Office of Special  Needs (OSN) to develop common performance metrics for assignment  coordination and family support, in accordance with leading practices for  performance measurement. (Recommendation 2)", "We recommend that the Secretary of Defense implement a systematic  process for evaluating the results of monitoring activities conducted by  each Service\u2019s EFMP. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Defense (DOD) for  comment. DOD provided written comments, which are reproduced in  appendix IV. DOD also provided technical comments, which we  incorporated as appropriate.", "DOD agreed with all three of our recommendations.", "In its written comments, DOD stated that additional performance metrics  need to be developed for assignment coordination and that it is in the  process of measuring families\u2019 satisfaction with family support provided  through the EFMP. DOD also stated that it is developing plans for  evaluating the results of each Service\u2019s monitoring activities for the  EFMP.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense and Education, and other  interested parties. The report also 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 (617) 788-0580 or nowickij@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The National Defense Authorization Act (NDAA) for Fiscal Year 2017  includes a provision for GAO to assess the effectiveness of the  Department of Defense\u2019s (DOD) Exceptional Family Member Programs  (EFMP). This report focuses on the assignment coordination and family  support components of the EFMP for dependents with special needs and  examines: (1) the extent to which each Service has provided family  support as required by DOD, and (2) the extent to which the Services  monitor and DOD evaluates assignment coordination and family support.  To address these objectives, we used a variety of data collection  methods. Key methods are described in greater detail below.", "For both objectives, we reviewed relevant federal laws, regulations, and  DOD guidance and documentation that pertain to the EFMP, including the  following:", "The NDAA for Fiscal Year 2010, which established the Office of  Special Needs and defined program requirements for assisting  families with special needs, including assignment coordination and  family support.", "DOD\u2019s guidance for administering the EFMP. We assessed how DOD  implements the requirements in the NDAA for Fiscal Year 2010; how  each Service implements assignment coordination and family support;  and how the Services and DOD monitor assignment coordination and  family support using performance measures. Specially, we reviewed  DOD Instruction 1315.19 - Exceptional Family Member Program;  Service-specific guidance and related documents from the Air Force,  Army, Marine Corps, and Navy; and DOD Instruction 1342.22 -  Military Family Readiness.", "Standards for internal control in the federal government related to the  documentation of responsibilities through policies, performance  measures, and evaluating the results of monitoring activities. We  compared each Service\u2019s procedures for monitoring assignment  coordination and family support to these standards.", "To determine the extent of the Services\u2019 EFMP family support, we  obtained and analyzed fiscal year 2016 EFMP data (the most recent  available) for each Service. We reviewed DOD policy to identify data  variables that each Service maintains related to its EFMP. We used  these data to summarize key characteristics of each Service\u2019s EFMP.  The selected variables provided Service-wide and installation-specific  EFMP information on,  the number of continental United States (CONUS) and outside the  continental United States (OCONUS) installations;  the number of servicemembers (sponsors) enrolled in the EFMP;  the number of family members with special needs enrolled in the  EFMP;  the number of EFMP family support personnel; and  the number of services plans created for families with special needs  enrolled in the EFMP.", "We determined that the selected data variables from each Service are  sufficiently reliable for the purposes of providing summary results about  family support for fiscal year 2016.", "To learn more about how the Services implement their EFMPs, we visited  seven installations in five states. We selected the seven installations  based on their location in states with the largest number of military- connected students in school year 2012-2013 (the most recent available  and reliable data) or in states with the largest percentage of students  enrolled in U.S. DOD schools as of May 2017, as well as their status as a  joint base. At each installation, we interviewed installation officials,  EFMP managers, selected family support personnel, and family members  and caregivers enrolled in the program. In states we visited that had the  largest number of military-connected students, the EFMP personnel we  interviewed collectively served 66 percent of students who attend local  public schools and 42 percent of the students attending U.S. DOD  schools.", "To obtain illustrative examples about how the EFMP serves families with  special needs, we conducted seven group interviews with EFMP-enrolled  family members and caregivers (one at each of the seven installations we  visited). Using a prepared script, we asked participants to describe how  they were identified and enrolled in the EFMP, how they were assigned to  new installations, and the types of family support services they received.  We also asked about how these services aligned with their family  member\u2019s EFMP-eligible condition, the benefits and challenges they  experienced, as well as their overall satisfaction. A total of 38 self- selected volunteers participated in the seven group discussions. While  the participants in these groups included a variety of family members and  caregivers, the number of participants and groups were very small  relative to the total number of family members enrolled in the EFMP.  Their comments are not intended to represent all EFMP-enrolled family  members or caregivers. Other EFMP-enrolled family members and  caregivers may have had other experiences with the program during the  same period.", "Finally, for both objectives, we conducted interviews with a variety of  DOD, Service-level, and nonfederal officials. We spoke with DOD officials  from the Office of the Assistant Secretary of Defense\u2013Offices of  Manpower and Reserve Affairs, Military Community and Family Policy,  Military Family Readiness Policy, and Special Needs. We also spoke with  EFMP Managers from Air Force, Army, Marine Corps, and Navy  headquarters. We also met with officials from selected national military  family advocacy organizations including the National Military Family  Association; the Military Family Advisory Network; and the Military  Officers Association of America to discuss the EFMP.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Services\u2019 Fiscal Year 2016 Exceptional Family Member Program Data", "paragraphs": ["Each Service has an Exceptional Family Member Program (EFMP) that  provides support to military families with special needs. The tables below  present the following information on selected EFMP and family support  categories for each Service\u2019s program at continental United States  (CONUS) and outside the continental United States (OCONUS)  installations in fiscal year 2016:", "City, state or country;", "Number of exceptional family members;", "Number of family support providers (by Full-Time Equivalent);", "Number of family support provider vacancies;", "Number of services plans;", "Number of indirect contacts; and", "Number of direct contacts.", "The information below is listed sequentially in alphabetical order by  Service."], "subsections": []}, {"section_title": "Appendix III: Issues Identified by Discussion Group Participants", "paragraphs": ["We held small group discussions with Exceptional Family Member  Program (EFMP) participants at the seven military installations we visited.  Family members and caregivers who attended each session reported  they had children or spouses with EFMP-eligible conditions. The  discussion group participants were self-selected; and their comments are  not intended to represent all EFMP -enrolled family members or  caregivers in fiscal year 2016. In addition, other EFMP -enrolled family  members and caregivers may have had different experiences with the  program during the same period. There were a total of 38 participants  representing all the Services. The following issues were discussed by one  or more participants during the small group discussions at the  installations we visited. The issues that emerged relate to the current  and future overall effectiveness of the EFMP.", "Overall Satisfaction with EFMP (Discussed by 30 of 38 participants):  Measure of participants\u2019 approval of the family support services offered  and experience with the EFMP.", "Many participants expressed overall satisfaction with the EFMP.", "Several participants expressed dissatisfaction with the EFMP.", "A participant expressed dissatisfaction with the lack of consistency in  the provision of family support services (i.e., special education  advocacy) across installations.", "School Liaison Officers (Discussed by 20 of 38 participants): Serve  as the primary point of contact for school-related matters as well as assist  military families with school issues.", "Several participants noted that they received no response to their  request for assistance from their School Liaison Officer or they only  received general information.", "Several participants said School Liaison Officers were not helpful.", "Some participants found School Liaison Officers were helpful.", "Some participants were unaware of School Liaison Officers being  available at their installation and the service(s) they provide.", "A few participants said School Liaison Officers did not follow up on  requests for information.", "A participant noted there seems to be a disconnect between family  support services provided through the EFMP and services provided  by School Liaison Officers.", "Family Support Personnel (Discussed by 12 of 38 participants):  Provide information and referral to military families with special needs.", "Some participants at one installation noted that the EFMP was  understaffed.", "Some participants at one installation noted high turnover of family  support personnel.", "Some participants noted family support personnel did not provide  support for their family with special needs.", "Stigma (Discussed by 12 of 38 participants): A perception that  participating in the EFMP may limit a soldier\u2019s assignment opportunities  and/or compromise career advancement.", "Several participants believe there is still stigma associated with  participating in the EFMP.", "Some participants said participating in the EFMP has not affected  career advancement.", "Assignment Coordination (Discussed by 10 of 38 participants): The  assignment of military personnel in a manner consistent with the needs of  armed forces that considers locations where care and support for family  members with special needs are available.", "Some participants found the assignment coordination process  challenging.", "Some participants described limitations with the assignment  coordination process.", "A few participants noted there is a lack of information among families  with special needs regarding how to express the need for stabilization  and /or continuity of care.", "A few participants cited the challenges of assignment coordination as  contributing to their decision to retire.", "One participant commented that the opinion of a medical professional  was not reflected in the assignment coordination process.", "Special Education Services (Discussed by 10 of 38 participants): The  provision of staff capable of assisting families with special needs with  special education and disability law advice and/or assistance and  attendance at individualized education program (IEP) meetings where  appropriate.", "Several participants who had a family support provider assist them  with preparing for or attending a school-based meeting, including IEP  meetings, spoke positively of their experience(s).", "Some participants at one installation agreed that assistance from  family support providers during meetings with school officials  regarding special education services is helpful.", "A few participants who were unable to get assistance with special  education services from the EFMP sought the services of private  attorneys at their own expense.", "Family Support Services (Discussed by 9 of 38 participants): The  non-clinical case management delivery of information and referral for  families with special needs, including the development and maintenance  of a services plan.", "Some participants found that family support providers were helpful.", "Some participants could not identify needed resources or were  unaware of the resources or services available to them.", "One participant noted that the family support provider had minimal  contact.", "One participant said navigating the system can be challenging.", "Surveys (Discussed by 8 of 38 participants): The process of collecting  data from a respondent using a structured instrument and survey method  to ensure the accurate collection of data.", "Several participants noted that they had not or rarely had the  opportunity to evaluate the family support services provided through  the EFMP.", "One participant noted that comment cards used by each service are  not effective for evaluating the EFMP.", "Warm hand-off (Discussed by 6 of 38 participants): Assistance to  identify needed supports or services and facilitating the initial contact or  meeting with the next program.", "Many participants at one installation agreed that the warm hand-off  process worked well for them.", "Several participants said they found the warm hand-off process  helpful when moving from one installation to the next.", "Outreach (Discussed by 5 of 38 participants): Developing partnerships  with military and civilian agencies and offices (local, state, and national),  improving program awareness, providing information updates to families,  and hosting and participating in EFMP family events.", "Some participants found it difficult to obtain information regarding the  types of family support services that are available.", "A few participants noted that communications regarding the EFMP  were not targeted to address their needs.", "A few participants noted communications regarding the EFMP are  untimely, (e.g., newsletters not issued periodically).", "Joint Base Family Support Services (Discussed by 1 of 38  participants): Family support services provided by the lead Service of  the Joint Base that is different from that of the servicemember enrolled in  the EFMP.", "One participant said that using family support services on joint bases  may pose a challenge as each Service has different rules and  procedures and as a result provides different types of family support  services."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Bill MacBlane (Assistant  Director), Brian Egger (Analyst-in-Charge), Patricia Donahue, Holly Dye,  Robin Marion, James Rebbe, Shelia Thorpe, and Walter Vance made  significant contributions to this report. Also contributing to this report were  Lucas Alvarez, Bonnie Anderson, Connor Kincaid, Brian Lepore, Daniel  Meyer, and Mimi Nguyen."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-57", "url": "https://www.gao.gov/products/GAO-19-57", "title": "Federal Real Property Asset Management: Agencies Could Benefit from Additional Information on Leading Practices", "published_date": "2018-11-05T00:00:00", "released_date": "2018-11-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government is the largest real property owner in the United States and spends billions of dollars to operate and maintain these assets, which include buildings, roads, bridges, and utility systems. Federal agencies are responsible for developing asset management policies, processes, and plans. In 2014, the ISO 55000 asset management standards were issued.", "GAO was asked to examine federal agencies' real property asset management practices and the applicability of ISO 55000. This report discusses: (1) key characteristics of an effective asset management framework and how selected federal agencies' frameworks reflect these characteristics, and (2) whether government-wide asset management guidance and information reflect standards and key characteristics of an effective asset management framework, among other objectives.", "To conduct this work, GAO reviewed the ISO 55000 standards, relevant studies and literature, and interviewed 22 experts and 10 practitioners. GAO selected six federal agencies as case studies, including agencies with the largest real property portfolio and some agencies that were using the ISO 55000 standards. GAO reviewed documentation and interviewed officials from these six agencies, GSA, and OMB."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identified six key characteristics of an effective asset management framework (see table 1) that can help federal agencies manage their assets and resources effectively. GAO identified these key characteristics through reviews of the International Organization for Standardization (ISO) 55000 standards\u2014an international consensus standard on asset management\u2014studies and articles on asset management practices, and interviews with experts. GAO reviewed the asset management practices of six federal agencies: the U.S. Coast Guard (Coast Guard); U.S. Army Corps of Engineers (Corps); General Services Administration (GSA); National Park Service (Park Service); National Aeronautics and Space Administration (NASA); and U.S. Forest Service (Forest Service). Each of the six federal-agency frameworks GAO reviewed included some of the key characteristics.", "Source: GAO analysis of ISO 55000 standards, asset management literature, and comments from experts. | GAO-19-57", "While the Office of Management and Budget (OMB) has issued guidance to inform federal agencies' real property management efforts, the existing guidance does not reflect an effective asset management framework because it does not fully align with ISO 55000 standards and the key characteristics. For example, this guidance does not direct agencies to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning, and operations, or maintaining leadership support, promoting a collaborative organizational culture, or evaluating and improving asset management practices. In addition, the guidance does not reflect information on successful agency asset management practices, information that officials from three of the six agencies GAO spoke with said would be helpful to them. OMB staff said that they did not plan to update existing government-wide guidance because OMB's real property management focus has shifted to the Reduce the Footprint initiative, which emphasizes efficiently managing and using buildings and warehouse space, rather than all assets. Without a more comprehensive approach, as described above, federal agencies may not have the knowledge needed to maximize the value of their limited resources."]}, {"section_title": "What GAO Recommends", "paragraphs": ["OMB should take steps to improve information on asset management to reflect leading practices. OMB had no comments on this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government is the largest real property owner in the United  States and spends billions of dollars annually to operate and maintain its  real property portfolio. While the General Services Administration (GSA)  provides real property asset management guidance and support to  federal agencies\u2014such as support to reduce their space requirements  and to effectively manage their inventory and reduce costs\u2014federal  agencies are responsible for developing asset management policies,  processes, and plans for their portfolios. Specifically, Executive Order  13327, issued in 2004, directed federal agencies to develop an asset  management planning process and plan to promote the efficient and  economical use of their real property assets. A number of standards and  leading practices exist to guide organizations in developing an effective  asset management framework, including the International Organization  for Standardization (ISO) \u201cISO 55000\u201d standards  which were published  in 2014. The ISO 55000 standards are international consensus  standards that describe leading practices for implementing, maintaining,  and improving an effective asset management framework to manage all  types of assets including real property assets. While some federal  agencies have taken steps to adopt some of the practices described in  ISO 55000, it is unclear what actions have been taken across the federal  portfolio or what standards and leading practices may be the most  applicable to the federal government.", "You asked us to examine federal agencies\u2019 real property asset  management practices and the applicability of ISO 55000. This report  discusses:  key characteristics of an effective asset management framework and  how selected federal agencies\u2019 frameworks reflect these  characteristics;  views of selected asset management experts and practitioners on  challenges and benefits to implementing an asset management  framework; and whether government-wide asset management guidance and  information reflect standards and key characteristics of an effective  asset management framework.", "To address all three objectives, we collected information from and  interviewed a judgmental sample of 22 asset management experts. To  identify the potential experts, we performed a literature search and  obtained recommendations from preliminary interviews with asset  management practitioners, who included representatives from public and  private organizations knowledgeable about asset management practices.  We then selected the 22 experts using a variety of criteria including type  and depth of their experience, affiliations with asset management trade  associations, experience with federal asset management practices,  relevant published work on our topic, and recommendations from other  entities. We interviewed each of these experts using a semi-structured  format with open-ended questions and conducted a content analysis of  their responses to identify recurring themes. The information gathered  from our interviews with experts and practitioners is useful in illustrating a  range of views on asset management issues, but is not generalizable.", "To identify key characteristics of an effective asset management  framework and how selected federal agencies\u2019 reflect them, we obtained  and reviewed the ISO 55000 standards, which include leading practices,  and literature on asset management practices and analyzed our  interviews with asset management experts. We synthesized information  from these sources and identified six commonly mentioned  characteristics. To compare selected agencies\u2019 asset management efforts  to the six key characteristics that we identified, we selected a non- generalizable sample of six bureau-level and independent federal  agencies as case studies. We used a variety of criteria to select agencies,  including selecting agencies with the largest number of real property  assets and the largest real property portfolio replacement values. We  also included in our selection some agencies that were using the ISO  55000 standards, and that were recommended by practitioners we  interviewed. We selected the following agencies (1) the U.S. Coast Guard  (Coast Guard); (2) the U.S. Army Corps of Engineers (Corps); (3) GSA;  (4) the National Park Service (Park Service); (5) the National Aeronautics  and Space Administration (NASA); and (6) the U.S. Forest Service  (Forest Service). We reviewed documents and interviewed officials from  each of the six selected agencies to learn about the agencies\u2019 practices,  their experiences with the ISO 55000 standards, and the challenges they  have faced in conducting asset management. In addition, we analyzed  fiscal year 2017 Federal Real Property Profile (FRPP) data, as managed  by GSA, to obtain information about each agency\u2019s portfolio, such as the  number of real property assets and total asset-replacement value, and to  obtain examples of the types of buildings and structures owned by the six  selected agencies. We conducted a data reliability assessment of the  FRPP data by interviewing GSA officials and reviewing documentation,  and concluded the data were reliable for the purposes of our reporting  objectives. We also visited four locations from our case study agencies to  discuss and view examples of how our selected case-study agencies are  conducting asset management. Agencies are not required to follow the  key characteristics we identified and we did not evaluate the extent to  which they did so. Instead, we provide this information as illustrative  examples of how the agencies\u2019 asset management practices reflect these  characteristics.", "To determine the 32 experts\u2019 and practitioners\u2019 views on challenges and  benefits to implementing an asset management framework, we  interviewed and synthesized information from our interviews with all 32  and analyzed the responses to identify key themes. These individuals  included the 22 experts previously mentioned and 10 practitioners from  public and private organizations we selected who were familiar with asset  management practices and the ISO 55000 standards.", "To assess whether government-wide guidance and information on asset  management reflect standards and key characteristics of an effective  asset management framework, we reviewed current Office of  Management and Budget (OMB), GSA, and Federal Real Property  Council (FRPC) federal guidance and evaluated the extent to which this  guidance incorporated practices in the ISO 55000 standards and in the  key characteristics. We selected practices described in ISO 55000  because it is the international-consensus asset management standard.  We also interviewed officials from the OMB and GSA about their role in  supporting federal agencies\u2019 asset management efforts. In addition, we  obtained information from our interviews with asset management experts  and practitioners about practices that could be applicable to the federal  government and opportunities to improve federal agencies\u2019 approaches.  Lastly, we obtained documents and interviewed representatives from  federal, provincial, and municipal governments in Canada\u2014a country with  over 20 years of experience in asset management\u2014to learn about their  practices, including their use of the ISO 55000 standard. We also  conducted a site visit to Canada to discuss and view examples of assets  in these municipalities (see appendix I for more information on Canada\u2019s  asset management practices). For more information on our scope and  methodology, see appendix II.", "We conducted this performance audit from August 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["ISO 55000 defines asset management as \u201cthe coordinated activity of an  organization to realize value from assets.\u201d This approach includes, for  example: developing an understanding of how each of an organization\u2019s assets  contributes to its success; managing and investing in those assets in such a way as to maximize  that success; and  fostering a culture of effective decision making through leadership  support, policy development, and staff training.", "While ISO defines an asset as any item, thing, or entity that has potential  or actual value to an organization, in this report we focus on real property  assets. Asset management can help federal agencies optimize limited  funding and make decisions to better target their policy goals and  objectives. See fig. 1 for an example of an asset management framework.", "Asset management as a distinct concept developed in the 1980s, and  since that time, organizations around the world have published a number  of standards and leading practices. These include:", "Publicly Available Specification (PAS) 55: The British Standards  Institution published this standard in its final form in 2008. This  standard focuses on the management of physical assets such as real  property and describes leading asset management practices in areas  such as life cycle planning, risk management, cost avoidance, and  collaborative decision-making. Additionally, the standard provides a  checklist for organizations to assess the maturity of their asset  management framework. Some public services, utilities, and oil and  gas sectors in the United Kingdom and other countries have adopted  this standard. The British Standards Institution formally withdrew this  standard in 2015 after the publication of ISO 55000, but it remains in  use as a reference for many organizations.", "ISO 55000: This standard, published in 2014, is a series of three  documents, collectively referred to as \u201cISO 55000.\u201d It is based on the  earlier PAS 55 standard but with stated applicability to all types of  assets as opposed to just the physical assets covered by PAS 55.  Committees with members from more than 30 countries identified  common asset management practices and developed this  international consensus standard that, according to ISO, applies to  the broadest possible range of assets, organizations, and cultures.  Some public and private sector organizations from around the world  including utilities, infrastructure management firms, cities, federal  agencies, and others have adopted the standard for their real property  assets. See appendix III for a summary of the key elements of the ISO  55000 standards.", "International Infrastructure Management Manual: Initially  published in 2000, this manual became one of the first sets of  internationally accepted asset management leading practices. The  Institute of Public Works Engineering Australasia published the most  recent edition in 2015. The current manual complements the ISO  55000 standards and includes case studies of how organizations in  different sectors have approached asset management. It provides  detailed information on how to create and implement an effective  asset management framework, such as how to incorporate estimates  of future demand for services. Various organizations, particularly in  sectors that manage physical assets, have adopted the manual as a  reference.", "In the United States, within the federal government\u2019s executive branch,  OMB and GSA are responsible for providing leadership in managing  federal real property\u2014one of the government\u2019s major assets. OMB is  tasked with overseeing how federal agencies devise, implement, manage,  and evaluate programs and policies. OMB has provided direction to  federal agencies by issuing various government-wide policies, guidance,  and memorandums related to asset management. For example:", "OMB\u2019s 2017 Capital Programming Guide  outlines a capital- programming process, including how agencies should effectively and  collectively manage a portfolio of capital assets and requirements for  agencies strategic asset management plans;", "OMB\u2019s Circular A-123 directs agencies to conduct enterprise risk  management assessments to identify significant risks to agency goals  and operations;", "OMB\u2019s Memorandum 18-21 expands the responsibilities of federal  agencies\u2019 senior real property officers in leading and directing the  agency\u2019s real property program.", "GSA\u2019s Office of Government-wide Policy is generally responsible for  identifying, evaluating, and promoting best practices to improve the  efficiency of real property management processes. This office has  provided guidance for federal agencies and published performance  measures.", "In 2004, the President issued Executive Order 13327 directing Chief  Financial Officers Act (CFO Act) agencies to designate a senior real  property officer responsible for establishing an asset management- planning process and developing a plan to carry out this process. Among  other things, this plan was to describe the agency\u2019s process for:  identifying and categorizing all real property managed by the agency, prioritizing actions needed to improve the operational and financial  management of the agency\u2019s real property inventory, using life-cycle cost estimations for those actions, and  identifying asset management goals and measuring progress towards  those goals. The order also required agencies to manage their real  property assets in a manner that supports the agency\u2019s asset  management plan, goals, and strategic objectives.", "In addition, Executive Order 13327 tasked GSA with providing policy  oversight and guidance to inform federal agencies\u2019 real property  management efforts and required that OMB review agencies\u2019 efforts in  implementing their asset management plans and completing the other  requirements specified in the executive order. The executive order also  established the Federal Real Property Council (FRPC)\u2014chaired by OMB  and composed of senior management officials from CFO agencies\u2014and  called for the FRPC to develop guidance, collect best practices, and help  federal agencies improve the management of real property assets. In  response to this executive order, in 2004 the FRPC developed guidance  describing guiding principles that agencies\u2019 asset management practices  should align with, requirements for what agencies should include in their  asset management plans, and a template for agencies to follow when  compiling these plans. Specifically, the guidance stated that each real  property asset\u2019s management plan should link the asset management  framework to the agency\u2019s strategic goals and objectives, describe a  process for periodically evaluating assets, and describe a process for  continuously monitoring the agency\u2019s framework.", "More recent federal asset management initiatives have focused on  efficiently managing and reducing federal agencies\u2019 real property  holdings. For example, in 2012 OMB directed the 24 CFO Act agencies to  maintain their civilian real-estate inventory at or below their then-current  levels, a policy known as Freeze the Footprint. In 2015, OMB issued its  National Strategy for the Efficient Use of Real Property and its  accompanying Reduce the Footprint policy requiring the CFO Act  agencies to set annual targets for reducing their portfolio of domestic  office and warehouse space. Subsequently, the Federal Assets Sale  and Transfer Act of 2016 established the Public Buildings Reform Board  to identify opportunities for the federal government to reduce its inventory  of civilian real property and reduce its costs. The act also requires the  head of each executive agency to provide annually to GSA information  describing the nature, use, and extent of the agency\u2019s real property  assets. In addition, the Federal Property Management Reform Act of  2016 codified the Federal Real Property Council to, among other things,  ensure efficient and effective real-property management while reducing  costs to the federal government. The act requires executive branch  agencies to annually submit to the Federal Real Property Council a report  on all excess and underutilized real property in their inventory."], "subsections": []}, {"section_title": "Effective Asset Management Frameworks Include Six Key Characteristics Reflected in Selected Agencies\u2019 Practices", "paragraphs": ["Based on our review of the ISO 55000 standards, asset management  literature, and interviews with experts, we identified six key characteristics  of an effective asset management framework: (1) establishing formal  policies and plans, (2) maximizing an asset portfolio\u2019s value, (3)  maintaining leadership support, (4) using quality data, (5) promoting a  collaborative organizational culture, and (6) evaluating and improving  asset management practices (see fig. 2). See appendix II for a more  detailed explanation of how we identified these key characteristics.", "Each of the six federal agencies we reviewed had a real property asset  management framework that included some of these key characteristics.  However, agencies varied in how they performed activities in these areas.  In addition, the scope and maturity level of the agencies\u2019 asset  management frameworks varied. For example, while some agencies\u2019  asset management policies applied to large portions of their portfolios,  other agencies\u2019 policies applied to only certain portions of their  portfolios. In addition, two agencies\u2014the Corps and Coast Guard\u2014told  us they were using the ISO 55000 standards. For example, according to  Corps officials, the Corps is in the process of incorporating elements of  the ISO 55000 standards into its frameworks. Coast Guard officials told  us they were using the ISO 55000 standards as a benchmark to compare  against their existing framework. According to OMB and GSA officials,  some of the differences in agencies\u2019 asset management frameworks can  be attributed to differences such as agency mission needs and the types  of assets that each manages. For example, the real property asset  portfolios of the six agencies we reviewed differed substantially in the  types, numbers, and total replacement values of the assets. See table 1  for more information on the agencies\u2019 asset portfolios and fig. 3 for  examples of agency assets and their primary uses.", "Below we discuss the six key characteristics of an effective asset  management framework and how the six selected agencies performed  asset management activities in these areas."], "subsections": [{"section_title": "Establishing Formal Policies and Plans", "paragraphs": ["Formal policies and plans can help agencies utilize their assets to support  their missions and strategic objectives. According to literature we  reviewed, developing a formal asset management plan can help agencies  take a more strategic approach in their asset management decision  making and identify key roles and responsibilities, resources required to  implement their plans, potential implementation obstacles and strategies  for overcoming these obstacles. In addition, several experts we  interviewed stated that having an asset management plan that describes  the overarching goals of the organization and how the organization\u2019s  assets relate to those goals is an important element of an asset  management framework. Each of the six agencies we reviewed had some  documentation such as asset management plans, investment strategies,  or technical orders that lay out how the agency conducts asset  management activities. This documentation covered important areas such  as collecting data, prioritizing assets, and making investment decisions,  along with documentation detailing the roles and responsibilities of key  officials, for example:  In 2014, the Corps published a Program Management Plan for Civil  Works Asset Management that laid out a vision, tenets, and objectives  for asset management along with the roles and responsibilities of key  officials. Corps officials told us that this document functions as a  strategic asset management plan for the Corps\u2019 Civil Works asset  portfolio, and the plan contains foundational principles such as how  the Corps will assess risk and measure the performance of its  framework.", "Since 2006, the Coast Guard Civil Engineering program has been  developing a series of manuals, process guides, and technical orders  that provide detailed procedures to support implementation of an  overarching asset management model. Coast Guard officials told us  this model will cover all of the Coast Guard\u2019s real property assets and  reflect the agency\u2019s mission and objectives.", "In addition, each of the six agencies we reviewed had developed a formal  asset management plan in response to Executive Order 13327 from  2004. One agency had a plan that officials said reflected their current  practices. Officials from the remaining five agencies told us that the  practices contained within their original asset management plans had  been superseded by later policy documents. For example:", "NASA officials told us the agency\u2019s 2008 Real Property Asset  Management Plan no longer reflects NASA\u2019s overarching asset  management framework. Officials said that NASA instead uses a  series of policy documents, procedural requirements, and annual data  calls to set out its framework.", "Park Service officials told us the agency\u2019s 2009 Asset Management  Plan is still in place, though some of the practices in that document  have been superseded by more recent policy documents including the  Capital Investment Strategy.", "Further, five of the agencies linked their asset management goals and  objectives to their agency mission and strategic objectives in their asset  management plans. For example, GSA\u2019s 2012 plan states that it supports  GSA\u2019s overall mission and goals, as well as the mission of the Public  Buildings Service, by organizing real property decision making and  supporting the Public Buildings Service\u2019s objectives for owned assets."], "subsections": []}, {"section_title": "Maximizing an Asset Portfolio\u2019s Value", "paragraphs": ["Prioritizing investments can help agencies better target resources toward  assets that will provide the greatest value to the agency in meeting its  missions and strategic objectives. Each of the six agencies we reviewed  has documentation describing a process for prioritizing asset  investments. For example, each agency has documentation describing a  scoring process for prioritizing projects based on specific criteria, such as  the risks an asset poses to agency operations, asset condition, project  cost, and project impact. Some agency officials told us that scoring  projects in this manner provides an objective foundation for decision  making that can lead to more consistent investment decisions and  improved transparency. In addition, each of the six agencies have  implemented, or are in the process of implementing, a centralized  decision-making process for prioritizing high value projects and  delegating approval for lower cost projects to local or regional offices. The  agencies vary, however, in the types of projects for which they use  centralized decision-making and the degree to which they use the project  scores, for example:", "NASA field centers are authorized to independently prioritize and  approve certain projects with total costs under $1 million. For larger  projects, however, NASA field centers develop project scores based  on a mission dependency index measuring the relative risk an asset  poses to NASA\u2019s missions. To prioritize and approve these larger  projects, NASA headquarters staff consider projects submitted by  centers using the mission dependency scores, asset conditions, and  other factors such as flooding risk, and make funding decisions using  NASA\u2019s available budget.", "GSA categorizes each of its assets into tiers based on the asset\u2019s  financial performance and capital investment needs. Additionally,  since 2017 GSA has been using an Asset Repositioning Tool, which  uses more detailed data analysis to rank assets within each tier.  GSA uses these designations when prioritizing asset investments. For  projects with projected costs below the prospectus level  (approximately $3.1 million in fiscal year 2018), GSA regions use  each asset\u2019s tier and core designation to allocate funds across the  region\u2019s asset portfolio. For larger projects, the GSA Administrator  and GSA\u2019s Public Buildings Service Commissioner and Deputy  Commissioner are responsible for determining the priority level of  projects.", "The Corps is in the process of implementing a procedure that would  base funding decisions for maintenance and repair projects on a  portfolio-wide comparison of scores, with the goal of approving the  projects that will reduce the greatest amount of risk. This differs from  the Corps\u2019 previous system of allocating projects\u2019 funding to local  divisions and districts based on historical amounts and staff  judgement. To prioritize projects, the Corps calculates a score for  each project based on an assessment of the asset\u2019s condition and the  risk the asset poses to operations. For example, the Corps measures  risk for a lock and dam component such as a gate (see fig. 5) based  on the potential economic impact of failure to users (e.g., shipping  companies that use the waterway). The Corps has a plan to  implement this process by 2020, a plan that Corps officials told us  they expect to complete on schedule.", "Officials from these agencies told us that more centralized decision- making processes can provide improved standardization and clarity in the  prioritization process, particularly for high value projects, and can help  ensure that mission-critical projects receive funding. As an example,  Coast Guard officials cited a project involving a permanent repair to a  failed steam heating pipe at the Coast Guard Yard near Baltimore. They  said that this failure left several key buildings, including the Coast Guard\u2019s  primary ship-painting facility, with intermittent service and an inability to  complete certain critical tasks. According to officials, the Coast Guard\u2019s  centralized decision-making process scored this project as a high priority  because of the importance of the facilities involved, the impact of the  failure, and the fragility of the temporary pipe that runs on the surface  amongst other equipment (see fig. 4).", "Leadership buy-in is important for organizational initiatives, and experts  told us that management support is vital to implementing an asset  management framework. However, officials from two of the six agencies  told us that they have received varying levels of leadership support for  asset management, for example:", "Corps officials told us that it can be a challenge to make senior  leadership understand the value that improved asset management  practices can provide to the agency, value that they said can affect  the level of support the program gets.", "Forest Service officials told us that they have faced challenges  obtaining the resources they need to develop their asset management  program.", "In addition, in 2015 the Coast Guard received a report it had  commissioned to examine the level of alignment between its asset  management framework and the ISO 55000 standards. This report  concluded, among other things, that the Coast Guard has faced  challenges with strategic leadership related to asset management,  including in balancing budgetary support for long-term initiatives\u2014like  developing an asset management framework\u2014against short-term  infrastructure investment needs and in communicating asset  management policies."], "subsections": []}, {"section_title": "Using Quality Data", "paragraphs": ["Using quality information when making decisions about assets can help  agencies ensure that they get the most value from their assets. Experts  we spoke with cited data elements such as inventory information (e.g.,  asset age and location); condition information (e.g., how well the asset is  performing); replacement value; and level of service (e.g., how the asset  helps the agency meet its missions and strategic objectives) as important  for maximizing an asset\u2019s value. Each of the six agencies collected  inventory and condition data on their assets, and used this data to make  decisions about its assets, for example:", "The Forest Service requires its units, such as national forests and  grasslands, to inventory and verify 100 percent of their asset data  over a 5-year cycle. It has developed a standardized process for units  to collect specific types of data for this inventory, such as condition  data and deferred maintenance. According to Forest Service officials,  the data tracked in the system informs several investment decisions,  such as decisions on decommissioning of assets.", "GSA developed the Building Assessment Tool Survey to assess the  overall condition of its assets and what investments they need. GSA  uses the data collected from the survey, conducted every 2 years, to  calculate a Facility Condition Index, which is the asset\u2019s current needs  divided by its replacement value.", "The Corps\u2019 2017 policy for operational condition assessments lays out  a methodology for assessing condition based on visible attributes and  asset performance, such as the degree to which water is leaking  around a lock gate (see fig. 5 for an example of what Corps officials  described as a minor water leak). Under this policy, Corps officials  assign a letter grade to the performance of each individual component  within a Corps\u2019 asset. Corps officials told us that there are key  differences between this system and the maintenance management  system they used previously. For example, officials said the Corps is  now able to more easily compare the condition of its assets across the  portfolio, and grade the condition of more types of asset components,  a process that Corps officials said gives them a more complete  understanding of how their assets are performing.", "Some agencies told us that they faced challenges related to collecting  and maintaining asset data, for example,", "The Park Service uses data on the condition of its assets to calculate  a facility condition index. Park Service officials told us that when they  developed their asset management program in the early 2000\u2019s they  had to change many of their existing data collection processes and  train their staff to manage the new data.", "NASA field centers are required to assess assets and enter key asset  data into NASA\u2019s database, but according to NASA Headquarters  officials, they have faced challenges collecting data from some  Centers. For example, NASA Centers are required to review and  revalidate the mission dependency scores for each of their assets  every 3 years, but Headquarters officials told us not all Centers have  entered such scores on all assets."], "subsections": []}, {"section_title": "Promoting a Collaborative Organizational Culture", "paragraphs": ["Aligning staff activities toward effective asset management and  communicating information across traditional agency boundaries can  ensure that agencies make effective decisions about their assets.  Officials from three of the agencies we reviewed told us that having staff  embrace asset management is a key to successful implementation, for  example,", "Park Service officials told us they implemented an organizational  change-management process and provided additional training to staff  in key asset management areas such as data collection. Finally, they  said that they tried to prevent asset management requirements from  overwhelming the other tasks staff perform by, for example,  considering staff time constraints when developing their data  collection processes. Officials told us that they continue to streamline  these processes to reduce field staff workload.", "The Corps\u2019 Program Management Plan includes chapters on  communications strategies and organizational change management to  promote an asset management culture.", "While these agency officials told us that obtaining leadership and staff  buy-in is important for asset management implementation to be effective,  officials from three of our six selected federal agencies cited managing  organizational culture changes as an implementation challenge. For  example, Corps officials told us that, prior to developing their framework,  the different functional areas in the Civil Works Program were each  responsible their own assets and were not sharing asset information  across areas. As a result, the Corps struggled with getting staff to work  together and coordinate on asset management activities. To help mitigate  this issue, Corps officials told us they have assigned dedicated asset  management staff to each regional district to facilitate communication at  the local level between staff in different functional areas, and developed a  community of practice to discuss maintenance issues including asset  management."], "subsections": []}, {"section_title": "Evaluating and Improving Asset Management practices", "paragraphs": ["Continuously evaluating the performance of an agency\u2019s asset  management framework and implementing needed changes can optimize  the value the agency\u2019s assets provide. According to literature we  reviewed, an asset management plan should be evaluated and  continuously improved over time to ensure it still reflects the  organization\u2019s goals. Officials from each of the six agencies told us that  they collect data to measure the performance of their asset management  policies, and two agencies have continuous evaluation processes laid out  in their asset management plans. For example:", "GSA\u2019s asset management plan describes the data GSA uses to track  the performance of its framework, including information on operating  costs, asset condition, asset utilization, operating income, and energy.", "The Corps evaluates its program by conducting maturity  assessments. According to the Corps\u2019 2014 Program Management  Plan, these assessments measure the maturity level of its asset  management program to review and identify gaps in achieving the  asset management system\u2019s vision and objectives while efficiently  using resources. Corps officials told us they self-assessed their own  operations at the low end of the maturity scale, and they are using the  results of the assessment to inform revisions to their Program  Management Plan.", "In addition, officials from five of the six agencies told us they are in the  process of developing or implementing major changes to their asset  management policies, including developing new policies for collecting  data, measuring asset criticality, and prioritizing investments, for example:", "The Coast Guard has been developing its asset management model  since 2006 and, as previously mentioned, is in the process of  developing manuals, process guides, and technical orders to support  this model.", "NASA officials told us that they are in the midst of developing new  policies and guidance for asset management based on a recently  completed business process assessment. Officials said that the new  process under development would involve more centralized planning  and management across NASA instead of the more center-based  asset management program they currently use, along with improved  data collection practices.", "Park Service is undertaking a program focused on improving the  operation and maintenance of its real property portfolio. Officials told  us that there are two major pieces to this effort, one to improve  efficiency of their data collection process by streamlining and  consolidating systems to reduce the data collection and management  burden on staff, and another to expand the Park Service\u2019s investment  strategies to reflect the agency's top priorities and strengthen the role  of the Developmental Advisory Board to ensure consistent application  of investment goals."], "subsections": []}]}, {"section_title": "Experts and Practitioners Said Implementing an Asset Management Framework Can Be Challenging but Also Provides Benefits", "paragraphs": [], "subsections": [{"section_title": "Experts and Practitioners Cited Managing Organizational Culture Changes and Capacity as Challenges to Implementing an Asset Management Framework", "paragraphs": ["According to our interviews with asset management experts and  practitioners whom we selected, organizations can face challenges  implementing an asset management framework. The two challenges  most frequently mentioned were managing both organizational culture  changes and capacity challenges, such as lack of skills and knowledge of  management practices."], "subsections": [{"section_title": "Managing Organizational Culture Changes", "paragraphs": ["Almost all the experts and over half of the practitioners we interviewed  stated that managing the organizational culture changes that result from  implementing a new asset management framework is a challenge. For  example, several experts and practitioners stated that an effective  framework requires enterprise-wide policies to manage assets and that  changing the organizational culture from one in which departments or  divisions are used to working independently to one that promotes  interdepartmental coordination and information sharing can be  challenging. Specifically, one expert representing a U.S. municipality told  us that a key implementation challenge it faced was in setting up policies  to promote more information sharing across the organization. This expert  stated that previously the organization\u2019s data systems were not set up to  share information across departments, leading to data silos that hindered  coordination across the agency. Similarly, another expert stated that  asset management is by nature a multidisciplinary practice, which  crosses through many functional silos that are typically present in large  organizations. These silos are necessary to allow for the required level of  specialization, but if these silos do not communicate, inefficiencies and  errors in asset management result. He stated that in these organizations,  a key challenge in implementing an asset management framework is  getting officials in these different departments to agree upon and  transition to a common set of goals and direction for the framework.", "Several experts and practitioners stated that obtaining the leadership and  staff buy-in that is critical for asset management implementation to be  effective can be a challenge. For example, one expert representing an  organization that had recently implemented a new asset management  framework stated that it faced resistance from some of its staff. These  employees had been working for the organization for a long time, had not  been updating their skills over time and were resistant to having to learn a  new process. In addition, it was difficult to convince staff previously  invested in the old decision-making process to adjust to a new process. A  study examining asset management practices of public agencies in New  Zealand found that obtaining buy-in and support from leadership and staff  was critical. According to this study, for asset management to be  successful, it has to become part of the organization\u2019s culture, and for that  to happen, leadership needs to \u201cbuy-into\u201d the process, the reason why it  is important, and the value of its outputs."], "subsections": []}, {"section_title": "Managing Capacity Challenges", "paragraphs": ["Over half of the experts and all of the practitioners we interviewed cited  capacity challenges to implementing an effective asset management  framework, such as lack of skills, knowledge of management practices,  asset data, and resources.", "Some experts and practitioners stated that implementing an effective  framework might require skills and competencies that the organization  may not currently have. For example, one expert stated that  organizations might not have the in-house expertise needed to  implement a risk management approach. Similarly, a practitioner  representing an asset management firm that provides consulting  services to municipalities noted that lack of in-house expertise could  lead to the organization\u2019s over-reliance on consultants; such over- reliance, in turn, can result in the organization\u2019s not following through  with the new asset management practices once the consultants finish  their work.", "Several experts and practitioners also stated that some organizations  struggle with collecting and managing data needed to conduct asset  management. For example, one expert stated that an important first  step to implementing an asset management framework is to develop  comprehensive records of the organization\u2019s assets. However,  according to this expert, it is difficult to actually collect and use good  information about assets to deliver robust planning. The age of assets  can compound this challenge because with older assets sometimes  the original plans and specifications have been lost.", "Several experts and practitioners also mentioned lack of sufficient  resources as an implementation challenge. Specifically, one expert  noted that obtaining funding to support asset management activities is  a challenge. This expert stated that it is more difficult to secure  funding for improving components of an asset management  framework, such as improving data collection processes, than it is to  secure funding for tangible investments in new assets. As we  previously discussed, some of the experts that we interviewed stated  that evaluating and continually improving asset management  practices is an important characteristic of an effective asset  management framework."], "subsections": []}, {"section_title": "Addressing Culture Change and Capacity Challenges", "paragraphs": ["Experts and practitioners we interviewed identified potential strategies for  addressing and overcoming implementation challenges, including  strategies for managing culture change and capacity challenges such as  lack of skills and resources. See table 2 for the strategies experts and  practitioners identified.", "We have previously reported on practices and implementation steps that  can help agencies manage organizational change and transform their  cultures to meet current and emerging needs, maximize performance,  and ensure accountability. Several of these practices\u2014such as  involving employees in the transformation effort, ensuring top leadership  drives the transformation effort, and establishing a communication  strategy\u2014could address some of the potential change-management  challenges that agencies might face when implementing an asset  management framework. For example, in our prior work on organizational  change we have noted that a successful transformation must involve  employees and their representatives from the beginning to increase  employees\u2019 understanding and acceptance of organizational goals and  objectives, help establish new networks and break down existing  organizational silos, and gain their ownership for the changes that are  occurring in the organization. Some of the experts we interviewed who  had implemented ISO 55000 stated that they involved employees in the  transformation effort. For example, one expert representing an  organization with recent success in implementing ISO 55000 stated that  the managers at person\u2019s organization involved staff in the  implementation process, which helped foster ownership of the new asset  management program."], "subsections": []}]}, {"section_title": "Experts and Practitioners Cited Improved Data and Other Benefits to Adopting an Asset Management Framework", "paragraphs": ["Asset management experts and practitioners we interviewed cited a  number of potential benefits to adopting an asset management framework  that aligns with the six characteristics we identified, including: (1)  improved data and information about assets, (2) better-informed  decisions, and (3) financial benefits."], "subsections": [{"section_title": "Improved Data and Information about Assets", "paragraphs": ["About half of the experts and practitioners we interviewed stated that  implementing an asset management framework that aligns with the six  characteristics we identified previously and discussed can result in an  organization\u2019s collecting more detailed and quality information about  assets. For example:", "One expert representing a U.S. municipality that had recently  implemented a new asset management framework stated that it now  collects and tracks more detailed asset data, including information  about the condition and performance of its assets. According to this  expert, this more detailed information provides asset managers with a  better understanding of how much asset repairs actually cost in the  long term, how long repairs take, and which assets are most critical to  repair or replace. Additionally, they are in the process of integrating  this data into the organization\u2019s capital-improvement project modeling,  a step that in turn has allowed the asset managers to make better  investment decisions. This expert also noted that collecting detailed  data about the municipality\u2019s assets has enabled the asset managers  to provide more information to the public and to decision-makers.", "Another expert we interviewed representing an organization that had  recently adopted a new asset management framework stated that its  data have improved as a result. According to this expert, prior to  implementing the program, the organization had a good inventory of  its assets, but it was missing dynamic information about condition and  performance. The managers made several changes to address this  situation, including investing in information technology systems and  infrastructure to collect and track condition data in real time. As a  result, the organization is now able to track trends in asset  performance failures and anticipate that over time it will predict future  performance failures with this information."], "subsections": []}, {"section_title": "Better-Informed Decisions", "paragraphs": ["Most of the experts and all of the practitioners who responded to this  question stated that another benefit of implementing an asset  management framework is that it can help organizations make better-  informed asset management decisions. For example, some of these  experts and practitioners stated that having a framework that includes  improving interdepartmental coordination, collecting more detailed data,  and having a strategic approach to asset management helps  organizations make better-informed decisions about how to maintain and  invest in their assets. In addition, about one-half of the experts stated  such a framework can also help organizations better understand the risks  the organization faces and make informed decisions about the  organization\u2019s assets. For example:", "One expert stated that a benefit to implementing an asset  management framework that incorporates interdepartmental  coordination is that everyone within the organization is working to  achieve the same goals in both the short-term and long-term, which  results in better decisions and better customer service. This expert  worked with a foreign network operator to implement an asset  management system that would support the company\u2019s goals for  increasing its electric grid capacity. He found that for different assets,  the company had adopted different asset strategies to deal with future  demand growth, approaches that resulted in misaligned asset  strategies. The differences in the individual asset strategies were  identified and realigned. If these differences had not been recognized,  this lack of coordination could have resulted in inefficient decision- making and the loss of time and money.", "Another expert representing a U.S. municipality stated that by  implementing an asset management framework, the municipality\u2019s  program managers are now able to make better-informed asset  management decisions and present information and proposals to the  city council and budget committee. In addition, this detailed  information has allowed managers to better assess the condition of  their assets across the portfolio and to compare it to industry  standards in the respective asset classes."], "subsections": []}, {"section_title": "Financial Benefits", "paragraphs": ["Over half of the experts and a third of the practitioners we interviewed  stated that effective asset management practices can result in financial  benefits to the organization, such as cost avoidance and better  management of financial resources. For example,", "One expert stated that asset management can lead to a greater  understanding of budget needs and better long-term capital and  lifecycle investment planning. In addition, this expert stated overall  that asset management improves clarity in terms of where funds are  spent. This enhanced insight can then inform asset management  decision-making to produce future cost savings.", "A practitioner representing a local municipality in Canada stated that  since implementing an asset management framework, the  municipality is now making better-informed decisions about  maintenance and have identified and eliminated unneeded  maintenance activities, steps that have resulted in cost savings. For  example, by analyzing condition data, the municipality identified an  optimal point in time for addressing maintenance issues on its roads  and achieved a fivefold-to-tenfold cost reduction over previous  repairs."], "subsections": []}]}]}, {"section_title": "Government-Wide Asset Management Information Does Not Fully Reflect an Effective Asset Management Framework", "paragraphs": [], "subsections": [{"section_title": "Experts and Practitioners Cited ISO 55000 Standards as a Resource to Inform Agency Efforts", "paragraphs": ["Experts and practitioners we interviewed most often cited the ISO 55000  standards as a useful resource that provided a solid foundation for an  asset management framework and could inform federal agencies\u2019 asset  management efforts. Specifically, these experts and practitioners stated  that the standards are flexible and adaptable to different types of  organizations regardless of size or organization mission, applicable to  different types of assets, and internationally accepted and credible. About  half of the experts we interviewed had used the standards, and some of  these experts shared examples of how their organization\u2019s asset  management approach improved by implementing ISO 55000. See, for  example, the experience of Pacific Gas & Electric below.", "Pacific Gas and Electric\u2019s (PG&E) experience with International Organization for  Standardization (ISO) 55001 standard:  In 2014 and 2017, PG&E, a public utility company in California, attained Publicly Available  Specification (PAS) 55 and ISO 55001 certification and recertification for its natural gas  operations. Its physical assets include gas transmission and distribution pipelines, pressure  regulator stations, gas storage facilities, and meters. According to PG&E, a key benefit from  implementing the standards is that PG&E has developed a consistent strategy for managing   its natural gas operations assets. This, according to PG&E, has enabled the utility to develop   a framework for program managers from different parts of the organization, such as finance,  operations, engineering and planning, to collaborate more effectively and work together to  wards one strategic goal rather than competing with one another for funding.  According to  PG&E, this new structure allows the program managers to prioritize investment decisions   across their asset portfolio to align with corporate objectives.", "Officials from five of the six agencies we interviewed stated that they were  familiar with the ISO 55000 standards, and officials from the Corps stated  that they use selected practices from ISO 55000. Corps officials stated  that using the standard has provided several benefits to their  organization. For example, they stated that using the standard has  informed their budget process and has helped them make better-informed  decisions about critical reinvestment. In addition, it has allowed them to  develop a consistent approach to managing all of their physical assets  across different lines of business.", "However, officials from four agencies raised some concerns about using  these standards. These included concerns about upfront costs and  resources needed to implement the standards and their applicability to  the federal government given the size, scope, and uniqueness of  agencies\u2019 assets, and the diverse missions of each agency. For example,  officials from one selected agency stated that in their view, the standards  are better suited for private organizations because federal agencies have  federal requirements they need to meet, such as those for disposition of  real property, which may affect their asset management decision making.  We have previously reported on challenges federal agencies face with  disposing of assets in part due to legal requirements agencies must  follow.", "Several experts and officials from one practitioner organization we  interviewed stated that they thought that federal agencies across the  government could implement the ISO 55000 standard. The experts stated  that key benefits of implementing the standard would be that it would  result in a more consistent asset management approach and help federal  agencies better manage resources. For example, one expert stated that a  key benefit of implementing the standard would be to drive federal  agencies to be better stewards of their resources by better utilizing  mission assets. In addition, some experts and practitioners also stated  that federal agencies do not need to implement the full standard or seek  certification to achieve results; agencies can decide which practices in the  standard are most relevant to their organization and implement those  practices. The ISO technical committee that produced the ISO 55000  standards is drafting a new standard on asset management in the public  sector. According to ISO, this standard, expected to be published in  December 2019, will provide guidance to any public entity at the federal,  state, or local level including more detailed information on how to  implement an asset management framework."], "subsections": []}, {"section_title": "Government-Wide Asset Management Information Lacks Many Elements of an Effective Asset Management Framework", "paragraphs": ["While OMB has issued government-wide requirements and guidance to  federal agencies related to asset management, this guidance does not  present a comprehensive approach to asset management because it  does not fully align with standards and key characteristics, nor does it  provide a clearinghouse of information on best practices for federal real  property management to agencies as required by Executive Order 13327.", "As mentioned earlier, OMB has issued various government-wide policies,  guidance, and memorandums related to federal asset management. For  example, in response to Executive Order 13327 in 2004, the FRPC\u2014 chaired by OMB\u2014developed guiding principles for agencies\u2019 asset  management practices and for developing a real property asset  management plan. Specifically, the guidance stated that each real  property asset management plan should, among other things:  link the agency\u2019s asset management framework to the agency\u2019s  strategic goals and objectives, describe a process for periodically evaluating assets, and describe a process for continuously monitoring the agency\u2019s  framework.", "In addition, OMB\u2019s Circular A-11 describes requirements for the agency  capital planning process, such as prioritizing assets to support agency  priorities and objectives, while OMB\u2019s Circular A-123 describes risk  management requirements for agencies, and OMB\u2019s Memorandum 18-21  describes requirements for an agency\u2019s senior real property officers, such  as coordinating real property planning and budget formulation. Further,  the Federal Assets Sale and Transfer Act and the Federal Property  Management Reform Act\u2014both of 2016\u2014collectively contain provisions  related to asset management including establishing procedures for  agencies to follow when disposing of real property assets and requiring  agencies to submit data on leases to the FRPC.", "Taken as a whole, the OMB guidance lacks many of the elements called  for by the ISO 55000 standards and the key characteristics we identified.  For example, the guidance:  covers several different areas of asset management but does not  direct agencies to develop a comprehensive approach to asset  management that incorporates strategic planning, capital planning,  and operations, as recommended by the ISO 55000 standards and  the key characteristics we identified. directs agencies to continuously monitor their asset management  frameworks and identify performance measures but does not direct  agencies to use the results to improve their asset management  frameworks in areas such as overall governance, decision making,  and data collection, as called for in ISO 55000 standards and the key  characteristics we identified. directs agencies to have a senior official in charge of coordinating the  real property management activities of the various parts of the  organization but does not direct agencies to demonstrate leadership  commitment to asset management or to define asset management  roles and responsibilities for each element of the agency, as called for  in ISO 55000 standards and the key characteristics we identified. directs agencies to ensure that their real property management  practices enhance their decision making, but does not direct agencies  to actively promote a culture of information sharing or ensure that the  agencies\u2019 decisions are made on an enterprise-wide basis, as called  for in ISO 55000 standards and the key characteristics we identified. directs agencies to identify asset management goals and enhance  decision making, but does not direct agencies to establish the scope  of their asset management frameworks by, for example, determining  how the agency should group or organize the management of its  different types of assets, as called for in ISO 55000 standards.", "Moreover, OMB staff told us that while the executive order\u2019s requirements  for federal agencies to develop an asset management plan and related  processes remain in effect, OMB\u2019s real property management focus has  shifted to the National Strategy for the Efficient Use of Real Property and  its accompanying Reduce the Footprint initiatives issued in 2015. These  initiatives emphasize efficiently managing and using space, rather than  overall asset management. OMB staff said that they view asset  management as a tactical activity, separate from broader strategic and  capital planning efforts, where agencies make operational-level policies to  support their real property portfolio. However, this approach to asset  management differs from ISO\u2019s definition of asset management, which  encompasses both the capital-planning and asset management levels of  OMB\u2019s policy model. Under the Reduce the Footprint initiative, federal  agencies are required to submit annual Real Property Efficiency plans  that specify their overall strategic and tactical approach to managing real  property, provide a rationale for and justify their optimum portfolio, and  direct the identification and execution of real property disposals, efficiency  improvements, and cost-savings measures. As a result, according to  OMB staff, they no longer require agencies to develop a comprehensive  asset management plan.", "We recognize that reducing, and more efficiently managing government- owned and leased space are important goals. However, effective asset  management is a more comprehensive objective that seeks to best  leverage assets to meet agencies missions and strategic objectives. For  example, some agencies have high-value real property assets that are  not building space, such as those at the Corps and the Park Service. See  table 2 for examples of these types of assets at the six selected agencies  in our review. For example, the Corps has over 700 dams\u2014the age and  criticality of which require the Corps to conduct regular maintenance and,  in some cases, major repairs to assure continued safe operation. In 2015,  the Corps estimated the cost of fixing all of its dams that need repair at  $24 billion. Similarly, in 2016, we reported that the Park Service\u2019s  deferred maintenance for its assets averaged about $11.3 billion from  fiscal year 2009 through fiscal year 2015 and that in each of those years,  deferred maintenance for paved roads made up the largest share of the  agency\u2019s deferred maintenance\u2014about 44 percent. Assets classified as  paved roads in the Park Service\u2019s database include bridges, tunnels,  paved parking areas, and paved roadways. For these and other agencies  with similar portfolios, the agencies\u2019 Real Property Efficiency plans are  not relevant to managing the bulk of their assets, and the guidance  primarily focused on buildings and office space is of limited use. In  addition, without specific information to help all federal agencies evaluate  their current practices and develop more comprehensive asset  management approaches, federal agencies may not have the knowledge  needed to maximize the value of their limited resources.", "In addition, while Executive Order 13327 requires the FRPC to provide a  clearinghouse of information on best practices for federal real property  management, this information is currently lacking from existing guidance  or other available sources. GSA officials and OMB staff stated they do not  currently have plans to compile this information. Because of this, existing  guidance falls short of what an effective asset management framework  might include. GSA officials told us that while certain agencies have  shared information on asset management at meetings of the FRPC, the  council does not take minutes or make this information readily available to  agencies outside of the meetings. Given OMB\u2019s shift in focus, OMB staff  said that they did not plan to update their guidance. However, Standards  for Internal Control in the Federal Government state that communicating  information, such as leading practices, is vital for agencies to achieve  their objectives.", "Further, government-wide information in some cases is not available,  such as information on practices federal agencies have successfully used  to conduct asset management. There is merit to having key information  on successful agency practices readily accessible for federal agencies to  use. For example, officials from three of the six agencies we spoke with  said information on best practices for asset management would be helpful  to them in developing their agencies asset management frameworks.  Such information could include practices that are described in ISO 55000  and that federal agencies have successfully used to improve asset  management. For example, one agency official stated that it would be  useful to have a compilation of asset management practices that federal  agencies use to determine if any of those practices might be applicable to  an agency. Similarly, an official from another agency stated that the  agency is currently evaluating opportunities to improve its asset  management program and that the agency would be interested in  learning more about asset management processes across the federal  government in order to inform the agency\u2019s asset management efforts.  Without information such as these officials described, federal agencies  lack access to practices geared to them on how to develop an asset  management plan and other asset management practices."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["Federal agencies collectively hold billions of dollars in real property  assets\u2014ranging from buildings, warehouses, and roads to structures  including beacons, locks, and dams\u2014and are charged with managing  these assets. The effective management of all of an agency\u2019s real  property assets plays an important role in its ability to execute its mission  now and into the future. However, because existing federal asset  management guidance does not fully reflect standards and the key  characteristics, such as, directing agencies to develop a comprehensive  approach to asset management that incorporates strategic planning,  capital planning, and operations, federal agencies may not have the  knowledge needed to maximize the value of their limited resources. In  addition, because there is no central clearinghouse of information to  support agencies\u2019 asset management efforts, as required by Executive  Order 13327, agencies may not know how best to implement asset  management activities, including using quality data to inform decisions  and prioritize investments. A reliable central source of information on  current effective asset management practices could support agencies in  making progress in their asset management efforts, helping them more  efficiently fulfill their missions and avoid unnecessarily expending  resources. Further, sharing experiences across the government could  assist agencies\u2019 efforts to adopt, assess, and tailor an asset management  approach appropriate to their needs and to support efforts to more  strategically manage their real property portfolios."], "subsections": []}, {"section_title": "Recommendation", "paragraphs": ["We are making the following recommendation to OMB:  The Director of OMB should take steps to improve existing information on  federal asset management to reflect leading practices such as those  described in ISO 55000 and the key characteristics we identified and  make it readily available to federal agencies. These steps could include  updating asset management guidance and developing a clearinghouse of  information on asset management practices and successful agency  experiences. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report for review to the Office of Management  and Budget, the General Services Administration, the National  Aeronautics and Space Administration, and the Departments of  Agriculture, Defense, Homeland Security, and the Interior.", "The Forest Service within the Department of Agriculture agreed with our  findings and noted that GAO's key characteristics for effective asset  management will help the Forest Service manage their assets and  resources effectively. Further, the Forest Service stated that asset  management leading practices are critical in measuring efficiencies and  meeting strategic goals for its diverse and large portfolio. The Forest  Service\u2019s written comments are reproduced in appendix IV. The  Departments of Homeland Security and the Interior, and the General  Services Administration provided technical comments, which we  incorporated as appropriate. The Office of Management and Budget, the  Department of Defense, and the National Aeronautics and Space  Administration had no comments on the draft report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of the Departments of Agriculture, Defense,  Homeland Security, and the Interior; the Administrators of the General  Services Administration and National Aeronautics and Space  Administration; and the Director of the Office of Management and Budget.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Asset Management in Canada", "paragraphs": ["As of 2016, public entities in Canada owned about $800 billion worth of  infrastructure assets including roads, bridges, buildings, waste and storm  water facilities, and public transportation assets. Municipalities owned  the majority of these assets, around 60 percent, with provincial and  federal entities owning around 38 percent and 2 percent respectively."], "subsections": [{"section_title": "Asset Management Policy and Support", "paragraphs": [], "subsections": [{"section_title": "Federal Asset Management Policies", "paragraphs": ["The federal government of Canada owns or leases approximately 20,000  properties containing about 37,000 buildings with about 300 million  square feet of floor space. In the fiscal year that ended in 2016, the  federal government spent around $7.5 billion on managing its real  property portfolio, of which about 80 percent went to operating  expenditures and about 20 percent went to capital investments such as  acquisitions and renovations. This portfolio is managed and controlled by  64 federal agencies, departments, and \u201cCrown corporations\u201d with primary  uses including post offices, military facilities, government offices,  employee housing, and navigation facilities such as lights. The Treasury  Board of Canada, supported by the Treasury Board Secretariat, provides  policy direction to agencies and departments for their real property assets  along with approving certain larger projects, acquisitions, and disposals.  The Treasury Board of Canada Secretariat is currently conducting a  portfolio-wide review of the federal government\u2019s real property  management in order to develop a road map for the most efficient and  effective model for federal real property asset management. Treasury  Board Secretariat officials told us that they have preliminarily found that  the federal government does not have a government-wide asset  management strategy and faces challenges related to the availability of  current and consistent asset condition data."], "subsections": []}, {"section_title": "Federal and Provincial Support for Municipal Asset Management", "paragraphs": ["Municipalities own and manage most of Canada\u2019s public infrastructure,  and in recent years, municipal governments have been leaders in  developing and implementing asset management frameworks. By the  early 2000\u2019s several large cities including Hamilton, Calgary, and  Edmonton began developing frameworks to reduce costs and improve the  management of certain types of municipal assets such as those related to  water distribution and treatment. More recently, the federal government  and several provincial governments have promoted asset management  for municipalities in a variety of ways including by awarding grants and  attaching requirements to infrastructure funding. Some of these programs  have focused on small municipalities that make up the large majority of  the total but may face particular challenges in obtaining the resources to  develop and implement an asset management framework.", "The federal government provides infrastructure funding to municipalities  through several programs, including the Federal Gas Tax Fund. This fund  provides around $1.5 billion in funding to municipalities each year for  projects such as water treatment, roads and bridges, broadband  connectivity, airports, and public transit, and does not require yearly  reauthorization. Each of Canada\u2019s municipalities receives funding through  this program by formula, and funds are routed through the provinces,  which can attach their own requirements. In the 2014 set of agreements  between the federal government and the provinces, provinces were  required to institute asset management requirements for municipalities to  receive gas tax funds, and each of the provinces developed separate  requirements for municipalities under its jurisdiction. These requirements  took several forms. For example, Ontario required each municipality to  develop an asset management plan by the end of 2016 while Nova Scotia  has withheld a small portion of its total provincial gas tax allocation to use  toward developing a province-wide asset management framework for  municipalities to use.", "The federal government also provides funding to municipalities for asset  management. Through the Municipal Asset Management Program,  administered by the Federation of Canadian Municipalities (FCM),  Infrastructure Canada made available $38 million over 5 years for  Canadian municipalities and partnering not-for-profit organizations to  improve municipal asset management practices. The maximum grant  amount for municipalities is $38,000. Eligible activities under this program  include assessing asset condition, collecting data on asset costs,  implementing asset management policies, training staff, and purchasing  software. FCM officials told us that, as of March 2018, they had received  253 grant applications and that, of the grants they had disbursed so far,  around:", "25 percent of grantees used the funds for data projects,", "15 percent to develop asset management plans,", "2 percent for staff training,", "4 percent for asset management system operations, and", "60 percent for some combination of these purposes.", "Canadian provinces have also taken several actions to improve asset  management practices at the municipal level by establishing  requirements for municipalities in their jurisdiction or by providing funding  programs. For example, in 2017, Ontario issued an asset management  planning regulation, which requires municipalities to develop a strategic  asset management policy by July 1, 2019, and then develop  progressively more detailed asset management planning documents in  later years. In addition to this regulation, in 2014, Ontario also introduced  a funding program for small and rural municipalities to provide long-term,  formula and application-based funding for these municipalities to develop  and repair their infrastructure. Under the program, municipalities are  required to have an asset management plan as a condition of receiving  funding. In addition, municipalities can use formula-based program funds  for certain asset management activities including purchasing software,  staff training, or direct staff activity related to asset management. In 2016,  Ontario announced plans to increase the funding available per year from  about $75 million to about $150 million in 2019."], "subsections": []}]}, {"section_title": "Experiences with Implementing Asset Management Frameworks", "paragraphs": [], "subsections": [{"section_title": "Selected Federal Asset Management Experiences", "paragraphs": ["Much of the federal government\u2019s real property is managed by a federal  department known as Public Services and Procurement Canada (PSPC)  whose nationwide portfolio includes around 350 owned buildings and an  additional 1,200 building leases. PSPC uses a portfolio-wide asset  management framework, which begins with developing national portfolio  strategies and plans every 5 years. Staff in each of PSPC\u2019s five regional  offices then use these plans to develop regional and community-based  portfolio strategies and plans, which then inform annual management  plans for each PSPC asset. To determine how to best allocate funds  across its portfolio of assets, PSPC places each of its assets into one of  four tiers based on three major criteria: (1) the asset\u2019s strategic  importance to PSPC\u2019s portfolio as measured by criteria such as the  asset\u2019s location and design, (2) the asset\u2019s operating and functional  performance such as cost per unit area, and (3) the asset\u2019s condition  based on a metric called the Liability Condition Index, which measures  the risk an asset poses to continuing operations and occupant safety.  Using this method, PSPC designates its highest tier assets as those that  have excellent financial performance, that have non-financial attributes  that support PSPC\u2019s objectives, and that are not expected to need major  capital investments in the next 5 years. The lowest tier assets have poor  performance and are in need of either major investments or disposal in  the next 5 to 10 years.", "PSPC officials told us that they are in the midst of making major changes  to their asset management framework, including by moving to a  component-based system of accounting where they will treat each asset  as 12 components, including 11 for the building such as roofs or heating  and air conditioning systems, and 1 for tenant equipment. Additionally,  PSPC plans to move to more modern enterprise systems to eliminate  paper records and improve the quality of the data they use to make  budgeting decisions. Officials said that they consider the ISO 55000  requirements when evaluating their asset management framework, but  they also use other best practices from the private sector that they said  better suit their needs by providing more detailed information on how to  develop and implement the various elements of an asset management  framework."], "subsections": []}, {"section_title": "Selected Municipal Asset Management Experiences", "paragraphs": ["Over the past 20 years, several Canadian municipalities have developed  detailed asset management frameworks to improve management  efficiency and cost-effectiveness as well as to obtain improved levels of  service from municipal infrastructure. In the late 1990\u2019s, the City of  Hamilton, Ontario, began developing an asset management framework  for its core municipal infrastructure assets, and in 2001, the city  established an office dedicated to asset management within its public  works department, which produced its most recent municipal asset  management plan for public works in 2014. This plan sets a strategic  vision and goals for the asset management program, which are designed  to align with the city\u2019s overall strategic plan, capital and operating  budgets, master plan, and other business documents, and describes how  the city\u2019s asset management activities will support the objectives laid out  in those documents. Additionally, the asset management plan provides an  overview of the current state of Hamilton\u2019s infrastructure assets in four  categories: drinking water supply, wastewater management, storm water  management, and roads and bridges. The plan states the total value of  the assets in each category and, the condition of those assets and has an  indicator of the recent trends in the condition of those assets. The plan  also defines the levels of service Hamilton aims to provide in each of the  four main asset categories and sets goals for each category such as  safety, reliability, regulatory compliance, and customer service. Next, the  plan defines an asset management strategy for the city, which includes  taking an inventory of assets, measuring asset condition, assessing risk,  measuring the performance of the asset management framework, making  coordinated citywide decisions, and planning for capital investments.  Finally, the document contains a plan for managing each of the four main  asset categories over their entire life cycles.", "Hamilton officials stressed the importance of collecting and using quality  data when deciding where and when to allocate resources. They told us  that the data they have collected under their asset management  framework have allowed them to make better-informed investment  decisions, and have provided them with the information necessary to  make business cases for investment and to better defend their decisions  when they solicit funding from the City Council. For example, officials  described how the city assesses the condition of its road network and  uses the results to prioritize investment in its assets. To assess the  condition of each road, the city uses a 100-point scale where, for  example, above 60 indicates the road is only in need of preventative  maintenance and 20 or less indicates the road is in need of total  reconstruction. Officials said that a total reconstruction could cost ten  times as much as a minor rehabilitation and that the window of time  between when a road needs only a minor rehabilitation and a full  reconstruction is only around 10 years. Because of this, Hamilton officials  said that it is important to conduct rehabilitation on roads and other  infrastructure assets before they deteriorate to the point where they either  fail or are in need of a full rehabilitation. For example, Hamilton undertook  a major re-lining project for a storm sewer that was in danger of complete  collapse, as shown in fig. 6. Officials told us this project would preserve  storm sewer service at significantly lower cost than waiting for the  structure to fail or completely rebuilding it, either of which would have  been cost prohibitive. Additionally, Hamilton officials noted that they do  not need all of their assets to be at a 100 rating and that their asset  management framework directs them to allow some assets to deteriorate  to a certain extent while rehabilitating others by making investment  decisions on a system-wide service basis, as opposed to an individual  project basis.", "The City of Calgary, Alberta, began developing its asset management  framework in the early 2000\u2019s, first focusing on the Calgary\u2019s municipal  water-management assets because they are expensive to maintain and  are only funded from water utility customer bills, as opposed to tax  revenue. City officials told us that the primary impetus for initially  exploring asset management was to be able to maintain levels of service  as the city rapidly expanded in both population and physical size; this  expansion forced Calgary to make major investments in the water  system. Since that time, Calgary has expanded its asset management  framework to include nearly all of its assets, including its software,  bridges, public recreation facilities, and even its trees. Between 2008 and  2010, the Calgary took steps to align its asset management to its  business processes, steps that culminated with the development of the  city\u2019s first citywide asset management policy in 2010.", "Calgary officials told us that between 2004 and 2008 they worked to align  their initial asset management framework with the British Standards  Institution Publicly Available Specification 55 (PAS 55). After this  experience, officials from Calgary participated in the development of the  ISO 55000 standards and provided the Standards Committee information  about tactics for asset management such as policy development and  business strategy. When the ISO 55000 standards were officially  published in 2014, the city began working on aligning their asset  management framework with the new standards, a process that led to a  new framework including a strategic asset management plan, which city  officials published in 2016. Calgary officials said that aligning their asset  management framework with the ISO 55000 standards has given them  support from the city\u2019s top management and has improved their  relationship with the various bodies that audit the city\u2019s operations  because it gives them a common language to use when describing  management processes. Calgary officials told us that the ISO 55000  standards are credible internationally recognized best practices and that  in practice they are a good guide for developing an asset management  framework. However, Calgary is not planning on certifying its operations  to the ISO 55000 standard because officials told us that they are not  required to be certified; certification is expensive and needs to be  repeated; and they are unsure of what additional value certification to the  standards would provide.", "The City of Ottawa, Ontario, began developing its asset management  framework in 2001. Since that time, the city\u2019s asset management  framework has gone through several versions, the most recent of which it  developed beginning in 2012 based on PAS 55. Ottawa officials told us  that implementing their asset management framework has allowed them  to collect better information about their assets and improve their long-term  financial-infrastructure-planning process. While Ottawa officials  developed and implemented an asset management framework, they have  a number of ongoing initiatives to further develop some areas of the  framework. For example, officials said that they consider determining the  levels of service to be provided by each asset class the most difficult  aspect of asset management, especially for those assets that do not  necessarily provide a measureable service. Ottawa officials are working  on ways to better measure the services each of their assets provides and  the levels of risk that each asset poses to these service levels. Officials  said that accurately measuring service and risk levels is critical for their  financial planning and will allow them to improve how they prioritize  funding and ensure that funds are spent on priority assets. See fig. 7 for  an example of an asset officials said was intended to improve levels of  service for Ottawa\u2019s pedestrian multi-use pathways. Another ongoing  initiative is an updated report card for the condition of the city\u2019s assets,  which officials said they use to transparently communicate to  stakeholders the current state of their infrastructure."], "subsections": []}]}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report discusses: (1) key characteristics of an effective asset  management framework, and how selected federal agencies\u2019 frameworks  reflect these characteristics; (2) views of selected asset management  experts and practitioners on challenges and benefits to implementing an  asset management framework; and (3) whether government-wide asset  management guidance and information reflect standards and key  characteristics of an effective asset management framework.", "To obtain information for all three objectives, we reviewed relevant  literature, including academic and industry literature on asset  management, publications describing asset management leading  practices, and the ISO 55000 and related standards. We selected the ISO  55000 standards because they are international consensus standards on  asset management practices. We also reviewed laws governing federal  real-property asset management, Office of Management and Budget\u2019s  (OMB) guidance and prior GAO reports describing agencies\u2019 real-property  management and efforts to more efficiently manage their real property  portfolios.", "In addition, to address all three objectives, we collected information from  and interviewed a judgmental sample of 22 experts to obtain their  perspectives on various asset management issues. To identify possible  experts to interview, we first worked to identify relevant literature  published in the topic area. Specifically we searched in October 2017 for  scholarly and industry trade articles and other publications that examined  effective asset management practices. We limited our search to studies  and articles published from January 2014 through January 2017. From  this search, we screened and identified studies and articles for relevance  to our report and selected those that discussed asset management  practices and the ISO 55000 standards. In addition, we conducted  preliminary interviews with selected asset management practitioners, who  included representatives from public and private organizations  knowledgeable about asset management practices, to learn about key  asset management issues and obtain recommendations about experts in  this field. Through these methods, we identified a total of 82 possible  candidates to interview.", "To ensure a diversity of perspectives, we used the following criteria to  assess and select a sample from this group: type and depth of an expert\u2019s  experience, affiliations with asset management trade associations,  experience with government asset management practices, relevance of  published work to our topic, and recommendations from other entities.   We selected a total of 22 experts representing academia, private  industries, foreign private and public entities, and entities that have  implemented ISO 55000. See table 3 for a list of experts whom we  interviewed. Their views on asset management practices are not  generalizable to those of all experts; however, we were able to secure the  participation of a diverse, highly qualified group of experts and believe  their views provide a balanced and informed perspective on the topics  discussed.", "We interviewed the selected 22 experts between January 2018 and  February 2018 and used a semi-structured interview format with open- ended questions for those interviews. We identified the topics that each of  the experts would be able to respond to, based on the individual\u2019s area of  expertise and each responded to questions in the semi-structured  interview guide in the areas in which they had specific knowledge. During  these interviews, we asked for experts\u2019 views on key characteristics of an  effective asset management system, opportunities for improving federal  agencies\u2019 asset management approaches, experiences with using ISO  55000, and their views on the applicability of ISO 55000 to the federal  government. After conducting these semi-structured interviews, we  conducted a content analysis of the interview data. To conduct this  analysis, we organized the responses by interview question, and then one  GAO analyst reviewed all of the interview responses to questions and  identified recurring themes. Using the identified themes, the analyst then  developed categories for coding the interview responses and  independently coded the responses for each question. To ensure the  accuracy of our content analysis, a second GAO analyst reviewed the first  analyst\u2019s coding of the interview responses, and then the two analysts  reconciled any discrepancies.", "To identify key characteristics of an effective asset management  framework and how selected federal agencies\u2019 frameworks reflect these  characteristics, we obtained and analyzed the ISO 55000 standards,  which include leading practices, and asset management literature, and  we analyzed information collected from our interviews with experts. We  synthesized information from these sources to identify six commonly  mentioned characteristics. We then selected six bureau-level and  independent agencies as case studies and compared these agencies\u2019  asset management frameworks to the six key characteristics that we  identified. Because the agencies are not required to follow the key  characteristics we identified, we did not evaluate the extent to which  agencies\u2019 efforts met these characteristics. Instead, we provide this  information as illustrative examples of how the agencies\u2019 asset  management practices reflect these characteristics.", "We used a variety of criteria to select these agencies, such as: whether  the agency was among the agencies that had the largest real property  portfolio; replacement value and total square footage of the portfolio;  extent to which the bureau or independent agency had a notable asset  management program as described by recommendations from  practitioners we interviewed; and whether the agency was implementing  the ISO 55000 standards. In order to ensure that we had a diversity of  experiences and expertise from across the federal government, we  limited our selection to independent agencies and one bureau-level entity  from each cabinet department. Based on these factors, we selected: (1)  U.S. Coast Guard (Coast Guard); (2) U.S. Army Corps of Engineers  (Corps); (3) General Service Administration (GSA); (4) National  Aeronautics and Space Administration (NASA); (5) National Parks  Service (Park Service); and (6) United States Forest Service (Forest  Service). While our case-study agencies are not generalizable to all Chief  Financial Officers Act (CFO) agencies, they provide a range of examples  of agencies\u2019 experiences with implementing asset management  practices.", "We reviewed documents and interviewed officials from each of the six  selected agencies to learn about the agency\u2019s practices, its experiences  with the ISO 55000 standards, and challenges it has faced in conducting  asset management. In addition, we analyzed fiscal year 2017 Federal  Real Property Profile (FRPP) data, as managed by GSA, to obtain  information about each agency\u2019s portfolio, such as the number of real  property assets and total asset-replacement value, and to obtain  examples of the types of buildings and structures owned by the six  selected agencies. The Corps and Coast Guard noted small differences  between our analysis of the FRPP data and the data from their reporting  systems. For example, the Corps reported having 139,744 real property  assets as of August 2018 with an estimated asset replacement value  $273.4 billion as of September 2017. In addition, the Coast Guard  reported 44,226 real property assets with an estimated asset replacement  value of $17.6 billion as of September 2017. To ensure consistency, and  because these differences were small, we relied on FRPP data rather  than data from these agencies\u2019 reporting systems.", "We conducted a data reliability assessment of the FRPP data by  reviewing documentation, interviewing GSA officials, and verifying data  with officials from our selected agencies, and concluded the data were  reliable for the purposes of our reporting objectives. We also visited four  locations from our case study agencies to discuss and view examples of  how our selected case-study agencies are conducting asset  management. Specifically, we visited the Park Service\u2019s Santa Monica,  CA, Mountains National Recreation Area; the Coast Guard\u2019s Baltimore  Shipyard in Curtis Bay, MD; the Corps\u2019 Washington Aqueduct in  Washington, D.C.; and the Brandon Road Lock and Dam in Joliet, IL. We  selected these locations based on several factors including geographic  and agency diversity, costs to travel to location, recommendations from  officials at our case study agencies, and extent to which the location  provided illustrative examples of how federal agencies are managing their  assets.", "To determine the 32 experts\u2019 and practitioners\u2019 views on challenges and  benefits to implementing an asset management framework, we analyzed  information collected from our interviews with the 22 experts previously  mentioned. We also reviewed documents from and interviewed asset  management practitioners from 10 additional organizations familiar with  asset management practices and the ISO 55000 standards. The 10  organizations included representatives from private industry, one federal  agency and local municipalities in Canada. We selected these additional  10 organizations by reviewing published materials related to asset  management and referrals from our preliminary interviews. We  interviewed the 32 experts and practitioners about their views on  challenges and benefits to conducting asset management, ISO 55000,  and illustrative examples of practices in other countries. The information  gathered from our interviews with experts and practitioners is not  generalizable but is useful in illustrating a range of views on asset  management issues. See table 4 for a list of organizations we  interviewed.", "To assess whether government-wide guidance and information on asset  management reflect standards and key characteristics of an effective  asset management framework, we reviewed current federal guidance and  evaluated the extent to which this guidance incorporates practices  described in the ISO 55000 standards and the six key characteristics of  an effective asset management framework that we identified. Specifically,  we reviewed the Federal Real Property Council\u2019s (FRPC\u2019s) 2004  Guidance for Improved Asset Management, OMB\u2019s, National Strategy for  the Efficient Use of Real Property 2015-2020: Reducing the Federal  Portfolio through Improved Space Utilization, Consolidation, and Disposal  and OMB\u2019s Implementation of OMB Memorandum M-12-12 Section 3:  Reduce the Footprint, Management Procedures Memorandum No. 2015- 01. We also reviewed other OMB guidance, such as OMB\u2019s 2017 Capital Programming Guide, OMB\u2019s Circular A-123, OMB\u2019s Memorandum 18- 21 and other guidance. In addition, we reviewed asset management requirements in the Federal Real Property Management Act of 2016 and in the Federal Assets Sale Transfer Act of 2016. We interviewed OMB and GSA officials about their role in supporting federal agencies\u2019 asset  management efforts. In addition, we obtained information from our  interviews with the 32 asset management experts and practitioners about  practices that could be applicable to the federal government and  opportunities to improve federal agencies\u2019 asset management  approaches.", "Lastly, we obtained documents and, as previously discussed, interviewed  representatives from private organizations, federal agencies, and local  municipalities in Canada\u2014a country with over 20 years of experience in  conducting asset management\u2014to learn about their asset management  practices, including their use of the ISO 55000 standard. We also  conducted a site visit to Canada to learn more about their practices and to  view examples of assets in local municipalities. See appendix I for more  information on Canada\u2019s asset management practices.", "We conducted this performance audit from August 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Key Elements of the International Organization for Standardization (ISO) 55000 Standards", "paragraphs": [], "subsections": [{"section_title": "ISO 55000 Section", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Amelia Shachoy, Assistant  Director; Maria Mercado, Analyst-in-Charge; Sarah Arnett; Melissa  Bodeau; Leia Dickerson; Alex Fedell; Geoffrey Hamilton; Terence Lam;  Malika Rice; Kelly Rubin; and Tasha Straszewski made key contributions  to this report."], "subsections": []}]}], "fastfact": ["The federal government spends billions of dollars to operate and maintain its real property assets, which include buildings, roads, and bridges. Agencies are responsible for managing these assets efficiently and cost-effectively.", "We identified 6 key characteristics of effective asset management. For example, we found that leadership support\u2014with leaders clearly articulating their support and providing resources\u2014can help.", "The federal information available to help agencies maximize the value of their assets wasn't consistent with leading practices and didn't reflect the key characteristics we identified, so we recommended improving it."]}
{"id": "GAO-18-562", "url": "https://www.gao.gov/products/GAO-18-562", "title": "Chemical Terrorism: A Strategy and Implementation Plan Would Help DHS Better Manage Fragmented Chemical Defense Programs and Activities", "published_date": "2018-08-22T00:00:00", "released_date": "2018-09-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Recent chemical attacks abroad and the threat of using chemical weapons against the West by the Islamic State of Iraq and Syria (ISIS) have raised concerns about the potential for chemical attacks occurring in the United States. DHS's chemical defense responsibilities include, among others, managing and coordinating federal efforts to prevent and protect against domestic chemical attacks.", "GAO was asked to examine DHS's chemical defense programs and activities. This report examines (1) DHS programs and activities to prevent and protect against domestic chemical attacks and (2) the extent to which DHS has integrated and coordinated all of its chemical defense programs and activities. GAO reviewed documentation and interviewed officials from relevant DHS offices and components and reviewed DHS strategy and planning documents and federal laws and directives related to chemical defense."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) manages several programs and activities designed to prevent and protect against domestic attacks using chemical agents (see figure). Some DHS components have programs that focus on chemical defense, such as the Science and Technology Directorate's (S&T) chemical hazard characterization. Others have chemical defense responsibilities as part of their broader missions, such as U.S. Customs and Border Protection (CBP), which interdicts chemical agents at the border. DHS recently consolidated some chemical defense programs and activities into a new Countering Weapons of Mass Destruction (CWMD) Office.", "However, GAO found and DHS officials acknowledged that DHS has not fully integrated and coordinated its chemical defense programs and activities. Several components\u2014including CBP, U.S. Coast Guard, the Office of Health Affairs, and S&T\u2014have conducted similar activities, such as acquiring chemical detectors or assisting local jurisdictions with preparedness, separately, without DHS-wide direction and coordination. As components carry out chemical defense activities to meet mission needs, there is a risk that DHS may miss an opportunity to leverage resources and share information that could lead to greater effectiveness addressing chemical threats. It is too early to tell the extent to which the new CWMD Office will enhance the integration of DHS's chemical defense programs and activities. Given the breadth of DHS's chemical defense responsibilities, a strategy and implementation plan would help the CWMD Office (1) mitigate the risk of fragmentation among DHS programs and activities, and (2) establish goals and identify resources to achieve these goals, consistent with the Government Performance and Results Modernization Act of 2010. This would also be consistent with a 2012 DHS effort, since abandoned, to develop a strategy and implementation plan for all chemical defense activities, from prevention to recovery. DHS officials stated the 2012 effort was not completed because of leadership changes and competing priorities."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Assistant Secretary for the CWMD Office develop a strategy and implementation plan to help DHS guide, support, integrate, and coordinate chemical defense programs and activities. DHS concurred with the recommendation and identified actions to address it."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Honorable Daniel M. Donovan, Jr.  Chairman  Subcommittee on Emergency Preparedness, Response, and  Communications  Committee on Homeland Security  House of Representatives  Recent chemical attacks in Malaysia and Syria, a thwarted chemical  attack in Australia, and the threat of using chemical weapons against the  West by the Islamic State of Iraq and Syria (ISIS) have sparked concerns  about the potential for chemical attacks occurring in the United States. In  March 2017, an exiled relative of the leader of North Korea was killed in  Malaysia after he was allegedly exposed to the chemical nerve agent VX.  In April 2017, a chemical attack in Syria using the nerve agent sarin killed  approximately 100 people and injured hundreds more. In July 2017,  Australian police foiled an alleged terrorist plot to bring down a plane by  using a device that would have generated an explosion and released a  toxic gas inside the plane. Similarly, according to Department of  Homeland Security (DHS) officials, ISIS has become increasingly  interested in conducting and inspiring chemical attacks in the West, with  the goal of increasing fear, enhancing the lethal nature of attacks, and  adding greater complexity into response efforts.", "According to the National Academies and DHS, chemical attacks involve  releasing toxic chemicals with the intent to do harm. In addition,  according to DHS, ISIS-inspired homegrown extremists or other domestic  actors who choose to pursue chemical attacks could use toxic chemicals  and crude methods to release them, such as releasing toxic gases from a  pressurized tank by breaching the tank with an improvised explosive  device. For example, facilities containing toxic chemicals or the trucks,  vessels, or rail cars used to transport these chemicals could be attacked  to cause a chemical release. Toxic chemicals that could be used in an  attack include industrial and commercial chemicals, such as chlorine or  ammonia, and chemical toxins of biological origin, such as ricin.", "DHS has a number of chemical defense responsibilities, programs, and  activities spread across its various components. They include, for  example, being responsible for managing domestic chemical incidents;  developing and implementing chemical detection technology; providing  chemical preparedness guidance and support to state, local, territorial,  and tribal partners; and regulating and supporting the security of facilities  that use or store certain chemicals. DHS\u2019s efforts to address a terrorist  chemical attack involve a wide range of components including the  Countering Weapons of Mass Destruction (CWMD) Office, the National  Protection and Programs Directorate (NPPD), the Science and  Technology Directorate (S&T), the Federal Emergency Management  Agency (FEMA), U.S. Customs and Border Protection (CBP), the  Transportation Security Administration (TSA), and the U.S. Coast Guard.", "In light of the range of DHS components involved in chemical defense  and concerns that some terrorist organizations have threatened to use  chemical agents to attack the United States, you asked us to examine  DHS\u2019 chemical defense efforts and whether these programs and activities  are positioned to address the threat of chemical terrorism. This report  examines (1) DHS programs and activities to prevent and protect against  domestic chemical attacks and (2) the extent to which DHS has  integrated and coordinated all of its chemical defense programs and  activities.", "To meet our two objectives, we reviewed and discussed with DHS  officials relevant legislation, presidential directives, and DHS  documentation to understand DHS\u2019s responsibilities related to domestic  chemical defense. We reviewed, among others, the Homeland Security  Act of 2002; the DHS Appropriations Act, 2007; the Protecting and  Securing Chemical Facilities from Terrorist Attacks Act of 2014; the 2007  Homeland Security Presidential Directive on domestic chemical defense;  the 2003 Homeland Security Presidential Directive on management of  domestic incidents; the 2011 Presidential Policy Directive on national  preparedness; the 2007 Homeland Security Presidential Directive on  medical countermeasures against weapons of mass destruction; the 2013  Presidential Policy Directive on critical infrastructure security and  resilience; the 2004 Homeland Security Presidential Directive on defense  of U.S. agriculture and food; the 2014 DHS Quadrennial Homeland  Security Review; the Fiscal Years 2014\u20132018 DHS Strategic Plan; the  2013 DHS National Infrastructure Protection Plan; and the 2016 DHS  National Response Framework.", "To identify the programs and activities that DHS has to prevent and  protect against chemical attacks, we reviewed DHS documentation and  interviewed DHS officials. Specifically, we reviewed a 2016 DHS  presidential transition issue paper that identified DHS components as  having activities intended to reduce the risk of chemicals being used as  weapons. Also, we reviewed documentation provided by DHS and  interviewed officials from the following components: the Office of Health  Affairs (OHA), S&T, NPPD, FEMA, CBP, TSA, the Office of Intelligence  and Analysis, the U.S. Coast Guard, and the U.S. Secret Service. For  example, we reviewed documentation and interviewed officials from  OHA\u2019s Chemical Defense Program about chemical defense  demonstration projects it conducted from fiscal year 2009 through fiscal  year 2017 in five jurisdictions: Baltimore, Maryland; Boise, Idaho;  Houston, Texas; New Orleans, Louisiana; and Nassau County, New York.  We also reviewed documentation and interviewed officials from S&T\u2019s Chemical and Biological Defense Division on its chemical detection work  conducted in 2016 and 2017 in New York and New Jersey. In addition,  we reviewed documentation and interviewed officials from S&T\u2019s  Chemical Security Analysis Center on its work analyzing chemical threats  and risks, such as the Chemical Terrorism Risk Assessment, which is  used to determine the risk associated with different terrorist scenarios and  to assess how proposed measures might reduce that risk. Further, we  reviewed documentation and interviewed officials from NPPD\u2019s  Infrastructure Security Compliance Division on its Chemical Facility Anti- Terrorism Standards (CFATS) program, which regulates security at  certain chemical facilities, and reviewed our related body of work,  including recent reports. Moreover, we reviewed documentation and  interviewed officials from NPPD\u2019s Office of Infrastructure Protection on its  Sector Outreach and Programs Division (SOPD) that represents DHS as  the sector-specific agency for the chemical sector and works in  conjunction with other NPPD divisions to assure the security of the  chemical sector. In addition, we reviewed documentation and  interviewed officials representing NPPD\u2019s Federal Protective Service.  Moreover, we reviewed documentation and interviewed officials from the  new CWMD Office on its efforts to consolidate some of DHS\u2019s chemical,  biological, radiological, and nuclear programs, including the status of  initial steps to establish the office\u2019s mission, integrated strategic goals,  structure, plans, processes, and procedures.", "To assess the extent to which DHS has integrated and coordinated all of  its chemical defense programs and activities, we reviewed DHS  documentation and interviewed DHS officials on the department\u2019s efforts.  Specifically, we examined DHS\u2019s 2017 action to consolidate some  chemical, biological, radiological, and nuclear functions into one office  and a 2012 DHS effort to develop a strategy and related implementation  plan to integrate and coordinate the department\u2019s chemical defense  programs and activities. In so doing, we reviewed the 2012 DHS strategy  for responding to and recovering from a chemical attack, which the  department approved for limited departmental use and distribution. In  addition, we examined the extent of DHS\u2019s efforts to integrate and  coordinate its chemical defense programs and activities relative to the  laws and presidential directives cited above that set forth DHS  responsibilities regarding chemical defense, national preparedness, and  critical infrastructure protection, and the DHS chemical response and  recovery strategy and other planning documents cited above. We also  compared the extent of these DHS efforts with criteria in the Government  Performance and Results Act of 1993 (GPRA), as updated by the GPRA  Modernization Act of 2010 (GPRAMA). This act provides guidance for  federal departments and agencies to establish strategies and plans for  achieving results, develop measurable goals and related measures, and  identify resources that will be required to achieve the goals.", "We conducted this performance audit from January 2017 through August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Chemical attacks have emerged as a prominent homeland security risk  because of recent attacks abroad using chemical agents and the interest  of ISIS in conducting and inspiring chemical attacks against the West.  DHS\u2019s OHA officials have stated that nationwide preparedness for a  chemical attack is critical to prevent, protect against, mitigate, respond to,  and recover from such an attack because it could occur abruptly, with  many victims falling ill quickly, and with a window of opportunity of a few  hours to respond effectively. Also, recent incidents in Malaysia and the  United Kingdom demonstrate that chemical agents can be used to target  individuals and can contaminate other individuals near the attack area.  Chemicals that have been used in attacks include chlorine, sarin, and  ricin, all of which can have deadly or debilitating consequences for  individuals exposed to them; see figure 1."], "subsections": [{"section_title": "Laws and Presidential Directives Guiding DHS\u2019s Chemical Defense Efforts", "paragraphs": ["Various laws guide DHS\u2019s efforts to defend the nation from chemical  threats and attacks. For example, under the Homeland Security Act of  2002, as amended, the Secretary of Homeland Security, through the  Under Secretary for Science and Technology, has various  responsibilities, to include conducting national research and developing,  testing, evaluating, and procuring technology and systems for preventing  the importation of chemical and other weapons and material; and  detecting, preventing, protecting against, and responding to terrorist  attacks. Under former Section 550 of the DHS Appropriations Act, 2007,  DHS established the CFATS program to, among other things, identify  chemical facilities and assess the security risk posed by each, categorize  the facilities into risk-based tiers, and inspect the high-risk facilities to  ensure compliance with regulatory requirements.", "DHS\u2019s responsibilities with regard to chemical defense are also guided by  various presidential directives promulgated following the September 11,  2001, terror attacks against the United States; see table 1."], "subsections": []}, {"section_title": "Our Work on Duplication, Overlap, and Fragmentation of Federal Programs", "paragraphs": ["In 2010, Public Law 111-139 included a provision for us to identify and  report annually on programs, agencies, offices, and initiatives\u2014either  within departments or government-wide\u2014with duplicative goals and  activities. In our annual reports to Congress from 2011 through 2018 in  fulfillment of this provision, we described areas in which we found  evidence of duplication, overlap, and fragmentation among federal  programs, including those managed by DHS. To supplement these  reports, we developed a guide to identify options to reduce or better  manage the negative effects of duplication, overlap, and fragmentation,  and evaluate the potential trade-offs and unintended consequences of  these options. In this report, we use the following definitions:", "Duplication occurs when two or more agencies or programs are  engaged in the same activities or provide the same services to the  same beneficiaries.", "Overlap occurs when multiple programs have similar goals, engage in  similar activities or strategies to achieve those goals, or target similar  beneficiaries. Overlap may result from statutory or other limitations  beyond the agency\u2019s control.", "Fragmentation occurs when more than one agency (or more than one  organization within an agency) is involved in the same broad area of  national interest and opportunities exist to improve service delivery."], "subsections": []}]}, {"section_title": "DHS Has Several Chemical Defense Programs and Activities Intended to Prevent and Protect Against Chemical Attacks", "paragraphs": ["DHS manages several programs and activities designed to prevent and  protect against domestic chemical attacks. Prior to December 2017, for  example, three DHS components\u2014OHA, S&T, and NPPD\u2014had specific  programs and activities focused on chemical defense. In December 2017,  DHS created the CWMD Office, which, as discussed later in this report,  consolidated the majority of OHA and some other DHS programs and  activities intended to counter weapons of mass destruction such as  chemical weapons. Other DHS components\u2014such as CBP, the Coast  Guard, and TSA\u2014have chemical defense programs and activities as part  of their broader missions. These components address potential chemical  attacks as part of an all-hazards approach to address a wide range of  threats and hazards. Appendix I discusses in greater detail DHS\u2019s  programs and activities that focus on chemical defense, and appendix II  discusses DHS components that have chemical defense responsibilities  as part of an all-hazards approach. Table 2 identifies the chemical  defense responsibilities of each DHS component, and whether that  component has a specific chemical defense program or an all-hazards  approach to chemical defense.", "Figure 2 shows that fiscal year 2017 funding levels for three of the  programs that focus on chemical defense totaled $77.3 million.  Specifically, about $1.3 million in appropriated funds was available for  OHA for its Chemical Defense Program activities and S&T had access to  about $6.4 million in appropriated funds for its Chemical Security Analysis  Center activities. The CFATS program had access to about $69.6 million  in appropriated funds\u2014or 90 percent of the $77.3 million for the three  programs\u2014to regulate high-risk facilities that produce, store, or use  certain chemicals. OHA officials stated that their efforts regarding  weapons of mass destruction over the last few years had focused mostly  on biological threats rather than chemical threats. For example, $77.2  million in fiscal year 2017 appropriated funds supported OHA\u2019s BioWatch  Program to provide detection and early warning of the intentional release  of selected aerosolized biological agents in more than 30 jurisdictions  nationwide. By contrast, as stated above, OHA and S&T had access to  about $7.7 million in fiscal year 2017 appropriated funds for chemical  defense efforts.", "We could not determine the level of funding for components that treated  chemical defense as part of their missions under an all-hazards approach  because those components do not have chemical defense funding that  can be isolated from funding for their other responsibilities. For example,  among other things, CBP identifies and interdicts hazardous chemicals at  and between ports of entry as part of its overall mission to protect the  United States from threats entering the country."], "subsections": []}, {"section_title": "A Chemical Strategy and Implementation Plan Would Enhance DHS Efforts to Integrate and Coordinate Its Chemical Defense Programs and Activities", "paragraphs": ["DHS\u2019s chemical defense programs and activities have been fragmented  and not well coordinated, but DHS recently created the CWMD Office to,  among other things, promote better integration and coordination among  these programs and activities. While it is too early to tell the extent to  which this new office will enhance this integration and coordination,  developing a chemical defense strategy and related implementation plan  would further assist DHS\u2019s efforts."], "subsections": [{"section_title": "DHS\u2019s Efforts to Address Chemical Attacks Have Been Fragmented and Not Well Coordinated", "paragraphs": ["DHS\u2019s chemical defense programs and activities have been fragmented  and not well coordinated across the department. As listed in table 2  above, we identified nine separate DHS organizational units that have  roles and responsibilities that involve conducting some chemical defense  programs and activities, either as a direct mission activity or as part of  their broader missions under an all-hazards approach. We also found  examples of components conducting similar but separate chemical  defense activities without DHS-wide direction and coordination.", "OHA and S&T\u2014two components with specific chemical defense  programs\u2014both conducted similar but separate projects to assist  local jurisdictions with preparedness. Specifically, from fiscal years  2009 to 2017, OHA\u2019s Chemical Defense Program conducted chemical  demonstration projects in five jurisdictions\u2014Baltimore, Maryland;  Boise, Idaho; Houston, Texas; New Orleans, Louisiana; and Nassau  County, New York\u2014to assist the jurisdictions in enhancing their  preparedness for a large-scale chemical terrorist attack. According to  OHA officials, they worked with local officials in one jurisdiction to  install and test chemical detectors without having department-wide  direction on these detectors\u2019 requirements. Also, according to S&T  officials, the Chemical and Biological Defense Division worked with  three jurisdictions in New York and New Jersey to help them purchase  and install chemical detectors for their transit systems beginning in  2016 again without having department-wide direction on chemical  detector requirements.", "The Secret Service, CBP, and the Coast Guard\u2014three components  with chemical defense activities that are part of their all-hazards  approach\u2014also conducted separate acquisitions of chemical  detection or identification equipment, according to officials from those  components. For example, according to Secret Service officials, the  agency has purchased chemical detectors that agents use for  personal protection of protectees and assessing the safety of  designated fixed sites and temporary venues. Also, according to CBP  officials, CBP has purchased chemical detectors for identifying  chemical agents at ports of entry nationwide. Finally, according to  Coast Guard officials, the agency has purchased chemical detectors  for use in maritime locations subject to Coast Guard jurisdiction.", "Officials from OHA, S&T, and the CWMD Office acknowledged that  chemical defense activities had been fragmented and not well- coordinated. They stated that this fragmentation occurred because DHS  had no department-wide leadership and direction for chemical defense  activities.", "We recognize that equipment, such as chemical detectors, may be  designed to meet the specific needs of components when they carry out  their missions under different operating conditions, such as an enclosed  space by CBP or on open waterways by the Coast Guard. Nevertheless,  when fragmented programs and activities that are within the same  department and are responsible for the same or similar functions are  executed without a mechanism to coordinate them, the department may  miss opportunities to leverage resources and share information that leads  to greater effectiveness."], "subsections": []}, {"section_title": "DHS Has Begun to Consolidate Some Chemical Defense Programs and Activities", "paragraphs": ["As discussed earlier, DHS has taken action to consolidate some chemical  defense programs and activities. Specifically, in December 2017, DHS  consolidated some of its chemical, biological, radiological, and nuclear  defense programs and activities under the CWMD Office. The CWMD  Office consolidated the Domestic Nuclear Detection Office; the majority of  OHA; selected elements of the Science and Technology Directorate, such  as elements involved in chemical, biological, and integrated terrorism risk  assessments and material threat assessments; and certain personnel  from the DHS Office of Strategy, Policy, and Plans and the Office of  Operations Coordination with expertise on chemical, biological,  radiological, and nuclear issues. According to officials from the CWMD  Office, the fiscal year 2018 funding for the office is $457 million. Of this  funding, OHA contributed about $121.6 million and the Domestic Nuclear  Detection Office contributed about $335.4 million. Figure 3 shows the  initial organizational structure of the CWMD Office as of June 2018.", "As of July 2018, according to the Assistant Secretary of CWMD, his office  supported by DHS leadership is working to develop and implement its  initial structure, plans, processes, and procedures. To guide the initial  consolidation, officials representing the CWMD Office said they plan to  use the key practices for successful transformations and reorganizations  identified in our past work. For example, they noted that they intend to  establish integrated strategic goals, consistent with one of these key  practices\u2014establish a coherent mission and integrated strategic goals to  guide the transformation. These officials stated that the goals include  those intended to enhance the nation\u2019s ability to prevent attacks using  weapons of mass destruction, including toxic chemical agents; support  operational components in closing capability gaps; and invest in and  develop innovative technologies to meet technical requirements and  improve operations. They noted that the latter might include networked  chemical detectors that could be used by various components to help  them carry out their mission responsibilities in the future. However, the  officials stated that all of the new office\u2019s efforts were in the initial planning  stages and none had been finalized. They further stated that the initial  setup of the CWMD Office covering the efforts to consolidate OHA and  the Domestic Nuclear Detection Office may not be completed until the  end of fiscal year 2018.", "It is still too early to determine the extent to which the creation of the  CWMD Office will help address the fragmentation and lack of coordination  on chemical defense efforts that we have identified. Our prior work on key  steps for assisting mergers and transformations shows that  transformation can take years to complete. One factor that could  complicate this transformation is that the consolidation of chemical  defense programs and activities is limited to certain components within  DHS, such as OHA, and not others, such as some parts of S&T and  NPPD. Officials from the CWMD Office stated that they intend to address  this issue by coordinating the office\u2019s chemical security efforts with other  DHS components that are not covered by the consolidation, such as  those S&T functions that are responsible for developing chemical detector  requirements. These officials also stated that they intend to address  fragmentation by coordinating with and supporting DHS components that  have chemical defense responsibilities as part of their missions under an  all-hazards approach, such as the Federal Protective Service, CBP, TSA,  the Coast Guard, and the Secret Service. Furthermore, the officials stated  that they plan to coordinate DHS\u2019s chemical defense efforts with other  government agencies having chemical programs and activities at the  federal and local levels."], "subsections": []}, {"section_title": "DHS\u2019s Prior Efforts and Recent Reorganization Offer an Opportunity for More Strategic Coordination", "paragraphs": ["In October 2011, the Secretary of Homeland Security designated FEMA  to coordinate the development of a strategy and implementation plan to  enhance federal, state, local, tribal and territorial government agencies\u2019  ability to respond to and recover from a catastrophic chemical attack. In  November 2012, DHS issued a chemical response and recovery strategy  that examined core capabilities and identified areas where improvements  were needed. The strategy identified a need for, among other things, (1)  a common set of catastrophic chemical attack planning assumptions, (2)  a formally established DHS oversight body responsible for chemical  incident response and recovery, (3) a more rapid way to identify the wide  range of chemical agents and contaminants that comprise chemical  threats, and (4) reserve capacity for mass casualty medical care. The  strategy also identified the principal actions needed to fill these gaps.", "For example, with regard to identifying the range of chemical agents and  contaminants that comprise chemical threats, the strategy focused on the  capacity to screen, search for, and detect chemical hazards (and noted  that this area was cross-cutting with prevention and protection). The  strategy stated that, among other things, the Centers for Disease Control  and Prevention, the Department of Agriculture and Food and Drug  Administration, the Department of Defense, the Environmental Protection  Agency, and DHS components, including the Coast Guard, provide  screening, search, and detection capabilities. However, the strategy  noted that \u201cDHS does not have the requirement to test, verify, and  validate commercial-off-the-shelf (COTS) chemical detection equipment  purchased and fielded by its various constituent agencies and  components, nor by the first responder community.\u201d", "According to a November 2012 memorandum transmitting the response  and recovery strategy to DHS employees, the distribution of the strategy  was only to be used for internal discussion purposes and was not to be  distributed outside of DHS because it had not been vetted by other  federal agencies and state, local, tribal, and territorial partners. The  memorandum and the strategy further stated that DHS was developing a  companion strategy focused on improving the national capacity to  prevent, protect against, and mitigate catastrophic chemical threats and  attacks and noted that once this document was complete, DHS would  engage with its partners to solicit comments and feedback. The strategy  also stated that DHS intended to develop a separate implementation plan  that would define potential solutions for any gaps identified, program any  needed budget initiatives, and discuss programs to enhance DHS\u2019s core  capabilities and close any gaps.", "DHS officials representing OHA and S&T told us that DHS had intended  to move forward with the companion strategy and the accompanying  implementation plan but the strategy and plan were never completed  because of changes in leadership and other competing priorities within  DHS. At the time of our discussion and prior to the establishment of the  CWMD Office, OHA officials also noted that DHS did not have a singular  entity or office responsible for chemical preparedness. An official  representing S&T also said that the consolidation of some chemical,  biological, radiological, and nuclear efforts may help bring order to  chemical defense efforts because DHS did not have an entity in charge of  these efforts or a strategy for guiding them.", "Now that DHS has established the CWMD Office as the focal point for  chemical, biological, radiological, and nuclear programs and activities,  DHS has an opportunity to develop a chemical defense strategy and  related implementation plan to better integrate and coordinate the  department\u2019s programs and activities to prevent, protect against, mitigate,  respond to, and recover from a chemical attack. The Government  Performance and Results Act of 1993 (GPRA), as updated by the GPRA  Modernization Act of 2010 (GPRAMA), includes principles for agencies to  focus on the performance and results of programs by putting elements of  a strategy and plan in place such as (1) establishing measurable goals  and related measures, (2) developing strategies and plans for achieving  results, and (3) identifying the resources that will be required to achieve  the goals. Although GPRAMA applies to the department or agency level,  in our prior work we have reported that these provisions can serve as  leading practices for strategic planning at lower levels within federal  agencies, such as planning for individual divisions, programs, or  initiatives.", "Our past work has also shown that a strategy is a starting point and basic  underpinning to better manage federal programs and activities such as  DHS\u2019s chemical defense efforts. A strategy can serve as a basis for  guiding operations and can help policy makers, including congressional  decision makers and agency officials, make decisions about programs  and activities. It can also be useful in providing accountability and guiding  resource and policy decisions, particularly in relation to issues that are  national in scope and cross agency jurisdictions, such as chemical  defense. When multiple agencies are working to address aspects of the  same problem, there is a risk that duplication, overlap, and fragmentation  among programs can result in wasting scarce funds, confuse and  frustrate program customers, and limit overall program effectiveness. A  strategy and implementation plan for DHS\u2019 chemical defense programs  and activities would help mitigate these risks. Specifically, a strategy and  implementation plan would help DHS further define its chemical defense  capability, including opportunities to leverage resources and capabilities  and provide a roadmap for addressing any identified gaps. By defining  DHS\u2019s chemical defense capability, a strategy and implementation plan  may also better position the CWMD Office and other components to work  collaboratively and strategically with other organizations, including other  federal agencies and state, local, tribal, and territorial jurisdictions.", "Officials from the CWMD Office agreed that the establishment of the new  office was intended to provide leadership to and help guide, support,  integrate, and coordinate DHS\u2019s chemical defense efforts and that a  strategy and implementation plan could help DHS better integrate and  coordinate its fragmented chemical defense programs and activities."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Recent chemical attacks abroad and the threat of ISIS to use chemical  weapons against the West have sparked concerns about the potential for  chemical attacks occurring in the United States. DHS components have  developed and implemented a number of separate chemical defense  programs and activities that, according to DHS officials, have been  fragmented and not well coordinated within the department. In December  2017, DHS consolidated some of its programs and activities related to  weapons of mass destruction, including those related to chemical  defense, by establishing the new CWMD Office. It is too early to tell  whether and to what extent this office will help address fragmentation and  the lack of coordination across all DHS\u2019s weapons of mass destruction  efforts, including chemical efforts. However, as part of its consolidation,  the CWMD Office would benefit from developing a strategy and  implementation plan to guide, support, integrate, and coordinate DHS\u2019s  programs and activities to prevent, protect against, mitigate, respond to,  and recover from a chemical attack. A strategy and implementation plan  would also help the CWMD Office guide DHS\u2019s efforts to address  fragmentation and coordination issues and would be consistent with the  office\u2019s aim to establish a coherent mission and integrated strategic goals."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Assistant Secretary for Countering Weapons of Mass Destruction  should develop a strategy and implementation plan to help the  Department of Homeland Security, among other things, guide, support,  integrate and coordinate its chemical defense programs and activities;  leverage resources and capabilities; and provide a roadmap for  addressing any identified gaps. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and GAO Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS  provided comments, which are reproduced in full in appendix III and  technical comments, which we incorporated as appropriate. DHS  concurred with our recommendation and noted that the Assistant  Secretary for CWMD will coordinate with the DHS Under Secretary for  Strategy, Policy, and Plans and other stakeholders to develop a strategy  and implementation plan that will better integrate and direct DHS  chemical defense programs and activities. DHS estimated that it will  complete this effort by September 2019. These actions, if fully  implemented, should address the intent of this recommendation.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Homeland Security, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (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 IV."], "subsections": []}]}, {"section_title": "Appendix I: Department of Homeland Security Chemical Defense Programs", "paragraphs": ["At the time our review began, the Department of Homeland Security  (DHS) had three headquarters components with programs and activities  focused on chemical defense. These were the Office of Health Affairs\u2019  (OHA) Chemical Defense Program; the Science and Technology  Directorate\u2019s (S&T) Chemical and Biological Defense Division and  Chemical Security Analysis Center (CSAC); and the National Protection  and Programs Directorate\u2019s (NPPD) Chemical Facility Anti-Terrorism  Standards (CFATS) program and Sector Outreach and Programs  Division. Each component had dedicated funding to manage the  particular chemical defense program or activity (with the exception of the  Sector Outreach and Programs Division because this division funds DHS  activities related to all critical infrastructure sectors, including the chemical  sector). On December 7, 2017, DHS established the Countering  Weapons of Mass Destruction (CWMD) Office, which incorporated most  of OHA and selected elements of S&T, together with other DHS programs  and activities related to countering chemical, biological, radiological, and  nuclear threats. According to DHS, the CWMD Office was created to,  among other things, elevate and streamline DHS\u2019s efforts to prevent  terrorists and other national security threat actors from using harmful  agents, such as chemical agents, to harm Americans and U.S. interests."], "subsections": [{"section_title": "Office of Health Affairs, Chemical Defense Program", "paragraphs": ["OHA, which was subsumed by the CWMD Office in December 2017, was  responsible for enhancing federal, state, and local risk awareness and  planning and response mechanisms in the event of a chemical incident  through the Chemical Defense Program. This program provided medical  and technical expertise to OHA leadership and chemical defense  stakeholders including DHS leadership, DHS components, the  intelligence community, federal interagency partners, and professional  and academic preparedness organizations. The program\u2019s efforts focused  on optimizing local preparedness and response to chemical incidents that  exceed the local communities\u2019 capacity and capability to act during the  first critical hours by providing guidance and tools for first responders and  supporting chemical exercises for preparedness. DHS\u2019s Chief Medical  Officer was responsible for managing OHA.", "The Chemical Defense Program expended about $8.3 million between  fiscal years 2009 and 2017 in chemical demonstration projects and  follow-on funding to assist five jurisdictions in their chemical  preparedness: Baltimore, Maryland; Boise, Idaho; Houston, Texas; New  Orleans, Louisiana; and Nassau County, New York. For example, in  Baltimore, OHA assisted the Maryland Transit Administration with the  selection and installation of chemical detection equipment to integrate  new technology into community emergency response and planning. In the  other four locales, OHA assisted these partners in conducting multiple  scenarios specific to each city based on high-risk factors identified by the  Chemical Terrorism Risk Assessment (CTRA), which is a risk  assessment produced by CSAC every 2 years. Such scenarios included  indoor and outdoor scenarios in which persons were \u201cexposed\u201d to either  an inhalant or a substance on their skin. Figure 4 summarizes the  scenarios conducted in each city and some of the lessons learned.", "According to OHA summary documentation, a key finding from this work  was that timely decisions and actions save lives and manage resources in  response to a chemical incident. Since the completion of the five-city  project, OHA has been working to, among other things, continue to  develop a lessons learned document based on the project, as well as a  related concept of operations, that state and local jurisdictions could use  to respond to chemical incidents.", "As of December 7, 2017, OHA was consolidated into the CWMD Office  and its functions transferred to the new office, according to officials from  the CWMD Office. The Chief Medical Officer is no longer responsible for  managing OHA but serves as an advisor to the Assistant Secretary for  Countering Weapons of Mass Destruction and as the principal advisor to  the Secretary and the Administrator of FEMA on medical and public  health issues related to natural disasters, acts of terrorism, and other  man-made disasters, among other things."], "subsections": []}, {"section_title": "Science and Technology Directorate, Chemical Defense Activities", "paragraphs": ["S&T\u2019s Homeland Security Advanced Research Projects Agency includes  the Chemical and Biological Defense Division, which supports state and  local jurisdictions by, for example, providing them help in modeling  potential chemical attacks. The Chemical and Biological Defense Division  worked with the City of New York to develop chemical detection modeling  by simulating a chemical attack. As a result of the simulation, New York  City officials wanted to implement mechanisms to prevent the potential  consequences of a chemical attack in a large city.", "S&T\u2019s Office of National Laboratories includes the CSAC, which identifies  and characterizes the chemical threat against the nation through analysis  and scientific assessment. CSAC is responsible for producing, among  other things, the CTRA, a comprehensive evaluation of the risks  associated with domestic toxic chemical releases produced every 2  years. CSAC officials chair the Interagency Chemical Risk Assessment  Working Group that meets to develop the CTRA, identify chemical  hazards, and produce a list of priority chemicals. This working group is  comprised of DHS components, federal partners, and private industry  officials that share industry information to ensure accurate and timely  threat and risk information is included in the CTRA. To complement the  CTRA, CSAC developed a standalone CTRA desktop tool that DHS  components can use to conduct risk-based modeling of a potential  chemical attack and provide results to DHS components, such as the  U.S. Secret Service, for advance planning of large-scale events.", "In addition, CSAC conducts tailored risk assessments addressing  emerging threats such as fentanyl, a synthetic opioid that has caused  numerous deaths across the United States. CSAC sends these  assessments, along with other intelligence and threat information, to  relevant DHS components, federal agencies, state and local partners,  and private entities so this information can be used in planning and  decision making. Officials from eight DHS components we spoke with  said they use CSAC information in their work and that CSAC products are  useful.", "CSAC conducted two exercises, known as Jack Rabbit I and II, to  experimentally characterize the effects of a large-scale chemical release  and to understand the reason for the differences seen between real-world  events and modeling predictions. These exercises were intended to  strengthen industry standards in chemical transportation, as well as  response and recovery plans. Outputs and data from these exercises  have been used to write first responder guidelines for these types of  events and are being taught in nationwide fire and hazmat courses. The  fiscal year 2018 President\u2019s Budget request did not ask for an  appropriation to fund CSAC. However, the Consolidated Appropriations  Act, 2018, did provide funding for CSAC. Furthermore, in May 2018, the  Secretary delegated responsibility for conducting the non-research and  development functions related to the Chemical Terrorism Risk  Assessment to the CWMD Office."], "subsections": []}, {"section_title": "National Protection and Programs Directorate, Chemical Facility Anti- Terrorism Standards (CFATS) Program and Other Chemical Facility Security Activities", "paragraphs": ["The CFATS program uses a multitiered risk assessment process to  determine a facility\u2019s risk profile by requiring facilities in possession of  specific quantities of designated chemicals of interest to complete an  online questionnaire. CFATS program officials said they also use CSAC  data as part of the process for making decisions about which facilities  should be covered by CFATS, and their level of risk. If CFATS officials  make a determination that a facility is high-risk, the facility must submit a  vulnerability assessment and a site security plan or an alternative security  program for DHS approval that includes security measures to meet risk- based performance standards. We previously reported on various  aspects of the CFATS program and identified challenges that DHS was  experiencing in implementing and managing the program. We made a  number of recommendations to strengthen the program to include, among  other things, that DHS verify that certain data reported by facilities is  accurate, enhance its risk assessment approach to incorporate all  elements of risk, conduct a peer review of the program to validate and  verify DHS\u2019s risk assessment approach, and document processes and  procedures for managing compliance with site security plans. DHS  agreed with all of these recommendations and has either fully  implemented them or taken action to address them.", "The Sector Outreach and Programs Division works to enhance the  security and resilience of chemical facilities that may or may not be  considered high-risk under the CFATS program and plays a  nonregulatory role as the sector-specific agency for the chemical sector.  The Sector Outreach and Programs Division works with the chemical  sector through the Chemical Sector Coordinating Council, the Chemical  Government Coordinating Council, and others in a public-private  partnership to share information on facility security and resilience. In  addition, the division and the coordinating councils help enhance the  security and resilience of chemical facilities that may or may not be  considered high-risk under the CFATS program. The division and  councils are to collaborate with federal agencies, chemical facilities, and  state, local, tribal, and territorial entities to, among other things, assess  risks and share information on chemical threats and chemical facility  security and resilience. Further, the Protective Security Coordination  Division in the Office of Infrastructure Protection works with facility owners  and operators to conduct voluntary assessments at facilities."], "subsections": []}]}, {"section_title": "Appendix II: Department of Homeland Security Components\u2019 Chemical Defense Responsibilities as Part of an All-Hazards Approach", "paragraphs": ["Department of Homeland Security (DHS) components conduct various  prevention and protection activities related to chemical defense. These  activities are managed by individual components as part of their overall  mission under an all-hazards approach.", "U.S. Coast Guard - The Coast Guard uses fixed and portable  chemical detectors to identify and interdict hazardous chemicals as  part of its maritime prevention and protection activities. It also  responds to hazardous material and chemical releases in U.S.  waterways. The Coast Guard also staffs the 24-hour National  Response Center, which is the national point of contact for reporting  all oil and hazardous materials releases into the water, including  chemicals that are discharged into the environment. The National  Response Center also takes maritime reports of suspicious activity  and security breaches at facilities regulated by the Maritime  Transportation Security Act of 2002. Under this act, the Coast Guard  regulates security at certain chemical facilities and other facilities  possessing hazardous materials.", "U.S. Customs and Border Protection (CBP) - CBP interdicts  hazardous chemicals at U.S. borders and ports of entry as part of its  overall mission to protect the United States from threats entering the  country. Among other things, CBP has deployed chemical detectors to  point of entry nationwide that were intended for narcotics detection,  but can also be used by CBP officers to presumptively identify a  limited number of chemicals. Also, CBP\u2019s National Targeting Center  helps to screen and identify high-risk packages that may contain  hazardous materials at ports of entry. In addition, CBP\u2019s Laboratories  and Scientific Services Directorate manages seven nationally  accredited field laboratories, where staff detect, analyze, and identify  hazardous substances, including those that could be weapons of  mass destruction. When CBP officers send suspected chemical  weapons, narcotics, and other hazardous materials to the labs, the  labs use various confirmatory analysis technologies, such as infrared  spectroscopy and mass spectrometry, to positively identify them. Also,  the Directorate has a 24-hour Teleforensic Center for on-call scientific  support for CBP officers who have questions on suspected chemical  agents.", "Federal Emergency Management Agency (FEMA) - FEMA provides  preparedness grants to state and local governments for any type of  all-hazards preparedness activity, including chemical preparedness.  According to FEMA data, in fiscal year 2016, states used about $3.5  million, local municipalities used about $48.5 million, and tribal and  territorial municipalities used about $80,000 in preparedness grant  funding for chemical defense including prevention and protection  activities, as well as mitigation, response, and recovery efforts related  to a chemical attack.", "Office of Intelligence and Analysis (I&A) - I&A gathers intelligence  information on all homeland security threats including chemical  threats. Such threat information is compiled and disseminated to  relevant DHS components and federal agencies. For example, I&A  works with CSAC to provide intelligence information for the CTRA and  writes the threat portion of that assessment. I&A also receives  information from CSAC on high-risk gaps in intelligence to help better  inform chemical defense intelligence reporting. Also, the Under  Secretary of I&A serves as the Vice-Chair of the Counterterrorism  Advisory Board. This board is responsible for coordinating, facilitating,  and sharing information regarding DHS\u2019s activities related to  mitigating current, emerging, perceived, or possible terrorist threats,  including chemical threats; and providing timely and accurate advice  and recommendations to the Secretary and Deputy Secretary of  Homeland Security on counterterrorism issues.", "NPPD\u2019s Federal Protective Service (FPS) - FPS secures federally- owned and leased space in various facilities across the country.  Federal facilities are assigned a facility security level determination  ranging from a Level 1 (low risk) to a Level 5 (high risk). As part of its  responsibility, FPS is to conduct Facility Security Assessments of the  buildings and properties it protects that cover all types of hazards  including a chemical release, in accordance with Interagency Security  Committee standards and guidelines. FPS is to conduct these  assessments at least once every 5 years for Level 1 and 2 facilities,  and at least once every 3 years for Level 3, 4, and 5 facilities. FPS  conducts the assessments using a Modified Infrastructure Survey  Tool.", "Transportation Security Administration (TSA) - TSA efforts to  address the threat of chemical terrorism have been focused on the  commercial transportation of bulk quantities of hazardous materials  and testing related to the release of commercially transported  chemicals that could be used as weapons of mass destruction. TSA\u2019s  activities with respect to hazardous materials transportation aim to  reduce the vulnerability of shipments of certain hazardous materials  through the voluntary implementation of operational practices by  motor carriers and railroads, and ensure a secure transfer of custody  of hazardous materials to and from rail cars at chemical facilities.  Also, in May 2003, TSA began requiring that all commercial motor  vehicle operators licensed to transport hazardous materials, including  toxic chemicals, must successfully complete a comprehensive  background check conducted by TSA. According to TSA documents,  approximately 1.5 million of the nation\u2019s estimated 6 million  commercial drivers have successfully completed the vetting process.  Additionally, TSA has also recently partnered with five mass transit  and passenger rail venues, together with other DHS components such  as DHS\u2019s Science and Technology Directorate and the U.S. Secret  Service, to test chemical detection technologies for such venues. In  addition, TSA is responsible for the Transportation Sector Security  Risk Assessment, which examines the potential threat, vulnerabilities,  and consequences of a terrorist attack involving the nation\u2019s  transportation systems. This assessment\u2019s risk calculations for  several hundred specific risk scenarios, including chemical weapons  attacks, are based on the elements of threat, vulnerability and  consequence using a combination of subject matter expert judgments  and modeling results.", "U.S. Secret Service - The Secret Service is responsible for protecting  its protectees and designated fixed sites and temporary venues from  all threats and hazards, including chemical threats. For example, the  Secret Service conducts security assessments of sites, which may  involve chemical detection, and coordinates with other agencies for  preparedness or response to threats and hazard incidents. In addition,  the Secret Service has a Hazardous Agent Mitigation Medical  Emergency Response team, dedicated to responding to numerous  hazards, including chemical threats and incidents."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, John Mortin (Assistant Director),  Juan Tapia-Videla (Analyst-in-Charge), Michelle Fejfar, Ashley Grant,  Imoni Hampton, Eric Hauswirth, Tom Lombardi, Sasan J. \u201cJon\u201d Najmi,  Claire Peachey, and Kay Vyas made key contributions to this report."], "subsections": []}]}], "fastfact": ["Recent attacks using chemical agents abroad have sparked concerns about potential similar attacks occurring in the United States. What is the Department of Homeland Security doing about it?", "We found that DHS recently consolidated some of its chemical defense programs into a new Countering Weapons of Mass Destruction Office. But several agency's components, including Customs and Border Protection and the U.S. Coast Guard, still run their own programs.", "Sharing resources and information department-wide could make DHS's chemical defense more effective. We recommended developing a strategy and implementation plan to better manage chemical defense."]}
{"id": "GAO-18-611T", "url": "https://www.gao.gov/products/GAO-18-611T", "title": "Summer Meals: Improvements Needed to Address Participation Estimates and Program Challenges", "published_date": "2018-07-17T00:00:00", "released_date": "2018-07-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes information contained in GAO's May 2018 report entitled Summer Meals: Actions Needed to Improve Participation Estimates and Address Program Challenges , GAO-18-369 . It addresses (1) what is known about SFSP participation, (2) other programs that help feed low-income children over the summer, and (3) challenges in providing summer meals to children and the extent to which USDA provides assistance to address these challenges.", "For its May 2018 report, GAO reviewed relevant federal laws, regulations, and guidance; analyzed USDA's SFSP data for fiscal years 2007 through 2016; and surveyed state agencies responsible for administering the SFSP in 50 states and the District of Columbia. GAO also visited a nongeneralizable group of 3 states and 30 meal sites, selected based on Census data on child poverty rates and urban and rural locations, and analyzed meal site data from these 3 states. In addition, GAO interviewed USDA, state, and national organization officials, as well as SFSP providers, including sponsors and site operators."]}, {"section_title": "What GAO Found", "paragraphs": ["Nationwide, the total number of meals served to children in low-income areas through the Summer Food Service Program (SFSP) increased from 113 to 149 million (about 32 percent) from fiscal year 2007 through 2016, according to GAO's May 2018 report. GAO noted that the U.S. Department of Agriculture (USDA) directed states to use the number of meals served, along with other data, to estimate the number of children participating in the SFSP. However, GAO found that participation estimates had been calculated inconsistently from state to state and year to year. In 2017, USDA took steps to improve the consistency of participation estimates, noting they are critical for informing program implementation and strategic planning. However, GAO determined that the method USDA directed states to use would continue to provide unreliable estimates of participation, hindering USDA's ability to use them for these purposes.", "Other federal and nonfederal programs helped feed low-income children over the summer to some extent, according to states GAO surveyed and SFSP providers and others GAO interviewed for its May 2018 report. For example, GAO found that in July 2016, about 26 million meals were served through a separate federal program that allowed school meal providers to serve summer meals, according to USDA data. Some children also received summer meals through nonfederal programs operated by faith-based organizations and foodbanks, though GAO's state survey and interviews with SFSP meal providers and national organizations indicated the reach of such efforts was limited.", "In GAO's May 2018 report, states and SFSP meal providers reported challenges with issues related to meal sites, participation, and program administration, though USDA, state, and local officials had taken some steps to address these issues. Seventeen states in GAO's survey and several providers in the states GAO visited reported a challenge with ensuring meal sites were in safe locations. To address this issue, USDA granted some states and providers flexibility from the requirement that children consume meals on-site. However, GAO found that USDA had not broadly communicated the circumstances it considered when granting this flexibility or reported to Congress on the use of flexibilities with respect to the on-site requirement in areas where safety was a concern, per requirements. As a result, neither USDA nor Congress knew whether these flexibilities were helping provide meals to children and meeting program goals. Further, officials from national and regional organizations GAO interviewed, as well as providers GAO visited, reported challenges related to the administrative burden associated with participating in multiple child nutrition programs. Although USDA had established program and policy simplifications to help lessen related burdens, the persistence of challenges in this area suggested that information had not reached all relevant state agencies, potentially limiting children's access to meals by discouraging provider participation."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its May 2018 report, GAO made four recommendations, including that USDA improve estimates of children's participation in SFSP, communicate the circumstances it considers when granting flexibilities to ensure safe meal delivery, evaluate and annually report to Congress on its use of waivers and demonstration projects when granting these flexibilities, and disseminate information about existing flexibilities available to streamline administrative requirements for providers participating in multiple child nutrition programs. USDA generally agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the U.S. Department of  Agriculture\u2019s (USDA) Summer Food Service Program (SFSP). A federal  nutrition program created in 1968, SFSP is designed to provide food  service to children in low-income areas during periods when area schools  are closed for vacation. In fiscal year 2017, USDA spent $485 million to  provide 152 million meals to children through the SFSP.", "USDA\u2019s Food and Nutrition Service (FNS) oversees the SFSP, which is  administered by the states and operated by a variety of public and private  nonprofit organizations and government entities that sponsor meals for  children at supervised sites such as schools, camps, parks, churches,  and libraries. FNS is responsible for issuing regulations, instructions, and  guidance; overseeing program administration; and reimbursing states for  meals served that meet program requirements. State agencies are  responsible for approving and monitoring sponsors who, in turn, are  responsible for monitoring and managing their meal sites.", "SFSP meals must meet certain requirements in order to be eligible for  federal reimbursement; for example, the meal must be served and  consumed on-site at an approved meal site. States may approve  different types of meal sites, including open sites, closed enrolled sites,  and camps. For example, open sites operate in an area where at least  half of the children are eligible for free or reduced-price school meals  (referred to as \u201carea eligible\u201d), according to data from entities such as  schools or the U.S. Census Bureau. Meals must also meet federal  requirements for menu components, meal times, and nutrition.", "Some flexibilities are available to FNS in implementing the SFSP  program, under its waiver and demonstration authorities. For example,  the Secretary of Agriculture has statutory authority to waive, upon request  of a state or eligible service provider, certain child nutrition program  requirements, including some for the SFSP. To grant a waiver request,  the Secretary must determine that the waiver would facilitate the state or  service provider\u2019s ability to carry out the purpose of the program, and that  the waiver will not increase the overall cost of the program to the federal  government, among other things. In the event a waiver request is  submitted, the Secretary is required to act promptly and state in writing  whether the waiver request is granted or denied, and why. The Secretary  is also required to periodically review the performance of waiver  recipients, and submit an annual report to Congress summarizing the use  of waivers and their effectiveness, among other details.", "In addition to this waiver authority, the Secretary is also authorized to  carry out demonstration projects to develop and test methods of providing  access to summer meals for low-income children in urban and rural  areas, to reduce or eliminate the food insecurity and hunger of low- income children and improve their nutritional status. The Secretary is  required to provide for an independent evaluation of the demonstration  projects carried out under this authority, and submit an annual report to  Congress on the status of each project and the results of the  evaluations.", "My testimony today summarizes the findings from our May 2018 report on  summer meals. This statement addresses (1) what is known about  SFSP participation, (2) other programs that help feed low-income children  over the summer, and (3) challenges in providing summer meals to  children and the extent to which USDA provides assistance to address  these challenges. To address these objectives, we reviewed relevant  federal laws, regulations, and guidance; analyzed USDA\u2019s SFSP data for  fiscal years 2007 through 2016; and surveyed state agencies responsible  for administering the SFSP in 50 states and the District of Columbia. We  also visited a nongeneralizable group of 3 states and 30 meal sites,  selected based on Census data on child poverty rates and urban and  rural locations, and analyzed meal site data from these 3 states. In  addition, we interviewed USDA, state, and national organization officials,  as well as SFSP providers, including sponsors and site operators. Our  work was performed in accordance with generally accepted government  auditing standards. More details on our scope and methodology can be  found in the issued report.", "In brief, we found that although USDA collects information about the  actual number of meals served to children through the SFSP program\u2014 which is one indicator of program participation\u2014USDA\u2019s estimates of the  number of children participating in the SFSP were unreliable. As a result,  USDA\u2019s understanding of children\u2019s participation in the SFSP was limited,  impairing its ability to both inform program implementation and facilitate  strategic planning and outreach to areas with low participation.", "Other federal and nonfederal programs helped feed low-income children  over the summer to some extent. These federal programs included the  National School Lunch Program\u2019s Seamless Summer Option, which  provides nutrition assistance benefits solely in the summer, and several  federal programs that operate year-round. Nonfederal programs,  commonly operated by local faith-based organizations and foodbanks,  also helped feed low-income children in the summer, but states and local  organizations reported that these had limited reach.", "Finally, there were gaps in USDA\u2019s efforts to address reported challenges  related to SFSP meal site safety and program administration. Although  USDA had granted some states and sponsors flexibility from the  requirement that children consume meals on-site when safety at the site  was a concern, the agency did not broadly communicate the  circumstances it considers when granting this flexibility, hindering its  usefulness in ensuring safe summer meal delivery to children.  Additionally, while FNS had established program and policy  simplifications to help lessen the administrative burden on sponsors  participating in multiple child nutrition programs, challenges in this area  persisted. Some of these simplifications had not been shared recently  with states, potentially discouraging sponsor participation in child nutrition  programs and limiting children\u2019s access to meals.", "My statement will highlight four recommendations we made in our May  report that USDA should implement to help improve SFSP participation  estimates and address challenges reported by states and sponsors  related to meal site safety and duplicative paperwork. In oral comments,  FNS officials, including the Deputy Administrator for Child Nutrition  Programs, generally agreed with the recommendations in the report."], "subsections": [{"section_title": "The Number of SFSP Meals Served Generally Increased from 2007 through 2016, but Estimates of Children Participating Were Unreliable", "paragraphs": ["The total number of SFSP meals served nationwide during the summer\u2014 one indicator of program participation\u2014increased from 113 million meals  in fiscal year 2007 to 149 million meals in fiscal year 2016, or by 32  percent. Although almost half of the total increase in meals served in the  summer months was due to increases in lunches, when comparing  across each of the meal types, supper and breakfast had the largest  percentage increases over the 10-year period, 50 and 48 percent,  respectively (see table 1). The increase in SFSP meals over this time  period was generally consistent with increases in the number of meals  served in the National School Lunch Program (NSLP), the largest child  nutrition assistance program, during this period.", "Although states reported the actual number of SFSP meals served to  FNS for reimbursement purposes, they estimated the number of children  participating in SFSP, and these participation estimates have been  calculated inconsistently, impairing FNS\u2019s ability to inform program  implementation and facilitate strategic planning and outreach to areas  with low participation. Specifically, state agencies calculated a statewide  estimate of children\u2019s participation in the SFSP, referred to as average  daily attendance (ADA), using sponsor-reported information on the  number of meals served and days of operation in July of each year.  However, according to our review of states\u2019 survey responses and FNS  documents, states\u2019 methods for calculating ADA have differed from state  to state and from year to year. For example, although FNS directed states  to include the number of meals served in each site\u2019s primary meal  service\u2014which may or may not be lunch\u2014some states calculated ADA  using only meals served at lunch. In addition, five states reported in our  survey that the method they used to calculate ADA in fiscal year 2016  differed from the one they used previously.", "While FNS clarified its instructions in May 2017 to help improve the  consistency of states\u2019 ADA calculations moving forward, ADA, even if  consistently calculated, remained an unreliable estimate of children\u2019s  daily participation in SFSP for at least two reasons. First, ADA did not  account for existing variation in the number of days that each site serves  meals to children. Specifically, because FNS\u2019s instructions indicated that  sites\u2019 ADAs were to be combined to provide a statewide ADA estimate,  differences in the number of days of meal service at each site were  disregarded. As a result, ADA did not reflect the average number of  children served SFSP meals daily throughout the month. Second, ADA  was an unreliable estimate of children\u2019s participation in SFSP because it  did not account for state variation in the month with the greatest number  of SFSP meals served. According to FNS officials, the agency instructed  states to calculate ADA for July because officials identified this as the  month with the largest number of meals served nationwide. However,  according to our analysis of nationwide FNS data, in summer 2016, 26  states served more SFSP meals in June or August than in July.", "Although FNS had taken some steps to identify other data that states  collect on the SFSP, at the time of our May 2018 report, FNS had not yet  used this information to help improve its estimate of children\u2019s  participation in the program. In 2015, FNS published a Request for  Information, asking whether states or sponsors collected any SFSP data  that were not reported to FNS, and received responses from 15 states.  The responses suggested some states collected additional data, such as  site-level data, that may allow for an improved estimate of children\u2019s  SFSP participation, potentially addressing the issues identified in our  analysis. FNS also followed up with several of these states in 2016 and  2017 to explore the feasibility of collecting additional data and improving  estimates of children\u2019s SFSP participation. FNS stated in a May 2017  memo to states that it is critical that the agency\u2019s means of estimating  children\u2019s participation in the SFSP is as accurate as possible because it  helps inform program implementation at the national level and facilitates  strategic planning and outreach to areas with low participation. Yet, at  the time of our report, FNS had not taken further action to improve the  estimate. In our May 2018 report, we concluded that FNS\u2019s limited  understanding of children\u2019s participation in the SFSP impaired its ability to  both inform program implementation and facilitate strategic planning and  outreach to areas with low participation.", "To improve FNS\u2019s estimate of children\u2019s participation in the SFSP, we  recommended that FNS focus on addressing, at a minimum, data  reliability issues caused by variations in the number of operating days of  meal sites and in the months in which states see the greatest number of  meals served. FNS generally agreed with this recommendation."], "subsections": []}, {"section_title": "Other Federal and Nonfederal Programs Helped Feed Low- Income Children over the Summer to Some Extent", "paragraphs": ["Other federal and nonfederal programs that operate solely in the summer,  as well as those operating year-round, helped feed low-income children in  the summer months. For example, in 2016, FNS data indicated about 26  million meals were served through the NSLP\u2019s Seamless Summer Option,  a separate federal program that streamlines administrative requirements  for school meal providers serving summer meals. Some children also  received summer meals through nonfederal programs operated by  entities such as faith-based organizations and foodbanks, though the  reach of these efforts was limited, according to our state survey and  interviews with providers and national organizations at the time of our  report. For example, of the 27 states that reported in our survey  awareness of the geographic coverage of these nonfederal programs, 11  states indicated that they operated in some portions of the state\u2014the  most common state response."], "subsections": []}, {"section_title": "States and SFSP Providers Faced Challenges with Meal Sites, Participation, and Program Administration, and FNS Actions Had Addressed Some, but Not All Areas", "paragraphs": ["States and SFSP providers reported challenges with issues related to  meal site availability, children\u2019s participation, and program administration,  though federal, state, and local entities had taken steps to improve these  areas. For example, a lack of available transportation, low population  density, and limited meal sites posed challenges for SFSP  implementation in rural areas, according to states we surveyed, selected  national organizations, and state and local officials in the three states we  visited. In response, state and local entities took steps, such as  transporting meals to children by bus, to address these issues\u2014efforts  that FNS supported through information sharing and grants.", "States and SFSP providers also reported challenges with meal site  safety, and FNS\u2019s efforts to address this area were limited. Seventeen  states reported in our survey that ensuring summer meal sites are in safe  locations was moderately to very challenging. Some states and  sponsors took steps to help address this issue, and FNS also used its  available authorities to grant some states and sponsors flexibility with  respect to the requirement that children consume summer meals on site,  such as when safety at the site is a concern. However, our review of FNS  documentation showed FNS had not clearly communicated to all states  and sponsors the circumstances it considers when deciding whether to  grant this flexibility. These circumstances\u2014described in letters the  agency sent to requesting states\u2014generally included verification that  violent crime activities occurred within both a 6-block radius of the meal  site and 72 hours prior to the meal service. Although FNS officials  explained that they reviewed state and sponsor requests for flexibility due  to safety concerns on a case-by-case basis, they also acknowledged that  the set of circumstances they used to approve state and sponsor  requests for flexibility, which we identified in their letters to states, had  been used repeatedly. Further, states and sponsors reported challenges  obtaining the specific data needed for approval of a site for this type of  flexibility, including inconsistent availability of timely data, which  hampered some providers\u2019 efforts to ensure safe delivery of meals.", "We concluded that unless FNS shared information with all states and  sponsors on the circumstances it considered when deciding whether to  grant flexibility with respect to the requirement that children consume  summer meals on site, states and sponsors would likely continue to be  challenged to use this flexibility, hindering its usefulness in ensuring safe  summer meal delivery to children. We therefore recommended that FNS communicate to all SFSP stakeholders the circumstances it considers in  approving requests for flexibility with respect to the requirement that  children consume SFSP meals on-site in areas that have experienced  crime and violence, taking into account the feasibility of accessing data  needed for approval, to ensure safe delivery of meals to children. FNS  generally agreed with this recommendation.", "We also found that while FNS had issued reports to Congress evaluating  some of its demonstration projects, as required under its statutory  authorities, the agency had not issued any such reports to Congress  specifically on the use of flexibilities with respect to the on-site  requirement in areas where safety was a concern. As previously  discussed, the agency is required to annually submit certain reports to  Congress regarding the use of waivers and evaluations of projects carried  out under its demonstration authority. FNS officials told us that they had  not evaluated or reported on these flexibilities, in part, because they had  limited information on their outcomes.", "We concluded that without understanding the impact of its use of these  flexibilities, neither FNS nor Congress knew whether these flexibilities  were helping provide meals to children\u2014the goal of the program.  Accordingly, we recommended that FNS evaluate and annually report to  Congress, as required by statute, on its use of waivers and demonstration  projects to grant states and sponsors flexibility with respect to the  requirement that children consume SFSP meals on-site in areas  experiencing crime or violence, to improve understanding of the use and  impact of granting these flexibilities on meeting program goals. FNS  generally agreed with this recommendation.", "Although FNS had established program and policy simplifications to help  lessen the administrative burden on sponsors participating in multiple  child nutrition programs, challenges in this area persisted, indicating that  information had not reached all relevant state agencies. According to  officials we spoke with from a national organization involved in summer  meals, management of each child nutrition program and the processes  related to applications, funding, and oversight were fragmented in many  states. For example, in one of the states we visited, a sponsor that  provided school meals during the school year told us they had to fill out  60 additional pages of paperwork to provide summer meals, which they  described as significant burden. FNS officials told us that some of the  duplicative requirements might have been a function of differences in  statute, and although FNS provided guidance to states on simplified  procedures for sponsors participating in more than one child nutrition  program, some states might have chosen not to implement them.", "We concluded that without further efforts from FNS to disseminate  information on current options for streamlining administrative  requirements across multiple child nutrition programs, overlapping and  duplicative administrative requirements may limit children\u2019s access to  meals by discouraging sponsor participation in child nutrition programs.  We recommended that FNS disseminate information about the existing  streamlining options, and FNS generally agreed with this  recommendation.", "Chairman Rokita, Ranking Member Polis, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Kathryn A. Larin at (202) 512-7215 or larink@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Individuals who made key  contributions to this testimony include Rachel Frisk, Melissa Jaynes, and  Claudine Pauselli.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-565", "url": "https://www.gao.gov/products/GAO-18-565", "title": "Health Insurance Exchanges: HHS Should Enhance Its Management of Open Enrollment Performance", "published_date": "2018-07-24T00:00:00", "released_date": "2018-08-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 2014, millions of consumers have purchased health insurance from the exchanges established by the Patient Protection and Affordable Care Act. Consumers can enroll in coverage during an annual open enrollment period. HHS and others conduct outreach during this period to encourage enrollment and ensure the exchanges' long-term stability. HHS announced changes to its 2018 outreach, prompting concerns that fewer could enroll, potentially harming the exchanges' stability.", "GAO was asked to examine outreach and enrollment for the exchanges using healthcare.gov. This report addresses (1) 2018 open enrollment outcomes and any factors that may have affected these outcomes, (2) HHS's outreach efforts for 2018, and (3) HHS's 2018 enrollment goals. GAO reviewed HHS documents and data on 2018 open enrollment results and outreach. GAO also interviewed officials from HHS and 23 stakeholders representing a range of perspectives, including those from 4 navigator organizations, 3 issuers, and 6 insurance departments, to obtain their non-generalizable views on factors that likely affected 2018 enrollment."]}, {"section_title": "What GAO Found", "paragraphs": ["About 8.7 million consumers in 39 states enrolled in individual market health insurance plans offered on the exchanges through healthcare.gov during the open enrollment period for 2018 coverage. This was 5 percent less than the 9.2 million who enrolled for 2017 and continued a decline in enrollment from a peak of 9.6 million in 2016. Among the 23 stakeholders we interviewed representing a range of perspectives, most reported that plan affordability played a major role in exchange enrollment\u2014both attracting and detracting from enrollment. In 2018, total premiums increased more than expected, and, as a result, plans may have been less affordable for consumers, which likely detracted from enrollment. However, most consumers receive tax credits to reduce their premiums, and stakeholders reported that plans were often more affordable for these consumers because higher premiums resulted in larger tax credits, which likely aided exchange enrollment. Stakeholders had mixed opinions on the effects that other factors, such as the impact of reductions in federal advertising and the shortened open enrollment period, might have had on enrollment.", "The Department of Health and Human Services (HHS), which manages healthcare.gov enrollment, reduced consumer outreach for the 2018 open enrollment period:", "HHS spent 90 percent less on its advertising for 2018 ($10 million) compared to 2017 ($100 million). Officials told us that the agency's approach for 2018 was to focus on low-cost, high-performing forms of advertising.", "HHS reduced funding by 42 percent for navigator organizations\u2014which provide in-person enrollment assistance for consumers\u2014spending $37 million in 2018 compared to $63 million in 2017 due to a shift in administration priorities. HHS allocated the funding using data that it acknowledged were not reliable in December 2016. The lack of quality data may affect HHS's ability to effectively manage the navigator program.", "Unlike in prior years, HHS did not set any numeric targets related to 2018 total healthcare.gov enrollment; officials told us that they instead focused on enhancing the consumer experience for the open enrollment period. Setting numeric targets would allow HHS to monitor and evaluate its overall performance, a key aspect of federal internal controls. Further, while HHS reported meeting its goal of enhancing the consumer experience, such as by improving healthcare.gov availability, it did not measure aspects of the consumer experience it had identified as key in 2017, such as successful outreach events. Absent a more complete assessment, HHS may not be able to fully assess its progress toward its goal of enhancing the consumer experience and may miss opportunities to improve other aspects of the consumer experience."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to HHS, including that it ensure the data it uses for determining navigator organization awards are accurate, set numeric enrollment targets, and assess other aspects of the consumer experience. HHS agreed with two recommendations, but disagreed with the need to set numeric targets. GAO maintains that such action is important."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 2014, millions of consumers have purchased individual market  health insurance plans through the health insurance exchanges\u2014or  marketplaces\u2014established under the Patient Protection and Affordable  Care Act (PPACA). PPACA directed each state to establish an  exchange\u2014referred to as a state-based exchange\u2014or elect to use the  federally facilitated exchange established by the Department of Health  and Human Services (HHS). Each year the exchanges offer an open  enrollment period during which eligible consumers may enroll in or  change their coverage. Consumers enroll in the federally facilitated  exchange though HHS\u2019s healthcare.gov website, and some state-based  exchanges have chosen to also use healthcare.gov for enrollment. HHS  facilitates enrollment for states that use the healthcare.gov website and is  required to perform outreach and education activities to educate  consumers about the exchanges and to encourage enrollment.", "Some health policy and insurance industry experts assert that the long- term stability of the exchanges will require sufficient levels of enrollment,  including enrollment among young or otherwise healthy individuals who  might be less likely to purchase health insurance. Specifically, bringing  these younger, healthier individuals into the exchanges would reduce  adverse selection\u2014where less-healthy individuals who expect or plan for  high use of health care services disproportionately enroll in coverage  leading to higher premiums that can ultimately discourage healthy  individuals from enrolling. Some experts have also asserted that  consumer outreach plays a key role in reducing adverse selection. For  example, while sick individuals may be motivated to enroll in exchange  coverage to obtain their needed treatment, healthier individuals may need  to be reminded and encouraged to do so\u2014which these experts contend is  the role of effective outreach.", "Beginning with the open enrollment period for 2014 coverage\u2014the  exchanges\u2019 first open enrollment period\u2014HHS conducted broad public  relations and advertising outreach to familiarize the public with the  availability of exchange coverage. However, beginning in 2017, HHS  announced several changes to its exchange outreach activities. For  example, it suspended certain planned marketing and advertising during  the final week of the 2017 open enrollment period and scaled back its  outreach efforts for the 2018 open enrollment period. In addition, the  agency reduced the length of the 2018 open enrollment period for states  using healthcare.gov for enrollment, from about 13 weeks to about 6  weeks. These changes led to questions among various stakeholders,  such as certain research and advocacy organizations, about whether the  number and health needs of those enrolled in the exchanges would meet  expectations or present challenges to the long-term stability of health  insurance markets. However, other research and advocacy organizations  contend that these and other changes collectively helped to simplify or  reduce unnecessary costs of the program. For the 2018 open enrollment  period, for example, HHS emphasized the availability of agents and  brokers that could assist consumers with enrollment and simplified its  enrollment process by allowing consumers to enroll in healthcare.gov  coverage through certain partner websites.", "You asked us to examine how 2018 open enrollment period outcomes  compared to those for 2017 and to review how HHS\u2019s outreach efforts  affected 2018 enrollment. In this report, we examine:  1.  how 2018 open enrollment outcomes for healthcare.gov compared  with those for 2017, and any factors that affected 2018 enrollment;  2.  how HHS\u2019s outreach efforts for the 2018 open enrollment period  compared to those for 2017; and  3.  HHS\u2019s 2018 enrollment goals for the health insurance exchanges.", "To examine how 2018 open enrollment outcomes compared with those  for 2017 and any factors that may have affected 2018 enrollment, we  examined HHS data on 2017 and 2018 open enrollment period results for  the 39 states that used the federal healthcare.gov website for enrollment.  We also reviewed HHS data on open enrollment period results for 2016  for additional context. To assess these data for reliability, we reviewed  supporting documentation, examined trends reported in these data, and  interviewed HHS officials. We found the data sufficiently reliable for the  purposes of our reporting objective. We also analyzed HHS information,  interviewed health policy experts, and reviewed publications by these  experts related to exchange enrollment to identify factors that had the  potential to affect 2018 enrollment. (See app. I for a list of these factors.)  Using this list of factors, we conducted structured interviews with officials  from 23 stakeholder organizations to gather their viewpoints as to  whether and how these or other factors affected 2018 health insurance  exchange enrollment. We selected organizations to reflect a wide range  of perspectives and included HHS-funded navigator organizations that  provide in-person consumer enrollment assistance, issuers, state  insurance departments, professional trade organizations, research and  advocacy organizations, and state-based exchanges. We identified  themes for reporting according to our analysis of the frequency with which  the stakeholders we interviewed identified factors as having a certain  impact. While we selected stakeholders to include a broad range of  perspectives, their viewpoints are not generalizable beyond the 23  organizations included in our interviews. Additional information about the  stakeholders we interviewed is presented in appendix II.", "To examine how HHS\u2019s outreach efforts for the 2018 open enrollment  period compared to those for 2017, we obtained and reviewed HHS data  from both periods, including its budgets for advertising and navigator  funding, and its allocation of that funding to various advertising  techniques and to navigator organizations. We also reviewed associated  HHS documentation, including a study on the effectiveness of advertising  during the 2017 open enrollment period and documentation of HHS\u2019s  navigator organization funding process. In addition, we reviewed relevant  PPACA provisions and HHS regulations and guidance and interviewed  officials from HHS to learn more about the agency\u2019s outreach efforts for  both open enrollment periods. We interviewed representatives from our  selected navigator organizations and a group that hosts an online  community for navigators to obtain additional context. We reviewed self- reported data that all navigator organizations provided to HHS on the  number of outreach events they performed during the 2017 and 2018  open enrollment periods. We also reviewed information HHS published  about its outreach for both open enrollment periods, and compared HHS\u2019s  outreach efforts to relevant standards for internal control in the federal  government.", "To examine HHS\u2019s 2018 enrollment goals for the health insurance  exchanges, we interviewed HHS officials to understand their goals for the  enrollment period and compared them to relevant federal internal control  standards. To examine the agency\u2019s performance with respect to its  goals, we reviewed relevant performance data. To assess these data for  reliability, we interviewed agency officials and examined trends in the  data. We found the data sufficiently reliable for the purposes of our  reporting objective.", "We conducted this performance audit from September 2017 to July 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Considerations for Exchange Enrollment and Plan Selection", "paragraphs": ["Qualified health plans sold through the exchanges must meet certain  minimum requirements, including those related to benefits coverage.  Beyond these requirements, many elements of plans can vary, including  their cost and availability. Those who opt to enroll in a plan generally pay  for their health care in two ways: (1) a premium to purchase the  insurance, and (2) cost-sharing for the particular health services they  receive (for example, deductibles, coinsurance, and co-payments)."], "subsections": [{"section_title": "Metal Tiers", "paragraphs": ["Qualified health plans are offered at one of four metal tiers that reflect the  out-of-pocket costs that may be incurred by a consumer. These tiers  correspond to the plan\u2019s actuarial value\u2014a measure of the relative  generosity of a plan\u2019s benefits that is expressed as a percentage of the  covered medical expenses expected to be paid, on average, by the issuer  for a standard population and set of allowed charges for in-network  providers. In general, as actuarial value increases, consumer cost- sharing decreases. The actuarial values of the metal tiers are: bronze (60  percent), silver (70 percent), gold (80 percent), and platinum (90  percent). If an issuer sells a qualified health plan on an exchange, it  must offer at least one plan at the silver level and one plan at the gold  level; issuers are not required to offer bronze or platinum plans."], "subsections": []}, {"section_title": "Financial Assistance", "paragraphs": ["Individuals purchasing coverage through the exchanges may be eligible,  depending on their incomes, to receive financial assistance to offset the  costs of their coverage. According to HHS, more than 80 percent of  enrollees obtained financial assistance in the first half of 2017, which  came in the form of premium tax credits or cost-sharing reductions.", "Premium tax credits. These are designed to reduce an eligible  individual\u2019s premium costs, and can either be paid in advance on a  monthly basis to an enrollee\u2019s issuer\u2014referred to as advance  premium tax credits\u2014or received after filing federal income taxes for  the prior year. To be eligible for premium tax credits, enrollees must  generally have household incomes of at least 100, but no more than  400, percent of the federal poverty level. The amount of the  premium tax credit varies based on enrollees\u2019 income relative to the  cost of premiums for their local benchmark plan\u2014which is the second  lowest cost silver plan available\u2014but consumers do not need to be  enrolled in the benchmark plan in order to be eligible for these tax  credits.", "Cost-sharing reductions. Enrollees who qualify for premium tax  credits, have household incomes between 100 and 250 percent of the  federal poverty level, and enroll in a silver tier plan may also be  eligible to receive cost-sharing reductions, which lower enrollees\u2019  deductibles, coinsurance, and co-payments.", "To reimburse issuers for reduced cost-sharing from qualified enrollees,  HHS made payments to issuers (referred to as cost-sharing reduction  payments) until October 2017, when it discontinued these payments.  Despite HHS\u2019s decision to discontinue cost-sharing reduction payments,  issuers are still required under PPACA to offer cost-sharing reductions to  eligible enrollees. Since consumers who receive these reductions are  generally enrolled in silver plans, insurance commissioners in most states  instructed the issuers in their states to increase 2018 premiums for silver  plans offered on the exchanges to reflect the discontinued federal  payments. This has been referred to as \u201csilver-loading\u201d and resulted in  substantial increases in exchange-based silver plan premiums for 2018. (See fig.1.) Because the amount of an eligible enrollee\u2019s premium tax  credit is based on the premium for the enrollee\u2019s local benchmark plan  (the second lowest cost silver plan available to an enrollee), the value of  this form of financial assistance also increased significantly for 2018.", "As we have previously reported, the number and type of plans available  in the health insurance exchanges varies from year to year. Issuers can  add new plans and adjust or discontinue existing plans from year to year,  as long as the plans meet certain minimum requirements\u2014such as  covering essential health benefits. Issuers can also extend or restrict the  locations in which they offer plans. According to HHS, while individuals  seeking 2018 coverage were able to select from an average of 25 plans  across the various metal tiers, 29 percent of consumers were able to  select from plans from only one issuer."], "subsections": []}, {"section_title": "Exchange Outreach", "paragraphs": ["HHS performs outreach to increase awareness of the open enrollment  period and facilitate enrollment among healthcare.gov consumers\u2014 including those new to the exchanges as well as those returning to renew  their coverage. Outreach to these different types of enrollees can vary.  For example, while outreach to those new to the exchanges may focus  more on the importance of having insurance, outreach to existing  enrollees may focus on encouraging them to go back to the exchange to  shop for the best option."], "subsections": []}, {"section_title": "Consumer Assistance", "paragraphs": ["All exchanges are required to carry out certain functions to assist  consumers with their applications for enrollment and financial assistance,  among other things. HHS requires exchanges to operate a website and  toll-free call center to address the needs of consumers requesting  assistance with enrollment, and to conduct outreach and educational  activities to help consumers make informed decisions about their health  insurance options. HHS administers the federal healthcare.gov website,  which allows consumers in states using the website for enrollment to  directly compare health plans based on a variety of factors, such as  premiums and provider networks. HHS also operates a Marketplace Call  Center to respond to consumer questions about enrollment. Consumers  may apply for coverage through the call center, the website, via mail, or in  person (in some areas), with assistance from navigator organizations or  agents and brokers.", "Navigators. PPACA required all exchanges to establish \u201cnavigator\u201d  programs to conduct public education activities to raise awareness of  the availability of coverage available through the exchanges, among  other things. As part of HHS\u2019s funding agreement with navigator  organizations in states using the federally facilitated exchange, HHS  requires them to maintain relationships with consumers who are  uninsured or underinsured. They must also examine consumers\u2019  eligibility for other government health programs, such as Medicaid,  and provide other assistance to consumers\u2014for example, by helping  them understand how to access their coverage.", "Agents and Brokers. Licensed by states, agents and brokers may  also provide assistance to those seeking to enroll in a health plan sold  on the exchanges; however, they are generally paid by issuers. They  may sell products for one issuer from which they receive a salary, or  from a variety of issuers and be paid a commission for each plan they  sell."], "subsections": []}]}]}, {"section_title": "Enrollment through Healthcare.gov Was 5 Percent Lower in 2018 than 2017, and Stakeholders Reported That Plan Affordability Likely Played a Major Role in Enrollment", "paragraphs": [], "subsections": [{"section_title": "Exchange Enrollment through Healthcare.gov Was 5 Percent Lower in 2018 than 2017", "paragraphs": ["About 8.7 million consumers enrolled in healthcare.gov plans during the  open enrollment period for 2018 coverage, 5 percent less than the 9.2  million who enrolled for 2017. This decline continues a trend from 2016,  when a peak of 9.6 million consumers enrolled in such plans. Since that  peak, enrollment has decreased by 9 percent. Enrollment in plans sold by  state-based exchanges that use their own enrollment website has  remained relatively stable during the same time period, with just over 3.0  million enrollees each year since 2016. Overall, enrollment in federal and  state exchanges has declined 7 percent from a peak of nearly 12.7 million  enrollees in 2016, largely driven by the decrease in enrollment in  exchanges using healthcare.gov. (See table 1.) HHS officials told us that  they did not want to speculate on the specific factors that affected  enrollment this year, but noted that the exchanges are designed for  consumers to utilize as needed, which includes degrees of fluctuation  from year to year. A decreased demand for exchange-based insurance  could be influenced by increases in the numbers of people with other  types of health coverage, such as coverage through other public  programs, or that which is sponsored by their employers.", "Enrollees who were new to healthcare.gov coverage comprised a smaller  proportion of total enrollees in 2018 than in 2017, continuing a trend seen  in prior years. The proportion of new enrollees decreased from 33 percent  (3 million) in 2017 to 28 percent (2.5 million) in 2018 (see fig. 2). Some  stakeholders noted the importance of enrolling new, healthy enrollees  each year to maintain the long-term viability of the exchanges. However,  other stakeholders noted that they had expected the number and  proportion of new enrollees to decrease over time because a large  majority of those who wanted coverage and were eligible for financial  assistance had likely already enrolled. The increasing proportion of  enrollees who return to the exchanges for their coverage could also  demonstrate their need for or satisfaction with this coverage option.", "The demographic characteristics of enrollees remained largely constant  from 2017 through 2018. For example, the proportion of enrollees with  household incomes of 100 to 250 percent of the federal poverty level  remained similar at 71 percent in 2017 and 70 percent in 2018. In  addition, the proportion of enrollees whose households were located in  rural areas was 18 percent in both years. However, the proportion of  healthcare.gov enrollees aged 55 and older increased from 27 percent in  2017 to 29 percent in 2018. Appendix III provides detailed information on  the characteristics of enrollees in 2017 and 2018."], "subsections": []}, {"section_title": "Stakeholders Reported That Plan Affordability Likely Played a Major Role in 2018 Exchange Enrollment and Plan Selection", "paragraphs": ["According to stakeholders we interviewed, plan affordability likely played  a major role in 2018 exchange enrollment\u2014both attracting and detracting  from enrollment\u2014and enrollees\u2019 plan selection. In 2018, premiums across  all healthcare.gov plans increased an average of 30 percent\u2014more than  expected given overall health cost trends. As a result of these premium  increases, plans were less affordable in 2018 compared to 2017 for  exchange consumers without advance premium tax credits (15 percent in  2018). One driver of these premium increases was the elimination of  federal cost-sharing reduction payments to issuers in late 2017, which  resulted in larger premium increases for silver tier plans (the most popular  healthcare.gov metal tier). For example, among enrollees who did not use  advance premium tax credits, the average monthly premium amount paid  for silver plans increased 45 percent (from $424 in 2017 to $614 in 2018).  Average premiums for these enrollees also increased for bronze and gold  plans, but not by as much\u201422 percent for bronze plans (from $374 in  2017 to $455 in 2018) and 23 percent for gold plans (from $509 in 2017  to $628 in 2018). Most stakeholders we interviewed told us the decreased  affordability of plans likely resulted in lower enrollment in exchange plans  for these consumers. Some stakeholders we interviewed reported  personally encouraging consumers who were not eligible for premium tax  credits to purchase their coverage off of the exchanges, where they could  often purchase the same health insurance plan for a lower price.", "However, despite overall premium increases, plans became more  affordable for the more than 85 percent of exchange consumers who  used advance premium tax credits, because the value of the premium tax  credits increased significantly in order to compensate for the higher  premiums of silver plans. For example, the average value of monthly  advance premium tax credits for those enrolled in any exchange plan  increased 44 percent, from $383 in 2017 to $550 in 2018\u2014the largest  increase in the program\u2019s history. As a result, enrollees who used  advance premium tax credits faced lower net monthly premiums on  average in 2018 than they had in 2017\u2014specifically, enrollees\u2019 average  net monthly premiums across all plans decreased 16 percent from $106  in 2017 to $89 in 2018. According to most stakeholders we interviewed,  the enhanced affordability of net monthly premiums among consumers  who used advance premium tax credits likely encouraged enrollment  among this group. (See fig. 3).", "Stakeholders we interviewed also noted that plan affordability likely  played a major role in enrollees\u2019 plan selection, including the metal tier of  their coverage. This finding is consistent with our prior work which  showed that plan cost\u2014including premiums\u2014is a driving factor in  exchange enrollees\u2019 selection of a plan. Specifically, we found that while  silver plans remained the most popular healthcare.gov metal tier,  covering 65 percent of all enrollees in 2018, this proportion decreased 9  percentage points from 2017 as more enrollees selected bronze and gold  plans. (See fig. 4.)", "Stakeholders reported that consumers using advance premium tax credits  benefitted from enhanced purchasing power in 2018 due to the impact of  silver loading, which likely served as a driving factor in these consumers\u2019  plan selections. Specifically, they noted that the increased availability of  free bronze and low-cost gold plans (after tax credits were applied) for  such consumers likely explained why many enrollees moved from silver  to bronze or gold plans for 2018. While average monthly net premiums  paid by these consumers decreased overall from 2017 to 2018 due to the  tax credits, the changes were most pronounced for those enrolled in  bronze or gold plans (which decreased 36 and 39 percent, respectively),  compared to silver plans (which decreased 13 percent). Separately, the  enhanced affordability of gold plans, along with the richer benefits they  offer, likely led some consumers to move from silver to gold plans in  2018. While the average monthly net premium amount paid for gold plans  in 2018 ($207) remained higher than that for less generous silver plans  ($88) among those using advance premium tax credits, it was nearly 40  percent lower than the average net premium for gold plans in 2017  ($340). Stakeholders also reported that consumers in some areas were  able to access gold plans for a lower cost than silver plans. The  proportion of enrollees in gold plans using advance premium tax credits  increased from 49 percent to 74 percent\u2014signaling that many enrollees  used their higher tax credits to enroll in richer gold plan coverage.", "As the proportion of enrollees with silver plans declined for 2018, so too  did the proportion of enrollees with cost-sharing reductions\u2014which are  generally only available to those with silver plans. Specifically, 54  percent of healthcare.gov enrollees received these subsidies in 2018, 6  percentage points lower than the 60 percent who received these  subsidies in 2017."], "subsections": []}, {"section_title": "Stakeholders Reported That a Variety of Other Factors Likely Affected 2018 Enrollment", "paragraphs": ["Stakeholders we interviewed reported that a variety of factors other than  plan affordability also likely affected 2018 exchange enrollment, but  opinions on the impact of each factor were mixed. Specifically, most  stakeholders we interviewed, including all 4 navigator organizations and 3  professional trade organizations, reported that consumer confusion about  PPACA and its status likely played a major role in detracting from 2018  healthcare.gov enrollment. Some of these stakeholders attributed  consumers\u2019 confusion about the exchanges to efforts to repeal and  replace PPACA. In addition, many stakeholders attributed consumer  confusion to the Administration\u2019s negative statements about PPACA.  Further, many stakeholders reported that as a result of the public debate  during 2017 over whether to repeal and replace PPACA many consumers  had questions about whether the law had been repealed and whether  insurance coverage was still available through the exchanges. However,  other stakeholders reported that this debate likely did not affect  enrollment and consumers who were in need of exchange-based  coverage were likely able to find the information they required to enroll. In  addition, many stakeholders noted that consumer understanding and  enrollment was aided through increased outreach and education events  conducted by many groups, including some state and local governments,  hospitals, issuers, and community groups. Many stakeholders also noted  that the volume of exchange-related news increased significantly before  and during the open enrollment period for 2018 coverage, in part due to  the ongoing political debate about the future of the exchanges. These  stakeholders agreed that this increase in reporting about the exchanges  likely resulted in increased consumer awareness and enrollment, even in  cases where the coverage negatively portrayed the exchanges.", "Many stakeholders also said that reductions in HHS outreach and  advertising of the open enrollment period likely detracted from 2018  enrollment, in part because any reduction in promoting enrollment  detracts from overall consumer awareness and understanding of the  program and its open enrollment period. In particular, some  stakeholders reported that outreach and advertising are especially  important for increasing new enrollment, especially among younger and  healthier consumers whose enrollment can help ensure the long-term  stability of the exchanges. However, other stakeholders reported that  these reductions likely had no effect on enrollment, noting that most  consumers who needed exchange-based coverage were already enrolled  in it and were well aware of the program, and also noting that enrollment  in 2018 did not dramatically change compared with that of 2017.", "Stakeholders we interviewed were largely divided on the effects of other  factors on 2018 healthcare.gov enrollment, including the shorter 6-week  open enrollment period. For example, about half of the stakeholders said  that the shorter open enrollment period likely led fewer to enroll due to  lack of consumer awareness of the new deadline, as well as to  challenges related to the reduced capacity of those helping consumers to  enroll. However, many others said that the shorter open enrollment period  likely had no effect. In particular, some of these stakeholders noted that  enrollment in 2018 was similar to that for 2017 and that during prior open  enrollment periods the majority of consumers had enrolled by December  15, as this was the deadline for coverage that began in January. Figure  5 displays the range of stakeholder views on factors affecting 2018  healthcare.gov enrollment, and appendix IV provides selected  stakeholder views of factors affecting 2018 healthcare.gov enrollment."], "subsections": []}]}, {"section_title": "HHS Reduced Consumer Outreach for 2018 and Used Problematic Data to Allocate Navigator Funding", "paragraphs": ["HHS reduced its consumer outreach\u2014including paid advertising and  navigator funding\u2014for the 2018 open enrollment period. Further, HHS  allocated the navigator funding using a narrower approach and  problematic data, including consumer application data that it  acknowledged were unreliable and navigator organization-reported goal  data that were based on an unclear description of the goal, and which  HHS and navigator organizations likely interpreted differently."], "subsections": [{"section_title": "HHS Reduced Paid Advertising", "paragraphs": ["HHS reduced the amount it spent on paid advertising for the 2018 open  enrollment period by 90 percent, spending $10 million as compared to the  $100 million it spent for the 2017 open enrollment period. HHS officials  reported that their 2018 advertising approach was a success, noting that  they cut wasteful spending on advertising, which resulted in a more cost- effective approach. HHS officials told us that the agency elected to  reduce funding for paid advertising to better align with its spending on  paid advertising for the Medicare open enrollment period. According to  the officials, HHS targeted its reduced funding toward low-cost forms of  paid advertising that HHS studies showed were effective in driving  enrollment, and that could be targeted to specific populations, such as  individuals aged 18 to 34 and individuals who had previously visited  healthcare.gov. For example, for 2018, HHS spent about 40 percent of its  paid advertising budget on two forms of advertising aimed at reaching  these populations.", "Specifically, HHS spent $1.2 million on the creation of two digital  advertising videos that were targeted to potential young enrollees, and  $2.7 million on search advertising, in which Internet search engines  displayed a link to healthcare.gov when individuals used relevant search  terms. HHS followed up with individuals that visited the link to encourage  them to enroll. Agency officials said they focused some of their paid  advertising on individuals aged 18 to 34 because in the prior open  enrollment period many individuals in this age range enrolled after  December 15\u2014the deadline for the 2018 open enrollment period. HHS  officials said they did not use paid television advertising because it was  too expensive and because it was not optimal for attracting young  enrollees\u2014although a 2017 HHS study found this was one of the most  effective forms of paid advertising for enrolling new and returning  individuals during the prior open enrollment period. See appendix V for  HHS\u2019s expenditures for paid advertising for the 2017 and 2018 open  enrollment periods."], "subsections": []}, {"section_title": "HHS Reduced Navigator Funding and Used a Narrower Approach and Problematic Data to Allocate It", "paragraphs": ["HHS reduced navigator funding by 42 percent for 2018, spending $37  million compared to the $63 million it spent for 2017. According to HHS  officials, the agency reduced this funding due to a shift in the  Administration\u2019s priorities. For the 2018 open enrollment period, HHS  planned to rely more heavily on agents and brokers\u2014another source of  in-person consumer assistance, who, unlike navigator organizations that  are funded through federal grants, are generally paid for by the issuers  they represent. HHS took steps to highlight their availability to help  consumers and enable consumers to enroll through them. For example,  for the 2018 open enrollment period, HHS made a new \u201cHelp on Demand\u201d  tool available on healthcare.gov that connected consumers directly to  local agents or brokers. HHS also developed a streamlined enrollment  process for those enrolling through agents and brokers.", "HHS also changed its approach for allocating the navigator funding to  focus on a narrower measure of navigator organization performance than  it had used in the past. According to HHS officials, in prior years, HHS  awarded funding based on navigator organizations\u2019 performance on a  variety of tasks, such as the extent to which navigator organizations met  their self-imposed goals for numbers of public outreach events and  individuals assisted with applications for exchange coverage and  selection of exchange plans. HHS officials said the agency previously  also took state-specific factors, such as the number of uninsured  individuals in a state, into account when awarding funding. HHS  calculated preliminary navigator funding awards for 2018 using this  approach. However, according to HHS officials, the agency later  decided to change both its budget and approach for allocating navigator  funding for 2018 to hold navigator organizations more accountable for the  number of individuals they enrolled in exchange plans. In its new funding  allocation approach, rather than taking into account navigator  organization performance on a variety of tasks, HHS only considered  performance in achieving one goal\u2014the number of individuals each  navigator organization planned to assist with selecting or enrolling in  exchange plans for 2017 coverage. In implementing this new approach,  HHS compared the number of enrollees whose 2017 exchange coverage  applications included navigator identification numbers with each navigator  organization\u2019s self-imposed goal. For navigator organizations that did not  appear to meet their goals, HHS decreased their preliminary 2018 award  amounts proportionately. For navigator organizations that appeared to  meet or exceed their goals, HHS left their preliminary 2018 award  amounts unchanged. Based on this change in approach, HHS offered 81  of its 98 navigator organizations less funding for 2018, with decreases  ranging from less than 1 percent to 98 percent of 2017 funding levels.  HHS offered 4 of the 98 navigator organizations increased funding and 13  the same level of funding they received for 2017 (see fig. 6).", "We found that the data HHS used for its revised funding approach were  problematic for multiple reasons. In particular, prior to using the 2017  consumer application data as part of its 2018 funding calculations, HHS  had acknowledged that these data were unreliable, in part because  navigators were not consistently entering their identification numbers into  applications during the 2017 open enrollment period. Specifically, HHS  stated in a December 9, 2016, email to navigator organizations that the  application data were unreliable and thus could not be used. Over 4  million individuals had enrolled in 2017 coverage by December 10, 2016,  so it is likely that many of the applications that HHS used in its 2018  funding calculation included incomplete or inaccurate information with  respect to navigator assistance. HHS provided guidance to navigator  organizations in the December 2016 email on the importance of, and  locations for, entering identification numbers into applications to help  improve the reliability of the data. However, some data reliability issues  may have remained throughout the 2018 open enrollment period, as two  of the navigator organizations we interviewed reported ongoing  challenges entering navigator identification numbers into applications  during this period. For example, representatives from one navigator  organization reported that the application field where navigators enter  their identification number was at times pre-populated with an agent or  broker\u2019s identification number. Consumer application data may therefore  still be unreliable for use in HHS navigator funding decisions that would  be expected later this year for 2019.", "Moreover, the 2017 goal data that HHS used in its funding calculation  were also problematic because HHS described the goal in an unclear  manner when it asked navigator organizations to set their goals. As a  result, HHS\u2019s interpretation of the goal was likely different than how it was  interpreted and established by navigator organizations. Specifically, in  its award application instructions, HHS asked navigator organizations to  provide a goal for the number of individuals that they \u201cexpected to be  assisted with selecting/enrolling in  (including re- enrollments)\u201d but HHS did not provide guidance to navigator  organizations on how it would interpret the goal. HHS officials told us  that they wanted to allow navigator organizations full discretion in setting  their goals, since the organizations know their communities best. In its  funding calculation, HHS interpreted this goal as the number of  individuals navigator organizations planned to enroll in exchange plans.  However, as written in the award application instructions, the goal could  be interpreted more broadly, because not all individuals whom navigators  assist with the selection of exchange plans ultimately apply and enroll in  coverage. Representatives from one navigator organization we spoke  with said they did interpret this goal more broadly than how it was  ultimately interpreted by HHS\u2014and thus set it as the number of  consumers they planned to assist in a variety of ways, not limiting it to  those they expected to assist through to the final step of enrollment in  coverage. The navigator organization therefore set a higher goal than it  otherwise would have, had it understood HHS\u2019s interpretation of the goal,  and ultimately received a decrease in funding for 2018.", "As a result, we found that two of the three inputs in HHS\u2019s calculation of  2018 navigator organization awards were problematic (see fig. 7).", "HHS\u2019s reduced funding and revised funding allocation approach resulted  in a range of implications for navigator organizations. According to HHS  officials, eight of the navigator organizations that were offered reduced  funding for 2018\u2014with reductions ranging from 50 to 98 percent of 2017  funding levels\u2014declined their awards and withdrew from the program.  HHS reported asking the remaining navigator organizations to focus on  re-enrolling consumers who had coverage in 2017 and resided in areas  where issuers reduced or eliminated plan offerings for 2018, and  informing consumers about the shortened open enrollment period for  2018 coverage. Representatives of the navigator community group we  interviewed reported that many navigator organizations did focus their  resources on enrollment and cut back on outreach efforts, particularly in  rural areas. According to self-reported navigator organization data  provided by HHS, navigator organizations collectively reported conducting  68 percent fewer outreach events during the 2018 open enrollment period as compared to the 2017 period. Representatives from the navigator  organizations we interviewed also reported making changes to their  operations; for example, officials from one of the navigator organizations  reported cutting staff and rural office locations. Officials from another  navigator organization said that they focused their efforts on contacting  prior exchange enrollees to assist them with re-enrollment, instead of  finding and enrolling new consumers, and de-prioritized assistance with  Medicaid enrollment. The three navigator organizations we spoke with  that had funding cuts for 2018 also reported that their ability to perform  the full range of navigator duties during the rest of the year would be  compromised because they needed to make additional cuts in their  operations\u2014such as reducing staff and providing less targeted assistance  to underserved populations\u2014in order to reduce total costs. One of the  three navigator organizations reported that it may go out of business at  the end of the 2018 award year.", "HHS\u2019s narrower approach to awarding funding; lack of reliable, complete  data on the extent to which navigator organizations enrolled individuals in  exchange plans; and lack of clear guidance to navigator organizations on  how to set their goals could hamper the agency\u2019s ability to use the  program to meet its objectives. Federal internal control standards state  that management should use quality information to achieve the agency\u2019s  objectives, such as by using relevant, reliable data for decision-making.  Without reliable performance data and accurate goals, HHS will be  unable to measure the effectiveness of the navigator program and take  informed action as necessary. Further, because HHS calculated awards  using problematic data, navigator organizations may have received  awards that did not accurately reflect their performance in enrolling  individuals in exchange plans. Additionally, HHS\u2019s narrow focus on  exchange enrollment limited its ability to make decisions based on  relevant information. Moving forward, this may affect navigator  organizations\u2019 interests and abilities in providing a full range of services to  their communities, including underserved populations. This, in turn, could  affect HHS\u2019s ability to meet its objectives, such as its objective of  improving Americans\u2019 access to health care."], "subsections": []}]}, {"section_title": "HHS Did Not Set Numeric Enrollment Targets for 2018, and Instead Focused on Enhancing Certain Aspects of Consumers\u2019 Experiences", "paragraphs": ["HHS did not set any numeric enrollment targets for 2018 related to total  healthcare.gov enrollment, as it had in prior years. In prior years, HHS  used numeric targets to monitor enrollment progress during the open  enrollment period and focus its resources on those consumers that it  believed had a high potential to enroll in exchange coverage. For  example, HHS established a target of enrolling a total of 13.8 million  individuals during the 2017 open enrollment period and also set numeric  enrollment targets for 15 regional markets that the agency identified as  presenting strong opportunities for meaningful enrollment increases,  partly due to having a high percentage of eligible uninsured individuals.  HHS used these regional target markets to focus its outreach, travel, and  collaborations with local partners. According to agency officials, during  prior open enrollment periods, HHS monitored its performance with  respect to its targets and revised its outreach efforts in order to better  meet its goals.", "According to federal internal control standards, agencies should design  control activities to achieve their objectives, such as by establishing and  monitoring performance measures. HHS has recognized the importance  of these internal controls by requiring state-based exchanges to develop  performance measures and report on their progress. Without developing  numeric targets for healthcare.gov enrollment, HHS\u2019s ability to both  perform high level assessments of its performance and progress and to  make critical decisions about how to use its resources is hampered. HHS  may also be unable to ensure that it meets its objectives\u2014including its  current objective of improving Americans\u2019 access to health care, including  by stabilizing the market and implementing policies that increase the mix  of younger and healthier consumers purchasing plans through the  individual market.", "HHS leadership decided against setting numeric enrollment targets for  the 2018 open enrollment period and instead focused on a goal of  enhancing the consumer experience, according to HHS officials.  Specifically, HHS officials measured the consumer experience based on  its assessment of healthcare.gov availability and functionality, and call  center availability and customer satisfaction. HHS officials told us that  they selected these measures of the consumer experience because  healthcare.gov and the call center represent two of the largest channels  through which consumers interact with the exchange. HHS reported  meeting its goal based on consumers\u2019 improved experiences with these  two channels, some of which had been problematic in the past. (See fig.  8.)", "Healthcare.gov. According to HHS officials, the healthcare.gov  website achieved enhanced availability and functionality for the 2018  open enrollment period, continuing a trend in improvements over prior  years. While HHS scheduled similar periods of healthcare.gov  downtime for maintenance in 2017 and 2018, the website had less  total downtime during the 2018 open enrollment period because the  agency needed to conduct less maintenance. HHS officials  attributed the increased availability in part to an operating system  upgrade and comprehensive testing of the website that they  conducted before the 2018 open enrollment period began. In addition,  unlike prior years, HHS officials said that the agency published  scheduled maintenance information for 2018 to reduce scheduling  conflicts for consumers and groups providing enrollment assistance.  HHS also reported enhancing the functionality of the website for the  2018 open enrollment period, including by adding new tools, such as  a \u201chelp on demand\u201d feature that links consumers with a local agent or  broker willing to assist them, as well as updated content that included  more plain language. Many stakeholders we interviewed told us that  healthcare.gov functioned well during the open enrollment period and  was more available than it had been in prior years.", "Call Center Assistance. According to HHS officials, the call center  reduced wait times and improved customer satisfaction scores in  2018, continuing a trend in improvements over prior years. HHS  officials reported average wait times of 5 minutes, 38 seconds for the  2018 open enrollment period\u2014almost four minutes shorter than the  average wait time experienced during a comparable timeframe of the  2017 open enrollment period. HHS officials attributed this reduction  in wait times to improvements in efficiency, including scripts that used  fewer words and generated fewer follow-up questions. In addition,  there was a modest reduction in call center volume during similar  timeframes of the 2017 and 2018 open enrollment periods. Officials  from many stakeholders we interviewed reported that call center  assistance was more readily available this year than it had been in  prior years. HHS officials also reported an average call center  customer satisfaction score of 90 percent in 2018 compared to 85  percent in 2017, based on surveys conducted at the end of customer  calls.", "Although HHS officials reported that the agency met its goal of enhancing  specific aspects of the consumer experience for the 2018 open  enrollment period, HHS narrowly defined its goal and excluded certain  aspects of the consumer experience that it had identified as key as  recently as 2017. More specifically, in 2017, HHS reported that successful  outreach and education events and the availability of in-person consumer  assistance, such as that provided by navigators to help consumers  understand plan options, were key aspects of the consumer experience.  However, HHS did not include these key items when measuring progress  toward their 2018 goal of enhancing the consumer experience. Federal  internal control standards state that agencies should identify risks that  affect their defined objectives and use quality information to achieve  these objectives, including by identifying the information required to  achieve the objectives and address related risks. By excluding key  aspects of the consumer experience in its evaluation of its performance,  HHS\u2019s assessment of the consumer experience may be incomplete. For  example, as noted above, some stakeholders we interviewed told us that  consumer confusion likely detracted from enrollment for 2018, and some  linked this outcome to HHS\u2019s reduced role in promoting exchange  enrollment, including navigator support, which may have resulted in less  in-person consumer assistance through navigators. HHS\u2019s assessment of  the consumer experience, which focused only on consumers who used  the website or reached out to the call center during open enrollment, did  not account for the experiences of those who interacted with the health  insurance exchanges through other channels, such as through navigators  or agents and brokers."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Some experts have raised questions about the long-term stability of the  exchanges absent sufficient enrollment, including among young and  healthy consumers. To encourage exchange enrollment, HHS has  traditionally conducted a broad outreach and education campaign,  including funding navigator organizations that provide in-person  enrollment assistance. For the 2018 open enrollment period, HHS  reduced its support of navigator organizations and changed its approach  for allocating navigator funding to focus on exchange enrollment alone.  HHS allocated the funding based on performance data that were  problematic for multiple reasons, including because some of the  underlying data were unreliable. As a result, navigator organizations  received funding that reflected a more limited evaluation of their  performance than HHS had used in the past, and that may not have  accurately reflected their performance. This raises the risk that navigator  organizations will decrease the priority they place on fulfilling a range of  other duties for which they are responsible, including providing assistance  to traditionally underserved populations, which some navigator  organizations we interviewed reported they had either decreased or  planned to decrease due to reduced funding. HHS\u2019s lack of complete and  reliable data on navigator organization performance hampers the  agency\u2019s ability to make appropriately informed decisions about funding.  Moreover, its focus on enrollment alone in awarding funding may affect  navigator organizations\u2019 ability to fulfill the full range of their  responsibilities, which could in turn affect HHS\u2019s ability to use the  program as a way to meet its objective of enhancing Americans\u2019 access  to health care.", "In addition, the lack of numeric enrollment targets for HHS to evaluate its  performance with respect to the open enrollment period hampers the  agency\u2019s ability to make informed decisions about its resources. HHS  reported achieving a successful consumer experience for the 2018 open  enrollment period based on enhancing its performance in areas that had  been problematic in the past. However, the agency\u2019s evaluation of its  performance did not include aspects of the consumer experience that it  identified in 2017 as key, and for which stakeholders reported problems in  2018. As a result, its assessment of its performance in enhancing the  consumer experience was likely incomplete. Absent a more complete  assessment, HHS may not have the information it needs to fully  understand the consumer experience."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to HHS:", "The Secretary of HHS should ensure that the approach and data it  uses for determining navigator award amounts accurately and  appropriately reflect navigator organization performance, for example,  by  1.  providing clear guidance to navigator organizations on  performance goals and other information they must report to HHS  that will affect their future awards,  2.  ensuring that the fields used to capture the information are  functioning properly, and  3.  assessing the effect of its current approach to funding navigator  organizations to ensure that it is consistent with the agency\u2019s  objectives. (Recommendation 1)", "The Secretary of HHS should establish numeric enrollment targets  for healthcare.gov, to ensure it can monitor its performance with  respect to its objectives. (Recommendation 2)", "Should the agency continue to focus on enhancing the consumer  experience as a goal for the program, the Secretary of HHS  should assess other aspects of the consumer experience, such as  those it previously identified as key, to ensure it has quality  information to achieve its goal. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for comment. In its comments,  reproduced in appendix VI, HHS concurred with two of our three  recommendations. HHS also provided technical comments, which we  incorporated as appropriate.", "HHS concurred with our recommendation that it ensure that the approach  and data it uses for determining navigator awards accurately and  appropriately reflect navigator organization performance. In its comments  on our draft report, HHS stated that it had notified navigator organizations  that their funding would be linked to the organizations\u2019 self-identified  performance goals and their ability to meet those goals. On July 10, 2018,  HHS issued its 2019 funding opportunity announcement for the navigator  program, which required those applying for the award to set performance  goals, including for the number of consumers assisted with enrollment  and re-enrollment in exchange plans, and also states that failure to meet  such goals may negatively impact a recipient\u2019s application for future  funding. In its comments, HHS also noted that it is in the process of  updating the healthcare.gov website so that individual applications can  hold the identification numbers of multiple entities, such as navigators,  agents or brokers, and will work to ensure that the awards align with  agency objectives.", "HHS also concurred with our recommendation that the agency assess  other aspects of the consumer experience, such as those it previously  identified as key, to ensure it has quality information to achieve its goal.  HHS noted that it had assessed the consumer experience based on the  availability of the two largest channels supporting exchange operations,  and also noted that it will consider focusing on other aspects of the  consumer experience as needed.", "HHS did not concur with our recommendation that the agency establish  numeric enrollment targets for healthcare.gov, to ensure that it can  monitor its performance with respect to its objectives. Specifically, HHS  noted that there are numerous external factors that can affect a  consumer\u2019s decision to enroll in exchange coverage that are outside of  the control of HHS, including the state of the economy and employment  rates. HHS stated that it does not believe that enrollment targets are  relevant to assess the performance of a successful open enrollment  period related to the consumer experience. Instead, it believes a more  informative performance metric would be to measure whether everyone  who utilized healthcare.gov, who qualified for coverage, and who desired  to purchase coverage, was able to make a plan selection.", "We continue to believe that the development of numeric enrollment  targets is important for effective monitoring of the program and  management of its resources. Without establishing numeric enrollment  targets for upcoming open enrollment periods, HHS\u2019s ability to evaluate  its performance and make informed decisions about how it should deploy  its resources is limited. We also believe that these targets could help the  agency meet its program objectives of stabilizing the market and of  increasing the mix of younger and healthier consumers purchasing plans  through the individual market. Furthermore, HHS has previously  demonstrated the ability to develop meaningful enrollment targets using  available data. For example, in prior years, HHS developed numeric  enrollment targets based on a range of factors, including the number of  exchange enrollees, number of uninsured individuals, and changes in  access to employer-sponsored insurance, Medicaid, and other public  sources of coverage. In addition, the agency set numeric enrollment  targets for regional markets that took these and other factors into  account. Once these targets were established, HHS officials were able to  use them to monitor progress throughout the open enrollment period and  revise its efforts as needed.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of HHS. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: GAO List of Factors That May Have Affected 2018 Healthcare.gov Enrollment", "paragraphs": ["We identified a list of factors that may have affected 2018 healthcare.gov  enrollment based on a review of Department of Health and Human  Services information, interviews with health policy experts, and review of  recent publications by these experts related to 2018 exchange  enrollment.", "Factors related to the open enrollment period:", "Open enrollment conducted during a shorter 6-week open enrollment  period.", "Consumer awareness of this year\u2019s open enrollment deadline.", "Factors related to plan availability and plan choice:", "Plan affordability for consumers ineligible for financial assistance.", "Plan affordability for consumers eligible for financial assistance.", "Consumers\u2019 perceptions of plan affordability.", "Availability of exchange-based plan choices.", "Availability of off-exchange plan choices.", "Consumer reaction to plan choices.", "Factors related to outreach and education:", "Reductions in federal funding allocated to outreach and education,  and lack of television and other types of advertising.", "Top Administration and agency officials\u2019 messaging about the health  insurance exchanges and open enrollment.", "National and local media reporting on the exchanges and open  enrollment.", "Local outreach and education events conducted by federally funded  navigator organizations.", "Outreach and education efforts and/or advertising by some states,  issuers, advocacy groups, community organizations, and agents and  brokers.", "Factors related to enrollment assistance and tools:", "Availability of one-on-one enrollment assistance from federally funded  navigator organizations.", "Availability of one-on-one enrollment assistance from agents and  brokers.", "Updates to the content and function of the healthcare.gov website.", "Availability of the healthcare.gov website during the open enrollment  period.", "Availability of assistance through the call center during the open  enrollment period.", "Consumer understanding of the Patient Protection and Affordable  Care Act and its status.", "Automatic re-enrollment occurred on the last day of the open  enrollment period."], "subsections": []}, {"section_title": "Appendix II: Information about Stakeholders Interviewed", "paragraphs": [], "subsections": [{"section_title": "Number of organizations interviewed", "paragraphs": ["4    Navigator organizations were selected to reflect a range in:  (1) amount of 2018 award from the Department of Health and Human Services (HHS);  (2) change in HHS award amount from 2017;  (3) region; and  (4) target population.", "Insurance departments in six states that use the federally facilitated exchanges were  selected to reflect a range with respect to:  (1) 2018 healthcare.gov enrollment outcomes;  (2) strategies used for calculating 2018 premiums to compensate for the loss of federal  cost-sharing reduction payments;  (3) changes in 2018 navigator organization award amounts; and  (4) the number of issuers offering 2018 exchange coverage in the state.  3    Three issuers were selected who offered 2018 plans on healthcare.gov exchanges;  two of which sold exchange plans in multiple states.  5    Five research and consumer advocacy organizations were selected to provide a range  of perspectives with respect to the law and issues related to exchange outreach and  enrollment. 3    Three professional trade associations were selected to collectively represent the  perspectives of regulators, issuers, and consumer assisters.   2    Two state-based exchanges were selected based on the length of their open  enrollment periods\u2014one had one of the shortest open enrollment periods and the  other had one of the longest open enrollment periods for 2018.", "Navigator organizations, among other things, carry out public education activities and help consumers enroll in a health insurance plan offered through  the exchange. HHS awards financial assistance to navigator organizations that provide these services in states using the federally facilitated exchange.  An issuer is an insurance company, insurance service, or insurance organization that is required to be licensed to engage in the business of insurance  in a state.  State-based exchanges are able to set their own budget and strategy for promoting exchange enrollment and set the length of their open enrollment  periods."], "subsections": []}, {"section_title": "Metal tier of selected plan Bronze", "paragraphs": [], "subsections": []}, {"section_title": "Household income", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix IV: Selected Stakeholder Views of Factors Likely Affecting 2018 Enrollment in Healthcare.gov Plans", "paragraphs": ["We identified a list of factors that may have affected 2018 healthcare.gov  enrollment based on a review of Department of Health and Human  Services (HHS) information, interviews with health policy experts, and  review of recent publications by these experts related to 2018 exchange  enrollment. Using this list, we conducted structured interviews with  officials from 23 stakeholder organizations to gather their viewpoints as to  whether and how these or other factors affected 2018 health insurance  exchange enrollment. Organizations interviewed were selected to reflect  a wide range of perspectives and included HHS-funded navigator  organizations that provide in-person consumer enrollment assistance,  issuers, state insurance departments, professional trade organizations,  research and advocacy organizations, and state-based exchanges. Table  2 displays a range in stakeholder views about the impact of these factors."], "subsections": []}, {"section_title": "Appendix V: HHS Paid Advertising Expenditures for 2017 and 2018 Open Enrollment Periods", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Gerardine Brennan, Assistant  Director; Patricia Roy, Analyst-in-Charge; Priyanka Sethi Bansal; Giao N.  Nguyen; and Fatima Sharif made key contributions to this report. Also  contributing were Muriel Brown, Laurie Pachter, and Emily Wilson."], "subsections": []}]}], "fastfact": ["We examined 2018 enrollment in Affordable Care Act health insurance exchanges and federal efforts to encourage enrollment.", "We found:", "About 8.7 million people bought insurance in 2018 through the federal website (healthcare.gov), 5% less than in 2017.", "Health and Human Services reduced its advertising and other consumer outreach. The 23 stakeholders we interviewed had mixed views about the effects of these reductions on enrollment.", "HHS did not set enrollment targets for 2018, but reported meeting its goal of enhancing specific aspects of consumer experience.", "We recommended that HHS take steps to better manage its performance."]}
{"id": "GAO-18-100", "url": "https://www.gao.gov/products/GAO-18-100", "title": "Medicare Fee-For-Service: Modernizing Cost-sharing Design Would Involve Trade-offs, the Results of Which Would Depend on Time Horizon", "published_date": "2018-01-09T00:00:00", "released_date": "2018-02-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To address concerns with the current Medicare FFS cost-sharing design, various groups have proposed modernizing the design to make it simpler and include features found in private plans. These proposals have generally included a single deductible, modified cost-sharing requirements (e.g., a uniform coinsurance), and the addition of a cap on beneficiaries' annual cost-sharing responsibilities.", "GAO was asked to review how modernized cost-sharing designs would affect beneficiaries' costs over multiple years. This report describes implications of the current cost-sharing design; options for modernizing; and how modernized cost-sharing designs could directly and indirectly affect beneficiaries' costs.", "GAO reviewed studies related to modernizing Medicare's cost-sharing design and interviewed authors of those studies and other experts. GAO also used summarized Medicare claims data from 2007 to 2014 (the most recent data available) to develop four illustrative modernized designs, each including a single deductible, uniform coinsurance, and an annual cap while maintaining Medicare program spending similar to the current design. For each design, GAO calculated how beneficiaries' annual cost-sharing responsibilities compared with the current design over a 1-, 4-, and 8-year time horizon.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO and others have raised concerns about the design of Medicare fee-for-service (FFS) cost-sharing\u2014the portion of costs beneficiaries are responsible for when they receive care. The current cost-sharing design has been largely unchanged since Medicare's enactment in 1965, can be confusing for beneficiaries, and can contribute to overuse of services. Additionally, the design leaves some beneficiaries exposed to catastrophic costs that can exceed tens of thousands of dollars annually. The complexity of the design and lack of an annual cap on cost-sharing responsibilities also increases demand for supplemental insurance, which can cost beneficiaries thousands annually and further contribute to overuse of services.", "Modernizing Medicare FFS's cost-sharing design to include features found in private plans could help address these concerns, but would involve design trade-offs. For example, adding an annual cap on cost-sharing responsibilities while maintaining Medicare's aggregate share of costs similar to the current design would involve a trade-off between the level of the cap and other cost-sharing requirements.", "In analyzing four illustrative FFS cost-sharing designs, GAO found that the direct effect of modernizing the design on beneficiaries' cost-sharing responsibilities\u2014that is, the effect when holding utilization and enrollment constant\u2014would depend on the specific revisions and the time horizon examined. For example, GAO found that", "During year 1, cost-sharing designs that feature relatively low deductibles (costs a beneficiary is responsible for before Medicare starts to pay) and relatively high caps would result in a median annual beneficiary cost-sharing responsibility close to or below that of the current design. In contrast, designs with relatively low caps\u2014and therefore greater beneficiary protection from catastrophic costs\u2014would result in a median annual cost-sharing responsibility above that of the current design.", "By the end of 8 years, there would still be differences in the median annual beneficiary cost-sharing responsibility across different designs, but they would become less pronounced.", "Modernizing the Medicare FFS cost-sharing design would also affect beneficiaries' costs indirectly through altered incentives. The studies GAO reviewed and experts GAO interviewed identified several types of behavioral responses that would influence the net effect of a modernized design on beneficiaries' out-of-pocket costs, including changes in beneficiaries' demand for and insurers' supply of supplemental insurance; changes in beneficiaries' use of services; changes in Medicare beneficiaries' enrollment in FFS versus Medicare's private plan alternative; and interactions among these and other behavioral responses, including effects on the price of supplemental insurance."]}], "report": [{"section_title": "Letter", "paragraphs": ["GAO and others have long noted concerns about the design of Medicare  fee-for-service (FFS) cost-sharing\u2014the portion of costs for covered  services that beneficiaries are responsible for when they receive care.  Generally, health care insurers set three types of cost-sharing  parameters: (1) deductibles\u2014costs a beneficiary is responsible for before  the health insurance plan will start to pay any costs; (2) coinsurance or  copayments (per-service payments) once the deductible is met; and (3)  caps\u2014limits on the maximum cost-sharing amount a beneficiary can be  responsible for during a year for covered services. Medicare FFS\u2019s cost- sharing is complicated and not well designed to discourage unnecessary  use of services. For example, Medicare FFS\u2019s cost-sharing design  includes two separate deductibles: a relatively high deductible for hospital  services, which are usually not discretionary and are less likely to be  influenced by cost-sharing requirements, and a relatively low deductible  for outpatient services, which are more often discretionary and likely to be  influenced by cost-sharing requirements. In addition, Medicare FFS lacks  an annual cap, which can leave beneficiaries vulnerable to catastrophic  costs.", "To address these concerns, various groups have proposed revising  Medicare FFS\u2019s cost-sharing design, which has been largely unchanged  from when Medicare was enacted in 1965. Specifically, groups have  proposed that Medicare FFS\u2019s cost-sharing design be simplified and  include features found in private plans (including in Medicare Advantage  (MA), the private plan alternative to Medicare FFS), which have evolved  over time to promote prudent use of health care services and protect  beneficiaries from catastrophic care costs. Although the specifics of each  proposal to revise Medicare FFS\u2019s cost-sharing design have varied, the  proposals have generally shared three features. First, they have  proposed establishing a single deductible to replace the current separate  deductibles for hospital and outpatient services. Second, they have  proposed modifying the per-service payments, with some proposals  suggesting moving to a uniform coinsurance that would be the same for  all services and others suggesting variable copayments tied to the clinical  value of the service. Third, they have proposed adding an annual cap.", "Modernizing Medicare\u2019s cost-sharing design would have both direct and  indirect effects on beneficiaries\u2019 costs. The direct effect would be how the  revised design would change beneficiaries\u2019 cost-sharing responsibilities  for a given set of services. The indirect effect would be that the altered  incentives under a revised design would trigger behavioral responses,  such as changes in beneficiaries\u2019 utilization of health care services,  enrollment in supplemental insurance to help cover their Medicare cost- sharing responsibilities, or enrollment in Medicare FFS or MA. The  indirect and direct effects together would determine how a modernized  design would affect beneficiaries\u2019 total out-of-pocket costs for covered  services (the amount of cost-sharing paid directly by the beneficiary plus  the premiums (monthly fees) that beneficiaries pay for their Medicare  coverage and other supplemental insurance they may have).", "Some studies have examined how modernizing Medicare\u2019s cost-sharing  design would affect beneficiaries financially; however, they have primarily  focused on first-year effects and may have understated the advantages to  beneficiaries of adding an annual cost-sharing cap. Over longer time  horizons, the percentage of beneficiaries who would benefit from a  catastrophic coverage cap in at least 1 year increases. However, as the  time horizon lengthens it becomes more difficult to predict beneficiaries\u2019  behavioral responses and their interactions with any degree of  confidence. Analyzing the direct effect of a modernized cost-sharing  design\u2014the effect on beneficiaries\u2019 cost-sharing responsibilities, holding  utilization and enrollment constant\u2014over multiple years provides a  baseline for understanding how the effect would vary depending on the  parameters of the revised design and the time horizon examined. In turn,  discussing behavioral responses that might be triggered by this direct  effect provides a fuller picture of how a modernized cost-sharing design  might affect beneficiaries\u2019 total out-of-pocket costs.", "You requested that we examine the potential annual and multiyear effects  on beneficiaries\u2019 costs if the Medicare FFS cost-sharing design were  modernized to include a single deductible, uniform coinsurance above the  deductible, and an annual cap. This report describes  1.  implications of the current Medicare FFS cost-sharing design and  options for modernizing while maintaining Medicare\u2019s and  beneficiaries\u2019 aggregate share of costs;  2.  how modernized cost-sharing designs could directly affect  beneficiaries\u2019 cost-sharing responsibilities; and  3.  how modernized cost-sharing designs could indirectly affect  beneficiaries\u2019 out-of-pocket costs.", "To identify implications of the current cost-sharing design and options for  modernizing, we reviewed relevant studies and analyzed summary  Medicare claims data. In particular, we reviewed studies exploring  implications of the current design and potential options for modernizing,  as well as studies and documentation on cost-sharing design in private  plans, including those in MA. We also analyzed claims data from 2014  (the most recent year of data available at the time we began our study) to  describe beneficiaries\u2019 cost-sharing responsibilities under the current  design. We also used claims data to develop four illustrative options for  modernized cost-sharing designs, each of which included a single  deductible, uniform coinsurance, and an annual cap, while maintaining  Medicare\u2019s aggregate share of costs similar to the current design when  holding health care utilization and beneficiary enrollment constant. To do  so, we first identified the approximately 28 million Medicare FFS  beneficiaries who were continuously enrolled in Medicare FFS from  January 2007 through December 2014 or their death. We then  calculated each beneficiary\u2019s annual cost-sharing responsibilities under  the current design and what they would have been under a revised  design, holding utilization and enrollment constant. To identify the specific  parameters for each illustrative design, we started with one of the four  caps applicable to MA plans in 2014 and a uniform coinsurance of 20  percent (the same level as the coinsurance for most Part B services  under the current design). We then tested different possible levels of the  deductible until we found a level that maintained Medicare program  spending and the split of costs between Medicare and beneficiaries  similar to the current design.", "To illustrate how modernized cost-sharing designs could directly affect  beneficiaries\u2019 cost-sharing responsibilities, we used the same cohort of 28  million beneficiaries. First, we calculated the distribution of these  beneficiaries\u2019 1-year, 4-year, and 8-year annual cost-sharing  responsibilities\u2014including the median and maximum responsibility\u2014 under the current cost-sharing design and each of the four illustrative  designs, and compared these distributions. Second, we calculated the  percentage of beneficiaries who would have experienced a change in  their annual cost-sharing responsibilities in specified ranges\u2014including at  least $100 lower or at least $100 higher than their responsibilities under  the current design\u2014and the average change among these groups. We  also calculated how these changes were related to whether a beneficiary  reached the cap at least once. To assess the accuracy of the summary  Medicare claims data, we reviewed related documentation; interviewed  Centers for Medicare & Medicaid Services (CMS) officials knowledgeable  about the data; conducted checks for missing, duplicative, or erroneous  data; and compared our results with published data. Based on these  activities, we determined that the data we used were sufficiently reliable  for the purposes of our reporting objectives.", "To identify how modernized cost-sharing designs could indirectly affect  beneficiaries\u2019 out-of-pocket costs, we reviewed relevant studies and  interviewed experts. The experts we interviewed included staff from  CMS\u2019s Office of the Actuary; organizations that conducted studies on  modernizing the Medicare FFS cost-sharing design (the Congressional  Budget Office, Kaiser Family Foundation, and Medicare Payment  Advisory Commission (MedPAC)); and other entities with insight on some  of the potential effects of modernizing the Medicare FFS cost-sharing  design (the American Academy of Actuaries and National Association of  Insurance Commissioners).", "We conducted this performance audit from March 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Medicare FFS Program", "paragraphs": ["In 2016, Medicare spent about $380 billion on health care services for  beneficiaries enrolled in Medicare FFS, which consists of two separate  parts: Medicare Part A, which primarily covers hospital services, and  Medicare Part B, which primarily covers outpatient services. The majority  of the 38 million Medicare FFS beneficiaries were enrolled in both Part A  and Part B, although about 5 million were enrolled in Part A only and 0.3  million were enrolled in Part B only."], "subsections": []}, {"section_title": "Medicare FFS Cost- Sharing Design", "paragraphs": ["The general design of Medicare FFS cost-sharing has been largely  unchanged since Medicare\u2019s enactment in 1965. It includes separate  deductibles for Part A and Part B services, a variety of per-service  copayments and coinsurance after the deductibles are met, and no cap  on beneficiaries\u2019 cost-sharing responsibilities (see table 1)."], "subsections": []}, {"section_title": "Supplemental Insurance among Medicare FFS Beneficiaries", "paragraphs": ["The current cost-sharing design leaves beneficiaries exposed to  potentially catastrophic cost-sharing, and in part because of that, in 2015,  81 percent of Medicare FFS beneficiaries obtained supplemental  insurance that covered some or all of their Medicare cost-sharing  responsibilities, often in exchange for an additional premium (see table 2).  For example, in 2015, 31 percent of Medicare FFS beneficiaries  purchased a private Medigap plan, the most common types of which fully  insulated them from Medicare cost-sharing responsibilities in exchange  for an average annual premium of $2,400. Another 20 percent of  Medicare FFS beneficiaries enrolled in Medicaid, which generally covered  most of their Medicare cost-sharing responsibilities; however, these low- income beneficiaries generally only paid a limited or no premium for this  supplemental coverage."], "subsections": []}]}, {"section_title": "Medicare FFS Cost- sharing Can Be Confusing and Lead to Overuse of Services; Modernizing Could Address Concerns, but Would Involve Trade-offs", "paragraphs": ["The current Medicare FFS cost-sharing design can be confusing,  contribute to beneficiaries\u2019 overuse of services, and leave beneficiaries  exposed to catastrophic costs. Modernizing the design could address  these concerns, but would involve trade-offs. For example, as shown in  four illustrative designs that we evaluated, maintaining Medicare\u2019s share  of costs would involve a trade-off between the level of the cap and the  deductible (or other cost-sharing)."], "subsections": [{"section_title": "Medicare FFS Cost- sharing Design Can Be Confusing, Contribute to Beneficiaries\u2019 Overuse of Services, and Leave Them Exposed to Catastrophic Costs", "paragraphs": ["As noted by Medicare advocacy groups and others, the current Medicare  FFS cost-sharing design, which includes multiple deductibles, can be  confusing for beneficiaries. In 2014, 16 percent of Medicare FFS  beneficiaries were responsible for at least one Part A deductible for an  episode of inpatient care as well as the annual Part B deductible.  (Medicare FFS beneficiaries may be subject to more than one Part A  deductible during the year, as the Part A deductible applies to each  admission to an inpatient hospital or skilled nursing facility that occurs  more than 60 consecutive days after the prior admission.) The  Congressional Budget Office has cited the separate deductibles as one  way in which Medicare FFS cost-sharing is more complicated than private  plans. In 2016, according to a survey conducted by the Kaiser Family  Foundation, only 1 percent of workers with employer-sponsored  insurance had a separate deductible for inpatient services. Moreover,  inpatient services tend to be nondiscretionary, and one or more  deductibles for those services can create a financial burden for  beneficiaries, while having minimal effect on their use of inpatient  services.", "The cost-sharing design also affects beneficiaries\u2019 utilization of services.  For example, as noted by the bipartisan Simpson-Bowles Fiscal  Commission, the lack of a coherent cost-sharing system is a significant  contributor to overuse and misuse of care. This is particularly true for  services such as home health and clinical laboratory services, which  currently have no cost-sharing under Medicare FFS and thus do not  provide beneficiaries an incentive to decline care of negligible value.  Because of these concerns, MedPAC recommended adding a cost- sharing requirement for home health services that were not preceded by  hospitalization or post-acute care, noting that the current lack of cost- sharing has likely contributed to the significant rise in utilization for these  services, which suggests some overuse.", "At the same time, the lack of an annual cost-sharing cap prevents  Medicare FFS from fulfilling a key purpose of health insurance: protecting  beneficiaries from catastrophic medical expenses. While most  beneficiaries had cost-sharing responsibilities under $2,000 in 2014, 1  percent\u2014over 300,000 beneficiaries\u2014had responsibilities over $15,000,  including several hundred beneficiaries with responsibilities between  $100,000 and $3 million. (See fig. 1.) Given the risk of catastrophic  medical expenses, a focus group of current and future Medicare  beneficiaries convened by MedPAC indicated that an annual cap is the  cost-sharing design feature they were most interested in seeing added to  the Medicare benefit. Annual caps are a common design feature of  private plans, as most are required to have an annual cap, including  those participating in MA.  Specifically, since 2011, CMS has required  most MA plans to have an annual cap of $6,700 or less and grants them  additional flexibility in their cost-sharing design if they voluntarily set their  cap at or below $3,400. The mandatory and voluntary caps for certain MA plans that provide both in- and out-of-network coverage are the same  ($6,700 and $3,400) for in-network services, and 1.5 times higher  ($10,000 and $5,100) for combined in- and out-of-network services.", "In addition to these implications of the cost-sharing design itself, the  American Academy of Actuaries and others have noted that the  complexity and the possibility of unlimited responsibilities increases  demand for supplemental insurance, which can lead to added costs for  beneficiaries and the Medicare program. It is uncommon for beneficiaries  enrolled in private health insurance to have supplemental coverage. By  insulating beneficiaries from some or all cost-sharing responsibilities (and  not just catastrophic costs), supplemental insurance further reduces the  incentives for beneficiaries to evaluate the need for discretionary care. In  part because of these reduced incentives, we previously estimated that  both beneficiaries\u2019 average total out-of-pocket costs and average  Medicare program spending were higher for Medicare FFS beneficiaries  with Medigap than those with FFS only."], "subsections": []}, {"section_title": "Modernizing Medicare FFS Cost-sharing Could Address Concerns, but Would Involve Design Trade-offs", "paragraphs": ["Modernizing Medicare FFS cost-sharing could address these concerns,  but would involve design trade-offs. Specifically, as proposed by various  groups, revising Medicare\u2019s cost-sharing design to include a single  deductible, modified cost-sharing requirements, and an annual cost- sharing cap could address concerns with the current cost-sharing design.  However, there are multiple options for revising within this broad  framework, including two key design trade-offs that would affect the  extent to which a modernized structure would address concerns about the  current design (and possibly also raise new concerns).", "One trade-off centers on how to modify the existing complicated set of  cost-sharing requirements for different services. While the reform  proposals have generally suggested moving to a single deductible, they  have varied in how to modify the subsequent per-service payments.  Some proposals have emphasized the value of simplicity and suggested  replacing the complex set of per-service payments above the deductible  with a uniform coinsurance. A uniform coinsurance would simplify the  cost-sharing design, provide beneficiaries insight into the total cost of  each service, and introduce cost-sharing for certain potentially  discretionary services, such as home health services. However, as noted  by the Medicare Payment Advisory Commission and Congressional  Budget Office, uniform coinsurance also has drawbacks, such as a fixed  percentage of an unknown bill being harder for beneficiaries to  understand and predict than copayments. Other proposals have  emphasized the need to set cost-sharing based on the value of services,  and have suggested moving Medicare toward a value-based insurance  design in which per-service cost-sharing would vary based on the clinical  value of the service to an individual beneficiary. While a value-based  design would specifically target cost-sharing to promote prudent use of  health care services, implementing it is challenging in practice and would  be more complicated for beneficiaries to understand and for CMS to  administer, though CMS is testing the feasibility of value-based insurance  design in MA.", "A second design trade-off centers on how to set the level of the  deductible and the annual cap. As shown in the four illustrative cost- sharing designs we evaluated, the lower the cap, the higher the  deductible (or other cost-sharing requirements) would need to be to  maintain Medicare\u2019s and beneficiaries\u2019 aggregate share of costs similar to  that of the current design. For example, holding utilization and  enrollment constant, we found that even without any deductible, a uniform  coinsurance of 18 percent (a level below the existing 20 percent  coinsurance for most Part B services) would be sufficient to add a cap  near $10,000 (the mandatory cap for certain MA plans that allow  beneficiaries to see any provider). In contrast, it would take a deductible  near $1,225 (a level similar to the existing Part A deductible for each  inpatient episode) and a uniform coinsurance of 20 percent to establish a  cap of $3,400 (the voluntary cap for most MA plans). (See table 3.)", "Different levels of the deductible and cap would address certain concerns  of the current design raised by GAO and others but also could create new  ones. For example, as our analysis of four illustrative cost-sharing  designs shows, designs with relatively high caps would provide some  additional protection from catastrophic costs while maintaining a  deductible and coinsurance near or below the current levels for Part B  services. However, per an analysis conducted by Kaiser Family  Foundation and the Urban Institute, half of Medicare beneficiaries in 2016  were living on less than $26,200 in income; thus, caps of $6,700 or  higher may still leave some beneficiaries vulnerable to costs that are  catastrophic for them and may not significantly decrease the associated  demand for supplemental insurance. In contrast, designs with relatively  low caps would provide greater protection from catastrophic costs.  However, as noted by the Congressional Budget Office, beneficiaries who  reached the cap would have less incentive to use services prudently. In  addition, the higher deductible needed to offset a lower cap while  maintaining Medicare\u2019s share of costs could present a financial barrier for  some beneficiaries to obtain necessary care."], "subsections": []}]}, {"section_title": "Direct Effect of Modernizing Medicare FFS Cost- sharing Design Would Depend on Specific Revisions and Time Horizon", "paragraphs": ["The direct effect of modernizing the Medicare FFS cost-sharing design  (i.e., the effect when holding utilization and enrollment constant) on  beneficiaries\u2019 cost-sharing responsibilities would depend on the specific  revisions and the time horizon examined. As we noted above,  modernizing the FFS cost-sharing design while maintaining Medicare\u2019s  aggregate share of costs similar to the current design requires a trade-off  between the level of the deductible and cap. At the beneficiary level, this  design trade-off affects beneficiaries\u2019 annual cost-sharing and the degree  to which beneficiaries would be protected from catastrophic costs. One  way of viewing how the design trade-off affects beneficiaries is to  compare across different designs the median annual cost-sharing  responsibility with the level of the cap (see fig. 2). In examining the direct  effect of the four illustrative modernized designs we analyzed, we found  the following:", "During year 1, cost-sharing designs that feature relatively low  deductibles and relatively high caps would result in a median annual  beneficiary cost-sharing responsibility close to or below that of the  current design. In contrast, designs with relatively low caps\u2014and  therefore greater beneficiary protection from catastrophic costs\u2014 would result in a median annual beneficiary cost-sharing responsibility  above that of the current design. For example, during year 1 of a  design with no deductible, 18 percent coinsurance, and a cap near  $10,000, we found that the median annual cost-sharing responsibility  would be $479, which is below that of the current design ($621),  despite the addition of a cap. In contrast, during year 1 of a design  with a $1,225 deductible, 20 percent coinsurance, and a cap near  $3,400, the median annual cost-sharing responsibility would be  $1,486, which is 2.4 times higher than that of the current design.  However, in exchange for this higher median annual cost-sharing  responsibility, beneficiaries would have much greater protection from  catastrophic costs, as their annual cost-sharing responsibilities would  be capped near $3,400.", "By the end of 8 years, there would still be differences in the median  annual beneficiary cost-sharing responsibility across different designs,  but they would become less pronounced\u2014despite the significantly  different levels of catastrophic protection. As beneficiaries age and  become more likely to have catastrophic costs in at least one year,  the median annual cost-sharing responsibility would increase,  regardless of the cost-sharing design. However, by the end of 8 years  the differences in the median annual cost-sharing responsibility  across different designs would become less pronounced. For  example, the median annual cost-sharing responsibility under the  design with a cap near $10,000 would increase from below that of the  current design in year 1 to 1.1 times higher than the current design by  the end of 8 years. In contrast, the median annual cost-sharing  responsibility under the design with the cap near $3,400 would  decrease from 2.4 times higher than the current design in year 1 to  only 1.6 times higher by the end of 8 years. (See app. I table 4 for  more details, including results on our other two illustrative designs and  results over 4 years.)", "The same patterns held when looking at how the design trade-off affects  beneficiaries in another way: the percentage of beneficiaries with cost- sharing responsibilities lower and higher than under the current design  (see fig. 3). In examining the direct effect of our four illustrative designs,  we found the following:", "During year 1, designs that feature relatively low deductibles and  relatively high caps would result in a minority of beneficiaries having  cost-sharing responsibilities that are at least $100 higher than under  the current design. In contrast, designs with relatively high deductibles  and relatively low caps would result in the majority of beneficiaries  having cost-sharing responsibilities that are higher than under the  current design. For example, during year 1 of a design with no  deductible, 18 percent coinsurance, and a cap near $10,000, 16  percent of beneficiaries would have cost-sharing responsibilities at  least $100 higher than their responsibilities under the current design.  In contrast, during year 1 of a design with a $1,225 deductible, 20  percent coinsurance, and a cap near $3,400, 69 percent of  beneficiaries would have cost-sharing responsibilities at least $100  higher than their responsibilities under the current design.", "By the end of 8 years, there would still be differences across the  designs, but they would become less pronounced\u2014despite levels of  catastrophic protection that vary significantly. Over a longer time  horizon, a larger percentage of beneficiaries would reach the cap at  least once, regardless of the cost-sharing design (ranging from 23  percent reaching the cap at least once over 8 years under the design  with a cap near $10,000 to 66 percent under the design with a cap  near $3,400). However, the subset of these beneficiaries who  nonetheless had annual cost-sharing responsibilities at least $100  higher would also increase. Whether this increase would be  augmented or offset by the changes over time in the percentage of  beneficiaries who never reached the cap and had higher cost-sharing  responsibilities would depend on the specific design. For example, the  percentage of beneficiaries with annual cost-sharing responsibilities at  least $100 higher than the current design would increase from 16  percent in year 1 to 38 percent by year 8 under the design with a cap  near $10,000. In contrast, this percentage would decrease from 69  percent in year 1 to 67 percent by year 8 under the design with a cap  near $3,400. (See app. I tables 5 and 6 for more details, including  results on our other two illustrative designs and results over 4 years.)"], "subsections": []}, {"section_title": "Modernizing Medicare Cost- sharing Design Would Affect Costs Indirectly through Behavioral Responses", "paragraphs": ["Modernizing the Medicare FFS cost-sharing design would affect  beneficiaries\u2019 costs indirectly through beneficiaries\u2019 and supplemental  insurers\u2019 behavioral responses to altered incentives, according to the  studies we reviewed and the experts we spoke to. These studies and  experts identified several types of behavioral responses that would  influence the net effect of a modernized design on beneficiaries\u2019 out-of- pocket costs, including  changes in beneficiaries\u2019 demand for, and insurers\u2019 supply of,  supplemental insurance;  changes in beneficiaries\u2019 utilization of services;  changes in Medicare beneficiaries\u2019 enrollment in FFS versus MA; and  interactions among these and other behavioral responses, including  effects on the price of supplemental insurance.", "According to studies we reviewed and experts we spoke to, implementing  a modernized cost-sharing design would likely trigger changes in the  demand for and supply of supplemental insurance. For example, a focus  group of current and future Medicare beneficiaries convened by MedPAC  and a report from the American Academy of Actuaries stated that the  addition of an annual cap would reduce the need of some beneficiaries to  purchase supplemental insurance. While beneficiaries who drop their  supplemental insurance would then need to pay all their Medicare cost- sharing responsibilities, those might be less than their annual premium for  supplemental insurance. Additionally, according to the same MedPAC  study and a Congressional Budget Office report, retiree coverage may change under a modernized design. For example, with a cap in place,  there would be less difference between employer-sponsored plans and  Medicare, and employers may choose to alter the supplemental  insurance they offer. CMS officials told us that this would continue the  trend of private employers reducing retiree health coverage.", "Several studies we reviewed and experts we interviewed indicated that  implementing a modernized design could also trigger changes in  utilization of Medicare services, the extent of which would affect  beneficiaries\u2019 out-of-pocket costs. For example, the RAND Health  Insurance Experiment (HIE), which some experts consider to be the most  comprehensive study on price and utilization, found that patients were  \u201cmoderately sensitive to price.\u201d The RAND HIE found that patients  respond to increases in cost-sharing that they need to pay at least partly  out-of-pocket by decreasing their use of some services.  Similarly, CMS  officials told us that they would expect utilization to decrease as  beneficiaries\u2019 out-of-pocket costs increased, while a study in the  American Economic Review found that the addition of a copayment led to  a decline in office visits. The RAND HIE study suggests that a 10  percent increase in cost-sharing would lead to a 1 to 2 percent decline in  patients\u2019 use of services. In the case of the RAND HIE study, cost- sharing affected the number of contacts people initiated with their  physician, which impacted preventive care and diagnostic tests. The  study found that this could potentially affect patients\u2019 use of both effective  and less effective services.", "According to several studies and interviews with experts, design changes  could trigger other behavioral responses. For example, a study by the  Kaiser Family Foundation and a report by the Congressional Budget  Office both anticipated that a modernized design could change the  proportion of Medicare beneficiaries who decide to enroll in FFS or MA.  Similarly, officials from the American Academy of Actuaries told us that  they would expect a change in demand for MA under a modernized  design. Under the current Medicare design, all MA plans have an annual  cap that protects beneficiaries from catastrophic medical expenses.  Between 2008 and 2017, the percentage of Medicare beneficiaries who  chose to enroll in an MA plan increased from 22 to 33 percent. CMS  officials told us that the increases in MA enrollment may be due in part to  the requirement that MA plans must include an annual cost-sharing cap.  The Kaiser Family Foundation study found that a modernized design,  similar to that of an MA plan, might incentivize some MA beneficiaries to  move back to FFS.", "According to experts we interviewed and studies we reviewed, different  behavioral responses described above would also likely interact and  affect beneficiaries\u2019 out-of-pocket costs. CMS officials told us that when  all of the factors contributing to out-of-pocket costs are combined, it is  difficult to assess the net effect of a modernized cost-sharing design on  beneficiaries\u2019 out-of-pocket costs. For example, officials with the National  Association of Insurance Commissioners emphasized that as both  demand for supplemental insurance and expected utilization changed,  supplemental premiums would also change, which would change out-of- pocket costs. Similarly, studies by both MedPAC and the Congressional  Budget Office found that changes in beneficiaries\u2019 level of supplemental  insurance might trigger additional changes in utilization, which would also  result in changes to the pricing of supplemental insurance. Specifically,  if a number of relatively healthy beneficiaries dropped their supplemental  insurance, and the beneficiaries left were sicker (that is, more costly),  premiums for supplemental insurance might increase. Officials from the  Congressional Budget Office told us that, conversely, if the more costly  beneficiaries dropped their supplemental insurance, premiums might be  lower."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Health and Human  Services for comment. The Department provided technical comments,  which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to appropriate congressional  committees, the Secretary of Health and Human Services, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or cosgrovej@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."], "subsections": []}]}, {"section_title": "Appendix I: Direct Effect on Medicare Beneficiaries\u2019 Cost-sharing Responsibilities under Four Illustrative Cost-sharing Designs", "paragraphs": ["The direct effect of modernizing the Medicare fee-for-service (FFS) cost- sharing design (i.e., the effect when holding utilization and enrollment  constant) on beneficiaries\u2019 cost-sharing responsibilities would depend on  the specific revisions and the time horizon examined. Tables 4, 5, and 6  present the direct effect of modernizing the Medicare FFS cost-sharing  design on beneficiaries\u2019 cost-sharing responsibilities under four illustrative  designs. Each table presents the direct effect of each illustrative design  over 1-, 4-, and 8-year time horizons."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Greg Giusto (Assistant Director),  Alison Binkowski, George Bogart, Reed Meyer, Beth Morrison, Brandon  Nakawaki, and Brian O\u2019Donnell made key contributions to this report.  Also contributing were Todd Anderson, Emei Li, Yesook Merrill, Vikki  Porter, and Frank Todisco."], "subsections": []}]}], "fastfact": ["Medicare beneficiaries must cover a portion of the costs of services they receive. The rules governing traditional Medicare\u2019s cost-sharing have changed little since the program began in 1965, while private insurance has evolved to include features that traditional Medicare lacks, such as an annual cap on the costs for which beneficiaries are responsible.", "As a result, Medicare beneficiaries can face catastrophic costs exceeding tens of thousands of dollars annually.", "In this report, we analyzed four scenarios for modernizing Medicare cost-sharing rules and how such changes could affect beneficiaries' costs."]}
{"id": "GAO-18-236", "url": "https://www.gao.gov/products/GAO-18-236", "title": "Aviation Security: TSA Uses Current Assumptions and Airport-Specific Data for Its Staffing Process and Monitors Passenger Wait Times Using Daily Operations Data", "published_date": "2018-02-01T00:00:00", "released_date": "2018-02-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TSA employs about 43,000 TSOs who screen over 2 million passengers and their baggage each day at airports in the United States. TSA allocates TSOs to airports using both a computer-based staffing model and information from airports that are intended to provide each airport with the optimum number of TSOs. In the spring of 2016, long screening checkpoint lines at certain U.S. airports raised questions about TSA's process for allocating TSOs to airports.", "The Aviation Security Act of 2016 includes a provision for GAO to review TSA's process for allocating TSOs. This report examines how (1) TSA modifies staffing assumptions and tailors staffing levels to airports' needs, (2) TSA monitors wait times and throughput and adjusts resources accordingly, and (3) TSA shares information with stakeholders about staffing and related screening procedures at airports. GAO reviewed TSA documentation describing how the agency modifies staffing assumptions and manages stakeholder coordination. GAO also analyzed passenger wait time and throughput data from January 2015 through May 2017 for the 28 airports monitored by headquarters. GAO visited eight airports selected on the basis of passenger volume and other factors and interviewed TSA officials and stakeholders at those locations.", "GAO is not making any recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration (TSA) modifies staffing assumptions used in its computer-based staffing model (model) and tailors staffing levels to individual airport needs. Specifically, TSA works with a contractor annually to evaluate the assumptions used in the model and modifies the model's assumptions as needed. For example, TSA adjusted its model after contractor evaluations conducted in fiscal years 2016 and 2017 found that transportation security officers (TSO) needed more time to screen passengers and their baggage when using one type of screening equipment. Moreover, in 2016, TSA began using forecasts on the number of passengers screened at each airport's checkpoints (throughput) to better allocate staff commensurate with the expected rate of increase in passenger throughput at each airport. Furthermore, prompted by the long wait times at some airports in 2016, for the 2017 model TSA officials used actual expedited screening data, specific to each individual airport, rather than relying on the system-wide estimate used in 2016. TSA officials also use other information specific to each airport\u2014such as staff training needs\u2014to further tailor the TSO allocation because the initial allocation resulting from the model does not reflect the full range of operating conditions at individual airports.", "TSA uses data to monitor passenger wait times and throughput on a daily basis and responds to increases. For example, TSA's Airport Operations Center (AOC) monitors daily wait times and passenger throughput from 28 airports that TSA officials say represent the majority of passenger throughput nationwide or are operationally significant. Furthermore, TSA officials at airports are required to report to the AOC when an event occurs\u2014such as equipment malfunctions\u2014that affects airport screening operations and results in wait times that are greater than 30 minutes in standard screening lanes. GAO analyzed wait time data for the AOC-monitored airports for the period of January 2015 through May 2017 and found that TSA's reported wait times met its standard of less than 30 minutes in standard screening 99 percent of the time. Within that time frame, two airports accounted for the longest wait times in the spring of 2016. TSA officials identified several tools, such as passenger screening canines, that they use to respond to increases in passenger wait times at these airports.", "TSA has taken steps to improve information sharing with airline and airport officials (stakeholders) about staffing and related airport screening operations, and most stakeholders GAO interviewed reported improved satisfaction with information sharing. However, some stakeholders noted differences in the type and extent of information shared. According to TSA officials, stakeholders can elevate any problems they experience with information sharing within TSA to ensure information is shared regularly with stakeholders."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security\u2019s Transportation Security  Administration (TSA) employs about 43,000 transportation security  officers (TSOs) who screen over 2 million passengers and their  accessible and checked baggage each day at airports in the United  States. TSA allocates TSOs to airports using its Resource Allocation  Plan (RAP), which is intended to provide each airport with the optimum  number of TSOs needed to screen passengers for threats to aviation  security, such as prohibited and other potentially dangerous items. In the  spring of 2016, unusually long screening checkpoint lines at certain major  U.S. airports raised questions about TSA\u2019s process for allocating TSOs to  airports. Identifying and deploying the right number of TSOs to meet  individual airport needs throughout the United States is a critical TSA  responsibility for carrying out the agency\u2019s mission to protect the nation\u2019s  transportation systems, while also ensuring the free movement of people  and commerce.", "To implement passenger screening and pursue efficient operations, in  addition to relying on TSOs, TSA works with officials from airlines and  airports, as well as officials from associations that represent airlines and  airports. In this report, we refer to all of these officials as \u2018stakeholders.\u2019 At  airports, Federal Security Directors (FSDs) and their designees work with  individual airport operators and airlines to, among other things, adjust  TSA resources (i.e., TSOs and screening assets such as metal detectors)  in response to increases in the number of passengers that are screened  at each checkpoint (throughput) and monitor passenger wait times at  checkpoints.", "In 2007, we reviewed the RAP (referred to as the Staffing Allocation  Model at that time) and recommended, among other things, that TSA  establish a mechanism to ensure periodic assessment of the  assumptions, such as passenger and checked baggage screening rates,  underlying the RAP. TSA agreed with the recommendation and in  December 2007 developed a plan to periodically assess the RAP\u2019s  assumptions.", "The Aviation Security Act of 2016 includes a provision for GAO to conduct  a review of TSA\u2019s RAP. This report addresses (1) how TSA modifies  staffing assumptions and has mechanisms in place to tailor TSO staffing  levels to individual airports\u2019 needs, (2) how TSA monitors wait times and  throughput and adjusts resources accordingly, and (3) how TSA has  shared information with stakeholders about staffing and related screening  procedures at airports, and what are the views of selected stakeholders  on these information sharing efforts.", "To gather information for each of our objectives, we visited eight airports  \u2013 Chicago O\u2019Hare International, Chicago Midway International,  Dallas/Fort Worth International, Dallas Love Field, Los Angeles  International, Hollywood Burbank International, Ronald Reagan  Washington National, and Richmond International. We selected these  airports based on a variety of factors, including the number of TSOs,  passenger volume, differences in geography, and longer-than-usual wait  times in fiscal year 2016, when passengers experienced long screening  wait times at a number of airports. At each airport, we interviewed airport- level TSA officials, TSOs, airport operators, and airline officials. The  results from our site visits cannot be generalized to all airports at which  TSA has screeners. However, they provided important context about, and  insights into, TSA\u2019s operations and coordination with stakeholders at  airports.", "To determine how TSA modifies its staffing assumptions, we reviewed  TSA guidance and policies, including the agency\u2019s plan for assessing the  assumptions used in the RAP, such as the frequency and methods for  reviewing passenger and baggage screening processes. In addition, to  determine whether TSA modified assumptions used in the RAP, we  reviewed TSA internal reports regarding the assumptions used in the  RAP in 2016 and 2017 as well as a 2016 assessment of TSA\u2019s approach  to staffing at airports overall. To evaluate the extent to which TSA has  mechanisms in place to tailor staffing allocations to individual airports\u2019  needs, we analyzed TSA procedures, such as annual reviews of  individual airports\u2019 configurations conducted by airport-level officials that  govern staffing allocation, including procedures for modifying the RAP  and tailoring staffing allocations to individual airports\u2019 needs. We reviewed  data on TSA staffing allocations and interviewed TSA headquarters  officials responsible for modifying the RAP to confirm our understanding  of the processes used and TSA officials at the airport-level regarding any  modifications to airport staffing levels resulting from this process.", "To determine how TSA monitors wait times and throughput and adjusts  resources accordingly, we reviewed TSA documentation on wait times  and throughput, such as TSA\u2019s Operations Directive, Reporting Customer  Throughput and Wait Times, as well as TSA reports on wait times and  throughput. To better understand trends in passenger wait times, we  analyzed wait time and throughput data for the period of January 2015  through May 2017 for 28 airports that, according to TSA headquarters  officials, represent the majority of passenger throughput nationwide or are  operationally significant. According to TSA directives and TSA  headquarters officials, TSA began requiring that FSDs and their  designees collect actual instead of estimated wait times for all airports in  July 2014, so we began our analysis in 2015, the first full calendar year  after this requirement was in place. We assessed the reliability of the  data used in our analyses by checking the data for any discrepancies,  reviewing TSA reports on the quality of the data, as well as related  database documentation, and working with agency officials responsible  for compiling the data to understand the data collection and reporting  methodologies. We determined that passenger wait time data and  throughput data for the 28 airports monitored by TSA headquarters were  sufficiently reliable for the purposes of our reporting objectives.  Additionally, using the same data, we analyzed the extent to which TSA  met its wait time standards for the period of January 2015 through May  2017 at the 28 airports. We also interviewed headquarters officials  responsible for overseeing TSA\u2019s collection and use of wait time and  throughput data. To obtain the perspective of TSA officials at airports, we  interviewed FSDs and their designees at the eight airports we visited to  determine the tools they use to respond to increases in passenger wait  times and throughput.", "To determine how TSA shares information with stakeholders about airport  staffing and related screening procedures, we reviewed TSA guidance  that directs FSDs to share information with stakeholders and directs  headquarters officials to facilitate daily conference calls with  stakeholders. We also reviewed TSA documentation, such as agendas  and attendance sheets, for meetings between FSDs and airport  stakeholders held from October 2016 through March 2017 for the eight  airports we visited to verify that the meetings took place. We selected this  time period because the TSA guidance directing FSDs to meet with  stakeholders became effective in October 2016. Additionally, we  interviewed TSA headquarters officials and TSA airport-level officials  such as FSDs and their designees at the eight airports we visited to  determine how TSA shares information about staffing and related  screening procedures at airports with stakeholders. The results from the  airport-level interviews with TSA officials at these eight airports we visited  cannot be generalized to all airports at which TSA has screeners, but  provided insights on how FSDs and their designees share information  with stakeholders at their respective airports during the time of our review.", "To determine the views of selected stakeholders on TSA\u2019s information  sharing efforts, we interviewed airline and airport officials at the eight  airports we visited, as well as TSOs at those locations, to obtain their  perspectives on TSA efforts to share information consistent with the  Aviation Security Act and TSA guidance. For each of the eight airports  we visited, we interviewed airport officials representing the airport  authority that oversees airport operations and airline officials from the  airline with the greatest number of passengers at the respective airport.  The FSD or FSD designee selected the TSOs we interviewed during our  site visits based on TSO schedule availability. Furthermore, we  interviewed industry association officials from the American Association of  Airport Executives (AAAE), Airports Council International-North America  (ACI-NA), and Airlines for America to obtain their insights on both TSA\u2019s  headquarters and airport-level information sharing. We chose these  industry associations because they work directly with TSA headquarters- level officials and the associations\u2019 members work directly with TSA  airport-level officials such as FSDs and their designees. The results  from the interviews with airline and airport officials at the eight airports we  visited and the three industry associations cannot be generalized to all  stakeholders, but provided insights on how these select stakeholders  viewed TSA\u2019s information sharing efforts.", "We conducted this performance audit from August 2016 to January 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "TSA Processes for Allocating TSOs across Airports", "paragraphs": ["At TSA headquarters, the Office of Security Operations (OSO) has  primary responsibility for operation of the RAP and allocation of TSOs  across airports. Within OSO, the Staffing and Scheduling Division  oversees the RAP. To allocate staff to the nearly 440 TSA-regulated  airports in the United States, OSO is to use a combination of computer- based modeling and line-item adjustments based on airport-specific  information. First, the agency is to work with a contractor to evaluate the  assumptions\u2014such as rates of expedited screening\u2014used by the  computer-based staffing allocation model (model) to determine the  optimal number of TSOs at each airport based on airport size and  configuration, flight schedules, and the time it takes to perform checkpoint  and baggage screening tasks. Second, after the model has determined  how many TSOs are required for each airport, headquarters-level staff  are to make line item adjustments to account for factors such as  differences in staff availability and training needs that affect each airport.  Figure 1 below provides additional details regarding TSA\u2019s process to  determine the number of TSOs at airports."], "subsections": []}, {"section_title": "TSA\u2019s Process for Evaluating Information Used in the RAP", "paragraphs": ["As previously discussed, in 2007, we recommended that TSA establish a  mechanism to periodically assess the assumptions in the RAP (prior to  fiscal year 2017, known as the Staffing Allocation Model) to ensure that  staffing allocations accurately reflect operating conditions that may  change over time. TSA implemented this recommendation by developing  an evaluation plan for regularly assessing the assumptions used in the  staffing model. Assumptions include the number of passengers or bags  that can be screened each hour by TSA equipment and the time TSOs  require to operate discrete sections of the screening process, such as  conducting pat-downs or searches of passengers\u2019 carry-on baggage. The  evaluation plan states that TSA is to assess (1) the time it takes to screen  passengers using TSA equipment and (2) the number of staff needed to  operate the equipment. Results from these assessments are to inform the  assumptions used in the model to determine the base allocation of TSOs  to U.S. airports.", "TSA uses the evaluation plan as well as airport-level characteristics to  systematically evaluate the assumptions used in the model on a regular  basis:", "Evaluation plan: TSA\u2019s evaluation plan recommends evaluating the  time it takes to perform 19 aspects of passenger and checked  baggage screening processes at least every two years and includes  detailed procedures for doing so. For instance, the evaluation of  passenger screening processes involves observing operations at  selected airports to determine the average time it takes for one  passenger to remove items of clothing and prepare his or her  belongings for screening. Similarly, the evaluation determines how  many passengers can be processed each hour during selected  aspects of screening, such as by travel document checkers or via  advanced imaging technology (AIT), often referred to as body  scanners.", "Individual airport characteristics: Each year, TSA airport-level staff,  such as FSDs or their designees, are to review the information in the  model to ensure that information on the number of checkpoints and  each checkpoint configuration and the number of flights departing the  airport each day is accurate."], "subsections": []}, {"section_title": "TSA Processes for Conducting Passenger and Checked Baggage Screening, and Collecting Wait Time Data at Airports", "paragraphs": ["At the airport level, FSDs and their designees are responsible for  overseeing TSA security activities, including passenger and checked  baggage screening. TSOs at airports follow standard operating  procedures that guide screening processes and utilize technology such  as AITs or walk through metal detectors (WTMD) to screen passengers  and their accessible property. TSOs also inspect checked baggage to  deter, detect, and prevent the carriage of any unauthorized explosive,  incendiary, or weapon onboard an aircraft. Checked baggage screening  is conducted in accordance with standard operating procedures and  generally is accomplished through the use of explosives detection  systems or explosives trace detection systems. TSA employs an  expedited screening program, known as TSA Pre\uf0fc\u00ae that assesses  passenger risk to aviation security prior to their arrival at an airport  checkpoint. According to TSA, expedited screening involves a relatively  more efficient and convenient screening process for individuals from  whom TSA has obtained sufficient information to determine them to be of  lower risk and thus undergo an expedited screening process, compared  to the standard screening process a traveler may undergo, for whom TSA  does not have such information in advance.", "Finally, at each airport, TSA is to collect throughput data on the number of  passengers screened under both expedited and standard screening and  monitor passenger wait times at screening checkpoints. TSA airport  officials are to submit passenger throughput and wait time data on a daily basis to OSO\u2019s Performance Management Division at TSA headquarters,  which compiles the data through the Performance Measurement  Information System (PMIS), TSA\u2019s web-based data collection system."], "subsections": []}, {"section_title": "TSA Offices Responsible for Sharing Information with Stakeholders about Airport Operations", "paragraphs": ["TSA\u2019s OSO and the Office of Security Policy and Industry Engagement  (OSPIE) are both responsible for sharing information with stakeholders  about airport operations. In response to the Aviation Security Act, OSO  issued guidance in October 2016 intended to ensure that FSDs share  information with stakeholders. OSPIE communicates TSA information  about airport operations, such as how TSOs are allocated across airports,  to stakeholders."], "subsections": []}]}, {"section_title": "TSA Modifies Its Staffing Assumptions and Relies on Airport Information to Tailor TSO Staffing Levels to Individual Airports", "paragraphs": [], "subsections": [{"section_title": "TSA Modifies Its Staffing Assumptions as Needed Based on Contractor and TSA Officials\u2019 Evaluations and Passenger Throughput Forecasts", "paragraphs": ["In fiscal years 2016 and 2017, TSA modified the assumptions used in its  model, as needed, to reflect changes identified through annual  evaluations performed by a contractor. The contractor is specifically  tasked with evaluating the assumptions related to the time needed to  screen passengers and their baggage. For example, TSA officials stated  that they increased the expected time needed to screen passengers for  one type of passenger screening equipment in fiscal year 2017 because  the contractor found that the actual time needed was more than the  assumption TSA used in fiscal year 2016. Similarly, in fiscal year 2016,  TSA allocated fewer staff to review images of checked baggage,  compared to previous years, because the contractor\u2019s evaluation  determined it took TSOs less time to review the images than the time  observed in previous years.", "In addition to modifying its model based on evaluations performed by  contractors, TSA officials at the headquarters level review and modify  other assumptions in the model to ensure they are accurate. For  example, prompted by the long waits in the spring of 2016, officials stated  that they modified the model for the 2017 fiscal year based on their  evaluation of the 2016 assumptions. Specifically, TSA assumed that 50  percent of airline passengers would use expedited screening in 2016, but  only an average of 27 percent of passengers used expedited screening  that year. According to the officials, TSA modified this assumption in fiscal  year 2017 and now uses TSA Pre\uf0fc\u00ae Program data specific to each  individual airport in the model. Similarly, officials told us that, since TSA  was established in November 2001, many employees will reach 15 years  of service with the federal government in fiscal years 2016 and 2017,  resulting in increased annual leave allowances. In response, officials  have increased the amount of annual leave they expect employees to use  and rely on airport-specific data regarding employee tenure to estimate  annual leave for the coming year.", "TSA has also modified the way it develops assumptions regarding  passenger throughput at each airport. For example, beginning in fiscal  year 2016, TSA used passenger throughput forecasts to allocate staff  commensurate with the expected rate of increase in passenger  throughput at each airport. The estimated increase in passenger  throughput for each fiscal year is based primarily on national and airport- level data from the previous 3 months from PMIS, TSA\u2019s web-based data  collection system, and flight forecast data from the airline industry, as well  as additional input from other sources. Prior to fiscal year 2016, TSA  planned for passenger throughput during the busiest 28 days from the  previous fiscal year and did not adjust the assumption for the annual  increase in passenger throughput, which increased two percent in 2014  and four percent in 2015. A TSA headquarters official responsible for  overseeing the RAP stated that the agency compared projected  passenger throughput to actual passenger throughput for fiscal year 2017  to determine the accuracy of the projections and concluded that no  significant changes to the method of forecasting were necessary for fiscal  year 2018."], "subsections": []}, {"section_title": "TSA Uses Airport-Level Information to Tailor Staffing Levels to Individual Airport Needs Using Line Item Adjustments", "paragraphs": ["According to TSA officials, each airport in the United States has unique  characteristics that make it difficult to apply a one-size-fits-all solution to  staffing security operations. For instance, officials told us that some  airports are allocated additional staff to account for the time needed to  transport TSOs to off-site training facilities. Because the staffing  allocation resulting from TSA\u2019s model does not reflect the full range of  operating conditions at individual airports, TSA headquarters officials use  airport-specific information to further adjust allocations by changing  individual line items within the allocation after running the model on both  an annual and an ad hoc basis. TSA headquarters officials stated that  they have developed methodologies for making standard line item  adjustments such as training requirements, overtime, and annual and sick  leave. Officials told us they review the methodologies each year and  use their professional judgement to modify the methodologies to account  for changes in airport needs as well as budget constraints. We found that  through its process of tailoring staffing allocations to individual airports\u2019  needs, TSA is able to respond to the circumstances at each individual  airport.", "TSA headquarters officials also use airport-specific data on staff  availability, training needs, supervisory needs, and additional security  layers to manually adjust the model\u2019s staffing allocation output at a line  item level. For instance, headquarters officials use the previous years\u2019  data on staff sick leave for each airport to evaluate whether they are  allocating the appropriate amount of sick leave to their staff allocations on  an individual airport basis. According to TSA headquarters officials, sick  leave use can vary by airport and region of the country. Similarly, officials  stated that they adjust the model\u2019s output to account for individual airport  staff\u2019s training needs so that each airport\u2019s staff can meet TSA\u2019s annual  training requirements.", "In addition, according to TSA officials at both the headquarters and airport  levels, airport-level officials can request exceptions\u2014modifications to their  staffing allocation\u2014based on unusual airport conditions that are difficult to  address, such as problematic checkpoint configurations or lack of space  for security operations. For instance, officials at one airport said that they  had been granted exceptions for one checkpoint because pillars and  curves within the checkpoint prevented the lanes in the checkpoint from  screening passengers at the rate assumed by the model. TSA officials at  the headquarters level review requests for exceptions and use their  professional judgement to determine whether the exception will be  granted.", "Finally, in some cases, TSA may adjust an airport\u2019s staffing allocation  outside of the annual staffing allocation process and may do so as the  result of significant and unforeseen changes in airport operations. For  instance, TSA officials stated that one airport was allocated additional  staff for the remainder of the fiscal year when the airport opened a new  terminal mid-year so that the additional checkpoints could be properly  staffed. Officials at another airport we visited said that they had been  allocated additional staff when an airline extended its operational hours to  ensure appropriate staffing for the additional hours of operation."], "subsections": []}]}, {"section_title": "TSA Uses Data to Monitor Airport Operations and Respond to Increases in Passenger Wait Times and Throughput", "paragraphs": [], "subsections": [{"section_title": "TSA Uses Passenger Wait Time and Throughput Data to Monitor Airport Operations on a Daily Basis", "paragraphs": ["TSA collects passenger wait time and throughput data and uses those  data to monitor daily operations at airports. TSA\u2019s Operations Directive  (directive), Reporting Customer Throughput and Wait Times, provides  instructions for collecting and reporting wait time and passenger  throughput data for TSA screening lanes. Regarding wait time data,  according to the directive, FSDs or their designees at all Category X, I,  and II airports must measure wait times every operational hour in all  TSA expedited and standard screening lanes. The directive requires wait  times to be measured in actual time, using a verifiable system such as  wait time cards, closed circuit television monitoring, or another  confirmable method. The directive indicates that wait times should be  measured from the end of the line in which passengers are waiting to the  WTMD or AIT units. FSDs or their designees at Category III and IV  airports may estimate wait times initially, but the directive requires them  to measure actual wait times when wait times are estimated at 10 minutes  or greater. The directive also requires FSDs or their designees to collect  passenger throughput data directly from the WTMD and AIT units.  According to TSA headquarters officials, the machines have sensors that  collect the number of passengers that pass through each hour, and TSOs  retrieve the data directly from the units. All airports regardless of category  are required to enter their wait time and throughput data daily into PMIS,  TSA\u2019s web-based data entry program, no later than 3:30 AM Eastern  Time of the next calendar day so that the data can be included in the  morning\u2019s Daily Leadership Report (discussed in more detail below).", "To monitor operations for all airports, TSA compiles a daily report utilizing  a variety of PMIS data points, including wait time and throughput data.  The Office of Security Operations\u2019 Performance Management Division  disseminates the Daily Leadership Report to TSA officials, including  regional directors and FSDs and their designees every morning detailing  the previous day\u2019s wait times and throughput figures, among other data  points. The Performance Management Division includes a quality  assurance addendum with each Daily Leadership Report, indicating  missing or incorrect data, to include wait time and throughput data, and  TSA has procedures in place intended to ensure officials at the airports  correct the data in PMIS within 2 weeks.", "In addition to the Daily Leadership Report, TSA utilizes wait time and  throughput data to monitor airport operations at 28 airports in near real  time. In May 2016, TSA established the Airport Operations Center (AOC)  that conducts near real time monitoring of the operations of 28 airports  that, according to TSA headquarters officials, represent the majority of  passenger throughput nationwide or are operationally significant. TSA  requires the 28 airports monitored by the AOC to enter passenger wait  time data and throughput data into PMIS hourly (whereas the remaining  airports are only required to submit data once daily, by 3:30 AM Eastern  Time, as described above) so that AOC officials can monitor the  operations in near real time. In addition, TSA officials at airports are  required to report to the AOC when an event occurs\u2014such as equipment  malfunctions, weather-related events, or unusually high passenger  throughput\u2014that affects airport screening operations and results in wait  times that are greater than TSA\u2019s standards of 30 minutes in standard  screening lanes or greater than 15 minutes in expedited screening  lanes.", "If an airport is undergoing a period of prolonged wait times, the AOC  coordinates with the Regional Director and the FSD to assist in deploying  resources. For example, over the course of the summer of 2016, after  certain airports experienced long wait times in the spring of 2016 as  confirmed by our analysis, the AOC assisted in deploying additional  passenger screening canines and TSOs to those airports that  experienced longer wait times. The AOC disseminates a morning and  evening situational report to TSA airport-level officials and airport  stakeholders summarizing nationwide wait times, highlighting wait times  at the top airports and any hot spots (unexpected passenger volume or  other operational challenges) that may have occurred since the most  recent report was issued. In addition to the near real time monitoring of  the 28 airports, the AOC also monitors operations at all other airports and  disseminates information to airports and stakeholders as needed.", "To determine the extent to which TSA exceeded its wait time standards,  we analyzed wait time data for the 28 airports monitored by the AOC for  the period of January 2015 through May 2017 for both standard and  expedited screening. Our analysis shows that TSA met its wait time  standard of less than 30 minutes in standard screening at the 28 AOC  airports 99.3 percent of the time for the period of January 2015 through  May 2017. For expedited screening for the same time period at the same  airports, we found that 100 percent of the time passengers were reported  to have waited 19 minutes or less. Additionally, our analysis confirmed  that the percentage of passengers in standard screening waiting over 30  minutes increased in 2016 during the months of March, April, and May as  compared to 2015 at all 28 airports monitored by the AOC."], "subsections": []}, {"section_title": "TSA Airport Officials Use a Variety of Tools to Respond to Increases in Passenger Wait Times and Throughput", "paragraphs": ["FSDs and their staff at the airports we visited identified a variety of tools  that they utilize to respond to increases in passenger wait times and/or  throughput.", "TSOs from the National Deployment Force (NDF)\u2014teams of  additional TSOs\u2014are available for deployment to airports to support  screening operations during major events and seasonal increases in  passengers. For example, TSA officials at one airport we visited  received NDF officers during busy holiday seasons and officials at  another airport received officers during the increase in wait times in  the spring and summer of 2016.", "TSA officials at select airports use passenger screening canines to  expedite the screening process and support screening operations  during increased passenger throughput and wait time periods. For  example, TSA officials at one airport we visited emphasized the  importance of passenger screening canines as a useful tool to  minimize wait times and meet passenger screening demands at times  when throughput is high. Officials at another airport we visited rely on  these canines in busy terminals during peak periods. According to  officials at two of the airports we visited, the use of passenger  screening canines helped them to reduce wait times due to increased  passenger volumes in the spring and summer of 2016.", "TSA officials at airports also utilize part-time TSOs and overtime  hours to accommodate increases in passenger throughput and wait  times. For example, according to officials at all eight of the airports we  visited, they use overtime during peak travel times, such as during  holiday travel seasons, and officials usually plan the use of overtime  in advance. Additionally, TSA officials at four of the airports we visited  told us they use part-time TSOs to help manage peak throughput  times throughout the day.", "According to TSA officials at two of the airports we visited, they move  TSOs between checkpoints to accommodate increases in passenger  throughput at certain checkpoints and to expedite screening  operations. For example, TSA officials at one airport we visited have a  team of TSOs that terminal managers can request on short notice.  Officials at the other airport estimated that they move TSOs between  terminals about 40 times per day."], "subsections": []}]}, {"section_title": "TSA Has Taken Steps to Improve Information Sharing with Stakeholders and Most Stakeholders We Interviewed Reported Improved Satisfaction", "paragraphs": [], "subsections": [{"section_title": "TSA Improved Information Sharing with Stakeholders through Daily Conference Calls, Presentations, and Meetings", "paragraphs": ["TSA headquarters has taken steps intended to improve information  sharing with stakeholders about staffing and related screening  procedures at airports. For example, TSA officials hold daily conference  calls with industry association, airline, and airport officials at the 28  airports monitored by the AOC. According to TSA headquarters officials,  TSA established the daily conference call as a mechanism intended to  ensure timely communication with stakeholders and to help identify and  address challenges in airport operations such as increases in passenger  wait times. Also, TSA headquarters officials stated that they conducted a  series of presentations and meetings with industry, airline, and airport  officials to discuss TSA\u2019s RAP, security enhancements at airports, and  airport screening processes, among other things. For example, TSA\u2019s  headquarters officials shared information about the fiscal year 2017 RAP  in October 2016 during a briefing at an industry conference and a meeting  with airline representatives, airline engineers, and Federal Aviation  Administration officials. Additionally, TSA headquarters officials facilitated  a stakeholder meeting in May 2017 to discuss planned improvements for  the TSA Pre\uf0fc\u00ae Program and met with stakeholders in June 2017 to  discuss security enhancements and changes to screening procedures for  carry-on baggage.", "In addition to headquarters-level initiatives, at the eight airports we  visited, we found that FSDs shared information with airport and airline  officials by meeting on an ongoing basis to discuss TSA staffing and  related screening procedures. For example, according to the FSDs and  airline and airport officials at all eight airports we visited, FSDs met with  stakeholders on a daily, weekly, monthly, or quarterly basis. During these  meetings, FSDs and airline and airport officials told us that FSDs  discussed TSO staffing levels at the airports, instances when passenger  screening wait times were long at security checkpoints, and TSA  screening equipment performance, among other things."], "subsections": []}, {"section_title": "Stakeholders Reported Improved Satisfaction with TSA Headquarters Information Sharing Efforts and with Most FSDs", "paragraphs": ["Stakeholders told us that TSA headquarters officials and most FSDs  improved information sharing since fiscal year 2016. With regard to TSA  headquarters officials\u2019 information sharing efforts, officials from all three  industry associations we interviewed stated that, since fiscal year 2016,  TSA headquarters improved information sharing with their association  member companies and attributed that improvement, in part, to the daily  conference call between TSA and stakeholders. For example, officials  from one industry association stated that the calls benefited members by  facilitating collaboration with TSA to more quickly identify and address  problems, such as malfunctioning screening equipment, before the  problems negatively affected passengers. An official from another  industry association told us that the daily conference call improved  communication substantially between TSA and the organization by  providing a regular opportunity to discuss airport security issues and  TSA\u2019s plans to resolve those issues.", "Additionally, stakeholders we interviewed generally reported positive  relationships or improved information sharing with FSDs, but also noted  differences in the type and extent of information that FSDs shared. For  example, officials at seven of eight airlines and all eight airports we visited  stated that they have positive relationships with their FSDs and that their  FSDs were accessible and available when needed, while the remaining  airline official noted improving access to information. Furthermore,  officials from all three industry associations cited improved information  sharing between their members at airports and FSDs since fiscal year  2016, but officials from two association noted that some FSDs still do not  regularly share information, such as changes in the number of TSOs  staffed at individual airports. According to TSA headquarters officials,  stakeholders can elevate any problems they experience with FSDs  sharing information to regional directors who are responsible for ensuring  that FSDs engage regularly with stakeholders."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to DHS for comment. We received  technical comments which we incorporated as appropriate.", "We are sending copies of this report to the Secretary of Homeland  Security, the Administrator of TSA 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 questions about this report, please contact me at  (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "GAO Staff and Acknowlegements", "paragraphs": ["In addition to the contact named above, Ellen Wolfe, Assistant Director;  Joel Aldape, David Alexander, Chuck Bausell, David Beardwood, Wendy  Dye, Miriam Hill, Susan Hsu, Thomas Lombardi, Kevin Newak, Heidi  Nielson, and Natalie Swabb made significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-417", "url": "https://www.gao.gov/products/GAO-18-417", "title": "DOD Personnel: Further Actions Needed to Strengthen Oversight and Coordination of Defense Laboratories' Hiring Efforts", "published_date": "2018-05-30T00:00:00", "released_date": "2018-05-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD's defense labs help sustain, among other things, U.S. technological superiority and the delivery of technical capabilities to the warfighter. Over time Congress has granted unique flexibilities\u2014such as the ability to hire qualified candidates who meet certain criteria using direct hire authorities\u2014to the defense labs to expedite the hiring process and facilitate efforts to compete with the private sector.", "Senate Report 114-255 included a provision for GAO to examine the labs' hiring structures and effective use of hiring authorities. This report examines (1) the defense labs use of existing hiring authorities and officials' views on the benefits of authorities and challenges of hiring; (2) the extent to which DOD evaluates the effectiveness of hiring, including hiring authorities at the defense labs; and (3) the extent to which DOD has time frames for approving and implementing new hiring authorities. GAO analyzed DOD hiring policies and data; conducted a survey of 16 defense lab officials involved in policy-making; interviewed DOD and service officials; and conducted nongeneralizable interviews with groups of officials, supervisors, and new hires from 6 labs\u20142 from each of the 3 military services, selected based on the labs' mission."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) laboratories (defense labs) have used the laboratory-specific direct hire authorities more than any other category of agency-specific or government-wide hiring authority for science, technology, engineering, and mathematics personnel. As shown below, in fiscal years 2015\u20142017 the labs hired 5,303 personnel out of 11,562 total hires, or 46 percent using these direct hire authorities. Lab officials, however, identified challenges to hiring highly qualified candidates, such as delays in processing security clearances, despite the use of hiring authorities such as direct hire.", "Source: GAO analysis of Department of Defense data. | GAO-18-417 .", "a Other includes all other defense laboratory-specific direct hiring authorities used.", "b All other includes remaining five categories of hiring authorities.", "c Percentages may not sum to total due to rounding.", "DOD and the defense labs track hiring data, but the Defense Laboratories Office (DLO) has not obtained or monitored these data or evaluated the effectiveness of the labs' hiring, including the use of hiring authorities. While existing lab data can be used to show the length of time of the hiring process, effectiveness is not currently evaluated. According to lab officials, timeliness data do not sufficiently inform about the effectiveness of the authorities and may not reflect a candidate's perception of the length of the hiring process. Further, the DLO has not developed performance measures to evaluate the effectiveness of hiring across the defense laboratories. Without routinely obtaining and monitoring hiring data and developing performance measures, DOD lacks reasonable assurance that the labs' hiring and use of hiring authorities\u2014in particular, those granted by Congress to the labs\u2014result in improved hiring outcomes.", "DOD does not have clear time frames for approving and implementing new hiring authorities. The defense labs were unable to use a direct hire authority granted by Congress in fiscal year 2015 because it took DOD 2\u00bd years to publish a federal register notice\u2014the process used to implement new hiring authorities for the labs\u2014for that authority. DOD officials identified coordination issues associated with the process as the cause of the delay and stated that DOD is taking steps to improve coordination\u2014including meeting to formalize roles and responsibilities for the offices and developing a new approval process\u2014between offices responsible for oversight of the labs and personnel policy. However, DLO's new federal register approval process does not include time frames for specific stages of coordination. Without clear time frames for its departmental coordination efforts related to the approval and implementation of new hiring authorities, officials cannot be certain they are taking action in a timely manner."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD (1) routinely obtain and monitor defense lab hiring data to improve oversight; (2) develop performance measures for evaluating the effectiveness of hiring; and (3) establish time frames to guide hiring authority approval and implementation. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The rapidly changing technological landscape necessitates that the  Department of Defense (DOD) pursue innovative ways to sustain and  advance its military superiority with a focus on new capabilities and  efficiencies to address existing and emerging threats. To support these  efforts, DOD\u2019s defense laboratory enterprise\u2019s vision includes sustaining  U.S. technological superiority, preparing for an uncertain future, and  accelerating the delivery of technical capabilities to the warfighter. In  February 2016 the then-Assistant Secretary of Defense for Research and  Engineering testified that the department employed more than 39,000  scientists and engineers in DOD\u2019s 63 laboratories, warfare centers, and  engineering centers, spanning 22 states. The Assistant Secretary  recognized that, to meet the needs of the warfighter, the department must  recruit and retain the best and brightest military and civilian scientists and  engineers.", "Staffing the enterprise, specifically the laboratories, is complicated by  factors such as the high demand for science and technology workers,  competition with the private sector, the requirement for U.S. citizenship,  the need for new hires to obtain security clearances, and the aging of the  federal science and technology workforce. These factors have contributed  to concerns about the outlook for a workforce that supports the  department\u2019s mission. In May 2016 the Senate Armed Services  Committee recognized the defense laboratory enterprise as a unique  national resource carrying out work that is vital to the national security  interests of the United States. According to the committee, it has taken steps to provide the defense laboratories with certain flexibilities from  federal rules and regulations that could hinder the laboratories\u2019 ability to  carry out their critical missions. These flexibilities include greater pay- setting authority and the ability to hire qualified candidates who meet  certain criteria using direct hire\u2014authorities that are intended to expedite  the hiring process and facilitate efforts to compete with the private sector.  The committee further stated that its ultimate goal is to help ensure that  the laboratories and lab employees have the desired flexibility  to  experiment and innovate as necessary to meet the needs of those  responsible for ensuring the national defense.", "Senate Report 114-255 accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2017 included a provision for us to  examine the various hiring structures at the defense laboratories, the time  it takes to hire personnel, and whether the laboratories are using existing  hiring authorities effectively. This report examines (1) the defense  laboratories use of existing hiring authorities and what officials view as  the benefits of authorities and incentives and the challenges in hiring; (2)  the extent to which DOD evaluates the effectiveness of hiring, including  hiring authorities, at the defense laboratories; and (3) the extent to which  DOD has time frames for approving and implementing new hiring  authorities.", "For our first objective, we reviewed the authorities used to hire science,  technology, engineering, and mathematics (STEM) personnel at 15 of  the 17 defense laboratories. We selected these 15 laboratories because  the remaining 2 laboratories were in the process of being implemented at  the time of our review. We obtained and analyzed documentation,  including past National Defense Authorization Acts (fiscal years 1995  through 2017), guidance related to government-wide hiring authorities,  and federal register notices on existing hiring authorities for the defense  laboratories.", "We obtained data that were coordinated by the Defense Manpower Data  Center and prepared by the Defense Civilian Personnel Advisory  Service\u2019s Planning and Accountability Directorate. These hiring action  data included hiring process milestone dates and the type of hiring  authority used for each civilian hire at the defense laboratories in fiscal  years 2015 through 2017. We selected these years because they were  the three most recent years for which hiring data were available and  because doing so would allow us to identify any trends in the use of hiring  authorities or the length of time taken to hire. The data we obtained were  extracted from the Defense Civilian Personnel Data System (DCPDS)  using the Corporate Management Information System. Based on  discussions with officials from the Defense Civilian Personnel Advisory  Service and the Defense Manpower Data Center and reviews of  additional documentation provided to support the data file, we determined  that these data were sufficiently reliable for the purposes of reporting the  frequency with which the labs used specific hiring authorities and  calculating the time it takes the labs to hire, or time to hire, for fiscal years  2015 through 2017.", "We also administered a survey to 16 officials who served as their  respective laboratories\u2019 representatives to the Laboratory Quality  Enhancement Program (LQEP) Panel on Personnel, Workforce  Development, and Talent Management, in order to collect information on  the use of specific hiring authorities, their perceptions about the  effectiveness of those authorities, and their perceptions about any  barriers to hiring. Given the panel members\u2019 knowledge of their labs\u2019  hiring processes, we determined that they would be best positioned to  respond to our survey. We received a response rate of 100 percent to our  questionnaire of 16 laboratory representatives from the Panel. A copy of  our questionnaire can be found in appendix II. We also interviewed  defense laboratory supervisors and recent hires to obtain their  perspectives on the hiring process. These individuals were selected by  their respective defense laboratories\u2019 points of contact based on specific  criteria we provided, including, for example, participation in hiring  activities and the amount of time since they were hired. However, the  views obtained from these officials, supervisors, and recent hires are not  generalizable and are presented solely for illustrative purposes.", "For our second and third objectives, we reviewed guidance and policies  for collecting and analyzing laboratory personnel data related to the  implementation and use of hiring authorities by these labs. We  interviewed DOD, military service, and defense laboratory officials to  discuss and review their hiring processes and procedures for STEM  personnel, the use of existing hiring authorities, and efforts to document  and evaluate time-to-hire metrics. We also met with DOD officials from  the Office of the Under Secretary of Defense for Personnel and  Readiness and the Office of the Under Secretary of Defense for Research  and Engineering to discuss processes and procedures for implementing  new hiring authorities granted by Congress. We evaluated their efforts to  determine whether they met federal internal control standards, including  that management should design appropriate types of control activities to  achieve the entity\u2019s objectives, such as conducting top-level reviews of  actual performance and establishing an organizational structure,  assigning responsibilities, and delegating authority to achieve an  organization\u2019s objectives. We provide further details on our scope and  methodology in appendix III.", "We conducted this performance audit from November 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Defense Laboratories", "paragraphs": ["The National Defense Authorization Act (NDAA) for Fiscal Year 1995  authorized the Secretary of Defense to conduct personnel demonstration  projects at the department\u2019s laboratories designated as Science and  Technology Reinvention Laboratories. The demonstration projects were  established to give laboratory managers more authority and flexibility in  managing their civilian personnel. These projects function as the vehicles  through which the department can determine whether changes in  personnel management concepts, policies, or procedures, such as  flexible pay or hiring authorities, would result in improved performance  and would contribute to improved DOD or federal personnel  management. Table 1 presents a list of the 15 defense laboratories  included in the scope of our review.", "The Defense Laboratories Office\u2014within the Office of the Undersecretary  of Defense for Research and Engineering (Research and Engineering)\u2014 carries out a range of core functions related to the defense labs, including  the aggregation of data, analysis of capabilities, and alignment of  activities, as well as advocacy for the defense labs. The National Defense  Authorization Act for Fiscal Year 2017 gave authority to conduct and  evaluate defense laboratory personnel demonstration projects to the  Under Secretary of Defense for Research and Engineering and,  accordingly, the Defense Laboratories Office. The Defense Laboratories  Office supports the Research and Engineering mission by helping to  ensure comprehensive department-level insight into the activities and  capabilities of the defense laboratories.", "The LQEP was chartered on April 15, 1994 to improve productivity and  effectiveness of the defense laboratories through changes in, among  other things, personnel management and contracting processes. The  NDAA for Fiscal Year 2017 established a new organizational structure for  the program, adding two new panels while also specifying that two  previously existing subpanels on personnel and infrastructure would  continue to meet. The NDAA for Fiscal Year 2017 requires the  department to maintain a LQEP Panel on Personnel, Workforce  Development, and Talent Management\u2014one of the four panels  established by a February 14, 2018 charter signed by the Under  Secretary of Defense for Research and Engineering. The purpose of the  panel is to help the LQEP achieve the following goals: (1) review and  make recommendations to the Secretary of Defense on current policies  and new initiatives affecting the defense laboratories; (2) support  implementation of quality enhancement initiatives; and (3) conduct  assessments and data analysis. The LQEP Panel on Personnel,  Workforce, Development, and Talent Management includes  representatives from each of the defense laboratories, as well as from the  Army, Navy, Air Force, appropriate defense agencies, and Office of the  Under Secretary of Defense for Research and Engineering."], "subsections": []}, {"section_title": "Hiring Authorities", "paragraphs": ["A hiring authority is the law, executive order, or regulation that allows an  agency to hire a person into the federal civil service. Among other roles,  hiring authorities determine the rules (or a subset of rules within a broader  set) that agencies must follow throughout the hiring process. These rules  may include whether a vacancy must be announced, who is eligible to  apply, how the applicant will be assessed, whether veterans preference  applies, and how long the employee may stay in federal service. Hiring  authorities may be government-wide or granted to specific agencies."], "subsections": [{"section_title": "Government-wide (Title 5) Hiring Authorities", "paragraphs": ["Competitive (Delegated) Examining. This is the traditional method  for making appointments to competitive service positions, and it  requires adherence to Title 5 competitive examining requirements.  The competitive examining process requires agencies to notify the  public that the government will accept applications for a job, screen  applications against minimum qualification standards, apply selection  priorities such as veterans preference, and assess applicants\u2019 relative  competencies or knowledge, skills, and abilities against job-related  criteria to identify the most qualified applicants. Federal agencies  typically assess applicants by rating and ranking them based on their  experience, training, and education. Figure 1 depicts the Office of  Personnel Management\u2019s (OPM) 80-day standard roadmap for hiring  under the competitive process.", "Governmentwide (Title 5) Direct Hire Authority. This authority  allows agencies to appoint candidates to positions without regard to  certain requirements in Title 5 of the United States Code, with OPM  approval. A direct hire authority expedites hiring by eliminating  specific hiring rules. In order for an agency to use direct hire, OPM  must determine that there is either a severe shortage of candidates or  a critical hiring need for a position or group of positions. When using  the direct hire authority, agencies must adhere to certain public notice  requirements.", "The Pathways Programs. These programs were created to ensure  that the federal government continues to compete effectively for  students and recent graduates. The current Pathways Programs  consist of the Internship Program, the Recent Graduates Program,  and the Presidential Management Fellows Program. Initial  hiring is  made in the excepted service, but it may lead to conversion to  permanent positions in the competitive service.", "Veterans-Related Hiring Authorities. These include both the  Veterans Recruitment Appointment Authority and the Veterans  Employment Opportunities Act authority. The Veterans Recruitment  Appointment authority allows for certain exceptions from the  competitive examining process. Specifically, agencies may appoint  eligible veterans without competition under limited circumstances or  otherwise through excepted service hiring procedures. The Veterans  Employment Opportunities Act authority is a competitive service  appointment authority that allows eligible veterans to apply for  positions announced under merit promotion procedures when an  agency accepts applications from outside of its own workforce."], "subsections": []}, {"section_title": "DOD-specific Hiring Authorities", "paragraphs": ["The Defense Laboratory Direct Hire Authorities. These include the  following four types of direct hire authorities granted to the defense  laboratories by Congress for hiring STEM personnel: (1) direct hire  authority for candidates with advanced degrees; (2) direct hire  authority for candidates with bachelor\u2019s degrees; (3) direct hire  authority for veterans; and (4) direct hire authority for students  currently enrolled in a graduate or undergraduate STEM program.  The purpose of these direct hire authorities is to provide a streamlined  and accelerated hiring process to allow the labs to successfully  compete with private industry and academia for high-quality scientific,  engineering, and technician talent.", "The Expedited Hiring Authority for Acquisition Personnel. This  authority permits the Secretary of Defense to designate any category  of positions in the acquisition workforce as positions for which there  exists a shortage of candidates or there is a critical hiring need; and to utilize specific authorities to recruit and appoint qualified persons  directly to positions so designated.", "The Science, Mathematics, and Research for Transformation  (SMART) Scholarship-for-Service Program. This program was  established pursuant to 10 USC \u00a72192a, as amended, and is funded  through the National Defense Education Program. The SMART  scholarship for civilian service program provides academic funding in  exchange for completing a period of full-time employment with DOD  upon graduation."], "subsections": []}]}]}, {"section_title": "The Defense Laboratories Have Used Direct Hire Authorities and Other Incentives to Help Hiring Efforts, but Officials Reported Challenges in Hiring Highly Qualified Candidates", "paragraphs": ["The labs have used the defense laboratory-specific direct hire authorities  more than any other category of agency-specific or government-wide  hiring authority. Defense laboratory officials we surveyed reported that  these direct hire authorities had been the most helpful to the labs\u2019 efforts  to hire highly qualified candidates for STEM positions, and also reported  that the use of certain incentives had been helpful in this effort. However,  even with access to the authorities, these defense laboratory officials  identified challenges associated with the hiring process that affected their  ability to hire highly qualified candidates."], "subsections": [{"section_title": "Defense Laboratories Used the Direct Hire Authorities Most Frequently for Hiring STEM Candidates, and the Use of These Authorities Has Increased since 2015", "paragraphs": ["For fiscal years 2015 through 2017, the defense laboratories used  laboratory-specific direct hire authorities more often than any other  category of hiring authorities when hiring STEM personnel. Moreover, the  defense laboratories\u2019 use of these direct hire authorities increased each  year from fiscal year 2015 through fiscal year 2017. Of the 11,562 STEM  hiring actions in fiscal years 2015 through 2017, approximately 46 percent  were completed using one of the defense laboratory direct hire  authorities. The second and third most used hiring authorities were  internal hiring actions and the expedited hiring authority for acquisition  personnel, each of which comprised approximately 12 percent of the  hiring actions during the time period. Table 2 provides information on the  overall number of hiring actions by hiring authority for fiscal years 2015  through 2017.", "The laboratory-specific direct hire authorities include the direct hire  authorities for candidates with advanced degrees, candidates with  bachelor\u2019s degrees, and candidates who are veterans\u2014authorities were  granted by Congress in prior legislation. Among the defense laboratory  direct hire authorities, the direct hire authority for candidates with  bachelor\u2019s degrees was used for 55 percent of all direct hires, for a total  of 2,920 hiring actions for fiscal years 2015 through 2017. During the  same time frame, the labs used the direct hire authority for candidates  with advanced degrees for approximately 36 percent (1,919 hiring  actions) of all direct hires, and the direct hire authority for veteran  candidates for approximately 9 percent (455 hiring actions). In addition,  for less than one percent of the direct hires, either the labs used another  category of laboratory-specific direct hire authority or we were unable to  determine which type of direct hire authority was used during those same  three fiscal years. See table 3 for information on the defense labs\u2019 use  of the defense laboratory-specific direct hire authorities for fiscal years  2015 through 2017.", "In fiscal year 2017 the defense labs used the defense laboratory direct  hire authorities for 54 percent of STEM hiring actions completed,  representing an increase of approximately 16 percentage points relative  to fiscal year 2015, when 38 percent were hired under defense lab direct  hire authorities. For additional information on the labs\u2019 use of hiring  authorities in fiscal years 2015 through 2017, as well as hiring authority  data by laboratory, see appendix IV. One laboratory official explained that  the increased use of the direct hire authorities could be a result of the  NDAA for Fiscal Year 2016, which increased the laboratories\u2019 allowable  use of the direct hire authority for candidates with bachelor\u2019s degrees from 3 percent to 6 percent, and use of the direct hire authority for  veterans from 1 percent to 3 percent, of the total number of scientific and  engineering positions at each laboratory at the end of the preceding fiscal  year. The direct hire authority for candidates with bachelor\u2019s degrees was  used most often\u2014for 1,151 out of 1,835 hiring actions\u2014as compared with  the other direct hire authorities in fiscal year 2017. See table 4 for more  information on the laboratories\u2019 use of all hiring authorities in fiscal year  2017. In addition, table 5 provides more information on the labs\u2019 use of  the direct hire authorities in fiscal year 2017."], "subsections": []}, {"section_title": "Laboratory Officials Reported That Certain Hiring Authorities and Incentives Have Helped Defense Laboratories Hire Highly Qualified Candidates", "paragraphs": ["Defense laboratory officials we surveyed most frequently identified the  three defense laboratory-specific direct hire authorities as having helped  to hire highly qualified candidates (see figure 2) and to hire quickly (see  figure 3). Specifically, 15 of 16 respondents to our survey stated that each  of the three direct hire authorities had been helpful in hiring highly  qualified candidates, and that the direct hire authorities for veterans and  for candidates with an advanced degree had helped them to hire quickly.  Moreover, all 16 survey respondents stated that the direct hire authorities  for candidates with a bachelor\u2019s degree had helped them to hire quickly.  Among the three direct hire authorities, the one for candidates with  bachelor\u2019s degrees was reported to be the most helpful to the  laboratories\u2019 hiring efforts, according to our survey results.", "A majority of the laboratory officials we surveyed also stated that the  Expedited Hiring Authority and the Science, Mathematics, and Research  for Transformation (SMART) Program had both helped facilitate their  efforts to hire highly qualified candidates and to hire them quickly.  According to our survey, the least helpful hiring authority that lab officials  reported using was the delegated examining unit authority. Six of 16  survey respondents stated that the delegated examining unit authority  had helped them to hire highly qualified candidates, while 9 of 16 stated  that the authority had hindered this effort. Three of 16 survey respondents  stated that the delegated examining unit authority had helped them to hire  quickly, while 12 of 16 stated that the use of this authority had hindered  their ability to hire quickly.", "During our interviews with laboratory officials, hiring officials and  supervisors described the defense laboratory direct hire authorities as  being helpful in their hiring efforts. For example, hiring officials from one  lab stated that the direct hire authorities were the easiest authorities to  use, and that since their lab had started using them, job offer acceptance  rates had increased and their workload related to hiring had decreased. A  hiring official from another laboratory stated that the use of direct hire  authorities had allowed their lab to be more competitive with the private  sector in hiring, which is useful due to the high demand for employees in  research fields. A supervisor from one lab stated that the use of direct  hire authorities was not only faster than the competitive hiring process,  but it also allowed supervisors a greater ability to get to know candidates  early in the process to determine whether they met the needs of a  position. In comparison, hiring managers we interviewed at one laboratory  stated that the Pathways Program is not an effective means of hiring  students because the program requires a competitive announcement.  Supervisors also stated that the application process for Pathways can be  cumbersome and confusing for applicants and may cause quality  applicants to be screened out early. Defense laboratory officials who  responded to our survey also stated that the process takes too long and  that quality applicants may drop out of the process due to the length of  the process.", "Defense laboratory hiring data also indicated that use of the defense  laboratory direct hire authorities resulted in faster than median hiring  times. As shown in table 6, the median time to hire for STEM positions at  the defense laboratories in fiscal year 2017 was 88 days. The median  time to hire when using the defense laboratories\u2019 direct hire authorities,  Pathways, or the SMART program authority was faster than that of the  median for all categories combined. The median time to hire when using  the competitive hiring process was approximately twice as long as when  using the labs\u2019 direct hire authorities. Our full analysis of defense  laboratory hiring data, including the time to hire by hiring authority  category, for fiscal years 2015 through 2017 can be found in appendix V.", "Defense laboratory officials also cited the use of incentives as helpful in  hiring highly qualified candidates, as shown in figure 4. According to our  survey results, the defense laboratories\u2019 flexibility  in pay setting under  their demonstration project authority was generally considered to be the  most helpful incentive, with 13 of 16 survey respondents stating that this  incentive had very much helped them to hire highly qualified candidates.", "During interviews, laboratory officials described the use of these  incentives as being particularly helpful if a candidate is considering  multiple job offers because the incentives can help make the lab\u2019s offer  more competitive with offers from other employers. Multiple hiring officials  stated that they would generally not include such incentives in an initial  offer, but that if the candidate did not accept that offer, they would  consider increasing the salary or offering a bonus. A hiring official from  one lab stated that his lab has not offered many recruitment bonuses in  recent years, because their acceptance rate has been sufficiently high  without the use of that incentive.", "Many of the recently hired lab employees whom we interviewed also cited  incentives, including bonuses and student loan repayment, as factoring  into their decisions to accept the employment offers for their current  positions. For example, one recently hired employee stated that the lab\u2019s  student loan repayment program was a significant factor in his decision to  accept employment at the lab rather than with private industry. Recently  hired employees also cited less tangible benefits of working at the labs,  including the  work environment, job stability, and type of work  performed, as key factors in their decisions to accept their current  positions. One newly hired employee stated that, while she could earn  more money in a private-sector job, the defense laboratory position would  afford her the freedom to pursue the type of work she is currently doing,  and that this was a major consideration in her decision to accept it.  Another newly hired employee similarly stated that he was interested in  the type of research conducted at the lab where he now works, and that  he was attracted to the opportunity to contribute to the national defense,  while also taking advantage of benefits that support the pursuit of higher  education."], "subsections": []}, {"section_title": "Defense Laboratory Officials We Surveyed Identified Challenges That Affect Their Ability to Hire Highly Qualified Candidates", "paragraphs": ["Defense laboratory officials we surveyed reported that, although the  available hiring authorities and incentives are helpful, they experience a  range of challenges to their ability to hire highly qualified candidates, as  shown in figure 5, ranging in order from the most to the least frequently  cited. In addition, figure 6 shows the extent to which officials reported  selected top challenges that hindered their respective labs\u2019 abilities to hire  highly qualified candidates.", "Defense laboratory officials described how hiring challenges identified in  our survey affect their ability to hire high quality candidates. Specifically,  these challenges are as follows:", "Losing quality candidates to the private sector: Fifteen of 16  survey respondents stated that this was a challenge, and 12 of the 15  stated that this challenge had somewhat or very much hindered their  lab\u2019s ability to hire highly qualified candidates for STEM positions  since October 2015. Hiring officials and supervisors we interviewed  stated that private-sector employers can make on-the-spot job offers  to candidates at college career fairs or other recruiting events,  whereas the labs are unable to make a firm job offer until later in the  hiring process.", "Government-wide hiring freeze: Fifteen of 16 survey respondents  identified this as a challenge, with 13 of those reporting that it had  either somewhat or very much hindered their lab\u2019s ability to hire highly  qualified candidates for STEM positions since October 2015. Multiple  hiring officials and supervisors we interviewed stated that they had  lost candidates whom they were in the process of hiring because the  candidates had accepted other offers due to the delays created by the  hiring freeze. In addition, some officials stated that, although the  freeze had been lifted, their labs\u2019 hiring efforts were still affected by  backlogs created by the freeze, or were adapting to new processes  that were implemented as a result of the freeze.", "Delays with the processing of security clearances: Fifteen of 16  survey respondents cited this as a challenge; 12 of the 15 stated that  this challenge had somewhat or very much hindered their lab\u2019s ability  to hire highly qualified candidates for STEM positions since October  2015. A supervisor from one lab stated that he was in the process of  trying to hire two employees whose hiring actions had been delayed  due to the security clearance process. The supervisor stated that he  had been told it could potentially take an additional 6 months to 1 year  to complete the process, and that he believed this may cause the  candidates to seek other employment opportunities. In other cases,  hiring officials stated that employees may be able to begin work prior  to obtaining a clearance, but that they may be limited in the job duties  they can perform while waiting for their clearance to be granted. The  government-wide personnel security clearance process was added to  GAO\u2019s High Risk List in 2018, based on our prior work that identified,  among other issues, a significant backlog of background  investigations and delays in the timely processing of security  clearances.", "Inability to extend a firm job offer until a final transcript is  received: Fourteen of 16 survey respondents stated that this was a  challenge, with 10 of the officials responding that it had somewhat or  very much hindered their lab\u2019s ability to hire highly qualified  candidates. One hiring official stated that top candidates will often  receive 5 to 10 job offers prior to graduation, and that his lab\u2019s may be  the only one of those offers that is characterized as tentative. Multiple  officials noted that career fairs can often occur several months prior to  graduation, so the lab would have to wait for the duration of this time  before extending a firm offer to a candidate who has been identified.", "Delays with processing personnel actions by the external human  resources office: Thirteen of 16 survey respondents stated that this  presented a challenge, and 9 of the 13 stated that this challenge had  somewhat or very much hindered their lab\u2019s ability to hire highly  qualified candidates for STEM positions since October 2015. Multiple  hiring officials stated that employees at their human resource offices  may not have an understanding of either the technical nature of the  positions being filled at the lab or the lab\u2019s unique hiring authorities,  and that this lack of knowledge could create delays. Other officials  noted that their servicing human resource offices seemed to be  inflexible regarding certain paperwork requirements. For example,  officials at one lab stated that their human resource office requires  candidates\u2019 resumes to be formatted in a particular way, and that they  have been required to ask candidates to make formatting changes to  their resumes. An official at another lab stated that the lab has faced  similar challenges with regard to the formatting of transcripts and has  had to request clarifying documentation from the university. In both  cases, the officials described these requirements as embarrassing,  and as a delay to the hiring process. Further, both a supervisor and a  newly hired employee we interviewed noted that it is difficult to learn  the status of an application when it is being processed by the human  resource office.", "Overall length of the hiring process: Twelve of 16 survey  respondents cited this as a challenge; 11 of the 12 stated that this  challenge had somewhat or very much hindered their lab\u2019s ability to  hire highly qualified candidates for STEM positions since October  2015. Hiring officials and supervisors we interviewed stated that their  lab had lost candidates due to the length of the hiring process. One  supervisor we interviewed stated that he has encountered candidates  who really wanted to work at his lab but had had to pursue other  opportunities because they could not afford to wait to be hired by the  lab. Multiple newly hired employees we interviewed described the  process as slow or lengthy, but described reasons why they were  willing to wait. For example, some employees were already working at  their lab in a contractor or post-doctoral fellowship position, and  accordingly they were able to continue in these positions while  completing the hiring process for the permanent positions they now  hold. One employee stated that if the process had gone on any  longer, he likely would have accepted another offer he had received,  while another employee stated that he knew of at least two post- doctoral fellows at his lab who chose not to continue in the hiring  process for a permanent position at the lab due to the length of the  hiring process."], "subsections": []}]}, {"section_title": "DOD and the Defense Labs Track Hiring Data, but the Defense Laboratories Office Has Not Obtained and Monitored These Data or Evaluated the Effectiveness of Hiring at the Laboratories", "paragraphs": ["The department and the defense laboratories track hiring data that can be  used to evaluate some aspects of the individual labs\u2019 hiring efforts, but  the Defense Laboratories Office has not routinely obtained or monitored  these data or evaluated the effectiveness of hiring, including the use of  hiring authorities, across the defense laboratories as a whole.  Laboratory hiring data are captured at the department level in the  Defense Civilian Personnel Data System (DCPDS)\u2014the department\u2019s  system of record for personnel data. In addition, the individual  defense  laboratories track hiring data, including the type of hiring authority used  and certain milestone dates that can be used to measure the length of the  hiring process, known as time to hire.", "According to OPM guidance and our prior work, time to hire is a  measure that may inform about the effectiveness of the hiring process,  and federal agencies are required to report time to hire for certain types of  hiring actions to OPM. Defense laboratory officials stated that, from their  perspectives, the time- to-hire metric does not sufficiently inform about  the effectiveness of the use of specific authorities, particularly when using  the most commonly tracked milestones\u2014from the initiation of a request  for personnel action to an employee\u2019s entrance-on-duty date. For  example, officials stated that when a direct hire authority is used to hire a  candidate who is completing the final year of his or her educational  program, the lab may identify and provide a tentative offer to this  candidate several months prior to graduation, consistent with private- sector recruitment methods. In this case, officials stated that the length of  time between the initiation of the request for personnel action and the  candidate\u2019s entrance-on-duty date, following his or her graduation, could  span a period of several months. According to defense laboratory  officials, the total number of days for this hiring action gives the  appearance that the use of the hiring authority was not efficient in this  case; however, officials stated that it would have been effective from the  supervisor\u2019s perspective, because the use of the hiring authority resulted  in the ability to recruit a highly qualified candidate in a manner that was  more competitive with the private sector.", "Further, time-to-hire data, as reflected by the milestone dates that are  currently tracked across the defense laboratories, may not reflect a  candidate\u2019s perception of the length of the hiring process. More  specifically, a candidate may consider the hiring process to be completed  upon receiving a job offer (either tentative or final), which could occur  weeks or months before the candidate\u2019s entrance-on-duty date, the  commonly used end-point for measuring time to hire. According to  officials, the length of time from when the offer is extended to entrance on  duty can be affected by a candidate\u2019s individual  situation and  preferences, such as the need to complete an educational program or  fulfill family or professional responsibilities prior to beginning work in the  new position. In other cases, certain steps of the hiring process, such as  completing the initial paperwork or obtaining management approval, may  occur after a candidate has been engaged but prior to the initiation of a  request for personnel action\u2014the commonly used start-point for  measuring time to hire. In this situation, the candidate\u2019s perception of the  length of the hiring process may be longer than what is reflected by the  time-to-hire data.", "For the reasons described above, some defense laboratories measure  time to hire using milestones that they have determined more  appropriately reflect the effectiveness of their hiring efforts. For example,  officials from one lab stated that they have sought to measure the length  of the hiring process that occurs prior to the request for personnel action,  while officials from some labs stated that they measure time to hire using  the tentative offer date as an end-point. In addition, some laboratories  informally collect other types of data that they use in an effort to evaluate  their hiring efforts, such as the reasons why candidates decline a job offer  or feedback on the hiring process from newly hired employees.", "However, officials from the Defense Laboratories Office stated that their  office has not conducted any review of the effectiveness of defense  laboratory hiring, including the use of hiring authorities, across the labs.  The National Defense Authorization Action for Fiscal Year 2017 gave  authority to conduct and evaluate defense laboratory personnel  demonstration projects to the Office of the Under Secretary of Defense for  Research and Engineering, under which the Defense Laboratories Office  resides. Defense Laboratories Office officials stated that the office has not  evaluated the effectiveness of defense laboratory hiring because it does  not have access to defense laboratory hiring data, has not routinely  requested these data from the labs or at the department level to monitor  the data, and has not developed performance measures to evaluate the  labs\u2019 hiring. As noted, laboratory hiring data are captured at the  department level in DCPDS and in a variety of service- and laboratory- specific systems and tools. However, the Defense Laboratories Office  does not have access to these data and, according to one official, the  office would not have access to defense laboratory hiring data unless  officials specifically requested them from the labs or from the Defense  Manpower Data Center, which maintains DCPDS. According to the  official, the Defense Laboratories Office has not routinely requested such  data in the past, in part because their role did not require evaluation of  such data.", "In addition, the Defense Laboratories Office has not developed  performance measures to evaluate the effectiveness of hiring across the  defense laboratories or the labs\u2019 use of hiring authorities. An official from  the Defense Laboratories Office stated that the office may begin to  oversee the effectiveness of the defense laboratories\u2019 hiring efforts and,  in doing so, may consider establishing performance measures to be used  consistently across the labs, which could include time-to-hire or other  measures. However, as of March 2018, the office had not established  such measures for use across the defense laboratories nor provided any  documentation on any planned efforts.", "Standards for Internal Control in the Federal Government states that  management should design appropriate types of control activities to  achieve the entity\u2019s objectives, including top-level reviews of actual  performance and the comparison of actual performance with planned or  expected results. Further, consistent with the principles embodied in the  GPRA Modernization Act of 2010, establishing a cohesive strategy that  includes measurable outcomes can provide agencies with a clear  direction for implementation of activities in multi-agency cross-cutting  efforts. We have previously reported that agencies are better equipped  to address management and performance challenges when managers  effectively use performance information for decision making.", "Without routinely obtaining and monitoring defense laboratory hiring data  and developing performance measures, the Defense Laboratories Office  cannot effectively oversee the effectiveness of hiring, including the use of  hiring authorities, at the defense laboratories. Specifically, without  performance measures for evaluating the effectiveness of the defense  laboratories\u2019 hiring, and more specifically the use of hiring authorities, the  department lacks reasonable assurance that these authorities\u2014in  particular, those granted by Congress to the defense laboratories\u2014are  resulting in improved hiring outcomes. In addition, without evaluating the  effectiveness of the defense laboratories\u2019 hiring efforts, the department  cannot understand any challenges experienced by the labs or determine  appropriate strategies for mitigating these challenges. As a result, the  department and defense laboratories may be unable to demonstrate that  they are using their authorities and flexibilities effectively, or that such  authorities and flexibilities should be maintained or expanded for future  use."], "subsections": []}, {"section_title": "DOD Does Not Have Clear Time Frames for Approving and Implementing New Hiring Authorities for the Defense Laboratories", "paragraphs": ["DOD does not have clear time frames for its process for approving and  implementing new hiring authorities for the defense laboratories. Section  1105 of the Carl Levin and Howard P \u201cBuck\u201d McKeon National Defense  Authorization Act for Fiscal Year 2015 established a direct hire authority  for students enrolled in a scientific, technical, engineering, or  mathematics course of study at institutions of higher education on a  temporary or term basis. Officials from the Defense Laboratories Office  stated that the labs were unable to use the authority because the  department\u2019s current process\u2014the publication of a federal register  notice\u2014for allowing the laboratories to use the hiring authority took longer  than anticipated. On June 28, 2017\u20142 \u00bd years after the authority was  granted in the NDAA for Fiscal Year 2015\u2014the department published a  federal register notice allowing the defense laboratories the authority to  use the direct hire for students.", "DOD officials stated that the department has typically published a federal  register notice whenever the defense laboratories are granted a new  hiring authority in legislation\u2014for example, when an NDAA is issued, or  when certain modifications to the demonstration projects are made. The  Defense Civilian Personnel Advisory Service\u2014through its personnel  policymaking role for the department\u2014at the time required that the  federal register notice process be used to implement any hiring  authorities granted to the defense labs by Congress in legislation.  These procedures were published in DOD Instruction 1400.37. DOD  officials identified coordination issues that occurred during the approval  process of the federal register notice across the relevant offices as the  cause of the delay associated with this federal register notice.", "Changes to DOD organizational structures further complicated the  process of implementing new hiring authorities for defense laboratories.  Specifically, in late 2016 a provision in the NDAA for Fiscal Year 2017  shifted the authority to conduct and evaluate defense laboratory  personnel demonstration projects from the Office of the Under Secretary  of Defense for Personnel and Readiness to the Office of the Under  Secretary of Defense for Research and Engineering. Within the Office of  the Under Secretary of Defense for Research and Engineering, the  Defense Laboratories Office has been tasked with the responsibility for  matters related to the defense laboratories. According to the Director of  the Defense Laboratories Office, informal discussions about the transition  began shortly after the NDAA for Fiscal Year 2017 was passed in late  2016. According to that official, despite the shift in oversight responsibility,  coordination between the offices of the Under Secretaries for Research  and Engineering and for Personnel and Readiness is required on issues  related to civilian personnel, including defense laboratory federal register  notices.", "Although a formal process for coordination did not exist at the start of our  review, officials from the Defense Laboratories Office stated that  representatives from the offices have met approximately five times since  December 2016 and were taking steps to establish a coordination  process for implementing new authorities. According to officials from the  Defense Laboratories Office, during those meetings as well as during  other, less formal interactions, officials have taken steps to formalize the  roles and responsibilities of the relevant offices. According to officials  from the Defense Laboratories Office, as of May 2018 the office was  drafting a memorandum to formalize the roles and responsibilities of the  Defense Laboratories Office and the Office of the Under Secretary of  Defense for Personnel and Readiness to correspond to the federal  register notice approval process; however, officials did not provide a  completion date.", "The Defense Laboratories Office established and documented its own  federal register approval process in spring 2017 and updated it in early  2018. The aforementioned memorandum would further describe the roles  and responsibilities for the Offices of the Under Secretary for Research  and Engineering and the Deputy Assistant Secretary of Defense for  Civilian Personnel Policy in carrying out the updated process. According  to officials, this is the process the office will use moving forward for  coordination and approval of any future federal register notices. On March  6, 2018, the Office published a federal register notice that rescinds the  earlier instruction published by the Defense Civilian Personnel Advisory  Service of the Office of the Under Secretary of Personnel and Readiness.  By rescinding that instruction\u2014including the earlier process for approving  requests from the labs and federal register notices\u2014the Defense  Laboratories Office can, according to officials, publish its own process  and guidance.", "In a 2016 presentation to the Joint Acquisition/Human Resources Summit  on the defense laboratories, the Chair of the Laboratory Quality  Enhancement Program Personnel Subpanel stated that a renewed and  streamlined approval process would be beneficial to the creation of new  authorities, among other things. Although Defense Laboratories Office  officials provided a flowchart of the office\u2019s updated federal register  approval process for coordination, this process did not include time  frames for specific stages of the coordination. Officials stated that they  cannot arbitrarily assign time frames or deadlines for a review process  because any time frames will be contingent on the other competing  priorities of each office, and other tasks may take priority and thus push  review of a federal register notice down in order of priority. Our prior work  has found that other federal agencies identify milestones, significant  events, or stages in the agency-specific rulemaking process, and track  data associated with these milestones. That work also found that,  despite variability  across federal agencies in the length of time taken by  the federal rulemaking process, scheduling and budgeting for rulemaking  are useful tools for officials to manage regulation development and  control the resources needed to complete a rule.", "Standards for Internal Control in the Federal Government further  establishes that management should design control activities to achieve  objectives and respond to risks. Further, management should also  establish an organizational structure, assign responsibility, and delegate  authority to achieve the entity\u2019s objectives. Moreover, documentation is a  necessary part of an effective internal control system. The level and  nature of documentation may vary based on the size and complexity of  the organization and its processes. The standards also underscore that  specific terms should be fully and clearly set forth such that they can be  easily understood. Our prior work on interagency collaboration has also  found that overarching plans can help agencies overcome differences in  missions, cultures, and ways of doing business, and can help agencies  better align their activities, processes, and resources to collaborate  effectively to accomplish a commonly defined outcome.", "Without establishing and documenting clear time frames for its process  for departmental coordination efforts related to the approval and  implementation of new hiring authorities, the department cannot be  certain that it is acting in the most efficient or effective manner possible.  Moreover, the defense laboratories may not promptly benefit from the use  of congressionally granted hiring authorities, relying instead on other  existing authorities. Doing so could, according to officials, have the  unintended consequence of complicating the hiring process, increasing  hiring times, or resulting in the loss of highly qualified candidates."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The future of the department\u2019s technological capabilities depends, in large  part, on its investment in its people\u2014the scientists and engineers who  perform research, development, and engineering. To that end, Congress  has granted the defense laboratories specific hiring authorities meant to  encourage experimentation and innovation in their approaches to building  and strengthening their workforces. The defense laboratories have used  most of these authorities as a part of their overall hiring efforts. However,  without obtaining and monitoring hiring data and developing performance  measures, the Defense Laboratories Office may not be in a position to  provide effective oversight of the defense laboratories\u2019 hiring, including  the use of hiring authorities, or to evaluate the effectiveness of specific  hiring authorities. Moreover, the absence of clear time frames to facilitate  timely decision-making and implementation of any new hiring authorities  may impede the laboratories\u2019 ability to make use of future authorities  when authorized by Congress. Until the department addresses these  issues, it lacks reasonable assurance that the defense laboratories are  taking the most effective approach toward hiring a workforce that is  critical to the military\u2019s technological superiority and ability to address  existing and emerging threats."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making three recommendations to DOD.", "The Secretary of Defense should ensure that the Defense Laboratories  Office routinely obtain and monitor defense laboratory hiring data to  improve the oversight of the defense laboratories\u2019 use of hiring  authorities. (Recommendation 1)", "The Secretary of Defense should ensure that the Defense Laboratories  Office develop performance measures to evaluate the effectiveness of the  defense laboratories\u2019 use of hiring authorities as part of the labs\u2019 overall  hiring to better inform future decision making about hiring efforts and  policies. (Recommendation 2)", "The Secretary of Defense should ensure that the Defense Laboratories  Office, in collaboration with the Under Secretary of Defense for Personnel  and Readiness and the Laboratory Quality Enhancement Panel\u2019s  Personnel Subpanel, establish and document time frames for its  coordination process to direct efforts across the relevant offices and help  ensure the timely approval and implementation of hiring authorities.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix VI, DOD concurred with our  recommendations, citing steps the department has begun and plans to  take to improve oversight and coordination of the defense laboratories\u2019  hiring efforts. DOD also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties,  including the Defense Laboratories Office and defense laboratories. In  addition, this report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions regarding this report, please  contact Brenda Farrell at (202) 512-3604 or farrellb@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made major  contributions to this report are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Department of Defense Science, Technology, Engineering, and Mathematics (STEM) Occupations", "paragraphs": ["The term \u201cSTEM\u201d refers to the fields of science, technology, engineering,  and mathematics. The following figure identifies the Department of  Defense\u2019s broad categories of STEM occupations, as well as the specific  occupational series within each category."], "subsections": []}, {"section_title": "Appendix II: Copy of GAO Questionnaire Administered to the Defense Laboratory Officials", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the defense laboratories use of existing hiring  authorities and what officials view as the benefits of authorities and  incentives and the challenges in hiring; (2) the extent to which the  Department of Defense (DOD) evaluates the effectiveness of hiring,  including hiring authorities, at the defense laboratories; and (3) the extent  to which DOD has time frames for approving and implementing new hiring  authorities.", "To address these objectives, we included in the scope of our review  science, technology, engineering, and mathematics (STEM) hiring at the  15 defense laboratories designated as Science and Technology  Reinvention Laboratories (STRL) that were implemented at the time of  our review within the Army, Navy, and Air Force. We included 9 Army  laboratories: Armament Research, Development, and Engineering  Center; Army Research Laboratory; Aviation and Missile Research,  Development, and Engineering Center; Communications-Electronics  Research, Development, and Engineering Center; Edgewood Chemical  and Biological Center; Engineer Research and Development Center;  Medical Research and Materiel Command; Natick Soldier Research,  Development, and Engineering Center; and Tank Automotive Research,  Development, and Engineering Center. We included 5 Navy laboratories:  Naval Air Systems Command Warfare Centers, Weapons Division and  Aircraft Division; Naval Research Laboratory; Naval Sea Systems  Command Warfare Centers, Naval Surface and Undersea Warfare  Centers; Office of Naval Research; and Space and Naval Warfare  Systems Command, Space and Naval Warfare Systems Center, Atlantic  and Pacific. We included 1 Air Force laboratory: Air Force Research  Laboratory. We excluded 2 additional defense laboratories within the  Army\u2014the Army Research Institute and the Space and Missile Defense  Command\u2014because these defense laboratories were in the process of  being implemented at the time of our review.", "For our first objective, we obtained and analyzed documentation,  including past National Defense Authorization Acts (fiscal years 1995  through 2017), guidance related to government-wide hiring authorities,  and federal register notices on existing hiring authorities used by the  defense laboratories to hire STEM personnel. We obtained data that were  coordinated by the Defense Manpower Data Center and prepared by the  Defense Civilian Personnel Advisory Service\u2019s Planning and  Accountability Directorate. These data included, among other things,  hiring process milestone dates and type of hiring authority used for each  civilian hire at the defense laboratories for fiscal years 2015 through  2017. We selected these years because they were the three most recent  years for which hiring data were available, and because doing so would  allow us to identify any trends in the use of hiring authorities or the length  of time taken to hire. The data we obtained were extracted from DCPDS  using the Corporate Management Information System.", "The team refined the data to include only those hiring actions that were  made by the 15 defense laboratories included within the scope of our  review. In addition, we excluded hiring actions that used a 700-series  nature of action code, which denotes actions that relate to position  changes, extensions, and other changes, which we determined should  not be included in our analysis. We included actions that used nature of  action codes in the 100-series (appointments) and 500-series  (conversions to appointments). For the purpose of calculating time to hire,  we also excluded records with missing dates and those for which the  time-to-hire calculation resulted in negative number (that is, the record\u2019s  request for personnel action initiation date occurred after the enter-on- duty date). Specifically, we excluded 92 actions for which no request for  personnel action initiation date was recorded and 205 actions for which  the date occurred after the enter-on-duty date, for a total of 2.57 percent  of all hiring actions. We included in our calculation 7 actions for which the  request for personnel action initiation date was the same date as the  enter-on-duty date, resulting in a time to hire of zero days.", "To determine the extent to which the defense laboratories use existing  hiring authorities, based on the department\u2019s data, we analyzed the  current appointment authority codes identified for individual hiring actions.  Current appointment authority codes are designated by the Office of  Personnel Management and are used to identify the law, executive order,  rule, regulation, or other basis that authorizes an employee\u2019s most recent  conversion or accession action. Based on our initial review of the data,  we determined that, in some cases, more than one distinct current  appointment authority code could be used to indicate the use of a certain  hiring authority. Alternately,  a single current appointment authority code  could in some cases be used for indicating more than one type of  authority. In these cases, the details of the specific type of hiring authority  that was used for the hiring action can be recorded in the description field  associated with the current appointment authority code field. For this  reason, in order to determine the type of hiring authority used, it was  necessary to analyze the description fields for the current appointment  authority code when certain codes were used. Two analysts  independently reviewed each description and identified the appropriate  hiring authority. Following this process, the two analysts compared their  work and resolved any instances in which the results of their analyses  differed. A data analyst used the results to produce counts of the number  of times various categories of hiring authorities were used, as well as the  average time to hire for each hiring authority category.", "For those instances where the analysts could not identify a hiring  authority on the basis of the three digit codes or the description fields, the  hiring actions were assigned to an \u201cunknown\u201d category. We note that the  \u201cunknown\u201d category included 591 hiring actions, or approximately 5  percent of the total data for fiscal years 2015 through 2017. In addition,  within the laboratory-specific direct hire authority category, if a  determination could not be made about the specific type of laboratory- specific direct hire authority used, the hiring action was captured in the  \u201cdirect hire authority, unspecified\u201d category because the action was  clearly marked as one of the laboratory-specific direct hire authorities but  the type of authority (for example, direct hire for veterans) was unclear. Of  the 5,303 hiring actions identified as a laboratory-specific direct hire  authority, 0.1 percent of the hiring actions fell into the unspecified  category. Based on the aforementioned steps and discussions with  officials from the Defense Civilian Personnel Advisory Service and the  Defense Manpower Data Center and reviews of additional documentation  provided to support the data file, as well as interviews with officials from  13 of the laboratories about their data entry and tracking, we determined  that these data were sufficiently reliable for the purposes of reporting the  frequency with which the labs used specific hiring authorities and  calculating the time it takes the labs to hire, or time to hire, for fiscal years  2015 through 2017.", "To describe officials\u2019 views of hiring authorities and other incentives, we  conducted a survey of officials at each of the defense laboratories on (1)  their perceptions of the various hiring authorities and incentives, (2)  whether those authorities and incentives have helped or hindered hiring  efforts, (3) the extent to which they experienced barriers to using hiring  authorities, and (4) any challenges during the hiring process, among other  things. We administered the survey to the official at each defense  laboratory who was identified as the Laboratory Quality Enhancement  Program Personnel, Workforce Development, and Talent Management  Panel point of contact, because we determined that this individual would  be the most knowledgeable about his or her lab\u2019s hiring process and use  of hiring authorities. One laboratory\u2014the Space and Naval Warfare  Systems Command Centers\u2014had two designated Laboratory Quality  Enhancement Program Personnel, Workforce Development, and Talent  Management Panel points of contact, one for each of its command  centers (Atlantic and Pacific). Because the contacts would each be  knowledgeable about his or her lab\u2019s hiring processes for their respective  command centers, we chose to include both command centers in our  survey. As a result, we included a total of 16 laboratory officials in our  survey.", "We drafted our questionnaire based on the information obtained from our  initial interviews with department, service, and laboratory personnel. We  conducted pretests to check that (1) the questions were clear and  unambiguous, (2) terminology was used correctly, (3) the questionnaire  did not place an undue burden on agency officials, (4) the information  could feasibly be obtained, and (5) the survey was comprehensive and  unbiased. We conducted five pretests to include representatives from  each of the three services, as well as from corporate research  laboratories and from research, development, and engineering centers.  We conducted the pretests\u2014with the assistance of a GAO survey  specialist\u2014by telephone and made changes to the content and format of  the questionnaire after each pretest, based on the feedback we received.  Key questions from the questionnaire used for this study are presented in  appendix II.", "We sent a survey notification email to each laboratory\u2019s identified point of  contact on July 6, 2017. On July 10, 2017, we sent the questionnaire by  email as a Microsoft Word attachment that respondents could return  electronically after marking checkboxes or entering responses into open  answer boxes. One week later, we sent a reminder email, attaching an  additional copy of the questionnaire, to everyone who had not responded.  We sent a second reminder email and copy of the questionnaire to those  who had not responded 2 weeks following the initial distribution of the  questionnaire. We received questionnaires from all 16 participants by  August 4, 2017, for a 100 percent response rate. Between July 26 and  October 5, 2017, we conducted additional follow-up with 11 of the  respondents via email to resolve missing or problematic responses.", "Because we collected data from every lab, there was no sampling error.  However, the practical difficulties of conducting any survey may introduce  errors, commonly referred to as non-sampling errors. For example,  differences in how a particular question is interpreted, the sources of  information available to respondents, how the responses were processed  and analyzed, or the types of people who do not respond can influence  the accuracy of the survey results. We took steps in the development of  the survey, the data collection, and the data analysis to minimize these  non-sampling errors and help ensure the accuracy of the answers that  were obtained. For example, a survey specialist designed the  questionnaire, in collaboration with analysts having subject matter  expertise. Then, as noted earlier, the draft questionnaire was pretested to  ensure that questions were relevant, clearly stated, and easy to  comprehend. The questionnaire was also reviewed by internal subject  matter experts and an additional survey specialist.", "Data were electronically extracted from the Microsoft Word  questionnaires into a comma-delimited file that was then imported into a  statistical program for quantitative analyses and Excel for qualitative  analyses. We examined the survey results and performed computer  analyses to identify inconsistencies and other indications of error, and we  addressed such issues as necessary. Quantitative data analyses were  conducted by a survey specialist using statistical software. An  independent data analyst checked the statistical computer programs for  accuracy.", "To obtain information on department- and service-level involvement in  and perspectives of defense laboratory hiring, we interviewed officials at  the Defense Personnel Advisory Service, Defense Laboratories Office,  Army Office of the Assistant G-1 for Civilian Personnel, and Navy Office  of Civilian Human Resources. In addition, we interviewed hiring officials,  first-line supervisors, and newly hired employees from a non- generalizable sample of six defense laboratories or subordinate level  entities within a laboratory (for example, division or directorate) to obtain  their perspectives on the hiring process. We selected the six laboratories  based on the following two criteria: (1) two laboratories from each of the  three services, and (2) a mix of both corporate research laboratories and  research and engineering centers. In addition, because some hiring  activities can occur at subordinate levels within a laboratory\u2014such as a  division or directorate\u2014we included at least one subordinate level entity  for each service. In total, we selected: Army Research Laboratory  Sensors and Electron Devices directorate; Aviation and Missile Research,  Development, and Engineering Center (Army); Naval Research  Laboratory; Naval Air Warfare Center Weapons Division; Air Force  Research Laboratory Information directorate; and Air Force Research  Laboratory Space Vehicles directorate. For each lab, we requested to  interview the official(s) most knowledgeable about the lab\u2019s hiring  process, supervisors who had recently hired, and newly hired employees.", "We initially requested to interview one group each of supervisors and  newly hired employees. Following our first round of interviews at one  laboratory, we requested to interview two groups each of supervisors and  newly hired employees. Subsequent to this request, at one lab we were  able to conduct one supervisor interview and at a second lab we were  able to conduct one newly hired employee interview, due to scheduling  constraints. The views obtained from these officials, supervisors, and  recent hires are not generalizable and are presented solely for illustrative  purposes.", "For our second and third objectives, we reviewed guidance and policies  for collecting and analyzing laboratory personnel data related to the  implementation and use of hiring authorities by these labs. We  interviewed DOD, military service, and defense laboratory officials to  discuss and review their hiring processes and procedures for STEM  personnel, the use of existing hiring authorities, and efforts to document  and evaluate time-to-hire metrics. We also met with DOD officials from  the Office of the Under Secretary of Defense for Personnel and  Readiness and the Office of the Under Secretary of Defense for Research  and Engineering to discuss processes and procedures for implementing  new hiring authorities granted by Congress. We evaluated their efforts to  determine whether they met federal internal control standards, including  that management should design appropriate types of control activities to  achieve the entity\u2019s objectives, including top-level reviews of actual  performance, and should establish an organizational structure, assigning  responsibilities and delegating authority to achieve an organization\u2019s  objectives.", "We conducted this performance audit from November 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: The Department of Defense Laboratories\u2019 Use of Hiring Authorities for Fiscal Years 2015, 2016, and 2017", "paragraphs": ["We analyzed three years of Department of Defense hiring data obtained  from the Defense Civilian Personnel Data System to identify the defense  laboratories\u2019 use of hiring authorities. We found that the defense  laboratories completed a total of 11,562 STEM hiring actions in fiscal  years 2015 through 2017 and used the defense laboratory direct hire  authorities the most often when hiring STEM personnel. Table 7 provides  information on the laboratories\u2019 use of hiring actions by hiring authority for  fiscal years 2015, 2016, and 2017.", "Table 8 provides a breakdown of the individual  labs\u2019 use of hiring  authorities in fiscal years 2015 through 2017."], "subsections": []}, {"section_title": "Appendix V: Defense Laboratory Time to Hire Data by Hiring Authority Category for Fiscal Years 2015, 2016, and 2017", "paragraphs": ["We analyzed three years of the DOD hiring data to identify time to hire  using various types of hiring authorities when hiring for Science,  Technology, Engineering, and Math (STEM) occupations at the defense  laboratories. Tables 9, 10, 11, and 12 below show the frequency of  actions for each hiring authority category and the average, minimum,  maximum, median, 25th percentile, and 75th percentile of the number of  days to hire for each category in fiscal years 2015 through 2017 and for  all three years combined."], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Vincent Balloon (Assistant  Director), Isabel Band, Vincent Buquicchio, Joseph Cook, Charles  Culverwell, Serena Epstein, Christopher Falcone, Robert Goldenkoff,  Cynthia Grant, Chelsa Gurkin, Amie Lesser, Oliver Richard, Michael  Silver, John Van Schaik, Jennifer Weber, and Cheryl Weissman made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-295", "url": "https://www.gao.gov/products/GAO-18-295", "title": "Heavy Equipment: Selected Agencies Should Improve Guidance for Purchases and Leases", "published_date": "2018-02-27T00:00:00", "released_date": "2018-02-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies use heavy equipment such as cranes and forklifts to carry out their missions, but there is no government-wide data on federal agencies' acquisition or management of this equipment.", "GAO was asked to review federal agencies' management of heavy equipment. This report, among other objectives, examines: (1) the number, type, and costs of heavy equipment items that are owned by 20 federal agencies and (2) the heavy equipment that selected agencies recently acquired as well as how they decided whether to purchase or lease this equipment.", "GAO collected heavy equipment inventory data as of June 2017 from the 24 agencies that have chief financial officers responsible for overseeing financial management. GAO also selected three agencies (using factors such as the heavy equipment fleet's size) and reviewed their acquisitions of and guidance on heavy equipment. These agencies' practices are not generalizable to all acquisitions but provide insight into what efforts these agencies take to acquire thousands of heavy equipment items. GAO also interviewed officials at the three selected agencies."]}, {"section_title": "What GAO Found", "paragraphs": ["Of the 24 agencies GAO reviewed, 20 reported owning over 136,000 heavy equipment items such as cranes, backhoes, and forklifts, and spending over $7.4 billion (in 2016 dollars) to acquire this equipment. The remaining 4 agencies reported that they do not own any heavy equipment.", "The three selected agencies GAO reviewed in-depth\u2014the Air Force within the Department of Defense (DOD), and the Fish and Wildlife Service and the National Park Service within the Department of the Interior (Interior)\u2014spent about $360 million to purchase about 3,500 heavy equipment assets in calendar years 2012 through 2016 and over $5 million to lease heavy equipment from fiscal years 2012 through 2016. Officials from all three agencies stated that they consider mission needs and the availability of equipment leases when deciding whether to lease or purchase heavy equipment. Federal regulations provide that agencies should consider whether it is more economical to lease or purchase equipment when acquiring heavy equipment, and federal internal control standards require that management clearly document all transactions in a manner that allows the documentation to be readily available for examination. However, in reviewing selected leases and purchases of heavy equipment from these three agencies, GAO found that officials did not consistently conduct or document lease-versus-purchase analyses. Officials at the Air Force and Interior said that there was a lack of clarity in agency policies about when they were required to conduct and document such analyses. Without greater clarity on when lease-versus-purchase analyses should be conducted and documented, these agencies may not be spending funds on heavy equipment effectively."]}, {"section_title": "What GAO Recommends", "paragraphs": ["The Department of the Interior and the Air Force should clarify the circumstances in which lease-versus-purchases analyses for heavy equipment acquisitions are to be conducted and documented. The Departments of the Interior and Defense concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies use a variety of heavy equipment\u2014such as cranes,  backhoes, and forklifts\u2014to carry out their missions. This type of  equipment can cost over $2 million per item. There is no government- wide information on how much heavy equipment agencies own and there  are no requirements for agencies to report on their ownership, use, or  cost of this equipment. This is in part due to the lack of a generally  accepted definition of heavy equipment. As the government continues to  seek opportunities to reduce costs, it is important to understand how  agencies determine the need for heavy equipment and how their methods  may affect the cost of their heavy equipment fleet.", "You asked us to identify data on federally owned heavy equipment and  agencies\u2019 efforts to manage utilization of their heavy equipment. This  report addresses:  the number, type, and cost of heavy equipment items that are owned  by 20 federal agencies;  the heavy equipment items that selected agencies have recently  acquired and how agencies decided whether to purchase or lease this  equipment; and how selected agencies manage the utilization of their heavy  equipment.", "To identify the number, type, and cost of heavy equipment owned by  federal agencies, we first developed a definition of heavy equipment for  the purposes of our review. Specifically, we identified 12 federal supply  classes in which the majority of items are self-propelled equipment and  include items such as backhoes, cranes, excavators, tractors, and  warehouse trucks. The selected federal supply classes do not include  classes specific to passenger vehicles and combat and tactical items, as  these items are generally not considered to be heavy equipment. We  validated our selection of federal supply classes with agency officials we  interviewed, who agreed that the selected classes are generally  considered to be heavy equipment. We then contacted the personal  property managers at each of the 24 agencies covered by the Chief  Financial Officers Act (CFO Act) and requested data on each agency\u2019s  heavy equipment inventory. We received inventory data from 20 of the  24 agencies either at the department level or from different components  within the agency, depending on how the data were maintained. Officials  at four agencies\u2014the Department of Education, the Department of the  Treasury, the General Services Administration (GSA), and the Small  Business Administration\u2014indicated that the agency does not own heavy  equipment. We did not verify the data or responses received, but did  review the data for inconsistencies and removed outliers; the results of  our data collection effort are used only for descriptive purposes and are  not generalizable beyond the 24 CFO Act agencies. We found these data  to be sufficiently reliable for our purposes. For a complete list of agencies  that responded to our data collection effort, as well as information on  whether they reported at the departmental level, see appendix I.", "To determine the heavy equipment items that selected agencies recently  acquired and how these agencies decided whether to purchase or lease  this equipment, we identified agencies that reported the highest  obligations for construction and/or heavy equipment in Federal  Procurement Data System-Next Generation (FPDS-NG). We then  identified additional factors such as spending on leases and a mix of  civilian and military departments. Through this process, we selected the  departments of Defense and the Interior for further review. Working with  department officials, we selected three agencies within those two  departments that had the highest number of heavy equipment items  based on their inventory data, among other criteria: the U.S. Air Force (Air  Force), the Fish and Wildlife Service (FWS), and the National Park  Service (NPS). For each agency, we used data from our data collection  effort to determine what heavy equipment the agency had purchased in  calendar years 2012 through 2016 and requested data on heavy  equipment leased in fiscal years 2012 through 2016. We obtained and  reviewed these three selected agencies\u2019 guidance documents on  acquiring heavy equipment and reviewed eight heavy equipment  acquisitions from the three selected agencies to determine if the  acquisitions followed relevant guidance and Standards for Internal Control  in the Federal Government. To select these acquisitions, we randomly  selected two purchases each from the Air Force, NPS, and FWS as well  as two leases each from the Air Force and FWS, for a total of ten  acquisitions. During our review, Interior identified guidance from 2013 on  lease-versus-purchase analysis. We excluded one FWS lease and one  NPS purchase from our analysis because they occurred prior to the  issuance of this guidance. As a result, we reviewed a total of eight  acquisitions. Any findings from our review of the selected agencies and  analysis of these procurement decisions are not generalizable within each  department or across the federal government. However, these  acquisitions provide examples of these three agencies\u2019 practices in  deciding whether to lease or purchase heavy equipment.", "To determine how the three selected agencies managed the utilization of  their heavy equipment, we reviewed the selected agencies\u2019 policies and  interviewed agency officials from each of the three agencies to determine  whether each agency has guidance for managing heavy equipment. For  those agencies with guidance for managing heavy equipment, we  reviewed the guidance to determine if and how selected agencies  measured and documented heavy equipment utilization. For more  information about our scope and methodology, see appendix II.", "We conducted this performance audit from October 2016 to February  2018 in accordance with generally accepted government auditing  standards Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Acquiring Heavy Equipment", "paragraphs": ["Agencies generally acquire equipment from commercial vendors and  through GSA, which contracts for the equipment from commercial  vendors. In acquiring heavy equipment from a commercial vendor or  GSA, agencies can purchase or lease the equipment. Generally,  agencies use the term \u201clease\u201d to refer to acquisitions that are time-limited  and therefore distinct from purchases. The term \u201clease\u201d is used to refer to  both long-term and short-term leases. For example, the three agencies  we reviewed in-depth use the term \u201crental\u201d to refer to short-term leases of  varying time periods. According to Air Force officials, they define rentals  as leases that are less than 120 days while FWS and NPS officials said  they generally use the term rental to refer to leases that are a year or  less. For the purposes of this report, we use the term \u201crental\u201d to refer to  short-term leases defined as rentals by the agency and \u201clong-term lease\u201d  to refer to a lease that is not considered a rental by the agency. (See fig.  1.)", "In 2013, GSA began offering heavy equipment through its Short-Term  Rental program, which had previously been limited to passenger vehicles,  in part to eliminate ownership and maintenance cost for infrequently used  heavy equipment. Under this program, agencies can request a short-term  equipment rental (less than a year) from GSA, and GSA will work with a  network of commercial vendors to provide the requested heavy  equipment."], "subsections": []}, {"section_title": "Heavy Equipment Reporting, Data, and Acquisition Requirements", "paragraphs": ["Unlike for some other types of federal property, there are no central  reporting requirements for agencies\u2019 inventories of heavy equipment.  However, each federal agency is required to maintain inventory controls  for its property, which includes heavy equipment. Agencies maintain  inventory data through the use of agency-specific databases, and each  agency can set its own requirements for what data are required and how  these data are maintained. For example, while an agency may choose to  maintain data in a headquarters database, it could also choose to  maintain data at the local level. As another example, an agency may  decide to track and maintain data on the utilization of its heavy equipment  (such as the hours used) or may choose not to have such data or require  any particular utilization levels.", "The Federal Acquisition Regulation (FAR) governs the acquisition  process of executive branch agencies when acquiring certain goods and  services, including heavy equipment. Under the FAR, agencies should  consider whether to lease equipment instead of purchasing it based on  several factors. Specifically, the FAR provides that agency officials should  evaluate cost and other factors by conducting a \u201clease-versus-purchase\u201d  analysis before acquiring heavy equipment. Additionally, DOD\u2019s  regulations require its component agencies to prepare a justification  supporting lease-versus-purchase decisions if the equipment is to be  leased for more than 60 days."], "subsections": []}]}, {"section_title": "Twenty Agencies Own Over 136,000 Pieces of Heavy Equipment, at an Acquisition Cost of Over $7.4 Billion", "paragraphs": [], "subsections": [{"section_title": "Agencies Report Owning Over 136,000 Pieces of Heavy Equipment of Various Types", "paragraphs": ["Twenty agencies reported data on their owned heavy equipment,  including the (1) number, (2) types, (3) acquisition year, and (4) location  of agencies\u2019 owned heavy equipment in their inventories as of June  2017."], "subsections": [{"section_title": "Number", "paragraphs": ["The 20 agencies reported owning over 136,000 heavy equipment items.  DOD reported owning most of this heavy equipment\u2014over 100,000  items, about 74 percent. (See app. I for more information on agencies\u2019  ownership of these items.) The Department of Agriculture reported  owning the second highest number of heavy equipment items\u2014almost  9,000 items, about 6 percent. (See fig. 2.) Four agencies\u2014the Nuclear  Regulatory Commission, the Department of Housing and Urban  Development, the Office of Personnel Management, and the Agency for  International Development\u2014reported owning five or fewer heavy  equipment items each.", "The 20 agencies reported owning various types of heavy equipment, such  as cranes, backhoes, and road maintenance equipment in five categories:  (1) construction, mining, excavating, and highway maintenance  equipment; (2) airfield-specialized trucks and trailers; (3) self-propelled  warehouse trucks and tractors; (4) tractors; and (5) soil preparation and  harvesting equipment.", "Thirty-eight percent (almost 52,000 items) were in the construction,  mining, excavating, and highway maintenance category (see fig. 3).  Fifteen of the 20 agencies reported owning at least some items in this  category.", "Twenty-four percent (over 33,000 items) were in the airfield- specialized trucks and trailers category, generally used to service and  re-position aircraft on runways. DOD reported owning 99 percent  (over 32,000) of these items, while 9 other agencies, including the  Department of Labor and the National Aeronautics and Space  Administration, reported owning the other one percent (317 items).", "Twenty-two percent (over 29,000 items) were in the self-propelled  warehouse trucks and tractors category, which includes equipment  such as forklift trucks. All 20 agencies reported owning at least one  item in this category, and five agencies\u2014the Agency for International  Development, Department of Housing and Urban Development, the  Environmental Protection Agency, the Nuclear Regulatory  Commission, and the Office of Personnel Management\u2014reported  owning only items in this category.  (For additional information on agencies\u2019 ownership of heavy equipment in  various categories, see app. I.)", "The twenty agencies reported acquiring their owned heavy equipment  between 1944 and 2017, with an average of about 13 years since  acquisition (see fig. 4). One heavy equipment manager we interviewed  reported that a dump truck can last 10 to 15 years, whereas other types  of equipment can last for decades if regularly used and well-maintained.", "The 20 agencies reported that over 117,000 heavy equipment items (86  percent) were located within the United States or its territories. Of these,  about one-fifth (over 26,000) were located in California and Virginia, the  two states with the most heavy equipment (see fig. 5).", "Of the equipment located outside of the United States and its territories,  94 percent was owned by the Department of Defense. The rest was  owned by the Department of State (714 items in 141 countries from  Afghanistan to Zimbabwe) and the National Science Foundation (237  items in areas such as Antarctica)."], "subsections": []}]}, {"section_title": "Agencies Reported Spending Over $7.4 Billion to Purchase Heavy Equipment, Although Actual Costs Were Greater Than Reported", "paragraphs": ["The twenty agencies reported spending over $7.4 billion in 2016 dollars to  acquire the heavy equipment they own (see table 1). However, actual  spending was higher because this inflation-adjusted figure excludes over  37,000 heavy equipment items for which the agencies did not report  acquisition cost or acquisition year, or both. Without this information, we  could not determine the inflation-adjusted cost and therefore did not  include the cost of these items in our calculation. The Army owns almost  all of these items, having not reported acquisition cost or acquisition year,  or both, for 36,589 heavy equipment items because, according to Army  officials, the data were not available centrally but may have been  available at individual Army units and would have been resource- intensive to obtain.", "The heavy equipment items reported by the 20 agencies ranged in  acquisition cost from zero dollars to over $2 million in 2016 dollars, with  an average acquisition cost in 2016 dollars of about $78,000, excluding  assets with a reported acquisition cost of $0. Of the items which we  adjusted to 2016 dollars and for which non-zero acquisition costs were  provided:", "94 percent cost less than $250,000 and accounted for 57 percent of  the total adjusted acquisition costs (See fig. 6.)", "6 percent of items cost more than $250,000 and accounted for 43  percent of the adjusted acquisition costs. (See fig. 6.)", "High-cost items included a $779,000 hydraulic crane acquired by the  National Aeronautics and Space Administration in 1997 ($1.2 million in  2016 dollars), a $1.4 million ultra-deep drilling simulator acquired by the  Department of Energy in 2009 ($1.6 million in 2016 dollars), and several  $2.2 million well-drilling machines acquired by the Air Force in 2013 ($2.3  million in 2016 dollars)."], "subsections": []}]}, {"section_title": "Three Selected Agencies Purchased Almost 3,500 Pieces of Heavy Equipment in Calendar Years 2012 through 2016, but Did Not Consistently Document Lease- Versus-Purchase Analyses", "paragraphs": [], "subsections": [{"section_title": "Air Force, FWS, and NPS Purchased Almost 3,500 Pieces of Heavy Equipment in Calendar Years 2012 through 2016; Limited Information Is Available on Leases", "paragraphs": ["In calendar years 2012 through 2016, the Air Force, FWS, and NPS  purchased almost 3,500 pieces of heavy equipment through GSA and  private vendors at a total cost of about $360 million to support mission  needs. (See table 2.) These agencies also spent over $5 million on long- term leases and rentals during this time period.", "The Air Force spent over $300 million to purchase over 2,600 heavy  equipment assets in calendar years 2012 through 2016 that were used to  support and maintain its bases globally. For example, according to Air  Force officials, heavy equipment is often used to maintain runways and  service and reposition aircraft on runways. While the majority of Air Force  heavy equipment purchased in this time period is located in the United  States, 41 percent of this heavy equipment is located outside the United  States and its territories in 17 foreign countries to support global military  bases.", "The Air Force could not provide complete information on its heavy  equipment leases for fiscal years 2012 through 2016. Specifically, the  Air Force provided data on 33 commercial heavy equipment leases that  were ongoing as of August 2017 but could not provide cost data for these  leases because this information is not tracked centrally. Additionally, the  Air Force could not provide any data on leases that occurred previously  because, according to Air Force officials, lease records are removed from  the Air Force database upon termination of the lease. Officials said that  rentals are generally handled locally and obtaining complete data would  require a data call to over 300 base contracting offices. Air Force officials  stated that rentals are generally used in unique situations involving short- term needs such as responding to natural disasters. For example,  following Hurricane Sandy, staff at Langley Air Force Base in Virginia  used rental equipment to clean up and repair the base. Although Air  Force did not provide complete information on rentals, data we obtained  from GSA\u2019s Short-Term Rental program indicated that Air Force rented  heavy equipment in 46 transactions not reflected in the Air Force data we  received totaling over $3.7 million since GSA began offering heavy  equipment through its Short-Term Rental program, which had previously  been limited to passenger vehicles, in part program in 2013.", "FWS spent over $32 million to purchase 348 heavy equipment assets  from calendar years 2012 through 2016. FWS used its heavy equipment  to maintain refuge areas throughout the United States and its territories,  including maintaining roads and nature trails. FWS also used heavy  equipment to respond to inclement weather and natural disasters. Most of  the heavy equipment items purchased by FWS were in the construction,  mining, excavating, and highway maintenance equipment category and  include items such as excavators, which were used for moving soil,  supplies, and other resources.", "FWS officials reported that they did not have any long-term leases for any  heavy equipment in fiscal years 2012 through 2016 because they  encourage equipment sharing and rentals to avoid long-term leases  whenever possible. FWS officials provided data on 228 rentals for this  time period with a total cost of over $1 million. Information regarding  these rentals is contained in an Interior-wide property management  system, the Financial Business Management System (FBMS). FWS  officials told us that they have not rented heavy equipment through GSA\u2019s  program because they have found lower prices through local equipment  rental companies.", "NPS spent over $27 million to purchase 471 heavy equipment assets  from calendar years 2012 through 2016. NPS uses heavy equipment\u2014 located throughout the United States and its territories\u2014to maintain  national parks and respond to inclement weather and natural disasters.  For example, NPS used heavy equipment such as dump trucks, snow  plows, road graders, and wheel loaders to clear and salt the George  Washington Memorial Parkway in Washington, D.C., following snow and  ice storms. Most of the heavy equipment items purchased by NPS were  in the construction, mining, excavating, and highway maintenance  equipment category and include items such as excavators, which are  used for moving soil, supplies, and other resources.", "NPS reported spending about $360,000 on 230 long-term leases and  rentals in fiscal years 2012 through 2016, not including rentals through  GSA\u2019s Short-Term Rental program, which had previously been limited to  passenger vehicles, in part program. As with FWS, NPS leases and  rentals are contained in FBMS, which is Interior\u2019s property management  system. Data we obtained from GSA\u2019s Short-Term Rental program, which  had previously been limited to passenger vehicles, in part program  indicated that NPS rented heavy equipment in 26 transactions totaling  over $200,000 since GSA began offering heavy equipment through its  Short-Term Rental program, which had previously been limited to  passenger vehicles, in part program in 2013, for a potential total cost of  over $560,000 for these long-term leases and rentals."], "subsections": []}, {"section_title": "Selected Agencies Did Not Consistently Conduct and Document Lease-versus- Purchase Analyses", "paragraphs": ["As mentioned earlier, the FAR provides that executive branch agencies  seeking to acquire equipment should consider whether it is more  economical to lease equipment rather than purchase it and identifies  factors agencies should consider in this analysis, such as estimated  length of the period that the equipment is to be used, the extent of use in  that time period, and maintenance costs. This analysis is commonly  referred to as a lease-versus-purchase analysis. While the FAR does not  specifically require that agencies document their lease-versus-purchase  analyses, according to federal internal control standards, management  should clearly document all transactions and other significant events in a  manner that allows the documentation to be readily available for  examination and also communicate quality information to enable staff to  complete their responsibilities.", "As discussed below, we found that most acquisitions we reviewed from  FWS, NPS, and the Air Force did not contain any documentation of a  lease-versus-purchase analysis. Specifically, officials were unable to  provide documentation of a lease-versus-purchase analysis for six of the  eight acquisitions we reviewed. FWS officials were able to provide  documentation for the other two. Officials told us that a lease-versus- purchase analysis was not conducted for five of the six acquisitions and  did not know if such analysis was conducted for the other acquisition.  According to agency officials, the main reason why analyses were not  conducted or documented for these six acquisitions is that the  circumstances in which such analyses were to be performed or  documented were not always clear to FWS, NPS, and Air Force officials."], "subsections": [{"section_title": "Interior", "paragraphs": ["In addition to the FAR, Interior has agency guidance stating that bureaus  should conduct and document lease-versus-purchase analyses. This July  2013 guidance\u2014that FWS and NPS are to follow\u2014states that requesters  of equipment valued at $15,000 or greater should perform a lease-versus- purchase analysis when requesting heavy equipment. According to the  guidance, this analysis should address criteria in the FAR and include a  discussion of the financial and operating advantages of alternate  approaches that would help contracting officials determine the final  appropriate acquisition method. At the time the guidance was issued,  Interior also provided a lease-versus-purchase analysis tool to aid officials  in conducting this analysis. Additionally, in April 2016, Interior issued a  policy to implement the July 2013 guidance. The 2016 policy clarifies that  program offices are required to complete Interior\u2019s lease-versus-purchase  analysis tool and provide the completed analysis to the relevant  contracting officer.", "Within Interior, bureaus are responsible for ensuring that procurement  requirements are met, including the requirements and directives outlined  in Interior\u2019s 2013 guidance and 2016 policy on lease-versus-purchase  analyses, according to agency officials. Within FWS, local procurement  specialists prepare procurement requests and ensure that procurement  requirements are met and that all viable options have been considered.  Regional equipment managers review these procurement requests,  decide whether to purchase or lease the requested equipment, and  prepare the lease-versus-purchase analysis tool if the procurement  specialist has indicated that it is required. Within NPS, local procurement  specialists are responsible for ensuring that all procurements adhere to  relevant requirements and directives, including documenting the lease- versus-purchase analysis.", "Of the three FWS heavy equipment acquisitions we reviewed for which  the 2013 Interior guidance was applicable, one included a completed  lease-versus-purchase analysis tool; one documented the rationale for  purchasing rather than leasing, although it did not include Interior\u2019s lease- versus-purchase analysis tool; and one did not include any  documentation related to a lease-versus-purchase analysis. (See table 3.)", "Regarding the acquisition for which no documentation of a lease-versus- purchase analysis was provided\u2014a 12-month lease of an excavator and  associated labor costs for over $19,000\u2014FWS officials initially told us  that a lease-versus-purchase analysis was not required because the  equipment lease was less than $15,000, and Interior\u2019s guidance required  a lease-versus-purchase analysis for procurements of equipment valued  at $15,000 or greater. However, we found the guidance did not specify  whether the $15,000 threshold includes the cost of labor. We also found  that Interior\u2019s guidance did not specify if a lease-versus-purchase analysis  was required if the total cost of a rental is less than the purchase price.  FWS officials acknowledged that Interior guidance is not clear and that it  would be helpful for Interior to clarify whether these leases require a  lease-versus-purchase analysis.", "NPS officials were unable to provide documentation of a lease-versus- purchase analysis for the single heavy equipment acquisition we  reviewed\u2014the purchase of a wheeled tractor in 2015 for $43,177.  According to these officials, they could not do so because of personnel  turnover in the contracting office that would have documented the  analysis. In addition, they told us that they believe that such analyses  are not always completed for heavy equipment acquisitions because  responsibility for completing these analyses is unclear. Specifically, they  told us that it was unclear whether the responsibility lies with the official  requesting the equipment, the contracting personnel who facilitate the  acquisition, or the property personnel who manage inventory data.  However, when we discussed our findings with Interior and NPS officials,  NPS officials were made aware of the 2016 Interior policy that specifically  requires program offices\u2014the officials requesting the equipment\u2014to  complete the lease-versus-purchase analysis and provide documentation  of this analysis to the contracting officer. As a result, NPS officials told us  at the end of our review that program office officials will now be required  to complete the lease-versus-purchase analysis tool and document this  analysis."], "subsections": []}, {"section_title": "Air Force", "paragraphs": ["According to Air Force officials responsible for managing heavy  equipment, financial or budget personnel at individual bases are  responsible for conducting lease-versus-purchase analyses, also called  economic analyses, to support purchase and lease requests. Air Force  fleet officials told us that they then review these requests from a fleet  perspective, considering factors such as whether the cost information  provided in the request is from a reputable source, expected maintenance  costs, and whether a requesting base has the capability to maintain the  requested equipment. However, they said they do not check to ensure  that a lease-versus-purchase analysis was completed or review the  analysis. Equipment rentals can be approved at individual bases.", "In our review of four Air Force heavy equipment acquisitions, we found no  instances in which Air Force officials documented a lease-versus- purchase analysis (see table 4).", "For the acquisitions that we reviewed, Air Force officials told us they did  not believe a lease-versus-purchase analysis was required because the  new equipment was either replacing old equipment that was previously  approved or could be deployed. Accordingly, the Air Force purchased two  forklifts in 2013 without conducting lease-versus-purchase analyses  because the forklifts were replacing old forklifts that were authorized in  1997 and 2005. Furthermore, Air Force officials told us that both of these  forklifts could be deployed and indicated that lease-versus-purchase  analyses are not required for deployable equipment. However, the Air  Force does not have guidance that describes the circumstances that  require either a lease-versus-purchase analysis or documentation of the  rationale for not completing such analysis.", "Although we identified several instances in which officials in the three  selected agencies did not document lease-versus-purchase analyses,  officials from these agencies stated that they consider mission needs and  equipment availability, among other factors, when making these  decisions. For example, Air Force officials told us following Hurricane  Sandy, staff at Langley Air Force Base in Virginia used rental equipment  to clean and repair the base because the equipment was needed  immediately to ensure the base could meet its mission. Moreover,  availability of heavy equipment for lease or rental, which can be affected  by factors such as geography and competition for equipment, is a key  consideration. For example, FWS officials told us that the specialized  heavy equipment sometimes needed may not be available for long-term  lease or rent in remote areas such as Alaska and the Midway Islands, so  the agency purchases the equipment. In addition, some agency officials  told us that they may purchase heavy equipment even if that equipment is  needed only sporadically if there is likely to be high demand for rental  equipment. For example, following inclement weather or a natural  disaster, demand for certain heavy equipment rentals can be high and  equipment may not be available to rent when it is needed.", "While we recognize that mission needs and other factors are important  considerations, without greater clarity regarding when to conduct or  document lease-versus-purchase analyses, officials at FWS, NPS, and  Air Force may not be conducting such analyses when appropriate and  may not always make the best acquisition decisions. These agencies  could be overspending on leased equipment that would be more cost- effective if purchased or overspending to purchase equipment when it  would be more cost-effective to lease or rent. Moreover, without  documenting decisions on whether to purchase or lease equipment, they  lack information that could be used to inform future acquisition decisions  for similar types of equipment or projects."], "subsections": []}]}]}, {"section_title": "Air Force and FWS Periodically Assess Heavy Equipment Utilization; NPS Does Not But Is Developing Guidance to Do So", "paragraphs": ["Air Force guidance requires that fleet managers collect utilization data for  both vehicles and heavy equipment items, such as the number of hours  used, miles traveled, and maintenance costs. The Air Force provided us  with utilization data for over 18,000 heavy equipment items and uses  such data to inform periodic base validations. Specifically, Air Force  officials said that every 3 to 5 years each Air Force base reviews the on- base equipment to ensure that the installation has the appropriate heavy  equipment to complete its mission and reviews utilization data to identify  items that are underutilized. If heavy equipment is considered  underutilized, the equipment is relocated\u2014either moved to another  location or sent to the Defense Logistics Agency for reuse or transfer to  another agency. According to Air Force officials the Air Force has  relocated over 700 heavy equipment items based on the results of the  validation process and other factors such as replacing older items and  agency needs since 2014.", "Similarly, FWS guidance for managing heavy equipment utilization sets  forth minimum utilization hours for certain types of heavy equipment and  describes requirements for reporting utilization data. FWS provided us  with utilization data on over 3,000 heavy equipment items. According to  officials, condition assessments of heavy equipment are required by FWS  guidance every 3 to 5 years. According to FWS officials, condition  assessments inform regional-level decision making about whether to  move equipment to another FWS location or dispose of the equipment.", "In contrast, NPS does not require the collection of utilization data to  evaluate heavy equipment use and does not have guidance for managing  heavy equipment utilization. However, NPS officials told us that they  recognize the need for such guidance. NPS officials shared with us draft  guidance that they have developed, which would require collection of  utilization data for heavy equipment such as hours or days of usage each  month. According to NPS officials, they plan to send the guidance to the  NPS policy office for final review in March 2018. Until this guidance is  completed and published, NPS is taking interim actions to manage the  utilization of its heavy equipment. For example, NPS officials stated that  they have asked NPS locations to collect and post monthly utilization  data, discussed the collection of utilization data at fleet meetings, and  distributed job aids to support this effort. During the course of our review,  NPS officials provided us with some utilization data for about 1,400 of the  more than 2,400 NPS heavy equipment items. Specifically, for the 1,459  heavy equipment items for which NPS provided utilization data, 541 items  had utilization data for each month. For the remaining 918 items,  utilization data were reported for some, but not all months."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The federal government has spent billions of dollars to acquire heavy  equipment. There is no requirement that agencies report on the inventory  of this equipment, as there is no standard definition of heavy equipment.  When deciding how to acquire this equipment, agencies\u2019 should conduct  a lease-versus-purchase analysis as provided in the FAR, which is a  critical mechanism to ensure agencies are acquiring the equipment in the  most cost-effective manner. Because FWS, NPS and the Air Force were  unclear when such an analysis was required, they did not consistently  conduct or document analyses of whether it was more economical to  purchase or lease heavy equipment. In the absence of clarity on the  circumstances in which lease-versus-purchase analyses for heavy  equipment acquisitions are to be conducted and documented, the  agencies may not be spending funds on heavy equipment cost- effectively."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations\u2014one to the Air Force and one to  the Department of the Interior.", "The Secretary of the Air Force should develop guidance to clarify the  circumstances in which lease-versus-purchase analyses for heavy  equipment acquisitions are to be conducted and documented.  (Recommendation 1)", "The Secretary of the Interior should further clarify in guidance the  circumstances in which lease-versus-purchase analyses for heavy  equipment acquisitions are to be conducted and documented.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Departments of Agriculture,  Defense, Energy, Homeland Security, Housing and Urban Development,  the Interior, Justice, Labor, State, and Veterans Affairs; General Services  Administration; National Aeronautics and Space Administration; National  Science Foundation; Nuclear Regulatory Commission; Office of  Personnel Management; and U.S. Agency for International Development.", "The departments of Agriculture, Energy, Homeland Security, Housing and  Urban Development, Justice, State and Veterans Affairs, as well as the   General Services Administration, National Aeronautics and Space  Administration, National Science Foundation, Nuclear Regulatory  Commission, Office of Personnel Management; and U.S. Agency for  International Development did not have comments.  The Department of  Labor provided technical comments, which we incorporated as  appropriate. In written comments, reproduced in appendix III, the  Department of Defense stated that it concurred with our recommendation  and plans to issue a bulletin to Air Force contracting officials.  In written  comments, reproduced in appendix IV, the Department of the Interior  stated that it concurred with our recommendation and plans to implement  it.", "If you or members of your staff have any questions about this report,  please contact me at (202) 512-2834 or RectanusL@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Major contributors to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Table of 20 Agencies\u2019 Heavy Equipment Inventories by Category, as of June 2017", "paragraphs": [], "subsections": [{"section_title": "Agency Department of Agriculture", "paragraphs": ["Specialized  Trucks and  Trailers   37  .", "Self-Propelled  Warehouse  Trucks and  Tractors   1,733  3  .  .  . . .  . ."], "subsections": []}, {"section_title": "Department of Commerce", "paragraphs": [".  .  .  .  ."], "subsections": []}, {"section_title": "U.S. Census Bureau Department of Defense", "paragraphs": [". . . . . . ."], "subsections": []}, {"section_title": "Agency Department of Energy", "paragraphs": ["Specialized  Trucks and  Trailers   7  .", "Self-Propelled  Warehouse  Trucks and  Tractors   2,925  134  .  .  .  .  .  .  .  .  .  ."], "subsections": []}, {"section_title": "Department of Health and Human Services", "paragraphs": [".  .  .  .  .  ."], "subsections": []}, {"section_title": "Department of Homeland Security", "paragraphs": [".  ."], "subsections": []}, {"section_title": "Agency", "paragraphs": ["Specialized  Trucks and  Trailers   .", "Self-Propelled  Warehouse  Trucks and  Tractors   146  .  .  .  ."], "subsections": []}, {"section_title": "Department of Housing and Urban Development Department of the Interior Bureau of Indian Affairs", "paragraphs": [".  .  7  .  . ."], "subsections": []}, {"section_title": "Department of Justice", "paragraphs": ["-  109  .  .  ."], "subsections": []}, {"section_title": "Agency Department of State Department of Transportation", "paragraphs": ["Self-Propelled  Warehouse  Trucks and  Tractors   575  64  40  .  .  . . ."], "subsections": []}, {"section_title": "Department of Veterans Affairs", "paragraphs": [".  .  .  ."], "subsections": []}, {"section_title": "Environmental Protection Agency National Aeronautics and Space Administration National Science Foundation", "paragraphs": [".  .  4  .  .  .  . . .  . . ."], "subsections": []}, {"section_title": "Agency", "paragraphs": ["Nuclear Regulatory Commission  Office of Personnel Management  Social Security Administration  United States Agency for  International Development  Grand Total  .  .  .  ."], "subsections": []}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report addresses: (1) the number, type, and cost of heavy equipment  items that are owned by the 24 CFO Act agencies; (2) the heavy  equipment items selected agencies have recently acquired and how  selected agencies decided to purchase or lease this equipment; and (3)  how selected agencies manage the utilization of their heavy equipment.", "To identify the number, type, and cost of heavy equipment owned by  federal agencies, we first interviewed officials at the General Services  Administration to determine whether there were government-wide  reporting requirements for owned heavy equipment and learned that there  are no such requirements. We then obtained and analyzed data on  agencies\u2019 spending on equipment purchases and leases from the Federal  Procurement Data System\u2013Next Generation (FPDS-NG), which contains  government-wide data on agencies\u2019 contracts. However, in reviewing the  data available and identifying issues with the reliability of the data, we  determined that data on contracts would not be sufficient to answer the  question of what heavy equipment the 24 CFO Act agencies own. We  therefore conducted a data collection effort to obtain heavy equipment  inventory information from the 24 CFO Act agencies, which are the  Departments of Agriculture, Commerce, Defense, Education, Energy,  Health and Human Services, Homeland Security, Housing and Urban  Development, the Interior, Justice, Labor, State, Transportation, the  Treasury, and Veterans Affairs; Environmental Protection Agency;  General Services Administration; National Aeronautics and Space  Administration; National Science Foundation; Nuclear Regulatory  Commission; Office of Personnel Management; Small Business  Administration; Social Security Administration; and Agency for  International Development.", "Because there is no generally accepted definition of heavy equipment, we  identified 12 federal supply classes in which the majority of items are self- propelled equipment but not passenger vehicles or items that are specific  to combat and tactical purposes, as these items are generally not  considered to be heavy equipment. (See table 5.) We then vetted the  appropriateness of these selected supply classes with Interior, FWS,  NPS, and Air Force agency officials, as well as with representatives from  a fleet management consultancy and a rental company, and they  generally agreed that items in selected federal supply classes are  considered heavy equipment. Federal supply classes are used in FPDS- NG and are widely used in agencies\u2019 inventory systems. Overall, about 90  percent of the heavy equipment items that agencies reported were  assigned a federal supply class in the agency\u2019s inventory data. In  discussing heavy equipment categories in the report, we use the category  titles below.", "To identify points of contact at the 24 CFO Act agencies, we obtained  GSA\u2019s list of contact information for agencies\u2019 national utilization officers,  who are agency property officers who coordinate with GSA. As a  preliminary step, we contacted these individuals at each of the 24 CFO  Act agencies and asked them to either confirm that they were the  appropriate contacts or provide contact information for the appropriate  contact and to inform us if they do not own heavy equipment. Officials at  4 agencies\u2014Department of Education, Department of the Treasury,  General Services Administration, and Small Business Administration\u2014 indicated that the agency did not own any items in the relevant federal  supply classes. Officials at 16 of these agencies indicated that they would  be able to respond on a departmental level because the relevant  inventory data are maintained centrally, while officials at 4 agencies  indicated that we would need to obtain responses from officials at some  other level because the relevant inventory data are not maintained  centrally. (See table 7 for a list of organizations within the 20 CFO Act  agencies that indicated they own relevant equipment and responded to  our data collection effort.)", "After identifying contacts responsible for agencies\u2019 heavy-equipment  inventory data, we prepared data collection instruments for requesting  information on heavy equipment and tested these documents with  representatives from 4 of the 20 CFO Act agencies that indicated they  own heavy equipment to ensure that the documents were clear and  logical and that respondents would be able to provide the requested data  and answer the questions without undue burden. These agency  representatives were selected to provide a variety of spending on federal  supply group 38 equipment as reported in FPDS-NG, civilian and military  agencies, and different levels at which the agency would be responding to  the data collection effort (e.g., at the departmental level or at a sub- departmental level).", "Our data collection instrument requested the following data on  respondent organizations\u2019 owned assets in 12 federal supply classes as  of June 2017:  Respondents provided data on original acquisition costs in nominal terms,  with some acquisitions occurring over 50 years ago. In order to provide a  fixed point of reference for appropriate comparison, we present in our  report inflation-adjusted acquisition costs using calendar year 2016 as the  reference. To adjust these dollar amounts for inflation, we used the  Bureau of Labor Statistic\u2019s Producer Price Index by Commodity for  Machinery and Equipment: Construction Machinery and Equipment  (WPU112), compiled by the Federal Reserve Bank of St. Louis. We  conducted the data collection effort from July 2017 through October 2017  and received responses from all 20 agencies that indicated they own  heavy equipment. In order to assess the reliability of agencies\u2019 reported  data, we collected and reviewed agencies\u2019 responses regarding  descriptions of their inventory systems, frequency of data entry, agency  uses of the data, and agencies\u2019 opinions on potential limitations of the use  of their data in our analysis. We conducted some data cleaning, which  included examining the data for obvious errors and eliminating outliers.  We did not verify the data or responses received; the results of our data  collection effort are used only for descriptive purposes and are not  generalizable beyond the 24 CFO Act agencies. Based on the steps we  took, we found these data to be sufficiently reliable for our purposes.", "To determine the heavy equipment items that selected agencies recently  acquired and how these agencies decided whether to purchase or lease  this equipment, we first used data from the FPDS-NG to identify agencies  that appeared to have the highest obligations for construction or heavy  equipment, or both, and used this information, along with other factors, to  select DOD and Interior. At the time, in the absence of a generally  accepted definition of heavy equipment, we reviewed data related to  federal supply group 38\u2014construction, mining, excavating, and highway  maintenance equipment\u2014because (1) we had not yet defined heavy  equipment for the purposes of our review; (2) agency officials had told us  that most of what could be considered heavy equipment was in this  federal supply group; and (3) our analysis of data from usaspending.gov  showed that about 80 percent of spending on items that may be  considered heavy equipment were in this federal supply group. In meeting  with officials at these departments, we learned that agencies within each  department manage heavy equipment independently, so we requested  current inventory data for Interior bureaus and the DOD military  departments and selected three agencies that had among the largest  inventories of construction and/or heavy equipment at the time, among  other criteria: the U.S. Air Force (Air Force); the Fish and Wildlife Service  (FWS); and the National Park Service (NPS). We then used information  from our data collection effort\u2014which included the number, type, cost,  acquisition year and other data elements\u2014to determine heavy equipment  items that these agencies acquired during 2012 through 2016. We  interviewed agency officials to determine what lease data were available  from the three selected agencies. We assessed the reliability of these  data with agency official interviews and reviewed the data for  completeness and potential outliers. We determined that the data  provided were sufficiently reliable for the purposes of documenting leased  and rental heavy equipment. We also obtained data from GSA\u2019s Short- Term Rental program, which had previously been limited to passenger  vehicles, in part program for August 2012, when the first item was rented  under this program, to February 2017, when GSA provided the data. We  used these data to identify selected agencies\u2019 rentals of heavy equipment  through GSA\u2019s Short-Term Rental program, which had previously been  limited to passenger vehicles, in part program and associated costs. We  interviewed officials from GSA\u2019s Short-Term Rental program to discuss  the program history as well as the reliability of their data on these rented  heavy equipment items. We determined that the data were sufficiently  reliable for our purposes.", "To determine how the three selected agencies decide whether to  purchase or lease heavy equipment, we interviewed fleet and property  managers at these selected agencies and asked them to describe their  process for making these decisions as well as to identify relevant federal  and agency regulations and guidance. We reviewed relevant federal and  agency regulations and guidance regarding how agencies should make  these decisions, including: Federal Acquisition Regulation, Office of  Management Budget\u2019s A-94, Guidelines and Discount Rates for Benefit- Cost Analysis of Federal Programs, Defense Federal Acquisition  Regulation Supplement, Air Force Manual 65-506, Air Force Guidance  Memorandum to Air Force Instruction 65-501, and Interior\u2019s Guidance On  Lease Versus Purchase Analysis and Capital Lease Determination for  Equipment Leases. We also reviewed the Standards for Internal Control  in the Federal Government for guidance on documentation as well as  past GAO work that reviewed agencies\u2019 lease-versus-purchase  analyses.", "To determine whether the three selected federal agencies documented  lease-versus-purchase decisions for selected acquisitions and adhered to  relevant agency guidance, we selected and reviewed a non-generalizable  sample of 10 heavy equipment acquisitions\u2014two purchases each from  the Air Force, FWS, and NPS, and two leases each from the Air Force  and FWS. Specifically, we used inventory data obtained through our data  collection effort, described above, to randomly select two heavy  equipment purchases from each selected agency using the following  criteria:  calendar years 2012 through 2016;  the two federal supply classes most prevalent in each selected  agency\u2019s heavy equipment inventory, as determined by the data  collection effort described above; and  for NPS and FWS, acquisition costs of over $15,000.", "In addition, we used lease data provided by the Air Force and FWS to  randomly selected two heavy equipment leases per agency. Because  NPS could not provide data on heavy equipment leases, we did not select  or review any NPS lease decisions. To select the Air Force and FWS  leases we used the following criteria:  fiscal years 2012 through 2016;  for the Air Force, which included federal supply classes in the lease  data provided, the two federal supply classes most prevalent in the  lease data and for FWS, which did not include federal supply class in  the lease data provided, the two federal supply classes most  prevalent in the purchase data; and  for FWS, leases over $15,000.", "After selecting these acquisitions, we determined that one FWS lease and  one NPS purchase we selected pre-dated Interior\u2019s 2013 guidance on  lease-versus-purchase analysis and excluded these acquisitions from our  analysis for a total of eight acquisitions. In reviewing agencies\u2019  documentation related to these acquisitions, we developed a data  collection instrument to assess the extent to which agencies documented  lease-versus-purchase analyses and, in the case of FWS and NPS,  adhered to relevant Interior guidance. We supplemented our review of  these acquisition decisions with additional information by interviewing  officials at the three selected agencies and requesting additional  information to understand specific circumstances surrounding each  procurement. Our findings are not generalizable across the federal  government or within each selected department.", "To determine how selected agencies manage heavy equipment  utilization, we interviewed officials at the three selected agencies to  identify departmental and agency-specific guidance and policies and to  determine whether utilization requirements exist. We reviewed guidance  identified by these officials, including Interior and Air Force vehicle  guidance, both of which apply to heavy equipment, and FWS\u2019s Heavy  Equipment Utilization and Replacement Handbook. We also compared  their practices to relevant Standards for Internal Control in the Federal  Government. For the selected agencies with guidance for managing  heavy equipment\u2014Air Force and FWS\u2014we reviewed the guidance to  determine if and how selected agencies measured and documented  heavy equipment utilization. For example, we reviewed whether selected  agencies developed reports for managing heavy equipment utilization  such as Air Force validation reports and FWS conditional assessment  reports. We also reviewed Air Force, FWS, and NPS utilization data for  heavy equipment but we did not independently calculate or verify the  utilization rate for individual heavy equipment items because each heavy  equipment item (backhoe, forklift, tractor, etc.,) has different utilization  requirements depending on various factors such as the brand, model, or  age of equipment. However, we did request information about agency  procedures to develop and verify utilization rates. We assessed the  reliability of the utilization data with agency official interviews and a review  of the data for completeness and potential outliers. We determined that  the data were sufficiently reliable for the purposes of providing evidence  of utilization data collection for heavy equipment assets.", "We also visited the NPS George Washington Memorial Parkway to  interview equipment maintenance officials regarding the procurement and  management of heavy equipment and to document photos of heavy  equipment. We selected this site because of its range of heavy equipment  and close proximity to the Capital region.", "We conducted this performance audit from October 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, John W. Shumann (Assistant  Director), Rebecca Rygg (Analyst in Charge), Nelsie Alcoser, Melissa  Bodeau, Terence Lam, Ying Long, Josh Ormond, Kelly Rubin, Crystal  Wesco, and Elizabeth Wood made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-76", "url": "https://www.gao.gov/products/GAO-19-76", "title": "Airline Consumer Protections: Additional Actions Could Enhance DOT's Compliance and Education Efforts", "published_date": "2018-11-20T00:00:00", "released_date": "2018-11-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Airlines recently came under scrutiny for their treatment of passengers\u2014including a high-profile incident in which a passenger was forcibly removed from an overbooked flight. However, airlines maintain that service has improved, citing better on-time performance and lower airfares. DOT has the authority to issue and enforce certain consumer protection requirements. DOT also educates passengers about their rights.", "GAO was asked to examine airline consumer protection issues. This report examines, among other issues, (1) trends in DOT's data on airline service; (2) the effectiveness of DOT's compliance efforts; and (3) the extent to which DOT's passenger education efforts align with key practices for consumer outreach. GAO reviewed DOT data on airline service and analyzed passenger complaint data for the 12 largest domestic airlines from 2008 through 2017; reviewed relevant documents and data on DOT's compliance program; assessed DOT's educational efforts against key practices for successful consumer outreach; and interviewed DOT officials. GAO interviewed or obtained written information from 11 of the 12 airlines."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Transportation's (DOT) data offered mixed information on whether airlines' service improved from 2008 through 2017. While DOT's operational data on rates of late flights, denied boardings, and mishandled baggage generally suggested improvement, the rate of passenger complaints received by DOT increased about 10 percent\u2014from about 1.1 complaints per 100,000 passengers to 1.2 complaints per 100,000 passengers.", "DOT conducts five key activities to ensure airlines' compliance with consumer protection requirements (see table). However, GAO found that DOT lacked performance measures to help it evaluate some of these activities and that it could improve its procedures (i.e., guidance documents and training materials), that analysts use to code passenger complaints.", "Performance measures : DOT has established objectives for each of its five key compliance activities that state what it seeks to achieve; however, DOT lacks performance measures for three objectives. For example, DOT lacks a performance measure for conducting inspections of airlines' compliance with consumer protection requirements at airlines' headquarters and at airports. As a result, DOT is missing opportunities to capture critical information about airlines' compliance with consumer protection requirements.", "Procedures : DOT has procedures to help analysts code passenger complaints and identify potential consumer protection violations. GAO found that DOT's guidance for coding passenger complaints did not consistently include definitions or examples that illustrate appropriate use or help analysts select among the various complaint categories. Additional procedures would help DOT ensure that complaints are consistently coded and that potential violations are properly identified.", "GAO found that while DOT has taken steps to educate passengers on their rights, its efforts did not fully align with four of nine key practices GAO previously identified for conducting consumer education. For example, while DOT has defined the goals and objectives of its outreach efforts, it has not used budget information to prioritize efforts or established performance measures to assess the results. DOT has also not solicited input directly from passengers to understand what they know about their rights. Taking such actions would provide DOT with greater assurance that its efforts are meeting passengers' needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that DOT: develop performance measures for compliance activities, improve its procedures for coding airline passengers' complaints, and improve how passenger education aligns with GAO's key practices. DOT concurred with our recommendations and provided technical comments, which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year hundreds of millions of passengers rely on airlines to get them  to their destination without incident. However, if a service incident does  occur\u2014such as a delayed or cancelled flight, mishandled or lost baggage,  an unsatisfactory customer-service experience, or a denied boarding\u2014a  passenger\u2019s experience can quickly deteriorate. For example, video of a  passenger being forcibly removed from an overbooked United Express  flight awaiting departure at Chicago\u2019s O\u2019Hare International Airport on April  9, 2017, went viral on social media, focusing national attention on the  common airline business practice of overbooking flights\u2014which can lead  to denied boardings\u2014and what is allowed under federal regulation.  Despite the public attention, airlines have maintained that these high- profile incidents are isolated and that service has improved in recent  years, citing better on-time performance, lower airfares, and newer  aircraft. More recently, some airlines\u2019 services and treatment of  passengers, as well as their traveling pets, have come under additional  public scrutiny, as have related federal requirements. For example,  airlines have called for additional regulation of service animals after  instances in which passengers tried to misrepresent pets as emotional  support animals to avoid certain fees and requirements.", "While U.S. airlines\u2019 business practices were largely deregulated following  the Airline Deregulation Act of 1978, a number of consumer protections  for airline passengers (i.e. \u201cconsumer protections\u201d) are in place at the  federal level. For example, some consumer protections are in federal  statute, such as the Air Carrier Access Act of 1986, as amended, which  prohibits airlines from discriminating against individuals based on a  disability. Federal statutes have also authorized the Department of  Transportation (DOT) to regulate certain areas affecting passengers. For  example, DOT has the authority to stop airlines from engaging in unfair or  deceptive practices, or unfair methods of competition, and may  promulgate consumer protection regulations under that authority. In  particular, under that authority, among others, DOT has issued three final  rules on Enhancing Airline Passenger Protections since 2009, with the  most recent rule issued in November 2016. These rules have, among  other things, restricted long tarmac delays, significantly increased  compensation amounts for passengers who are involuntarily denied  boarding, and required certain airlines to post information about their fees  and on-time performance on their websites. Despite these protections,  some congressional members have questioned if additional consumer  protections are needed and whether passengers know about their  existing rights. More recently, in October 2018, the FAA Reauthorization  Act of 2018 was enacted and includes a number of consumer protection  provisions.", "You asked us to examine airline consumer protection issues. This report: describes trends in DOT\u2019s data on airline service from 2008 through  2017 and airlines\u2019 actions to improve service, assesses how effectively DOT ensures airlines\u2019 compliance with  consumer protection requirements, and assesses the extent to which DOT\u2019s airline passenger education  efforts align with key practices for consumer outreach.", "At your request, we also examined the relationship between airline  competition and airline customer service (see app. I).", "The scope of this report focused on airline consumer protection issues  overseen by DOT. To describe trends in airline service, we analyzed  DOT\u2019s operational data\u2014including data on late flights and cancellations,  denied boardings, and mishandled baggage\u2014and passenger complaints  submitted to DOT from 2008 through 2017. We limited our analysis of  passenger complaints to \u201cselected\u201d airlines that were required to report  operational data to DOT in 2017\u2014the most recent year of available data  when we started our review\u2014because they were the largest U.S.  domestic passenger airlines in 2016. To assess the reliability of DOT\u2019s  data, we reviewed DOT reports, analyzed data to identify any outliers,  and interviewed DOT program officials about how the data were collected  and used. We determined that the data were sufficiently reliable for our  purposes, including to present high-level trends in passenger service over  time. To understand airlines\u2019 actions to enhance service from 2013  through 2017, we conducted a literature search of popular press articles  and interviewed or obtained written responses from representatives from  11 of the 12 selected airlines. We requested interviews with all selected  12 airlines; 11 airlines agreed to be interviewed or provided written  responses (Alaska Air Group representatives provided written responses  on behalf of both Alaska and Virgin America as the airlines have merged  since 2016), and 1 airline declined to be interviewed. Given the dynamic  nature of the industry, we asked about business practices and reviewed  passenger satisfaction data for the most recent 5-year period.", "To determine how effectively DOT ensures airlines\u2019 compliance with  consumer protection requirements, we conducted multiple interviews with  DOT officials and reviewed DOT\u2019s data and documents on its compliance  activities from 2008 through 2017. We then evaluated selected DOT  compliance activities against principles of Standards for Internal Control  in the Federal Government related to DOT\u2019s policies and procedures for  coding passenger complaints, case management system, and  performance measures. We also compared DOT\u2019s use of performance  measures against other leading practices for successful performance  measures.", "To understand the extent to which DOT\u2019s passenger education efforts  align with key practices for consumer outreach, we assessed DOT\u2019s  efforts to disseminate educational materials against key practices we  identified in prior work. We believe the key practices we identified in  2007 remain relevant today since the practices are not time-sensitive.  DOT officials agreed that these key practices were relevant to conducting  consumer outreach. See appendix II for more information on our scope  and methodology.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "State of the Airline Industry", "paragraphs": ["In the U.S. commercial airline industry, passengers travel by air on  network, low-cost, and regional airlines. With thousands of employees  and hundreds of aircraft, network airlines support large, complex hub- and-spoke operations, which provide service at various fare levels to  many destinations. Low-cost airlines generally operate less costly point- to-point service using fewer types of aircraft. Regional airlines typically  operate small aircraft\u2014turboprops or regional jets with up to 100 seats\u2014and generally provide service to smaller communities on behalf of  network airlines.", "The U.S. airline industry\u2019s financial health has improved greatly in recent  years due in part to increased demand for air travel as a result of the  improved economy, industry reorganization, and changes in business  practices. Starting in 2007, airlines faced a number of major challenges,  including volatile fuel prices, the financial crisis, and the ensuing  recession of 2007\u20132009. These events led to a wave of domestic airline  bankruptcies, five airline mergers, and changes in airlines\u2019 business  practices. In all, these circumstances\u2014such as the improved economy  and new airline business practices\u2014contributed to record level profits for  airlines. For example, in 2017, U.S. airlines reported an after-tax net profit  of $13.4 billion for domestic operations, according to DOT data.", "As the industry recovered from the recession and passenger traffic began  to rebound, airlines began to exercise \u201ccapacity restraint\u201d by carefully  controlling the number of seats on flights to achieve higher load factors in  order to control costs and improve profitability. Because capacity  restraint may result in fewer empty seats on many flights, this practice  also limits airlines\u2019 ability to rebook passengers if a flight is delayed or  cancelled. Airlines have also made changes in their ticket pricing. For  example, airlines now generally \u201cunbundle\u201d optional services from the  base ticket price and charge ancillary fees for those services.  Unbundling may result in passengers paying for services that were  previously included in the price of the ticket. Additionally, certain aspects  of customer service quality are tied to the class of ticket passengers  purchase. For example, purchasing a \u201cbasic economy\u201d ticket may  include restrictions, such as not allowing passengers to select seats or  charging for carry-on bags, that would not apply to a higher priced ticket  class. Similarly, the quality of seating varies based on the ticket class  purchased\u2014even within the main cabin of the aircraft. Moreover, while  the recent airline mergers have resulted in some new service options for  passengers in certain markets, they have also reduced consumers\u2019  choice of airlines on some routes and can result in higher ticket prices. At  the same time, low-cost airlines provide greater competition in the  markets they serve, which may help to keep prices in check."], "subsections": []}, {"section_title": "Factors That Affect Passengers\u2019 Satisfaction with Service", "paragraphs": ["Many factors\u2014from booking a flight through collecting checked  baggage\u2014may contribute to passengers\u2019 level of satisfaction with an  airline\u2019s service, according to an airline industry association and market  research organizations (see fig.1). For example, one industry survey  found that passengers most valued affordable airfare, convenient flight  schedules, and reliable on-time departures and arrivals."], "subsections": []}, {"section_title": "DOT\u2019s Regulatory, Compliance, and Education Efforts", "paragraphs": ["DOT\u2019s regulatory activities include issuing consumer protection  regulations. Specifically, DOT may issue or amend consumer protection  regulations under its statutory authority to prohibit unfair or deceptive  practices, or unfair methods of competition by airlines, among others.  As mentioned previously, under this authority DOT has promulgated  various regulations to enhance airline consumer protections since 2009  (see table 1).", "When regulations are promulgated, agency officials must determine how  to promote compliance and deter noncompliance. Agencies charged  with promoting regulatory compliance, including DOT, usually adopt a  program that consists of two types of activities: those that encourage  compliance and those that enforce the regulations. Compliance  assistance helps regulated entities, such as U.S. airlines, understand and  meet regulatory requirements, whereas activities such as monitoring,  enforcement, and data reporting deter noncompliance and ensure that  entities follow requirements. Agencies choose a mix of compliance  activities that will achieve their desired regulatory outcome.", "DOT promotes airlines\u2019 compliance with consumer protection  requirements through a number of activities, and it educates passengers  on their rights. For example, DOT has the authority to investigate whether  an airline has been, or is engaged, in an unfair or deceptive practice or an  unfair method of competition in air transportation or the sale of air  transportation. If DOT finds that an airline has violated consumer  protection requirements, DOT may take enforcement action against the  airline by, for example, assessing civil penalties. In addition to  promoting airlines\u2019 compliance with consumer protection requirements,  DOT also conducts activities aimed at educating passengers about their  rights and the services provided by airlines. For example, DOT has an aviation consumer protection website where it highlights passengers\u2019  rights and describes how to file complaints with DOT, in addition to other  consumer resources. Within DOT\u2019s Office of the Secretary (OST), the  Office of the Assistant General Counsel for Aviation Enforcement and  Proceedings and its Aviation Consumer Protection Division are  responsible for these efforts. According to DOT officials, the annual  appropriation to OST\u2019s Office of the General Counsel provides funding for  DOT\u2019s consumer protection activities, among other things. At the end of  fiscal year 2017, DOT employed 38 staff\u2014including 18 attorneys and 15  analysts\u2014to conduct these activities, according to DOT officials."], "subsections": []}]}, {"section_title": "DOT\u2019s Data Provide Mixed Information on Improvement in the Quality of Airline Service; Selected Airlines Indicate They Are Taking Steps Intended to Enhance Service DOT\u2019s Data Provide Mixed Information on the Quality of Airline Services", "paragraphs": ["DOT\u2019s data, which include both operational measures of airline service,  as well as passenger complaints received by DOT, provide mixed  information on whether service improved from 2008 through 2017. DOT  requires reporting airlines to provide operational data, including  information on late, cancelled, or diverted flights; mishandled baggage;  and denied boardings. These data showed some general improvement  in the quality of airline service from 2008 through 2017. However, during  the same time period, the total number of passenger complaints filed with  DOT increased for \u201cselected\u201d airlines. Moreover, while these data may  be imperfect measures of service quality, they do provide some indication  of the passenger experience. DOT publishes data on both operational  performance and passengers\u2019 complaints in its monthly Air Travel  Consumer Report to inform the public about the quality of services  provided by airlines."], "subsections": [{"section_title": "Selected Airlines Indicate They Have Taken a Variety of Actions to Enhance Passenger Service", "paragraphs": ["Representatives from all 11 selected airlines highlighted actions they took  to enhance passenger service since 2013, including in some of the areas  discussed above. While customer service is important for airlines, these  actions can also be motivated in part by other factors\u2014including  compliance with certain consumer protection requirements or DOT  consent orders, or competition with other airlines. For example, one  airline developed a wheelchair tracking system in response to DOT  enforcement, which also contributed to the airline\u2019s goal to improve its  services to passengers with disabilities. Additional examples of service  improvements are listed below.", "On-time performance. Representatives we interviewed from almost  all selected airlines (10 of 11) reported taking actions intended to  improve on-time performance or mitigate challenges associated with  flight delays and cancellations. These actions varied across airlines  from those intended to improve operational performance to those  intended to improve the comfort of passengers. For example, one  airline began tracking flights that were \u201cat-risk\u201d of meeting DOT\u2019s  definition of a chronically delayed flight, so it could, among other  things, swap crews or substitute aircraft and avoid these types of  delays. According to DOT regulations, airlines with a chronically  delayed flight for more than four consecutive one-month periods are  engaging in a form of unrealistic scheduling, which is an unfair or  deceptive practice and an unfair method of competition. Airlines  have also used technology, such as text-messaging updates, to  communicate with passengers during delays and cancellations (8 of  9); increased the number of situations where passengers are  compensated during delays and cancellations (5 of 9); and  empowered customer service agents to provide food, beverages, and  entertainment to passengers during flight delays (1 of 9). For  example, one airline e-mails all passengers that experience long  delays with an apology and voucher for future travel, regardless of  whether the delay was within the airline\u2019s control. While DOT has  some requirements for airlines on delays and cancellations, such as  on tarmac delays and chronically delayed flights, it generally does not  require airlines to compensate passengers for delays.", "Baggage handling. Representatives we interviewed from almost all  network and low-cost airlines (8 of 9) reported investing resources in  order to improve baggage-handling efforts and minimize the effects to  passengers whose bags are lost or delayed. Among other things,  airlines upgraded baggage technology (5 of 9); modernized the claims  process, so passengers could complete forms on-line (3 of 9); and  instituted replacement baggage programs, where passengers get a  replacement bag at the airport (2 of 9). For example, one airline  invested several million dollars to use radio frequency identification  technology (RFID) to track bags, as well as allowing passengers to  track their baggage via an application on their smartphone. Another  airline introduced a policy to use FedEx to deliver delayed bags if the  airline cannot return them within 24 hours. Since 2011, DOT has  required certain airlines to make every reasonable effort to return  mishandled baggage within 24 hours.", "Quality of interaction with airline staff. Representatives we  interviewed from almost all selected airlines (10 of 11) reported  improving training programs in an attempt to enhance interactions  between airline staff and passengers. For example, one airline worked  with the Disney Institute to provide training to staff on relating to  guests during travel disruptions and de-escalating conflict. While  airlines have increased customer service training, representatives  from one industry association said that the training would be more  beneficial if it was provided on a more regular basis. Two airlines also  expanded their customer service departments\u2019 hours to better match  when passengers travel. According to DOT officials, airlines are not  required to provide customer service training to staff.", "Passengers with disabilities. Representatives we interviewed from  almost all network and low-cost airlines (8 of 9) reported taking  actions intended to improve services for passengers with disabilities.  These actions included programs to replace damaged or misplaced  wheelchairs or other assistive devices (3 of 9); improving seating and  access to lavatories in the aircraft (1 of 9); and using RFID technology  to track wheelchairs (1 of 9). For example, representatives from one  airline told us they have retrofitted their larger single aisle aircraft  lavatories to be wheelchair accessible. Two airlines also reported  changing policies pertaining to emotional support animals. For  example, one airline has an online registration for emotional support  animals where passengers must submit all documentation at least 48  hours in advance of the flight; according to representatives, the  process allows the airline to validate the required paperwork, while  providing relevant information to passengers with emotional support  animals and ensuring the safety of everyone onboard the aircraft.", "Involuntary denied boardings. Representatives we interviewed from  network and low-cost airlines (9) reported taking steps to reduce or  eliminate involuntary denied boardings. Representatives from three  airlines said they have reduced or stopped overbooking flights, and  other representatives (5 of 9) said their airlines have begun soliciting  volunteers to be \u201cbumped\u201d off a flight (i.e., give up their seat) earlier in  the process. Two conduct reverse auctions where they ask  passengers what compensation they would accept to take an  alternative flight. Airlines are also offering additional incentives to  encourage passengers to voluntarily switch to flights with available  seats (5 of 9)\u2014including travel vouchers with fewer restrictions or that  cover ancillary fees, gift cards for Amazon and other retailers, or large  travel credits of up to $10,000."], "subsections": []}]}, {"section_title": "DOT Conducts Multiple Activities to Monitor Airline Compliance, but Opportunities Exist to Improve These Efforts\u2019 Effectiveness", "paragraphs": ["DOT promotes and monitors airlines\u2019 compliance with consumer  protection requirements and deters noncompliance in five key ways, such  as by reviewing passenger complaint data and taking enforcement action  where it identifies violations. However, we found that DOT could improve  its procedures to provide additional assurances that analysts consistently  code passengers\u2019 complaints and properly identify potential consumer  protection violations, in addition to more fully utilizing data from DOT\u2019s  information systems to inform its compliance program. Further, while DOT  has objectives for each of its five key compliance activities, it lacks  performance measures for three of these objectives. As a result, DOT is  limited in its ability to assess progress toward achieving its goal of  promoting airlines\u2019 compliance with consumer protection requirements or  to identify and make any needed improvements."], "subsections": [{"section_title": "DOT Conducts Five Key Compliance Activities", "paragraphs": ["DOT conducts five key activities to help airlines understand and comply  with consumer protection requirements: (1) providing compliance  assistance to airlines, (2) processing complaints from passengers, (3)  conducting compliance inspections of airlines at headquarters and  airports, (4) conducting airline investigations, and (5) enforcing airlines\u2019  compliance with consumer protection requirements. Collectively, these  key compliance activities are intended to help airlines understand and  meet consumer protection requirements and deter noncompliance.", "Providing compliance information to airlines. DOT attorneys assist  airlines in meeting consumer protection requirements by developing  guidance materials and responding to questions. DOT publishes  these materials\u2014such as topic-specific webpages and frequently  asked questions\u2014on its website. Attorneys and analysts also  informally respond to questions or requests for information from airline  representatives.", "Processing complaints from passengers. As previously stated,  passengers may file complaints with DOT via its website, by mail, or  through DOT\u2019s telephone hotline. DOT analysts use a web  application\u2014the Consumer Complaints Application system\u2014to  receive, code, and track passenger complaints. In 2017, DOT\u2019s 15  analysts processed about 18,000 air travel-related complaints. Initial  processing involves reviewing the information in the complaint,  notifying complainants that their complaint was received, and  transmitting the complaint to the relevant airline for action. Analysts  assign one of 15 high-level complaint category codes (e.g.,  \u201cadvertising\u201d or \u201cdiscrimination\u201d) to each complaint as well as more  specific lower-level complaint codes and codes indicating a potential  violation of consumer protection requirements as necessary. Analysts  initially code a complaint based on the passenger\u2019s perception of  events and not on an assessment of whether the complaint is a  potential violation of consumer protections. According to DOT officials,  when initially coding passenger complaints, analysts generally use  their judgment to code each passenger\u2019s complaint based on the  primary issue. While analysts handle a variety of complaints, DOT  may designate specific analysts to handle more complex complaint  codes, such as disability complaints. On a monthly basis, DOT  provides airlines the opportunity to review the complaints received  and the agency\u2019s categorization of each complaint. At that time,  airlines have an opportunity to challenge DOT\u2019s categorizations.  According to DOT officials, a limited number of complaints are  recoded as a result of this process.", "Conducting compliance inspections of airlines at headquarters  and airports. DOT analysts and attorneys inspect airlines at airline  headquarters and airports to assess their compliance with consumer  protection requirements. From 2008 through 2016, analysts and  attorneys conducted compliance inspections of airlines at the airlines\u2019  headquarters, but DOT has not conducted any such inspections since  September 2016. Beginning in 2015, DOT initiated compliance  inspections of airlines at airports, and DOT continued to conduct  these inspections through 2018. According to DOT officials, they have  exclusively conducted on-site inspections of airlines at airports in  recent years due, in part, to limited resources and budget  unpredictability. However, officials stated that they would consider  conducting more inspections of airlines at airline headquarters in the  future.", "Inspections of airlines at airlines\u2019 headquarters examine customer  service policies and passenger complaints received directly by  airlines, among other things. According to DOT officials, these  inspections represent a \u201cdeep dive\u201d into an airline\u2019s relevant  policies and involve collecting and analyzing data prior to and after  their weeklong visit, as well as interviewing corporate personnel.  DOT analysts and attorneys use the agency\u2019s inspection checklist  to assess compliance with a variety of regulated areas such as the  inclusion of certain information on the airline\u2019s website and the  proper reporting of data to DOT (e.g., mishandled baggage and  on-time performance data). According to DOT data, between 2008  and 2016 DOT completed inspections at 33 U.S. airlines\u2019  headquarters. These 33 inspections identified 23 systemic  violations, resulting in consent orders. Two inspections resulted  in warning letters, and eight did not identify any systemic  violations. The assessed penalty amounts for these inspections  ranged from $40,000 to $1,200,000.", "Inspections of airlines at airports examine staff\u2019s knowledge of  certain consumer protection requirements and the availability and  accuracy of signage and documentation. Such inspections provide  DOT the opportunity to examine multiple airlines in one visit.  According to DOT officials, during these unannounced  inspections, attorneys and analysts focus on assessing  compliance through observation and interviews with randomly  selected airline employees. For example, analysts and attorneys  may confirm the availability of information on compensation for  denied boarding from an airline gate agent or review an airline\u2019s  required signage on compensation for mishandled baggage to  determine whether the information is accurate. According to DOT  data, DOT inspected 12 to 14 U.S. airlines annually\u2014most  multiple times\u2014at 51 domestic airports from 2015 through 2017.  In 2017, DOT conducted inspections at 18 domestic airports that  included inspecting 12 U.S. airlines multiple times. In total, from  2015 through 2017, DOT found violations of various consumer  protection requirements for 13 airlines that DOT addressed  through warning letters. In addition, DOT found violations related  to incorrect (e.g., out-of-date) or missing notices regarding  baggage liability limits or oversales compensation for 8 airlines  that were settled by consent orders with penalties between  $35,000 and $50,000.", "Conducting airline investigations. According to DOT officials,  attorneys determine whether to open an investigation by weighing  numerous factors, including whether they believe an airline is  systematically violating consumer protection requirements. Attorneys  may initiate an investigation based on findings from trends in  passenger complaints, compliance inspections, monitoring of airline  websites and news media, or information supplied by other entities,  including other DOT offices or governmental agencies. According to  DOT officials, after gathering preliminary information, an attorney may  notify the airline of his or her investigation, request information for  further analysis, and then determine whether a violation has occurred  and which enforcement action, if any, is appropriate. Attorneys  document these investigations using DOT\u2019s case management  system. From 2008 to 2017, DOT initiated almost 2,500  investigations as shown in table 2 below.", "Enforcing airlines\u2019 compliance with consumer protection  requirements. When investigations result in a determination that a  violation occurred, DOT may pursue enforcement action against the  airline by, for example; (1) seeking corrective actions through warning  letters; (2) consent orders (which may include fines); or (3)  commencement of a legal action (see table 2). According to DOT  officials, attorneys consider a number of factors in determining the  appropriate enforcement action, including whether there is evidence  of recidivism or systemic misconduct, and the number of passengers  affected. According to DOT data, most investigations result in  administrative closures and findings of no violation.", "According to DOT officials, when attorneys decide to issue a consent  order, they work with their managers to arrive at an initial civil penalty  level and then negotiate with the airline to arrive at a final settlement  agreement and civil penalty amount if applicable. DOT has criteria for  setting civil penalties, but officials describe the process as \u201cmore art than  science\u201d because facts and circumstances always vary. Civil penalties  assessed in consent orders often include three parts: mandatory  penalties, credits, and potential future penalties (see table 3). A  mandatory penalty is the portion of the assessed penalty that must be  paid immediately or in installments over a specified period of time. A  credit is the portion of the assessed penalty that DOT allows an airline to  not pay in order to give credit to the airline for spending funds on  passenger compensation or toward specific service improvements, both  of which must be above and beyond what is required by existing  requirements. A potential future penalty is the portion of the assessed  penalty that the airline will pay if DOT determines that the airline violated  certain requirements during a specified period of time.", "Our review of 76 consent orders for our 12 selected airlines where a  penalty was assessed found that DOT issued penalties totaling  $17,967,000 from 2008 through 2017. Of this, 47 percent ($8,437,700)  comprised mandatory penalties paid by the airline. The remaining  amounts were either credits or potential future penalties. According to  DOT officials, credits are a better way to effect positive change than  merely assessing a mandatory penalty. For example, one recent consent  order included violations of regulations regarding assistance for  passengers with disabilities, among other things. The airline and DOT  agreed to an assessed civil penalty amount of $400,000, $75,000 of  which was credited to the airline for compensation to customers filing disability-related complaints in certain years and for implementation of an  application to provide real-time information and response capabilities to a  wheelchair dispatch and tracking system, among other things. However,  our review found that consent orders do not always ensure future  compliance. Specifically, we found 14 instances where an airline received  multiple consent orders for the same regulatory violation. Three of these  instances\u2014each for different airlines\u2014related to violations of the \u201cfull fare  rule,\u201d and two\u2014also for different airlines\u2014related to airlines\u2019 failure to  adhere to customer service plans."], "subsections": []}, {"section_title": "Improvements to DOT\u2019s Procedures Could Provide Greater Assurance That Passengers\u2019 Complaints Are Consistently Coded and that Consumer Protection Violations are Properly Identified", "paragraphs": ["We found that while DOT has some procedures (i.e., guidance  documents and on-the-job training) in place for coding passenger  complaints, it lacks others that could help ensure that analysts  consistently code complaints and that potential consumer protection  violations are properly identified. Federal internal control standards state  that agencies should design control activities to achieve objectives and  establish and operate monitoring activities to evaluate results. By  designing and assessing control activities, such as procedures and  training, agencies are able to provide management with assurance that  the program achieves its objectives, which in this case involve identifying  instances of airline noncompliance.", "DOT has taken some steps to help analysts code passenger complaints  and properly identify potential violations of consumer protection  requirements:", "Guidance documents. DOT developed two documents to guide  complaint processing and evaluation\u2014a coding sheet that helps  analysts determine how to code complaints and identify potential  consumer protection violations, and a user guide that describes how  analysts should enter complaint information into the web application.  However, we found that these documents may not be clear or specific  enough to ensure that analysts consistently coded complaints or  properly identified potential consumer protection violations. For  example, while the coding sheet includes explanatory notes in 9 of the  15 complaint categories, it does not include definitions and examples  for each of DOT\u2019s 15 complaint categories that would illustrate  appropriate use of a complaint code, a gap that could result in  inconsistent coding.", "On-the-job training. DOT supplements its guidance documents with  on-the-job training, which officials told us helps analysts consistently  code complaints and identify potential consumer protection violations;  however, DOT has not established formal training materials to ensure  all new analysts get the same information. DOT pairs each newly- hired analyst with a senior analyst to be their coach and instruct them  on how to code complaints. According to DOT officials, senior and  supervisory analysts determine when new analysts are able to code  and work independently but continue to monitor their work as needed  and determined by the senior analyst. DOT officials stated that while  the agency does not regularly check the extent to which complaints  are consistently coded, supervisory analysts check analysts\u2019  complaint coding on an as-needed basis throughout the year, as well  as during semi-annual performance reviews. However, DOT does not  provide formal training materials or other guidance to ensure that  senior analysts are conveying the same information during these  informal, on-the-job training sessions.", "DOT officials stated that the combination of the existing guidance,  procedures, and hands-on training provides adequate assurance that  analysts share a common understanding of the complaint categories  resulting in complaints being consistently coded. As a result, DOT officials  have not developed additional guidance documents or established formal  training materials.", "While DOT officials said they believe their procedures and on-the-job  training are sufficient to ensure that complaints are consistently coded  and that potential consumer protection violations are properly identified, a  recent DOT Office of Inspector General (OIG) report found that DOT  analysts did not identify when to code complaints as potential consumer  protection violations for a sample of frequent flyer complaints the agency  reviewed. As a result, in 2016, the DOT OIG recommended that DOT  provide additional training on what constitutes an unfair or deceptive  practice to strengthen oversight of airlines\u2019 frequent flyer programs. In  response, DOT created a special team to process frequent flyer  complaints and developed and provided review team analysts and other  members with training on how to review complaints and identify potential  violations related to airlines\u2019 frequent flyer programs.", "Improving DOT\u2019s procedures that analysts use to code complaints and  identify potential consumer protection violations could provide DOT with  additional assurances that analysts: share a common understanding of  the definitions of all the complaint codes, are coding complaints in each  category consistently, and are identifying potential consumer protection  violations. Consistent coding among analysts is important for a number of  reasons. First, according to DOT officials, passengers use complaint  data\u2014which are publicly reported in DOT\u2019s Air Travel Consumer  Report\u2014to make decisions about air travel, including which airlines to fly.  Second, DOT analysts and attorneys use complaint data to guide their  compliance activities (e.g., selecting airlines for inspections and  investigations, and determining proper enforcement actions)."], "subsections": []}, {"section_title": "DOT Is Missing Opportunities to Use Its Case Management System to Help Inform Its Compliance Program", "paragraphs": ["We found that while DOT\u2019s case management system allows attorneys to  track investigations, it lacks functionality that would allow DOT officials to  more efficiently use data from the system to inform other key activities,  such as making compliance and enforcement decisions. Federal  internal control principles state that agencies should design an entity\u2019s  information system and related control activities to achieve objectives and  respond to risks, which in this case involve using data from DOT\u2019s case  management system to inform its compliance activities.", "Our review of DOT\u2019s case management system identified the following  limitations that affect DOT\u2019s ability to use data from its case management  system to target resources and accurately monitor trends in violations,  compliance activities, and the results of its enforcement actions:", "Key data are optional. Attorneys are not required to complete certain  key data fields in the case management system. For example,  attorneys are not required to document the outcome of an  investigation in the \u201cenforcement action\u201d field. According to officials,  while attorneys do not always complete this field, they often choose to  document the outcome of investigations in the case notes. Even if that  information is captured in the case notes section, attorneys can only  access that information by individually reviewing each case file.", "Data entries are limited. Attorneys cannot record multiple consumer  protection violations for a single investigation in the case management  system. As a result, when multiple violations occur, attorneys must  use their professional judgement to select the primary violation to  record. Our review of the 76 consent orders against selected airlines  resulting from airline investigations identified 24 instances\u2014or more  than 30 percent\u2014where an airline violated multiple consumer  protection regulations. While this is a small subset of all investigations  (2,464) DOT completed across our timeframe, it suggests  investigations could include violations of multiple consumer protection  regulations.", "Data entries do not reflect DOT\u2019s compliance activities. While the  case management system includes a field for attorneys to document  the source of investigations, the field\u2019s response options do not fully  correspond to DOT\u2019s key compliance activities or align to DOT\u2019s  documentation listing the sources of investigations. For example, the  field that tracks the source of an investigation includes an option to  identify passenger complaints as the source but not an inspection of  an airline. Officials told us that, like the outcomes of investigations,  attorneys often document the source of an investigation in the case  notes. However, as mentioned previously, information captured in the  case notes section can only be accessed by individually reviewing  each case file.", "Limited reporting capabilities exist. Attorneys are limited in their  ability to run reports to understand trends across multiple  investigations, according to DOT officials. For example, the case  management system lacks a function to run reports by certain data  fields. Specifically, according to DOT officials, attorneys cannot run  reports by the airline name data field and must instead type in the  airline name to create a report, a process that could produce  unreliable results if an airline\u2019s name is inconsistently entered into the  database.", "According to DOT officials, the case management system\u2019s capabilities  are limited largely because the database was designed as a mechanism  for attorneys to manage ongoing investigations. DOT officials told us that,  while the database has successfully fulfilled that role, officials have  increasingly used data from the case management system to make  enforcement decisions. For example, DOT attorneys use information from  the case management system to inform civil penalty amounts. In addition,  DOT uses data from the case management system to analyze the results  of investigations and inspections, as well as the details of consent orders  in order to target future compliance activities. However, because of  limited reporting capabilities, attorneys and managers must manually  create summary documents from the case management system\u2019s data,  work that could be time consuming and subject to manual errors, and that  does not address the issue that some data are not entered into various  data fields in the first place.", "Recognizing limitations with the case management system, DOT has  taken steps to improve the system. Specifically, starting in June 2018,  DOT began working with a contractor to update the case management  system\u2019s functionality. Among other things, the updates are intended to  improve the system\u2019s ability to run reports, which could enhance DOT\u2019s  ability to examine trends in enforcement actions and penalty amounts,  and allow the system to track investigation milestones. While DOT\u2019s  planned updates may help DOT officials better examine trends in  enforcement actions, the planned updates do not fully address the issues  we identified above, particularly related to collecting complete data.  Collecting complete and comprehensive data in the case management  system could allow DOT to better track trends in its investigations,  inspections, and enforcement actions and to use that information to make  data-driven decisions about future compliance activities and enforcement  actions."], "subsections": []}, {"section_title": "DOT Lacks Performance Measures for Three of Five of Its Compliance Program Objectives", "paragraphs": ["While DOT has five objectives for its key compliance program activities, it  has not established performance measures for three of these objectives.  Objectives communicate what results the agency seeks to achieve, and  performance measures show the progress the agency is making toward  achieving those objectives. Federal internal control standards state that  agencies should define objectives clearly to enable the identification of  risks and define risk tolerances. They further state that management  defines objectives in measurable terms, so that performance toward  those objectives can be assessed. Additionally, the Government  Performance and Results Act of 1993 (GPRA), as enhanced by the  GPRA Modernization Act of 2010, requires agencies to develop objective,  measurable, and quantifiable performance goals and related measures  and to report progress in performance reports in order to promote public  and congressional oversight, as well as to improve agency program  performance.", "In fiscal years 2017 and 2018, DOT developed objectives for each of its  five key compliance activities; however, as illustrated in table 4 below,  DOT does not have performance measures for three of its objectives.", "For the three objectives for which DOT has not established performance  measures, it has documented qualitative measures in internal agency  documents. For example, while DOT has not developed a performance  measure related to enforcing airlines\u2019 compliance with consumer  protection requirements, it summarized enforcement cases in fiscal year  2017 that illustrated actions the agency had taken to achieve this  objective. For instance, one enforcement action included a consent order  against an airline with an assessed penalty of $1.6 million for violating  DOT\u2019s tarmac delay rule. DOT highlighted similar accomplishments for  educating airlines and conducting inspections. For example, DOT issued  guidance to help airlines understand their legal obligations to not  discriminate against passengers in air travel on the basis of race, color,  national origin, religion, sex or ancestry, and the agency highlighted  identifying unlawful practices by multiple airlines during an inspection of  airlines at an airport. While the actions described may provide DOT with  some information on whether it is achieving its objectives, they fall short  of internal control standards that call for federal agencies to define  objectives in measureable terms to assess performance.", "DOT officials stated that they have not developed performance measures  to monitor progress toward achievement of some objectives because it is  difficult to develop quantifiable performance measures. We have  previously reported that officials from other enforcement agencies with  similar objectives found it challenging to develop performance measures  in part due to the reactive nature of enforcement as well as the difficultly  of quantifying deterrence, but were ultimately able to do so. Developing  performance measures for all objectives would allow DOT to more fully  assess the effectiveness of its efforts at promoting airlines\u2019 compliance  with consumer protection requirements. Specifically:", "Providing compliance information to airlines. DOT has not  developed quantifiable performance measures to assess how well  DOT educates airlines about consumer protection requirements. For  example, DOT does not have a performance measure for developing  and disseminating guidance for specific rules or to issue information  on new rules within a certain time frame. Rather, officials told us that  they proactively e-mail stakeholders new consumer protection rules\u2014 rather than relying on stakeholders having to find them on DOT\u2019s  website or Regulations.gov\u2014and if officials receive the same question  repeatedly, about the same requirement they might issue guidance on  the topic. According to DOT officials, these activities help ensure that  stakeholders are complying with relevant consumer protection  requirements. DOT officials did not provide a specific reason for why  they do not have a performance measure related to this objective.  However, without such a measure, DOT cannot be sure that it is  providing timely educational materials to clarify new consumer  protection requirements and assist airlines in complying with these  requirements.", "Conducting compliance inspections of airlines at headquarters  and airports. DOT lacks quantifiable performance measures related  to conducting inspections of airlines at airlines\u2019 headquarters and at  airports. Having such a measure could help ensure that DOT  conducts these activities. Specifically, we found that while DOT  continues to conduct inspections of airlines at airports, it has not  conducted inspections at airlines\u2019 headquarters since 2016, despite  having identified this compliance activity as a key priority in planning  documents. According to DOT officials, they have not conducted  inspections at airlines\u2019 headquarters for two primary reasons. First,  DOT officials said inspections at airlines\u2019 headquarters require  significant staff resources, which DOT has allocated to other  compliance activities in recent years. Second, officials said that no  airline was an obvious choice for an inspection at its headquarters  because DOT had not received a disproportionate number of  complaints against a specific airline to suggest an inspection was  warranted. However, the DOT OIG previously directed the agency to  make these inspections a priority and to allocate resources  accordingly, and DOT officials themselves have said that these  inspections provide incentives for airlines\u2019 continued compliance  regardless of whether one airline has an obvious problem.  Establishing performance measures for conducting both types of  inspections would provide greater assurance that DOT conducts  these activities on a regular basis.", "Moreover, officials told us that inspections at airlines\u2019 headquarters  examine specific consumer protection requirements that are not  examined during inspections at airports, and that inspections at  headquarters help promote compliance. Among other things,  inspections at airlines headquarters allow DOT officials to: (1) review  training manuals and training records; (2) examine a sample of  passengers\u2019 complaint data received directly by the airlines, including  disability and discrimination complaints; and (3) verify that airlines are  current on reporting data such as on mishandled baggage and denied  boardings to DOT. Performance measures related to how often and  under what circumstances compliance inspections should take place  could provide assurance that DOT conducts these activities, and is  not missing opportunities to monitor airlines\u2019 compliance with  consumer protection requirements.", "Enforcing airlines\u2019 compliance with consumer protections. DOT  officials told us that they have not developed performance measures  for enforcement actions because they would not want to have  performance measures that were punitive or reactive by, for example,  requiring the agency to collect a certain penalty amount from airlines.  While we acknowledge the complexity and risks involved in setting  these types of performance measures, as mentioned previously, other  agencies have done so. For example, one of the Federal Trade  Commission\u2019s performance measures is to focus 80 percent of  enforcement actions on consumer complaints. Without a performance  measure for enforcement activities, DOT is missing opportunities to  assess the effectiveness of these activities and make any needed  changes. We have previously reported that performance  measurement gives managers crucial information to identify gaps in  program performance and plan any needed improvements."], "subsections": []}]}, {"section_title": "DOT Has Made Recent Improvements, but Its Passenger Education Efforts Do Not Fully Align with Key Consumer Outreach Practices", "paragraphs": [], "subsections": [{"section_title": "DOT Updated Its Website to More Effectively Educate Passengers on their Rights", "paragraphs": ["DOT\u2019s primary vehicle for educating passengers is its aviation consumer  protection website, which it relaunched in November 2017 (see fig. 3).  According to DOT officials, as part of the relaunch, DOT improved the  navigability and accessibility of the website by, among other things,  arranging material by topic, adding icons for various subjects, and  including a link for the website on DOT\u2019s aviation homepage. The  website now includes summaries of passengers\u2019 rights on a number of  issues including tarmac delays, overbookings, mishandled baggage, and  disability issues, as well as DOT\u2019s rules, guidance issued to airlines and  others, and enforcement orders on key consumer protection issues.  Moreover, the website is now accessible to people with disabilities.  Moving forward, DOT has a number of additional updates planned  through fiscal year 2019. For example, DOT plans to update its website  with information on frequent flyer issues, optional services and fees, and  codeshare agreements by the end of calendar year 2018. According to  DOT officials, while not statutorily required to conduct these education  activities, passenger education is a key effort to ensuring airlines\u2019  compliance.", "DOT also has numerous other efforts to educate passengers on their  rights. For example:", "Establishing resources for passengers. DOT developed Fly  Rights\u2014an online brochure that details how passengers can avoid  common travel problems\u2014in addition to material on unaccompanied  minors, family seating, and a glossary of common air travel terms.  DOT also developed training tools (e.g., brochures, digital content,  and videos) on the rights of passengers with disabilities under the Air  Carrier Access Act of 1986 and its implementing regulations, including  wheelchair assistance at airports and onboard aircraft, traveling with a  service animal, and traveling with assistive devices. While some of  these materials were developed primarily for airline employees and  contractor staff, others were developed to directly assist passengers  with disabilities by providing helpful tips on airlines\u2019 responsibilities,  according to DOT officials.", "Building consumer education information into existing  regulations. Passenger education is built into certain consumer  protection requirements, according to DOT officials. For example,  when an airline involuntarily denies a passenger boarding,  immediately after the denied boarding occurs the airline must provide  a written statement explaining the terms, conditions, and limitations of  denied boarding compensation, and describing the airline\u2019s boarding  priority rules and criteria.", "Responding to complaints. DOT officials said they include  information on an airline\u2019s responsibilities when responding to  passenger complaints. For example, if a passenger submits a  complaint to DOT about not receiving compensation for a delayed or  cancelled flight, the DOT analyst may inform the passenger that  airlines are generally not required to compensate passengers in these  instances."], "subsections": []}, {"section_title": "DOT\u2019s Educational Efforts Fully Align with Five of Nine Key Practices", "paragraphs": ["We compared DOT\u2019s efforts to educate airline passengers about their  rights against key practices for consumer outreach GAO identified in prior  work and found that DOT\u2019s efforts fully align with five of the nine key  practices (see fig. 4). For example, we found that DOT has successfully  identified the goals and objectives of its passenger education program  and identified the appropriate media mix for disseminating its materials.  Similarly, we found that DOT had identified and engaged stakeholders, a  step that, according to DOT officials, allowed them to better tailor  materials.", "However, as summarized in the figure below, we found that DOT only  partially met or did not meet the remaining four key practices.", "For example, DOT\u2019s actions do not align with the key practice to \u201cidentify  resources\u201d and only partially align with the key practice to \u201cdevelop  consistent, clear messages\u201d based on the established budget. According  to a senior DOT official, DOT has not identified budgetary resources  because, while important, DOT\u2019s educational efforts are secondary to the  office\u2019s other efforts. Further, officials said that it has been difficult for the  agency to develop a budget when it has been operating under a  continuing resolution for some part of the fiscal year for the last decade.  However, without identifying short- and long-term budgetary resources  and planning activities accordingly, DOT is missing an opportunity to plan  educational efforts or prioritize needs based on available resources.", "In addition, we found DOT\u2019s efforts only partially align with the key  practice that calls for an agency to research its target audience. While  DOT has solicited some input from stakeholder groups such as those  representing passengers with disabilities, DOT has not solicited feedback  directly from passengers to understand what they know about their rights.  DOT officials said they have not sought such feedback because they  have not identified a method for doing so that would be statistically  generalizable and not cost prohibitive. While costs are always an issue  when considering budget priorities, we have previously reported on other  agencies\u2019 direct consumer outreach efforts that while not statistically  generalizable were nonetheless useful for understanding the effect of the  agencies\u2019 efforts. For example, the Bureau of Consumer Financial  Protection has used focus groups to understand its outreach efforts.  Bureau of Consumer Financial Protection officials previously told GAO  that while obtaining information through such efforts was resource  intensive, it allowed them to assess the performance of their outreach  activities. In another case, an agency surveyed users that access its  website to help it understand whether its outreach efforts were effective.  Obtaining input from passengers directly on what information they want or  what they know about their rights would provide DOT with greater  assurance that educational materials are appropriately tailored to meet a  wide range of passengers\u2019 needs.", "Finally, DOT has not established performance measures to understand  the quality of its passenger education materials (i.e., process measures)  or the effectiveness of its efforts (i.e., outcome measures). DOT officials  said that they receive informal input from stakeholders on the quality of  the materials and track website traffic to understand whether materials  are reaching passengers. Officials said they believe that these  mechanisms provide them with some assurance that the materials are  meeting passengers\u2019 needs and that passengers are accessing and using  the materials. While these mechanisms may provide DOT with some  information on how often materials are accessed online, they do not help  it understand the quality of the materials and measure the success of its  passenger education efforts. For example, while DOT officials track  website traffic, they have not established a related performance measure.  A number of different measures could be used to track processes and  outcomes related to the use of its website, including the time consumers  spend on the website, number of website pages viewed, bounce rate (i.e.,  percentage of visitors who looked at only one page and immediately left  the site), or user\u2019s perception of the experience of their visit.  Establishing such measures would provide DOT with greater assurances  that its educational efforts are appropriately tailored to passengers and  leading to improved understanding of passengers\u2019 rights, including  whether any adjustments are needed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["To enforce consumer protection requirements, such as those preventing  unfair or deceptive practices or unfair methods of competition by airlines,  DOT has conducted almost 2,500 investigations and issued about 400  consent orders over the last decade. However, DOT lacks reasonable  assurance that its approach is achieving the highest level of airlines\u2019  compliance, given its available resources. For example, DOT has not  assessed whether its procedures and training materials help analysts  consistently code passengers\u2019 complaints and identify potential consumer  protection violations. Additionally, DOT has not fully used data from its  case management system to inform its compliance program. Moreover, in  the absence of comprehensive performance measures, DOT lacks a full  understanding of the extent to which it is achieving its goal of airlines\u2019  compliance with consumer protection requirements and whether any  programmatic changes may be warranted. Improvements in these areas  would provide DOT with additional information to target its resources and  improve compliance.", "DOT has taken positive steps to educate passengers about their rights\u2014 through its revamped website and other educational resources.  Nevertheless, DOT could improve its efforts by more fully following key  practices GAO previously identified for conducting consumer education,  such as by:  seeking feedback directly from consumers;  identifying short- and long-term budget resources; and establishing performance measures.", "Taking such actions would provide DOT with greater assurance that its  efforts are meeting passengers\u2019 needs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to DOT:", "The Office of the Secretary should assess its procedures and training  materials for coding airline passengers\u2019 complaints, as appropriate, to  help ensure that passengers\u2019 complaints are consistently coded and  that potential consumer protection violations are properly identified.  (Recommendation 1)", "The Office of the Secretary should assess the feasibility and cost of  updating its airline case management system to address data and  reporting limitations, and to undertake those updates that are cost  effective and feasible. (Recommendation 2)", "The Office of the Secretary should establish performance measures  for each of its objectives for its five key airline-compliance activities.  (Recommendation 3)", "The Office of the Secretary should capture feedback directly from  airline passengers or identify other mechanisms to capture  passengers\u2019 perspectives to inform DOT\u2019s education efforts.  (Recommendation 4)", "The Office of the Secretary should identify available short- and long- term budgetary resources for DOT\u2019s airline-passenger education  efforts. (Recommendation 5)", "The Office of the Secretary should develop performance measures for  DOT\u2019s efforts to educate airline passengers. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOT for review and comment.  DOT  provided written comments, which are reprinted in appendix IV, and  technical comments, which we incorporated as appropriate. DOT  concurred with our recommendations and officials said that they had  begun taking steps to address the recommendations.", "We are sending copies of this report to the appropriate congressional  committees, DOT, and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at 202-512-2834 or vonaha@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Studies on the Effect of Market Structure on Elements of Airlines\u2019 Customer Service", "paragraphs": ["Since its deregulation in 1978, numerous studies have examined the  effects of competition in the airline industry. Most have examined the link  between competition and pricing on specific airline routes\u2014i.e., airline  service between two airports or cities. These routes are viewed as the  relevant markets for competitive analysis because they reflect the  products that consumers purchase and for which airlines set prices.  These studies have examined the pricing effect: (1) of route competition,  (2) of the extent of an airline\u2019s presence at airports, and (3) of mergers in  the evolving airline industry. Studies have generally shown (1) that prices  tend to be higher when fewer airlines serve a city-pair market and (2) that  airline dominance at airports can be associated with higher market  prices. Other studies have also shown that the presence of a low-cost  airline on a route\u2014or even the threat of entry by a low-cost airline\u2014is  associated with lower fares.", "In addition, some studies have examined whether there is a link between  the level of competition in city-pair markets and certain elements of  customer service quality, such as the incidence and length of delays,  cancellations, lost baggage, flight frequency, and denied boarding. While  competition generally lowers prices, the effect of competition on the  quality of service is more ambiguous. On the one hand, firms may  compete on quality of service; in this instance, competition leads to higher  service, but it is also possible that a firm facing less competition may  invest in quality of service to more fully differentiate among passengers. A  variety of factors could influence the association between competition and  customer service. These factors include, for example:  the cost of providing higher levels of quality,  the extent to which consumers have full knowledge of quality,  the extent to which consumers change future purchasing decisions  based on quality, and  the value consumers place on product quality relative to product  price.", "In the context of the airline industry, airline investments that underlie the  provision of consumer services are not necessarily route-specific as they  more likely relate to investments airlines make at airports, or at the overall  airline level. For example, airlines make decisions about the extent to  which resources\u2014such as the number of aircraft and customer service  personnel\u2014are available at a given airport. Moreover, policies regarding  training of gate and customer service personnel likely take place at the  corporate level as do decisions about the configuration of aircraft, which  may have related quality of service factors. Also, because airlines provide  a service that involves a large network, some elements of quality may  relate to the broad decisions regarding the management of that network.  For example, if a flight is delayed on one route, it may affect the  timeliness of several downstream flights due to the late arrival of the  aircraft, pilots, and flight attendants, and airlines may take these  networked effects into consideration in ways that could affect customer  service. Still, some decisions that airlines make do have route-specific  consequences that could influence customer service, such as decisions  on flight scheduling, and which flights to cancel or delay in the face of  operational disruptions.", "Some empirical airline literature on the impact of competition on certain  quality factors predates several airline mergers, and some was conducted  more recently. In the earlier literature, several studies found a linkage  between the competitiveness of airline markets and customer service  outcomes such as on-time performance, cancellations, mishandled  baggage and flight frequency. These studies generally found that more  competitive markets are associated with an improvement in one or more  of these aspects of customer service. For example, one study found a  small increase in the number of cancelled flights when a route was served  by only one airline, and another found that such routes had, on average,  slightly longer delays. However, the extent of these improvements has  typically been small, such as an association with a small reduction in  cancellations or a reduced average delay of just a few minutes. On the  other hand, some studies found that delays and cancellations are less  common when they involve airlines\u2019 hub airports\u2014especially when a flight  is destined for an airline\u2019s hub airport.", "In order to look more closely at the relationship between market  competition and airline customer service in recent years, we reviewed  several more current studies. Specifically, because the nature of the  airline industry\u2014particularly its competitive landscape\u2014transformed after the 2007\u20132009 recession, we selected studies that included at least some  of the study period post-recession. We identified six studies that met our  criteria for inclusion, each of which examined some aspect of the link  between airline market competition and one or more element of customer  service.", "As with the earlier studies, these more recent studies generally found  greater competition was associated with some improved customer  service. Specifically, some studies found that flight delays were, on  average, a little longer, and flight cancellations more likely when markets  were more highly concentrated or in the aftermath of an airline merger.  For example, one study found that a particular level of increased route  concentration was associated with about a 4-minute average increase in  flight delay. Another study found a similar effect on delay and also found  a slightly higher incidence of cancellations on more concentrated routes.  These increases in delays and cancellations were generally small. In the  case of mergers, the findings are somewhat mixed. One study we  reviewed found increased cancellations and more delays after mergers,  but the effects tended to diminish over time, while another study did not  find an effect of mergers on these measures of customer service. Another  study found that the effect of mergers on consumer welfare\u2014as  measured by both price and flight frequency\u2014may be idiosyncratic to the  specific airlines involved in the merger and the state of competition in the  broader market at the time of the merger. Finally, a GAO study that  examined the effect of the tarmac delay rule on flight cancellations found  that flights on routes where either the originating or destination airport  was a hub airport for the airline had a lower likelihood of cancellation,  possibly indicating a focus by airlines on maintaining smooth operations  as much as possible. Generally, the differing findings on the extent or  existence of quality impacts could be the result of varied methodologies in  these analyses, including differing model specifications, variable  measurements, and analysis time frames.", "Finally, while these studies provide insight into the link between  competition and certain aspects of service quality, some elements of  airline\u2019s service quality are harder to explore in this way. For example,  there are no data that would be readily usable in empirical analyses on  the effect of competition on certain quality measures such as the extent  airline websites are user-friendly, the ability to be rebooked on a different  flight when a flight is missed or was cancelled, the helpfulness of airline  staff, and consumer satisfaction with airline cabin amenities, such as seat  comfort and availability and quality of food for sale. Moreover, while  studies examine effects of competition at the route level, the national  airline industry has become more concentrated in the past decade due to  a series of bankruptcies and mergers. The reduced competition at this  broad level may also have implications for customer service, such as the  level of service provided at airports and policies on flight cancellations  and rebooking."], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives for this report were to: (1) describe trends in DOT data on  airline service from 2008 through 2017 and airlines\u2019 actions to improve  service; (2) assess how effectively DOT ensures airlines\u2019 compliance with  consumer protection requirements; and (3) assess the extent to which  DOT\u2019s airline passenger education efforts align with key practices for  consumer outreach. We also examined the relationship between airline  competition and customer service (app. I).", "The scope of this report focused on issues regarding consumer  protections for airline passengers (i.e., \u201cconsumer protections\u201d) overseen  by DOT. We focused our analysis on the time period 2008 through 2017  unless otherwise noted because it encompassed key additions or  amendments to consumer protection regulations, including Enhancing  Airline Passenger Protections I, II, and III. For each of our objectives, we  reviewed documents and data from DOT and airlines, to the extent  possible. We also conducted multiple interviews with officials from DOT\u2019s  Office of the Assistant General Counsel for Aviation Enforcement and  Proceedings and its Aviation Consumer Protection Division, in addition to  a non-generalizable sample of 25 stakeholders\u2014including  representatives from 11 airlines, 3 market research organizations, 3  aviation academics, and 8 industry associations representing airlines,  airline staff, and airline passengers.", "To describe trends in airline service, we analyzed DOT operational data  and passenger complaints submitted to DOT from 2008 through 2017.  Specifically, we analyzed DOT\u2019s data on late flights; cancellations;  diverted flights (i.e., flights operated from the scheduled origin point to a  point other than the scheduled destination point in the airline\u2019s published  schedule); voluntary and involuntary denied boardings; and mishandled  baggage to describe airlines\u2019 operational performance. From 2008  through 2017, DOT required airlines with at least one percent of domestic  scheduled-passenger revenues in the most recently reported 12-month  period to report this data for reportable flights\u2014we refer to these airlines  as \u201creporting airlines\u201d throughout our report. We also obtained data for  passenger complaints submitted to DOT and analyzed the data to identify  the frequency, types, and changes in complaints over time. We limited  our analysis of passenger complaint data to \u201cselected\u201d airlines that were  required to report operational data to DOT in 2017\u2014 the most recent year  of available data when we started our review\u2014because they were the 12  largest U.S. domestic passenger airlines in 2016. To assess the  reliability of the operational data and complaints, we conducted electronic  testing of the data to identify any outliers, compared our results to DOT  published data, and interviewed DOT officials about how the data were  collected and used. Because our interviews with DOT officials indicated  that no changes had been made to the processes used to collect and  maintain both data sources, we also relied on our past data reliability  assessments from recently issued GAO reports, assessments that found  that both data sources are sufficiently reliable for providing information on  trends over time. Therefore, we determined that the data were  sufficiently reliable for our purposes, including to present high-level trends  in service over time. Moreover, we also reviewed analyses from three  market research organizations that we identified during the course of our  work\u2014 J.D. Power and Associates, the American Customer Satisfaction  Index, and the Airline Quality Rankings\u2014to provide additional information  on airline service quality. We interviewed the authors to understand how  they conducted the analyses; however, we did not evaluate the  underlying methodologies. We determined that the results were reliable  enough to report their high-level trends on passenger satisfaction.", "To understand airlines\u2019 actions to enhance service, we interviewed or  received written responses from 11 of 12 selected airlines. We  conducted interviews with airline representatives using a semi-structured  interview instrument, which included questions pertaining to business  practices aimed at improving service from 2013 through 2017, among  other things. We conducted three pretests with one airline and two  industry groups. Representatives from each group provided technical  comments, which we incorporated, as appropriate. We limited our  timeframe to the most recent 5 years because business practices in the  industry evolve quickly and we wanted to highlight the most relevant and  recent practices. During interviews, we asked selected airline  representatives whether these practices were documented in contracts of  carriage or other customer commitment documents and reviewed those  documents as appropriate. During these interviews, we also asked  selected airline representatives if they considered certain aspects of their  passenger complaint data they receive directly from passengers to be  proprietary, and all airline representatives said the data were proprietary.  To inform interviews with selected airlines representatives and to  understand recent airlines business practices aimed at improving service  for passengers, we also conducted a literature search of trade  publications and industry reports from 2013 through 2017. Where  relevant, we used information from this literature search as additional  context and as a basis for our questions to airline representatives  regarding specific business practices.", "To describe how DOT ensures airlines\u2019 compliance with consumer  protection requirements, we reviewed DOT\u2019s documentation of the  policies, procedures, and guidance that describe its five key compliance  activities. In addition, we conducted multiple interviews with staff from  DOT\u2019s Office of the Assistant General Counsel for Aviation Enforcement  and Proceedings and its Aviation Consumer Protection Division. To  identify trends in DOT\u2019s key compliance activities from 2008 through  2017, we analyzed reports and data DOT provided on the number and  results of its airline inspections, investigations, enforcement actions, and  civil penalties\u2014including data from DOT\u2019s case management system. To  assess the reliability of the data, we interviewed DOT officials to  understand how the data are collected and used and the steps DOT takes  to ensure the data are accurate, complete, and reliable. We determined  that the data were reliable enough to summarize trends in DOT\u2019s  investigation and enforcement actions from 2008 through 2017.", "To determine how effectively DOT implements its compliance program,  we assessed selected key compliance activities\u2014i.e., coding passenger  complaints, using the case management system to inform compliance  activities, and developing objectives and related performance  measures\u2014against selected principles of Standards of Internal Control in  the Federal Government related to control activities. We also  summarized other leading practices for developing performance  measures, in addition to our past work, which has identified other  agencies with successful performance measures.", "To understand the extent to which passenger education materials  developed by DOT align with key practices for consumer outreach, we  reviewed DOT\u2019s educational materials and assessed them against nine  key practices we previously developed for consumer education  planning. In that prior work, GAO convened an expert panel of 14 senior  management-level experts in strategic communications to identify the key  practices of a consumer education campaign. We believe the key  practices the expert panel identified in 2007 remain relevant today since  the practices are not time-sensitive. In addition to reviewing relevant  materials, we also conducted interviews with DOT officials to understand  their outreach efforts. During these interviews, DOT officials agreed that  these criteria were relevant to conducting consumer outreach. For a  complete list of the criteria and corresponding definitions, see appendix  III.", "To understand the impact of airline competition on customer service  provided to passengers we conducted a literature search of pertinent  studies in scholarly, peer-reviewed journals, conference papers, and  government publications. We restricted our review to results published  between January 1, 2012, and December 31, 2017, and our search  yielded 57 academic results and 10 government studies. Of these results,  we reviewed each abstract to determine whether it was relevant to our  objective based on criteria we established. For example, we limited  results to those looking at the U.S. airline system and eliminated results  that focused solely on airfares. In total, we found that 5 academic studies  and 1 government study were ultimately relevant and sufficiently reliable  for our report. Moreover, we also summarized 6 additional studies that we  identified by reviewing the bibliographies of our selected studies or that  were identified as key pieces of research in the field to summarize prior  work in this area.", "We conducted this performance audit from September 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Key Practices for Conducting Consumer Outreach", "paragraphs": ["GAO previously identified nine key practices that are important to  conducting a consumer education campaign (see table 5)."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Andrew Von Ah, (202) 512-2834 or vonaha@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, other key contributors to this  report were Jonathan Carver, Assistant Director; Melissa Swearingen,  Analyst-in-Charge; Amy Abramowitz; Lacey Coppage; Caitlin Cusati;  Delwen Jones; Kelsey Kreider; Ethan Levy; Gail Marnik; SaraAnn  Moessbauer; Malika Rice; Minette Richardson; Pamela Snedden; and  Laurel Voloder."], "subsections": []}]}], "fastfact": ["Remember when a passenger was forcibly removed from an overbooked flight? Recent customer service issues like this have prompted Congress to question if the Department of Transportation is doing enough to protect passengers.", "We summarized airline consumer protections and trends in DOT service data (like on-time flights) and passenger complaints. We found that while service generally improved in recent years, complaints increased.", "We also found DOT could improve its airline oversight and passenger education efforts. We made 6 recommendations, including that DOT capture feedback from passengers directly to inform its education efforts."]}
{"id": "GAO-18-394", "url": "https://www.gao.gov/products/GAO-18-394", "title": "Lead Paint in Housing: HUD Should Strengthen Grant Processes, Compliance Monitoring, and Performance Assessment", "published_date": "2018-06-19T00:00:00", "released_date": "2018-06-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Lead paint in housing is the most common source of lead exposure for U.S. children. HUD awards grants to state and local governments to reduce lead paint hazards in housing and oversees compliance with lead paint regulations in its rental assistance programs. The 2017 Consolidated Appropriations Act, Joint Explanatory Statement, includes a provision that GAO review HUD\u2019s efforts to address lead paint hazards. This report examines HUD\u2019s efforts to (1) incorporate statutory requirements and other relevant federal standards in its lead grant programs, (2) monitor and enforce compliance with lead paint regulations in its rental assistance programs, (3) adopt federal health guidelines and environmental standards for its lead grant and rental assistance programs, and (4) measure and report on the performance of its lead efforts. GAO reviewed HUD documents and data related to its grant programs, compliance efforts, performance measures, and reporting. GAO also interviewed HUD staff and some grantees."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Housing and Urban Development\u2019s (HUD) lead grant and rental assistance programs have taken steps to address lead paint hazards, but opportunities exist for improvement. For example, in 2016, HUD began using new tools to monitor how public housing agencies comply with lead paint regulations. However, HUD could further improve efforts in the following areas:", "Lead grant programs. While its recent grant award processes incorporate statutory requirements on applicant eligibility and selection criteria, HUD has not fully documented or evaluated these processes. For example, HUD\u2019s guidance is not sufficiently detailed to ensure consistent and appropriate grant award decisions. Better documentation and evaluation of HUD\u2019s grant program processes could help ensure that lead grants reach areas at risk of lead paint hazards. Further, HUD has not developed specific time frames for using available local-level data to better identify areas of the country at risk for lead paint hazards, which could help HUD target its limited resources.", "Oversight. HUD does not have a plan to mitigate and address risks related to noncompliance with lead paint regulations by public housing agencies. We identified several limitations with HUD\u2019s monitoring efforts, including reliance on public housing agencies\u2019 self-certifying compliance with lead paint regulations and challenges identifying children with elevated blood lead levels. Additionally, HUD lacks detailed procedures for addressing noncompliance consistently and in a timely manner. Developing a plan and detailed procedures to address noncompliance with lead paint regulations could strengthen HUD\u2019s oversight of public housing agencies.", "Inspections. The lead inspection standard for the Housing Choice Voucher program is less strict than that of the public housing program. By requesting and obtaining statutory authority to amend the standard for the voucher program, HUD would be positioned to take steps to better protect children in voucher units from lead exposure as indicated by analysis of benefits and costs.", "Performance assessment and reporting. HUD lacks comprehensive goals and performance measures for its lead reduction efforts. In addition, it has not complied with annual statutory reporting requirements, last reporting as required on its lead efforts in 1997. Without better performance assessment and reporting, HUD cannot fully assess the effectiveness of its lead efforts."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes nine recommendations to HUD including to improve lead grant program and compliance monitoring processes, request authority to amend its lead inspection standard in the voucher program, and take additional steps to report on progress. HUD generally agreed with eight of the recommendations. HUD disagreed that it should request authority to use a specific, stricter inspection standard. GAO revised this recommendation to allow HUD greater flexibility to amend its current inspection standard as indicated by analysis of the benefits and costs."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Centers for Disease Control and Prevention (CDC) have estimated  that approximately half a million U.S. children (ages 1 to 5) have blood  lead levels higher than most children\u2019s levels. According to CDC, no safe  level of lead in the blood has been identified. When absorbed into the  body, especially in young children, lead can damage the brain and  nervous system, slow development and growth, and cause learning or  behavioral problems. According to CDC, lead-based paint hazards, such  as dust containing lead and chips from deteriorated lead-based paint, are  the most common source of lead exposure for U.S. children. Young  children are at greater risk of being exposed to lead because they often  crawl on the floor, have frequent hand-to-mouth activity, and intentionally  ingest nonfood items. Also, exposure to lead impacts young children  more because of their small body size and weight compared to adults.", "The Department of Housing and Urban Development\u2019s (HUD) most  recent survey of housing conditions estimated that roughly 35 percent of  U.S. homes (37 million) contained some lead-based paint. Additionally,  the survey estimated that 93 percent of the homes with lead paint were  built before 1978\u2013\u2013the year the United States banned lead-containing  paint used in housing. HUD has certain statutory responsibilities related  to reducing lead exposure in housing, which include, awarding grants to  states and local governments to help address lead paint hazards in  private, low-income housing and promulgating lead paint regulations for  HUD\u2019s rental assistance programs.", "The 2017 Consolidated Appropriations Act, Joint Explanatory Statement,  Division K, includes a provision for GAO to report on HUD\u2019s policies,  procedures, and processes for addressing lead paint hazards in housing.  This report examines HUD\u2019s efforts to (1) incorporate statutory  requirements and other relevant federal standards in its lead grant  programs; (2) monitor and enforce compliance with lead paint regulations  for its rental assistance programs; (3) adopt federal health guidelines and  environmental standards for lead paint hazards in its lead grant and rental  assistance programs; and (4) measure and report on its performance  related to making housing lead-safe. The provision also directs GAO to  review opportunities to improve coordination and leveraging of public and  private (i.e., nonfederal) sources of funds to reduce federal costs  associated with identifying and remediating lead paint hazards.  Information about nonfederal sources of funds used by grantees as part  of HUD\u2019s lead grant programs is included in appendix I of this report.", "In this report, we examine lead paint hazards in housing and we focus on  HUD\u2019s lead hazard control grant programs and its two largest rental  assistance programs that serve the most families with children: the  Housing Choice Voucher (voucher) and public housing programs.", "To address the first objective, we compared HUD\u2019s lead grant programs\u2019  processes with statutory requirements and federal internal control  standards. For example, we reviewed HUD\u2019s annual notices of funding  availability to identify the criteria HUD has used to evaluate grant  applications and determine the extent to which the 2017 notices  incorporated statutory requirements. We also compared HUD\u2019s lead grant  program processes to the Office of Management and Budget (OMB)  requirements for competitively awarded grants. To review the extent to  which grant awards have gone to counties with indicators of lead paint  hazard risk, we analyzed HUD\u2019s grant data from 2013 through 2017 and  county-level U.S. Census Bureau data on the age of housing and poverty  level of individuals in the United States. HUD\u2019s grant data were not  available electronically before 2013, when the agency started using  grants management software. We determined the HUD and Census data  were sufficiently reliable for our purposes\u2013\u2013to identify the locations and  grant award amounts for HUD grantees and to identify counties with older  housing and individuals living in poverty. Additionally, we interviewed  HUD staff about the agency\u2019s grant application and award processes. To  obtain information and perspectives from HUD grantees, we also  reviewed a nongeneralizable sample of 20 grant applications and  interviewed 10 of the 20 grantees. We conducted site visits to 5 of the 10  grantees we interviewed. We selected these grantees to achieve variation  in geographic locations and the type of HUD grants they had previously  received, among other things.", "To address the second objective, we reviewed relevant laws and HUD\u2019s  lead paint regulations and guidance and internal memorandums related to  its efforts to monitor and enforce compliance with these regulations. We  reviewed HUD databases used to monitor compliance and observed HUD  staff demonstrating these databases. We reviewed HUD documentation  of instances of potential noncompliance by public housing agencies  (PHA) with lead paint regulations and enforcement actions HUD has  taken. We compared HUD\u2019s regulatory compliance monitoring and  enforcement approach to federal internal control standards. We  interviewed HUD staff about internal procedures for monitoring and  enforcing compliance of lead paint regulations. To address the third  objective, we compared HUD\u2019s programs and regulations with relevant  CDC health guidelines and Environmental Protection Agency (EPA)  standards. We also interviewed staff from CDC and EPA to obtain  information about their health guidelines and environmental standards  related to lead.", "To address the fourth objective, we reviewed HUD documentation related  to performance goals, measures, program evaluations, and reporting  requirements, including HUD\u2019s recent annual performance reports. We  compared HUD\u2019s practices against leading practices for assessing  program performance and federal internal control standards. Finally, we  interviewed HUD staff to understand performance goals, measures, and  reporting HUD has used to assess its lead efforts. Appendix II contains a  more detailed description of our objectives, scope, and methodology.", "We conducted this performance audit from March 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Agencies and Key Regulations Related to Lead Paint Hazards", "paragraphs": ["While HUD has primary responsibility for addressing lead paint hazards in  federally-assisted housing, EPA also has responsibilities related to setting  federal lead standards for housing. EPA sets federal standards for lead  hazards in paint, soil, and dust. Additionally, EPA regulates the training  and certification of workers who remediate lead paint hazards. CDC  sets a health guideline known as the \u201cblood lead reference value\u201d to  identify children exposed to more lead than most other children. As of  2012, CDC began using a blood lead reference value of 5 micrograms of  lead per deciliter of blood. For children whose blood lead level is at or  above CDC\u2019s blood lead reference value, health care providers and public  health agencies can identify those children who may benefit the most  from early intervention. CDC\u2019s blood lead reference value is based on the  97.5th percentile of the blood lead distribution in U.S. children (ages 1 to  5), using data from the National Health and Nutrition Examination  Survey. Children with blood lead levels above CDC\u2019s blood lead  reference value have blood lead levels in the highest 2.5 percent of all  U.S. children (ages 1 to 5). HUD, EPA, and the Department of Health and  Human Services (HHS) are members of the President\u2019s Task Force on  Environmental Health Risks and Safety Risks to Children. HUD co- chairs the lead subcommittee of this task force with EPA and HHS. The  task force published the last national lead strategy in 2000.", "The primary federal legislation to address lead paint hazards and the  related requirements for HUD is the Residential Lead-Based Paint Hazard  Reduction Act (Title X of the Housing and Community Development Act of  1992). We refer to this law as Title X throughout this report. Title X  required HUD to, among other things, promulgate lead paint regulations,  implement the lead hazard control grant programs, and conduct research  and reporting, as discussed throughout this report.", "The two key regulations that HUD has issued under Title X are the Lead  Disclosure Rule and the Lead Safe Housing Rule:", "Lead Disclosure Rule. In 1996, HUD and EPA jointly issued the  Lead Disclosure Rule. The rule applies to most housing built before  1978 and requires sellers and lessors to disclose any known  information, available records, and reports on the presence of lead  paint and lead paint hazards and provide an EPA-approved  information pamphlet prior to sale or lease.", "Lead Safe Housing Rule. In 1999, HUD first issued the Lead Safe  Housing Rule, which applies only to housing receiving federal  assistance or federally-owned housing being sold. The rule  established procedures for evaluating whether a lead paint hazard  exists, controlling or eliminating the hazard, and notifying occupants of  any lead paint hazards identified and related remediation efforts. The  rule established an \u201celevated blood lead level\u201d as a threshold that  requires landlords and PHAs to take certain actions if a child\u2019s blood  test shows lead levels meeting or exceeding this threshold. In 2017,  HUD amended the rule to align its definition of an \u201celevated blood lead  level\u201d with CDC\u2019s blood lead reference value. This change lowered  the threshold that generally required landlords and PHAs to act from  20 micrograms to 5 micrograms of lead per deciliter of blood.  According to the rule, when a child under age 6 living in HUD-assisted  housing has an elevated blood lead level, the housing provider must  take several steps. These generally include testing the home and  other potential sources of the child\u2019s lead exposure within 15 days,  ensuring that identified lead paint hazards are addressed within 30  days of receiving a report detailing the results of that testing, and  reporting the case to HUD."], "subsections": []}, {"section_title": "HUD Offices Involved in Lead Efforts and HUD\u2019s Rental Assistance Programs", "paragraphs": ["Office of Lead Hazard Control and Healthy Homes (Lead Office).  HUD\u2019s Lead Office is primarily responsible for administering HUD\u2019s two  lead hazard control grant programs, providing guidance on HUD\u2019s lead  paint regulations, and tracking HUD\u2019s efforts to make housing lead-safe.  The Lead Office collaborates with HUD program offices on its oversight  and enforcement of lead paint regulations. For instance, the Lead Office  issues guidance, responds to questions about requirements of lead paint  regulations, and provides training and technical assistance to HUD  program staff, PHA staff, and property owners. The Lead Office\u2019s  oversight efforts also include maintaining email and telephone hotlines to  receive complaints and tips from tenants or homeowners, among others,  as they pertain to lead paint regulations. Additionally, the Lead Office, in  collaboration with EPA, contributes to the operation of the National Lead  Information Center\u2013\u2013a resource that provides the general public and  professionals with information about lead, lead hazards, and their  prevention.", "Office of Public and Indian Housing (PIH). HUD\u2019s PIH oversees and  enforces HUD\u2019s lead paint regulations for the rental assistance  programs. As discussed earlier, this report focuses on the two largest  rental assistance programs serving the most families with children\u2013\u2013the  Housing Choice Voucher and public housing programs.", "Housing Choice Voucher program. In the voucher program, eligible  families and individuals are given vouchers as rental assistance to  use in the private housing market. Generally, eligible families with  vouchers live in the housing of their choice in the private market. The  voucher generally pays the difference between the family\u2019s  contribution toward rent and the actual rent for the unit. Vouchers  are portable; once a family receives one, it can take the voucher and  move to other areas where the voucher program is administered. In  2017, there were roughly 2.5 million vouchers available.", "Public housing program. Public housing is reduced-rent  developments owned and operated by the local PHA and subsidized  by the federal government. PHAs receive several streams of funding  from HUD to help make up the difference between what tenants pay  in rent and what it costs to maintain public housing. For example,  PHAs receive operating and capital funds through a formula allocation  process. PHAs use operating funds to pay for management,  administration, and day-to-day costs of running a housing  development. Capital funds are used for modernization needs, such  as replacing roofs or remediating lead paint hazards. According to  HUD rules, generally families that are income-eligible to live in public  housing pay 30 percent of their adjusted income toward rent. In 2017,  there were roughly 1 million public housing units available.", "For both of these rental assistance programs, the Office of Field  Operations (OFO) within PIH oversees PHAs\u2019 compliance with lead paint  regulations, in conjunction with HUD field office staff. The office has a  risk-based approach to overseeing PHAs and performs quarterly risk  assessments. Also within PIH, staff from the Real Estate Assessment  Center are responsible for inspecting the physical condition of public  housing properties.", "Office of Policy Development and Research (PD&R). HUD\u2019s PD&R is  the primary office responsible for data analysis, research, and program  evaluations to inform the development and implementation of programs  and policies across HUD offices."], "subsections": []}, {"section_title": "HUD\u2019s Lead Hazard Control Grant Programs", "paragraphs": ["of the total grant amount, while the Lead Hazard Reduction  Demonstration grant program has required at least a 25 percent match.", "For fiscal years 2013\u20132017, HUD awarded $527 million for its lead  hazard control grants, which included 186 grants to state and local  jurisdictions (see fig. 1). In these 5 years, about 40 percent of grants  awarded went to jurisdictions in the Northeast and 31 percent to  jurisdictions in the Midwest\u2013\u2013regions of the country known to have a high  prevalence of lead paint hazards.", "Additionally, in these 5 years, 90 percent of grant awards went to  grantees at the local jurisdiction level (cities, counties, and the District of  Columbia). The other 10 percent of grant awards went to state  governments. During this time period, HUD awarded the most grants to  jurisdictions in Ohio (17 grants), Massachusetts and New York (15 grants  each), and Connecticut (14 grants)."], "subsections": []}]}, {"section_title": "HUD Has Incorporated Relevant Requirements for Awarding Recent Lead Grants, but Could Better Document and Evaluate Grant Processes", "paragraphs": [], "subsections": [{"section_title": "Lead Grant Programs Have Incorporated Statutory Requirements for Eligibility and Selection", "paragraphs": ["HUD\u2019s Lead-Based Paint Hazard Control grant and the Lead Hazard  Reduction Demonstration grant programs have incorporated Title X  statutory requirements through recent annual funding notices and their  grant processes. Title X contains applicant eligibility requirements and  selection criteria HUD should use to award lead grants.", "To be eligible to receive a grant, applicants need to be a state or local jurisdiction,  contribute matching funds to supplement the grant award, have an approved comprehensive affordable housing strategy, and have a certified lead abatement program (if the applicant is a state  government).", "HUD has incorporated these eligibility requirements in its grant programs\u2019  2017 funding notices, which require applicants to demonstrate that they  meet these requirements when they apply for a lead grant. According to  the 2017 funding notices, applicants must detail the sources and amounts  of their matching contributions in their applications. Similarly, applicants  must submit a form certifying that the proposed grant activities are  consistent with their local affordable housing strategy. HUD\u2019s 2017  funding notices state that if applicants did not meet these eligibility  requirements, HUD would not consider their applications.", "Additionally, Title X requires HUD to award lead grants according to the  following applicant selection criteria:  the extent to which an applicant\u2019s proposed activities will reduce the  risk of lead poisoning for children under the age of 6;  the degree of severity and extent of lead paint hazards in the  applicant\u2019s jurisdiction;  the applicant\u2019s ability to supplement the grant award with state, local,  or private funds;  the applicant\u2019s ability to carry out the proposed grant activities; and other factors determined by the HUD Secretary to ensure that the  grants are used effectively.", "In its 2017 funding notices, HUD incorporated the Title X applicant  selection criteria through five scoring factors that it used to assess lead  grant applications. HUD allocated a certain number of points to each  scoring factor. Applicants are required to develop their grant proposals in  response to the scoring factors. When reviewing applications, HUD staff  evaluated an applicant\u2019s response to the factors and assigned points for  each factor. See table 1 for a description of the 2017 lead grant programs\u2019  scoring factors and points.", "As shown in table 1, HUD awarded the most points (46 out of 100) to the  \u201csoundness of approach\u201d scoring factor, according to HUD\u2019s 2017 funding  notices. Through this factor, HUD incorporated Title X selection criteria on  an applicant\u2019s ability to carry out the proposed grant activities and  supplement a grant award with state, local, or private funds. For example,  HUD\u2019s 2017 funding notices required applicants to describe their detailed  plans to implement grant activities, including how the applicants will  establish partnerships to make housing lead-safe. Specifically, HUD  began awarding 2 of the 100 points to applicants who demonstrated  partnerships with local public health agencies to identify families with  children for enrollment in the lead grant programs. Additionally, HUD  asked applicants to identify partners that can help provide assistance to  complete the lead hazard control work for high-cost housing units.  Furthermore, HUD required applicants to identify any nonfederal funding,  including funding from the applicants\u2019 partners. Appendix I includes  examples of state, local, and nongovernmental funds that selected  grantees planned to use to supplement their lead grants."], "subsections": []}, {"section_title": "HUD Has Taken Actions Consistent with OMB Requirements but Has Not Fully Documented or Evaluated Its Lead Grant Programs\u2019 Processes", "paragraphs": ["In its lead grant programs, HUD has taken actions that were consistent  with OMB\u2019s requirements for competitively awarded grants. OMB  generally requires federal agencies to: (1) establish a merit-review  process for competitive grants that includes the criteria and process to  evaluate applications; and (2) develop a framework to assess the risks  posed by applicants for competitive grants, among other things.  Through a merit-review process, an agency establishes and applies  criteria to evaluate the merit of competitive grant applications. Such a  process helps to ensure that the agency reviews grant applications in a  fair, competitive, and transparent manner. Consistent with the OMB  requirement to establish a merit review process, HUD has issued annual  funding notices that communicate clear and explicit evaluative criteria. In  addition, HUD has established processes for reviewing and scoring grant  applications using these evaluative criteria, and selects grant recipients  based on the review scores (see fig. 2). For example, applicants that  score at or above 75 points are qualified to receive awards from HUD.  Also, HUD awards funds beginning with the highest scoring applicant and  proceeds by awarding funds to applicants in a descending order until  funds are exhausted. Furthermore, consistent with the OMB requirement  to develop a framework to assess applicant risks, HUD has developed a  framework to assess the risk posed by lead grant applicants by, among  other things, deeming ineligible those applicants with past performance  deficiencies or those that do not have a financial management system  that meets federal standards.", "However, HUD has not fully documented or evaluated its lead grant  processes in reviewing and scoring the grants and making award  decisions:  Documenting grant processes and award decisions. While HUD has  established processes for its lead grant programs, it lacks documentation,  including detailed guidance to help ensure that staff carry out processes  consistently and appropriately. Federal internal control standards state  that agency management should develop and maintain documentation of  its internal control system. Such documentation assists agency  management by establishing and communicating the processes to staff.  Additionally, documentation of processes can provide a means to retain  organizational knowledge and communicate that knowledge as needed to  external parties.", "The Lead Office\u2019s Application Review Guide describes its grant  application review and award processes at a high level but does not  provide detailed guidance for staff as to how tasks should be performed.  For example, the Guide notes that reviewers score eligible applications  according to factors contained in the funding notices but does not  describe how the reviewers should allocate points to the subfactors that  make up each factor. Lead Office staff told us that creating detailed  scoring guidance would be challenging because applicants\u2019 proposed  grant activities differ widely, and they said that scoring grant applications  is a subjective process. While scoring grant applications may involve  subjective judgments, improved documentation of grant review and  scoring processes, including additional direction to staff, can help staff  apply their professional judgment more consistently in evaluating  applications. By better documenting processes, HUD can better ensure  that staff evaluate applications consistently.", "Additionally, HUD has not fully documented its rationale for deciding  which applicants receive lead grant awards and for deciding the dollar  amounts of grant awards to successful applicants. In prior work  examining federal grant programs, one recommended practice we  identified is that agencies should document the rationale for award  decisions, including the reasons individual applicants were selected or not  and how award funding amounts were determined. While HUD\u2019s internal  memorandums listed the applicants selected and the award amounts,  these memorandums did not document the rationale for these decisions  or provide information sufficient to help applicants understand award  outcomes. Lead Office staff told us that most grantees have received  the amount of funding they requested in their applications, which was  generally based on HUD\u2019s maximum grant award amount. Lead Office  staff said they could use their professional judgment to adjust award  amounts to extend funding to more applicants when applicants received  similar scores.", "However, the Lead Office\u2019s documentation we reviewed did not explain  this type of decision making. For example, in 2017, when two applicants  received identical scores on their applications, HUD awarded each  applicant 50 percent of the remaining available funds rather than  awarding either applicant the amount they requested. Representatives of  one of the two grantees told us they did not know why the Lead Office  had not provided them the full amount they had requested. Lead Office  staff told us that, to date, HUD has not considered alternative ways to  award grant funding amounts. By fully documenting grant award  processes, including the rationale for award decisions and amounts, HUD  could provide greater transparency to grant applicants about its grant  award decisions.", "Evaluating processes. HUD lacks a formal process for reviewing and  updating its lead grant funding notices, including the factors and point  allocations used to score applications. Federal internal control standards  state that agencies should implement control activities through policies  and that periodic review of policies and procedures can provide  assurance of their effectiveness in achieving the agency\u2019s objectives.  Lead Office staff told us that previous changes to the factors and point  allocation used to score applicants have been made based on informal  discussions among staff. However, the Lead Office does not have a  formal process to review and evaluate the relevance and appropriateness  of the factors or points used to score applicants. Lead Office staff told us  that they have never analyzed the scores applicants received for the  factors to identify areas where applicants may be performing well or  poorly or to help inform decisions about whether changes may be needed  to the factors or points.", "Additionally, HUD has not changed the threshold criteria used to make  award decisions since the threshold was established in 2003. As  previously shown in figure 2, applicants who received at least 75 points  (out of 100) have been qualified to receive a grant award. However, HUD  grant documentation, including the funding notices and the Application  Review Guide, does not explain the significance of this 75-point  threshold. Lead Office staff stated that this threshold was first established  in 2003 by HUD based on OMB guidance. A formal review of this 75-point  threshold can help HUD determine whether it remains appropriate for  achieving the grant programs\u2019 objectives. Furthermore, by periodically  evaluating processes for reviewing and scoring grant applications, HUD  can better determine whether these processes continue to help ensure  that lead grants reach areas of the country at greater risk for lead paint  hazards."], "subsections": []}, {"section_title": "HUD Has Begun to Develop Analyses to Help More Fully Identify Areas at Risk for Lead Paint Hazards but Has Not Set Time Frames for Using Local-Level Data", "paragraphs": ["HUD has begun to develop analyses and tools to inform its efforts to  target outreach and ensure that grant awards go to areas of the country  that are at risk for lead paint hazards. However, HUD has not developed  time frames for incorporating the results of the analyses into its lead grant  programs\u2019 processes. HUD has required jurisdictions applying for lead  grants to include data on the need or extent of the problem in their  jurisdiction (i.e., scoring factor 2). Additionally, Lead Office staff told us  that HUD uses information from the American Healthy Homes Survey to  obtain information on lead paint hazards across the country. However,  the staff explained that the survey was designed to provide meaningful  results at the regional level and did not include enough homes in its  sample to provide information about housing conditions, such as lead  paint hazards, at the state or local level. Because HUD awards lead  grants to state and local jurisdictions, it cannot effectively use the survey  results to help the agency make award decisions or inform decisions  about areas for potential outreach.", "In early 2017, the Lead Office began working with PD&R to develop a  model to identify local jurisdictions (at the census-tract level) that may be  at heightened risk for lead paint hazards. Lead Office staff said that they  hope to use results of this model to develop geographic tools to help  target HUD funding to areas of the country at risk for lead paint hazards  but not currently receiving a HUD lead grant. Lead Office staff said that  they could reach out to these at-risk areas, help them build the capacity  needed to administer a grant, and encourage them to apply. For example,  HUD has identified that Mississippi and two major metropolitan areas in  Florida (Miami and Tampa) had not applied for a lead grant. HUD has  conducted outreach to these areas to encourage them to apply for a lead  grant. In 2016, the City of Jackson, Mississippi, applied for and received a  lead grant.", "Though the Lead Office has collaborated with PD&R on the model, HUD  has not developed specific time frames to operationalize the model and  incorporate the results of the model for using local-level data to help  better identify areas at risk for lead paint hazards. Federal internal control  standards require agencies to define objectives clearly to enable the  identification of risks. This includes clearly defining time frames for  achieving the objectives. Setting specific time frames could help to ensure  that HUD operationalizes this model in a timely manner. By  operationalizing a model that incorporates local data on lead paint hazard  risk, HUD can better target its limited grant resources towards areas of  the country with significant potential for lead hazard control needs.", "We performed a county-level analysis using HUD and Census Bureau  data and found that most lead grants from 2013 through 2017 have gone  to counties with at least one indicator of lead paint hazard risk.  Information we reviewed, such as relevant literature, suggests that the  two common indicators of lead paint hazard risk are the prevalence of  housing built before the 1978 lead paint ban and the prevalence of  individuals living below the poverty line. We defined areas with lead  paint hazard risk as counties that had percentages higher than the  corresponding national percentages for both of these indicators. The  estimated average percentage nationwide of total U.S. housing stock  constructed before 1980 was 56.9 percent and the estimated average  percentage nationwide of individuals living below the poverty line was  17.5 percent. As shown in figure 3, our analysis estimated that 18  percent of lead grants from 2013 through 2017 have gone to counties  with both indicators above the estimated national percentages, 59 percent  of grants have gone to counties with estimated percentages of old  housing above the estimated national percentage, and 7 percent of grants  have gone to counties that had estimated poverty rates above the  estimated national percentage. (For an interactive version of this map,  click here.) When HUD finalizes its model and incorporates information  into its lead grant processes, HUD will be able to better target its grant  resources to areas that may be at heightened risk for lead paint hazards."], "subsections": []}]}, {"section_title": "HUD Could Take Additional Steps to Monitor Compliance with Lead Paint Regulations", "paragraphs": [], "subsections": [{"section_title": "HUD Has Taken Steps to Strengthen Compliance Monitoring for Lead Paint Regulations", "paragraphs": ["In 2016, HUD began to incorporate new steps to monitor PHAs\u2019  compliance with lead paint regulations for nearly 4,000 PHAs.  Previously, according to PIH staff, HUD required only that PHAs annually  self-certify their compliance with lead paint laws and regulations, and  HUD\u2019s Real Estate Assessment Center inspectors check for lead paint  inspection reports and disclosure forms at public housing properties  during physical inspections. Starting in June 2016, PIH began using  new tools for HUD field staff to track PHAs\u2019 compliance with lead paint  requirements in the voucher and public housing programs.", "As shown in figure 4, PIH\u2019s compliance oversight processes for the  voucher and public housing programs include various monitoring tools for  overseeing PHAs. Key components of PIH\u2019s lead paint oversight  processes include the following:", "Tools for tracking lead hazards and cases of elevated blood  levels in children. HUD uses two databases to monitor PHAs\u2019  compliance with lead paint regulations: (1) the Lead-Based Paint  Response Tracker, which PIH uses to collect and monitor information  on the status of lead paint-related documents, including lead  inspection reports and disclosure forms, in public housing properties  but not in units with voucher assisted households; and (2) the  Elevated Blood Lead Level Tracker, which PIH uses to collect and  monitor information reported by PHAs on cases of elevated blood  levels in children living in voucher and public housing units. In June  2016, OFO began using the Lead-Based Paint Response Tracker  database to store information on public housing units and to help HUD  field office staff to follow up with PHAs that have properties missing  required lead documentation. In July 2017, OFO began using  information recorded in the Elevated Blood Lead Level Tracker to  track whether PHAs started lead remediation activities in HUD- assisted housing within the time frames required by the Lead Safe  Housing Rule.", "Lead paint hazards included in PHAs\u2019 risk assessment scores.", "OFO assigns scores to PHAs based on their relative risk in four  categories: physical condition, financial condition, management  capacity, and governance. OFO uses these scores to identify high-  and very high-risk PHAs that will receive on-site full compliance  reviews. In July 2017, OFO incorporated data from the Real Estate  Assessment Center into the physical condition category of its Risk  Assessment Protocol to help account for potential lead paint hazards  at public housing properties.", "Questions about lead paint included as part of on-site full  compliance reviews. In fiscal year 2016, HUD field offices began  conducting on-site full compliance reviews at high- and very high-risk  PHAs as part of HUD\u2019s compliance monitoring program to enhance  oversight and accountability of PHAs. In fiscal year 2017, as part of  the reviews, HUD field office staff started using a compliance  monitoring checklist to determine if PHAs comply with major HUD  rules and to gather additional information on the PHAs. This checklist  included lead-related questions that PIH field office staff use to  determine whether PHAs meet the requirements in lead paint  regulations for both the voucher and public housing programs.", "In 2016, OFO and HUD field offices began using information from the  new monitoring efforts to identify potential noncompliance by PHAs with  lead paint regulations and help the PHAs resolve the identified issues.  According to HUD data, as of November 2017, the Lead-Based Paint  Response Tracker indicated that 9 percent (357) of PHAs were missing  both lead inspection reports and lead disclosure forms for one or more  properties. There were 973 PHAs missing one of the two required  documents. OFO staff told us that they prioritized following up with PHAs  that were missing both documents. According to OFO staff, PHAs can  resolve potential noncompliance by submitting adequate lead  documentation to HUD. OFO staff told us the agency considers missing  lead documentation as \u201cpotential\u201d noncompliance because PHAs may  provide the required documentation or they may be exempt from certain  requirements (e.g., HUD-designated elderly housing)."], "subsections": []}, {"section_title": "HUD Does Not Have a Plan to Mitigate Risks Associated with Its Compliance Monitoring Approach", "paragraphs": ["While HUD has taken steps to strengthen compliance monitoring  processes, it does not have a plan to identify and address the risks of  noncompliance by PHAs with lead paint regulations. Federal internal  control standards state that agencies should identify, analyze, and  respond to risks related to achieving the defined objectives.  Furthermore, when an agency has made significant changes to its  processes\u2014as HUD has done with its compliance monitoring  processes\u2014management review of changes to these processes can help  the agency determine that its control activities are designed appropriately.", "Our review found that HUD does not have a plan to help mitigate and  address risks related to noncompliance with lead paint regulations by  PHAs (i.e., ensuring lead safety in assisted housing). Additionally, our  review found several limitations with HUD\u2019s new compliance monitoring  approach, which include the following:", "Reliance on PHA self-certifications. HUD\u2019s compliance monitoring  processes rely in part on PHAs self-certifying that they are in  compliance with lead paint regulations, but recent investigations have  found that some PHAs may have falsely certified that they were in  compliance. In November 2017, HUD filed a fraud complaint against  two former officials of the Alexander County (Illinois) Housing  Authority, alleging that the former official, among other things, falsely  certified to HUD that the Housing Authority was in compliance with  lead paint regulations. Further, PIH staff told us there are ongoing  investigations related to potential noncompliance with lead paint  regulations and false certifications at two other housing authorities.", "Lack of comprehensive data for the public housing program.", "OFO started to collect data for the public housing program in the  Lead-Based Paint Response Tracker in June 2016 and the inventory  of all public housing properties includes units inspected since 2012. In  addition, HUD primarily relies on the presence of lead inspection  reports but does not record in the database when inspections and  remediation activities occurred and does not determine whether they  are still effective. Because of this, the information contained in the  lead inspection reports may no longer be up-to-date. For example, a  lead inspection report from the 1990s may provide evidence that  abatement work was conducted at that time, but according to PIH  staff, the housing may no longer be lead-safe.", "Lack of readily available data for the voucher program. The  voucher program does not have readily available data on housing  units\u2019 physical condition and compliance with lead paint regulations  because data on the roughly 2.5 million units in the program are kept  at the PHA level. According to PIH staff, HUD plans to adopt a new  system for the voucher program that will include standardized,  electronic data for voucher units. PIH staff said the new system  (Uniform Physical Condition Standards for Vouchers Protocol) will  allow greater oversight and provide HUD the ability to conduct data  analysis for voucher units.", "Challenges identifying children with elevated blood lead levels.", "For several reasons, PHAs face ongoing challenges receiving  information from state and local public health departments on the  number of children identified with elevated blood lead levels. First,  children across the U.S. are not consistently screened and tested for  exposure to lead. Second, according to CDC data, many states use  a less stringent health guideline to identify children compared to the  health standard that HUD uses (i.e., CDC\u2019s current blood lead  reference value). PIH staff told us that some public health  departments may not report children with elevated blood levels to  PHAs because they do not know that a child is living in a HUD- assisted unit and needs to be identified using the more stringent HUD  standard. Lastly, Lead Office staff told us that privacy laws in some  states may impose restrictions on public health departments\u2019 ability to  share information with PHAs.", "Limited coverage of on-site compliance reviews. While full on-site  compliance reviews can be used to determine if PHAs are in  compliance with lead paint regulations, OFO conducts a limited  number of these reviews annually. For example, in Fiscal Year 2017,  OFO conducted 72 reviews of the roughly 4,000 total PHAs. Based on  OFO information, there are 973 PHAs that are missing either lead  inspection reports or lead disclosure forms indicating some level of  potential noncompliance.", "HUD\u2019s steps since June 2016 to enhance monitoring of PHAs\u2019  compliance with lead paint regulations have some limitations that create  risks in its new compliance monitoring approach. By developing a plan to  help mitigate and address the various limitations associated with the new  compliance monitoring approach, HUD could further strengthen its  oversight and help ensure that PHAs maintain lead-safe housing units."], "subsections": []}, {"section_title": "HUD Lacks Detailed Procedures to Address Noncompliance and Make Enforcement Decisions", "paragraphs": ["HUD does not have detailed procedures to address PHA noncompliance  with lead paint regulations or to determine when enforcement decisions  may be needed. Lead Office staff told us that their enforcement program  aims to ensure that PHAs have the information necessary to remain in  compliance with lead paint regulations. According to federal internal  control standards, agencies should implement control activities through  policies and procedures. Effective design of procedures to address  noncompliance would include documenting specific actions to be  performed by agency staff when deficiencies are identified and related  time frames for these actions.", "While HUD staff stated that they address PHA noncompliance through  ongoing communication and technical assistance to PHAs, HUD has not  documented specific actions to be performed by staff when deficiencies  are identified. OFO staff told us that in general, PIH has not needed to  take many enforcement actions because field offices are able to resolve  most lead paint regulation compliance concerns with PHAs through  ongoing communication and technical assistance. For example, HUD  field offices sent letters to PHAs when Real Estate Assessment Center  inspectors could not locate required lead inspection reports and lead  disclosure forms, and requested that the PHA send the missing  documentation within 30 days. However, OFO\u2019s fiscal years 2015\u20132017  internal memorandums on monitoring and oversight guidance for HUD  field offices did not contain detailed procedures, including time frames or  criteria HUD staff would use to determine when to consider whether a  more formal enforcement action might be warranted.", "Additionally, Lead Office staff said if efforts to bring a PHA into  compliance are unsuccessful, the Lead Office would work in conjunction  with PIH and HUD\u2019s Office of General Counsel\u2019s Departmental  Enforcement Center to determine if an enforcement action is needed,  such as withholding or delaying funds from a PHA or imposing civil  money penalties on a PHA. Lead Office staff also told us that instead of  imposing a fine on a PHA, HUD would rather work with the PHA to  resolve the lead paint hazard. However, the Lead Office provided no  documentation detailing the specific steps or time frames HUD staff would  follow to determine when a noncompliance case is escalated to the Office  of General Counsel. In a March 2018 report to Congress, HUD noted that  children continued to test positive for lead in HUD-assisted housing in  2017. In the same report, HUD notes PIH and the Lead Office will  continue to work with PHAs to ensure compliance with lead paint  regulations. By adopting procedures that clearly describe when lead paint  hazard compliance efforts are no longer sufficient and enforcement  decisions are needed, HUD can better keep PHAs accountable in a  consistent and timely manner."], "subsections": []}]}, {"section_title": "HUD\u2019s Blood Lead Level Standard Aligns with CDC Guidelines and Lead Inspection Standards Are Less Stringent in the Voucher Program HUD\u2019s Blood Lead Level Standard Aligns with the Current CDC Health Guideline", "paragraphs": ["The standard HUD uses to identify children with elevated blood lead  levels and initiate lead hazard control activities in its rental assistance  aligns with the health guideline set by CDC in 2012. HUD also uses  CDC\u2019s health guideline in its lead grant programs. In HUD\u2019s January  2017 amendment to the Lead Safe Housing Rule, HUD made its standard  for lead in a child\u2019s blood more stringent by lowering it from 20  micrograms to 5 micrograms of lead per deciliter of blood, matching  CDC\u2019s health guideline (i.e., blood lead reference value). Specifically,  HUD\u2019s stronger standard allows the agency to respond more quickly  when children under 6 years old are exposed to lead paint hazards in  voucher and public housing units. The January 2017 rule also  established more comprehensive testing for children and evaluation procedures for HUD assisted housing. According to HUD\u2019s press release  that accompanied the rule, by aligning HUD\u2019s standard with CDC\u2019s  guidance, HUD can respond more quickly in cases when a child who lives  in HUD assisted housing shows early signs of lead in their blood. The  2017 rule notes HUD will revise the agency\u2019s elevated blood lead level to  align with future changes HHS may make to its recommended  environmental intervention level."], "subsections": [{"section_title": "HUD\u2019s Lead Dust Standards Align with EPA\u2019s for Rental Assistance Programs and Exceed Them for Lead Grant Programs", "paragraphs": ["HUD\u2019s standards for lead dust levels align with EPA standards for its  rental assistance programs and exceed EPA standards for the lead grant  programs. In 2001, EPA published a final rule on lead paint hazard  standards, including lead dust clearance standards. The rule  established standards to help property owners, contractors, and  government agencies identify lead hazards in residential paint, dust, and  soil and address these hazards in and around homes. Under these  standards, lead is considered a hazard when equal to or exceeding 40  micrograms of lead in dust per square foot sampled on floors and 250  micrograms of lead in dust per square foot sampled on interior window  sills. In 2004, HUD amended the Lead Safe Housing Rule to incorporate  the 2001 EPA lead dust standards as HUD\u2019s standards. Since this time,  HUD has used EPA\u2019s 2001 lead hazard standards in its rental assistance  programs.", "In February 2017, HUD released policy guidance for its lead grantees  requiring them to meet new and more protective requirements for  identifying and addressing lead paint hazards in the lead grant programs  than those imposed by EPA\u2019s 2001 standards that HUD uses in the rental  assistance programs. For example, the policy guidance requires grantees to consider lead dust a hazard on floors at 10 micrograms per  square foot sampled (down from 40) and on window sills at 100  micrograms per square foot sampled (down from 250). The policy  guidance noted that the new requirements are supported by scientific  evidence on the adverse effects of lead exposure at low blood lead levels  in children. Further, the policy guidance established a standard for porch  floors\u2013\u2013an area that EPA has not covered\u2013\u2013because porch floors can be  both a direct exposure source for children and a source of lead dust that  can be tracked into the home.", "On December 27, 2017, the United States Court of Appeals for the Ninth  Circuit ordered EPA to issue a proposed rule updating its lead dust  hazard standard and the definition of lead-based paint within 90 days of  the decision becoming final and a final rule within 1 year of the proposed  rule. Because HUD\u2019s Lead Safe Housing Rule generally defines lead  paint hazards and lead dust hazards to mean the levels promulgated by  EPA, if EPA changes its 2001 standards those new standards would be  used in HUD\u2019s rental assistance programs. On March 16, 2018, EPA filed  a request to the court asking for clarification for when EPA is required to  issue the proposed rule and followed up with a motion seeking  clarification or an extension. In response to EPA\u2019s motion, on March 26,  2018, the court issued an order clarifying time frames and ordered that  the proposed rule be issued within 90 days from March 26, 2018."], "subsections": []}, {"section_title": "HUD Uses a Less Stringent Lead Inspection Standard for the Voucher Program", "paragraphs": ["HUD\u2019s Lead Safe Housing Rule requires a stricter lead inspection  standard for public housing than for voucher units. According to HUD  staff, HUD does not have the authority to require the more stringent  inspection in the voucher program. While HUD has acknowledged that  moving to a stricter inspection standard for voucher units would provide  greater assurance that these units are lead-safe and expressed its plan to  support legislative change to authorize it to impose a more stringent  inspection standard, HUD has not requested authority from Congress to  amend its inspection standard for the voucher program.", "For voucher units, HUD requires PHAs to ensure that trained inspectors  conduct visual assessments to identify deteriorated paint for housing units  inhabited by a child under 6 years old. In a visual assessment, an  inspector looks for deteriorated paint and visible surface dust but does not  conduct any testing of paint chips or dust samples from surfaces to  determine the presence of lead in the home\u2019s paint. By contrast, for  public housing units, HUD requires a stronger inspection process. Lead- based paint inspections are required for pre-1978 public housing units. If that  inspection identifies lead-based paint, PHAs must then perform a risk  assessment. In a risk assessment, in addition to conducting a visual  inspection, an inspector tests for the presence of lead paint by collecting  and testing samples of paint chips and surface dust, and typically using a  specialized device (an X-ray fluorescence analyzer) to measure the  amount of lead in the paint on a surface, such as a wall, door, or window  sill.", "Staff from HUD\u2019s Lead Office and the Office of General Counsel told us  that Title X did not include specific risk assessment requirements for  voucher units, and HUD does not believe, therefore, that it has the  statutory authority to require an assessment more thorough than a visual  assessment of voucher units. As of May 2018, HUD had not requested  statutory authority to change the visual assessment standard used in the  voucher program. However, HUD previously acknowledged the limitation  of the weaker inspection standard in a June 2016 publication titled Lead- Safe Homes, Lead-Free Kids Toolkit. In this publication, HUD noted its  plans to support legislative change to strengthen lead safety in voucher  units by eliminating reliance on visual-only inspections. Staff from HUD\u2019s  Lead Office and Office of General Counsel told us the agency recognizes  that risk assessments are more comprehensive than visual assessments.  The staff noted that, by definition, a risk assessment is a stronger  inspection standard than a visual-only assessment because it includes  additional identification and testing.", "In responding to a draft of this report, HUD cited the need to conduct and  evaluate the results of a statistically rigorous study on the impacts of  requiring a lead risk assessment versus a visual assessment, such as the  impact on leasing times and the availability of housing for low-income  families. HUD further noted that such a study could explore whether  alternative options to the full risk assessment standard (such as targeted  dust sampling) could achieve similar levels of protection for children in the  voucher program. Requesting and obtaining authority to amend the  standard for the voucher program would not preclude HUD from doing  such a study. Such analysis might support a range of options based on  consideration of health effects for children, housing availability, and other  relevant factors.", "Because HUD\u2019s Lead Safe Housing Rule contains a weaker lead  inspection standard for the voucher program children living in voucher  units may be less protected from lead paint hazards than children living in  public housing. By requesting and obtaining statutory authority to amend  the voucher program inspection standard, HUD would be positioned to  take steps to ensure that children in the voucher program are provided  better protection as indicated by analysis of the benefits and costs from  amending the standard."], "subsections": []}]}, {"section_title": "HUD Could Better Measure and Report on Performance of Lead Efforts", "paragraphs": ["HUD has taken limited steps to measure, evaluate, and report on the  performance of its programmatic efforts to ensure that housing is lead- safe. First, HUD has tracked one performance measure for its lead grant  programs but lacks comprehensive performance goals and measures.  Second, while HUD has evaluated the effectiveness of its Lead-Based  Paint Hazard Control grant program, it has not formalized plans and does  not have a time frame for evaluating its lead paint regulations. Third, HUD  has not issued an annual report on the results of its lead efforts since  1997.", "A key aspect to promoting improved federal management and greater  efficiency and effectiveness is that agencies set goals and report on  performance. We have previously reported that a program performance  assessment contains three key elements\u2013\u2013program goals, performance  measures, and program evaluations (see fig. 5). In our prior work, we  have noted that both the executive branch and congressional committees  need evaluative information to help them make decisions about the  programs they oversee\u2013\u2013information that tells them whether, and why, a  program is working well or not.", "Program goals and performance measures. HUD has tracked one  performance measure for making private housing units lead-safe as part  of its lead grant programs but lacks goals and performance measures that  more fully cover the range of its lead efforts. In addition to our prior work  on program goals and performance measures, federal internal control  standards state that management should define objectives clearly and  that defining objectives in measurable terms allows agency management  to assess performance toward achieving objectives. According to Lead  Office staff, HUD provides information on its goals and performance  measures related to its lead efforts in the agency\u2019s annual performance  reports. For example, the fiscal year 2016 report contains information  about the number of private housing units made lead-safe as part of  HUD\u2019s lead grant programs but does not include any performance  measures on HUD\u2019s lead efforts for the voucher and public housing  programs. Lead Office staff told us HUD does not have systems to  count the number of housing units made lead-safe in these two housing  programs. The staff said the Lead Office and PIH recently began  discussing whether data from an existing HUD database could be used to  count units made lead-safe within these programs. However, they could  not provide additional details on the status of all these efforts. Without  comprehensive goals and performance measures, HUD does not know  the results it is achieving with all its lead paint hazard reduction efforts.  Moreover, HUD may be missing opportunities to use performance  information to improve the results of its lead efforts.", "Program evaluations. HUD has evaluated the effectiveness of its Lead- Based Paint Hazard Control grant program but has not taken similar  steps to evaluate the Lead Safe Housing Rule or Lead Disclosure Rule.  As previously stated, our prior work on program performance assessment  has noted the importance of program evaluations to know how well a  program is working relative to its objectives. Additionally, Title X required  HUD to conduct research to evaluate the long-term cost-effectiveness of  interim lead hazard control and abatement strategies. For its Lead-Based  Paint Hazard Control Grant program, HUD has contracted with outside  experts to conduct evaluations. For example, the National Center for  Healthy Housing and the University of Cincinnati\u2019s Department of  Environmental Health evaluated whether the lead hazard control methods  used by grantees continued to be effective 1, 3, 6, and 12 years later.", "The evaluations concluded that the lead hazard control activities used by  grantees substantially reduced lead dust levels and the original evaluation  and those completed 1 and 3 years later were also associated with  substantial declines in the blood lead levels of children living in the  housing remediated using lead grant program funds.", "HUD has general plans to conduct evaluations of the Lead Safe Housing  Rule and the Lead Disclosure Rule, but Lead Office and PD&R staff said  they did not know when or if the studies will begin. In a 2016 publication,  HUD noted its plans to evaluate the Lead Safe Housing Rule  requirements and noted that such an evaluation would contribute toward  policy recommendations and program improvements. Additionally, in its  2017 Research Roadmap, PD&R outlined HUD\u2019s plans for two studies to  evaluate the effectiveness of requirements within the Lead Safe Housing  and Lead Disclosure Rules. However, PD&R and Lead Office staff were  not able to provide a time frame for when the studies would begin. PD&R  staff told us that the plans noted within the Research Roadmap were  HUD\u2019s first step in research planning and prioritization but that  appropriations for research have been prescriptive in recent years (i.e.,  tied to specific research topics) and fell short of the agency\u2019s research  needs. By studying the effectiveness of requirements included within the  Lead Safe Housing and Lead Disclosure Rules, including the cost- effectiveness of the various lead hazard control methods, HUD could  have more complete information to assess how effectively it uses federal  dollars to make housing units lead-safe.", "Reporting. HUD has not reported on its lead efforts as required since  1997. Title X includes annual and biennial reporting requirements for  HUD. Staff from HUD\u2019s Lead Office and General Counsel told us that in  1998 the agency agreed with the congressional committees of jurisdiction  that HUD could satisfy this reporting requirement by including the  required information in its annual performance reports. Lead Office staff  told us HUD\u2019s recent annual performance reports do not contain specific  information required by law and that HUD has not issued other publicly  available reports that contain the Title X reporting requirements. Title X  requires HUD to annually provide Congress information on its progress in  implementing the lead grant programs; a summary of studies looking at  the incidence of lead poisoning in children living in HUD-assisted housing;  the results of any required lead technical studies; and estimates of federal  funds spent on lead hazard evaluation and reduction in HUD-assisted  housing. As previously stated, the annual performance reports have  provided information on the number of housing units made lead-safe  through the agency\u2019s lead grant programs, but not through the voucher or  public housing programs. In March 2018, Lead Office staff told us HUD  plans to submit separate reports on the agency\u2019s lead effort, covering the  Title X reporting requirements, starting in fiscal year 2019. By HUD  complying with Title X statutory reporting requirements, Congress and the  public will be in a position to better know the progress HUD is making  toward ensuring that housing is lead-safe."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Lead exposure can cause serious, irreversible cognitive damage that can  impair a child for life. Through its lead grant programs and oversight of  lead paint regulations, HUD is helping to address lead paint hazards in  housing. However, our review identified specific areas where HUD could  improve the effectiveness of its efforts to identify and address lead paint  hazards and protect children in low-income housing from lifelong health  problems:", "Documenting and evaluating grant processes. HUD could improve  documentation for its lead grant programs\u2019 processes by providing  more specific direction to staff and documenting grant award  rationale. In doing so, HUD could better ensure that grant program  staff score grant applications consistently and appropriately and  provide greater transparency about its award decisions. Additionally,  periodically evaluating its grant processes and procedures could help  HUD better ensure that its lead grants reach areas most at risk for  lead paint hazards.", "Identifying areas at risk for lead hazards. By developing specific  time frames to finalize and incorporate the results of its model to more  fully identify areas at risk for lead paint hazards, HUD can better  identify and conduct outreach to at-risk localities that its lead grant  programs have not yet reached.", "Overseeing compliance with lead paint regulations. False self- certifications of compliance by some PHAs and other limitations in  HUD\u2019s compliance monitoring approach make it essential for HUD to  develop a plan to mitigate and address limitations, as well as establish  procedures to determine when enforcement decisions are needed.  These actions could further strengthen HUD\u2019s oversight and keep  PHAs accountable for ensuring that housing units are lead-safe.", "Amending inspection standard in the voucher program. Children  living in voucher units may receive less protection from lead paint  hazards than children living in public housing units because HUD  applies different lead inspection standards to the two programs. HUD  could ensure that children in the voucher program are provided better  protection from lead by requesting and obtaining statutory authority to  amend the voucher program inspection standard as indicated by  analysis of the benefits and costs of amending the standard.", "Assessing and reporting on performance. Fully incorporating key  elements of performance assessment\u2014by developing comprehensive  goals, improving performance measures, and adhering to reporting  requirements\u2014could better enable HUD to assess its own progress  and target its resources toward lead efforts that maximize impact.  Additionally, HUD may be missing opportunities to inform the  Congress and the public about how HUD\u2019s lead efforts have helped  reduce lead poisoning in children."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following nine recommendations to HUD:", "The Director of HUD\u2019s Lead Office should ensure that the office more  fully documents its processes for scoring and awarding lead grants  and its rationale for award decisions. (Recommendation 1)", "The Director of HUD\u2019s Lead Office should ensure that the office  periodically evaluates its processes for scoring and awarding lead  grants. (Recommendation 2)", "The Director of HUD\u2019s Lead Office, in collaboration with PD&R, should  set time frames for incorporating relevant data on lead paint hazard  risks into the lead grant programs\u2019 processes. (Recommendation 3)", "The Director of HUD\u2019s Lead Office and the Assistant Secretary for PIH  should collaborate to establish a plan to mitigate and address risks  within HUD\u2019s lead paint compliance monitoring processes.  (Recommendation 4)", "The Director of HUD\u2019s Lead Office and the Assistant Secretary for PIH  should collaborate to develop and document procedures to ensure  that HUD staff take consistent and timely steps to address issues of  PHA noncompliance with lead paint regulations. (Recommendation 5)", "The Secretary of HUD should request authority from Congress to  amend the inspection standard to identify lead paint hazards in the  Housing Choice Voucher program as indicated by analysis of health  effects for children, the impact on landlord participation in the  program, and other relevant factors. (Recommendation 6)", "The Director of the Lead Office should develop performance goals  and measures to cover the full range of HUD\u2019s lead efforts, including  its efforts to ensure that housing units in its rental assistance  programs are lead-safe. (Recommendation 7)", "The Director of the Lead Office, in conjunction with PD&R, should  finalize plans and develop a time frame for evaluating the  effectiveness of the Lead Safe Housing and Lead Disclosure Rules,  including an evaluation of the long-term cost effectiveness of the lead  remediation methods required by the Lead Safe Housing Rule.  (Recommendation 8)", "The Director of the Lead Office should complete statutory reporting  requirements, including but not limited to its efforts to make housing  lead-safe through its lead grant programs and rental-assistance  programs, and make the report publicly available. (Recommendation  9)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HUD for review and comment. We  also provided the relevant excerpts of the draft report to CDC and EPA for  their review and technical comments. In written comments, reproduced in  appendix III, HUD disagreed with one of our recommendations and  generally agreed with the remaining eight. HUD and CDC also provided  technical comments, which we incorporated as appropriate. EPA did not  have any comments on the relevant excerpts of the draft report provided  to them.", "In its general comments, HUD noted that the lead grant programs and  HUD\u2019s compliance assistance and enforcement of lead paint regulations  have contributed significantly to, among other things, the low prevalence  of lead-based paint hazards in HUD-assisted housing. Further, HUD said  the lead grant programs and compliance assistance and enforcement of  lead paint regulations have played a critical part in developing and  maintaining the national lead-based paint safety infrastructure. HUD  asked that this contextual information be included in the background of  the report. The draft report included detailed information on the purpose  and scope of HUD\u2019s lead grant programs, two key regulations related to  lead paint hazards, and efforts to make housing lead-safe. Furthermore,  the draft report provided context on other federal agencies\u2019 role in  establishing relevant standards and guidelines for lead paint hazards. We  made no changes in response to this comment because we did not think  it was necessary for background purposes.", "HUD disagreed with the draft report\u2019s sixth recommendation to request  authority from Congress to use the risk assessment inspection standard  to identify lead paint hazards in the Housing Choice Voucher program. As  discussed in the report, HUD\u2019s Lead Safe Housing Rule requires a more  stringent lead inspection standard (risk assessments) for public housing  than for Housing Choice Voucher units, for which a weaker inspection  standard is used (visual assessments). In its written comments, HUD said  that before deciding whether to request the statutory authority to  implement risk assessments for voucher units, it would need to conduct  and evaluate the results of a statistically rigorous study on the impacts of  requiring a lead risk assessment versus a visual assessment, such as the  impact on leasing times and the availability of housing for low-income  families. HUD further noted that such a study could explore whether  alternative options to the full risk assessment standard (such as targeted  dust sampling) could achieve similar levels of protection for children in the  voucher program. We note that requesting and obtaining authority to  amend the standard for the Housing Choice Voucher program would not  preclude HUD from doing such a study. We acknowledge that the results  of such a study might support a range of options. Therefore, we revised  our recommendation to provide HUD with greater flexibility in how it might  amend the lead inspection standard for the voucher program based on  consideration of not only leasing time and availability of housing, as HUD  emphasized in its written comments, but also based on the health effects  on children. The need for HUD to review the lead inspection standard for  the voucher program is underscored by the greater number of households  with children served by the voucher program compared to public housing,  as well as recent information indicating that more children with elevated  blood lead levels are living in voucher units than in public housing.", "HUD generally agreed with our remaining eight recommendations and  provided specific information about planned steps and other  considerations related to implementing them. For example, in response to  our first three recommendations on the lead grant programs, HUD  outlined specific steps it plans to take, such as updating its guidance for  scoring grant applications and reviewing its grant application scoring  methods to identify potential improvements. In response to our fourth and  fifth recommendations to the Director of HUD\u2019s Lead Office on  compliance monitoring and enforcement of lead paint regulations, HUD  noted that PIH should be the primary office for these recommendations  with the Lead Office providing support. While these recommendations  had already recognized the need for the Lead Office to collaborate with  PIH, we reworded them to clarify that it is not necessary for the Lead  Office to have primary responsibility for their implementation.", "HUD generally agreed with our seventh and eighth recommendations, but  noted some considerations for implementing them. For our seventh  recommendation about performance goals and measures, HUD noted  that it will re-examine the availability of information from the current  housing databases to determine whether data on housing unit production  can be added to the existing data collected. HUD noted if that information  is not sufficient, it would need to obtain Office of Management and Budget  approval and have sufficient funds for such an information technology  project. For our eighth recommendation about evaluating the Lead Safe  Housing and Lead Disclosure Rules, HUD noted if its own resources are  insufficient, the time frame for implementing this recommendation may  depend on the availability of funding for contracted resources. Finally, in  response to our ninth recommendation, HUD said that it will draft and  submit annual and biennial reports to the congressional authorizing and  appropriations committees and then post the reports on the Lead Office\u2019s  public website.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Housing and Urban  Development, the Administrator of the Environmental Protection Agency,  and the Secretary of Health and Human Services, 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) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Nonfederal Funding Sources Used by Selected Grantees of HUD Lead Hazard Control Grants", "paragraphs": ["Under the Department of Housing and Urban Development\u2019s (HUD)  Lead-Based Paint Hazard Control and the Lead Hazard Reduction  Demonstration grant programs, HUD competitively awards grants to state  and local jurisdictions, as authorized by the Residential Lead-Based Paint  Hazard Reduction Act (Title X of the Housing and Community  Development Act of 1992). Title X requires each grant recipient to make  matching contributions with state, local, and private funds (i.e.,  nonfederal) toward the total cost of activities. For the Lead-Based Paint  Hazard Control grant and the Lead Hazard Reduction Demonstration  grant programs, the matching contribution has been set at no less than 10  percent and 25 percent, respectively, of the total grant amount. For  example, if the total grant amount is $3 million, then state or local  jurisdictions must provide at least $300,000 and $750,000, respectively,  for each grant program, in additional funding toward the cost of activities.  HUD requires lead grant applicants to include information on the sources  and amounts of grantees\u2019 matching contributions as part of their grant  applications. Additionally, Title X requires HUD to award grants in part  based on an applicant\u2019s ability to leverage state, local, and private funds  to supplement the federal grant funds.", "To identify the nonfederal funding sources grantees used in the lead  hazard control grants, we selected and reviewed the lead grant  applications of 20 HUD grantees and interviewed representatives from 10 of these. We selected these grantees based on their geographic  locations; the number of HUD lead grants they had previously received;  experience with HUD\u2019s lead hazard control grants; and whether they have  received both grants from 2013 through 2017. Grantees we selected  included entities at the state, municipality, and county levels. Information  from our grant application reviews and interviews of grantees cannot be  generalized to all HUD grantees.", "Based on our review of the selected grant applications and interviews of  selected grantees, we found that grantees planned to use the following  types of nonfederal funding sources as their matching contributions to  support their lead grants activities:", "State and local funds. Eighteen of the 20 grantees we selected  noted that they planned to use state or local funding sources to  supplement HUD\u2019s grant funds. The state and local funding sources  included state or local general funds and local property taxes or fees.  For example, grantees in Connecticut, Baltimore, and Philadelphia  used state or local general funds to cover personnel and operating  costs. Additionally, grantees in Alameda County (California),  Hennepin County (Minnesota), Malden, St. Louis, and Winnebago  County (Illinois) planned to use local taxes, including property taxes or  fees, such as real estate recording and building permit fees, to cover  some costs associated with their lead hazard control grants activities.", "Community Development Block Grant funds. Ten of the 20  grantees we selected indicated that they planned to use Community  Development Block Grant (CDBG) program funds to cover part of the  costs of their lead hazard control grants. CDBG program funds can  be used by states and local communities for housing; economic  development; neighborhood revitalization; and other community  development activities. For example, grantees in Baltimore and  Memphis noted in their grant applications that they planned to use the  funds to cover costs related to personnel, operations, and training.", "Nongovernmental contributions or discounts. Eight of 20 grantees  we selected stated that they anticipated some forms of  nongovernmental contributions from nonprofit organizations or  discounts from contractors to supplement the lead grants. For  example, all eight grantees stated that they expected to receive  matching contributions from nonprofit organizations.", "Table 2 summarizes the nonfederal funds by source that the 20 selected  grantees planned to use, based on our review of these grantees\u2019  applications.", "Furthermore, almost all of the selected grantees stated in their grant  applications or told us that they expected to receive or have received  other nonfederal funds in excess of their matching contributions. For  example, 15 grantees stated that they generally required or encouraged  property owners or landlords to contribute toward the lead hazard  remediation costs. Also, grantees in Baltimore, District of Columbia,  Lewiston, and Providence indicated that they expected to receive  monetary or in-kind donations from organizations to help carry out lead  hazard remediation, blood lead-level testing, or training. Additionally, the  grantee in Alameda County (California) told us that they have received  nonfederal funds from a litigation settlement with a private paint  manufacturer."], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report examines the Department of Housing and Urban  Development\u2019s (HUD) efforts to (1) incorporate statutory requirements  and other relevant federal standards in its lead grant programs; (2)  monitor and enforce compliance with lead paint regulations for its rental  assistance programs; (3) adopt federal health guidelines and  environmental standards for lead hazards in its lead grant and rental  assistance programs; and (4) measure and report on its performance  related to making housing lead-safe.", "In this report, we examine lead paint hazards in housing, and we focus on  HUD\u2019s lead hazard control grant programs and its two largest rental  assistance programs that serve the most families with children: the  Housing Choice Voucher (voucher) and public housing programs.", "To address all four objectives, we reviewed relevant laws, such as the  Residential Lead-Based Paint Hazard Reduction Act (Title X of the  Housing and Community Development Act of 1992, referred to as Title X  throughout this appendix) and relevant HUD regulations, such as the  Lead Safe Housing Rule and a January 2017 amendment to this rule. To  examine trends in funding for HUD\u2019s lead grant programs for the past 10  years, we also reviewed HUD\u2019s budget information for fiscal years 2008  through 2017. We interviewed HUD staff from the Office of Lead Hazard  Control and Healthy Homes (Lead Office), Office of Public and Indian  Housing (PIH), Office of Policy Development and Research (PD&R), and  other relevant HUD program and field offices. Finally, we reviewed our  prior work and those of HUD\u2019s Office of Inspector General.", "To address the first objective, we reviewed HUD\u2019s Notices of Funding  Availability (funding notices), policies, and procedures to identify HUD\u2019s  grant award processes for the Lead-Based Paint Hazard Control grant  and Lead Hazard Reduction Demonstration grant programs. For example,  we reviewed HUD\u2019s annual notices of funding availability from 2013  through 2017 to identify HUD\u2019s scoring factors for evaluating grant  applications. We compared HUD\u2019s grant award processes in 2017 with  Title X statutory requirements, the Office of Management and Budget  (OMB) requirements for awarding federal grants, and relevant federal  internal control standards. We also interviewed HUD staff about the  agency\u2019s grant application review and award processes.", "To determine the extent to which HUD\u2019s grants have gone to counties in  the United States potentially at high risk for lead paint hazards, we  compared grantee locations from HUD\u2019s lead grant data for grants  awarded from 2013 through 2017 with county-level data on two indicators  of lead paint hazard risk from the 2011\u20132015 American Community  Survey\u2014a continuous survey of households conducted by the U.S.  Census Bureau. We analyzed HUD\u2019s grant data to determine the number  and dollar amount of grants received by each grantee, and the grantees\u2019  addresses. We then conducted a geographic analysis to determine  whether each HUD lead grant went to a county that met at least one,  both, or neither of the two commonly known indicators of lead paint  hazard risk\u2014the age of housing and poverty level. We identified these  two indicators through a review of relevant academic literature, agency  research, and state lead modelling methodologies.", "We used data from the 2011\u20132015 American Community Survey because  the data covered a time frame that best aligned with the 5 years of lead  grant data (2013 through 2017). Using its county-level data, we calculated  an estimated average percentage nationwide of housing units built before  1980 (56.9 percent) and an estimated average percentage nationwide of  individuals living below the poverty level (17.5 percent). We used 1980 as  a benchmark for age of housing because the American Community  Survey data for age of housing is separated by the decade of construction  and 1980 was closest in time to the 1978 federal lead paint ban. We  categorized counties based on whether their levels of pre-1980 housing  and poverty were above one, both, or neither of the respective national  average percentage for each indicator. The estimated average  nationwide and county-level percentages of the two indicators (e.g., older  housing and poverty rate) are expressed as a range of values. For the  lower and upper ends of the range, we generated a 95 percent  confidence interval that was within plus or minus 20 percentage points.", "We classified a county as above the estimated average percentages  nationwide if the county\u2019s confidence interval was higher and did not  overlap with the nationwide estimate\u2019s confidence interval. We omitted  the data for 12 counties that we determined were unreliable for our  purposes. We analyzed data starting in 2013 because that was the first  year for which these grant data were available electronically. We also  interviewed HUD staff to understand their efforts and plans to perform  similar analyses using indicators of lead paint hazard risk. To assess the  reliability of HUD\u2019s grant data, we reviewed documentation of HUD\u2019s  grant database, interviewed Lead Office staff on the processes HUD used  to collect and ensure the reliability of the data, and tested the data for  missing values, outliers, and obvious errors. To assess the reliability of  the American Community Survey data, we reviewed statistical information  from the Census Bureau and other publicly available documentation on  the survey and conducted electronic testing of the data. We determined  that the HUD grant data and American Community Survey county-level  data on age of housing and poverty were sufficiently reliable for  identifying areas at risk of lead paint hazards and determining the extent  to which lead grants from 2013 through 2017 have gone to at-risk areas.", "Furthermore, to obtain information about how HUD works with grantees to  achieve program objectives, we conducted in-person site visits to five  grantees located in five localities (Alameda County, California; Atlanta,  Georgia; Baltimore, Maryland; District of Columbia; and San Francisco,  California); and interviewed an additional five grantees on the telephone  (Hennepin County, Minnesota; Lewiston, Maine; Malden, Massachusetts;  Providence, Rhode Island; and Winnebago County, Illinois). In addition,  we reviewed the grant applications of the 10 grantees we spoke to and an  additional 10 grantees from 10 additional jurisdictions (State of  Connecticut; Cuyahoga County, Ohio; Denver, Colorado; Monroe County,  New York; Philadelphia, Pennsylvania; Memphis, Tennessee; San  Antonio, Texas; St. Louis, Missouri; Tucson, Arizona; and State of  Vermont).", "We selected the 10 grantees for site visits or interviews based on the  following criteria: geographic variation, number of years the grantees had  HUD\u2019s lead grants, and grantees that have received both types of lead  grants from 2013 through 2017. We selected the 10 additional grantees\u2019  applications for review based on geographic diversity and to achieve a  total of two applications for each year during our 5-year time frame, with  at least one application from each of the two HUD lead grant programs.  As part of our review of selected grant applications, we identified  nonfederal funding sources used by grantees, such as local tax revenues,  contractor discounts, and property owner contributions. Information from  the selected grantees and grant applications review cannot be  generalized to those grantees we did not include in our review.  Additionally, we interviewed representatives from housing organizations  to obtain additional examples of any nonfederal funding sources, such as  state or local bond measures, or low-interest loans to homeowners.", "To address the second objective, we also reviewed HUD guidance and  internal memorandums related to its efforts to monitor and enforce  compliance with lead paint regulations for public housing agencies (PHA),  the entities that manage HUD\u2019s voucher and public housing rental  assistance programs. In addition, we reviewed HUD\u2019s documentation of  databases it uses to monitor compliance, including the Lead-Based Paint  Response Tracker and the Elevated Blood Lead Level Tracker, and  observed HUD staff\u2019s demonstrations of these databases. HUD staff also  provided a demonstration of the Record and Process Inspection Data  database (known as \u201cRAPID\u201d) used by HUD\u2019s Real Estate Assessment  Center to collect physical inspection data for public housing units. We  obtained and reviewed information from HUD about instances of potential  noncompliance with lead paint regulations by PHAs as of November 2017  and enforcement actions HUD has taken. We compared HUD\u2019s regulatory  compliance monitoring and enforcement approach to federal internal  control standards. We interviewed staff from HUD\u2019s Lead Office, Office  of General Counsel, Office of Field Operations, and field staff, including  four HUD regional directors in areas of the country known to have a high  prevalence of lead paint hazards, about internal procedures for  monitoring and enforcing compliance with lead paint regulations by the  PHAs within their respective regions.", "To address the third objective on HUD\u2019s adoption of federal health  guidelines and environmental standards for lead paint hazards in its lead  grant and rental assistance programs, we reviewed relevant rules and  HUD documentation. To identify relevant federal health guidelines and  environmental standards, we reviewed guidelines and regulations from  the Centers for Disease Control and Prevention (CDC) and the  Environmental Protection Agency (EPA) and interviewed staff from each  agency. To identify state and local laws with different requirements than  these federal guidelines and standards, we obtained information from and  interviewed staff from CDC\u2019s Public Health Law Program and the National  Conference of State Legislatures. We compared HUD\u2019s requirements to  CDC\u2019s health guideline known as the \u201cblood lead reference value\u201d and  EPA\u2019s standards for lead-based paint hazards and lead-dust clearance  standards. Finally, we reviewed information in HUD\u2019s 2017 funding  notices and lead grant programs\u2019 policy guidance about requirements for  grantees as they pertain to health guidelines and environmental  standards. We also interviewed HUD staff about how HUD has used the  findings from lead technical study grants to consider changes to HUD\u2019s  requirements and processes regarding identifying and addressing lead  paint hazards for the grant programs.", "To address the fourth objective, we reviewed HUD documentation related  to performance goals and measures, program evaluations, and reporting.  For example, we reviewed HUD\u2019s recent annual performance reports to  identify goals and performance measures related to HUD\u2019s efforts to  make housing lead-safe. Further, we reviewed Title X to identify  requirements related to evaluating and reporting on HUD\u2019s lead efforts.  We reviewed program evaluations and related studies completed by  outside experts for the lead grant programs and interviewed staff from  one of the organizations that conducted the evaluations. In addition, we  interviewed Lead Office and PD&R staff about the agency\u2019s plans to  evaluate the requirements in the Lead Safe Housing Rule and reviewed  corresponding agency documentation about these plans. Additionally,  we reviewed the Lead Office\u2019s most recent strategic plan (2009) and  annual report (1997) on the agency\u2019s lead efforts. We compared HUD\u2019s  use of performance goals and measures, program evaluations, and  reporting against leading practices for assessing program performance  and federal internal control standards. Finally, we interviewed staff from  HUD to understand goals and performance measures used by the agency  to assess their lead efforts.", "We conducted this performance audit from March 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, John Fisher (Assistant Director),  Beth Faraguna (Analyst in Charge), Enyinnaya David Aja, Farah  Angersola, Carol Bray, William R. Chatlos, Anna Chung, Melinda  Cordero, Elizabeth Dretsch, Christopher Lee, Marc Molino, Rebecca  Parkhurst, Tovah Rom, Tyler Spunaugle, and Sonya Vartivarian made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-68", "url": "https://www.gao.gov/products/GAO-19-68", "title": "Missile Defense: Air Force Report to Congress Included Information on the Capabilities, Operational Availability, and Funding Plan for Cobra Dane", "published_date": "2018-12-17T00:00:00", "released_date": "2018-12-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["First fielded in 1976 on Shemya Island in Alaska, the Cobra Dane radar faces growing sustainment challenges that DOD plans to address through modernization projects. Anticipating future needs, DOD began investing in new radar systems that share capabilities with Cobra Dane to support ballistic missile defense and space surveillance, including the LRDR (Alaska), the Space Fence (Marshall Islands), and the Pacific Radar (location to be determined).", "The conference report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review the Air Force's report to Congress on the operation and sustainment of Cobra Dane. This report identifies information included in the Air Force's report and describes additional information that GAO reviewed on (1) the capabilities of the Cobra Dane radar and other planned radars to meet DOD's mission requirements, (2) Cobra Dane's operational availability and the plan to mitigate the effect on those missions when Cobra Dane is not available, and (3) DOD's funding plan and project cost estimates for the operation and sustainment of Cobra Dane and its site at Shemya Island. GAO reviewed the Air Force report and related documentation, and interviewed relevant officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In its January 2018 report to Congress, the Air Force reported how the Cobra Dane radar and the Long Range Discrimination Radar (LRDR) have shared and unique capabilities to support ballistic missile defense and space surveillance missions. The report noted that the respective locations of both radar systems affect their ability to provide those capabilities. The Department of Defense (DOD) also has other radar investments\u2014the Pacific Radar and the Space Fence, which, according to DOD officials, may reduce DOD's reliance on Cobra Dane to provide ballistic missile defense and space surveillance capabilities.", "The Air Force's report to Congress noted that Cobra Dane met its requirement for operational availability, which refers to the percentage of time that the radar is able to meet its missions. GAO found that the Air Force has developed procedures to mitigate risks when Cobra Dane is not available. For example, U.S. Northern Command and Missile Defense Agency (MDA) officials stated that they can mitigate risks when Cobra Dane is not available by using the Sea-Based X-band radar to provide support for ballistic missile defense. The Air Force would face some limitations in its ability to conduct space surveillance if Cobra Dane were not available, as Cobra Dane tracks objects no other radar can track. However, MDA officials noted there are no plans to take Cobra Dane offline long enough to compromise space surveillance.", "The Air Force and MDA plan to contribute total funding of $278.6 million for the operation and sustainment of Cobra Dane, according to their fiscal year 2019 budget plans. Specifically, the Air Force and MDA plan to share funding for the operation and maintenance of the Cobra Dane radar and for three modernization projects that make up their sustainment plan for the radar. Further, the Air Force report noted that the Air Force also plans to provide $140 million in funding for the sustainment and maintenance of operational access to Cobra Dane's site at Shemya Island. In addition, GAO found that the Air Force developed a total cost estimate for one project\u2014known as the transmitter group replacement\u2014but not for its other two projects. Air Force officials plan to complete cost estimates for those two projects in conjunction with their fiscal year 2020 budget submission."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Cobra Dane radar faces growing sustainment challenges that the  Department of Defense (DOD) plans to address through modernization  projects. The Air Force fielded Cobra Dane in 1976 on Shemya Island,  Alaska. In subsequent years, Cobra Dane has undergone upgrades and  changes to its mission. From 1977 to 1994, the Air Force used Cobra  Dane to support a primary mission of intelligence gathering, and to  provide early warning of missile threats and conduct space surveillance  (tracking objects in space) as additional missions. In 1994, the Air Force  stopped using Cobra Dane to support missile warning. The Air Force also  ceased using Cobra Dane for space surveillance for 5 years, but  continued to operate the radar in a limited capacity to support intelligence  gathering. In 2004, the Missile Defense Agency (MDA) completed  upgrades to Cobra Dane so that it could contribute to a new ballistic  missile defense mission. Since MDA completed the upgrades, the Air  Force has used Cobra Dane to support ballistic missile defense and  space surveillance missions. In anticipating future needs, DOD began  investing in new radar systems that will provide varying mission  capabilities. However, DOD does not intend for any one of these systems  to be a complete replacement for Cobra Dane. Radar investments include  the Long Range Discrimination Radar (LRDR) at Clear Air Force Station  in Alaska; the Space Fence at Kwajalein Atoll, Marshall Islands; and the  Pacific Radar. See figure 1 for a photo of the Cobra Dane radar.", "Congress has expressed interest in DOD\u2019s plan to use Cobra Dane to  meet various mission requirements and how it would maximize the  radar\u2019s reliability and minimize life-cycle costs. Specifically, the  conference report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 (\u201cthe Act\u201d) included a provision that  the Air Force, in coordination with MDA and U.S. Northern Command,  submit a report on the Cobra Dane radar to the congressional defense  committees with its fiscal year 2019 budget request. The report was to  outline the capabilities of Cobra Dane and alternative radars, DOD\u2019s plan  for the operation and sustainment of Cobra Dane, and the costs to  sustain Cobra Dane and its site at Shemya Island. The Air Force  submitted the report in January 2018.", "The conference report accompanying the Act also included a provision  that we review the Air Force\u2019s report to Congress. This report identifies  information included in the Air Force\u2019s report and describes additional  information that we reviewed on (1) the capabilities of the Cobra Dane  radar and other planned radars to meet DOD\u2019s mission requirements, (2)  Cobra Dane\u2019s operational availability and the plan to mitigate the effect on  those missions when Cobra Dane is not operationally available, and (3)  DOD\u2019s funding plan and project cost estimates related to the operation  and sustainment of Cobra Dane and its site at Shemya Island.", "For all objectives, we reviewed the Air Force report to Congress and  identified information related to requirements outlined in the conference  report. We interviewed officials from Headquarters Air Force, Air Force  Space Command, the Air Force Life Cycle Management Center, MDA,  U.S. Northern Command, and U.S. Strategic Command to discuss  information contained within the Air Force report, and to identity other  information and documentation relevant to each of our three objectives.", "For objective one, we also reviewed documentation that outlined the  capabilities of Cobra Dane and other radar investments. Our review  included MDA\u2019s reports on the LRDR and its analysis of alternatives on  ballistic missile defense sensors. We also reviewed a U.S. Strategic  Command briefing for information on the capabilities of Cobra Dane and  alternative radar systems. We did not independently review the quality of  the technical materials or the process by which MDA or U.S. Strategic  Command assessed the capabilities of Cobra Dane or other radar  systems because doing so was beyond the scope of our review to  describe additional information on the capabilities of Cobra Dane and  other radar investments.", "For objective two, we also reviewed documentation related to the  operational availability of Cobra Dane and the associated effects if Cobra  Dane is not available, including Air Force data on the operational  availability and space surveillance performance of Cobra Dane. We  asked cognizant Air Force officials questions about the reliability of their  operational availability data and reviewed relevant documentation on how  they calculate that data. We determined that we could use these data for  the limited purpose of describing the reported operational availability of  Cobra Dane compared to its requirement. We also reviewed U.S.  Northern Command\u2019s analysis on the abilities of various radar systems to  track missile threats targeting U.S. locations.", "For objective three, we also reviewed documentation related to DOD\u2019s  plans to fund the operation and sustainment of Cobra Dane and to  identify project cost estimates. Specifically, we reviewed documents from  the Air Force and MDA, such as budget submissions, funding profiles,  and cost estimates. We did not independently assess the underlying  budget data or cost estimates from the documentation we reviewed  because doing so was beyond the scope of our review to describe  additional information on DOD\u2019s funding plan and project cost estimates.", "We conducted this performance audit from June 2018 to November 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Cobra Dane and other radar systems can provide capabilities that  contribute to a range of missions, such as ballistic missile defense, space  surveillance, and intelligence-gathering missions. DOD uses Cobra Dane  and other radar systems to provide information over a short period of time  to ground-based interceptors so they can hit their targets. Such radar  systems contribute to ballistic missile defense by tracking incoming  missile threats, classifying the missile threat, and determining if a threat  was intercepted successfully. In addition, some radar systems can  provide discrimination capabilities, which allow for that radar to identify a  warhead when a missile threat deploys decoys at the same time. Radar  systems can also have the capability to contribute to a space surveillance  mission, which provides an awareness of space objects within or near the  Earth\u2019s orbit and their movements, capabilities, and intent. Finally, radars  can also contribute intelligence-gathering capabilities. Each radar  system\u2019s ability to contribute to various missions can be dependent on  that radar\u2019s inherent capabilities and physical location.", "See table 1 for a description of selected radar systems that can provide  some or all of these capabilities.", "Various offices within the Air Force, in coordination with MDA, are  responsible for the operation and sustainment of the Cobra Dane radar.  Since 2013, Air Force Space Command has overseen the operation of  Cobra Dane, and contributes to the sustainment of Cobra Dane\u2019s site at  Shemya Island. The Air Force Life Cycle Management Center has overall  responsibility of the sustainment of the Cobra Dane radar. In addition,  MDA works in coordination with the Air Force and combatant commands  to develop, test, and field ballistic missile defense assets. MDA also  shares funding with the Air Force to operate and sustain Cobra Dane.", "U.S. Northern Command and U.S. Strategic Command define priorities  for the overall radar infrastructure and establish the various missions that  those radar systems are intended to meet. U.S. Northern Command  oversees the homeland ballistic missile defense mission, and establishes  operational objectives for radar systems operating in its region. U.S.  Northern Command officials told us that they are the end user for Cobra  Dane. U.S. Strategic Command has established a ballistic missile  defense and a space surveillance mission, both of which are supported  by Cobra Dane. Further, U.S. Strategic Command\u2019s components  coordinate global missile defense and space operations planning."], "subsections": []}, {"section_title": "Air Force Reported That Cobra Dane and LRDR Can Contribute to Various Missions, and We Found That Additional Radar Investments May Reduce Reliance on Cobra Dane", "paragraphs": [], "subsections": [{"section_title": "Air Force Reported That Cobra Dane and LRDR Contribute Both Shared and Unique Capabilities to Their Respective Missions", "paragraphs": ["In its January 2018 report to Congress, the Air Force described how  Cobra Dane and LRDR can meet mission requirements through their  shared and unique capabilities, as well as how their locations affect their  ability to provide those capabilities for DOD\u2019s ballistic missile defense  mission. MDA studies we reviewed found that locating LRDR at Clear Air  Force Station allows for operational advantages and cost savings."], "subsections": [{"section_title": "Ballistic Missile Defense and Space Surveillance Missions", "paragraphs": ["The Air Force included information in its report to Congress on the  ballistic missile defense capabilities of Cobra Dane and LRDR, and the  effects of each radar\u2019s location on those capabilities. Specifically, the Air  Force report stated that both radars have the capabilities to track and  classify missile threats. However, the report incorrectly stated that both  radar systems have the inherent capability to determine if a missile threat  is successfully intercepted. MDA documentation that we reviewed shows  that Cobra Dane does not yet have this capability. When we shared our  finding with Air Force and MDA officials, they agreed that this reported  capability was incorrectly identified in the Air Force report to Congress.  MDA officials also told us that Cobra Dane could provide this capability in  the future if it implements software changes, but they are unlikely to do  this until calendar year 2025.", "The Air Force report also noted that LRDR would have a unique  capability, once it is operational, to discriminate missile threats from any  deployed decoys. See table 2 for a summary of what the Air Force  reported for the ballistic missile defense capabilities of Cobra Dane and  LRDR.", "In addition to identifying ballistic missile defense capabilities of each  radar, the Air Force report noted that both Cobra Dane and LRDR will  have the inherent capabilities to support space surveillance and  intelligence-gathering missions. DOD officials we spoke to confirmed that  they have plans to use those inherent capabilities to support these other  missions. For example, U.S. Strategic Command identified that DOD  needs Cobra Dane to support its space surveillance mission. Further, Air  Force and MDA officials told us that they use Cobra Dane to track small  objects that no other radar system can track. MDA officials told us that  LRDR could be used for space surveillance. However, Air Force and U.S.  Strategic Command officials stated that there are no plans to use LRDR\u2019s  space surveillance capabilities as a replacement for Cobra Dane.  Additionally, Air Force officials told us that neither Cobra Dane nor LRDR  is required to support an intelligence-gathering mission.", "The Air Force also included information in its report on how the locations  of Cobra Dane and LRDR affect their abilities to contribute to the ballistic  missile defense mission. For example, the Air Force reported that Cobra  Dane\u2019s location at Shemya Island, Alaska, allows it to track missile  threats from North Korea earlier in their trajectories than LRDR would be  able to track at Clear Air Force Station, Alaska. This is consistent with an  MDA analysis that we reviewed that outlined additional advantages  provided by Cobra Dane\u2019s location at Shemya Island. According to that  analysis, Cobra Dane can begin tracking missile threats approximately  210 seconds earlier than LRDR. Air Force officials told us that the  additional time to track missile threats allows the warfighter an earlier  opportunity to intercept a missile threat and deploy additional interceptors  if the first attempt fails. Further, the MDA analysis described a tracking  gap between the areas covered by LRDR\u2014once it is operational at Clear  Air Force Station\u2014and the two sets of AN/TPY-2 radars that are currently  located in Japan. Without Cobra Dane\u2019s coverage of this gap, the  analysis found that the warfighter would have a more limited opportunity  to intercept a missile threat from North Korea. Figure 2 shows how Cobra  Dane covers a gap between the LRDR (once operational) and the two  AN/TPY-2 radars in Japan.", "The Air Force report also noted that LRDR\u2019s geographic location has its  own advantages in contributing to ballistic missile defense compared to  Cobra Dane\u2019s location. For example, the Air Force report noted that  LRDR\u2019s location would allow it to track missile threats later in their  trajectories beyond Cobra Dane\u2019s coverage as those threats make their  way to the continental United States. We also found that MDA has  determined LRDR will have other advantages due to its location. For  example, an MDA analysis that we reviewed found that LRDR\u2019s location  will allow for the radar system to contribute to ballistic missile defense  from North Korean and Iranian threats. Absent LRDR, this analysis  determined that there are no other radar systems that are located in a  position to provide the capability to discriminate missile threats and  determine if a threat was successfully intercepted."], "subsections": []}, {"section_title": "Determination of LRDR Location", "paragraphs": ["In addition to what the Air Force reported, we found that DOD decided to  locate LRDR at Clear Air Force Station in Alaska after considering the  advantages and disadvantages of other locations. For example, MDA  completed studies that examined how LRDR could perform at various  locations in Alaska, and the cost-effectiveness of constructing and  sustaining the radar at those sites. In a June 2015 analysis, MDA  compared how LRDR could perform in discriminating missile threats  when co-locating it with Cobra Dane at Shemya Island or placing it at  Clear Air Force Station. MDA determined that LRDR could provide more  real-time discrimination information for missile threats targeting Alaska  and the continental United States if it constructed the radar at Clear Air  Force Station versus Shemya Island. Additionally, MDA identified in an  October 2016 study that the department could obtain operational  advantages and cost savings by constructing LRDR at Clear Air Force  Station, Alaska, when compared to constructing it at Shemya Island,  Alaska. Specifically, MDA determined that Clear Air Force Station could  provide better results for 11 of the 13 factors it reviewed compared to  Shemya Island. For example, MDA determined that locating LRDR at  Clear Air Force Station would result in lower costs and enhanced system  performance."], "subsections": []}]}, {"section_title": "DOD Has Made Other Investments in Radar Systems That May Reduce Its Reliance on Cobra Dane to Meet Mission Requirements", "paragraphs": ["According to DOD officials and documents we reviewed, other radar  investments may reduce the department\u2019s reliance on Cobra Dane for  ballistic missile defense and space surveillance, given that U.S. Northern  Command identified it has a need for Cobra Dane after DOD begins  operating LRDR in fiscal year 2021. Specifically, the Pacific Radar and  Space Fence may reduce DOD\u2019s reliance on Cobra Dane to support  ballistic missile defense and space surveillance, respectively.", "Pacific Radar: According to DOD officials, the department may no  longer need Cobra Dane to meet the ballistic missile defense mission  after MDA fields a new radar in the Pacific region in fiscal year 2025.  MDA began developing the Pacific Radar to provide additional missile  threat tracking and discrimination capabilities. According to U.S.  Northern Command and MDA officials, the Pacific Radar may fill the  gap in tracking missile threats currently covered by Cobra Dane.", "Space Fence: The Air Force has also determined it will no longer  have a requirement for Cobra Dane to provide space surveillance  once the Space Fence is fully operational. The Air Force plans for the  Space Fence to be operational in fiscal year 2019. According to a  U.S. Strategic Command briefing, the Space Fence will provide the  same capabilities as Cobra Dane. Air Force officials noted that they  want to continue relying on Cobra Dane for space surveillance when  the Space Fence is operational, as long as the radar is available and  used to contribute to ballistic missile defense."], "subsections": []}]}, {"section_title": "Air Force Reported That Cobra Dane Generally Meets Its Requirements for Operational Availability, and We Found That the Air Force Can Mitigate Radar Downtime for Its Missions", "paragraphs": ["In its January 2018 report to Congress, the Air Force noted that Cobra  Dane met its requirement for operational availability\u2014i.e., the percentage  of time that the radar system is able to meet its ballistic missile defense  and space surveillance missions. Specifically, the Air Force report noted  that Cobra Dane had been available an average of 91 percent of the time  over a 2-year period (January 2016 through December 2017), which  exceeded the 90 percent requirement for operational availability.", "Information that we reviewed from a more recent 2-year period (August  2016 through July 2018) showed that Cobra Dane\u2019s 2-year average for  operational availability had declined to approximately 88 percent\u2014below  the 90 percent requirement. Air Force officials stated that the decline in  the operational availability over the more recent two-year period was due  to a few instances where they needed to take Cobra Dane off-line for  extended periods of scheduled downtime (e.g., regular operations and  maintenance, calibration of instruments). Further, they noted that when  Cobra Dane is not operationally available, the reason is usually due to  scheduled downtime.", "Officials also told us there was one instance of unscheduled downtime  (e.g., part or system failure) in that 2-year period which required  emergency maintenance on the radar\u2019s mission control hardware. We  also reviewed Air Force data on the frequency of unscheduled downtime  between August 2016 and July 2018, which show that Cobra Dane is able  to contribute to its missions without unscheduled downtime 99.7 percent  of the time.", "According to U.S. Northern Command and MDA officials, they can  mitigate the effect on the ballistic missile defense mission if they know far  enough in advance that Cobra Dane will not be operationally available\u2014 such as during scheduled downtime. Officials stated that they do this by  moving a transportable radar, known as the Sea-Based X-band radar, to  specific locations in the Pacific Ocean to provide additional tracking  coverage of missile threats. A U.S. Northern Command analysis that we  reviewed describes how DOD can deploy the Sea-Based X-band radar at  particular locations in the Pacific Ocean to supplement Cobra Dane.  This analysis found that U.S. Northern Command can lose the ability to  track some missile threat trajectories if Cobra Dane is not available and  the Sea-Based X-band radar is not deployed.", "We also reviewed Air Force data on space surveillance, which shows that  the Air Force would face some limitations in its ability to complete its  space surveillance mission when Cobra Dane is not operationally  available. According to the data, Cobra Dane tracks 3,300 space objects  each day that cannot be tracked by any other radar system. Air Force  officials noted that when Cobra Dane is not operationally available for  space surveillance for short periods (less than 24 hours), they can  overcome that downtime without losing track of those unique objects.  However, officials told us that it would take six months to reacquire all of  the small space objects that Cobra Dane tracks, if they encounter any  significant scheduled or unscheduled downtime. MDA officials told us  there are no scheduled plans to take Cobra Dane down long enough to  compromise DOD\u2019s ability to conduct space surveillance."], "subsections": []}, {"section_title": "Air Force Reported That DOD Has Plans to Fund Cobra Dane and Its Site, and We Found That It Has Developed Cost Estimates for Some Projects", "paragraphs": [], "subsections": [{"section_title": "Air Force Reported the Funding for the Operation and Sustainment of Cobra Dane, and We Found That DOD Has Developed Cost Estimates for Some Modernization Projects", "paragraphs": ["In its January 2018 report to Congress, the Air Force projected that the  Air Force and MDA would contribute total funding of $278.6 million based  on their fiscal year 2019 budget plans for the operation and sustainment  of Cobra Dane. According to the report, the Air Force and MDA plan to  share funding for the operation and maintenance of the Cobra Dane  radar, and for three modernization projects that make up their  sustainment plan for the radar. Table 3 outlines the plan for how the Air  Force and MDA will share funding for the operation and maintenance of  Cobra Dane.", "In addition, the Air Force included information in its report on how the Air  Force and MDA plan to share funding to support Cobra Dane\u2019s three  modernization projects. Specifically, the Air Force and MDA plan to  redesign parts for three sets of obsolete systems: (1) mission system  replacement; (2) traveling wave tubes; and (3) transmitter groups. The  Air Force has identified that it no longer has vendors that manufacture  some critical parts, and failure of any of the three systems could result in  Cobra Dane not being available to meet mission requirements. As such,  the Air Force determined that it could sustain these three systems more  effectively if they were redesigned. Table 4 summarizes the reported  funding for the three projects that make up the Cobra Dane sustainment  plan.", "In addition to what the Air Force reported, we identified that the Air Force  developed a total cost estimate for its transmitter group replacement, but  not for its other two projects. For the other two projects, Air Force officials  stated that they plan to complete estimates for the total costs in  conjunction with their fiscal year 2020 budget submission. In August  2016, the Air Force estimated that the transmitter group replacement  would have a total cost of $91.2 million, but reported it would fund this  project at $94.0 million through fiscal year 2023 (see table 4). Air Force  officials plan to request the transfer of any unused funding to the other  projects once it completes the transmitter group project. The Air Force  also completed a partial cost estimate for the traveling wave tube  redesign\u2014covering the redesign of the parts and replacement of 1 of 12  groups of parts\u2014estimating that the first phase would cost $16.0 million.  Further, Air Force officials told us that they have not yet developed a total  cost estimate for the mission system replacement.", "We also found that the Air Force and MDA expedited Cobra Dane\u2019s  mission system replacement project, but Air Force officials told us they face challenges in expediting the other two projects without compromising  Cobra Dane\u2019s operational availability. For the mission system  replacement, MDA requested additional funding in fiscal year 2018. Air  Force and MDA officials told us that the additional funding they received  allowed them to prioritize the mission system replacement and advance  its timeline earlier that year. Air Force officials stated that they explored  ways to expedite the two other projects: the traveling wave tubes and  transmitter groups. However, they stated that replacing too many parts at  the same time will result in their having to take Cobra Dane off-line for  longer periods of time. According to Air Force and MDA officials, they  may look for opportunities to expedite timeframes for their other two  projects as long as the amount of scheduled downtime is kept to  acceptable levels."], "subsections": []}, {"section_title": "The Air Force Reported the Funding for the Operation and Sustainment of Shemya Island", "paragraphs": ["In its report to Congress, the Air Force identified that it plans to provide  $140 million in funding for the sustainment and maintenance of  operational access to Cobra Dane\u2019s site at Shemya Island based on its  fiscal year 2019 budget plans. According to the report, the Air Force is  solely responsible for funding all work related to the operation and  sustainment of Shemya Island, shared between two of its major  commands: Air Force Space Command and Pacific Air Forces. Table 5  summarizes the information the Air Force included in its report on how  funding will be shared for Shemya Island.", "We also reviewed a support agreement between Air Force Space  Command and Pacific Air Forces that identifies how they will sustain the  site and the calculation for sharing costs. The agreement describes the  specific work to sustain the site, including maintaining the airfield, support  facilities, and communication infrastructure. Air Force officials told us that  they are constantly addressing challenges related to operational access  to the site at Shemya Island, but Air Force Space Command and Pacific  Air Forces work together to address those challenges."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for review and comment. DOD  told us that it had no comments on the draft report.", "We are sending copies of this report to the Secretary of Defense; the  Under Secretary of Defense for Acquisitions and Sustainment; the  Secretary of the Air Force; the Director of the Missile Defense Agency;  and the Commanders of U.S. Northern Command and U.S. Strategic  Command. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Joe Kirschbaum at (202) 512-9971 or kirschbaumj@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made  contributions to the report are listed in Appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kevin O\u2019Neill (Assistant Director),  Scott Bruckner, Vincent Buquicchio, Martin De Alteriis, Amie Lesser, and  Richard Powelson made key contributions to the report."], "subsections": []}]}], "fastfact": ["DOD plans to invest over $278 million to operate, maintain, and modernize its Cobra Dane radar system\u2014which helps defend against incoming missiles and tracks space objects such as satellites and debris. These investments are needed because the system has been operating for over 40 years, and key components are obsolete.", "The Air Force occasionally has to take Cobra Dane offline to address failing parts or for routine maintenance, but we found that DOD has a mobile radar system it can use when Cobra Dane is scheduled to be offline.", "We also found that DOD is planning to invest in new radar systems that may reduce its reliance on Cobra Dane."]}
{"id": "GAO-18-609SP", "url": "https://www.gao.gov/products/GAO-18-609SP", "title": "Managing for Results: Government-wide Actions Needed to Improve Agencies' Use of Performance Information in Decision Making", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["To reform the federal government and make it more efficient and effective, agencies need to use data about program performance. The benefit of collecting performance information is only fully realized when it is used by managers to make decisions aimed at improving results.", "GAO was asked to review agencies' use of performance information. This report assesses, among other things, the extent to which: (1) 24 agencies' reported use of performance information and related leading practices has changed since 2013 and (2) the Executive Branch has taken actions to enhance the use of performance information.", "To address the first objective, GAO analyzed results from its 2017 survey of federal managers, and compared them to 2013 results. The survey covered a stratified random sample of 4,395 managers from the 24 Chief Financial Officers Act agencies. The survey had a 67 percent response rate and results can be generalized to the population of managers government-wide and at each agency. For the second objective, GAO reviewed agency documents and interviewed staff from OMB and the PIC."]}, {"section_title": "What GAO Found", "paragraphs": ["Agencies' reported use of performance information to make decisions, and leading practices that can promote such use, generally has not improved since GAO's last survey of federal managers in 2013. However, GAO's survey results continue to point to certain practices that could help agencies improve managers' use of performance information. For example, as shown in the table below, GAO's survey found that managers whose programs were subject to data-driven reviews (regular reviews used to assess progress on select agency goals) to a greater extent reported statistically significantly greater use of performance information to make decisions.", "The Executive Branch has begun taking steps to improve the use of performance information within agencies and across the government. For example,", "In the President's Management Agenda and government-wide reform plan, released in March and June 2018 respectively, the administration acknowledged the need to do more, and announced a goal, among other actions, to improve the use of data in federal decision making. However, the Office of Management and Budget (OMB) and others responsible for this goal have yet to fully develop action plans to hold agencies accountable for achieving it.", "The Performance Improvement Council (PIC), which is chaired by OMB, has undertaken efforts to improve the use of performance information by, for example, creating a working group on agency performance reviews. But it has not yet taken a systematic approach to identify and share proven practices that led to, or challenges that may be hampering, increased use of performance information by managers. GAO's survey results identified agencies that may have insights into such practices and challenges.", "More fully developing action plans for the new goal, and identifying and sharing proven practices and challenges, could help ensure the Executive Branch takes further steps to improve the use of performance information by managers within agencies and across the federal government."]}, {"section_title": "What GAO Recommends", "paragraphs": ["To improve the use of performance information within agencies and across the federal government, GAO recommends that OMB work with (1) fellow goal leaders to more fully develop action plans for the new goal to improve the use of data and (2) the PIC to prioritize efforts to identify and share proven practices and challenges. OMB had no comments on this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government is one of the world\u2019s largest and most complex  entities. It oversees a broad array of programs central to protecting the  health, safety, and security of the American public. As the nation  confronts both new and long-standing challenges, the public expects the  government to be more transparent and accountable. This requires  federal agencies to focus on their performance and improving results. To  modernize the federal government and improve agencies\u2019 abilities to  achieve results, the Office of Management and Budget (OMB) released  the President\u2019s Management Agenda and its plan to reform and  reorganize the federal government. These initiatives propose a range of  reform efforts and priorities designed to address the complex and  interconnected challenges facing federal agencies.", "To successfully implement reforms and improve their operations and  results, agencies will need to robustly manage their performance. This  involves not only measuring progress toward goals, but also using that  information to identify and correct problems, improve program  implementation, and make other important management and resource  allocation decisions. However, for more than two decades, our work has  highlighted weaknesses in the use of performance information in decision  making across the federal government. For example, in September  2017, we found that the use of performance information (i.e., data collected to measure progress toward agency goals) in various decision- making activities generally was unchanged or even declined government- wide, as reported by federal managers on a periodic survey we have  conducted since 1997. These persisting weaknesses could hinder  agencies\u2019 abilities to achieve critical results.", "Based on the aggregated, government-wide level survey results  presented in our September 2017 report, you asked us to review  individual agencies\u2019 use of performance information in decision making.  This report assesses the extent to which:  the reported use of performance information and related leading  practices at 24 agencies has changed compared to our prior survey in  2013; being subject to data-driven reviews related to managers\u2019 reported  use of performance information and leading practices; and  the Executive Branch has taken actions to enhance agencies\u2019 use of  performance information in various decision-making activities.", "To address the first and second objectives, we analyzed relevant results  from our 2017 survey of federal managers on organizational performance  and management issues. We administered the web-based survey to a  stratified random sample of 4,395 managers at 24 agencies between  November 2016 and March 2017. We received usable questionnaires  from about 67 percent of the eligible sample. The weighted response rate  at each agency generally ranged from 57 percent to 82 percent, except  for the Department of Justice, which had a weighted response rate of 36  percent. The maximum margin of error for the government-wide  estimates was less than or equal to 6 percentage points, and the  maximum margin of error for agency estimates was less than 20  percentage points. These results are generalizable to the population of  managers government-wide and at each individual agency. The 2017  results are comparable to those from other surveys we conducted in  1997, 2000, 2003, 2007, and 2013.", "To further address the first objective, we conducted various statistical  analyses on selected survey questions related to the use of performance  information and practices that can promote such use. For the use of  performance information, we selected the same set of 11 survey  questions used in our last report on our 2013 survey that focused on  agency-level survey results. Using 2017 survey data, we conducted  statistical analyses and ensured that these 11 questions were still  positively correlated and no changes were necessary. As in that  September 2014 report, we updated our index to create a single score for  each agency to approximate its reported use of performance information  in decision making as of 2017. We also reviewed our 2017 survey and  identified 22 questions that reflect five management practices\u2014identified  by our past work\u2014that can promote the use of performance information in  decision making. Of those 22 questions, we selected 10 questions that  our analyses showed had statistically significant associations with greater  reported use of performance information.", "For the index and each question described above, we calculated results  for each agency based on the 2017 survey results. We then determined if  each agency\u2019s results were statistically significantly different from (1) their  prior results in 2013 and (2) the government-wide average results in  2017. We focus on statistically significant results throughout the report  because these indicate that observed relationships between variables  and differences between groups are likely to be valid, after accounting for  the effects of sampling and other sources of survey error. Because our  audit work was limited to analyzing and summarizing the results of our  2017 survey, we did not conduct any audit work at the agencies to  determine what may have caused any statistically significant changes.  Appendix I presents the relevant survey results for each of the 24  agencies.", "To further address the second objective, we used 2017 survey results to  identify managers who reported they were familiar with their agency\u2019s  data-driven reviews. For those who reported familiarity with the reviews,  we identified the extent managers reported that their programs had been  subject to those reviews. Based on the extent they were subject to  reviews, we assessed differences among managers\u2019 (1) index scores and  (2) responses on the 10 questions that reflect leading practices that can  promote the use of performance information.", "For the third objective, we identified and reviewed various resources (i.e.,  guidance, guides, and playbooks) developed by OMB and the  Performance Improvement Council (PIC) that could support agencies\u2019 use  of performance information. We also reviewed our past work that  assessed Executive Branch activities to enhance the use of performance  information. Lastly, we reviewed documents on recent cross-agency  efforts to improve the use of data in federal decision making, and  interviewed OMB and PIC staff about any actions they have taken, or  planned to take, to further support the use of performance information  across the federal government. Appendix II provides additional details on  the objectives, scope, and methodology of this report.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Use of Performance Information in the Federal Government", "paragraphs": ["Concerned that the federal government was more focused on program  activities and processes than the results to be achieved, Congress  passed the Government Performance and Results Act of 1993 (GPRA).  GPRA sought to focus federal agencies on performance by requiring  agencies to develop long-term and annual goals, and measure and report  on progress towards those goals annually. Based on our analyses of the  act\u2019s implementation, we concluded in March 2004 that GPRA\u2019s  requirements had laid a solid foundation for results-oriented  management. At that time, we found that performance planning and  measurement had slowly yet increasingly become a part of agencies\u2019  cultures. For example, managers reported having significantly more  performance measures in 2003 than in 1997, when GPRA took effect  government-wide.", "However, the benefit of collecting performance information is fully realized  only when that information is actually used by managers to make  decisions aimed at improving results. Although our 2003 survey found  greater reported availability of performance information than in 1997, it  also showed managers\u2019 use of that information for various management  activities generally had remained unchanged. Based on those results,  and in response to a request from Congress, in September 2005, we  developed a framework intended to help agencies better incorporate  performance information into their decision making. As shown in figure  1, we identified  five leading practices that can promote the use of performance  information for policy and program decisions; and  four ways agency managers can use performance information to  make program decisions aimed at improving results.", "Our September 2005 report also highlighted examples of how agencies  had used performance information to improve results. For example, we  described how the Department of Transportation\u2019s National Highway  Traffic Safety Administration used performance information to identify,  develop, and share effective strategies that increased national safety belt  usage\u2014which can decrease injuries and fatalities from traffic accidents\u2014 from 11 percent in 1985 to 80 percent in 2004.", "Subsequently, the GPRA Modernization Act of 2010 (GPRAMA) was  enacted, which significantly expanded and enhanced the statutory  framework for federal performance management. The Senate  Committee on Homeland Security and Governmental Affairs report  accompanying the bill that would become GPRAMA stated that agencies  were not consistently using performance information to improve their  management and results. The report cited the results of our 2007  survey of federal managers. That survey continued to show little change  in managers\u2019 use of performance information. The report further stated  that provisions in GPRAMA are intended to address those findings and  increase the use of performance information to improve performance and  results. For example, GPRAMA requires certain agencies to designate a  subset of their respective goals as their highest priorities\u2014known as  agency priority goals\u2014and to measure and assess progress toward those  goals at least quarterly through data-driven reviews.", "Our recent work and surveys suggest that data-driven reviews are having  their intended effect. For example, in July 2015, we found that agencies  reported that their reviews had positive effects on progress toward  agency goals and efforts to improve the efficiency of operations, among  other things. In addition, for those managers who were familiar with their  agencies\u2019 data-driven reviews, our 2013 and 2017 surveys showed that  the more managers viewed their programs as being subject to a review,  the more likely they were to report their agencies\u2019 reviews were driving  results and conducted in line with our leading practices. Recognizing the  important role these reviews were playing in improving data-driven  decision making, our management agenda for the presidential and  congressional transition in 2017 included a key action to expand the use  of data-driven reviews beyond agency priority goals to other agency  goals.", "More broadly, our recent surveys of federal managers have continued to  show that reported government-wide uses of performance information  generally have not changed or in some cases have declined. As we  found in September 2017, and as illustrated in figure 2, the 2017 update  to our index suggests that government-wide use of performance  information did not improve between 2013 and 2017. In addition, it is  statistically significantly lower relative to our 2007 survey, when we  created the index.", "Moreover, in looking at the government-wide results on the 11 individual  survey questions that comprise the index, we found few statistically  significant changes in 2017 when compared to (1) our 2013 survey or (2)  the year each question was first introduced. For example, in comparing  2013 and 2017 results, two questions had results that were statistically  significantly different:", "The percentage of managers who reported that employees who report  to them pay attention to their agency\u2019s use of performance information  was statistically significantly higher (from 40 to 46 percent).", "The percentage of managers who reported using performance  information to adopt new program approaches or change work  processes was statistically significantly lower (from 54 to 47 percent).", "As we stated in our September 2017 report, the decline on the latter  question was of particular concern as agencies were developing plans to  improve their efficiency, effectiveness, and accountability, as called for by  an April 2017 memorandum from OMB."], "subsections": []}, {"section_title": "The Administration\u2019s Plans for Federal Performance Management", "paragraphs": ["In early 2017, the administration announced several efforts intended to  improve government performance. OMB issued several memorandums  detailing the administration\u2019s plans to improve government performance  by reorganizing the government, reducing the federal workforce, and  reducing federal agency burden. As part of the reorganization efforts,  OMB and agencies were to develop government-wide and agency reform  plans, respectively, designed to leverage various GPRAMA provisions.  For instance, the April 2017 memorandum mentioned above stated that  OMB intends to monitor implementation of the reforms using, among  other things, agency priority goals. While many agency-specific  organizational improvements were included in the President\u2019s fiscal year  2019 budget, released in February 2018, OMB published additional  government-wide and agency reform proposals in June 2018.", "The President\u2019s Management Agenda (PMA), released in March 2018,  outlines a long-term vision for modernizing federal operations and  improving the ability of agencies to achieve outcomes. To address the  issues outlined in the PMA, the administration established a number of  cross-agency priority (CAP) goals. CAP goals, required by GPRAMA, are  to address issues in a limited number of policy areas requiring action  across multiple agencies, or management improvements that are needed  across the government.", "The PMA highlights several root causes for the challenges the federal  government faces. Among them is that agencies do not consistently apply  data-driven decision-making practices. The PMA states that smarter use  of data and evidence is needed to orient decisions and accountability  around service and results. To that end, in March 2018, the administration  established the Leveraging Data as a Strategic Asset CAP goal to  improve the use of data in decision making to increase the federal  government\u2019s effectiveness."], "subsections": []}, {"section_title": "Federal Performance Management Leadership Roles and Responsibilities", "paragraphs": ["Over the past 25 years, various organizations, roles, and responsibilities  have been created by executive action or in law to provide leadership in  federal performance management. At individual agencies and across the  federal government, these organizations and officials have key  responsibilities for improving performance, as outlined below.", "OMB: At least every four years, OMB is to coordinate with other  agencies to develop CAP goals\u2014such as the one described earlier on  leveraging data as an asset\u2014to improve the performance and  management of the federal government. OMB is also required to  coordinate with agencies to develop annual federal government  performance plans to define, among other things, the level of  performance to be achieved toward the CAP goals. Following  GPRAMA\u2019s enactment, OMB issued guidance for initial  implementation, as required by the act, and continues to provide  updated guidance in its annual Circular No. A-11, additional  memorandums, and other means.", "Chief Operating Officer (COO): The deputy agency head, or  equivalent, is designated as the COO, with overall responsibility for  improving agency management and performance through, among  other things, the use of performance information.", "President\u2019s Management Council (PMC): The PMC is comprised of  OMB\u2019s Deputy Director for Management and the COOs of major  departments and agencies, among other individuals. Its  responsibilities include improving overall executive branch  management and implementing the PMA.", "Performance Improvement Officer (PIO): Agency heads designate  a senior executive as the PIO, who reports directly to the COO. The  PIO is responsible for assisting the head of the agency and COO to  ensure that agency goals are achieved through, among other things,  the use of performance information.", "Performance Improvement Council (PIC): The PIC is charged with  assisting OMB to improve the performance of the federal  government. It is chaired by the Deputy Director for Management at  OMB and includes PIOs from each of the 24 Chief Financial Officers  Act agencies, as well as other PIOs and individuals designated by the  chair. Among its responsibilities, the PIC is to work to resolve  government-wide or cross-cutting performance issues, and facilitate  the exchange among agencies of practices that have led to  performance improvements.", "Previously, the General Service Administration\u2019s (GSA) Office of  Executive Councils provided analytical, management, and administrative  support for the PIC, the PMC, and other government-wide management  councils. In January 2018, the office was abolished and its functions,  staff, and authorities, along with those of the Unified Shared Services  Management Office, were reallocated to GSA\u2019s newly created Shared  Solutions and Performance Improvement Office."], "subsections": []}]}, {"section_title": "Agencies\u2019 Use of Performance Information in Decision Making and Related Leading Practices Generally Has Not Improved", "paragraphs": [], "subsections": [{"section_title": "Reported Use of Performance Information in Decision Making Generally Has Not Improved at Individual Agencies Since 2013", "paragraphs": ["As at the government-wide level\u2014where, as described earlier, the use of  performance information did not change from 2013 to 2017\u2014managers\u2019  reported use of performance information at most agencies also did not  improve since 2013 (illustrated in figure 3).", "At the agency level, 3 of the 24 agencies had statistically significant  changes in their index scores\u20141 increase (National Science Foundation)  and 2 decreases (Social Security Administration and the Office of  Personnel Management). Also, in 2017, 6 agencies had results that  were statistically significantly different\u20144 higher and 2 lower\u2014than the  government-wide average (see sidebar).", "Throughout the report, we highlight two different types of statistically  significant results\u2014changes from our last survey in 2013 and differences  from the 2017 government-wide average. The former indicates when an  agency\u2019s reported use of performance information or leading practices  has measurably improved or declined. The latter indicates when it is  statistically significantly higher or lower than the rest of government.  These results suggest agencies have taken actions that led to  improvements in their use of performance information. For example,  when a result is a statistically significant increase since 2013, as with the  National Science Foundation index score in 2017, this suggests that the  agency has adopted practices that led to a measurable increase in the  use of performance information by managers.", "When a result is statistically significantly higher than the government-wide  average, like GSA\u2019s 2017 index score, this suggests that the agency\u2019s  use of performance information is among the highest results when  compared to the rest of government. These agencies could also have  insights into practices that led to relatively high levels of performance  information use. Finally, when a result is a statistically significant  decrease since 2013, as with the Social Security Administration\u2019s index  score in 2017, or statistically significantly lower than the government-wide  average, like the Department of Homeland Security\u2019s 2017 index score,  this suggests the agencies face challenges that are hampering their  ability to use performance information. Appendix III provides each  agency\u2019s index scores from 2007, 2013, and 2017 to show changes  between survey years.", "When we disaggregated the index and analyzed responses from the 11  questions that comprise the index\u2014which could help pinpoint particular  actions that improved the use of performance information\u2014we similarly  found relatively few changes in agencies\u2019 recent results. Specifically, we  identified 16 instances where agency responses on individual questions  were statistically significantly different from 2013 to 2017\u201410 increases  and 6 decreases. This represents about 6 percent of the total possible  responses to the 11 survey questions from each of the agencies.", "In addition, we found 12 instances where an agency\u2019s result on a  question was statistically significantly higher (11) or lower (1) than the  government-wide average in 2017. For example, the percentage of Social  Security Administration (SSA) managers reporting that their peers use  performance information to share effective approaches was statistically  significantly higher than the government-wide average. Although SSA\u2019s  index score had a statistically significant decline in 2017 compared to  2013, the agency\u2019s index score remains relatively high, as it has in prior  years. The scope of our work has not allowed us to determine definitively  what factors caused the decline in SSA\u2019s index score and whether the  decline is likely to continue, although its result on this particular question  may indicate a continued strength. Each agency\u2019s results on the 11  questions that comprise the index are presented in appendix I. The  agencies\u2019 respective statistically significant results are identified in figure  4.", "While some agencies had statistically significant improvements on  individual questions, and could point to actions that led to improvements  in their use of performance information, these improvements should be  considered in relation to the range of agency results and the government- wide average. In figure 4, there are five agencies with statistically  significant increases on responses to individual questions, where those  results were not statistically significantly higher than the government-wide  average (see arrows without plus signs for the Departments of  Agriculture, Defense, and Justice; the Environmental Protection Agency;  and the National Science Foundation). While these represent  improvements, they should be considered in relation to the range of  agency results and the government-wide average (provided in detail in  the agency summaries in appendix I). For example, in 2017, the  percentage of managers at the Department of Agriculture who reported  that upper management use performance information to inform decisions  about program changes was statistically significantly higher than in 2013.  However, the department\u2019s 2017 result (37 percent) was relatively lower  when compared to the maximum agency result on that question (60  percent). Appendix I presents the results on the index and the 11  questions that comprise it for each of the 24 agencies."], "subsections": []}, {"section_title": "Individual Agencies\u2019 Reported Use of Leading Practices Generally Remains Unchanged", "paragraphs": ["When we compared government-wide and agency-level results on  selected survey questions that reflect practices that promote the use of  performance information, we found that results between 2013 and 2017  generally remained unchanged. As described earlier, there are 10 survey  questions that both reflect the five leading practices identified in our past  work and had statistically significant associations with higher index  scores. As shown in figure 5, government-wide results on 2 of the 10  questions were statistically significantly different, both increases, from  2013 to 2017. Despite these two increases, the overall results suggest  these practices are not widely followed government-wide. On most of the  10 questions, only about half (or fewer) of the managers reported their  agencies were following them to a \u201cgreat\u201d or \u201cvery great\u201d extent.", "When we analyzed agency-level responses to these 10 questions, we  also found relatively few changes in recent results. Specifically, our  analysis found 20 instances\u201416 increases and 4 decreases\u2014where  agencies\u2019 responses on individual questions were statistically significantly  different from 2013 to 2017. This represents about 8 percent of the total  possible responses to the 10 survey questions from each of the  agencies.", "In addition, we found 10 instances where an agency\u2019s result on a  question was statistically significantly higher (8) or lower (2) than the  government-wide average in 2017. Each agency\u2019s results on these 10  questions are presented in appendix I, and the statistically significant  results are identified in figure 6.", "Those agencies with results on individual questions that are either  statistically significantly higher than 2013, higher than the 2017  government-wide average, or both may have taken actions in line with our  leading practices for promoting the use of performance information. For  example, the National Science Foundation had both types of statistically  significant results on a question about having sufficient information on the  validity of their performance data. Here, the agency\u2019s result increased 27  percentage points from 2013 to 2017. While the scope of our review does  not allow us to definitively determine the reasons for the National Science  Foundation\u2019s higher results, they suggest the agency has taken recent  actions that greatly improved the availability and accessibility of  information on the validity of performance data. In both 2013 and 2017,  our analyses found this particular question to be the strongest predictor of  higher performance information use when we tested for associations  between the questions that reflect leading practices and our index."], "subsections": []}]}, {"section_title": "Managers Whose Programs Were Subject to Data- Driven Reviews Reported Greater Use of Performance Information and Leading Practices", "paragraphs": ["Our 2017 survey results show that managers who reported their  programs were subject to data-driven reviews also were more likely to  report using performance information in decision making to a greater  extent (see figure 7). For the 35 percent of managers who reported being  familiar with data-driven reviews, those who reported their programs had  been subject to data-driven reviews to a \u201cgreat\u201d or \u201cvery great\u201d extent had  index scores that were statistically significantly higher than those whose  programs were subject to these reviews to a lesser extent.", "Similarly, we found that being subject to data-driven reviews to a greater  extent was also related to greater reporting of agencies following  practices that can promote the use of performance information. As figure  8 shows, managers who reported their programs were subject to these  reviews to a \u201cgreat\u201d or \u201cvery great\u201d extent more frequently reported that  their agencies followed the five leading practices that promote the use of  performance information, as measured by the 10 related survey questions  associated with higher scores on the index. For example, of the estimated  48 percent of managers who reported their programs were subject to  data-driven reviews to a \u201cgreat\u201d or \u201cvery great\u201d extent, 72 percent also  reported that managers at their level (peers) effectively communicate  performance information on a routine basis to a \u201cgreat\u201d or \u201cvery great\u201d  extent. Conversely, for the 24 percent of managers who reported their  programs were subject to data-driven reviews to a \u201csmall\u201d or \u201cno\u201d extent,  only 30 percent reported that managers at their level do this to a \u201cgreat\u201d  or \u201cvery great\u201d extent."], "subsections": []}, {"section_title": "Opportunities Exist for the Executive Branch to Increase the Use of Performance Information within Agencies", "paragraphs": [], "subsections": [{"section_title": "Disparities Exist in the Use of Performance Information by Senior Agency Leaders and Managers at Lower Levels", "paragraphs": ["Our past work has found that the Executive Branch has taken steps to  improve the use of performance information in decision making by senior  leaders at federal agencies. However, our survey results indicate those  steps have not led to similar improvements in use by managers at lower  levels. Through its guidance to implement GPRAMA, OMB developed a  framework for performance management in the federal government that  involves agencies setting goals and priorities, measuring performance,  and regularly reviewing and reporting on progress. This includes  expectations for how agency senior leaders should use performance  information to assess progress towards achieving agency priority goals  through data-driven reviews, and strategic objectives through strategic  reviews. For example, GPRAMA requires, and OMB\u2019s guidance  reinforces, that data-driven reviews should involve the agency head,  Chief Operating Officer, Performance Improvement Officer, and other  senior officials responsible for leading efforts to achieve each goal.", "OMB\u2019s guidance also identifies ways in which agency leaders should use  the results of those reviews to inform various decision-making activities,  such as revising strategies, formulating budgets, and managing risks. Our  past work also found that agencies made progress in implementing these  reviews and using performance information. In July 2015, we found that  agencies generally were conducting their data-driven reviews in line with  GPRAMA requirements and our related leading practices, including that  agency leaders used the reviews to drive performance improvement. In  addition, in September 2017, we reported on selected agencies\u2019  experiences in implementing strategic reviews and found that the reviews  helped direct leadership attention to progress on strategic objectives.", "Despite those findings, our survey results continue to show that the  reported use of performance information by federal managers has  generally not improved, and actually declined at some agencies. This  could be because of the two different groups of agency officials covered  by our work. GPRAMA\u2019s requirements, and the federal performance  management framework established by OMB\u2019s guidance, apply at the  agency-wide level and generally involve senior leaders. Our past work  reviewing implementation of the act therefore focused on improvements  in the use of performance information by senior leaders at the agency- wide level. In contrast, our surveys covered random samples of mid- and  upper-level managers within those agencies, including at lower  organizational levels such as component agencies. Their responses  indicate that the use of performance information more broadly within  agencies\u2014at lower organizational levels\u2014generally has not improved  over time. The exception to this was managers whose programs were  subject to the data-driven reviews required by GPRAMA. As described  above, those managers were more likely to report greater use of  performance information in their agencies. This reinforces the value of the  processes and practices put in place by GPRAMA. Our survey results  suggest that limited actions have been taken to diffuse processes and  practices related to the use of performance information to lower levels  within federal agencies, where mid-level and senior managers make  decisions about managing programs and operations.", "Although OMB staff agreed that diffusing processes and practices to  lower levels could lead to improved use of performance information, they  told us they have not directed agencies to do so for a few reasons. First,  OMB staff expressed concerns about potentially imposing a \u201cone-size-fits- all\u201d approach on agencies. They stated that agencies are best positioned  to improve their managers\u2019 use of performance information, given their  individual and unique missions and cultures, and the environments in  which they operate. We agree that it makes sense for agencies to be able  to tailor their approaches for those reasons. OMB\u2019s existing guidance  provides an overarching framework that recognizes the need for flexibility  and for agencies to tailor their approaches. Moreover, given the long- standing and cross-cutting nature of this challenge, a government-wide  approach also would provide a consistent focus on improving the use of  performance information more extensively within agencies.", "OMB staff also told us that they believed it would go beyond their  mandate to direct agencies to extend GPRAMA requirements to lower  levels. GPRAMA requires OMB to provide guidance to agencies to  implement its requirements, which only apply at the agency-wide level. As  noted earlier, however, GPRAMA also requires OMB to develop cross- agency priority (CAP) goals to improve the performance and  management of the federal government. The President\u2019s Management  Agenda established a CAP goal to leverage data as a strategic asset, in  part, to improve the use of data for decision making and accountability  throughout the federal government. This new CAP goal presents an  opportunity for OMB and agencies to identify actions to expand the use of  performance information in decision making throughout agencies."], "subsections": []}, {"section_title": "Plan for New CAP Goal Does Not Yet Contain Required Elements for Successful Implementation", "paragraphs": ["As of June 2018, the action plan for implementing the Leveraging Data as  a Strategic Asset CAP goal is limited. According to the President\u2019s  Management Agenda and initial CAP goal action plan, the goal primarily  focuses on developing and implementing a long-term, enterprise-wide  federal data strategy to better govern and leverage the federal  government\u2019s data. It is through this strategy that, among other things, the  administration intends to improve the use of data for decision making and  accountability. However, the strategy is under development and not  expected to be released until January 2019, with a related plan to  implement it expected in April 2019.", "The existing action plan, released in March 2018 and updated in June  2018, does not yet include specific steps needed to improve the use of  data\u2014including performance information\u2014more extensively within  agencies. According to the action plan for the goal, potential actions  currently under consideration focus on establishing agency \u201clearning agendas\u201d that prioritize the development  and use of data and other evidence for decision-making; building agency capacity to use data and other evidence; and  improving the timeliness of performance information and other data,  and making that information available to decision makers and the  public.", "Although developing learning agendas and building capacity could help  improve the use of performance information in agencies, improving  availability of data may be less effective. For example, as our past survey  results have shown, increasing the availability of performance information  has not resulted in corresponding increases in its use in decision  making.", "We recognize that the CAP goal was created in March 2018.  Nonetheless, it is important that OMB and its fellow goal leaders develop  the action plan and related federal data strategy consistent with all key  requirements to better ensure successful implementation. The action plan  does not yet include complete information related to the following  GPRAMA requirements: performance goals that define the level of performance to be achieved  each year for the CAP goal;  the various federal agencies, organizations, programs, and other  activities that contribute to the CAP goal; performance measures to assess overall progress towards the goal  as well as the progress of each agency, program, and other activity  contributing to the goal; and  clearly defined quarterly targets.", "Consistent with GPRAMA, Standards for Internal Control in the Federal  Government identifies information that agencies are required to include in  their plans to help ensure they achieve their goals. The standards state  that objectives\u2014such as improving the use of data in decision making\u2014 should be clearly defined to enable the identification of risks. Objectives  are to be defined in specific terms so they can be understood at all levels  of the entity\u2014in this case, government-wide as well as within individual  agencies. This involves defining what is to be achieved, who is to achieve  it, how it will be achieved, and the time frames for achievement.", "Ensuring that future updates to the new CAP goal\u2019s action plan includes  all required elements is particularly important, as our previous work has  found that some past CAP goal teams did not meet all planning and  reporting requirements. For example, in May 2016 we found that most  of the CAP goal teams we reviewed had not established targets for all  performance measures they were tracking. This limited the transparency  of their efforts and the ability to track progress toward established goals.  We recommended that OMB, working with the Performance Information  Council (PIC), report on actions that CAP goal teams are taking, or plan  to take, to develop such targets and performance measures. OMB staff  generally agreed and, in July 2017, told us they were working, where  possible, to assist the development of measures for CAP goals. However,  the recommendation has not been addressed and OMB staff said the  next opportunity to address it would be when the administration  established new CAP goals (which took place in March 2018). Following  the initial release of the new CAP goals, CAP goal teams are to more fully  develop the related action plans through quarterly updates. Given the  ongoing importance of meeting these planning and reporting  requirements, we will continue to monitor the status of actions to address  this recommendation as implementation of the new CAP goals proceeds."], "subsections": []}, {"section_title": "Our Survey Results Identify Additional Opportunities for the PIC to Improve Federal Use of Performance Information", "paragraphs": ["While the PIC, which is chaired by OMB, has contributed to efforts to  enhance the use of performance information, our survey results identify  additional opportunities to further those efforts. The PIC\u2019s past efforts  have included hosting various working groups and learning events for  agency officials to provide performance management guidance, and  developing resources with relevant practices. For example, the PIC  created a working group focused on agency performance reviews, which  was used to share recommendations for how agencies can implement  reviews, along with a guide with practices for effectively implementing  strategic reviews. In January 2018, staff supporting the PIC joined with  staff from another GSA office to create a new group called Fed2Fed  Solutions. This group consults with agencies and provides tailored  support, such as data analysis and performance management training for  agency officials, to help them address specific challenges related to  organizational transformation, data-driven decision making, and other  management improvement efforts.", "Our survey results identify useful information related to potential  promising practices and challenges that OMB and the PIC could use to  inform efforts to enhance the use of performance information more  extensively within agencies (e.g., at lower levels). As was previously  described, the PIC has responsibilities to (1) facilitate the exchange  among agencies of proven practices, and (2) work to resolve government- wide or cross-cutting performance issues, such as challenges. Our  analyses of 2017 survey results identified instances where agencies may  have found effective ways to enhance the use of performance information  by agency leaders and managers in decision making, as well as  instances where agencies (and their managers) face challenges in doing  so.", "Specifically, based on analyses of our survey responses, we identified 14  agencies that may have insights into specific practices that led to recent  improvements in managers\u2019 use of performance information, or ways that  they maintain relatively high levels of use by their managers when  compared to the rest of the government. Figure 9 summarizes the  agencies identified earlier in the report that had statistically significant  increases, or results higher than the government-wide average, on our  index or individual survey questions. As the figure shows, several  agencies had statistically significant results across all three sets of  analyses and therefore may have greater insights to offer: the General  Services Administration, National Aeronautics and Space Administration,  and the National Science Foundation.", "In addition, our analyses identified nine agencies where results suggest  managers face challenges that have hampered their ability to use  performance information. Figure 10 summarizes the agencies identified  earlier in the report that had statistically significant decreases, or results  lower than the government-wide average, on our index or individual  survey questions. As the figure shows, the Office of Personnel  Management had statistically significant decreases in all three sets of  analyses.", "Four agencies\u2014the Departments of the Treasury and Veterans Affairs,  the Nuclear Regulatory Commission, and the Social Security  Administration\u2014were common to both of the figures above. That is, they  had results that indicate they may have insights on some aspects of using  performance information and face challenges in other aspects. As was  mentioned earlier, to provide proper context, these results should be  considered in relation to the range of agency results and the government- wide average (provided in detail in the agency summaries in appendix I).", "Given the prioritization of other activities, such as the recent creation of  the Fed2Fed Solutions program, the PIC has not yet undertaken a  systematic approach that could improve the use of performance  information by managers at lower levels within agencies. Such an  approach would involve identifying and sharing practices that have led to  improved use, as well as identifying common or cross-cutting challenges  that have hampered such use. The results of our analyses could help the  PIC do so, and in a more targeted manner. By identifying and sharing  proven practices, the PIC could further ensure that agency leaders and  managers are aware of effective or proven ways they can use  performance information to inform their decisions across the spectrum of  activities they manage within their agencies. Those proven practices also  may help agency leaders and managers resolve any identified  challenges.", "Furthermore, in September 2017, we found that, for the estimated 35  percent of managers who reported familiarity with data-driven reviews,  the more they viewed their programs being subject to a review, the more  likely they were to report the reviews were driving results and were  conducted in line with our leading practices for using performance  information. Despite the reported benefits of and results achieved through  data-driven reviews, they were not necessarily widespread. As noted  above, GPRAMA requires agencies to conduct such reviews for agency  priority goals, which represent a small subset of goals, and they are  required at the departmental level. These reasons may explain why most  managers reported they were not familiar with the reviews.", "As a result, we recommended that OMB should work with the PIC to  identify and share among agencies practices for expanding the use of  data-driven reviews. OMB staff agreed with our recommendation but have  yet to address it. In June 2018, OMB updated its annual guidance to  agencies to explicitly encourage them to expand data-driven reviews to  include other goals, priorities, and management areas as applicable to  improve organizational performance. However, as of June 2018, OMB  and the PIC have yet to take any steps to identify and share practices for  expanding the use of these reviews in line with our recommendation.  Given the additional analyses we conducted for this report\u2014which show  that being subject to data-driven reviews is related to greater reported use  of performance information and leading practices that promote such  use\u2014we continue to believe these further actions would help agencies  implement these reviews more extensively. We reiterate the importance  of the September 2017 recommendation and will continue to monitor  OMB\u2019s progress to address it."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["For more than 20 years, our work has highlighted weaknesses in the use  of performance information in federal decision making. While the  Executive Branch has taken some actions in recent years, such as  establishing a framework for performance management across the  federal government, our survey results underscore that more needs to be  done to improve the use of performance information more extensively  within agencies and government-wide. The President\u2019s Management  Agenda and its related CAP goal to leverage data as a strategic asset  present an opportunity to do so, as it aims to improve data-driven  decision making. As OMB and its fellow goal leaders more fully develop  the action plan for achieving this goal, providing additional details for its  plans to improve data-driven decision making would help provide  assurance that it can be achieved.", "As part of those initiatives, our survey results could provide a useful guide  for targeting efforts. Officials at each agency could use these results to  identify areas for additional analysis and potential actions that could help  improve the use of performance information across the agency and at  lower levels. Similarly, OMB and the PIC could use the results to identify  broader issues in need of government-wide attention. It will also be  important, however, for OMB and the PIC to go beyond this analysis and  work with agencies to identify and share proven practices for increasing  the use of performance information at lower levels within agencies, as  well as challenges that may be hampering agencies\u2019 ability to do so."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to OMB:  The Director of OMB should direct the leaders of the Leveraging Data as  a Strategic Asset CAP Goal to ensure future updates to the action plan,  and the resulting federal data strategy, provide additional details on  improving the use of data, including performance information, more  extensively within federal agencies. The action plan should identify  performance goals; contributing agencies, organizations, programs, and  other activities; those responsible for leading implementation within these  contributors; planned actions; time frames; and means to assess  progress. (Recommendation 1)", "The Director of OMB, in coordination with the PIC, should prioritize efforts  to identify and share among agencies proven practices for increasing,  and challenges that hamper, the use of performance information in  decision making more extensively within agencies. At a minimum, this  effort should involve the agencies that our survey suggests may offer  such insights. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Director of the Office of  Management and Budget for review and comment. We also provided a  draft of the report to the heads of each of the 24 federal agencies covered  by our survey.", "OMB had no comments, and informed us that it would assess our  recommendations and consider how best to respond.", "We are sending copies of this report to congressional requesters, the  Director of the Office of Management and Budget, the heads of each of  the 24 agencies, and other interested parties. This report will also be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or mcneilt@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of our report. Key contributors to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Summaries of Agency Survey Results", "paragraphs": [], "subsections": [{"section_title": "U.S. Department of Agriculture", "paragraphs": ["(USDA) (Goverment-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Commerce", "paragraphs": ["(Commerce) (Goverment-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to 5 Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Defense", "paragraphs": ["(Goverment-wide) (DOD)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Education", "paragraphs": ["(Education) (Goverment-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Energy", "paragraphs": ["(Government-wide) (Energy)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Health & Human Services", "paragraphs": ["(HHS) (Goverment-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Partices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Homeland Security", "paragraphs": ["(DHS) (Goverment-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Housing and Urban Development", "paragraphs": ["(Government-wide) (HUD)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of the Interior", "paragraphs": ["(Interior) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Justice", "paragraphs": ["(DOJ) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Labor", "paragraphs": ["(DOL) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of State", "paragraphs": ["(State) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Transportation", "paragraphs": ["(DOT) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of the Treasury", "paragraphs": ["(Treasury) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Department of Veterans Affairs", "paragraphs": ["(Government-wide) (VA)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "U.S. Agency for International Development", "paragraphs": ["(Goverment-wide) (USAID)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}]}, {"section_title": "Environmental Protection Agency", "paragraphs": ["(Government-wide) (EPA)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "General Services Administration", "paragraphs": ["(Government-wide) (GSA)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "National Aeronautics and Space Administration", "paragraphs": ["(Government-wide) (NASA)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "National Science Foundation", "paragraphs": ["(Government-wide) (NSF)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Nuclear Regulatory Commission", "paragraphs": ["(NRC) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Office of Personnel Management", "paragraphs": ["(Government-wide) (OPM)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Partices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Small Business Administration", "paragraphs": ["(SBA) (Government-wide)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}, {"section_title": "Social Security Administration", "paragraphs": ["(Government-wide) (SSA)"], "subsections": [{"section_title": "11 Questions that Comprise the Index", "paragraphs": [], "subsections": []}, {"section_title": "Performance information is used to:", "paragraphs": ["10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d"], "subsections": []}, {"section_title": "10 Questions Related to Leading Practices That Promote the Use of Performance Information", "paragraphs": [], "subsections": []}, {"section_title": "Leading Practices:", "paragraphs": [], "subsections": []}, {"section_title": "Aligning agencywide goals, objectives, and measures", "paragraphs": [], "subsections": []}, {"section_title": "Improving the usefulness of performance information", "paragraphs": [], "subsections": []}, {"section_title": "Communicate performance information frequently and effectively", "paragraphs": [], "subsections": []}]}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report responds to a request that we analyze agency-level results  from our 2017 survey of federal managers at the 24 agencies covered by  the Chief Financial Officers (CFO) Act of 1990, as amended, to determine  the extent agencies are using performance information. This report  assesses the extent to which:  1.  the reported use of performance information and related leading  practices at 24 agencies has changed compared to our prior survey in  2013;  2.  being subject to data-driven reviews related to managers\u2019 reported  use of performance information and leading practices; and  3.  the Executive Branch has taken actions to enhance agencies\u2019 use of  performance information in various decision-making activities.", "From November 2016 through March 2017, we administered our online  survey to a stratified random sample of 4,395 individuals from a  population of 153,779 mid- and upper-level civilian managers and  supervisors at the 24 CFO Act agencies. The management levels  covered general schedule (GS) or equivalent schedules at levels  comparable to GS-13 through GS-15, and career Senior Executive  Service (SES) or equivalent. We obtained the sample from the Office of  Personnel Management\u2019s Enterprise Human Resources Integration  database as of September 30, 2015\u2014the most recent fiscal year data  available at the time. The sample was stratified by agency and whether  the manager or supervisor was a member of the SES. To help determine  the reliability and accuracy of the database elements used to draw our  sample of federal managers for the 2017 survey, we checked the data for  reasonableness and the presence of any obvious or potential errors in  accuracy and completeness and reviewed our past analyses of the  reliability of this database. We concluded in our September 2017 report  that the data used to draw our sample were sufficiently reliable for the  purpose of the survey. For the 2017 survey, we received usable  questionnaires from about 67 percent of the eligible sample. The  weighted response rate at each agency generally ranged from 57 percent  to 82 percent, except the Department of Justice, which had a weighted  response rate of 36 percent. The overall survey results are generalizable  to the population of managers government-wide and at each individual  agency.", "To assess the potential bias from agencies with lower response rates, we  conducted a nonresponse bias analysis using information from the survey  and sampling frame as available. The analysis confirmed discrepancies in  the tendency to respond to the survey related to agency and SES status.  The analysis also revealed some differences in response propensity by  age and GS level; however, the direction and magnitude of the  differences on these factors were not consistent across agencies or  strata. Our data may be subject to bias from unmeasured sources for  which we cannot control. Results, and in particular estimates from  agencies with low response rates such as the Department of Justice,  should be interpreted with caution. However, the survey\u2019s results are  comparable to five previous surveys we conducted in 1997, 2000, 2003,  2007, and 2013.", "To address the first objective, we used data from our 2017 survey to  update agency scores on our use of performance information index.   This index, which was last updated using data from our 2013 survey,  averages managers\u2019 responses on 11 questions related to the use of  performance information for various management activities and decision  making. Using 2017 survey data, we conducted statistical analyses to  ensure these 11 questions were still positively correlated. That analysis  confirmed that no negative correlations existed and therefore no changes  to the index were needed. Figure 11 shows the questions that comprise  the index.", "After calculating agency index scores for 2017, we compared them to  previous results from 2007 and 2013, and to the government-wide  average for 2017, to identify any statistically significant differences. We  focus on statistically significant results because these indicate that  observed relationships between variables and differences between  groups are likely to be valid, after accounting for the effects of sampling  and other sources of survey error. For each of the 11 questions that  comprise the index, we identified individual agency results, excluding  missing and no basis to judge responses, and determined when they  were statistically significantly different from (1) the agency\u2019s results on the  same question in 2013, or (2) the government-wide average results on  the question in 2017. In this report, we analyzed and summarized the  results of our 2017 survey of federal managers. Due to the limited scope  of the engagement, we did not conduct additional audit work to determine  what may have caused statistically significant changes between our 2017  and past survey results.", "To further address this objective we completed several statistical  analyses that allowed us to assess the association between the index and  22 survey questions that we determined relate to leading practices we  previously found promote the use of performance information. See figure  12 for the 22 specific questions related to these five practices that we  included in the analysis.", "When we individually tested these 22 survey questions (bivariate  regression), we found that each was statistically significantly and  positively related to the index in 2017. This means that each question,  when tested in isolation from other factors, was associated with higher  scores on the index. However, when all 22 questions were tested  together (multivariate regression), we found that 5 questions continued to  be positively and significantly associated with the index in 2017, after  controlling for other factors.", "To conduct this multivariate analysis, we began with a base model that  treated differences in managers\u2019 views of agency performance  management use as a function of the agency where they worked. We  found, however, that a model based on agency alone had little predictive  power (R-squared of 0.04). We next examined whether managers\u2019  responses to these questions reflecting practices that promote the use of  performance information related to their perceptions of agency use of  performance information, independent of agency. The results of this  analysis are presented in table 1 below. Each coefficient reflects the  increase in our index associated with a one-unit increase in the value of a  particular survey question.", "Our final multivariate regression model had an R-squared of 0.67,  suggesting that the variables in this model explain approximately 67  percent of the variation in the use index. We also tested this model  controlling for whether a respondent was a member of the SES and found  similar results.", "As shown above in table 1, five questions related to three of the leading  practices that promote agencies\u2019 use of performance information were  statistically significant in 2017. These results suggest that, when  controlling for other factors, certain specific efforts to increase agency use  of performance information\u2014such as providing information on the validity  of performance data\u2014may have a higher return and lead to higher index  scores.", "With respect to aligning agency-wide goals, objectives, and  measures, we found that each increase in terms of the extent to which  individuals felt that managers aligned performance measures with  agencywide goals and objectives was associated with a 0.08 increase  in their score on the use index.", "In terms of improving the usefulness of performance information, we  found that having information on the validity of performance data for  decision making was the strongest predictor in our model (0.18). As  measured here, taking steps to ensure the performance information is  useful and appropriate was associated with almost as large a change  in a managers\u2019 index score (0.16).", "In terms of developing agency capacity to use performance  information, we found that having sufficient analytical tools to collect,  analyze, and use performance information (0.07), and providing or  paying for training that would help link their programs to achievement  of agency strategic goals (0.10), were also statistically significantly  related to a manager\u2019s reported use of performance information.", "When we combined these results with what we previously found through  a similar analysis of 2013 survey results in September 2014, we identified  10 questions that have had a statistically significant association with  higher index scores. This reinforces the importance of the five leading  practices to promote the use of performance information. For each of  these questions, which are outlined in figure 13 below, we determined  when agency results were statistically significantly different from 2013  results or the 2017 government-wide average.", "For the second objective, we examined, based on the extent they  responded their programs had been subject to agency data-driven  reviews, differences in managers\u2019 use index scores and responses on  questions related to practices that promote the use of performance  information. We grouped managers based on the extent they reported  their programs had been subject to these reviews, from \u201cno extent\u201d  through \u201cvery great extent.\u201d We then calculated the average index scores  for the managers in each of those five categories.", "We also examined differences in how managers responded to the 10  questions reflecting practices that can promote the use of performance  information based on the extent they reported their programs had been  subject to data-driven reviews. We grouped managers into three  categories based on the extent they reported their programs had been  subject to these reviews (no-small extent, moderate extent, great-very  great extent). We then compared how these groups responded to the ten  questions.", "For the third objective, we reviewed our past work that assessed Executive Branch activities to enhance  the use of performance information;  various resources (i.e., guidance, guides, and playbooks) developed  by the Office of Management and Budget (OMB) and the Performance  Improvement Council (PIC) that could support agencies\u2019 use of  performance information; and  the President\u2019s Management Agenda, and related materials with  information on cross-agency efforts to improve the use of data in  federal decision making.", "Lastly, for the third objective we also interviewed OMB and PIC staff  about any actions they have taken, or planned to take, to further support  the use of performance information across the federal government.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: Comparison of 2007, 2013, and 2017 Agency Use of Performance Information Index Scores", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the above contact, Benjamin T. Licht (Assistant Director)  and Adam Miles (Analyst-in-Charge) supervised this review and the  development of the resulting report. Arpita Chattopadhyay, Caitlin Cusati,  Meredith Moles, Dae Park, Amanda Prichard, Steven Putansu, Alan  Rozzi, Shane Spencer, and Khristi Wilkins also made key contributions.  Robert Robinson developed the graphics for this report. Alexandra  Edwards, Jeff DeMarco, Mark Kehoe, Ulyana Panchishin, and Daniel  Webb verified the information presented in this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Results of the Periodic Surveys on Organizational Performance and  Management Issues  Managing for Results: Further Progress Made in Implementing the GPRA  Modernization Act, but Additional Actions Needed to Address Pressing  Governance Challenges. GAO-17-775. Washington, D.C.: September 29,  2017.", "Supplemental Material for GAO-17-775: 2017 Survey of Federal  Managers on Organizational Performance and Management Issues.  GAO-17-776SP. Washington, D.C.: September 29, 2017.", "Program Evaluation: Annual Agency-wide Plans Could Enhance  Leadership Support for Program Evaluations. GAO-17-743. Washington,  D.C.: September 29, 2017.", "Managing for Results: Agencies\u2019 Trends in the Use of Performance  Information to Make Decisions. GAO-14-747. Washington, D.C.:  September 26, 2014.", "Managing for Results: Executive Branch Should More Fully Implement  the GPRA Modernization Act to Address Pressing Governance  Challenges. GAO-13-518. Washington, D.C.: June 26, 2013.", "Managing for Results: 2013 Federal Managers Survey on Organizational  Performance and Management Issues, an E-supplement to GAO-13-518.  GAO-13-519SP. Washington, D.C.: June 26, 2013.", "Program Evaluation: Strategies to Facilitate Agencies\u2019 Use of Evaluation  in Program Management and Policy Making. GAO-13-570. Washington,  D.C.: June 26, 2013.", "Government Performance: Lessons Learned for the Next Administration  on Using Performance Information to Improve Results. GAO-08-1026T.  Washington, D.C.: July 24, 2008.", "Government Performance: 2007 Federal Managers Survey on  Performance and Management Issues, an E-supplement to  GAO-08-1026T. GAO-08-1036SP. Washington, D.C.: July 24, 2008.", "Results-Oriented Government: GPRA Has Established a Solid  Foundation for Achieving Greater Results. GAO-04-38. Washington, D.C.:  March 10, 2004.", "Managing for Results: Federal Managers\u2019 Views on Key Management  Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.:  May 25, 2001.", "Managing for Results: Federal Managers\u2019 Views Show Need for Ensuring  Top Leadership Skills.GAO-01-127. Washington, D.C.: October 20, 2000.", "The Government Performance and Results Act: 1997 Governmentwide  Implementation Will Be Uneven. GAO/GGD-97-109. Washington, D.C.:  June 2, 1997."], "subsections": []}], "fastfact": ["Information about whether and how well agencies are reaching their goals is essential to making the federal government more effective. This only works, however, when federal managers use that data to make decisions.", "Despite various efforts aimed at increasing managers\u2019 use of data in decision making, our work has found little change over the past 20 years. The Office of Management and Budget has begun taking steps to address this issue, and our work identified additional practices\u2014such as data-driven reviews\u2014that can lead to increased use of data.", "We recommended that OMB do more to further improve managers' use of performance information."]}
{"id": "GAO-19-233", "url": "https://www.gao.gov/products/GAO-19-233", "title": "Ground Combat Forces: The Marine Corps Should Take Actions to Track Training Funds and Link Them to Readiness", "published_date": "2019-04-08T00:00:00", "released_date": "2019-04-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Training is key to building readiness\u2014the military's ability to fight and meet the demands of its missions. Through the Department of Defense (DOD) budget cycle, the Marine Corps estimates or programs its funding needs for training and spends funds to accomplish its training mission. Questions have been raised about whether the Marine Corps' training budget estimates are sufficiently detailed to determine training costs at the unit level or the expected readiness generated by those costs.", "House Report 115-200 included a provision for GAO to examine the military services' budgeting processes to build unit-level training readiness. This report examines the extent to which the Marine Corps (1) tracks unit-level training funds for ground combat forces through the budget cycle, and (2) links ground combat forces' unit-level training funds to readiness. GAO analyzed budget data and studies conducted by the Marine Corps and others, examined tools used by units to link training funds with readiness, and interviewed knowledgeable officials at various levels in the Marine Corps."]}, {"section_title": "What GAO Found", "paragraphs": ["The Marine Corps cannot fully track all unit-level training funds for ground combat forces through the budget cycle. According to GAO's analysis of data provided by the Marine Expeditionary Forces (MEFs), the principal warfighting organization for the Marine Corps, units can track some, but not all, funds for training exercises from the budget request through use of the funds. The Marine Corps cannot fully track all training funds through the budget cycle, in part, because it has not established the consistent use of fiscal codes. Two key fiscal codes that officials identified as relevant to track funds for unit-level training are the Marine Corps Programming Code (MCPC) and the Special Interest Code (SIC). The Marine Corps uses MCPCs to program funds, but GAO found that when the Marine Corps spends those funds, it uses a different set of fiscal codes. This makes it difficult to link the programmed intent of funds to the execution of those funds. The Marine Corps uses SICs to track funds associated with training exercises, but GAO found that units do not use SICs consistently. For example, officials at all three MEFs told GAO that units generate SICs for large-scale training exercises, but may not do so for small-scale exercises. The Marine Corps is taking steps to align fiscal codes across the budget cycle, but this effort is in its early stages and will not include MCPCs, and may not address the inconsistent use of SICs. Without the ability to track unit-level training funds through the budget cycle, the Marine Corps lacks readily available data to assess whether funds were obligated consistent with their programmed intent and to adequately forecast and defend budget requests for training.", "Although internal Marine Corps assessments and guidance state that the Marine Corps needs an enterprise-wide process to link resources to readiness, the Marine Corps has made little progress establishing a link between training funds for ground combat forces and readiness. The Marine Corps identified challenges with linking funds to readiness in a series of reports from fiscal years 2009 through 2014, citing factors such as stove-piped efforts and limited data availability and quality. Guidance directed that the Deputy Commandant for Programs and Resources organize quality coordination events with key stakeholders to synchronize activities within major lines of effort, but officials from this office stated that they have not been given the authority to direct the various efforts. Therefore, challenges have persisted, in part, because the Marine Corps has not designated a single entity with authority to oversee and coordinate efforts to link training funds to readiness. In the absence of a single oversight entity, two separate and overlapping tools were developed\u2014the Cost to Run a MEF (C2RAM) tool and the Predictive Readiness Model (PRM). Although each tool had its own particular use and design, both were intended to link resources to readiness. Moreover, both faced similar challenges, such as data quality limitations, and relied on some of the same data sources. The Marine Corps recently assessed and discontinued development of PRM, however, it has not assessed C2RAM and how it could support an enterprise wide performance management process linking resources to readiness. Without dedicating a single entity with authority, and conducting an assessment of C2RAM, the Marine Corps is unlikely to make headway in addressing the challenges posed by trying to link resources to readiness."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Marine Corps (1) tracks training funds through the budget cycle, (2) designates a single entity to oversee establishment of a process that links resources to readiness, and (3) conducts an assessment of C2RAM. DOD concurred, and based on its comments, GAO modified one recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Training is key to building mission readiness\u2014the military\u2019s ability to fight  and meet the demands of assigned missions. To build readiness, the  Marine Corps uses funds from its Operation and Maintenance (O&M)  account to pay for training and education requirements for active Marine  Corps forces, among other items. To develop its budget requests and  allocate resources to provide capabilities necessary to accomplish its  missions, the Marine Corps follows the Planning, Programming,  Budgeting, and Execution process, which we refer to as the budget cycle,  for purposes of this report. In fiscal year 2017, the Marine Corps  obligated approximately $1.4 billion for its operational forces to be able to  rapidly deploy ready forces in support of combatant commanders. In  testimony before Congress in 2017, the Commandant of the Marine  Corps stated that the instability of and the level of funding available  adversely impacted readiness. However, the House Armed Services  Committee reported that the Marine Corps\u2019 budget estimates for training  are not sufficiently detailed to determine training costs at the unit level or  the amount of readiness expected to be generated by those costs.", "A House report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2018 contained a provision for us to  examine the military services\u2019 budgeting processes to build unit-level  training readiness and their processes for evaluating the amount of  readiness generated from unit-level training costs. In this report, we  focus on the Marine Corps. Specifically, we examined the extent to which  the Marine Corps (1) tracks unit-level O&M training funds for ground  combat forces through the budget cycle; and (2) links unit-level training  funds for ground combat forces to readiness.", "For objective one, we analyzed fiscal year 2017 budget data collected  from the Marine Expeditionary Forces (MEFs). We collected data for this  fiscal year because it was the most recently completed fiscal year for  which actual obligated amounts could be obtained. We discussed the  systems used to provide these data with knowledgeable Marine Corps  officials. We determined that the data were sufficiently reliable to assess  the availability of fiscal year 2017 funding for unit-level training exercises;  however, we identified issues with tracking unit-level O&M training fund  data, as discussed later in this report. Further, we reviewed a series of  reports issued by the Marine Corps from fiscal years 2009 through 2014,  which evaluated the health of the Marine Corps, including its use of fiscal  codes, through an enterprise-wide study of resource investments,  organizational activities, and readiness outcomes. In addition, we  reviewed documents and interviewed knowledgeable officials at Marine  Corps headquarters, major command, and various unit levels, including  MEF, division, and regiment, about the Marine Corps\u2019 annual O&M  budget process for ground combat forces. This report focuses on ground  combat forces, which conduct a myriad of training exercises at the MEFs.", "For objective two, we reviewed reports and other documentation about  Marine Corps efforts to evaluate readiness levels achieved from O&M  obligations for training for ground combat forces. We also were briefed on  and observed the operation of systems used to track training funds and  readiness at Marine Forces Command, I MEF, II MEF, and III MEF. This  observation enhanced our understanding of the efforts taken by the  Marine Corps to link training funds to readiness. Further, we reviewed  documents and interviewed knowledgeable officials at Marine Corps  headquarters, major command, and unit levels about the Marine Corps\u2019  efforts to evaluate the readiness levels achieved from O&M training funds  for ground combat forces. We assessed this information against Marine  Corps Order 5230.23, Performance Management Planning, which calls  for the development and implementation of an enterprise-wide  performance management process that links resources to institutional  readiness via a robust analytic framework, as well as Standards for  Internal Control in the Federal Government, which states that  management should establish an organizational structure, assign  responsibility, and delegate authority to achieve its objective. Further  details on our scope and methodology can be found in appendix I.", "We conducted this performance audit from August 2017 to April 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Marine Corps Organizational Structure", "paragraphs": ["The Marine Corps, within the Department of the Navy, organizes itself  into different Marine Air Ground Task Forces. Each Marine Air Ground  Task Force consists of a command element that includes a ground  combat element, air combat element, and logistics combat element that  can conduct operations across a broad range of crisis and conflict  situations. As shown in figure 1, there are four types of Marine Air Ground  Task Forces: Marine Expeditionary Forces (MEFs), Marine Expeditionary  Brigades, Marine Expeditionary Units, and Special Purpose Marine Air  Ground Task Forces. The MEF is the principal warfighting organization  for the Marine Corps and consists of one or more divisions, including  subordinate units such as regiments and battalions. There are three  MEFs in the active component of the Marine Corps: I MEF\u2014Camp  Pendleton, California; II MEF\u2014Camp Lejeune, North Carolina; and III  MEF\u2014Okinawa, Japan.", "Headquarters Marine Corps consists of the Commandant of the Marine  Corps (Commandant) and the staff organizations, which are responsible  for advising and assisting the Commandant to carry out duties. For  example, the Deputy Commandant for Programs and Resources is  responsible for developing, defending, and overseeing the Marine Corps\u2019  financial requirements and the Deputy Commandant for Plans, Policies,  and Operations is responsible for establishing policy, procedures,  training, and guidance on unit readiness reporting."], "subsections": []}, {"section_title": "Marine Corps Unit-Level Training", "paragraphs": ["Marine Corps units train to their core missions\u2014the fundamental missions  a unit is organized or designed to perform\u2014and their assigned  missions\u2014those missions which an organization or unit is tasked to carry  out. Units train to a list of Mission Essential Tasks that are assigned  based on the unit\u2019s required operational capabilities and projected  operational environments. For example, the Mission Essential Tasks for  a Marine Corps infantry battalion include amphibious operations,  offensive operations, defensive operations, and stability operations.  Marine Corps Training and Readiness manuals describe the training  events, frequency of training required to sustain skills, and the conditions and standards that a unit must accomplish to be certified in a Mission  Essential Task."], "subsections": []}, {"section_title": "Marine Corps Readiness", "paragraphs": ["Unit commanders are responsible for their units\u2019 readiness, including  assessing and reporting their units\u2019 capabilities to accomplish Mission  Essential Tasks to specified conditions and standards. Unit readiness  assessments are tracked in the Defense Readiness Reporting System\u2013 Marine Corps. This information provides Marine Forces Command,  Headquarters Marine Corps, the Office of the Secretary of Defense, Joint  Staff, and Combatant Commands, among others, a means to assess  ground combat forces\u2019 readiness trends and to assist with strategic and  operational planning."], "subsections": []}, {"section_title": "Marine Corps O&M Budget", "paragraphs": ["The Marine Corps\u2019 O&M budget funds a wide range of activities, including  the recruiting, organizing, training, sustaining, and equipping of the  service. The Department of Defense (DOD) uses the Planning,  Programming, Budgeting, and Execution (PPBE) process to allocate  resources to provide capabilities necessary to accomplish the  department\u2019s missions. In this report, we refer to the PPBE process as  the budget cycle. The budget cycle includes the following phases:", "The planning phase of the budget cycle examines the military role and  defense posture of the United States and DOD in the world  environment and considers enduring national security objectives, as  well as the need for efficient management of defense resources.", "The programming phase of the budget cycle involves developing  proposed programs consistent with planning, programming, and fiscal  guidance, reflecting, among other things, the effective allocation of  resources.", "The budgeting phase of the budget cycle refers to developing and  submitting detailed budget estimates for programs.", "The execution phase of the budget cycle involves spending funds.", "The Marine Corps\u2019 Office of Programs and Resources has multiple  divisions that support Program Objective Memorandum (POM)  development, strategy, independent analysis, budget justification and  legislative coordination, among others. Two key divisions that have  responsibilities regarding Marine Corps resources are:", "The Budget and Execution Division is responsible for leading  development and submission of the POM, providing quality control  over programmatic and financial data, and allocating funds to major  commands. According to a Marine Corps official, the division also  assists with defending the Marine Corps\u2019 budget request to Congress  and others.", "The Program Analysis and Evaluation Division is responsible for  providing Marine Corps senior leaders with independent and objective  analysis to inform resource allocation decisions and assessing  institutional risk.", "The Program Budget Information System (PBIS) is the primary  information system used by the Navy and Marine Corps in the  programming and budgeting phases of the budget cycle to develop and  submit financial plans (i.e., the POM and the budget) to the Office of the  Secretary of Defense. Once appropriated, funds are passed via allocation  and allotment to subordinate units and executed via the Standard  Accounting, Budgeting, and Reporting System (SABRS). SABRS is  used to (1) record and report financial information; (2) provide an  accounting and reporting system for the execution of appropriations; and  (3) record financial transactions that originate from source systems."], "subsections": []}]}, {"section_title": "The Marine Corps Cannot Fully Track All Unit-Level Training Funds for Ground Combat Forces through the Budget Cycle", "paragraphs": ["Our analysis of data from the three MEFs for fiscal year 2017 funds  shows that the MEFs had some data available that could be used to track  some training funds from budget request to obligation. According to the  Marine Corps\u2019 Financial Guidebook for Commanders, as part of the  budget cycle, commanders should determine the cost involved in meeting  requirements, among other things. To help develop a sound budget,  commanders need to know what they were and were not able to  accomplish as a result of funding in previous years. However, Marine  Corps officials told us they faced limitations tracking training funds, as  discussed below. Specifically, as shown in table 1, we found that I MEF  and II MEF were able to provide data on their fiscal year 2017 budget  request, allotment, and obligations for training exercises directed at the  MEF and division level, but data on exercises at smaller unit levels, such  as regiments and battalions, were not consistently available because  officials at those levels do not always track funds for these exercises. We  found that III MEF was able to provide obligations data for fiscal year  2017 training exercises at all unit levels, but was not able to provide data  on funds requested and allotted by training exercise. Officials at III MEF  stated that these data were not available because III MEF incurs several  large one-time expenses that contribute to training, but allocating those  costs across specific training exercises is difficult.", "One of the primary reasons that the Marine Corps cannot fully track all  training funds through the budget cycle is that the Office of Programs and  Resources has not established the consistent use of fiscal codes to  provide greater detail about the use of funds across the budget cycle  phases, and the accuracy of these fiscal codes is sometimes  questionable. The Marine Corps uses a variety of fiscal codes to track  funds in the programming and execution phases of the budget cycle in  the PBIS and SABRS systems, respectively. Some of these codes are  used across DOD, while others are specific to the Marine Corps. Two key  fiscal codes that officials identified as relevant to efforts to track funds for  unit-level training are the Marine Corps Programming Code (MCPC) and  the Special Interest Code (SIC). However, we identified limitations with  how these fiscal codes are applied, as detailed below.", "MCPCs are used to program funds for intended use, but are not  clearly linked to executed funds. When the Marine Corps programs  funds for intended use, it uses MCPCs to identify the funds; however,  when it executes those funds, it uses a different set of fiscal codes to  identify them. As a result, the Marine Corps cannot link the  programmed intent of the funds to the execution of the funds, making  it difficult to track funds through the budget cycle. In fiscal years 2011,  2012, and 2013, the Marine Corps found in a series of reports that it  faced challenges tracking funds through the budget cycle, in part  because MCPCs were used to program funds, but not to track them in  the execution phase. According to the fiscal year 2012 report, such  tracking would enable the Marine Corps to improve financial  traceability and add consistently reliable program execution data that  would promote an understanding of the current fiscal environment to  Marine Corps financial managers, comptrollers and others.", "In 2014, the Marine Corps implemented a process to include MCPCs  in the execution phase of the budget cycle. The process enabled  SABRS to automatically generate MCPCs for executed funds, based  on the fiscal codes already used in the execution phase of the budget  cycle. According to officials in the Office of Programs and Resources,  this process increased the amount of executed funding that could be  linked to an MCPC. However, Marine Corps officials told us that the  mapping of MCPCs used in the programming phase to those used in  the execution phase were not cleanly aligned, causing uncertainty  about their linkage. The MCPCs associated with executed funds are  estimates based on subject matter expert and working group mapping  of fiscal codes to an MCPC and require continuous manual validation  to ensure their accuracy. Additionally, the data quality of the multiple  execution fiscal codes that are used to generate MCPCs is  questionable because the data quality of the various underlying  systems that feed data into SABRS is poor, according to officials in  the Office of Programs and Resources. Senior Marine Corps officials  from the Office of Programs and Resources told us that due to these  limitations, analysts cannot be certain that executed funds associated  with an MCPC as reflected in SABRS correspond to the purpose for  which the funds associated with the same MCPC were programmed  in the Program Budget Information System. This limits the Marine  Corps\u2019 ability to assess the extent to which funds were executed  consistent with their programmed intent and track funds through the  budget cycle.", "SICs are not used consistently across units. The Marine Corps uses  SICs to track funds associated with individual training exercises.  However, units, including the MEF and its subordinate units, do not  consistently use SICs in identifying funds associated with all training  exercises. Specifically, officials at all three MEFs told us that units  generate SICs for large-scale training exercises directed at the MEF  or division level, but may not generate SICs to track expenses for  small-scale exercises at lower unit levels such as the regiment and  battalion, making it difficult to track those funds. Officials at I MEF and II MEF stated that tracking costs associated with small-scale  exercises is less consistent because units are not required to use  SICs to track funds associated with exercises at those levels, and  SICs associated with each exercise may change from year to year.  Further, officials at I MEF and II MEF stated that supply officers are  responsible for financial management at units below the division level,  and they may not prioritize use of SICs. Officials at III MEF stated that  tracking costs associated with specific exercises was difficult because  officials could not attribute several large one-time training expenses to  specific training exercises. Officials at all three MEFs stated that there  is currently no systematic way to ensure that SICs are used  accurately to associate funds executed with training exercises, which  means they do not have complete or consistent data on costs  associated with individual training exercises. As a result, commanders  may lack accurate data for making resource decisions about training  exercises needed to complete Mission Essential Tasks and improve  units\u2019 training readiness.", "In 2014, the Marine Corps issued Marine Corps Order 5230.23,  Performance Management Planning, with the mission of linking resources  to readiness and requiring the Deputy Commandant for the Office of  Programs and Resources to ensure visibility and traceability of funds  through the budget cycle and accounting systems for all organizational  units and programs.", "Officials in the Office of Programs and Resources cited one effort to align  inconsistent fiscal codes, but this effort will not directly address the  challenges we have identified. According to officials in the Office of  Programs and Resources, the Marine Corps is currently conducting a  fiscal code alignment effort to address inconsistent use of fiscal codes,  but this effort is in its early stages, and the Marine Corps has not yet  developed clear guidance for implementation of the effort. Further, while  the Marine Corps uses a variety of fiscal codes to track funds in the  programming and execution phases of the budget cycle, an official from  the Budget and Execution division told us that this effort will focus on  fiscal codes that are used across DOD due to manpower limitations.  However, MCPCs are unique to the Marine Corps and not recognized in  larger DOD budgeting systems. As a result, the fiscal code alignment  effort will not include aligning MCPCs across the programming and  execution phases of the budget cycle, even though the Marine Corps will  continue to use MCPCs. Additionally, although an official told us that SIC  codes will be a part of this effort, implementation guidance for the effort  was still under development and as a result, it is unclear whether the  effort will address the inconsistent use of SICs across unit-level training  exercises. Without the ability to track unit-level training funds through the  budget cycle, including aligning MCPCs and ensuring consistent use of  SIC codes, the Marine Corps lacks data to assess the extent to which  funds were obligated consistent with their programmed intent and to  adequately forecast and defend budget requests for training. As a result,  commanders may face challenges making informed resource decisions."], "subsections": []}, {"section_title": "The Marine Corps Has Made Limited Progress Establishing a Link between Training Funds for Ground Combat Forces and Readiness", "paragraphs": [], "subsections": [{"section_title": "The Marine Corps Identified a Need to Link Training Funds to Readiness, but Did Not Designate Responsibility to Meet That Need", "paragraphs": ["Although internal Marine Corps assessments and guidance state that the  Marine Corps needs an enterprise-wide process to link resources to  readiness, the Marine Corps has made little progress fulfilling this need.  The Marine Corps has been aware for years of the challenges it faces in  explaining its resource needs in its budget estimates to Congress. As  stated in its 2009 Financial Guidebook for Commanders, \u201cMany of the  congressional cuts the Marine Corps receives are because of an inability  to explain why we spent the money the way we did.\u201d From fiscal years  2009 through 2014, the Marine Corps Office of Programs and Resources  issued a series of classified and unclassified reports\u2014referred to as the  Marine Corps Strategic Health Assessments\u2014that evaluated the health of  the Marine Corps. The reports cited a number of factors inhibiting the  Marine Corps\u2019 ability to link funding to readiness, including stove-piped  efforts, lack of an analytical framework, limited data availability, and poor  data quality. For example, the fiscal year 2013 and 2014 reports found  that the lack of a comprehensive model to connect the output of  institutional processes to readiness measures hindered the Marine Corps\u2019  ability to link funding to readiness. Table 2 below summarizes some of  the key related findings in the reports.", "In fiscal year 2014, the Marine Corps stopped issuing the Marine Corps  Strategic Health Assessments, in part, because the person responsible  for preparing the analyses moved to another position. A senior Marine  Corps official also told us that the reports were discontinued because  producing them was no longer a priority for Marine Corps leadership.  However, the Marine Corps also issued guidance in August 2014 calling  for an enterprise-wide effort to link institutional resources to readiness.  Specifically, Marine Corps Order 5230.23 called for the development and  implementation of an enterprise-wide performance management process  that links resources to institutional readiness via a robust analytic  framework. The order included requirements to, among other things,  identify readiness goals, develop strategic performance indicators, and  improve data and business processes to include ensuring the visibility  and traceability of funds.", "While implementing this order could address a number of the findings in  the Marine Corps Strategic Health Assessments, Marine Corps officials  told us that the service had not prioritized implementation of this order.  Specifically, the Marine Corps did not designate a single oversight entity  with the authority to enforce the order and directly oversee and coordinate  efforts to link training funds to readiness. For example, although the order  directed the Deputy Commandant for Programs and Resources to  organize a quarterly coordination event of key stakeholders to synchronize activities within each major line of effort, officials from this  office told us that they have not been given the authority to direct the  various efforts. As a result, problems identified in the Marine Corps  Strategic Health Assessments have persisted, and the Marine Corps  does not have a comprehensive model to connect the output of  institutional processes to readiness measures, as called for in the fiscal  year 2013 Marine Corps Strategic Health Assessment.", "According to Standards for Internal Control in the Federal Government,  management should establish an organizational structure, assign  responsibility, and delegate authority to achieve its objective. Marine  Corps officials told us the benefits of having a single entity to oversee  efforts to tie funds to readiness include having one authority responsible  for ensuring a consistent data architecture\u2014how data will be collected,  stored and transferred across the Marine Corps\u2014and data quality.  Further, having a single entity would help ensure a unified approach that  would help analysts better answer questions about how funds affect  readiness."], "subsections": []}, {"section_title": "Marine Corps Has Not Assessed Its Current Initiative to Link Dollars to Readiness", "paragraphs": ["In the absence of a single entity responsible for overseeing the Marine  Corps\u2019 efforts to link training funds to readiness, two different  organizations within the Marine Corps developed separate and  overlapping initiatives. First, in 2012, the Commanding General of II MEF  directed the development of C2RAM, a tool that attempts to link funding  to readiness for ground combat forces by capturing and correlating  resources and requirements associated with specific unit-level training  exercises. C2RAM was developed in response to our recommendation  that the Marine Corps develop results-oriented performance metrics that  can be used to evaluate the effectiveness of its training management  initiatives. The tool, a complex excel-based spreadsheet, is used to  capture day-to-day operating costs for training exercises to meet a unit\u2019s  core and assigned Mission Essential Tasks for training readiness  requirements. For example, unit operations and resource officials enter  data on training exercise costs and the Mission Essential Tasks expected to be accomplished by each exercise, and the tool uses this data to  project the unit\u2019s expected training readiness levels. Further,  commanders can use the tool to project the expected effect of decreases  in funding on training readiness levels. According to Marine Corps  officials, they spent approximately $11 million on the C2RAM initiative  from fiscal years 2012 through 2017.", "Second, in 2015, the Headquarters Marine Corps Office of Programs and  Resources adopted and made adjustments for Marine Corps purposes to  the Air Force\u2019s Predictive Readiness Assessment system and test-piloted  it with Marine Corps units. The Marine Corps\u2019 system was known as the  Predictive Readiness Model (PRM). PRM was designed to evaluate the  complex interactions between resources and readiness to help inform  decisions about resource allocations and readiness outcomes. According  to Headquarters Marine Corps officials, PRM attempted to map  approximately 500 causal factors related to readiness ratings. The effort  involved input from more than 70 subject matter experts from multiple  Marine Corps organizations. In addition, data input into PRM was  obtained from various authoritative sources, including readiness,  financial, and training systems of record, as well as other unauthoritative  sources, including C2RAM. According to Marine Corps officials, as of  June 2018, the Corps had spent approximately $4 million to develop  PRM. In March 2019, while responding to a draft of this report, the Marine  Corps stated that it decided to discontinue development of PRM because  the model did not meet its objectives.", "While these initiatives were both designed to help the Marine Corps link  dollars to readiness, each had its own particular use and design. For  example, unlike C2RAM, which focuses only on the training pillar of  readiness for ground combat forces, PRM focused on all pillars of  readiness tracked by the Marine Corps for ground combat forces and air  combat forces. In addition, while PRM attempted to capture all training  data, C2RAM does not. For example, it does not capture data on  individual training. Moreover, while C2RAM is primarily used at the MEF  level and below to help inform commanders\u2019 decisions about how much  training funding to request and identify the effect of funding on readiness,  PRM was designed to help officials in Marine Corps Headquarters make  service-wide decisions about budget development and resource  allocation.", "During our review, we found data quality and classification challenges  faced by both PRM and C2RAM, as discussed below.", "Data quality limitations. Some Headquarters Marine Corps officials  questioned the accuracy and reliability of some of the data planned for  use in PRM because the data had to be aggregated from multiple  sources that have varying degrees of internal control. In addition,  officials told us that existing data were insufficient or are not currently  collected, so, in some cases, PRM had to rely on the opinion of  subject matter experts to determine how causal factors affect  readiness. According to Marine Corps officials at various levels,  C2RAM data quality is questionable because data is manually input  by various sources with varying degrees of expertise. This is  exacerbated by weak processes for conducting quality checks of the  data. Moreover, officials stated that cost data may be inaccurate  because units may neglect to update cost estimates with actual costs  after a training event is completed. Further, C2RAM is not  consistently used across all three MEFs. For example, when we  visited II MEF, we learned that their resource management officials do  not use C2RAM to build their budgets because of concerns about  data quality.", "Classification of Data. Another challenge that both efforts faced is  the classification of aggregated data. Readiness data are classified;  budget data are generally not. When these data are combined, the  resulting data are classified, potentially making the tool less useful  and available to officials seeking to make informed decisions about  resource allocation. For example, C2RAM is currently an unclassified  system that captures fiscal and training data, but not readiness data.  However, officials at I Marine Expeditionary Force told us that if  readiness data were incorporated into the tool, it could become  classified, which would limit its availability and usefulness to lower unit  levels.", "As the Marine Corps found in its Fiscal Year 2012 Strategic Health  Assessment, its stove-piped processes often require integration at the  senior leadership level to develop a comprehensive view of issues,  including the effect of dollars on readiness. Development of C2RAM and  PRM, however, was not integrated, resulting in two separate systems\u2014 each devoted to tackling the same problem, but in different ways and with  similar weaknesses, such as data quality limitations. Moreover, there was  some overlap between the two systems. For example, C2RAM was one  of the many data sources for PRM. In addition, both PRM and C2RAM  used some of the same data sources. For instance, both systems relied  on information captured in the Marine Corps Training Information  Management System as well as on data captured in SABRS.", "The Marine Corps assessed the feasibility of moving forward with the  PRM tool and, in March 2019, while responding to a draft of this report,  the Marine Corps stated that they decided to discontinue its development.  However, the Marine Corps has not assessed C2RAM as part of an  enterprise wide performance management process that links resources to  readiness. For example, the Marine Corps could learn from the  experience of commanders at the MEF level who find C2RAM useful and  consider the extent to which those usability considerations could and  should be brought into a service-wide model. Without conducting this  analysis, the Marine Corps is unlikely to make headway in tackling the  challenges posed by trying to link resources to readiness."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["To meet the demands of its missions, the future security environment will  require military forces to train across the full range of military operations,  according to DOD. While the Marine Corps continues to ask for increased  funding, according to a congressional report, the Marine Corps is unable  to provide sufficient detail in its O&M budget estimates for training that  would allow Congress to determine the benefits gained from additional  funding. The Marine Corps has been aware for many years of the  importance of providing accurate budget justifications to Congress. A  number of factors have made it challenging for the Marine Corps to  provide Congress the information it needs. First, the Marine Corps cannot  fully track training funds through the budget cycle, making it difficult for  the Marine Corps to, among other things, show that training funds were  spent as planned. Second, the Marine Corps has not prioritized tackling  the longstanding problem of how to link training resources to readiness.  Although the Marine Corps has a standing order to develop an enterprise- wide performance management framework that links resources to  readiness via a robust analytical framework, no single entity has been  assigned the authority to enforce this order. In the absence of that  leadership, certain components of the Marine Corps have developed their  own, independent initiatives that were designed to achieve the same  objective of linking funding to readiness, but had their own specific  approaches and intended uses. Moreover, the Marine Corps has not  assessed whether C2RAM provides an enterprise-wide performance  management process linking resources to readiness. Until the Marine  Corps assigns the authority needed to oversee development and  implementation of a methodologically sound approach and assesses the  degree to which C2RAM could be used, it will continue to face challenges  making fully informed decisions about how much money it needs for  training purposes and what it can reasonably expect to deliver for that  money in terms of readiness gains."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations:  The Secretary of the Navy should ensure that the Deputy Commandant  for the Office of Programs and Resources oversee development and  implementation of an approach to enable tracking of unit-level training  funds through the budget cycle. This approach should include aligning  MCPCs across the Marine Corps and ensuring consistent use of SIC  codes. (Recommendation 1)", "The Secretary of the Navy should ensure that the Commandant of the  Marine Corps designates a single entity responsible for directing,  overseeing, and coordinating efforts to achieve the objective of  establishing an enterprise-wide performance management process that  links resources to readiness. (Recommendation 2)", "The Secretary of the Navy should ensure that the Commandant of the  Marine Corps assesses C2RAM to determine the extent to which this  system, or elements of this system, should be adapted for use in an  enterprise-wide performance management process linking resources to  readiness. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In  written comments, DOD concurred with all three of the recommendations  in the draft report and stated that the Marine Corps would take actions to  track unit-level training funds, link resources to readiness, and examine  C2RAM, as discussed below. DOD\u2019s comments are reprinted in appendix  II. DOD also provided technical comments, which we incorporated as  appropriate.", "DOD concurred with the third recommendation in the draft report that the  Secretary of the Navy should ensure that the Commandant of the Marine  Corps assesses C2RAM and PRM and determine the extent to which  these systems or elements of these systems could and should be  adapted for use in the enterprise-wide performance management process  linking resources to readiness. In its comments, the Marine Corps stated  that work to develop PRM had been discontinued because the model did  not satisfy the Marine Corps objectives. Given that the Marine Corps\u2019  decision to stop development of PRM mitigates the potential for  overlapping initiatives moving forward, we revised the report and  recommendation to focus on the Marine Corps assessing C2RAM for use  in the enterprise-wide performance management process linking  resources to readiness. The Marine Corps stated in its written response  that C2RAM has potential utility for supporting an understanding of  resources to readiness and it will examine the system further.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Defense, the Secretary of the Navy,  and the Commandant of the Marine Corps. In addition, the report is  available at no charge on our website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report evaluates the extent to which the Marine Corps (1) tracks unit- level Operations and Maintenance (O&M) training funds for ground  combat forces through the budget cycle; and (2) links unit-level training  funds for ground combat forces to readiness. This report focuses on  ground combat forces which conduct a myriad of training at the Marine  Expeditionary Forces (MEF).", "For our first objective, we requested and analyzed budget request,  allocation, and obligations training exercise data for fiscal year 2017 from  I Marine Expeditionary Force (MEF), II MEF, and III MEF. We collected  data for this fiscal year because it was the most recently completed fiscal  year for which actual obligated amounts could be obtained. We used this  data request to determine the Marine Corps\u2019 ability to provide the data as  well as determine the source or sources they used to provide the data.  We discussed the systems\u2014Cost to Run a Marine Expeditionary Force  (C2RAM) and Standard Accounting, Reporting, and Budgeting System  (SABRS)\u2014used to provide this data with knowledgeable Marine Corps  officials, including discussion of the data reliability concerns with these  systems which are identified in this report. We interviewed knowledgeable  officials about the systems, reviewed the user guide for one of the  systems, and observed how data was input and extracted to form reports.  Although we found the data to be insufficient to consistently identify and  fully track unit-level O&M training funding data though the budget cycle,  we determined that the data we obtained were sufficiently reliable to  provide information about the availability of fiscal year 2017 funding  amounts requested, allotted, and obligated for unit-level training  exercises, as discussed in this report.", "We also reviewed and analyzed data from a series of classified and  unclassified reports that were issued by the Marine Corps from fiscal year  2009 through fiscal year 2014. These reports, known as the Marine Corps  Strategic Health Assessment (MCSHA), evaluated the health of the  Marine Corps, including its use of fiscal codes, through an enterprise- wide study of resource investments, organizational activities, and  readiness outcomes. We also reviewed data about Marine Corps  Programming Codes (MCPC) and Special Interest Codes (SIC) in Marine  Corps documents such as the MCSHAs as well as the Standard  Accounting, Budgeting, and Reporting System (SABRS) Customer  Handbook. We assessed this information against Marine Corps Order  5230.23, Performance Management Planning, which requires the Deputy  Commandant for Programs and Resources to ensure visibility and  traceability of funds through the budget cycle and accounting systems for  all organizational units and programs, as well as Standards for Internal  Control in the Federal Government, which states that management  should design an entity\u2019s information system to ensure, among other  things, that data is readily available to users when needed.", "For our second objective, we reviewed reports and supporting  documentation on Marine Corps efforts to evaluate readiness levels  achieved from O&M obligations for ground combat forces training and  observed the operation of systems used to track training funds and  readiness. Specifically, we reviewed and analyzed the MCSHAs to  identify challenges that the Marine Corps reported facing in attempting to  link training funds to readiness. As a part of our review of supporting  documentation, we reviewed and analyzed the MCSHAs from fiscal years  2011 through 2014 issued by the Marine Corps Office of Program  Analysis and Evaluation to summarize some of the key findings identified  by the Marine Corps related to linking training funds to readiness. We  reviewed these reports because they intended to provide a  comprehensive overview of the health of the Marine Corps. From these  reports, we identified and summarized key findings related to our review.  Specifically, one GAO analyst reviewed the four reports to identify  reported findings that prevent the Marine Corps from linking resources to  readiness, such as stove-piped processes and inconsistent data  management processes, while a second analyst confirmed the summary  from this review. We shared our summary of key findings with Marine  Corps officials and they concurred.", "In addition, we reviewed guidance and other related documents on the  Predictive Readiness Model (PRM) and Cost to Run a Marine  Expeditionary Force (C2RAM). We were briefed on and observed data  being input into the C2RAM model and queries being run from that data.  We were able observe the summary reports that resulted from the queries  which helped to enhance our understanding of the Marine Corps efforts to  link training funds to readiness. In addition, we reviewed previously  issued GAO reports related to the issue. We assessed this information  against Marine Corps Order 5230.23, Performance Management  Planning, which calls for the development and implementation of an  enterprise-wide performance management process that links resources to  institutional readiness via a robust analytic framework, as well as  Standards for Internal Control in the Federal Government, which states  that management should establish an organizational structure, assign  responsibility, and delegate authority to achieve its objective.", "To answer the two objectives for this review, we interviewed  knowledgeable officials from the following offices:", "Office of the Secretary of Defense", "Cost Assessment and Program Evaluation", "Personnel and Readiness, Force Readiness", "Headquarters Marine Corps, Washington, D.C.", "Office of Programs and Resources", "Budget and Execution Division", "Program Analysis and Evaluation Division", "Command, Control, Communications, and Computers", "Marine Forces Command \u2013 Norfolk, Virginia", "Marine Corps Training and Education Command \u2013 Quantico, Virginia  I Marine Expeditionary Force \u2013 Camp Pendleton, California  II Marine Expeditionary Force \u2013 Camp Lejeune, North Carolina  III Marine Expeditionary Force \u2013 Okinawa, Japan.", "We conducted this performance audit from August 2017 to April 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Margaret Best, Assistant Director;  William J. Cordrey; Pamela Davidson; Angela Kaylor; Amie Lesser;  Tamiya Lunsford; Samuel Moore, III; Shahrzad Nikoo; Clarice Ransom;  Cary Russell; Matthew Ullengren; and Sonja Ware made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Marine Corps continues to request more money to train its forces on day-to-day operations and to prepare them for rapid deployment. However, a congressional report said that the Corps' budget estimates haven't included sufficient detail for Congress to determine what benefits more funding would bring.", "We found that the Marine Corps can't fully track training funds or link them to mission readiness\u2014its ability to fight and meet its assigned missions.", "We recommended that the Marine Corps better align its efforts to track funds through the budget cycle and designate an entity to oversee a process that links dollars to readiness.", "Marine Corps Ground Combat Forces Training"]}
{"id": "GAO-19-84", "url": "https://www.gao.gov/products/GAO-19-84", "title": "Nuclear Weapons: NNSA Has Taken Steps to Prepare to Restart a Program to Replace the W78 Warhead Capability", "published_date": "2018-11-30T00:00:00", "released_date": "2018-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of Defense and NNSA have sought for nearly a decade to replace the capabilities of the aging W78 nuclear warhead used by the U.S. Air Force. NNSA undertakes LEPs to refurbish or replace the capabilities of nuclear weapons components. In fiscal year 2014, NNSA was directed to suspend a program that was evaluating a capability that could replace the W78 and also be used by the U.S. Navy. NNSA's most recent estimate\u2014reported in October 2018\u2014was that the combined program would cost about $10 billion to $15 billion. NNSA has been directed by the 2018 Nuclear Posture Review to restart a program to replace the W78 for the Air Force in fiscal year 2019. The 2018 Nuclear Posture Review also directed NNSA and the Navy to further evaluate whether the Navy could also use the warhead.", "Senate report 115-125 included a provision for GAO to review NNSA's progress on the program to replace the W78.", "GAO's report describes NNSA's steps in key early planning areas\u2014including program management, technology assessment, and coordination with facilities and capabilities\u2014to prepare to restart a program to replace the W78. GAO reviewed documentation on areas such as program management, technologies, and facilities needed for the program, and interviewed NNSA and DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy's National Nuclear Security Administration (NNSA) has taken steps to prepare to restart a life extension program (LEP) to replace the capabilities of the Air Force's W78 nuclear warhead\u2014a program which was previously suspended. According to NNSA officials, these steps are typically needed to conduct any LEP. Therefore, they can be undertaken despite the current uncertainty about whether the final program will develop the warhead for the Air Force only or for both the Air Force and the Navy. Specifically, NNSA has taken the steps described below:", "Program management. NNSA has begun to establish the program management functions needed to execute a W78 replacement program, as required by NNSA's program execution instruction. For example, NNSA has started to develop a risk management plan to define the process for identifying and mitigating risks. In addition, NNSA has created a preliminary schedule to restart the program in fiscal year 2019 in the feasibility and design options phase with the goal of producing the first unit in fiscal year 2030. (See figure)", "Technology assessment. In May 2018, NNSA completed an assessment of 126 technologies for potential use in a W78 replacement. These included nine technologies that are needed to replace obsolete or no longer available technologies or materials. These are considered \u201cmust-do\u201d because they are the only technologies or materials available to meet minimum warhead requirements established by the Department of Defense and NNSA. NNSA officials said that in fiscal year 2019 they will use the assessment to further evaluate technologies for potential use in the warhead.", "Coordination with facilities and capabilities. NNSA's program manager is identifying the facilities and capabilities needed to provide components for the warhead. This information will be used to produce a report that identifies aspects of the program\u2014including facilities and capabilities to support it\u2014that could affect the program's schedule and technical risk. However, several of the needed facilities must be built or repaired, and these activities are separately managed and supported outside the W78 replacement program\u2014representing a critical external risk to the program. As mitigation, the program intends to coordinate with the offices that oversee these facilities to draft agreements that describe the work to be performed and timeframes, among other things."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations. NNSA and DOD provided technical comments, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["For nearly a decade, the Department of Defense (DOD) and the  Department of Energy\u2019s (DOE) National Nuclear Security Administration  (NNSA) have sought to replace the capabilities of the W78 nuclear  warhead\u2014one of two U.S. Air Force intercontinental ballistic missile  (ICBM) warheads. Critical components within the W78 are aging, and the  military\u2019s requirements for, among other things, the safety and security  features of this warhead have changed since it entered the stockpile in  1979. NNSA is responsible for delivering nuclear warheads to the U.S. Air  Force and the U.S. Navy, which are organized under DOD, for use in their  weapons delivery systems. NNSA and DOD undertake life extension  programs (LEPs) to refurbish or replace nuclear weapons components to,  among other things, extend the lives of these weapons and enhance the  safety and security of the stockpile.", "The Nuclear Weapons Council is the joint DOD and DOE activity  responsible for matters related to executive-level management of the  nuclear weapons stockpile. The Nuclear Weapons Council serves as the  focal point for interagency analyses and decisions to maintain and  manage U.S. nuclear weapons, and reviews and approves proposed  LEPs. When undertaking an LEP, DOD, with input from NNSA, defines  the performance, safety, and security requirements for the warhead\u2014 known as the military characteristics\u2014which DOD refines over time and  finalizes before NNSA begins production. NNSA develops warhead  designs to meet these requirements and is ultimately responsible for  producing the warheads. The Nuclear Weapons Council is also used to  resolve larger questions regarding design and costs for LEPs.", "The April 2010 Nuclear Posture Review (NPR)\u2014which described  presidential policy on the role of nuclear weapons in national security\u2014 directed NNSA and DOD to study options to replace the capabilities of the  W78 nuclear warhead in an ICBM system. The NPR also directed the agencies to study whether the resulting warhead could also be fielded by  the U.S. Navy in its submarine launched ballistic missile (SLBM) system,  making the weapon an \u201cinteroperable\u201d warhead. In September 2010,  DOD and NNSA began assessing concepts for an interoperable warhead  to extend the life of the W78 and the Navy\u2019s W88 warhead. DOD  subsequently began drafting military characteristics that captured a set of  joint Air Force and Navy requirements, including an interoperable nuclear  explosive package\u2014the explosive core of the weapon\u2014and adaptable  nonnuclear components for the Air Force\u2019s ICBM and Navy\u2019s SLBM  systems.", "From 2011 through 2014, NNSA, with input from DOD, assessed  concepts for the warhead based on the draft military characteristics and  completed initial feasibility studies analyzing various warhead design  options. NNSA concluded, on the basis of these studies, that the initial  design concepts that it proposed could, in principle, be fielded in both Air  Force and Navy delivery systems. During this period, the warhead  replacement program was initially referred to as the W78 LEP, then as  the W78/88-1 LEP, and then subsequently as the Interoperable Warhead  1 (IW1). During this four year period, NNSA expended about $114.5  million on the program, according to information provided by NNSA.", "In fiscal year 2014, in part because of budget constraints, the Nuclear  Weapons Council directed NNSA to suspend the program for an  anticipated 5 years, with resumption planned in fiscal year 2020. At the  time the program was suspended, NNSA had selected the major  components of the nuclear explosive package to replace the capabilities  of the W78 and briefed the Nuclear Weapons Council on some of those  choices.", "In February 2018, DOD issued a new NPR that revised nuclear weapons  policy and programs. Rather than endorsing the interoperable warhead  concept, it directed NNSA and DOD to restart the program to replace the  W78 warhead and to continue to investigate the feasibility of fielding the  nuclear explosive package in a Navy SLBM system. It also directed  NNSA to restart the W78 replacement warhead program a year early, in  fiscal year 2019, to better align its schedule with the Air Force\u2019s schedule  for modernizing its ICBM system. NNSA\u2019s most recent preliminary cost  estimate\u2014reported in October 2018 and based on a program to provide a  warhead to both the Air Force and Navy\u2014was that the program would  cost about $10 billion to $15 billion from fiscal year 2019 through fiscal  year 2041.", "The Senate Armed Services Committee report 115-125 accompanying S.  1519, a bill for the National Defense Authorization Act for Fiscal Year  2018, includes a provision for GAO to report on NNSA\u2019s progress on the  IW1. This report describes the steps that NNSA has taken to prepare a  W78 replacement program for restart.", "To describe the steps that NNSA has taken to prepare a W78  replacement program for restart, we focused on the agency\u2019s planning  and activities during fiscal years 2015 through 2018. In particular, we  focused on planning activities related to program management and  personnel, technology development and assessment, and coordination  with facilities and capabilities because they are key areas in the early  planning phases of NNSA\u2019s LEP process. We reviewed documentation on  NNSA\u2019s planning for program management, technologies, and facilities  for a W78 replacement program, such as internal briefing documents and  a technology readiness assessment that NNSA completed in May 2018 in  preparation to restart the program. We interviewed NNSA officials as well  as contractors from Lawrence Livermore, Los Alamos National Laboratory  (Los Alamos), and Sandia National Laboratories (Sandia) to obtain  information about the planning for program management and personnel,  technology, and facilities needed for the program. We interviewed  contractors at these laboratories because they are involved in the design  of the nuclear warheads and warhead components. We also interviewed  NNSA officials in the Office of Technology Maturation to learn about  technology development related to a W78 replacement, and in the Office  of Systems Engineering and Integration to learn about the results of the  technology readiness assessment and the potential impact of the  program on facilities within the nuclear security enterprise. We also  interviewed officials from DOD\u2019s Office of the Deputy Assistant Secretary  of Defense for Nuclear Matters, the Air Force Nuclear Weapons Center,  the Navy Strategic Systems Programs, and the U.S. Strategic Command  to learn about their roles in preparing to restart the program and in setting  requirements for the warhead.", "We conducted this performance audit from October 2017 to November  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section describes (1) NNSA\u2019s weapons design and production sites;  (2) the framework for managing LEPs, known as the Phase 6.X process,  and NNSA\u2019s program execution instruction; and (3) NNSA\u2019s technology  development and assessment process."], "subsections": [{"section_title": "NNSA Weapons Design and Production Sites", "paragraphs": ["NNSA oversees three national security laboratories\u2014Lawrence  Livermore in California, Los Alamos in New Mexico, and Sandia in New  Mexico and California. Lawrence Livermore and Los Alamos are the  design laboratories for the nuclear components of a weapon, while  Sandia works with both to design nonnuclear components and as the  system integrator. Los Alamos led the original design of the W78, but  Lawrence Livermore is leading current efforts to design the replacement  warhead.", "NNSA also oversees four nuclear weapons production plants\u2014the  Pantex Plant in Texas, the Y-12 National Security Complex in Tennessee,  the Kansas City National Security Campus in Missouri, and the Savannah  River Site in South Carolina. In general, the Pantex Plant assembles,  maintains, and dismantles nuclear weapons; the Y-12 National Security  Complex produces the secondary and the radiation case; the Kansas City  National Security Campus produces nonnuclear components; and the  Savannah River Site replenishes a component known as a gas transfer  system that transfers boost gas to the primary during detonation."], "subsections": []}, {"section_title": "Phase 6.X Process for Managing LEPs and NNSA\u2019s Program Management Directive", "paragraphs": ["DOD and NNSA have established a process, known as the Phase 6.X  process, to manage life extension programs. According to a Nuclear  Weapons Council document, NNSA\u2019s Office of Defense Programs will  follow this process to manage a W78 replacement program. As shown in  figure 1, this process includes key phases or milestones that a nuclear  weapon LEP must undertake before proceeding to subsequent steps.", "In January 2017, while the program was still suspended, NNSA issued a  supplemental directive that defines additional activities that NNSA offices  should conduct in support of the Phase 6.X process. For example, as  discussed below, NNSA\u2019s supplemental directive established a new  requirement during Phase 6.1 (Concept Assessment) that NNSA conduct  a technology readiness assessment of technologies proposed for  potential use in the warhead. In addition, NNSA\u2019s Office of Defense  Programs issued a program execution instruction that defines enhanced  program management functions for an LEP and other programs. This  instruction also describes the level of program management rigor that the  LEP must achieve as it advances through the Phase 6.X process."], "subsections": []}, {"section_title": "NNSA\u2019s Technology Development and Assessment Process", "paragraphs": ["According to NNSA\u2019s Fiscal Year 2018 Stockpile Stewardship  Management Plan, NNSA extends the life of existing U.S. nuclear  warheads by replacing aged nuclear and non-nuclear components with  modern technologies. In replacing these components, NNSA seeks  approaches that will increase safety, improve security, and address  defects in the warhead. Several technologies are frequently developed  concurrently before one approach is selected. According to NNSA\u2019s  Fiscal Year 2018 Stockpile Stewardship Management Plan, this approach  allows selection of the option which best meets warhead requirements  and reduces the risks and costs associated with an LEP. NNSA conducts  technology readiness assessments to provide a snapshot in time of the  maturity of technologies and their readiness for insertion into a program\u2019s  design and schedule, according to NNSA\u2019s guidance. NNSA\u2019s  assessments also look at the ability to manufacture the technology.  NNSA measures technological maturity using technology readiness levels  (TRLs) on a scale from TRL 1 (basic principles developed) through TRL 9  (actual system operation). Similarly, NNSA measures manufacturing  readiness using manufacturing readiness levels (MRL) on a scale from  MRL 1 (basic manufacturing implications identified) through MRL 9  (capability in place to begin full rate production). According to NNSA\u2019s  guidance, NNSA recommends but does not require that an LEP\u2019s critical  technologies reach TRL 5 (technology components are integrated with  realistic supporting elements) at the beginning of Phase 6.3  (Development Engineering). At the end of Phase 6.3, it recommends  that a technology be judged to have achieved MRL 5 (capability to  produce prototype components in a production relevant environment).  However, according to NNSA officials, lower TRLs and MRLs may be  accepted in circumstances where a technology is close to achieving the  desired levels or the program team judges that the benefit of the  technology is high and worth the increased risk that it may not be  sufficiently mature when the program needs it."], "subsections": []}]}, {"section_title": "NNSA Has Taken Steps to Prepare to Restart a Program to Replace the W78 Nuclear Warhead Capability", "paragraphs": ["NNSA has taken steps to prepare to restart a program to replace the W78  nuclear warhead capability. According to NNSA officials, these steps are  typically needed to conduct any LEP. Therefore, they can be undertaken  despite the uncertainty about whether the final program will develop the  warhead for the Air Force only or for both the Air Force and the Navy.  Specifically, NNSA has (1) taken initial steps to establish the program  management functions needed to execute the program and assemble  personnel for a program management team; (2) assessed technologies  that have been under development while the program was suspended  that could potentially be used to support a W78 replacement; and (3)  initiated plans for the facilities and capabilities needed to provide the  nuclear and nonnuclear components for the warhead.", "At the time of our review, NNSA and DOD officials stated that, in  response to the 2018 NPR, they planned to restart a program that would  focus on replacing the capabilities of the W78 for the Air Force; however,  the extent to which the program would focus on providing a nuclear  explosive package for the Navy was uncertain. DOD officials said that  the Navy plans to complete a study examining the feasibility of using the  nuclear explosive package developed for the W78 replacement warhead  in its SLBM system by the end of fiscal year 2019. According to DOD  officials, the Nuclear Weapons Council will make a decision about  developing an interoperable warhead for the Air Force and the Navy  based on the results of the study but, as of August 2018, had not  established time frames for making that decision. According to Air Force  and NNSA officials, if the Nuclear Weapons Council decided that the  Navy should participate in the program, then NNSA would not need to  redo the work planned for fiscal year 2019."], "subsections": [{"section_title": "Program Management and Personnel", "paragraphs": ["NNSA has taken initial steps to establish the program management  functions needed to execute the program and assemble personnel for a  program management team, as follows:", "Program management. In fiscal year 2018, NNSA started to  establish the program management functions needed to execute a  W78 replacement program, as required in the Office of Defense  Programs\u2019 program execution instruction. In preparation for the  program restart, NNSA assigned a manager for a W78 replacement  program who is taking or plans to take steps to implement these  functions. For example, among other steps, the W78 replacement  program manager told us that he had started developing the risk  management plan to define the process for identifying and mitigating  risks that may impact the program. The program manager also said  NNSA had started to adapt a standardized work breakdown structure  for life extension programs to define and organize the W78  replacement program\u2019s work scope for restart. An initial version of  this work breakdown structure would be completed before the  program restarts in fiscal year 2019, according to the program  manager. Further, as NNSA refines the scope of work, the agency will  refine and tailor the work breakdown structure. At the time of our  review, this work was under development and therefore we were not  able to review these plans and tools.", "In addition, as of July 2018, NNSA had created a preliminary schedule  for a W78 replacement program under the Phase 6.X process (see  fig. 2).", "According to NNSA\u2019s preliminary schedule, the program will:", "Restart in Phase 6.2 (Feasibility and Design Options) in the third  quarter of fiscal year 2019. NNSA previously completed Phase 6.1  and was authorized by the Nuclear Weapons Council to start  Phase 6.2 in June 2012. During Phase 6.2, NNSA plans to,  among other things, select design options and develop cost  estimates of the selected design options.", "Conduct Phase 6.2A (Design Definition and Cost Study) for one  year beginning in the fourth quarter of fiscal year 2021. During this  phase, for example, NNSA plans to develop a preliminary cost  estimate for the program, called a weapons design and cost  report, and also produce an independent cost estimate.", "Start Phase 6.3 (Development Engineering) in the fourth quarter  of fiscal year 2022 and transition to Phase 6.4 (Production  Engineering) in the mid-2020s. During these phases, NNSA will  develop the final design as well as begin producing selected  acquisition reports, which detail the total program cost, schedule,  and performance, among other things. According to the W78  program manager, the military characteristics will be finalized in  Phase 6.4 and before that point DOD will continue to update the  requirements.", "Achieve production of the first warhead\u2014Phase 6.5\u2014by the  second quarter of fiscal year 2030 so that it can be fielded on the  Air Force\u2019s planned Ground Based Strategic Deterrent that same  year.", "Start Phase 6.6 (Full Scale Production) by the second quarter of  fiscal year 2031.", "When the program restarts in fiscal year 2019, NNSA intends to  develop or finalize initial versions of other plans and tools such as a  requirements management plan, according to the program manager.  (See appendix I for a detailed description of the steps NNSA is taking  or plans to take to establish the program management functions  needed to execute a W78 replacement program, according to the  manager for the W78 replacement program.)", "The program manager also told us that as the program progresses  through Phases 6.2 (Feasibility and Design Options), 6.2A (Design  Definition and Cost Study), and 6.3 (Development Engineering),  NNSA will increase the maturity of the program management  processes and tools, consistent with the Office of Defense Programs\u2019  program execution instruction. For example, in Phases 6.2 and 6.2A,  NNSA intends to establish an earned value management system  (EVM)\u2014used to measure the performance of large, complex  programs. In Phase 6.3, NNSA will further develop the system to be  consistent with DOE and industry standards, as specified in the  program execution instruction. NNSA officials said they will need to  achieve sufficient program management rigor in Phase 6.3 to  effectively report to Congress on the status and performance of the  program as NNSA develops cost and schedule baselines.", "Personnel. At the time of our review, NNSA was reconstituting a  program management team. Specifically, as mentioned above, NNSA  assigned a new program manager in March 2017. In the spring of  2018, NNSA began assigning additional federal staff and contractor  support to help ramp up the program in advance of the fiscal year  2019 restart date. According to the program manager, he expected to  complete a plan in the late summer or early fall of 2018 that NNSA  could use to hire additional federal staff needed to manage the  program in fiscal year 2019. The advanced development and  implementation of staffing plans prior to each phase of an LEP was a  key lesson learned from an NNSA review of another LEP\u2014the W76- 1."], "subsections": []}, {"section_title": "Technology Development and Assessment", "paragraphs": ["While the program was suspended, NNSA supported other programs that  developed weapons technologies\u2014including materials and manufacturing  processes\u2014that could potentially be used by the W78 replacement  program and potentially by other future life extension programs.  Specifically, according to NNSA officials, NNSA supported the  development of technologies through ongoing LEPs (such as the W80-4  LEP) and other technology maturation projects (such as the Joint Technology Demonstrator) that could support future LEPs. For example,  the W80-4 program has supported development at Lawrence Livermore  of certain new materials as a risk mitigation strategy in case certain  legacy materials used in the secondary are not available. According to  NNSA officials, NNSA will likely continue to develop these new materials  for use in future weapons, including the W78 replacement. In addition,  contractors at Lawrence Livermore told us that test demonstrations  conducted under the Joint Technology Demonstrator have helped to  mature potential technologies for a W78 replacement. Examples they  cited included additively manufactured mounts and cushions for securing  and stabilizing the nuclear explosive package inside the Air Force\u2019s  aeroshell.", "In May 2018, in anticipation of the restart of a W78 replacement program  and to retroactively address NNSA\u2019s new supplemental requirement to  conduct a technology readiness assessment in Phase 6.1, NNSA\u2019s Office  of Systems Engineering and Integration completed a technology  readiness assessment that evaluated the maturity of technologies  potentially available for the W78 replacement program. According to  NNSA officials, the assessment identified and evaluated technologies that  NNSA would have available for the next LEP, irrespective of whether the  final program will replace the W78 warhead in ICBMs only or will also be  used in the Navy\u2019s SLBMs.", "The assessment evaluated 126 technologies based on proposals from  the laboratories and production sites. As shown in table 1 below, the proposals related to key functional areas of the warhead, including the  nuclear explosive package and the arming, fuzing, and firing  mechanism\u2014which provides signaling that initiates the nuclear explosive  chain. For the W78 warhead replacement, DOD divided the military  characteristics into two categories: threshold or minimum requirements  (or \u201cneeds\u201d) and objective or optional requirements (or \u201cwants\u201d). NNSA\u2019s  assessment grouped the technologies into one of three categories, as  follows.", "Must do. A technology deemed \u201cmust do\u201d means that it is the only  technology available that can meet a minimum requirement (or  \u201cneed\u201d) for the warhead to function. The technology that previously  fulfilled this requirement is generally obsolete or no longer produced,  and there are no alternatives.", "Must do (trade space). \u201cMust do (trade space)\u201d technologies fulfill a  minimum requirement (or \u201cneed\u201d) for the warhead, but there are two  or more technologies that could meet this need. NNSA must evaluate  and select which technology it will use to fulfill the need.", "Trade space. \u201cTrade space\u201d technologies are those that can meet an  optional requirement (or \u201cwant\u201d) for the warhead.", "Among the nine \u201cmust do\u201d technologies that NNSA evaluated, for  example, was a new manufacturing process being developed at Sandia to  produce a type of magnesium oxide\u2014needed for use in the thermal  batteries that power the warhead\u2019s firing mechanism\u2014that is no longer  available from a vendor and for which NNSA\u2019s existing supplies are  limited. For this new process, the assessment team estimated that it had  completed TRL 1 (basic principles developed) but had not yet reached  MRL 1 (basic manufacturing implications identified). The technology  readiness assessment noted that for technologies with a TRL of 3 or less,  an MRL of 1 or less is expected. In addition, according to the report,  Sandia estimated that it may cost about $7.1 million to develop the  material and manufacturing process to TRL 5 and MRL 4 during fiscal  years 2018 through 2023\u2014when the program is slated to reach Phase  6.3\u2014to achieve a level of readiness where it could potentially be included  in the design of the W78 replacement warhead.", "Among the 59 \u201cmust do (trade space)\u201d technologies that NNSA evaluated  were, for example, two new gas transfer system technologies developed  by Sandia that may offer advantages compared with the existing  technology. A gas transfer system is a required capability (or \u201cmust do\u201d)  but, according to the technology readiness assessment report, NNSA  needs to compare the costs, benefits, and risks of these new  technologies with the traditional technology (i.e., evaluate the \u201ctrade  space\u201d) and make a selection among them. The first new technology was  a gas transfer system bottle made out of aluminum that could be cheaper,  weigh less, and last longer than the gas transfer system used in the W78.  According to the technology readiness assessment report, the  assessment team estimated the aluminum-based bottle had completed  TRL 2 but did not have enough information to estimate an MRL. Sandia  estimated that it would cost about $6.5 million to achieve TRL 5 and MRL  4 during fiscal years 2018 through 2023. The second Sandia technology  involved an advanced gas transfer system technology. The assessment  team estimated that this technology had completed TRL 3 but did not  have enough information to estimate an MRL. Sandia estimated that it  would cost about $5.4 million to achieve TRL 5 and MRL 4 during fiscal  years 2018 through 2023. According to the technology readiness  assessment report, NNSA will need to further evaluate these approaches  as well as the traditional technology to make a selection for a W78  replacement program.", "The 75 \u201ctrade space\u201d technologies that the assessment team evaluated  included, for example, several proposed by Lawrence Livermore, Los  Alamos, and Sandia for providing an advanced safety feature to prevent  unauthorized detonation of the warhead. As mentioned above, when  NNSA extends the life of existing U.S. nuclear warheads it also seeks  approaches that will increase the safety and improve security of the  warhead. According to the report, the laboratories proposed similar  concepts that varied in maturity levels and estimated costs for further  development. Specifically, the assessment team estimated the Lawrence  Livermore and Los Alamos technologies to have completed TRL 4 and  Sandia\u2019s proposal to have completed TRL 3. Regarding MRLs, the  assessment team also estimated Lawrence Livermore\u2019s technology to  have completed MRL 1, Los Alamos\u2019s technology to be at MRL 1, and did  not have enough information to estimate the MRL for Sandia\u2019s  technology. In addition, according to the report, Lawrence Livermore  estimated costs of about $31.2 million to $45.6 million to further mature its  technology during fiscal years 2018 through 2023. Los Alamos estimated  costs of about $72.1 million to $154.5 million to further mature its  technology during the same period. Sandia estimated costs of about $8.2  million to further mature its technology during the same period. Because  the feature is not a minimum requirement, NNSA officials told us that they  are continuing to evaluate the costs, benefits, and risks of including the  feature.", "According to NNSA\u2019s manager for the W78 replacement program and key  staff involved in preparing to restart the program, when the program  restarts in fiscal year 2019 they will use the assessment to identify  specific technologies or groups of technologies (i.e., trade spaces) to  further evaluate for potential use in the warhead. These officials said they  will continue evaluating technologies and make selections of preferred  options at the same time that the warhead\u2019s program requirements and  priorities are refined during Phases 6.2 and 6.2A. According to the  program manager, NNSA will produce a technology development plan for  technologies selected for a W78 replacement during Phase 6.2 and 6.2A  and that will identify the current readiness levels of the technologies, key  risks, and estimated costs to bring them to TRL 5 in Phase 6.3.", "In addition, the technology readiness assessment team made several  recommendations to the NNSA Deputy Administrator for Defense  Programs regarding the development of technologies that could provide  benefits to the nuclear security enterprise overall. For example, the  assessment team observed that 21 of the proposed technologies for a  W78 replacement involved the use of additive manufacturing. The  assessment noted that, if successful, these technologies could reduce  component production costs and schedule risks for future LEPs  compared to current methods. The team recommended that the Office of  Defense Programs conduct an analysis to validate these capabilities and  develop a nuclear enterprise-wide effort to address additive  manufacturing for a W78 replacement, future LEPs, and other  applications. According to the NNSA official who led the assessment, at  the time of our review, the assessment team was preparing to present its  enterprise-wide recommendations to the Office of Defense Program\u2019s  senior leadership; therefore, specific follow-on actions had not yet been  decided."], "subsections": []}, {"section_title": "Coordination with Facilities and Capabilities", "paragraphs": ["The manager of the W78 replacement program said that he has begun to  identify the facilities and capabilities at the laboratories and production  sites that will be needed to provide the nuclear and nonnuclear  components for a W78 replacement, and plans to draft formal  agreements to help ensure coordination with them. According to the  program manager, collecting the information that identifies facilities and  capabilities\u2014including a rough idea of key milestone dates for when the  program will need to use them\u2014is the first step in producing a major  impact report, which is required upon completion of Phase 6.2 and  accompanies the final Phase 6.2 study report delivered to the Nuclear  Weapons Council. Among other things, a major impact report identifies  aspects of the program\u2014including facilities and capabilities to support it\u2014 that could affect the program\u2019s schedule and technical risk, according to  the Phase 6.X guidelines.", "According to an NNSA official and contractor representatives, many of the  existing nuclear and nonnuclear components of the W78 are outdated or  unusable and a W78 replacement will need all newly manufactured  components. As a result, NNSA will need to exercise numerous  manufacturing capabilities in support of this effort, and the facilities and  capabilities must be ready to support the work. However, many of the  facilities that may be needed to provide components for a W78  replacement program are outdated and are undergoing modernization to  either build new facilities or repair existing facilities and capabilities, which  represents a critical external risk to the program. According to NNSA\u2019s  Fiscal Year 2018 Stockpile Stewardship and Management Plan, these  planned modernization activities will require sustained and predictable  funding over many years to ensure they are available to support the  weapons programs. Some examples of NNSA activities to build or repair  facilities and capabilities that will provide nuclear or nonnuclear  components for a W78 replacement warhead\u2014and which may have  schedule, cost, or capacity issues that could impact the program\u2014 include:", "Plutonium pit production facilities. NNSA does not currently have  the capability to manufacture sufficient quantities of plutonium pits for  a W78 replacement program. NNSA\u2019s Fiscal Year 2018 Stockpile  Stewardship and Management Plan stated that the agency will  increase its capability to produce new pits over time, from 10 pits per  year in fiscal year 2024 to 30 pits per year in fiscal year 2026, and as  many as 50 to 80 pits per year by 2030. NNSA is refurbishing its pit  production capabilities at Los Alamos to produce at least 30 pits per  year. In addition, in May 2018, NNSA announced its intention to  repurpose the Mixed Oxide Fuel Fabrication Facility at the Savannah  River Site in South Carolina to produce at least an additional 50 pits  per year by 2030. NNSA officials told us that they will need both the  Los Alamos and Savannah River pit production capabilities to meet  anticipated pit requirements for the W78 replacement program and for  future warhead programs.", "Uranium processing facilities. NNSA\u2019s construction of the Uranium  Processing Facility at the Y-12 National Security Complex will help  ensure NNSA\u2019s continued ability to produce uranium components for  the W78 replacement program. NNSA plans to complete the facility  for no more than $6.5 billion by the end of 2025\u2014approximately 4  years before the scheduled delivery of the first production unit of a  W78 replacement program warhead. This effort is part of a larger  NNSA plan to relocate and modernize other enriched uranium  capabilities performed in a legacy building at the Y-12 National  Security Complex to other existing buildings or in newly constructed  buildings.", "Lithium production facility. NNSA will require lithium for a W78  replacement warhead. The United States no longer maintains full  lithium production capabilities and relies on recycling as the only  source of lithium for nuclear weapon systems. According to the Fiscal  Year 2018 Stockpile Stewardship and Management Plan, NNSA has  analyzed options to construct a new lithium production facility, and a  conceptual design effort is next, with an estimated completion date of  fiscal year 2027 for the new facility. Until the facility is available,  NNSA has developed a bridging strategy to fill the interim supply  gaps.", "Radiation-hardened microelectronics facility. Nuclear warheads,  such as a W78 replacement warhead, include electronics that must  function reliably in a range of operational environments. NNSA has a  facility at Sandia that produces custom, strategic radiation-hardened  microelectronics for nuclear weapons. In August 2018, NNSA officials  told us that this facility, known as Microsystems and Engineering  Sciences Applications, can remain viable until 2040\u2014but would need  additional investment.", "The W78 replacement program manager told us that the need for newly  manufactured components coupled with the scale of NNSA\u2019s  modernization activities means that a comprehensive coordination effort  will be necessary to ensure that the facilities and capabilities are ready to  provide components for the warhead by the end of the 2020s. Because  these activities are separately managed and supported outside the W78  replacement program, NNSA considers progress on them to represent a  critical external risk to the program.", "NNSA is taking or plans to take some action to mitigate this external risk  at the program and agency level. One step that the program plans to take  to address this risk is to draft formal agreements\u2014called interface  requirements agreements\u2014with other NNSA program offices that  oversee the deliverables and schedules for the design, production, and  test facilities that are needed for the program. These agreements  describe the work to be provided by these external programs, including  milestone dates for completing the work; funding; and any risks to cost,  schedule, or performance. The W78 program manager stated that they  are generally drafted toward the end of Phase 6.2 through Phase 6.2A  and largely finalized in Phase 6.3\u2014though small adjustments may be  made into Phase 6.4 (Production Engineering).", "At the agency level, in response to a direction in the 2018 NPR, NNSA  officials told us that the agency is also developing an agency-wide  integrated master schedule that is intended to align NNSA\u2019s enterprise- wide modernization schedule with milestone delivery dates for nuclear  weapons components. The W78 program manager and other NNSA  officials told us that the information they provide on the facilities and  capabilities needed, as well as milestone dates, will be integrated into this  schedule and used to help ensure that the facilities and capabilities are  ready to support the program."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to NNSA and DOD for comment. NNSA  and DOD provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense and Energy, the Administrator of  NNSA, and other interested parties. In addition, this report is available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made significant  contributions to the report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: NNSA\u2019s Program Management Functions to Execute a W78 Replacement Program", "paragraphs": ["The table below identifies the steps NNSA is taking or plans to take to  establish the program management functions needed to execute a W78  replacement program. NNSA was directed by the Nuclear Weapons  Council to suspend the program in fiscal year 2014 and the 2018 Nuclear  Posture Review directed NNSA to restart the program in fiscal year 2019.  The NNSA Office of Defense Program\u2019s program execution instruction  defines enhanced program management functions for a warhead life  extension program (LEP) such as the W78 replacement program and  other programs. The instruction also describes the level of program  management rigor that the LEP must achieve as it advances through the  Department of Defense and NNSA process for managing life extension  programs called the Phase 6.X process. This process includes key  phases or milestones that a nuclear weapon life extension program must  undertake before proceeding to subsequent steps. NNSA completed  Phase 6.1 (Concept Assessment) and started Phase 6.2 (Feasibility and  Design Options) activities before the program was suspended in fiscal  year 2014. NNSA, therefore, plans to restart the program in Phase 6.2."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Allison B. Bawden, (202) 512-3841 or bawdena@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, William Hoehn (Assistant  Director), Brian M. Friedman (Analyst in Charge), and Julia T. Coulter  made significant contributions to this report. Also contributing to this  report were Antoinette Capaccio, Pamela Davidson, Penney Harwell  Caramia, Greg Marchand, Diana Moldafsky, Cynthia Norris, Katrina  Pekar-Carpenter, and Sara Sullivan."], "subsections": []}]}], "fastfact": ["The National Nuclear Security Administration is preparing to restart a program to replace the W78 nuclear warhead, which is used in Air Force intercontinental ballistic missiles. The goal is to produce the first W78 replacement warhead in fiscal year 2030. Pending further study, this replacement warhead may also be used in Navy submarine launched ballistic missiles.", "NNSA has taken steps in", "program management, such as developing a risk management plan", "assessing technologies for potential use", "coordinating with facilities needed to provide warhead components"]}
{"id": "GAO-19-229", "url": "https://www.gao.gov/products/GAO-19-229", "title": "Navy Readiness: Actions Needed to Address Costly Maintenance Delays Facing the Attack Submarine Fleet", "published_date": "2018-11-19T00:00:00", "released_date": "2018-11-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to the Navy, its 51 attack submarines provide the United States an asymmetric advantage to gather intelligence undetected, attack enemy targets, and insert special forces, among others. These capabilities make attack submarines some of the most\u2013requested assets by the global combatant commanders.", "GAO was asked to review the readiness of the Navy's attack submarine force. This report discusses the extent to which the Navy (1) has experienced maintenance delays in its attack submarine fleet and costs associated with any delays; and (2) has addressed any challenges and developed mitigation plans for any maintenance delays. GAO analyzed readiness information from fiscal years 2008-2018, operating and support costs, maintenance performance, and other data; visited attack submarines and squadrons; and interviewed public and private shipyard and fleet officials.", "This is a public version of a classified report issued in October 2018. Information the Department of Defense deemed classified or sensitive, such as attack submarine force structure requirements and detailed data on attack submarine maintenance delays, has been omitted."]}, {"section_title": "What GAO Found", "paragraphs": ["The Navy has been unable to begin or complete the vast majority of its attack submarine maintenance periods on time resulting in significant maintenance delays and operating and support cost expenditures. GAO's analysis of Navy maintenance data shows that between fiscal year 2008 and 2018, attack submarines have incurred 10,363 days of idle time and maintenance delays as a result of delays in getting into and out of the shipyards. For example, the Navy originally scheduled the USS Boise to enter a shipyard for an extended maintenance period in 2013 but, due to heavy shipyard workload, the Navy delayed the start of the maintenance period. In June 2016, the USS Boise could no longer conduct normal operations and the boat has remained idle, pierside for over two years since then waiting to enter a shipyard (see figure). GAO estimated that since fiscal year 2008 the Navy has spent more than $1.5 billion in fiscal year 2018 constant dollars to support attack submarines that provide no operational capability\u2014those sitting idle while waiting to enter the shipyards, and those delayed in completing their maintenance at the shipyards.", "The Navy has started to address challenges related to workforce shortages and facilities needs at the public shipyards. However, it has not effectively allocated maintenance periods among public shipyards and private shipyards that may also be available to help minimize attack submarine idle time. GAO's analysis found that while the public shipyards have operated above capacity for the past several years, attack submarine maintenance delays are getting longer and idle time is increasing. The Navy may have options to mitigate this idle time and maintenance delays by leveraging private shipyard capacity for repair work. But the Navy has not completed a comprehensive business case analysis as recommended by Department of Defense guidelines to inform maintenance workload allocation across public and private shipyards. Navy leadership has acknowledged that they need to be more proactive in leveraging potential private shipyard repair capacity. Without addressing this challenge, the Navy risks continued expenditure of operating and support funding to crew, maintain, and support attack submarines that provide no operational capability because they are delayed in getting into and out of maintenance."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Navy conduct a business case analysis to inform maintenance workload allocation across public and private shipyards. The Department of Defense concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Navy spends over $9 billion annually to operate and sustain its fleet  of 51 attack submarines\u2014consisting of 33 Los Angeles class, 3 Seawolf  class, and 15 Virginia class submarines\u2014that vary in age, size, and  capability. These submarines are responsible for attacking enemy surface  ships and submarines, intelligence collection and surveillance, striking  land targets, and special operations force insertion. According to Navy  documentation, attack submarines\u2019 stealthy nature provides an  asymmetric advantage for gathering intelligence undetected and, due to  their nuclear power, allows for prolonged underwater operations with few  practical limits. These capabilities make attack submarines some of the  most\u2013requested assets by the geographic combatant commanders.", "Providing the military forces needed to deter war and to protect the  security of the United States is a fundamental mission of the Department  of Defense (DOD), and DOD has made the sustainment of ready forces a  priority for meeting mission needs. Each of the military services is  generally smaller and less combat-ready today than it has been in many  years. We reported in May 2016 that the Navy faced significant  challenges in rebuilding readiness, with maintenance delays limiting the  ability of Navy forces to surge to respond to unforeseen crises or           contingencies. In August 2018, we reported that as the military services  take steps to rebuild the readiness of their forces, they continue to be  challenged by a demand for forces that, at times, outpaces the available  supply. DOD has recognized the challenges associated with low  readiness and has made rebuilding the readiness of the military forces a  priority.", "You asked us to complete a review of the readiness of the Navy\u2019s attack  submarine force. This report is a public version of a classified report that  we issued on October 31, 2018. This report discusses the extent to which  the Navy (1) has experienced maintenance delays in its attack submarine  fleet and costs associated with any delays; and (2) has addressed any  challenges and developed mitigation plans for any maintenance delays.  The classified report included an objective discussing attack submarine  readiness goals and wartime requirements. DOD deemed this information  to be classified, which must be protected from loss, compromise, or  inadvertent disclosure. Consequently, this public version excludes that  information.", "Further, this public report omits certain information that DOD deemed to  be sensitive related to (1) attack submarine force structure requirements,  (2) detailed data on attack submarine maintenance delays, (3) attack  submarine cannibalization rates, (4) maintenance prioritization at the  Navy\u2019s public shipyards, (5) maintenance duration forecasting, and (6)  additional recommendations we made to address these issues. Although  the information provided in this report is more limited, it uses the same  methodology as the classified report.", "For our first objective, we reviewed data from Naval Sea Systems  Command on maintenance schedule performance for all attack  submarine depot-level maintenance periods for fiscal years 2008\u20142018  and any idle periods (that is, time awaiting maintenance and unable to  conduct normal operations) during that time period. We determined  maintenance delays by identifying the elapsed time between the expected  completion date and the actual completion date; and we determined idle  periods by identifying the length of time during which a submarine  awaiting maintenance was unable to conduct normal operations. We also  determined the total amount of time for which a submarine was  unavailable due to actual maintenance and idle time. To estimate costs  associated with maintenance delays and idle time, we calculated average  daily cost factors using data from the Navy\u2019s Visibility and Management of  Operating and Support Costs system. We also interviewed Navy fleet and  squadron officials, submarine crews, and shipyard officials to understand  factors affecting operational availability.", "For our second objective, we reviewed the Navy\u2019s plans to mitigate any  maintenance delay challenges and interviewed Navy headquarters, fleet,  and squadron officials, as well as public and private shipyard officials, to  discuss these plans. We visited the three public shipyards\u2014Portsmouth  Naval Shipyard, Norfolk Naval Shipyard, and Pearl Harbor Naval  Shipyard and Intermediate Maintenance Facility\u2014that perform the  majority of attack submarine maintenance; the two private shipyards that  conduct attack submarine maintenance; and Navy facilities in  Connecticut, Virginia, Hawaii, and Guam. We evaluated the Navy\u2019s plans  to address any challenges against criteria in federal standards for internal  control, the Department of Defense\u2019s business case analysis guidebook,  A Guide to the Project Management Body of Knowledge, and guidance in  the Secretary of the Navy\u2019s December 2017 Strategic Readiness Review  on assessing risks to fleet readiness.", "To assess the reliability of the data sources used in conducting our  analysis, we reviewed systems documentation and interviewed officials to  understand system operating procedures, organizational roles and  responsibilities, and error-checking mechanisms. We selected the time  frames for each of the data series above after assessing their availability  and reliability to maximize the amount of data available for us to make  meaningful comparisons. We assessed the reliability of each of the data  sources based on Navy documentation and interviews with Navy officials.  We also conducted our own error checks to identify potentially inaccurate  or questionable data, and we discussed with officials any data  irregularities we found. We determined that the data series were  sufficiently reliable for the purposes of summarizing attack submarine  readiness trends and related information. Our scope and methodology  are discussed in greater detail in appendix I.", "The performance audit upon which this report is based was conducted  from August 2017 to October 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  worked with DOD to prepare this unclassified version of the report for  public release. This public version was also prepared in accordance with  these standards."], "subsections": [{"section_title": "Background", "paragraphs": ["The Navy currently has 51 attack submarines\u2014comprising 33 Los  Angeles class, 3 Seawolf class, and 15 Virginia class submarines (see  fig. 1). Attack submarines are homeported at bases in the United States:  in New London, Connecticut; Pearl Harbor, Hawaii; Norfolk, Virginia; San  Diego, California; and Bangor, Washington; 4 are homeported overseas,  in the U.S. territory of Guam.", "Submarine Safety Controls and Culture  On April 10, 1963, the USS Thresher (SSN  593) sank during deep submergence tests off  the coast of New England. One hundred and  twelve officers and enlisted sailors and 17  civilians perished in the tragedy. The accident  investigation concluded that the Navy did not  have adequate procedures in place to prevent  and respond to a catastrophic flooding  incident. time, and that maintenance delays reduce the amount of time during  which ships and submarines are available for training and operations.", "Submarine fleet and squadron officials emphasized the strict safety  culture that permeates the submarine community. This emphasis on  meeting safety certification criteria means that the Navy operates a  supply-based submarine force that does not compromise on adherence to  training and maintenance standards to meet combatant commander  demands, according to these officials (see sidebar). Officials added that  the Navy will delay deployment dates if necessary to ensure that these  standards are met. As a result, deployed readiness is high and attack  submarines are in excellent materiel condition as compared with the rest  of the Navy fleet.", "The loss of the USS Thresher and its crew  spurred the Navy to establish stringent safety  requirements for submarines to prevent  another loss at sea. Following the accident,  the Navy established submarine safety  certification criteria to provide maximum  reasonable assurance that critical systems  would protect the crew from flooding and  allow the submarine to conduct an emergency  surfacing should flooding occur. This  program, known as SUBSAFE, is still in use  today, to ensure that these critical systems  receive a high quality of work and that all  work is properly documented. According to  the Navy, the SUBSAFE certification status of  a submarine is fundamental to its mission  capability, as it provides a thorough and  systematic approach to quality, and to a  culture that permeates the entire submarine  community. According to Navy officials, since  the SUBSAFE program was established in  1963, no SUBSAFE-certified submarine has  ever been lost.", "The Navy has been unable to begin or complete the vast majority of its  attack submarine maintenance periods on time resulting in significant  maintenance delays and operating and support cost expenditures. Our  analysis of Navy maintenance data shows that between fiscal year 2008  and the end of fiscal year 2018, attack submarines will have incurred  10,363 days of idle time and maintenance delays as a result of delays in  getting into and out of the shipyards.", "Our analysis found that the primary driver affecting attack submarines are  delays in completing depot maintenance. For example, of the 10,363 total  days of lost time since fiscal year 2008, 8,472 (82 percent) were due to  depot maintenance delays. As we previously reported, completing ship  and submarine maintenance on time is essential to Navy readiness, as  maintenance periods lasting longer than planned could reduce the  number of days during which ships and crews are available for training or  operations.", "Attack submarines also face delays in beginning maintenance when the  public shipyards have no available capacity, in some cases forcing  submarines to idle pierside because they are no longer certified to  conduct normal operations. According to Navy officials, the SUBSAFE  program\u2014its program to ensure and certify submarine safety\u2014requires  submarines to adhere to strict maintenance schedules and pass materiel  condition assessments before they are allowed to submerge. Attack  submarines that go too long without receiving required maintenance are  at risk of having their materiel certification expire. Should this certification  expire, these submarines are restricted to sitting idle, pierside, while they  wait until a shipyard has the capacity to begin their maintenance period  (see fig. 2).", "We found that since fiscal year 2008, 14 attack submarines have spent a  combined 61 months (1,891 days) idling while waiting to enter shipyards  for maintenance. Idle time incurred while waiting to begin a maintenance  period is often coupled with maintenance delays while at the shipyards,  thus compounding total delays.", "We also found that the Navy incurs significant costs in operating and  supporting submarines that are experiencing maintenance delays and idle  time. We analyzed the operating and support costs the Navy incurs on  average to estimate the costs of crewing, maintaining, and supporting  attack submarines that are delayed in getting into and out of the  shipyards. Using historical daily cost data the Navy adjusted for inflation,  we estimated that since fiscal year 2008 the Navy has spent more than  $1.5 billion in fiscal year 2018 constant dollars on attack submarines  sitting idle while waiting to enter the shipyards, and on those delayed in  completing their maintenance at the shipyards (see table 1). While the  Navy would incur these costs regardless of whether the submarine was  delayed, idled, or deployed, our estimate of $1.5 billion represents costs  incurred from fiscal year 2008 through fiscal year 2018 for attack  submarines without receiving any operational capability in return. While  acknowledging the magnitude of these costs, Navy officials stated that  there may be some benefits that could be realized from these operating  and support costs since crews on idle attack submarines can conduct  some limited training.", "Operating and support costs include payment of crew salaries,  purchasing of spare parts, and conducting of maintenance, among other  things, but they do not represent the full operational impact incurred by  the Navy from the idle time and maintenance delays. For example, attack  submarine depot-level maintenance requires the use of a drydock, and  officials from the three public shipyards we visited told us that their  drydock capacity was limited. A delayed attack submarine maintenance  period can restrict the use of a drydock for much longer than originally  anticipated, thereby preventing the shipyard from using that drydock to  maintain other vessels, including other types of ships, or to conduct  necessary repairs on the facilities."], "subsections": []}, {"section_title": "Navy Has Begun to Address Some Challenges Associated with Attack Submarine Maintenance Delays but Has Not Effectively Allocated Maintenance Periods to Limit Idle Time", "paragraphs": [], "subsections": [{"section_title": "Navy Is Addressing Some Challenges at the Public Shipyards", "paragraphs": ["The Navy has started to address workforce shortages and facilities needs  at the public shipyards. These efforts to address the Navy\u2019s maintenance  challenges are important steps, but they will require several years of  sustained management attention to reach fruition. As we reported in  September 2017, maintenance on ships and submarines may be delayed  for numerous reasons, including workforce gaps and inexperience, the  poor condition of facilities and equipment, parts shortages, changes in  planned maintenance work, and weather. According to Navy officials, all  of these issues continue to affect the Navy\u2019s ability to complete attack  submarine maintenance on time. According to officials, the Navy has  begun to address some of these challenges. For example:", "The public shipyards have been hiring to address workforce  shortages. The number of civilian full-time employees at the  shipyards increased from 25,087 in 2007 to 34,160 in 2017, with a  goal to reach 36,100 by 2020. Navy officials cautioned that this newly  hired workforce is largely inexperienced and will require time to attain  full proficiency.", "The Navy has released a plan to guide public shipyard capital  investments. In September 2017 we reported that the Navy projected  an inability to support 50 planned submarine maintenance periods  over the ensuing 23 years, due to capacity and capability shortfalls at  the public shipyards. We recommended that the Navy develop a  comprehensive plan for shipyard capital investment. In February  2018 the Navy published its shipyard optimization plan, outlining an  estimated $21 billion investment needed to address shipyard facility  and equipment needs over 20 years to meet the operational needs of  the current Navy fleet, but not the larger fleet size planned for the  future."], "subsections": []}, {"section_title": "Navy Has Not Effectively Allocated Maintenance Periods among the Public and Private Shipyards to Limit Attack Submarine Idle Time", "paragraphs": ["While the public shipyards have operated above capacity for the past  several years, attack submarine maintenance delays are getting longer  and idle time is increasing. The Navy expects the maintenance backlogs  at the public shipyards to continue. We estimate that, as a result of these  backlogs, the Navy will incur approximately $266 million in operating and  support costs in fiscal year 2018 constant dollars for idle submarines from  fiscal year 2018 through fiscal year 2023, as well as additional depot  maintenance delays.", "The Navy may have options to mitigate idle time and maintenance delays.  For example, officials at the private shipyards\u2014General Dynamics  Electric Boat and Huntington Ingalls Industries-Newport News  Shipbuilding\u2014told us that they will have available capacity for repair work  for at least the next 5 years. Although the Navy has shifted about 8  million man-hours in attack submarine maintenance to private shipyards  over the past 5 years, it has done so sporadically, having decided to do  so in some cases only after experiencing lengthy periods of idle time.  According to private shipyard officials, the sporadic shifts in workload  have resulted in repair workload gaps that have disrupted private  shipyard workforce, performance, and capital investment\u2014creating costs  that are ultimately borne in part by the Navy.", "We believe that the Navy has not fully mitigated this challenge because it  has not completed a comprehensive business case analysis to inform  maintenance workload allocation across public and private shipyards, and  to proactively minimize attack submarine idle time and maintenance  delays. Such an analysis would help the Navy better assess private  shipyard capacity to perform attack submarine maintenance and would  help it incorporate a complete accounting of all costs, benefits, and risks,  including:  the large operating and support costs of having attack submarines  sitting idle;  the qualitative benefits associated with providing additional availability  to the combatant commanders; and  the potential for additional work at private shipyards to reduce  schedule risk to submarine construction programs by allowing the  yards to build and maintain a stable shipyard workforce.", "The April 2011 DOD Product Support Business Case Analysis Guidebook  provides standards for DOD\u2019s process for conducting analyses of costs,  benefits, and risks. It states that data sources used to conduct a  business case analysis should be comprehensive and should include  both quantitative and qualitative values. It notes that benefits, such as the  availability of a weapon system, may be qualitative in nature, and that  DOD should evaluate all possible support options, to include government-  and contractor-provided maintenance. Navy leadership has  acknowledged that they need to be more proactive in leveraging private  shipyard repair capacity, but officials cautioned that maintenance could  cost more at a private shipyard than at a public shipyard. However,  without a complete accounting of all costs, benefits, and risks, the Navy  will remain unable to determine whether the cost of performing a  maintenance period at a private shipyard would outweigh the mission  benefits of having reduced idle time, additional operational availability,  and the potential for reduced risk to submarine construction programs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The nation\u2019s investment in attack submarines provides the United States  an asymmetric advantage to gather intelligence undetected, attack enemy  targets, and insert special forces, among other capabilities. However, the  Navy\u2019s attack submarine fleet has suffered from persistent and costly  maintenance delays. Although the Navy has several activities underway  to reduce maintenance delays for the attack submarine fleet, it has not  yet taken additional steps to maximize attack submarine readiness that  fully address challenges such as the allocation of maintenance periods  between public and private shipyards. Without addressing this challenge,  the Navy will not achieve the full benefit of the nation\u2019s investment in its  attack submarines, and it risks continued expenditure of operating and  support funding to crew, maintain, and support attack submarines that  provide no operational capability because they are delayed in getting into  and out of maintenance."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of the Navy should ensure that the Chief of Naval  Operations conducts a business case analysis to inform maintenance  workload allocation across public and private shipyards; this analysis  should include an assessment of private shipyard capacity to perform  attack submarine maintenance, and should incorporate a complete  accounting of both (a) the costs and risks associated with attack  submarines sitting idle, and (b) the qualitative benefits associated with  having the potential to both mitigate risk in new submarine construction  and provide additional availability to the combatant commanders."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of the classified version of the report to DOD for  review and comment. That draft contained the same recommendation as  this unclassified version as well as three additional recommendations  DOD deemed sensitive. In written comments provided by DOD (reprinted  in appendix II), DOD concurred with our recommendation stating that it  has taken the first steps to take a more holistic view of submarine  maintenance requirements and impacts across both the public and  private shipyards.", "The Navy also provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to congressional committees; the  Secretary of Defense; the Secretary of the Navy, 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) 512-3489 or pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To assess the extent to which the Navy has experienced maintenance  delays in its attack submarine fleet, we analyzed attack submarine  maintenance delay and idle time data from Naval Sea Systems  Command, and we reviewed prior GAO work on shipyard maintenance  delays. The Navy determines depot maintenance delays by counting  each day in which a submarine maintenance period extends beyond the  planned completion date. Two Navy offices within Naval Sea Systems  Command\u2014that is, the Logistics, Maintenance, and Industrial Operations  office and Program Executive Office Submarines\u2014track days incurred  from depot-level maintenance delays and idle time. To determine the total  number of days of maintenance delays for each fiscal year within our  scope, we subtracted the planned completion date from the actual  completion date to produce the number of days of maintenance delays for  each maintenance period for each submarine. We added together the  days of maintenance delays across all attack submarines for each fiscal  year, and then added the fiscal year totals to produce the overall total.  Although the data included some maintenance periods that began before  fiscal year 2008, we counted days of maintenance delays only from  periods that were incurred in fiscal years 2008 through 2018. We also  tracked the total number of days that the Navy completed maintenance  periods ahead of schedule\u2014that is, 153\u2014but we noted these separately  instead of subtracting them from the total number of days of maintenance  delays.", "To estimate costs associated with these delays, we analyzed annual data  from fiscal years 2011 through 2017 (the most current data available at  the time of our review) from the Navy\u2019s Visibility and Management of  Operating and Support Costs system. We also reviewed prior work on  determining the operating and support costs of Navy ships. The Navy  calculates total operating and support expenditures for each attack  submarine on an annual basis, as well as the yearly average expenditure  for each attack submarine class, including Los Angeles class, Seawolf  class, and Virginia class blocks one and two. For each class, we  converted the Navy\u2019s annual class averages into daily average costs by  adding the annual class averages together for each year that data were  available, fiscal years 2011 through 2017, then dividing that number by  the total number of days. We then multiplied the daily class average by  the total number of days of maintenance delays and idle time incurred by  submarines within that class, according to our calculations outlined  above, between fiscal year 2008 and fiscal year 2018, and we added  these totals together to produce the total estimated operating and support  cost for days of maintenance delays and idle time incurred during this  period. The data did not include annual class average costs for fiscal  years 2008, 2009, 2010, or 2018. However, the annual class averages for  fiscal years 2011 through 2017 did not show significant variation, so we  applied these averages to 2008, 2009, 2010, and 2018.", "To assess the extent to which the Navy has addressed any challenges  and developed mitigation plans for any maintenance delays, we reviewed  the Navy\u2019s plans to address attack submarine maintenance delays and  interviewed Navy headquarters, fleet, and squadron officials, attack  submarine crews, and public and private shipyard officials to understand  any plans to address attack submarine maintenance delays and idle time.  We analyzed data on factors contributing to attack submarine  maintenance delays, such as cannibalization rates. We visited three of  the four public shipyards, including Pearl Harbor Naval Shipyard and  Intermediate Maintenance Facility, Portsmouth Naval Shipyard, and  Norfolk Naval Shipyard, to observe operations, training, and the condition  of the facilities and equipment, and to interview officials about challenges  affecting operational efficiency and performance. We also met with Navy  maintainers at Naval Station Norfolk and Naval Submarine Base New  London, and with the crew of the submarine tenders USS Frank Cable  (AS-40) and USS Emory S. Land (AS-39) in Guam. We toured the two  private shipyards that conduct attack submarine repair work\u2014General  Dynamics Electric Boat and Huntington Ingalls Industries-Newport News  Shipbuilding\u2014and interviewed executives at both locations. We also  toured attack submarines and met with crew leadership, selected  according to which submarines and crews were available for tours at  each of the sites we visited. We visited the USS Boise (SSN 764) at  Naval Station Norfolk and four attack submarines in depot-level  maintenance: the USS Albany (SSN 753), the USS Jefferson City (SSN  759), the USS New Mexico (SSN 779), and the USS Springfield (SSN  761). We met with the crews of two attack submarines assigned to the  operating forces at the time of our visit, the USS Missouri (SSN 780) and  the USS North Dakota (SSN 784). We evaluated the Navy\u2019s plans to  address any challenges against criteria in federal standards for internal  control, which state that agencies should evaluate performance in  achieving key objectives and addressing risks; the Department of  Defense\u2019s business case analysis guidebook, which provides standards  for the process used to conduct analyses of costs, benefits, and risks; the  Project Management Book of Knowledge, which provides best practices  for project management; and the Secretary of the Navy\u2019s December 2017  Strategic Readiness Review, which calls for the early identification of  systemic risks before problems occur.", "To assess the reliability of the data sources for conducting analyses to  address all of the objectives in this report, we reviewed systems  documentation and interviewed officials to understand system operating  procedures, organizational roles and responsibilities, and error-checking  mechanisms. We selected the time frames for each of the data series  above after assessing their availability and reliability, to maximize the  amount of data available for us to make meaningful comparisons. We  assessed the reliability of each of the data sources. The Navy provided  information based on our questions regarding data reliability, including  information on an overview of the data, data-collection processes and  procedures, data quality controls, and overall perceptions of data quality.  The Navy provided documentation of how the systems are structured and  what written procedures are in place to help ensure that the appropriate  information is collected and properly categorized. Additionally, we  interviewed Navy officials to obtain further clarification on data reliability,  discuss how the data were collected and reported, and explain how we  planned to use the data. We also conducted our own error checks to look  for inaccurate or questionable data, and we discussed with officials any  data irregularities we found. We conducted these assessments on the  following data for attack submarines: Navy deployed and surge-ready  submarines from fiscal years 2011 through 2018; maintenance timeliness  from fiscal years 2000 through 2018; idle time from fiscal years 2008  through 2018; operating and support costs from fiscal years 2011 through  2017; and cannibalization rates from 2012 through 2017. Some of these  data were used in prior reports, and their reliability had previously been  assessed. After further assessing any data that we had not recently used,  we determined that they were sufficiently reliable for the purposes of  summarizing attack submarine readiness trends and related information.", "We interviewed officials, and where appropriate obtained documentation,  at the following locations:", "Office of the Chief of Naval Operations", "Undersea Warfare Division (N97)", "Warfare Integration Division (N83)", "U.S. Fleet Forces Command", "Commander, Submarine Force, U.S. Atlantic Fleet", "Commander, Submarine Squadron 4", "Commander, Regional Support Group Groton", "Commander, Submarine Force, U.S. Pacific Fleet", "Commander, Submarine Squadron 1", "Commander, Submarine Squadron 7", "Commander, Submarine Squadron 15", "Naval Sea Systems Command (NAVSEA)", "Logistics, Maintenance, and Industrial Operations (NAVSEA 04)", "Program Executive Office, Submarines", "Attack Submarine Program Office (PMS 392)", "Submarine Maintenance Engineering, Planning, and Procurement  (SUBMEPP)", "Supervisor of Shipbuilding, Conversion, and Repair (SUPSHIP)", "Newport News, Virginia", "Navy Education and Training Command", "Submarine Learning Facility Norfolk", "Navy Board of Inspection and Survey", "Norfolk Naval Shipyard, Norfolk, Virginia", "Pearl Harbor Naval Shipyard and Intermediate Maintenance  Facility, Pearl Harbor, Hawaii", "Portsmouth Naval Shipyard, Kittery, Maine", "Newport News Shipbuilding, Virginia, operated by Huntington  Ingalls Industries", "Electric Boat, Groton, Connecticut, operated by General Dynamics  The performance audit upon which this report is based was conducted  from August 2017 to October 2018 in accordance with generally accepted  government auditing standards. Those standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives. We  worked with DOD to prepare this unclassified version of the report for  public release. This public version was also prepared in accordance with  these standards."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Related GAO Products", "paragraphs": ["Report numbers with a C or RC suffix are Classified. Classified reports  are available to personnel with the proper clearances and need to know,  upon request.", "Columbia Class Submarine: Immature Technologies Present Risks to  Achieving Cost Schedule and Performance Goals. GAO-18-158.  Washington, D.C.: Dec. 21, 2017.", "Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Affecting the Fleet. GAO-17-809T.  Washington, D.C.: Sept. 19, 2017.", "Naval Shipyards: Actions Needed to Improve Poor Conditions that Affect  Operations. GAO-17-548. Washington, D.C.: Sept. 12, 2017.", "Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-798T.  Washington, D.C.: Sept. 7, 2017.", "Military Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.: Sept. 7,  2016.", "Navy and Marine Corps: Services Face Challenges to Rebuilding  Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016.  (SECRET//NOFORN)", "Military Readiness: Progress and Challenges in Implementing the Navy\u2019s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.", "Navy Force Structure: Sustainable Plan and Comprehensive Assessment  Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas  Homeports. GAO-15-329. Washington, D.C.: May 29, 2015."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Suzanne Wren, Assistant  Director; Chris Watson, Analyst in Charge; Herb Bowsher; Chris Cronin;  Ally Gonzalez; Cynthia Grant; Carol Petersen; Amber Sinclair; and Cheryl  Weissman made key contributions to this report."], "subsections": []}]}], "fastfact": ["Navy shipyards have been unable to keep up with maintenance demands for attack submarines. As a result, the Navy has spent $1.5 billion since 2008 to support submarines that it could not deploy.", "For example, the USS Boise has been docked for over 2 years while waiting for maintenance\u2014with the Navy paying to support it.", "The Navy has begun to hire more workers at its shipyards and, in some cases, has shifted more work to private shipyards.", "We recommended the Navy assess how to best use public and private shipyards to achieve the full benefit of the nation\u2019s investment in these submarines."]}
{"id": "GAO-18-182", "url": "https://www.gao.gov/products/GAO-18-182", "title": "Federal Prisons: Information on Inmates with Serious Mental Illness and Strategies to Reduce Recidivism", "published_date": "2018-02-15T00:00:00", "released_date": "2018-02-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2016, SAMHSA estimated that about 10.4 million adults in the United States suffered from a serious mental illness, which generally includes conditions such as schizophrenia and bipolar disorder. As of May 27, 2017, BOP was responsible for overseeing 187,910 inmates and 7,831 of these inmates were considered to have a serious mental illness. Research has shown that inmates with serious mental illness are more likely to recidivate than those without.", "The 21st Century Cures Act directed GAO to report on the prevalence of crimes committed by persons with serious mental illness and the costs to treat these offenders\u2014including identifying strategies for reducing recidivism among these individuals. This report discusses (1) what is known about crimes committed by inmates with serious mental illness incarcerated by the federal and selected state governments; (2) what is known about the costs to the federal and selected state governments to incarcerate and provide mental health care services to those individuals; and (3) what strategies have the federal and selected state governments and studies identified for reducing recidivism among individuals with serious mental illness.", "GAO selected six states that varied in their adult incarceration rates and provided geographic diversity. At BOP and the six states' departments of corrections, GAO analyzed criminal offense and incarceration and mental health care cost data and interviewed officials about strategies for reducing recidivism for inmates with serious mental illness. The results from these six states are not generalizable, but provide insights. GAO also reviewed studies that analyzed the relationship between various programs and recidivism among offenders with mental illness."]}, {"section_title": "What GAO Found", "paragraphs": ["About two-thirds of inmates with a serious mental illness in the Department of Justice's (DOJ) Federal Bureau of Prisons (BOP) were incarcerated for four types of offenses\u2014drug (23 percent), sex offenses (18 percent), weapons and explosives (17 percent), and robbery (8 percent)\u2014as of May 27, 2017. GAO's analysis found that BOP inmates with serious mental illness were incarcerated for sex offenses, robbery, and homicide/aggravated assault at about twice the rate of inmates without serious mental illness, and were incarcerated for drug and immigration offenses at about half or less the rate of inmates without serious mental illness. GAO also analyzed available data on three selected states' inmate populations and the most common crimes committed by inmates with serious mental illness varied from state to state due to different law enforcement priorities, definitions of serious mental illness and methods of tracking categories of crime in their respective data systems.", "BOP does not track costs related to incarcerating or providing mental health care services to inmates with serious mental illness, but BOP and selected states generally track these costs for all inmates. BOP does not track costs for inmates with serious mental illness in part because it does not track costs for individual inmates due to resource restrictions and the administrative burden such tracking would require. BOP does track costs associated with mental health care services system-wide and by institution. System-wide, for fiscal year 2016, BOP spent about $72 million on psychology services, $5.6 million on psychotropic drugs and $4.1 million on mental health care in residential reentry centers. The six state departments of corrections each used different methods and provided GAO with estimates for different types of mental health care costs. For example, two states provided average per-inmate costs of incarceration for mental health treatment units where some inmates with serious mental illness are treated; however, these included costs for inmates without serious mental illness housed in those units.", "DOJ, Department of Health and Human Service's Substance Abuse and Mental Health Services Administration (SAMHSA), and criminal justice and mental health experts have developed a framework to reduce recidivism among adults with mental illness. The framework calls for correctional agencies to assess individuals' recidivism risk and substance abuse and mental health needs and target treatment to those with the highest risk of reoffending. To help implement this framework, SAMHSA, in collaboration with DOJ and other experts, developed guidance for mental health, correctional, and community stakeholders on (1) assessing risk and clinical needs, (2) planning treatment in custody and upon reentry based on risks and needs, (3) identifying post-release services, and (4) coordinating with community-based providers to avoid gaps in care. BOP and the six states also identified strategies for reducing recidivism consistent with this guidance, such as memoranda of understanding between correctional and mental health agencies to coordinate care. Further, GAO's literature review found that programs that reduced recidivism among offenders with mental illness generally offered multiple support services, such as mental health and substance abuse treatment, case management, and housing assistance."]}], "report": [{"section_title": "Letter", "paragraphs": ["Mental illness is widespread in the United States. According to figures  from the Substance Abuse and Mental Health Services Administration  (SAMHSA)\u2014an agency within the Department of Health and Human  Services (HHS)\u2014an estimated 44.7 million adults in the United States  suffered from a mental illness in 2016. Among those, about 10.4 million  suffered from a serious mental illness, which generally includes  conditions such as schizophrenia, bipolar disorder, major depression, and  severe post-traumatic stress disorder (PTSD).", "At the federal and state levels, law enforcement components\u2014such as  the Department of Justice\u2019s (DOJ) Federal Bureau of Prisons (BOP) and  state departments of corrections\u2014are responsible for incarcerating  individuals who are charged with or convicted of crimes. Some of these  individuals have serious mental illness and require mental health care  while incarcerated. Multiple U.S. courts over the years have determined  that inmates have a constitutional right to adequate medical and mental  health care. By statute, BOP is required to provide for suitable housing  and the safekeeping, care, and subsistence of all persons charged with or  convicted of offenses against the United States. As part of its duties,  BOP is responsible for delivering adequate health care, including medical,  dental, and mental health care, in a manner consistent with accepted  community standards for a correctional environment. As of May 27,  2017, BOP incarcerated and was responsible for ensuring that about  187,910 inmates received medical and mental health care\u2014the agency  considered 7,831 (4.2 percent) of these inmates to have a serious mental  illness. See appendix I for the characteristics of BOP\u2019s inmate population  with and without serious mental illness, as of May 27, 2017.", "Research has shown that inmates with serious mental illness are more  likely to have higher rates of recidivism than those without. Further,  inmates with co-occurring serious mental illness and substance use  disorders are more likely to recidivate than those with serious mental  illness alone.", "This report responds to the 21st Century Cures Act (Act), which directed  us to report on the prevalence of crimes committed by persons with  serious mental illness and the costs to treat the offenders\u2014including  identifying strategies for reducing recidivism among individuals with  serious mental illness. Specifically, this report addresses the following  questions:  1.  What is known about the crimes committed by inmates with serious  mental illness who were incarcerated by the federal and selected  state governments?  2.  What is known about the costs to the federal and selected state  governments to incarcerate and provide mental health services to  incarcerated individuals with serious mental illness?  3.  What strategies for reducing recidivism among individuals with serious  mental illness have federal and selected state governments and  studies identified?", "To address all three objectives, we reviewed documents, interviewed  officials, and analyzed data obtained from BOP and selected states\u2019  departments of corrections. For objective 3, we also reviewed documents  and interviewed officials from DOJ\u2019s Office of Justice Programs and HHS  (SAMHSA and the National Institute of Mental Health). For purposes of  this review, we based our work on the definitions of \u201cserious mental  illness\u201d that are provided by each of the selected federal agencies and  selected states\u2019 department of corrections. We selected six states based  upon variation in the rate of incarcerated adults per capita to obtain a mix  of states with high, medium, and low rates, specialist recommendations  on data quality and quality of programs for inmates with serious mental  illness, and variation in geography. Using these criteria, we selected  California, New York, Ohio, Texas, Virginia, and Washington.", "To determine what types of crimes were committed by inmates with  serious mental illness who were imprisoned by the federal government  and selected state governments, we analyzed policies and guidance at  BOP and the departments of corrections in selected states to determine  how, if at all, the agencies define serious mental illness and the  processes used to identify incarcerated inmates with serious mental  illness. We also analyzed available data from BOP and the departments  of corrections in selected states to identify the most serious types of  crimes for which inmates with serious mental illness were convicted and  incarcerated during fiscal year 2017. We focused on fiscal year 2017 as it  was the most recent year of data available on BOP\u2019s population of  inmates with serious mental illness. To assess the reliability of BOP\u2019s  criminal offense data, tracked in BOP\u2019s SENTRY data system, we  performed electronic data testing for obvious errors in accuracy and  completeness and interviewed agency officials knowledgeable about the  system to determine the processes in place to ensure the integrity of the  data. We determined that the data were sufficiently reliable for the  purposes of this report. We also interviewed officials from the selected  state departments of corrections to determine the challenges they faced  in recording, tracking, and maintaining data on inmates with serious  mental illness, but we did not independently assess the internal controls  associated with the selected states\u2019 data systems. We provided state  level data as illustrative examples of the crimes committed by inmates  with serious mental illness in selected states.", "To identify what is known about the costs to the federal government and  selected state governments to incarcerate and provide mental health  services to incarcerated individuals with serious mental illness, we  interviewed officials from BOP\u2019s Reentry Services Division, Correctional  Programs Division, Administration Division, Program Review Division,  and Health Services Division, and the departments of corrections in  selected states to discuss and obtain documentation on the processes  and systems used to identify the costs to incarcerate and provide mental  health services to inmates with serious mental illness\u2014including any  challenges faced in tracking such costs. We obtained and analyzed BOP  obligation data from fiscal year 2016, the last full year of cost data  available, for the following budget categories for services related to  mental illness: Psychology Services, psychotropic medications, and  Residential Reentry Center mental health care costs. To assess the  reliability of BOP\u2019s obligations data, we performed electronic testing for  obvious errors in accuracy and completeness, and interviewed agency  officials knowledgeable about BOP\u2019s budget to determine the processes  in place to ensure the integrity of the data. We determined that the data  were sufficiently reliable for the purposes of this report.", "Additionally, we obtained and analyzed BOP data from the Psychology  Data System (PDS) on the extent to which BOP personnel engaged in  psychology services related to inmate psychological well-being during  fiscal year 2016, to calculate the average psychology services  interactions (by category) per inmate during fiscal year 2016. To assess  the reliability of BOP\u2019s psychology services utilization services data, we  performed electronic testing for obvious errors in accuracy and  completeness, and interviewed agency officials knowledgeable about  BOP\u2019s psychology services to determine the processes in place to ensure  the integrity of the data. We determined that the data were sufficiently  reliable for the purposes of this report.", "To determine what strategies for reducing recidivism among individuals  with serious mental illness have been identified by the federal  government and selected state governments and in literature, we  obtained and analyzed documents and interviewed officials from BOP  and the selected states\u2019 corrections departments, as well as from DOJ  and HHS organizations that support research, training, and programs  related to mental health and recidivism. These DOJ organizations  included the National Institute of Corrections within BOP, and the Bureau  of Justice Assistance (BJA) and National Institute of Justice (NIJ) within  the Office of Justice Programs. The HHS organizations included  SAMHSA and the National Institute of Mental Health. We also interviewed  subject matter specialists from the Council of State Governments Justice  Center, Pew Charitable Trusts, and the Treatment Advocacy Center,  which we selected to obtain perspectives from researchers and mental  health and criminal justice organizations. Further, we conducted a  literature review of studies that have sound methodologies and use  primary data collection or secondary analysis to assess the impact of  programs or interventions during incarceration or reentry on recidivism  among adult offenders with mental illness. Appendix II contains a more  detailed discussion of our objectives, scope, and methodology.", "We conducted this performance audit from February 2017 through  February 2018, in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "BOP\u2019s Roles and Responsibilities in Providing Mental Health Care to Incarcerated Inmates", "paragraphs": ["To identity inmates with mental illness, BOP screens inmates prior to  designation to a facility by reviewing an inmate\u2019s pre-sentence report and  assigning preliminary medical and mental health screening levels. Once  an inmate is designated to a BOP institution, the institution staff assesses  inmates to provide an accurate mental health diagnosis and  determination of the severity of any mental illness as well as determining  their suicide risk. BOP also identifies the mental health needs of each  inmate and matches the inmate to an institution with the appropriate  resources. Institution mental health care levels range from 1 to 4, with 1  being institutions that care for the healthiest inmates and 4 being  institutions that care for inmates with the most acute needs. Inmate  mental health care levels are also rated in this manner from level 1 to  level 4. After an inmate arrives at a BOP institution, during the admission  and orientation process, every inmate receives information on mental  health services available at that site. Table 1 identifies inmate mental  health care levels and the percentage of all inmates by designated level.  Throughout an inmate\u2019s incarceration, BOP psychologists, psychiatrists,  and qualified mid-level practitioners (i.e., a physician assistant or nurse  practitioner who is licensed in the field of medicine and possess  specialized training in mental health care) can determine a new mental  health care level following a review of records and a face-to-face clinical  interview.", "BOP\u2019s Psychology Services Branch, which the Reentry Services Division  oversees, provides most mental health services to inmates in BOP- operated institutions, including providing individualized psychological care  and residential and non-residential treatment programs (Figure 1 shows  BOP\u2019s organization for providing mental health services). BOP\u2019s Health  Services Division manages psychiatry and pharmacy services. Most  mental health treatment is provided in what BOP calls its mainline, or  regular, institutions. Acutely ill inmates in need of psychiatric  hospitalization, such as inmates suffering from schizophrenia or bipolar  disorder, may receive these services at one of BOP\u2019s five medical referral  centers, which provide inpatient psychiatric services as part of their  mission. At BOP institutions, psychologists are available for formal counseling and treatment on an individual or group basis. In addition, staff  in an inmate\u2019s housing unit is available for informal counseling.  Psychiatric services available at the institution are enhanced by contract  services from the community."], "subsections": []}, {"section_title": "BOP Criteria Used to Identify the Population of Inmates with Serious Mental Illness", "paragraphs": ["Prior to the passage of the 21st Century Cures Act, and at the beginning  of our work, BOP defined serious mental illness in accordance with the  agency\u2019s program statement\u2014which states that classification of an  inmate as seriously mentally ill requires consideration of diagnoses; the  severity and duration of symptoms; the degree of functional impairment  associated with the illness; and treatment history and current treatment  needs. In accordance with BOP\u2019s program statement, BOP used this  guidance along with other variables to develop six criteria to identify the  population of inmates with serious mental illness who were incarcerated  in fiscal years 2016 and 2017\u2014the most recent fiscal years for which data  on these criteria are available. The additional criteria to identify the  population of inmates with serious mental illness are as follows:  1.  Inmate was evaluated by BOP and assigned a mental health care  level 3: An inmate requires enhanced outpatient mental health care  such as weekly psychosocial intervention or residential mental health  care.  2.  Inmate was evaluated by BOP and assigned a mental health care  level 4: An inmate requires acute care in a psychiatric hospital; the  inmate is gravely disabled and cannot function in a general population  environment.  3.  Inmate was assigned a mental health study level 4: This indicated that  the inmate was subject to a court ordered forensic study that required  an inpatient setting.  4.  Inmate was diagnosed to have one or more of 74 Diagnostic and  Statistical Manual of Mental Disorders (DSM) diagnoses, both active  and in remission, that BOP considers a serious mental illness.  5.  Inmate was evaluated by BOP and identified as having a chronic  suicide risk, due to the inmate having a history of two or more suicide  attempts.  6.  Inmate was evaluated by BOP and assigned a psychology alert  status. This designation was applied to inmates who were evaluated  as having substantial mental health concerns and requiring extra care  when changing housing or transferring institutions.", "On August 15, 2017, in a memorandum for the Comptroller General of the  United States from the Acting Director of BOP, BOP defined \u201cserious  mental illness\u201d for purposes of section 14016 of the 21st Century Cures  Act as follows:  Individuals with a serious mental illness are persons:", "Who currently or at any time during the past year,", "Have had a diagnosable mental, behavioral, or emotional disorder  of sufficient duration to meet diagnostic criteria specified within the  most current edition of the Diagnostic and Statistical Manual of  Mental Disorders,", "That has resulted in functional impairment which substantially  interferes with or limits one or more major life activities.", "The memorandum also stated that BOP may further operationalize this  definition by identifying specific mental disorders which are to be  classified as serious mental illness and providing examples of functional  impairment specific to BOP\u2019s settings and/or populations. BOP officials  indicated that BOP\u2019s program statement and the six criteria to identify the  population of inmates with serious mental illness who were incarcerated  in fiscal years 2016 and 2017 would coincide with the definition for  \u201cserious mental illness\u201d provided in the memorandum for the Comptroller  General of the United States for purposes of the 21st Century Cures Act  and identify an identical set of BOP inmates with \u201cserious mental illness\u201d  for fiscal years 2016 and 2017."], "subsections": []}, {"section_title": "Incarceration and Reentry Are Key Periods to Affect Recidivism", "paragraphs": ["The periods during incarceration in federal and state prisons and reentry  into the community are considered to be key periods to implement  interventions to reduce recidivism among individuals with serious mental  illness, according to public health and correctional stakeholders. The  Bureau of Justice Statistics has found that for all offenders, regardless of  their mental health status, the highest rate of recidivism occurs during the  first year after release from prison. Further, researchers have found that  offenders with serious mental illness return to prison sooner than those  without serious mental illness. Multiple factors may contribute to the  cycle of repeated incarceration among individuals with serious mental  illness. SAMHSA reports that individuals with mental illness face  additional challenges upon reentering the community, including those  associated with finding treatment providers, stable housing, and  employment. Federal agencies have established interagency groups and  other mechanisms to share information on how to address the challenges  related to recidivism among offenders with serious mental illness.  Examples of these information sharing mechanisms are described in  appendix III.", "While the periods of incarceration and reentry are the focus of this review,  there are other points in the criminal justice system where there are  opportunities to intervene to prevent individuals with serious mental  illness from becoming further involved with the system, such as during the  initial law enforcement response or during court proceedings. Further,  SAMHSA has identified connecting those in need of treatment to  community mental health services before a behavioral health crisis begins  as a way to prevent individuals with mental illness from becoming  involved in the criminal justice system."], "subsections": []}]}, {"section_title": "The Type of Crimes Committed by Inmates with Serious Mental Illness Incarcerated by BOP and Selected States\u2019 Departments of Corrections Vary", "paragraphs": [], "subsections": [{"section_title": "BOP Inmates with Serious Mental Illness Were Incarcerated for Similar Crimes as BOP Inmates Without Serious Mental Illness, But Some Differences Exist", "paragraphs": ["About two-thirds of BOP inmates with a serious mental illness were  incarcerated for four types of offenses\u2014drug offenses (23 percent), sex  offenses (18 percent), weapons and explosives offenses (17 percent),  and robbery (8 percent)\u2014as of May 27, 2017. As shown in figure 2, some  differences in offenses exist between inmates with and without serious  mental illness in BOP custody. Specifically, our analysis found that BOP  inmates with serious mental illness were incarcerated for sex offenses,  robbery, and homicide or aggravated assault at about twice the  percentage of inmates without serious mental illness, and were  incarcerated for drug and immigration offenses at about half or less the  rate of inmates without serious mental illness.", "Additionally, we found some differences between BOP inmates with and  without serious mental illness in the length and severity of sentences.  Although a similar percentage of inmates with and without serious mental  illness have life sentences (2.8 percent and 2.5 percent, respectively), a  lower percentage of inmates with serious mental illness had sentences of  10 years or less (43.5 percent and 49.2 percent, respectively). About .06  percent (5 inmates) of inmates with serious mental illness and about .03  percent (52 inmates) of inmates without serious mental illness received a  death sentence. See appendix I for additional information on the  characteristics of BOP inmates with and without serious mental illness."], "subsections": []}, {"section_title": "The Most Common Types of Crimes Committed by Inmates with Serious Mental Illness Varied Among Selected States\u2019 Departments of Corrections", "paragraphs": ["Based on our analysis of available data provided by selected states\u2019  departments of corrections, the most common crimes committed by  inmates with serious mental illness varied from state to state. The  difference in types of crimes reported by states and BOP may be due to  different priorities, laws, and enforcement priorities across the state and  federal criminal justice systems, among other things. The federal and  state governments also define serious mental illness differently, and they  track different categories of crime in their respective data systems. The  percentages and types of crimes committed by incarcerated inmates are  shown in figures 3 through 5 below for three selected states\u2019 departments  of corrections."], "subsections": [{"section_title": "New York", "paragraphs": ["The New York State Department of Corrections and Community  Supervision (DOCCS) cared for 2,513 inmates with serious mental illness  out of a total of 51,436 inmates as of December 31, 2016. Figure 3 shows  the categories of offenses committed by inmates defined by DOCCS as  having serious mental illness. Three out of four inmates with serious  mental illness under the care of DOCCS were incarcerated for violent  crimes. According to DOCCS program descriptions, diagnostic criteria for  serious mental illness are: (1) an inmate is determined by the New York  State Office of Mental Health to have specified mental health diagnoses;  (2) an inmate is actively suicidal or has made a recent, serious suicide  attempt; or (3) an inmate is diagnosed with serious mental illness, organic  brain syndrome, or a severe personality disorder that is manifested in  significant functional impairment such as acts of self-harm or other  behaviors that have a serious adverse effect on life or on mental or  physical health.", "The Virginia Department of Corrections cared for 527 inmates with  serious mental illness out of a total of 30,052 inmates as of September  29, 2017. Figure 4 shows the crimes committed by inmates that Virginia  defined as having serious mental illness. About one quarter of the  inmates with serious mental illness in Virginia committed rape, sexual  assault, and other assault crimes. Virginia policy defines an inmate with  serious mental illness as an offender diagnosed with a psychotic disorder,  bipolar disorder, major depressive disorder, PTSD or anxiety disorder, or  any diagnosed mental disorder (excluding substance use disorders)  currently associated with serious impairment in psychological, cognitive,  or behavioral functioning that substantially interferes with the person\u2019s  ability to meet the ordinary demands of living and requires an  individualized treatment plan by a qualified mental health professional(s).", "The Washington Department of Corrections cared for 1,881 inmates with  serious mental illness out of a total of 17,234 inmates as of June 30,  2017. Figure 5 shows the crimes committed by Washington inmates that  Washington defined as having serious mental illness. About half of the  inmates with serious mental illness in Washington committed assault or  sex crimes. The Washington Department of Corrections defines serious  mental illness as a substantial disorder of thought or mood which  significantly impairs judgment, behavior, or capacity to recognize reality or  cope with the ordinary demands of life within the prison environment and  is manifested by substantial pain or disability. The Washington  Department of Corrections\u2019 definition does not include inmates who are  substance abusers or substance dependent\u2014including alcoholics and  narcotics addicts\u2014or persons convicted of any sex offense, who are not  otherwise diagnosed as seriously mentally ill."], "subsections": []}]}]}, {"section_title": "BOP Does Not Track Costs Related to Inmates with Serious Mental Illness but BOP and Selected States Generally Track Costs Related to Treating Inmates with Mental Illness", "paragraphs": [], "subsections": [{"section_title": "BOP Does Not Track Costs Related to Inmates with Serious Mental Illness", "paragraphs": ["According to BOP officials, the agency does not track costs specifically  associated with inmates with serious mental illness due to resource  restrictions and the administrative burden such tracking would require.  BOP officials stated that BOP, unlike a hospital, is not structured to bill  individual interactions; and noted that, generally, the correctional industry  does not account for costs by tracking individual costs. BOP officials said  that requiring BOP staff to gather individual cost data manually would be  an extremely time consuming and burdensome process. In addition, BOP  does not maintain the mental health care cost data necessary to calculate  the individual inmate costs related to specific program areas (i.e.,  psychology and psychiatric services)."], "subsections": []}, {"section_title": "BOP Tracks Some Costs Related to Treating Inmates with Mental Illness", "paragraphs": ["BOP tracks the costs associated with incarcerating its overall inmate  population and with providing mental health care services to inmates  system-wide and separately by institution. For fiscal year 2016, BOP\u2019s  institution-level data show that total incarceration costs vary by BOP  institution (ranging from $15 million to over $247 million), for a number of  reasons, including varying amounts of medical and mental health care  available at each institution. Table 2 identifies BOP\u2019s costs for mental  health care services provided to all inmates (including inmates with  serious mental illness) for fiscal year 2016, the last year for which BOP  had complete data during our audit work. The costs below are the most  readily available BOP-wide costs directly related to mental health care.  BOP\u2019s Psychology Services staff provides most inmate mental health  services in BOP-operated institutions, including the provision of  individualized psychological care. Psychotropic medication may be used  to treat mental illness, although in some instances, BOP uses  psychotropic medication to treat individuals with other kinds of health  conditions. Residential Reentry Centers, also known as halfway houses,  provide assistance to inmates nearing release, including some inmates  with serious mental illness.", "BOP includes psychiatric treatment and services under medical care  costs, but BOP does not track psychiatric costs separately. In July 2013,  we reported that BOP also does not track its contractors\u2019 costs of  providing mental health services to the 13 percent of BOP inmates  housed in privately managed facilities. The performance-based, fixed- price contracts that govern the operation of BOP\u2019s privately managed  facilities give flexibility to the contractors to decide how to provide mental  health services.", "BOP tracks and maintains information on the number and types of inmate  interactions with Psychology Services personnel. These interactions  include clinical and non-clinical interactions between Psychology Services  staff and inmates that may be crisis-oriented or routine, such as individual  and group therapy. Based on our analysis of these data, in fiscal year  2016, BOP inmates with serious mental illness were more likely than  other inmates to use 18 of the 20 services or programs tracked by  Psychology Services. On average, we found that an inmate with serious  mental illness had 9.6 clinical interventions compared to 0.24 clinical  interventions for inmates without serious mental illness during fiscal year  2016. As a result, an average BOP inmate with serious mental illness  was 40 times more likely to receive a clinical intervention than an average  inmate without serious mental illness. BOP data do not capture the time  and resources associated with any of the Psychology Services  interactions; thus we cannot assign a cost value to differences between  populations in receipt of these services. Appendix IV shows the extent to  which BOP\u2019s inmate population received specific types of psychology  services in fiscal year 2016."], "subsections": []}, {"section_title": "Selected States\u2019 Departments of Corrections Provided Estimated Costs for Inmate Mental Health Care", "paragraphs": ["The selected state departments of corrections provided us with estimates  for different types of mental health care costs, but did not identify mental  health care costs specifically for inmates with serious mental illness.  Additionally, the states did not provide us with the total cost to incarcerate  inmates with serious mental illness. For example, officials from one state  said staff did not calculate costs separately for inmates with mental illness  compared to inmates without mental illness as they did not believe an  accurate comparison could be made. Officials from another state said that  they did not track costs of incarceration or mental health services per  inmate based on whether or not an inmate has mental illness, while  officials from another state said they were not able to track costs for  mental health services for inmates at the individual level. The selected  state departments of corrections also used different methods to determine  the costs of the mental health services they provided to their inmate  population. For example:", "Two state departments of corrections provided us with the average  per-inmate costs of incarceration for a mental health treatment unit or  treatment center where some inmates with serious mental illness are  treated, but these per-inmate costs also included incarceration costs  for inmates without serious mental illness who were housed in these  facilities.", "Another state department of corrections provided total psychotropic  medication costs for all inmates and mental health care costs per  offender. Mental health care costs per offender were averaged across  all offenders, not exclusively those with serious mental illness.", "Two other states provided total costs for one budget item related to  mental illness: total mental health program spending in one state, and  psychiatric care expenditures in the other state. These costs were for  all inmates, not exclusively for inmates with serious mental illness.", "Another state department of corrections provided an estimate for  average mental health care costs per inmate with mental illness, but  this estimate included all inmates diagnosed as having a mental  illness, not exclusively those inmates diagnosed with serious mental  illness."], "subsections": []}]}, {"section_title": "Targeting Treatments Based on Risk and Coordinating Transition Plans of Individuals with Serious Mental Illness Are among Strategies Identified by Federal and Selected State Agencies and Studies", "paragraphs": ["In 2012, the Council of State Governments Justice Center developed the  Criminogenic Risk and Behavioral Health Needs Framework in  collaboration with DOJ\u2019s National Institute of Corrections and Bureau of  Justice Assistance, SAMHSA, and experts from correctional, mental  health, and substance abuse associations. The framework is an  approach to reduce recidivism and promote recovery among adults under  correctional supervision with mental illness, substance use disorders, or  both. It calls for correctional agencies to assess individuals\u2019 criminogenic  risk (the risk of committing future crimes), substance abuse and mental  health needs. The agencies are to use the results of the assessment to  target supervision and treatment resources based on these risks and  needs. Additionally, the framework states that individuals with the highest  criminogenic risks should be prioritized for treatment to achieve the  greatest effect on public safety outcomes.", "Mental health and substance abuse  treatment  There are a number of different approaches  that can be tailored and combined to address  an individual\u2019s mental health and substance  abuse treatment needs. Examples include:", "Psychopharmacology.", "Approach that aims to address  dysfunctional thoughts, moods, or  behavior through time-limited counseling.", "To help implement the principles set forth in the framework, SAMHSA  developed additional guidance in collaboration with the Council of State  Governments Justice Center, the Bureau of Justice Assistance and  experts from correctional, mental health, and substance abuse  associations. This guidance is for mental health, correctional, and  community stakeholders, and uses the Assess, Plan, Identify, Coordinate  model to provide procedural guidelines to reduce recidivism and promote  recovery at different points during incarceration and reentry. Table 3  below describes selected guidelines and examples of strategies that were  identified by BOP and the six selected states that correspond to each  element of the model.", "A residential treatment program for  individuals with both substance use and  mental disorders that uses a peer  community to address substance abuse,  psychiatric symptoms, cognitive  impairments, and other common  impairments.   who are in recovery and have previously  been involved in the criminal justice  system provide support to others who are  also involved in the criminal justice  system.", "Forensic intensive case management.  A case manager coordinates services in  the community to help clients sustain  recovery and prevent further involvement  with the criminal justice system.", "Forensic Assertive Community  Treatment (FACT). Treatment is  coordinated by a multidisciplinary team,  which may include psychiatrists, nurses,  peer specialists, and probation officers.  FACT teams have high staff-to-client  ratios and are available around-the-clock  to address clients\u2019 case management and  treatment needs.", "Examples of Bureau of Prisons (BOP) and Selected State Strategies  booking/intake process as feasible and  throughout the criminal justice continuum to  detect substance use disorders, mental  disorders, co-occurring substance use and  mental disorders, and criminogenic risk.  Follow up with comprehensive assessment  to guide program placement and service  delivery. Assessment should include clinical  needs, social support needs (e.g., housing,  education, employment, and transportation),  and risk factors.", "All six selected states and BOP have developed mental health  assessments during the intake process.   BOP officials stated that the agency is in the process of enhancing the  predictive validity of its criminogenic risk assessment and expects to  complete this project in 2018.", "One of the six selected states uses a multidisciplinary treatment team  composed of a clinician, psychiatrist, and correctional counselor, to assess  the treatment and programming needs of inmates with serious mental  illness. In addition to mental health treatment, the multidisciplinary team  assesses if the inmate is ready for and would benefit from institutional  services such as academic and vocational education programs, work, or  substance abuse counseling. These assessments occur at least annually,  but may occur whenever an inmate\u2019s treatment needs have changed."], "subsections": [{"section_title": "Studies Indicate Some Promising Strategies to Reduce Recidivism Among Offenders with Mental Illness", "paragraphs": ["To identify strategies to reduce recidivism among offenders with mental  illness during incarceration and reentry, we searched for studies that  analyzed the relationship between programs and recidivism among  offenders with mental illness. Our search identified about 200  publications. We used a systematic process to conduct the review, which  appendix II describes in more detail. We ultimately identified 14 studies  that (1) assessed correctional institution or reentry programs for offenders  with mental illness implemented in the United States, (2) contained  quantitative analyses of the effect of a program on recidivism, and (3)  used sufficiently sound methodologies for conducting such analyses.", "The studies examined different kinds of recidivism outcomes (e.g., re- arrest, re-incarceration, reconviction) and one study often examined more  than one recidivism outcome. We categorize the findings for each study  as follows:", "Statistically significant reduction in recidivism: the study reported  that one or more outcome measures indicated a statistically significant  reduction in recidivism among program participants; the study may  also have one or more recidivism outcome measures that were not  statistically significant.", "Statistically significant increase in recidivism: the study reported  that one or more outcome measures indicated a statistically significant  increase in recidivism among program participants; the study may  also have one or more recidivism outcome measures that were not  statistically significant.", "No statistically significant effect on recidivism: the study reported  only outcomes indicating no statistically significant effect on recidivism  among program participants.", "The statistical significance finding categories are based on the effect of  the program as a whole and do not indicate if or how all individual  elements of the programs impacted recidivism. For additional information  on recidivism findings, see appendices V and VI. See appendix VII for a  bibliography of the studies.", "The results of the literature review provide insights into factors that can  affect recidivism among individuals with mental illness; however, the  following considerations should be taken into account: (1) the type of  mental illness of program participants varied within and across programs  making it difficult to generalize results to individuals with all types of  mental illness; (2) the studies may not provide a full description of the  programs; (3) not all participants may have used available program  services; (4) studies assessed the programs as a whole and did not  determine to what extent different elements of the programs impacted  recidivism; and (5) some studies used designs which cannot control for all  unobserved factors that could affect the recidivism results.", "Nine of the 14 studies we reviewed found statistically significant  reductions in recidivism. The studies that found statistically significant  reductions generally involved programs that offered multiple support  services, as shown in figure 6. Providing mental health and substance  abuse treatment (8 of 9 studies), case management (5 of 9 studies),  release planning (5 of 9 studies), housing (6 of 9 studies) and  employment assistance (4 of 9 studies) were the most common services  across the programs where studies we reviewed found statistically  significant reductions in recidivism. In addition, more than half of the  programs that resulted in statistically significant reductions in recidivism  were coordinated with multidisciplinary stakeholders, such as mental  health providers, correctional officials, substance use specialists, social  workers, and peer support specialists (7 of 9 studies), and community  corrections agencies, such as probation or parole offices (6 of 9 studies).  However, other studies found that programs that offered multiple support  services did not reduce recidivism, suggesting that other factors may also  affect recidivism. Such factors may include the extent to which  participants used services, as well as other unique programmatic factors,  such as addressing criminogenic risk or criminal thinking. We further  discuss examples of programs that did and did not reduce recidivism  below.", "For example, study 9 examined Washington\u2019s Dangerously Mentally Ill  Program, in which a multidisciplinary committee determines which  offenders meet the program criteria of having a mental illness and are at  high risk of being dangerous to themselves or others six months prior to  their release from prison. Members of the committee include  representatives from the Department of Social and Health Services,  Department of Corrections, law enforcement, and community mental  health and substance abuse treatment agencies. Offenders designated  for participation are immediately assigned a community mental health  treatment provider and receive special transition planning prior to their  release from prison. After release, and for up to five years, a variety of  services are available to participants based on assessed needs. Services  may include mental health and substance abuse treatment, housing and  medical assistance, training, and other support services. Researchers  found that program participants were about 42 percent less likely to be  reconvicted of a new felony than similar offenders in the comparison  group four years after release (recidivism rates were 28 percent and 48  percent, respectively).", "Two other studies (numbers 3 and 6) evaluated Colorado\u2019s Modified  Therapeutic Community, a residential program that was provided both as  a 12-month prison program and 6-month reentry program after release  from prison for offenders with co-occurring mental illness and substance  use disorders. Participants may have participated in only the prison  program, only the reentry program, or both. Both programs use a  cognitive-behavioral curriculum designed to help participants recognize  and respond to the interrelationship of substance abuse, mental illness,  and criminality and to use strategies for symptom management. The  reentry program was coordinated with the community corrections agency,  which provided the residential facility and monitored medication and  compliance with parole terms for both participants and the comparison  group. The reentry program also assisted with housing placement and  employment. Researchers found that both the prison program and the  reentry program resulted in statistically significant reductions in recidivism  among participants. Specifically, the studies found that at 12 months post- release, prison program participants had a 9 percent reincarceration rate  versus a 33 percent rate for the comparison group that did not participate  in either program; and reentry program participants had a 19 percent  reincarceration rate versus 38 percent for the comparison group. Further,  researchers found that those who participated in both the prison and  reentry program experienced the greatest reductions in recidivism, with a  reincarceration rate of 5 percent versus a rate of 33 percent for the  comparison group that did not participate in either program 12 months  after release from prison.", "Studies that did not find a reduction in recidivism also provide insights on  factors that may affect recidivism. For example, study 10 examined a  Washington program to help enroll inmates with severe mental illness in  Medicaid prior to their release from prison and found that jail and prison  stays were higher among program participants than non-participants. The  researchers hypothesized that receiving mental health treatment may  have led to more interaction with authorities, putting participants at a  greater risk of being caught violating the terms of their parole than non- participants. There was some evidence to support this: they found that  most of the difference in prison days between participants and non- participants was the result of noncompliance with conditions of parole  (technical violations) rather than the commission of new crimes. Further,  the researchers conclude that Medicaid benefits alone are not enough to  reduce arrests or keep people with severe mental illness out of jail or  prison.", "In addition, study 11 examined Minnesota\u2019s release planning services for  inmates with serious and persistent mental illness, which provided some  of the same types of services as the programs that did reduce recidivism.  For example, while incarcerated, inmates were provided pre-release  planning to address vocational, housing, chemical dependency,  psychiatric, disability, medical, medication, and transportation needs.  However, this program did not result in any significant reduction in  recidivism. The researchers conclude that including programming to  target criminogenic risks and providing a continuum of care from the  institution to the community, instead of only providing services in the  institution, may make the program more effective at reducing recidivism."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOJ and HHS for review and  comment. DOJ and HHS did not provide official written comments or  technical comments.", "We are sending copies of this report to the Assistant Attorney General for  Administration, Department of Justice, the Secretary of Health and  Human Services, selected congressional committees, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: Characteristics of the Federal BOP\u2019s Inmate Population with and without Serious Mental Illness, as of May 27, 2017", "paragraphs": ["The population of Federal Bureau of Prisons (BOP) inmates with and  without serious mental illness varies in several characteristics, see table  4."], "subsections": []}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["To address all three objectives, we reviewed documents, interviewed  officials, and analyzed data obtained from the Federal Bureau of Prisons  (BOP) and selected states\u2019 departments of corrections. For objective 3,  we also reviewed documents and interviewed officials from the  Department of Justice\u2019s (DOJ) Office of Justice Programs and the  Department of Health and Human Services\u2019 (HHS) Substance Abuse and  Mental Health Services Administrations (SAMHSA) and the National  Institute of Mental Health. We selected six state departments of  corrections (California, New York, Ohio, Texas, Virginia, and Washington)  based upon variation in the rate of incarcerated adults per capita to obtain  a mix of states with high, medium, and low rates, specialist  recommendations on data quality and quality of programs for inmates  with serious mental illness, and variation in geography. We contacted  officials from SAMHSA and the National Institute of Mental Health and  representatives from correctional accreditation organizations, as well as  subject matter specialists from Pew Charitable Trusts and the Treatment  Advocacy Center that we identified through previous work and asked for  their recommendations of states that, in their view, had reliable data  sources on the number of incarcerated individuals with serious mental  illness and the costs of providing mental health services, as well as  noteworthy programming for inmates with serious mental illness. The  results from these six states are not generalizable, but provide insights.  For purposes of this review, we based our work on the definition(s) of  serious mental illness that are provided by each of the selected federal  agencies and selected states\u2019 departments of corrections. We analyzed  policies and guidance at BOP and the departments of corrections in  selected states to determine how, if at all, the agencies define serious  mental illness and the processes used to identify incarcerated inmates  with serious mental illness. To determine the population of inmates with  serious mental illness for the purposes of our work, BOP operationalized  its definition of serious mental illness using six criteria, covering the  required degree of mental health care, mental illness diagnoses,   and suicide risk. BOP defined \u201cserious mental illness\u201d in accordance with  the agency\u2019s program statement, BOP Program Statement 5310.16,  Treatment and Care of Inmates with Mental Illness, May 1, 2014. On  August 15, 2017, in a memorandum for the Comptroller General of the  United States from the Acting Director of BOP, BOP defined \u201cserious  mental illness\u201d for purposes of section 14016 of the 21st Century Cures  Act. BOP officials indicated that BOP\u2019s program statement and the six  criteria to identify the population of inmates with serious mental illness  who were incarcerated in fiscal years 2016 and 2017 would coincide with  the definition for \u201cserious mental illness\u201d provided in the memorandum for  the Comptroller General of the United States for purposes of the 21st  Century Cures Act and identify an identical set of BOP inmates with  \u201cserious mental illness\u201d for fiscal years 2016 and 2017. BOP applied  these criteria to inmate information in its SENTRY, Bureau Electronic  Medical Record (BEMR), and Psychology Data System (PDS) data  systems to identify inmates with serious mental illness. To assess the  reliability of the these data, we performed electronic data testing for  obvious errors in accuracy and completeness, and interviewed agency officials knowledgeable about these systems to determine the processes  in place to ensure the integrity of the data. We determined that the data  were sufficiently reliable for identifying the population of BOP inmates  with serious mental illness, for the purposes of this report.", "To determine what types of crimes were committed by inmates with  serious mental illness who were incarcerated by the federal and selected  state governments we analyzed available data from BOP and the  departments of corrections in selected states on the most serious types of  crimes for which inmates with serious mental illness were incarcerated  during fiscal year 2017. BOP officials track and maintain information on  the types of crimes for which inmates have been incarcerated via  SENTRY. We interviewed officials from BOP\u2019s Office of Research and  Evaluation, Reentry Services Division, and Correctional Programs  Division to discuss the number and types of crimes committed by BOP  inmates with serious mental illness. To assess the reliability of BOP\u2019s  criminal offense data, tracked in BOP\u2019s SENTRY system, we performed  electronic data testing for obvious errors in accuracy and completeness,  and interviewed agency officials from BOP\u2019s Office of Research and  Evaluation knowledgeable about BOP\u2019s inmate tracking system to  determine the processes in place to ensure the integrity of the data. We  determined that the data were sufficiently reliable for the purposes of this  report. We also interviewed and received written responses from officials  from the selected state departments of corrections to determine the  challenges they faced in recording, tracking, and maintaining data on  inmates with serious mental illness, but we did not independently assess  the internal controls associated with the selected states\u2019 data systems.  We provided state level data as illustrative examples of the crimes  committed by inmates with serious mental illness in selected states.", "To identify what is known about the costs to the federal and selected  state governments to incarcerate and provide mental health services to  incarcerated individuals with serious mental illness, we interviewed and  received written responses from officials from BOP\u2019s Reentry Services  Division, Correctional Programs Division, Administration Division,  Program Review Division, and Health Services Division, and the  departments of corrections in selected states to discuss and obtain  documentation on the processes and systems used to track the costs to  incarcerate and provide mental health services to inmates with serious  mental illness, and obtain their perspectives on the challenges faced, if  any, in tracking such costs. We analyzed BOP obligation data from fiscal  year 2016 for the following budget categories: Psychology Services,  psychotropic medications, and Residential Reentry Center mental health  care costs. We included these obligation categories as indicators of BOP  mental health care costs because our prior work identified that these  services were used by inmates with mental illness. To assess the  reliability of BOP\u2019s obligations data, we performed electronic testing for  obvious errors in accuracy and completeness, and interviewed agency  officials knowledgeable about BOP\u2019s budget to determine the processes  in place to ensure the integrity of the data. We determined that the data  were sufficiently reliable for the purposes of this report. In response to our  inquiries, the selected states provided various data on costs to  incarcerate and provide mental health care to inmates under their  supervision. We did not independently assess the internal controls  associated with the selected states\u2019 data systems. We provided state  level data as illustrative examples of the manner in which state  correctional agencies tracked costs of incarceration and mental health  care services for inmates under their supervision.", "Additionally, we obtained and analyzed BOP data from PDS on the extent  to which inmates interacted with Psychology Services personnel and  programs during fiscal year 2016, to calculate the average psychology  services interactions (by category) per inmate during fiscal year 2016. To assess the reliability of BOP\u2019s psychology services utilization services  data, we performed electronic testing for obvious errors in accuracy and  completeness, and interviewed agency officials knowledgeable about  BOP\u2019s psychology services to determine the processes in place to ensure  the integrity of the data. We determined that the data were sufficiently  reliable for the purposes of this report.", "To determine what strategies for reducing recidivism among individuals  with serious mental illness have been identified by the federal and  selected state governments and in literature, we obtained and analyzed  documents and interviewed officials from BOP and the selected states\u2019  corrections departments, as well as from DOJ and HHS organizations  that support research, training, and programs related to mental health and  recidivism. These DOJ organizations included the National Institute of  Corrections, within BOP, and the Bureau of Justice Assistance and  National Institute of Justice, within the Office of Justice Programs. The  Department of Health and Human Services (HHS) organizations included  SAMHSA and the National Institute of Mental Health. We also interviewed  subject matter experts from the Council of State Governments Justice  Center, Pew Charitable Trusts, and the Treatment Advocacy Center,  which we selected to obtain perspectives from researchers and mental  health and criminal justice organizations."], "subsections": [{"section_title": "Literature Review", "paragraphs": ["Further, we conducted a literature review of studies that have sound  methodologies and use primary data collection or secondary analysis to  assess the impact of programs or interventions during incarceration or  reentry on recidivism among adult offenders with mental illness. To  identify relevant studies, we took the following steps:  1.  A GAO research librarian conducted searches of various research  databases and platforms including ProQuest, MEDLINE, PsycINFO,  Social SciSearch, and Scopus, among others, to identify scholarly and  peer reviewed publications; government reports; and publications by  trade associations, nonprofits and think tanks from 2008 through  2017, a period chosen to identify a comprehensive set of relevant and  timely research.  2.  We identified and reviewed selected additional studies that were cited  within literature reviews, meta analyses and studies referenced on  information-sharing websites, including the Council of State  Governments\u2019 \u201cWhat Works in Reentry\u201d website, National Institute of  Justice\u2019s \u201cCrime Solutions\u201d website, and SAMHSA\u2019s Registry of  Evidence Based Practices and Programs, and other secondary  sources published from 2000 through 2017. We chose this time period  to ensure we identified key older, reliable studies we may have  missed by virtue of our database search timeframe. We identified  these secondary resources during the course of our audit through the  previously discussed database search, interviews with agency officials  and representatives from research, criminal justice, and mental health  organizations, and by reviewing websites of relevant agencies.", "The literature search produced about 200 publications. To select studies  that were relevant to our research objective two reviewers independently  assessed the abstracts for each publication using the following criteria:  1.  Program studied was implemented in the U.S.  2.  Study described in the publication includes original data analysis to  assess the impact of a program for adults with mental illness on  recidivism.", "For those that met the above two criteria we obtained and reviewed the  full text of the publication, using the same criteria. We also further  categorized the studies that met the two criteria above into the following  categories: 1) studies that evaluated programs implemented during the  period of incarceration or reentry, 2) studies that evaluated programs  meant to divert individuals with serious mental illness from jail or prison  (e.g., mental health courts) and 3) other, for those interventions that did  not fall into either of these categories. As our review focused on  strategies to reduce recidivism during incarceration and reentry, we  excluded the studies on diversion programs (the second category). We  evaluated the 31 studies that fell into the incarceration and reentry and  the other categories using a data collection instrument. The data  collection instrument captured information on the elements of the  program, the recidivism effects, and the study\u2019s methodology. The data  collection instrument was initially filled out by one individual and then  verified for accuracy by another individual; any differences in the  individuals\u2019 assessments were discussed and reconciled.", "To determine if the findings of the 31 studies should be included in our  review of the literature, the study reviewers conferred regarding each  study and assessed if: 1) the study was sufficiently relevant to the  objective; and 2) the study\u2019s methodology was sufficiently rigorous. With  regard to the study\u2019s relevance, we included studies that evaluated: a program for individuals with mental illness incarcerated in prison or  jail or provided directly upon release from prison or jail; or a program for individuals with mental illness that is not provided in a  prison, jail, or directly upon release from prison or jail (e.g., in a  psychiatric hospital or in the community after a psychiatric  hospitalization), but is hypothesized to impact criminal justice  involvement and could potentially be applied in a correctional setting.", "With regard to methodological rigor, two GAO methodologists used  generally accepted social science standards to assess the design and  analytic strategy of each study to ensure analyses were sufficiently sound  to support the results and conclusions. Specifically, the methodologists  examined such factors as how the effects of the programs were isolated  (i.e., use of comparison groups and statistical controls); the  appropriateness of treatment and comparison group selection, if used;  and the statistical analyses used.", "As a result of this process, we found 18 studies within the scope of our  review that used sufficiently sound methodologies. Some studies used a  randomized controlled trial methodology or quasi-experimental research  designs, and some studies used non-experimental designs to compare  recidivism outcomes for a single population before and after the  intervention. These studies used various recidivism measures, and some  used more than one measure. For each of the 18 studies, we reviewed  the study\u2019s findings related to recidivism, and categorized the findings  based on statistical significance as follows:", "Statistically significant reduction in recidivism: the study reported that  one or more outcome measures indicated a statistically significant  reduction in recidivism among program participants; the study may  also have one or more recidivism outcome measures that were not  statistically significant.", "Statistically significant increase in recidivism: the study reported that  one or more outcome measures indicated a statistically significant  increase in recidivism among program participants; the study may  also have one or more recidivism outcome measures that were not  statistically significant.", "No statistically significant effect on recidivism: the study reported only  outcomes indicating no statistically significant effect on recidivism  among program participants.", "For a list of the 18 studies, see appendix VII.", "We conducted this performance audit from February 2017 through  February 2018, in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix III: Federal Information Sharing Mechanisms to Address Recidivism among Individuals with Serious Mental Illness", "paragraphs": ["Federal agencies have established interagency groups and other  mechanisms, such as web-based resources, to share information related  to correctional mental health and reducing recidivism among individuals  with serious mental illness, among other things. Examples of these  information sharing mechanisms are described in table 5 below."], "subsections": []}, {"section_title": "Appendix IV: Federal Bureau of Prisons (BOP) Psychology Services Utilization Data for Incarcerated Inmates, Fiscal Year 2016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Findings of Studies Examining the Recidivism Effects of Non-Correctional Programs for Individuals with Mental Illness", "paragraphs": ["Our literature review also identified four studies that met the criteria of (1)  containing quantitative analyses of the effect of a program for individuals  with mental illness on recidivism, and (2) using sufficiently sound  methodologies for conducting such analyses; but were in non-correctional  settings, such as in a psychiatric hospital or in the community after a  psychiatric hospitalization. While the findings from these studies may not  be generalizable to a correctional setting, they may offer insights on  effective strategies for reducing recidivism, as many of the program  participants had a history of involvement with the criminal justice system.", "As shown in figure 7, half (2 of 4) of the studies found statistically  significant reductions in recidivism. The non-correctional programs that  were found to reduce recidivism included some of the same elements as  the correctional programs that reduced recidivism, including mental health  treatment (2 of 2 studies), substance abuse treatment (1 of 2 studies),  case management (2 of 2 studies), release planning (1 of 2 studies),  employment assistance (2 of 2 studies), housing assistance (1 of 2  studies), and multidisciplinary coordination among mental health  providers, substance use specialists, social workers, and/or peer support  specialists, for example (1 of 2 studies). However, similar to the literature  on correctional programs, there were also studies that found that  programs that offered multiple support services did not reduce recidivism,  suggesting other factors may affect recidivism; such factors may include  the extent to which participants used services, as previously noted, as  well as other unique programmatic factors. We further discuss examples  of programs that did and did not reduce recidivism below.", "For example, study 15 evaluated New York\u2019s Assisted Outpatient  Treatment, a court-ordered treatment program for individuals with mental  illness and a history of multiple hospitalizations or violence toward self or  others. Individuals entering the program are assigned a case manager  and prioritized for enhanced services that include housing and vocational  services. Researchers found that the comparison group who never  received Assisted Outpatient Treatment had nearly double the odds (odds  ratio of 1.91) of being arrested than program participants during and  shortly after the period of assignment to the program.", "The programs that were found not to reduce recidivism also provide some  insights into factors that affect recidivism. For example, study 18  evaluated a Pennsylvania-based modified outpatient therapeutic  community treatment program for individuals with co-occurring substance  use disorder and emotional distress or mental illness and found that it had  no significant effect on recidivism. Researchers attributed this finding to  the program\u2019s emphasis on substance use rather than on addressing  criminogenic risks."], "subsections": []}, {"section_title": "Appendix VI: Literature Review Findings for Selected Recidivism Measures", "paragraphs": ["The 14 studies we identified through our literature review that (1)  assessed correctional institution or reentry programs for offenders with  mental illness implemented in the United States (2) contained quantitative  analyses of the effect of a program on recidivism, and (3) used sufficiently  sound methodologies for conducting such analyses, used a number of  different recidivism outcome measures, and some assessed more than  one recidivism outcome measure. Tables 7, 8, and 9 below show the  recidivism results for studies that measured reincarceration rates,  reconviction rates, and number of days in jail or prison, which were  reported by multiple studies. These do not represent all recidivism  findings; some studies used other recidivism measures such as the  number of arrests or convictions, odds ratio or hazard ratio of  reincarceration, and self-reported criminal activity."], "subsections": []}, {"section_title": "Appendix VII: Bibliography", "paragraphs": ["This bibliography contains citations for the 18 studies we reviewed  regarding programs for individuals with mental illness that may affect  recidivism. (See appendix II for more information about how we identified  these studies.) Following the citation we include the study numbers that  we used to reference the study earlier in this report.", "Burke, C. and S. Keaton. San Diego County\u2019s Connections Program  Board of Corrections Final Report. San Diego, CA: SANDAG, June 2004.  (Study 1)", "Chandler, D.W. and G. Spicer. \u201cIntegrated Treatment for Jail Recidivists  with Co-occuring Psychiatric and Substance Use Disorders.\u201d Community  Mental Health Journal, vol. 42, no. 4 (2006):405-425. (Study 2)", "Compton, M.T., M.E. Kelley, A. Pope, K. Smith, B. Broussard, T.A. Reed,  J.A. DiPolito, B.G. Druss, C. Li, and N.L. Haynes. \u201cOpening Doors to  Recovery: Recidivism and Recovery Among Persons With Serious Mental  Illnesses and Repeated Hospitalizations.\u201d Psychiatric Services, vol. 62,  no. 2 (2016): 169-175. (Study 17)", "Cusack, K.J., J.P. Morrissey, G.S. Cuddleback, A. Prins, and D.M.  Williams. \u201cCriminal Justice Involvement, Behavioral Health Service Use,  and Costs of Forensic Assertive Community Treatment: A Randomized  Trial.\u201d Community Mental Health Journal, vol. 46 (2010): 356-363. (Study  4)", "Duwe, G. \u201cDoes Release Planning for Serious and Persistent Mental  Illness Offenders Reduce Recidivism? Results From an Outcome  Evaluation.\u201d Journal of Offender Rehabilitation, vol. 54, no. 1 (2015): 19- 36. (Study 11)", "Link, B.G., M.W. Epperson, B.E. Perron, D.M. Castille, and L.H. Yang.  \u201cArrest Outcomes Associated with Outpatient Commitment in New York  State.\u201d Psychiatric Services, vol. 62, no. 5 (2011): 504-508. (Study 15)", "Mayfield, J. The Dangerous Mentally Ill Offender Program: Four-Year  Felony Recidivism and Cost Effectiveness. Olympia, WA: Washington  State Institute for Public Policy, February 2009. (Study 9)", "Morrissey, J.P., G.S. Cuddeback, A.E. Cuellar, and H.J. Steadman. \u201cThe  Role of Medicaid Enrollment and Outpatient Service Use in Jail  Recidivism Among Persons with Severe Mental Illness.\u201d Psychiatric  Services, vol. 58, no. 6 (2007):794-801. (Study 5)", "Morrissey, J.P., M.E. Domino, and G.S. Cuddeback. \u201cExpedited Medicaid  Enrollment, Mental Health Service Use, and Criminal Recidivism Among  Released Prisoners With Severe Mental Illness.\u201d Psychiatric Services,  vol. 67, no. 8 (2016): 842-849. (Study 10)", "Sacks, J.Y., K. McKendrick, and Z. Hamilton. \u201cA Randomized Clinical  Trial of a Therapeutic Community Treatment for Female Inmates:  Outcomes at 6 and 12 Months After Prison Release.\u201d Journal of Addictive  Diseases, vol. 31, no. 3 (2012): 258-269. (Study 7)", "Sacks, S., M. Chaple, J.Y. Sacks, K. McKendrick, C.M. Cleland.  \u201cRandomized Trial of a Reentry Modified Therapeutic Community for  Offenders with Co-Occuring Disorders: Crime Outcomes.\u201d Journal of  Substance Abuse Treatment, vol. 42 (2012): 247-259. (Study 3)", "Sacks, S, K. McKendrick, J.Y. Sacks, S. Banks, M. Harle. \u201cEnhanced  Outpatient Treatment for Co-Occurring Disorders: Main Outcomes.\u201d  Journal of Substance Abuse Treatment, vol. 34 (2008): 48-60. (Study 18)", "Sacks, S., J.Y. Sacks, K. McKendrick, S. Banks, and J. Stommel.  \u201cModified TC for MICA Offenders: Crime Outcomes.\u201d Behavioral Sciences  and the Law, vol. 22 (2004): 477-501. (Study 6)", "Taylor, N. An Analysis of the Effectiveness of Santa Clara County\u2019s  Mentally Ill Offender Crime Reduction Program. Anne Arbor, MI:  ProQuest Information and Learning Company, May 2005. (Study 14)", "Theurer, G. and D. Lovell. \u201cRecidivism of Offenders with Mental Illness  Released from Prison to an Intensive Community Treatment Program.\u201d  Journal of Offender Rehabilitation, vol. 47, no. 4 (2008): 385-406. (Study  8)", "Van Stelle, K.R., and D.P. Moberg. \u201cOutcome Data for MICA Clients After  Participation in an Institutional Therapeutic Community.\u201d Journal of  Offender Rehabilitation, vol. 39 no.1 (2004): 37-62. (Study 12)", "Yates, K.F., M. Kunz, A. Khan, J. Volavka, and S. Rabinowitz.  \u201cPsychiatric Patients with Histories of Aggression and Crime Five Years  after Discharge from a Cognitive-Behavioral Program.\u201d The Journal of  Forensic Psychiatry and Psychology, vol. 21, no. 2 (2010):167-188.  (Study 16)", "Zlotnick, C., J. Johnson, and L.M. Najavits. \u201cRandomized Controlled Pilot  Study of Cognitive-Behavioral Therapy in a Sample of Incarcerated  Women with Substance Use Disorder and PTSD.\u201d Behavior Therapy, vol.  40 (2009): 325-336. (Study 13)"], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Tom Jessor (Assistant Director);  Frederick Lyles, Jr. (Analyst-in-Charge); Pedro Almoguera; David  Blanding, Jr.; Billy Commons, III; Thomas C. Corless; Dominick Dale;  Michele Fejfar; Eric Hauswirth; Valerie Kasindi; Heather May; Leia J.  Dickerson; Sam Portnow; and Cynthia Saunders all made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-80", "url": "https://www.gao.gov/products/GAO-19-80", "title": "Grade-Crossing Safety: DOT Should Evaluate Whether Program Provides States Flexibility to Address Ongoing Challenges", "published_date": "2018-11-08T00:00:00", "released_date": "2018-11-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Crashes at highway-rail grade crossings are one of the leading causes of railroad-related deaths. According to FRA data, in 2017, there were more than 2,100 crashes resulting in 273 fatalities. Since 2009 crashes have occurred at a fairly constant rate. The federal government provides states funding to improve grade-crossing safety through FHWA's Section 130 Program. The persistence of crashes and deaths raises questions about the effectiveness of the federal grade-crossing-safety program.", "GAO was asked to review federal efforts to improve grade-crossing safety. This report examines: (1) the focus of FRA's grade-crossing-safety research, (2) how states select and implement grade-crossing projects and what data are available from FRA to inform their decisions, and (3) the challenges states reported in implementing and assessing projects and the extent to which FHWA assesses the program's effectiveness. GAO analyzed FRA data; reviewed FRA's, FHWA's, and states' documents; reviewed a study of states' selection of projects; and interviewed FRA and FHWA headquarters and field staff, and officials from a non-generalizable sample of eight states, selected to include a mix in the number of grade crossings and crashes, and geographic diversity."]}, {"section_title": "What GAO Found", "paragraphs": ["Research sponsored by the Federal Railroad Administration (FRA) has identified driver behavior as the main cause of highway-rail grade crossing crashes and that factors such as train and traffic volume can contribute to the risk of a crash. (See figure.) Over 70 percent of fatal crashes in 2017 occurred at grade crossings with gates.", "To meet the requirements of the federal grade-crossing program, states are responsible for selecting and ensuring the implementation of grade-crossing improvement projects. Most state DOT officials and other relevant transportation officials use local knowledge of grade crossings to supplement the results of models that rank grade crossings based on the risk of an accident. These states generally consider the same primary risk factors, such as vehicle and train traffic. FRA is taking steps to improve the data used in its model to help states assess risk factors at grade crossings. For example, FRA's grade-crossing inspectors will review and identify issues with railroad- and state-reported inventory data. FRA is currently developing guidelines, which it plans to finalize by the end of 2018, to implement these inspections as it has for other types of FRA inspections.", "Officials we spoke with in eight states reported challenges in pursuing certain types of projects that could further enhance safety, in part because of federal requirements. While safety has improved, many crashes occur at grade crossings with gates, and officials said there could be additional ways to focus program requirements to continue improving safety. States' and the Federal Highway Administration's (FHWA) reporting focuses on the program's funding and activity, such as the number and types of projects, yet the low number of crashes makes it difficult to assess the effectiveness of projects in reducing crashes and fatalities. FHWA reports the program has been effective in reducing fatalities by about 74 percent since 1975. However, since 2009, annually there have been about 250 fatalities\u2014almost one percent of total highway fatalities. FRA expects future crashes to grow, in part, due to the anticipated increase in rail and highway traffic. An evaluation of the program should consider whether its funding and other requirements allow states to adequately address ongoing safety issues. FHWA officials said they are not required to perform such evaluations. GAO has previously reported on the importance of program evaluations to determine the extent to which a program is meeting its objectives. An evaluation of the program could lead FHWA to identify changes that could allow states to more strategically address problem areas."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FHWA evaluate the program's requirements to determine if they allow states the flexibility to address ongoing safety issues. The Department of Transportation concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. railroad system consists of a vast network of operations. More  than 780 railroads operate on 220,000 miles of track\u2014including about  210,000 highway-rail at-grade crossings (hereafter \u201cgrade crossings\u201d)  meaning where public or private roads intersect with the tracks at the  same level as the roadway. Crashes at grade crossings are one of the  leading causes of railroad-related deaths and injuries, accounting for  about 30 percent of railroad-related fatalities. One recent crash\u2014still  under investigation\u2014occurred on January 31, 2018, when a chartered  Amtrak train carrying members of Congress hit a refuse truck at a grade  crossing near Crozet, Virginia. According to the National Transportation  Safety Board\u2019s (NTSB) preliminary report, the crossing was equipped with  lights and gates to warn of a train\u2019s presence, but witnesses reported the  truck drove around the gates prior to the accident.", "Federal investments in grade-crossing safety improvement have  noticeably reduced the number of deaths and injuries at public grade  crossings. According to the Federal Railroad Administration\u2019s (FRA)  data, since FRA began measuring in 1975, crashes at grade crossings  have declined by over 80 percent and fatalities have dropped 70 percent.  Crashes have leveled off in recent years, and since 2009, the number of  grade-crossing crashes and fatalities has hovered at around 2,100  crashes and 250 fatalities per year. However, FRA expects future crashes  to grow, in part, because of the anticipated increase in rail and highway  traffic. The persistence of crashes and deaths raises questions as to  whether improvements could be made to increase the effectiveness of  FRA\u2019s rail-safety oversight activities and states\u2019 use of federal grade- crossing safety improvement funds.", "Within the U.S. Department of Transportation (DOT), the Federal  Highway Administration (FHWA) and FRA are the two federal agencies  primarily responsible for improving and overseeing safety at public grade  crossings. FHWA\u2019s Railway-Highway Crossings Program (commonly  referred to as the Section 130 Program) is the primary federal program for  providing states, through a statutory formula, funding to address safety at  grade crossings. FRA oversees railroad safety, including the safety of  rail operations at grade crossings. FRA also awards safety discretionary  grants to states, local governments, and other public entities to address  rail planning, infrastructure, and safety issues. While these grants are not  specifically targeted for grade-crossing safety, they may include  improvements to rail-highway crossing safety.", "You requested that we review federal efforts to improve grade-crossing  safety. This report examines:  1.  What has been the focus of FRA\u2019s grade-crossing-safety research.  2.  How states select and implement grade-crossing projects, and what  railroad- and state-reported data are available from FRA to inform  states\u2019 decisions.  3.  The challenges states reported in implementing and assessing  projects, and the extent to which FHWA assesses the program\u2019s  effectiveness.", "The scope of this work focused on the nation\u2019s more than 128,000 grade  crossings where public roads cross rail tracks. We focused our work on  the Section 130 Program. For each of our objectives, we reviewed  pertinent statutes and FHWA and FRA regulations and documents, and  interviewed FHWA and FRA program officials in headquarters as well as  a non-generalizable sample of 10 stakeholders from railroads, industry  and transportation associations, and academia, in addition to a rail safety  organization and a rail safety consultant. We also interviewed federal  officials from the National Transportation Safety Board and the Volpe  Center. We selected these organizations based on our initial background  research, prior work, and input from other stakeholders, among other  things. We also selected eight states for case studies to include a mix of  state experiences based on several factors. We selected half of our  states from those ranked in the top 25 percent of all states for the number  of grade crossings and the amount of Section 130 Program funds  received. We selected the other half to include a range of these factors.  We also considered geographical diversity in our selections. For these  eight states, we conducted in-depth interviews with the FHWA division  staff assigned to those states and the FRA regional staff assigned to the  regions that included those states, as well as officials from states\u2019  departments of transportation (state DOT), public utility commissions, and  other state officials involved with state use of Section 130 Program funds  (referred to collectively as \u201cstate officials\u201d in our report). We used a similar  set of questions to collect information from the eight selected states on  each of our objectives. Information from these state discussions cannot  be generalized to other states; instead, we used the information for  illustrative purposes, including when we describe the challenges  interviewees reported facing. When appropriate, we indicate whether the  challenges we summarize are shared by:  \u201csome\u201d (two or three);  \u201cmany\u201d (four or five); or  \u201cmost\u201d (six or seven)  of the state officials, but frequency is not necessarily indicative of the  relative importance of a challenge or consensus, or lack thereof.", "We also conducted additional work related to each of the objectives.", "To describe the focus of FRA\u2019s grade-crossing-safety research, we  examined FRA research aimed at understanding the causes of grade- crossing crashes and identifying potential safety improvements and  described FRA efforts to test new approaches that could improve  safety.", "To describe how states select and implement grade-crossing projects,  and what FRA data are available to inform their decisions, we  reviewed an academic study that included a literature review and  interviews with state officials to describe how states select Section  130 Program projects. We also assessed the reliability of FRA\u2019s  National Highway-Rail Crossing Inventory data, which are the only  source for national statistics on grade-crossing characteristics. We  tested whether the data were within reasonable ranges, were  internally consistent, and appeared complete. We identified data  reliability issues in FRA\u2019s crossing inventory that we will discuss more  fully later in this report.", "To determine the challenges states reported in implementing and  assessing projects and the extent to which FHWA assesses the  program\u2019s effectiveness, we reviewed program requirements and  state project information and other components from FHWA\u2019s 2016  and 2018 Biennial Section 130 Program progress reports to  Congress. We also reviewed federal laws and guidance related to  implementing projects and measuring performance. We interviewed  state DOT officials from the eight selected states and other  stakeholders on the challenges states face implementing projects and  FHWA and FRA officials for their perspectives on managing the  program, including how FHWA measures performance and assesses  program effectiveness. We compared information collected from  FHWA to federal internal control standards and criteria on program  evaluation identified in our previous work. Appendix I describes our  objectives, scope, and methodology in greater detail.", "We conducted this performance audit from October 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Grade-Crossing-Safety Trends", "paragraphs": ["Grade-crossing safety has improved significantly since 1975, but since  2009, the number of crashes and fatalities at grade crossings has  plateaued (see fig. 1). The yearly number of grade-crossing crashes  declined from 12,126 in 1975 to 2,117 in 2017. In that time frame,  fatalities dropped from 917 to 273. The most significant reductions in  grade-crossing crashes and fatalities were achieved from 1975 to 1985,  when states closed or improved the most dangerous crossings. Grade- crossing safety continued to improve until the mid-2000s, though at a  slower rate. Since 2009, the number of grade-crossing crashes and  fatalities remains at around 2,100 crashes and 250 fatalities a year.  These fatalities typically make up less than one percent of all highway- related fatalities. The decrease in crashes and fatalities occurred as the  volume of train and highway traffic generally increased over the years.  FRA expects the traffic volumes to continue to increase and has  expressed concern that grade-crossing crashes and fatalities may also  increase."], "subsections": []}, {"section_title": "The Section 130 Program", "paragraphs": ["As a set-aside portion of FHWA\u2019s much larger Highway Safety  Improvement Program (HSIP), the Section 130 Program provides funds  to state DOTs for the elimination of hazards at highway-rail grade  crossings. States determine what improvements need to be made at  grade crossings. FHWA has oversight responsibilities regarding the use  of federal funds as part of its administration of federal-aid highway  programs and funding, including HSIP funds. FHWA uses a statutory  formula to distribute to states Section 130 Program funds, which  averaged $235 million per year during the last 10 years (fiscal years 2009  through 2018). Section 130 Program projects are funded at a 90 percent  federal share, with the state or the roadway authority funding the  remaining 10 percent. States have 4 years to obligate their program  funds before they expire, meaning that in any given fiscal year, states can  obligate funds appropriated in that year as well as any unobligated funds  from the previous 3 fiscal years. In addition, states may choose to  combine funds from multiple years to fund relatively expensive projects.", "The Section 130 Program\u2019s requirements direct states to establish an  implementation schedule for grade-crossing-safety improvement projects  that, at a minimum, include warning signs for all public grade crossings.  Grade crossings are generally categorized as \u201cactive\u201d or \u201cpassive\u201d  depending on the type of traffic control devices that are present. As of  July 2018, according to FRA\u2019s National Highway-Rail Crossing Inventory,  there were approximately 68,000 public grade crossings with electronic,  or active, traffic control devices in the United States. Another  approximately 58,000 public grade crossings have passive traffic-control  devices, which include signs and supplementary pavement markings.  The requirements also specify that at least 50 percent of Section 130  Program funding must be dedicated to the installation of protective  devices at grade crossings, including traffic control devices. States can  use remaining program funds for any hazard elimination project. States  may also use program funds to improve warning signs and pavement  markings or to improve the way the roadway aligns with the tracks (e.g.,  to ensure low-clearance vehicles do not get stuck on the tracks). In addition, states can use up to 2 percent of the funds to improve their  grade-crossing inventories and to collect and analyze data. See figure 2  for examples of the types of projects eligible for Section 130 Program  funds and graphical depictions of grade crossings before and after safety  improvements have been made."], "subsections": []}, {"section_title": "The Federal Role in Grade-Crossing Safety", "paragraphs": ["FHWA and FRA are the primary agencies responsible for safety at grade  crossings, and they both play key\u2014yet distinct\u2014roles. FHWA oversees   the Section 130 Program and monitors states\u2019 uses of program funds  through 52 division offices located in each state, the District of Columbia,  and Puerto Rico and through headquarters staff in Washington, D.C. In  addition, FHWA\u2019s division staff reviews states\u2019 processes for prioritizing  and selecting grade-crossing-safety improvement projects. FHWA does  not evaluate the appropriateness of individual grade-crossing projects,  but instead helps states determine that projects meet program eligibility  requirements. Division staff assists in the implementation of Section 130  Program state-administered projects, and they may participate in state- DOT-led, on-site reviews of grade crossings under consideration for  Section 130 Program projects. FHWA headquarters staff is responsible  for FHWA-wide initiatives, such as working with stakeholders to establish  standards for traffic control devices and systems at grade crossings and  for engineering oversight of state-administered safety improvement  projects.", "FRA provides safety oversight of both freight and passenger railroads by: collecting and analyzing data;   issuing and enforcing numerous safety regulations, including on  grade-crossings\u2019 warning systems; conducting focused inspections, audits, and accident providing technical assistance to railroads and other stakeholders.", "Specifically, FRA oversees rail safety through eight regional offices and  through headquarters staff in Washington, D.C. Regional staff monitor  railroads\u2019 compliance with federal safety regulations through inspections  and provide technical assistance and guidance to states. In 2017, FRA  created a new discipline for grade-crossing safety and is hiring new  grade-crossing inspectors. These inspectors conduct field  investigations, identify regulatory defects and violations, recommend civil  penalty assessments when appropriate, and may participate in state- DOT-led teams that conduct on-site reviews of grade crossings to  evaluate potential safety improvements. According to FRA  documentation, FRA\u2019s new inspectors will also work with a variety of  stakeholders to institute new types of training, explore new safety  concepts and technologies, and assist in the development of new or  modified highway-rail grade-crossing-safety regulations, initiatives, and  programs. The inspectors will also work with FHWA and other DOT  operating administrations in a cooperative effort to improve grade- crossing safety. FRA regional staff also investigates select railroad  crashes, including those at grade crossings, to determine root causation  and any contributing factors, so that railroads can implement corrective  actions. FRA headquarters staff develops analytical tools for states to  use to prioritize grade-crossing projects. In addition, headquarters staff  manages research and development to support improved railroad safety,  including at grade crossings.", "FRA\u2019s Office of Railroad Safety maintains the National Highway-Rail  Crossing Inventory database and the Railroad Accident/Incident  Reporting System on grade-crossing crashes. Both states and railroads  submit information to FRA\u2019s crossing inventory, which is designed to  contain information on every grade crossing in the nation. Railroads  submit information such as train speed and volume; states submit  information such as highway speed limits and average annual daily traffic.  The Rail Safety Improvement Act of 2008 added requirements for both  railroads and states to periodically update the inventory; however, the  Moving Ahead for Progress in the 21st Century Act (MAP-21) repealed a  provision providing DOT authority to issue implementing regulations that  would govern states\u2019 reporting to the inventory. According to FRA  officials, while FRA\u2019s regulations do not require states to report the  information, FRA encourages them to do so. FRA regulations require  railroads to report and update their information in the inventory every 3  years or sooner in some instances, such as if new warning devices are  installed or the grade crossing is closed. FRA\u2019s accident system contains  details about each grade-crossing accident that has occurred. In addition  to submitting immediate reports of fatal grade-crossing crashes, railroads  are required to submit accident reports within 30 days after the end of the  month in which the accident occurred and describe conditions at the time  of the accident (e.g., visibility and weather); information on the grade  crossing (e.g., type of warning device); and information on the driver (e.g.,  gender and age)."], "subsections": []}]}, {"section_title": "FRA Has Focused Research on Understanding and Addressing Risky Behavior by Drivers at Grade Crossings", "paragraphs": [], "subsections": [{"section_title": "Research Sought to Identify Risk Factors at Grade Crossings and Understand Driver Behavior", "paragraphs": ["In its role overseeing grade-crossing safety, FRA has sponsored a  number of research efforts to better understand the causes of grade- crossing crashes and identify potential ways to improve engineering,  education, and enforcement efforts. For example, FRA sponsored an in- depth data analysis of grade-crossing crashes to better identify which  crossing characteristics increase the risk of an accident. The report,  issued in 2017, found that the volumes of train and vehicle traffic at a  crossing are the biggest predictors of grade-crossing crashes. Changes  in vehicle and train traffic therefore affect the annual number of grade- crossing crashes. For example, as highway traffic decreased in 2008,  possibly due to the economic recession and higher gas prices, so too did  the number of grade-crossing crashes. As previously noted, FRA expects  that the number of grade-crossing crashes will likely grow with anticipated  increases in future train and highway traffic. As discussed below, vehicle  and train volume are included in the U.S. DOT Accident Prediction Model,  which some states use to select grade-crossing improvement projects.  According to FRA officials, FRA is using the results of this recent in-depth  data analysis to, in part, evaluate whether additional risk factors, such as  the number of male drivers or trains carrying toxic materials, should be  added to the model.", "FRA has targeted other research into understanding driver behavior at  grade crossings, which is the leading cause of crashes. According to  FRA\u2019s accident data, in 2017, 71 percent of fatal crashes at public grade  crossings occurred at those with gates. In 2004, the DOT Inspector  General (IG) reported that 94 percent of grade-crossing crashes from  1994 to 2003 could be attributed to risky driver behavior or poor  judgement. State officials we spoke with explained that drivers may  become impatient waiting at a grade crossing and decide to go around  the gates. Drivers may also line up over the grade crossing in heavy  vehicular traffic, and be unable to exit before the gates come down. See  figure 3 for examples of risky driver behavior at grade crossings.", "To better understand driver behavior, FRA sponsored a John A. Volpe  National Transportation Systems Center (Volpe Center) study that  recorded and analyzed drivers\u2019 actions as they approached grade  crossings. The researchers found that almost half of drivers were doing  another task, such as eating, and over a third did not look in either  direction while approaching passive grade crossings. We have previously  reported, and many stakeholders we interviewed agreed, that in light of  inappropriate driver behavior, technological solutions alone may not fully  resolve safety issues at grade crossings. In addition, public-education  and law-enforcement efforts can augment the effectiveness of  technological solutions. According to FRA officials, they shared  information on driver education with DOT\u2019s National Highway Traffic  Safety Administration (NHTSA) as NHTSA works more closely with states  on driver education manuals. According to DOT officials, NHTSA updates  its driver education materials every 2\u20133 years and plans to consider  including grade-crossing-safety materials in the next versions."], "subsections": []}, {"section_title": "FRA Works with States to Research New Safety Measures to Address Risky Behavior at Grade Crossings", "paragraphs": ["FRA is also working with states and localities to research and develop  new protective devices and other safety measures targeted at improving  driver behavior at grade crossings. As most fatal crashes happen at  grade crossings already equipped with gates, FRA and state and local  agencies are exploring whether additional safety measures can improve  safety at those locations. For example, in 2016 and 2017, FRA\u2019s Grade  Crossing Task Force worked with the Volpe Center and the City of  Orlando to test whether photo enforcement at grade crossings could  reduce risky driver behavior. The City of Orlando installed automated  photo-enforcement devices at a grade crossing, and instead of issuing  fines to drivers who had violated its warning devices, sent drivers a  warning notice and educational safety materials. Eight months after the  photo-enforcement system was installed, grade crossing violations  decreased by 15 percent. While FRA judged these enforcement efforts  successful at changing driver behavior, a 2015 FRA whitepaper noted  that photo enforcement equipment is costly\u2014on average costing over  $300,000 per crossing to install and operate for 2 years\u2014and may not be  cost-effective for most grade crossings. FRA found that due to costs  and state laws prohibiting photo-enforcement, only two photo- enforcement cameras were currently in operation at grade crossings  across the country.", "States, localities, and FHWA are also exploring whether new types of  pavement markings at grade crossings can improve driver behavior.   According to DOT officials, FHWA is working with two states to develop  new cross-hatch pavement markings for grade crossings that would  comply with the Manual on Uniform Traffic Control Devices, similar to the  \u201cdon\u2019t block the box\u201d type pavement markings used in intersections.  FHWA also worked with a city to test the use of in-roadway lights to  delineate the crossing. (See fig. 4).", "FRA and state DOTs are also trying to improve pedestrian safety at grade  crossings by developing new safety measures. Grade-crossing accidents  involving pedestrians are less frequent than those involving automobiles  at grade crossings but have a higher fatality rate. While pedestrians were  involved in only 9 percent of accidents at public crossings in 2017, almost  40 percent of fatal grade-crossing accidents involved pedestrians. To try  to improve pedestrian safety, in 2012 the Volpe Center worked with New  Jersey Transit to study whether adding additional pedestrian gate skirts\u2014 hanging gates that further block a crossing (see fig. 5)\u2014would prevent  people from ducking under the gates. The Volpe Center reported that  these new gates had mixed success. While incidents of people going  under and around the gates decreased, more people chose to cross the  tracks in the street rather than at the sidewalk.", "Finally, FRA is exploring new automated and connected vehicle  technologies that could reduce risky driver behavior at grade crossings.  FRA, FHWA, and officials from one state we interviewed said they  anticipate that such technology will be critical to further improving safety.  Specifically, FRA and FHWA are coordinating with DOT\u2019s Intelligent  Transportation Systems Joint Program Office to develop pilot technology  that would enable crossing infrastructure or trains to communicate  wirelessly with vehicles. Vehicles can use this information to warn the  driver that a crash or violation is imminent, or integrate with onboard  active safety systems. According to FRA officials, they completed a proof  of concept in 2013 and completed and tested a prototype of the  technology in 2017. DOT officials said that DOT does not have a time  frame for when automakers might begin incorporating such connected  vehicle technologies and noted that retrofitting older cars with new  equipment will likely make this a long-term effort.", "FRA shares information on its research in various ways with state DOTs,  because states are responsible for deciding which safety measures to  install at grade crossings. Specifically, FRA and FHWA jointly hold  quarterly webinars with stakeholders, including state DOT officials, and  conduct presentations at highway-rail safety workshops. Information on  safety measures such as grade-crossing devices, signs, and markings  are also included in the Railroad-Highway Grade Crossing Handbook.  According to DOT officials, the handbook was developed jointly by FHWA  and FRA. The last version of the handbook was updated in 2007 and  includes some out of date information. FRA and FHWA officials said they  began working on an update in 2017, but missed the July 2018 target  completion date. According to FHWA officials, updating the handbook is a  complex undertaking that has taken more time than they anticipated due  to the extensive collaboration required among stakeholders. FHWA  officials said they anticipate completing the update during the spring of  2019."], "subsections": []}]}, {"section_title": "States Use a Risk- Based Approach for Project Selection and May Use FRA Data", "paragraphs": [], "subsections": [{"section_title": "States Consider Risk when Identifying Grade- Crossing Improvement Projects", "paragraphs": ["The risk of crashes at public grade crossings within a state factors into  states\u2019 selection of over 1,000 new Section 130 Program projects  nationally each fiscal year. FHWA requires states to develop a grade  crossing program that considers relative risk. FHWA officials said they  review the methods that states use to select projects to ensure that risk is  considered. According to a 2016 academic study of 50 states, most states  use mathematical formulas, or \u201caccident prediction models,\u201d to help  assess risk and identify grade crossings for potential projects. More  specifically, these accident prediction models use factors such as grade  crossing characteristics and accident history to rank grade crossings by  risk. DOT provides one such model\u2014the Accident Prediction Model\u2014and  some states have developed their own models. The study reported that  19 states used DOT\u2019s model and 20 states used a different model. It  also found that the DOT and commonly used state models include some  similar grade-crossing characteristics to predict accident risk. For  example, the selected models reviewed all considered vehicle- and train- traffic volume, which FRA has found to be the strongest predictors of  grade-crossing crashes.", "FRA makes its Accident Prediction Model available to states online  through its Web Accident Prediction System. This system is an online tool  that uses FRA\u2019s crossing inventory, crossing collision history, and the  DOT Accident Prediction Model to predict accident risk for grade  crossings in each state. Only one of the eight states in our review used  the system as its primary source for ranking grade-crossing risk. Most of  the other states perform their own calculations to rank grade crossings.  Officials from two states said that they believe their state-maintained data  are more reliable than FRA\u2019s crossing inventory and explained that they  go directly to their contacts at railroads to get updated information on  factors such as train volume.", "Accident prediction models are only one source of information states use  when selecting Section 130 Program projects. According to the state  officials we spoke with, a variety of other considerations can also  influence their decisions, including the following:", "Proximity of projects together along a railroad \u201ccorridor\u201d in order to  gain efficiencies and reduce construction costs.", "Requests from local jurisdictions or railroads. These stakeholders may  have information on upcoming changes at a grade crossing, such as  higher train volume or new housing developments nearby, which  would increase risk but would not be reflected yet in the accident  prediction model.", "Availability of local funding to provide the required 10 percent match  for Section 130 Program projects, while trying to spread the funds  fairly across the state.", "States may also consider grade crossings that have had close calls in the  past, such as where a car narrowly avoided being hit by a train. FRA does  not require railroads to report on these close calls, or \u201cnear misses;\u201d  however, according to state officials, railroads sometimes provide this  information to states on an ad-hoc basis. State officials from four of the  eight states we spoke with said they considered near misses when  selecting Section 130 Program projects. A 2004 Volpe Center report  noted that studying close calls was a proactive way to improve safety.  According to the report, FRA sponsored a workshop to learn about the  benefits of collecting and analyzing close calls. However, stakeholders we  interviewed noted challenges formalizing near-miss reporting. For  example, Volpe Center officials said these reports are subjective in  nature\u2014what one engineer considers a close call, others may not.", "FRA developed another online tool\u2014GradeDec\u2014to allow states to  compare the costs and benefits for various grade-crossing improvement  projects. GradeDec uses models to analyze a project\u2019s risk and calculate  cost-benefit ratios and net present value for potential projects. FRA  provides state DOTs with on-site GradeDec workshops upon request.  While FRA officials noted that many state and local governments have  registered to use the program, none of the state officials we spoke with  identified GradeDec as a tool that they use to conduct cost-benefit  analysis. Officials from two state DOTs we spoke with said that cost- benefit analyses could help them better identify and select the most cost- effective crossing safety projects in the future. According to the  academic study of 50 states noted above, because of limited funding for  grade-crossing improvements, states should consider the life-cycle costs  of the projects as well as net present value to help select projects. As  discussed later in this report, the small number of crashes at grade  crossings can make it challenging to distinguish between different  projects in terms of their effectiveness in reducing accidents.", "Finally, after they have considered risk factors and created a list of  potential grade crossings for improvement, state officials, along with  relevant stakeholders from railroads and local governments, conduct field  reviews of the potential projects. According to state officials, these  reviews help identify grade-crossing characteristics that may not be  included in the accident prediction models, such as vegetation that would  obstruct drivers\u2019 views."], "subsections": []}, {"section_title": "FRA Has Taken Steps to Improve Inventory Data and Is Formalizing How Inspectors Will Validate the Data\u2019s Accuracy", "paragraphs": ["In 2008, legislation was enacted mandating reporting by states and  railroads to the National Highway-Rail Crossing Inventory. However, the  fact that reporting to the inventory remained voluntary until 2015 has had  lingering effects on the completeness of the data in the inventory. In  2015, as mandated by statute, FRA issued regulations requiring railroads  to update certain data elements for all grade crossings every 3 years.  However, our analysis of FRA\u2019s crossing inventory found that 4 percent of  grade crossings were last updated in 2009 or earlier. In addition, because  MAP-21 repealed DOT\u2019s authority to issue regulations that would govern  state reporting to the inventory, state reporting of grade-crossing data  remains voluntary, according to FRA officials, and all state-reported  information is not complete. Our analysis of state-reported data in FRA\u2019s  crossing inventory found varying levels of completeness. For example,  while some state-reported data fields were almost entirely complete, 33  percent of public grade crossings were missing data on posted highway  speed. We also found that of the crossings for which states reported the  year when the highway-traffic count was conducted, 64 percent of the  highway-traffic counts for public grade crossings, another important risk  factor, had not been updated since 2009, or earlier. According to the 2015  final rule, FRA will continue to evaluate whether additional regulations to  address state reporting are needed to maintain the crossing inventory\u2019s  accuracy.", "FRA officials told us that improving inventory data will help them better  deploy their limited resources, particularly their grade-crossing inspectors,  and said that they have taken steps to help improve the data. In 2017,  FRA regional officials conducted field reviews to verify the latitude and  longitude data for grade crossings in the inventory, data that states are  responsible for updating. In addition, FRA expects its grade-crossing  inspectors as part of their inspections to review and identify issues with  the railroad- and state-reported inventory data. According to FRA officials,  FRA has begun to both transition its 19 grade-crossing managers into  grade-crossing inspectors and also hire new inspectors, for an eventual  total of 24 inspectors and eight regional specialists to supervise their  activities.", "To help ensure railroads\u2019 compliance with crossing inventory regulations,  officials said that the inspectors will use spot checks to validate the  inventory data by comparing grade-crossing characteristics in the field  with the information railroads submitted to the inventory. In addition, FRA  has incorporated information on inventory-reporting requirements into the  grade-crossing inspectors\u2019 training. Finally, FRA is currently developing  guidelines for the grade-crossing inspections similar to those for other  FRA safety disciplines. FRA headquarters officials acknowledged that  they are still clarifying the details for the inspections that will be included  in the compliance manuals that inspectors will use. Specifically, they  said they are still determining appropriate inspector workloads and  drafting specific guidelines that will need to be integrated into FRA\u2019s  regional inspection plans.", "FRA officials said they are working to develop and make available  inventory inspection guidance to the grade-crossing managers and  inspectors by December 31, 2018. In the meantime, FRA held training  that included information on inventory-reporting requirements. In August  2018, FRA developed guidance for grade-crossing inspections specific to  quiet zones in response to a recommendation we made in 2017. It is  important that FRA meets its goal to issue similar guidance specific to  reviewing the accuracy of the inventory data, as FRA cannot have  reasonable assurance that inspections that are already under way are  being conducted in such a manner that would allow them to consistently  identify data reliability issues at each crossing."], "subsections": []}]}, {"section_title": "States Reported Challenges Implementing Certain Project Types and Measuring Projects\u2019 Effectiveness, and FHWA\u2019s Efforts to Assess the Program\u2019s Effectiveness Have Limitations", "paragraphs": [], "subsections": [{"section_title": "The Program\u2019s Requirements and Other Challenges Cited by States Contribute to the Selection of Active- Warning Equipment Projects over Other Projects", "paragraphs": ["About 75 percent of all Section 130 Program projects states implemented  in fiscal year 2016 involved installing or updating active grade-crossing  equipment, including warning lights and protective gates (see fig. 6).  The prevalence of this type of project is in part due to the Section 130  Program requirement that states spend at least 50 percent of funds on  protective devices. Other than eliminating a grade crossing, adding  protective devices has long been considered the most effective way of  reducing the risk of a crash.", "Officials from six of eight state DOTs we interviewed told us that the  numbers and types of grade-crossing projects they implement are  dependent on the amount of Section 130 Program funding they receive  and the cost of the projects. As previously described, funds are set aside  from the Highway Safety Improvement Program and distributed to states  by a statutory formula that includes factors such as the number of grade  crossings in each state. Officials from six of the eight state DOTs we  spoke to agreed that the set-aside nature of the program was crucial in  allowing them to implement projects, many of which they said would not  have been possible without Section 130 Program funds. For example,  many said the formula funding ensures that grade-crossing projects are  completed along with highway safety projects, particularly given the fact  that fatalities resulting from grade-crossing crashes account for so few  when compared to highway deaths. Overall, fatalities resulting from  grade-crossing crashes account for less than 1 percent of all highway- related fatalities.", "In fiscal year 2018, the funds distributed ranged from a low of  approximately $1.2 million for eight states and Washington, D.C., to over  $16 million for California and over $19 million for Texas. The number of  grade crossings in the eight states and Washington, D.C. ranged from 5  to 380, while California had almost 6,000 and Texas had over 9,000.  Project implementation costs varied by project type and ranged widely  depending on project scope. Based on 2016 DOT data, some typical  project costs ranged as follows: adding signs to passive grade crossings\u2014$500 to $1,500; adding flashing lights and two gates to passive grade crossings\u2014 $150,000 to $300,000; adding four gates to grade crossings with flashing lights\u2014$250,000 -  closing a grade crossing\u2014$25,000 to $100,000; and  separating a grade crossing from traffic (Grade Separation)\u2014$5  million to $40 million.", "State officials we spoke with cited several challenges in pursuing certain  types of controversial, innovative, and expensive projects that could help  them address the evolving nature of risk at grade crossings and difficulty  in measuring the effectiveness of their projects. First, most state DOT  officials said that the cost of grade-separation projects and, at times, the  controversy of eliminating grade crossings through closure reduces the  number of these projects, while acknowledging that they are the most  effective ways to improve safety. These types of projects made up only 3  percent of Section 130 Program projects in fiscal year 2016 (see fig. 6).  Grade-separation projects are often more expensive than the annual  Section 130 Program funding available to states. In 2018, only eight  states received annual Section 130 Program funding sufficient to fund a  $7-million grade-separation project. As discussed previously, to fund  relatively expensive projects, states may choose to combine funds from  multiple years. Also, states and railroads may make incentive payments  to localities for the permanent closure of a grade crossing. In addition to  the cost, most state DOT officials reported challenges obtaining local  support for closing grade crossings. They said closures may  inconvenience residents who use the road and force emergency  responders to take longer routes, potentially slowing response times.  Grade-separation projects address these safety concerns and may be  more agreeable to residents, but they are substantially more expensive.  While up to $7,500 in Section 130 Program funding can be used to help  incentivize communities to close grade crossings, officials from some of  our selected state DOTs said this amount is generally not enough to  persuade local officials to support the closing.", "Second, officials from many state DOTs we interviewed also reported that  the requirements of the Section 130 Program create challenges for them  in implementing what they considered to be innovative projects. For  example, the program requirement that 50 percent of funds be used on  protective devices, combined with what one researcher described to us  as the tendency by states to implement \u201cknown\u201d projects\u2014i.e., protective  devices\u2014may impede states\u2019 selection of new, more innovative safety  projects. Officials we interviewed from many state DOTs described  challenges related to the program\u2019s requirements. They noted that they  are prevented from using Section 130 Program funds for new types of  safety technologies not yet incorporated into FHWA\u2019s Manual on Uniform  Traffic Control Devices. As noted previously in this report, outside the  Section 130 Program FHWA is working with states and localities to  explore whether new types of pavement markings at grade crossings, not  in the manual, can improve driver behavior. One state DOT official we  interviewed suggested changes to allow states to fund one grade- crossing pilot project per year or to use a set percentage of program  funds to finance a pilot project that could help them explore promising but  as yet unproven technologies.", "Third, state DOT officials from four of the eight selected states also said it  can be difficult to find funding for the required 10 percent state match. As  previously mentioned, while certain rail-safety projects are eligible for up  to 100 percent federal funding, Section 130 Program projects are funded  at a 90 percent federal share. According to DOT documentation we  reviewed, only some states have a dedicated source for such a match,  and state DOT officials from one of our selected states said their state  cannot use state funds for the 10 percent match. Some state DOT  officials said this situation can drive project selection. For example, they  sometimes chose projects based on which localities or railroads were  willing to provide matching funds or offer cost savings.", "Finally, many state officials cited challenges in measuring the  effectiveness of grade crossing projects in reducing crashes or the risk of  crashes. In particular, state officials we spoke to said it can be difficult to  use before-and-after crash statistics as a measure of effectiveness  because of the low number and random nature of crashes. Also, as FRA  research has shown and as FHWA and FRA have noted, reporting on  before-and-after grade-crossing accident statistics can be misleading,  given the infrequency of crashes and crashes that are not the result of  grade crossing conditions. States\u2019 required Section 130 Program annual  progress reports to the Secretary of DOT call for states to report on the  effectiveness of the improvements they made. FHWA reporting  guidance suggests they define effectiveness as the reduction in the  number of fatalities and serious injuries after grade-crossing projects  were implemented, consistent with statutory requirements. In addition,  FHWA guidance states that consideration should be given to quantifying  effectiveness in the context of fatalities and serious injuries. However,  states often report no differences in crashes after specific projects were  implemented, and there have been instances where states reported a slight increase in crashes. Such an increase does not necessarily mean  that the project was not effective in reducing the overall risk of a crash.  Also, not all projects are implemented at grade crossings where there has  been a crash.", "Among other information, states also typically report information on  funding and data on the numbers and types of projects implemented. In  addition, the extent to which states report projects\u2019 effectiveness varies  greatly. Given states\u2019 responsibility for implementing the Section 130  Program and the differences in the amounts of funding they receive,  FHWA officials said states should determine and report on the  appropriate effectiveness metrics for their programs. According to FHWA  officials, during the 2017 reporting year, a few states requested examples  of what to include when reporting effectiveness, and FHWA responded  with examples of various methods they could use, such as a benefit-cost  ratio or the percentage decrease in fatalities, serious injuries, and  crashes. Regardless of the difficulty in measuring the effectiveness of  specific projects, most state DOT officials we interviewed stressed the  importance of the Section 130 Program in funding grade-crossing  projects."], "subsections": []}, {"section_title": "FHWA Reports Provide Limited Insight into the Program\u2019s Effectiveness, and FHWA Has Not Evaluated Program Requirements in Light of Changing Risk Conditions", "paragraphs": ["FHWA\u2019s biennial report to Congress is intended to provide information to  Congress on the progress being made by the states in implementing  projects to improve safety and, in addition, make recommendations for  future implementation of the program. FHWA reviews states\u2019 annual  Section 130 Program reports and uses them to formulate the report to  Congress every 2 years. FHWA\u2019s 2018 report highlights that the Section  130 Program has seen great success since 1975, with a decrease of  approximately 74 percent in fatalities at the same time that there was an  increase in vehicle and train traffic. The report described the latest  available 10-year trend, from 2007 to 2016, as showing a 31 percent  decrease in fatalities. Fatalities have also decreased when adjusted for  train traffic. However, FHWA officials acknowledged in interviews with us  that crashes and fatalities have remained constant since about 2009, with  more recent data showing a slight increase in fatalities over the last 2 to 3  years, data that are consistent with the increases in overall roadway  fatalities. The officials said increased train- and vehicle-traffic volumes  could be contributing to that increase, in addition to other factors, such as  more bicycle riders and pedestrians using grade crossings. As described  earlier, states have generally already used Section 130 Program funding  to address safety at the riskiest grade crossings by adding protective  measures, typically lights and gates. Yet crashes continue to occur at  these improved grade crossings. Given these trends and the challenges  discussed earlier related to the requirements of the Section 130 Program,  it is not clear whether the program remains effective in continuing to  reduce the risk of crashes and fatalities at grade crossings.", "As required, FHWA\u2019s biennial report includes a section on  \u201crecommendations for future implementation\u201d of the Section 130 Program.  As part of this, FHWA reports on challenges and actions being taken to  address them. FHWA\u2019s 2018 report identified one of the same challenges  we heard about from state DOT officials related to the inability or  unwillingness of local agencies to provide matching funds and the  relatively low amount of funding designed to incentivize localities to close  crossings. FHWA reported on its efforts to address these challenges,  including by providing guidance, resources, and supportive training to  states and local agencies and serving as a clearinghouse for innovative  methods of supporting projects. However, with the exception of the  funding challenge, FHWA\u2019s most recent report does not include the other  challenges state officials identified to us related to the requirements of the  Section 130 Program discussed above. These include program funding  requirements that may impede innovative approaches and the difficulties  of using before-and-after crash statistics to measure effectiveness.", "Many state DOT officials we spoke with said there may be an opportunity  to more broadly assess the Section 130 Program at the national level. It  could be more informative to comprehensively assess more detailed  crash trends, such as those that look forward over multiple years across  the more than 1,700 crashes nationwide, rather than on the  approximately 35 that occur on average within a state, and identify  strategies to address those trends. Doing so could help FHWA learn more  about why crashes are continuing and what types of projects may be  effective. There could be ways to evaluate the program in a more  comprehensive way; many state DOT officials we interviewed told us  such a comprehensive evaluation could help improve program  effectiveness in a number of ways, including by enabling the program to  better keep up with the rapid pace of technological change and re- examining eligibility requirements that limit the flexibility of states to  consider other types of projects beyond engineering. Also, most state  DOT officials we interviewed agreed that education and enforcement  efforts are crucial to further improving safety, as did 8 out of 10 other  stakeholders we spoke to, as well as officials from Volpe Center and  NTSB. However, according to FHWA officials, those project types are not  allowed under the Section 130 Program\u2019s requirements. The officials said  FHWA has partnered with FRA and NHTSA on research efforts, such as  driver-behavior studies, to inform grade-crossing safety issues. However,  the officials said that FHWA has not conducted a program evaluation of  the Section 130 Program to consider whether the program\u2019s funding and  other requirements allow states to adequately address ongoing safety  issues such as driver behavior. FHWA officials said that there is no  federal requirement for them to conduct such a program evaluation.", "We have previously reported that an important component of effective  program management is through program performance assessment,  which helps establish a program\u2019s effectiveness\u2014the extent to which a  program is operating as it was intended and the extent to which a  program achieves what the agency proposes to accomplish. This type  of evaluative information helps the executive branch and congressional  committees make decisions about the programs they oversee. Assessing  program performance includes conducting program evaluations, which  are individual systematic studies that answer specific questions about  how well a program is meeting its objectives. In addition, federal  internal-control standards state that management should identify,  analyze, and respond to significant changes in a program\u2019s environment  that could pose new risks.", "FHWA officials said the fact that crashes and fatalities have held steady  while the volume of train and vehicle traffic has increased is an indication  that grade-crossing safety has continued to improve. However, specific to  fatalities per million train-miles, FHWA\u2019s 2018 biennial report shows this  rate to be fairly constant since 2009. As noted previously, FRA expects  train and traffic volumes to continue to increase and has expressed  concern that grade-crossing crashes and fatalities may also increase.   Without conducting a program evaluation, FHWA cannot ensure that the  Section 130 Program is achieving one of the national goals of the federal- aid highway program, to reduce fatalities and injuries. In addition, It is  difficult to see how FHWA, in its biennial reports to Congress, could make  informed recommendations for future program implementation without  conducting a program evaluation to assess, among other things, whether  program requirements first established some four decades ago continue  to reduce fatalities and injuries. We note that as part of a program  evaluation, some changes that FHWA, working with FRA, identifies as  potentially having merit to improve the program\u2019s effectiveness could  require a statutory change."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The continued number of crashes and fatalities at grade crossings with  devices intended to warn of a train\u2019s presence calls into question whether  the Section 130 Program is structured to help states continue making  progress toward the national goal to reduce fatalities and injuries. An  evaluation of the program\u2019s requirements could help determine whether  Congress should consider better ways to focus federal funds to address  the key factor in crashes\u2014risky driver behavior. An FHWA program  evaluation could also help determine whether, for example, states could  more strategically target emerging safety problems if changes were made  to the types of projects eligible for funding under the Section 130  Program. FRA\u2019s new grade-crossing inspectors are meant to increase the  effectiveness of FRA\u2019s rail-safety oversight activities, and accordingly,  these FRA inspectors, along with FRA researchers, may be well  positioned to help FHWA evaluate potential changes to improve the  effectiveness of the Section 130 Program."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Administrator of FHWA, working with FRA, should evaluate the  Section 130 Program\u2019s requirements to determine whether they allow  states sufficient flexibility to adequately address current and emerging  grade-crossing safety issues. As part of this evaluation, FHWA should  determine whether statutory changes to the program are necessary to  improve its effectiveness. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOT for review and comment. In  written comments, reproduced in appendix II, DOT concurred with our  recommendation. DOT also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Transportation, the Administrator of the  Federal Highway Administration, and the Administrator of the Federal  Railroad Administration. In addition, the report will be available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) what has been the focus of Federal Railroad  Administration\u2019s (FRA) grade-crossing-safety research, (2) how states  select and implement grade-crossing projects and what railroad- and  state-reported data are available from FRA to inform states\u2019 decisions,  and (3) the challenges states reported in implementing and assessing  projects and the extent to which the Federal Highway Administration  (FHWA) assesses the program\u2019s effectiveness. The scope of this work  focused on the nation\u2019s more than 128,000 public grade crossings. We  did not include private grade crossings, as states can only use Railway- Highway Crossings Program (commonly referred to as the Section 130  Program) funds to improve safety at public grade crossings. While FRA  provides safety grants to address rail issues, including for grade-crossing  projects, we focused our work on the Section 130 Program because it is  the primary source of federal funding directed at grade-crossing-safety  improvement.", "For each objective we reviewed: pertinent statutes and FHWA and FRA  regulations and documents; interviewed FHWA and FRA program officials  in headquarters; and conducted in-depth interviews with a non- generalizable sample of organizations that included officials from 4 freight  and passenger railroads, 12 state agencies from 8 states, 6 FRA regional  offices, and 8 FHWA state division offices. We also spoke with  representatives from relevant associations and officials from NTSB and  Volpe Center. We selected these organizations based on our initial  background research, prior work, and input from other stakeholders,  among other things. See the paragraph below for additional selection  details and table 5 for a complete list of organizations we spoke with.", "We selected eight states as part of our non-generalizable sample for  interviews. These states included Arizona, California, Florida, Illinois,  Missouri, New Jersey, North Carolina, and Pennsylvania. The states were  selected to include a mix of state experiences based on a variety of  factors, including the number of grade crossings and crashes at those  crossings, and the amount of Section 130 Program funding they received.  Specifically, we selected four states from those in the top 25 percent of all  states in terms of their number of grade crossings and the amount of  Section 130 Program funds they received. We selected the other four  states to include a mix of these factors. We also considered geographical  diversity and recommendations from FRA and FHWA officials. Within  these eight states, we conducted in-depth interviews with FHWA division  staff, FRA regional staff, and state officials. A variety of state agencies  administer the Section 130 Program within their state; the state officials  we spoke with from our eight selected states worked for agencies such as  state departments of transportation, corporation commissions, and public  utility commissions. We also spoke with a non-generalizable sample of  four railroads: Amtrak, CSX, Norfolk Southern, and Sierra Northern. We  selected railroads based on a variety of factors including geographic  location and stakeholder recommendations.", "We also conducted additional work related to each of the objectives. To  describe the focus of FRA\u2019s grade-crossing-safety research, we  examined FRA research aimed at understanding the causes of grade- crossing crashes and identifying potential improvements and described  FRA efforts to test new approaches that could improve safety. We did not  assess the quality of FRA\u2019s research, as that was beyond the scope of  this engagement. Instead, we described the nature of the research. We  also spoke with FRA research and development staff, Volpe researchers,  and state partners about this work.", "To describe how states select and implement grade-crossing projects,  and what FRA data are available to inform their decisions, we reviewed  an academic study that included a literature review and interviews with  state officials to describe how states select Section 130 Program  projects. We spoke with the researcher and determined the study to be  reliable for the purposes of our reporting objectives. We also spoke with  officials from our eight selected states, FHWA division staff, and FRA  regional staff, and reviewed the states\u2019 2017 Section 130 Program  reports. As part of this objective, we also assessed the reliability of data  reported for all railroads in FRA\u2019s National Highway-Rail Crossing  Inventory data as of August 31, 2018. For public grade crossings that  were not closed, we examined a selection of fields within the database to  identify the frequency of missing data (see table 1), data anomalies (see  table 2), relational errors, where two related data fields had values that  were incompatible (see table 3), and when the data was last updated (see  table 4). Specifically, we conducted the following electronic tests on the  crossing inventory data to determine if they were within reasonable  ranges, were internally consistent, and appeared complete:  Before conducting our analysis, we filtered the inventory data to only  include open, public, at-grade crossings. To understand FRA\u2019s efforts to  improve its crossing inventory data, we interviewed FRA regional and  headquarters staff and reviewed job descriptions for FRA\u2019s new grade-  crossing inspectors.", "Finally, to determine the challenges states reported in implementing and  assessing grade-crossing safety projects and the extent to which FHWA  assesses the program\u2019s effectiveness, we reviewed program  requirements and state project data and other components from FHWA\u2019s  2016 and 2018 Section 130 Program biennial reports to Congress. We  also reviewed FHWA\u2019s summary of fiscal year 2018 program funds  provided to states and federal laws and guidance related to implementing  projects and measuring performance. We interviewed state DOT officials  from the eight selected states and other stakeholders on the challenges  states reported in implementing and assessing projects, and FHWA and  FRA officials for their perspectives on managing the program, including  how FHWA measures performance and assesses program effectiveness.  We compared information collected from FHWA and FRA to federal  internal-control standards and criteria on program evaluation identified in  our previous work. In addition, we reviewed FHWA and FRA documents  designed to guide states, such as the Grade Crossing Handbook, the  Manual on Uniform Traffic Control Devices, the Action Plan and Project  Prioritization Noteworthy Practices Guide, and other related documents.", "We conducted this performance audit from November 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Susan A. Fleming, (202) 512-2834, Flemings@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Maria Edelstein (Assistant  Director); Gary Guggolz (Analyst in Charge); Steven Campbell; Tim  Guinane; Ben Licht; Catrin Jones; Delwen Jones; SaraAnn Moessbauer;  Malika Rice; Larry Thomas; and Crystal Wesco made key contributions to  this report."], "subsections": []}]}], "fastfact": ["Where roads and train tracks meet, accidents can be deadly. A federal program helps states fund projects to make these crossings safer.", "State officials told us that the program's requirements favor certain projects, such as gates\u2014but most of the crashes since 2009 have happened at crossings with gates, largely because of impatient drivers who drive through or go around. Officials said that the requirements may be preventing them from using more innovative approaches.", "As greater rail and road use is expected in the future, we recommended that the Department of Transportation evaluate whether the program's requirements need to be more flexible."]}
{"id": "GAO-18-46", "url": "https://www.gao.gov/products/GAO-18-46", "title": "TSA Modernization: Use of Sound Program Management and Oversight Practices Is Needed to Avoid Repeating Past Problems", "published_date": "2017-10-17T00:00:00", "released_date": "2017-10-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TSA conducts security threat assessment screening and credentialing activities for millions of workers and travelers in the maritime, surface, and aviation transportation industries that are seeking access to transportation systems. In 2008, TSA initiated the TIM program to enhance the sophistication of its security threat assessments and to improve the capacity of its supporting systems. However, the program experienced significant cost and schedule overruns, and performance issues, and was suspended in January 2015 while TSA established a new strategy. The program was rebaselined in September 2016 and is estimated to cost approximately $1.27 billion and be fully operational by 2021 (about $639 million more and 6 years later than originally planned).", "GAO was asked to review the TIM program's new strategy. This report determined, among other things, the extent to which (1) TSA implemented selected key practices for transitioning to Agile software development for the program; and (2) TSA and DHS are effectively overseeing the program's cost, schedule, and performance. GAO compared program documentation to key practices identified by the Software Engineering Institute and the Office of Management and Budget, as being critical to transitioning to Agile and for overseeing and governing programs."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration's (TSA) new strategy for the Technology Infrastructure Modernization (TIM) program includes using Agile software development, but the program only fully implemented two of six leading practices necessary to ensure successful Agile adoption. Specifically, the Department of Homeland Security (DHS) and TSA leadership fully committed to adopt Agile and TSA provided Agile training. Nonetheless, the program had not defined key roles and responsibilities, prioritized system requirements, or implemented automated capabilities that are essential to ensuring effective adoption of Agile. Until TSA adheres to all leading practices for Agile implementation, the program will be putting at risk its ability to deliver a quality system that strengthens and enhances the sophistication of TSA's security threat assessments and credentialing programs.", "TSA and DHS fully implemented one of the key practices for overseeing the TIM program, by establishing a process for ensuring corrective actions are identified and tracked. However, TSA and DHS did not fully implement the remaining three key practices, which impede the effectiveness of their oversight. Specifically,", "TSA and DHS documented selected policies and procedures for governance and oversight of the TIM program, but they did not develop or finalize other key oversight and governance documents. For example, TSA officials developed a risk management plan tailored for Agile; however, they did not update the TIM system life-cycle plan to reflect the Agile governance framework they were using.", "The TIM program management office conducted frequent performance reviews, but did not establish thresholds or targets for oversight bodies to use to ensure that the program was meeting acceptable levels of performance. In addition, department-level oversight bodies have focused on reviewing selected program life-cycle metrics for the TIM program; however, they did not measure the program against the rebaselined cost, or important Agile release-level metrics.", "TIM's reported performance data were not always complete and accurate. For example, program officials reported that they were testing every line of code, even though they were unable to confirm that they were actually doing so, thus calling into question the accuracy of the data reported.", "These gaps in oversight and governance of the TIM program were due to, among other things, TSA officials not updating key program management documentation and DHS leadership not obtaining consensus on needed oversight and governance changes related to Agile programs. Given that TIM is a historically troubled program and is at least 6 months behind its rebaselined schedule, it is especially concerning that TSA and DHS have not fully implemented oversight and governance practices for this program. Until TSA and DHS fully implement these practices to ensure the TIM program meets its cost, schedule, and performance targets, the program is at risk of repeating past mistakes and not delivering the capabilities that were initiated 9 years ago to protect the nation's transportation infrastructure."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 14 recommendations, including that DHS should prioritize requirements and obtain leadership consensus on oversight and governance changes. DHS concurred with all 14 recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The nation\u2019s maritime, surface, and aviation transportation systems and  facilities are vulnerable and difficult to secure given their size, easy  accessibility, large number of potential targets, and proximity to urban  areas. In order to help reduce the threats to these critical transportation  systems and facilities, the Transportation Security Administration (TSA), a  component of the Department of Homeland Security (DHS), conducts  various security threat assessment screening and credentialing activities  for millions of workers and travelers seeking access to the maritime,  surface transportation, and aviation industries.", "However, as we have previously reported, the effectiveness and the  efficiency of the agency\u2019s threat assessments and credentialing programs  have been hindered by stove-piped information technology (IT) systems  and duplicative processes which cannot accommodate growing  enrollment demand. Moreover, the current stove-piped environment limits  TSA\u2019s ability to effectively detect malicious individuals that apply for  multiple transportation credentials to try to gain access through at least  one of them.", "In 2008, TSA initiated the Technology Infrastructure Modernization (TIM)  program to, among other things, enhance the sophistication of its security  threat assessments and improve the capacity of its systems. Specifically,  the program is intended to provide a modern and centralized end-to-end  credentialing system that includes registration and enrollment, individual  security threat assessments, adjudication, credential  issuance/management, and revocation for transportation workers and  travelers. The program\u2019s initial baseline estimated that the program would  be deployed in 2015 and cost about $631 million.", "However, the program experienced significant cost and schedule  overruns, a significant increase in its requirements, and critical system  performance and technical issues during its initial limited deployment in  2014. As a result, in January 2015, TSA suspended the program while it  established a new strategy for developing and deploying the TIM system.  The program was rebaselined in September 2016 and is now estimated  to cost about $1.27 billion ($639 million more than originally planned).  Further, full operational capability for the system is now planned for fiscal  year 2021 (6 years later than originally planned).", "TSA officials decided to move away from implementing a commercial-off- the-shelf product for the program and instead planned to develop an open  source system. Moreover, officials decided to use an Agile software  development approach, rather than the traditional waterfall development  approach the program had been using.", "Given the issues that the TIM program has faced in developing the  system, you asked us to review the agency\u2019s current effort. Our objectives  were to (1) describe TSA\u2019s past implementation efforts for the TIM  program and its new implementation strategy; (2) determine the extent to  which TSA\u2019s new strategy for the program addresses the challenges  encountered during earlier implementation attempts; (3) determine the  extent to which TSA has implemented selected key practices for  transitioning to an Agile software development framework for the  program; and (4) determine the extent to which TSA and DHS are  effectively overseeing and governing the TIM program to ensure that it is  meeting cost, schedule, and performance requirements.", "To address the first objective, we reviewed program documentation, such  as initial and current acquisition program baselines, initial and current life- cycle cost estimates, acquisition decision memorandums, and program  plans documenting a new strategy for implementing the TIM program. We  used the information in this documentation to summarize TSA\u2019s earlier  attempts to implement TIM capabilities and the program\u2019s new  implementation strategy, including estimated costs, schedule, and key  decisions made. In this report, we use the TIM program\u2019s objective  estimated cost and schedule values (targets that reflect the most likely  cost and schedule), and not the threshold cost and schedule values  (ceilings which, if exceeded, initiate official replanning actions). We also  interviewed TSA officials, including the TIM Director and Deputy Director,  on the status of the program office\u2019s efforts.", "For the second objective, we reviewed program documentation on the  challenges the TIM program office faced when it experienced cost,  schedule, and system performance issues and synthesized the  information to identify a consolidated list of key challenges the program  had previously faced. We then reviewed documentation on the TIM  program\u2019s new implementation strategy. We compared this new strategy  to selected prior challenges and assessed the strategy against leading  practices and guidance, such as DHS\u2019s Systems Engineering Lifecycle  Guide and the Software Engineering Institute\u2019s Capability Maturity  Model\u00ae Integration for Development. We also conducted a site visit at  the TSA Adjudication Center in Reston, Virginia, where we observed  demonstrations of the information systems that are currently used to  conduct security threat assessments.", "To address the third objective, we first reviewed leading practices and  guidance from, among others, the Software Engineering Institute, the  Office of Management and Budget (OMB), and DHS, and identified those  practices that are critical to establish when transitioning to an Agile  software development framework. Then, in consultation with GAO\u2019s  internal Agile expert, we selected six practices that were most applicable  to the status of the program. We then reviewed relevant program  documentation, such as Agile training records, program plans, and status  reports, and interviewed TSA and DHS officials to assess the extent that  the program met these practices. We also observed Agile software  development activities conducted at TSA facilities in Annapolis Junction,  Maryland, and at a contractor\u2019s facilities in Beltsville, Maryland.", "To address the fourth objective, we reviewed leading practices and  guidance from, among others, the Software Engineering Institute, OMB,  DHS, and TSA, and identified four key practices in oversight and  governance of programs using Agile software development. We then  reviewed relevant TIM program management and governance  documentation, such as program management plans, Agile contracts,  schedules, cost estimates, program status reports, and artifacts from  program oversight reviews. We also interviewed TSA and DHS officials to  determine the extent to which these officials were following the key  practices.", "To assess the reliability of the data that we used to support the findings in  this report, we reviewed relevant program documentation to substantiate  evidence obtained through interviews with agency officials. We  determined that the data used in this report were sufficiently reliable for  the purposes of our reporting objectives. We made appropriate attribution  indicating the sources of the data. A full description of our objectives,  scope, and methodology can be found in appendix I.", "We conducted this performance audit from September 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["As we have previously reported, transportation systems and facilities are  vulnerable and difficult to secure given their size, easy accessibility, large  number of potential targets, and proximity to urban areas. TSA\u2019s mission  is to protect the nation\u2019s transportation systems by providing effective and  efficient security to ensure freedom of movement for people and  commerce. Accordingly, TSA is responsible for managing vetting and  credentialing programs to ensure that individuals that transport hazardous  materials or have unescorted access to secure or restricted areas of  transportation facilities at maritime ports and TSA-regulated airports do  not pose a security threat. In order to carry out this responsibility, TSA  conducts background checks\u2014known as security threat assessments\u2014 on individuals seeking an endorsement, credential, access, and/or  privilege (hereafter called a credential).", "Specifically, TSA reviews applicant information and searches government  databases, such as criminal history records from federal, state, and local  sources in the Federal Bureau of Investigation\u2019s National Crime  Information Center database and Terrorist Screening Database, which is  the federal government\u2019s consolidated terrorist watchlist. This information  is used to determine whether the applicant has known ties to terrorism  and whether the applicant may be otherwise precluded from obtaining a  credential based on his or her immigration status and criminal history,  among other factors. If TSA determines that an applicant does not pose  a security threat, a credential may be supplied by an issuing entity. If it  determines an applicant should be denied, the agency issues a  preliminary determination of ineligibility letter to the applicant. The  applicant may seek redress by appealing the determination or requesting  a waiver.", "TSA\u2019s security threat assessments support over 30 credentialing  programs in the maritime, surface, and aviation transportation segments.  The largest programs include the Transportation Worker Identification  Credential program for maritime workers, Hazardous Materials  Endorsement program for commercially licensed drivers, the Aviation  Worker program, and TSA Pre\uf0fc\u00ae for travelers at airport checkpoints.  According to TIM program officials, these transportation programs are  collectively estimated to have processed about 12.8 million enrollments  by October 2017. Table 1 describes the largest transportation  credentialing programs, by segment, and purpose of each."], "subsections": [{"section_title": "TSA Established the TIM Program to Address Shortcomings with Security Threat Assessments and Credentialing Systems", "paragraphs": ["TSA\u2019s legacy IT systems that are currently used to help conduct its  security threat assessment and credentialing functions are an  aggregation of stove-piped solutions that were developed over a period of  time to support individual transportation screening programs. These  systems are duplicative and lack needed sophistication to effectively  detect, for example, if an individual is attempting to gain access to  multiple facilities across different transportation programs in an effort to  find any successful entry point. Early detection of this type of threat is  difficult and time consuming because many aspects of the current  systems are not fully automated.", "Additionally, we and the DHS Office of Inspector General (OIG) have  previously reported numerous shortfalls with TSA\u2019s security threat  assessment and credentialing systems.", "We reported in 2011 that the demand for security threat assessments  is expected to continue to grow and the existing credentialing systems  will not be able to accommodate this growing enrollment demand.", "In July 2013, we reported on functional limitations and technical  problems with TSA\u2019s legacy credentialing systems that were to be  addressed by the TIM system. These limitations included the  inability to run reports to measure TSA response times to applicants,  track adjudication of cases, and address case workload backlogs. We  also reported on delays in processing new cases. We made  recommendations to address these issues and DHS agreed with our  recommendations. DHS has taken several actions to implement the  recommendations, such as establishing a process for developing  accurate workload projections and hiring additional adjudicators.", "In June 2015, DHS\u2019s OIG reported on issues with TSA\u2019s lack of  continuous vetting once a credential was issued, referred to as  recurrent vetting. For example, the OIG reported on the need for  recurrent vetting of aviation workers. Specifically, it found that TSA did  not have effective controls in place for ensuring that aviation workers  had not committed crimes that would disqualify them from having  unescorted access to secure areas of airports, and that they had  lawful immigration status and were authorized to work in the United  States. Instead, TSA depended on the commercial airports and air  carriers to verify criminal histories of workers who already hold  credentials, and on the credential holders themselves to report  disqualifying crimes to the airports where they worked. The DHS OIG  recommended that TSA pilot the Federal Bureau of Investigation\u2019s  Rap Back program and take steps to institute recurrent vetting of  criminal histories at all commercial airports. TSA concurred with the  recommendation and stated that it planned to initiate a pilot Rap Back  program to help ensure full implementation across all eligible TSA- regulated populations in the future.", "In September 2016, DHS\u2019s OIG reported that, although TSA required  Transportation Worker Identification Credential cardholders to self- report to the administration and surrender their card when charged  with a disqualifying offense, this self-reporting occurred only once  between 2007 and 2016. The report also stated that TSA was  testing two methods to implement recurrent vetting into its  credentialing programs\u2014the Federal Bureau of Investigation\u2019s Rap  Back program to check for criminal violations and the use of DHS\u2019s  Automated Biometric Identification System to check for both criminal  and immigration violations. However, TSA\u2019s plans did not include a  method for determining the best approach, and the OIG reported that  this would impede TSA\u2019s ability to implement recurrent vetting  successfully and efficiently. Accordingly, the OIG recommended that  TSA establish measurable and comparable criteria to use in  evaluating and selecting the best criminal and immigration recurrent  vetting option, and TSA concurred with this recommendation.", "Also, in September 2016, the DHS OIG reported that the  background checks for the Transportation Worker Identification  Credential program were not as reliable as they could be. For  example, the OIG found that TSA did not have processes in place to  ensure the proper separation of duties for adjudicators, who had the  ability to assign, review, and perform quality assurance on the same  case. The OIG also found missing supervisory review controls in the  terrorism vetting process. Accordingly, the OIG recommended that  TSA identify and implement additional internal controls and quality  assurance procedures; TSA agreed with the recommendation. In  response, TSA planned to make improvements to the TIM system to  include an additional quality assurance component in which the  system would automatically select cases for senior adjudicators to  review and to incorporate into the overall reporting and monitoring  activities.", "The TIM system is intended to address the shortfalls identified in these  prior reports by providing a modern and centralized end-to-end  credentialing system. The system is also intended to provide counter- terrorism and trend analytic capabilities to help identify unusual activities  (e.g., credential shopping and using multiple aliases) across the entire  credentialing process and all transportation populations supported by  TSA\u2019s security threat assessments. In addition, the system is expected to  enable automated recurrent vetting of individuals against criminal and  immigration databases to ensure that a credential or endorsement is  revoked if an individual commits a disqualifying act.", "The planned credentialing process that is to be supported by the TIM  system includes:", "Registration and enrollment: Individuals seeking a credential or  endorsement under one of the transportation programs supported by  the system are expected to be able to apply for a security threat  assessment at a Universal Enrollment Center or via the system\u2019s  online portal. The biographic and biometric information collected from  the applicant is to be received and processed by the system.", "Eligibility vetting and risk assessment: The system is to conduct  automated vetting of the applicant\u2019s information against criminal,  immigration, and terrorism watchlists to determine the security risk  associated with allowing access privileges based on the criteria for the  credential or endorsement that the individual is seeking to obtain. If  the results return a flag for a potentially disqualifying factor, the  applicant\u2019s case is to be sent for adjudication. TSA adjudicators are to  use the system to review and adjudicate cases that did not pass  automated vetting by comparing the applicant\u2019s information to the  criteria for the credential or endorsement that the individual is seeking  to obtain. The adjudicators are to determine the applicant\u2019s eligibility  for the credential or endorsement, and approve or deny the  individual\u2019s application.", "Issuance: When an applicant is approved through eligibility vetting or  adjudication, the system is to notify the applicant of approval and  provide instructions on how to receive the credential, which is to be  activated by the system and supplied by the issuing entity. The  applicant also is to be able to login to the online portal to view the  status of the application.", "Verification and use: Use of the credential in secured areas is to be  verified, including determining that the credential is authentic, that the  individual is the correct recipient of the credential, and that the  credential\u2019s status is valid (not revoked or expired).", "Revocation and expiration: The system is expected to conduct  subsequent automated recurrent vetting of individuals who previously  had been approved against criminal, immigration, and terrorist  databases on an ongoing basis. If, as a result of recurrent vetting or  self-reporting, there is new information indicating that an applicant\u2019s  credential should be revoked, the system is to alert the adjudicators  who are then to determine if revocation is needed. The system is to  prompt credential expiration at the end of a specified period of time.", "Redress or waiver: An applicant that is denied a credential is to be  able to apply to TSA to either appeal the decision, to include providing  documentation to prove that he/she is eligible, or request a waiver  from having to meet the eligibility criteria.", "Trend analytics: The system is to allow TSA\u2019s Office of Intelligence  and Analysis users to select from a standardized suite of analysis  tools that would allow them to identify unusual activities across  transportation populations. A key objective would be to identify  through analysis those adversaries and terrorists who may attempt to  hide behind multiple personas and aliases.", "Figure 1 provides an overview of the intended future credentialing  process which the TIM system is expected to support."], "subsections": []}, {"section_title": "Agile Software Development", "paragraphs": ["TIM program officials decided to adopt an Agile software development  approach\u2014a type of incremental development\u2014which calls for the rapid  delivery of software in small, short increments rather than in the typically  long, sequential phases of a traditional waterfall software development  approach. This decision is consistent with OMB\u2019s guidance as specified in  its IT Reform Plan, as well as the legislation commonly referred to as  the Federal Information Technology Acquisition Reform Act. Agile  emphasizes early and continuous software delivery, as well as using  collaborative teams and measuring progress with working software.  Figure 2 provides a depiction of software development using the Agile  approach compared to a waterfall approach.", "The Agile approach significantly differs in several ways from traditional  waterfall software development. Table 2 highlights major differences  between the Agile and waterfall software development approaches.", "Additionally, Agile practices integrate planning continuously throughout  the life-cycle. Although Agile requires some high-level, up front planning,  in general, planning in Agile focuses on the near term of the next few  software releases. Planning sessions are conducted to support each  release, iteration, and every work day. For example, development teams  have daily meetings, where the team members discuss what they did  yesterday and what they plan to do that day. Frequent planning is aimed  at ensuring the program is delivering the needed capabilities to the end  users.", "As we have previously reported, numerous frameworks are available to  Agile practitioners to guide their Agile software development activities.  Scrum is one common framework, which is widely used in the public and  private sectors and its terminology is often used in Agile discussions. The  following are key Scrum terminology and concepts:", "Product owners represent the end user community and have the  authority to set business priorities, make decisions, and accept  completed work.", "Scrum iterations (also called sprints) are where development teams  build a piece of working software during a short, set period of time  (e.g., 2 weeks). A collective set of sprints is bundled into a software  release.", "Sprint teams (or development teams) conduct the Agile software  development and testing work. These teams collaborate with minimal  management direction, often co-located in work rooms. They meet  daily and post their task status visibly, such as on wall charts.", "Scrum masters, similar to project managers, are responsible for  removing impediments to the sprint teams\u2019 ability to deliver the  product goals and deliverables.", "User stories convey the customers\u2019 requirements at the smallest and  most discrete unit of work that must be done to create working  software. Each user story is assigned a level of effort, called story  points, which is a relative unit of measure used to communicate  complexity and progress between the business and development  sides of the project.", "To ensure that the product is usable at the end of every iteration,  teams adhere to an agreed-upon definition of what constitutes  acceptable, completed work.", "Backlogs are lists of requirements, such as user stories, to be  addressed by working software. If new requirements or defects are  discovered, these can be stored in the backlog to be addressed in  future iterations.", "Velocity is a metric which is used to track the rate of work completed  using the number of story points completed or expected to be  completed in an iteration (i.e., sprint), or release. For example, if a  team completed 100 story points during a 4-week iteration, the  velocity for the team would be 100 story points every 4 weeks.", "Another framework, referred to as the Scaled Agile Framework (SAFe), is  a governance model for organizations to use to align and collaborate the  product delivery for modest to large numbers of Agile software  development teams. The framework is intended to be applied to several  organizational levels, including the development team level, the program  level, and the portfolio level. It is also intended to provide a scalable and  flexible governance framework that defines roles, artifacts, and processes  for Agile software development across all levels of an organization.", "DHS has sought to establish Agile software development as the preferred  method for acquiring and delivering IT capabilities. Specifically, in  February 2016, the DHS Under Secretary for Management initiated an  Agile software development pilot to improve the execution and oversight  of the department\u2019s IT acquisitions. The Under Secretary for Management  selected five DHS programs that were in various stages of the acquisition  life-cycle, including the TIM program, to be part of the pilot.", "As part of this pilot initiative, DHS established integrated product teams  designed to support each of the five programs in their efforts to adopt  Agile practices. These teams were directed to focus on effectively  planning and executing the pilot programs, as well as developing  appropriate documentation to support program execution. According to  the Under Secretary for Management, the department plans to use  lessons learned from the pilots to develop and update policies and  procedures for executing the pilot programs and future IT acquisitions. As  of May 2017, department officials had not determined a completion date  for the pilot.", "Additionally, DHS established a headquarters-level Agile team intended  to collaborate across the department on improvements to policy,  governance, and acquisition guidance. This group is intended to support  Agile delivery; codify and publicize process improvement artifacts  generated by the program-level integrated product teams; and eliminate  redundancies and conflicting guidance so that oversight groups speak  with one voice, reducing time through the acquisition process."], "subsections": []}, {"section_title": "DHS Oversight Framework", "paragraphs": ["In addition to the use of Agile software development principles, the TIM  program is subject to the department\u2019s oversight framework. Specifically,  the program is to adhere to DHS\u2019s acquisition policy, including its systems  engineering life-cycle framework, which is intended to support efficient  and effective delivery of IT capabilities. The Under Secretary for  Management serves as the decision authority for the program, and is  responsible for overseeing adherence to DHS\u2019s acquisition policies for the  department\u2019s largest acquisition programs (i.e., those with life-cycle cost  estimates of $1 billion or more).", "The Under Secretary for Management is supported by two offices within  the department. The first of these offices\u2014the Office of Program  Accountability and Risk Management (PARM)\u2014is responsible for DHS\u2019s  overall acquisition governance process. PARM is responsible for, among  other things, periodically conducting program health assessments to  evaluate acquisition programs, in terms of a program\u2019s management,  resources, planning and execution activities, requirements, cost and  schedule, and how these factors are impacting a program\u2019s ability to  deliver a capability.", "The other key supporting office\u2014the DHS Chief Information Officer  (CIO)\u2014is responsible for, among other things, setting departmental IT  policies, processes, and standards. The CIO is also responsible for  ensuring that acquisitions comply with the department\u2019s IT management  processes, technical requirements, and the approved enterprise  architecture. Within the Office of the Chief Information Officer (OCIO), the  Enterprise Business Management Office is to ensure that the  department\u2019s IT investments align with its missions and objectives. As  part of its responsibilities, this office periodically assesses investments to  gauge how well they are performing through a review of program risk,  human capital, cost and schedule, and requirements\u2014referred to as the  CIO\u2019s program health assessment.", "According to the CIO, the Chief Technology Officer, which is responsible  for leading the development of IT and standards across the department,  and for management of the Agile pilot initiative, offers guidance and  assistance to programs to help improve their execution. In addition, the  Director of the Office of Test and Evaluation is to provide oversight of  components\u2019 independent test and evaluation activities.", "The DHS Acquisition Review Board is chaired by the Under Secretary for  Management and is made up of many executive level members including  the CIO, the Executive Director of the Office of PARM, and the Chief  Procurement Officer. The board is to meet periodically to oversee  programs\u2019 business strategies, resources, management, accountability,  and alignment to strategic initiatives. Additionally, the department has  established executive steering committees, which generally are  comprised of component and DHS executive-level members, such as the  component CIO and Chief Financial Officer, as well as the DHS Chief  Technology Officer and the Executive Director of the Office of PARM. The  committees are to provide governance, oversight, and guidance to  programs and their related projects and initiatives to help ensure  successful development and operations.", "Figure 3 shows the organizational structure of the key DHS organizations  with IT acquisition management responsibilities."], "subsections": []}, {"section_title": "TSA Organizations Involved with the TIM Program", "paragraphs": ["The TIM program office resides within the Mission Operations component  of TSA\u2019s Office of Information Technology. The expected users of the TIM  system come from multiple offices under the Office of Intelligence and  Analysis, including the Security Threat Assessment Operations office,  which is responsible for conducting the security threat assessments, and  the Program Management office, which is responsible for managing  TSA\u2019s maritime, surface, and aviation credentialing programs. The TIM  program\u2019s Executive Steering Committee is chaired by the TSA CIO, who  is the head of the Office of Information Technology, and the TSA Deputy  Component Acquisition Executive, and meets quarterly. In addition, the  TSA Operational Test Agent is to perform operational testing and  evaluation of the TIM system\u2019s operational effectiveness, interoperability,  cybersecurity, and suitability. As previously mentioned, the DHS Director  of the Office of Test and Evaluation is to provide oversight of these test  and evaluation activities.", "Figure 4 shows the key TSA organizations involved with the TIM program."], "subsections": []}]}, {"section_title": "After Experiencing Significant Cost, Schedule, and Performance Issues with the Initial TIM System Deployment, TSA Implemented a New Strategy", "paragraphs": ["The TIM program experienced significant cost, schedule, and  performance issues during its initial implementation efforts. Specifically, in  May 2014, TSA launched an initial version of a commercial-off-the-shelf  (COTS) system for the maritime transportation segment of TIM that was  to support the Transportation Worker Identification Credential program.  However, as we previously reported, in September 2014, TSA reported  to DHS that the program had breached its baseline because it had  significant cost, schedule, and performance issues due to, among other  things, the addition of newly created credentialing programs that were  added to the program\u2019s scope, such as TSA Pre\uf0fc\u00ae and Chemical Facility  Anti-Terrorism Standards.", "TIM program officials also reported in the breach remediation plan other  issues that led to the breach, including different expectations between  TSA officials and the contractor regarding the extent of reuse of system  functionality among the different transportation segments. Specifically,  TSA expected that it would be able to reuse more of the maritime  functionality for the surface and aviation populations, while the contractor  expected there to be less reuse.", "In January 2015, the Acting Under Secretary for Management directed  program officials to suspend all planning and development efforts related  to the other two segments of the program\u2014surface and aviation\u2014until  the issues with the maritime segment could be resolved. In August 2015,  program officials prepared a revised life-cycle cost estimate which  increased costs to approximately $1.34 billion (about $713 million more  than the original 2011 estimate), and delayed full deployment of the TIM  system (to include all three transportation segments) to fiscal year 2022  (7 years later than originally planned).", "Also, in September 2015, the Director of the Office of Test and Evaluation  issued a letter of assessment which concluded that initial operational  testing of the COTS system for the maritime segment had determined  that the system was not operationally effective and not operationally  suitable. The Under Secretary for Management directed the DHS CIO to  conduct a thorough review of the proposed plans for moving forward with  the TIM program.", "After conducting the review, the CIO did not support the program\u2019s  proposal. As a result, in November 2015, the Under Secretary for  Management continued the suspension of all developmental efforts for  the surface and aviation transportation segments, but authorized the  program to continue resolving problems that were identified during initial  operational testing for the COTS system being used by the maritime  segment. The Under Secretary for Management also directed the CIO to  form and lead an integrated product team with senior TSA  representatives and the TIM program office to develop a new strategy for  the program.", "In March 2016, DHS and TSA officials completed a new strategy for  delivering TIM capabilities. This strategy included the following changes:  replace proprietary COTS applications with custom-developed  applications using open source code;  transition traditional, large development teams using a waterfall  system development methodology to an Agile software development  framework to enable rapid, incremental development and deployment;  and migrate from a defined, fixed data center environment to a scalable  Federal Risk and Authorization Management Program (FedRAMP)  certified cloud computing environment.", "Also, according to the new strategy, the move from the COTS product to  an open source solution is to include replacing the COTS product that  had already been deployed to the maritime segment with the open source  solution. It is also to include replacing the legacy systems that support the  credentialing programs from the other two transportation segments  (surface and aviation) with the open source solution. TSA plans to  incrementally transition the program from these legacy systems between  fiscal years 2018 and 2021.", "Additionally, the system is expected to interface with at least 19 other  information systems, including the following key systems:", "TSA\u2019s Transportation Vetting System, which conducts initial and  recurrent name-based matching against defined terrorist related data  sets.", "The Federal of Bureau of Investigation\u2019s National Crime Information  Center, which is an electronic clearinghouse of crime data.", "DHS\u2019s Automated Biometric Identification System, also referred to as  IDENT, which is the central DHS-wide system for storage and  processing of biometric and associated biographic information for  national security, law enforcement, immigration and border  management, intelligence, and other background investigative  purposes.", "TSA\u2019s Secure Flight, which identifies individuals who may pose a  threat to aviation or national security and designates them for  enhanced screening or prohibition from boarding an aircraft, as  appropriate.", "The U.S. Citizenship and Immigration Service\u2019s Systematic Alien  Verification for Entitlements, which is the primary data source for  government agencies to verify legal entry and presence in the United  States of a non-U.S. citizen or naturalized U.S. citizen.", "In April 2016, the Under Secretary for Management approved the TIM  program\u2019s new strategy and, in September 2016\u2014almost 2 years after  the program was initially suspended\u2014the program was rebaselined to  reflect the new strategy. As we previously reported, the estimated cost  and schedule in the revised baseline was significantly different than the  initial baseline. The revised baseline estimate was for about $1.27  billion (a $74 million decrease from the previous 2015 cost estimate and  an overall increase of $639 million from the original 2011 estimate), with  full deployment planned for 2021 (a 1-year acceleration from the previous  2015 schedule and an overall delay of 6 years from the original 2011  schedule). Table 3 shows the estimated costs and schedules reflected in  the initial and revised estimates.", "According to TIM officials, in the program\u2019s first 8 years (between October  2008 and September 2016), TSA spent over $280 million to deploy the  initial COTS solution to the maritime segment and address critical fixes in  the solution (i.e., the solution that TSA determined it needs to replace).  Also during 2016, TSA began transitioning to an Agile software  development framework. In September 2016, TSA issued two task orders  to a contractor to provide Agile software development services. The  orders were issued to the same design and development contractor that  had assisted with the initial deployment of the TIM COTS solution.", "From October 2016 to June 2017, the program deployed four software  releases using Agile software development practices. These releases  were focused on, for example, deploying new functionality to the COTS  system to enhance the criminal and immigration vetting data provided to  adjudicators.", "In December 2016, between the first and second Agile releases, the  program suspended new development for 1 month while officials  reconsidered the order in which they would deliver functionality. Also  during this period, the program developed and deployed a smaller release  which program officials refer to as a \u201chalf release.\u201d According to program  officials, this release did not produce any new capabilities and instead  addressed operations and maintenance-related fixes to the deployed  COTS system.", "After development of the second software release, at the end of March  2017, the program was reviewed by DHS\u2019s Acquisition Review Board.  The purpose was to review the results of follow-on operational testing that  was performed to determine whether the program had adequately  addressed the prior system and usability issues and implementation of  the program\u2019s new strategy. The meeting was also intended to discuss  the status of several action items from a prior review board meeting that  occurred in September 2016, such as finalizing a test and evaluation  master plan, conducting a cybersecurity threat assessment, updating the  program\u2019s mission needs statement and concept of operations, and  establishing software development cost metrics. Implementation of the  new strategy continues to be monitored by DHS and TSA oversight  bodies."], "subsections": []}, {"section_title": "The New Strategy for the TIM Program Has Addressed Selected Prior Challenges, but Concerns Remain", "paragraphs": ["The new strategy for the TIM program addressed a number of major  challenges that the program faced during earlier efforts to develop and  deploy the system; nevertheless, key challenges remain. Specifically, of  the seven major challenges that the program faced during its initial  implementation of a COTS solution for the maritime segment, four  challenges have been addressed related to (1) system performance and  usability issues, (2) data migration issues, (3) information security testing,  and (4) the inadequacy of the program\u2019s previous hosting facility.  However, the remaining three challenges regarding constraints with  COTS product, significant addition of new transportation programs (e.g.,  TSA Pre\uf0fc\u00ae), and insufficient stakeholder coordination and  communication have not been fully addressed."], "subsections": [{"section_title": "Fixes Have Been Implemented to Address Critical System Performance and Usability Issues", "paragraphs": ["According to DHS guidance, among other things, an operational test and  evaluation examines systems for operational effectiveness. Specifically, it  tests for the ability of a system to accomplish a mission when used by  representative users in the expected environment.", "The 2015 initial operational testing of the maritime segment (supporting  the Transportation Worker Identification Credential program) found that  the COTS system was extremely unreliable due to frequent critical  failures, and had several system performance and usability issues that  limited users\u2019 ability to execute tasks in a timely and accurate manner.  These issues included lags, freezes, the need for excessive refreshes,  inadequate reporting and case management functionalities, as well as an  interface that was not user-friendly. For example, the system was unable  to produce accurate reports on case workload and status, so users  expended significant effort creating spreadsheets to manually assign  cases and manage their progress. The system was also unable to  perform certain waiver functions in a timely and complete manner, which  resulted in a significant backlog.", "The program office has addressed the issues identified in the initial  operational test report by first identifying a list of over 900 action items.  According to TIM officials, they validated this list with the operational test  agent and prioritized the action items with the product owners (i.e., end  users) to identify which were the most critical to complete. For example,  critical items included addressing issues with the waiver functions,  assigning cases, and issuing credentials. The program implemented the  critical fixes by developing seven software releases from September 2015  to October 2016. In January 2017, the TSA operational test agent  reported that follow-on operational testing of the COTS system confirmed  that the program had adequately addressed the prior system and usability  issues. As a result, according to the test agent, the program\u2019s previously  deployed maritime segment of the system performed as intended."], "subsections": []}, {"section_title": "Actions Have Been Taken to Better Account for the TIM Program\u2019s Future Data Migration Efforts", "paragraphs": ["According to leading practices, IT programs should identify potential  problems before they occur. This allows programs to plan and execute  activities to mitigate the risk of such problems having adverse impacts on  the program.", "When the TIM program transitioned maritime users from the legacy  system to the COTS system, according to TSA\u2019s breach remediation plan,  program officials found that cleaning and properly migrating data was  very difficult and time consuming because the legacy systems were old  and the data mapping information was not readily evident. Program  officials stated that the data migration efforts were also difficult because  of the proprietary nature of the COTS product, which impacted the ability  to effectively migrate data from legacy systems. The additional time  needed for data migration resulted in higher than anticipated costs for the  maritime transportation segment.", "Program officials have taken action to better account for the TIM  program\u2019s future data migration efforts. Specifically, as part of the new  strategy, the officials plan to defer legacy data migration until after system  deployment efforts are complete to avoid disrupting deployment efforts.  The strategy focuses on the program migrating only closed case data  from the legacy systems to the new system. As such, adjudicators are to  continue to complete and close any security threat assessment cases  opened in the legacy system even after the new system is deployed, and  the new system is to only handle newly opened security threat  assessment cases. Once final disposition of the cases in the legacy  system is complete, those cases would then be included in the closed  case data migration effort, which is planned to occur at the end of  development, around fiscal years 2020 to 2021.", "In addition, the new strategy includes streamlining the data migration by  using the open source solutions to help simplify the migration of data on  transportation populations from the legacy systems. As a result of the  new approach, the program should be better positioned to more  effectively migrate data during future transitions between the legacy  systems and new system."], "subsections": []}, {"section_title": "Prior Information Security Weaknesses in the TIM System Have Been Addressed, and Deferred Cybersecurity Threat Testing Is Planned", "paragraphs": ["According to DHS guidance, the operational test and evaluation also  should examine the department\u2019s systems for operational suitability,  which is the degree to which a system is deployable and sustainable. The  evaluation is to take into account factors such as reliability,  maintainability, availability, and interoperability.", "The 2015 initial operational testing of the COTS system found that it was  not suitable because the system had significant information security  weaknesses. Specifically, the system inappropriately provided users with  greater access than was necessary to do their jobs, which undermined  the security benefits of controlling what different users were able to do in  the system based on their role. The COTS system also contained critical  and high-risk system security vulnerabilities which could result in the  compromise of sensitive system information, such as passwords, and  could hinder TSA officials\u2019 ability to effectively respond to incidents.", "Program officials took actions to address the security weaknesses  previously identified. For example, in response to the findings from the  initial operational testing, between September 2015 and October 2016,  they developed and released fixes to the significant security weaknesses.  In April 2017, the results of the follow-on operational testing confirmed  that the COTS system was free of critical or high-risk system security  vulnerabilities and that it appropriately restricted access to the system by  only allowing users to access areas of the system needed to support their  specific business tasks.", "In addition, critical steps to evaluate the system\u2019s cybersecurity have  been planned, but not yet completed. Specifically, testing for realistic  cybersecurity threats which is used to help categorize the system\u2019s risk- level in terms of confidentiality, integrity, and availability, was deferred  until March 2018. Program officials decided to defer this test until new  hosting environments for TIM are implemented, rather than testing TIM in  an environment that will soon be retired. These environments are  intended to enable the development, testing, and production of the  system. However, implementation of those environments has been  delayed until December 2017, and as a result, the cybersecurity  vulnerability assessment has been deferred to March 2018. The  identification of a time frame in which the program plans to conduct this  important cybersecurity test is a step in the right direction, and avoiding  additional delays will be important."], "subsections": []}, {"section_title": "TSA Decided to Discontinue Use of a DHS-Provided Cloud, and Recently Took Actions to Address Delays in Implementing Interim Hosting Environments", "paragraphs": ["According to OMB, a hosting facility or data center is to process or store  data and must meet stringent availability requirements. Additionally, cloud  computing can be used as a means for enabling on-demand access to  shared and scalable pools of computing resources.", "During the initial implementation of TIM, the system was hosted in a cloud  that operated out of a DHS data center (referred to as DHS Data Center  1). However, the DHS cloud was higher in operations and maintenance  costs than the program originally planned, which presented a challenge  for the program.", "To address this challenge, in 2016, TIM program officials decided to  move the COTS system that was previously deployed (the maritime  segment) out of the DHS cloud and set it up in a public cloud  environment. They also planned to use the public cloud environment to  develop, test, and operate the future TIM open-source based system. The  officials planned to use a phased migration that consisted of first  establishing hosting environments at two data centers\u2014DHS Data Center  1 and TSA Colorado Springs Operations Center. The officials planned to  use the data centers for the development, testing, and production of the  future TIM open-source based system, and then eventually transition to a  public or hybrid cloud once the system reaches full operational capability  in fiscal year 2021. As part of this approach, officials planned to  establish 10 development, testing, and production environments at these  data centers from January to July 2017, so that TIM\u2019s development teams  did not have to compete for the same environments during Agile software  development and testing efforts.", "While the program experienced delays in setting up its production  environment, officials recently took actions to address these delays.  Specifically, the program was expected to have a new production  environment available at the TSA Colorado Springs Operations Center by  March 2017; however, it was delayed until May 2017. Additionally, while  migration of the TIM system to the new hosting environments was  planned to occur by September 2017, it has been delayed. These delays  have contributed, in part, to delays in other aspects of the program,  including the execution of the cybersecurity vulnerability assessment, as  well as delays in the implementation of automated testing and  deployment tools (discussed later in this report). In response to these  delays, program officials recently established a revised schedule in May  2017 for setting up the new environments by December 2017.", "Effectively executing against this updated schedule should help to keep  the program on track with delivering these important environments and  fully addressing the related challenge that the program experienced  during its prior implementation efforts."], "subsections": []}, {"section_title": "TSA Decided to Move the TIM System from COTS to Open Source, but Implementation Plans Continue to Significantly Change", "paragraphs": ["According to leading practices and guidance, technology decisions should  seek to enable services to scale easily and cost-effectively and to avoid  vendor lock-in by, for example, using open source solutions. The benefits  of using open source solutions can include improved software reliability  and security through the identification and elimination of defects from  continuous and broad peer review of publicly available source code that  might otherwise go unrecognized by a more limited core development  team; unrestricted ability to modify software source code; no reliance on a  particular software vendor due to proprietary restrictions; reduced  software licensing costs; and the ability to \u201ctest drive\u201d the software with  minimal costs and administrative delays in a rapid prototyping and  experimentation environment.", "Also, according to leading practices, IT programs should ensure that their  plans include how they will transition from the current state to the final  state of system operations. Such planning provides a mutual  understanding to relevant stakeholders of how programs are to  accomplish the transition.", "According to TSA\u2019s breach remediation plan, the TIM program\u2019s use of a  COTS solution led to several challenges. For example, program officials  reported that the COTS product restricted their ability to make changes to  the product to improve system usability and, as previously discussed,  impacted the ability to effectively migrate data from legacy systems  because of the proprietary COTS product. Program officials also reported  that they were highly dependent on the COTS vendor to remediate  compatibility issues and resolve problems, which required additional time.  The plan also stated that the COTS product required a complex system  architecture which prevented the program from implementing modern  software development and testing tools. Finally, use of the COTS product  resulted in higher software licensing costs.", "The TIM program\u2019s new strategy is intended to address these challenges  by moving away from using a COTS product to a custom-developed open  source solution. However, the program\u2019s approach for developing and  delivering this new solution has been in a continual state of fluctuation  and implementation plans have not been defined. As such, this challenge  has yet to be fully addressed. Specifically,  In September 2016\u2014after the 2-year pause in the program and  completion of its extensive rebaselining effort\u2014DHS and TSA officials  decided that TSA would incrementally retire legacy systems as the  transportation programs that use those systems are migrated to the  open source solution; they also decided to eventually replace the  COTS system that was previously deployed to support the maritime  Transportation Worker Identification Credential program and migrate  to the open source solution. This was to be completed using a staged  approach between the migrations, and also by using two versions of  the COTS system as well as the open source system. However, the  program lacked a plan detailing how it was going to migrate from the  current legacy state, to the interim environment (with the two versions  of COTS plus an open source system), to the final state.", "As previously mentioned, in December 2016, new development for  the TIM system was paused once again to, among other things,  further evaluate the transitioning approach that was agreed to 3  months prior. Four months later (in mid-March 2017), program officials  decided to continue pursuing the approach that was agreed to in  September. Subsequently, the high-level implementation schedule  was revised to adjust for delays that this most recent replanning effort  contributed to (other contributing factors for the delay are discussed  later in this report). The revised schedule delayed deployment of the  initial Pre\uf0fc\u00ae capabilities by 6 months and other key functionality up to  12 months.", "Further adding to the fluctuation in the program, at the end of March  2017, the DHS Acquisition Review Board requested that the  program\u2019s implementation approach be revised to accelerate the  delivery of the TIM program\u2019s front-end interface for adjudication and  redress functions. However, it is unclear how the acceleration of the  development and implementation of these functions will impact the  delivery of the other planned functionality, and what tradeoffs the  program will need to make. Program officials were expected to  develop an overview of the acceleration efforts associated with cost,  schedule, risk, and impacts on the program and deliver it to PARM  and the Office of the Chief Technology Officer in August 2017.", "As a result, while it has been 8 months since the TIM program was  rebaselined, the details of how the program will transition from its current  state, to an interim state, then to the final state of full open source, have  yet to be determined. This is contrary to leading practices that we have  previously identified, which state that when pursuing an IT modernization  effort, organizations should develop a plan for transitioning from the  current to the target environment.", "In response to our concerns, program officials stated that after they  determine how they will adjust to incorporate the Acquisition Review  Board\u2019s recent acceleration request, they will determine the details of how  the program will achieve the desired final state. However, until the  program establishes and implements specific time frames for determining  key implementation details, including how it will transition the program  from its current state to an interim state and to the final state, the TIM  program office, and TSA and DHS oversight bodies cannot be certain  about how the program will ultimately deliver its complete open source  solution."], "subsections": []}, {"section_title": "New Transportation Programs Have Been Incorporated in TIM\u2019s Rebaselined Schedule, but the Program Is Experiencing Significant Delays", "paragraphs": ["According to leading practices, programs should manage changes to  requirements as they evolve during the project. Programs should also  ensure that planned schedules provide a realistic forecast for completion  of activities, including providing reasonable slack (i.e., flexibility in the  schedule).", "After the TIM program was initiated in 2008, it experienced significant  increases in scope, such as the addition of TSA Pre\uf0fc\u00ae and Chemical  Facility Anti-Terrorism Standards populations in 2012, which required  more functionality and considerably more processing demands than  originally planned. The TIM program was challenged to accommodate the  additional work needed to incorporate these new transportation  populations and capabilities, and, in part, contributed to a significant  breach in its original cost and schedule estimates.", "To address the challenge, the TIM program incorporated the additional  functionality and processing requirements into its cost and schedule  rebaseline that was approved in September 2016. In addition, the  program\u2019s new strategy addressed the need to be adaptable to  accommodate any new transportation populations and capabilities that  could be added in the future by taking an enterprise-level approach to  providing capabilities.", "Nevertheless, while the TIM program incorporated TSA Pre\uf0fc\u00ae into its  new plans, the implementation schedule for the program was very  compressed and program officials did not establish a schedule that  realistically forecasted when activities would be completed. Specifically,  program officials planned to deploy initial TSA Pre\uf0fc\u00ae capabilities by May  2017 without any slack in the schedule. According to program officials,  the reason for this approach, was because TSA Pre\uf0fc\u00ae was considered a  high priority for migrating from its legacy system in order to accommodate  an expected influx of applicants during the summer months. However,  slack was not incorporated in the implementation schedule; therefore,  when the program experienced schedule delays, it resulted in the  program missing the May 2017 implementation deadline and being  rescheduled to November 2017.", "The 6-month delay in delivering initial Pre\uf0fc\u00ae capabilities was due to the  delays discussed in the prior section associated with replanning the  strategy for transitioning to the open source system, as well as delays in  onboarding additional development team members and setting up new  development and production environments. The delay in delivering  Pre\uf0fc\u00ae capabilities is especially problematic because program officials  have reported that the legacy system is at risk of exceeding its processing  capacity.", "Additionally, as previously mentioned, the program\u2019s revised schedule  shows the delivery dates for almost all (8 of 10) capabilities being  significantly pushed back\u2014with 2 capabilities being delayed up to 12  months. Moreover, not only were the implementation dates delayed for  these efforts, the time to complete a number of these efforts was reduced  by about 1 to 12 months\u2014thus further exacerbating our concerns about  unrealistic schedules. Without a schedule that realistically forecasts when  activities will be completed, TIM program officials cannot ensure that they  will meet the dates that they have committed to, such as when key  capabilities for TSA Pre\uf0fc\u00ae are to be deployed."], "subsections": []}, {"section_title": "Efforts to Improve Stakeholder Coordination and Communication for the TIM Program Have Begun, but Key Actions Have Not Been Implemented", "paragraphs": ["According to leading practices, programs should coordinate and  collaborate with relevant stakeholders (i.e., those that are affected by or  in some way accountable for the outcome of the program, such as  program or work group members, suppliers, and end users). Stakeholder  coordination includes, for example, involving stakeholders in reviewing  and committing to program plans, agreeing on revisions to the plans, and  identifying risks. Programs should also identify the needs and  expectations of stakeholders and translate them into end user  requirements.", "However, during prior implementation efforts with the COTS solution, the  program experienced challenges with effectively coordinating and  communicating with end-users. For example, according to program  documentation, it had not adequately collaborated with end users in  developing and implementing business requirements and conducting  post-deployment user satisfaction assessments. This led to frustration  among end users who felt inadequately informed and prepared for the  new COTS system.", "To address this challenge, the TIM program\u2019s new strategy includes  establishing a product owner role, which, as previously mentioned, is  intended to represent the end user community and have the authority to  set business priorities, make decisions, and accept completed work. The  program\u2019s adoption of the Agile software development approach has also  significantly increased the frequency of the program\u2019s engagement with  stakeholders to define, test, and implement software releases.", "In addition, program officials established an organizational change  management strategy in October 2016 that is intended to, among other  things, focus broadly on establishing overall communication processes for  program stakeholders. This strategy identifies key steps such as,  establishing a communication team and hiring a communication lead to  oversee the development and execution of the communication action  plans, establishing a communication working group, and serving as chair  of the communication working group. This group is to be responsible for  developing four communication action plans for key stakeholder groups  (e.g., new transportation populations, existing transportation populations,  and management). These particular steps were to be completed from  November 2016 through January 2017.", "However, while as of May 2017, the TIM program had implemented  certain steps from the organizational change management strategy, such  as establishing a communication team, the program has been delayed in  implementing other steps. Specifically, the communication lead position  was to be filled in November 2016. However, in March 2017 TIM program  officials stated that the position had not yet been filled due to the federal  hiring freeze. Additionally, because of the vacancy in the communication  lead position, other key actions have been delayed, such as the  development and execution of the communication action plans.", "Program officials have not established new time frames for completing  the remaining steps outlined in the organizational change management  strategy. Until these time frames are established and effectively executed,  program officials will have less assurance that there will be effective  communication with stakeholders and customers to ensure that the  program is meeting their needs."], "subsections": []}]}, {"section_title": "The TIM Program Has Not Fully Implemented Leading Practices for Transitioning to Agile Software Development", "paragraphs": ["As discussed previously, transitioning a program from waterfall  development to Agile software development is a significant effort, and  requires the implementation of fundamental practices to ensure that the  transition is successful. According to leading guidance, an organization  transitioning to Agile software development should establish critical  practices to help ensure successful adoption of the Agile approach, such  as obtaining full support from leadership to adopt Agile processes, enhancing Agile knowledge, ensuring product owners are engaged with the development teams  and have clearly defined roles, establishing a clear product vision, prioritizing backlogs of requirements, and  implementing automated tools to enable rapid system development  and deployment.", "While the TIM program has fully implemented the first two of these  leading practices necessary to ensure the successful adoption of Agile,  the remaining four practices have not been fully implemented. The gaps  we have identified with the program\u2019s implementation of Agile are  concerning given that it did not follow key IT acquisition best practices  when using its waterfall development approach during the program\u2019s first  8 years and spent over $280 million on a system that TSA has  determined it needs to replace."], "subsections": [{"section_title": "The TIM Program Has Received and Maintained Support from TSA and DHS Leadership to Adopt Agile Practices", "paragraphs": ["According to leading practices and guidance, an organization transitioning  to Agile software development should get and maintain full support from  the organization\u2019s leadership to adopt Agile processes. Leadership  support helps empower employees to continuously improve the use of  Agile software development practices.", "DHS and TSA leadership have approved the TIM program\u2019s adoption of  Agile software development, and continue to support the transition. For  example, the DHS OCIO worked closely with TSA officials in 2015 and  2016 to develop the new strategy for the program which included moving  away from a waterfall development approach to Agile software  development. As previously mentioned, the Under Secretary for  Management selected the TIM program to be part of the DHS Agile pilot  initiative in February 2016 and approved the program\u2019s new strategy in  April 2016.", "Moreover, the DHS Office of the Chief Technology Officer has continued  to provide guidance and resources to the program since it adopted Agile.  For example, TIM program officials stated that the DHS Chief Technology  Officer added two of the office\u2019s full-time and one part-time staff members  to the TIM program. DHS and TSA officials stated that the Chief  Technology Officer also provided an Agile coach to assist the TIM Program Manager about 3 days per week with establishing an Agile  governance framework. Finally, DHS established an Agile Integrated  Product Team that is co-chaired by PARM and the TIM Program  Manager. The team meets bi-weekly to provide guidance on adopting  Agile processes. As a result of the sustained leadership commitment, the  program is better positioned to continuously improve its Agile practices."], "subsections": []}, {"section_title": "Key TIM Program Staff Have Received Agile Training to Enhance Knowledge", "paragraphs": ["According to leading practices and guidance, an organization transitioning  to Agile software development should ensure that the entire program  team receives Agile training. This allows organizations to achieve a faster  shift away from the previous culture and processes and toward a more  agile culture.", "Toward this end, the TIM program requires its Agile contractor to ensure  that development teams are trained and skilled in Agile methods, as well  as in the specific Agile frameworks the program has adopted, which  include the Scrum and SAFe frameworks. Additionally, the program  provided initial Agile training for key program staff when it began  transitioning to Agile software development. Specifically, the program  provided a mandatory 2-day Agile workshop in October and December  2016 which covered basic Agile principles and the Scrum and SAFe  frameworks. This training was provided to many key staff members,  including contractor support staff, a contracting officer representative, and  product owners.", "Further, in December 2016, the program began providing training on the  SAFe framework to its government employees. This training was tailored  based on different roles, such as Agile practitioner, program manager or  product owner, and scrum master. The training courses were provided to  key staff members, including TIM program leadership, team leads, branch  managers, and scrum masters. As a result of providing Agile training, the  program\u2019s staff should be able to more effectively adopt and apply Agile  software development processes."], "subsections": []}, {"section_title": "TIM Program Product Owners Frequently Engage with Development Teams, but Roles and Responsibilities Are Not Clearly Defined", "paragraphs": ["According to leading practices and guidance, an organization transitioning  to Agile software development should designate a product owner who  represents the user community and establishes priorities based on  business needs, approves user stories and their acceptance criteria, and  decides whether completed work meets the acceptance criteria and can  be considered done. The product owner should also maintain close  collaboration with the development teams by, among other things,  providing daily support to help clarify requirements and attending key  Agile meetings, such as sprint- and release-level planning sessions and  system demonstrations. Additionally, roles and responsibilities among  relevant stakeholders, such as the product owner, should be clearly  defined and documented by the organization that is transitioning to Agile  software development, so that the stakeholders are aware of their  responsibilities and given the authority to perform their roles.", "The TIM program has two different groups of individuals that collectively  share the responsibilities of product owner, and while these groups  frequently engage with the development teams, program officials have  not yet clearly defined the groups\u2019 roles and responsibilities. Specifically,  according to program officials, the first group consists of five product  owners that represent end users and are collectively responsible for  supporting all development teams, attending all Agile meetings, and  prioritizing and approving planned and completed work. In addition,  according to program officials, these five individuals are also responsible  for approving user stories associated with new system functionality.", "The other group is referred to as the solutions team, which includes, for  example, the TIM Chief Architect and Chief Engineer. According to  program officials, the technical work (which is to help enable the system  functionality, such as ensuring network connectivity and proper software  licenses) is approved by the solutions team.", "Nevertheless, while program officials told us about these high-level roles  and responsibilities, the program\u2019s documentation does not clearly define  them among the five product owners and the solutions team. Moreover,  program officials have not defined the rules of engagement for these  product owners, such as how competing priorities among different  product owners should be handled.", "According to program officials, the lack of clearly defined roles and  responsibilities has not been a problem for the program because the  product owners and the solutions team regularly communicate and  coordinate with each other, and thus far, have been in agreement on the  priorities for the program. However, the program recently scaled up the  amount of work being conducted simultaneously, which adds to the  volume of the decisions that need to be made and the coordination that  has to occur among the five product owners and solutions team. Thus,  even if the program has not yet experienced issues with coordination,  without more clarity in the roles and responsibilities among the groups  that are responsible for prioritizing and accepting work, the program risks  facing challenges in establishing priorities, approving user stories, and  deciding whether completed work meets the acceptance criteria."], "subsections": []}, {"section_title": "The TIM Program Established a Vision, but It Does Not Always Align to the Requirements; Recent Corrective Actions Should Yield Improvements", "paragraphs": ["According to leading practices and guidance, a program transitioning to  Agile software development should have a clearly defined vision. This can  be in the form of a product roadmap, to guide the development of the  product and to help inform the planning and requirements development of  Agile software development releases.", "Consistent with leading practices, TSA established a vision for the TIM  program. This vision is articulated in multiple documents\u2014including the  Mission Needs Statement, Concept of Operations, and Operational  Requirements Document. Officials also use a strategic roadmap to  articulate the program\u2019s vision, which specifies the high-level system  capabilities that are to be deployed over the life-cycle of the program  through 2021.", "However, the program\u2019s vision has not always informed the planning of  requirements for the software releases, as intended by leading practices.  Specifically, the capabilities outlined in the program vision documents,  such as the strategic roadmap, do not consistently map to program  requirements. While 5 of the 10 capabilities in the strategic roadmap align  to the high-level and large scope requirements, referred to as epics, the  other half of the capabilities do not clearly align to the epics. For example,  the adjudication and redress capabilities that are in the strategic roadmap  do not align to any epic. In addition, the capability for public-facing portals  does not clearly track to any epic.", "TIM officials recognized the alignment issues, and in August 2017, stated  that they are in the process of establishing alignment from the program\u2019s  vision down to the lowest level of requirements, by refining the program\u2019s  vision and requirements. Officials also stated that they expected this effort  to be completed by 2018. Effective execution of this effort should help  ensure the program\u2019s vision is informing requirements planning."], "subsections": []}, {"section_title": "Requirements for the TIM System Have Not Been Fully Prioritized", "paragraphs": ["According to leading practices and guidance, a program transitioning to  Agile software development should have a prioritized list of the  requirements that are to be delivered\u2014referred to as the backlog. This  backlog should be maintained so that the program can ensure it is always  working on the highest priority requirements that will deliver the most  value to the users. In addition, according to TIM Agile management  documentation and program officials, the program\u2019s backlog of features  (i.e., mid-sized requirements) is expected to represent the features that  are to be delivered over the next several software releases. These  features are to be assigned priority levels to help determine which should  be selected for development when planning the next release.", "According to TIM Agile management documentation, the TIM program is  expected to manage a backlog for each software release, which is to  identify the features and their derived user stories (i.e., the smallest and  most detailed requirements) that are to be delivered in a specific release.  The documentation also indicates that each feature and user story is to  be assigned priority levels to determine which should be included in the  development of the next release and associated sprint. Figure 5  illustrates the intended prioritization in the features, releases, and user  stories backlogs.", "However, as of July 2017, the program\u2019s backlogs did not contain specific  prioritization levels for each of the features and user stories, as called for  in DHS guidance. According to program officials, instead of assigning  specific prioritization levels, they had more generally identified which  features should be developed within the near-term (e.g., in the next  several Agile releases). Program officials recognized that they still  needed to prioritize their backlogs by assigning priority levels to all  features and user stories, but they did not have a time frame for  completing this effort.", "Without ensuring full prioritization of current and future features and user  stories, the program is at risk of delivering functionality that is not aligned  with the highest needs of those that are responsible for conducting  security threat assessments to protect the nation\u2019s critical transportation  infrastructure."], "subsections": []}, {"section_title": "The TIM Program Has Been Delayed in Implementing Many of the Planned Automated System Development and Deployment Tools", "paragraphs": ["According to leading practices and guidance, automating system  development and deployment work and avoiding manual work is  especially important for Agile programs, as it enhances the ability for  rapid development and delivery of high quality software. Specifically, a  program transitioning to Agile software development should use an  automated tool for managing Agile activities, such as maintaining the  product backlog and tracking the status of completed work. The program  should also establish automated testing and deployment capabilities to  improve the quality of the system. For example, according a DHS\u2019s Agile  development instruction manual, the vast majority of software defects are  discovered during system integration testing, and\u2014if automated\u2014this  testing can be run multiple times on a sprint or release in order to identify  more defects sooner. In addition, automated tools can enable more  efficient processes for frequently integrating computer code that is  developed by different team members (e.g., hourly or daily), in order to  quickly detect any code integration errors. Automation of testing can also  help decrease the risk of introducing security flaws due to human error.", "However, program officials deferred implementation of an automated  Agile program management tool and many other testing and deployment  tools. Specifically, while the program had been using Agile software  development practices since October 2016, the program has not used an  automated management tool for tracking the status of completed work for  its first three Agile software releases. Instead the program has used  spreadsheets that require TIM program officials to manually populate and  track large amounts of program status information.", "Program officials had planned to implement an automated management  tool by October 2016, but did not do so until the end of April 2017.  According to the officials, the delay occurred because they were in the  process of tailoring the SAFe governance framework and the  management tool needed to be customized to reflect the tailored  approach.", "Regarding tools for testing and deployment, as of May 2017, the program  was only using 4 of the16 automated tools that program officials planned  to use. These included tools that enable the management of software  code development, defect tracking, and components of automated  functional testing. However, the remaining 12 testing and deployment  tools had not yet been implemented. These include, among others, tools  that enable the automated building of software code, frequent merging of  an individual piece of software code with the main code repository so that  new changes are tested continuously (referred to as continuous  integration), small automated tests to verify that each individual unit of  code written by the developer works as intended, and installation of  application patches to protect against known vulnerabilities. TIM program  officials stated that these testing and deployment tools are not expected  to be implemented until the new development, testing, and production  environments are set up. However, as previously mentioned, the program  has experienced challenges in implementing these environments.", "As a result, the program\u2019s use of manual processes have been time  consuming, impeded visibility into the process, and hindered software  testing. In addition, without automated tools, program performance  metrics were being manually calculated and this increases the risk for  incomplete and inaccurate data. While the automated Agile management  tool has just been implemented, until the remainder of the automated  Agile testing and deployment tools are implemented, the program is likely  to continue to operate at reduced efficiency levels, and be limited in its  ability to ensure product quality."], "subsections": []}]}, {"section_title": "TSA and DHS Have Not Fully Implemented Most Key Practices for Overseeing the TIM Program\u2019s Cost, Schedule, and Performance", "paragraphs": ["According to leading practices, to ensure effective program oversight of  cost, schedule, and performance, organizations should: ensure that corrective actions are identified and tracked until the  desired outcomes are achieved, document relevant governance and oversight policies and monitor program performance and progress, and  rely on complete and accurate data to review performance against  expectations.", "While TSA fully implemented the first practice, the remaining three  practices were not fully implemented by DHS and TSA. As a result, the  effectiveness with which the governance bodies oversee and monitor the  program has been limited."], "subsections": [{"section_title": "TSA Established a Process for Ensuring Corrective Actions Are Identified and Tracked for the TIM Program", "paragraphs": ["According to leading practices, effective program oversight includes  ensuring that corrective actions are identified and tracked until the desired  outcomes are achieved. In this regard, governance bodies should collect  and analyze data on program risks and issues and determine corrective  actions to address them and track them to completion.", "TSA has established a process for ensuring that corrective actions are  identified and tracked. Specifically, the program has a process for  identifying corrective actions and monitoring the status of these actions in  its weekly program status reviews. The program also uses an automated  tool to track and maintain a complete list of all actions that have been  identified. As of February 2017, the list contained 89 actions and included  the status of the actions\u201483 of which had been tracked to completion. As  a result of the program having a process that can identify and track  corrective actions, it is better positioned to address significant deviations  in cost, schedule, and performance parameters."], "subsections": []}, {"section_title": "TSA and DHS Have Documented Selected Oversight and Governance Processes for the TIM Program, but Other Key Processes Are Underdeveloped", "paragraphs": ["According to leading practices, effective program oversight includes the  use of documented policies and procedures for program governance and  oversight, such as reporting and control processes. These processes may  include, among others, requiring programs to report on the status and  progress of activities; expected or incurred program resource  requirements; known risks, risk response plans, and escalation criteria;  and benefits realized. Oversight and governance documentation may also  include threshold criteria to use when analyzing performance, and the  conditions under which a program or project would be terminated.", "TSA and DHS have documented selected policies and procedures for  governance and oversight of the TIM program. Specifically, DHS  documented procedures for its Acquisition Review Board and its  Executive Steering Committee for the TIM program on how these  governance bodies are to review the cost, schedule, and performance of  the program. For example, according to the Committee\u2019s charter, it is  responsible for assessing the health of the program and identifying major  issues and risks, utilizing a standard reporting format at oversight  meetings.", "TSA has also documented processes for the program\u2019s Agile milestone  reviews, such as conducting workshops at the end of the release cycle to  perform a system demonstration, review qualitative metrics, and promote  continuous quality improvement. TSA also developed a risk management  plan tailored for the Agile approach to guide TIM staff members in  identifying, managing, and mitigating risks and issues impacting cost,  schedule, and performance of the program. The agency also developed a  test and evaluation master plan that outlines how it and DHS will conduct  and oversee testing and evaluation of the program\u2019s capabilities under  the new Agile software development approach.", "However, TSA and DHS have not developed or finalized other key  oversight and governance documents. Specifically, three oversight and  governance policies have not been finalized and/or appropriately  updated: the TIM program\u2019s tailoring plan for SAFe, a DHS-level oversight  policy for Agile programs, and DHS Office of the Chief Technology  Officer\u2019s guidance for Agile programs to use for collecting and reporting  on performance metrics.", "The TIM program has not updated its Systems Engineering Life Cycle  Tailoring Plan (which outlines the Agile governance process and all  milestone reviews that are required for planning and deploying Agile  releases), to reflect changes in the way officials have reported using  the SAFe governance framework. As a result, there are  inconsistencies in the governance documentation. For example, the  Systems Engineering Life Cycle Tailoring Plan describes four levels of  governance\u2014portfolio, value stream, program, and team\u2014while  program officials have reported omitting the value stream level from  the governance framework. According to TSA officials in May 2017,  they planned to update the Systems Engineering Life Cycle Tailoring  Plan to reflect the revised governance framework, but they did not  have a specific time frame for completing the revision. Until the TIM  program fully updates its Systems Engineering Life Cycle Tailoring  Plan to reflect the revised governance framework, the program lacks a  clearly documented and repeatable governance process to effectively  oversee the program.", "DHS officials stated that they plan to conduct biannual oversight  reviews of the five Agile pilot programs (including TIM), instead of the  annual reviews that are typically conducted for traditional waterfall  development programs. According to the officials, the purpose of  moving to biannual reviews is to better ensure cost, schedule, and  performance remain on track for these Agile programs. However,  officials in the Office of the Chief Technology Officer stated that DHS- level Agile governance and oversight policies and procedures have  not been revised to reflect this new oversight approach because  consensus among DHS leadership on related changes needs to be  established before this new oversight approach can be documented in  the department\u2019s guidance. As of May 2017, officials had not specified  a time frame for reaching such consensus. Until DHS leadership  reaches consensus on needed oversight and governance changes,  and then documents and implements associated changes, the  program continues to plan as though it is undergoing annual oversight  reviews, versus biannual reviews.", "As of early May 2017, officials in the Office of the Chief Technology  Officer were also in the process of drafting guidance for Agile  programs to use for collecting and reporting on performance metrics,  but did not know when this guidance will be finalized. According to  TSA officials, in the absence of complete Agile guidance, the TIM  program receives support from DHS\u2019s Agile team supporting the pilot  initiative, which, as specified in the team\u2019s charter, is intended to help  the program (as well as the other four pilot programs) facilitate Agile  software development. However, this team is not intended to perform  oversight functions to ensure that the program is meeting cost,  schedule, and performance targets. Thus, until the Office of the Chief  Technology Officer completes guidance for Agile programs to use for  collecting and reporting on performance metrics, TIM program officials  may not report the most informative Agile performance metrics to  oversight entities."], "subsections": []}, {"section_title": "TSA and DHS Consistently Conduct Program Performance Reviews, but Lack Insights from Key Performance Metrics", "paragraphs": ["According to leading practices, effective program oversight includes  monitoring program performance and progress by comparing actual cost,  schedule, and performance data with estimates in the plan and identifying  significant deviations from established targets or thresholds for  acceptable performance levels. Program reviews are to be conducted at  predetermined checkpoints or milestones in order to determine progress  by measuring programs against cost, schedule, and performance metrics.  In addition, Agile programs should be measured on, among other things,  velocity (i.e., number of story points completed per sprint or release),  development progression (e.g., the number of features and user stories  planned and accepted), product quality (e.g., number of defects and unit  test coverage), and user satisfaction.", "The TIM program management office conducts frequent and regular  performance reviews and focuses on several important Agile release- level metrics. Specifically, program management officials monitor TIM\u2019s  performance and progress during weekly program status review meetings  and in periodic Agile reviews that are conducted at the end of each  release. These reviews also include officials from the development teams  and program stakeholders. The reviews focus on, among other things,  velocity, progress, and product quality. They also include the status of key  activities and risks impacting cost, schedule, and performance.", "Nevertheless, while the program management office uses performance  metrics, the program has not established thresholds or targets for  acceptable performance levels for these metrics. For example, program  status reports showed that about 47 percent of the work that was planned  to be completed in the first Agile release was accepted by the product  owners. While the program appears to have been improving in this  metric\u201474 percent was accepted in the second Agile release and 94  percent in the third Agile release\u2014program officials have not established  the thresholds or targets to determine the acceptable level of  performance.", "Program officials stated that they considered the performance in the first  Agile release to be low, but they have not yet established targets or  thresholds. According to program officials, they planned to establish  targets based on the capacity of work that development teams are  expected to complete in a release, which can be better predicted as the  teams spend more time together. However, the program has since  developed three releases and continues to lack performance thresholds  and targets. Until program officials establish performance thresholds or  targets, oversight bodies may lack important information to ensure the  program is meeting acceptable performance levels.", "In addition, the program management office\u2019s performance reviews have  included limited information on program cost. According to TIM officials,  the program manager holds weekly meetings with the contract, finance,  and budget groups to review costs associated with TIM\u2019s contracts.  However, management does not review or produce reports on overall life- cycle cost performance for the program or Agile software development  cost performance. Program officials said they have not yet determined  how best to measure cost performance in an Agile software development  environment. In September 2016, the Under Secretary for Management  instructed the program to collaborate with DHS\u2019s Cost Analysis Division  and the headquarters-level Agile integrated product team to establish  agreed-upon software development cost metrics as well as a method for  collecting and reporting on those metrics by the end of the March 2017.  However, as of May 2017, this effort was still in progress. Until the TIM  program begins collecting and reporting on Agile-related cost, oversight  bodies will have limited information by which to monitor TIM costs.", "Department-level oversight bodies have focused on reviewing certain  program life-cycle metrics for the TIM program. Specifically, the DHS  Acquisition Review Board conducts periodic reviews of the program to  monitor the program\u2019s performance and hold the program accountable.", "Since the program was rebaselined in September 2016 and transitioned  to Agile software development, the Acquisition Review Board has  conducted one review. In addition, the Executive Steering Committee,  which is chaired by the TSA CIO and Deputy Component Acquisition  Executive, and includes representatives from the DHS Chief Technology  Officer and PARM, reviews the program quarterly. As of July 2017, the  Executive Steering Committee had conducted three reviews of the TIM  program since implementing its new development approach. These  oversight bodies reviewed, for example, performance information such as  comparisons of the dates that milestones were actually achieved, against  the planned schedule, and the burnup charts for the program (i.e.,  graphical representations of accumulated story points planned and  completed per release).", "However, the Acquisition Review Board and the Executive Steering  Committee have not been measuring the program against the rebaselined  life-cycle costs, or important Agile release-level metrics, which are  essential for providing early indicators of issues with the program. For  example, these oversight bodies did not review the program\u2019s velocity,  number of features/user stories planned and accepted, product quality, or  Agile software development cost metrics.", "In addition, while we have previously reported that there was overlap in  the DHS OCIO\u2019s and the PARM office\u2019s assessments of certain IT  programs, neither of these offices assessed the TIM program\u2019s progress  against key Agile performance metrics or cost performance. Specifically,  the DHS OCIO and the PARM office conducted periodic (monthly or  quarterly health assessments) of the program that included, among other  things, schedule and system performance indicators for the entire life- cycle of the program (similar to what is used to review traditional waterfall  programs). While these metrics are useful for understanding the  program\u2019s progress against the full schedule (60 months to full  operational capability, or 30 Agile releases), they do not offer insight into  the progress of individual Agile releases, which are deploying high-priority  capabilities for the TIM program every 2 months. For example, as of April  2017, these two oversight bodies did not include Agile performance  metrics which would have offered important insights into the progress of  individual releases, such as velocity, progress metrics, quality metrics,  post-deployment user satisfaction, or Agile software development costs.  Thus, until DHS-level oversight bodies review key Agile performance and  cost metrics and use them to inform management oversight decisions, the  oversight bodies will be limited in their ability to obtain early indicators of  any issues with the program, and to call for course correction, if needed.", "Recently, the TIM program also began measuring user satisfaction.  Specifically, in April 2017, the DHS Acting Under Secretary for  Management directed TSA\u2019s Operational Test Agent to implement a  continuous evaluation dashboard based on the results from the program\u2019s  third Agile release by the end of June 2017. This dashboard was to  measure, among other things, post-deployment user satisfaction. TSA  subsequently implemented the continuous evaluation dashboard in June  2017.", "Table 4 summarizes the extent to which performance metrics are  reviewed by various oversight bodies."], "subsections": []}, {"section_title": "TSA and DHS Do Not Always Rely on Complete and Accurate TIM Performance Data", "paragraphs": ["According to leading practices, effective program oversight includes  relying on complete and accurate data to review program performance  against stated expectations. Complete and accurate data allow oversight  bodies to have transparency into the performance of programs and helps  them identify when course correction is needed.", "However, TIM\u2019s reported performance data were not always complete  and accurate. Specifically, when reporting on the velocity (i.e., total  number of story points completed per sprint and/or release across the  development teams) of TIM\u2019s first release after it was deployed, program  officials inconsistently reported velocity among the program\u2019s  performance reports, thus calling into question the accuracy and  completeness of the information. Since the data were being reported on a  completed release, the velocity should have been reported as one  consistent number that did not change. According to program officials, the  reason for inconsistent reporting was that, despite best practices, the  program\u2019s methodology for measuring velocity was not consistent and  was calculated differently each time. For example, table 5 shows three  different numbers that were to represent the collective velocity across the  development teams, and that officials reported to program management  after the deployment of the first software release.", "While there was less variation in the velocity data reported after the  second software release was deployed, discrepancies were still present.  For example, table 6 shows the different numbers that officials reported to  TIM program management after the deployment of the second software  release.", "Program officials stated that the reason for the inconsistencies in reported  velocity data was that during the first release they were still in the process  of adapting Agile and were working to determine how best to calculate  velocity. However, as shown in table 6 inconsistent data continued to  occur beyond that first release.", "These inconsistencies in reported data call into question the  completeness and accuracy of the velocity numbers reported, and the  potential impact on oversight bodies\u2019 ability to hold the program  accountable. For example, velocity is most useful when tracked over time  to ensure consistent performance and for forecasting how quickly  development teams can work through the items in a backlog. However,  without a complete and accurate velocity number from each release, it is  difficult for oversight bodies to ensure the program is producing work at  an acceptable pace to enable the program to meet its cost, schedule, and  performance targets.", "In addition, the program had been reporting inaccurate unit test coverage  data using a manual measurement approach. Specifically, from  December 2016 to March 2017, program officials were reporting that, for  each release, they tested every line of code, based on a manual estimate  (i.e., 100 percent). However, testing each line of code manually is  unrealistic because with manual tests, it is difficult to determine which  function, line of code, or logic decision is executed, and which is not. As  such, program officials were reporting that they were testing every line of  code, even though they were unable to confirm that they were actually  doing so, thus calling into question the reliability and accuracy of the data  reported.", "In response to our concerns, program officials acknowledged that they  could not confirm whether they had tested every line of code. Accordingly,  program officials stopped estimating this metric manually and stated that  they planned to begin measuring unit test coverage again once lines of  code could be tracked using automated tools. As previously discussed,  program officials stated that the testing and deployment tools are not  expected to be implemented until the new development, testing, and  production environments are set up. However, until the program has  complete and accurate unit test code coverage data, program officials will  not know if portions of its code are going untested, which could lead to  undetected issues and impact the quality of the product."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["TSA\u2019s TIM program has taken notable steps to address several of the  major issues it faced during prior system development and deployment  efforts, such as implementing system fixes to address critical  performance and usability issues found in the maritime segment.  Nonetheless, a number of significant challenges have not been fully  addressed. In particular, until the TIM program establishes specific time  frames for determining key implementation details, ensures its schedule  provides planned completion dates based on realistic estimates, and  establishes new time frames for implementing the actions identified in the  strategy, it is at significant risk of repeating past mistakes and  experiencing the same pitfalls as it did during its initial implementation  attempts. An indication of concern is that the program is currently  experiencing a delay of at least 6 months in the rebaselined schedule for  delivering TSA Pre\uf0fc\u00ae capabilities.", "While the program has also taken certain steps to successfully make the  transition from a waterfall development approach to Agile software  development\u2014a substantial and complex effort\u2014TIM has not defined key  roles and responsibilities, prioritized features and user stories, or  implemented automated capabilities that are essential to ensuring  effective adoption of Agile. The gaps we identified with the program\u2019s  implementation of Agile are concerning given that it did not follow key IT  acquisition best practices when using its waterfall development approach,  in which the program spent approximately 8 years and over $280 million  on a system that TSA has determined it needs to replace. While selected  corrective actions have been taken, until the TIM program is implemented  in accordance with leading practices, the program will be putting at risk its  ability to deliver a quality system that strengthens and enhances the  sophistication of TSA\u2019s security threat assessment and credentialing  programs.", "In addition, while TSA and DHS have implemented certain practices for  overseeing and governing the program, the lack of other practices has  impeded their oversight effectiveness, including the lack of thresholds or  targets for acceptable performance levels, the lack of reporting on Agile- related cost metrics, and inconsistent measuring and reporting of program  velocity and unit test coverage for software releases. These gaps limit the  ability of DHS oversight bodies to obtain early indicators of any issues  with the program, and to call for course corrections, if needed.", "Further, until DHS leadership reaches consensus on needed oversight  and governance changes related to Agile programs, and then documents  and implements associated changes to align oversight reviews with the  timing of Agile software releases, the department will not be well  positioned to hold the program accountable. Moreover, until the Office of  the Chief Technology Officer completes guidance for Agile programs to  use for collecting and reporting on performance metrics, and DHS-level  oversight bodies require the TIM program to report on key Agile  performance and cost metrics and use them to inform management  oversight decisions, the department will also be limited in its ability to hold  the TIM program accountable and ensure that it is meeting its cost,  schedule, and performance targets."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 14 recommendations to DHS:  The TSA Administrator should ensure that the TIM program management  office establishes and implements specific time frames for determining  key strategic implementation details, including how the program will  transition from the current state to the final TIM state. (Recommendation  1)", "The TSA Administrator should ensure that the TIM program management  office establishes a schedule that provides planned completion dates  based on realistic estimates of how long it will take to deliver capabilities.  (Recommendation 2)", "The TSA Administrator should ensure that the TIM program management  office establishes new time frames for implementing the actions identified  in the organizational change management strategy and effectively  executes against these time frames. (Recommendation 3)", "The TSA Administrator should ensure that the TIM program management  office defines and documents the roles and responsibilities among  product owners, the solution team, and any other relevant stakeholders  for prioritizing and approving Agile software development work.  (Recommendation 4)", "The TSA Administrator should ensure that the TIM program management  office establishes specific prioritization levels for current and future  features and user stories. (Recommendation 5)", "The TSA Administrator should ensure that the TIM program management  office implements automated Agile management testing and deployment  tools, as soon as possible. (Recommendation 6)", "The TSA Administrator should ensure that the TIM program management  office updates the Systems Engineering Life Cycle Tailoring Plan to  reflect the current governance framework and milestone review  processes. (Recommendation 7)", "The TSA Administrator should ensure that the TIM program management  office establishes thresholds or targets for acceptable performance-levels.  (Recommendation 8)", "The TSA Administrator should ensure that the TIM program management  office begins collecting and reporting on Agile-related cost metrics.  (Recommendation 9)", "The TSA Administrator should ensure that the TIM program management  office ensures that program velocity is measured and reported  consistently. (Recommendation 10)", "The TSA Administrator should ensure that the TIM program management  office ensures that unit test coverage for software releases is measured  and reported accurately. (Recommendation 11)", "The Secretary of Homeland Security should direct the Under Secretary  for Management to ensure that appropriate DHS leadership reaches  consensus on needed oversight and governance changes related to the  frequency of reviewing Agile programs, and then documents and  implements associated changes. (Recommendation 12)", "The Secretary of Homeland Security should direct the Under Secretary  for Management to ensure that the Office of the Chief Technology Officer  completes guidance for Agile programs to use for collecting and reporting  on performance metrics. (Recommendation 13)", "The Secretary of Homeland Security should direct the Under Secretary  for Management to ensure that DHS-level oversight bodies review key  Agile performance and cost metrics for the TIM program and use them to  inform management oversight decisions. (Recommendation 14)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DHS provided written comments on a draft of this report, which are  reprinted in appendix II. In its comments, the department concurred with  all 14 of our recommendations and described actions it has planned or  taken to address them. For example, with regard to recommendation 6,  which calls for DHS to implement automated Agile management testing  and deployment tools, the department stated that TSA plans to implement  such tools by June 30, 2018. Additionally, for recommendation 14, the  department stated that DHS intends to ensure that oversight bodies  review key Agile performance and cost metrics for the TIM program by  June 30, 2018. If implemented effectively, these actions should address  the weaknesses we identified.", "The department also described recent actions that it and TSA had taken  to address three of the recommendations, and requested that we  consider these recommendations resolved. Specifically, in response to  recommendation 9, calling for TSA to ensure that the TIM program  management office begins collecting and reporting on Agile-related cost  metrics, the department stated that the program is now reporting these  metrics on a monthly basis. In response to recommendation 10, calling for  TSA to ensure that the program\u2019s velocity is measured and reported  consistently, the department stated that velocity is now being reported  consistently and in accordance with DHS guidelines. Further, in response  to recommendation 13, which calls for DHS to complete guidance for  Agile programs to use for collecting and reporting on performance  metrics, the department stated that the guidance had recently been  published and provided to us. However, to date, we have received only  draft versions of the guidance. We will work with the department to obtain  finalized documentation related to the three recommendations, to  determine if the recent actions fully address the recommendations.", "In addition to the aforementioned comments, we received technical  comments from DHS and TSA officials, which we incorporated, as  appropriate.", "We are sending copies of this report to the Secretary of Homeland  Security and interested congressional committees. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) describe the Transportation Security  Administration\u2019s (TSA) past implementation efforts for the Technology  Infrastructure Modernization (TIM) program and its new implementation  strategy; (2) determine the extent to which TSA\u2019s new strategy for the  program addresses the challenges encountered during earlier  implementation attempts; (3) determine the extent to which TSA has  implemented selected key practices for transitioning to an Agile software  development framework for the program; and (4) determine the extent to  which the TSA and the Department of Homeland Security (DHS) are  effectively overseeing and governing the TIM program to ensure that it is  meeting cost, schedule, and performance requirements.", "To address our first objective, we reviewed program documentation, such  as initial and current acquisition program baselines, initial and current life- cycle cost estimates, acquisition decision memorandums, and program  plans documenting a new strategy for implementing the program. We  used the information in this documentation to summarize the program\u2019s  earlier attempts to implement TIM capabilities and its new implementation  strategy for delivering the program, including estimated costs, schedule,  and key decisions made. We also interviewed TSA officials, including the  TIM Director and Deputy Director, on the status of TIM program office  efforts.", "To determine the extent to which the TIM program\u2019s new strategy  addresses the challenges encountered during earlier implementation  attempts, we reviewed documentation on the challenges the TIM program  faced when it breached cost and schedule thresholds and experienced  system performance issues, such as those described in initial operational  test reports, the breach remediation plan, and the results of a technical  evaluation of program challenges. We synthesized the information in  these documents to identify a consolidated list of key challenges the  program had faced. We did not include challenges that were already  being evaluated as part of other objectives, such as the use of the  waterfall software development approach. We then reviewed  documentation on the program\u2019s new strategy, such as plans  documenting the new strategy, follow-on operational test reports, program  schedules, program status reports, and identified risks. We assessed the  extent to which the new strategy outlined in these documents addressed  the prior challenges by comparing them against criteria identified in  leading practices and guidance, such as DHS\u2019s Systems Engineering  Lifecycle Guide and the Software Engineering Institute\u2019s Capability  Maturity Model\u00ae Integration for Development. In addition, we conducted  a site visit at the TSA Adjudication Center in Reston, Virginia. During this  site visit, we observed demonstrations of the current commercial-off-the- shelf system and legacy systems for TSA Pre\uf0fc\u00ae and Aviation Workers,  and we interviewed adjudicators and supervisors on current security  threat assessment processes and limitations. Further, we interviewed  TSA officials, including the TIM Director and Deputy Director, on the  program office\u2019s efforts to address prior challenges.", "To determine the extent to which the program has implemented selected  key practices for transitioning to an Agile software development  framework, we identified leading practices and guidance outlined in the  following sources:", "GAO, Software Development: Effective Practices and Federal  Challenges in Applying Agile Methods", "Software Engineering Institute, Agile Readiness and Fit", "TechFAR handbook", "TSA Agile Scrum guidance", "CMMI\u00ae for Development, version 1.3", "Software Engineering Institute, Agile Metrics  After reviewing the sources listed, in consultation with our internal expert,  we grouped practices that were identified as being critical to establish  when transitioning to an Agile software development framework, and  selected the practices that were most relevant based on the status of the  program\u2019s transition and we discussed the practice areas with TSA  officials. The practices included:  full support from leadership to adopt Agile processes, enhancing Agile knowledge, ensuring product owners are engaged with the development teams  and have clearly defined roles, establishing a clear product vision, prioritized backlogs of requirements, and  implementing automated tools to enable rapid system development  and deployment.", "We reviewed program management documentation against these  practices, such as Agile training records, Agile contracts, program  roadmaps, backlogs, test plans, Agile release artifacts, program status  reports, and identified risks. Additionally, we observed Agile release and  sprint development activities at TSA facilities in Annapolis Junction,  Maryland, and at a contractor\u2019s facilities in Beltsville, Maryland, and we  observed a demonstration of how user stories map from high-level  capabilities and tracked through development and testing.", "We also interviewed TSA officials, including the TIM Director and Deputy  Director and the five TIM product owners, on their efforts to transition the  program to an Agile software development framework. Further, we  interviewed DHS officials, including the Chief Technology Officer, on their  efforts to conduct an Agile pilot to assist programs like TIM in adopting  Agile software development processes. We assessed the evidence  against leading practices to determine the extent to which TSA met the  practices.", "To determine the extent to which TSA and DHS are effectively overseeing  and governing the program to ensure that it is meeting cost, schedule,  and performance requirements, we identified leading practices and  guidance outlined in the following sources:", "TSA Agile Scrum guidance", "CMMI for Development, version 1.3", "Software Engineering Institute, Agile Metrics  After reviewing the sources listed, we grouped practices related to  oversight and governance for programs using Agile software development  into four key practice areas and we discussed the practices with DHS and  TSA officials. These areas included:", "Document relevant governance and oversight policies and  procedures.", "Monitor program performance and progress.", "Rely on complete and accurate data to review performance against  expectations.", "Ensure that corrective actions are identified and tracked until the  desired outcomes are achieved.", "To assess the extent that TSA and DHS had addressed these key  practices, we reviewed the most current program management and  governance documentation as of April 2017. Specifically, we analyzed  documentation on program management processes, such as TIM\u2019s  Systems Engineering Life Cycle Tailoring Plan, TIM Agile and Technical  Strategy, TIM Agile software development contract, and draft DHS Agile  Acquisition Program Delivery Metrics Playbook; and artifacts from TIM\u2019s  program execution and review, such as Agile release artifacts, program  status reports, contractor status reports, program schedules, life-cycle  cost estimates, risk registers, TSA Executive Steering Committee  reviews, DHS program health assessments, DHS Agile pilot integrated  product team meetings, DHS Office of the Chief Technology Officer Agile  pilot reviews, and DHS Acquisition Review Board reviews.", "Additionally, we interviewed TSA officials, including the TIM Director and  Deputy Director, on their efforts to oversee TIM\u2019s development. Further,  we interviewed DHS officials, including the Chief Technology Officer, on  their efforts to oversee the program\u2019s Agile software development  activities. We compared this evidence against leading practices to  determine the extent to which TSA and DHS met the practices.", "To assess the reliability of the data that we used to support the findings in  this report, we reviewed relevant program documentation to substantiate  evidence obtained through interviews with agency officials. We  determined that the data used in this report were sufficiently reliable for  the purposes of our reporting objectives. We made appropriate attribution  indicating the sources of the data.", "We conducted this performance audit from September 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following staff made key  contributions to this report: Shannin G. O\u2019Neill (Assistant Director),  Jeanne Sung (Analyst in Charge), Jennifer Beddor, Rebecca Eyler, Bruce  Rackliff, and Dwayne Staten."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-452T", "url": "https://www.gao.gov/products/GAO-18-452T", "title": "Freedom of Information Act: Agencies Are Implementing Requirements but Need to Take Additional Actions", "published_date": "2018-03-13T00:00:00", "released_date": "2018-03-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FOIA requires federal agencies to provide the public with access to government records and information based on the principles of openness and accountability in government. Each year, individuals and entities file hundreds of thousands of FOIA requests for information on numerous topics that contribute to the understanding of government actions. In the last 9 fiscal years, federal agencies subject to FOIA have received about 6 million requests.", "GAO was asked to summarize its draft report on federal agencies' compliance with FOIA requirements. GAO's objectives, among others, were to (1) determine the extent to which agencies have implemented selected FOIA requirements; (2) describe the methods established by agencies to reduce backlogged requests and the effectiveness of those methods; and (3) identify any statutory exemptions that have been used by agencies as the basis for withholding (redacting) information from requesters.", "To do so, GAO selected 18 agencies based on their size and other factors and assessed their policies against six FOIA requirements. GAO also reviewed the agencies' backlog reduction plans and developed a catalog of statutes that agencies have used to withhold information."]}, {"section_title": "What GAO Found", "paragraphs": ["In its draft report, GAO determined that all 18 selected agencies had implemented three of six Freedom of Information Act (FOIA) requirements reviewed. Specifically, all agencies had updated response letters to inform requesters of the right to seek assistance from FOIA public liaisons, implemented request tracking systems, and provided training to FOIA personnel. For the three additional requirements, 15 agencies had provided online access to government information, such as frequently requested records, 12 agencies had designated chief FOIA officers, and 5 agencies had published and updated their FOIA regulations to inform the public of their operations. Until these agencies address all of the requirements, they increase the risk that the public will lack information that ensures transparency and accountability in government operations.", "The 18 selected agencies had backlogs of varying sizes, with 4 agencies having backlogs of 1,000 or more requests during fiscal years 2012 through 2016. These 4 agencies reported using best practices identified by the Department of Justice, such as routinely reviewing metrics, as well as other methods, to help reduce their backlogs. Nevertheless, these agencies' backlogs fluctuated over the 5-year period (see figure). The 4 agencies with the largest backlogs attributed challenges in reducing their backlogs to factors such as increases in the number and complexity of FOIA requests. However, these agencies lacked plans that described how they intend to implement best practices to reduce backlogs. Until agencies develop such plans, they will likely continue to struggle to reduce backlogs to a manageable level.", "Agencies used various types of statutory exemptions to withhold information when processing FOIA requests during fiscal years 2010 to 2016. The majority of these fell into the following categories: personally identifiable information, national security, law enforcement and investigations, and confidential and commercial business information."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO's draft report contains recommendations to selected agencies to post records online, designate chief FOIA officers, update regulations consistent with requirements, and develop plans to reduce backlogs."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to participate in today\u2019s hearing on the  Freedom of Information Act (FOIA). As you know, FOIA was enacted into  law more than 50 years ago, requires federal agencies to provide the  public with access to government records and information based on the  principles of openness and accountability in government. Each year,  individuals and entities file hundreds of thousands of FOIA requests for  information on numerous topics that contribute to the understanding of  government actions. In the last 9 fiscal years, agencies subject to FOIA  have reported receiving about 6 million requests.", "Given the significance of FOIA, Congress has had a longstanding interest  in the manner in which the act is being implemented, including the extent  to which federal agencies respond to FOIA requests, the timeliness of the  responses, and the number and nature of exemptions claimed by  agencies in withholding requested information. Since 1978, we have  issued a number of reports that have addressed various aspects of  federal agencies\u2019 efforts to implement the act.", "As requested, this statement summarizes key preliminary findings based  on our draft report reviewing, among other things, federal agencies\u2019  compliance with FOIA requirements, backlogs, and use of exemptions.  Specifically, this statement (1) determines the extent to which agencies  have implemented selected FOIA requirements; (2) describes the  methods established by agencies to reduce backlogged requests and the  effectiveness of those methods; (3) identifies any statutory (b)(3)  exemptions that have been used by agencies as the basis for withholding  (redacting) information. The draft report on FOIA compliance is currently  out for comment with selected agencies. Accordingly, the draft report is  subject to revision prior to final issuance, expected in April 2018.", "In our FOIA draft report, for our first and second objectives, we reviewed  the FOIA-related actions of a nonprobability sample of federal agencies.  We identified these agencies by considering the following factors: the  number of FOIA requests received, the sizes of FOIA backlogs, and the  average time for processing FOIA requests for fiscal years 2012 through  2016. We also chose the agencies to represent a range of sizes (by  number of employees)\u2014large (10,000 or more), medium (1,000 to 9,999),  and small (999 or fewer). Based on these criteria, we selected 18  agencies for our review.", "For the first objective, we reviewed six FOIA requirements outlined in the  FOIA Improvement Act of 2016 and the OPEN Government Act of 2007.  These specific requirements call for agencies to (1) update response  letters, (2) implement tracking systems, (3) provide FOIA training, (4),  provide required records online, (5) designate chief FOIA officers, and (6)  update and publish timely and comprehensive regulations. We then  obtained and reviewed available documentation from the 18 selected  agencies describing their decisions and actions related to the requirements. We also interviewed relevant officials at each selected  agency, the Office of Management and Budget (OMB) and the  Department of Justice\u2019s (Justice) Office of Information Policy (OIP) to  discuss the status of efforts to develop a government-wide FOIA request  portal, as required by the 2016 amendments to FOIA. The findings related  to our first objective are not generalizable to the 117 FOIA reporting  agencies.", "For the second objective, we first reviewed requirements for agencies to  produce backlog reduction plans, as outlined in Justice\u2019s annual chief  FOIA officer report guidance and OMB\u2019s Open Government Directive of  2009. We then determined whether agencies had developed such plans  as required, by interviewing relevant agency personnel and reviewing  existing plans. Further, we analyzed data on Justice\u2019s FOIA.gov website  to identify any instances of a reported reduction in an agency\u2019s FOIA  backlog when the agency had a backlog reduction plan in place.", "To address the third objective, we developed a catalog of (b)(3) statutes  that agencies previously have used to withhold information in FOIA  records under the (b)(3) exemption. To develop the catalog, we compiled  a list of (b)(3) exemptions, along with the number of times each  exemption was used by at least 1 of 117 agencies for which annual FOIA  report data covering fiscal years 2010 through 2016 were available on  Justice\u2019s FOIA.gov website and could use.", "In addition, this statement summarizes our findings based on an  additional report, being issued today, which provides information  regarding federal court decisions that pertain to the improper withholding  of FOIA records. For this report we reviewed Justice\u2019s annual FOIA  Litigation and Compliance reports for calendar years 2008 through 2016  to identify instances in which the department had notified OSC of a  lawsuit regarding improperly withheld FOIA records. We focused our  review on these specific years because the OPEN Government Act of  2007 amended FOIA to require Justice to report on court findings.  Justice began including this information in its 2008 FOIA Litigation and  Compliance reports, and at the time of our review, had completed reports  through calendar year 2016.", "The work upon which this testimony is based is being conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The Freedom of Information Act establishes a legal right of access to  government information on the basis of the principles of openness and  accountability in government. Before FOIA\u2019s enactment in 1966, an  individual seeking access to federal records faced the burden of  establishing a \u201cneed to know\u201d before being granted the right to examine a  federal record. FOIA established a \u201cright to know\u201d standard, under which  an organization or person could receive access to information held by a  federal agency without demonstrating a need or reason. The \u201cright to  know\u201d standard shifted the burden of proof from the individual to a  government agency and required the agency to provide proper  justification when denying a request for access to a record.", "Any person, defined broadly to include attorneys filing on behalf of an  individual, corporations, or organizations, can file a FOIA request. For  example, an attorney can request labor-related workers\u2019 compensation  files on behalf of his or her client, and a commercial requester, such as a  data broker who files a request on behalf of another person, may request  a copy of a government contract. In response, an agency is required to  provide the relevant record(s) in any readily producible form or format  specified by the requester, unless the record falls within a permitted  exemption that provides limitations on the disclosure of information."], "subsections": [{"section_title": "FOIA Amendments and Guidance Call for Improvements in How Agencies Process Requests", "paragraphs": ["Various amendments have been enacted and guidance issued to help  improve agencies\u2019 processing of FOIA requests, including:", "The Electronic Freedom of Information Act Amendments of 1996 (e- FOIA amendments) strengthened the requirement that federal  agencies respond to a request in a timely manner and reduce their  backlogged requests. The amendments, among other things, made  a number of procedural changes, including allowing a requester to  limit the scope of a request so that it could be processed more quickly  and requiring agencies to determine within 20 working days whether a  request would be fulfilled. This was an increase from the previously  established time frame of 10 business days.", "The amendments also authorized agencies to multi-track requests\u2014 that is, to process simple and complex requests concurrently on  separate tracks to facilitate responding to a relatively simple request  more quickly. In addition, the amendment encouraged online, public  access to government information by requiring agencies to make  specific types of records available in electronic form.", "Executive Order 13392, issued by the President in 2005, directed  each agency to designate a senior official as its chief FOIA officer.  This official was to be responsible for ensuring agency-wide  compliance with the act by monitoring implementation throughout the  agency and recommending changes in policies, practices, staffing,  and funding, as needed. The chief FOIA officer was directed to review  and report on the agency\u2019s performance in implementing FOIA to  agency heads and to Justice on an annual basis. (These are referred  to as chief FOIA officer reports.)", "The OPEN Government Act, which was enacted in 2007, made the 2005  executive order\u2019s requirement for agencies to have a chief FOIA officer a  statutory requirement. It also required agencies to submit an annual  report to Justice outlining their administration of FOIA, including  additional statistics on timeliness. Specifically, the act called for agencies  to adequately track their agency\u2019s FOIA request processing information  throughout the reporting year and then produce reports on that topic to  comply with FOIA reporting requirements and Justice guidance for  reporting.", "The FOIA Improvement Act of 2016 addressed procedural issues,  including requiring that agencies: (1) make records available in an  electronic format if they have been requested three or more times; (2)  notify requesters that they have a minimum of 90 days to file an  administrative appeal, and (3) provide dispute resolution services at  various times throughout the FOIA process. This act also created  more duties for chief FOIA officers, including requiring them to offer  training to agency staff regarding FOIA responsibilities. The act also  revised and added new obligations for OGIS, and created the Chief  FOIA Officers Council to assist in compliance and efficiency. Further,  the act required OMB, in consultation with Justice, to create a  consolidated online FOIA request portal that allows the public to  submit a request to any agency through a single website."], "subsections": []}, {"section_title": "FOIA Authorizes Agencies to Use Other Federal Statutes to Withhold Information Prohibited from Disclosure", "paragraphs": ["In responding to requests, FOIA authorizes agencies to utilize one of nine  exemptions to withhold portions of records, or the entire record. Agencies  may use an exemption when it has been determined that disclosure of the  requested information would harm an interest related to certain protected  areas. These nine exemptions can be applied by agencies to withhold  various types of information, such as information concerning foreign  relations, trade secrets, and matters of personal privacy.", "One such exemption, the statutory (b)(3) exemption, specifically  authorizes withholding information under FOIA on the basis of a law  which:  requires that matters be withheld from the public in such a manner as  to leave no discretion on the issue; or establishes particular criteria for withholding or refers to particular  types of matters to be withheld; and  if enacted after October 28, 2009, specifically refers to section  552(b)(3) of title 5, United States Code.", "To account for agencies use of the statutory (b)(3) exemptions, FOIA  requires each agency to submit, in its annual report to Justice, a complete  listing of all statutes that the agency relied on to withhold information  under exemption (b)(3). The act also requires that the agency describe for  each statute identified in its report (1) the number of occasions on which  each statute was relied upon; (2) a description of whether a court has  upheld the decision of the agency to withhold information under each  such statute; and (3) a concise description of any information withheld.   Further, to provide an overall summary of the statutory (b)(3) exemptions  used by agencies in a fiscal year, Justice produces consolidated annual  reports that list the statutes used by agencies in conjunction with (b)(3)."], "subsections": []}, {"section_title": "Processing a FOIA Request", "paragraphs": ["As previously noted, agencies are generally required by the e-FOIA  amendments of 1996 to respond to a FOIA request within 20 working  days. Once received, the request is to be processed through multiple  phases, which include assigning a tracking number, searching for  responsive records, and releasing the records response to the requester.", "Also, as relevant, FOIA allows a requester to challenge an agency\u2019s final  decision on a request through an administrative appeal or a lawsuit.  Specifically, a requester has the right to file an administrative appeal if he  or she disagrees with the agency\u2019s decision on their request. Agencies  have 20 working days to respond to an administrative appeal.", "Figure 1 provides a simplified overview of the FOIA request and appeals  process.", "In a typical agency, as indicated, during the intake phase, a request is  logged into the agency\u2019s FOIA tracking system, and a tracking number is  assigned. The request is then reviewed by FOIA staff to determine its  scope and level of complexity. The agency then typically sends a letter  or email to the requester acknowledging receipt of the request, with a  unique tracking number that the requester can use to check the status of  the request.", "Next, FOIA staff (non-custodian) begin the search to retrieve the  responsive records by routing the request to the appropriate program  office(s).This step may include requesting that the custodian (owner) of  the record search and review paper and electronic records from multiple  locations and program offices.", "Agency staff then process the responsive records, which includes  determining whether a portion or all of any record should be withheld  based on FOIA\u2019s exemptions. If a portion or all of any record is the  responsibility of another agency, FOIA staff may consult with the other  agency or may send (\u201crefer\u201d) the document(s) to that other agency for  processing. After processing and redaction, a request is reviewed for  errors and to ensure quality. The documents are then released to the  requester, either electronically or by regular mail.", "In addition, FOIA allows requesters to sue an agency in federal court if  the agency does not respond to a request for information within the  statutory time frames or if the requesters believe they are entitled to  information that is being withheld by the agency. Further, the act requires  the Office of Special Counsel (OSC) to initiate a proceeding to determine  whether disciplinary action is warranted against agency personnel in  cases involving lawsuits where a court has found, among other things that  agency personnel may have acted arbitrarily or capriciously in responding  to a FOIA request. The act requires Justice to notify OSC when a  lawsuit meets this requirement."], "subsections": []}, {"section_title": "FOIA Oversight and Implementation", "paragraphs": ["Responsibility for the oversight of FOIA implementation is spread across  several federal offices and other entities. These include Justice\u2019s OIP,  NARA\u2019s OGIS, and the Chief FOIA Officers Council. These oversight  agencies and the council have taken steps to assist agencies to address  the provisions of FOIA.", "Justice\u2019s OIP is responsible for encouraging agencies\u2019 compliance with  FOIA and overseeing their implementation of the act. In this regard, the  office, among other things, provides guidance, compiles information on  FOIA compliance, provides FOIA training, and prepares annual summary  reports on agencies\u2019 FOIA processing and litigation activities. The office  also offers FOIA counseling services to government staff and the public.", "Issuing guidance. OIP has developed guidance, available on its  website, to assist federal agencies by instructing them in how to  ensure timely determinations on requests, expedite the processing of  requests, and reduce backlogs. The guidance also informs agencies  on what should be contained in their annual FOIA reports to Justice\u2019s  Attorney General.", "The office also has documented ways for federal agencies to address  backlog requests. In March 2009 the Attorney General issued  guidance and related policies to encourage agencies to reduce their  backlogs of FOIA requests. In addition, in December 2009, OMB  issued a memorandum on the OPEN Government Act, which called  for a reduction in backlogs and the publishing of plans to reduce  backlogs. Further, in August 2014, OIP held a best practices  workshop and issued guidance to agencies on reducing FOIA  backlogs and improving timeliness of agencies\u2019 responses to FOIA  requests. The OIP guidance instructed agencies to obtain leadership  support, routinely review FOIA processing metrics, and set up staff  training on FOIA.", "Overseeing agencies\u2019 compliance. OIP collects information on  compliance with the act by reviewing agencies\u2019 annual FOIA reports  and chief FOIA officer reports. These reports describe the number of  FOIA requests received and processed in a fiscal year, as well as the  total costs associated with processing and litigating requests.", "Providing training. The office offers an annual training class that  provides a basic overview of the act, as well as hands-on courses  about the procedural requirements involved in processing a request  from start to finish. In addition, it offers a seminar outlining successful  litigation strategies for attorneys who handle FOIA cases.", "Preparing administrative and legal annual reports. OIP prepares two  major reports yearly\u2014one related to agencies\u2019 annual FOIA  processing and one related to agencies\u2019 FOIA litigation and  compliance. The first report, compiled from agencies\u2019 annual FOIA  reports, contains statistics on the number of requests received and  processed by each agency, the time taken to respond, and the  outcome of each request, as well as other statistics on FOIA  administration such as number of backlogs, and the use of  exemptions to withhold information from a requestor. The second  report describes Justice\u2019s efforts to encourage compliance with the  act and provides a listing of all FOIA lawsuits filed or determined in  that year, the exemptions and/or dispositions involved in each case,  and any court-assessed costs, fees, and penalties.", "NARA\u2019s OGIS was established by the OPEN Government Act of 2007 to  oversee and assist agencies in implementing FOIA. OGIS\u2019s  responsibilities include reviewing agency policies and procedures,  reviewing agency compliance, recommending policy changes, and  offering mediation services.", "The 2016 FOIA amendments required agencies to update response  letters to FOIA requesters to include information concerning the roles of  OGIS and agency\u2019s FOIA public liaisons. As such, OGIS and Justice  worked together to develop a response letter template that includes the  required language for agency letters. In addition, OGIS, charged with  reviewing agency\u2019s compliance with FOIA, launched in 2014 a FOIA  compliance program. OGIS also developed a FOIA compliance self- assessment program, which is intended to help OGIS look for potential  compliance issues across federal agencies.", "The Chief FOIA Officers Council is co-chaired by the Director of OIP  and the Director of OGIS. Council members include senior  representatives from OMB, OIP, and OGIS, together with the chief FOIA  officers of each agency, among others. The council\u2019s FOIA-related  responsibilities include: developing recommendations for increasing compliance and disseminating information about agency experiences, ideas, best  practices, and innovative approaches;  identifying, developing, and coordinating initiatives to increase  transparency and compliance; and promoting the development and use of common performance  measures for agency compliance. Selected Agencies Collect and  Maintain Records That Can Be Subject to FOIA Requests.", "The 18 agencies selected for our review are charged with a variety of  operations that affect many aspects of federal service to the public. Thus,  by the nature of their missions and operations, the agencies have  responsibility for vast and varied amounts of information that can be  subject to a FOIA request. For example, the Department of Homeland  Security\u2019s (DHS) mission is to protect the American people and the  United States homeland. As such, the department maintains information  covering, among other things, immigration, border crossings, and law  enforcement. As another example, the Department of the Interior\u2019s (DOI)  mission includes protecting and managing the Nation\u2019s natural resources  and, thus, providing scientific information about those resources. Table 1  provides details on each of the 18 selected agencies\u2019 mission and the  types of information they maintain.", "The 18 selected agencies reported that they received and processed  more than 2 million FOIA requests from fiscal years 2012 through 2016.  Over this 5-year period, the number of reported requests received  fluctuated among the agencies. In this regard, some agencies saw a  continual rise in the number of requests, while other agencies  experienced an increase or decrease from year to year. For example,  from fiscal years 2012 through 2014, DHS saw an increase in the number  of requests received (from 190,589 to 291,242), but in fiscal year 2015,  saw the number of requests received decrease to 281,138. Subsequently,  in fiscal year 2016, the department experienced an increase to 325,780  requests received.", "In addition, from fiscal years 2012 through 2015, the reported numbers of  requests processed by the selected agencies showed a relatively steady  increase. However, in fiscal year 2016, the reported number of requests  processed by these agencies declined. Figure 2 provides a comparison of  the total number of requests received and processed in this 5-year period."], "subsections": []}]}, {"section_title": "Selected Agencies Implemented the Majority of FOIA Requirements Reviewed", "paragraphs": ["Among other things, the FOIA Improvement Act of 2016 and the OPEN  Government Act of 2007 calls for agencies to (1) update response  letters, (2) implement tracking systems, (3) provide FOIA training, (4),  provide required records online, (5) designate chief FOIA officers, and (6)  update and publish timely and comprehensive regulations. As part of our  ongoing work, we determined that the 18 selected agencies included in  our review had implemented the majority of the six FOIA requirements  evaluated. Specifically,", "18 agencies updated response letters, implemented tracking systems,", "15 agencies provided required records online, and", "12 agencies designated chief FOIA officers.", "However, only 5 of the agencies published and updated their FOIA  regulations in a timely and comprehensive manner. Figure 3 summarizes  the extent to which the 18 agencies implemented the selected FOIA  requirements.", "Beyond these selected agencies, Justice\u2019s OIP and OMB also had taken  steps to develop a government-wide FOIA request portal that is intended  to allow the public to submit a request to any agency from a single  website."], "subsections": [{"section_title": "Selected Agencies Have Updated Their FOIA Response Letters", "paragraphs": ["The 2016 amendments to FOIA required agencies to include specific  information in their responses when making their determinations on  requests. Specifically, agencies must inform requesters that they may  seek assistance from the FOIA Public Liaison,  file an appeal to an adverse determination within a period of time that  is not less than 90 days after the date of such adverse determination;  and  seek dispute resolution services from the FOIA Public Liaison of the  agency or OGIS.", "Among the 18 selected agencies, all had updated their FOIA response  letters to include this required information."], "subsections": []}, {"section_title": "All Selected Agencies Had Implemented FOIA Tracking Systems", "paragraphs": ["Various FOIA amendments and guidance call for agencies to use  automated systems to improve the processing and management of  requests. In particular, the OPEN Government Act of 2007 amended  FOIA to require that federal agencies establish a system to provide  individualized tracking numbers for requests that will take longer than 10  days to process and establish telephone or Internet service to allow  requesters to track the status of their requests.", "Further, the President\u2019s January 2009 Freedom of Information Act  memorandum instructed agencies to use modern technology to inform  citizens about what is known and done by their government. In addition,  FOIA processing systems, like all automated information technology  systems, are to comply with the requirements of Section 508 of the  Rehabilitation Act (as amended). This act requires federal agencies to  make their electronic information accessible to people with disabilities.", "Each of the 18 selected agencies had implemented a system that  provides capabilities for tracking requests received and processed,  including an individualized number for tracking the status of a request.  Specifically,", "Ten agencies used commercial automated systems, (DHS, EEOC,  FDIC, FTC, Justice, NTSB, NASA, Pension Benefit Guaranty  Corporation, and USAID).", "Three agencies developed their own agency systems (State, DOI, and  TVA).", "Five agencies used Microsoft Excel or Word to track requests  (Administrative Conference of the United States, American Battle  Monuments Commission, Broadcasting Board of Governors, OMB,  and U.S. African Development Foundation).", "Further, all of the agencies had established telephone or Internet services  to assist requesters in tracking the status of requests; and they used  modern technology (e.g., mobile applications) to inform citizens about  FOIA. For example, the commercial systems allow requesters to submit a  request and track the status of that request online. In addition, DHS  developed a mobile application that allows FOIA requesters to submit  requests and check the status of existing requests."], "subsections": []}, {"section_title": "All Reviewed Agencies\u2019 Chief FOIA Officers Have Offered FOIA Training", "paragraphs": ["The 2016 FOIA amendments require agencies\u2019 chief FOIA officers to offer  training to agency staff regarding their responsibilities under FOIA. In  addition, Justice\u2019s OIP has advised every agency to make such training  available to all of their FOIA staff at least once each year. The office has  also encouraged agencies to take advantage of FOIA training  opportunities available throughout the government.", "The 18 selected agencies\u2019 chief FOIA officers offered FOIA training  opportunities to staff in fiscal years 2016 and 2017. For example:", "Eleven agencies provided training that gave an introduction and  overview of FOIA (the American Battle Monuments Commission,  EEOC, Justice, FDIC, FTC, NARA, Pension Benefit Guaranty  Corporation, State, TVA, U.S. African Development Foundation, and  USAID).", "Three agencies offered training for their agencies\u2019 new online FOIA  tracking and processing systems (DOI, NTSB, and Pension Benefit  Guaranty Corporation).", "Three agencies provided training on responding to, handling, and  processing FOIA requests (DHS, DOI, and State).", "Three agencies offered training on understanding and applying the  exemptions under FOIA (FDIC, FTC, and U.S. African Development  Foundation).", "Two agencies offered training on the processing of costs and fees  (NASA and TVA)."], "subsections": []}, {"section_title": "The Majority of Selected Agencies Post Required Records Online", "paragraphs": ["Memorandums from both the President and the Attorney General in 2009  highlight the importance of online disclosure of information and further  direct agencies to make information available without a specific FOIA  request. Further, the 2016 FOIA amendments require online access to  government information and require agencies to make information  available to the public in electronic form for up to four categories: agency final opinions and orders, administrative staff manuals of interest to the public, and  frequently requested records.", "While all 18 agencies that we reviewed post records online, only 15 of  them had posted all categories of information, as required by the FOIA  amendments. Specifically, 7 agencies\u2014the American Battle Monuments  Commission, the Pension Benefit Guaranty Corporation, and EEOC,  FDIC, FTC, DOJ, and State\u2014had, as required, made records in all four  categories publicly available online. In addition, 5 agencies that were only  required to publish online records in three of the categories\u2014the  Administrative Conference of the United States, Broadcasting Board of  Governors, DHS, OMB, and USAID\u2014 had done so. Further, 3 agencies  that were only required to publish online records in two of the  categories\u2014U.S. African Development Foundation, NARA, and TVA\u2014 had done so. The remaining 3 agencies\u2014DOI, NASA, and NTSB\u2014had  posted records online for three of four required categories.", "Regarding why the three agencies did not post all of their four required  categories of online records, DOI officials stated that the agency does not  make publically available all FOIA records that have been requested 3 or  more times, as it does not have the time to post all such records that have  been requested. NASA officials explained that, while the agency issues  final opinions, it does not post them online. As for NTSB, while its officials  said they try to post information that is frequently requested, they do not  post the information on a consistent basis  Making the four required categories of information available in electronic  form is an important step in allowing the public to easily access to  government documents. Until these agencies make all required  categories of information available in electronic form, they cannot ensure  that they are providing the required openness in government."], "subsections": []}, {"section_title": "Most Reviewed Agencies Designated a Senior Official as a Chief FOIA Officer", "paragraphs": ["In 2005, the President issued an executive order that established the role  of a Chief FOIA Officer. In 2007, amendments to FOIA required each  agency to designate a chief FOIA officer who shall be a senior official at  the Assistant Secretary or equivalent level.", "Of the 18 selected agencies, 12 agencies have Chief FOIA Officers who  are senior officials at the Assistant Secretary or equivalent level. The  Assistant Secretary level is comparable to senior executive level positions  at levels III, IV, and V. Specifically,", "State has designated its Assistant Secretary of Administration, Bureau", "DOI and NTSB had designated its Chief Information Officers;", "Administrative Conference of the United States, Broadcasting Board  of Governors, FDIC, NARA, and U.S. African Development  Foundation have designated their general counsels; and  Justice, NASA, TVA, and USAID designated their Associate Attorney  General, Associate Administrator for Communications, the Vice  President for Communications, and the Assistant Administrator for the  Bureau of Management, respectively.", "However, 6 agencies \u2014 American Battle Monuments Commission DHS,  EEOC, Pension Benefit Guaranty Corporation, FTC, and OMB \u2014 do not  have chief FOIA officers that are senior officials at the Assistant Secretary  or equivalent level. According to officials from 5 of these agencies, the  agencies all have chief FOIA officers and officials believed they had  designated the appropriate officials. Officials at FTC acknowledged that  the chief FOIA officer position is not designated at a level equivalent to an  Assistant Secretary but a senior position within the agency. However,  while there are chief FOIA officers at these agencies, until the chief FOIA  officers are designated at the Assistant Secretary or equivalent level, they  will lack assurance regarding the necessary authority to make decisions  about agency practices, personnel, and funding."], "subsections": []}, {"section_title": "Most Reviewed Agencies Have Not Updated Regulations as Required to Inform the Public of Their FOIA Operations", "paragraphs": ["FOIA requires federal agencies to publish regulations in the Federal  Register that inform the public of their FOIA operations.   Specifically, in 2016, FOIA was amended to require agencies to update  their regulations regarding their FOIA operations. To assist agencies in  meeting this requirement, OIP created a FOIA regulation template for  agencies to use as they update their regulations. Among other things,  OIP\u2019s guidance encouraged agencies to: describe their dispute resolution processed, describe their administrative appeals process for response letters of notify requesters that they have a minimum of 90 days to file an  inform requesters that the agency may charge fees for requests  determined as \u201cunusual\u201d circumstances ; and update the regulations in a timely manner (i.e., update regulations by  180 days after the enactment of the 2016 FOIA amendment.)", "Five agencies in our review\u2014DHS, DOI, FDIC, FTC, and USAID\u2014 addressed all five requirements in updating their regulations. In addition,  seven agencies addressed four of the five requirements: the  Administrative Conference of the United States, EEOC, Justice, NARA,  NTSB, Pension Benefit Guaranty Corporation, and TVA did not update  their regulations in a timely manner.", "Further, four agencies addressed three or less requirements (U.S. African  Development Foundation, State, NASA, and Broadcasting Board of  Governors) and two agencies (American Battle Monuments Commission  and OMB) did not address any of the requirements. Figure 4 indicates the  extent to which the 18 agencies had addressed the five selected  requirements.", "Agencies that did not address all five requirements provided several  explanations as to why their regulations were not updated as required:", "American Battle Monuments Commission stated that while they  updated their draft regulation in August 2017, it is currently  unpublished due to internal reviews with the General Counsel in  preparation for submission to the Federal Register. No new posting  date has been established. American Battle Monuments Commission  last updated its regulation in February 26, 2003.", "State officials noted that their regulation was updated two months  prior to the new regulation requirements but did not provide a specific  reason for not reissuing its regulation. As such, they explained that  they have a working group reviewing their regulation for updates, with  no timeline identified. State last updated its regulation on April 6,  2016.", "NASA officials did not provide a reason for not updating its regulation  as required. Officials did, however, state that its draft regulation is with  the Office of General Counsel for review. NASA last updated its  regulations on August 11, 2017.", "Broadcasting Board of Governors officials did not provide a reason for  not updating its regulation as required. Officials did, however, note  that the agency is in the process of updating its regulation and  anticipates it will complete this update by the end of 2018. The  Broadcasting Board of Governors last updated its regulation on  February 2, 2002.", "OMB officials did not provide a reason for not updating the agency\u2019s  regulation as required. Officials did, however, state that due to a  change in leadership they do not have a time frame for updating their  regulation. OMB last updated its regulation on May 27, 1998.", "The chief FOIA officer at the U.S. African Development Foundation  stated that, while the agency had updated and submitted their  regulation to be published in December 2016, they were unpublished  due to an error that occurred with the acknowledgement needed to  publish the regulation on the federal register. The regulation was  subsequently published on February 3, 2017. The official further noted  that when the agency responds to FOIA requests it has not charged a  fee for unusual circumstances, and therefore they did not believe they  had to disclose information regarding fees in its regulation.", "Until these six agencies publish updated regulations that address the  necessary requirements, as called for in FOIA and OIP guidance, they  likely will be unable to provide the public with required regulatory and  procedural information to ensure transparency and accountability in the  government."], "subsections": []}, {"section_title": "Justice and OMB Have Taken Steps to Develop an Online FOIA Request Portal", "paragraphs": ["The 2016 FOIA amendments required OMB to work with Justice to build a  consolidated online FOIA request portal. This portal is intended to allow  the public to submit a request to any agency from a single website and  include other tools to improve the public\u2019s access to the benefits of FOIA.  Further, the act required OMB to establish standards for interoperability  between the consolidated portal and agency FOIA systems. The 2016  FOIA amendments did not provide a time to develop the portal and  standards.", "With OMB\u2019s support, Justice developed an initial online portal. Justice\u2019s  OIP officials stated that they expect to update the portal to provide basic  functionality that aligns with requirements of the act, including the ability  to make a FOIA request, and technical processes for interoperability  amongst agencies\u2019 various FOIA systems. According to OIP officials, in  partnership with OMB, OIP was able to identify dedicated funding source  to operate and maintain the portal to ensure its success in the long term,  with major agencies sharing in the costs to operate, maintain, and fund  any future enhancements designed to improve FOIA processes. The first  iteration of the National FOIA portal launched on Justice\u2019s foia.gov  website on March 8, 2018."], "subsections": []}]}, {"section_title": "Agencies Have Methods to Reduce Backlogged Requests, but Their Efforts Have Shown Mixed Results", "paragraphs": ["In our draft report, we determined that the 18 selected agencies in our  review had FOIA request backlogs of varying sizes, ranging from no  backlogged requests at some agencies to 45,000 or more requests at  other agencies. Generally, the agencies with the largest backlogs had  received the most requests. In an effort to aid agencies in reducing their  backlogs, Justice\u2019s OIP identified key practices that agencies can use.  However, while the agencies reported using these practices and other  methods, few of them managed to reduce their backlogs during the period  from fiscal year 2012 through 2016. In particular, of the four agencies with  the largest backlogs, only one\u2014NARA\u2014reduced its backlog. Agencies  attributed their inability to decrease backlogs to the number and  complexity of requests, among other factors. However, agencies also lack  comprehensive plans to implement practices on an ongoing basis."], "subsections": [{"section_title": "Agencies Have FOIA Request Backlogs of Varying Sizes, and Most Increased from Fiscal Year 2012 through 2016", "paragraphs": ["The selected agencies in our review varied considerably in the size of  their FOIA request backlogs. Specifically, from fiscal year 2012 through  2016, of the 18 selected agencies", "10 reported a backlog of 60 or fewer requests, and of these 10  agencies, 6 reported having no backlog in at least 1 year.", "4 agencies had backlog numbers between 61 and 1,000 per year; and", "4 agencies had backlogs of over 1,000 requests per year.", "The four agencies with backlogs of more than 1,000 requests for each  year we examined were Justice, NARA, State and DHS. Table 2 shows  the number requests and the number of backlogged request for the 18  selected agencies during the 5-year period.", "Over the 5-year period, 14 of the 18 selected agencies experienced an  increase in their backlogs in at least 1 year. By contrast, 2 agencies  (Administrative Conference of the United States and the U.S. African  Development Foundation) reported no backlogs, and 3 agencies  (American Battle Monument Commission, NASA and NARA) reported  reducing their backlogs. Further, of the four agencies with the largest  backlogs (DHS, State, Justice, and NARA) only NARA reported a backlog  lower in fiscal year 2016 than in fiscal year 2012. Figure 5 shows the  trends for the four agencies with the largest backlogs, compared with the  rest of the 18 agencies.", "In most cases, agencies with small or no backlogs (60 or fewer) also  received relatively few requests. For example, the Administrative  Conference of the United States and the U.S. African Development  Foundation reported no backlogged requests during any year but also  received fewer than 30 FOIA requests a year. The American Battle  Monuments Commission also received fewer than 30 requests a year and  only reported 1 backlogged request per year in 2 of the 5 years  examined. However, the Pension Benefit Guaranty Corporation and FDIC  received thousands of requests over the 5-year period, but maintained  zero backlogs in a majority of the years examined. PBGC received a total  of 19,120 requests during the 5-year period and only reported a backlog  of 8 requests during one year, fiscal year 2013. FDIC received a total of  3,405 requests during the 5-year period and reported a backlog of 13  requests in fiscal year 2015 and 4 in fiscal year 2016.", "The four agencies with backlogs of 1,000 or more (Justice, NARA, State,  and DHS) received significantly more requests each year. For example,  NARA received between about 12,000 and 50,000 requests each year,  while DHS received from about 190,000 to 325,000 requests. In addition,  the number of requests NARA received in fiscal year 2016 was more than  double the number received in fiscal year 2012. DHS received the most  requests of any agency\u2014a total of 1,320,283 FOIA requests over the 5- year period."], "subsections": []}, {"section_title": "Agencies Identified a Variety of Methods to Reduce Backlogs, but Few Saw Reductions", "paragraphs": ["The Attorney General\u2019s March 2009 memorandum called on agency chief  FOIA officers to review all aspects of their agencies\u2019 FOIA administration  and report to Justice on steps that have been taken to improve FOIA  operations and disclosure. Subsequent Justice guidance required  agencies are to include in their chief FOIA officer reports information on  their FOIA request backlogs, including whether the agency experienced a  backlog of requests; whether that backlog decreased from the previous  year; and, if not, reasons the backlog did not decrease. In addition,  agencies that had more than 1,000 backlogged requests in a given year  were required to describe their plans to reduce their backlogs. Beginning  in fiscal year 2015, these agencies were to describe how they  implemented their plans from the previous year and whether that resulted  in a backlog reduction.", "In addition, Justice\u2019s OIP identified best practices for reducing FOIA  backlogs. The office held a best practices workshop on reducing backlogs  and improving timeliness. The office then issued guidance in August 2014  which highlighted key practices to improve the quality of a FOIA program.  OIP identified the following methods in its best practices guidance.", "Utilize resources effectively. Agencies should allocate their  resources effectively by using multi-track processing, making use of  available technology, and shifting priorities and staff assignments to  address needs and effectively manage workloads.", "Routinely review metrics. Agencies should regularly review their  FOIA data and processes to identify challenges or barriers.  Additionally, agencies should identify trends to effectively allocate  resources, set goals for staff, and ensure needs are addressed.", "Emphasize staff training. Agencies should ensure FOIA staff are  properly trained so they can process requests more effectively and  with more autonomy. Training and engagement of staff can also  solidify the importance of the FOIA office\u2019s mission.", "Obtain leadership support. Agencies should ensure that senior  management is involved in and supports the FOIA function in order to  increase awareness and accountability, as well as make it easier to  obtain necessary resources or personnel.", "Agencies identified a variety of methods that they used to address their  backlogs. These included both the practices identified by Justice, as well  as additional methods.", "Ten agencies maintained relatively small backlogs of 60 or fewer  requests and were thus not required to develop plans for reducing  backlogs. However, 2 of these 10 agencies, who both received significant  numbers of requests, described various methods used to maintain a small  backlog:", "PBGC officials credits its success to training, not only for FOIA staff,  but all Incoming personnel, while also awarding staff for going above  and beyond in facilitating FOIA processing. Pension Benefit Guaranty  Corporation has incorporated all the best practices identified by OIP,  including senior leadership involvement that supports FOIA initiatives  and program goals, routine review of metrics to optimize workflows,  effective utilization of resources and staff training.", "According to FDIC officials, its overall low backlog numbers are  attributed to a trained and experienced FOIA staff, senior  management involvement, and coordination among FDIC divisions.  However, FDIC stated the reason for the increase in backlogs in fiscal  year 2015 was due to increased complexity of requests.", "The 4 agencies with backlogs greater than 60 but fewer than 1,000  (EEOC, DOI, NTSB, and USAID) reported using various methods to  reduce their backlogs. However, all 4 showed an increase over the 5-year  period.", "EEOC officials stated that it had adopted practices recommended by  OIP such as multi-track processing, reviewing workloads to ensure  sufficient staff, and using temporary assignments to address needs.  However, it has seen a large increase in its backlog numbers, going  from 131 in fiscal year 2012 to 792 in fiscal year 2016. EEOC  attributed the rise in backlogs to an increase in requests received,  loss of staff, and the complex and voluminous nature of requests.", "DOI, according to agency officials, has also tried to incorporate  reduction methods and best practices, including proactively releasing  information that may be of interest to the public, thus avoiding the  need for a FOIA request; enhanced training for its new online FOIA  tracking and processing system; improved inter-office collaboration;  monthly reports on backlogs and weekly charts on incoming requests  to heighten awareness among leadership; and monitoring trends. Yet,  DOI has seen an increase in its backlog, from 449 in fiscal year 2012  to 677 in fiscal year 2016, an increase of 51 percent. DOI attributed  the increase to loss of FOIA personnel, increase in the complexity of  requests, increase in FOIA-related litigation, increase in incoming  requests, and staff having additional duties.", "Officials at NTSB stated that it utilized contractors and temporary staff  assignments to augment staffing and address backlogs. Despite the  effort, NTSB saw a large increase in backlogs, from 62 in fiscal year  2012 to 602 in fiscal year 2016. Officials stated that reason for the  increase was due to increased complexity of requests, including  requests for \u201cany and all\u201d documentation related to a specific subject,  often involving hundreds to thousands of pages per request.", "According to USAID officials, the agency conducts and reviews  inventories of its backlog and requests to remove duplicates and  closed cases, group and classify requests by necessary actions and  responsive offices, and initiate immediate action. In addition, USAID  seeks to identify tools and solutions to streamline records for review  and processing. However, its backlog numbers have continually  increased, from 201 in fiscal year 2012 to 318 in fiscal year 2016.  USAID attributes that increase to increase in the number of requests,  loss of FOIA staff, increased complexity and volume of requests,  competing priorities, and world events that may drive surges in  requests.", "Of the four agencies with the largest backlogs, all reported taking steps  that in some cases included best practices identified by OIP; however,  only NARA successfully reduced its backlog by the end of the 5-year  period.", "Justice made noted that it efforts to reduce its backlog by  incorporating best practices. Specifically, OIP worked with  components within Justice through the Component Improvement  Initiative to identify causes contributing to a backlog and assist  components in finding efficiencies and overcoming challenges. The  Chief FOIA Officer continued to provide top-level support to reduction  efforts by convening the department\u2019s FOIA Council to manage  overall FOIA administration. In addition, many of the components  created their own reduction plans, which included hiring staff, utilizing  technology, and providing more training, requester outreach, and  multitrack processing.", "However, despite these efforts, the number of backlogs steadily  increased during the 5-year period, from 5,196 in fiscal year 2012 to  10,644 in fiscal year 2016, an overall increase of 105 percent. Justice  attributes the increase in backlogs to several challenges, including an  increase of incoming requests and an increase in the complexity of  those requests. Other challenges that Justice noted were staff  shortages and turnover, reorganization of personnel, time to train  incoming staff, and the ability to fill positions previously held by highly  qualified professionals.", "NARA officials stated that one key step NARA took was to make  corrections in its Performance Measurement and Reporting System.  They noted that this system previously comingled backlogged  requests with the number of pending FOIA requests, skewing the  backlog numbers higher. The improvements included better  accounting for pending and backlogged cases, distinguishing between  simple and complex requests, and no longer counting as open cases  that were closed within 20 days, but not until the beginning of the  following fiscal year. In addition, officials also stated that the FOIA  program offices have been successful at working with requesters to  narrow the scope of requests.", "NARA also stated that it was conducting an analysis of FOIA across  the agency to identify any barriers in the process. Officials also  identified other methods, including using multi-track processing,  shifting priorities to address needs, improved communication with  agencies, proactive disclosures, and the use of mediation services.", "NARA has shown significant progress in reducing its backlog. In fiscal  year 2012 it had a backlog of 7,610 requests, which spiked to 9,361 in  fiscal year 14. However, by fiscal year 2016 the number of  backlogged requests had dropped to 2,932 despite an more than  doubling of requests received for that fiscal year. However, NARA did  note challenges to reducing its backlog numbers, namely, the  increase in the number of requests received.", "State developed and implemented a plan to reduce its backlog in  fiscal year 2016. The plan incorporated two best practices by focused  on identifying the extent of the backlog problem and developing ways  to address the backlog with available resources. According to State  officials, effort was dedicated to improve how FOIA data was  organized and reported. Expedited and litigation cases were top  priorities, whereas in other cases a first in first out method was  employed.", "Even with these efforts, however, State experienced a 117 percent  increase in its backlog over the 5-year period. State\u2019s backlog doubled  from 10,045 in fiscal year 2014 to 22,664 in fiscal year 2016. Among  the challenges to managing its backlog, State reported an increase in  incoming requests, a high number of litigation cases, and competing  priorities. Specifically, the number of incoming requests for State  increase by 51 percent during the 5-year period. State has also  reported that it has allocated 80 percent of its FOIA resources to meet  court-ordered productions associated with litigation cases, resulting in  fewer staff to work on processing routine requests. This included,  among other efforts, a significant allocation of resources in fiscal year  2015 to meet court-imposed deadlines to process emails associated  with the former Secretary of State, resulting in a surge of backlogs.", "In 2017 State began an initiative to actively address its backlogs. The  Secretary of State issued an agency-wide memorandum stating the  department\u2019s renewed efforts by committing more resources and  workforce to backlog reduction. The memo states new processes are  to be implemented for both the short and long-term, and the FOIA  office has plans to work with the various bureaus to outline the tasks,  resources, and workforce necessary to ensure success and  compliance. With renewed leadership support, State has reported  significant progress in its backlog reduction efforts.", "DHS, in its chief FOIA officer reports, reported that it implemented  several plans to reduce backlogs. The DHS Privacy office, which is  responsible for oversight of the department\u2019s FOIA program, worked  with components to help eliminate the backlog. The Privacy Office  sent monthly emails to component FOIA officers on FOIA backlog  statistics, convened management meetings, conducted oversight, and  reviewed workloads. Leadership met weekly to discuss the oldest  pending requests, appeals, and consultations, and determined  needed steps to process those requests.", "In addition, several other DHS components implemented actions to  reduce backlogs. Customs and Border Protection hired and trained  additional staff, encouraged requesters to file requests online,  established productivity goals, updated guidance, and utilized better  technology. U.S. Citizenship and Immigration Services, National  Protection and Programs Directorate, and Immigration and Customs  Enforcement increased staffing or developed methods to better  forecast future workloads ensure adequate staffing. Immigration and  Customs Enforcement also implemented a commercial off-the-shelf  web application, awarded a multi-million dollar contract for backlog  reduction, and detailed employees from various other offices to assist  in the backlog reduction effort.", "Due to efforts by the Privacy Office and other components, the  backlog dropped 66 percent in fiscal year 2015, decreasing to 35,374.  Yet, despite the continued efforts in fiscal year 2016, the backlog  numbers increased again, to 46,788. DHS attributes the increases in  backlogs to several factors, including an increase in the number of  requests received, increased complexity and volume of responsive  records for those requests, loss of staff and active litigation with  demanding production schedules.", "One reason the eight agencies with significant backlogs may be  struggling to consistently reduce their backlogs is that they lack  documented, comprehensive plans that would provide a more reliable,  sustainable approach to addressing backlogs. In particular, they do not  have documented plans that describe how they will implement best  practices for reducing backlogs over time, including specifying how they  will use metrics to assess the effectiveness of their backlog reduction  efforts and ensure that senior leadership supports backlog reduction  efforts, among other best practices identified by OIP.", "While agencies with backlogs of 1,000 or more are required to describe  backlog reduction efforts in their chief FOIA officer reports, these consist  of a high-level narrative and do not include a specific discussion of how  the agencies will implement best practices over time to reduce their  backlog. In addition, agencies with backlogs of fewer than 1,000 requests  are not required to report on backlog reduction efforts; however, the  selected agencies in our review with backlogs in the hundreds still  experienced an increase over the 5-year period.", "Without a more consistent approach, agencies will continue to struggle to  reduce their backlogs to a manageable level, particularly as the number  and complexity of requests increase over time. As a result, their FOIA  processing may not respond effectively to the needs of requesters and  the public."], "subsections": []}]}, {"section_title": "Various Types of Statutory Exemptions Exist and Many Have Been Used by Agencies", "paragraphs": ["FOIA requires agencies report annually to Justice on their use of statutory  (b)(3) exemptions. This includes specifying which statutes they relied on  to exempt information from disclosure and the number of times they did  so. To assist agencies in asserting and accounting for their use of these  statutes, Justice instructs agencies to consult a running list of all the  statutes that have been found to qualify as proper (b)(3) statutes by the  courts.", "However, agencies may also use a statute not included in the Justice list,  because many statutes that appear to meet the requirements of (b)(3)  have not been identified by a court as qualifying statutes. If the agency  uses a (b)(3) statute that is not identified in the qualifying list, Justice  guidance instructs the agency to include information about that statute in  its annual report submission. Justice reviews the statute and provides  advice to the agency, but does not make a determination on the  appropriateness of using that statute under the (b)(3) exemption.", "Based on data agencies reported to Justice, during fiscal years 2010 to  2016, agencies claimed 237 statutes as the basis for withholding  information. Of these statutes, 75 were included on Justice\u2019s list of  qualifying statutes under the (b)(3) exemption. Further, we identified 140  additional statutes that were not identified in our 237 statutes claimed by  agencies during fiscal years 2010 to 2016, but have similar provisions to  other (b)(3) statutes authorizing an agency to withhold information from  the public.", "We found that the 237 statutes cited as the basis for (b)(3) exemptions  during the period from fiscal year 2010 to 2016 to fell into eight general  categories of information. These categories were (1) personally  identifying information, (2) national security, (3) commercial, (4) law  enforcement and investigations, (5) internal agency, (6) financial  regulation, (7) international affairs, and (8) environmental. Figure 6  identifies the eight categories and the number of agency-claimed (b)(3)  statutes in each of the categories.", "Of the 237 (b)(3) statutes cited by agencies, the majority\u2014178\u2014fell into  four of the eight categories:", "Forty-nine of these statutes related to withholding personally  identifiable information including, for example, a statute related to  withholding death certificate information provided to the Social  Security Administration.", "Forty-five statutes related to the national security category. For  example, one statute exempted files of foreign intelligence or  counterintelligence operations of the National Security Agency.", "Forty-two statutes were in the law enforcement and investigations  category, including a statute that exempts from disclosure information  provided to Justice pursuant to civil investigative demands pertaining  to antitrust investigations.", "Forty-two statutes fell into the commercial category. For example, one  statute in this category related to withholding trade secrets and other  confidential information related to consumer product safety.", "The remaining 59 statutes were in four categories: internal agency  functions and practices, financial regulation, international affairs, and  environmental. The environmental category contained the fewest number  of statutes and included, for example, a statute related to withholding  certain air pollution analysis information.", "As required by FOIA, agencies also reported the number of times they  used each (b)(3) statute. In this regard, 33 FOIA-reporting agencies  indicated that they had used 10 of the 237 (b)(3) statutes more than  200,000 times. Of these 10 most-commonly used statutes, the single  most-used statute (8 U.S.C \u00a7 1202(f)) related to withholding records  pertaining to the issuance or refusal of visas to enter the United States. It  was used by 4 agencies over 58,000 times.", "Further, of the 10 most-commonly used statutes, the statute used by the  greatest number of agencies (26 U.S.C \u00a7 6103) related to the withholding  of certain tax return information; it was used by 24 FOIA-reporting  agencies about 30,000 times. By contrast, some statutes were only  used by a single agency. Specifically, the Department of Veterans Affairs  used a statute related to withholding certain confidential veteran medical  records (38 U.S.C. \u00a7 7332) more than 16,000 times. Similarly, EEOC  used a statute related to employment discrimination on the basis of  disability (42 U.S.C. \u00a7 12117) more than 10,000 times.", "Table 4 shows the 10 most-used statutes under the (b)(3) exemption, the  agency that used each one most frequently, and the number of times they  were used by that agency for the period covering fiscal years 2010  through 2016."], "subsections": [{"section_title": "Most Statutes Enacted after 2009 That Were Used by Agencies Did Not Specifically Cite the (b)(3) Exemption", "paragraphs": ["The OPEN FOIA Act of 2009 amended FOIA to require that any federal  statute enacted subsequently must specifically cite paragraph (b)(3) of  FOIA to qualify as a (b)(3) exemption statute. Prior to 2009, a federal  statute qualified as a statutory (b)(3) exemption if it (1) required that the  matters be withheld from the public in such a manner as to leave no  discretion on the issue, or (2) established particular criteria for withholding  or refers to particular types of matters to be withheld.", "In response to the amendment, in 2010, Justice released guidance to  agencies stating that any statute enacted after 2009 must specifically cite  to the (b)(3) exemption to qualify as a withholding statute. Further, the  guidance encouraged agencies to contact Justice with questions  regarding the implementation of the amendment.", "Even with this guidance, we found that a majority of agency-claimed  statutes during fiscal years 2010 through 2016 did not specifically cite the  (b)(3) exemption. Specifically, of the 237 (b)(3) statutes claimed by  agencies, 103 were enacted or amended after 2009 and, thus, were  subject to the requirement of the OPEN FOIA Act. Of those 103  statutes, 86 lacked the required statutory text that cited exemption (b)(3)  of FOIA.", "Figure 7 shows the number of agency-claimed statutes subject to the  OPEN FOIA Act of 2009 requirement that did not cite the (b)(3)  exemption.", "Agencies are using these statutes as the basis for withholding information  when responding to a FOIA request. This is despite these statutes not  having a reference to the (b)(3) exemption as required by the 2009 FOIA  amendments."], "subsections": []}]}, {"section_title": "Federal Court Decisions Have Not Required the Office of Special Counsel to Initiate Disciplinary Actions for the Improper Withholding of Records", "paragraphs": ["In our report, being issued today, we found that, according to the  available information and Justice and OSC officials, since fiscal year  2008, no court orders have been issued that have required OSC to initiate  a proceeding to determine whether disciplinary action should be taken  against agency FOIA personnel. Specifically, officials in Justice\u2019s Office of  Information Policy stated that there have been no lawsuits filed by a FOIA  requester that have led the courts to conduct all three requisite actions  needed for Justice to refer a court case to OSC.", "Justice\u2019s litigation and compliance reports identified six court cases  (between calendar years 2013 and 2016) in which the requesters sought  a referral from the courts in an attempt to have OSC initiate an  investigation. However, in all six cases, the courts denied those requests,  finding that each case did not result in the courts taking the three actions  necessary to involve OSC.", "Thus, given these circumstances, Justice has not referred any court  orders to OSC to initiate a proceeding to determine whether disciplinary  action should be taken against agency FOIA personnel. For its part, OSC  officials confirmed that the office has neither received, nor acted on, any  such referrals from Justice. As such, OSC has not had cause to initiate  disciplinary actions for the improper withholding of FOIA records.", "In summary, the 18 agencies we selected for review fully implemented  half of the six FOIA requirements reviewed and the vast majority of  agencies implemented two additional requirements. However, 5 agencies  published and updated their FOIA regulations in a timely and  comprehensive manner. Fully implementing FOIA requirements will better  position agencies to provide the public with necessary access to  government records and ensure openness in government.", "The selected agencies in our review varied considerably in the size of  their backlogs. While 10 reported a backlog of 60 or fewer requests, 4  had backlogs of over 1,000 per year. Agencies identified a variety of  methods that they used to address their backlogs, including practices  identified by Justice, as well as additional methods. However, the  selected agencies varied in the success achieved for reducing their  backlogs. This was due, in part, to a lack of plan that describes how the  agencies will implement best practices for reducing backlogs over time.  Until agencies develop plans to reduce backlogs, they will be limited in  their ability to respond effectively to the needs of requesters and the  public.", "Accordingly, our draft report contains 23 planned recommendations to  selected agencies. These recommendations address posting records  online, designating chief FOIA officers, updating regulations consistent  with requirements, and developing plans to reduce backlogs.  Implementation of our recommendations should better position these  agencies to address FOIA requirements and ensure the public is provided  with access to government information.", "Chairman Grassley, Ranking Member Feinstein, and Members of the  Committee, this completes my prepared statement. I would be pleased to  respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you have any questions on matters discussed in this testimony, please  contact David A. Powner at (202) 512-9286 or at pownerd@gao.gov.  Individuals who made key contributions to this testimony are Anjalique  Lawrence (assistant director), Lori Martinez (analyst in charge), Gerard  Aflague, David Blanding, Christopher Businsky, Rebecca Eyler, James  Andrew Howard, Carlo Mozo, David Plocher, and Sukhjoot Singh.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-263", "url": "https://www.gao.gov/products/GAO-18-263", "title": "Bank Secrecy Act: Derisking along the Southwest Border Highlights Need for Regulators to Enhance Retrospective Reviews", "published_date": "2018-02-26T00:00:00", "released_date": "2018-02-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Some Southwest border residents and businesses have reported difficulties accessing banking services in the region. GAO was asked to review if Southwest border residents and businesses were losing access to banking services because of derisking and branch closures.", "This report (1) describes the types of heightened BSA/AML compliance risks that Southwest border banks may face and the BSA/AML compliance challenges they may experience; (2) determines the extent to which banks have terminated accounts and closed branches in the region and the reasons for any terminations and closures; and (3) evaluates how regulators have assessed and responded to concerns about derisking in the region and elsewhere, and how effective their efforts have been; among other objectives. GAO surveyed a nationally representative sample of 406 banks, which included the 115 banks that operate in the Southwest border region; analyzed Suspicious Activity Report filings; developed an econometric model on the drivers of branch closures; and interviewed banks that operate in the region."]}, {"section_title": "What GAO Found", "paragraphs": ["\u201cDerisking\u201d is the practice of banks limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering. The Southwest border region is a high-risk area for money laundering activity, in part, because of a high volume of cash and cross-border transactions, according to bank representatives and others. These types of transactions may create challenges for Southwest border banks in complying with Bank Secrecy Act/anti-money laundering (BSA/AML) requirements because they can lead to more intensive account monitoring and investigation of suspicious activity. GAO found that, in 2016, bank branches in the Southwest border region filed 2-1/2 times as many reports identifying potential money laundering or other suspicious activity (Suspicious Activity Reports), on average, as bank branches in other high-risk counties outside the region (see figure).", "According to GAO's survey, an estimated 80 percent (+/- 11 percent margin of error) of Southwest border banks terminated accounts for BSA/AML risk reasons. Further, according to the survey, an estimated 80 percent (+/- 11) limited or did not offer accounts to customers that are considered high risk for money laundering because the customers drew heightened regulatory oversight\u2014behavior that could indicate derisking. Counties in the Southwest border region have been losing bank branches since 2012, similar to national and regional trends. Nationally, GAO's econometric analysis generally found that counties that were urban, younger, had higher income or had higher money laundering-related risk were more likely to lose branches. Money laundering-related risks were likely to have been relatively more important drivers of branch closures in the Southwest border region.", "Regulators have not fully assessed the BSA/AML factors influencing banks to derisk. Executive orders and legislation task the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and the federal banking regulators with reviewing existing regulations through retrospective reviews to determine whether they should be retained or amended, among other things. FinCEN and federal banking regulators have conducted retrospective reviews of parts of BSA/AML regulations. The reviews, however, have not evaluated how banks' BSA/AML regulatory concerns may influence them to derisk or close branches. GAO's findings indicate that banks do consider BSA/AML regulatory concerns in providing services. Without assessing the full range of BSA/AML factors that may be influencing banks to derisk or close branches, FinCEN, the federal banking regulators, and Congress do not have the information needed to determine if BSA/AML regulations and their implementation can be made more effective or less burdensome."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FinCEN and the federal banking regulators conduct a retrospective review of BSA regulations and their implementation for banks. The review should focus on how banks' regulatory concerns may be influencing their willingness to provide services. The federal banking regulators agreed to the recommendation. FinCEN did not provide written comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["Money laundering and terrorist financing pose threats to national security  and the integrity of the financial system. The Bank Secrecy Act (BSA) is  an important tool in federal law enforcement efforts to detect and deter  the use of financial institutions for criminal activity, including money  laundering and terrorist financing. The BSA and its implementing  regulations generally require financial institutions, including banks, to  collect and retain various records of customer transactions, verify  customers\u2019 identities, maintain anti-money laundering (AML) programs,  and report suspicious transactions.", "In recent years, some Southwest border residents and businesses  reported difficulty accessing banking services, including experiencing  bank account terminations. In addition, reports of bank branch closings in  the region added to questions about the ability of residents to access  banking services. You and others have raised questions about whether  some banks may be engaging in \u201cderisking\u201d\u2014the practice of banks  limiting certain services or ending their relationships with customers to,  among other things, avoid perceived regulatory concerns about facilitating  money laundering.", "This report (1) describes the types of heightened BSA/AML compliance  risks that Southwest border banks may face and the BSA/AML  compliance challenges they may experience; (2) determines the extent to  which banks are terminating accounts and are closing bank branches in  the Southwest border region and their reasons for any terminations and  closures; (3) describes what Southwest border banking customers and  others told us about any effects of account terminations and branch  closures on Southwest border communities; and (4) evaluates how the  Department of the Treasury\u2019s (Treasury) Financial Crimes Enforcement  Network (FinCEN) and the federal banking regulators\u2014the Board of  Governors of the Federal Reserve System (Federal Reserve), Federal  Deposit Insurance Corporation (FDIC), and the Office of the Comptroller  of the Currency (OCC)\u2014have assessed and responded to concerns  about derisking in the Southwest border region and elsewhere, and the  effectiveness of those efforts.", "We defined the Southwest border region as all counties that have at least  25 percent of their landmass within 50 miles of the U.S.-Mexico border.  Thirty-three counties in Arizona, California, New Mexico, and Texas fell  within this definition. To describe the types of heightened BSA/AML  compliance risks that Southwest border banks may face and the  BSA/AML compliance challenges they may experience, we interviewed  19 Southwest border banks, a variety of banking industry groups and  trade associations, and officials from the federal banking regulators. In  addition, we analyzed data on Suspicious Activity Reports (SAR),  Currency Transaction Reports (CTR), and BSA/AML enforcement actions  and violations identified during bank examinations. We also reviewed  documentation from BSA/AML examinations of selected Southwest  border banks to gain additional context about BSA/AML violations.", "To determine the extent to which banks are terminating accounts and  their reasons why, we administered a web-based survey to a nationally  representative sample of banks in the United States, which includes 115  Southwest border banks, for a total survey sample of 406 banks. In the  survey, we asked banks about terminations of accounts and limitations on account offerings related to BSA/AML risk, the types of customers for  which the banks terminate or limit account offerings, and the reasons for  these decisions for the period January 1, 2014, to December 31, 2016.  We obtained a weighted survey response rate of 46.5 percent. See  appendix I for additional information about our survey methodology and  appendix II for information on survey results. To assess the extent to  which banks have closed branches in the Southwest border region and  the reasons why, we analyzed trends in bank branch closures by  comparing trends in branch closures in the Southwest border region to  national and regional trends, as well as trends in high-risk areas  elsewhere. We also combined the data on branch closures with  demographic, economic, and money laundering-related risk data and  conducted an econometric analysis designed to examine the potential  drivers of branch closures (see app. III for information on the econometric  analysis). We also interviewed representatives from Southwest border  banks about the time and resources required to file SARs and how they  approached the decision to close a branch.", "To describe what Southwest border banking customers and others said  about any effects of account terminations and branch closures on  Southwest border communities, we conducted site visits to three  communities: Nogales, Arizona; San Ysidro, California; and McAllen,  Texas. We selected these communities to achieve a sample of locations  that collectively satisfied the following criteria: (1) counties with different  classifications of how rural or urban they are, (2) counties that  experienced different rates of branch closures from 2013 through 2016,  and (3) counties that had received different designations by the federal  banking regulators as distressed or underserved. We conducted a total of  five discussion groups across the three locations and summarized  participants\u2019 responses about how they were affected by account  terminations and branch closures in their communities. Three of the five  discussion group sessions included business banking customers and the  other two sessions included nonbusiness retail banking customers. We  also interviewed economic development specialists, industry and trade  organizations that focus on border trade and commerce, and chambers of  commerce and municipal officials representing Southwest border  communities.", "To evaluate how FinCEN and the federal banking regulators have  assessed and responded to concerns about derisking and the  effectiveness of those efforts, we reviewed agency documentation and  guidance the agencies issued to banks related to derisking. We also  reviewed documentation on BSA/AML retrospective reviews that FinCEN  and the federal banking regulators have conducted. In addition, we  reviewed various executive orders that, among other things, require most  executive branch agencies, and encourage independent agencies, to  develop a plan to conduct retrospective analyses, and Office of  Management and Budget guidance implementing those executive  orders. Finally, we interviewed officials from FinCEN and the federal  banking regulators about the actions they have taken related to derisking,  as well as retrospective reviews they had conducted on BSA regulations.", "To assess the reliability of the data we used, we reviewed related  documentation; conducted electronic testing of the data for missing data,  outliers, or any obvious errors; and interviewed knowledgeable officials  about the data. We concluded that all applicable data were sufficiently  reliable for the purposes of describing BSA/AML compliance risks and  challenges for Southwest border banks; identifying banks to survey on  account terminations and limitations; evaluating branch closure trends in  the Southwest border region and elsewhere, and the factors driving those  closures; and describing the effects for Southwest border communities  experiencing branch closures and account terminations. Appendix I  provides more information on our scope and methodology.", "We conducted this performance audit from March 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The BSA established reporting, recordkeeping, and other AML  requirements for financial institutions. By complying with BSA/AML  requirements, U.S. financial institutions assist government agencies in the  detection and prevention of money laundering and terrorist financing by,  among other things, maintaining compliance policies, conducting ongoing  monitoring of customers and transactions, and reporting suspicious  financial activity. Regulation under and enforcement of BSA involves  several federal agencies. FinCEN is responsible for administering the  BSA, has authority for enforcing compliance with its requirements and  implementing regulations, and also has the authority to enforce the act,  including through civil money penalties. FinCEN issues regulations under  BSA and relies on the examination functions performed by other federal  regulators, including the federal banking regulators. FinCEN also collects,  analyzes, and maintains the reports and information filed by financial  institutions under BSA and makes those reports available to law  enforcement and regulators.", "FinCEN has delegated BSA/AML examination authority for banks to the  federal banking regulators. The federal banking regulators have issued  their own BSA regulations that require banks to establish and maintain a  BSA compliance program which, among other things, requires banks to  identify and report suspicious activity. The banking regulators are also  required to review compliance with BSA/AML requirements and  regulations which they generally do every 12 to 18 months as a part of  their routine safety and soundness examinations. Federal banking  regulators take a risk-based approach to BSA examinations\u2014that is, they  review key customers of risk or specific problems identified by the bank.  Among other things, examiners review whether banks have an adequate  system of internal controls to ensure ongoing compliance with BSA/AML  regulations. The federal banking regulators may take enforcement actions  using their prudential authorities for violations of BSA/AML requirements.  They may also assess civil money penalties against financial institutions  and individuals independently, or concurrently with FinCEN."], "subsections": [{"section_title": "Components of Banks\u2019 BSA/AML Compliance Programs", "paragraphs": ["All banks are required to establish an AML compliance program that  includes policies, procedures, and processes which, at a minimum, must  provide for: a system of internal controls to ensure ongoing compliance, a designated individual or individuals responsible for managing BSA  compliance (BSA compliance officer),  training for appropriate personnel,  independent testing for BSA/AML compliance, and appropriate risk-based procedures for conducting ongoing customer  due diligence.", "BSA/AML regulations require that each bank tailor a compliance program  that is specific to its size and own risks based on factors such as the  products and services offered, customers, types of transactions  processed, and locations served. BSA/AML compliance programs may  include the following components:", "Customer Identification Program (CIP)\u2014Banks must have written  procedures for opening accounts and, at a minimum, must obtain from  each customer their name, date of birth, address, and identification  number before opening an account. In addition, banks\u2019 CIPs must  include risk-based procedures for verifying the identity of each  customer to the extent reasonable and practicable. Banks must also  collect information on individuals who are beneficial owners of a legal  entity customer in addition to the information they are required to  collect on the customer under the CIP requirement.", "Customer Due Diligence (CDD)\u2014CDD procedures enable banks to  predict with relative certainty the types of transactions in which a  customer is likely to engage, which assists banks in determining when  transactions are potentially suspicious. Banks must document their  process for performing CDD and implement and maintain appropriate  risk-based procedures for conducting ongoing customer due  diligence. These procedures include, but are not limited to,  understanding the nature and purpose of customer relationships for  the purpose of developing a customer risk profile, and conducting  ongoing monitoring to identify and report suspicious transactions and,  on a risk basis, to maintain and update customer information.", "Enhanced Due Diligence (EDD)\u2014Customers who banks determine  pose a higher money laundering or terrorist financing risk are subject  to EDD procedures. EDD for higher-risk customers helps banks  understand these customers\u2019 anticipated transactions and implement  an appropriate suspicious activity monitoring system. Banks review  higher-risk customers and their transactions more closely at account  opening and more frequently throughout the term of their relationship  with the bank.", "Suspicious Activity Monitoring\u2014Banks must also have policies and  procedures in place to monitor transactions and report suspicious  activity. Banks use different types of monitoring systems to identify  or alert staff of unusual activity. A manual transaction monitoring  system typically targets specific types of transactions (for example,  those involving large amounts of cash and those to or from foreign  areas) and includes a manual review of various reports generated by  the bank\u2019s information systems in order to identify unusual activity. An  automated monitoring system can cover multiple types of transactions  and use various rules, thresholds, and scenarios to identify potentially  suspicious activity. These systems typically use computer programs to  identify individual transactions, patterns of unusual activity, or  deviations from expected activity. Banks that are large, operate in  many locations, or have a large volume of higher-risk customers  typically use automated monitoring systems.", "Banks also must comply with certain reporting requirements, including:", "CTR: A bank must electronically file a CTR for each transaction in  currency\u2014such as a deposit or withdrawal\u2014of more than $10,000.", "SAR: Banks are required to electronically file a SAR when a  transaction involves or aggregates at least $5,000 in funds or other  assets, and the institution knows, suspects, or has reason to suspect  that the transaction meets certain criteria qualifying as suspicious."], "subsections": []}, {"section_title": "Regulatory Requirements Related to Account Terminations and Branch Closures", "paragraphs": ["Generally, the federal banking regulators do not direct banks to open,  close, or maintain individual accounts. However, banks generally include  policies and procedures to describe criteria for not opening, or closing, an  account in their BSA/AML compliance program. For example, although  there is no requirement for a bank to close an account that is the subject  of a SAR filing, a bank should develop policies and procedures that  indicate when it will escalate issues identified as the result of repeat SAR  filings on accounts, including criteria on when to close an account.  Additionally, a bank\u2019s CIP should contain procedures for circumstances  when a bank cannot verify the customer\u2019s identity, including procedures  that include circumstances in which the bank should not open an account  and when the bank should close an account.", "Federal banking regulators also cannot prohibit banks from closing  branches. However, FDIC-insured banks are required to submit a notice  of any proposed branch closing to their primary banking regulator no later  than 90 days prior to the date of the proposed branch closing. The  notice must include a detailed statement of the reasons for closing the  branch and statistical or other information in support of the reasons.  Banks are also required to mail a notice to the customers of the branch  proposed to be closed at least 90 days prior to the proposed closing and  must post a notice to customers in the branch proposed to be closed at  least 30 days prior to the proposed closing. The notice should state the  proposed date of closing and either identify where branch customers may  obtain service following that date or provide a telephone number for  customers to call to determine such alternative sites."], "subsections": []}, {"section_title": "Characteristics and Money Laundering-Related Risks of the Southwest Border Region", "paragraphs": ["In October 2017, Mexico was the second largest goods trading partner of  the United States in terms of both imports and exports, according to U.S.  Census trade data. Trade with Mexico is an important component of  Southwest border states\u2019 economies, which benefit from their proximity to  the international border and the related seaports and inland ports for the  exportation and importation of goods. The fresh produce industry is an  example of a key industry in the border region. The fresh produce  industry encompasses several activities involved with importation,  inspection, transportation, warehousing, and distribution of Mexican- grown produce to North American markets, all of which provide  employment opportunities and revenues to local economies. Another key  industry in the region is manufacturing. The Southwest border has played  a role in a growing trend known as production sharing, in which  companies\u2014predominantly based in the United States\u2014locate some  operations in Mexico, thus achieving lower costs in the overall production  process. Local Southwest border communities also benefit from  pedestrians crossing into the United States from Mexico to visit and shop  in their communities. For example, Department of Transportation border  crossing data show that in September 2017, nearly 750,000 pedestrians  entered the United States at the San Ysidro, California, border crossing\u2014 the busiest pedestrian port of entry into the country.", "The Department of State has identified Mexico as a major money  laundering country. As a result of its proximity to Mexico, the Southwest  border region faces high money laundering and related financial crime  risks. The U.S.-Mexico border includes major population centers,  transportation hubs, and large tracts of uninhabited desert. According to  Treasury\u2019s 2015 National Money Laundering Risk Assessment, criminal  organizations have used the vast border to engage in cross-border drug  trafficking, human smuggling, and money laundering. The 2015  assessment also states that bulk cash smuggling remains the primary  method Mexican drug trafficking organizations use to move illicit proceeds  across the Southwest border into Mexico. Some cash collected  domestically to pay the drug trafficking organizations for drugs is  channeled from distribution cells across the United States to cities and  towns along the Southwest border, and from there is smuggled into  Mexico. All counties within the Southwest border region have been  identified as either a High Intensity Financial Crime Area (HIFCA) or a  High Intensity Drug Trafficking Area (HIDTA) with the vast majority being  identified as both (see fig. 1). HIFCAs and HIDTAs aim to concentrate  law enforcement efforts at the federal, state, and local levels to combat  money laundering and drug trafficking in designated high-intensity money  laundering zones and in areas determined to be critical drug-trafficking  regions of the United States, respectively."], "subsections": []}]}, {"section_title": "Southwest Border Banks Report Heightened BSA/AML Compliance Risks and Challenges Due to Volume of High- Risk Customers", "paragraphs": ["Several characteristics of the Southwest border region make the region a  high-risk area for money laundering activity. These characteristics, which  require additional efforts for Southwest border banks to comply with  BSA/AML requirements, include high volumes of cash transactions,  cross-border transactions, and foreign accountholders. Bank  representatives we spoke with said that they manage these added  BSA/AML compliance challenges through activities such as more  frequent monitoring and investigating of suspicious activities, but that  these efforts require an investment of resources."], "subsections": [{"section_title": "Volume of Cash Transactions and Cross- Border Trade Increases Risk for Money Laundering and Terrorist Financing", "paragraphs": ["Money laundering risk is high in the Southwest border region because of  the high volume of cash transactions, the number of cross-border  transactions, and foreign accountholders, according to bank  representatives, federal banking regulators, and others. Cash  transactions increase the BSA/AML compliance risk for banks because  the greater anonymity associated with using cash results in greater risk  for money laundering or terrorist financing. A regional economic  development specialist noted, for example, that Mexican nationals who  shop in border communities typically use cash as a payment form.  Further, representatives from a regional trade group told us that border  businesses prefer payment in cash over checks from Mexican banks  because of potential variations in the exchange rate before a peso- denominated check clears. The trade group representatives we spoke  with also noted that currency exchanges also add to the volume of cash  transactions in the region. In June 2010, the Mexican finance ministry  published new AML regulations that restricted the amounts of physical  cash denominated in U.S. dollars that Mexican financial institutions could  receive. According to FinCEN officials and some of the federal bank  examiners we spoke with, these regulations altered the BSA/AML risk  profile of some U.S. banks, particularly those in the Southwest border  region. For example, U.S. banks started receiving bulk shipments of  currency directly from Mexican nationals and businesses, rather than  from Mexican banks. This increased BSA/AML compliance risk for the  U.S. banks because they now had to assess the risk of each individual  customer shipping them currency, rather than the collective risk from their  Mexican banking counterparts. In addition, according to FinCEN, the  regulations added to the level of cash in the Southwest border region  because businesses in the region saw higher levels of cash payments  from Mexican customers. This also created additional risk for U.S. banks  when these businesses deposited the cash payments.", "Our review of data on banks\u2019 CTR filings confirmed that bank branches  that operate in Southwest border region counties handle more large cash  transactions than bank branches elsewhere. For example, our analysis  found that bank branches in Southwest border region counties generally  file more CTRs than bank branches in comparable counties in the same  border states or in other high-risk financial crime or drug trafficking  counties that are not in border states. Specifically, in 2016, bank  branches in Southwest border region counties filed nearly 30 percent  more CTRs, on average, than bank branches in comparable counties  elsewhere in their same state, and about 60 percent more than those in  other high-risk counties outside the region. Similar differences occurred in  2014 and 2015 (see fig. 2).", "Cross-border transactions are also higher risk for money laundering  because international transfers can present an attractive method to  disguise the source of funds derived from illegal activity. Certain  industries, such as agriculture, that are prevalent in the Southwest border  region have legitimate business practices that could appear suspicious  without sufficient context, regional representatives said. For example,  representatives of one produce industry association we spoke with said  produce distributors often import produce from Mexican farmers and pay  them via wire transfer, which the farmers may then immediately withdraw  in cash to pay laborers. Transactions that involve cross-border wire  transfers and immediate withdrawals of cash may raise suspicion of  money laundering that requires further scrutiny by the bank. BSA/AML  regulations generally require banks to keep additional documentation for  domestic and international fund transfers of $3,000 or more, including  specific identifying information about the originator and beneficiary of the  transaction. If the bank sends or receives funds transfers to or from  institutions in other countries, especially those with strict privacy and  secrecy laws, the bank should have policies and procedures to determine  whether the amounts, the frequency of the transfer, and countries of  origin or destination are consistent with the nature of the business or  occupation of the customer.", "Southwest border banks cited foreign accountholders as another type of  high-risk customer for money laundering and terrorist financing. These  types of customers are prevalent in the Southwest border region,  examiners said, and can create challenges for banks to verify and  authenticate their identification, source of funds, and source of wealth.  Southwest border banks and others cited these types of customers as  adding BSA/AML compliance risk for banks, particularly if the  accountholders do not reside in the United States. These customers may  also have more frequent funds transfers to other countries. Foreign  accountholders who are \u201csenior foreign political figures\u201d also create  additional money laundering and terrorist financing risk because of the  potential for their transactions to involve the proceeds from foreign-official  corruption. Some Southwest border banks told us they provide accounts  to senior foreign political figures, but may limit the number of those types  of accounts."], "subsections": []}, {"section_title": "Southwest Border Banks\u2019 High-Risk Customers Require More Intensive Due Diligence and Monitoring", "paragraphs": ["The volume of high-risk customers and cross-border transactions can  lead to more intensive account monitoring and investigation of suspicious  transactions, Southwest border bank representatives said. Performing  effective due diligence and complying with CIP requirements for higher- risk customers and transactions can be more challenging because banks  might need specialized processes for higher-risk customers and  transactions than for those that are lower-risk. For example,  representatives from some Southwest border banks told us their  BSA/AML compliance staff travel to Mexico or collect information from  sources in Mexico to establish the legitimacy of businesses across the  border. Another bank said they ask to see 3 months of some high-risk  businesses\u2019 previous bank statements to determine the typical volume of  cash and wire transfers and that this type of due diligence is very time- consuming. The bank also collects details about the recipients of the  wired funds in an effort to determine the legitimacy of the payments.  Some Southwest border banks also described using special processes to  evaluate BSA/AML compliance risks for foreign customers and said they  used extra caution before accepting them as customers. These special  processes included translating business documents from Spanish to  English to certify the legitimacy of business customers and developing  internal expertise on currently acceptable identity documents issued by  foreign governments.", "Southwest border bank representatives we spoke with said addressing  these compliance challenges also can require more resources for  monitoring high-risk customers and investigating suspicious transactions.  High-risk customers require additional detail to be collected when  accounts are opened and on an ongoing basis. Representatives of one  Southwest border bank explained that they monitor high-risk customers\u2019  transactions more frequently\u2014every 3 months, compared to every 6  months for medium-risk customers. Further, high volumes of cash activity  can generate substantial numbers of alerts in bank monitoring systems,  and these alerts are evaluated by banks to determine whether SARs  should be filed. Transaction structuring, which involves attempts to evade  the $10,000 CTR filing requirement by, for example, making several  smaller transactions, is a common source of alerts, some bank  representatives said. Several banks we interviewed cited the investigation  of potential structuring as one of their common BSA/AML compliance  activities. Although many banks have monitoring software to generate  suspicious activity alerts, representatives said the flagged transactions  generally are investigated manually and can be a labor-intensive part of  banks\u2019 overall BSA/AML compliance programs. Southwest border bank  representatives we spoke with also told us that their suspicious activity  monitoring systems often generate \u201cfalse positives\u201d\u2014meaning further  investigation leads to a determination that no SAR filing is warranted. As  a result, the total number of SAR filings can actually understate banks\u2019  total BSA/AML compliance efforts associated with suspicious transaction  monitoring.", "We found that bank branches in Southwest border region counties filed  more SARs, on average, from 2014 through 2016 than bank branches in  comparable counties in the same border states or in other high-risk  financial crime or drug trafficking counties that are not in border states.  For example, in 2016, bank branches in Southwest border region  counties filed three times as many SARs, on average, as bank branches  operating in other counties within Southwest border states and about 2.5  times as many SARs, on average, as bank branches in other high-risk  financial crime or drug trafficking counties in nonborder states. These  differences in SAR filings showed a similar pattern in 2014 and 2015 (see  fig. 3).", "Federal banking regulators cited some Southwest border banks for  noncompliance with BSA/AML requirements from January 2009 through  June 2016. Those citations included 41 formal or informal enforcement  actions taken against Southwest border banks. FinCEN also took two  formal enforcement actions during that period. As part of the bank  examination process, the federal banking regulators also cited Southwest  border banks for 229 BSA/AML violations from January 2009 through  June 2016. Of these, SAR-related violations were the most common  type of violation (33 percent). This was followed closely by violations  related to BSA/AML monitoring and compliance (31 percent)\u2014a category  we defined to include competencies such as having an adequate system  of BSA/AML internal controls and providing adequate BSA/AML training  (see fig. 4)."], "subsections": []}]}, {"section_title": "Risks Related to Money Laundering Appear to Be a Factor in Reduced Access to Banking Services for Southwest Border Customers", "paragraphs": ["Our nationally representative survey found that most Southwest border  banks terminated accounts for reasons related to BSA/AML risk from  January 2014 through December 2016 and limited, or did not offer,  accounts to certain customer types, consistent with BSA/AML purposes.  However, our survey also found that many Southwest border banks may  also be engaging in derisking. Nationally, our econometric analysis  suggests that counties that were urban, younger, had higher income, or  had higher money laundering-related risk were more likely to lose  branches. Money laundering-related risks were likely to have been  relatively more important drivers of branch closures in the Southwest  border region."], "subsections": [{"section_title": "Some Account Terminations and Limitations Are Consistent with BSA/AML Purposes", "paragraphs": [], "subsections": [{"section_title": "Most Southwest Border Banks Terminated Accounts Because of Suspicious Activity", "paragraphs": ["Most Southwest border banks reported terminating accounts for reasons  related to BSA/AML risk. Based on our survey results, from January 1,  2014, through December 31, 2016, we estimate that almost 80 percent of  Southwest border banks had terminated personal or business accounts  for reasons related to BSA/AML risk. For the subset of Southwest  border banks whose operations extend outside of the Southwest border  region, we estimate that almost 60 percent reported that they terminated  business or personal accounts domiciled in their Southwest border  branches. For banks that did not operate in the Southwest border region  (non-Southwest border banks), account terminations related to BSA/AML  risk varied by the size of the bank. For example, an estimated 93 percent  of medium banks and an estimated 95 percent of large banks terminated  accounts for reasons related to BSA/AML risk, compared to an estimated  26 percent of small banks. Among the five types of businesses we  identified for our survey as high risk for money laundering and terrorist  financing, cash-intensive small businesses (for example, retail stores,  restaurants, and used car dealers) were the most common types of  business accounts that Southwest border banks reported terminating for  reasons related to BSA/AML risk. For example, over 70 percent of  Southwest border banks reported terminating cash-intensive small  business accounts. Between 45 percent and 58 percent of Southwest  border banks cited terminating accounts for the remaining four categories  of high-risk business accounts we identified: money services businesses,  domestic businesses engaged in cross-border trade, nontrade-related  foreign businesses, and foreign businesses engaged in cross-border  trade.", "Bank-Reported Data on Accounts  Terminated in 2016 for BSA/AML Reasons  In response to our survey, several banks  provided data on the number of accounts they  terminated in 2016 for reasons related to  BSA/AML risk. We found that two extra-large  banks (those banks with $50 billion or greater  in assets) were responsible for the majority of  these account terminations for both business  and personal accounts. These terminations  accounted for less than half a percent of the  extra-large banks\u2019 overall accounts. These  numbers only represent account terminations  for the banks that provided data and are not  generalizable to the population of banks.", "The most common reason related to BSA/AML risk banks reported for  terminating accounts from January 2014 through December 2016 was the  filing of SARs associated with the accounts. Based upon our survey, we  estimate that 93 percent of Southwest border banks terminated accounts  because of the filing of SARs. Through discussions with Southwest  border bank representatives, we found that banks vary the level of  internal investigations they conduct into the suspicious activity before  deciding to terminate an account as a result of a certain number of SAR  filings. Representatives from 3 of the 19 Southwest border banks we  spoke with told us that their account closure policies generally required  the automatic termination of an account when a certain number of  SARs\u2014ranging from 1 to 4\u2014were filed for an account. Representatives  from two other Southwest border banks said a certain number of SARs  filed for one account would lead to an automatic review of the account  that would determine whether or not the account should be closed. Other  Southwest border bank representatives we interviewed did not indicate  having a specific policy for terminating accounts related to the number of  SAR filings, but some of these representatives said that SAR filings were  one of the factors that could lead to account terminations.", "Figure 5 shows the survey estimates for the other BSA/AML reasons  Southwest border banks cited for terminating accounts. Some commonly  cited reasons were the failure of the customer to respond adequately to  requests for information as part of customer due diligence processes and  the reputational risk associated with the customer type. For example, an  estimated 80 percent of Southwest border banks cited the failure of the  customer to respond adequately to requests for information as part of  customer due diligence processes. Some Southwest border bank  representatives told us that sometimes customers do not provide  adequate documentation in response to their due diligence inquiries.  These representatives said that after a certain number of attempts to  obtain the documentation, the lack of customer responsiveness results in  them terminating the account. A bank may also terminate an account if  the activity of the customer could risk the reputation of the bank. About 68  percent of Southwest border banks that terminated accounts cited the  reputational risk associated with the customer type as a reason for  terminating an account. Some Southwest border bank representatives we spoke with said they have closed accounts due to the nature of the  business. For example, some bank representatives said they have closed  accounts for gambling and marijuana businesses. In addition, law  enforcement officials from the Southwest Border Anti-Money Laundering  Alliance told us that they thought that some of the accounts terminated by  Southwest border banks were a result of the information the banks were  given from local law enforcement and other federal agencies. For  example, when funnel accounts\u2014accounts in one geographic area that  receive multiple cash deposits and from which funds are withdrawn in a  different geographic area with little time elapsing between the deposits  and withdrawals\u2014were first identified by law enforcement as a money  laundering method, banks responded by closing these types of accounts.  Non-Southwest border banks generally reported the same primary  reasons for terminating accounts as Southwest border banks. The top two  reasons for terminating accounts cited by non-Southwest border banks  that responded to the survey was the filing of SARs associated with the  accounts and the failure of the customer to respond adequately to  requests for information as part of customer due diligence processes.", "A majority of Southwest border banks and non-Southwest border banks  reported limiting or not offering accounts to certain types of businesses  considered high risk for money laundering and terrorist financing,  particularly money services businesses and foreign businesses. For  example, the estimates for Southwest border banks that have limited, or  not offered, accounts to nontrade-related foreign businesses is 76  percent, money service businesses is 75 percent, and foreign businesses  engaged in cross-border trade is 72 percent. The most common reason  (cited by 88 percent of Southwest border banks) for limiting, or not  offering, an account to these types of businesses was that the business  type fell outside of the bank\u2019s risk tolerance\u2014the acceptable level of risk  an organization is willing to accept around specific objectives. Similarly,  69 percent of Southwest border banks cited the inability to manage the  BSA/AML risk associated with the customer (for example, because of  resource constraints) as a factor for limiting, or not offering, accounts.  Representatives from some Southwest border banks we spoke with  explained that they do not have the resources needed to conduct  adequate due diligence and monitoring for some of the business types  considered high risk for money laundering and terrorist financing. As a  result, they told us that they no longer offer accounts for certain business  lines. For example, a representative from one Southwest border bank told  us that the bank no longer offers accounts to money services businesses  because of the BSA/AML compliance requirements and monitoring  needed to service those types of accounts. In particular, they stated they  do not have the resources to monitor whether the business has the  appropriate BSA/AML compliance policies and procedures in place and to  conduct site visits to ensure it is operating in compliance with BSA/AML  requirements. Another Southwest border bank representative told us they  have stopped banking services for used clothing wholesalers who export  their product to Mexico because they were unable to mitigate the risk  associated with these types of businesses. They explained that these  companies\u2019 business models involve many individuals crossing the U.S.- Mexico border to purchase with cash pallets of clothing to import to  Mexico. The bank representative explained that the business model for  this industry made it very hard to identify the source of the large volumes  of cash.", "Other reasons Southwest border banks reported for limiting, or not  offering, certain types of business accounts are shown in figure 6. Similar  to the reasons given by Southwest border banks, the most common  reason that non-Southwest border banks reported limiting, or not offering  accounts, to certain types of businesses considered high risk for money  laundering and terrorist financing was that the customer type fell outside  of the bank\u2019s risk tolerance."], "subsections": []}]}, {"section_title": "Other Account Terminations and Limitations Raise Concerns about Derisking", "paragraphs": ["The second most common reason\u2014cited by 80 percent of Southwest  border banks\u2014for limiting, or not offering, accounts to certain types of  businesses considered high risk for money laundering and terrorist  financing, was that the customer type drew heightened BSA/AML  regulatory oversight\u2014behavior that could indicate derisking. For  example, representatives from one Southwest border bank explained that  they no longer offer accounts to money services businesses because  they want to be viewed from a good standpoint with their regulator. They  added that banking for these types of customers is very high risk for the  bank with very little reward. Another bank that operates in the Southwest  border region explained that rather than being able to focus on their own  BSA/AML risk assessment and the performance of accounts, they feel  pressured to make arbitrary decisions to close accounts based on specific  concerns of their examiners. Several Southwest border bank  representatives also described how recent BSA/AML law enforcement  and regulatory enforcement actions have caused them to become more  conservative in the types of businesses for which they offer accounts. For  example, representatives from one Southwest border bank we spoke with  stated that many of the banks that do business in the Southwest border  region have stopped servicing cross-border businesses due to a large  enforcement action in which the allegations against the bank cited an  ineffective AML program that exposed it to illicit United States/Mexico  cross-border cash transactions. A representative from another  Southwest border bank explained that his bank could have a large  banking business in one of the state\u2019s border towns, but the bank has  chosen not to provide services there because if BSA/AML compliance  deficiencies are identified from servicing that area, the penalties could be  high enough to shut down the whole bank. In addition, while banks may  terminate accounts because of SAR filings as a method to manage  money laundering and terrorist financing risk and to comply with  BSA/AML requirements, some of these terminations may be related to  derisking. For example, some Southwest border bank representatives we  spoke with as part of this review, as well as other banks and credit unions  we spoke with in a previous review, told us that they have filed SARs to  avoid potential criticism during examinations, not because they thought  the observed activity was suspicious. Non-Southwest border banks also  commonly cited the inability to manage risk associated with the customer  type and heightened regulatory oversight as reasons for limiting, or not  offering, accounts.", "Our survey results and discussions with Southwest border bank  representatives are consistent with what a senior Treasury official  identified in a 2015 speech as causing correspondent banking and money  services business account terminations. The speech noted that a  number of interrelated factors may be resulting in the terminations, but  that the most frequently mentioned reason related to efforts to comply with AML and terrorist financing requirements. In particular, banks raised  concerns about (1) the cost of complying with AML and terrorist financing  regulations, (2) uncertainty about supervisors\u2019 expectations regarding  what is appropriate due diligence, and (3) the nature of the enforcement  and supervisory response if they get it wrong. The speech noted that  banks said that they made decisions to close accounts not so much  because they were unable to manage the illicit finance risks but because  the costs associated with taking on those risks had become too high. It  further stated that there is a gap between what supervisory agencies  have said about the standards they hold banks to and banks\u2019 assessment  of those standards, and that there was still a perception among banks  that supervisory and enforcement expectations lack transparency,  predictability, and consistency. The senior Treasury official noted this  perception feeds into higher anticipated compliance costs and when  banks input this perceived risk into their cost-benefit analysis, it may  eclipse the potential economic gain of taking on a new relationship."], "subsections": []}, {"section_title": "Southwest Border Bank Branch Closures Have Been Concentrated in a Small Number of Communities", "paragraphs": ["Counties in the Southwest border region have been losing bank branches  since 2012, similar to national and regional trends, as well as trends in  other high-risk financial crime or drug trafficking counties that are outside  the region. Most of the 32 counties (18 counties or nearly 60 percent)  comprising the Southwest border region did not lose bank branches from  2013 through 2016, but 5 counties lost 10 percent or more of their  branches over this time period (see top panel of fig. 7). Those 5  counties are Cochise, Santa Cruz, and Yuma, Arizona; Imperial,  California; and Luna, New Mexico.", "Within those counties we identified as having the largest percentage loss  of branches, sometimes those losses were concentrated in smaller  communities within the county (see bottom panel of fig. 7). For example,  Calexico in Imperial County, California, lost 5 of its 6 branches from 2013  through 2016. In Santa Cruz County in Arizona, one zip code in Nogales  accounted for all of the branch losses in the county from 2013 through  2016, losing 3 of its 9 branches. More generally, branch losses can vary  substantially across different zip codes in a county (see for example  bottom panel of fig. 7). In other instances, counties that lost a relatively  small share of their branches can contain communities that lost a more  substantial share\u2014for example San Ysidro in San Diego County lost 5 of  its 12 branches (about 42 percent) while the county as a whole lost only 5  percent of its branches from 2013 through 2016.", "Based on our analysis, counties losing branches in the Southwest border  region tended to have substantially higher SAR filings, on average, than  Southwest border region counties that did not lose branches. That is,  counties that lost branches from 2013 through 2016 had about 600 SAR  filings per billion dollars in deposits, on average, and counties that did not  lose branches had about 60 SAR filings per billion dollars in deposits, on  average (see fig. 8)."], "subsections": []}, {"section_title": "Empirical Evidence Suggests Demographic and Money Laundering- Related Risk Factors Are Drivers of Branch Closures", "paragraphs": ["The econometric models we developed and estimated generally found  that demographic and money laundering-related risk factors were  important predictors of national bank branch closures. These models are  subject to certain limitations, some of which we detail later in this section  as well as appendix III, and as such, we interpret the results with some  degree of caution. In general, our results suggest that counties were  more likely to lose branches, all else equal, if they were (1) urban, had a  higher per capita personal income, and had a younger population  (proportion under 45); or (2) designated as a HIFCA or HIDTA county, or  had higher SAR filings. We term the latter three characteristics (HIFCA,  HIDTA, and SAR filings) \u201cmoney laundering-related risk factors.\u201d While  our models are unable to definitively identify the causal effect of  BSA/AML regulation on branch closures from these money laundering- related risk factors, the impact of the SAR variables, in particular, could  reflect a combination of BSA/AML compliance effort and the underlying  level of suspicious or money laundering-related activity in a county.", "Our econometric models are based on all counties with bank branches in  the United States and are designed to predict whether a county will lose a  branch the following year based on the characteristics of the county. The  models included demographic, economic, and money laundering-related  risk factors that might have influenced branch closures nationally since  2010 (see app. III for additional information on our models). The  demographic factors included in our models are Rural-Urban Continuum  Codes, age profile (proportion of the county over 45), and the level of per  capita income. We chose these demographic factors, in particular,  because they are associated with the adoption of mobile banking, which  may explain the propensity to close branches in a community. The  economic factors included in our models\u2014intended to reflect temporary  or cyclical economic changes affecting the county\u2014are the growth of per  capita income, growth in building permits (a measure of residential housing conditions), and growth of the population. The money laundering- related risk factors, as described previously, are whether a county has  been designated a HIFCA or a HIDTA and the level of suspicious or  possible money laundering-related activity reported by bank branches in  the county, as represented by SAR filings.", "Demographic characteristics of counties were important predictors of  branch closures. Our results were consistent with those demographic  characteristics associated with the adoption of mobile banking. As such,  our results are consistent with the hypothesis that mobile banking is  among the factors leading some banks to close branches. The most  urban counties were about 22 percentage points more likely to lose one  or more branches over the next year than the most rural counties. A  county with 70 percent of the population under 45 was about 9  percentage points more likely to lose one or more branches over the next  year than a county with half the population under 45. A county with per  capita income of $50,000 was about 7 percentage points more likely to  lose one or more branches over the next year than a county with per  capita income of $20,000.", "Money laundering-related characteristics of a county were also important  predictors of branch closures in our models. HIDTA counties were about  11 percentage points more likely to lose one or more branches over the  next year than non-HIDTA counties (the effect in HIFCA counties is less  significant statistically and smaller in magnitude). A county with 200  SARs filed per billion dollars in bank deposits was about 8 percentage  points more likely to lose one or more bank branches over the next year  than a county where no bank branch had filed a SAR. Southwest border  bank officials we spoke with generally said that SAR filings were a time-  and resource-intensive process, and that the number of SARs filings\u2014to  some extent\u2014reflected the level of effort, and overall BSA compliance  risk, faced by the bank. That said, the impact of SAR variables in our  models could reflect a combination of (1) the extent of BSA/AML  compliance effort and risk faced by the bank, as expressed by bank  officials, and (2) the underlying level of suspicious or money laundering- related activity in a county.", "Money laundering-related risk factors were likely to have been relatively  more important drivers of branch closures in the Southwest border region  because it had much higher SAR filings and a larger share of counties  designated as HIDTAs than the rest of the country. More generally, given  the characteristics of Southwest border counties and the rest of the  United States, our models suggest that while demographic factors have  been important drivers of branch closures in the United States overall,  risks associated with money laundering were likely to have been relatively  more important in the Southwest border region. Specifically, the  Southwest border region is roughly as urban as the rest of the country,  has a somewhat lower per capita income (about $35,000 in the  Southwest border region versus about $41,000 elsewhere) and is  somewhat younger on average (about 40 percent 45 and over in the  Southwest border region versus about 45 percent elsewhere), but money  laundering-related risk factors were relatively more prevalent, based on  our measures, in the Southwest border region.", "Southwest border bank representatives we interviewed told us they  considered a range of factors when deciding whether or not to close a  branch. For example, most Southwest border bank representatives that  we spoke with about the reasons for branch closures (6 of 10) told us that  BSA/AML compliance challenges were not part of the decision to close a  branch. However, most Southwest border bank representatives said  that the financial performance of the branch is one of the most important  factors they consider when deciding to close a branch, and as described  previously, BSA/AML compliance can be resource intensive, which may  affect the financial performance of a branch. Further, nearly half of the  Southwest border bank representatives we spoke with (4 of 10), did  mention that BSA/AML compliance costs could be among the factors  considered in determining whether or not to close a branch. In addition, at  least one bank identified closing a branch as one option to address  considerable BSA/AML compliance challenges. Finally, some Southwest  border bank representatives (3 of 10) also mentioned customer traffic in  the branch or the availability of mobile banking as relevant to their  decision to close a branch."], "subsections": []}]}, {"section_title": "Select Border Communities Raised Concerns That Branch Closures and Account Terminations Reduced Economic Growth and Access to Banking Services", "paragraphs": ["Communities we visited in Arizona, California, and Texas experienced  multiple bank branch closures from 2013 through 2016. Some local  banking customers that participated in the discussion groups we held in  these communities also reported experiencing account terminations.  While perspectives gathered from our visits to the selected cities cannot  be generalized to all locations in Southwest border counties, stakeholders  we spoke with noted that these closures affected key businesses and  local economies and raised concerns about economic growth."], "subsections": [{"section_title": "Border Communities We Visited Experienced Account Terminations and Branch Closures", "paragraphs": ["According to some discussion group participants, local businesses,  economic development specialists, and other stakeholders (border  stakeholders) in the three Southwest border communities we visited,  banks in their communities terminated the accounts of longtime  established customers, sometimes without notice or explanation. They  acknowledged that, because of their proximity to the U.S.-Mexico border,  their communities were susceptible to money laundering-related activity  and described how banks\u2019 increased efforts to comply with BSA/AML  requirements may have influenced banks\u2019 decisions to terminate  accounts. Each of the three Southwest border communities we visited\u2014 Nogales, Arizona; San Ysidro, California; and McAllen, Texas\u2014also  experienced multiple bank branch closures from 2013 through 2016 (see  fig. 9).", "Our analysis shows that from 2013 through 2016, these communities lost  a total of 12 bank branches, 9 of which were branches of large or extra- large banks, based on asset size. But the percentage of branch closures  in some communities was more significant in locations where there were  already a limited number of branch options. For instance, Nogales (3 of  its 9 branches closed) and San Ysidro (5 of its 12 branches closed) both  lost a third or more of all their bank branches compared to McAllen where  approximately 6 percent of its branches were closed (4 of its 63 branches  closed)."], "subsections": []}, {"section_title": "Account Terminations and Branch Closures Affected Key Southwest Border Businesses and Customers and Concerns about Limited Economic Growth Were Reported", "paragraphs": ["According to border stakeholders we spoke with, businesses engaged in  cross-border trade, cash-intensive businesses, and Mexican nationals\u2014 all significant parts of the border economy\u2014were affected by account  terminations and branch closures in the three communities we visited. For  example, the cross-border produce industry accounts for almost 25  percent of jobs and wages in Nogales, according to a 2013 study  prepared for Nogales Community Development. One produce business  owner who had an account terminated told us that she was told that the  volume of funds deposited into the account from her affiliated Mexican  business created security risks that the bank was no longer willing to  sustain, and she was unable to negotiate with the bank to keep it open.  She said that it took almost 7 months to open a new account and that it  involved coordination among bankers in multiple cities on both sides of  the border. While some produce businesses and economic development  specialists we spoke with explained that some regional banks in their  communities have opened accounts for some small- to medium-sized  produce businesses, they still have concerns about the long-term effects  of limited access to banking services on smaller produce firms. One  economic development specialist explained that these small companies  often rely on local banks for funding, which enables them to develop and  bring innovation to the produce industry.", "Some discussion group participants who we spoke with also described  challenges related to account terminations that cash-intensive businesses  face in operating in the Southwest border region because of banks\u2019  increased emphasis on BSA/AML compliance. They explained that cash  transactions raised suspicions for banks because of their associated  money laundering risk; however, cash is a prevalent payment source for  legitimate businesses in the region. For example, one money services  business owner who participated in our discussion group in San Ysidro  said that because his business generates large volumes of cash, he  struggles to keep a bank account as a result of banks\u2019 oversight of and  caution regarding cash transactions. He said his business account has  been closed three times over the past 35 years and that banks have  declined his requests to open an account at least half a dozen times.  Similarly, another discussion group participant explained that companies  that import automobiles into Mexico use cash to pay for cars in the United  States and that trying to make these large cash deposits raised  suspicions for U.S. banks.", "Border stakeholders we spoke with also described how challenges  associated with branch closures and terminations of accounts of Mexican  nationals affected the Southwest border communities we visited. Border  communities like San Ysidro are home to retail businesses, such as  restaurants and clothing stores. According to our analysis of Bureau of  Transportation Statistics data, an average of almost 69,000 personal  vehicle passengers and 25,000 pedestrians entered the United States  daily in September 2017 through the San Ysidro land port of entry.  Economic development specialists told us that these visitors spend  money on goods and services in local border communities. For example,  one economic development specialist in Arizona estimated that Mexican  nationals spend about $1 billion in Pima County alone each year, and  another one estimated that 70 percent of the sales taxes collected in  Nogales are paid by Mexican customers who cross the border to shop.  One of the specialists explained that Mexicans\u2014both Mexican day  travelers to Tucson, as well as those who own U.S. real estate and travel  to the United States for other investment business\u2014used to visit the  region and withdraw money from their U.S. bank accounts and  subsequently spend money in border communities. He explained that  Mexican nationals find it easier to have U.S. bank accounts to use while  visiting and shopping on the U.S. side of the border. However, some  discussion group participants said that because Mexican nationals have  faced difficulties maintaining U.S. bank accounts, they have made fewer  trips across the border and engaged in less commerce, which has  affected the economies in their communities. Some participants also said  that branch closures have affected businesses\u2019 sales volumes in their  communities. For example, one participant said that when branches  closed in the San Ysidro Boulevard area\u2014which is at the base of the  pedestrian border crossing\u2014businesses have had difficulty thriving due to  reduced foot traffic by customers.", "According to border stakeholders we spoke with, branch closures also  resulted in fewer borrowing options and limited investment in the  communities, which they thought hindered business growth. For example,  one discussion group participant explained that middle-sized businesses,  such as those with revenues of approximately $2 million\u2013$25 million,  have fewer borrowing options when branches closed in the community  because the remaining regional and smaller banks may not have the  capital to support the lending needs of businesses that size. One  economic development specialist and some discussion group participants  also suggested that branch closures limited opportunities for local  business expansion when banks outside the community are reluctant to  lend to them. For example, in Tucson, Arizona, one specialist said that  small businesses are having difficulty getting loans, which affects the  ability of businesses to grow. To fill the void, some local businesses have  turned to alternative lending options, such as title loan companies,  accounts receivable lending companies, and family members as  alternative funding sources. Rigorous academic research we reviewed  suggests that branch closures reduce small business lending and  employment growth in the area immediately around the branch. Our  analysis of branch closure data based on estimates from this research  suggests closed branches in the communities we visited could have  amounted to millions of dollars in reduced lending and hundreds of fewer  jobs. For example, in McAllen, Texas, this research suggests that the loss  of four bank branches could have reduced employment growth by over  400 jobs and small business lending by nearly $3.5 million."], "subsections": []}, {"section_title": "Discussion Group Participants in Communities We Visited Reported Reduced Access to Banking Services", "paragraphs": ["Some discussion group participants said that as a result of branch  closures and account terminations in the Southwest border communities  we visited, they traveled further to conduct banking activities, paid higher  fees for new banking alternatives, and experienced difficulty completing  banking transactions. Some participants told us that they had to travel  further to their new banking location, which resulted in additional costs  and inconvenience for customers. For instance, some participants in  Nogales and San Ysidro said they had to travel 20 to 40 minutes further  to the next closest bank branch, with one participant noting that this  especially created difficulty for elderly bank customers. One discussion  group participant said that when their local bank branch closed, they kept  their account with that bank and traveled more than 70 miles to the next  closest branch because they were afraid that they would not be able to  open an account with another bank. Another participant also noted the  additional cost of gas and time lost for other important matters as a result  of traveling further to a branch. Other participants also noted that they  experienced longer lines at their new branches because of the higher  volume of customers from closed branches. Some participants also found  that some banking alternatives were more expensive than their previous  banking options when their accounts were terminated or a local branch  closed. For instance, some discussion group participants said they paid  higher fees at their new bank and one participant mentioned that she  received a lower interest rate on her deposits at her new bank. Some  participants also mentioned that some banking alternatives they used,  such as currency exchanges, were more expensive than their previous  banking options.", "Some discussion group participants also told us that they experienced  difficulty completing banking transactions in their communities as a result  of branch closures or banks\u2019 increased efforts to comply with BSA/AML  requirements. For example, some participants from one discussion group  session said that only an automated teller machine (ATM) was available  in their community after their branch closed and it was not appropriate for  all types of banking transactions. Further, some participants were  unsatisfied with not being able to get in-person assistance from bank staff  when their branch closed. For instance, one participant said that without a  local branch, there was no nearby bank personnel to help her when the  local ATM malfunctioned. Further, while acknowledging banks\u2019 need to  comply with BSA/AML requirements, some discussion group participants  explained that some banking transactions have become more difficult,  such as banks requiring additional forms of identification and limitations  placed on cash transactions. Some participants, many who were longtime  customers with their bank, also noted their disapproval with banks\u2019  additional questioning and documentation requirements, and that there  was little acknowledgment by the bank of their value as a legitimate  customer or of their knowledge about them as a customer. Some  participants acknowledged that they did not experience this challenge  because of the increasing availability of mobile banking options, which  allow customers to complete some transactions without going to a  physical branch location. As another example, one business owner said  she mostly used online banking and has a check reader in her office that  she uses to deposit checks directly into her business accounts."], "subsections": []}]}, {"section_title": "Regulators Have Not Fully Assessed the BSA/AML Factors Influencing Banks to Reduce Services", "paragraphs": ["The results of our survey (for both Southwest border banks and non- Southwest border banks) and discussions with Southwest border bank  representatives indicate that banks are terminating accounts and limiting  services, in part, as a way to manage perceived regulatory concerns  about facilitating money laundering. In addition, the econometric models  we developed and estimated also generally found that money laundering- related risk factors that could be reflective, in part, of BSA/AML  compliance effort and risks, were an important predictor of national bank  branch closures, and likely to have been relatively more important in the  Southwest border region. Regulators have taken some actions in  response to derisking, including issuing guidance and conducting some  agency reviews. Regulators have also conducted retrospective reviews  on some BSA/AML requirements. However, regulators have taken limited  steps aimed at addressing how banks\u2019 regulatory concerns and BSA/AML  compliance efforts may be influencing banks to engage in derisking or  close branches."], "subsections": [{"section_title": "Regulators Have Issued Guidance and Taken Some Actions Related to Derisking", "paragraphs": ["FinCEN and the federal banking regulators have responded to concerns  about derisking on a national level by issuing guidance to banks and  conducting some evaluations within their agencies to understand the  extent to which derisking is occurring. The guidance issued by regulators  has been aimed at clarifying BSA/AML regulatory expectations and  discouraging banks from terminating accounts without evaluating risk  presented by individual customers or banks\u2019 abilities to manage risks. The  guidance has generally encouraged banks to use a risk-based approach  to evaluate individual customer risks and not to eliminate entire  categories of customers. Some of the guidance issued by regulators  attempted to clarify their expectations specifically for banks\u2019 offering of  services to money services businesses. For example, in March 2005, the  federal banking regulators and FinCEN issued a joint statement on  providing banking services to money services businesses to clarify the  BSA requirements and supervisory expectations as applied to accounts  opened or maintained for this type of customer. The statement  acknowledged that money services businesses were losing access to  banking services as a result of concerns about regulatory scrutiny, the  risks presented by these types of accounts, and the costs and burdens  associated with maintaining such accounts. In addition, in November  2014, OCC issued a bulletin which explained that OCC-supervised banks  are expected to assess the risks posed by an individual money services  business customer on a case-by-case basis and to implement controls to  manage the relationship commensurate with the risks associated with  each customer. More recently, Treasury and the federal banking  regulators issued a joint fact sheet on foreign correspondent banking  which summarized key aspects of federal supervisory and enforcement  strategy and practices in the area of correspondent banking.", "In addition to issuing guidance, FDIC and OCC have taken some steps  aimed at trying to determine why banks may be terminating accounts  because of perceived regulatory concerns. For example, in January  2015, FDIC issued a memorandum to examiners establishing a policy  that examiners document and report instances in which they recommend  or require banks to terminate accounts during examinations. The  memorandum noted that recommendations or requirements to terminate  accounts must be made and approved in writing by the Regional Director  before being provided to and discussed with bank management and the  board of directors. As of December 2017, FDIC officials stated that there  were no instances of recommendations or requirements for account  terminations being documented by examiners. In 2016, OCC reviewed  how the institutions it supervises develop and implement policies and  procedures for evaluating customer risks as part of their BSA/AML  programs and for making risk-based determinations to close customer  accounts. OCC focused its review on certain large banks\u2019 evaluation of  risk for foreign correspondent bank accounts. This effort resulted in  OCC issuing guidance to banks on periodic evaluation of the risks of  foreign correspondent accounts. The guidance describes corporate  governance best practices for banks\u2019 consideration when conducting  these periodic evaluations of risk and making account retention or  termination decisions on their foreign correspondent accounts. Further,  OCC\u2019s Fiscal Year 2018 Bank Supervision Operating Plan noted that  examiners should be alert to banks\u2019 BSA/AML strategies that may  inadvertently impair financial inclusion. However, as of September 2017,  OCC officials stated that the agency has not identified any concerns  related to financial inclusion.", "Treasury and the federal banking regulators have also participated in a  number of international activities related to concerns about the decline in  the number of correspondent banking and money services business  accounts. For example, FDIC, OCC, and the Federal Reserve participate  in the Basel Committee on Banking Supervision\u2019s Anti-Money  Laundering/Counter Financing of Terrorism Experts Group. Recent efforts  of the group involved revising guidelines to update and clarify  correspondent banking expectations. Treasury leads the U.S.  engagement to the Financial Action Task Force (FATF)\u2014an inter- governmental body that sets standards for combating money laundering,  financing of terrorism, and other related threats to the integrity of the  international financial system\u2014which has issued guidance on  correspondent banking and money services businesses. Treasury also  participates in the efforts to combat derisking that are occurring through   the Financial Stability Board\u2019s Correspondent Banking Coordination  Group, the Global Partnership for Financial Inclusion, and the  International Monetary Fund.", "The federal banking regulators also met with residents and businesses in  the Southwest border region to discuss concerns related to derisking in  the region. For example, FDIC officials hosted a BSA/AML workshop in  Nogales, Arizona, in 2015 for banks, businesses, trade organizations, and  others. Officials from the Federal Reserve and OCC also participated in  the workshop during which the regulators tried to clarify BSA/AML  regulatory requirements and expectations. In addition, OCC officials told  us that they met with representatives of the Fresh Produce Association of  the Americas, who had concerns about banks not providing services in  the region. OCC officials spoke to the produce industry representatives  about various money laundering schemes and the role of the agency\u2019s  examiners during the meeting."], "subsections": []}, {"section_title": "BSA/AML Regulatory Reviews Have Not Evaluated All Factors Influencing Banks to Derisk and Close Branches", "paragraphs": ["Evaluation of BSA/AML regulations and their implementation is essential  to ensuring the integrity of the financial system while facilitating financial  inclusion. Without oversight of regulations after implementation, they  might prove to be less effective than expected in achieving their intended  goals, become outdated, or create unnecessary burdens. Regulations  may also change the behaviors of regulated entities and the public in  ways that cannot be predicted prior to implementation. Some regulators  and international standard setters recognize that establishing a balanced  BSA/AML regulatory regime is challenging. For example, in a 2016  speech, the then Comptroller of the Currency Curry stated that preventing  money laundering and terrorist financing are important goals, but that a  banking system that is truly safe and sound must also meet the legitimate  needs of its customers and communities. FinCEN officials also told us  that while the agency\u2019s mission is to safeguard the financial system from  illicit use and combat money laundering, they also must be cautious that  their efforts do not prevent people from using the system. Further, FATF  acknowledged that AML and counter-terrorism financing safeguards can  affect financial inclusion efforts. FATF explained that applying an overly  cautious approach to safeguards for money laundering and terrorist  financing can have the unintended consequence of excluding legitimate  businesses and consumers from the formal financial system.", "Executive orders encourage and legislation requires agencies to review  existing regulations to determine whether they should be retained,  amended, or rescinded, among other things. Retrospective reviews of  existing rules help agencies evaluate how existing regulations are  working in practice. A retrospective review is an important tool that may  reveal that an existing rule\u2014while needed\u2014has not operated as well as  expected, and that changes may be warranted. Retrospective reviews  seek to make regulatory programs more effective or less burdensome in  achieving their regulatory objectives. Many recent presidents have  directed agencies to evaluate or reconsider existing regulations. For  example, in 2011 President Obama issued Executive Orders 13563 and  13579. Among other provisions, Executive Orders 13563 and 13579  require executive branch agencies and encourage independent regulatory  agencies, such as the federal banking regulators, respectively, to develop  and implement retrospective review plans for existing significant  regulations. Further, the Trump Administration has continued to focus  on the need for agencies to improve regulatory effectiveness while  reducing regulatory burdens. Executive Order 13777, issued by President  Trump in February 2017, also reaffirms the objectives of previous  executive orders and directs agency task forces to identify regulations  which, among other criteria, are outdated, unnecessary, or ineffective.  In addition to the executive orders, the Economic Growth and Regulatory  Paperwork Reduction Act (EGRPRA) requires federal banking regulators  to review the regulations they prescribe not less than once every 10 years  and request comments to identify outdated, unnecessary, or unduly  burdensome statutory or regulatory requirements."], "subsections": [{"section_title": "FinCEN and Federal Banking Regulators\u2019 BSA/AML Retrospective Reviews", "paragraphs": ["FinCEN and the federal banking regulators have all participated in  retrospective reviews of different parts of the BSA/AML regulations. For  example, FinCEN officials told us that they review each new or  significantly amended regulation to assess its clarity and effectiveness  within 18 months of its effective date. Each assessment is targeted to the  specific new regulation, or significant change to existing regulations, and  a determination is made on how best to evaluate its effectiveness.  FinCEN officials explained that the agency consistently receives feedback  from all of the relevant stakeholders, including law enforcement, regulated  entities, relevant federal agencies, and the public, which informs their  retrospective reviews. Based on the specific findings of an assessment,  FinCEN considers whether to publish guidance or whether additional rule  making is required. For example, FinCEN officials explained that they  revised the money services business definitions to adapt to evolving  industry practice as part of the regulatory review process.", "As part of fulfilling their requirements under EGRPRA, the federal banking  regulators\u2014through the Federal Financial Institutions Examination  Council (FFIEC)\u2014have also participated in retrospective reviews of  BSA/AML regulations. As part of the 2017 EGRPRA review, FFIEC  received several public comments on BSA/AML requirements, including  increasing the threshold for filing CTRs, the SAR threshold, and the  overall increasing cost and burden of BSA compliance. The federal  banking regulators referred the comments to FinCEN. FinCEN is not a  part of the EGRPRA review and is not required to consider the  comments; however, in its response in the 2017 EGRPRA report, the  agency stated that it finds the information helpful when assessing BSA  requirements. FinCEN officials and the federal banking regulators stated  that the agencies are working to address the BSA-related EGRPRA  comments\u2014particularly those related to CTR and SAR filing  requirements\u2014through the BSA Advisory Group (BSAAG), which  established three subcommittees to address some of the concerns raised  during the EGRPRA process. One subcommittee is reviewing the  metrics used by industry, law enforcement, and FinCEN to assess the  value and effectiveness of BSA reporting. Another subcommittee is  focusing on how SAR filing requirements could be streamlined or reduced  while maintaining the value of the data, and the third subcommittee is  focusing on issues related to the filing of CTRs. FinCEN and the federal  banking regulators are also considering, through the advisory group, the  EGRPRA comments that involve the supervisory process and  expectations related to BSA examinations of financial institutions. FinCEN  officials stated that there have been significant discussions during two  BSAAG meetings since the 2017 EGRPRA report was issued and that, as  of November 2017, all of these efforts are ongoing. In addition to the  BSAAG, regulators also told us that that the FFIEC BSA/AML working  group has discussed EGRPRA and other compliance burden issues at its  recent meetings and is trying to promote BSA examination consistency  through its monthly meetings and with the interagency FFIEC BSA/AML  examination manual.", "The actions FinCEN and the federal banking regulators have taken  related to derisking\u2014issuing guidance, conducting internal agency  reviews, and meeting with affected Southwest border residents\u2014have not  been aimed at addressing and, if possible ameliorating, the full range of  factors that influence banks to engage in derisking, in particular banks\u2019  regulatory concerns and BSA/AML compliance efforts. Further, the  actions regulators have taken to address concerns raised in BSA/AML  retrospective reviews have focused primarily on the burden resulting from  the filing of CTRs and SARs, but again, these actions have not evaluated  how regulatory concerns may influence banks to engage in derisking or  close branches. Federal internal control standards call for agencies to  analyze and respond to risks to achieving their objectives. Further,  guidance implementing Executive Orders 13563 and 13579 states that  agencies should consider conducting retrospective reviews on rules that  unanticipated circumstances have overtaken.", "Our evidence shows that derisking may be an unanticipated response  from the banking industry to BSA/AML regulations and their  implementation. For example, our evidence demonstrates that banks not  only terminate or limit customer accounts as a way to address legitimate  money laundering and terrorist financing threats, but also, in part, as a  way to manage regulatory concerns. Further, our econometric models  and discussions with bank representatives suggest that BSA/AML  compliance costs and risks can play a role in the decision to close a  branch. The actions FinCEN and the federal banking regulators have  taken to address derisking and the retrospective reviews that have been  conducted have not been broad enough to evaluate all of the BSA/AML  factors banks consider when they derisk or close branches, including  banks\u2019 regulatory concerns which may influence their willingness to  provide services. Without assessing the full range of BSA/AML factors  that may be influencing banks to derisk or close branches, FinCEN, the  federal banking regulators, and Congress do not have the information  they need to determine if adjustments are needed to ensure that the  BSA/AML regulations and their implementation are achieving their  regulatory objectives in the most effective and least burdensome way."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["BSA/AML regulations promote the integrity of the financial system by  helping a number of regulatory and law enforcement agencies detect  money laundering, drug trafficking, terrorist financing, and other financial  crimes. As with any regulation, oversight after implementation is needed  to ensure the goals are being achieved and that unnecessary burdens are  identified and ameliorated. The collective findings from our work indicate  that BSA/AML regulatory concerns have played a role in banks\u2019 decisions  to terminate and limit accounts and close branches. However, the actions  taken to address derisking by the federal banking regulators and FinCEN  and the retrospective reviews conducted on BSA/AML regulations have  not fully considered or addressed these effects. Retrospective reviews  help agencies evaluate how existing regulations are working in practice  and can assist to make regulatory programs more effective or less  burdensome in achieving their regulatory objectives. BSA/AML  regulations have helped to detect money laundering and other financial  crimes, but there are also real concerns about the unintended effects,  such as derisking, that these regulations and their implementation may be  having. While it is important to evaluate how effective BSA/AML  regulations are in helping to identify money laundering, terrorist financing,  and other financial crimes, it is also important to identify and attempt to  address any unintended outcomes. We have found that reduced access  to banking services can have consequential effects on local communities.  However, without evaluating how banks\u2019 regulatory concerns may be  affecting their decisions to provide services, the federal banking  regulators, FinCEN, and Congress do not have the information to  determine if BSA/AML regulations and their implementation can be made  more effective or less burdensome in achieving their regulatory  objectives."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations to FinCEN and the three federal  banking regulators in our review\u2014FDIC, the Federal Reserve, and  OCC\u2014to jointly conduct a retrospective review of BSA/AML regulations  and their implementation for banks.", "The Director of FinCEN should jointly conduct a retrospective review of  BSA/AML regulations and their implementation for banks with FDIC, the  Federal Reserve, and OCC. This review should focus on how banks\u2019  regulatory concerns may be influencing their willingness to provide  services. In conducting the review, FDIC, the Federal Reserve, OCC, and  FinCEN should take steps, as appropriate, to revise the BSA regulations  or the way they are being implemented to help ensure that BSA/AML  regulatory objectives are being met in the most effective and least  burdensome way. (Recommendation 1)", "The Chairman of FDIC should jointly conduct a retrospective review of  BSA/AML regulations and their implementation for banks with the Federal  Reserve, OCC, and FinCEN. This review should focus on how banks\u2019  regulatory concerns may be influencing their willingness to provide  services. In conducting the review, FDIC, the Federal Reserve, OCC, and  FinCEN should take steps, as appropriate, to revise the BSA regulations  or the way they are being implemented to help ensure that BSA/AML  regulatory objectives are being met in the most effective and least  burdensome way. (Recommendation 2)", "The Chair of the Federal Reserve should jointly conduct a retrospective  review of BSA/AML regulations and their implementation for banks with  FDIC, OCC, and FinCEN. This review should focus on how banks\u2019  regulatory concerns may be influencing their willingness to provide  services. In conducting the review, FDIC, the Federal Reserve, OCC, and  FinCEN should take steps, as appropriate, to revise the BSA regulations  or the way they are being implemented to help ensure that BSA/AML  regulatory objectives are being met in the most effective and least  burdensome way. (Recommendation 3)", "The Comptroller of the Currency should jointly conduct a retrospective  review of BSA/AML regulations and their implementation for banks with  FDIC, the Federal Reserve, and FinCEN. This review should focus on  how banks\u2019 regulatory concerns may be influencing their willingness to  provide services. In conducting the review, FDIC, the Federal Reserve,  OCC and FinCEN should take steps, as appropriate, to revise the BSA  regulations or the way they are being implemented to help ensure that  BSA/AML regulatory objectives are being met in the most effective and  least burdensome way. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to CFPB, the Department of Justice, the  Federal Reserve, FDIC, Treasury/FinCEN, and OCC. The Federal  Reserve, FDIC, and OCC provided written comments that have been  reproduced in appendixes IV\u2013VI, respectively. Treasury/FinCEN did not  provide a written response to the report. FDIC, Treasury/FinCEN, and  OCC provided technical comments on the draft report, which we have  incorporated, as appropriate. CFPB and the Department of Justice did not  have any comments on the draft of this report.", "In their written responses, the Federal Reserve, FDIC, and OCC agreed  to leverage ongoing interagency work reviewing BSA/AML regulations  and their implementation for banks to address our recommendation. We  agree that using existing interagency efforts is an appropriate means for  conducting a retrospective review of BSA/AML regulations that focuses  on evaluating how banks\u2019 BSA/AML regulatory concerns may be  influencing their willingness to provide services.", "The Federal Reserve, FDIC, and OCC also raised concerns with some of  the findings of our report and the methodologies we used. For example, in  their responses, each agency discussed that the report did not take into  consideration the extent to which law enforcement activities may be a  driver of account terminations and branch closures in the Southwest  border region. In response to this comment, we added some information  to the report that we received from law enforcement officials about  instances in which some account terminations were the result of law  enforcement\u2019s identification of suspicious accounts. This type of account  termination, however, is not included in our definition of the term  \u201cderisking,\u201d because such terminations are consistent with BSA/AML  purposes. In addition, when we discuss the role that enforcement actions  have played in making Southwest border banks more conservative in  their account offerings, we\u2019ve clarified the language to ensure it  encompasses both regulatory enforcement actions taken by the federal  banking regulators and criminal enforcement actions taken by law  enforcement agencies. Treasury/FinCEN\u2019s technical comments also  noted that the report did not take into consideration the 2010 Mexican  exchange control regulations and their subsequent changes, which it  considers to be the most important catalyst of changes to BSA risk  profiles for banks in the Southwest border region. To address this  comment, we added language describing these regulations and their  potential effects on Southwest border banks.", "In its written response, the Federal Reserve stated that the report does  not find a causal linkage between the agency\u2019s regulatory oversight and  derisking decisions made by some banks that operate along the  Southwest border (see app. IV). OCC made a similar comment in its  technical comments on the draft report. While the methodologies used in  our report included a nationally representative survey of banks,  econometric modeling of potential drivers of branch closures, and  discussions with bank representatives, do not on their own allow us to  make a definitive causal linkage between regulation and derisking, the  collective evidence we gathered indicates that banks\u2019 BSA/AML  regulatory concerns have played a role in their decisions to terminate and  limit accounts and close branches. We believe that, based on this  evidence, further examination by the federal banking regulators and  FinCEN into how banks\u2019 perceived regulatory concerns are affecting their  offering of services is warranted.", "OCC\u2019s written response noted that the definition of derisking we used is  inconsistent with definitions used by other regulatory bodies and that our  definition encompasses a wide range of situations in which banks limit  certain services or end customer relationships (see app. VI).  Treasury/FinCEN also made a similar comment in its technical comments  on the draft report. OCC\u2019s letter notes that FATF and the World Bank  define derisking as situations in which financial institutions terminate or  restrict business relationships with entire countries or classes of  customers in order to avoid, rather than to manage, AML-related risks.  We, however, defined derisking for the purposes of our report as the  practice of banks limiting certain services or ending their relationships  with customers to, among other things, avoid perceived regulatory  concerns about facilitating money laundering because it best described  the bank behavior we wanted to examine. While we recognize that there  are narrower definitions of derisking that focus solely on the treatment of  entire countries or classes of customers, we chose to focus on banks\u2019  perceived regulatory concerns because these concerns could influence  banks\u2019 decisions to provide services in a variety of ways. Moreover,  including perceived regulatory concerns as a factor enabled us to  examine whether there were ways the federal regulators may be able to  improve the implementation of BSA/AML to reduce the effects of  derisking on different populations of banking customers. Furthermore, our  definition is broader and allows us to include individual decisions banks  make to terminate or limit accounts, as well as whole categories of  customer accounts. Our decision to define derisking in this manner was  based on, among other things, discussions we had with representatives  of Southwest border banks who indicated such behavior was occurring.  We added additional information on the definition of derisking we chose to  our scope and methodology section (see app. I).", "OCC\u2019s response letter also notes that because we focus exclusively on  BSA/AML regulatory issues, the report does not take into consideration  other reasons that banks terminate account relationships. We recognize  that banks may terminate accounts for a variety of reasons, some of  which are not related to BSA/AML regulatory issues. However, because  the focus of our review was to determine why banks are terminating  accounts for BSA/AML regulatory reasons, we did not seek to identify all  the potential reasons banks may terminate accounts.", "Finally, OCC\u2019s letter states that the agency has concerns regarding our  econometric analysis and the conclusions that can be drawn from it. FDIC  made similar comments in its technical comments on the draft report. In  response to these comments, we have clarified how we interpret the  effect of money laundering-related risk in our models. We agree that the  econometric results on their own do not provide definitive evidence that  regulatory burden is causing branch closures, but our econometric  models and discussions with bank representatives together suggest that  BSA/AML compliance costs and risks can play a role in the decision to  close a branch.", "FDIC\u2019s written letter states that the report does not distinguish account or  branch closures resulting from suspected money laundering or other illicit  financial transactions from closures that may have resulted from  ineffective or burdensome regulations. In response to this concern, we  revised language in the report to ensure that we do not imply that  instances in which banks limit services or terminate relationships based  on credible evidence of suspicious or illegal activity reflects derisking  behavior. As noted above, we also clarified how we interpret the effect of  money laundering-related risk on branch closures in our models and  recognize that our econometric results alone do not provide definitive  evidence that regulatory burden is causing branch closures. However, our  econometric models coupled with discussions we had with bank  representatives suggest that BSA/AML compliance costs and risks can  play a role in the decision to close a branch. FDIC\u2019s letter also stated that  our report highlighted that 1 in 10 branch closures may be due to  \u201ccompliance challenges.\u201d This statement is incorrect. The report states  that nearly half of the Southwest border bank representatives (4 of 10) we  spoke with mentioned that BSA/AML compliance costs could be among  the factors considered in whether or not to close a branch. Further, we  identified one bank that considered closing a branch as an option to  address considerable BSA/AML compliance challenges. In addition, most  Southwest border bank representatives we spoke with said that the  financial performance of the branch is one of the most important factors  they consider when deciding to close a branch, and as we describe in the  report, BSA/AML compliance can be resource intensive, which may affect  the financial performance of a branch.", "We are sending copies of this report to the appropriate congressional  committees, the Director of Financial Crimes Enforcement Network, the  Chairman of the Federal Deposit Insurance Corporation, the Chair of the  Board of Governors of the Federal Reserve System, the Comptroller of  the Currency, the Attorney General, the Acting Director of the Bureau of  Consumer Financial Protection, and other interested parties. The report  will also be available at no charge on our website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs are listed on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to (1) describe the types of heightened  Bank Secrecy Act/anti-money laundering (BSA/AML) compliance risks  that Southwest border banks may face and the BSA/AML compliance  challenges they may experience; (2) determine the extent to which banks  are terminating accounts and closing bank branches in the Southwest  border region and their reasons for any terminations or closures; (3)  describe what Southwest border banking customers and others told us  about any effects of account terminations and branch closures on  Southwest border communities; and (4) evaluate how the Department of  the Treasury\u2019s (Treasury) Financial Crimes Enforcement Network  (FinCEN) and the federal banking regulators\u2014the Board of Governors of  the Federal Reserve System (Federal Reserve), Federal Deposit  Insurance Corporation (FDIC), and Office of the Comptroller of the  Currency (OCC)\u2014have assessed and responded to concerns about  derisking in the Southwest border region and elsewhere, and the  effectiveness of those efforts.", "We defined \u201cderisking\u201d to mean the practice of banks limiting certain  services or ending their relationships with customers to, among other  things, avoid perceived regulatory concerns about facilitating money  laundering. We developed this definition by reviewing various existing  definitions used by international banking industry standard setters and  others, including the Financial Action Task Force (FATF)\u2014an  intergovernmental body that, among other things, sets standards for  combating money laundering; the Bank for International Settlements; the  World Bank; and the Global Partnership for Financial Inclusion. We also  reviewed guidance and other documentation issued by the federal  banking regulators, Treasury, and FinCEN; research reports on derisking;  an industry survey; and testimonial evidence from several banks we  interviewed. The methodologies we used allowed us to gather information  on a variety of factors that may be causing banks to limit services, while  our definition of derisking allowed us to focus on the role played by the  federal regulators in implementing BSA/AML requirements.", "We defined the Southwest border region as all counties that have at least  25 percent of their landmass within 50 miles of the U.S.-Mexico border.  Thirty-three counties fell within this definition. They are: Cochise, Pima,  Santa Cruz, and Yuma, Arizona; Imperial and San Diego, California;  Dona Ana, Hidalgo, and Luna, New Mexico; and Brewster, Brooks,  Cameron, Culberson, Dimmit, Edwards, El Paso, Hidalgo, Hudspeth, Jeff  Davis, Jim Hogg, Kenedy, Kinney, La Salle, Maverick, Presidio, Starr,  Terrell, Uvalde, Val Verde, Webb, Willacy, Zapata, and Zavala, Texas.  We excluded credit unions from the scope of our review based on  discussions with and information received from the National Credit Union  Administration (NCUA)\u2014which oversees credit unions for compliance  with BSA/AML requirements\u2014and two regional credit union groups that  cover the Southwest border states. These groups noted that neither  branch closures nor account terminations by credit unions were prevalent  in the Southwest border region.", "To describe the types of heightened BSA/AML compliance risks that  Southwest border banks may face and the BSA/AML compliance  challenges they may experience, we analyzed data from FinCEN on the  volume of Suspicious Activity Reports (SAR) and Currency Transaction  Reports (CTR) filed by bank branches in Southwest border counties and  compared the volume of those filings to filings in similar geographic areas  outside the Southwest border region from 2014 through 2016. To adjust  for variances in the size of counties, which may be reflected in the  number of SAR and CTR filings by counties, we standardized the quantity  of SARs and CTRs filed by county by calculating the number of SAR and  CTR filings per billion dollars in bank branch deposits. We used data from  FDIC\u2019s Summary of Deposits database for information on bank branch  deposits. To construct comparison groups that were comparable along  some key dimensions, we matched Southwest border counties to  counties with the same 2013 Rural-Urban Continuum Code (RUCC),  which measures how urban or rural a county is, and by population if there  was more than one potential matching county. We undertook this  process for two comparison groups, one for counties in Southwest border  states, but not directly on the U.S.-Mexico border, and one for counties  outside the Southwest border states that were designated as High  Intensity Financial Crimes Areas (HIFCA) or High Intensity Drug  Trafficking Areas (HIDTA). In addition, we analyzed data on BSA/AML  bank examination violations using nonpublic data provided by FDIC,  OCC, and the Federal Reserve from January 2009 through June 2016.  We obtained data for all Southwest border banks (if they had been cited  for a BSA/AML compliance violation during the period we reviewed), as  well as aggregated data for all banks in the United States that received a  BSA/AML compliance violation during the period we reviewed. Because  each regulator categorized violations differently, we developed a set of  categories to apply to violations across all three regulators. We analyzed  the distribution of violations by category. In addition, we analyzed data on  BSA/AML informal enforcement actions provided by the federal banking  regulators and formal BSA/AML enforcement actions taken by the federal  banking regulators and FinCEN from January 2009 through June 2016.  We also reviewed documentation from BSA/AML examinations of  selected Southwest border banks to gain additional context about  BSA/AML violations.", "We also interviewed representatives from 19 Southwest border banks.  Using data from FDIC\u2019s Summary of Deposits database, we identified all  Southwest border banks as of June 30, 2016. We then selected banks to  interview in the following ways. First, we interviewed four of the five  largest Southwest border banks (based on asset size). Second, as part of  our site visits to communities in the Southwest border region (described  below), we interviewed nine Southwest border banks that operate in or  near the communities we visited\u2014 Nogales, Arizona; San Ysidro,  California; and McAllen, Texas. We selected banks in these communities  based on the following criteria: (1) the number of branches the bank  operates in the Southwest border region, focusing on banks that operate  only a few branches in the region; (2) the size of the bank based on  assets; and (3) the bank\u2019s primary federal regulator. We focused our  selection on banks that operate fewer branches in the region because we  interviewed four of the five largest banks in the region that operate many  branches in the region. To the extent that a bank was located in the  community and willing to speak with us, we interviewed at least one bank  that was regulated by each federal banking regulator (Federal Reserve,  FDIC, and OCC). Third, we interviewed six additional Southwest border  banks as part of the development of our bank survey (described in more  detail below) and also asked them questions related to their efforts to  comply with BSA/AML requirements. We selected these banks using the  same criteria we used for the selection of banks in our site visit  communities: the bank\u2019s primary federal regulator, size of the bank  (based on assets), and number of branches. For the interviews, we used  a semistructured interview protocol, and responses from bank officials  were open-ended to allow for a wide variety of perspectives and  responses. Responses from these banks are not generalizable to all  Southwest border banks. In addition to the interviews with banks, we also  interviewed officials from FDIC, Federal Reserve, and OCC, as well as  BSA/AML examination specialists from each federal banking regulator to  gain their perspectives on the risks faced by banks in the Southwest  border region.", "To determine the extent to which banks are terminating accounts in the  Southwest border region and the reasons for the terminations, we  administered a web-based survey to a nationally representative sample of  banks to obtain information on bank account terminations for reasons  related to BSA/AML risk. In the survey, we asked banks about limitations  and terminations of accounts related to BSA/AML risk, the types of  customer categories being limited or terminated, and the reasons for  these decisions. We administered the survey from July 2017 to  September 2017, and collected information for the 3-year time period of  January 1, 2014, to December 31, 2016. Appendix II contains information  on the survey results.", "To identify the universe of banks, we used data from FDIC\u2019s Statistics on  Depository Institutions database. Our initial population list contained  5,922 banks downloaded from FDIC\u2019s Statistics on Depository Institutions  database as of December 31, 2016. We stratified the population into five  sampling strata and used a stratified random sample. First, banks that did  not operate in the Southwest border region (non-Southwest border banks)  were stratified into four asset sizes (small, medium, large, and extra- large). Second, to identify the universe of Southwest border banks, we  used FDIC\u2019s Summary of Deposits database as of June 30, 2016. This is  a hybrid stratification scheme.", "Our initial sample size allocation was designed to achieve a stratum-level  margin of error no greater than plus or minus 10 percentage points for an  attribute level at the 95 percent level of confidence. Based upon prior  surveys of financial institutions, we assumed a response rate of 75  percent to determine the sample size for the asset size strata. Because  there are only 17 extra-large banks in the population, we included all of  them in the sample. We also included the entire population of 115  Southwest border banks as a separate certainty stratum. We reviewed  the initial population list of banks in order to identify nontraditional banks  not eligible for this survey. We treated nontraditional banks as out-of- scope. We also reviewed the initial population list to determine whether  subsidiaries of the same holding company should be included separately  in the sample. In addition, during the administration of our survey, we  identified six banks that had been bought and acquired by another bank,  as well as one additional bank that was nontraditional and, therefore, not  eligible for this survey. We treated these sample cases as out-of-scope;  this adjusted our population of banks to 5,805 and reduced our sample  size to 406. We obtained a weighted survey response rate of 46.5  percent.", "Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample\u2019s results as a 95 percent confidence interval (for example, plus or  minus 7 percentage points). This is the interval that would contain the  actual population value for 95 percent of the samples we could have  drawn. Confidence intervals are provided along with each sample  estimate in the report. All survey results presented in the body of this  report are generalizable to the estimated population of 5,805 in-scope  depository institutions, except where otherwise noted.", "The practical difficulties of conducting any survey may introduce errors,  commonly referred to as nonsampling errors. For example, difficulties in  interpreting a particular question or sources of information available to  respondents can introduce unwanted variability into the survey results.  We took steps in developing the questionnaire, collecting the data, and  analyzing the results to minimize such nonsampling error. To inform our  methodology approach and our survey development, we conducted  interviews with representatives from seven selected Southwest border  banks. From these interviews, we gathered information on the type and  amount of data banks keep on account terminations for reasons related to  BSA/AML risk. The selection process used to identify these banks is  described above. We conducted pretests of the survey with four banks.  We selected these banks to achieve variation in geographic location  (within and outside the Southwest border region) and asset size (small,  large, extra large). The pretests of the survey were conducted to ensure  that survey questions were clear, to obtain any suggestions for  clarification, and to determine whether representatives would be able to  provide responses to questions with minimal burden. We also interviewed  the federal banking regulators; federal, state, and local law enforcement  officials; and bank industry associations, to obtain their perspectives on  banks\u2019 experience with account terminations.", "To determine the extent to which banks have closed branches in the  Southwest border region and the reasons for the closures, we analyzed  data from a variety of sources and interviewed bank officials. To assess  trends in bank branch closures, we analyzed data from FDIC\u2019s Summary  of Deposits database on the size and location of bank branches. Our  measure of bank branches includes both full-service and limited-service  branches. Limited-service branches provide some conveniences to bank  customers but generally offer a reduced set of bank services. As of 2016,  limited-service branches were about 2.5 percent of branches in the  Southwest border region. We compared growth rates for all branches in  the Southwest border region and only full-service branches, for 2013  through 2016, and found that they were almost identical (-5.92 percent  and -5.93 percent, respectively). We combined the Summary of Deposits  data on the size and location of bank branches with demographic,  economic, and money laundering-related risk data from the U.S. Census  Bureau, U.S. Department of Commerce\u2019s Bureau of Economic Analysis,  and FinCEN, among other sources. We then utilized the merged dataset  to conduct an econometric analysis of the potential drivers of branch  closures (see app. III for information on the econometric analysis). We  also compared trends in branch closures in the Southwest border region  to national trends, as well as trends in counties in Southwest border  states that were not in the Southwest border region, and trends in HIFCA  and HIDTA counties not in Southwest border states. We also interviewed  representatives from banks that operate in the Southwest border region  about the time and resources required to file SARs and how they  approached the decision to close a branch.", "To describe what Southwest border banking customers and others told us  about any effects of account terminations and branch closures in  Southwest border communities, we conducted site visits to communities  in three of the four Southwest border states (Nogales, Arizona; San  Ysidro, California; and McAllen, Texas). We selected these communities  to achieve a sample of locations that collectively satisfied the following  criteria: (1) counties with different classifications of how rural or urban  they are based on their RUCC classification; (2) counties that  experienced different rates of branch closures from 2013 through 2016;  and (3) counties that had received different designations by the federal  banking regulators as distressed or underserved as of June 1, 2016.  Perspectives gathered from our visits to the selected cities cannot be  generalized to all locations in Southwest border counties.", "During our site visits, we conducted a total of five discussion groups and  summarized participants\u2019 responses about how they were affected by  account terminations and branch closures in their communities.  Discussion groups included a range of 2 to10 participants with varied  experiences related to access to banking services in their area, including  customers whose accounts were terminated or branch was closed.  Participants were selected using a convenience sampling method,  whereby we coordinated with local city government and chamber of  commerce officials who agreed to help us recruit participants and identify  facilities where the discussion groups were held. Local officials  disseminated discussion group invitations and gathered demographic  data on potential participants. Three of the five discussion group sessions  included business banking customers\u2014persons representing businesses  that utilize banking services (such as banking accounts or business  loans). The other two sessions included nonbusiness retail banking  customers\u2014persons with individual experience with banking services  (such as a personal checking or savings account) and were conducted in  Spanish. Each session was digitally recorded, translated (if necessary),  and transcribed by an outside vendor, and we used the transcripts to  summarize participant responses. An initial coder assigned a code that  best summarized the statements from discussion group participants and  provided an explanation of the types of discussion group participant  statements that should be assigned to a particular code. A separate  individual reviewed and verified the accuracy of the initial coding. The  initial coder and reviewer discussed orally and in writing any  disagreements about code assignments and documented consensus on  the final analysis results. Discussion groups are intended to generate in- depth information about the reasons for the participants\u2019 views on specific  topics. The opinions expressed by the participants represent their points  of view and may not represent the views of all residents in the Southwest  border region.", "We also interviewed various border stakeholders including economic  development specialists, industry and trade organizations that focus on  border trade and commerce, as well as chamber of commerce and  municipal officials representing border communities. We reviewed recent  articles on the effects of account terminations and branch closures on  communities as well as research organization, industry, and government  reports. Finally, we reviewed academic studies on the effects of branch  closings on communities. In particular, we focused our review on one  recent paper that estimated the impact of branch closings, using detailed  geographic and lending data, on employment growth and small business  lending, among other outcomes. We identified the census tracts of all  branch closures in our three site visit communities from 2013 through  2016 and applied impact estimates from this research to the level of small  business lending and employment in these communities, based on data  from Community Reinvestment Act reporting (small-business lending) and  the U.S. Census American Community Survey (employment).These  results are intended to illustrate an approximate magnitude of effects and  not produce precise estimates of local impacts.", "To evaluate how FinCEN and the federal banking regulators have  assessed and responded to concerns about derisking and the  effectiveness of those efforts, we reviewed guidance the agencies issued  to banks related to derisking, related agency memorandums and  documents, and an OCC internal analysis on derisking. We also reviewed  guidance from FATF on AML and terrorist financing measures and  financial inclusion. In addition, we reviewed various executive orders  that require most executive branch agencies, and encourage independent  agencies, to develop a plan to conduct retrospective analyses, and Office  of Management and Budget guidance implementing those executive  orders. We reviewed Treasury documentation on BSA regulatory  reviews and the BSA-related components of the 2007 and 2017  Economic Growth and Regulatory Paperwork Reduction Act reports  issued by the Federal Financial Institutions Examination Council  (FFIEC). We also reviewed federal internal control standards related to  risk assessment. Finally, we interviewed officials from FinCEN and the  federal banking regulators about the actions they have taken related to  derisking, as well as retrospective reviews they had conducted on BSA  regulations.", "We utilized multiple data sources throughout our review and took steps to  assess the reliability of each one. First, to assess the reliability of data in  FDIC\u2019s Summary of Deposits database we discussed the appropriateness  of the database for our purposes with FDIC officials, reviewed related  documentation, and conducted electronic testing for missing data,  outliers, or any obvious errors. Second, to assess the reliability of  FinCEN\u2019s data on SAR and CTR filings, we interviewed knowledgeable  agency officials on the appropriateness of the data for our purposes, any  limitations associated with the data, and the methods they used to gather  the data for us. We also reviewed related documentation and conducted  electronic testing to identify missing data, outliers, and any obvious  errors. Third, we assessed the reliability of the HIFCA and HIDTA county  designations by interviewing officials from FinCEN, the Office of National  Drug Control Policy, and the National HIDTA Assistance Center on  changes to county designations over time and reviewed related  documentation. Fourth, to assess the reliability of FDIC\u2019s Statistics on  Depository Institutions database, we reviewed related documentation and  conducted electronic testing of the data for missing data, outliers, or any  obvious errors. Fifth, we interviewed officials from FDIC, the Federal  Reserve, and OCC on the data the agencies collect related to BSA/AML  bank exam violations and also asked them questions related to methods  they used to gather the data for us and any limitations associated with the  data. We also manually reviewed the data for any obvious errors and  followed up with agency officials, as needed. Finally, for data we obtained  from the U.S. Census Bureau (American Community Survey data on  population and age and the Residential Building Permits Survey), the  Bureau of Economic Analysis (Local Area Personal Income), and  Department of Agriculture (Rural-Urban Continuum Codes), we reviewed  related documentation, interviewed knowledgeable officials about the  data, when necessary, and conducted electronic testing of the data for  missing data, outliers, or any obvious errors. We concluded that all  applicable data were sufficiently reliable for the purposes of describing  BSA/AML risks and compliance challenges for Southwest border banks;  identifying banks to survey on account terminations and limitations;  evaluating branch closure trends in the Southwest border region and  elsewhere, and the factors driving those closures; and describing the  effects for Southwest border communities experiencing branch closures  and account terminations.", "We conducted this performance audit from March 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Responses to Selected Questions from GAO\u2019s Survey of Banks on Account Terminations and Limitations", "paragraphs": ["From July 2017 to September 2017, we administered a web-based  survey to a nationally representative sample of banks. In the survey, we  asked banks about the number of account terminations for reasons  related to Bank Secrecy Act/anti-money laundering (BSA/AML) risk;  whether banks are terminating, limiting, or not offering accounts to certain  types of customer categories; and the factors influencing these decisions.  We collected information for the 3-year time period of January 1, 2014, to  December 31, 2016. All survey results presented in this appendix are  generalizable to the population of banks, except where otherwise noted.  We obtained a weighted survey response rate of 46.5 percent. Because  our estimates are from a generalizable sample, we express our  confidence in the precision of our particular estimates as 95 percent  confidence intervals. Responses to selected questions we asked in our  survey that were directly applicable to the research objectives in this  report are shown below. Survey results presented in this appendix are  categorized into three groups (1) all banks nationwide, (2) Southwest  border banks, and (3) non-Southwest border banks, unless otherwise  noted. Our survey was comprised of closed- and open-ended questions.  In this appendix, we do not provide information on responses provided to  the open-ended questions. For a more detailed discussion of our survey  methodology, see appendix I.", "Questions 15 through 23 applied only to banks in our sample that  had branches domiciled both inside and outside of the Southwest  border region in order to obtain information on their accounts  domiciled in the Southwest border region.", "All the percentage estimates for this question are not statistically reliable.", "All the percentage estimates for this question are not statistically reliable.", "Between January 1, 2014 and December 31, 2016, did the bank  terminate any cash-intensive small business checking, savings, or  money market accounts domiciled in the bank\u2019s Southwest border  branches for reasons related to BSA/AML risk? (Check one.)  (Question 21)", "All the percentage estimates for this question are not statistically reliable."], "subsections": []}, {"section_title": "Appendix III: Econometric Analysis of Bank Branch Closures", "paragraphs": ["This technical appendix outlines the development, estimation, results, and  limitations of the econometric model we described in the report. We  undertook this analysis to better understand factors that may have  influenced banks to close branches in recent years."], "subsections": [{"section_title": "Model Development and Specification", "paragraphs": ["We developed a number of econometric models that included  demographic, economic, and risk factors that might have influenced  branch closures nationally since 2010. We developed these models  based on a small number of relevant studies, our discussions with banks  and regulators, and our own prior empirical work on banking. Our models  are based on all counties with bank branches in the United States and are  designed to predict whether a county will lose a branch the following year  based on the characteristics of the county. Because we are modeling a  binary outcome (whether or not a county lost a branch) we use a specific  functional form for our regression models known as a logistic regression  (logit).", "The demographic factors included in our models are rural-urban  continuum codes, age profile (proportion of the population of the county  over 45), and the level of per capita income. We chose these  demographic factors, in particular, because they tend to be associated  with the adoption of mobile banking, which may explain the propensity to  close branches in a community. The economic factors included in our  models\u2014intended to reflect temporary or cyclical economic changes  affecting the county\u2014are the growth of per capita income, growth in  building permits (a measure of residential housing conditions), and growth  of the population. The money laundering-related risk factors are whether  a county has been designated a High Intensity Financial Crime Area  (HIFCA) or a High Intensity Drug Trafficking Area (HIDTA), and the level  of suspicious or possible money laundering-related activity reported by  bank branches in the county (known as Suspicious Activity Report (SAR)  filings). HIDTA and HIFCA designations in our model could proxy for a  number of features of a county, including but not limited to the intensity of  criminal activity related to drug trafficking or financial crimes. Bank  officials we spoke with generally said that SAR filings were a time and  resource-intensive process, and that the number of SARs filings\u2014to  some extent\u2014reflected the level of effort, and overall BSA compliance  risk, faced by the bank. That said, the impact of SAR variables in our  models could reflect a combination of (1) the extent of BSA/AML  compliance effort and risk faced by the bank, as described by bank  officials, and (2) the underlying level of suspicious or money laundering- related activity in a county.", "We constructed variables from the following data sources to estimate our  models:", "Net branch closures and the size of deposits in each county, from  Federal Deposit Insurance Corporation\u2019s (FDIC) Summary of  Deposits;", "Rural-urban continuum codes, from the U.S. Department of", "Population growth and age profile in each county, from the Census  Bureau\u2019s American Community Survey;", "Per capita income, from Bureau of Economic Analysis Local Area", "Building permits by county, from the Census Bureau;", "HIFCA and HIDTA county designations from the Financial Crimes  Enforcement Network (FinCEN) and the Office of National Drug  Control Policy, respectively; and", "SAR filings by depository institution branches, from FinCEN  We estimated a large number of econometric models to ensure that our  results were generally not sensitive to small changes in our model, in  other words, to determine if our results were \u201crobust.\u201d Our results, as  described in the body of the report, were highly consistent across models  and were generally both statistically and economically significant\u2014that is,  results of this size are unlikely to occur at random if there were no  underlying relationship (p-values of interest are almost always less than  0.001), and the estimated impacts on the probability of branch closures  are substantively relevant.", "For our baseline model, we estimated branch closures (dependent  variable: 1/0 for whether or not a county lost one or more branches, on  net, that year) as a function of the 1 year lagged share of the population  over 45 in the county, a rural-urban continuum code, level of per capita  income, population growth, growth in the value of building permits, growth  in per capita income, whether or not the county is a HIDTA, and the level  of suspicious activity report filings per billion dollars of deposits held in the  county, including time and state fixed effects. Economic variables were  adjusted for inflation (converted to constant 2015 dollars) using  appropriate price indices. We generally estimated models with cluster  robust standard errors, clustering at the county. See the logistic  regression equation for our baseline model below, where the c subscript  represents the county and the t subscript represents the year.", "Where f is the cumulative logistic function: \ud835\udc53\ud835\udc53(\ud835\udc67\ud835\udc67)= \ud835\udc66\ud835\udc66\ud835\udc67\ud835\udc671+\ud835\udc66\ud835\udc66\ud835\udc67\ud835\udc67  Full year SAR filings are only available for 2014\u20132016 which is generally  the limiting factor on the time dimension of our panel. Because FinCEN  changed reporting requirements as of April 2013, we were able to obtain  an additional year of data by calculating SAR filings for 4 truncated years,  which is April\u2013December 2013, April\u2013December 2014, April\u2013December  2015, and April\u2013December 2016. As we discussed earlier in the report,  this variable is an important geographic measure of money laundering- related risk, based on a bank-reported measure of the extent of  suspicious or money-laundering related activity associated with branches  located in a particular county. After confirming that results were similar for  full year and truncated year SARs, we continued estimation with  truncated year SARs to benefit from the additional year of data. We report  estimates from the version of our baseline model that includes truncated  year SARs. Marginal effects for select coefficients (and associated p- values) are reported in table 20 below along time period, sample size,  and goodness-of-fit (pseudo r-squared).", "Generally speaking, across our baseline specifications and robustness  tests, counties were more likely to lose branches, all else equal, if they  were (1) urban, high income, and had a younger population (proportion  under 45), or (2) designated HIFCA, HIDTA, or had higher SAR filings.  Economic variables were generally not statistically significant.", "Below is a list of robustness tests\u2014changing how or which variables  influenced branch closures in the model, over what time period\u2014we  performed. Unless specifically noted the results described above were  very similar in the models listed below (i.e., robust):", "As an alternative to total SARs as an indicator of money laundering- related risk, we estimated a model with only those SARs that were  classified as money laundering or structuring. Total SARs include  suspicious activity that may be unrelated to money laundering or  structuring, including, for example, check fraud.", "As an alternative to HIDTAs as a county risk designation we  estimated a model with HIFCA county designations. The impact of  HIFCAs in the model was smaller magnitude and less statistically  significant.", "We estimated a model interacting HIDTAs with SARs (the interaction  suggests SARs have a larger impact on non-HIDTA counties).", "We estimated models restricted to only rural counties or only urban  counties. SARs and HIDTAs have larger effects in urban counties and  the impact of the age profile and per capita income are not statistically  significant in the model with only rural counties.", "We estimated models with MSA fixed effects or state-year fixed  effects, in addition to state and year fixed effects.", "We estimated models that assumed that economic conditions from  the previous 2 years were relevant or only economic conditions from 2  years prior. Our baseline model assumed only the prior year\u2019s  economic conditions influenced branch closures.", "We estimated a panel logit with random effects.", "We estimated a panel logit with county fixed effects. None of the  results discussed above are statistically significant when county fixed  effects are introduced. This suggests that the model is identified  primarily based on cross-sectional (differences between counties that  persist over time) rather than time series variation in the relevant  variables. The role of county fixed effects here may also indicate the  presence of unobserved, county characteristics that are omitted from  our models, although it is generally not possible to simultaneously  estimate the role of highly persistent factors that influence branch  closures while including fixed effects.", "We estimated models where we omitted small percentage changes in  branches from our indicator dependent variable\u2014for example, we  estimated models with indicators equal to one only if branch losses  were above 3 percent or 5 percent (omitting smaller branch losses  from the dependent variable altogether). Generally speaking,  demographic factors have less explanatory power for larger loss  levels although SARs remains statistically significant and at practically  meaningful magnitudes. This suggests that higher SARs are relatively  better at explaining larger branch losses while demographic factors  are better at explaining smaller branch losses.", "Despite the robustness of our results and our efforts to control for relevant  factors, our results are subject to a number of standard caveats. The  variables we use come from a number of datasets, and some of them  have sampling error, relied on imputation, or are better thought of as  proxy variables that measure underlying factors of interest with some  degree error. As such, our statistical measures, including standard errors,  p-values, and goodness of fit measures such as pseudo r-squared,  should be viewed as approximations. Some of the effects we measure  based on these variables may reflect associational rather than causal  relationships. Also, our regression models may be subject to omitted  variable bias or specification bias\u2014for example, it is unlikely that we have  been able to quantify and include all relevant factors in bank branching  decisions, and even where we have measured important drivers with  sufficient precision the functional form assumptions embedded in our  choice of regression model (e.g., logistic regression) are unlikely to be  precisely correct. Should omitted variables be correlated with variables  that we include, the associated coefficient may be biased. We interpret  our results, including our statistical measures and coefficients values, with  appropriate caution."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Board of Governors of the Federal Reserve System", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Federal Deposit Insurance Corporation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Office of the Comptroller of the Currency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Stefanie Jonkman (Assistant  Director), Christine Houle (Analyst in Charge), Carl Barden, Timothy  Bober, Rebecca Gambler, Toni Gillich, Michael Hansen, Michael  Hoffman, Jill Lacey, Patricia Moye, Erica Miles, Marc Molino, Steve  Robblee, Tovah Rom, Jerry Sandau, Mona Sehgal, Tyler Spunaugle, and  Verginie Tarpinian made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-88", "url": "https://www.gao.gov/products/GAO-18-88", "title": "Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts with the Fraud Risk Framework", "published_date": "2017-12-05T00:00:00", "released_date": "2017-12-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CMS, an agency within the Department of Health and Human Services (HHS), provides health coverage for over 145 million Americans through its four principal programs, with annual outlays of about $1.1 trillion. GAO has designated the two largest programs, Medicare and Medicaid, as high risk partly due to their vulnerability to fraud, waste, and abuse. In fiscal year 2016, improper payment estimates for these programs totaled about $95 billion.", "GAO's Fraud Risk Framework and the subsequent enactment of the Fraud Reduction and Data Analytics Act of 2015 have called attention to the importance of federal agencies' antifraud efforts. This report examines (1) CMS's approach for managing fraud risks across its four principal programs, and (2) how CMS's efforts managing fraud risks in Medicare and Medicaid align with the Fraud Risk Framework.", "GAO reviewed laws and regulations and HHS and CMS documents, such as program-integrity manuals. It also interviewed CMS officials and a sample of CMS stakeholders, including state officials and contractors. GAO selected states based on fraud risk and other factors, such as geographic diversity. GAO selected contractors based on a mix of companies and geographic areas served."]}, {"section_title": "What GAO Found", "paragraphs": ["The approach that the Centers for Medicare & Medicaid Services (CMS) has taken for managing fraud risks across its four principal programs\u2014Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the health-insurance marketplaces\u2014is incorporated into its broader program-integrity approach. According to CMS officials, this broader program-integrity approach can help the agency develop control activities to address multiple sources of improper payments, including fraud. As the figure below shows, CMS views fraud as part of a spectrum of actions that may result in improper payments.", "CMS's efforts managing fraud risks in Medicare and Medicaid partially align with GAO's 2015 A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework). This framework describes leading practices in four components: commit , assess , design and implement , and evaluate and adapt . CMS has shown commitment to combating fraud in part by establishing a dedicated entity\u2014the Center for Program Integrity\u2014to lead antifraud efforts. Furthermore, CMS is offering and requiring antifraud training for stakeholder groups such as providers, beneficiaries, and health-insurance plans. However, CMS does not require fraud-awareness training on a regular basis for employees, a practice that the framework identifies as a way agencies can help create a culture of integrity and compliance. Regarding the assess and design and implement components, CMS has taken steps to identify fraud risks, such as by designating specific provider types as high risk and developing associated control activities. However, it has not conducted a fraud risk assessment for Medicare or Medicaid, and has not designed and implemented a risk-based antifraud strategy. A fraud risk assessment allows managers to fully consider fraud risks to their programs, analyze their likelihood and impact, and prioritize risks. Managers can then design and implement a strategy with specific control activities to mitigate these fraud risks, as well as an appropriate evaluation approach consistent with the evaluate and adapt component. By developing a fraud risk assessment and using that assessment to create an antifraud strategy and evaluation approach, CMS could better ensure that it is addressing the full portfolio of risks and strategically targeting the most-significant fraud risks facing Medicare and Medicaid."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that CMS (1) provide and require fraud-awareness training to its employees, (2) conduct fraud risk assessments, and (3) create an antifraud strategy for Medicare and Medicaid, including an approach for evaluation. HHS concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Centers for Medicare & Medicaid Services (CMS)\u2014an agency within  the Department of Health and Human Services (HHS)\u2014provides health  coverage for over 145 million Americans, but its programs are susceptible  to fraud. Instances of fraud in CMS programs have been regularly and  widely reported, involving multimillion-dollar scams and false claims. For  example, in 2015 a Michigan oncologist was sentenced for submitting $34  million in fraudulent claims to Medicare and private insurance companies  for administering medically unnecessary chemotherapy to 553 patients.  Every year, the federal government investigates hundreds of fraud cases  involving CMS programs and during fiscal year 2016 won or negotiated  about $2.5 billion in health-care fraud judgments and settlements as a  result of federal investigations and prosecutions.", "According to the Congressional Budget Office (CBO), annual mandatory  outlays for CMS\u2019s four principal programs\u2014Medicare, Medicaid, the  Children\u2019s Health Insurance Program (CHIP), and the health-insurance  marketplaces\u2014total about $1.1 trillion. Total outlays across these CMS  programs are projected to nearly double in the next 10 years. Medicare  and Medicaid are the largest CMS programs, covering approximately 129  million individuals in fiscal year 2016, with total outlays of about $1 trillion.", "In addition to their size and related expenditures, the complexities of  these programs\u2014such as Medicare\u2019s four distinct program parts and the  variation in states\u2019 design and implementation of Medicaid\u2014pose  challenges to CMS oversight and present opportunities to be exploited for  fraud. We have designated Medicare and Medicaid as high-risk  programs due to their size, complexity, and vulnerability to fraud, waste, and abuse. Although the extent of fraud in Medicare and Medicaid is  unknown, given the large size of the programs even a small percentage  of fraud poses significant risks to the integrity of these programs.", "This report addresses CMS fraud risk management efforts in light of  GAO\u2019s July 2015 A Framework for Managing Fraud Risks in Federal  Programs (Fraud Risk Framework), which describes key components and  leading practices for agencies to proactively and strategically manage  fraud risks. Our objectives were to determine: (1) CMS\u2019s approach for  managing fraud risks across its four principal programs and (2) how  CMS\u2019s efforts for managing fraud risks in Medicare and Medicaid align  with GAO\u2019s Fraud Risk Framework. We performed our work under the  authority of the Comptroller General to assist Congress with its oversight.", "To address both objectives, we reviewed relevant laws, regulations, and  HHS and CMS documents, such as strategic plans, reports to Congress,  program-integrity manuals, guidance, and other documents issued from  2011 through 2017. We also reviewed reports by GAO and the HHS  Office of the Inspector General (OIG) on antifraud and program-integrity  topics across Medicare and Medicaid.", "Furthermore, for both objectives, we interviewed CMS officials from the  Center for Program Integrity (CPI) as well as officials from other centers  and offices within CMS. We interviewed a nongeneralizable sample of  CMS stakeholders including states, contractors, private health-insurance  plans, federal law-enforcement agencies, as well as industry experts.", "For our sample of stakeholders, we selected four states\u2014Florida,  Maryland, Michigan, and Oregon\u2014based on health-care fraud risk  factors. We selected two states (Florida and Michigan) meeting our high- risk criteria: the presence of Medicare Fraud Strike Force Teams, temporary moratoriums on certain newly enrolling providers and suppliers  in specific geographic areas, and a high number of Medicaid fraud  investigations. We also selected two states (Maryland and Oregon) that  did not meet our high-risk criteria. These four states also represented a  mix of Medicaid spending, enrollment in managed care, and geographic  variation. For each state, we interviewed state officials from the Medicaid  program-integrity unit, Medicaid Fraud Control Unit (MFCU), and state  audit organization.", "In addition to the states, we interviewed national and regional CMS  contractors. We interviewed all national contractors that we identified as  most directly involved in CMS\u2019s antifraud and program-integrity efforts;  there were six such contractors. We also interviewed six regional CMS  contractors. We identified six types of regional CMS antifraud and  program-integrity contractors, and interviewed one of each type. We  selected these contractors to achieve a mix of companies holding each  type of regional contract (some companies hold more than one type of  contract), and to ensure geographic diversity of the areas they serve. We  also interviewed officials from one national and one regional private  health-insurance plan. We chose these two plans because they are  among larger plans that provide Medicare, Medicaid, and commercial  services. We chose one large regional and one national health-insurance  plan to obtain a diversity of perspectives.", "In addressing our second objective, we evaluated CMS\u2019s efforts against  the four components of the Fraud Risk Framework: (1) commit to  combating fraud by creating an organizational culture and structure  conducive to fraud risk management; (2) plan regular fraud risk  assessments and assess risks to determine a fraud risk profile; (3) design  and implement strategy with specific control activities to mitigate  assessed fraud risks and collaborate to help ensure effective  implementation; and (4) evaluate outcomes using a risk-based approach  and adapt activities to improve fraud risk management. In doing so, we  reviewed agency documents and information obtained from interviews  that enabled us to compare CMS\u2019s antifraud efforts against each of these  components. We did not evaluate the effectiveness of individual CMS  fraud control activities and other antifraud efforts we describe in the  report.", "We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CMS has four principal programs: Medicare, Medicaid, CHIP, and the  health-insurance marketplaces. See table 1 for information about the four  programs.", "As discussed earlier, Medicare and Medicaid are CMS\u2019s largest programs  and have been growing steadily (see fig. 1). CBO projects that, in 2026,  under current law, Medicare spending will reach $1.3 trillion. Medicaid is  also expected to continue to grow\u2014program spending is projected to  increase 66 percent to over $950 billion by fiscal year 2025, and more  than half of the states have chosen to expand their Medicaid programs by  covering certain low-income adults not historically eligible for Medicaid  coverage, as authorized under the Patient Protection and Affordable Care  Act of 2010 (PPACA).", "The two programs\u2019 use of managed-care delivery systems to provide care  has also increased. For example, the number and percentage of Medicare beneficiaries enrolled in Medicare Part C has grown steadily  over the past several years, increasing from 8.7 million (20 percent of all  Medicare beneficiaries) in calendar year 2007 to 17.5 million (32 percent  of all Medicare beneficiaries) in calendar year 2015. As of July 1, 2015,  nearly two-thirds of all Medicaid beneficiaries were enrolled in managed- care plans and about 40 percent of expenditures in fiscal year 2015 were  for health-care services delivered through managed care."], "subsections": [{"section_title": "CMS Funding to Address Fraud, Waste, and Abuse", "paragraphs": ["CMS receives appropriations to carry out antifraud activities through  several funds including the Health Care Fraud and Abuse Control  (HCFAC) program and the Medicaid Integrity Program. The HCFAC  program was established under the Health Insurance Portability and  Accountability Act of 1996 to coordinate federal, state, and local law- enforcement efforts to address health-care fraud and abuse and to  conduct investigations and audits, among other things. In fiscal year  2016, CMS received $560 million through the HCFAC program  appropriations. The Medicaid Integrity Program, established by the Deficit  Reduction Act of 2005, supports contracts to audit and identify  overpayments in Medicaid claims, and provides technical assistance for  states\u2019 program-integrity efforts. According to CMS, it received $75  million every year since fiscal year 2009 through the Medicaid Integrity  Program appropriations. According to CMS, in fiscal year 2016, total  program-integrity obligations to address fraud, waste, and abuse for  Medicare and Medicaid were $1.45 billion."], "subsections": []}, {"section_title": "Fraud Vulnerabilities and Improper Payments in Medicare and Medicaid", "paragraphs": ["As mentioned previously, we designated Medicare and Medicaid as high- risk programs starting in 1990 and 2003, respectively, because their size,  scope, and complexity make them vulnerable to fraud, waste, and  abuse. Similarly, the Office of Management and Budget (OMB)  designated all parts of Medicare as well as Medicaid \u201chigh-priority\u201d  programs because these programs report $750 million or more in  estimated improper payments in a given year. We also highlighted  challenges associated with improper payments in Medicare and Medicaid  in our annual report on duplication and opportunities for cost savings in  federal programs.", "Improper payments are a significant risk to the Medicare and Medicaid  programs and can include payments made as a result of fraud. Improper  payments are payments that are either made in an incorrect amount  (overpayments and underpayments) or those that should not be made at  all. For example, CMS estimated in fiscal year 2016 that the Medicare  fee-for-service (FFS) improper payment rate was 11 percent  (approximately $41 billion) and the Medicaid improper payment rate was  10.5 percent (approximately $36 billion). Improper payment  measurement does not specifically identify or estimate improper  payments due to fraud."], "subsections": []}, {"section_title": "Types of Health-Care Fraud and Fraud Risk", "paragraphs": ["Health-care fraud can take many forms, and a single case can involve  more than one scheme. Schemes may include fraudulent billing for  services not provided, services provided that were not medically necessary, and services intentionally billed at a higher level than  appropriate. These fraud schemes may include compensating providers,  beneficiaries, or others for participating in the fraud scheme. Fraud can  be regionally focused or can target particular service areas such as  home-health services, or durable medical equipment such as  wheelchairs. Fraud may also have nonfinancial effects. For example,  patients may be subjected to harmful or unnecessary services by  fraudulent providers. Fraud can be perpetrated by different actors, such  as providers, beneficiaries, health-insurance plans, as well as organized  crime.", "Fraud and \u201cfraud risk\u201d are distinct concepts. Fraud is challenging to detect  because of its deceptive nature. Additionally, once suspected fraud is  identified, alleged fraud cases may be prosecuted. If the court determines  that fraud took place, then fraudulent spending may be recovered. Fraud  risk exists when individuals have an opportunity to engage in fraudulent  activity, have an incentive or are under pressure to commit fraud, or are  able to rationalize committing fraud. When fraud risks can be identified  and mitigated, fraud may be less likely to occur.", "Although the occurrence of one or more cases of health-care fraud  indicates there is a fraud risk, a fraud risk can exist even if fraud has not  yet been identified or occurred. Suspicious billing patterns, certain types  of health-care providers, or complexities in program design may indicate  a risk of fraud. Information to help identify potential fraud risks may come  from various sources, including whistleblowers, agency officials,  contractors, law-enforcement agencies, beneficiaries, or providers."], "subsections": []}, {"section_title": "Fraud Risk Management Standards and Guidance", "paragraphs": ["According to federal standards and guidance, executive-branch agency  managers are responsible for managing fraud risks and implementing  practices for combating those risks. Federal internal control standards call  for agency management officials to assess the internal and external risks  their entities face as they seek to achieve their objectives. The standards  state that as part of this overall assessment, management should  consider the potential for fraud when identifying, analyzing, and  responding to risks. Risk management is a formal and disciplined  practice for addressing risk and reducing it to an acceptable level.", "In July 2015, GAO issued the Fraud Risk Framework, which provides a  comprehensive set of key components and leading practices that serve  as a guide for agency managers to use when developing efforts to  combat fraud in a strategic, risk-based way. The Fraud Risk Framework  describes leading practices in four components: commit, assess, design  and implement, and evaluate and adapt, as depicted in figure 2.", "The Fraud Reduction and Data Analytics Act of 2015, enacted in June  2016, requires OMB to establish guidelines for federal agencies to create  controls to identify and assess fraud risks and design and implement  antifraud control activities. The act further requires OMB to incorporate  the leading practices from the Fraud Risk Framework in the guidelines. In  July 2016, OMB published guidance about enterprise risk management  and internal controls in federal executive departments and agencies.  Among other things, this guidance affirms that managers should adhere  to the leading practices identified in the Fraud Risk Framework. Further,  the act requires federal agencies to submit to Congress a progress report  each year for 3 consecutive years on the implementation of the controls  established under OMB guidelines, among other things."], "subsections": []}]}, {"section_title": "CMS Manages Fraud Risks as Part of Its Agency-Wide Program-Integrity Activities and through an Extensive Network of Stakeholders", "paragraphs": [], "subsections": [{"section_title": "Fraud Risk Management Is a Part of CMS\u2019s Broader Program-Integrity Approach", "paragraphs": ["CMS\u2019s antifraud efforts for its four principal programs are part of the  agency\u2019s broader program-integrity approach to address fraud, waste,  and abuse. CMS\u2019s Center for Program Integrity (CPI) is the agency\u2019s  focal point for program integrity across the programs. According to CMS,  its approach to program-integrity allows it to \u201caddress the whole spectrum  of fraud, waste, and abuse.\u201d For example, CMS describes its program- integrity activities as addressing unintentional errors resulting from  providers being unaware of recent policy changes on one end of the  spectrum, through somewhat more-serious patterns of abuse such as  billing for a more-expensive service than was performed (known as  upcoding), and finally up to serious fraudulent activities, such as billing for  services that were not provided. CMS then aims to target its corrective  actions to fit the risk. See figure 3 for CMS\u2019s description of the spectrum  of fraud, waste, and abuse that its program-integrity activities aim to  address.", "Within its program-integrity activities, CMS has established several  control activities that are specific to managing fraud risks, while others  serve broader program-integrity purposes. According to CMS officials,  the agency\u2019s antifraud control activities mainly focus on providers in  Medicare FFS. Officials told us that when CPI began operating, its  primary focus was developing program integrity for Medicare FFS and, as  a result, it is the most \u201cmature\u201d of all of CPI\u2019s programs. CMS\u2019s specific  fraud control activities include, for example, the Fraud Prevention System  (FPS), a predictive-analytics system that helps identify potentially  fraudulent payments in Medicare FFS, and the Unified Program Integrity  Contractors (UPIC), which detect and investigate aberrant provider  behavior and potential fraud in Medicare and Medicaid. Other control  activities serve broader program-integrity purposes such as to reduce  improper payments resulting from error, waste, and abuse in addition to preventing or detecting potential fraud. For example, CMS provides  education and outreach to Medicare providers and beneficiaries on issues  identified through data analyses in order to reduce improper payments  and to increase their awareness of fraud.", "HHS and CMS department- and agency-wide strategic plans guide  CMS\u2019s program-integrity activities\u2014including antifraud activities. The  program-integrity goals identified in the HHS strategic plan primarily focus  on improper payments and are driven by statutory requirements. For  example, the HHS strategic plan for fiscal years 2014\u20132018 includes  performance goals of reducing the percentage of improper payments  made under Medicare FFS and Medicare Parts C and D. One antifraud- focused goal in the HHS strategic plan is to increase the percentage of  Medicare providers and suppliers identified as high risk that receive  administrative actions, such as suspending payments to providers or  revoking providers\u2019 billing privileges.", "HHS and CMS department- and agency-wide strategic plans also include  an emphasis on fraud prevention and early detection\u2014a leading practice  in the Fraud Risk Framework\u2014and moving away from a \u201cpay-and-chase\u201d  model. For example, the HHS strategic plan calls for \u201cfostering early  detection and prevention of improper payments by focusing on preventing  bad actors from enrolling or remaining in Medicare and Medicaid\u201d and to  \u201cuse public-private partnerships to prevent and detect fraud across the  health care industry by sharing fraud-related information and data  between the public and private sectors.\u201d As a part of this emphasis on  prevention, CMS developed FPS in response to the Small Business Jobs  Act of 2010, which required CMS to implement predictive-analytics  technologies. Also, the Patient Protection and Affordable Care Act of  2010 (PPACA) included provisions to strengthen Medicare and  Medicaid\u2019s provider enrollment standards and procedures, among other  program-integrity provisions."], "subsections": []}, {"section_title": "CMS Uses an Extensive Network of Stakeholders to Manage Fraud Risks and Plays Varying Roles in These Relationships", "paragraphs": ["CMS works with an extensive and complex network of stakeholders to  manage fraud risks in its four principal programs. In Medicaid and CHIP,  CMS partners with and oversees the 50 states and the District of  Columbia. Until the Deficit Reduction Act of 2005 expanded CMS\u2019s role in  Medicaid program integrity to provide effective federal support and  assistance to states\u2019 efforts to combat fraud, waste, and abuse, states  were primarily responsible for Medicaid program integrity. Each state  has its own Medicaid program-integrity unit, Medicaid Fraud Control Unit  (MFCU), and state audit organization.", "CMS also uses numerous contractors to conduct the majority of its  program-integrity activities. Since the enactment of Medicare in 1965,  contractors have played an integral role in the administration of the  program. The original Medicare program was designed so that the federal  government contracted with health insurers or similar organizations  experienced in handling physician and hospital claims to pay Medicare  claims. Later, the Health Insurance Portability and Accountability Act of  1996 required the Secretary of Health and Human Services to enter into  contracts to promote the integrity of the Medicare program. According to  CMS officials, in fiscal year 2016 contractors received 92 percent of  CMS\u2019s program-integrity funding. Medicare and Medicaid program- integrity contractors play a variety of roles: (1) processing and reviewing  claims, (2) conducting site visits of providers enrolling in Medicare, (3)  auditing claims and recovering overpayments, (4) performing data  analysis, and (5) investigating aberrant claims and provider behaviors,  among other things. States also use contractors in many of these roles for  managing program integrity.", "Additionally, multiple private health-insurance plans in Medicare Parts C  and D and over 200 health-insurance plans in Medicaid managed care  also carry out program-integrity activities. For the health-insurance  marketplaces, CMS is responsible for operating the federally facilitated  marketplace and overseeing the state-based marketplaces. CMS also  developed the Federal Data Services Hub, which acts as a portal for  exchanging information between state-based marketplaces, the federally  facilitated marketplace, and state Medicaid agencies, among other  entities, as well as other external partners, including other federal  agencies, such as the Internal Revenue Service. Finally, law- enforcement groups, including the joint Department of Justice (DOJ) and  HHS OIG Medicare Fraud Strike Force Teams, identify, investigate, and  prosecute instances of fraud in CMS programs. See figure 4 for a  depiction of CMS\u2019s stakeholder network for managing fraud risks. This  figure illustrates approximate numbers of stakeholders (through the  concentration of dots), but not the extent of individual stakeholder roles.", "CMS provides oversight to, or partners with, these stakeholders to  manage fraud risks. For oversight, CMS creates policies and guidance to  direct stakeholders\u2019 antifraud efforts, such as Medicare and Medicaid  program-integrity manuals and the Medicaid Provider Enrollment  Compendium. CMS also provides technical assistance to states in  areas such as provider enrollment and data analysis. In areas where  CMS does not have a primary role, it acts as a partner by collaborating  and coordinating program-integrity and antifraud activities. For example,  CMS is directly responsible for Medicare program integrity, but, in  Medicaid and CHIP, states are the first line of program-integrity efforts.  Similarly, CMS maintains control over Medicare FFS program integrity,  but within Medicare managed care, it provides guidance for health- insurance plans to carry out their own program-integrity activities.", "In the health-insurance marketplaces, CMS reviews state-based  marketplaces\u2019 procedures for verifying applicant eligibility for coverage.  For example, it conducts annual reviews of the state-based marketplaces,  which include a review of states\u2019 fraud, waste, and abuse policies.", "See figure 5 for a further description of CMS\u2019s and various stakeholders\u2019  roles and responsibilities in fraud risk management.", "CMS also facilitates collaboration among federal, state, and private  entities for managing fraud risks. In 2012, CMS created the Healthcare  Fraud Prevention Partnership (HFPP) to share information with public and  private stakeholders and to conduct studies related to health-care fraud,  waste, and abuse. According to CMS, as of October 2017, the HFPP  included 89 public and private partners, including Medicare- and  Medicaid-related federal and state agencies, law-enforcement agencies,  private health-insurance plans (payers), and antifraud and other health- care organizations. The HFPP has conducted studies that pool and  analyze multiple payers\u2019 claims data to identify providers with patterns of  suspect billing across payers. In a recent report, participants separately  told us that the HFPP\u2019s studies helped them to identify and take action  against potentially fraudulent providers and payment vulnerabilities of  which they might not otherwise have been aware, and fostered both  formal and informal information sharing.", "CMS\u2019s relationships with stakeholders were varied in terms of maturity  and extent of information sharing, according to stakeholders we  interviewed. While some relationships between CMS and stakeholders  have been long-standing, some are developing, and others exist on an ad  hoc basis. For example, CMS has had a long-standing relationship with  state Medicaid program-integrity units, by collaborating through monthly  meetings of the Medicaid Fraud and Abuse Technical Advisory Group,  sending fraud alerts, and offering courses through the Medicaid Integrity  Institute. However, in our interviews with state program-integrity units,  and as we recently reported, some state Medicaid agencies shared  concerns about the communication, level of policy guidance, and  technical support provided by and received from CMS for managing fraud  risks in Medicaid. This concern was echoed by state audit officials, with  whom CMS recently initiated coordination to build relationships that would  facilitate state auditing of Medicaid programs.", "CMS also has varying relationships with its law-enforcement partners. For  example, the relationship between CMS and DOJ\u2019s Health Care Fraud  unit, which leads the DOJ and HHS OIG Medicare Fraud Strike Force  Teams, has been ad hoc. According to CMS and DOJ officials, the  interactions between the agencies have been based on specific fraud  cases such as coordination of national takedowns when DOJ provided  CMS with the names of providers committing fraud so that CMS could  suspend them consistently with the timing of the enforcement efforts.  According to CMS officials, they coordinate more with HHS OIG, working  together on payment suspensions and revocations for OIG cases, or  working with it to take administrative actions against large providers."], "subsections": []}]}, {"section_title": "CMS\u2019s Efforts Managing Fraud Risks in Medicare and Medicaid Are Partially Aligned with the Fraud Risk Framework", "paragraphs": ["CMS\u2019s antifraud efforts partially align with the Fraud Risk Framework.  Consistent with the framework, CMS has demonstrated commitment to  combating fraud by creating a dedicated entity to lead antifraud efforts. It  has also taken steps to establish a culture conducive to fraud risk  management, although it could expand its antifraud training to include all  employees. CMS has taken some steps to identify fraud risks in Medicare  and Medicaid; however, it has not conducted a fraud risk assessment or  developed a risk-based antifraud strategy for Medicare and Medicaid as  defined in the Fraud Risk Framework. CMS has established monitoring  and evaluation mechanisms for its program-integrity control activities that,  if aligned with a risk-based antifraud strategy, could enhance the  effectiveness of fraud risk management in Medicare and Medicaid."], "subsections": [{"section_title": "CMS Has Shown Commitment to Combating Fraud by Creating an Organizational Structure and Taking Steps to Establish a Culture Conducive to Fraud Risk Management CMS\u2019s Organizational Structure Includes a Dedicated Entity for Program-Integrity and Antifraud Efforts", "paragraphs": ["The commit component of the Fraud Risk Framework calls for an agency  to commit to combating fraud by creating an organizational culture and  structure conducive to fraud risk management. This component includes  establishing a dedicated entity to lead fraud risk management activities.", "Within CMS, the Center for Program Integrity (CPI) serves as the  dedicated entity for fraud, waste, and abuse issues in Medicare and  Medicaid, which is consistent with the Fraud Risk Framework. CPI was  established in 2010, in response to a November 2009 Executive Order on  reducing improper payments and eliminating waste in federal programs.  This formalized role, according to CMS officials, elevated the status of  program-integrity efforts, which previously were carried out by other parts  of CMS.", "As an executive-level Center\u2014on the same level with five other  executive-level Centers at CMS, such as the Center for Medicare and the  Center for Medicaid and CHIP Services\u2014CPI has a direct reporting line  to executive-level management at CMS. The Fraud Risk Framework  identifies a direct reporting line to senior-level managers within the  agency as a leading practice. According to CMS officials, this elevated  organizational status offers CPI heightened visibility across CMS,  attention by CMS executive leadership, and involvement in executive- level conversations.", "Additionally, in 2014, CMS established a Program Integrity Board that has  brought together senior officials across CMS Centers on a monthly basis  to coordinate on fraud and program-integrity vulnerabilities. According to  CPI officials, the board is one of the mechanisms through which CPI  engages other executive-level offices at CMS. CPI chairs the meetings  and typically develops meeting agendas to solicit information from and  disseminate information to other CMS units or stakeholders. Further, the  board may establish small working groups, known as integrated project  teams, to address specific vulnerabilities. For example, according to CMS  officials, in 2016 the board established a Marketplace integrated project  team to resolve potential fraud eligibility and enrollment issues in the  federally facilitated marketplace using the Fraud Risk Framework.", "CPI has further demonstrated commitment to addressing fraud, waste,  and abuse through several organizational changes with the goal of  improving coordination and communication of program-integrity activities  across Medicare and Medicaid. Most recently, in 2014, CPI reorganized  its structure to align functional areas across Medicare and Medicaid,  where possible. Previously, separate units within CPI administered their  own program-integrity activities for Medicare and Medicaid programs. For  example, CPI established a Provider Enrollment and Oversight Group,  responsible for provider screening and enrollment functions in both  Medicare and Medicaid. According to CMS officials, if CPI employees  identify an issue in provider enrollment in Medicare, the same CPI  employees also consider how this issue applies to Medicaid. According to  CMS officials, the reorganization has helped CPI to look at vulnerabilities  in a crosscutting way and to facilitate communication across programs.", "Similarly, since 2016, CPI began shifting contracting functions from  separate Medicare and Medicaid regional contractors that identify and  investigate cases of potential fraud and conduct audits to five regional  UPICs responsible for a range of program-integrity and fraud-specific  activities in both Medicare FFS and Medicaid. According to CMS, the  purpose of the UPICs is to coordinate provider investigations across  Medicare and Medicaid, improve collaboration with states by providing a  mutually beneficial service, and increase contractor accountability through  coordinated oversight. CMS officials told us that UPIC integration is a  cornerstone of CMS\u2019s contract management strategy and would help to  ensure communication and coordination across Medicare and Medicaid  program-integrity efforts. CMS plans to award all the UPIC contracts by  the end of 2017, ultimately phasing out the ZPICs and Medicaid Integrity  Contractors."], "subsections": [{"section_title": "CMS Has Taken Steps to Create a Culture Conducive to Fraud Risk Management but Could Enhance Antifraud Training for Employees", "paragraphs": ["The commit component of the Fraud Risk Framework also includes  creating an organizational culture to combat fraud at all levels of the  agency.", "Consistent with the Fraud Risk Framework, CMS has promoted an  antifraud culture by demonstrating a senior-level commitment to  combating fraud through public statements, increased resource levels,  and internal and external coordination.", "In addition to HHS and CMS strategic documents discussed earlier, CMS  and CPI leaders have testified publicly about CMS\u2019s commitment to  preventing fraud and protecting taxpayers and beneficiaries. For example,  CPI\u2019s former Director testified in May 2016 before the House Committee  on Energy and Commerce\u2019s Subcommittee on Oversight and  Investigations that \u201cCMS is deeply committed to our efforts to prevent  waste, fraud and abuse in Medicare and Medicaid programs, protecting  both taxpayers and the beneficiaries that we serve.\u201d More recently,  CMS\u2019s new Administrator testified in her February 2017 confirmation  hearing regarding her intent to prioritize efforts around preventing fraud  and abuse.", "CPI\u2019s budget and resources have increased over time to support its  ongoing program-integrity mission. According to CMS, program-integrity  obligations for Medicare and Medicaid increased from about $1.02 billion  in fiscal year 2010 to $1.45 billion in fiscal year 2016. According to CMS  officials, the Health Care Fraud and Abuse Control (HCFAC) account,  one of the primary sources of CPI funding, has never received a funding  reduction. Additionally, in 2015, CPI received additional funding based on  a discretionary cap adjustment to HCFAC. Similarly, CPI staff resources have increased over time. According to CMS, CPI\u2019s full-time equivalent  positions increased from 177 in 2011 to 419 in 2017.", "Consistent with leading practices in the Fraud Risk Framework to involve  all levels of the agency in setting an antifraud tone, CPI has also worked  collaboratively with other CMS Centers. In addition to engaging  executive-level officials of other CMS Centers through the Program  Integrity Board, CPI has worked collaboratively with other Centers within  CMS to incorporate antifraud features into new program design or policy  development and established regular communication at the staff level.  For example:", "Center for Medicare and Medicaid Innovation (CMMI). When  developing the Medicare Diabetes Prevention Program, CMMI  officials told us they worked with CPI\u2019s Provider Enrollment and  Oversight Group and Governance Management Group to develop  risk-based screening procedures for entities that would enroll in  Medicare to provide diabetes-prevention services, among other  activities. The program was expanded nationally in 2016, and CMS  determined that an entity may enroll in Medicare as a program  supplier if it satisfies enrollment requirements, including that the  supplier must pass existing high categorical risk-level screening  requirements.", "Center for Medicaid and CHIP Services (CMCS). CMCS officials told  us they worked closely with CPI to issue Medicaid guidance and best  practices to states on home and community-based services that  incorporate program-integrity provisions. A senior CMCS official told  us that, to address fraud, CMS has requested that states include  provider information on claims to determine whether providers are  meeting eligibility criteria.", "Center for Medicare (CM). In addition to building safeguards into  programs and developing policies, CM officials told us that there are  several standing meetings, on monthly, biweekly, and weekly bases,  between groups within CM and CPI that discuss issues related to  provider enrollment, FFS operations, and contractor management. A  senior CM official also told us that there are ad hoc meetings taking  place between CM and CPI: \u201cWe interact multiple times daily at  different levels of the organization. Working closely is just a regular  part of our business.\u201d", "CMS has also demonstrated its commitment to addressing fraud, waste,  and abuse to its stakeholders. Representatives of CMS\u2019s extensive  stakeholder network whom we interviewed\u2014state officials, contractors,  and officials from public and private entities\u2014generally recognized the  agency\u2019s commitment to combating fraud. In our interviews with  stakeholders, officials observed CMS\u2019s increased commitment over time  to address fraud, waste, and abuse and cited examples of specific CMS  actions. State officials, for example, told us that the Medicaid Integrity  Institute, a training center coordinated jointly by CMS and DOJ, has been  a helpful resource for states to build capacity to address fraud and  program integrity. CMS contractors told us that CMS\u2019s commitment to  combating fraud is incorporated into contractual requirements, such as  requiring (1) data analysis for potential fraud leads and (2) fraud-  awareness training for providers. Officials from entities that are members  of the HFPP, specifically, a health-insurance plan and the National Health  Care Anti-Fraud Association, added that CMS\u2019s effort to establish the  HFPP and its ongoing collaboration and information sharing reflect CMS\u2019s  commitment to combat fraud in Medicare and Medicaid.", "The Fraud Risk Framework identifies training as one way of  demonstrating an agency\u2019s commitment to combating fraud. Training and  education intended to increase fraud awareness among stakeholders,  managers, and employees, serves as a preventive measure to help  create a culture of integrity and compliance within the agency. The Fraud  Risk Framework discusses requiring all employees to attend training upon  hiring and on an ongoing basis thereafter.", "To increase awareness of fraud risks in Medicare and Medicaid, CMS  offers and requires training for stakeholder groups such as providers,  beneficiaries, and health-insurance plans. Specifically, through its  National Training Program and Medicare Learning Network, CMS makes  available training materials on combating Medicare and Medicaid fraud,  waste, and abuse. These materials help to identify and report fraud,  waste, and abuse in CMS programs and are geared toward providers,  beneficiaries, as well as trainers and other stakeholders. Separately,  CMS requires health-insurance plans working with CMS to provide annual  fraud, waste, and abuse training to their employees.", "However, CMS does not offer or require similar fraud-awareness training  for the majority of its workforce. For a relatively small portion of its overall  workforce\u2014specifically, contracting officer representatives who are  responsible for certain aspects of the acquisition function\u2014CMS requires  completion of fraud and abuse prevention training every 2 years.  According to CMS, 638 of its contracting officer representatives (or about  10 percent of its overall workforce) completed such training in 2016 and  2017. Although CMS offers fraud-awareness training to others, the  agency does not require fraud-awareness training for new hires or on a  regular basis for all employees because the agency has focused on  providing process-based internal controls training for its employees.", "While fraud-awareness training for contracting officer representatives is  an important step in helping to promote fraud risk management, fraud- awareness training specific to CMS programs would be beneficial for all  employees. Such training would not only be consistent with what CMS  offers to or requires of its stakeholders and some of its employees, but  would also help to keep the agency\u2019s entire workforce continuously aware  of fraud risks and examples of known fraud schemes, such as those  identified in successful OIG investigations. Such training would also keep  employees informed as they administer CMS programs or develop  agency policies and procedures. Considering the vulnerability of Medicare  and Medicaid programs to fraud, waste, and abuse, without regular  required training CMS cannot be assured that its workforce of over 6,000  employees is continuously aware of risks facing its programs.", "Although CMS has shown commitment to combating fraud, at times CPI\u2019s  efforts to combat fraud compete with other mission priorities, such as (1)  ensuring beneficiary access to health-care services and (2) limiting  provider burden. CPI leadership has been aware of this inherent  challenge. For example, at a congressional hearing in May 2016, CPI\u2019s  Director stated that \u201cour efforts strike an important balance: protecting  beneficiary access to necessary health care services and reducing the  administrative burden on legitimate providers and suppliers, while  ensuring that taxpayer dollars are not lost to fraud, waste, and abuse.\u201d", "Beneficiary access to care. In accordance with its mission statement,  providing and improving beneficiaries\u2019 access to health care is a CMS  priority. CMS\u2019s commitment to providing access to high-quality care and  coverage is reflected in the agency\u2019s mission statement and is one of its  four strategic goals. As a result, before taking administrative actions  against a Medicare Part A provider, such as a hospice, or providers in  rural areas, CMS officials told us that they first look at whether there is a  sufficient number of providers in an area by running a provider search by  provider county and adjacent counties and considering how heavily  populated an area is with Medicare beneficiaries. According to these  officials, rather than taking an administrative action against a provider that  would limit beneficiaries\u2019 access to services, the agency may enter into a  corrective action plan with the provider. CMS officials told us that revoking  a provider\u2019s enrollment in Medicare, an option available to CMS in cases  of provider noncompliance or misconduct, is rare.", "Administrative burden on providers. According to CMS documents and  officials, concern over placing undue burden on providers\u2014the majority of  whom are presumed to be honest\u2014provides a counterforce to  implementing program-integrity control activities. CMS\u2019s web page  entitled Reducing Provider Burden states: \u201cCMS is committed to reducing  improper payments but must be mindful of provider burden because  medical review is a resource-intensive process for both the healthcare  provider and the Medicare review contractor.\u201d Two CMS contractors told  us that they scaled back or did not pursue audits of providers\u2019  documentation because of provider burden or sensitivity considerations.  One contractor removed providers from audit samples after some  providers opposed having to supply multiple medical records. CPI officials  told us that they want to reduce provider burden in a logical manner. For  example, according to CMS officials, in the Medicare FFS Recovery Audit  Program, CMS established limits on Additional Documentation Requests,  which are requests for medical documentation supporting a claim being  reviewed. CMS requires such documentation adjustments so that they  align with a providers\u2019 claim denial rates. Providers with low denial rates  will have lower documentation requirements, while providers with high  denial rates will have higher documentation requirements, thus adjusting  provider burden based on demonstrated compliance."], "subsections": []}]}, {"section_title": "CMS Has Taken Steps to Identify Program Fraud Risks but Has Not Conducted a Fraud Risk Assessment for Medicare or Medicaid", "paragraphs": [], "subsections": [{"section_title": "CMS Has Taken Steps to Identify Some Fraud Risks for Medicare and Medicaid", "paragraphs": ["The assess component of the Fraud Risk Framework calls for federal  managers to plan regular fraud risk assessments and to assess risks to  determine a fraud risk profile. Identifying fraud risks is one of the steps  included in the Fraud Risk Framework for assessing risks to determine a  fraud risk profile.", "CMS has taken steps to identify some fraud risks through several control  activities that target areas the agency has designated as higher risk within  Medicare and Medicaid, including specific provider types, such as home  health agencies, and specific geographic locations. As discussed earlier,  CMS officials told us that CPI initially focused on developing control  activities for Medicare FFS and considers these activities to be the most  mature of all CPI efforts to address fraud risks. CMS has identified fraud  risks in the following selected examples, which are not an exhaustive list  of its control activities.", "Data analytics to assist investigations in Medicare FFS. In 2011, CMS  implemented FPS, a data-analytic system that screens all Medicare FFS  claims to identify health-care providers with suspect billing patterns for  further investigation. Medicare FFS contractors\u2014ZPICs and UPICs\u2014 have used FPS to identify and prioritize leads for investigations of  potential fraud by high-risk Medicare FFS providers. Contractors told us  that FPS allows them to quickly identify and triage leads. CMS\u2019s guidance  requires contractors to prioritize investigations with the greatest program  impact or urgency and identifies required criteria for prioritizing  investigations, such as patient abuse or harm, multistate fraud, and high  dollar amount of potential overpayments. One contractor we interviewed  developed a risk-prioritization model that incorporated CMS\u2019s required  criteria, such as patient harm, as well as additional criteria, such as  provider spikes in billing, into a tool that automatically creates a provider  risk score to help the contractor focus and prioritize investigative  resources.", "Prior authorization for Medicare FFS services or supplies. CMS published  a final rule in December 2015 that identifies a master list of durable  medical equipment, prosthetics, orthotics, and supplies for which CMS  can require prior authorization before suppliers submit a Medicare FFS  claim. In this rule, CMS identified 135 items that are frequently subject to  unnecessary utilization and stated that the agency expects the final rule  to result in savings in the form of reduced unnecessary utilization, fraud,  waste, and abuse. Under this program, prior authorization is a condition  of payment for claims. CMS can choose which items on the master list to  subject to prior authorization. For example, in March 2017, it began  requiring prior authorization for selected power wheelchairs in four states  and expanded the prior authorization program for these items to all states  in July 2017.", "CMS also began to test the use of prior authorization on a voluntary basis  through a series of fixed-length demonstrations for items and services  that have been associated with high levels of improper payments,  including high incidences of fraud in some cases, and unnecessary  utilization in certain geographic areas. For example, CMS began  implementing a voluntary prior authorization demonstration in September  2012 for other power mobility devices, such as power scooters, in seven  states where historically there has been extensive evidence of fraud and  improper payments. CMS expanded the demonstration to an additional  12 states in October 2014, for a total of 19 states. According to the initial  Federal Register notice, CMS planned to use the demonstration to  develop improved methods for investigation and prosecution of fraud to  protect federal funds from fraudulent actions and the resulting improper  payments. Under the demonstration, providers and suppliers are  encouraged\u2014but not required\u2014to submit a request for prior authorization  for certain items before they provide the item to the beneficiary and  submit a claim for payment.", "Revised provider screening and enrollment processes for Medicare FFS  and Medicaid FFS. In response to PPACA, in 2011 CMS implemented a  revised screening process for providers and suppliers who enroll in  Medicare and Medicaid based on identified provider risk categories.  CMS placed all Medicare provider and supplier types into one of three  risk categories\u2014limited, moderate, or high\u2014based on its assessment of  the potential risk of fraud, waste, and abuse each provider and supplier  type poses. For example, CMS designated prospective (newly enrolling)  home health agencies and prospective suppliers of durable medical  equipment, prosthetics, orthotics, and supplies in the high-risk category.  According to the final rule and our interviews with CMS officials, CMS  developed these risk-based categories based on its review and synthesis  of various information sources about the fraud risks posed by each  provider and supplier type, including (1) the agency\u2019s experience with  claims data used to identify potentially fraudulent billing practices, (2)  expertise of contractors responsible for investigating and identifying  Medicare fraud, and (3) GAO and OIG reports. CMS designated specific  screening activities for each risk category, with increased requirements  for moderate- and high-risk provider and supplier types. For example,  moderate- and high-risk providers and suppliers must receive  preenrollment site visits, and high-risk providers and suppliers also are  subject to fingerprint-based criminal-background checks. As part of the  revised screening process, beginning in September 2011, CMS also  undertook its first program-wide effort to rescreen, or revalidate, the  enrollment records of about 1.5 million existing Medicare FFS providers  and suppliers, to determine whether they remain eligible to bill  Medicare.", "Temporary provider enrollment moratoriums for certain providers and  geographic areas for Medicare FFS and Medicaid FFS. CMS identified  certain provider types and geographic areas as high risk for fraud and  used its authority under PPACA to implement temporary moratoriums to  suspend enrollment of such Medicare and Medicaid providers in those  areas. For example, in July 2016, CMS extended temporary moratoriums  statewide on the enrollment of new Medicare Part B nonemergency  ambulance suppliers and Medicare home health agencies statewide in six  states, as applicable. The statewide moratoriums also apply to  Medicaid. According to the Federal Register notice, CMS imposed the  temporary moratoriums based on qualitative and quantitative factors  suggesting a high risk of fraud, waste, or abuse, such as law-enforcement  expertise with emerging fraud trends and investigations. CMS\u2019s data  analysis also confirmed the agency\u2019s determination of a high risk of fraud,  waste, and abuse for these provider and supplier types within certain  geographic areas, according to the notice.", "Medicaid state program integrity reviews and desk reviews. CMS tailored  state Medicaid program-integrity reviews to areas it identified as high risk  for improper payments, such as personal care services, which may also  be at high risk for fraud. In March 2017, we reported that, from fiscal  years 2014 through 2016, CMS conducted focused reviews of state  program-integrity efforts in 31 states, reviewing 10 or 11 states annually.  For each state, CMS tailored its focused reviews to the state\u2019s managed  care plans and relevant other high-risk areas, including provider  enrollment and screening, nonemergency medical transportation, and  personal care services. CMS and state officials we spoke with as part of  that work told us that the tailored oversight had been beneficial and  helped identify areas for improvement. CMS has also initiated desk  reviews of state program-integrity efforts. According to CMS, these desk  reviews allow the agency to provide states with customized program- integrity oversight.", "Vulnerability tracking system for Medicare. CPI recently initiated an effort  to centralize and formalize a vulnerability tracking process for Medicare,  which could support identification of specific fraud risks, both in Medicare  and possibly Medicaid. As described by CPI officials, the process aims  to collect information on fraud-related vulnerabilities from CMS  employees, contractors, and other sources, such as GAO and HHS OIG  reports."], "subsections": []}, {"section_title": "CMS Has Not Conducted a Fraud Risk Assessment for Medicare or Medicaid", "paragraphs": ["The assess component of the Fraud Risk Framework calls for federal  managers to plan regular fraud risk assessments and assess risks to  determine a fraud risk profile. Furthermore, federal internal control  standards call for agency management to assess the internal and  external risks their entities face as they seek to achieve their objectives.  The standards state that, as part of this overall assessment, management  should consider the potential for fraud when identifying, analyzing, and  responding to risks.", "The Fraud Risk Framework states that, in planning the fraud risk  assessment, effective managers tailor the fraud risk assessment to the  program by, among other things, identifying appropriate tools, methods,  and sources for gathering information about fraud risks and involving  relevant stakeholders in the assessment process. Fraud risk  assessments that align with the Fraud Risk Framework involve (1)  identifying inherent fraud risks affecting the program, (2) assessing the  likelihood and impact of those fraud risks, (3) determining fraud risk  tolerance, (4) examining the suitability of existing fraud controls and  prioritizing residual fraud risks, and (5) documenting the results. (See fig.  6.)", "Although, as discussed earlier, CMS has identified some fraud risks  posed by providers in Medicare FFS and, to a lesser degree, Medicaid  FFS, the agency has not conducted a fraud risk assessment for either the  Medicare or Medicaid program. Such a risk assessment would provide  the detailed information and insights needed to create a fraud risk profile,  which, in turn, is the basis for creating an antifraud strategy.", "According to CMS officials, CMS has not conducted a fraud risk  assessment for Medicare or Medicaid because, within CPI\u2019s broader  approach of preventing and eliminating improper payments, its focus has  been on addressing specific vulnerabilities among provider groups that  have shown themselves particularly prone to fraud, waste, and abuse.  With this approach, however, it is unlikely that CMS will be able to design  and implement the most-appropriate control activities to respond to the  full portfolio of fraud risks.", "A fraud risk assessment consists of discrete activities that build upon  each other. Specifically:  Identifying inherent fraud risks affecting the program. As discussed  earlier, CMS has taken steps to identify fraud risks. However, CMS  has not used a process to identify inherent fraud risks from the  universe of potential vulnerabilities facing Medicare and Medicaid  programs, including threats from various sources. According to CPI  officials, most of the agency\u2019s fraud control activities are focused on  fraud risks posed by providers. The Fraud Risk Framework discusses  fully considering inherent fraud risks from internal and external  sources in light of fraud risk factors such as incentives, opportunities,  and rationalization to commit fraud. For example, according to CMS  officials, the inherent design of the Medicare Part C program may  pose fraud risks that are challenging to detect. A fraud risk  assessment would help CMS identify all sources of fraudulent  behaviors, beyond threats posed by providers, such as those posed  by health-insurance plans, contractors, or employees.", "Assessing the likelihood and impact of fraud risks and determining  fraud risk tolerance. CMS has taken steps to prioritize fraud risks in  some areas, but it has not assessed the likelihood or impact of fraud  risks or determined fraud risk tolerance across all parts of Medicare  and Medicaid. Assessing the likelihood and impact of inherent fraud  risks would involve consideration of the impact of fraud risks on  program finances, reputation, and compliance. Without assessing the  likelihood and impact of risks in Medicare or Medicaid or internally  determining which fraud risks may fall under the tolerance threshold,  CMS cannot be certain that it is aware of the most-significant fraud  risks facing these programs and what risks it is willing to tolerate  based on the programs\u2019 size and complexity.", "Examining the suitability of existing fraud controls and prioritizing  residual fraud risks. CMS has not assessed existing control activities  or prioritized residual fraud risks. According to the Fraud Risk  Framework, managers may consider the extent to which existing  control activities\u2014whether focused on prevention, detection, or  response\u2014mitigate the likelihood and impact of inherent risks and  whether the remaining risks exceed managers\u2019 tolerance. This  analysis would help CMS to prioritize residual risks and to determine  mitigation approaches. For example, CMS has not established  preventive fraud control activities in Medicare Part C. Using a fraud  risk assessment for Medicare Part C and closely examining existing  fraud control activities and residual risks, CMS could be better  positioned to address fraud risks facing this growing program and  develop preventive control activities. Further, without assessing  existing fraud control activities and prioritizing residual fraud risks,  CMS cannot be assured that its current control activities are  addressing the most-significant risks. Such analysis would also help  CMS determine whether additional, preferably preventive, fraud  controls are needed to mitigate residual risks, make adjustments to  existing control activities, and potentially scale back or remove control  activities that are addressing tolerable fraud risks.", "Documenting the risk-assessment results in a fraud risk profile. CMS  has not developed a fraud risk profile that documents key findings and  conclusions of the fraud risk assessment. According to the Fraud Risk  Framework, the risk profile can also help agencies decide how to  allocate resources to respond to residual fraud risks. Given the large  size and complexity of Medicare and Medicaid, a documented fraud  risk profile could support CMS\u2019s resource-allocation decisions as well  as facilitate the transfer of knowledge and continuity across CMS staff  and changing administrations.", "Senior CPI officials told us that the agency plans to start a fraud risk  assessment for Medicare and Medicaid after it completes a separate  fraud risk assessment of the federally facilitated marketplace. This fraud  risk assessment for the federally facilitated marketplace eligibility and  enrollment process is being conducted in response to a recommendation  we made in February 2016. In April 2017, CPI officials told us that this  fraud risk assessment was largely completed, although in September  2017 CPI officials told us that the assessment was undergoing agency  review. CPI officials told us that they have informed CM and CMCS  officials that there will be future fraud risk assessments for Medicare and  Medicaid; however, they could not provide estimated timelines or plans  for conducting such assessments, such as the order or programmatic  scope of the assessments.", "Once completed, CMS could use the federally facilitated marketplace  fraud risk assessment and apply any lessons learned when planning for  and designing fraud risk assessments for Medicare and Medicaid.  According to the Fraud Risk Framework, factors such as size, resources,  maturity of the agency or program, and experience in managing risks can  influence how the entity plans the fraud risk assessment. Additionally,  effective managers tailor the fraud risk assessment to the program when  planning for it. The large scale and complexity of Medicare and Medicaid  as well as time and resources involved in conducting a fraud risk  assessment underscore the importance of a well-planned and tailored  approach to identifying the assessment\u2019s programmatic scope. Planning  and tailoring may involve decisions to conduct a fraud risk assessment for  Medicare and Medicaid programs as a whole or divided into several  subassessments to reflect their various component parts (e.g., Medicare  FFS, Medicaid managed care) as well as determining the timing and  order of assessments (e.g., concurrently or consecutively for Medicare  and Medicaid).", "CMS\u2019s existing fraud risk identification efforts as well as communication  channels with stakeholders could serve as a foundation for developing a  fraud risk assessment for Medicare and Medicaid. The leading practices  identified in the Fraud Risk Framework discuss the importance of  identifying appropriate tools, methods, and sources for gathering  information about fraud risks and involving relevant stakeholders in the  assessment process. CMS\u2019s fraud risk identification efforts discussed  earlier could provide key information about fraud risks and their likelihood  and impact. Further, existing relationships and communication channels  across CMS and its extensive network of stakeholders could support  building a comprehensive understanding of known and potential fraud  risks for the purposes of a fraud risk assessment. For example, the fraud  vulnerabilities identified through data analysis and information sharing  with states, health-insurance plans, law-enforcement organizations, and  contractors through the HFPP could inform a fraud risk assessment.  CPI\u2019s Command Center missions\u2014facilitated collaboration sessions that  bring together experts from various disciplines to improve the processes  for fraud prevention in Medicare and Medicaid\u2014could bring together  experts to identify potential or emerging fraud vulnerabilities or to  brainstorm approaches to mitigate residual fraud risks.", "As CMS makes plans to move forward with a fraud risk assessment for  Medicare and Medicaid, it will be important to consider the frequency with  which the fraud risk assessment would need to be updated. While,  according to the Fraud Risk Framework, the time intervals between  updates can vary based on the programmatic and operating environment,  assessing fraud risks on an ongoing basis is important to ensure that  control activities are continuously addressing fraud risks. The constantly  evolving fraud schemes, the size of the programs in terms of beneficiaries  and expenditures, as well as continual changes in Medicare and Medicaid  programs\u2014such as development of innovative payment models and  increasing managed-care enrollment\u2014call for constant vigilance and  regular updates to the fraud risk assessment."], "subsections": []}]}, {"section_title": "CMS Has Not Developed a Risk-Based Antifraud Strategy for Medicare and Medicaid, Which Would Include Plans for Monitoring and Evaluation", "paragraphs": [], "subsections": [{"section_title": "CMS Has Not Developed a Risk-Based Antifraud Strategy", "paragraphs": ["The design and implement component of the Fraud Risk Framework calls  for federal managers to design and implement a strategy with specific  control activities to mitigate assessed fraud risks and collaborate to help  ensure effective implementation.", "According to the Fraud Risk Framework, effective managers develop and  document an antifraud strategy that describes the program\u2019s approach for  addressing the prioritized fraud risks identified during the fraud risk  assessment, also referred to as a risk-based antifraud strategy. A risk- based antifraud strategy describes existing fraud control activities as well  as any new fraud control activities a program may adopt to address  residual fraud risks. In developing a strategy and antifraud control  activities, effective managers focus on fraud prevention over detection,  develop a plan for responding to identified instances of fraud, establish  collaborative relationships with stakeholders, and create incentives to  help effectively implement the strategy. Additionally, as part of a  documented strategy, management identifies roles and responsibilities of  those involved in fraud risk management activities; describes control  activities as well as plans for monitoring and evaluation, creates timelines,  and communicates the antifraud strategy to employees and stakeholders,  among other things.", "As discussed earlier, CMS has some control activities in place to identify  fraud risk in Medicare and Medicaid, particularly in the FFS program.  However, CMS has not developed and documented a risk-based  antifraud strategy to guide its design and implementation of new antifraud  activities and to better align and coordinate its existing activities to ensure  it is targeting and mitigating the most-significant fraud risks.", "Antifraud strategy. CMS officials told us that CPI does not have a  documented risk-based antifraud strategy. Although CMS has developed  several documents that describe efforts to address fraud, the agency  has not developed a risk-based antifraud strategy for Medicare and  Medicaid because, as discussed earlier, it has not conducted a fraud risk  assessment that would serve as a foundation for such strategy.", "In 2016, CPI identified five strategic objectives for program integrity,  which include antifraud elements and an emphasis on prevention.  However, according to CMS officials, these objectives were identified  from discussions with CMS leadership and various stakeholders and not  through a fraud risk assessment process to identify inherent fraud risks  from the universe of potential vulnerabilities, as described earlier and  called for in the leading practices. These strategic objectives were  presented at an antifraud conference in 2016, but were not announced  publicly until the release of the Annual Report to Congress on the  Medicare and Medicaid Integrity Programs for Fiscal Year 2015 in June  2017.", "Stakeholder relationships and communication. CMS has established  relationships and communicated with stakeholders, but, without an  antifraud strategy, stakeholders we spoke with lacked a common  understanding of CMS\u2019s strategic approach. Prior work on practices that  can help federal agencies collaborate effectively calls for a strategy that is  shared with stakeholders to promote trust and understanding. Once an  antifraud strategy is developed, the Fraud Risk Framework calls for  managers to collaborate to ensure effective implementation. Although some CMS stakeholders were able to describe various CMS program- integrity priorities and activities, such as home health being a fraud risk  priority, the stakeholders could not communicate, articulate, or cite a  common CMS strategic approach to address fraud risks in its programs.", "Incentives. The Fraud Risk Framework discusses creating incentives to  help ensure effective implementation of the antifraud strategy once it is  developed. Currently, some incentives within stakeholder relationships  may complicate CMS\u2019s antifraud efforts. As discussed earlier, CMS is a  partner and provides oversight to states\u2019 program-integrity functions.  Officials from one state told us that they were reluctant to share their  program vulnerabilities because CMS would use this information to later  audit the state. Among contractors, CMS encourages information sharing  through conferences and workshops; however, competition for CMS  business among contractors can be a disincentive to information sharing.  CMS officials acknowledged this concern and said that they expect  contractors to share information related to fraud schemes, outcomes of  investigations, and tips for addressing fraud, but not proprietary  information such as algorithms to risk-score providers.", "Without developing and documenting an antifraud strategy based on a  fraud risk assessment, as called for in the design and implement  component of the Fraud Risk Framework, CMS cannot ensure that it has  a coordinated approach to address the range of fraud risks and to  appropriately target and allocate resources for the most-significant risks.  Considering fraud risks to which the Medicare and Medicaid programs are  most vulnerable, in light of the malicious intent of those who aim to exploit  the programs, would help CMS to examine its current control activities  and potentially design new ones with recognition of fraudulent behavior it  aims to prevent. This focus on fraud is distinct from a broader view of  program integrity and improper payments by considering the intentions  and incentives of those who aim to deceive rather than well-intentioned  providers who make mistakes. Also, continued growth of the programs,  such as growth of Medicare Part C and Medicaid managed care, call for  consideration of preventive fraud control activities across the entire  network of entities involved.", "Further, considering the large size and complexity of Medicare and  Medicaid and the extensive stakeholder network involved in managing  fraud in the programs, a strategic approach to managing fraud risks within  the programs is essential to ensure that a number of existing control  activities and numerous stakeholder relationships and incentives are  being aligned to produce desired results. Once developed, an antifraud  strategy that is clearly articulated to various CMS stakeholders would help  CMS to address fraud risks in a more coordinated and deliberate fashion.  Thinking strategically about existing control activities, resources, tools,  and information systems could help CMS to leverage resources while  continuing to integrate Medicare and Medicaid program-integrity efforts  along functional lines. A strategic approach grounded in a comprehensive  assessment of fraud risks could also help CMS to identify future  enhancements for existing control activities, such as new preventive  capabilities for FPS or additional fraud factors in provider enrollment and  revalidation, such as provider risk scoring, to stay in step with evolving  fraud risks."], "subsections": []}, {"section_title": "CMS Has Established Monitoring and Evaluation Mechanisms That Could Inform a Risk-Based Antifraud Strategy for Medicare and Medicaid", "paragraphs": ["The evaluate and adapt component of the Fraud Risk Framework calls for  federal managers to evaluate outcomes using a risk-based approach and  adapt activities to improve fraud risk management. Furthermore,  according to federal internal control standards, managers should  establish and operate monitoring activities to monitor the internal control  system and evaluate the results, which may be compared against an  established baseline. Ongoing monitoring and periodic evaluations  provide assurances to managers that they are effectively preventing,  detecting, and responding to potential fraud.", "CMS has established monitoring and evaluation mechanisms for its  program-integrity activities that it could incorporate into an antifraud  strategy.", "In Medicare, CMS has taken steps to measure the rate of fraud in a  particular service area. We have previously reported that agencies may  face challenges measuring outcomes of fraud risk management activities  in a reliable way. These challenges include the difficulty of measuring the  extent of deterred fraud, isolating potential fraud from legitimate activity or  other forms of improper payments, and determining the amount of  undetected fraud. Despite these challenges, CMS has taken steps to  estimate a fraud baseline\u2014meaning the rate of probable fraud\u2014in the  home health benefit. In fiscal year 2016, CMS conducted a pretest in the  Miami-Dade area of Florida to evaluate its potential measurement  approach that could later be used in a nationwide study of probable fraud  among home health agencies. The pretest was not a random sample and was not intended to produce a rate of fraud, but instead was intended to  test the interview instruments and data-collection methodology CMS  might use in a study nationwide. CMS and its contractor collected  information from home health agencies, the attending providers, and  Medicare beneficiaries in the Miami-Dade area in order to test these  interview instruments. CMS completed this pretest, but, according to CMS  officials, the agency does not yet have plans to roll out a nationwide study  that would estimate a probable fraud rate for the Medicare FFS home  health benefit.", "In its 2015 annual report to Congress, CMS stated that \u201cdocumenting the  baseline amount of fraud in Medicare is of critical importance, as it allows  officials to evaluate the success of ongoing fraud prevention activities.\u201d  CMS officials working on the pilot told us that having an estimate of the  rate of fraud in home health benefits would allow CMS to reliably assess  its efforts at eliminating or reducing fraud. Without a baseline, officials  said, the agency cannot know whether its antifraud efforts are as effective  as they could be. We previously reported that the lack of a baseline for  the amount of health-care fraud that exists limits CMS\u2019s ability to  determine whether its activities are effectively reducing health care fraud  and abuse. A baseline estimate could provide an understanding of the  extent of fraud and, with additional information on program activities,  could help to inform decision making related to allocation of resources to  combat health-care fraud.", "As described in the Fraud Risk Framework, in the absence of a fraud  baseline, agencies can gather additional information on the short-term or  intermediate outcomes of some antifraud initiatives, which may be more  readily measured. For example, CMS has developed some performance  measures to provide a basis for monitoring its progress towards meeting  the program-integrity goals set in the HHS Strategic Plan and Annual  Performance Plan. Specifically, CMS measures whether it is meeting its  goal of \u201cincreasing the percentage of Medicare FFS providers and  suppliers identified as high risk that receive an administrative action.\u201d  CMS does not set specific antifraud goals for other parts of Medicare or  Medicaid; other CMS performance measures relate to measuring or  reducing improper payments in CHIP, Medicaid, and the various parts of  Medicare.", "CMS uses return-on-investment and savings estimates to measure the  effectiveness of its Medicare program-integrity activities and FPS. For  example, CMS uses return-on-investment to measure the effectiveness of  FPS and, in response to a recommendation we made in 2012, CMS  developed outcome-based performance targets and milestones for FPS.  CMS has also conducted individual evaluations of its program-integrity  activities, such as an interim evaluation of the prior-authorization  demonstration for power mobility devices that began in 2012 and is  currently implemented in 19 states.", "Commensurate with greater maturity of control activities in Medicare FFS  compared to other parts of Medicare and Medicaid, monitoring and  evaluation activities for Medicare Parts C and D and Medicaid are more  limited. For example, CMS calculates savings for its program-integrity  activities in Medicare Parts C and D, but not a full return-on-investment.  CMS officials told us that calculating costs for specific activities is  challenging because of overlapping activities among contractors. CMS  officials said they continue to refine methods and develop new savings  estimates for additional program-integrity activities.", "According to the Fraud Risk Framework, effective managers develop a  strategy and evaluate outcomes using a risk-based approach. In  developing an effective strategy and antifraud activities, managers  consider the benefits and costs of control activities. Ongoing monitoring  and periodic evaluations provide reasonable assurance to managers that  they are effectively preventing, detecting, and responding to potential  fraud. Monitoring and evaluation activities can also support managers\u2019  decisions about allocating resources, and help them to demonstrate their  continued commitment to effectively managing fraud risks.", "As CMS takes steps to develop an antifraud strategy, it could include  plans for refining and building on existing methods such as return-on- investment or savings measures, and setting appropriate targets to  evaluate the effectiveness of all of CMS\u2019s antifraud efforts. Such a  strategy would help CMS to efficiently allocate program-integrity  resources and to ensure that the agency is effectively preventing,  detecting, and responding to potential fraud. For example, while doing so  would involve challenges, CMS\u2019s strategy could detail plans to advance  efforts to measure a potential fraud rate through baseline and periodic  measures. Fraud rate measurement efforts could also inform risk  assessment activities, identify currently unknown fraud risks, align  resources to priority risks, and develop effective outcome metrics for  antifraud controls. Such a strategy would also help CMS ensure that it  has effective performance measures in place to assess its antifraud  efforts beyond those related to providers in Medicare FFS, and establish  appropriate targets to measure the agency\u2019s progress in addressing fraud  risks.", "As CMS makes plans to move forward with a strategy and to further  develop evaluation and monitoring mechanisms, it will be important to  share its efforts with stakeholders. The Fraud Risk Framework states that  effective managers communicate lessons learned from fraud risk  management activities to stakeholders. For example, CMS could be a  leader to states in measuring the effectiveness of program-integrity  efforts. Officials in three of the four states we spoke with expressed  interest in receiving CMS guidance on how to measure the effectiveness  of their Medicaid program-integrity efforts, such as by providing models  for how to calculate return-on-investment."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Medicare and Medicaid provide health insurance to over 129 million  Americans, but the size\u2014in terms of number of beneficiaries and amount  of expenditures\u2014as well as complexity of these programs make them  inherently susceptible to fraud and improper payments. CMS currently  manages these risks across its programs as part of a broader approach  to identifying and controlling for multiple sources of improper payments  and by developing relationships with an extensive network of  stakeholders. In Medicare and Medicaid specifically, we note that CMS  has taken many important steps toward implementing a strategic  approach for managing fraud. However, the agency could benefit by more  fully aligning its efforts with the four components of the Fraud Risk  Framework.", "CMS is well positioned to leverage its fraud risk management efforts\u2014 such as demonstrated leadership for combating fraud, existing control  activities, and stakeholder relationships\u2014to provide additional antifraud  training, as well as to develop an antifraud strategy based on fraud risk  assessments for Medicare and Medicaid. We recognize that the effort  may be challenging, given the size and complexity of Medicare and  Medicaid, and the need to balance antifraud activities with CMS\u2019s other  mission priorities. However, by not employing the actions identified in the  Fraud Risk Framework and incorporating them in its approach to  managing fraud risks, CMS is missing a significant opportunity to better  ensure employee vigilance against fraud, and to organize and focus its  many antifraud and program-integrity activities and related resources into  a comprehensive strategy. Such a strategy would (1) provide reasonable  assurance that CMS is targeting the most-significant fraud risks in its  programs and (2) help protect the government\u2019s substantial and growing  investments in these programs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to CMS:", "The Administrator of CMS should provide fraud-awareness training  relevant to risks facing CMS programs and require new hires to  undergo such training and all employees to undergo training on a  recurring basis. (Recommendation 1)", "The Administrator of CMS should conduct fraud risk assessments for  Medicare and Medicaid to include respective fraud risk profiles and  plans for regularly updating the assessments and profiles.  (Recommendation 2)", "The Administrator of CMS should, using the results of the fraud risk  assessments for Medicare and Medicaid, create, document,  implement, and communicate an antifraud strategy that is aligned with  and responsive to regularly assessed fraud risks. This strategy should  include an approach for monitoring and evaluation. (Recommendation  3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS and DOJ for comment. HHS  provided written comments, which are reprinted in appendix I. DOJ did  not have comments. HHS and DOJ also provided technical comments,  which we incorporated as appropriate.", "In commenting on this report, HHS agreed with our three  recommendations. Specifically, in response to our first recommendation  to provide required fraud-awareness training to all employees, HHS  stated that it will develop and implement a fraud-awareness training plan  to ensure all CMS employees receive training.", "Regarding our second recommendation to conduct fraud risk  assessments for Medicare and Medicaid, HHS stated that it is currently  conducting a fraud risk assessment on the federally facilitated  marketplace and, when this assessment is complete, will apply the  lessons learned in assessing this program to fraud risk assessments of  Medicare and Medicaid.", "In response to our third recommendation to create, document, implement,  and communicate an antifraud strategy that is aligned with and  responsive to regularly assessed fraud risks, HHS stated that it will  develop respective risk-based antifraud strategies after completing fraud  risk assessments for Medicare and Medicaid.", "We are sending copies of this report to the Acting Secretary of Health and  Human Services, the Administrator of CMS, the Assistant Attorney  General for Administration at DOJ, as well as appropriate congressional  committees and other interested parties. In addition, this report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found   on the last page of this report. GAO staff who made contributions to this  report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tonita Gillich (Assistant Director),  Irina Carnevale (Analyst-in-Charge), Michael Duane, Laura Sutton  Elsberg, and Catrin Jones made key contributions to this report. Also  contributing to the report were Lori Achman, James Ashley, Colin Fallon,  Leslie V. Gordon, Maria McMullen, Sabrina Streagle, and Shana Wallace."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-667T", "url": "https://www.gao.gov/products/GAO-18-667T", "title": "Information Security: Supply Chain Risks Affecting Federal Agencies", "published_date": "2018-07-12T00:00:00", "released_date": "2018-07-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IT systems are essential to the operations of the federal government. The supply chain\u2014the set of organizations, people, activities, and resources that create and move a product from suppliers to end users\u2014for IT systems is complex and global in scope. The exploitation of vulnerabilities in the IT supply chain is a continuing threat. Federal security guidelines provide for managing the risks to the supply chain.", "This testimony statement highlights information security risks associated with the supply chains used by federal agencies to procure IT systems. The statement also summarizes GAO's 2012 report that assessed the extent to which four national security-related agencies had addressed such risks. To develop this statement, GAO relied on its previous reports, as well as information provided by the national security-related agencies on their actions in response to GAO's previous recommendations. GAO also reviewed federal information security guidelines and directives."]}, {"section_title": "What GAO Found", "paragraphs": ["Reliance on a global supply chain introduces multiple risks to federal information systems. Supply chain threats are present during the various phases of an information system's development life cycle and could create an unacceptable risk to federal agencies. Information technology (IT) supply chain-related threats are varied and can include:", "installation of intentionally harmful hardware or software (i.e., containing \u201cmalicious logic\u201d);", "installation of counterfeit hardware or software;", "failure or disruption in the production or distribution of critical products;", "reliance on malicious or unqualified service providers for the performance of technical services; and", "installation of hardware or software containing unintentional vulnerabilities, such as defective code.", "These threats can have a range of impacts, including allowing adversaries to take control of systems or decreasing the availability of materials needed to develop systems. These threats can be introduced by exploiting vulnerabilities that could exist at multiple points in the supply chain. Examples of such vulnerabilities include the acquisition of products or parts from unauthorized distributors; inadequate testing of software updates and patches; and incomplete information on IT suppliers. Malicious actors could exploit these vulnerabilities, leading to the loss of the confidentiality, integrity, or availability of federal systems and the information they contain.", "GAO reported in 2012 that the four national security-related agencies in its review\u2014the Departments of Defense, Justice, Energy, Homeland Security (DHS)\u2014varied in the extent to which they had addressed supply chain risks. Of the four agencies, Defense had made the most progress addressing the risks. It had defined and implemented supply chain protection controls, and initiated efforts to monitor the effectiveness of the controls. Conversely, Energy and DHS had not developed or documented policies and procedures that defined security measures for protecting against IT supply chain threats and had not developed capabilities for monitoring the implementation and effectiveness of the measures. Although Justice had defined supply chain protection measures, it also had not developed or documented procedures for implementing or monitoring the measures.", "Energy and Justice fully implemented the recommendations that GAO made in its 2012 report and resolved the deficiencies that GAO had identified with their supply chain risk management efforts by 2016. DHS also fully implemented two recommendations to document policies and procedures for defining and implementing security measures to protect against supply chain threats by 2015, but could not demonstrate that it had fully implemented the recommendation to develop and implement a monitoring capability to assess the effectiveness of the security measures."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its 2012 report, GAO recommended that Justice, Energy, and DHS take eight actions, as needed, to develop and document policies, procedures, and monitoring capabilities that address IT supply chain risk. The departments generally concurred with the recommendations and subsequently implemented seven recommendations and partially implemented the eighth recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to testify at today\u2019s hearing on keeping  adversaries away from the homeland security supply chain. As you know,  federal agencies and the owners and operators of our nation\u2019s critical  infrastructure rely extensively on information technology (IT) and IT  services to carry out their operations. Securing this technology, its supply  chain, and the information it contains is essential to protecting national  and economic security.", "Since 1997, we have identified federal information security as a  governmentwide high-risk area. In 2003, we expanded this high-risk area  to include protecting systems supporting our nation\u2019s critical  infrastructure.", "My statement provides an overview of the information security risks  associated with the supply chains used by federal agencies to procure IT  equipment, software, or services. The statement also discusses our  2012 assessment of the extent to which four national security-related  agencies\u2014the Departments of Defense, Justice, Energy, and Homeland  Security (DHS)\u2014had addressed these risks.", "In developing this testimony, we relied on our previous reports, as well  as information provided by the national security-related agencies on their  actions in response to our previous recommendations. We also  considered information contained in special publications issued by the  National Institute of Standards and Technology (NIST) and a directive  issued by DHS. A more detailed discussion of the objectives, scope, and  methodology for this work is included in each of the reports that are cited  throughout this statement.", "The work on which this statement is based was conducted in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform audits to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions.  We believe that the evidence obtained provided a reasonable basis for  our findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The design and development of information systems can be complex  undertakings, consisting of a multitude of pieces of equipment and  software products, and service providers. Each of the components of an  information system may rely on one or more supply chains\u2014that is, the  set of organizations, people, activities, information, and resources that  create and move a product or service from suppliers to an organization\u2019s  customers.", "Obtaining a full understanding of the sources of a given information  system can also be extremely complex. According to the Software  Engineering Institute, the identity of each product or service provider may  not be visible to others in the supply chain. Typically, an acquirer, such as  a federal agency, may only know about the participants to which it is  directly connected in the supply chain. Further, the complexity of  corporate structures, in which a parent company (or its subsidiaries) may  own or control companies that conduct business under different names in  multiple countries, presents additional challenges to fully understanding  the sources of an information system. As a result, the acquirer may have  little visibility into the supply chains of its suppliers.", "Federal procurement law and policies promote the acquisition of  commercial products when they meet the government\u2019s needs.  Commercial providers of IT use a global supply chain to design, develop,  manufacture, and distribute hardware and software products throughout  the world. Consequently, the federal government relies heavily on IT  equipment manufactured in foreign nations.", "Federal information and communications systems can include a multitude  of IT equipment, products, and services, each of which may rely on one  or more supply chains. These supply chains can be long, complex, and  globally distributed and can consist of multiple tiers of outsourcing. As a  result, agencies may have little visibility into, understanding of, or control  over how the technology that they acquire is developed, integrated, and  deployed, as well as the processes, procedures, and practices used to  ensure the integrity, security, resilience, and quality of the products and  services. Table 1 highlights possible manufacturing locations of typical  components of a computer or information systems network.", "Moreover, many of the manufacturing inputs required for these  components\u2014whether physical materials or knowledge\u2014are acquired  from various sources around the globe. Figure 1 depicts the potential  countries of origin of common suppliers of various components in a  commercially available laptop computer."], "subsections": [{"section_title": "Federal Laws and Guidelines Require the Establishment of Information Security Programs and Provide for Managing Supply Chain Risk", "paragraphs": ["The Federal Information Security Modernization Act (FISMA) of 2014  requires federal agencies to develop, document, and implement an  agency-wide information security program to provide information security  for the information systems and information that support the operations  and assets of the agency. The act also requires that agencies ensure  that information security is addressed throughout the life cycle of each  agency information system. FISMA assigns NIST the responsibility for  providing standards and guidelines on information security to agencies. In  addition, the act authorizes DHS to develop and issue binding operational  directives to agencies, including directives that specify requirements for  the mitigation of exigent risks to information systems.", "NIST has issued several special publications (SP) that provide guidelines  to federal agencies on controls and activities relevant to managing supply  chain risk. For example,", "NIST SP 800-39 provides an approach to organization-wide  management of information security risk, which states that  organizations should monitor risk on an ongoing basis as part of a  comprehensive risk management program.", "NIST SP 800-53 (Revision 4) provides a catalogue of controls from  which agencies are to select controls for their information systems. It  also specifies several control activities that organizations could use to  provide additional supply chain protections, such as conducting due  diligence reviews of suppliers and developing acquisition policy, and  implementing procedures that help protect against supply chain  threats throughout the system development life cycle.", "NIST SP 800-161 provides guidance to federal agencies on  identifying, assessing, selecting, and implementing risk management  processes and mitigating controls throughout their organizations to  help manage information and communications technology supply  chain risks.", "In addition, as of June 2018, DHS has issued one binding operational  directive related to an IT supply chain-related threat. Specifically, in  September 2017, DHS issued a directive to all federal executive branch  departments and agencies to remove and discontinue present and future  use of Kaspersky-branded products on all federal information systems.  In consultation with interagency partners, DHS determined that the risks  presented by these products justified their removal.", "Beyond these guidelines and requirements, the Ike Skelton National  Defense Authorization Act for Fiscal Year 2011 also included provisions  related to supply chain security. Specifically, Section 806 authorizes the  Secretaries of Defense, the Army, the Navy, and the Air Force to exclude  a contractor from specific types of procurements on the basis of a  determination of significant supply chain risk to a covered system.  Section 806 also establishes requirements for limiting disclosure of the  basis of such procurement action."], "subsections": []}]}, {"section_title": "IT Supply Chains Introduce Numerous Information Security Risks to Federal Agencies", "paragraphs": ["In several reports issued since 2012, we have pointed out that the  reliance on complex, global IT supply chains introduces multiple risks to  federal information and telecommunications systems. This includes the  risk of these systems being manipulated or damaged by leading foreign  cyber-threat nations such as Russia, China, Iran, and North Korea.  Threats and vulnerabilities created by these cyber-threat nations, vendors  or suppliers closely linked to cyber-threat nations, and other malicious  actors can be sophisticated and difficult to detect and, thus, pose a  significant risk to organizations and federal agencies.", "As we reported in March 2012, supply chain threats are present at  various phases of a system\u2019s development life cycle. Key threats that  could create an unacceptable risk to federal agencies include the  following.", "Installation of hardware or software containing malicious logic, which is hardware, firmware, or software that is intentionally included or inserted in a system for a harmful purpose. Malicious logic can cause significant damage by allowing attackers to take control of entire systems and, thereby, read, modify, or delete sensitive information; disrupt operations; launch attacks against other  organizations\u2019 systems; or destroy systems.", "Installation of counterfeit hardware or software, which is hardware  or software containing non-genuine component parts or code.  According to the Defense Department\u2019s Information Assurance  Technology Analysis Center, counterfeit IT threatens the integrity,  trustworthiness, and reliability of information systems for several  reasons, including the facts that (1) counterfeits are usually less  reliable and, therefore, may fail more often and more quickly than  genuine parts; and (2) counterfeiting presents an opportunity for the  counterfeiter to insert malicious logic or backdoors into replicas or  copies that would be far more difficult in more secure manufacturing  facilities.", "Failure or disruption in the production or distribution of critical  products. Both man-made (e.g., disruptions caused by labor, trade,  or political disputes) and natural (e.g., earthquakes, fires, floods, or  hurricanes) causes could decrease the availability of material needed  to develop systems or disrupt the supply of IT products critical to the  operations of federal agencies.", "Reliance on a malicious or unqualified service provider for the  performance of technical services. By virtue of their position,  contractors and other service providers may have access to federal  data and systems. Service providers could attempt to use their access  to obtain sensitive information, commit fraud, disrupt operations, or  launch attacks against other computer systems and networks.", "Installation of hardware or software that contains unintentional  vulnerabilities, such as defects in code that can be exploited. Cyber  attackers may focus their efforts on, among other things, finding and  exploiting existing defects in software code. Such defects are usually  the result of unintentional coding errors or misconfigurations, and can  facilitate attempts by attackers to gain unauthorized access to an  agency\u2019s information systems and data, or disrupt service.", "We noted in the March 2012 report that threat actors can introduce  these threats into federal information systems by exploiting vulnerabilities  that could exist at multiple points in the global supply chain. In addition,  supply chain vulnerabilities can include weaknesses in agency acquisition  or security procedures, controls, or implementation related to an  information system. Examples of the types of vulnerabilities that could be  exploited include acquisitions of IT products or parts from sources other than the  original manufacturer or authorized reseller, such as independent  distributors, brokers, or on the gray market;  lack of adequate testing for software updates and patches; and  incomplete information on IT suppliers.", "If a threat actor exploits an existing vulnerability, it could lead to the loss  of the confidentiality, integrity, or availability of the system and associated  information. This, in turn, can adversely affect an agency\u2019s ability to carry  out its mission."], "subsections": []}, {"section_title": "Four National Security-Related Agencies Have Acted to Better Address IT Supply Chain Risks for Their Information Systems", "paragraphs": ["In March 2012, we reported that the four national security-related  agencies (i.e., Defense, Justice, Energy, and DHS) had acknowledged  the risks presented by supply chain vulnerabilities. However, the  agencies varied in the extent to which they had addressed these risks by  (1) defining supply chain protection measures for department information  systems, (2) developing implementing procedures for these measures,  and (3) establishing capabilities for monitoring compliance with, and the  effectiveness of, such measures.", "Of the four agencies, the Department of Defense had made the most  progress addressing the risks. Specifically, the department\u2019s supply chain  risk management efforts began in 2003 and included: a policy requiring supply chain risk to be addressed early and across  a system\u2019s entire life cycle and calling for an incremental  implementation of supply chain risk management through a series of  pilot projects; a requirement that every acquisition program submit and update a  \u201cprogram protection plan\u201d that was to, among other things, help  manage risks from supply chain exploits or design vulnerabilities; procedures for implementing supply chain protection measures, such  as an implementation guide describing 32 specific measures for  enhancing supply chain protection and procedures for program  protection plans identifying ways in which programs should manage  supply chain risk; and a monitoring mechanism to determine the status and effectiveness of  supply chain protection pilot projects, as well as monitoring  compliance with and effectiveness of program protection policies and  procedures for several acquisition programs.", "Conversely, our report noted that the other three agencies had made  limited progress in addressing supply chain risks for their information  systems. For example:", "The Department of Justice had defined specific security measures for  protecting against supply chain threats through the use of provisions  in vendor contracts and agreements. Officials identified (1) a  citizenship and residency requirement and (2) a national security risk  questionnaire as two provisions that addressed supply chain risk.  However, Justice had not developed procedures for ensuring the  effective implementation of these protection measures or a  mechanism for verifying compliance with, and the effectiveness of  these measures. We stressed that, without such procedures, Justice  would have limited assurance that its departmental information  systems were being adequately protected against supply chain  threats.", "In May 2011, the Department of Energy revised its information  security program, which required Energy components to implement  provisions based on NIST and Committee on National Security  Systems guidance. However, the department was unable to provide  details on implementation progress, milestones for completion, or how  supply chain protection measures would be defined. Because it had  not defined these measures or associated implementing procedures,  we reported that the department was not in a position to monitor  compliance or effectiveness.", "Although its information security guidance mentioned the NIST control  related to supply chain protection, DHS had not defined the supply  chain protection control activities that system owners should employ.  The department\u2019s information security policy manager stated that  DHS was in the process of developing policy that would address  supply chain protection, but did not provide details on when it would  be completed. In the absence of such a policy, DHS was not in a  position to develop implementation procedures or to monitor  compliance or effectiveness.", "To assist Justice, Energy, and DHS in better addressing IT supply chain- related security risks for their departmental information systems, we made  eight recommendations to these three agencies in our 2012 report.  Specifically, we recommended that Energy and DHS: develop and document departmental policy that defines which security  measures should be employed to protect against supply chain threats.", "We also recommended that Justice, Energy, and DHS: develop, document, and disseminate procedures to implement the  supply chain protection security measures defined in departmental  policy, and develop and implement a monitoring capability to verify compliance  with, and assess the effectiveness of, supply chain protection  measures.", "The three agencies generally agreed with our recommendations and,  subsequently, implemented seven of the eight recommendations.  Specifically, we verified that Justice and Energy had implemented each of  the recommendations we made to them by 2016. We also confirmed that  DHS had implemented two of the three recommendations we made to  that agency by 2015.", "However, as of fiscal year 2016, DHS had not fully implemented our  recommendation to develop and implement a monitoring capability to  verify compliance with, and assess the effectiveness of, supply chain  protections. Although the department had developed a policy and  approach for monitoring supply chain risk management activities, it could  not provide evidence that its components had actually implemented the  policy. Thus, we were not able to close the recommendation as implemented. Nevertheless, the implementation of the seven  recommendations and partial implementation of the eighth  recommendation better positioned the three agencies to monitor and  mitigate their IT supply chain risks.", "In addition, we reported in March 2012 that the four national security- related agencies had participated in interagency efforts to address supply  chain security, including participation in the Comprehensive National  Cybersecurity Initiative, development of technical and policy tools, and  collaboration with the intelligence community. In support of the  cybersecurity initiative, Defense and DHS jointly led an interagency  initiative on supply chain risk management to address issues of  globalization affecting the federal government\u2019s IT. Also, DHS had  developed a comprehensive portfolio of technical and policy-based  product offerings for federal civilian departments and agencies, including  technical assessment capabilities, acquisition support, and incident  response capabilities. The efforts of the four agencies could benefit all  federal agencies in addressing their IT supply chain risks.", "In summary, the global IT supply chain introduces a myriad of security  risks to federal information systems that, if realized, could jeopardize the  confidentiality, integrity, and availability of federal information systems.  Thus, the potential exists for serious adverse impact on an agency\u2019s  operations, assets, and employees. These factors highlight the  importance and urgency of federal agencies appropriately assessing,  managing, and monitoring IT supply chain risk as part of their agencywide  information security programs.", "Chairmen King and Perry, Ranking Members Rice and Correa, and  Members of the Subcommittees, this completes my prepared statement. I  would be pleased to answer your questions."], "subsections": []}, {"section_title": "Contact and Acknowledgments", "paragraphs": ["If you have any questions regarding this statement, please contact  Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Other  key contributors to this statement include Jeffrey Knott (assistant  director), Christopher Businsky, Nancy Glover, and Rosanna Guerrero.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-161", "url": "https://www.gao.gov/products/GAO-19-161", "title": "Automated Trucking: Federal Agencies Should Take Additional Steps to Prepare for Potential Workforce Effects", "published_date": "2019-03-07T00:00:00", "released_date": "2019-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Automated vehicle technology may eventually make commercial trucking more efficient and safer, but also has the potential to change the employment landscape for nearly 1.9 million heavy and tractor-trailer truck drivers, among others. GAO was asked to examine the potential workforce effects of automated trucking.", "This report addresses (1) what is known about how and when automated vehicle technologies could affect commercial trucks; (2) what is known about how the adoption of automated trucks could affect the commercial trucking workforce; and (3) the extent to which DOT and DOL are preparing to assist drivers whose jobs may be affected. GAO reviewed research since 2014 on automated trucking technology, viewed demonstrations of this technology, and analyzed federal data on the truck driver workforce. GAO also interviewed officials from DOT and DOL, as well as a range of stakeholders, including technology developers, companies operating their own trucking fleets, truck driver training schools, truck driver associations, and workforce development boards."]}, {"section_title": "What GAO Found", "paragraphs": ["Automated trucks, including self-driving trucks, are being developed for long-haul trucking operations, but widespread commercial deployment is likely years or decades away, according to stakeholders. Most technology developers said they were developing trucks that can travel without drivers for part of a route, and some stakeholders said such trucks may become available within 5 to 10 years. Various technologies, including sensors and cameras, could help guide a truck capable of driving itself (see figure). However, the adoption of this technology depends on factors such as technological limitations and public acceptance.", "Stakeholders GAO interviewed predicted two main scenarios for how the adoption of automated trucks could affect the trucking workforce, which varied depending on the future role of drivers or operators. Technology developers, among others, described one scenario in which self-driving trucks are used on highway portions of long-haul trips. Stakeholders noted this scenario would likely reduce the number of long-haul truck drivers needed and could decrease wages because of lower demand for such drivers. In contrast, groups representing truck drivers, among others, predicted a scenario in which a truck would have an operator at all times for complex driving and other non-driving tasks, and the number of drivers or operators would not change as significantly. However, stakeholders lacked consensus on the potential effect this scenario might have on wages and driver retention. Most stakeholders said automated trucking could create new jobs, and that any workforce effects would take time\u2014providing an opportunity for a federal response, such as any needed policy changes.", "The Department of Transportation (DOT) is consulting with the Department of Labor (DOL) to conduct a congressionally-directed analysis of the workforce impacts of automated trucking by March 2019. As part of this analysis, DOT and DOL have coordinated to conduct stakeholder outreach. However, they do not currently plan to convene stakeholders on a regular basis to gather information because they have focused on completing this analysis first. Continuing to convene stakeholders could provide the agencies foresight about policy changes that may be needed to prepare for any workforce effects as this technology evolves."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that both DOT and DOL should continue to convene key stakeholders as the automated trucking technology evolves to help the agencies analyze and respond to potential workforce changes that may result. DOT and DOL agreed with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Emerging automated and self-driving vehicle technology has the potential  to change the employment landscape for the commercial motor carrier  industry, including for the nearly 1.9 million people who drive heavy and  tractor-trailer trucks in the United States. This technology may eventually  create opportunities to decrease the roughly 4,000 traffic fatalities that  involve large trucks annually and may make trucking more efficient, as  well as easier on drivers. However, the prospective deployment of this  technology also raises questions about its future effects on employment  in the industry, including on the numbers of drivers and types of skills that  will be needed to operate and maintain these newer trucks. Recent media  reports have highlighted these questions about the over $700 billion-a- year U.S. trucking industry, with some reports suggesting large-scale,  imminent job loss. However, addressing these questions entails making  some assumptions both about how the technology might continue to  develop and how, once adopted, it could affect the workforce.", "You asked us to examine the potential workforce impacts of automated  trucking technology, and how federal agencies are preparing to assist  workers whose jobs may be affected. This report examines: (1) what is  known about how and when automated vehicle technologies could affect  commercial trucks; (2) what is known about how the adoption of  automated trucks could affect the commercial trucking workforce; and (3)  the extent to which the Department of Transportation (DOT) and the  Department of Labor (DOL) are preparing to assist drivers whose jobs  may be affected by automated trucking.", "To describe how and when automated vehicle technologies could affect  the current fleet of commercial trucks, we conducted a review of key  research since 2014 related to automated vehicle technologies for  commercial trucks. We visited California, where we viewed  demonstrations of this emerging technology and interviewed  representatives of one truck manufacturer and four automated truck  technology developers. We selected California because it had the largest  number of these developers that we identified through our research  efforts. We also interviewed officials from DOT and selected  stakeholders, including researchers; representatives from truck  manufacturers and companies operating their own trucking fleet; and  representatives of national industry organizations and a national safety  organization. The views of the stakeholders we interviewed are illustrative  examples and may not be generalizable. For more information about how  we selected stakeholders, see appendix I.", "To describe how the adoption of automated trucks could affect the current  and future trucking workforce, we analyzed 2017 employment level and  wage data from DOL\u2019s Bureau of Labor Statistics (BLS) and 2017  demographic data from the Census Bureau. Additionally, we reviewed  key research on possible employment effects of automated trucking  technology. We also interviewed organized labor representatives, industry  stakeholders, and representatives of four truck driver training schools. We  selected these schools in part based on recommendations from an  association of truck driver training schools, and included two accredited  and two nonaccredited schools in our selection. We interviewed officials  from four local workforce development board as well. We selected three  of these boards due to the prevalence of trucking jobs in their areas and  one board because it was in an area that several stakeholders suggested  could be early to adopt automated trucking technology. In addition, we  interviewed officials from the Departments of Education, Labor,  Transportation, and Veterans Affairs.", "To determine the extent to which DOT and DOL are preparing to assist  current and future drivers, we interviewed federal officials, local workforce  development board officials, and representatives from a national  association of state and local workforce organizations. We compared  agencies\u2019 efforts against their strategic plans as well as Standards for  Internal Control in the Federal Government. Additionally, for all the  objectives, we reviewed relevant federal laws and regulations, as well as  agency documentation. See appendix I for more information on our  objectives, scope, and methodology.", "We conducted this performance audit from August 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Trucking Industry", "paragraphs": ["In 2016, commercial trucks transported about 70 percent of all U.S.  freight, and over 250,000 heavy trucks were sold in the same year.  These trucks operate within a diverse industry that can be distinguished  in several ways:", "Long-haul vs. local-haul. Long-haul trucking operations are so  named because the drivers frequently drive hundreds of miles for a  single route and can be on the road for days or weeks at a time. For  these operations, freight is usually shipped from a single customer  and may fill an entire trailer by either space or weight. Long-haul  trucking also includes \u201cless-than-truckload\u201d freight shipments, or  freight combined from multiple customers. In comparison, local-haul  trucking operations may involve delivering packages and shipments  between a customer and a freight company\u2019s drop-off point, where  they are combined with other shipments in preparation to move them  over longer distances. This type of operation also includes local  cement trucks, as well as moving shipping containers at ports and  moving freight a short distance from a train that has transported it  long-distance to near its destination.", "For-hire vs. private (in-house). Different types of companies\u2014or  carriers\u2014engage in long-haul and local trucking and are known either  as \u201cfor-hire\u201d (those that transport goods for others) or \u201cprivate\u201d (those  that transport their own goods in their own trucks). For instance, J.B.  Hunt is a for-hire carrier that transports goods for clients, while  Walmart is a private carrier that uses its in-house fleet of trucks to  transport its own goods between its distribution centers and its  stores.", "Carrier size. In addition, carriers vary in size, with fleets ranging from  one truck to tens of thousands of trucks. For example, a person might  own and drive one for-hire truck; these are known as \u201cowner- operators.\u201d By contrast, the largest for-hire trucking companies in the  country can have fleets of over 20,000 tractors and even more trailers.", "Operating costs. Driver compensation represents either the largest  or second-largest cost component for truck carriers, depending on the  price of fuel; each typically accounts for about one-third of total  operating costs. Other operating costs include purchasing truck  tractors and trailers, as well as repair and maintenance of the trucks  and trailers, and insurance."], "subsections": []}, {"section_title": "Truck Drivers", "paragraphs": ["BLS data indicate that in 2017, the United States had nearly 1.9 million  truck drivers categorized as \u201cheavy and tractor-trailer truck drivers,\u201d who  operate trucks over 26,000 pounds. This category includes many  different kinds of drivers, including long-haul and local-haul, along with  cement or garbage truck drivers and drivers of specialty loads, such as  trucks transporting cars, logs, or livestock. The number of heavy and  tractor-trailer truck drivers has increased over the last 5 years, from fewer  than 1.6 million in 2012, and is projected to increase to about 2 million  drivers by 2026. The trucking industry has also had high annual driver  turnover, according to industry reports\u2014approaching 100 percent for  large, truckload carriers, though it can be less for small, truckload  carriers. This turnover includes drivers who move to other carriers and  others who leave the field altogether or retire. Some companies that  experience lower turnover rates are able to provide drivers with  predictable schedules and coordinate around the various obligations the  drivers may have. Firms must balance the costs of scheduling drivers to  return home more frequently with the costs of high turnover rates.", "Industry reports have noted that companies find it difficult to hire and  retain sufficient numbers of long-haul drivers, even with wages reportedly  rising for many drivers. Heavy and tractor-trailer truck drivers make more  on average\u2014$44,500 in 2017\u2014than other types of drivers, according to  BLS data. Many drivers, including most drivers working in long-haul  trucking, are compensated on a per-mile basis rather than a per-hour  basis. The per-mile rate varies from employer to employer and may  depend on the type of cargo and the experience of the driver. Some  long-haul truck drivers are paid a share of the revenue from shipping."], "subsections": []}, {"section_title": "Truck Driver Training", "paragraphs": ["In order to operate certain commercial vehicles, including heavy trucks  and tractor-trailers, drivers must obtain a state-issued commercial driver\u2019s  license (CDL). DOT administers the federal CDL program through the  Federal Motor Carrier Safety Administration by setting federal standards  for knowledge and driving skills tests, among other requirements. CDL  applicants must have a state motor vehicle driver\u2019s license and must be at  least 21 years old to operate in interstate commerce. Prior to receiving a  CDL, applicants must first pass the knowledge test and meet other  federal requirements, after which they are eligible to pursue a commercial  learner\u2019s permit. After receiving the learner\u2019s permit, applicants must  wait at least 14 days before taking the skills test. During this period,  applicants may train on their own with a CDL holder, with a truck driver  training school\u2014a private school or public program run through a  community college, for example\u2014or with a motor carrier to prepare for  the skills test. Applicants must pass all three parts of the skills test\u2014pre- trip inspection, basic control skills, and an on-the-road driving test\u2014in the  type of vehicle they intend to operate with their license. Apart from the  CDL requirements, some truck driving jobs (such as those that involve  handling hazardous materials) require additional endorsements, and  some employers require on-the-job training.", "DOL and other federal agencies administer programs that can be used to  provide training for truck drivers. For example, DOL administers federal  employment and training programs, such as those funded through the  Workforce Innovation and Opportunity Act (WIOA), which provide training  dollars that can be used by prospective truck drivers, among others.  Likewise, the Department of Education provides federal student aid funds  that can be used at eligible accredited trucking schools, and DOT and the  Department of Veterans Affairs both operate programs that can assist  veterans interested in becoming truck drivers."], "subsections": []}, {"section_title": "Federal Regulation of Trucking", "paragraphs": ["Federal regulation of trucking is focused primarily on interstate trucking  activity; states can have separate regulations related to intrastate motor  carriers. DOT is the lead federal agency responsible for overall vehicle  safety, including commercial truck safety. The agency also regulates  other aspects of commercial trucking, such as the maximum number of  hours truck drivers are allowed to drive. For example, under current  hours of service regulations, a truck driver may drive a maximum of 11  total hours within a 14-hour window after coming on duty. In addition,  DOT regulates CDL standards and the maximum weight of trucks allowed  on the Interstate Highway System, among other things. Until recently,  DOT\u2019s National Highway Traffic Safety Administration led automated  vehicles policy with a focus on passenger vehicles. However, DOT\u2019s  October 2018 federal automated vehicles policy was developed by the  Office of the Secretary of Transportation and includes several different  modes of transportation, including automated commercial trucks."], "subsections": []}, {"section_title": "Automated Trucks", "paragraphs": ["Automated vehicles can perform certain driving tasks without human  input. They encompass diverse automated technologies ranging from  relatively simple driver assistance systems to self-driving vehicles.  Certain automated features, like adaptive cruise control, can adjust  vehicle speed in relation to other objects on the road and are currently  available on various truck models. DOT has adopted a framework for  automated driving developed by the Society of Automotive Engineers  International, which categorizes driving automation into 6 levels (see fig.  1).", "Commercial trucks with Level 0 and 1 technologies, as outlined in figure  1, are already available for private ownership and are currently used on  public roadways. Level 0 encompasses conventional trucks where a  human driver controls all aspects of driving and technologies can warn  drivers of safety hazards, such as lane departure warning, but do not take  control away from the driver and are not considered automated. Level 1  technologies incorporate automatic control over one major driving  function, such as steering or speed, and examples include adaptive  cruise control and automatic emergency braking.", "The Society of Automotive Engineers International categorizes vehicles  with Level 3, 4, and 5 technologies as Automated Driving Systems. At  Level 3, the system can take full control of the vehicle in certain  conditions. However, a human driver must maintain situational awareness  at all times to ensure the vehicle is functioning safely. At Level 4,  automation controls all aspects of driving in certain driving conditions and  environments, such as on highways in good weather. In these particular  driving conditions and environments, a human driver would not be  required to take over the driving task from the automated vehicle and the  system would ensure the vehicle is functioning safely. At Level 5, the  vehicle can operate fully, in any condition or environment, without a  human driver or occupant. There are various automated vehicle  technologies that could help guide a vehicle capable of driving itself,  including cameras and other sensors (see fig. 2)."], "subsections": []}]}, {"section_title": "Widespread Deployment of Platooning and Self- Driving Long-Haul Trucks Is Likely Years Away, and Several Factors Will Affect Timeframes", "paragraphs": [], "subsections": [{"section_title": "Platooning and Self- Driving Trucks Are Being Developed, Generally for Long-Haul Trucking", "paragraphs": ["According to stakeholders we spoke with and literature we reviewed,  automated trucks, including self-driving trucks, are being developed,  generally for long-haul trucking. Specifically, we found there could be  various types of automation for long-haul trucks, including platooning,  self-driving for part of a route, and self-driving for an entire route.", "Platooning. Technology developers and researchers told us there is  ongoing development and testing of truck platoons, which involve one  or more trucks following closely behind a lead truck, linked by  wireless\u2014or vehicle-to-vehicle\u2014communication (see fig. 3).", "In a platoon, the driver in the lead truck controls the braking and  acceleration for all of the connected trucks in the platoon, while the driver  in each following truck controls its own steering. Several stakeholders  we interviewed and three studies we reviewed identified potential benefits  from platooning, including fuel savings and increased safety, for example,  due to the trucks\u2019 faster reaction times for braking.", "Self-driving for part of a route. Most of the technology developers  we spoke with said they were developing automated trucks that will be  self-driving for part of a long-haul route, such as exit-to-exit on  highways (see fig. 4).", "Representatives from one developer explained that their truck uses self- driving software installed on the truck. The software instructs the truck  what to do, such as to steer or brake. In addition, cameras and other  sensors on the truck\u2019s exterior provide the self-driving software with a  view of the truck\u2019s surroundings to inform the software\u2019s instructions. For  example, Light Detection and Ranging (LIDAR) sensors use lasers to  map a truck\u2019s surroundings (see fig. 5).", "Such trucks would operate with no driver intervention under favorable  conditions, such as on highways in good weather. Two developers  said that in their business models a driver would be in the truck for the  first and last portions of the route to assist with picking up and  dropping off trailers at hubs outside urban areas. Alternatively, one  developer said a remote driver\u2014one not in the truck but operating  controls from another location\u2014would drive the first and last portions  of a route. Stakeholders identified potential benefits of self-driving for  part of a route, such as increased safety, labor cost savings, and  addressing what they said is a truck driver shortage. Research funded  by industry also suggests that an automated truck could improve  productivity by, for example, continuing to drive to a destination while  a human in the truck conducts other work or rests. In addition, one  study noted that the most likely scenario for widespread adoption of  automated trucks is the one in which trucks are capable of self-driving  from exit-to-exit.", "Self-driving for an entire route. None of the technology developers  we interviewed told us they are planning to develop automated trucks  that are self-driving for an entire route (see fig. 6).", "Such trucks would be able to drive under all weather and  environmental conditions. A person would not be expected to  operate these trucks at any time. The potential benefits of these  kinds of trucks are similar to those of trucks that are self-driving for  part of a route, with higher potential labor savings because a  person would not need to drive the first and last portions of a  route."], "subsections": []}, {"section_title": "Widespread Deployment of Automated Trucks May Be Years to Decades Away, Depending on Technological, Operational, and Other Factors", "paragraphs": [], "subsections": [{"section_title": "Anticipated Timeframes", "paragraphs": ["Stakeholders we spoke with generally indicated that it will be years to  decades before the widespread deployment of automated commercial  trucks (see text box). However, many stakeholders also noted the  uncertainty of predicting a specific timeframe for particular technologies.", "Platooning. Many stakeholders said that platooning will likely deploy  within the next 5 years and will be the first automated trucking  technology to be widely available. Notably, one company that is  developing platooning technology said it could begin deployment in  2019. In addition, DOT officials told us that truck platoons are  currently being tested, but that it would be difficult to estimate when  there might be widespread adoption of platooning technology.", "Self-driving for part of a route. Automated trucks that are self- driving for part of a route may become available for commercial use  within the next 5 to 10 years, according to several stakeholders,  including technology developers. While such trucks may begin  appearing on roads in that timeframe, other stakeholders, including  two researchers, said widespread deployment may take more than 10  years. DOT officials noted that multiple variables make it difficult to  develop a precise estimate for the deployment and widespread  adoption of trucks that are self-driving for part of a route.", "Self-driving for an entire route. Although none of the technology  developers told us they are developing trucks that would be self- driving for an entire route, other stakeholders we spoke with said such trucks could become available in more than a decade. However, most  stakeholders either did not provide a timeframe for, or said they did  not know, when such trucks might become available. Similarly, at a  listening session in August 2018, DOT officials told attendees that it  will be decades before large trucking operations replace their fleets of  conventional trucks with trucks that self-drive for an entire route.", "One Stakeholder\u2019s Description of Anticipated Timeframes for Overall Automated  Truck Adoption  One researcher described an anticipated timeframe for automated truck adoption in  which there is an initial, long period of development and testing, which would include  making technological adjustments. This period would then be followed by a period of  automated truck adoption\u2014i.e., when such trucks replace human drivers.  At that point,  technology developers and truck manufacturers would also encounter scenarios in which  it may not be desirable to use an automated truck, such as for the transport of hazardous  materials, according to the researcher. Such scenarios would limit the extent to which  automated trucks could replace human drivers."], "subsections": []}, {"section_title": "Factors That May Affect Timing", "paragraphs": ["Stakeholders we interviewed and the literature we examined identified  technological, operational, infrastructure, legal, and other factors that may  affect automated truck development and deployment.", "Stakeholders and literature identified several technology-related  limitations that may affect the timing of automated truck deployment.  Specifically, several stakeholders and a study noted that automated  trucks may require simpler operating environments, such as highways, in  the near term because they are less complex for the technology to  navigate than roads in an urban setting, for example. Even so, a  highway presents its own challenges, several stakeholders said. For  instance, a developer, a manufacturer, and a researcher we spoke with  told us that Light Detection and Ranging (LIDAR)\u2014a costly and complex  technology\u2014may not be as useful at higher speeds due to its limited  range and its inability to process information about the surrounding  environment as quickly as needed at these speeds. Further, one  manufacturer told us that LIDAR is not as durable as it needs to be for  commercial trucking\u2014for example, able to withstand dirt and debris.  Stakeholders also discussed the need to have backup systems built into  trucks\u2019 automated systems in case of technology failures, including the  ability to guide the truck to a safe stop.", "Stakeholders identified several operational factors that may pose  challenges for the deployment of automated trucks. For example, several  stakeholders said that there may be challenges with self-driving trucks  with no person inside when responding to a tire blowout or other  mechanical problems. Likewise, several stakeholders said there must be  ways for a self-driving truck to respond to required safety inspections and  communicate with inspectors. Representatives from a safety  organization noted that a truck could potentially communicate a unique  identification number through an electronic device. This number would  give the inspector information about the truck, such as safety information  from the sensors on automated trucks. Additionally, several stakeholders  said platooning may not be practical for logistical reasons, for instance, if  trucks are not traveling on the same routes or if cargo is not ready to  depart at the same time. In addition, according to stakeholders we spoke  with and literature we reviewed, the lead truck in a platoon will save less  on fuel than the following trucks. If trucking fleets adopt platooning  systems that work on commercial trucks across different companies\u2014i.e.,  systems that are interoperable\u2014distributing fuel savings in a manner  agreeable to all parties involved may be challenging. Representatives  from two fleet owners and one industry association we spoke with raised  concerns about platooning across different companies, including that  companies might not partner with other fleets to platoon trucks because  they would be primarily concerned with their own fuel savings, not with  saving fuel for their competitors. In addition to these operational factors,  stakeholders noted that automated trucks may be prohibitively expensive  for some smaller fleet owners, including owner-operators, particularly  when these trucks are first deployed.", "Several stakeholders and relevant literature noted that certain  infrastructure factors may affect the development, testing, and  deployment of automated trucks. For example, a few stakeholders said if  one truck picks up or drops off trailers for another truck at a location near  highways, land acquisition near these highways may be an issue.  Representatives from a developer that planned to acquire land for its  business model said the land acquisition could take 5 to 10 years. The  representatives explained that they found enabling direct access to  freeways is more difficult than simply acquiring vacant land. They planned  to partner with states to create hubs on under-utilized land with existing  freeway access by, for example, repurposing abandoned rest stops. In  addition to land acquisition, two technology developers and a study  identified the need for widely available data connectivity and the related  ability to use connected vehicle technologies as an infrastructure  challenge. Connected technologies allow vehicles to communicate with  other vehicles (vehicle-to-vehicle), roadway infrastructure (vehicle-to- infrastructure), and personal communication devices. Connectivity has  potential implications for, among other things, the maps self-driving trucks  use to navigate routes and obstacles, as well as the ability for trucks in a  platoon to communicate with one another effectively. However, because  the ability for vehicles to communicate with infrastructure is not  ubiquitous, two of the developers we spoke with are not taking into  account connected infrastructure as they develop and test their  automated trucks. Two stakeholders also expressed concern about  platooning trucks and the stress they could place on bridges, for example,  that were not designed to hold the weight of two or more heavy trucks at  once. In addition, stakeholders noted that automated trucks may  encounter difficulties with things like road work or construction zones.  This may be because the truck relies on pre-built maps, in addition to  sensors, that would potentially be outdated or might not reflect current  road conditions, including any recent or temporary changes.", "Several legal factors may affect the timing of development, testing, and  deployment for automated trucks, according to our stakeholder interviews  and literature review. Many stakeholders expressed concern about the  possibility of a \u201cpatchwork\u201d of state laws related to automated trucks that  could affect interstate trucking, with some saying they would like to see a  shared national framework. For example, one technology developer said  that this emerging patchwork can make it difficult for an automated truck  to travel across the country without a driver, because some states  specifically prohibit self-driving vehicles, including trucks. However, this  same developer said that some states are less restrictive regarding the  need for a driver in a self-driving truck, and that others have ambiguous  regulations. Several stakeholders we spoke with and two studies we  reviewed noted that liability issues may arise and become more complex  for automated trucks. This may be because, for example, more parties  may become involved. One of these stakeholders\u2014a fleet owner\u2014said  that these parties could include the software developer, the truck  manufacturer, the owner of the truck, and, if applicable, the truck driver.  These issues could be addressed under the current liability system, and  courts would decide the various liability issues on a case-by-case basis.", "In addition, several stakeholders have requested that DOT clarify whether  existing regulations require that human drivers always be present in  automated trucks, particularly those capable of Level 4 and 5 driving  automation, in which at least some of the driving is done by the  automated truck. Two technology developers have requested that DOT  confirm that regulations that apply to human drivers do not apply to  automated trucks, and one of these developers also requested  confirmation that a truck capable of at least Level 4 automation is allowed  to operate without a human on board, which could permit testing without a  person in the truck. In Preparing for the Future of Transportation:  Automated Vehicles 3.0, DOT\u2019s automated vehicles voluntary guidance,  the agency laid out its approach to its automated vehicles policy. DOT\u2019s  guidance stated that, going forward, DOT will interpret and, consistent  with all applicable notice and comment requirements, adapt the  definitions of \u201cdriver\u201d and \u201coperator\u201d to recognize that such terms do not  refer exclusively to a human, but may include an automated system. In  the same guidance document, DOT also noted that regulations will no  longer assume that the driver of a commercial truck is always human or  that a human is necessarily present inside of a truck during its operation.", "A few stakeholders also said that DOT may have to clarify the hours of  service rules if a human driver is in an automated truck that is self-driving  for part or all of a route. This is because under current hours of service  regulations, a human driver may drive a maximum of 11 total hours within  a 14-hour window after coming on duty. However, if a truck self-drives  for at least part of a route, it is unclear if a human driver would need to  comply with the existing hours of service requirements and, if not, how  the driver would account for worked time. For example, if the human  driver is not actively engaged in the driving task, whether monitoring the  automated driving system or even sleeping, there could be a question  about whether that time would be counted toward \u201cdriving,\u201d according to  the requirements. For a list of potential legal factors identified by  stakeholders or in literature that may affect timing for the development  and deployment of automated commercial trucks, and related DOT  information, see appendix II.", "Stakeholders and relevant literature identified several other factors, such  as public perception and cybersecurity, that could affect timing for the  development and deployment of automated trucks. Several stakeholders  we interviewed and a study we reviewed noted that public acceptance  concerning the safety of platooning and self-driving trucks may pose a  challenge to the deployment of these trucks. One researcher we spoke  with said interactions between truck platoons and cars may be  problematic, because drivers may need to speed in order to change lanes  around the platoons of trucks following each other closely. Similarly, other  stakeholders told us that it may be difficult for the public to accept large  automated commercial trucks. Two of these stakeholders said this is  particularly true for a heavy truck without a human driver on board\u2014 implying that vehicle size and weight play roles in the public\u2019s acceptance  of these types of automated vehicles. Several stakeholders also  expressed concerns about cybersecurity and automated trucks\u2019 reliance  on wireless communication and self-driving software. They said  connectivity could leave automated trucks vulnerable to cyberattacks."], "subsections": []}]}]}, {"section_title": "Workforce Changes Due to Automated Trucking Will Depend in Part on the Role of Future Drivers or Operators, and Will Take Time to Develop", "paragraphs": [], "subsections": [{"section_title": "Workforce Effects of Automated Trucking Could Include Changes to Employment Levels, Wages, Retention, and Skills", "paragraphs": ["Predicting workforce changes in light of future automated trucking is  inherently challenging, as it is based on uncertainties about how the  trucking industry will respond to new technologies that face operational,  regulatory, and other factors that could affect deployment. Many of the  stakeholders we interviewed declined to predict various possible  workforce effects, because they said to do so was too speculative.  However, stakeholders we spoke with and literature we reviewed  presented two main scenarios for the future trucking workforce: one in  which trucks would be self-driving for part of a route, without a driver or  operator, and the other in which trucks would require a driver or operator  in the truck for the entire route. An operator would monitor truck  operations and may not always function as a traditional driver. Because  most stakeholders agreed that the prospect of using fully self-driving  trucks for an entire route is either unlikely or at least several decades into  the future\u2014and no developer we spoke with was planning to develop a  fully self-driving truck\u2014we do not discuss the workforce effects of that  scenario in this report."], "subsections": [{"section_title": "Potential Effects If Truck Has No Driver or Operator for Part of Route", "paragraphs": ["Technology developers we spoke with generally envisioned trucks that  are self-driving for part of a route, which they said would potentially lead  to significant workforce changes. Several technology developers and  researchers, along with two studies, said trucks that are self-driving for  part of a route could decrease the number of long-haul drivers, and  perhaps decrease wages and affect retention as well. Additionally, any  displaced drivers may need new skills if they change jobs, according to  several stakeholders we spoke with and studies we reviewed.", "Employment levels: Technology developers we interviewed  generally predicted the number of long-haul jobs would decrease with  the adoption of trucks that are self-driving for part of a route. Drivers  constitute a significant operational cost, so part of the reported  economic rationale for self-driving trucks is to employ fewer drivers,  allowing companies to transport the same amount of freight\u2014or  more\u2014at lower labor costs. Several studies have analyzed the  potential number of driving jobs that might be eliminated in this  scenario, but the studies specifically noted the speculative, long-term  nature of those estimates and the inability to identify the number of  current long-haul truck drivers whose jobs could be lost sometime in  the future. Estimates in the studies we reviewed ranged from under  300,000 driver jobs lost to over 900,000 jobs lost\u2014out of a total of  nearly 1.9 million heavy and tractor-trailer truck driver jobs, according  to BLS data\u2014and in each case over periods of 10 to 20 years or  more.", "Although long-haul jobs would decrease in this scenario, local-haul  jobs could increase and offset those losses, according to a study and  several stakeholders, including two technology developers. The  study, for example, said that automated trucking would drive long-haul  trucking costs down, leading more companies to use trucking to ship  goods. As a result, demand for trucking could increase, leading to an  increased demand for local-haul truck drivers on either end of the  long-haul routes, two studies noted.", "Several stakeholders we spoke with agreed that any decrease in long- haul jobs would likely not affect many current drivers because most  will have voluntarily left driving for a different job or retired by the time  self-driving trucks are widely deployed. According to the Census  Bureau\u2019s American Community Survey data, the average age of truck  and sales delivery drivers from 2012 through 2016 was 46. Many  stakeholders also said that trucking fleets are currently having  difficulty hiring and retaining qualified drivers, and two technology  developers said automation could help move goods in an environment  in which it is difficult to find workers.", "Technology developers also told us they are focusing the initial  development of automated trucking technology in the southwest  United States because of its good weather and long highways. As a  result, any future job losses could first occur there. Additionally, BLS  data show that the estimated concentration of truck driving jobs varies  in different areas of the country (see fig. 7). One study noted that  trucking job losses in more regionally concentrated occupations are  likely to pose more challenges for workers, because more workers  with similar skills in the same labor markets will be out of work at the  same time, and thus the whole local economy will be more likely to  suffer.", "Wages: If the truck is self-driving for parts of a route, wages for long- haul drivers could decrease because there would be lower demand  for\u2014or greater supply of\u2014such drivers, according to several  stakeholders. Moreover, one study noted that average long-haul  wages could decrease because the jobs most likely to be automated  include those that tend to be unionized and have higher wages and  benefits, such as jobs at parcel delivery companies and some private  carriers. Similarly, drivers changing occupations might face  significant wage reductions in new occupations that do not require  retraining, according to a researcher and one study. Wages for  local-haul drivers\u2014generally lower than for long-haul drivers\u2014could  decrease as well, because transitioning long-haul drivers could  increase competition for those jobs, according to two studies. One  technology developer presented a different perspective, saying that  wages for local-haul drivers could increase from current levels due to  increased overall demand for trucking.", "Retention: Overall, retention of truck drivers could improve if the  long-haul portion of the route becomes self-driving, lessening time  drivers spend away from home\u2014a key reason long-haul drivers leave  the profession, according to many stakeholders. However, retention  may depend on several factors, including wages, time at home, and  other working conditions, making it more difficult to predict self-driving  trucks\u2019 effect on retention.", "Skills: Long-haul drivers have skills that would transfer to local-haul  routes, so additional training may not be needed for those who move  to local-haul routes. However, displaced long-haul drivers seeking to  move to a different occupation or industry may need additional  training, according to several stakeholders and two studies. From  2012-2016, the highest level of education attainment for almost 65  percent of truck and sales delivery drivers was high school or its  equivalent."], "subsections": []}, {"section_title": "Potential Effects If Driver or Operator Remains in Truck", "paragraphs": ["Most officials from truck driver training schools, organizations  representing truck drivers, and workforce development boards envisioned  automated trucks as continuing to need either a driver or some kind of  operator in the truck, with several noting that drivers may need to do non- driving tasks. Automated trucking with an operator in the truck would have  a more limited effect on the numbers of truck drivers, but would still result  in workforce changes, according to several stakeholders. As with the  driverless scenario, many stakeholders said future developments were so  uncertain that they could not predict how automated trucking would affect  various aspects of the workforce, such as wages or retention.", "Employment levels: Under this scenario, automated trucking would  have a more limited effect on employment levels. Several  stakeholders noted, for example, that a person would still be needed  in the truck to manage emergencies, repair flat tires, and secure  cargo, among other duties. (See text box.) For example, one study  noted that even for trucking jobs identified as the most likely to be  automated, driving may represent only about half of drivers\u2019 total work  time. Additionally, particular kinds of long-haul trucking may present  different non-driving tasks that could make automating those driving  jobs more difficult.", "Wages: If the truck has an operator, several stakeholders said that  wages might increase if increased skills are needed to operate more  sophisticated equipment. However, several other stakeholders said  wages might not change significantly or could decrease with fewer  driving tasks. Two studies noted that wage changes were difficult to  predict and could be affected by specific policy interventions.", "Truck Drivers: Responsible for More than Just Driving   Truck drivers have many responsibilities other than driving a truck. Non-driving tasks for  heavy and tractor-trailer truck drivers can include:  checking vehicles to ensure that mechanical, safety, and emergency equipment is in  good working order;  loading or unloading trucks, including checking contents for any damage;  inspecting loads to ensure that cargo is secure; and  performing basic vehicle maintenance tasks, such as adding fuel or radiator fluid;  performing minor repairs; or removing debris from loaded trailers.", "Retention: Many stakeholders said new technology could help the  trucking industry bring in and retain more people\u2014such as women  and younger workers\u2014if it could, for example, make truck driving  safer, less stressful, and less physically demanding. Others  cautioned that automated technology may not decrease truck  operators\u2019 time away from home, because they would still have to be  in the truck for the entirety of long-haul routes. One stakeholder, who  was also a truck driver, said that many truck drivers enjoy driving, so  automating aspects of that task would not necessarily entice those  drivers to stay in the job. Two other stakeholders noted that some  drivers may not want to learn how the new technology works and  could leave the field rather than drive automated trucks.", "Skills: Future truck operators may need new skills to work with  automated technology that assists rather than replaces them, many  stakeholders noted. For example, operators may need to adapt to  technology that takes over a number of the standard driving functions,  such as braking, staying in a designated lane, and keeping a safe  distance from other vehicles. Operators may also need to understand  how to monitor software and hardware used to automate the driving  function and how to make appropriate use of advanced safety  systems. Furthermore, officials from many truck driver training schools  and workforce development boards said additional certification  beyond the standard CDL may be needed in order to demonstrate an  understanding of how to operate the technology in automated trucks.  In some instances, the skills needed may vary across trucking  companies and trucks, requiring further on-the-job training."], "subsections": []}, {"section_title": "New Trucking-Related Jobs", "paragraphs": ["Regardless of their vision for how automated trucking might materialize,  many stakeholders said there could be new trucking-related occupations,  such as specialized technicians, mechanics, and engineers, which will  accompany the deployment of automated trucks. For example, one study  noted that these jobs could include producing the technology used by  automated trucks, in addition to jobs created as a result of potential  greater spending on other consumer goods and services, in the event that  automated trucking decreases overall industry transportation costs.  Another study noted that autonomous trucks, e-commerce, and economic  growth are together poised to create many new trucking jobs. However,  new jobs may be located in different geographical areas than any jobs  lost, and as noted above, may require different skills than the prior jobs.  One study noted this development could potentially leave lower-skilled  workers competing for jobs that pay little and have few opportunities for  advancement."], "subsections": []}]}, {"section_title": "Stakeholders Said the Anticipated Timeframe for Automated Trucking\u2019s Effects on the Workforce Provides an Opportunity for a Federal Response", "paragraphs": ["While many stakeholders we spoke with and several studies we reviewed  stated that the potential workforce effects of automated trucking were  difficult to predict, they generally agreed that any effect would not occur  for at least 5 to 10 years. Several stakeholders and two studies said this  time horizon provides an opportunity for federal agencies and workers to  prepare for potential workforce changes. One of these studies noted that  trucking policy is complex; any changes could take a long time to fully  materialize. That same study suggested that now is the appropriate time  for policy research and debate. The other study and several stakeholders  stated that potential workforce effects are not set in stone, and that public  policy could influence specific workforce outcomes. That study said that  with advance planning, the federal government and other stakeholders  could realize the possible benefits of automated trucks and other vehicles  while mitigating potential workforce effects and other costs."], "subsections": []}]}, {"section_title": "DOT and DOL Could Take Additional Steps to Fully Consider Automated Trucking\u2019s Potential Workforce Effects, as Technology Evolves", "paragraphs": [], "subsections": [{"section_title": "DOT Has Gathered Stakeholder Perspectives to Inform Potential Regulatory Changes, and DOL Has Incorporated Technology Changes into Employment Projections", "paragraphs": ["DOT and DOL have both taken some steps to prepare for the potential  workforce effects of automated trucking. DOT has held events to obtain  stakeholder perspectives on automated vehicles policy, including how it  affects commercial long-haul trucks. For example, DOT had public  listening sessions in 2017 and 2018 to solicit information on the design,  development, testing, and integration of Automated Driving Systems, and  requests for comment to inform potential rulemaking efforts for the  Federal Motor Carrier Safety Regulations. DOT officials said their role  during these discussions was to hear stakeholder concerns. They also  said that their ongoing goal is to identify barriers in their regulations to  safe deployment of automated driving technology. Stakeholders have  raised concerns about the potential workforce effects of automated trucks  at DOT\u2019s listening sessions. For example, after participants questioned  potential job losses at a listening session in August 2018, DOT officials  said that automation may eventually change the role of a truck driver from  driver to technician and that any changes would probably not be  immediate. DOL officials said they have participated in some of DOT\u2019s  listening sessions.", "For its part, DOL has taken steps to study how automated trucking may  affect the near-term demand for truck drivers as part of their standard,  biennial employment projections for all occupations. DOL officials said they consulted experts and economic studies prior to publishing their  most recent projections, covering 2016 to 2026, and included information  on possible effects of automation in projections for heavy and tractor- trailer truck drivers. The projections state that the demand for these  drivers is expected to grow by 5.8 percent between 2016 and 2026, with  an average of over 200,000 job openings each year, of which 10,000 are  projected to be new jobs. DOL\u2019s analysis anticipated that automation  will not reduce the number of drivers by 2026. DOL officials said that  they expect automation to assist drivers rather than displace them in the  near term. Unlike estimates developed by other researchers, these  numbers do not include potential job losses after 2026, though DOL  officials noted that the agency\u2019s next projections, for 2018 to 2028, will  incorporate information on how automated trucking technology has  evolved since the 2016-2026 projections. Additionally, officials said the  agency is transitioning to annual updates of projections to more quickly  incorporate developing information.", "Congress has directed DOT to consult with DOL to study the workforce  impacts of automated trucking technology. Specifically, the Explanatory  Statement accompanying the Consolidated Appropriations Act, 2018  instructs the Secretary of Transportation to consult with the Secretary of  Labor to conduct a comprehensive analysis of the effect of advanced  driver-assistance systems and highly automated vehicle technology on  drivers and operators of commercial vehicles, including commercial  trucks. Congress directed DOT to include stakeholder outreach in its  analysis and provide information on workers who may be displaced as a  result of such technology, as well as minimum and recommended training  requirements for operating vehicles with these systems. DOL officials told  us that they have begun collaborating with DOT on this study by  consulting with organized labor and other stakeholders. In October 2018,  DOT issued a request for information to solicit comments on the scope of  this analysis and detailed several potential research questions, including  which commercial drivers are likely to be affected and what skills might be  needed to operate new vehicles or transition to new jobs. DOT also  announced that it is planning to coordinate with the Departments of  Commerce and Health and Human Services, in addition to consulting with  DOL to conduct this analysis. The Explanatory Statement directs DOT to  conduct this analysis by March 23, 2019, and DOT officials told us they  expect to meet this deadline and report on the analysis by that date."], "subsections": []}, {"section_title": "DOL and DOT Do Not Have Plans to Gather and Share Information about the Potential Workforce Effects of Automated Trucking as Technology Evolves", "paragraphs": [], "subsections": [{"section_title": "Convening Key Groups of Stakeholders on an Ongoing Basis to Gather Information", "paragraphs": ["DOL and DOT have taken some steps to convene stakeholders to inform  DOT\u2019s analysis of automated trucking in advance of March 2019.  However, DOL and DOT have not made plans to continue collaborating to  convene key groups of stakeholders as the technology evolves to gather  information about potential workforce effects of automated trucking.  Insofar as automated trucking technology is still evolving, convening  stakeholders solely to inform the March 2019 analysis will not provide  agency officials with sufficient information about important developments  that may occur after the analysis is completed. This analysis will be an  important step. However, DOT must complete it before potential  workforce effects can be more fully predicted. After its completion,  developers will likely continue to test their technologies, and issues  related to operational and other factors that will affect the deployment of  automated trucks may change or be resolved. For the agencies to more  fully understand these developments and clarify the range of associated  workforce effects, they would need to collaborate and to continue to  gather information in the future, for example by continuing to convene key  groups of stakeholders as the technology evolves. The majority of  stakeholders we spoke with, including representatives from local  workforce development boards, truck driver training schools, technology  developers, and groups representing truck drivers, told us it would be  helpful for federal agencies to play a convening role so that DOL and  DOT can better anticipate and understand any potential workforce  changes. Several stakeholders also said that convening stakeholders  would enable DOL and DOT to surface different parties\u2019 concerns.  Additionally, our recent report on emerging technologies found that  federal agencies can play an important role in convening stakeholders to  gather information in areas where technology is still under development,  including information on the research plans of industry stakeholders and  ways to address national needs.", "Continuing to convene stakeholders could also help agencies to identify  any information or data gaps that may need to be addressed to  understand the potential workforce effects of automated trucking. DOL  officials said that because the technology is still advancing, the related  workforce effects, including the magnitude of any job losses, are  uncertain. They also said they do not have information to identify the  number of long-haul truck drivers, whose jobs may be the most likely to  be affected by automation. Specifically, the occupational code DOL uses  to classify heavy and tractor-trailer truck drivers captures drivers who  operate any type of heavy truck. Along with long-haul drivers, this code  includes other drivers whose jobs may be harder to automate, such as  tow truck operators. Experts who participated in the National Science  Foundation-sponsored workshop on the potential workforce effects of  automated trucking also identified information gaps. They noted that  more information is needed in several areas, including a better  understanding of current truck drivers\u2019 skills beyond driving, how those  skills might translate to other occupational areas, and new jobs and skills  that will be required with the deployment of automated trucks. DOL  officials said that the agency provides information on knowledge, skills,  and abilities for various driver occupations, as well as detailed work  activities, on its Occupational Information Network (O*NET). However,  that information is based on surveys to current workers and therefore  does not include what skills future drivers may need as automated  technology evolves.", "DOL officials told us they do not typically convene stakeholders on an  industry-specific basis. They also said that state and local workforce  development boards are best positioned to identify and respond to  changes in their local economy and employment needs, because these  boards include members from the local business community who know  which industries are growing in their local labor markets. However, there  are close to 1.9 million heavy and tractor-trailer truck drivers across the  country, making the trucking industry an important segment of the  national workforce. In addition, one of DOL\u2019s objectives in its fiscal year  2018-2022 strategic plan is to provide timely, accurate, and relevant  information on labor market activity, working conditions, and price  changes. While DOL officials said they consider the agency\u2019s national  labor statistics as the primary tool in understanding macroeconomic  changes, they acknowledged that gathering information from local boards  and other stakeholders may complement those statistics. DOL officials  said they may consider continuing to convene stakeholders to learn more  about automated trucking if they find that their current efforts with DOT  provide fruitful information, but they currently do not have plans to do so.  If DOL waits until the effects of automated trucking on the workforce are  widespread enough to affect multiple local economies, the agency will  have missed the opportunity to proactively gather information that could  help it anticipate large-scale workforce changes in this important industry  before they take effect.", "DOT officials told us they have likewise not made plans to work with DOL  to convene stakeholders on an ongoing basis to gather information.  Rather, they said they have concentrated on developing the analysis  described by the Explanatory Statement accompanying the Consolidated  Appropriations Act, 2018 and they do not plan to update that analysis  after it is completed. Nonetheless, one of the objectives outlined by DOT  in its fiscal year 2018-2022 strategic plan is to promote economic  competitiveness by supporting the development of appropriately skilled  transportation workers (including truck drivers who transport freight) and  strategies to meet emerging workforce challenges. Working with DOL to  gather and analyze information from stakeholders as technology  continues to develop could assist DOT in meeting this goal. DOT has  previously collaborated with DOL on transportation workforce issues. For  example, in 2015, DOT and DOL worked with the Department of  Education on a blueprint for aligning investments in transportation,  including trucking, with career pathways. The report highlighted  potential future growth areas in the transportation industry and identified  potential jobs that may be in demand through 2022. Unless DOL and  DOT continue to gather information from stakeholders as automated  trucking technology evolves, they may be unable to fully anticipate the  emerging workforce challenges that may result. DOT\u2019s prior efforts to  convene stakeholders to address automated vehicles could serve as a  model for gathering information from stakeholders about automated  trucking. For example, DOT held a series of meetings across the country  to gather information, identify key issues, and support the transportation  community to integrate automated vehicles onto roads for its National  Dialogue on Highway Automation. Further, analyzing information from  ongoing meetings with stakeholders could help DOT as it considers  potential workforce-related regulatory changes that might be affected by  automated truck technologies, such as the requirements to obtain a  commercial driver\u2019s license or the maximum number of hours commercial  truck drivers are permitted to work."], "subsections": []}, {"section_title": "Sharing Information", "paragraphs": ["DOL has not provided information to stakeholders about the potential  workforce effects of automated trucking technology, including how the  skills needed to operate a truck may change in the future. DOL officials  told us they have not done so, in part, because they do not yet know how  skills and training needed to be a truck driver might change, if at all.  Representatives from all of the truck driver training schools and training  associations we interviewed said they expect drivers to need new skills to  operate or maintain automated trucks, and that future truck drivers may  need an additional certification or endorsement to their commercial driver\u2019s license. However, in the absence of specific information about  future skill changes, they all said they did not know what specific  adjustments would be needed to their curriculum. Additionally, nearly all  stakeholders we spoke with\u2014including representatives of technology  developers, truck driver training schools, and local workforce  development boards\u2014told us that federal agencies can help prepare the  future workforce by sharing information with stakeholders about  impending workforce changes. In particular, some workforce officials we  spoke with said they would benefit from information about technology  developers\u2019 plans that would affect future demand or skills for truck  drivers.", "Furthermore, DOL officials told us that heavy and tractor-trailer truck  driving was the most common type of occupational training funded  through the WIOA Adult and Dislocated Worker programs between April  2017 and March 2018, the most recent period for which data are  available. Specifically, local workforce development boards provided  funding from these programs to roughly 17,000 individuals for heavy and  tractor-trailer truck driver training during that year, or about 15 percent of  all individuals who received training services that began within that  timeframe. This was more than twice as many individuals as those who  received funding for nursing assistant training, the second most frequently  funded type of training through these programs.", "As previously noted, one of DOL\u2019s strategic objectives is to provide timely  and accurate labor market information. In addition, according to  Standards for Internal Control in the Federal Government, an agency\u2019s  management should externally communicate the necessary quality  information to achieve the entity\u2019s objective. This includes  communicating quality information so that external parties can help the  entity address related risks. Additionally, our work has shown that federal  agencies can play an important role in sharing information. We have  noted that such information sharing is important to help maintain U.S.  competiveness. DOT\u2019s strategic plan highlights the agency\u2019s concern  that the lack of credentialed workers, combined with projected  retirements, threaten to cause significant worker shortages, and that the  introduction of innovations and new technologies adds additional  complexity for workforce development. Consulting with DOT to provide stakeholders with information about how automated technology could  affect the number of trucking jobs and the skills needed to drive or  operate commercial trucks would better position local workforce  development boards, truck driver training schools, and others to  adequately prepare the workforce for future needs."], "subsections": []}, {"section_title": "Responding to Potential Job Losses", "paragraphs": ["DOL officials said that existing employment and training programs  administered by the agency, usually through grants, are generally  designed to respond to economic changes that may result in job losses,  including any that may result from automated trucking. In addition, DOL  officials said that the agency has several resources to support state and  local workforce areas to respond to mass layoffs and help workers  upgrade their skills. For example, Rapid Response, which is carried out  by states and local workforce development agencies, can provide  services to employees after a layoff, including career counseling, job  search assistance, and information about unemployment insurance and  training opportunities. Additionally, under WIOA, local workforce  development boards can use up to 20 percent of their Adult and  Dislocated Worker allocations to help fund the cost of providing  incumbent worker training designed to help avert potential layoffs or  increase the skill levels of employees. While these programs may help  mitigate any future job losses due to automated trucking, DOL would be  better positioned to help local economies leverage them effectively if the  agency continued to convene stakeholders, building on its efforts to  gather and share good information on when and how those workforce  effects are likely to materialize as technology evolves."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Automated and self-driving technology for commercial trucks could make  the industry safer and more efficient, but it also introduces significant  uncertainties for the trucking workforce that DOL and DOT, in  consultation with other federal agencies and stakeholders, can help  navigate. For example, there is uncertainty about the widespread  deployment of self-driving trucks as well as what the resulting effects will  be on employment levels, wages, and needed skills. Although technology  companies generally envision self-driving trucks being used for long-haul  routes\u2014which could result in fewer long-haul trucking jobs\u2014other  stakeholders argued that a truck will always need a driver or operator.  Stakeholders we interviewed also lacked consensus about what  automated trucking might mean for wages and what new skills will be  needed to drive or operate automated trucks.", "Federal agencies have an opportunity to prepare truck drivers for the  possible workforce effects of automated trucking. Many stakeholders  noted that the effects would be gradual, giving the government time to  act, but studies note the effects could eventually be significant, possibly  affecting hundreds of thousands of truck driving jobs.", "DOT is taking an important step toward learning about these workforce  effects by consulting with DOL and other stakeholders to inform DOT\u2019s  analysis of these developments. However, these agencies have not made  plans to continue to convene stakeholders to gather information on an  ongoing basis or update their analysis as the technology evolves and the  effects become more apparent. Doing so could allow DOL and DOT the  foresight to consider whether additional policy changes are needed to  prepare for any possible future workforce effects. Similarly, DOL\u2019s  publication of routine employment projections and current driver skills and  tasks provide useful information. However, DOL has not shared  information on what skills drivers might require in the future with other key  stakeholders, including technology developers, industry experts, truck  driver representatives, training schools, local workforce development  boards, and other relevant federal agencies. As a result, those  stakeholders may miss an opportunity to better anticipate and plan for  changes that may arise from automated trucking technology, including  potential labor displacement, wage changes, and the need for new skills."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations, including two for the  Department of Labor and two for the Department of Transportation:  1.  The Secretary of Labor should collaborate with the Secretary of  Transportation to continue to convene key groups of stakeholders to  gather information on potential workforce changes that may result  from automated trucking as the technology evolves, including  analyzing needed skills and identifying any information or data gaps,  to allow the agencies to fully consider how to respond to any changes.  These stakeholders could include, for example, representatives of  other relevant federal agencies, technology developers, the trucking  industry, organizations that represent truck drivers, truck driver  training schools, state workforce agencies, and local workforce  development boards. (Recommendation 1)  2.  The Secretary of Transportation should collaborate with the Secretary  of Labor to continue to convene key groups of stakeholders to gather  information on potential workforce changes that may result from  automated trucking as the technology evolves, including analyzing  needed skills and identifying any information or data gaps, to allow the  agencies to fully consider how to respond to any changes. These  stakeholders could include, for example, representatives of other  relevant federal agencies, technology developers, the trucking  industry, organizations that represent truck drivers, truck driver  training schools, state workforce agencies, and local workforce  development boards. (Recommendation 2)  3.  The Secretary of Transportation should consult with the Secretary of  Labor to further analyze the potential effects of automated trucking  technology on drivers to inform potential workforce-related regulatory  changes, such as the requirements to obtain a commercial driver\u2019s  license or hours of service requirements (e.g., the maximum hours  commercial truck drivers are permitted to work). This could include  leveraging the analysis described by the Explanatory Statement  accompanying the Consolidated Appropriations Act, 2018 once it is  complete, as well as information the department obtains from  stakeholders as the technology evolves. (Recommendation 3)  4.  The Secretary of Labor should consult with the Secretary of  Transportation to share information with key stakeholders on the  potential effects of automated trucking on the workforce as the  technology evolves. These stakeholders could include, for example,  representatives of other relevant federal agencies, technology  developers, the trucking industry, organizations that represent truck  drivers, truck driver training schools, state workforce agencies, and  local workforce development boards. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to the  Departments of Education, Labor (DOL), Transportation (DOT), and  Veterans Affairs. We received formal written comments from DOL and  DOT, which are reproduced in appendices III and IV, respectively. In  addition, DOL and DOT provided technical comments, which we have  incorporated as appropriate. The Departments of Education and Veterans  Affairs did not have comments on our report.", "In its written comments, DOL agreed with our recommendations and  noted several efforts that it said will help the agency assess and provide  information on the potential workforce effects of evolving technologies,  such as automated trucking. For example, DOL noted that the agency\u2019s  employment projections incorporate expert interviews and other  information to identify shifts in industry employment. DOL is also currently  consulting with DOT to study these workforce effects, and agreed to  consider what other information and stakeholder meetings remain  necessary after that study\u2014due in March 2019\u2014is completed. Likewise,  DOL agreed to share related information as the technology evolves, and  the agency noted it currently publishes employment projections and other  occupational information. While useful, these efforts alone will not allow  DOL to sufficiently anticipate the future workforce effects of automated  trucking. For instance, the broad employment projections do not provide  estimates specifically for the long-haul truck drivers who could be affected  by automated trucking first. Further, DOL\u2019s occupational information is  based on surveys of current workers, so it does not include the skills  future drivers will need as automated trucking evolves. Therefore, we  continue to believe that convening stakeholders and sharing information  about potential workforce effects in the future will position DOL to better  understand and inform key stakeholders of these changes.", "In its written comments, DOT agreed with our recommendations. DOT  noted two of its current efforts related to automated trucking technology,  namely its October 2018 automated vehicles voluntary guidance,  Preparing for the Future of Transportation: Automated Vehicles 3.0, and  its forthcoming Congressionally-directed research on the impact of  automated vehicle technologies on the workforce.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Education, Labor, Transportation, and  Veterans Affairs, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact us at (202) 512-7215 or brownbarnesc@gao.gov or  flemings@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine: (1) what is known about how and when  automated vehicle technologies could affect commercial trucks; (2) what  is known about how the adoption of automated trucks could affect the  commercial trucking workforce; and (3) the extent to which the  Department of Transportation (DOT) and Department of Labor (DOL) are  preparing to assist drivers whose jobs may be affected by automated  trucking.", "For all the objectives, we reviewed relevant federal laws and regulations  as well documentation from DOT and DOL. To determine the extent to  which federal agencies are preparing to assist current and future drivers,  we compared DOT and DOL\u2019s efforts against their strategic plans as well  as Standards for Internal Control in the Federal Government.  Additionally, we:", "Conducted Interviews: We interviewed officials from several federal  agencies to obtain relevant information about our objectives, including  the Departments of Education, Labor, Transportation, and Veterans  Affairs, as well as the National Science Foundation.", "To obtain information about all of our objectives, we also interviewed  other selected stakeholders. We used our initial research and  interviews to develop a list of stakeholder categories that would  provide informed perspectives, which when taken as a whole,  provided a balanced perspective to answer our objectives. We  selected stakeholders who had a range of perspectives regarding the  timing for adoption of automated trucking technology, and how this  adoption could affect the truck driving workforce. We used the  following criteria to select interviewees:  1.  authored a report, article, book, or paper regarding automated  trucking technology or its potential workforce effects;  2.  participated in panels, hearings, or roundtables regarding automated  trucking or its potential workforce effects; or  3.  was recommended by at least one of our interviewees.", "We interviewed organized labor representatives; researchers; and  representatives from three truck manufacturers and three companies  operating their own trucking fleet; two national industry organizations; one  national safety organization; four truck driver training schools; an  association of state and local workforce organizations; and four local  workforce development boards. We selected the schools in part based on  recommendations from an association of truck driver training schools, and  included two accredited and two non-accredited schools in our selection.  We selected three of the workforce development boards due to the  prevalence of trucking jobs in their areas and the other board because it  was in an area that several stakeholders suggested could be early to  adopt automated trucking technology.", "Additionally, we visited California, where we interviewed representatives  of four automated truck technology developers and a manufacturer, and  viewed demonstrations of automated trucking technology. We selected  California because it had the largest number of technology developers  that we identified through our research efforts.", "We asked all of these stakeholders a core set of questions, as well as  tailored questions based on their expertise. Some of the questions we  asked stakeholders varied, and some stakeholders chose not to answer  every question we asked because they either did not think they had  sufficient knowledge about the specific question or did not want to make  predictions about future industry developments. Therefore, we generally  did not report the specific number of stakeholder responses in this report.  The views of the stakeholders we interviewed are illustrative examples  and may not be generalizable. For a full list of stakeholders we  interviewed, see table 1.", "Analyzed federal data. To examine how the adoption of automated  trucks could affect the current and future trucking workforce, we  analyzed relevant data from the Bureau of Labor Statistics (BLS) and  the Census Bureau on the current trucking workforce. Specifically, we  examined BLS\u2019s Occupational Employment Statistics to obtain  employment level and wage data for heavy and tractor-trailer truck  drivers (Standard Occupational Classification code 53-3032). The  Occupational Employment Statistics survey is a federal-state  cooperative program between the Bureau of Labor Statistics and  State Workforce Agencies. The survey provides estimates regarding  occupational employment and wage rates for the nation as a whole,  by state, by metropolitan or nonmetropolitan area, and by industry or  ownership. Data from self-employed persons are not included in the  estimates. For our analysis of geographic concentration of heavy and  tractor-trailer truck driving jobs, we carried out a one-sided test at the  0.05 percent level of significance of the null hypothesis that a region\u2019s  concentration is equal to or less than twice the national concentration  versus the alternative hypothesis, that the region\u2019s concentration is  greater than twice the national concentration. We classified the  results, excluding any unreliable areas (i.e., areas with a 95 percent  confidence level margin of error for the estimated number of truck  drivers that was larger than 30 percent of the estimate itself). We used  Poisson tests because these are more appropriate for event  occurrences in smaller populations or on a small number of cases. In  addition, we analyzed data from the Census Bureau\u2019s American  Community Survey regarding the education level, sex, and age of  current truck drivers and other drivers. The American Community  Survey is an ongoing survey that collects information about the U.S.  population such as jobs and occupations, educational attainment,  income and earnings and other topics. According to the Census  Bureau\u2019s description of the American Community Survey, this survey  uses a series of monthly samples to produce annually updated  estimates for the same small areas (census tracts and block groups)  formerly surveyed via the decennial census long-form sample. Based  on our review of related documents and interviews with  knowledgeable agency officials, we found the data to be reliable for  our purposes.", "Synthesized literature. To explore how and when automated vehicle  technologies could affect the current fleet of commercial trucks and  gather information about the possible employment effects of this  technology, we conducted a review of key research related to  automated vehicle technologies for commercial trucks. We searched  bibliographic databases for articles that were published between  January 1, 2014 and May 22, 2018 and included key terms such as  \u201cautonomous\u201d, \u201cautomated\u201d, \u201cdriverless\u201d, and \u201ctruck platoon\u201d to  describe the trucking technology. We also asked the researchers we  interviewed to identify any studies that may be relevant to our work.", "Our search initially resulted in over 250 articles with potential  relevance to our objectives. Two analysts reviewed the abstracts of  these articles to determine if the articles in this initial search were  germane to our objectives. We excluded any articles that were not  relevant to our objectives or did not meet our standards for empirical  analysis.", "We included articles that were published in peer review journals, by  industry, or by government agencies, as well as articles that were  recommended by researchers we interviewed. We identified a final list  of 12 studies that met our criteria. Although we reviewed each study\u2019s  methodological approach, we did not independently assess the  evidence in the articles or verify the analysis of the evidence that was  used to come to the conclusions these studies reached."], "subsections": []}, {"section_title": "Appendix II: Potential Legal Factors That May Affect Timing of Automated Trucking", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": ["Cindy Brown Barnes or Susan Fleming, (202) 512-7215 or  brownbarnesc@gao.gov or flemings@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["GAO staff who made major contributions to this report include Brandon  Haller (Assistant Director), Rebecca Woiwode (Assistant Director), Drew  Nelson (Analyst-in-Charge), MacKenzie Cooper, Marcia Fernandez, and  Hedieh Fusfield. Additional assistance was provided by Susan Aschoff,  David Ballard, James Bennett, Melinda Cordero, Patricia Donahue, Philip  Farah, Camilo Flores Monckeberg, David Hooper, Angie Jacobs, Michael  Kniss, Terence Lam, Ethan Levy, Sheila R. McCoy, Madhav Panwar,  James Rebbe, Benjamin Sinoff, Pamela Snedden, Almeta Spencer, John  Stambaugh, Walter Vance, Sonya Vartivarian, and Stephen C. Yoder."], "subsections": []}]}], "fastfact": ["What could self-driving trucks mean for hundreds of thousands of the nation's long-haul truck drivers?", "We found two possible scenarios:", "Long-haul highway driving will be fully automated, resulting in fewer trucking jobs and possibly lower wages, or", "Self-driving trucks may still need operators, possibly changing the skillset and wages without significantly affecting the number of trucking jobs", "Because widespread use of self-driving trucks is still years to decades away, we recommend that the Departments of Labor and Transportation consult with stakeholders on an ongoing basis to help the agencies analyze and respond to any workforce changes."]}
{"id": "GAO-19-207", "url": "https://www.gao.gov/products/GAO-19-207", "title": "Nuclear Waste: DOE Should Take Actions to Improve Oversight of Cleanup Milestones", "published_date": "2019-02-14T00:00:00", "released_date": "2019-02-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["EM manages DOE's radioactive and hazardous waste cleanup program using compliance agreements negotiated between DOE and other federal and state agencies. Within the agreements, milestones outline cleanup work to be accomplished by specific deadlines. EM's cleanup program faces nearly $500 billion in future environmental liability, which has grown substantially.", "GAO was asked to review DOE's cleanup agreements. This report examines the extent to which EM (1) tracks the milestones in cleanup agreements for EM's cleanup sites; (2) has met, missed, or postponed cleanup-related milestones at selected sites and how EM reports information; and (3) has analyzed why milestones are missed or postponed and how EM considers those reasons when renegotiating milestones.", "GAO reviewed agreements and milestones at EM's 16 cleanup sites and compared information tracked by EM headquarters and these sites; interviewed officials from four selected sites (chosen for variation in location and scope of cleanup, among other factors); and reviewed EM guidance related to milestone negotiations."]}, {"section_title": "What GAO Found", "paragraphs": ["The cleanup process at the 16 sites overseen by the Department of Energy's (DOE) Office of Environmental Management (EM) is governed by 72 agreements and hundreds of milestones specifying actions EM is to take as it carries out its cleanup work. However, EM headquarters and site officials do not consistently track data on the milestones. EM headquarters and site officials provided GAO with different totals on the number of milestones in place at the four sites GAO selected for review. These discrepancies result from how headquarters and selected sites define and track milestones. First, not all sites make the same distinction between major (i.e., related to on-the-ground cleanup) and non-major milestones and, as a result, are not consistently reporting the same milestones to EM headquarters. Second, sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site. These inconsistencies limit EM's ability to use milestones to manage the cleanup mission and monitor its progress.", "EM does not accurately track met, missed, or postponed cleanup-related milestones at the four selected sites, and EM's milestone reporting to Congress is incomplete. EM sites renegotiate milestone dates before they are missed, and EM does not track the history of these changes. This is because once milestones change, sites are not required to maintain or track the original milestone dates. GAO has previously found that without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project. Further, since 2011, EM has not consistently reported to Congress on the status of the milestones each year, as required, and the information it has reported is incomplete. EM reports the most recently renegotiated milestone dates with no indication of whether or how often those milestones have been missed or postponed. Since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, milestones do not provide a reliable measure of program performance.", "EM officials at headquarters and selected sites have not conducted root cause analyses on missed or postponed milestones; thus, such analyses are not part of milestone negotiations. Specifically, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials GAO interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed. Best practices for project and program management outlined in GAO's Cost Estimating and Assessment Guide note the importance of identifying root causes of problems that lead to schedule delays. Additionally, in a 2015 directive, DOE emphasized the importance of conducting such analysis. Analyzing the root causes of missed or postponed milestones would better position EM to address systemic problems and consider those problems when renegotiating milestones with regulators. Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As GAO has reported previously, these delays lead to increases in the overall cost of the cleanup."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that EM establish a standard definition of milestones across the cleanup sites, track and report original and renegotiated milestone dates, and identify the root causes of why milestones are missed or postponed. In commenting on a draft of this report, DOE agreed with three of the recommendations and partially agreed with a fourth."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Energy (DOE) faces nearly $500 billion in future  environmental liabilities related to the cleanup of nuclear and hazardous  waste at its 16 sites around the country. These liabilities have grown  substantially despite DOE spending roughly $6 billion annually on its  cleanup program. The waste is primarily a result of decades of producing  material for the nation\u2019s nuclear weapons program and can pose risks to  human health and the environment. The waste consists of millions of  gallons of radioactive waste in underground storage tanks, thousands of  tons of spent (used) nuclear fuel and special nuclear material, large  volumes of transuranic and mixed low level waste, and huge quantities of  contaminated soil and water. At many of its sites, DOE has had difficulty  making significant progress on the cleanup, particularly for the most  dangerous wastes and at sites with the most challenging cleanup work.  Because of the large and expanding estimated costs of cleaning up these  sites, in 2017, we designated the federal government\u2019s environmental  liabilities\u2014more than 80 percent of which pertain to DOE\u2014as a new high- risk area. In January 2019, we noted that the estimated cost to complete  the cleanup was likely to increase.", "DOE\u2019s Office of Environmental Management (EM) is responsible for  managing DOE\u2019s cleanup program and overseeing the contractors that  carry out the cleanup work at EM\u2019s sites. Federal laws\u2014including the  Comprehensive Environmental Response, Compensation, and Liability  Act of 1980, as amended (CERCLA); the Resource Conservation and  Recovery Act of 1976, as amended (RCRA); and the Atomic Energy Act  of 1954, as amended\u2014govern cleanup at these sites. EM\u2019s cleanup work  has been implemented under cleanup agreements negotiated between  DOE sites and federal and state regulatory agencies, such as the U.S.  Environmental Protection Agency (EPA) and state environmental  protection agencies. EM uses milestones\u2014dates by which certain tasks  are to be completed\u2014as a tool for managing and tracking progress on  site cleanup, along with earned value management systems and  performance metrics. EM also reports to Congress on the status of these  milestones and bases its annual request for cleanup funding in part on  the need to meet site milestones. However, in 1995 and 2002, for  example, we reported that milestones, as developed and used by DOE,  were not a good measure of EM\u2019s cleanup progress and recommended  that DOE set national cleanup priorities and renegotiate milestones based  on those priorities. In 2015, an independent review found that the use of  cleanup agreements negotiated by individual EM sites, rather than a more  centralized approach, sometimes caused EM to focus its scarce  resources on outdated milestones and lower-priority risks to human  health and the environment.", "You asked us to review EM\u2019s cleanup agreements that set requirements  and milestones for EM\u2019s cleanup approach at its 16 sites and how EM  has performed in meeting those milestones historically. This report  examines the extent to which EM (1) tracks the milestones in cleanup  agreements in place at EM\u2019s cleanup sites; (2) has met, missed, or  postponed cleanup-related milestones at selected sites and how EM  reports that information; and (3) has analyzed why milestones are missed  or postponed and how, if at all, EM considers those reasons when  renegotiating milestones with regulators.", "To review and summarize the number of cleanup agreements and  corresponding milestones in place at EM\u2019s cleanup sites, we collected  and examined all of the cleanup agreements for EM\u2019s 16 active cleanup  sites. We also collected EM\u2019s publicly reported lists of cleanup  milestones\u2014as found in DOE\u2019s Future-Years Plans submitted to  Congress in 2012 and 2017\u2014as well as updated lists that we obtained  from EM headquarters. In addition, we gathered lists of milestones from  some of the sites, as described below. We compared information  provided by EM headquarters and the sites to identify discrepancies, if  any, regarding the number and status of the milestones. We also  compared EM\u2019s approach to tracking milestones against GAO\u2019s  standards for internal control in the federal government.", "To analyze the extent to which EM has met, missed, or postponed  cleanup-related milestones at selected sites and how EM reports that  information, we selected a nongeneralizable sample of four sites\u2014Idaho  National Laboratory in Idaho; Savannah River Site in South Carolina; Los  Alamos National Laboratory in New Mexico; and the Hanford Site in  Washington\u2014for in-depth review. We selected these sites to ensure  diversity in (1) geographic location, (2) the responsible DOE agency (EM  is responsible for the cleanup at the 16 sites, but the National Nuclear  Security Administration oversees five of the sites), (3) the size of the  annual cleanup budget (selecting both large and small budgets), and (4)  the size of the total environmental liability (selecting both large and small  liabilities). Findings from these sites cannot be generalized to sites that  we did not include in our review. From each of the selected sites, we collected EM\u2019s public reports on historical and current data on the number  and status of milestones and reviewed, analyzed, and summarized this  information. We reviewed DOE\u2019s 2017 cleanup policy and associated  policies and procedures and met with officials from each of the sites in the  sample to find out more about site efforts to track how often milestones  had been met, missed, or postponed. To evaluate how EM reported this  information, we compared DOE\u2019s 2012 and 2017 reports to Congress and  EM\u2019s internal milestone reporting systems at headquarters and the sites.  We also compared EM\u2019s reporting against the requirement to report to  Congress and best practices for project schedules.", "To evaluate the extent to which EM has analyzed why milestones are  missed or postponed, we interviewed EM headquarters and site officials.  To analyze the extent to which EM considers those reasons when  renegotiating milestones, we reviewed EM\u2019s orders and guidance that  govern the process of negotiating cleanup milestones with regulators. We  compared this guidance against best practices in project and program  management.", "We conducted this performance audit from May 2017 to February 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."], "subsections": [{"section_title": "Background", "paragraphs": ["EM oversees a nationwide complex of 16 sites. A majority of the sites  were created during World War II and the Cold War to research, produce,  and test nuclear weapons (see figure 1). Much of the complex is no  longer in productive use but still contains vast quantities of radioactive  and hazardous materials related to the production of nuclear weapons. In  1989, EM began carrying out activities around the complex to clean up,  contain, safely store, and dispose of these materials. Starting at about  the same time, DOE documents indicate that EM and state and federal  regulators entered into numerous cleanup agreements that defined the  scope of cleanup work and established dates for coming into compliance  with applicable environmental laws. EM has spent more than $170 billion  since it began its cleanup program, but its most challenging and costly  cleanup work remains, according to EM documents.", "The processes that govern the cleanup at EM\u2019s nuclear waste sites are  complicated, involving multiple laws, agencies, and administrative steps.  EM\u2019s cleanup responsibilities derive from different laws, including  CERCLA, RCRA, the Atomic Energy Act, and state hazardous waste  laws. Federal facility agreements, compliance orders, and other  compliance agreements also govern this cleanup.", "Federal facility agreements are generally enforceable agreements that  DOE enters into with EPA and affected states under CERCLA and  applicable state laws. For each federal facility listed on the National  Priorities List, EPA\u2019s list of seriously contaminated sites, section 120 of  CERCLA requires the relevant federal agency to enter into an interagency  agreement with EPA for the completion of all necessary cleanup actions  at the facility. The interagency agreement must include, among other  things, the selection of the cleanup action and schedule for its completion.  Interagency agreement provisions can be renegotiated, as necessary, to  incorporate new information, adjust schedules, and address changing  conditions.", "States generally issue federal facility compliance orders to DOE under  RCRA and the Federal Facilities Compliance Act. RCRA prohibits the  treatment, storage or disposal of hazardous waste without a permit from  EPA or a state that EPA has authorized to implement and enforce a  hazardous waste management program. Under the Federal Facilities  Compliance Act, federal agencies are subject to state hazardous waste  laws and state enforcement actions, including compliance orders. RCRA  regulations establish detailed and often waste-specific requirements for  the management and disposal of hazardous wastes, including the  hazardous waste component of mixed waste. Tri-party agreements  among DOE, EPA, and the relevant state often serve as both a federal  facility agreement and a compliance order.", "In addition to federal facility agreements, other types of agreements  governing cleanup at specific sites may also be in place, including  administrative compliance orders, court-ordered agreements, and  settlement agreements. Administrative compliance orders are orders from  state agencies enforcing state hazardous waste management laws.  Court-ordered agreements result from lawsuits initiated primarily by  states. Settlement agreements are agreements between parties that end  a legal dispute.", "These agreements may include milestones\u2014dates by which DOE  commits to plan and carry out its cleanup work at the sites. DOE has  identified two different types of milestones: enforceable and planning  milestones. Generally, an enforceable milestone has a fixed, mandatory  due date, subject to the availability of appropriated funds, whereas a  planning milestone is not enforceable and usually represents a  placeholder or shorter term of work. In this report, we are examining any  enforceable milestone that derives from either federal facility agreements  or other compliance agreements.", "EM manages its cleanup program based on internal guidance, on  milestone commitments to regulators, and in consultation with a variety of  stakeholders. First, according to EM officials, EM manages cleanup  activities based on requirements listed in a cleanup policy that it issued in  July 2017 along with guidance listed in standard operating policies and  procedures associated with this policy. The 2017 cleanup policy states  that EM will apply DOE\u2019s project management principles described in  Order 413.3B to its operations activities in a tailored way. Second, EM\u2019s  budget requests are explicit regarding the role the milestones play in the  cleanup effort. For example, in its fiscal year 2019 request to Congress,  EM stated that the request addresses cleanup \u201cgoverned through  enforceable regulatory milestones.\u201d Third, in addition to the milestone  commitments to EPA and state environmental agencies, other  stakeholders involved include county and local governmental agencies,  citizen groups, and other organizations. These stakeholders advocate  their views through various public involvement processes, including site- specific advisory boards."], "subsections": []}, {"section_title": "At EM\u2019s 16 Cleanup Sites, Cleanup Is Governed by 72 Agreements, but EM Headquarters and Sites Do Not Consistently Define or Track Milestones", "paragraphs": ["At EM\u2019s 16 cleanup sites, cleanup is governed by 72 agreements and  hundreds of cleanup milestones. These agreements include federal  facility agreements generally negotiated between DOE, the state, and  EPA, and compliance orders from state regulators. These agreements  may impose penalties for missing milestones and may amend or modify  earlier agreements, including extending or eliminating milestone dates.  Within the agreements, hundreds of milestones outline deadlines for  specific actions to be taken by EM as it carries out its cleanup work.  However, because EM lacks a standard definition of milestones, some  sites track milestones differently than EM headquarters, limiting EM\u2019s  ability to monitor performance."], "subsections": [{"section_title": "At EM\u2019s 16 Cleanup Sites, Cleanup Is Governed by 72 Agreements, Most of Which Include Cleanup Milestones", "paragraphs": ["In total, DOE has entered into 72 cleanup agreements at EM\u2019s 16 cleanup  sites. The agreements were initially signed between 1985 and 2009 (see  table 1). With the exception of the Moab Uranium Mill Tailings Remedial  Action Project in Utah and the Waste Isolation Pilot Plant in New Mexico,  each site is governed by at least one cleanup agreement. Twelve are  governed by multiple agreements (up to as many as 17 at the Savannah  River Site, for example).", "Twelve sites are governed by federal facility agreements, generally with  the relevant state and EPA. These agreements generally set out a  sequence for accomplishing the work, tend to cover a relatively large  number of cleanup activities, and include milestones that DOE must  meet. All of the 12 sites with federal facility agreements are also governed  by additional compliance agreements that have been negotiated at each  site subsequent to the initial federal facility agreement or other agreement  with the state. These agreements may impose penalties for missing  milestones and may amend or modify earlier agreements, including  extending or eliminating milestone dates. For example, the Hanford Site  is subject to three consent decrees that resulted from litigation in which  the state of Washington sued DOE for failing to meet certain cleanup  milestones."], "subsections": []}, {"section_title": "EM Headquarters and Selected Cleanup Sites Do Not Consistently Define or Track Milestones", "paragraphs": ["EM headquarters and cleanup site officials provided us with different  totals on the number of milestones in place at the four sites we selected  for further review. Both federal facility agreements and other compliance  agreements contain milestones with which EM must comply and,  according to EM officials and our review of the agreements, these  agreements collectively contain hundreds of milestones. However,  milestone information that EM headquarters and site officials shared with  us was not consistent. For example, for milestones due in fiscal years  2018 through 2020, officials at EM headquarters identified 135  enforceable cleanup milestones at the four selected sites, which was less  than half of the number of such milestones officials at those sites reported  to us (see table 2).", "These discrepancies result from how headquarters and selected sites  define and track milestones.", "Milestone definitions. EM headquarters officials said that they are  primarily concerned with milestones related to on-the-ground cleanup;  that is, cleanup activities that actually result in waste being removed,  treated, or disposed of. EM officials said they consider these to be  major milestones. However, not all sites make the same distinction  between major and non-major milestones and, as a result, are not  consistently reporting the same types of milestones to EM  headquarters. For example, officials at the Savannah River Site track  milestones in a federal facility agreement that lists 79 milestones due  in fiscal years 2018 through 2020. This agreement makes no  distinction between major and non-major milestones and includes  administrative activities, such as revisions to cleanup reports, in its  milestone totals. EM headquarters officials, on the other hand, do not  include these activities as major milestones and list only 43  milestones due in the same time frame. Similarly, Hanford officials do  not distinguish between major or other milestones in their internal  tracking. As a result, Hanford officials are tracking 178 milestones due  in fiscal years 2018 through 2020, whereas EM headquarters officials  are tracking 57 for the same time frame at Hanford.", "Requirements for updating milestones. Sites do not consistently  provide EM headquarters with the most up-to-date information on the  status of milestones at each site. This is because EM requirements  governing the submission of milestone information do not specify  when or how often sites are to update this information, so sites have  the discretion to choose when to send updated milestone data to  headquarters. As a result, the information on the list of milestones  used to track cleanup performance by EM headquarters may differ  from the more up-to-date information kept by the sites. For example,  officials at each of the four sites we examined stated that they try to  send updated information on the status of milestones to headquarters  on an annual basis, though they sometimes send it less frequently.  Officials at EM headquarters acknowledged that their list of  milestones is not always up-to-date because of the lag between when  a milestone changes at the site and when sites update that  information in the EM headquarters\u2019 database.", "In addition to inconsistencies in tracking and defining milestones, lists of  milestones maintained by EM headquarters and the four selected sites  may not include all cleanup milestones governing the cleanup work at the  site. We found two cases in which permits at two sites included  milestones that neither EM headquarters nor site officials included in their  list of sites\u2019 cleanup milestones. For example, milestones related to a  major construction project at one of the selected sites we reviewed\u2014 Savannah River\u2014are not listed in either EM headquarters\u2019 or the  Savannah River Site\u2019s list of enforceable milestones. According to South  Carolina state environmental officials, milestones associated with this  project are part of a separate permit and dispute resolution agreement not  connected to the federal facility agreement or one of the sites\u2019 compliance  agreements. Recently, DOE acknowledged in its fiscal year 2019 budget  request that this project has faced technical challenges, and officials  noted that the previously agreed-upon start date for operating this project  would be delayed. However, this milestone and its delay are not included  in either EM headquarters\u2019 or Savannah River\u2019s list of milestones.  Similarly, officials at the Hanford Site said that some milestones  governing Hanford\u2019s cleanup are part of the site wide RCRA permit  issued by the state, which is separate from its federal facility agreement,  and, as a result, officials do not track this information in the same Hanford  milestone tracking system and do not report it to EM headquarters.", "EM does not have a standard definition of milestones for either sites or  headquarters to use for reporting and monitoring cleanup milestones or  guidance on how often sites should update the status of milestones. EM  headquarters officials cited guidance that sites can refer to when entering  their milestone data into the headquarters-managed database. This  guidance addresses how to submit milestone data but does not include a  definition of milestones or specify how often sites should update the  information. EM headquarters officials noted that sites have the  discretion to input milestones as they choose. EM\u2019s lack of a standard  definition of milestones limits management\u2019s ability to use milestones to  manage EM\u2019s cleanup mission and monitor its progress. We have  previously found that poorly defined, incomplete, or missing requirements  make it difficult to hold projects accountable, result in programs or  projects that do not meet user needs, and can result in cost and schedule  growth. In addition, according to Standards for Internal Control in the  Federal Government, information and communication are vital for an  entity to achieve its objectives.  According to these standards, the first  principle of information and communication is that management should  define the information requirements at the relevant level and the requisite  specificity for appropriate personnel. Without this, EM\u2019s ability to use  milestones for managing and measuring the performance of its cleanup  program is limited."], "subsections": []}]}, {"section_title": "EM Does Not Track Sites\u2019 Renegotiated Milestone Dates and Has Not Consistently Reported Milestone Information to Congress as Required", "paragraphs": ["EM relies on cleanup milestones, among other metrics, to measure the  overall performance of its operations activities. However, sites regularly  renegotiate milestones they are at risk of missing, and EM does not track  data on the history of postponed milestones. As a result, EM cannot  accurately track the progress of cleanup activities to meet these  milestones. Additionally, EM has not consistently reported required  information to Congress, and the information it has reported is  incomplete. For example, in its report to Congress on the status of the  enforceable milestones, EM includes the latest (meaning the most  recently renegotiated) milestone dates with no indication of whether or  how often those milestones have been missed or postponed."], "subsections": [{"section_title": "Sites Renegotiate Milestone Dates Before They Are Missed, and EM Does Not Track How Often This Occurs", "paragraphs": ["Site officials typically renegotiate enforceable milestones they are at risk  of missing with their regulators, in accordance with the modification  procedures established in federal facility agreements. EM officials said  that sites have the ability to renegotiate milestones before they are  missed. For example, the Hanford Site Federal Facility Agreement allows  DOE to request an extension of any milestone; the request must include,  among other things, DOE\u2019s explanation of the good cause for the  extension. As long as there is consensus among EM and its regulators,  the milestone is changed. Similarly, the Los Alamos Federal Facility  Agreement requires site officials to negotiate cleanup milestones each  fiscal year. Because renegotiated milestones are not technically missed,  EM avoids any fines or penalties associated with missed milestones.", "Site officials we interviewed at the four selected sites stated that it is  common for regulators and sites to renegotiate milestones before sites  miss them. For example, at the Savannah River Site, both DOE and  South Carolina officials said they could not recall any missed milestones  among the thousands of milestones completed since the cleanup began.  Similarly, Hanford officials told us that since the beginning of the cleanup  effort in 1989, more than 1,300 milestones had been completed and only  62 had actually been missed because, in most cases, whenever  milestones were at risk of being missed, they were renegotiated.  However, officials at these sites could not provide us with the exact  number of times milestones had been renegotiated. This is because once  milestones are changed, sites are not required to maintain or track the  original milestones. As a result, the new milestones become the new  agreed-upon time frame, essentially resetting the deadline.", "Because EM does not track the original baseline schedule for  renegotiated milestone dates, milestones do not provide a reliable  measure of program performance. According to best practices identified  in GAO\u2019s schedule assessment guide, agencies should formally establish  a baseline schedule against which performance can be measured. In  particular, we have previously found that management does not have the  ability to identify and mitigate the effects of unfavorable performance  without a formally established baseline schedule against which it can  measure performance. We have also found that, without a documented  and consistently-applied schedule change control process, program staff  may continually revise the schedule to match performance, hindering  management\u2019s insight into the true performance of the project. In addition,  DOE\u2019s internal project management policies call for steps to maintain a  change control process, including setting a baseline schedule for  completing certain activities and maintaining a record of any subsequent  deviations from that baseline. EM uses milestones as one of its metrics  for measuring the performance of its cleanup efforts, since the milestones  are effectively schedule targets. However, since neither EM headquarters  nor the sites track renegotiated milestones and their baseline dates at the  sites, EM cannot accurately use milestones for managing and measuring  the performance of its cleanup program."], "subsections": []}, {"section_title": "EM Has Not Consistently Reported Required Information to Congress, and the Information It Has Reported Is Incomplete", "paragraphs": ["EM has not consistently reported required information to Congress on the  status of its milestones. The National Defense Authorization Act for Fiscal  Year 2011 established a requirement for EM to annually provide  Congress with a future-years defense environmental cleanup plan. This  plan is to contain, among other things, information on the current dates  for enforceable milestones at specified cleanup sites, including whether  each milestone will be met and, if not, an explanation as to why and when  it will be met. However, since 2011, EM has only provided Congress  with the required annual plan in 2 years\u20142012 and 2017\u2014and EM  officials told us in September 2018 that they were unsure when EM would  release the next future-years plan. EM officials said that, instead of the  annual plan, they have provided oral briefings to Congressional staff  during the 4 years when a formal report was not produced.", "In addition, our analysis of the 2012 and 2017 plans EM submitted to  Congress identified three ways in which the plans provide inaccurate or  incomplete information on EM\u2019s enforceable milestones.", "No historical record. First, the plans contain no indication of whether  each milestone date reported is the original date for that milestone or  whether or how many times the milestones listed have been missed  or postponed. Instead, the plans report the latest (and most recently  renegotiated) dates for the milestones without listing the original dates  or acknowledging that some of the milestones have been delayed, in  some cases by several years, beyond their original agreed-upon  completion dates. For example, we found that at least 14 milestones  from the 2012 plan were repeated in the 2017 plan with new  forecasted completion dates, but the 2017 plan gave no indication that  these milestones had been postponed (see table 3). The milestones\u2019  due dates had been pushed back by as many as 6 years without any  indication in the 2017 report that they were delayed. As noted above,  EM headquarters does not track changes to milestones and EM  officials at both headquarters and the sites said that they have not  historically kept a record of the original baseline dates for renegotiated  milestones they change. As a result, EM officials could not readily  provide information on whether the other milestones listed in the 2012  report met their listed due date or whether they were postponed.  Headquarters officials stated that to gather this information they would  need to survey officials at each site.", "Inaccurate forecast. Second, the forecast completion dates for  milestones listed in the 2012 and 2017 plans may not present an  accurate picture of the status of the milestones and EM\u2019s cleanup  efforts. For example, in the 2012 plan, DOE reported that four out of  218 milestones were at risk of missing their planned completion date,  while the rest were on schedule. As discussed above, we found 14 of  the milestones in the 2012 plan had been postponed and listed again  in the 2017 plan. Similarly, the 2017 plan listed only one milestone  out of 154 as forecasted to miss its due date. However, because EM  does not have a historical record of the changes made to the  milestones, it is unclear how many of these milestones represented  their original due dates.", "Incomplete list. Third, the plans did not include milestones from all of  the 10 DOE cleanup sites that EM is required to report on. In 2012,  EM did not report milestone information for two of the 10 sites that  were required to be included in the plan. In the 2017 plan, information  was missing for one of the 10 required sites. EM headquarters  officials said that this could be because some sites did not update  their milestone information or some sites may still be renegotiating  new milestones. However, neither report indicated that data were  missing for these sites.", "As a result of these issues, DOE\u2019s future-years defense environmental  cleanup plans provide only a partial picture of the milestones and overall  cleanup progress made across the cleanup complex, and actual progress  made in cleanup is not transparent to Congress. The absence of reliable  and complete information on the progress of EM\u2019s cleanup mission limits  EM\u2019s ability to manage its mission and complicates Congress\u2019s ability to  oversee the cleanup work."], "subsections": []}]}, {"section_title": "EM Does Not Analyze the Root Causes of Missed or Postponed Milestones and Does Not Have Guidelines for Considering Root Causes When Renegotiating New Milestones", "paragraphs": ["Best practices and DOE requirements for project management call for a  root cause analysis when problems lead to schedule delays, but EM  officials at both headquarters and selected sites have not analyzed  reasons why milestones are missed or postponed. According to best  practices identified in GAO\u2019s cost estimating guide, agencies should  identify root causes of problems that lead to schedule delays and  renegotiated milestones. Specifically, when risks materialize (i.e., when  milestones are missed or delayed), risk management should provide a  structure for identifying and analyzing root causes. The benefits of doing  so include developing a better understanding of the factors that caused  milestones to be missed and providing agencies with information to more  effectively address those factors in the future. In addition, DOE has  recently emphasized the importance of doing this kind of analysis. In  2015, DOE issued a directive requiring sites to do a root cause analysis  when the project team, program office, or independent oversight offices  determine that a project has breached its cost or schedule thresholds.  This directive, which applies to all programs and projects within DOE,  calls for \u201can independent and objective root cause analysis to determine  the underlying contributing causes of cost overruns, schedule delays, and  performance shortcomings,\u201d such as missed or postponed milestones.", "However, EM has not done a complex-wide analysis of the reasons for  missed or postponed milestones. Similarly, officials we interviewed at the  four selected sites said that they were not aware of any site-wide review  of why milestones were missed or postponed. According to headquarters  officials, this analysis has not been done because EM has determined  that DOE requirements governing this type of analysis apply only to  contract schedules, not regulatory milestones, and that missed or  postponed milestones are not necessarily an indication of cleanup  performance shortcomings. However, as previously noted in this report,  missing or postponing milestones is a systemic problem across the  cleanup complex that makes it difficult for DOE to accurately identify  cleanup performance shortcomings. Because EM has not analyzed why it  has missed or postponed milestones, EM cannot address these systemic  problems and consider those problems when renegotiating milestones  with regulators. Without such analysis, EM and its cleanup regulators  lack information to set more realistic and achievable milestones and, as a  result, future milestones are likely to continue to be pushed back, further  delaying the cleanup work. As we have reported previously, these delays  lead to increases in the overall cost of the cleanup."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The federal government faces a large and growing future environmental  liability, the vast majority of which is related to the cleanup of radioactive  and hazardous waste at DOE\u2019s 16 sites around the country. EM has  responsibility for addressing the human health and environmental risks  presented by this contamination in the most cost-effective way. However,  most of EM\u2019s largest projects are significantly delayed and over budget,  and state regulators for nearly all of EM\u2019s cleanup sites have responded  by initiating enforcement actions, often leading to additional agreements,  including administrative orders and court settlements, in addition to initial  federal facility agreements to ensure those risks are addressed.", "EM relies on cleanup milestones, among other metrics, to measure the  overall performance of its operations activities, and EM reports that very  few of its cleanup milestones over the past 2 decades have been missed.  However, EM\u2019s self-reported performance in achieving milestones does  not provide an accurate view of actual progress in cleaning up sites. EM  has not established clear definitions for tracking and reporting milestones  and does not have any requirements governing the way sites are to  update milestone information. As a result, EM\u2019s internal tracking of these  milestones has inconsistencies. Additionally, since the requirement to  annually report on the status of milestones was set in 2011, EM has  produced only two reports to Congress, and these were inaccurate and  incomplete. Without a clear and consistent approach to collecting and  reporting this data, including the history of milestone changes, EM cannot  accurately use milestones for managing and measuring the performance  of its cleanup program. The absence of reliable and complete information  on the progress of EM\u2019s cleanup mission also limits EM\u2019s and Congress\u2019s  ability to oversee the cleanup work. In addition, without a root cause  analysis of why milestones are missed or postponed, EM and its cleanup  regulators lack information to set more realistic and achievable  milestones. As a result, future milestones are likely to continue to be  pushed back, further delaying the cleanup work, which will likely increase  cleanup costs and risks to human health and the environment."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DOE:  The Assistant Secretary of DOE\u2019s Office of Environmental Management  should update EM\u2019s policies and procedures to establish a standard  definition of milestones and specify requirements for both including and  updating information on milestones across the complex.  (Recommendation 1)", "The Assistant Secretary of DOE\u2019s Office of Environmental Management  should track original milestone dates as well as changes to its cleanup  milestones. (Recommendation 2)", "The Assistant Secretary of DOE\u2019s Office of Environmental Management  should comply with the requirements in the National Defense  Authorization Act by reporting annually to Congress on the status of its  cleanup milestones and including a complete list of cleanup milestones  for all sites required by the act. The annual reports should also include,  for each milestone, the original date along with the currently negotiated  date. (Recommendation 3)", "The Assistant Secretary of DOE\u2019s Office of Environmental Management  should conduct root cause analyses of missed or postponed milestones.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOE for review and comment. DOE  provided written comments, which are reproduced in appendix II; the  agency also provided technical comments that we incorporated in the  report as appropriate. Of the four recommendations in the report, DOE  agreed with three, and partially agreed with one.", "Regarding the recommendation that DOE update EM\u2019s policies and  procedures to establish a standard definition of milestones and  specify requirements for both including and updating information on  milestones across the complex, the agency agreed with the  recommendation. DOE stated that these policy-driven reforms can  improve the efficiency of milestone tracking.", "Regarding the recommendation that DOE track changes to cleanup  milestones, the agency agreed with the recommendation. DOE stated  that EM currently monitors milestone status, including changes as the  need for changes are identified and as part of its ongoing  communication with field offices, and therefore DOE considers the  recommendation to be closed. However, as we noted in the report,  neither EM headquarters nor the sites track the original baseline  schedule for renegotiated milestone dates. We adjusted the language  of the recommendation to make clear that the EM Assistant Secretary  should track original milestone dates as well as changes to cleanup  milestones. DOE stated in its written comments that EM does not  believe that tracking original and changed milestones will strengthen  EM's ability to use milestones to manage and measure the  performance of its cleanup program. However, as we noted in this  report, according to best practices identified in GAO's schedule  assessment guide, agencies should formally establish a baseline  schedule against which performance can be measured. We have  found that, without a documented and consistently-applied schedule  change control process, program staff may continually revise the  schedule to match performance, hindering management's insight into  the true performance of the project. In addition, DOE's internal project  management policies call for steps to maintain a change control  process, including setting a baseline schedule for completing certain  activities and maintaining a record of any subsequent deviations from  that baseline.", "Regarding our recommendation that DOE comply with the  requirements in the National Defense Authorization Act by reporting  annually to Congress on the status of its cleanup milestones and  including a complete list of cleanup milestones for all sites required by  the act, the agency partially agreed with the recommendation. DOE  stated that additional budget and clarification of purpose and scope  would be required to fulfill this recommendation. As we point out in our  report, DOE has not fully complied with requirements established by  the act, including not submitting all required annual reports and, even  when DOE did submit these reports, its reporting omitted information  about some sites. DOE stated that EM is reviewing options to address  this recommendation.", "Regarding our recommendation that DOE conduct root cause  analyses of performance shortcomings that lead to missed or  postponed milestones, the agency agreed with the recommendation  and stated that EM is evaluating options to implement it. However,  DOE stated that there may be multiple reasons why milestones are  changed, and not all of the changes are due to DOE performance. To  acknowledge the uncertainty in the causes of missed or postponed  milestones, we adjusted the language of the recommendation to  clarify that the EM Assistant Secretary should conduct root cause  analyses of missed or postponed milestones.", "In addition, in its written comments, DOE disagreed with the draft report's  description of the process and authorities related to renegotiating  compliance milestones, stating that EM cannot and does not unilaterally  delay/postpone milestones and that EPA and state regulator approval of  milestone changes is required. We agree, and the report states that it is  common for regulators and sites to renegotiate milestones before sites  miss them. DOE also disagreed with the draft report\u2019s characterization of  the coordination between EM sites and headquarters in tracking  milestones. In particular, DOE\u2019s written comments state that site-specific  databases include all regulatory compliance milestones drawn from  applicable agreements, while the headquarters database tracks major  enforceable milestones. However, as our report notes, because not all  sites make the same distinction between major and non-major  milestones, sites are not consistently reporting the same types of  milestones to EM headquarters. In addition, DOE\u2019s written comments  state that EM sites and headquarters routinely collaborate and discuss  the status of milestones via meetings and EM periodically requests that  sites verify the data in the EM headquarters database. Nevertheless, as  our report notes, EM requirements governing the submission of milestone  information do not specify when or how often sites are to update this  information.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, and other interested parties. In  addition, this report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made significant contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Department of Energy (DOE) Cleanup Sites", "paragraphs": [], "subsections": [{"section_title": "Brookhaven National Laboratory", "paragraphs": ["The Brookhaven National Laboratory was established in 1947 by the  Atomic Energy Commission. Formerly Camp Upton, a U.S. Army  installation site, Brookhaven is located on a 5,263-acre site on Long  Island in Upton, NY, approximately 60 miles east of New York City.  Historically, Brookhaven was involved in the construction of accelerators  and research reactors such as the Cosmotron, the High Flux Beam  Reactor, and the Brookhaven Graphite Research Reactor. These  accelerators and reactors led the way in high-energy physics experiments  and subsequent discoveries but also resulted in radioactive waste. To  complete the cleanup mission, DOE is working to build and operate  groundwater treatment plants, decontaminate and decommission the  High Flux Beam Reactor and the Brookhaven Graphite Research  Reactor, and dispose of some wastes off-site."], "subsections": []}, {"section_title": "Energy Technology Engineering Center", "paragraphs": ["The Energy Technology Engineering Center occupies 90 acres within the  290 acre Santa Susana Field Laboratory 30 miles north of Los Angeles,  California. The area was primarily used for DOE research and  development activities. In the mid-1950s, part of the area was set aside  for nuclear reactor development and testing, primarily related to the  development of nuclear power plants and space power systems, using  sodium and potassium as coolants. In the mid-1960s, the Energy  Technology Engineering Center was established as a DOE laboratory for  the development of liquid metal heat transfer systems to support the  Office of Nuclear Energy Liquid Metal Fast Breeder Reactor program.  DOE is now involved in the deactivation, decommissioning, and  dismantlement of contaminated facilities on the site."], "subsections": []}, {"section_title": "Hanford Site", "paragraphs": ["DOE is responsible for one of the world\u2019s largest environmental cleanup  projects: the treatment and disposal of millions of gallons of radioactive  and hazardous waste at its 586 square mile Hanford Site in southeastern  Washington State. Hanford facilities produced more than 20 million  pieces of uranium metal fuel for nine nuclear reactors along the Columbia  River. Five plants in the center of the Hanford Site processed 110,000  tons of fuel from the reactors, discharging an estimated 450 billion gallons  of liquids to soil disposal sites and 53 million gallons of radioactive waste  to 177 large underground tanks. Plutonium production ended in the late  1980s. Hanford cleanup began in 1989 and now involves (1) groundwater  monitoring and treatment, (2) deactivation and decommissioning of  contaminated facilities, and (3) the construction of the waste treatment  and immobilization plant intended, when complete, to treat the waste in  the underground tanks."], "subsections": []}, {"section_title": "Idaho National Laboratory", "paragraphs": ["DOE\u2019s Idaho Site is an 890-square-mile federal reserve, situated in the  Arco Desert over the Snake River Plain Aquifer in central Idaho. The  Idaho Cleanup Project involves the environmental cleanup of the Idaho  Site, contaminated with legacy wastes generated from World War II-era  conventional weapons testing, government-owned research and defense  reactors, spent nuclear fuel reprocessing, laboratory research, and  defense missions at other DOE sites."], "subsections": []}, {"section_title": "Lawrence Livermore National Laboratory", "paragraphs": ["The 1-square-mile Lawrence Livermore National Laboratory site is an  active, multi-program DOE research laboratory about 45 miles east of  San Francisco. A number of research and support operations at  Lawrence Livermore handle, generate, or manage hazardous materials  that include radioactive wastes. The site first was used as a Naval Air  Station in the 1940s. In 1951, it was transferred to the U.S. Atomic  Energy Commission and was established as a nuclear weapons and  magnetic fusion energy research facility. Over the past several years,  Lawrence Livermore constructed several treatment plants for  groundwater pumping and treatment and for soil vapor extraction. These  systems will continue to operate until cleanup standards are achieved."], "subsections": []}, {"section_title": "Los Alamos National Laboratory", "paragraphs": ["Los Alamos National Laboratory is located in Los Alamos County in north  central New Mexico. The laboratory, founded in 1943 during World War II,  served as a secret facility for research and development of the first  nuclear weapon. The site was chosen because the area provided  controlled access, steep canyons for testing high explosives, and existing  infrastructure. The Manhattan Project\u2019s research and development efforts  that were previously spread throughout the nation became centralized at  Los Alamos and left a legacy of contamination. Today, the Los Alamos  National Laboratory Cleanup Project is responsible for the treatment,  storage, and disposition of a variety of radioactive and hazardous waste  streams; removal and disposition of buried waste; protection of the  regional aquifer; and removal or deactivation of unneeded facilities."], "subsections": []}, {"section_title": "Moab Uranium Mill Tailings Project", "paragraphs": ["The Moab Site is located about 3 miles northwest of the city of Moab in  Grand County, Utah. The former mill site encompasses approximately  435 acres, of which about 130 acres is covered by the uranium mill  tailings pile. Uranium concentrate (called yellowcake), the milling product,  was sold to the U.S. Atomic Energy Commission through December 1970  for use in national defense programs. After 1970, production was  primarily for commercial sales to nuclear power plants. During its years of  operation, the mill processed an average of about 1,400 tons of ore a  day. The milling operations created process-related wastes and tailings, a  radioactive sand-like material. The tailings were pumped to an unlined  impoundment in the western portion of the Moab Site property that  accumulated over time, forming a pile more than 80 feet thick. The  tailings, particularly in the center of the pile, have a high water content.  Excess water in the pile drains into underlying soils, contaminating the  ground water."], "subsections": []}, {"section_title": "Nevada National Security Site", "paragraphs": ["In 1950, President Truman established what is now known as the Nevada  National Security Site in Mercury, Nevada, to perform nuclear weapons  testing activities. In support of national defense initiatives, a total of 928  atmospheric and underground nuclear weapons tests were conducted at  the site between 1951 and 1992, when a moratorium on nuclear testing  went into effect. Today, the site is a large, geographically-diverse  research, evaluation, and development complex that supports homeland  security, national defense, and nuclear nonproliferation. In Nevada, DOE  activities focus on groundwater, soil, and on-site facilities; radioactive,  hazardous, and sanitary waste management and disposal; and  environmental planning."], "subsections": []}, {"section_title": "Oak Ridge Reservation", "paragraphs": ["DOE\u2019s Oak Ridge Reservation is located on approximately 33,500 acres  in eastern Tennessee. The reservation was established in the early 1940s  by the Manhattan Engineer District of the U. S. Army Corps of Engineers  and played a role in the production of enriched uranium during the  Manhattan Project and the Cold War. DOE is now working to address  excess and contaminated facilities, remove soil and groundwater  contamination, and enable modernization that allows the National Nuclear  Security Administration to continue its national security and nuclear  nonproliferation responsibilities and the Oak Ridge National Laboratory to  continue its mission for advancing technology and science."], "subsections": []}, {"section_title": "Paducah Gaseous Diffusion Plant", "paragraphs": ["The Paducah Gaseous Diffusion Plant, located within an approximately  650-acre fenced security area in in McCracken County in western  Kentucky, opened in 1952 and played a role in the production of enriched  uranium during and after the Cold War until ceasing production for  commercial reactor fuel purposes in 2013. Decades of uranium  enrichment and support activities required the use of a number of typical  and special industrial chemicals and materials. Plant operations  generated hazardous, radioactive, mixed (both hazardous and  radioactive), and nonchemical (sanitary) wastes. Past operations also  resulted in soil, groundwater, and surface water contamination at several  sites located within plant boundaries."], "subsections": []}, {"section_title": "Portsmouth Gaseous Diffusion Plant", "paragraphs": ["The Portsmouth Gaseous Diffusion Plant is located in Pike County, Ohio,  in southern central Ohio, approximately 20 miles north of the city of  Portsmouth, Ohio. Like the Paducah Plant, this facility was also initially  constructed to produce enriched uranium to support the nation\u2019s nuclear  weapons program and was later used by commercial nuclear reactors.  Cleanup activities here are similar to those at the Paducah Plant."], "subsections": []}, {"section_title": "Sandia National Laboratories", "paragraphs": ["The Sandia National Laboratories comprises 2,820 acres within the  boundaries of the 118 square miles of Kirtland Air Force Base and is  located about 6 miles east of downtown Albuquerque, New Mexico. It is  managed by the National Nuclear Security Administration. Sandia  National Laboratories was established in 1945 for nuclear weapons  development, testing, and assembly for the Manhattan Engineering  District. Beginning in 1980, the mission shifted toward research and  development for nonnuclear components of nuclear weapons.  Subsequently, the mission was expanded to research and development  on nuclear safeguards and security and multiple areas in science and  technology."], "subsections": []}, {"section_title": "Savannah River Site", "paragraphs": ["The Savannah River Site complex covers 198,344 acres, or 310 square  miles, encompassing parts of Aiken, Barnwell, and Allendale counties in  South Carolina, bordering the Savannah River. The site is a key DOE  industrial complex responsible for environmental stewardship,  environmental cleanup, waste management, and disposition of nuclear  materials. During the early 1950s, the site began to produce materials  used in nuclear weapons, primarily tritium and plutonium-239. Five  reactors were built to produce nuclear materials and resulted in unusable  by-products, such as radioactive waste. About 35 million gallons of  radioactive liquid waste are stored in 43 underground tanks. The Defense  Waste Processing Facility is processing the high-activity waste,  encapsulating radioactive elements in borosilicate glass, a stable storage  form. Since the facility began operations in March 1996, it has produced  more than 4,000 canisters (more than 16 million pounds) of radioactive  glass."], "subsections": []}, {"section_title": "Separations Process Research Unit", "paragraphs": ["The Separations Process Research Unit is an inactive facility located at  the Knolls Atomic Power Laboratory in Niskayuna, New York, near  Schenectady. The Mohawk River forms the northern boundary of this site.  Built in the late 1940s, its mission was to research the chemical process  to extract plutonium from irradiated materials. Equipment was flushed and  drained, and bulk waste was removed following the shutdown of the  facilities in 1953. Today, process vessels and piping have been removed  from all the research unit\u2019s facilities. In 2010, cleanup of radioactivity and  chemical contamination in the Lower Level Railroad Staging Area, Lower  Level Parking Lot, and North Field areas was completed."], "subsections": []}, {"section_title": "Waste Isolation Pilot Plant", "paragraphs": ["The Waste Isolation Pilot Plant is an underground repository located near  Carlsbad, New Mexico, that is used for disposing of defense transuranic  waste. The plant is managed by DOE\u2019s Office of Environmental  Management and is the only deep geological repository for the permanent  disposal of defense generated transuranic waste."], "subsections": []}, {"section_title": "West Valley Demonstration Project", "paragraphs": ["The West Valley Demonstration Project occupies approximately 200  acres within the 3,345 acres of land called the Western New York Nuclear  Service Center. The project is located approximately 40 miles south of  Buffalo, New York. The West Valley Demonstration Project Act of 1980  established the project. The act directed DOE to solidify and dispose of  the high-level waste and decontaminate and decommission the facilities  used in the process. The land and facilities are not owned by DOE.  Rather, the project premises are the property of the New York State  Energy Research and Development Authority. DOE does not have  access to the entire 3,345 acres of property."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nico Sloss (Assistant Director),  Jeffrey T. Larson (Analyst in Charge), Natalie M. Block, Antoinette C.  Capaccio, R. Scott Fletcher, Cindy K. Gilbert, Richard P. Johnson, Jeffrey  R. Rueckhaus, Ilga Semeiks, Sheryl E. Stein, and Joshua G. Wiener  made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Energy is tasked with cleaning up waste from Cold War nuclear weapons production, much of which is hazardous or radioactive. DOE spends about $6 billion a year on this cleanup, and faces about $500 billion in future liabilities.", "Agreements between DOE and its regulators set requirements and milestones (deadlines) for the work at each cleanup site.", "We found that DOE didn't accurately track or report whether milestones were met, missed, or postponed. We also found that sites continually renegotiate milestones they are at risk of missing.", "We made 4 recommendations to address these and other issues we found."]}
{"id": "GAO-18-34", "url": "https://www.gao.gov/products/GAO-18-34", "title": "Veterans Affairs Contracting: Improvements in Buying Medical and Surgical Supplies Could Yield Cost Savings and Efficiency", "published_date": "2017-11-09T00:00:00", "released_date": "2017-12-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA medical centers spend hundreds of millions of dollars annually on medical supplies and services. In December 2016, VA instituted a major change in how it purchases medical supplies\u2014the MSPV-NG program\u2014to gain effectiveness and efficiencies.", "GAO was asked to examine VA's transition to the MSPV-NG program and its use of emergency procurements. This report assesses the extent to which (1) VA's implementation of MSPV-NG was effective in meeting program goals, and (2) VA awards contracts on an emergency basis. GAO analyzed VA's MSPV-NG requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also reviewed a non-generalizable sample of 18 contracts designated in VA's database as emergency procurements with high dollar values; and met with contracting, logistics, and clinical officials at 6 medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation was flawed, lacked an overarching strategy, stable leadership, and sufficient workforce that could have facilitated medical center buy-in. VA developed requirements for a broad range of MSPV-NG items with limited clinical input. As a result, the program has not met medical centers' needs, and usage remains far below VA's 40 percent target. VA also established cost avoidance as a goal for MSPV-NG, but currently only has a metric in place to measure broader supply chain cost avoidance, not savings specific to MSPV-NG. Also, starting in June 2015, VA planned to award competitive contracts for MSPV-NG items, but instead, 79 percent were added using non-competitive agreements. (See figure.) This was done primarily to meet VA's December 2016 deadline to establish the formulary, the list of items available for purchase through MSPV-NG.", "The roll-out of MSPV-NG ran counter to practices of leading hospitals that GAO spoke with, which highlighted key steps, such as prioritizing supply categories and obtaining continuing clinician input to guide decision-making. VA has taken steps to address some deficiencies identified in the first phase of implementation and is considering a new approach for this program. However, until VA addresses the existing shortcomings in the MSPV-NG program, such as the lack of medical center buy-in, it will face challenges in meeting its goals.", "Medical centers often rely on emergency procurements to obtain routine goods and services\u2014some of which could be made available at lower cost via MSPV-NG. Sixteen of the 18 contracts in GAO's sample were not competed, which puts the government at risk of paying more. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts over a 3-year period. VA policy clearly defines emergency actions; however, inefficiencies in planning, funding, and communication at the medical centers contributed to emergency procurements, resulting in the contracting officers quickly awarding contracts with no competition."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 10 recommendations, including that VA expand clinician input in requirements development, calculate MSPV-NG cost avoidance, establish a plan for awarding future competitive contracts, and identify opportunities to strategically procure supplies and services frequently purchased on an emergency basis. VA agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In December 2016, the Department of Veterans Affairs (VA) launched the  next generation of the Medical Surgical Prime Vendor program as its  primary means for purchasing supplies, such as bandages and scalpels,  for 170 VA medical centers to meet the health care needs of about 7  million veterans. In fiscal year 2015, VA obligated $465 million for these  types of supplies, and, in 2016, it stated that it planned to achieve $150  million in cost avoidance through a supply chain transformation effort,  which includes the Medical Surgical Prime Vendor-Next Generation  (MSPV-NG) program. In addition to leveraging VA\u2019s large buying power,  the department\u2019s other stated goals for this program were to standardize  supplies used across VA medical centers and improve supply chain  efficiency.", "The transition to MSPV-NG has been a major effort, involving  stakeholders from the Veterans Health Administration\u2019s (VHA)  Procurement and Logistics Office and VA\u2019s Strategic Acquisition Center  (SAC), as well as logistics and clinical personnel at every medical center.  The program also includes hundreds of new contracts with individual  supply vendors and a new set of prime vendor contracts to distribute the  supplies. This transition represents a significant change to how medical  and surgical supplies are purchased, which has raised questions about  whether MSPV-NG will appropriately balance medical needs with  logistical efficiency. Effective supply chain management is an essential  part of delivering quality health care to veterans. For instance, in April  2017, the VA Inspector General released an interim report detailing  supply management issues at the District of Columbia VA Medical Center  that posed risks to patient care. Moreover, VHA\u2019s procurement of routine  goods on an urgent or emergency basis at medical centers, as our prior  work indicated has occurred, has the potential to strain VA\u2019s acquisition  workforce.", "You requested that we examine VA\u2019s transition to the MSPV-NG program  and the extent to which the department contracts for goods and services  on an emergency basis. This report assesses the extent to which (1) VA\u2019s  implementation of MSPV-NG has been effective in meeting program  goals; and (2) VHA awards contracts on an emergency basis for routine  supplies and ongoing services and what, if any, impact these awards  have on VHA\u2019s acquisition function.", "To review the extent to which VA\u2019s transition to MSPV-NG has been  effective, we reviewed policy, communications, briefings, and other  documents. We reviewed prior GAO reports on best practices for  organizational transformation, as well as internal control standards. We  also interviewed supply chain managers from four leading hospital  networks regarding their medical supply management practices. We  selected the hospital networks because they were identified by an  industry study as having leading supply chain practices. During  interviews, we asked these supply chain managers a standard set of  questions about processes followed to standardize their hospital  networks\u2019 supply chain. VA had also identified two of these hospital  networks as having leading supply chain practices, and used the industry  study to identify these hospital networks. We used this information from  the leading hospital networks to compare the key steps\u2014identified by  each of the four hospital networks\u2014followed in standardizing their  medical supply chains to those steps that VA followed when implementing  the MSPV-NG program. We also confirmed these key steps with the  leading hospital networks. To assess VA\u2019s MSPV-NG contracting  process, we obtained data on the contents of the formulary (a list of  specific items that medical centers are allowed to purchase), and  determined that it was sufficiently reliable for our reporting objectives by  tracing data to a sample of source documents, among other steps. We  analyzed the data to determine what acquisition instrument was used to  add items or change the composition of the formulary over time. We  conducted site visits to three Veterans Integrated Service Networks  (VISNs), selected based on highest total contract obligations in fiscal  years 2014 through 2016, geographic diversity, and other factors, and  interviewed VISN leadership. We visited two medical centers within each  selected VISN and interviewed officials, such as Chief Supply Chain  Officers, clinicians, and ordering officers. We also interviewed VHA- and  VA-wide procurement leaders, program office managers, and managers  and members of three integrated product teams who helped develop  requirements for supply items\u2014selected based on those responsible for  the largest number of items. Finally, we obtained and analyzed data on  VA\u2019s metrics for the program. We determined the data were sufficiently  reliable for our purpose of measuring utilization by interviewing officials  responsible for maintaining the data and other measures.", "To assess the extent to which VHA awards contracts on an emergency  basis, we reviewed VA-provided contracting data from fiscal years 2014  through 2016. We determined these data were sufficiently reliable for our  reporting objective by reviewing information on system controls, among  other things. We used these data to select a non-generalizable sample of  18 contract files, chosen from the three VISNs based on their designated  urgency level, among other criteria. We interviewed the contracting officer  and medical center customer for each selected contract, as well as  leadership of the selected contracting offices. See appendix I for a more  detailed scope and methodology.", "We conducted this performance audit from November 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VA serves veterans of the U.S. armed forces and provides health,  pension, burial, and other benefits. The department\u2019s three operational  administrations\u2014VHA, Veterans Benefits Administration, and National  Cemetery Administration\u2014operate largely independently from one  another. Each has its own contracting authority, though all three also  work with national contracting organizations under the Office of  Acquisition, Logistics, and Construction for certain types of purchases,  such as medical equipment and information technology. VHA, which  provides medical care to about 7 million veterans at 170 medical centers,  is by far the largest of the three administrations. These medical centers  are organized into 18 VISNs, organizations that manage medical centers  and associated clinics across a given geographic area. Each VISN is  served by a corresponding Network Contracting Office. Figure 1 shows  the organizational structure of the procurement function at VA."], "subsections": [{"section_title": "MSPV-NG Program", "paragraphs": ["For over a decade, each of VA\u2019s 170 medical centers used VHA\u2019s legacy  MSPV program to order medical supplies, such as bandages and  scalpels. Many of those items were purchased using the Federal Supply  Schedules, which provided medical centers with a great deal of flexibility.  As we reported in 2016, this legacy program, however, prevented VHA  from standardizing items used across its medical centers and affected its  ability to leverage its buying power to achieve greater cost avoidance.  Standardization is a process of narrowing the range of items purchased to  meet a given need in order to improve buying power, simplify supply  chain management, and provide clinical consistency. For example, a  hospital network might find that it purchases 100 varieties of bandages,  but might ultimately determine\u2014with input from clinicians\u2014that it can  narrow those choices down to 10 varieties to fill most needs, which would  provide greater consistency and allow the hospital to negotiate lower  prices. In part because the legacy MSPV program limited standardization,  VHA decided to transition to a new iteration, called MSPV-NG.", "VHA launched the MSPV-NG program in December 2016 but allowed a  4-month transition period. After April 2017, medical centers could no  longer use the legacy program. MSPV-NG now restricts ordering to a  narrow \u201cformulary\u201d\u2014a list of specific items that medical centers are  allowed to purchase. VA has had a formulary in place for pharmaceuticals  since 1997, and many leading hospital networks rely on a similar  formulary approach when it comes to purchasing their own medical  supplies. VHA policy requires medical centers to use MSPV-NG\u2014as  opposed to other means such as open market purchase card  transactions\u2014when purchasing items that are available in the formulary.  Figure 2 illustrates the program structure and key participants involved in  the transition to MSPV-NG.", "VA\u2019s primary MSPV-NG program goals are to:", "Standardize requirements for supply items for greater clinical  consistency.", "Achieve cost avoidance by leveraging VA\u2019s substantial buying power  when making competitive awards; VA set a goal of achieving $150  million in cost avoidance in 2016 through a supply chain  transformation effort, of which MSPV-NG is a primary part.", "Achieve greater efficiency in ordering and supply chain management,  including a metric of ordering 40 percent of medical centers\u2019 supplies  from the MSPV-NG formulary.", "Involve clinicians in requirements development to ensure uniform  clinical review of medical supplies.", "VHA gave responsibility for developing and implementing MSPV-NG to its  Healthcare Commodity Program Executive Office (program office), an  organization within VHA\u2019s Procurement and Logistics Office. According to  documentation, the program office and SAC, a VA-wide contracting  organization, identified several steps to allow for a successful transition to  MSPV-NG. These steps included the following:  1.  Identify and develop requirements \u2013 Determine which types of  medical supplies should be made available to medical centers via the  MSPV-NG formulary and their key characteristics. The program office  was responsible for this aspect of the transition.  2.  Award contracts and establish agreements \u2013 SAC was responsible for  awarding distribution contracts to a select number of prime vendors  within certain geographic areas to deliver supplies to medical centers.  SAC was also responsible for awarding contracts and establishing  agreements with suppliers that provide the products themselves,  which set prices for individual items.  3.  Implement MSPV-NG at medical centers \u2013 MSPV-NG orders are  placed by ordering officers\u2014members of the logistics staff at each  medical center that are delegated authority by SAC contracting  officers to place orders for medical supplies. Each medical center\u2019s  most frequently purchased items\u2014referred to as their core list\u2014vary  based on the type of care provided, local preferences, and other  factors."], "subsections": []}, {"section_title": "Leading Practices for Organizational Transformation Efforts", "paragraphs": ["We have previously reported that organizational transformations (such as  MSPV-NG) require careful planning and implementation to be  successful. For instance, one leading practice is for leadership to set  clear implementation goals and a timeline to achieve them. Likewise,  communicating a strategy and progress to stakeholders\u2014as well as  seeking feedback\u2014is a hallmark of successful organizational  transformations. We have reported that at the center of any serious  change management initiative are the people. Thus, to facilitate success,  is to recognize the \u201cpeople\u201d element and implement strategies to help  individuals maximize their full potential in the organization, while  simultaneously managing the risk of reduced productivity and  effectiveness that often occurs as a result of the changes. Building on the  lessons learned from the experiences of large private and public sector  organizations, the key practices and implementation steps that we  identified in our prior work can help agencies transform their cultures so  that they can be more results oriented, customer focused, and  collaborative in nature. Standards for Internal Control in the Federal  Government also identify related principles, such as the importance of the  tone from the top and ensuring that data used in decision-making are  reliable."], "subsections": []}, {"section_title": "Supply Chain Practices Identified by Selected Leading Hospital Networks", "paragraphs": ["Leading hospital networks we spoke with have similar goals to VA in  managing their supply chains, including clinical standardization and  reduced costs. In managing their supply chain efforts, the leading hospital  networks we identified take consistent approaches to drive change and  achieve savings. These hospitals reported they analyze their spending to  identify items purchased most frequently, and which ones would be the  best candidates to standardize first to yield cost savings. These hospitals  also acknowledge that this is an iterative process and do not attempt to  standardize all categories of medical supplies at a single time, but instead  prioritize categories of supplies based on the potential for standardization.  The hospitals\u2019 supply chain managers establish consensus with clinicians  through early and frequent collaboration on supply chain standardization.", "These hospitals also continually involve clinicians in determining key  supply characteristics and evaluating potential items, understanding that  clinician involvement is critical to the success of any effort to standardize  their medical supply chain. For example, a supply chain official from one  large hospital we spoke with stated that selecting an item that does not  meet clinician needs could damage clinician buy-in for future efforts, so  they take great care to be thorough in taking clinician input into account.  Supply chain officials from these leading hospitals have reported positive  results from these efforts, such as increased cost savings and the  potential for improved patient care.", "By tackling a few specific categories at a time and communicating with  clinicians on an ongoing basis about the outcomes of these processes  and the decisions taken, these hospitals are able to achieve efficiencies,  including significant cost savings in some cases, while maintaining buy-in  from their clinicians. Figure 3 depicts the key steps that selected  hospitals\u2019 supply chain managers reported following when standardizing  their medical supply chains, including the critical role of clinicians  throughout the process."], "subsections": []}, {"section_title": "Emergency Procurements", "paragraphs": ["The Federal Acquisition Regulation (FAR) generally requires agencies to  contract using full and open competition, but permits contracting without  full and open competition in specified circumstances, such as when the  agency\u2019s need for supplies or services is of unusual and compelling  urgency. The VHA Procurement Manual describes an emergency as a  situation\u2014such as response to fires or floods\u2014where delay in award of a  contract would result in financial or physical injury to the VA or a veteran.  The manual also states that neither a lack of advance planning nor  concerns about a need to obligate funds before the end of the fiscal year  are valid justifications for an urgent or emergency procurement request.", "For needs that cannot be met through MSPV-NG, medical centers submit  purchase requests to their local VHA contracting office\u2014the Network  Contracting Office. The contracting office provides medical centers with  expected lead times for various types of procurements, which can be from  days to months, depending on the complexity of the requested item.  However, if a medical center has an urgent need that must be met more  quickly than the expected lead times, the customer submitting the request  can identify it as an emergency. The purchase request is entered into two  VA data systems, the Integrated Funds Distribution Control Point Activity,  Accounting and Procurement and VA\u2019s Electronic Contract Management  System (eCMS). The medical center designates the priority level of the  request as:  1.  Emergency: life threatening cases, emergency physical plant repair,  and requires acquisition action within 24 hours;  2.  Special: urgent, non-life threatening, and requires acquisition action  within 72 hours; and  3.  Standard: all other cases and requires acquisition action within 40  days.", "Incoming requests are screened by Network Contracting Office managers  and assigned to individual contracting officers, who must prioritize  emergency requests over other pending contract actions. Figure 4  illustrates the typical process for submitting and awarding an emergency  procurement."], "subsections": []}]}, {"section_title": "VHA\u2019s Implementation of MSPV-NG Program Has Not Yet Achieved Its Goals", "paragraphs": ["VHA\u2019s implementation of the MSPV-NG program\u2014from its initial work to  identify a list of supply requirements in 2015, through its roll-out of the  formulary to medical centers in December 2016\u2014was not executed in line  with leading practices. Despite changes aimed at improving  implementation, the agency continues to face challenges that have  precluded achievement of program goals. Specifically, VHA lacked a  documented program strategy, leadership stability, and workforce  capacity for the transition that\u2014if in place\u2014could have facilitated buy-in  for the change throughout the organization. Furthermore, the initial  requirements development process and tight time frames contributed to  ineffective contracting processes. As a result, VHA developed an initial  formulary that did not meet the needs of the medical centers. VA made  some changes in the second phase of requirements development to  address deficiencies identified in the initial roll out, namely by increasing  the level of clinical involvement. However, VHA has not yet achieved its  goals for utilization and cost avoidance."], "subsections": [{"section_title": "VA Lacked an Overarching Strategy for Implementing MSPV-NG", "paragraphs": ["VA did not document a clear overall strategy for the MSPV-NG program  at the start and has not done so to date. According to program office and  SAC officials responsible for developing and executing the program, no  document existed at the outset of the MSPV-NG program that outlined  the overall strategy. About 6 months after our initial requests for a  strategy or plan, an official provided us with an October 2015 plan  focusing on the mechanics of establishing the MSPV-NG formulary.  However, this plan was used only within the VHA Procurement and  Logistics Office and had not been approved by VHA or VA leadership.  Leading practices for organizational transformation state that agencies  must have well-documented plans and strategies for major initiatives  (such as MSPV-NG) and communicate them clearly and consistently to  all involved\u2014which included VHA headquarters, the SAC, and all 170  medical centers. Without such a strategy, VA could not ensure that all  stakeholders understood VHA\u2019s approach for MSPV-NG and worked  together in a coordinated manner to achieve program goals. This is also  in contrast to the practices of several leading hospital networks we met  with, which placed an emphasis on designing and communicating a  strategy and governance structure for their medical supply  standardization efforts before making any changes to purchasing. If VA  continues to move forward with MSPV-NG without an overarching  strategy that it communicates to all stakeholders to ensure they  understand VHA\u2019s approach for MSPV-NG, VA will continue to face  challenges in meeting program goals."], "subsections": []}, {"section_title": "Leadership Instability and Staffing Shortages Were Obstacles to Effective Implementation of MSPV- NG", "paragraphs": ["Leadership instability and workforce challenges also made it difficult for  VA to execute its transition to MSPV-NG. Due to a combination of budget  and hiring constraints, and lack of prioritization within VA, the program  office, which has primary responsibility for implementing MSPV-NG, has  never been fully staffed and has experienced instability in leadership. As  of January 2017, 24 of the office\u2019s 40 positions were filled, and program  office officials stated that this lack of staff affected their ability to  implement certain aspects of the program within the planned time frames.  Our work has shown that leadership buy-in is necessary to ensure that  major programs like MSPV-NG have the resources and support they  need to execute their missions. We have also previously found that  leadership must set a tone at the top and demonstrate strong  commitment to improve and address key issues. However, leadership of  VHA\u2019s Procurement and Logistics Office changed frequently during the  implementation of MSPV-NG, and two of its leaders, the Chief  Procurement and Logistics Officer and the Deputy Chief Logistics Officer,  were serving in an acting capacity. A similar instability in leadership  affected the program office itself. Since the inception of MSPV-NG, the  program office has had four directors, two of whom were acting and two  of whom were fulfilling the director position while performing other  collateral duties. For instance, one of the acting MSPV-NG program office  directors was on detail from a VISN office to fulfill the position but had to  abruptly leave and return to her VISN position due to a federal hiring  freeze. Without prioritizing the hiring of the program director position on a  permanent basis, this lack of stability could continue to affect execution of  MSPV-NG.", "Moreover, VA\u2019s Chief Acquisition Officer (CAO), whose responsibilities  include oversight of VA acquisition programs such as MSPV-NG, is  serving in an acting capacity and is not a \u201cnon-career employee.\u201d By  statute, VA is required to appoint or designate a non-career employee as  the agency\u2019s CAO. VA provided information to show that since 2009, VA  has designated career employees as \u201cacting\u201d CAOs rather than  appointing or designating non-career employees to the CAO position. As  we reported in 2012, clear, strong, and effective leadership, including a  CAO, is key to an effective acquisition function that can execute  complicated procurements like MSPV-NG. By appointing a CAO in a  non-acting capacity, VA could improve the effectiveness of its acquisition  function. During our 2012 review, VA indicated that it sought to establish  an Assistant Secretary for Acquisition, Logistics, and Construction, who  would serve as VA\u2019s CAO. In connection with the current review, VA\u2019s  Office of General Counsel cited a statutory limitation on the number of  assistant secretaries that may be established within VA as the reason it  has not established that additional assistant secretary position. VA\u2019s  Office of General Counsel indicated that the agency was considering  requesting, in the reform plan that VA was required to submit to the Office  of Management and Budget in September 2017, a change to the statute  that limits the number of VA assistant secretaries. However,  subsequently, VA\u2019s Office of General Counsel indicated that the plan will  not include such a request. By not appointing or designating a non- career employee as CAO, VA will continue to be noncompliant with the  statute. Figure 5 summarizes the history of leadership changes in these  positions, which are all currently filled in an acting capacity.", "Further, according to officials, leadership vacancies at medical centers  and competing demands on logistics staff time made implementation of  MSPV-NG more challenging at the selected VISNs and medical centers  we visited. For instance, longstanding vacancies in the Chief Supply  Chain Officer positions existed at one of the VISNs and its medical center  that we visited. The VISN-level position was vacant for about 4 years,  with Chief Supply Chain Officers from individual medical centers filling in  for periods of time, according to the current Chief Supply Chain Officer,  who took the position in January 2017. In one medical center within that  VISN, the local position was also vacant for several years, according to  the current Chief Supply Chain Officer, who took the position in 2016. He  stated that he found that the staffing of the office had suffered in the  absence of a leader, leaving it poorly-equipped to execute the transition  to MSPV-NG. Medical center logistics staff also had several other major  transformation efforts to manage alongside the MSPV-NG transition, such  as implementing a new system for managing equipment. Several Chief  Supply Chain Officers we interviewed stated that these additional  demands made it challenging for their staff to implement the MSPV-NG  program."], "subsections": []}, {"section_title": "The MSPV-NG Initial Requirements Development Process Had Limited Clinician Involvement and Did Not Prioritize Categories of Supplies", "paragraphs": ["The MSPV-NG program office initially developed requirements for  medical and surgical supply categories\u2014identifying items to include in the  formulary\u2014based almost exclusively on prior supply purchases, with  limited clinician involvement. The program office concluded in its October  2015 formulary plan that relying on data on previous clinician purchases  would be sufficient and that clinician input would not be required for  identifying which items to include in the initial formulary. Further, rather  than standardizing purchases of specific categories of supplies\u2014such as  bandages or scalpels\u2014program officials told us they identified medical  and surgical items on which VA had spent $16,000 or more annually and  ordered at least 12 times per year, and made this the basis for the  formulary. Officials said this analysis initially yielded a list of about 18,000  items, which the program office further refined to about 6,000 items by  removing duplicate items or those that were not considered consumable  commodities, such as medical equipment.", "In 2015, the program office also took the lead in developing requirements  for these 6,000 items. In documentation, and as confirmed by agency  officials, we found that the program office did not solicit input from  clinicians for most items and did not prioritize categories of supplies.  Instead, the program office relied on historical purchase data to set  requirements across medical and surgical categories because officials  said they thought this would provide a good representation of medical  centers\u2019 needs. This approach to requirement development stood in sharp  contrast to those of the leading hospital networks we met with, which  relied heavily on clinicians to help drive the standardization process and  focused on individual categories of supplies rather than addressing all  categories simultaneously."], "subsections": []}, {"section_title": "Initial Requirements Development and Tight Time Frames Contributed to Ineffective Contracting Practices for Initial Formulary", "paragraphs": ["Based on the requirements developed by the program office, SAC began  to issue solicitations for the 6,000 items on the initial formulary in June  2015. From June 2015 to January 2016, medical supply companies  responded to only about 30 percent of the solicitations. As a result,  according to SAC officials, they conducted outreach and some of these  companies told SAC that VHA\u2019s requirements did not appear to be based  on clinical input and instead consisted of manufacturer-specific  requirements that favored particular products instead of broader  descriptions. Furthermore, SAC did not solicit large groups of related  items, but rather issued separate solicitations for small groups\u2014 consisting of 3 or fewer items\u2014of supply items. This is contrary to  industry practices of soliciting large groups of related supplies together.  Therefore, according to SAC officials, some medical supply companies  told them that submitting responses to SAC\u2019s solicitations required more  time and resources than they were willing to commit.", "By its April 2016 deadline for having 6,000 items on the formulary, SAC  had been working on the effort for over a year and had competitively  awarded contracts for about 200 items, representing about 3 percent of  the items. Without contracts for the items on the formulary in place, VA  delayed the launch of the MSPV-NG program until December 2016. To  continue the legacy MSPV program through the new launch date, SAC  awarded bridge contracts\u2014short-term sole-source contracts\u2014to its  legacy prime vendor contractors for a second year. We previously  reported that bridge contracts had resulted in higher costs to the  government. In part because of these costs, SAC officials stated that VA  leadership did not view a third set of bridge contracts for the legacy  MSPV program as a viable option. As a result of the pressure not to miss  the revised December 2016 deadline, which VA documents we reviewed  stated would have been \u201ccatastrophic,\u201d SAC abandoned its original goal  of using competitive procedures and relied instead on a non-competitive  strategy for placing most of the items on the MSPV-NG initial formulary.  Starting in August 2016, SAC established 175 limited source blanket  purchase agreements with Federal Supply Schedule vendors to complete  the initial Phase 1 formulary. While this approach enabled the MSPV- NG program office to establish the formulary more quickly, it did so at the  expense of one of the primary goals of the MSPV-NG program\u2014 leveraging VA\u2019s buying power to obtain cost avoidance through  competition.", "We previously reported that a senior VA procurement official said VA  could save 30 percent, on average, on the prices available under the  Federal Supply Schedules when awarding competitive contracts that  leveraged VA\u2019s buying power under the legacy MSPV program. The  discounts VA obtained from these limited source agreements were  generally much less. We reviewed a non-generalizable sample of 10  randomly-selected limited source blanket purchase agreements and  found that most items (332 of the 376 items covered by these  agreements) were discounted 5 percent or less. Competition is the  cornerstone of the acquisition system; its benefits are well established,  including saving the taxpayer money. As shown in figure 6, the non- competitive agreements awarded in the last few months before the launch  of MSPV-NG accounted for approximately 79 percent of the items on the  January 2017 version of the formulary."], "subsections": []}, {"section_title": "Initial Formulary and Unclear Communication Contributed to a Lack of Medical Center Buy-In for MSPV-NG Implementation", "paragraphs": ["Once VA\u2019s MSPV-NG initial formulary was established in December  2016, each medical center was charged with implementing it. Previously,  medical centers had hundreds of thousands of items they could obtain  through the legacy MSPV program. In order to transition to the new  formulary\u2014consisting of around 6,000 items at launch\u2014the program  office directed medical centers to determine if items they had ordered in  the past could be fulfilled by the formulary. To do this, each medical  center\u2019s Chief Supply Chain Officer\u2014the head of the logistics office\u2014was  to review their center\u2019s core list of previously ordered items to try to  identify matches on the MSPV-NG formulary in three different categories:  1.  Direct matches \u2013 For some items, the exact same item a medical  center had been purchasing was available in the formulary. Identifying  these matches may not necessarily be simple, as the names and  identification numbers were not typically the same.  2.  Potential clinical equivalents \u2013 Many items that were no longer  available under the MSPV-NG formulary had close matches on the  formulary. However, because these were not exactly the same, work  was required to ensure that they were clinically equivalent\u2014in nearly  all cases, this required clinician input. Clinical Product Review  Committees at each medical center, which are comprised of clinicians  and others, are responsible for approving new supplies before they  are introduced to a medical center.  3.  Items without matches \u2013 Finally, there were some items that medical  centers had been purchasing for which logistics staff were not able to  identify a clinical equivalent in the MSPV-NG formulary. In these  cases, logistics staff sought non-MSPV methods of obtaining the  same items they had previously purchased\u2014usually via purchase  card transactions and, in a few cases, via requests to their local  contracting office to award new contracts for the items.", "Figure 7 shows the typical process for identifying MSPV-NG matches for  core list items at individual VA medical centers, as described by logistics  officials at the selected medical centers.", "According to logistics officials we spoke with, the MSPV-NG formulary  matching process was challenging for the selected medical centers, and  they had varying levels of success, in part, due to incomplete guidance  from the program office. The MSPV-NG program office provided some  guidance, including a tool for identifying direct matches, but three of the  Chief Supply Chain Officers at the selected medical centers stated that  they did not find it very helpful, in part, because it only included matches  for the highest-volume items. Based on our discussions with the MSPV- NG program office and selected medical centers, as well as our review of  communications provided to medical centers, the program office provided  various emails and held conference calls, but did not provide complete  guidance to summarize the steps medical centers should take to execute  the matching process. Without complete guidance, each selected VISN  and medical center approached the process somewhat differently. One  medical center devoted a great deal of effort to matching items early on,  had completed its review, and determined its purchasing strategy for  nearly all core list items before the transition period was complete. Others  devoted less attention to this and planned instead to rely on purchase  cards to continue buying the same items they had purchased under the  legacy MSPV program, which works against VA\u2019s goal of leveraging  buying power through MSPV-NG.", "The amount of clinician input on the matching process varied among  medical centers in our review, in part, because the various  communications from the program office did not provide complete  information on how to involve clinicians and Clinical Product Review  Committees at medical centers. While the program office asked medical  centers to involve clinicians, it did not specify a process for how to do so,  and centers were left to develop their own approaches. For example, in  one selected VISN, the Deputy Chief Medical Officer became involved  with the logistics office coordination effort and obtained active  participation from clinicians at each medical center, who formed working  groups to review potential clinical equivalent matches. In other VISNs and  medical centers, there was little concerted effort to involve clinicians at  this stage of the process, and only a few clinical equivalent items were  reviewed and matched with clinical input. Without effective matching to  the formulary, VA cannot achieve the MSPV-NG utilization rates it needs  to meet the program\u2019s goals. Without complete guidance, these centers  may be unable to effectively match their core lists to the MSPV-NG  formulary and, thus, increase their utilization of it.", "The MSPV-NG formulary also continued to change while the medical  centers were working to match their core list items, which made the  process more challenging. Several clinicians and logistics staff at the  medical centers we visited expressed frustration about the frequency by  which items were being added and deleted on the formulary and the  impact it had on their purchasing strategies. Our analysis found that in  April 2017, 690 items were added to the formulary, but, in June, 628  items were deleted. These medical center officials also noted that they  had not received any communications from the program office or SAC  regarding why items were being added and deleted, and were unsure  why the changes were taking place. SAC and MSPV-NG program office  officials stated that these continuing changes stemmed from several  factors, including elimination of duplicate items from multiple vendors and  addition of other items identified as necessary by VHA or medical centers.  In some cases, medical center officials told us that that they were less  willing to expend effort on the matching process because the formulary  was a moving target. Without visibility into or an understanding of the  criteria used by the program office on its process for adding or removing  items on the formulary, medical centers will likely continue to face  challenges in matching their items to the formulary. See Table 1 for the  number of items added and deleted from the formulary from January to  July 2017.", "Many medical centers were unable to find direct matches or substitutes  for a substantial number of items on their core lists, which negatively  impacted utilization rates for the initial formulary. In October 2015, the  program office estimated that the items on the initial formulary would  meet 80 percent or more of the medical centers\u2019 needs. However,  according to SAC, as of June 2017, only about a third of the items on the  initial version of the formulary were being ordered in any significant  quantity by medical centers, indicating that many items on the formulary  may not be those that are needed by medical centers. Senior VHA  acquisition officials attributed this mismatch to shortcomings in their initial  requirements development process as well as with VA\u2019s purchase data.", "VA set out a target that medical centers would order 40 percent of their  supplies from the MSPV-NG formulary, but utilization rates are below this  target with a nationwide average utilization rate across medical centers of  about 24 percent as of May 2017. Instead of fully using MSPV-NG, the  selected medical centers are purchasing many items through other  means, such as purchase cards or new contracts awarded by their local  contracting office, in part, because they said the formulary does not meet  their needs. These approaches run counter to the goals of the MSPV-NG  program and result in VA not making the best use of taxpayer dollars.  Specifically, Chief Supply Chain Officers\u2014who are responsible for  managing the ordering and stocking of medical supplies at the six  selected medical centers\u2014told us that many items they needed were not  included in the MSPV-NG formulary. As discussed above, the difficult  transition process also created a lack of clinician desire to find substitutes  on the formulary. As such, we found that these six medical centers  generally fell below VA\u2019s stated utilization target that medical centers  order 40 percent of their items from the MSPV-NG formulary. As shown in  figure 8, among the six selected medical centers we reviewed, one met  the target, while the remaining five were below 25 percent utilization. The  one facility that met the target, Hampton VA Medical Center, is  categorized by VA as a smaller, less complex facility, and had fewer  items to match, which could contribute to its higher utilization.", "The utilization rate is VA\u2019s primary metric for the success of MSPV-NG\u2014 broad usage of the formulary is necessary for VA to meet its goals of  more efficient supply purchasing, standardization, and cost avoidance.  Utilization is calculated by dividing the purchases made via MSPV-NG by  the total purchases under the medical supply budget category. This is the  same metric used under the legacy MSPV program, and most medical  centers were meeting the 40 percent target prior to the transition to  MSPV-NG. Officials stated that the current metric does not provide  enough information and, as a result, VHA is in the process of preparing a  new metric to more precisely assess MSPV-NG use and effectiveness,  and has begun conducting routine surveys of its medical centers to obtain  their feedback on MSPV-NG.", "Greater utilization of MSPV-NG is essential to VA achieving the cost  avoidance goal of $150 million for its supply chain transformation effort.  Under the legacy MSPV program, the National Acquisition Center tracked  cost avoidance achieved by comparing prices for competitively-awarded  MSPV supply contracts with prices available elsewhere. However, VHA  officials stated that they are not currently tracking cost avoidance related  specifically to MSPV-NG. VHA officials told us they plan to use a new  cost avoidance metric that compares total supply spending for VHA as a  whole across fiscal years. This new metric, however, does not measure  whether cost savings are being achieved specifically through MSPV-NG.  Officials stated the broader metric was more useful than measuring cost  avoidance specific to MSPV-NG.", "VA\u2019s practices are in contrast with those of the leading hospitals we met  with, which maintain detailed, item-level data on cost avoidance and use  them to inform future supply requirements and contracting. These  hospitals we interviewed reported substantial cost savings from their  standardization efforts. For example, the director of supply chain  management at one leading hospital network stated that it achieved a  goal of $100 million in cost savings on medical supplies in the first 2 years  of their standardization effort, and an additional $35 million annually in the  several years since. This hospital achieved these results despite its  purchasing power being less than VA\u2019s. Without calculating cost  avoidance attributable to MSPV-NG, VHA cannot assess whether the  program is meeting its goals, nor can it use cost avoidance data to guide  future MSPV-NG requirement development and contracting strategy  efforts."], "subsections": []}, {"section_title": "VA Encouraged Greater Clinical Involvement in the Second Phase of Requirements Development, but Faced Further Staffing and Schedule Constraints", "paragraphs": ["In Phase 2 of MSPV-NG, the program office has taken some steps to  incorporate greater clinical involvement in subsequent requirement  development, but both its requirements development and SAC\u2019s  contracting efforts have been hampered by staffing and schedule  constraints. Work on Phase 2 began while medical centers were  implementing Phase 1 and beginning to order from the MSPV-NG  formulary. Figure 9 shows key dates in the concurrent requirements  development, contracting, and implementation processes for Phases 1  and 2.", "In the fall of 2016, the program office began to establish panels of  clinicians\u2014including physicians, surgeons, and nurses working in the  medical centers\u2014to serve on MSPV-NG integrated product teams (IPT)  assigned to the task of developing updated requirements for the second  phase of the formulary. The IPTs were to review categories of medical  supplies such as operating room surgical supplies and patient exam room  instruments and supplies. According to VA officials and our analysis, this  revised approach was based on a recognition that more robust  mechanisms were needed for incorporating clinician input, in part,  because VA had sought information on best practices from leading  hospital networks, and because of shortcomings with the Phase 1  requirements that became apparent in the contracting process. Similar to  the analysis performed in support of the initial formulary, the MSPV-NG  program office analyzed updated data on medical center supply  purchases to generate a list that had grown from the 6,000 items  established for the initial formulary to a new total of about 9,900 items for  these new IPTs to review.", "The program office set a March 2017 deadline to complete this second,  IPT-based phase of requirements development\u2014VHA ultimately met this  compressed timeline, but in a rushed manner that limited the impact of  the clinical involvement. Program officials said they had difficulty  recruiting clinicians to participate, and the program office\u2019s first IPTs were  not established until the fall of 2016. In December 2016, slightly more  than half (20 of the 38) of the IPTs had begun their work to review items  and develop updated requirements. Many of the remaining IPTs were still  looking for additional clinicians to participate. Program officials said they  received assistance from the Assistant Deputy Under Secretary for Health  for Administrative Operations in December 2016. According to program  officials, this involvement proved critical in successfully recruiting staff to  participate in some of the remaining IPTs, which were then able to make  progress in reviewing each item in the formulary.", "However, the program office did not provide training for the IPTs on how  to carry out their work until late January 2017, about 2 months before the  IPTs were scheduled to complete the development of all medical and  surgical requirements. Further, staff on the IPTs had to complete their  responsibilities while simultaneously managing their regular workload as  physicians, surgeons, or nurses. By early March 2017, the IPTs still had  about 4,200 of the 9,900 items to review. Faced with meeting this  unrealistic time frame, the MSPV-NG program office had 9 IPT members  travel to one location\u2014with an additional 10 members participating  virtually\u2014to meet for 5 days to review the remaining items. Members told  us that this time pressure limited the extent to which they were able to  pursue the goal of standardizing supplies, and that their review ended up  being more of a data validation exercise than a standardization review.", "In addition, the program office attempted to pursue standardization across  all supply categories rather than those with the greatest potential for  standardization and cost avoidance and continues to lack a strategy for  doing so going forward. Standards for Internal Control in the Federal  Government state that management should define what is to be achieved  and who is to achieve it, how it will be achieved, and the time frames for  achievement. In addition, this approach runs counter to how leading  hospitals standardize their supply chains by tackling individual categories  one at a time and obtaining deep clinician involvement. Without a strategy  for how best to prioritize these items by category for future phases of the  requirement development process, these IPTs will be limited in fully  contributing to VHA\u2019s goals of more efficient supply purchasing,  standardization, and cost avoidance."], "subsections": [{"section_title": "VA Plans to Replace Limited Source Blanket Purchase Agreements, but Faces Challenges Doing So Before They Expire", "paragraphs": ["SAC\u2019s ongoing Phase 2 contracting effort also faces an unrealistic  schedule. The SAC plans to replace the existing Phase 1 limited source  agreements with competitive awards based on the Phase 2 requirements  generated by the IPTs, but it may not be able to keep up with expiring  agreements. Because they were made on a non-competitive basis, the  Phase 1 limited source blanket purchase agreements were established  for a period of one year. In order to keep the full formulary available, the  SAC director said his staff must award several hundred contracts before  the Phase 1 limited source agreements expire later this year. However,  the SAC director stated that doing so will be difficult because his staff  must award between 200 to 250 contracts in a 3-month period from the  end of September 2017 through December 2017. To adhere to this  ambitious schedule, each of the 15 contracting staff on the MSPV-NG  team would need to award between 13 to 17 contracts within 3 months,  equaling one contract per staff member every 5 to 6 days, which is  significantly faster than SAC\u2019s typical pace. SAC officials acknowledged  that it is unlikely that they will be able to award the 200 to 250 contracts  by the time the existing limited source agreements expire. According to  SAC officials, they are in the process of hiring more staff to deal with the  increased workload. Further, the SAC division director told us that they  cancelled all outstanding Phase 2 solicitations in September 2017 due to  low response rates, protests from service-disabled veteran-owned small  businesses, and changes in overall MSPV-NG strategy. SAC is still  assessing alternative approaches, which poses additional challenges for  replacing expiring agreements by December 2017.", "For cases where limited source agreements expire without new contracts  in place, SAC officials said they intend to use a different type of  agreement called a distribution and pricing agreement as a stopgap. They  stated that the use of these agreements with suppliers who have existing  limited source agreements would prevent items from falling off the  formulary. However, like BPAs, the agreements are not contracts\u2014the  supplier informally agrees to continue to sell its products to VA at the  same price and terms. SAC officials stated that VA has not used these  types of agreements previously, and they pose a risk in that the supplier  is not required to perform and VA has no remedy if the supplier opts to  end the agreement or raise the price. These agreements also do not  allow VA to achieve its goal of achieving greater cost avoidance through  supply standardization and competitive contracts. Despite the unrealistic  time frames and the risks of the stopgap approach, VA has not developed  a plan for how to mitigate these risks, established an achievable schedule  for making the competitive Phase 2 contract awards, or prioritized the  various categories of supplies. Establishing such a plan would help  ensure that VA is better positioned to mitigate risks and prioritize supply  categories that are most likely to yield cost avoidance."], "subsections": []}]}, {"section_title": "VA Is Revising Its Approach to MSPV-NG", "paragraphs": ["VA is currently revising its approach to MSPV-NG requirement  development to adopt a model that focuses on clinician-driven sourcing, a  key step that leading hospital networks reported following in standardizing  their medical supply chains. The MSPV-NG program office continues to  refine its strategy for requirement development and is seeking greater  clinician involvement in future requirement development efforts, which it  refers to as clinician-driven sourcing. For example, program officials said  they plan to involve VHA\u2019s national clinical program offices\u2014groups of  clinicians at VHA that provide national policy and leadership within their  clinical specialty\u2014to obtain greater buy-in from senior clinical leaders and  to implement a more structured approach for identifying clinicians willing  to serve on integrated product teams. This approach, if implemented  effectively, could mitigate some of the prior challenges in recruiting  clinicians to participate. However, these efforts are in their early stages,  and the MSPV-NG program office has not outlined whether or how it will  use input from these clinical groups to prioritize its requirements  development and standardization efforts. Without input from these  national clinical program offices, VA will continue to be challenged to  focus on supply categories that offer the best opportunity for  standardization and cost avoidance.", "Senior VHA and MSPV-NG program officials also told us each VA  medical center was expected to use a standing committee, known as the  Clinical Product Review Committee, to review new items to include on the  formulary and to evaluate opportunities to streamline the formulary  through standardization. This approach will likely require additional effort  on the part of the MSPV-NG program office to implement, as some  centers\u2019 clinicians said the Clinical Product Review Committees were not  operating as intended.", "VA is also exploring major changes in its contracting strategy for MSPV- NG. Specifically, MSPV-NG program office and SAC officials plan to  replace the current contract and formulary process with a new contract  where the vendor would not only provide distribution services, but also  develop the formulary. In October 2017, VA sought information from  industry on their capabilities to support such a program. VA stated that its  target completion date for this new MSPV-NG contracting strategy is  December 2018. To date, VA has provided only limited details on this  potential new approach, thus, we cannot assess whether it has the  potential to address the shortcomings with the current MSPV-NG  approach described in this report."], "subsections": []}]}, {"section_title": "Frequent Use of Emergency Procurements Impacts VHA\u2019s Ability to Strategically Manage Its Acquisitions", "paragraphs": ["Some emergencies are to be expected, as VHA operates one of the  largest health care systems in the country. However, VHA designated a  substantial number of its procurements in fiscal year 2016 as  emergencies, and we found that it frequently uses emergency  procurements to buy routine supplies and on-going services that do not  warrant the emergency designation defined in VHA guidance. Among the  18 contract actions we reviewed from three VISNs, we found instances of  emergency procurements caused by shortcomings in planning, funding,  and communication. These emergency procurements strain the capacity  of VA\u2019s acquisition workforce and put the government at risk of paying  more than it should for goods and services."], "subsections": [{"section_title": "Emergency Procurements Account for Almost Two Billion Dollars\u2019 Worth of VHA Contract Obligations", "paragraphs": ["Based on our analysis of VA data, we found that emergency  procurements accounted for approximately 20 percent of VHA\u2019s overall  contract actions in fiscal year 2016, with obligations totaling about $1.9  billion. As shown in figure 10, we found that the percentage of requests  designated as emergencies varied across the 19 VISNs."], "subsections": []}, {"section_title": "Some Selected Procurements Identified as Emergencies Stemmed from Lack of Planning, Communication Problems, and Other Factors", "paragraphs": ["We selected a non-generalizable sample of 18 contract actions  designated by customers as emergencies. Most of these contracts were  not awarded on a competitive basis, and half cited the unusual and  compelling urgency exception to full and open competition. Table 2 shows  instances in which the 18 contract actions were awarded without  competition, those that cited unusual and compelling urgency as the basis  for use of non-competitive procedures, and our observations on the main  contributing factor to designating these procurements as emergencies.", "Additional information on each of the contributing factors follows."], "subsections": [{"section_title": "Planning Challenges", "paragraphs": ["VHA guidance specifies that neither a lack of acquisition advance  planning nor concerns about a need to obligate funds before the end of  the fiscal year are valid justifications for an urgent or emergency  procurement request. However, among our selected contract actions, lack  of planning by customers was a principal contributing cause, leading to 7  of the 18 contract actions being procured as emergencies, resulting in  some non-competitive awards to the incumbent vendor for the same  requirement. For instance, one medical center procured medical gas on  an emergency basis through consecutive non-competitive contracts. The  initial contract was terminated because the company was not licensed by  the state where services were being provided, which led to a 3-month  emergency contract being awarded to a different vendor. This was  followed by a series of non-competitive bridge contracts to that incumbent  vendor over a 3-year period. In another case, a medical center routinely  procured custom surgical packs through consecutive emergency sole- source purchase orders. The contracting officer\u2019s representative told us  the medical center may be paying more for custom surgical packs  ordered on an emergency basis than it would under a competitive, long- term contract."], "subsections": []}, {"section_title": "Funding Issues", "paragraphs": ["Funding uncertainty also contributed to three awards being designated as  emergencies. For example, one medical center submitted an emergency  request to outsource patient laundry due to funding uncertainties for  repairs of on-site, VA-owned and operated laundry equipment. The  contracting officer\u2019s representative stated that the VISN could not provide  funds to repair the equipment, leading to a series of last-minute  emergency requests, a few months at a time, for contracted patient  laundry services to prevent a gap in service.", "At another VISN, a large amount of funding became available late in the  fiscal year, which led to an emergency request to purchase postage to  ensure the funding was spent before it expired at the end of that fiscal  year. The contracting office issued an order for $890,000 worth of  metered mail postage, which medical center staff told us would cover 1 to  2 years of usage."], "subsections": []}, {"section_title": "Lack of Communication", "paragraphs": ["We found that shortcomings in communication between customers and  contracting offices also contributed to eight awards made on an  emergency basis for routine items. For one of the contracts in our review,  a medical center resubmitted a request in January 2016 to purchase  equipment for a new operating room that had previously been submitted  as a standard request months earlier. However, the contracting officer\u2019s  representative at the medical center told us that no action was taken by  the contracting office, and he did not receive a response for 6 months.  The medical center then upgraded the request to an emergency since the  operating room was scheduled to open in June 2016. The contracting  officer\u2019s representative noted that delays procuring the equipment past  the scheduled opening date would delay the opening of the new operating  room and possibly result in the rescheduling or cancelling of procedures,  affecting patient care. After the order was upgraded to an emergency, the  equipment was ultimately delivered before the operating room was  opened.", "In another case, an inventory manager routinely submitted emergency  purchase requests for cardiac catheters as a strategy to manage stock  levels. The reason he cited was that he was uncertain how long it would  take the contracting office to fulfill standard requests. He stated that the  contracting office\u2019s time frames for standard orders are unpredictable,  and more consistent communication about the expected delivery date of  any given order would reduce his need to place emergency orders. He  noted that being able to plan around delivery dates was important for  maintaining stock at designated levels for the various types of catheters  used in the cardiology department. Figure 11 shows a medical center  stock room and designated stock levels for one type of catheter. The \u201cL\u201d  indicates the standard stock level, and \u201cR\u201d indicates the level of stock at  which refill is needed. Ordering officers use these levels to inform when  they should place orders."], "subsections": []}]}, {"section_title": "Overreliance on Emergency Procurements Can Drive Up Costs and Overtax the Workforce", "paragraphs": ["In addition to being contrary to VHA guidance, overuse of emergency  procurement requests has negative effects on the overall operation of  VA\u2019s procurement system. In reviewing the 18 selected contracts, we  identified two primary effects\u2014the potential for increased costs and  increased burden on the contracting workforce that could take resources  away from other important efforts."], "subsections": [{"section_title": "Increased Costs", "paragraphs": ["As noted above, half of the contract actions we reviewed (9 out of 18)  cited unusual and compelling urgency as the basis for the use of non- competitive procedures. When unusual and compelling urgency exists, an  agency may limit competition to the firms it reasonably believes can  perform the work in the time available. In all nine cases, however, there  was no competition at all, which puts the government at risk of paying  more than it should for goods and services. Promoting competition\u2014 even in a limited form\u2014increases the potential for quality goods and  services at a lower price. We have previously reported that competition in  contracting is a critical tool for achieving the best return on investment  and that it can improve contractor performance and promote  accountability for results."], "subsections": []}, {"section_title": "Burden on the Contracting Workforce", "paragraphs": ["Emergency procurement requests must be processed quickly, and  contracting officers have limited ability to question the validity of an  emergency request. Nevertheless, many of the contracting officials we  spoke with that had responsibility for our 18 selected contracts told us  they generally communicate directly with the requestor to clarify the  requirement and assess the nature of the request. As stated in the VHA  procurement manual, contracting officers generally must process  emergencies within 5 days or less. However, the manual acknowledges  that different Network Contracting Offices assign different time frames to  priority categories. For instance, officials from all three selected Network  Contracting Offices told us they generally process emergencies  immediately. Several contracting officials we interviewed stated that,  because they do not have clinical expertise, they infrequently question the  medical center staff customer about whether their request is truly an  emergency. Even if they work with customers to reach a compromise,  such as purchasing a smaller quantity to fill just the immediate need,  emergencies still require immediate attention and result in deprioritizing  other tasks. The impact on the contracting officer workload can be  exacerbated by low staffing levels. For example, none of the three  Network Contracting Offices we visited were staffed to their authorized  levels. Table 3 shows the number of emergency actions processed by  each selected Network Contracting Office in fiscal year 2016, along with  staff levels.", "We have previously reported that when contracting officers process  frequent and emergency small-dollar transactions, it reduces their ability  to plan ahead and take a strategic view of procurement needs. Several  of the VA contracting officials we spoke with noted that regularly  processing emergency contracts and extensions affects their ability to  work on bigger-picture efforts, some of which would reduce workload. For  instance, one contracting officer stated that awarding emergency contract  extensions has prevented him from competitively awarding more than 40  lab contracts. In these cases, the contracting officer stated that he instead  extended the period of performance of the non-competitive contracts to  the incumbent vendors. In addition, emergency contracts are generally  awarded for short periods of time\u2014often 1 year or less\u2014while  competitive contracts often have terms of 5 years. According to some  contracting officers we spoke with, this can result in contracting officers  spending much of their time tending to a large number of short-term  contracts, instead of a smaller number of fully-competed contracts with  longer periods of performance."], "subsections": []}]}, {"section_title": "Better Planning and Management of Contracting Strategies May Help Reduce Emergencies", "paragraphs": ["We found that greater planning and coordination between medical center  and contracting staff can help to leverage VA\u2019s buying power by  employing principles of strategic sourcing\u2014a process that moves away  from numerous individual procurements to a broader aggregate  approach\u2014and thereby reducing the need for emergencies. For  example, inventory managers responsible for two of the selected cardiac  catheter contracts in our sample stated that managing catheter inventory  was difficult because of the unpredictability of the needs, the high cost of  the items, and the long turnaround times from their respective contracting  offices. As a result, they had to place frequent emergency orders to keep  stock at safe levels. One inventory manager noted, however, that there is  no longer a need to place emergency orders for catheters because the  SAC has since put in place a purchasing agreement that enabled her to  place orders directly, without requiring involvement from the contracting  office. In addition to reducing contracting office workload, the supply  technician said this agreement greatly reduced the amount of work  required to place an order and allowed her to more effectively maintain  her inventory with short and predictable turnaround times. She also stated  that the agreement protected against the frequent price increases she  experienced when purchasing the catheters on the open market through  the contracting office. The agreement also reduced workload for the local  VISN contracting office. In analyzing eCMS data on awards from fiscal  years 2014 through 2016, we identified several types of goods and  services that were repeatedly purchased on an emergency basis through  stand-alone contract actions. This suggests there may be additional  opportunities, at both the VISN and national levels, to reduce  emergencies by making supplies and services available through more  efficient, competitively-awarded contract vehicles. In addition to reducing  burden on logistics and contracting staff, reviewing existing spending to  find opportunities to leverage buying power is also in line with strategic  sourcing best practices.", "MSPV-NG is one such contracting mechanism for procuring routine  supplies, and a more strategic approach to developing requirements for  the formulary could help avoid some emergency procurements. Our  analysis of VA eCMS data found that many awards designated as  emergencies were for medical-surgical items, some of which could likely  be purchased through MSPV-NG. Figure 12 shows the number of  medical-surgical procurements designated as emergencies within each  VISN in fiscal year 2016.", "Within our sample of 18 contract actions, we found several instances of  reoccurring emergency procurements for medical-surgical supplies, such  as custom surgical packs and catheters. Procuring routine supplies on an  emergency basis defeats the objectives of MSPV-NG to leverage VA\u2019s  large buying power and make the process of ordering supplies more  efficient and transparent. However, while data on emergency  procurements are available, VHA\u2019s Procurement and Logistics Office  does not currently analyze this data to identify items frequently purchased  on an emergency basis to determine whether such items could be  referred to SAC to be added to the MSPV-NG formulary. In addition, local  VISN Network Contracting Offices have also not used available data on  emergency purchases to identify items frequently purchased on an  emergency basis. Steps by VHA\u2019s Procurement and Logistics Office and  individual VISN contracting offices to review such data and identify  opportunities for leveraging MSPV-NG or other national contracts could  help VA achieve greater efficiency. Purchasing medical supplies through  individual emergency contract actions is much less efficient than using  MSPV-NG; moreover, by making numerous individual procurements at  the local level and not leveraging its aggregate buying power, VA is  paying more for items than it needs to."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Any major organizational change requires a solid strategic plan that is  communicated with stakeholders, stable leadership, and stakeholder  involvement and buy-in. VHA was missing all of these elements when it  rolled out the MSPV-NG program, which presented obstacles to effective  implementation and buy-in and affected the program\u2019s ability to meet its  goals. Moving forward, without an overall strategy that is communicated  to all stakeholders and enhanced leadership stability, VHA will likely  continue to face these challenges. In addition, in the initial requirements  development process, VHA relied on prior purchase data\u2014rather than  clinician input\u2014and did not prioritize categories of medical supplies, both  of which veered from practices employed by leading hospital networks.  Once the initial formulary was established, medical centers faced  challenges matching supply items to the formulary and took varying  approaches, in part, due to incomplete guidance on key aspects of the  process and frequent changes in the items on the formulary. Providing  complete guidance and communicating the criteria and processes for  adding or removing items from the formulary would help centers more  effectively match items to the formulary, thereby increasing utilization,  which as of May 2017 was below VA\u2019s established target. Further,  because it does not calculate cost avoidance attributable to MSPV-NG,  VA cannot accurately measure the extent to which the program is  contributing to its overall cost avoidance goal.", "VA made changes during the second phase of requirements  development, in particular to encourage greater clinician involvement.  However, the program faces an unrealistic contracting schedule and has  not yet developed a plan for how to manage or mitigate the associated  risks.  Establishing such a plan is essential for risk mitigation, and supply  category prioritization could help VA target those categories most likely to  yield cost avoidance. In addition, while the program is planning to involve  national clinical program offices to obtain greater clinician buy-in, it has  not outlined whether or how it will use input from these groups to prioritize  its requirements development efforts. Without such input, VA will continue  to face challenges focusing on those supply categories that offer the best  opportunity for standardization and cost avoidance. Further, VA is  considering another major change in its MSPV program in which the  prime vendor may absorb some of the work currently conducted by SAC.   However, VA may face challenges in this new approach until it addresses  the existing shortcomings in the MSPV-NG program, such as the absence  of a documented overall strategy, insufficient clinician involvement in the  requirements development process, and lack of medical center buy-in.", "Meanwhile, among the 18 contract actions we reviewed, we found  shortcomings in planning and communication that led to medical centers\u2019  overreliance on emergency procurements to obtain routine goods and  services\u2014some of which could be made available via MSPV-NG\u2014 bypassing effective contracting practices like competition. These  emergency procurements can be a particular drain on resources,  especially those of contracting officers who must respond immediately to  fulfill emergency orders. Identifying opportunities to more strategically  purchase frequently purchased goods and services\u2014both at the local  levels and nationwide through the MSPV-NG program\u2014could help  minimize these workforce challenges and minimize costs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making 10 recommendations to VA.", "The Director of the MSPV-NG program office should, with input from the  Strategic Acquisition Center (SAC), develop, document, and  communicate to stakeholders an overarching strategy for the program,  including how the program office will prioritize categories of supplies for  future phases of requirement development and contracting.  (Recommendation 1)", "The VHA Chief Procurement and Logistics Officer should take steps to  prioritize the hiring of the MSPV-NG program office\u2019s director position on  a permanent basis. (Recommendation 2)", "The Secretary of Veterans Affairs should assign the role of Chief  Acquisition Officer to a non-career employee, in line with statute.  (Recommendation 3)", "The Director of the MSPV-NG program office should provide complete  guidance to medical centers for matching equivalent supply items, which  could include defining the roles of clinicians and local Clinical Product  Review Committees. (Recommendation 4)", "The Director of the MSPV-NG program office should, with input from  SAC, communicate to medical centers the criteria and processes for  adding or removing items from the formulary. (Recommendation 5)", "The VHA Chief Procurement and Logistics Officer, in coordination with  SAC, should calculate cost avoidance achieved by MSPV-NG on an  ongoing basis. (Recommendation 6)", "The MSPV-NG program office and SAC should establish a plan for how  to mitigate the potential risk of gaps in contract coverage while SAC is still  working to make competitive Phase 2 awards, which could include  prioritizing supply categories that are most likely to yield cost avoidance.  (Recommendation 7)", "The VHA Chief Procurement and Logistics Officer should use input from  national clinical program offices to prioritize its MSPV-NG requirements  development and standardization efforts beyond Phase 2 to focus on  supply categories that offer the best opportunity for standardization and  cost avoidance. (Recommendation 8)", "The VHA Chief Procurement and Logistics Officer should direct VISN  Network Contracting Offices to work with medical centers to identify any  opportunities to more strategically purchase goods and services  frequently purchased on an emergency basis. For example, offices could  do this by analyzing existing data. (Recommendation 9)", "VHA Chief Procurement and Logistics Officer should analyze data on  items that are frequently purchased on an emergency basis, determine  whether such items are suitable to be added to the MSPV-NG formulary,  and work with SAC to make any suitable items available via MSPV-NG.  (Recommendation 10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  for review and comment. VA provided written comments on a draft of this  report. In its written comments, reprinted in appendix II, VA concurred  with all of our 10 recommendations.", "In its response to our recommendation that VA assign the role of Chief  Acquisition Officer to a non-career employee, as required by statute, VA  stated that it is unable to implement the recommendation without  congressional action and requested closure of the recommendation. We  asked VA officials what congressional action they believe is necessary to  follow the recommendation. The officials told us they believe the CAO  position should be assigned to an assistant secretary, but that the number  of assistant secretaries within VA is limited by statute. We decline to close  this recommendation. VA should assign the role of CAO to a non-career  employee, as required by statute. If VA maintains its view that it cannot  meet this requirement without congressional action, then VA should  request the specific congressional action that VA believes is necessary.", "VA provided technical comments on the draft report, which we  incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Veterans Affairs, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by email at oakleys@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["You requested that we examine the Department of Veterans Affairs\u2019 (VA)  transition to the Medical Surgical Prime Vendor-Next Generation (MSPV- NG) program and the extent to which the department contracts for good  and services on an emergency basis. This report addresses the extent to  which: (1) VA\u2019s implementation of MSPV-NG was effective in meeting  program goals, and (2) Veterans Health Administration (VHA) awards  contracts on an emergency basis for routine supplies and ongoing  services, and what impact, if any, these awards have on VHA\u2019s  acquisition function.", "To review the extent to which implementation of MSPV-NG was effective,  we reviewed policy and guidance related to the program. We obtained  and analyzed the MSPV-NG program\u2019s formulary development plan,  which explained the program\u2019s rationale for pursuing its initial  requirements development approach. We also obtained and reviewed  additional program documentation, including communications to medical  centers and other stakeholders, briefings, and training and tools provided  to medical centers. We interviewed leaders in the VHA Procurement and  Logistics Office and Healthcare Commodity Program Executive Office  (the program office for MSPV-NG), as well as other staff involved in  planning and executing aspects of MSPV-NG. We also interviewed VA\u2019s  Chief Acquisition Officer during the development of MSPV-NG, cognizant  Office of General Counsel staff, and others regarding the program. We  also interviewed supply chain managers from four leading hospital  networks regarding their medical supply management practices. We  selected the hospital networks because they were identified by an  industry study as having leading supply chain practices.  During  interviews, we asked each of these supply chain managers a standard set  of questions about processes followed to standardize their hospital  networks\u2019 supply chain. VA had also identified two of these hospital  networks as having leading supply chain practices and used the industry  study to identify these hospital networks. We used this information from  the leading hospital networks to compare the key steps\u2014identified by  each of the four hospital networks\u2014followed in standardizing their  medical supply chains to those steps that VA followed when implementing  the MSPV-NG program. We also confirmed these key steps with the  leading hospital networks.", "We conducted site visits at a non-generalizable selection of three  Veterans Integrated Service Networks (VISNs), and two medical centers  within each selected VISN:", "VISN 6: Durham, North Carolina", "Durham, North Carolina VA Medical Center", "Hampton, Virginia VA Medical Center", "VISN 8: St. Petersburg, Florida", "Tampa, Florida VA Medical Center", "Gainesville, Florida VA Medical Center", "VISN 22: Long Beach, California", "Long Beach, California VA Medical Center", "San Diego, California VA Medical Center  The VISNs were selected primarily based on highest total contract  obligations in fiscal years 2014 through 2016 and representation of  multiple geographic areas and prime vendor contractors. The first site  visit to VISN 22 was also chosen based on the rollout schedule for the  graphical user interface, an IT system related to MSPV-NG. The final site  visit to VISN 6 was also chosen as the VISN with the highest percentage  of contract actions designated as emergencies over the fiscal year 2014  through 2016 period. The selected medical centers in each VISN were  chosen based on our review of VA Electronic Contract Management  System (eCMS) data on emergency procurements within each VISN  (see  below) and geographic proximity to the VISN office location. At each  selected VISN, we interviewed the Chief Supply Chain Officer and other  members of leadership. At medical centers in each selected VISN, we  met with the Chief Supply Chain Officer, ordering officers, other logistics  staff, clinicians involved in the MSPV-NG transition, and on-site  representatives of the prime vendor contractors.", "We evaluated MSPV-NG program office status briefings and integrated  product team training briefings, which documented the planned role of  clinicians in the Phase 2 requirements development process. We  interviewed VHA Procurement and Logistics Office leadership, other  MSPV-NG program office staff, and integrated product team managers  and clinicians about the evolution of the program office\u2019s requirements  development approach, including the role of clinicians in preparing item  descriptions and evaluating items. Three integrated product teams were  selected for interviews based on those that covered the greatest number  of items, as well as for diversity of types of medical supplies. We also met  with members of additional integrated product teams during site visits to  the selected medical centers.", "We obtained and analyzed the Strategic Acquisition Center\u2019s acquisition  strategy for MSPV-NG supply contracts and discussed its evolution with  the Center\u2019s acquisition staff. We analyzed the MSPV-NG formulary as of  January 2017 to determine what acquisition instrument was used to add a  particular item to the formulary, how the cumulative total of items by  award type changed from fiscal year 2014 to fiscal year 2017, and when  certain MSPV-NG items would be removed from the formulary because  the underlying acquisition instrument had expired. We also analyzed the  contents of the formulary monthly from January to July 2017 to determine  the number of items added and deleted each month. We determined that  the MSPV-NG formulary data were sufficiently reliable for the purposes of  our reporting objectives. For the formulary data, we corroborated the  supplier\u2019s name, award number, award type, and the award\u2019s effective  and expiration dates with data in the Federal Procurement Data System- Next Generation. We were also able to corroborate the total number of  items on the January 2017 MSPV-NG formulary through other  documentation, such as program briefings. To determine the level of  discounts obtained by the MSPV-NG program office, we randomly  selected 10 limited source blanket purchase agreements. We reviewed  each agreement and compared the price for each item on the supplier\u2019s  price list with the item\u2019s Federal Supply Schedule price. We obtained and  analyzed the current MSPV-NG indefinite delivery, indefinite quantity  solicitations and the Defense Logistics Agency\u2019s documentation on  distribution and pricing agreements. We also reviewed related prior GAO  reports and relevant parts of the Federal Acquisition Regulation.", "We obtained information on the metrics used by VA to assess the  performance of MSPV-NG, primarily the utilization metric, which is  calculated by VA based on budget object code spending data from the  financial system and MSPV-NG spending data. We obtained data on the  performance of the six selected medical centers for May 2017 and July  2017. We also interviewed officials responsible for maintaining this data  to gather information on processes, accuracy, and completeness, as well  as on planned changes in the metric. We found the utilization metric data  to be sufficiently reliable for our purposes.", "To assess the extent to which VA has awarded contracts on an  emergency basis for routine supplies and ongoing services, and the effect  on VA\u2019s acquisition function, we obtained and analyzed VA and VHA  policy and guidance documents, reviewed relevant parts of the Federal  Acquisition Regulation, and reviewed prior GAO reports. We obtained  eCMS data for fiscal years 2014 through 2016, and analyzed these data  to determine the number of actions designated by customers as  emergencies, the percentage of actions designated as emergencies in  each VISN, and the total obligations attributed to these actions. We also  calculated the number and value of all actions designated as  emergencies in selected Product and Service Codes related to medical  supplies and services for fiscal year 2016. We determined that these  eCMS data were sufficiently reliable for the purposes of determining the  extent of emergency procurements by reviewing information on system  controls and conducting validation of data, including tracing selected  information to source documents for the contracts that we selected.", "We selected a non-generalizable sample of 18 contracts from the three  selected VISNs. The selection was based primarily on:  contracts designated by the customer as emergencies in eCMS data; use of the term \u201cemergency\u201d or \u201curgent\u201d in the description field; high dollar value; and", "Product and Service Codes for services and medical supplies.", "We obtained and reviewed the contract files for each of the selected  contracts, which are also stored in eCMS, including signed awards,  limited competition justifications, work statements, and other documents.  We compared key information, such as extent of competition, against  data reported in eCMS. We interviewed the requesters\u2014in most cases  the contracting officer\u2019s representative\u2014for all selected contracts. We  also visited Network Contracting Offices for each of the three selected  VISNs and interviewed leadership at each location, as well as the  contracting officials responsible for each selected contract. Finally, we  met with a Strategic Acquisition Center contracting officer to discuss a  related contract award.", "We conducted this performance audit from November 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Lisa Gardner, Assistant  Director; Emily Bond; Matthew T. Crosby; Lorraine Ettaro; Michael  Grogan; Jeff Hartnett; Katherine Lenane; Teague Lyons; Roxanna Sun;  and Colleen Taylor made key contributions to this report."], "subsections": []}]}], "fastfact": ["The VA launched a new program last year, MSPV-NG, to streamline the way its medical centers buy supplies for treating 7 million vets.", "As with any organizational transformation, the program's success depended on having a strong strategic plan, stable leadership, good communication, and stakeholder buy-in. But as we report here, the VA was missing these elements when it launched the program; as a result, the program has yet to achieve key goals of cost savings and greater efficiency.", "We made 10 recommendations for how the VA can better manage future phases of the program and improve its purchasing."]}
{"id": "GAO-18-130", "url": "https://www.gao.gov/products/GAO-18-130", "title": "Defense Business Systems: DOD Needs to Continue Improving Guidance and Plans for Effectively Managing Investments", "published_date": "2018-04-16T00:00:00", "released_date": "2018-04-16T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD spends billions of dollars each year on systems that support its key business areas, such as personnel and logistics. For fiscal year 2018, DOD reported that these business system investments are expected to cost about $8.7 billion. The NDAA for Fiscal Year 2016 requires DOD to perform activities aimed at ensuring that business system investments are managed efficiently and effectively, to include taking steps to limit their complexity and cost.", "The NDAA also includes a provision for GAO to report every 2 years on the extent to which DOD is complying with the act's provisions on business systems. For this report, GAO assessed, among other things, the department's guidance for managing defense business system investments and its business and IT enterprise architectures (i.e., descriptions of DOD's current and future business and IT environments and plans for transitioning to future environments). To do so, GAO compared the department's system certification guidance and architectures to the act's requirements. GAO also interviewed cognizant DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has made progress in complying with most legislative provisions for managing its defense business systems, but additional actions are needed. For example, the National Defense Authorization Act (NDAA) for Fiscal Year 2016 required DOD and the military departments to issue guidance to address five requirements for reviewing and certifying the department's business systems. While DOD has issued guidance addressing all of these requirements, as of February 2018, the military departments had shown mixed progress.", "\u25cf Fully addressed: The department provided evidence that it fully addressed this requirement.", "\u25d0 Partially addressed: The department provided evidence that it addressed some, but not all, portions of this requirement.", "\u25cc Not addressed: The department did not provide any evidence that it addressed this requirement.", "Source: GAO analysis of Department of Defense documentation. | GAO-18-130", "The military departments' officials described plans to address the gaps in their guidance; however, none had defined when planned actions are to be completed. Without guidance that addresses all five requirements, the military departments risk developing systems that, among other things, are overly complex and costly to maintain.", "DOD has efforts underway to improve its business enterprise architecture, but its information technology (IT) architecture is not complete. Specifically, DOD's business architecture includes content called for by the act. However, efforts to improve this architecture to enable the department to better achieve outcomes described by the act, such as routinely producing reliable business and financial information for management, continue to be in progress. In addition, DOD is updating its IT enterprise architecture, which describes, among other things, the department's computing infrastructure. However, the architecture lacks a road map for improving the department's IT and computing infrastructure for each of the major business processes. Moreover, the business and IT enterprise architectures have yet to be integrated, and DOD has not established a time frame for when it intends to do so. As a result, DOD lacks assurance that its IT infrastructure will support the department's business priorities and related business strategies."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making six recommendations, including that DOD and the military departments establish time frames for, and issue, required guidance; and that DOD develop a complete IT architecture and integrate its business and IT architectures. DOD concurred with three and partially concurred with three recommendations. GAO continues to believe all of the recommendations are warranted as discussed in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) spends billions of dollars each year to  acquire modernized systems that are fundamental to achieving its  business transformation goals, including systems that address key areas  such as personnel, financial management, health care, and logistics.  However, while DOD\u2019s capacity for modernizing its business systems has  improved over time, significant challenges remain. We have designated  the department\u2019s business systems modernization program as high risk  since 1995.", "In addition, we have reported that significant potential exists for identifying  and avoiding costs associated with duplicative functionality across the  department\u2019s portfolio of defense business systems. Since 1995, we  have made a series of recommendations aimed at strengthening the  department\u2019s institutional approach to business systems modernization  and reducing the risks associated with its key investments. Congress  included provisions consistent with our recommendations in the  department\u2019s annual authorizing legislation for fiscal year 2005, and in  subsequent amendments. Most recently, the National Defense  Authorization Act for Fiscal Year 2016 (NDAA), which was enacted in  November 2015, included provisions that revised U.S. Code Title 10,  Section 2222. These provisions required DOD to perform certain activities  aimed at ensuring that its business system investments are managed  efficiently and effectively.", "The NDAA included provisions for GAO to assess, biennially, the  department\u2019s compliance with the provisions in the act. Accordingly, our  objective for this review was to assess the extent to which actions taken  by DOD comply with the act\u2019s provisions to:  1.  establish guidance for effectively managing its defense business  2.  develop and maintain a defense business enterprise architecture and  information technology (IT) enterprise architecture, in accordance with  relevant laws and Office of Management and Budget (OMB) policies  and guidance;  3.  use the Defense Business Council to provide advice to the Secretary  on developing the business enterprise architecture, reengineering the  department\u2019s business processes, developing and deploying  business systems, and developing requirements for business  systems; and  4.  ensure that covered business systems are reviewed and certified in  accordance with the act.", "To assess the extent to which actions taken by DOD comply with the act\u2019s  provisions to establish guidance for effectively managing its defense  business system investments, we obtained and reviewed the  department\u2019s guidance for managing business system investments. We  then compared the guidance with the act\u2019s requirements that the  guidance include six specific elements related to managing business  system investments.", "We also assessed DOD\u2019s guidance for managing business system  investments relative to the act\u2019s certification requirements. Specifically,  we compared the DOD Deputy Chief Management Officer\u2019s (DCMO)  April 2017 certification guidance with the act\u2019s certification requirements.  In addition, we compared the guidance established by the Departments of  the Air Force, the Army, and the Navy for certifying their business  systems with the act\u2019s certification requirements.", "To assess the extent to which actions taken by DOD comply with the act\u2019s  provisions to develop and maintain a defense business enterprise  architecture in accordance with relevant laws and OMB policies and  guidance, we reviewed the department\u2019s business enterprise architecture,  version 10, which was released in February 2013. We also reviewed data  in the department\u2019s Integrated Business Framework\u2014Data Alignment  Portal system and DOD IT Portfolio Repository\u2014which the department  defined as part of its business enterprise architecture. We compared the  architecture with the act\u2019s requirements and OMB policy and guidance  for the architecture\u2019s content. We also reviewed the department\u2019s January  2017 plan for improving the architecture and changes in the plan since it  was issued.", "To assess the extent to which actions taken by DOD comply with the act\u2019s  provisions regarding DOD\u2019s IT enterprise architecture, we first determined  the extent to which the IT architecture addressed relevant laws and OMB policies and guidance. In particular, we reviewed the department\u2019s  information enterprise architecture, which the department considers its IT  enterprise architecture. The information enterprise architecture was  released in August 2012. We compared its content with the act\u2019s  requirements and OMB policy and guidance for enterprise architectures  to determine if it includes a plan for improving the IT and computing  infrastructure for each of the department\u2019s major business processes, as  required by the act.", "We also assessed the extent to which the department has integrated its  business and IT enterprise architectures. To do this, we obtained and  reviewed documentation about the architectures, including the  department\u2019s business enterprise architecture compliance guide and  DOD Directive 8000.01: Management of the Department of Defense  Information Enterprise. Further, we reviewed business and IT  architecture working group meeting documentation that discussed plans  to update each architecture.", "To assess the extent to which actions taken by DOD comply with the act\u2019s  provisions to use the Defense Business Council to provide advice to the  Secretary on developing the business enterprise architecture,  reengineering the department\u2019s business processes, developing and  deploying business systems, and developing requirements for business  systems, we reviewed Defense Business Council meeting documentation,  including meeting summaries and presentations, to identify instances in  which the Council discussed the topics. We also discussed with officials  in the Office of the DCMO how the Council provides advice on these  topics to the Secretary of Defense.", "To assess the extent to which actions taken by DOD comply with the act\u2019s  provisions to ensure that covered business systems are reviewed and  certified in accordance with the act, we reviewed a nongeneralizable  sample of business systems from DOD\u2019s two categories of covered  defense business systems that require certification. To select the  sample, we considered Category I systems, which were systems that  were expected to have a total amount of budget authority of more than  $250 million over the period of the current future-years defense  program, and Category II systems, which were systems that were  expected to have a total amount of budget authority of between $50  million and $250 million over the period of the future-years defense  program.", "We further categorized the Category II systems into four groups\u2014those  owned by the Air Force, the Army, Navy, and the remaining DOD  components. We selected one system with the highest expected cost  over the course of the department\u2019s future-years defense program from  each group. This resulted in our selection of five systems: one Category I  system, one Category II system from each military department, and one  Category II system from the remaining DOD components.", "We reviewed, respectively, DOD\u2019s Healthcare Management System  Modernization Program; Air Force\u2019s Maintenance, Repair and Overhaul  initiative; Army\u2019s Reserve Component Automation System; Navy\u2019s  Electronic Procurement System; and the Defense Logistics Agency\u2019s  Defense Agencies Initiative Increment 2. We compared documentation of  the certifications for fiscal year 2017 of the five systems with the  requirements in the act.", "We supplemented our analyses with interviews of cognizant DOD  officials. Specifically, we interviewed officials in the department\u2019s Office of  the DCMO, Office of the Under Secretary of Defense for Acquisition,  Technology, and Logistics, and Office of the Chief Information Officer  (CIO). We also interviewed officials in the Offices of the Chief  Management Officers of the Departments of the Air Force, Army, and  Navy, as well as other cognizant military department officials. Additional  details on our objectives, scope, and methodology are contained in  appendix I.", "We conducted this performance audit from January 2017 to March 2018,  in accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objective. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objective."], "subsections": [{"section_title": "Background", "paragraphs": ["DOD is the largest U.S. federal department and one of the most complex  organizations in the world. In support of its military operations, the  department manages many interdependent business functions, including  logistics management, procurement, health care management, and  financial management. DOD relies extensively on IT to support its  business functions.", "According to its IT investment data, the department has 2,097 business  system investments. The department\u2019s fiscal year 2018 IT budget  request states that DOD plans to spend about $8.7 billion in fiscal year  2018 on its defense business systems.", "The IT budget organizes investments by mission areas. The four mission  areas are enterprise information environment, business, warfighting, and  defense intelligence. Figure 1 shows the amount of DOD\u2019s requested  fiscal year 2018 IT budget that the department plans to spend on each  mission area.", "The department further organizes its IT budget by segments. For  example, the business mission area includes segments such as financial  management, health, and human resource management. Figure 2  shows the department\u2019s projected fiscal year 2018 spending for each  segment in the business mission area.", "GAO designated the department\u2019s business systems modernization  efforts as high risk in1995 and has continued to do so in the years since.  DOD currently bears responsibility, in whole or in part, for half of the  programs (17 of 34 programs) across the federal government that we  have designated as high risk. Seven of these areas are specific to the  department, and 10 other high-risk areas are shared with other federal  agencies.", "Collectively, these high-risk areas are linked to the department\u2019s ability to  perform its overall mission and affect the readiness and capabilities of  U.S. military forces. DOD\u2019s business systems modernization is one of the  department\u2019s specific high-risk areas and is essential for addressing  many of the department\u2019s other high-risk areas. For example, modernized  business systems are integral to the department\u2019s efforts to address its  financial and supply chain high-risk areas.", "Since 2005, we have issued 11 reports in response to mandates directing  GAO to assess DOD\u2019s actions to respond to business system  modernization provisions contained in Section 2222 of Title 10, United  States Code. These reports contained 23 recommendations to help  strengthen the department\u2019s management of its business systems. As of  September 2017, the department had implemented 13 of the  recommendations and 2 had been closed as not implemented. The other  8 recommendations remain open. The 11 reports are listed in appendix II."], "subsections": [{"section_title": "The NDAA for Fiscal Year 2016 Included Provisions for Managing Defense Business Systems", "paragraphs": ["The NDAA for Fiscal Year 2016 included provisions requiring DOD to  perform certain activities aimed at ensuring that its business system  investments are managed efficiently and effectively. Specifically, the act  established requirements for the department related to issuing policy and  guidance for managing defense business systems; developing and  maintaining a defense business enterprise architecture; establishing a  Defense Business Council to provide advice to the Secretary on  managing defense business systems; and obtaining approvals before  systems proceed into development (or if no development is required, into  production or fielding) and related annual reviews.", "According to the Joint Explanatory Statement accompanying the NDAA  for Fiscal Year 2016, the act revised Section 2222 of Title 10, United  States Code, to streamline requirements and clarify the responsibilities of  senior officials related to acquiring and managing business systems.  Key revisions pertain to:", "Covered defense business systems. The code previously defined a  covered defense business system as a system having a total cost of  over $1 million over the period of the future-years defense program.", "As revised, the code now defines a covered defense business system  as a system that is expected to have a total amount of budget  authority over the period of the current future-years defense program  of over $50 million.", "Priority defense business systems. The act established a new category of system, called a priority defense business system. This is a system that is (1) expected to have a total amount of budget authority of over $250 million over the period of the current future- years defense program, or (2) designated by the DCMO as a priority defense business system based on specific program analyses of factors including complexity, scope, and technical risk, and after notification to Congress of such designation.", "Thresholds and officials responsible for review and certification of defense business systems. The code previously stated that the DCMO had responsibility for reviewing and certifying all defense business system investments over $1 million over the future-years defense program. The revised code states that, unless otherwise assigned by the Secretary of Defense, military department Chief Management Officers (CMO) are to have approval authority for their covered defense business system investments below $250 million over the future-years defense program. The DCMO is to have approval authority for defense business systems owned by DOD components other than the military departments, systems that will support the business process of more than one military department or other component, and priority defense business systems.", "Certification requirements. The code previously required that a defense business system program be reviewed and certified, at least annually, on the basis of its compliance with the business enterprise architecture and appropriate business process reengineering. In addition to these requirements, the revised code requires that the business system program be reviewed and certified on the basis of having valid, achievable requirements and a viable plan for implementing the requirements; having an acquisition strategy designed to eliminate or reduce the need to tailor commercial off-the- shelf systems; and being in compliance with the department\u2019s  auditability requirements."], "subsections": []}, {"section_title": "Key Roles and Responsibilities for Managing Defense Business Systems", "paragraphs": ["DOD Instruction 5000.75: Business Systems Requirements and  Acquisition assigns roles and responsibilities for managing defense  business system investments. Table 1 identifies the key entities and  their responsibilities for managing defense business system investments."], "subsections": []}]}, {"section_title": "DOD Has Made Progress in Complying with Legislative Provisions for Managing Defense Business Systems, but More Remains to Be Done", "paragraphs": ["DOD has taken steps to address provisions of the NDAA for Fiscal Year  2016 related to defense business system investments. Specifically, as  called for in the act, the department has established guidance that  addresses most legislative requirements for managing its defense  business systems; however, the military departments are still developing  guidance to fully address certification requirements for their systems.", "Further, DOD has developed a business enterprise architecture and is in  the process of updating the architecture to improve its content. The  department also has a plan to improve the usefulness of the business  enterprise architecture; however, the department has not delivered the  plan\u2019s intended capabilities. In addition, the department is in the process  of updating its IT enterprise architecture; however, it does not have a plan  for improving the department\u2019s IT and computing infrastructure for each of  the major business processes. Further, the department has not yet  demonstrated that the business enterprise architecture and the IT  enterprise architecture are integrated.", "The department fully addressed the act\u2019s requirement related to defense  business system oversight. Specifically, the department\u2019s governance  board, called the Defense Business Council, addressed legislative  provisions to provide advice to the Secretary of Defense.", "Lastly, DOD and the military departments did not apply new legislative  requirements when certifying business systems for fiscal year 2017.  Instead, the DOD DCMO certified the systems in our sample in  accordance with the previous fiscal year\u2019s (fiscal year 2016) certification  requirements."], "subsections": [{"section_title": "DOD Issued Guidance Addressing Most Legislative Requirements for Managing Business Systems", "paragraphs": ["The NDAA for Fiscal Year 2016 required the Secretary of Defense to  issue guidance by December 31, 2016 to provide for the coordination of,  and decision making for, the planning, programming, and control of  investments in covered defense business systems. The act required this  guidance to address six elements:", "Policy to ensure DOD business processes are continuously reviewed  and revised to implement the most streamlined and efficient business  processes practicable and eliminate or reduce the need to tailor  commercial off-the-shelf systems to meet or incorporate requirements  or interfaces that are unique to the department.", "A process to establish requirements for covered defense business  systems.", "Mechanisms for planning and controlling investments in covered  defense business systems, including a process for the collection and  review of programming and budgeting information for covered  defense business systems.", "Policy requiring the periodic review of covered defense business  systems that have been fully deployed, by portfolio, to ensure that  investments in such portfolios are appropriate.", "Policy to ensure full consideration of sustainability and technological  refreshment requirements, and the appropriate use of open  architectures.", "Policy to ensure that best acquisition and systems engineering  practices are used in the procurement and deployment of commercial  systems, modified commercial systems, and defense-unique systems  to meet DOD missions.", "Of these six elements called for by the act, the department has issued  guidance that fully addresses four elements and partially addresses two  elements. Table 2 summarizes our assessment of DOD\u2019s guidance  relative to the act\u2019s requirements.", "DOD fully addressed the element requiring policy to ensure that the  business processes of the department are continuously reviewed and  revised. For example, DOD Instruction 5000.75 requires the functional  sponsor of a defense business system to engage in continuous process  improvement throughout all phases of the business capability acquisition  cycle. The department also fully addressed the element to provide a  process for establishing requirements for covered defense business  systems with DOD Instruction 5000.75, which introduces the business  capability acquisition cycle for business system requirements and  acquisition.", "In addition, DOD fully addressed the element to provide mechanisms for  planning and controlling investments in covered defense business  systems. Specifically, the department\u2019s Financial Management  Regulation; Directive 7045.14 on its planning, programming, budgeting,  and execution process; and the April 2017 Defense Business System  Investment Management Guidance provide such mechanisms. For  example, the April 2017 investment management guidance includes a  process, called the integrated business framework, which the department  is to follow for selecting, managing, and evaluating the results of  investments in defense business systems. In addition, the directive  assigns the DOD CIO responsibility for participating in the department\u2019s  annual resource allocation process and for advising the Secretary and  Deputy Secretary of the Defense on IT resource allocations and  investment decisions.", "Further, DOD fully addressed the requirement for a policy requiring the  periodic review of covered business systems that have been fully  deployed, by portfolio, to ensure that investments in such portfolios are  appropriate. Specifically, the department\u2019s April 2017 Defense Business  System Investment Management Guidance requires the department to  annually review an organization\u2019s plan for managing its portfolio of  defense business systems over the period of the current future-years  defense program (e.g., Army\u2019s plan for its financial management systems)  to ensure, among other things, that the portfolio is aligned with applicable  functional strategies (e.g., DOD\u2019s strategy for its financial management  functional area).", "DOD partially addressed the element requiring policy to ensure full  consideration of sustainability and technological refreshment  requirements, and the appropriate use of open architectures. Specifically,  the department established policy requiring consideration of open  architectures, but it has not established policy requiring consideration of  sustainability and technological refreshment requirements. The Office of  the DCMO stated that future guidance is expected to provide a policy to  ensure full consideration of sustainability and technological refreshment  requirements. However, the department could not provide a time frame  for when the guidance will be developed and issued. Without a policy  requiring full consideration of sustainability and technological refreshment  requirements for its defense business system investments, the  department may not be able to ensure that it has a full understanding of  the costs associated with these requirements. As a result, the department  may not be able to effectively manage spending on these systems.", "DOD has also partially addressed the element requiring policy to ensure  that best acquisition and systems engineering practices are used in the  procurement and deployment of commercial, modified-commercial, and  defense-unique systems. Specifically, the department has established  policy requiring the acquisition of business systems to be aligned with  commercial best practices and to minimize the need for customization of  commercial products to the maximum extent possible. On the other hand,  the department has not established policy to ensure the use of best  systems engineering practices.", "With regard to this finding, officials in the Office of the DCMO asserted  that DOD Instruction 5000.75 addresses the requirement. However, while  the instruction requires the system acquisition strategy to include a  description of how the program plans to leverage systems engineering, it  does not require the use of best systems engineering practices. Without a  policy requiring the use of best systems engineering practices in the  procurement and deployment of commercial, modified, and defense- unique systems, the department may be limited in its ability to effectively  balance meeting system cost and performance objectives."], "subsections": [{"section_title": "DOD Issued Guidance that Addresses New Certification Requirements, and the Military Departments Have Made Mixed Progress in Issuing Supporting Guidance", "paragraphs": ["In addition to guidance for addressing the aforementioned legislative  requirements for business systems management, the NDAA for Fiscal  Year 2016 requires the Secretary to direct the DCMO and the CMO of  each of the military departments to issue and maintain supporting  guidance, as appropriate and within their respective areas of  responsibility. In this regard, one of the key areas for which the DCMO  and military department CMOs are to provide supporting guidance is the  review and certification of defense business systems in accordance with  specific requirements.", "Specifically, the act requires that, for any fiscal year in which funds are  expended for development or sustainment pursuant to a covered defense  business system program, the appropriate approval official is to review  the system to determine if the system: has been, or is being, reengineered to be as streamlined and efficient  as practicable, and whether the implementation of the system will  maximize the elimination of unique software requirements and unique  interfaces;  is in compliance with the business enterprise architecture or will be in  compliance as a result of planned modifications; has valid, achievable requirements, and a viable plan for  implementing those requirements (including, as appropriate, market  research, business process reengineering, and prototyping activities); has an acquisition strategy designed to eliminate or reduce the need  to tailor commercial off-the-shelf systems to meet unique  requirements, incorporate unique requirements, or incorporate unique  interfaces to the maximum extent practicable; and  is in compliance with the department\u2019s auditability requirements.", "The act and DOD Instruction 5000.75 define the systems that the DOD  DCMO is responsible for certifying and the systems that military  department CMOs are responsible for certifying.", "Consistent with the act, in April 2017, the DCMO issued guidance for  certifying officials that addresses the certification requirements. Table 3  provides our rating and assessment of the DCMO\u2019s guidance for  implementing defense business system certification requirements.", "By establishing guidance requiring that defense business systems be  certified on the basis of the legislative requirements, the department is  better positioned to ensure that a covered system does not proceed into  development (or, if no development is required, into production or fielding)  without the appropriate due diligence. Further, the department has taken  steps which should help ensure that funds are limited to systems in  development or sustainment that meet these requirements."], "subsections": []}, {"section_title": "Air Force and Navy Guidance Partially Addresses Certification Requirements; Army Has Not Yet Issued Guidance", "paragraphs": ["The military departments have made mixed progress in developing  supporting guidance to assist in making certification decisions regarding  systems within their respective areas of responsibility. More specifically,  the Air Force has issued supporting guidance that addresses three of the  act\u2019s five certification requirements, but does not address the remaining  two requirements. Navy has issued guidance that addresses two of the  certification requirements, partially addresses one requirement, and does  not address two requirements. The Army has not yet issued guidance  on any of the five certification requirements.", "Table 4 provides an overview of our assessment of the Air Force\u2019s,  Navy\u2019s, and Army\u2019s guidance relative to the NDAA for Fiscal Year 2016  certification requirements. Each department\u2019s efforts are further  discussed following the table.", "Air Force. In April 2017, the Department of the Air Force issued guidance for certifying business systems for fiscal year 2018. The guidance addresses the requirements that a system be certified on the basis of sufficient business process reengineering, business enterprise architecture compliance, and valid requirements and a viable plan to implement them. Specifically, the guidance states that Air Force core defense business systems are required to comply with the business process reengineering guidance prescribed in the DCMO\u2019s February 2015 Defense Business Systems Investment Management Process Guidance and for systems to assert compliance with the architecture through DCMO\u2019s Integrated Business Framework\u2014Data Alignment Portal. In addition, the guidance states that the department must follow DOD Instruction 5000.75, which requires that certifying officials determine that business requirements are valid and capability efforts have feasible implementation plans.", "However, the Air Force guidance does not address the remaining two certification requirements. Officials in the office of the Air Force DCMO acknowledged that the Air Force\u2019s business system certification guidance does not address determining how the acquisition strategy is designed to eliminate or reduce the need to  tailor commercial off-the-shelf systems to meet unique requirements,  incorporate unique requirements, or incorporate unique interfaces to  the maximum extent practicable or is in compliance with DOD\u2019s  auditability requirements.", "In May 2017, Air Force DCMO officials stated that the department was  in the process of developing guidance. However, as of December  2017, the Air Force had not described specific plans to update its  business system certification guidance.", "Navy. The Department of the Navy issued guidance in May 2016.", "This guidance addresses the requirements that a system be certified  on the basis of sufficient business process reengineering and  business enterprise architecture compliance. In this regard, the  guidance provides guidelines for documenting business process  reengineering and requires verification that business process  reengineering is complete. The guidance also specifies that defense  business systems are to map alignment with the business enterprise  architecture in DCMO\u2019s Integrated Business Framework\u2013Data  Alignment Portal.", "Navy\u2019s guidance partially addresses the certification requirement for  determining if a defense business system has valid requirements and  a viable plan to implement them. Specifically, the guidance includes  information on validating requirements; however, it does not include  information on determining if a system has a viable plan to implement  the requirements.", "In addition, Navy\u2019s guidance does not address the remaining two  certification requirements, which are to determine that the covered  defense business system has an acquisition strategy that eliminates  or reduces the need to tailor commercial-off-the-shelf systems, and  that the system is in compliance with DOD\u2019s auditability requirements.  In August 2017, officials in the Office of the Under Secretary of the  Navy (Management) stated that the office was in the process of  updating its May 2016 Defense Business System Investment  Certification Manual. The officials stated that the goal is to issue  interim investment certification guidance by May 2018. As of  November 2017, however, Navy had not established a plan for when  it expects to publish finalized certification guidance.", "Army. The Department of the Army has not issued guidance that  addresses any of the act\u2019s certification requirements. The Army  issued a template that was to be used to develop fiscal year 2018  portfolio review submissions. However, the template does not address  any of the certification requirements.", "Officials in the Army\u2019s Office of Business Transformation explained  that the Army used DOD DCMO\u2019s 2014 guidance to certify its  business systems for fiscal year 2017. In May 2017, they stated that  the Army was in the process of developing guidance to implement  DOD\u2019s new instruction. In November 2017, an official in the Army\u2019s  Office of Business Transformation stated that the office was in the  process of completing the guidance and aimed to provide it to the  Deputy Under Secretary\u2019s office for signature in January 2018.  However, the department has not committed to a specific time frame  for when the new guidance is expected to be issued.", "Without guidance for the certification authority to determine that defense  business systems have addressed each of the act\u2019s certification  requirements, the Air Force, Navy, and Army risk allowing systems to  proceed into development or production that do not meet these  requirements. In particular, the military departments risk wasting funds on  developing and maintaining systems that do not have valid requirements  and a viable plan to implement the requirements, introduce unnecessary  complexity, or that do not adequately support the Department of  Defense\u2019s efforts to meet its auditability requirements."], "subsections": []}]}, {"section_title": "DOD Has Efforts Underway to Improve Its Business Enterprise Architecture, but Its IT Architecture Is Not Complete", "paragraphs": ["According to the NDAA for Fiscal Year 2016, DOD is to develop and  maintain a defense business enterprise architecture to guide the  development of integrated business processes within the department. In  addition, the act states that the business architecture must be consistent  with the policies and procedures established by the Director of the Office  of Management and Budget. Among other things, OMB policy calls for  agencies to develop an enterprise architecture that describes the current  architecture, target architecture, and a transition plan to get to the target  architecture. The act also calls for the business architecture to contain  specific content, including policies, procedures, business data standards,  business information requirements, and business performance measures  that are to apply uniformly throughout the department.", "DOD has developed a business enterprise architecture that is intended to  help guide the development of its defense business systems. The  department issued version 10 of the business architecture, which is  currently being used to support system certification decisions, in February  2013. The business architecture and related documentation include  content describing aspects of the current architecture, target architecture,  and a transition plan to get to the target architecture. In addition, the  business architecture includes content that addresses the act\u2019s  requirements. Table 5 provides examples of required content in DOD\u2019s  business enterprise architecture.", "Nevertheless, some content included in version 10 of the business  architecture is outdated and incomplete. For example, version 10 of the  business architecture\u2019s repository of laws, regulations, and policies was  last updated in February 2013, and officials in the Office of the DOD CIO  and Office of the DCMO confirmed that they are not current. Further, the  department\u2019s March 2017 business architecture compliance guidance  stated that not all relevant business data standards are identified in the  business architecture. In addition, based on our review, information about  performance measures documented in the architecture is incomplete. For  example, target values for performance measures associated with  acquisition and logistics initiatives are not identified.", "According to officials in the Office of the DCMO, the department is  working to update the business architecture. Specifically, the department  has developed version 11 of the business architecture to, in part, replace  outdated architecture content. According to the officials, version 11 of the  architecture is currently available online, but version 10 remains the  official version of the business enterprise architecture used for system  certification decisions. The officials stated that the department continues  to add content to version 11, and they expect that it will be used as the  basis of system certification decisions for fiscal year 2019.", "In addition, DOD has ongoing work to address a key recommendation we  made in July 2015 associated with improving the usefulness of its  business architecture. In particular, we reported that the majority of  military department portfolio managers that we surveyed believed that  the business architecture had not been effective in meeting intended  outcomes. For example, only 25 percent of the survey respondents  reported that the business architecture effectively enabled DOD to  routinely produce timely, accurate, and reliable business and financial  information for management purposes. In addition, only 38 percent  reported that the business architecture effectively guided the  implementation of interoperable defense business systems. As a result,  we reported that the architecture had produced limited value and  recommended that the department use the results of our survey to  determine additional actions that can improve the department\u2019s  management of its business enterprise architecture activities.", "In response to our recommendation, DOD identified opportunities to  address our survey findings and developed a plan for improving its ability  to achieve architecture-related outcomes. DOD\u2019s business enterprise  architecture improvement plan was signed by the Assistant DCMO in  January 2017. However, the department has not yet demonstrated that it  has delivered the capabilities described by the plan; thus, we will continue  to monitor DOD\u2019s progress to fully address this recommendation."], "subsections": [{"section_title": "DOD Has Taken Steps to Develop Its IT Enterprise Architecture, but Does Not Have a Plan That Provides a Road Map for Improving the Department\u2019s IT and Computing Infrastructure", "paragraphs": ["In addition to the business enterprise architecture, according to the act,  the DOD CIO is to develop an IT enterprise architecture. This architecture  is to describe a plan for improving the IT and computing infrastructure of  the department, including for each of the major business processes.", "Officials in the Office of the DOD CIO stated that the department  considers its information enterprise architecture to be its IT enterprise  architecture. The DOD CIO approved version 2.0 of its information  enterprise architecture in August 2012. According to DOD documentation,  this architecture describes the department\u2019s current information enterprise  (i.e., information resources, assets, and processes used to share  information across the department and with its mission partners) and  includes a vision for the target information enterprise; documents required  capabilities, and the activities, rules, and services needed to provide  them; and includes information for applying and complying with the  architecture.", "Nevertheless, while the architecture includes content describing the  department\u2019s current and target information enterprise, which is  consistent with OMB guidance, it does not include a transition plan that  provides a road map for improving the department\u2019s IT and computing  infrastructure. Related to this finding, DCMO officials did not agree with  our assessment concerning the department\u2019s IT enterprise architecture  transition plan. In this regard, officials in the Office of the DCMO stated  that the department\u2019s DOD IT Portfolio Repository includes information for  managing efforts to improve IT and computing infrastructure at the  system level. According to the repository\u2019s data dictionary, this  information can include system life cycle start and end dates, as well as  information that supports planning for a target environment.", "However, documentation describing DOD\u2019s information enterprise  architecture does not identify the DOD IT Portfolio Repository as being  part of the architecture. Moreover, it does not include a plan for improving  the department\u2019s IT and computing infrastructure for each of the major  business processes. Officials in the Office of the CIO acknowledged that  the architecture does not include such plans. According to the officials,  the department is currently developing version 3.0 of its information  enterprise architecture (i.e., its IT enterprise architecture). The officials  stated that the department does not currently intend for the architecture to  include a plan for improving the department\u2019s IT and computing  infrastructure that addresses each of the major business processes. They  added, however, that there is an effort to ensure that functional areas,  such as human resources management, are included. DCMO officials  stated that the department has not defined how the DOD IT enterprise  architecture needs to be segmented for each major business process  because the infrastructure requirements seem to be similar for each of  the processes.", "Without an architecture that includes a plan for improving its IT and  computing infrastructure, including for each of the major business  processes, DOD risks not ensuring that stakeholders across the  department have a consistent understanding of the steps needed to  achieve the department\u2019s future vision, agency priorities, potential  dependencies among investments, and emerging and available  technological opportunities."], "subsections": []}, {"section_title": "DOD Has Not Demonstrated That Its Business and IT Architectures Are Integrated", "paragraphs": ["According to the act, the DOD business enterprise architecture is to be  integrated into the DOD IT enterprise architecture. The department\u2019s  business architecture compliance guide also recognizes that the business  architecture is to be integrated with the IT enterprise architecture.", "However, the department has not demonstrated that it has integrated the  business enterprise architecture into the information enterprise  architecture. Specifically, the department did not provide documentation  associated with either architecture that describes how the two are, or are  to be, integrated. The business enterprise architecture compliance guide  states that DOD Directive 8000.01 implements the requirement that the  two architectures are to be integrated. However, the directive does not  address how they are, or are to be, integrated.", "Officials in the Offices of the CIO and the DCMO described steps they  were taking to coordinate the development of the next versions of the  information enterprise architecture (i.e., IT enterprise architecture) and  business enterprise architecture. However, these steps were not sufficient  to help ensure integration of the two architectures. Specifically, in June  2017, officials in the Office of the DOD CIO stated they were participating  in the development of the next version of the business architecture and  that the DOD CIO is represented on the Business Enterprise Architecture  Configuration Control Board. Officials in the Office of the DCMO  confirmed that DOD CIO officials participate on the board. However,  officials from the Office of the DCMO said that, until it met in June 2017  the board had not met since 2014. Moreover, documentation of the June  2017 meeting, and a subsequent November 2017 meeting, did not  indicate that the board members had discussed integration of the  department\u2019s business and information enterprise architectures.", "In addition, officials in the Office of the DCMO reported that the office has  not actively participated in the information enterprise architecture working  group. Further, our review of meeting minutes from this working group did  not identify participation by officials in the Office of the DCMO, or that  integration of the architectures was discussed. The Office of the DCMO  described other mechanisms for its sharing of information about  architectures with the Office of the DOD CIO. For example, the Office of  the DCMO stated that it participates with DOD CIO bodies governing  version 3.0 development. Nevertheless, the Office of the DCMO  reiterated that technical integration of the architectures has not been  designed.", "Until DOD ensures that its business architecture is integrated into its IT  enterprise architecture, the department may not be able to ensure that its  business strategies capitalize on technologies and that its IT  infrastructure will support DOD\u2019s business priorities and related business  strategies."], "subsections": []}]}, {"section_title": "The Defense Business Council Addressed Legislative Provisions to Provide Advice on Defense Business Systems to the Secretary of Defense", "paragraphs": ["The NDAA for Fiscal Year 2016 requires the Secretary to establish a  Defense Business Council, chaired by the DCMO and the DOD CIO, to  provide advice to the Secretary on: developing the business enterprise architecture,  reengineering the department\u2019s business processes, developing and deploying business systems, and developing requirements for business systems.", "DOD established the department\u2019s Defense Business Council in October  2012, prior to the act. According to its current charter, dated December  2014, the Council is co-chaired by the DCMO and the DOD CIO. In  addition, the Council is to serve as the principal governance body for  vetting issues related to managing and improving defense business  operations. Among other things, it serves as the investment review board  for defense business system investments.", "The Defense Business Council charter also states that the Council was  established as a principal supporting tier of governance to the Deputy\u2019s  Management Action Group. The Deputy\u2019s Management Action Group was  established by an October 2011 memorandum issued by the Deputy  Secretary of Defense. According to information published on DCMO\u2019s  website, the group was established to be the primary civilian-military  management forum that supports the Secretary of Defense, and is to  address top department issues that have resource, management, and  broad strategic and/or policy implications. The group\u2019s primary mission  is to produce advice for the Deputy Secretary of Defense in a  collaborative environment and to ensure that the group\u2019s execution aligns  with the Secretary of Defense\u2019s priorities. According to the Office of the  DCMO, the Defense Business Council determines whether or not to  elevate a topic to the Deputy\u2019s Management Action Group to address on  behalf of the Secretary.", "Based on our review of meeting documentation for 27 meetings that the  Defense Business Council held between January 2016 and August 2017,  the Council discussed the four topics on which the NDAA for Fiscal Year  2016 requires it to provide advice to the Secretary. According to the  Office of the DCMO, during the discussions of these topics, the Council  did not identify any issues related to the topics that needed to be elevated  to the Deputy\u2019s Management Action Group. Table 6 identifies the number  of meetings in which the Council discussed each topic during this time  period.", "By ensuring that the required business system topics are discussed  during Defense Business Council meetings, the department should be  positioned to raise issues to the Deputy\u2019s Management Action Group, and  ultimately, to advise the Secretary of Defense on matters associated with  these topics."], "subsections": []}, {"section_title": "DOD Certified Selected Business Systems for Fiscal Year 2017 on the Basis of Earlier Certification Requirements", "paragraphs": ["The NDAA for Fiscal Year 2016 requires that, for any fiscal year in which  funds are expended for development or sustainment pursuant to a  covered defense business system program, the Secretary of Defense is  to ensure that a covered business system not proceed into development  (or, if no development is required, into production or fielding) unless the  appropriate approval official reviews the system to determine if the  system meets five key requirements, as previously discussed in this  report. In addition, the act requires that the appropriate approval official  certify, certify with conditions, or decline to certify that the system satisfies  these five requirements.", "The department issued DOD Instruction 5000.75, which established  business system categories and assigned certifying officials, consistent  with the act. Table 7 describes the business system categories and the  assigned certifying officials, as defined in DOD Instruction 5000.75.", "The DOD DCMO certified the five systems in our sample (which included  the military departments\u2019 systems) for fiscal year 2017. However, these  certifications were issued in accordance with the previous fiscal year\u2019s  (fiscal year 2016) certification requirements. Those requirements had  stipulated that a defense business system program was to be reviewed  and certified on the basis of the system\u2019s compliance with the business  enterprise architecture and appropriate business process reengineering,  rather than on the basis of having met all five requirements identified in  the NDAA for Fiscal Year 2016.", "Specifically, DCMO certified the systems on the basis of determining that  the systems were in compliance with the business enterprise architecture  and had been sufficiently reengineered. However, none of the systems  were certified on the basis of a determination that they had valid,  achievable requirements and a viable plan for implementing them; had an  acquisition strategy to reduce or eliminate the need to tailor commercial  off-the-shelf systems; or were in compliance with the department\u2019s  auditability requirements.", "Officials in the Offices of the DOD DCMO, the Air Force DCMO, the  Under Secretary of the Navy (Management), and Army Business  Transformation told us that the systems were not certified relative to three  of the requirements because the department did not issue guidance to  reflect changes made by the NDAA for Fiscal Year 2016 in time for the  fiscal year 2017 certification process. Prior to the NDAA for Fiscal Year  2016, relevant legislation and DOD guidance only called for annual  determinations to be made regarding whether a system complied with the  business enterprise architecture and whether appropriate business  process reengineering had been conducted.", "In January 2016, the DCMO issued a memorandum stating that the  department planned to issue new guidance and policy to implement the  new legislation by the end of February 2016. However, the department  did not issue additional guidance addressing the new certification  requirements until April 2017. The system certifications, which were  required by the act to be completed before systems could spend fiscal  year 2017 funds, occurred in August and September 2016.", "In explaining the delay in issuing new guidance on the certification  requirements, officials in the Office of the DCMO stated that the statutory  deadline for issuing guidance was December 31, 2016. They added that,  given this statutory deadline, and the start of fiscal year 2017 on October  1, 2016, it was their determination that Congress did not intend for the  NDAA for Fiscal Year 2016\u2019s certification requirements to be fully  implemented before fiscal year 2017 started. DCMO officials stated that  they intend for the department to use the certification requirements  established by the NDAA for Fiscal Year 2016 for future system  certifications.", "While it was reasonable for the department to use the earlier guidance for  its fiscal year 2017 certifications, given that the new guidance had not yet  been issued, it will be important going forward that the department  certifies business systems on the basis of the certification requirements  established in the NDAA for Fiscal Year 2016 and its related guidance  addressing these requirements. Certifying systems on the basis of the  act\u2019s requirements should help ensure that funds are not wasted on  developing and maintaining systems that do not have valid requirements  and a viable plan to implement the requirements, that introduce  unnecessary complexity, or that impede the Department of Defense\u2019s  efforts to meet its auditability requirements."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Since the NDAA for Fiscal Year 2016 was signed in November 2015,  DOD has issued guidance that addresses most provisions of the NDAA  for Fiscal Year 2016 related to managing defense business system  investments. However, the department has not established policies  requiring consideration of sustainability and technology requirements and  the use of best systems engineering practices in the procurement and  deployment of its systems. Having these policies would better enable the  department to ensure it is efficiently and effectively procuring and  deploying its business systems.", "In addition, the Air Force, the Army, and Navy have made mixed progress  in issuing guidance to assist in making certification decisions regarding  systems within their respective areas of responsibility. Specifically, the Air  Force and Navy issued guidance on the certification of business systems  that does not fully address new certification requirements, while the Army  has not issued any updated guidance for its certifications. As a result, the  Air Force, Navy, and Army risk wasting funds on developing and  maintaining systems that do not have valid requirements and a viable  plan to implement the requirements, introduce unnecessary complexity,  or do not adequately support the Department of Defense\u2019s efforts to meet  its auditability requirements.", "Also, DOD has developed an IT architecture, but this architecture does  not address the act\u2019s requirement that it include a plan for improving the  department\u2019s IT and computing infrastructure, including for each business  process. In addition, DOD\u2019s plans for updating its IT architecture do not  address how the department intends to integrate its business and IT  architectures, as called for by the act. As a result, DOD risks not having a  consistent understanding of what is needed to achieve the department\u2019s  future vision, agency priorities, potential dependencies among  investments, and emerging and available technological opportunities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making six recommendations, including three to the Secretary of  Defense and one to each of the Secretaries of the Air Force, the Navy  and the Army:  The Secretary of Defense should define a specific time frame for  finalizing, and ensure the issuance of (1) policy requiring full  consideration of sustainability and technological refreshment  requirements for its defense business system investments; and (2) policy  requiring that best systems engineering practices are used in the  procurement and deployment of commercial systems, modified  commercial systems, and defense-unique systems to meet DOD  missions. (Recommendation 1)", "The Secretary of the Air Force should define a specific time frame for  finalizing, and ensure the issuance of guidance for certifying the  department\u2019s business systems on the basis of (1) having an acquisition  strategy designed to eliminate or reduce the need to tailor commercial off- the-shelf systems to meet unique requirements, incorporate unique  requirements, or incorporate unique interfaces to the maximum extent  practicable; and (2) being in compliance with DOD\u2019s auditability  requirements. (Recommendation 2)", "The Secretary of the Navy should define a specific time frame for  finalizing, and ensure the issuance of guidance for certifying the  department\u2019s business systems on the basis of (1) having a viable plan to  implement the system\u2019s requirements; (2) having an acquisition strategy  designed to eliminate or reduce the need to tailor commercial off-the-shelf  systems to meet unique requirements, incorporate unique requirements,  or incorporate unique interfaces to the maximum extent practicable; and  (3) being in compliance with DOD\u2019s auditability requirements.  (Recommendation 3)", "The Secretary of the Army should define a specific time frame for  finalizing, and ensure the issuance of guidance for certifying the  department\u2019s business systems on the basis of (1) being reengineered to  be as streamlined and efficient as practicable, and determining that  implementation of the system will maximize the elimination of unique  software requirements and unique interfaces; (2) being in compliance with  the business enterprise architecture; (3) having valid, achievable  requirements and a viable plan to implement the requirements; (4) having  an acquisition strategy designed to eliminate or reduce the need to tailor  commercial off-the-shelf systems to meet unique requirements,  incorporate unique requirements, or incorporate unique interfaces to the  maximum extent practicable; and (5) being in compliance with DOD\u2019s  auditability requirements. (Recommendation 4)", "The Secretary of Defense should ensure that the DOD CIO develops an  IT enterprise architecture which includes a transition plan that provides a  road map for improving the department\u2019s IT and computing infrastructure,  including for each of its business processes. (Recommendation 5)", "The Secretary of Defense should ensure that the DOD CIO and Chief  Management Officer work together to define a specific time frame for  when the department plans to integrate its business and IT architectures  and ensure that the architectures are integrated. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DOD provided written comments on a draft of this report, which are  reprinted in appendix III. In the comments, the department stated that it  concurred with three of the recommendations and partially concurred with  three of the recommendations. DOD also provided evidence that it has  fully addressed one of the recommendations. In addition, DOD provided  technical comments that we incorporated in the report, as appropriate.", "DOD stated that it concurred with our first recommendation, which called  for it to define a specific time frame for finalizing, and ensure the issuance  of, policies that fully address provisions in the NDAA for Fiscal Year 2016.  Furthermore, the department stated that it had complied with the  recommendation. Specifically, the department stated that it had published  its defense business systems investment management guidance in April  2017. This guidance identifies DOD\u2019s Financial Management Regulation,  Volume 2B, Chapter 18 \u201cInformation Technology\u201d and supporting IT  budget policy and guidance as well as DOD Instruction 5000.75 and  supporting acquisition policy and guidance. The department stated that  the Financial Management Regulation specifically addresses the  requirement for sustainability and technological refreshment requirements  for its defense business system investments.", "While DOD reported taking this action, we do not agree that the  department has complied with our recommendation. In reviewing the  department\u2019s guidance, we found that none of the cited management  documents includes a policy requiring consideration of sustainability and  technological refreshment requirements for DOD\u2019s defense business  systems. Further, none of these documents includes a policy requiring  that best systems engineering practices be used in the procurement and  deployment of commercial, modified-commercial, and defense unique  systems.", "Without a policy requiring full consideration of sustainability and  technological refreshment requirements for its defense business system  investments, the department may not be able to ensure that it has a full  understanding of the costs associated with these requirements. Further,  without a policy requiring the use of best systems engineering practices in  systems procurement and deployment, the department may be limited in  its ability to effectively balance meeting system cost and performance  objectives. Accordingly, we continue to believe that our recommendation  is valid.", "The department concurred with our second recommendation, that the  Secretary of the Air Force define a specific time frame for finalizing, and  ensure the issuance of, guidance that fully addresses certification  requirements, in accordance with the NDAA for Fiscal Year 2016.  Moreover, the department stated that the Air Force has complied with the  recommendation. Specifically, DOD stated that Air Force Manual 63-144  details the consideration of using existing commercial solutions without  modification or tailoring.", "However, while the manual provides a foundation on which the Air Force  can build, it is not sufficient to fully address our recommendation because  it does not include guidance on certifying business systems on the basis  of having an acquisition strategy that eliminates or reduces the need to  tailor commercial-off-the-shelf systems. In addition, the department did  not demonstrate that the Air Force has issued guidance for certifying  business systems on the basis of being in compliance with DOD\u2019s  auditability requirements. Rather, the Air Force stated that it has pending  guidance that addresses the acquisition strategy and auditability  requirements. We plan to evaluate the guidance to determine the extent  to which it addresses our recommendation after it is issued.", "The department partially agreed with our third recommendation, that the  Secretary of the Navy define a specific time frame for finalizing, and  ensure the issuance of, guidance that fully addresses certification  requirements. Specifically, DOD stated that Navy agreed to issue  guidance. Subsequently, on March 8, 2018, Navy issued its updated  guidance.", "However, Navy disagreed with the recommendation, as written, and  suggested that GAO revise the recommendation to state that \u201cThe  Secretary of the Navy should ensure guidance is issued according to   established timeline for certifying the department\u2019s business systems. . .\u201d  According to Navy, this change would support alignment with the timeline  for certifying the department\u2019s business systems driven by the Chief  Management Officer investment review timeline.", "Based on our analysis, we found the guidance that Navy issued to be  consistent with our recommendation. Thus, we plan to close the  recommendation as fully implemented. We have also annotated this  report, where appropriate, to explain that the Navy issued guidance while  the draft of this report was at the department for comment. On the other  hand, we did not revise the wording of our recommendation, as we  believe it appropriately reflected the importance of Navy taking action to  ensure the issuance of its guidance.", "The department stated that it concurred with our fourth recommendation,  which called for the Secretary of the Army to define a specific time frame  for finalizing, and ensure the issuance of, guidance for certifying the  department\u2019s business systems on the basis of the certification  requirements. Furthermore, on March 23, 2018, the Army issued its  guidance. However, because of the timing of this report relative to when  the Army provided its guidance to us (on March 27, 2018), we have not  yet completed an assessment of the guidance.  We have annotated this  report, where appropriate, to reflect the Army\u2019s action on our  recommendation.", "The department stated that it partially concurred with our fifth  recommendation. This recommendation called for the DOD CIO to  develop an IT enterprise architecture which includes a transition plan that  provides a road map for improving the department\u2019s IT and computing  infrastructure, including for each of its business processes. Toward this  end, the department agreed that the DOD CIO should develop an  architecture that enables improving the department\u2019s IT and computing  infrastructure for each of its business processes. However, the  department also stated that the recommendation is not needed because  the goal is already being accomplished by a set of processes,  organizations, protocols, and architecture data.", "For example, the department described processes and relationships  between the Office of the DOD CIO and the Office of the Chief  Management Officer and the boards that support the department\u2019s  business and IT enterprise architectures. In particular, the department  stated that information enterprise architecture data relevant to the  business enterprise are accessed via the DOD Information Enterprise  Architecture Data Selection Wizard and imported into the business  enterprise architecture. The department further stated that, if the business  capability acquisition cycle process indicates a need to improve the IT or  computing infrastructure, the Office of the Chief Management Officer has  a protocol to initiate a proposal to change the information enterprise  architecture.", "We agree that the department\u2019s processes, organizations, protocols, and  architecture data are keys to successful IT management. However, during  the course of our audit, we found that documentation describing DOD\u2019s IT  architecture did not include a plan for improving the department\u2019s IT and  computing infrastructure for each of the major business processes.  Moreover, officials in the Office of the CIO acknowledged that the  architecture did not include such a plan.", "Without a transition plan that provides a road map for improving the  department\u2019s IT and computing infrastructure, including for each of its  business processes, it will be difficult for the department to rely on its  personnel to timely and proactively manage and direct modernization  efforts of such a magnitude as DOD\u2019s systems modernization efforts.  Further, without such a plan, DOD risks not being able to ensure that  stakeholders across the department have a consistent understanding of  the steps needed to achieve the department\u2019s future vision, agency  priorities, potential dependencies among investments, and emerging and  available technological opportunities. Thus, we maintain that the  department should fully implement our recommendation.", "The department stated that it partially concurred with our sixth  recommendation, that the DOD CIO and DCMO work together to define a  specific time frame for when the department plans to integrate its  business and IT architectures. In particular, the department stated that it  agrees that the DOD CIO and Chief Management Officer should work  together to establish a time frame and ensure coordination and  consistency of the IT and business architectures. However, the  department disagreed with the use and intent of the term \u201cintegrate,\u201d as  stated in the recommendation, although it did not explain the reason for  this disagreement. Instead, it proposed that we change our  recommendation to read \u201cThe GAO recommends the Secretary of  Defense ensure the DoD CIO and CMO work together to define a specific  timeline for coordinating its business and IT architectures to achieve  better enterprise alignment among the architectures.\u201d", "We agree that it is important to achieve coordination and consistency  between the business and IT architectures. However, the department did  not provide documentation associated with either architecture that  describes how the two are, or are to be, integrated, as called for by the  NDAA for Fiscal Year 2016 and DOD guidance.", "Integrating the architectures would help ensure that business strategies  better capitalize on existing and planned technologies and that IT  solutions and infrastructure support business priorities and related  business strategies. Thus, we continue to believe that our  recommendation is valid. However, we have updated the  recommendation to state that the DOD CIO and the Chief Management  Officer should work together. We made this change because, effective  February 1, 2018, the Secretary of Defense eliminated the DCMO  position and expanded the role of the Chief Management Officer, in  accordance with the National Defense Authorization Act for Fiscal Year  2018.", "We are sending copies of this report to appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, Navy,  and Air Force; and the Director of the Office of Management and Budget.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["Our objective was to determine the actions taken by the Department of  Defense (DOD) to comply with provisions included in the National  Defense Authorization Act for Fiscal Year 2016 (NDAA). These  provisions require DOD to perform certain activities aimed at ensuring  that its business system investments are managed efficiently and  effectively. Specifically, we determined to what extent DOD has  1.  established guidance for effectively managing its defense business  2.  developed and maintained a defense business enterprise architecture  and information technology (IT) enterprise architecture, in accordance  with relevant laws and Office of Management and Budget (OMB)  policies and guidance;  3.  used the Defense Business Council to provide advice to the Secretary  on developing the business enterprise architecture, reengineering the  department\u2019s business processes, developing and deploying business  systems, and developing requirements for business systems; and  4.  ensured that covered business systems are reviewed and certified in  accordance with the act.", "To address the extent to which DOD has established guidance for  effectively managing defense business system investments, we obtained  and analyzed the department\u2019s guidance, as well as the guidance  established by the Departments of the Air Force, Army, and Navy, for  managing defense business systems relative to the act\u2019s requirements.  Specifically, the NDAA for Fiscal Year 2016 required the Secretary of  Defense to issue guidance, by December 31, 2016, to provide for the  coordination of and decision making for the planning, programming, and  control of investments in covered defense business systems. The act  required this guidance to include the following six elements:", "Policy to ensure DOD business processes are continuously reviewed  and revised to implement the most streamlined and efficient business  processes practicable and eliminate or reduce the need to tailor  commercial off-the-shelf systems to meet or incorporate requirements  or interfaces that are unique to the department.", "Process to establish requirements for covered defense business  systems.", "Mechanisms for planning and controlling investments in covered  defense business systems, including a process for the collection and  review of programming and budgeting information for covered  defense business systems.", "Policy requiring the periodic review of covered defense business  systems that have been fully deployed, by portfolio, to ensure that  investments in such portfolios are appropriate.", "Policy to ensure full consideration of sustainability and technological  refreshment requirements, and the appropriate use of open  architectures.", "Policy to ensure that best acquisition and systems engineering  practices are used in the procurement and deployment of commercial  systems, modified commercial systems, and defense-unique systems  to meet DOD missions.", "We assessed the February 2017 DOD Instruction 5000.75, Business  Systems Requirements and Acquisitions, and April 2017 defense  business system investment management guidance, which the  department issued to address the act\u2019s requirements. In addition, we  assessed the department\u2019s Financial Management Regulation and  directive on its planning, programming, budgeting, and execution  process, which the department stated also address the act\u2019s provisions.", "We also assessed DOD\u2019s guidance for managing business system  investments relative to the act\u2019s business system certification  requirements. The act requires that the Secretary of Defense ensure that  a covered defense business system not proceed into development (or, if  no development is required, into production or fielding) unless the  appropriate approval official determines that the system meets five  requirements. The act further requires for any fiscal year in which funds  are expended for development or sustainment pursuant to a covered  defense business system program, the appropriate approval official to  review the system to determine if the system: has been, or is being, reengineered to be as streamlined and efficient  as practicable, and whether the implementation of the system will  maximize the elimination of unique software requirements and unique  interfaces;  is in compliance with the business enterprise architecture or will be in  compliance as a result of planned modifications; has valid, achievable requirements, and a viable plan for  implementing those requirements (including, as appropriate, market  research, business process reengineering, and prototyping activities); has an acquisition strategy designed to eliminate or reduce the need  to tailor commercial off-the-shelf systems to meet unique  requirements, incorporate unique requirements, or incorporate unique  interfaces to the maximum extent practicable; and  is in compliance with the department\u2019s auditability requirements.", "We compared Office of the Deputy Chief Management Office (DCMO)  certification guidance with the act\u2019s certification requirements. In addition,  we compared the guidance established by the Departments of the Air  Force, the Army, and the Navy for certifying their business systems with  the act\u2019s certification requirements.", "We also interviewed cognizant officials responsible for managing defense  business system investments at DOD, including the military departments.  Specifically, we interviewed officials in the Office of the DCMO, the Office  of the Under Secretary of Defense for Acquisition, Technology, and  Logistics, the Office of the Chief Information Officer (CIO), and the Offices  of the CMOs in the Departments of the Air Force, Army, and Navy.", "To determine the extent to which DOD has developed and maintained a  defense business enterprise architecture and IT enterprise architecture, in  accordance with relevant laws and OMB policy and guidance, we  assessed the business enterprise architecture against the relevant laws  and OMB policy and guidance; the IT enterprise architecture against the  relevant laws and OMB policy and guidance; and the department\u2019s efforts  to integrate its business and IT architectures against the act\u2019s  requirement.", "To determine the extent to which the department has developed and  maintained a business enterprise architecture in accordance with relevant  laws and OMB policy and guidance, we reviewed version 10 of its  business enterprise architecture, which was released in February 2013,  and related information relative to the act\u2019s requirements; U.S. Code,  Title 44, Section 3601, which defines an enterprise architecture; and  OMB policy and guidance. We also reviewed version 11 of the  architecture to determine the extent to which it differed from version 10.", "Further, we reviewed the department\u2019s business enterprise architecture  improvement plan, which it developed in response to a recommendation  we made in July 2015. Specifically, we recommended that the  department use the results of our portfolio manager survey to determine  additional actions that could improve the department\u2019s management of its  enterprise architecture activities. In response to our recommendation, the  department developed and approved a plan in January 2017. We  assessed the extent to which the department had delivered the planned  capabilities relative to the plan. We also reviewed the extent to which the  delivery dates of the three planned capabilities and associated tasks  changed over time relative to the plan.", "To assess the extent to which the department developed and maintained  an IT enterprise architecture in accordance with relevant laws and OMB  policy and guidance, we reviewed content from the department\u2019s IT  enterprise architecture and compared it with requirements from the act,  U.S. Code, Title 44, Section 3601, and OMB policy and guidance.", "Specifically, we reviewed version 2.0 of the department\u2019s information  enterprise architecture, which was released in August 2012, relative to  the act\u2019s requirement for the DOD CIO to develop an IT enterprise  architecture that is to describe a plan for improving the IT and computing  infrastructure of the department, including for each of the major business  processes. We reviewed volumes I and II of the information enterprise  architecture and the four enterprise-wide reference architectures to  determine if the architecture described a plan for improving the IT and  computing infrastructure of the department, as called for by the act. We  also reviewed whether the architecture included content that described  the current and the target environments, and a transition plan to get from  the current to the target environment, consistent with OMB policy and  guidance.", "To determine the extent to which the department has integrated its  business and IT architectures, as required by the act, we reviewed DOD  Directive 8000.01, Management of the Department of Defense  Information Enterprise. We also reviewed meeting documentation from  the information enterprise architecture working group responsible for the  development of an updated architecture. In addition, we reviewed  meeting documentation from the Business Enterprise Architecture  Configuration Control Board to identify any discussions among CIO and  DCMO officials regarding integration of the two architectures, as well as  the level of participation by both parties.", "Finally, we interviewed officials in the Office of the DCMO and the Office  of the CIO about efforts to develop and maintain a business enterprise  architecture, develop an IT enterprise architecture, and integrate the  business and IT architectures.", "To determine the extent to which the department has used the Defense  Business Council to provide advice to the Secretary of Defense on  developing the business enterprise architecture, reengineering the  department\u2019s business processes, developing and deploying business  systems, and developing requirements for business systems, in  accordance with the act, we analyzed the department\u2019s December 2014  Defense Business Council Charter and April 2017 defense business  systems investment management guidance. We compared information in  the charter and guidance to the requirement that the Secretary establish  the Defense Business Council to advise the Secretary on the required  defense business system topics.", "In addition, we obtained and analyzed meeting summaries and briefings  for 27 Defense Business Council meetings that took place from January  2016 through August 2017. Specifically, we assessed the frequency  with which the meetings held during this time period addressed the  required topics. We chose this time period because 2016 was the first  calendar year following the enactment of the NDAA for Fiscal Year 2016.  Further, we chose August 2017 as our end date because it was the last  month\u2019s data that we could reasonably expect to obtain and review within  our reporting time frame. We also interviewed officials in the Offices of the  DCMO and CIO about the Defense Business Council and the Deputy\u2019s  Management Action Group, which is the governance entity to which the  Council reports.", "To determine the extent to which DOD has ensured that covered  business systems are reviewed and certified in accordance with the act,  we reviewed a nongeneralizable sample of business systems from DOD\u2019s  two categories of covered defense business systems that require  certification. To select the sample, we considered Category I systems,  which were systems that were expected to have a total amount of budget  authority of more than $250 million over the period of the current future- years defense program, and Category II systems, which were systems  that were expected to have a total amount of budget authority of between  $50 million and $250 million over the period of the future-years defense  program.", "We further categorized the Category II systems into four groups\u2014those  owned by the Air Force, the Army, Navy, and the remaining DOD  components. We selected one system with the highest expected cost  over the course of the department\u2019s future-years defense program from  each group. This resulted in our selection of five systems: one Category I  system, one Category II system from each military department, and one  Category II system from the remaining DOD components.", "We reviewed, respectively, DOD\u2019s Healthcare Management System  Modernization Program; Air Force\u2019s Maintenance, Repair and Overhaul  initiative; Army\u2019s Reserve Component Automation System; Navy\u2019s  Electronic Procurement System; and the Defense Logistics Agency\u2019s  Defense Agencies Initiative Increment 2. We determined that the number  of systems we selected was sufficient for our evaluation.", "For each system, we assessed the extent to which it had been certified  on the basis of the five certification requirements in the act. Specifically,  we evaluated investment decision memos and certification assertions to  determine if each system had been certified according to the act\u2019s  requirements, which include ensuring that the system had been, or was  being, reengineered to be as streamlined and efficient as practicable, and  the implementation of the system would maximize the elimination of  unique software requirements and unique interfaces; was in compliance  with the business enterprise architecture or would be in compliance as a  result of planned modifications; had valid, achievable requirements, and a  viable plan for implementing those requirements; had an acquisition  strategy designed to eliminate or reduce the need to tailor commercial off- the-shelf systems to meet unique requirements, incorporate unique  requirements, or incorporate unique interfaces to the maximum extent  practicable; and was in compliance with the department\u2019s auditability  requirements. We did not determine whether the certification assertions  were valid. For example, we did not evaluate business process  reengineering activities to determine if they were sufficient. We also  interviewed DOD DCMO and military department officials about the  certification of these systems.", "To determine the reliability of the business system cost data used to  select the systems, we reviewed system documentation for the three  systems DOD uses to store data, which include the Defense Information  Technology Investment Portal, the DOD Information Technology Portfolio  Repository, and the Select and Native Programming-Information  Technology system. In this regard, we requested and reviewed  department responses to questions about the systems and about how the  department ensures the quality and reliability of the data. In addition, we  requested and reviewed documentation related to the systems (e.g., data  dictionaries, system instructions, and user training manuals) and  reviewed the data for obvious issues, including missing or questionable  values. We also reviewed available reports on the quality of the  inventories (e.g., inspector general reports). We found the data to be  sufficiently reliable for our purpose of selecting systems for evaluation.", "We conducted this performance audit from January 2017 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Prior GAO Reports on Department of Defense Business System Modernization", "paragraphs": ["Since 2005, we have issued 11 reports assessing DOD\u2019s actions to  respond to business system modernization provisions contained in U.S.  Code, Title 10, Section 2222. The reports are listed below.", "DOD Business Systems Modernization: Additional Action Needed to  Achieve Intended Outcomes, GAO-15-627 (Washington, D.C.: July 16,  2015).", "Defense Business Systems: Further Refinements Needed to Guide the  Investment Management Process, GAO-14-486 (Washington, D.C. May  12, 2014).", "DOD Business Systems Modernization: Further Actions Needed to  Address Challenges and Improve Accountability, GAO-13-557  (Washington, D.C.: May 17, 2013).", "DOD Business Systems Modernization: Governance Mechanisms for  Implementing Management Controls Need to Be Improved, GAO-12-685  (Washington, D.C.: June 1, 2012).", "Department of Defense: Further Actions Needed to Institutionalize Key  Business System Modernization Management Controls, GAO-11-684  (Washington, D.C.: June 29, 2011).", "Business Systems Modernization: Scope and Content of DOD\u2019s  Congressional Report and Executive Oversight of Investments Need to  Improve, GAO-10-663 (Washington, D.C.: May 24, 2010).", "DOD Business Systems Modernization: Recent Slowdown in  Institutionalizing Key Management Controls Needs to Be Addressed,  GAO-09-586 (Washington, D.C.: May 18, 2009).", "DOD Business Systems Modernization: Progress in Establishing  Corporate Management Controls Needs to Be Replicated Within Military  Departments, GAO-08-705 (Washington, D.C.: May 15, 2008).", "DOD Business Systems Modernization: Progress Continues to Be Made  in Establishing Corporate Management Controls, but Further Steps Are  Needed, GAO-07-733 (Washington, D.C.: May 14, 2007).", "Business Systems Modernization: DOD Continues to Improve Institutional  Approach, but Further Steps Needed, GAO-06-658 (Washington, D.C.:  May 15, 2006).", "DOD Business Systems Modernization: Important Progress Made in  Establishing Foundational Architecture Products and Investment  Management Practices, but Much Work Remains, GAO-06-219  (Washington, D.C.: November 23, 2005)."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, individuals making contributions to this  report include Michael Holland (Assistant Director), Cheryl Dottermusch  (Analyst in Charge), John Bailey, Chris Businsky, Camille Chaires, Nancy  Glover, James Houtz, Anh Le, Tyler Mountjoy, Monica Perez-Nelson,  Priscilla Smith, and Adam Vodraska."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-459", "url": "https://www.gao.gov/products/GAO-18-459", "title": "Animal Use in Federal Research: Agencies Share Information, but Reporting and Data Quality Could Be Strengthened", "published_date": "2018-05-31T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Research facilities, including those managed by federal agencies, use a wide range of animals in research and related activities each year. The Animal Welfare Act and the Health Research Extension Act have varying requirements for federal agencies and others to protect the welfare of and report on the use of different research animals to APHIS and NIH.", "GAO was asked to review several issues related to animals used in federal research. This report examines (1) the extent to which APHIS and NIH have provided federal facilities with guidance for reporting their animal use programs, (2) the extent to which APHIS and NIH have shared agencies' animal use information with the public, and (3) stakeholder views on federal agencies' sharing additional information. GAO identified federal agencies that used vertebrate animals in research in fiscal years 2014 through 2016, reviewed their reports to APHIS and NIH, and examined publicly available data. GAO also surveyed a nongeneralizable sample of stakeholders from federal agencies and animal advocacy, research and science, and academic organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Health and Human Services' (HHS) National Institutes of Health (NIH) and the U.S. Department of Agriculture's (USDA) Animal and Plant Health Inspection Service (APHIS) have provided guidance to federal research facilities on what they must report about their animal use programs under the Health Research Extension Act and the Animal Welfare Act, respectively. Federal research facilities we reviewed met NIH's reporting instructions. However, APHIS's instructions have not ensured consistent and complete reporting in three areas: research with birds, activities outside the United States, and field studies outside a typical laboratory. By clarifying its instructions, APHIS could improve the quality of animal use data it receives from agencies.", "APHIS and NIH voluntarily share some information about agencies' animal research with the public. In particular, APHIS posts to its website data on agencies' annual use of animals covered by the Animal Welfare Act, and NIH publicly posts a list of research facilities with approved animal use programs. However, APHIS does not describe potential limitations related to the accuracy and completeness of the data it shares as called for by USDA guidance. For example, APHIS does not explain that the data do not include birds used for activities that are covered by the Animal Welfare Act and may include field studies that are not covered by the act. APHIS could increase the data's usefulness to the public by making such disclosures.", "Federal agencies may have additional information about their animal use programs, including data on vertebrate species used but not reported to APHIS; the purpose of research activities; and internal inspection reports. However, stakeholders GAO surveyed had different views on agencies' sharing such data with the public. Some stakeholders, particularly animal advocacy organizations, cited the need for more transparency and oversight while others, including federal agencies and research and science organizations, raised concerns about the additional administrative burden on agencies.", "Source: GAO analysis of the Animal Welfare Act and the Office of Laboratory Animal Welfare's Public Health Service Policy on Humane Care and Use of Laboratory Animals. | GAO-18-459 .", "a The act covers research funded by the public health service agencies of the U.S. government."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that APHIS clarify its reporting instructions and fully describe the potential limitations of the animal use data it makes available to the public. USDA stated that APHIS will take steps to implement GAO's recommendations, with the exception of clarifying reporting instructions for activities outside the United States. GAO continues to believe that APHIS needs to ensure complete reporting of such activities by federal facilities."]}], "report": [{"section_title": "Letter", "paragraphs": ["U.S. research facilities, including those managed by federal agencies,  use a wide range of animal species in research, testing, teaching, and  experimentation. These activities can occur in laboratories or field  settings and have many purposes, such as developing knowledge about  human disease diagnosis and treatment, testing medicines and other  products for toxicity, training professionals in veterinary methods, and  conserving animal populations. Federal agencies conducted research  using animals at about 120 domestic and international research facilities  in fiscal years 2014 through 2016. For example, the Departments of  Defense, Health and Human Services (HHS), and Veterans Affairs have  used rats, mice, nonhuman primates, and other species in research on  disease prevention and treatment. The U.S. Department of Agriculture  (USDA) has used cattle, poultry, and other agricultural species in  research on animal production and health and on the effects of animal  agriculture on the environment, among other things. The Departments of  Commerce and the Interior and other agencies have also conducted  conservation research on a wide range of species, often in the field.", "Research with animals has led to advances in scientific understanding,  but it has also raised concerns about animal welfare. In particular,  concerns about the welfare of animals used in research encompass a  range of factors, such as efforts to minimize pain, the suitability of living  conditions, the negative effects on wild populations when animals are  removed or handled, and the care provided for animals when they are no  longer needed for research. In response to these and other concerns, the  U.S. government has implemented statutes, regulations, and policies that  govern how animals are to be cared for and used for certain purposes,  including research conducted by federal and nonfederal facilities.", "In particular, the USDA\u2019s Animal and Plant Health Inspection Service  (APHIS) is responsible for implementing the Animal Welfare Act. APHIS  is to:  implement standards for the humane handling, care, treatment, and  transportation of the species covered by the act,  routinely inspect nonfederal research facilities for compliance with  those standards, and collect information from federal and nonfederal research facilities  about their uses of animals covered by the act.", "The HHS\u2019s National Institutes of Health (NIH) is responsible for  establishing guidelines implementing certain provisions of the Health  Research Extension Act of 1985. Specifically, NIH  is responsible for  reviewing federal and nonfederal research facilities\u2019 animal care and use  programs to determine whether they meet relevant standards and are  thereby eligible to receive funding from HHS\u2019s Public Health Service  agencies, including NIH. To complete this review, NIH  collects  information from research facilities about their use of animals. NIH\u2019s  review includes federal agencies that wish to receive Public Health  Service funding.", "These and other statutes also address, to varying degrees, actions that  federal and nonfederal research facilities must take to collect and report  information about their animal research activities to APHIS, NIH,  or the  public. For example, the regulations implementing the Animal Welfare Act  require that all research facilities annually report information about their  use of certain animals to APHIS. Likewise, the Health Research  Extension Act requires that facilities that receive Public Health Service  funding report information about their animal use program to NIH. The  public may request information about agencies\u2019 research activities using  procedures established under the Freedom of Information Act (FOIA),  which requires federal agencies to provide the public with access to  government information, with some exceptions, on the basis of the  principles of openness and accountability in government.", "You asked us to review several issues related to federal agencies\u2019 use of  animals in research and related activities\u2014specifically, research with their  own staff using their own facilities and equipment. This report examines:  the extent to which APHIS  and NIH provided federal agencies with  guidance for reporting on their animal use programs,  the extent to which APHIS  and NIH share information on animal use  with the public, and stakeholders\u2019 views on federal agencies\u2019 sharing of additional  information.", "We focused our review on federal agencies that conduct research with  vertebrate animals. Our review did not examine the research performed  by nonfederal entities using federal funding. We sought to identify  agencies that conduct activities with vertebrate species because the  Animal Welfare Act and the Health Research Extension Act govern  activities with vertebrate species but not activities with invertebrate  species.", "Using these criteria, we focused our review on 10 agencies that we  identified as conducting such activities (with their own staff using their  own facilities and equipment) during fiscal years 2014, 2015, or 2016.  The agencies are Commerce, Defense, HHS, Department of Homeland  Security (DHS), Interior, USDA, VA, the Environmental Protection Agency  (EPA), the National Aeronautics and Space Administration (NASA), and  the Smithsonian Institution. We chose to analyze these agencies\u2019  activities and compliance with the reporting requirements over the 3-year  period in order to better identify issues that might not be evident in  examining a single year, and fiscal year 2016 was the most recent year  for which data reported to APHIS  were available.  To identify these 10  agencies, we contacted a total of 14 independent agencies that we  believed were likely to conduct research using vertebrate animal species  based on information from USDA, HHS, and other relevant sources. We  asked the 14 agencies to identify the species of vertebrate animals that  they used in research within the 3-year time frame. Four agencies responded that they did not conduct research with vertebrate animals in  fiscal years 2014 through 2016. Therefore, they did not meet our criteria  for inclusion in our review. See appendix I for detailed information on the  activities of the 10 agencies included in our review.", "To examine the extent to which APHIS and NIH provided federal  agencies with guidance for reporting on their animal use programs, we  took the following steps:", "APHIS. We reviewed the Animal Welfare Act and its implementing  regulations and interviewed agency officials to identify relevant  reporting requirements and determine whether they were consistent  with APHIS\u2019s reporting instructions. To assess the instructions, we  examined how agencies followed them in practice. In particular, we  obtained from APHIS the data that federal agencies or their facilities  submitted for fiscal years 2014 through 2016 to determine whether  agencies submitted reports as expected.", "NIH. We reviewed the Health Research Extension Act and  accompanying NIH policy to identify the information that federal  research facilities must provide to NIH to be eligible for Public Health  Service funding. We also reviewed NIH\u2019s guidance to research  facilities on how to obtain eligibility  for funding. To assess the  guidance, we examined its implementation through NIH  and other  federal agencies\u2019 actions. In particular, we determined whether NIH  had current approvals for all federal research facilities receiving such  funding through interviews with NIH officials and by reviewing NIH  documents. We then reviewed a sample of 16 assurances from  federal facilities chosen by randomly selecting a facility from each  agency or sub-agency that had approved animal care and use  programs. We compared the information in the selected assurance  documents with NIH\u2019s guidance to determine whether the documents  contained key information.", "We also took steps to assess the reliability of information that APHIS  provided us about federal agencies and facilities that report to it under the  Animal Welfare Act and information that NIH provided on federal research facilities receiving Public Health Service funding. In particular, we cross- checked animal use information from APHIS with animal use information  we obtained directly from the 10 agencies in our review of their facilities\u2019  research activities. In addition, we checked summary data on animal use  that we obtained from APHIS against the annual reports that federal  agencies sent to APHIS under the Animal Welfare Act to determine  whether the data were consistent. We also reviewed NIH\u2019s website for  information about research facilities with approved assurances, and we  reviewed NIH documentation and queried NIH officials about their  process for ensuring that facilities receiving Public Health Service funding  for animal research have an assurance. Based on these steps, we  determined that the APHIS and NIH  information on federal facilities that  conduct animal research was sufficiently reliable for examining APHIS  and NIH guidance to agencies on reporting about their animal use  programs.", "To examine the extent to which APHIS and NIH share information on  animal use with the public, we interviewed agency officials and reviewed  agency websites. In particular, we interviewed APHIS officials to identify  the agency\u2019s current policies and procedures for collecting and posting to  its website the annual reports the agency receives from research  facilities. We reviewed the APHIS website to document the timespan  covered by the data that are posted and the methods by which the data  can be searched by the public. We also reviewed APHIS\u2019s posting of  annual report data against USDA\u2019s data quality requirements, which state  that USDA\u2019s agencies and its offices will strive to ensure that the  information they disseminate for the public is substantively accurate,  reliable, and unbiased and presented in an accurate, clear, complete, and  unbiased manner. We interviewed NIH officials to identify the agency\u2019s  policies and procedures for making public information about research  facilities that seek approval for a Public Health Service animal welfare  assurance, such as the identity of facilities with approved assurances or  descriptions of their animal care programs.", "For insight into stakeholders\u2019 views on federal agencies\u2019 sharing  additional information, we surveyed federal departments and agencies that conduct research as well as nonfederal organizations and individuals  we identified as having knowledge and interest in animal research. We  surveyed the 10 federal agencies that we identified as conducting  research with vertebrate animals in fiscal years 2014, 2015, or 2016. All  10 agencies provided at least one response, with some providing  responses from multiple sub-agencies or components. The total number  of federal responses was 20.", "We also sent surveys to a nongeneralizable sample of 28 nonfederal  stakeholders identified using a \u201csnowball selection\u201d methodology. We  sought to gather perspectives from a variety of stakeholders, and our  sample included organizations that advocate on behalf of animals;  research and science organizations; individuals from academia; and other  stakeholders we identified as having knowledge of animal research  issues and a national focus or representation. Nineteen of these 28  groups completed the survey. See app. II for a complete list of  respondents.", "The survey asked about specific types of information about animal use  and whether stakeholders believed federal agencies should proactively  and routinely share such information with the public on a website or by  other means. In particular, we asked respondents for their views on  whether agencies should routinely make available to the public  information that we determined agencies may possess for internal  decision-making purposes and, under certain circumstances, may provide  to other parties, including NIH or a private organization for accreditation of  a facility\u2019s animal care program. Such information could include data on  all vertebrate animals used, information on the purpose of specific  research activities, and general descriptions of the agency\u2019s animal care  program. The survey also asked whether stakeholders reviewed and  used annual reports that APHIS posts on its website and what changes  stakeholders would like to see, if any, in how APHIS collects and posts  annual report data on its website. See app. III  for a summary of the  stakeholders\u2019 suggested changes. We included these questions to  understand the extent to which stakeholders use available data and  whether they had suggestions for changes in how APHIS currently makes  data routinely available. We did not ask stakeholders a similar question  about NIH because that agency does not proactively provide data to the  public about federal agencies\u2019 use of animals in research.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Department of Agriculture Administers the Animal Welfare Act", "paragraphs": ["USDA\u2019s APHIS  is responsible for implementing the Animal Welfare Act.  The act and its implementing regulations govern, among other things,  how federal and nonfederal research facilities must treat particular  species of warm-blooded animals to ensure their humane treatment when  used in research, teaching, testing, or experimentation. The Animal  Welfare Act\u2019s definition of \u201canimal\u201d excludes birds, rats of the genus  Rattus, and mice of the genus Mus when those animals are bred for use  in research. The act also excludes horses not used for research purposes  and other farm animals used or intended for use as food or fiber or in  certain types of research. The Animal Welfare Act also excludes cold- blooded animals\u2014such as fish, reptiles, or amphibians\u2014and  invertebrates. See table 1 for a summary of the animals covered and  not covered by the Animal Welfare Act. (Animals covered by the Health  Research Extension Act are also included in table 1 and described in the  next section.)", "The Animal Welfare Act and its regulations contain specific standards for  research facilities. These include:", "Registration. Nonfederal research facilities that conduct activities  regulated by the Animal Welfare Act must register with APHIS. The  act does not require that federal research facilities register with  APHIS. APHIS does, however, assign federal research facilities  certificate numbers that it uses to track whether they have submitted  their required annual report (see below). As of March 2018, APHIS  had assigned such numbers to 157 federal research facilities. Some  of these federal research facilities, such as VA, have elected to report  information to APHIS on an individual basis, while others, such as the  HHS\u2019s Centers for Disease Control and Prevention, submit a single  report covering research facilities in several states.", "Annual report. Reporting facilities that used or intended to use live  animals in research, tests, experiments, or for teaching must submit a  retrospective annual report about those animals to APHIS on or  before December 1 of each calendar year.", "Standards for humane handling, care, treatment, and  transportation of animals. The Animal Welfare Act directs research  facilities to meet certain standards of care for the animal species that  are covered by the act. The standards of care are tailored to particular  species of animals or groups of species.  Institutional Animal  Care and Use Committees. Research facilities  must appoint a committee to, at least semi-annually, review the  facility\u2019s program for humane care and use of animals, to inspect all  facilities, and to prepare reports of its evaluation. The committee is  responsible for reviewing research proposals to determine whether  the proposed activities are in accordance with the act or there is an  acceptable justification for a departure from the act.", "Federal inspections. APHIS officials have the authority to inspect  nonfederal research facilities, records, and animals to enforce the  provisions of the act. The Animal Welfare Act does not expressly  provide APHIS the authority to inspect federal research facilities, and  APHIS will not do so unless invited.", "The Animal Welfare Act exempts farm animals, other than horses, from  its coverage when they are used or intended for use as food or fiber or in  agricultural research that is intended to improve animal nutrition,  breeding, management, or production efficiency, or to improve the quality  of food or fiber. According to officials with USDA\u2019s Agricultural Research  Service (ARS), most of the agency\u2019s research activities fall under this  exemption. Nevertheless, in February 2016, APHIS and ARS signed a  memorandum of understanding concerning laboratory animal welfare.  The intent of the memorandum of understanding is to maintain and  enhance agency effectiveness and avoid duplication by allowing APHIS  to use applicable sections of the Animal Welfare Act\u2019s requirements,  regulations, and standards to inspect ARS animal research facilities.  Among the provisions of the memorandum, ARS agreed to register its  animal research facilities with APHIS and submit an annual report to  APHIS. As of March 2018, 35 ARS animal research facilities were  voluntarily registered with APHIS, and ARS facilities submitted their first  annual reports for activities conducted in fiscal year 2016."], "subsections": []}, {"section_title": "NIH Administers the Health Research Extension Act", "paragraphs": ["NIH, within the Department of Health and Human Services, administers  the Health Research Extension Act. The act calls for the Director of NIH  to establish guidelines that govern how certain research institutions that  conduct activities using animals are to consider animal welfare. In  particular, the guidelines govern how those research institutions\u2014 including federal facilities\u2014that receive funding from Public Health  Service agencies are to ensure the humane treatment of all vertebrate  animals used in biomedical or behavioral science research. NIH  conducts  site visits at selected institutions to assess compliance with the act.  Whereas the Animal Welfare Act applies to certain warm-blooded  animals, the definition of animals used for the purposes of the Health  Research Extension Act covers all vertebrates, including mice, rats, and  fish species that are commonly used in laboratory research (see table 1).", "Under the act, research institutions are required to provide certain  information to NIH in order to be eligible for Public Health Service funding.  In particular, they must provide for NIH approval a document that  describes their animal care and use program and that assures that the  facility meets applicable standards. NIH calls for research institutions to  provide, among other information, a commitment to comply with all  applicable provisions of the Animal Welfare Act and other federal statutes  and regulations relating to animals, a description of the facility, and an  \u201caverage daily inventory\u201d of species housed at the facility. In addition,  research institutions approved for Public Health Service funding must  annually report changes in their animal use program to NIH. As of  September 2017, NIH had approved 111 federal facilities across 8  agencies for funding under the act."], "subsections": []}]}, {"section_title": "APHIS and NIH Have Instructed Federal Agencies to Provide Data on Animal Use, but APHIS\u2019s Instructions Have Not Ensured Consistent and Complete Reporting", "paragraphs": ["As directed by the regulations implementing the Animal Welfare Act, the  10 agencies we reviewed submitted to APHIS the required annual reports  on their use of animals covered by the act from fiscal years 2014 through  2016. However, APHIS\u2019s reporting instructions have not ensured  consistent and complete reporting because they have been unclear about  which animal species, activities, and activity locations are required to be  reported for the purposes of the Animal Welfare Act. Federal facilities that  conduct activities with animals using Public Health Service funding that  we reviewed met NIH  requirements to provide assurance documentation  about their animal use programs and to provide required annual reports  for fiscal years 2014 through 2016."], "subsections": [{"section_title": "Federal Agencies Generally Report to APHIS on Animal Use, but APHIS Has Not Provided Sufficient Instructions to Ensure Consistent and Complete Reporting", "paragraphs": ["The Animal Welfare Act regulations require federal agencies that use or  intend to use live animals in research to report on their use of these  animals. As directed by APHIS, these agencies, or their individual  research facilities, must submit an annual report to APHIS on or before  December 1 of each calendar year. APHIS instructs research facilities to  submit an annual report that:  includes information about animals covered by the Animal Welfare  Act\u2019s regulations and the number of such animals used as well as  those held for use but not used, and provides assurances that the facility has met applicable standards,  such as standards for the appropriate use of anesthetic, analgesic,  and tranquilizing drugs.", "In addition, facilities must report whether the animals fall into one of three  categories related to pain or distress and the efforts the facilities took to  relieve pain or distress. Facilities must also attach a summary of any  activity that did not meet the standards of the act but that were approved  by the facility\u2019s Institutional  Animal Care and Use Committee.", "All 10 of the federal agencies we reviewed submitted annual reports to  APHIS showing that their facilities had used animals in research in fiscal  years 2014 through 2016. APHIS has procedures in place to track which  agencies\u2019 facilities have reported and to notify any that have not done so.  For example, APHIS has developed schedules for sending reminders to  facilities that have not yet reported. APHIS expects federal research  facilities that it has assigned certificate numbers but that did not use any  animals in a particular fiscal year to submit a report with that information.", "APHIS data show that the 10 federal agencies in our review reported that  their facilities used more than 210,000 animals covered by the Animal  Welfare Act in fiscal years 2014 through 2016. However, in our  comparison of federal agencies\u2019 annual reports to APHIS  with their  responses to our request for information about their activities, we found  instances in which agencies did not report activities covered by the act or  did not report similar activities consistently across facilities. These  conditions resulted, in part, from APHIS not providing sufficient  instructions on the research activities that federal agencies are to include  in their annual reports. Additionally,  we found that facilities reported  species not covered by the act. As a result, the data that research  facilities submit to APHIS in their annual reports may not accurately  reflect the facilities\u2019 uses of animals covered by the act. We identified  three areas in which federal agencies\u2019 annual reports were inconsistent or  incomplete: birds, animal use outside the United States, and field studies."], "subsections": [{"section_title": "Use of Birds", "paragraphs": ["The Animal Welfare Act and birds", "Animal Welfare Act  The term animal excludes birds bred for use  in research.", "APHIS\u2019s 2017 instructions for  completing the annual report  \u201co NOT  report the use of \u2026 birds, reptiles,  fish or other animals w hich are exempt from  the regulation under the .\u201d", "In 2002, Congress amended the definition of animal in the Animal Welfare  Act to exclude birds that are bred for use in research. However, APHIS  instructs facilities to not report any birds in their annual reports,  regardless of whether they were bred for research. Five agencies  reported to us that their research facilities used birds in fiscal years 2014  through 2016\u2014including some not bred for research and therefore  potentially covered by the act\u2014but that they followed APHIS\u2019s  instructions to not report them. According to APHIS officials, since  Congress amended the definition of animal in the act, the agency has  been aware of the need to define which birds are covered by the act and  should, among other things, be reported to APHIS by research facilities.  The officials said that until the agency has defined birds covered by the  act, they do not believe that it is appropriate to require research facilities  to report their use of birds.", "However, as of February 2018, APHIS had not provided us with a  schedule or plan for defining birds covered by the act or for developing reporting requirements for those birds. As a result, it is unclear when, or  if, APHIS  will require research facilities to report their use and treatment  in research of birds that are covered by the Animal Welfare Act. Until  APHIS develops such requirements, federal (and other) research facilities  will have incomplete information about what information they should  include in annual reports submitted to APHIS, and APHIS will not have  assurance that annual reports from research facilities fully reflect  research activities covered by the act."], "subsections": []}, {"section_title": "Animal Use outside the United States", "paragraphs": ["The Animal Welfare Act and reporting  facilities", "Animal Welfare Act regulations  \u201cThe reporting facility shall be that segment of  the research facility, or that department,  agency, or instrumentality of the United  States, that uses or intends to use live  animals in research, tests, experiments, or for  teaching.\u201d", "APHIS\u2019s 2017 Instructions for  completing the annual report  The instructions do not instruct federal  research facilities to report activities involving  animal use outside the United States.", "The Animal Welfare Act regulations define a reporting facility to include a  department, agency, or instrumentality of the United States. Officials from  USDA\u2019s Office of the General Counsel told us that there is no exclusion in  the act or its regulations for federal research facilities that are located  outside of the United States. However, APHIS  does not instruct federal  research facilities to report activities involving animal use outside the  United States. Of the 10 agencies with federal research facilities that  submitted annual reports to APHIS, we identified three through our initial  contacts and follow-up interviews that conduct activities outside the  United States involving animals that may be covered by the Animal  Welfare Act: the Departments of Commerce and Defense and the  Smithsonian Institution. We found that officials from the three agencies  had a different understanding of their obligation to report those activities  to APHIS.  A senior official from the Department of Commerce\u2019s National  Marine Fisheries Service said that he knew of no reason to not report on  studies conducted outside the United States and that the agency had  reported such activities in fiscal year 2017. On the other hand, officials  from the Department of Defense and the Smithsonian Institution told us  that APHIS officials have instructed them not to report activities  conducted outside of the United States. As a result, the Department of  Defense and the Smithsonian Institution did not report animal use in their  non-domestic facilities in fiscal years 2014 through 2016. With  instructions from APHIS that federal research agencies report all activities  covered by the Animal Welfare Act, regardless of location, APHIS and the  public would have greater assurance that annual reports fully reflect  activities covered by the act and that agencies are reporting such  activities consistently."], "subsections": []}, {"section_title": "Animal Use in Field Studies", "paragraphs": ["The Animal Welfare Act and field studies", "Animal Welfare Act regulations  \u201cField study means a study conducted on  free-living w ild animals in their natural habitat.  How ever, this term excludes any study that  involves an invasive procedure, harms, or  materially alters the behavior of an animal  under study.\u201d", "APHIS\u2019s  2017 instructions for completing  APHIS\u2019s  instructions do not sufficiently clarify  the conditions under w hich a field study w ould  be invasive, harmful, or materially alter  behavior and, therefore, be covered under the  act.", "APHIS exempts some research involving wild animals from the  requirements of the Animal Welfare Act regulations, including annual  reporting. Specifically, in promulgating the current definition of \u201cfield  studies\u201d in regulation, APHIS stated, \u201cif the research project meets the  definition of field studies, the research project would not fall under the   regulation.\u201d To qualify for this exemption, a study  must take place in a free-living, wild animal\u2019s natural habitat and not  involve an invasive procedure, harm, or materially alter the behavior of an  animal under study. APHIS\u2019s instructions for annual reporting note this  exemption. However, they do not sufficiently clarify the conditions under  which a field study would qualify, nor do they point to any source  providing clarifying language. For example, the instructions do not  describe criteria research facilities could use to identify activities that are  invasive, harmful, or materially alter behavior.", "We found that agencies have interpreted the field study exemption  differently. For example,", "Officials from three agencies within the Department of the Interior told  us that the agencies did field research with many species in fiscal  years 2014 through 2016, but we found the agencies had different  approaches to reporting that research to APHIS. Specifically, the U.S.  Geological Survey and National Park Service reported using dozens  of animal species to APHIS while the Fish and Wildlife Service did not  report any. An official with the Fish and Wildlife Service explained to  us that the agency did not report the animals to APHIS because they  were only held temporarily. Officials from the Fish and Wildlife Service  and U.S. Geological Service told us that APHIS\u2019s guidance on field  studies is confusing and causes discrepancies in reporting.", "NASA conducts research involving temporary capture, blood  sampling, and tagging of animals to study any possible effects of  NASA\u2019s launch sites on the surrounding ecosystem, but the agency  does not include these activities in its annual reports to APHIS. The  National Marine Fisheries Service conducts field research also  involving temporary capture, blood sampling, and tagging of marine  mammals for various purposes. Some of the service\u2019s research  facilities have reported these types of activities to APHIS, and  according to a service official, the other facilities plan to do so. An  official from the service also told us that the agency has received  inconsistent guidance from APHIS about what field research to report.", "The National Marine Fisheries Service\u2019s facilities that have reported  animal research to APHIS have represented a large portion of the overall  number of animals that federal facilities reported in fiscal years 2014  through 2016. For example, in fiscal year 2016, the agency\u2019s facilities  accounted for nearly 16,000 of about 82,000 animals reported to APHIS  by the 10 federal agencies in our review. Therefore, whether these  activities should or should not be reported will have a large effect on the  total number of animals that federal facilities reported using for research.", "APHIS officials told us that they are developing additional clarifying  guidance on field studies and will publish the guidance for public  comment in the third quarter of fiscal year 2018. However, APHIS has not  yet released a draft of this guidance. A draft with criteria for identifying  which field studies are covered by the Animal Welfare Act and therefore  should be reported\u2014for example, because the studies are considered to  be invasive, harmful, or materially alter behavior\u2014would enable APHIS to  ensure that the research community\u2019s views are incorporated. With  clearer instructions that include such criteria, APHIS and the public would  have greater assurance that annual reports fully reflect activities covered  by the act."], "subsections": []}]}, {"section_title": "Federal Research Facilities We Reviewed Met Instructions to Report Information on Their Animal Care and Use Programs to NIH", "paragraphs": ["NIH has provided guidance to federal and nonfederal research facilities  about what they are required to report on their animal use, and federal  facilities we reviewed met those requirements. In order to obtain funding  from the Public Health Service agencies, research facilities must obtain  approval from NIH of their animal welfare assurance statement and must  provide annual reports to NIH.  To obtain an approved assurance, a  research facility must provide NIH with information about its animal care  and use program. NIH provides facilities with a sample assurance  document that describes the required information, including assurances  of compliance with animal welfare standards signed by appropriate  officials, a roster of Institutional  Animal Care and Use Committee  membership, an average daily census of animals, and other information.  NIH\u2019s approval of an animal care program lasts up to 5 years, and  according to NIH officials, the agency typically begins its review of a  renewal after 4 years. To help facilities meet the annual report  requirement, NIH  provides an annual-reporting sample document that  directs research facilities to update the animal care and use committee\u2019s  roster and to note any change in accreditation from the private  accreditation organization AAALAC  International  and describe any  significant changes in their animal care program, such as the species or  number of animals maintained in housing. NIH officials told us the  purpose of the assurances is to ensure that the proper facilities and  procedures are in place to properly care for the animals, and that NIH  does not use them as a public reporting tool.", "Health Research Extension Act of 1985    animal  care  committees at each entity w hich conducts  biomedical and behavioral research with  funds provided under this Act (including the  National Institutes of Health and the national  research institutes) to assure compliance w ith  the guidelines established [by the Director of  NIH].", "NIH has procedures to ensure that facilities that seek to receive funding  from Public Health Service agencies have animal care programs with  active assurances. NIH provided us with its data for tracking which  facilities were receiving Public Health Service funding and which facilities  had approved programs. As of November 2017, according to NIH data, all  of the federal facilities receiving funding from Public Health Service  agencies for activities involving  animals had an active assurance. Using a  sample of 16 assurances from federal facilities, we found that these  assurances contained information called for by NIH, including signatures  from institutional officials, rosters of Institutional  Animal Care and Use  Committees, and animal inventories. NIH  data show that all assured  facilities submitted annual reports in calendar years 2014, 2015, and  2016."], "subsections": []}]}, {"section_title": "APHIS and NIH Publicly Share Some Federal Animal Use Information, but APHIS Does Not Describe the Quality of the Information It Shares", "paragraphs": ["APHIS and NIH publicly report some information about federal agencies\u2019  use of research animals. Although the Animal Welfare Act does not  require APHIS to share this information, APHIS posts the following on its  website:", "Annual reports from research facilities. Research facilities\u2019 annual  reports include data on the species and numbers of animals held and  used for research, categorized by the steps taken to minimize pain  and distress to the animal. The annual reports also include the  facility\u2019s explanation  of any exceptions to the Animal Welfare Act\u2019s  standards and regulations during the reporting year. As of April 2018,  APHIS\u2019s website included research facilities\u2019 annual reports from  fiscal years 1999 through 2017.", "National summaries of the annual reports. APHIS prepares  national summaries using the annual reports submitted by research  facilities. APHIS\u2019s annual national-summary reports include data  provided by research facilities on species and numbers of animals,  categorized by state and by the steps taken to minimize pain and  distress to the animal. As of March 2018, APHIS\u2019s website had  national summary reports for fiscal years 2008 through 2016. The  national summaries do not categorize the data by types of facilities,  such as federal or nonfederal research facilities.", "Reports of APHIS inspections. The APHIS  inspection reports\u2014 typically of nonfederal facilities\u2014could contain such information as  descriptions of non-compliance, the number of animals involved in  noncompliance, a correction deadline and a description of what  should be done to correct the problem, and the date of the inspection.  As of March 2018, APHIS\u2019s website contained reports of inspections  at three federal facilities, including a zoo and an aquarium. This  number does not include ARS research facilities, which APHIS  inspects as part of its 2016 memorandum of understanding with ARS.  As of March 2018, APHIS\u2019s website contained inspection reports for  19 ARS research facilities.", "USDA\u2019s Chief Information Officer has provided guidance directing the  department\u2019s agencies and offices to strive to ensure and maximize,  among other things, the objectivity of information disseminated to the  public. To ensure objectivity, the guidance directs that USDA agencies  and offices ensure that the information they disseminate is presented in  an accurate, clear, complete, and unbiased manner.", "APHIS has not fully implemented this guidance for the animal use data it  shares publicly. In particular, APHIS does not explain on its website  potential limitations related to the accuracy and completeness of the  annual reports that it provides to the public or in the national summaries  of the annual reports that APHIS prepares. For example, APHIS does not  explain that research facilities\u2019 annual reports may contain data on  animals used for activities that are not covered by the Animal Welfare Act  regulations, such as excluded field studies. Additionally,  APHIS does not  explain that the annual reports do not include birds not bred for  research\u2014and consequently covered by the Animal Welfare Act\u2014 because APHIS has instructed facilities to not report any birds.  Furthermore, APHIS does not explain that it does not validate the  accuracy and completeness of agencies\u2019 reporting. In particular, APHIS  officials told us that they have the opportunity to validate reporting when  they inspect nonfederal facilities, but do not have the authority to inspect  federal research facilities unless invited to do so.", "Some stakeholders responded to our survey that they use the data that  APHIS reports on animal use to identify trends and practices within the  research community. By fully implementing USDA guidance by explaining  what the data represent and possible issues with their quality, APHIS  could have more assurance that it is providing these data to users in a  manner that is as accurate, clear, complete and unbiased as possible.  Users could then be better equipped to properly analyze or assess the  quality of the data, interpret the annual reports, and draw conclusions  based on these data.", "NIH posts a list of federal and nonfederal facilities with active assurances  on its website. The Health Research Extension Act does not require NIH  to make such information available through a public website, but NIH  policy directs the agency to provide to Public Health Service agencies a  list of facilities with such assurances. The list includes facilities that  receive Public Health Service funding and facilities that have voluntarily  requested NIH\u2019s review and approval of their programs. Our review did  not identify federal facilities that were missing from or incorrectly included  in NIH\u2019s posted list of assured facilities.", "NIH does not regularly post other information\u2014such as the facilities\u2019  average daily inventory of animals, the date they obtained an assurance,  or the date they submitted their most recent annual report.\u2014from  research facilities\u2019 assurance documents. Therefore, we did not review in  detail the information that agencies provide to NIH  to determine its  accuracy."], "subsections": []}, {"section_title": "Stakeholder Groups Have Differing Views on Whether Agencies Should Share Additional Animal Use Information with the Public", "paragraphs": ["Federal agencies may have additional information about their animal use  programs. However, stakeholders who responded to our survey had  different views about whether federal agencies should proactively and  routinely make more information on animal use available to the public on  their websites or other means than the data that APHIS and NIH currently  provide. Stakeholders other than animal advocacy organizations\u2014 including federal agencies, research organizations, academia, and  others\u2014generally expressed the view that federal agencies should not  routinely make additional information available to the public, citing  reasons including the existence of other methods to obtain this  information and administrative burden. In contrast, stakeholders from  animal advocacy organizations cited the need for more transparency and  oversight as reasons that federal agencies should make additional  information routinely available to the public, among other reasons. (See  app. III  for more information about stakeholders\u2019 responses to our  questions).", "More specifically, we asked stakeholders to provide their views on  whether federal agencies should proactively and routinely report certain  types of information to the public. We selected 10 types of information for  stakeholders to consider, including some types of information that federal  agencies may have for internal purposes and, in some instances, may  provide to other agencies or organizations but that neither they nor others  are required to proactively share with the public. The types of  information we asked stakeholders to consider included data on  vertebrate animals that are not covered by the Animal Welfare Act,  internal or external inspection reports, and general descriptions of  agencies\u2019 animal use programs. See table 2 for the complete list of types  of information we asked stakeholders to consider.", "For stakeholder groups that generally expressed the view that federal  agencies should not make additional information available to the public on  a proactive and routine basis, one of the most frequently cited reasons  included that the public could obtain this information through other  publicly available means. For example, several stakeholders said that agencies\u2019 reports of noncompliance to APHIS or NIH  and data on  resource expenditures are already available via the FOIA. One federal  stakeholder said that it provides the public with information about the  nature and extent of field research when it is required by the Marine  Mammal Protection Act of 1972 or the Endangered Species Act of  1973 to obtain permits; the permitting processes include public notice  and comment. In addition, some stakeholders said that certain types of  information, such as the identity of the species used and the purpose and  expected benefit of specific research projects are already published in  peer-reviewed journals that are accessible to the public.", "Several stakeholders also responded that providing additional information  would impose an administrative burden on agencies. For example,  several stakeholders said any potential public benefit from the additional  information shared with the public would not justify the effort to collect and  share the information, and one stakeholder said that providing certain  types of information would reduce the time they have to do actual  research. In addition, one stakeholder said that a requirement to make  additional information available to the public would be in direct conflict  with a 2016 law that directed NIH, the Food and Drug Administration, and  USDA to look for ways to reduce administrative burdens associated with  animal welfare regulations.", "Other less frequently cited reasons that stakeholders gave for not  believing that agencies should proactively and routinely share additional  information with the public included:", "Certain information, such as expenditures on animal use, could be  difficult to collect from disparate sources. For example, one federal  agency said that much of its animal use funding is allocated in  different areas of research and that it would need guidance to collect  data on expenditures separately from each area.", "Disseminating information could jeopardize the security of facilities or  personnel or disclose proprietary data. For example, one stakeholder  said agency reports contain key details about federal research  facilities that opposition groups could use to target personnel in those  facilities.", "Disseminating information could confuse the public unless appropriate  context is provided. One stakeholder said that the passive  dissemination of data on animal research on a website, without  appropriate context, would potentially increase public confusion and  add misplaced scrutiny on animal use in federal research facilities.", "For those stakeholder groups that generally expressed the view that  federal agencies should make additional information available to the  public on a proactive and routine basis, the most frequently cited reasons  were the importance of transparency to allow the public to assess and  understand animal use in federal research facilities and the need for  oversight and accountability of federal agencies\u2019 use of animals. For  example, some stakeholders responded that sharing additional  information with the public would aid their efforts to monitor the reduction,  refinement, and replacement of animals used in federal research. One  stakeholder also mentioned that sharing additional information could be  easily done on a website and would give the public a more complete  picture of the use of animals by federal research facilities. Several  stakeholders also expressed the need for greater oversight and  accountability of federal agencies\u2019 use of animals. For example, two  stakeholders said that making additional information available about the  degree to which animals experience pain or distress would help them  assess whether federal programs\u2019 animal use is in compliance with  specific provisions related to pain and distress in the Animal Welfare Act.  Stakeholder groups less frequently cited other reasons for favoring  routine reporting, such as:", "FOIA requests can take several months and sometimes years for  agencies to fulfil.", "Certain information, such as the number of all vertebrate animals  used by each agency\u2014including those not reported under the Animal  Welfare Act\u2014should be easy to disseminate because federal  agencies already collect or compile it for internal purposes.", "Additional  reporting would align the federal government with other  countries\u2019 practices. For example, according to one stakeholder, the  European Union categorizes and publicly releases animal use  numbers that are more detailed than those reported in the United  States."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["APHIS and NIH routinely collect information about federal agencies\u2019  research with vertebrate animals and provide the public with related  information. Having access to this information can help the public observe  trends in animal use in research and learn about facilities\u2019 compliance  with standards of humane care.", "Federal agencies met NIH\u2019s requirements for reporting on their animal  use, but the data federal agencies provided to APHIS were not always  consistent or complete. This situation resulted in part from APHIS\u2019s not  providing sufficient instructions to federal research facilities for reporting  on their use of animals covered by the Animal Welfare Act. In particular,  APHIS instructs facilities to not report any birds in their annual reports,  regardless of whether the birds are covered by the act. Although aware of  this limitation, APHIS has not provided a schedule or plan for defining  birds covered by the act or for developing reporting requirements for  those birds. In addition, APHIS\u2019s instructions have not sufficiently clarified  two areas of confusion and differing understanding among federal  agencies: first, activities that involve animal use outside the United States  and, second, the specific conditions under which field studies are or are  not covered by the act. APHIS plans to develop clarifying guidance on  field studies and will publish the guidance for public comment. By defining  the birds that need to be reported, by instructing federal research facilities  to report research activities outside the United States, and by working  with the research community to develop clear criteria for identifying field  studies, APHIS would have greater assurance that the data it receives  from research facilities fully reflect the activities covered by the Animal  Welfare Act.", "APHIS has also not fully implemented the USDA\u2019s information  dissemination policy that calls for the department\u2019s agencies to ensure  information is presented in an accurate, clear, complete, and unbiased  manner. In particular, APHIS does not explain issues related to the  completeness and accuracy of the data it provides to the public, for  example, issues such as inconsistencies in the types of field studies  reported by federal agencies. By fully explaining these issues, the agency  would improve users\u2019 ability to accurately interpret and analyze the data."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to APHIS:  The Administrator of APHIS should develop a timeline for (1) defining  birds that are not bred for research and that are covered by the Animal  Welfare Act, and (2) requiring that research facilities report to APHIS  their  use of birds covered by the act. (Recommendation 1)", "The Administrator of APHIS should instruct federal agencies to report  their use of animals covered by the Animal Welfare Act in federal facilities  located outside of the United States. (Recommendation 2)", "In developing the definition of field studies, the Administrator of APHIS  should provide research facilities with clear criteria for identifying field  studies that are covered by the Animal Welfare Act\u2019s regulations and that  facilities should report to APHIS as well as field studies that facilities  should not report. (Recommendation 3)", "The Administrator of APHIS should ensure APHIS fully describes on its  website how the agency compiles annual report data from research  facilities, what the data represent, and any potential limitations to the  data\u2019s completeness and accuracy. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Commerce, Defense, HHS, DHS,  Interior, USDA, VA, EPA, NASA, and the Smithsonian Institution. USDA  and VA provided written comments on the draft, which are presented in  appendixes IV and V, respectively. In its written comments, USDA said  that APHIS provided planned corrective actions and timeframes for  implementing three of our four recommendations; APHIS disagreed with  one recommendation. In its written comments, VA said that the report\u2019s  conclusions were consistent with our findings.", "Regarding our first recommendation that the Administrator of APHIS  develop a timeline for (1) defining birds that are not bred for research and  that are covered by the Animal Welfare Act, and (2) requiring that  research facilities report to APHIS their use of birds covered by the act,  USDA stated that APHIS  will submit a recommendation and timeline by  September 30, 2018, to USDA officials regarding the development of a  definition for birds. USDA\u2019s comments did not specifically respond to our  recommendation that APHIS also develop a timeline for requiring that  research facilities report their use of birds covered by the act; we continue  to believe that APHIS  should develop such a timeline.", "USDA\u2019s written comments stated that APHIS disagreed with our second  recommendation that the Administrator of APHIS should instruct federal  agencies to report their use of animals covered by the Animal Welfare Act  in federal facilities located outside of the United States. USDA provided  several reasons for the disagreement:", "USDA stated that the absence of an exclusion to the requirements of the Animal Welfare Act or its regulations for federal research located outside of the United States does not create a requirement to collect information about such facilities\u2019 use of animals. However, the Animal Welfare Act regulations define a reporting facility to include a department, agency, or instrumentality of the United States. In addition, officials from USDA\u2019s Office of the General Counsel told us that there is no exclusion in the act or its regulations for federal research facilities that are located outside the United States. We have no reason to believe that such facilities should be excluded from the requirements of the Animal Welfare Act or its implementing regulations. We also note that in February 2018, APHIS officials told us that if federal agencies\u2019 activities involving animals outside of the United States are in fact covered by the Animal Welfare Act based on the specific facts and circumstances of their activities, they should report those activities to APHIS.", "USDA\u2019s comments stated that the collection of information related to  research activities outside of the United States does not enable or  inform its daily administration of the Animal Welfare Act and its charge  to ensure the humane treatment of animals. Rather, USDA stated that  our recommendation would impose an additional regulatory burden on  federal research facilities. As stated above, we have no reason to  believe that such facilities should be excluded from the requirements  of the Animal Welfare Act or its implementing regulations. Without  such an exclusion, the regulatory burden already exists; our  recommendation would simply have APHIS instruct federal agencies  to meet that regulatory requirement.", "Finally, USDA commented that our recommendation would place  APHIS in the position of collecting different information from \u201creporting  facilities,\u201d as defined in the regulations, which in turn, would impact  any summary presentation of information involving the use of animals.  We understand that, if our recommendation were implemented,  APHIS may receive \u201cdifferent\u201d information from federal and nonfederal  facilities; that is, federal research facilities might report activities  outside of the United States while nonfederal facilities would not.  However, as stated above, we have no reason to believe that such  facilities should be excluded from the requirements of the Animal  Welfare Act or its implementing regulations. Without such an  exclusion, activities covered by the Animal Welfare Act in federal  facilities located outside of the United States must already be  reported. We also note that, as we state in our fourth  recommendation, APHIS  should inform the public about the nature of  its data. That information could include describing any differences in  reporting by federal and nonfederal research facilities.", "For the reasons given above, we continue to believe that the  Administrator of APHIS should instruct federal agencies to report their  use of animals in activities covered by the Animal Welfare Act in federal  facilities located outside of the United States.", "In response to our third recommendation that the Administrator of APHIS  take certain steps to clarify the definition of field studies that are covered  by the Animal Welfare Act, USDA stated that APHIS  agreed to issue a  guidance document by December 31, 2018. We appreciate APHIS\u2019s  commitment to issuing new guidance on field studies, but note that  USDA\u2019s written comments did not directly respond to the language in our  draft recommendation that called for the agency to provide research  facilities with clear examples of field studies that are covered by the  Animal Welfare Act regulations. We also note that the Forest Service  stated in technical comments that the extensive number and variation in  wildlife species preclude providing specific examples of activities that  meet a prescribed definition of a field study. The Forest Service  suggested that we modify our recommendation to call for APHIS to  provide criteria for how research facilities should determine which studies  qualify as an exempted field study. We agreed with that suggestion and  modified our recommendation to call on APHIS to provide research  facilities with criteria to help research facilities determine which studies  are covered by the Animal Welfare Act.", "APHIS agreed with our fourth recommendation that the Administrator of  APHIS direct the agency to fully describe animal use data on its website.  USDA\u2019s comments stated that, beginning with the fiscal year 2017  summary activities, APHIS will describe how it compiles annual report  data from research facilities, what the data represent, and any potential  limitations to the data\u2019s completeness and accuracy. USDA stated that  APHIS will update the website with this information by September 30,  2018.", "In its written comments, VA stated that our overall descriptions of its  animal research program were accurate. The agency also stated that it  looks forward to a time when the use of animals in research is no longer  needed, but until that time, the agency will use all necessary research  strategies to reduce and prevent the suffering of veterans.", "APHIS, HHS, and DHS also provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Agriculture, the Secretary of Commerce, the  Secretary of Defense, the Secretary of Health and Human Services, the  Secretary of Homeland Security, the Secretary of the Interior, the  Secretary of Veterans Affairs, the Administrator of the Environmental  Protection Agency, the Administrator of the National Aeronautics and  Space Administration, the Secretary of the Smithsonian Institution, and  other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact us at (202) 512-3841 or morriss@gao.gov or  neumannj@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  VI."], "subsections": []}]}, {"section_title": "Appendix I: Animal Species Used in Research by Federal Agencies in Fiscal Years 2014 through 2016", "paragraphs": ["Federal agencies conduct research with animals for a variety of purposes,  including to benefit human or animal populations. We identified 10  agencies that conducted research using vertebrate animals in fiscal years  2014, 2015, or 2016 with their own staff using their own facilities and  equipment. Federal agencies also fund activities that use animals,  meaning that the research is done by a nonfederal entity. However, we  did not include those activities in our review.", "In the process of identifying federal agencies that conducted research  with animals, we also identified the wide range of vertebrate animal  species that these agencies used from fiscal years 2014 through 2016. In  response to our survey of agencies, we learned that some agencies  conducted research with a dozen or more species of animal while others  conducted activities with hundreds of species. For example, NASA  reported to GAO that it used 16 species while the National Museum of  Natural History\u2014one of the four animal research facilities within the  Smithsonian Institution that responded to our survey\u2014reported it  conducted research on about 1,400. Table 3 shows groups of vertebrate  species the 10 agencies reported to GAO that they used in research in  fiscal years 2014 through 2016.", "Some of the species groups shown in table 3 are not covered by the  Animal Welfare Act (i.e., amphibians, fish, and reptiles), while some  animal species within a group may not be covered by the act. For  example, farm animals are not covered by the Animal Welfare Act if  researchers use them for agricultural purposes, such as improving animal  nutrition, breeding management, or production efficiency, or for improving  the quality of food or fiber, but are covered if researchers use them for  human health purposes. Mice and rats are not covered by the Animal  Welfare Act if they are of the genus Mus or Rattus and bred for use in  research. Similarly, the act does not cover birds bred for use in research.  Furthermore, agencies may have used animal species in a field study that  is not covered by Animal Welfare Act regulations. Agencies are not  required by the Animal Welfare Act to report their use of animals that are  not covered by the act to the U.S. Department of Agriculture\u2019s Animal and  Plant Health Inspection Service (APHIS). Nevertheless, the agencies are  required by other policies and statutes to ensure that they treat those  animals humanely."], "subsections": []}, {"section_title": "Appendix II: List of Federal and Nonfederal Participants in GAO\u2019s Survey", "paragraphs": [], "subsections": [{"section_title": "Federal departments, agencies, and components:", "paragraphs": [], "subsections": []}, {"section_title": "Animal advocacy organizations:", "paragraphs": [], "subsections": []}, {"section_title": "Research and science organizations:", "paragraphs": [], "subsections": []}, {"section_title": "Academic stakeholders (speaking as individuals and not on behalf of their institutions):", "paragraphs": [], "subsections": []}, {"section_title": "Other stakeholders:", "paragraphs": ["American Association for Laboratory Animal Science  AAALAC  International  (formerly known as the Association for Assessment  and Accreditation of Laboratory Animal Care International)"], "subsections": []}]}, {"section_title": "Appendix III: Analysis of GAO\u2019s Survey about Whether Federal Agencies Should Publicly Provide Information on Their Use of Animals in Research, Testing, and Training", "paragraphs": ["As described in this report, GAO conducted a survey of federal agencies  and stakeholder groups regarding their opinions on whether federal  agencies should proactively and routinely and publicly share information  about their animals on a website or other means. The graphics in this  appendix illustrate the responses to our survey by stakeholder group. The  stakeholder groups included 20 federal departments, agencies, and sub- agencies that conduct animal research on vertebrate species; eight  animal advocacy organizations that advocate on behalf of animals; six  research and science organizations; and five other stakeholders including  individuals in academia and other knowledgeable entities. Stakeholders  from federal agencies, research organizations, and academia and other  entities except animal advocacy organizations generally expressed the  view that federal agencies should not make additional information made  routinely available to the public. (See figs. 1, 2, and 3, respectively.) In  contrast, animal advocacy organizations generally expressed the view  that federal agencies should make additional information routinely  available to the public. (See fig. 4.) Figure 5 provides examples of  stakeholders\u2019 statements explaining their views on whether federal  agencies should or should not provide additional information to the public.", "GAO also asked stakeholder groups in the survey about their opinion  regarding whether the Animal and Plant Health Inspection Service  (APHIS) should modify how it collects and posts annual report data under  the Animal Welfare Act. Seventeen of 39 stakeholders responded that  they would like to see changes to the way APHIS collects and posts  annual report data. Specifically, all stakeholders from animal advocacy  organizations and individuals in academia would like to see changes to  how APHIS collects and posts annual report data while some  stakeholders from federal agencies and research and science  organizations also noted that they would like to see changes. Table 4  provides examples of stakeholders\u2019 views and suggestions regarding  such changes."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff acknowledgments", "paragraphs": ["In addition to the individuals named above, Mary Denigan-Macauley  (Acting Director), Joseph Cook (Assistant Director), Ross Campbell  (Analyst-in-Charge), Kevin Bray, Tara Congdon, Hayden Huang, Marc  Meyer, Amber Sinclair, and Rajneesh Verma made key contributions to  this report."], "subsections": []}]}], "fastfact": ["Federal agencies must treat research animals humanely in their quest to answer scientific questions. As a check on their practices, the agencies must submit data about their animal use to the Animal and Plant Health Inspection Service (APHIS) and the National Institutes of Health.", "Concerned members of the public seek data on animal use to help ensure humane treatment. We found that agencies publicly report some data on animal use but do not report other data unless asked.", "We also found that agencies may not accurately report their animal use to APHIS because of inadequate instructions. We recommended that APHIS improve its instructions."]}
{"id": "GAO-18-693T", "url": "https://www.gao.gov/products/GAO-18-693T", "title": "Energy Infrastructure Permitting: Factors Affecting Timeliness and Efficiency", "published_date": "2018-09-06T00:00:00", "released_date": "2018-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress recognizes the harmful effects of permitting delays on infrastructure projects and has passed legislation to streamline project reviews and hold agencies accountable. For example, in 2015 Congress passed the Fixing America's Surface Transportation Act, which included provisions streamlining the permitting process. Federal agencies, including the Department of the Interior and FERC, play a critical role by reviewing energy infrastructure projects to ensure they comply with federal statutes and regulations.", "This testimony discusses factors GAO found that can affect energy infrastructure permitting timeliness and efficiency. To do this work, GAO drew on reports issued from July 2012 to December 2017. GAO reviewed relevant federal laws, regulations, and policies; reviewed and analyzed federal data; and interviewed tribal, federal, state and industry officials, among others."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's prior work has found that the timeliness and efficiency of permit reviews may be affected by a range of factors. For the purposes of this testimony, GAO categorized these factors into five categories.", "Coordination and Communication. GAO found that better coordination between agencies and applicants is a factor that could result in more efficient permitting. Coordination practices that agencies can use to streamline the permitting process include the following:", "Designating a Lead Coordinating Agency . GAO found having a lead agency to coordinate the efforts of federal, state, and local stakeholders is beneficial to permitting processes. For example, in a February 2013 report on natural gas pipeline permitting, industry representatives and public interest groups told GAO that the interstate process was more efficient than the intrastate process because in the interstate process the Federal Energy Regulatory Commission (FERC) was lead agency for the environmental review.", "Establishing Coordinating Agreements among Agencies . In the February 2013 report, GAO reported that FERC and nine other agencies signed an interagency agreement for early coordination of required environmental and historic preservation reviews to encourage the timely development of pipeline projects.", "Human Capital. Agency and industry representatives cited human capital factors as affecting the length of permitting reviews. Such factors include having a sufficient number of experts to review applications. GAO reported in November 2016 on long-standing workforce challenges at the Department of the Interior's Bureau of Indian Affairs (BIA), such as inadequate staff resources and staff at some offices without the skills to effectively conduct such reviews. GAO recommended that Interior incorporate effective workforce planning standards by assessing critical skills and competencies needed to fulfill its responsibilities related to energy development. Interior agreed with this recommendation, and BIA stated that its goal is to develop such standards by the end of fiscal year 2018.", "Collecting and Analyzing Accurate Milestone Information. GAO's work has shown that a factor that hinders efficiency and timeliness is that agencies often do not track when permitting milestones are achieved, such as the date a project application is submitted or receives final agency approval. Having quality information on permitting milestones can help agencies better analyze process deficiencies and implement improvements.", "Incomplete Applications. Agency officials and agency documents cited incomplete applications as affecting the duration of reviews. For example, in a 2014 budget document, BLM reported that\u2014due to personnel turnover in the oil and gas industry\u2014operators were submitting inconsistent and incomplete applications for drilling permits, delaying permit approvals.", "Significant Policy Changes. Policy changes unrelated to permitting can affect permitting time frames. For example, after the 2010 Deepwater Horizon incident and oil spill, Interior issued new safety requirements for offshore drilling. GAO found that review times for offshore oil and gas drilling permits increased after these safety requirements were implemented."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made numerous recommendations about ways to improve energy infrastructure permitting processes. Federal agencies have implemented a number of GAO's recommendations and taken steps to implement more efficient permitting, but several of GAO's recommendations remain open, presenting opportunities to continue to improve permitting processes."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our work on the role of federal  agencies in the permitting processes for energy infrastructure projects.", "Federal agencies, including the Department of the Interior and the  Federal Energy Regulatory Commission (FERC), play a critical role in  ensuring that energy infrastructure projects developed in the United  States comply with a wide range of federal statutes and regulations.  Perhaps the most notable is the National Environmental Policy Act  (NEPA), which requires federal agencies to evaluate the potential  environmental effects of actions they propose to carry out, fund, or  approve, such as by permit.", "Over the years, we have issued numerous reports describing the role of  federal agencies in permitting various types of energy infrastructure,  including onshore and offshore oil and gas projects, natural gas pipelines,  and liquefied natural gas (LNG) export facilities. Two common themes  emerge from these reports. First, permitting processes are varied and  complex, often requiring an applicant to comply with a range of federal,  state, and local laws and regulations. Second, permitting processes can  involve several federal and state agencies, as well as other stakeholders,  many of whom have approval responsibilities. For example, to construct  an LNG export facility, an applicant must coordinate with federal agencies  such as FERC\u2014the lead agency responsible for the environmental and  safety review\u2014as well as the U.S. Coast Guard\u2014which assesses  waterway suitability; the applicant may also need permits from, among  others, the U.S. Army Corps of Engineers for dredging activities and the  U.S. Environmental Protection Agency for permits under the Clean Air  Act. In addition to federal permits and consultations, applicants may also  be required to obtain other permits under state and local law. Because of  the wide variety of projects, locations, and state and local laws, permitting  requirements vary by project. Public interest groups and the public also  contribute to the process.", "We have found that inefficiencies in the permitting process can have real  world effects. For example, in a June 2015 report on Indian energy  development, we reported that a review by the Bureau of Indian Affairs  (BIA) could be a lengthy process and increase development costs and  project development times, resulting in missed development opportunities  and lost revenue and jeopardizing the viability of projects. As we  reported then, the Acting Chairman for the Southern Ute Indian Tribe  reported in 2014 that BIA\u2019s review of some of its energy-related  documents took as long as 8 years, and during that time the tribe  estimated it lost $95 million in revenues.", "Congress has recognized the harmful effects of permitting delays and  passed legislation to streamline permitting and to hold agencies  accountable, including Fixing America\u2019s Surface Transportation Act.  When Congress passed this act in 2015, it included provisions for  streamlining the infrastructure permitting process and codified into law the  use of a permitting dashboard to track project timelines.", "This testimony discusses factors that can affect permitting timeliness and  efficiency. This statement draws on findings from our reports issued from  July 2012 to December 2017. In conducting that work, we reviewed  relevant federal laws, regulations, and policies; reviewed and analyzed  federal data; and interviewed tribal, federal, state and industry officials,  among others. More detailed information on our scope and methodology  can be found in each of the cited reports.", "We conducted the work on which this testimony is based 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."], "subsections": [{"section_title": "Factors Affecting Federal Infrastructure Permitting", "paragraphs": ["In our prior work, we identified a range of factors that can affect permitting  timeliness and efficiency. For the purposes of this statement, we have  categorized the factors into five broad categories: 1) coordination and  communication, 2) human capital, 3) collecting and analyzing accurate  milestone information, 4) incomplete applications, and 5) significant policy  changes."], "subsections": [{"section_title": "Coordination and Communication", "paragraphs": ["Effective coordination and communication between agencies and  applicants is a critical factor in an efficient and timely permitting process.  Standards for internal control in the federal government call for  management to externally communicate the necessary quality information  to achieve the entity\u2019s objectives, including by communicating with and  obtaining quality information from external parties. We found that better  coordination between agencies and applicants could result in more  efficient permitting. For example, in our February 2013 review of natural  gas pipeline permitting, we reported that virtually all applications for  pipeline projects require some level of coordination with one or more  federal agencies, as well as others, to satisfy requirements for  environmental review. For example, BIA is responsible for, among other  things, approving rights of way across lands held in trust for an Indian or  Indian tribe and must consult and coordinate with any affected tribe.", "We have reported on coordination practices that agencies use to  streamline the permitting process, including the following."], "subsections": [{"section_title": "Designating a Lead Coordinating Agency", "paragraphs": ["We have found that having a lead agency coordinate efforts of federal,  state, and local stakeholders is beneficial to permitting processes. For  example, in our February 2013 review on natural gas pipeline permitting,  industry representatives and public interest groups told us that the  interstate process was more efficient than the intrastate process because  in the interstate process FERC was designated the lead agency for the  environmental review. Other agencies may also designate lead entities  for coordination. For example, in a November 2016 report, we described  how BIA had taken steps to form an Indian Energy Service Center that  was intended to, among other things, help expedite the permitting  process associated with Indian energy development. We recommended  that BIA involve other key regulatory agencies in the service center so  that it could more effectively act as a lead agency."], "subsections": []}, {"section_title": "Establishing Coordinating Agreements among Agencies", "paragraphs": ["Establishing coordinating agreements among agencies can streamline  the permitting process and reduce time required by routine processes.  For example, in our February 2013 review of natural gas pipeline  permitting, we reported that FERC and nine other agencies signed an  interagency agreement for early coordination of required environmental  and historic preservation reviews to encourage the timely development of  pipeline projects."], "subsections": []}, {"section_title": "Using Mechanisms to Expedite Routine or Less Risky Reviews", "paragraphs": ["Agencies can also use mechanisms to streamline reviews of projects that  are routine or less environmentally risky. For example, under NEPA, agencies may categorically exclude actions that an agency has found\u2014in  NEPA procedures adopted by the agency\u2014do not individually or  cumulatively have a significant effect on the human environment and for  which, therefore, neither an environmental assessment nor an  environmental impact statement is required. Also under NEPA,  agencies may rely on \u201ctiering,\u201d in which broader, earlier NEPA reviews  are incorporated into subsequent site-specific analyses. Tiering is used to  avoid duplication of analysis as a proposed activity moves through the  NEPA process, from a broad assessment to a site-specific analysis.  Such a mechanism can reduce the number of required agency reviews  and shorten the permitting process."], "subsections": []}]}, {"section_title": "Human Capital", "paragraphs": ["Agency and industry representatives cited human capital factors as  affecting the length of permitting reviews. Such factors include having a  sufficient number of experts to review applications. Some examples  include:  In June 2015 and in November 2016, we reported concerns  associated with BIA\u2019s long-standing workforce challenges, such as  inadequate staff resources and staff at some offices without the  skills needed to effectively review energy-related documents. In  November 2016 we recommended that Interior direct BIA to  incorporate effective workforce planning standards by assessing  critical skills and competencies needed to fulfill BIA\u2019s  responsibilities related to energy development.", "For a September 2014 report, representatives of companies  applying for permits to construct LNG export facilities told us that  staff shortages at the Pipeline and Hazardous Safety Materials  Administration delayed spill modeling necessary for LNG facility  reviews.", "In an August 2013 review of Interior\u2019s Bureau of Land  Management (BLM) and oil and gas development, industry  representatives told us that BLM offices process applications for  permit to drill at different rates, and inadequate BLM staffing in  offices with large application workloads are one of the reasons for  these different rates.", "Agencies have taken some actions to mitigate human capital issues. For  example, we reported in August 2013 that BLM had created special  response teams of 10 to 12 oil and gas staff from across BLM field offices  to help process applications for permits to drill in locations that were  experiencing dramatic increases in submitted applications. In July 2012,  we recommended that Interior instruct two of its bureaus to develop  human capital plans to help manage and prepare for human capital  issues, such as gaps in critical skills and competencies."], "subsections": []}, {"section_title": "Collecting and Analyzing Accurate Milestone Information", "paragraphs": ["Our work has shown that a factor that hinders efficiency and timeliness is  that agencies often do not track when permitting milestones are achieved,  such as the date a project application is submitted or receives final  agency approval to determine if they are achieving planned or expected  results. In addition, our work has shown that agencies often do not collect  accurate information, which prevents them from analyzing their processes  in order to improve and streamline them. The following are examples of  reports in which we discussed the importance of collecting accurate  milestone information:  In December 2017, we found that the National Marine Fisheries  Service and the U.S. Fish and Wildlife Service were not recording  accurate permit milestone dates, so it was not possible to  determine whether agencies met statutory review time frames.  We recommended that these agencies clarify how and when staff  should record review dates so that the agencies could assess the  timeliness of reviews.", "We found in June 2015 that BIA did not have a documented  process or the data needed to track its review and response  times; to improve the efficiency and transparency of BIA\u2019s review  process, we recommended that the agency develop a process to  track its review and response times and improve efforts to collect  accurate review and response time information.", "We found in an August 2013 report that BLM did not have  complete data on applications for permits to drill, and without  accurate data on the time it took to process applications, BLM did  not have the information it needed to improve its operations. We  recommended that BLM ensure that all key dates associated with  the processing of applications for permits to drill are completely  and accurately entered into its system to improve the efficiency of  the review process.", "Standards for internal control in the federal government call for  management to design control activities to achieve objectives and  respond to risks, including by comparing actual performance with planned  or expected results and analyzing significant differences. Without tracking  performance over time, agencies cannot do so. The standards also call  for agency management to use quality information to achieve agency  objectives; such information is appropriate, current, complete, accurate,  accessible, and provided on a timely basis. As we have found, having  quality information on permitting milestones can help agencies identify the  duration of the permitting process, analyze process deficiencies, and  implement improvements."], "subsections": []}, {"section_title": "Incomplete Applications", "paragraphs": ["According to agency officials we spoke with and agency documents we  reviewed, incomplete applications are a factor that can affect the duration  of reviews. For example, in a 2014 BLM budget document, BLM reported  that\u2014due to personnel turnover in the oil and gas industry\u2014operators  were submitting inconsistent and incomplete applications for permits to  drill, which was delaying the approval of permits. In a February 2013  report, officials we spoke with from Army Corps of Engineers district  offices said that incomplete applications may delay their review because  applicants are given time to revise their application information.  Deficiencies within agency IT systems may also result in incomplete  applications. As we noted in a July 2012 report, Interior officials told us  that their review of oil and gas exploration and development plans was  hindered by limitations in its IT system that allowed operators to submit  inaccurate or incomplete plans, after which plans were returned to  operators for revision or completion.", "Agencies can reduce the possibility of incomplete applications by  encouraging early coordination between the prospective applicant and the  permitting agency. According to agency and industry officials we spoke  with, early coordination can make the permitting process more efficient.  One example of early coordination is FERC\u2019s pre-filing process, in which  an applicant may communicate with FERC staff to ensure an application  is complete before formally submitting it to the commission."], "subsections": []}, {"section_title": "Significant Policy Changes", "paragraphs": ["Changes in U.S. policy unrelated to permitting are a factor that can also  affect the duration of federal permitting reviews. For example, in  September 2014, we reported that the Department of Energy did not  approve liquefied natural gas exports to countries without free-trade  agreements with the United States for a period of 16 months.  We found  that the Department stopped approving applications while it conducted a  study of the effect of liquefied natural gas exports on the U.S. economy  and the national interest. Exporting liquefied natural gas was an economic  reversal from the previous decade in which the United States was  expected to become an importer of liquefied natural gas.", "Policy changes can result from unforeseen events. After the Deepwater  Horizon incident and oil spill in 2010, Interior strengthened many of its  safety requirements and policies to prevent another offshore incident. For  example, Interior put new safety requirements in place related to well  control, well casing and cementing, and blowout preventers, among other  things. In a July 2012 report, we found that after the new safety  requirements went into effect, review times for offshore oil and gas drilling  permits increased, as did the number of times that Interior returned a  permit to an operator.", "In conclusion, our past reports have identified varied factors that affect  the timeliness and efficiencies of federal energy infrastructure permitting  reviews. Federal agencies have implemented a number of our  recommendations and taken steps to implement more efficient permitting,  but several of our recommendations remain open, presenting  opportunities to continue to improve permitting processes.", "Chairmen Palmer and Gianforte, Ranking Members Raskin and Plaskett,  and Members of the Subcommittees, this concludes my prepared  statement. I would be pleased to answer any questions that you may  have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact Frank Rusco, Director, Natural Resources and  Environment, who may be reached at (202) 512-3841 or  RuscoF@gao.gov. Contact points for our Office of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Key contributors to this testimony include Christine Kehr  (Assistant Director), Dave Messman (Analyst-in-Charge), Patrick Bernard,  Marissa Dondoe, Quindi Franco, William Gerard, Rich Johnson, Gwen  Kirby, Rebecca Makar, Tahra Nichols, Holly Sasso, and Kiki  Theodoropoulos.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Federal agencies play a critical role in ensuring that energy infrastructure projects comply with federal statutes and regulations. We testified about the role of federal agencies in reviewing and permitting various types of energy infrastructure, such as offshore oil and gas projects.", "We found that a number of factors affect the timeliness and efficiency of these reviews\u2014such as coordination between federal agencies, the number of experts that agencies have to review applications, whether agencies are tracking and collecting milestone information, the completeness of applications, and changes in federal policy that affect reviews."]}
{"id": "GAO-18-376", "url": "https://www.gao.gov/products/GAO-18-376", "title": "Foster Care: Additional Actions Could Help HHS Better Support States' Use of Private Providers to Recruit and Retain Foster Families", "published_date": "2018-05-30T00:00:00", "released_date": "2018-05-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Foster care caseloads have increased in recent years due, in part, to the national opioid epidemic. States have struggled to find foster families for children who can no longer live with their parents, including those who need TFC services. States may use private providers, such as non-profit and for-profit organizations, to help recruit and retain foster families. States may also use federal funds provided by HHS for these efforts. GAO was asked to review states' efforts to recruit and retain foster families.", "This report examines: (1) how state child welfare agencies recruit foster families, including those who provide TFC services, (2) any challenges in recruiting and retaining foster families, and (3) the extent to which HHS provides support to child welfare agencies in these efforts. GAO reviewed relevant federal laws, regulations, and guidance; interviewed HHS officials; surveyed child welfare agencies in all states and the District of Columbia; held discussion groups with private providers and foster parents who provide TFC services; and conducted interviews with officials in California, Georgia, and Indiana, which were selected for factors such as changes in foster care caseloads, opioid abuse rates, and geographic location."]}, {"section_title": "What GAO Found", "paragraphs": ["States employ a range of strategies to recruit foster families and nearly all use private providers to recruit, particularly for therapeutic foster care (TFC) services, in which parents receive training and support to care for children who need a higher level of care. Recruitment strategies include searching for relatives, conducting outreach to the community, targeting certain populations, and obtaining referrals from current foster families. In response to GAO's national survey, 49 states reported using private providers to recruit foster families. In the three selected states where GAO conducted interviews, private providers were responsible for both recruiting and retaining foster families, such as helping families become licensed and providing them with support (see fig.).", "States reported various challenges with recruiting and retaining foster families in response to GAO's survey. In recruiting families, over two-thirds of states reported challenges such as limited funding and staff, which can make prioritizing recruitment efforts difficult; extensive licensing processes; and difficulties finding families willing to care for certain children, such as those with high needs. In retaining families, 29 states reported concerns about inadequate support for foster families, which can include difficulties contacting child welfare agency caseworkers. In addition, 31 states reported limited access to services needed to care for children, such as child care.", "The U.S. Department of Health and Human Services (HHS) provides a number of supports to help states recruit and retain foster families, including technical assistance with their recruitment programs, guidance and information, and funding. Most states GAO surveyed found HHS's supports moderately or very helpful. However, several private providers GAO interviewed in three selected states said they have not received guidance or information from child welfare agencies about recruiting and retaining foster families. In addition, 11 of the 14 providers said they were unaware of related HHS supports and all of them described concerns about communication with child welfare agencies. HHS officials said they encourage states to involve all relevant stakeholders in their efforts, though HHS has focused on supporting child welfare agencies. Consistent with internal control standards on communication, determining whether information on working with private providers would be useful to states could help HHS better support states' use of private providers in efforts to recruit and retain foster families."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends HHS seek feedback from states on whether information on effective ways to work with private providers to recruit and retain foster families would be useful and if so, provide such information. HHS agreed with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["After steady declines for more than a decade, foster care caseloads  nationwide rose from about 400,000 children in fiscal year 2012 to nearly  440,000 in fiscal year 2016. According to a recent study by the U.S.  Department of Health and Human Services (HHS), the national opioid  epidemic has contributed to this increase because parents under the  influence of opioids are often unable to care for their children. Child  welfare officials in many states have noted challenges finding placements  for children who can no longer live with their parents, and media reports  have described instances in which children were placed in hotel rooms,  emergency shelters, and child welfare offices until appropriate  placements could be found.", "States may place children in a variety of settings depending on a child\u2019s  needs, including placements with unrelated foster parents, relatives, or in  congregate care settings such as group homes and residential treatment  centers. States may use several federal funding sources administered by  HHS to assist in these efforts. However, a 2015 HHS study found  agreement among multiple child welfare stakeholders that children are  best served in family settings, and many states have reduced the number  of children in congregate care in the last decade. The reduction in states\u2019  use of congregate care has contributed to the need for foster families,  particularly for children who require a higher level of care, such as those  who have severe mental health conditions or who are medically fragile. A  potential alternative to congregate care is therapeutic foster care, a  family-based model in which children who need a higher level of care are  placed with foster parents who are trained, supervised, and supported by  qualified program staff to provide services such as crisis support,  behavior management, medication monitoring, counseling, and case  management. There is no national definition of therapeutic foster care  and these programs can vary widely among states.", "You asked us to explore issues related to states\u2019 efforts to recruit and  retain foster families. This report examines (1) how state child welfare  agencies recruit foster families, including those who provide therapeutic  foster care services; (2) what challenges, if any, there are in recruiting  and retaining foster families; and (3) the extent to which HHS provides  support to child welfare agencies in their efforts to recruit and retain foster  families.", "To address all three of our objectives, we conducted a web-based survey  of state child welfare agencies in the 50 states and the District of  Columbia to obtain national information. The survey was administered in  September 2017 and we obtained a 100 percent response rate. We also  conducted interviews in three states\u2014California, Georgia, and Indiana\u2014 to obtain more in-depth information from officials from state child welfare  agencies, representatives from 14 private foster care providers working  with these child welfare agencies, and foster parents working with 8 of  these providers. The three states were selected for in-person and phone  interviews based on factors such as recent changes in foster care  caseloads, opioid abuse rates, variation in child welfare administration  systems (i.e., state- versus county-administered), and geographic  location. In California, the only selected state with a county-administered  child welfare system, we selected three counties\u2014Los Angeles,  Sacramento, and Sonoma\u2014and interviewed officials from the respective  county-level child welfare agencies. These counties were selected based  on factors similar to those mentioned above, as well as variation in  population density (i.e., rural versus urban). The information gathered in  the three selected states is not generalizable to all states.", "To obtain perspectives on providing therapeutic foster care services  specifically, we conducted two discussion groups with representatives  from 17 private providers and one discussion group with eight sets of  foster parents. Our discussion groups were held at a conference hosted  by the Family Focused Treatment Association, a non-profit organization  that aims to develop, promote, and support therapeutic foster care  services. The information gathered in our discussion groups is not  generalizable, though it provides valuable insights on the recruitment and  retention of families who can provide therapeutic foster care services. To  develop our methodologies, we reviewed related literature and  interviewed child welfare experts. In addition, to examine how HHS  supports child welfare agencies in their recruitment and retention efforts,  we interviewed HHS officials and reviewed relevant documents obtained  in these interviews. We also reviewed relevant federal laws, regulations,  and HHS policies, as well as federal internal control standards. See  appendix I for additional information on our objectives, scope, and  methodology.", "We conducted this performance audit from January 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Placements for Children Entering and Exiting Foster Care", "paragraphs": ["Children enter foster care when they have been removed from their  parents or guardians and placed under the responsibility of a child welfare  agency. Reasons for a child\u2019s removal can vary, though 61 percent of  nearly 275,000 removals during fiscal year 2016 involved neglect and 34  percent involved drug abuse by the parent(s), according to the most  recent available HHS data. Child welfare agencies most commonly place  children with unrelated foster parents, with relatives, or in congregate  care settings. Coordinating placement and support services for these  children, such as physical and mental health services, education, child  care, and transportation, is typically the responsibility of child welfare  agency caseworkers. Caseworkers may also coordinate placements for  children exiting foster care, which most commonly include reunifications  with the child\u2019s parents or permanent placements through adoption, legal  guardianship, or other living arrangements with a relative. Children who  age out of the foster care system without a permanent placement with a  family may receive transitional supports, such as housing and job search  services.", "Children placed in foster families\u2014including unrelated foster parents,  relatives, and fictive kin (e.g., close family friends who are not relatives)\u2014 live in the family\u2019s home and are typically incorporated into an existing  family structure. For example, these families may include biological  children and other children in foster care. Families may receive a  payment from the child welfare agency to help cover the costs of a child\u2019s  care, as determined by each state. Families who are trained to provide  therapeutic foster care services are supervised and supported by  qualified program staff to care for children who need a higher level of  care. Therapeutic foster care families may have fewer or no other children  in the home, and parents in these families may be required to provide a  higher level of care and supervision for the child. In addition, the payment  provided to these families may be higher."], "subsections": []}, {"section_title": "Responsibilities for Recruiting and Retaining Foster Families", "paragraphs": ["States are primarily responsible for administering their child welfare  programs, consistent with applicable federal laws and regulations. Their  responsibilities include recruiting and retaining foster families and finding  other appropriate placements for children. In recruiting foster families,  states generally require that families undergo a licensing process that  includes a home study to assess the suitability of the prospective parents,  including their health, finances, and criminal history, and take pre-service  training on topics such as the effects of trauma on a child\u2019s behavior. In  retaining foster families, states may provide support to families, such as  through ongoing training classes and regular visits from child welfare  agency caseworkers if a child is placed in their home.", "State and county child welfare agencies may work with private foster care  providers, commonly through contracts, to help them administer child  welfare services. Private providers can include non-profit and for-profit  organizations that provide a range of public and private services in  addition to foster care, such as residential treatment, mental health, and  adoption services. For foster care, private providers may be responsible  for recruiting foster families, which may involve identifying prospective  foster parents, providing information on and helping with the licensing  process, and conducting home studies and training. If the child welfare  agency places a child with a foster family working with a private provider,  the private provider may also be responsible for activities that can help  retain foster families, such as conducting regular visits with the family (in  addition to visits from child welfare agency caseworkers) and helping  them access needed services. Child welfare agencies may pay these  providers based on the number of children placed. This payment may  include an administrative payment to the private provider, as well as a  payment that the private provider passes on to the foster family to help  cover the costs of a child\u2019s care.", "Child welfare agencies and private providers may also work with other  entities to recruit and retain foster families. For example, they may  collaborate with community partners, such as faith-based organizations  and schools, to share information about foster care and recruit families.  Child welfare agencies and private providers may also work with direct  service providers, such as hospitals and community-based mental health  clinics, to obtain services to support children in foster care and their foster  families, which can help retain these families."], "subsections": []}, {"section_title": "Federal Supports Related to Recruiting and Retaining Foster Families", "paragraphs": ["HHS\u2019s Administration for Children and Families (ACF) administers several  federal funding sources that states can use to recruit and retain foster  families, in addition to state, local, and other funds. For example, funding  appropriated for title IV-E of the Social Security Act makes up the large  majority of federal funding provided for child welfare, comprising about 89  percent of federal child welfare appropriations in fiscal year 2017  (approximately $7 billion of nearly $7.9 billion), according to ACF. These  funds are available to states to help cover the costs of operating their  foster care, adoption, and guardianship assistance programs. For  example, in their foster care programs, states may use these funds for  payments to foster families to help cover the costs of care for eligible  children (e.g., food, clothing, and shelter) and for certain administrative  expenses, including recruiting and training prospective foster parents.  Title IV-E funds appropriated specifically for foster care programs totaled  about $4.3 billion in fiscal year 2017, comprising about 61 percent of title  IV-E funding, according to ACF.", "In addition, title IV-B of the Social Security Act is the primary source of  federal child welfare funding available for child welfare services. States  may use these funds for family support and family preservation services  to help keep families together and reduce the need to recruit and retain  foster families. Such services can include crisis intervention, family  counseling, parent support groups, and mentoring. States may also use  title IV-B funds to support activities to recruit and retain foster families.  Federal appropriations for title IV-B comprised about 8 percent of federal  child welfare appropriations (approximately $650 million of nearly $7.9  billion) in fiscal year 2017, according to ACF.", "ACF is responsible for monitoring states\u2019 implementation of these  programs. For example, ACF monitors state compliance with title IV-B  plan requirements through its review of states\u2019 5-year Child and Family  Services Plans and Annual Progress and Services Reports. Child and  Family Services Plans set forth a state\u2019s vision, goals, and objectives to  strengthen its child welfare system, and Annual Progress and Services  Reports provide annual updates on the progress made by states toward  those goals and objectives. Child and Family Services Plans are required  for a state to receive federal funding under title IV-B, and document the  state\u2019s compliance with federal program requirements. One requirement  is that states must describe in their plans how they will \u201cprovide for the  diligent recruitment of potential foster and adoptive families that reflect the  ethnic and racial diversity of children in the State for whom foster and  adoptive homes are needed.\u201d In addition, ACF conducts Child and  Family Services Reviews, generally every 5 years, to assess states\u2019  conformity with requirements under these federal programs. These  reviews involve case file reviews and stakeholder interviews, and are  structured to help states identify strengths and areas needing  improvement within their agencies and programs. States found not to be  in substantial conformity with federal requirements must develop a  program improvement plan and undergo more frequent review."], "subsections": []}]}, {"section_title": "States Employ a Range of Strategies to Recruit Foster Families and Nearly All Use Private Providers to Recruit, Particularly for Therapeutic Foster Care", "paragraphs": [], "subsections": [{"section_title": "States Recruit Foster Families by Searching for Relatives, Conducting Outreach, Targeting Certain Populations, and Obtaining Referrals", "paragraphs": [], "subsections": [{"section_title": "Searching for Relatives or Fictive Kin", "paragraphs": ["In addition to the diligent recruitment requirements under title IV-B of the  Social Security Act, states receiving federal foster care funds under title  IV-E are generally required to search for relatives when a child enters  foster care. In the three selected states\u2014California, Georgia, and  Indiana\u2014child welfare officials said their first priority is to recruit relatives  or fictive kin to care for children entering foster care, when appropriate.  Officials in California and Georgia discussed recent initiatives to expand  the search for relatives and fictive kin for children already in foster care.  For example, county child welfare officials in California said they  contracted with a private provider who they also use to recruit and retain  foster families to conduct these searches. This particular private provider  told us that they can access the child welfare agency\u2019s case management  system to review information about each child to determine which  relatives or fictive kin have already been contacted. The private provider  said they may contact these relatives or fictive kin to see whether  circumstances have changed such that they would now be able to care  for the child. In addition, the private provider said they may use existing  contacts, social media, and an identity search program to locate  additional relatives or fictive kin for a child. This private provider reported  that from July to September 2017, their searches yielded 36 additional  relatives or fictive kin, on average, for each of the 23 children in one  county for whom the private provider conducted a search. In addition,  officials in Georgia said they initiated pilot projects in two regional offices  to train staff on how to search for relatives and fictive kin."], "subsections": []}, {"section_title": "Community Outreach", "paragraphs": ["Community outreach to a broad population of prospective foster families  is a moderately or very useful recruitment strategy, according to 36 states  that responded to our survey. In addition, child welfare officials and 11  of the 14 private providers in the three selected states said they engage  in community outreach events to recruit prospective foster families. For  example, they said they attend local events (e.g., state fairs) or visit local  organizations (e.g., faith-based organizations or schools) to provide  information about becoming a foster parent. One private provider said  they attend local markets and summer festivals to talk with prospective  families and provide them with informational materials. Another private  provider said they hold meetings for prospective foster parents to answer  questions and provide additional information about foster care and the  role of the private provider.", "In addition, 20 states reported in our survey that marketing campaigns,  such as mailings and media advertisements, are a moderately or very  useful recruitment strategy. In the three selected states, child welfare  officials and 12 of the 14 private providers said they use different forms of  media, such as newspapers, radio, television, billboards, social media, or  printed advertisements, to solicit foster families. Child welfare officials we  interviewed in Georgia and Indiana said they have implemented statewide  media campaigns that incorporate both traditional and digital media.  Officials in Georgia told us the campaigns have successfully increased  inquiries through the agency\u2019s website and toll-free phone line. A private  provider in one county said they worked with a marketing firm to create  advertisements that were shown in movie theaters, which also resulted in  additional inquiries from prospective families. With regard to therapeutic  foster care services, private providers we spoke with in both of our  discussion groups said they use strategies such as yard signs, television  commercials, and social media to recruit therapeutic foster care  families."], "subsections": []}, {"section_title": "Targeted Recruitment", "paragraphs": ["In our survey, nearly all states reported having targeted recruitment  strategies as part of their recruitment plans or practices, such as  strategies that focus on certain populations of prospective foster parents  (e.g., those in faith-based communities or of a certain race), families for  certain populations of children in foster care (e.g., teenagers and sibling  groups), and families living in specific geographic locations. To help  inform their recruitment strategies, 39 states reported in our survey that  they collect and use information on children awaiting placement, such as  their backgrounds and service needs, and 31 states reported that they  collect and use information on available foster families, such as their  preferences for placements and where they are located. In the three  selected states, child welfare officials and 8 of the 14 private providers we  interviewed said they use targeted recruitment to identify prospective  foster families. In addition, child welfare officials and five private providers  said they collect or use demographic data on children needing placement  and available foster families to inform their efforts. For example, child  welfare officials in one county said they use data to target recruitment  efforts in the neighborhoods where children entered foster care. Similarly,  one private provider told us they use data on the demographics of  successful foster families to target recruitment efforts toward those types  of families, such as social workers and parents whose children have  grown up and left home (i.e., \u201cempty nesters\u201d).", "Targeted recruitment can be a particularly useful strategy to identify  families who can provide therapeutic foster care services for children who  need a higher level of care, such as those who have severe mental health  conditions or who are medically fragile. In the three selected states, child  welfare officials and four private providers said they use targeted  recruitment strategies to search for families who can provide therapeutic  foster care services. For example, child welfare officials in one state said  they focus on recruiting individuals with specific skillsets, such as doctors  and nurses who have experience working with children who need more  care. Private providers in both of our discussion groups also said they use  targeted recruitment strategies for these purposes."], "subsections": []}, {"section_title": "Referrals from Current Foster Families", "paragraphs": ["When asked in our survey about the usefulness of various recruitment  strategies, states most often cited referrals from current foster families as  a moderately or very useful recruitment strategy. In the three selected  states, child welfare officials and all 14 private providers said they use  referrals from current foster families to recruit new families, and the  majority of these officials and private providers said such referrals are the  most effective recruitment strategy. One private provider emphasized that  current foster families are better recruiters than private providers because  these families can speak from first-hand experience about the potential  benefits and difficulties of caring for a child in foster care. Another private  provider said that referrals occur through regular interactions in the  community or through information meetings and events facilitated by  private providers, such as movie nights. To encourage referrals, 6 of the  14 private providers in the three states said they offer financial incentives  to current foster families who help recruit new families. For example,  three of these private providers said they offer incentives ranging from  $100 to $500. In regard to therapeutic foster care services, private  providers in both of our discussion groups said referrals are the most  effective recruitment strategy. Private providers in one group said they  offer financial incentives ranging from $200 to $300, which generally are  paid after a new family becomes licensed to provide therapeutic foster  care services and a child has been placed in their home.", "Eight of the 14 private providers in the three selected states said they try,  in general, to employ multiple types of recruitment strategies. Further,  many of these private providers explained that prospective foster parents  typically hear about foster care through multiple mediums before applying  to become a parent. For example, a prospective parent might hear a radio  advertisement, then see a billboard, and later talk to a private provider at  a state fair before deciding to apply. Foster parents we spoke with in the  three states, as well as in discussion groups on therapeutic foster care  services, discussed a number of reasons why they became foster  parents, including knowing others who had provided foster care, having  the desire to give back, and wanting to expand their family by fostering  with the intention to adopt a child (see text box)."], "subsections": []}]}, {"section_title": "Almost All States Reported Using Private Providers to Recruit Foster Families, Particularly for Therapeutic Foster Care", "paragraphs": ["In our survey, 49 states reported using private providers to recruit foster  families, including 44 that use private providers to recruit families who can  provide therapeutic foster care services for children who need a higher  level of care. Specifically, 30 states reported that they use private  providers to recruit both traditional and therapeutic foster care families, 14  reported that they use private providers to recruit therapeutic foster care  families exclusively, and the remaining 5 reported that they use private  providers to recruit traditional foster families exclusively. In the three  selected states, child welfare officials said they initially developed  agreements with private providers to recruit families who can provide  therapeutic foster care services. However, as state caseloads have risen,  these officials said they have also referred children who do not need  therapeutic foster care services to private providers.", "Child welfare officials and private providers in the three selected states  said that private providers in their states are responsible for both  recruiting and retaining foster families. They said responsibilities of  private providers can include helping families become licensed,  suggesting possible matches between children and available families,  and providing support to help families access services needed to care for  children in foster care (see fig. 1).", "Child welfare officials and private providers in the three selected states  described ways they have collaborated to recruit foster families, and  discussed the benefits of using private providers to recruit and retain  these families. For example, child welfare officials in one county said they  collaborated with private providers to create common marketing materials  that included information about the child welfare agency and each private  provider, which helps prospective foster families decide which entity they  want to work with. Officials and private providers in this county said  collaborative recruitment efforts are an efficient use of resources and  reduce competition in recruiting from the same pool of prospective foster  families. Nearly all of the 14 private providers we interviewed in the three  selected states said they can help child welfare agencies support foster  families, particularly those who care for children who need more care than  others, because they can maintain lower caseloads and be more  accessible to families than child welfare agencies. These private  providers explained that they accept placements for children only when  they have available foster families and staff, whereas child welfare  agencies cannot choose how many children they have in their caseloads.", "Specifically, four private providers noted that private providers typically  maintain small caseloads, such as 10 children per private provider  caseworker. In contrast, seven private providers said child welfare  agencies manage larger caseloads\u2014as high as 40 children per  caseworker\u2014which can strain their ability to support foster families. In  addition, eight private providers said families can contact them 24 hours a  day, which may not be the case with child welfare agency caseworkers.", "All of the 49 states that reported using private providers in our survey also  reported having various oversight mechanisms to monitor them. These  mechanisms include periodic audits and site visits, regular calls for  information sharing, periodic check-ins with foster families working with  private providers, and requirements for providers to develop recruitment  plans. Child welfare officials in the three selected states provided detail  on a range of oversight activities. For example, child welfare officials in  Georgia said their agency conducts comprehensive audits of private  providers annually, which include an examination of the facility, case file  reviews, and staff interviews. In addition, county child welfare officials in  California said their agency requires private providers to attend monthly  meetings with agency staff and submit quarterly outcome reports."], "subsections": []}]}, {"section_title": "States Reported Various Recruitment and Retention Challenges, Including Difficulties Prioritizing Recruitment Efforts and Supporting Foster Families", "paragraphs": [], "subsections": [{"section_title": "In Recruiting Foster Families, States Reported Challenges with Prioritizing Efforts, Extensive Licensing Processes, and Finding Families Who Can Meet the Needs of Children Difficulties Prioritizing Recruitment Efforts", "paragraphs": ["In response to our survey, 34 states reported that limited resources to  focus on foster family recruitment made their recruitment efforts  moderately or very challenging. In the three selected states, child welfare  officials raised concerns about their ability to prioritize foster family  recruitment efforts, given large increases in their foster care caseloads  and other demands for resources. Nationwide, caseloads increased by  over 10 percent from fiscal years 2012 through 2016, according to HHS  data. In addition, 8 of the 14 private providers in the three states told us  that a lack of dedicated funding for recruitment from child welfare  agencies made recruitment efforts challenging. One private provider said  they have recently put recruitment efforts on hold to focus on serving  children in existing placements.", "States also reported in our survey that eligibility requirements for federal  foster care funding have affected their ability to prioritize resources for  recruitment. Specifically, of the 34 states that provided a response on this  issue, almost half reported that requirements that tie eligibility for  receiving federal funds under title IV-E of the Social Security Act to  income eligibility standards under the discontinued Aid to Families with  Dependent Children program have affected their recruitment efforts to a  moderate or great extent. States may use title IV-E funds to assist with  the costs of operating their foster care programs, and are generally  entitled to receive these funds based on the number of eligible children  they have in their programs. To be eligible for title IV-E foster care funds,  a child must have been removed from a home that meets income  eligibility standards under the Aid to Families with Dependent Children  program as of July 1996, among other criteria. The Aid to Families with  Dependent Children program was replaced by the Temporary Assistance  for Needy Families program beginning in 1996, and the income eligibility  standards for title IV-E foster care funding have not been changed since  then. We reported in 2013 that a family of four had to have an annual  income below $15,911 to meet the income eligibility threshold in 1996. If  adjusted for inflation, the threshold would have been $23,550 in 2013.  Due, in part, to fewer families meeting these income eligibility standards,  we found that the number of children who currently meet title IV-E  eligibility requirements has declined. As a result, we reported that states  have received less federal funding under title IV-E and have paid an  increasingly larger share of funds for their foster care programs. The  percentage of children eligible for title IV-E foster care funds decreased  from about 54 percent in fiscal year 1996 to nearly 39 percent in fiscal  year 2015, according to data published by the Congressional Research  Service (see fig. 2). Given fiscal constraints, child welfare agencies, like  other state agencies, may need to make difficult choices about how to  allocate their limited resources.", "The process for licensing foster families can help ensure that children are  placed in safe and stable environments that meet their needs. However,  35 states reported in our survey that lengthy licensing processes made it  moderately or very challenging to recruit new foster families. In the three  selected states, child welfare officials and 7 of the 14 private providers  discussed extensive state licensing processes that may discourage  prospective foster families, including delays in getting fingerprints,  completing background checks, or reviewing applications. Some private  providers said delays are likely caused by competing priorities at state  licensing agencies or limited staff in child welfare agencies. One private  provider told us that families may wait several months for approval after  completing an application. Another private provider told us that in the past  year, approval time frames for licenses have, in some cases, increased  from 1 to 2 weeks to 3 to 6 months. In regard to therapeutic foster care  services, private providers in both discussion groups raised similar  concerns (see text box).", "Child welfare officials in California told us they are in the process of  restructuring their licensing process to improve efficiencies and reduce  burden for foster families. In addition, county child welfare officials in the  state told us they are offering families additional support to help them  through the licensing process, such as assigning staff to prospective  foster families as soon as they initiate the licensing process to help them  complete required paperwork and schedule pre-service training."], "subsections": [{"section_title": "Finding Families Who Can Meet the Needs of Children and Other Challenges", "paragraphs": ["In response to our survey, states reported difficulties finding families who  can meet the needs of children, particularly for therapeutic foster care  services. Specifically, 37 states reported that the needs of children  entering foster care have increased, and 35 reported that there are not  enough foster families willing to care for the types of children needing  placement. For example, nearly all states cited difficulties finding families  for children with aggressive behaviors and severe mental health needs,  as well as for teenagers and sibling groups. Consequently, 36 states  reported difficulties appropriately matching children with families, and 30  reported having moderately or significantly too few therapeutic foster care  families (see text box).", "In the three selected states, child welfare officials and 7 of 14 private  providers discussed similar challenges finding appropriate families for  children needing placement. For example, officials in one state said the  increased demand for both traditional and therapeutic foster care families  has caused them to place children in the first available home rather than  match them with families based on the family\u2019s preferences and ability to  provide care. One private provider told us that due to the increasing  number of referrals for placements, they are not able to be as selective  during the matching process as they have been in the past. Another  private provider said child welfare agencies may be so pressed to find  placements for children that they may call foster families working with the  private provider directly, which can put pressure on the family to agree to  the placement even when the family does not believe the child is a good  fit. One private provider told us that a foster family accepted a child who  had been sleeping in the child welfare agency caseworker\u2019s office, but the  placement was not a good fit and was eventually disrupted, which was  traumatic for both the child and the foster family. Private providers in both  of our discussion groups said finding families willing to provide  therapeutic foster care services to children can be difficult. They noted  that parents may be required to take on more documentation and  supervision responsibilities for a child who requires a higher level of care  and complete more intensive training, which may be difficult for working  parents.", "In addition to challenges finding appropriate families for children, 34  states reported in our survey that a negative perception of foster care  made it moderately or very challenging to recruit new families. Child  welfare officials in two states and 5 of the 14 private providers we  interviewed raised similar concerns. For example, child welfare officials in  one county told us that they recruit foster families in an environment  where media reports have highlighted challenges with overburdened  caseworkers and turnover of agency directors. These officials also said  foster parents may share negative experiences with family and friends,  leading to an unfavorable impression of child welfare agencies within the  community. In addition, child welfare officials in one state and four private  providers said some families who provide foster care services have faced  false allegations of child abuse and subsequent investigations. Some  private providers said these investigations can be emotionally draining or  disruptive to the family, and some said that fear of such allegations and  investigations may deter prospective families from becoming a foster  family. Other recruitment challenges cited by several child welfare  officials, private providers, and foster parents we interviewed included  concerns by prospective foster families about caring for children who  have high needs or who are certain ages, or that providing foster care will  disrupt their nuclear family. While many child welfare officials and private  providers we spoke with acknowledged these negative perceptions and  fears, parents in all eight foster parent groups we interviewed in the three  states also discussed how being a foster family can be a positive  experience. For example, several foster parents said providing foster care  to different types of children has enhanced their family. Private providers  and foster parents also said it is important to share personal experiences  to bring understanding about what it is like to be a foster family. For  example, one foster parent told us about a blog she writes to describe  normal family activities that include children in foster care, such as taking  family trips."], "subsections": []}]}, {"section_title": "In Retaining Foster Families, States Reported Challenges with Inadequate Support for Families and Limited Access to Services for Children", "paragraphs": [], "subsections": [{"section_title": "Inadequate Support for Foster Families", "paragraphs": ["In response to our survey, 29 states reported that inadequate support for  foster families from the child welfare agency made it moderately or very  challenging to retain these families. In the three selected states, all 14  private providers we interviewed and foster parents in all eight of the  foster parent groups we spoke with emphasized the importance of  supporting families in order to retain them. All 14 private providers  discussed concerns about communication with child welfare agencies,  which they said can affect the quality of services they provide to foster  families. For example, 10 of the private providers said they have difficulty  contacting or receiving a response from child welfare agency  caseworkers when they try to obtain information needed to comply with  child welfare agency requirements. One private provider explained that  they are required to develop a service plan for each child they place with  a family, and the plan must be signed by the child welfare agency  caseworker within 5 days of placement. However, this private provider  said they often cannot reach the caseworker to have plans reviewed and  approved within the required time frame. Seven private providers told us  that there often is confusion on the part of child welfare agency  caseworkers about the role of private providers. For example, these  private providers said child welfare agency caseworkers may not know  which tasks the private providers are responsible for or may be unfamiliar  with the paperwork they need to give to the private provider. Similarly,  foster parents in five groups expressed dissatisfaction with the level of  support they have received from child welfare agency caseworkers.  These foster parents described instances in which they were unable to  reach their caseworker during emergencies, such as when they needed  permission to administer medications to their foster child. One foster  parent told us she had waited approximately 8 weeks for her caseworker  to approve her child\u2019s medication. This parent said she worked with her  private provider to email the child welfare agency caseworker on a daily  basis, but received no response. Foster parents in our discussion group  raised similar concerns (see text box).", "Reasons why child welfare agency caseworkers may be limited in their  ability to support foster families can include high caseloads and  caseworker turnover. For example, 33 states reported in our survey that  having too few staff and inadequate funding made it moderately or very  challenging to retain foster families. In the three selected states, child  welfare officials, 9 of 14 private providers, and foster parents in five of the  eight foster parent groups noted that high caseloads contribute to a lack  of support for foster families. Child welfare officials in one state said  although their regulations stipulate a maximum caseload of 12 to 17,  many caseworkers have caseloads that exceed those levels. In addition,  a private provider in this state told us that child welfare agency  caseworkers typically carry about 35 cases. Other private providers  explained that the demands on child welfare caseworkers to meet basic  paperwork and case planning requirements and conduct visits for a large  caseload may prevent them from responding to requests or returning  phone calls in a timely manner. Child welfare officials in two states, 11  private providers, and foster parents in three foster parent groups also  explained that frequent caseworker turnover can affect the level of  support foster families receive, particularly when new caseworkers are  unfamiliar with a child\u2019s history and needs. One foster parent told us that  she had worked with eight different child welfare agency caseworkers in a  19-month period. Another foster parent said she maintains all of her foster  children\u2019s records, since in the past, documents have been lost in  transfers between child welfare agency caseworkers. Child welfare  officials in the three selected states acknowledged difficulties supporting  foster families due to high caseloads or caseworker turnover. Officials in  one state said they recently requested additional state funds to add 500  caseworker positions, and officials in another state said they have made  efforts to revisit staffing levels following reductions during the economic  recession in 2008.", "In addition, many private providers and foster parents we interviewed  noted limitations with other supports for foster families. For example, 10  of 14 private providers and foster parents in three of the eight foster  parent groups in the three states discussed their concerns about low  payment rates for foster families, which some said may not adequately  cover the costs of caring for a child. A 2012 study on payment rates for  foster families found that basic payment rates (e.g., for traditional foster  care services) in the majority of states fell below estimated costs of caring  for a child, based on data from the U.S. Department of Agriculture. Five  private providers and foster parents in five foster parent groups also  discussed a lack of access to respite care services or a lack of \u201cvoice\u201d for  foster parents in contributing to decisions regarding children in their care.  These private providers and foster parents said these circumstances can  be frustrating and cause parents to leave the system."], "subsections": []}, {"section_title": "Limited Access to Services for Children and Other Challenges", "paragraphs": ["In response to our survey, 31 states reported that inadequate access to  services, such as child care and transportation, made it moderately or  very challenging to retain foster families. In the three selected states,  child welfare officials, 9 of 14 private providers, and foster parents in six  of eight foster parent groups discussed similar difficulties. For example,  they discussed difficulties accessing child care services, which some said  are particularly needed because of the increasing number of opioid- affected infants coming into care. Some officials, private providers, and  foster parents said their state may offer child care subsidies, but waitlists  can be long, and foster families may have difficulties finding an approved  childcare center, particularly for children who need a higher level of care.  Further, child welfare officials, private providers, and foster parents  discussed challenges accessing transportation services. For example,  child welfare officials said children are sometimes moved to homes  outside their original community due to a lack of available homes, which  places a burden on foster families to transport children to physical and  mental health appointments, regular visits with their biological families,  and school. A private provider we interviewed said many parents who  provide transportation to these various appointments also must go  through a burdensome process to claim mileage reimbursement from the  child welfare agency, so many parents do not submit a claim. In addition,  child welfare officials, private providers, and foster parents discussed  challenges accessing mental health services. For example, one private  provider said they have been unable to find a qualified mental health  provider who accepts Medicaid to deliver needed services to an autistic  child. Further, child welfare officials we interviewed in one county  discussed difficulties connecting children with therapists who have an  understanding of childhood trauma.", "In addition to these challenges, child welfare officials and private  providers we interviewed said many foster families leave the foster care  system due to family or life changes, including adoptions of children in  their care, retirements, health issues, and relocation to a different state."], "subsections": []}]}]}, {"section_title": "HHS Supports States\u2019 Recruitment and Retention Efforts with Technical Assistance, Guidance, and Funding, though Private Providers Were Unaware of Some Supports", "paragraphs": ["HHS\u2019s Administration for Children and Families (ACF) provides a number  of supports to help state child welfare agencies in their efforts to recruit  and retain foster families, according to ACF officials we interviewed and  agency documents we reviewed. These supports include technical  assistance, guidance and information, and funding.", "Technical assistance. ACF provided technical assistance through its  National Resource Center for Diligent Recruitment (the Center), and  subsequently, the Child Welfare Capacity Building Collaborative.  The Center provided several types of technical assistance to achieve  its aim of helping states develop and implement diligent recruitment  programs to achieve outcomes such as improving permanency and  placement stability for children in foster care. The Center provided on-  and off-site coaching to states in a number of areas, such as  developing a mix of general and targeted recruitment strategies, using  existing data to target recruitment efforts, and developing a  recruitment plan. Staff who worked at the Center reported providing  direct technical assistance and training to 30 states. The Center also  provided toolkits that guide states through the process of developing a  comprehensive diligent recruitment plan to meet federal  requirements. For example, the toolkits include discussion questions  about the goals states have for their plans, suggestions on which  stakeholders to include, and worksheets to help states analyze  existing data. ACF officials told us that they also review states\u2019 diligent  recruitment plans and may provide feedback to states.", "In addition, ACF provides technical assistance to states through its  Child and Family Services Reviews. These reviews are generally  conducted every 5 years and examine a number of factors in states\u2019  foster care programs to assess conformity with federal requirements,  including factors related to recruiting and retaining foster families. In  its reviews of 24 states in fiscal years 2015 and 2016, ACF reported  deficiencies for 18. ACF officials said these deficiencies included a  lack of adequate state recruitment plans and data used for recruitment  efforts. In addition, they said they will be working with states to  address identified deficiencies in subsequent program improvement  plans, which are to be developed in consultation with ACF.", "Guidance and information. ACF provides a wide range of guidance  and information to states to support their recruitment and retention  efforts. For example, the Center distributed free monthly electronic  newsletters that provided information on new tools, resources, and  webinars related to foster family recruitment and retention. The Center  also developed or provided links to publications on topics such as  using data to inform recruitment efforts, taking a customer service  approach in working with current and prospective foster families, and  lessons learned from related projects funded by ACF. The Center  facilitated information sharing among states by holding webinars, such  as one on the benefits of implementing a comprehensive diligent  recruitment program, and peer-to-peer networking events on topics  such as recruiting, developing, and supporting therapeutic foster care  families. In addition, ACF\u2019s Child Welfare Information Gateway is a  website that provides access to a broad array of electronic  publications, websites, databases, and online learning tools for  improving child welfare practice. For example, its resources related  to recruiting and retaining foster families include publications on  strategies and tools, as well as examples from state and local child  welfare agencies on promising practices.", "Funding. HHS administers a number of federal funding sources that  states said they used for their foster family recruitment and retention  efforts. For example, in our survey, states most often cited using child  welfare funds under title IV-E and IV-B of the Social Security Act for  these purposes in fiscal year 2016 (see fig. 3).", "ACF also provided a number of discretionary grants to support state  efforts to recruit and retain foster families through the Adoption  Opportunities program, which funds projects designed to eliminate  barriers to adoption and help find permanent families for children,  particularly older children, minority children, and those with special  needs. Specifically, ACF awarded cooperative agreements to 22  states, localities, and non-profit organizations in fiscal years 2008  through 2013 for 5-year projects that aim to enhance recruitment  efforts and improve permanency outcomes for children, among other  things. For example, ACF awarded a cooperative agreement in 2010  to the county child welfare agency in Los Angeles, California to launch  a project that targeted recruitment efforts to prospective foster families  in African American, Latino, LGBT, and deaf communities to increase  permanency outcomes for their foster care population. In addition, it  awarded a cooperative agreement in 2013 to Oregon\u2019s state child  welfare agency to implement a project that focused on developing  customer service concepts in working with foster families, increasing  community partnerships, and using data to inform recruitment efforts  and outcome measures. In addition, ACF also awarded two  cooperative agreements to Spaulding for Children to develop training  for prospective and current foster and adoptive families. The first,  awarded in fiscal year 2016, was for a 3-year project to develop a  foster and adoptive parent training program to prepare families who  can care for children who have high needs, such as children needing  therapeutic foster care services. The second, awarded in fiscal year  2017, was for a 5-year project to develop a foster and adoptive parent  training program for all individuals interested in becoming a foster  family or adopting a child from foster care or internationally.", "In response to our survey, many states reported that they found these  federal supports helpful to their recruitment and retention efforts. For  example, guidance and information, such as the electronic newsletters,  publications, and webinars provided by the Center, were cited most often  by states as being moderately or very helpful (31 states). Over half the  states reported that networking opportunities, such as peer-to-peer  networking events facilitated by the Center, and technical assistance  provided by the Center were moderately or very helpful to their efforts (28  and 27 states, respectively).", "However, similar to concerns raised by all 14 private providers in the  three selected states about communication issues with child welfare  agencies, several private providers told us they have not received  guidance or information from these agencies about recruiting and  retaining foster families, and most were unaware of some of the supports  provided by ACF. Specifically, 11 of the 14 private providers said they  were unaware of the National Resource Center for Diligent Recruitment,  and 7 told us that the information offered by the Center would have been  useful to their recruitment efforts had they known about it. For example,  one private provider told us they have been trying to use data to more  effectively recruit foster families, and the Center\u2019s resources on  recruitment strategies and tools would have been helpful in these efforts.", "Another private provider said each private provider in their area conducts  recruitment activities based on its own ideas and experiences, and the  Center\u2019s resources would have been helpful in ensuring that they use the  most effective strategies.", "ACF officials said they encourage states to involve all relevant  stakeholders in their efforts to recruit and retain foster families. They  acknowledged that ACF has not provided specific guidance and  information to states on working with private providers, but noted that  some supports, such as online publications and webinars, are available to  private providers working in the public sector. ACF officials explained that  their efforts have focused on child welfare agencies because these are  the entities that receive federal funds. However, federal internal control  standards state that agencies should communicate necessary  information, both internally and externally, to achieve their objectives.  The mission statement for ACF\u2019s Children\u2019s Bureau is to partner with  federal, state, tribal, and local agencies to improve the overall health and  well-being of the nation\u2019s children and families. According to its website,  the Children\u2019s Bureau carries out a variety of projects to achieve its goals,  such as providing guidance on federal law, policy, and program  regulations, offering training and technical assistance to improve child  welfare service delivery, and sharing research to help child welfare  professionals improve their services. Given that almost all states use  private providers to help them recruit foster families, and that private  providers may be responsible for providing supports to help retain these  families, it is important for HHS to determine whether additional  information on working more effectively with private providers would be  useful to states. This could help HHS better achieve its goals in  supporting states\u2019 efforts to recruit and retain foster families."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["States face challenges recruiting and retaining foster care families and  almost all states rely on private providers to help them meet the demand  for appropriate foster families, particularly those who can provide  therapeutic foster care services. However, private providers used by child  welfare agencies in the three states where we conducted interviews  raised concerns about the level of communication they have with these  agencies. Such communication issues can affect the quality of services  provided to support foster families, as well as the level of guidance and  information private providers receive from child welfare agencies.  Although HHS has provided various supports that states have found  useful in their efforts to recruit and retain foster families, many of the  private providers we spoke with were unaware of some supports that they  said could have helped them. Given the important role private providers  play in recruiting and retaining foster families, state feedback to HHS on  whether child welfare agencies could benefit from information on how to  work more effectively with private providers could help HHS determine  whether it needs to take action to better support states\u2019 use of private  providers."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["GAO recommends that the Secretary of Health and Human Services seek  feedback from states on whether information on effective ways to work  with private providers to recruit and retain foster families would be useful  and if so, provide such information. For example, HHS can seek feedback  from states through technical assistance and peer-to-peer networking  activities. If states determine that information would be useful, examples  of HHS actions could include facilitating information sharing among states  on successful partnerships between states and private providers and  encouraging states to share existing federal guidance and information.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretary of HHS for review and  comment. HHS agreed with our recommendation and said it will explore  with states whether additional materials specific to private providers  would be useful. While HHS noted that it has no authority over private  providers, it provided examples of ways the agency has supported states\u2019  efforts to recruit and retain foster families and encouraged them to involve  private providers in these efforts. We believe that seeking feedback from  states on whether they would like information on effective ways to work  with private providers would be a useful first step. With that information,  HHS could then determine if additional supports are needed to help  states meet the demand for appropriate foster families. A letter conveying  HHS\u2019s formal comments is reproduced in appendix II.", "We are sending copies to the appropriate congressional committees, the  Secretary of the Department of Health and Human Services, and other  interested parties. The report will also be available at no charge on the  GAO website at www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": [], "subsections": [{"section_title": "Overview", "paragraphs": ["This report examines (1) how state child welfare agencies recruit foster  families, including those who provide therapeutic foster care services, (2)  challenges, if any, to recruiting and retaining families, and (3) the extent  to which the U.S. Department of Health and Human Services (HHS)  provides support to child welfare agencies in their efforts to recruit and  retain foster families. To address our objectives, we administered a web- based survey of state child welfare agencies in the 50 states and the  District of Columbia to obtain national information. To obtain more in- depth information, we interviewed child welfare officials, private providers,  and foster parents in three selected states (California, Georgia, and  Indiana). To obtain perspectives on providing therapeutic foster care  services specifically, we conducted three discussion groups with private  providers and foster parents at a national foster care conference. To  develop our methodologies, we conducted a literature search related to  foster care recruitment and retention, including for therapeutic foster care  services, and we interviewed experts with a range of related research,  policy, and direct service experience.", "To examine how HHS supports child welfare agencies in their efforts to  recruit and retain foster families, we interviewed officials from HHS\u2019s  Administration for Children and Families (ACF), Centers for Medicare &  Medicaid Services, Office of the Assistant Secretary for Planning and  Evaluation, and Substance Abuse and Mental Health Services  Administration. We reviewed relevant documents obtained in these  interviews and other information available on HHS\u2019s website, such as  from the National Resource Center for Diligent Recruitment and the  Child Welfare Information Gateway. We focused on HHS efforts from  fiscal years 2012 through 2016. We also reviewed relevant federal laws,  regulations, and HHS policies, as well as federal internal control  standards."], "subsections": [{"section_title": "Survey of State Child Welfare Agencies", "paragraphs": ["To obtain nationwide information on our objectives, we surveyed officials  from state child welfare agencies in the 50 states and the District of  Columbia. The survey was administered in September 2017, and we  obtained a 100 percent response rate. The survey used a self- administered, Web-based questionnaire, and state respondents received  unique usernames and passwords.", "To develop the survey, we performed a number of steps to ensure the  accuracy and completeness of the information collected, including an  internal peer review by an independent GAO survey expert, a review by  an external foster care expert, and pre-testing of the survey instrument.  Pre-tests were conducted over the phone with child welfare officials in  four states to check the clarity of the question and answer options, as well  as the flow and layout of the survey. The states that participated in pre- testing were selected based on recommendations from foster care  experts and variation in child welfare administration systems (i.e., state-  versus county-administered) and use of private providers. We revised the  survey based on the reviews and pre-tests. The survey was designed to  gather information from state child welfare agencies rather than county- level child welfare agencies or private providers. As such, we included  questions in the survey to ensure that respondents were knowledgeable  about foster family recruitment and retention efforts if the state child  welfare agency was not directly involved.", "Our survey included a range of fixed-choice and open-ended questions  related to recruiting and retaining foster families, including those who  provide therapeutic foster care services. These questions were grouped  into six subsections that covered (1) the states\u2019 administrative structure  for recruiting and retaining foster families, including the use of private  providers; (2) information on states\u2019 recruitment and retention plans and  the usefulness of various strategies in recruiting and retaining foster  families; (3) challenges states face in their efforts; (4) perspectives on  various federal supports in this area and any additional supports needed;  (5) data collected and used in recruitment and retention efforts; and (6)  oversight of county child welfare agencies and private providers, if  applicable.", "To obtain our 100 percent response rate, we made multiple follow-up  contacts by email and phone in September 2017 with child welfare  officials who had not yet completed the survey. While all surveyed  officials affirmatively checked \u201ccompleted\u201d at the end of the web-based  survey, not all state child welfare agencies responded to every question  or the sub-parts of every question. We conducted additional follow-up  with a small number of state child welfare agencies to verify key  responses.", "Because this was not a sample survey, it has no sampling errors.  However, the practical difficulties of conducting any survey may introduce  errors, commonly referred to as non-sampling errors. For example,  unwanted variability can result from differences in how a particular  question is interpreted, the sources of information available to  respondents, or how data from respondents are processed and analyzed.  We tried to minimize these factors through our reviews, pre-tests, and  follow-up efforts. In addition, the web-based survey allowed state child  welfare agencies to enter their responses directly into an electronic  instrument, which created an automatic record for each state in a data  file. By using the electronic instrument, we eliminated the errors  associated with a manual data entry process. Lastly, data processing and  programming for the analysis of survey results was independently verified  to avoid any processing errors and to ensure the accuracy of this work."], "subsections": []}, {"section_title": "Interviews in Selected States", "paragraphs": ["To gather more in-depth information representing a variety of  perspectives on our objectives, we interviewed officials from three state  and three county child welfare agencies, representatives from 14 private  foster care providers working with these agencies, and foster parents  working with 8 of these private providers in the three selected states  (California, Georgia, and Indiana). The states were selected based on  factors such as recent changes in foster care and congregate care  caseloads, opioid abuse rates estimated by HHS in June 2016, variation  in child welfare administration systems (i.e., state- versus county- administered), and geographic location. Interviews were conducted during  in-person site visits in California and Indiana and via phone in Georgia.  We used semi-structured interview protocols for child welfare agencies,  private providers, and foster parents that included open-ended questions  on the strategies and challenges in recruiting and retaining foster families  and federal supports in this area, among other topics. We interviewed  officials from state-level child welfare agencies in each of these states. In  California, the only selected state with a county-administered child  welfare system, we selected three counties\u2014 Los Angeles, Sacramento,  and Sonoma\u2014and conducted interviews with officials from the respective  county-level child welfare agency. These counties were selected based  on factors similar to those mentioned above as well as variation in  population density (i.e., rural versus urban).", "In addition, we interviewed 14 private providers in the three selected  states, including 3 private providers in California (1 in each county we  visited), 4 in Georgia, and 7 in Indiana. Private providers were chosen for  interviews from a list of all private providers working with state child  welfare agencies to recruit foster families. This list was provided by child  welfare officials from each selected state. We considered factors such as  the number of foster families private providers worked with, their  involvement in recruiting families who provide therapeutic foster care  services, and geographic location.", "We interviewed foster parents working with 8 of the private providers  mentioned above, including 2 groups of foster parents in California, 1  group in Georgia, and 5 groups in Indiana. Each of these groups included  between one and three sets of foster parents (e.g., one foster parent or a  couple). Due to the sensitivity of the topics discussed, we worked with  private providers to identify foster parents who were able and willing to  participate in interviews. We discussed several considerations for  selecting foster parents, such as gathering parents with a range of  experience providing foster care services to children in both traditional  and therapeutic foster care settings. Because foster parents we  interviewed self-selected to participate and were all working with private  providers we interviewed, their views do not represent the views of all  foster parents, such as those working directly with child welfare agencies.  We also reviewed relevant documents that corroborated the information  obtained in our interviews with child welfare agencies and private  providers, such as recruitment plans, marketing materials, and child  placement reports.", "Because we conducted interviews with a non-generalizable sample of  child welfare officials, private providers, and foster parents, the  information gathered in the three selected states is not generalizable.  Although not generalizable, our selection methodologies provide  illustrative examples to support our findings."], "subsections": []}, {"section_title": "Discussion Groups", "paragraphs": ["To obtain information specifically about efforts to recruit and retain  families who provide therapeutic foster care services, we conducted three  discussion groups at a conference hosted by the Family Focused  Treatment Association, a non-profit organization that aims to develop,  promote, and support therapeutic foster care services. The conference  was held in July 2017 in Chicago, Illinois. We held two discussion groups  with representatives from 17 private providers and one discussion group  with eight sets of foster parents. To solicit participants, we used email to  invite all individuals who registered for the conference to participate in our  discussion groups. These emails explained our objectives and potential  discussion topics related to recruiting and retaining therapeutic foster care  families. Participants who volunteered were sorted into the three groups.  Discussion groups for private providers and foster parents were guided by  a GAO moderator using semi-structured interview protocols. These  protocols included open-ended questions that encouraged participants to  share their thoughts and experiences on recruiting and retaining  therapeutic foster care families, including strategies and challenges in  these efforts, as well as differences in providing therapeutic versus  traditional foster care services.", "Discussion groups are not designed to (1) demonstrate the extent of a  problem or to generalize results to a larger population, (2) develop a  consensus to arrive at an agreed-upon plan or make decisions about  what actions to take, or (3) provide statistically representative samples or  reliable quantitative estimates. Instead, they are intended to generate in- depth information about the reasons for participants\u2019 attitudes on specific  topics and to offer insights into their concerns about and support for an  issue. For these reasons, and because discussion group participants  were self-selected volunteers, the results of our discussion groups are not  generalizable.", "We conducted this performance audit from January 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}]}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, the following staff members made  key contributions to this report: Elizabeth Morrison (Assistant Director);  Nhi Nguyen (Analyst-in-Charge); Luqman Abdullah; Laura Gibbons; and  Elizabeth Hartjes. Also contributing to this report were Sarah Cornetto;  Tiffany Johnson Lapuebla; Cheryl Jones; Kirsten Lauber; Serena Lo;  Hannah Locke; Mimi Nguyen; Samuel Portnow; Ronni Schwartz; Almeta  Spencer, and Kathleen van Gelder."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-590", "url": "https://www.gao.gov/products/GAO-18-590", "title": "Homeland Security: Clearer Roles and Responsibilities for the Office of Strategy, Policy, and Plans and Workforce Planning Would Enhance Its Effectiveness", "published_date": "2018-09-19T00:00:00", "released_date": "2018-09-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GAO has designated DHS management as high risk because of challenges in building a cohesive department. PLCY supports cohesiveness by, among other things, coordinating departmentwide policy and strategy. In the past, however, questions have been raised about PLCY's efficacy. In December 2016, the NDAA codified PLCY's organizational structure, roles, and responsibilities.", "GAO was asked to evaluate PLCY's effectiveness. This report addresses the extent to which (1) DHS established an organizational structure and processes and procedures that position PLCY to be effective, (2) DHS and PLCY have ensured alignment of workforce with priorities, and (3) PLCY has engaged relevant component staff to help identify and respond to emerging needs. GAO analyzed the NDAA, documents describing specific responsibilities, and departmentwide policies and strategies. GAO also interviewed officials in PLCY and all eight operational components."]}, {"section_title": "What GAO Found", "paragraphs": ["According to our analysis and interviews with operational components, the Department of Homeland Security's (DHS) Office of Strategy, Policy, and Plans' (PLCY) organizational structure and efforts to lead and coordinate departmentwide and crosscutting strategies\u2014a key organizational objective\u2013have been effective. For example, PLCY's coordination efforts for a strategy and policy executive steering committee have been successful, particularly for strategies. However, PLCY has encountered challenges leading and coordinating efforts to develop, update, or harmonize policies that affect multiple DHS components. In large part, these challenges are because DHS does not have clearly-defined roles and responsibilities with accompanying processes and procedures to help PLCY lead and coordinate policy in a predictable, repeatable, and accountable manner. Until PLCY's roles and responsibilities for policy are more clearly defined and corresponding processes and procedures are in place, situations where the lack of clarity hampers PLCY's effectiveness in driving policy are likely to continue. Development of a delegation of authority, which involves reaching agreement about PLCY's roles and responsibilities and clearly documenting them, had been underway. However, it stalled due to changes in department leadership. As of May 2018, the effort had been revived, but it is not clear whether and when DHS will finalize it.", "PLCY does some workforce planning as part of its annual budgeting process, but does not systematically apply key principles of the DHS Workforce Planning Guide to help ensure that PLCY's workforce aligns with its and DHS's priorities and goals. According to PLCY officials, the nature of its mission requires a flexible staffing approach. As such, a portion of the staff functions as generalists who can be assigned to meet the needs of different situations, including unexpected changing priorities due to an emerging need. However, shifting short-term priorities requires tradeoffs, which may divert attention and resources from longer-term priorities. As of June 5, 2018, PLCY also had a number of vacancies in key leadership positions, which further limited attention to certain priorities. According to PLCY officials, PLCY recently began a review to identify the office's authorities in the National Defense Authorization Act for Fiscal Year 2017 (NDAA) and other statutes, compare these authorities to the current organization and operations, and address any workforce capacity gaps. Employing workforce planning principles\u2014in particular, systematic identification of workforce demand, capacity gaps, and strategies to address them\u2014consistent with the DHS Workforce Planning Guide could better position PLCY to use its workforce as effectively as possible under uncertain conditions and to communicate effectively with DHS leadership about tradeoffs.", "Officials from PLCY and DHS operational components praised existing mechanisms to coordinate and communicate at the senior level, especially about strategy, but component officials identified opportunities to better connect PLCY and component staff to improve communication flow about emerging policy and strategy needs. Among the ideas offered by component officials to enhance communication and collaboration were holding routine small-group meetings, creating forums for periodic knowledge sharing, and maintaining accurate and up-to-date contact information for all staff-level stakeholders."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations. DHS concurred with three recommendations, including that DHS finalize a delegation of authority defining PLCY's roles and responsibilities and develop corresponding processes and procedures. DHS did not concur with a recommendation to apply the DHS Workforce Planning Guide to identify and communicate workforce needs. GAO believes this recommendation is valid as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security (DHS) was established by the  Homeland Security Act of 2002 and began operations in 2003. That  year, we designated implementing and transforming DHS as high risk  because DHS had to transform 22 agencies\u2014several with major  management challenges\u2014into one department. Further, failure to  effectively address DHS\u2019s management and mission risks could have  serious consequences for U.S. national and economic security. Given the  significant effort required to build and integrate a department as large and  complex as DHS, our initial high-risk designation addressed the  department\u2019s implementation and transformation efforts to include  associated management and programmatic challenges. We reported that  the creation of DHS was an enormous undertaking and successfully  transforming large organizations, even those undertaking less strenuous  reorganizations, could take years to implement. Over the past 15 years,  the focus of this high-risk area has evolved in tandem with DHS\u2019s  maturation and evolution. The overriding tenet has consistently remained  DHS\u2019s ability to build a single, cohesive, and effective department that is  greater than the sum of its parts\u2014a goal that requires effective  collaboration and integration of its various components and management  functions.", "DHS\u2019s Office of Strategy, Policy, and Plans (PLCY) is responsible for  some of these management functions, including developing and  coordinating departmentwide policies and strategies, conducting analyses for senior leadership, and supporting the Secretary\u2019s initiatives. For  example, PLCY develops and disseminates departmentwide policies in  the form of directives and instructions, strategy documents required by  statute, operational plans, and reports for Congress. The National  Defense Authorization Act for Fiscal Year 2017 (NDAA), enacted in  December 2016, established PLCY in statute. Although largely  consistent with the roles and responsibilities of DHS\u2019s Office of Policy, as  PLCY was named before enactment of the NDAA, implementation of the  act required organizational changes designed to respond to certain  challenges the office had identified as barriers to its ability to perform  effectively.", "For a number of years, questions have been raised about the office\u2019s  efficacy and engagement with key stakeholders, like the DHS operational  components. For example, we have reported on challenges related to  obtaining stakeholder feedback under the office\u2019s leadership of the 2010  and 2014 Quadrennial Homeland Security Reviews (QHSR). We have  also reported on opportunities for select components of the office\u2014the  Screening Coordination Office and the Office of International Affairs\u2014to  implement better management controls to help enhance monitoring and  accountability for their respective missions. DHS agreed with all of our  recommendations in those prior reports.", "In light of past concerns about efficacy and the recent statutory changes,  you asked us to review how PLCY is contributing to efforts to build a  single, cohesive department by driving departmentwide and crosscutting  strategy and policy. This report addresses the extent to which (1) DHS  has established an organizational structure and processes and  procedures that position PLCY to achieve its organizational objectives, (2)  DHS and PLCY have ensured that PLCY\u2019s workforce is aligned with  PLCY\u2019s and DHS\u2019s priorities and goals, and (3) PLCY has effectively  engaged across the operational components to identify and respond to  emerging policy and strategy needs.", "To address all three objectives, we analyzed key documents and  interviewed officials from PLCY and other DHS offices, including officials  responsible for policy, strategy, and plan development and  implementation at all eight of DHS\u2019s operational components. Specifically,  to better understand the roles and responsibilities of PLCY, DHS\u2019s eight  operational components, and other offices at DHS, we reviewed the  NDAA and analyzed documents, such as departmental directives that  describe what is required and expected of each office. In addition, we  interviewed officials from PLCY to understand its roles and  responsibilities, workforce planning practices, and collaboration with DHS  operational components.", "Furthermore, we interviewed officials from DHS\u2019s Office of the Under  Secretary for Management to understand the differences between  PLCY\u2019s roles and responsibilities and those of the Office of the Under  Secretary for Management, who oversees all internal management  operations and oversight of management functions for components at  DHS headquarters. To further understand PLCY\u2019s engagement with DHS  operational components as well as their perspectives on PLCY\u2019s roles  and responsibilities, we conducted both unstructured and structured  interviews with each of DHS\u2019s eight operational components. For the  structured interviews, we developed a questionnaire that we tested  internally before administering it to DHS officials. At the structured  interviews, we asked officials at each operational component the same  questions in the same order to ensure we collected information  consistently and reliably across the different respondents. We compared  our findings to Standards for Internal Control in the Federal Government,  leading collaboration practices identified in our prior work, and the DHS  Workforce Planning Guide to determine the extent to which PLCY is able  to achieve its goals given its organizational structure, workforce planning,  and communication and collaboration with operational components.", "We conducted this performance audit from July 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "PLCY Organizational Structure and Vacancies", "paragraphs": ["With the passage of the NDAA in December 2016, PLCY is to be led by  an Under Secretary for Strategy, Policy, and Plans, who is appointed by  the President with advice and consent of the Senate. The Under  Secretary is to report directly to the Secretary of Homeland Security. Prior  to the NDAA, the office was headed by an assistant secretary. Since the  passage of the act, the undersecretary position has been vacant, and as  of June 5, 2018, the President had not nominated an individual to fill the position. According to PLCY officials, elevating the head of the office to  an undersecretary was important because it equalizes PLCY with other  DHS management offices and DHS headquarters components. The  NDAA further authorizes, but does not require, the Secretary to establish  a position of deputy undersecretary within PLCY. If the position is  established, the NDAA provides that the Secretary may appoint a career  employee to the position (i.e., not a political appointee). In March 2018,  the Secretary named a Deputy Under Secretary, who has been  performing the duties of the Deputy Under Secretary and the Under  Secretary since then. As shown in figure 1, PLCY is divided into five sub- offices, each with a different focus area.", "As of June 5, 2018, the top position in these sub-offices was an assistant  secretary and two of the five positions were vacant. As of June 5, 2018, 6  of PLCY\u2019s 12 deputy assistant secretary positions were vacant or filled by  acting staff temporarily performing the duties in the absence of permanent  staff placement."], "subsections": []}, {"section_title": "PLCY\u2019s Policy and Strategy Responsibilities, and Strategic Priorities", "paragraphs": ["The NDAA codified many of the functions and responsibilities that PLCY  had been carrying out prior to the act\u2019s enactment and, with a few  exceptions as discussed later in this report, were largely consistent with  the duties the office was already pursuing. According to the act and PLCY  officials, one of the office\u2019s fundamental responsibilities is to lead,  conduct, and coordinate departmentwide policy development and  implementation, and strategic planning. According to PLCY officials, there  are four categories of policy and strategy efforts that PLCY leads,  conducts, or coordinates:", "Statutory responsibilities: among others, the Homeland Security  Act, as amended by the NDAA, includes such responsibilities as  establishing standards of validity and reliability for statistical data  collected by the department, conducting or overseeing analysis and  reporting of such data, and maintaining all immigration statistical  information of U.S. Customs and Border Protection, U.S. Immigration  and Customs Enforcement, and U.S. Citizenship and Immigration  Services; the Immigration and Nationality Act includes such  responsibilities as providing for a system for collection and  dissemination to Congress and the public of information useful in  evaluating the social, economic, environmental, and demographic  impact of immigration laws, and reporting annually on trends in lawful  immigration flows, naturalizations, and enforcement actions,", "Representing DHS in interagency efforts: coordinating or  representing departmental policy and strategy positions for larger  interagency efforts (e.g., interagency policy committees convened by  the White House),", "Secretary\u2019s priorities: leading or coordinating efforts that correspond  to the Secretary of Homeland Security\u2019s priorities (e.g., certain  immigration or law-enforcement related issues), and", "Self-initiated activities: opportunities to better harmonize policy and  strategy or create additional efficiencies given PLCY\u2019s ability to see  across the department. For example, PLCY officials said that DHS  observed an increase in e-commerce and small businesses shipping  items via carriers other than the U.S. Postal Service, thus exploiting a  gap in DHS monitoring, which covers the U.S. Postal Service and  other traditional shipping entities. PLCY officials noted that DHS\u2019s  interest in addressing e-commerce issues occurred just before opioids  and other controlled substances were being mailed through small  businesses and the U.S. Postal Service. As a result, PLCY developed  an e-commerce strategy for, among other things, the shipping of  illegal items and how to provide information to U.S. Customs and  Border Protection before parcels are shipped to the United States  from abroad.", "In accordance with the NDAA, as PLCY leads, conducts, and coordinates  policy and strategy, it is to do so in a manner that promotes and ensures  quality, consistency, and integration across DHS and applies risk-based  analysis and planning to departmentwide strategic planning efforts. The  NDAA further provides that all component heads are to coordinate with  PLCY when establishing or modifying policies or strategic planning  guidance to ensure consistency with DHS\u2019s policy priorities. In addition to  the roles PLCY plays that are directly related to leading, conducting, and  coordinating policy and strategy, the office is responsible for select  operational functions. For example, PLCY is charged with operating the  REAL ID and Visa Waiver Programs.", "The NDAA also conferred responsibilities to PLCY that had not been  responsibilities of the DHS Office of Policy prior to the NDAA\u2019s  enactment. Among other things, the NDAA charged PLCY with  responsibility for establishing standards of reliability and validity for  statistical data collected and analyzed by the department, and ensuring  the accuracy of metrics and statistical data provided to Congress. In  conferring this responsibility, the act also transferred to PLCY the  maintenance of all immigration statistical information of the U.S. Customs  and Border Protection, U.S. Immigration and Customs Enforcement, and  U.S. Citizenship and Immigration Services.", "PLCY has established five performance goals: build departmental policy-making capacity, coordination, and foster  the Unity of Effort, mature the office as a mission-oriented, component-focused  organization that is responsive to DHS leadership, effectively engage and leverage stakeholders, enhance productivity and effectiveness of policy personnel through  appropriate alignment of knowledge, skills, and abilities, and accountability, transparency, and leadership.", "PLCY officials stated that the office established the performance goals in  fiscal year 2015 and they were still in effect as of fiscal year 2018."], "subsections": []}, {"section_title": "Homeland Security Crosscutting Missions and Functions", "paragraphs": ["As previously discussed, DHS has eight operational components. DHS  also has six support components. Although each one has a distinct role  to play in helping to secure the homeland, there are operational and  support functions that cut across mission areas. For example, nearly  every operational component has, as part of its security operations, a  need for screening, vetting, and credentialing procedures and risk- targeting mechanisms. Likewise, nearly all operational components have  some form of international engagement, deploying staff abroad to help  secure the homeland before threats reach U.S. borders. Finally, as shown  in figure 2, different aspects of broad mission areas fall under the purview  of more than one DHS operational component."], "subsections": []}, {"section_title": "Key Departmentwide and Crosscutting Strategic Efforts", "paragraphs": ["PLCY is responsible for coordinating three key DHS strategic efforts: the  QHSR, the DHS Strategic Plan, and the Resource Planning Guidance.", "The QHSR is a comprehensive examination of the homeland security strategy of the nation that is to occur every 4 years and include recommendations regarding the long-term strategy and priorities for homeland security of the nation and guidance on the programs, assets, capabilities, budget, policies, and authorities of DHS. The QHSR is to be conducted in consultation with the heads of other federal agencies, key DHS officials (including the Under Secretary, PLCY), and key officials from other relevant governmental and nongovernmental entities.", "The DHS Strategic Plan describes how DHS can accomplish the missions it identifies in the QHSR report, identifies high-priority mission areas within DHS, and lays the foundation for DHS to accomplish its Unity of Effort Initiative as well as various cross-agency priority goals in the strategic plan, such as cybersecurity.", "The Resource Planning Guidance describes DHS\u2019s annual resource allocation process in order to execute the missions and goals of the QHSR and DHS Strategic Plan. The Resource Planning Guidance contains guidance over a 5-year period and informs several forward- looking reports to Congress, including the annual fiscal year Congressional Budget Justification as well as the Future Years Homeland Security Program Report."], "subsections": []}]}, {"section_title": "PLCY Has Effectively Coordinated Intradepartmental Strategy Efforts, but Ambiguous Roles and Responsibilities Have Limited PLCY\u2019s Effectiveness in Coordinating Policy", "paragraphs": ["Although PLCY has effectively carried out key coordination functions at  the senior level related to strategy, PLCY\u2019s ability to lead and coordinate  policy have been limited due to ambiguous roles and responsibilities and  a lack of predictable, accountable, and repeatable procedures."], "subsections": [{"section_title": "PLCY Has Effectively Conducted Key Coordination Functions at the Senior Level", "paragraphs": ["According to our analysis and interviews with operational components,  PLCY\u2019s efforts to lead and coordinate departmentwide and crosscutting  strategies\u2014a key organizational objective\u2014have been effective in  providing opportunities for all relevant stakeholders to learn about and  contribute to departmentwide or crosscutting strategy development. In  this role, PLCY routinely serves as the executive agent for the Deputies  Management Action Group and the Senior Leaders Council, which  involve analytical and coordination support. PLCY also provides support  for deputy- and principal-level decision making. For example, the Strategy  and Policy Executive Steering Committee (S&P ESC) meetings have  been used to discuss components\u2019 implementation plans for crosscutting  strategies, PLCY\u2019s requests for information from components for an  upcoming strategy, and updates on departmentwide strategic planning  initiatives. According to PLCY and operational component officials, PLCY  also provides leadership for the Resource Planning Guidance and Winter  Studies, both of which help inform departmentwide resource decision- making. For example, officials from one operational component stated  that PLCY\u2019s leadership of the Resource Planning Guidance is a helpful  practice for coordination and collaboration on departmentwide or  crosscutting strategies. The officials stated that PLCY reaches out to  ensure that the component is covering the Secretary\u2019s priorities and this  helps the component to ensure that its budget includes them.  Furthermore, PLCY develops and coordinates policy options and opinions  for the Secretary to present at the National Security Council and other  White House-level meetings. For example, PLCY officials told us that, in  light of allegations of Russian involvement in using poisonous nerve  agents on two civilians in Great Britain, PLCY coordinated the collection  of information to develop a policy recommendation for the Secretary to  present at a National Security Council meeting."], "subsections": []}, {"section_title": "Ambiguity in Roles and Responsibilities and a Lack of Predictable, Repeatable, and Accountable Procedures Have Limited PLCY\u2019s Ability to Lead and Coordinate Policy", "paragraphs": ["PLCY has encountered challenges leading and coordinating efforts to  develop, update, or harmonize policy\u2014also a key organizational  objective\u2014because it does not have clearly-defined roles, responsibilities,  and mechanisms to implement these responsibilities in a predictable,  repeatable, and accountable way. Standards for Internal Control in the  Federal Government states that management should establish an  organizational structure, assign responsibility, and delegate authority to  achieve the entity\u2019s objectives. As such, an organization\u2019s management  should develop an organizational structure with an understanding of the  overall responsibilities and assign these responsibilities to discrete units  to enable the organization to operate in an efficient and effective  manner. An organization\u2019s management should also implement control  activities through policies. It is important that an organization\u2019s  management document and define policies and communicate those  policies and procedures to personnel, so they can implement control  activities for their assigned responsibilities. In addition, leading  collaboration practices we have identified in our prior work include  defining and articulating a common outcome, clarifying roles and  responsibilities, and establishing mutually-reinforcing or joint strategies to  enhance and sustain collaboration, such as the work that PLCY and the  components need to do together to ensure that departmentwide and  crosscutting policy is effective for all relevant parties.", "According to PLCY officials, in general, PLCY is responsible for leading  the development of a policy when it crosses multiple components or if  there is a national implication, including White House interest in the  policy. However, PLCY officials acknowledged that this practice does not  always make them the lead and there are no established criteria that  define the circumstances under which PLCY (or another organizational  unit) should lead development of policies that cut across organizational  boundaries. PLCY officials said the lead entity for a policy is often  announced in an email from the Secretary\u2019s office, on a case-by-case  basis. According to PLCY officials, once components have been assigned responsibility for a policy, they have generally tended to retain it, and  PLCY may not have oversight for crosscutting policies that are  maintained by operational components. Therefore, there is no  established, coordinated system of oversight to periodically monitor the  need for policy harmonization, revision, or rescission.", "In the absence of clear roles and responsibilities, and processes and  procedures to support them, PLCY and officials in 5 of the 8 components  have encountered challenges in coordinating with each other. Although  PLCY and most component officials we interviewed described overall  positive experiences in coordinating with each other, we identified  multiple instances of (1) confusion about which parties should lead and  engage in policy efforts, (2) not engaging components at the right times,  (3) incompatible expectations around timelines, and (4) uncertainty about  PLCY\u2019s role and the extent to which it can and should identify and drive  policy in support of a more cohesive DHS.", "Confusion about who should lead and engage. Officials from one  operational component told us that they were tasked with leading a  departmentwide policy development effort they believed was outside their  area of responsibility and expertise. Officials in another operational  component stated that components sometimes end up coordinating  among themselves, but that policy development could be more effective  and efficient if PLCY took the role of convener and facilitator to ensure the  departmentwide perspective is present and all relevant stakeholders  participate. Officials from a third component stated that they spent  significant time and resources to develop a policy directly related to their  component\u2019s mission. As the component got ready to implement the  policy, PLCY became aware of it and asked the component to stop  working on the policy, so PLCY could develop a departmentwide policy.  According to component officials, while they were supportive of a  departmentwide policy, PLCY\u2019s timing delayed implementation of the  policy the component had developed and wasted the resources it had  invested. Moreover, officials from four operational components told us  that sometimes counselors from outside PLCY, such as the Secretary\u2019s  office, have led policy efforts that seem like they should be PLCY\u2019s  responsibility, which created more confusion about what PLCY\u2019s ongoing  role should be. PLCY officials agreed that, at times, it has been challenging to define PLCY\u2019s role relative to counselors for the Secretary,  and acknowledged that clear guidance to define who is leading which  types of policy development and coordination would be helpful.", "Not engaging components at the right times. Officials from 5 of 8  operational components told us that they had not always been engaged  at the right times by PLCY in departmentwide or crosscutting policies that  affected their missions. For example, officials from an operational  component described a crosscutting policy that had significant  implications for some of its key operational resources, but the component  was not made aware of the policy until it was about to be presented at the  White House. Officials from another component stated that they learned  of a new policy after it was in place and had to find significant training and  software resources to implement it even though they viewed the policy as  unnecessary for their mission. PLCY officials stated that, while they  intend to identify all components that should be involved in a policy, there  are times when PLCY is unaware a component is developing a policy that  affects other components. PLCY officials said they will involve other  components when PLCY becomes aware that a component is developing  such a policy. PLCY officials stated that it would be helpful to have a  process and procedures for cross-component coordination on policies to  help guide engagement regardless of who is developing the policy.", "Incompatible expectations around timelines. Officials at 4 of 8  operational components stated that short timelines from PLCY to provide  input and feedback can prevent PLCY from obtaining thoughtful and  complete information from components. For example, officials from one  component stated that PLCY asked them to perform an analysis that  would inform major, departmental decision-making and quickly provide  the analysis. Component officials told us that they did not understand why  PLCY needed the analysis on such an accelerated timeline, which  seemed inappropriate given the level of importance and purpose of the  analysis. Officials from another component told us that PLCY had not  always provided enough time to provide thoughtful feedback; therefore,  component officials were not sure if PLCY really wanted their feedback.  Officials from a third component stated that sometimes PLCY did not  provide sufficient time for thoughtful input or feedback that had cleared  the component\u2019s legal review, so component officials elected to miss  PLCY\u2019s deadline and provide late feedback. PLCY officials told us that,  frequently, timelines are not within their control, a situation that some  component officials also noted during our interviews with them. However,  PLCY officials agreed that a documented, predictable, and repeatable  process and procedures for policies may help ensure PLCY provides  sufficient comment time when in its control and may provide a basis to  help negotiate timelines with DHS leadership in other situations. PLCY  officials stated that, even with a documented process and procedures,  there would still be circumstances when short timelines are unavoidable.", "Uncertainty about PLCY\u2019s role in driving policy harmonization. Policy  officials at 6 of 8 operational components told us that they were unsure or  not aware of PLCY\u2019s role in harmonizing policy across the department,  and stated a desire for PLCY to be more involved in harmonizing or  enhancing departmentwide and crosscutting policy or for greater clarity  about PLCY\u2019s responsibility to play this role. As previously discussed,  PLCY\u2019s policy and strategy efforts fall into four categories\u2014statutory  responsibilities, interagency efforts, Secretary\u2019s priorities, and self- initiated activities; these activities include efforts to better harmonize  policies and strategies. According to PLCY officials, the category with the  lowest priority is self-initiated activities. PLCY officials stated that PLCY  makes tradeoffs and rarely chooses to work on self-initiated projects over  its other three categories of effort. According to the officials, PLCY\u2019s work  on the other three higher-priority categories is sufficient to ensure that the  office is effectively leading, conducting, and coordinating strategy and  policy across the department. Given its organizational position and  strategic priorities, PLCY is uniquely situated to identify opportunities to  better harmonize or enhance departmentwide and crosscutting policy, a  role that is in line with its strategic priority to build departmental  policymaking capacity and foster Unity of Effort. In the absence of clear  articulation of the department\u2019s expectations for PLCY in this role, it is  difficult for PLCY and DHS leadership to make completely informed and  deliberate decisions about the tradeoffs they make across any available  resources."], "subsections": []}, {"section_title": "Past Efforts to Define and Codify PLCY\u2019s Roles and Responsibilities in a Delegation of Authority Remain Incomplete", "paragraphs": ["In addition to statutory authority that PLCY received in the NDAA, PLCY  officials stated that a separate, clear delegation of authority\u2014a  mechanism by which the Secretary delegates responsibilities to other  organizational units within DHS\u2014is needed to help confront the  ambiguous roles it has experienced in the past. PLCY officials stated that  past efforts to finalize a delegation of authority have stalled during  leadership changes and that the initiative has been a lower priority, in  part, due to where PLCY is in its maturation process and DHS is in its  evolution into a more cohesive department under the Unity of Effort. As of  May 2018, the effort had been revived, but it is not clear whether and  when DHS will finalize it.", "According to a senior official in the Office of the Under Secretary for  Management, a delegation of authority is important for PLCY. He  described the creation of a delegation of authority as a process that does  more than simply delegate the Secretary\u2019s authority. He noted that  defining PLCY\u2019s roles and responsibilities in relation to other  organizational units presents an opportunity to engage all relevant  components and agree on appropriate roles. He said that, earlier in the  organizational life of the Office of the Under Secretary for Management, it  went through a process like this, which has been vital in it being able to  carry out its mission. He said now that PLCY has a deputy undersecretary  in place, this is a good time to restart the process to develop the  delegation of authority. Until the delegation or a similar process clearly  and fully articulates PLCY\u2019s roles and responsibilities, PLCY and the  operational components are likely to continue to experience limitations in  collaboration on crosscutting and departmentwide policy."], "subsections": []}]}, {"section_title": "PLCY Identifies Workforce Needs during the Annual Budget Cycle, but Could Apply DHS Workforce Planning Guidance to Better Identify and Communicate Resource Needs", "paragraphs": ["PLCY determines its workforce needs through the annual budget  process, but systematic identification of workforce demand, capacity  gaps, and strategies to address them could help ensure that PLCY\u2019s  workforce aligns with its and DHS\u2019s priorities and goals."], "subsections": [{"section_title": "PLCY Uses the Annual Budget Cycle to Determine Workforce Needs and Requires Flexibility in Staffing", "paragraphs": ["To determine its workforce needs each year, PLCY officials told us that,  as part of the annual budget cycle, they work with PLCY staff and  operational components to determine the scope of activities required for  each PLCY area of responsibility and the associated staffing needs.  PLCY officials said there are three skill sets needed to carry out the  office\u2019s responsibilities: policy analysis, social science analysis, and  regional affairs analysis. PLCY officials explained that the office\u2019s  priorities can change rapidly as events occur and the Secretary\u2019s and  administration\u2019s priorities shift. Therefore, according to PLCY officials,  their staffing model must be flexible. They said that, rather than a defined  system of full-time equivalents with set position types and levels, PLCY  officials start with their budget allotment and consider current and  potential emerging needs to set position types and levels, which may  fluctuate significantly from year to year. In addition, PLCY officials stated  that PLCY staff are primarily generalists and, given the versatility in skill  sets of their workforce, PLCY has a lot of flexibility to move staff around if  there is an emerging need. For example, if there is an emerging law  enforcement issue that affects all law enforcement agencies, PLCY may  be tasked with developing a policy to ensure the issue is addressed  quickly and that the resulting policy is harmonized across the department  and with other law enforcement agencies, such as the Department of  Justice."], "subsections": []}, {"section_title": "PLCY Has Not Used DHS\u2019s Workforce Planning Guide to Analyze Workforce Gaps or Communicate Tradeoffs to DHS Management to Ensure Alignment with DHS Priorities", "paragraphs": ["While PLCY completes some workforce planning activities as part of its  annual budgeting process, PLCY does not systematically address several  aspects of the DHS Workforce Planning Guide that may create more  efficient operations and greater alignment with DHS priorities. According  to the DHS Workforce Planning Guide, workforce planning is a process  that ensures the right number of people with the right skills are in the right  jobs at the right time for DHS to achieve the mission. This process  provides a framework to: align workforce planning to the department\u2019s mission and goals, predict, then assess how evolving missions, new processes, or  environmental conditions may impact the way that work will be  performed at DHS in the future,  identify gaps in capacity, develop and implement strategies and action plans to address  capacity and capability gaps, and  continuously monitor the effectiveness of action plans and modify, as  necessary.", "The DHS Workforce Planning Guide stipulates that an organization\u2019s  management should not only lead and show support during the workforce  planning process, but ensure alignment with the strategic direction of the  agency. Moreover, Standards for Internal Control in the Federal  Government states that management should use quality information to  achieve the entity\u2019s objectives. For example, management uses an  entity\u2019s operational processes to make informed decisions and evaluate  the entity\u2019s performance in achieving key agency objectives.", "According to PLCY officials, the current staffing paradigm involves shifting  the office\u2019s staff when new and urgent issues arise from the Secretary or  White House, and adding these unexpected tasks to staff\u2019s existing  responsibilities. However, this means that tradeoffs are made, resulting in  some priority items taking longer to address or not getting attention at all.  PLCY officials stated that they have been caught off-guard at times by  changes in demands placed on PLCY and had to scramble to address the  new needs.", "Additionally, PLCY officials said they have a number of vacancies, which  hamper the office\u2019s ability to meet certain aspects of its mission. For  example, PLCY\u2019s Office of Cyber, Infrastructure, and Resilience was  created in 2015. According to PLCY officials, PLCY has had some  resources to address cyber issues, however, there has not been funding  to staff this office and an assistant secretary has not been appointed to  lead it. Therefore, PLCY officials stated that PLCY has not been able to  address its responsibilities for infrastructure resilience.", "Similarly, PLCY has limited capacity for risk analysis. A provision of the  NDAA provides that PLCY is to:  develop and coordinate strategic plans and long-term goals of the  department with risk-based analysis and planning to improve operational  mission effectiveness, including consultation with the Secretary regarding  the quadrennial homeland security review under section 707 [6 U.S.C. \u00a7  347].", "However, PLCY officials acknowledged that their focus on identifying  needs for risk analyses and conducting them has been limited, in part,  because DHS disbanded the risk management office.", "Officials from one component told us that they contribute to a report that  PLCY coordinates, called Homeland Security National Risk  Characteristics, which is prepared as a precursor to the DHS Strategic  Plan. PLCY officials stated that, outside of these foundational documents  and some risk-based analyses completed as part of specific policy  development efforts, PLCY does not have the capacity to complete any  additional risk analysis activities.", "Although PLCY officials said they conduct some analysis of potential  demands as a starting point for how to allocate PLCY\u2019s annual staffing  budget, these efforts are largely informal and internal and have not  resulted in a systematic analysis that provides PLCY and DHS  management with the information they need to understand the effects of  resource tradeoffs. Also, PLCY officials said they track accomplishments  toward PLCY\u2019s strategic priorities as part of a weekly meeting and report,  however, officials acknowledged they do not analyze what role workforce  decisions have played in achieving or not achieving strategic priorities.  Moreover, although PLCY officials stated that they have intermittent, in- person, informal communication about resource use, they have not used  the principles outlined in the DHS Workforce Planning Guide to  systematically identify and communicate workforce demands, capacity  gaps, and strategies to address workforce issues. According to PLCY  officials, they have not conducted such analysis, in part, because the  Secretary\u2019s office has not requested it of them or the other DHS offices  that are funded in the same part of the DHS budget. Regardless of  whether the Secretary expects workforce analysis as part of the  budgeting process, the DHS Workforce Planning Guide could be used  within and outside of the budgeting process to help inform resource  decision making throughout the year.", "PLCY officials stated that at the PLCY Deputy Under Secretary\u2019s  initiative, they recently began a review of all relevant statutory authorities,  which they will map against the current organizational structure and day- to-day operations. The Deputy Under Secretary plans to use the results of  the review to enhance PLCY\u2019s efficiency and effectiveness, and the  results could serve as a foundation for a more holistic and systematic  analysis of workforce demand, any capacity gaps, and strategies to  address them. Employing workforce planning principles\u2014in particular,  systematic identification of workforce demand, capacity gaps, and  strategies to address them\u2014consistent with the DHS Workforce Planning  Guide could better position PLCY to use its workforce as effectively as  possible under uncertain conditions. Moreover, using the DHS guide  would help PLCY to systematically communicate information about any  workforce gaps to DHS leadership, so there is transparency about how  workforce tradeoffs affect PLCY\u2019s ability to support DHS goals."], "subsections": []}]}, {"section_title": "Additional External Communication Practices Could Enhance PLCY\u2019s Collaboration with DHS Stakeholders", "paragraphs": ["As discussed earlier, officials from PLCY and DHS operational  components praised existing mechanisms to coordinate and  communicate at the senior level, especially about strategy. However,  component officials identified opportunities for PLCY to better connect at  the staff level to identify and respond to emerging policy and strategy  needs. Leading practices for collaboration that we have identified in our  prior work state that it is important to ensure that all relevant participants  have been included in a collaborative effort, and positive working  relationships among participants from different agencies or offices can  bridge organizational cultures. These relationships build trust and foster  communication, which facilitate collaboration.", "Also, as previously stated, PLCY has mechanisms like the S&P ESC to  communicate and coordinate with operational components and other  DHS stakeholders at the senior level (e.g., Senior Executive Service  officials). However, PLCY does not have a mechanism to effectively  engage in routine communication and collaboration at the staff level (e.g.,  program and policy specialists working at operational components to  oversee or implement policy and strategy functions). Specifically, officials  with responsibility for policy and strategy at 6 of 8 operational  components told us that they did not have regular contact with or know  who to contact at PLCY for questions about policies or strategies, or that  the reason they knew who to contact was because of existing working  relationships, not because of efforts PLCY had undertaken to facilitate  such contacts. In addition, some component officials noted that, when  they tried to use the PLCY website to coordinate, they found it to be out of  date and lacking sufficient information. PLCY officials acknowledged that  the website needs improvement. They stated that the office has  developed improved content for the website, but does not have the  necessary staff to update the website. According to the officials, the  needed staff should be hired soon and improved content should be on the  website by the end of summer 2018.", "Although officials at 5 of the 8 operational components we interviewed  stated that the quality of PLCY\u2019s coordination and collaboration has  improved in the past 2 years or so, component officials offered several  suggestions to enhance PLCY\u2019s coordination and collaboration,  especially at the staff level. Among these were:  conduct routine information sharing meetings with staff-level officials  who have policy and strategy responsibilities at each operational  component,  clearly articulate points of contact, their contact information, and their  portfolios at PLCY as well as at other policy and strategy  stakeholders, ensure the PLCY website is up-to-date with contact information for  PLCY and components that work in strategy and policy areas, and  with relevant information about crosscutting strategy and policy  initiatives underway, host a forum\u2014such as an annual conference\u2014to bring together policy  and strategy officials from PLCY and DHS components to share ideas  and make contacts, and prepare a standard briefing for component officials with strategy and  policy responsibilities to help ensure that staff at all levels understand  what PLCY does, how it works, and opportunities for engagement on  emerging policy and strategy needs or identified harmonization  opportunities.", "For example, officials from one component told us that they would like  PLCY officials to have in-person meetings with component staff to  discuss what PLCY does, who to contact in PLCY, where to find  information about policies and strategies, and other relevant information  to ensure a smooth working relationship between the component and  PLCY.", "According to PLCY officials, the office recognizes the value of creating  mechanisms to connect staff, who work on policy and strategy at all levels  in DHS. PLCY officials said they have historically done a better job in  coordinating at the senior level, but are interested in expanding  opportunities to connect other staff with policy and strategy  responsibilities. PLCY officials stated that they are considering creating a  working group structure that mirrors existing organizational mechanisms  to coordinate at the senior level, but have not taken steps to do so.", "Routine collaboration among PLCY, operational components, and other  DHS offices at the staff level is important to ensure that PLCY is able to  carry out its functions under the NDAA, including the effective  coordination of policies and strategies. A positive working relationship  among these stakeholders can build trust, foster communication, and  facilitate collaboration. Such enhanced communication and collaboration  across PLCY and among component officials with policy and strategy  responsibility could help the department more quickly and completely  identify emerging, crosscutting strategy and policy needs and  opportunities to enhance policy harmonization."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["PLCY\u2019s efforts to lead, conduct, and coordinate departmentwide and  crosscutting policies have sometimes been hampered by the lack of  clearly-defined roles and responsibilities. In addition, PLCY does not have  a consistent process and procedures for its strategy development and  policymaking efforts. Without a delegation of authority or similar  documentation from DHS leadership clearly articulating PLCY\u2019s missions,  roles, and responsibilities\u2014along with defined processes and procedures  to carry them out in a predictable and repeatable manner\u2014there is  continuing risk that confusion and uncertainty about PLCY\u2019s authority,  missions, roles, and responsibilities will limit its effectiveness.", "PLCY employs some workforce planning, but does not systematically  apply key principles of the DHS Workforce Planning Guide to help predict  workforce demand, and identify any workforce gaps and design strategies  to address them. Without this analysis, PLCY faces limitations in ensuring  that its workforce is aligned with its and DHS\u2019s priorities and goals.  Moreover, the results of this analysis would better position PLCY to  communicate to DHS leadership any potential tradeoffs in workforce  allocation that would affect PLCY\u2019s ability to meet priorities and goals.", "PLCY could enhance its use of mechanisms for collaboration and  communication with DHS stakeholders at the staff level. Implementation  of additional mechanisms at the staff level for regular communication and  coordination, including providing up-to-date information to stakeholders  about the office, could help PLCY and operational components to better  connect in order to identify and address emerging policy and strategy  needs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DHS:  The Secretary of Homeland Security should finalize a delegation of  authority or similar document that clearly defines PLCY\u2019s mission, roles,  and responsibilities relative to DHS\u2019s operational and support  components. (Recommendation 1)", "The Secretary of Homeland Security should create corresponding  processes and procedures to help implement the mission, roles, and  responsibilities defined in the delegation of authority or similar document  to help ensure predictability, repeatability, and accountability in  departmentwide and crosscutting strategy and policy efforts.  (Recommendation 2)", "The Under Secretary for Strategy, Policy, and Plans should use the DHS  Workforce Planning Guide to help identify and analyze any gaps in  PLCY\u2019s workforce, design strategies to address any gaps, and  communicate this information to DHS leadership. (Recommendation 3)", "The Under Secretary for Strategy, Policy, and Plans should enhance the  use of collaboration and communication mechanisms to connect with staff  in the components with responsibilities for policy and strategy to better  identify and address emerging needs. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DHS. DHS  provided written comments, which are reproduced in appendix I. DHS  also provided technical comments, which we incorporated, as  appropriate. DHS concurred with three of our recommendations and  described actions planned to address them. DHS did not concur with one  recommendation.", "Specifically, DHS did not concur with our recommendation that PLCY  should use the DHS Workforce Planning Guide to help identify and  analyze any gaps in PLCY\u2019s workforce, design strategies to address any  gaps, and communicate this information to DHS leadership. The letter  described a number of actions, including actions that are also described  in the report, which PLCY takes to help ensure alignment of its staff with  organizational needs. In the letter, PLCY officials pointed to the workforce  activities PLCY undertakes as part of the annual budgeting cycle. We  acknowledge that the actions described to predict upcoming priorities and  resource needs as part of the annual budgeting cycle are in line with the  DHS workforce planning principles. However, as we noted, there are  opportunities to apply the workforce planning principles outside the  annual budgeting cycle to provide greater visibility and awareness of  resource tradeoffs to management inside PLCY and in the Secretary\u2019s  office.", "In the letter, PLCY officials made note of the dynamic and changing  nature of its operational environment, stating that it often required them to  shift resources and priorities on a more frequent or ad hoc basis than  many organizations. We acknowledged in the report that PLCY\u2019s  operating environment requires it to maintain flexibility in its staffing  approach. However, PLCY has a number of important duties, including  helping foster Unity of Effort throughout the department and helping to  ensure the availability of risk information for departmental decision  making, that require longer-term, sustained attention and strategic  management. During interviews, PLCY officials acknowledged that  striking a balance between these needs has been difficult and at times  they have faced significant struggles. The report describes some areas  where, during the time we were conducting our work, it was clear that  some tasks and functions, such as risk analyses, lacked the resources or  focus necessary to ensure they received sustained institutional attention.  It is because of PLCY\u2019s dynamic operating environment, coupled with the  need for sustained institutional attention to other key responsibilities, that  we recommended PLCY undertake workforce planning activities that  would help generate better information for PLCY and DHS management  to have full visibility and awareness of gaps and resource tradeoffs.", "Finally, the letter stated that because PLCY is a very small and flat  organization, it is able to identify capacity gaps and develop action plans  without obtaining all of the data collected through each recommended  element, worksheet, form, and template of the model proposed in the  DHS Workforce Planning Guide. We acknowledge that it would be  counterproductive for PLCY to engage in data collection and analysis that  are significantly more elaborate than its planning needs. Nevertheless, we  continue to believe that PLCY could use the principles more robustly,  outside the annual budgeting process, to help ensure that it identifies and  communicates the effect that resource tradeoffs have on its ability to  accomplish its multifaceted mission.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov. If you or your staff have any questions concerning  this report, 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  significant contributions to this report are listed in Appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff", "paragraphs": ["In addition to the contact named above, Kathryn Godfrey (Assistant  Director), Joseph E. Dewechter (Analyst-in-Charge), Michelle Loutoo  Wilson, Ricki Gaber, Dominick Dale, Thomas Lombardi, Ned Malone,  David Alexander, Sarah Veale, and Michael Hansen made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Twenty-two agencies\u2014several with major management challenges\u2014combined to form the Department of Homeland Security in 2003. Since then, DHS has often struggled to build a cohesive, effective department, and its management has remained on our High Risk list.", "Its Office of Strategy, Policy, and Plans helps shape DHS by, for example, developing and coordinating departmentwide strategies and policies. The office has been effective with strategies, but a lack of clearly defined roles and responsibilities in DHS has hampered its efforts to develop and align policies.", "We recommended, among other things, that DHS more clearly define the office's role."]}
{"id": "GAO-18-607", "url": "https://www.gao.gov/products/GAO-18-607", "title": "Medicaid: Access to Health Care for Low-Income Adults in States with and without Expanded Eligibility", "published_date": "2018-09-13T00:00:00", "released_date": "2018-10-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Under PPACA, states could choose to expand Medicaid coverage to certain uninsured, low-income adults. As of December 2017, 31 states and the District of Columbia chose to expand Medicaid to cover these adults, and 19 states did not.", "GAO was asked to provide information about the demographic characteristics of and access to health care services for low-income adults\u2014those with household incomes less than or equal to 138 percent of the federal poverty level\u2014in expansion and non-expansion states. This report describes 2016 national survey estimates of (1) the number and demographic characteristics for low-income adults who were uninsured in expansion and non-expansion states, (2) unmet medical needs for low-income adults in expansion and non-expansion states and by insurance status, (3) barriers to health care for low-income adults in expansion and non-expansion states and by insurance status, and (4) having a usual place of care and receiving selected health care services for low-income adults in expansion and non-expansion states and by insurance status.", "GAO obtained 2016 NHIS estimates from the National Center for Health Statistics (NCHS), the federal agency within the Department of Health and Human Services that maintains these survey data.", "NHIS is a household interview survey designed to be a nationally representative sample of the civilian, non-institutionalized population residing in the United States. Estimates were calculated for demographic characteristics for uninsured, low-income adults. In addition, estimates were calculated for unmet medical needs, barriers to health care, and having a usual place of care and receiving selected health services for low-income adults in expansion and non-expansion states and by insurance status The estimates were based on responses to selected survey questions. GAO selected these survey questions from the Family and Adult Access to Health Care and Utilization and another section of the 2016 NHIS.", "GAO took steps to assess the reliability of the 2016 NHIS estimates, including interviewing NCHS officials and examining the data for logical errors. GAO determined that the data were sufficiently reliable for the purposes of its analyses.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["According to the 2016 National Health Interview Survey (NHIS), an estimated 5.6 million uninsured, low-income adults\u2014those ages 19 through 64\u2014had incomes at or below the income threshold for expanded Medicaid eligibility as allowed under the Patient Protection and Affordable Care Act (PPACA). Estimates from this nationally representative survey showed that about 1.9 million of the 5.6 million uninsured, low-income adults lived in states that chose to expand Medicaid under PPACA, while the remaining 3.7 million lived in non-expansion states\u2014those that did not choose to expand Medicaid. In 2016, over half of uninsured, low-income adults were male, over half were employed, and over half had incomes less than 100 percent of the federal poverty level in both expansion and non-expansion states.", "The 2016 NHIS estimates showed that low-income adults in expansion states were less likely to report having any unmet medical needs compared with those in non-expansion states, and low-income adults who were insured were less likely to report having unmet medical needs compared with those who were uninsured. Among the low-income adults who were uninsured, those in expansion states were less likely to report having any unmet medical needs compared with those in non-expansion states.", "The 2016 NHIS estimates also showed that low-income adults in expansion states were less likely to report financial barriers to needed medical care and other types of health care, such as specialty care, compared with those in non-expansion states, and low-income adults who were insured were less likely to report financial barriers to needed medical care compared with those who were uninsured.", "Among low-income adults who were uninsured, those in expansion states were less likely to report financial barriers to needed medical care compared with those in non-expansion states.", "Finally, the 2016 NHIS estimates showed that low-income adults in expansion states were more likely to report having a usual place of care to go when sick or needing advice about their health and receiving selected health care services compared with those in non-expansion states. The estimates also showed that low-income adults who were insured were generally more likely to report having a usual place of care and receiving selected health care services compared with those who were uninsured. Among the uninsured, relatively similar percentages of low-income adults in expansion and non-expansion states reported having a usual place of care. Similarly, estimates showed that relatively similar percentages of low-income adults who were uninsured in expansion and non-expansion states reported receiving selected health care services, such as receiving a flu vaccine or a blood pressure check."]}], "report": [{"section_title": "Letter", "paragraphs": ["Historically, eligibility for Medicaid\u2014a federal-state health care financing  program\u2014has been limited to certain categories of low-income  individuals, including children, parents, pregnant women, and individuals  who have disabilities or who are aged 65 and older. Beginning in 2014,  the Patient Protection and Affordable Care Act (PPACA) gave states the  option of expanding Medicaid eligibility beyond these categories to  include certain adults with incomes that do not exceed 138 percent of the  federal poverty level (FPL). As of December 2017, there were 31  \u201cexpansion states\u201d\u2014those states and the District of Columbia that chose  to expand Medicaid eligibility\u2014and 19 \u201cnon-expansion states\u201d\u2014those that  had not expanded Medicaid eligibility to this additional adult population.", "Several years have passed since PPACA gave states the option of  expanding Medicaid eligibility. You asked us to provide the most recently  available information on the demographic characteristics of uninsured,  low-income adults, and the extent to which low-income adults are  accessing health care services in two groups of states: expansion states  and non-expansion states. This report describes what 2016 national  survey estimates showed regarding:  1.  the number and demographic characteristics for low-income adults  who were uninsured in expansion and non-expansion states,  2.  unmet medical needs for low-income adults in expansion and non- expansion states and by insurance status,  3.  barriers to health care for low-income adults in expansion and non- expansion states and by insurance status, and  4.  having a usual place of care and receiving selected health care  services for low-income adults in expansion and non-expansion states  and by insurance status.", "To address our research objectives, we used data from the 2016 National  Health Interview Survey (NHIS), from the Centers for Disease Control and  Prevention, National Center for Health Statistics (NCHS). These data  were the most recent data available when we conducted our analyses.", "To describe the number and demographic characteristics for low-income  adults\u2014individuals ages 19 to 64, with incomes that did not exceed 138  percent FPL\u2014who were uninsured in expansion and non-expansion  states, we requested that NCHS calculate estimates based on responses  to survey questions on demographic characteristics. Responses to  survey questions were calculated as an estimated percentage of the total  population for three groups of low-income adults: those in expansion  states, in non-expansion states, and for all states. We also requested  that NCHS test for statistically significant differences between expansion  states and non-expansion states. Using these estimates, we summarized  the uninsured, low-income adult population by expansion states, non- expansion states, and all states combined for demographic  characteristics including race and ethnicity, gender, and employment  status.", "To describe unmet medical needs, barriers to health care, and having a  usual place of care and receiving selected health care services for low- income adults in expansion and non-expansion states and by insurance  status, we requested that NCHS also calculate estimates using the 2016  NHIS. Estimates were based on responses to selected survey questions  and composite measures\u2014NCHS-developed measures based on  responses to NHIS questions on related topics. We selected survey  questions and their related composite measures from the Access to  Health Care and Utilization and Health Behaviors sections of the 2016  NHIS. These survey questions and composite measures allowed us to  summarize access to health care for low-income adults in terms of unmet  medical needs, barriers to health care, and having a usual place of care  and receiving selected health care services. Responses to survey  questions and composite measures were calculated as an estimated  percentage of the total population for eight groups of low-income adults:  (1) those in expansion states, (2) those in non-expansion states, (3) those  who had Medicaid in expansion states, (4) those who had Medicaid in  non-expansion states, (5) those who had private health insurance in  expansion states, (6) those who had private health insurance in non- expansion states, (7) those who were uninsured in expansion states, and  (8) those who were uninsured in non-expansion states. We also  requested that NCHS test for statistically significant differences between  the groups of low-income adults, specifically: all low-income adults in expansion states compared with all low- income adults in non-expansion states; uninsured, low-income adults in expansion states compared with each  of the four groups of insured, low-income adults\u2014low-income adults  who had Medicaid in expansion states, low-income adults who had  Medicaid in non-expansion states, low-income adults who had private  health insurance in expansion states, and low-income adults who had  private health insurance in non-expansion states; uninsured, low-income adults in non-expansion states compared with  each of the four groups of insured, low-income adults; and uninsured, low-income adults in expansion states compared with  uninsured, low-income adults in non-expansion states.", "We took steps to assess the reliability of the 2016 NHIS estimates,  including interviewing NCHS officials and checking frequency distributions  for missing estimates, outliers, and obvious errors. Based on this work,  we determined that the estimates were sufficiently reliable for the  purposes of our reporting objectives. Appendix I provides additional  information on our scope and methodology.", "We conducted this performance audit from May 2017 through September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In fiscal year 2016, Medicaid covered an estimated 72.2 million low- income and medically needy individuals in the United States, and  Medicaid estimated expenditures totaled over $575.9 billion. The federal  government matches most state expenditures for Medicaid services on  the basis of a statutory formula. States receive higher federal matching  rates for certain services or populations, including an enhanced matching  rate for Medicaid expenditures for individuals who became eligible for  Medicaid under PPACA. Of the $575.9 billion in estimated expenditures  for 2016, the federal share totaled over $363.4 billion and the states\u2019  share totaled $212.5 billion.", "The Centers for Medicare & Medicaid Services (CMS)\u2014a federal agency  within the Department of Health and Human Services (HHS)\u2014and states  jointly administer and fund the Medicaid program. States have flexibility  within broad federal requirements to design and implement their Medicaid  programs. States must submit a state Medicaid plan to CMS for review  and approval. A state\u2019s approved Medicaid plan outlines the services  provided and the groups of individuals covered. While states must cover  certain mandatory populations and benefits, they have the option of  covering other categories of individuals and benefits.", "PPACA permitted states to expand coverage to a new population\u2014non- elderly, non-pregnant adults who are not eligible for Medicare and whose  income does not exceed 138 percent of the FPL. This expansion  population comprised 20 percent of total Medicaid enrollment in 2017.  (See fig. 1.)", "As of December 2017, 31 states and the District of Columbia had  expanded Medicaid eligibility to the new coverage population allowed  under PPACA and 19 states had not. Figure 2, an interactive map, illustrates states\u2019 Medicaid expansion status. See appendix II for  additional information on figure 2."], "subsections": []}, {"section_title": "Survey Estimates Showed 5.6 Million Uninsured, Low- Income Adults Had Qualifying Incomes for Expanded Medicaid Coverage", "paragraphs": ["According to the NHIS estimates, 5.6 million low-income adults were  uninsured in 2016. Of these 5.6 million, an estimated 1.9 million  uninsured, low-income adults resided in expansion states, compared with  an estimated 3.7 million in non-expansion states. Estimates of uninsured,  low-income adults comprised less than 1 percent of the total population  for all expansion states and 3 percent of the total population for all non- expansion states.", "NHIS estimates also showed that over half of uninsured, low-income  adults were male, over half were employed, and over half had incomes  less than 100 percent FPL. For some demographic characteristics, there  were some statistically significant differences between uninsured, low- income adults in expansion states compared with these adults in non- expansion states. For example, expansion states had significantly larger  percentages of uninsured, low-income males than non-expansion states.  (See table 1.) See table 6 in appendix III for additional demographic  characteristics of uninsured, low-income adults.", "Estimates from the 2016 NHIS showed some statistically significant  differences in the health status of uninsured, low-income adults in  expansion and non-expansion states. In particular, expansion states had  a larger percentage of these adults who reported that their health was  \u201cgood\u201d and a smaller percentage who reported their health as \u201cfair or  poor\u201d than those in non-expansion states. However, the percentages of  uninsured, low-income adults with responses of \u201cexcellent or very good\u201d  in both expansion and non-expansion states were large\u201447 percent or  larger, and the differences between the two groups of states were not  statistically significant. (See fig. 3.) See table 7 in appendix III for  additional information about the health status for uninsured, low-income  adults."], "subsections": []}, {"section_title": "Survey Estimates Showed Low-Income Adults in Expansion States and Those Who Were Insured Were Less Likely to Report Any Unmet Medical Needs", "paragraphs": ["The 2016 NHIS estimates showed that smaller percentages of low- income adults in expansion states reported having any unmet medical  needs compared with those in non-expansion states; and smaller  percentages of those who were insured reported having any unmet  medical needs compared with those who were uninsured, regardless of  where they lived, for example:", "Low-income adults in expansion and non-expansion states.", "Access to Health Care: Measuring Any  Unmet Medical Needs  The National Center for Health Statistics, the  federal agency that conducts the National  Health Interview Survey (NHIS), developed a  composite measure on any unmet medical  needs, which was based on six survey  questions on respondents\u2019 ability to afford  different types of needed health care services.  These questions asked whether in the past 12  months respondents could not afford medical  care at any time; delayed seeking medical  care due to worries about costs; or could not  afford needed prescription drugs, mental  health or counseling, dental care, or  eyeglasses. percent or less of the low-income adults who had Medicaid or private  health insurance in expansion or non-expansion states reported  having any unmet medical needs, compared with 50 percent or more  of those who were uninsured in expansion or non-expansion states.  Further, among the uninsured, 50 percent of low-income adults living  in expansion states reported any unmet medical needs, compared  with 63 percent of those in non-expansion states. (See fig. 4.) See  tables 8 and 9 in appendix IV for estimates of the composite measure  we reviewed on any unmet medical needs."], "subsections": []}, {"section_title": "Survey Estimates Showed Low-Income Adults in Expansion States and Those Who Were Insured Were Less Likely to Report Financial Barriers to Health Care", "paragraphs": ["The 2016 NHIS estimates showed that smaller percentages of low- income adults in expansion states reported financial barriers to needed  health care compared with those in non-expansion states; and smaller  percentages of those who were insured reported financial barriers to  needed health care compared with those who were uninsured, regardless  of where they lived, for example:", "Low-income adults in expansion and non-expansion states. Nine  percent of low-income adults in expansion states reported that they  could not afford needed medical care, compared with 20 percent of  low-income adults in non-expansion states.", "Low-income adults who were insured and uninsured. Twelve  percent or less of low-income adults who had Medicaid or private  health insurance in expansion or non-expansion states reported  financial barriers to needed medical care, compared with 27 percent  or more of those who were uninsured in expansion or non-expansion  states. In addition, among low- income adults who were uninsured,  a smaller percentage of those who lived in expansion states reported  financial barriers to two of the six needed health care services  compared with those who lived in non-expansion states. (See fig. 5.)  See tables 10 through 13 in appendix V for estimates of all survey  questions we reviewed on financial barriers to health care.", "The 2016 NHIS also collected information on non-financial barriers to  health care. Specifically, the survey asked whether respondents had  delayed health care due to non-financial reasons, such as they lacked  transportation, were unable to get through on the phone, were unable to  get a timely appointment, experienced long wait time at the doctor\u2019s  office, or were not able to get to a clinic or doctor\u2019s office when it was  open. The 2016 NHIS showed that the same or similar percentages of  low-income adults in expansion and non-expansion states reported  delaying care due to a lack of transportation or other non-financial  reasons. Further, generally similar or larger percentages of low-income  adults with insurance reported delaying care due to non-financial reasons,  compared with those who were uninsured. See tables 14 and 15 in appendix V for estimates of low-income adults in expansion and non- expansion states and by insurance status on non-financial barriers to  health care."], "subsections": []}, {"section_title": "Survey Estimates Showed Low-Income Adults in Expansion States and Those Who Were Insured Were Generally More Likely to Report Having a Usual Place of Care and Receiving Selected Health Care Services", "paragraphs": ["The 2016 NHIS estimates showed that a larger percentage of low-income  adults in expansion states reported having a usual place of care  compared with those in non-expansion states; and larger percentages of  those who were insured reported having a usual place of care compared  with those who were uninsured, regardless of where they lived, for  example:", "Low-income adults in expansion and non-expansion states.  Eighty-two percent of the low-income adults in expansion states  reported having a usual place of care when they were sick or needed  advice about their health, compared with 68 percent of those in non- expansion states.", "Access to Health Care: Having a Usual  Place of Care  The 2016 National Health Interview Survey  (NHIS) asked respondents about whether  they had a place they usually go when sick or  need advice about their health.", "Low-income adults who were insured and uninsured. Seventy- eight percent or more of those who had Medicaid or private health  insurance in expansion or non-expansion states reported having a  usual place of care, compared with 46 percent or less of those who  were uninsured in expansion or non-expansion states. Among the  uninsured, similar percentages of low-income adults in expansion and  non-expansion states reported having a usual place of care. (See  fig. 6.) See tables 16 through 19 in appendix VI for estimates of all  survey questions we reviewed on having a usual place of care."], "subsections": [{"section_title": "Survey Estimates Showed Low-Income Adults in Expansion States and Those Who Were Insured Were Generally More Likely to Report Receiving Selected Services", "paragraphs": ["The 2016 estimates showed that larger percentages of low-income adults  in expansion states reported receiving selected health care services, such  as a flu vaccine, compared with those in non-expansion states; and larger  percentages of those with insurance reported receiving selected health  care services compared with those who were uninsured, regardless of  where they lived, for example:", "Low-income adults in expansion and non-expansion states.", "Thirty-one percent of low-income adults in expansion states reported  receiving flu vaccinations, compared with 24 percent of those in non- expansion states. having their blood cholesterol checked by having their blood pressure checked by a  doctor, nurse, or other health professional; visiting a hospital emergency department. percent or more of low-income adults who had Medicaid or private  health insurance in expansion or non-expansion states reported  receiving blood cholesterol checks, compared with 28 percent or less  of low-income adults who were uninsured in expansion or non- expansion states. Among the uninsured, generally similar  percentages of low-income adults in expansion and non-expansion  states reported blood cholesterol checks, flu vaccines, and other  selected services. (See fig. 7.) See tables 20 and 21 in appendix VI  for estimates of all survey questions we reviewed on selected health  care services.", "The 2016 NHIS also asked respondents whether they visited or had  spoken to a health care professional about their health, including: a general doctor, such as a general practitioner, family doctor, and a nurse practitioner, physician\u2019s assistant, or midwife; and a doctor who specializes in a particular disease, with the exception of  obstetricians, gynecologists, psychiatrists, and ophthalmologists.", "See tables 22 and 23 in appendix VI for estimates of low-income adults in  expansion and non-expansion states and by insurance status on  contacting health care professionals."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for comment. HHS provided  technical comments, which we incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services, the appropriate congressional  committee, and other interested parties. In addition, this report is  available at no charge on the GAO website at http://www.gao.gov.", "If you are your staff members have any questions about this report,  please contact me at (202) 512-7114 or yocomc@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Major contributors to this report  are listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["To describe national survey estimates of (1) the number and  demographic characteristics of uninsured, low-income adults in expansion  and non-expansion states; (2) unmet medical needs for low-income  adults in expansion and non-expansion states and by insurance status;  (3) barriers to health care for low-income adults in expansion and non- expansion states and by insurance status; and (4) having a usual place of  care and receiving selected health care services for low-income adults in  expansion and non-expansion states and by insurance status, we used  data from the 2016 National Health Interview Survey (NHIS). The 2016  NHIS were the most recent data available when we conducted our  analyses. This appendix describes the data source, study population,  analyses conducted, study limitations, and data reliability assessment."], "subsections": [{"section_title": "Data Source", "paragraphs": ["The NHIS collects demographic, health status, health insurance, health  care access, and health care service use data for the civilian,  noninstitutionalized U.S. population. It is an annual, nationally  representative, cross-sectional household interview survey. NHIS  interviews are conducted continuously throughout the year for the  National Center for Health Statistics (NCHS), which is a federal agency  within the Department of Health and Human Services that compiles  statistical information to help guide health policy decisions. Interviews are  conducted in respondents\u2019 homes, and interviewers may conduct follow- up interviews over the telephone to complete an interview. Information  about some NHIS respondents, such as information about their health  status, may be obtained through an interview with another family member  on behalf of the respondent.", "NHIS data are organized into several data files. Estimates used for our  study are based on data with the 2016 Family and Sample Adult Core  components of the 2016 NHIS. Sociodemographic, insurance, and select  health care access and utilization variables were defined using data  collected in the Family Core component of the survey, which includes  data on every household member for the families participating in NHIS.  Other measures of health care access and utilization examined in this  study are based on data collected in the Sample Adult Core component.  In this component, the respondent (i.e., the sample adult) is randomly  selected from among all adults aged \u226518 years in the family. A proxy  respondent might respond for the sample adult if, because of health  reasons, the sample adult is physically or mentally unable to respond  themselves. The 2016 imputed income files were used to define poverty  thresholds, which is based on reported and imputed family income. The  NHIS publicly released data files for 2016 include data for 40,220  households containing 97,169 persons, and the total household response  rate was 67.9 percent."], "subsections": []}, {"section_title": "Study Population", "paragraphs": ["For this study we asked NCHS to provide estimates of low-income, non- elderly adults, which we defined as individuals ages 19 to 64, with family  incomes that did not exceed 138 percent of the federal poverty level  (FPL). We also requested that estimates be provided separately for  respondents based on whether they resided in an expansion or non- expansion state, and whether they were covered by private health  insurance, Medicaid, or had no insurance. We gave NCHS specifications  for the definition of low-income, non-elderly adults; the states that should  be classified as expansion or non-expansion states in calendar year  2016; and the respondents who should be classified as having private  health insurance, Medicaid, or no insurance.", "We asked NCHS to exclude respondents who were noncitizens, were  covered by Medicare, only received health care services through military  health care or through the Indian Health Service, or had Supplemental  Social Security Income. We also excluded adult females from the Sample  Adult file who responded they were pregnant at the time of the interview.  In addition, we asked NCHS to exclude individuals for which information  was missing\u2014not recorded or not provided during the interview\u2014on  health insurance coverage (Medicaid, private health insurance, Indian  Health Service, military health care, or no health insurance), receipt of  Supplemental Social Security Income, and U.S. citizenship.", "We classified individuals in our study population as residing in an  expansion or non-expansion state based on their state of residence when  they were interviewed for the 2016 NHIS. We classified the 30 states and  the District of Columbia that expanded their Medicaid eligibility before July  1, 2016, as expansion states. The remaining 20 states were classified as  non-expansion states. Louisiana expanded Medicaid coverage on July 1,  2016; therefore, we classified it as a non-expansion state. We decided  not to classify Louisiana as an expansion state because we allowed a 6- month period for the effects of expansion to appear. Therefore, for  Louisiana we only included NHIS respondents interviewed from January  through June 2016 when Louisiana was a non-expansion state. Similarly,  for two expansion states\u2014Alaska and Montana\u2014we only included  individuals who were interviewed March through December 2016 and July  through December 2016, respectively, after the state expanded Medicaid  to allow for a 6-month time period for the effect of expansion to take  place. (See table 2.)", "Table 3 below illustrates the sample size and population estimates of low- income sample adults by expansion state, non-expansion state, and  national total.", "We classified NHIS respondents as having private health insurance,  Medicaid, or no insurance based on the health insurance classification  approach used by NCHS for NHIS. NCHS assigned NHIS respondents\u2019  health insurance classification based on a hierarchy of mutually exclusive  categories in the following order: private health insurance, Medicaid, other  coverage, and uninsured. Low-income adults with more than one  coverage type were assigned to the first appropriate category in the  hierarchy. Respondents were classified as having private health  insurance if they reported that they were covered by any comprehensive  private health insurance plan (including health maintenance and preferred  provider organizations). Private coverage excluded plans that pay for one  type of service, such as accidents or dental care. Respondents were  classified as having Medicaid if they reported they were covered by  Medicaid or by a state-sponsored health plan with no premiums or it was  not known whether a premium was charged. Respondents were classified  as being uninsured if they did not report having any private health  insurance, Medicare, Medicaid, Children\u2019s Health Insurance Program,  state-sponsored or other government-sponsored health plan, or military  health plan. Respondents were also classified as being uninsured if they  only had insurance coverage with a private plan that paid for one type of  service, such as accidents or dental care."], "subsections": []}, {"section_title": "Analyses Conducted", "paragraphs": ["We gave NCHS officials specifications to calculate estimates from the  2016 NHIS for demographic characteristics, access to care, as well as  composite measures of access to health care based on selected survey  questions. Composite measures are NCHS-developed measures based  on responses to NHIS questions covering related topics. The analysis  included two composite measures:  1.  any unmet medical needs, which is based on responses to six  underlying survey questions that asked respondents about whether  during the past 12 months they needed medical care but did not get it  because they could not afford it; delayed seeking medical care  because of worry about the cost; or did not get prescription medicines,  mental health care or counseling, eyeglasses, or dental care due to  cost; and  2.  any non-financial barriers to health care, which is based on five  underlying questions that asked respondents whether they delayed  care in the past 12 months for any of the following reasons: could not  get through on the telephone; could not get an appointment soon  enough; waited too long to see the doctor after arriving at the doctor\u2019s  office; the clinic/doctor\u2019s office was not open when respondent could  get there; and did not have transportation.", "NCHS officials calculated our requested estimates of groups within our  study population based on whether respondents resided in an expansion  or non-expansion state and whether they had private health insurance,  Medicaid, or were uninsured at the time of the interview. For each  comparison\u2014such as comparisons of access to health care for  respondents in expansion versus non-expansion states\u2014we asked  NCHS to test for statistically significant differences. We identified a  statistically significant difference when the p-value from a t-test of the  difference in the estimated proportions between two study subgroups had  a value of less than 0.05.", "To describe the number and demographic characteristics of uninsured,  low-income adults, we compared estimates of selected demographic  characteristics (race and ethnicity, gender, poverty status, and  employment status) and reported health status for this group in expansion  and non-expansion states. These and other estimates of demographic  characteristics and reported health status from the 2016 NHIS for  uninsured, low-income adults by expansion states, non-expansion states,  and all states are provided in tables 6 and 7 in appendix III.", "To describe unmet medical needs, barriers to health care, and having a  usual place of care and receiving selected services for all low-income  adults in expansion and non-expansion states and by insurance status,  we asked NCHS to calculate estimates based on responses to selected  NHIS questions and NCHS composite measures. We selected these  survey questions and composite measures from the Family and Adult  Access to Health Care and Utilization and Adult Health Behaviors  sections of the 2016 NHIS. To summarize estimates of low-income adults  in expansion and non-expansion states and by insurance status,  responses to selected survey questions and composite measures were  calculated as an estimated percentage of the relevant group\u2019s total  population for eight groups of low-income adults: (1) those in expansion  states, (2) those in non-expansion states, (3) those who had Medicaid in  expansion states, (4) those who had Medicaid in non-expansion states,  (5) those who had private health insurance in expansion states, (6) those  who had private health insurance in non-expansion states, (7) those who  were uninsured in expansion states, and (8) those who were uninsured in  non-expansion states.", "We asked NCHS to test for statistically significant differences for the  estimates of access to care between selected groups of low-income  adults. (See table 4.) The results of the tests for statistically significant  differences for these comparison groups are in appendixes IV through VI."], "subsections": []}, {"section_title": "Study Limitations and Data Reliability Assessment", "paragraphs": ["Our study has some limitations. First, our study did not examine whether  statistically significant differences in estimates of access to health care  between respondents in expansion and non-expansion states were  associated with the choice to expand Medicaid. Second, NHIS data are  based on respondent-reported data, which may be subject to potential  biases and recall of participants\u2019 use of health services and may be less  accurate than administrative data or clinical data. Third, we could not  report estimates of access to health care that did not meet NCHS\u2019s  standards of reliability or precision.", "We assessed the reliability of NHIS data by reviewing NHIS data  documentation; interviewing knowledgeable NCHS officials and academic  researchers; and examining the data for logical errors, missing values,  and values outside of expected ranges. We determined that the data  were sufficiently reliable for the purposes of these analyses."], "subsections": []}]}, {"section_title": "Appendix II: Status of Medicaid Eligibility Expansion by States, as of 2017", "paragraphs": ["Under the Patient Protection and Affordable Care Act (PPACA), states  may opt to expand their Medicaid programs\u2019 eligibility to cover certain  low-income adults beginning January 2014. As of December 2017, 31  states and the District of Columbia had expanded their Medicaid  programs as permitted under PPACA and 19 states had not. Table 5 lists  the states that expanded Medicaid eligibility and those that did not. It also  includes state population and other Medicaid data, which is presented in  the roll-over information in interactive figure 2."], "subsections": []}, {"section_title": "Appendix III: Estimates of Demographic Characteristics and Health Status in Expansion and Non-Expansion States", "paragraphs": ["This appendix provides additional 2016 National Health Interview Survey  (NHIS) estimates we obtained from the National Center for Health  Statistics (NCHS). Table 6 presents estimates of selected demographic  characteristics for low-income adults who were uninsured at the time of  the survey interview. The table provides estimates for these adults based  on whether they resided in states that expanded Medicaid eligibility as  permitted under the Patient Protection and Affordable Care Act (PPACA)  (referred to as expansion states) or states that did not (referred to as non- expansion states). We report statistically significant differences when  comparing the responses of uninsured, low-income adults in expansion  and non-expansion states.", "Table 7 shows estimates of the reported health status of uninsured, low- income adults based on whether they resided in an expansion or non- expansion state. The table provides the number and percent of these  adults who reported that at the time of the interview their health status  was excellent or very good; good; or fair or poor. The table also shows  the extent to which these adults reported whether their health status was  different at the time of the interview compared to the previous year. We  report statistically significant differences when comparing the responses  of uninsured, low-income adults in expansion and non-expansion states."], "subsections": []}, {"section_title": "Appendix IV: Estimates of Any Unmet Medical Needs in Expansion and Non- Expansion States and by Insurance Status", "paragraphs": ["This appendix provides estimates of any unmet medical needs for low- income adults\u2014individuals ages 19 to 64, with family incomes that did not  exceed 138 percent of the federal poverty level (FPL)\u2014from the 2016  National Health Interview Survey (NHIS), which were produced by the  National Center for Health Statistics (NCHS). Estimates are based on a  composite measure of any unmet medical needs. Table 8 shows  estimates of all low-income adults in expansion and non-expansion  states. We also report statistically significant differences between low- income adults in expansion and non-expansion states.", "Table 9 shows estimates of six groups of low-income adults: (1) low- income adults who were uninsured in expansion states; (2) low-income  adults who were uninsured in non-expansion states; (3) low-income  adults who had Medicaid in expansion states; (4) low-income adults who  had Medicaid in non-expansion states; (5) low-income adults who had  private health insurance in expansion states; and (6) low-income adults  who had private health insurance in non-expansion states. We also  report any statistically significant differences when comparing the six  groups of low-income adults, specifically:  low-income adults who were uninsured in expansion states compared  with each of the four groups of low-income adults who were insured\u2014 low-income adults who had Medicaid in expansion states, low-income  adults who had Medicaid in non-expansion states, low-income adults  who had private health insurance in expansion states, and low-income  adults who had private insurance in non-expansion states;  low-income adults who were uninsured in non-expansion states  compared with each of the four groups of low-income adults who were  insured;  low-income adults who were uninsured in expansion states compared  with low-income adults who were uninsured in non-expansion states;  low-income adults who had Medicaid in expansion states compared  with low-income adults who had Medicaid in non-expansion states;  and  low-income adults who had private health insurance in expansion  states compared with low-income adults who had private health  insurance in non-expansion states."], "subsections": []}, {"section_title": "Appendix V: Estimates of Barriers to Health Care in Expansion and Non-Expansion States and by Insurance Status", "paragraphs": ["This appendix provides estimates of barriers to health care for low- income adults\u2014individuals ages 19 to 64, with family incomes that did not  exceed 138 percent of the federal poverty level (FPL)\u2014from the 2016  National Health Interview Survey (NHIS), which we obtained from the  National Center for Health Statistics (NCHS). Estimates of financial  barriers to needed medical, specialty, and other types of health care and  prescription drugs are based on selected survey questions. Estimates of  non-financial barriers to health care are based on responses to selected  survey questions and a composite measure. Estimates are reported for:", "All low-income adults in expansion and non-expansion states. We  also report statistically significant differences between low-income  adults in expansion and non-expansion states.", "Six groups of low-income adults: (1) low-income adults who were  uninsured in expansion states; (2) low-income adults who were  uninsured in non-expansion states; (3) low-income adults who had  Medicaid in expansion states; (4) low-income adults who had  Medicaid in non-expansion states; (5) low-income adults who had  private health insurance in expansion states; and (6) low-income  adults who had private health insurance in non-expansion states. We  also report any statistically significant differences when comparing the  six groups of low-income adults, specifically:  low-income adults who were uninsured in expansion states  compared with each of the four groups of low-income adults who  were insured\u2014low-income adults who had Medicaid in expansion  states, low-income adults who had Medicaid in non-expansion  states, low-income adults who had private health insurance in  expansion states, and low-income adults who had private  insurance in non-expansion states;  low-income adults who were uninsured in non-expansion states  compared with each of the four groups of low-income adults who  were insured;  low-income adults who were uninsured in expansion states  compared with low-income adults who were uninsured in non- expansion states;  low-income adults who had Medicaid in expansion states  compared with low-income adults who had Medicaid in non- expansion states; and  low-income adults who had private health insurance in expansion  states compared with low-income adults who had private health  insurance in non-expansion states.", "Financial barriers to medical, specialty, and other types of health  care. Tables 10 and 11 present estimates and differences in estimates of  responses to survey question that asked whether respondents did not  obtain different types of needed health care services in the past 12  months because they could not afford it.", "Financial barriers to prescription drugs. Tables 12 and 13 present  estimates and differences in estimates of survey question that asked  respondents who had been prescribed medications whether they had  taken actions during the past 12 months to save money on medications.", "Non-financial barriers to health care. Tables 14 and 15 present  estimates and differences in estimates of the NCHS composite measure  on any non-financial barriers to health care, which was based on  responses to five survey questions on whether respondents delayed care  in the past 12 months due to long wait times, a lack of transportation, and  other non-financial reasons. Additionally, these tables present estimates  and differences in estimates of responses to the composite measure\u2019s  five underlying survey questions."], "subsections": []}, {"section_title": "Appendix VI: Estimates on Place of Care and Services in Expansion and Non- Expansion States and by Insurance Status", "paragraphs": ["This appendix provides estimates on having a usual place of care and  receiving selected health care services for adults\u2014individuals ages 19 to  64, with family incomes that did not exceed 138 percent of the federal  poverty level (FPL)\u2014from the 2016 National Health Interview Survey  (NHIS), which we obtained from the National Center for Health Statistics  (NCHS). Estimates are based on responses to selected survey  questions on having a usual place of care, receiving selected health care  services, and contacting health care professionals. Estimates are  reported for:", "All low-income adults in expansion and non-expansion states. We  also report statistically significant differences between low-income  adults in expansion and non-expansion states.", "Six groups of low-income adults: (1) low-income adults who were  uninsured in expansion states; (2) low-income adults who were  uninsured in non-expansion states; (3) low-income adults who had  Medicaid in expansion states; (4) low-income adults who had  Medicaid in non-expansion states; (5) low-income adults who had  private health insurance in expansion states; and (6) low-income  adults who had private health insurance in non-expansion states. We  also report any statistically significant differences when comparing the  six groups of low-income adults, specifically:  low-income adults who were uninsured in expansion states  compared with each of the four groups of low-income adults who  were insured\u2014low-income adults who had Medicaid in expansion  states, low-income adults who had Medicaid in non-expansion  states, low-income adults who had private health insurance in  expansion states, and low-income adults who had private  insurance in non-expansion states;  low-income adults who were uninsured in non-expansion states  compared with each of the four groups of low-income adults who  were insured;  low-income adults who were uninsured in expansion states  compared with low-income adults who were uninsured in non- expansion states;  low-income adults who had Medicaid in expansion states  compared with low-income adults who had Medicaid in non- expansion states; and  low-income adults who had private health insurance in expansion  states compared with low-income adults who had private health  insurance in non-expansion states.", "Having a usual place of care. Tables 16 through 19 present estimates  and differences in estimates of survey questions that asked respondents  about the place of care they usually go to when sick or need advice about  their health and the type of place that respondents most often went.", "Receiving selected health care services. Tables 20 and 21 present  estimates and differences in estimates of survey questions that asked  respondents whether they had received a blood cholesterol check, flu  vaccine, or other selected services.", "Contacting health care professionals. Tables 22 and 23 present  estimates and differences in estimates of survey questions that asked  respondents whether they had visited or spoken to a general doctor,  specialist, or other health care professionals about their health in the past  12 months."], "subsections": []}, {"section_title": "Appendix VII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Katherine M. Iritani (Director),  Tim Bushfield (Assistant Director), Deitra H. Lee (Analyst-in-Charge),  Kristin Ekelund, Laurie Pachter, Vikki Porter, Merrile Sing, and Emily  Wilson made key contributions to this report."], "subsections": []}]}], "fastfact": ["As of December 2017, 31 states and the District of Columbia have expanded access to Medicaid for low-income adults under the Patient Protection and Affordable Care Act. In 2017, these adults made up 20% of all Medicaid recipients.", "We reviewed available survey results and found that low-income adults in states that expanded Medicaid generally reported better access to health care. For example, they were less likely to report having unmet medical needs (such as not being able to afford their prescriptions)\u2014whether or not they were insured."]}
{"id": "GAO-19-168", "url": "https://www.gao.gov/products/GAO-19-168", "title": "Women-Owned Small Business Program: Actions Needed to Address Ongoing Oversight Issues", "published_date": "2019-03-14T00:00:00", "released_date": "2019-04-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2000, Congress authorized the WOSB program, allowing contracting officers to set aside procurements to women-owned small businesses in industries in which they are substantially underrepresented. To be eligible to participate in the WOSB program, firms have the option to self-certify or be certified by a third-party certifier. However, the 2015 NDAA changed the WOSB program by (1) authorizing SBA to implement sole-source authority, (2) eliminating the option for firms to self-certify as being eligible for the program and (3) allowing SBA to implement a new certification process.", "GAO was asked to review the WOSB program. This report discusses (1) the extent to which SBA has addressed the 2015 NDAA changes, (2) SBA's efforts to address previously identified deficiencies, and (3) use of the WOSB program. GAO reviewed relevant laws, regulations, and program documents; analyzed federal contracting data from April 2011 through June 2018; and interviewed SBA officials, officials from contracting agencies selected to obtain a range of experience with the WOSB program, and three of the four private third-party certifiers."]}, {"section_title": "What GAO Found", "paragraphs": ["The Small Business Administration (SBA) has implemented one of the three changes to the Women-Owned Small Business (WOSB) program authorized in the National Defense Authorization Act of 2015 (2015 NDAA). Specifically, in September 2015 SBA published a final rule to implement sole-source authority, effective October 2015. As of February 2019, SBA had not eliminated the option for program participants to self-certify that they are eligible to participate, as required by 2015 NDAA. SBA officials stated that this requirement would be addressed as part of the new certification process for the WOSB program, which they expect to implement by January 1, 2020.", "SBA has not addressed WOSB program oversight deficiencies identified in GAO's 2014 review (GAO-15-54). For example, GAO previously recommended that SBA establish procedures to assess the performance of four third-party certifiers\u2014private entities approved by SBA to certify the eligibility of WOSB firms. While SBA conducted a compliance review of the certifiers in 2016, it has no plans to regularly monitor them. By not improving its oversight of the WOSB program, SBA is limiting its ability to ensure third-party certifiers are following program requirements. In addition, the implementation of sole-source authority in light of these continued oversight deficiencies can increase program risk. Consequently, GAO maintains that its prior recommendations should be addressed. In addition, similar to previous findings from SBA's Office of Inspector General, GAO found that about 3.5 percent of contracts using a WOSB set-aside were awarded for ineligible goods or services from April 2011 through June 2018. SBA does not review contracting data that could identify this problem and inform SBA which agencies making awards may need targeted outreach or training. As a result, SBA cannot provide reasonable assurance that WOSB program requirements are being met and that the program is meeting its goals.", "While federal contract obligations to all women-owned small businesses and WOSB program set-asides have increased since fiscal year 2012, WOSB program set-asides remain a small percentage (see figure)."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that SBA develop a process for periodically reviewing the extent to which WOSB program set-asides are awarded for ineligible goods or services and use the results to address identified issues, such as through targeted outreach or training on the WOSB program. SBA agreed with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Women-owned businesses play an increasingly significant role in the U.S.  economy. According to the most recent U.S. Census Survey of Business  Owners, the number of women-owned businesses grew by almost 27  percent from 2007 through 2012. However, the federal goal of awarding  5 percent of procurements government-wide to women-owned small  businesses has only been met once since fiscal year 2013. In 2000,  Congress authorized the Women-Owned Small Business Federal  Contracting Program (WOSB program) to, among other things, reserve  contracts for qualified women-owned small businesses in industries  where these businesses are substantially underrepresented. On October  7, 2010, the Small Business Administration (SBA) issued a final rule to  implement the WOSB program, and the program began operating in  2011.", "SBA allows businesses to establish program eligibility through self- certification or certification by third-party certifiers. In 2014, we reviewed  the WOSB program and found a number of deficiencies in SBA\u2019s  oversight of the four SBA-approved third-party certifiers and in SBA\u2019s  eligibility examination processes. In addition, in 2015 and 2018 the SBA  Office of Inspector General (OIG) reviewed the WOSB program and also  found several oversight deficiencies.", "In December 2014, the National Defense Authorization Act of 2015 (2015  NDAA) amended the WOSB program by, among other things, granting  contracting officers the authority to award sole-source contracts to eligible  women-owned small businesses (WOSB) and economically  disadvantaged women-owned small businesses (EDWOSB). The act  also removed firms\u2019 ability to self-certify as eligible for the WOSB program  and allowed SBA to certify the eligibility of program participants as an  additional alternative to third-party certification.", "You requested that we evaluate SBA\u2019s WOSB program, including any  actions SBA has taken in response to the 2015 NDAA and to previously  identified deficiencies, as well as usage of the program. This report  examines (1) the extent to which SBA has implemented changes to the  WOSB program made by the 2015 NDAA; (2) the extent to which SBA  has implemented changes to address previously identified oversight  deficiencies; and (3) changes in WOSB program use since 2011 and  stakeholder views on its use, including since the 2015 implementation of  sole-source authority.", "To address the first objective, we reviewed the 2015 NDAA, proposed  regulations, and SBA documentation, and we interviewed SBA officials.  To respond to the second and third objectives, we interviewed SBA  officials, three of the WOSB program\u2019s four private third-party certifiers  (referred to in the report as \u201cthird-party certifiers\u201d), three selected federal  agencies (and three agency components within two of the agencies), and  a total of eight selected contracting offices within the six selected  agencies or components. Using data from the Federal Procurement Data  System-Next Generation (FPDS-NG), we judgmentally selected the three  federal agencies and three components (for a total of six selected  agencies and components) because their WOSB dollar obligations  (including competed and sole-source) were among the largest or because  we had interviewed them for our prior work. Specifically, we selected the  following six agencies or agency components: the Department of  Homeland Security (DHS) and, within DHS, the Coast Guard; the  Department of Defense (DOD) and, within DOD, the U.S. Army and U.S.  Navy; and the General Services Administration (GSA). Within the  components and GSA, we judgmentally selected eight contracting offices  (two each from Coast Guard, U.S. Army, U.S. Navy, and GSA) based on  whether they had a relatively large amount of obligations and had used  multiple types of set-asides (competed or sole-source) to WOSBs or  EDWOSBs.", "To address the second objective, we reviewed SBA policies and  procedures for the WOSB program and SBA oversight activities, such as  SBA compliance reviews of the four third-party certifiers. We analyzed  FPDS-NG data on obligations for WOSB program set-aside contracts and  the goods and services for which they were awarded\u2014represented by  North American Industry Classification System (NAICS) codes\u2014against  NAICS codes approved for WOSB program eligibility to determine if these  contracts were made in eligible industries. We compared SBA\u2019s activities  against federal internal control standards, GAO\u2019s framework for managing  fraud risk, and our prior recommendations to SBA. We also reviewed  relevant SBA OIG reports and interviewed SBA OIG officials.", "To address the third objective, we analyzed FPDS-NG data from April  2011 through June 2018 (the most recent data available during the period  of our analysis) and identified trends in total obligation amounts of  competed and sole-source contracts awarded under the WOSB program  (including both WOSB and EDWOSB contracts). To determine the  relative usage of the WOSB program, we compared data on obligations  for set-asides under the WOSB program with federal contract obligations  for WOSB-program-eligible goods and services to all woman-owned small  businesses. We assessed the reliability of FPDS-NG data by reviewing  available documentation and prior GAO data reliability assessments and  by electronically testing for missing data, outliers, and inconsistent  coding. We found the data to be reliable for the purposes of reporting on  trends in the WOSB program and the usage of sole-source authority  under the program. Appendix I provides more detail on our scope and  methodology.", "We conducted this performance audit from October 2017 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies conduct a variety of procurements that are reserved for  small business participation through small business set-asides. The set- asides can be for small businesses in general, or they can be specific to  small businesses that meet additional eligibility requirements in the  Service-Disabled Veteran-Owned Small Business (SDVOSB), Historically  Underutilized Business Zone (HUBZone), 8(a) Business Development  (8(a)), and WOSB programs.", "The WOSB program enables federal contracting officers to identify and  establish a sheltered market, or set-aside, for competition among WOSBs  and EDWOSBs in certain industries. To determine the industries eligible  under the WOSB program, SBA is required to conduct a study to  determine which NAICS codes are eligible under the program and to  report on such studies every 5 years. WOSBs can receive set-asides in  industries in which SBA has determined that women-owned small  businesses are substantially underrepresented. EDWOSBs can receive  set-asides in WOSB-eligible industries as well as in an additional set of  industries in which SBA has determined that women-owned small  businesses are underrepresented but not substantially so. As of  February 2019, there were a total of 113 four-digit NAICS codes  (representing NAICS industry groups) eligible under the WOSB  program\u201492 eligible NAICS codes for WOSBs and 21 for EDWOSBs.", "Additionally, businesses must be at least 51 percent owned and  controlled by one or more women who are U.S. citizens to participate in  the WOSB program. The owner must provide documents demonstrating  that the business meets program requirements, including a document in  which the owner attests to the business\u2019s status as a WOSB or  EDWOSB. EDWOSBs are WOSBs that are controlled by one or more  women who are citizens and who are economically disadvantaged in  accordance with SBA regulations. According to SBA, as of early October  2018, there were 13,224 WOSBs and 4,488 EDWOSBs registered in  SBA\u2019s online certification database.", "SBA\u2019s Office of Government Contracting administers the WOSB program  by promulgating regulations, conducting eligibility examinations of  businesses that receive contracts under a WOSB or EDWOSB set-aside,  deciding protests related to eligibility for a WOSB set-aside, conducting  studies to determine eligible industries, and working with other federal  agencies in assisting WOSBs and EDWOSBs. According to SBA officials,  the Office of Government Contracting also works at the regional and local  levels with SBA\u2019s Small Business Development Centers and district  offices, and with other organizations (such as Procurement Technical  Assistance Centers), to help WOSBs and EDWOSBs obtain contracts  with federal agencies. The services SBA coordinates include training,  counseling, mentoring, facilitating access to information about federal  contracting opportunities, and business financing. According to SBA, as  of October 2018, there were two full-time staff within the Office of  Government Contracting whose primary responsibility was the WOSB  program.", "Initially, the program\u2019s statutory authority allowed WOSBs to be self- certified by the business owner or certified by an approved third-party  national certifying entity as eligible for the program. Self-certification is  free, but some third-party certification options require businesses to pay a  fee. Each certification process requires businesses to provide signed  representations attesting to their WOSB or EDWOSB eligibility.  Businesses must provide documents supporting their status before  submitting an offer to perform the requirements of a WOSB set-aside  contract. In August 2016, SBA launched certify.sba.gov, which is an  online portal that allows firms to upload required documents and track  their submission and also enables contracting officers to review firms\u2019  eligibility documentation. According to the Federal Acquisition  Regulation (FAR), contracting officers are required to verify that all  required documentation is present in the online portal when selecting a  business for an award. In addition, businesses must register and attest to  being a WOSB in the System for Award Management, the primary  database of vendors doing business with the federal government.", "In 2011, SBA approved four organizations to act as third-party certifiers:", "El Paso Hispanic Chamber of Commerce,", "NWBOC (previously known as the National Women Business Owners", "U.S. Women\u2019s Chamber of Commerce, and", "Women\u2019s Business Enterprise National Council.", "These organizations have been the WOSB program\u2019s third-party certifiers  since 2011. According to SBA data, the Women\u2019s Business Enterprise  National Council was the most active third-party certifier in fiscal year  2017\u2014performing 2,638 WOSB certification examinations. The U.S.", "Women\u2019s Chamber of Commerce, NWBOC, and El Paso Hispanic  Chamber of Commerce\u2014completed 644, 105, and 12 certifications,  respectively.", "As discussed previously, in 2014 we reviewed the WOSB program and  found a number of deficiencies in SBA\u2019s oversight of the four SBA- approved third-party certifiers and in SBA\u2019s eligibility examination  processes and we made related recommendations for SBA. In addition,  in 2015 and 2018 the SBA OIG reviewed the WOSB program and also  found oversight deficiencies, including evidence of WOSB contracts set  aside for ineligible firms. In both reports, the SBA OIG also made  recommendations for SBA. Further, in July 2015, we issued GAO\u2019s  fraud risk framework, which provides a comprehensive set of key  components and leading practices that serve as a guide for agency  managers to use when developing efforts to combat fraud in a strategic,  risk-based way. In July 2016, the Office of Management and Budget  issued guidelines requiring executive agencies to create controls to  identify and respond to fraud risks. These guidelines also affirm that  managers should adhere to the leading practices identified in GAO\u2019s  fraud risk framework."], "subsections": []}, {"section_title": "SBA Has Implemented One of the Three Changes Made by the 2015 NDAA", "paragraphs": ["As of February 2019, SBA had implemented one of the three changes  that the 2015 NDAA made to the WOSB program\u2014sole-source authority.  The two other changes\u2014authorizing SBA to implement its own  certification process for WOSBs and requiring SBA to eliminate the  WOSB self-certification option\u2014have not been implemented. The 2015  NDAA did not require a specific time frame for SBA to update its  regulations. SBA officials have stated that they will not eliminate self- certification until the new certification process for the WOSB program is in  place, which they expect to be completed by January 1, 2020."], "subsections": [{"section_title": "Sole-Source Authority Has Been Implemented", "paragraphs": ["In September 2015, SBA published a final rule to implement sole-source  authority for the WOSB program (effective October 2015). Among other  things, the rule authorized contracting officers to award a contract to a  WOSB or EDWOSB without competition, provided that the contracting  officer\u2019s market research cannot identify two or more WOSBs or  EDWOSBs in eligible industries that can perform the requirements of the  contract at a fair and reasonable price. In the final rule, SBA explained  that it promulgated the sole-source rule before the WOSB certification  requirements for two reasons. First, the sole-source rule could be  accomplished by simply incorporating the statutory language into the  regulations, whereas the WOSB certification requirements would instead  require a prolonged rulemaking process. Second, SBA said that  addressing all three regulatory changes at the same time would delay the  implementation of sole-source authority. SBA described the sole-source  mechanism as an additional tool for federal agencies to ensure that  women-owned small businesses have an equal opportunity to participate  in federal contracting and to ensure consistency among SBA\u2019s  socioeconomic small business procurement programs.", "According to SBA, most of the 495 comments submitted about the sole- source rule supported the agency\u2019s decision to implement the authority  quickly. However, the SBA OIG\u2019s June 2018 audit report cautioned that  allowing sole-source contracting authority while firms can still self-certify  exposes the WOSB program to unnecessary risk of fraud and abuse, and  the report recommended that SBA implement a new certification process  for the WOSB program per the 2015 NDAA. In addition, our previous  report identified risks of program participation by ineligible firms  associated with deficiencies in SBA\u2019s oversight structure. As we discuss  in detail later, SBA has still not addressed these risks, which may be  exacerbated by the implementation of sole-source authority without  addressing the other changes made by the 2015 NDAA, including  eliminating the self-certification option."], "subsections": []}, {"section_title": "A New WOSB Program Certification Process Has Not Been Implemented", "paragraphs": ["As of February 2019, SBA had not published a proposed rule for public  comment to establish a new certification process for the WOSB program.  Previously, in October 2017, an SBA official stated that SBA was about  1\u20132 months away from publishing a proposed rule. However, in June  2018, SBA officials stated that a cost analysis would be necessary before  the draft could be sent to the Office of Management and Budget for  review. Certain stages of the rulemaking process have mandated time  periods, such as the required interagency review process for certain  rules. In June 2017, we reported that SBA officials said that an increase  in the number of statutorily mandated rules in recent years had  contributed to delays in the agency\u2019s ability to promulgate rules in a more  timely fashion. As of February 2019, SBA had not provided  documentation or time frames for issuing a proposed rule or completing  the rulemaking process. However, in response to the SBA OIG  recommendation that SBA implement the new certification process, SBA  stated that it would fulfill the recommendation (meaning implement a new  certification process) by January 1, 2020.", "In December 2015, SBA published an advance notice of proposed  rulemaking to solicit public comments to assist the agency with drafting a  proposed rule to implement a new WOSB certification program. In the  notice, SBA stated that it intends to address the 2015 NDAA changes,  including eliminating the self-certification option, through drafting  regulations to implement a new certification process. Previously, in its  September 2015 final rule implementing sole-source authority, SBA  stated that there was no evidence that Congress intended that the  existing WOSB program, including self-certification, be halted before  establishing the infrastructure and new regulations for a new certification  program. The advance notice requested comments on various topics,  such as how well the current certification processes were working, which  of the certification options were feasible and should be pursued, whether  there should be a grace period for self-certified WOSB firms to complete  the new certification process, and what documentation should be  required.", "Three third-party certifiers submitted comments in response to the  advance notice of proposed rulemaking, and none supported the option of  SBA acting as a WOSB certifier. One third-party certifier commented  that such an arrangement is a conflict of interest given that SBA is also  responsible for oversight of the WOSB program, and two certifiers  commented that SBA lacked the required resources. The three third-party  certifiers also asserted in their comments that no other federal agency  should be allowed to become an authorized WOSB certifier, with one  commenting that federal agencies should instead focus on providing  contracting opportunities for women-owned businesses. All three certifiers  also proposed ways to improve the current system of third-party  certification\u2014for example, by strengthening oversight of certifiers or  expanding their number. The three certifiers also suggested that SBA  move to a process that better leverages existing programs with  certification requirements similar to those of the WOSB program, such as  the 8(a) program. In the advance notice, SBA asked for comments on  alternative certification options, such as SBA acting as a certifier or  limiting WOSB program certifications to the 8(a) program and otherwise  relying on state or third-party certifiers. Further, in June 2018, SBA  officials told us that they were evaluating the potential costs of a new  certification program as part of their development of the new certification  rule."], "subsections": []}]}, {"section_title": "SBA Has Not Fully Addressed Deficiencies in Oversight and Program Implementation", "paragraphs": [], "subsections": [{"section_title": "SBA Has Not Implemented Procedures to Regularly Monitor and Assess the Performance of Third- Party Certifiers", "paragraphs": ["SBA has not fully addressed deficiencies in its oversight of third-party  certifiers that we identified in our October 2014 report. We reported that  SBA did not have formal policies for reviewing the performance of its four  approved third-party certifiers, including their compliance with their  agreements with SBA. Further, we found that SBA had not developed  formal policies and procedures for, among other things, reviewing the  monthly reports that certifiers submit to SBA. As a result, we  recommended that SBA establish comprehensive procedures to monitor  and assess the performance of the third-party certifiers in accordance  with their agreements with SBA and program regulations. While SBA has  taken some steps to address the recommendation, as of February 2019 it  remained open.", "In response to our October 2014 recommendation, in 2016 SBA  conducted compliance reviews of the four SBA-approved third-party  certifiers. According to SBA, the purpose of the compliance reviews was  to ensure the certifiers\u2019 compliance with regulations, their signed third- party certifier certification form (or agreement) with SBA, and other  program requirements. The compliance reviews included an assessment  of the third-party certifiers\u2019 internal certification procedures and  processes, an examination of a sample of applications from businesses  that the certifiers deemed eligible and ineligible for certification, and an  interview with management staff.", "SBA officials said that SBA\u2019s review team did not identify significant  deficiencies in any of the four certifiers\u2019 processes and found that all were  generally complying with their agreements. However, one compliance  review report described \u201cgrave concerns\u201d that a third-party certifier had  arbitrarily established eligibility requirements that did not align with WOSB  program regulations and used them to decline firms\u2019 applications. SBA  noted in the report that if the third-party certifier failed to correct this  practice SBA could terminate the agreement. As directed by SBA, the  third-party certifier submitted a letter to SBA outlining actions it had taken  to address this issue, among others. The final compliance review  reports for the other third-party certifiers also recommended areas for  improvement, including providing staff with additional training on how to  conduct eligibility examinations and reviewing certification files to ensure  they contain complete documentation. In addition, two of the three  compliance review reports with recommendations (including the  compliance review report for the certifier discussed above) required the  certifier to provide a written response within 30 days outlining plans to  correct the areas. SBA officials said that they reviewed the written  responses and determined that no further action was required.", "In January 2017, SBA\u2019s Office of Government Contracting updated its  written Standard Operating Procedures (SOP) to include policies and  procedures for the WOSB program, in part to address our October 2014  recommendation. The 2017 SOP discusses what a third-party-certifier  compliance review entails, how often the reviews are to be conducted, and how findings are to be reported. The 2017 SOP notes that SBA may  initiate a compliance review \u201cat any time and as frequently as the agency  determines is necessary.\u201d In September 2018, SBA officials told us that  they were again updating the SOP, in part to address deficiencies we  identified in our prior work and during this review. However, as of  February 2019, SBA had not provided an updated SOP.", "In addition, in April 2018, SBA finalized a WOSB Program Desk Guide  that, according to SBA, is designed to provide program staff with detailed  guidance for conducting oversight procedures, including compliance  reviews of third-party certifiers. For example, the Desk Guide discusses  how staff should prepare for a compliance review of a third-party certifier,  review certification documents, and prepare a final report. However, the  Desk Guide does not describe specific activities designed to oversee  third-party certifiers on an ongoing basis. In November 2017, SBA  officials told us that they planned to conduct additional compliance  reviews of the third-party certifiers. However, in June 2018, officials said  there were no plans to conduct further compliance reviews until the final  rule implementing the new certification process was completed. Further,  SBA officials said that the 2016 certifier compliance reviews did not result  in significant deficiencies. However, as noted previously, one of the  compliance review reports described a potential violation of the third-party  certifier\u2019s agreement with SBA.", "Per written agreements with SBA, third-party certifiers are required to  submit monthly reports that include  the number of WOSB and EDWOSB applications received, approved,  and denied;  identifying information for each certified business, such as the  business name;  concerns about fraud, waste, and abuse; and a description of any changes to the procedures the organizations  used to certify businesses as WOSBs or EDWOSBs.", "In our October 2014 report, we noted that SBA had not followed up on  issues raised in the monthly reports and had not developed written  procedures for reviewing them. At that time, SBA officials said that they  were unaware of the issues identified in the certifiers\u2019 reports and that the  agency was developing procedures for reviewing the monthly reports but  could not estimate a completion date.", "In our interviews for this report, SBA officials stated that SBA still does not  use the third-party certifiers\u2019 monthly reports to regularly monitor the  program. Specifically, SBA does not review the reports to identify any  trends in certification deficiencies that could inform program oversight.  Officials said the reports generally do not contain information that SBA  considers helpful for overseeing the WOSB program, although staff  sometimes use the reports to obtain firms\u2019 contact information. SBA  officials also said that staff very rarely receive information about  potentially fraudulent WOSB firms from the third-party certifiers\u2014maybe  three firms per year\u2014and that this information is generally received via  email and not as part of the monthly reports. SBA officials said that when  they receive information about potentially fraudulent firms, WOSB  program staff conduct an examination to determine the firm\u2019s eligibility  and report the results back to the certifier. However, a third-party certifier  told us it has regularly reported firms it suspected of submitting potentially  fraudulent applications in its monthly reports and that SBA has not  followed up with them. In addition, two third-party certifiers said that if  SBA is not cross-checking the list of firms included in their monthly  reports, a firm deemed ineligible by one certifier may submit an  application to another certifier and obtain approval.", "The three third-party certifiers we spoke with said that SBA generally had  not communicated with them about their implementation of the program  since the 2016 compliance reviews. However, SBA officials noted that  three of the four third-party certifiers attended an SBA roundtable in  March 2017 to discuss comments on the proposed rulemaking. In  addition, SBA officials said that the third-party certifiers may contact them  with questions about implementing the WOSB program, but SBA  generally does not reach out to them.", "Although SBA has taken steps to enhance its written policies and  procedures for oversight of third-party certifiers, it does not have plans to  conduct further compliance reviews of the certifiers and does not intend to  review certifiers\u2019 monthly reports on a regular basis. SBA officials said  that third-party certifier oversight procedures would be updated, if  necessary, after certification options have been clarified in the final  WOSB certification rule. However, ongoing oversight activities, such as  regular compliance reviews, could help SBA better understand the steps  certifiers have taken in response to previous compliance review findings  and whether those steps have been effective. In addition, leading fraud  risk management practices include identifying specific tools, methods,  and sources for gathering information about fraud risks, including data on  fraud schemes and trends from monitoring and detection activities, as  well as involving relevant stakeholders in the risk assessment process.  Without procedures to regularly monitor and oversee third-party certifiers,  SBA cannot provide reasonable assurance that certifiers are complying  with program requirements and cannot improve its efforts to identify  ineligible firms or potential fraud. Further, it is unclear when SBA\u2019s final  rule will be implemented. As a result, we maintain that our previous  recommendation should be addressed\u2014that is, that the Administrator of  SBA should establish and implement comprehensive procedures to  monitor and assess the performance of certifiers in accordance with the  requirements of the third-party certifier agreement and program  regulations."], "subsections": []}, {"section_title": "SBA Has Not Implemented Procedures to Improve Its Eligibility Examinations of WOSB Program Participants", "paragraphs": ["SBA also has not fully addressed deficiencies found in our 2014 review  related specifically to eligibility examinations. We found that SBA lacked  formalized guidance for its eligibility examination processes and that the  examinations continued to identify high rates of potentially ineligible  businesses. As a result, we recommended that SBA enhance its  examination of businesses that register for the WOSB program to ensure  that only eligible businesses obtain WOSB set-asides. Specifically, we  suggested that SBA consider (1) completing the development of  procedures to conduct annual eligibility examinations and implementing  such procedures; (2) analyzing examination results and individual  businesses found to be ineligible to better understand the cause of the  high rate of ineligibility in annual reviews and determine what actions are  needed to address the causes, and (3) implementing ongoing reviews of  a sample of all businesses that have represented their eligibility to  participate in the program.", "SBA has taken some steps to implement our recommendation\u2014such as  by completing its 2017 SOP and its Desk Guide, both of which include  written policies and procedures for WOSB program eligibility  examinations. The 2017 SOP includes a brief description of what  activities are entailed in the examinations, the staff responsible for  conducting them, and how firms are selected. In addition, as noted  previously, SBA officials told us in September 2018 that a forthcoming  update to the SOP would address deficiencies we identified regarding  WOSB eligibility examinations. However, as of February 2019, SBA had  not provided an updated SOP. The Desk Guide contains more detailed  information on eligibility examinations. It notes that a sample of firms is to  be examined annually and it provides selection criteria, which can include  whether the agency has received information challenging the firm\u2019s  eligibility for the program. The Desk Guide also provides specific  instructions on how to determine whether a firm meets the WOSB  program\u2019s ownership, control, and financial requirements and what  documentation should be consulted or requested.", "SBA does not collect reliable information on the results of its annual  eligibility examinations. According to SBA officials, SBA has conducted  eligibility examinations of a sample of businesses that received WOSB  program set-aside contracts each year since fiscal year 2012. However,  SBA officials told us that the results of annual eligibility examinations\u2014 such as the number of businesses found eligible or ineligible\u2014are  generally not documented. As a result, we obtained conflicting data from  SBA on the number of examinations completed and the percentage of  businesses found to be ineligible in fiscal years 2012 through 2018. For  example, based on previous information provided by SBA, we reported in  October 2014 that in fiscal year 2012, 113 eligibility examinations were  conducted and 42 percent of businesses were found to be ineligible for  the WOSB program. However, during this review, we received information  from SBA that 78 eligibility examinations were conducted and 37 percent  of businesses were found ineligible in fiscal year 2012. We found similar  disparities when we compared fiscal year 2016 data provided by SBA for  this report with a performance memorandum summarizing that fiscal  year\u2019s statistics. Regardless of the disparity between the data sources,  the rate of ineligible businesses has remained significant. For example,  according to documentation SBA provided during this review, in fiscal  year 2017, SBA found that about 40 percent of the businesses in its  sample were not eligible.", "In addition, SBA continues to have no mechanism for evaluating  examination results in aggregate to inform the WOSB program. In 2014,  we reported that SBA officials told us that most businesses that were  deemed ineligible did not understand the documentation requirements for  establishing eligibility. However, we also reported that SBA officials could  not explain how they knew a lack of understanding was the cause of  ineligibility among businesses and had not made efforts to confirm that  this was the cause. In June 2018, SBA officials told us they did not  analyze the annual examinations in aggregate for common eligibility  issues because the examination results are unique to each WOSB firm.  They noted that this was not necessary as WOSB program staff are  familiar with common eligibility issues through the annual eligibility  examinations. As we noted in 2014, by not analyzing aggregate  examination results, the agency is missing opportunities to obtain  meaningful insights into the program, such as the reasons many  businesses are deemed ineligible.", "Also, SBA still conducts eligibility examinations only of firms that have  already received a WOSB award. In 2014, we concluded that this  sampling practice restricts SBA\u2019s ability to identify potentially ineligible  businesses prior to a contract award. Similarly, during this review, SBA  officials said that while some aspects of the sample characteristics have  changed since 2012, the samples still generally consist only of firms that  have been awarded a WOSB set-aside. In addition, officials said that the  sample size of the eligibility examinations has varied over time and is  largely based on the workload of WOSB program staff. Restricting the  samples in this way limits SBA\u2019s ability to better understand the eligibility  of businesses before they apply for and are awarded contracts, as well as  its ability to detect and prevent potential fraud.", "SBA officials said that their other means of reducing participation by  ineligible firms and mitigating potential fraud is through WOSB or  EDWOSB status protests\u2014that is, allegations that a business receiving  an award does not meet program eligibility requirements. A federal  contractor can file a status protest against any firm receiving an award  that represents itself as a WOSB in the System for Award Management  for grounds that include failure to provide all required supporting  documentation. The penalties for misrepresenting a firm\u2019s status, per  regulation, include debarment or suspension. However, one third-party  certifier expressed in its comments to the advance notice of proposed  rulemaking on certification that status protests alone are not a viable  option for protecting the integrity of the WOSB program. The certifier  questioned how a firm could have sufficient information about a  competitor firm to raise questions about its eligibility. According to SBA  officials, 11 status protests were filed under the WOSB program in fiscal  year 2018. Of these, four firms were deemed ineligible for the WOSB  program, four were deemed eligible, and three status protests were  dismissed. In fiscal year 2017, 9 status protests were filed; of these, three  firms were found ineligible, two were found eligible, and four status  protests were dismissed.", "We recognize that SBA has made some effort to address our previous  recommendation by documenting procedures for conducting annual  eligibility examinations of WOSB firms. However, leading fraud risk  management practices state that federal program managers should  design control activities that focus on fraud prevention over detection and  response, to the extent possible. Without maintaining reliable  information on the results of eligibility examinations, developing  procedures for analyzing results, and expanding the sample of  businesses to be examined to include those that did not receive  contracts, SBA limits the value of its eligibility examinations and its ability  to reduce ineligibility among businesses registered to participate in the  WOSB program. These deficiencies also limit SBA\u2019s ability to identify  potential fraud risks and develop any additional control activities needed  to address these risks. As a result, the program may continue to be  exposed to the risk of ineligible businesses receiving set-aside contracts.  In addition, in light of these continued oversight deficiencies, the  implementation of sole-source authority without addressing the other  changes made by the 2015 NDAA could increase program risk. For these  reasons, we maintain that our previous recommendation that SBA  enhance its WOSB eligibility examination procedures should be  addressed."], "subsections": []}, {"section_title": "SBA Has Not Addressed Previously Identified Issues with WOSB Set- Asides Awarded Under Ineligible Industry Codes", "paragraphs": ["In 2015 and 2018, the SBA OIG reported instances in which WOSB set- asides were awarded using NAICS codes that were not eligible under the  WOSB program, and our analysis indicates that this problem persists. In  2015, the SBA OIG reported on its analysis of a sample of 34 WOSB set- aside awards and found that 10 awards were set aside using an ineligible  NAICS code. The SBA OIG concluded that this may have been due to  contracting officers\u2019 uncertainty about NAICS code requirements under  the program and recommended that SBA provide additional, updated  training and outreach to federal agencies\u2019 contracting officers on the  program\u2019s NAICS code requirements. In response, SBA updated WOSB  program training and outreach documents in March 2016 to include  information about the program\u2019s NAICS code requirements.", "In 2018, the SBA OIG issued another report evaluating the WOSB  program, with a focus on the use of the program\u2019s sole-source contract  authority. Here, the SBA OIG identified additional instances of contracting  officers using inaccurate NAICS codes to set aside WOSB contracts.  Specifically, the SBA OIG reviewed a sample of 56 awards and found that  4 were awarded under ineligible NAICS codes. The report included two  recommendations for SBA aimed at preventing and correcting improper  NAICS code data in FPDS-NG: (1) conduct quarterly reviews of FPDS- NG data to ensure contracting officers used the appropriate NAICS codes  and (2) in coordination with the Office of Federal Procurement Policy and  GSA, strengthen controls in FPDS-NG to prevent contracting officers from  using ineligible NAICS codes.", "SBA disagreed with both of these recommendations. In its response to  the first recommendation, SBA stated that it is not responsible for the  oversight of other agencies\u2019 contracting officers and therefore is not in a  position to implement the corrective actions. With respect to the second  recommendation, SBA stated that adding such controls to FPDS-NG  would further complicate the WOSB program and increase contracting  officers\u2019 reluctance to use it. SBA also stated its preference for focusing  its efforts on ensuring that contracting officers select the appropriate  NAICS code at the beginning of the award process.", "In our review, we also found several issues with WOSB program set- asides being awarded under ineligible NAICS codes. Our analysis of  FPDS-NG data on all obligations to WOSB program set-asides from the  third quarter of fiscal year 2011 through the third quarter of fiscal year  2018 found the following:", "3.5 percent (or about $76 million) of WOSB program obligations were  awarded under NAICS codes that were never eligible for the WOSB  program;", "10.5 percent (or about $232 million) of WOSB program obligations  made under an EDWOSB NAICS code went to women-owned  businesses that were not eligible to receive awards in EDWOSB- eligible industries; and", "17 of the 47 federal agencies that obligated dollars to WOSB program  set-asides during the period used inaccurate NAICS codes in at least  5 percent of their WOSB set-asides (representing about $25 million).", "According to SBA officials we spoke with during this review, WOSB  program set-asides may be awarded under ineligible NAICS codes  because of human error when contracting officers are inputting data in  FPDS-NG or because a small business contract was misclassified as a  WOSB program set-aside. They characterized the extent of the issue as  \u201csmall\u201d relative to the size of the FPDS-NG database and said that such  issues do not affect the program\u2019s purpose. Rather than review FPDS-NG  data that are inputted after the contract is awarded, SBA officials said that  they have discussed options for working with GSA to add controls  defining eligible NAICS codes for WOSB program set-aside opportunities  on FedBizOpps.gov\u2014the website that contracting officers use to post  announcements about available federal contracting opportunities.  Adding controls to this system, officials said, would help contracting  officers realize as they are writing the contract requirements that they  should not set aside contracts under the WOSB program without  reviewing the proper NAICS codes. However, SBA officials said that the  feasibility of this option was still being discussed and that the issue was  not a high priority. For these reasons, according to officials, SBA\u2019s  updated oversight procedures described in the 2017 SOP and the Desk  Guide do not include a process for reviewing WOSB program set-aside  data in FPDS-NG to determine whether they were awarded under the  appropriate NAICS codes.", "Further, as of November 2018, the WOSB program did not have targeted  outreach or training that focused on specific agencies\u2019 use of NAICS  codes. As noted previously, in March 2016, SBA updated its WOSB  program training materials to address NAICS code requirements in  response to a 2015 SBA OIG recommendation. In fiscal year 2018, SBA  conducted three WOSB program training sessions for federal contracting  officers, including (1) a virtual learning session, (2) a session conducted  during WOSB Industry Day at the Department of Housing and Urban  Development, and (3) a session conducted during a Department of  Defense Small Business Training Conference. However, with the  exception of the virtual learning session, these training sessions were  requested by the agencies. SBA officials did not identify any targeted  outreach or training provided to specific agencies to improve  understanding of WOSB NAICS code requirements (or other issues  related to the WOSB program).", "Congress authorized SBA to develop a contract set-aside program  specifically for WOSBs and EDWOSBs to address the  underrepresentation of such businesses in specific industries. In addition,  federal standards for internal control state that management should  design control activities to achieve objectives and respond to risks and to  establish and operate monitoring activities to monitor and evaluate the  results. Because SBA does not review whether contracts are being  awarded under the appropriate NAICS codes, it cannot provide  reasonable assurance that WOSB program requirements are being met  or identify agencies that may require targeted outreach or additional  training on eligible NAICS codes. As a result, WOSB contracts may  continue to be awarded to groups other than those intended, which can  undermine the goals of and confidence in the program."], "subsections": []}]}, {"section_title": "Federal Contracts to WOSB Set-Asides Remain Relatively Small, and Stakeholders Discussed Various Aspects of Program Use", "paragraphs": [], "subsections": [{"section_title": "The Percentage of Obligations to Women- Owned Small Businesses under the WOSB Program Increased Slightly since 2012", "paragraphs": ["Federal dollars obligated for contracts to all women-owned small  businesses increased from $18.2 billion in fiscal year 2012 to $21.4 billion  in fiscal year 2017. These figures include contracts for any type of good  or service awarded under the WOSB program, under other federal  programs, or through full and open competition. Contracts awarded to all  women-owned small businesses within WOSB-program-eligible industries  also increased during this period\u2014from about $15 billion to $18.8 billion,  as shown in figure 1. However, obligations under the WOSB program  represented only a small share of this increase. In fiscal year 2012,  WOSB program contract obligations were 0.5 percent of contract  obligations to all women-owned small businesses for WOSB-program- eligible goods or services (about $73.5 million), and in fiscal year 2017  this percentage had grown to 3.8 percent (about $713.3 million) (see fig.  1).", "From fiscal years 2012 through 2017, 98 percent of total dollars obligated  for contracts to all women-owned small businesses in WOSB-program- eligible industries were not awarded under the WOSB program. Instead,  these contracts were awarded without a set-aside or under other, longer- established socioeconomic contracting programs, such as HUBZone, the  SDVOSB, and 8(a). For example, during this period, dollars obligated to  contracts awarded to women-owned small businesses without a set-aside  represented about 34 percent of dollars obligated for contracts to all  women-owned small businesses in these industries (see fig. 2).", "As shown in table 1, six federal agencies\u2014DOD, DHS, Department of  Commerce, Department of Agriculture, Department of Health and Human  Services, and GSA\u2014collectively accounted for nearly 83 percent of the  obligations awarded under the WOSB program from the third quarter of  fiscal year 2011 through the third quarter of fiscal year 2018, with DOD  accounting for about 49 percent of the total.", "Contracting officers\u2019 use of sole-source authority was relatively limited,  representing about 12 percent of WOSB program obligations from  January 2016 through June 2018. In fiscal year 2017\u2014the only full fiscal  year for which we have data on sole-source authority\u2014about $77 million  were obligated using sole-source authority. The share of sole-source  awards as a percentage of total WOSB program set-asides also varied  considerably by quarter\u2014from as low as 5 percent in the third quarter of  2016 to as high as 21 percent in the first quarter of 2017 (see fig. 3)."], "subsections": []}, {"section_title": "Stakeholders Discussed Various Issues Related to WOSB Program Usage", "paragraphs": ["We spoke with 14 stakeholder groups to obtain their views on usage of  the WOSB program. These groups consisted of staff within three federal  agencies (DHS, DOD, and GSA), eight contracting offices within these  agencies, and three third-party certifiers. Issues stakeholders discussed  included the impact of sole-source authority and program-specific NAICS  codes on program usage. Stakeholders also noted the potential effect of  other program requirements on contracting officers\u2019 willingness to use the  program, and some suggested that SBA provide additional guidance and  training to contracting officers.", "Sole-source authority. Participants in 12 of the 14 stakeholder groups  commented on the effect of sole-source authority on WOSB program  usage. Staff from 4 of the 12 stakeholder groups\u2014including three  contracting offices\u2014said that sole-source authority generally had no  effect on the use of the WOSB program. One of these stakeholders  believed contracting officers seldom use the authority because they lack  an understanding of how and when to use it; therefore, in this  stakeholder\u2019s opinion, use of the WOSB program has not generally  changed since the authority was implemented. However, staff from two  contracting offices and one third-party certifier said that sole-source  authority was a positive addition because, for example, it can significantly  reduce the lead time before a contracting officer can offer a contract  award to a firm. Staff from one of these two contracting offices stated that  the award process can take between 60 to 90 days using sole-source  authority, compared to 6 to 12 months using a competitive WOSB  program set-aside. These staff also said that negotiating the terms of a  sole-source contract is easier, from a contracting officer\u2019s perspective,  because they can communicate directly with the firm. As discussed  previously, SBA officials we interviewed said that adding sole-source  authority to the WOSB program made the program more consistent with  other existing socioeconomic set-aside programs, such as 8(a) and  HUBZone.", "The remaining five stakeholder groups that discussed the effects of  WOSB sole-source authority described difficulties with implementing it.  Specifically, representatives from DHS, DOD, and one third-party certifier  said that executing sole-source authority under the WOSB program is  difficult for contracting officers because rules for sole-source authority  under WOSB are different from those under other SBA programs, such as  8(a) and HUBZone. For example, the FAR\u2019s requirement that contracting  officers justify, in writing, why they do not expect other WOSBs or  EDWOSBs to submit offers on a contract is stricter under the WOSB  program than it is for the 8(a) program. Further, staff from one contracting  office noted that justifications for WOSB set-asides must then be  published on a federal website. In contrast, contracting officers generally  do not need to prepare and publish a justification under the 8(a)  program. According to staff from another contracting office, it may be  difficult to find more than one firm qualified to do the work under some  WOSB-eligible NAICS codes, but contracting officers would still have to  conduct market research and explain why they do not expect additional  offers in order to set the contract aside for a WOSB.", "Program-specific NAICS codes. Participants in 13 of the 14 stakeholder  groups we interviewed commented on the requirement that WOSB  program set-asides be awarded within certain industries, represented by  NAICS codes. For example, two third-party certifiers we interviewed  recommended that the NAICS codes be expanded or eliminated to  provide greater opportunities for WOSBs to win contracts under the  program. Another third-party certifier said that some of its members focus  their businesses\u2019 marketing efforts on industries specific to the WOSB  program to help them compete for such contracts.", "Representatives from GSA and DHS made comments about limitations  with respect to the WOSB program\u2019s NAICS code requirement. Staff we  interviewed from three contracting offices made similar statements,  adding that the NAICS codes limit opportunities to award a contract to a  WOSB or EDWOSB because they are sufficient in some industry areas  but not others. All five of these stakeholder groups suggested that NAICS  codes be removed from the program\u2019s requirements to increase  opportunities for WOSBs.", "Conversely, staff from five other contracting offices we interviewed  generally expressed positive views about the WOSB program\u2019s NAICS  code requirements and stated that eligible codes line up well with the  services for which they generally contract. Finally, SBA officials noted that  there are no plans to reassess the NAICS codes until about 2020.  However, SBA officials also stated that the NAICS code requirements  complicate the WOSB program and add confusion for contracting officers  who use program, as compared to other socioeconomic programs that do  not have such requirements, such as HUBZone or 8(a).", "Requirement to verify eligibility documentation. Staff from 7 of the 14  stakeholder groups we interviewed discussed the requirement for the  contracting officer to review program eligibility documentation and how  this requirement affects their decision to use the program. For example,  staff from one contracting office said that using the 8(a) or HUBZone  programs is easier because 8(a) and HUBZone applicants are already  certified by SBA; therefore, the additional step to verify documentation for  eligibility is not needed. GSA officials noted that eliminating the need for  contracting officers to take additional steps to review eligibility  documentation for WOSB-program set-asides\u2014in addition to checking  the System for Award Management\u2014could create more opportunities for  WOSBs by reducing burden on contracting officers. However, staff from  two contracting offices said it is not more difficult to award contracts under  the WOSB program versus other socioeconomic programs.", "WOSB program guidance. Staff from 13 of the14 stakeholder groups we  interviewed discussed guidance available to contracting officers under the  WOSB program. Most generally said that the program requirements  outlined in the FAR are fairly detailed and help contracting officers  implement the program. According to SBA officials, SBA provides training  on WOSB program requirements to contracting officers in federal  agencies by request, through outreach events, and through an annual  webinar. SBA officials also said that the training materials include all the  regulatory issues that contracting officers must address.", "However, representatives from two third-party certifiers described  feedback received from their members about the need to provide  additional training and guidance for contracting officers to better  understand and implement the WOSB program. Staff from two  contracting offices also expressed the need for SBA to provide additional  training and guidance. Staff from one of these contracting offices said that  the last time they received training on the WOSB program was in 2011,  when the program was first implemented. Staff in the other contracting  office added that the most recent version of a WOSB compliance guide  they could locate online was at least 6 years old. SBA officials estimated  that the WOSB compliance guide was removed from their public website  in March 2016 because it was difficult to keep the document current and  officials did not want to risk publishing a guide that was out-of-date. SBA  officials also said that there are no plans to issue an updated guide as the  FAR is sufficient.", "The stakeholder groups also identified positive aspects of the WOSB  program. Specifically, staff from seven stakeholder groups believed that  the program provided greater opportunities for women-owned small  businesses to obtain contracts in industries in which they are  underrepresented. In addition, staff from three stakeholder groups  mentioned that SBA-led initiatives, such as the Small Business  Procurement Advisory Council and SBA\u2019s co-sponsorship of the  ChallengeHER program, help improve collaboration between federal  agencies and the small business community and overall government  contracting opportunities for women-owned small businesses."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The WOSB program aims to enhance federal contracting opportunities for  women-owned small businesses. However, weaknesses in SBA\u2019s  management of the program continue to hinder its effectiveness. As of  February 2019, SBA had not fully implemented comprehensive  procedures to monitor the performance of the WOSB program\u2019s third- party certifiers and had not taken steps to provide reasonable assurance  that only eligible businesses obtain WOSB set-aside contracts, as  recommended in our 2014 report. Without ongoing monitoring and  reviews of third-party certifier reports, SBA cannot ensure that the  certifiers are fulfilling the requirements of their agreements with SBA, and  it is missing opportunities to gain information that could help improve the  program\u2019s processes. Further, limitations in SBA\u2019s procedures for  conducting, documenting, and analyzing eligibility examinations inhibit its  ability to better understand the eligibility of businesses before they apply  for and potentially receive contracts, which exposes the program to  unnecessary risk of fraud. In addition, given that SBA does not expect to  finish implementing the changes in the 2015 NDAA until January 1, 2020,  these continued oversight deficiencies increase program risk. As a result,  we maintain that our previous recommendations should be addressed.", "In addition, SBA has not addressed deficiencies that the SBA OIG  identified previously\u2014and that we also identified during this review\u2014 related to WOSB set-asides being awarded under ineligible industry  codes. Although SBA has updated its training and outreach materials for  the WOSB program to address NAICS code requirements, it has not  developed plans to review FPDS-NG data or provide targeted outreach or  training to agencies that may be using ineligible codes. As a result, SBA  is not aware of the extent to which individual agencies are following  program requirements and which agencies may require targeted outreach  or additional training. Reviewing FPDS-NG data would allow SBA to  identify those agencies (and contracting offices within them) that could  benefit from such training. Without taking these additional steps, SBA  cannot provide reasonable assurance that WOSB program requirements  are being met."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The SBA Administrator or her designee should (1) develop a process for  periodically reviewing FPDS-NG data to determine the extent to which  agencies are awarding WOSB program set-asides under ineligible NAICS  codes and (2) take steps to address any issues identified, such as  providing targeted outreach or training to agencies making awards under  ineligible codes. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DHS, DOD, GSA, and SBA for review  and comment.  DHS, DOD, and GSA indicated that they did not have  comments. SBA provided a written response, reproduced in appendix II,  in which it agreed with our recommendation. SBA stated that it will  implement a process to review WOSB program data extracted from  FPDS-NG and certified by each agency. Specifically, through the  government-wide Small Business Procurement Advisory Council, SBA  plans to provide quarterly presentations to contracting agencies\u2019 staff that  would include training and an analysis and review of the data. The  response also reiterated that SBA has contacted GSA to implement a  system change to FedBizOpps.gov that would prevent contracting officers  from entering an invalid NAICS code for a WOSB program set-aside.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time we will send copies of this report to appropriate  congressional committees and members, the Acting Secretary of DOD,  the Secretary of DHS, the Administrator of GSA, the Administrator of  SBA, and other interested parties. This report will also be available at no  charge on our website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the extent to which the Small Business  Administration (SBA) has implemented changes to the Women-Owned  Small Business Program (WOSB program) made by the 2015 National  Defense Authorization Act (2015 NDAA); (2) the extent to which SBA has  implemented changes to address previously identified oversight  deficiencies; and (3) changes in WOSB program use since 2011 and  stakeholder views on its use, including since the 2015 implementation of  sole-source authority.", "To describe the extent to which SBA has implemented changes to the  WOSB program made by the 2015 NDAA, we reviewed relevant  legislation, including the 2015 NDAA; related proposed regulations; and  SBA documentation. We reviewed comment letters on the advance notice  of proposed rulemaking for the new WOSB program certification process  from three of the four SBA-approved third-party certifiers: the El Paso  Hispanic Chamber of Commerce, the U.S. Women\u2019s Chamber of  Commerce, and the Women\u2019s Business Enterprise National Council. To  ensure the accuracy of our characterization of the comment letters, one  staff member independently summarized the third-party certifiers\u2019  comments on the advance notice, and a second staff member then  reviewed the results. We also interviewed SBA officials, including officials  from SBA\u2019s Office of Government Contracting and Business  Development.", "To respond to the second and third objectives, we conducted interviews  on SBA\u2019s implementation and oversight of the WOSB program and its use  with SBA officials, three of the WOSB program\u2019s four third-party certifiers,  three selected agencies (and three agency components within two of the  agencies), and a total of eight selected contracting offices within six  selected agencies or components. Using data from the Federal  Procurement Data System-Next Generation (FPDS-NG), we judgmentally  selected the three federal agencies and three components (for a total of  six federal agencies and components) because their WOSB program  dollar obligations (including competed and sole-source) were among the  largest or because we had interviewed them for our prior work.  Specifically, we selected the following six agencies or agency  components: the Department of Homeland Security (DHS) and, within  DHS, the Coast Guard; the Department of Defense (DOD) and, within  DOD, the U.S. Army and U.S. Navy; and the General Services  Administration (GSA). Within the components and GSA, we judgmentally  selected eight contracting offices (two each from Coast Guard, U.S.  Army, U.S. Navy, and GSA) based on whether they had a relatively large  amount of obligations and had used multiple types of WOSB program set- asides (competed or sole-source) to WOSBs or economically  disadvantaged women-owned small businesses (EDWOSB).", "To address our second objective, we reviewed the findings and  recommendations in our October 2014 report and in audit reports issued  by the SBA Office of Inspector General (OIG) in May 2015 and June  2018. We also reviewed SBA documentation on the WOSB program,  including SBA\u2019s 2017 Standard Operating Procedures and 2018 WOSB  Program Desk Guide, results from 2016 compliance reviews of the four  third-party certifiers, and SBA eligibility examinations from fiscal years  2012 through 2018. In addition, we analyzed FPDS-NG data on contract  obligations to WOSB program set-asides from the third quarter of fiscal  year 2011 through the third quarter of fiscal year 2018 to determine  whether set-asides were made using eligible program-specific North  American Industry Classification System (NAICS) codes. To conduct this  analysis, we compared contract obligations in FPDS-NG with the NAICS  codes eligible under the WOSB program at the time of the award for the  time frame under review. The WOSB program\u2019s eligible NAICS codes  have changed three times since the program was implemented in 2011,  but the eligible industries have changed once. SBA commissioned the  RAND Corporation to conduct the first study to assist SBA in determining  eligible NAICS codes under the WOSB program. Based on the results of  the RAND study, SBA identified 45 four-digit WOSB NAICS codes and 38  four-digit EDWOSB NAICS codes, for a total of 83 four-digit NAICS  codes. WOSB and EDWOSB NAICS codes are different and do not  overlap. In December 2015, the Department of Commerce issued the  next study, which increased the total NAICS codes under the program to  113 four-digit codes, with 92 WOSB NAICS codes and 21 EDWOSB  NAICS codes (which became effective March 2016). Often, there is a  time lag between the effective date of NAICS codes and when they are  entered in FPDS-NG. Therefore, we did not classify a contract as having  an ineligible NAICS code if the code eventually became eligible under the  WOSB program. We also excluded actions in FPDS-NG coded other than  as a small business. These actions represented a small amount of  contract obligations\u2014approximately $125,000. We compared SBA  information on its oversight activities and responses to previously  identified deficiencies, federal internal control standards, and GAO\u2019s fraud  risk framework.", "We assessed the reliability of FPDS-NG data by considering their known  strengths and weaknesses, based on our past work and through  electronic testing for missing data, outliers, and inconsistent coding in the  data elements we used for our analysis. We also reviewed FPDS-NG  documentation, including the FPDS-NG data dictionary, FPDS-NG data  validation rules, FPDS-NG user manual, prior GAO reliability  assessments, and relevant SBA OIG audit reports. Based on these steps,  we concluded that the data were sufficiently reliable for the purposes of  reporting on trends in the WOSB program and the use of sole-source  authority under the program.", "To describe how participation in the WOSB program has changed since  2011, including since the 2015 implementation of sole-source authority,  we analyzed FPDS-NG data from the third quarter of fiscal year 2011  through the third quarter of fiscal year 2018. We identified any trends in  WOSB program participation using total obligation dollars set aside for  competitive and sole-source contracts awarded to WOSBs and  EDWOSBs under the program. We also compared data on obligations for  set-asides under the WOSB program with federal contract obligations for  WOSB-program-eligible goods and services to all women-owned small  businesses, including those made under different set-aside programs or  with no set-asides, to determine the relative usage of the WOSB program.  In our analysis, we excluded from WOSB program set-aside data actions  in FPDS-NG coded other than as a small business (representing  approximately $125,000) or coded under ineligible NAICS codes that  were never eligible under the WOSB program (representing  approximately $76.3 million).", "To describe stakeholder views on WOSB program use, we conducted  semistructured interviews to gather responses from 14 stakeholder  groups. These groups consisted of staff within three federal agencies  (DHS, DOD, and GSA), eight contracting offices within these agencies,  and three third-party certifiers (selection criteria described above). One  person summarized the results of the interviews, and another person  reviewed the summary of the interviews to ensure an accurate depiction  of the comments. In addition, a third person then reviewed the  summarized results.", "We conducted this performance audit from October 2017 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the U.S. Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Allison Abrams (Assistant  Director), Tiffani Humble (Analyst-in-Charge), Pamela Davidson,  Jonathan Harmatz, Julia Kennon, Jennifer Schwartz, Rebecca Shea,  Jena Sinkfield, Tyler Spunaugle, and Tatiana Winger made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Women-Owned Small Business program aims to give these businesses an edge when competing for federal contracts in industries where women have traditionally been underrepresented.", "Each year, the Small Business Administration examines a sample of businesses that received contracts under the program to determine whether they were eligible to participate. In fiscal year 2017, SBA found about 40 percent of the businesses in its sample weren't eligible. Moreover, SBA doesn't use the examination results to improve its oversight.", "We made a recommendation and reiterated previous ones to address this and other persistent problems we found."]}
{"id": "GAO-18-215T", "url": "https://www.gao.gov/products/GAO-18-215T", "title": "2020 Census: Actions Needed to Mitigate Key Risks Jeopardizing a Cost-Effective Enumeration", "published_date": "2017-10-31T00:00:00", "released_date": "2017-10-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["One of the Bureau's most important functions is to conduct a complete and accurate decennial census of the U.S. population. The decennial census is mandated by the Constitution and provides vital data for the nation. A complete count of the nation's population is an enormous undertaking as the Bureau seeks to control the cost of the census, implement operational innovations, and use new and modified IT systems. In recent years, GAO has identified challenges that raise serious concerns about the Bureau's ability to conduct a cost-effective count. For these reasons, GAO added the 2020 Census to its High-Risk list in February 2017.", "In light of these challenges, GAO was asked to testify about the reasons the 2020 Census was placed on the High-Risk List. To do so, GAO summarized its prior work regarding the Bureau's planning efforts for the 2020 Census. GAO also included observations from its ongoing work on the 2018 End-to-End Test. This information is related to, among other things, recent decisions on preparations for the 2020 Census; progress on key systems to be used for the 2018 End-to-End Test, including the status of IT security assessments; execution of the address canvassing operation at the test sites; and efforts to update the life-cycle cost estimate."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO added the 2020 Census to its high-risk list because of challenges associated with (1) developing and testing key innovations; (2) implementing and securing IT systems; and (3) controlling any further cost growth and preparing reliable cost estimates. The Census Bureau (Bureau) is planning several innovations for the 2020 Decennial Census, including re-engineering field operations by relying on automation, using administrative records to supplement census data, verifying addresses in-office using on-screen imagery, and allowing the public to respond using the Internet. These innovations show promise for controlling costs, but they also introduce new risks, in part because they have not been used extensively in earlier enumerations, if at all. As a result, robust testing is needed to ensure that key systems and operations will function as planned. However, citing budgetary uncertainties, the Bureau canceled its 2017 field test and then scaled back its 2018 End-to End Test. Without sufficient testing, operational problems can go undiscovered and the opportunity to improve operations will be lost, as key census-taking activities will not be tested across a range of geographic locations, housing types, and demographic groups.", "The Bureau continues to face challenges in managing and overseeing the information technology (IT) programs, systems, and contracts supporting the 2020 Census. For example, GAO's ongoing work indicates that the system development schedule leading up to the 2018 End-to-End test has experienced several delays. Further, the Bureau has not addressed several security risks and challenges to secure its systems and data, including making certain that security assessments are completed in a timely manner and that risks are at an acceptable level. Given that certain operations for the 2018 End-to-End Test began in August 2017, it is important that the Bureau quickly address these challenges. GAO plans to monitor the Bureau's progress as part of its ongoing work.", "In addition, the Bureau needs to control any further cost growth and develop cost estimates that reflect best practices. Earlier this month, the Department of Commerce (Department) announced that it had updated the October 2015 life-cycle cost-estimate and now projects the life-cycle cost of the 2020 Census will be $15.6 billion, more than $3 billion (27 percent) increase over its earlier estimate. The higher estimated life-cycle cost is due, in part, to the Bureau's failure to meet best practices for a quality cost-estimate. The Bureau and Department are still finalizing the documentation used to develop the $15.6 billion cost-estimate. Until these documents are complete and made available for inspection, GAO cannot determine the reliability of the estimate."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Over the past decade, we have made 84 recommendations specific to the 2020 Census to address the issues raised in this testimony and others. The Bureau generally has agreed with our recommendations. As of October 2017, 36 recommendations had not been implemented."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the U.S. Census Bureau\u2019s  (Bureau) progress in preparing for the 2020 Decennial Census.  Conducting the decennial census of the U.S. population is mandated by  the Constitution and provides vital data for the nation. The information  that the census collects is used to apportion the seats of the House of  Representatives; redraw congressional districts; allocate billions of dollars  each year in federal financial assistance; and provide a social,  demographic, and economic profile of the nation\u2019s people to guide policy  decisions at each level of government. Further, businesses use census  data to market new services and products and to tailor existing ones to  demographic changes.", "For 2020, a complete count of the nation\u2019s population is an enormous  undertaking as the Bureau seeks to control the cost of the census while it  implements several innovations and manages the processes of acquiring  and developing new and modified information technology (IT) systems. In  recent years, we have identified challenges that raise serious concerns  about the Bureau\u2019s ability to conduct a cost-effective count of the nation,  including issues with the agency\u2019s research, testing, planning, scheduling,  cost estimation, systems development, and IT security practices. Over the  past decade, we have made 84 recommendations specific to the 2020  Census to help address these and other issues. The Bureau has  generally agreed with those recommendations; however 36 of them had  not been implemented as of October 2017. We also added the 2020  Decennial Census to GAO\u2019s High-Risk List in February 2017. As  preparations for 2020 ramp-up, addressing the risks jeopardizing the  2020 Census by implementing our recommendations is more critical than  ever.", "The Bureau is currently conducting the 2018 End-to-End Test, which  began in August 2017 and runs through April 2019. It is the Bureau\u2019s final  opportunity to test all key systems and operations to ensure readiness for  the 2020 Census.", "My testimony today will describe (1) why we added the decennial census  to our high risk list, and (2) the steps the Department of Commerce and  the Bureau need to take going forward to mitigate the risks jeopardizing a  cost-effective census.", "The information in this statement is based primarily on prior work  regarding the Bureau\u2019s planning efforts for 2020. For that body of work,  we reviewed, among other things, relevant Bureau documentation,  including the 2020 Census Operational Plan, recent decisions on  preparations for the 2020 Census, and outcomes of key IT milestone  reviews. Other details on the scope and methodology for our prior work  are provided in each published report on which this testimony is based.  We also discussed the status of recommendations with Department of  Commerce and Bureau staff.", "In addition, we included information in this statement from our ongoing  work on the 2018 End-to-End Test. For our ongoing work examining the  address canvassing operation, we reviewed plans for and the execution  of the address canvassing portion of the 2018 End-to-End Test at each of  the three test sites\u2014in Pierce County, Washington; Providence County,  Rhode Island; and Bluefield-Beckley-Oak Hill, West Virginia. Across the  three test sites, we observed 18 census workers conduct address  canvassing operations and interviewed local office staff at each location.  These observations are not generalizable.", "For our ongoing work on the readiness of the Bureau\u2019s IT systems, we  collected and reviewed documentation on the status and plans for system  development, testing, and security assessments for the 2018 End-to-End  Test. This includes the Bureau\u2019s integration and implementation plan,  solution architecture, and memorandums documenting outcomes of  security assessments. We also interviewed agency officials.", "We provided a copy of the new information we are reporting in this  testimony to the Bureau for comment on October 19, 2017. The Bureau  provided technical comments, which we addressed as appropriate.", "We conducted the work on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The cost of the census has been escalating over the last several  decennials. The 2010 decennial was the costliest U.S. Census in history  at about $12.3 billion, and was about 31 percent more costly than the  $9.4 billion 2000 Census (in 2020 dollars). The average cost for counting  a housing unit increased from about $16 in 1970 to around $92 in 2010  (in 2020 dollars). According to the Department of Commerce  (Department), the total cost of the 2020 Census is now estimated to be  approximately $15.6 billion dollars, more than $3 billion higher than  previously reported by the Bureau.", "Meanwhile, the return of census questionnaires by mail (the primary  mode of data collection) declined over this period from 78 percent in 1970  to 63 percent in 2010 (see figure 1). Declining mail response rates\u2014a key  indicator in determining the cost-effectiveness of the census\u2014are  significant and lead to higher costs. This is because the Bureau sends  temporary workers to each non-responding household to obtain census  data. As a result, non-response follow-up is the Bureau\u2019s largest and  most costly field operation. In many ways, the Bureau has had to invest  substantially more resources each decade to conduct the enumeration.", "Achieving a complete and accurate census is becoming an increasingly  daunting task, in part, because the nation\u2019s population is growing larger,  more diverse, and more reluctant to participate. When the census misses  a person who should have been included, it results in an undercount;  conversely, an overcount occurs when an individual is counted more than  once. Such errors are particularly problematic because of their impact on  various subgroups. Minorities, renters, and children, for example, are  more likely to be undercounted by the census.", "The challenges to an accurate count can be seen, for example, in the  difficulties associated with counting people residing in unconventional and  hidden housing units, such as converted basements and attics. In figure  2, what appears to be a small, single-family house could contain an  apartment, as suggested by its two doorbells. If an address is not in the  Bureau\u2019s address file, its residents are less likely to be included in the  census."], "subsections": [{"section_title": "The Bureau Plans to Rely Heavily on IT for the 2020 Census", "paragraphs": ["The Bureau plans to rely heavily on both new and legacy IT systems and  infrastructure to support the 2018 End-to-End Test and the 2020 Census  operations. For example, the Bureau plans to deploy and use 43 systems  in the 2018 End-to-End Test. Eleven of these systems are being  developed or modified as part of an enterprise-wide initiative called  Census Enterprise Data Collection and Processing (CEDCaP), which is  managed within the Bureau\u2019s IT Directorate. This initiative is a large and  complex modernization program intended to deliver a system-of-systems  to support all of the Bureau\u2019s survey data collection and processing  functions, rather than continuing to rely on unique, survey-specific  systems with redundant capabilities. According to Bureau officials, the  remaining 32 IT systems are being developed or modified by the 2020  Census Directorate or other Bureau divisions.", "To support the 2018 End-to-End Test, the Bureau plans to incrementally  deploy and use the 43 systems for nine operations from December 2016  through the end of the test in April 2019. These nine operations are: (1)  in-office address canvassing, (2) recruiting staff for address canvassing,  (3) training for address canvassing, (4) in-field address canvassing, (5)  recruiting staff for field enumeration, (6) training for field enumeration, (7)  self-response (i.e., Internet, phone, or paper), (8) field enumeration, and  (9) tabulation and dissemination."], "subsections": []}]}, {"section_title": "Key Risks are Jeopardizing a Cost- Effective Enumeration", "paragraphs": ["We added the 2020 Census to our list of high-risk programs in February,  2017, because (1) innovations never before used in prior enumerations  will not be fully tested; (2) the Bureau continues to face challenges in  implementing and securing IT systems; and (3) the Bureau needs to  control any further cost growth and develop reliable cost estimates. Each  of these key risks are discussed in greater detail below; if not sufficiently  addressed, these risks could adversely impact the cost and/or quality of  the enumeration. Moreover, they compound the inherent challenges of  conducting a successful census such as the nation\u2019s increasingly diverse  population and concerns over personal privacy."], "subsections": [{"section_title": "Key Risk #1: Reduced Operational Testing Limits Confidence in 2020 Census Innovation Areas", "paragraphs": ["The basic design of the enumeration\u2014mail out and mail back of the  census questionnaire with in-person follow-up for non-respondents\u2014has  been in use since 1970. However, a key lesson learned from the 2010  Census and earlier enumerations, is that this \u201ctraditional\u201d design is no  longer capable of cost-effectively counting the population.", "In response to its own assessments, our recommendations, and studies  by other organizations, the Bureau has fundamentally re-examined its  approach for conducting the 2020 Census. Specifically, its plan for 2020  includes four broad innovation areas: re-engineering field operations,  using administrative records, verifying addresses in-office, and  developing an Internet self-response option (see table 1).", "If they function as planned, the Bureau initially estimated that these  innovations could result in savings of over $5 billion (in 2020 dollars)  when compared to its estimates of the cost for conducting the census with  traditional methods. However, in June 2016, we reported that the  Bureau\u2019s life-cycle cost estimate of $12.5 billion, developed in October  2015, was not reliable and did not adequately account for risk. As  discussed earlier in this statement, the Department has recently updated  this figure and now estimates a life-cycle cost of $15.6 billion. At this  higher level, the cost savings would be reduced to around $1.9 billion.", "While the planned innovations could help control costs, they also  introduce new risks, in part, because they include new procedures and  technology that have not been used extensively in earlier decennials, if at  all. Our prior work has shown the importance of the Bureau conducting a  robust testing program, including the 2018 End-to-End Test. Rigorous  testing is a critical risk mitigation strategy because it provides information  on the feasibility and performance of individual census-taking activities,  their potential for achieving desired results, and the extent to which they  are able to function together under full operational conditions. To address  some of these challenges we have made several recommendations  aimed at improving reengineered field operations, using administrative  records, verifying the accuracy of the address list, and securing census  responses via the Internet  The Bureau has held a series of operational tests since 2012, but  according to the Bureau, has scaled back recent tests because of funding  uncertainties. For example, the Bureau canceled the field components of  the 2017 Census Test including non-response follow-up, a key census  operation. In November 2016, we reported that the cancelation of the  2017 field test was a lost opportunity to test, refine, and integrate  operations and systems, and that it put more pressure on the 2018 End- to-End Test to demonstrate that enumeration activities will function under  census-like conditions as needed for 2020. However, in May 2017, the  Bureau scaled back the operational scope of the 2018 End-to-End and, of  the three planned test sites; only the Rhode Island site would fully  implement the 2018 End-to-End Test. The Washington and West Virginia  state test sites would test just one field operation, address canvassing. In  addition, due to budgetary concerns, the Bureau decided to remove three  coverage measurement operations (and the technology that supports  them) from the scope of the test.", "Without sufficient testing, operational problems can go undiscovered and  the opportunity to improve operations will be lost, in part because the  2018 End-to-End Test is the last opportunity to demonstrate census  technology and procedures across a range of geographic locations,  housing types, and demographic groups."], "subsections": [{"section_title": "Operational Issues Observed in the End-to-End Test Will Need to Be Addressed", "paragraphs": ["On August 28, 2017, temporary census employees known as address  listers began implementing the in-field component of address canvassing  for the 2018 End-to-End Test. Listers walked the streets of designated  census blocks at all three test sites to verify addresses and geographic  locations. The operation ended on September 27, 2017. As part of our  ongoing work, we visited all three test sites and observed 18 listers  conduct address canvassing. Generally, we found that listers were able to  conduct address canvassing as planned. However, we also noted several  challenges. We shared the following preliminary observations from our  site visits with the Bureau:  Internet connectivity was problematic at the West Virginia test site.  We spoke to four census field supervisors who described certain  areas as dead spots where Internet and cell phone service were not  available. We also were told by those same supervisors that only  certain cell service providers worked in certain areas. In order to  access the Internet or cell service in those areas, census workers  sometimes needed to drive several miles.", "The allocation of lister assignments was not always optimal. Listers  were supposed to be provided assignments close to where they live in  order to optimize their local knowledge and to limit the numbers of  miles being driven by listers to and from their assignment area.  Bureau officials told us this was a challenge at all three test sites.  Moreover, at one site the area census manager told us that some  listers were being assigned work in another county even though  blocks were still unassigned closer to where they resided. Relying on  local knowledge and limiting the number of miles can increase both  the efficiency and effectiveness of address canvassing.", "The assignment of some of the large blocks early in the operations  was not occurring as planned. At all three 2018 End-to-End Test sites  Bureau managers had to manually assign some large blocks (some  blocks had hundreds of housing units). It is important to assign large  blocks early on because leaving the large blocks to be canvassed  until the end of the operation could jeopardize the timely completion of  address canvassing.", "According to Bureau officials,during the test, completed address and  map updates for some blocks did not properly transmit. This  happened at all three test sites, and included data on 11 laptops for  25 blocks. The address and map information on seven of the laptops  was permanently deleted. However, data on four laptops were still  available. The Bureau is examining those laptops to determine what  occurred that prevented the data from being transmitted. In  Providence, Rhode Island, where the full test will take place, the  Bureau recanvassed those blocks where data were lost to ensure that  the address and map information going forward was correct. It will be  important for the Bureau to understand what happened and ensure all  address and map data is properly transmitted for the 2020 Census.", "We have discussed these challenges with Bureau officials who stated that  overall they are satisfied with the implementation of address canvassing  but also agreed that resolving challenges discovered during address  canvassing, some of which can affect the operation\u2019s efficiency and  effectiveness, will be important before the 2020 Census. We plan to issue  a report early in 2018 on address canvassing at the three test sites."], "subsections": []}]}, {"section_title": "Key Risk #2: The Bureau Continues to Face Challenges Implementing and Securing IT Systems", "paragraphs": ["We have previously reported that the Bureau faced challenges in  managing and overseeing IT programs, systems, and contractors  supporting the 2020 Census. Specifically, it has been challenged in  managing schedules, costs, contracts, governance and internal  coordination, and security for its IT systems. As a result of these  challenges, the Bureau is at risk of being unable to fully implement key IT  systems necessary to support the 2020 Census and conduct a cost- effective enumeration. We have previously recommended that the Bureau  take action to improve its implementation and management of IT in areas  such as governance and internal coordination. We also have ongoing  work reviewing each of these areas.", "Our ongoing work has indicated that the Bureau faces significant  challenges in managing the schedule for developing and testing systems  for the 2018 End-to-End Test that began in August 2017. In this regard,  the Bureau still has significant development and testing work that remains  to be completed. As of August 2017, of the 43 systems in the test, the  Bureau reported that 4 systems had completed development and  integration testing, while the remaining 39 systems had not completed  these activities.", "Of these 39 systems, the Bureau reported that it had deployed a portion  of the functionality for 21 systems to support address canvassing for the  2018 End-to-End Test; however, it had not yet deployed any functionality  for the remaining 18 systems for the test. Figure 3 summarizes the  development and testing status for the 43 systems planned for the 2018  End-to-End Test.", "Moreover, due to challenges experienced during systems development,  the Bureau has delayed key IT milestone dates (e.g., dates to begin  integration testing) by several months for several of the systems in the  2018 End-to-End Test. Figure 4 depicts the delays to the deployment  dates for the operations in the 2018 End-to-End Test, as of August 2017.", "Our ongoing work also indicates that the Bureau is at risk of not meeting  the updated milestone dates. For example, in June 2017 the Bureau  reported that at least two of the systems expected to be used in the self- response operation (the Internet self-response system and the call center  system) are at risk of not meeting the delayed milestone dates. In  addition, in September 2017 the Bureau reported that at least two of the  systems expected to be used in the field enumeration operation (the  enumeration system and the operational control system) are at risk of not  meeting their delayed dates.", "Combined, these delays reduce the time available to conduct the security  reviews and approvals for the systems being used in the 2018 End-to- End Test. We previously testified in May 2017 that the Bureau faced  similar challenges leading up to the 2017 Census Test, including  experiencing delays in system development that led to compressed time  frames for security reviews and approvals.  Specifically, we noted that  the Bureau did not have time to thoroughly assess the low-impact  components of one system and complete penetration testing for another  system prior to the test, but accepted the security risks and uncertainty  due to compressed time frames. We concluded that, for the 2018 End-to- End Test, it will be important that these security assessments are  completed in a timely manner and that risks are at an acceptable level  before the systems are deployed.", "The Bureau noted that, if it continues to be behind schedule, key field  operations for the 2018 End-to-End Test (such as non-response follow- up) could be delayed or canceled, which may affect the Bureau\u2019s ability to  meet the test\u2019s objectives. As we stated earlier, without sufficient testing,  operational problems can go undiscovered and the opportunity to improve  operations will be lost. Bureau officials are evaluating options to decrease  the impact of these delays on integration testing and security review  activities by, for example, utilizing additional staff. We have ongoing work  reviewing the Bureau\u2019s development and testing delays and the impacts  of these delays on systems readiness for the 2018 End-to-End Test.", "The Bureau faces challenges in reporting and controlling IT cost growth.  In April 2017, the Bureau briefed us on its efforts to estimate the costs for  the 2020 Census, during which it presented IT costs of about $2.4 billion  from fiscal years 2018 through 2021. Based on this information and other  corroborating IT contract information provided by the Bureau, we testified  in May 2017 that the Bureau had identified at least $2 billion in IT costs.", "However, in June 2017, Bureau officials in the 2020 Census Directorate  told us that the data they provided in April 2017 did not reflect all IT costs  for the 2020 program. The officials provided us with an analysis of the  Bureau\u2019s October 2015 cost estimate that identified $3.4 billion in total IT  costs from fiscal years 2012 through 2023. These costs included, among  other things, those associated with system engineering, test and  evaluation, and infrastructure, as well as a portion of the costs for the  CEDCaP program.", "Yet, our ongoing work determined the Bureau\u2019s $3.4 billion cost estimate  from October 2015 did not reflect its current plans for acquiring IT to be  used during the 2020 Census and that the related costs are likely to  increase:  In August 2016, the Bureau awarded a technical integration contract  for about $886 million, a cost that was not reflected in the $3.4 billion  expected IT costs. More recently, in May 2017, we testified that the  scope of work for this contract had increased since the contract was  awarded; thus, the corresponding contract costs were likely to rise  above $886 million, as well.", "In March 2017, the Bureau reported that the contract associated with  the call center and IT system to support the collection of census data  over the phone was projected to overrun its initial estimated cost by at  least $40 million.", "In May 2017, the Bureau reported that the CEDCaP program\u2019s cost  estimate was increasing by more than $400 million\u2014from its original  estimate of $548 million in 2013 to a revised estimate of $965 million  in May 2017.", "In June 2017, the Bureau awarded a contract for mobile devices and  associated services for about $283 million, an amount that is about  $137 million higher than the cost for these devices and services  identified in its October 2015 estimate.", "As a result of these factors, the Bureau\u2019s $3.4 billion estimate of IT costs  is likely to be at least $1.4 billion higher, thus increasing the total costs to  at least $4.8 billion. Figure 5 identifies the Bureau estimate of total IT  costs associated with the 2020 program as of October 2015, as well as  anticipated cost increases as of August 2017.", "IT cost information that is accurately reported and clearly communicated  is necessary so that Congress and the public have confidence that  taxpayer funds are being spent in an appropriate manner. However,  changes in the Bureau\u2019s reporting of these total costs, combined with cost  growth since the October 2015 estimate, raise questions as to whether  the Bureau has a complete understanding of the IT costs associated with  the 2020 program. In early October 2017, the Secretary of Commerce  testified that he expected the total IT costs for the 2020 Census to be  about $4.96 billion. This estimate of IT costs is approximately $1.6 billion  higher than the Bureau\u2019s October 2015 estimate and further confirms our  analysis of expected IT cost increases discussed above. As of late  October 2017, the Bureau and Department were still finalizing the  documentation used to develop the new cost estimate. After these  documents are complete and made available for inspection, as part of our  ongoing work, we plan to evaluate whether this updated IT cost estimate  includes the cost increases, discussed above, that were not included in  the October 2015 estimate.", "Our ongoing work also determined that the Bureau faces challenges in  managing its significant contractor support. The Bureau is relying on  contractor support in many key areas of the 2020 Census. For example, it  is relying on contractors to develop a number of key systems and  components of the IT infrastructure. These activities include (1)  developing the IT platform that is intended to be used to collect data from  those responding via the Internet, telephone, and non-response follow-up  activities; (2) procuring the mobile devices and cellular service to be used  for non-response follow-up; and (3) developing the infrastructure in the  field offices. According to Bureau officials, contractors are also providing  support in areas such as fraud detection, cloud computing services, and  disaster recovery.", "In addition to the development of key technology, the Bureau is relying on  contractor support for integrating all of the key systems and infrastructure.  The Bureau awarded a contract to integrate the 2020 Census systems  and infrastructure in August 2016. The contractor\u2019s work was to include  evaluating the systems and infrastructure and acquiring the infrastructure  (e.g., cloud or data center) to meet the Bureau\u2019s scalability and  performance needs. It was also to include integrating all of the systems,  supporting technical testing activities, and developing plans for ensuring  the continuity of operations. Since the contract was awarded, the Bureau  has modified the scope to also include assisting with operational testing  activities, conducting performance testing for two Internet self-response  systems, and technical support for the implementation of the paper data  capture system.", "However, our ongoing work has indicated that the Bureau is facing  staffing challenges that could impact its ability to manage and oversee the  technical integration contractor. Specifically, the Bureau is managing the  integration contractor through a government program management office,  but this office is still filling vacancies. As of October 2017, the Bureau  reported that 35 of the office\u2019s 58 federal employee positions were  vacant. As a result, this program management office may not be able to  provide adequate oversight of contractor cost, schedule, and  performance.", "The delays during the 2017 Test and preparations for the 2018 End-to- End Test raises concerns regarding the Bureau\u2019s ability to effectively  perform contractor management. As we reported in November 2016, a  greater reliance on contractors for these key components of the 2020  Census requires the Bureau to focus on sound management and  oversight of the key contracts, projects, and systems. As part of our  ongoing work, we plan to monitor the Bureau\u2019s progress in managing its  contractor support.", "Effective IT governance can drive change, provide oversight, and ensure  accountability for results. Further, effective IT governance was envisioned  in the provisions referred to as the 2014 Federal Information Technology  Acquisition Reform Act (FITARA), which strengthened and reinforced  the role of the departmental CIO. The component CIO also plays a role in  effective IT governance as subject to the oversight and policies of the  parent department or agency implementing FITARA.", "To ensure executive-level oversight of the key systems and technology,  the Bureau\u2019s CIO (or a representative) is a member of the governance  boards that oversee all of the operations and technology for the 2020  Census. However, in August 2016 we reported on challenges the Bureau  has had with IT governance and internal coordination, including  weaknesses in its ability to monitor and control IT project costs,  schedules, and performance. We made several recommendations to the  Department of Commerce to direct the Bureau to, among other things,  better ensure that risks are adequately identified and schedules are  aligned. The Department agreed with our recommendations. However, as  of October 2017, the Bureau had only fully implemented one  recommendation and had taken initial steps toward implementing others.", "Further, given the schedule delays and cost increases previously  mentioned, and the vast amount of development, testing, and security  assessments left to be completed, we remain concerned about executive- level oversight of systems and security. Moving forward, it will be  important that the CIO and other Bureau executives continue to use a  collaborative governance approach to effectively manage risks and  ensure that the IT solutions meet the needs of the agency within cost and  schedule. As part of our ongoing work, we plan to monitor the steps the  Bureau is taking to effectively oversee and manage the development and  acquisition of its IT systems.", "In November 2016, we described the significant challenges that the  Bureau faced in securing systems and data for the 2020 Census, and we  noted that tight time frames could exacerbate these challenges. Two  such challenges were (1) ensuring that individuals gain only limited and  appropriate access to the 2020 Census data, including personally  identifiable information (PII) (e.g., name, personal address, and date of  birth), and (2) making certain that security assessments were completed  in a timely manner and that risks were at an acceptable level. Protecting  PII, for example, is especially important because a majority of the 43  systems to be used in the 2018 End-to-End Test contain PII, as reflected  in figure 6.", "To address these and other challenges, federal law and guidance specify  requirements for protecting federal information and information systems,  such as those to be used in the 2020 Census. Specifically, the Federal  Information Security Management Act of 2002 and the Federal  Information Security Modernization Act of 2014 (FISMA) require executive  branch agencies to develop, document, and implement an agency-wide  program to provide security for the information and information systems  that support operations and assets of the agency.", "Accordingly, the National Institute of Standards and Technology (NIST)  developed risk management framework guidance for agencies to follow in  developing information security programs. Additionally, the Office of  Management and Budget\u2019s (OMB) revised Circular A-130 on managing  federal information resources required agencies to implement the NIST risk management framework to integrate information security and risk  management activities into the system development life cycle.", "In accordance with FISMA, NIST guidance, and OMB guidance, the  Office of the CIO established a risk management framework. This  framework requires that system developers ensure that each of the  systems undergoes a full security assessment, and that system  developers remediate critical deficiencies. In addition, according to the  Bureau\u2019s framework, system developers must ensure that each  component of a system has its own system security plan, which  documents how the Bureau plans to implement security controls. As a  result, system developers for a single system might develop multiple  system security plans which all have to be approved as part of the  system\u2019s complete security documentation. We have ongoing work that is  reviewing the extent to which the Bureau\u2019s framework meets the specific  requirements of the NIST guidance.", "According to the Bureau\u2019s framework, each of the 43 systems in the 2018  End-to-End Test will need to have complete security documentation (such  as system security plans) and an approved authorization to operate  prior to their use in the 2018 End-to-End Test. However, our ongoing  work indicates that, while the Bureau is completing these steps for the 43  systems to be used in the 2018 End-to-End Test, significant work  remains. Specifically, as we reported in October 2017:", "None of the 43 systems are fully authorized to operate through the  completion of the 2018 End-to-End Test. Bureau officials from the  CIO\u2019s Office of Information Security stated that these systems will  need to be reauthorized because, among other things, they have  additional development work planned that may require the systems to  be reauthorized; are being moved to a different infrastructure  environment (e.g., from a data center to a cloud-based environment);  or have a current authorization that expires before the completion of  the 2018 End-to-End Test. The amount of work remaining is  concerning because the test has already begun and the delays  experienced in system development and testing mentioned earlier  reduce the time available for performing the security assessments  needed to fully authorize these systems before the completion of the  2018 End-to-End test.", "Thirty-seven systems have a current authorization to operate, but the  Bureau will need to reauthorize these systems before the completion  of the 2018 End-to-End Test. This is due to the reasons mentioned  previously, such as additional development work planned and  changes to the infrastructure environments.", "Two systems have not yet obtained an authorization to operate.", "For the remaining four systems, the Bureau has not yet provided us  with documentation about the current authorization status.", "Figure 7 depicts the authorization to operate status for the systems being  used in the 2018 End-to-End Test, as reported by the Bureau.", "Because many of the systems that will be a part of the 2018 End-to-End  Test are not yet fully developed, the Bureau has not finalized all of the  security controls to be implemented; assessed those controls; developed  plans to remediate control weaknesses; and determined whether there is  time to fully remediate any deficiencies before the systems are needed for  the test. In addition, as discussed earlier, the Bureau is facing system  development challenges that are delaying the completion of milestones  and compressing the time available for security testing activities.", "While the large-scale technological changes (such as Internet self- response) increase the likelihood of efficiency and effectiveness gains,  they also introduce many information security challenges. The 2018 End- to-End Test also involves collecting PII on hundreds of thousands of  households across the country, which further increases the need to  properly secure these systems. Thus, it will be important that the Bureau  provides adequate time to perform these security assessments,  completes them in a timely manner, and ensures that risks are at an  acceptable level before the systems are deployed. We plan to continue  monitoring the Bureau\u2019s progress in securing its IT systems and data as  part of our ongoing work."], "subsections": []}, {"section_title": "Key Risk #3: Lack of Reliable Costs Estimates Limits Support for 2020 Census Funding", "paragraphs": ["Earlier this month, the Department announced that it had updated the  October 2015 life-cycle cost estimate and now projects the life-cycle cost  of the 2020 Census will be $15.6 billion, more than a $3 billion (27  percent) increase over the Bureau\u2019s earlier estimate. The higher  estimated life-cycle cost is due, in part, as we reported in June 2016, to  the Bureau\u2019s failure to meet best practices for a quality cost-estimate.  Specifically, we reported that, although the Bureau had taken steps to  improve its capacity to carry out an effective cost estimate, such as  establishing an independent cost estimation office, its October 2015  version of the estimate for the 2020 Census only partially met the  characteristics of two best practices (comprehensive and accurate) and  minimally met the other two (well-documented and credible). We also  reported that risks were not properly accounted for in the cost estimate.", "We recommended that the Bureau take action to ensure its 2020 Census  cost estimate meets all four characteristics of a reliable cost estimate, as  well as properly account for risk to ensure there are appropriate levels for  budgeted contingencies. The Bureau agreed with our recommendations.  In response, the Department of Commerce reported that in May 2017, a  multidisciplinary team was created to evaluate the 2020 Census program  and to produce an independent cost estimate. Factors driving the  increased cost-estimate include changes to assumptions relating to self- response rates, wage levels for temporary census workers, as well as the  fact that major contracts and IT scale-up plans and procedures were not  effectively planned, managed, and executed. The new estimate also  includes a contingency of 10 percent of estimated costs per year as  insurance against \u201cunknown-unknowns\u201d, such as a major cybersecurity  event.", "The Bureau and Department are still finalizing the documentation used to  develop the $15.6 billion cost-estimate. Until these documents are  complete and made available for inspection, we cannot determine the  reliability of the estimate. We will review the documentation when it is  available. In order for the estimate to be deemed high quality, and thus  the basis for any 2020 Census annual budgetary figures, the new cost- estimate will need to address the following four best practices, and do so  as quickly as possible given the expected ramp-up in spending:", "Comprehensive. To be comprehensive an estimate should have  enough detail to ensure that cost elements are neither omitted nor  double-counted, and all cost-influencing assumptions are detailed in  the estimate\u2019s documentation, among other things, according to best  practices. In June 2016, we reported that, while Bureau officials were  able to provide us with several documents that included projections  and assumptions that were used in the cost estimate, we found the  estimate to be partially comprehensive because it was unclear if all  life-cycle costs were included in the estimate or if the cost estimate  completely defined the program.", "Accurate. Accurate estimates are unbiased and contain few  mathematical mistakes. We reported in June 2016 that the estimate  partially met best practices for this characteristic, in part because we  could not independently verify the calculations the Bureau used within  its cost model, which the Bureau did not have documented or  explained.", "Well-documented. Cost estimates are considered valid if they are  well-documented to the point they can be easily repeated or updated  and can be traced to original sources through auditing, according to  best practices. In June 2016, we reported that, while the Bureau  provided some documentation of supporting data, it did not describe  how the source data were incorporated.", "Credible. Credible cost estimates must clearly identify limitations due  to uncertainty or bias surrounding the data or assumptions, according  to best practices. In June 2016, we reported that the estimate  minimally met best practices for this characteristic in part because the  Bureau carried out its risk and uncertainty analysis only for about $4.6  billion (37 percent) of the $12.5 billion total estimated life-cycle cost,  excluding, for example, consideration of uncertainty over what the  decennial census\u2019s estimated part will be of the total cost of CEDCaP."], "subsections": []}]}, {"section_title": "Continued Management Attention Needed to Keep Preparations on Track and Help Ensure a Cost- Effective Enumeration", "paragraphs": [], "subsections": [{"section_title": "2020 Challenges Are Symptomatic of Deeper Long-Term Organizational Issues", "paragraphs": ["The difficulties facing the Bureau\u2019s preparation for the decennial in such  areas as planning and testing; managing and overseeing IT programs,  systems, and contractors supporting the enumeration; developing reliable  cost estimates; prioritizing decisions; managing schedules; and other  challenges, are symptomatic of deeper organizational issues.", "Following the 2010 Census, a key lesson learned for 2020 we identified  was ensuring that the Bureau\u2019s organizational culture and structure, as  well as its approach to strategic planning, human capital management,  internal collaboration, knowledge sharing, capital decision-making, risk  and change management, and other internal functions are aligned toward  delivering more cost-effective outcomes.", "The Bureau has made improvements over the last decade, and continued  progress will depend in part on sustaining efforts to strengthen risk  management activities, enhancing systems testing, bringing in  experienced personnel to key positions, implementing our  recommendations, and meeting regularly with officials from its parent  agency, the Department of Commerce. Going forward, our experience  has shown that the key elements needed to make progress in high-risk  areas are top-level attention by the administration and agency officials to  (1) leadership commitment, (2) ensuring capacity, (3) developing a  corrective action plan, (4) regular monitoring, and (5) demonstrated  progress. Although important steps have been taken in at least some of  these areas, overall, far more work is needed.", "On the one hand, the Secretary of Commerce has taken several actions  towards demonstrating leadership commitment. For example, the  previously noted multidisciplinary review team included members with  Bureau leadership experience, as well as members with private sector  technology management experience. Additional program evaluation and  the independent cost estimate was produced by a team from the  Commerce Secretary\u2019s Office of Acquisition Management that included a  member detailed from OMB. Commerce also reports senior officials are  now actively involved in the management and oversight of the decennial.  Likewise, with respect to monitoring, the Commerce Secretary reports  having weekly 2020 Census oversight reviews with senior Bureau staff  and will require metric tracking and program execution status on a real- time basis.", "On the other hand, demonstrating the capacity to address high risk  concerns remains a challenge. For example, our ongoing work has  indicated that the Bureau is facing staffing challenges that could impact  its ability to manage and oversee the technical integration contractor.  Specifically, the Bureau is managing the integration contractor through a  government program management office, but this office is still filling  vacancies. As of October 2017, the Bureau reported that 35 of 58, or 60  percent, of the office\u2019s federal employee positions were vacant. As a  result, this program management office may not be able to provide  adequate oversight of contractor cost, schedule, and performance.", "In the months ahead, we will continue to monitor the Bureau\u2019s progress in  addressing in each of the 5 elements essential for reducing the risk to a  cost-effective enumeration."], "subsections": []}, {"section_title": "Leadership Continuity Will Be Critical For Keeping Efforts on Track", "paragraphs": ["At a time when strong Bureau management is needed, vacancies in the  agency\u2019s two top positions\u2014Director and Deputy Director\u2014are not helpful  for keeping 2020 preparations on-track. These vacancies are due to the  previous director\u2019s retirement on June 30, 2017, and the previous deputy  director\u2019s appointment to be the Chief Statistician of the United States  within the Office of Management and Budget in January 2017. Although  interim leadership has since been named, in our prior work we have  noted how openings in the Bureau\u2019s top position makes it difficult to  ensure accountability and continuity, as well as to develop and sustain  efforts that foster change, produce results, mitigate risks, and control  costs over the long term.", "The census director is appointed by the President, by and with the advice  and consent of the Senate, without regard to political affiliation. The  director\u2019s term is a fixed 5-year term of office, and runs in 5-year  increments. An individual may be reappointed and serve 2 full terms as  director. The director\u2019s position was first filled this way beginning on  January 1, 2012, and cycles every fifth year thereafter. Because the new  term began on January 1, 2017, the time that elapses until a new director  is confirmed counts against the 5-year term of office. As a result, the next  director\u2019s tenure will be less than 5 years.", "Going forward, filling these top two slots should be an important priority.  On the basis of our prior work, key attributes of a census director, in  addition to the obvious ones of technical expertise and the ability to lead  large, long-term, and high risk programs, could include abilities in the  following areas:", "Strategic Vision. The Director needs to build a long-term vision for  the Bureau that extends beyond the current decennial census.  Strategic planning, human-capital succession planning, and life-cycle  cost estimates for the Bureau all span the decade.", "Sustaining Stakeholder Relationships. The Director needs to  continually expand and develop working relationships and  partnerships with governmental, political, and other professional  officials in both the public and private sectors to obtain their input,  support, and participation in the Bureau\u2019s activities.", "Accountability. The life-cycle cost for a decennial census spans a  decade, and decisions made early in the decade about the next  decennial census guide the research, investments, and tests carried  out throughout the decennial census. Institutionalizing accountability  over an extended period may help long-term decennial initiatives  provide meaningful and sustainable results."], "subsections": []}, {"section_title": "Further Actions Needed on Our Recommendations", "paragraphs": ["Over the past several years we have issued numerous reports that  underscored the fact that if the Bureau was to successfully meet its cost  savings goal for the 2020 Census, the Bureau needs to take significant  actions to improve its research, testing, planning, scheduling, cost  estimation, system development, and IT security practices. Over the past  decade, we have made 84 recommendations specific to the 2020 Census  to help address these and other issues. The Bureau has generally agreed  with those recommendations; however 36 of them had not been  implemented as of October 2017. We have designated 20 of these  recommendations as a priority for the Department of Commerce and 5  have been implemented. In August 2017, we sent the Secretary of  Commerce a letter that identified our open priority recommendations at  the Department, 15 of which concern the 2020 Census. We believe that  attention to these recommendations is essential for a cost-effective  enumeration. The recommendations included implementing reliable cost  estimation and scheduling practices in order to establish better control  over program costs, as well as taking steps to better position the Bureau  to develop an Internet response option for the 2020 Census. Appendix I  summarizes our priority recommendations related to the 2020 Census  and the actions the Department has taken to address them.", "On October 3, 2017, in response to our August 2017 letter, the  Commerce Secretary noted that he shared our concerns about the 2020  Census and acknowledged that some of the programs had not worked as  planned, and are not delivering the savings that were promised. The  Commerce Secretary also stated that he intends to improve the  timeliness for implementing our recommendations.", "We meet quarterly with Bureau officials to discuss the progress and  status of open recommendations related to the 2020 Census. We are  encouraged by the actions taken by the Department and the Bureau in  addressing our recommendations. Implementing our recommendations in  a complete and timely manner is important because it would improve the  management of the 2020 Census and help to mitigate continued risks.", "In conclusion, while the Bureau has made progress in revamping its  approach to the census, it faces considerable challenges and  uncertainties in (1) implementing key cost-saving innovations and  ensuring they function under operational conditions; (2) managing the  development and security of key IT systems; and (3) developing a quality  cost estimate for the 2020 Census and preventing further cost increases.  Without timely and appropriate actions, these challenges could adversely  affect the cost, accuracy, and schedule of the enumeration.", "For these reasons, the 2020 Census is a GAO high risk area. Going  forward, continued management and Congressional attention\u2014such as  hearings like this one\u2014will be vital for ensuring risks are managed,  preparations stay on-track, and the Bureau is held accountable for  implementing the enumeration as planned.", "We will continue to assess the Bureau\u2019s efforts to conduct a cost-effective  enumeration and look forward to keeping Congress informed of the  Bureau\u2019s progress. Chairman Johnson, Ranking Member McCaskill, and  Members of the Committee, this completes my prepared statement. I  would be pleased to respond to any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you have any questions about this statement, please contact Robert  Goldenkoff at (202) 512-2757 or by e-mail at goldenkoffr@gao.gov or  David A. Powner at (202) 512-9286 or by e-mail at pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other key  contributors to this testimony include Lisa Pearson (Assistant Director);  Jon Ticehurst (Assistant Director); Katherine Wulff (Analyst in Charge);  Mark Abraham; Brian Bothwell; Jeffrey DeMarco; Hoyt Lacy; Jason Lee;  Ty Mitchell; LaSonya Roberts; Kate Sharkey; Andrea Starosciak; Umesh  Thakkar; and Timothy Wexler."], "subsections": []}]}, {"section_title": "Appendix I: Priority Recommendations from GAO\u2019s Work Related to the 2020 Census", "paragraphs": ["The Department of Commerce and Census Bureau have taken some  actions to address our recommendations related to implementation of the  2020 Census; however, a large number of recommendations remain  open. Since just prior to the 2010 Census, we have made 84  recommendations in 23 reports to the Department of Commerce and  Census Bureau aimed at helping the Bureau prepare for and implement a  successful 2020 Census (table 1). Of those 84, the Department of  Commerce and the Census Bureau have implemented 48  recommendations. Thirty-six recommendations require additional action.", "Of these 84 recommendations, we have designated 20 as priorities for  Commerce to address. The Census Bureau has taken some action on our  priority recommendations, implementing 5 of the 20 priority  recommendations we have made.", "The following table presents each of the 20 priority recommendations  along with a summary of actions taken to address it."], "subsections": []}], "fastfact": ["Results of the 2020 Census will be used to apportion congressional seats, redraw districts, and allocate federal assistance. But the Census Bureau faces challenges, including:", "Controlling costs, estimated at $15.6 billion for 2020, up $3 billion from its original estimate.", "Counting a larger population in light of a historical decline in response rates.", "Managing innovations such as allowing online responses.", "Managing development and security of IT systems.", "We testified that management issues and development delays have increased risks to systems. We have made recommendations in past reports to improve census management and mitigate risks."]}
{"id": "GAO-18-74", "url": "https://www.gao.gov/products/GAO-18-74", "title": "Global Positioning System: Better Planning and Coordination Needed to Improve Prospects for Fielding Modernized Capability", "published_date": "2017-12-12T00:00:00", "released_date": "2017-12-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GPS provides positioning, navigation, and timing data to civilian and military users who depend on this satellite-based system. Since 2000, DOD\u2014led by the Air Force\u2014has been working to modernize GPS and to keep the current system of satellites\u2014known as the GPS constellation\u2014operational, although these efforts have experienced cost and schedule growth.", "The National Defense Authorization Act for Fiscal Year 2016 contained a provision that the Air Force provide reports to GAO on GPS acquisition programs and that GAO brief the congressional defense committees. GAO briefed the committees in 2016 and 2017. This report summarizes and expands on information presented in those briefings.", "This report assesses the extent to which DOD faces acquisition challenges (1) sustaining the GPS constellation; (2) developing a new ground control system; and (3) developing and fielding modernized receivers. GAO analyzed GPS quarterly acquisition reports and data, acquisition strategies, software and test plans, and other documents, and interviewed DOD and contractor officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) acquisition of the next generation Global Positioning System (GPS) satellites, known as GPS III, faces a number of acquisition challenges, but these challenges do not threaten DOD's ability to continue operating the current GPS system, which DOD refers to as the constellation, in the near term. Projections for how long the current constellation will be fully capable have increased by nearly 2 years to June 2021, affording some buffer to offset any additional satellite delays. While the first GPS III satellite has a known parts problem, six follow-on satellites\u2014which do not\u2014are currently scheduled to be launched by June 2021.", "DOD is relying on a high-risk acquisition schedule to develop a new ground system, known as OCX, to control the broadcast of a modernized military GPS signal. OCX remains at risk for further delays and cost growth. To mitigate continuing delays to the new ground control system, the Air Force has begun a second new program\u2014Military-code (M-code) Early Use\u2014to deliver an interim, limited broadcast encrypted GPS signal for military use by modifying the current ground system. GAO will continue to monitor OCX progress.", "DOD has made some progress on initial testing of the receiver cards needed to utilize the M-code signal. However, additional development is necessary to make M-code work with over 700 weapon systems that require it. DOD has begun initial planning for some weapon systems, but more remains to be done to understand the cost and schedule needed to transition to M-code receivers. The preliminary estimate for integrating and testing a fraction of the weapon systems that need the receiver cards is over $2.5 billion through fiscal year 2021 with only 28 fully and 72 partially funded (see figure). The cost will increase by billions when as yet unfunded weapon systems are included.", "The level of development and procurement effort beyond the initial receiver cards is significant and will require close coordination across DOD. After the Air Force develops initial cards, the breadth and complexity of this acquisition will multiply, as the offices responsible for upgrading hundreds of weapon systems begin their own individual efforts to further develop and test the cards. However, DOD does not have an organization assigned to collect test data, lessons learned, and design solutions so that common design solutions are employed to avoid duplication of effort as multiple entities separately mature receiver cards. DOD therefore risks paying to repeatedly find design solutions to solve common problems because each program office is likely to undertake its own uncoordinated development effort."]}, {"section_title": "What GAO Recommends", "paragraphs": ["DOD should assign responsibility to an organization to collect test data, lessons learned, and design solutions so they may be shared. DOD concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["For more than two decades, the satellite-based Global Positioning  System (GPS) has provided positioning, navigation, and timing (PNT)  data to civilian and military users worldwide. Given its ubiquity throughout  the world, failure, malfunction, or jamming of GPS can severely disrupt  day-to-day civilian and military activities across the globe. The  Department of Defense (DOD) maintains and operates GPS, which  consists of three segments: orbiting satellites that continuously broadcast  position and time data; a ground control system that operates the  satellites and monitors and corrects signal data; and receivers used by  civilians and the military in aircraft, ships, land vehicles, munitions, and  hand-held units. Since 2000, the Air Force has led the multi-billion dollar  effort to modernize GPS to sustain the satellite constellation\u2014currently  comprised of 31 satellites\u2014by providing new civilian and military signals,  enhancing cybersecurity, developing modernized military receivers, and  countering known threats.", "The National Defense Authorization Act for Fiscal Year 2016 contained a  provision that the Air Force provide quarterly reports to GAO on the next  generation GPS acquisition programs. The Act also contained a  provision that GAO brief congressional defense committees on the first  report, and at GAO\u2019s discretion, on subsequent quarterly reports. The Air  Force delivered the first quarterly report to us on April 22, 2016. We  assessed the report, briefed congressional committees in June 2016, and  issued a report on that briefing. During fiscal years 2016 and 2017, we  briefed the congressional defense committees several additional times  regarding the ongoing work. This report summarizes and expands on  those briefings. This report assesses the extent to which DOD faces  acquisition challenges (1) sustaining the GPS constellation; (2)  developing a new ground system to control the broadcast of a  modernized military GPS signal called military-code, or M-code; and (3)  developing and fielding modernized receiver cards across the  department.", "To conduct our work, we reviewed Air Force GPS fiscal year 2016 and  2017 quarterly acquisition reports, program acquisition baselines,  integrated master schedules, acquisition strategies, software  development plans, test plans, and other documents for five programs:", "Next generation operational control system (OCX),", "Military GPS user equipment (MGUE),", "Contingency Operations (COps), and", "M-code Early Use (MCEU) programs.", "We also interviewed officials from the GPS III, OCX, MGUE, COps, and  MCEU programs; the prime contractors from all five programs; the  Defense Contract Management Agency; and, where applicable, officials  from DOD\u2019s Office of Cost Assessment and Program Evaluation; the  Office of the Director, Operational Test and Evaluation (DOT&E); Under  Secretary of Defense for Acquisition, Technology, and Logistics (USD  AT&L); Joint Staff / J-6 Space Branch; Air Force Space Command; and  each of the military services involved with the planning and procurement  of the MGUE program. Appendix I contains a more detailed description of  our scope and methodology.", "We conducted this performance audit from February 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Collectively, the ongoing GPS acquisition effort aims to (1) modernize and  sustain the existing GPS capability and (2) enhance the current GPS  system by adding an anti-jam, anti-spoof cybersecure M-code capability.  Figure 1 below shows how GPS satellites, ground control, and user  equipment\u2014in the form of receiver cards embedded in systems\u2014function  together as an operational system.", "Modernizing and sustaining the current GPS broadcast capability requires  launching new satellites to replace the existing satellites that are near the  end of their intended operational life as well as developing a ground  control system that can launch and control both existing and new  satellites. Sustaining the current GPS broadcast capability is necessary to  ensure the quality and availability of the existing broadcast signals for  civilian and military GPS receivers. The ongoing modernization of GPS  began with three programs: (1) GPS III satellites; (2) OCX to control the  satellites; and (3) MGUE increment 1 (which develops initial receiver test  cards for military ships, ground vehicles, or aircraft). Table 1 describes  these programs.", "Delays to OCX of more than 5 years led the Air Force to create two  additional programs in 2016 and 2017 to modify the current GPS ground  system to control GPS III satellites and provide a limited M-code  broadcast. As a result, there are currently five total GPS modernization  programs. Table 2 provides a description of the two new programs.", "All of the original GPS modernization programs\u2014GPS III, OCX, and  MGUE\u2014have experienced significant schedule growth during  development. Table 3 outlines several schedule challenges in the  modernized GPS programs.", "We found in 2015 that unrealistic cost and schedule estimates of the new  ground control system and receiver card development delays could pose  significant risks to sustaining the GPS constellation and delivering M- code. At that time, we also made five recommendations so that DOD  would have the information necessary to make decisions on how best to  improve GPS modernization and to mitigate risks to sustaining the GPS  constellation. We made four OCX-specific recommendations targeted to  identify underlying problems, establish a high confidence schedule and  cost estimate, and improve management and oversight. For MGUE, we  recommended the Air Force add a critical design review before  committing resources to allow the military services to fully assess the  maturity of the MGUE design before committing test and procurement  resources. DOD concurred with the four recommendations on OCX and  partially concurred on the MGUE recommendation. Since 2015, our  annual assessment of DOD weapon systems has shown that some of the  original GPS programs have continued to face cost or schedule  challenges, increasing the collective cost to modernize GPS by billions of  dollars. Appendix III outlines the cost increases that have resulted."], "subsections": [{"section_title": "Key GPS Modernization Points", "paragraphs": ["According to our analysis, over the next decade or more, DOD plans to  achieve three key GPS modernization points: (1) constellation  sustainment, (2) M-code broadcast, and (3) M-code receivers fielded.", "Figure 2 shows the current sequencing of the three points and the  intervals when they are planned to be achieved, if known.", "Throughout this report, we will use figures based on this one to highlight  the separately-managed programs DOD plans to synchronize to achieve  each of the three identified modernization points. Some GPS capabilities  require the delivery of more than one program, which must compete for  limited resources, such as testing simulators. The Air Force coordinates  the interdependent activities of the different programs and contractors in  order to achieve each modernization point."], "subsections": []}, {"section_title": "GPS Satellite Constellation", "paragraphs": ["The satellites in the GPS constellation broadcast encrypted military  signals and unencrypted civilian signals and move in six orbital planes  approximately 12,500 miles above the earth.", "What is a Global Positioning System (GPS)  satellite orbital plane and how many are  there?", "The GPS constellation availability performance standards commit the  U.S. government to at least a 95 percent probability of maintaining a  constellation of 24 operational GPS satellites to sustain the positioning  services provided to both civilian and military GPS users. Therefore, while  the minimum constellation consists of satellites occupying 24 orbital  slots\u20144 slots in each of the six orbital planes\u2014the constellation actually  has 31 total satellites, generally with more than four in each plane to meet  the 95 percent probability standard. These additional satellites are  needed to provide uninterrupted availability in case a satellite fails. The  constellation includes three generations of satellites with varying  capabilities and design lives.", "An orbital plane is an imaginary flat disc  containing an Earth satellite\u2019s orbit. One  orbital plane, as is shown above, represents  the trajectory a GPS satellite follows as it  circles the Earth in space.  The GPS constellation has six orbital planes.  Each contains at least 4 satellites that allow  the constellation to meet the minimum  requirement of 24 satellites.", "We found in 2010 and 2015 that GPS satellites have proven more reliable  than expected, greatly exceeding their initially predicted life  expectancies. Nevertheless, the Air Force must regularly replace  satellites to meet the availability standard, since operational satellites  have a finite lifespan. Excluding random failures, the operational life of a  GPS satellite tends to be limited by the amount of power that its solar  arrays can produce. This power level declines over time as the solar  arrays degrade in the space environment until eventually they cannot  produce enough power to maintain all of the satellite\u2019s subsystems.  Consequently, the Air Force monitors the performance of operational  satellites in order to calculate when new satellites need to be ready to join  the constellation.", "The 10 GPS III satellites currently under contract and in production with  Lockheed Martin will provide a range of performance enhancements over  prior GPS satellite generations. The GPS III satellites were designed to  provide a longer life than previous generations, greater signal accuracy,  and improved signal integrity\u2014meaning that the user has greater  assurance that the broadcast signal is correct. When they are eventually  controlled through the OCX ground control system, the satellites will also  offer a stronger M-code signal strength than prior GPS satellite  generations. They will also include an additional civilian signal known as  L1C, which will permit interoperability with European, Japanese, and  other global navigation satellite systems for civilian users. Figure 3  describes the evolution of GPS satellite generations, including capabilities  and life-span estimates."], "subsections": []}, {"section_title": "Ground Control Segment", "paragraphs": ["The current GPS ground control segment, OCS, primarily consists of  software deployed at a master control station at Schriever Air Force Base,  Colorado, and at an alternate master control station at Vandenberg Air  Force Base, California. The ground control software is supported by 6 Air  Force and 11 National Geospatial-Intelligence Agency monitoring stations  located around the globe along with four ground antennas that  communicate with the moving satellites. Information from the monitoring  stations is processed at the master control station to determine satellite  clock and orbit status. As each of the three ground control segment  programs\u2014COps, MCEU, and OCX\u2014is completed or partially completed,  they will each introduce new capabilities, eventually culminating in the  delivery of the full M-code broadcast planned for January 2022."], "subsections": []}, {"section_title": "Receiver Cards", "paragraphs": ["GPS receiver cards determine a user\u2019s position and time by calculating  the distance from four or more satellites using the navigation signals on  the satellites to determine the card\u2019s location. All warfighters currently  acquire, train with, and use GPS receivers. Until MGUE receiver cards  are developed and available for production, all DOD weapon systems that  use GPS will continue to use the current GPS Selective Availability/Anti- Spoofing Module (SAASM) receiver card or an older version. The Ike  Skelton National Defense Authorization Act for Fiscal Year 2011 generally  prohibits DOD from obligating or expending funds to procure GPS user  equipment after fiscal year 2017 unless that equipment is capable of  receiving M-code. Under certain circumstances this requirement may be  waived or certain exceptions may apply. The increment 1 receiver cards  range in size from approximately 2 inches by 3 inches for the ground card  up to 6 inches by 6 inches for the aviation/maritime card. Figure 4 below  shows an illustration of a MGUE receiver card.", "DOD has previously transitioned its weapon systems gradually from one  generation of GPS receivers to the next. For example, some weapon  systems have either upgraded or are still in the process of upgrading to  the current SAASM receivers that were introduced in 2003, while others  are still equipped with older cards. DOD anticipates that the length of time  necessary to transition to MGUE will require users to operate with a mix  of receiver cards. Hundreds of different types of weapon systems require  GPS receiver cards, including ships, aircraft, ground vehicles, missiles,  munitions, and hand-held devices, among others, across all military  services. The Air Force funds the MGUE program, providing funding to  the military services so they can acquire, integrate, and operationally test  the receiver cards on four service-specific lead platforms. These  platforms are intended to test the card in the military services\u2019 ground,  aviation, and maritime environments: (1) Army\u2014Stryker ground combat  vehicle; (2) Air Force\u2014B-2 Spirit bomber; (3) Marine Corps\u2014Joint Light  Tactical Vehicle (JLTV); and (4) Navy\u2014DDG-51 Arleigh Burke destroyer.  Figure 5 depicts selected weapon systems that will need to install M-code  capable receiver cards."], "subsections": []}]}, {"section_title": "Acquisition Risks Persist on GPS III Satellites but Do Not Threaten Sustainment of the Constellation in the Short Term", "paragraphs": ["The Air Force has made some progress toward ensuring continued  constellation sustainment since our September 2015 report and should be  able to sustain the current service because of the length of life of the  current satellites. The current GPS constellation is now projected to meet  its availability performance standard (in the absence of operational GPS  III satellites) into June 2021\u2014an increase of nearly 2 years over previous  projections. This increase will give the Air Force more schedule buffer in  the event of any additional delays to the GPS III satellite program.  However, the Air Force still faces technical risks and schedule pressures  in both the short and long term. In the short term, schedule compression  with the first GPS III satellite is placing the satellite\u2019s launch and operation  at risk of further delays. In the long term, most of the satellites under  contract will have been launched before operational testing is completed,  limiting Air Force corrective options if issues are discovered. Figure 6  shows the schedule for programs that need to be delivered to modernize  and sustain the GPS satellite constellation."], "subsections": [{"section_title": "Progress: Programs Advancing to Support Constellation Sustainment Requirements", "paragraphs": ["The Air Force has made progress since our last report in September 2015  on the three programs (GPS III, OCX, and COps) needed to support GPS  constellation sustainment, readying both ground control and the satellite  for the first GPS III satellite\u2019s launch, testing, and eventual operation.  Raytheon delivered OCX block 0, the launch and checkout system for  GPS III satellites, in September 2017. The Air Force took possession of  OCX block 0 in October 2017 and will finally accept it at a later date after  OCX block 1 is delivered. Lockheed Martin completed the assembly,  integration, and testing for the first GPS III satellite and in February 2017  the Air Force accepted delivery in advance of its currently scheduled May  2018 launch. As noted earlier, because of delays to OCX block 1, the Air  Force initiated the COps program to ensure an interim means to control  GPS III satellites. Without COps, no GPS III satellites can join the  constellation to sustain it until OCX block 1 is operational in fiscal year  2022. In September 2016, COps formally started development,  establishing a cost baseline of approximately $162 million to meet an  April 2019 delivery. The COps program began software coding in  November 2016, after a design review established that the product design  would meet the Air Force\u2019s intended needs."], "subsections": []}, {"section_title": "Short-Term Challenges: Compressed and Concurrent Schedules, Component Issues with the First GPS III Satellite", "paragraphs": ["The Air Force continues to struggle with keeping multiple, highly  compressed, interdependent, and concurrent program schedules  synchronized in order to sustain and modernize the GPS constellation.  Figure 7 shows some of the schedule challenges of the three programs  needed for constellation sustainment and modernization.", "Launching and operating the new GPS III satellite is a highly complex  effort, since it requires synchronizing the development and testing  schedules of OCX block 0, the first GPS III satellite, and the COps  programs. For the Air Force to achieve its objective of making the first  GPS III satellite operational by September 2019, numerous challenges  (discussed below) must be addressed in the next 18 months on all three  programs. If any of the three programs cannot resolve their challenges,  the operation of the first GPS III satellite\u2014and constellation  sustainment\u2014may be delayed.", "OCX Block 0 and Pre-Launch Testing Schedules  With the goal of launching the first GPS III satellite in March 2018, the Air  Force restructured its pre-launch integrated satellite and ground system  testing in the summer of 2016, compressing the overall testing timeframe  from 52 weeks to 42 weeks. More OCX block 0 delays in early fiscal  year 2017 complicated Air Force test plans, resulting in changes to the  sequence and timing of events, the introduction of concurrency at various  points throughout the testing, the use of incomplete software in early  testing, and an increase in the likelihood of discovering issues later in pre- launch integrated testing. Air Force officials stated that some pre-launch  testing revisions streamlined the overall test plan since the merging of  certain test events allowed multiple objectives to be met by the same  event. Raytheon delivered OCX block 0, the launch and checkout system  for GPS III satellites, in September 2017. The Air Force took possession  of OCX block 0 in October 2017 and will finally accept it at a later date  after OCX block 1 is delivered. However, if issues requiring corrective  work are discovered during subsequent integrated testing, the GPS III  launch schedule may be delayed further since there is minimal schedule  margin on OCX block 0 for correcting any additional problems that may  be found.", "First GPS III Satellite Capacitors  There are hundreds of capacitors\u2014devices used to store energy and  release it as electrical power\u2014installed in each GPS III satellite. In 2016,  while investigating capacitor failures, the Air Force discovered that the  subcontractor, then known as Exelis (now Harris Corporation), had not  conducted required qualification testing for the capacitor\u2019s operational use  in GPS III satellites. The Air Force conducted a review of the components  over many months, delaying program progress while a subcontractor  qualified the capacitor design as suitable for use on the GPS III satellite.  However, the Air Force concluded that Harris Corporation failed to  properly conduct a separate reliability test of the particular production lot  from which the questionable capacitors originated. The Air Force directed  the contractor to remove and replace the capacitors from that production  lot from the second and third GPS III satellites. After weighing the  technical data and cost and schedule considerations, the Air Force  decided to accept the first satellite and launch it \u201cas is\u201d with the  questionable capacitors installed.", "The COps program is also pursuing a compressed and concurrent  development and testing schedule to be operational as planned in  September 2019. The COps acquisition strategy document acknowledges  that the program\u2019s timeline is aggressive. DOT&E has highlighted the  compressed COps schedule as a risk, since the limited time between the  developmental and operational testing permits little time for the evaluation  of test results and resolution of any deficiencies found. The COps  program has already begun drawing from its 60-day schedule margin,  with a quarter of this margin used within the first 5 months after  development started. According to Air Force officials, this margin use was  the result of unplanned delays certifying a software coding lab.  Additionally, the program schedule has concurrent development and  testing, which in our previous work we have noted is often a high risk  approach but is sometimes appropriate for software development.", "COps faces further schedule risk from its need for shared test assets,  particularly the GPS III satellite simulator, a hardware- and software- based ground system that simulates GPS III function, which is also  required by the GPS III and OCX programs. According to a DOT&E  official, the OCX program receives priority over COps for the use of the  GPS III satellite simulator, since the testing asset is heavily needed in the  development of the ground control system. Because of the competing  demands for this resource, which Air Force and DOT&E officials maintain  requires lengthy and complex software reconfigurations to repurpose the  simulator from one test event to the next, the Air Force is using a less  realistic and purely software-based simulator for the testing of COps,  where possible."], "subsections": []}, {"section_title": "Short-Term Risk Mitigation: Nearly 2 Years of Schedule Buffer to When First GPS III Satellite Needed", "paragraphs": ["Recent data show that the current satellites in the GPS constellation are  expected to remain operational longer than previously projected, creating  an additional, nearly 2-year schedule buffer before the first GPS III  satellite needs to be operational to sustain the current GPS constellation  capability. The Air Force projected that the first GPS III satellite needed to  be operational by September 2019 based on 2014 satellite performance  data. However, our analysis of the Air Force\u2019s more recent May 2016  GPS constellation performance data indicates that, in order to continue  meeting the constellation availability performance standard without  interruption, the operational need for the first GPS satellite is now June  2021. This projection incorporates updated Air Force data from the  current satellites that take into account an increase in solar array  longevity expected for IIR and IIR-M satellites, according to Air Force  officials. The Air Force is likely to meet the constellation\u2019s June 2021  operational requirement because there are seven GPS III satellites  planned to be launched by June 2021. Figure 8 shows the events leading  to the launch and operation of the first GPS III satellite, achieving  constellation sustainment once the first GPS III is operational, and  subsequent GPS III launches that continue to support sustainment.", "The nearly 2-year buffer between planned operation and actual need for  the first GPS III satellite permits the Air Force additional time to resolve  any development issues. Because of this additional 2-year schedule  buffer, we are not making a recommendation at this time to address the  short term challenges we have identified but will continue to assess the  progress of each of the programs and risks to constellation sustainment in  our future work."], "subsections": []}, {"section_title": "Long-Term Challenge: Most GPS III Satellites Under Contract Will Have Launched before Operational Testing Confirms Satellite Performance", "paragraphs": ["The Air Force risks additional cost increases, schedule delays, and  performance shortfalls because operational testing to confirm that GPS III  satellites work as intended with OCX blocks 1 and 2 will not be completed  until after the planned launch of 8 of the 10 GPS III satellites currently  under contract. Due to delays to the OCX final delivery, the new ground  control system will not be completed in time to control the GPS III  satellites for the first few years they are in orbit (approximately 3.5 years).  Consequently, GPS III operational testing will now occur in three  phases\u2014  1.  in late fiscal year 2019 to confirm the satellites can perform similarly to  the existing GPS satellites with COps;  2.  in fiscal year 2020 to confirm the GPS III satellites can perform some  of the new M-code capabilities with MCEU; and  3.  in fiscal year 2022 to confirm the GPS III satellites can perform all of  the new M-code capabilities with OCX blocks 1 and 2.", "The first GPS III satellite is projected to complete operational testing of  legacy signal capabilities in September 2019. By that point, the Air Force  plans to have launched 3 of the 10 GPS III satellites, the fourth satellite is  expected to be delivered, and major integration work will be underway on  satellites 5 through 8. Therefore, if satellite shortcomings are discovered  during any phase of the operational testing, the Air Force will be limited to  addressing such issues through software corrections to satellites already  on orbit. If any of the three phases of operational testing reveals issues,  the Air Force may face the need for potentially costly contract  modifications and delivery delays for satellites not yet launched. To offset  this risk, the Air Force has obtained performance knowledge of GPS III  satellites through ground testing of the first satellite, and findings from this  testing have driven modifications to all ten satellites. Because of the rigor  of the ground testing of the first satellite, Air Force officials maintain that  the knowledge that might be obtained through on-orbit operational testing  of the first GPS satellite would be minimal. However, a DOT&E official  said that ground testing is limited to assessing system responses that are  induced through the testing process and therefore may omit phenomena  that might be experienced in actual system operation on orbit. We will  continue to track the progress of operational testing in our future work."], "subsections": []}]}, {"section_title": "Modernizing GPS Military Broadcast Challenged by High- Risk Development Schedules", "paragraphs": ["DOD has established high-risk schedules for modernizing the GPS  broadcast, or M-code signal, produced by GPS satellites. These risks are  manifest in different ways. In the near term, the Air Force plans to provide  a limited M-code broadcast\u2014one that does not have all of the capabilities  of OCX\u2014in the MCEU program in fiscal year 2020. However, the MCEU  schedule is high risk for its dependency on the timely completion of the  COps program, for its aggressive schedule, and because of competition  for limited test resources. Further, the full M-code broadcast capability,  planned for fiscal year 2022, is at high risk of additional delays because  (1) it is dependent on unproven efficiencies in software coding, (2) the  program has not yet completed a baseline review, which may identify  additional time needed to complete currently contracted work, and (3)  there are known changes to the program that must be done that are not  included in the proposed schedule."], "subsections": [{"section_title": "High-Risk Programs Underlie Strategy to Deliver M-code Broadcast Capability", "paragraphs": ["As noted above, the Air Force\u2019s plans for delivering the M-code broadcast  involve two separate high-risk programs\u2014MCEU and OCX blocks 1 and  2\u2014delivered at separate times to make an operational M-code signal  available to the warfighter. Figure 9 highlights the current forecasted  operational schedules to deliver limited M-code broadcast capabilities  with MCEU and full M-code broadcast with OCX.", "The MCEU program, created because of multiple delays to OCX and to  partially address that program\u2019s remaining schedule risk, is itself a high- risk program that is dependent on the timely development of COps.  Estimated to cost approximately $120 million, MCEU formally entered the  acquisition process in January 2017 as a software-specific program to  modify OCS. To develop MCEU, Lockheed Martin officials stated they will  leverage personnel with expertise maintaining and upgrading OCS as  well as utilize the staff working on COps. With a planned December 2019  delivery for testing and a September 2020 target to begin operations, the  MCEU program faces several schedule risks. The Air Force\u2019s proposed  plan anticipates a compressed software development effort, which the Air  Force describes as aggressive. The Air Force has also identified potential  risks to the MCEU schedule from competing demands by GPS III, OCX,  COps, and MCEU for shared test resources. Air Force officials specifically  noted competing demands for the GPS III simulator test resource. If  development or testing issues arise in these other programs, those issues  could delay the availability of the satellite simulator and thereby disrupt  the planned MCEU development effort. According to program officials, the  Air Force is working to mitigate this threat to the MCEU program through  the use of a software-based simulator, when possible. Additionally,  MCEU software development work is dependent on the timely conclusion  of the COps effort\u2014which, as previously mentioned, itself has an  aggressive schedule and faces competition for a limited test resource. Air  Force program officials have said that some Lockheed Martin staff  planned to support MCEU will need to transfer from the COps effort.  However, after reviewing the staffing plans at the MCEU contractor  kickoff, Air Force officials said this is no longer viewed as a significant  risk.", "OCX blocks 1 and 2  Raytheon has made some progress starting coding for OCX block 1 and  taken the first steps toward implementing and demonstrating initial  software development efficiencies that may benefit development for OCX  blocks 1 and 2. The software efficiencies are built up in seven phases and  need to be completed before the development process reaches each of  the phases to take full advantage of the efficiencies they will create. Once  ready, the efficiencies are inserted at different points in the software  development schedule. For example, as of August 2017, the first of seven  phases implementing the software development improvements was  nearly complete, while the second phase was approximately two-thirds  complete. Both are needed in place for insertion when the next phase of  coding begins.", "Further, the Air Force proposed a new rebaselined schedule in June 2017  as the final step to getting the program back on track after declaring a  critical Nunn-McCurdy unit cost breach in 2016 when the program  exceeded the original baseline by more than 50 percent. A Nunn- McCurdy unit cost breach classified as critical is the most serious type of  breach and requires a program to be terminated unless the Secretary of  Defense submits a written certification to Congress that, among other  things, the new estimate of the program\u2019s cost is reasonable and takes  other actions, including restructuring the program. In October 2016, DOD  recertified the program, with a 24-month schedule extension. Under this  newer proposed schedule Raytheon forecasts delivering blocks 1 and 2 in  December 2020 with 6 months of extra schedule\u2014a 30-month schedule  extension\u2014to account for unknown technical issues before OCX blocks 1  and 2 are due to the Air Force in June 2021. The Air Force projects  operating OCX in fiscal year 2022 after completing 7 months of  operational testing post-delivery.", "Three factors place delivery of OCX blocks 1 and 2 in June 2021 at high  risk for additional schedule delays and cost increases:", "First, the newly proposed June 2017 rebaselined schedule assumes  significant improvements in the speed of software coding and testing  that have not yet been proven, but will be introduced at various  periods as software development proceeds. Whether Raytheon can  achieve the majority of these efficiencies will not be known until the  end of fiscal year 2018. However, the Defense Contract Management  Agency, which independently oversees Raytheon\u2019s work developing  OCX, noted in July 2017 a number of risks to the schedule, including  that some initial assumed efficiencies had not been demonstrated.  Specifically, they noted for initial coding on block 1 that Raytheon had  achieved only 60 percent of the software integration maturity planned  to that point in time in conjunction with greater numbers of software  deficiencies that will require more time than planned to resolve.", "Second, the proposed rebaseline schedule has not yet undergone an  integrated baseline review (IBR) to verify all of the work that needs to  be done is incorporated into that schedule. The IBR is a best practice  required by the Office of Management and Budget on programs with  earned value management. An IBR ensures a mutual understanding  between the government and the contractor of the technical scope,  schedule, and resources needed to complete the work. We have  found that too often, programs overrun costs and schedule because  estimates fail to account for the full technical definition, unexpected  changes, and risks. According to prior plans, the IBR would have  taken place in early 2017, but it has been delayed multiple times for a  number of reasons. A significant and recurring root cause of delays on  the OCX program has been a lack of mutual understanding of the  work between the Air Force and Raytheon.", "The IBR start was scheduled for November 2017 with completion in  February 2018. Once conducted, the review may identify additional  work not in the proposed schedule that needs to be completed before  delivery. For example, Raytheon is conducting a review of hardware  and software obsolescence. If significant additional obsolescence  issues are found that need to be resolved before OCX blocks 1 and 2  are delivered, the projected delivery date may need to be delayed  further at additional cost.", "Third, the OCX contract will likely be modified because the Air Force  needs to incorporate into its contract with Raytheon a number of  changes that are not currently a part of the proposed schedule.  According to Air Force and contractor officials, negotiations are under  way to determine which of these changes will be incorporated before  OCX blocks 1 and 2 are delivered and which may be added after  delivery. Air Force officials said that the incorporation of changes  should be completed by February 2018.", "Schedule risk assessments for OCX blocks 1 and 2 delivery vary, making  it unclear when the full M-code broadcast will finally be operational.  Government assessments of Raytheon\u2019s performance continue to  indicate more schedule delays are likely. Table 4 shows the varying  assessments of potential schedule delays by the Defense Contract  Management Agency and the Air Force to the proposed June 2021  delivery date and the subsequent operational date that occurs 7 months  later.", "In 2015, we made four recommendations to the Secretary of Defense,  one of which was to use outside experts to help identify all underlying  problems on OCX and develop high confidence cost and schedule  estimates, among others, in order to provide information necessary to  make decisions and improve the likelihood of success. To date, none of  these recommendations have been fully implemented but DOD has taken  steps to address some of them. Further, because the Air Force has  undertaken the COps and MCEU programs to provide interim capabilities  to mitigate OCX delays for the full broadcast capability, we are not  making additional recommendations at this time but will continue to  monitor progress and risks to the acquisition of OCX."], "subsections": []}]}, {"section_title": "Greater Coordination Needed to Prevent Duplication of Effort Developing and Fielding M-code Receivers", "paragraphs": ["While technology development for the M-code receiver cards is  underway, DOD has developed preliminary\u2014but incomplete\u2014plans to  fully develop and field M-code receiver cards across the more than 700  weapon systems that will need to make the transition from the current  technology. DOD has prepared initial cost and schedule estimates for  department-wide fielding for a fraction of these weapon systems. While  the full cost remains unknown, it is likely to be many billions of dollars  greater than the $2.5 billion identified through fiscal year 2021 because  there is significant work remaining to verify the initial cards work as  planned and to develop them further after the MGUE increment 1  program ends. Without greater coordination of integration test results,  lessons learned, and design solutions DOD is at risk of duplicated  development work as multiple weapon system programs separately  mature and field similar technologies on their own. Further, with the full  M-code broadcast available in fiscal year 2022, a gap\u2014the extent of  which is unknown\u2014between operationally broadcasting and receiving M- code exists. Figure 10 highlights the gap between the time the M-code  signal will be operational and the undefined time M-code can be used by  the military services."], "subsections": [{"section_title": "DOD Has Made Some Progress in Developing Technology for New M- code Receiver Cards", "paragraphs": ["The Air Force program to develop initial M-code receiver test cards has  made progress by establishing an acquisition strategy for this effort and  maturing receiver test cards. In January 2017, DOD approved the MGUE  increment 1 program to formally begin development, and it defined the  criteria to end the program as (1) verifying technical requirements on all  types of final receiver test cards; (2) certifying readiness for operational  testing by the Air Force Program Executive Officer; (3) completing  operational testing for the four lead platforms for, at a minimum, at least  the first card available; and (4) completing manufacturing readiness  assessments for all three contractors.", "Within the MGUE increment 1 program, contractors are making progress  toward delivering final hardware test cards and incremental software  capabilities. For example, one contractor has achieved its initial security  certification from the Air Force, which is a key step toward making the  MGUE increment 1 receiver test card available for continued  development and eventual procurement. Further, the MGUE increment 1  program is also conducting risk reduction testing in preparation for formal  developmental verification testing, an important step that ensures the  receiver cards meet technical requirements. Programs throughout DOD  can make risk-based decisions to develop and test the receiver test cards  after technical verification of the card\u2019s hardware and software. According  to MGUE program officials, this is significant because it allows non-lead  platforms to obtain and work with the cards sooner than the end date of  operational testing on lead platforms."], "subsections": []}, {"section_title": "Significant Development Work Remains to Eventually Field M-code Receiver Cards", "paragraphs": ["Although the Air Force has made progress in maturing receiver test  cards, significant development work remains to reach the point where the  cards can ultimately be fielded on over 700 different weapon systems. For  example, for MGUE increment 1, the Air Force must define additional  technical requirements in order for the M-code receiver cards to be  compatible and communicate with existing weapon systems. The Air  Force will also need to conduct operational tests for each of the lead  platforms\u2014the Stryker ground combat vehicle; B-2 Spirit bomber; JLTV;  and DDG-51 Arleigh Burke destroyer\u2014before the full M-code signal is  available with OCX. Because these tests will instead be conducted with  the limited signal provided by MCEU, DOD risks discovering issues  several years later once full operational testing is conducted. Further,  according to military service officials and assessments by DOT&E, this  operational testing will only be minimally applicable to other weapon  systems because those other weapon systems have different operational  requirements and integration challenges than the four lead platforms. As  a result, additional development and testing will be necessary on an  undetermined number of the remaining weapon systems to ensure the  receiver cards address each system\u2019s unique interfaces and  requirements. In 2018, DOD will also formally begin development for  MGUE increment 2. Increment 2 will provide more compact receiver  cards to be used when size, weight, and power must be minimized, such  as on handheld receivers, space receivers, and munitions where  increment 1 receiver cards are too large to work.", "The military services are working to mitigate some of these development  challenges. For example, Army officials told us they do not plan to field  MGUE receiver cards on its lead platform, the Stryker, due to ongoing  gaps in technical requirements. In addition, there is not a lead platform to  demonstrate increment 1 on munitions since munition requirements were  planned to be addressed in increment 2. However, to address its needs,  the Army has initiated efforts to modify the MGUE increment 1 receiver  card for some munitions that would otherwise need to wait for MGUE  increment 2 technologies. Individual munition program offices within other  military services have begun to do so as well. According to military  service officials from the Army, Navy, and Marine Corps, it is essential  that user needs are met by increment 2, or they will have to conduct  additional development and testing. The Army previously identified gaps  in increment 1 that the Air Force has either addressed in increment 1, has  deferred to increment 2, or will need to be addressed outside of the  MGUE increment 1 and 2 programs. Army and Navy officials also stated  that they were concerned that any disagreements in requirements for  increment 2 could lead to further fielding delays.", "Finally, the transition from existing GPS receiver cards to M-code receiver  cards is likely to take many years. We recently reported that transitioning  all DOD platforms to the next generation of receiver cards will likely take  more than a decade. A lengthy transition has happened before, as  previous efforts to modernize GPS to the current receiver cards, begun in  2003, are still underway and the older receiver cards are still being used.  As a result, DOD anticipates that warfighters will have to operate with a  mix of older and newer receiver cards."], "subsections": []}, {"section_title": "DOD Has Begun Cost and Schedule Planning; Full Cost Is Unknown but Likely to be Many Billions of Dollars", "paragraphs": ["DOD has begun collecting preliminary information on M-code  requirements for individual weapon systems. In December 2016, the USD  AT&L directed the military services, the Missile Defense Agency (MDA),  and Special Operations Command (SOCOM) to submit implementation  plans with M-code investment priorities across weapon systems and  munitions, including projected costs and schedules. According to DOD,  these M-code implementation plans are intended to provide DOD with a  management and oversight tool for the fielding effort. In February 2017,  each organization submitted its own implementation plan to USD AT&L.", "These plans were then briefed to the PNT Executive Management Board  and PNT Oversight Council in February and March, respectively.", "However, these implementation plans are preliminary and based on  assumptions about the Air Force\u2019s ability to achieve MGUE increment 1  and 2 technical requirements, the timeline required to do so, and the  amount of development and test work that will remain for the receiver  cards to be ready for production and fielding after the programs end.  Since the MGUE increment 2 program has not started development, it  has not yet finalized requirements. Once approved, the increment 2  program office will produce an acquisition strategy, schedule, and cost  estimate. However, after the MGUE increment 2 program ends there is no  detailed plan for completing development, testing, and fielding of M-code  receiver cards for weapon systems across the department.", "DOD has preliminary cost and schedule estimates for some weapon  programs, but lacks a total cost at this point because the department  does not include all efforts initiated by programs to meet specific needs,  including those outside the MGUE increment 1 and 2 programs. The  initial M-code implementation plans responded to what was requested but  do not individually identify what the total cost will be for each organization  to develop and field M-code receiver cards, so a total cost can be  determined across DOD. Because USD AT&L required that the  implementation plans include funding and schedule estimates for 2 to 3  years while directing that plans be resubmitted, at a minimum, every 2  years, weapon systems that will need M-code but were not considered an  immediate priority were not included in the initial submissions. In addition,  the military services, MDA, and SOCOM provided only initial cost  estimates. According to military service officials, these estimates were  based on the current MGUE increment 1 program schedule and technical  development and include risk-based decisions to partially fund specific  programs until the MGUE increment 1 program matures. According to a  USD AT&L official, the plans would both facilitate M-code implementation  planning for the department and inform the issuance of waivers. The  official stated that as the acquisition programs critical to providing M-code  capability mature, future implementations plans should provide more  comprehensive estimates of cost and schedule to achieve M-code  implementation for the department.", "Our analysis of the M-code receiver card implementation plans found that  initial funding estimates indicate a cost of over $2.5 billion to integrate and  procure M-code receiver cards on only a small number of weapon  systems out of the hundreds of types that need M-code receiver cards.  The full cost will be much larger\u2014likely many billions of dollars because  the majority of the weapon systems that need M-code receiver cards are  not funded yet or are only partially funded, according to the M-code  implementation plans. Specifically, the military services, MDA, and  SOCOM identified 716 types of weapon systems in their February 2017  implementation plans that require almost a million M-code receiver cards.  For example, the JLTV fleet\u2014which provides protection for passengers  against current and future battlefield threats for multiple military  services\u2014is one type of weapon system that will eventually need almost  25,000 receiver cards. Of the 716 types of weapon systems that will need  M-code receiver cards, only 28\u2014or less than 4 percent\u2014are fully funded  through fiscal year 2021. The remainder have either partially funded M- code development and integration efforts (72 weapon systems), or do not  yet have funding planned (616 weapon systems). Additionally, the  preliminary estimates to develop and procure M-code receivers on  selected weapon systems do not all include funding beyond fiscal year  2021 that will be needed for further development, integration, and  procurement. This means that DOD and Congress do not have visibility  into how much additional funding could be needed to fully fund the  remaining 96 percent of all weapon systems that need M-code receivers.  Figure 11 shows the M-code development and integration efforts that are  funded, partially funded, or unfunded through fiscal year 2021 across  DOD weapon systems that will need M-code receiver cards.", "Because the implementation plans are a first step toward providing DOD  leadership insight on this large set of acquisitions and they will be  updated at least every 2 years by the different organizations within DOD,  we are not making a recommendation at this time. However, we will  continue to monitor DOD\u2019s cost and schedule planning."], "subsections": []}, {"section_title": "DOD Risks Duplication of Effort Integrating and Testing M-code Receiver Cards", "paragraphs": ["The level of development and procurement effort beyond MGUE  increments 1 and 2 is significant and will require close coordination  among the military services, MDA, and SOCOM. While Joint Staff officials  stated that the DOD Chief Information Officer is working with the military  services and Joint Staff to produce a user equipment roadmap to help  guide that coordination, they said that these efforts are not yet complete.  DOD has designated the Air Force to lead initial development of both  larger and smaller test cards that other organizations will need to develop  further to meet their individual needs. After the Air Force develops initial  cards for both sizes, the breadth and complexity of this acquisition will  multiply, as the offices responsible for upgrading hundreds of weapon  systems begin their own individual efforts to further develop and test the  cards so they work for the unique needs of their specific system. While  some common solutions are being developed, Air Force officials said the  military services and individual weapon systems will have the freedom to  go to the contractors and begin their own development efforts.", "DOD does not have a developed plan in place to help ensure that  common design solutions are employed and that DOD avoids duplication  of effort as multiple entities separately mature receiver cards. We  previously found that duplication occurs when two or more agencies or  programs are engaged in the same activities. In this case, because the  individual organizations and program offices are likely to be pursuing  individual and uncoordinated receiver card programs at different times  with different contractors, DOD is at risk for significant duplication of  effort. We previously found that establishing formal mechanisms for  coordination and information sharing across DOD programs reduces the  risk of gaps and results in more efficient and more effective use of  resources. Internal control standards also state that establishing clear  responsibilities and roles in achieving objectives is key for effective  management. Further, DOD previously reported clear leadership  ensures that programs and stakeholders are aligned with common  goals.", "According to MGUE program officials, the MGUE increment 1 program is  already capturing all issues observed in receiver test card risk reduction  testing and sharing this information through a joint reporting system.  However, while non-lead platforms may also report deficiencies in this  system, there is no requirement that they do so, nor is there an entity  responsible for ensuring data from testing, design, and development is  shared between programs. We previously found that the absence of a  formal process for coordination results in the potential for duplication,  overlap, and fragmentation. DOD therefore risks paying to repeatedly  find design solutions to solve common problems because each program  office is likely to undertake its own uncoordinated development effort.  Some duplicated effort may already be occurring. Air Force officials have  expressed concern that work is already being duplicated across the  military services in developing embedded GPS systems to be integrated  into aircraft. According to multiple DOT&E assessments, the absence of a  plan across the wide variety of intended interfaces leaves significant risk  in integrating the receiver cards, and therefore fielding cost and schedule  risk for DOD."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["GPS is a national asset for civilians and the military service members who  depend upon it each day. Any disruption to the system would have severe  economic and military consequences. In keeping the system sustained  and modernizing it with additional capabilities, DOD has spent billions of  dollars more than planned developing five interdependent GPS programs.  Developing these technologies is complex work with the collective effort  already years behind initial estimates to provide the warfighter with a  means to counter known threats, such as jamming, to the current system.  It will be many years before M-code receiver cards are fielded at a cost  that remains unknown but that will be substantially higher than the  estimated $2.5 billion already identified through fiscal year 2021. In the  short term, it is unclear when there will be a receiver card ready for  production after the end of operational testing, and in the long term DOD  risks wasting resources duplicating development efforts on weapon  systems with similar requirements. Without better coordination of this  effort, DOD risks unnecessary cost increases and schedule delays  because there is no established process or place for collecting and  sharing development and integration practices and solutions between  programs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following recommendation to DOD:  The Secretary of Defense should ensure that the Under Secretary of  Defense for Acquisition, Technology, and Logistics, as part of M-code  receiver card acquisition planning, assign an organization with  responsibility for systematically collecting integration test data, lessons  learned, and design solutions and making them available to all programs  expected to integrate M-code receiver cards.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Defense for review  and comment. In its written comments, reproduced in appendix II, DOD  concurred with the recommendation. DOD also provided technical  comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Air Force, 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 concerning this report, please  contact me at (202) 512-4841 or by email at chaplainc@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Key contributors to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["To determine the extent to which there are acquisition risks to sustaining  the Global Positioning System (GPS) satellite constellation, we reviewed  the Air Force GPS quarterly reports, program acquisition baselines,  integrated master schedules, acquisition strategies, software  development plans, test plans, and other documents to the extent they  existed for GPS III, Next Generation Operational Control System (OCX),  and Contingency Operations (COps) programs. We also interviewed  officials from the GPS III, OCX, and COps programs; the Air Force Space  and Missile Systems Center\u2019s (SMC) GPS Enterprise Integrator office; the  prime contractors from all three programs; the Defense Contract  Management Agency; the Office of Cost Assessment and Program  Evaluation; and the Office of the Director, Operational Test and  Evaluation (DOT&E). We also reviewed briefings and other documents  from each to evaluate program progress in development. We assessed  the status of the currently operational GPS satellite constellation,  interviewing officials from the Air Force SMC GPS program office and Air  Force Space Command.", "To assess the risks that a delay in the acquisition and fielding of GPS III  satellites could result in the GPS constellation falling below the 24  satellites required by the standard positioning service and precise  positioning service performance standards, we employed a methodology  very similar to the one we had used to assess constellation performance  in 2009, 2010, and 2015. We obtained information dated May 2016 from  the Air Force predicting the reliability for 63 GPS satellites\u2014each of the  31 current (on-orbit as of July 2017) and 32 future GPS satellites\u2014as a  function of time. Each satellite\u2019s total reliability curve defines the  probability that the satellite will still be operational at a given time in the  future. It is generated from the product of two reliability curves\u2014a wear- out reliability curve defined by the cumulative normal distribution, and a  random reliability curve defined by the cumulative Weibull distribution.  For each of the 63 satellites, we obtained the two parameters defining the  cumulative normal distribution, and the two parameters defining the  cumulative Weibull distribution. For each of the 32 unlaunched satellites  we included in our model, we also obtained a parameter defining its  probability of successful launch, and its current scheduled launch date.  The 32 unlaunched satellites include 10 GPS III satellites currently under  contract and 22 GPS III satellites planned for contract award in late 2018;  launch of the final GPS III satellite we included in our model is scheduled  for October 2031. Using this information, we generated overall reliability  curves for each of the 63 GPS satellites. We discussed with Air Force and  Aerospace Corporation representatives, in general terms, how each  satellite\u2019s normal and Weibull parameters were calculated. However, we  did not analyze any of the data used to calculate these Air Force provided  parameters.", "Using the reliability curves for each of the 63 GPS satellites, we  developed a Monte Carlo simulation to predict the probability that at least  a given number of satellites would be operational as a function of time,  based on the GPS launch schedule as of May 2016. We conducted  several runs of our simulation\u2014each run consisting of 10,000 trials\u2014and  generated \u201csawtoothed\u201d curves depicting the probability that at least 24  satellites would still be operational as a function of time. We then used  our Monte Carlo simulation model to examine the effect of delays to the  operational induction of the GPS III satellites into the constellation. We  reran the model based on month/year delay scenarios, calculating new  probabilities that at least 24 satellites would still be operational as a  function of time, determining in terms of month/year the point at which a  satellite would be required to enter operations to maintain an  uninterrupted maintenance of the 95 percent probability of 24 satellites in  operation. The Air Force satellite parameters we used for the Monte Carlo  simulation pre-dated the Air Force investigation into navigation payload  capacitors and the subsequent decision to launch the first satellite \u201cas is\u201d  with questionable parts. Therefore, the reliability parameters for this  satellite were not informed by any possible subsequent Air Force  consideration of the decision to launch the first GPS III satellite \u201cas is\u201d  with these parts.", "To determine the extent to which the Department of Defense (DOD) faces  acquisition challenges developing a new ground system to control the  broadcast of a modernized GPS signal, we reviewed Air Force program  plans and documentation related to cost, schedule, acquisition strategies,  technology development, and major challenges to delivering M-code  Early Use (MCEU) and OCX blocks 1 and 2. We interviewed officials from  the MCEU and OCX program offices, SMC GPS Enterprise Integrator  office, DOT&E, and the prime contractors for the two programs. For OCX,  we also reviewed quarterly reviews, monthly program assessments, and  slides provided by Raytheon on topics of our request. We also  interviewed Office of Performance Assessments and Root Cause  Analyses officials regarding root causes of the OCX program\u2019s cost and  schedule baseline breach and Defense Contract Management Agency  officials charged with oversight of the OCX contractor regarding cost and  schedule issues facing the program\u2019s development efforts, major program  risks, and technical challenges.", "To determine the extent to which DOD faces acquisition challenges  developing and fielding modernized receiver cards across the  department, we reviewed Air Force program plans and documentation  related to M-code GPS User Equipment (MGUE) increment 1 cost,  schedule, acquisition strategy, and technology development. We  interviewed officials at the Air Force SMC GPS program office, MGUE  program office, DOT&E, and the three MGUE increment 1 contractors\u2014 L3 Technologies, Raytheon, and Rockwell Collins. To identify the military  services\u2019 respective development efforts and challenges in integrating  MGUE with their lead platforms, we interviewed officials from the lead  program offices for the Army\u2019s Defense Advanced GPS Receiver  Distributed Device/Stryker, Air Force\u2019s B-2 aircraft, Navy\u2019s DDG-51  Arleigh Burke class destroyer, and Marine Corps Joint Light Tactical  Vehicle. Additionally, to understand the extent to which DOD has a plan  for implementing M-code for the warfighter, we analyzed DOD  Positioning, Navigation, and Timing (PNT) plans and other DOD  memorandum on GPS receiver cards. We also held discussions with and  received information from officials at Office of the Undersecretary of  Defense for Acquisition, Technology, and Logistics; Joint Staff / J-6  Space Branch; and military service officials from the offices responsible  for developing M-code receiver card implementation plans.", "We conducted this performance audit from February 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GPS Modernization Cost Increases, Original Baseline vs. Current Estimate", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, David Best, Assistant Director;  Jay Tallon, Assistant Director; Karen Richey, Assistant Director; Pete  Anderson; Andrew Berglund; Brandon Booth; Brian Bothwell; Patrick  Breiding; Erin Carson; Connor Kincaid; Jonathan Mulcare; Sean  Sannwaldt; Alyssa Weir; Robin Wilson and Marie P. Ahearn made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Americans rely on the Global Positioning System daily. DOD is working to modernize GPS and deliver a more secure signal to military users, an effort that has taken longer than planned and cost more than expected.", "DOD faces risks as it simultaneously develops satellites, a ground system to operate them, and receiver cards that allow use of GPS signals. It will need to install receiver cards on hundreds of systems and, without better coordination, risks paying repeatedly to solve similar problems across the systems.", "We recommended that DOD assign responsibility to an organization to collect test data, lessons learned, and design solutions."]}
{"id": "GAO-19-63", "url": "https://www.gao.gov/products/GAO-19-63", "title": "Information Technology: Agencies Need Better Information on the Use of Noncompetitive and Bridge Contracts", "published_date": "2018-12-11T00:00:00", "released_date": "2018-12-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government spends tens of billions of dollars each year on IT products and services. Competition is a key component to achieving the best return on investment for taxpayers. Federal acquisition regulations allow for noncompetitive contracts in certain circumstances. Some noncompetitive contracts act as \u201cbridge contracts\u201d\u2014which can be a useful tool to avoid a lapse in service but can also increase the risk of the government overpaying. There is currently no government-wide definition of bridge contracts.", "GAO was asked to review the federal government's use of noncompetitive contracts for IT. This report examines (1) the extent that agencies used noncompetitive contracts for IT, (2) the reasons for using noncompetitive contracts for selected IT procurements, (3) the extent to which IT procurements at selected agencies were bridge contracts, and (4) the extent to which IT procurements were in support of legacy systems. GAO analyzed FPDS-NG data from fiscal years 2013 through 2017 (the most recent and complete data available). GAO developed a generalizable sample of 171 fiscal year 2016 noncompetitive IT contracts and orders awarded by DOD, DHS, and HHS\u2014the agencies with the most spending on IT, to determine the reasons for using noncompetitive contracts and orders, and the extent to which these were bridge contracts or supported legacy systems."]}, {"section_title": "What GAO Found", "paragraphs": ["From fiscal years 2013 through 2017, federal agencies reported obligating more than $15 billion per year, or about 30 percent, of information technology (IT) contract spending on a noncompetitive basis (see figure).", "GAO found, however, that Departments of Defense (DOD), Homeland Security (DHS), and Health and Human Services (HHS) contracting officials misreported competition data in the Federal Procurement Data System-Next Generation (FPDS-NG) for 22 of the 41 orders GAO reviewed. GAO's findings call into question competition data associated with nearly $3 billion in annual obligations for IT-related orders. DHS identified underlying issues resulting in the errors for its orders and took corrective action. DOD and HHS, however, had limited insight into why the errors occurred. Without identifying the issues contributing to the errors, DOD and HHS are unable to take action to ensure that competition data are accurately recorded in the future, and are at risk of using inaccurate information to assess whether they are achieving their competition objectives.", "GAO found that DOD, DHS, and HHS primarily cited two reasons for awarding a noncompetitive contract or order: (1) only one source could meet the need (for example, the contractor owned proprietary technical or data rights) or (2) the agency awarded the contract to a small business to help meet agency goals.", "GAO estimates that about 8 percent of 2016 noncompetitive IT contracts and orders at DOD, DHS, and HHS were bridge contracts, awarded in part because of acquisition planning challenges. GAO previously recommended that the Office of Federal Procurement Policy define bridge contracts and provide guidance on their use, but it has not yet done so. GAO believes that addressing this recommendation will help agencies better manage their use of bridge contracts.", "Additionally, GAO estimates that about 7 percent of noncompetitive IT contracts and orders were used to support outdated or obsolete legacy IT systems. Officials from the agencies GAO reviewed stated these systems are needed for their mission or that they are in the process of modernizing the legacy systems or buying new systems."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommended DOD and HHS identify the reasons why competition data for certain orders in FPDS-NG were misreported and take corrective action. DOD and HHS concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government obligates tens of billions of dollars for products  and services related to information technology (IT) each year. Meeting the  federal government\u2019s IT needs is critical to the health, economy, and  security of the nation. Competition for these IT products and services is a  key component to fostering IT innovation and achieving the best return on  investment for taxpayers. Federal agencies are generally required to  award contracts competitively but are permitted to award noncompetitive  contracts under certain circumstances, such as when only one contractor  can meet the need or to eligible small businesses in order to meet  agencies\u2019 small business goals.", "In some cases, noncompetitive contracts act as \u201cbridge contracts.\u201d While  there is no government-wide definition for bridge contracts, GAO has  defined it as an extension to an existing contract beyond the period of  performance (including base and option years), or a new, short-term  contract awarded on a sole-source basis to an incumbent contractor to  avoid a lapse in service caused by a delay in awarding a follow-on  contract. Bridge contracts can be a useful tool to avoid a gap in services  and are typically envisioned as short-term. However, in October 2015, we  found that some bridge contracts spanned multiple years, potentially  undetected by approving officials. When noncompetitive bridge contracts  are used frequently or for prolonged periods, the government is at risk of  paying more than it should for products and services. In addition, our past  work found that agencies are investing most of their IT dollars on  maintaining legacy IT systems, which are becoming increasingly  obsolete. For example, in May 2016, we found that many systems use  outdated software languages and hardware parts that are no longer  supported by their vendors. The government, in these instances, runs the  risk of maintaining systems that have outlived their effectiveness.", "You asked us to review the federal government\u2019s use of noncompetitive  contracts for IT, including the use of bridge contracts. This report  examines (1) the extent to which agencies used noncompetitive contracts  to procure IT products and services for fiscal years 2013 through 2017;  (2) the reasons for using noncompetitive contracts for selected IT  procurements; (3) the extent to which IT procurements at selected  agencies were bridge contracts; and (4) the extent to which  noncompetitive IT procurements at selected agencies were in support of  legacy systems. For the last objective, you requested that we ascertain  the extent to which our generalizable sample of contracts and orders  were in support of legacy systems as defined by the Modernizing  Government Technology Act (MGT), which was enacted in December  2017, after our work was underway.", "To examine the extent to which agencies used noncompetitive contracts  and orders to procure IT products and services, we analyzed  government-wide Federal Procurement Data System-Next Generation  (FPDS-NG) data on IT obligations from fiscal years 2013 through 2017  (the most recent and complete data available). To define IT, we used the  Office of Management and Budget\u2019s (OMB) Category Management  Leadership Council list of IT product and service codes to identify IT- related products and services. To assess the reliability of the FPDS-NG  data, we electronically tested for missing data, outliers, and inconsistent  coding, and compared data on selected noncompetitive contracts to  contract documentation we obtained. Based on these steps, we  determined that FPDS-NG data were sufficiently reliable for describing  general trends in government-wide and IT contract obligations data for  fiscal years 2013 through 2017. We determined, however, that a subset  of noncompetitive obligations were inaccurately coded as noncompetitive  and thus not reliable. We explore this issue further in the body of this  report.", "To determine the reasons for using noncompetitive contracts and orders  for selected IT procurements, we selected the three agencies with the  highest reported obligations on IT noncompetitive contracts for fiscal  years 2012 through 2016 (the most recent year of data available at the  time we began our review)\u2014the Departments of Defense (DOD),  Homeland Security (DHS), and Health and Human Services (HHS).  These three agencies collectively accounted for 70 percent of all  noncompetitively awarded contracts for IT during this period. From these  agencies, we selected a generalizable stratified random sample of 171  fiscal year 2016 noncompetitive contracts and orders for IT above the  simplified acquisition threshold of $150,000 to determine the reasons for  using noncompetitive contracts and orders. The sample was  proportionate to the amount of noncompetitive contracts and orders for IT  at each agency. For each of the contracts and orders in our generalizable  sample, we analyzed selected contract documentation, such as  justification and approval documents (J&A), exception to fair opportunity  documents, and small business coordination records. Based on our  review of documentation, we excluded 29 contracts and orders because  they were awarded competitively, but had been miscoded as  noncompetitive or as having an exception to fair opportunity. As a result,  our sample consisted of 142 contracts and orders. See table 1 for a  breakdown by agency.", "To determine the extent to which IT procurements at selected agencies  were bridge contracts or in support of legacy systems, we leveraged the  generalizable sample described above to estimate the percentage of  bridge contracts and legacy IT systems at DOD, DHS, and HHS.  Agencies provided information as to whether the contracts and orders  within the generalizable sample met GAO\u2019s definition of a bridge contract  and whether the systems they supported met the definition of legacy IT  systems in OMB\u2019s draft IT Modernization Initiative or the definition  provided under the Modernizing Government Technology Act (MGT).  OMB\u2019s draft IT Modernization Initiative defined legacy systems as  spending dedicated to maintaining the existing IT portfolio excluding  provisioned services such as cloud, while the MGT Act defined them as  an outdated or obsolete IT system. We verified the agencies\u2019  determinations of bridge contracts by reviewing documentation for the  contracts and orders in our generalizable sample. To obtain additional  insights into the bridge contracts and legacy systems, we selected a  nonprobability sample of 26 contracts and orders from our generalizable  sample of 142 contracts and orders for in-depth review. Our selection was  based on factors such as obtaining a mix of bridge contracts and  contracts used in support of legacy IT systems.", "For our in-depth review, we collected and analyzed contract file  documentation for the selected contracts and orders. In cases where we  selected a potential bridge contract, we also reviewed the contract  preceding it, additional bridge contracts (if any), and, if awarded at the  time of our review, the follow-on contract. We interviewed contracting and  program officials to gain insights into the facts and circumstances  surrounding the awards of IT noncompetitive contracts and orders. For  bridge contracts and orders, we asked about the reasons why bridge  contracts were needed and status of follow-on contracts; for legacy  contracts, we asked about the nature of the requirement and plans to  move to newer technologies or systems. For more information on our  scope and methodology, see appendix I.", "We conducted this performance audit from April 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The federal government obligates tens of billions annually on IT. Prior IT  expenditures, however, have too often produced failed projects\u2014that is,  projects with multimillion dollar cost overruns and schedule delays and  with questionable mission-related achievements. In our 2017 high risk  series update, we reported that improving the management of IT  acquisitions and operations remains a high risk area because the federal  government has spent billions of dollars on failed IT investments."], "subsections": [{"section_title": "Awarding Contracts and Orders Noncompetitively", "paragraphs": ["Agencies are generally required to use full and open competition\u2014 meaning all responsible sources are permitted to compete\u2014when  awarding contracts. However, the Competition in Contracting Act of  1984 recognizes that full and open competition is not feasible in all  circumstances and authorizes contracting without full and open  competition under certain conditions. In addition, there are competition- related requirements for other types of contract vehicles, including  multiple award indefinite-delivery/indefinite-quantity (IDIQ) contracts and  the General Services Administration\u2019s (GSA) Federal Supply Schedule  (FSS). The rules regarding exceptions to full and open competition and  other competition-related requirements are outlined in various parts of the  Federal Acquisition Regulation (FAR). For example:", "Contracting officers may award a contract without providing for full  and open competition if one of seven exceptions listed in FAR  Subpart 6.3 apply. Examples of allowable exceptions include  circumstances when products or services required by the agency are  available from only one source, when disclosure of the agency\u2019s need  would compromise national security, or when the need for products  and services is of such an unusual and compelling urgency that the  federal government faces the risk of serious financial or other injury.  Generally, exceptions to full and open competition under FAR subpart  6.3 must be supported by written justifications that contain sufficient  facts and rationale to justify use of the specific exception.", "Depending on the proposed value of the contract, the justifications  require review and approval at successively higher approval levels  within the agency.", "Contracting officers are also authorized to issue orders under multiple  award IDIQ contracts noncompetitively. Generally contracting officers  must provide each IDIQ contract holder with a fair opportunity to be  considered for each order unless exceptions apply. Contracting  officers who issue orders over certain thresholds under an exception  to fair opportunity are required to provide written justification for doing  so. In April 2017 we found that government-wide, more than 85  percent of all order obligations under multiple-award IDIQ contracts  were competed from fiscal years 2011 through 2015.", "Orders placed under GSA\u2019s FSS program are also exempt from FAR  part 6 requirements. However, ordering procedures require certain  FSS orders exceeding the simplified acquisition threshold to be  placed on a \u201ccompetitive basis,\u201d which includes requesting proposals  from as many schedule contractors as practicable. If a contracting  officer decides not to provide opportunity to all contract holders when  placing an FSS order over the simplified acquisition threshold, that  decision must be documented and approved. The FAR allows for  orders to be placed under these circumstances based on the following  justifications: when an urgent and compelling need exists; when only  one source is capable of providing the supplies or services because  they are unique or highly specialized; when in the interest of economy  and efficiency, the new work is a logical follow-on to an original FSS  order that was placed on a \u201ccompetitive basis;\u201d and when an item is  \u201cpeculiar to one manufacturer.\u201d", "Agencies may also award contracts on a sole-source basis in  coordination with the Small Business Administration (SBA) to eligible  8(a) program participants. While agencies are generally not required  to justify these sole-source awards, contracts that exceed a total value  of $22 million require a written justification in accordance with FAR  Subpart 6.3."], "subsections": []}, {"section_title": "Bridge Contracts", "paragraphs": ["In certain situations, it may become evident that services could lapse  before a subsequent contract can be awarded. In these cases, because  of time constraints, contracting officers generally use one of two options:  (1) extend the existing contract or (2) award a short-term stand-alone  contract to the incumbent contractor on a sole-source basis to avoid a  lapse in services. While no government-wide definition of bridge  contracts exists, we developed the following definitions related to bridge  contracts that we used for our October 2015 report:", "Bridge contract. An extension to an existing contract beyond the  period of performance (including base and option years), or a new,  short-term contract awarded on a sole-source basis to an incumbent  contractor to avoid a lapse in service caused by a delay in awarding a  follow-on contract.", "Predecessor contract. The contract in place prior to the award of a  bridge contract.", "Follow-on contract. A longer-term contract that follows a bridge  contract for the same or similar services. This contract can be  competitively awarded or awarded on a sole-source basis.", "Contracts, orders, and extensions (both competitive and noncompetitive)  are included in our definition of a \u201cbridge contract\u201d because the focus of  the definition is on the intent of the contract, order, or extension.", "DOD and some of its components, including the Navy, the Defense  Logistics Agency (DLA), and the Defense Information Systems Agency  (DISA), have established their own bridge contract definitions and  policies. Congress enacted legislation in 2017 that established a definition  of \u201cbridge contracts\u201d for DOD and its components.", "For the purposes of this report, we use the same definition as we used in  our October 2015 report to define bridge contracts, unless otherwise  specified. We acknowledge that in the absence of a government-wide  definition, agencies may have differing views of what constitutes a bridge  contract. We discuss these views further in the body of this report.", "In our October 2015 report on bridge contracts, we found that the  agencies included in our review\u2014DOD, HHS, and the Department of  Justice\u2014had limited or no insight into their use of bridge contracts. In  addition, we found that while bridge contracts are typically envisioned as  short term, some bridge contracts included in our review involved one or  more bridges that spanned multiple years\u2014potentially undetected by  approving officials. The fact that the full length of a bridge contract, or  multiple bridge contracts for the same requirement, is not readily apparent  from documents that may require review and approval, such as an  individual J&A, presents a challenge for those agency officials  responsible for approving the use of bridge contracts. Approving officials  signing off on individual J&As may not have insight into the total number  of bridge contracts that may be put in place by looking at individual J&As  alone.", "In October 2015, we recommended that the Administrator of the Office of  Federal Procurement Policy (OFPP) take the following two actions: (1)  take appropriate steps to develop a standard definition for bridge  contracts and incorporate it as appropriate into relevant FAR sections;  and (2) as an interim measure until the FAR is amended, provide  guidance to agencies on: a definition of bridge contracts, with consideration of contract  extensions as well as stand-alone bridge contracts; and  suggestions for agencies to track and manage their use of these  contracts, such as identifying a contract as a bridge in a J&A when it  meets the definition, and listing the history of previous extensions and  stand-alone bridge contracts.", "OFPP concurred with our recommendation to provide guidance to  agencies on bridge contracts, and stated its intention is to work with  members of the FAR Council to explore the value of incorporating a  definition of bridge contracts in the FAR. As of November 2018, OFPP  had not yet implemented our recommendations but has taken steps to  develop guidance on bridge contracts. Specifically, OFPP staff told us  they have drafted management guidance, which includes a definition of  bridge contracts, and provided it to agencies\u2019 Chief Acquisition Officers  and Senior Procurement Executives for review. OFPP staff told us they  received many comments on the draft guidance and were in the process  of addressing those comments."], "subsections": []}]}, {"section_title": "Agencies Obligated More than $10 Billion Annually for Information Technology on Noncompetitively Awarded Contracts and Orders, but Unreliable Data Obscures Full Picture", "paragraphs": ["Federal agencies reported annually obligating between $53 billion in fiscal  year 2013 to $59 billion in fiscal year 2017 on IT-related products and  services. Of that amount, agencies reported that more than $15 billion  each year\u2014or about 30 percent of all obligations for IT products and  services\u2014were awarded noncompetitively. However, in a generalizable  sample of contracts and orders, we found significant errors in certain  types of orders, which call into question the reliability of competition data  associated with roughly $3 billion per year in obligations. As a result, the  actual amount agencies obligated on noncompetitive contract awards for  IT products and services is unknown."], "subsections": [{"section_title": "IT Contract Obligations Totaled More than $50 Billion Annually", "paragraphs": ["From fiscal years 2013 through 2017, we found that total IT obligations  reported by federal agencies ranged from nearly $53 billion in fiscal year  2013 to $59 billion in fiscal year 2017. The amount obligated on IT  products and services generally accounted for about one-tenth of total  federal contract spending (see figure 1).", "For fiscal years 2013 through 2017, the three agencies we reviewed in  more depth\u2014DOD, DHS and HHS\u2013\u2013collectively accounted for about two- thirds of federal IT spending (see figure 2)."], "subsections": []}, {"section_title": "Agencies Reported Obligating More than $15 Billion on Noncompetitive Contracts for IT Annually, but Full Extent of Noncompetitive Dollars Is Not Known Due to Unreliable Data", "paragraphs": ["From fiscal years 2013 through 2017, agencies reported in FPDS-NG  obligating more than $15 billion\u2014about 30 percent of all annual IT  obligations\u2014each year on noncompetitively awarded contracts and  orders. We determined, however, that the agencies\u2019 reporting of certain  competition data was unreliable (see figure 3).", "Specifically, we found that contracting officers miscoded 22 out of 41  orders in our sample, of which 21 cited \u201cfollow-on action following  competitive initial action\u201d or \u201cother statutory authority\u201d as the legal  authority for using an exception to fair opportunity. DOD contracting  officers had miscoded 11 of the 21 orders, while DHS and HHS  contracting officers had miscoded 4 and 6 orders, respectively. This  miscoding occurred at such a high rate that it put into question the  reliability of the competition data on orders totaling roughly $3 billion per  year in annual obligations. In each of these cases, contracting officers  identified these orders as being noncompetitively awarded when they  were, in fact, competitively awarded. As an assessment of the extent to  which contracts and orders that were identified as being competitively  awarded were properly coded was outside the scope of our review, we  are not in a position to assess the overall reliability of competition  information of IT-related contracts.", "For these 21 orders, we found that DHS was aware of issues surrounding  most of their miscodings and had taken actions to fix the problems, while  DOD and HHS generally had limited insights as to why these errors  occurred.", "DHS miscoded 4 orders, 3 of which were orders awarded under single  award contracts. DHS officials told us that orders issued from single  award contracts should inherit the competition characteristics of the  parent contract. However, as FPDS-NG currently operates, contracting  officers have the ability to input a different competition code for these  orders. In this case, each of the single award contracts was competitively  awarded and therefore all the subsequent orders issued from these  contracts should be considered competitively awarded, as there are no  additional opportunities for competition. DHS has taken actions to  address this issue. DHS officials stated that in conjunction with DOD they  have asked GSA, which manages the FPDS-NG data system, to modify  FPDS-NG to automatically prefill competition codes for orders awarded  under single award contracts. DHS officials noted that GSA expects to  correct the issue in the first quarter of fiscal year 2019, which should  mitigate the risks of agencies miscoding orders issued under single award  contracts in the future. DHS officials have also provided training to their  contracting personnel that single award orders must inherit the  characteristics of the parent contract.", "DOD and HHS officials, on the other hand, had limited insights as to why  their orders were miscoded. For example, DOD miscoded a total of 11  orders (5 orders awarded under single award contracts and 6 awarded  under multiple award contracts). For 8 of these orders, contracting  officers did not provide the reasons as to why these errors occurred. For  the remaining 3 orders awarded\u2014each of which were issued under single  award contracts\u2014contracting officials told us that they had used the  \u201cfollow-on action following competitive initial action\u201d because the  underlying contract had been competed. Similarly, at HHS, which  miscoded a total of 6 orders (4 awarded under single award contracts and  2 awarded under multiple award contracts), component officials told us  that these errors were accidental and could not provide any additional  insight as to why these errors were made.", "While GSA\u2019s changes in the FPDS-NG system, when implemented, may  help address the issue of miscoding competition data on orders issued  from single award contracts, it will not address errors in coding for  multiple award orders that cited exceptions to competition even when  they were competed.", "The FAR notes that FPDS-NG data are used in a variety of ways,  including assessing the effects of policies and management initiatives, yet  we have previously reported on the shortcomings of the FPDS-NG  system, including issues with the accuracy of the data. Miscoding of  competition requirements may hinder the accomplishment of certain  statutory, policy, and regulatory requirements. For example,", "The FAR requires agency competition advocates, among other duties  and responsibilities, to prepare and submit an annual report to their  agencies\u2019 senior procurement executive and chief acquisition officer  on actions taken to achieve full and open competition in the agency  and recommend goals and plans for increasing competition.", "OMB required agencies to reduce their reliance on noncompetitive  contracts, which it categorized as high-risk, because, absent  competition, agencies must negotiate contracts without a direct  market mechanism to help determine price.", "Federal internal control standards state that management should use  quality information to achieve an entity\u2019s objectives. Without identifying  the reasons why contracting officers are miscoding these orders in FPDS-NG, DOD and HHS are unable to take action to ensure that competition  data are accurately recorded, and are at risk of using inaccurate  information to assess whether they are achieving their competition  objectives.", "After excluding the $3 billion in annual obligations we determined was not  sufficiently reliable, we found that from fiscal years 2013 through 2017  about 90 percent of noncompetitive IT obligations reported in FPDS-NG  were used to buy services, hardware, and software (see figure 4).", "Services include the maintenance and repair of IT equipment as well as  professional technology support. Hardware includes products such as  fiber optic cables and computers, and software includes items such as  information technology software and maintenance service plans."], "subsections": []}]}, {"section_title": "Agencies Cited That Only One Contractor Could Meet the Need or Small Business Requirements as Most Common Reasons for Awarding Noncompetitive Contracts", "paragraphs": ["The documentation for the contracts and orders at the three agencies we  reviewed generally cited either that only one source could meet their  needs or that they were awarding the contract sole-source to an 8(a)  small business participant when noncompetitively awarding IT contracts  or orders. Specifically, based on our generalizable sample, we estimate  that nearly 60 percent of fiscal year 2016 noncompetitive contracts and  orders at DOD, DHS, and HHS were awarded noncompetitively because  agencies cited that only one contractor could meet the need, and  approximately 26 percent of contracts and orders were awarded sole- source to an 8(a) small business participant. We estimate that agencies  cited a variety of other reasons for not competing approximately 16  percent of noncompetitive contracts and orders, such as unusual and  compelling urgency, international agreement, and national security.", "Within our sample of 142 contracts and orders, we analyzed J&As or  similar documents to obtain additional detail as to why the contracts and  orders were awarded noncompetitively. See table 2 for a breakdown of  the overall reasons cited for awarding contracts noncompetitively within  our sample.", "For 79 of the 142 contracts and orders we reviewed, agencies cited that  only one source could meet the need. We found that this exception was  the most commonly cited reason for a sole-source IT contract or order at  DOD and DHS, but not at HHS. At HHS, the most common reason was  that the contract or order was awarded on a sole source basis to an 8(a),  which we discuss in more detail later. Agencies justified use of the \u201conly  one source\u201d exception on the basis that the contractor owned the  proprietary technical or data rights; the contractor had unique  qualifications or experience; compatibility issues; or that a brand-name  product was needed (see figure 5).", "The following examples illustrate the reasons cited by the agencies as to  why only one contractor could meet their needs:", "Proprietary data rights issues and compatibility issues. The Navy  issued a 9-month, approximately $350,000 order under an IDIQ  contract for two data terminal sets. The terminal sets, which according  to Navy officials, have been used by the Navy since the 1990s to  exchange radar tracking and other information among airborne, land- based, and ship-board tactical data systems and with certain allies.  The Navy\u2019s J&A document noted that the contractor owned the  proprietary data rights to the transmitting equipment and software,  and the Navy required the equipment to be compatible and  interchangeable with systems currently fielded throughout the Navy.  Furthermore, the document noted that seeking competition through  the development of a new source would result in additional costs that  would far exceed any possible cost savings that another source could  provide and would cause unacceptable schedule delays.", "This example illustrates that decisions the program officials make  during the acquisition process to acquire or not acquire certain rights  to technical data can have far-reaching implications for DOD\u2019s ability  to sustain and competitively procure parts and services for those  systems, as we have previously reported. In our May 2014 report on  competition in defense contracting, we found that 7 of 14 justifications  we reviewed explained that the awards could not be competed due to  a lack of technical data. All 7 of these justifications or supporting  documents described situations, ranging from 3 to 30 years in  duration, where DOD was unable to conduct a competition because  data rights were not purchased with the initial award. We  recommended in May 2014 that DOD ensure that existing acquisition  planning guidance promotes early vendor engagement and allows  both the government and vendors adequate time to prepare for  competition. DOD concurred with our recommendation. In April 2015,  DOD updated its acquisition guidance to incorporate new guidelines  for creating and maintaining a competitive environment. These  guidelines emphasize acquisition planning steps including  involvement with industry in obtaining feedback on draft solicitations,  market research, and requirements development.", "Unique qualifications and experience. DHS placed four separate  orders under an IDIQ contract for data center support totaling  approximately $7 million. The requirement was to maintain mission  critical services during a data center support pilot, prototype, and  transition period starting in fiscal year 2015. Among other things,  DHS\u2019s J&A noted that no other contractors had sufficient experience  with DHS\u2019s infrastructure and requirements necessary to maintain  services at the required level during the transition period.", "HHS awarded an approximately $4 million contract to buy support  services for an IT center for a 12-month ordering period, including  options. HHS\u2019s J&A noted that only the incumbent contractor had the  requisite knowledge and experience to operate and maintain the  mission and business systems in the IT center during the transition of  operations from one location to another. The justification further stated  that HHS had no efforts underway to increase competition in the  future as this requirement is not anticipated to be a recurring  requirement. Program officials stated that they are migrating from  legacy IT systems to a new commercial off-the-shelf system.", "Brand-name products. DOD awarded a 5-month, approximately  $500,000 contract for brand name equipment and installation that  supported various video-teleconference systems. The J&A stated that  this particular brand name product was the only product that would be  compatible with current configurations installed in one of its  complexes. To increase competition in the future, the J&A stated that  technical personnel will continue to evaluate the marketplace for  commercially available supplies and installation that can meet DOD\u2019s  requirements.", "For 42 of the 142 contracts and orders we reviewed, we found that  agencies awarded a sole-source contract or order to 8(a) small business  participants. HHS awarded 13 of its 23 sole-source contracts and orders  we reviewed to 8(a) small business participants, DOD awarded 25 of 95,  and DHS 4 of 24. We found that all contracts and orders in our review  that were awarded on a sole-source basis to 8(a) small business  participants were below the applicable competitive thresholds or  otherwise below the FAR thresholds that require a written justification.", "As previously discussed, agencies may award contracts on a sole-source  basis to eligible 8(a) participants, either in coordination with SBA or when   they are below the competitive threshold. While agencies are generally  not required to justify these smaller dollar value sole-source 8(a) awards,  contracts that exceed a total value of $22 million require a written  justification. Since none of the 8(a) sole source contracts and orders in  our review required written justifications, the contract files generally did  not provide the rationale behind the sole-source award.", "Policy and contracting officials from all three agencies we reviewed stated  they made sole-source awards to 8(a) small business participants to help  meet the agency\u2019s small business contracting goals and save time. HHS  officials further stated that they consider their awards to 8(a) small  business participants a success because they are supporting small  businesses. Officials stated that once a requirement is awarded through  the 8(a) program, the FAR requires that requirement be set aside for an  8(a) contractor unless the requirement has changed or that an 8(a)  contractor is not capable or available to complete the work.", "For 23 of the 142 contracts and orders we reviewed, we found that  agencies cited other reasons for awarding contracts and orders  noncompetitively. For example:", "Urgent and compelling need. DHS\u2019s Coast Guard awarded an  approximately 10-month, $6.5 million order (encompassing all  options) for critical payroll services in its human resources  management system under a GSA federal supply schedule contract.  The Coast Guard justified the award based on an urgent and  compelling need. A Coast Guard official explained that the efforts to  competitively award a follow-on contract had been delayed as the  Coast Guard had not developed a defined statement of work in a  timely manner, and that the agency had received a larger number of  proposals than initially anticipated. Therefore, the evaluation process  took longer than expected. In addition, the Coast Guard\u2019s competitive  follow-on contract, which was awarded in June 2018, was protested.  In October 2018, GAO denied the protest and the Coast Guard is  currently planning to transition to the newly awarded contract.", "International agreement. The Army placed an approximately 8- month, $1 million order under an IDIQ contract for radio systems and  cited international agreement as the reason for a noncompetitive  award. This order was part of a foreign military sales contract with  the Government of Denmark.", "Authorized or required by statute. The Defense Logistics Agency  (DLA) cited \u201cauthorized or required by statute\u201d when it placed an  approximately $1.5 million, 12-month order under an IDIQ contract for  sustainment support services for an application that is used for  planning and initiating contracting requirements in contingency  environments. DLA noted that this model was contracted under the  Small Business Innovation Research Program, which supports  scientific and technological innovation through the investment of  federal research funds into various research projects.", "National security. The U.S. Special Operations Command (SOCOM)  placed an approximately 8-month, $1 million order for radio spare  parts and cited national security as the reason for a noncompetitive  award."], "subsections": []}, {"section_title": "An Estimated Eight Percent of Fiscal Year 2016 IT Noncompetitive Contracts and Orders Were Bridges, and Agencies Have Difficulty Managing Them An Estimated Eight Percent of IT Noncompetitive Contracts and Orders in Fiscal Year 2016 Were Bridge Contracts", "paragraphs": ["We estimate that about 8 percent of contracts and orders above $150,000  in fiscal year 2016 at DOD, DHS, and HHS were bridge contracts.  Consistent with our October 2015 findings, agencies we reviewed face  continued challenges with oversight of bridge contracts, based on 15  contracts and orders we reviewed in-depth. For example, we found that  in 9 of the 15 cases, bridge contracts were associated with additional  bridges not apparent in the documentation related to the contract and  order we reviewed, such as a J&A, and corresponded with longer periods  of performance and higher contract values than initially apparent. Agency  officials cited a variety of reasons for needing bridge contracts, including  acquisition planning challenges, source selection challenges, and bid  protests.", "Based on our generalizable sample, we estimate that about 8 percent of  contracts and orders above $150,000 in fiscal year 2016 at DOD, DHS,  and HHS were bridge contracts. We verified, using our definition of  bridge contracts as criteria, that 13 of 142 contracts and orders in our  generalizable sample were bridge contracts based on reviews of J&As,  limited source justifications, or exceptions to fair opportunity, among other  documents. In addition, we found two additional bridge contracts related  to our generalizable sample while conducting our in-depth review,  bringing the total number of bridge contracts we identified during this  review to 15."], "subsections": [{"section_title": "Agencies Face Continued Challenges with Oversight of Bridge Contracts", "paragraphs": ["We found that the bridge contracts we reviewed were often longer than  initially apparent from our review of related documentation, such as a  J&A, and sometimes spanned multiple years. Bridge contracts can be a  useful tool in certain circumstances to avoid a gap in providing products  and services, but they are typically envisioned to be used for short  periods of time. When we conducted an in-depth review of the bridge  contracts, such as by reviewing the contract files for the predecessor,  bridge, and follow-contracts, we found that in most cases, these involved  one or more bridges that spanned longer periods and corresponded with  higher contract values than initially apparent. Specifically, we found that 9  of the 15 bridge contracts had additional bridges related to the same  requirement that were not initially apparent from documents requiring  varying levels of approval by agency officials, such as the J&As.  Collectively, agencies awarded bridge contracts associated with these 15  contracts and orders with estimated contract values of about $84 million  (see table 3).", "The following examples illustrate contracts we reviewed in which the  periods of performance were longer than initially apparent:", "HHS\u2019s Indian Health Service (IHS) awarded a 4-month, approximately  $1.6 million bridge order for project management and support services  for IHS\u2019s resource and patient management system. We found,  however, that the predecessor contract had already been extended by  6 months before the award of the bridge order due to acquisition  planning challenges associated with delays in developing the  acquisition package for the follow-on contract. Subsequently, the 4- month bridge order was extended for an additional 6 months, in part  because the follow-on award\u2014which had been awarded to a new  contractor\u2014was protested by the incumbent contractor due to  concerns over proposal evaluation criteria. Ultimately, the protest was  dismissed. Following the resolution of the bid protest, officials  awarded an additional 2-month bridge order for transition activities. In  total, the bridge orders and extensions spanned 18 months and had  an estimated value of about $4.7 million. Figure 6 depicts the bridge  orders and extensions and indicates the 4-month bridge and 6-month  extension we had initially identified.", "The Air Force awarded a 3-month, approximately $630,000 bridge  contract to support a logistics system used to monitor weapon system  availability and readiness. We found, however, that the Air Force had  previously awarded a 3-month bridge contract due to delays resulting  from a recent reorganization, which, according to Air Force officials,  made it unclear which contracting office would assume responsibility  for the requirement. The Air Force subsequently awarded an  additional 3-month bridge contract due to acquisition planning  challenges, such as planning for the award of the follow-on sole- source contract. The total period of performance for the bridges was 9  months with an estimated value of about $1.9 million (see figure 7).", "As of August 2018, 13 of the 15 bridge contracts had follow-ons in  place\u20145 were awarded competitively and 8 were awarded  noncompetitively. Two bridge contracts do not currently have follow-on  contracts in place for various reasons. For example, in one instance, the  Coast Guard\u2019s requirement for human resources and payroll support  services has continued to operate under a bridge contract because the  Coast Guard\u2019s planned follow-on contract\u2014a strategic sourcing IDIQ\u2014 was awarded in June 2018, and subsequently protested, among other  delays."], "subsections": []}, {"section_title": "Officials Frequently Cited Acquisition Planning Challenges as Necessitating the Use of a Bridge Contract", "paragraphs": ["Based on our reviews of contract documentation and information provided  by agency officials, we found that acquisition planning challenges were  the principal cause for needing to use a bridge contract across the 15  bridge contracts we reviewed. In particular, acquisition packages  prepared by program offices to begin developing a solicitation were often  not prepared in a timely fashion. Acquisition packages include statements  of work and independent government cost estimates, among other  documents, and are generally prepared by the program office, with the  assistance of the contracting office. In addition to acquisition planning  challenges, officials cited delays in source selection and bid protests,  among others, as additional reasons justifying the need to use a bridge  contract (see figure 8).", "The following examples illustrate reasons officials cited for needing a  bridge contract:", "DOD\u2019s DISA awarded a bridge contract for IT support services due to  acquisition planning challenges, and specifically, the late submission  of acquisition packages. According to contracting officials, the bridge  contract was originally intended to consolidate 3 of the previous  contracts associated with this requirement, but a fourth was added  much later in the process. DISA contracting officials said that the  program office did not submit acquisition package documentation in a  timely manner, and, once submitted, the documentation required  numerous revisions. These officials added that they had to award an  additional bridge contract to avoid a lapse in service once they  received a completed package from the program office because there  was not enough time to do a competitive source selection and  analysis.", "DOD\u2019s SOCOM extended an IDIQ contract for radio supplies and  services due to source selection delays and acquisition workforce  challenges. For example, contracting officials said they extended the  IDIQ for 12 months because the contracting office was working on a  source selection for the follow-on contract for modernized radios and  simply did not have the manpower to award a new sustainment  contract for the existing radios at the same time.", "DHS\u2019s Customs and Border Protection (CBP) awarded an  approximately 16-month bridge contract in June 2016 for engineering  and operations support of CBP\u2019s Oracle products and services due to  bid protests associated with March 2016 orders for this requirement.  We found the protests were filed on the basis that CBP had issued the  task order on a sole-source basis, which precluded other contractors  from competing for the award. GAO dismissed the protest in May  2016 as a result of CBP\u2019s stated intent to terminate the task order and  compete the requirement as part of its corrective action plan.", "According to CBP contracting officials, they awarded the  approximately16-month bridge contract to the incumbent contractor to  continue services until GAO issued a decision and the services could  be transitioned to the awardee. In September 2017, CBP officials  awarded the competitive follow-on contract to a new vendor, but this  award was also protested due to alleged organizational conflicts of  interest, improperly evaluated technical proposals, and an  unreasonable best-value tradeoff determination. As a result, CBP  officials issued a stop-work order effective October 2017. To continue  services during the protest, CBP officials extended the existing bridge  contract by 3 months and then again by another 6 months. In January  2018, GAO dismissed the protest in its entirety and the stop-work  order was lifted. According to a CBP contracting official, CBP did not  exercise the final 3 months of options of the 6-month extension.", "In 2015, we found that the full length of a bridge contract, or multiple  bridge contracts, is not always readily apparent from review of an  individual J&A, which presents challenges for approving officials, as they  may not have insight into the total number of bridges put into place by  looking at individual J&As alone. We found a similar situation in our  current review. For example, the J&As for the 8 bridge contracts with  J&As did not include complete information on the periods of performance  or estimated values of all related bridge contracts."], "subsections": []}, {"section_title": "In the Absence of Government-wide Guidance, Others Have Taken Steps to Define Bridge Contracts", "paragraphs": ["OFPP has not yet taken action to address the challenges related to the  use of bridge contracts that we found in October 2015. At that time, we  recommended that OFPP take appropriate steps to develop a standard  definition of bridge contracts and incorporate it as appropriate into  relevant FAR sections, and to provide guidance to federal agencies in the  interim. We further recommended that the guidance include (1) a  definition of bridge contracts, with consideration of contract extensions as  well as stand-alone bridge contracts, and (2) suggestions for agencies to  track and manage their use of these contracts, such as identifying a  contract as a bridge in a J&A when it meets the definition, and listing the  history of previous extensions and stand-alone bridge contracts back to  the predecessor contract in the J&A. However, as of November 2018,  OFPP had not yet done so. As a result, agencies continue to face similar  challenges with regard to the use of bridge contracts that we identified in  2015 and there is a lack of government-wide guidance that could help to  address them.", "In the absence of a federal government-wide definition, others have taken  steps to establish a bridge contracts definition. For example, Congress  has established a statutory definition of bridge contracts that is applicable  to DOD and its components. Specifically, Section 851 of the National  Defense Authorization Act for Fiscal Year 2018 defined a bridge contract  as (1) an extension to an existing contract beyond the period of  performance to avoid a lapse in service caused by a delay in awarding a  subsequent contract; or (2) a new short-term contract awarded on a sole- source basis to avoid a lapse in service caused by a delay in awarding a  subsequent contract. Section 851 requires that, by October 1, 2018, the  Secretary of Defense is to ensure that DOD program officials plan  appropriately to avoid the use of a bridge contract for services. In  instances where bridge contracts were awarded due to poor acquisition  planning, the legislation outlines notification requirements with associated  monetary thresholds for bridge contracts.", "Acting on this requirement and in response to our prior bridge contracts  report, DOD established a bridge contracts policy memorandum in  January 2018. The policy defines bridge contracts as modifications to  existing contracts to extend the period of performance, increase the  contract ceiling or value or both, or a new, interim sole-source contract  awarded to the same or a new contractor to cover the timeframe between  the end of the existing contract and the award of a follow-on contract.  The DOD policy excludes extensions awarded using the option to extend  services clause as bridge contracts unless the extension exceeds 6 - months. In addition, DOD\u2019s bridge contract policy directs the military  departments and DOD components to develop a plan to reduce bridge  contracts and to report their results annually to the Office of the Under  Secretary of Defense for Acquisition and Sustainment. As of August  2018, DHS and HHS did not have component- or department-level  policies that define or provide guidance on the use of bridge contracts.", "Differing definitions of bridge contracts can lead to varying perspectives  as to what constitutes a bridge contract. For example:", "Differing views on whether a contract within the 8(a) program can be a  bridge. In one instance, we reviewed a 3-month, approximately $1.9  million bridge contract that DLA awarded to the incumbent contractor  for a variety of IT contractor support services for DLA\u2019s Information  Operations (J6). This bridge contract was awarded to continue  services until DLA could award a 12-month, roughly $2.9 million sole- source contract (including all options) to an 8(a) small business  participant to consolidate tasks from 20 contracts as part of a  reorganization effort within J6. After that contract expired, DLA  awarded a second 12-month, about $3 million contract (including all  options) to the same 8(a) small business participant to continue these  task consolidation efforts. DLA subsequently awarded a 2-month  $122,000 contract extension to continue services until it could award a  follow-on order under DLA\u2019s J6 Enterprise Technology Services  (JETS) multiple award IDIQ contract, the award of which had also  been delayed.", "Although the 8(a) contracts were not awarded to the incumbent of the  initial 3-month bridge, we believe that these contracts could be  considered bridge contracts as they were meant to bridge a gap in  services until the reorganization efforts were complete and the JETS  contract was awarded. DLA contracting officials, however, told us they  do not consider the 8(a) contracts to be bridge contracts as these two  contracts and the follow-on task order under JETS were awarded  sole-source to 8(a) small business participants. DLA officials added  that they plan to keep the requirement in the 8(a) program.", "Differing views as to whether contract extension are bridges. DOD\u2019s  policy generally does not include contract extensions using the \u201coption  to extend services\u201d clause as bridges, unless the option is extended  beyond the 6 months allowed by the clause. Navy policy, however,  states that using the option to extend services clause is considered a  bridge if the option was not priced at contract award. Similarly, HHS  officials stated that the department does not consider contract  extensions using the \u201coption to extend services\u201d clause to be bridge  contract actions if the total amount of the services covered are  evaluated in the initial award, and if the length does not extend  beyond the allowable 6 months. The differences among agencies\u2019  views and policies may be due to the extent to which the extensions  are considered \u201ccompetitive\u201d. For the purposes of our definition, if  the extension\u2014whether it was competed or not\u2014was used to bridge a  gap in service until a follow-on contract could be awarded, then it  would be considered a bridge.", "Without agreement as to what constitutes a bridge contract, agencies\u2019  efforts to improve oversight of and to identify challenges associated with  the use of bridge contracts will be hindered. While we are not making any  new recommendations in this area, we continue to believe that our  October 2015 recommendation to OFPP to establish a government-wide  definition and provide guidance to agencies on their use remains valid."], "subsections": []}]}, {"section_title": "New Definition Narrows Scope of Legacy IT Noncompetitive Contracts and Orders to About Seven Percent", "paragraphs": ["An estimated 7 percent of IT noncompetitive contracts and orders at  selected agencies in fiscal year 2016 were in support of legacy IT  systems as newly defined in statute, which is considerably fewer than we  found when using the previous definition of legacy IT. At the time our  review began, OMB\u2019s draft definition for legacy IT systems stated that  legacy IT spending was spending dedicated to maintaining the existing IT  portfolio, excluding provisioned services such as cloud. Using this  definition, and based on our generalizable sample, we estimated that  about 80 percent of IT noncompetitive contracts and orders over  $150,000 in fiscal year 2016 at DOD, DHS, and HHS were awarded in  support of legacy IT systems. In December 2017, however, Congress  enacted the Modernizing Government Technology Act (MGT) as part of  the National Defense Authorization Act for Fiscal Year 2018. This act  defined a legacy IT system as an \u201coutdated or obsolete system of  information technology.\u201d", "Using this new statutory definition of a legacy IT system, we requested  that each agency reassess how it would characterize the nature of the IT  system using the revised definition provided under the MGT Act. For the  142 contracts and orders we reviewed, we found that when using the new  definition, agencies significantly reduced the number of contracts and  orders identified as supporting legacy IT systems. For example, using the  OMB draft definition agencies identified that 118 out of 142 contracts and  orders were supporting legacy IT systems. However, when using the  more recent MGT Act definition, agencies identified only 10 out of 137  contracts and orders as supporting legacy IT systems (see figure 9).", "Consequently, using the definition provided under the MGT Act, we  estimate that about 7 percent of IT noncompetitive contracts and orders  over $150,000 in fiscal year 2016 at DOD, DHS, and HHS were awarded  in support of outdated or obsolete legacy IT systems.", "Agencies\u2019 program officials said that they are still supporting outdated or  obsolete legacy IT systems (as defined by the MGT Act) because they  are needed for the mission, or they are in the process of buying new  updated systems or modernizing current ones. For example:", "Army officials awarded a 5-year, roughly $1.2 million contract to  install, configure, troubleshoot, and replace Land Mobile Radio  equipment at Ft. Sill, Oklahoma. An Army official noted that all  equipment is older than 12 years and is nearing its end of life. The  radio equipment, however, is required to support first responder and  emergency service personnel critical communications. An Army  official did not indicate any plans to modernize, but noted that the  impact of this system not being supported would significantly affect all  of Fort Sill\u2019s land mobile radio communications.", "The Air Force awarded a $218,000 order to buy repair services for the  C-130H aircraft\u2019s radar display unit and electronic flight instrument. An  Air Force official noted that legacy hardware that was bought through  the order is part of critical systems that are required to safely fly the  aircraft. The system, however, is obsolete and the associated  hardware is no longer supported by the vendor. The official told us  that there is currently a re-engineering effort to modernize the  systems that use this hardware.", "HHS issued a 12\u2013month, nearly $2.5 million order to buy operations  and maintenance support for a Food and Drug Administration (FDA)  system used to review and approve prescription drug applications.  According to an FDA program official, efforts are underway to retire  the system by gradually transferring current business processes to a  commercial-off-the-shelf solution that can better meet government  needs. This official, however, told us that the system currently  remains in use because FDA\u2019s Office of New Drugs is still heavily  reliant on the system."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Competition is a cornerstone of the federal acquisition system and a  critical tool for achieving the best possible return on investment for  taxpayers. In the case of information technology, federal agencies  awarded slightly under a third of their contract dollars under some form of  noncompetitive contract. Further, our current work was able to quantify  that about a tenth of all information technology-related contracts and  orders were made under some form of a noncompetitively awarded  bridge contract, which provides new context for the issues associated  with their use. The challenges themselves, however, remain much the  same since we first reported on the issue in 2015. OFPP has yet to issue  guidance or promulgate revised regulations to help agencies identify and  manage their use of bridge contracts, and our current work finds that the  full scope of bridge contracts or the underlying acquisition issues that  necessitated their use in the first place may not be readily apparent to  agency officials who are approving their use. We continue to believe that  our 2015 recommendation would improve the use of bridge contracts, and  we encourage OFPP to complete its ongoing efforts in a timely fashion.", "The frequency of the errors in reporting and their concentration within a  specific type of contract action signals the need for more management  attention and corrective action. These errors resulted in the potential  misreporting of billions of dollars awarded under orders as being  noncompetitively awarded when, in fact, they were competed. One  agency included in our review\u2014DHS\u2014has taken steps to address the  problems that underlie the errors in coding and provided additional  training to its staff. DOD and HHS could benefit from additional insight as  to the reasons behind the high rates of miscoding to improve the  accuracy of this information."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of two recommendations, one to DOD and one to  HHS.", "The Secretary of Defense should direct the Under Secretary of  Defense for Acquisition and Sustainment to identify the reasons  behind the high rate of miscoding for orders awarded under multiple  award contracts and use this information to identify and take action to  improve the reliability of the competition data entered into FPDS-NG.  (Recommendation 1)", "The Secretary of Health and Human Services should direct the  Associate Deputy Assistant Secretary for Acquisition to identify the  reasons behind the high rate of miscoding for orders awarded under  multiple award contracts and use this information to identify and take  action to improve the reliability of the competition data entered into  FPDS-NG. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD, DHS, HHS, and OMB for  review and comment. DOD and HHS provided written comments and  concurred with the recommendation we made to each department.", "In its written response, reproduced in appendix II, DOD stated it will  analyze FPDS-NG data in an effort to identify why the miscoding of  orders on multiple award contracts occurs, and use the information to  advise the contracting community of actions to improve the reliability of  competition data.", "In its written response, reproduced in appendix III, HHS stated that the  Division of Acquisition within HHS\u2019s Office of Grants and Acquisition  Policy and Accountability uses a data quality management platform to  ensure data accuracy. HHS is currently in the process of performing the  annual data validation and verification of the acquisition community\u2019s  contract data for fiscal year 2018. Once this process is complete the  Division of Acquisition will contact contracting offices that produced  records that were flagged as containing errors and provide  recommendations that should help improve the fiscal year 2019 accuracy  rating. HHS added that it will closely monitor those checks and all others  to ensure contract data are accurate. However, in its letter, HHS did not  specify how its annual data validation and verification process would  specifically address the fact that we found a high rate of miscoding of  competition data for certain orders.", "OMB staff informed us that they had no comments on this report. DHS,  HHS and the Air Force provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of Homeland  Security, the Secretary of Health and Human Services, and the Director  of the Office of Management and Budget. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our report examines (1) the extent to which agencies used  noncompetitive contracts to procure Information Technology (IT) products  and services for fiscal years 2013 through 2017; (2) the reasons for using  noncompetitive contracts for selected IT procurements; (3) the extent to  which IT procurements at selected agencies were bridge contracts; and  (4) the extent to which noncompetitive IT procurements at selected  agencies were in support of legacy systems.", "To examine the extent to which agencies used noncompetitive contracts  and orders to procure IT products and services, we analyzed  government-wide Federal Procurement Data System-Next Generation  (FPDS-NG) data on IT obligations from fiscal years 2013 through 2017.  To define IT, we used the Office of Management and Budget\u2019s (OMB)  Category Management Leadership Council list of IT products and service  codes, which identified a total of 79 IT-related codes for IT services and  products. Data were adjusted for inflation to fiscal year 2017 dollars,  using the Fiscal Year Gross Domestic Product Price Index. To assess the  reliability of the FPDS-NG data, we electronically tested for missing data,  outliers, and inconsistent coding. Based on these steps, we determined  that FPDS-NG data were sufficiently reliable for describing general trends  in government-wide and IT contract obligations data for fiscal years 2013  through 2017.", "In addition, as we later describe, we compared data for a generalizable  sample of 171 noncompetitive contracts and orders to contract  documentation, and we determined that 29 of these had been  inaccurately coded in FPDS-NG as noncompetitive. As such, we  determined that the data were not reliable for the purposes of reporting  the actual amount agencies obligated on noncompetitive contracts and  orders for IT products and services. Specifically, we determined, that data  for IT noncompetitive obligations awarded under multiple award contracts  that cited \u201cfollow-on action following competitive initial action\u201d or \u201cother  statutory authority\u201d as the legal authority for using an exception to fair  opportunity for the Departments of Defense (DOD), Homeland Security  (DHS), and Health and Human Services (HHS) in fiscal year 2016 were  not reliable. Evidence from our review of this sample suggests there was  a high rate of miscoding for these orders; thus, we applied these findings  to the remaining agencies and fiscal years because we do not have  confidence that the data were more reliable than what we had found.", "To determine the reasons for using noncompetitive contracts for selected  IT procurements, we selected the three agencies with the highest  reported obligations on IT noncompetitive contracts for fiscal years 2012  through 2016 (the most recent year of data available at the time we  began our review)\u2014DOD, DHS and HHS. These three agencies  collectively accounted for about 70 percent of all noncompetitively  awarded contracts for IT during this period. From these agencies, we  selected a generalizable stratified random sample of 171 fiscal year 2016  noncompetitive contracts and orders for IT above the simplified  acquisition threshold of $150,000. The sample was proportionate to the  amount of noncompetitive contracts and orders for IT at each agency.", "Based on our review of documentation collected for the generalizable  sample, we excluded 29 contracts and orders because they were  awarded competitively, but had been miscoded as noncompetitive or as  having an exception to fair opportunity. As a result, our sample consisted  of 142 contracts and orders. See table 4 for a breakdown by agency.", "To determine the extent to which IT procurements at selected agencies  were bridge contracts or in support of legacy systems, agencies provided  information as to whether the contracts and orders met GAO\u2019s definition  of a bridge contract\u2014which we defined as an extension to an existing  contract beyond the period of performance (including base and option  years) or a new, short-term contract awarded on a sole-source basis to  an incumbent contractor to avoid a lapse in service caused by a delay in  awarding a follow-on contract\u2014and whether they met the definitions of  legacy IT systems in OMB\u2019s draft IT Modernization Initiative and the  Modernizing Government Technology Act (MGT). OMB\u2019s draft IT  Modernization Initiative defined legacy systems as spending dedicated to  maintaining the existing IT portfolio but excluding provisioned services,  such as cloud, while the MGT Act defines them as outdated or obsolete.", "We verified the agencies\u2019 determinations of whether a contract or order  was a bridge by reviewing documentation, such as justification and  approval and exception to fair opportunity documents, for the contracts  and orders in our generalizable sample, and conducting follow-up with  agency officials as needed. We verified agencies\u2019 determination of  whether or not a contract or order was in support of a legacy system, as  defined in OMB\u2019s draft IT Modernization Initiative by reviewing the  agencies\u2019 determination and comparing these determinations to additional  documentation, such as the statement of work, and conducting follow-up  with program officials about the nature of the requirement where needed.  We verified agencies\u2019 determination of whether a contract or order was in  support of a legacy system as defined in the MGT Act by reviewing  agencies\u2019 rationale for these determinations and following up with agency  officials where we identified discrepancies between the determination and  rationale. To obtain additional insights into bridge contracts and legacy  systems, we selected a nonprobability sample of 26 contracts and orders  from our generalizable sample of 142 contracts and orders for in-depth  review. We selected these contracts based on factors such as obtaining a  mix of bridge contracts and other contracts used in support of legacy IT  systems and location of the contract files.", "For our in-depth review of contracts and orders, we collected and  analyzed contract file documentation for the selected contracts and  orders and interviewed contracting and program officials to gain insights  into the facts and circumstances surrounding the awards of IT  noncompetitive contracts and orders. In cases where we selected a  potential bridge contract, we also reviewed the predecessor contract,  additional bridge contracts (if any), and, follow-on contract, if awarded at  the time of our review. For bridge contracts and orders, we asked about  the reasons why bridges were needed and the status of follow-on  contracts. We verified, using the definition of bridge contracts that we  developed for our October 2015 report as criteria, that 13 of 142 contracts  and orders in our generalizable sample were bridge contracts based on  reviews of justification and approval documents, limited source  justifications, or exceptions to fair opportunity, among other documents.   We acknowledge, however, that in the absence of a government-wide  definition, agencies may have differing views of what constitutes a bridge  contract.", "In addition, we found 2 additional bridge contracts not included in our  generalizable sample while conducting our in-depth review. For example,  we selected three noncompetitive orders from our generalizable sample  for in-depth review that were used to buy accessories and maintenance  for the U.S. Special Operations Command (SOCOM) PRC-152 and 117G  radios. We found that although the three orders were not bridge  contracts, the underlying indefinite delivery/ indefinite quantity (IDIQ)  contract\u2014which outlines the terms and conditions, including pricing for  the orders\u2014had been extended 12 months to continue services until the  follow-on IDIQ could be awarded. We also selected an Air Force order for  equipment for the Joint Strike Fighter instrumentation pallet for in-depth  review. Further analysis revealed that the underlying IDIQ was extended  for 5 additional months to continue services until officials could award a  follow-on contract for this requirement. Including these 2 additional bridge  contracts brings the total number of bridge contracts we identified during  this review to 15. For legacy contracts and orders we asked about the  nature of the requirement and plan to move to newer technologies or  systems. The selection process for the generalizable sample is described  in detail below."], "subsections": [{"section_title": "Selection Methodology for Generalizable Sample", "paragraphs": ["We selected a generalizable stratified random sample of 171 contracts  and orders from a sample frame of 3,671 fiscal year 2016 IT  noncompetitive contracts and orders, including orders under multiple  award indefinite delivery/indefinite quantity contracts over $150,000 to  generate percentage estimates to the population. We excluded contracts  and orders with estimated values below the simplified acquisition  threshold of $150,000 as these contracts have streamlined acquisition  procedures. We stratified the sample frame into nine mutually exclusive  strata by agency and type of award, i.e. contract, order, and multiple  award order for each of the three agencies. We computed the minimum  sample size needed for a proportion estimate to achieve an overall  precision of at least plus or minus 10 percentage points or fewer at the 95  percent confidence level. We increased the computed sample size to  account for about 10 percent of the population to be out of scope, such as  competitive or non-IT contracts or orders. We then proportionally  allocated the sample size across the defined strata and increased sample  sizes where necessary so that each stratum would contain at least 10  sampled contracts or orders. The stratified sample frame and sizes are  described in table 5 below.", "We selected contracts and orders from the following components:", "DOD: Air Force, Army, Navy, Defense Information Systems Agency,  Defense Logistics Agency, Defense Security Service, Defense Threat  Reduction Agency, U.S. Special Operations Command, and  Washington Headquarter Services;", "HHS: Centers for Disease Control, Centers for Medicare and  Medicaid Services, Food and Drug Administration, Indian Health  Service, National Institutes of Health, and the Office of the Assistant  Secretary for Administration;", "DHS: Federal Emergency Management Agency, Office of  Procurement Operations, U.S. Citizenship and Immigration Services,  U.S. Coast Guard, U.S. Customs and Border Protection, and the U.S.  Secret Service.", "We excluded 29 contracts and orders as we determined they had been  miscoded as noncompetitive or as not having an exception to fair  opportunity. Based on these exclusions, we estimate the number of  noncompetitive contracts and orders in this population was about 3,000  (+/- 6.7 percent). All estimates in this report have a margin of error, at the  95 percent confidence level, of plus or minus 9 percentage points or  fewer.", "We conducted this performance audit from April 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Janet McKelvey (Assistant  Director), Pete Anderson, James Ashley, Andrew Burton, Aaron Chua,  Andrea Evans, Lorraine Ettaro, Julia Kennon, Miranda Riemer, Guisseli  Reyes-Turnell, Roxanna Sun, Alyssa Weir, and Kevin Walsh made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Competition among companies for federal information technology contracts is critical to achieving the best return on investment for taxpayers. However, noncompetitive contracts\u2014including bridge contracts\u2014are also allowed under certain circumstances.", "Federal data estimates 30% of IT spending is noncompetitive\u2014or about $15 billion annually. However, this estimate may not be accurate. We found some agencies misreported whether certain orders were competitive or noncompetitive. This calls the federal estimate into question.", "We recommended that selected agencies identify the reason for these errors and correct the problem."]}
{"id": "GAO-18-207", "url": "https://www.gao.gov/products/GAO-18-207", "title": "Small Business Research Programs: Agencies Need to Take Steps to Assess Progress Toward Commercializing Technologies", "published_date": "2018-01-31T00:00:00", "released_date": "2018-01-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Through the SBIR and STTR programs, federal agencies have awarded about 162,000 contracts and grants totaling $46 billion to small businesses to help them develop and commercialize new technologies. Eleven federal agencies participate in the SBIR program, and 5 agencies also participate in the STTR program. Each program has three phases, which take projects from initial feasibility studies through commercialization activities. SBA oversees both programs.", "In response to the 2011 reauthorization of the programs, SBA and the participating agencies developed benchmarks to measure small businesses' progress in developing and commercializing technologies. GAO was asked to review SBA's and the agencies' efforts related to these benchmarks. This report examines the extent to which SBA and the participating agencies have implemented these benchmarks, including assessing businesses against them and establishing the consequence of not meeting them. GAO analyzed award data and interviewed officials from SBA and the 11 participating agencies."]}, {"section_title": "What GAO Found", "paragraphs": ["Data challenges have limited the Small Business Administration's (SBA) and the 11 participating federal agencies' efforts to assess businesses against two benchmarks\u2014the Transition Rate Benchmark and the Commercialization Benchmark\u2014of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.", "Transition Rate Benchmark. Small businesses that received more than 20 awards for the first phase of the programs in the past 5 fiscal years\u2014excluding the most recent fiscal year\u2014must have received an average of 1 award for the second phase of the programs for every 4 first phase awards. Since 2014, SBA and the agencies participating in the programs have regularly assessed small businesses against this benchmark. From 2014 through 2017, SBA determined that 4 to 7 businesses did not meet the benchmark each year. SBA officials provided GAO guidance on how to enter data into the programs' awards database they said is available to agencies, but GAO found evidence that suggests agencies are not fully utilizing it. For example, GAO found that the database used to perform the assessments contained inaccurate and incomplete data, such as about 2,700 businesses with multiple records with different spellings of their names and more than 1,400 instances in which a unique identification number had errors, such as an incorrect number of digits, all zeros, or hyphens. Thus, it could be difficult to determine which small businesses should be subject to the benchmark.", "Commercialization Benchmark. Small businesses that received more than 15 awards for the second phase of the programs in the past 10 fiscal years\u2014excluding the most recent 2 fiscal years\u2014must have received a certain amount of sales, investments, or patents resulting from their efforts. SBA and participating agencies have assessed small businesses against this benchmark only once, in 2014, and identified 12 businesses that did not meet the benchmark. This is, in part, due to challenges in collecting and verifying the accuracy of the data that small businesses report and that are needed to implement the benchmark, according to officials from SBA and several agencies. For example, agency officials told GAO that some needed data, such as for reported sales, are not consistently applicable across agencies or projects. The Small Business Act and policy directives provide flexibility in how the agencies can implement the benchmark. Working together to implement it as designed or revise it so that it can be implemented could allow the agencies to fulfill statutory requirements.", "SBA and the participating agencies have provided inconsistent information to small businesses about the consequence of not meeting the benchmarks. SBA and the agencies agreed to change how the consequence of not meeting the benchmarks was to be implemented, starting in 2017, from ineligibility to receive certain awards to ineligibility to submit certain proposals. However, as of November 2017, some agencies had not updated this information in their project solicitations. Furthermore, SBA has not updated this information in its policy directives. Without consistent information, businesses may be confused about their eligibility to submit proposals or receive awards and could invest time developing and submitting proposals when they are not eligible to do so."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 11 recommendations to SBA and other agencies to take actions to improve implementation of the benchmarks, including improving the reliability of award data; implementing or revising the Commercialization Benchmark; and updating information about the consequence of not meeting the benchmarks. SBA and these agencies agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies support research or research and development (R&D)  projects at small businesses through the Small Business Innovation  Research (SBIR) and Small Business Technology Transfer (STTR)  programs. Federal agencies have awarded about 162,000 contracts and  grants, totaling about $46 billion, since the programs\u2019 inceptions in 1982  and 1992, respectively. Through the SBIR and STTR programs, federal  agencies have sought to help small businesses develop and  commercialize innovative technologies. For example, an SBIR award  from the Department of Health and Human Services helped a small  business develop glasses that allow people with color vision deficiency to  see the full color palette, and this business has made more than $20  million in annual sales, according to information on the SBIR website.", "Federal agencies with obligations of $100 million or more for extramural  R&D are required to participate in the SBIR program, and federal  agencies with obligations of $1 billion or more for extramural R&D are  required to also participate in the STTR program. Currently, 11 agencies  participate in the SBIR program, and 5 of these agencies also participate  in the STTR program, as shown in table 1.", "The Small Business Act authorizes the SBIR and STTR programs, and  the Small Business Administration\u2019s (SBA) Office of Investment and  Innovation is responsible for overseeing and coordinating the participating  agencies\u2019 efforts for the programs. As part of SBA\u2019s oversight and  coordination role, the agency issued SBIR and STTR policy directives to  explain and outline requirements for agencies\u2019 implementation of these  programs.", "The SBIR and STTR programs each include three phases:  In phase I, agencies make awards to small businesses to determine  the scientific and technical merit and feasibility of ideas that appear to  have commercial potential. Phase I awards normally do not exceed  $150,000. For SBIR, phase I awards generally last up to 6 months.  For STTR, these awards generally last 1 year.", "In phase II, small businesses with phase I projects that demonstrate  scientific and technical merit and feasibility, in addition to commercial  potential, may compete for awards of up to $1 million to continue the  R&D for an additional period, normally not to exceed 2 years.", "In phase III, small businesses pursue commercialization of technology  developed in prior phases. Phase III work derives from, extends, or  completes an effort made under prior phases, but it is funded by  sources other than the SBIR and STTR programs. In this phase, small  businesses are expected to raise funds from private investors, the  capital markets, or funding sources within the agency that made the  initial award other than the agency\u2019s SBIR or STTR program.  Agencies can also participate in phase III by, for example, purchasing  the technology developed in prior phases.", "The 2011 reauthorization of the SBIR and STTR programs amended the  Small Business Act to require participating agencies to establish, and  SBA to approve, minimum standards for businesses\u2019 progress in  developing and commercializing technologies. In response to this  requirement, SBA and the participating agencies worked together to  develop two \u201cbenchmarks\u201d to serve as those minimum standards across  all the participating agencies:", "Transition Rate Benchmark: Businesses that received more than 20  phase I awards over the prior 5 fiscal years\u2014excluding the most  recent fiscal year\u2014must have received an average of 1 phase II  award for every 4 phase I awards during this period. That is, the ratio  of phase II to phase I awards must be at least 0.25.", "Commercialization Benchmark: Businesses that received more  than 15 phase II awards over the prior 10 fiscal years\u2014excluding the  most recent 2 fiscal years\u2014must have received an average of at least  $100,000 in sales, investments, or both per phase II award received,  or have received a number of patents resulting from the work equal to  or greater than 15 percent of the number of phase II awards received  during this period.", "The reauthorization act states that, generally, small businesses that do  not meet the minimum standards may not participate in phase I of the  SBIR or STTR program. The policy directives state that small businesses  that do not meet the Transition Rate or Commercialization Benchmarks  are ineligible to receive phase I awards starting on June 1, when the  consequence period takes effect, through May 31 of the following year.", "You asked us to review SBA\u2019s and the participating agencies\u2019 efforts  related to the benchmarks. This report examines the extent to which SBA  and the participating agencies have implemented the Transition Rate  Benchmark and the Commercialization Benchmark, including assessing  businesses against them and establishing the consequence of not  meeting them.", "To accomplish this objective, we reviewed relevant legislation and the  SBIR and STTR policy directives to determine the requirements of SBA  and the participating agencies for implementing the benchmarks. We  reviewed project solicitations and agencies\u2019 websites, and we interviewed  officials from SBA and each of the 11 participating agencies to obtain  information about the agencies\u2019 efforts to implement the benchmarks. We  reviewed the applicable lists of small businesses that SBA assessed as  not having met a benchmark from 2014 through 2017 and analyzed SBIR  and STTR program award data. Further, we reviewed Standards for  Internal Control in the Federal Government and SBA\u2019s data policy and  guidelines. We also performed electronic testing of the data to search for  missing or incorrect information, and interviewed officials from SBA about  the data. We found instances in which the award data were unreliable,  which we discuss later in this report.", "We conducted this performance audit from April 2017 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The SBIR program was initiated in 1982 and has four main purposes: (1)  use small businesses to meet federal R&D needs, (2) stimulate  technological innovation, (3) increase commercialization of innovations  derived from federal R&D efforts, and (4) encourage participation in  technological innovation by small businesses owned by women and  disadvantaged individuals. The STTR program was initiated a decade  later, in 1992, and has three main purposes: (1) stimulate technological  innovation, (2) foster technology transfer through cooperative R&D  between small businesses and research institutions, and (3) increase  private-sector commercialization of innovations derived from federal R&D.", "The SBIR and STTR programs are similar in that participating agencies  identify topics for R&D projects and support small businesses, but the  STTR program requires the small business to partner with a nonprofit  research institution, such as a college or university or a federally funded  research and development center.", "Each participating agency must manage its SBIR and STTR programs in  accordance with program laws and regulations and the policy directives  issued by SBA. In general, the programs are similar across participating  agencies. All of the participating agencies follow the same general  process to obtain proposals from and make awards to small businesses  for both the SBIR and STTR programs. However, each participating  agency has considerable flexibility in designing and managing specific  aspects of these programs, such as determining research topics,  selecting award recipients, and administering funding agreements. At  least once a year, each participating agency issues a solicitation  requesting proposals for projects in topic areas determined by the  agency. Each participating agency uses its own process to review  proposals and determine which proposals should receive awards. The  agencies that participate in both SBIR and STTR programs usually use  the same process for both programs. Also, each participating agency  determines whether to provide the funding for awards as grants or  contracts.", "According to the policy directives, SBA maintains a system that records  SBIR and STTR award information\u2014using data submitted by the  agencies\u2014as well as commercialization information, such as information  about patents, sales, and investments reported by small businesses that  received these awards. SBA is to use these data to assess small  businesses that received awards against the benchmarks and identify any  small businesses that did not meet the benchmarks. SBA is to initially  assess the small businesses against the benchmarks and then in April of  each year notify those that do not meet the benchmarks so that the  businesses can review their award data and work with participating  agencies to correct the database if necessary. SBA then is to analyze the  award data again to identify, on June 1, those small businesses that still  do not meet the benchmarks. These small businesses are then ineligible  for certain awards from that date through May 31 of the following year."], "subsections": [{"section_title": "Data Challenges Have Limited the Implementation of the Benchmarks, and SBA and Participating Agencies Have Provided Inconsistent Information about the Consequence SBA and Participating Agencies Assessed Small Businesses against the Transition Rate Benchmark, but the Assessments Have Been Based on Inaccurate or Incomplete Data", "paragraphs": ["Data challenges have limited SBA\u2019s and the 11 participating agencies\u2019  efforts to fully implement the benchmarks. Since 2014, SBA and the  participating agencies have regularly assessed small businesses against  the Transition Rate Benchmark, but the assessments have been based  on inaccurate or incomplete data. SBA and the participating agencies  have assessed small businesses against the Commercialization  Benchmark only once, in 2014, because of challenges in collecting and  verifying the accuracy of data. In addition, SBA and the participating  agencies have provided inconsistent information to small businesses  about the consequence of not meeting the benchmarks.", "Since 2014, SBA and the participating agencies have regularly assessed  small businesses against the Transition Rate Benchmark, which, in  general, measures the rate at which businesses move projects from  phase I to phase II. From 2014 through 2017, SBA determined that 4 to  7 small businesses did not meet the benchmark each year and placed  those businesses on a list of those ineligible to receive certain additional  awards.", "However, we found instances in which the data used to generate the list  were inaccurate or incomplete. For example, we identified an instance in  which the data in the awards database changed considerably after SBA\u2019s  initial assessment, indicating that the data used for that assessment were  inaccurate. SBA\u2019s list of small businesses subject to the benchmark in  2015 showed that a small business received 297 phase I awards during  the assessment period. However, data received from SBA officials in  August 2017 showed that this small business received only 1 phase I  award. Agencies can update their data in the awards database at any  time to, for example, submit additional award data or correct previously  submitted award data, which is what an SBA official stated may have  caused this change. Because the small business received only 1 award, it  would not have been subject to the Transition Rate Benchmark. In this  case, the change meant that SBA did not miss identifying a small business that should have been ineligible for an award; however, in other  instances, changes to the data may lead SBA to miss identifying a small  business that should have been ineligible for awards.", "In addition, we identified instances in which the publicly available data on  awards were incomplete, including data that were missing or otherwise  unusable. For example, based on our review of the award data from 2007  through 2016, we identified more than 2,700 small businesses that had  multiple records with different spellings of the same business\u2019s name.  Furthermore, we identified more than 1,400 instances in which a unique  identification number had errors, such as having an incorrect number of  digits, all zeros, or hyphens. SBA officials told us that the quality of the  award information in the database has been an issue, and that accurate  information is important because small businesses may avoid being  identified as subject to the benchmark if their business names and  identification numbers are different across multiple records. For example,  if the database contains 18 phase I awards made within the assessment  period to a small business with a certain unique identification number but  also contains 3 other phase I awards within that period with a different or  missing unique identification number, the small business may avoid being  identified as subject to the benchmark because the data would suggest it  did not meet the threshold of receiving more than 20 phase I awards,  even if it did. As a result, it could be difficult to determine which small  businesses actually received more than 20 awards and should be subject  to the benchmark.", "Standards for Internal Control in the Federal Government state that  management should use quality information to achieve the entity\u2019s  objectives, and SBA\u2019s Information Quality Guidelines state that SBA  seeks to ensure the quality, utility, and integrity of the information it  shares with the public, among other things. SBA\u2019s policy directives for  the SBIR and STTR programs state that SBA maintains a system that  records SBIR and STTR award information, which is publicly available,  and uses this information to calculate small businesses\u2019 performance  against the benchmark. SBA officials told us they depend on the accuracy  of the data received from the participating agencies to perform SBA\u2019s  assessment. These officials also acknowledged that confirming the  accuracy of SBA\u2019s annual assessments against the benchmarks has  been challenging because agencies can update their data over time. SBA  officials stated that they have sought to improve the quality of the data  after the data are entered into the database, such as fixing instances in  which small businesses\u2019 names were spelled differently across multiple  records; however, the officials said that correcting the data already  entered in the awards database is an ongoing and time-consuming  process. SBA officials told us that there are errors in the database, in part  because SBA has not worked with participating agencies to ensure that  agencies enter high-quality, accurate data into the database. SBA officials  provided us guidance on how to enter data that they said is available to  agencies, but the errors we found suggest that agencies are not fully  utilizing this guidance. As a result, SBA cannot reasonably ensure the  quality and reliability of its award data and therefore cannot reasonably  ensure that it has correctly assessed small businesses against the  Transition Rate Benchmark."], "subsections": []}, {"section_title": "SBA and the Participating Agencies Assessed Small Businesses against the Commercialization Benchmark Only in 2014", "paragraphs": ["The Small Business Act requires agencies to evaluate whether small  businesses have met a minimum performance standard for  commercializing their technology. SBA and participating agencies do not  know the extent to which small businesses are meeting the  Commercialization Benchmark because SBA and the agencies have  assessed businesses against the benchmark only once, in 2014, when  SBA determined that 12 businesses did not meet the benchmark. This is  in part because, according to officials from SBA and several agencies,  they cannot collect and verify the accuracy of the data needed to  implement the benchmark as written.", "For SBA and participating agencies to assess whether small businesses  meet the Commercialization Benchmark, these small businesses must  provide data on sales, investments, or patents resulting from the awards.  However, agency officials told us about challenges related to obtaining  the data they need to implement this benchmark. For example, agency  officials told us that the needed data are not consistently applicable  across agencies or projects. Specifically, these officials said that an  agency may purchase the technology developed as a result of the SBIR  or STTR award, while another agency may focus on funding technologies  that will be sold on the commercial market, leading to different kinds of  data on \u201csales.\u201d Additionally, officials from SBA and several of the  participating agencies told us they have been unable to collect and verify  the accuracy of the information from small businesses to assess them  against the Commercialization Benchmark. In addition, officials from 2  agencies told us that small businesses can easily circumvent the  benchmark by submitting incorrect data.", "The Small Business Act and the policy directives provide agencies  flexibility in how they can implement the Commercialization Benchmark.  Officials from participating agencies said that they thought the  Commercialization Benchmark should be revised, but they provided  differing views on how to do it. Officials from SBA and 2 agencies told us  that they would consider having individual agencies develop a benchmark  or metric tailored to their agency, in part because the definition of  successful commercialization could vary across the agencies. However,  officials acknowledged that collecting and verifying the accuracy of the  data would still be a concern with this approach. Officials from 2  participating agencies told us that collecting and verifying the accuracy of  the data is a significant amount of work, and officials from a third agency  added that implementing the benchmark independently is impractical  because they do not have the capability to track small businesses\u2019  commercialization efforts. Officials from 1 agency said they preferred to  keep a uniform benchmark across the agencies, in part because having  varying benchmarks could lead to a small business being eligible to  participate in the programs with one agency but not with another.  Although views differed across agencies, working together to find a way  to implement the benchmark as designed or revising it so that it can be  implemented could allow the agencies to fulfill the requirement in the  Small Business Act.", "Officials from 3 agencies told us they would prefer to consider  businesses\u2019 prior commercialization experience as part of their overall  evaluation of businesses\u2019 proposals, rather than implement the current  Commercialization Benchmark. The SBIR and STTR policy directives  currently allow agencies to define the benchmark in terms other than  revenue or investment, such as using a commercialization scoring system  that rates awardees on their past commercialization success. Defining the  benchmark in these terms could help agencies to implement the statutory  requirement. Officials from SBA said they see the value of allowing  reviewers to use professional judgment in determining the  commercialization success of applicants, rather than assessing small  businesses against standard criteria. Officials from 1 agency said that  such a change could help achieve the goal of the benchmark without the  challenges of collecting data from all small businesses participating in the  programs.", "Nine of the 11 participating agencies currently consider prior  commercialization experience as part of their evaluation when making  award selections (see table 2), which shows that evaluating  commercialization experience at individual agencies can be feasible. For  example, project solicitations from the Department of Agriculture, the  Department of Defense, and the National Science Foundation state that  these agencies require applicants to provide sales or revenue information  for products resulting from SBIR or STTR awards, and the Department of  Homeland Security\u2019s solicitation requires applicants to provide a history of  previous federal and nonfederal funding and subsequent  commercialization of their products. All agencies consider  commercialization potential when selecting these awards."], "subsections": []}, {"section_title": "SBA and Participating Agencies Have Provided Inconsistent Information to Small Businesses on the Consequence of Not Meeting the Benchmarks", "paragraphs": ["The consequence for small businesses not meeting the benchmarks is  ineligibility to participate in phase I of the SBIR or STTR program for a  year, according to the Small Business Act. SBA officials stated that they  and the agencies initially interpreted this to mean that small businesses  could not receive awards during the ineligibility period of June 1 through  May 31 of the following year, and this is how the consequence is  described in the SBIR and STTR policy directives. SBA officials told us  that they and the participating agencies sought to change how to  implement the consequence of businesses not meeting the benchmarks  because of SBA\u2019s and agencies\u2019 difficulties in implementing the  benchmarks. Officials from 4 agencies said that they generally evaluate  and select awards shortly before SBA releases the list of ineligible  companies, leading them to potentially select projects from small  businesses that will be on the ineligible list by the time the award period  begins. Based on our review of award data from October 2014 to May  2017, we identified 13 phase I awards across 5 small businesses with  award start dates during the period that the business was ineligible to  receive such awards. According to agency officials, each of these awards  was selected before the small business became ineligible to receive the  award. SBA and the participating agencies agreed to change how the  consequence would be implemented, starting in 2017, so that small  businesses that do not meet the benchmarks are ineligible to submit  proposals, according to SBA officials.", "As of November 2017, however, the information available about this new  way to implement the consequence was inconsistent because some of  the agencies had not updated their project solicitations. Specifically,  information in the most recent project solicitations available at that time  for 2 agencies and one subunit of an agency stated that businesses that  do not meet the benchmarks are ineligible to submit certain proposals,  consistent with the revised approach for how to implement the  consequence. However, the most recent project solicitations available at  that time for 7 other agencies and the other subunit of the agency  mentioned above instead stated that those businesses that do not meet  the benchmarks are ineligible to receive certain awards, consistent with  the prior approach for how to implement the consequence. One other  agency directed users to SBA\u2019s website in its solicitation. Table 3 shows  the information about the consequence of not meeting the benchmarks  that each agency included in its most recent project solicitations as of  November 2017.", "As of November 2017, the SBIR and STTR policy directives stated that  the consequence for not meeting these benchmarks is ineligibility to  receive certain awards. SBA officials told us they are in the process of  updating the policy directives to reflect this change in how the  consequence is implemented, but these officials said that it is a long  process and they could not provide a timeframe for when the update  would be complete. As mentioned earlier in this report, SBA\u2019s Information  Quality Guidelines state that SBA seeks to ensure the quality, utility, and  integrity of the information it shares with the public, among other things.  Until participating agencies update their project solicitations and SBA  updates its policy directives to accurately reflect agreed-upon practices  about the consequence for small businesses that do not meet the  benchmarks, small businesses may be confused about their eligibility to  submit proposals and could invest time developing and submitting  proposals when they are not eligible to do so."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Under the SBIR and STTR programs, federal agencies have awarded  billions of dollars to small businesses to help these businesses develop  and commercialize innovative technologies. SBA and the participating  agencies have assessed these small businesses against the Transition  Rate Benchmark, but those assessments have been based on inaccurate  or incomplete data. Without ensuring the reliability of its data, SBA cannot  reasonably ensure that it has correctly assessed small businesses  against the Transition Rate Benchmark.", "SBA and the participating agencies developed a Commercialization  Benchmark across all the participating agencies but have not fully  implemented it, in part because they have been unable to collect  information from the small businesses and verify the accuracy of that  information. Working together to implement the benchmark as written or  revise it so that it can be implemented could allow the agencies to fulfill  the requirement in the Small Business Act to evaluate whether small  businesses have met a minimum performance standard for  commercializing their technology.", "Lastly, SBA and the participating agencies have provided inconsistent  information to small businesses about the consequence of not meeting  the benchmarks. Officials from SBA and the participating agencies had  agreed to change how the consequence would be implemented, starting  in 2017, because of difficulties implementing the benchmarks. However,  as of November 2017, seven agencies, and a subunit of one agency, had  not updated their project solicitations and SBA had not updated its policy  directives. Without consistent information on the benchmarks, small  businesses may be confused about their eligibility to submit proposals  and could invest time developing proposals that they are not eligible to  submit."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 11 recommendations, including 3 to SBA and 1  each to the Department of Commerce\u2019s National Oceanic and  Atmospheric Administration; the Departments of Defense, Education,  Energy, Health and Human Services, and Homeland Security; the  Environmental Protection Agency; and the National Science Foundation.  Specifically:  The Director of the Office of Investment and Innovation within SBA should  work with participating agencies to improve the reliability of its SBIR and  STTR award data (Recommendation 1).", "The Director of the Office of Investment and Innovation within SBA should  work with participating agencies to implement the Commercialization  Benchmark or, if that is not feasible, revise the benchmark so that it can  be implemented (Recommendation 2).", "The Director of the Office of Investment and Innovation within SBA should  update the SBIR and STTR policy directives to accurately reflect how the  consequence of the benchmarks is to be implemented (Recommendation  3).", "The SBIR Program Manager of the Department of Commerce\u2019s National  Oceanic and Atmospheric Administration should update the agency\u2019s  SBIR project solicitation to accurately reflect how the consequence of not  meeting the benchmarks is to be implemented (Recommendation 4).", "The SBIR Program Administrator within the Department of Defense  should update the agency\u2019s SBIR and STTR project solicitations to  accurately reflect how the consequence of not meeting the benchmarks is  to be implemented (Recommendation 5).", "The SBIR Program Manager within the Department of Education should  update the agency\u2019s SBIR project solicitation to accurately reflect how the  consequence of not meeting the benchmarks is to be implemented  (Recommendation 6).", "The SBIR Program Manager within the Department of Energy should  update the agency\u2019s combined SBIR and STTR project solicitation to  accurately reflect how the consequence of not meeting the benchmarks is  to be implemented (Recommendation 7).", "The SBIR/STTR Program Coordinator within the Department of Health  and Human Services should update the agency\u2019s SBIR and STTR project  solicitations to accurately reflect how the consequence of not meeting the  benchmarks is to be implemented (Recommendation 8).", "The SBIR Program Director within the Department of Homeland Security  should update the agency\u2019s SBIR project solicitation to accurately reflect  how the consequence of not meeting the benchmarks is to be  implemented (Recommendation 9).", "The SBIR Program Manager within the Environmental Protection Agency  should update the agency\u2019s SBIR project solicitation to accurately reflect  how the consequence of not meeting the benchmarks is to be  implemented (Recommendation 10).", "The SBIR and STTR Program Manager within the National Science  Foundation should update the agency\u2019s SBIR and STTR project  solicitations to accurately reflect how the consequence of not meeting the  benchmarks is to be implemented (Recommendation 11)."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to SBA and the 11 participating  agencies for review and comment. In written comments, the Department  of Commerce\u2019s National Oceanic and Atmospheric Administration; the  Departments of Defense, Education, Energy, Health and Human  Services, and Homeland Security; the Environmental Protection Agency;  and SBA agreed with the respective recommendations directed to their  agencies. Agencies\u2019 written comments are reproduced in appendixes I  through VIII. An official from one agency\u2014the National Science  Foundation\u2014stated in an email that the agency concurred with the  recommendation and did not have any further comments. Two  agencies\u2014the Department of Homeland Security and SBA\u2014also  provided technical comments, which we incorporated as appropriate.  Three agencies\u2014the Departments of Agriculture and Transportation, and  the National Aeronautics and Space Administration\u2014as well as the  Department of Commerce\u2019s National Institute of Standards and  Technology stated via email that they had no technical or written  comments.", "In its comments, SBA stated that it disagreed with a statement in our draft  report that SBA had not worked with agencies to enter high-quality and  accurate data into the database and provided us documentation of an  instruction guide on entering data that SBA officials said was available to  agencies. Based on our review of this information, we clarified the text of  the report and modified the draft report\u2019s recommendation by removing  the suggested example that SBA provide guidance to the agencies to  improve SBIR and STTR award data reliability. SBA agreed with the  revised recommendation.", "After we provided a draft of the report to the agencies for comment, the  Departments of Education and Homeland Security took action on their  respective recommendations. Specifically, in December 2017, the  agencies issued new project solicitations that reflected the updated  consequence of not meeting the benchmarks. We agree that these  agencies fully implemented the recommendations we made to them in  this report.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Agriculture, Commerce, Defense,  Education, Energy, Health and Human Services, Homeland Security, and  Transportation; the Administrators of the Small Business Administration,  the Environmental Protection Agency, and the National Aeronautics and  Space Administration; the Director of the National Science Foundation;  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Education", "paragraphs": ["Error! No text of specified style in document."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of Homeland Security", "paragraphs": ["Appendix VII: Comments from the Department of Homeland  Security Error! No text of specified style in document."], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": ["Appendix IX: GAO Contact and Staff  Acknowledgments Error! No text of specified style in document."], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Hilary Benedict (Assistant  Director), John Barrett, Natalie Block, Antoinette Capaccio, Tanya Doriss,  Justin Fisher, Ellen Fried, Juan Garay, Cindy Gilbert, Perry Lusk, William  Shear, and Elaine Vaurio made key contributions to this report."], "subsections": []}]}], "fastfact": ["Under two federal programs, agencies have awarded $46 billion to small businesses to develop and commercialize innovative technologies. The Small Business Administration and participating agencies set two benchmarks to assess the recipient's progress and eligibility for future awards. For example, small businesses must meet a certain amount of sales, investments, or patents resulting from their efforts.", "However, we found data problems that prevented the agencies from accurately measuring businesses against these benchmarks.", "We made several recommendations to SBA and agencies, including the need to improve data reliability."]}
{"id": "GAO-19-155", "url": "https://www.gao.gov/products/GAO-19-155", "title": "Unmanned Aerial Systems: Air Force Pilot Promotion Rates Have Increased but Oversight Process of Some Positions Could Be Enhanced", "published_date": "2019-02-07T00:00:00", "released_date": "2019-02-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["An increasing number of Air Force missions use unmanned aerial systems, or RPAs, to provide their specialized capabilities in support of combat operations. The demand for crew members for these systems has grown rapidly. For example, RPA pilot requirements increased by 76 percent since fiscal year 2013 while those for fighter pilots stayed about the same. These requirements include pilots who serve in non-operational staff positions, such as trainers.", "Senate Report 115-125 included a provision that GAO review career advancement for Air Force RPA pilots compared to other pilots. This report, among other things, describes (1) the rates that RPA and other pilots were promoted; (2) the rates that non-operational staff positions requiring RPA pilot expertise were assigned to various organizations, and (3) the extent to which the Air Force has reviewed its oversight process to effectively manage non-operational staff positions requiring aviator expertise.", "Among other things, GAO analyzed Air Force pilot promotion data from 2006-2017. GAO also analyzed non-operational staff position data from fiscal years 2013-2018 and interviewed officials regarding the management and oversight of these positions."]}, {"section_title": "What GAO Found", "paragraphs": ["The promotion rates for Air Force Remotely Piloted Aircraft (RPA) pilots have been generally similar to those of other pilots since 2013 and have increased over time. See figure below for promotion rates from major to lieutenant colonel. Air Force officials stated that RPA pilot promotion rates increased because the creation of a dedicated career field resulted in more competitive candidates.", "Since 2013, over 75 percent of non-operational staff positions requiring RPA pilot expertise were assigned to various organizations within the Air Force, according to GAO's analysis. These positions carry out support and other noncombat-related activities as well as training functions and are essential to the development of officers. However, the overall number of these positions that require a RPA pilot is about one-tenth of the combined number of those requiring other pilots. For example, in fiscal year 2018, 83 non-operational staff positions required RPA pilots compared to 330 requiring fighter pilots. Air Force officials stated that the small number of RPA positions is because the career field is new.", "The Air Force has not reviewed its oversight process to ensure that it is efficiently managing its non-operational staff positions that require aviator expertise. Air Force officials explained that over the last 10 years, the Air Force reduced the number of squadrons but had not reviewed the number of non-operational staff positions. Similarly, the Air Force has had no widely accessible oversight process to monitor whether it had established an accurate number of non-operational staff positions required to support the new RPA career field. In August 2018, the Air Force identified 513 non-operational staff positions (out of 2,783) as needing further review because they lacked adequate justification of the need for aviator expertise. Officials described the process for managing these positions as time and labor intensive, which can cause delays in obtaining reliable information needed to inform decision-making. By reviewing this process, the Air Force may be able to identify opportunities to create efficiencies and more effectively manage its non-operational staff positions requiring aviator expertise."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Air Force review its oversight process for managing the non-operational staff positions, including those for RPA pilots, to identify opportunities to increase efficiencies. DOD concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["An increasing number of Air Force missions call for the use of Remotely  Piloted Aircraft (RPAs) to provide their specialized capabilities in support  of combat operations. The Air Force uses RPAs to gather intelligence,  conduct surveillance and reconnaissance, and launch attacks against a  variety of targets. RPA aircrews consist of two people\u2014a pilot and a  sensor operator. The pilot\u2014in most cases a rated officer, i.e., an officer  possessing aviation expertise\u2014flies the aircraft. The Air Force relied  solely on manned aircraft pilots assigned to fly RPAs until 2010 when it  established an RPA pilot career field for officers trained to fly only RPAs.  The sensor operator\u2014an enlisted servicemember\u2014controls the aircraft\u2019s  sensors that record video and other intelligence information. The demand  for these skilled pilots and sensor operators has grown rapidly. For  example, from fiscal years 2013 to 2018, the Air Force experienced about  a 76 percent increase in its requirements of RPA pilots (1,366 to 2,404)  while its requirements for fighter pilots remained about the same (3,976 to  3,951).", "Our prior work has identified challenges that the Air Force has  experienced with the growth of the RPA pilot career field. For example, in  April 2014, we found shortages of RPA pilots and that the Air Force faced  challenges recruiting, developing, and retaining pilots and building their  morale. Additionally, we found that RPA pilot promotion rates were lower  than those for other career fields. The Air Force generally concurred with  our seven recommendations in that report to address these issues and  subsequently has fully implemented all but one recommendation to  analyze the career field effect of being an RPA pilot to determine whether  and how being an RPA pilot is related to promotions. Further, in January  2017, we found, among other things, that the Air Force could improve its  strategic human capital planning, and we made three recommendations  to the Air Force and two to the Office of the Under Secretary of Defense  for Personnel and Readiness to which they generally concurred. As of  July 2018, the Air Force had taken some action, but has not fully  implemented these recommendations. Appendix I contains more details  related to the recommendations that we have made regarding unmanned  aerial systems pilot issues along with DOD\u2019s and the Air Force\u2019s actions  taken to address them.", "In a report accompanying a bill for the National Defense Authorization Act  for Fiscal Year 2018, the Senate Armed Services Committee included a  provision for us to provide, among other things, the promotion rates for Air  Force RPA pilots since our 2014 report as well as for RPA sensor  operators. This report describes (1) the rates at which RPA pilots were  promoted and nominated to attend developmental education opportunities  as compared to the rates for pilots in other career fields; (2) the rates at  which enlisted RPA sensor operators were promoted as compared to the  rates for other enlisted servicemembers; (3) the rates at which non- operational staff positions requiring RPA pilot expertise were assigned  among Air Force organizations; and (4) reviews the extent to which the  Air Force has evaluated its oversight process used to manage non- operational staff positions requiring aviator expertise.", "To determine the rates at which RPA pilots have been promoted, we  obtained from the Air Force Personnel Center data on the number of  promoted officers and the number of officers eligible from 2006 through  2017 for pilots from four career fields\u2014bombers, fighters, mobility, and  RPA\u2014who qualified as \u201cIn-the-Promotion-Zone\u201d to the ranks of major  (grade O-4), lieutenant colonel (grade O-5), and colonel (grade O-6).  The promotion rates from 2006 through 2012 were initially reported in our  2014 report on Air Force RPA workforce issues and included in this  report for comparison purposes with the promotion rates from 2013  through 2017 that we calculated. From these data from 2013 through  2017, we calculated promotion rates to each rank for pilots from four  career fields\u2014bombers, fighters, mobility, and RPAs\u2014by dividing the  number of promoted officers by the number of eligible officers. We then  compared the annual RPA pilot promotion rates we calculated to (1)  those that we calculated for the other types of pilots to determine the  extent to which the rates were similar and (2) the promotion rates that we  reported in our 2014 report covering 2006 through 2012 to determine the  extent to which the rates from 2013 through 2017 had changed from  these previously reported promotion rates. Further, we reviewed Air Force  documents governing the officer promotion processes and interviewed  Headquarters Air Force Operations and Air Force Personnel Center  officials to obtain their perspectives on trends in RPA pilot promotion  rates.", "To determine the rates at which RPA pilots have been nominated to  attend developmental education\u2014e.g. professional military education\u2014 opportunities as compared to the rates for pilots in other career fields, we  analyzed intermediate and senior level developmental education  nomination data for all eligible officers for academic years 2014 through  2018. In order to analyze data consistent with the promotion analyses we  performed, we requested developmental education nomination data from  the same time period. However, officials told us that no academic year  2013 data was available but that academic year 2018 data were  available. Therefore, we obtained the most recent 5-year developmental  education nomination data available, which covered academic years 2014  through 2018. From these data, we calculated nomination rates by  dividing the number of nominated officers by the number of eligible pilots  from four career fields\u2014bombers, fighters, mobility, and RPAs\u2014that  competed for nominations. We then compared the annual RPA pilot  nomination rates we calculated to those of the other types of pilots to  determine the extent to which the rates were similar. We also reviewed  Air Force documents governing the developmental education nomination  process and interviewed Headquarters Air Force Personnel and Air Force  Personnel Center officials about such processes.", "To determine the rates at which enlisted sensor operators have been  promoted as compared to the rates for other enlisted servicemembers,  we obtained from the Air Force Personnel Center data on the number  promoted and the number eligible for promotion to the ranks of Staff  Sergeant (grade E-5) through Chief Master Sergeant (grade E-9) for RPA  sensor operators and the entire population of enlisted personnel. In order  to analyze data consistent with promotion analyses we performed, we  obtained this enlisted promotion data from the same period of 2013  through 2017. From these data, we calculated promotion rates for each  year by dividing the number of promoted enlisted servicemembers by the  number of eligible enlisted servicemembers. For each year, we compared  the annual enlisted RPA sensor operator promotion rates to those of the  entire population of enlisted servicemembers that were eligible for  promotions to determine the extent to which the rates were similar. We  also reviewed Air Force documents governing the enlisted promotion  processes and interviewed Headquarters Air Force Personnel and Air  Force Personnel Center officials to obtain their perspectives on trends in  enlisted sensor operator promotion rates.", "To determine the rates at which non-operational staff positions that  require RPA pilot expertise are assigned among Air Force organizations,  we obtained the number of non-operational staff positions required and  assigned within Air Force organizations for rated officers (i.e., have  aviator expertise) from four selected careers fields\u2014bombers, fighters,  mobility and RPA pilots. These data were obtained from Headquarters  Air Force Operations, Headquarters Air Force Personnel, and Air Force  Personnel Center. In order to analyze data consistent with the promotion  analyses we performed, we obtained this non-operational staff position  assignment data from the same fiscal years 2013 through 2017. Because  fiscal year 2018 data became available during the time of our review, we  also included it in our analysis. Therefore, we obtained the most recent 6- year non-operational staff position assignment data available, which  covered fiscal years 2013 through 2018. From these data, we calculated  annual non-operational staff position assignment rates by dividing the  number of positions assigned by the number of positions required by Air  Force organizations for the four types of pilots. We then compared the  annual RPA non-operational staff position assignment rates to those  calculated for the other types of pilots to determine the extent to which the  rates were similar.", "Additionally, to determine the extent to which the Air Force has reviewed  its oversight process to effectively manage its non-operational staff  positions that require aviator expertise, we reviewed Air Force instructions  related to the requirements and responsibilities for managing the process  for reviewing and justifying the need for aviator expertise in non- operational staff positions. We evaluated Air Force practices for  obtaining and using information for various Air Force organizations  regarding their justification for aviator expertise in their non-operational  staff positions against requirements from both the applicable Air Force  instructions and the Standards for Internal Control in the Federal  Government. This included the importance of designing control activities  to achieve objectives and respond to risks and using quality information  by identifying information requirements, obtaining relevant data from  reliable sources in a timely manner, and processing the obtained data into  quality information. Further, we also interviewed operations officials from  both Headquarters Air Force and the Air Force Air Combat Command to  obtain their perspectives of the process used to review and justify the  need for aviator expertise in staff positions. Further, we also interviewed  Headquarters Air Force officials regarding the status of their efforts to  respond to a House of Representatives requirement for the Secretary of  Air Force to report the results of a review of every staff position requiring  aviator expertise within the Air Force.", "To assess the reliability of the data used for each of the objectives, we  reviewed technical documentation for each data source to understand the  methods used to collect, store, and maintain these data; assessed the  data for errors, omissions, and inconsistencies; and interviewed officials  from Headquarters Air Force operations directorate, Headquarters Air  Force personnel directorate, and the Air Force Personnel Center who  were familiar with the systems from which the data were extracted. We  also considered the use of the data in prior related GAO reports. We  determined that the data were sufficiently reliable for our purposes of  reporting historical promotion, developmental education selection, and  rated staff position allotment trends, respectively.", "We conducted this performance audit from January 2018 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Air Force RPA Aircrews", "paragraphs": ["RPA aircrews consist of a pilot and a sensor operator. The Air Force in  most cases assigns officers to fly its RPAs. The Air Force relied solely  on manned aircraft pilots to fly remotely piloted aircraft until 2010 when it  established a RPA pilot career field (designated as Air Force Specialty  Code 18X) for officers trained to fly only RPAs. As of December 2013,  approximately 42 percent of the RPA pilots were temporarily assigned,  manned aircraft pilots and manned aircraft pilot training graduates. Both  of those groups of RPA pilots are temporarily assigned to fly RPAs with  the assumption that after their tour they will return to flying their manned  aircraft. By comparison, as of September 2018, manned aircraft pilots and  manned aircraft pilot training graduates comprised only 17 percent of the  RPA pilots. Further, the number of permanent RPA pilots has increased  from 58 percent of all RPA pilots in December 2013, to 83 percent as of  September 2018, as shown in figure 1.", "Additionally, Air Force enlisted personnel operate the RPAs\u2019 sensors,  which provide intelligence, surveillance, and reconnaissance capabilities.  As a crewmember, the RPA sensor operators provide assistance to the  RPA pilot with all aspects of aircraft use, such as tracking and monitoring  airborne, maritime and ground objects and continuously monitoring the  aircraft and weapons systems status."], "subsections": []}, {"section_title": "Officer Promotion Process", "paragraphs": ["The Defense Officer Personnel Management Act, as amended, created a  standardized system for managing the promotions for the officer corps of  each of the military services. Pursuant to the established promotion  system, the secretaries of the military departments must establish the  maximum number of officers in each competitive category that may be  recommended for promotion by competitive promotion boards. Within the  Air Force, there are groups of officers with similar education, training, or  experience, and these officers compete among themselves for promotion  opportunities. There are several competitive categories including one that  contains the bulk of Air Force officers called the Line of the Air Force,  which includes RPA pilots, as well as pilots of manned aircraft and other  operations-oriented careers.", "To determine the best-qualified officers for promotion to positions of  increased responsibility and authority, the Air Force appoints senior  officers to serve as members of a promotion selection board for each  competitive category of officer in the Air Force. Promotion selection  boards consist of at least five active-duty officers who are senior in grade  to the eligible officers and who reflect the eligible population with respect  to minorities and women, as well as career field, aviation skills, and  command in an attempt to provide a balanced perspective. Promotion  boards convene at the Air Force Personnel Center headquarters to  perform a subjective assessment of each officer\u2019s relative potential to  serve in the next higher grade by reviewing the officer\u2019s entire selection  folder. This \u201cwhole-person concept\u201d involves the assessment of such  factors as job performance, professional qualities, leadership, job  responsibility, depth and breadth of experience, specific achievements,  and academic and professional military education."], "subsections": []}, {"section_title": "Developmental Education Program Selection Process", "paragraphs": ["The Air Force developmental education programs expand expertise and  knowledge as well as a path that helps to ensure that personnel receive  the appropriate level of education throughout their careers. Officers  have three opportunities to compete for intermediate developmental  education programs, which focus on warfighting within the context of  operations and leader development, such as at the Air Command and Staff College. Officers have four opportunities to compete for senior  developmental education programs, such as at the Air War College,  which are designed to educate senior officers to lead at the strategic level  in support of national security, and in joint interagency, intergovernmental  and multinational environments.", "A subset of developmental education is Professional Military Education,  which includes resident and non-resident attendance options open to  officers in both the intermediate and senior developmental education  programs. Nonresident programs exist to provide individuals who have  not completed resident programs an opportunity to complete them via  correspondence, seminar, or other approved methods. Prior to 2017,  officers who were identified by their promotion board as a developmental  education candidate or \u201cselectee\u201d were assured of the opportunity to  attend some form of developmental education in-resident program.  However, in March 2017, the Air Force announced changes to its  nomination process for officer developmental education by separating in- residence school selection status from promotion decisions. Since that  time, commanders nominate candidates for in-residence, developmental  education programs based on individual performance."], "subsections": []}, {"section_title": "Various Career Assignments for Officers with Aviation Expertise", "paragraphs": ["Officers with aviation expertise, including RPA pilots, at various points in  their careers, may rotate through both flying and nonflying positions to  broaden their career experiences. Operational positions, whether flying or  nonflying, include those positions that exist primarily for conducting a  military action or carrying out a strategic, tactical, service, training or  administrative military mission. Operational positions include a range of  flying positions, such as for RPA pilots, operating aircraft to gather  intelligence or conduct surveillance, reconnaissance or air strikes against  a variety of targets. Operational positions that are non-flying positions  could include assignments as a close-air-support duty officer in an Air  Operations Center.", "Non-operational staff positions are generally non-flying positions and  include assignments to headquarters or combatant command positions.  Certain non-operational staff positions can be filled only by qualified  pilots. Other non-operational positions are more general in nature and are  divided among officer communities to help carry out support activities,  training functions, and other noncombat related activities in a military  service. These positions could include positions such as a recruiter,  working as an accident investigator, advisor to foreign militaries, or a  policy position at an Air Force major command. The Air Force views  nonoperational staff positions as a means to develop leaders with the  breadth and depth of experience required at the most senior levels inside  and outside the Air Force."], "subsections": []}, {"section_title": "Roles and Responsibilities Related to Aircrew Management", "paragraphs": ["Various offices within the Air Force have roles and responsibilities for the  management of aircrew positions and personnel.", "The Deputy Chief of Staff for Operations is to establish and  oversee policy to organize, train and equip forces for the Department  of the Air Force. This specifically includes the responsibility for all  matters pertaining to aircrew management.", "The Directorate of Operations is responsible for developing and  overseeing the implementation of policy and guidance governing  aircrew training, readiness, and aircrew requirements. The  directorate is the approval authority for aircrew distribution plans,  rated allocation oversight and any other areas that have significant  aircrew management implications.", "The Operational Training Division produces the official Air  Force aircrew personnel requirements projections, and in  conjunction with the Military Force Policy Division, develops  and publishes the Rated Management Directive, formerly  known as the Rated Staff Allocation Plan, as approved by the  Chief of Staff of the Air Force as designed to meet near-term  operational as well as long-term leadership development  requirements.", "The Office of the Deputy Chief of Staff for Manpower, Personnel,  and Services has responsibilities that include developing personnel  policies, guidance, programs, and other initiatives to meet the Air  Force\u2019s strategic objectives to include accessions, assignments,  retention, and career development.", "The Directorate of Force Management Policy, the Force  Management Division analyzes officer, enlisted and civilian  personnel issues. The division also maintains a variety of  computer models and databases to analyze promotion, retention,  accession, compensation and separation policy alternatives.", "Additionally, it is responsible for providing official aircrew  personnel projections for use in various management analyses.", "The Air Force Personnel Center, one of three field-operating  agencies reporting to the Deputy Chief of Staff of the Air Force,  Manpower, Personnel and Services, conducts military and civilian  personnel operations such as overseeing performance  evaluations, promotions, retirements, separations, awards,  decorations and education. The Center also directs the overall  management and distribution of both military and civilian  personnel."], "subsections": []}]}, {"section_title": "Since 2013 RPA Pilots Have Been Promoted and Nominated for Education Opportunities at Rates Generally Similar to Pilots in Other Fields", "paragraphs": [], "subsections": [{"section_title": "RPA Pilots Have Been Promoted at Rates Generally Similar to Those of Pilots in Other Career Fields", "paragraphs": ["Based on our analysis of Air Force promotion data, the percentage of  RPA pilots promoted were generally similar in comparison to the  promotion rates of pilots in other career fields since 2013. However, it is  important to note that since the population of eligible RPA pilots to be  considered for promotion was smaller than other pilot populations, the  promotion of one or two RPA pilots could have a large effect on their  promotion rate. For example, the RPA pilot promotion rates were within  10 percentage points of the promotion rates for the other types of pilots in  each year of those years in 8 out of 10 promotion boards to major and to  lieutenant colonel held during that time frame.", "RPA pilot promotion rates from captain to major were generally similar as  the promotion rates for other pilots from 2014 through 2017, as shown in  figure 2. For example, in 2014, 94 percent of eligible RPA pilots (29 of  31), bomber pilots (47 of 50), fighter pilots (189 of 201) and 91 percent of  eligible mobility pilots (355 of 388) were promoted from captain to major.  This is an improvement in promotion rates for RPA pilots compared to  2006 through 2012, where RPA pilot promotion rates fell below those for  all other pilots in 5 of the 7 promotion boards held.", "Additionally, the promotion rates for RPA pilots from major to lieutenant  colonel relative to other types of pilots in 2013 through 2017 showed a  similar improvement compared to 2006 through 2012, as shown in figure  3. For example, in 2017, 75 percent of eligible RPA pilots (15 of 20) were  promoted, which is generally similar to the promotion rates for the other  pilots\u201478 percent for bomber pilots (18 of 23), 83 percent for fighter  pilots (75 of 90), and 72 percent for mobility pilots (143 of 199). However,  in 7 of the 8 promotion boards held from 2006 through 2012, RPA pilot  promotion rates from major to lieutenant colonel fell below the promotion  rates for all other pilots.", "The one exception to the promotion rates being generally similar was the  rate at which RPA pilots were promoted from lieutenant colonel to  colonel. In this case, the rates for RPA pilots diverged notably from the  promotion rates of bomber, fighter, and mobility pilots from 2013 to 2017.  For example, in 2016, 1 out of the 5 (20 percent) eligible RPA pilots was  promoted to colonel. In contrast, 13 of 21 (62 percent), bomber pilots, 32  of 51 (63 percent) fighter pilots, and 34 of 65 (52 percent) mobility pilots  were promoted from lieutenant colonel to colonel. However, the  promotion rates of RPA pilots from lieutenant colonel to colonel that we  calculated should be considered cautiously as fewer than 10 RPA pilots  were eligible for promotion boards each year through this time period.  The promotion of one or two officers could have a large effect on the  promotion rate due to the small number of eligible RPA pilots.", "In April 2014, we reported that Air Force officials attributed the low RPA  pilot promotion rates from 2006 through 2012 generally to the process  that it used to staff RPA pilot positions at that time. Specifically, they  stated that commanders generally transferred less competitive pilots from  other pilot career fields to RPA squadrons to address the increased  demand. Air Force officials also stated that these officers generally had in  their records fewer of the factors that the Air Force Personnel Center  identified that positively influence promotions than their peers. They said  that because the bulk of RPA pilots who competed for promotion during  the time of our previous review was transferred using this process, these  were the reasons that RPA pilots had been promoted at lower rates than  their peers.", "Air Force officials stated that they believed the trend of increased  promotion rates for RPA pilots from 2013 through 2017 mostly reflected  the change in the population of eligible pilots who were recruited and  specialized as an RPA pilot (i.e., the 18X career field). According to Air  Force officials, the creation and establishment of this career field resulted  in an increase in the number of skilled and more competitive promotion  candidates. Specifically, as of September 2018, the number of permanent  RPA pilots outnumbered all other types of pilots serving as RPA pilots  combined."], "subsections": []}, {"section_title": "RPA Pilots Have Been Nominated to Developmental Education Programs at Rates Similar to Pilots in Other Career Fields", "paragraphs": ["RPA pilots were nominated to attend developmental education programs,  such as professional military education, at rates similar to the rates for  other pilots from academic years 2014 through 2018, according to our  analysis of Air Force data. An officer\u2019s attendance at developmental  education programs can be a factor that is taken into consideration when  being assessed for promotion. Our analysis showed that, for the  academic years 2014 through 2018, nomination rates for RPA pilots to  Intermediate and Senior Developmental Education programs combined  ranged from a low of 25 percent for academic year 2016 to a high of 31  percent for academic year 2015. In comparison, nomination rates across  the same time period for pilots in other career fields ranged from a low of  21 percent for mobility pilots for academic year 2016 to a high of 35  percent for fighter pilots for academic year 2014. Table 1 provides the  various nomination rates for each of the different types of pilots that we  analyzed."], "subsections": []}]}, {"section_title": "RPA Sensor Operators Have Been Promoted at Rates Similar to Other Enlisted Servicemembers", "paragraphs": ["The Air Force promoted enlisted RPA sensor operators at a rate similar to  the rates of all enlisted servicemembers, according to our analysis of Air  Force promotion data. Specifically, the Air Force promoted an average  of 100 RPA sensor operators (or an average of 26 percent) annually for  the period from 2013 through 2017. Similarly, the Air Force annually  promoted an average of approximately 27,000 enlisted personnel (or an  average of 25 percent) for the same period. Our analysis showed that in  2013 through 2017, promotion rates for RPA sensor operators ranged  from a low of 18 percent in 2014 to a high of almost 35 percent in 2017.  The promotion rates across the same time period for all other enlisted  servicemembers ranged from a low of approximately 19 percent in 2014  to a high of 32 percent in 2017. Table 2 provides the various promotion  rates that we analyzed.", "Air Force enlisted servicemembers in the lowest four levels (grades E1- E4) are selected for promotion based on time in grade and time in  service. Selection for promotion to the next two levels, known as the non- commissioned officer levels (grades E5 and E6), is based on the  Weighted Airman Promotion System to fill the requirement. This system  provides weighted points for an individual\u2019s performance record and  service decorations received, and the results of tests to assess an  individual\u2019s promotion fitness and job skills and knowledge. Selection for  promotion to the senior non-commissioned officer level (grades E7-E9) is  based on the same Weighted Airman Promotion System plus the results  from a central board evaluation. Servicemembers eligible for promotions  to the non-commissioned ranks are assessed and then listed from the  highest to lowest scores and offered promotion if they fall above a specific  cutoff score established to meet quotas within each career field and for  each rank.", "While enlisted servicemembers must pass knowledge and skills tests to  qualify for promotions, officials explained that the resulting promotion  rates essentially reflect requirements and are not indicative of  competitiveness across career fields as with officer promotion rates.  Officials stated that enlisted servicemember promotions are based on the  service\u2019s numeric personnel requirements for each enlisted grade. To  consider an enlisted servicemember for promotion from among those who  are eligible, a vacancy must first be required at the next higher grade  within that servicemember\u2019s occupational area, known as their Air Force  Specialty Code that needs to be filled. For example, in 2017, the Air  Force required promotions for 128 RPA sensor operators, and officials  promoted that many enlisted servicemembers from the cohort of 370  eligible servicemembers."], "subsections": []}, {"section_title": "Air Force Assigned Non-operational Staff Positions Requiring RPA Pilots at High Rates Since 2013", "paragraphs": ["For each year since 2013, the Air Force has assigned over 75 percent of  the non-operational staff positions that require an RPA pilot to the  organizations that had requested those positions, according to our  analysis of service headquarters data. However, the overall number of  non-operational staff positions that require an RPA pilot is about one- tenth of the number of those requiring pilots in other career fields. For  example, in fiscal year 2018 the Air Force had 83 non-operational staff  positions that required an RPA pilot compared to 330 positions requiring  fighter pilots. Air Force officials stated that the number of RPA positions  was smaller than for other pilots because the career field is relatively new  and still growing.", "Non-operational staff positions are generally non-flying positions and  include assignments to headquarters or combatant command positions.  Certain non-operational staff positions can be filled only by qualified  pilots. Other non-operational positions are more general in nature and are  divided among officer communities in a military service. Officers with  aviation expertise, including RPA pilots, at various points in their careers  may rotate through both flying and nonflying positions to broaden their  career experiences and Air Force officials stated that staff assignments  are essential to the development of officers who will assume greater  leadership responsibilities.", "Headquarters Air Force prepares allocation or \u201cassignment\u201d plans to  provide positions requiring aviator expertise to various Air Force  commands and other entities. Under this process, these organizations  identify the number of non-operational staff positions requiring aviator  expertise (e.g., pilots) they require as well as indicate the type of aviator  expertise that is needed to fill those positions, (e.g., fighter, bomber,  RPA). Headquarters Air Force then determines the extent to which the  staff position requirements can be met in accordance with senior  leadership priorities designed to equitably manage the shortage of  officers with aviation expertise. The results of this process are outlined in  the Air Force\u2019s annual Rated Management Directive which reinforces  each organization\u2019s flexibility for using their entitlements in non- operational staff and other positions.", "In some instances, the Air Force is able to assign enough positions to an  organization to meet nearly all of its non-operational staff position  requirements. For the purposes of our analyses, the assignment rate is  determined by the number of positions assigned compared to the number  of positions the organization required. For example, in fiscal year 2018  the Air Force assigned 99 percent of the non-operational staff positions  that require an RPA pilot to the requesting entities. In other instances, the  Air Force assignment rate of non-operational staff positions may be much  lower because of competing management priorities or shortages of  personnel in a career field. As a result, the Air Force\u2019s assignment of staff  positions can vary across the different career fields. For example, the Air  Force fighter pilot career field has had fewer fighter pilots than its  authorization number since 2013. Therefore, the Air Force assignment  rate for staff positions requiring fighter pilots is significantly lower than the  rate for staff positions requiring other types of pilots. For example, in fiscal  year 2017, the Air Force assignment rate for staff positions requiring a  fighter pilot was 18 percent, which was less than a quarter of the rate for  staff positions requiring an RPA pilot, as shown in table 3."], "subsections": []}, {"section_title": "The Air Force Has Not Reviewed Its Oversight Process to Manage Its Non- operational Staff Positions That Require Aviator Expertise", "paragraphs": ["The Air Force has not reviewed its oversight process to ensure that it is  effectively and efficiently managing its review of non-operational staff  positions that require aviator expertise, such as RPA pilots. Air Force  officials explained that its oversight process for managing these positions  requiring pilot expertise consists of a time-consuming, labor-intensive  process of exchanging emails and spreadsheets with 57 organizations,  such as various Air Force Major commands like the Air Combat  Command, the Air Force Special Operations Command, and the National  Guard Bureau. According to these officials, this process consists of the  maintenance and exchange of spreadsheets and briefing slides with  information about every position found throughout the Air Force and in  various other entities that are required to be reviewed and validated  annually. Additionally, this process is maintained by one official within the  Headquarters Air Force who must exchange the spreadsheets via email  approximately twice a year with officials from each of the organizations  that are responsible for annually justifying their continued need for non- operational staff positions requiring aviator expertise. Air Force officials  stated that this process does not always produce complete and accurate  information in a timely manner as in some instances the information  produced is not relevant by the time a complete review of the positions is  accomplished.", "Headquarters Air Force officials familiar with its oversight responsibilities  stated that using a different system would more efficiently and effectively  support their ability to manipulate, analyze and share information among  the applicable organizations and make informed decisions. For example,  these officials explained that over the last 10 years, the Air Force drew  down the number of squadrons, but did not do a good job of cross  checking that reduced number of squadrons with a revised number of  staff positions required for support. Therefore, the number of non- operational staff positions was not adjusted and are now artificially high in  some career fields and others may have fewer non-operational staff  positions than needed. These officials added that as the new RPA pilot  career field has developed, there has been no timely and widely  accessible system of checks and balances to establish an accurate  number of non-operational staff positions required to support the career  field. Further, they said that using a different system that allows them to  have more timely and quality information would enhance their ability to  manage and make decisions regarding the appropriate mix of expensive  pilots and others with aviator expertise between operational line positions  and non-operational staff position needs. They said this would better  ensure that there is a reasonable range of non-operational staff positions  required for each career field, such as for the growing RPA pilot career  field.", "An October 2017 memorandum from the Air Force Chief of Staff stated  that the number of non-operational staff positions which require aviation  expertise must be brought into balance with the Air Force\u2019s ability to  produce the appropriate number of officers with aviator expertise. The  memorandum also stated that organizations were strongly encouraged to  change their current requirements to meet the available current force  levels including converting chronically unfilled non-operational staff  positions requiring aviator expertise to positions specifically designated  for RPA pilots. As a result of two separate reviews, Air Force officials  identified hundreds of these positions that lacked adequate justification or  qualifications to support the positions\u2019 requirement to be filled by officers  with aviator expertise. For example, in August 2018, out of 2,783 non- operational staff positions, the Air Force found that 513 of these positions  were evaluated as lacking adequate justification or mission qualifications  to support the need for aviator expertise and 61 positions were eliminated  after further review.", "Prior to 2010, according to officials, the Headquarters Air Force  maintained a web-based management oversight system to review and  approve the justifications for its non-operational staff positions requiring  aviator expertise that allowed for wide access to and manipulation and  timely analyses of information. Additionally, this former system provided  multilevel coordination among Headquarters Air Force and its major  commands for reviewing the justifications of all of the positions. According  to Headquarters Air Force officials, the use of this management oversight  system was discontinued in 2010 due to a decision to no longer fund the  contractor maintaining the system. In October 2018, officials from one of  the Air Force\u2019s Major Commands confirmed that the current oversight  system in use is time-consuming, does not readily support information  analysis and that plans to integrate it with another existing management  system had not happened.", "The Headquarters Air Force official in charge of managing this process  told us that he had submitted multiple requests over the last 3 years to  integrate the information being managed with spreadsheets and emails  into an existing personnel management system to improve the efficiency  of the process. However, according to this official, higher priorities and funding issues have precluded the information from being integrated into  another existing system. In September, 2018, another Air Force official  told us that the Program Management Office that manages a system into  which the information could be integrated was behind schedule in  implementing several other system updates. Because of these delays, the  official acknowledged that no review has yet been done of what is needed  to provide the most efficient management oversight process of the  information currently being managed via the spreadsheet process. The  official said that before any actions could take place, a review of  requirements and priorities would be needed in order to make a  determination as to what changes could be made. Therefore, he said that  there are no decisions or timelines available for reviewing a process that  would provide the validation information for non-operational staff positions  in a timelier and widely accessible manner.", "Air Force instructions state that major commands are required to perform  annual aircrew requirements reviews including review and revalidation of  all aircrew positions, except for rank of colonel or higher, to ensure aviator  expertise is required, and report the results to the Headquarters Air Force  Operations Training Division. Further, the Headquarters Air Force  Operations Training Division has the responsibility to ensure a  management process is in place to provide efficient and effective  oversight of the major commands\u2019 annual review and revalidation of the  aircrew position requirements process. Additionally, Standards for Internal  Control in the Federal Government states that management should  identify needed information, obtain the relevant information from reliable  sources in a timely manner, and process the information into quality data  to make informed decisions and evaluate its performance in achieving  key objectives and addressing risks.", "By reviewing its oversight process, the Air Force may be able to identify a  more efficient manner to manage its non-operational staff positions that  require aviator expertise. A management oversight process that provides  timely and widely accessible position justification information may help  ensure that the proper type of aviator expertise needed in these positions  is up to date. In turn, this could result in a more efficient use of the Air  Force\u2019s short supply of expensive pilot resources, particularly fighter  pilots, and could potentially improve its ability to assign and develop  effective leaders, such as those within the growing RPA career field."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The Air Force continues to expand the use of RPAs in its varied missions  of intelligence gathering, surveillance and reconnaissance, and combat  operations. While the overall number of eligible RPA pilots is much  smaller compared to other pilots, over the last 5 years RPA pilots have  achieved promotions and nominations to attend developmental education  programs at rates that were generally similar in comparison to pilots in  other career fields. Additionally, non-operational staff positions requiring  RPA pilots have been assigned to entities at high rates since 2013, but  the number of positions available to them is smaller than the number that  require fighter, bomber, and mobility pilots because the career field is still  growing.", "Air Force officials have noted problems with the current oversight process  which may be hindering its ability to efficiently and effectively manage  these non-operational staff positions as required by Air Force policy. For  example, the Air Force has recently identified that a large number of  these positions designated as requiring officers with aviator expertise  lacked adequate justification for that requirement. By reviewing the  efficiency and effectiveness of its management oversight process that  provides information in a timelier and more widely accessible manner, the  Air Force could better ensure that it makes informed decisions regarding  the need for pilots in certain non-operational staff positions and is in  compliance with policy. It also could help ensure that the Air Force more  efficiently uses its short supply of expensive pilot resources. Ultimately,  this may positively affect its ability to assign and develop effective  leaders, such as those within the growing RPA career field."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of the Air Force should review its management oversight  process that provides information and documents the justifications of the  Air Force\u2019s non-operational staff positions requiring aviator expertise,  including RPA positions, to identify opportunities for increased efficiency  and effectiveness and take any necessary actions. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["In written comments reproduced in appendix II, DOD concurred with  comments to the recommendation, and provided separate technical  comments, which we incorporated as appropriate.", "DOD concurred with the recommendation to review the management  oversight process that provides information and documents the  justifications of the Air Force\u2019s non-operational staff positions requiring  aviator expertise, including RPA positions, to identify opportunities for  increased efficiency and effectiveness and to take any necessary actions.  In its comments, DOD stated that it agrees the current oversight process  is time-consuming and could be more efficient. However, it believes this  process is effective because the Air Force was able to validate the need  for having pilots fill a majority of its non-operational staff positions during  a recent congressionally-mandated review of these positions. As we  reported, this review of all staff positions requiring aviator expertise  across the Air Force and other defense entities discovered more than 500  of approximately 2,800 positions that were initially found to be lacking  adequate justifications, and 61 positions eventually were eliminated. We  believe the Air Force\u2019s results from this one-time review is an example of  how the current process is not consistently yielding up-to-date validations  of positions. Further, DOD also stated that while a move to automating  the process again has been considered, current funding shortfalls prevent  the Air Force from establishing an automated system to increase the  process\u2019s efficiency. We continue to believe that the Air Force should  review its current process in order to identify any viable means to  increase its efficiency and effectiveness. Such a review may provide the  Air Force with opportunities to more consistently provide the proper type  of aviator expertise needed to fill its staff positions as well as potentially  provide more leadership opportunities to those within growing career  fields, such as RPA pilots.", "We provided a draft of this report to DOD for review and comment.", "We are sending copies of this report to the appropriate congressional  committees, the Acting Secretary of Defense, and the Secretary of the Air  Force. In addition, this report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions regarding this report, please  contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Steps Taken by the Department of Defense and the Air Force to Address Prior GAO Report Recommendations", "paragraphs": ["Since 2014, we have issued three reports assessing the Air Force\u2019s  remotely piloted aircraft (RPA) workforce management.", "In April 2014, we found that the Air Force had shortages of pilots of  remotely piloted aircraft (RPA) and faced challenges to recruit,  develop, and retain pilots and build their morale. We also found that  Air Force RPA pilots experienced potentially challenging working  conditions and were promoted at lower rates than other career fields.  We made seven recommendations, and the Air Force generally  concurred with our recommendations. It has fully implemented all but  one recommendation to analyze the career field effect of being an  RPA pilot to determine whether and how being an RPA pilot is related  to promotions.", "In May 2015, we found that the Air Force faced challenges ensuring  that their RPA pilots completed their required training and that the  Office of the Deputy Assistant Secretary of Defense for Readiness  had not issued a training strategy that addresses if and how the  services should coordinate with one another to share information on  training pilots who operate unmanned aerial systems. We made one  recommendation related to these findings with which DOD concurred.  However, in September 2018, an official from the Office of Secretary  of Defense for Readiness stated that there are compelling reasons  why a training strategy is no longer necessary and that no action is  planned to implement the recommendation.", "In January 2017, we found, among other things, that the Air Force had  not fully tailored a strategy to address the UAS pilot shortage and  evaluated their workforce mix of military, federal civilian, and private- sector contractor personnel to determine the extent to which these  personnel sources could be used to fly UAS. We made five  recommendations related to these findings with which the Air Force  and DOD generally concurred. As of July 2018, the Air Force has  taken some action to address the first three recommendations and  officials from the Office of the Under Secretary of Defense for", "Personnel and Readiness have fully implemented the other two  recommendations.", "In table 4, we present the recommendations that we made to the Air  Force and the Under Secretary of Defense for Personnel and Readiness  and summarize the actions taken to address those recommendations as  of September 2018."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Lori Atkinson (Assistant Director),  Rebecca Beale, Amie Lesser, Felicia Lopez, Grant Mallie, Ricardo  Marquez, Richard Powelson, Amber Sinclair, and John Van Schaik made  key contributions to this report."], "subsections": []}]}], "fastfact": ["Many Air Force unmanned aerial systems (UAS) are larger and more complex than commercial drones, requiring special training and investment in their pilots.", "Since 2013, promotion rates for UAS pilots have increased to match those of other pilots. However, there are relatively fewer non-flying positions\u2014which are essential for career development\u2014requiring UAS pilots' expertise.", "We recommended improving how the Air Force manages and justifies its non-flying pilot positions to help it better use its resources and develop leaders among UAS pilots.", "This text was updated due to an incorrect date."]}
{"id": "GAO-18-536", "url": "https://www.gao.gov/products/GAO-18-536", "title": "Highway and Transit Projects: Better Data Needed to Assess Changes in the Duration of Environmental Reviews", "published_date": "2018-07-19T00:00:00", "released_date": "2018-07-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 2005, the federal government has enacted various statutes aimed at accelerating the environmental review process for highway and transit projects. In addition, the Clean Water Act and the Endangered Species Act may require three federal agencies\u2014the Corps, FWS, and NMFS\u2014to issue permits or perform consultations before a project can proceed.", "GAO is required by statute to assess the extent to which statutory provisions have accelerated and improved environmental permitting and consulting processes for highway and transit projects. This report examines, among other things: 1) the impact of streamlining provisions on consulting and permitting time frames, and (2) additional actions used by federal resource agencies to streamline their reviews. GAO analyzed permitting and consulting data from the 3 federal agencies and interviewed officials from the 3 agencies, 16 agency field offices, and 7 state DOTs for their perspectives on the effect of streamlining provisions and other efforts. GAO selected these offices to include a range of locations and those with a greater number of permits and consultations, among other factors."]}, {"section_title": "What GAO Found", "paragraphs": ["Federally funded highway and transit projects must be analyzed for their potential environmental effects, as required by the National Environmental Policy Act, and may be subject to other environmental protection laws, including the Clean Water Act and the Endangered Species Act. These laws may require the U.S. Army Corps of Engineers (Corps) to issue permit decisions and the U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) to conduct consultations before a project can proceed. These three agencies are referred to as \u201cresource agencies\u201d for this report. The three most recent transportation reauthorization acts include provisions that are intended to streamline various aspects of the environmental review process; 18 of these provisions could potentially affect time frames for the environmental permitting and consulting processes for highway and transit projects.", "While officials GAO interviewed at resource agencies and state departments of transportation (state DOT) noted that some actions called for by the 18 statutory provisions have helped streamline the consultation and permitting processes for highway and transit projects, GAO found that a lack of reliable agency data regarding permitting and consulting time frames hinders a quantitative analysis of the provisions' impact. Officials said, for example, that a provision that allows federal liaison positions at resource agencies to focus solely on processing applications for state DOT projects has helped avoid delays in permit and consultation reviews. However, none of the three resource agencies could provide enough reliable data to analyze changes in the durations of consultations and permit reviews over time for any of the provisions. Further, GAO identified limitations, such as negative or missing values, and inconsistent data entry practices for FWS and NMFS data. FWS and NMFS have limited controls, such as electronic safeguards and other data-entry procedures, to ensure the accuracy and reliability of their data on the duration of consultations. Left unaddressed, these data quality issues may impair the agencies' ability to accurately determine whether they are meeting their 135-day statutory and regulatory deadlines to complete consultations and provide biological opinions, and could affect their ability to provide accurate data on time frames for efforts of the Office of Management and Budget to track agencies' performance in conducting environmental reviews. While FWS and NMFS officials stated that the agencies plan to improve their tracking systems, the agencies do not have documented plans or time frames for the improvements and it is unclear whether the efforts will include internal controls to improve data reliability.", "Some federal resource agency and state DOT officials GAO interviewed identified additional actions that have been used to streamline the consultation and permitting processes to avoid delays in agency reviews. For example, 16 of the 23 resource agency and state DOT officials said that field office staff provided training to state DOT staff about the information field offices required for permit or consultation applications. Resource agency and state DOT officials also identified electronic systems with environmental data and for submitting documents as streamlining actions that have been helpful."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations, one to FWS and one to NMFS, to develop plans and time frames for improving their tracking systems and to develop internal controls to improve data reliability.", "The Departments of Commerce and Interior concurred with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Highway and transit projects that use federal funds are subject to federal  requirements, including requirements under the National Environmental  Policy Act (NEPA), to analyze the potential environmental effects of  proposed projects; such evaluations are called environmental impact  statements or environmental assessments, which we refer to in this report  as \u201cenvironmental reviews\u201d. In addition, other environmental protection  laws sometimes require \u201cfederal resource agencies\u201d\u2014such as the U.S.  Army Corps of Engineers (Corps), the U.S. Fish and Wildlife Service  (FWS), and the National Marine Fisheries Service (NMFS)\u2014to issue  permit decisions or perform consultations before a project can proceed.  Generally, as part of the environmental review, federal agencies are  required, to the fullest extent possible, to integrate the NEPA  requirements with other planning and environmental review procedures  so that all run concurrently. For transportation projects, including  highway and transit projects, additional streamlining provisions have been  enacted for environmental reviews. Nonetheless, some view the NEPA  environmental review process as time-consuming, while others have  praised it for, among other things, helping protect the environment and  bringing public participation into the government\u2019s decision making.", "The past three surface transportation reauthorization acts\u2014the Safe,  Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for  Users (SAFETEA-LU) in 2005, the Moving Ahead for Progress in the 21st  Century Act (MAP-21) in 2012, and the Fixing America\u2019s Surface  Transportation Act (FAST Act) in 2015\u2014contain a number of provisions  aimed at accelerating the environmental review process for highway and  transit projects. In addition, the Council on Environmental Quality (CEQ),  an executive office of the White House established in NEPA, is  responsible for overseeing NEPA implementation and issues regulations  and guidance that, among other things, are intended to make  environmental reviews more efficient.", "The FAST Act included provisions for us to assess, among other things,  the extent to which the streamlining provisions in the three most recent  transportation reauthorization acts have improved and accelerated the  environmental permitting and consulting processes for highway and  transit projects. This report: addresses the extent to which identified streamlining provisions have  had an impact on the time frames for the environmental consulting  and permitting processes;  identifies actions taken by federal resource agencies to streamline  their consulting and permitting reviews and identifies additional  streamlining opportunities, if any; and describes the actions taken by CEQ to accelerate highway and transit  projects.", "To evaluate the extent to which the streamlining provisions had an impact  on the consulting and permitting processes for highway and transit  projects, we reviewed the last three surface transportation  reauthorizations to identify the relevant provisions. We identified 18  provisions that are intended to streamline various aspects of the NEPA  environmental review process and could potentially affect the permitting  and consultation processes of the three federal resource agencies. In  addition, to obtain perspectives on the use and impact of the streamlining  provisions, we conducted interviews with resource agency officials in  Washington, D.C. and selected field and district offices, as well as state  departments of transportation (state DOT) and transit agency officials, as  described below. The officials we interviewed from three local transit  agencies did not offer any perspectives on the use of streamlining actions  or provisions related to environmental consulting and permitting and are  therefore not included in this report. To determine the time frames for  completing consultations and permit reviews, we analyzed the most  recently available data on the time frames of consulting and permitting  processes from the resource agencies for fiscal years 2009 through 2016.  We checked for missing data, errors, and other discrepancies in the  agencies\u2019 data to determine its reliability and to identify any potential  limitations. While these were the best available consultation and  permitting data maintained by these agencies, we found inconsistencies,  errors, and limitations in some data; we address these flaws later in this  report. We reviewed agency policies and procedures on ensuring  accurate and reliable data and compared them with federal standards for  internal controls.", "To examine the actions used by resource agencies to streamline  environmental consulting and permitting, we interviewed officials in seven  FWS field offices, seven Corps district offices, and two NMFS regional  offices. We reviewed field office documents and policies used to  accelerate environmental consulting and permitting reviews. We selected  these offices based on several factors identified through analysis of  federal resource agencies\u2019 data between fiscal years 2009 and 2016 to  include locations with a relatively large number of consultations or permit  decisions performed by each office, a mix of the average length of time  for consultations or permit decisions by each office, a mix of different  types of consultations or permit decisions performed by each office, and a  mix of geographic regions. We also interviewed officials from seven state  DOTs to discuss streamlining actions and additional opportunities to  streamline the consulting and permitting processes. We selected the  state DOTs based on our analysis of federal resource agency data  between fiscal years 2009 and 2016 to include locations with a large  number of consultations and permit decisions requested by state, a mix of  average consultation or permit decision times by state, a mix of different  types of consultations or permit decisions the states received, and a mix  of geographic regions. We obtained the perspectives of these field,  district, regional, and state DOT officials on additional efforts, beyond the  statutory streamlining provisions, to accelerate the resource agencies\u2019  environmental consulting and permitting reviews. These responses from  the interviews are not generalizable.", "To describe actions taken by CEQ, we reviewed guidance and  regulations issued by the Council and interviewed CEQ officials about the  Council\u2019s actions to help streamline the environmental review process for  federal transportation projects. We also interviewed the Department of  Transportation (DOT) and federal resource agency officials to discuss the  extent to which CEQ actions resulted in streamlining environmental  reviews.", "We conducted this performance audit from March 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Enacted in 1970, NEPA, along with subsequent CEQ implementing  regulations, sets out an environmental review process that has two  principal purposes: (1) to ensure that an agency carefully considers  information concerning the potential environmental effects of proposed  projects; and (2) to ensure that this information is made available to the  public. DOT\u2019s Federal Highway Administration (FHWA) and Federal  Transit Administration are generally the federal agencies responsible for  NEPA compliance for federally funded highway and transit projects.  Project sponsors\u2014typically state DOTs and local transit agencies\u2014may  receive DOT funds, oversee the construction of highway and transit  projects, develop the environmental review documents that are approved  by federal agencies, and collaborate with federal and state  stakeholders.", "In addition, the Clean Water Act and the Endangered Species Act are two  key substantive federal environmental protection laws that may be  triggered by a proposed transportation project and that may require the  federal resource agencies to issue permit decisions or perform  consultations before a project can proceed."], "subsections": [{"section_title": "Permits under Section 404 of the Clean Water Act", "paragraphs": ["Section 404 of the Clean Water Act generally prohibits the discharge of  dredged or fill material, such as clay, soil or construction debris, into the  waters of the United States, except as authorized through permits issued  by the Corps. Before the Corps can issue a section 404 permit, it must  determine that the discharge of material is in compliance with guidelines  established by the Environmental Protection Agency.", "The Corps issues two types of permits:  Individual permits: issued as a standard permit for individual projects,  following a case-by-case evaluation of a specific project involving the  proposed discharge of dredged or fill material and/or work or  structures in navigable water.", "General permits: issued for categories of projects the Corps has  identified as being similar in nature and causing minimal individual  and cumulative adverse environmental impacts. General permits may  be issued on a state, regional, or nationwide basis.", "In fiscal year 2016, the Corps completed approximately 250 individual  permits and 10,750 general permits for transportation projects, based on  agency data. The Corps is not required to complete its permit reviews  within a specified time frame; however, it has performance metrics,  including target time frames for issuing permit decisions based on permit  type."], "subsections": []}, {"section_title": "Consultations under Section 7 of the Endangered Species Act", "paragraphs": ["The purpose of the Endangered Species Act is to conserve threatened  and endangered species and the ecosystems upon which they depend.  Section 7 of the Act directs federal agencies to consult with FWS or  NMFS when an action they authorize, fund, or carry out, such as a  highway or transit project, could affect listed species or their critical  habitat. Section 7 also applies if non-federal entities receive federal  funding to carry out actions that may affect listed species.", "Before authorizing, funding, or carrying out an action, such as a highway  or transit project, lead federal agencies must determine whether the  action may affect a listed species or its critical habitat. If a lead federal  agency determines a proposed action may affect a listed species or its  critical habitat, formal consultation is required unless the agency finds,  with FWS\u2019 or NMFS\u2019 written concurrence, that the proposed action is not  likely to adversely affect the species. Formal consultation is initiated when  FWS or NMFS receives a complete application from the lead agency,  which may include a biological assessment and other relevant  documentation, which describe the proposed action and its likely effects.  The formal consultation usually ends with the issuing of a biological  opinion by FWS or NMFS, which generally must be completed within time  frames specified in the Endangered Species Act and in its implementing  regulations. Specifically, FWS and NMFS have 135 days to complete a  formal consultation and provide a biological opinion to the lead federal  agency and project sponsor in order for the project to proceed. The consultation period can be extended by mutual agreement of the lead  federal agency and FWS or NMFS. In fiscal year 2016, FWS completed  179 formal consultations and NMFS completed 29 formal consultations  for federally-funded highway and transit projects, based on agency data.", "The three most recent transportation reauthorization acts include  provisions that are intended to streamline various aspects of the  environmental review process for highway and transit projects. We  identified 18 statutory provisions from these acts that could potentially  affect time frames for the environmental permitting and consulting  processes for highway and transit projects. Based on our review, we  grouped the provisions into two general categories: Administrative and  Coordination Changes and NEPA Assignment. See appendix II for a  complete list and descriptions of the 18 provisions that we identified.", "The 16 Administrative and Coordination Changes provisions are process  oriented. These provisions, for example: (1) establish time frames for the  environmental review process, (2) encourage the use of planning  documents and programmatic agreements, and (3) seek to avoid  duplication in the preparation of environmental review documents. The  two NEPA Assignment provisions authorize DOT to assign its NEPA  responsibility to states."], "subsections": []}]}, {"section_title": "Agency Experience Suggests Streamlining Provisions Had Some Positive Effect, but Lack of Reliable Data Hinders Impact Assessment", "paragraphs": ["Resource agency and state DOT officials told us they believe that some  actions called for by the 18 provisions we identified, such as  programmatic agreements, have helped streamline the consulting and  permitting processes. However, a lack of reliable agency data regarding  permitting and consulting time frames hinders a quantitative analysis of  the provisions\u2019 impact. Further, limitations in FWS and NMFS data, such  as missing or incorrect data and inconsistent data entry, could impair the  agencies\u2019 ability to determine whether the agencies are meeting statutory  and regulatory requirements, such as the extent to which the agencies  complete formal consultations and provide biological opinions within 135  days. FWS and NMFS have limited controls that would help ensure the  completeness and accuracy of their data."], "subsections": [{"section_title": "Officials at Resource Agencies and State DOTs Identified Some Actions That Are Called for by Streamlining Provisions That May Accelerate Environmental Reviews", "paragraphs": ["Resource agency and state DOT officials we interviewed told us they  believe that some actions called for by the provisions we identified have  helped streamline the consulting and permitting processes. While these  officials generally did not quantify or estimate the number of days review  times may have been reduced, they did generally explain how the review  processes were accelerated, depending upon the action being taken, for  example:", "Programmatic agreements: Officials from 18 of the 23 state DOTs and  federal resource agency field offices we spoke with told us that using  programmatic agreements has generally helped reduce review times.  Programmatic agreements can standardize the consulting and  permitting processes for projects that are relatively routine in nature  (e.g., repaving an existing highway). For example, one state DOT and  an FWS field office have an agreement that establishes a consistent  consultation process to address projects, such as pavement marking,  that have either a minimal or no effect on certain federally protected  species and their critical habitat. Programmatic agreements may  contain review time targets that are shorter than those for reviews not  subject to the agreements. For example, officials from one FWS field  office said that they typically met the 60-day time limit that was  established in one such agreement, compared to the standard 135- day period for completing formal consultations and issuing biological  opinions. In part, DOT has assisted in establishing programmatic  agreements affecting consultation and permit review processes. For  example, according to DOT, its Every Day Counts initiative has  helped create scores of programmatic agreements through efforts  such as identifying best practices, performing outreach, developing  new approaches, and improving existing ones. In our 2018 report on  highway and transit project delivery, 39 of 52 state DOTs in our  survey reported that programmatic agreements had sped up project  delivery within their states.", "Federal liaison positions: Officials from 21 of the 23 selected state  DOT and federal resource agency field offices told us that liaison  positions at resource agency offices, which are positions held by  federal employees who work on consultation and permit reviews for  state DOTs, have streamlined the consultation and permit review  processes. According to almost all of the selected officials, these  positions provide benefits, such as dedicating staff to process the  state DOTs\u2019 applications for permits and consultations, allowing state  DOTs to prioritize projects, and enabling enhanced coordination  between agencies to avoid conflicts and delays in the review process.", "For example, officials from one state DOT said that having a  dedicated liaison at an FWS field office gave the state DOT a  responsive point of contact, helped address workload concerns at the  FWS field office, and enabled FWS office staff to attend interagency  coordination meetings. According to DOT, as of November 2017,  states had 43 full-time equivalent positions at FWS and 11 at NMFS.  Corps officials stated that states had more than 40 full-time equivalent  positions at the Corps in fiscal year 2017. In our 2018 report on  highway and transit project delivery, 32 of 52 state DOTs in our  survey reported that they had used this provision. We found that 23  of those state DOTs reported that it had sped up project delivery  within their states.", "Early coordination: Officials from 18 of the 23 state DOT and federal  resource agency field offices we spoke with told us that early  coordination in consultation and permit review processes has  generally reduced review times. According to most selected state  DOT and resource agency officials, this early coordination can provide  benefits, such as improving the quality of applications, avoiding later  delays by identifying concerns early in the process, and allowing  permitting to be considered in the design phase of projects. For  example, officials at one of the Corps\u2019 district offices told us that they  routinely hold pre-application meetings with state, DOT, and resource  agency contacts to define what the Corps needs to process the  application quickly and to avoid later problems. Similarly, in our 2018  report on highway and transit project delivery, 43 of 52 state DOTs in  our survey reported that they had used this provision, and 27 of those  reported that the provision had sped up project delivery within their  states.", "Although selected federal resource agency and state DOT officials were  able to identify actions called for by the provisions that they believe have  helped streamline the consulting and permitting processes, officials from  all three resource agencies said that their agencies had not analyzed the  impact of the streamlining provisions on permit review or consultation  time frames and did not have plans to do so in future."], "subsections": []}, {"section_title": "Lack of Resource Agencies\u2019 Data Hinders Analysis of Whether Streamlining Provisions Reduced Time to Conduct Reviews", "paragraphs": ["For two reasons, we were unable to quantify the impact the 18  streamlining provisions had on the three federal resource agencies\u2019  consultation and permit review time frames. First, factors other than the  streamlining provisions may have also affected review times, limiting our  ability to discern the extent to which the provisions had an impact.  Second, the resource agencies could not provide enough reliable data for  us to analyze changes in consultation and permit review durations over  time.", "With respect to the first reason, factors other than the streamlining  provisions can influence the durations of permit reviews and  consultations, a situation that would make it difficult to establish whether  the streamlining provisions in the reauthorization acts had a direct impact.  In particular, officials from resource agencies and state DOTs we  interviewed informed us that some offices took actions included in some  of the various streamlining provisions before the three transportation  reauthorizations were enacted. For example, officials at one FWS field  office said that the office completed a programmatic agreement in 2004.  Officials at one state DOT said that they had funded positions at resource  agency offices for two decades. Corps officials said that the Corps  implemented early coordination before the provision requiring this action  was enacted. DOT officials also said that the provisions generally codified  and expanded on existing actions. Further, factors such as staffing  shortages at state DOTs and resource agency offices may also affect the  length of consultations and permit reviews. Therefore, even if the  durations of permit reviews and consultations could be evaluated over  time with enough reliable data, it could be difficult to connect changes in  the durations to the streamlining provisions with any confidence.", "Second, none of the three resource agencies could provide enough  reliable data to evaluate trends in the duration of consultations and permit  reviews after the 15 provisions were introduced in SAFETEA-LU and  MAP-21, and the FAST Act was enacted too recently to evaluate any  trends following the 3 provisions it introduced. To evaluate trends in  permit review and consultation durations before and after the provisions  were enacted, we would need sufficient data before and after their  enactment. The SAFETEA-LU, MAP-21, and FAST Act provisions were  enacted in August 2005, July 2012, and December 2015, respectively.", "Available Corps\u2019 data could not be used to determine trends in permit  review durations before and after the SAFETEA-LU and MAP-21  provisions were enacted. Specifically, Corps officials told us that their  data prior to October 2010 should not be used to evaluate trends due  to changes in the Corps\u2019 data tracking system and data entry  practices. The Corps did not provide more than one full fiscal year of  data prior to 2012, and we would need more than one year of data to  establish an adequate baseline in order to control for variations that  may occur from year to year.", "Further, FWS and NMFS could not provide reliable data to evaluate  trends in the durations of consultations before or after enactment of  SAFETEA-LU and MAP-21. FWS and NMFS officials informed us of  limitations in their agencies\u2019 consultation data that rendered the data  incomplete prior to fiscal year 2009 and calendar year 2012  respectively, a circumstance that would prevent us from evaluating  trends following SAFETEA-LU. Specifically, FWS officials told us that  use of its data tracking system was not mandatory in all regions for  consultation activities prior to fiscal year 2009. NMFS officials told us  that data from its tracking system are incomplete prior to 2012,  because some prior records did not transfer properly during a  migration to a newer version of the database. Further, the  weaknesses in more recent FWS and NMFS data that we identify  below would also limit an analysis of changes in consultation  durations following MAP-21.", "Finally, since the three agencies provided data through fiscal year  2016, we had less than one fiscal year of data following the December  2015 enactment of the FAST Act, an amount that was insufficient to  evaluate trends in consultation and permit review durations following  the Act\u2019s enactment."], "subsections": []}, {"section_title": "Weaknesses in FWS and NMFS Data Would Limit Analysis of Consultation Time Frames", "paragraphs": ["We identified limitations, such as incorrect or missing data and  inconsistent data entry practices, in more recent FWS and NMFS data,  and such limitations would limit future analysis of trends in the duration of  consultations. We did not identify similar limitations in Corps data. These  limitations could also hinder analyses of the extent to which the agencies  meet statutory and regulatory requirements, such as the extent to which  the agencies completed formal consultations and issued biological  opinions within 135 days. Standards for internal control in the federal  government state that agency management should use quality  information to achieve the agency\u2019s objectives and should design  appropriate controls for information systems that ensure that all  transactions are completely and accurately recorded. Information systems  should include controls to achieve validity, completeness, and accuracy of  data during processing, including input, processing, and output controls.  However, we identified errors in consultation data provided by FWS and  NMFS officials. For example, FWS\u2019s data included 1,568 unique  transportation-related formal consultations that started and concluded  within fiscal years 2009 through 2016. Of those records, 27 had formal  consultation initiation dates that followed the conclusion date, resulting in  a negative duration; 113 lacked an initiation date, precluding a  determination of the duration; and 19 had formal consultation initiation  dates that preceded the dates on which FWS could begin work. NMFS  officials said that records cannot be removed from the database once  saved\u2014including duplicate, incomplete, withdrawn, or otherwise bad  records\u2014and that the database does not always retain corrections after  they are made. As a result, data exported from the database are manually  reviewed for errors, according to NMFS officials. However, data provided  to us after this manual review process still contained errors.", "Further, FWS and NMFS officials described limited controls to ensure the  completeness and accuracy of their data. FWS officials said that they do  not currently conduct systematic reviews to examine the accuracy of the  data. The officials also said that they do not have procedures for follow-up  when errors are found, although regional or headquarters staff may  conduct outreach to an affected office if errors are found. FWS officials  also acknowledged that the database lacks sufficient electronic  safeguards on all fields to prevent errors. Similarly, NMFS officials said  that NMFS has not tracked the accuracy of its data and that many fields  in NMFS\u2019s database do not have safeguards to limit data entry errors.", "FWS and NMFS also lack procedures to ensure that they consistently  track all data associated with consultation time frames. For example,  FWS and NMFS officials could not provide data on whether formal  consultations and the issuance of biological opinions that exceeded 135  days obtained extensions, data that officials would need to track the  extent to which their agencies comply with the requirement to complete  consultations and issue biological opinions within 135 days absent an  extension. The officials said that the agencies do not require their staff to  enter extension data, and that some staff enter extension dates but others  do not. In addition, although hundreds of projects may be reviewed under  a single programmatic agreement, FWS and NMFS do not record all  projects reviewed under programmatic agreements. For example, NMFS  officials told us that the agency\u2019s system is not designed for staff to enter  individual actions reviewed under programmatic agreements. This  process prevents comparisons of review time frames for individual  projects under programmatic agreements with projects not reviewed  under those agreements. FWS\u2019s database also does not require some  critical information for determining consultation time frames, such as the  initiation dates for formal consultations. Further, FWS headquarters  officials acknowledged that differing field office procedures had  contributed to varying record-keeping methods, and officials at five of the  seven FWS field offices we interviewed told us that FWS\u2019s database is  not used consistently among field offices.", "The quality of FWS\u2019s and NMFS\u2019s consultation data may limit the ability of  the agencies to determine whether they are completing consultations  within required time frames, as described above, and may also impact  other internal and external uses of the data. For example, the quality of  the data may limit the agencies\u2019 evaluation and management of their  consultation processes. FWS officials said that FWS uses its data internally in calculating annual performance measures and to answer  questions from senior leadership, among other purposes. NMFS officials  said that NMFS uses its data internally to examine the agency\u2019s Section 7  workload, help set agency funding priorities, and track projects through  the consultation process. FWS and NMFS will also have to ensure that  their data systems can provide reliable data to comply with an executive  order requiring federal agencies to track major infrastructure projects,  including the time required to complete the processing of environmental  reviews. The August 2017 executive order directed the Office of  Management and Budget, in coordination with the Federal Permitting  Improvement Steering Council, to issue guidance for establishing a  system to track agencies\u2019 performance in conducting environmental  reviews for certain major infrastructure projects. To meet this directive,  this system is to include assessments of the time and costs for each  agency to complete environmental reviews and authorizations for those  projects, among other things. According to a multi-agency plan, system  implementation is planned to begin in the fourth quarter of fiscal year  2018, and publishing of performance indicator data is planned to begin in  the first quarter of fiscal year 2019. In addition, FWS has provided  consultation data to outside researchers who have publicly reported them  in a study and a web portal. NMFS makes some data for completed  consultations publicly available through the internet.", "NMFS and FWS officials we interviewed said that the agencies are  developing new versions of their databases, and FWS officials said that  they will develop new standard-operating procedures and guidance for  data entry. Specifically, FWS officials said that they have discussed the  development of a new version of their database that would better track  consultations chronologically and ensure greater data accuracy and  consistency, but that effort is still in the planning stage. Those officials  also said that they have formed a team to explore the development of  new standard-operating procedures, training, and guidance for consistent  data entry and that they are considering how to include data on whether  consultations received extensions in the new system. NMFS officials  said that the agency is modernizing its database, including improving data  entry, error prevention, maintenance, and tracking of actions under  programmatic agreements. However, FWS and NMFS officials could not  provide specific time frames for implementation or documentation of  these efforts. Therefore, it is not clear whether these efforts will include  internal controls that address all of the types of issues we identified."], "subsections": []}]}, {"section_title": "Federal and State Officials Identified Additional Actions That Helped Resource Agencies Streamline Processes", "paragraphs": [], "subsections": [{"section_title": "Some Officials at Resource Agencies and State DOTs Took Actions to Improve Applications", "paragraphs": ["Officials at 19 of the 23 federal resource agency field offices and state  DOTs we spoke with generally mentioned two additional actions, beyond  the 18 provisions we identified, for streamlining the consultation and  permitting process:  field office assistance to lead federal agencies and project sponsors,  including state DOTs, to improve applications for permits and  consultations; and electronic systems for environmental screening and document  submission.", "First, officials from some of the 16 federal resource agency field offices  we spoke with stated that they provide assistance to lead federal  agencies and project sponsors to clarify the information required in permit  and consultation applications before they are submitted to the resource  agency. Officials from 8 of those 16 offices stated that they provided that  assistance in order to improve the quality and completeness of  information included in the applications. Resource agency officials stated  that the permit or consultation process is delayed when the lead federal  agency or project sponsor does not initially provide the quantity or quality  of information necessary for resource agencies\u2019 field office staff to  complete permits and consultations. These staff must then request  additional information from the lead federal agency or project sponsor,  extending the permit or consultation reviews. Therefore, officials at 16  of the 23 federal resource agency field offices and state DOTs we spoke  with said that field office staff provided training to state DOT staff to  specify the information field offices required for initial permit or  consultation applications. In addition, officials at 6 of the 23 resource  agency field offices and state DOTs we spoke with created or were in the  process of creating documents, such as application templates or  checklists, that specify information required initially by field offices for  applications. For example, according to officials at one FWS field office, a  staff member created a standardized form letter for consultation  applications that includes information for the state DOT to submit with its  applications.", "Second, officials at federal resource agency field offices and state DOTs  also identified electronic systems for environmental screening and  document submission as helpful streamlining actions. Some state  agencies created electronic systems for permitting and consultation  applications, according to officials at 6 of the 23 resource agency field  offices and state DOTs we spoke with. Some of those state agencies  created systems for submitting application documentation, which can  include multiple reports and studies related to an endangered species or  its critical habitat. In addition, some of those state agencies created  electronic tools that screen potential transportation project areas for  environmental impacts. For example, in Pennsylvania, state agencies  created two electronic systems. The first system allows application  materials to be shared with multiple state and federal agencies while the  second allows applicants to screen project areas for potential impacts on  endangered species. The Pennsylvania Natural Heritage Program, a  partnership between four state agencies, created a system that allows  lead federal agencies or project sponsors to determine what potential  environmental impacts, if any, exist in a proposed project\u2019s geographic area (fig. 1). According to field office officials who use this resource, it  saves time and improves agency coordination on transportation projects.  Officials at two additional offices stated that their state agencies were in  the process of establishing such electronic systems. In addition, FWS has  piloted additional capabilities for its existing electronic system that  screens for species information. According to FWS officials, the current  pilot is restricted to specific species included in existing programmatic  agreements, but this updated system would guide applicants through the  consultation application and allow electronic document submission.", "The federal resource agencies continue to seek out additional  opportunities for their field offices to streamline the permitting and  consultation processes, according to officials at 11 of the 16 field offices.  Officials at four of those offices stated that they discuss additional  streamlining opportunities at regular transportation-related meetings with  other federal and state agency offices. However, beyond the streamlining  actions and provisions cited above, officials at resource agency field  offices and state DOTs did not identify additional opportunities used by  multiple field offices to streamline permits and consultations."], "subsections": []}, {"section_title": "DOT Supports Actions to Streamline the NEPA Process", "paragraphs": ["DOT has a role in streamlining the overall NEPA process for  transportation projects. Officials from DOT and its modal  administrations, in coordination with federal resource agencies,  participate in or support several efforts, including the following, to  streamline the NEPA process:", "Coordination meetings: DOT officials participate in some early or  regular coordination efforts, according to officials at some federal  resource agency field offices and state DOTs we spoke with. For  instance, according to officials at one Corps district office, DOT  officials participate in some monthly meetings between federal and  state agencies to discuss both specific transportation projects and  recurring issues that may present streamlining opportunities.", "Transportation liaisons: As mentioned above, recipients of DOT funds  may partially fund the transportation liaison positions at federal  resource agency field offices. Officials at some resource agency field  offices and state DOTs we spoke with stated that liaisons  implemented streamlining actions at those offices. For example,  officials at one FWS field office stated that the office\u2019s transportation  liaisons are responsible for creating and maintaining programmatic  agreements with the state DOT. In addition, DOT currently has  interagency agreements to provide national transportation liaisons at  resource agencies\u2014including the Corps, FWS, and NMFS\u2014who lead  nationwide efforts, such as meetings among field offices where  officials can share streamlining actions.", "Streamlining resource database: DOT maintains an online database  of resources created by DOT and transportation liaisons for  streamlining the NEPA process. The database, which is part of the  Transportation Liaison Community of Practice online portal, includes  programmatic agreements, regional streamlining efforts, and liaison- funding agreements, among other resources. The purpose of this  database is to provide examples of streamlining actions for  transportation liaisons and state DOT officials to use in implementing  these actions with state and federal agency offices to streamline  NEPA processes.", "DOT also participates in multi-agency efforts to identify recommendations  for streamlining the NEPA process. Those efforts produced two multi- agency reports that have identified best practices for improving  streamlining of the NEPA process:", "Red Book: In 2015, DOT coordinated with multiple federal agencies,  including the resource agencies, to update the Red Book, a resource  to help both federal and state agencies conduct concurrent  environmental review processes and to improve coordination in the  NEPA process for major transportation and other infrastructure  projects. For instance, the Red Book recommended electronic  information systems, including systems that share geographic  information with the agencies involved, as a way to streamline the  NEPA process.", "Annual interagency report: DOT and multiple federal agencies,  including the resource agencies, contribute to the Federal Permitting  Improvement Steering Council\u2019s annual report on recommended  actions for federal agencies. In the reports for fiscal years 2017 and  2018, those recommended steps included actions taken by some  resource agency field offices. For example, recommended steps in  the 2017 report included the creation of electronic application  submission systems and training to improve permit and consultation  applications.", "DOT officials stated that they continue to seek additional streamlining  opportunities with federal and state entities, including federal resource  agencies and state DOTs, through outreach to those agencies. For  example, the officials told us that they had reached out to the resource  agencies and provided training to help them identify what basic  application information is needed for certain types of projects that are  unlikely to be fully designed at that point in the project\u2019s design. DOT  officials also suggested that expanding the current streamlining actions  that resource agencies have taken, such as utilizing the transportation  liaison positions, would help streamline the process."], "subsections": []}]}, {"section_title": "The Council on Environmental Quality Has Issued Regulations and Guidance to Streamline NEPA Reviews", "paragraphs": ["CEQ oversees NEPA implementation, reviews and approves federal  agency NEPA procedures, and issues regulations and guidance  documents that govern and guide federal agencies\u2019 interpretation and  implementation of NEPA. In addition, CEQ has focused some of its efforts  on furthering the goal of streamlining environmental reviews. Those  efforts have included publication of various guidance and memorandums  on the effective use of programmatic reviews, according to CEQ  officials. For example, CEQ issued regulations that direct agencies, to  the fullest extent possible, to integrate the NEPA process into project  planning at the earliest possible time to avoid delays and resolve potential  issues, and to perform coordinated and concurrent environmental reviews  to the extent possible to minimize duplication of effort. CEQ officials also  noted that CEQ continues to co-chair the Transportation Rapid Response  Team, a working group of federal agencies that facilitates interagency  coordination and seeks to improve surface transportation project delivery  consistent with environmental guidelines.", "CEQ periodically reviews and assesses its guidance and regulations to  improve the effectiveness and timeliness of NEPA reviews, according to a  CEQ official. For example, CEQ reviewed the environmental review  processes of selected agencies in 2015 to identify model approaches that  simplify the NEPA process and reduce the time and cost involved in  preparing NEPA documents. CEQ used this review to identify and  recommend changes to modernize NEPA\u2019s implementation, including  using information technology, such as a web-based application that  identifies environmental data from federal, state, and local sources within  a specific location, to improve the efficiency of environmental reviews.", "On August 15, 2017, the President signed an executive order that  directed CEQ to develop a list of actions it will take to enhance and  modernize the environmental review and authorization process. In  September 2017, CEQ outlined its actions to respond to the executive  order in a Federal Register Notice. According to CEQ officials, in  response to the executive order, CEQ is in the process of reviewing its  existing regulations on the implementation of the provisions of NEPA to  identify changes needed to update and clarify its regulations. In June  2018, CEQ published an advance notice of proposed rulemaking to solicit  public comment on potential revisions to its regulations to ensure a more  efficient, timely, and effective NEPA process consistent with the national  environmental policy. In addition, CEQ, along with the Office of  Management and Budget, issued guidance for federal agencies for  processing environmental reviews and authorizations in accordance with  the executive order\u2019s goal of reducing the time for completing  environmental reviews for major infrastructure projects. Finally, CEQ  officials stated that CEQ is leading an interagency working group, which  includes representatives from the resource agencies, to review agency  regulations and policies to identify impediments to the processing of  environmental review and permitting decisions. CEQ anticipates the  working group findings will address a number of issues relating to  environmental reviews, including the environmental consulting and  permitting processes."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The federal government has enacted a number of statutory provisions  aimed at streamlining the environmental review process for highway and  transit projects. However, while Corps, FWS, and NMFS officials believe  that these provisions have helped streamline their permit reviews and  consultations, the lack of data hinders quantification of any trends in the  duration of those reviews. Furthermore, agency and government-wide  efforts to track major infrastructure projects, such as the planned Office of  Management and Budget performance tracking system, will be hindered  without accurate and reliable data. FWS and NMFS do not have  adequate internal control procedures in place to ensure accurate and  reliable data and cannot accurately assess their ability to meet statutory  and regulatory requirements for completing consultations and issuing  biological opinions. Although FWS and NMFS are in the process of  upgrading their data systems, the agencies do not have documented  plans or time frames that identify what controls they will use to ensure  accurate data on the time taken for consultation reviews."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of two recommendations, one to the Fish and  Wildlife Service and one to the National Marine Fisheries Service.", "Specifically, we are making the following recommendation to the Fish and  Wildlife Service:  The Principal Deputy Director of the Fish and Wildlife Service should  direct the Fish and Wildlife Service to develop plans and time frames for  improving its new consultation tracking system and develop appropriate  internal controls, such as electronic safeguards and other data-entry  procedures, to ensure accurate data on the time taken for consultations.  (Recommendation 1)", "We are making the following recommendation to the National Marine  Fisheries Service:  The Assistant Administrator for Fisheries should direct the National  Marine Fisheries Service to develop plans and time frames for improving  its new consultation tracking system and develop appropriate internal  controls, such as electronic safeguards and other data-entry procedures,  to ensure accurate data on the time taken for consultations.  (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of the report to the Departments of Transportation,  Defense, Commerce, and Interior and the Council on Environmental  Quality. The Departments of Commerce and Interior each provided  written responses, which are reprinted in appendixes III and IV,  respectively. The Departments of Commerce and Interior agreed with our  recommendations. In addition, the Departments of Transportation,  Defense, Commerce, and Interior and the Council on Environmental  Quality provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to appropriate congressional  committees, the Secretary of the Department of Transportation, Secretary  of the Department of Defense, Secretary of the Department of the Interior,  Secretary of the Department of Commerce, and other interested parties.  In addition, this report will be available at no charge on GAO\u2019s website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["Our work focused on federal-aid highway and transit projects and the  provisions included in the past three surface-transportation  reauthorizations that are intended to streamline the environmental  consulting and permitting processes performed by the three federal  resource agencies: Fish and Wildlife Service (FWS), National Marine  Fisheries Service (NMFS), and the U.S. Army Corps of Engineers  (Corps). This report (1) addresses the extent to which identified  streamlining provisions had an impact on the time frames for the  environmental consulting and permitting processes; (2) identifies actions  taken by the resource agencies to streamline their consulting and  permitting reviews and identifies additional streamlining opportunities, if  any; and (3) describes the actions taken by the Council on Environmental  Quality (CEQ) to accelerate highway and transportation projects.", "To identify relevant provisions that were aimed at streamlining the  consulting and permitting processes for highway and transit projects, we  reviewed the last three surface transportation reauthorization acts and  relevant federal statutes, regulations, and guidance. The three  reauthorizations we reviewed are as follows:  the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A  Legacy for Users (SAFETEA-LU);  the Moving Ahead for Progress in the 21st Century Act (MAP-21); and  the Fixing America\u2019s Surface Transportation Act (FAST Act).", "We identified 18 provisions that are intended to streamline various  aspects of the NEPA environmental review process and could potentially  affect the permitting and consultation processes of the three federal  resource agencies. Provisions were grouped into categories developed in  a previous GAO report on project delivery for ease of understanding. In  our review we identified relevant statutory provisions as they had been  amended by the three surface transportation reauthorization acts. Some  of the provisions, as originally enacted, were modified by subsequent  legislation.", "To evaluate the extent to which the streamlining provisions had an impact  on the consulting and permitting processes, we requested official responses from each of the three resource agencies on the impact of the  18 provisions we identified on the consulting and permitting processes.  We also conducted interviews with resource agency officials in  Washington, D.C. and the respective field, district, and regional offices to  determine the use and impact of the streamlining provisions from the  surface transportation reauthorization acts.", "To quantify the extent to which the streamlining provisions had an impact  on the time frames for completing consultations and permit reviews, we  requested data on the time frames of consulting and permitting from  FWS, NMFS, and Corps data systems for fiscal years 2005 through 2016  for all federally funded highway and transit projects. We requested data  from the resource agencies with a variety of information for each record  that included the start and end dates for each consultation and permit  decision, the type of consultation or permit decision, the project sponsor  or entity requesting the consultation or permit decision, the project type, a  description of the project, and the field, district, or regional office that  received and entered each record. The agencies provided the most  recently available data, which we analyzed. FWS was unable to provide  us reliable data prior to fiscal year 2009; the Corps was unable to provide  us reliable data prior to fiscal year 2011, and NMFS was unable to  provide us reliable data prior to calendar year 2012. Agency officials  stated that data prior to those years were unreliable because of various  factors, such as NMFS\u2019s performing a data migration to a new system  where some records did not transfer properly and Corps changes to its  database in 2011 that made earlier data incomparable to post-2011  permit records. We performed checks to determine the reliability of the  agency data and to identify potential limitations, such as missing data  fields, errors, and discrepancies in calculations between records. We  determined that the data provided by FWS and NMFS were not  sufficiently reliable for examining the impact of the streamlining provisions  on the time frames for completing consultation reviews. We also  determined that the data provided by the Corps was sufficiently reliable to  conduct analysis of permitting time frames, but because the Corps was  unable to provide reliable data prior to fiscal year 2010, we were unable  to examine the impact of streamlining provisions on the time frames for  completing permit reviews. Our discussion in the report of resource  agency data focuses on these limitations. We reviewed agency policies  and procedures on ensuring accurate and reliable data and compared  them with federal standards for internal controls.", "To examine the actions used by resource agencies to streamline  consulting and permitting reviews, we interviewed officials in seven FWS  field offices, seven Corps district offices, two NMFS regional offices, three  transit agencies, and seven state departments of transportation (state  DOTs) to discuss leading practices and additional opportunities for  streamlining the consulting and permitting processes, as well as the use  of the respective agency data systems. We reviewed field office  documents and policies used to accelerate consulting and permitting. To  select the federal resource agency field and district offices for interviews,  we used the consultation and permit data collected from the agencies.  We selected the offices based on a number of criteria identified through  analysis of federal resource agency data between fiscal years 2009 and  2016, including:  the most consultations or permit decisions performed; a mix of the average length of time for consultations or permit a mix of the types of consultations (e.g., formal or programmatic) or  permit decisions (e.g., general or individual) performed by office; and a mix of geographic regions.", "For the selection of state DOTs, we used a number of selection criteria  including:  the most consultations and permit decisions requested by state; a mix of the average consultation or permit decision time by state; a mix of the types of consultations or permit decisions the states a mix of geographic regions.", "To select the transit agencies for interviews, we used a number of  selection criteria including: high ridership numbers, substantial federal  capital funding between 2005 and 2015, and a mix of geographic regions.  We interviewed officials from these offices to identify actions that the  offices use to accelerate the consulting and permitting processes,  challenges in the processes, and potential actions that could be  implemented to further streamline the consulting and permitting  processes. The officials we interviewed from three local transit agencies  did not offer any perspectives on the use of streamlining practices or  provisions related to environmental consulting and permitting, and are  therefore not included in this report. These interviews are not  generalizable to all resource agency, state DOT, or transit agency offices.", "In addition, we met with transportation and environmental advocacy  groups to discuss potential additional actions for consulting and  permitting. We also reviewed federal reports and recommendations on  best practices for streamlining environmental reviews for federal  infrastructure projects, including highway and transit. These reports  included the Department of Transportation\u2019s Red Book and the Federal  Permitting Improvement Steering Council\u2019s annual best practices  reports.", "To describe actions taken by CEQ, we reviewed guidance and  regulations issued by CEQ and interviewed CEQ officials on the actions  the Council has taken to help streamline the environmental review  process for federal transportation projects. We also interviewed officials at  the Department of Transportation and resource agencies to discuss the  extent to which CEQ actions helped streamline environmental reviews for  transportation projects.", "We conducted this performance audit from March 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Provisions from Recent Transportation Reauthorization Acts that May Streamline Consultation and Permit Reviews", "paragraphs": [], "subsections": [{"section_title": "Description of the provision and the transportation reauthorization act reference 1.", "paragraphs": ["Programmatic approaches: Directs the Department of Transportation (DOT) to allow for programmatic  approaches to conducting environmental reviews for an environmental impact statement and to the extent  determined appropriate, other projects. Requires DOT to seek opportunities with states to enter into  programmatic agreements to carry out environmental and other project reviews.  MAP-21: \u00a7\u00a7 1305(a) and 1318(d) and FAST Act: \u00a7 1304(b) (codified at 23 U.S.C. \u00a7 139(b)(3) and 23 U.S.C.  \u00a7 109(note))", "Identifying participating agencies: Requires the lead agency to identify, no later than 45 days after the date  of publication of a notice of intent to prepare an environmental impact statement or the initiation of an  environmental assessment, any other federal and non-federal agencies that may have an interest in the  project, and to invite those agencies to become participating agencies in the environmental review process  for the project.  SAFETEA-LU: \u00a7 6002(a) as amended by FAST Act: \u00a7 1304(d)(1) (codified at 23 U.S.C. \u00a7 139(d)(2))", "Concurrent reviews: Requires that each participating and cooperating agency carry out its obligations under  other applicable law concurrently and do so in conjunction with the review required under the National  Environmental Policy Act (NEPA), unless doing so would impair the ability of the agency to conduct needed  analysis or otherwise to carry out those obligations, and that each agency should implement mechanisms to  enable the agency to ensure completion of the environmental review process in a timely, coordinated, and  environmentally responsible manner.  SAFETEA-LU: \u00a7 6002(a) as amended by MAP-21: \u00a7 1305(c) (codified at 23 U.S.C. \u00a7 139(d)(7))", "Use single NEPA document: Requires to the maximum extent practicable and consistent with federal law,  that the project\u2019s lead agency develop a single NEPA document to satisfy the requirements for federal  approval or other federal action, including permits.  FAST Act: \u00a7 1304(d)(2) (codified at 23 U.S.C. \u00a7 139(d)(8))", "Limiting participating agency responsibilities: Requires that participating agencies provide comments,  responses, studies, or methodologies on areas within the special expertise or jurisdiction of the agency, and  that an agency use the environmental review process to address any environmental issues of concern to the  agency.  FAST Act: \u00a7 1304(d)(2) (codified at 23 U.S.C. \u00a7 139(d)(9))", "Environmental checklist: Requires the development of a checklist by the lead agency, in consultation with  participating agencies, as appropriate, to help identify natural, cultural, and historic resources.  FAST Act: \u00a7 1304(e) (codified at 23 U.S.C. \u00a7 139(e)(5))", "Alternatives analysis: Requires the lead agency to determine the range of alternatives for consideration in  any document that the lead agency is responsible for preparing for a project, and requires that those  alternatives should be used to the extent possible in all reviews and permit processes required for the  project, unless the alternatives must be modified to address significant new information or circumstances or  for the lead agency or a participating agency to fulfill the agency\u2019s responsibilities under NEPA in a timely  manner.  SAFETEA-LU: \u00a7 6002(a) and FAST Act: \u00a7 1304(f) (codified at 23 U.S.C. \u00a7 139(f)(4))", "Coordination and scheduling: Requires a coordination plan for public and agency participation in the  environmental review process within 90 days of notice of intent to prepare an EIS or the initiation of an EA,  including a schedule for completion of the environmental review process for the project.  SAFETEA-LU: \u00a7 6002(a) as amended by MAP-21: 1305(e) and FAST Act: \u00a7 1304(g) (codified at 23 U.S.C.  \u00a7 139(g)(1))", "Description of the provision and the transportation reauthorization act reference  9.", "Issue resolution process: Establishes procedures to resolve issues between state DOTs and relevant  resource agencies, including those issues that could delay or prevent an agency from granting a permit or  approval, and describes lead and participating agency responsibilities.  SAFETEA-LU: \u00a7 6002(a) as amended by MAP-21: \u00a7 1306, and FAST Act: \u00a7 1304(h) (codified at 23 U.S.C. \u00a7  139(h))  10.  Financial penalty provisions: Can cause a rescission of funding from the applicable office of the head of an  agency, or equivalent office to which the authority for rendering the decision has been delegated by law, if  that office fails to make a decision within certain time frames under any federal law relating to a project that  requires the preparation of an EIS or EA, including the issuance or denial of a permit, license, or other  approval.  MAP-21: \u00a7 1306 as amended by FAST Act: \u00a7 1304(h)(3) (codified at 23 U.S.C. \u00a7 139(h)(7))  11.  Use of federal highway or transit funds to support agencies participating in the environmental review  process: Allows a public entity to use its highway and transit funds to support a federal (including DOT) or  state agency or Indian tribe participating in the environmental review process on activities that directly and  meaningfully contribute to expediting and improving project planning and delivery.  SAFETEA-LU: \u00a7 6002(a) as amended by MAP-21: \u00a7 1307, and FAST Act: \u00a7 1304(i) (codified at 23 U.S.C. \u00a7  139(j))  12.  150-Day statute of limitations: Bars claims seeking judicial review of a permit, license, or approval issued by  a federal agency for highway projects unless they are filed within 150 days after publication of a notice in the  Federal Register announcing the final agency action, or unless a shorter time is specified in the federal law  under which the judicial review is allowed.  SAFETEA-LU: \u00a7 6002(a) as amended by MAP-21: \u00a7 1308 (codified at 23 U.S.C. \u00a7 139(l))  13.  Enhanced technical assistance and accelerated project completion: At the request of a project sponsor or a  governor of the state in which the project is located, requires DOT to provide additional technical assistance  for a project where EIS review has taken 2 years, and establish a schedule for review completion within 4  years. In providing assistance, DOT shall consult, if appropriate, with resource and participating agencies on  all methods available to resolve the outstanding issues and projects delays as expeditiously as possible.  MAP-21: \u00a7 1309 (codified at 23 U.S.C. \u00a7 139(m))  14.  Early coordination activities in environmental review process: Encourages early cooperation between DOT  and other agencies, including states or local planning agencies, in the environmental review process to  avoid delay and duplication, and suggests early coordination activities. Early coordination includes  establishment of memorandums of agreement with states or local planning agencies.  MAP-21: \u00a7 1320 (codified at 23 U.S.C. \u00a7 139(note))  15.  Planning documents used in NEPA review: To the maximum extent practicable and appropriate, authorizes  the lead agency for a project and cooperating agencies responsible for environmental permits, approvals,  reviews, or studies under federal law to use planning products, such as planning decisions, analysis, or  studies, in the environmental review process of the project.  MAP-21: \u00a7 1310 as amended by FAST Act: \u00a7 1305 (codified at 23 U.S.C. \u00a7 168(b))  16.  Programmatic mitigation plans used in NEPA review: Allows a state DOT or metropolitan planning  organization to develop programmatic mitigation plans to address potential environmental impacts of future  transportation projects. It also requires that any federal agency responsible for environmental reviews,  permits, or approvals for a transportation project give substantial weight to the recommendations in a state  or metropolitan programmatic mitigation plan, if one had been developed as part of the transportation  planning process, when carrying out responsibilities under NEPA or other environmental law.  MAP-21: \u00a7 1311 as amended by FAST Act: \u00a7 1306 (codified at 23 U.S.C. \u00a7 169(f))", "Description of the provision and the transportation reauthorization act reference  17.  Categorical exclusion determination authority: Authorizes DOT to assign and a state to assume  responsibility for determining if projects can be categorically excluded from NEPA review, and allows states  that have assumed that responsibility to also assume DOT\u2019s responsibility for environmental review,  consultation, or other actions required under federal law applicable to activities classified as categorical  exclusions.  SAFETEA-LU: \u00a7 6004(a), as amended by MAP-21: \u00a7 1312, and FAST Act: \u00a7 1307 (codified at 23 U.S.C. \u00a7  326)  18.  Surface transportation project delivery program: Authorizes DOT to assign and a state to assume many  federal environmental review responsibilities for highway, public transportation, and railroad projects, to be  administered in accordance with a written agreement between DOT and the participating state.  SAFETEA-LU: \u00a7 6005(a), as amended by MAP-21: \u00a7 1313 and FAST Act: \u00a7 1308 (codified at 23 U.S.C. \u00a7  327)"], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Brandon Haller (Assistant  Director), Lauren Friedman, Tobias Gillett, Rich Johnson, Delwen Jones,  Hannah Laufe, Jeff Miller, Cheryl Peterson, Malika Rice, Alison Snyder,  Kirsten White, and Elizabeth Wood made significant contributions to this  report."], "subsections": []}]}], "fastfact": ["Since 2005, Congress has passed statutory provisions to help speed up the environmental review process for highway and transit projects. 3 federal agencies (the National Marine Fisheries Service, the Army Corps of Engineers, and the Fish and Wildlife Service) are often called on to review these projects.", "We looked at the time it takes to complete these environmental reviews. Agency officials told us that these provisions have helped make the review process faster, but we found that they lack reliable data and tracking systems to know for sure. We recommended that they develop better tracking systems and improve data quality."]}
{"id": "GAO-19-100", "url": "https://www.gao.gov/products/GAO-19-100", "title": "Troubled Asset Relief Program: Monitoring of the Hardest Hit Fund Program Could Be Strengthened", "published_date": "2018-12-21T00:00:00", "released_date": "2018-12-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Treasury established the HHF program in 2010 to help stabilize the housing market and assist homeowners facing foreclosure in the states hardest hit by the housing crisis. Through HHF, Treasury has obligated a total of $9.6 billion in Trouble Asset Relief Program funds to 19 state HFAs. HFAs use funds to implement programs that address foreclosure and help stabilize local housing markets\u2014for example, by demolishing blighted properties. Congress extended HHF in 2015, and HFAs must disburse all HHF funds by December 31, 2021, or return them to Treasury.", "The Emergency Economic Stabilization Act of 2008 included a provision for GAO to report on Troubled Asset Relief Program activities. This report focuses on the HHF program and examines, among other objectives, (1) the extent to which Treasury's monitoring addresses leading practices for program oversight and (2) HFAs' progress toward program targets.", "GAO reviewed documentation of Treasury's HHF monitoring practices, interviewed HFAs (selected based on differences in program types implemented) and Treasury officials, and reviewed information on how HFAs developed program targets."]}, {"section_title": "What GAO Found", "paragraphs": ["For its Housing Finance Agency Innovation Fund for Hardest Hit Markets (HHF), the Department of the Treasury (Treasury) has addressed or partially addressed all 14 leading monitoring practices that GAO identified. For example, Treasury periodically collects performance data from housing finance agencies (HFA) and analyzes and validates these data. However, while Treasury requires HFAs to regularly assess the risks of their programs, it does not systematically collect or analyze these assessments. As a result, Treasury is missing an opportunity to ensure that HFAs are appropriately assessing their risk. Also, Treasury does not require HFAs to consistently document which of their staff are responsible for internal control execution. This documentation could help HFAs wind down their programs, particularly as staff turn over.", "Most HFAs met Treasury's goals for drawing down HHF funds, with $9.1 billion disbursed to HFAs as of September 2018. HHF programs have assisted hundreds of thousands of distressed homeowners since 2010. However, the data Treasury has collected are of limited use for determining how well HFAs met their goals for assisting households and demolishing blighted properties, or for evaluating the HHF program overall. For example, Treasury did not develop a consistent methodology for HFAs to use when setting performance targets, which limits Treasury's ability to compare across programs or assess the HHF program as a whole. Further, GAO's guide to designing evaluations states that where federal programs operate through multiple local public or private agencies, it is important that the data these agencies collect are sufficiently consistent to permit aggregation nationwide. Although HFAs have until the end of 2021 to disburse their HHF funds, many programs are beginning to close, making it too late for meaningful changes to Treasury's approach to performance measurement. However, should Congress authorize Treasury to extend the program beyond December 2021 or establish a similar program in the future, it would be useful at that time for Treasury to develop a program evaluation design that would allow the agency to assess overall program performance, as well as performance across HFAs and program types."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that Treasury collect and evaluate HFAs' risk assessments and routinely update staffing documentation. Treasury agreed with these recommendations and stated that it has already taken steps toward addressing them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The housing crisis that began in 2007 led to unprecedented home price  declines, foreclosures, and high unemployment in certain parts of the  country. In response, under the authority granted to it by the Emergency  Economic Stabilization Act of 2008, the Department of the Treasury  (Treasury) established the Troubled Asset Relief Program (TARP).  Through TARP, Treasury funded housing programs intended to help  prevent avoidable foreclosures and preserve homeownership, including  the TARP Housing Finance Agency Innovation Fund for Hardest Hit  Markets, also known as the Hardest Hit Fund (HHF). HHF, established in  2010, provides funding to selected states to develop innovative solutions  to housing market difficulties in their states. As of October 2018, Treasury  had obligated $9.6 billion to 19 state housing finance agencies (HFA)\u2014 state-chartered authorities established to help meet affordable housing  needs\u2014to design and implement HHF programs. Participating HFAs  have until December 31, 2021, to disburse these funds.", "The Emergency Economic Stabilization Act of 2008 provided GAO with  broad oversight authorities for actions taken under TARP activities and  included a provision that we report on TARP activities and performance.  We have continued to provide updates on the HHF program. This report  provides an update on the HHF program as of December 31, 2017. This  report (1) determines the extent to which Treasury\u2019s monitoring of HHF  addresses leading practices for program oversight, (2) provides  information on HFAs\u2019 active programs and the status of HFAs\u2019 progress  toward program targets, and (3) describes challenges in implementing  HHF programs that HFAs and others identified.", "To assess the extent to which Treasury\u2019s monitoring of HHF addresses  leading practices for program oversight, we obtained and reviewed  documentation of Treasury\u2019s policies and procedures for monitoring the  HHF program. We identified 14 monitoring and oversight practices based  on a review of federal internal control standards, Office of Management  and Budget (OMB) guidance, and GAO reports on leading monitoring  activities. Although Treasury is not required to follow all of the guidance  that we identified, we determined that the guidance describes practices  that are helpful for creating an effective monitoring framework. We  selected practices that focused on the structure of Treasury\u2019s oversight  framework, the performance measures Treasury requires HFAs to track,  goal setting, and communication with external parties. We assessed the  extent to which Treasury\u2019s current monitoring policies and procedures  addressed the leading practices. More specifically, we determined  whether Treasury\u2019s monitoring policies and procedures addressed,  partially addressed, or did not address leading practices. Additionally, we  compared evidence of Treasury\u2019s 2016 and 2017 monitoring activities for  all participating HFAs to the agency\u2019s monitoring policies and procedures.", "To describe active HHF programs and the status of HFAs\u2019 progress  toward program targets, we reviewed contracts and quarterly  performance reports to identify HHF programs that were active as of  December 2017. We defined programs as active if they had a total  allocation approved by Treasury, were accepting applications, and were  disbursing HHF funds as of December 2017. For each of these programs,  we reviewed the HFA\u2019s contract with Treasury to identify the most current  targets for either assisting homeowners or demolishing blighted  properties. We also analyzed quarterly performance reports on program  outputs (defined as the products or services delivered) and outcomes  (defined as the consequences of carrying out an activity). Through a  review of program documentation and information from knowledgeable  officials, we found that Treasury\u2019s output data on homeowners assisted  and blighted properties demolished were sufficiently reliable for the  purpose of describing program outputs. However, as we discuss later in  this report, we found that outcomes data, such as the number of  homeowners who are no longer participating in HHF programs, were not  sufficiently reliable for our purposes due to differences in HFAs\u2019  interpretations of outcomes data definitions, among other things.", "To identify the factors that HFAs and other stakeholders viewed as  challenges for the HHF program, we reviewed related audit reports and  interviewed officials from four HFAs, selected based on their mix of HHF  programs, proportion of HHF funds disbursed, and geographic diversity.  For two of these HFAs, which had blight-elimination programs, we  conducted site visits to observe activities related to blight elimination  efforts. For this and the other objectives, we also interviewed mortgage  servicers and organizations that work with HFAs and housing counseling  agencies. To identify the factors that Treasury identified as challenges for  the HHF program, we reviewed documentation of Treasury\u2019s monitoring  reports for 2016 and 2017 and interviewed Treasury officials. See  appendix I for a full description of our scope and methodology.", "We conducted this performance audit from November 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Treasury established HHF in February 2010 to help stabilize the housing  market and assist homeowners facing foreclosure in the states hardest hit  by the housing crisis. The HHF program is implemented by Treasury\u2019s  Office of Financial Stability. Treasury obligated funds to 18 states and the  District of Columbia. Treasury allocated funds to each state\u2019s HFA to help  unemployed homeowners and others affected by house price declines.  HFAs, in turn, design their own programs under HHF specific to local  economic needs and circumstances pursuant to their contracts with  Treasury.", "Treasury allocated $9.6 billion in HHF funding to 19 HFAs in five rounds.  As described below, Treasury allocated $7.6 billion to participating HFAs  during the first four rounds of funding, all of which occurred in 2010. HFAs  were required to disburse these funds by December 2017.", "Round one: In February 2010, Treasury allocated $1.5 billion to the  HFAs in the five states that had experienced the greatest housing  price declines\u2014Arizona, California, Florida, Michigan, and Nevada.", "Round two: In March 2010, Treasury allocated $600 million to the  HFAs in five states with a large proportion of their populations living in  counties with unemployment rates above 12 percent in 2009\u2014North  Carolina, Ohio, Oregon, Rhode Island, and South Carolina.", "Round three: In August 2010, Treasury allocated $2 billion to the  HFAs in nine of the states funded in the previous rounds, along with  the HFAs for eight additional states and the District of Columbia, all of  which had unemployment rates higher than the national average in  2009. The additional HFAs that received funding were Alabama, the  District of Columbia, Georgia, Illinois, Indiana, Kentucky, Mississippi,  New Jersey, and Tennessee.", "Round four: In September 2010, Treasury allocated an additional  $3.5 billion to the same 19 HFAs that received HHF funding through  the previous rounds.", "In December 2015, the Consolidated Appropriations Act, 2016 authorized  Treasury to make an additional $2 billion in unused TARP funds available  to existing HHF participants. In early 2016, Treasury announced a fifth  round of HHF funding. According to Treasury and HFA officials and other  stakeholders, by that time some of the participating HFAs had begun to  wind down their programs by letting go of program staff or making other  changes after they had disbursed most of their funding from the first four  rounds. Treasury allocated this additional $2 billion in two phases.", "Round five, phase one: In February 2016, Treasury allocated $1  billion to 18 of the HFAs that had previously been awarded HHF funds  based on each state\u2019s population and utilization of previous HHF  funds. In order to qualify for phase one funding, states had to have  drawn at least 50 percent of their previously received funding.", "Round five, phase two: In April 2016, Treasury allocated an  additional $1 billion to 13 HFAs that applied and sufficiently  demonstrated to Treasury their states\u2019 ongoing housing market needs  and the ability to effectively utilize additional funds. The HFAs that  received funding were California, District of Columbia, Illinois, Indiana,  Kentucky, Michigan, Mississippi, New Jersey, North Carolina, Ohio,  Oregon, Rhode Island, and Tennessee.", "In conjunction with the fifth round of funding, Treasury extended the  deadline for disbursement to December 31, 2021. Treasury also  determined that HFAs must finish reviewing and underwriting all  applications for final approval to participate in the program no later than  December 31, 2020. HFAs that do not disburse HHF funds by the  December 31, 2021, deadline will have to return the remainder of the  funds to Treasury. See figure 1 for an overview of the allocation amounts  and disbursement deadlines."], "subsections": [{"section_title": "HHF Programs", "paragraphs": ["Under HHF, HFAs designed locally tailored programs that address HHF\u2019s  goals of preventing foreclosures and stabilizing housing markets. These  programs had to meet the requirements of the Emergency Economic  Stabilization Act of 2008 and be approved by Treasury. Treasury  categorizes programs into six types, which are discussed in detail later in  this report, including programs that provide monthly mortgage payment  assistance and programs that reduce the principal of a mortgage.  Programs vary by state in terms of eligibility criteria and other details.", "HFAs contract with various stakeholders to implement HHF programs,  including mortgage servicers and, in some cases, housing counseling  agencies and land banks. The types of stakeholders involved vary  depending on program design. For example, HFAs with blight elimination  programs may choose to provide HHF funding to a local land bank to  demolish and green blighted properties in distressed housing markets.", "Also, HFAs may contract with housing counseling agencies approved by  the Department of Housing and Urban Development (HUD) to identify  eligible applicants at risk of foreclosure.", "HFAs are required to report performance information on each of their  HHF programs to Treasury on a quarterly basis. This information includes  outputs, such as the number of homeowners assisted or properties  demolished, as well as outcomes, such as the number of homeowners  who are no longer participating in HHF programs. The specific types of  performance information that Treasury requires HFAs to report vary  depending on the program type and include both intended and  unintended consequences of the program. For example, HFAs with  mortgage payment assistance programs must report on the number of  homeowners who have transitioned out of the program due to specific  changes in their circumstances, such as regaining employment. HFAs do  not have to report on the number of borrowers who transitioned out of the  program into foreclosure sales, short sales, or deeds-in-lieu of foreclosure  for their down payment assistance programs because the assistance is  provided on behalf of a buyer who is purchasing, not selling or otherwise  exiting, the home. Treasury provides HFAs with spreadsheet templates,  which HFAs are to fill out and submit back to Treasury. The templates  include data-reporting guidance in the form of a data dictionary, which  describes the data elements HFAs are to report."], "subsections": []}, {"section_title": "Participation Agreements", "paragraphs": ["Participating HFAs\u2019 HHF programs are governed by a participation  agreement, or contract, with Treasury that outlines the terms and  conditions in providing services that the HFA must meet as a recipient of  HHF funds. Each agreement includes reporting requirements, program  deadlines, and descriptions of permitted administrative expenses.  Additionally, agreements include detailed descriptions of the HHF  programs that Treasury has approved. Program descriptions include  details such as eligibility criteria, structure of assistance, and the  estimated number of participating homeowners.", "Participation agreements may be amended with Treasury approval to  reflect changes to HHF programs, such as new requirements from  Treasury or changes in the amounts HFAs allocate to each program. As  an example, in 2015 Treasury added new conditions, called utilization  thresholds, to each HFA\u2019s participation agreement. The thresholds  establish the percentage of allocated funds each HFA was required to  draw from its Treasury account by the end of each year from 2016  through 2018. If an HFA did not meet a threshold, Treasury reallocated a  portion of the additional funds received during the fifth round to HFAs that  did meet the threshold. If an HFA would like to make a change to an HHF  program, the HFA must submit a request to Treasury that outlines the  proposed change. Treasury reviews the proposal through an  interdisciplinary committee and, if the proposal is approved, amends the  participation agreement. As of December 2017, the 19 participating HFAs  had each received approval from Treasury and executed between 9 and  21 amendments to their individual participation agreements."], "subsections": []}]}, {"section_title": "Treasury\u2019s Monitoring of HHF Addresses or Partially Addresses Leading Practices for Program Oversight", "paragraphs": ["Treasury\u2019s policies and procedures to monitor HFAs\u2019 implementation of  the HHF program address 10 leading monitoring practices, including  practices related to the collection of periodic performance reports and  validation of performance through site visits. However, Treasury\u2019s  assessment of HFAs\u2019 internal control programs, development of  performance indicators, documentation of goals and measures, and  documentation of HFAs\u2019 monitoring could better address leading  practices (see fig. 2)."], "subsections": [{"section_title": "Treasury Addressed 10 Leading Practices for Monitoring", "paragraphs": [], "subsections": [{"section_title": "Regular Monitoring of Policies and Procedures", "paragraphs": ["Treasury created policies and procedures to guide regular oversight of  HFAs\u2019 implementation of HHF. According to internal control standards for  the federal government, management should design control activities to  achieve objectives and implement control activities through policies\u2014 such as by periodically reviewing policies, procedures, and related control  activities. In addition, management should establish and operate  activities to monitor the internal control system and evaluate the results\u2014 for example, through ongoing monitoring procedures and separate  evaluations. Treasury documented procedures for key areas of its  monitoring framework, including providing funds to HFAs, evaluating  HFAs\u2019 requests to change their programs, collecting financial and  performance information from HFAs, conducting site visits, and  addressing fraud detection and mitigation for Treasury\u2019s staff. Treasury  regularly updates the policies and procedures it created and reviews its  compliance oversight procedures annually. In addition, Treasury regularly  conducts site visits to HFAs, as discussed below."], "subsections": []}, {"section_title": "Risk-Based Monitoring Approach", "paragraphs": ["Treasury uses a risk-based approach to selecting HFAs for its regular site  visits. This approach is consistent with leading practices we have  developed for managing fraud risk, which state that agencies should  employ a risk-based approach to fraud monitoring by taking into account  internal and external factors that can influence the control environment.  In 2018, Treasury began using a point-based, 29-factor approach to  selecting HFAs for site visits for compliance reviews, taking into account  factors such as whether prior fraud was detected or reported,  observations from HFAs\u2019 compliance reviews, administrative dollars spent  compared to program assistance provided, and whether HFAs have  documented blight-specific policies and procedures. According to  Treasury staff, during site visits Treasury determines its test and sample  sizes for a risk-based review of an HFA\u2019s programs.", "Treasury also uses a risk-based approach to responding to potentially  impermissible payments, and according to Treasury staff, its responses  depend on the circumstances. If an HFA notifies Treasury of issues  related to inappropriate payments involving fraud, waste, or abuse,  Treasury staff notify and work with the Office of the Special Inspector  General for the Troubled Asset Relief Program (SIGTARP) to provide  technical assistance as needed. In 2017, Treasury implemented  additional procedures with regard to HFAs\u2019 administrative expenses. If  Treasury identifies an administrative expense issue during a site visit,  Treasury requires the visited HFA to undertake a multistep review of its  administrative expenses, including reviewing additional administrative  expenses if similar problems are identified during the initial review. The  HFA is required to reimburse HHF for any administrative expenses that  were not made in accordance with federal cost principles. Additionally,  Treasury may require the HFA to create a plan for corrective action."], "subsections": []}, {"section_title": "Periodic Collection of Performance Reports and Data from Implementing Partners", "paragraphs": ["Treasury collects performance information from participating HFAs on a  regular basis, which a compliance team receives and reviews. These  efforts are consistent with internal control standards, which state that  management should use quality information to achieve the entity\u2019s  objectives, such as by obtaining relevant data from reliable sources.  Treasury tracks its receipt of agencies\u2019 quarterly performance reports and  financial statements, as well as HFAs\u2019 annual internal control  certifications. Quarterly performance reports include information about  homeowners, such as the number of homeowners who receive or are  denied assistance. These reports also include program-specific  performance data, such as the median assistance amount, and  outcomes, such as the number of program participants who still own their  home. According to HFAs\u2019 participation agreements, HFAs are required to report performance information through the end of their programs. In  addition, Treasury collects informal monthly updates from HFAs on their  program performance and is in frequent contact with HFAs by phone to  obtain information on HFAs\u2019 performance, including any challenges states  are facing, according to Treasury staff and HFAs with whom we met.  Treasury also collects reports on the impact of blight elimination  programs, which HFAs with these programs are required to submit to  Treasury."], "subsections": []}, {"section_title": "Periodic Analysis of Performance Data", "paragraphs": ["Treasury regularly analyzes the performance and financial data that it  collects through quarterly performance reports, quarterly unaudited  financial statements, and annual audited financial statements that HFAs  are required to submit. Periodic analysis of these materials is consistent  with standards for internal control, which state that management should  design control activities to achieve objectives and respond to risks\u2014for  example, by establishing activities to monitor performance measures and  indicators. Treasury uses information from quarterly performance  reports to produce quarterly reports for the public on the number of  homeowners who received or were denied assistance, among other  things. Treasury also includes data on the extent to which states have  spent their HHF funding in monthly reports to Congress. Additionally,  Treasury analyzes quarterly unaudited and annual audited financial  statements to monitor HFAs\u2019 spending of program funds and identify any  areas of concern. According to Treasury staff, the agency also uses  performance information HFAs report quarterly, such as the number of  homeowners who receive or are denied assistance, to assess whether  HFAs are making sufficient progress in effectively utilizing program funds  to reach the targets for assisting homeowners."], "subsections": []}, {"section_title": "Procedures for Ensuring Quality of Performance Data", "paragraphs": ["Treasury has procedures to assess the quality of HFAs\u2019 performance data  when reviewing quarterly performance reports and conducting site  visits. These procedures are consistent with internal control standards,  which state that management should use quality information to achieve  the entity\u2019s objectives, such as by evaluating data sources for reliability.  According to Treasury staff, beginning in the first quarter of 2018,  Treasury required all participating HFAs to upload their performance data  into a system that does basic data reliability testing, such as ensuring the  numbers submitted by HFAs are consistent with data submitted for  previous quarters. This system flags outliers or large changes for further  review. Prior to this requirement, HFAs could use the system optionally.  HFAs are able to upload their data as frequently as they want to check for  errors or inconsistencies.", "After performance information is uploaded into the system, two Treasury  staff review any issues flagged by the system and follow up with HFAs to  resolve them. According to Treasury staff, as an additional validation  step, Treasury staff conducts a reconciliation by checking whether the  funds reported in HFAs\u2019 performance reports match the data in the HFAs\u2019  quarterly financial reports. After Treasury reviews each HFA\u2019s  performance data, it combines that information to create quarterly reports.  In addition, Treasury staff told us that they do a detailed review of HFAs\u2019  financial statements during site visits, including but not limited to the  timeliness of financial reporting, corrections to reports after the reporting  cycle, and supporting documentation for all categories of expenditures  sampled during the review."], "subsections": []}, {"section_title": "Roles and Responsibilities of Personnel Responsible for Monitoring", "paragraphs": ["Treasury documents the offices that are responsible for receiving and  reviewing monitoring materials, the deadlines for receiving this  information, and the responsibilities of staff who execute internal control.  This documentation is consistent with internal control standards, which  state that management should implement control activities through  policies, such as by documenting each unit\u2019s internal control  responsibilities. The standards also state that management should  remediate identified internal control deficiencies on a timely basis, such  as by having personnel report internal control issues through established  reporting lines. Treasury\u2019s policies and procedures document which  offices are in charge of executing its monitoring procedures, such as  collecting required documentation, conducting site visits, and evaluating  HHF performance. Treasury informs HFAs of reporting lines to Treasury  through phone calls and emails. Treasury and HFA staff also noted that  they are in frequent contact with each other regarding administration of  the program."], "subsections": []}, {"section_title": "Validation of Implementing Partners\u2019 Performance through Site Visits or Other Means of Verification", "paragraphs": ["Treasury uses regular (at least biennial) site visits, biweekly calls with  HFAs, and monthly informal performance updates as means of validating  HFAs\u2019 performance. These practices are consistent with OMB guidance,  which states that a federal awarding agency may make site visits as  warranted by program needs. Treasury uses its site visits to assess  HFAs\u2019 program implementation, conduct its own analyses of program  results, review HFAs\u2019 use of program funds, and review HFAs\u2019  implementation of internal controls. According to Treasury staff, Treasury  also uses site visits to corroborate the information HFAs report on their  program performance and use of HHF funds.", "According to HFAs with whom we met, site visits typically last multiple  days and include entrance and exit conferences between Treasury and  HFA staff. During site visits, Treasury staff review documentation related  to homeowners and properties associated with the programs, quality  assurance processes, antifraud procedures, information technology and  data security, finances, and legal matters. After the site visit, Treasury  issues a report documenting its observations. Within 30 days of receiving  Treasury\u2019s written report, HFAs are required to provide Treasury with a  written response describing how they will address any issues of concern."], "subsections": []}, {"section_title": "Procedures for Project Closeout", "paragraphs": ["Treasury included some procedures for project closeout in HFAs\u2019  participation agreements. Creating procedures for project closeout is  consistent with OMB guidance, which states that agencies should close  out federal awards when they determine that applicable administrative  actions and all required work have been completed by the nonfederal  entity. Participation agreements describe various procedures for closing  out HHF programs, including requirements for the return of unexpended  funds to Treasury and final reporting and provisions for reimbursement of  expenses.", "In addition, according to Treasury staff, Treasury is in the process of  developing and issuing wind-down guidance for HFAs in stages to  address specific areas of program activity. Agency officials also  discussed winding down the HHF program during Treasury\u2019s 2018 Annual  Hardest Hit Fund Summit. The annual summit is a meeting that HFAs,  servicers, and other stakeholders are invited to attend to facilitate  information sharing among stakeholders involved in HHF. At the 2018  summit, the agency discussed topics that included final compliance and  financial reviews, program change requests, operational timelines, and  budgeting and staffing as they relate to the wind-down of HHF programs  and operations. In addition, as states have begun to close some of their  programs, Treasury has issued clarifying guidance to HFAs in order to  effectively wind down the HHF program\u2014including on streamlining the  process for requesting changes to programs. Treasury staff also  performed outreach to each HFA in April 2018 about their wind-down  plans and, according to Treasury staff, the agency expects to prepare  written guidelines for HFAs on certain other topics related to winding  down the program, including reporting requirements, as appropriate."], "subsections": []}, {"section_title": "Consideration of Performance Information in Making Management Decisions", "paragraphs": ["Treasury uses performance information to assess whether HFAs are  performing at a satisfactory level. This practice is consistent with internal  control standards, which state that management should establish and  operate monitoring activities to monitor the internal control system and  evaluate results, which can include evaluating and documenting the  results of ongoing monitoring and separate evaluations to identify internal  control issues. In addition, management should remediate identified  internal control deficiencies on a timely basis. This can entail  management completing and documenting corrective actions to  remediate internal control deficiencies on a timely basis. Treasury staff  described the agency\u2019s process of assessing HFAs\u2019 performance as  \u201cholistic.\u201d As a part of this process, Treasury staff review the targets HFAs  set for assisting households or demolishing blighted properties and  monitor HFAs\u2019 utilization rates. According to Treasury staff, if  performance and financial data suggest that an HFA is not making  sufficient progress toward its performance targets or is drawing funds too  slowly, Treasury collaborates with the HFA and the HFA must create a  plan to improve its performance. If an HFA is not responsive to Treasury\u2019s  efforts, Treasury issues a performance memorandum requiring the HFA  to create a plan to address its deficiencies. As of October 2018, Treasury  had issued performance memorandums to seven HFAs\u2014five in 2012 and  two in 2015.", "Additionally, as mentioned previously, Treasury issues a report to each  HFA following each site visit describing any issues of concern Treasury  identified. Treasury requires HFAs to provide the agency with a written  response to the report within 30 days of the report date describing the  HFA\u2019s plan for addressing any deficiencies."], "subsections": []}, {"section_title": "Communication with External Parties to Address Risks and Achieve Objectives", "paragraphs": ["Treasury regularly communicates with HFAs, servicers, and other  stakeholders interested in HHF, which is consistent with internal control  standards that state management should externally communicate the  necessary quality information to achieve the entity\u2019s objectives. This can  include communicating with, and obtaining quality information from,  external parties using established reporting lines. According to Treasury  staff, Treasury holds biweekly calls with HFAs and servicers, facilitates  issue-specific working groups between HFAs and stakeholders, and holds  an annual summit related to HHF. HFA staff said Treasury staff are very  responsive to program-related questions. Treasury\u2019s annual summit  allows interested parties, such as HFAs, servicers, and other  stakeholders, to discuss important issues related to HHF."], "subsections": []}]}, {"section_title": "Treasury Partially Addressed Four Leading Practices", "paragraphs": [], "subsections": [{"section_title": "Identification, Evaluation, and Monitoring of Risks", "paragraphs": ["To assist HFAs in designing their internal control activities, including  defining program objectives, Treasury created an optional risk  assessment matrix to help HFAs and their auditors identify and assess  HFAs\u2019 risks. The matrix includes control objectives and example control  activities, and it allows HFAs to determine their risk tolerances for each  control objective. For example, for the risk of improper use of  administrative funds, the matrix includes \u201censuring that appropriate  documentation exists to support HHF administrative expenses\u201d as a  control objective, and it lists routine review of administrative payments by  internal auditors as an example control activity. HFAs can identify their  risk tolerances as low, medium, or high in the matrix. This matrix is  consistent with federal internal control standards, which state that  management should define objectives clearly to enable the identification  of risks and define risk tolerances.", "However, Treasury does not systematically collect or evaluate HFAs\u2019 risk  assessments. HFAs\u2019 participation agreements require them to submit an  annual certification of their internal control programs by an independent  auditor to Treasury. According to Treasury staff, independent auditors  sometimes choose to include HFAs\u2019 risk assessments with the annual  certification, and during site visits Treasury obtains documentation of  HFAs\u2019 internal control programs, which sometimes includes their risk  assessments. Outside of these instances, Treasury does not routinely  collect HFAs\u2019 risk assessments. Further, in those instances when  Treasury does collect them, it does not analyze the assessments to  evaluate whether the risk levels are appropriate. While Treasury does a  more in-depth evaluation of HFAs\u2019 internal controls during site visits, this  review does not include evaluating the appropriateness of the risk levels  HFAs identified. For example, one of the risk assessment matrixes we  reviewed listed the HFAs\u2019 administrative expenses as low-risk despite this  HFA having a history of alleged improper-payment related issues with its  HHF program, which Treasury\u2019s review would not have evaluated.  Treasury officials told us that during site visits they may discuss the risk  levels that HFAs determine, but Treasury has not asked or required any  HFAs to change a risk level.", "Failure to collect and evaluate HFAs\u2019 risk assessments is inconsistent  with an important practice for preventing fraud we have previously  identified\u2014monitoring and evaluating the effectiveness of preventive  activities, including fraud risk assessments and the antifraud strategy, as  well as controls to detect fraud and response efforts. Further, according  to internal control standards, management should identify, analyze, and  respond to risks related to achieving the defined objectives, and an  oversight body may oversee management\u2019s estimates of significance so  that risk tolerances have been properly defined.", "According to Treasury staff, the risk assessment matrixes are intended for  use by HFAs and their independent auditors in preparing for the annual  certification. They said that risk tolerances, or levels, are to be assigned  by HFAs and their independent auditors, not by Treasury, and that it  would be inappropriate for Treasury to interfere with their determination.  However, agreed-upon procedures performed by HFAs\u2019 independent  auditors do not provide assurance or conclusion as to whether HFAs\u2019 risk  levels are appropriate. For example, in two agreed-upon procedures  reports we reviewed, the auditors stated that the procedures performed  were based on the HFAs\u2019 risk matrixes, but they did not mention  assessing whether the risk levels assigned to different controls were  appropriate. Treasury staff also said that Treasury expands its sample  size and criteria for specific programs or categories of expenses during a  compliance review where repeated or significant observations have been  previously found. However, by not collecting and evaluating HFAs\u2019 risk  assessments, Treasury limits its ability to monitor the effectiveness of  HFAs\u2019 preventive activities, controls to detect fraud, and response efforts.  In addition, Treasury is missing an opportunity to help ensure that risk  levels are appropriate."], "subsections": []}, {"section_title": "Documentation That Monitoring Plans Were Executed", "paragraphs": ["Treasury\u2019s documentation of its efforts to monitor HFAs is consistent with  internal control standards, which state that management should establish  and operate activities to monitor the internal control system and evaluate  results and remediate deficiencies on a timely basis. More specifically,  the standards cite as characteristics of these principles that management  evaluate and document the results of ongoing monitoring and separate  evaluations to identify internal control issues, and determine appropriate  corrective actions for internal control deficiencies on a timely basis.  Treasury addresses these criteria by documenting its monitoring findings  through site visit reports, as previously discussed. Treasury requires  HFAs to provide the agency with a plan to address any issue described in  the site visit report within 30 days. In addition, Treasury addresses these  criteria by documenting HFAs\u2019 responses and assessing whether the  issue has been addressed at the next site visit. Furthermore, Treasury  sets deadlines for and documents receipt of HFAs\u2019 annual internal control certifications, quarterly financial and performance reports, and annual  audited financial statements. When underperforming HFAs are not  responsive to Treasury\u2019s attempts to work with them to improve their  performance, Treasury documents the issues it has found and requires  the HFAs to create and submit a corrective plan.", "Treasury also directs HFAs to establish and execute their own internal  control system, but it does not require HFAs to consistently document  which of their staff are responsible for internal control execution. HFAs  were required to submit staffing information within 90 days of joining HHF.  However, HFAs are not required to regularly update this information.  Further, Treasury\u2019s written procedures for reviewing HFAs\u2019 internal  control programs during site visits do not include reviewing  documentation of which HFA staff are responsible for responding to or  reporting internal control issues. These practices are inconsistent with  standards for internal control, which state that management should  establish an organizational structure, assign responsibility, and delegate  authority to achieve the entity\u2019s objectives. The standards also note that  effective documentation can assist management\u2019s design of internal  control by establishing the \u201cwho, what, when, where, and why\u201d of internal  control execution.", "We asked Treasury if it encouraged HFAs to document which personnel  are in charge of executing internal control procedures. Treasury staff  referred us to the initial requirement that HFAs submit staffing information  within 90 days of joining HHF and stated that there is no requirement that  HFAs update this information. Further, Treasury staff said that during site  visits they interview key HFA staff who execute internal controls and  document these interviews. However, this practice does not help ensure  that HFAs consistently provided updated information to their staff about  which of their staff are responsible for internal control execution. Without  requiring HFAs to routinely update their documentation, particularly as  HFAs are winding down their HHF programs and staff begin to turn over,  Treasury cannot be assured that HFAs are keeping their staff updated  about who is responsible for monitoring issues and internal control  execution."], "subsections": []}, {"section_title": "Development of Relevant Output and Outcome Performance Indicators", "paragraphs": ["Treasury and HFAs created quantitative output and outcome measures to  assess HFAs\u2019 performance. For example, Treasury created utilization  thresholds to help ensure HFAs spend their HHF funds in a timely  manner. Also, HFAs created performance targets to estimate the number  of homeowners they could assist (or blighted properties they could  demolish) through HHF. These activities are consistent with an attribute  of successful performance measures\u2014specifically, that measures should  have a numerical goal.", "However, some of Treasury\u2019s performance measures are not clearly  stated, and Treasury did not create consistent methodologies for HFAs to  use to assess the performance of their HHF programs. In our previous  work on attributes of successful measures, we identified that measures  should be clearly stated and that the name and definition should be  consistent with the methodology used to calculate them. While Treasury  provided HFAs with a data dictionary to describe the information HFAs  are required to report, Treasury defined the term \u201cunique applicants\u201d in a  manner that allows HFAs to count applicants differently, leading to  inconsistencies in HFAs\u2019 methodologies for calculating some performance  measures. As discussed later in this report, Treasury also allowed and  sometimes required HFAs to self-define some data elements.", "Additionally, performance measures should indicate how well different  organizational levels are achieving goals. However, Treasury did not  design a consistent methodology for HFAs to use to develop targets for  the number of homeowners and properties their HHF programs may  assist, and as discussed later in this report, HFAs we interviewed used  different methodologies. Because some of Treasury\u2019s performance  measures are not clearly stated and because Treasury did not design  consistent methodologies for HFAs to use in setting targets, as HFAs  close down their HHF programs, Treasury has a limited ability to compare  performance across HFAs or aggregate these data to evaluate how well  the HHF program as a whole is achieving its goals."], "subsections": []}, {"section_title": "Documentation of Goals and Measures and Their Relationship to Program Outputs", "paragraphs": ["Treasury created goals and measures to assess HHF performance,  consistent with a practice we previously identified of creating performance  goals and measures that address important dimensions of program  performance and balance competing priorities. Treasury addressed this  practice by creating utilization thresholds for HFAs and inserting them in  HFAs\u2019 participation agreements. Treasury also addressed this practice by  documenting its performance measures, using standardized  spreadsheets through which HFAs regularly report on outputs and  outcomes related to the services provided to distressed homeowners.", "However, Treasury has not explicitly documented the relationship  between program outputs and the overall goals of the HHF program, and  it does not generally require HFAs to establish intermediate goals unless  the HFA has not met Treasury\u2019s performance expectations. This is  inconsistent with practices we previously identified relating to results- oriented performance goals and measures. Among these practices are  including explanatory information on goals and measures in performance  plans and using intermediate goals to show progress or contributions  toward intended results. The main goals of HHF are to prevent  foreclosures and stabilize housing markets. However, Treasury has not  documented the relationship between many of the program outputs it  tracks and the main goals of the HHF program. According to Treasury,  the relationship between its outputs and the goals of HHF can be inferred  through various memorandums and materials it issued when HHF was  created. However, these documents do not explicitly explain the rationale  for the use of these output measures to assess HHF\u2019s ability to stabilize  neighborhoods and prevent foreclosures. By not documenting the  relationship between HHF\u2019s program outputs and services and the overall  goals of the HHF program or requiring all HFAs to set intermediate goals,  Treasury missed the opportunity to more proactively articulate a results- oriented focus for the HHF program."], "subsections": []}]}]}, {"section_title": "Most HFAs Have Met Thresholds for Withdrawing Funds, but Inconsistent Targets and Outcome Measures Limit the Assessment of Program Performance Most Homeowners Participating in HHF Were Assisted through Mortgage Payment Assistance Programs", "paragraphs": ["As of December 2017, the 19 participating HFAs had 71 active HHF  programs. Active HHF programs fall under one of six Treasury-defined  program types: mortgage assistance, reinstatement, transition assistance,  principal reduction, down payment assistance, and blight elimination.  Participating HFAs may have implemented additional HHF programs, but  these programs had either stopped disbursing funds or had not received  a total allocation from Treasury at the time of our review. Individual HFAs  may implement multiple programs\u2014for example, the Mississippi HFA had  two active programs, and the South Carolina HFA had five.", "The most common type of HHF program as of December 2017 was  mortgage assistance, as shown in table 1. All 19 HFAs had active  mortgage payment assistance programs as of December 2017. In  contrast, 3 HFAs had active transition assistance programs.", "As of December 2017, we found that the 71 active HHF programs had  assisted approximately 400,000 homeowners and demolished almost  24,000 blighted properties. According to Treasury data, the majority of  homeowners who received HHF assistance participated in a mortgage  payment assistance program. Treasury data also indicate that transition  assistance programs assisted the smallest number of homeowners  relative to other HHF program types (see table 2).", "HHF programs of the same program type can vary in a number of ways,  including eligibility criteria, length of time implemented, and number of  homeowners assisted. Within each program type, HFAs designed  programs that sometimes varied based on specific housing needs. For  example, while both the Nevada and Florida HFAs had active  reinstatement programs as of December 2017, these programs had  different eligibility criteria. The Nevada HFA\u2019s reinstatement program  targeted low-to-moderate income homeowners who had fallen behind on  their mortgages. The Florida HFA offered a similar reinstatement program  for delinquent mortgages but also offered a program for senior  homeowners who had fallen behind on property taxes and other fees.", "HHF programs also varied by duration and the amounts of assistance  provided as of December 2017. For instance, since all HFAs initially  launched mortgage payment assistance programs at the beginning of  HHF, these programs have been active for an average of 7 years. In  contrast, HFAs began implementing down payment assistance programs  in 2015. Additionally, the median amount of assistance provided varied by  program type. According to analysis of Treasury data from 2010 through  2017, assistance ranged from a median amount of $4,000 per household  for transition assistance programs to over $42,000 per household for  principal reduction programs.", "The HHF program is beginning to wind down. As of September 2018,  Treasury had disbursed $9.1 billion of the $9.6 billion obligated under  HHF. According to Treasury officials, although HFAs may continue  issuing new approvals through December 31, 2020, most states have  already begun to close down HHF programs or will do so by the end of  2018 as they exhaust their available funds. These include California and  Florida, the two largest states in the program."], "subsections": [{"section_title": "Most HFAs Have Met Thresholds for Withdrawing Funds from Treasury", "paragraphs": ["According to Treasury officials, during the fifth round of funding Treasury  established new conditions for HFAs, called utilization thresholds, to help  maximize the use of the $2 billion in newly available funds. According to  documentation from Treasury, if an HFA does not meet its utilization  threshold, Treasury will reallocate a portion of the unused funds to HFAs  that did. The amount reallocated to each HFA is determined by state  population, the percentage of funds drawn by HFAs, and other factors.", "The utilization thresholds for 2016 and 2017 were structured as follows:", "2016. If an HFA did not draw at least 70 percent of its funding from  rounds one through four by December 31, 2016, 50 percent of its  round five funding would have been reallocated.", "2017. If an HFA did not draw at least 95 percent of its funding from  rounds one through four by December 31, 2017, 75 percent of its  round five funding would have been reallocated.", "Most HFAs have met Treasury\u2019s 2016 and 2017 utilization thresholds.  More specifically, the 18 HFAs eligible for round five funding met the 2016  utilization threshold. As a result, Treasury did not reallocate any HHF  funds for that year. As of December 2017, 17 of the 18 HFAs eligible for  round five funding met the 2017 utilization threshold. The Nevada HFA  drew 70 percent of its funding for rounds one through four as of  December 31, 2017, and therefore did not meet the 2017 utilization  threshold. As a result, Treasury reallocated approximately $6.7 million of  the Nevada HFA\u2019s unused fifth round HHF funds to the 17 other HFAs.", "As of September 2018, all HFAs had met the 2018 utilization threshold,  and Treasury had disbursed most of the funds obligated under HHF. If an  HFA did not draw at least 80 percent of its participation cap by December  31, 2018, an amount equal to the portion of round five funding that had  not been drawn from Treasury would have been reallocated."], "subsections": []}, {"section_title": "Data on the Extent to Which HHF Programs Met Targets Are of Limited Use Because Treasury Did Not Develop a Consistent Methodology for Calculating Targets", "paragraphs": ["The targets that HFAs set are of limited use for evaluating the  performance of individual programs, program types, HFAs, or the HHF  program overall. In their participation agreements, HFAs were required to  estimate the number of homeowners they intended to assist and, if they  had a blight elimination program, the number of blighted properties they  intended to demolish for each of their HHF programs. Treasury refers to  these estimates as targets.", "HFAs that we spoke with used different methodologies to calculate these  targets. For instance, one of the HFAs we spoke to calculated targets for  the number of homeowners they could assist by dividing the program\u2019s  total allocation by the average amount of assistance it anticipated  awarding to each homeowner. In contrast, another HFA calculated its  target for assisting homeowners by dividing that program\u2019s total allocation  by the maximum amount of assistance homeowners could be awarded  through the program. According to Treasury staff, they did not develop a  consistent methodology for HFAs to use in setting these targets because,  in their view, HFAs are most familiar with local conditions and should  have flexibility in adjusting the program criteria or creating new programs  based on these conditions.", "Internal control standards state that management should define  objectives clearly to enable the identification of risks and define risk  tolerances. In particular, the standards note the importance of stating  measurable objectives in a form that permits reasonably consistent  measurement. Further, our guide to designing evaluations states that  where federal programs operate through multiple local public or private  agencies, it is important that the data agencies collect are sufficiently  consistent to permit aggregation nationwide, which allows evaluation of  progress toward national goals. Because Treasury did not develop a  consistent methodology for HFAs to use when setting performance  targets, the targets HFAs developed do not permit consistent  measurement of program performance or an evaluation of how well the  HHF program as a whole met its goals. However, with the program  beginning to wind down, any changes going forward would not improve  the consistency of previously collected data or Treasury\u2019s ability to  evaluate the program as a whole."], "subsections": []}, {"section_title": "Treasury Collects Information on Outcomes for Some HHF Programs, but This Information Is of Limited Use", "paragraphs": [], "subsections": [{"section_title": "Treasury Requires HFAs to Report Some Outcome Information for Four Program Types", "paragraphs": ["Treasury collects quarterly data on outcomes from HFAs that implement  four of the six HHF program types: mortgage payment assistance,  principal reduction, reinstatement programs, and transition assistance  programs. HFAs must track outcomes, both intended and unintended,  until a household is no longer involved with an HHF program. Intended  outcomes include, for example, the number of homeowners who  completed or transitioned out of an HHF program as a result of regaining  employment. Unintended outcomes include the number of homeowners  who transitioned out of an HHF program into a foreclosure sale. The type  of outcomes Treasury requires HFAs to track depends on the program  type.", "Treasury did not design outcome measures in a way that would permit it  to use these data to evaluate whether HFAs or the overall program are  achieving the stated goals. More specifically, Treasury officials told us  that the data they collect on outcomes cannot be used to compare the  outcomes achieved by different HFAs or through different HHF program  types. According to Treasury officials, HFAs have historically had different  interpretations of Treasury\u2019s outcome measures. Treasury revised its  template for HHF reporting in 2015 and 2017 to clarify certain  performance-related terms. However, Treasury officials told us that  conclusions drawn from HHF data on some outcomes are of limited use  because HFAs interpret Treasury\u2019s guidance on these data differently.  Additionally, after it made revisions to guidance on performance reporting  in 2015, Treasury allowed\u2014and in some cases required\u2014HFAs to self- define certain data elements. For example, Treasury required HFAs to  define how they calculate the median principal forgiveness awarded by an  HHF program.", "As previously discussed, a key attribute of effective performance  measurement is clearly stated performance measures with names and  definitions that are consistent with the methodology used to calculate the  measure. Additionally, we have noted in our guide to designing  evaluations that a program\u2019s outcomes signal the ultimate benefits  achieved by a program and should be considered when evaluating a  program. Further, OMB has set the expectation that agencies should  conduct evaluations of federal programs. However, because Treasury  did not clarify certain outcome measures until 5 years into the program, or  take steps to ensure that HFAs calculated alternative outcomes  consistently, even after Treasury clarified its reporting guidance, the  alternative outcomes data that Treasury collects are of limited use for  evaluating the performance of HFAs, HHF programs by program type, or  the HHF program overall. As many programs are closing, further  clarification or changes would not capture the full scope of the program  and would not improve such evaluations."], "subsections": []}, {"section_title": "Treasury Requires HFAs with Blight Elimination and Down Payment Assistance Programs to Conduct Impact Studies", "paragraphs": ["Treasury requires HFAs with blight elimination and down-payment  assistance programs to identify indicators that are intended to track and  quantify the HHF program\u2019s impact on targeted areas, although HFAs are  not required to report outcomes data to Treasury in their quarterly  performance reports for these program types. According to Treasury,  blight elimination and down payment assistance programs are focused on  stabilizing housing markets in targeted distressed areas to prevent  foreclosures, and therefore they are not required to report individual-level  outcomes for HFAs to report in quarterly performance reports. Treasury  officials told us that the impact of these program types upon  neighborhoods, such as increases in the values of properties in  neighborhoods where down-payment assistance or blight elimination  programs were used, may not be observable immediately but may appear  over time. As of August 2018, four of eight HFAs with blight elimination  programs had submitted impact studies to Treasury. Also, all HFAs with  down payment assistance programs have submitted studies to Treasury.", "Three blight elimination program impact studies suggest that the  programs had positive impacts on targeted areas, although two of the  studies have important limitations. Studies on the programs in Michigan  and Ohio found that home prices increased in communities where  blighted properties were demolished. For example, the Ohio study found  there was about a 4-dollar increase in home values for every dollar spent  on the HHF-funded blight elimination program. However, this study  examined only 1 of the 18 counties that were served by the Ohio HFA\u2019s  blight elimination program. A study on the Illinois program found that  certain key economic indicators had improved over a 6-year period in  areas targeted by the program. For example, the percentage of negative  equity mortgages in 9 of the 10 areas studied declined by an average of 7  percent between 2010 and 2016. However, the findings of this study do  not isolate the independent effect of the Illinois HFA\u2019s blight elimination  program because other factors, such as local economic conditions, could  also affect the performance of key economic indicators."], "subsections": []}]}]}, {"section_title": "Stakeholders Identified a Variety of Challenges in Implementing HHF Programs", "paragraphs": [], "subsections": [{"section_title": "Treasury, HFAs, and Mortgage Servicers Described Challenges Related to Implementing Programs", "paragraphs": ["HHF stakeholders with whom we spoke described challenges in  implementing HHF programs related to staffing and multiple funding  rounds, program implementation, outreach to borrowers, program  accessibility, the variety of programs and their status, and external  factors. Both Treasury staff with responsibilities for monitoring HFAs\u2019  implementation of HHF and stakeholders told us that these were the  types of topics discussed during regular phone calls and annual  meetings. Stakeholders included staff from four HFAs that are  implementing HHF programs, mortgage servicers and housing counseling  agencies that are involved with HHF, and other interested organizations,  including those that work with HFAs.", "Staffing and multiple funding rounds. All four HFAs and various  stakeholders with whom we spoke told us that staff turnover at HFAs  presents challenges. In some cases, turnover has been related to the way  the HHF program has been funded. For example, staff from two HFAs  mentioned that either they let staff go or their temporary staff found more  permanent positions as the agencies spent down their initial HHF funds.  When Congress authorized Treasury to make additional TARP funds  available to HHF beginning in 2016, these HFAs had to hire and train new  staff. Treasury officials told us that many HFAs encountered staffing  challenges as a result of the program\u2019s fifth funding round. Additionally,  staff from two servicers and an organization that advocates for HFAs told  us that HFA turnover presents challenges because it takes time for new  staff to become familiar with the program and for programs to ramp back  up.", "Program implementation. Staff from most of the HFAs and servicers  with whom we spoke, as well as Treasury staff and other stakeholders,  told us that implementation of the HHF program was challenging. Specific  implementation challenges mentioned by HFAs included creating an in- house information system to manage HHF data; managing refinancing  requests from homeowners who have been awarded HHF funds (to help  ensure the HFA\u2019s place as a lien-holder); and sharing information with  servicers. While Treasury helped to develop a system to facilitate the  sharing of loan-level information for the HHF program, one HFA and  some servicers noted that the system has not always worked smoothly.  Additionally, Treasury staff told us that a challenge HFAs are currently  facing is the wind-down of the HHF program. They stated that HFAs must  determine how they should advertise to the public, internal staff, and  external partners that programs are closing; when they should stop  accepting applications; and what resources are available for activities  related to program closeout.", "Outreach to homeowners. All four HFAs and an advocacy organization  told us that it can be challenging to effectively reach eligible homeowners.  As an example, staff from one HFA told us that housing counseling  agencies have been an effective tool for making homeowners aware of  HHF programs but that there are fewer foreclosure counselors available  to homeowners now compared to when the HHF program started in 2010.  Staff from an HFA that closed its HHF programs to new applicants after  the initial funding rounds told us that it was challenging to communicate to  the public, and therefore to potential clients, that its HHF programs were  reopening after they received additional funding. Additionally, a  representative of a nonprofit organization that works to address  challenges in the mortgage market told us that many people did not know  about the HHF program and that program information was hard for  consumers to find on many states\u2019 websites.", "Program accessibility. According to academic research and two  stakeholders (an advocacy group and a housing counseling agency), the  accessibility of an HFA\u2019s program can affect program participation. A  2014 study of Ohio\u2019s HHF program found that the design of the program  hampered accessibility and therefore program participation. The  program was designed to require registrants (those who started the application process) to continue the application process by working with a  housing counseling agency. The study found that registrants who lived  within 5 miles of their assigned housing counseling agency submitted a  complete application almost 32 percent of the time, while those who lived  over 50 miles away submitted a complete application about 18 percent of  the time. Similarly, a representative for an organization that advocates on  behalf of low-income homeowners noted that the design of one state HHF  program requires applicants to meet with specific housing counseling  agencies to complete the application process. However, the housing  counseling agencies to which applicants are assigned may not be nearby.  The representative stated that in some cases, homeowners are assigned  to a housing counseling agency that is located 3 or 4 hours away from  where the homeowners live. According to the advocacy group  representative, this design is particularly challenging for elderly  homeowners who may have trouble applying online and need personal  help.", "Additionally, representatives for a housing counseling agency told us that  their state HFA stopped involving community organizations to guide  applicants throughout the application process once the HFA received  additional HHF funding in 2016 and instead chose to work with applicants  directly. They said this design may hurt homeowners who do not live near  the HFA and would benefit from in-person assistance that could be  provided close to their homes. A representative from the state\u2019s HFA  confirmed that the HFA decided to work directly with applicants once it  received additional HHF funds in 2016. The representative stated that  while homeowners could also apply for HHF assistance online (after the  HFA changed the program design in 2016), the HFA\u2019s system did not  accept electronic signatures. Thus, homeowners without the ability to  print and scan documents would need to come to the HFA\u2019s office to  complete the application process.", "Variety of programs and their status. Treasury officials noted that the  wide variety of programs that HFAs are implementing can create  operational challenges for HFAs. As an example, the officials explained  that HFAs may encounter challenges when their programs require  coordination with local partners. For example, land banks can encounter  delays in acquiring properties for demolition, and contractors may not do  demolition work properly or may attempt to increase the amounts that  they charge for their work after winning a contract.", "Five mortgage servicers with whom we spoke described similar  challenges. For example, representatives from one servicer told us that it  was challenging to work with the 19 different HFAs because they all  implemented different HHF programs. The representative added that it  was particularly challenging if an HFA had a change in either leadership  or points of contact for the HHF program. Another servicer explained that  servicers have to review each HFA\u2019s participation agreement and  subsequent updates. This servicer noted that updates to agreements can  create challenges, as the servicer needs to determine whether it can  provide what the HFA is requesting. Representatives from this and a third  servicer told us that it would have been helpful for servicers to have an  up-to-date list of active HHF programs. Further, one servicer told us that it  is challenging to help homeowners understand that each HFA and  program has different requirements and guidelines. As previously  discussed, Treasury communicates information to stakeholders, such as  servicers, through regular conference calls. However, Treasury expects  HFAs to keep their servicers abreast of the status of HHF programs  because HFAs contract directly with servicers.", "Representatives from one HFA noted that it was challenging to keep  servicers updated on changes to their HHF programs. For example, they  reported that when the HFA made changes to its unemployment program,  servicers confused the program with another of the agency\u2019s HHF  programs. The representatives also stated that they have had to make  many phone calls to try to keep servicers up to date.", "External factors. Treasury officials and other stakeholders noted that  external factors such as changing market needs and natural disasters  have created challenges for some HFAs. Treasury officials noted that  some HFAs have had to change their HHF programs over time to  respond to changes in local housing conditions. An organization that  advocates for HFAs as well as an HFA similarly noted that changing  housing markets present challenges for HFAs, which have to adjust their  program offerings in an effort to continue to serve homeowners. As  previously discussed, HFAs must obtain Treasury approval to add or  revise their HHF programs, and they must document the changes by  amending participation agreements. Treasury officials also noted that  natural disasters can affect HHF programs because HFAs have to turn  their attention to post-disaster housing needs. Additionally, Treasury  officials stated that after a natural disaster it can become difficult to verify  the eligibility of applicants, particularly if key documents have been lost or  communication channels with homeowners or servicers are affected."], "subsections": []}, {"section_title": "Treasury and SIGTARP Also Identified Challenges through Their Monitoring and Oversight Activities", "paragraphs": ["Through its on-site monitoring efforts, Treasury has identified issues that  participating HFAs must address for their HHF programs. During on-site  reviews in 2016 and 2017, Treasury staff assessed selected HFAs\u2019 efforts  in one or more Treasury-identified areas. As previously noted,  Treasury\u2019s policy at the time of our review was to conduct on-site reviews  of each participating HFA at least once every 2 years. In 2016 Treasury  conducted on-site monitoring visits for 14 HFAs and identified issues that  the HFAs needed to address to improve their HHF programs. Issues  Treasury identified primarily fell into two areas. The first of these was  monitoring processes and internal controls\u2014for example, Treasury found  that one HFA had not developed documentation of its compliance  procedures for a down payment assistance program. The other primary  area was homeowner eligibility\u2014for example, Treasury found that an  HFA had misclassified the reasons that some homeowners were not  admitted into the state\u2019s HHF program.", "In 2017 Treasury conducted site visits to 15 HFAs. For this period,  Treasury\u2019s most common issues related to homeowner eligibility and  administrative expenses. According to Treasury officials, the increase in  issues related to administrative expenses between 2016 and 2017 was a  result of greater agency focus on this topic. Treasury observed, for  example, that one HFA lacked sufficient documentation to support some  administrative expenses and that another HFA had misclassified some  administrative expenses. As previously discussed, HFAs are required to  provide Treasury with a written plan describing how they will address  issues Treasury identifies and reimburse HHF for any impermissible  expenses.", "Through its oversight activities, SIGTARP reported that some  participating HFAs have encountered challenges related to appropriate  use of administrative expenses, management of their programs, and  blight removal. In August 2017, SIGTARP reported that participating  HFAs used $3 million in HHF funds for unnecessary expenses. The  report maintained that some HFAs were using their administrative funds  for expenses that were unnecessary. In a May 2018 hearing, SIGTARP  testified that some HFAs were not following federal cost principles related  to administrative expenses. Additionally, SIGTARP has issued reports  describing mismanagement of the HHF program by specific HFAs, as well  as challenges related to blight removal. While Treasury has disagreed  with the dollar amount of administrative expenses used inappropriately by  HFAs, it has also worked with HFAs and SIGTARP to address  SIGTARP\u2019s findings."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["As HHF programs begin to close and participating HFAs take steps to  ensure they spend all of their HHF funds before the program deadline,  opportunities exist in two areas for Treasury to manage risk and improve  program operation and closeout:", "By not consistently and routinely collecting HFAs\u2019 risk assessments,  Treasury limits its ability to monitor and evaluate the effectiveness of  HFAs\u2019 preventive activities, controls to detect fraud, and response  efforts. Further, by not evaluating these risk assessments, Treasury is  missing an opportunity to help ensure that risk levels are appropriate.", "As HFAs wind down their HHF programs and HFA staff are relieved of  their HHF-related positions, maintaining updated and accurate staffing  information can help ensure that HFA staff are informed of who in  their own offices is responsible for internal control execution.", "Because Treasury did not implement the HHF program in a manner that  is consistent with standards for program evaluation design we previously  identified, the performance data that Treasury collects do not provide  significant insights into the program\u2019s effectiveness. More specifically,  Treasury did not clearly state some of its performance measures; lacks documentation of the relationship between program outputs and  overall goals; did not design consistent methodologies for HFAs to use in setting did not require participating HFAs to use consistent methodologies to  calculate outcomes.", "As a result, Treasury cannot aggregate key performance data or compare  performance data across HFAs or HHF program types to demonstrate the  results of the HHF program. As we have previously reported, OMB has  set the expectation that agencies should conduct evaluations of federal  programs. Moreover, our guide to designing evaluations states that where  federal programs operate through multiple local public or private  agencies, it important to ensure the data these agencies collect are  sufficiently consistent to permit aggregation nationwide in order to  evaluate progress toward national goals. Although HHF programs must  stop disbursing funds by December 31, 2021, many of the programs have  already ended or are in the process of winding down, making it too late  for changes to Treasury\u2019s approach to performance measurement to have  a meaningful impact. However, we note that if Treasury were to extend  the current program, as it did after Congress provided additional funding  in 2015, or if Congress were to establish a similar program due to a future  housing crisis, it would be useful at that time for Treasury to develop a  program evaluation design that would allow the agency to assess overall  program performance, as well as assess performance across HFAs and  program types."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to Treasury:  The Assistant Secretary for Financial Institutions should annually collect  and evaluate HFAs\u2019 risk assessments, which include HFAs\u2019 risk levels.  (Recommendation 1)", "The Assistant Secretary for Financial Institutions should ensure that the  documentation listing the HFA staff responsible for internal control  execution is updated routinely. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to Treasury for review and comment. In  its comments, reproduced in appendix IV, Treasury agreed with our  recommendations and stated that it has already taken steps toward  addressing them by enhancing the existing review procedures for HFA\u2019s  risk assessments and staffing updates. Treasury also provided a  technical comment, which we incorporated.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Treasury, and other interested parties.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov. We will make copies available to others upon  request. The report will also be available at no charge on our website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or ortiza@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs are listed on the last page of  this report. GAO staff who made major contributions to this report are  listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to (1) determine the extent to which the  Department of the Treasury\u2019s (Treasury) monitoring of the Hardest Hit  Fund (HHF) addresses leading practices for program oversight, (2)  provide information on housing finance agencies\u2019 (HFA) active programs  and the status of HFAs\u2019 progress toward program targets, and (3)  describe challenges in implementing HHF programs that HFAs and others  identified.", "To determine the extent to which Treasury\u2019s monitoring of HHF  addresses leading practices for program oversight, we used a scorecard  methodology to compare Treasury\u2019s monitoring policies and procedures,  as implemented by 2016, against leading practices for an effective  monitoring framework. To create the framework, we reviewed key reports  and guidance related to monitoring, oversight, and performance  management. In particular we reviewed relevant leading practices from  internal control standards; previous GAO work on results-oriented  performance goals and measures,  key attributes for successful  performance measures, characteristics for successful hierarches of  performance measures, and managing fraud risk; and Office of  Management and Budget guidance on oversight. Although Treasury is  not required to follow all of the guidance that we identified, we determined  that the guidance describes practices that are helpful for creating an  effective monitoring framework.", "To select the practices for the scorecard, we focused on practices  relevant to the structure of an oversight framework (including fraud risk);  performance measures; goal setting; and communication with external  parties. We reviewed key reports and guidance and then vetted our  selected practices with stakeholders knowledgeable about performance  measurement, design methodology, fraud risk, and the law. Based on this  review and input, we consolidated identified practices into 14 leading  practices to apply to Treasury\u2019s monitoring framework.", "We then assessed Treasury\u2019s policies and procedures against the  framework. Specifically, we reviewed the agencies\u2019 documented policies  and procedures, reviewed documentation of how Treasury followed its  policies and procedures, conducted interviews with Treasury staff  responsible for overseeing HHF, and interviewed stakeholders, such as  mortgage servicers, about Treasury\u2019s monitoring of HHF. We also  interviewed staff from four HFAs about Treasury\u2019s monitoring of their  programs; we selected the HFAs based on their mix of HHF programs,  proportion of HHF funds disbursed, and geographic diversity. We also  took into account whether stakeholders indicated that an HFA\u2019s  implementation of the program was particularly successful or challenging.  With regard to the documentation Treasury collects as part of its  monitoring, we limited our review to its 2016 and 2017 monitoring  activities, and we limited our review of Treasury\u2019s written policies and  procedures to those implemented from January 2016 to September 2018.  Two analysts independently reviewed agency policies and procedures to  determine whether the policies were consistent with the 14 identified  leading practices. Any disagreements in the determinations were resolved  through discussion or with a third party, including the General Counsel\u2019s  office. We categorized each practice as follows:", "Addressed: Treasury\u2019s policies and procedures reflect each  component of the leading practice.", "Partially addressed: Treasury\u2019s policies and procedures reflect some  but not all components of the leading practice.", "Not addressed: Treasury\u2019s policies and procedures do not reflect any  of the components of the leading practice  To describe active HHF programs and the status of HFAs\u2019 progress  toward program goals, we reviewed program documents, administered a  data collection instrument, and spoke with officials at four HFAs (selected  as previously described) and Treasury. We defined active programs as  those that had a total allocation approved by Treasury and were  accepting applications and still disbursing funds to households or blight  elimination projects as of December 2017. In order to identify which  programs were active, we developed, collected, and reviewed a  questionnaire in which HFAs provided information on when each of their  HHF programs started and stopped disbursing funds. For each of the 71  active programs we identified, we reviewed quarterly performance reports  as of December 2017 to compile descriptive information such as program  outputs and outcomes.", "Through the review of program documentation and interviews with  knowledgeable officials, we found that Treasury\u2019s output data were  sufficiently reliable for our description of homeowners assisted and  properties demolished. We also found that the data Treasury collected  from HFAs on program outcomes were not reliable for the purpose of  summarizing alternative outcomes by HFA or by program type. Treasury  officials noted that the conclusions that can be drawn from alternative  outcome data are inherently limited, particularly for the purpose of making  comparisons between HFAs or program types, due to HFAs interpreting  certain outcome measures differently, among other factors. Additionally,  by comparing Treasury\u2019s outcome measures to leading practices, we  found that their definitions were not clearly stated.", "We also identified four studies on the impact of HHF blight elimination  programs and reviewed them for reliable methodology. We determined  that one of the four studies was not reliable for the purpose of assessing  the impact of blight programs on targeted areas. Two of the three studies  that we determined to be reliable had important limitations. One study  examined 1 of the 18 counties that were served by that HFA\u2019s blight  elimination program. The other study did not isolate the independent  effect of the HFA\u2019s blight elimination program because other factors, such as local economic conditions, could also affect the performance of key  economic indicators. We reviewed each HFA\u2019s contract with Treasury  as of December 2017 to identify each program\u2019s target for assisting  homeowners or demolishing blighted properties. Through comparison  with internal control standards, we found that these targets were not  reliable for the purpose of describing HFAs\u2019 progress toward program  goals because they were not stated in a form that permitted reasonably  consistent measurement.", "To describe the factors Treasury identified as challenges for the HHF  program, we analyzed Treasury\u2019s on-site compliance monitoring reports  for 2016 and 2017. As a part of our analysis, we identified the HFAs that  Treasury visited in 2016 and 2017 and the extent to which Treasury had  observations related to five Treasury-identified areas: monitoring  processes and internal controls, eligibility, program expenses and  income, administrative expenses, and reporting.", "We also interviewed key stakeholders regarding their views of challenges  related to implementation of the HHF program, particularly since 2012.  We discussed challenges with Treasury staff with responsibilities for  monitoring HFAs\u2019 implementation of the program; staff from four HFAs  that are implementing HHF programs; six mortgage servicers that are  involved with the HHF program; and two housing counseling agencies  that are involved with the HHF program. For two of the HFAs with blight  elimination programs, we conducted site visits to observe activities  related to blight elimination. Additionally, we discussed challenges with  other interested organizations, including an association for HFAs and an  organization that brings together housing counselors, mortgage  companies, investors, and other mortgage market participants to help  address challenges in the mortgage market. Further, we reviewed reports  issued by the Special Inspector General for the Troubled Asset Relief  Program. We summarized the challenges that stakeholders described.", "We conducted this performance audit from November 2017 through  December 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Monitoring Scorecard", "paragraphs": ["To determine the extent to which the Department of the Treasury\u2019s  (Treasury) policies and procedures for monitoring and oversight address  leading monitoring practices, we identified factors for an effective  monitoring framework based on a review of key reports and guidance and  input from stakeholders knowledgeable about performance measurement,  design methodology, fraud risk, and the law. To select the practices for  the scorecard, we focused on factors relevant to the structure of an  oversight framework (including fraud risk); performance measures; goal  setting; and communication with external parties. We consolidated  identified factors into 14 leading practices to apply to Treasury\u2019s oversight  and monitoring framework. See Table 3 for the 14 leading practices and  their underlying factors."], "subsections": []}, {"section_title": "Appendix III: Homeowners Assisted through the Hardest Hit Fund", "paragraphs": ["As shown in table 4, housing finance agencies (HFA) were implementing  from one to seven Hardest Hit Fund (HHF) programs (excluding blight  programs) as of the fourth quarter of 2017. We included programs for  which HFAs were disbursing funds to homeowners. As of December  2017, individual HFAs had assisted from 807 to 86,220 homeowners.", "Eight HFAs were implementing active blight elimination programs as of  December 2017, as shown in table 5. The number of blighted properties  demolished by individual HFAs ranged from 0 to 13,925.", "The Department of the Treasury\u2019s 2017 utilization threshold requires that  HFAs draw at least 95 percent of their HHF funding from rounds one  through four by December 31, 2017 (see table 6). As of December 2017,  17 of 18 HFAs had drawn 95 percent or more of their funding from rounds  one through four. The Nevada HFA had drawn 70 percent of its funding  from rounds one through four."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jill Naamane, Assistant Director;  Lisa Moore, Analyst in Charge; Vida Awumey; Farrah Graham; John  Karikari; Moira Lenox; Benjamin Licht; Dan Luo; John McGrail; Marc  Molino; Jennifer Schwartz; Shannon Smith; Estelle Tsay-Huang; and Erin  Villas made key contributions to this report."], "subsections": []}]}], "fastfact": ["Treasury's Hardest Hit Fund provided nearly $10 billion to states that experienced high unemployment and large drops in home prices during the housing crisis. States use the funds to help homeowners avoid foreclosure or to demolish blighted properties.", "Treasury monitors states' use of these funds by collecting reports on performance and spending and conducting site visits, which are important monitoring practices. However, because states don\u2019t report the data in the same way, Treasury can\u2019t effectively evaluate state programs or the fund overall. We recommended that Treasury improve certain monitoring practices."]}
{"id": "GAO-18-622", "url": "https://www.gao.gov/products/GAO-18-622", "title": "High-Risk Series: Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation", "published_date": "2018-09-06T00:00:00", "released_date": "2018-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies and the nation's critical infrastructures\u2014such as energy, transportation systems, communications, and financial services\u2014are dependent on information technology systems to carry out operations. The security of these systems and the data they use is vital to public confidence and national security, prosperity, and well-being.", "The risks to these systems are increasing as security threats evolve and become more sophisticated. GAO first designated information security as a government-wide high-risk area in 1997. This was expanded to include protecting cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015.", "This report provides an update to the information security high-risk area. To do so, GAO identified the actions the federal government and other entities need to take to address cybersecurity challenges. GAO primarily reviewed prior work issued since the start of fiscal year 2016 related to privacy, critical federal functions, and cybersecurity incidents, among other areas. GAO also reviewed recent cybersecurity policy and strategy documents, as well as information security industry reports of recent cyberattacks and security breaches."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO has identified four major cybersecurity challenges and 10 critical actions that the federal government and other entities need to take to address them. GAO continues to designate information security as a government-wide high-risk area due to increasing cyber-based threats and the persistent nature of security vulnerabilities.", "GAO has made over 3,000 recommendations to agencies aimed at addressing cybersecurity shortcomings in each of these action areas, including protecting cyber critical infrastructure, managing the cybersecurity workforce, and responding to cybersecurity incidents. Although many recommendations have been addressed, about 1,000 have not yet been implemented. Until these shortcomings are addressed, federal agencies' information and systems will be increasingly susceptible to the multitude of cyber-related threats that exist."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made over 3,000 recommendations to agencies since 2010 aimed at addressing cybersecurity shortcomings. As of August 2018, about 1,000 still needed to be implemented."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies and our nation\u2019s critical infrastructures\u2014such as  energy, transportation systems, communications, and financial services\u2014 are dependent on information technology (IT) systems and electronic data  to carry out operations and to process, maintain, and report essential  information. The security of these systems and data is vital to public  confidence and national security, prosperity, and well-being.", "Many of these systems contain vast amounts of personally identifiable  information (PII), thus making it imperative to protect the confidentiality,  integrity, and availability of this information and effectively respond to data  breaches and security incidents, when they occur. Underscoring the  importance of this issue, we continue to designate information security as a government-wide high-risk area in our most recent biennial report to  Congress\u2014a designation we have made in each report since 1997.", "The risks to IT systems supporting the federal government and the  nation\u2019s critical infrastructure are increasing as security threats continue  to evolve and become more sophisticated. These risks include insider  threats from witting or unwitting employees, escalating and emerging  threats from around the globe, steady advances in the sophistication of  attack technology, and the emergence of new and more destructive  attacks.", "In particular, foreign nations\u2014where adversaries may possess  sophisticated levels of expertise and significant resources to pursue their  objectives\u2014pose increasing risks. Rapid developments in new  technologies, such as artificial intelligence and the Internet of Things  (IoT), makes the threat landscape even more complex and can also  potentially introduce security, privacy, and safety issues that were  previously unknown.", "Compounding these risks, IT systems are often riddled with security  vulnerabilities\u2014both known and unknown. These vulnerabilities can  facilitate security incidents and cyberattacks that disrupt critical  operations; lead to inappropriate access to and disclosure, modification,  or destruction of sensitive information; and threaten national security,  economic well-being, and public health and safety. This is illustrated by  significant security breaches reported by the Office of Personnel  Management (OPM) in 2015 that resulted in the loss of PII for an  estimated 22.1 million individuals and, more recently, in 2017, a security  breach reported by Equifax\u2014one of the nation\u2019s largest credit bureaus\u2014 that resulted in the loss of PII for an estimated 148 million U.S.  consumers.", "This report provides an update to the information security high-risk area  by identifying actions that the federal government and other entities need  to take to address cybersecurity challenges facing the nation. To do so,  this report reflects work we conducted since the prior high-risk update  was issued in February 2017, among other things. We also plan to issue  an updated assessment of this high-risk area in February 2019.", "In conducting the work for this update, we first identified cybersecurity  areas in which the federal government has experienced challenges. To  do so, we primarily reviewed our prior work issued since the start of fiscal  year 2016 related to privacy, critical federal functions, and cybersecurity  incidents, among other areas (see appendix I for a list of our prior work).", "We also reviewed recent cybersecurity policy and strategy documents  issued by the current administration, such as Executive Order 13800,  Strengthening the Cybersecurity of Federal Networks and Critical  Infrastructure; the National Security Strategy; and the Department of  Homeland Security\u2019s (DHS) May 2018 cybersecurity strategy. We then  analyzed these documents to determine the extent to which they included  GAO\u2019s desirable characteristics of a national strategy. We also reviewed  recent media and information security industry reports of cyberattacks  and security breaches. Based on these actions, we identified four  cybersecurity areas in which federal agencies had experienced  challenges.", "To identify the actions needed to address each challenge area, we  reviewed the findings of our work specific to each challenge, the status of  our prior recommendations to the Executive Office of the President and  federal agencies, and any actions taken by these entities to address our  recommendations. In reviewing the status of prior recommendations, we  also determined which recommendations had not been implemented and  what additional actions, if any, the Executive Office of the President and  federal agencies needed to take in order to address them. We then  summarized the actions needed and the status of our prior  recommendations. We also identified our ongoing work related to each  action.", "We performed our work at the initiative of the U.S. Comptroller General.  We conducted this performance audit from February 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["IT systems supporting federal agencies and our nation\u2019s critical  infrastructures are inherently at risk. These systems are highly complex  and dynamic, technologically diverse, and often geographically dispersed.  This complexity increases the difficulty in identifying, managing, and  protecting the numerous operating systems, applications, and devices  comprising the systems and networks.", "Compounding the risk, federal systems and networks are also often  interconnected with other internal and external systems and networks,  including the Internet. This increases the number of avenues of attack  and expands their attack surface. As systems become more integrated,  cyber threats will pose an increasing risk to national security, economic  well-being, and public health and safety.", "Advancements in technology, such as data analytics software for  searching and collecting information, have also made it easier for  individuals and organizations to correlate data (including PII) and track it  across large and numerous databases. For example, social media has  been used as a mass communication tool where PII can be gathered in  vast amounts. In addition, ubiquitous Internet and cellular connectivity  makes it easier to track individuals by allowing easy access to information  pinpointing their locations. These advances\u2014combined with the  increasing sophistication of hackers and others with malicious intent, and  the extent to which both federal agencies and private companies collect  sensitive information about individuals\u2014have increased the risk of PII  being exposed and compromised.", "Cybersecurity incidents continue to impact entities across various critical  infrastructure sectors. For example, in its 2018 annual data breach  investigations report, Verizon reported that 53,308 security incidents  and 2,216 data breaches were identified across 65 countries in the 12  months since its prior report. Further, the report noted that cybercriminals  can often compromise a system in just a matter of minutes\u2014or even  seconds, but that it can take an organization significantly longer to  discover the breach. Specifically, the report stated nearly 90 percent of  the reported breaches occurred within minutes, while nearly 70 percent  went undiscovered for months.", "These concerns are further highlighted by the number of information  security incidents reported by federal executive branch civilian agencies  to DHS\u2019s U.S. Computer Emergency Readiness Team (US-CERT). For  fiscal year 2017, 35,277 such incidents were reported by the Office of  Management and Budget (OMB) in its 2018 annual report to Congress,  as mandated by the Federal Information Security Modernization Act  (FISMA). These incidents include, for example, web-based attacks,  phishing, and the loss or theft of computing equipment.", "Different types of incidents merit different response strategies. However,  if an agency cannot identify the threat vector (or avenue of attack), it  could be difficult for that agency to define more specific handling  procedures to respond to the incident and take actions to minimize similar  future attacks. In this regard, incidents with a threat vector categorized as  \u201cother\u201d (which includes avenues of attacks that are unidentified) made up  31 percent of the various incidents reported to US-CERT. Figure 1 shows  the percentage of the different types of incidents reported across each of  the nine threat vector categories for fiscal year 2017, as reported by  OMB.", "These incidents and others like them can pose a serious challenge to  economic, national, and personal privacy and security. The following  examples highlight the impact of such incidents:  In March 2018, the Mayor of Atlanta, Georgia, reported that the city  was victimized by a ransomware cyberattack. As a result, city  government officials stated that customers were not able to access  multiple applications that are used to pay bills or access court related  information. In response to the attack, the officials noted that they  were working with numerous private and governmental partners,  including DHS, to assess what occurred and determine how best to  protect the city from future attacks.", "In March 2018, the Department of Justice reported that it had indicted  nine Iranians for conducting a massive cybersecurity theft campaign  on behalf of the Islamic Revolutionary Guard Corps. According to the  department, the nine Iranians allegedly stole more than 31 terabytes  of documents and data from more than 140 American universities, 30  U.S. companies, and five federal government agencies, among other  entities.", "In March 2018, a joint alert from DHS and the Federal Bureau of  Investigation (FBI) stated that, since at least March 2016, Russian  government actors had targeted the systems of multiple U.S.  government entities and critical infrastructure sectors. Specifically, the  alert stated that Russian government actors had affected multiple  organizations in the energy, nuclear, water, aviation, construction, and  critical manufacturing sectors.", "In July 2017, a breach at Equifax resulted in the loss of PII for an  estimated 148 million U.S. consumers. According to Equifax, the  hackers accessed people\u2019s names, Social Security numbers (SSN),  birth dates, addresses and, in some instances, driver\u2019s license  numbers.", "In April 2017, the Commissioner of the Internal Revenue Service  (IRS) testified that the IRS had disabled its data retrieval tool in early  March 2017 after becoming concerned about the misuse of taxpayer  data. Specifically, the agency suspected that PII obtained outside the  agency\u2019s tax system was used to access the agency\u2019s online federal  student aid application in an attempt to secure tax information through  the data retrieval tool. In April 2017, the agency began notifying  taxpayers who could have been affected by the breach.", "In June 2015, OPM reported that an intrusion into its systems had  affected the personnel records of about 4.2 million current and former  federal employees. Then, in July 2015, the agency reported that a  separate, but related, incident had compromised its systems and the  files related to background investigations for 21.5 million individuals.  In total, OPM estimated 22.1 million individuals had some form of PII  stolen, with 3.6 million being a victim of both breaches."], "subsections": [{"section_title": "Federal Information Security Included on GAO\u2019s High-Risk List Since 1997", "paragraphs": ["Safeguarding federal IT systems and the systems that support critical  infrastructures has been a long-standing concern of GAO. Due to  increasing cyber-based threats and the persistent nature of information  security vulnerabilities, we have designated information security as a  government-wide high-risk area since 1997. In 2003, we expanded the  information security high-risk area to include the protection of critical  cyber infrastructure. At that time, we highlighted the need to manage  critical infrastructure protection activities that enhance the security of the  cyber and physical public and private infrastructures that are essential to  national security, national economic security, and/or national public health  and safety.", "We further expanded the information security high-risk area in 2015 to  include protecting the privacy of PII. Since then, advances in technology  have enhanced the ability of government and private sector entities to  collect and process extensive amounts of PII, which has posed  challenges to ensuring the privacy of such information. In addition, high- profile PII breaches at commercial entities, such as Equifax, heightened  concerns that personal privacy is not being adequately protected.", "Our experience has shown that the key elements needed to make  progress toward being removed from the High-Risk List are top-level  attention by the administration and agency leaders grounded in the five  criteria for removal, as well as any needed congressional action. The five  criteria for removal that we identified in November 2000 are as follows:", "Leadership Commitment. Demonstrated strong commitment and top  leadership support.", "Capacity. The agency has the capacity (i.e., people and resources) to  resolve the risk(s).", "Action Plan. A corrective action plan exists that defines the root  cause, solutions, and provides for substantially completing corrective  measures, including steps necessary to implement solutions we  recommended.", "Monitoring. A program has been instituted to monitor and  independently validate the effectiveness and sustainability of  corrective measures.", "Demonstrated Progress. Ability to demonstrate progress in  implementing corrective measures and in resolving the high-risk area.", "These five criteria form a road map for efforts to improve and ultimately  address high-risk issues. Addressing some of the criteria leads to  progress, while satisfying all of the criteria is central to removal from the  list. Figure 2 shows the five criteria and illustrative actions taken by  agencies to address the criteria. Importantly, the actions listed are not  \u201cstand alone\u201d efforts taken in isolation from other actions to address high- risk issues. That is, actions taken under one criterion may be important to  meeting other criteria as well. For example, top leadership can  demonstrate its commitment by establishing a corrective action plan  including long-term priorities and goals to address the high-risk issue and  using data to gauge progress\u2014actions which are also vital to monitoring  criteria.", "As we reported in the February 2017 high-risk report, the federal  government\u2019s efforts to address information security deficiencies had fully  met one of the five criteria for removal from the High-Risk List\u2014 leadership commitment\u2014and partially met the other four, as shown in  figure 3. We plan to update our assessment of this high-risk area against  the five criteria in February 2019."], "subsections": []}]}, {"section_title": "Ten Critical Actions Needed to Address Major Cybersecurity Challenges", "paragraphs": ["Based on our prior work, we have identified four major cybersecurity  challenges: (1) establishing a comprehensive cybersecurity strategy and  performing effective oversight, (2) securing federal systems and  information, (3) protecting cyber critical infrastructure, and (4) protecting  privacy and sensitive data. To address these challenges, we have  identified 10 critical actions that the federal government and other entities  need to take (see figure 4). The four challenges and the 10 actions  needed to address them are summarized following the table. In addition,  we also discuss in more detail each of the 10 actions in appendices II  through XI."], "subsections": [{"section_title": "Establishing a Comprehensive Cybersecurity Strategy and Performing Effective Oversight", "paragraphs": ["The federal government has been challenged in establishing a  comprehensive cybersecurity strategy and in performing effective  oversight as called for by federal law and policy. Specifically, we have  previously reported that the federal government has faced challenges in  establishing a comprehensive strategy to provide a framework for how the  United States will engage both domestically and internationally on  cybersecurity related matters. We have also reported on challenges in  performing oversight, including monitoring the global supply chain,  ensuring a highly skilled cyber workforce, and addressing risks  associated with emerging technologies. The federal government can take  four key actions to improve the nation\u2019s strategic approach to, and  oversight of, cybersecurity.", "Develop and execute a more comprehensive federal strategy for  national cybersecurity and global cyberspace. In February 2013  we reported that the government had issued a variety of strategy- related documents that addressed priorities for enhancing  cybersecurity within the federal government as well as for  encouraging improvements in the cybersecurity of critical  infrastructure within the private sector; however, no overarching  cybersecurity strategy had been developed that articulated priority  actions, assigned responsibilities for performing them, and set time  frames for their completion.", "In October 2015, in response to our recommendation to develop an  overarching federal cybersecurity strategy that included all key  elements of the desirable characteristics of a national strategy, the  Director of OMB and the Federal Chief Information Officer issued a  Cybersecurity Strategy and Implementation Plan for the Federal  Civilian Government. The plan directed a series of actions to  improve capabilities for identifying and detecting vulnerabilities and  threats, enhance protections of government assets and information,  and further develop robust response and recovery capabilities to  ensure readiness and resilience when incidents inevitably occur. The  plan also identified key milestones for major activities, resources  needed to accomplish milestones, and specific roles and  responsibilities of federal organizations related to the strategy\u2019s  milestones.", "Since that time, the executive branch has made progress toward  outlining a federal strategy for confronting cyber threats. For example,  a May 2017 presidential executive order required federal agencies to  take a variety of actions, including better manage their cybersecurity  risks and coordinate to meet reporting requirements related to  cybersecurity of federal networks, critical infrastructure, and the  nation. Additionally, the December 2017 National Security Strategy  cites cybersecurity as a national priority and identifies related needed  actions, such as including identifying and prioritizing risk, and building  defensible government networks.", "Further, DHS issued a cybersecurity strategy in May 2018, which  articulated seven goals the department plans to accomplish in support  of its mission related to managing national cybersecurity risks. The  strategy is intended to provide DHS with a framework to execute its  cybersecurity responsibilities during the next 5 years to keep pace  with the evolving cyber risk landscape by reducing vulnerabilities and  building resilience; countering malicious actors in cyberspace;  responding to incidents; and making the cyber ecosystem more  secure and resilient.", "These efforts provide a good foundation toward establishing a more  comprehensive strategy, but more effort is needed to address all of  the desirable characteristics of a national strategy that we have  previously recommended. The recently issued executive branch  strategy documents did not include key elements of desirable  characteristics that can enhance the usefulness of a national strategy  as guidance for decision makers in allocating resources, defining  policies, and helping to ensure accountability. Specifically, the  documents generally did not include milestones and performance  measures to gauge results, nor did they describe the resources  needed to carry out the goals and objective. Further, most of the  strategy documents lacked clearly defined roles and responsibilities  for key agencies, such as DHS, the Department of Defense (DOD),  and OMB, who contribute substantially to the nation\u2019s cybersecurity  programs.", "Ultimately, a more clearly defined, coordinated, and comprehensive  approach to planning and executing an overall strategy would likely  lead to significant progress in furthering strategic goals and lessening  persistent weaknesses. For more information on this action area, see  appendix II.", "Mitigate global supply chain risks. The global, geographically  disperse nature of the producers and suppliers of IT products is a  growing concern. We have previously reported on potential issues  associated with IT supply chain and risks originating from foreign- manufactured equipment. For example, in July 2017, we reported that  the Department of State had relied on certain device manufacturers,  software developers, and contractor support which had suppliers that  were reported to be headquartered in a cyber-threat nation (e.g.,  China and Russia). We further pointed out that the reliance on  complex, global IT supply chains introduces multiple risks to federal  agencies, including insertion of counterfeits, tampering, or installation  of malicious software or hardware.", "In July 2018, we testified that if such global IT supply chain risks are  realized, they could jeopardize the confidentiality, integrity, and  availability of federal information systems. Thus, the potential exists  for serious adverse impact on an agency\u2019s operations, assets, and  employees. These factors highlight the importance and urgency of  federal agencies appropriately assessing, managing, and monitoring  IT supply chain risk as part of their agency-wide information security  programs. For more information on this action area, see appendix III.", "Address cybersecurity workforce management challenges. The  federal government faces challenges in ensuring that the nation\u2019s  cybersecurity workforce has the appropriate skills. For example, in  June 2018, we reported on federal efforts to implement the  requirements of the Federal Cybersecurity Workforce Assessment Act  of 2015. We determined that most of the Chief Financial Officers  (CFO) Act agencies had not fully implemented all statutory  requirements, such as developing procedures for assigning codes to  cybersecurity positions. Further, we have previously reported that  DHS and DOD had not addressed cybersecurity workforce  management requirements set forth in federal laws. In addition, we  have reported in the last 2 years that federal agencies (1) had not  identified and closed cybersecurity skills gaps, (2) had been  challenged with recruiting and retaining qualified staff, and (3) had  difficulty navigating the federal hiring process.", "A recent executive branch report also discussed challenges  associated with the cybersecurity workforce. Specifically, in response  to Executive Order 13800, the Department of Commerce and DHS led  an interagency working group exploring how to support the growth  and sustainment of future cybersecurity employees in the public and  private sectors. In May 2018, the departments issued a report that  identified key findings, including:  the U.S. cybersecurity workforce needs immediate and sustained  improvements;  the pool of cybersecurity candidates needs to be expanded  through retraining and by increasing the participation of women,  minorities, and veterans; a shortage exists of cybersecurity teachers at the primary and  secondary levels, faculty in higher education, and training  instructors; and  comprehensive and reliable data about cybersecurity workforce  position needs and education and training programs are lacking.", "The report also included recommendations and proposed actions to  address the findings, including that private and public sectors should  (1) align education and training with employers\u2019 cybersecurity  workforce needs by applying the National Initiative for Cybersecurity  Education Cybersecurity Workforce Framework; (2) develop  cybersecurity career model paths; and (3) establish a clearinghouse  of information on cybersecurity workforce development education,  training, and workforce development programs and initiatives.", "In addition, in June 2018, the executive branch issued a government  reform plan and reorganization recommendations that included,  among other things, proposals for solving the federal cybersecurity  workforce shortage. In particular, the plan notes that the  administration intends to prioritize and accelerate ongoing efforts to  reform the way that the federal government recruits, evaluates,  selects, pays, and places cyber talent across the enterprise. The plan  further states that, by the end of the first quarter of fiscal year 2019, all  CFO Act agencies, in coordination with DHS and OMB, are to develop  a critical list of vacancies across their organizations. Subsequently,  OMB and DHS are to analyze these lists and work with OPM to  develop a government-wide approach to identifying or recruiting new  employees or reskilling existing employees. Regarding cybersecurity  training, the plan notes that OMB is to consult with DHS to  standardize training for cybersecurity employees, and should work to  develop an enterprise-wide training process for government  cybersecurity employees. For more information on this action area,  see appendix IV.", "Ensure the security of emerging technologies. As the devices  used in daily life become increasingly integrated with technology, the  risk to sensitive data and PII also grows. Over the last several years,  we have reported on weaknesses in addressing vulnerabilities  associated with emerging technologies, including:  IoT devices, such as fitness trackers, cameras, and thermostats,  that continuously collect and process information are potentially  vulnerable to cyber-attacks;  IoT devices, such as those acquired and used by DOD employees  or that DOD itself acquires (e.g., smartphones), may increase the  security risks to the department;  vehicles that are potentially susceptible to cyber-attack through  technology, such as Bluetooth;  the unknown impact of artificial intelligence cybersecurity; and advances in cryptocurrencies and blockchain technologies.", "Executive branch agencies have also highlighted the challenges  associated with ensuring the security of emerging technologies.  Specifically, in a May 2018 report issued in response to Executive  Order 13800, the Department of Commerce and DHS issued a report  on the opportunities and challenges in reducing the botnet threat.  The opportunities and challenges are centered on six principal  themes, including the global nature of automated, distributed attacks;  effective tools; and awareness and education. The report also  provides recommended actions, including that federal agencies  should increase their understanding of what software components  have been incorporated into acquired products and establish a public  campaign to support awareness of IoT security. For more information  on this action area, see appendix V.", "In our previously discussed reports related to this cybersecurity  challenge, we made a total of 50 recommendations to federal agencies to  address the weaknesses identified. As of August 2018, 48  recommendations had not been implemented. These outstanding  recommendations include 8 priority recommendations, meaning that we  believe that they warrant priority attention from heads of key departments  and agencies. These priority recommendations include addressing  weaknesses associated with, among other things, agency-specific  cybersecurity workforce challenges and agency responsibilities for  supporting mitigation of vehicle network attacks. Until our  recommendations are fully implemented, federal agencies may be limited  in their ability to provide effective oversight of critical government-wide  initiatives, address challenges with cybersecurity workforce management,  and better ensure the security of emerging technologies.", "In addition to our prior work related to the federal government\u2019s efforts to  establish key strategy documents and implement effective oversight, we  also have several ongoing reviews related to this challenge. These  include reviews of:  the CFO Act agencies\u2019 efforts to submit complete and reliable  baseline assessment reports of their cybersecurity workforces;  the extent to which DOD has established training standards for cyber  mission force personnel, and efforts the department has made to  achieve its goal of a trained cyber mission force; and  selected agencies\u2019 ability to implement cloud service technologies and  notable benefits this might have on agencies."], "subsections": []}, {"section_title": "Securing Federal Systems and Information", "paragraphs": ["The federal government has been challenged in securing federal systems  and information. Specifically, we have reported that federal agencies  have experienced challenges in implementing government-wide  cybersecurity initiatives, addressing weaknesses in their information  systems and responding to cyber incidents on their systems. This is  particularly concerning given that the emergence of increasingly  sophisticated threats and continuous reporting of cyber incidents  underscores the continuing and urgent need for effective information  security. As such, it is important that federal agencies take appropriate  steps to better ensure they have effectively implemented programs to  protect their information and systems. We have identified three actions  that the agencies can take.", "Improve implementation of government-wide cybersecurity  initiatives. Specifically, in January 2016, we reported that DHS had  not ensured that the National Cybersecurity Protection System  (NCPS) had fully satisfied all intended system objectives related to  intrusion detection and prevention, information sharing, and  analytics. In addition, in February 2017, we reported that the DHS  National Cybersecurity and Communications Integration Center\u2019s  (NCCIC) functions were not being performed in adherence with the  principles set forth in federal laws. We noted that, although NCCIC  was sharing information about cyber threats in the way it should, the  center did not have metrics to measure that the information was  timely, relevant and actionable, as prescribed by law. For more  information on this action area, see appendix VI.", "Address weaknesses in federal information security programs.  We have previously identified a number of weaknesses in agencies\u2019  protection of their information and information systems. For example,  over the past 2 years, we have reported that: most of the 24 agencies covered by the CFO Act had weaknesses  in each of the five major categories of information system controls  (i.e., access controls, configuration management controls,  segregation of duties, contingency planning, and agency-wide  security management);  three agencies\u2014the Securities Exchange Commission, the  Federal Deposit Insurance Corporation, and the Food and Drug  Administration\u2014had not effectively implemented aspects of their  information security programs, which resulted in weaknesses in  these agencies\u2019 security controls;  information security weaknesses in selected high-impact systems  at four agencies\u2014the National Aeronautics and Space  Administration, the Nuclear Regulatory Commission, OPM, and  the Department of Veterans Affairs\u2014were cited as a key reason  that the agencies had not effectively implemented elements of  their information security programs;", "DOD\u2019s process for monitoring the implementation of cybersecurity  guidance had weaknesses and resulted in the closure of certain  tasks (such as completing cyber risk assessments) before they  were fully implemented; and agencies had not fully defined the role of their Chief Information  Security Officers, as required by FISMA.", "We also recently testified that, although the government had acted to  protect federal information systems, additional work was needed to  improve agency security programs and cyber capabilities. In  particular, we noted that further efforts were needed by agencies to  implement our prior recommendations in order to strengthen their  information security programs and technical controls over their  computer networks and systems. For more information on this action  area, see appendix VII.", "Enhance the federal response to cyber incidents. We have  reported that certain agencies have had weaknesses in responding to  cyber incidents. For example, as of August 2017, OPM had not fully implemented controls to  address deficiencies identified as a result of its 2015 cyber  incidents;", "DOD had not identified the National Guard\u2019s cyber capabilities  (e.g., computer network defense teams) or addressed challenges  in its exercises; as of April 2016, DOD had not identified, clarified, or implemented  all components of its support of civil authorities during cyber  incidents; and as of January 2016, DHS\u2019s NCPS had limited capabilities for  detecting and preventing intrusions, conducting analytics, and  sharing information.", "For more information on this action area, see appendix VIII.", "In the public versions of the reports previously discussed for this  challenge area, we made a total of 101 recommendations to federal  agencies to address the weaknesses identified. As of August 2018, 61  recommendations had not been implemented. These outstanding  recommendations include 14 priority recommendations to address  weaknesses associated with, among other things, the information security  programs at the National Aeronautics and Space Administration, OPM,  and the Security Exchange Commission. Until these recommendations  are implemented, these federal agencies will be limited in their ability to  ensure the effectiveness of their programs for protecting information and  systems.", "In addition to our prior work, we also have several ongoing reviews  related to the federal government\u2019s efforts to protect its information and  systems. These include reviews of:", "Federal Risk and Authorization Management Program (FedRAMP)  implementation, including an assessment of the implementation of the  program\u2019s authorization process for protecting federal data in cloud  environments;  the Equifax data breach, including an assessment of federal oversight  of credit reporting agencies\u2019 collection, use, and protection of  consumer PII;  the Federal Communication Commission\u2019s Electronic Comment Filing  System security, to include a review of the agency\u2019s detection of and  response to a May 2017 incident that reportedly impacted the system;", "DOD\u2019s efforts to improve the cybersecurity of its major weapon", "DOD\u2019s whistleblower program, including an assessment of the  policies, procedures, and controls related to the access and storage of  sensitive and classified information needed for the program;  IRS\u2019s efforts to (1) implement security controls and the agency\u2019s  information security program, (2) authenticate taxpayers, and (3)  secure tax information; and  the federal approach and strategy to securing agency information  systems, to include federal intrusion detection and prevention  capabilities and the intrusion assessment plan."], "subsections": []}, {"section_title": "Protecting Cyber Critical Infrastructure", "paragraphs": ["The federal government has been challenged in working with the private  sector to protect critical infrastructure. This infrastructure includes both  public and private systems vital to national security and other efforts, such  as providing the essential services that underpin American society. As the  cybersecurity threat to these systems continues to grow, federal agencies  have millions of sensitive records that must be protected. Specifically, this  critical infrastructure threat could have national security implications and  more efforts should be made to ensure that it is not breached.", "To help address this issue, the National Institute of Standards and  Technology (NIST) developed the cybersecurity framework\u2014a voluntary  set of cybersecurity standards and procedures for industry to adopt as a  means of taking a risk-based approach to managing cybersecurity.", "However, additional action is needed to strengthen the federal role in  protecting the critical infrastructure. Specifically, we have reported on  other critical infrastructure protection issues that need to be addressed.  For example:", "DHS did not track vulnerability reduction from the implementation and  verification of planned security measures at the high-risk chemical  facilities that engage with the department, as a basis for assessing  performance.", "Entities within the 16 critical infrastructure sectors reported  encountering four challenges to adopting the cybersecurity  framework, such as being limited in their ability to commit necessary  resources towards framework adoption and not having the necessary  knowledge and skills to effectively implement the framework.", "DOD and the Federal Aviation Administration identified a variety of  operations and physical security risks that could adversely affect DOD  missions.", "Major challenges existed to securing the electricity grid against cyber  threats. These challenges included monitoring implementation of  cybersecurity standards, ensuring security features are built into smart  grid systems, and establishing metrics for cybersecurity.", "DHS and other agencies needed to enhance cybersecurity in the  maritime environment. Specifically, DHS did not include cyber risks in  its risk assessments that were already in place nor did it address  cyber risks in guidance for port security plans.", "Sector-specific agencies were not properly addressing progress or  metrics to measure their progress in cybersecurity.", "For more information on this action area, see appendix IX.", "We made a total of 21 recommendations to federal agencies to address  these weaknesses and others. These recommendations include, for  example, a total of 9 recommendations to 9 sector-specific agencies to  develop methods to determine the level and type of cybersecurity  framework adoption across their respective sectors. As of August 2018,  all 21 recommendations had not been implemented. Until these  recommendations are implemented, the federal government will continue  to be challenged in fulfilling its role in protecting the nation\u2019s critical  infrastructure.", "In addition to our prior work related to the federal government\u2019s efforts to  protect critical infrastructure, we also have several ongoing reviews  focusing on:  the physical and cybersecurity risks to pipelines across the country  responsible for transmitting oil, natural gas, and other hazardous  liquids;  the cybersecurity risks to the electric grid; and  the privatization of utilities at DOD installations."], "subsections": []}, {"section_title": "Protecting Privacy and Sensitive Data", "paragraphs": ["The federal government has been challenged in protecting privacy and  sensitive data. Advances in technology, including powerful search  technology and data analytics software, have made it easy to correlate  information about individuals across large and numerous databases,  which have become very inexpensive to maintain. In addition, ubiquitous  Internet connectivity has facilitated sophisticated tracking of individuals  and their activities through mobile devices such as smartphones and  fitness trackers.", "Given that access to data is so pervasive, personal privacy hinges on  ensuring that databases of PII maintained by government agencies or on  their behalf are protected both from inappropriate access (i.e., data  breaches) as well as inappropriate use (i.e., for purposes not originally  specified when the information was collected). Likewise, the trend in the  private sector of collecting extensive and detailed information about  individuals needs appropriate limits. The vast number of individuals  potentially affected by data breaches at federal agencies and private  sector entities in recent years increases concerns that PII is not being  properly protected.", "Federal agencies should take two types of actions to address this  challenge area. In addition, we have previously proposed two matters for  congressional consideration aimed toward better protecting PII.", "Improve federal efforts to protect privacy and sensitive data. We  have issued several reports noting that agencies had deficiencies in  protecting privacy and sensitive data that needed to be addressed.  For example:", "The Department of Health and Human Services\u2019 (HHS) Centers  for Medicare and Medicaid Services (CMS) and external entities  were at risk of compromising Medicare Beneficiary Data due to a  lack of guidance and proper oversight.", "The Department of Education\u2019s Office of Federal Student Aid had  not properly overseen its school partners\u2019 records or information  security programs.", "HHS had not fully addressed key security elements in its guidance  for protecting the security and privacy of electronic health  information.", "CMS had not fully protected the privacy of users\u2019 data on state- based marketplaces.", "Poor planning and ineffective monitoring had resulted in the  unsuccessful implementation of government initiatives aimed at  eliminating the unnecessary collection, use, and display of  SSNs.", "For more information on this action area, see appendix X.", "Appropriately limit the collection and use of personal information  and ensure that it is obtained with appropriate knowledge or  consent. We have issued a series of reports that highlight a number  of the key concerns in this area. For example:", "The emergence of IoT devices can facilitate the collection of  information about individuals without their knowledge or consent;", "Federal laws for smartphone tracking applications have not  generally been well enforced;", "The FBI has not fully ensured privacy and accuracy related to the  use of face recognition technology.", "For more information on this action area, see appendix XI.", "We have previously suggested that Congress consider amending laws,  such as the Privacy Act of 1974 and the E-Government Act of 2002,  because they may not consistently protect PII. Specifically, we found  that while these laws and guidance set minimum requirements for  agencies, they may not consistently protect PII in all circumstances of its  collection and use throughout the federal government and may not fully  adhere to key privacy principles. However, revisions to the Privacy Act  and the E-Government Act have not yet been enacted.", "Further, we also suggested that Congress consider strengthening the  consumer privacy framework and review issues such as the adequacy  of consumers\u2019 ability to access, correct, and control their personal  information; and privacy controls related to new technologies such as web  tracking and mobile devices. However, these suggested changes have  not yet been enacted.", "We also made a total of 29 recommendations to federal agencies to  address the weaknesses identified. As of August 2018, 28  recommendations had not been implemented. These outstanding  recommendations include 6 priority recommendations to address  weaknesses associated with, among other things, publishing privacy  impact assessments and improving the accuracy of the FBI\u2019s face  recognition services. Until these recommendations are implemented,  federal agencies will be challenged in their ability to protect privacy and  sensitive data and ensure that its collection and use is appropriately  limited.", "In addition to our prior work, we have several ongoing reviews related to  protecting privacy and sensitive data. These include reviews of:  IRS\u2019s taxpayer authentication efforts, including what steps the agency  is taking to monitor and improve its authentication methods;  the extent to which the Department of Education\u2019s Office of Federal  Student Aid\u2019s policies and procedures for overseeing non-school  partners\u2019 protection of federal student aid data align with federal  requirements and guidance; data security issues related to credit reporting agencies, including a  review of the causes and impacts of the August 2017 Equifax data  breach;  the extent to which Equifax assessed, responded to, and recovered  from its August 2017 data breach;  federal agencies\u2019 efforts to remove PII from shared cyber threat  indicators; and how the federal government has overseen Internet privacy, including  the roles of the Federal Communications Commission and the Federal  Trade Commission, and strengths and weaknesses of the current  oversight authorities."], "subsections": []}, {"section_title": "Continued Implementation of Our Recommendations Is Needed to Address Cybersecurity Weaknesses", "paragraphs": ["In conclusion, since 2010, we have made over 3,000 recommendations to  agencies aimed at addressing the four cybersecurity challenges.  Nevertheless, many agencies continue to be challenged in safeguarding  their information systems and information, in part because many of these  recommendations have not been implemented. Of the roughly 3,000  recommendations made since 2010, nearly 1,000 had not been  implemented as of August 2018. We have also designated 35 as priority  recommendations, and as of August 2018, 31 had not been implemented.", "The federal government and the nation\u2019s critical infrastructure are  dependent on IT systems and electronic data, which make them highly  vulnerable to a wide and evolving array of cyber-based threats. Securing  these systems and data is vital to the nation\u2019s security, prosperity, and  well-being. Nevertheless, the security over these systems and data is  inconsistent and urgent actions are needed to address ongoing  cybersecurity and privacy challenges. Specifically, the federal  government needs to implement a more comprehensive cybersecurity  strategy and improve its oversight, including maintaining a qualified  cybersecurity workforce; address security weaknesses in federal systems  and information and enhance cyber incident response efforts; bolster the  protection of cyber critical infrastructure; and prioritize efforts to protect  individual\u2019s privacy and PII. Until our recommendations are addressed  and actions are taken to address the four challenges we identified, the  federal government, the national critical infrastructure, and the personal  information of U.S. citizens will be increasingly susceptible to the  multitude of cyber-related threats that exist.", "We are sending copies of this report to the appropriate congressional  committees. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Nick Marinos at (202) 512-9342 or marinosn@gao.gov or Gregory C.  Wilshusen at (202) 512-6244 or wilshuseng@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 XII."], "subsections": []}]}]}, {"section_title": "Appendix I: Related GAO Reports", "paragraphs": ["Critical Infrastructure Protection: DHS Should Take Actions to Measure  Reduction in Chemical Facility Vulnerability and Share Information with  First Responders. GAO-18-538. Washington, D.C.: August 8, 2018.", "High-Risk Series: Urgent Actions Are Needed to Address Cybersecurity  Challenges Facing the Nation. GAO-18-645T. Washington, D.C.: July 25,  2018.", "Information Security: Supply Chain Risks Affecting Federal Agencies.  GAO-18-667T. Washington, D.C.: July 12, 2018.", "Information Technology: Continued Implementation of High-Risk  Recommendations Is Needed to Better Manage Acquisitions, Operations,  and Cybersecurity. GAO-18-566T. Washington, D.C.: May 23, 2018.", "Cybersecurity: DHS Needs to Enhance Efforts to Improve and Promote  the Security of Federal and Private-Sector Networks, GAO-18-520T.  Washington, D.C.: April 24, 2018.", "Electronic Health Information: CMS Oversight of Medicare Beneficiary  Data Security Needs Improvement. GAO-18-210. Washington, D.C.:  March 6, 2018.", "Technology Assessment: Artificial Intelligence, Emerging Opportunities,  Challenges, and Implications. GAO-18-142SP. Washington, D.C.: March  28, 2018.", "GAO Strategic Plan 2018-2023: Trends Affecting Government and  Society. GAO-18-396SP. Washington, D.C.: February 22, 2018.", "Critical Infrastructure Protection: Additional Actions Are Essential for  Assessing Cybersecurity Framework Adoption. GAO-18-211.  Washington, D.C.: February 15, 2018.", "Cybersecurity Workforce: Urgent Need for DHS to Take Actions to  Identify Its Position and Critical Skill Requirements. GAO-18-175.  Washington, D.C.: February 6, 2018.", "Homeland Defense: Urgent Need for DOD and FAA to Address Risks and  Improve Planning for Technology That Tracks Military Aircraft.  GAO-18-177. Washington, D.C.: January 18, 2018.", "Federal Student Aid: Better Program Management and Oversight of  Postsecondary Schools Needed to Protect Student Information.  GAO-18-121. Washington, D.C.: December 15, 2017.", "Defense Civil Support: DOD Needs to Address Cyber Incident Training  Requirements. GAO-18-47. Washington, D.C.: November 30, 2017.", "Federal Information Security: Weaknesses Continue to Indicate Need for  Effective Implementation of Policies and Practices. GAO-17-549.  Washington, D.C.: September 28, 2017.", "Information Security: OPM Has Improved Controls, but Further Efforts Are  Needed. GAO-17-614. Washington, D.C.: August 3, 2017.", "Defense Cybersecurity: DOD\u2019s Monitoring of Progress in Implementing  Cyber Strategies Can Be Strengthened. GAO-17-512. Washington, D.C.:  August 1, 2017.", "State Department Telecommunications: Information on Vendors and  Cyber-Threat Nations. GAO-17-688R. Washington, D.C.: July 27, 2017.", "Internet of Things: Enhanced Assessments and Guidance Are Needed to  Address Security Risks in DOD. GAO-17-668. Washington, D.C.: July 27,  2017.", "Information Security: SEC Improved Control of Financial Systems but  Needs to Take Additional Actions. GAO-17-469. Washington, D.C.: July  27, 2017.", "Information Security: Control Deficiencies Continue to Limit IRS\u2019s  Effectiveness in Protecting Sensitive Financial and Taxpayer Data.  GAO-17-395. Washington, D.C.: July 26, 2017.", "Social Security Numbers: OMB Actions Needed to Strengthen Federal  Efforts to Limit Identity Theft Risks by Reducing Collection, Use, and  Display. GAO-17-553. Washington, D.C.: July 25, 2017.", "Information Security: FDIC Needs to Improve Controls over Financial  Systems and Information. GAO-17-436. Washington, D.C.: May 31, 2017.", "Technology Assessment: Internet of Things: Status and implications of an  increasingly connected world. GAO-17-75. Washington, D.C.: May 15,  2017.", "Cybersecurity: DHS\u2019s National Integration Center Generally Performs  Required Functions but Needs to Evaluate Its Activities More Completely.  GAO-17-163. Washington, D.C.: February 1, 2017.", "High-Risk Series: An Update. GAO-17-317. Washington, D.C.: February  2017.", "IT Workforce: Key Practices Help Ensure Strong Integrated Program  Teams; Selected Departments Need to Assess Skill Gaps. GAO-17-8.  Washington, D.C.: November 30, 2016.", "Electronic Health Information: HHS Needs to Strengthen Security and  Privacy Guidance and Oversight. GAO-16-771. Washington, D.C.:  September 26, 2016.", "Defense Civil Support: DOD Needs to Identify National Guard\u2019s Cyber  Capabilities and Address Challenges in Its Exercises. GAO-16-574.  Washington, D.C.: September 6, 2016.", "Information Security: FDA Needs to Rectify Control Weaknesses That  Place Industry and Public Health Data at Risk. GAO-16-513. Washington,  D.C.: August 30, 2016.", "Federal Chief Information Security Officers: Opportunities Exist to  Improve Roles and Address Challenges to Authority. GAO-16-686.  Washington, D.C.: August 26, 2016.", "Federal Hiring: OPM Needs to Improve Management and Oversight of  Hiring Authorities. GAO-16-521. Washington, D.C.: August 2, 2016.", "Information Security: Agencies Need to Improve Controls over Selected  High-Impact Systems. GAO-16-501. Washington, D.C.: May 18, 2016.", "Face Recognition Technology: FBI Should Better Ensure Privacy and  Accuracy. GAO-16-267. Washington, D.C.: May 16, 2016.", "Smartphone Data: Information and Issues Regarding Surreptitious  Tracking Apps That Can Facilitate Stalking. GAO-16-317. Washington,  D.C.: May 9, 2016.", "Vehicle Cybersecurity: DOT and Industry Have Efforts Under Way, but  DOT Needs to Define Its Role in Responding to a Real-world Attack.  GAO-16-350. Washington, D.C.: April 25, 2016.", "Civil Support: DOD Needs to Clarify Its Roles and Responsibilities for  Defense Support of Civil Authorities during Cyber Incidents. GAO-16-332.  Washington, D.C.: April 4, 2016.", "Healthcare.gov: Actions Needed to Enhance Information Security and  Privacy Controls. GAO-16-265. Washington, D.C.: March 23, 2016.", "Information Security: DHS Needs to Enhance Capabilities, Improve  Planning, and Support Greater Adoption of Its National Cybersecurity  Protection System. GAO-16-294. Washington, D.C.: January 28, 2016.", "Critical Infrastructure Protection: Sector-Specific Agencies Need to Better  Measure Cybersecurity Progress. GAO-16-79. Washington, D.C.:  November 19, 2015.", "Critical Infrastructure Protection: Cybersecurity of the Nation\u2019s Electricity  Grid Requires Continued Attention. GAO-16-174T. Washington, D.C.:  October 21, 2015.", "Maritime Critical Infrastructure Protection: DHS Needs to Enhance Efforts  to Address Port Cybersecurity. GAO-16-116T. Washington, D.C.: October  8, 2015.", "Cybersecurity: National Strategy, Roles, and Responsibilities Need to Be  Better Defined and More Effectively Implemented. GAO-13-187.  Washington, D.C.: February 14, 2014.", "Information Resellers: Consumer Privacy Framework Needs to Reflect  Changes in Technology and the Marketplace. GAO-13-663. Washington,  D.C.: September 25, 2013.", "Privacy: Alternatives Exist for Enhancing Protection of Personally  Identifiable Information. GAO-08-536. Washington, D.C.: May 19, 2008."], "subsections": []}, {"section_title": "Appendix II: Action 1\u2014Develop and Execute a More Comprehensive Federal Strategy for National Cybersecurity and Global Cyberspace", "paragraphs": ["Federal law and policy call for a risk-based approach to managing  cybersecurity within the government, as well as globally. We have  previously reported that the federal government has faced challenges in  establishing a comprehensive strategy to provide a framework for how the  United States will engage both domestically and internationally on  cybersecurity related matters.", "More specifically, in February 2013, we reported that the government had  issued a variety of strategy-related documents that addressed priorities  for enhancing cybersecurity within the federal government as well as for  encouraging improvements in the cybersecurity of critical infrastructure  within the private sector; however, no overarching cybersecurity strategy  had been developed that articulated priority actions, assigned  responsibilities for performing them, and set time frames for their  completion. Accordingly, we recommended that the White House  Cybersecurity Coordinator in the Executive Office of the President  develop an overarching federal cybersecurity strategy that included all  key elements of the desirable characteristics of a national strategy  including, among other things, milestones and performance measures for  major activities to address stated priorities; cost and resources needed to  accomplish stated priorities; and specific roles and responsibilities of  federal organizations related to the strategy\u2019s stated priorities.", "In response to our recommendation, in October 2015, the Director of  OMB and the Federal Chief Information Officer, issued a Cybersecurity  Strategy and Implementation Plan for the Federal Civilian Government.", "The plan directed a series of actions to improve capabilities for identifying  and detecting vulnerabilities and threats, enhance protections of  government assets and information, and further develop robust response  and recovery capabilities to ensure readiness and resilience when  incidents inevitably occur. The plan also identified key milestones for  major activities, resources needed to accomplish milestones, and specific  roles and responsibilities of federal organizations related to the strategy\u2019s  milestones.", "Since that time, the executive branch has made progress toward outlining  a federal strategy for confronting cyber threats. Table 1 identifies these  recent efforts and a description of their related contents.", "These efforts provide a good foundation toward establishing a more  comprehensive strategy, but more effort is needed to address all of the  desirable characteristics of a national strategy that we recommended.  The recently issued executive branch strategy documents did not include  key elements of desirable characteristics that can enhance the usefulness  of a national strategy as guidance for decision makers in allocating  resources, defining policies, and helping to ensure accountability.  Specifically:", "Milestones and performance measures to gauge results were  generally not included in strategy documents. For example, although  the DHS Cybersecurity Strategy stated that its implementation would  be assessed on an annual basis, it did not describe the milestones  and performance measures for tracking the effectiveness of the  activities intended to meet the stated goals (e.g., protecting critical  infrastructure and responding effectively to cyber incidents). Without  such performance measures, DHS will lack a means to ensure that  the goals and objectives discussed in the document are accomplished  and that responsible parties are held accountable.", "According to officials from DHS\u2019s Office of Cybersecurity and  Communications, the department is developing a plan for  implementing the DHS Cybersecurity Strategy and expects to issue  the plan by the end of calendar year 2018. The officials stated that the  plan is expected to identify milestones, roles, and responsibilities  across DHS to inform the prioritization of future efforts.", "The strategy documents generally did not include information  regarding the resources needed to carry out the goals and objectives.  For example, although the DHS Cybersecurity Strategy identified a  variety of actions the agency planned to take to perform their  cybersecurity mission, it did not articulate the resources needed to  carry out these actions and requirements. Without information on the  specific resources needed, federal agencies may not be positioned to  allocate such resources and investments and, therefore, may be  hindered in their ability meet national priorities.", "Most of the strategy documents lacked clearly defined roles and  responsibilities for key agencies, such as DHS, DOD, and OMB.  These agencies contribute substantially to the nation\u2019s cybersecurity  programs. For example, although the National Security Strategy  discusses multiple priority actions needed to address the nation\u2019s  cybersecurity challenges (e.g., building defensible government  networks, and deterring and disrupting malicious cyber actors), it does  not describe the roles, responsibilities, or the expected coordination of  any specific federal agencies, including DHS, DOD, or OMB, or other  non-federal entities needed to carry out those actions. Without this  information, the federal government may not be able foster effective  coordination, particularly where there is overlap in responsibilities, or  hold agencies accountable for carrying out planned activities.", "Ultimately, a more clearly defined, coordinated, and comprehensive  approach to planning and executing an overall strategy would likely lead  to significant progress in furthering strategic goals and lessening  persistent weaknesses."], "subsections": []}, {"section_title": "Appendix III: Action 2\u2014Mitigate Global Supply Chain Risks", "paragraphs": ["The exploitation of information technology (IT) products and services  through the supply chain is an emerging threat. IT supply chain-related  threats can be introduced in the manufacturing, assembly, and  distribution of hardware, software, and services. Moreover, these threats  can appear at each phase of the system development life cycle, when an  agency initiates, develops, implements, maintains, and disposes of an  information system. As a result, the compromise of an agency\u2019s IT supply  chain can degrade the confidentiality, integrity, and availability of its  critical and sensitive networks, IT-enabled equipment, and data.", "Federal regulation and guidance issued by the National Institute of  Standards and Technology (NIST) set requirements and best practices  for mitigating supply chain risks. The Federal Acquisition Regulation  established codification and publication of uniform policies and  procedures for acquisition by all executive branch agencies. Agencies are  required by the Federal Acquisition Regulation to ensure that contracts  include quality requirements that are determined necessary to protect the  government\u2019s interest. In addition, the NIST guidance on supply chain risk  management practices for federal information systems and organizations  intends to assist federal agencies with identifying, assessing, and  mitigating information and communications technology supply chain risks  at all levels of their organizations.", "We have previously reported on risks to the IT supply chain and risks  originating from foreign-manufactured equipment. For example:  In July 2018, we testified that if global IT supply chain risks are  realized, they could jeopardize the confidentiality, integrity, and  availability of federal information systems. Thus, the potential exists  for serious adverse impact on an agency\u2019s operations, assets, and  employees. We further stated that in 2012 we determined that four  national security-related agencies\u2014the Departments of Defense,  Justice, Energy, Homeland Security (DHS)\u2014varied in the extent to  which they had addressed supply chain risks. We recommended that  three agencies take eight actions, as needed, to develop and  document policies, procedures, and monitoring capabilities that  address IT supply chain risk. The agencies generally concurred with  the recommendations and subsequently implemented seven  recommendations and partially implemented the eighth  recommendation.", "In July 2017, we reported that, based on a review of a sample of  organizations within the Department of State\u2019s telecommunications  supply chain, we were able to identify instances in which device  manufacturers, software developers and contractor support were  reported to be headquartered in a leading cyber-threat nation. For  example, of the 52 telecommunications device manufacturers and  software developers in our sample, we were able to identify 12 that  had 1 or more suppliers that were reported to be headquartered in a  leading cyber-threat nation. We noted that the reliance on complex,  global IT supply chains introduces multiple risks to federal agencies,  including insertion of counterfeits, tampering, or installation of  malicious software or hardware. Figure 5 illustrates possible  manufacturing locations of typical network components.", "Although federal agencies have taken steps to address IT supply chain  deficiencies that we previously identified, this area continues to be a  potential threat vector for malicious actors to target the federal  government. For example, in September 2017, DHS issued a binding  operating directive which calls on departments and agencies to identify  any use or presence of Kaspersky products on their information systems  and to develop detailed plans to remove and discontinue present and  future use of the products. DHS expressed concern about the ties  between certain Kaspersky officials and Russian intelligence and other  government agencies, and requirements under Russian law that allow  Russian intelligence agencies to request or compel assistance from  Kaspersky and to intercept communications transiting Russian networks."], "subsections": []}, {"section_title": "Appendix IV: Action 3\u2014Address Cybersecurity Workforce Management Challenges", "paragraphs": ["On May 11, 2017, the President issued an executive order on  strengthening the cybersecurity of federal networks and critical  infrastructure. The order makes it the policy of the United States to  support the growth and sustainment of a workforce that is skilled in  cybersecurity and related fields as the foundation for achieving our  objectives in cyberspace. It directed the Secretaries of Commerce and  Homeland Security (DHS), in consultation with other federal agencies, to  assess the scope and sufficiency of efforts to educate and train the  American cybersecurity workforce of the future, including cybersecurity- related education curricula, training, and apprenticeship programs, from  primary through higher education.", "Nevertheless, the federal government continues to face challenges in  addressing the nation\u2019s cybersecurity workforce.", "Agencies had not effectively conducted baseline assessments of  their cybersecurity workforce or fully developed procedures for  coding positions. In June 2018, we reported that 21 of the 24  agencies covered by the Chief Financial Officer\u2019s Act had conducted  and submitted to Congress a baseline assessment identifying the  extent to which their cybersecurity employees held professional  certifications, as required by the Federal Cybersecurity Workforce  Assessment Act of 2015. However, we found that the results of these  assessments may not have been reliable because agencies did not  address all of the reportable information and agencies were limited in  their ability to obtain complete and consistent information about their  cybersecurity employees and the certifications they held. We  determined that this was because agencies had not yet fully identified  all members of their cybersecurity workforces or did not have a  consistent list of appropriate certifications for cybersecurity positions.", "Further, 23 of the agencies reviewed had established procedures for  identifying and assigning the appropriate employment codes to their  civilian cybersecurity positions, as called for by the act. However, 6 of  the 23 did not address one or more of 7 activities required by OPM in  their procedures, such as reviewing all filled and vacant positions and  annotating reviewed position descriptions with the appropriate  employment code. Accordingly, we made 30 recommendations to 13  agencies to fully implement two of the act\u2019s requirements on baseline  assessments and coding procedures. The extent to which these  agencies agreed with the recommendations varied.", "DHS and the Department of Defense (DOD) had not addressed  cybersecurity workforce management requirements set forth in  federal laws. In February 2018, we reported that, while DHS had  taken actions to identify, categorize, and assign employment codes to  its cybersecurity positions, as required by the Homeland Security  Cybersecurity Workforce Assessment Act of 2014, its actions were  not timely and complete. For example, DHS did not establish timely  and complete procedures to identify, categorize, and code its  cybersecurity position vacancies and responsibilities. Further, DHS  had not yet completed its efforts to identify all of its cybersecurity  positions and accurately assign codes to all filled and vacant  cybersecurity positions. Table 2 shows DHS\u2019s progress in  implementing the requirements of the Homeland Security  Cybersecurity Workforce Assessment Act of 2014, as of December  2017.", "Accordingly, we recommended that DHS take six actions, including  ensuring that its cybersecurity workforce procedures identify position  vacancies and responsibilities; reported workforce data are complete  and accurate; and plans for reporting on critical needs are developed.  DHS agreed with our six recommendations, but had not implemented  them as of August 2018.", "Regarding DOD, in November 2017, we reported that instead of  developing a comprehensive plan for U.S. Cyber Command, the  department submitted a report consisting of a collection of documents  that did not fully address the required six elements set forth in Section  1648 of the National Defense Authorization Act for Fiscal Year 2016.  More specifically, DOD\u2019s 1648 report did not address an element  related to cyber incident training. In addition to not addressing the  training element in the report, DOD had not ensured that staff were  trained as required by the Presidential Policy Directive on United  States Cyber Incident Coordination or DOD\u2019s Significant Cyber  Incident Coordination Procedures.", "Accordingly, we made two recommendations to DOD to address  these issues. DOD agreed with one of the recommendations and  partially agreed with the other, citing ongoing activities related to  cyber incident coordination training it believed were sufficient.  However, we continued to believe the recommendation was  warranted. As of August 2018, both recommendations had not yet  been implemented.", "Agencies had not identified and closed cybersecurity skills gaps.", "In November 2016, we reported that five selected agencies had  made mixed progress in assessing their information technology (IT)  skill gaps. These agencies had started focusing on identifying  cybersecurity staffing gaps, but more work remained in assessing  competency gaps and in broadening the focus to include the entire IT  community. Accordingly, we made a total of five recommendations to  the agencies to address these issues. Four agencies agreed and one,  DOD, partially agreed with our recommendations citing progress  made in improving its IT workforce planning. However, we continued  to believe our recommendation was warranted. As of August 2018, all  five of the recommendations had not been implemented.", "Agencies had been challenged with recruiting and retaining  qualified staff. In August 2016, we reported on the current authorities  chief information security officers (CISO) at 24 agencies. Among  other things, CISOs identified key challenges they faced in fulfilling  their responsibilities. Several of these challenges were related to the  cybersecurity workforce, such as not having enough personnel to  oversee the implementation of the number and scope of security  requirements. In addition, CISOs stated that they were not able to  offer salaries that were competitive with the private sector for  candidates with high-demand technical skills. Furthermore, CISOs  stated that certain security personnel lacked the skill sets needed or  were not sufficiently trained. To assist CISOs in carrying out their  responsibilities and better define their roles, we made a total of 34  recommendations to the Office of Management and Budget (OMB)  and 13 agencies in our review. Agency responses to the  recommendations varied; as of August 2018, 18 of the 34  recommendations had not been implemented.", "Agencies have had difficulty navigating the federal hiring  process. In August 2016, we reported on the extent to which federal  hiring authorities were meeting agency needs. Although competitive  hiring has been the traditional method of hiring, agencies can use  additional hiring authorities to expedite the hiring process or achieve  certain public policy goals. Among other things, we noted that  agencies rely on a relatively small number of hiring authorities (as  established by law, executive order, or regulation) to fill the vast  majority of hires into the federal civil service.", "Further, while OPM collects a variety of data to assess the federal  hiring process, neither it nor agencies used this information to assess  the effectiveness of hiring authorities. Conducting such assessments  would be a critical first step in making more strategic use of the  available hiring authorities to more effectively meet their hiring needs.  Accordingly, we made three recommendations to OPM to work with  agencies to strengthen hiring efforts. OPM generally agreed with the  recommendations; however, as of August 2018, two of them had not  been implemented."], "subsections": []}, {"section_title": "Appendix V: Action 4\u2014Ensure the Security of Emerging Technologies", "paragraphs": ["The emergence of new technologies can potentially introduce security  vulnerabilities for those technologies which were previous unknown. As  we have previously reported, additional processes and controls will need  to be developed to potentially address these new vulnerabilities. While  some progress has been made to address the security and privacy issues  associated with these technologies, such as the Internet of Things (IoT)  and vehicle networks, there is still much work to be done. For example:  IoT devices that continuously collect and process information  are potentially vulnerable to cyber-attacks. In May 2017, we  reported that the IoT has become increasingly used to communicate  and process vast amounts of information using \u201csmart\u201d devices (such  as fitness trackers, cameras, and thermostats). However, we noted  that this emerging technology also presents new issues in areas such  as information security, privacy, and safety. For example, IoT devices,  networks, or the cloud servers where they store data can be  compromised in a cyberattack. Table 3 provides examples of cyber- attacks that could affect IoT devices and networks.", "IoT devices may increase the security risks to federal agencies.  In July 2017, we reported that IoT devices, such as those acquired  and used by Department of Defense (DOD) employees or that DOD  itself acquires (e.g., smartphones), may increase the security risks to  the department. We noted that these risks can be divided into two  categories, risks with the devices themselves, such as limited  encryption, and risks with how they are used, such as unauthorized  communication of information. The department has also identified  notional threat scenarios, based on input from multiple DOD entities,  which exemplify how these security risks could adversely impact DOD  operations, equipment, or personnel. Figure 6 highlights a few  examples of these scenarios.", "In addition, we reported that DOD had started to examine the security  risks of IoT devices, but that the department had not conducted  required assessments related to the security of its operations. Further,  DOD had issued policies and guidance for these devices, but these  did not clearly address all of the risks relating to these devices. To  address these issues, we made two recommendations to DOD. The  department agreed with our recommendations; however, as of August  2018, they had not yet been implemented.", "Vehicles are potentially susceptible to cyber-attack through  networks, such as Bluetooth. In March 2016, we reported that many  stakeholders in the automotive industry acknowledge that in-vehicle  networks pose a threat to the safety of the driver, as an external  attacker could gain control to critical systems in the car. Further,  these industry stakeholders agreed that critical systems and other  vehicle systems, such as a Bluetooth connection, should be separate  in-vehicle networks so they could not communicate or interfere with  one another. Figure 7 identifies the key interfaces that could be  exploited in a vehicle cyber-attack.", "To enhance the Department of Transportation\u2019s ability to effectively  respond in the event of a real-world vehicle cyberattack, we made one  recommendation to the department to better define its roles and  responsibilities. The department agreed with the recommendation but,  as of August 2018, had not yet taken action to implement it.", "Artificial intelligence holds substantial promise for improving  cybersecurity, but also posed new risks. In March 2018, we  reported on the results of a forum we convened to discuss emerging  opportunities, challenges, and implications associated with artificial  intelligence. At the forum, participants from industry, government,  academia, and nonprofit organizations discussed the potential  implications of this emerging technology, including assisting with  cybersecurity by helping to identify and patch vulnerabilities and  defending against attacks; creating safer automated vehicles;  improving the criminal justice system\u2019s allocation of resources; and  improving how financial services govern investments.", "However, forum participants also highlighted a number of challenges  and risks related to artificial intelligence. For example, if the data used  by artificial intelligence are biased or become corrupted by hackers,  the results could be biased or cause harm. Moreover, the collection  and sharing of data needed to train artificial intelligence systems, a  lack of access to computing resources, and adequate human capital  were also challenges facing the development of artificial intelligence.  Finally, forum participants noted that the widespread adoption raises  questions about the adequacy of current laws and regulations.", "Cryptocurrencies provide an alternative to traditional  government-issued currencies, but have security implications. In  February 2018, we reported on trends affecting government and  society, including the increased use of cryptocurrencies\u2014digital  representations of value that are not government-issued\u2014that  operate online and verify transactions using a public ledger called  blockchain. We highlighted the potential benefits of this technology,  such as anonymity and lower transaction costs, as well as drawbacks,  including making it harder to detect money laundering and other  financial crimes. Because of these capabilities and others, we noted  the potential for virtual currencies and blockchain technology to  reshape financial services and affect the security of critical financial  infrastructures. Lastly, we pointed out that the use of blockchain  technology could have more security vulnerabilities as computing  power increases as a result of new advancements in quantum  computing, an area of quantum information science."], "subsections": []}, {"section_title": "Appendix VI: Action 5\u2014Improve Implementation of Government-wide Cybersecurity Initiatives", "paragraphs": ["In January 2008, the President issued National Security Presidential  Directive 54/Homeland Security Presidential Directive 23. The directive  established the Comprehensive National Cybersecurity Initiative, a set of  projects with the objective of safeguarding federal executive branch  government information systems by reducing potential vulnerabilities,  protecting against intrusion attempts, and anticipating future threats  against the federal government\u2019s networks. Under the initiative, the  Department of Homeland Security (DHS) was to lead several projects to  better secure civilian federal government networks. Specifically, the  agency established the National Cybersecurity and Communications  Integration Center (NCCIC), which functions as the 24/7 cyber monitoring,  incident response, and management center. Figure 8 depicts the Watch  Floor, which functions as a national focal point of cyber and  communications incident integration.", "The United States Computer Emergency Readiness Team (US-CERT),  one of several subcomponents of the NCCIC, is responsible for operating  the National Cybersecurity Protection System (NCPS), which provides  intrusion detection and prevention capabilities to entities across the  federal government.", "Although DHS is fulfilling its statutorily required mission by establishing  the NCCIC and managing the operation of NCPS, we have identified  challenges in the agency\u2019s efforts to manage these programs:", "DHS had not ensured that NCPS has fully satisfied all intended  system objectives. In January 2016, we reported that NCPS had a  limited ability to detect intrusions across all types of network types. In  addition, we reported that the system\u2019s intrusion prevention capability  was limited and its information-sharing capability was not fully  developed. Furthermore, we reported that DHS\u2019s current metrics did  not comprehensively measure the effectiveness of NCPS.  Accordingly, we made nine recommendations to DHS to address  these issues and others. The department agreed with our  recommendations and has taken action to address one of them.  However, as of August 2018, eight of these recommendations had not  been implemented.", "DHS had been challenged in measuring how the NCCIC was  performing its functions in accordance with mandated  implementing principles. In February 2017, we reported instances  where, with certain products and services, NCCIC had implemented  its functions in adherence with one or more of its principles, as  required by the National Cybersecurity Protection Act of 2014 and  Cybersecurity Act of 2015. For example, consistent with the principle  that it seek and receive appropriate consideration from industry  sector-specific, academic, and national laboratory expertise, NCCIC  coordinated with contacts from industry, academia, and the national  laboratories to develop and disseminate vulnerability alerts.", "However, we also identified instances where the cybersecurity  functions were not performed in adherence with the principles. For  example, NCCIC is to provide timely technical assistance, risk  management support, and incident response capabilities to federal  and nonfederal entities, but it had not established measures or other  procedures for ensuring the timeliness of these assessments. Further,  we reported that NCCIC faces impediments to performing its  cybersecurity functions more efficiently, such as tracking security  incidents and working across multiple network platforms. Accordingly,  we made nine recommendations to DHS related to implementing the  requirements identified in the National Cybersecurity Protection Act of  2014 and the Cybersecurity Act of 2015. The department agreed with  our recommendations and has taken action to address two of them.  However, as of August 2018, the remaining seven recommendations  had not been implemented."], "subsections": []}, {"section_title": "Appendix VII: Action 6\u2014Address Weaknesses in Federal Agency Information Security Programs", "paragraphs": ["The Federal Information Security Modernization Act of 2014 (FISMA)  requires federal agencies in the executive branch to develop, document,  and implement an information security program and evaluate it for  effectiveness. The act retains many of the requirements for federal  agencies\u2019 information security programs previously set by the Federal  Information Security Management Act of 2002. These agency programs  should include periodic risk assessments; information security policies  and procedures; plans for protecting the security of networks, facilities,  and systems; security awareness training; security control assessments;  incident response procedures; a remedial action process, and continuity  plans and procedures.", "In addition, Executive Order 13800 states that the President will hold  agency heads accountable for managing cybersecurity risk to their  enterprises. In addition, according to the order, it is the policy of the  United States to manage cybersecurity risk as an executive branch  enterprise because risk management decisions made by agency heads  can affect the risk to the executive branch as a whole, and to national  security.", "Over the past several years, we have performed numerous security  control audits to determine how well agencies are managing information  security risk to federal information systems and data through the  implementation of effective security controls. These audits have resulted  in the identification of hundreds of deficiencies related to agencies\u2019  implementation of effective security controls. Accordingly, we provided  agencies with limited official use only reports identifying technical security  control deficiencies for their respective agency. In these reports, we made  hundreds of recommendations related to improving agencies\u2019  implementation of those security control deficiencies.", "In addition to systems and networks maintained by federal agencies, it is  also important that agencies ensure the security of federal information  systems operated by third party providers, including cloud service  providers. Cloud computing is a means for delivering computing services  via information technology networks. Since 2009, the government has  encouraged agencies to use cloud-based services to store and process  data as a cost-savings measure. In this regard, the Office of Management  and Budget (OMB) established the Federal Risk and Authorization  Management Program (FedRAMP) to provide a standardized approach to  security assessment, authorization, and continuous monitoring for cloud  products and services. FedRAMP is intended to ensure that cloud  computing services have adequate information security, eliminate  duplicative efforts, and reduce costs.", "Although there are requirements and government-wide programs to assist  with ensuring the security of federal information systems maintained by  federal agencies and third party providers, we have identified  weaknesses in agencies\u2019 implementation of information security  programs.", "Federal agencies continued to experience weaknesses in  protecting their information and information systems due to  ineffective implementation of information security policies and  practices. In September 2017, we reported that most of the 24  agencies covered by the Chief Financial Officers (CFO) Act had  weaknesses in each of the five major categories of information system  controls (i.e., access controls, configuration management controls,  segregation of duties, contingency planning, and agency-wide security  management). Weaknesses in these security controls indicate that  agencies did not adequately or effectively implement information  security policies and practices during fiscal year 2016. Figure 9  identifies the number of agencies with information security  weaknesses in each of the five categories.", "In addition, we found that several agencies had not effectively  implemented some aspects of its information security program, which  resulted in weaknesses in these agencies\u2019 security controls.", "In July 2017, we reported that the Security Exchange Commission did  not always keep system security plans complete and accurate or fully  implement continuous monitoring, as required by agency policy. We  made two recommendations to the Security Exchange Commission to  effectively manage its information security program. The agency  agreed with our recommendations; however, as of August 2018, they  had not been implemented.", "In another July 2017 report, we noted that the Internal Revenue  Service (IRS) did not effectively support a risk-based decision to  accept system deficiencies; fully develop, document, or update  information security policies and procedures; update system security  plans to reflect changes to the operating environment; perform  effective tests and evaluations of policies, procedures, and controls;  or address shortcomings in the agency\u2019s remedial process.  Accordingly, we made 10 recommendations to IRS to more effectively  implement security-related policies and plans. The agency neither  agreed nor disagreed with the recommendations; as of August 2018,  all 10 recommendations had not been implemented.", "In May 2017, we reported that the Federal Deposit Insurance  Corporation did not include all necessary information in procedures for  granting access to a key financial application; fully address its  Inspector General findings that security control assessments of  outsourced service providers had not been completed in a timely  manner; fully address key previously identified weaknesses related to  establishing agency-wide configuration baselines and monitoring  changes to critical server files; or complete actions to address the  Inspector General\u2019s finding that the Federal Deposit Insurance  Corporation had not ensured that major security incidents are  identified and reported in a timely manner. We made one  recommendation to the agency to more fully implement its information  security program. The agency agreed with our recommendation and  has taken steps to implement it.", "In August 2016, we reported that the Food and Drug Administration  did not fully implement certain security practices involved with  assessing risks to systems; complete or review security policies and  procedures in a timely manner; complete and review system security  plans annually; always track and fully train users with significant  security responsibilities; fully test controls or monitor them; remediate  identified security weaknesses in a timely fashion based on risk; or  fully implement elements of its incident response program.  Accordingly, we issued 15 recommendations to the Food and Drug  Administration to fully implement its agency-wide information security  program. The agency agreed with our recommendations. As of  August 2018, all 15 recommendations had been implemented.", "In May 2016, we reported that a key reason for the information  security weaknesses in selected high-impact systems at four  agencies\u2014National Aeronautics and Space Administration, Nuclear  Regulatory Commission, the Office of Personnel Management, and  Department of Veterans Affairs\u2014was that they had not effectively  implemented elements of their information security programs. For  example, most of the selected agencies had conducted information  security control assessments for systems, but not all assessments  were comprehensive. We also reported that remedial action plans  developed by the agencies did not include all the required elements,  and not all agencies had developed a continuous monitoring strategy.  Table 4 identifies the extent to which the selected agencies  implemented key aspects of their information security programs.", "Accordingly, we made 19 recommendations to the four selected  agencies to correct these weaknesses. Agency responses to the  recommendations varied. Further, as of August 2018, 16 of the 19  recommendations had not been implemented.", "DOD\u2019s monitoring of progress in implementing cyber strategies  varied. In August 2017, we reported that the DOD\u2019s progress in  implementing key strategic cybersecurity guidance\u2014the DOD Cloud  Computing Strategy, DOD Cyber Strategy, and DOD Cybersecurity  Campaign\u2014has varied. More specifically, we determined that the  department had implemented the cybersecurity objectives identified in  the DOD Cloud Computing Strategy and had made progress in  implementing the DOD Cyber Strategy and DOD Cybersecurity  Campaign. However, the department\u2019s process for monitoring  implementation of the DOD Cyber Strategy had resulted in the closure  of tasks as implemented before the tasks were fully implemented. In  addition, the DOD Cybersecurity Campaign lacked time frames for  completion and a process to monitor progress, which together provide  accountability to ensure implementation.", "We made two recommendations to improve DOD\u2019s process of  ensuring its cyber strategies are effectively implemented. The  department partially concurred with these recommendations and  identified actions it planned to take to address them. We noted that, if  implemented, the actions would satisfy the intent of our  recommendations. However, as of August 2018, DOD had not yet  implemented our recommendations.", "Agencies had not fully defined the role of their Chief Information  Security Officers (CISO), as required by FISMA. In August 2016,  we reported that 13 of 24 agencies covered by the CFO Act had not  fully defined the role of their CISO. For example, these agencies did  not always identify a role for the CISO in ensuring that security  controls are periodically tested; procedures are in place for detecting,  reporting, and responding to security incidents; or contingency plans  and procedures for agency information systems are in place. Thus,  we determined that the CISOs\u2019 ability to effectively oversee these  agencies\u2019 information security activities can be limited.", "To assist CISOs in carrying out their responsibilities and better define  their roles, we made a total of 34 recommendations to OMB and 13  agencies in our review. Agency responses to the recommendations  varied; as of August 2018, 18 of the 34 recommendations had not  been implemented."], "subsections": []}, {"section_title": "Appendix VIII: Action 7\u2014Enhance the Federal Response to Cyber Incidents", "paragraphs": ["Presidential Policy Directive-41 sets forth principles governing the  federal government\u2019s response to any cyber incident, whether involving  government or private sector entities. According to the directive, federal  agencies shall undertake three concurrent lines of effort when responding  to any cyber incident: threat response; asset response; and intelligence  support and related activities. In addition, when a federal agency is an  affected entity, it shall undertake a fourth concurrent line of effort to  manage the effects of the cyber incident on its operations, customers,  and workforce.", "We have reviewed federal agencies\u2019 preparation and response to cyber  incidents and have identified the following weaknesses:", "The Office of Personnel Management (OPM) had not fully  implemented controls to address deficiencies identified as a  result of a cyber incident. In August 2017, we reported that OPM did  not fully implement the 19 recommendations made by the Department  of Homeland Security\u2019s (DHS) United States Computer Emergency   Readiness Team (US-CERT) after the data breaches in 2015.  Specifically, we noted that, after breaches of personnel and  background investigation information were reported, US-CERT  worked with the agency to resolve issues and develop a  comprehensive mitigation strategy. In doing so, US-CERT made 19  recommendations to OPM to help the agency improve its overall  security posture and, thus, improve its ability to protect its systems  and information from security breaches.", "In our August 2017 report, we determined that OPM had fully  implemented 11 of the 19 recommendations. For the remaining 8  recommendations, actions for 4 were still in progress. For the other 4  recommendations, OPM indicated that it had completed actions to  address them, but we noted further improvements were needed.  Further, OPM had not validated actions taken to address the  recommendations in a timely manner.", "As a result of our review, we made five other recommendations to  OPM to improve its response to cyber incidents. The agency agreed  with four of these and partially concurred with the one related to  validating its corrective action. The agency did not cite a reason for its  partial concurrence and we continued to believe that the  recommendation was warranted. As of August 2018, three of the five  recommendations had not been implemented.", "The Department of Defense (DOD) had not identified the National  Guard\u2019s cyber capabilities (e.g., computer network defense  teams) or addressed challenges in its exercises. In September  2016, we reported that DOD had not identified the National Guard\u2019s  cyber capabilities or addressed challenges in its exercises.", "Specifically, DOD had not identified and did not have full visibility into  National Guard cyber capabilities that could support civil authorities  during a cyber incident because the department has not maintained a  database that identifies National Guard cyber capabilities, as required  by the National Defense Authorization Act for Fiscal Year 2007. In  addition, we identified three types of challenges with DOD\u2019s cyber  exercises that could limit the extent to which DOD is prepared to  support civilian authorities in a cyber incident:  limited access because of classified exercise environments;  limited inclusion of other federal agencies and critical  infrastructure owners; and  inadequate incorporation of joint physical-cyber scenarios.", "In our September 2016 report, we noted that DOD had not addressed  these challenges. Furthermore, we stated that DOD had not  addressed its goals by conducting a \u201ctier 1\u201d exercise (i.e., an exercise  involving national-level organizations and combatant commanders  and staff in highly complex environments), as stated in the DOD  Cyber Strategy.", "Accordingly, we recommended that DOD (1) maintain a database that  identifies National Guard cyber capabilities and (2) conduct a tier 1  exercise to prepare its forces in the event of a disaster with cyber  effects. The department partially agreed with our recommendations,  stating that its current mechanisms and exercises are sufficient to  address the issues highlighted in our report. However, we continued  to believe the recommendations were valid. As of August 2018, our  two recommendations had not been implemented.", "DOD had not identified, clarified, or implemented all components  of its incident response program. In April 2016, we also reported  that DOD had not clarified its roles and responsibilities for defense  support of civil authorities during cyber incidents. Specifically, we  found that DOD\u2019s overarching guidance about how it is to support civil  authorities as part of its Defense Support of Civil Authorities mission  did not clearly define the roles and responsibilities of key DOD  entities, such as DOD components, the supported command, or the  dual-status commander, if they are requested to support civil  authorities in a cyber incident. Further, we found that, in some cases,  DOD guidance provides specific details on other types of Defense  Support of Civil Authorities-related responses, such as assigning roles  and responsibilities for fire or emergency services support and  medical support, but does not provide the same level of detail or  assign roles and responsibilities for cyber support.", "Accordingly, we recommended that DOD issue or update guidance  that clarifies DOD roles and responsibilities to support civil authorities  in a domestic cyber incident. DOD concurred with the  recommendation and stated that the department will issue or update  guidance. However, as of August 2018, the department had not  implemented our recommendation.", "DHS\u2019s NCPS had limited capabilities for detecting and preventing  intrusions, conducting analytics, and sharing information. In  January 2016, we reported that NCPS had a limited ability to detect  intrusions across all types of network types. In addition, we reported  that the system\u2019s intrusion prevention capability was limited and its  information-sharing capability was not fully developed. Furthermore,  we reported that DHS\u2019s current metrics did not comprehensively  measure the effectiveness of NCPS. Accordingly, we made nine  recommendations to DHS to address these issues and others. The  department agreed with our recommendations and has taken action to  address one of them. However, as of August 2018, eight of these  recommendations had not been implemented."], "subsections": []}, {"section_title": "Appendix IX: Action 8\u2014Strengthen the Federal Role in Protecting the Cybersecurity of Critical Infrastructure", "paragraphs": ["The nation\u2019s critical infrastructure include both public and private systems  vital to national security and other efforts including providing the essential  services, such as banking, water, and electricity\u2014that underpin American  society. The cyber threat to critical infrastructure continues to grow and  represents a national security challenge. To address this cyber risk, the  President issued Executive Order 13636 in February 2013 to enhance  the security and resilience of the nation\u2019s critical infrastructure and  maintain a cyber environment that promotes safety, security, and privacy.", "In accordance with requirements in the executive order which were  enacted into law in 2014, the National Institute of Standards and  Technology (NIST) facilitated the development of a set of voluntary  standards and procedures for enhancing cybersecurity of critical  infrastructure. This process, which involved stakeholders from the public  and private sectors, resulted in NIST\u2019s Framework for Improving Critical  Infrastructure Cybersecurity. The framework is to provide a flexible and  risk-based approach for entities within the nation\u2019s 16 critical  infrastructure sectors to protect their vital assets from cyber-based  threats. Since then, progress has been made to protect the critical  infrastructure of the nation but we have reported that challenges to  ensure the safety and security of our infrastructure exist.", "The Department of Homeland Security (DHS) had not measured  the impact of its efforts to support cyber risk reduction for high- risk chemical sector entities. In August 2018, we reported that DHS  had strengthened its processes for identifying high-risk chemical  facilities and assigning them to tiers under its Chemical Facility Anti- Terrorism Standards program. However, we found that DHS\u2019s new  performance measure methodology did not measure reduction in  vulnerability at a facility resulting from the implementation and  verification of planned security measures during the compliance  inspection process. We concluded that doing so would provide DHS  an opportunity to begin assessing how vulnerability is reduced\u2014and  by extension, risk lowered\u2014not only for individual high-risk facilities  but for the Chemical Facility Anti-Terrorism Standards program as a  whole.", "We also determined that, although DHS shares some Chemical  Facility Anti-Terrorism Standards program information, first  responders and emergency planners may not have all of the  information they need to minimize the risk of injury or death when  responding to incidents at high-risk facilities. This was due to first  responders at the local level not having access or widely using a  secure interface that DHS developed (known as the Infrastructure  Protection Gateway) to obtain information about high-risk facilities and  the specific chemicals they process.", "To address the weaknesses we identified, we recommended that  DHS take actions to (1) measure reduction in vulnerability of high-risk  facilities and use that data to assess program performance, and (2)  encourage access to and wider use of the Infrastructure Protection  Gateway among first responders and emergency planners. DHS  concurred with both recommendations and outlined efforts underway  or planned to address them.", "The federal government had identified major challenges to the  adoption of the cybersecurity framework. In February 2018, we  reported that there were four different challenges to adopting the  cybersecurity framework, including limited resources and competing  priorities, reported by entities within their sectors. We further reported  that none of the 16 sector-specific agencies were measuring the  implementation by these entities, nor did they have qualitative or  quantitative measures of framework adoption. While research had  been done to determine the use of the framework in the sectors, these  efforts had yielded no real results for sector wide adoption. We  concluded that, until sector-specific agencies understand the use of  the framework by the implementing entities, their ability to understand  implementation efforts would be limited. Accordingly, we made a total  of nine recommendations to nine sector-specific agencies to address  these issues. Five agencies agreed with the recommendations, while  four others neither agreed nor disagreed; as of August 2018, all five  recommendations had not been implemented.", "Agencies had not addressed risks to their systems and the  information they maintain. In January 2018, we reported that the  Department of Defense (DOD) and Federal Aviation Administration  (FAA) identified a variety of operations and physical security risks  related to Automatic Dependent Surveillance-Broadcast Out  technology that could adversely affect DOD missions. These risks  came from information broadcast by the system itself, as well as from  potential vulnerabilities to electronic warfare- and cyber-attacks, and  from the potential divestment of secondary-surveillance radars.  However, DOD and FAA had not approved any solutions to address  the risks they identified to the system. Accordingly, we recommended  that DOD and FAA, among other things, take action to approve one or  more solutions to address Automatic Dependent Surveillance- Broadcast Out-related security risks. DOD and FAA generally agreed  with our recommendations; however, as of August 2018, they had not  been implemented.", "Major challenges existed to securing the electricity grid against  cyber threats. In October 2015, we testified on the status of the  electricity grid\u2019s cybersecurity, reporting that entities associated with  the grid have encountered several challenges. We noted that these  challenges included implementation monitoring, built-in security  features in smart grid systems, and establishing metrics for  cybersecurity. We concluded that continued attention to these issues  and cyber threats in general was required to help mitigate these risks  to the electricity grid.", "DHS and other agencies needed to enhance cybersecurity in the  maritime environment. In October 2015, we testified on the status of  the cybersecurity of our nation\u2019s ports, concluding that steps needed  to be taken to enhance their security. Specifically, we noted that  DHS needed to include cyber risks in its risk assessments that are  already in place as well as addressing cyber risks in guidance for port  security plans. We concluded that, until DHS and the other  stakeholders take steps to address cybersecurity in the ports, risk of a  cyber-attack with serious consequences are increased.", "Sector-specific agencies were not properly addressing progress  or metrics to measure their progress in cybersecurity. In  November 2015, we reported that sector-specific agencies were not  comprehensively addressing the cyber risk to the infrastructure, as 11  of the 15 sectors had significant cyber risk. Specifically, we noted  that these entities had taken actions to mitigate their cyber risk;  however, most had not identified incentives to promote cybersecurity  in their sectors. We concluded that while the sector-specific agencies  have successfully disseminated the information they possess, there  was still work to be done to properly measure cybersecurity  implementation progress. Accordingly, we made seven  recommendations to six agencies to address these issues. Four of  these agencies agreed with our recommendation, while two agencies  did not comment on the recommendations. As of August 2018, all  seven recommendations had not been implemented."], "subsections": []}, {"section_title": "Appendix X: Action 9\u2014Improve Federal Efforts to Protect Privacy and Sensitive Data", "paragraphs": ["Advancements in technology, such as new search technology and data  analytics software for searching and collecting information, have made it  easier for individuals and organizations to correlate data and track it  across large and numerous databases. In addition, lower data storage  costs have made it less expensive to store vast amounts of data. Also,  ubiquitous Internet and cellular connectivity make it easier to track  individuals by allowing easy access to information pinpointing their  locations. the effectiveness of these procedures. Based on a survey of the  schools, the majority of the schools had policies in place for records  retention but the way these policies were implemented was highly  varied for paper and electronic records. We also found that the  oversight of the school\u2019s programs was lacking, as Federal Student  Aid conducts reviews but does not consider information security as a  factor for selecting schools. out provisions of the Patient Protection and Affordable Care Act. We  made three recommendations to CMS related to defining procedures  for overseeing the security of state-based marketplaces and requiring  continuous monitoring of state marketplace controls. HHS concurred  with our recommendations. As of August 2018, two of the  recommendations had not yet been implemented.", "Poor planning and ineffective monitoring had resulted in the  unsuccessful implementation of government initiatives designed  to protect federal data. In July 2017, we reported that government  initiatives aimed at eliminating the unnecessary collection, use, and  display of Social Security numbers (SSN) have had limited success.  Specifically, in agencies\u2019 response to our questionnaire on SSN  reduction efforts, the 24 agencies covered by the Chief Financial  Officers Act reported successfully curtailing the collection, use, and  display of SSNs. Nevertheless, all of the agencies continued to rely on  SSNs for important government programs and systems, as seen in  figure 10."], "subsections": []}, {"section_title": "Appendix XI: Action 10\u2014Appropriately Limit the Collection and Use of Personal Information and Ensure That It Is Obtained with Appropriate Knowledge or Consent", "paragraphs": ["Given that access to data is so pervasive, personal privacy hinges on  ensuring that databases of personally identifiable information (PII)  maintained by government agencies or on their behalf are protected both  from inappropriate access (i.e., data breaches) as well as inappropriate  use (i.e., for purposes not originally specified when the information was  collected). Likewise, the trend in the private sector of collecting extensive  and detailed information about individuals needs appropriate limits. The  vast number of individuals potentially affected by data breaches at federal  agencies and private sector entities in recent years increases concerns  that PII is not being properly protected.", "The emergence of IoT devices can facilitate the collection of  information about individuals without their knowledge or  consent. In May 2017, we reported that the IoT has become  increasingly used to communicate and process vast amounts of  information using \u201csmart\u201d devices (such as a fitness tracker connected  to a smartphone). However, we noted that this emerging technology  also presents new issues in areas such as information security,  privacy, and safety.", "Smartphone tracking apps can present serious safety and  privacy risks. In April 2016, we reported on smartphone applications  that facilitated the surreptitious tracking of a smartphone\u2019s location  and other data. Specifically, we noted that some applications could  be used to intercept communications and text messages, essentially  facilitating the stalking of others. While it is illegal to use these  applications for these purposes, stakeholders differed over whether  current federal laws needed to be strengthened to combat stalking.  We also noted that stakeholders expressed concerns over what they  perceived to be limited enforcement of laws related to tracking apps  and stalking. In particular, domestic violence groups stated that  additional education of law enforcement officials and consumers  about how to protect against, detect, and remove tracking apps is  needed.", "The Federal Bureau of Investigation (FBI) has not ensured  privacy and accuracy related to the use of face recognition  technology. In May 2016, we reported that the Department of  Justice had not been timely in publishing and updating privacy  documentation for the FBI\u2019s use of face recognition technology.  Publishing such documents in a timely manner would better assure  the public that the FBI is evaluating risks to privacy when  implementing systems. Also, the FBI had taken limited steps to  determine whether the face recognition system it was using was  sufficiently accurate. We recommended that the department ensure  required privacy-related documents are published and that the FBI  test and review face recognition systems to ensure that they are  sufficiently accurate. Of the six recommendations we made, the  Department of Justice agreed with one, partially agreed with two, and  disagreed with three. We continued to believe all the  recommendations made were valid. As of August 2018, the six  recommendations had not been implemented."], "subsections": []}, {"section_title": "Appendix XII: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Jon Ticehurst, Assistant  Director; Kush K. Malhotra, Analyst-In-Charge; Chris Businsky; Alan  Daigle; Rebecca Eyler; Chaz Hubbard; David Plocher; Bradley Roach;  Sukhjoot Singh; Di\u2019Mond Spencer; and Umesh Thakkar made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-77", "url": "https://www.gao.gov/products/GAO-19-77", "title": "Human Trafficking: State and USAID Should Improve Their Monitoring of International Counter-trafficking Projects", "published_date": "2018-12-04T00:00:00", "released_date": "2018-12-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Human trafficking is a pervasive problem throughout the world. Victims are often held against their will in slave-like conditions.", "The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to report on the programs conducted by specific agencies, including State, DOL, and USAID, that address trafficking in persons. Among other objectives, this report (1) identifies the recent projects in international counter-trafficking in persons that key U.S. agencies have awarded to implementing partners; and, for selected projects, assesses the extent to which key agencies have (2) documented their monitoring activities and (3) ensured the reliability of project performance information.", "GAO reviewed State, DOL, and USAID project documents and interviewed agency officials. GAO reviewed monitoring documents for 54 of the 57 projects that were active from the beginning of fiscal year 2016 through the end of fiscal year 2017. Of these 54 projects, GAO selected a nongeneralizable sample of 5 projects, based primarily on largest total award amounts, for review of the reliability of project performance information."]}, {"section_title": "What GAO Found", "paragraphs": ["The Departments of State (State), Labor (DOL), and the U.S. Agency for International Development (USAID)\u2014through agreements with implementing partners\u2014managed 120 international counter-trafficking in person projects during fiscal year 2017.", "GAO reviewed a selection of 54 counter-trafficking projects (37 State, 3 DOL, and 14 USAID), and found that DOL and USAID had fully documented their monitoring activities, while State had not. All three agencies used similar tools to monitor the performance of their projects, such as monitoring plans, performance indicators and targets, progress reports, and site visits. GAO found, however, that State did not fully document its monitoring activities for 16 of its 37 projects (43 percent). GAO found that State did not have the monitoring plans or complete progress reports for one-third of its projects and often lacked targets for performance indicators in its final progress reports. State officials said they had not required targets for each performance indicator for the projects GAO reviewed, or had not set targets due to limited resources in prior years. State has taken steps to improve its monitoring efforts, including issuing a November 2017 policy that requires targets to be set for each performance indicator and developing an automated data system that would require targets to be recorded. However, because the pilot data system allows targets to be recorded as \u201cto be determined\u201d and does not have controls to ensure entry of actual targets, it is uncertain whether performance targets will be regularly recorded. Without full documentation of monitoring activities and established performance targets, State has limited ability to assess project performance, including project efficiency or effectiveness.", "GAO reviewed the reliability of project performance information for 5 of the 54 counter-trafficking projects (2 State, 1 DOL, and 2 USAID) and found that State and USAID used inconsistent and incomplete performance information, while DOL used consistent and complete information. For example, some quarterly indicator results in State and USAID progress reports were inconsistent with annual total results, and narrative explanations for significant deviations from performance targets were sometimes not present in quarterly reports. According to agency officials, performance information from these projects is regularly used not only for direct project oversight but also for internal and external reporting, program decisions, and lessons learned. GAO found that State's and USAID's processes lack sufficient controls to ensure the reliability of project performance information, but did not find inadequate controls in DOL's process. For example, neither State nor USAID consistently used automated checks on indicator results to ensure consistency and completeness of performance indicator result calculations. In contrast, DOL used automated checks as part of its process. Without implementing controls to ensure that performance information is consistent and complete, State and USAID officials cannot fully or accurately understand what projects are, or are not, achieving, and how their efforts might be improved."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to State and one recommendation to USAID, including that both agencies establish additional controls to improve the consistency and completeness of project performance information, and that State maintain monitoring activity documentation and establish targets for each performance indicator. State and USAID concur with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Trafficking in persons, or human trafficking, is a longstanding and  pervasive problem throughout the world, as traffickers buy, sell, and  transport victims across national boundaries. Victims are often held  against their will in slave-like conditions or forced to work in the  commercial sex trade, garment factories, fishing boats, agriculture,  domestic service, and other types of servitude. In addition to inflicting  grave damage upon its victims, trafficking in persons is a multi-billion  dollar industry that undermines government authority, distorts markets,  fuels organized criminal groups and gangs, enriches transnational  criminals and terrorists, and imposes social and public health costs. The  Department of State (State) noted in its June 2018 Trafficking in Persons  Report that terrorist organizations also use trafficking in persons to recruit  adherents and finance their operations. Congress enacted the Trafficking  Victims Protection Act of 2000 to combat trafficking in persons, and has  reauthorized this act four times. The act, as amended, defines severe  forms of trafficking in persons as (1) sex trafficking in which a commercial  sex act is induced by force, fraud, or coercion, or in which the person  induced to perform such act is under age 18; or (2) the recruitment,  harboring, transportation, provision, or obtaining of a person for labor or  services, through the use of force, fraud, or coercion, for the purpose of  subjection to involuntary servitude, peonage, debt bondage, or slavery.  According to the International Labor Organization, in 2016, there were an  estimated 24.9 million people in forced labor, including 4.8 million people  in forced sexual exploitation. However, as we previously reported,  estimates of the number of trafficking victims are often questionable due  to data and methodological weaknesses.", "The National Defense Authorization Act for Fiscal Year 2017 includes a  provision for GAO to report on the programs conducted by the  Department of State (State), the Department of Labor (DOL), the United  States Agency for International Development (USAID), the Department of  Defense (DOD), and the Department of the Treasury (Treasury) that  address human trafficking and modern slavery, including a detailed  analysis of the effectiveness of such programs in limiting human  trafficking and modern slavery. Three of these agencies\u2014State, DOL,  and USAID\u2014have programs that design and award counter-trafficking  projects to implementing partners, through contracts, grants, or  cooperative agreements. These agencies then oversee and monitor  these projects. Since DOD and Treasury officials did not identify these  types of projects as part of their counter-trafficking in persons efforts, we  provide background information on their efforts but do not cover these  agencies in our reporting objectives. This report (1) identifies the recent  projects in international counter-trafficking in persons that key U.S.  agencies have awarded to implementing partners, and for selected  projects, assesses the extent to which key agencies have (2) documented  their monitoring activities, (3) ensured the reliability of the performance  information they use in monitoring projects, and (4) reviewed the  usefulness of the performance indicators they use in monitoring projects.", "To address these objectives, we reviewed relevant agency documents  and interviewed agency officials. To report on agencies\u2019 programs, we  asked knowledgeable officials at State, DOL, USAID, DOD, and Treasury  to identify their projects that (1) had an international focus; (2) were  delivered by implementing partners to external recipients, such as  trafficking victims or host governments, as project beneficiaries; and (3)  addressed trafficking in persons, modern slavery, or forced labor.  Because State, DOL, and USAID managed such projects, we focus on  them as the three key agencies for the purposes of our reporting  objectives. According to officials from these three agencies, the projects  they identified range from those with counter-trafficking in persons as a  primary goal, to those in which this goal was integrated as part of the  agency\u2019s activities. We used the lists of projects that these agencies  provided to report the relevant counter-trafficking projects that agencies  awarded to implementing partners to carry out the projects. For our first  objective, we determined the projects that were active during fiscal year  2017, including those which began, were ongoing, or ended during fiscal  year 2017, and interviewed agency officials to confirm project information.", "To analyze the effectiveness of agencies\u2019 programs in limiting human  trafficking and modern slavery, we assessed the key agencies\u2019 monitoring  efforts for a subset of the projects. We identified State\u2019s, DOL\u2019s, and  USAID\u2019s projects that started before or during October 2015, which  corresponded to the first quarter of fiscal year 2016, and were active  through September 30, 2017, which corresponded to the fourth and last  quarter of fiscal year 2017. This resulted in a selection of 54 projects\u2014 37 from State, 3 from DOL, and 14 from USAID\u2014for our review. To  assess the extent to which State, DOL, and USAID documented their  monitoring activities for selected projects, we reviewed documentation of  key monitoring activities as specified in agency policy or the project award  agreements, including (1) the monitoring plan for each project, (2)  evidence of performance indicators and targets for each project, (3)  fiscal year 2017 progress reports for each project, (4) final progress  reports for the projects that ended by December 2017, and (5) evidence  of the agency\u2019s site visits for each project. Additionally, we interviewed  knowledgeable monitoring officials from each agency to understand  agencies\u2019 monitoring process and application of monitoring requirements  for counter-trafficking in persons projects.", "To assess the extent to which key agencies ensured the reliability of the  performance information, as well as the extent to which they reviewed the  usefulness of the performance indicators they use to monitor selected  international counter-trafficking in persons projects, we selected for  review a nongeneralizable sample of 5 projects\u20142 State projects, 1 DOL  project, and 2 USAID projects\u2014out of the 54 counter-trafficking in  persons projects identified by agencies that started before or during  October 2015 and were active through fiscal year 2017. We based our  selection of these projects primarily on the largest total award amounts.  For these five selected projects, we collected 2 years of progress reports  and other documents to assess the quantitative and qualitative  performance information. We assessed whether quarterly or semi-annual  indicator totals were consistent with annual and cumulative totals where  these were reported. Using this quantitative information, we judgmentally  selected indicators for inclusion in agency interviews where it appeared  likely that numerical errors had occurred or there appeared to be  significant project events, such as large over- or under-performance or  the elimination of the indicator. We interviewed agency officials, including  managers of each of the 5 projects, about the consistency and  completeness of monitoring information in these projects for about 60  indicators identified through our analysis, as well as to determine whether  our findings for these selected projects reflected general agency policies  and procedures, and to understand the processes and systems agencies  use to review indicators. We assessed the completeness and  consistency of project performance data that State, DOL, and USAID use  to monitor projects as part of our data reliability assessment. We found  State and USAID data to be unreliable in the projects we reviewed. We  discuss the implications of these unreliable data for State and USAID\u2019s  project management and reporting in our findings and recommendations.  We found the performance data that DOL used were consistent and  complete for the project we reviewed. While we examined indicator and  narrative information for consistency and completeness, we did not verify  the accuracy of performance information. See appendix I for more details  on our scope and methodology.", "We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Human trafficking exploits individuals and often involves transnational  criminal organizations, violations of labor and immigration codes, and  government corruption. Many forms of trafficking\u2014including sex  trafficking and labor trafficking\u2014can take place anywhere in the world and  occur without crossing country boundaries. As discussed in State\u2019s  annual Trafficking in Persons Report, trafficking victims include, for  example, Asian and African women and men who migrate to the Persian  Gulf region for domestic labor but then suffer both labor trafficking and  sexual abuse in the homes of their employers. Some victims are children.  For example, Pakistani children as young as 5 years are sold or  kidnapped into forced labor to work in brick kilns, some of which are  owned by government officials. Other victims are subjected to sexual  exploitation. In some cases, women and girls have been bought and sold  as sex slaves by members of the Islamic State. In other cases, adult men  and women have been forced to engage in commercial sex, and children  induced to do the same. Individuals, including men, are exploited in  forced labor in a variety of industries. Burmese men, for example, have  been forced to labor 20 hours a day, 7 days a week on fishing boats in  Thailand. See figure 1 for examples of victims of trafficking in persons.", "Among other U.S. agencies involved in counter-trafficking in persons,  State, DOL, USAID, DOD, and Treasury have various roles and  responsibilities related to international counter-trafficking in persons,  including some internationally-focused programs and activities that do not  involve awards made to implementing partners, as follows:", "State. State leads the global engagement of the United States, and  supports the coordination of efforts across the U.S government in  counter-trafficking in persons. State\u2019s Office to Monitor and Combat  Trafficking in Persons (TIP Office), established pursuant to the  Trafficking Victims Protection Act of 2000, is responsible for bilateral  and multilateral diplomacy, targeted foreign assistance, and public  engagement on trafficking in persons. The office also prepares and  issues an annual Trafficking in Persons Report that assesses the  counter-trafficking efforts of governments and assigns them tier  rankings. Furthermore, the TIP Office develops annual regional  programming strategies, awards projects to implementing partners  and oversees the project award process, and provides technical  assistance to implementing partners. Other parts of State, including  regional bureaus that cover geographic regions and functional  bureaus that cover global issues such as human rights, are also  responsible for work related to combating trafficking in persons.", "DOL. Within DOL, the Bureau of International Labor Affairs\u2019 (ILAB)", "Office of Child Labor, Forced Labor, and Human Trafficking (OCFT)  conducts research, publishes reports, and administers projects  awarded to implementing partners on international child labor, forced  labor, and trafficking in persons. ILAB\u2019s reports include the annual  Findings on the Worst Forms of Child Labor report, which assesses  the efforts of approximately 140 countries and territories to eliminate  the worst forms of child labor in the areas of laws and regulations,  institutional mechanisms for coordinating and enforcement, and  government policies and programs. ILAB also reports on the List of  Goods Produced by Child Labor or Forced Labor showing goods and  their source countries which ILAB has reason to believe are produced  by child labor or forced labor in violation of international standards.", "USAID. USAID administers projects awarded to implementing  partners that address counter-trafficking in persons, including  increased investments in conflict and crisis areas, and integrating  such projects into broader development projects. USAID field  missions manage the majority of these counter-trafficking activities  through projects that address trafficking challenges specific to the field  mission\u2019s region or country. USAID\u2019s Center of Excellence on  Democracy, Human Rights and Governance (DRG Center) in  Washington, D.C. is responsible for oversight of USAID\u2019s counter- trafficking policy. The DRG Center is responsible for coordinating and  reporting on USAID-wide counter-trafficking in persons efforts;  oversees the implementation of USAID\u2019s counter-trafficking in persons  policy in collaboration with regional bureaus and country missions;  works with regional bureaus and country missions to gather counter- trafficking best practices and lessons learned; provides technical  assistance and training to field and Washington-based staff on  designing, managing, and monitoring and evaluating trafficking in  persons projects; and conducts and manages research and learning  activities related to combating trafficking in persons to collect data to  inform the design of field projects.", "DOD. DOD\u2019s Combating Trafficking in Persons Program Management  Office, under the Under Secretary of Defense for Personnel and  Readiness in the Defense Human Resources Activity, develops  trafficking awareness and training material for all DOD components.  On December 16, 2002, the President signed National Security  Presidential Directive 22, which declared the United States had a zero  tolerance policy for trafficking in persons. The Combating Trafficking  in Persons Program Management Office is responsible for  overseeing, developing, and providing the tools necessary for  implementing National Security Directive 22 within DOD. The office  has developed several different training programs, designed to  provide an overview of trafficking in persons (including signs of  trafficking, key policies and procedures, and reporting procedures), as  well as awareness materials for distribution to DOD components and  defense contractors overseas.", "Treasury. Treasury has activities, but not specific programs, that may  support wider U.S. efforts to address counter-trafficking in persons,  according to Treasury officials. Pursuant to its mandate, components  of Treasury\u2019s Office of Terrorism and Financial Intelligence (TFI),  including Financial Crimes Enforcement Network (FinCEN), Office of  Terrorist Financing and Financial Crimes (TFFC), and Office of  Foreign Assets Control (OFAC) work on addressing illicit finance  activities that support the wider goal of combating global trafficking in  persons.", "Pursuant to the Trafficking Victims Protection Act of 2000, the President  established the President\u2019s Interagency Task Force to Monitor and  Combat Trafficking in Persons (PITF), which is a cabinet-level entity that  consists of agencies across the federal government responsible for  coordinating implementation of the Trafficking Victims Protection Act of  2000, among other activities. It is chaired by the Secretary of State;  State, DOL, USAID, DOD, and Treasury are all PITF agencies. In  addition, the Trafficking Victims Protection Act, as amended in 2003,  established the Senior Policy Operating Group, which consists of senior  officials designated as representatives of the PITF agencies."], "subsections": []}, {"section_title": "During Fiscal Year 2017, State, DOL, and USAID Managed 120 Counter- Trafficking in Persons Projects", "paragraphs": ["State, DOL, and USAID managed 120 projects in counter-trafficking in  persons carried out by implementing partners during fiscal year 2017,  according to information provided by officials with these agencies. These  projects, as identified by agency officials, ranged from those focused on  counter-trafficking in persons, to those in which counter-trafficking in  persons was integrated into but was not the primary goal of the project.  At these agencies, project officers work with the implementing partner on  the administration and technical guidance of the project, such as  reviewing progress reports. Table 1 shows a summary of these  agencies\u2019 project information; appendix II provides more detailed  information on all 120 projects.", "During fiscal year 2017, State managed 79 counter-trafficking projects,  from those focused on individual countries, to regional and global ones  that covered several countries, with a total award amount of  approximately $62 million, according to information provided by State  officials. State TIP Office managed 75 projects with total awarded amount  of around $57 million. Award amounts per project ranged from  approximately $150,000 to $2.55 million. For example,", "State TIP Office had 11 global projects totaling about $10 million and  6 regional projects in Africa amounting to about $4 million.", "State TIP Office had two projects in Ghana that received the highest  amount of awards, approximately $2.5 million for each project.", "State TIP Office had four projects in India amounting to around $3  million, and four in Thailand totaling around $2.35 million.", "In addition to State TIP Office\u2019s projects, State\u2019s Bureau of Democracy,  Human Rights, and Labor (DRL) managed four counter-trafficking  projects with a reported total award amount of about $5 million, with two  projects in Mauritania making up around 70 percent of DRL\u2019s total  awarded amount.", "DOL\u2019s ILAB/OCFT managed six projects in fiscal year 2017 with a total  award amount of approximately $31 million, according to DOL officials.  These projects ranged from one scheduled to last for 5 years with an  awarded amount of about $1 million, to one scheduled to last for about 4  years with an awarded amount of about $14 million. Three of DOL\u2019s  projects were global projects, while two others focused on two countries  each and one project focused on one country.", "USAID\u2019s projects during fiscal year 2017 consisted of 2 regional projects  in Asia, and 33 individual projects in 22 different countries. Some of these  USAID-identified projects were integrated projects with a broader  development focus that includes USAID programmatic objectives other  than counter-trafficking in persons. According to information provided by  USAID officials, the award amount for all counter-trafficking in persons  projects active in fiscal year 2017, including all integrated projects and  standalone projects with a sole focus on combatting trafficking in persons,  totaled around $296 million; and USAID\u2019s committed funding to these  projects\u2019 activities related to counter-trafficking in persons was about $79  million as of September 2018. During fiscal year 2017, USAID focused  on a few countries where the agency awarded multiple counter-trafficking  projects, such as four projects in Nepal and four projects in Burma.", "According to officials, State, DOL, and USAID generally design projects to  align with the \u201c3Ps approach\u201d\u2014prevention, protection, and prosecution\u2014 and to consider trends and recommendations identified in agency reports  on foreign governments\u2019 counter-trafficking efforts. According to State\u2019s  publicly available information, the \u201c3Ps\u201d approach serves as the  fundamental counter-trafficking in persons framework used around the  world, and the U.S. government follows this approach to  1.  prevent trafficking in persons through public awareness, outreach,  education, and advocacy campaigns;  2.  protect and assist victims by providing shelters as well as health,  psychological, legal, and vocational services; and  3.  investigate and prosecute trafficking in persons crimes by providing  training and technical assistance for law enforcement officials, such  as police, prosecutors, and judges.", "State\u2019s publicly available information on the 3Ps noted that prevention,  protection, and prosecution efforts are closely intertwined. Prosecution,  for example, can function as a deterrent, potentially preventing the  occurrence of human trafficking. Likewise, protection can empower those  who have been exploited so that they are not victimized again once they  re-enter society. A victim-centered prosecution that enables a survivor to  participate in the prosecution is integral to protection efforts.", "In addition to the \u201c3Ps,\u201d a \u201c4th P\u201d\u2014for partnership\u2014serves as a  complementary means to achieve progress across the \u201c3Ps\u201d and enlist all  segments of society in the fight against human trafficking, according to  State\u2019s publicly available information. Addressing the partnerships  element, USAID\u2019s counter-trafficking policy seeks to increase  coordination across a broad range of national, regional, and global  stakeholders from civil society, government, the private sector, labor  unions, media, and faith-based organizations."], "subsections": []}, {"section_title": "DOL and USAID Fully Documented Their Monitoring Activities for All Selected Projects, but State Did Not Fully Document Its Activities for 16 of 37 Selected Projects", "paragraphs": [], "subsections": [{"section_title": "State, DOL, and USAID Use Similar Tools to Monitor Performance of Their Counter-Trafficking in Persons Projects", "paragraphs": ["Monitoring is the collecting of data to determine whether a project is being  implemented as intended and the tracking of progress through  preselected performance indicators during the life of a project. State,  DOL, and USAID use a number of similar tools\u2014according to their  current policies, guidance, and agency officials\u2014to monitor the  performance of their counter-trafficking in persons projects, including  monitoring plans, indicators and targets, periodic progress reports, and  final progress reports. The agencies also conduct site visits, but their  policies vary on whether site visits are required for every project during  implementation.", "Monitoring plan. The monitoring plan\u2014according to monitoring  policies of the three agencies\u2014documents, among other things, all of  the indicators and targets for the project as well as data collection  frequency for each indicator. In addition, according to State TIP Office  officials, the monitoring plan\u2019s indicators and targets for TIP Office- managed counter-trafficking in persons projects are to be organized in  a logic model, which is a visual representation that shows the linkages  among the project\u2019s goals, objectives, activities, outputs, and  outcomes (see table 2). The logic model is intended to show  relationships between what the project will do and what changes it  expects to achieve.", "Indicators and Targets. Performance indicators\u2014according to  monitoring policies of the three agencies\u2014are used to monitor  progress and measure actual results compared to expected results.  Targets are to be set for each performance indicator to indicate the  expected results over the course of each period of performance.  According to agency officials, the monitoring plan documents  indicators and targets to be tracked and reported on through periodic  progress reports to assess whether the project is likely to achieve the  desired results. GAO has also found that a key attribute of effective  performance measures is having a measurable target.", "Periodic progress reports. The reporting templates for the three  agencies show that periodic progress reports\u2014which are submitted at  established intervals during the project\u2019s implementation\u2014compare  actual to planned performance and indicate the progress made in  accomplishing the goals and objectives of the project, including  reporting on progress toward the monitoring plan\u2019s indicator targets.", "Final progress report. The final progress report\u2014according to  monitoring policies of the agencies or agency officials\u2014is a stand- alone report that provides a summary of the progress and  achievements made during the life of the project.", "Site Visits. The three agencies policies vary on whether site visits are  required for every project during implementation. For example,  State\u2019s policy notes that site visits may be conducted to review and  evaluate recipient records, accomplishments, organizational  procedures, and financial control systems, as well as to conduct  interviews and provide technical assistance as necessary. In 2015,  the State TIP Office established a goal to conduct at least one site  visit during the life time of every project. While site visits during a  project\u2019s implementation are not required under DOL\u2019s policy, DOL  officials explained that they use site visits when deemed necessary to  supplement information from other forms of oversight. USAID\u2019s policy  requires that a site visit be conducted for every project during  implementation to provide activity oversight, inspect implementation  progress and deliverables, verify monitoring data, and learn from  activity implementation.", "In addition to these monitoring tools, State, USAID, and DOL officials told  us that they rely on frequent communication with implementing partners  as part of their monitoring process. Overall, monitoring is intended to help agencies determine whether the project is meeting its goals, update and  adjust interventions and activities as needed, and ensure that funds are  used responsibly."], "subsections": []}, {"section_title": "DOL and USAID Fully Documented Their Monitoring Activities for Selected Projects, while State Did Not", "paragraphs": ["We found, based on our review of 54 selected counter-trafficking in  persons projects (37 State, 3 DOL, and 14 USAID), that DOL and USAID  had fully documented their performance monitoring activities, while State  did not fully document its activities for 16 of 37 (43 percent) of the projects  we reviewed with project start dates between fiscal years 2011 to 2016.", "DOL\u2019s documented monitoring activities included the monitoring plan for  each project as well as fiscal year 2017 semi-annual progress reports,  including indicators and targets. USAID\u2019s documented monitoring  activities included the monitoring plan for each project; fiscal year 2017  progress reports at the reporting frequency specified in the agreements  for each project; the final progress report, including indicators and targets,  for the three projects that ended as of December 2017; and evidence that  at least one site visit was conducted during each project\u2019s  implementation. Overall, the three agencies reported having conducted at  least one site visit during the life time of the project for 47 of 54 (87  percent) of the selected projects.", "As shown in table 3, State did not fully document its monitoring activities  (monitoring plan; fiscal year 2017 quarterly progress reports; and final  progress report, including indicators and targets, for projects that ended  as of December 2017) for 16 of the 37 selected projects we reviewed.  Specifically, State did not have nine monitoring plans, five complete  progress reports, or targets for each indicator in six of seven final  progress reports for projects that ended as of December 2017. (See  appendix III for detailed information on each of the 37 projects.)", "For the nine projects for which the monitoring plan was not  documented, the State TIP Office indicated that it was unable to  locate these documents or they were not completed because the  projects were finalized when the TIP Office was beginning to institute  the monitoring plan requirement. Although TIP Office officials told us  that the TIP Office piloted and began to phase in the monitoring plan  requirement over the course of 2014 and early 2015, eight of the nine  projects without monitoring plans started in September or October  2015. We found that each of the nine projects had a logic model  used to report progress in the fiscal year 2017 quarterly progress  reports we reviewed, which would have provided TIP Office officials a  basis for monitoring project performance at that point. However,  federal standards for internal control call for agency management to  design monitoring activities so that all transactions are completely and  accurately recorded and so that management can evaluate project  results. Specifically, internal controls specify that monitoring should  be ongoing throughout the life of the project, which is consistent with  State\u2019s current policy that generally requires completion of the  monitoring plan prior to award. Without timely documentation of the  monitoring plans at the start of the project, TIP Office officials may not  be able to ensure that projects are achieving their goals, as intended,  from the beginning of project operations.", "For the three projects for which the quarterly progress report for the  first quarter of fiscal year 2017 had been partially completed, the State  TIP Office indicated that the implementing partners began to use the  TIP Office\u2019s quarterly reporting template for subsequent reports after  TIP Office officials instructed the implementing partner to do so. For  the one project where the quarterly progress report was not  completed for the third quarter of fiscal year 2017, or partially  completed for the fourth quarter of fiscal year 2017, the project officer  provided possible reasons why the documents were not in the  project\u2019s file, including that the implementing partner lacked the  capacity to design a logic model. The project ended December 31,  2017. Federal standards for internal control call for agency  management to design monitoring activities, such as performance  reporting, so that all transactions are completely and accurately  recorded, and project results can be continuously evaluated. As  previously discussed, performance progress reports should compare  actual to planned performance and indicate the progress made in  accomplishing the goals and objectives of the project. Therefore, the  TIP Office may lack information needed to assess project  performance if it does not have access to complete monitoring  documentation.", "For the six projects for which targets were not fully documented in the  final progress reports, we found that targets were lacking for 110 of  253 (43 percent) of indicators across the six final progress reports.  Our prior work on performance measurement identified 10 key  attributes of performance measures\u2014such as having a measurable  target\u2014that GAO has found are key to successfully measuring a  project\u2019s performance. For example, our prior work has shown that  numerical targets or other measurable values facilitate future  assessments of whether overall goals and objectives are achieved  because comparisons can be easily made between projected  performance and actual results. State TIP Office officials explained  that the final progress reports we reviewed lacked targets because the  TIP Office had not required targets for each indicator for the projects  we reviewed that started in fiscal years 2011 to 2016. State TIP Office  officials also said that project officers may not have set targets due to  limited resources in previous years. A lack of actual targets limits the  TIP Office\u2019s ability to assess project performance, including  effectiveness, and determine if implementation is on track or if any  timely corrections or adjustments may be needed to improve project  efficiency or effectiveness.", "According to State TIP Office officials, the TIP Office has taken steps to  improve its documentation of monitoring activities, such as instituting a  monitoring plan requirement; increasing staff, including hiring a  monitoring and evaluation specialist; and developing standard templates  for implementing partners to use for reporting. Moreover, in November  2017, State established a new policy asserting that, building on the logic  model or project charter, bureaus and independent offices must set  targets for each performance indicator to indicate the expected change  over the course of each period of performance. It further notes that  bureaus and independent offices should maintain documentation of  project design, including the logic model. Additionally, State TIP Office  officials said that State is developing a department-wide automated  information management system (State Assistance Management System  - Domestic, or SAMS-D) that officials expect to standardize entry of  performance information and, under the new system targets, must be  recorded for each indicator. State TIP Office officials have worked to pilot- test SAMS-D to provide feedback on the system, including suggestions to  improve the completeness of data collection, according to TIP Office  officials.", "Despite these efforts, the TIP Office\u2019s documentation of all monitoring  activities, and implementation of its November 2017 requirement to set  targets for all performance indicators, is uncertain. For example, even  though the TIP Office informed us that it began to institute a monitoring  plan requirement over the course of 2014 and early 2015, as previously  noted, eight projects we reviewed that started in September or October  2015 did not have monitoring plans. In addition, according to State  officials, in SAMS-D, targets could be recorded as \u201cto be determined\u201d and  there are no controls in place to ensure that \u201cto be determined\u201d entries  are replaced with actual targets. State officials said that SAMS-D has the  capability to implement controls to alert users to update \u201cto be  determined\u201d targets, but pilot users of SAMS-D, which include the TIP  Office, have not provided feedback for this capability so far. Furthermore,  State TIP Office officials informed us that the TIP Office cannot require all  implementing partners to set targets, but that the TIP Office aspires to  update relevant targets regularly in the future and would encourage  implementing partners to update target values when appropriate.  Without controls to ensure full documentation of monitoring activities and  established performance targets, State is limited in its ability to assess  project performance, including project efficiency or effectiveness."], "subsections": []}]}, {"section_title": "State and USAID Do Not Have Sufficient Controls to Ensure the Reliability of Project Information, while DOL Had Consistent and Complete Performance Information in the Project We Reviewed", "paragraphs": ["In our review of selected indicators in two State TIP Office and two  USAID projects, we found that State and USAID used inconsistent and  incomplete performance information to monitor these projects. We found  that State TIP Office and USAID do not have sufficient controls in place to  ensure that the performance information they use is reliable. In contrast,  we found that DOL had consistent and complete performance information  in a project we reviewed, and we identified no controls in DOL\u2019s process  that were insufficient for assuring the reliability of this information."], "subsections": [{"section_title": "State and USAID Projects We Reviewed Showed Inconsistent and Incomplete Performance Information", "paragraphs": ["For selected indicators in two State TIP Office and two USAID projects,  we found numerous errors or omissions in progress reports we reviewed,  which resulted in inconsistent and incomplete performance information  agencies used to monitor these projects. Specifically, we found  examples of inconsistent information, which included many instances in  which quarterly indicator totals differed from annual or cumulative totals  reported separately on the same projects, and numbers reported in  narrative information that differed from numbers reported as indicator  values. In addition, we found examples of incomplete information,  including narrative elements that were missing in whole or in part.", "Inconsistent Performance Information. We found numerous instances  in which quarterly totals differed from annual or cumulative totals reported  separately on the same projects. When these errors occurred, it was not  possible to independently determine project performance based on report  information. For example,", "For one State TIP Office project, reported cumulative progress  overstated quarterly progress for at least 11 indicators (3 of which by  25 percent or more) and understated quarterly progress for at least 5  indicators (once by 25 percent or more). For example, for the indicator  \u201cnumber of standardized reintegration protocols/guidelines/tools  developed (case forms, family assessment, etc.,)\u201d State\u2019s cumulative  performance report as of the 4th quarter of fiscal year 2017 indicated  that two tools had been developed, whereas quarterly reports showed  that only one had been developed.", "For one USAID project, the indicator \u201cnumber of assisted communes  allocating and accessing funds for trafficking in persons prevention  activities\u201d showed that annual results were 60, while quarterly report  data combined showed that the number was 6, which USAID officials  confirmed was the correct figure.", "For another USAID project, the indicator, \u201cnumber of food security  private enterprises (for profit), producers organizations, water users  associations, women\u2019s groups, trade and business associations, and  community-based organizations receiving U.S. government  assistance\u201d showed an annual result of one, while quarterly totals  combined showed a total of three, which USAID officials confirmed  was the correct figure.", "For the projects we reviewed, implementing partners produced narrative  descriptions of progress made to accompany indicator results. We found  cases in which numbers reported in narrative information were not  consistent with numbers reported as indicator values. For example, for  the State TIP Office indicator \u201cnumber of criminal justice practitioners  trained\u201d for one project, indicator results for two quarters differed from  results presented in the corresponding narrative during fiscal years 2016  to 2017. State officials found that the narrative information was correct for  one of these inconsistencies and the indicator result was correct for the  other. In addition, for one USAID indicator\u2014number of public awareness  tools on trafficking in persons developed and disseminated\u2014the narrative  report for one quarter described distributions that added up to 21,765  products, while the reported quantitative indicator total was 21,482.  USAID officials confirmed that 21,765 was the correct figure.", "Incomplete Performance Information. Additionally, some quarterly  reports had narrative elements that were incomplete in whole or in part,  which made independent interpretation of project performance difficult or  impossible.", "The implementing partner in one State TIP Office project copied and  pasted significant portions of narrative information in quarterly reports  for 2 years and, according to State TIP Office officials, did not fulfill a  request by State TIP Office to include only current quarterly  information in formal quarterly reports because it was focused on  other activities. For nearly the entire period, the implementing partner  indicated that it was \u201cfollowing up\u201d with government entities in three  countries to set up counter-trafficking in persons training for  government officials, but no indication was made in formal quarterly  reports about the results of any of these follow-up activities.", "For one State TIP Office project, the indicator \u201cnumber of children  receiving care, whose cases are reported to the police\u201d had no  narrative information or incomplete narrative information provided for  three of the four quarters in which activity occurred during our period  of review (comprising almost 90 percent of reported performance  under this indicator).", "For a USAID project, the implementing partner reported a combined  performance number of approximately 200 from the first through third  quarters of fiscal year 2017 for the indicator \u201cnumber of members of  producer organizations and community based organizations receiving  U.S. government assistance.\u201d However, annual performance for fiscal  year 2017 was reported as nearly 1,700 organizations. USAID officials  explained that this difference was the result of the implementing  partner\u2019s misinterpretation of the indicator\u2019s definition when producing  the quarterly reports, but the annual report narrative did not explain  this correction.", "Additionally, for USAID\u2019s indicator on the \u201cnumber of public  awareness tools on trafficking in persons developed and  disseminated,\u201d no narrative information in the quarterly or annual  reports explained how the last quarter of fiscal year 2016 performance  approximately doubled from that of the previous quarter. Narrative  information in the annual report described performance for the year  only in general terms and did not clarify this significant change.", "In addition to direct project oversight, State TIP Office and USAID officials  stated that performance information from progress reports that the  agencies use to monitor counter-trafficking in persons projects is regularly  used for internal and external reporting, program decisions, and lessons  learned. For example, according to officials, this information is used by  senior agency officials to inform their decision-making, in reports such as  the Attorney General\u2019s Annual Report to Congress and Assessment of  U.S. Government Activities to Combat Trafficking in Persons, and to fulfil  other requests from Congress."], "subsections": []}, {"section_title": "Neither State TIP Office nor USAID Has Sufficient Controls to Ensure the Reliability of Performance Information", "paragraphs": ["Neither State TIP Office nor USAID has sufficient controls to ensure  consistent and complete performance information, and both face  challenges to data reliability stemming from information reported in non- standard formats, implementing partners with limited capacities to report  performance information, and the time-consuming nature of reviewing  reported information. Federal internal control standards state that  management should obtain data from reliable internal and external  sources. According to these standards, reliable internal and external  sources should provide data that are reasonably free from error and bias  and faithfully represent what they purport to represent; and management  should evaluate both internal and external sources of data for reliability.  Without implementing additional controls to ensure that performance  information are consistent and complete, State and USAID officials may  not fully or accurately understand what projects are, or are not, achieving  and, therefore, how their efforts could be altered as needed. Further,  reports that are prepared or program decisions that are made using the  TIP Office monitoring reports could be based on inconsistent or  incomplete information that does not accurately present project results."], "subsections": [{"section_title": "State Lacks Adequate Controls to Ensure the Reliability of Performance Information", "paragraphs": ["State TIP Office currently receives performance information using  documents submitted by implementing partners, although this information  is not compiled into a single data system and is not in a standardized  format. While State provides suggested templates for reporting  information, officials said that they cannot require implementing  organizations to use these templates and we found that implementing  partners provided information in varying formats.", "According to State TIP Office officials, project officers perform manual  reviews of quantitative information in monitoring reports but have  insufficient time to carry out detailed reviews of data reliability for all  indicators. State TIP Office project officers also stated that the process of  comparing narrative information to indicator information was time  consuming and difficult. According to these officials, the quality of the  information in progress reports also depends on the priorities and  resources\u2014which can be limited\u2014of the implementing partner. In  addition to reviewing progress reports, State project officers we spoke to  said that they rely on site visits and frequent, less formal communication  as part of their oversight process.", "Project officers for the State TIP Office projects we reviewed stated that  they did not always examine performance trends over time or review  consistency in reported cumulative totals\u2014which should be the sums of  the previous and current quarters\u2019 reported results\u2014with quarterly totals,  for reasons including the difficulty in assembling quarterly information in  this manner and resource limitations. State TIP Office officials noted that  they are aware of data quality problems in counter-trafficking in persons  monitoring reports.", "State is developing SAMS-D, a system that officials expect to standardize  entry of information from common performance indicators and logic  models, according to State officials. These officials stated that if SAMS-D  is deployed, State TIP Office could find it easier to analyze and revise  logic models that implementing partners submit, as well as examine  performance indicator results over time, since standardized data would be  available in a centralized location. According to State officials, SAMS-D  could be programmed with automatic checks or alerts under conditions  defined by the TIP Office and the database programmer. For example,  the system could require that fields be filled out in particular formats or  provide an alert if performance under a certain indicator has significantly  deviated from prior quarters or the indicator\u2019s target.", "State TIP Office officials said they were uncertain whether SAMS-D would  become operational in 2019, as currently planned. According to officials,  State TIP Office has participated in planning and pilot activities for SAMS- D, including testing monitoring tools with implementing partners.  According to these officials, additional work is needed to develop rules  and controls necessary to operationalize SAMS-D to meet the TIP  Office\u2019s particular needs and ensure improved data. Another challenge to  implementation of SAMS-D, according to these officials, is that some  implementing partners are unable to maintain consistent internet  connections necessary to upload information, impeding full roll-out of the  system, and an alternative upload mechanism does not yet exist."], "subsections": []}, {"section_title": "USAID Lacks Adequate Controls to Ensure the Reliability of Performance Information", "paragraphs": ["According to USAID officials, overseas missions currently set many of  their own policies and procedures for data quality oversight. For the two  projects we reviewed, USAID relied on implementing partners to manage  information, while it reviewed this information in addition to conducting  site visits and communicating with implementing partners on a regular  basis to monitor the projects. USAID officials attributed errors in the  project reports we reviewed to factors including implementing partners\u2019  errors in manual computation and misunderstandings of indicator  definitions. According to USAID officials, data quality errors due to factors  such as transcription errors can also occur in the performance information  USAID uses to monitor counter-trafficking in persons projects.", "USAID project officers for the projects we reviewed said that they  regularly conducted manual analysis of information received from  implementing partners, but USAID and implementing partners are often  pressed for time during the quarterly reporting cycle. According to these  project officers, some of the errors GAO found had already been  identified by USAID implementing partners during their annual review  process and corrected in the annual reports we reviewed. For example,  for the USAID indicator \u201cvalue of new private sector investments in select  value chains,\u201d quarterly totals overstated corrected annual results by  more than $120,000\u2014approximately $170,000 instead of approximately  $50,000. USAID officials said that they and the implementing partner had  identified that the implementing partner was incorrectly including  additional, unrelated data when producing its quarterly totals and while  the annual total had been corrected to approximately $50,000, the annual  report did not indicate that this error had occurred in the quarterly reports.  USAID officials noted that the quality of the information in the progress  reports also depends on the experience and capacity\u2014which can be  limited\u2014of the implementing partner.", "According to USAID officials, USAID is currently building the  Development Information Solution (DIS), an agency-wide information  system that would provide USAID\u2019s operating units (such as headquarters  bureaus or field missions) with a tool to better collect, track, and analyze  information to improve how they manage their projects and overall  strategies. Implementing partners would be able to access the DIS via a  portal where they would directly enter project information and upload  reports and supporting information, according to this official. In addition,  this information would better inform USAID\u2019s decision-making at the  operating unit level and agency level. A USAID official explained that  USAID developed DIS partly as a result of USAID senior management\u2019s  concern about the lack of one corporate system to collect data in a timely  fashion and improve efficiency.", "A USAID official responsible for managing DIS informed us that the  business case for DIS was approved in fiscal year 2016. Developers have  regularly solicited input from across the agency, according to this official,  and a pilot with six missions is expected to begin in November 2018. This  official explained that USAID plans to have DIS operational by the end of  2019, but DIS\u2019s timeframe has been accelerated by a year, to 2019 from  2020, which may create programming and budget challenges, and  unexpected challenges may also arise during the pilot process as mission  needs for DIS are more fully assessed. USAID is currently developing  training, deployment, and communications plans to prepare the agency  for implementing DIS, according to officials."], "subsections": []}]}, {"section_title": "DOL Had Consistent and Complete Performance Information for the Selected Project and We Identified No Controls Insufficient to Ensure the Reliability of Performance Information", "paragraphs": ["We reviewed selected indicators and targets information in one DOL  project and identified no significant consistency or completeness issues  beyond early project stages. For example, for the indicator \u201cnumber of  countries that ratify the International Labor Organization Protocol on  Forced Labor,\u201d the October 2016 report contained no reported value for  this indicator, while the subsequent report (April 2017) updated this figure  to indicate a value of \u201c4\u201d for October 2016. DOL officials explained that a  data reporting form had not yet been developed as of October 2016, but  indicator performance was discussed in the October 2016 narrative and  added to the data reporting form when it was developed. While DOL does  not require that a project progress report discuss every indicator  associated with an activity in the performance report narrative, according  to officials, we found that explanations were present for every significant  performance-related event that we identified for the fiscal year 2016 and  fiscal year 2017 period.", "We did not identify any controls in DOL\u2019s process that were insufficient to  ensure the reliability of performance monitoring information. DOL officials  said that they use a system of spreadsheets with automated calculations  and validation checks that are intended to standardize information  submission and assure consistency and completeness of submitted  information. These officials said that the project\u2019s Comprehensive  Monitoring and Evaluation Plan defines rules for how information for  indicators is to be collected and how indicators are to be computed from  this information. According to these officials, DOL develops a customized  indicator reporting form for each project in conjunction with implementing  partners, which implementing partners complete as part of their regular  reporting requirements. According to these officials, these spreadsheets  contain formula checks to mitigate the risk of implementing partners  making undisclosed changes to indicator results and array information in  a standardized manner across reporting periods. Officials also  commented that for internal reporting purposes, such as the Government  Performance and Results Act, project officers can extract information  from indicator templates in a manner that is not overly burdensome.  According to officials, DOL is developing an enhancement to existing  tools, expected in late 2019, which will provide a traceable way to send  and receive reports from grant recipients; timestamps when reports are  sent, received, and accepted; and tracking of performance monitoring  communications between DOL and implementing partners. They plan to  continue to use a spreadsheet-based system for tracking indicator  information."], "subsections": []}]}, {"section_title": "State Does Not Have a Process to Ensure that All Performance Indicators are Useful, while USAID and DOL Have Established Processes to Regularly Review the Usefulness of Indicators State TIP Office Does Not Have a Process to Review All Indicators to Ensure Their Usefulness", "paragraphs": ["State TIP Office does not have a process to regularly review the number  and content of indicators for counter-trafficking in persons projects to  ensure that these indicators are useful and that collecting and reviewing  information for them is not overly burdensome. State TIP Office officials  acknowledged there are too many indicators for many counter-trafficking  in persons projects. Project officers have the discretion to revise  indicators if the scope of the project is not altered, according to State  officials. In addition, according to these officials, changes that alter the  project scope are possible with the consent of the implementing partner.  However, State TIP Office project officers do not formally indicate which  indicators they have determined are most useful and informed us that  they have insufficient time and resources to do so as projects progress.  One official who focuses on monitoring issues stated that, ideally, there  should be three to five indicators per activity, and efforts have been made  to reduce the number of indicators in some projects. For example, in one  of the State TIP Office projects we reviewed\u2014which was designed prior  to the hiring of this official\u2014had more than 230 indicators across 20  activities as of the first quarter of fiscal year 2017, which had been  reduced to about 150 by the fourth quarter of fiscal year 2017.", "Our review of two State TIP Office projects showed that indicators did not  change in some situations even when the project officer considered the  indicator to have become less relevant. State project officers explained  that, instead of only relying on indicator information, they regularly spoke  with implementing partners for an understanding of what performance  level to expect. While acknowledging errors in the numerical information  for some indicators, project officers for the two projects we reviewed said  that they sometimes overlooked reviews of all reported indicators in the  quarterly progress reports because they consider some indicators to be  less useful or unimportant and not needed for monitoring purposes, and  burdensome to review in depth. These officials said that project officers  focus on the indicators that they consider to be most important for project  oversight or congressional requests.", "State TIP Office officials said that logic models, which include indicators,  have improved significantly in recent years (including improvements to  the suggested logic model template and the glossary of definitions), partly  due to hiring additional monitoring staff, but that State has found the  analysis of logic models to be difficult because of the absence of  centralized and standardized information and a lack of staff capacity. In  addition, project officers stated that they often rely on implementing  partners for suggestions with regard to changing indicators. However,  according to State officials, these implementing partners may be reluctant  to bring up challenges they encounter out of concern that doing so may  damage their relationship with State.", "State\u2019s Program Design and Performance Management Toolkit, rolled-out  in 2017, states that indicators can be costly to collect and manage and  should therefore be \u201cuseful,\u201d which includes having a clear utility for  learning, tracking, informing decisions, or addressing ongoing program  needs. This policy further states that indicators should also be  \u201cadequate,\u201d which includes having only as many indicators in overall  monitoring plan as are necessary and feasible to track key progress and  results, inform decisions, conduct internal learning, and meet any external  communication or reporting requirements. Further, federal internal control  standards state that management should establish and operate  monitoring activities, and, after doing so, may determine how often it is  necessary to change the design of the internal control system as  conditions change to effectively address objectives. Without a process  to ensure that the number and content of counter-trafficking in persons  project indicators are reviewed and modified as needed, project  monitoring may be less efficient and effective as implementing partners  and State TIP Office staff spend time collecting and reviewing indicator  information that is not useful for project monitoring and management."], "subsections": [{"section_title": "DOL and USAID Have Established Processes to Regularly Review the Usefulness of Indicators", "paragraphs": ["DOL and USAID had processes in place to regularly review indicators for  the projects we selected. DOL officials told us that project officers work  with subject-matter experts to review the relevance of indicators in each  semi-annual reporting period. These officials also stated that grantees are  required to review their monitoring and evaluation plan annually, which  includes the project\u2019s indicators, and to provide the most recent work plan  with each semi-annual report. According to DOL officials, while not a DOL  requirement, the project we reviewed incorporated a work plan for each  component of the project defining when important activities were planned  under each output indicator. We found that DOL and the implementing  partner made regular changes to these project plans in response to  changing conditions. These plans were consistently included in the  monitoring documents and most elements were discussed in the  associated narrative text.", "USAID conducts its project oversight primarily out of its overseas  missions, according to USAID officials. According to USAID officials  associated with the projects we reviewed, these officials should review  the project\u2019s indicators annually, as well as when they determine a review  is needed, such as when projects have changes in planned activities.  USAID officials stated that this annual review process may be explicitly  required in some agreements. According to these officials, missions or  other operating units are required to manage and update reference  sheets for indicators, which officials said are intended to define each  indicator and the information to be collected to measure each indicator.  Changes to these reference sheets are tracked, according to these  officials. Projects we reviewed showed evidence of regular changes to  indicators and associated targets. We spoke to project officers about  several specific changes that we had identified. For many of these  changes, the project officers provided information about their work with  implementing partners to appropriately adjust program goals and  expectations, such as adapting the project indicators and targets to  unexpected or changing conditions."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given the grave suffering of victims and damaging effects on society that  trafficking in persons imposes, and the U.S. government\u2019s reliance on  implementing partners to carry out its counter-trafficking projects,  performance monitoring is important to ensure that the United States  funds projects that are effective, efficient, and achieve their intended  counter-trafficking goals. In fiscal year 2017, State, DOL, and USAID  managed 120 counter-trafficking projects and monitored the performance  of the projects. However, weaknesses in State\u2019s and USAID\u2019s monitoring  processes limit their ability to collect reliable performance information and  assess project performance. First, we found that the State TIP Office did  not fully document its monitoring activities for many of the projects we  reviewed that started in between fiscal years 2011 to 2016. Monitoring the  implementation of projects and fully documenting the results of such  monitoring are key management controls to help ensure that project  recipients use federal funds appropriately and effectively. The State TIP  Office was also not setting targets for some project indicators, which may  have limited the TIP Office\u2019s ability to determine if implementation was on  track or if corrections needed to be made. Furthermore, we found that the  State TIP Office and USAID used project performance information  reported by the implementing partners\u2014used for internal and external  reporting purposes\u2014that was not always consistent or complete, and did  not have sufficient controls to ensure the reliability of performance  information. Finally, to ensure effective and efficient monitoring, projects  need to establish a reasonable number of indicators and update them as  needed. However, we found that the State TIP Office does not regularly  evaluate and revise all of its indicators for counter-trafficking in persons  projects, which can have large numbers of indicators. As a result, the  State TIP Office may be using information to monitor project performance  that that is less useful and relevant for understanding project progress,  and requires more resources and time for the implementing partners to  produce and agency officials to review.", "State TIP Office officials noted that the TIP Office has taken steps to  improve its monitoring process, and State and USAID officials explained  that State and USAID are developing information management systems  that may increase the quality and usefulness of the monitoring information  they use. However, these systems are not fully designed or operational  and their capabilities are not yet known. Thus, the potential of these  systems to strengthen the ability of State and USAID to collect reliable  performance information and assess their efforts to combat the serious  problem of global trafficking in persons is unclear. State and USAID could  benefit from making additional improvements to ensure their projects are  being implemented as intended and achieving project goals to prevent  trafficking in persons, protect victims, and prosecute trafficking crimes."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations, including four to State  and one to USAID. Specifically:  The Secretary of State should ensure that the Director of the TIP Office  establishes targets for each performance indicator. (Recommendation 1)", "The Secretary of State should ensure that the Director of the TIP Office  maintains documentation of all required monitoring activities, including  monitoring plans, progress reports, and performance targets.  (Recommendation 2)", "The Secretary of State should ensure that the Director of the TIP Office  establishes additional controls to improve the consistency and  completeness of performance information that the TIP Office uses to  monitor counter-trafficking in persons projects. (Recommendation 3)", "The Secretary of State should ensure that the Director of the TIP Office  establishes a process to review and update performance indicators, with  the participation of implementing partners, to ensure that project  monitoring remains efficient and effective. (Recommendation 4)", "The Administrator of USAID should establish additional controls to  improve the consistency and completeness of performance information  that USAID uses to monitor counter-trafficking in persons projects.  (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State, DOL, USAID, DOD, and the  Treasury for review and comments. In State\u2019s and USAID\u2019s letters,  reproduced in appendixes IV and V, respectively, both agencies  concurred with our recommendations and described their planned actions  to address the recommendations. In addition, State\u2019s letter indicated that  our draft report did not fully recognize the investment State has made,  and the changes underway, to improve the TIP Office\u2019s performance  measurement and ensure complete and consistent documentation. State  cited additional dedicated financial and personnel resources for  monitoring and evaluation added over the past two years. We  acknowledge and report on these positive steps, including the hiring of a  monitoring and evaluation specialist and other TIP Office staff, in our  report. USAID\u2019s letter included other comments that we have responded  to in appendix V. Furthermore, State, DOL, USAID, and the Treasury  provided technical comments, which we incorporated as appropriate.  DOD had no comments.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of State, Labor, Defense, and Treasury; and  the Administrator of USAID. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7141, or groverj@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2017 includes a  provision for GAO to report on the programs conducted by the  Department of State (State), the Department of Labor (DOL), the United  States Agency for International Development (USAID), the Department of  Defense (DOD), and the Department of the Treasury (Treasury) that  address human trafficking and modern slavery, including a detailed  analysis of the effectiveness of such programs in limiting human  trafficking and modern slavery. Three of these agencies\u2014State, DOL,  and USAID\u2014have programs that design and award counter-trafficking  projects to implementing partners, through contracts, grants, or  cooperative agreements.  These agencies then oversee and monitor  these projects. Since DOD and Treasury officials did not identify these  types of projects as part of their counter-trafficking in persons efforts, we  provided background information on their efforts but did not cover these  agencies in our reporting objectives. This report (1) identifies the recent  projects in international counter-trafficking in persons that key U.S.  agencies have awarded to implementing partners, and for selected  projects, assesses the extent to which key agencies have (2) documented  their monitoring activities, (3) ensured the reliability of the performance  information they use in monitoring projects, and (4) reviewed the  usefulness of the performance indicators they use in monitoring projects.", "To address these objectives, we reviewed relevant agency documents  and interviewed agency officials. To report on agencies\u2019 programs, we  asked knowledgeable officials at State, DOL, USAID, DOD, and Treasury  to identify their projects that (1) had an international focus; (2) were  delivered by implementing partners to external recipients, such as  trafficking victims or host governments, as project beneficiaries; and (3)  addressed trafficking in persons,   modern slavery, or forced labor. Because State, DOL, and USAID  managed such projects, we focus on them as the three key agencies for  the purposes of our reporting objectives. According to officials from these  three agencies, the projects they identified range from those with counter- trafficking in persons as a primary goal, to those in which this goal was  integrated as part of each agency\u2019s activities. We used the lists of  projects that these agencies provided to report the relevant counter- trafficking projects that agencies awarded to implementing partners to  carry out the projects. For our first objective, we determined the projects  that were active during fiscal year 2017, including those which began,  were ongoing, or ended during fiscal year 2017, and interviewed agency  officials to confirm project information.", "To analyze the effectiveness of agencies\u2019 programs in limiting human  trafficking and modern slavery, we assessed the key agencies\u2019 monitoring  efforts for selected projects by examining the extent to which agencies  have documented their monitoring activities, ensured the reliability of the  performance information, and reviewed the usefulness of the  performance indicators they use in monitoring projects.", "To assess the extent to which State, DOL, and USAID documented their  monitoring activities for selected counter-trafficking in persons projects,  we reviewed these agencies\u2019 monitoring policies and related guidance as  well as the full agreements for the projects to identify specific required  monitoring activities. The policies and related guidance included State\u2019s  Grants Policy Directive Number 42 (GPD-42) related to monitoring  assistance awards; Federal Assistance Policy Directive (FAPD), which  according to a State official superseded State\u2019s grants policy directives,  including GPD-42; Federal Assistance Directive, which superseded the  FAPD; Program Design and Performance Management Toolkit; and  Program and Project Design, Monitoring, and Evaluation Policy. We  also reviewed State\u2019s Office to Monitor and Combat Trafficking in Persons  standard operating procedures. For DOL, we reviewed its Management  Procedures and Guidelines (MPG) as well as the Comprehensive  Monitoring and Evaluation Plan Guidance Document referenced in the  fiscal year 2017 MPG. For USAID, we reviewed\u2014from its Automated  Directives System or ADS\u2014Chapter 203 on Assessing and Learning  and Chapter 201 on Program Cycle Operational Policy, which according  to USAID officials superseded Chapter 203. Once we determined what  tools the agencies use to monitor their counter-trafficking in persons  projects, we sought documentation of those tools to determine whether  agencies were implementing those tools.", "To assess the agencies\u2019 monitoring efforts, we identified all of State\u2019s,  DOL\u2019s, and USAID\u2019s projects that started before or during October 2015,  which corresponds to the first quarter of fiscal year 2016, and were active  through September 30, 2017, which corresponds to the fourth and last  quarter of fiscal year 2017. This produced a list of a total of 57 State,  DOL, and USAID projects. Out of these 57 projects, we excluded 3  projects from our selection for various reasons. We excluded one DOL  project because DOL identified the project as being a research project for  which certain agency performance monitoring requirements (e.g.,  indicators, targets) are not applicable. We also excluded two USAID  projects because USAID identified each project as including several  projects with various start and end dates, thus making it difficult to  determine their time frames for inclusion in our report. This resulted in a  selection of 54 projects\u201437 from State, 3 from DOL, and 14 from USAID.  We reviewed documentation of key monitoring activities as specified in  agency policy or the project award agreements to determine the extent to  which the agencies had full documentation of key monitoring activities.  We also applied federal standards for internal control, which call for  agency management to design monitoring activities so that all  transactions are completely and accurately recorded, and GAO\u2019s key  attributes of effective performance measures, specifically the attribute of  having a numerical target. We made our determinations of the extent to  which agencies had full documentation of key monitoring activities, as  follows:", "State (37 projects). To determine whether State had fully  documented its monitoring activities, we reviewed the monitoring plan  for each project; fiscal year 2017 quarterly progress reports for each  project; and the final progress report, including indicators and targets,  for the seven projects that ended as of December 2017.", "We determined that State had \u201cfully documented\u201d the monitoring  plan, if State provided a monitoring plan worksheet for the project.  If State did not provide a monitoring plan worksheet for the  project, we determined the monitoring plan was \u201cnot documented.\u201d", "For each quarterly progress report for fiscal year 2017 as well as  the final progress report for projects that ended as of December  2017, we determined that State had \u201cfully documented\u201d the report,  if the report included both a qualitative and quantitative summary  of progress. For the State TIP Office projects we reviewed, the  qualitative summary of progress is captured in a narrative and the  quantitative summary of progress is captured in the logic model.  For the State DRL project we reviewed, the qualitative summary of  progress is captured in a narrative and the quantitative summary  of progress is captured in the monitoring plan. If either  component\u2014narrative or quantitative summary\u2014was not  documented, we determined that the report was \u201cpartially  documented.\u201d If both components were not documented, we  determined that the report was \u201cnot documented.\u201d", "We determined that State had \u201cfully documented\u201d indicators and  targets for projects that ended as of December 2017, if the final  progress report for the project included indicators as well as  targets for each indicator. If the final progress report included  indicators but did not specify targets for each indicator, we  determined that indicators and targets were \u201cpartially  documented.\u201d If the final progress report did not include  indicators and targets, we determined that indicators and targets  were \u201cnot documented.\u201d (We did not find any instances of \u201cnot  documented.\u201d)", "DOL (3 projects). To determine whether DOL had full documentation  of its monitoring activities, we reviewed the monitoring plan as well as  fiscal year 2017 semi-annual progress reports for each project.  Because DOL\u2019s three projects were ongoing as of December 2017,  we reviewed the second semi-annual progress report for fiscal year  2017 to determine whether DOL had \u201cfully documented\u201d indicators  and targets for each project. Overall, we determined that DOL had  \u201cfully documented\u201d (1) the monitoring plan for each project, if the  monitoring plan documented the performance metrics and data  collection frequency for the project; (2) each fiscal year 2017 semi- annual progress report for the project, if the report included a  qualitative and quantitative summary of progress for the period of  performance; and (3) indicators and targets for the project, if the  second semi-annual progress report included indicators as well as  targets for each applicable indicator.", "USAID (14 projects). To determine whether USAID had full  documentation of its monitoring activities, we reviewed the monitoring  plan for each project; fiscal year 2017 progress reports at the  reporting frequency specified in the agreements for each project; and  the final progress report, including indicators and targets, for the three  projects that ended as of December 2017. We also reviewed evidence  of site visits conducted during the life time of the projects. Overall, we  determined that USAID had \u201cfully documented\u201d (1) the monitoring plan  for each project, if the monitoring plan documented performance  metrics for the project; (2) the periodic progress reports for fiscal year  2017 as well as the final progress report for projects that ended as of  December 2017, if the report included a qualitative and quantitative  summary of progress for the period of performance; and (3) indicators  and targets for the three projects that ended as of December 2017, if  the final progress report included indicators as well as targets for each  applicable indicator. We determined that USAID \u201cfully documented\u201d a  project\u2019s site visit, if USAID provided evidence of having conducted at  least one site visit during the life time of the project.", "Additionally, we interviewed knowledgeable monitoring officials from each  agency to understand agencies\u2019 monitoring process and application of  monitoring requirements for counter-trafficking in persons projects.  Because State and DOL officials also identified site visits as a key tool  they use to monitor their counter-trafficking in persons projects, we  reviewed evidence of site visits conducted during the life time of the  projects to report on these efforts. We also interviewed State TIP Office  officials to discuss instances in which the agency did not have full  documentation of key monitoring activities.", "To assess the extent to which key agencies have ensured the reliability of  the performance information they use to monitor selected projects, we  selected for review a nongeneralizable sample of 5 projects\u20142 State  projects, 1 DOL project, and 2 USAID projects\u2014out of the 54 counter- trafficking in persons projects identified by agencies that started before or  during October 2015 and were active through fiscal year 2017. We based  our selection of these projects primarily on largest total award amounts.  For these selected projects, we obtained 2 years of progress reports and  other documents to assess the quantitative and qualitative performance  information. We developed a standardized template to capture all  quarterly or semi-annual indicator performance information reported for  each of these projects and assessed whether quarterly or semi-annual  totals were consistent with annual and cumulative totals where these  were reported. Using this quantitative information, we judgmentally  selected indicators for inclusion in agency interviews where it appeared  likely that numerical errors had occurred or there appeared to be  significant project events, such as large over- or under-performance or  the elimination of the indicator. We interviewed agency officials, including  managers of these five projects, about the consistency and completeness  of monitoring information in these projects for about 60 indicators  identified through our analysis. Additionally, we questioned these  officials about performance report narrative information describing project  activities that, in our judgement, appeared to be incomplete or  inconsistent with respect to indicator results. We also used these  interviews to determine whether our findings for these selected projects  reflected general agency policies and procedures. We assessed the  completeness and consistency of project performance data that State,  DOL, and USAID use to monitor projects as part of our data reliability  assessment. We found State and USAID data to be unreliable in the  projects we reviewed. We discuss the implications of these unreliable  data for State and USAID\u2019s project management and reporting in our  findings and recommendations. We found the performance data that DOL  used were consistent and complete for the project we reviewed. While we  examined indicator data and narrative information for consistency and  completeness, we did not verify the accuracy of performance information.", "To assess the extent to which key agencies have reviewed the  usefulness of the performance indicators they use to monitor selected  projects, we used the same nongeneralizable sample of five projects\u2014 two State projects, one DOL project, and two USAID projects. We  interviewed agency officials, including managers of these five projects,  about processes and systems they use to review the usefulness of  indicators on an ongoing basis, such as when conditions in the project  activity region change or if the agency and implementing partner learn  that certain project activities are less effective than expected. We  identified examples of indicators that had apparently been discontinued,  as well as continued indicators that showed minimal progress, and we  asked these officials to explain what had or had not been discontinued.  We also used these interviews to determine whether our findings for  these selected projects reflected general agency policies and procedures.", "We conducted this performance audit from October 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Three Key U.S. Agencies\u2019 Counter-trafficking in Persons Projects, Active in Fiscal Year 2017", "paragraphs": ["The Departments of State (State) and Labor (DOL), and U.S. Agency for  International Development (USAID) managed 120 projects in counter- trafficking in persons carried out by implementing partners during fiscal  year 2017, according to information provided by officials with these  agencies. The three agencies used different approaches to identify  relevant projects. For example, State reported projects with a primary  goal of counter-trafficking in persons, while DOL and USAID included  projects that may not have counter-trafficking in persons as a primary  goal. Table 4 lists these agencies\u2019 reported project information for  projects that were active during fiscal year 2017."], "subsections": []}, {"section_title": "Appendix III: State Documentation for Its Performance Monitoring Activities for 37 Counter-Trafficking in Persons Projects", "paragraphs": ["The Department of State (State) did not fully document its monitoring  activities (monitoring plan; fiscal year 2017 quarterly progress reports;  and final progress report, including indicators and targets, for projects that  ended as of December 2017) for 16 of the 37 selected projects we  reviewed with start dates between fiscal years 2011 to 2016. (See table  5.) For example, State\u2019s Office to Monitor and Combat Trafficking in  Persons did not have monitoring plans for nine projects or targets for  each indicator in six of seven final progress reports for projects that  ended as of December 2017."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": [{"section_title": "GAO Comments", "paragraphs": ["1.  USAID commented that it does not believe that our draft report  reflected the existing controls the USAID mission in Ghana shared  with us, and that the mission had furnished us with a file that,  according to USAID, contained correct information for all indicators  and their results from the time the activity began until our audit. While  the mission provided us with a spreadsheet, this document included  only annual performance totals for several years without  accompanying quarterly totals, or quarterly or annual narrative  information. We focused our analysis on the quarterly and annual  performance reports to understand the extent to which USAID was  ensuring the consistency and completeness of performance  information, including associated narratives, underlying its aggregate  and higher-level performance reports. We reported on inconsistent or  incomplete performance information only after discussing and  substantiating the specific errors we identified with USAID officials.  Further, we recognize USAID\u2019s efforts to address errors that the  agency identified prior to our review and we provide an example of  such efforts in the report.  2.  We have incorporated USAID\u2019s comment. Our report no longer  characterizes USAID\u2019s regular activity monitoring and conversations  with implementing partners as \u201cinformal.\u201d  3.  USAID noted that our report does not discuss how the USAID mission  in Ghana uses its third-party monitoring project\u2014Monitoring,  Evaluation and Technical Support Services (METSS)\u2014to work with  local organizations to improve their collection and analysis of data.  We have added a reference to USAID\u2019s third-party monitoring project  to the report where we discussed limited capacity of local partners as  a cause of data reliability issues.  4.  USAID commented that one of the Ghana counter-trafficking in  persons indicators we examined in the integrated project (\u201cvalue of  new private sector investments in selected value-chains\u201d), was not  related to trafficking in persons and, therefore, was not directly related  to the focus of our audit. As discussed in the Objectives, Scope, and  Methodology section of our report (see app. I), we selected projects,  including the integrated project in Ghana, based on a list of counter- trafficking in persons projects provided by USAID. Because the same  operational policy that sets the monitoring and evaluation standards  for the agency applied to all indicators within a given project, we  examined available quarterly or semi-annual indicator data for all  reported indicators in selected projects to determine the completeness  and consistency of the data. We then conducted interviews with  agency officials to discuss instances in which we identified potentially  incomplete and inconsistent performance information, as well as  whether our findings about the management of performance  information for these selected projects reflected general agency  policies and procedures."], "subsections": []}]}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Leslie Holen (Assistant Director),  Victoria Lin (Analyst-in-Charge), Esther Toledo, and Andrew Kurtzman  made key contributions to this report. The team benefited from the expert  advice and assistance of Neil Doherty, Justin Fisher, Benjamin Licht,  Grace Lui, and Aldo Salerno."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Human Trafficking: State Has Made Improvements in Its Annual Report  but Does Not Explicitly Explain Certain Tier Rankings or Changes,  GAO-17-56 (Washington, D.C.: December 5, 2016).", "Human Trafficking: Oversight of Contractors\u2019 Use of Foreign Workers in  High-Risk Environments Needs to Be Strengthened. GAO-15-102  (Washington, D.C.: November 18, 2014).", "Human Trafficking: Monitoring and Evaluation of International Projects  Are Limited, but Experts Suggest Improvements. GAO-07-1034  (Washington, D.C.: July 26, 2007).", "Human Trafficking: Better Data, Strategy, and Reporting Needed to  Enhance U.S. Antitrafficking Efforts Abroad. GAO-06-825 (Washington,  D.C.: July 18, 2006)."], "subsections": []}], "fastfact": ["Human trafficking victims are often held in slave-like conditions and forced to work in areas such as the commercial sex trade, factories, and agriculture.", "The Departments of State and Labor, and the U.S. Agency for International Development managed 120 counter-trafficking projects in FY 2017. These projects were carried out by grantees and others, and overseen by the agencies.", "We found some weaknesses in State\u2019s and USAID\u2019s monitoring of projects we reviewed, including the use of inconsistent and incomplete information to assess project performance.", "We made 5 recommendations to improve monitoring."]}
{"id": "GAO-18-492", "url": "https://www.gao.gov/products/GAO-18-492", "title": "Export-Import Bank: The Bank Needs to Continue to Improve Fraud Risk Management", "published_date": "2018-07-19T00:00:00", "released_date": "2018-07-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to the Bank, it serves as a financier of last resort for U.S. firms seeking to sell to foreign buyers but that cannot obtain private financing for their deals. Its programs support tens of thousands of American jobs and enable billions of dollars in U.S. export sales annually, the Bank says. The Bank is also backed by the full faith and credit of the United States government, meaning that taxpayers could be responsible for Bank losses.", "The Export-Import Bank Reform Reauthorization Act of 2015 included a provision for GAO to review the Bank's antifraud controls within 4 years, and every 4 years thereafter. This report examines the extent to which the Bank has adopted the four components of GAO's Fraud Risk Framework\u2014commit to combating fraud; regularly assess fraud risks; design a corresponding antifraud strategy with relevant controls; and evaluate outcomes and adapt. GAO reviewed Bank documentation; interviewed a range of Bank managers; and surveyed Bank employees about the extent to which the Bank has established an organizational culture and structure conducive to fraud risk management."]}, {"section_title": "What GAO Found", "paragraphs": ["In managing its vulnerability to fraud, the Export-Import Bank of the United States (the Bank) has adopted some aspects of GAO's A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework). This framework describes leading practices in four components: organizational culture, assessment of inherent program risks, design of tailored antifraud controls, and evaluation of outcomes. As provided in the framework, for example, the Bank has identified a dedicated entity within the Bank to lead fraud risk management. GAO also found that Bank managers and staff generally hold positive views of the Bank's antifraud culture. However, GAO also found that management and staff hold differing views on key aspects of that culture. These differing views include how active the Bank should be in addressing fraud. For example, Bank managers told GAO the Bank's current approach has been appropriate for dealing with fraud. However, about one-third of Bank staff responding to a GAO employee survey said the Bank should be \u201cmuch more active\u201d or \u201csomewhat more active\u201d in preventing, detecting, and addressing fraud. These and other divergent views indicate an opportunity to better ensure the Bank sets an antifraud tone that permeates the organizational culture, as provided in the Fraud Risk Framework.", "GAO found the Bank has taken some steps to assess fraud risk. For example, the Bank's practice has generally been to assess particular fraud risks and lessons learned following specific instances of fraud encountered, according to Bank managers. However, the Bank has not conducted a comprehensive fraud risk assessment, as provided in the framework. The Bank has also been compiling a \u201cregister\u201d of risks identified across the organization, including fraud. This register, however, does not include some known methods of fraud, such as submission of fraudulent documentation, thus indicating it is incomplete. Without planning and conducting regular fraud risk assessments as called for in the framework, the Bank is vulnerable to failing to identify fraud risks that can damage its reputation or harm its ability to support U.S. jobs through greater exports. As provided in the framework, managers should determine where fraud can occur and the types of internal and external fraud the program faces, including an assessment of the likelihood and impact of fraud risks inherent to the program.", "At the conclusion of GAO's review, Bank managers said they will fully adopt the GAO framework. They said they plan to complete a fraud risk assessment by December 2018, and to determine the Bank's fraud risk profile\u2014that is, document key findings and conclusions from the assessment\u2014by February 2019. Work to adopt other framework components will begin afterward, the managers said. However, they did not provide details of how their efforts will be in accord with leading practices of the framework. As a result, GAO makes framework-specific recommendations in order to enumerate relevant issues and to present clear benchmarks for assessing Bank progress. This complete listing of recommendations is important in light of the Bank's recent embrace of the framework; recent changes in Bank leadership; and expected congressional consideration of the Bank's reauthorization in 2019."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes seven recommendations, centering on conducting a fraud risk assessment, tailored to the Bank's operations, to serve as the basis for the design and evaluation of appropriate antifraud controls. The Bank agreed with GAO's recommendations, saying it will take steps to improve its fraud risk management activities."]}], "report": [{"section_title": "Letter", "paragraphs": ["The mission of the Export-Import Bank of the United States (the Bank) is  to support American jobs by facilitating the export of U.S. goods and  services. According to the Bank, it serves as a financier of last resort for  U.S. companies that are seeking to sell to foreign buyers but that cannot  obtain private financing for their deals\u2014thus assuming credit and country  risks the private sector is unable or unwilling to accept. To support these  exports, the Bank offers loan, loan guarantee, and insurance programs.  According to the Bank, its programs support tens of thousands of  American jobs and enable billions of dollars in U.S. export sales annually.", "The Bank is backed by the full faith and credit of the United States  government, meaning that taxpayers could be responsible for losses  arising from Bank operations. Since 2011, the Bank\u2019s congressionally  authorized exposure limit\u2014the total amount it may have outstanding in  credit and insurance authority\u2014has increased from $100 billion and now  stands at $135 billion. Total actual exposure as of September 30, 2017,  was $72.5 billion. By number, a large majority of Bank transactions  involve smaller companies and smaller amounts of assistance. By dollar  amount, however, large transactions dominate activity, according to the  Bank.", "The Bank requires periodic reauthorization from Congress. Congress last  did so in 2015, after debate that included discussion of fraud risks at the  Bank. As part of its 2015 reauthorization, Congress included a provision  in the statute for us to review the adequacy of design and effectiveness of  the Bank\u2019s antifraud controls, within 4 years of reauthorization, and every  4 years thereafter.", "This report examines the Bank\u2019s management of fraud risks in its export  credit activities, by evaluating the extent to which the Bank has adopted  the four components described in GAO\u2019s A Framework for Managing  Fraud Risks in Federal Programs (Fraud Risk Framework). Specifically,  we evaluate the extent to which the Bank has (1) established an  organizational culture and structure conducive to fraud risk management;  (2) planned regular fraud risk assessments and assessed risks to  determine a fraud risk profile; (3) designed and implemented a strategy  with specific control activities to mitigate assessed fraud risks; and (4)  evaluated outcomes using a risk-based approach and adapted activities  to improve fraud risk management.", "To evaluate the extent to which the Bank has adopted the components  described in GAO\u2019s Fraud Risk Framework, we assessed Bank fraud risk  management practices against provisions of the framework, which also  incorporates concepts from Standards for Internal Control in the Federal  Government (also known as the \u201cGreen Book\u201d). We reviewed Bank  policy and governance documentation, plus other documentation;  reviewed GAO and Bank Office of the Inspector General (OIG) reports on  fraud and fraud risk management topics; and interviewed a range of Bank  managers, at both the senior-management level and those overseeing  relevant Bank operating units. We also surveyed Bank employees about  their perceptions of the Bank\u2019s organizational culture and attitudes toward  fraud and fraud risk management. Specifically, we surveyed all non- senior-management Bank employees (that is, those below the level of  senior vice president, who are responsible for implementing, but not  determining, Bank policy), and obtained a sufficient response rate\u201473.5  percent\u2014to capture a range of employee views. We present tallies of  survey results for particular questions, as well as individual comments, in  the main text of this report based on their relevance to the respective  subject matter. See appendix I for a full discussion of our scope and  methodology, including our survey methodology. Complete results of our  survey are presented in appendix II.", "We conducted this performance audit from October 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Export credit agencies such as the Bank are usually government  agencies, although some private institutions operate export credit  programs on their respective governments\u2019 behalf, according to a Bank  report on global export credit competition. These agencies offer financing  for domestic companies to make sales to foreign buyers, in the form of  products such as loans, guarantees, and insurance for exporters,  according to the Organisation for Economic Co-operation and  Development, which monitors international export credit activity.", "The Bank is one of several federal agencies promoting U.S. exports.  According to the Bank, as of December 31, 2016, it had identified 96  export credit agencies worldwide. There have been significant changes in  the role of export credit agencies since 2007 and the global financial crisis  and the European debt crisis, according to the Bank. This is because  ready access to credit before the global financial crisis has given way to  caution in lending among private-sector banks, and also because other  nations have adopted export credit agencies as a tool for national growth.", "For fiscal year 2014\u2014which the Bank says is the most recent year in  which it operated with full authority\u2014 the Bank reported authorizing  nearly $20.5 billion in financing in support of an estimated $27.5 billion  worth of U.S. exports and nearly 165,000 American jobs. For fiscal year  2017, operating under reduced authority, the Bank reported authorizing  more than $3.4 billion in financing to support $7.4 billion of exports and an  estimated 40,000 jobs.", "The Bank, which has about 430 employees, was established under the  Export-Import Bank Act of 1945. Under the act, the Bank must have a  \u201creasonable assurance\u201d of repayment when providing financing; it must  supplement, and not compete with, private capital; and it must provide  terms that are competitive with foreign export credit agencies. Also  relevant to whether the Bank provides assistance is whether foreign  competitors of the U.S. exporter are receiving export credit assistance  from their home nations, and thus the American exporter would need  assistance to stay competitive. Over time, Congress has directed the  Bank to support certain specific types of exports. Such requirements  include using at least 25 percent of its authority to finance small-business  exports; promoting exports related to renewable energy sources; and  promoting financing for sub-Saharan Africa."], "subsections": [{"section_title": "Bank Product Types", "paragraphs": ["As described in figure 1, to support U.S. exports, the Bank offers four  major types of financing: direct loans, loan guarantees, export-credit  insurance, and working capital guarantees. Bank products generally have  three maturity periods: Short-term transactions are for less than 1 year;  medium-term transactions are from 1 to 7 years long; and long-term  transactions are more than 7 years.", "For fiscal year 2017, the Bank reported it had exposure in 166  countries. Figure 2 shows Bank exposure by product type, geographic  region, and economic sector, for fiscal year 2017. Its greatest exposure,  by product type, was in loan guarantees. By geographic region, the  largest exposure was the Asian market. By economic sector, exposure  was biggest in aircraft products.", "Because the Bank\u2019s mission is to support U.S. jobs through exports, there  are foreign-content eligibility criteria and limitations on the level of foreign  content that may be included in a Bank financing package. For medium-  and long-term transactions, for example, the Bank limits its support to 85  percent of the value of goods and services in a U.S. supply contract, or  100 percent of the U.S. content of an export contract, whichever is less.  There are also requirements that certain products supported by the Bank  must be shipped only on U.S.-flagged vessels.", "Defaults occur when transaction participants fail to meet their financial  obligations. The Bank must report default rates to Congress quarterly. It  calculates the default rate as overdue payments divided by financing  provided. If the rate is 2 percent or more for a quarter, the Bank may not  exceed the amount of loans, guarantees, and insurance outstanding on  the last day of that quarter until the rate falls under 2 percent. As of March  31, 2018, the Bank reported its default rate at 0.438 percent."], "subsections": []}, {"section_title": "Bank Board of Directors and Vacancies", "paragraphs": ["The Bank is overseen by a Board of Directors (the Board), which has a  key role in approving Bank transactions, because directors must approve  medium- and long-term transactions of greater than $10 million. Since  July 2015, however, the Board has lacked a quorum (at least three  members), which has precluded approval of these large transactions.", "Also due to the lack of a quorum, new transaction activity has shifted  away from larger transactions, according to Bank managers.", "The Bank\u2019s total exposure has recently declined by about a third, from  $113.8 billion at the end of fiscal year 2013 to $72.5 billion at the close of  fiscal year 2017, according to the Bank. In part during the period when  the Board has lacked a quorum and been unable to approve large  transactions, the amount of earnings the Bank has transferred to the  Department of the Treasury has declined steadily, according to Bank  figures. Since 2012, the amount the Bank transferred to the Treasury  peaked at $1.1 billion in fiscal year 2013. In successive years, that  transfer fell to $674.7 million in fiscal year 2014, $431.6 million in fiscal  year 2015, and $283.9 million in fiscal year 2016, before reaching zero in  fiscal year 2017. As the Board vacancies have continued, a backlog of  Board-level transactions has grown, reaching an estimated $42.2 billion  as of December 2017.", "The Board also has a key role in risk management, with members serving  on the Bank\u2019s Risk Management Committee, which oversees portfolio  stress testing and risk exposure, according to the Bank. Board members  also approve the appointment of the chief risk officer (CRO), the chief  ethics officer, and members of advisory committees.", "During the course of our review, in addition to the Board quorum issue,  Bank senior leadership changed. According to the Bank, the following  took place: The acting chairman of the Board and president of the Bank  resigned. The vice chairman, first vice president, and acting agency head  also later resigned. Subsequently, a new executive vice president, chief  operating officer, and acting agency head was named. Following that, an  acting president and Board chairman was named."], "subsections": []}, {"section_title": "Fraud Risk Management Standards and Guidance", "paragraphs": ["Fraud and \u201cfraud risk\u201d are distinct concepts. Fraud\u2014obtaining something  of value through willful misrepresentation\u2014is challenging to detect  because of its deceptive nature. Fraud risk exists when individuals have  an opportunity to engage in fraudulent activity, have an incentive or are  under pressure to commit fraud, or are able to rationalize committing  fraud. When fraud risks can be identified and mitigated, fraud may be less  likely to occur. Although the occurrence of fraud indicates there is a fraud  risk, a fraud risk can exist even if actual fraud has not yet been identified  or occurred.", "According to federal standards and guidance, executive-branch agency  managers are responsible for managing fraud risks and implementing  practices for combating those risks. Federal internal control standards call  for agency management officials to assess the internal and external risks  their entities face as they seek to achieve their objectives. The standards  state that as part of this overall assessment, management should  consider the potential for fraud when identifying, analyzing, and  responding to risks. Risk management is a formal and disciplined  practice for addressing risk and reducing it to an acceptable level.", "We issued our Fraud Risk Framework in July 2015. The Fraud Risk  Framework provides a comprehensive set of leading practices, arranged  in four components, which serve as a guide for agency managers  developing efforts to combat fraud in a strategic, risk-based manner. The  Fraud Risk Framework is also aligned with Principle 8 (\u201cAssess Fraud  Risk\u201d) of the Green Book. The Fraud Risk Framework describes leading  practices in four components: commit, assess, design and implement,  and evaluate and adapt, as depicted in figure 3.", "The Fraud Reduction and Data Analytics Act of 2015, enacted in June  2016, requires the Office of Management and Budget (OMB) to establish  guidelines for federal agencies to create controls to identify and assess  fraud risks, and to design and implement antifraud control activities. The  act also requires OMB to incorporate the leading practices of the Fraud  Risk Framework in those guidelines. In July 2016, OMB published  guidance on enterprise risk management and internal controls in federal  executive departments and agencies. Among other things, this guidance  affirms that managers should adhere to the leading practices identified in  the Fraud Risk Framework. The act also requires federal agencies to  submit to Congress a progress report each year, for 3 consecutive years,  on implementation of the controls established under the OMB guidelines."], "subsections": []}]}, {"section_title": "The Bank Has Identified a Dedicated Entity to Lead Fraud Risk Management, but Management and Staff Disagree on Aspects of an Antifraud Culture", "paragraphs": ["The Bank has identified a dedicated entity to lead fraud risk management  activities, as called for in the first component of GAO\u2019s Fraud Risk  Framework. In addition, employees generally have a positive view of  antifraud efforts across the Bank, according to our employee survey.  However, we also found that management and staff have differing views  on key aspects of the Bank\u2019s antifraud culture. In particular, we identified  issues inconsistent with the notion of \u201can antifraud tone that permeates  the organizational culture,\u201d as the Fraud Risk Framework calls for, in  which there is agreement across the organization on key fraud issues and  practices. These areas of disagreement on aspects of the Bank\u2019s  antifraud culture include how active the Bank should be in preventing,  detecting, and addressing fraud; and the adequacy of time for  underwriting, which the Bank says is its primary safeguard against fraud.  Bank managers said that our findings provide an opportunity for additional  staff training on fraud issues."], "subsections": [{"section_title": "The Bank Has Identified a Dedicated Entity to Lead Fraud Risk Management Activities", "paragraphs": ["The Bank has identified two managers who serve as a dedicated entity  for leading fraud risk management activities, managers told us. These are  a vice president of the Credit Review and Compliance division (CRC) and  an assistant general counsel in the Bank\u2019s Office of the General Counsel  (OGC). According to Bank managers, they work together under the  direction of the CRO, who was permanently named to the position on a  part-time basis in September 2016. GAO\u2019s Fraud Risk Framework  provides that the dedicated entity can be an individual or a team,  depending on the needs of the agency. Hence, the Bank\u2019s arrangement is  consistent with the framework. Before recently identifying the two  managers as the dedicated entity, Bank managers told us there was no  centralized entity responsible for fraud risk management. Likewise, Bank  written procedures, dated February 2015, for preventing, detecting, and  prosecuting fraud provided there is no \u201ccentral figure in charge\u201d of such  efforts. The CRO told us that he oversees the two managers in their work  as the dedicated entity.", "We also found that the two managers named to form the dedicated entity  are involved in one of the key activities contemplated by the Fraud Risk  Framework. Overall, these activities include serving as a repository of  knowledge on fraud risks and controls; leading or assisting with trainings  and other fraud-awareness activities; and coordinating antifraud  initiatives. The two managers have helped develop and provide training,  some of which is mandatory and targeted directly at fraud issues,  managers told us. The Bank provides semiannual fraud training through  OGC for claims-processing staff, Bank managers also said. Other  training, while nominally not directed at fraud, can nevertheless involve  fraud issues, Bank managers told us. For instance, managers told us  recent training on shipping matters included a review of fraudulent  shipping documentation, which is one way fraud can be perpetrated."], "subsections": []}, {"section_title": "Bank Managers and Staff Express Positive Views of Antifraud Culture, but They Hold Different Views on Key Aspects of That Culture", "paragraphs": ["GAO\u2019s Fraud Risk Framework calls for creating an organizational culture  to combat fraud, such as by demonstrating senior-level commitment to  fighting fraud and involving all levels of the agency in setting an antifraud  tone. Bank managers, in interviews, and staff, in our employee survey,  generally expressed positive views of the Bank\u2019s antifraud culture. For  example, according to Bank managers, the Bank has maintained an  antifraud culture, which they attribute to factors including: fraud and ethics  training; internal controls; tone set at the top by management; a  realization after fraud cases in the 2000s that the Bank cannot be solely  reactive to fraud; and the pursuit of fraud cases by the Bank and its OIG.", "Our survey results indicate that Bank employees also generally have a  positive view of antifraud tone across the Bank and attention paid to  combating fraud. For example:", "Eighty percent said Bank management in general has established a  clear antifraud tone, to the extent of \u201ca great deal\u201d or \u201ca lot.\u201d", "Employees said that based on senior management\u2019s actions,  preventing, detecting, and addressing fraud is \u201cextremely\u201d or \u201cvery\u201d  important to the Bank (86 percent).", "Staff expressed \u201ca great deal\u201d or \u201ca lot\u201d of confidence in senior  management (76 percent), managers in their division (85 percent),  and their peers (82 percent), to respond to fraud on a timely and  appropriate basis.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \u201cThe Bank has become much more sensitized to the risks of fraud over the last 10  years.\u201d  \u201cThe progress made on combating fraud is tremendous. When I started, no one  really cared, and fraud was common\u2026. Now, blatant attempts at fraud are a rarity.\u201d  \u201cThere is a high degree of concern at all levels of the Bank regarding potential fraud,  which has resulted in good oversight.\u201d", "We also found indications of disagreement among managers and staff  about how active the Bank should be in preventing, detecting, and  addressing fraud. Overall, Bank managers told us, the Bank\u2019s current  approach has been appropriate for dealing with fraud. In particular, an  OGC manager told us that with its underwriting and due diligence  standards\u2014the process for assessing and evaluating an application  before approval\u2014and established fraud procedures, the Bank has an  appropriate strategy to mitigate fraud risks it knows about or envisions  occurring. However, about one-third of survey respondents (35 percent)  said the Bank should be \u201cmuch more active\u201d or \u201csomewhat more active\u201d in  preventing, detecting, and addressing fraud. Less than half (44 percent)  said the current level of activity should remain the same. Asked whether  what they see as the Bank\u2019s current approach for overseeing fraud and  fraud risk, based on the level of responsibilities of various parties  involved, is the most effective way to do so, about 6 in 10 (62 percent)  said yes. While Bank managers characterized our survey results as  positive, these divergent views indicate room for strengthening antifraud  culture, in light of the Fraud Risk Framework\u2019s goal of achieving shared  views across the organization.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \u201cThe Bank should be much more active in preventing, detecting, and addressing  fraud, because the Bank handles business transactions that involve taxpayers\u2019  money.\u201d  \u201cThe Bank needs more funding for technology to help with fraud prevention and  additional Bank staff to spot/monitor fraud.\u201d  \u201cThe first- and second-level managers have not done all they could to ensure fraud  prevention. The front-line credit officers are the ones in the best position to detect  fraud and management does not always support it.\u201d  \u201cA more proactive approach to fraud detection, rather than a reactive approach,  would be more prudent. This means trying to sniff out fraud  the preapplication  and underwriting stages.\u201d", "Another area where we identified differing views is in the adequacy of  time for underwriting. Preapproval underwriting, and the due diligence  done as part of that process, is the Bank\u2019s main control against fraud,  according to Bank managers and procedures. However, during our  review, Bank managers also acknowledged in interviews that their  business involves potentially competing objectives: performing sufficient  due diligence to prevent and detect fraud prior to approving transactions,  while still processing transactions in a timely manner to meet customers\u2019  needs and achieve the Bank\u2019s mission.", "Some comments we received in our employee survey illustrated the  tension between the competing objectives of thorough due diligence and  timely processing of transactions.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \u201cDetecting fraud is a very high priority, as is appropriate. But overemphasis on  managing that risk would lead to a sense of paranoia when approaching any new  risk.\u201d  \u201cGiven all the other obligations we have, even more time spent on fraud detection  means less time for other transaction-related work, with only marginal benefit.\u201d   \u201cRisk is part of the business, and being overly cautious leads to never taking any risk  and consequently not serving the customers.\u201d  \u201cFraud is important to discuss, but it should not become the main force driving the  organization. There needs to be more of a risk-based analysis when determining  how much to concentrate on fraud.\u201d", "According to a Bank report on global export credit competition,  transaction processing time is an important factor in customers\u2019 decisions  to choose the Bank over foreign export-financing agencies. In recent  years, the Bank has significantly reduced processing time. Bank statistics  show that the percentage of transactions completed in 30 days or fewer  grew from 57 percent in fiscal year 2009 to 91 percent in fiscal year 2016.  For 100 days or fewer, the rate has increased from 90 percent to 99  percent over the same period.", "Bank managers told us they seek to strike the right balance between the  competing objectives and believe they have done so. For example,  according to the CRC division, the Bank chooses to perform some of its  fraud-detection and mitigation activities after application approval\u2014such  as through reviews of transactions selected on both a random and risk- based basis\u2014in order to not unduly delay processing applications. Under  Bank practices, document review can be abbreviated, and, after  underwriting approval, lenders may accept certain transaction  documentation, such as invoices or shipping documents, at face value  unless something appears suspicious, managers told us. In the particular  case of processing short- and medium-term transactions, the Bank is alert  to \u201cred flag\u201d items\u2014known warning signs, such as use of nonbank  financial institutions, or participants that are trading entities rather than  original equipment manufacturers, managers told us. But otherwise, the  Bank limits the extent of its application investigation, according to the  Bank\u2019s OGC. In particular, as the Bank\u2019s OGC told us, the Bank is  required by law to make medium-term offerings a \u201csimple product.\u201d  There is pressure both legally and commercially to process transactions  quickly, because, otherwise, an exporter could lose its business  opportunity, the Bank\u2019s OGC told us. In many of these transactions, both  the exporter and buyer are small, the OGC also said, so it is more difficult  to get information. As a result, according to the OGC, the Bank relies  more on self-reporting by transaction parties. For these reasons, the  Bank\u2019s OGC told us, for both short- and medium-term products, there are  not as many \u201cinherent checks and balances\u201d in the process. We note that  based on previous GAO work, self-reporting can present an opportunity  for fraud.", "However, our survey results suggest that significant portions of Bank staff  question whether the Bank is striking the right balance in providing  sufficient time for preapproval review of transactions. Specifically, Bank  staff raised concerns about the amount of time dedicated to the key task  of preapproval review of applications. For each of the Bank\u2019s three major  product maturity categories, we asked whether the application process  provides enough time for Bank staff to conduct thorough due diligence on  potential fraud risks. For short-term products\u2014which Bank managers  said, as a category in general, have been the most susceptible to fraud  recently\u2014less than half (47 percent) said there is \u201calways\u201d or \u201cusually\u201d  enough time; and about 20 percent said there is \u201csometimes,\u201d \u201cseldom,\u201d  or \u201cnever\u201d enough time. For both medium- and long-term products,  about 6 in 10 (56 percent and 61 percent, respectively) said the  application process \u201calways\u201d or \u201cusually\u201d provides enough time. As  noted, while Bank managers characterized our survey results as positive,  these views indicate an opportunity for the Bank to further set an antifraud  tone that permeates the organizational culture.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \u201cMore due diligence should be required in order to qualify for the U.S. government\u2019s  support.\u201d  \u201cThe Bank is more concerned with increasing sales than preventing fraud.\u201d", "Our survey also identified that while nearly half (48 percent) of  respondents rated fraud as a \u201cvery significant\u201d or \u201csignificant\u201d risk to the  Bank, there may be misunderstanding among employees on where  responsibility lies for fraud risk management. We asked employees to  describe the extent to which each of six offices or groups\u2014OGC, the  OIG, the Office of Risk Management, Bank senior management, all bank  staff and managers collectively, or others\u2014are responsible for overseeing  fraud risk management activities at the Bank. The OIG received the  highest response, with 73 percent saying it has \u201ca great deal of  responsibility.\u201d Bank managers told us this result is to be expected,  because staff associate issues of fraud with the OIG. However, these  survey results suggest confusion\u2014lack of a shared view, from the  standpoint of antifraud culture\u2014around the OIG\u2019s role, which includes  investigating suspected fraud, rather than overseeing the Bank\u2019s fraud  risk management activities. The OIG acknowledged to us that its role  does not include responsibility for overseeing fraud risk management  activities at the Bank.", "Asked about our findings overall, Bank managers told us they view our  survey results as positive because the results indicate employees have a  strong awareness of fraud and the risk it presents to the Bank. For  example, regarding the results about the role of the OIG, they noted that  staff are actively encouraged to report suspected fraud through  channels\u2014first to OGC, for subsequent referral to the OIG. Thus,  employees would understand the OIG as being responsive to fraud, and  Bank managers believe this likely accounts for the survey result.", "Nevertheless, they said, our survey results provide an opportunity for  more detailed training, to better communicate with staff. In particular, the  Bank managers told us such training would focus on the Bank\u2019s approach  to fraud, plus the Bank\u2019s organizational structure for addressing fraud.  The training will also clarify that the OIG has an investigative function as  well as an auditing function, they said. Our employee survey results  underscore the potential benefit of further fraud training. Among  respondents who said they have received fraud or fraud risk-related  training provided by the Bank in the last 2 years, three-quarters said it  was \u201cextremely\u201d or \u201cvery\u201d relevant to their job duties. Nearly two-thirds (63  percent) said it was \u201cextremely\u201d or \u201cvery\u201d useful to their duties. Overall,  about half (52 percent) of respondents said fraud or fraud risk-related  information obtained from management, or any Bank resources, has  increased their understanding of fraud \u201ca great deal\u201d or \u201ca lot.\u201d", "The differences we identified in perceptions of fraud risk and fraud  management responsibilities do not, by themselves, implicate the  performance of any particular antifraud control, or suggest that any  additional control is necessary. However, to the extent views on  significant antifraud issues, such as how active the Bank should be in  preventing, detecting, and addressing fraud, or adequacy of time devoted  to underwriting, differ across the organization, the Bank cannot ensure  that it is best setting an antifraud tone that permeates the organizational  culture, as provided in the Fraud Risk Framework. In particular, as the  framework describes, antifraud tone and culture are important parts of  effective fraud risk management. These elements can provide an  imperative among peers within an organization to address fraud risks,  rather than have the organization rely solely on top-down directives."], "subsections": []}]}, {"section_title": "The Bank Has Taken Some Steps to Assess Known Fraud Risks but Has Not Conducted a Comprehensive Fraud Risk Assessment", "paragraphs": ["The Bank has taken some steps to assess fraud risk. However, it has not  conducted a fraud risk assessment, tailored to its operations, or created a  fraud risk profile, both as provided in the second component of GAO\u2019s  Fraud Risk Framework. Further, under the framework, recent changes  in the Bank\u2019s operating environment indicate a heightened need to do so.  We also found that although the Bank has been compiling a \u201crisk register\u201d  intended to catalog risks it faces across the organization, this compilation  does not include some known fraud risks, indicating that the Bank\u2019s  assessment is incomplete. In addition, we found that while the Bank has  adopted a general position on the degree of risk it will tolerate, its current  risk tolerance is not specific and measurable, as provided by federal  internal control standards. Bank managers told us they will revise their  fraud risk management practices to fully adopt the Fraud Risk  Framework."], "subsections": [{"section_title": "The Bank Has Taken Some Steps to Assess Known Fraud Risks but Does Not Conduct Regular, Comprehensive Fraud Risk Assessments", "paragraphs": ["A leading practice of the Fraud Risk Framework calls for agencies to  conduct fraud risk assessments at regular intervals, as well as when there  are changes to the program or operating environment, because  assessing fraud risks is an iterative process. Managers should  determine where fraud can occur and the types of internal and external  fraud the program faces. This includes an assessment of the likelihood  and impact of fraud risks inherent to the program; that is, meaning both  fraud risks known through fraud that has been experienced, as well as  other fraud risk that can be identified, based on the nature of the program.", "According to a Bank report, FY2016 Enterprise Risk Assessment, the  Bank is more susceptible to fraud, due to \u201cthe nature of the Bank\u2019s  mission, the high volume of transactions it executes, and the need for  various groups within the Bank to work together to successfully defend  against fraud.\u201d The Bank\u2019s short- and medium-term products are more  susceptible to fraud, according to Bank managers. Other indicators of  fraud, according to the managers, include domestic geography,  transactions that involve truck shipments; international geography, since  conducting adequate due diligence can be more difficult in remote  locations; and when there are smaller, less well-known parties on both  sides of the transaction.", "In this environment, the Bank has taken some steps to assess known  fraud risks. Generally, the Bank\u2019s practice has been to assess particular  fraud risks and lessons learned following specific instances of fraud  encountered, according to Bank managers. Because it has focused on  fraud already encountered, the Bank\u2019s practice has not been of the  comprehensive nature provided in the Fraud Risk Framework.", "As an example of its current approach, according to Bank managers, the  Bank experienced \u201csignificant fraud\u201d in the early 2000s. This was chiefly  in the medium-term program, and to a lesser degree, the short-term  program, the managers said. As a result, the Bank made changes that  reduced the fraud significantly, they said. Otherwise, according to the  CRO, fraud has been addressed within product lines, as appropriate.  Under its current approach, the Bank\u2019s risk assessments do not include  areas where fraud has not already been detected, according to Bank  managers. They acknowledged that approach could expose the Bank to  fraud risks for activities not yet discovered.", "A key difference between the Bank\u2019s current approach, as illustrated  above, and leading practices as provided in the Fraud Risk Framework,  can be seen in how fraud risks are assessed. As described later, the  Bank has been compiling risks it faces across the organization, with fraud  risk among them. These efforts have focused on soliciting views of Bank  staff. By contrast, the framework envisions a more comprehensive  approach. Effective fraud risk assessments identify specific tools,  methods, and sources for gathering information about fraud risks,  according to the framework. Among other things, this can include data on  trends from monitoring and detection activities. Under the framework,  programs might develop surveys that specifically address fraud risks and  related control activities. It may be possible, the framework suggests, to  conduct focus groups, or engage relevant stakeholders, both internal and  external, in one-on-one interviews or brainstorming about types of fraud  risks.", "Thus, we found, the Bank\u2019s current process for assessing fraud risk has  been generally reactive and episodic, rather than regularly planned and  comprehensive. Rather than adopt a more proactive approach, the Bank  has instead relied on the normal processing and review of transactions\u2014 which build in experience with previous fraud schemes\u2014as the truest test  for identifying fraud issues or concerns, according to Bank managers.", "Recent changes in the Bank\u2019s program and operating environment also  heighten the need for comprehensively assessing fraud risks, according  to the Fraud Risk Framework. Such changes include the Bank\u2019s inability  to approve large transactions due to the absence of a quorum. This has  meant transaction activity has shifted to smaller transactions, which carry  a greater risk of fraud, according to bank managers. Additionally,  Congress recently mandated that the Bank increase its focus on small  businesses, whose transactions present a different risk profile than those  of the Bank\u2019s large customers, according to Bank managers. Further,  the Bank\u2019s transaction backlog could also become an issue in the future.  If a Board quorum is restored, there could be pressure to process  transactions quickly in order to clear the backlog, which could undermine  the quality of the underwriting process, according to documentation from  the Office of the CRO.", "According to our review, the Bank\u2019s current antifraud controls further the  goal of protecting Bank resources and providing \u201creasonable assurance\u201d  of repayment. However, without planning and conducting regular fraud  risk assessments, as identified in GAO\u2019s Fraud Risk Framework, the  Bank is vulnerable to not identifying material risks that can hurt  performance or its ability to fulfill its mission. As Bank managers acknowledged to us, the Bank faces acute reputational risk if new  instances of large or otherwise significant fraud emerge."], "subsections": []}, {"section_title": "The Bank Has Been Working to Identify Major Organizational Risks, but Its Identification of Fraud Risks Is Incomplete", "paragraphs": ["The Bank has taken some steps in an effort to identify, manage, and  respond to risks, including those related to fraud. It has been developing  a \u201crisk register\u201d\u2014a compilation of risks across the organization. It has  also recently completed an \u201centerprise risk assessment\u201d through an  outside consultant. However, these efforts do not reach the full extent of  the relevant leading practices of the Fraud Risk Framework. Specifically,  the framework call for agencies to identify inherent fraud risks of a  program, examine the suitability of existing fraud controls, and then to  prioritize \u201cresidual\u201d fraud risks\u2014that is, risks remaining after antifraud  controls are adopted.", "For the risk register, individual business units contribute items, such as  indicating types of risk and likelihood, and methods to mitigate the risk.  The register, through the Bank\u2019s Office of Risk Management, notes the  risk of fraudulent deals generally, characterizing the likelihood as  \u201csomewhat likely,\u201d but having the possibility of \u201cmajor\u201d financial,  operational, legal, and reputational impacts. However, particular methods  of fraud known to the Bank through experience\u2014such as applicants  submitting fraudulent documentation\u2014are absent thus far. This indicates  the register is incomplete, from the standpoint of identifying where fraud  can occur and the types of internal and external fraud risks the program  faces, as provided in GAO\u2019s Fraud Risk Framework. Other inherent fraud  risks, such as those posed by the Bank\u2019s more limited understanding of  transactions made when it delegates lending authority to other  institutions, are also absent from its risk register. Work continues on  developing the risk register, Bank managers told us. However, adoption  of the risk register has been delayed, due to a reorganization of Bank  management and the vacancies on the Board. Without a more  comprehensive assessment of inherent fraud risks, the Bank cannot be  assured of the extent to which existing controls effectively mitigate  inherent risks.", "According to the chief risk officer, the Bank\u2019s risk register is part of a more  wide-ranging \u201centerprise risk management\u201d strategy, which includes  documenting a range of risks across the organization, including fraud. In  March 2017, as part of this strategy, the Bank completed the enterprise  risk assessment. Based on assessments by senior Bank managers, it  identifies fraud risk\u2014defined as a \u201csignificant and high-profile fraud\u201d  conducted against the Bank\u2014as one among a range of risks facing the  Bank. Consistent with Bank managers\u2019 representations to us, the  enterprise risk assessment ranks the likelihood of fraud risk as low  against other risks the Bank faces\u2014fourth out of five among \u201coperational\u201d  risks, and 24th out of 26 total identified risks. Figure 4 depicts how the  Bank evaluates these operational risks, in a schematic pairing likelihood  of the event with expected impact if they were to occur. In this context, fraud risk is the least prominent risk among the top operational risks  identified.", "In addition to operational risks, the enterprise risk assessment also details  six high risks facing the Bank overall. Among them are new or unfamiliar  deal structures, which may present increased repayment risk; and doing  business in new and unfamiliar technologies, sectors, and industries  where the Bank has limited experience. Although fraud is not explicitly  identified as a risk, we note these new activities could provide an opening  for those seeking to commit fraud.", "During our review, Bank managers maintained that the enterprise risk  assessment represents a \u201ccomprehensive fraud risk assessment\u201d  undertaken by the Bank. They also, however, acknowledged that this  assessment does not contain all the elements of a fraud risk assessment  as described in GAO\u2019s Fraud Risk Framework. For instance, as noted,  the Bank has not conducted a comprehensive assessment of inherent  fraud risks, tailored to its operations.", "We note that because, as described above, the Bank has not undertaken  a fraud risk assessment as envisioned by the Fraud Risk Framework, its  ranking of fraud risk compared to other risks may change after it has  completed such an assessment. This is because a comprehensive  assessment may identify new fraud risks or produce revised assessments  of known fraud risks, both of which could affect relative rankings of other  risks."], "subsections": []}, {"section_title": "The Bank\u2019s Fraud Risk Tolerances Are Not Specific and Measurable", "paragraphs": ["A leading practice of the Fraud Risk Framework calls for agencies to  determine fraud risk tolerance. Further, federal internal control  standards state that managers should consider defining risk tolerances  that are specific and measurable. In addition, under the framework,  tolerance cannot be determined until the agency has identified inherent  fraud risks and assessed their likelihood or impact.", "As part of its overall risk management activities, the Bank has adopted a  general position on its fraud risk tolerance. Specifically, Bank managers told us that, by its nature, the Bank accepts more risk than the  commercial sector; and some level of fraud is to be expected because it  is not reasonable to eliminate all fraud in its programs. The instances of  fraud encountered by the Bank in recent years have centered on small  exposures, according to bank managers. Thus, the current level of fraud  the Bank experiences is \u201cdefensible,\u201d given the Bank\u2019s mission and  number of transactions it undertakes, according to the CRO. Bank  managers said that fraud activity has steadily declined over the last  decade, based on what they cited as fraud indicators that are reviewed by  the Bank\u2019s OGC.", "Bank managers also pointed to claims as another indication of declining  fraud activity. Transaction participants file claims for losses covered under  Bank loan guarantee and insurance products, such as if a borrower fails  to make required payments. The Bank considers fraud to be a subset of  transactions that result in claims, and managers cited declining claims  activity over the last decade as an indirect measure of fraud activity.  Table 1 shows a history of claims paid for fiscal years 2008 through 2017.", "Overall, Bank managers told us that in light of the decline in fraud they  described, the task facing the Bank is to make sure that staff do not lose  their focus on fraud and become too comfortable.", "We asked the Bank to provide statistics supporting the claimed long-term  decline in fraud activity, based on fraud indicators. In response, managers  told us the indicators are actually not \u201cprecise or numerical measures.\u201d  Instead, OGC noted the office is aware of fraud activity through  \u201cconsultations and  general sense of day-to-day business.\u201d As for  claims, we note that not all fraud activity may result in claims.  Consequently, an analysis of claims alone may not reveal a complete or  accurate view of fraud activity. In addition, although Bank statistics we  reviewed show a decline in number of claims filed from fiscal year 2014  through nearly the end of fiscal year 2017, the decline is likely attributable  to the lapse in the Bank\u2019s authority in fiscal year 2015, according to a  Bank report.", "While the Bank has adopted a general position on its fraud risk  tolerance\u2014that the current level of fraud is defensible, given the Bank\u2019s  mission\u2014its current risk tolerances are not specific and measurable.  Without more specific and measurable risk tolerances, the Bank cannot  be assured of the extent to which any fraud risks exceed the Bank\u2019s fraud  risk tolerance. For example, a measurable risk tolerance could express  willingness to tolerate an estimated amount of potentially fraudulent  activity, given resource constraints in eliminating all fraud risks."], "subsections": []}, {"section_title": "The Bank Will Revise Its Practices, According to Managers", "paragraphs": ["After initially telling us that the Bank\u2019s fraud risk management practices  are working well and do not need modification, Bank managers later told  us they will revise their approach. They now plan to conduct periodic  fraud risk assessments and assess risks to determine a fraud risk profile,  as provided in GAO\u2019s Fraud Risk Framework, they said. Asked what  prompted the changes, the CRO attributed them to our inquiries plus the  Bank\u2019s own growing experience with enterprise risk management. Bank  managers also noted that since 2013, there has been an evolution in  Bank antifraud controls, as part of what they refer to as a continuous  improvement process.", "Specifically, the Bank\u2019s new effort will include a range of new fraud  management activities, according to the managers, starting with a fraud  risk assessment and also including determining a fraud risk profile, on a  priority-risk basis. The Bank also plans to identify residual risks and  mitigating factors. In addition, according to the managers, this new work  in addressing fraud risk is planned to include developing specific fraud  risk tolerance or tolerances, with a metric for measuring such tolerance.  As for implementation of the planned new approach, Bank managers  stated they plan to complete a fraud risk assessment by December 2018  and to determine the Bank\u2019s fraud risk profile by February 2019.", "However, Bank managers did not provide us with documentation  describing in detail how they plan to ensure their fraud risk assessments  and fraud risk profile are consistent with GAO\u2019s Fraud Risk Framework.  For example, we requested documentation of any specific plans to adopt  any of the four components of GAO\u2019s framework. Bank managers told us  they plan to work with an outside consultant, and provided an outline of  planned activities. However, the information did not describe how the  Bank will ensure its risk assessments and profile include a full range of  inherent fraud risks, including known fraud risks that are absent from its  current risk register. Similarly, the managers did not provide  documentation describing how the Bank\u2019s fraud risk assessments and  profile will include risk tolerances that are specific and measurable.", "Our employee survey results highlight the importance of the Bank\u2019s  planned new approach. In comments, some respondents noted the  changing nature of fraud, underscoring the importance of taking a wider,  more proactive approach to fraud, which the Fraud Risk Framework  encourages.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \u201cThere are tricks that financial fraudsters would use that many of our staff are  unaware of.\u201d  \u201cThe biggest risk is that we cease to see fraud controls as an ever-evolving process.\u201d  \u201cTypes of fraud are constantly changing.\u201d  \u201cTo assume that thieves don\u2019t evolve is inane, and to assume that you have the best,  most evolved mechanisms for combating fraud is presumptuous.\u201d", "Given the importance, under a more proactive approach, of being able to  identify and react to new forms of fraud, we also asked employees how  well they believe Bank senior management understands new or changing  ways of attempting or committing fraud. About two-thirds (67 percent)  said senior Bank management understands \u201cvery well\u201d or \u201cfor the most  part,\u201d with the remaining respondents undecided or believing otherwise."], "subsections": []}]}, {"section_title": "The Bank Has Instituted Some Antifraud Controls but Not Developed a Strategy Based on a Fraud Risk Assessment, and Has Opportunities to Improve Fraud Awareness and Data Analytics", "paragraphs": ["The Bank has instituted a number of antifraud controls but has not  developed an antifraud strategy based on a fraud risk profile, or  implemented specific control activities to achieve such a strategy. This is  because, as discussed earlier, it has not yet completed a fraud risk  assessment tailored to its operations. As described in the third  component of GAO\u2019s Fraud Risk Framework, agencies should design and  implement a strategy with specific control activities to address risks  identified in the fraud risk assessment. We also found the Bank has  opportunities to improve antifraud controls through greater fraud  awareness and use of data analytics. Leading practices for fraud risk  management under the third component include fraud awareness and  data analytics activities, which can enhance the agency\u2019s ability to  prevent and detect fraud.", "The Bank currently employs a number of antifraud controls, both before  and after transaction approval, which Bank managers told us include:", "Specific antifraud activities within individual business units, as they  operate their respective programs.", "Review of transactions, including checking for fraud activity, following  transaction approval.", "Later-stage review, such as examinations and recommendations by  the Bank\u2019s OIG.", "Preapproval antifraud efforts: Underwriting is the initial step in  preventing fraud, and underwriters have a heightened awareness of fraud  and irregularities, Bank managers told us. Under the Bank\u2019s antifraud  procedures, underwriters in the business units should be aware of fraud  risks in their transactions and be alert to indications of fraud. Prior to  approval, transactions and their participants go through several  evaluations. These can assist underwriters in preventing fraud, according  to Bank procedures. Figure 5 describes selected preapproval  evaluations.", "According to the Bank, additional preapproval measures include  analyzing lenders, focusing on sufficiency of due diligence or what appear  to be a high level of claims; requiring collateral on most medium-term  transactions; not allowing online applications to proceed unless applicants  provide required information; and using a two-step approval process, in  which both the underwriter and the underwriter\u2019s supervisor must approve  certain transactions.", "Postapproval antifraud efforts: Postapproval monitoring is generally not  directed specifically at fraud, but plays a key role in fraud detection.  Specifically, Bank managers told us that the Bank typically learns of fraud  through the claims process\u2014that is, after transactions are approved.  Figure 6 describes postapproval monitoring.", "Later, third parties, such as the Bank\u2019s OIG, review transactions and  operations, the chief risk officer told us. The Bank has developed a policy  and expectations for employee conduct in matters of possible fraud,  imposing a duty to report any \u201csuspicion\u201d of fraud to OGC or the OIG. In  particular, OGC is not selective about what information it passes to OIG,  a manager told us\u2014anything about Bank transactions is referred, no  matter the strength of the evidence.", "In our employee survey, some respondents expressed concern that there  is reliance on postapproval monitoring, versus greater scrutiny at the time  of application.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \uf0d8  The current division of responsibilities \u201cis not the most effective way for the Bank to  oversee fraud and fraud risk, as responsibility needs to be given to the teams on the  front end\u2014such as the individual relationship managers and loan officers\u2014not on  the back end.\u201d  \uf0d8  The current arrangement \u201cseems to be more of an after-the-fact approach to  potentially (if reluctantly) detecting fraud than any proactive encouragement to  actively prevent fraud.\u201d", "Although the Bank has instituted these pre- and postapproval antifraud  controls, they may not provide the most effective protection available.  According to GAO\u2019s Fraud Risk Framework, the leading practice is for  agencies to design and implement antifraud controls based on a strategy  determined after performing a fraud risk assessment and creating a fraud  risk profile. However, as previously discussed, the Bank has not yet  completed such an assessment to determine such a profile.  Consequently, the Bank cannot develop an antifraud strategy and  associated controls that meet the leading practice until it has completed a  fraud risk assessment and documented the results in a fraud risk profile.", "As noted earlier, Bank managers told us they now recognize the need to  conduct assessments and develop a fraud risk profile for the Bank, and  that they plan to complete this work by February 2019. They further told  us that, after conducting a risk assessment and developing a fraud risk  profile, they plan to design and implement antifraud controls as may be  indicated by the assessment, in keeping with the framework\u2019s third  component. Until the Bank creates an antifraud strategy based explicitly  on a fraud risk assessment and corresponding fraud risk profile, and has  designed and implemented specific control activities to prevent and detect  fraud, it is at risk of failing to address fraud vulnerabilities that could hurt  its performance, undermine its reputation, or impair its ability to fulfill its  mission."], "subsections": [{"section_title": "The Bank Has Opportunities to Improve Fraud Awareness among Its Staff", "paragraphs": ["As provided in GAO\u2019s Fraud Risk Framework, increasing awareness of  potential fraud schemes can serve a preventive purpose, by helping to  create a culture of integrity and compliance, as well as to enable staff to  better detect potential fraud. The Bank currently takes some steps to  share information on fraud risks across the institution, through a variety of  mechanisms, but it has opportunities to further improve information  sharing to build fraud awareness.", "Training, cited earlier, is a leading practice of the Fraud Risk Framework,  by which an agency can build fraud awareness. In particular, the  framework cites requiring that all employees, including managers, attend  training when hired and then on an ongoing basis thereafter. As  discussed earlier, the Bank now conducts some training, and Bank  managers told us they see our survey results as an opportunity to provide  additional training. By extending training requirements to all employees,  the Bank can seek to build awareness as broadly as possible, and with  that, further reinforce antifraud tone and culture. Currently, according to  our assessment of information the Bank provided, it does not offer  dedicated fraud training across the organization, for all employees and on  an ongoing basis.", "Another way to build fraud awareness is information sharing. For  example, a manager in the Bank\u2019s OGC told us he monitors fraud activity  and communicates relevant fraud-related information to other units in the  Bank, based on considerations such as whether a situation could be  repeated in other cases. However, there are limitations in information- sharing. For example, the Bank\u2019s OGC told us it restricts how widely it  shares information on parties placed on an internally generated \u201cwatch  list\u201d of parties that should be scrutinized. The Bank also cannot share  information provided by OIG on parties in a confidential law enforcement  database as being under investigation, managers said, because those  parties may not know they are under investigation. The reasons for such  caution, according to managers, include the Privacy Act of 1974 and  fear of creating a \u201cde facto debarment list\u201d absent any formal findings of  fraud. In addition, CRC division managers told us that when the division  discovers fraud-related information, it communicates such information to  appropriate Bank staff.", "Despite concerns, we found there are opportunities for greater  compilation and sharing of information, and employees said in our survey  that they believe wider sharing of fraud-related information would be  beneficial to building fraud awareness and performing their duties. For  example, one way of boosting fraud awareness would be if Bank  managers comprehensively tracked referrals of suspected fraud matters  to the OIG and shared case outcomes with Bank staff, Bank managers  told us. However, Bank managers told us they do not currently maintain  and share such information on cases of suspected fraud referred to the  OIG. Relatedly, GAO\u2019s Fraud Risk Framework notes the opportunity for  an agency to collaborate with its OIG when planning or conducting  training, and promoting the results of successful OIG investigations  internally.", "Some program managers also told us maintaining a repository of known  fraud cases could aid in compliance and transaction approvals, but the  Bank does not maintain and share this information with staff. In addition,  as Bank managers acknowledge, compiling and maintaining information  collected through the Bank\u2019s database checks on transaction participants  could serve as a library of useful information. However, Bank managers  told us they do not currently maintain and share such information.", "In our survey, we asked employees whether Bank management provides  any information on outcomes of fraud cases involving the Bank or Bank  staff. Nearly half of respondents (49 percent) said no. About a third (35  percent) said yes. Among a subset of employees who reported that their  job duties include direct responsibility for fraud matters, the \u201cYes\u201d figure  was higher but still less than a majority (41 percent). Some survey  respondents noted lack of information-sharing about fraud practices and  case outcomes, including that staff processing transactions must rely on  personal memory for fraud issues that arose in previous transactions.", "Illustrative Comments from GAO\u2019s Survey of Bank Employees  \u201cIn some cases, there is no way to track bad actors or suspected fraudsters unless  someone working the new transaction remembers that there was an issue with the  actor in a previous transaction.\u201d  \u201cManagement seems to not want to discuss any fraud with staff. Instead, they should  use the opportunity to educate staff about fraud that occurs and show the  consequences that result. They need to be more open.\u201d  \u201cWhile the Bank has put a lot of best practices in place, more could be done to more  regularly communicate to staff about changing practices in committing and detecting  fraud.\u201d  \u201cOutcomes are rarely relayed to staff.\u201d", "Underscoring the value of sharing information, our survey also found that  when Bank management does share fraud-related information, Bank staff  tend to find it useful in carrying out their duties. For those reporting that  management does share fraud information, more than half of respondents  (54 percent) said they found such information was \u201cextremely\u201d or \u201cvery\u201d  helpful in their job duties. Similarly, for those who reported they can  readily access fraud-related information on their own from internal Bank  resources, nearly two-thirds (63 percent) said the information was  \u201cextremely\u201d or \u201cvery\u201d helpful.", "In response to our inquiries, Bank managers said they plan to evaluate  the feasibility of maintaining and sharing case outcome and database  query information. In addition, they said OGC is exploring how it might  share more fraud-related information, but in a protected way. In particular,  the Bank wants to be able to share information on \u201cintegrity factors,\u201d  especially at the underwriting level. One way to do this might be  distribution of fraud case studies as a refresher for staff, they said.", "Until the Bank makes greater efforts to share information on known fraud  schemes or bad actors, the Bank forgoes the opportunity, as described in  the Fraud Risk Framework, to build staff awareness that could enhance  antifraud efforts in these ways. For example, by not sharing the outcomes  of suspected fraud matters referred to the OIG, the Bank forgoes the  opportunity to build awareness through lessons learned from actual  cases, which could give staff especially relevant insight into future  attempts at fraud."], "subsections": []}, {"section_title": "The Bank Has Opportunities to Improve Data Analytics to Fight Fraud", "paragraphs": ["GAO\u2019s Fraud Risk Framework cites data analytics as a leading practice  for preventing and detecting fraud; in particular, to mitigate the likelihood  and impact of fraud. We found the Bank makes limited use of data  analytics for antifraud purposes. For example, it conducts analyses of  claims cases, according to Bank managers, and, as noted earlier,  considers fraud to be a subset of transactions that result in claims.  Documentation of such activity provided to us by the Bank includes  analyses and statistical summaries, such as number and types of claims  filed, and tallies of claim decisions (for example, approved, denied).", "However, the Bank does not perform data analytics, which are additional  leading practices described in the Fraud Risk Framework.", "According to one manager, the Bank does not perform data analytics on  its transaction-related data because the Bank OIG does not provide a  specific transaction number (or \u201cdeal number\u201d) necessary to link fraud  cases it successfully pursues to the specific transactions from which the  OIG action arises. Without that link, the Bank cannot distinguish  transactions proven to be fraudulent from other, nonfraudulent  transactions in its data, the Bank manager said. The link would be  necessary for data-analytics purposes, the manager said. This inability to  tie proven fraud cases to individual transactions, based on inability to  obtain the key identifying information from the OIG, is a significant  weakness in the Bank\u2019s postapproval transaction monitoring, the  manager further said.", "The Bank and its OIG take different views on this linking information. The  Bank has asked the OIG to provide these specific transaction numbers in  an effort to link proven fraud cases to its transaction data, according to  one Bank manager. OIG officials, meanwhile, told us they always notify  the Bank when a conviction is made, and provide as much information as  possible and appropriate under the circumstances, including company  name and individual name. OIG officials also noted that, even without the  specific transaction number the Bank requests, the Bank should  nevertheless be able to use OIG-provided case data to search its own  transaction files and successfully locate corresponding transactions.", "In response to our inquiries, Bank managers said they are now  considering a move into data analytics, including predictive analytics, to  guard against fraud. However, until the Bank has a feasible and cost- effective means of linking OIG cases to specific transactions, its ability to  use data-analytics for antifraud purposes will be limited. Without the  ability to make use of data-analytics, the Bank forgoes the opportunity to  develop a best-practices antifraud tool that could aid in identifying  potential fraud retrospectively, on transactions already approved, or  prospectively, in advance of approval."], "subsections": []}]}, {"section_title": "The Bank Has Opportunities to Improve Monitoring and Evaluating Outcomes of Its Fraud Risk Management Activities", "paragraphs": ["The fourth and final component of GAO\u2019s Fraud Risk Framework calls for  ongoing monitoring and periodic evaluations of the effectiveness of  antifraud controls. This monitoring and evaluation should be from the  specific perspective of antifraud controls established based on a  comprehensive fraud risk assessment. Such activities can serve as an  early warning system to help identify and resolve issues in fraud risk  management\u2014whether they involve current controls or prospective  changes. Ongoing monitoring and periodic evaluations provide  assurances to managers that they are effectively preventing, detecting,  and responding to potential fraud. Further, according to the framework,  effective monitoring and evaluation focuses on measuring outcomes and  progress toward achieving objectives.", "Because the Bank has not completed a comprehensive fraud risk  assessment, or designed antifraud controls based on such an  assessment, it is not in a position to fulfill this final component. Even at  that, however, we found the Bank does not generally evaluate the  effectiveness or efficiency of its current fraud risk management practices.  For example, OGC and CRC managers\u2014who form the dedicated entity  for managing fraud risks (as described earlier in component one)\u2014both  told us they are unaware of any procedure to periodically assess the  effectiveness of the Bank\u2019s fraud risk management policies. In addition,  the Bank currently has no formal method for tracking fraud activity,  according to a Bank manager. Thus, the Bank is not in a position to  explicitly judge the effectiveness of antifraud controls. Further, as  described earlier, Bank managers told us the fraud indicators they do  track are not precise or numerical measures and that, instead, OGC is  aware of fraud activity through a general sense of daily business.", "Following our inquiries, Bank managers told us they plan to revise their  approach to monitoring, evaluating, and adapting their fraud risk  management practices. They said they now plan to evaluate the  effectiveness of those practices, following adoption of the second and  third components of GAO\u2019s Fraud Risk Framework, and with the intent to  adapt controls as indicated necessary, in accordance with the  framework\u2019s fourth component. Timing will depend on implementation of  the underlying fraud risk assessment, Bank managers told us. The Bank  cannot be assured that its antifraud controls are optimal until it has  fulfilled component four of GAO\u2019s Fraud Risk Framework in the  comprehensive fashion envisioned, following previous full implementation  of components two and three. In particular, it cannot be assured that  current practices are adequate, based on inherent program risks."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Proactively and strategically managing fraud risks can aid the Bank\u2019s  mission of supporting American jobs by facilitating U.S. exports, by  reducing not only the risk of financial loss to the government, but also the  risk of serious reputational harm to the Bank. The Bank has taken some  steps to address fraud that are among leading practices identified in  GAO\u2019s Fraud Risk Framework. But overall, the Bank has approached  fraud risk management on a fragmented, reactive basis, and its antifraud  activities have not been marshalled into the kind of comprehensive,  strategic fraud risk management regime envisioned by GAO\u2019s Fraud Risk  Framework and its leading practices.", "Chiefly, this is because the Bank has not anchored its fraud risk  management policies in a comprehensive fraud risk assessment and  corresponding risk profile, tailored to its operations, and then  implemented controls designed to address the specific fraud risks  identified in the assessment. Some fraud risk facing the Bank is already  known, such as fabricated documentation. But as the Bank  acknowledges, in addition to fraud risk inherent in its complex lines of  business, it also faces significant risk from new or unfamiliar deal  structures it may employ, and in new and unfamiliar technologies and  industries it may service, where it has limited experience. Regular,  comprehensive fraud risk assessments will address not only known types  of fraud, but also seek to identify where fraud can occur and the types of  fraud the program faces, including likelihood and impact.", "Accordingly, until the Bank begins conducting thorough, systematic  assessments of its fraud risks, and compiles a risk profile prioritizing such  risks, it cannot be assured that it satisfactorily understands its  vulnerabilities to fraud and any gaps in its capabilities for addressing  them. Following on from that, without developing and implementing an  antifraud strategy that builds on the findings of the comprehensive risk  assessments and risk profile, the Bank cannot be assured that its  antifraud control activities are optimally designed for, and targeted to, the  actual fraud risks its faces\u2014meaning that it could be failing to address  significant risks or targeting the wrong ones. Finally, without establishing  outcome-oriented metrics and then regularly reviewing progress toward  meeting these goals, the Bank cannot be assured that its antifraud control  activities are working as intended.", "As we concluded our review, the Bank, encouragingly, said it would adopt  the more proactive approach described by GAO\u2019s Fraud Risk Framework.  Thus, the Bank now needs to follow through on its stated intent to change  its practices, and accomplish the tasks, described to us by Bank  managers, as intended and in a timely fashion. This is true not only for  current operations, but also prospectively, for the large transaction  backlog the Bank faces, which Bank managers will process if or when the  Bank\u2019s quorum issue is resolved, and which could stress Bank fraud  controls.", "The Bank\u2019s identification of a dedicated entity to lead fraud risk  management activities can be an important step in the right direction if  that move now becomes the start of a sustained commitment. By fully  adopting the elements of the framework, the Bank can strengthen its  antifraud culture, better understand fraud risks facing its products and  programs, and reshape how it monitors and evaluates the outcomes of its  fraud risk management activities. In doing so, it will be better positioned to  protect taxpayers and its multi-billion-dollar portfolio, while still meeting its  mission to support American jobs and exports.", "Even though Bank managers have already told us they plan to implement  the framework, they did not provide us documentation describing in detail  how they will ensure their fraud risk assessment and fraud risk profile are  consistent with leading practices of the framework\u2014such as by ensuring  the risk assessment considers all inherent fraud risks and the risk profile  reflects risk tolerances that are specific and measurable. Thus, we  include the following framework-specific recommendations in order to  comprehensively enumerate relevant issues we identified, as well as to  present clear benchmarks of accountability for assessing Bank progress.  This complete listing is important in light of the Bank\u2019s recent embrace of  the framework; changes in the Bank\u2019s executive leadership and  vacancies on the Bank Board; and expected congressional consideration  of the Bank\u2019s reauthorization in 2019."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following seven recommendations to the Bank:  The acting Bank president and Board chairman should ensure that the  Bank evaluates and implements methods to further promote and sustain  an antifraud tone that permeates the Bank\u2019s organizational culture, as  described in GAO\u2019s Fraud Risk Framework. This should include  consideration of requiring training on fraud risks relevant to Bank  programs, for new employees and all employees on an ongoing basis,  with the training to include identifying roles and responsibilities in fraud  risk management activities across the Bank. (Recommendation 1)", "As the agency begins efforts to plan and conduct regular fraud risk  assessments and to determine a fraud risk profile, the acting Bank  president and Board chairman should ensure that the Bank\u2019s risk  assessments and profile address not only known methods of fraud,  including those that are absent from its current risk register, but other  inherent fraud risks as well. (Recommendation 2)", "As the agency begins efforts to plan and conduct regular fraud risk  assessments and to determine a fraud risk profile, the acting Bank  president and Board chairman should ensure that the risk profile includes  risk tolerances that are specific and measurable. (Recommendation 3)", "The acting Bank president and Board chairman should ensure that the  Bank develops and implements an antifraud strategy with specific control  activities, based upon the results of fraud risk assessments and a  corresponding fraud risk profile, as provided in GAO\u2019s Fraud Risk  Framework. (Recommendation 4)", "The acting Bank president and Board chairman should ensure that the  Bank identifies, and then implements, the best options for sharing more  fraud-related information\u2014including details of fraud case referrals and  outcomes\u2014among Bank staff, to help build fraud awareness, as  described in GAO\u2019s Fraud Risk Framework. (Recommendation 5)", "The acting Bank president and Board chairman should lead efforts to  collaborate with the Bank\u2019s OIG to identify a feasible, cost-effective  means to systematically track outcomes of fraud referrals from the Bank  to the OIG, including creating a means to link the OIG\u2019s proven cases of  fraud to the specific Bank transactions from which the OIG actions arose.  If any such means are found to be feasible and cost-effective, the acting  Bank president and Board chairman should direct appropriate staff to  implement them, with such information to be used for purposes consistent  with GAO\u2019s Fraud Risk Framework, such as data analytics.  (Recommendation 6)", "The acting Bank president and Board chairman should ensure that the  Bank monitors and evaluates outcomes of fraud risk management  activities, using a risk-based approach and outcome-oriented metrics, and  that it subsequently adapts antifraud activities or implements new ones,  as determined to be appropriate and consistent with GAO\u2019s Fraud Risk  Framework. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Bank for review and comment. In  written comments, summarized below and reproduced in appendix III, the  Bank agreed with our recommendations. The bank also provided  technical comments, which we incorporated as appropriate.", "In its written comments, the Bank said it will take several steps to  implement our recommendations to improve its fraud risk management  activities. For example, the Bank stated it would continue to evaluate and  implement methods to promote and sustain an antifraud tone that  permeates the Bank\u2019s organizational culture. In assessing fraud risks, the  Bank stated it will include not only known risks, but also other inherent  risks not yet known to have led to fraud. Following a fraud risk  assessment as provided in GAO\u2019s Fraud Risk Framework, the Bank  stated that it will develop antifraud controls based on that assessment,  subject to cost-benefit analysis. The Bank also stated that it will monitor  and evaluate outcomes of its fraud risk management activities, and adapt  existing controls or implement new controls as indicated, subject to cost- benefit analysis. The Bank further stated it will identify and implement  ways to share more fraud-related information.", "In its written comments, the Bank also raised four concerns about our  work.", "First, the Bank stated that it keeps substantial reserves for losses, which  protect against taxpayer costs. We clarified our report to indicate that  Bank officials told us they maintain reserves to protect against taxpayer  costs. We did not evaluate the extent to which these reserves protect  against taxpayer costs because doing so was outside the scope of our  review.", "Second, the Bank stated our employee survey does not directly support  some of the conclusions that we draw from responses received, and that  only 24 percent of respondents were in the Export Finance area, which  handles underwriting of Bank transactions. We note that the leading  practices of the Fraud Risk Framework call for involving all levels of the  agency in setting an antifraud tone that permeates the organizational  culture. We also note that the Office of the Export Finance is not the only  division involved in fraud control activities. For example, during our  review, Bank managers told us that employees in the Credit Review and  Compliance division, the Office of the General Counsel, and the Office of  the Chief Financial Officer, among other offices, are also involved in fraud  control activities. Thus, we believe it is appropriate that survey responses  from those who work in these and other offices are included in our survey  results. As noted in our report, Bank managers, in interviews, and staff, in  our employee survey, generally expressed positive views of the Bank\u2019s  antifraud culture, but they hold different views on key aspects of that  culture. We believe that our survey results support these findings, as well  as related conclusions and recommendation (Recommendation 1), with  which the Bank agreed.", "Third, the Bank stated that it has been very effective in preventing,  detecting, and prosecuting fraud in Bank transactions. Our review  evaluated the extent to which the Bank has adopted leading practices for  managing fraud risks, as described in the Fraud Risk Framework. We did  not evaluate the operational effectiveness of specific Bank control  activities for preventing, detecting, and prosecuting fraud because doing  so was beyond the scope of our review.", "Fourth, the Bank stated that our report and the employee survey did not  clearly and consistently distinguish between fraud and fraud risk, which  may lead to confusion in both the survey responses and the analysis in  the report. However, we define the terms \u201cactual fraud\u201d and \u201cfraud risk\u201d in  our employee survey, which appears in appendix II. Further, as described  in greater detail in appendix I, we pretested and modified the survey to  ensure questions were understood by respondents and that we used  correct terminology. This process allowed us to determine whether survey  questions and answer choices were clear and appropriate. Thus, we  believe the survey results support our findings. Overall, as noted, these  findings include positive views of the Bank\u2019s antifraud culture as well as  differing views on some aspects of that culture.", "We are sending copies of this report to the appropriate congressional  committees, the acting president and Board chairman of the Bank, 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 staffs have any questions about this report, please contact  me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines management by the Export-Import Bank of the  United States (the Bank) of fraud risks in its export credit activities, by  evaluating the extent to which the Bank has adopted the four components  described in GAO\u2019s A Framework for Managing Fraud Risks in Federal  Programs (Fraud Risk Framework). Specifically, we evaluate the extent  to which the Bank has established an organizational culture and structure conducive to planned regular fraud risk assessments and assessed risks to  determine a fraud risk profile; designed and implemented a strategy with specific control activities to  mitigate assessed fraud risks; and evaluated outcomes using a risk-based approach and adapted  activities to improve fraud risk management.", "To examine the extent to which the Bank has adopted the components of  GAO\u2019s Fraud Risk Framework, we reviewed Bank policy and governance  documentation, plus other documentation; reviewed GAO and Bank  Office of the Inspector General reports on fraud and fraud risk  management topics; reviewed relevant reports of the Congressional  Research Service and the Congressional Budget Office; and reviewed  other reports and background information. Documentation we reviewed  included Bank operating procedures, details of database search  procedures, Bank annual reports, reports to Congress, the Bank\u2019s  strategic plan, risk assessments, and other materials.", "We also interviewed a range of Bank managers, at both the senior- management level and those overseeing relevant Bank operating units.  These included the Bank\u2019s chief financial officer, its chief risk officer, its  acting chief operating officer, those with specific antifraud responsibilities,  and others responsible for individual business units. These individual  business units included those with responsibilities for monitoring  transactions following approval.", "We then assessed our findings on the Bank\u2019s fraud risk management  practices and its antifraud controls against provisions of the Fraud Risk  Framework, which also incorporates concepts from GAO\u2019s Standards for  Internal Control in the Federal Government."], "subsections": [{"section_title": "Survey Development and Administration", "paragraphs": ["To examine the extent to which the Bank has established an  organizational culture and structure conducive to fraud risk management,  we conducted a web-based survey of Bank employees. In our survey, we  assessed, among other things, perceptions of the Bank\u2019s organizational  culture and attitudes toward fraud and fraud risk management, and  whether employees viewed senior Bank management as committed to  establishing and maintaining an antifraud culture. We surveyed all non- senior-management Bank employees, regardless of their position or  length of employment, who are responsible for implementing, but not  determining, Bank policy (that is, those below the level of senior vice  president). There were 403 employees in our survey population, and we  received 296 responses, thus producing a response rate of 73.5 percent.  We received sufficient representation across Bank offices and divisions,  and, overall, obtained a range of employee views.", "To develop our survey instrument, we utilized background research,  leading practices as identified in GAO\u2019s Fraud Risk Framework,  interviews with Bank senior managers, and other sources. We conducted  in-person pretests of survey questions with five Bank employees, varying  in position, Bank office or division, and seniority, at Bank headquarters in  Washington, D.C. We pretested the survey instrument to ensure the  questions were understood by respondents, that we used correct  terminology, and that the survey was not burdensome to complete. This  process allowed us to determine whether the survey question and answer  choices were clear and appropriate. We modified our survey instrument  as appropriate based on pretest results and suggestions made by an  independent survey specialist. The final survey instrument included  closed- and open-ended questions on Bank management and tone-at- the-top; fraud-related training and information; antifraud environment; and  personal experiences with fraud at the Bank. Throughout the survey  instrument, we defined important terms, such as \u201csenior management,\u201d so  respondents could interpret key concepts consistently through the  survey.", "We administered the survey, via the World Wide Web, from July 31,  2017, through September 22, 2017. To do so, we obtained from Bank  management a file of Bank employees with relevant identifying  information. Before we opened the survey, the Bank president, at our  suggestion, sent an email to employees notifying them of the forthcoming  survey and encouraging them to respond. We also sent Bank employees  a notification email describing the forthcoming survey, in advance of  sending employees another email providing a unique username and  password to access the web-based survey. To improve the response  rate, we contacted Bank employees by phone who had not yet completed  the survey (nonrespondents), to determine their eligibility, update their  contact information, answer any questions or concerns about the survey,  and seek their commitment to participate. We also sent multiple follow-up  emails to nonrespondents encouraging them to respond, and provided  instructions for taking the survey. These follow-up contacts reduced the  possibility of nonresponse error. We sent our follow-up reminder emails to  the survey population on August 10, 17, and 29, 2017, and September 1  and 14, 2017.", "Because we surveyed all non-senior-management employees, the survey  did not involve sampling error. To minimize nonsampling errors, and to  enhance data quality, we employed recognized survey design practices in  the development of the survey instrument and in the collection,  processing, and analysis of the survey data. We calculated frequencies  for closed-ended responses and reviewed open-ended response for  themes and illustrative examples. When we analyzed the survey data, an  independent analyst checked statistical programs used to collect and  process responses. We selected survey excerpts\u2014tallies of answers to  selected questions, plus individual comments received from  respondents\u2014presented in the main text of this report based on  relevance to the respective subject matter.", "We conducted our performance audit from October 2016 to July 2018, in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Results of GAO Survey of Bank Employees: \u201cAnti-Fraud Controls at the Export-Import Bank of the United States\u201d", "paragraphs": ["Appendix II: Results of GAO Survey of Bank  Employees: \u201cAnti-Fraud Controls at the  Export-Import Bank of the United States\u201d", "As described in appendix I, GAO conducted a survey of employees of the  Export-Import Bank of the United States (the Bank), to obtain their views  on the Bank\u2019s organizational culture and attitudes toward fraud and fraud  risk management. We surveyed 403 employees and obtained 296  responses, for a response rate of 73.5 percent. Our survey did not rely on  a sample, as we distributed it to the entire employee population identified.  Although originally presented through the World Wide Web, the questions  and answer choices that follow are the same wording as shown to Bank  employees. Results are tallied for each question. We omit, however, all  individual responses to open-ended questions, in order to protect  respondent anonymity. Underlined items indicate terms for which  hyperlinked definitions were available in the original survey form."], "subsections": [{"section_title": "Please use these definitions when thinking about your answers\u2014", "paragraphs": ["\u201cFraud\u201d generally means obtaining something of value through willful misrepresentation; and in  particular, misconduct involving Bank transactions.", "We mean it to include actual fraud, as found through the judicial system or an administrative  process; as well as \u201cfraud risk\u201d \u2013 an opportunity, situation, or vulnerability that could allow for  someone to engage in fraudulent activity.", "For this section and elsewhere, two additional definitions\u2014 \u201cSenior management\u201d refers to Bank managers at the senior vice president level and above. \u201cManagement in general\u201d refers to a broader management group \u2013 first-level supervisors and  above.  4.  In your view, to what extent has Bank management in general established a clear anti-fraud tone for the  Bank?", "A great deal", "A lot", "Some", "A little", "Not at all", "Unsure/don\u2019t know  Valid responses: 296  50.3%  29.4%  10.8%  2.7%  1.4%  5.4%  5.  Based on the actions of Bank senior management in particular, how important do you think preventing,  detecting, and otherwise addressing fraud is to the Bank?", "Extremely important", "Very important", "Not at all important", "Unsure/don\u2019t know 61.5%  25.0%  7.1%  1.7%  1.0%  3.7%  6.  Based on the actions of the managers of your division in particular, how important do you think preventing,  detecting, and otherwise addressing fraud is to the Bank?", "Extremely important", "Very important", "Not at all important", "Unsure/don\u2019t know 60.5%  27.9%  5.1%  1.7%  1.4%  3.4%  7.  How clearly has Bank management in general communicated a standard of conduct that applies to all  employees, and which includes the Bank\u2019s expectations of behavior concerning fraud?", "Extremely clearly", "Very clearly", "Somewhat clearly", "Slightly clearly", "Not at all clear", "Unsure/don\u2019t know  Valid responses: 294  44.6%  33.3%  16.0%  1.7%  1.7%  2.7%  8.  Based on your experience, for each entity below, which category best describes the level of responsibility  the entity has for overseeing fraud risk management activities at the Bank?"], "subsections": []}, {"section_title": "9. Thinking about your response to question 8, do you believe your answer represents the most effective way", "paragraphs": ["for the Bank to oversee fraud and fraud risk?", "Yes", "No", "Unsure/don\u2019t know  Valid responses: 295  62.4%  7.1%  30.5%  9(a).  Why, or why not, is this the most effective way for  the Bank to oversee fraud and fraud risk?"], "subsections": []}, {"section_title": "Fraud-Related Training and Information", "paragraphs": [], "subsections": []}, {"section_title": "10. Within the past two years, have you received fraud- or fraud risk-related training provided by the Bank", "paragraphs": ["23. In your view, should the Bank be more, or less, active in preventing, detecting, and otherwise addressing  fraud or fraud risk?", "Much more active", "Somewhat more active", "Remain the same", "Much less active", "Unsure/don\u2019t know  9.8%  25.7%  43.6%  1.7%   \u2013  19.3%  23(a).  Why do you feel this is the appropriate level of  activity for addressing fraud or fraud risk?"], "subsections": []}, {"section_title": "Priority and Employee Feedback", "paragraphs": [], "subsections": []}, {"section_title": "24. Among all the various activities of the Bank, where do you think preventing, detecting, and otherwise", "paragraphs": ["Excluding \u201cNot applicable to my job or experience\u201d\u2014", "Always enough time", "Usually enough time", "Sometimes enough time", "Seldom enough time", "Never enough time", "Unsure/don\u2019t know  14.9%  32.2%  14.4%  4.6%  1.1%  32.8%  31. If you have additional comments on any of the items above, or on fraud- or fraud risk-related issues at the  Bank generally, please feel free to provide them below.  32. Would you be willing to speak with GAO regarding your answers to the survey, the topics raised above, or  other fraud-related matters?  32(a).  Please provide your name and contact information."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Export- Import Bank of the United States", "paragraphs": [], "subsections": [{"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jonathon Oldmixon (Assistant  Director), Marcus Corbin, Carrie Davidson, David Dornisch, Paulissa Earl,  Colin Fallon, Dennis Fauber, Kimberly Gianopoulos, Gina Hoover,  Farahnaaz Khakoo-Mausel, Heather Latta, Flavio Martinez, Maria  McMullen, Carl Ramirez, Christopher H. Schmitt, Sabrina Streagle, and  Celia Thomas made key contributions to this report."], "subsections": []}]}], "fastfact": ["The Export-Import Bank of the United States helps U.S. companies that want to sell to foreign buyers but can\u2019t get private financing. According to the Bank, its programs support tens of thousands of U.S. jobs annually. However, the Bank is backed by the U.S. government\u2014so taxpayers could be responsible for losses.", "We reviewed the Bank's controls for preventing losses from fraud. The Bank has taken steps to improve fraud risk management, including adopting some practices in our fraud risk management framework. However, it should conduct a comprehensive fraud risk assessment and use that to design antifraud controls. We made 7 recommendations."]}
{"id": "GAO-19-179", "url": "https://www.gao.gov/products/GAO-19-179", "title": "Retirement Savings: Additional Data and Analysis Could Provide Insight into Early Withdrawals", "published_date": "2019-03-28T00:00:00", "released_date": "2019-04-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal law encourages individuals to save for retirement through tax incentives for 401(k) plans and IRAs\u2014the predominant forms of retirement savings in the United States. In 2017, U.S. plans and IRAs reportedly held investments worth nearly $17 trillion dollars. Federal law also allows individuals to withdraw assets from these accounts under certain circumstances. DOL and IRS oversee 401(k) plans, and collect annual plan data\u2014including financial information\u2014on the Form 5500. For both IRAs and 401(k) plans, GAO was asked to examine: (1) the incidence and amount of early withdrawals; (2) factors that might lead individuals to access retirement savings early; and (3) policies and strategies that might reduce the incidence and amounts of early withdrawals.", "To answer these questions, GAO analyzed data from IRS, the Census Bureau, and DOL from 2013 (the most recent complete data available); and interviewed a diverse range of stakeholders identified in the literature, including representatives of companies sponsoring 401(k) plans, plan administrators, subject matter experts, industry representatives, and participant advocates."]}, {"section_title": "What GAO Found", "paragraphs": ["In 2013 individuals in their prime working years (ages 25 to 55) removed at least $69 billion (+/- $3.5 billion) of their retirement savings early, according to GAO's analysis of 2013 Internal Revenue Service (IRS) and Department of Labor (DOL) data. Withdrawals from individual retirement accounts (IRA)\u2014$39.5 billion (+/- $2.1 billion)\u2014accounted for much of the money removed early, were equivalent to 3 percent (+/- 0.15 percent) of the age group's total IRA assets, and exceeded their IRA contributions in 2013. Participants in employer-sponsored plans, like 401(k) plans, withdrew at least $29.2 billion (+/- $2.8 billion) early as hardship withdrawals, lump sum payments made at job separation (known as cashouts), and loan balances that borrowers did not repay. Hardship withdrawals in 2013 were equivalent to about 0.5 percent (+/-0.06 percent) of the age group's total plan assets and about 8 percent (+/- 0.9 percent) of their contributions. However, the incidence and amount of certain unrepaid plan loans cannot be determined because the Form 5500\u2014the federal government's primary source of information on employee benefit plans\u2014does not capture these data.", "Stakeholders GAO interviewed identified flexibilities in plan rules and individuals' pressing financial needs, such as out-of-pocket medical costs, as factors affecting early withdrawals of retirement savings. Stakeholders said that certain plan rules, such as setting high minimum loan thresholds, may cause individuals to take out more of their savings than they need. Stakeholders also identified several elements of the job separation process affecting early withdrawals, such as difficulties transferring account balances to a new plan and plans requiring the immediate repayment of outstanding loans, as relevant factors.", "Stakeholders GAO interviewed suggested strategies they believed could balance early access to accounts with the need to build long-term retirement savings. For example, plan sponsors said allowing individuals to continue to repay plan loans after job separation, restricting participant access to plan sponsor contributions, allowing partial distributions at job separation, and building emergency savings features into plan designs, could help preserve retirement savings (see figure). However, they noted, each strategy involves tradeoffs, and the strategies' broader implications require further study."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that, as part of revising the Form 5500, DOL and IRS require plan sponsors to report the incidence and amount of all 401(k) plan loans that are not repaid. DOL and IRS neither agreed nor disagreed with our recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal law encourages U.S. workers to save for retirement by  authorizing tax incentives for the predominant forms of retirement savings  in the United States\u2014employer-sponsored defined contribution (DC)  plans like 401(k) plans and individual retirement accounts (IRA). In 2017,  DC plans and IRAs reportedly held investments worth nearly $17 trillion  dollars. Federal law also allows workers to access assets in employer- sponsored 401(k) plans before retirement under certain circumstances,  such as financial hardship. Early access to retirement savings has been  shown to benefit participants by encouraging plan participation,  increasing participant contributions, and providing participants with a  means of addressing their financial needs. Additionally, IRA owners can  take a distribution from their IRA at any time for any reason. While such  withdrawals occur for various reasons and can help workers facing  financial difficulties, they can also affect a worker\u2019s long-term retirement  security by reducing account assets and subjecting withdrawn amounts to  additional taxation.", "You asked us to examine various aspects of early withdrawals of  retirement savings from both IRAs and 401(k) plans. This report  examines: (1) the incidence and amount of retirement savings being  withdrawn early; (2) what is known about the factors that might lead  individuals to access their retirement savings early; and (3) what  strategies or policies, if any, might reduce the incidence and amount of  early withdrawals of retirement savings.", "To examine the incidence and amount of early withdrawals from IRAs and  401(k) plans, we analyzed the most recent nationally representative data  available from three relevant federal sources focusing on individuals ages  25 to 55, when possible. First, to examine recent incidence and amounts  of IRA withdrawals and tax consequences of withdrawal, we analyzed  published statistics from the Internal Revenue Service (IRS) for 2013.  Second, to examine the incidence and amount of early withdrawals from  401(k) plans, we analyzed the most recently available data on individuals  collected in 2013 for the 2014 panel of the U.S. Census Bureau\u2019s Survey  of Income and Program Participation (SIPP), along with its Social Security  Administration (SSA) supplement. Third, to examine the incidence and  amount of participant loans not paid back to a plan (i.e., plan loans), we  analyzed annual plan data from 2013 reported to the Department of Labor  (DOL) on the Form 5500. We determined that the data from these three  sources were sufficiently reliable for the purposes of our report. To learn  what is known about factors that lead to early withdrawals, and possible  strategies or policies that could reduce early withdrawals, we conducted  site visits in four metropolitan areas\u2014Boston, Chicago, San Francisco,  and Seattle\u2014and interviewed a diverse sample of stakeholders identified  in the literature, including human resource professionals at companies  sponsoring 401(k) plans, administrators of large and small plans, subject  matter experts; industry representatives; and participant advocates. For  more information on the methodology used in developing this report, see  appendix I.", "We conducted this performance audit from October 2017 to March 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Over the last 3 decades employers have shifted away from sponsoring  defined benefit (DB) plans and toward DC plans. This shift also transfers  certain types of risk\u2014such as investment risk\u2014from employers to  employee participants. DB plans generally offer a fixed level of monthly  annuitized retirement income based upon a formula specified in the plan,  which usually takes into account factors such as a participant\u2019s salary,  years of service, and age at retirement, regardless of how the plan\u2019s  investments perform. In contrast, benefit levels in DC plans\u2014such as  401(k) plans\u2014depend on the contributions made to the plan and the  performance of the investments in individual accounts, which may  fluctuate in value. As we have previously reported, some experts have  suggested that the portability of DC plans make them better-suited for a  mobile workforce, and that such portability may lead to early withdrawals  of retirement savings. DOL reported there were 656,241 DC and 46,300  DB plans in the United States in 2016.", "Tax incentives are in place to encourage employers to sponsor retirement  plans and employees to participate in plans. Under the Employee  Retirement Income Security Act of 1974 (ERISA), employers may  sponsor DC retirement plans, including 401(k) plans\u2014the predominant  type of DC plan, in which benefits are based on contributions to and the  performance of the investments in participants\u2019 individual accounts. To  save in 401(k) plans, participants contribute a portion of their income into  an investment account, and in traditional 401(k) plans taxes are deferred  on these contributions and associated earnings, which can be withdrawn  without penalty after age 59\u00bd (if permitted by plan terms). As plan  sponsors, employers may decide the amount of employer contributions (if  any) and how long participants must work before having a non-forfeitable  (i.e., vested) interest in their plan benefit, within limits established by  federal law. Plan sponsors often contract with service providers to  administer their plans and provide services such as record keeping (e.g.,  tracking and reporting individual account contributions); investment  management (i.e., selecting and managing the securities included in a  mutual fund); and custodial or trustee services for plan assets (e.g.,  holding the plan assets in a bank).", "Individuals also receive tax incentives to save for retirement outside of an  employer-sponsored plan. For example, traditional IRAs provide certain individuals with a way to save pre-tax money for retirement, with  withdrawals made in retirement taxed as income. In addition, Roth IRAs  allow certain individuals to save after-tax money for retirement with  withdrawals in retirement generally tax-free. IRAs were established  under ERISA, in part, to (1) provide a way for individuals not covered by a  pension plan to save for retirement; and (2) give retiring workers or  individuals changing jobs a way to preserve assets from 401(k) plans by  transferring their plan balances into IRAs. The Investment Company  Institute (ICI) reported that 34.8 percent of households in the United  States owned an IRA in 2017, a percentage that has generally remained  stable since 2000. In 2017, IRA assets accounted for almost 33 percent  (estimated at $9.2 trillion) of total U.S. retirement assets, followed by DC  plans, which accounted for 27 percent ($7.7 trillion). Further, according  to ICI, over 94 percent of funds flowing into traditional IRAs from 2000 to  2015 came from rollovers\u2014primarily from 401(k) plans."], "subsections": [{"section_title": "Oversight of IRAs and 401(k) Plans", "paragraphs": ["IRS, within the Department of the Treasury, is responsible for enforcing  IRA tax laws, while IRS and DOL share responsibility for overseeing  prohibited transactions relating to IRAs. IRS also works with DOL\u2019s  Employee Benefits Security Administration (EBSA) to enforce laws  governing 401(k) plans. IRS is primarily responsible for interpreting and  enforcing provisions of the Internal Revenue Code (IRC) that apply to tax- preferred retirement savings. EBSA enforces ERISA\u2019s reporting and  disclosure and fiduciary responsibility provisions, which, among other  things, include requirements related to the type and extent of information  that a plan sponsor must provide to plan participants.", "Employers sponsoring employee benefit plans subject to ERISA, such as  a 401(k) plans, generally must file detailed information about their plan  each year. The Form 5500 serves as the primary source of information  collected by the federal government regarding the operation, funding,  expenses, and investments of employee benefit plans. The Form 5500  includes information about the financial condition and operation of their  plans, among other things. EBSA uses the Form 5500 to monitor and  enforce plan administrators and other fiduciaries, and service providers\u2019  responsibilities under Title I of ERISA. IRS uses the form to enforce  standards that relate to, among other things, how employees become  eligible to participate in benefit plans, and how they become eligible to  earn rights to benefits."], "subsections": []}, {"section_title": "Permitted Early Withdrawals of Retirement Savings", "paragraphs": ["In certain instances, sponsors of 401(k) plans may allow participants to  access their tax-preferred retirement savings prior to retirement. Plan  sponsors have flexibility under federal law and regulations to choose  whether to allow plan participants access to their retirement savings prior  to retirement and what forms of access to allow. Typically, plans allow  participants to access their savings in one or more of the following forms:", "Loans: Plans may allow participants to take loans and limit the  number of loans allowed. If the plan provides for loans, the maximum  amount that the plan can permit as a loan generally cannot exceed  the lesser of (1) the greater of 50 percent of the vested account  balance, or $10,000 or (2) $50,000 less the excess of the highest  outstanding balance of loans during the 1-year period ending on the  day before the day on which a new loan is made over the outstanding  balance of loans on the day the new loan is made. Plan loans are  generally not treated as early withdrawals unless they are not repaid  within the terms specified under the plan.", "Hardship withdrawals: Plans may allow participants facing a hardship  to take a withdrawal on account of an immediate and heavy financial  need, and if the withdrawal is necessary to satisfy the financial  need. Though plan sponsors can decide whether to offer hardship  withdrawals and approve applications for hardship withdrawals, IRS  regulations provide \u201csafe harbor\u201d criteria regarding circumstances  when a withdrawal is deemed to be on account of an immediate  heavy financial need. IRS regulations allow certain expenses to  qualify under the safe harbor including: (1) certain medical expenses;  (2) costs directly relating to the purchase of a principal residence; (3)  tuition and related educational fees and expenses for the participant,  and their spouse, children, dependents or beneficiary; (4) payments  necessary to prevent eviction from, or foreclosure on, a principal  residence; (5) certain burial or funeral expenses; and (6) certain  expenses for the repair of damage to the employee\u2019s principal  residence. Plans that provide for hardship withdrawals generally  specify what information participants must provide to the plan sponsor  to demonstrate a hardship meets the definition of an immediate and  heavy financial need.", "Early withdrawals of retirement savings may have short-term and long- term impacts on participants\u2019 ability to accumulate retirement savings. In  the short term, IRA owners and participants in 401(k) plans who received  a withdrawal before reaching age 59\u00bd generally pay an additional 10  percent tax for early distributions in addition to income taxes on the  taxable portion of the distribution amount. The IRC exempts certain  distributions from the additional tax, but the exceptions vary among  401(k) plans and IRAs. Early withdrawals of any type can result in the  permanent removal of assets from retirement accounts thereby reducing  the amounts participants can accumulate before retirement, including the  loss of compounded interest or other earnings on the amounts over the  participant\u2019s career."], "subsections": []}, {"section_title": "Disposition of Account Balances at Job Separation", "paragraphs": ["According to DOL\u2019s Bureau of Labor Statistics (BLS), U.S. workers are  likely to have multiple jobs in their careers as average employee tenure  has decreased. In 2017, BLS reported that from 1978 to 2014, workers  held an average of 12 jobs between the ages of 18 and 50. BLS also  reported in 2016 that the median job tenure for a worker was just over 4  years.", "Employees who separate from a job bear responsibility for deciding what  to do with their accumulated assets in their former employer\u2019s plan.  Recent research estimated that 10 million people with a retirement plan  change jobs each year, many of whom faced a decision on how to treat  their account balance at job separation. Plan administrators must  provide a tax notice detailing participants\u2019 options for handling the  balance of their accounts. When plan participants separate from their  employers, they generally have one of three options:  1.  They may leave the balance in the plan,  2.  They may ask their employer to roll the money directly into a new  qualified employer plan or IRA (known as a direct rollover), or  3.  They may request a distribution. Once the participant receives the  distribution he or she can (1) within 60 days, roll the distribution into a  new qualified employer plan or IRA (in which case the money would  remain tax-preferred); or (2) keep the distributed amount, and pay any  income taxes or additional taxes associated with the distribution  (known as a cashout).", "Sponsors of 401(k) plans may cash out or transfer separating participant  accounts if an account balance falls below a certain threshold. The  Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)  amended the IRC to provide certain protections for separating  participants with account balances between $1,000 and $5,000 by  requiring, in the absence of participant direction, plan sponsors to either  keep the account in the plan or to transfer the account balance to an IRA  to preserve its tax-preferred status. Plan sponsors may not distribute  accounts with balances of more than $5,000 without participant direction,  but have discretion to distribute account balances of $1,000 or less."], "subsections": []}, {"section_title": "Additional Tax Consequences for Early Withdrawals", "paragraphs": ["The IRC imposes an additional 10 percent tax (in addition to ordinary  income tax) on certain early withdrawals from qualified retirement plans,  which includes IRAs and 401(k) plans in an effort to discourage the use of  plan funds for purposes other than retirement and ensure the favorable  tax treatment for plan funds is used to provide retirement income.  Employers are required to withhold 20 percent of the amount cashed out  to cover anticipated income taxes unless the participant pursues a direct  rollover into another qualified plan or IRA."], "subsections": []}, {"section_title": "Employee Financial Literacy and Financial Wellness", "paragraphs": ["Research has found that many employees are concerned about their  level of savings and ability to manage their retirement accounts, and  some employers provide educational services to improve employees\u2019  financial wellness and financial literacy and encourage them to save for retirement. A 2017 survey on employee financial wellness in the  workplace found more than one-half of workers experienced financial  stress and that insufficient emergency savings was a top concern for  employees. Research has also found that limited financial literacy is  widespread among Americans over age 50, and those who lack financial  knowledge are less likely to successfully plan for retirement. In 2018,  the Federal Reserve reported that three-fifths of non-retirees with  participant-directed retirement accounts had little to no comfort managing  their own investments. As we have previously reported, some  employers have developed comprehensive programs aimed at overall  improvement in employees\u2019 financial health. These programs, often called  financial wellness programs, may help employees with budgeting,  emergency savings, and credit management, in addition to the traditional  information and assistance provided for retirement and health benefits."], "subsections": []}]}, {"section_title": "At Least $69 Billion Dollars in 2013 Left Retirement Accounts Early, Mostly from Individual Retirement Accounts", "paragraphs": ["In 2013, individuals ages 25 to 55 withdrew at least $68.7 billion early  from their retirement accounts. Of this amount, IRA owners in this age  group withdrew the largest share (about 57 percent) and 401(k) plan  participants in this age group withdrew the rest (about 43 percent)  However, a total amount withdrawn from 401(k) plans cannot be  determined due to data limitations."], "subsections": [{"section_title": "Nearly $40 Billion Withdrawn Early from IRAs in 2013", "paragraphs": ["IRA withdrawals were the largest source of early withdrawals of  retirement savings, accounting for an estimated $39.5 billion of the total  $68.7 billion in early withdrawals made by individuals ages 25 to 55 in  2013. According to IRS estimates, 12 percent of IRA owners in this age  group withdrew money early that year from their IRAs in 2013. The  amount they withdrew early comprised a small percentage of their total  IRA assets. Specifically, in 2013, the amount of early withdrawals was  equivalent to 3 percent of the cohort\u2019s total IRA assets and, according to  IRS estimates, the total amount withdrawn by this cohort exceeded their  total contributions to IRAs in that year."], "subsections": []}, {"section_title": "At Least $29 Billion Withdrawn Early from 401(k) Plans in 2013", "paragraphs": ["At least $29.2 billion left 401(k) plans in 2013 in the form of hardship  withdrawals, cashouts at job separation, and unrepaid plan loans,  according to our analysis of 2013 SIPP data and data from DOL\u2019s Form  5500. Specifically, we found that:", "Hardship withdrawals were the largest source of early withdrawals  from 401(k) plans with an estimated 4 percent (+/- 0.25) of plan  participants ages 25 to 55 withdrawing an aggregate $18.5 billion in  2013. The amount of hardship withdrawals was equivalent to 0.5  percent (+/- 0.06) of the cohort\u2019s total plan assets and 8 percent (+/-  0.9) of the cohort\u2019s plan contributions made in 2013.", "Cashouts of account balances of $1,000 or more at job separation  were the second largest source of early withdrawals from 401(k)  plans. In 2013, an estimated 1.1 percent (+/- 0.11) of plan participants  ages 25 to 55 withdrew an aggregate $9.8 billion from their plans that  they did not roll into another qualified plan or IRA. Additionally, 86  percent (+/- 2.9) of these participants taking a cashout of $1,000 or  more did not roll over the amount in 2013. The amounts cashed out  and not rolled over were equivalent to 0.3 percent (+/- 0.05) of the  cohort\u2019s total plan assets and 4 percent (+/- 0.75) of the cohort\u2019s total  contributions made in 2013.", "Loan defaults accounted for at least $800 million withdrawn from  401(k) plans in 2013; however, the amount of distributions of unpaid  plan loans is likely larger as DOL data cannot be used to quantify plan  loan offsets that are deducted from participants\u2019 account balances  after they leave a plan. As a result, the amount of loan offsets among  terminating participants ages 25 to 55 cannot be determined with  certainty. Specifically, DOL\u2019s Form 5500 instructions require plan  sponsors to report unpaid loan balances in two separate places on the  Form 5500, depending on whether the loan holder is an active or a  terminated participant. For active participants, plan sponsors report  loan defaults as a single line item on the Form 5500 (i.e., the $800  million in 2013 listed above). For terminated participants, plan  sponsors report unrepaid plan loan balances as benefits paid directly  to participants\u2014a category that also includes rollovers to employer  plans and IRAs. According to a DOL official, as a result of this  commingling of benefits on this line item, isolating the amount of loan  offsets for terminated participants using the Form 5500 data is not  possible. Without better data of the amount of unrepaid plan loans,  the amount of loan offsets and the characteristics of plan participants  who did not repay their plan loans at job separation cannot be  determined."], "subsections": []}, {"section_title": "Additional Tax Consequences of Early Withdrawals Also Contributed to Reductions in Overall Savings", "paragraphs": ["IRA owners and plan participants taking early withdrawals paid $6.2  billion as a result of the additional 10 percent tax for early distributions in  2013, according to IRS estimates. Although the taxes are generally  treated separately from the amounts withdrawn, IRA owners and plan  participants are expected to pay any applicable taxes resulting from the  additional 10 percent tax when filing their income taxes for the tax year in  which the withdrawal occurred."], "subsections": []}, {"section_title": "Certain Characteristics Were Associated With Higher Incidence of Early Withdrawals", "paragraphs": ["Individuals with certain demographic and economic characteristics that  we analyzed had higher incidence of early withdrawals of retirement  savings, according to our analysis of SIPP data. The characteristics  described below reflect statistically significant differences between  comparison groups (a full listing of all demographic groups can be found  in appendix III).", "Age. The incidence of IRA withdrawals was higher among individuals  ages 45 to 54 (8 percent) than individuals ages 25 to 34 and 35 to 44.", "Education. Individuals with a high school education or less had higher  incidence of cashouts (97 percent) and hardship withdrawals (7  percent) than individuals with some college or some graduate school  education.", "Family size. Individuals in families of seven or more (8 percent) or in  families of five to six (7 percent) had higher incidence of hardship  withdrawals than individuals in smaller family groups we analyzed.  Individuals living alone had higher incidence of IRA withdrawals than  individuals living in the larger family groups.", "Marital status. Widowed, divorced, or separated individuals had higher  incidence of IRA withdrawals (11 percent) and hardship withdrawals  (7 percent) than married or never married individuals.", "Race. The incidence of hardship withdrawals among African American  (10 percent) and Hispanic individuals (6 percent) was higher than  among individuals who were White, Asian, or Other.", "Residence. The incidence of IRA withdrawals and hardship  withdrawals was higher among individuals living in nonmetropolitan  areas (7 percent and 6 percent, respectively) than among individuals  living in metropolitan areas.", "Similarly, individuals with certain economic characteristics that we  analyzed had higher incidence of early withdrawals of retirement savings,  according to our analysis of SIPP data. The characteristics described  below reflect statistically significant differences between comparison  groups (a full listing of all demographic groups can be found in appendix  III).", "Employer size. Individuals working for employers with fewer than 25  employees had higher incidence of IRA withdrawals (9 percent) than  individuals working for employers with higher number of employees.", "Employment. Individuals working fewer than 35 hours per week had  higher incidence of IRA withdrawals (7 percent) than employees  working 35 hours or more.", "Household debt. Individuals with household debt of $5,000 up to  $20,000 had higher incidence of IRA withdrawals (14 percent) than  individuals with other debt amounts.", "Household income. Individuals with household income of less than  $25,000 or $25,000 up to $50,000 had higher incidence of IRA  withdrawals (12 percent and 9 percent, respectively) and hardship  withdrawals (9 percent and 7 percent, respectively) than individuals  with higher income amounts.", "Personal cash reserves. Individuals with personal cash reserves of  less than $1,000 had higher incidence of IRA withdrawals (10 percent)  and hardship withdrawals (6 percent) than individuals with larger  reserves.", "Retirement assets. Individuals with combined IRA and 401(k) plan  assets valued at less than $5,000 had higher incidence of hardship  withdrawals (7 percent) than individuals with higher valued assets.", "Tenure in retirement plan. Individuals with fewer than 3 years in their  retirement plan had higher incidence of hardship withdrawals (6  percent) than individuals with longer tenures."], "subsections": []}]}, {"section_title": "Plan Rule Flexibilities and Use of Retirement Assets for Pressing Financial Needs Said to Result in Early Withdrawals", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Said Plan Rules Governing Early Withdrawals May Lead to Reduced Savings for Some Participants", "paragraphs": ["Stakeholders we interviewed said that plan rules related to the disposition  of account balances at job separation can lead participants to remove  more than they need, up to and including their entire balance. We  previously reported U.S. workers are likely to change jobs multiple times  in a career. Plan sponsors may cash out balances of $1,000 or less at  job separation, although they are not required to do so. As a result, plan  participants with such balances, including younger employees and others  with short job tenures, risk having their account balances distributed in full  each time they change jobs. As shown in table 1, a separating  employee must take multiple steps to ensure that an account balance  remains tax-preferred.", "Participants who take a distribution from a plan with the intent of rolling it  into another qualified plan or IRA must acquire additional funds to  complete the rollover and avoid adverse tax consequences. Plan  sponsors are required to withhold 20 percent of the account balance to  pay anticipated taxes on the distribution. As a result, the sponsor then  sends 80 percent of the account balance to the participant, who must  acquire outside funds to compensate for the 20 percent withheld or forgo  the preferential tax treatment of that portion of their account balance. For  example, a participant seeking to roll over a retirement account with a  $10,000 balance would receive an $8,000 distribution after tax  withholding, requiring them to locate an additional $2,000 to complete the  rollover within the 60-day period to avoid a taxable distribution of the  withheld amount. If participants can replace the 20 percent withheld and  complete the rollover within the 60-day period, they do not owe taxes on  the distribution.", "Stakeholders said that the complexity of rolling a 401(k) account balance  from one employer to another may encourage participants to take the  relatively simpler route of rolling their balance into an IRA or cashing out  altogether. They noted that separating participants had many questions  when evaluating their options and had difficulty understanding the notice  provided. For example, participants may not fully understand how the  decisions made at job separation can have a significant impact on their  current tax situation and eventual retirement security. One plan sponsor,  describing concerns about giving investment advice, said she watched  participants make what she judged to be poor choices with their account  balances and felt helpless to intervene. Stakeholders also noted that the  lack of a standardized rollover process sometimes bred mistrust among  employers and complicated separating participants\u2019 ability to successfully  facilitate a rollover between plans. For example, one stakeholder told us  that some plans were hesitant to accept funds from other employer plans  fearing that the funds might come from plans that have failed to comply  with plan qualification requirements and could create problems for the  receiving plan later on. Another stakeholder suggested that the  requirement for plan sponsors to provide a notice to separating  participants likely caused more participants to take the distribution.", "Stakeholders described loans as a useful source of funds in times of need  and a way to avoid more expensive options, such as high-interest credit cards. They also noted that certain plan loan policies could lead to early  withdrawals of retirement savings. (See fig. 1.)", "Loan repayment at job separation: Stakeholders said loan repayment  policies can increase the incidence of defaults on outstanding loans.  When participants do not repay their loan after separating from a job,  the outstanding balance is treated as a distribution, which may subject  it to income tax liability and, possibly, an additional 10 percent tax for  early distributions. According to stakeholders, the process of changing  jobs can inadvertently lead to a distribution of a participant\u2019s  outstanding loan balance, when the participant could have otherwise  repaid the loan.", "Extended loan repayment periods: Some plan sponsors allow  participants to take loans to purchase a home. Stakeholders told us  that the amounts of these home loans tended to be larger than  general purpose loans and had longer repayment periods that these  extended from 15 to 30 years. A stakeholder further noted that these  loans could make it more likely that participants would have larger  balances to repay if they lost or changed jobs.", "Multiple loans: While some plan sponsors noted that their plans  limited the number of loans participants can take from their retirement  plan, others do not. Some plan sponsors limited participants to  between one and three simultaneous loans, and one plan  administrator indicated that 92 percent of their plan-sponsor clients  allowed no more than two simultaneous loans. Other plan sponsors  placed no limit on the number of participant loans or limited loans to  one or two per calendar year, in which case a participant could take  out a new loan at the start of a calendar year regardless of whether or  not outstanding loans had been repaid. Stakeholders described some  participants as \u201cserial\u201d borrowers, who take out multiple loans and  have less disposable income as a result of ongoing loan payments.  One plan administrator stated that repeat borrowing from 401(k) plans  was common, and some participants took out new loans to pay off old  loans.", "Other loan restrictions: Allowing no loans or one total outstanding loan  can cause participants facing economic shocks to take a hardship  withdrawal, resulting in the permanent removal of their savings and  subjecting them to income tax liability and, possibly, an additional 10  percent tax for early distributions and a suspension on contributions.", "Minimum loan amounts: Minimum loan amounts may result in  participants borrowing more than they need to cover planned  expenses. For example, a participant may have a $500 expense for  which they seek a loan, but may have to borrow $1,000 due to plan  loan minimums."], "subsections": []}, {"section_title": "Stakeholders Said Participants Take Early Withdrawals for Pressing Financial Needs", "paragraphs": ["Stakeholders said that plan participants take plan loans and hardship  withdrawals for pressing financial needs. Many plan sponsors we  interviewed said they used the IRS safe harbor exclusively as criteria  when reviewing a participant\u2019s application for a hardship withdrawal.  Stakeholders said the top two reasons participants took hardship  withdrawals were to prevent imminent eviction or foreclosure and to cover  out-of-pocket medical costs not covered by health insurance.  Participants generally took loans to reduce debt, for emergencies, or to  purchase a primary residence. Stakeholders also said that participants  who experienced economic shocks stemming from job loss made early  withdrawals. They said retirement plans often served as a form of  insurance for those between jobs or facing a sudden economic shock and  participants accessed their retirement accounts because, for many, they  were the only source of savings. They cited personal debt, health care  costs, and education as significant factors that affected employees across  all income levels.", "Stakeholders said some participants also used their retirement savings to  pay for anticipated expenses. Two plan administrators said education  expenses were one of the reasons participants took hardship  withdrawals. They said that participants accessed their retirement savings  to address the cost of higher education, including paying off their own  student loan debt or financing the college costs for family members. For  example, plan administrators told us that some participants saved with  the expectation of taking a hardship withdrawal to pay for college tuition.  Other participants utilized hardship withdrawals to purchase a primary  residence."], "subsections": []}, {"section_title": "Reasons for IRA Withdrawals Are Not Reported to IRS", "paragraphs": ["IRA owners generally may take withdrawals at any time and IRS does not  analyze the limited information it receives on the reasons for IRA  withdrawals. IRA owners can withdraw any amount up to their entire  account balance at any time. In addition, IRAs have certain exceptions  from the additional 10 percent tax for early distributions. For example, IRA  withdrawals taken for qualified higher education expenses, certain health  insurance premiums, and qualified \u201cfirst-time\u201d home purchases (up to  $10,000) are excepted from the additional 10 percent tax. IRA owners  who make an IRA distribution receive a Form1099-R or similar statement  from their provider. On the Form 1099-R, IRA providers generally identify  whether the withdrawal, among other things, can be categorized as a  normal distribution, an early distribution, or a direct distribution to a  qualified plan or IRA. For an early distribution, the IRA provider may  identify whether a known exception to the additional 10 percent tax  applies. For their part, IRA owners are required to report early  withdrawals on their income tax returns, as well as the reason for any  exception from the additional 10 percent tax for a limited number of  items. In written responses to questions, an IRS official indicated that  IRS collected data on the exemption reason codes, but did not use  them."], "subsections": []}]}, {"section_title": "Stakeholders Suggested Strategies to Balance Access to Early Withdrawals with the Need to Build Long-term Retirement Savings", "paragraphs": [], "subsections": [{"section_title": "Some Plan Sponsors Have Implemented Policies to Preserve the Benefits of Early Withdrawals While Reducing Their Long-term Effects", "paragraphs": [], "subsections": [{"section_title": "Preserving 401(k) Account Balances at Job Separation", "paragraphs": ["Some plan sponsors we interviewed had policies in place that may  reduce the long-term impact of early withdrawals of retirement savings  taken at job separation. Policies suggested by plan sponsors included:", "Providing a periodic installment distribution option: Although some  plan sponsors may require participants wanting a distribution to take  their full account balance at job separation, other plan sponsors  provided participants with an option of receiving their account balance  in periodic installments. For example, one plan sponsor gives  separating participants an option to receive periodic installment  distributions at intervals determined by the participants. This plan  sponsor said separating participants could select distributions on a  monthly, quarterly, semi-annual or annual basis. These participants  could also elect to stop distributions at any time, preserving the  remaining balance in the employer\u2019s plan. The plan sponsor said the  plan adopted this option to help separating participants address any  current financial needs, while preserving some of the account balance  for retirement. Another plan sponsor adopted a similar policy to  address the cyclical nature of the employer\u2019s business, which can  result in participants being terminated and rehired within one year.", "Offering partial distributions: One plan sponsor provided separated  participants with the option of receiving a one-time, partial  distribution. If a participant opted for partial distribution, the plan  sponsor issued the distribution for the requested sum and preserved  the remainder of the account balance in the plan. The plan sponsor  adopted the partial distribution policy to provide separating  participants with choices for preserving account balances, while  simultaneously providing access to address any immediate financial  needs.", "Providing plan loan repayment options for separated participants:  Some plan sponsors allowed former participants to continue making  loan repayments after job separation. Loan repayments after job  separation reduce the loan default risk and associated tax implications  for participants. Some plan sponsors said that separating  participants who have the option to continue repaying an outstanding  loan balance generally have three options: (1) to continue repaying  the outstanding loan, (2) to repay the entire balance of the loan at  separation within a set repayment period, or (3) not to repay the loan.  Those participants who continue repaying their loans after separation  generally have the option to set up automatic debit payments to  facilitate the repayment. Those separated participants who do not set  up loan repayment terms within established timeframes, or do not  make a payment after the loan repayment plan has been established,  default on their loan and face the associated tax consequences,  including, possibly, an additional 10 percent tax for early distributions."], "subsections": []}, {"section_title": "Setting Limits on Plan Loans", "paragraphs": ["Some plan sponsors we spoke with placed certain limits on participant  loan activity, which may reduce the incidence of loan defaults (see fig. 2).", "Limiting loan amounts to participant contributions: Some plan  sponsors said they limited plan loans to participant contributions and  any investment earnings from those contributions to reduce early  withdrawals of retirement savings. For example, one plan sponsor\u2019s  policy limited the amount a participant could borrow from their plan to  50 percent of participant contributions and earnings, compared to 50  percent of the total account balance.", "Implementing a waiting period after loan repayment before a  participant can access a new loan: Some plan sponsors said they had  implemented a waiting period between plan loans, in which a  participant, having fully paid off the previous loan, was temporarily  ineligible to apply for another. Among plan sponsors who  implemented a waiting period, the length varied from 21 days to 30  days.", "Reducing the number of outstanding loans: Some plan sponsors we  spoke with limited the number of outstanding plan loans to either one  or two loans. One plan sponsor had previously allowed one new  loan each calendar year, but subsequently revised plan policy to allow  participants to have a total of two outstanding loans. The plan sponsor  said the rationale was to balance limiting participant loan behavior  with the ability of participants to access their account balance."], "subsections": []}, {"section_title": "Reducing Impact of Economic Shocks", "paragraphs": ["Some plan sponsors said they had expanded the definition of immediate  and heavy financial need beyond the IRS safe harbor to better align with  the economic needs of their participants. For example, one plan  sponsor approved a hardship withdrawal to help a participant pay  expenses related to a divorce settlement. Another plan sponsor  developed an expanded list of qualifying hardships, including past-due  car, mortgage, or rent payments; and payday loan obligations.", "Some plan sponsors implemented loan programs outside their plan,  contracting with third-party vendors to provide short-term loans to  employees. For example, one plan sponsor instituted a loan program that  allowed employees to borrow up to $5,000 from a third-party vendor that  would be repaid through payroll deduction. This plan sponsor said the  loan program featured an 8 to 12 percent interest rate, and approval was  not based on a participant\u2019s credit history. The plan sponsor also  observed that they had fewer 401(k) loan applications since the third- party loan program was implemented. A second plan sponsor instituted a  similar loan program that allowed employees to borrow up to $500  interest free from a third-party vendor. According to this sponsor, to  qualify for a loan, an employee must demonstrate financial hardship and  have no outstanding plan loans, and is required to attend a financial  counseling course if their loans are approved."], "subsections": []}, {"section_title": "Improving Participants\u2019 Financial Wellness", "paragraphs": ["Some plan sponsors said they have provided workplace-based financial  wellness resources for their participants to improve their financial literacy.  Some implemented optional financial wellness programs that covered  topics such as investment education, how plan loans work, and the  importance of saving for emergencies. These plan sponsors told us they  offered on-site financial counseling with representatives of the plan  administrator to help provide guidance on financial decision-making;  however, other plan sponsors said that\u2014despite their investment in  participant-specific financial education\u2014participation in these programs  was low."], "subsections": []}]}, {"section_title": "Stakeholders Suggested Strategies That Could Preserve the Benefits of Early Withdrawals While Reducing Their Long-term Effects", "paragraphs": ["Stakeholders suggested strategies that they believed could help mitigate  the long-term effects of early withdrawals of retirement savings on IRA  owners and plan participants. They noted that any of these proposed  strategies, if implemented, could (1) increase the costs of administering  IRAs and plans, (2) require changes to federal law or regulations, and (3)  involve tradeoffs between providing access to retirement savings and  preserving savings for retirement."], "subsections": [{"section_title": "Strategies for IRAs", "paragraphs": ["Stakeholders suggested several strategies that, if implemented, could  help reduce early withdrawals from IRAs. These strategies centered on  modifying existing rules to reduce early withdrawals from IRAs (and  subsequently the amount paid as a result of the additional 10 percent tax  for early distributions). Specifically, stakeholders suggested:", "Raising the age at which the additional 10 percent tax applies: Some  stakeholders noted that raising the age at which the additional 10  percent tax for early distributions applies from 59\u00bd to 62 would align it  with the earliest age of eligibility to claim Social Security and may  encourage individuals to consider a more comprehensive retirement  distribution strategy. However, other stakeholders cautioned that it  could have drawbacks for employees in certain situations. For  example, individuals who lose a job late in their careers could face  additional tax consequences for accessing an IRA before reaching the  age 62. In addition, one stakeholder said some individuals may shift  to a part-time work schedule later in their careers as they transition to  retirement and plan on taking IRA withdrawals to compensate for their  lower wages.", "Allowing individuals to roll existing plan loans into an IRA: Some  stakeholders said that allowing individuals to include an existing plan  loan as part of a rollover into an IRA, although currently not allowed,  would likely reduce plan loan defaults by giving individuals a way to  continue repaying the loan balance. One stakeholder suggested that  rolling an existing plan loan into an IRA could be administratively  challenging for IRA providers, but doing so to repay the loan may  ultimately preserve retirement savings.", "Allowing IRA loans: While currently a prohibited transaction that could  lead to the cessation of an IRA, some stakeholders suggested that  IRA loans could theoretically reduce the amounts being permanently  removed from the retirement system through early IRA withdrawals.  One stakeholder said an IRA loan would present a good alternative to  an early withdrawal from an IRA account because it would give the  account holder access to the balance, defer any tax implications, and  improve the likelihood the loaned amount would ultimately be repaid.  However, another stakeholder said that allowing IRA loans could  increase early withdrawals, given the limited oversight of IRAs, as well  as additional administrative costs and challenges for IRA providers."], "subsections": []}, {"section_title": "Strategies for 401(k) Plans", "paragraphs": ["Stakeholders suggested several strategies that, if implemented, could  reduce the effect of cashouts at job separation from 401(k) plans.", "Simplifying the rollover process: Stakeholders proposed two  modifications to the current rollover process that they believe could  make the process more seamless and reduce the incidence of  cashouts. First, stakeholders suggested that a third-party entity tasked  with facilitating rollovers between employer plans for a separating  participant would likely reduce the incidence of cashouts at job  separation. Such an entity could automatically route a participant\u2019s  account balance from the former plan to a new one. One  stakeholder said having a third-party entity facilitate the rollover would  eliminate the need for a plan participant to negotiate the process.  Such a service, however, would likely come at cost that may likely be  passed onto participants. Stakeholders also suggested direct  rollovers of account balances between plans could further reduce the  incidence of cashouts. One stakeholder, however, cautioned that  direct rollovers could have downsides for some participants. For  example, participants who prefer to keep their balance in their former  employer\u2019s plan but provide no direction to the plan sponsor may  inadvertently find their account balance rolled into a new employer\u2019s  plan.", "Restricting cashouts to participant contributions only: Some  stakeholders suggested limiting the assets a participant may access  at job separation. For example, some stakeholders said that  participants should not be allowed to cash out vested plan sponsor  contributions, thus preserving those contributions and their earnings  for retirement. However, this strategy could result in participants  overseeing and monitoring several retirement accounts.", "Stakeholders suggested several strategies that, if implemented, could  limit the adverse effect of hardship withdrawals on retirement savings.", "Narrowing the IRS safe harbor: Although some plan sponsors are  expanding the reasons for a hardship to align with perceived  employee needs, some stakeholders said narrowing the IRS safe  harbor would likely reduce the incidence of early withdrawals. For  example, some stakeholders suggested narrowing the definition of a  hardship to exclude the purchase of a primary residence or for  postsecondary education costs. In addition, one stakeholder said  alternatives exist to finance home purchases (mortgages) and  postsecondary education (student loans). Stakeholders noted that  eliminating the purchase of a primary residence and postsecondary  education costs from the IRS safe harbor would make hardship  withdrawals a tool more strictly used to avoid sudden and unforeseen  economic shocks. In combination with the two exclusions, one  stakeholder suggested consideration be given to either reducing or  eliminating the additional 10 percent tax for early distributions that  may apply to hardship withdrawals.", "Replacing hardship withdrawals with hardship loans: Stakeholders  said replacing a hardship withdrawal, which permanently removes  money from the retirement system, with a no-interest hardship loan,  which would be repaid to the account, would reduce early  withdrawals. Under this suggestion, if the loan were not repaid within  this predetermined time frame, the remaining loan balance could be  considered a deemed distribution and treated as income (similar to  the way a hardship withdrawal is treated now).", "Incorporating emergency savings features into 401(k) plans:  Stakeholders said incorporating an emergency savings account into  the 401(k) plan structure may help participants absorb economic  shocks and better prepare for both short-term financial needs and  long-term retirement planning. (See fig. 3.)", "In addition, stakeholders said participants with emergency savings  accounts could be better prepared to avoid high interest rate credit  options, such as credit cards or payday loans, in the event of an  economic shock. Stakeholders had several ideas for implementing  emergency savings accounts. For example, one stakeholder  suggested that, were it allowed, plan sponsors could revise automatic  account features to include automatic contributions to an emergency  savings account. Some stakeholders also said emergency savings  accounts could be funded with after-tax participant contributions to  eliminate the tax implications when withdrawing money from the  account. However, another stakeholder said emergency savings  contributions could reduce contributions to a 401(k) plan."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["In the United States, the amount of aggregate savings in retirement  accounts continues to grow, with nearly $17 trillion invested in 401(k)  plans and IRAs. Early access to retirement savings in these plans may  incentivize plan participation, increase participant contributions, and  provide participants with a way to address their financial needs. However,  billions of dollars continue to leave the retirement system early. Although  these withdrawals represent a small percentage of overall assets in these  accounts, they can erode or even deplete an individual\u2019s retirement  savings, especially if the retirement account represents their sole source  of savings.", "Employers have implemented plan policies that seek to balance the short- term benefits of providing participants early access to their accounts with  the long-term need to build retirement savings. However, the way plan  sponsors treat outstanding loans after a participant separates from  employment has the potential to adversely affect retirement savings. In  the event of unexpected job loss or separation, plan loans can leave  participants liable for additional taxes. Currently, the incidence and  amount of loan offsets in 401(k) plans cannot be determined due to the  way DOL collects data from plan sponsors. Additional information on loan  offsets would provide insight into how plan loan features might affect  long-term retirement savings. Without clear data on the incidence of these  loan offsets, which plan sponsors are generally required to include, (but  not itemize) on the Form 5500, the overall extent of unrepaid plan loans in  401(k) plans cannot be known."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["To better identify the incidence and amount of loan offsets in 401(k) plans  nationwide, we recommend that the Secretary of Labor direct the  Assistant Secretary for EBSA, in coordination with IRS, to revise the Form  5500 to require plan sponsors to report qualified plan loan offsets as a  separate line item distinct from other types of distributions.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to the Department of Labor, the  Department of the Treasury, and the Internal Revenue Service for review  and comment. In its written comments, reproduced in appendixes IV and  V, respectively, DOL and IRS generally agreed with our findings, but  neither agreed nor disagreed with our recommendation.  DOL said it  would consider our recommendation as part of its overall evaluation of the  Form 5500, and IRS said it would work with DOL as it responds to our  recommendation. The Department of Treasury provided no formal written  comments. In addition, DOL, IRS, Treasury and two third-party subject  matter experts provided technical comments, which we incorporated in  the report, as appropriate  As agreed with your staff, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Labor,  Secretary of the Treasury, Commissioner of Internal Revenue, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or jeszeckc@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 making key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this study were to determine: (1) what are the incidence  and amount of retirement savings being withdrawn early; (2) what is  known about the factors that might lead individuals to access their  retirement savings early; and (3) what strategies or policies, if any, might  reduce the incidence and amount of early withdrawals of retirement  savings."], "subsections": [{"section_title": "Data Analysis", "paragraphs": ["To examine the incidence and amount of early withdrawals from  individual retirement accounts (IRA) and 401(k) plans, we analyzed the  most recent nationally representative data available in three relevant  federal data sources, focusing our analysis on individuals in their prime  working years (ages 25 to 55), when possible. For consistency, we  analyzed data from 2013 from each data source because it was the most  recent year that data were available for all types of early withdrawals we  examined. We adjusted all dollar-value estimates derived from each data  source for inflation and reported them in constant 2017 dollars. We  determined that the data from these sources were sufficiently reliable for  the purposes of our report.", "First, to examine recent incidence and amount of early withdrawals  from IRAs and the associated tax consequences for individuals ages  25 to 55, we analyzed IRS estimates based on tax returns as filed by  taxpayers before enforcement activity published by the Internal  Revenue Service\u2019s (IRS) Statistics of Income Division for tax year  2013. Specifically, we analyzed the number of taxpayers reporting  early withdrawals from their IRAs in 2013 and the aggregate amount  of these withdrawals. To provide additional context on the scope of  these early withdrawals, we analyzed the age cohort\u2019s total IRA  contributions and the end-of-year fair market value of the IRAs, and  compared these amounts to the aggregate amount withdrawn. To  examine the incidence and amount of taxes paid as a result of the  additional 10 percent tax for early distributions, we analyzed estimates  on the additional 10 percent tax paid on qualified retirement plans in  2013. Although IRS did not delineate these data by age, we used  these data as proxy because IRS assesses the additional 10 percent  tax on distributions to taxpayers who have not reached age 59\u00bd.  Given the delay between a withdrawal date and the date of the tax  filing, it is possible that some of the taxes were paid in the year  following the withdrawal. We reviewed technical documentation and  developed the 95 percent confidence intervals that correspond to  these estimates.", "Second, to examine the incidence and amount of early withdrawals  from 401(k) plans, we analyzed data included in the 2014 panel of the  U.S. Census Bureau\u2019s Survey of Income and Program Participation  (SIPP)\u2014a nationally representative survey of household income,  finances, and use of federal social safety net programs\u2014along with  retirement account contribution and withdrawal data included in the  SIPP\u2019s Social Security Administration (SSA) Supplement on  Retirement, Pensions, and Related Content. Specifically, we  developed percentage and dollar-value estimates of the incidence and  amount of lump sum payments received and hardship withdrawals  taken by participants in 401(k) plans in 2013. Because the SIPP is  based upon a complex probability sample, we used Balanced  Repeated Replication methods with a Fay adjustment to derive all  percentage, dollar-total, and dollar-ratio estimates and their 95  percent confidence intervals. To better understand the characteristics  of individuals who received a lump sum and/or took a hardship  withdrawal in 2013, we analyzed a range of selected individual and  household demographic variables and identified characteristics  associated with a higher incidence of withdrawals. We applied domain  estimation methods to make estimates for these subpopulations. (For  a list of variables used and the results of our analysis, please see  appendix III.) We attempted to develop a multiple regression model to  estimate the unique association between each characteristic and  withdrawals, but determined that the SIPP did not measure key  variables in enough detail to develop persuasive causal explanations.  The sample size of respondents receiving lump sums was too small to  precisely estimate the partial correlations of many demographic  variables at once. Even with adequate sample sizes, associations  between broad demographic variables, such as age and income,  likely reflected underlying causes, such as retirement and financial  planning strategies, which SIPP did not measure in detail.", "Third, to examine the incidence and amount of unrepaid plan loans  from 401(k) plans, we analyzed the latest filing of annual plan data  that plan sponsors reported on the Form 5500 to the Department of  Labor (DOL) for the 2013 plan year. We looked at unrepaid plan  loans reported by sponsors of large plans (Schedule H) and small  plans (Schedule I). For each schedule, we analyzed two variables  related to unrepaid plan loans: (1) deemed distributions of participant  loans (which captures the amount of loan defaults by active  participants) and (2) benefits distributed directly to participants (which  includes plan loan offsets for a variety of reasons, including plan loans  that remain unpaid after a participant separates from a plan). Because  plan sponsors report data in aggregate and do not differentiate by  participant age, we calculated and reported the aggregate of loan  defaults identified as deemed distributions in both schedules. We  could not determine the amount of plan loan offsets based on the way  that plan sponsors are required to report them. Specifically, plan  sponsors are required to treat unrepaid loans occurring after a  participant separates from a plan as reductions or offsets in plan  assets, and are required to report them as part of a larger commingled  category of offsets that also includes large-dollar items like rollovers of  account balances to another qualified plan or IRA. As a result, we  were unable to isolate and report the amount of this category of  unrepaid plan loans."], "subsections": []}, {"section_title": "Literature Search", "paragraphs": ["To identify what is known about the factors that might lead individuals to  access their 401(k) plans and IRAs and what strategies or policies might  reduce the early withdrawal of retirement savings, we performed a  literature search using multiple databases to locate documents regarding  early withdrawals of retirement savings published since 2008 and to  identify experts for interviews. The search yielded a wide variety of  scholarly articles, published articles from various think tank organizations,  congressional testimonies, and news reports. We reviewed these studies  and identified factors that lead individuals to withdraw retirement savings  early, as well as potential strategies or policies that might reduce this  behavior. The search also helped us identify additional potential  interviewees."], "subsections": []}, {"section_title": "Interviews", "paragraphs": ["To answer our second and third objectives, we visited four metropolitan  areas and conducted 51 interviews with a wide range of stakeholders that  we identified in the literature. In some cases, to accommodate  stakeholder schedules, we conducted phone interviews or accepted  written responses. Specifically, we interviewed human resource  professionals from 22 private-sector companies (including 4 written  responses), representatives from 8 plan administrators, 13 retirement  research experts (including 1 written response), representatives from 4  industry associations, representatives from 2 participant advocacy  organizations, and representatives from 2 financial technology  companies.", "We conducted in-person interviews at four sites to collect information  from three different groups: (1) human resource officials in private-sector  companies, (2) top 20 plan administrators or recordkeepers, and (3)  retirement research experts. We selected site visit locations in four  metropolitan locations that were home to representatives of each group.  To select companies for potential interviews, we reached out to a broad  sample of Fortune 500 companies that offered a 401(k) plan to  employees and varied by geographic location, industry, and number of  employees. We selected plan administrators based on Pensions and  Investments rankings for assets under management and number of  individual accounts. We selected retirement research experts who had  published research on early withdrawals from retirement savings, as well  as experts that we had interviewed in our prior work. Based on these  criteria, we conducted site visits in Boston, Massachusetts; Chicago,  Illinois; the San Francisco Bay Area, California; and Seattle, Washington.  We held interviews with parties in each category who responded  affirmatively to our request. In each interview, we solicited names of  additional stakeholders to interview. We also interviewed representatives  of organizations, such as financial technology companies, participant  advocacy organizations, industry associations, and plan administrators  focused on small businesses, whose work we deemed relevant to our  study.", "We developed a common question set for each stakeholder category that  we interviewed. We based our interview questions on our literature  review, research objectives, and the kind of information we were soliciting  from each stakeholder category. In each interview, we asked follow-up  questions based on the specific responses provided by interviewees.", "In our company interviews, we asked how companies administered  retirement benefits for employees; company policies and procedures  regarding separating employees and the disposition of their retirement  accounts; company policies regarding plan loans, hardship  withdrawals, and rollovers from other 401(k) plans; and company  strategies to reduce early withdrawals from retirement savings.", "In our interviews with plan administrators, we asked about factors that  led individuals to access their retirement savings early, how plan  providers interacted with companies and separating employees,  available data on loans and hardship withdrawals from client  retirement plans, and potential strategies to reduce the incidence and  amount of early withdrawals.", "In our interviews with retirement research experts, financial  technology companies, participant advocacy organizations, and  industry associations we asked about factors that led individuals to  make early withdrawals from their retirement savings and any  potential strategies that may reduce the incidence and amount of  early withdrawals.", "In our interviews with plan administrators and retirement research  experts, we also provided a supplementary table outlining 37 potential  strategies to reduce early withdrawals from retirement savings. We asked  interviewees to comment on the strengths and weaknesses of each  strategy in terms of its potential to reduce early withdrawals, and gave  them opportunity to provide other potential strategies not listed in the  tables. We developed the list of strategies based on the results of our  literature review.", "Some interviewees also provided us with additional data and documents  to assist our research. For example, some companies and plan  administrators we interviewed provided quantitative data on the number  of plan participants, the average cashout or rollover amounts, the  percentage of participants who took loans or hardship withdrawals from  their retirement accounts, and known reasons for these withdrawals.  Some research experts also provided us with documentation, including  published articles and white papers that supplemented our interviews and  literature review. All data collected through these methods are  nongeneralizable and reflect the views and experiences of the  respondents and not the entire population of their respective constituent  groups."], "subsections": []}, {"section_title": "Analysis of Interview Responses", "paragraphs": ["To answer our second and third objectives, we analyzed the content of  our stakeholder interview responses and corroborated our analysis with  information obtained from our literature review and quantitative  information provided by our interviewees. To examine what is known  about the factors leading individuals to access retirement savings early,  we catalogued common factors that stakeholders identified as  contributing to early withdrawals from retirement savings. We also  collected information on plan rules governing early participant withdrawals  of retirement savings.", "To identify potential strategies or policies that might reduce the incidence  and amount of early withdrawals, we analyzed interview responses and  catalogued (1) company practices that employers identified as having an  effect in reducing early withdrawals and (2) strategies that stakeholders  suggested that could achieve a similar outcome. GAO is not endorsing or  recommending any strategy in this report, and has not evaluated these  strategies for their behavioral or other effects on retirement savings or on  tax revenues."], "subsections": []}]}, {"section_title": "Appendix II: Selected Provisions Related to Early Withdrawals from 401(k) Plans and Individual Retirement Accounts (IRAs)", "paragraphs": ["Appendix II: Selected Provisions Related to  Early Withdrawals from 401(k) Plans and  Individual Retirement Accounts (IRAs)", "Requirements  Provides an exception for distributions for qualified higher education expenses and for  qualified \u201cfirst-time\u201d home purchases made before age 59\u00bd from the additional 10  percent tax for early distributions  Defines \u201cqualified first-time homebuyer distribution\u201d and \u201cfirst-time homebuyer,\u201d and  prescribes the lifetime dollar limit on such distributions, among other things.", "Allows eligible individuals to make tax-deductible contributions to individual retirement  accounts, subject to limits based, for example, on income and pension coverage.", "Provides for the loss of exemption for an IRA if the IRA owner engages in a prohibited  transaction, which results in the IRA being treated as distributing all of its assets to the  IRA owner at the fair market value on the first day of the year in which the transaction  occurred.", "Defines a prohibited transaction to include the lending of money or other extension of  credit between a plan and a disqualified person.", "Requirements   Allows eligible individuals to make contributions to a Roth IRA that are not tax- deductible. Distributions from the account can generally be treated as a qualified  distribution if a distribution is made on or after the Roth IRA owner reaches age 59\u00bd  and the distributions is made after the 5-taxable year period beginning when the  account was initially opened.", "Defines a prohibited transaction to include the lending of money or other extension of  credit between a plan and a disqualified person."], "subsections": []}, {"section_title": "Appendix III: Estimated Incidence of Certain Early Withdrawals of Retirement Savings", "paragraphs": ["Appendix III: Estimated Incidence of Certain  Early Withdrawals of Retirement Savings 401(k) plans  401(k) plans  ($1000 or more)"], "subsections": [{"section_title": "Category", "paragraphs": ["401(k) plans  401(k) plans  ($1000 or more)"], "subsections": []}, {"section_title": "Category", "paragraphs": ["401(k) plans  401(k) plans  ($1000 or more)", "Legend: * Sampling error was too large to report an estimate."], "subsections": []}]}, {"section_title": "Appendix V: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgment", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgment:", "paragraphs": ["In addition to the contact named above, Dave Lehrer (Assistant Director);  Jonathan S. McMurray (Analyst-in-Charge); Gustavo O. Fernandez; Sean  Miskell; Jeff Tessin; and Adam Wendel made key contributions to this  report. James Bennett, Holly Dye, Sara Edmondson, Sarah Gilliland,  Sheila R. McCoy, Ed Nannenhorn, Katya Rodriguez, MaryLynn Sergent,  Linda Siegel, Rachel Stoiko, Frank Todisco, and Sonya Vartivarian also  provided support."], "subsections": []}]}, {"section_title": "Related GAO Reports", "paragraphs": ["The Nation\u2019s Fiscal Health: Action Is Needed to Address the Federal  Government\u2019s Future. GAO-18-299SP. Washington, D.C.: June 21, 2018.", "The Nation\u2019s Retirement System: A Comprehensive Re-evaluation is  Needed to Better Promote Future Retirement Security. GAO-18-111SP.  Washington, D.C.: October 18, 2017.", "Retirement Security: Improved Guidance Could Help Account Owners  Understand the Risks of Investing in Unconventional Assets.  GAO-17-102. Washington, D.C.: December 8, 2016.  401K Plans: Effects of Eligibility and Vesting Policies on Workers\u2019  Retirement Savings. GAO-17-69. Washington, D.C.: October 21, 2016.", "Retirement Security: Low Defined Contribution Savings May Pose  Challenges. GAO-16-408. Washington, D.C.: May 5, 2016.", "Retirement Security: Shorter Life Expectancy Reduces Projected Lifetime  Benefits for Lower Earners. GAO-16-354. Washington, D.C.: March 25,  2016.", "Social Security\u2019s Future: Answers to Key Questions. GAO-16-75SP.  Washington, D.C.: October 27, 2015.", "Retirement Security: Federal Action Could Help State Efforts to Expand  Private Sector Coverage. GAO-15-556. Washington, D.C.: September 10,  2015.", "Highlights of a Forum: Financial Literacy: The Role of the Workplace.  GAO-15-639SP. Washington, D.C.: July 7, 2015.  401(K) Plans: Greater Protections Needed for Forced Transfers and  Inactive Accounts. GAO-15-73. Washington, D.C.: November 21, 2014.", "Older Americans: Inability to Repay Student Loans May Affect Financial  Security of a Small Percentage of Retirees. GAO-14-866T. Washington,  D.C.: September 10, 2014.", "Financial Literacy: Overview of Federal Activities, Programs, and  Challenges. GAO-14-556T. Washington, D.C.: April 30, 2014.", "Retirement Security: Trends in Marriage and Work Patterns May Increase  Economic Vulnerability for Some Retirees. GAO-14-33. Washington,  D.C.: January 15, 2014.  401(K) Plans: Labor and IRS Could Improve the Rollover Process for  Participants. GAO-13-30. Washington, D.C.: March 7, 2013.", "Retirement Security: Women Still Face Challenges. GAO-12-699.  Washington, D.C.: July 19, 2012.  401(K) Plans: Policy Changes Could Reduce the Long-term Effects of  Leakage on Workers\u2019 Retirement Savings. GAO-09-715. Washington,  D.C: August 28, 2009."], "subsections": []}], "fastfact": ["Usually, the money in a tax-deferred retirement account, like a 401(k) plan, stays there until retirement. However, you may be able to borrow or withdraw money from such accounts to meet pressing needs, such as medical bills.", "If you default on a loan from your retirement account, it counts as an early withdrawal, which may be subject to taxes and penalties. Early withdrawals can also erode your long-term savings.", "We reported on policies and strategies that might reduce early withdrawals, such as building emergency savings features into retirement plans. We also recommended improving information about defaults on retirement account loans."]}
{"id": "GAO-18-620", "url": "https://www.gao.gov/products/GAO-18-620", "title": "Drinking Water: Approaches For Identifying Lead Service Lines Should Be Shared With All States", "published_date": "2018-09-21T00:00:00", "released_date": "2018-09-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The crisis in Flint, Michigan, brought increased attention to lead in drinking water infrastructure. Lead in drinking water primarily comes from corrosion of service lines connecting the water main to a house or building. In 1991, EPA issued the Lead and Copper Rule that required water systems to conduct a \u201cmaterials inventory\u201d of lead service lines. In light of the events in Flint, EPA sent a letter to all states in February 2016 encouraging them to work with water systems to publicly post the materials inventory, along with any additional updated maps or inventories of lead service linesactions the rule does not require.", "A House Committee report accompanying a bill for the Department of the Interior, Environment and Related Agencies Appropriations Act, 2017, includes a provision for GAO to review lead service lines. This report examines (1) what is known about the number of existing lead service lines among states and water systems and (2) states' responses to EPA's February 2016 request to work with water systems to publicize inventories of lead service lines and any steps EPA has taken to follow up on these responses. GAO reviewed existing studies of lead service lines, reviewed the websites of the 100 largest water systems, and interviewed EPA officials in headquarters and its 10 regional offices."]}, {"section_title": "What GAO Found", "paragraphs": ["The total number of lead service lines is unknown and while national, state, and local estimates exist, approaches used to count lead service lines vary. A 2016 American Water Works Association study estimated that nationally there were 6.1 million lead service lines, but the study has significant sampling limitations and, as a result, likely does not accurately reflect the total number of lead service lines nationwide. In addition, at least two statesMassachusetts and Washingtonpublished reports with estimates of lead service lines and reported 22,023 and 1,000-2,000 lead service lines as of 2016 and 2017, respectively. Certain water systems also have estimates, such as the approximately 7 percent of publicly owned lead service lines out of the area's total number of service lines cited by a representative for the system serving Cincinnati, Ohio and surrounding areas, as of May 2018.", "While most states informed the Environmental Protection Agency (EPA) that they intend to fulfill the agency's request to publicize inventories of lead service lines, EPA has identified potential challenges to these efforts. Of the approximately 43 states that responded that they would fulfill EPA's request, almost all (39) reported to EPA that, although they had encouraged water systems to publicize inventories, few systems had completed these actions. GAO found in January 2018 that, of the 100 largest water systems, 12 had publicized information on the inventory of lead service lines. According to EPA, among challenges in conducting inventories of lead service lines and publicizing information about lead service lines were concerns about posting on public websites information about lead service lines on private property; and a lack of records about the locations of lead service lines. EPA told GAO the agency was focused on state compliance with drinking water rules, and not following up with information on how states could address the challenges cited. By sharing information with all states about the approaches that some states and water systems are using to successfully identify and publicize information about lead service lines, including responses to potential challenges, EPA could encourage states to be more transparent to the public and support the agency's objectives for safe drinking water."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that EPA share information about the successful approaches states and water systems use to identify and publicize locations of lead service lines with all states. EPA agreed with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The crisis in Flint, Michigan, brought increased attention to the country\u2019s  challenge of addressing lead in drinking water infrastructure. According to  the U.S. Environmental Protection Agency (EPA) and others, there is no  level of lead that is safe in drinking water. Lead poses the greatest risk to  infants, children under the age of 6, and pregnant women. In children, it  can delay growth, cause learning and behavioral problems, and lower IQ,  while in pregnant women it can reduce fetal growth and cause premature  birth. Lead in drinking water primarily comes from the corrosion of pipes  (such as service lines made of lead) that connect the drinking water main  (a primary pipeline) to a house or building. The corrosion results from a  chemical interaction between water and pipes that wears the metal and  allows lead to dissolve or lead particles to flake away over time. Other  sources of lead in drinking water include solder that connects pipes, and  fixtures made with lead or with brass that contains lead.", "Lead was widely used in plumbing materials, including service lines, until  1986 when the Safe Drinking Water Act (SDWA) was first amended to  generally prohibit the new installation of lead pipes and solder. According  to EPA, homes built before 1986 are more likely to have lead pipes,  solder, and fixtures. Consequently, these homes are a priority for  monitoring under EPA\u2019s Lead and Copper Rule, which minimizes the  amount of lead in the nation\u2019s drinking water supply. As of December  2016, the approximately 68,000 drinking water systems covered by the  Lead and Copper Rule served about 312 million people\uf8e7most of the U.S.  population. When the Lead and Copper Rule was promulgated in 1991, it  required all covered drinking water systems to collect information about  the infrastructure that delivered water to customers, including any known  lead pipes and lead service lines. The purpose of this effort\uf8e7 referred to  as materials evaluation (hereafter materials inventory)\uf8e7was to identify  locations that may have been particularly susceptible to high lead or  copper concentrations, from which water systems would collect drinking  water samples. According to 2010 EPA guidance, in developing the  materials inventory, water systems should survey all records documenting  the materials used to construct and repair the drinking water distribution  system and buildings connected to the system.", "In a January 2016 letter to Michigan\u2019s Governor, EPA noted its concern  with lack of transparency and accountability to the public in Flint. In light  of events in Flint and other U.S. cities, EPA sent a letter to all state  environmental commissioners in February 2016 requesting near-term  actions to assure the public that EPA and the states were working  together to address risks from lead in drinking water, and to increase  transparency in water systems\u2019 implementation of the Lead and Copper  Rule. In this letter, EPA encouraged states to work with water systems to  post, on a public website, the water system\u2019s original materials inventory  along with any additional updated maps or inventories of lead service  lines\uf8e7actions the Lead and Copper Rule does not require. EPA also  encouraged states to place an emphasis on large water systems, which  EPA regulations define as those serving populations greater than  50,000.", "House Report No. 114-632, accompanying a bill for the Department of the  Interior, Environment, and Related Agencies Appropriations Act, 2017,  includes a provision for us to review the number of lead service lines.  Our objectives were to examine (1) what is known about the number of  existing lead service lines nationally, and among states and water  systems; and (2) states\u2019 responses to EPA\u2019s February 2016 request to  work with water systems to publicize inventories of lead service lines and  any steps EPA has taken to follow up on these responses. This report  addresses lead in drinking water, not other sources of lead such as paint,  paint chips, dust, toys, or food.", "To examine what is known about the number of existing lead service lines  nationally, and among states and water systems, we reviewed existing  studies and other documents regarding the extent of and experience with  such lines. We found three written studies with estimates of lead service  lines\u2014one using national data and two that were state-specific. We took  a number of steps, including conducting interviews with each study\u2019s  authors, to examine the reliability of the data used in the studies. For the  one study we reviewed that used national data, the data were of  undetermined reliability because the sample of water systems included in  the study was not generalizable to all water systems and the authors  could not verify the accuracy of the information provided by water  systems. Appendix I provides more information on our reasons for  designating the data as undetermined reliability. For the two state-specific  studies, we determined that the data represented reasonable efforts to  estimate the number of lead service lines, although the states also could  not verify the accuracy of the information provided by water systems.  Therefore, we also found these estimates to be of undetermined  reliability. Appendix I provides more information on our reasons for  designating the data as undetermined reliability. We did not find any  studies with information comparing the quality of estimates among water  systems. However, we interviewed representatives of the Greater  Cincinnati Water Works water system about their estimate and found the  data to be sufficiently reliable for the purpose of describing their reported  best available estimate. We also interviewed EPA staff about their  knowledge of estimates provided by states and water systems; and  subsequently interviewed officials in some of these states, namely  Massachusetts, Ohio, and Washington. We also interviewed  representatives of water organizations to identify potential studies and  other sources of information about the number of lead service lines. We  selected these organizations based on their knowledge of conducting  inventories of lead service lines as a part of the process for replacing  such lines.", "To examine states\u2019 responses to EPA\u2019s request and any steps EPA has  taken to follow up on these responses, we reviewed the websites of the  100 largest water systems (by population served) to identify which water  systems have made the information available to the public. We used a  structured process to review each website for the presence or absence of  such information so that we could reliably tabulate the results. We also  conducted an in-depth, semi-structured interview with representatives  from the Greater Cincinnati Water Works about their experiences in  mapping lead service lines and providing the information to the public. We  selected this water system based on the extent of its mapping initiative  and based on recommendations from EPA and several nonprofit and  water advocacy organizations. The results of this interview are not  generalizable to other water systems but provide illustrative examples.  We also conducted semi-structured interviews with officials in EPA\u2019s  headquarters and all 10 of its regional offices. Finally, we compared  EPA\u2019s actions to follow up on state responses with federal standards for  internal control for information and communication.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Generally, the responsibility for reducing lead in drinking water and  ensuring safe drinking water overall is shared by EPA, states, and local  water systems. EPA is responsible for, among other things, national  implementation of the Lead and Copper Rule, setting standards,  overseeing states\u2019 implementation of the rule, and conducting some  enforcement activities. However, most states have primary responsibility  for enforcing the requirements under SDWA as amended. Water  systems are generally subject to requirements under SDWA as amended,  such as the Lead and Copper Rule, and are responsible for managing  and funding the activities and infrastructure needed to meet those  requirements.", "Such infrastructure includes storage facilities and drinking water mains  and may include other pipes such as service lines. There are 1 million  miles of drinking water mains in the country, according to a 2017  American Society of Civil Engineers study. As figure 1 illustrates,  service lines are the smaller pipes that connect the water mains to homes  and buildings. According to EPA guidance, service lines also include any  smaller pipes used for connecting a service line to the water mains (e.g.,  gooseneck pipes which are also known as pigtails). Service lines can  generally be made of lead, steel, copper, or plastic. Service lines can be  fully owned by the water system (publicly owned) or by the homeowner  (privately owned), or ownership can be shared. In most communities, lead  service lines are partially owned by the water system and partially owned  by the homeowner. With shared ownership, the water system typically  owns the service line from the water main to the curb stop, and the  homeowner owns the service line from the curb stop into the home. In  such cases, each party is responsible for maintaining the part of the  service line that it owns.", "In some circumstances, if lead levels are higher than the Lead and  Copper Rule allows and other measures do not alleviate the problem, the  Lead and Copper Rule requires water systems to replace lead service  lines under the systems\u2019 control. The Lead and Copper Rule does not  require homeowners to replace the portion of lead service lines they own,  but if they choose to do so they are generally responsible for the  associated costs. The Lead and Copper Rule allows for a partial  replacement by the water system when an owner of a home or building is  unable or unwilling to pay for replacement of the portion of the service line  not owned by the water system."], "subsections": []}, {"section_title": "The Total Number of Lead Service Lines Is Unknown, and National, State, and Local Estimates Vary", "paragraphs": ["The total number of lead service lines is unknown and while national,  state, and local estimates exist, approaches used to count lead service  lines vary. The total number of lead service lines is unknown because,  among other things, the Lead and Copper Rule does not require all water  systems to collect such information. National, state, and local estimates  exist, but the methods used to arrive at these estimates vary, making it  challenging to compare estimates."], "subsections": [{"section_title": "The Lead and Copper Rule Does Not Generally Require Water Systems to Maintain Complete Information about Lead Service Lines or Report Such Information to EPA", "paragraphs": ["The total number of lead service lines is unknown, in part because the  Lead and Copper Rule does not require all water systems to develop and  maintain a complete inventory of lead service lines, and there are no  national repositories of information about lead service lines. According to  EPA headquarters officials we interviewed in 2017, the materials  inventory required under the Lead and Copper Rule is not intended to be  a census of lead service lines (and other lead pipes such as goosenecks/  pigtails). Instead, it is intended to provide sufficient information to develop  a plan for periodically obtaining tap samples. For example, according to  2008 EPA guidance to water systems, if a system contains lead service  lines, then, if possible, half of the sample sites should include those  served by a lead service line.", "The Lead and Copper Rule requires water systems to conduct complete  inventories only if the water system is required to begin replacing lead  service lines. In these instances, water systems are required to expand  the materials inventory to a complete inventory that identifies the total  number of lead service lines for the purpose of tracking replacements  over time. As we reported in 2017, based on the available data, the  majority of the 68,000 water systems subject to the Lead and Copper  Rule at the time of our review had not been required to replace lead  service lines and therefore were not required to conduct complete  inventories.", "Moreover, there are no national repositories for information about lead  service lines. In September 2017, we recommended that, as a part of  revisions to the Lead and Copper Rule, EPA require states to report data  on lead pipes (including lead service lines) and incorporate these data in  the agency\u2019s Safe Drinking Water Information System. EPA agreed with  the recommendation but has not implemented it. In May 2018, EPA noted  that it was in the process of reviewing comments received through  consultations with state and local officials and tribes. According to EPA  officials, final revisions to the Lead and Copper Rule are expected by  February 2020. We continue to believe that EPA should collect data  about lead pipes (including lead service lines) from states. By doing so,  EPA and congressional decision makers would have important  information at the national level on what is known about lead  infrastructure in the country, thereby facilitating oversight of the Lead and  Copper Rule."], "subsections": []}, {"section_title": "National, State, and Local Estimates of Lead Service Lines Exist, and Those We Reviewed Had Significant Limitations; but the Methods Used to Arrive at These Estimates Vary", "paragraphs": ["The total number of lead service lines is unknown, and while some  entities have developed estimates of lead service lines at the national,  state, or local water system level, the estimates we reviewed have  significant limitations to their reliability. Moreover, the approaches used to  arrive at these estimates vary, making it challenging to compare  estimates. Nationally, according to EPA\u2019s October 2016 Lead and Copper  Rule Revisions White Paper, there are an estimated 6.5 million to 10  million homes served by lead service lines. This range of estimates,  based in part on data from a study for the 1991 Lead and Copper Rule,  has significant limitations. In appendix I we explain why EPA\u2019s estimate  may not accurately reflect the total number of lead service lines,  nationwide.", "An April 2016 American Water Works Association study estimated 6.1  million lead service lines nationwide. The authors of this study  extrapolated the number based on survey responses from 978 water  systems in 2011 and 2013. While this study is the most recent attempt to  provide a national estimate, it has significant limitations. First, the sample  was not statistically representative of all 68,000 water systems subject to  the Lead and Copper Rule. Rather, the water systems that responded to  the American Water Works Association\u2019s survey are not a statistical  sample. Second, according to the study\u2019s authors, survey responses were  based on water systems\u2019 best guesses of the number of lead service lines  in their systems. However, since water systems have not been required to  maintain inventories of lead service lines, many of them do not know the  exact number. For these reasons, we are not confident that the number  accurately reflects the total number of lead service lines nationwide.", "An American Water Works Association official told us that the  organization is not planning to update the study. EPA officials told us that  they were not aware of a more recent study than the association\u2019s 2016  study. In addition, EPA officials said in May 2018 that the results in the  American Water Works Association study likely represent a lower-bound  estimate for the number of lead service lines in the country because the  sample was not generalizable, and had other data quality issues. EPA  officials in one region we interviewed said that estimates of lead service  lines can decrease or increase as a water system replaces lead service  lines and as a water system does or does not count lead service lines on  private property.", "The Lead and Copper Rule does not require states to collect statewide  information about lead service lines, but at least two states collected data  from water systems in their states and published reports with these data:", "A 2016 report by the Massachusetts Department of Environmental Protection\u2019s Drinking Water Program reported 22,023 lead service lines and 15,809 lead goosenecks and pigtails statewide. The report counted goosenecks and pigtails separately from lead service lines. Officials from the Massachusetts Department of Environmental Protection told us that the state has about 2 million service lines total; therefore, about 1 percent of the total service lines are lead.", "A 2017 report by the Washington State Department of Health estimated 1,000-2,000 lead service lines statewide and 8,000 goosenecks statewide. According to Washington State officials, they continued to update their estimates in early 2018 with selected water utilities.", "Generally, the purpose of both studies, as stated in each report, was to  identify areas in which water systems would need technical assistance in  complying with the Lead and Copper Rule or state requirements.  However, for the purposes of estimating the number of lead service lines,  complete details were not available about the methodologies and some  systems that did respond were only able to provide rough guesses rather  than precise counts of lead service lines. EPA headquarters officials told  us that Massachusetts and Washington were at the forefront of states\u2019  efforts to gather information about lead service lines. EPA officials also  told us that they were not aware of any other states with published reports  estimating the number of lead service lines. However, at least two states  have also collected information about lead service lines but have not  published the information in official reports, at the time of our review. For  example, in 2016, officials in Indiana and Maryland sent questionnaires to  water systems in their states asking for information about the number of  lead service lines.", "A representative of a water association told us that, generally, water  systems were in the beginning stages of conducting complete inventories  of lead service lines. However, some local water systems also have  estimates. For example, EPA officials told us that water systems in the  states of Ohio, Michigan, and Washington had estimates of lead service  lines. In May 2018, a representative of the Greater Cincinnati Water  Works water system estimated there were approximately 7 percent of  publicly owned and approximately 18 percent privately owned lead  service lines out of a total of 240,000 service lines in the area served by  that water system. In March 2018, representatives of the Greater  Cincinnati Water Works water system said that their estimates of lead  service lines are best characterized as what is known at any given point  in time. These representatives also told us that they collect this  information on a continual basis from historical and on-going maintenance  records, reports of lead service lines by customers, and the water  system\u2019s lead service line replacement program, among other sources.", "To conduct complete inventories and develop estimates, water systems  have used varying approaches, which can hinder comparisons among  states and water systems. The publicly available reports that existed as of  May 2018 provide some insight into the various approaches water  systems have used. For example, to identify lead service lines, water  systems have used visual inspection or a combination of visual  inspections, existing water system records, and discussions with  homeowners. In addition, water systems have used various definitions of  lead service lines. For example, water systems have counted:  only active service lines delivering water to customers, or both active and inactive (no longer delivering water to customers) service lines; or only the publicly owned lead service lines, or both the publicly and privately owned portions of the lead service lines; or only lead service lines or the lead service lines and goosenecks/pigtails separately."], "subsections": []}]}, {"section_title": "Most States Reported Fulfilling EPA\u2019s Request, but Potential Challenges Remain that EPA Information Sharing Could Help to Address", "paragraphs": ["While most states informed EPA that they intend to fulfill the agency\u2019s  request to work with water systems to publicize inventories of lead service  lines, EPA has identified potential challenges to these efforts.  Nonetheless, the agency has not followed up with all states since 2016 to  share information about how to address these challenges. Most states  that said they intended to fulfill EPA\u2019s request to encourage water  systems to publicize materials inventories reported in subsequent letters  to or meetings with EPA that they did so; however, as of May 2018, most  large waters systems had not made such information public."], "subsections": [{"section_title": "Most States Reported Fulfilling EPA\u2019s Request to Encourage Water Systems to Publicize Materials Inventories, but Most Large Water Systems GAO Reviewed Did Not Do So", "paragraphs": ["Our analysis of states\u2019 written responses to EPA\u2019s 2016 request, and  information obtained through interviews with EPA officials as of February  2018, found that most (43) of the 50 states indicated an intent to fulfill  EPA\u2019s request, 3 states said that they may consider it, and 4 states did  not intend to fulfill EPA\u2019s request. Of the approximately 43 states that  responded that they would fulfill EPA\u2019s request, almost all (39) reported in  subsequent letters to or meetings with EPA that they had encouraged  water systems to publicize their materials inventories or other information  about lead service lines. In these letters and meetings, states also  reported taking other actions to increase their knowledge about lead  service lines such as requesting that water systems update the materials  inventory required by the Lead and Copper Rule, creating online  repositories of maps of lead service lines, posting reports on lead service  lines, and issuing requirements for water systems to collect information  on lead service lines. For example, in May 2016, the governor of  Washington issued a directive requiring the state\u2019s Department of Health  to work with certain water systems to identify all lead service lines and  lead components within 2 years. Figure 2 shows the number of states that  reported fulfilling EPA\u2019s request or taking other related actions.", "Because EPA asked states to prioritize large water systems (those  servicing populations greater than 50,000), we reviewed the websites for  the 100 largest water systems. As of January 2018, we found 12 of these  water systems had publicized information on the inventory of lead service  lines; the rest had not. The information on the websites for the 12 water  systems varied. For example, the water system for Tulsa, Oklahoma  posted a map that highlighted where lead service lines may be present.  Water systems such as Cincinnati, Ohio, Boston, Massachusetts, and  Washington, D.C., provided interactive maps that showed locations  identified as having lead service lines. See figure 3 for examples of the  interactive maps of lead service lines that some selected large water  systems have provided to the public. Water systems that serve  populations greater than 50,000 but were not among the 100 largest  water systems at the time of our review may have also publicized  information on the inventory of lead service lines. For example, the water  systems for Akron, Ohio, Flint, Michigan, and Providence, Rhode Island  each publicized an interactive or other type of map of lead service lines."], "subsections": []}, {"section_title": "EPA Identified Potential Challenges to Publicizing Materials Inventories but Has Not Followed Up with All States about How to Address Such Challenges Since 2016", "paragraphs": ["EPA officials in the regional offices provided a range of reasons why  water systems may be challenged in conducting inventories of lead  service lines and making any information about lead service lines public,  however, it has not followed up with all states about how to address such  challenges since 2016. In September 2017, we reported that the six  states that would not fulfill EPA\u2019s 2016 request had highlighted challenges  in finding historical documentation about lead pipes to create plans for  collecting tap water samples or in dedicating staff resources to do so. In  January and February 2018, some officials whom we interviewed in  EPA\u2019s 10 regional offices agreed that these would be challenges for  states and water systems. The officials also mentioned additional  potential challenges in conducting complete inventories of lead service  lines or publicizing information about lead service lines. Table 1 describes  the challenges mentioned by EPA officials in the 10 regional offices.", "Since the February 2016 letter, EPA followed up in July 2016 with a letter  to the Association of State and Territorial Health Officials and  Environmental Council of States, which represents all states. In that letter,  EPA provided two examples of state practices that increase public  transparency: some drinking water systems are providing online  searchable databases that provide information on known locations of lead  service lines, or are providing videos that show homeowners how to  determine whether their home is served by a lead service line.  The  letter also said that EPA would continue to work with states to ensure that  the identification of the locations of lead service lines remains a priority for  drinking water systems.", "However, EPA has conducted limited follow-up since then, mainly, EPA  headquarters and regional officials said, because they have focused their  efforts on ensuring states appropriately comply with the Lead and Copper  Rule. As previously noted in this report, posting materials inventories or  other information about the location of lead service lines is not a  requirement of the Lead and Copper Rule. In May 2018, EPA  headquarters officials we interviewed said that they learned of some  states\u2019 and water systems\u2019 efforts toward making information about lead  service lines available to the public since 2016, through conferences and  discussions with states. These headquarters officials told us that they  have shared such efforts with those states who, in 2016, said they did not  intend to fulfill EPA\u2019s 2016 request. For example, EPA shared how states  that were publicizing information about lead service lines were addressing  privacy concerns with states that originally said they would not fulfill  EPA\u2019s request. However, as of January 2018, most of the 100 largest  water systems had not made their materials inventories or additional  maps or updated inventories public. According to EPA\u2019s February 2016  letter, the agency\u2019s objective in encouraging states to work with water  systems to post, on a public website, the water system\u2019s original materials  inventory along with any additional updated map or inventories of lead  service lines was to assure the public that lead risks were being  addressed. Under federal standards for internal control, management  should externally communicate the necessary quality information, so that  external parties can help to achieve the entity\u2019s objectives. By sharing  information with all states about the approaches that some states and  water systems are using to successfully identify and publicize information  about lead service lines, including responses to potential challenges, EPA  could encourage states to be more transparent to the public and support  the agency\u2019s objectives for safe drinking water."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Lead service lines present a significant risk of lead contamination in  drinking water. Publicizing drinking water systems\u2019 knowledge about lead  service lines, and other lead infrastructure, would facilitate oversight of  the Lead and Copper Rule. In September 2017, we recommended that,  as a part of revisions to the Lead and Copper Rule expected by February  2020, EPA require states to report data on lead pipes (including lead  service lines) and incorporate these data in the agency\u2019s Safe Drinking  Water Information System. EPA agreed with the recommendation, and  we continue to believe that EPA should require data about lead pipes  (including lead service lines) from states. Most states reported that they  had encouraged their water systems to publicize information about lead  service lines in response to EPA\u2019s February 2016 requests. EPA  headquarters officials told us that they had learned of some states\u2019 and  water systems\u2019 efforts since 2016 and shared this information with the few  states that said that they would not take action in response to EPA\u2019s  letter. This information did in fact help at least one state take action,  according to information we received from EPA and the state. By sharing  information with all states about the approaches that some states and  water systems are using to successfully identify and publicize information  about lead service lines, including responses to potential challenges, EPA  could encourage states to be more transparent to the public and support  the agency\u2019s objectives for safe drinking water."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Assistant Administrator for Water of EPA\u2019s Office of Water should  share information with all states about the approaches that some states  and water systems are using to successfully identify and publicize  information on lead service lines, including responses to potential  challenges. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to EPA for review and comment. In its  comments, reproduced in appendix II, EPA agreed with our  recommendation. The agency also highlighted a recently developed  website that showcases efforts to identify and replace lead service lines  and said that it will continue to ensure states and water systems are  aware of this resource.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of EPA, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives Scope and Methodology", "paragraphs": ["Our objectives were to examine (1) what is known about the number of  existing lead service lines nationally, and among states and water  systems; and (2) state responses to EPA\u2019s February 2016 request to  work with water systems to publicize inventories of lead service lines and  any steps EPA has taken to follow up on these responses.", "To examine what is known about the number of existing lead service lines  nationally, and among states and water systems, we relied on interviews  and publicly available reports for which we could assess the reliability of  the data. We reviewed the requirements under the Lead and Copper Rule  for assessing the number of lead service lines. We interviewed officials  from EPA\u2019s Office of Water and the following water organizations  concerning what these officials knew about the number of lead service  lines nationally and among states and water systems: the American  Water Works Association, Association of State Drinking Water  Administrators, and Regional Community Assistance Partnership. We  also interviewed an official with the Environmental Defense Fund  regarding the available information about the number of lead service lines  nationally and among states and water systems. We selected these  organizations because they are all members of the Lead Service Line  Replacement Collaborative, a consortium that provides information about  voluntary lead service line replacement for states and water systems. On  behalf of the Lead Service Line Replacement Collaborative, the  organizations we spoke with are collecting examples of states\u2019 and water  systems\u2019 experiences in conducting inventories of lead service lines, as  the first step in replacing lead service lines. Using information from these  interviews, we identified three published studies from the American Water  Works Association, the state of Massachusetts, and the state of  Washington. We interviewed the authors of the studies to determine the  reliability, completeness, and accuracy of the data presented in the  studies.", "For the 2016 American Water Works Association study, we determined  that the data were of undetermined reliability because the responses of  the water systems surveyed were not generalizable to all water systems  and the study authors could not verify the accuracy of the information.  Specifically, the sample in the 2016 American Water Works Association  study was not based on a statistical sample, and therefore the sampling  error was not calculated and information was not available to determine  whether responding water systems were similar to nonresponding water  systems. For example, the estimate is based on survey responses from  978 of the approximately 23,000 water systems that existed around the  time of the surveys, and therefore may not represent all water systems  nationwide. In addition, since many water systems do not have complete  inventories of their lead service lines, the accuracy of data that water  systems submitted in response to the survey is difficult to verify. For  example, our interview with the study authors indicates that the  information provided by water systems varied in quality, with some  systems basing their responses on rough estimates. We based our  determination about the data using the criteria of Total Survey Error,  which is a framework for assessing the validity and reliability of survey  estimates. It includes sampling error (the difference between the  population and the sample), nonresponse error, measurement error (the  difference between the true response and the response provided by the  respondent) and coverage error (the discrepancy between the list of  individuals that is used to select a sample and the target population).  EPA\u2019s 2016 Lead and Copper Rule Revisions White Paper also identified  an estimate of lead service lines. According to EPA officials, this estimate  used data from the 2016 American Water Works Association study and a  1988 American Water Works Association study cited in the regulatory  impact analysis for the 1991 Lead and Copper Rule. The 1991 estimate  also had significant limitations in measurement error and representation  error as well as a lack of documentation about key aspects of the  methodology. As such, we determined the estimate was not reliable for  the purposes of establishing the total number of lead service lines in  existence as of 1991.", "The two state-specific studies represent reasonable efforts to estimate  the number of lead service lines in these states. However, they generally  could not verify the accuracy of the information provided by these  systems because, as we note elsewhere in this report, water systems  may not know the number of lead service lines they have. Therefore, for  the state-specific studies, we also determined that the data were also of  undetermined reliability. Finally, while the Greater Cincinnati Water Works  water system did not publish a report about lead service lines, we  collected the information through an in-person interview and corroborated  the information through a review of the water system\u2019s geographic  information system database. The Greater Cincinnati Water Works\u2019 GIS  database includes the location and material information for all of the water  system\u2019s distribution system. According to the Greater Cincinnati Water  Works website, the water system continues to update its map as it  obtains more information from its customers. Based on these steps we  deemed the data provided by the water system to be sufficiently reliable  for the purposes of describing the estimate reported by representatives of  the Greater Cincinnati Water Works system.", "To examine states\u2019 responses to EPA\u2019s February 2016 request to work  with water systems to publicize inventories of lead service lines and any  steps EPA has taken to follow up on these responses, we relied both on  the publicly available letters from each state to EPA and on interviews  with EPA regional and headquarters officials. We did not interview state  officials in all 50 states, but reviewed some state documents, where  available. We used a standard set of open-ended questions to interview  officials in EPA\u2019s headquarters and in each of the 10 regional offices. To  analyze states\u2019 and EPA officials\u2019 responses, we conducted two analyses.  Specifically, we conducted two analyses to summarize updates in state  responses to EPA\u2019s February 2016 letter and EPA\u2019s responses to  challenges states and water systems may face in conducting and  publicizing materials inventories. To confirm each analysis, one analyst  independently summarized the information and another analyst verified  the accuracy of the information. All initial disagreements were discussed  and reconciled. All numbers in our analysis are considered approximate  because interpretations of the states\u2019 responses to EPA\u2019s 2016 letter can  differ, and states may have taken actions after our interviews with EPA  regional officials, or may have taken actions that they did not report to  EPA. Figure 4 shows the EPA regions and the states within those  regions. We also reviewed EPA documents related to EPA\u2019s request that  states take certain actions following the events in Flint, Michigan. In  addition, we reviewed federal regulations; EPA guidance to water  systems on how to implement the Lead and Copper Rule; and other  relevant documents such as an EPA white paper.", "Because EPA asked states to place an emphasis on working with large  water systems to publicize their materials inventories or updated  inventories or maps of lead service lines, we reviewed the websites of the  100 largest water systems by population. Our review was conducted in  January to February 2018; and since then, additional water systems may  have provided information to the public on lead service lines. We  identified the largest water systems, based on population served, from  data in EPA\u2019s Safe Drinking Water Information System/Fed. EPA has  stated on its website that the agency acknowledges challenges related to  the data in the Safe Drinking Water Information System/Fed, specifically  underreporting of some data by states. GAO has also reported on EPA\u2019s  challenges with the Safe Drinking Water Information System/Fed. Even  with these challenges, the information on the populations served by water  systems in the Safe Drinking Water Information System/Fed is generally  reliable. We used a standard set of search terms on each website to  ensure the consistency of our searches, as well as information from water  organizations and EPA officials, where applicable. We counted a water  system as having an inventory if the water system provided a map,  interactive map, list of pipes or service lines, or numerical count of lead  service lines available to the public. To ensure the completeness of this  analysis, one analyst independently conducted the search of websites  and another analyst verified the search. All initial disagreements were  discussed and reconciled. We compared EPA\u2019s actions to follow up on  state responses with federal standards for internal control for information  and communication.", "We conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the U.S. Environmental Protection Agency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Diane Raynes (Assistant  Director); Tahra Nichols (Analyst in Charge); David Blanding, Jr.; Mark  Braza; Lawrence Crockett, Jr.; Justin Fisher; Richard P. Johnson, and  Jeanette Soares made key contributions to this report. In addition,  Cynthia Norris and Dan Royer made important contributions."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Drinking Water: Additional Data and Statistical Analysis May Enhance  EPA\u2019s Oversight of the Lead and Copper Rule. GAO-17-424.  Washington, D.C.: September 1, 2017.", "Water Infrastructure: Information on Selected Midsize and Large Cities  with Declining Populations. GAO-16-785. Washington, D.C.: September  15, 2016.", "Water Infrastructure: EPA and USDA Are Helping Small Water Utilities  with Asset Management; Opportunities Exist to Better Track Results.  GAO-16-237. Washington, D.C.: January, 27, 2016.", "Drinking Water: Unreliable State Data Limit EPA\u2019s Ability to Target  Enforcement Priorities and Communicate Water Systems\u2019 Performance.  GAO-11-381. Washington, D.C.: June 17, 2011.", "Drinking Water: The District of Columbia and Communities Nationwide  Face Serious Challenges in Their Efforts to Safeguard Water Supplies.  GAO-08-687T. Washington, D.C.: April 15, 2008.", "Drinking Water: EPA Should Strengthen Ongoing Efforts to Ensure That  Consumers Are Protected from Lead Contamination. GAO-06-148.  Washington, D.C.: January 4, 2006.", "District of Columbia\u2019s Drinking Water: Agencies Have Improved  Coordination, but Key Challenges Remain in Protecting the Public from  Elevated Lead Levels. GAO-05-344. Washington, D.C.: March 31, 2005.", "Drinking Water: Safeguarding the District of Columbia\u2019s Supplies and  Applying Lessons Learned to Other Systems. GAO-04-974T.  Washington, D.C.: July 22, 2004."], "subsections": []}], "fastfact": ["The water crisis in Flint, Michigan, highlighted dangers of lead in drinking water infrastructure. Lead enters drinking water primarily from old service lines between water mains and houses or buildings. The total number of lead service lines across the country is unknown.", "EPA asked states to publicize information about known locations of lead service lines. However, we found most of the largest water systems have not done so.", "We recommended that EPA share information on approaches for counting lead service lines with all states."]}
{"id": "GAO-18-500", "url": "https://www.gao.gov/products/GAO-18-500", "title": "Consumer Protection: Gender-Related Price Differences for Goods and Services", "published_date": "2018-08-09T00:00:00", "released_date": "2018-08-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Gender-related price differences occur when consumers are charged different prices for the same or similar goods and services because of factors related to gender. While variation in costs and consumer demand may give rise to such price differences, some policymakers have raised concerns that gender bias may also be a factor. While the Equal Credit Opportunity Act and Fair Housing Act prohibit discrimination based on sex in credit and housing transactions, no federal law prohibits businesses from charging consumers different prices for the same or similar goods targeted to different genders.", "GAO was asked to review gender-related price differences for consumer goods and services sold in the United States. This report examines, among other things, (1) how prices compared for selected goods and services marketed to men and women, and potential reasons for any price differences; (2) what is known about price differences for men and women for products not differentiated by gender, such as mortgages; and (3) the extent to which federal agencies have identified and addressed any concerns about gender-related price differences.", "To examine these issues, GAO analyzed retail price data, reviewed relevant academic studies, analyzed federal consumer complaint data, and interviewed federal agency officials, industry experts, and academics."]}, {"section_title": "What GAO Found", "paragraphs": ["Firms differentiate many consumer products to appeal separately to men and women by slightly altering product attributes like color or scent. Products differentiated by gender may sell for different prices if men and women have different demands or willingness to pay for these product attributes. Of 10 personal care product categories (e.g., deodorants and shaving products) that GAO analyzed, average retail prices paid were significantly higher for women's products than for men's in 5 categories. In 2 categories\u2014shaving gel and nondisposable razors\u2014men's versions sold at a significantly higher price. One category\u2014razor blades--had mixed results based on two price measures analyzed, and two others\u2014disposable razors and mass-market perfumes\u2014showed no significant gender price differences. GAO found that the target gender for a product is a significant factor contributing to price differences identified, but GAO did not have sufficient information to determine the extent to which these gender-related price differences were due to gender bias as opposed to other factors, such as different advertising costs. Though the analysis controlled for several observable product attributes, such as product size and packaging type, all underlying differences in costs and demand for products targeted to different genders could not be fully observed.", "Studies GAO reviewed found limited evidence of gender price differences for four products or services not differentiated by gender\u2014mortgages, small business credit, auto purchases, and auto repairs. For example, with regard to mortgages, women as a group paid higher average mortgage rates than men, in part due to weaker credit characteristics, such as lower average income. However, after controlling for borrower credit characteristics and other factors, three studies did not find statistically significant differences in borrowing costs between men and women, while one found women paid higher rates for certain subprime loans. In addition, one study found that female borrowers defaulted less frequently than male borrowers with similar credit characteristics, and the study suggested that women may pay higher mortgage rates than men relative to their default risk. While these studies controlled for factors other than gender that could affect borrowing costs, several lacked important data on certain borrower risk characteristics, such as credit scores, which could affect analysis of gender disparities. Also, several studies analyzed small samples of subprime loans that were originated in 2005 or earlier, which limits the generalizability of the results.", "In their oversight of federal antidiscrimination statutes, the Bureau of Consumer Financial Protection, Federal Trade Commission, and Department of Housing and Urban Development have identified limited consumer concerns based on gender-related pricing differences. GAO's analysis of complaint data received by the three agencies from 2012\u20132017 found that they had received limited consumer complaints about gender-related price differences. The agencies provide general consumer education resources on discrimination and consumer awareness. However, given the limited consumer concern, they have not identified a need to incorporate additional materials specific to gender-related price differences into their existing consumer education resources."]}], "report": [{"section_title": "Letter", "paragraphs": ["Gender-related price differences can occur when manufacturers  differentiate their products to appeal separately to female and male  consumers, such as with clothing, personal care products, toys, and other  consumer goods. In addition, businesses may offer different prices to  female and male consumers for services, such as dry cleaning or  haircuts, to account for different costs, different consumer preferences, or  other factors associated with providing services to different genders.  While manufacturing, marketing, or other cost differences may contribute  to gender-related price differences, some policymakers have raised  concerns that gender bias may play a role. Moreover, if female and male  consumers pay different prices for similar products that they purchase  frequently, such as personal care products, this could result in substantial  differences in expenditures by gender over time. A consumer\u2019s annual  spending on a product category can be significant, even when prices for  products within that category are low.", "You asked us to review gender-related price differences for goods and  services sold in the U.S. marketplace. This report examines (1) how  prices compared for selected categories of consumer goods that are  differentiated for men and women, and potential reasons for any  significant price differences; (2) what is known about the extent to which  men and women may pay different prices in, or experience different levels  of access to, markets for credit and goods and services that are not  differentiated based on gender; (3) the extent to which federal agencies  have identified and taken steps to address any concerns about gender- related price differences; and (4) state and local government efforts to  address concerns about gender-related price differences.", "To address our first objective, we purchased and analyzed Nielsen  Company (Nielsen) data on retail prices paid for 10 personal care product  categories for calendar year 2016. The product categories included  underarm deodorants, body deodorants, disposable razors,  nondisposable razors, razor blades, shaving creams, shaving gels, and  three categories of fragrances. We selected these categories because  they are commonly-purchased consumer goods that were categorized by  gender in the Nielsen data. The women\u2019s and men\u2019s versions of personal  care products we selected are generally more similar in terms of the form,  size, and packaging in comparison to certain other consumer product  categories that are also differentiated by gender, such as clothing. We  used regression models to analyze data on retail prices paid for 10  categories of personal care products differentiated for men and women.  We assessed the reliability of the Nielsen data by reviewing relevant  documentation and conducting interviews with Nielsen representatives to  review steps they took to collect and ensure the reliability of the data. In  addition, we electronically tested data fields for missing values, outliers,  and obvious errors. We determined that these data were sufficiently  reliable for our purposes. For more details on the methodology for, and  limitations of, our analysis of these retail price data, see appendix I.", "We also manually collected listed prices for 16 pairs of selected personal  care products from four different retailer websites over two 7-day periods  in January and March 2018. We selected comparable pairs of similar men\u2019s and women\u2019s products that were differentiated by product  attributes, such as scent or color, and were commonly sold across  retailers. We included product pairs from similar categories used in our  analysis of the Nielsen data. For more details on our online price data  collection and the limitations associated with interpreting the results, see  appendix II.", "To address our second objective, we identified and reviewed studies that  examined differences between the prices men and women paid for, or  their access to, consumer services and goods that are not differentiated  by gender\u2014specifically interest rates, pricing, or access for mortgages or  other loan types while controlling for the effects of factors other than  gender or sex. We also identified and reviewed three studies on  differences in price for autos and auto repair services. We found the  studies we reviewed to be reliable for purposes of determining what is  known about price differences for the same products, though several  studies analyzed nonrepresentative data samples, such as subprime  mortgage loans, and thus the results are not generalizable.", "For our third objective, we reviewed relevant federal antidiscrimination  statutes and agency documentation related to oversight and enforcement  of these statutes. To learn about the potential extent of consumer  concerns about price differences that could be based solely on gender or  sex, we analyzed federal data on consumer complaints and  investigations. We selected a random sample of gender-related consumer  complaints from three databases managed by the Bureau of Consumer  Financial Protection (BCFP), the Federal Trade Commission (FTC), and  the Department of Housing and Urban Development (HUD), respectively,  and counted the number of complaints alleging a perceived gender- related price difference. We assessed the reliability of these data by  reviewing documentation and interviewing agency officials about these  databases. We determined that these data were sufficiently reliable for  our purposes of identifying complaints of gender-related price differences.  In addition, we interviewed agency officials from BCFP, FTC, HUD, and  the Department of Justice (DOJ), as well as industry experts and  academics, on gender-related price differences.", "To address our fourth objective, we identified and reviewed three  examples of state and local laws that specifically address gender-related  price differences. We also interviewed officials from the state and  localities that had enacted these laws. See appendix III for more  information on our scope and methodology.", "We conducted this performance audit from October 2016 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Many consumer products\u2014such as deodorants, shaving products, and  hair care products\u2014are differentiated to appeal specifically to men or  women through differences in packaging, scent, or other product  characteristics (see fig. 1). These differences related to gender can affect  manufacturing and marketing costs that may contribute to price  differences in products targeted to different genders.", "However, firms may also charge consumers different prices for the same  (or very similar) goods and services even when there are no differences  in costs to produce. To maximize profits, firms use a variety of  techniques to charge prices close to the highest price different consumers  are willing to pay. Firms may attempt to get segments of the consumer  market to pay a higher price than another segment by slightly altering or  differentiating the product. Based on the differentiated products,  consumers self-select into different groups according to their preferences  and what they are willing to pay. For example, some consumer goods  have different versions of what is essentially the same product\u2014except  for differences in packaging or features, such as scent\u2014with one version  intended for women and another version intended for men. The two  products may be priced differently because the firm expects that one  gender will be willing to pay more for the product than the other based on  preference for certain product attributes.", "Firms may also use some group characteristic, such as age or gender, to  charge different prices because some groups may have differences in  willingness or ability to pay. For example, a firm may offer discounted  movie tickets to students or seniors, as they may have less disposable  income. For the seller the cost of providing the movie is the same for any  customer, but the seller is able to maximize its profits by offering tickets to  different groups of customers at different prices. A firm\u2019s ability to  differentiate prices depends on multiple factors, such as the firm\u2019s market  power (so that competitors cannot put downward pressure on prices to  eliminate the price differences), the presence of consumer segments with  different demands and willingness to pay, and control over the sale of its  product so it cannot be easily resold to exploit price differences.", "In addition, the extent to which consumers pay different prices for the  same or similar goods can depend on other factors, such as consumers\u2019: willingness to purchase an item they believe may be priced higher for ability to compare prices and product characteristics and choose a  product based on its characteristics rather than its price,  choices about whether to purchase a more expensive version of the  product (e.g., a branded item versus a cheaper store brand),  choices about where to purchase the item (i.e., when different  retailers sell the same item at different prices), and use of coupons or promotions.", "No federal law expressly prohibits businesses from charging different  prices for the same or similar consumer goods and services targeted to  men and women. However, consumer protection laws do prohibit sex  discrimination in credit and real estate transactions. Specifically, the  Equal Credit Opportunity Act (ECOA) prohibits creditors from  discriminating against credit applicants based on sex or certain other  characteristics and the Fair Housing Act (FHA) prohibits discrimination in  the housing market on the basis of sex or certain other characteristics.", "ECOA and FHA (collectively known as the fair lending laws) prohibit  lenders from, among other things, refusing to extend credit or using  different standards in determining to extend credit based on sex. Credit,  such as a credit card account or mortgage loan, is generally made  available and priced based on a number of risk factors, including credit  score, income, and employment history. A borrower with a lower credit  score is likely to pay a higher interest rate on a loan, reflecting the greater  risk to the lender that the borrower could default on the loan. In addition  to the interest rate, borrowing costs for consumers can also include fees  and other costs charged by lenders or brokers. However, there may be  differences in average outcomes for men and women\u2014such as for  availability of credit or interest rates\u2014if there are differences related to  gender in the factors that determine creditworthiness, such as income.", "BCFP, FTC, the federal prudential regulators, and DOJ have the authority  to investigate alleged violations of ECOA and are primarily responsible for  enforcing the act\u2019s requirements, while HUD and DOJ share responsibility  for enforcing the provisions of FHA. Further, BCFP and the prudential  regulators oversee regulated entities for compliance with ECOA by,  among other things, collecting complaints from the public and through  routine inspections of the financial institutions they oversee. HUD and  DOJ have the authority to bring enforcement actions for alleged violations  of FHA."], "subsections": []}, {"section_title": "Prices Differed Significantly for Selected Men\u2019s and Women\u2019s Personal Care Products, but We Could Not Attribute the Differences to Bias as Opposed to Other Factors", "paragraphs": ["In 5 out of 10 product categories we analyzed, personal care products  targeted to women sold at higher average prices than those targeted to  men after controlling for certain observable factors. For 2 of the 10  product categories, men\u2019s versions sold at higher average prices. While  the factors we controlled for likely proxy for various costs and consumer  preferences, we could not fully observe all underlying differences in costs  and demand for products targeted to different genders. As a result, we  could not determine the extent to which the gender-based price  differences we observed may be attributed to gender bias as opposed to  other factors."], "subsections": [{"section_title": "For 5 of 10 Product Categories Analyzed, Women\u2019s Products Sold at Higher Average Prices Than Men\u2019s after Controlling for Some Observable Factors", "paragraphs": ["Women\u2019s versions of personal care products sold at a statistically  significant higher average price than men\u2019s versions for 5 of the 10  personal care product categories we analyzed\u2014using two different price  measures and after controlling for observable factors that could affect  price, such as brands, product size or quantity, promotional expenses  (see table 1) and other product-specific attributes (e.g., scent, special  claims, form). Because women\u2019s and men\u2019s versions of the same  product were frequently sold in different sizes, we compared prices using  two price measures: average item price and average price per ounce or  count of product. For 2 of the 10 product categories\u2014shaving gel and  nondisposable razors\u2014men\u2019s versions sold at a statistically significant  higher price using both price measures. For one category (razor blades),  women\u2019s versions sold at a statistically significant higher average price  per count, but there was no gender price difference using average item  prices. Additionally, for two product categories\u2014disposable razors and  mass-market perfumes\u2014there were no statistically significant price  differences between men\u2019s and women\u2019s products using either price  measure.", "In addition to this analysis of retail price scanner data, we also manually  collected advertised online prices for a limited selection of personal care  products targeted to women and men from several online retailers.  Some price comparisons of advertised online prices for men\u2019s and  women\u2019s versions of a product were similar to comparisons of average  prices paid based on the Nielsen retail price scanner data. For example,  for three pairs of comparable underarm deodorants, the women\u2019s  deodorant was listed at a higher price per ounce on average than the  men\u2019s deodorant (see app. II). In addition, for one pair of shaving gel  products we analyzed, the men\u2019s shaving gel was listed at a higher price  per ounce on average. However, for both pairs of nondisposable razors  we analyzed, the women\u2019s razors were listed at a higher average price  per count than the men\u2019s razors. This contrasted with the Nielsen data  showing that men\u2019s nondisposable razors sold at higher prices on  average than women\u2019s. An important limitation of our analysis of these  advertised prices is that we were unable to determine the extent to which  consumers actually paid these prices and in what volume the products  were sold, and our results are not generalizable to the broader universe  of prices for these products sold at other times or by other online retailers."], "subsections": []}, {"section_title": "We Could Not Determine the Extent to Which Price Differences May Be Due to Market Factors as Opposed to Gender Bias", "paragraphs": ["Though we found that the target gender for a product is a significant  factor contributing to price differences we identified, we do not have  sufficient information to determine the extent to which these gender- related price differences were due to gender bias as opposed to other  factors. Versions differentiated to appeal to men and women can result in  different costs for the manufacturer. Our econometric analysis controlled  for many observable factors related to costs, such as product size,  promotional activity, and packaging type. We also controlled for many  product attributes such as forms, scents, and special claims that products  make to account for underlying manufacturing cost differences. In  addition, we controlled for brands, which can reflect consumer  preferences. However, we do not have firm-level data on all cost  differences\u2014for example, those related to advertising and packaging. As  a result, we could not determine the extent to which the price differences  we observed may be explained by remaining cost differences between  men\u2019s and women\u2019s products.", "We also do not have the data to determine the extent to which men and  women have different demands and willingness to pay for a product,  which would be expected to affect the prices firms charge for  differentiated products. For example, some academic experts we spoke with said that women may value some product attributes, such as design  and scent, more than men do. If products differentiated to incorporate  those attributes do not result in different costs, then differences in prices  could be part of a firm\u2019s pricing strategy based on the willingness of one  gender to pay more than another.", "The conditions necessary for firms to be able to implement a strategy of  price differentiation likely exist for the personal care products we  analyzed. First, our analysis suggests that due to industry  concentration, there is limited market competition for the 10 personal care  products we analyzed. With more market power, firms can more easily  set different prices for different consumer segments. Second, firms have  the ability to segment the market for personal care products by tailoring  product characteristics related to gender, such as by labeling the product  as women\u2019s deodorant or men\u2019s deodorant, or by altering scent or colors.  Third, while men and women are able to freely purchase a product  targeted to the opposite gender, certain factors may limit the extent to  which this occurs. For example, some product differences such as  scents may discourage one gender from buying products targeted to  another gender. In addition, consumers may find it difficult and time- consuming to compare prices for similar men\u2019s and women\u2019s products  because of the ways they are differentiated (such as product size and  scents) and because they may be sold in different parts of a store."], "subsections": []}]}, {"section_title": "Studies We Reviewed Found Limited Evidence of Price Differences for Men and Women for Mortgages, Small Business Credit, and Auto Purchases", "paragraphs": ["We reviewed studies that compared prices for men and women in four  markets where the product or service is not differentiated by gender:  mortgages, small business credit, auto purchases, and auto repairs.  First, we reviewed studies on mortgage and small business credit that  analyzed interest rates and access to credit to identify any differences for  men and women. Second, we reviewed studies that compared prices  quoted to men and women in auto purchase and repair markets.  However, several of these studies have important limitations, such as  using nonrepresentative data samples, and the results are not  generalizable."], "subsections": [{"section_title": "Studies on Mortgages Found Mixed Evidence of Disparities in Borrowing Costs between Men and Women", "paragraphs": ["Studies we reviewed found that women as a group pay higher interest  rates on average than men in part due to weaker credit characteristics.  After controlling for borrower credit characteristics and other factors, three  studies did not find statistically significant differences in interest rates  between men and women for the same type of mortgage, while one study  found that women paid higher mortgage rates for certain subprime loans.  In addition, one study found that female borrowers defaulted less  frequently on their loans than male borrowers with similar credit  characteristics, suggesting that women as a group may pay higher  mortgage rates than men relative to their default risk. While these studies  attempted to control for factors other than gender or sex that could affect  borrowing costs, several lacked important data on certain borrower risk  characteristics. For example, several studies we reviewed rely on Home  Mortgage Disclosure Act of 1975 (HMDA) data, which did not include data  on risk factors such as borrower credit scores that could affect analysis of  disparities between men and women. Also, several studies analyzed  nonrepresentative samples of loans, such as subprime loans or loans  originated more than 10 years ago, which limits the generalizability of the  results (see table 2).", "Three of the studies we reviewed found that while women on average  were charged higher interest rates on mortgage loans than men, this  difference was not statistically significant after controlling for other factors.  For example, one study found that differences in mortgage interest rates  between men and women became insignificant after controlling for  differences in how men and women shop for mortgage rates. The  authors used data from the 2004 Survey of Consumer Finances (SCF) to  analyze the effect on interest rates of mortgage features, borrower  characteristics such as gender, and market conditions. However, their  analysis did not include data on some borrower credit characteristics such  as credit score and debt-to-income ratio that could affect borrowing  costs. Another study found that women were charged higher interest  rates for subprime loans made in 2005, but once the authors controlled  for observed risk characteristics there was no evidence of disparity in  interest rates by gender of the borrower in the subprime market.", "However, the authors\u2019 data did not include any fees paid at loan  origination, which could affect the overall cost of borrowing. A third study  that examined disparities between men and women in subprime loans  found no significant evidence that gender affected the cost of borrowing  within the subprime market, though it did find that women\u2014particularly  African American women\u2014were more likely to have subprime loans.  The authors found that, even after controlling for some financial  characteristics and loan terms, single African American women were  more likely than non-Hispanic white couples to have subprime loans.", "One study analyzed subprime loans made by one large lender from 2003  through 2005 and found that women paid more for subprime mortgages  than men after controlling for some risk factors. This study found that  women had higher average borrowing costs\u2014as measured by annual  percentage rate\u2014than men, and controlling for credit characteristics such  as credit scores and debt-to-income ratios did not fully explain the  differences. However, the authors did not control for other factors that  could also affect borrowing costs, such as differences in education,  shopping behaviors, and geographic location.", "Additionally, a research paper found that female-only borrowers\u2014that is,  where the only borrower is a woman\u2014default less than male-only  borrowers with similar loans and credit characteristics. The authors  found that female-only borrowers on average pay more for their mortgage  loans because they generally have weaker credit characteristics, such as  lower income, and also because a higher percentage of these mortgage  loans are subprime. However, after controlling for credit characteristics  such as credit score, loan term, and loan-to-value ratio, among others,  the analysis showed that these weaker credit characteristics do not  accurately predict how well women pay their mortgage loans. Since  pricing is tied to credit characteristics and not performance, women may  pay more relative to their actual risk than do similar men."], "subsections": []}, {"section_title": "Studies on Small Business Credit Did Not Identify Gender Differences in Borrowing Costs but Found Mixed Evidence of Differences for Access to Credit", "paragraphs": ["Studies we reviewed on small business loans generally did not find  differences in interest rates, though some found differences in denial  rates and other accessibility issues between female- and male-owned  firms. Most of the studies we reviewed used data from the 1993, 1998,  or 2003 Survey of Small Business Finances (SSBF), which could limit the  applicability or relevance of their findings today. A study that analyzed  data from the 1993 SSBF did not find evidence that businesses owned by  women paid more for credit than firms owned by white men. However,  when the authors took into account the market concentration and  competition, they found that white female-owned firms experienced  increased denial rates in less competitive markets. In addition, the study  found that women may avoid applying for credit in those markets because  of the fear of being denied. For example, almost half of all small business  owners who needed credit reported that they did not apply for credit, and  these rates were even higher for businesses owned by women and  minorities.", "Other studies found that women may have less access to small business  credit than men, in part because of higher denial rates and because they  may not apply for credit out of fear of rejection. For example, one study  found that women-owned firms have higher loan denial rates compared  with men; however, this is mainly due to differences in business  characteristics of female- and male-owned firms. The authors also  found that even when denial rates are the same for small businesses with  similar characteristics, women\u2019s loan application rates are lower,  suggesting that women may be discouraged from applying for credit by  the higher overall denial rates for female-owned firms. Another study by  one of the same authors examined the reasons why female borrowers  may be discouraged from applying for a business loan compared to male  business owners and found that it was mainly because they fear that their  application will be rejected. A third study by the same author found that  women in general did not have less access to credit than men, though  newer female-owned firms received significantly lower loan amounts than  requested compared to their male-owned counterparts. Similarly, the  study also found that women with few years of experience managing or  owning a business received significantly lower loan amounts compared  with men with similar years of experience. A fourth study looked at six  different types of loans, including lines of credit, and found that white  women were significantly more likely than white men to avoid applying for  a loan because they assume they would be denied.  However, once the  authors\u2019 model controlled for education differences, all gender disparities  in applying for credit disappeared, though white women were still less  likely than white men to have loans."], "subsections": []}, {"section_title": "Studies Found That Men and Women Paid or Were Quoted Different Prices for Auto Purchases and Auto Repairs", "paragraphs": ["Studies we reviewed on auto purchases and repairs found that a seller\u2019s  expectation of what customers are willing to pay and how informed they  seemed can differ by gender, which can affect the price customers are  quoted. However, these studies were published in 1995 and 2001, which  may limit the applicability or relevance of their findings today. The 2001  study we reviewed on auto purchases found that though women paid  higher prices than men for car purchases on average, these differences  declined when cars were purchased online. The authors suggest that  this may be because Internet consumers can effectively convey their level  of price knowledge and therefore may seem better informed to the sellers.  They also suggest it could be because the dealerships have less  information about online consumers and their willingness to pay, which  may limit the extent of price differentiation. The 1995 study on auto  purchases found that the dealers quoted significantly lower prices to white  males than to female or African American test buyers using identical,  scripted bargaining strategies in part because dealers may have made  assumptions about women\u2019s willingness to bargain for lower prices.", "We also reviewed one study on auto repairs that found that women were  quoted higher prices than men if they seemed uninformed about the cost  of car repair when requesting a quote, but the price differences  disappeared if the study participant mentioned an expected price. The  study suggests that a potential explanation for this result could be that  auto repair shops expect women to accept a price that is higher than the  market average and men to accept a price below it."], "subsections": []}]}, {"section_title": "Federal Agencies Have Identified Limited or No Consumer Concerns about Price Differences Based on Sex or Gender", "paragraphs": [], "subsections": [{"section_title": "Federal Agencies Monitor Consumer Complaints and Identified Limited Examples of Concerns of Price Differences Based on the Consumer\u2019s Sex or Gender", "paragraphs": ["BCFP and HUD have responsibilities to monitor consumer complaints in  the consumer credit and housing markets, respectively. Additionally,  FTC monitors complaints about the consumer credit and consumer goods  markets. All three agencies play a role in potentially monitoring or  addressing issues of gender-related price differences and have online  complaint forms for submission of consumer complaints:", "BCFP collects and reviews consumer complaints about financial  products and services and provides complaints and related data in its  Consumer Complaint Database. In 2017 BCFP received  approximately 320,200 consumer complaints. The products that  generated the most complaints in 2017 were \u201cCredit or consumer  reporting,\u201d \u201cDebt collection,\u201d and \u201cMortgage.\" According to BCFP  officials, BCFP also analyzes loan and demographics data collected  through HMDA and other data sources to monitor and identify market  trends. In addition, BCFP and the federal financial regulators examine  fair lending practices of the institutions they regulate, and these  examinations have uncovered sex discrimination in credit products by  FDIC and NCUA.", "FTC receives complaints and the complaints are stored in the  Consumer Sentinel Network, a database of consumer complaints  received by FTC, as well as those filed with other federal and state  agencies and organizations, such as mass marketing fraud  complaints from the Council of Better Business Bureaus. The  complaints in the Consumer Sentinel Network focus on consumer  fraud, identity theft, and other consumer protection matters, such as  debt collection, and can include complaints related to consumer credit  markets.", "HUD receives consumer complaints about potential FHA violations  through its website, via its toll-free phone hotline, and in writing. HUD  monitors those complaints through its online HUD Enforcement  Management System. HUD investigates all complaints for which it has  jurisdictional authority. HUD may monitor complaints to identify trends,  but HUD officials stated that the agency does not generally monitor  consumer credit and housing market data, absent a specific  complaint. In cases where HUD has jurisdictional authority under  FHA, HUD offers conciliation between the parties. If resolution is not  reached, and HUD determines there is reasonable cause to believe a  violation has occurred, the parties may elect to have the matter heard  in U.S. District Court or at HUD.", "In their oversight of federal antidiscrimination statutes, BCFP officials said  they have not identified significant consumer concerns about price  differences based on a consumer\u2019s sex or gender. FTC and HUD officials  identified some examples of concerns of this nature. For example, FTC  has taken enforcement actions alleging unlawful race- and gender-related  price differences. HUD has also identified several cases where pregnant  women and their partners applied for a mortgage while the woman was  on maternity leave, and the couple\u2019s mortgage loan application was  denied."], "subsections": []}, {"section_title": "Our Analysis of Federal Agency Data Identified Few Consumer Complaints about Price Differences Based on Sex or Gender", "paragraphs": ["BCFP, FTC, and HUD have received few consumer complaints about  price differences related to sex or gender, according to our analysis of a  sample of each agency\u2019s 2012\u20132017 complaint data (see table 3). In  separate samples of 100 gender-related complaints at BCFP, HUD, and  FTC, we found that 0, 4, and 1 complaint, respectively, were related to  price differences based on sex or gender. Three of the complaints from  HUD also cited differences in price based on other protected classes  (such as race or ethnicity).", "Half of the academic experts and consumer groups we interviewed told  us that in some markets it is difficult for consumers to observe and  compare prices paid by other consumers, such as when prices are not  posted or can be negotiated (e.g., car sales). In such cases, consumers  may not know if other consumers are paying a higher or lower price than  the price quoted to them. Most academic experts also told us that when  consumers are aware that price differences could exist, they may make  different decisions when making purchases. Additionally, officials from  BCFP noted that price differences related to gender may be difficult for  consumers to identify, or that consumers may not know where to  complain."], "subsections": []}, {"section_title": "Agencies Provide Resources on Discrimination and Have Not Developed Other Consumer Education Efforts on Gender in Part Due to Limited Public Complaints", "paragraphs": ["The consumer education resources of BCFP, FTC, and HUD provide  general consumer education resources on discrimination (i.e., consumer  user guide or a website) and consumer awareness. Officials from BCFP  and HUD said they have not identified a need to develop other consumer  education resources specific to gender-related price differences. For  example, BCFP\u2019s print and online consumer education materials are  intended to inform consumers of their rights and protections related to  credit discrimination, which includes discrimination based on sex or  gender. The three agencies\u2019 consumer education materials also provide  advice that could help consumers avoid paying higher prices regardless  of their gender\u2014such as home-buying resources and resources on  comparison shopping. However, the agencies have not developed  additional educational resources focused specifically on potential gender- related price differences in part because few complaints on this topic  have been collected in their databases, agency officials told us. FTC  officials noted that it tries to focus its education efforts on topics that will  have the greatest benefit to consumers, often determined by information it  gathers through complaints and investigations.", "Representatives of five consumer groups and industry associations told  us that they have received few complaints about gender-related price  differences. However, four consumer groups noted that low concern could  be the result of consumers being unaware of price differences related to  gender. For example, as indicated above, price differences related to  gender may be difficult for consumers to identify when they cannot  determine whether they are paying a higher price than others.  Representatives of two retailing industry associations similarly stated that  they have not heard concerns about price differences related to gender."], "subsections": []}]}, {"section_title": "Some State and Local Governments Have Passed Laws to Address Concerns about Gender-related Price Differences", "paragraphs": ["In response to consumer complaints or concerns about gender disparities  in pricing, at least one state (California) and two municipalities (Miami- Dade County and New York City) have passed laws or ordinances to  prohibit businesses from charging different prices for the same or similar  goods or services solely based on gender (see table 4). In addition, two  of these laws included requirements related to promoting price  transparency. California enacted the Gender Tax Repeal Act of 1995,  which prohibits businesses from charging different prices for the same or  similar services based on a consumer\u2019s gender. The law also requires  certain businesses to display price information and disclose prices upon  request, according to state officials with whom we spoke. Similarly, in  1997, Miami-Dade County passed the Gender Pricing Ordinance, which  prohibits businesses from charging different prices based solely on a  consumer\u2019s gender (though businesses are permitted to charge different  prices if the goods or services involve more time, difficulty, or cost). In the  same year, it also passed an ordinance that prohibits dry cleaning  businesses from charging different prices for similar services based on  gender. This ordinance also requires those businesses to post all prices  on a clear and conspicuous sign, according to county officials with whom  we spoke.", "State and local officials we interviewed identified benefits and challenges  associated with these laws. For example, California, New York City, and  Miami-Dade County officials noted that these laws give them the ability to  intervene to address pricing practices that may lead to discrimination  based on gender. In addition, California state officials said that the state\u2019s  efforts to implement the Gender Tax Repeal Act helped to improve  consumer awareness about gender price differences. However, officials  from California and Miami-Dade County cited challenges associated with  tracking relevant complaints. For example, Miami-Dade County\u2019s online  complaint form includes a narrative section but does not ask for the  complainant\u2019s gender. Consumers do not always identify their gender in  the narrative or state that that was the reason for their treatment.", "Additionally, officials from California and Miami-Dade County stated that  seeking out violations would be very resource-intensive, and they rely on  residents to submit complaints about violations."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to BCFP, DOJ, FTC, and HUD. BCFP,  FTC, and HUD provided technical comments on the report draft, which  we incorporated where appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, BCFP, DOJ, FTC, HUD, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or cackleya@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Nielsen Retail Price Data Analysis Methodology", "paragraphs": ["We used a multivariate regression model to estimate the effect of gender  (to which a product is targeted to) on the price of that product while  controlling for other factors that may also affect the product\u2019s price. The  factors that we controlled for were the product size, promotional and  packaging costs, and other product characteristics discussed in detail  later. We used scanner data from the Nielsen Company (Nielsen) for  calendar year 2016 and analyzed the following 10 product categories: (1)  underarm deodorants, (2) body deodorants, (3) shaving cream, (4)  shaving gel, (5) disposable razors, (6) nondisposable razors, (7) razor  blades, (8) designer perfumes, (9) mass-market perfumes, and (10)  mass-market body sprays. We estimated the following regression model  for each of our 10 product categories:  P=\u03b1+\u03b2*Male + \u03bb* Size + \u03b8*Owner +\u03b7*Promotion+ \u03bc*X + \u03b4*Y + \u03b5  The dependent variable P in the above equation represents price. For our  analysis, we constructed two measures of price. The first is the item price,  estimated as the total dollar sales of an item (each item is depicted by a  unique Universal Product Code (UPC) in the Nielsen data), divided by the  total units sold of that item. The second measure of price that we use is  price per ounce or price per count. This is estimated as the item price  divided by the total quantity of product, where quantity or size depicts the  number of ounces (as in the case of fragrances) or the count of blades in  razor blade packs. The total quantity of the product is the ounces or  counts of one item multiplied by the number of items included in a specific  product configuration. For example, a 2-pack of deodorant sticks where  each deodorant stick is 2.7 ounces would be a total quantity of 5.4  ounces.", "The variable Male in the above equation is an indicator variable depicting  whether the product is designated as a \u201cmen\u2019s\u201d product in the Nielsen  data. It is represented as a value of \u201c1\u201d for men\u2019s products and a value of  \u201c0\u201d for women\u2019s products. The co-efficient for this variable, parameter \u03b2,  would therefore show the price difference between a men\u2019s and women\u2019s  product. A negative value would imply a lower price for products  designated as men\u2019s products.", "The variable Size represents the most appropriate specification of the  size of the product.", "Owner is a set of indicator variables representing all the brand owners  selling a particular product. The brand of a product can be expected to  have a substantial effect on prices for the kind of products we analyze  because brands can be a proxy for quality for some consumers. However,  we also found that firms often create gender-specific brands, so holding  brands constant rendered most gender-based price comparisons  infeasible. To overcome this, we hold owners instead of brands constant  for our price comparison analysis.", "The variable Promotion represents the percentage of dollar sales that  were sold on any type of promotion. This variable proxies for promotional  costs to some extent based on the assumption that the greater the  proportion of sales due to promotional activity, the greater the promotional  costs.", "The variables X represent a set of indicator variables for packaging  characteristics such as package delivery method (for example, roll-on or  aerosol spray deodorants) or package shape (for example, bottle, tube, or  can). We expect these characteristics to proxy for different costs  associated with different packaging methods.", "The variables Y represent a set of indicator variables representing  different product characteristics (for example, forms such as gel stick or  smooth solid and claims such as \u201cactive cooling\u201d or \u201canti-wetness\u201d for  underarm deodorants, and blade types such as \u201ctriple edge\u201d and \u201cflexible  six\u201d for razors). These product characteristics may proxy for some  underlying manufacturing costs or even consumer preferences. Since  firms may create gender-specific product attributes\u2014scents like \u201csweet  petals\u201d and \u201cpure sport\u201d or razor head types and colors to differentiate  products between genders\u2014we did not always keep every product  attribute constant when comparing prices. The idiosyncratic error term is  represented by \u03b5.", "All of our regressions are weighted, with the proportion of units sold for a  particular item in that year as the weight. This is because, for personal  care products, there are large differences in units sold of various product  types and brands, and therefore it not useful to compare simple un- weighted average prices. For example, for one company the highest  selling men\u2019s deodorant stick sold almost 12 million units in 2016, and the  highest selling women\u2019s deodorant stick sold over 8 million units. The  average units sold for underarm deodorants as a whole was just over  300,000 units, and 1,000 products out of a total of almost 3,000 products  had less than 100 units sold in 2016.", "The linear model we used has the usual shortcomings of being subject to  specification bias to the extent the relationship between price and each of  the independent variables is not linear. The model also does not include  complete data on costs, such as advertising and packaging, or  consumers\u2019 willingness to pay, both of which have an effect on the price  differences. The model may thus also be subject to omitted variable bias.  In addition, the model may have some endogeneity issues to the extent  the product characteristics themselves are influenced by consumers\u2019  willingness to pay for some of those product features. To reduce the  impact of any model misspecifications or heteroscedasticity, we used the  robust (or Huber-White sandwich) estimator.", "We estimated the regression model above for each of the 10 products  separately and for each of the two measures of price. We used Nielsen\u2019s  in-store, retail price scanner data, which include information on total  volume sold and dollar sales for items purchased at 228 retailers  including grocery stores, drug stores, mass merchandisers (such as  Target), dollar stores, club stores (such as Sam\u2019s Club), and convenience  stores. The data capture 82 percent of all U.S. sales. Nielsen also  projects sales for the remaining noncooperating retailers, and that  information is included in this dataset. We excluded some very small  brands that did not have enough units sold from our regression analysis  in order to avoid outliers. These brands usually had less than 50,000 units  sold over the entire year, and for some products they represented less  than 1 percent of all units sold. We found that average retail prices paid  were significantly higher for women\u2019s products than for men\u2019s in 5 out of  10 personal care products. In 2 categories, men\u2019s versions sold at a  significantly higher price. One category had mixed results based on two  price measures analyzed, and two others showed no significant gender  price differences. A summary of our regression results is presented in  table 5."], "subsections": []}, {"section_title": "Appendix II: Collection of Online Prices for Selected Personal Care Products", "paragraphs": ["We manually collected prices for 16 pairs of selected personal care  products from the websites of four online retailers that also operated  physical store locations. We selected comparable pairs of similar men\u2019s  and women\u2019s products that were differentiated by product attributes, such  as scent or color, and were sold at most or all of the four retailers. The  products were selected based on several comparability factors such as  brand, product claims, and number of blades in a razor. For two 1-week  time periods in January and March 2018, we collected prices manually  between 1:00 p.m. and 7:00 p.m. (ET) over two 7-day time periods. We  collected listed prices and did not adjust the prices for any promotions  that were available, such as online coupons or buy-one-get-one-free  offers.", "Table 6 presents the results of our online price collection. These results  have important limitations:", "The average prices shown are not generalizable to the broader  universe of prices for these products sold at other times or by other  online retailers.", "The data reflect prices advertised to consumers rather than the prices  consumers actually paid.", "The data do not capture the volume of sales for each item for each  retailer; in our analysis, we weighted all advertised prices equally  across the retailers. As a result, differences we found within these  advertised prices may not have translated into comparable differences  in prices female and male consumers paid for these products online.", "The prices do not reflect any promotional discounts, volume  discounts, or other discounts that may have been available to some or  all consumers."], "subsections": []}, {"section_title": "Appendix III: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how prices compared for selected categories of  consumer goods that are differentiated for men and women, and potential  reasons for any significant price differences; (2) what is known about the  extent to which men and women may pay different prices in, or  experience different levels of access to, markets for credit and goods and  services that are not differentiated based on gender; (3) the extent to  which federal agencies have identified and taken steps to address any  concerns about gender-related price differences; and (4) state and local  government efforts to address concerns about gender-related price  differences.", "To compare prices for selected goods that are differentiated for men and  women, we purchased and analyzed Nielsen Company (Nielsen) data on  retail prices paid for 10 personal care product categories for calendar  year 2016. The product categories included underarm deodorants, body  deodorants (typically sold as a spray), disposable razors, nondisposable  razors, razor blades, shaving creams, shaving gels, and three categories  of fragrances. We selected these categories of personal care products  because they are commonly purchased consumer goods that were  categorized by gender in the Nielsen data. The women\u2019s and men\u2019s  versions of personal care products we selected are generally more similar  in terms of the form, size, and packaging in comparison to certain other  consumer product categories that are also differentiated by gender, such  as clothing. We used regression models to analyze data on retail prices  paid for the 10 categories of personal care products differentiated for  women and men. To assess the reliability of the Nielsen data, we  reviewed relevant documentation and conducted interviews with Nielsen  representatives to review steps they took to collect and ensure the  reliability of the data. In addition, we electronically tested data fields for  missing values, outliers, and obvious errors. We determined that these  data were sufficiently reliable for our purposes. For more details on the  methodology for, and limitations of, our analysis of these retail price data,  see appendix I.", "We also manually collected listed prices for 16 pairs of selected personal  care products from four different retailer websites over two 7-day periods  in January and March 2018. For each pair, we selected comparable  men\u2019s and women\u2019s products that were differentiated by product  attributes, such as scent or color, and were commonly sold across  retailers. For more details on our online price data collection and the  limitations associated with interpreting the results, see appendix II.", "To examine what is known about the extent to which men and women  may be offered different prices or access for the same goods or services,  we reviewed academic literature identified through a literature search  covering the last 25 years. To identify existing studies from peer-reviewed  journals, we conducted searches using subject and keyword searches of  various databases, such as EconLit, Scopus, ProQuest, and Social  SciSearch. We also used a snowball search technique\u2014meaning we  reviewed relevant academic literature cited in our selected studies\u2014to  identify additional studies. We performed these searches and identified  articles from December 2016 to April 2018. From these searches, we  identified 21 studies that appeared in peer-reviewed journals or research  institutions\u2019 publications from 1995 through 2016 and were relevant to  gender-related price differences for the same products. We reviewed and  assessed each study\u2019s evaluation methodology based on generally  accepted social science standards. See the bibliography at the end of this  report for a list of the 21 studies.", "We then summarized the research findings. A GAO economist read and  assessed each study, using the same data collection instrument. The  assessment focused on information such as the types of disparities  examined, the research design and data sources used, and methods of  data analysis. The assessment also focused on the quality of the data  used in the studies as reported by the researchers and any limitations of  data sources for the purposes for which they were used. A second GAO  economist reviewed each completed data collection instrument to verify  the accuracy of the information included. As a result, the 21 studies that  we selected for our review met our criteria for methodological quality. We  found the studies we reviewed to be reliable for purposes of determining  what is known about price differences for the same products. However,  these studies have important limitations, such as using nonrepresentative  data samples, and the results are not generalizable.", "To examine the federal role in overseeing gender-related price  differences, we reviewed relevant federal statutes and agency guidance,  and interviewed officials from the Federal Trade Commission (FTC),  Bureau of Consumer Financial Protection (BCFP), the Department of  Housing and Urban Development (HUD), and the Department of Justice  (DOJ). To help identify the extent of concerns about gender-related price  differences, we interviewed representatives from eight consumer groups,  three industry associations, and four academic experts. Additionally, we  reviewed a sample of consumer complaints from databases managed by  BCFP, FTC, and HUD (Consumer Complaint Database, Consumer  Sentinel Network, and Enforcement Management System, respectively).  Complaints were submitted by consumers across the United States about  various financial products, housing grievances, and other consumer  protection concerns.", "To identify our universe of gender-related consumer complaints in BCFP  and FTC databases, we used the following search terms that targeted sex  or gender discrimination: discriminat, unfair, treat, decept, abus, female,  woman, women, man, men, male, gender, sex, female, woman, women,  man, men, male, gender, and sex. HUD\u2019s consumer complaint database  is categorized by protected class (e.g., race, sex, national origin), so we  did not need to use search terms to identify gender-related complaints.", "For the years 2012 through 2017, we identified 6,117 BCFP consumer  complaint narratives; 10,472 FTC consumer complaints narratives; and  5,421 HUD consumer complaint narratives that were relevant to our  scope. We then drew a stratified random probability sample of 100  gender-related consumer complaints from each database. To determine  which complaints in our samples were about price differences related to  gender or sex, two team members read through each complaint narrative  and coded whether or not the complainant\u2019s narrative indicated that they  felt that they paid or were charged more because of their gender or sex. A  third team member conducted a final review of the results, and made a  final determination in cases where there were differences in the first two  team member\u2019s assessments.", "With this probability sample, each member of the study population had a  nonzero probability of being included, and that probability could be  computed for any member. We followed a probability procedure based on  random selections and our sample is only one of a large number of  samples that we might have drawn. Since each sample could have  provided different estimates, we express our confidence in the precision  of our particular sample\u2019s results as a 95 percent confidence interval (with  a margin of error of 5.9 percent). This is the interval that would contain  the actual population value for 95 percent of the samples we could have  drawn. We assessed the reliability of these data by reviewing  documentation and interviewing agency officials about the databases  used to collect these complaints. We determined that these data were  sufficiently reliable for our purposes of identifying complaints of gender- related price differences.", "To explore state and local efforts to address concerns about gender- related price differences, we conducted a literature search and identified  three state or local laws or ordinances that specifically address gender- related price differences: California, Miami-Dade County, Florida, and  New York City, New York. We reviewed these laws and ordinances and  interviewed officials from these jurisdictions to discuss motivations for,  oversight of, and the impact of these laws.", "We conducted this performance audit from October 2016 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix IV: Descriptive Statistics of Nielsen Retail Price Data", "paragraphs": ["For each of 10 personal care product categories we analyzed, we  compared the overall average prices for women\u2019s products and men\u2019s  products using two measures of average price: average item price and  average price per ounce or count. While the second price measure  adjusts the average price for quantity of product, these comparisons did  not take into account the effect on price of differences in product brand,  packaging, and other characteristics.", "As shown in table 7, adjusting the average item price to account for  differences in product quantity (ounces or count) significantly affected the  size and magnitude of gender price differences for several product  categories. This is because men\u2019s products in the dataset were  frequently larger in size or count compared with women\u2019s products in the  same category. For example, women\u2019s disposable razors sold for 11  percent less than those targeted to men when we compared average item  prices. However, when we compared average price per count of razors,  women\u2019s disposable razors sold for 19 percent more on average than  men\u2019s. This is because women\u2019s disposable razors had on average about  one fewer razor per package. In 5 out of 10 product categories, women\u2019s  versions of the product on average sold for a higher price per ounce or  count than men\u2019s and these differences were statistically significant at the  95 percent confidence level for 4 products and at the 90 percent level for  one product.", "Information about sales and relative sizes of different products targeted to  men and women are presented in table 8 below."], "subsections": []}, {"section_title": "Appendix V: Selected Federal Agency Consumer Complaint Processes", "paragraphs": ["This appendix provides additional details about the consumer complaint  processes at the Bureau of Consumer Financial Protection (BCFP),  Federal Trade Commission (FTC), and Department of Housing and Urban  Development (HUD). Consumers with a complaint about unfair treatment  related to gender could submit a complaint to one of these agencies.  BCFP and FTC monitor consumer complaints related to violations under  the Equal Credit Opportunity Act, while HUD and the Department of  Justice (DOJ) investigate housing discrimination complaints under the  Fair Housing Act. These complaints could be about price differences  because of gender."], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Alicia Puente Cackley, (202) 512-8678 or cackleya@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, John Fisher (Assistant Director),  Jeff Harner (Analyst in Charge), Vida Awumey, Bethany Benitez, Namita  Bhatia-Sabharwal, Kelsey Kreider, and Kelsey Sagawa made key  contributions to this report. Also contributing to this report were Abigail  Brown, Michael Hoffman, Jill Lacey, Oliver Richard, Tovah Rom, and Paul  Schmidt."], "subsections": []}]}, {"section_title": "Appendix VII: Bibliography", "paragraphs": ["We reviewed literature to identify what is known about the extent to which  female and male consumers may face different prices or access in  markets for credit and goods and services that are not differentiated  based on gender. This bibliography contains citations for the 20 studies  and articles that we reviewed that compared prices or access for female  and male consumers in markets where the product is not differentiated by  gender (mortgages, small business credit, auto purchases, and auto  repairs).", "Asiedu, Elizabeth, James A. Freeman, and Akwasi Nti-Addae. \u201cAccess to  Credit by Small Businesses: How Relevant Are Race, Ethnicity, and  Gender?\u201d The American Economic Review, vol. 102, no. 3 (2012): 532- 537.", "Ayers, Ian and Peter Siegelman. \u201cRace and Gender Discrimination in  Bargaining for a New Car.\u201d The American Economic Review, vol. 85, no.  3. (1995): 304-321.", "Blanchard, Lloyd, Bo Zhaob, and John Yinger. \u201cDo lenders discriminate  against minority and woman entrepreneurs?\u201d Journal of Urban Economics  63 (2008): 467\u2013497.", "Blanchflower, David G., Phillip B. Levine, and David J. Zimmerman.  \u201cDiscrimination in the Small-Business Credit Market.\u201d The Review of  Economics and Statistics, vol. 85, no. 4 (2003): 930-943.", "Busse, Meghan R., Ayelet Israeli, and Florian Zettelmeyer. \u201cRepairing the  Damage: The Effect of Price Expectations on Auto Repair Price Quotes.\u201d  National Bureau of Economic Research, Working Paper 19154 (2013).", "Cavalluzzo, Ken S., Linda C. Cavalluzzo, and John D. Wolken.  \u201cCompetition, Small Business Financing, and Discrimination: Evidence  from a New Survey.\u201d The Journal of Business, vol. 75, no. 4 (2002): 641- 679.", "Cheng, Ping, Zhenguo Lin, and Yingchun Liu. \u201cDo Women Pay More for  Mortgages?\u201d The Journal of Real Estate Finance and Economics, vol. 43  (2011): 423-440.", "Cheng, Ping, Zhenguo Lin, and Yingchun Liu. \u201cRacial Discrepancy in  Mortgage Interest Rates.\u201d The Journal of Real Estate Finance and  Economics, vol. 51 (2015): 101-120.", "Cole, Rebel, and Tatyana Sokolyk. \u201cWho Needs Credit and Who Gets  Credit? Evidence from the Surveys of Small Business Finances\u201d. Journal  of Financial Stability, vol. 24 (2016), 40-60.", "Coleman, Susan. \u201cAccess to Debt Capital for Women- and Minority- Owned Small Firms: Does Educational Attainment Have an Impact?\u201d  Journal of Developmental Entrepreneurship, vol. 9, no. 2 (2004): 127-143.", "Duesterhas, Megan, Liz Grauerholz, Rebecca Weichsel, and Nicholas A.  Guittar. \u201cThe Cost of Doing Femininity: Gendered Disparities in Pricing of  Personal Care Products and Services,\u201d Gender Issues, vol. 28, (2011):  175-191.", "Goodman, Laurie, Jun Zhu, and Bing Bai. \u201cWomen Are Better than Men  at Paying Their Mortgages.\u201d Urban Institute, Research Report (2016).", "Haughwout, Andrew, et al. \u201cSubprime Mortgage Pricing: The Impact of  Race, Ethnicity, and Gender on the Cost of Borrowing.\u201d Brookings- Wharton Papers on Urban Affairs (2009): 33-63.", "Mijid, Naranchimeg. \u201cGender differences in Type 1 credit rationing of  small businesses in the US.\u201d Cogent Economics & Finance, vol. 3 (2015).", "Mijid, Naranchimeg. \u201cWhy are female small business owners in the United  States less likely to apply for bank loans than their male counterparts?\u201d  Journal of Small Business & Entrepreneurship, vol. 27, no. 2 (2015): 229- 249.", "Mijid, Naranchimeg and Alexandra Bernasek. \u201cGender and the credit  rationing of small businesses.\u201d The Social Science Journal, vol. 50  (2013): 55-65.", "Morton, Fiona Scott, Florian Zettelmeyer, and Jorge Silva-Risso.  \u201cConsumer Information and Price Discrimination: Does the Internet Affect  the Pricing of New Cars to Women and Minorities?\u201d National Bureau of  Economic Research, Working Paper 8668 (2001).", "O\u2019Connor, Sally. \u201cThe Impact of Gender in the Mortgage Credit Market.\u201d  University of Wisconsin-Milwaukee Doctoral Dissertation (1996).", "Van Rensselaer, Kristy N., et al. \u201cMortgage Pricing and Gender: A Study  of New Century Financial Corporation.\u201d Academy of Accounting and  Financial Studies Journal, vol. 18, no. 4 (2014): 95-110.", "Wyly, Elvin and C.S. Ponder. \u201cGender, age, and race in subprime  America.\u201d Housing Policy Debate, vol. 21, no. 4 (2011): 529-564.", "Zimmerman Treichel, Monica and Jonathan A. Scott. \u201cWomen-Owned  Businesses and Access to Bank Credit: Evidence from Three Surveys  Since 1987.\u201d Venture Capital, vol. 8, no. 1 (2006): 51-67."], "subsections": []}], "fastfact": ["Do women pay more than men for similar consumer products, giving rise to what some call a \u201cPink Tax\u201d? After controlling for product size and other factors, prices for half of the personal care items we looked at are higher for women, including deodorants and fragrances. Some men's items cost more, such as razors.", "Whether the price differences are due to gender bias is unclear. Ad costs and consumer preferences also affect pricing. No federal law prevents firms from charging different prices for men's and women's products.", "Three federal agencies that oversee antidiscrimination laws received few consumer complaints about gender bias in pricing."]}
{"id": "GAO-18-343", "url": "https://www.gao.gov/products/GAO-18-343", "title": "Immigration Detention: Opportunities Exist to Improve Cost Estimates", "published_date": "2018-04-18T00:00:00", "released_date": "2018-04-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In fiscal year 2017, ICE operated on a budget of nearly $3 billion to manage the U.S. immigration detention system, which houses foreign nationals whose immigration cases are pending or who have been ordered removed from the country. In recent years, ICE has consistently had to reprogram and transfer millions of dollars into, out of, and within its account used to fund its detention system. The explanatory statement accompanying the DHS Appropriations Act, 2017, includes a provision for GAO to review ICE's methodologies for determining detention resource requirements. This report examines (1) how ICE formulates its budget request for detention resources, (2) how ICE develops bed rates and determines ADP for use in its budget process, and (3) to what extent ICE's methods for estimating detention costs follow best practices. GAO analyzed ICE's budget documents, including CBJs, for fiscal years 2014 to 2018, examined ICE's models for projecting ADP and bed rates, and evaluated ICE's cost estimating process against best practices."]}, {"section_title": "What GAO Found", "paragraphs": ["U.S. Immigration and Customs Enforcement (ICE) formulates its budget request for detention resources based on guidance from the Office of Management and Budget and the Department of Homeland Security (DHS). To project its detention costs, ICE primarily relies on two variables\u2014the average dollar amount to house one adult detainee for one day (bed rate) and the average daily population (ADP) of detainees.", "U.S. Immigration and Customs Enforcement's (ICE) Formula to Calculate Detention Costs", "GAO found a number of inconsistencies and errors in ICE's calculations for its congressional budget justifications (CBJs). For example, in its fiscal year 2015 budget request, ICE made an error that resulted in an underestimation of $129 million for immigration detention expenses. While ICE officials stated their budget documents undergo multiple reviews to ensure accuracy, ICE was not able to provide documentation of such reviews. Without a documented review process for reviewing the accuracy of its budget request, ICE is not positioned to ensure the credibility of its budget requests.", "ICE has models to project the adult bed rate and ADP for purposes of determining its budget requests. However, ICE consistently underestimated the actual bed rate due to inaccuracies in the model, and it is unclear if the ADP used in the budget justification is based on statistical analysis. GAO identified factors in ICE's bed rate model\u2014such as how it accounts for inflation and double counts certain costs\u2014that may lead to its inaccurate bed rate projections. For example, in fiscal year 2016, ICE's projections underestimated the actual bed rate by $5.42 per day. For illustrative purposes, underestimating the bed rate by $5 per day, assuming an ADP of 34,000, yields a more than $62 million underestimation in the detention budget request. By assessing its methodology and addressing identified inaccuracies, ICE could ensure a more accurate estimate of its actual bed rate cost. Additionally, ICE reported that the ADP projections in its CBJs are based on policy decisions that account, for example, for anticipated policies that could affect the number of ICE's detainees. While ICE's projected ADP may account for policy decisions, documenting the methodology and rationale by which it determined the projected ADP would help demonstrate how the number was determined and that it was based on sound assumptions.", "ICE's methods for estimating detention costs do not fully meet the four characteristics of a reliable cost estimate, as outlined in GAO's Cost Estimating and Assessment Guide . For example, while ICE's fiscal year 2018 detention cost estimate substantially met the comprehensive characteristic, it partially met the well-documented and accurate characteristics, and minimally met the credible characteristic. By taking steps to fully reflect cost estimating best practices, ICE could better ensure a more reliable budget request."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Director of ICE: (1) document and implement its review process to ensure accuracy in its budget documents; (2) assess ICE's adult bed rate methodology; (3) update ICE's adult bed rate methodology; (4) document the methodology and rationale behind the ADP projection used in budget requests; and (5) take steps to ensure that ICE's detention cost estimate more fully addresses best practices. DHS concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Homeland Security\u2019s (DHS) U.S. Immigration and  Customs Enforcement (ICE), through its Enforcement and Removal  Operations (ERO) directorate, manages the nation\u2019s immigration  detention system, which houses foreign nationals detained while their  immigration cases are pending or after being ordered removed from the  country. ICE requested $2.2 billion for fiscal year 2017 to operate the  immigration detention system. The DHS Appropriations Act, 2017,  provided nearly $2.6 billion, around $380 million over the request, and  ICE reprogrammed funds ultimately amounting to approximately $2.97  billion to fund the system during fiscal year 2017. The explanatory  statement accompanying DHS\u2019s fiscal year 2017 appropriation states \u201cfor  the past several years, the agency\u2019s forecast for the required number of  detention beds and its cost estimates have resulted in budget requests  that missed the mark by wide margins.\u201d In recent years, ICE has  reprogrammed and transferred millions of dollars within, into, and out of  the Custody Operations account to adjust for differences in funds  provided versus actual costs of immigration detention as well as changes  in immigration enforcement policy and migration patterns, among other  factors. For example, in fiscal year 2015, ICE transferred $111.3 million  out of the Custody Operations account; and in fiscal year 2016, ICE  transferred and reprogrammed an additional $50.8 million for immigration  detention purposes.", "To determine its immigration detention costs, ICE primarily relies on two  variables\u2014the average dollar amount required to house one adult  detainee for one day (bed rate) and the average daily population (ADP) of  detainees. According to ICE, changes in policy may also have an impact  on anticipated immigration detention cost estimates. For example,  executive orders on border security and immigration enforcement issued  in January 2017 led ICE officials to anticipate an increase in the  population of detained individuals. ICE\u2019s fiscal year 2018 budget  justification reflected this expectation, increasing the projected ADP by 49  percent over the fiscal year 2016 actual ADP and increasing the budget  request to $3.6 billion for immigration detention\u2014more than $1 billion  over the fiscal year 2017 appropriation.", "The explanatory statement accompanying the DHS Appropriations Act,  2017, includes a provision for us to review ICE\u2019s current methodologies  for determining immigration detention resource requirements, including  how it estimates the ADP, and ICE\u2019s efforts to improve the accuracy of its  cost estimates and projections. This report examines (1) how ICE  formulates its budget request for detention resources, (2) how ICE  develops bed rates and determines ADP for use in its budget process,  and (3) to what extent ICE\u2019s methods for estimating detention costs follow  GAO best practices.", "To describe and assess how ICE formulates its budget request for  detention resources, we analyzed ICE\u2019s congressional budget  justifications, budget calculations, and supporting documentation from  fiscal year 2014 through fiscal year 2018. Focusing on detention cost  information during this time period allowed us to examine four years of  data, as well as the data used to create the fiscal year 2018 budget  request and cost estimate. Since ICE had not yet received an  appropriation for fiscal year 2018 during the time of our review, we could  not assess ICE\u2019s budget projection compared to actual costs for fiscal  year 2018. We interviewed ICE and DHS officials to understand the steps  in ICE\u2019s budget process and the calculations and methodology used  within the budget requests. We also evaluated ICE\u2019s process against  Office of Management and Budget (OMB) and DHS guidance for  formulating budget requests, and Standards for Internal Control in the  Federal Government.", "To describe and assess how ICE develops bed rates and determines the  ADP for use in its budget process, we examined ICE\u2019s models for  calculating and projecting bed rates and for tracking and forecasting ADP.  We assessed the reliability of ICE\u2019s data used to calculate bed rate costs  and ADP by reviewing the data used within the bed rate and ADP models  and interviewing officials responsible for overseeing the models, and  found the data sufficiently reliable for the purposes of this report. We also  interviewed ICE and DHS officials to better understand how they calculate  the bed rate and ADP variables, including the methodology they use and  what factors they account for. We then compared ICE\u2019s projected bed  rates and ADP from fiscal year 2014 through fiscal year 2017 to the  actual bed rates and ADP to assess the accuracy of ICE\u2019s estimates. We  examined the bed rate model to determine whether the formulas used  were appropriate for their application and that all variables were correct to  create an accurate bed rate. After examining the formulas in the model,  we recreated the bed rate model using the appropriate formulas,  formulated a bed rate using the appropriate calculations, and then utilized  ICE\u2019s projected ADP to derive a cost estimate for detention beds. In  addition, a GAO statistician evaluated ICE\u2019s ADP model to identify its  strengths and weaknesses, described how ICE may apply the model, and  assessed its practical forecasting value for the budget request  justification. Finally, we evaluated ICE\u2019s methodology for projecting the  bed rate and ADP against OMB\u2019s Circular A-11 and DHS\u2019s Resource  Planning Guidance for determining and applying a proper inflation rate,  accepted practices for statistical modeling, and federal internal control  standards, as well as GAO\u2019s Cost Estimating and Assessment Guide.", "To assess the extent to which ICE\u2019s methods for estimating detention  costs follow best practices, we evaluated ICE\u2019s process for developing its  immigration detention cost estimates, specifically the most recent budget  request, against GAO\u2019s best practices for cost estimation. We examined  ICE\u2019s fiscal year 2018 congressional budget justification and supporting  documentation and interviewed agency officials to understand how ICE  formulated its fiscal year 2018 estimate for immigration detention  resources. We compared our findings to the 12 best practices detailed in  GAO\u2019s Cost Estimating and Assessment Guide. Based on documentation  provided by ICE, a GAO analyst assessed ICE\u2019s estimate for detention  costs for each of the 12 best practices. For our reporting needs, we  collapsed these best practices into four general characteristics for sound  cost estimating, which include: well documented, comprehensive,  accurate, and credible. The assessment of each characteristic was  based on an average of ICE\u2019s scores for the best practices included in  that category. A second analyst verified the assessment and then  management reviewed the results.", "We conducted this performance audit from May 2017 to March 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federal Budget Process and Relevant ICE Entities", "paragraphs": ["The federal budget process provides the means for the President and  Congress to make informed decisions between competing national needs  and policies, to allocate resources among federal agencies, and ensure  laws are executed according to established priorities. OMB, as part of  the Executive Office of the President, is to guide the annual budget  process, make decisions on executive agencies\u2019 budgets, aggregate  submissions for agencies, and submit the consolidated document for the  executive branch as the President\u2019s Budget Request to Congress. In  support of the President\u2019s budget request, departments are to submit  budget justifications to the congressional appropriations committees,  typically to explain the key changes between the current appropriation  and the amounts requested for the next fiscal year. During the process,  OMB is to ensure that budget requests are consistent with presidential  objectives and issue guidance to federal agencies through OMB Circular  A-11, which provides instructions for submitting budget data and  materials, as well as for developing budget justifications.", "Various offices within ICE are involved in developing ICE\u2019s annual budget  request for immigration detention (see fig. 1). Two ICE entities integral to  the budget request formulation are the Office of Budget and Program  Performance (OBPP) and Enforcement and Removal Operations (ERO).  Within ICE\u2019s Office of the Chief Financial Officer, OBPP is responsible for  guiding ICE\u2019s annual budget request process, including analyzing and  validating budget projections for all of ICE\u2019s directorates, including ERO.  ERO is responsible for estimating the total amount of funding to cover  costs of immigration detention. For the upcoming budget year, ERO  determines the projected ADP, while OBPP determines the projected bed  rate. ERO then utilizes the two variables of bed rate and ADP in its  estimate of future detention costs. Other offices within ICE, such as  Custody Management, Field Operations, Operations Support,  Management and Administration, and the Office of Policy are involved in  the formulation of other aspects of ICE\u2019s budget or in supervisory roles.  Figure 1 is an organizational chart of ICE offices that are involved in the  annual budget request for immigration detention resources."], "subsections": []}]}, {"section_title": "ICE Formulates Its Budget Request According to DHS Guidance, But Does Not Have a Documented Review Process to Ensure Accuracy of Budget Calculations", "paragraphs": [], "subsections": [{"section_title": "ICE Follows DHS Guidance and Uses Key Variables to Formulate its Budget Request", "paragraphs": ["ICE follows budget formulation guidance from DHS, and uses two key  variables\u2014the bed rate and ADP\u2014when formulating its budget request.  Approximately 20 months before the start of a particular fiscal year, the  Secretary of Homeland Security provides its Resource Planning  Guidance to all DHS components. This document works to align the  department\u2019s planning, programming, and budgeting activities and  execution activities over a five-year period, and sets forth the resource  planning priorities of the department as they relate to its mission. The  department planning priorities are to guide the DHS components as they  develop their respective Resource Allocation Plans (RAP). After the  Secretary issues the Resource Planning Guidance, DHS\u2019s Office of the  Chief Financial Officer provides fiscal guidance to ICE that identifies an  estimated allocation amount, which ICE is to budget to in its RAP  submission.", "In developing its RAP, each of ICE\u2019s program offices determines its  current budget needs and then submits Program Decision Options (PDO)  to ICE leadership for any changes from the prior year\u2019s budget. Every ICE  program and activity submits, in the form of a PDO, any changes that are  to occur, including all programmatic increases, initiatives, reductions, or  eliminations. Once all of the program offices submit their PDOs to ICE  leadership, a council of leadership representatives from across ICE  convenes to approve and prioritize the selected PDOs moving forward to  DHS.", "ICE submits its RAP to DHS for a final decision with all pertinent  information attached, such as the prioritized PDOs based on mission and  department needs, fiscal changes to programs, and potential capital  investments. During the Resource Allocation Decision (RAD) process,  DHS leadership reviews all of the RAP submissions from across the  department and approves or rejects the PDOs. Individual program offices  work out any changes that may have occurred during the RAD process  prior to the completion of the budget request and submission to OMB.", "DHS then submits a budget proposal on behalf of the entire department,  inclusive of ICE, to OMB. OMB is to prepare a budget request for all of  the executive departments and agencies, which is submitted to Congress  as the President\u2019s budget. Following OMB decisions on agency budget  requests, DHS submits a budget justification, inclusive of ICE, with more  details to the congressional appropriations committees. Key steps in the  overall process are shown in figure 2.", "When preparing the budget submission, ICE uses two key variables, the  bed rate and ADP (see sidebar), to calculate a cost estimate for the  resources needed for managing the immigration detention system. In  order to determine the amount necessary to operate the detention system  for adult detainees, ICE multiplies the projected ADP by the projected bed  rate by the number of days in the year (see fig. 3). ICE then includes  these costs as part of its Custody Operations account."], "subsections": []}, {"section_title": "ICE Does Not Have a Documented Review Process to Ensure the Accuracy of Budget Calculations", "paragraphs": ["ICE does not have a documented review process to ensure the accuracy  of its budget calculations presented in its yearly congressional budget  justifications (CBJ). Based on our review of CBJs from fiscal year 2014 to  fiscal year 2018, there are a number of inconsistencies and errors in the  numerical calculations pertaining to immigration detention costs. During  our review of ICE\u2019s fiscal year 2014 and fiscal year 2015 budget requests,  we calculated the total amounts requested for ICE\u2019s immigration detention  costs using its formula (see fig. 3) and the ADP and bed rate figures  provided in the budget request and compared it with ICE\u2019s requested  amount. Based on our calculations, the amounts ICE requested are not  consistent (by a difference of $34.7 million for fiscal year 2014 and $129  million for fiscal year 2015) with the figures used to develop their  estimate. ICE officials acknowledged the error.", "Additionally, ICE\u2019s fiscal year 2017 budget request erroneously applied $2  million in costs from detention beds to transportation and removal,  resulting in a request for $2 million less for detention beds and $2 million  more for transportation and removal, a total of $4 million in errors in the  agency\u2019s estimate. In response to the misapplication of $2 million, ICE  officials stated that the CBJ still provided for the same net total because  the two mistakes offset each other. Officials also stated that the final  appropriation ultimately was not based on its budget request numbers  and ICE\u2019s detention activities were funded at an amount that was greater  than what they requested. The fiscal year 2018 request also contains a  multiplication error that resulted in ICE requesting less funds\u2014$4,000\u2014 than using the correct calculation.", "ICE officials told us that there are multiple reviews of the budget  documents prior to submission to ensure that the numbers presented are  accurate and supportable. However, ICE could not provide us with any  documentation that the reviews were conducted. ICE officials stated that  reviews were typically completed using hard copies and then approval  was verbal and not documented formally. Standards for Internal Control  in the Federal Government states that management should design control  activities to achieve objectives and respond to risks. Such activities  include review processes to ensure the accuracy of budget calculations  prior to official submission and appropriate documentation of the reviews.", "While the final appropriations that Congress determines for ICE may  ultimately be higher or lower than what ICE requested, generating and  presenting an accurate picture of ICE\u2019s funding needs is necessary to  provide Congress the information needed to make informed decisions. By  developing and implementing a documented review process, it is more  likely that relevant ICE officials are accountable for ensuring the accuracy  of the budget requests and underlying calculations. Without a  documented review process, ICE is not positioned to demonstrate the  credibility of its budget requests. Furthermore, Congress may not have  reliable information to make informed decisions about funding immigration  detention needs."], "subsections": []}]}, {"section_title": "ICE Has Models for Developing Bed Rates and ADP But Could Improve Projections", "paragraphs": [], "subsections": [{"section_title": "ICE Uses Historical Costs to Develop its Projected Bed Rates But Underestimated Actual Bed Rates from Fiscal Years 2014 through 2017", "paragraphs": ["Bed Rate  ICE\u2019s bed rate is based on four cost  categories.  Bed/guard costs: The contract costs of beds  and guards at U.S. Immigration and Customs  Enforcement\u2019s (ICE) various detention  facilities.  Health care: Medical expenses of the  detainee population.  Other direct costs: All costs that directly  concern detainees, including payments to  detainees for work programs, provisions and  supplies for detainees, and  telecommunications billed to individual  facilities.  Service-wide or indirect costs: Overhead  expenses for ICE\u2019s management of the  detention system, including rent, security,  office equipment, and liability insurance.", "Although ICE bases its projected adult bed rate on historical costs, from  fiscal year 2014 through fiscal year 2017, ICE underestimated the actual  rate. ICE calculates the adult bed rate by tracking obligations and  expenditures in four categories\u2014bed/guard costs, health care, other  direct costs, and service-wide costs, also known as indirect costs. (See  sidebar for more information.) We found that ICE has improved its  process for collecting this information from its financial management   system since 2014, when we previously reported that limitations in its  data system required ICE personnel to manually enter codes to  categorize relevant data. In fiscal year 2014, ICE introduced a new  financial coding process that allows staff to pull costs\u2014the obligations  and expenditures\u2014directly from its financial management system. This  system is an improvement over the manual workarounds that ICE  previously used and allows staff to pull the necessary data more easily for  the purposes of calculating the projected bed rate.", "To estimate what ICE\u2019s projected adult bed rate will be two years into the  future, ICE calculates and averages the year-over-year percentage  change in costs since fiscal year 2009 and multiplies the current bed rate  by this figure twice, following the formula outlined in figure 4.", "ICE calculates the year-over-year percentage change for each cost  category\u2014bed/guard costs, health care, other direct costs, and service- wide costs\u2014and then applies the average of these changes to the current  cost of the category. The final projected bed rate is the sum of the four  cost categories. According to ICE, the average of the year-over-year  percentage change serves as its inflation rate and more accurately  reflects the annual escalation of its detention costs. Given that ICE must  determine the projected bed rate almost two years into the future, ICE  applies its inflation rate twice to the current costs.", "Although the formula outlined in figure 4 summarizes ICE\u2019s adult bed rate  methodology, ICE\u2019s guidance notes that situations may occur in which it  is advisable to adjust national bed rate projections to account for new  trends or other changes. For example, in response to concerns from  Congress about ICE\u2019s application of indirect costs, and the opportunity to  revise the fiscal year 2017 bed rate, ICE officials told us they changed  some of the methodology for the projected 2017 and 2018 bed rates.", "Although ICE\u2019s bed rate model is based on historical costs, from fiscal  year 2014 through fiscal year 2017 ICE\u2019s adult bed rate projections  underestimated the actual bed rate. Specifically, ICE underestimated the  bed rate by $2.16 in fiscal year 2014, by $8.08 in fiscal year 2015, by  $5.42 in fiscal year 2016, and by $0.31 in fiscal year 2017 (see fig. 5).  For illustrative purposes, underestimating the bed rate by $5 per day,  assuming an ADP of 34,000, yields a more than $62 million  underestimation in the detention budget request.", "The bed rate model assumes that operations in the immigration detention  system will continue without drastic changes and that past trends will  continue since it bases its projections on historical costs. According to  ICE officials, the bed rate model cannot anticipate a need to increase the  capacity of the entire system, or anticipate a policy decision to close or  continue operation of a facility. Either of these situations may cause the  bed rate to change.", "Although certain situations may lead to unanticipated changes in the bed  rate, we identified a number of factors in ICE\u2019s current bed rate model  that have led to inaccuracies, including using incorrect inflation factors  and mixing costs for family and adult facilities.", "ICE calculates the projected bed rate by using its own inflation rate based  on the escalation of detention costs instead of a standard inflation rate  provided by OMB or DHS, but did not provide documentation of its  rationale. As described previously, ICE\u2019s inflation factor is based on an  average of the year-over-year changes in costs since fiscal year 2009.  OMB guidance states that it will provide agencies with economic  assumptions to be used for budget requests, including inflation rates, and  that agencies can consider price changes, such as bed/guard costs, as a  factor in developing estimates. ICE officials told us that historical costs  more accurately reflect potential increases, but did not provide us with  documentation to support that rationale. According to ICE officials, by  accepting the inflation factor used in ICE\u2019s budget request, OMB has  given tacit, if not direct, approval for its usage.", "Based on our review of ICE\u2019s adult bed rate projections, historical costs  may not be the best method for predicting future costs and assumes that  past trends will continue, including negative inflation rates. Because the  bed rate model accounts for changes on a per person basis, negative  inflation factors could be due to decreasing costs or an increasing  detainee population, both of which may change in the following year. For  example, ICE\u2019s fiscal year 2018 bed rate model incorporates a negative  inflation factor for health care costs even though in its budget justification  ICE attributes part of the bed rate increase over the prior year to rising  health care costs. Relying on historical costs may lead to inaccuracies if a  deflationary trend does not continue as the model assumes.", "In our examination of the bed rate model, we also found that ICE did not  calculate the percentage change correctly. Year-over-year percentage  change compares the difference in costs in percentage terms and can be  calculated by dividing the difference in costs by the starting costs. Instead  of following this formula, ICE\u2019s bed rate model calculated the actual  monetary difference between the two years and represented it as a  percentage change. For example, from fiscal year 2009 to fiscal year  2010, the bed/guard rate increased from $77.50 to $81.59. Whereas the  percentage change in the rate is 5.28 percent, ICE calculated the  percentage change by subtracting one rate from the other ($4.09) and  adding a percent sign (4.09%), thereby treating the dollar difference as a  percentage change. (See table 1.)", "ICE officials stated that they decided to use the actual monetary  difference as a way to account for inflation for the fiscal year 2018 adult  bed rate. However, using the actual monetary difference in costs does not  provide a percentage of change. It misrepresents a difference in price as  a percentage. Further, we found that because ICE did not appropriately  calculate the percentage change for each year, the average of year-over- year changes, which ICE uses as its inflation factor, is not correct. For  example, ICE\u2019s inflation factor for the bed/guard rate is 2.74 percent,  while the appropriate calculation is 3.28 percent. (See table 1.) (See  Appendix I for more information and calculations.)", "In addition, when calculating the fiscal year 2018 projected bed rate,  rather than following formulas contained in the bed rate model, ICE  manually entered a different inflation factor for two cost categories\u2014other  direct costs and service-wide costs\u2014instead of relying on the historical  data. ICE added together the inflation factors indicated by the model for  other direct costs and service-wide costs and then applied the combined  inflation factor to both categories. By combining and manually entering  the factors, ICE mistakenly introduced an additional error. Officials did  not provide an explanation or documentation of why they manually  entered these numbers or combined the two inflation factors except to  state that it stemmed from the Congressional request to separate the  costs.", "ICE\u2019s adult bed rate model includes information for family facilities, even  though family facilities are budgeted separately and in a different manner  from adult facilities. For its adult facilities, ICE contracts with the individual  facilities to provide beds and the cost is dependent on the number of  adults detained. ICE\u2019s family detention facilities, however, are operated  by local governments or private companies and are funded through fixed  price contracts that are not dependent on the number of people detained.  (See sidebar for more information.)", "While ICE budgeted $291.4 million for its family facilities in fiscal year  2018, our analysis showed that ICE also included the population in its  family facilities in the calculations of the adult bed rate. For example, in  fiscal year 2018, ICE divided the obligations and expenditures for health  care, other direct costs, and service-wide costs across the entire detainee  population of adults and families, resulting in an adult bed rate that was  lower than if the costs were divided by the adult population alone. Using  this underestimated bed rate has resulted in a lower cost estimate than  what ICE may need to sustain its adult population.", "Additionally, ICE double-counted some costs by budgeting for family  facilities in both the adult bed rate and the total cost for family facilities.  Specifically, we found that ICE included \u201cother direct costs\u201d associated  with its family facilities when calculating its adult bed rate. Given that ICE  already budgeted for these family facilities\u2019 costs as a line item within its  budget for family facilities, calculating the adult bed rate in this way  double-counts the costs for family facilities in the budget. ICE officials did  not provide documentation or their rationale for including the family  facilities in their adult bed rate model. (See Appendix I for more  information and calculations.)", "Standards for Internal Control in the Federal Government states that  management should use quality information to achieve objectives,  defining quality information as appropriate, current, complete, accessible,  and provided on a timely basis. Quality information is based on relevant  data from reliable sources and relatively free from error. According to GAO\u2019s Cost Estimating and Assessment Guide, having a realistic  estimate of projected costs facilitates effective resource allocation.  Because information requirements should consider the expectations of  external users, by basing its detention cost estimates on quality  information, ICE would help ensure they are useful to Congress for  making resource allocation decisions. Additionally, GAO\u2019s cost estimating  guide states that applying correct inflation rates is an important step to  ensure accurate cost estimates and that inflation assumptions should be  well documented.", "According to ICE officials, ICE\u2019s most substantial change to the bed rate  model since its creation in 2009 was a revision in 2014 to account for the  costs of family facilities. In our review, we found that ICE includes  information for family facilities in the adult bed rate model. By reviewing  its bed rate model and methodology and correcting identified inaccuracies  and other potential issues, ICE could improve its adult bed rate  projections and better ensure its funding requests are credible and  reliable."], "subsections": []}, {"section_title": "ICE Reported Using ADP Numbers Based on Policy Decisions to Calculate Budget Needs, But It Is Unclear How the ADP Figures Were Developed", "paragraphs": ["To calculate its budget needs, ICE reported using ADP figures that are  based on policy decisions, but it is unclear if the ADP figures were based  on statistical analysis. Further, ICE did not provide documentation on how  it calculated the final ADP numbers used in its budget requests. For  example, the fiscal year 2018 budget justification includes a projected  ADP of 48,879 adults, a 63 percent increase over the fiscal year 2017  projected adult ADP (29,953) and a 49 percent increase over the fiscal  year 2016 actual adult ADP (32,770). Although ICE provided a general  explanation of various factors that influence ADP, including policy  changes such as executive orders regarding immigration enforcement,  the agency did not provide documentation quantifying the effect of these  factors nor the calculations or methodology used to arrive at the 48,879  figure.", "In the absence of documentation, we reviewed ICE\u2019s CBJs from fiscal  year 2014 through fiscal year 2018 and we could not identify a clear  methodology that ICE used across the years for developing the ADP and  using it to calculate its detention-related budget needs. For example, in  the fiscal year 2018 CBJ, ICE did not independently determine the  projected ADP for use as an input into its cost estimate. Rather, officials  started with the prior year\u2019s funding level for detention costs, which  officials told us they were directed to do by OMB, and calculated the ADP  it could house with that amount. In the fiscal year 2017 budget  justification, ICE used its projected ADP numbers from the previous year  as starting points to calculate changes in its budget request. Additionally,  while the appropriations act for fiscal year 2014 included a proviso that  ICE\u2019s funding support at least 34,000 detention beds during the fiscal  year, ICE included a lower number of detention beds (30,539) in its 2015  budget request.", "According to ICE officials, the ADP figures used in its budget requests are  initially projected by ERO, but may be changed by ICE leadership, DHS  leadership, or OMB. Officials said the final ADP figure is based on policy  decisions that account for factors that could affect the detainee  population\u2014for example, delays in immigration courts or the number of  asylum officers on staff. According to officials, ICE prepares the budget  request two years in advance of the year of execution with the best  knowledge they have available at that time, including ADP projections.  Officials stated that ADP is difficult to estimate given the unpredictable  nature of events such as natural disasters, gang activity, or political  upheaval in another part of the world, which may lead to an unanticipated  increase in migration. Additionally, officials told us that various policy  developments across the administration, DHS, or other agencies may  affect immigration trends or enforcement. ICE officials also stated that  because immigration detention facilities may receive detainees from other  parts of the immigration system, ADP can be affected by actions taken by  other actors involved in immigration enforcement, such as the Executive  Office for Immigration Review, U.S. Customs and Border Protection, and  U.S. Citizenship and Immigration Services. Such events could include, for  example, delays in immigration court cases or an increase in the number  of asylum cases, which could increase ADP.", "When asked to provide documentation for the fiscal year 2018 ADP  projection of 51,379, ICE provided us a document containing tables and  justification that explained the factors that impact ADP, but did not provide  us the calculations or methodology used to arrive at the projected ADP.  While the ADP used in its budget requests may be developed based on  policy decisions, documenting the calculations and rationale by which the  figure was developed would help to demonstrate how the number was  determined and that it was based on sound decisions.", "Although ICE officials stated that ADP is difficult to forecast, the agency  has developed a statistical model that may help predict the ADP. ERO\u2019s  Law Enforcement Systems and  Analysis (LESA) Office has developed a  statistical model that uses population data directly pulled from ICE\u2019s  Enforcement Information Database to forecast the ADP in upcoming  years. (See sidebar for more information.) ERO began using the model  in 2014, and according to officials, ICE currently uses it to estimate how  much funding the agency will need for detention costs for the remainder  of the fiscal year. The model describes historical trends, seasonal  fluctuations, and random movement in the ADP, and then uses these  historical patterns to make forecasts. Based on our evaluation, we found  that this type of model was a reasonable method to forecast ADP, and  that LESA\u2019s particular modeling choices were generally consistent with  accepted statistical practices and appropriate for the data and application.", "Using LESA\u2019s model, ICE can produce a range of ADP forecasts under  different scenarios, as well as confidence intervals for any particular  forecast. Confidence intervals indicate the level of certainty around the  model\u2019s forecast, depending on how wide the range is for the ADP  forecast. Confidence in the model\u2019s forecasts decreases when the ADP  range is smaller and when forecasting for later time periods. Because the  model relies on historical data in making ADP forecasts, LESA is able to  incorporate separate analysis of external or unexpected events to help  inform the effects of similar events on ADP in the future. For example,  according to ICE officials, LESA can conduct ad hoc analysis outside of  the model of how potential policy decisions, such as a change in the  number of field officers, may affect future ADP, if a similar event occurred  in the past. Although new policies, processes, or political or economic  events may cause the dynamics of ICE\u2019s detainee population to change  in ways that historical data would not predict, incorporating this type of  model into ICE\u2019s process to project ADP could potentially help provide  useful and accurate forecasts in instances where ICE does have relevant  historical data. ICE officials stated that ICE has used the LESA model in  the past to inform the budget during the year of execution, but has only  recently used it to provide confidence intervals for the ADP inputs into the  budget projections when revising the projected fiscal year 2017 bed rate.", "According to GAO\u2019s Cost Estimating and Assessment Guide, having a  realistic estimate of projected costs facilitates effective resource  allocation. In addition, federal standards for internal control state that  management should design control activities to achieve objectives, and  as part of those control activities, management should clearly document  significant events in a manner that allows the documentation to be readily  available for examination. Without documenting the methodology or  rationale behind the ADP numbers ICE uses to develop its budget  request for immigration detention, Congress and other stakeholders do  not have clear visibility into the number upon which ICE is basing its  budget request. Additionally, by considering how or whether the LESA  model could be incorporated into ICE\u2019s process for projecting ADP, ICE  could leverage an existing model and identify potential improvements in  the accuracy of its ADP projections based on historical data."], "subsections": []}]}, {"section_title": "ICE Does Not Fully Meet GAO Best Practices For Estimating Detention Costs", "paragraphs": ["ICE\u2019s cost estimate for immigration detention resources does not fully  meet best practices outlined in GAO\u2019s Cost Estimating and Assessment  Guide. As described earlier, the characteristics of a reliable cost estimate  are comprehensive, well documented, accurate, and credible. As noted in  table 2, ICE\u2019s cost estimate for fiscal year 2018 substantially met the  comprehensive characteristic, partially met the well documented and  accurate characteristics, and minimally met the credible characteristic. By  not sufficiently meeting the best practices in all of the characteristics, the  cost estimate for the immigration detention cannot be considered reliable.", "Based on our analysis, ICE substantially met the comprehensive  characteristic by including all costs, but has double-counted certain costs,  as described earlier, and has not clearly documented all ground rules and  assumptions. Based on our analysis, ICE\u2019s cost estimate appears to  include all government and contractor labor costs as well as material,  equipment, facilities, and services to fund immigration detention,  accounting for both the salary and expenses categories of the budget.  ICE also adheres to DHS\u2019s Common Appropriations Structure, and  follows the OMB Object Class structure for planning and tracking costs at  a more granular level. Officials stated that they use past execution  reports, historical data, and spend plans to help inform the necessary  distribution of funding for immigration detention by project and object  code.", "While ICE accounted for all costs, ICE did not directly address how the  agency prevents omissions or double-counting in its cost estimate, and  double-counted costs by including other direct costs for family facilities  when estimating the cost to house adult detainees. Additionally, ICE did  not identify ground rules and assumptions influencing the estimate.  Officials said that several documents list ground rules and assumptions;  however, the ground rules cited are very broad or have not been followed.  For example, ICE guidance states that ICE shall fund sufficient detention  beds to support current enforcement and removal priorities and  mandatory detention requirements, but it does not provide a basis for  determining a sufficient number of detention beds. Another important  factor in determining the bed/guard rate for adult beds is tier utilization.  Tier utilization refers to the use of bed space in detention centers. For  example, at a given detention center, ICE may pay a lower rate if it  houses more detainees. When determining the bed rate based on tier  utilization, ICE did not provide documentation of the ground rules or  assumptions behind the tier utilization percentage used to calculate the  fiscal year 2018 bed rate. Finally, as noted earlier in this report, ICE has  not documented its rationale for not following DHS or OMB guidance for  applying inflation rates to the estimate.", "According to GAO\u2019s guide, given that cost estimates are based on limited  information, defining ground rules and assumptions is important because  they help identify the risks associated with these assumptions, including  how changes in the assumptions could influence cost. Without clear  documentation and rationale behind ground rules and assumptions, the  estimate will not be able to be reconstructed when the budget staff and  information used to develop the estimate are no longer available.", "Based on our analysis, ICE partially met the well documented  characteristic by showing that its cost estimate had been reviewed by  management and providing documentation that described its  methodology in general. However, ICE did not show the formulas used to  develop the cost estimate in sufficient detail to enable an outside party to  fully follow its calculations or to re-create the fiscal year 2018 bed rate.  Although the agency provided the bed rate model and showed what  numbers were used as inputs into the model to project the fiscal year  2018 bed rate, it did not provide documentation that described the  formulas used to calculate the projected bed rate. During our review of  the bed rate model, we had to reconstruct the calculations step-by-step to  identify the formulas and variables used to create the fiscal year 2018 bed  rate.", "Additionally, ICE officials provided conflicting explanations regarding how  they applied inflation to develop the projected fiscal year 2018 adult bed  rate. In one instance, ICE officials said that they applied a 2.66 percent  inflation factor to develop the fiscal year 2017 adult bed rate and then  calculated and applied a cost adjustment to add more than 8,800 new  beds, to produce the fiscal year 2018 bed rate. In another instance, ICE  officials stated that the inflation factor was adjusted to 3.73 percent  overall to develop the fiscal year 2017 bed rate and then they applied the  cost adjustment to develop the fiscal year 2018 projected bed rate. These  two explanations also differ from how the bed rate model applies inflation  as described earlier in this report. ICE also did not document how the cost  adjustment was calculated or the actual costs that the adjustment is  based upon.", "When asked about documentation, ICE officials stated that the budget  justification was not the appropriate document to cite detailed  methodologies, but did not provide any additional supporting  documentation. Documentation is essential for validating a cost estimate,  including demonstrating that it is a reliable estimate of future costs.  Consistent with GAO\u2019s guide, without a well documented cost estimate,  ICE is not positioned to present the estimate\u2019s validity or answer  questions about its basis. According to GAO\u2019s Cost Estimating and  Assessment Guide, estimates that lack sufficient documentation are not  useful for updates or information sharing and can hinder understanding  and proper use.", "Based on our analysis, ICE partially met the accurate characteristic by  basing the cost estimate on historical cost data and tracking the  differences between the projected and actual bed rate and ADP. ICE  officials stated that they utilized historical cost data for bed/guard contract  costs, health care costs, overhead expenses, detainee wages and  supplies, and detainee headcount and capacity utilization, among other  categories to estimate detention costs. However, ICE did not provide  evidence that it analyzes the reasons behind the variances between the  cost estimate and actual numbers for each year, and as mentioned  previously, we identified issues with the inflation rates used to project the  bed rate and the inclusion of family facilities in the adult bed rate.", "While ICE tracks differences between the projected bed rate used in the  cost estimate and the actual numbers for each fiscal year, officials did not  provide evidence that they analyze the reasons for these variances nor  that they use this information to reassess its assumptions or models and  improve them. ICE officials said that variances between the projected and  actual bed rates are documented in a quarterly report that is publicly  available. While these reports track the bed rate in the execution year,  they do not demonstrate that ICE tracks explanations for variances  between that bed rate and the original cost estimate figures presented in  the budget request. ICE provided a document that showed the bed rate  projection and the year-end result for fiscal years 2013 through 2016 and  quarter-end results for fiscal year 2017, but the document did not explain  most of the changes from the projected and actual numbers. ICE officials  also said that they conduct ad hoc analyses to identify and communicate  sources of variance, but did not provide any related documentation.", "Without a comparison and analysis of the reasons behind the differences  between the actual figures and the original estimates, ICE is not  positioned to assess the quality of its projections and use that information  to improve cost estimates. Tracking the forecast rate against the actual  rate and tracking budget justification assumptions against actual  conditions could offer insight into the quality of the forecasts, according to  GAO\u2019s cost estimating guide.", "Based on our analysis, ICE minimally met the credible characteristic, and  in particular did not conduct sensitivity or risk and uncertainty analyses to  capture the cumulative effects if variables change. ICE also did not  conduct any cross checks on the major cost elements using alternate  methods to estimate cost. A sensitivity analysis reveals how a change in  a single assumption, or variable, affects the cost estimate. A risk and  uncertainty analysis would provide ICE a clear level of confidence about  the estimate. ICE did not conduct a risk and uncertainty analysis for either  the fiscal year 2018 cost estimate or the fiscal year 2018 bed rate model.  Additionally, ICE\u2019s description of the LESA model to project ADP  discussed forecast confidence levels, but ICE did not quantify the  uncertainty around the ADP projection of 51,379 detainees used in the  fiscal year 2018 budget justification. ICE also did not discuss the range of  potential costs due to uncertainty in the ADP and bed rate projections.  Having a range of costs around a point estimate is useful to decision  makers because it conveys the level of confidence in achieving the most  likely cost.", "Additionally, ICE did not provide any documentation showing that major  cost elements were cross checked using a different method for  calculating the cost estimate to see if results were similar. According to  GAO\u2019s cost estimating guide, one way to reinforce the credibility of the  cost estimate is to determine whether applying a different method  produces similar results. If so, then confidence in the estimate increases,  leading to greater credibility. ICE officials stated that internal and external  auditors vetted the bed rate model and determined it to be credible, but  this does not constitute an estimate cross check and using an alternate  cost estimating method to cross check its estimate would provide greater  assurance of its credibility. As noted previously, we found ICE\u2019s bed rate  model underestimated the actual bed rates over several years.", "Unless all characteristics are met or substantially met, the cost estimate  cannot be considered reliable. Additionally, a poor cost estimate can  negatively affect a program by eventually requiring a transfer or  reprogramming of funds. In recent years, ICE has consistently transferred  and reprogrammed millions of dollars of funds to account for budgeting  too little or too much for immigration detention costs. By improving the  budget estimation to better reflect cost estimating best practices, ICE  could ensure a more reliable budget request."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["As an agency, ICE operates the immigration detention system on a  budget of nearly $3 billion. Although estimating immigration detention  costs may be difficult, taking steps to improve ICE\u2019s cost estimating and  budget request processes could help provide Congress with a more  accurate picture of ICE\u2019s funding needs.", "Developing and implementing a documented review process for its  annual budget request calculations could help ICE better ensure that its  budget requests are consistently credible and reliable. Additionally,  assessing its bed rate model and addressing the identified inaccuracies in  its methodology could help ICE more accurately project the bed rate in  upcoming years. As we noted, a difference of just five dollars in the bed  rate amounts to a difference of tens of millions of dollars in the final  budget calculation. Documenting the methodology or rationale behind the  ADP projections would better position ICE to support the basis for its  budget requests each year, and incorporating the use of a statistical  model may help decision makers by providing more information about the  numbers that ICE presents. Furthermore, taking steps to ensure that ICE  fully addresses cost estimating best practices could ensure a more  reliable overall estimate."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to ICE:", "The Director of ICE should take steps to document and implement its  review process to ensure accuracy in its budget documents.", "The Director of ICE should take steps to assess ICE\u2019s adult bed rate  methodology to determine the most appropriate way to project the  adult bed rate, including any inflation rates used.", "The Director of ICE should take steps to update ICE\u2019s adult bed rate  methodology by incorporating necessary changes based on its  assessment, and ensure the use of appropriate inflation rates and the  removal of family beds from all calculations.", "The Director of ICE should take steps to determine the most  appropriate way to project the ADP for use in the congressional  budget justification and document the methodology and rationale  behind its ADP projection. As part of that determination, ICE should  consider the extent to which a statistical model could be used to  accurately forecast ADP.", "The Director of ICE should take steps to ensure that ICE\u2019s budget  estimating process more fully addresses cost estimating best  practices."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for the department\u2019s review and  comment. DHS provided written comments, which are noted below and  reproduced in full in appendix II, and technical comments, which we  incorporated as appropriate. DHS concurred with our recommendations  and described actions underway or the actions it plans to take in  response.", "To our first recommendation, DHS stated that ICE recently implemented a  more stringent process for the fiscal year 2020 budget cycle, and will  work to more effectively document its review process and decisions  during the budget formulation process. To our second recommendation,  DHS stated that ICE has completed multiple third-party assessments of  its bed rate methodology. We will evaluate any assessments provided  and determine the extent to which those assessments meet the intent of  the recommendation. To our third recommendation, DHS stated that ICE  will provide GAO with documentation demonstrating updates to the adult  bed rate methodology, including the use of an appropriate inflation rate  and removal of family beds from calculation. We will evaluate any  documentation provided and determine the extent to which ICE\u2019s actions  meet the intent of the recommendation. To our fourth recommendation,  DHS stated that ICE ERO developed a statistical modeling capability and  provided that documentation and methodology to GAO. As previously  noted in this report, we found that this type of model was a reasonable  method to forecast ADP, and the particular modeling choices were  generally consistent with accepted statistical practices and appropriate for  the data and application. DHS began leveraging the model for its fiscal  year 2019 budget cycle, and it will be important to see how the model is  used in future budget justifications. To our fifth recommendation, DHS  stated that ICE will implement the best practices for cost estimating to the  degree that it is possible, specifically performing sensitivity and cost risk  and uncertainty analyses to strengthen the credibility of its estimates.  Implementing the best practices should help position ICE to produce a  more reliable cost estimate. If implemented effectively, these actions  should address the intent of our recommendations.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of the Department of Homeland Security.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777 or GamblerR@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: GAO Analysis of U.S. Immigration and Customs Enforcement\u2019s Fiscal Year 2018 Bed Rate Model", "paragraphs": ["U.S. Immigration and Customs Enforcement (ICE) calculated a bed rate  for fiscal year 2018 using a bed rate model built in Excel with data from its  Federal Financial Management System and Enforcement Information  Database. To project the fiscal year 2018 bed rate, ICE officials told us  they used a different inflation factor from the ones set forth in guidance  from the Office of Management and Budget (OMB) or the Department of  Homeland Security (DHS). Specifically, ICE used an inflation factor based  on the historical service costs. ICE did not provide a documented  rationale for not using the OMB\u2019s inflation rate, written descriptions of the  calculations within the bed rate model, or detailed ground rules and  assumptions for the bed rate model.", "In examining the adult bed rate model used by ICE to project the fiscal  year 2018 bed rate, we identified a number of inaccuracies and errors in  the formulas used. Specifically:  Instead of using the average of the percentage change in year-over- year costs, ICE used the average of the actual monetary difference in  year-over-year costs and then applied that figure as a percentage;  ICE added the inflation factors for two cost categories and then  applied the combined rate to each category, which led to additional  negative inflation; and  ICE included information for family facilities, which were already  budgeted as fixed priced contracts, in the calculation of the adult bed  rate.", "ICE calculates a projected bed rate for two years into the future based on  actual obligations and expenditures for four cost categories\u2014bed/guard  costs, health care, other direct costs, and service-wide or indirect costs.  Table 3 shows ICE\u2019s historical costs since fiscal year 2009 for these  categories.", "Table 4 shows ICE\u2019s calculations to determine the projected fiscal year  2018 bed rate. To calculate the projected fiscal year 2018 bed rate, ICE  applied its inflation factors twice to the fiscal year 2016 costs and then  added a cost adjustment to account for the cost of adding new beds.", "ICE notes that the initial projected rate is for fiscal year 2017; however,  this figure follows the formula that ICE would use to determine the fiscal  year 2018 bed rate. With the change in administration during fiscal year  2017, ICE had the opportunity to revise its projected bed rate. ICE  officials told us that they applied their inflation factors to fiscal year 2016 costs once to project the bed rate one year into the future and then  applied their inflation factors a second time in order to account for an  operational adjustment, which they estimated to be approximately 3  percent. ICE officials did not provide us with documentation of their  calculations or analysis showing that compounding the inflation factors  over two years was equivalent to one year\u2019s inflation plus an operational  adjustment. In addition, because the inflation factors used in the bed rate  model are based on historical costs, any operational costs should already  have been accounted for in the model itself."], "subsections": [{"section_title": "Inflation Factors", "paragraphs": ["Using Actual Monetary Difference in Costs Instead of Percentage  Change  ICE\u2019s bed rate model is designed to use the average of year-over-year  percentage change as its inflation rate. However, for the revised fiscal  year 2017 and the projected fiscal year 2018 bed rates, ICE did not  calculate the inflation rate based on year-over-year percentage changes,  but based it on the actual monetary difference in yearly costs. ICE  officials told us that in response to Congress\u2019s concerns about service- wide costs, ICE began separating service-wide costs from other direct  costs in fiscal year 2017. Previously, the two cost categories had been  combined as an \u201cother costs, miscellaneous\u201d cost category. ICE officials  told us that when other direct costs were separated from service-wide  costs, they discovered that the average of year-over-year percentage  changes showed a large decrease (negative 20 percent) for other direct  costs which was not reflected in a separate analysis conducted by ICE.  Therefore, officials decided to use the average of the actual monetary  difference in year-over-year costs instead. ICE officials did not provide  documentation of this separate analysis. According to ICE officials, for  consistency they decided to use the average of the actual monetary  difference in year-over-year costs for all of the cost categories including  bed/guard, health care, and service-wide costs. The bed rate model then  applied these figures as inflation factors.", "Table 5 shows the results from ICE\u2019s calculation of yearly cost changes  as percentages. In this table, ICE uses the formula of (Year 2 - Year  1)/100 and displays it as a percentage. For example, as noted in table 1, the fiscal year 2010 bed/guard rate was $81.59 and the fiscal year 2009  rate was $77.50. ICE calculated the change in the bed/guard rate for  fiscal year 2010 as $81.59 - $77.50 = $4.09, and then replaced the dollar  sign with a percent sign, thereby treating the dollar difference as a  percentage change.", "Table 6 shows the results if the year-over-year change were calculated by  comparing the actual percentage difference in costs. In this table, we use  the formula of (Year 2 - Year 1) / Year 1 and display it as a percentage.  For example, for fiscal year 2010, the percentage change in the  bed/guard rate is 5.28 percent (or ($81.59 - $77.50) / $77.50), not 4.09  percent as calculated by ICE.", "Because of how ICE presented the percentage change for each year, the  average of year-over-year changes, which ICE uses as its inflation  factors, is not correct. For example, ICE\u2019s inflation factor for the  bed/guard rate is 2.74 percent (see table 3), while the appropriate  calculation is 3.28 percent (see table 4).", "Applying Combined Inflation Factor Twice  In developing its fiscal year 2018 projected adult bed rate, ICE combined  the inflation factors for two cost categories\u2014other direct costs and  service-wide costs\u2014and applied the combined rate to each category. By  using this combined rate, the bed rate model applies an additional -0.54  percent factor to the categories, which it otherwise would not have done if  ICE applied the individual inflation factors for the categories.", "As noted in Table 7, ICE\u2019s year-over-year average change for other direct  costs was -1.33 percent when ICE calculated it individually for the  category, and was 0.78 percent for service-wide costs.", "Instead of applying these inflation factors (-1.33 and 0.78 percent) to the  fiscal year 2016 costs for these categories, ICE added the two inflation  factors for a total of -0.54 percent, based on the following calculation: - 1.3267 + 0.7833 = -0.5433. ICE then applied this combined inflation factor  to both categories (see table 2). Officials did not provide us with a  rationale or documentation of why they manually entered these numbers,  or combined the two rates except that it stemmed from the Congressional  request to separate the costs. By applying the combined inflation factor to  both categories, ICE mistakenly introduced an additional error for these  two cost categories."], "subsections": []}, {"section_title": "Family Facility Information in the Adult Bed Rate", "paragraphs": ["Counting Families in the Adult Bed Rate  ICE\u2019s bed rate model divides the obligations and expenditures for health  care, other direct costs, and service-wide costs by the entire detainee  population of adults and families, resulting in an adult bed rate that is  lower than if the costs were divided by the adult population alone. ICE\u2019s  bed rate model is used to calculate a bed rate to estimate detention costs  for the adult population. Family facilities operate on firm fixed price  contracts and all cost categories for the family facilities\u2014bed/guard costs,  health care costs, other direct costs, and service-wide costs\u2014are  budgeted for separately from costs for adult detention in ICE\u2019s budget  request. By dividing adult bed costs across its entire detainee population,  ICE may be underestimating the total detention costs.", "To calculate the daily per person cost of health care, other direct costs,  and service-wide or indirect costs, the bed rate model divides the total  obligations and expenditures for each category by the number of  mandays. Table 8 shows ICE\u2019s calculations using the formula:  Obligations and Expenditures / Mandays for Adults and Families = Daily  Per Person Rate  By spreading these costs across the entire population, the bed rate model  derives a lower daily per person cost than by considering only the adult  detainee population. For example, ICE calculated the daily per person  cost of health care in fiscal year 2016 as:  $148,186,091 / 9,096,014 = $16.29.", "Table 9 shows what the daily per person cost of health care would be if  the family population were removed from the calculation. Specifically, the  daily per person health care cost would be $148,186,091 / 8,696,453 =  $17.04  The result of a $0.75 underestimate in health care costs is an overall  underestimation of approximately $13.4 million for the fiscal year 2018  immigration detention system cost estimate based on the calculation:  $0.75 x 48,879 x 365 = $13,380,626.", "Including Family Facilities in Cost Data  In addition to spreading total costs across the entire population, rather  than just the adult population, ICE\u2019s bed rate model includes obligations  and expenditures for family facilities. In examining ICE\u2019s data for other  direct costs, we found that data from the three family facilities (Berks,  Karnes, and South Texas) were included in the facility cost data. These  three facilities\u2019 other direct costs totaled $222,425. Because these  facilities operate on firm fixed price contracts that include other direct  costs, and these costs were already budgeted at $5.5 million in the  $291.4 million allotted for family facilities, these costs were double- counted in the model and the costs were added to the adult bed rate. It is  unclear if cost data for family facilities are also included in the health care  and in the service-wide costs used to calculate the adult bed rate. ICE  officials did not provide documentation or their rationale for including the  family facilities in their adult bed rate model.", "Table 10 demonstrates the effect of removing information for family  facilities from the other direct cost data and then dividing by the adult  population alone. This calculation results in a daily per adult rate for other  direct costs of $1.75 for fiscal year 2016, which is 3 cents lower than the  rate if the other direct costs for family facilities are included (and the costs  are divided by the adult population alone)."], "subsections": []}]}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kirk Kiester (Assistant Director),  Brian Bothwell, Pamela Davidson, Eric Hauswirth, Susan Hsu, Heather  Keister, Sasan J. \u201cJon\u201d Najmi, Leah Q. Nash, Karen Richey, Daniela  Rudstein, Jack Sheehan, and Jeff Tessin made significant contributions  to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-141", "url": "https://www.gao.gov/products/GAO-19-141", "title": "Medicare: Payments for Certain Long-Term Care Hospitals that Specialize in Spinal Cord Treatment", "published_date": "2018-12-13T00:00:00", "released_date": "2018-12-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Centers for Medicare & Medicaid Services pays LTCHs for care provided to Medicare beneficiaries. There were about 400 LTCHs across the nation in 2016.", "The 21st Century Cures Act included a provision for GAO to examine certain issues pertaining to LTCHs. This report examines (1) the health care needs of Medicare beneficiaries who receive services from the two qualifying hospitals; (2) how Medicare LTCH payment polices could affect the two qualifying hospitals; and (3) how the two qualifying hospitals compare with other LTCHs and other facilities that may treat Medicare patients with similar conditions.", "GAO analyzed the most recently available Medicare claims and other data for the two qualifying hospitals and other facilities that treat patients with spinal cord injuries. GAO also interviewed HHS officials and stakeholders from the qualifying hospitals, other facilities that treat spinal cord patients, specialty associations, and others.", "GAO provided a draft of this report to HHS. HHS provided technical comments, which were incorporated as appropriate. We also provided the two qualifying hospitals summaries of information we collected from them, to confirm the accuracy of statements included in our draft report. We incorporated their comments, as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Spinal cord injuries may result in secondary complications that often lead to decreased functional independence and quality of life. The 21st Century Cures Act changed how Medicare pays certain long-term care hospitals (LTCH) that provide spinal cord specialty treatment. For these hospitals, the act included a temporary exception from how Medicare pays other LTCHs. Two LTCHs\u2014Craig Hospital in Englewood, Colorado and Shepherd Center in Atlanta, Georgia\u2014have qualified for this exception. GAO found that most Medicare beneficiaries treated at these two hospitals typically receive specialized care for multiple chronic conditions and other long-term complications that develop after initial injuries, such as pressure ulcers that can result in life-threatening infection. The two hospitals also provide specialty care for acquired brain injuries, such as traumatic brain injuries.", "GAO's simulations of Medicare payments to these two hospitals using claims data from two baseline years\u2014fiscal years 2013 and 2016\u2014illustrate potential effects of payment policies. LTCHs are paid under a two-tiered system for care provided to beneficiaries: they receive the LTCH standard federal payment rate\u2014or standard rate\u2014for certain patients discharged from the LTCH, and a generally lower rate\u2014known as a \u201csite-neutral\u201d rate\u2014for all other discharges. Under the temporary exception, Craig Hospital and Shepherd Center receive the standard rate for all discharges during fiscal years 2018 and 2019. Assuming their types of discharges remain the same as in fiscal years 2013 and 2016, GAO's simulations of Medicare payments in the baseline years indicate:", "Most of the discharges we examined would not qualify for the standard rate, if the exception did not apply.", "Medicare payments would generally decrease under fiscal year 2020 payment policy, once the exception expires.", "However, the actual effects of Medicare's payment policies on these two hospitals could vary based on factors, including the severity of patient conditions (e.g., Medicare payment is typically higher for more severe injuries), and whether hospitals' discharges meet criteria for the standard rate.", "Similarities and differences may exist between the two qualifying hospitals and other facilities that treat Medicare patients with spinal cord and brain injuries. Patients with spinal cord and brain injuries may receive care in other LTCHs, but GAO found that most Medicare beneficiaries at these other LTCHs are treated for conditions other than spinal cord and brain injuries. Certain inpatient rehabilitation facilities (IRF) also provide post-acute rehabilitation services to patients with spinal cord and brain injuries. While data limitations make a direct comparison between these facilities and the two qualifying hospitals difficult, GAO identified some similarities and differences. For example, officials from some IRFs we interviewed reported providing several of the same programs and services as the two qualifying hospitals to medically complex patients, but the availability of services and complexity of patients varied. Among other reasons, the different Medicare payment requirements that apply to LTCHs and IRFs affect the types of services they provide and the patients they treat."]}], "report": [{"section_title": "Letter", "paragraphs": ["Long-term care hospitals (LTCHs) provide care to individuals, including  Medicare beneficiaries, who receive hospital services that require  inpatient lengths of stay greater than 25 days, on average. The Medicare  Payment Advisory Commission (MedPAC) estimates that Medicare spent  approximately $5.1 billion on care provided to beneficiaries at 407 LTCHs  nationwide in 2016. Traditionally, LTCHs have been paid by Medicare  under the LTCH prospective payment system (PPS) at the LTCH PPS  standard federal payment rate (hereafter standard rate). However, the  Pathway for SGR Reform Act of 2013 introduced site-neutral payment  policy, which changed Medicare\u2019s payment for services that could be  provided in other less costly settings, beginning in fiscal year (FY) 2016.  As a result, LTCH PPS is now a two-tiered payment system under which  certain LTCH discharges continue to be paid at the standard rate, while  other discharges are paid at a generally lower site-neutral rate. Site- neutral payment policy is being phased into the LTCH PPS over five  years, with certain exceptions. In addition, statute provides that by fiscal  year 2021 LTCHs will no longer receive the standard rate if they fail to  meet certain requirements, raising concerns that some LTCHs may no  longer provide care to certain patients if they are paid at the site-neutral  rate.", "The 21st Century Cures Act provided a temporary exception to this two- tiered approach for certain LTCHs that provide spinal cord specialty  treatment for cost reporting periods beginning during fiscal years 2018  and 2019. To qualify for this exception, LTCHs must meet three criteria  and according to Centers for Medicare & Medicaid Services\u2019 (CMS)  officials, two LTCHs did so\u2014Craig Hospital in Englewood, Colorado, and  Shepherd Center in Atlanta, Georgia. Under current law, the LTCH PPS  two-tiered payment system will apply to these hospitals after the  exception expires, in fiscal year 2020 and beyond.", "The 21st Century Cures Act also included a provision for us to examine  the LTCHs that qualify for this exception. In this report we describe:  1.  the health care needs of Medicare beneficiaries who receive services  from the two qualifying hospitals;  2.  how Medicare LTCH payment policies could affect the two qualifying  3.  how the two qualifying hospitals compare with other LTCHs and other  facilities that may treat Medicare patients with similar conditions.", "To determine the health care needs of Medicare beneficiaries who  receive services from the two qualifying hospitals, we reviewed  documentation, analyzed Medicare claims data, and conducted  interviews. Specifically, we reviewed documentation from the qualifying  hospitals that describes the health care needs of their Medicare  beneficiaries, including those beneficiaries receiving services for spinal  cord injury, and acquired brain injuries, such as traumatic brain injury. We  also analyzed Medicare claims data for federal fiscal years 2013 through  2016\u2014the most recent data available at the time of our analysis\u2014to  identify commonly charged Medicare severity long term care diagnosis- related group (MS-LTC-DRG) codes at both hospitals. Finally, we  interviewed representatives from the two qualifying hospitals; Department  of Health and Human Services (HHS) officials, including officials from  CMS, the National Institutes of Health, and the Administration for  Community Living; as well as other selected stakeholders on the health  care needs of these beneficiaries and the services they may receive from  the qualifying hospitals. We selected these other stakeholders based on  their relevant experience to cover a range of perspectives on the health  care needs of patients with spinal cord injury or traumatic brain injury. We  identified these stakeholders by conducting Internet searches on  organizations that work with patients or conduct research on spinal cord  and traumatic brain injuries, through analysis of Medicare claims data, or  through referrals from agency officials and other stakeholders we  interviewed. These stakeholders included: (1) health care providers with  experience treating spinal cord or acquired brain injury patients, including  providers from facilities that are among the National Institute on Disability,  Independent, Living, and Rehabilitation Research (NIDILRR) Spinal Cord  Injury and Traumatic Brain Injury Model Systems; (2) representatives  from specialty associations, such as the National Association of Long- Term Hospitals and the American Academy of Physical Medicine and  Rehabilitation; and (3) representatives from patient advocacy  organizations, including the Christopher & Dana Reeve Foundation and  the Brain Injury Association of America.", "To determine how Medicare LTCH payment policies could affect the two  qualifying hospitals, we reviewed relevant laws and regulations, analyzed  Medicare claims data, and interviewed officials and stakeholders.  Specifically, we reviewed Medicare laws and regulations providing for  payments to acute care hospitals and LTCHs from fiscal years 2016  through 2018. We also analyzed Medicare claims data for federal fiscal  years 2013 through 2016 to determine the payments made to the two  qualifying hospitals prior to the temporary exception. We then conducted  simulations of Medicare payments to calculate what the two qualifying  hospitals would have been paid for patient discharges that occurred in  two baseline years\u2014fiscal years 2013 and 2016\u2014if applicable payment  rules from future years were applied to those discharges. See appendix I  for more information on how we conducted these simulations. In addition,  we interviewed officials from HHS, including CMS, to gather information  on how payment policies are being implemented. Lastly, we interviewed  representatives from the two qualifying hospitals and some of the other  stakeholder groups, officials from MedPAC, and state officials from  Georgia and Colorado to determine how LTCH payment policies have, or  are expected to, affect the two qualifying hospitals and other LTCHs.", "To describe how the two qualifying hospitals compare with other LTCHs  and other facilities that may treat Medicare patients with similar  conditions, we analyzed Medicare claims data for federal fiscal years  2013 through 2016, reviewed information provided by the qualifying  hospitals and other stakeholders, and conducted interviews. Specifically,  we reviewed Medicare claims data for LTCHs\u2014including the two  qualifying hospitals\u2014and inpatient rehabilitation facilities (IRF), which  provide intensive rehabilitation services to patients after illness, injury, or  surgery. We reviewed information provided by selected facilities\u2014to  identify similarities and differences in the types of patients treated and  services provided, such as information on patient characteristics, clinical  services provided, and staffing levels. Selected facilities included those  designated as NIDILRR model systems for spinal cord injury and other  facilities that treat high volumes of patients with similar conditions, as  identified through our data analysis. In addition, we interviewed officials  from HHS\u2014including CMS, the Office of the Assistant Secretary for  Planning and Evaluation, and the Administration for Community Living\u2014 to gather information on what other types of facilities may treat patients  with conditions similar to those treated at the qualifying hospitals, current  work underway related to post-acute care, and the NIDILRR model  systems program, respectively. In addition to the two qualifying hospitals  and stakeholders previously noted for other components of our work, we  also interviewed officials from certain accrediting organizations\u2014the Joint  Commission and the Commission on Accreditation of Rehabilitation  Facilities (CARF) International\u2014to discuss their accreditation standards  and obtain their perspectives on similarities and differences in the types  of patients treated and services provided at the two qualifying hospitals  and other facilities.", "We assessed the reliability of the Medicare claims data used in this report  by reviewing relevant documentation and interviewing officials and  representatives knowledgeable about the data. Based on these steps, we  found the data were sufficiently reliable for the purpose of our reporting  objectives.", "We conducted this performance audit from October 2017 through  December 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Spinal Cord Injury", "paragraphs": ["Spinal cord injuries are complex, lifelong injuries that typically result from  acute traumatic damage to the spinal cord or nerves within the spinal  column. In spinal cord injury patients, certain nervous system functions  may be impaired temporarily or permanently lost, depending on the level  and severity of the patient\u2019s injury. In addition to lower level nervous  system functioning, spinal cord injury patients may develop secondary  medical complications that can further decrease functional independence  and quality of life, including, but not limited to:", "Autonomic dysreflexia: a condition that may result in life threatening  hypertension\u2014high blood pressure\u2014due to impaired nervous system  response, below the level of spinal cord injury.", "Depression: a medical mood disorder\u2014commonly affecting about one  in five spinal cord injury patients\u2014that can cause physical and  psychological symptoms (including changes in sleep and appetite,  and thoughts of death or suicide).", "Impaired bowel and bladder functioning: potential inability to move  waste through the colon and control, stop or release, urine\u2014which  can lead to other life-threatening illnesses (such as autonomic  dysreflexia) and/or infections.", "Pressure ulcers: a common complication affecting up to 80 percent of  spinal cord injury patients that results from an area of the skin or  underlying tissue that is damaged due to decreased blood flow, which  can occur after extended periods of inactive sitting or lying, among  other ways. Pressure ulcers\u2014also known as pressure sores or  wounds\u2014can occur years after initial injury and may also result in life- threatening infections or amputation.", "Spasticity: a common condition that affects 65 to 78 percent of spinal  cord injury patients and can result in symptoms ranging from mild  muscle stiffness to severe, uncontrollable leg movements.", "Syringomyelia: a rare disorder that occurs when cerebrospinal fluid\u2014 normally found outside of the spinal cord and brain\u2014enters the  interior of the spinal cord to form a cyst known as a syrinx. This cyst  expands and elongates over time, destroying the center of the spinal  cord. Symptoms can develop slowly and can include numbness, pain,  effects on bowel and bladder function, or paralysis. While this  condition can occur as a result of a trauma, such as a spinal cord  injury, the majority of cases are associated with a complex brain  abnormality."], "subsections": []}, {"section_title": "Brain Injury", "paragraphs": ["Acquired brain injuries occur after birth and are not hereditary, congenital,  degenerative, or a result of birth trauma. Acquired brain injuries result in  changes to the brain\u2019s neuronal activity, which can affect the physical  integrity, metabolic activity, or functional ability of nerve cells in the brain.  Acquired brain injuries can be either non-traumatic or traumatic in nature:  non-traumatic brain injuries are caused by an internal force\u2014such as in  the case of stroke, tumors, or drowning\u2014and traumatic brain injuries are  caused by an external force\u2014such as in the case of car accidents,  gunshot wounds, or falls. The severity of brain injury can often result in  changes to physical, behavioral, and/or cognitive functioning. For  example, according to one source, nearly 50 percent of all people with a  traumatic brain injury experience depression within the first year after  injury, and nearly two-thirds experience depression within 7 years post- injury. Depression can develop as a result of physical changes in the  brain, emotional response to the injury, and other unrelated factors\u2014such  as family history. Due to impaired cognitive functioning, traumatic brain  injury patients may also experience difficulty communicating,  concentrating, and processing and understanding information."], "subsections": []}, {"section_title": "Medicare Payment in LTCHs", "paragraphs": ["Acute care hospitals and LTCHs are paid under different Medicare  payment systems by law. Acute care hospitals are paid under the  inpatient prospective payment system (IPPS). LTCHs are paid under  the LTCH PPS. Under both systems, Medicare classifies patients based  on Medicare diagnosis groups, which organize patients based on their  conditions and the care they receive. Medicare payments for LTCHs are  typically higher than payments for acute care hospitals, to reflect the  average resources required to treat Medicare beneficiaries who need  long-term care.", "Traditionally, all LTCH discharges were paid at the LTCH PPS standard  federal payment rate. The Pathway for SGR Reform Act of 2013  modified the LTCH PPS by establishing a two-tiered payment system\u2014 such that certain LTCH discharges continue to be paid at the standard  rate and others are paid at a generally lower, site-neutral rate. In its  March 2013 report, MedPAC described concerns regarding growth in the  number of LTCHs and the extent to which some of their patients may  otherwise be treated appropriately in less costly settings. To continue to  be eligible for the standard rate, the discharge must generally have a  preceding acute care hospital stay with either an intensive care unit stay  of at least 3 days or an assigned diagnosis group based on the receipt of  at least 96 hours of mechanical ventilation services in the LTCH, unless  an exception applies. Discharges that do not qualify for the standard  rate are to receive a blended site-neutral rate\u2014equal to 50 percent of the  site-neutral rate and 50 percent of the standard rate\u2014for discharges in  cost reporting periods beginning in fiscal years 2016 through 2019, and  the full site-neutral rate for discharges in cost reporting periods beginning  in fiscal year 2020.", "Beginning with cost reporting periods in fiscal year 2020, if fewer than half  of an LTCH\u2019s discharges meet the statutory requirements to be paid at  the standard rate, the LTCH will no longer receive any payments at that  rate for discharges in future cost reporting periods until eligibility for  receiving payments under that rate is reinstated. Under this scenario, all  discharges in succeeding cost reporting periods would be paid at the  generally lower rate that an acute care hospital would receive for  providing comparable care until eligibility for receiving payments at the  standard rate is reinstated. According to officials from HHS, the  department intends to establish a process for how hospitals would have  their eligibility for receiving payments at the standard rate reinstated as  part of the fiscal year 2020 rule-making cycle. Since the two qualifying  hospitals are currently only excepted from the statutory two-tiered  payment structure for cost reporting periods beginning during fiscal years  2018 and 2019, these two hospitals must also meet the statutory 50  percent threshold in fiscal year 2020 and beyond in order to receive the  standard rate for any future discharges until reinstated. See table 1 for  more information on Medicare\u2019s LTCH PPS payment policies."], "subsections": []}, {"section_title": "The Two Qualifying Hospitals: Craig Hospital and Shepherd Center", "paragraphs": ["Two LTCHs have qualified for the temporary exception to site-neutral  payments, according to CMS officials. Craig Hospital is a private, not-for- profit facility that has specialized in medical treatment, research, and  rehabilitation for patients with spinal cord and brain injury since 1956.  Craig Hospital is classified as an LTCH for the purposes of Medicare  payment, and is licensed as a general hospital by the state of Colorado\u2014 which does not have separate designations for LTCHs. Craig Hospital  has been selected as one of 14 NIDILRR Spinal Cord Injury Model  Systems and one of 16 Traumatic Brain Injury Model Systems and is  accredited by the Joint Commission.", "Shepherd Center is a private, not-for-profit facility that specializes in  medical treatment, research, and rehabilitation for people with traumatic  spinal cord injury and brain injury\u2014as well as neuromuscular disorders,  including multiple sclerosis. Shepherd Center is classified as an LTCH for  the purposes of Medicare payment, and as a specialty hospital\u2014which  includes LTCHs\u2014by the state of Georgia. Shepherd Center is also  currently designated as a NIDILRR Spinal Cord Injury Model System and  is accredited by the Joint Commission. Shepherd Center also has several  CARF International accredited specialty programs. Specifically, it has  CARF-accredited inpatient rehabilitation specialty programs in spinal cord  injury and brain injury\u2014for adults, children, and adolescents; and  interdisciplinary outpatient medical rehabilitation specialty programs in  spinal cord injury and brain injury\u2014for adults, children, and adolescents,  among others.", "More than half of the Medicare discharges in fiscal year 2013 at the two  qualifying hospitals\u201443 of 75 at Craig Hospital and 47 of 88 at Shepherd  Center\u2014were within the diagnosis groups designated in section 15009(a)  of the 21st Century Cures Act. (See table 2 below for more information.)  Patients treated for these diagnosis groups may receive treatment for  spinal disorders and injuries; medical back problems; degenerative  nervous system disorders; skin grafts for skin ulcers; acquired brain  injuries, such as traumatic brain injuries; or other significant traumas with  major complicating and comorbid (simultaneous) conditions.", "Both qualifying hospitals have a variety of specialized inpatient and  outpatient programs to help treat the complex health care needs of their  patients, including those covered by Medicare. For example, both  hospitals have wheelchair positioning clinics that can help prevent skin  complications, such as pressure ulcers, that can occur in spinal cord  patients. Both hospitals also have programs for those patients who need  ventilator support such as diaphragmatic pacing\u2014support for patients  with respiratory problems whose diaphragm, lungs, and nerves have  limited function\u2014and ventilator weaning programs. In addition to clinical  programs, both qualifying hospitals also provide transitional support, such  as providing counseling and education to families of patients with these  injuries."], "subsections": []}]}, {"section_title": "Most Medicare Beneficiaries Who Receive Services at the Two Qualifying Hospitals Need Specialized Follow- Up Care to Manage Long-Term Effects of Catastrophic Injury", "paragraphs": ["We found that most Medicare beneficiaries at the two qualifying hospitals  need specialized services to manage the chronic, long-term effects of a  catastrophic spinal cord or brain injury. Most of these patients are  younger than 65 and ineligible for Medicare at the time of their initial  injury, according to officials from the qualifying hospitals. Instead,  according to officials, these patients typically become eligible for  Medicare 2 years or more after their initial injury due to disability.  Medicare beneficiaries at the two qualifying hospitals typically need care  to manage comorbidities or the associated long-term complications of  their injury. Officials from Craig Hospital said a significant number of their  Medicare beneficiaries have comorbid conditions\u2014such as diabetes or  cardiac problems\u2014upon admission, that can be further complicated by  their injury. The officials said managing these comorbidities is as much of  a medical challenge as managing the spinal or brain injury. Officials from  both qualifying hospitals noted their Medicare beneficiaries who have a  spinal cord or brain injury also frequently seek care after initial injury to  address secondary complications resulting from their injury, including  urinary tract infections; respiratory problems; and pressure ulcers.", "While the qualifying hospitals primarily treated traumatic spinal cord or  brain injuries, we found that their Medicare populations differed from each  other during the period from fiscal year 2013 to 2016. Specifically,", "Craig Hospital. Our review of Medicare claims data indicates more  than 50 percent of the 246 Medicare discharges during this time were  associated with Medicare diagnosis groups for spinal cord conditions.  Specifically, during this time, Craig Hospital\u2019s Medicare discharges  were commonly assigned to three diagnosis groups covering spinal  procedures and spinal disorders and injuries. For example, officials  from Craig Hospital told us that about 60 percent of Medicare  beneficiaries in fiscal year 2016 required surgical care for a spinal  cord injury. According to officials, most of these patients received  surgery for syringomyelia\u2014a complication in spinal cord patients that  generally develops years after their initial injury. These officials told us  that Craig Hospital provided the pre- and post-operative care for those  patients in fiscal year 2016; however, currently, Craig Hospital is only  responsible for pre-operative assessments. The remaining 40  percent of their Medicare beneficiaries in fiscal year 2016 received  care for new spinal cord injuries.", "Shepherd Center. Our review of Medicare claims data indicates the  most common diagnosis group of the 365 Medicare discharges during  this time\u2014fiscal year 2013 to fiscal year 2016\u2014related to treatment  for skin grafts that can be associated with pressure ulcers, among  other things. Shepherd Center officials confirmed that most of their  Medicare beneficiaries received treatment for a pressure ulcer that  occurred after initial injury which, as previously noted, can be so  severe as to result in life-threatening infections. According to officials,  most of their post-injury Medicare beneficiaries receive post-operative  care and other wound management services following surgery to treat  pressure ulcers, to ensure that the site will not tear again and to avoid  reoccurrence. Other diagnosis groups for Medicare patients at  Shepherd Center included those for spinal disorders and injuries and  extensive operating room procedures unrelated to principal  diagnosis. According to officials, beneficiaries in these diagnosis  groups received treatment for a range of conditions, including  traumatic injuries, urinary tract infections, neurogenic bladder and  bowel or respiratory complications. Officials told us the hospital also  served Medicare beneficiaries recovering from other acquired brain  injuries, such as stroke, and paralyzing neuromuscular conditions,  such as multiple sclerosis.", "Stakeholders we interviewed\u2014including providers at other facilities\u2014 noted that traumatic spinal cord and brain injury patients\u2014including those  covered by Medicare\u2014require significant levels of care due to the  complexity of their injuries as well as the immediate and long-term  complications that can occur from the injuries. For example, most  stakeholders told us these patients often require lifelong care due to the  complexity and reoccurrence of comorbidities or secondary  complications. Some of these stakeholders noted, for example, spinal  cord and brain injury patients often face mental health or psychosocial  conditions, such as depression or anxiety. Some stakeholders also  emphasized that many spinal cord injury patients risk secondary  complications that may not occur until years after injury, such as  pneumonia, pressure ulcers, and other infections. A few stakeholders told  us spinal cord and brain injury patients are often among the most  complex patients they treat. As such, patients with spinal cord or brain  injuries often require interdisciplinary care that covers a wide range of  specialties\u2014including physiatry (rehabilitation medicine), neurology,  cardiology, and pulmonology\u2014as well as specialized equipment or  technology, such as eye glance tools to control call systems or the  television."], "subsections": []}, {"section_title": "Medicare Policies May Have Modest Effects on Payments to the Two Qualifying Hospitals Depending on the Types of Patients Treated and Other Factors", "paragraphs": [], "subsections": [{"section_title": "Simulations of Medicare Payments to Qualifying Hospitals Illustrate Potential Effects of Payment Policies", "paragraphs": ["Simulations of Medicare payments illustrate the potential effects of  Medicare\u2019s site-neutral payment policies, which were required by law, on  the qualifying hospitals. Specifically, our simulations calculated what the  qualifying hospitals would have been paid for Medicare patient discharges  that occurred in two baseline years\u2014fiscal year 2013 (baseline year 1)  and fiscal year 2016 (baseline year 2)\u2014if applicable payment policies  from future years (2017 through 2021) were applied to those  discharges. We selected two baseline years to account for differences  in data, such as the number of discharges, between fiscal year 2016\u2014the  most recent year of complete data available at the time we began our  analysis\u2014and fiscal year 2013. Table 3 below provides a summary of  Medicare discharges and payments to the qualifying hospitals during  these two baseline years. Variation in utilization and patient mix across  the baseline years allows the simulations to cover a range of possible  changes in payments for the two hospitals.", "Our simulations indicated how Medicare\u2019s payment policies could have  affected these baseline payments to each qualifying hospital:", "Fiscal Year 2017 Blended Site-Neutral Rate Policy: Discharges that  do not meet criteria to receive the standard rate are to receive a  blended site-neutral rate\u2014equal to 50 percent of the site-neutral rate  and 50 percent of the standard rate. We found that while some of the  baseline discharges would qualify for the standard rate, most  discharges would have been paid at the blended site-neutral rate.  Specifically, 8 to 20 percent of Craig Hospital\u2019s baseline Medicare  discharges would have qualified for the standard rate, resulting in  simulated payments of about $3.86 million (baseline year 1) and  $3.22 million (baseline year 2) under blended site-neutral rate policy.", "For Shepherd Center, between 23 percent and 40 percent of baseline  Medicare discharges would have qualified for the standard rate,  resulting in simulated payments of about $5.16 million (baseline year  1) and $5.31 million (baseline year 2). Each of these simulated  payments is an increase compared to actual payments made in the  baseline years.", "Fiscal Years 2018 and 2019 Temporary Exception: The qualifying  hospitals are receiving the standard rate for all discharges, due to the  temporary exception. As a result, simulated payments under the  temporary exception are about $3.74 million (baseline year 1) and  $3.18 million (baseline year 2) for Craig Hospital and about $5.64  million (baseline year 1) and $5.75 million (baseline year 2) for  Shepherd Center, which is an increase compared to actual payments  made in the baseline years.", "Fiscal Year 2020 Two-Tiered Payment Rate: The temporary exception  for the qualifying hospitals no longer applies; therefore, the site- neutral rate will apply to discharges not qualifying for the standard  rate. We found that both qualifying hospitals would receive some  payments at the standard rate, but that most of their discharges would  be paid at the lower, site-neutral rate\u2014assuming similar caseloads  (e.g., patient mix). As a result, simulated baseline year payments at  Craig Hospital are about $3.47 million (baseline year 1) and $3.03  million (baseline year 2), and simulated baseline payments to  Shepherd are about $4.42 million (baseline year 1) and $4.55 million  (baseline year 2). The simulated payments therefore decrease  compared to those in fiscal year 2019, and also generally decrease  compared to actual payments made in the baseline years.", "Future Years Under 50 Percent Threshold: Under statute, unless 50  percent or more of the hospital\u2019s discharges in cost reporting periods  beginning during or after fiscal year 2020 qualify for the standard rate,  no subsequent payments will be made to a hospital at that rate in  each succeeding cost reporting period. Most of the baseline year  discharges did not qualify for the standard rate, and therefore  simulated payments are based on the generally lower comparable  acute care rate. However, simulated payments stayed about the same  between fiscal year 2020 and 2021, in part due to differences in  calculations for high-cost outlier payments. A high-cost outlier  payment is made to hospitals for those cases that are extraordinarily  costly, which can occur because of the severity of the case and/or a  particularly long length of stay. Specifically, simulated payments  were about $3.49 million (baseline year 1) and $3.02 million (baseline  year 2) for Craig Hospital and about $4.24 million (baseline year 1)  and $4.16 million (baseline year 2) for Shepherd Center. Without the  high-cost outlier payments, the simulated payments would have  decreased by at least $2 million. If the mix of patients at Craig  Hospital and Shepherd Center changes so that they meet the 50  percent threshold in fiscal year 2020, then simulated payments for  fiscal year 2021 could be higher. As of September 2018, Craig  Hospital officials told us that they expect to meet the 50 percent  threshold with their current patient mix. Shepherd Center officials told  us they do not expect to meet the 50 percent threshold.", "See figures 1 and 2 below for the results of our simulations.", "Our simulations of payments assume the number and type of Medicare  discharges at the two qualifying hospitals remain the same as those in  fiscal years 2013 and 2016. However, the full effect of payment policy on  future Medicare payments to the qualifying hospitals will depend on three  key factors that are subject to change:  1.  Severity of patient conditions: Medicare payment is typically higher  for more severe injuries, such as a traumatic injury with major  comorbidities or complications, relative to less severe injuries. In the  two baseline years we used for our simulations\u2014fiscal year 2013 and  fiscal year 2016\u2014more than half of the Medicare discharges at the  qualifying hospitals were associated with conditions with multiple  comorbidities and complications, as indicated by the diagnosis  groups, and this level of severity is reflected in the simulation results.  Future payments to qualifying hospitals will depend on the extent to  which the severity of patient conditions changes over time.  2.  Volume of discharges meeting criteria for the standard rate: As  previously noted, for a hospital to receive the standard rate for a  discharge, the discharge must meet certain criteria, such as having a  preceding acute care hospital stay with either an intensive care unit  stay of at least 3 days or an assigned diagnosis group based on the  receipt of at least 96 hours of mechanical ventilation services in the  LTCH. Our simulations reflect that in the two baseline years, about  23 percent of the fiscal year 2013 discharges and about 40 percent of  the fiscal year 2016 discharges met the criteria to receive the  standard rate for Shepherd Center; and about 8 percent of the fiscal  year 2013 discharges and about 20 percent of the fiscal year 2016  discharges met the criteria for Craig Hospital. Changes to these  amounts could affect future payments to the qualifying hospitals. In  particular, if 50 percent or more of either hospital\u2019s discharges  beginning in fiscal year 2020 meet the standard rate criteria, then the  hospitals would be eligible for payments at the standard rate in fiscal  year 2021, which may result in higher payments compared to our  simulations.  3.  Payment adjustments: LTCHs may receive a payment adjustment  for certain types of discharges, such as short-stay outliers, interrupted  stays, or high-cost outliers. In particular, most discharges at Craig  Hospital received high-cost outlier payments (additional payments for  extraordinarily costly cases) during the two baseline years\u201476  percent in fiscal year 2013 and 85 percent in fiscal year 2016. At  Shepherd Center, at least 40 percent of discharges during the two  baseline years received high-cost outlier payments\u2014about 42 percent  in fiscal year 2013 and about 58 percent in fiscal year 2016. The  amount of future payments to qualifying hospitals will depend on the  extent to which they continue to have a high proportion of discharges  with high-cost outlier payments."], "subsections": []}, {"section_title": "Qualifying Hospitals and Some Stakeholders Reported that Payment Policies May Result in Fewer Services Provided and Fewer Patients Served by LTCHs", "paragraphs": ["In addition to the effect on payments, officials from both qualifying  hospitals and some stakeholders we interviewed noted that the LTCH  site-neutral payment policies may result in fewer services provided and  fewer patients served by the qualifying hospitals and other LTCHs. For  example, officials from Craig Hospital told us they stopped providing post- operative care to patients requiring spinal surgery, such as patients with  syringomyelia, in 2016\u2014instead referring them to other facilities\u2014in part  because these discharges do not meet the criteria for the standard rate.  As of September 2018, they told us they do not plan to provide this care  in the future unless the temporary exception is extended. Officials from  Shepherd Center told us while they have not yet made changes to  services they offer to Medicare patients, they may limit which Medicare  beneficiaries they serve in the future. For example, they told us that most  of their Medicare beneficiaries were admitted from home or sought care in  their outpatient clinic. When the temporary exception expires after fiscal  year 2019, hospital officials expected that these patients will not qualify  for the standard rate. Shepherd Center officials said they may not be able  to serve similar patients in future years.", "MedPAC officials and some stakeholders\u2014a specialty association and  health care providers with experience treating patients with similar  conditions at other LTCHs\u2014told us that some LTCHs have changed the  services they offer and the patients they treat to increase the proportion of  discharges that qualify for the standard rate. For example,", "MedPAC officials cited reports that indicate how some LTCHs have  adjusted to the site-neutral policies. For example, a 2018 MedPAC  report indicated that LTCHs in one large for-profit chain were able to  make adjustments so that, as of September 30, 2016, close to 100  percent of their Medicare discharges met the criteria to receive the  standard rate.", "A representative from an LTCH association told us that many LTCHs  have adjusted their patient mix by increasing the number of  discharges that meet criteria for the standard rate and turning away  some Medicare beneficiaries to reduce the number of discharges  subject to the site-neutral rate. The representative noted that certain  LTCHs have already been able to adjust their patient mix because  they have existing programs in place that focus on chronic, critically ill  patients who would have a preceding acute care hospital stay. The  representative told us that some LTCHs specialize in care for patients  who do not meet the criteria to receive the standard rate and would  generally be paid at the site-neutral rate; therefore, changing their  patient mix is not a viable strategy for these LTCHs. According to the  stakeholder, as of February 2018, about two-thirds of all LTCHs are  above the 50 percent threshold.", "Providers from another LTCH told us that before the site-neutral  payment policy went into effect, only about 40 to 45 percent of its  discharges met criteria for the standard rate. However, they worked to  ensure most patients referred to the LTCH would qualify for the  standard rate. Officials told us patients who do not meet the criteria for  that rate typically either stay longer in the acute care hospital or are  transferred to a different post-acute care setting, such as a skilled  nursing facility. Officials noted that, in both cases, the patient may not  receive the specialized services often required for their injuries,  including those patients with spinal cord or brain injuries.", "A provider we interviewed from another LTCH said that, historically,  the LTCH has accepted patients who acquire pressure ulcers at home  following discharge, but they may choose not to continue this practice  because the patients\u2019 discharges would not meet the criteria to  receive the standard rate.", "A few of these stakeholders told us some LTCHs are in markets that do  not have alternative providers of care, such as skilled nursing facilities, for  patients who do not meet the criteria. These LTCHs may have difficulty  adjusting their patient mix to avoid site-neutral payments. For example, a  provider from one LTCH said his facility continues to take \u201csite-neutral  patients\u201d because those patients often do not have another option to  receive the specialized services they need. The provider emphasized  concerns about the long-term viability of caring for those patients at the  facility, because their care is paid at lower rates."], "subsections": []}]}, {"section_title": "Similarities and Differences May Exist Between the Two Qualifying Hospitals and Other Facilities that Treat Medicare Patients with Spinal Cord and Brain Injuries", "paragraphs": [], "subsections": [{"section_title": "The Two Qualifying Hospitals Treat Patients with Conditions Different Than Those at Most Other LTCHs, and Treat Fewer Medicare Patients", "paragraphs": ["Our review of Medicare claims data, other information, and interviews  with stakeholders indicated the two qualifying hospitals treated Medicare  beneficiaries with different conditions than most of those treated at other  LTCHs. Our analysis of Medicare claims data indicates Craig Hospital  and Shepherd Center treat very few patients in the Medicare diagnosis  groups that are most common to other LTCHs. Specifically, for several  years, MedPAC has reported that LTCH patient discharges are  concentrated in a relatively small number of diagnosis groups. For  example, in March 2018, MedPAC reported that 20 diagnosis groups  accounted for over 61 percent of LTCH discharges at both for-profit and  not-for-profit facilities, in fiscal year 2016. However, in fiscal year 2016,  these diagnosis groups accounted for approximately 30 percent of  Medicare discharges\u201426 out of 88\u2014at Shepherd Center, and most of  these discharges fell within a single diagnosis group which covers a  range of conditions. Craig Hospital did not discharge any Medicare  beneficiaries assigned to these 20 diagnosis groups, in fiscal year 2016.  The seven diagnosis groups that were used in the statutory criteria to  except Craig Hospital and Shepherd Center from site-neutral payments  were also not among these 20 diagnosis groups. For more information on  the 20 diagnosis groups common to LTCHs in fiscal year 2016, see  Appendix III, table 5.", "Our review of Medicare claims data and other information indicates the  two qualifying hospitals also treat a relatively small number of Medicare  beneficiaries, a key distinguishing factor from most other LTCHs. In  March 2018, MedPAC reported that, on average, Medicare beneficiaries  account for about two-thirds of LTCH discharges. However, Medicare  claims data and other information provided by the two qualifying hospitals  indicate Medicare beneficiaries account for a significantly smaller  proportion (about 8 percent) of patients discharged from Craig Hospital  and Shepherd Center in 2016. Specifically, 40 of the 486 patients  discharged from Craig Hospital in fiscal year 2016 and 75 of the 912  patients discharged from Shepherd Center in calendar year 2016, were  Medicare beneficiaries. Officials from the qualifying hospitals told us  they treat few Medicare patients primarily because of the younger  average age of persons with spinal cord injuries and acquired brain  injuries.", "While patients with spinal cord and brain injuries may receive care in  other LTCHs, most stakeholders we interviewed also suggested the two  qualifying hospitals treat patients that are different from those treated at  most other LTCHs, and can offer specialized care. Officials from the two  qualifying hospitals told us that, relative to most other facilities\u2014including  most traditional LTCHs\u2014they offer a more complete continuum of care to  meet the needs of patients at different stages of spinal cord and brain  injury treatment, without the need to transfer to different facilities. Officials  also stated that, unlike most traditional LTCHs, they are able to offer more  specialized care for patients with spinal cord and brain injuries, including  more comprehensive rehabilitation services. Stakeholders we interviewed  generally agreed that the two qualifying hospitals have developed  expertise in treating spinal cord and brain injury patients and offer  intensive rehabilitation services that are not provided in most other  LTCHs. In addition, officials from the Colorado Department of Health Care  Policy & Financing noted that Craig Hospital treats a patient population  that is different from most other LTCHs in the state of Colorado.  Specifically, according to officials, in comparison to other LTCHs in the  state, Craig Hospital treats: (1) a higher percentage of patients with more  severe conditions, (2) more patients from outside the state of Colorado,  (3) fewer patients requiring ventilator weaning or requiring wound care\u2014 conditions typically characteristic of LTCH patients\u2014and (4) patients that  are, on average, younger than most other LTCHs in the state of Colorado.  In addition, a 2014 study of LTCHs conducted for the Georgia  Department of Community Health found Shepherd Center was \u201cdistinctly  different\u201d from other LTCHs in the state of Georgia, and most LTCHs  nationwide."], "subsections": []}, {"section_title": "Patients with Conditions Treated at Qualifying Hospitals Could Also Receive Care in IRFs, But Differences in Payment Systems and Data Limitations Make a Direct Comparison Difficult", "paragraphs": ["Most stakeholders we interviewed suggested some IRFs provide  specialty care to patients with catastrophic spinal cord, acquired brain  injuries, or other paralyzing neuromuscular conditions. Most of the  stakeholders we interviewed noted that\u2014like the two qualifying  hospitals\u2014some IRFs have the expertise to treat patients with  catastrophic spinal cord, acquired brain injuries, or other paralyzing  neuromuscular conditions patients and thus, may also treat patients with  similar conditions. According to CMS officials, IRFs are specifically  designed to provide post-acute rehabilitation services to patients with  spinal cord injuries, brain injuries, and other neuromuscular conditions.  CMS officials noted that patients with these conditions typically respond  well to intensive rehabilitation therapy provided in a resource intensive  inpatient hospital environment and to the specific interdisciplinary  approach to care that is provided in the IRF setting. Stakeholders also  noted that patients with spinal cord injuries, brain injuries, and other  neuromuscular conditions may receive care in other settings. However,  some stakeholders noted that some of these providers\u2014such as skilled  nursing facilities\u2014generally do not offer the specialized care these  patients generally require.", "Differences in payment systems and data limitations make it difficult to  directly compare the attributes of Medicare beneficiaries discharged from  the two qualifying hospitals and IRFs, including the costs of care they  receive. Medicare uses separate payment systems to pay LTCHs and  IRFs, for care provided to beneficiaries. LTCHs are paid pre-determined  fixed amounts for care provided to Medicare beneficiaries, under the  LTCH PPS. Medicare beneficiaries treated in LTCHs are assigned to  diagnosis groups (MS-LTC-DRGs) for each stay\u2014based on the patient\u2019s  primary and secondary diagnoses, age, gender, discharge status, and  procedures performed. IRFs are also paid pre-determined fixed amounts  for care provided to Medicare beneficiaries, but under a separate  system\u2014IRF PPS. Medicare beneficiaries treated in IRFs are assigned to  case-mix groups\u2014based on age, and level of motor and cognitive  function\u2014and then further assigned to one of four tiers (within these  groups) based on the presence of specific comorbidities that may  increase their cost of care. According to CMS officials, because the  payment groups and assignments to those groups are different, it is  difficult to directly compare LTCH patients, classified in diagnosis groups,  with IRF patients, classified in case-mix groups. See Appendix II for more  information on these payment systems.", "MedPAC has previously reported the differences in patient assessment  tools used by post-acute care providers undermines Medicare\u2019s ability to  compare the patients admitted, costs of care, and outcomes beneficiaries  achieve in these settings, on a risk-adjusted basis. MedPAC has also  reported that while similar beneficiaries can receive care in each setting,  payments can differ considerably for comparable conditions, due to  differences in payment systems. It has made recommendations to address these issues. The Improving Medicare Post-Acute Care  Transformation Act of 2014 also requires the Secretary of HHS to collect  and analyze common patient assessment information and, in consultation  with MedPAC, submit a report to Congress recommending a post-acute  care PPS. Such efforts may make future comparison of beneficiaries,  costs of services, and outcomes of care across these settings possible."], "subsections": []}, {"section_title": "Some Information Suggests Similarities and Differences Between Qualifying Hospitals and IRFs that Specialize in Spinal Cord and Brain Injuries", "paragraphs": ["While data limitations make a direct comparison difficult, based on our  review of other data and information, and interviews with stakeholders,  we identified similarities and differences between the qualifying hospitals  and certain IRFs that provide specialty treatment for catastrophic spinal  cord injuries, acquired brain injuries, or other paralyzing neuromuscular  conditions. Key similarities and differences include the following:  Volume of services. Our review of Medicare claims data, other  information, and interviews with stakeholders indicate that\u2014similar to the  two qualifying hospitals\u2014some IRFs treat a high volume (at least 100) of  patients with complex spinal cord injury, brain injury, and other related  conditions. Officials from the two qualifying hospitals, as well as some  other stakeholders we interviewed\u2014including officials from the  Christopher & Dana Reeve Foundation and the Brain Injury Association of  America\u2014emphasized the importance of facilities treating a high volume  of patients with these specialized conditions, which can be an indicator of  expertise in treating these patients. Our review of Medicare claims data  for 1,148 IRFs in fiscal year 2016 identified 21 IRFs that treated at least  100 Medicare beneficiaries with non-traumatic and traumatic spinal cord  injuries and 109 IRFs that treated at least 100 Medicare beneficiaries with  non-traumatic and traumatic brain injuries.", "Our review of Medicare claims data indicated that, similar to the two  qualifying hospitals\u2014some IRFs also treat a high volume of patients with  \u201ccatastrophic\u201d injuries\u2014traumatic brain injury, traumatic spinal cord injury,  and major multiple traumas with brain or spinal cord injuries. Specifically,  we identified 25 IRFs that treated a high volume (at least 100) of  Medicare beneficiaries with catastrophic injuries, in fiscal year 2016. In  the absence of patient assessment data from the facilities, we did not  independently evaluate the level and severity of these patients\u2019 injuries,  which can vary due to the presence of other co-morbid conditions. The  Medicare case mix indexes we reviewed for these 25 IRFs indicated that,  relative to other IRFs, most of these facilities treat patients who are more  resource intensive.", "Specialty accreditation and designation as model systems. Like  Shepherd Center, some IRFs receive CARF-accreditation for specialty  programs to treat spinal cord and brain injuries. According to most  stakeholders, this accreditation indicates expertise in treating these  patients, as CARF International has established standards using  evidence-based practices, among other factors. Officials from the two  qualifying hospitals also noted CARF International has a specific focus on  quality and outcomes. However, officials from Shepherd Center noted  similarities in care and services offered at CARF-accredited facilities  would depend on the specialties for which they are certified.", "Most of the stakeholders we interviewed also noted that designation as a  NIDILRR model system is an indicator of similar expertise in treating  patients with spinal cord and brain injuries. According to the Model  Systems Knowledge Translation Center, spinal cord injury and brain  injury model systems are recognized as national leaders in medical  research and patient care and provide the highest level of comprehensive  specialty services from the point of injury through eventual re-entry into  full community life. While stakeholders we interviewed from NIDILRR  model systems indicated the model system designation is focused  primarily on research, rather than clinical care, most noted that model  systems\u2019 research often complements the facilities\u2019 clinical efforts to  address the unique needs of these patients. Officials from HHS\u2019s  Administration for Community Living also noted that all model system  grantees must provide a continuum of care\u2014emergency care, acute  medical care, acute medical rehabilitation, and post-acute care\u2014and that  can happen in various provider types. According to officials from the  qualifying hospitals and stakeholders from one other NIDILRR model  system we interviewed, Craig Hospital and Shepherd Center are the only  two LTCHs currently classified as spinal cord injury model systems; 12 of  14 spinal cord injury model systems are IRFs.", "Specialized programs and services. Similar to the two qualifying  hospitals, some IRFs may also offer specialized programs and services  for patients with brain and spinal cord injuries, but the availability of these  programs and services may vary by facility. Officials from some of the  IRFs that responded to our information request\u2014which included both  NIDILRR facilities and IRFs with CARF-accredited programs\u2014told us  they provide specialized programs and services for patients with similar  conditions as those treated at two qualifying hospitals, and sometimes  compete with the two qualifying hospitals for the same patients. For  example, each IRF reported having interdisciplinary treatment teams; the  capacity to provide medical management of medically complex and high  acuity patients with spinal cord injury, traumatic brain injury, or other  major multiple traumas associated with a brain or spinal cord injury; family  education and training; and skin and wound programs or services, among  other services. However, the availability of certain services\u2014including but  not limited to ventilator-dependent weaning programs, diaphragmatic  pacing, and outpatient programs for spinal cord and traumatic brain injury  patients\u2014varied by facility.", "Staff with specialized training and clinical expertise. Similar to the two  qualifying hospitals, most facilities that responded to our information  request also reported having physicians, nurses, and physical and  occupational therapists with specialty training in medical rehabilitation,  spinal cord, and/or brain injury. However, the number of staff with these  trainings, varied by facility. In comparison to the other facilities that  responded to our information request, the number of nurses and physical  and occupational therapists with these specialty trainings were generally  higher at Craig Hospital and Shepherd Center. According to an American  Spinal Injury Association consumer guideline that the Christopher & Dana  Reeve Foundation typically provides to spinal cord injury patients and  families, programs should regularly admit persons with spinal cord injury  each year, to develop and maintain the necessary skills to manage a  person with spinal cord injury, and a substantial portion of those admitted  should have traumatic injuries.", "Out-of-state Admissions. Officials from the two qualifying hospitals  emphasized they admit a significant number of patients from out-of-state,  and our review of information provided by the qualifying hospitals and a  select group of IRFs indicated the qualifying hospitals admit a higher  percentage of patients from out-of-state. Specifically, information provided  by these IRFs indicates that less than a quarter of patients admitted to  these facilities, in 2016, were from out-of-state. Information provided by  Craig Hospital and Shepherd Center indicate that about half of their  patients were admitted from out-of-state in 2016. Officials from the  Colorado Department of Health Care Policy & Financing also noted Craig  Hospital treats a higher percentage of out-of-state patients, compared to  IRFs in the state.", "Ability to treat medically complex patients. Officials from the two  qualifying hospitals told us they treat more medically complex patients  and provide a more complete range of medical services to spinal cord  and brain injury patients, not provided by most IRFs. Specifically, officials  from the two qualifying hospitals both noted they are able to treat patients  much sooner in their recovery process than most IRFs, due to their LTCH  status. Officials from the Shepherd Center noted that they have a 10-bed intensive care unit which allows them to take patients with certain injures  that some IRFs may not be equipped to admit\u2014such as patients requiring  advance medical management and advanced level procedural services  and monitoring. Information provided by Shepherd Center indicated that,  in calendar year 2017, approximately 20 percent of all inpatients were  admitted to this unit and 13 percent of all inpatients were internally  transferred to this unit after developing medical complications. According  to officials, Craig Hospital does not have an intensive care unit, but noted  their ability to similarly care for medically complex patients\u2014including  telemetry (e.g., specialized heart monitoring) and one-to-one nursing  care, if necessary. Most stakeholders we interviewed agreed that both  qualifying hospitals\u2019 LTCH status provides certain advantages over IRFs,  such as the ability to admit some medically complex patients earlier in the  recovery process and longer lengths of stay. Stakeholders from most of  the IRFs we interviewed also reported having the flexibility to admit some  medically complex patients requiring more advanced level monitoring and  resources earlier in the recovery process\u2014such as patients with  disorders of consciousness.", "Officials from the two qualifying hospitals also said they offer a continuum  of care that can meet patient\u2019s changing needs, without the need to  transfer them to different facilities. Information provided by Craig Hospital  indicated that 83 percent of patients treated at its facility, in 2016, were  discharged to home, 13 percent were discharged to another post-acute  care facility, and 3 percent were discharged to an acute care hospital. In  2016, approximately 91 percent of patients treated at Shepherd Center  were discharged to home, 7 percent were discharged to another post- acute care facility, and 2 percent were discharged to an acute care  hospital. Information provided by the IRFs that responded to our written  request varied by facility, but\u2014similar to the two qualifying hospitals\u2014 each facility discharged more than 65 percent of patients to home.", "IRF payment criteria. CMS and most other stakeholders we interviewed  noted that two Medicare payment policies applicable to IRFs, but not  LTCHs, may contribute to their different patient populations. Specifically,  to be classified for payment under Medicare\u2019s IRF PPS, at least 60  percent of the IRF\u2019s total inpatient population must require intensive  rehabilitative treatment for one or more of 13 conditions\u2014which includes  both spinal cord and brain injury. To be admitted to an IRF, Medicare  beneficiaries must reasonably be expected to actively participate in and  benefit from the intensive rehabilitation therapy program, typically  provided in IRFs. According to HHS, per industry standard, the intensive  rehabilitation therapy program is often demonstrated by providing three  hours of rehabilitation services per day for at least five days per week, but  this is not the only way such intensity can be demonstrated. Officials  from the two qualifying hospitals told us they generally use Medicare\u2019s  intensive rehabilitation requirement as a minimum standard for their  rehabilitation patients\u2014even though they are not held to this requirement,  for the purposes of Medicare payment\u2014but noted that some of their  patients may not meet this requirement, due to their medical complexity.", "Length of stay and site-neutral payment requirements, for LTCHs. As  previously noted, LTCHs\u2014including the two qualifying hospitals\u2014must  have an average length of stay of greater than 25 days; IRFs are not  subject to this requirement. The average length of stay for patients  discharged from the Craig Hospital was about 60 days, in fiscal year  2016, and the average length of stay for patients discharged from  Shepherd Center was about 53 days, in calendar year 2016.", "Stakeholders from the IRFs that responded to our information request  reported average lengths of stay ranging from 14 to 31 days, for patients  discharged in fiscal year 2016; the ranges of lengths of stay were slightly  higher for spinal cord injury and traumatic brain injury inpatients for the  IRFs, during the same period. LTCHs are also generally subject to site- neutral payment policy that is not applicable to IRFs and may decrease  LTCHs payments for certain discharges, under Medicare.", "Other services provided. In addition to these Medicare specific  differences, a few stakeholders we interviewed also noted the two  qualifying hospitals receive additional funding from their strong  philanthropic donor base that may allow them to provide other services  and resources, not covered by Medicare or offered at some IRFs. For  example, while a few IRFs that responded to our information request  reported offering housing for families of injured patients, the two qualifying  hospitals offer up to 30 days of free housing to families of newly injured  rehabilitation patients, if both the family and patient live more than 60  miles from the hospital. Officials from Shepherd Center told us their  revenues are supplemented by investment income and donor funds.  Craig Hospital has also established a foundation that supports the  hospital in achieving its goals through philanthropy."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS. HHS provided technical  comments, which we incorporated as appropriate. We also provided the  two qualifying hospitals summaries of information we collected from them,  to confirm the accuracy of statements included in our draft report. We  incorporated their comments, as appropriate.", "We are sending copies of this report to the Secretary of Health and  Human Services and other interested parties. In addition, the report will  be available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at farbj@gao.gov. Contact points for our Office  of Congressional Relations and Office of Public Affairs can be found on   the last page of this report. Other major contributors to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Methodology for Simulating Payments to Qualifying Hospitals", "paragraphs": ["This appendix describes our methodology for conducting simulations of  payments for the two qualifying hospitals."], "subsections": [{"section_title": "Simulations of Payments", "paragraphs": ["We used Medicare claims data to conduct simulations of payments for the  two qualifying hospitals. We first identified discharges at each hospital in  two baseline years\u2014federal fiscal years 2013 and 2016. We selected  fiscal year 2016 because it was the year with the most recent data  available at the time of our analysis, and we selected a second baseline  year because data for 2016 was different than data for other recent years.  For example, the number of discharges for one qualifying hospital  declined by nearly half between fiscal years 2013 and 2016. We chose  fiscal year 2013 because data from that year was used to help determine  which hospitals are subject to the temporary exception.", "To identify how to appropriately calculate the long-term care hospital  (LTCH) payment for each of these discharges in future payment years,  we reviewed applicable federal regulation and documents from the  Centers for Medicare & Medicaid Services (CMS) and the Medicare  Payment Advisory Commission (MedPAC), and interviewed officials from  both organizations. See table 4 for the relevant components in the  formulas, such as Medicare severity long-term care diagnosis related  group (MS-LTC-DRG) weights, identified from final rule tables.", "When conducting these simulations, we made the following assumptions:", "For simulated payments for payment policies in effect for fiscal years  2017 and 2018, we used the base rates, relative weights (e.g., the  MS-LTC-DRG weights), geometric mean length of stay, wage index,  geographic adjustment factor, fixed-loss amounts, and outlier  thresholds that were published in the final rule tables for LTCH and  inpatient prospective payment system (IPPS) hospitals\u2014also known  as acute care hospitals\u2014for each respective year. At the time we  began our analysis, this information was not known for fiscal years  2019 through 2021. We chose to use the fiscal year 2018 rates when  conducting simulations for payment policies in those years because  historical trends showed that annual changes were minimal\u2014about 1  percent. Therefore, to the extent that these values continue to change  over time, our findings may understate or overstate the amount that  the qualifying hospitals would have been paid in our baseline years  based on these future payment policies.", "The site-neutral payment policy did not apply to discharges from the  fiscal year 2013 baseline year. Therefore, we examined Medicare  claims data to determine whether each discharge would have met the  criteria to receive the LTCH standard rate in that year. Specifically, we  determined whether each discharge had an acute care hospital stay  that immediately preceded their LTCH stay. We then determined  whether the time at the acute care hospital included three or more  days in the intensive care unit or whether there was a code on the  LTCH claim that indicated at least 96 hours of mechanical ventilation  services were provided. Per Medicare\u2019s payment policy, we assumed  any discharge that met these two criteria would qualify for full LTCH  payment rate, unless the case was a psychiatric or rehabilitation stay,  as identified by the following MS-LTC-DRG codes: 876, 880, 881,  882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945, or 946.", "Under statute, unless 50 percent or more of the hospital\u2019s discharges  beginning during or after 2020 qualify for the standard rate, no  subsequent payments will be made to a hospital at that rate.  Therefore, when calculating simulated payments for fiscal year 2021,  we applied the 50 percent threshold. At the time of our analysis, CMS  had not yet finalized this policy through rule-making. As of November  2018, CMS officials told us that it is unlikely that any payment  adjustment under this provision would apply until 2022 because the  percentage cannot be determined until after an LTCH\u2019s cost reporting  period has ended and data have been submitted.", "Shepherd Center\u2019s fiscal year is different than the federal fiscal year.", "Therefore, the variables used to determine whether discharges in  federal fiscal year 2016 met criteria to receive the standard rate were  not available to use for some of the discharges that year. Of those  discharges, we assumed that the same percentage of discharges that  met the criteria to receive the standard rate in Shepherd\u2019s fiscal  year\u201430 percent\u2014met the criteria in federal fiscal year 2016.", "When calculating site-neutral payments, we assumed that each  discharge would be paid at a rate comparable to that for acute care  hospitals\u2014the IPPS comparable amount rate. Site-neutral payments  may also be based on the estimated cost-of-care, if it is lower than the  IPPS comparable amount rate. However, over 90 percent of  discharges at the qualifying hospitals were paid at the IPPS  comparable amount rate in fiscal year 2016.", "Per CMS\u2019s recommendation, we applied the cost-to-charge ratio that  was effective October 1, 2017, for each qualifying hospital, regardless  of discharge date. For Craig Hospital this value was 0.442 and for  Shepherd Center this value was 0.464. According to CMS officials, in  general, these values do not change significantly when they are  updated during the fiscal year. Therefore, they believe that using the  values effective at the start of the fiscal year is a reasonable  assumption.", "We excluded indirect medical education adjustments and  disproportionate share hospital payments that are part of the IPPS  comparable amount rate because, according to CMS, they were  unlikely to have much impact for these hospitals.", "CMS reviewed each of these assumptions and agreed they were  reasonable for purposes of our analysis. CMS also verified that we were  correctly applying the formulas for calculating these payments and using  the appropriate values from the final rules."], "subsections": []}]}, {"section_title": "Appendix II: Calculating Medicare Payments for Long-Term Care Hospitals and Inpatient Rehabilitation Facilities", "paragraphs": ["Figures 3 and 4 illustrate the methodology for calculating Medicare  payments under the long-term care hospital (LTCH) prospective payment  system (PPS) and the inpatient rehabilitation facility (IRF) PPS,  respectively, as reported by the Medicare Payment Advisory Commission  (MedPAC)."], "subsections": []}, {"section_title": "Appendix III: List of Common Diagnosis Groups for Long-Term Care Hospitals (LTCH)", "paragraphs": ["Appendix III: List of Common Diagnosis  Groups for Long-Term Care Hospitals (LTCH)", "In its March 2018 annual report to the Congress, the Medicare Payment  Advisory Commission (MedPAC) reported that 20 diagnosis groups  accounted for over 61 percent of LTCH discharges at both for-profit and  not-for-profit facilities, in fiscal year 2016. Table 5 provides a list of these  20 diagnosis groups."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgments", "paragraphs": ["In addition to the contact named above, Will Simerl, Assistant Director;  Kathy King; Amy Leone, Analyst-in-Charge; Todd Anderson; Sam  Amrhein; LaKendra Beard; Rich Lipinski; Jennifer Rudisill; and Eric  Wedum made key contributions to this report. Also contributing were Leia  Dickerson, Diona Martyn, Vikki Porter, and Lisa Rogers."], "subsections": []}]}], "fastfact": ["After an injury or illness, Medicare patients who need long-term care may be able to get that care at different types of facilities.", "Medicare payments to long-term care hospital facilities were typically higher than payments to other facilities because long-term care can take more resources, such as specialized equipment and staff.", "A 2013 law phased in lower Medicare payments to long-term care hospitals for patients who could be treated in less costly facilities. Two hospitals focusing on spinal cord care qualified for an exception to the new payments in fiscal years 2018-19. We reviewed the effects of the exception."]}
{"id": "GAO-18-209T", "url": "https://www.gao.gov/products/GAO-18-209T", "title": "Strategic Petroleum Reserve: Preliminary Observations on the Emergency Oil Stockpile", "published_date": "2017-11-02T00:00:00", "released_date": "2017-11-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Over 4 decades ago, Congress authorized the SPR\u2014the world's largest government-owned stockpile of emergency oil\u2014to release oil to the market during supply disruptions and protect the U.S. economy from damage. The SPR is managed by DOE. According to DOE's strategic plan, the SPR benefits the nation by providing an insurance policy against actual and potential interruptions in U.S. petroleum supplies caused by international turmoil and hurricanes, among other things. The SPR also helps the United States meet its obligations, including to holding reserves of oil or refined petroleum products equaling 90 days of net petroleum imports, as one of 29 members of the IEA\u2014an international energy forum established to help members respond to major oil supply disruptions. The SPR held almost 674 million barrels of oil at the end of September 2017.", "This testimony primarily focuses on preliminary observations from ongoing work on (1) DOE's use of the SPR in response to domestic petroleum supply disruptions, (2) the extent to which the SPR is able to respond to domestic petroleum supply disruptions, and (3) how other IEA members structure their strategic reserves and extent to which DOE has examined these structures. GAO reviewed past work from August 2006 through September 2014 and DOE and IEA documentation. GAO also interviewed DOE and IEA officials, as part of GAO's ongoing work."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's preliminary analysis of Department of Energy (DOE) documents indicates that DOE has primarily used the Strategic Petroleum Reserve (SPR) to an exchange of oil to companies in response to domestic supply disruptions, such as hurricanes. In the event of a supply disruption, the SPR can supply the market by either exchanging oil for an equal quantity of oil plus an additional amount as a premium to be returned to the SPR in the future or selling stored oil. Since the SPR was authorized in 1975, DOE has released oil 11 times in response to domestic supply disruptions. All but one were in the form of an exchange, including six exchanges in response to hurricanes. For example, Hurricane Harvey in 2017 closed or restricted ports through which 2 million barrels of oil per day were imported. In response, DOE exchanged 5 million barrels of oil to Gulf Coast refineries. According to DOE officials, exchanges from the SPR allowed refineries to operate, ensuring continued production of refined petroleum products for use by consumers.", "Based on past GAO work and preliminary observations, the SPR is limited in its ability to respond to domestic supply disruptions, including severe weather events, for three main reasons. First, as GAO reported in September 2014 (GAO-14-807), the SPR is almost entirely composed of oil and not refined products like gasoline, which may not be effective in responding to all disruptions. For example, following Hurricanes Katrina and Rita, nearly 30 percent of U.S. refining capacity was shut down for weeks, disrupting supplies of gasoline and other petroleum products. The SPR could not mitigate the effects of disrupted supplies. Second, as GAO also reported in September 2014, the SPR is nearly entirely located in the Gulf Coast, so it may not be responsive to disruptions in other regions, such as the West Coast. Third, GAO's ongoing work reviewed DOE and energy task force reports that found that statutory authorities governing SPR releases may inhibit their use for regional disruptions.", "GAO's preliminary observations show that other International Energy Agency (IEA) member countries generally have used one of five reserve structures configured in various ways. The structures are defined by whether countries hold either public reserves (e.g., the SPR), industry reserves (e.g., placing reserve holding requirements on industry), or a combination. Most IEA members hold refined petroleum products in reserve, with many members holding at least a third of their reserves in these products. For example, in Germany, 55 percent of reserves are in petroleum products. In addition, some IEA members' reserves are geographically dispersed in their countries to respond to disruptions. For example, France has reserves in each of its seven regions and has used these to address fuel supply disruptions as a result of recent domestic strikes. DOE has taken some steps to evaluate other structures but has not formally evaluated the structures of other countries in over 35 years. In addition, DOE contractors studied the feasibility of regional product reserves in the Southeast and West Coast regions to address supply vulnerabilities from hurricanes and earthquakes, respectively but DOE did not finalize the two 2015 studies. In 2016, DOE released a long- term strategic review of the SPR that Congress had required and GAO recommended. However, DOE did not include the results of the two studies in its 2016 review."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations but will consider making them, as appropriate, as it finalizes its work."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our work on energy resilience,  specifically preliminary observations from our ongoing work looking at the  Strategic Petroleum Reserve (SPR)\u2014the world\u2019s largest government  owned stockpile of emergency oil. U.S. energy systems are vulnerable to  a range of potential disruptions, including from international events, such  as conflicts or terrorism incidents that may affect oil supplies, and  domestic ones, such as from hurricanes and other severe weather  events, which can disrupt oil and gas supplies and cause temporary fuel  or electricity shortages. Because of the central role that energy plays in  the U.S. economy and the configuration of the nation\u2019s energy system,  vulnerabilities may have wide-ranging implications for energy production  and use, ultimately affecting transportation, industrial, agricultural, and  other critical sectors of the economy that require reliable energy. We have  reported on energy vulnerabilities as well as on federal efforts to address  them. Recent experience with Hurricanes Harvey, Irma, and Maria  underscores these vulnerabilities. In addition to damaging infrastructure  and property, and causing the loss of life, the hurricanes disrupted the  operations of refineries representing at least 15 percent of the nation\u2019s  refining capacity, affected fuel distribution, and left millions of U.S.  citizens without electricity.", "After the Arab oil embargo, over 4 decades ago, Congress authorized the  creation of the SPR to include the ability to release oil to the market  during supply disruptions and protect the U.S. economy from damage.  The SPR is managed by the Department of Energy (DOE). The SPR held  673.7 million barrels of oil as of September 30, 2017 which is worth about  $38.4 billion at prices as of October 30, 2017. According to DOE\u2019s 2014- 2018 strategic plan, the SPR benefits the nation by providing an  insurance policy against actual and potential interruptions in petroleum  supplies caused by international turmoil, hurricanes, accidents, or terrorist  activities. Releasing SPR oil during a disruption is intended to mitigate  damage to the economy by replacing disrupted oil supplies, thereby  reducing price increases that can result in economic damage. When  processed, oil is converted into refined petroleum products such as  gasoline and diesel fuel.", "The SPR also helps the United States meet its stockholding obligations  as a member of the International Energy Agency (IEA)\u2014an international  energy forum of 29 member nations established in 1974 to help members  respond to major oil supply disruptions. IEA members have agreed to  fulfill obligations, including holding reserves of oil or refined petroleum  products equaling 90 days of net petroleum imports, and to release these  reserves, utilize demand restraint measures, increase surge production,  or utilize fuel switching during an IEA collective action in response to oil  supply disruptions. In September 2014, we found that changes including  increasing oil production, shrinking oil imports, and changing oil and fuel  distribution patterns have important implications for the SPR. In that  report, we concluded that changing market conditions have implications  for the size, location, and composition of the SPR, and recommended that  the Secretary of Energy undertake a comprehensive reexamination of the  appropriate size of the SPR. In addition, in 2015, Congress required the  Secretary of Energy to complete a long-range strategic review of the  SPR. DOE completed its review in August 2016 which reviewed the size,  composition, infrastructure needs, and distribution capability of the  reserve.", "My statement today is based primarily on preliminary observations from  ongoing work and focuses on (1) how DOE has used the SPR to address  domestic petroleum supply disruptions; (2) the extent to which the SPR is  able to respond to domestic petroleum supply disruptions; and (3) how  other IEA members have structured their strategic reserves and the  extent to which DOE has evaluated these structures.", "As part of our ongoing work, we reviewed reports and studies, including  by DOE, IEA, and the U.S. Energy Information Administration (EIA) and  interviewed DOE and IEA officials. Specifically, to describe how DOE has  used the SPR to address domestic petroleum supply disruptions, we  reviewed DOE, IEA, and EIA documents. To examine the extent to which  the SPR is able to respond to domestic petroleum supply disruptions, we  reviewed documents and reports from DOE, IEA, and DOE\u2019s Inspector  General and interviewed DOE officials. We also reviewed our past work  from August 2006 through September 2014. To describe how other IEA  members have structured their strategic reserve systems to respond to  disruptions, we reviewed IEA documents on members\u2019 reserve systems,  reviewed a French document on its reserve system, and interviewed IEA  officials about these systems. To describe the extent to which DOE has  evaluated these structured, we reviewed DOE documents and  interviewed DOE officials. We shared the information in this statement  with DOE, and the agency provided comments.", "We are conducting the work upon which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Strategic Petroleum Reserve", "paragraphs": ["The Energy Policy and Conservation Act (EPCA) of 1975 authorized the  SPR, partly in response to the Arab oil embargo of 1973 to 1974 that  caused a shortfall in the international oil market. The SPR is owned by  the federal government, managed by DOE\u2019s Office of Petroleum  Reserves, and maintained by Fluor Federal Petroleum Operations LLC.  The SPR stores oil in underground salt caverns along the Gulf Coast in  Louisiana and Texas. DOE established an initial target capacity for the  SPR of 500 million barrels based on U.S. import levels and implemented  a phased approach to create large underground oil storage sites in salt  formations, to reach a physical storage capacity of 750 million barrels.  The SPR currently maintains four storage sites with a physical capacity of  713.5 million barrels.", "Three recent laws required sales of oil from the SPR to fund its  modernization and other national priorities. The Bipartisan Budget Act of  2015 provided for the drawdown and sale of 58 million barrels of oil from  fiscal years 2018 through 2025 and authorized the sale of up to $2 billion  worth of oil through fiscal year 2020 to be used for an SPR modernization  program. The Fixing America\u2019s Surface Transportation Act provided for  the drawdown and sale of 66 million barrels of oil from fiscal years 2023  through 2025. The 21st Century Cures Act provided for the drawdown  and sale of 25 million barrels from fiscal years 2017 through 2019. DOE  estimates that, as a result of these sales, the SPR will hold between 506  and 513 million barrels of oil by 2025. For member countries to meet net  petroleum import obligations, the IEA counts both public and private oil  reserves, although the United States meets its IEA obligation solely  through the SPR. As of July 2017, according to IEA data, the SPR held  the equivalent of 141 days of import protection and U.S. private oil held  the equivalent of an additional 216 days, for a total of about 356 days.  Based on EIA projections of net imports, between 506 and 513 million  barrels of oil would be equivalent to about 242 and 245 days of net  imports in 2025."], "subsections": []}, {"section_title": "Regional Refined Product Reserves", "paragraphs": ["The United States has two regional refined product reserves\u2014Northeast  Home Heating Oil Reserve and Northeast Gasoline Supply Reserve.", "The Northeast Home Heating Oil Reserve, which is not part of the  SPR, holds 1 million barrels of ultra-low sulfur distillate, used for  heating oil, for homes and businesses in the northeastern United  States, a region heavily dependent upon the use of heating oil,  according to DOE\u2019s website. The distillate is stored in leased  commercial storage in terminals located in three states: Connecticut,  Massachusetts, and New Jersey. In 2000, President Clinton directed  the creation of the reserve to hold approximately 10 days of inventory,  the time required for ships to carry additional heating oil from the Gulf  of Mexico to New York Harbor.", "The Northeast Gasoline Supply Reserve, a part of the SPR, holds a  1 million barrel supply of gasoline for consumers in the northeastern  United States. According to DOE\u2019s website, this region is particularly  vulnerable to gasoline disruptions as a result of hurricanes and other  natural events. In response to Superstorm Sandy, which caused  widespread gasoline shortages in the region in 2012, DOE conducted  a test sale of the SPR and used a portion of the proceeds from the  sale to create the reserve in 2014. The gasoline is stored in leased  commercial storage in terminals located in three states: Maine,  Massachusetts, and New Jersey."], "subsections": []}, {"section_title": "Statutory Release Authority for the SPR", "paragraphs": ["Under conditions prescribed by EPCA, as amended, the President has  discretion to authorize the release of petroleum products from the SPR to  minimize significant supply disruptions. In the event of an oil supply  disruption, the SPR can supply the market by selling stored oil. Should  the President order an emergency sale of SPR oil, DOE conducts a public  sale, evaluates and selects offers, and awards contracts to the highest  qualified bidders. Purchasers are responsible for making their own  arrangements for the transport of the SPR oil to its final destination. The  Secretary of Energy also is authorized to release petroleum products from  the SPR through an exchange for the purpose of acquiring oil for the  SPR. According to DOE officials, this authority is sometimes utilized in  oil supply disruptions when a specific volume of SPR oil is provided to a  private sector company in an emergency exchange for an equal quantity  of oil plus an additional amount as a premium to be returned to the SPR  in the future. According to DOE\u2019s website, emergency exchanges are  generally requested by a company after an event outside the control of  the company, such as a hurricane, disrupts commercial oil supplies. The  Secretary of Energy is also authorized to carry out test drawdowns  through a sale or exchange of petroleum products to evaluate SPR\u2019s  drawdown and sales procedures. When oil is released from the SPR, it  flows through commercial pipelines or on waterborne vessels to  refineries, where it is converted into gasoline and other petroleum  products, and then transported to distribution centers for sale to the  public."], "subsections": []}, {"section_title": "Changing Petroleum Markets", "paragraphs": ["Petroleum markets have changed substantially in the 40 years since the  establishment of the SPR, including increases in global markets,  increases in domestic oil production, and declines in net petroleum  imports.", "Increases in global markets. At the time of the Arab oil embargo,  price controls in the United States prevented the prices of oil and  petroleum products from increasing as much as they otherwise might  have, contributing to a physical oil shortage that caused long lines at  gasoline stations throughout the United States. Now that the oil  market is global, the price of oil is determined in the world market,  primarily on the basis of supply and demand. In the absence of price  controls, scarcity is generally expressed in the form of higher prices,  as purchasers are free to bid as high as they want to secure oil  supply. In a global market, an oil supply disruption anywhere in the  world raises prices everywhere. Releasing oil reserves during a  disruption provides a global benefit by reducing oil prices in the world  market.", "Increases in domestic oil production. Reversing a decades-long  decline, U.S. oil production has generally increased in recent years.  According to EIA data, U.S. production of oil reached its highest level  in 1970 and generally declined through 2008, reaching a level of  almost one-half of its peak. During this time, the United States  increasingly relied on imported oil to meet growing domestic energy  needs. However, recent improvements in technologies have allowed  producers to extract oil from shale formations that were previously  considered to be inaccessible because traditional techniques did not  yield sufficient amounts for economically viable production. In  particular, the application of horizontal drilling techniques and  hydraulic fracturing\u2014a process that injects a combination of water,  sand, and chemical additives under high pressure to create and  maintain fractures in underground rock formations that allow oil and  natural gas to flow\u2014have increased U.S. oil and natural gas  production.", "Declines in net petroleum imports. One measure of the economy\u2019s  vulnerability to oil supply disruptions is to assess net petroleum  imports\u2014that is, imports minus exports. Net petroleum imports have  declined by over 60 percent from a peak of about 12.5 million barrels  per day in 2005 to about 4.8 million barrels per day in 2016. In 2006,  net imports were expected to increase in the future, increasing the  country\u2019s reliance on foreign oil. However, imports have declined  since then and, according to EIA\u2019s most recent forecast, are expected  to remain well below 2005 import levels into the future. Canada and  Mexico are the nation\u2019s major foreign sources for imported oil.  Furthermore, the United States has increased its exports of oil and  refined petroleum products."], "subsections": []}]}, {"section_title": "DOE Has Primarily Used Exchanges from the SPR to Private Companies to Address Domestic Petroleum Disruptions", "paragraphs": ["To quantify how DOE has used the SPR to address domestic petroleum  supply disruptions, we reviewed DOE and EIA documents. We also  reviewed our past work from August 2006 to January 2014.", "Our preliminary analysis indicates that DOE has primarily used  exchanges to private companies in response to domestic supply  disruptions such as hurricanes and other events. DOE has released oil 24  times from 1985 through September 2017, including 11 releases in  response to domestic supply disruptions. Of these 11 releases, 10 were  exchanges, including 6 exchanges in response to hurricanes. One of the  11 releases was an SPR sale in response to Hurricane Katrina, which  was part of an IEA coordinated action release. Historic releases from the  SPR are shown in figure 1.", "Our preliminary analysis also indicates that the six exchanges from DOE  to U.S. refineries in response to hurricanes totaled about 28 million  barrels.", "Based on our preliminary analysis of DOE documents, most recently,  in response to Hurricane Harvey in 2017, DOE exchanged 5 million  barrels of oil to Gulf Coast refineries that requested supplies. Refinery  operations largely depend on a supply of oil and feedstocks.  Hurricane Harvey closed or restricted ports through which 2 million  barrels of oil per day were imported, and several refineries had no  supply options except for SPR oil. According to DOE officials,  exchanges from the SPR have allowed refineries to continue to  operate until alternative supply sources became available, ensuring  continued production of refined petroleum products for use by  consumers.", "Based on our preliminary analysis of DOE documents, DOE\u2019s most  significant response to a hurricane was in 2005 following Hurricane  Katrina. As we reported in January 2014, oil platforms were  evacuated and damaged, virtually shutting down all oil production in  the Gulf region as a result of the hurricane. Based on our  preliminary analysis of DOE documents, exchanges from the SPR,  totaling 9.8 million barrels of oil, helped refineries offset this short-term  physical supply disruption at the beginning of the supply chain,  thereby helping to moderate the impact of the production shutdown on  U.S. oil supplies. In addition to these exchanges, DOE also  participated in an IEA collective action that was called in response to  Hurricane Katrina by selling 11 million barrels of oil from the SPR, and  IEA member countries delivered and sold much needed gasoline and  other products to the United States. In total, DOE sold or exchanged  20.8 million barrels of oil from the SPR.", "Our preliminary analysis of DOE documents and reports also showed that  although almost all of DOE\u2019s releases in response to domestic supply  disruptions have been from the SPR, DOE also used the Northeast Home  Heating Oil Reserve in response to Superstorm Sandy in 2012. According  to DOE\u2019s website, the agency transferred approximately 120,000 barrels  of fuel to the Department of Defense to help provide fuel for first  responders."], "subsections": []}, {"section_title": "The SPR Is Limited in Its Ability to Respond to Domestic Disruptions", "paragraphs": ["Based on our past work and preliminary observations, the SPR is limited  in its ability to respond to domestic petroleum supply disruptions for three  main reasons. First, as we reported in September 2014, reserves are  almost entirely composed of oil and not refined products, which may not  be effective in responding to all disruptions that affect the refining  sector. Second, as we reported in September 2014, reserves are nearly  entirely located in one region, the Gulf Coast, which may limit  responsiveness to disruptions in other regions. Third, during the course of  our ongoing work, we reviewed DOE and energy task force reports that  found that the statutory authorities governing SPR releases may inhibit  their use for regional disruptions.", "Composition: As we reported in September 2014, the SPR is almost  entirely composed of oil, which may not be effective in responding to  all disruptions that affect the refining sector. In September 2014, we  reported that many recent economic risks associated with supply  disruptions have originated from the refining and distribution sectors,  which provide refined products, such as gasoline, rather than from  shortages of oil. Oil reserves are of limited use in such instances.  We reported in May 2009 that following Hurricanes Katrina and Rita,  nearly 30 percent of U.S. refining capacity was shut down for weeks,  disrupting supplies of gasoline and other products. The SPR could  not mitigate the effects of disrupted supplies because it holds oil. As  of September 2017, over 99 percent of the SPR and its Northeast  Gasoline Supply Reserve component (about 674 of 675 million  barrels) is held as oil rather than as refined products, such as gasoline  and diesel. Moreover, Gulf Coast hurricanes severely impacted  refinery operations, such as Hurricane Katrina in 2005, Hurricane Ike  and Hurricane Gustav in 2008, and Hurricane Harvey this year.  According to DOE officials, oil reserves are not able to mitigate the  potential effects of large-scale Gulf Coast refinery outages that may  impact refined product deliveries.", "Location: As we reported in September 2014, the SPR is nearly  entirely located in one region, the Gulf Coast, which may limit its  ability to respond to disruptions in other regions. In the Gulf Coast,  the SPR is located close to a major refining center as well as to  distribution points for tankers, barges, and pipelines that can carry oil  from it to refineries in other regions of the country. Most of the system  of oil pipelines in the United States was constructed in the 1950s,  1960s, and 1970s to accommodate the needs of the refining sector  and demand centers at the time. Given the SPR\u2019s current location in  the Gulf Coast, transporting oil from the reserve may impact  commercial distribution of oil. Based on our ongoing work, according  to DOE\u2019s 2016 long-term strategic review of the SPR, the agency  reported that the expanding North American oil production and the  resulting shifts in how oil is transported around the country have  reduced the SPR\u2019s ability to add incremental barrels of oil to the  market under certain scenarios in the event of an oil supply crisis.  This means that while the SPR remains connected to physical assets  that could bring oil to the market, in many cases, forcing SPR oil into  the distribution system would result in an offsetting reduction in  domestic commercial oil flows. As we reported in September 2014, it  may be more difficult to move oil from the SPR to refineries in certain  regions of the United States. For example, since no pipelines connect  the SPR to the West Coast, supplies of petroleum products and oil  must be shipped by pipeline, truck, or barge from other domestic  regions or by tanker from foreign countries. Such modes of transport  are slower and more costly than via pipelines. For example, it can  take about 2 weeks for a vessel to travel from the Gulf Coast to Los  Angeles\u2014including transit time through the Panama Canal.", "Statutory release authorities: In the course of our ongoing work, we  reviewed DOE and energy task force reports that found that the  statutory authorities governing SPR releases may inhibit their use for  regional disruptions. DOE is authorized to release petroleum distillate  (fuel) from the Northeast Home Heating Oil Reserve upon a finding by  the President of a severe energy supply interruption that includes a  dislocation in the heating oil market or other regional supply  shortage. On the other hand, because the Northeast Gasoline  Supply Reserve is a part of the SPR, DOE can release gasoline from  that reserve only after the President makes the statutorily required  findings for release from the SPR, which do not explicitly include the  existence of a regional supply shortage. According to DOE\u2019s 2016  long-term strategic review of the SPR, a regional product reserve is  meant to address regional supply shortages, whereas the SPR of  which the Northeast Gasoline Supply Reserve is a part of, is meant to  address severe energy supply interruptions that have a national  impact. As a result, according to DOE\u2019s 2016 long-term strategic  review of the SPR, in practice, this means that the release of the  gasoline reserve would have to have a national impact. The  Quadrennial Energy Review of 2015 recommended that Congress  integrate the authorities of the President to release products from the  regional product reserves\u2014the Northeast Home Heating Oil Reserve  and Northeast Gasoline Supply Reserve\u2014into a single, unified  authority by amending the trigger for the release of fuel from the two  refined product reserves so that they are aligned and properly suited  to the purpose of a product reserve, as opposed to an oil reserve.", "As discussed, based on our preliminary observations, DOE has used the  SPR in response to domestic supply disruptions, but the effectiveness of  these releases is unclear because DOE has not formally assessed all of  them. DOE has exchanged about 28 million barrels of oil in response to  hurricanes, but we found only two reports assessing DOE\u2019s response to  Hurricanes Gustav, Ike, Katrina, and Rita, and it is unclear whether DOE  has examined other responses. According to a 2006 DOE Inspector  General report, DOE used the SPR and its assets with great  effectiveness to address emergency energy needs in the crises  surrounding Hurricanes Katrina and Rita,  but the concentration of SPR  sites along the Gulf Coast meant the United States also had to rely on  refined petroleum products from Europe. The report noted that despite  being in the path of the hurricanes\u2019 destruction, the SPR promptly fulfilled  requests for oil from refineries suffering from storm-related supply  shortages. However, the damage caused by Hurricane Katrina  demonstrated that the concentration of refineries on the Gulf Coast and  resulting damage to pipelines left the United States to rely on imports of  refined petroleum products from Europe, as part of an IEA collective  response. Consequently, regions experienced a shortage of gasoline, and  prices rose. DOE testified in 2009 that despite a response from the SPR  and IEA, some markets south of Virginia and north of Florida could not be  immediately supplied with refined products due to a lack of infrastructure  to receive and distribute imports from the Atlantic coast to inland  population centers. Exchanges with multiple refiners totaling 5.4 million  barrels of SPR oil were authorized to Hurricanes Gustav and Ike in 2008.  DOE assessed this response and submitted a report to Congress in  2009. According to DOE\u2019s 2009 report, the exchanges conducted in  September and October 2008 were successful in providing emergency  petroleum supplies to refiners experiencing shortages caused by  Hurricanes Gustav and Ike.", "As we reported in May 2009, as originally enacted, EPCA envisioned the  possibility that the SPR would include a variety of petroleum products  stored at locations across the country. In a 2009 hearing, the then  Deputy Assistant Secretary for Petroleum Reserves testified that DOE still  considers a large SPR focused on oil storage to be the best way to  protect the nation from the negative impacts of a short-term international  interruption to U.S. oil imports; however, the hurricanes of 2005 and 2008  showed that the SPR may be limited in its ability to address some short- term interruptions to domestic refined products supply and distribution  infrastructure."], "subsections": []}, {"section_title": "Other IEA Members Structure Their Reserves Differently, with Some Holding Industry Reserves and Refined Products, and DOE Has Taken Steps to Explore These Structures", "paragraphs": ["Based on information reviewed during the course of our ongoing work, to  respond to disruptions, 27 of the 29 IEA member countries use one of five  reserve structures, also known as stockholding structures, in which these  countries hold public reserves, industry reserves, or a combination of  these. The five structures are shown in figure 2. Also, most members  hold refined petroleum products, with many members holding at least a  third of their reserves in refined petroleum products. Some members hold  their refined petroleum products in different regions across their country  to respond to disruptions.", "Based on our preliminary analysis of information on the 29 IEA member  countries, 18 place a stockholding obligation on industry either exclusively  or in part to meet their total emergency reserve needs. Most of these  countries distribute the stockholding obligation in proportion to  companies\u2019 share of oil imports or of sales in the domestic market.  However, several member countries instead impose a higher obligation  on refineries because of their high amount of operating oil.", "According to a 2014 IEA report, most IEA members hold some amount  of refined petroleum products, and a European Union (EU) directive  generally requires EU members to ensure that at least one-third of their  stockholding obligation is held in the form of refined petroleum products.  For example, according to the IEA\u2019s website, Germany\u2019s stockholding  agency, Erdolbevorratungsverband (EBV), holds 55 percent of its reserve  in refined petroleum products such as gasoline, diesel fuel, and light  heating oil. In contrast, the United States holds almost all of its reserves  in oil rather than refined petroleum products.", "Some IEA member countries geographically disperse their reserves of  refined petroleum products to be able to respond to domestic disruptions.  For example, according to the IEA\u2019s website, to maintain a wide  geographical distribution of emergency reserves, the French stockholding  agency stores refined petroleum products in each of its seven geographic  zones. Moreover, according to the IEA\u2019s website, France\u2019s agency  stores petroleum product reserves in each zone; reserves in each zone  should represent specified amounts based on consumption in order to  respond to emergencies. During a labor strike in December 2013,  France used its emergency reserves to supply local gas stations when  delivery of fuel was impeded for a prolonged period of time, according to  a French document. In another example, the IEA reported that Germany  holds petroleum product reserves in several regions in the country and  that the reserves are to be distributed throughout Germany, so that a  minimum reserve equivalent to a 15-day supply is maintained in each of  five designated supply areas. The rationale for this is to prevent  logistical bottlenecks that could occur if all emergency reserves were  stored centrally, according to a 2014 IEA report.", "Based on our preliminary observations, DOE has taken some steps to  evaluate different structures for holding reserves. However, the agency  has not formally evaluated other countries\u2019 structures in over 35 years  and has not finalized its 2015 studies on regional petroleum product  reserves. According to DOE officials, the agency explored the feasibility  of adopting the industry structure shortly after creating the SPR and  concluded that this and other structures were not feasible in the United  States. In 1980, DOE studied the feasibility of adopting the agency  structure, which is the most similar to the SPR since the only major  difference is how the reserve is funded, according to DOE officials.  According to IEA documents, in the agency structure, generally the  reserve is funded by a tax or levy on products or industry, which is  passed down to the consumer. In contrast, the SPR is funded through  congressional appropriations. However, DOE officials we interviewed  cautioned that the agency has not reassessed its findings from 35 years  ago. As mentioned above, in 2016 DOE reassessed the SPR in light of  the changing global oil market, but this assessment did not include a  review of other IEA countries\u2019 structures.", "Our preliminary review indicates that DOE examined the feasibility of  additional regional petroleum product reserves in two 2015 studies, but it  did not finalize these studies or expand the SPR to include additional  reserves. In September 2014, we reported that DOE officials told us they  were conducting a regional fuel resiliency study that would provide  insights into whether there is a need for additional regional product  reserves and, if so, where these reserves should be located. The  Quadrennial Energy Review of 2015 recommended that the agency  analyze the need for additional or expanded regional product reserves by  undertaking updated cost-benefit analyses for all of the regions of the  United States that have been identified as vulnerable to fuel supply  disruptions. Figure 3 illustrates vulnerabilities that DOE identified in 2014.", "In response to the 2015 recommendation, DOE contractors studied the  feasibility of additional regional petroleum product reserves, as part of the  SPR, in the U.S. Southeast and West Coast regions to address supply  vulnerabilities from hurricanes and earthquakes, respectively. According  to DOE officials, weather events in the Southeast are of higher probability  but lower consequence, and events in the West Coast are of lower  probability but higher consequence. DOE did not finalize its 2015 studies  on regional petroleum product reserves and make them publicly available.", "According to DOE officials, because consensus could not be reached  within the Administration on several issues associated with the refined  product reserve studies, these studies were not included as part of DOE\u2019s  2016 long-term strategic review of the SPR. Our ongoing work indicates  that DOE\u2019s 2016 long-term strategic review of the SPR did not account for  the risks of domestic supply disruptions as a factor in determining the  appropriate size, location, and composition of the SPR. Prior to the two  2015 studies, in 2011, DOE carried out a cost-benefit study of the  establishment of a refined product reserve in the Southeast and  estimated that such a reserve would reduce the average gasoline price  rise by 50 percent to 70 percent in the weeks immediately after a  hurricane landfall, resulting in consumer cost savings, according to the  Quadrennial Energy Review of 2015.", "In closing, I note that we are continuing our ongoing work examining  issues that may help inform future considerations for the SPR. Given the  constrained budget environment and the evolving nature of energy  markets and their vulnerabilities, it is important that DOE ensures the  SPR is an efficient and effective use of federal resources. We look  forward to continuing our work to determine whether additional DOE  actions may be warranted to promote this objective.", "Chairman Upton, Ranking Member Rush, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Frank Rusco, Director, Natural Resources and Environment, at  (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Key contributors to this testimony include Quindi  Franco, Assistant Director; Philip Farah, Ellen Fried, Nkenge Gibson,  Cindy Gilbert, Gregory Marchand, Patricia Moye, Camille Pease, Oliver  Richard, Danny Royer, Rachel Stoiko, Marie Suding, and Kiki  Theodoropoulos.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Congress created the Strategic Petroleum Reserve more than 4 decades ago to release oil during supply disruptions and protect the U.S. economy.", "In this testimony, we noted that since then, oil has been released 11 times in response to domestic disruptions, including 6 caused by hurricanes.", "However, the reserve\u2019s ability to respond is limited. We found 3 main reasons:", "it is almost entirely made up of unrefined oil, and refineries may also be disrupted;", "almost all reserve storage sites are on the Gulf Coast, potentially complicating distribution; and,", "the law generally limits releases to times of national rather than regional disruption."]}
{"id": "GAO-18-71", "url": "https://www.gao.gov/products/GAO-18-71", "title": "Internet of Things: FCC Should Track Growth to Ensure Sufficient Spectrum Remains Available", "published_date": "2017-11-16T00:00:00", "released_date": "2017-11-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["IoT generally refers to devices (or \u201cthings\u201d), such as vehicles and appliances, that use a network to communicate and share data with each other. The increasing popularity of wireless IoT devices that use spectrum has created questions about spectrum needs. GAO was asked to examine issues related to spectrum and IoT. This report discusses, among other things, (1) spectrum challenges related to IoT, (2) how the federal government plans for IoT\u2019s spectrum needs, and (3) how selected leading countries prepare for IoT\u2019s spectrum needs.", "GAO reviewed documents and interviewed officials from FCC and the National Telecommunications and Information Administration as well as 24 officials from a variety of sectors, including government, commercial, and manufacturing. Stakeholders were selected based on a literature review, among other factors. GAO interviewed government and commercial representatives from four leading countries regarding IoT planning and development and reviewed associated documents. These countries were selected based on criteria that included level of economic development among other criteria."]}, {"section_title": "What GAO Found", "paragraphs": ["The stakeholders GAO spoke with identified two primary spectrum-related challenges for the internet of things (IoT)\u2014the availability of spectrum and managing interference. Although not considered an immediate concern, Federal Communications Commission (FCC) staff and some stakeholders noted that rapid increases in IoT devices that use large amounts of spectrum\u2014called high-bandwidth devices\u2014could quickly overwhelm networks, as happened with smart phones. Stakeholders and FCC staff also indicated that managing interference is becoming more challenging as the number of IoT and other wireless devices grows, particularly in bands that do not require a spectrum license. The figure below illustrates the uses of radio frequency spectrum, including unlicensed use.", "FCC plans for IoT\u2019s spectrum needs by broadly tracking spectrum demand and making additional spectrum available as needed. Ensuring sufficient spectrum to support commercial demand is one way FCC pursues its strategic goal of promoting economic growth. FCC has made additional spectrum publicly available at least four times since 2015 by repurposing over 11 gigahertz of spectrum. However, FCC does not track the growth of IoT devices in two areas that pose the greatest risk to IoT\u2019s growth\u2014high bandwidth and unlicensed-spectrum devices. In 2014, FCC\u2019s Technical Advisory Council (TAC) recommended that FCC monitor high-bandwidth IoT devices and make sufficient unlicensed spectrum available. FCC officials said that FCC monitors spectrum use broadly and makes spectrum available as needed. However, since the process of reallocating spectrum is lengthy, FCC may not have adequate time to take actions to avoid a shortage, possibly hindering IoT\u2019s growth and associated economic growth.", "Spectrum planners in four leading countries\u2014France, Germany, the Netherlands, and South Korea\u2014have taken steps similar to those taken by the United States in preparation for IoT\u2019s expansion, including taking a technology-neutral approach that stakeholders believe encourages innovation. Unlike the United States, officials from two leading countries said they are concerned about spectrum congestion from the growth of IoT devices, but only one is actively monitoring congestion. In addition, three leading countries have developed nationwide low power wide-area networks that use unlicensed spectrum with potential benefits including low costs and low barriers to entry."]}, {"section_title": "What GAO Recommends", "paragraphs": ["FCC should track the growth in (1) high-bandwidth IoT devices and (2) IoT devices that rely on unlicensed spectrum. FCC did not believe these actions are necessary but noted that it would ask its TAC to periodically review and report on IoT\u2019s growth. GAO continues to believe the recommendations are valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The number of connected devices\u2014ranging from goods like phones and  cameras to connected vehicles to automated manufacturing facilities\u2014is  currently estimated in the billions and rising. The Internet of Things (IoT)  generally refers to these connected devices (or \u201cthings\u201d) that use a  network to communicate with one another and process data. These  connected devices are integrated into the daily activities of consumers,  businesses, and government. For example, wearable IoT devices enable  users to track information about their health and fitness activities. In  agriculture, IoT technology can analyze soil quality and harvest yield to  automatically deposit seed in fertile parts of a field. Further, some cities  now use connected traffic sensors to monitor traffic flow and air quality.  These devices may connect to networks through a wired connection, but  the trend in new technology is increasingly to connect wirelessly.  Connected wireless devices use radio frequency spectrum (spectrum) to  communicate. Wireless communications allow devices to remain  connected while mobile but also allow connected devices in locations  where a wire may not be possible. While specific estimates vary, wireless  IoT devices are expected to grow exponentially and this means many  more devices using spectrum. Some experts forecast 25\u201350 billion  devices will be competing for spectrum by 2025. Continued growth in the  number of connected devices could require more spectrum be made  available or more efficient ways of using available spectrum, more  spectrum sharing, or a combination of all three.", "The National Telecommunications and Information Administration (NTIA)  within the Department of Commerce and the Federal Communications  Commission (FCC) are responsible for managing spectrum within the  United States. FCC manages spectrum used for consumer, commercial,  and state and local public safety purposes, and NTIA oversees spectrum  used by the federal government. Both are responsible for planning ways  to meet increasing demands for spectrum created by IoT and other  wireless devices. You asked us to examine the challenges facing federal  spectrum managers and the steps they are taking to address those  challenges. In this report we discuss: (1) the spectrum-related challenges  selected stakeholders identified due to the anticipated growth of IoT, (2)  steps the federal government is taking to plan for the anticipated growth  in the demand for spectrum as a result of IoT, and (3) efforts that selected  leading countries are undertaking to plan for IoT\u2019s spectrum needs and  ways that these efforts compare with those of the United States.", "To identify the spectrum-related challenges stemming from the expected  growth of IoT, we conducted interviews and reviewed relevant hearings,  reports and literature. We identified relevant stakeholders (1) by  reviewing comments submitted to NTIA in response to its request for  comment on the government\u2019s role in planning for IoT growth, (2) by  reviewing records of three congressional hearings related to IoT growth,  and (3) by conducting a review of literature on topics that encompassed  academic articles, government reports, and trade journals. We conducted  24 telephone, and in-person interviews with stakeholders, including  industrial and commercial users of IoT, nonprofit groups, subject matter  experts, manufacturers, and telecommunications companies and FCC  and NTIA regarding the spectrum-related challenges presented by the  anticipated growth in IoT. The views of these stakeholders are not  generalizable to those of all IoT stakeholders in the United States;  however, we believe that these interviews provide a balanced and  informed perspective on the topics discussed. We then analyzed the  results of these interviews and related documents to identify the main  themes and develop summary findings. To characterize the views  captured during the interviews, we defined the terminology used to  quantify the views as follows:  \u201cmost\u201d users represents 18 to 24 users,  \u201ca majority of\u201d users represents 11 to 17 users,  \u201cseveral\u201d users represents 6 to 10 users, and  \u201csome\u201d users represents 3 to 5 users.\u201d", "Further, we reviewed the previously mentioned hearings, reports, and  journals for additional insight on the spectrum challenges related to IoT  and to understand the projected growth of IoT devices. We also reviewed  literature concerning the growth of wireless devices, such as smart  phones, to determine if there are any lessons learned from the demand  these devices placed on spectrum that could be applied to the expected  growth of IoT. To identify the steps FCC and NTIA are taking to plan for  the anticipated growth in the demand for spectrum as a result of IoT, we  interviewed FCC and NTIA officials and reviewed relevant agency  documents including reports and plans. We compared FCC\u2019s and NTIA\u2019s  efforts against their strategic goals and federal internal control standards  for identifying, analyzing, and responding to risks to achieving agency  objectives.", "To identify the efforts that selected leading countries are undertaking to  plan for IoT\u2019s spectrum needs and ways that these efforts compare with  those of the United States, we identified leading countries by reviewing  trade journals, industry publications, foreign governments\u2019 websites and  publications, and asking the stakeholders identified above. Through this  process, we identified seven countries of potential interest, all of which  have conducted spectrum planning in support of IoT: China, France,  Germany, Netherlands, Japan, Singapore, and South Korea. We selected  four of these countries\u2014France, Germany, the Netherlands, and South  Korea\u2014as having similarities to the United States and being leaders in  IoT development, based on additional criteria including the level of their  economic development, the maturity of their telecommunications  infrastructures, and the comparability of their governments to the United  States and the accessibility of their spectrum planning information. We  reviewed documents and conducted telephone and written interviews with  officials from the spectrum management agencies in each of these four  countries. We also conducted eight telephone and written interviews with  officials from telecommunications companies in these four countries, with  IoT manufacturers, and with officials from international spectrum planning  groups to gather information about IoT development, challenges, and  responses to these challenges in the leading countries that we contacted.  While the experiences of the interviewees are not generalizable to those  of all spectrum-planning officials and IoT stakeholders worldwide, we  believe that the information we gathered from them provides a balanced  and informed perspective on the topics discussed. See appendix I for  completed scope and methodology.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Spectrum is a natural resource used to provide a variety of  communication services to businesses and consumers, as well as  federal, state, and local governments. Businesses and consumers use  spectrum for a variety of wireless services including mobile voice and  data, WiFi- and Bluetooth-enabled devices, broadcast television, radio,  and satellite services. Federal, state, and local governments\u2019 uses of  spectrum include national defense, law enforcement communication, air- traffic control, weather services, military radar, and first responder  communications. IoT applications that rely on spectrum are highly diverse  and include connected vehicles, devices in the home, and personal  mobile devices. IoT devices communicate using wireless networks,  including wide area networks that use cellular networks to cover large  areas (e.g., cellular transmission), local area networks that cover about  100 meters (e.g., Wi-Fi within a house), and personal networks covering  about 10 meters (e.g., Bluetooth inside a room) (see fig. 1).", "Each of these wireless devices, like other wireless IoT devices,  communicates using spectrum, and the number of connected devices is  expected to increase. In 2013, the number of devices connected to the  internet globally was estimated to be over 9 billion. In 2015, the  Organisation for Economic Cooperation and Development (OECD)  estimated that a family of four had an average of 10 devices connected to  the Internet in their household, and that this average will increase to 50  devices by 2022. As companies bring new IoT technologies and services  to market and government users develop new mission needs, the  demand for spectrum will increase.", "The frequencies, or frequency bands, of spectrum have different  characteristics that make them more or less suitable for specific  purposes, depending on the specific band (see fig. 2). These bands have  different levels of ability to penetrate physical obstacles and cover  distances, known as \u201cpropagation,\u201d and different limits to the amount of  information that they can carry, known as data capacity, and are used for  different communication purposes. Low frequency bands are  characterized by strong propagation, and are used by numerous IoT  devices, some of which may only transmit small amounts of information  such as temperature, location, or activity status. The strong propagation  of low bands means they can transmit over long distances. Mid-band  frequencies have higher data capacity than low bands (because, in part,  frequency allocations in higher bands are larger, allowing wider  channels), as well as, stronger propagation qualities than higher bands.  The bands above 30 GHz have high data capacity but relatively poor  propagation, to the point that bands at the highest frequencies can be  easily obstructed. This spectrum is currently used by a variety of services,  including satellite, fixed microwave, and radio astronomy, and is expected  to be important for the next generation wireless technology (5G).", "FCC is the federal agency responsible for allocating spectrum for various  consumer and commercial purposes, assigning spectrum licenses, and  making spectrum available for use by unlicensed devices. Licensing  assigns frequencies of spectrum, in a specific area, to a specific entity,  such as a telecommunications company that operates a network using  licensed spectrum. We refer to these bands as licensed spectrum. In  some frequency bands, FCC authorizes unlicensed use of spectrum  bands\u2014generally referred to as unlicensed spectrum\u2014that is, users do  not need to obtain a license to use spectrum. Rather, users of unlicensed  devices can share frequencies on a non-interference basis, such as with  home wireless networks, cordless phones, and garage door openers. In  addition, FCC supports federal emergency-communications activities.", "NTIA is responsible for establishing policy on regulating federal spectrum  use, assigning spectrum bands to government agencies, and maintaining  spectrum use databases. Additionally, like FCC, NTIA participates in  federal emergency communications activities. NTIA also determines what  spectrum bands reserved for the federal government can be made  available for commercial use.", "In managing spectrum, one factor that FCC and NTIA consider is the  potential for interference. Harmful interference occurs when two  communication signals are either at the same frequencies or close to the  same frequencies in the same vicinity, a situation that may lead to  degradation of a device\u2019s operation or service. Co-channel interference  occurs when two communications systems operate on the same  frequency assignment in the same vicinity. Adjacent band interference  occurs between two communication systems operating on different, but  adjacent frequencies in the same geographic area. Another source of  interference can be signals on adjacent spectrum bands leaking into  another band.", "FCC and NTIA work to make more efficient use of spectrum that has  been assigned. One means of more efficiently using spectrum is to share  it, between and among both federal users and commercial users. In 2017,  FCC and NTIA continued oversight of the development of a new- spectrum sharing mechanism called the Spectrum Access System (SAS)  in the 3.5 GHz band. Among other things, the SAS allows multiple users  access to the same band at different times or places. Within this spectrum  band the SAS establishes a three-tiered system of access priority, with  federal and non-federal incumbent users having first priority, new non- federal users who have paid for licensed access as second priority, and  other users as third priority. This system relies on the SAS to assign  frequencies by determining if a frequency is in use by a higher priority  user before assigning it to a lower priority user."], "subsections": []}, {"section_title": "Selected Stakeholders Identified Spectrum Availability and Managing Interference as Challenges Affecting IoT Devices", "paragraphs": ["Stakeholders representing IoT network providers, device manufacturers,  users, and federal regulators consistently identified two spectrum-related  challenges to the continued growth and development of IoT 1) ensuring  the availability of sufficient spectrum and 2) managing the harmful  interference from the increasing number of IoT devices."], "subsections": [{"section_title": "Spectrum Availability", "paragraphs": ["While not currently a crisis, the stakeholders we spoke to agreed that  ensuring the availability of sufficient amounts and the right kinds of  spectrum is a key challenge for supporting the growth of IoT. Specifically,  stakeholders cited three dimensions of the spectrum availability  challenge: the amount, the balance between licensed and unlicensed,  and the variety of spectrum bands available. According to some reports,  incorrectly anticipating industry needs in any of these areas could weaken  IoT growth and development in the United States.", "Amount of spectrum: The amount of spectrum needed for IoT devices is  expected to increase with their growth. According to a majority of  stakeholders we interviewed, FCC will need to continue to make  additional spectrum commercially available in order to meet the demand  from expected rapid growth in wireless devices, including IoT devices.  FCC officials told us the current amount of available spectrum will be  sufficient for the growth of IoT unless devices that use a disproportionally  large amount of spectrum become more prevalent. Such devices, like  those that stream video, could lead to a spectrum shortage that  negatively impacts IoT growth. According to several stakeholders  spectrum availability will become an issue as use of these devices  increases. FCC officials said that cellular providers experienced similar  issues when they introduced smart phones, spurring rapid, exponential  growth in consumer demand to send and receive wireless data. Despite  the potential for a shortage of spectrum for IoT devices, most of the  stakeholders agreed that there should not be specific spectrum set aside  for IoT devices; rather, some noted spectrum policies should remain  flexible, allowing licensees to determine the best use.", "Licensed and unlicensed spectrum: A majority of stakeholders said that  the spectrum availability challenge includes making both licensed and  unlicensed spectrum available. According to FCC staff, FCC is  responsible for ensuring sufficient spectrum exists for commercial  purposes and will continue to identify new spectrum that can be used for  a variety of uses, including by IoT and other wireless devices. This  identification of new spectrum includes making spectrum available on  both a licensed and unlicensed basis to meet the needs of IoT and other  wireless devices. For example, some devices may need to send a signal  over a long distance and with a high quality of service to ensure a signal  will go through, such as a fire alarm, something licensed spectrum can  provide. However, for other devices, cost is a more important  consideration. Licensed spectrum has costs that can come from  purchasing the license or accessing the spectrum. For example, an  official from a supply-chain automation company that develops radio- frequency identification tags told us the lack of inexpensive, low power  networks that provide broad coverage is a challenge for their business.  With such a network, the company\u2019s tags could send out small amounts  of data at intervals to help manufacturers track their goods. However, the  cost of such a service is important if these tags are to attach to all size  packages because paying for GPS or a wireless connections for each  would make it unfeasible. According to several stakeholders, the correct  balance between licensed and unlicensed spectrum is difficult to know.", "Spectrum bands: Several stakeholders indicated that the need to make  various spectrum bands available for IoT devices contributes to the  spectrum management challenge. As previously described, each band of  spectrum has different characteristics, such as the ability to carry data  long distances and penetrate obstacles. IoT devices have diverse  spectrum needs, such as needing to send a signal over a distance or  send a constant stream of information. For example, in the package  delivery industry there could be IoT devices, sending signals over a  distance, that read the location of the vehicle and direct the driver on a  different route based on traffic and deliveries. In addition, there are IoT  devices that can monitor containers being delivered including their  location, temperature within the container, and other characteristics. In  both these examples, the devices can send signals over long distances to  systems that can monitor the information."], "subsections": []}, {"section_title": "Spectrum Interference", "paragraphs": ["Some stakeholders and FCC staff also agreed that managing interference  caused by the increasing number of IoT devices will challenge the  continued growth of IoT. As previously stated, interference occurs when  signals in the same vicinity attempt to access the same spectrum bands  or bands close to each other, causing the signals to degrade. This can  lead to intermittent access, poor reception, or no reception. As the  number of wireless IoT devices grows, the chances of harmful  interference increases. The number of IoT devices is predicted to grow so  fast the instances of harmful interference could be difficult to track.  Furthermore, according to one stakeholder, with devices being made by  more manufacturers, not all devices are created of equal quality,  potentially further increasing the chance that such devices will cause  interference. A recently issued GAO report found that according to FCC  staff, the expansion in wireless services and devices, not just IoT, has  contributed to interference becoming more of a challenge for FCC. FCC  staff agreed that managing interference is becoming more challenging as  the number of wireless IoT devices grows. However, according to FCC  staff, relatively few complaints pertaining to licensed services involve  devices that are compliant with FCC regulations and operating properly.", "Managing interference may be particularly difficult in homes where many  devices rely on unlicensed spectrum. The FCC Technical Advisory  Council\u2019s (TAC) report from 2014, expressed concerns that the rapid  growth of IoT could exacerbate interference issues in the home.  Particularly, the growing reliance on unlicensed spectrum for many  consumer IoT devices has contributed to this concern. For example,  many IoT devices using unlicensed spectrum, such as digital assistants  or wireless speaker systems, use Wi-Fi, Bluetooth or similar technology to  transmit a short distance to a smart phone or Wi-Fi router. Not all agree  however, that this use is an issue. One spectrum expert we interviewed  for a recently-issued report said that interference among consumer  devices is less likely to be an issue because they only transmit for short  durations and over short distances. If the devices only transmit a short  distance then many devices can transmit on the same spectrum.  Similarly, if devices only transmit for short durations then they can take  turns transmitting over the same spectrum."], "subsections": []}]}, {"section_title": "The Federal Government Has Plans to Meet Spectrum Needs but Does Not Track IoT Devices That Could Cause Congestion", "paragraphs": [], "subsections": [{"section_title": "FCC Spectrum Planning", "paragraphs": ["To plan for spectrum needs, FCC has repurposed spectrum by making  additional spectrum available for commercial purposes and, according to  FCC officials, the agency is continuing to look for additional opportunities  to do so. For example, in 2016, FCC issued a final order that opened up  high-band spectrum (above 24 GHz) for use with 5G networks and  applications. This particular rulemaking from FCC opened up a total of  10.85 GHz of spectrum, 3.85 GHz for licensed mobile use and 7 GHz for  unlicensed use. According to FCC, this order follows a technology  neutral approach to planning by allowing spectrum users to develop  technologies for the spectrum and not have FCC dictate its specific use.  Advances in technology that now allow use of spectrum above 24 GHz for  high-speed mobile services led the FCC to initiate the proceeding  resulting in this order. Previously, this spectrum was best suited for  various satellite or fixed microwave applications. As shown in table 1, in  recent years FCC has freed up spectrum for licensed use, unlicensed  use, and sharing between the two.", "In 2016, FCC issued a proposed rule to allow mobile uses in an additional  17.7 GHz of spectrum. In 2017, the FCC issued a Notice of Inquiry  seeking input on potential opportunities for additional flexibility,  particularly for wireless broadband services, in spectrum bands between  3.7 and 24 GHz. However, according to FCC staff, the process of  identifying and freeing up new spectrum can take a significant amount of  time as FCC must complete a rulemaking and either relocate existing  users or define sharing arrangements between the existing users and  new users. FCC has also proposed sharing mechanisms it hopes will  allow some bands to be used by existing users as well as additional uses  in the future. Other efforts to make additional spectrum commercially  available have included examining the potential for sharing the 5.9 GHz  band that FCC designated for transportation safety. This band was  allocated over 15 years ago and designated exclusively for safety  communication between vehicles and between vehicles and  infrastructure. In recent years, FCC has worked with the automobile  industry and Department of Transportation to assess whether all or a  portion of that spectrum could be shared. FCC is also monitoring  development of specifications to support 5G\u2014the next generation of  wireless networks. According to FCC, the 5G technologies that providers  develop are projected to bring wireless networks lower latency, better  coverage, faster Internet connections, and allow for more connections  than the existing cellular network, all of which may enable more IoT  devices to be connected. However, 5G technology is still being  developed, and while specifications are not fully defined, according to the  plans from the standards-making bodies there will be particular standards  designed to support IoT communications."], "subsections": []}, {"section_title": "NTIA\u2019s Data Gathering and Research", "paragraphs": ["In 2016, NTIA issued a report on the potential roles of the federal  government in support of the growth of IoT. It addressed specific  questions regarding the spectrum needs and potential interference  related to IoT devices and reaffirmed the government\u2019s role in supporting  technology growth. Furthermore, the report identified ongoing initiatives  that support IoT as well as proposed future steps the Department of  Commerce can take to further support IoT development. For example,  NTIA\u2019s report proposed that it continue to analyze the usage and growth of IoT devices through its survey used to collect its Digital Nation data.  Recent Digital Nation surveys have asked about wearable devices, use of  smart televisions, and use of Internet-enabled mobile phones, all uses  that include IoT applications. The most recent survey, in 2015, also  asked Internet users whether they interact with household equipment or  appliances via the Internet. NTIA officials recently told us that they will  continue to monitor these connected items to track trends in their use but  do not intend to expand the survey to include questions about additional  IoT devices. Specifically, in January 2017, NTIA sought out public  comment on its November 2017 Digital Nation survey including comment  on a proposed questionnaire. NTIA subsequently submitted its proposed  questionnaire to Office of Management and Budget for final approval.", "NTIA also has ongoing spectrum studies through its Institute for  Telecommunications Sciences and the findings may apply to IoT\u2019s use of  spectrum. As shown in table 2, these studies touch on a number of areas  related to IoT including interference issues and spectrum use. NTIA also  co-chairs the Wireless Spectrum Research and Development Interagency  Working Group that coordinates spectrum-related research and  development activities across the federal government, academia, and the  private sector. Among other activities, this working group has developed  the Wireless Spectrum Research and Development Inventory that, in its  2016 iteration, provides information on completed projects or those  scheduled to be completed between January 1, 2015 and December 31,  2018."], "subsections": []}, {"section_title": "Tracking IoT\u2019s Growth", "paragraphs": ["FCC has a strategic goal of promoting economic growth, and one way  FCC pursues that goal is by ensuring that there is sufficient spectrum to  support commercial demand. Most stakeholders agree that the growth in  mobile IoT devices will eventually require additional spectrum to operate  effectively. According to some stakeholders we interviewed and reports  we reviewed, rapid, unexpected growth in two areas could lead to  congestion and interference that could slow the growth of IoT in the  United States: (1) high-bandwidth devices and (2) devices that operate  in unlicensed bands. Federal standards for internal control instruct  agencies to address risks such as these by estimating the significance of  the risk, analyzing the likelihood of it occurring, and assessing its  nature. Such assessments can be used to determine how to respond to  the potential risks that could prevent agencies from meeting their goals.  Rapid growth in high-bandwidth and unlicensed spectrum devices  represent risks to FCC achieving its goal of promoting economic growth  by ensuring that sufficient spectrum is available.", "FCC officials said that the agency tracks industry-produced trends and  projections related to spectrum demand and use but does not focus on  specific devices. Rather, it relies on network providers to manage and  track the spectrum related to specific device types. When more spectrum  is needed, FCC officials said that FCC identifies additional spectrum and  makes it available to the commercial sector. However, this reactive  approach may not adequately address the risks caused by high- bandwidth and unlicensed-spectrum devices.", "High-bandwidth devices: Some stakeholders we interviewed and FCC  officials said that rapid increases in high-bandwidth IoT devices could  overwhelm current wireless networks. Such IoT devices could include  video-streaming devices or unmanned drones, which have much  higher data needs and will require a lot of bandwidth. FCC officials  said that the supply of spectrum has not always kept pace with  demand caused by rapid increases in high-bandwidth devices. For  example, the officials said that wireless networks were overwhelmed  when providers introduced smart phones. Until then, ringtones  represented the bulk of demand for wireless data, but mobile Internet  browsing caused the demand for wireless data to increase several  fold. In 2014, the FCC TAC warned that new IoT applications could  overwhelm networks the same way smartphones and other new  technologies have in the past. The TAC recommended that FCC  monitor IoT wireless networks with a specific focus on high-bandwidth  devices.", "Unlicensed spectrum use: Some stakeholders also said that  unlicensed bands are particularly vulnerable to congestion and  potential interference because of expected growth in IoT devices. For  example, all the commercial, industrial, and personal devices that  connect using WiFi and Bluetooth networks use unlicensed spectrum.  In 2014, the TAC indicated that the majority of wireless IoT devices  will rely on unlicensed spectrum and recommended FCC make  sufficient unlicensed spectrum available for devices operating on local  and personal area networks, like WiFi and Bluetooth. However, FCC  may not have enough information to determine when the amount of  unlicensed spectrum is sufficient. While network providers can  manage the number of devices on their own licensed networks, this  approach does not work for devices that use unlicensed spectrum,  and FCC does not track unlicensed spectrum utilization. It does not  track use of unlicensed spectrum because congestion of unlicensed  spectrum is geographically and technically challenging to track.  Specifically, it is geographically challenging because network  congestion and demand can vary over very short distances and  technically challenging because there are so many bands of spectrum  that would have to be tracked at one time and unlicensed spectrum  typically propagates over relatively short distances. However, there  may be ways to track unlicensed use that does not require monitoring.  For example, NTIA\u2019s Digital Nation survey provides information on  select IoT devices using unlicensed spectrum that could help track  unlicensed spectrum use.", "While FCC makes additional spectrum available when needed, it lacks an  early warning system for high-risk sectors, like high-bandwidth and  unlicensed-spectrum devices. The process of identifying and reallocating  spectrum is a lengthy process that can take years, including the need to  identify new bands, address the needs of existing users on the bands,  establish service rules, and license or assign the spectrum for commercial  uses. Without tracking the high-bandwidth and unlicensed-spectrum  devices, FCC is not assessing a key risk associated with its goal of  promoting economic growth. Rapid, unexpected growth in these IoT  sectors could lead to spectrum congestion and interference that could  slow or halt the economic growth associated with IoT until FCC can make  additional spectrum available."], "subsections": []}]}, {"section_title": "Selected Leading Countries Vary in Spectrum-Planning Approaches for IoT", "paragraphs": [], "subsections": [{"section_title": "Approaches to Spectrum Planning in Selected Leading Countries", "paragraphs": ["Like the United States, France, Germany, the Netherlands, and South  Korea are among the world leaders in the development of IoT. We  contacted public and private officials in these countries to identify their  approaches to spectrum planning to address the growth of IoT. Those  officials described approaches to planning for future spectrum needs that  are similar to the United States in one area but different in others (see  table 3). Specifically, we found that all four countries practice technology  neutral spectrum planning, an approach that was broadly supported by  the stakeholders we interviewed, including wireless carriers, a technology  manufacturer, academics, and a nonprofit group. Some of these  stakeholders indicated that this approach to spectrum planning  encourages innovation as it allows developers to choose the most  appropriate spectrum bands for new technology without having to take  the extra step of getting regulators\u2019 permission for each new device or  application.", "Two of the selected leading countries, Germany and South Korea, have  developed national IoT plans focused on developing IoT for industry;  however, only South Korea has a plan that specifically addresses  spectrum issues. South Korea\u2019s national IoT plan seeks to increase  collaboration among IoT stakeholders, promote innovation, and develop  services for the global market in order to promote productivity and  efficiency in Korean business. South Korea also developed a mid- to  long-term spectrum plan to respond to the expected growth in demand for  spectrum as IoT expands and 5G cellular networks are deployed.  Released in 2016, the plan intends to makes more spectrum available to  support new services such as smart homes, smart factories, smart cities,  remote medical treatment, and unmanned vehicles. Specifically, the  South Korean spectrum plan that includes IoT and establishes the  following goals: almost doubling the amount of available spectrum available,  expanding from 44 GHz of available spectrum to 84 GHz by 2026,  and  increasing the efficiency of spectrum use, promoting spectrum  sharing, and advancing international coordination in spectrum  planning.", "Officials from France and the Netherlands told us that making more  unlicensed spectrum available is a high priority in their spectrum planning.  These officials told us that unlicensed spectrum promotes greater  innovation by lowering barriers to access, and many IoT devices are  expected to be designed to operate on unlicensed bands. German and  Dutch officials told us that numerous smart city IoT applications have  been developed in their respective countries, most of which operate on  unlicensed spectrum. For example, German and Dutch networks use  unlicensed spectrum for purposes that include managing street lighting,  preventing the theft of property such as bicycles, monitoring parking  spaces, and managing agricultural resources.", "To provide service options for low power IoT devices, private companies  in France, the Netherlands, and South Korea developed nationwide low- power wide-area networks (LPWAN) which use unlicensed spectrum to  transmit data. These LPWANs use the 800 and 900 MHz bands to  transmit data from wireless IoT devices such as sensors and location  trackers. Signals in these bands can be transmitted over long distances  and can penetrate obstacles. According to one LPWAN provider, the  distance served by a LPWAN site is greater than a single cellular network  site. However, according to the same LPWAN operator, the bands used  for LPWAN networks have limited data capacity compared to those used  by cellular networks. According to officials and telecommunications  industry stakeholders in these countries, LPWANs offer several potential  benefits including low barriers to entry, low costs, and broad coverage.", "According to a Dutch telecommunications industry stakeholder most  devices that use LPWANs transmit only small amounts of data. A  telecommunications industry stakeholder in France told us that the long  range and strong propagation of these LPWANs make them useful for  utility metering data and South Korean official told us that LPWANs are  used to transmit location or temperature data. For example, in the  Netherlands, LPWANs are used to monitor water depth and quality,  manage street lighting, and to track the location of business inventory and  personal property. In France, LPWANs are used for similar tracking as  well as smoke detectors. Other uses for the LPWANs are currently in  development. For example, a representative of a Dutch  telecommunications company told us that in the Netherlands, IoT devices  operating on the nationwide LPWAN are being tested at an airport for use  in logistical processes such as baggage handling. Additionally, a Dutch  railway station is experimenting with IoT technology that monitors rail  switches using the LPWAN, and depth sounders at the port of Rotterdam  have been fitted with devices to connect them to the network. South  Korean officials said that the LPWAN in their country also provides  specialized location-tracking services."], "subsections": []}, {"section_title": "Selected Leading Countries Face International Coordination and Potential Spectrum Congestion Challenges", "paragraphs": ["Selected leading countries take many similar approaches to each other  and the United States to managing spectrum in order to address related  challenges (see table 4). Like the United States, spectrum-planning  officials in France, Germany, and the Netherlands told us that it was  necessary to coordinate spectrum planning with other countries on their  borders. Officials in each of these countries told us that European  spectrum planning is complicated by the number of countries that share  borders. Germany, for example, borders nine other countries. As each  country is responsible for its own spectrum planning, if their plans are not  closely coordinated, there is a potential for cross-border interference. This  coordination is complicated by the fact that European countries have  legacy spectrum allocations, and these must be accommodated in  spectrum planning. The United States, by contrast, shares its border with  only Mexico and Canada. According to FCC officials, both of these  countries generally align their spectrum plans to those of the United  States, reducing interference issues.", "In order to facilitate international coordination of spectrum planning, each  of the four selected leading countries, like the United States, belongs to a  regional spectrum-planning association that works to harmonize spectrum  planning among member states. Officials of regional groups we spoke  with told us that harmonizing can reduce interference issues across  borders and facilitate interoperability of devices across different countries.  Officials from the manufacturing and telecommunications industries told  us that this interoperability creates a larger potential market for IoT  devices, thereby improving the economies of scale for the manufacture of  IoT devices and reducing production costs. Regional planning  associations are also taking steps to prepare their member countries for  the spectrum needs of IoT. For example, an official of one association,  the Inter-American Telecommunication Commission, told us that in 2016  it held a workshop on \u201cmachine-to-machine\u201d technologies that brought  together spectrum planners and stakeholders from IoT-related  industries. Regional-planning associations also represent their member  countries at World Radiocommunications Conferences (WRC). An  official from one association told us that due to the diverse nature of IoT  devices and applications it is unnecessary for IoT to be explicitly  addressed as an agenda item at WRCs. However, the official further  stated that the spectrum needs of specific IoT applications\u2014 including  low power sensors, robotics, and connected vehicles\u2014are included on  the agenda. For example, the next WRC is scheduled for 2019 and  includes an agenda item addressing connected vehicles, which are  closely linked to IoT.", "Spectrum-planning officials in each of the selected leading countries told  us they are concerned about the potential for spectrum congestion, due to  growth in the number of IoT devices. However, like FCC in the United  States, these officials do not currently believe such congestion presents  an immediate problem. Representatives of the four countries we spoke  with told us that one way that they address the potential challenge of  spectrum congestion is through the use of spectrum-sharing  arrangements. Representatives from Germany specifically stressed the  importance of finding additional sharing arrangements in response to the  expected spectrum needs for IoT. In 2016, both France and the  Netherlands initiated pilot programs for spectrum sharing in which  multiple users\u2019 access the same bands while prioritizing use by the  licensee. These pilot programs are similar to the dynamic-sharing model  that FCC adopted in 2015, as described previously. However, whereas  the model adopted by FCC has three tiers of users, the model used by  France and the Netherlands has only two, and lacks the third tier of  general access users.", "Unlike the United States, officials from Germany and France told us that  they directly monitor spectrum congestion. For example, German officials  told us that there are spectrum-monitoring services at six locations  around the country, and that they perform mobile measurements of  spectrum congestion. FCC officials told us that their primary means of  tracking congestion is to communicate with spectrum licensees.  According to officials from the Netherlands, the Dutch spectrum  management agency takes a similar approach and has struck an  agreement with a group of telecommunications companies to share  information concerning IoT\u2019s interference and congestion issues. Officials  also told us that it is easier to monitor spectrum congestion in smaller  countries, as there is simply less geographical space to monitor.  Nevertheless, officials in France, Germany, and the Netherlands told us  that monitoring spectrum is a challenging task, as it is difficult to  determine how many wireless devices are active at any given time."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["FCC has a strategic goal to promote economic growth and effective  spectrum management represents a key way that FCC can support  meeting that goal. To that end, FCC officials said that the agency  continuously seeks to make additional spectrum available and broadly  tracks spectrum demand. However, stakeholders and FCC\u2019s own  technical advisors have identified rapid, unexpected growth in both high- bandwidth devices and unlicensed spectrum as risks to effective  spectrum management. By overwhelming existing networks before FCC  can make more spectrum available, rapid growth in spectrum demand  could slow or halt IoT\u2019s potential to facilitate economic growth. Absent  additional efforts to assess the risks to effective spectrum management  by focusing on high-bandwidth and unlicensed-spectrum devices,  spectrum congestion and interference could slow IoT growth."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following two recommendations to the Chairman of  FCC.", "The Chairman of FCC should track the growth in high bandwidth IoT  devices, such as video-streaming devices and optical sensors.  (Recommendation 1)", "The Chairman of FCC should track the growth in IoT devices relying on  unlicensed spectrum. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to FCC and the Department of  Commerce for their review and comment. FCC provided comments in a  letter, which is reprinted in appendix IV. FCC and the Department of  Commerce provided technical comments that we incorporated as  appropriate.", "In its written comments, FCC did not concur with our recommendation  that it track growth in high-bandwidth devices. FCC noted that it continues  to believe that the best approach to track growth of devices is by  monitoring overall traffic statistics and forecasts and how these devices  affect aggregate spectrum requirements for all applications and services.  However, FCC noted that it would task the Technological Advisory  Council (TAC) to periodically review the state of the IoT ecosystem to  ensure that the planned communications infrastructure is sufficient to  support the needs of the growing sector and advise on any actions the  FCC should take. We continue to believe that tracking the growth of high- bandwidth devices is necessary to avoid the potential spectrum shortage  and that the TAC may be able to help FCC accomplish that.", "FCC did not concur with our recommendation to track IoT devices that  rely on unlicensed spectrum. FCC noted that it may not be practical to  determine which devices qualify as IoT or quantify their effect on  spectrum utilization. As a result, FCC said that the best way to monitor  growth in unlicensed IoT devices is to continue to monitor published  papers and conferences and work with industry. However, since most of  the projected IoT growth is expected to occur in unlicensed bands that  are not protected from interference, we continue to believe that FCC  should place a greater focus on tracking IoT devices in these bands. For  example, the TAC may also be well positioned to help FCC track  unlicensed IoT devices.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretaries of  Homeland Security and Commerce, the Chairman of FCC, and  appropriate congressional committees. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or members of your staff have any questions about this report,  please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Major contributors to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["We were asked to examine the challenges facing federal spectrum  managers and the steps they are taking to address those challenges. In  this report we discuss: (1) the spectrum-related challenges stakeholders  identified due to the anticipated growth of IoT, (2) steps FCC and NTIA  are taking to plan for the anticipated growth in the demand for spectrum  as a result of IoT, and (3) efforts that selected leading countries are  undertaking to plan for IoT\u2019s spectrum needs and ways that these efforts  compare with those of the United States.", "To identify the spectrum-related challenges stemming from the expected  growth of IoT, we reviewed documents from the Federal Communications  Commission (FCC) and the National Telecommunications and  Information Administration (NTIA), the two federal agencies that have  direct authority over spectrum planning. Further, in order to identify  relevant literature for review, we (1) conducted a key word search of data  bases; (2) searched IoT and spectrum related websites, such as those of  cellular carriers, telecommunications industry groups, and nonprofit  organizations; (3) reviewed prior GAO reports on IoT and spectrum  issues; and (4) asked FCC and NTIA officials, researchers, and non-profit  organizations to identify relevant documents. Through our literature  search, we identified a number of documents, including academic reports,  government reports, congressional committee hearings, and trade  journals addressing the projected growth of IoT to understand the number  of devices that would be relying on the spectrum in the coming years. We  also reviewed literature concerning the growth of other wireless devices,  such as smart phones, and the burden they place on the spectrum, to  assess if there are any lessons learned from the demand these devices  placed on the spectrum that could be applied to the expected growth of  IoT.", "In addition, we interviewed FCC and NTIA officials, and conducted 24  telephone and in-person interviews with officials from industry  associations, industrial and commercial users of IoT, nonprofit groups,  subject matter experts, manufacturers, and telecommunications  companies to obtain their perspectives on the challenges presented by  the expected growth of IoT. The experiences of the stakeholders are not  generalizable to those of all IoT stakeholders in the United States;  however, we believe that the information we gathered from selected  stakeholders provides a balanced and informed perspective on the topics  discussed. We identified relevant stakeholders by reviewing comments  submitted to NTIA in response to its request for comment on the  government\u2019s role in planning for IoT growth, reviewing congressional  hearings, and conducting a literature review encompassing academic  articles, government reports, and trade journals. We interviewed officials  from businesses that manufacture Internet-connected devices or  equipment that would be considered part of IoT, including agriculture,  telecommunications, and manufacturing. We spoke with these officials to  gather information about the spectrum challenges they face as  businesses working with and developing IoT devices. We then analyzed  the results of these interviews and related documents to identify the main  themes and develop summary findings. To characterize the views  captured during the interviews, we defined the terms to quantify the views  as follows:  \u201cmost\u201d users represents 18 to 24 users,  \u201ca majority of\u201d users represents 11 to 17 users,  \u201cseveral\u201d users represents 6 to 10 users, and  \u201csome\u201d users represents 3 to 5 users.\u201d", "To identify the steps FCC and NTIA are taking to plan for the anticipated  growth in the demand for spectrum as a result of IoT, we interviewed FCC  and NTIA officials and reviewed agency reports and documents. We  interviewed officials to understand any agency plans to address spectrum  needs for IoT devices and how these plans aligned with the spectrum  planning for other wireless devices. We reviewed agency reports and  documents on spectrum planning, IoT planning, and the role of the  federal government in planning for IoT. Specifically, we reviewed  comments submitted in response to NTIA\u2019s request for comment and the  final report developed in response to the comments received on the role  of the federal government. To identify other relevant reports and literature  from FCC and NTIA, we asked officials at the meetings and conducted a  literature search. We also compared those planning efforts against FCC\u2019s  and NTIA\u2019s strategic goals and the federal internal control standards  related to risk management. Specifically, we compared FCC\u2019s planning  against its strategic goal to promote economic growth and national  leadership in telecommunications, and NTIA\u2019s efforts against its mission  to expand the use of spectrum by all users and to ensure that the Internet  remains an engine for continued innovation and economic growth. We  also assessed the efforts of both agencies against leading practices that  we previously developed for identifying, analyzing, and responding to  risks related to achieving agency objectives.", "To identify the efforts that selected foreign governments are taking to plan  for the expected spectrum needs of IoT and ways their efforts compare  with those of the United States, we surveyed trade journals, industry  publications, and foreign governments\u2019 websites and publications.  Through this survey, we identified seven countries of potential interest, all  of which have conducted spectrum planning in support of IoT: China,  France, Germany, Netherlands, Japan, Singapore, and South Korea. We  selected four of these countries\u2014France, Germany, the Netherlands, and  South Korea\u2014as being like the United States and leaders in IoT  development based on additional criteria including the level of their  economic development, the maturity of their telecommunications  infrastructures, the comparability of their governments to the United  States, and the accessibility of their spectrum-planning information. We  categorized a country\u2019s economy as fully developed if the United Nations  Statistics Division categorized it in 2016 as existing in a developed  economic region. When determining the maturity of a country\u2019s  telecommunications infrastructure, we followed the United Nation\u2019s  International Telecommunication Union (ITU) in categorizing a country\u2019s  telecom infrastructure as mature if it was included in the top quartile of the  175 countries ranked in ITU\u2019s 2016 Information and Communications  Technology Development Index. We considered a country to have a  government structure comparable to that of the United States if Freedom  House\u2019s 2016 Freedom in the World report rated it as \u201cfree\u201d and the Polity  Project categorized it as a \u201cdemocracy\u201d in 2015. Finally, we considered  the extent to which information could be efficiently procured from each  country under consideration. We reviewed documents and conducted  telephone and written interviews with officials from the spectrum  management agencies in each of these four countries. We also  conducted eight telephone and written interviews with officials from  foreign telecommunications companies, IoT manufactures, and  international spectrum-planning groups to gather information about IoT  development, challenges, and responses to these challenges in the  leading countries that we contacted.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Agencies, Organizations, and Individuals GAO Interviewed", "paragraphs": ["Barcoding  Case IH  Deere & Co.  O-I  Consumer Technology Association  CTIA  National Association of Manufacturers  Telecommunications Industry Association  U.S. Chamber of Commerce  Wi-Fi Alliance  World Shipping Council  New America Foundation  Public Knowledge  Technology and Innovation Foundation  Jeffrey Reed, Ph.D. (Virginia Polytechnic Institute  and State University)  Douglas Sicker, Ph.D. (Carnegie Mellon University)", "AT&T  Sigfox  Verizon  Agence Nationale des Fr\u00e9quences (France)  Agentschap Telecom (Netherlands)  Bundesnetzagentur (Germany)  Ministry of Science, ICT, and Future Planning  (South Korea)"], "subsections": []}, {"section_title": "Appendix III: Regional Spectrum- Management Associations and Their Member States", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Federal Communications Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgment", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Keith Cunningham (Assistant  Director); Eric Hudson (Analyst-in-Charge); Camilo Flores; Adam Gomez;  Josh Ormond; Andrew Stavisky; Hai Tran; and Michelle Weathers made  key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-327", "url": "https://www.gao.gov/products/GAO-18-327", "title": "Federal Research: Additional Actions Needed to Improve Licensing of Patented Laboratory Inventions", "published_date": "2018-06-19T00:00:00", "released_date": "2018-06-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The federal government spends approximately $137 billion annually on research and development\u2014mostly at DOD, DOE, NASA, and NIH\u2014to further agencies' missions, including at federal labs. Multiple laws have directed agencies and labs to encourage commercial use of their inventions, in part by licensing patents, to private sector companies and others that aim to further develop and bring the inventions to market.", "GAO was asked to review agency practices for managing inventions developed at federal labs, with a particular focus on patent licensing. This report examines (1) challenges in licensing patents and steps taken to address and report them and (2) information to guide establishing financial terms in patent licenses at DOD, DOE, NASA, and NIH. GAO reviewed relevant literature, laws, and agency documents, including patent licenses from 2014, to match the most recent NIST summary report when the licenses were requested, and GAO interviewed agency officials and knowledgeable stakeholders, including organizations that assist federal labs in licensing patents."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal agency and laboratory (lab) officials identified challenges in licensing patents across the federal government, and agencies have taken some steps to address and report them. Patent licensing is a technology transfer activity that allows, for example, federal inventions to be legally transferred to the private sector for commercial use. Specifically, officials at the Departments of Defense (DOD) and Energy (DOE), National Aeronautics and Space Administration (NASA), and National Institutes of Health (NIH), as well as external stakeholders, noted challenges in having researchers identify potentially patentable inventions. DOD, DOE, and NIH officials also cited having inadequate internal systems to keep track of inventions developed in the labs. In addition, several stakeholders stated that licensing patented inventions can be lengthy and bureaucratic, which may deter companies from licensing. The agencies reported taking steps to address these challenges, such as implementing model license agreements across labs to expedite the process.", "The Department of Commerce has delegated to its National Institute of Standards and Technology (NIST) to annually report agencies' technology transfer activities, including patent licensing. Although NIST has reported some challenges, it has not fully reported the range of challenges identified by agency and lab officials and stakeholders. NIST officials stated that they were generally aware of the challenges but had not considered including them to a greater degree in their annual reports to Congress. By fully reporting the range of challenges in federal patent licensing, NIST has the opportunity to further ensure that Congress is more aware of challenges that limit agencies' efforts and ways for potentially addressing those challenges.", "Federal agencies and labs have limited information to guide officials when establishing the financial terms of patent licenses. For example, while federal labs can use comparable licenses to help establish financial terms, their access to information on comparable licenses from other labs varies, and such information is not formally shared among the agencies. Based on its established interagency role, NIST is best positioned to assist agencies in sharing information on comparable licenses, in accordance with leading practices for interagency collaboration. By doing so, NIST would provide federal agencies and labs with useful information that can help them better establish financial terms and successfully license inventions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that Commerce instruct NIST to fully report the range of challenges in federal patent licensing in its annual reports to Congress and facilitate information sharing among agencies. Commerce, DOD, DOE, NASA, and NIH generally agreed with GAO's recommendations and are taking steps to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal government spends approximately $137 billion annually on  research and development (R&D) to help further agencies\u2019 missions,  including at federal laboratories (lab). The intellectual property generated  by this research\u2014including inventions\u2014has application beyond federal  agencies\u2019 immediate, mission-related goals if the private sector can bring  the inventions to market. For example, government research has led to  new products and processes for the commercial marketplace, including  antibiotics, plastics, airplanes, computers, microwaves, and  bioengineered drugs. However, a 2013 Office of Science and Technology  Policy report raised concerns that only a small portion of the inventions  arising from government research have been commercialized by the  private sector, and that the United States is potentially missing critical  opportunities to improve the nation\u2019s standard of living, create new jobs,  maintain international competitiveness, and enhance the overall  economy, among other things.", "Technology transfer is the process of transferring scientific findings from  one organization to another for the purpose of further development and  commercialization. A series of federal laws and executive orders  spanning nearly 40 years have directed federal agencies to enhance their  labs\u2019 beneficial impact on society through technology transfer. For  example, the Stevenson-Wydler Technology Innovation Act of 1980  (Stevenson-Wydler Act) states that its purpose is to improve the  economic, environmental, and social well-being of the United States by,  among other things, stimulating improved utilization of federally funded  technology developments by nonfederal entities. Accordingly, the act  provides that the federal government, where appropriate, shall transfer  federally owned or originated technology to state and local governments  and to the private sector.", "From fiscal years 2015 to 2017, four federal agencies consistently had  the highest annual federal R&D spending: the Department of Defense  (DOD), the Department of Energy (DOE), the National Aeronautics and  Space Administration (NASA), and the National Institutes of Health (NIH)  within the Department of Health and Human Services (HHS). Together,  these four agencies accounted for nearly 90 percent of total federal R&D  spending on average, as shown in figure 1.", "One way federal agencies transfer technology is by licensing patents on  inventions generated by R&D at federal labs. This licensing aims to put  federal inventions in the hands of those equipped to further develop the  inventions into marketable products accessible to the public or to find  other practical applications for them. Examples of inventions developed  at DOD, DOE, NASA, and NIH labs can be found in appendix I.  Numerous statutory and regulatory requirements have been established  to help ensure that agencies commercialize inventions arising from R&D  at federal labs. The Department of Commerce (Commerce) is responsible  for government-wide functions related to patenting, including granting  patents through the United States Patent and Trademark Office (USPTO).  Commerce is also responsible for functions related to licensing of  federally owned inventions, including reporting federal agencies\u2019  technology transfer activities to Congress and issuing regulations, both of  which it delegated to the National Institute of Standards and Technology  (NIST).", "Over the years, we and others have reported on a range of challenges  that agencies face in commercializing inventions arising from R&D at  federal labs. You asked us to review agency practices for managing  intellectual property developed at federal labs, with a particular focus on  the licensing of patented inventions (patent licensing) to nonfederal  parties that might use the patented inventions to manufacture products.  This report examines, for DOD, DOE, NASA, and NIH and their labs, (1)  challenges that federal labs face in patent licensing, steps taken to  address those challenges, and the extent to which NIST has reported  them and (2) the extent to which federal agencies and labs have  information on processes, goals, and comparable licenses to guide  establishing patent license financial terms.", "For both objectives, we reviewed statutes and regulations applicable to  patent licensing to describe the legal framework governing federal patent  licensing and license financial terms. To obtain views on patent licensing  practices across the federal government, we conducted 60  semistructured interviews, including 38 with agency and lab officials. We  interviewed officials from DOD, DOE, NASA, and NIH, as well as from  nine federal labs across these agencies. We interviewed officials at  multiple labs at each agency and selected them to obtain a variety of  perspectives on patent licensing, including variation in whether they were  contractor-operated (two labs) or government-operated labs (seven labs);  the volume and type of licensing activity; and other agency-specific  considerations, such as whether they use a service center model.", "In addition, we conducted 22 interviews with external stakeholders\u2014 including academic researchers (4), partnership intermediaries (11) (i.e.,  organizations that assist federal labs and businesses in licensing federal  patents), industry representatives and companies (3), and professional  trade organizations and universities (4)\u2014that were knowledgeable about  federal patent licensing practices. Partnership intermediaries were  selected based on lists of partnership intermediaries associated with the  selected labs and agencies that the agencies submitted and referrals  from other partnership intermediaries. To select other stakeholders, we  used snowball sampling based on referrals obtained from prior  engagements, our review of academic literature, and referrals from  stakeholder interviews during the engagement. We also interviewed  officials from NIST and USPTO. The information we obtained from these  interviews is not generalizable to all agency and lab officials and external  stakeholders, but we determined that our selection of interviewees was  appropriate to obtain varied perspectives on the patent licensing process  and related challenges and that the selection would generate valid and  reliable evidence to support our work.", "To understand the level of patent licensing activity and the terms in patent  licenses at federal labs, we requested data from each agency on licenses  that were active as of the end of fiscal year 2014. To assess the  reliability of the data on active patent license agreements, we asked  agency and lab officials questions about the accuracy and completeness  of the data and asked them to confirm specific information. Based on  these steps, we found the data to be sufficiently reliable for understanding  the overall level of licensing activity in the labs, for identifying licenses  that became effective in fiscal year 2014, and as a source of information  for those licenses. We also requested from each agency and reviewed  the subset of licenses that became effective in fiscal year 2014.", "To address the first objective, we first conducted a literature search. We  broadened our search beyond articles published in peer-reviewed  journals to identify studies, such as dissertations, conference  proceedings, and organizational studies issued by research institutes or  studies issued by government agencies. For example, we conducted  both subject and keyword searches related to patent licensing in various  databases. We performed these searches and identified 23 studies from  2000 to 2016\u20142016 was the year for which the most recent information  was available at the time of our review.", "We reviewed relevant agency documentation and interviewed the agency  and lab officials and external stakeholders identified above to obtain their  perspectives on areas of the patent licensing process identified from our  review of relevant federal statutes and regulations. Using information  obtained from the interviews, we conducted a content analysis of  responses. Challenges in each area were identified from the content  analysis based on the frequency and consistency of responses from  agency and lab officials and stakeholders. We also examined other  relevant agency documentation, including NIST\u2019s fiscal year summary  reports to Congress from fiscal years 2013 through 2015\u2014the most  recent reports available\u2014to determine the extent to which challenges in  federal patent licensing had been reported.", "To address the second objective, we reviewed relevant economic  literature on establishing the financial terms of patent licenses and other  related licensing terms. From the literature, we identified economic  principles that apply to structuring financial terms to promote the  commercial use of inventions. We reviewed all relevant documentation  describing licensing practices at the agency and lab levels that DOD,  DOE, NASA, and NIH provided. This included documentation describing,  among other things, processes and goals for establishing license terms,  including financial terms. We reviewed each document to identify (1)  factors considered in establishing financial terms; (2) data sources used  in the process; (3) methods, such as calculations or guidelines, for setting  financial terms; (4) guidance on when or how to use various types of financial terms; and (5) goals applicable to financial terms. We also  reviewed narratives and written responses describing lab practices for  establishing financial terms in patent licenses that the agencies and labs  provided in response to our requests. To identify patents at the labs under  the four agencies we reviewed and the extent to which they patent in  similar technology fields, we searched the assignee field in USPTO\u2019s  PatentsView database for patents issued since 2000 using search terms  associated with the four agencies and their contractor labs, if applicable.  The list of assignees for the patents from the initial search was reviewed  to eliminate patents that may not have been assigned to the four  agencies. In total, the search yielded 20,612 patents assigned to the four  agencies. To examine similarities across technology areas, we used  PatentsView data on technology sectors and fields classified according to  the World Intellectual Property Organization (WIPO) international  classification system for patents.", "We conducted this performance audit from June 2016 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["This section outlines the legal framework under which agencies and  federal labs license patents and general stages of the patent licensing  process."], "subsections": [{"section_title": "Legal Framework for Patent Licensing", "paragraphs": ["Prior to 1980, federal agencies generally retained title to any inventions  developed through federally funded research\u2014whether extramural, that  is, conducted by universities and contractors, or intramural, conducted by  federal agencies in their own facilities. By the late 1970s, there was  increasing debate in Congress over ways to allow the private and public  sectors better access to federally owned inventions by, among other  things, creating a uniform policy for those seeking to license inventions  developed in federal labs. In the 1980s, Congress began passing a series  of key laws that have provided the foundation for federal technology  transfer activities, including patenting and licensing inventions that are  developed in federal labs and funded by federal dollars. One of the first  technology transfer laws, the Stevenson-Wydler Act, established  technology transfer as a federal policy and required federal labs to set up  Offices of Research and Technology Applications (which, for our  purposes, we refer to as technology transfer offices) and devote budget  and personnel resources to promoting the transfer of federal technologies  to the private sector. In 1980, another key law, the Bayh-Dole Act  allowed not-for-profit corporations, including universities, and small  businesses to retain title to their federally funded inventions. In 1984,  through amendments made to the Bayh-Dole Act, Commerce became  responsible for issuing regulations to implement the act.", "The Stevenson-Wydler Act was amended by the Federal Technology  Transfer Act of 1986, which (1) established the Federal Laboratory  Consortium (FLC); (2) required that technology transfer efforts be  considered positively in employee performance evaluations; and (3)  empowered federal agencies to permit the directors of government- owned, government-operated labs to enter into cooperative research and  development agreements (CRADA) and to negotiate license agreements  for inventions created in the labs. The FLC began largely as a forum for  the education, training, and networking of federal technology transfer  officials to promote the integration of technical knowledge that federal  departments and agencies developed into the U.S. economy. Over time,  the FLC\u2019s role would include serving as a clearinghouse\u2014a central point  for collecting and disseminating information\u2014for federal technologies and  assisting outside entities in identifying available federal technology. Within  Commerce, NIST is the designated host and financial administrator of the  FLC.", "Additional laws were adopted to help further the development of federally  owned inventions for commercial use. Among them was the National  Competitiveness Technology Transfer Act of 1989, which directed federal  agencies to propose, for inclusion in contracts, provisions to establish  technology transfer as a mission of government-owned, contractor- operated labs and permitted those labs, under certain circumstances, to  enter into CRADAs. In addition, the Technology Transfer  Commercialization Act of 2000 required Commerce to provide Congress  with summary reports on agencies\u2019 patent licensing and other technology  transfer activities. Since 2007, Commerce has delegated to NIST the  role of providing to Congress an annual report summarizing technology  transfer at federal agencies. NIST\u2019s role as the lead in an interagency  collaborative effort in federal technology transfer grew further when  Commerce delegated to the agency the additional responsibility of  coordinating the Interagency Working Group for Technology Transfer.  Commerce also has delegated to NIST its authority to promulgate  implementing regulations pertaining to patenting and licensing at federal  labs. In 2011, Congress passed the Leahy-Smith America Invents Act  (AIA) that further affected technology transfer activities by federal labs  through comprehensive changes made to the U.S. patent system."], "subsections": []}, {"section_title": "Federal Labs", "paragraphs": ["Federal labs are typically managed under either a government-operated  or a contractor-operated model. Commerce regulations prescribe the  terms, conditions, and procedures that government-operated labs are to  use to license their inventions for commercial use or other practical  applications. Government-operated labs are usually owned or leased by  the federal government and are predominantly staffed by federal  employees. Contractor-operated labs, on the other hand, operate facilities  and equipment that are owned by the federal government, but the staff is  employed by a private or nonprofit contractor that operates the lab under  a contract with the federal government. Contractor-operated labs  typically license their technologies under the authority of the Bayh-Dole  Act, applicable regulations, and their contracts, which generally give  contractor-operated labs more flexibility in licensing their technologies.  Contractors that manage and operate labs include universities, private  companies, nonprofit organizations, or consortia thereof. As discussed  below, whether a lab is government-operated or contractor-operated will  affect how that lab licenses inventions because each type operates under  a different set of licensing regulations and requirements."], "subsections": []}, {"section_title": "The Federal Licensing Process", "paragraphs": ["The pathway of an invention from lab development to commercial product  can end at any point, and products may not always reach, or find success  in, the marketplace. Figure 2 shows the seven general areas of the patent  licensing process at federal labs.", "The patent licensing process begins with researchers identifying  inventions\u2014a process that primarily relies on researchers disclosing their  inventions to lab officials, mostly through the lab director or directly to an  agency\u2019s technology transfer office. Various laws and regulations  establish a uniform policy for determining who holds the rights to  government employees\u2019 inventions. Some government-operated labs  allow or encourage researchers to publish their research, including  research describing inventions, for public dissemination, such as in  research journals. Contractor-operated labs are required to disclose  inventions to the agency within 2 months after notifying contractor  personnel responsible for patent licensing activities. Labs must then  decide within 2 years after the disclosure whether to retain title to the  invention. The contract then must file its initial patent application on the  invention to which it elects to retain title within one year after election of  title. If the contractor-operated lab does not disclose the invention or elect  to retain title within the times specified in the law and regulations, it will  convey title to the invention to the funding agency upon written request."], "subsections": [{"section_title": "Keeping Track of Inventions", "paragraphs": ["Once an invention has been identified and disclosed, federal agencies  and labs keep track of the invention. How they do so varies in degree of  automation and centralization. For example, systems that keep track of  lab inventions can range from spreadsheets to automated software that  tracks all patent licensing and other technology transfer activities. Also,  such systems can be centralized, with oversight at the agency level, or  decentralized, with independent oversight at the lab level\u2014which is  generally the case at contractor-operated labs. Some contractor-operated  labs manage their federally funded inventions through the Interagency  Edison (iEdison) reporting system, which is owned and managed by  NIH."], "subsections": []}, {"section_title": "Selecting Inventions to Patent", "paragraphs": ["Before applying for patent protection through USPTO, agency and lab  officials review the invention\u2014often using evaluation committees and  patent attorneys\u2014to consider a number of factors, including whether it is  patentable, it furthers the lab\u2019s mission, and patenting the invention is  likely to bring it to commercial use or practical application. The agency  must file a patent application within 1 year of the first publication, public  use, sale, or offer for sale of the invention or lose U.S. patent rights to that  invention. Not all patents will be licensed out to companies for a variety  of reasons, including national security considerations. The average time  from filing to issuing a patent, or when an application is abandoned, is  about 2 years, according to USPTO. Patent applications are often  rejected, modified, and refiled, and various fees are associated with filing  and prosecuting a patent application. However, according to USPTO,  patent maintenance fees that allow federal labs to maintain their patents  in force are among the most significant fees."], "subsections": []}, {"section_title": "Attracting Potential Licensees", "paragraphs": ["Agencies and labs use a variety of methods to attract potential licensees,  including those from industry, universities, and nonprofits. For example,  agencies may post their inventory of patented inventions online, publish  them in academic journals, or highlight them at public events. Agencies  and labs actively engage with the private sector by, for example,  attending conferences where companies can network with federal  researchers and federal technology transfer officials. In addition,  technology transfer offices often work with partnership intermediaries\u2014 such as local or state entities and nonprofit organizations\u2014to support  their efforts, including reaching out to potential licensees. Labs have  other mechanisms to help attract potential licensees to further develop  their inventions. For example, CRADAs can help facilitate licensing or the  transfer of knowledge from a lab to a licensee, and new inventions that  arise under a CRADA are typically made available to the partner via an  option to license."], "subsections": []}, {"section_title": "Negotiating the License Agreement", "paragraphs": ["The technology transfer offices and legal counsel are generally  responsible for crafting and negotiating the terms of the patent license,  sometimes with input from other lab officials. Negotiations are often an  iterative process in which both the lab and the licensee request  adjustments to the terms of the license. Laws and regulations specify  some terms that government-operated labs must include in their licenses.  Among others, a typical license includes terms related to (1) financial  compensation (if applicable), (2) the degree of exclusivity of the license,  (3) the U.S. manufacturing requirement, (4) retained rights for the  government, (5) termination of the license, and (6) enforcement of  licenses.", "Financial terms may include up-front fees; minimum payments; royalties,  usually based on sales; and milestone payments, among others. Federal  labs typically establish financial terms on a case-by-case basis that are  tailored to the specifics of the technology, licensee, and market  conditions. License agreements may be nonexclusive, partially  exclusive, or fully exclusive, and may be limited to some fields of the  invention\u2019s use or to specific geographic areas.", "Government-operated labs must publicly announce their intent to grant an  exclusive license for at least 15 days. After this period, comments and  objections are considered. Negotiations then begin with the proposed  licensee or, if the licensee has changed, another public announcement of  the new licensee may be required. Government-operated labs are  required to obtain a commercialization plan from a potential licensee  regardless of the degree of exclusivity. Contractor-operated labs, which  typically retain title to their inventions under the authority of the Bayh-Dole  Act, are not subject to the requirement to obtain a commercialization plan  from a prospective licensee before granting a license; however, they are  subject to requirements specified in their contracts regarding patent  licensing. In addition, they are not subject to the same notification  requirements as government-operated labs.", "The law also contains some other provisions pertaining to patent licenses  originating from federal labs. For example, the law generally gives  preference to small businesses that are capable of bringing the invention  to practical application. There is a general preference for products that  incorporate federal inventions to be manufactured substantially in the  United States; however, on a case-by-case basis, agencies may waive  this requirement. Applicable law also reserves certain rights for the  government to protect the public\u2019s interests in federally funded inventions.  For example, the government retains a royalty-free license to use  inventions that are contractor owned or that are licensed exclusively. In  addition, the Bayh-Dole Act provides the government march-in authority  when certain statutory conditions have been met. Under this authority, an  agency may grant a license to an invention developed with federal  funding even if the invention is exclusively licensed to another party if, for  example, it determines that such action is needed to alleviate public  health or safety needs which are not reasonably satisfied by the  contractor, assignee, or their licensee. A federal lab can also terminate  a license when the licensee is not meeting its commitment to achieve  practical application of the invention. The lab can also, through the  license, grant permission to a licensee to pursue patent infringement  cases."], "subsections": []}, {"section_title": "Monitoring Licensee Performance", "paragraphs": ["Federal license agreements generally require licensees to report  periodically on their commercialization. For instance, labs generally put  specific monitoring requirements in the license agreements, including  milestones and reporting requirements. Through the agreements,  government-operated labs have the right to terminate or modify licenses if  certain requirements are not met. Government-operated labs must  submit written notices to the licensees and any sublicensees of their  intentions to modify or terminate licenses, and allow 30 days for the  licensees or sublicensees to remedy any breach of the licenses or show  cause why the licenses should not be modified or terminated.  Contractor-operated labs also monitor licensee performance in much the  same way; however, they are subject to a different set of regulations."], "subsections": []}, {"section_title": "Measuring Licensing Outcomes", "paragraphs": ["Federal labs are responsible for measuring the outcomes of their  activities in all areas of the patent licensing process by developing metrics  and evaluation methods. Measuring licensing outcomes help labs assess  the effectiveness of their patent licensing efforts. Soon after the passage  of AIA, President Obama issued a memorandum in October 2011 to the  heads of executive departments and agencies calling for, among other  things, (1) developing strategies to increase the usefulness and  accessibility of information about federal technology transfer  opportunities; (2) listing all publicly available, federally owned inventions  on a public government database; and (3) improving and expanding its  collecting of metrics for Commerce\u2019s annual technology transfer summary  report."], "subsections": []}]}, {"section_title": "Technology Transfer and Agency Mission", "paragraphs": ["Federal law states that it is Congress\u2019s policy and objective to use the  patent system to promote the commercialization and public availability of  inventions, and that technology transfer, including federal patent  licensing, is the responsibility of each laboratory science and engineering  professional. No single federal agency is responsible for managing  technology transfer activities government-wide. Rather, each federal  agency involved in technology transfer designs its own program to meet  technology transfer objectives, consistent with its other mission  responsibilities."], "subsections": []}]}, {"section_title": "Federal Labs and Stakeholders Identified Challenges in Patent Licensing, and Agencies Have Taken Some Steps to Address Them, but NIST Has Not Fully Reported Such Challenges", "paragraphs": ["Federal agency and lab officials and external stakeholders have identified  challenges across the federal patent licensing process, but NIST has not  fully reported such challenges. Specifically, DOD, DOE, NASA, and NIH  officials at the agency and lab levels, as well as external stakeholders,  cited challenges related to all seven areas of the patent licensing process.  In addition, officials and stakeholders cited challenges in one area that  cuts across the entire process: prioritizing patent licensing as part of  agencies\u2019 missions. In its annual reports to Congress on federal labs\u2019  performance in patent licensing activities, NIST has discussed some  challenges identified by agency and lab officials and external  stakeholders but has not fully reported on the range of challenges they  have experienced."], "subsections": [{"section_title": "Federal Labs and Stakeholders Identified Challenges across the Patent Licensing Process, and Agencies Have Taken Some Steps to Address These Challenges.", "paragraphs": ["DOD, DOE, NASA, and NIH officials at the agency and lab levels, as well  as external stakeholders, identified challenges in all seven areas of the  patent licensing process, including identifying inventions, keeping track of  inventions, and negotiating license agreements. They also cited  challenges in prioritizing patent licensing as part of agencies\u2019 missions.  Based on our analysis of relevant literature and on interviews with  external stakeholders, many of these challenges are occurring  government-wide. DOD, DOE, NASA, and NIH have taken some steps to  address the challenges in each area of the patent licensing process."], "subsections": [{"section_title": "Challenges in Implementing the Patent Licensing Process", "paragraphs": ["DOD, DOE, NASA, and NIH officials at the agency and lab levels, as well  as external stakeholders, identified challenges in all seven areas of the  patent licensing process, including not identifying inventions, keeping  track of inventions in inadequate systems, and difficulty negotiating  license agreements. For example, several DOD, DOE, NASA, and NIH  officials stated that some researchers do not have adequate training in  identifying potentially patentable inventions. When a federal researcher  does not disclose to lab officials an invention developed in a federal lab,  the opportunity to assess the invention\u2019s potential for commercial use  may be lost. Federal officials cited various reasons why researchers do  not disclose inventions. Navy officials, for example, stated that  researchers are often intimidated by the overall invention disclosure  process and tend to focus on their research rather than consider what  could be patentable. Officials at one NASA lab noted that they have come  across a few contractor employees who do not see the benefit of filing  invention disclosures, and sometimes researchers are too busy to engage  in the patenting process.", "Our analysis of relevant literature and interviews with stakeholders also  showed that researchers not identifying and disclosing inventions is a  government-wide challenge. For example, one stakeholder stated that  researchers at federal labs generally have limited understanding of the  patenting process, including an understanding of what constitutes  patentable subject matter and how to conduct a prior art search on the  technology to determine whether it is patentable.", "DOD, DOE, NASA, and NIH officials stated that they are taking a variety  of actions to help address this challenge. For example, some agency and  lab officials stated that labs conduct training to educate researchers about  the patenting process, inform researchers about requirements to disclose  inventions, and incentivize them by acknowledging their efforts through  awards and monetary incentives\u2014such as potential royalty distributions\u2014 when their inventions reach commercial success.", "In addition, DOD, DOE, and NIH officials described their agencies\u2019  systems for keeping track of inventions developed in the labs as  inadequate or in need of improvement. How agencies and labs keep track  of such inventions can range from spreadsheets to sophisticated  databases that manage all technology transfer activities, including  keeping track of patented inventions and licenses. Currently, DOD has a  decentralized approach to keeping track of inventions, which, according  to DOD officials, needs improvement given how large the agency is.", "Several stakeholders we interviewed also noted that the challenge of  keeping track of inventions exists government-wide. According to some  stakeholders, federal labs not only have inadequate systems to keep  track of their own inventions but also limited information on the kinds of  inventions being developed in federal labs across the government. The  result is that agencies risk being unaware of research across the labs,  which can limit their ability to leverage other federal research efforts. For  example, one stakeholder stated that there can be research conducted  independently at three or four labs under different agencies but little  interaction among those labs about the research.", "DOD, DOE, and NIH officials stated that they have made efforts to  improve their current systems for keeping track of inventions. Specifically,  DOE officials reported that they have developed a plan to leverage the  capabilities of the iEdison reporting system to unify the agency\u2019s data  management process. Air Force and NIH officials stated that they have  contacted NASA, which has a centralized system for tracking inventions,  about leveraging its expertise. NASA officials reported that they have  been hosting regular webinars with other agencies to determine whether  NASA\u2019s tracking system could help meet other agencies\u2019 needs.", "Furthermore, agency and lab officials and stakeholders noted that federal  labs face challenges in negotiating license agreements because the  licensing process is lengthy and uniquely regulated, which can deter  companies from licensing federal inventions. Stakeholders stated that the  federal licensing process can take anywhere from about 3 months to  more than 2 years. Some stakeholders stated that from their point of view  taking a year to negotiate a license agreement is too long. One  stakeholder said that such lengthy processes are particularly difficult for  start-ups, which often need to finalize license agreements in 3 months.", "DOD, DOE, NASA, and NIH officials said they are taking steps to address  companies\u2019 concerns about the time it takes to negotiate a license  agreement. For instance, NASA, NIH, and Navy officials told us that they  have developed model license agreements to help guide companies  through the process, and NASA and NIH have special license  agreements for start-ups to shorten the licensing process.", "For more detail on challenges in the seven areas of the patent licensing  process that agency and lab officials and external stakeholders identified,  see appendix II."], "subsections": []}, {"section_title": "Challenges in Prioritizing Patent Licensing", "paragraphs": ["DOD, DOE, NASA, and NIH face challenges in prioritizing patent  licensing as part of their agency missions. For example, DOD and DOE  officials stated that an agency\u2019s mission affects patent licensing activities.  DOD officials stated that the agency\u2019s primary mission is protecting the  warfighter and that patent licensing is a secondary benefit to the agency.  According to DOE officials, the nuclear security labs do not focus on  patenting but instead on developing technologies associated with a  weapons program.", "In addition, several stakeholders we interviewed stated that some  agencies and labs do not have a culture that prioritizes patent licensing.  In particular, one stakeholder stated that at some federal labs, patent  licensing is not reflected in performance evaluation management plans,  which can help incentivize lab personnel to engage in patent licensing  activities. A few stakeholders stated that at some labs where  management does not prioritize patent licensing activities, researchers\u2019  careers can be negatively affected if they engage in patent licensing  activities.", "Some agency and lab officials stated that they have taken steps to  overcome such challenges. For example, officials at one Navy lab stated  that the lab has management support and nine patent attorneys to assist  in the reviews of researchers\u2019 invention disclosures. Also, officials at one  NIH lab stated that the lab has strong management support and a good  royalty stream from successful inventions that pay for patenting and other  reinvestments, which allows the lab to not draw from its appropriations."], "subsections": []}]}, {"section_title": "NIST Has Reported Some Challenges Faced by Federal Labs in Areas of Patent Licensing but Has Not Fully Reported on the Range of Such Challenges", "paragraphs": ["In its three most recent fiscal year summary reports to Congress, NIST  identified some challenges faced by federal labs in areas of patent  licensing and has assisted agencies in addressing challenges in their  patent licensing activities. However, NIST does not fully report on the  range of challenges that agency and lab officials and stakeholders  identify.", "NIST collaborates with agencies to gather patent licensing data for its  summary reports to Congress. For example, according to agency officials,  NIST engages with agencies to inform them about new requirements in  technology transfer and helps them identify their successes in conducting  technology transfer activities. NIST also provides administrative support  to the FLC, which offers training to federal technology transfer specialists  through workshops; publishes a desk reference on federal patent  licensing, laws, and regulations; and has commissioned studies on efforts  to develop federal inventions for commercial use. Further, NIST  developed a survey in 2016 on agency technology transfer processes.  NIST officials stated that the survey is aimed in part at improving federal  labs\u2019 decisions on whether to spend money on applying for patents,  whether patents will facilitate the commercialization of technology, and  what data are needed to make those determinations. NIST officials stated  that the agency continues to analyze the survey data and currently plans  to report its findings in fiscal year 2018.", "While NIST has identified in its annual summary reports to Congress  some challenges that federal labs face in patent licensing and other  technology transfer activities, it has not fully reported the range of  challenges that agencies and labs face in patent licensing. For example,  in its fiscal year 2015 summary report\u2014its most recent report\u2014on federal  technology transfer, NIST reported that the federal intramural research  budget has been relatively consistent over the years but not that DOD,  DOE, NASA, and NIH face challenges in prioritizing patent licensing as  an agency mission. The report also mentions that there is no uniform  federal system for tracking research that employees in federal labs  published but not that DOE, for example, has faced challenges in keeping  track of inventions developed in its labs. In addition, we found that  although the report mentions that the Department of Veterans Affairs is  facing challenges with its labs disclosing inventions, it does not mention  similar challenges at DOD. NIST officials stated that they were generally  aware of the challenges identified by agency and lab officials and external  stakeholders but had not considered including such challenges to a  greater degree in the summary reports to Congress.", "We have previously reported on Congress\u2019s goal to make the federal  government more results oriented through reporting of agency  performance information to aid decision making by agency executives,  Congress, and program partners. Specifically, we have reported how  the effective implementation of good governance can help address  government challenges in five key areas involving agency performance  and management: (1) instituting a more coordinated and crosscutting  approach to achieving meaningful results, (2) focusing on addressing  weaknesses in major management functions, (3) ensuring that agency  performance information is useful and used in decision making, (4)  sustaining leadership commitment and accountability for achieving  results, and (5) engaging Congress in identifying management and  performance issues to address. By fully reporting the range of  challenges in federal patent licensing\u2014such as those outlined in this  report\u2014and including that information in its annual summary reports to  Congress, NIST has the opportunity to further ensure that Congress is  more aware of challenges that limit agencies\u2019 efforts in patent licensing  and ways for potentially addressing those challenges. To identify these  challenges, NIST could, for example, leverage its survey, past FLC  studies, and agency reports."], "subsections": []}]}, {"section_title": "Federal Agencies and Labs Have Limited Information on Processes, Goals, and Comparable Licenses to Guide Establishing Financial Terms in Patent Licenses", "paragraphs": ["Federal agencies and labs have limited information on processes, goals,  and comparable licenses to guide establishing the financial terms in  patent licenses. DOD, DOE, NASA, and NIH labs generally do not  document their processes for establishing the financial terms of patent  licenses and instead rely on the expertise of technology transfer staff.  Furthermore, existing agency and lab guidance does not consistently link  the practice of establishing license financial terms to the statutory goal of  promoting commercial use of inventions. In addition, although many  federal labs rely on comparable licenses to aid them in setting the terms  of new licenses, labs have varying levels of access to information about  such licenses."], "subsections": [{"section_title": "Federal Agencies and Labs Have Limited Documentation of Their Processes for Establishing the Financial Terms of Patent Licenses", "paragraphs": ["DOD, DOE, NASA, and NIH labs have limited documentation of their  processes for establishing the financial terms of patent licenses. Such  documentation is limited at both the agency level and the lab level.", "At the agency level, the four agencies we reviewed had some  documentation on patent licensing in general, such as policies,  procedures, guides, and handbooks, but had limited information on how  to establish financial terms. For example, the Air Force and the Navy  had handbooks on technology transfer that include brief passages on  financial terms. However, agency officials noted that these handbooks  were either outdated or under revision. At DOE, labs collaborated to  develop two agency-level documents on patent licensing: one for lab  officials on using equity in licenses and a licensing guide for licensees.  These documents describe the general structure of various types of  financial terms and, in the document on using equity, factors to consider  regarding its use in a license, but do not discuss methods for establishing  financial terms. NASA and NIH have policies and procedures for patent  licensing that mention the types of financial terms that are normally found  in licenses but do not cover other aspects, such as methods for  establishing financial terms. All four agencies reported that they gave  their labs discretion to develop their own processes for establishing  financial terms.", "At the lab level, DOD, DOE, NASA, and NIH generally had not  documented their processes for establishing financial terms in patent  licenses. Based on documentation provided by NASA, NIH, and DOD,  few labs at these agencies had issued additional documentation on the  patent licensing process. DOE labs had documented the patent  licensing process in general, and 6 out of 17 DOE labs provided  documentation that covered aspects of establishing financial terms. For  example, one DOE lab document contained a set of licensing principles  that help clarify what financial terms a license usually contains, their  purpose, and how to structure the financial terms in patent licenses. In  addition, agency and lab officials at NASA and DOE reported using tools,  such as financial term calculators, at some of their labs, which aid  technology transfer staff in valuing technologies.", "Agency and lab officials reported that they generally rely on the expertise  of technology transfer staff to establish and vet appropriate financial  terms. Accordingly, agencies and labs reported that they have taken  some steps to develop, share, and retain expertise among staff in their  technology transfer offices. The agencies we reviewed reported that  some technology transfer staff participate in training opportunities  provided by professional organizations like the Association of University  Technology Managers (AUTM) or the Licensing Executives Society  (LES), as well as the FLC and the agencies. In addition, some agencies  and labs reported that internal working groups and regular meetings are  opportunities to share licensing expertise. At DOD, officials stated that on  a case-by-case basis, labs may use the expertise of their partnership  intermediary to help establish financial terms.", "However, according to agency and lab officials and stakeholders, federal  labs face challenges in acquiring, developing, and retaining expertise in  patent licensing for their technology transfer offices. Specifically, some  agency officials, lab officials, and stakeholders cited issues such as losing  experienced technology transfer staff to retirement or to the private  sector, having difficulties in hiring staff with expertise in part because of  limited funding, and facing a limited pool of prospective employees to hire  with the expertise to value and license inventions. A few stakeholders  said that government training in the business aspects of patent licensing  is inadequate and not widespread. In addition, some stakeholders had  concerns about consistency in licensing practices both within the labs and  across labs. For example, some of these stakeholders said that the  outcome of license negotiations can depend on the specific licensing  professional handling the license. Varying levels of expertise may lead to inconsistency in licensing practices, including establishing financial terms,  as can undocumented processes.", "Under the federal standards for internal control, management should  design control activities by, for example, clearly documenting them in  management directives, administrative policies, or operating manuals, to  achieve objectives and respond to risks. Furthermore, documentation  can act as a means to retain organizational knowledge and provide some  assurance that an approach is operational across the lab or agency.", "Agency and lab officials stated that they had not documented their  processes for establishing financial terms for various reasons. For  example, lab officials stated that establishing financial terms is often  complex and varies based on the specific circumstances applicable to  each potential license, which may limit what can be documented. Some  agency and lab officials stated that labs need flexibility in negotiating  terms to make adjustments based on the circumstances and therefore  officials do not want to be prescriptive. A few agency and lab officials also  noted that there are benefits to having streamlined processes.  Furthermore, a few agency and lab officials described negotiating license  terms as a craft or art that requires expertise and said that documenting  this will not enhance licensing by itself.", "However, some agency and lab officials and stakeholders said that it is  possible to document some aspects of the process. A few stakeholders  we interviewed noted that even if each agreement is unique, it is still  possible to develop guidelines or outline a methodology for establishing  financial terms. A few agency and lab officials stated that they are  investigating opportunities to standardize their processes or would be  open to documenting them. For example, one agency official told us that  the agency plans to update existing documents with specific information  about royalty ranges so labs do not have to constantly \u201creinvent the  wheel.\u201d Some labs also described steps that they take to establish  financial terms, such as methods for valuing inventions, without being  prescriptive. By documenting processes for establishing the financial  terms of licenses while maintaining enough flexibility to tailor the specific  terms of each license, the four agencies could have more reasonable  assurance of consistency across their labs regardless of the expertise of  staff."], "subsections": []}, {"section_title": "Federal Agency and Lab Documentation Does Not Consistently Link Financial Terms to the Goal of Promoting Commercial Use", "paragraphs": ["Agency and lab documentation does not consistently link establishing  financial terms in patent licenses to the goal of promoting commercial use  of inventions. As noted above, federal law states that it is Congress\u2019s  policy and objective to use the patent system to promote the  commercialization and public availability of inventions, and that  technology transfer, including federal patent licensing, is the responsibility  of each laboratory science and engineering professional.", "Agency-level documentation at NASA contains a provision that clearly  links establishing financial terms to the goal of promoting commercial use  of inventions\u2014that is, \u201cterms should be negotiated that provide the  licensee incentive to commercialize the invention.\u201d NIH\u2019s documentation  mentions financial terms in the context of protecting the public from  nonuse, which is one aspect of promoting commercial use, and also  mentions the goal of obtaining a fair financial return on investment from  the licensed invention. DOD and DOE agency-level documents mention  the general goal of promoting the commercial use of inventions without  specifically linking it to the financial terms. At the lab level, DOD  documents generally do not address the goals for financial terms. Of 17  DOE labs, 4 had a statement in their documentation to link financial terms  to the goal of promoting commercial use of inventions.", "DOD, DOE, NASA, and NIH officials we interviewed stated that getting  the technology into the marketplace is their primary goal in licensing but  also mentioned other goals related to financial terms that support their  mission. In addition, some agency and lab officials described using  revenues from licenses as a means to provide a reward to inventors for  their work or to obtain a fair return on investment for research conducted  by federal agencies. Furthermore, lab officials we interviewed mentioned  the flexibility of revenues from licenses as helpful in funding activities,  such as additional research, training, and patent prosecution.", "Some agency officials and stakeholders we interviewed expressed  concerns about competing goals for establishing financial terms. For  example, a few stakeholders stated that licensing professionals may be  motivated to negotiate for increased license revenue because it reflects  positively on them professionally. Further, some stakeholders expressed  concerns about labs taking a short-term view of some licensees,  particularly small companies, because they have less ability to pay initially  and thus may offer less certain revenues.", "Our review of relevant economic literature and interviews with  stakeholders suggest that license financial terms set with goals other than  promoting commercial use in mind, such as short-term revenue  maximization, may undermine that longer-term goal. For example, high  up-front license fees typically provide more guaranteed short-term  revenue to the licensor than other forms of payment but can also reduce  the capital available to develop a product successfully. Labs with other  goals in mind when establishing financial terms may be at risk of  establishing them in ways that run counter to the goal of promoting  commercial use.", "NIST plays an important role in providing regulations and guidance to  agencies regarding patent licensing. Commerce has delegated to NIST  the authority to promulgate implementing regulations pertaining to  patenting and licensing at federal labs\u2014that is, regulations that indicate  how agencies are to implement statutory provisions, including the goal of,  among other things, promoting commercial use of inventions. NIST has  developed regulations, but they do not link the financial terms of federal  patent licenses and the statutory goal of promoting commercial use of  inventions.", "As the host of the FLC and a coordinator for the Interagency Working  Group for Technology Transfer, NIST also plays a role in supporting the  development of interagency guidance on patent licensing that covers,  among other topics, establishing financial terms in licenses. However,  existing interagency guidance provides limited information regarding the  goals for financial terms. For example, the FLC desk reference contains a  statement that links royalty rates to the goal of promoting commercial use  but does not clarify how the goal applies to other financial terms.  Furthermore, the FLC desk reference states that labs are entitled to  market-based compensation for their intellectual property. However,  licenses are structured differently to accomplish different goals and a  primary focus on obtaining market-based compensation may undermine  the goal of promoting commercial use.", "As the lead agency on the government-wide effort to find commercial  uses or practical applications for federally funded inventions, NIST has  been delegated the responsibility to promulgate regulations pertaining to  patenting and licensing at federal labs, including implementing the  statutory goal of promoting commercial use. NIST officials stated that a  change to the regulations could be made as part of an upcoming rule- making process. However, in doing so, a stakeholder and agency officials  noted that any changes to the regulations should avoid prescriptive  language that mandates specific practices. NIST officials also stated that  they could update relevant guidance on this issue through one of their  current efforts. By clarifying the link between establishing federal patent  license financial terms and the goal of encouraging commercial use,  through the upcoming rule-making process and updating relevant  guidance, NIST would have better assurance that financial terms in  patent licenses are targeted to that goal."], "subsections": []}, {"section_title": "Federal Agencies and Labs Have Varying Amounts of Information on Comparable Licenses, but Such Information Is Not Shared across Agencies", "paragraphs": ["According to agency and lab officials, comparable license information can  be used as a point of reference to guide establishing financial and other  terms in new patent licenses. Just as real estate agents look at sales of  comparable houses when setting the selling price of a house, patent  licensing professionals can look at licenses for comparable inventions  when determining what financial terms to include in a new license.", "However, federal labs have varying amounts of information on  comparable licenses when establishing financial terms. NASA and NIH  each have an agency-wide system that enables each lab to access  information from other labs at the agency, including the financial terms in  previous licenses. NIH agency officials reported that technology transfer  offices have access to thousands of previous licenses and refer to such  information frequently to help establish the financial terms of new  licenses. Labs at DOE and DOD are generally responsible for tracking  their own licenses and do not have access to information on comparable  licenses from other labs in their agencies. According to DOE officials,  under DOE contracts and relevant law, license information at the  agency\u2019s contractor-operated labs is considered business sensitive and a  contractor-owned record that resides at the labs, which limits DOE\u2019s  ability to share it. Officials at DOE and DOD\u2019s military departments  reported that they have investigated and continue to investigate systems  that would provide greater access to information on financial terms but  have encountered some obstacles, such as network security  requirements, that they have not yet overcome.", "To bolster their access to comparable license information, some federal  labs obtain private sector license information. For example, some lab  officials we interviewed said that they have occasionally purchased  benchmarking guides and access to other private sector license  information through organizations such as AUTM and LES. According to  some lab officials and stakeholders, private sector license information is  useful for understanding acceptable royalty rates in industry and may  cover certain technology areas or inventions that are new to the lab.  However, access to private sector license information is typically ad hoc  and can be limited by its cost, according to agency and lab officials. Some  agency and lab officials stated that they would like increased access to  private sector information on comparable licenses. For example,  according to agency officials at DOE, there is an effort under way to  obtain benchmark financial terms from labs and universities with  comparable R&D portfolios.", "Although lab officials and stakeholders said that private licensing  information can be helpful for understanding financial terms acceptable to  the market, using private license information may not always be  appropriate for government licenses. Private licenses are often structured  to maximize revenue for the licensor\u2014not necessarily to promote  commercial use or practical application, according to stakeholders. Our  review of economic literature and interviews with stakeholders and  agency officials suggest that licenses are structured differently to  accomplish different goals. For example, a few stakeholders and agency  officials noted that federal licenses would typically be less exclusive and  have different financial terms than those in the private sector, where there  is a greater emphasis on generating revenue from R&D investments.  Some stakeholders and agency officials also stated that in general the  value of a government license may be different from that of a private  license for a similar technology because of the rights the government  retains on its licenses. In addition, according to agency and lab officials  and stakeholders, government inventions tend to be in an earlier stage of  development than those in the private sector, potentially making it more  difficult to find licenses for comparable inventions in the private sector.", "Some agency and lab officials and a few stakeholders stated that it would  be valuable for federal labs to have greater access to information on  financial terms in government licenses to help establish a benchmark for  financial terms. Our analysis of approximately 21,000 patents assigned to  DOD, DOE, NASA, and NIH and issued since 2000 shows that different  agencies may patent inventions in similar technology fields. All four  agencies we reviewed had patented inventions in 26 of 35 technology  fields covered by the patents, and all had 10 or more patents in 9 of the  35 technology fields. DOD and DOE, including DOE contractor-operated  labs, had more patents in a wider range of fields than the other agencies.  On the other hand, HHS\u2019s patents are more focused on fields such as  biotechnology and medical technology. However, even in the area of  biotechnology, there were hundreds of patents issued to the other three  agencies. Although other information would be needed to determine  whether the agencies\u2019 inventions are truly comparable, their having  patents in the same technology fields suggests that some government- wide information on financial terms could be useful to federal labs.", "Under internal control standards for the federal government, management  should externally communicate the necessary quality information to  achieve the entity\u2019s objectives; this includes communicating with and  obtaining quality information from external parties using established  reporting lines. The four agencies we reviewed communicate and share  information through several collaborative efforts to improve federal patent  licensing, including the FLC and the Interagency Working Group for  Technology Transfer. For example, agency officials said they share  experiences, ideas, and best practices related to patent licensing  informally through these groups. However, there is no formal sharing of  information on financial terms in patent licenses among federal labs,  according to NIST officials.", "We have previously reported that federal agencies engaged in  interagency collaborative efforts should identify and address needs by  leveraging their resources to obtain additional benefits that would not be  available if they were working separately. NIST plays a leading role in  these interagency collaborative efforts on patent licensing, including  gathering and sharing information among the labs. As the administrative  host for the FLC, NIST has already supported an effort to share  information about available technology. NIST is also responsible for  gathering information from technology transfer agencies, including gross  license income, and submitting summary reports to Congress annually  and sharing them with the public. Furthermore, NIST has initiated a  survey of practices at federal technology transfer offices and shared  some preliminary information with the agencies. By facilitating the formal  sharing of comparable license information, NIST could help provide  agencies and labs with benchmarks for evaluating which financial terms  are best suited to licensing inventions successfully.", "NIST officials stated that gathering and sharing comparable license  information could be done as part of their existing efforts but that there  are obstacles to doing so. Specifically, NIST officials stated that this effort  would add to the reporting burdens of agencies, may require additional  resources, and would need to take into account data security and  proprietary information considerations. Agency officials also stressed that  any effort to share license terms would have to ensure that confidential  and proprietary information from licensees, including specific financial  terms from a particular license, is not divulged."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Federal labs under DOD, DOE, NASA, and NIH face challenges at  various stages of the patent licensing process, and agencies have taken  some steps to address such challenges. For example, ensuring that  researchers identify and disclose inventions is a government-wide  challenge, according to interviews with external stakeholders and our  analysis of relevant literature. However, such challenges in federal patent  licensing are not fully reported by NIST, the lead agency delegated by  Commerce to provide annual summary reports to Congress on federal  technology transfer activities. By fully reporting the range of these  challenges that agencies and labs face, NIST can ensure that Congress  has greater awareness of these challenges. To help identify these  challenges, NIST could, for example, leverage its survey of practices at  federal technology transfer offices, past FLC studies, and agency reports.", "In addition, DOE, DOD, NASA, and NIH documentation does not  consistently link establishing financial terms in patent licenses to the  statutory goal of promoting commercial use. As the lead agency on the  government-wide effort to find commercial uses or practical applications  for federally funded inventions, NIST has been delegated the  responsibility to promulgate regulations pertaining to patenting and  licensing at federal labs, including implementing the statutory goal of  promoting commercial use. By clarifying the link between establishing  patent license financial terms and the goal of encouraging commercial  use, through the upcoming rule-making process and updating relevant  guidance, NIST would have better assurance that financial terms in  patent licenses are targeted to that goal.", "Further, federal labs have varying amounts of information on comparable  government licenses when establishing financial terms. However, there is  no formal sharing of information on financial terms in patent licenses  among federal labs, according to NIST officials. NIST plays a leading role  in interagency collaborative efforts on patent licensing, including  gathering and sharing information among the labs. By facilitating the  formal sharing of comparable license information, NIST could help  provide agencies and labs with benchmarks for evaluating which financial  terms are best suited to successfully licensing inventions.", "To establish financial terms, DOD, DOE, NASA, and NIH labs rely on the  expertise of their technology transfer staff and take a number of steps to  build and share expertise, but had limited documentation of their  processes for establishing the financial terms of patent licenses. Agency  and lab officials explained that there is a need for flexibility, and thus not  every aspect of their processes can be documented in detail. By  documenting processes for establishing the financial terms of licenses  while maintaining enough flexibility to tailor the specific terms of each  license, the four agencies could have more reasonable assurance of  consistency across their labs regardless of the expertise of staff."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making seven recommendations, including three to Commerce  and one each to DOD, DOE, NASA, and NIH:", "The Secretary of Commerce should instruct NIST to fully report the  range of challenges in federal patent licensing, such as those outlined  in this report, by, for example, leveraging its survey of practices at  federal technology transfer offices, past FLC studies, and agency  reports and including that information in its summary reports to  Congress. (Recommendation 1)", "The Secretary of Commerce should instruct NIST to clarify the link  between establishing patent license financial terms and the goal of  promoting commercial use, through appropriate means, such as the  upcoming rule-making process and updating relevant guidance.  (Recommendation 2)", "The Secretary of Commerce should instruct NIST to facilitate formal  information sharing among the agencies to provide federal labs with  information on financial terms in comparable patent licenses, as  appropriate. (Recommendation 3)", "The Secretary of Defense should ensure that the agency or its labs  document processes for establishing license financial terms, while  maintaining flexibility to tailor the specific financial terms of each  license. (Recommendation 4)", "The Secretary of Energy should ensure that the agency or its labs  document processes for establishing license financial terms, while  maintaining flexibility to tailor the specific financial terms of each  license. (Recommendation 5)", "The Administrator of NASA should ensure that the agency or its labs  document processes for establishing license financial terms, while  maintaining flexibility to tailor the specific financial terms of each  license. (Recommendation 6)", "The Director of NIH should ensure that the agency or its labs  document processes for establishing license financial terms, while  maintaining flexibility to tailor the specific financial terms of each  license. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to Commerce, DOD, DOE, NASA, and  NIH for review and comment.  All provided written responses, which are  reproduced in appendixes IV-VIII.  Commerce and NIH also provided  technical comments, which we incorporated as appropriate.", "Commerce agreed with all three of our recommendations to the agency.  In general, the agency stated that it will work through interagency groups,  such as the Interagency Working Group for Technology Transfer and the  FLC, to address our recommendations, including by creating a specific  section in its annual reports to Congress with more details on challenges  agencies and labs face in patent licensing and by examining and  implementing solutions to facilitate the sharing of information among  agencies. According to Commerce, such solutions could include  identifying licensing officers who have expertise and creating a  community of practice in which they can share best practices and  approaches for establishing license terms.", "DOD, DOE, and HHS agreed, and NASA partially agreed, with the  recommendation that they or their labs document processes for  establishing financial terms in patent licenses. In its written response,  DOD said it will direct the military departments and appropriate defense  agencies to have their labs establish documentation of their licensing  processes as appropriate. In their written comments, DOE, HHS, and  NASA noted the complexity and nuances associated with negotiating  license agreements, such as understanding the market for the technology  and the level of risk involved. Further, DOE and NASA noted challenges  that limit their ability to document processes and emphasized the  importance of maintaining flexibility in establishing financial terms in  patent licenses. We agree that some flexibility in establishing financial  terms of patent licenses is important. DOE, HHS, and NASA all identified  steps they would take to ensure that at least some processes for  establishing financial terms are documented.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Commerce, Defense, and Energy; the  Administrator of NASA; and the Director of NIH. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or neumannj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Examples of Inventions Developed in Federal Labs", "paragraphs": ["Figure 3 presents examples of inventions developed in federal  laboratories under the Department of Defense, Department of Energy,  National Aeronautics and Space Administration, and National Institutes of  Health."], "subsections": []}, {"section_title": "Appendix II: Selected Descriptions of Challenges Federal Labs Face in Patent Licensing", "paragraphs": ["The following are additional descriptions of challenges in the seven areas  of the patent licensing process as well as challenges in prioritizing patent  licensing faced by federal laboratories (lab) that were identified by  external stakeholders and by agency and lab officials at the Department  of Defense (DOD), Department of Energy (DOE), National Aeronautics  and Space Administration (NASA), and the National Institutes of Health  (NIH)\u2014as well as steps agencies and labs have taken to address those  challenges."], "subsections": [{"section_title": "Challenges in the Seven Areas of the Patent Licensing Process", "paragraphs": [], "subsections": [{"section_title": "Identifying Inventions", "paragraphs": ["DOD, DOE, NASA, and NIH officials reported challenges in identifying  inventions that lab researchers developed. When a federal researcher  does not disclose to lab officials an invention developed in a federal lab,  the opportunity to assess the invention\u2019s potential for commercial use  may be lost.", "Federal officials cited various reasons why researchers do not disclose  inventions. For instance, several DOD, DOE, NASA, and NIH agency and  lab officials stated that some researchers do not have adequate training  in identifying potentially patentable inventions. Some agency and lab  officials pointed to other reasons why invention disclosures may not be  filed, such as researchers not having enough incentive to disclose their  inventions. Navy officials stated that researchers are often intimidated by  the overall invention disclosure process and tend to focus on their  research rather than consider what could be patentable. Officials at one  NASA lab noted that they have come across a few contractor employees  who do not see the benefit of filing invention disclosures, and sometimes  researchers are too busy to engage in the patenting process. According  to National Institute of Standards and Technology (NIST) officials, some  researchers decide not to disclose an invention because they believe  filing a patent application, which includes a filing fee, could take away  money from the research itself, and most federal researchers are not  motivated by the potential for receiving royalty distributions.", "Our analysis of relevant literature and interviews with stakeholders also  showed that researchers not identifying and disclosing inventions is a  government-wide challenge. One stakeholder stated that researchers at  federal labs generally have limited understanding of the patenting  process, including an understanding of what constitutes patentable  subject matter and how to conduct prior research on the technology to  determine whether it is patentable.", "DOD, DOE, NASA, and NIH agency and lab officials stated that they are  taking a variety of actions to help address these challenges. For example,  some agency and lab officials stated that labs conduct training to educate  researchers about the patenting process, inform researchers about  statutory requirements to disclose inventions, and incentivize them by  acknowledging their efforts through awards and monetary incentives  when their inventions reach commercial success."], "subsections": []}, {"section_title": "Keeping Track of Inventions", "paragraphs": ["DOD, DOE, and NIH officials described their agencies\u2019 systems for  keeping track of inventions developed in the labs as inadequate or in  need of improvement. How agencies and labs keep track of such  inventions can range from spreadsheets to sophisticated databases that  manage all technology transfer activities, including keeping track of  patented inventions and licenses.", "Currently, DOD has a decentralized approach to keeping track of  inventions, which, according to DOD officials, needs improvement given  how large the agency is. Each military department has its own systems to  track and store information on inventions developed in the labs. Officials  from DOD and the departments describe the systems as inadequate to  keep track of the agency\u2019s inventions. For example, Navy officials  described the department\u2019s in-house system to track inventions as  \u201cplagued by outages\u201d and thus ineffective. According to officials, the Army  funds systems that track inventions, but these systems are different from  each other and not connected to headquarters and have been suspended  since 2015.", "We have previously reported on federal agencies\u2019 challenges in  monitoring technology transfer activities, including tracking inventions  developed in the federal labs. Several stakeholders we interviewed also  noted that keeping track of inventions is a government-wide challenge.  According to some stakeholders, federal labs not only have inadequate  systems to keep track of their own inventions but also limited information  on the kinds of inventions being developed in federal labs across the  government. The result is that agencies risk being unaware of research  across the labs, which can limit their ability to leverage other federal  research efforts. One stakeholder specifically noted that the Interagency  Edison (iEdison) reporting system\u2014which allows federal grantees and  contractors to report federally funded inventions to the agency that issued  the funding award, including inventions developed by some contractor- operated labs\u2014is difficult to navigate and needs improvement. Another  stakeholder stated that there can be independent research at three or  four labs under different agencies but little interaction among those labs  about the research. Information on federal lab inventions can also be  accessed publically through the Federal Laboratory Consortium (FLC)  website; however, NIST officials stated that the website\u2019s information on  inventions relies on agencies to submit accurate information, which may  be limited by the agencies\u2019 tracking systems.", "DOD, DOE, and NIH officials stated that they have made efforts to  improve their current systems. For example, since our 2015 report on the  agency\u2019s challenges with its data management systems that track  federally funded inventions, DOE officials reported that they have  developed a plan to leverage the capabilities of the iEdison reporting  system to unify the agency\u2019s data management process. While DOD  officials stated that the agency has been unsuccessful in purchasing  software to track inventions across the agency, Air Force officials said  they are developing a pilot program and seeking new software to manage  the Air Force\u2019s inventions, and they expect the pilot program to increase  the number of invention disclosures. Air Force and NIH officials stated  that they have contacted NASA, which has a centralized system for  tracking inventions, about leveraging the agency\u2019s expertise. NASA  officials reported that they have been hosting regular webinars with other  agencies to determine whether NASA\u2019s tracking system could help meet  other agencies\u2019 needs."], "subsections": []}, {"section_title": "Selecting Inventions to Patent", "paragraphs": ["DOD, DOE, NASA, and NIH agency and lab officials cited selecting  inventions to patent as a challenge because of the expense of patenting  fees. According to some agency and lab officials we interviewed, fees  paid to the United States Patent and Trademark Office (USPTO) affect  their decision on whether to patent an invention. For example, DOE  officials stated that budget constraints force them to make decisions  about whether they should file a patent or engage in other agency  activities. NIH officials stated that the agency maintains fewer patents  because of the patent maintenance fees and the agency\u2019s tight budgets.", "NASA officials reported that one step the agency is taking to deal with the  costs of maintaining its issued patents is to identify technologies with low  licensing potential and allow the patents to expire if they fail to attract  licensees. NASA has created a searchable database that catalogs  thousands of expired NASA patents already in the public domain, making  them freely available to industry for unrestricted commercial use."], "subsections": []}, {"section_title": "Attracting Potential Licensees", "paragraphs": ["Federal labs under DOD, DOE, NASA, and NIH face challenges that limit  their ability to attract potential licensees, according to agency and lab  officials. Even officials at NASA, described by NIST officials as one of the  best agencies in promoting its inventions to industry, said the agency is  not selecting among multiple licensees and would like to have more  companies license its patents.", "There are various reasons why federal labs struggle to attract companies  interested in licensing their inventions, according to agency and lab  officials we interviewed. First, several agency and lab officials cited that  the number of entities that want to license inventions is generally not  large. Second, some agency and lab officials identified inadequate  promotion of federal inventions and licensing opportunities to companies,  including start-ups, as a factor. Third, some agency and lab officials also  noted that their inventions are often in the early stages of development  and thus pose more of a risk for companies to license.", "Based on our analysis of relevant literature and interviews with  stakeholders, difficulty in attracting industry to license inventions  developed in federal labs is a government-wide challenge. According to  several stakeholders, industry perceives federal labs as not friendly to the  private sector when it comes to patent licensing, especially for start-ups.  For example, one stakeholder said that it is rare that federal agencies  want to license to a start-up, and that more often the labs want a \u201csafer  route\u201d by licensing inventions to large companies that already have a  steady revenue stream. Another stakeholder said that DOE\u2019s contractor- operated labs in particular tend to not issue exclusive licenses to start-ups  and prefer to license to large companies because the agency sees those  companies as presenting less of a risk. In addition, stakeholders stated  that federal inventions are often not yet commercially viable, which can  deter companies from licensing federal inventions. One stakeholder, for  example, stated that NASA officials may think that NASA technology is  more developed than it is and therefore underestimate how long it will  take a company to develop it for practical application, the millions of  dollars needed to develop it, and whether it can be manufactured for  commercial use.", "DOD, DOE, NASA, and NIH officials stated that they are taking steps to  attract potential licensees by, for example, conducting local outreach to  attract companies and working on improving their databases so that  companies can learn about federal inventions available for licensing. For  instance, NASA officials stated that the agency\u2019s comprehensive  database accessible to potential licensees uses a wide variety of search  criteria and attracted 6 million unique visitors in 2016."], "subsections": []}, {"section_title": "Negotiating the License Agreement", "paragraphs": ["Agency and lab officials and stakeholders noted that federal labs face  challenges in negotiating the license agreement because the process is  (1) lengthy and (2) uniquely regulated, which can deter companies from  licensing federal inventions.", "Stakeholders stated that the federal licensing process can take anywhere  from about 3 months to more than 2 years. Some stakeholders stated that  from their point of view taking a year to negotiate a license agreement is  too long. One stakeholder said that such lengthy processes are  particularly difficult for start-ups, which often need to finalize license  agreements in 3 months. Another stakeholder noted that the federal  government in general does not understand how urgent it is for  companies to complete the licensing process in a timely manner.  Although actions on the part of both the labs and companies can cause  delays, if the overall process is time-consuming, prospective licensees  will tend to move onto something else instead, according to agency and  lab officials and stakeholders.", "Based on our analysis of licensing information provided by the agencies,  we found that the amount of time from receipt of an application for a  license to signature of the license by the lab varies widely. Specifically,  based on this measure of the length of the process, approximately 60  percent of 132 licenses effective in fiscal year 2014 took at most 6  months for DOD, DOE, NASA, and NIH labs to process. Officials at one  Navy lab stated that issuing an invention license to a company within 6  months is \u201chighly unusual,\u201d and officials at one NASA lab stated that the  fastest they have issued a license was a week because the start-up was  prepared and ready to go. For more on our analysis of licensing  information from DOD, DOE, NASA, and NIH, see appendix III.", "Several agency and lab officials also noted that federal regulations  associated with patent licensing can deter companies from licensing  federal inventions. Such regulations include requirements that are unique  to federally funded and federally owned inventions, including that  products arising from the invention must be substantially manufactured in  the United States and that the government may retain rights to the  invention and terminate the license agreement if the licensee does not  take steps to commercialize the technology. In particular, NASA officials  stated that venture capital firms sometimes oppose the government  retaining rights for federal technology used by start-ups that they fund.  According to DOD and DOE officials, federal regulations require a level of  documentation or explanation that can deter some companies from  licensing inventions developed in federal labs. Based on interviews with  stakeholders, as well as our analysis of relevant literature, company  concerns about federal regulations is a government-wide challenge that  federal labs face in licensing their inventions.", "For example, according to NIST officials, the U.S. manufacturing  requirement can influence whether companies consider licensing federal  inventions, because manufacturing in the United States can be more  expensive than manufacturing in other countries. NIST officials also  stated that some prospective licensees initially become concerned when  they are told about march-in authority, because it applies to federally  funded inventions and contractors. However, once companies are told  that it is a legal requirement and that the provision has never been  exercised, they generally become more comfortable with it.", "DOD, DOE, NASA, and NIH agency officials said they are taking steps to  address companies\u2019 concerns about the time it takes to negotiate a  license agreement and their unfamiliarity with federal licensing  requirements. For instance, NASA, NIH, and Navy officials told us they  have developed model license agreements to help guide companies  through the process, and NASA and NIH have special license  agreements for start-ups to shorten the licensing process. Also, DOE  created an agency-wide licensing guide to help prospective licensees  navigate federal licensing requirements."], "subsections": []}, {"section_title": "Monitoring Licensee Performance", "paragraphs": ["DOD, DOE, NASA, and NIH agency and lab officials we interviewed  identified limited resources and inadequate monitoring systems as factors  that make it difficult to monitor licensee performance.", "NASA and NIH officials reported that the number of license agreements  has increased in their labs and that they do not have enough resources to  monitor licenses. DOD officials stated that the agency\u2019s technology  transfer offices have traditionally been understaffed and that the agency\u2019s  monitoring systems are inadequate for tracking the status of issued  licenses. Officials at one DOE lab stated that collecting royalties from  licensees can be difficult because the lab does not have enough funds to  support that activity. In addition, agencies may rely on the same systems  they use to keep track of inventions to monitor licensee performance, and  as previously discussed, these systems are in need of improvement.", "Some stakeholders we interviewed noted that monitoring licensee  performance is a government-wide challenge. They explained that  sometimes licensees do not pay fees if they are not contacted, and a few  stakeholders stated that federal labs have limited funding and resources  to monitor contracts effectively. One stakeholder recalled one agency that  did not communicate with a licensee for 2 years after the license  agreement was signed. According to another stakeholder, ineffective  monitoring of licensee performance may limit federal labs\u2019 ability to  determine whether a company is developing federal inventions for  commercial use per the terms and conditions of the license agreement.", "Some agency and lab officials stated that they have taken steps to  regularly monitor licensees. In particular, at NASA and NIH\u2014where  monitoring of licensee performance is centralized at the agency level\u2014 officials have programed systems to remind staff to check on licensee  performance."], "subsections": []}, {"section_title": "Measuring Licensing Outcomes", "paragraphs": ["Federal labs, including those under DOD, DOE, NASA, and NIH, also  face challenges in effectively measuring patent licensing outcomes,  based on our interviews with stakeholders and analysis of relevant  literature. According to one stakeholder, labs need metrics to assess  whether a licensee has made progress on developing the invention for  commercial use and whether the lab needs to get the license back and  give it to another company.", "However, some stakeholders we interviewed stated that although the  2011 presidential memorandum on technology transfer called for  strategies to establish metrics, federal labs are still struggling to  implement metrics for measuring technology transfer outcomes, including  patent licensing activities. Stakeholders we interviewed and our analysis  of relevant literature have indicated that federal labs in general track the  numbers of patents, licenses, and revenues instead of using metrics that  identify direct economic impacts from patent licensing and other  technology transfer activities. In agencies where such metrics do exist,  they may be applied inconsistently across labs. For example, officials at  one DOE lab stated that DOE metrics are generally not consistent across  the agency\u2019s labs.", "DOD, DOE, NASA, and NIH agency officials stated that they are working  to improve their metrics and incorporate metrics beyond tracking numbers  of patents, licenses, and revenues. For example, in addition to measuring  the numbers of patents and licenses issued, NASA and Air Force officials  stated that they are also measuring factors that affect the length of time it  takes for their labs to process licenses. Such information, officials said,  will help them expedite the licensing process."], "subsections": []}]}, {"section_title": "Prioritizing Patent Licensing as an Agency Mission", "paragraphs": ["DOD, DOE, NASA, and NIH face challenges in prioritizing patent  licensing as part of their agency missions, which can affect the entire  patent licensing process.", "For example, DOD and DOE agency and lab officials stated that an  agency\u2019s mission affects patent licensing activities. DOD officials stated  that the agency\u2019s primary mission is protecting the warfighter and that  patent licensing is a secondary benefit to the agency. According to DOE  officials, the nuclear security labs do not focus on patenting but instead  on developing technologies associated with a weapons program.", "In addition, several stakeholders we interviewed stated that some  agencies and labs do not have a culture that prioritizes patent licensing.  In particular, one stakeholder stated that at some federal labs, patent  licensing is not reflected in performance evaluation management plans,  which can help incentivize lab personnel to engage in patent licensing  activities. A few stakeholders stated that at some labs where  management does not prioritize patent licensing activities, researchers\u2019  careers can be negatively affected if they engage in patent licensing  activities.", "DOD, DOE, NASA, and NIH agency and lab officials cited limited  resources to conduct the range of activities related to patent licensing.  For example, sometimes there is just one person at a DOD lab  overseeing technology transfer activities, according to DOD agency and  lab officials. Officials at one NIH lab stated that many labs across the  agency do not receive enough royalties to offset their patent licensing  costs. In its fiscal year 2015 report\u2014its most recent report\u2014to Congress  on federal technology transfer activities, NIST reported that the federal  intramural research budget, which include patent licensing activities, has  generally not increased in the past 4 fiscal years. Several agency and  lab officials stated that budget constraints affect the extent to which they  can engage in patent licensing activities\u2014including patent enforcement,  which can cost millions of dollars and presents challenges for federal  labs, according to DOE officials.", "Some agency and lab officials stated they have taken steps to overcome  such challenges. For example, officials at one Navy lab stated that the lab  has management support and nine patent attorneys to assist in the  reviews of researchers\u2019 invention disclosures. Also, officials at one NIH  lab stated that the lab has strong management support and a good  royalty stream from successful inventions that pay for patenting and other  reinvestments, which allows the lab to not draw from its appropriations."], "subsections": []}]}, {"section_title": "Appendix III: Patent License Summary for Licenses Effective in Fiscal Year 2014", "paragraphs": ["Tables 1 through 3 and figures 4 through 6 are based on 222 patent  licenses that became effective in fiscal year 2014, and associated data,  provided by the Department of Defense (specifically the Army, Navy, and  Air Force), Department of Energy, National Aeronautics and Space  Administration, and National Institutes of Health. They include both data  provided by the agencies and information compiled directly from the  licenses. The tables and figures are provided for informational purposes  and are not generalizable to all patent licenses."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Robert J. Marek (Assistant  Director), James D. Ashley, Kevin S. Bray, Virginia A. Chanley, Ellen L.  Fried, Sarah C. Gilliland, Cheryl M. Harris, Robert Letzler, Gregory A.  Marchand, Christopher P. Murray, Emmy L. Rhine Paule, Dan C. Royer,  Ardith A. Spence, Vasiliki Theodoropoulos, and Reed Van Beveren made  key contributions to this report."], "subsections": []}]}, {"section_title": "Bibliography", "paragraphs": ["Bozeman, Barry. Technology Transfer Research and Evaluation:  Implications for Federal Laboratory Practice, Final Report to VNS Group,  Inc. and the U.S. National Institute of Standards, 2013. Accessed on  March 14, 2018. https://www.nist.gov/tpo/return-investment-roi-initiative.", "Bozeman, Barry, Heather Rimes, and Jan Youtie. \u201cThe Evolving State-of- the-Art in Technology Transfer Research: Revisiting the Contingent  Effectiveness Model.\u201d Research Policy, vol. 44, no. 1 (2014): 34-49.", "Franza, Richard M. and Kevin P. Grant. \u201cImproving Federal to Private  Sector Technology Transfer: A Study Identifies Seven Critical Factors  with the Greatest Impact on Whether Transfer Attempt Succeeds or  Fails.\u201d Research Technology Management, vol. 49, no. 3 (2006): 36-40.", "Greiner, Michael A. and Richard M. Franza. \u201cBarriers and Bridges for  Successful Environmental Technology Transfer.\u201d Journal of Technology  Transfer, vol. 28, no. 2 (2003): 167-177  Howieson, Susannah V., Stephanie Shipp, Gina Walejko, Pamela  Rambow, Vanessa Pe\u00f1a, Sherrica S. Holloman, and Phillip N, Miller.  Exemplar Practices for Department of Defense Technology Transfer.  Alexandria, Va.: Institute of Defense Analyses, January 2013.", "Hughes, Mary E., Susannah V. Howieson, Gina Walejko, Nayanee  Gupta, Seth Jonas, Ashley T. Brenner, Dawn Holmes, Edward Shyu, and  Stephanie Shipp. Technology Transfer and Commercialization Landscape  in the Federal Laboratories. Alexandria, Va.: Institute of Defense  Analyses, June 2011.", "Jin, D., X. Mo, A. M. Subramanian, K. H. Chai, and C. C. Hang. \u201cKey  Management Processes to Technology Transfer Success.\u201d 2016 IEEE  International Conference on Management of Innovation and Technology,  (2016), 67-71.", "Linton, Jonathan D., Cesar A. Lombana, and A. D. Romig, Jr.  \u201cAccelerating Technology Transfer from Federal Laboratories to the  Private Sector\u2014the Business Development Wheel.\u201d Engineering  Management Journal, vol. 13, no. 3 (2001): 15-20.", "Office of Science and Technology Policy and the National Institutes of  Health, National Heart, Lung and Blood Institute. Lab-to-Market Inter- agency Summit: Recommendations from the National Expert Panel.", "Washington, D.C.: National Expert Panel, White House Conference  Center, May 2013.", "Stepp, Matthew, Sean Pool, Nick Loris, and Jack Spencer. Turning the  Page: Reimagining the National Labs in the 21st Century Innovation  Economy. Washington, D.C.: Information Technology and Innovation  Foundation, Center for American Progress, and Heritage Foundation,  June 2013.", "Toregas, Costis, E. Colin Campbell, Sharon S. Dawes, Harold B. Finger,  Michael D. Griffin, and Thomas Stackhouse. Technology Transfer:  Bringing Innovation to NASA and the Nation. Washington, D.C.: National  Academy of Public Administration, November 2004.", "U.S. Department of Energy, Commission to Review the Effectiveness of  the National Energy Laboratories. Securing America\u2019s Future: Realizing  Potential of the Department of Energy\u2019s National Laboratories, vol. 1,  Executive Report. Washington, D.C.: October 2015. Accessed March 14,  2018. https://www.energy.gov/labcommission/downloads/final-report- commission-review-effectiveness-national-energy-laboratories.", "Wang, Mark, Shari Pfleeger, David M. Adamson, Gabrielle Bloom,  William Butz, Donna Fossum, Mihal Gross, et al. Technology Transfer of  Federally Funded R&D: Perspectives from a Forum. Conference  Proceedings. Santa Monica, Calif.: RAND Corporation, 2003."], "subsections": []}], "fastfact": ["Cell-phone cameras have their roots in a federal lab\u2014thanks to laws encouraging commercial use of federal inventions.", "The federal government spends about $137 billion a year researching and developing inventions. The government can license the patents on these inventions to private companies to further develop and bring the technologies to market.", "Federal agencies and labs said that identifying patentable inventions was difficult, with some citing inadequate tracking systems. Stakeholders said that the bureaucracy and length of the patent licensing process could deter companies.", "We made 7 recommendations to address these and other challenges."]}
{"id": "GAO-18-337", "url": "https://www.gao.gov/products/GAO-18-337", "title": "NASA Information Technology: Urgent Action Needed to Address Significant Management and Cybersecurity Weaknesses", "published_date": "2018-05-22T00:00:00", "released_date": "2018-05-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["NASA depends heavily upon IT to conduct its work. The agency spends at least $1.5 billion annually on IT investments that support its missions, including ground control systems for the International Space Station and space exploration programs.", "The National Aeronautics and Space Administration Transition Authorization Act of 2017 included a provision for GAO to review the effectiveness of NASA's approach to overseeing and managing IT, including its ability to ensure that resources are aligned with agency missions and are cost effective and secure. Accordingly, GAO's specific objective for this review was to determine the extent to which NASA has established and implemented leading IT management practices in strategic planning, workforce planning, governance, and cybersecurity. To address this objective, GAO compared NASA IT policies, strategic plans, workforce gap assessments, and governance board documentation to federal law and leading practices. GAO also assessed NASA IT security plans, policies, and procedures against leading cybersecurity risk management practices."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Aeronautics and Space Administration (NASA) has not yet effectively implemented leading practices for information technology (IT) management. Specifically, GAO identified weaknesses in NASA's IT management practices for strategic planning, workforce planning, governance, and cybersecurity.", "NASA has not documented its IT strategic planning processes in accordance with leading practices. While NASA's updated IT strategic plan represents improvement over its prior plan, the updated plan is not comprehensive because it does not fully describe strategies for achieving desired results or describe interdependencies within and across programs. Until NASA establishes a comprehensive IT strategic plan, it will lack critical information needed to align resources with business strategies and investment decisions.", "Of the eight key IT workforce planning activities, the agency partially implemented five and did not implement three. For example, NASA does not assess competency and staffing needs regularly or report progress to agency leadership. Until NASA implements the key IT workforce planning activities, it will have difficulty anticipating and responding to changing staffing needs.", "NASA's IT governance does not fully address leading practices. While the agency revised its governance boards, updated their charters, and acted to improve governance, it has not fully established the governance structure, documented improvements to its investment selection process, fully implemented investment oversight practices and ensured the Chief Information Officer's visibility into all IT investments, or fully defined policies and procedures for IT portfolio management. Until NASA addresses these weaknesses, it will face increased risk of investing in duplicative investments or may miss opportunities to ensure investments perform as intended.", "NASA has not fully established an effective approach to managing agency-wide cybersecurity risk. An effective approach includes establishing executive oversight of risk, a cybersecurity risk management strategy, an information security program plan, and related policies and procedures.", "As NASA continues to collaborate with other agencies and nations and increasingly relies on agreements with private companies to carry out its missions, the agency's cybersecurity weaknesses make its systems more vulnerable to compromise. Until NASA leadership fully addresses these leading practices, its ability to ensure effective management of IT across the agency and manage cybersecurity risks will remain limited."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 10 recommendations to NASA to address the deficiencies identified in NASA IT strategic planning, workforce planning, governance, and cybersecurity. NASA concurred with seven recommendations, partially concurred with two, and did not concur with one. GAO maintains that all of the recommendations discussed in this report remain valid."]}], "report": [{"section_title": "Letter", "paragraphs": ["The National Aeronautics and Space Administration (NASA) exercises  control over aeronautical and space activities sponsored by the United  States and also seeks to encourage the fullest commercial use of space.  NASA\u2019s current and planned activities span a broad range of complex  and technical endeavors, including developing new capabilities to send  future missions to Mars, improving the air transportation experience, and  developing new space transportation systems. These activities may rely  on partnerships with academic, private sector, and international  organizations, including foreign space agencies. In recent years, NASA  also has increasingly relied on other countries and agreements with  private companies to support its missions.", "NASA depends heavily upon information technology (IT) to conduct its  work. Since fiscal year 2016, the agency has planned to spend about  $1.5 billion annually on IT investments that support its missions, including  ground control systems for the International Space Station and other  space exploration programs. In addition, the agency has invested in cloud  computing, data center optimization, and IT security capabilities to  support its business operations.", "However, we and the NASA Office of Inspector General have reported  that the agency has struggled for more than two decades to overcome its  decentralized operations and culture of autonomy at its major  organizational units, in an attempt to provide effective oversight and  management of its IT environment. Moreover, we and others have  reported on information security concerns. NASA systems are highly  interconnected. The agency is also affected by geopolitics and is  targeted by cybercriminals, including those that may be sponsored by  foreign intelligence services. In addition, entities with whom NASA  collaborates may also be targets of cybercriminals.", "The National Aeronautics and Space Administration Transition  Authorization Act of 2017 included a provision for us to review the  effectiveness of NASA\u2019s approach to overseeing and managing IT,  including its ability to ensure that resources are aligned with agency  missions and are cost effective and secure. Our objective for this review  was to address the extent to which NASA has established and  implemented leading IT management practices in strategic planning,  workforce planning, governance, and cybersecurity.", "To address this objective, we compared NASA\u2019s IT management policies,  procedures, and documentation to criteria established by federal law and  leading practices.", "For our work regarding IT strategic planning, we obtained and  evaluated NASA\u2019s documentation on IT strategic planning, including  its related planning guidance, agency-wide strategic plan, and IT- specific strategic plans. We analyzed its strategic planning guidance  and assessed the contents of the previous and current IT strategic  plans by comparing them to leading practices that we and the Office  of Management and Budget (OMB) have previously identified. These  practices include documenting the IT strategic planning process and  developing a strategic plan that defines the agency\u2019s vision and  provides a road map to help align information resources with business  strategies and investment decisions.", "For IT workforce planning, we reviewed documentation, including  NASA\u2019s 2015 draft IT workforce plan, competencies, reported staffing  data, and a workforce gap assessment. We compared this  documentation to eight key IT workforce planning activities that we  previously identified and that were derived from federal law and  guidance, including OMB memorandums, GAO reports, and the Office  of Personnel Management\u2019s (OPM) Human Capital Framework.", "Our review of IT governance involved analyzing NASA\u2019s governance  board meeting minutes and briefings, charters, and policies and  procedures, and comparing them to criteria as identified by GAO in  the IT investment management framework. Specifically, we focused  on policies and procedures related to instituting investment boards,  selecting investments, overseeing investments, and developing  investment portfolios.", "Regarding cybersecurity, we obtained and analyzed available NASA  documentation to determine the extent to which the agency had  established an effective approach for managing cybersecurity risk.  This documentation included information security policies and  procedures, management briefings and reports, and a draft  information security program plan. We then assessed whether  NASA\u2019s approach addressed foundational cybersecurity risk  management components identified in the National Institute for  Standards and Technology\u2019s (NIST) guidance. These components  included the establishment of a risk executive function, a  cybersecurity risk management strategy, an information security  program plan, and current policies and procedures for relevant  security controls.", "In addition to assessing IT management at NASA headquarters, we  reviewed such management practices at two of the agency\u2019s centers and  one mission directorate, focusing on those with the largest fiscal year  2017 IT budgets. In addition, we visited and reviewed IT management  practices for the Goddard Space Flight Center because of the center\u2019s  proximity to GAO. We also interviewed cognizant officials with  responsibilities for IT management at NASA. The results of our work at  the selected NASA centers and mission directorate are not generalizable  to other NASA centers and mission directorates. Additional details on our  objective, scope, and methodology can be found in appendix I.", "We conducted this performance audit from May 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objective."], "subsections": [{"section_title": "Background", "paragraphs": ["NASA\u2019s mission is to drive advances in science, technology, aeronautics,  and space exploration to enhance knowledge, education, innovation,  economic vitality, and stewardship of Earth. The NASA Administrator is  responsible for leading the agency and is accountable for all aspects of its  mission, including establishing and articulating its vision and strategic  priorities and ensuring successful implementation of supporting policies,  programs, and performance assessments.", "Within NASA headquarters, the agency has four mission directorates that  define its major core mission work: (1) Aeronautics Research conducts  cutting-edge research to enable revolutionary advances in future aircraft,  as well as in the airspace in which they will fly; (2) Human Exploration and  Operations is responsible for NASA space operations, developing new  exploration and transportation systems, and performing scientific  research; (3) Science carries out the scientific exploration of Earth and  space to expand the frontiers of Earth science, planetary science, and  astrophysics, and (4) Space Technology develops revolutionary  technologies through transparent, collaborative partnerships that expand  the boundaries of aerospace. The agency also has a mission support  directorate to manage its business needs and administrative functions,  such as human capital management.", "In addition to NASA headquarters in Washington, D.C., the agency is  composed of nine field centers managed by NASA employees, and one  federally funded research and development center that are responsible  for executing programs and projects. NASA centers are located  throughout the country and manage projects or programs for multiple  mission directorates. For example, the Goddard Space Flight Center  supports various IT programs within the Science mission directorate,  while the Johnson Space Center supports multiple programs in the  Human Exploration and Operations mission directorate.", "According to NASA documents, the agency planned to spend $1.6 billion  of its fiscal year 2018 budget authority on IT. Of this total, $888 million  was to be used for business IT and $672.8 million was to be used for  mission IT. Business IT includes the infrastructure and systems needed to  support internal agency operations, such as commodity IT (e.g., e-mail  and communications systems), infrastructure, IT management,  administrative services, and support systems, whereas mission IT  includes the technology needed to support space programs and research  for the agency\u2019s mission programs. The technology that the agency uses  to support its mission programs includes highly-specialized IT, defined by  NASA as any equipment, system, and/or software that is used to acquire,  store, retrieve, manipulate, and/or transmit data or information when the  IT is embedded in a mission platform or provides a platform required for  simulating, executing, or operating a mission.", "Historically, NASA and its Inspector General have reported that funding  for and oversight of highly-specialized IT has been decentralized among  mission directorates and embedded within launch programs and other  mission activities instead of being identified as IT to be managed as part  of the agency\u2019s IT portfolio. According to the Inspector General, the  agency\u2019s decentralized funding for and oversight of IT has minimized  agency-wide visibility into and oversight of NASA\u2019s spending on these  systems."], "subsections": [{"section_title": "NASA\u2019s IT Management and Governance Structure", "paragraphs": ["The agency\u2019s Chief Information Officer (CIO) reports directly to the NASA  Administrator and serves as the principal advisor to the NASA  Administrator and senior officials on all matters pertaining to IT. The CIO  is to provide leadership, planning, policy direction, and oversight for the  management of NASA\u2019s information and systems. Toward this end, the  CIO\u2019s responsibilities include developing and implementing approaches  for executing the goals and outcomes in the NASA strategic plan;  ensuring that the agency\u2019s human resources possess the requisite  knowledge and skills in IT and information resources management;  maximizing the value of NASA IT investments through an investment  management process; and leading and implementing the agency\u2019s IT  security program. The CIO also is responsible for developing and  implementing agency-wide IT policies and processes.", "NASA\u2019s CIO also is to direct, manage, and provide policy guidance and  oversight of the agency\u2019s center CIOs. Each center has a CIO  responsible for supporting center leadership and managing IT staff.", "Similarly, each mission directorate has a representative who coordinates  with programs on IT-specific issues and, as needed, obtains support from  the Office of the CIO. Both center CIOs and mission directorate IT  representatives report to the NASA CIO and to the leadership of their  respective centers and mission directorates.", "The CIO is supported by staff in the Office of the CIO. This office is  organized into four divisions responsible for (1) IT security, (2) capital  planning and governance, (3) technology and innovation, and (4)  enterprise services and integration. Collectively, these divisions support  NASA\u2019s approach to IT strategic and workforce planning, governance  boards and practices, and cybersecurity.", "In March 2017, the Office of the CIO submitted plans to establish a fifth  division focused on new applications, and also to rename existing  divisions to better represent the services they provide. For example, the  Office of the CIO proposed that the Capital Planning and Governance  Division be renamed the IT Business Management Division. As of March  2018, NASA had not yet approved or implemented the planned  reorganization.", "Figure 1 depicts the organization of the Office of the CIO, including  relevant reporting relationships for center CIOs and mission directorate IT  representatives, as of March 2018."], "subsections": []}, {"section_title": "GAO and NASA\u2019s Office of Inspector General Have Reported on Longstanding Weaknesses in IT Management", "paragraphs": ["We and NASA\u2019s Office of Inspector General have reported on  longstanding IT management weaknesses within the agency. For  example, in October 2009, we reported that NASA had made progress in  implementing IT security controls and aspects of its information security  program, but that it had not always implemented appropriate controls to  sufficiently protect the confidentiality, integrity, and availability of  information and systems. We also identified control vulnerabilities and  program shortfalls, which, collectively, increased the risk of unauthorized  access to NASA\u2019s sensitive information, as well as inadvertent or  deliberate disruption of its system operations and services. We  recommended that the NASA Administrator take steps to mitigate control  vulnerabilities and fully implement a comprehensive information security  program. The agency concurred with our eight recommendations and  stated that it was taking actions to mitigate the information security  weaknesses identified.", "In addition, NASA\u2019s Office of Inspector General has issued 24 reports  over the last 7 years on IT governance and security weaknesses at the  agency. For example, in June 2013, the office reported that the  decentralized nature of NASA\u2019s operations and its longstanding culture of  autonomy had hindered the agency\u2019s ability to implement effective IT  governance. Specifically, the report stated that the CIO had limited  visibility and control over a majority of IT investments, operated in an  organizational structure that marginalized the authority of the position,  and could not enforce security measures across NASA\u2019s computer  networks. Moreover, the IT governance structure in place at the time was  overly complex, did not function effectively, and operated under a  decentralized model that relegated decision making about critical IT  issues to numerous individuals across NASA, leaving such decisions  outside the purview of the CIO.", "The Office of Inspector General made eight recommendations to the  NASA Administrator for improving IT governance, including calling for all  governance to be consolidated within the Office of the CIO to ensure  adequate visibility, accountability, and integration into all mission-related  IT assets and activities. The Administrator concurred with six and partially  concurred with two of the recommendations and planned actions  sufficient for the Office of Inspector General to close all eight  recommendations as implemented. However, the Office of Inspector  General later reported that the extent to which NASA had implemented  the agreed-upon changes was in doubt based on subsequent audit  findings that NASA was still struggling with limited agency CIO authority,  decentralized IT operations, and ineffective IT governance.", "A follow-on report issued in October 2017 described a continued lack of  progress in improving IT governance, determined that the CIO\u2019s visibility  into investments across the agency continued to be limited, and identified  flaws in the process developed to improve governance. Specifically, the  Office of Inspector General noted that the Office of the CIO had made  changes to its IT governance boards over the past few years, but the  boards had not made strategic decisions to substantively impact how  NASA IT would be managed. According to the Office of Inspector  General, slow implementation of the revised governance structure had left  many IT officials operating under the previous inefficient and ineffective  framework.", "The report also noted that, as of August 2017, the Office of the CIO had  not finalized the roles and responsibilities for IT management and  lingering confusion regarding security roles, coupled with poor IT  inventory practices, had negatively impacted NASA\u2019s security posture.  Importantly, the report explained that the Office of the CIO continued to  have limited influence over IT management within the mission  directorates and at centers.", "The Office of Inspector General made five recommendations to the CIO  that were intended to improve, among other things, governance and  security. As of October 2017, NASA had concurred with three  recommendations, partially concurred with two recommendations, and  described corrective actions taken or planned. However, the Office of  Inspector General found that NASA\u2019s original proposed action to address  the fourth recommendation was insufficient; thus, in December 2017, the  agency established additional proposed actions to address that  recommendation."], "subsections": []}, {"section_title": "Key IT Management Disciplines", "paragraphs": ["We have identified a set of essential and complementary management  disciplines that provide a sound foundation for IT management. These  include the following:", "Strategic planning: Strategic planning defines what an organization  seeks to accomplish and identifies the strategies it will use to achieve  desired results. We have previously reported that a defined strategic  planning process allows an agency to clearly articulate its strategic  direction and establish linkages among planning practices, such as  goals, objectives, and strategies and identified leading practices for  agency planning.", "Workforce planning: We have previously reported that it is important  for an agency to have a strong IT workforce to help ensure the timely  and effective acquisition of IT. In November 2016, we identified eight  key workforce planning activities derived from the Clinger-Cohen Act  of 1996 and relevant guidance, including memorandums and  guidance from OPM and OMB, and prior GAO reports. These laws  and guidance focus on the importance of setting the strategic direction  for workforce planning, analyzing the workforce to identify skill gaps,  developing strategies to address skill gaps, and monitoring and  reporting on progress in addressing skill gaps.", "IT governance: IT projects can significantly improve an organization\u2019s  performance, but they can also become costly, risky, and  unproductive. In 1996, Congress passed the Clinger-Cohen Act,  which requires executive branch agencies to establish a process for  selecting, managing, and evaluating investments in order to maximize  the value and assess and manage the risks of IT acquisitions.  Agencies can maximize the value of their investments and minimize  the risks of their acquisitions by having an effective and efficient  governance process, as described in GAO\u2019s guide to effective IT  investment management.", "Cybersecurity: Federal systems and networks are often  interconnected with other internal and external systems and networks,  including the Internet. When systems are interconnected, the number  of avenues of attack increases and the attack surface expands.  Effective security for agency systems and data is essential to prevent  data tampering, disruptions in critical operations, fraud, and  inappropriate disclosure of sensitive information, including personal  information entrusted to the government by members of the American  public. Taking action to assure that an agency\u2019s contractors and  partners are adequately protecting the agency\u2019s information and  systems is one way an agency can address cybersecurity risks.", "NIST has issued a suite of information security standards and  guidelines that, collectively, provide comprehensive guidance on  managing cybersecurity risk to agencies and any entities performing  work on the agencies\u2019 behalf. NIST\u2019s cybersecurity framework was  issued in February 2014 in response to Executive Order 13636. The  framework outlines a risk-based approach to managing cybersecurity  risk and protecting an organization\u2019s critical information assets.  Subsequent to the issuance of the cybersecurity framework, a May  2017 executive order required agencies to use the framework to  manage cybersecurity risks. The order outlined actions to enhance  cybersecurity across federal agencies and critical infrastructure to  improve the nation\u2019s cyber posture and capabilities against  cybersecurity threats to digital and physical security."], "subsections": []}]}, {"section_title": "NASA Has Not Yet Effectively Established and Implemented Leading IT Management Practices", "paragraphs": ["NASA has not yet effectively established and implemented leading IT  management practices for strategic planning, workforce planning,  governance, and cybersecurity. Specifically,", "The agency\u2019s IT strategic planning process is not yet fully  documented and its IT strategic plan lacks key elements called for by  leading practices.", "NASA has not yet established an IT workforce planning process  consistent with leading practices.", "The agency has taken recent action to improve its IT governance  structure; however, it has not yet fully established that structure,  documented improvements to its investment selection process, fully  implemented investment oversight leading practices, or fully defined  its policies and procedures for IT portfolio management.", "NASA has not fully established an effective approach to managing  agency-wide cybersecurity risk. While it has designated a risk  executive, the agency lacks a dedicated office to provide  comprehensive executive oversight of risks. In addition, the agency- wide cybersecurity risk management strategy is currently in  development, and the agency\u2019s information security program plan  does not address all leading practices and has not been finalized.  Further, policies and procedures for protecting NASA\u2019s information  systems are in place, but the agency has not ensured that they are  always current or integrated."], "subsections": [{"section_title": "NASA Has Not Fully Documented Its IT Strategic Planning Process", "paragraphs": ["Leading practices of IT strategic planning established in OMB guidance  call for an agency to document its IT strategic planning process,  including, at a minimum, documenting the responsibilities and  accountability for IT resources across the agency. It also calls for  documenting the method by which the agency defines its IT needs and  develops strategies, systems, and capabilities to meet those needs.", "NASA\u2019s documented IT strategic planning process describes the  responsibilities and accountability for IT resources across the agency. For  example, NASA has assigned specific governance bodies with  responsibility for developing and overseeing the implementation of the IT  strategy. Also, in its IT strategic plan, NASA described key stakeholders  across the agency that are responsible for the development of the plan.  These stakeholders include the Associate CIOs, representatives from  mission directorates, mission support organizations, and the centers.", "On the other hand, the methods by which the agency defines its IT needs  and develops strategies, systems, and capabilities to meet those needs  are not documented. For example, according to the IT strategic plan, the  Office of the CIO is to perform a gap analysis to inform the development  of NASA\u2019s roadmap that translates its IT needs and the strategies  identified for meeting those needs into tactical plans. The tactical plans  are to define how the strategic plan will be incrementally executed to  achieve the longer term goals.", "However, the Office of the CIO has not documented in its strategic  planning policies and procedures how the CIO will perform the gap  analysis or the methods for developing these tactical plans and  roadmaps. This is particularly important since, according to officials in  NASA\u2019s Office of the CIO, the centers vary as to whether they have  developed their own IT strategic plans or tactical plans, and the office  does not oversee or review any center-level plans to ensure they align  with the NASA IT strategic plan.", "According to officials in the Office of the CIO, NASA used a new model in  formulating its IT strategy for fiscal years 2018 to 2021, such as including  a broader set of stakeholders in the strategic planning cycle before  documenting the strategic planning process. The officials stated that they  intend to identify lessons learned from using this new model and formally  document a complete and repeatable IT strategic planning process in the  future. However, the agency has not established time frames for when the  Office of the CIO will fully document its strategic planning process.  Without a fully documented strategic planning process, NASA risks not  being able to clearly articulate what it seeks to accomplish and identify  the IT resources needed to achieve desired results in a way that is  consistent and complete."], "subsections": [{"section_title": "NASA Has Improved Its IT Strategic Plan, but Has Not Yet Established a Comprehensive Plan", "paragraphs": ["In addition to calling for agencies to fully document the strategic planning  process, leading practices from OMB guidance and our prior research  and experience at federal agencies have shown that an agency should  develop a comprehensive and effective IT strategic plan that (1) is aligned  with the agency\u2019s overall strategy; (2) identifies the mission of the agency,  results-oriented goals, and performance measures that permit the agency  to determine whether implementation of the plan is succeeding; (3)  includes strategies, with resources and time frames, that the governing IT  organization intends to use to achieve desired results; and (4) provides  descriptions of interdependencies within and across projects so that they  can be understood and managed. The resulting plan is to serve as an  agency\u2019s vision, or road map, and help align information resources with  business strategies and investment decisions.", "NASA has taken steps to improve its IT strategic plan, but the updated  plan is not comprehensive in that it does not fully address all four  elements of a comprehensive and effective plan outlined above. In this  regard, the agency had a prior strategic plan covering the time frame of  March 2014 to November 2017. More recently, in December 2017, the  CIO and Associate Administrator approved an updated plan for  implementation. The updated plan is intended for use from the date it was  approved through fiscal year 2021.", "Regarding the four elements of a comprehensive IT strategic plan,  NASA\u2019s prior plan addressed one element, partially addressed two  elements, and did not address one element. The updated plan was  slightly improved in that it addressed two elements, partially met one  element, and did not meet one element of a comprehensive strategic  plan. Table 1 provides a summary of the extent to which NASA\u2019s prior IT  strategic plan (covering the time frame of March 2014 to November 2017)  and recently updated IT strategic plan (covering the time frame of  December 2017 to fiscal year 2021) addressed key elements of a  comprehensive strategic plan.", "NASA\u2019s prior IT strategic plan was aligned with the agency\u2019s overall  strategic plan and identified the mission of the agency and results- oriented goals. However, these goals were not linked to specific  performance measures that were needed to track progress and did not  always describe strategies to achieve desired results. Additionally, this  plan lacked descriptions of interdependencies within and across projects.", "NASA\u2019s updated IT strategic plan is aligned with the agency\u2019s overall  strategic plan and identifies the mission of the agency and results- oriented goals. For example, the plan describes the agency\u2019s IT vision,  mission, principles, and objectives of five strategic goals\u2014excellence,  data, cybersecurity, value, and people. To support these goals, the plan  defines 14 objectives to be accomplished over 4 years. For example, the  plan defines objectives for increasing the effectiveness of NASA\u2019s IT  strategy execution through disciplined program and project management.", "In addition, NASA has improved upon the prior plan by identifying  performance measures that allow the agency to determine whether it is  succeeding in the implementation of its goals. For example, in order to  increase the effectiveness of its IT strategy execution, the Office of the  CIO expects 85 percent of projects to be in conformance with approved  project plans by the end of fiscal year 2018. As another example, to  prepare its employees to achieve NASA\u2019s IT vision, the Office of the CIO  plans to, by the end of fiscal year 2020, identify skills gaps and ways to  close the gaps based on the workforce strategy.", "However, similar to the prior plan, the updated plan does not fully  describe strategies NASA intends to use to achieve the desired results or  descriptions of interdependencies within and across projects. Specifically,  the plan discusses how the agency intends to achieve its strategic goals  and objectives through various activities. For example, according to the  plan, to increase the effectiveness of investment analysis and  prioritization, NASA intends to implement a financial management  process that integrates Office of the CIO, center, and mission directorate  IT spending. The plan states that this process will map IT investments to  NASA\u2019s vision and strategy, as well as enable high-quality internal and  external investment insight and reporting.", "However, the updated plan does not further describe the strategies NASA  intends to use to accomplish these activities, including a schedule for  significant actions and the resources needed to achieve this objective.  For instance, the plan states that the Office of the CIO will define clear  lines of authority and accountability for IT between the agency and  NASA\u2019s centers, but does not describe a strategy, including time frames  and resources, for accomplishing this. Additionally, the plan does not  describe interdependencies between projects, which is essential to help  define the relationships within and across projects and major initiatives.", "According to NASA\u2019s CIO, the updated strategic plan was kept at a higher  level with the expectation that more detailed implementation plans (e.g.,  tactical plans and roadmaps) would define the necessary projects and  interdependencies. However, NASA has not defined guidance for  developing the implementation plans to ensure that any plans developed  will fully describe strategies and interdependencies, or time frames for  when these plans will be completed. Until NASA incorporates the key  elements of a comprehensive IT strategic plan, it will lack critical  information needed to align information resources with business  strategies and investment decisions."], "subsections": []}]}, {"section_title": "NASA Has Gaps in Its IT Workforce Planning Efforts", "paragraphs": ["Key to an agency\u2019s success in managing its IT investments is sustaining  a workforce with the necessary knowledge, skills, and abilities to execute  a range of management functions that support the agency\u2019s mission and  goals. Achieving such a workforce depends on having effective human  capital management consistent with workforce planning activities  pursuant to federal laws and guidance.", "Specifically, OMB requires agencies to develop and maintain a current  workforce planning process. In addition, we reported in 2016 on the  importance of setting a strategic direction for IT workforce planning,  identifying skills gaps and implementing strategies to address them, and  monitoring and reporting on progress in addressing the identified skills  gaps. We identified eight key IT workforce planning activities that are  essential to agency efforts to establish an effective IT workforce:  1.  establish and maintain a workforce planning process;  2.  develop competency and staffing requirements;  3.  assess competency and staffing needs regularly;  4.  assess gaps in competencies and staffing;  5.  develop strategies and plans to address gaps in competencies and  6.  implement activities that address gaps (including IT acquisition  cadres, cross-functional training of acquisition and program  personnel, career paths for program managers, plans to strengthen  program management, and use of special hiring authorities);  7.  monitor the agency\u2019s progress in addressing competency and staffing  8.  report to agency leadership on progress in addressing competency  and staffing gaps.", "The Office of the CIO has had IT workforce planning efforts underway  since 2015 that are intended to address the workforce planning activities  listed above; however, the office has not finalized or implemented any of  the planned actions. The office recently began working to establish a  more comprehensive workforce strategy for fiscal year 2019 to align with  the agency\u2019s increased emphasis on improving the overall workforce.  Specifically, in the draft NASA Strategic Plan, the agency established a  workforce development goal and two strategic objectives that relate to its  IT workforce and call for, among other things, workforce training and  efforts to increase cybersecurity awareness to reduce cybersecurity risks.", "Nevertheless, NASA has gaps in its IT workforce planning efforts. Of the  eight key IT workforce planning activities that we previously outlined,  NASA partially implemented five and did not implement three. Table 2  shows the extent to which NASA has implemented each IT workforce  planning activity and provides examples of workforce practices planned or  implemented, as well as those not yet undertaken.", "According to NASA\u2019s CIO, the Office of the CIO put IT workforce planning  activities on hold in 2015 pending the outcome of more comprehensive,  agency-wide efforts. Specifically, the agency began planning and  developing a new phased program\u2014the Mission Support Future  Architecture Program\u2014designed to deliver workforce and other mission  support services, including a talent management program. Phase 1 of  the new phased Mission Support Future Architecture Program began in  May 2017.", "According to the NASA CIO, the Office of the CIO is expected to be part  of a future phase and to renew its IT workforce planning as part of that  effort. However, the CIO did not have an estimate for when the Office of  the CIO would join the program. Until NASA implements all of the key IT  workforce planning activities discussed in this report, the agency will have  difficulty anticipating and responding to changing staffing needs. Further,  NASA will face challenges in controlling human capital risks when  developing, implementing, and operating IT systems."], "subsections": []}, {"section_title": "NASA\u2019s IT Governance Approach Does Not Fully Address Leading Practices", "paragraphs": ["Leading practices for governing IT, such as those identified by GAO in its  IT investment management framework, call for agencies to establish and  follow a systematic and organized approach to investment management  to help lay a foundation for successful, predictable, and repeatable  decisions. Critical elements of such an approach include instituting an IT  investment board (or boards), developing and documenting a governance  process for investment selection and for investment oversight, and  establishing governance policies and procedures for managing the  agency\u2019s overall IT investment portfolio."], "subsections": [{"section_title": "NASA Has Not Fully Instituted an Effective Governance Structure", "paragraphs": ["Instituting an effective IT governance structure involves establishing one  or more governance boards, clearly defining the boards\u2019 roles and  responsibilities, and ensuring that they operate as intended. Moreover,  Section 811(a) of the National Aeronautics and Space Administration  Transition Authorization Act of 2017 directs the agency to ensure that the  NASA CIO, mission directorates, and centers have appropriate roles in  governance processes. The act also calls on the Administrator to provide,  among other things, an IT program management framework to increase  the efficiency and effectiveness of IT investments, including relying on  metrics for identifying and reducing potential duplication, waste, and cost.", "NASA has established three boards focused specifically on IT  governance\u2014an IT Council which is its executive-level IT board, a CIO  Leadership Team, and an IT Program Management Board which provides  oversight of programs and projects. Meeting minutes for the three IT- specific governance bodies identified above revealed that these groups  are meeting as required by their charters.", "Further, two of NASA\u2019s agency-wide councils (whose governance  responsibilities extend beyond IT) also play a role in IT governance.  Specifically, the Mission Support Council is the governance body to which  the IT Council escalates unresolved decisions, and the Agency Program  Management Council is responsible for reviewing and approving highly- specialized IT. In addition, NASA centers have the option to create  center-specific IT governance boards to make decisions about center- level IT investments under the authority of center CIOs.", "Table 3 describes the roles of the IT-specific governance boards, the  agency-wide councils with roles in IT governance, and the center-level IT  governance boards. The table also includes additional details on how  frequently the councils and boards meet, the dollar thresholds NASA has  established to determine which investments each council or board  reviews, and which officials serve as members of the boards.", "Although it has established and assigned responsibilities for the  aforementioned governance councils and boards, NASA has not yet fully  instituted an effective investment board governance structure for several  reasons.", "Planned improvements to the IT governance structure are not yet  complete. NASA has established new governance boards in addition  to the boards listed above, but has not yet approved charters to guide  their operations. Specifically, the Office of the CIO has revised its  governance structure to establish six new boards, one for each of its  IT programs. Agency officials, including the IT governance lead,  reported that the boards had been established; however, as of  December 2017, NASA had not yet approved charters defining the  new governance bodies\u2019 membership, functions, and interactions with  other governance boards.", "Roles and responsibilities of the IT governance boards and  agency-wide governance councils are not clearly defined. NASA  continues to operate a federated governance model with  decentralized roles and responsibilities for governance of mission and  business IT investments. Business IT is selected and approved by the  IT-specific governance boards, but mission IT follows a different path  for investment selection in that it is not reviewed and approved by the  CIO along with other IT investments proposed for selection. Instead,  the Agency Program Management Council\u2019s reviews focus on the  selection of overall mission programs, and not on selecting IT. As a  result, mission IT has historically been reported to the Office of the  CIO only if the program has been designated as a major agency IT  investment to be reported to OMB.", "NASA has begun making changes to its decentralized governance  approach in response to provisions in legislation commonly referred to  as the Federal Information Technology Acquisition Reform Act that  are intended to ensure that the CIO has visibility into both mission and  business IT investments. However, the agency has not yet developed  policies and procedures to clarify how these changes will affect the  CIO\u2019s and governance boards\u2019 roles and responsibilities. For  example, in January 2017, the IT Council approved an updated  definition for highly-specialized IT and established new expectations  about the extent to which highly-specialized IT investments would be  reviewed by the NASA CIO.", "However, NASA has not clarified roles and responsibilities for  identifying such investments and ensuring they are reported by  mission directorate programs to the CIO. In addition, the agency has  not yet outlined procedures for how these investments that are  overseen by the agency-wide Agency Program Management Council  are to be reported to the CIO or IT-specific governance boards.", "During a January 2017 IT Council meeting, the NASA CIO  acknowledged that roles and responsibilities for IT governance were  unclear and that it would take 1 to 2 years to clarify them. In July  2017, the Deputy CIO recognized that significant work remained for  NASA to achieve a consistent agency-wide governance approach with  established roles and responsibilities.", "While the IT governance boards are meeting regularly, they are  not consistently operating as intended. Board charters finalized in  2016 defined the membership for the governance boards and  established expectations for the expertise to be made available to  support board decisions. However, the boards are not consistently  operating with all designated board members in attendance. For  example, the Chief Engineer was designated as a member of the IT  Council, but the council\u2019s meeting minutes indicated that the Deputy  Chief Engineer regularly attends the council meetings instead.", "In addition, IT Program Management Board meetings are consistently  held with fewer voting members than designated by the board\u2019s  charter. The board\u2019s meeting minutes indicated that fewer than six  voting members regularly attend board meetings instead of the eight  voting members outlined in the board charter. For example, the  minutes showed that each meeting has been held with only one  center and mission support directorate representative\u2014instead of the  two required by the charter.", "NASA officials, including the Associate CIO for Capital Planning and  Governance, stated that planned efforts to update the governance  structure and develop additional guidance for IT investment management  have impacted the agency\u2019s time frames for fully establishing its new  boards and defining their roles and responsibilities. Specifically, these  officials stated that the Office of the CIO is working to develop a  comprehensive IT framework intended to update the governance  structure, fully establish the new governance boards, and define  governance roles and responsibilities. According to the officials, this  framework is expected to be finalized in 2018, but the office did not  provide a detailed schedule with milestones for completing the  framework. Without a detailed schedule for updating the governance  structure and establishing a comprehensive IT framework to help ensure  that the revised governance boards are fully established and operating as  intended, NASA may not be able to improve IT governance in accordance  with the requirements in the National Aeronautics and Space  Administration Transition Authorization Act of 2017."], "subsections": []}, {"section_title": "NASA Has Not Completed or Updated Governance Selection Process Policies and Procedures and Lacks Established Guidance for Reselecting Investments", "paragraphs": ["According to our IT investment management guide, defining policies and  procedures for selecting investments provides investment boards and  others with a structured process and a common understanding of how  investments will be selected. Selection policies and procedures should,  among other things, establish thresholds or criteria (e.g., investment size,  technical difficulty, risk, business impact, customer needs, and cost- benefit analysis) for boards to use in identifying, analyzing, prioritizing and  selecting new IT proposals.", "In addition, outlining a process for reselecting ongoing projects is  intended to support board decisions about whether to continue to fund  projects not meeting established goals or plans. Using the defined  selection process promotes consistency and transparency in IT  governance decision making. Further, after the guidance has been  developed, organizations must actively maintain it, making sure that it  always reflects the board\u2019s current structure and the processes that are  being used to manage the selection of the organization\u2019s IT investments.", "NASA\u2019s defined selection process policies and procedures designated the  CIO with responsibility to ensure that IT governance, investment  management, and program/project management processes are  integrated to facilitate the selection of appropriate IT investments. The  agency has established multiple policies and procedures outlining certain  aspects of how both mission programs and business IT investments are  to be planned, such as standardized templates for requesting approval to  plan investments and direction for teams to use in planning for  investments. In addition, the Office of the CIO has established a Capital  Planning and Investment Control Guide for business IT investments and  issues annual budget guidance for requesting funding for IT investments.", "The agency\u2019s selection process also includes specific IT governance  processes developed by centers for the investments they review. For  example, Goddard Space Flight Center had developed additional center- specific guidance assigning lead responsibility for assessing new and  ongoing projects. The center also has established predetermined criteria,  such as whether projects conflict, overlap, or are redundant with other  projects, and the risk if the investment was not funded.", "Nevertheless, NASA\u2019s established process does not yet define thresholds  or criteria (e.g., qualitative or quantitative data) to be analyzed and  compared when governance boards make decisions to select  investments. Charters for NASA\u2019s governance boards outline the  functions these boards are to perform and direct them to be involved in IT  governance. However, the charters do not outline specific thresholds or  procedures that the boards are to follow in selecting investments.", "For example, NASA\u2019s process does not fully define how investment risks  are to be evaluated. NASA policy establishes dollar thresholds for IT  governance board reviews, but does not define any other parameters for  how risk will be evaluated. In addition, NASA has established an  expectation that the new capital investment review process is to yield risk- based decisions for all investments and help mitigate IT security risks.  However, guidance for capital investment reviews does not address how  investment risks are to be evaluated.", "Moreover, NASA\u2019s selection process policies and procedures have not  been updated to reflect efforts to improve governance. Its guidance for  selecting investments (and for all aspects of its governance process) is  fragmented, and the agency has not updated its policies and procedures  to reflect current selection practices. In addition, this guidance does not  yet reflect recent efforts to clarify and standardize the definitions of  fundamental IT investment terms, such as \u201cinformation technology\u201d and  \u201cmajor\u201d investments.", "Further, while NASA has begun changing its selection process to ensure  that the CIO and IT governance boards will be provided data about all IT  investments, including mission IT investments such as highly-specialized  IT, the agency\u2019s selection policies have not been updated to reflect these  changes. NASA\u2019s Capital Planning and Investment Control Guide does  not require all investments to be included in the selection process (or  other IT governance processes) and the NASA Space Flight Program and  Project Management procedures for mission program governance do not  address whether or how the investments within mission programs are to  be reported to the agency\u2019s IT-specific governance boards.", "In addition, NASA has not yet defined a reselection process for IT  investments. Current policies and guidance for selecting investments do  not clearly define a consistent approach for how performance is to be  considered in reselecting investments. Without a defined reselection  process, the agency\u2019s boards lack structure and a common  understanding about how to make decisions about whether to continue to  fund projects not meeting established goals or plans.", "NASA officials acknowledged that the current policies and procedures do  not establish sufficient content within the business cases and IT plans for  proposed investments to support effective governance decision making.", "The agency has begun working to update its policy for IT program and  project management but did not expect to complete the update until April  2018. Further, even when this key IT investment management policy is  updated, the agency will still need to update related policies and  procedures to reflect changes it has made but not yet documented in the  investment selection process. NASA has not yet established plans for  when all needed updates to the policies and procedures will be  completed.", "Until NASA updates its IT governance policies and procedures to  establish thresholds and procedures to guide its boards in decision  making and outline a process for reselecting investments, the agency will  be limited in its assurance that the investment selection process will  provide a consistent and structured method for selecting investments.  Further, until all relevant governance policies and procedures are updated  to reflect current investment selection practices and proposed changes  intended to provide the CIO with data about mission IT, the CIO will not  be positioned to minimize investments that present undue risk to the  agency and ensure accountability for both business and mission IT."], "subsections": []}, {"section_title": "NASA Lacks Criteria for Assessing Investment Performance and Ensuring Oversight of All Investments", "paragraphs": ["Organizations that provide effective IT investment oversight have  documented policies and procedures that, among other things, ensure  that data on actual performance (e.g., cost, schedule, benefit, and risk)  are provided to the appropriate IT investment board(s). In addition, such  organizations establish procedures for escalating or elevating unresolved  or significant issues; ensure that appropriate actions are taken to correct  or terminate underperforming IT projects based on defined criteria; and  regularly track corrective actions until they are completed.", "As with investment selection, NASA has established multiple policies and  procedures for the oversight of IT investments. In October 2015, the  agency added to its oversight processes by establishing a capital  investment review process to improve the quality of the information  available for investment oversight and established a matrix defining dollar  thresholds to delineate oversight among the IT governance boards. The  IT Program Management Board is also assigned specific oversight  responsibilities for reviewing investment cost, schedule, performance, and  risk at key lifecycle decision points for investments submitted for its  review. In addition, the IT Program Management Board\u2019s charter requires  this board to track, among other things, board decisions about  investments and action items.", "In implementing NASA\u2019s oversight practices, the IT Program  Management Board consistently reviewed updates on investment  performance (i.e., cost, schedule, and benefits) and progress. In addition,  the IT Program Management Board\u2019s oversight decisions about IT  investments are documented in meeting minutes, and the board also  records any action items identified for investments in the decision  memorandums it submits to the CIO.", "Nevertheless, we identified limitations in NASA\u2019s established oversight  policies and procedures. For example, the agency\u2019s policies and  procedures require IT investments to report data to the governance  boards at key decision points but do not establish specific thresholds or  other criteria for the governance boards to use in overseeing the  investments\u2019 performance or escalating investments to review by other  boards. The oversight guidance also does not specify the conditions  under which a project would be terminated.", "In addition, weaknesses we identified in oversight of specific NASA IT  investments highlighted additional limitations of the established oversight  process.", "Specifically, NASA did not have a mechanism for alerting the IT  Program Management Board to provide oversight if investments were  underperforming or overdue for review. For example, significant  schedule overruns did not trigger additional oversight for one  investment. In March 2015, NASA approved the proposed design for  an investment to implement a security tool in June 2015 at an  expected cost of $1.3 million. Although the project fell 13 months  behind schedule and encountered unforeseen challenges, the IT  Program Management Board did not review the investment again until  June 2017\u20142 years later.", "Not all IT investments followed the established oversight process. For  example, in our review of governance board meeting minutes and  documentation, we identified an investment that was close to  completion before the IT Program Management Board reviewed its  proposed design. Specifically, in February 2016, the board was  asked\u20141 day before the investment was to become operational\u2014to  (1) approve the proposed design and (2) grant authority to operate for  the investment intended for use by NASA staff and external partners.  Although concerns about limited oversight were noted, the investment  was approved.", "Further, NASA lacks procedures to ensure that action items identified  are tracked. We identified instances in which the IT Program  Management Board did not consistently track action items identified  for IT investments. NASA\u2019s investments typically report back to the IT  Program Management Board at future decision point reviews about  steps taken to address documented action items. However, the  board\u2019s meeting minutes and documentation identified multiple  examples of investments that were returned to the board at future  decision points without reporting on whether identified action items  had been addressed.", "Moreover, NASA\u2019s oversight processes do not encompass highly- specialized or other IT that supports mission programs. After reviewing  NASA\u2019s fiscal year 2015 budget request, OMB directed NASA to identify  unreported IT investments throughout the agency to ensure that all  related spending would be documented. NASA established a team in  2016 to explore how to identify such investments so that they could be  reported to the CIO. The team initiated efforts to identify such investments  in mission directorates and evaluated various mechanisms that NASA  could employ to detect unreported IT. However, the agency has not yet  finalized decisions about how to implement the team\u2019s recommendations,  including those for fully identifying investments for all mission directorates  or determining which mechanisms to employ to identify unreported IT.  According to NASA officials, time frames for completing these activities  have not yet been established.", "In July 2017, NASA officials, including the Deputy CIO, acknowledged in  governance board meeting minutes describing needed improvements,  that the agency had not yet fully identified its IT footprint and needed to  establish a comprehensive investment management process to address  federal requirements, including those governing processes for selecting,  reselecting, and overseeing IT investments. NASA officials explained that  important progress had been made in improving oversight practices, but  that efforts to implement more thorough capital investment reviews and  identify IT investments across the agency had not yet been completed.  The officials reported that they anticipated additional improvement to be  made by the next annual budget cycle.", "However, expanding NASA\u2019s oversight of IT will require continued  coordination with the mission directorates to work through any needed  changes to the longstanding differences in NASA\u2019s management of  mission and business IT. The scope and complexity of such efforts are  likely to be significant and may take time to plan and implement. Clearly  defining how IT across the agency is to be identified and reported to the  CIO would likely involve changes to policies and processes within and  across NASA\u2019s IT, engineering, and mission program areas and would  involve expertise and collaboration from those same groups. Until such  practices are fully established, NASA will continue to operate with  limitations in its oversight process and projects that fall short of  performance expectations. In addition, the agency will face increased risk  that its oversight will fail to (1) prevent duplicative investments, (2) identify  opportunities to improve efficiency and effectiveness, and (3) ensure that  investment progress and performance meet expectations."], "subsections": []}, {"section_title": "NASA Has Not Yet Fully Defined Policies and Procedures for Managing Investments as a Portfolio", "paragraphs": ["The IT investment management framework developed by GAO notes  that, as investment management processes mature, agencies move from  project specific processes to managing investments as a portfolio. The  shift from investment management to IT portfolio management enables  agencies to evaluate potential investments by how well they support the  agency\u2019s missions, strategies, and goals. According to the framework, the  investment board enhances the IT investment management process by  developing a complete investment portfolio. As part of the process to  develop a complete portfolio, an agency is to establish and implement  policies and procedures for developing the portfolio criteria, creating the  portfolio, and evaluating the portfolio.", "NASA has not yet fully defined its policies and procedures for developing  the portfolio criteria, creating the portfolio, and evaluating the portfolio. In  its Annual Capital Investment Review Implementation Plan, dated  October 2015, NASA began documenting policies for IT portfolio  management and procedures for creating and evaluating the portfolio. For  example, the procedures state that NASA is to update its IT portfolio  annually in conjunction with the agency\u2019s planning and budgeting  process. Additionally, in its IT Capital Planning and Investment Control  Process guide, dated October 2006, NASA outlined procedures the  agency can use to analyze the portfolio by establishing factors that should  be taken into consideration, including the relative benefits, costs, and  risks of the investment compared to all other proposals and the strength  of the investment\u2019s linkage to NASA\u2019s strategic business plan.", "However, these documents do not constitute a comprehensive IT portfolio  management process in that they do not specifically define the  procedures for creating and modifying the IT portfolio selection criteria;  analyzing, selecting, and maintaining the investment portfolio; or  reviewing, evaluating, and improving the performance of its portfolio.  Further, the policies and procedures have not been updated to reflect  current NASA practices. Specifically, the current policies and procedures  have not been updated to reflect changes the agency made to its capital  investment review process that are relevant to portfolio management.", "According to NASA officials, the reason that the agency has not fully  defined its policies and procedures is because they are intended to be  part of a new IT portfolio management framework that also requires  NASA to make changes to its investment management process.  Specifically, the IT portfolio management plan that NASA drafted in  January 2017 called for the agency to develop new IT investment criteria,  discover currently unreported IT investments, develop an investment  review process, and implement an IT investment dashboard and reporting  tool, and a communications plan.", "Although the IT Council has not yet approved the IT portfolio  management plan, NASA has begun work to address elements of the  draft plan, including building the requirements for an IT dashboard and  reporting tool for implementation in 2018. In addition, according to Office  of the CIO officials, the capital planning team is continuing to work with  stakeholders to develop a comprehensive IT framework and investment  review process. However, no firm dates have been established for the  approval and implementation of the final plan or the framework. Until  NASA fully defines its policies and procedures for developing the portfolio  criteria, creating the portfolio, and evaluating the portfolio, the agency will  lack assurance it is identifying and selecting the appropriate mix of IT  projects that best meet its mission needs."], "subsections": []}]}, {"section_title": "NASA Has Not Fully Established an Effective Approach for Managing Cybersecurity Risk", "paragraphs": ["We have previously reported that securing federal government  computerized information systems and electronic data is vital to the  nation\u2019s security, prosperity, and well-being. Yet, the security over these  systems is inconsistent and agencies have faced challenges in  establishing cybersecurity approaches. Accordingly, we have  recommended that federal agencies address control deficiencies and fully  implement organization-wide information security programs.", "NIST\u2019s cybersecurity framework is intended to support federal agencies  as they develop, implement, and continuously improve their cybersecurity  risk management programs. In this regard, the framework identifies  cybersecurity activities for achieving specific outcomes over the lifecycle  of an organization\u2019s management of cybersecurity risk. According to  NIST, the first stage of the cybersecurity risk management lifecycle\u2014 which the framework refers to as \u201cidentify\u201d\u2014is focused on foundational  activities for effective risk management that provide agencies with the  organizational understanding to manage cybersecurity risk to systems,  assets, data, and capabilities. NIST also provides specific guidance for  implementing foundational activities and achieving desired outcomes that  calls for, among other things, the following:", "A risk executive in the form of an individual or group that provides  agency-wide oversight of risk activities and facilitates collaboration  among stakeholders and consistent application of the risk  management strategy.", "A cybersecurity risk management strategy that articulates how an  agency intends to assess, respond to, and monitor risk associated  with the operation and use of the information systems it relies on to  carry out the mission.", "An information security program plan that describes the security  controls that are in place or planned for addressing an agency\u2019s risks  and facilitating compliance with applicable federal laws, executive  orders, directives, policies, or regulations.", "Risk-based policies and procedures that act as the primary  mechanisms through which current security requirements are  communicated to help reduce the agency\u2019s risk of unauthorized  access or disruption of services.", "However, NASA has not yet fully implemented these foundational  activities of effective cybersecurity risk management."], "subsections": [{"section_title": "Efforts to Establish Executive Oversight of Cybersecurity Are Underway", "paragraphs": ["According to NIST guidance, federal agencies should establish a risk  executive in the form of an individual or group that provides organization- wide oversight of risk activities and facilitates collaboration among  stakeholders and consistent application of the risk management strategy.  This functional role helps to ensure that risk management is  institutionalized into the day-to-day operations of organizations as a  priority and integral part of carrying out missions.", "NASA has developed a policy regarding the establishment of a risk  executive function in accordance with NIST guidance, but it has not fully  implemented the policy. Specifically, the agency\u2019s policy designates the  Senior Agency Information Security Officer (SAISO) as the risk executive.  According to the policy, the SAISO is charged with ensuring that  cybersecurity is considered and managed consistently across the  systems that support the agency and its partnerships\u2014academic,  commercial, international, and others that leverage NASA resources and  extend scientific results. The policy also calls for the SAISO to establish  an office with the mission and resources for information security  operations, security governance, and cyber-threat analysis.", "In accordance with its policy, NASA has designated an Acting SAISO.  Since April 2017, the Acting SAISO has led the IT Security Division within the Office of the CIO\u2014an office that coordinates information security  operations, security governance, security architecture and engineering,  and cyber-threat analysis.", "However, the agency has not yet established a risk executive office with  assigned leadership positions and defined roles and responsibilities.  According to NASA documentation, the agency had planned for the office  to become operational by mid-December 2016. Agency officials, including  the Acting Deputy Associate CIO for Information Security, explained that  an IT security program office was not established in 2016 because the  planned time frame for doing so was not realistic and failed to take into  account other risk management efforts competing for available resources.  For example, the officials stated that the agency was focused on a priority  goal of deploying a centralized tool across its centers that would provide  monitoring of implemented security controls to ensure they are  functioning adequately.", "According to the NASA CIO, the agency planned to establish a  comprehensive risk executive function by employing a cybersecurity risk  manager in April 2018 and forming a program office\u2014called the  Enterprise Security Office\u2014by September 2018. NASA\u2019s new  cybersecurity risk manager began work on April 2, 2018. The agency\u2019s  plan to have the new cybersecurity risk manager establish a  comprehensive risk executive function should help ensure that current  risk management efforts and decisions are appropriate and consistently  carried out across the agency and its external partnerships."], "subsections": []}, {"section_title": "NASA Has Not Yet Established an Agency-Wide Cybersecurity Risk Management Strategy", "paragraphs": ["NIST guidance states that federal agencies should establish and  implement an organizational strategy for managing cybersecurity risk that  guides and informs how the agency assesses, responds to, and monitors  risk to the information systems being relied on to carry out its mission.  The strategy should, among other things, make explicit an agency\u2019s risk  tolerance, accepted risk assessment methodologies, a process for  consistently evaluating risk across the organization, risk response  strategies, approaches for monitoring risk over time, and priorities for  investing in risk management.", "In 2015, NASA recognized the need to establish and implement an  agency-wide strategy for managing its cybersecurity risks to address  weaknesses it had identified with the decentralized approach it was using.  Specifically, because the agency\u2019s centers had independently developed  approaches for managing cybersecurity risk, there was little integration  regarding risk management and practices across the agency. Further,  NASA determined that the decentralized, center-level approach did not  provide sufficient transparency regarding risks that could affect mission  directorate programs.", "To overcome the limitations of its decentralized approach, NASA planned  to develop and begin implementing a comprehensive cybersecurity  strategy by the end of September 2016 that was expected to include the  key elements identified in NIST guidance. For example, it was expected  to define the agency\u2019s risk tolerance, establish a methodology for  identifying and assessing risks, and provide a clear understanding of  NASA\u2019s risk posture.", "However, the strategy was not completed as planned and is currently in  development. According to officials in the Office of the CIO, including the  Acting Deputy Associate CIO for Information Security, the strategy was  not completed as planned due to the complexity and scope of the effort.  For example, the officials stated that establishing an effective agency- wide strategy required insight into center-specific practices and significant  input from stakeholders at all levels of NASA. In addition, these officials  and the NASA CIO explained that the agency\u2019s efforts were redirected in  order to respond to a new executive order from the President to develop  an action plan for adopting NIST\u2019s cybersecurity framework in phases.", "According to NASA\u2019s CIO, the agency plans to move forward with drafting  an agency-wide cybersecurity strategy that reflects the agency\u2019s  approach to using NIST\u2019s framework; however, the agency has not yet  established time frames for completing this effort. Until NASA establishes  and implements a comprehensive strategy for managing its cybersecurity  risks using NIST\u2019s framework, its ability to make operational decisions  that adequately address security risks and prioritize IT security  investments will be hindered."], "subsections": []}, {"section_title": "NASA\u2019s Information Security Program Plan Does Not Fully Address Relevant Leading Practices and Is Not Finalized", "paragraphs": ["NIST recommends that federal agencies develop and disseminate an  information security program plan that describes the organization-wide  security controls that are in place or planned for addressing the agency\u2019s  risks and complying with applicable federal laws, executive orders,  directives, policies, or regulations. Specifically, the plan should provide  a description of the agency\u2019s program management controls and common  controls in place or planned for meeting relevant federal, legal, or  regulatory requirements; include the identification and assignment of  roles, responsibilities, and coordination among organizational entities  responsible for different aspects of information security; define the  frequency for reviews of the security program plan; and receive approval  from a senior official with responsibility and accountability for the risk  being incurred.", "NASA issued a draft information security program plan in November 2017  that addresses many of the components called for in NIST guidance. For  example, the plan discusses program management controls that will be established, including the  development of an inventory of its information systems, measures to  determine information security performance, and an information  security workforce development and improvement program;  common controls that are to be implemented agency-wide, including  configuration management, contingency planning, and personnel  security;  roles and responsibilities for promoting collaboration and providing  consolidated unclassified security operations, and incident response  and IT security awareness and training capabilities; and  responsibility for ensuring that the information security program plan is  maintained, approved by the NASA CIO, and reviewed annually.", "However, the plan is currently in draft and incomplete. For example, it  does not yet describe the majority of the security functions and services  that are to be carried out by the agency\u2019s IT Security Division to address  the relevant federal statutory and regulatory requirements. Specifically,  the plan does not identify the agency-wide privacy controls derived from  standards promulgated pursuant to federal law and guidance that,  according to the agency, are an integral part of its security program.", "According to NASA\u2019s Acting Deputy Associate CIO for Information  Security, the information security program plan has not been finalized  because of an upcoming revision to NIST\u2019s guidance for implementing  security controls. Specifically, a fifth revision of NIST SP 800-53 is  planned for release in December 2018. NASA\u2019s Acting Deputy Associate  CIO for Information Security stated that the agency intends to finalize its  draft plan after incorporating the updated NIST guidance.", "In the absence of an established information security program plan,  NASA\u2019s view of the security controls that protect its systems will remain  decentralized, and it will lack assurance that it has established oversight  over security controls for all of its systems. In addition, the agency will  continue to operate its systems without defined and established  information security requirements that are essential to agency-wide  operations."], "subsections": []}, {"section_title": "NASA\u2019s Security Policies and Procedures Are Not Always Current or Integrated", "paragraphs": ["NIST Special Publication 800-53 recommends that agencies create  policies and procedures to facilitate the appropriate application of security  controls. If properly implemented, these policies and procedures may be  able to effectively reduce the risk that could come from cybersecurity  threats such as unauthorized access or disruption of services. Because  risk-based policies and procedures are the primary mechanisms through  which federal agencies communicate views and requirements for  protecting their computing environments, it is important that they are  established and kept current.", "NASA has taken steps to document policies and procedures that address  the security controls identified in NIST guidance for protecting information  systems. For example, the agency established an overarching security  policy that identified roles and responsibilities related to configuration  management, contingency planning, and incident response. In addition,  the agency issued procedures for implementing each of the NIST  controls.", "However, NASA does not have current and fully integrated policies and  procedures. For example, the agency\u2019s overarching policy for  implementing security controls expired in May 2017. In addition,  approximately one-third of the documents that guide the implementation  of these controls remained in effect past their expiration dates instead of  being updated before they had expired per NASA policy requirements.", "Further, in July 2017, NASA determined that cybersecurity roles and  responsibilities were not always clear and sufficiently integrated across  policies. For example, responsibilities were not consistently well-defined  in the policies for governance, IT security, program and project  management, and systems engineering. In addition, although NASA\u2019s  Policy Directive 2810.1E, NASA Information Security Policy provided the  SAISO with responsibility for the agency\u2019s cybersecurity risk, the policy  assigned mission directorates control over risk decisions for their  missions and programs and the centers were given the authority to  implement any technical changes needed to address risk.", "NASA\u2019s Procedural Requirement 2810.1A, Security of Information  Technology states that the agency\u2019s SAISO is responsible for ensuring  that information security policies and procedures are reviewed and  appropriately updated. However, according to officials in the Office of the  CIO, including the specialist for IT security, responsibilities for  establishing, reviewing, and updating policies and procedures are being  shared by two groups: the IT Security Division, led by the SAISO, and the  Capital Planning and Governance Division. Specifically, the IT Security  Division controls the content of IT-related policies and procedures but  does not have control over the established NASA-wide process for  reviewing the policies and procedures to determine if any changes are  needed to the content. Instead, the Capital Planning and Governance  Division is responsible for ensuring formal review and approval of any IT- related policies and procedures through the standard agency process and  schedule.", "Officials from the Office of the CIO, including the specialist for IT security,  also stated that they intend to (1) establish a policy management  framework that would provide the SAISO with more control over policies  and procedures and include an annual document review, and (2) clarify  and update cybersecurity roles and responsibilities in NASA policies.  However, the agency has not yet developed a plan and specific time  frame for completing these activities.", "In addition, the Acting Deputy Associate CIO for Information Security  stated that, having expired policies and procedures is not significant  because they will remain in use until they are rescinded or superseded by  updated versions. However, until NASA fully updates its policies and  procedures to govern security over the agency\u2019s computing  environments, it will have limited assurance that controls over information  are appropriately applied to its systems."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["NASA continues to pursue efforts to improve IT strategic planning,  workforce planning, IT governance, and cybersecurity, but consistently  lacks the documented processes needed to ensure that policies and  leading practices are fully addressed. Specifically, the agency has taken  steps to improve the content of its strategic plan and established an  agency-wide goal for improving its workforce. In addition, after analyzing  its IT management and governance structure, NASA took action to  streamline its governance boards and standardize and strengthen its  selection and oversight of investments, including initiating a portfolio  management process. NASA has also moved toward new strategies and  plans to bolster cybersecurity.", "Nevertheless, while NASA has made progress, the agency has not yet  fully addressed many of the leading IT management practices noted in  this report or completed efforts to increase the CIO\u2019s authority over, and  visibility into, agency-wide IT. Among other things, NASA has not fully  documented a process for IT strategic planning or addressed all key  elements of a comprehensive plan. In addition, it has not yet fully  implemented a workforce planning process and has gaps in efforts to  address leading practices. Regarding IT governance, its efforts to institute  an effective governance structure and update policies and procedures for  selecting IT investments are not yet complete. Moreover, NASA has not  yet addressed weaknesses in its oversight practices or fully defined  policies and procedures for developing an effective portfolio management  process.", "Similarly, although NASA continues cybersecurity improvement efforts,  important elements of an effective cybersecurity approach have not been  completed, including establishing a risk management strategy, an  information security program plan, and updated policies and procedures.  Until NASA leadership fully addresses these leading practices, its ability  to overcome its longstanding weaknesses and ensure effective oversight  and management of IT across the agency will remain limited. Moreover,  NASA may be limited in its ability to strengthen its risk posture, including  ensuring effective cybersecurity across partnerships with commercial  entities, federal agencies, and other countries."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making 10 recommendations to the National Aeronautics and  Space Administration:", "The Administrator should direct the Chief Information Officer to  develop a fully documented IT strategic planning process, including  methods by which the agency defines its IT needs and develops  strategies, systems, and capabilities to meet those needs.  (Recommendation 1)", "The Administrator should direct the Chief Information Officer to update  the IT strategic plan for 2018 to 2021 and develop associated  implementation plans to ensure it fully describes strategies the agency  will use to achieve the desired results and descriptions of  interdependencies within and across programs. (Recommendation 2)", "The Administrator should direct the Chief Information Officer to  address, in conjunction with the Chief Human Capital Officer, gaps in  IT workforce planning by fully implementing the eight key IT workforce  planning activities noted in this report. (Recommendation 3)", "The Administrator should direct the Chief Information Officer to  institute an effective IT governance structure by completing planned  improvement efforts and finalizing charters to fully establish IT  governance boards, clearly defining roles and responsibilities for  selecting and overseeing IT investments, and ensuring that the  governance boards operate as intended. (Recommendation 4)", "The Administrator should direct the Chief Information Officer to update  policies and procedures for selecting investments to provide a  structured process, including thresholds and criteria needed for,  among other things, evaluating investment risks as part of governance  board decision making, and outline a process for reselecting  investments. (Recommendation 5)", "The Administrator should direct the Chief Information Officer to  address weaknesses in oversight practices and ensure routine  oversight of all investments by taking action to document criteria for  escalating investments among governance boards and establish  procedures for tracking corrective actions for underperforming  investments. (Recommendation 6)", "The Administrator should ensure that the Chief Information Officer  fully defines policies and procedures for developing the portfolio  criteria, creating the portfolio, and evaluating the portfolio.  (Recommendation 7)", "The Administrator should direct the Chief Information Officer to  establish an agency-wide approach to managing cybersecurity risk  that includes a cybersecurity strategy that, among other things, makes explicit  the agency\u2019s risk tolerance, accepted risk assessment  methodologies, a process for consistently evaluating risk across  the organization, response strategies and approaches for  monitoring risk over time, and priorities for risk management  investments; (Recommendation 8) an information security program plan that fully reflects the  agency\u2019s IT security functions and services and agency-wide  privacy controls for protecting information; (Recommendation 9)  and policies and procedures with well-defined roles and  responsibilities that are integrated and reflect NASA\u2019s current  security practices and operating environment. (Recommendation  10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to NASA for comment. In its  comments, which are reproduced in appendix II, NASA concurred with  seven of the recommendations, partially concurred with two  recommendations, and did not concur with one recommendation.", "NASA partially concurred with our first and second recommendations.  Specifically, consistent with the first recommendation, NASA agreed to  fully document its strategic planning process, including the methods by  which the agency defines IT needs and develops outcomes, strategies,  major actions, and performance measures to meet those needs.", "In addition, our second recommendation called for NASA to update the  strategic plan and develop associated implementation plans. With regard  to updating the plan, NASA stated that its strategic plan provides the  context and parameters to support achievement of the agency's vision  and mission through the strategic use of IT. The agency also stated that  this plan describes the business outcomes, strategies, major actions, and  performance measures to achieve the desired results.", "With regard to the implementation plans related to our first and second  recommendation, NASA agreed to develop the associated  implementation plans for accomplishing the IT strategic plan, including  descriptions of the interdependencies within and across programs.  Nevertheless, in commenting on both recommendations, as well as the  first recommendation, NASA stated that it does not believe that  implementation plans, including specific IT capability and system  changes, should be part of a strategic plan. The agency also maintained  that the implementation plans, including descriptions of  interdependencies within and across programs, are at a lower level than  the IT strategic plan, since detailed IT implementation plans are more  dynamic than the four-year NASA IT Strategic Plan.", "However, our first and second recommendations do not call for NASA to  incorporate implementation plans within the strategic plan. Rather, as  discussed in the report, it is important that NASA document how it intends  to accomplish the activities outlined in the strategic plan. Further, we  continue to believe that NASA should address the weaknesses we  identified in this report by updating the strategic plan to incorporate  strategies on resources and time frames to achieve desired results and  descriptions of interdependencies within and across projects so that they  can be understood and managed. Thus, we stand by both  recommendations (recommendations 1 and 2) that the agency take these  actions.", "NASA did not concur with our third recommendation to implement the IT  workforce planning activities noted in our report. In this regard, the  agency stated that its workforce improvement efforts were already  underway. Specifically, NASA stated that IT workforce planning is part of  the agencywide Mission Support Future Architecture Program. It added  that, among other things, this program is intended to ensure that mission  support resources, including the IT workforce, are optimally structured to  support NASA\u2019s mission. In addition, NASA referenced our two additional  ongoing audits of the agency\u2019s IT workforce, and noted that its activities  related to IT workforce planning would be centered on any  recommendations resulting from those audits.", "In our view, neither of these circumstances should hinder NASA from  addressing our recommendation in this report. As of March 2018, the  agency\u2019s IT workforce plans were out-of-date and incomplete because  activities the agency had been planning since 2015 had not been finalized  in an approved plan or implemented. Further, NASA had not yet  determined when the Office of the CIO would become an active part of  the agencywide Mission Support Future Architecture program or  developed plans for when that program\u2019s assessment of the IT workforce  would be completed.", "Thus, instead of limiting NASA\u2019s ability to address our recommendation,  implementing the workforce planning activities discussed in this report  could complement the agency\u2019s ongoing and future efforts. Specifically,  NASA could use the IT workforce leading practices described in this  report to strengthen any new workforce plans and assess the  implementation of any planned improvements. Until NASA documents an  IT workforce planning process and implements all of the key IT workforce  planning activities, the agency may not be effectively positioned to  anticipate and respond to changing staffing needs. Further, the agency is  likely to face challenges in controlling human capital risks when  developing, implementing, and operating IT systems.", "NASA concurred with our four recommendations aimed at addressing  deficiencies in its IT governance (recommendations 4 through 7). In this  regard, the agency described planned actions intended to address each  of these recommendations. For example, among other activities, the  agency stated that it intended to publish charters for all IT governance  boards; have the IT Council review governance board operations  annually; document criteria for escalating investments among governance  boards; and update policies and procedures for managing its investments  as a portfolio.", "Similarly, NASA concurred with our three recommendations related to  establishing an agency-wide approach to managing cybersecurity risk  (recommendations 8, 9, and 10). The agency described actions it had  taken or planned to address each of these recommendations. In  particular, with regard to establishing a cybersecurity risk management  strategy (recommendation 8), NASA asserted that it had already taken  actions that met the requirements of our recommendation. Specifically,  NASA stated that it had established an approach to developing its  cybersecurity risk management strategy by approving a charter for an  agency-wide team to address cybersecurity risk management needs and  hiring a Chief Cybersecurity Risk Officer to oversee agency-wide risk  management initiatives.", "While these actions constitute steps toward addressing the  recommendation, we disagree that establishing a charter for a team and  hiring a Chief Cybersecurity Risk Officer fully addresses the  recommendation. As previously noted in this report, the agency does not  have a cybersecurity risk management strategy that includes elements of  NIST guidance. The strategy should, among other things, make explicit  the agency\u2019s risk tolerance, accepted risk assessment methodologies, a  process for consistently evaluating risk across the organization, risk  response strategies, approaches for monitoring risk over time, and  priorities for investing in risk management. Ensuring that the established  agency-wide team and the Chief Cybersecurity Risk Officer develop a  cybersecurity risk management strategy that aligns with the NIST  guidance will be essential to fully address our recommendation.", "NASA also provided technical comments on the draft report, which we  incorporated, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Administrator of the National Aeronautics and Space  Administration, and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "Should you or your staffs have any questions on information discussed in  this report, please contact Carol Harris at (202) 512-4456 or  harriscc@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made major contributions to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["The National Aeronautics and Space Administration Transition  Authorization Act of 2017 included a provision for us to review the  effectiveness of the agency\u2019s approach to overseeing and managing  information technology (IT), including its ability to ensure that resources  are aligned with agency missions, cost effective, and secure. Our  specific objective for this review was to address the extent to which the  National Aeronautics and Space Administration (NASA) has established  and implemented leading IT management practices in strategic planning,  workforce planning, governance, and cybersecurity.", "To address this objective, we compared NASA\u2019s IT management policies,  procedures, and other documentation to criteria established by federal  laws and leading practices. This documentation included the agency\u2019s  strategic plans, workforce gap assessments, governance board meeting  minutes and briefings, charters, policies and procedures, and other  documentation of the Chief Information Officer\u2019s (CIO) authority. We also  reviewed relevant reports by GAO and the NASA Office of Inspector  General.", "With regard to IT strategic planning, we identified the strategic plans and  related planning guidance issued by NASA and the Office of the CIO,  including NASA\u2019s Governance and Strategic Management Handbook,  dated November 26, 2014; NASA\u2019s Information Resources Management  Strategic Plan, dated March 2014; and NASA\u2019s updated Information  Technology Strategic Plan for fiscal years 2018 to 2021. We then  reviewed the agency\u2019s overall strategic plan, and evaluated its previous  and current IT strategic plans against key practices for IT strategic  planning that we have previously identified. These practices call for  documenting the agency\u2019s IT strategic planning processes and  developing an IT strategic plan that aligns with the agency\u2019s overall strategy;  identifies the mission of the agency, results-oriented goals, and  performance measures that permit the agency to determine whether  implementation of the plan is succeeding;  includes strategies the governing IT organization will use to achieve  desired results; and provides descriptions of interdependencies within and across projects  so that they can be understood and managed.", "To determine the extent to which NASA has established and implemented  leading IT workforce planning practices, we conducted a comparative  analysis of NASA\u2019s IT workforce planning policies and documents.  Specifically, we compared agency documents, such as NASA policy  directives, the desk guide, and documentation of efforts to establish IT  workforce competencies and staffing requirements and conduct gap  assessments, to GAO\u2019s IT workforce framework. GAO\u2019s framework  consists of four IT workforce planning steps and eight key activities. The  eight key activities were identified in federal law, regulations, and  guidance, including the Clinger-Cohen Act of 1996, the legislation  referred to as the Federal Information Technology Acquisition Reform  Act, Office of Management and Budget (OMB) guidance, the Office of  Personnel Management\u2019s Human Capital Framework, and GAO  reports.", "Based on our assessment of the documentation and discussions with  agency officials, we assessed the extent to which the agency  implemented, partially implemented, or did not implement the activities.  We considered an activity to be fully implemented if NASA addressed all  of the underlying practices for the activity; partially implemented if it  addressed some but not all of the underlying practices for the activity; and  not implemented if it did not address any of the underlying practices for  the activity.", "We assessed IT governance practices by comparing NASA  documentation to critical processes identified by GAO in the IT  investment management framework. To align our work with the provision in Section 811(a) of the National Aeronautics and Space  Administration Transition Authorization Act of 2017 calling for NASA to  take actions regarding IT governance, we selected critical processes  from Stage 2 of the framework:  instituting the investment board;  selecting and reselecting investments that meet business needs; and providing investment oversight.", "For each critical process, we compared key practices outlined in the  framework to NASA documentation. The documentation we reviewed  included NASA\u2019s IT governance policies and procedures, and charters  and other guidance. We also reviewed governance board meeting  minutes and briefings from each board\u2019s first meeting in 2016 through  meetings held in August 2017.", "In addition, we selected key practices for effective governance from Stage  3 of the IT investment management framework regarding establishing and  implementing policies and procedures for developing the portfolio criteria,  creating the portfolio, and evaluating the portfolio. We then compared  documentation, including NASA\u2019s IT Capital Planning and Investment  Control Process guide dated October 2006, and Annual Capital  Investment Review Implementation Plan dated October 2015, and draft IT  portfolio management plans, against these practices.", "Using standards and guidance from the National Institute of Standards  and Technology (NIST), which identify foundational elements of  effective cybersecurity risk management, we evaluated NASA\u2019s  cybersecurity risk management approach by analyzing policies and plans for establishing a comprehensive risk evaluating documents and plans for establishing a cybersecurity risk  comparing a draft Information Security Program Plan to determine if it  was consistent with NIST guidance; and analyzing policies and procedures to determine if they address  relevant NIST security controls and are current.", "In addition to assessing NASA headquarters, we reviewed IT  management practices at two of the agency\u2019s nine centers (Marshall  Space Flight Center in Huntsville, Alabama; and Johnson Space Center  in Houston, Texas) and at one of NASA\u2019s four mission directorates (the  Human Exploration and Operations Mission Directorate). The two centers  and one mission directorate were selected because they had the largest  fiscal year 2017 IT budgets, respectively, as reported on the federal IT  dashboard. We also visited the Goddard Space Flight Center in  Greenbelt, Maryland, because of the center\u2019s proximity to GAO. The  results of our work at the selected NASA centers and mission directorate  are not generalizable to other NASA centers and mission directorates.", "To assess the reliability of these data, we compared them to budgetary  data obtained directly from NASA\u2019s Office of the CIO. We found the data  to be sufficiently reliable for the purpose of identifying the NASA centers  and mission directorate with the largest IT budgets. We also interviewed  cognizant officials with responsibilities for IT management at NASA  headquarters and for the selected centers and mission directorate.", "We conducted this performance audit from May 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objective."], "subsections": []}, {"section_title": "Appendix II: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, the following staff also made key  contributions to this report: Eric Winter (Assistant Director), Donald Baca,  Rebecca Eyler, Amanda Gill (Analyst in Charge), Tom Johnson, Kate  Nielsen, Teresa Smith, and Niti Tandon."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-162", "url": "https://www.gao.gov/products/GAO-18-162", "title": "Military Personnel: Actions Needed to Better Position the Navy and the Marine Corps to Support Expanding Unmanned Systems Operations", "published_date": "2018-02-06T00:00:00", "released_date": "2018-02-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of the Navy has committed to rapidly grow its unmanned systems portfolio. It currently has at least 24 types of systems and has budgeted nearly $10 billion for their development and procurement for fiscal years 2018-2022. Personnel who launch, navigate, and recover the systems are integral to effective operations. Senate Report 114-255 included a provision for GAO to review the Navy's and the Marine Corps' strategies for unmanned system operators. GAO examined, among other things, the extent to which the Navy and the Marine Corps have (1) evaluated workforce alternatives (such as the use of civilians and contractors) for unmanned system operators and (2) developed and updated personnel requirements and related policies and goals for selected unmanned systems. GAO compared documentation on unmanned systems with DOD policies and conducted discussion groups with unmanned system operators."]}, {"section_title": "What GAO Found", "paragraphs": ["The Navy and the Marine Corps are rapidly growing their portfolios of unmanned aerial systems (UAS) and unmanned maritime systems and have opted to use military personnel as operators without evaluating alternatives, such as federal civilian employees and private sector contractors. Service officials stated that civilians or contractors are not viable alternatives and policies are unclear about when and how to use them. However, a June 2016 Department of Defense-commissioned study found that alternative staffing strategies could meet the UAS mission more cost-effectively. Military personnel may be the most appropriate option for unmanned systems, but without clarifying policies to identify circumstances in which civilians and contractors may serve in operational roles, the services could continue to make workforce decisions that do not consider all available resources.", "The Navy and the Marine Corps have sufficient personnel requirements or efforts underway to develop personnel requirements for seven unmanned systems that GAO reviewed (see fig.), but requirements for one system (i.e., the RQ-21 Blackjack UAS) have not been updated. That system's requirements have not been updated because service entities disagree about whether they are sufficient. Since 2015, units have deployed with about two to three times the personnel that headquarters and command officials expected they would need. Marine Corps officials stated that the Blackjack's personnel requirements were based on an outdated concept of operations and are insufficient for supporting workloads. Without updating the personnel requirements for the Blackjack UAS, the services will lack current information about the number of personnel needed.", "The Department of the Navy has taken positive steps but has not fully evaluated and updated aviation policies that affect personnel requirements for certain UAS and lacks clear goals for informing future requirements for all of its UASs. GAO found that the policies do not fully account for differences between UASs of varying sizes and capabilities. These policies require, for example, that the Blackjack UAS be held to the same maintenance standards designed for larger aircraft and UAS, which in turn affects personnel requirements. Until the Department of the Navy evaluates and updates such policies and clarifies related goals, the services will be hampered in developing and updating future requirements as unmanned system inventories grow and operations expand."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making ten recommendations, including that the Navy and the Marine Corps clarify policies to identify circumstances in which civilians and contractors may serve in operational roles and apply the policies to future evaluations; update personnel requirements for one UAS; and evaluate and update policies and goals to inform future personnel requirements. DOD concurred with eight recommendations and partially concurred with two. As discussed in the report, GAO continues to believe that all ten are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Navy\u2019s top senior leaders have emphasized the growing importance  of unmanned systems to future fleet operations. In 2015, for example, the  Secretary of the Navy established a Deputy Assistant Secretary for  Unmanned Systems and announced that the F-35 Lightning II will likely  be the last manned strike fighter aircraft the Department of the Navy will  buy or fly. The Chief of Naval Operations announced in 2017 that the  future of the Navy includes unmanned aerial, surface, and underwater  systems as an integral part of the future fleet and that these systems  must be purchased in large numbers in order to expand the Navy\u2019s  presence in key areas. To fulfill its commitment to rapidly grow its  portfolio of unmanned systems, the Department of the Navy included  nearly $10 billion in its budget for fiscal years 2018 through 2022 for  unmanned aerial systems (UAS), unmanned surface vehicles (USV), and  unmanned underwater vehicles (UUV). The Navy also committed to  tailoring policies to support expeditious acquisition processes. The  Department of the Navy has at least 24 different types of unmanned  systems in various stages of development, testing, and fielding to units.", "Despite their name, \u201cunmanned\u201d systems require personnel who are  integral to performing their missions. Operator personnel are needed to  transit, launch, navigate, and recover unmanned systems and control and  monitor their payloads (e.g., sensors for identifying terrain or targets);  maintainers are needed to perform preventive and corrective  maintenance tasks; and other support personnel are needed for post- mission analyses of data the systems gather. According to DOD policy,  the initial steps in planning for personnel requirements include  determining categories of eligible personnel (i.e., military servicemembers  or the other two workforce alternatives of federal civilian employees and  private sector contractors) based on whether the activities to be  performed are \u201cinherently governmental\u201d or \u201ccommercial.\u201d The next step  involves the identification of the appropriate and cost-effective  combination of eligible personnel categories (i.e., workforce mix). Military  servicemembers and federal civilians must be considered before the  services may consider using private sector contractors as a workforce  alternative to perform a function. Following that step are analyses of the  numbers of personnel required and the staffing approaches needed to fill  personnel requirements.", "Since 2001, we have identified the strategic management of human  capital as a high-risk area across the government in part because of the  mission-critical skills gaps within the federal workforce that pose a high  risk to the nation by impeding the government from cost-effectively  serving the public and achieving results. Related to the UAS workforces,  we issued multiple reports from 2014 through 2017 on the Army\u2019s and the  Air Force\u2019s personnel strategies for UAS operators. For example, in  January 2017 we reported that neither the Air Force nor the Army had  evaluated its UAS operator workforce mix to determine an effective and  efficient mix of personnel for meeting mission needs. We recommended  that the Air Force and the Army evaluate their workforce mix and the use  of federal civilians for UAS pilot positions and conduct cost analyses  consistent with Department of Defense (DOD) guidance. DOD concurred  with both recommendations but has not yet implemented them. A list of  related products is included at the end of this report.", "A Senate Armed Services Committee report accompanying a proposed  bill for the National Defense Authorization Act for Fiscal Year 2017  includes a provision for us to review the Department of the Navy\u2019s  personnel strategies for unmanned systems, including UASs, USVs, and  UUVs. This report addresses the extent to which the Navy and the  Marine Corps have (1) evaluated workforce alternatives for their  unmanned system operators, including the use of federal civilian  employees and private sector contractors; (2) developed and updated  personnel requirements and related policies and goals that affect  requirements for operators, maintainers, and other support personnel for  selected unmanned systems; and (3) developed approaches for staffing  unmanned system operators to meet personnel requirements.", "For these objectives, we used a case study approach to review the  Navy\u2019s and the Marine Corps\u2019 evaluations of workforce alternatives,  development and updates of personnel requirements and related policies  and goals, and staffing approaches for selected unmanned systems. Of  24 Navy and the Marine Corps unmanned systems in development as  programs of record in calendar year 2016, we selected: four UASs\u2014the  Navy\u2019s MQ-4 Triton, MQ-8 Fire Scout, MQ-25 Stingray, and the Marine  Corps\u2019 RQ-21 Blackjack; two USVs\u2014the Unmanned Influence Sweep  System and the Mine Countermeasures USV\u2014associated with the  Navy\u2019s littoral combat ships; and two types of Navy UUVs\u2014the MK 18  family of UUV systems and the Snakehead Large Displacement UUV\u2014 based on their size and missions. While the UUV case study findings  are not generalizable, they provide illustrative examples for each  objective. In appendix I, we provide additional information on each of  these eight unmanned systems.", "For objective one, we compared any Navy and Marine Corps efforts to  evaluate workforce alternatives\u2014specifically the use of federal civilian  employees and private security contractors\u2014for operators of unmanned  systems with two DOD policies: (1) DOD Directive 1100.4, Guidance for  Manpower Management and (2) DOD Instruction 1100.22, Policy and  Procedures for Determining Workforce Mix. DOD Directive 1100.4  directs that authorities should consider all available sources when  determining workforce mix. DOD Instruction 1100.22 directs the steps  that workforce planning authorities must take in planning for personnel  requirements. We analyzed documentation on the services\u2019 efforts to  evaluate alternative workforces for unmanned system operator positions,  and interviewed knowledgeable officials about such evaluations and any  reasons for not evaluating workforce alternatives. We also compared the  services\u2019 respective policies on workforce planning with DOD policies and  with federal internal controls standards that emphasize the importance of  having clear, updated policies that align with an organization\u2019s mission  and goals. Finally, we reviewed DOD-commissioned workforce mix  studies and interviewed officials from the Office of the Under Secretary of  Defense for Personnel and Readiness (OUSD(P&R)) to identify benefits  and limitations of the different personnel categories as workforce  alternatives.", "For objective two, we reviewed the Navy\u2019s and the Marine Corps\u2019 efforts  to develop and update personnel requirements for our selected case  study systems and interviewed knowledgeable service officials about their  perception of the sufficiency of those personnel requirements for  supporting training and deployment requirements. We compared  requirements documents with DOD Directive 1100.4, which states that  personnel requirements should be driven by workload and established at  the minimum levels necessary to accomplish mission and performance  objectives, and with Navy Instruction 1000.16L. The Navy instruction  states that personnel requirements must be validated as program  changes dictate and at a minimum annually over a system\u2019s lifecycle to  determine if a personnel update is required. We also compared the life  cycle cost estimate for the RQ-21 Blackjack with DOD Instruction  5000.02, Operation of the Defense Acquisition System, and with Office of  Management and Budget guidance. DOD Instruction 5000.02 requires  that components determine a weapon system program\u2019s life cycle cost by  planning for the many factors needed to support the system, including  personnel. The Office of Management and Budget guidance states that to  keep the cost analyses for capital assets, such as weapon systems,  current, accurate, and valid, cost estimating should be continuously  updated based on the latest information available as programs mature.", "We also reviewed the Navy\u2019s policies on operating and maintaining UAS  and documentation from the Marine Corps about any effects of those  policies on personnel workload, and interviewed service officials about  any effects and efforts to review and update policies. We then compared  those efforts with DOD policy and with federal internal controls standards  that emphasize the importance of having clear, updated policies that align  with an organization\u2019s mission and goals. Finally, we compared goals  established in DOD\u2019s Unmanned Systems Integrated Roadmap, FY2013- 2038 and Department of the Navy strategy documents on unmanned  systems with federal internal controls standards that state than an  agency\u2019s management should define goals clearly to enable the  identification of risk.", "For objective three, we reviewed the Navy\u2019s and the Marine Corps\u2019  approaches for selecting, training, and tracking unmanned system  operators to identify any challenges. We also reviewed Navy reports and  Marine Corps data on operator inventory and retention levels relative to  the services\u2019 requirements and goals. Specifically, we reviewed Navy  reports on the retention of certain aviation personnel to serve as UAS  operators for fiscal years 2015 through 2017 because data from earlier  years were less relevant given the lower numbers of UAS inventories. We  requested data from the Marine Corps on its inventories of and  requirements for enlisted UAS operators for fiscal years 2007 through  2017, and on UAS officers for fiscal years 2013 (the first year of available  data) through 2017. We requested retention data\u2014actual numbers of  personnel who reenlisted versus annual quotas\u2014on enlisted UAS  operators for fiscal years 2010 (the earliest year for which data were  available) through 2017.", "We assessed the reliability of the Marine Corps\u2019 data by administering  questionnaires to obtain information on the quality control measures in  place to ensure that the data systems record, track, and report reliable  data, and by interviewing knowledgeable officials and manually testing  the data for errors and omissions. We found the data to be sufficiently  reliable for our purposes of describing personnel inventory trends and the  sufficiency of operator personnel to meet requirements. We found that the  retention data are of undetermined reliability but are reporting them  because they are the data of record used by Marine Corps planning  officials.", "We also compared Navy and Marine Corps financial incentives for  retaining personnel as UAS operators with DOD\u2019s 2012 Eleventh  Quadrennial Review of Military Compensation, which established that  organizations should assess civilian supply and demand and civilian  wages to determine the most cost-effective special and incentive pay  strategies. We compared any Marine Corps efforts to address workforce  challenges specific to the Marine Corps\u2019 UAS operator career field with a  key principle of strategic human capital planning from our prior work,  which states that agencies should ensure that \u201cflexibilities\u201d are part of  their overall human capital strategy. We interviewed Marine Corps UAS  leaders and conducted discussion groups with UAS operators and  officers from one squadron, selected because of its experience level, to  learn their views about UAS personnel requirements and staffing  approaches and career satisfaction. We provide further details on our  scope and methodology in appendix II.", "We conducted this performance audit from September 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Unmanned Systems", "paragraphs": ["Unmanned systems provide DOD with capabilities for conducting a range  of military operations, including environmental sensing and battlespace  awareness; chemical, biological, radiological, and nuclear detection;  counter-improvised explosive device capabilities; port security; precision  targeting; and precision strike. DOD\u2019s unmanned systems operate in  different warfighting \u201cdomains\u201d ranging from air, land, and maritime  environments. As shown in figure 1, DOD categorizes its unmanned  systems into five groups by domain (i.e., aerial and maritime, including  surface and underwater) and other attributes of size and capability.", "Group 1 UASs weigh fewer than 20 pounds and operate below 1,200 feet  in altitude, whereas group 5 UASs weigh more than 1,320 pounds and  operate above 18,000 feet. Similarly, USVs are categorized in five  groups, increasing in size and capability from very small to extra-large,  and UUVs are categorized in four groups\u2014small, medium, large, and  extra-large."], "subsections": []}, {"section_title": "Organizational Roles and Responsibilities for Evaluating Workforces", "paragraphs": ["Various offices within the Office of the Secretary of Defense and the  Department of the Navy have roles and responsibilities for evaluating the  appropriate mix of personnel for the Navy\u2019s and the Marine Corps\u2019 total  workforces.", "According to Section 129a of Title 10 of the U.S. Code, which governs  DOD\u2019s general policy for total force management, the Secretary of  Defense is required to establish policies and procedures for determining  the most appropriate and cost efficient mix of military, federal civilian, and  contractor personnel to perform the missions of the department. Section  2463 of Title 10 mandates the Under Secretary of Defense for Personnel  and Readiness (USD(P&R)) to devise and implement guidelines and  procedures to ensure consideration is given to using DOD civilian  employees to perform new functions and functions that are performed by  contractors and could be performed by civilian employees.", "DOD policies also establish roles and responsibilities for the USD(P&R):", "DOD Directive 1100.4 establishes departmental policy concerning  workforce management, including multiple responsibilities for the  USD(P&R) (e.g., reviewing the workforce management guidelines and  practices of DOD components for compliance with established  policies and guidance).", "DOD Instruction 1100.22 implements policy set forth under DOD  Directive 1100.4; assigns responsibilities; and prescribes procedures  for determining the appropriate mix of military, federal civilian, and  contractor personnel. The instruction assigns to the USD(P&R) the  responsibility for overseeing the instruction\u2019s implementation and  working with component heads to ensure that they establish policies  and procedures consistent with this instruction.", "DOD Instruction 7041.04 states that DOD\u2019s USD(P&R), the  Comptroller, and the Director of Cost Assessment and Program  Evaluation are responsible for developing a DOD-wide cost model for  estimating and comparing the full costs of DOD workforce and  contract support.", "Section 129a of title 10 of the U.S. Code directs the Secretary of Defense  to delegate responsibility for the implementation of policies and  procedures established by the Secretary to the Secretaries of the military  departments. In accordance with this delegation, the Secretary of the  Navy has overall responsibility for requirements determination, planning,  programming, and budgeting for policies and procedures for determining  the appropriate and cost-effective mix of personnel.", "DOD policies establish the following roles and responsibilities for the  military department Secretaries, including the Secretary of the Navy and  heads of other DOD components:", "DOD Directive 1100.4 requires the component heads to designate an  individual with full authority for workforce management, to include  responsibility for, among other things, developing annual personnel  requests to Congress considering the advantages of converting from  one form of support (active or reserve military servicemembers,  federal civilians, or private sector contractors) to another for the  performance of a specified function, consistent with section 129a of  the U.S. Code.", "DOD Instruction 1100.22 establishes that the component heads  should require that their designated workforce authority issue  implementing guidance requiring the use of the instruction when  determining workforce mix for current, new, or expanded missions.", "Secretary of the Navy Instruction 5430.7R assigns authority for workforce  management in the Department of the Navy, including workforce mix issues, to the Assistant Secretary of the Navy for Manpower and Reserve  Affairs."], "subsections": []}, {"section_title": "Navy and Marine Corps Processes for Determining and Staffing Personnel Requirements", "paragraphs": ["Concurrently with a weapon system\u2019s development through DOD\u2019s  acquisition process, the Navy and the Marine Corps determine the  numbers and types of personnel and skills required for their unmanned  systems. The personnel requirements development process generally  begins with the program manager from a Navy systems command (e.g.,  Naval Air Systems Command for Navy and Marine Corps aircraft and  Naval Sea Systems Command for ships and submarines) that is  responsible for supervising the management of assigned acquisition  programs. The program manager and systems command utilize Navy  policies and other inputs to formulate initial requirements. In doing so, the  program manager coordinates any Navy personnel requirements with the  Office of the Chief of Naval Operations and other entities such as the  Navy Personnel Command and commands that will operate and maintain  the systems, such as the U.S. Fleet Forces Command and the  Commander, Naval Air Forces. For Marine Corps aircraft systems, the  program manager from the Naval Air Systems Command coordinates  with Marine Corps headquarters entities, such as the Deputy  Commandant for Aviation and the Deputy Commandant for Combat  Development and Integration. The program manager and systems  command calculate the cost of personnel as part of a system\u2019s total life  cycle cost. The program manager validates personnel requirements as  program changes dictate and at a minimum annually, over a system\u2019s  lifecycle.", "The Navy and the Marine Corps staff the units that will operate and  maintain their unmanned systems by filling the required positions to the  extent possible based on the number of positions funded and the number  of trained and qualified personnel available to fill them. This staffing  process is managed by the Navy Personnel Command and in the Marine  Corps by the Deputy Commandant for Manpower and Reserve Affairs."], "subsections": []}]}, {"section_title": "The Navy and the Marine Corps Have Not Evaluated Using Federal Civilian Employees and Private Sector Contractors as Workforce Alternatives for Unmanned System Operators", "paragraphs": ["The Navy and the Marine Corps are in the process of rapidly growing  their portfolios of unmanned systems, but have not evaluated the use of  alternative workforces\u2014specifically the use of federal civilian employees  and private sector contractors as unmanned system operators. DOD  Directive 1100.4 states that authorities should consider all available  sources when determining workforce mix, including federal civilians and  contractors, and personnel shall be designated as federal civilians except  in enumerated circumstances. According to DOD Instruction 1100.22,  the initial steps in planning for personnel requirements include  determining categories of eligible personnel (e.g., military  servicemembers, federal civilian employees, or private sector  contractors). These determinations are based on whether activities to be  performed are \u201cmilitary essential\u201d (the activity must be performed by a  military servicemember), \u201cinherently governmental\u201d (the activity could be  performed by a military servicemember or a federal civilian employee), or  \u201ccommercial\u201d (the activity could be performed by military servicemembers,  federal civilians, or private sector contractors). Military servicemembers  and federal civilians must be considered before the services may  consider using contractors to perform a function.", "In the absence of workforce alternative analyses, the services have  decided to rely solely on military servicemembers as operator workforces  for all of their unmanned systems, including the eight systems we  reviewed in detail. For all eight case studies, Navy and Marine Corps  officials told us that their decisions to rely on servicemembers as  operators were based on the pre-existing force structure made up of  personnel who were already trained in related mission areas. For seven  of the eight selected systems, the officials stated that they did not  evaluate the use of federal civilians or contractors in their determinations  for using military personnel for their operator workforces. In the case of an  eighth system, the MQ-4 Triton UAS, the Navy evaluated using contractor  personnel, but did so without first considering the use of federal civilian  employees as DOD policy requires. In a 2009 analysis for the Triton, the  Navy concluded that comparisons between the cost-effectiveness of  using military personnel and federal civilian employees were beyond the  expertise of the working group that performed the analysis. Ultimately, the  Navy decided to use military personnel as Triton operators.", "According to senior-level officials from OUSD(P&R), there are concerns  within the department about the level of consideration the military  services have applied to workforce mix alternatives for unmanned system  operators. As a result, OUSD(P&R) and other entities from the Office of  the Secretary of Defense commissioned the Institute for Defense  Analyses to conduct a study, which was published in June 2016, on  alternative staffing strategies to enable DOD to accomplish UAS-related  missions more cost-effectively. The study found that staffing alternatives  exist for each service and could produce cost savings. According to the  Institute for Defense Analyses\u2019 report, the use of enlisted personnel for a  portion of the Navy\u2019s and the Air Forces\u2019 UAS operator workforces offers  the potential for savings, as could the use of limited duty officers or  warrant officers. The Institute for Defense Analyses also reported that  federal civilian employees of DOD could generate the most substantial  savings of the options studied if they were used in combination with  military servicemembers as UAS operators responsible for the launch and  recovery of air vehicles. OUSD(P&R) officials stated that this latter  approach would free up military servicemembers to fill key positions for  supporting military readiness in other areas of operations that are military  personnel essential, and better leverage the services\u2019 limited military  personnel end strengths.", "In September 2016, OUSD(P&R) issued a proposal for an additional  study of UAS staffing options that stated that the Department of the  Navy\u2019s workforce mix determination (i.e., relying on military  servicemembers as operators) is \u201cimmature and infeasible\u201d and that any  recommended approaches should also be applied to unmanned maritime  systems. OUSD(P&R) has also commissioned a study to clarify  circumstances in which military servicemembers should be considered  essential for certain positions, which is expected to be complete by the  end of fiscal year 2018. OUSD(P&R) officials stated that they plan to  continue their efforts to expand awareness of these studies and of the  available workforce mix alternatives for UAS operators with military  service officials.", "On the basis of our discussions with Navy and Marine Corps workforce  planners, key reasons for not evaluating workforce alternatives for  unmanned system operators were that planners did not believe it was  necessary, and they did not believe that federal civilian employees or  private sector contractors were viable workforce alternatives to military  servicemembers for such roles and functions. For example, officials cited  concerns that federal civilians cannot serve aboard Navy ships or provide  rapid deployment capability. However, officials from OUSD(P&R) told us  that these concerns are inaccurate, noting that federal civilian employees  have deployed on Navy ships. Further, we note that DOD\u2019s Expeditionary  Civilian Workforce comprises federal civilian employees across DOD  components who are available to deploy within 120 days of notice to meet  urgent requirements. DOD officials responsible for the Expeditionary  Civilian Workforce program stated that such personnel are intended to be  predictable, reliable, and effective so that the military services will source  them and the combatant commands can depend upon them.", "Further, service workforce planners stated that relevant service-level  guidance is unclear on when and how such personnel can and should be  considered for performing in operational roles and in deployable  positions. The Navy\u2019s and the Marine Corps\u2019 policies do not provide  details about the types of operational roles specific to a service, including  those related to unmanned system operators, that could be filled with  federal civilians or private sector contractors, nor do the policies provide  guidance on the limitations and benefits of using these personnel  sources, such as those identified in DOD-commissioned reports and our  prior work. For example, military personnel can be the most costly of the  three personnel categories and shortages exist in certain functions that  have been deemed military essential and are in high demand, such as  fighter pilots. On the other hand, federal civilians and private sector  contractors can be cost-effective and may augment military  servicemembers on a short-term basis if needed (see table 1).", "Federal internal controls standards emphasize the importance of having  clear, updated policies that align with an organization\u2019s mission and  goals. Officials from the Office of the Secretary of the Navy for  Manpower and Reserve Affairs agreed that the cited service policies do  not provide the sort of detail and clarity that could aid planners and  decision makers with determining eligible personnel categories for their  workforces and weighing the benefits and limitations thereof. Clarifying  their respective workforce planning policies could help workforce planners  better understand when, where, and how federal civilians or contractors  may serve in operational roles (e.g., from shore or from underway naval  vessels) and what the benefits and limitations are. The use of military  servicemembers, and not federal civilians or private sector contractors, as  unmanned system operators may indeed be the most appropriate and  cost-effective workforce option for the Navy and the Marine Corps.  However, the services will not have certainty about the basis for such  decisions without first clarifying workforce planning policies and then  applying the revised policies to evaluate the use of all personnel  resources available to them for future unmanned systems."], "subsections": []}, {"section_title": "The Navy and the Marine Corps Have Not Fully Developed Personnel Requirements for One of Eight Selected Unmanned Systems or Updated Related Policies and Goals", "paragraphs": ["The Navy and the Marine Corps have efforts underway to develop  requirements for operators, maintainers, and other support personnel  needed for selected unmanned systems. According to Navy information,  personnel requirements for three systems are sufficient and the  sufficiency of requirements for four other systems is yet undetermined.  However, the Navy and the Marine Corps have not updated personnel  requirements and the related cost estimate for the RQ-21 Blackjack UAS  based on deployment data. Furthermore, the Department of the Navy has  not fully evaluated and updated policies or clarified goals that may inform  future personnel requirements development and updates to requirements."], "subsections": [{"section_title": "The Navy and the Marine Corps Developed Personnel Requirements for Selected Unmanned Systems but Have Not Updated the RQ-21 Blackjack UAS Requirements and Cost Estimate", "paragraphs": ["The Navy and the Marine Corps have efforts underway to develop  requirements for operators, maintainers, and other support personnel  needed for selected unmanned systems, commensurate with each  system\u2019s maturity in DOD\u2019s acquisition process. The USVs associated  with the littoral combat ships, the Snakehead Large Displacement UUV,  and the MQ-25 Stingray UAS are in earlier phases of both acquisition and  personnel requirements development and, according to Navy information,  the precise number of required personnel will be determined and updated  as the systems progress through acquisition. On the other hand, the MK  18 UUVs, MQ-8 Fire Scout UAS, MQ-4 Triton UAS, and RQ-21 Blackjack  UAS have matured the furthest through DOD\u2019s acquisition process. The  Navy and the Marine Corps have identified personnel requirements, and  service officials told us they have reviewed their sufficiency as units have  trained and deployed with the systems. Although future modifications to  personnel requirements for the MK 18 UUVs, the MQ-8 Fire Scout, and  the MQ-4 Triton may be needed as their inventories and the pace of  deployments increase, Navy officials told us the numbers of operators are  appropriate at this time to meet mission objectives based on available  deployment data and feedback from operators.", "For the RQ-21 Blackjack UAS, however, Navy and Marine Corps  headquarters and command entities disagree with unit-level officials  about the sufficiency of the personnel requirements. Marine Corps UAS  squadrons have identified a requirements shortfall of 13 to 21 personnel  per detachment to support each RQ-21 Blackjack UAS. The UAS  squadrons have established that a total of 22 personnel are necessary to  form a detachment sufficiently sized to support operations with the UAS.  Marine Corps unit-level officials told us that this personnel requirement is  based on the numbers needed to conduct training and deployments since  the first Blackjack system was delivered in 2015, for which 22 to 30  personnel have been needed per detachment to meet mission  requirements. In contrast, higher level command and service  headquarters entities in the Navy and the Marine Corps have established  a requirement of nine Marine Corps personnel per detachment, including  three enlisted UAS operators and one UAS officer along with  maintenance and support personnel. Squadron officials stated to the  Navy and the Marine Corps in their written rebuttal of the 9-person  requirement that 13 more personnel are needed to support operations for  10 to 12 hours per day, or up to 24 hours a day for 10-day surges in  operations, and to comply with naval aviation maintenance procedures.  Marine Corps officials also told us that the squadrons believe these  additional personnel are essential for supporting the workload and levels  of supervision they believe are necessary to operate and maintain an RQ- 21 Blackjack UAS and avoid mishaps and damage to the aircraft during  recovery.", "DOD policy directs that personnel requirements should be driven by  workload and established at the minimum levels necessary to accomplish  mission and performance objectives. In addition, according to a Navy  instruction, personnel requirements must be validated as program  changes dictate and at a minimum annually, over a system\u2019s lifecycle to  determine if a personnel update is required. The Navy instruction also  identifies guidelines for average weekly working hours and personnel  availability for different tasks, which are key elements in the calculation of  personnel requirements. The instruction states that routinely exceeding  these guidelines to meet workloads should be avoided because it can  adversely affect unit morale, retention and safety.", "With respect to the RQ-21 Blackjack UAS, Marine Corps officials stated  that the concept of operations has changed for the service\u2019s vision of  employing the system to support Marine Expeditionary Units and that the  9-person detachment requirement was based on the outdated concept of  operations. As a result, Marine Corps officials told us that the personnel  requirements for the squadrons that operate them are too low to support  the workloads associated with the systems and service headquarters- level decision makers have not yet updated them based on the most  current and enduring concept of operations for the system. Marine Corps  officials stated that efforts are underway to review the differences in  personnel requirements deemed necessary by squadrons and  headquarters-level entities as training and deployments continue, which is  a positive step. However, according to the program office, the personnel  requirements were not changing at the time of this report. Until the Navy  and the Marine Corps update the personnel requirements for the RQ-21  Blackjack based on the most current and enduring concept of operations  and deployment data, the services will lack current information about the  number of operators needed for the squadrons that operate the RQ-21  Blackjack.", "In addition, the Navy and the Marine Corps have not updated the life  cycle cost estimate for the RQ-21 Blackjack UAS to include additional  personnel that Marine Corps squadrons have needed for current  operations and expect to need for future operations and deployments.  The program office estimated the total Marine Corps personnel cost for  the RQ-21 Blackjack based on detachments of 9 personnel each at  approximately $371 million over the program\u2019s expected 19-year life  cycle\u2014nearly 20 percent of the Marine Corps\u2019 life cycle cost for the  program. However, this estimate may be too low because Marine Corps  squadrons have reported that they need up to 21 more personnel per  detachment to support the workload associated with the system, as  discussed previously.", "DOD guidance requires that components determine a weapon system  program\u2019s life cycle cost by planning for the many factors needed to  support the system, including personnel. Decision makers use this  information to determine whether a new program is affordable and the  program\u2019s projected funding and personnel requirements are achievable.  In addition, the Office of Management and Budget\u2019s Capital Programming  Guide indicates that to keep the cost analyses for capital assets, such as  weapon systems, current, accurate, and valid, cost estimating should be  continuously updated based on the latest information available as  programs mature.", "The Navy and the Marine Corps have updated the life cycle cost estimate  for the RQ-21 Blackjack to account for changing assumptions, such as  the expected usage rate of spare parts for system repairs, but not for  additional Marine Corps personnel that squadrons have reportedly  needed for deployments. Without updating the cost estimate as  appropriate after updating personnel requirements, the Navy and the  Marine Corps may not have current information about the Marine Corps\u2019  RQ-21 Blackjack UAS lifecycle cost and affordability."], "subsections": []}, {"section_title": "The Department of the Navy Has Made Positive Steps but Has Not Fully Evaluated and Updated Policies or Clarified Goals for Informing Future Personnel Requirements", "paragraphs": [], "subsections": [{"section_title": "The Navy Has Modified Some UAS Policies but Has Not Fully Evaluated and Updated Policies to Inform Future Personnel Requirements", "paragraphs": ["The Department of the Navy has made some positive steps but has not  fully evaluated and updated its aviation policies for operation and  maintenance of certain UAS to inform the development of future  personnel requirements. According to officials from the Navy Manpower  Analysis Center, correctly determining personnel workload and the  related numbers of personnel required for operation and maintenance is  especially critical for UAS units because of the safety risks associated  with operating in shared airspaces and over populated areas. These  officials also stated that naval aviation policies\u2014which apply to manned  aircraft and UAS\u2014affect the workload of operators and maintenance  personnel and the numbers required to achieve a squadron\u2019s mission and  meet the standards prescribed in the policies. For example, the Naval Air  Training and Operating Procedures Standardization manual contains  provisions for pilot fatigue and hours they can fly compared with the hours  they must rest. Further, the Naval Aviation Maintenance Program  instruction prescribes standards for performing and documenting quality  assurance steps for maintenance tasks, among other things.", "Our review of these selected policies found that some naval aviation  standards have been modified to account for UAS separately from  manned aircraft, and to some extent between UAS of different sizes and  capabilities. The Naval Air Training and Operating Procedures  Standardization manual was updated in 2016 with a new chapter for UAS  policies and operations. The Naval Aviation Maintenance Program  instruction has been updated to specify that UAS of groups 3, 4, and 5  will always be governed by the policy similar to manned aircraft, with a  few exceptions, such as compass calibration.", "Notwithstanding these updates, Marine Corps headquarters- and unit- level officials told us that the policies have not been fully reviewed and  updated to account for differences in UAS of varying sizes and  capabilities, especially group 3 UAS, which are those systems weighing  55 to 1,320 pounds. According to these officials, applying certain  procedures and standards from these policies equally across different  sizes of UAS is problematic for group 3 UAS in particular, which includes  the RQ-21 Blackjack. The officials stated that the application of such  standards affects workloads and personnel levels in a way that prevents  squadrons from accomplishing their missions as efficiently as possible.  Specifically, they stated that upholding current naval aviation standards is  one key reason\u2014the other being changes to the concept of operations for  the RQ-21 Blackjack\u2014for having staffed up to 21 more personnel per  RQ-21 Blackjack detachment than the 9-person requirement discussed  earlier in this report.", "Applying naval aviation operating and maintenance standards equally  across different sizes of UAS may not align with the Marine Corps\u2019  concept of operations, which states that all UAS are intended to be  recovered by landing or capture even though they may be expendable.  Each RQ-21 Blackjack system includes five air vehicles, more than one of  which could be unavailable for assigned missions at the same time. For  example, Marine Corps officials told us that damage to RQ-21 Blackjack  air vehicles can be caused by weather, a deficiency with the air vehicle  itself, a crash landing, or a combination of factors, and up to three air  vehicles could be unavailable at a time. These officials told us that  holding the RQ-21 Blackjack to maintenance standards designed for  other non-expendable aircraft may not be efficient because their  application has a limited effect on mishap rates relative to the additional  personnel needed to uphold the standards. Moreover, in discussion  groups we held with Marine Corps UAS operator personnel, operators  mentioned that mishap investigations performed to existing standards  sideline operators from training pending the investigation\u2019s outcome.  Such standards also apply to the Navy\u2019s larger, non-expendable UAS like  the MQ-8 Fire Scout and the MQ-4 Triton.", "According to DOD Directive 1100.4, existing policies, procedures, and  structures should be periodically evaluated to ensure efficient and  effective use of personnel resources. Further, federal internal controls  standards emphasize the importance of having clear, updated policies  that align with an organization\u2019s mission and goals. Such goals could  include the Department of the Navy\u2019s goal to accelerate the development  and fielding of unmanned systems, and the Marine Corps\u2019 emphasis on  reducing operator workload and providing effective and efficient support  to mission execution and decision making. For example, the Marine  Corps\u2019 UAS concept of operations envisions a future in which one UAS  operator will perform multiple functions as opposed to the current  approach in which multiple Marines are necessary for a single mission.", "We found that the Navy has taken a preliminary step to further evaluate  what policy changes may be needed to support unmanned systems by  establishing an advisor position for this purpose within the Naval  Innovation Advisory Council. The advisor is responsible for making  recommendations to the Secretary of the Navy and other senior leaders  to streamline policy and remove roadblocks that hinder innovation, among  other things. In addition, the program manager for the RQ-21 Blackjack  and the Marine Corps\u2019 Deputy Commandant for Combat Development  and Integration are supporting a research effort through the Naval  Postgraduate School to improve the efficiency and effectiveness of naval  aviation maintenance procedures for group 3 UAS, according to a Marine  Corps official who is leading this effort.", "While these are positive steps, the time frames for making such policy  changes have not been identified. In addition, we did not find evidence  that the Navy has taken or planned related steps such as determining  whether future reductions to personnel requirements could be  accomplished, and any associated cost savings, or benefits to UAS  operations if policies were further updated to account for UAS of different  sizes and capabilities. The Navy has thus far prioritized the evaluation  and modification of acquisition-related policies to expedite the delivery of  unmanned systems to units, consistent with a 2015 memorandum from  the Secretary of the Navy. Unless the Navy and the Marine Corps  prioritize updating policies for operating and maintaining UAS of different  sizes and capabilities they may miss opportunities to effectively and  efficiently use personnel resources as system inventories grow."], "subsections": []}, {"section_title": "The Department of the Navy Lacks Clear Overarching Goals for Informing Future Unmanned System Personnel Requirements", "paragraphs": ["The Department of the Navy also lacks clear overarching goals for  informing future unmanned system personnel requirements and the level  of priority that should be assigned to these systems and the units that  operate them for the purpose of personnel resourcing decisions. While  DOD\u2019s Unmanned Systems Integrated Roadmap, FY2013-2038 stated  that the department must strive to reduce the number of personnel  required to operate and maintain its unmanned systems, the Department  of the Navy has not affirmed this goal or communicated any other  personnel goals for its unmanned system development. Department of  the Navy documents we reviewed for unmanned systems expressed  goals that are less directly related to personnel requirements, to include  expanding the range of operations and reducing costs and risks to  personnel safety and mission success. As previously mentioned, the  Navy has prioritized the evaluation and modification of acquisition-related  policies to expedite the delivery of unmanned systems to units, consistent  with a 2015 memorandum from the Secretary of the Navy.", "Navy and Marine Corps officials we spoke with who are responsible for  the RQ-21 Blackjack and other case study systems we reviewed told us  they did not believe the Department of the Navy has a clear and  overarching goal for unmanned system personnel requirements either  now or over the long-term. For example, officials stated that they did not  know if the Department of the Navy expects that fewer personnel should  be needed to operate and support unmanned systems than the numbers  of personnel required for other types of systems. Without such clarity  about personnel-related goals and priority levels, some officials  expressed concern that using the term \u201cunmanned\u201d systems conveys  expectations that technological advances can substantially reduce  personnel requirements in the near term, and that funding for related  personnel resources are a lower priority than those for other system  types. For example, a senior Navy personnel official told us that the  Navy\u2019s past goals and related efforts to reduce personnel required for its  ship crews\u2014an initiative referred to as optimal manning\u2014makes them  cautious about whether the same goals and efforts will be adopted for  unmanned systems and could produce similar, undesirable effects on  readiness.", "Navy officials at three commands also stated they are concerned that  resources for unmanned system personnel over future years may not  keep pace with the increasing inventories of the systems if a lower priority  is assigned to them in budget decisions in the absence of goals and  clarity over priorities. The Navy\u2019s Commander, Submarine Forces,  identified a personnel shortfall for supporting increased UUV inventories  as its second-highest personnel priority for the Navy\u2019s fiscal year 2019  budget deliberations to help underscore to headquarters entities the  importance of personnel resources for such systems. According to Navy  officials, the Navy has since authorized the requested addition of 66  personnel to the command to augment the sole unit that will operate the  Snakehead Large Displacement UUV along with increasing inventories of  other types of UUVs.", "Federal internal controls standards state that an agency\u2019s management  should define goals clearly to enable the identification of risk. By  applying this standard to the Department of the Navy\u2019s acquisition and  operations of unmanned systems, such goals could include whether or  not unmanned systems should require fewer personnel resources than  manned counterparts. Until the Secretary of the Navy clarifies  overarching goals for unmanned system personnel requirements and  resource priority levels and communicates them to requirements planners  and budget decision makers, the services will be hampered in developing  future personnel requirements and identifying risks as system inventories  grow and operations expand."], "subsections": []}]}]}, {"section_title": "The Navy and the Marine Corps Have Developed Staffing Approaches for Unmanned System Operators, but Face Challenges Meeting Personnel Requirements", "paragraphs": ["The Navy and the Marine Corps have developed staffing approaches to  select, train, and track unmanned systems operators and to retain some  UAS operators by offering special and incentive pays. However, both  services face challenges in ensuring that there are sufficient UAS  operators to meet personnel requirements. Yet neither service has  assessed the commercial drone industry to inform its retention approach  for UAS operators. Although Marine Corps UAS operators and officers  report low morale and career satisfaction, the Marine Corps has not fully  explored the use of human capital flexibilities to address these workforce  challenges."], "subsections": [{"section_title": "The Navy and the Marine Corps Have Developed Staffing Approaches to Select, Train, Track, and Retain Unmanned System Operators", "paragraphs": ["In the Navy, unmanned system operations are secondary skills for  personnel from related communities. For its UASs in groups 4 and 5, for  example, the Navy utilizes personnel from manned aviation communities  within the same mission areas, such as MH-60 helicopter pilots and  aircrew who are selected and then trained to operate the MQ-8 Fire Scout  UAS. Likewise, Navy officials stated that personnel from related  communities are selected and trained to operate USVs and UUVs. The  Navy is taking steps to track these trained operator personnel by using  secondary skill identification codes. According to Navy officials, these  identification codes will help personnel managers monitor the inventories  of personnel with unmanned system operator qualifications and provide a  temporary surge in capability if needed.", "In contrast to the Navy\u2019s approach, the Marine Corps has a primary  career field for operating UAS, including enlisted and officer personnel.  The Marine Corps replenishes its UAS operator and officer personnel  inventories by selecting from eligible applicant groups. To become UAS  operators, enlisted marines must achieve minimum test scores  comparable to those required for other high-skill occupations, such as  intelligence specialists. Eligible groups include new graduates of recruit  training and experienced marines who apply for a lateral transfer from  another occupational specialty. UAS officers take a separate test battery  and must attain the same minimum scores as other officers who are  selected for manned naval aviation training. They are selected from three  sources: new graduates of officer training; pilot or flight officer trainees  who do not complete their manned aircraft qualification; and experienced  officers seeking a transfer from another occupational specialty, including  pilots of manned aircraft. Following their selection, enlisted personnel and  officers must complete 5 months of Army UAS training courses or 6  months of Air Force UAS training courses, respectively. The Marine  Corps then assigns a primary occupation identification code to trained  personnel, which facilitates tracking their inventory to help meet  requirements.", "To help retain sufficient numbers of personnel to meet requirements, both  the Navy and the Marine Corps have offered special and incentive pays  to personnel who operate UASs. Navy personnel who serve as air vehicle  operators for the MQ-8 Fire Scout and MQ-4 Triton or as MQ-4 Triton  tactical coordinators are eligible for two types of aviation pays based on  their qualification as pilots or naval flight officers rather than their UAS  assignments\u2014monthly \u201cflight pay\u201d of up to $1,000 and aviation career  continuation pay bonuses of $75,000 for a new 5-year contract, as of  fiscal year 2017. Marine Corps UAS officers are not offered special and  incentive pays, but enlisted operators have been eligible for a selective  reenlistment or selective retention bonus since 1998, which ranged from  $8,250 up to $19,750 in fiscal year 2017 for qualified marines who  committed to an additional 4 years of service."], "subsections": []}, {"section_title": "The Navy and the Marine Corps Face Challenges Meeting UAS Operator Personnel Requirements and Have Not Assessed Commercial Competition to Inform Staffing Approaches", "paragraphs": [], "subsections": [{"section_title": "Navy Faces Challenges Meeting UAS Operator Personnel Requirements", "paragraphs": ["Based on our analysis, the Navy faces challenges with meeting personnel  requirements for UAS operators although, according to Navy officials, it is  too soon to know if personnel shortfalls may arise with unmanned  maritime systems because many programs are in early in stages of  development. Navy officials told us they have sufficient numbers of  personnel to operate the current inventory of UAS, which included 49  MQ-8 Fire Scouts and 2 MQ-4 Tritons as of September 2017. As UAS  inventories increase, the Navy has reported growing retention challenges  among its pilots and naval flight officers over the past 3 years as the U.S.  economy improves and commercial airline hiring increases. Navy aviation  and workforce planning officials told us this could affect the ability to fill  both its manned aviation and UAS personnel requirements.", "According to Navy proposals for the Navy\u2019s aviation retention bonus  program, future retention shortfalls are expected in the helicopter,  maritime patrol and reconnaissance, and E-2 Hawkeye communities,  among others. The first two communities are sources of personnel for the  MQ-8 Fire Scout and MQ-4 Triton and, according to Navy officials, the  latter community is being considered as a personnel source for the MQ- 25 Stingray. In particular, the Navy has reported concerns about the  future retention of its maritime patrol and reconnaissance pilots because  their experience directly translates to a commercial 737 aircraft.  Additionally, the Navy has reported shortages and significant retention  issues in meeting requirements for its reserve helicopter and maritime  patrol and reconnaissance pilots, communities that the Navy uses to  augment its available inventories of active duty pilots who also operate  UASs."], "subsections": []}, {"section_title": "The Marine Corps Has Not Met Personnel Requirements for UAS Operators", "paragraphs": ["Based on our analysis, the Marine Corps has experienced past shortfalls  of UAS operators through fiscal year 2017. Since the first fiscal year of  available data after the inception of the Marine Corps\u2019 career specialty for  UAS officers in 2012, personnel inventories have increased but fallen  short of requirements (see fig. 2).", "For fiscal years 2013 through 2017, the Marine Corps was substantially  short of captains, majors, and lieutenant colonels (i.e., O3, O4, and O5  pay grades) to serve as UAS officers. Consistent with this trend, the  Marine Corps has designated UAS officer inventories as unhealthy since  fiscal year 2013. Marine Corps officials told us these shortfalls could be  attributable to the annual growth in requirements for this new community.  They also stated that they do not currently anticipate retention challenges  for UAS officers. However, according to these officials, their predictions  about UAS officer retention for future years are based on data from other  longer established career fields as proxies until more UAS officer data are  available.", "For fiscal years 2007 through 2017, inventories of enlisted UAS operators  increased in all but one year, but fell short of requirements (see fig. 3) in  part due to substantial yearly shortfalls of certain junior enlisted  personnel. According to a Marine Corps official, the UAS operator  inventory will exceed requirements in fiscal year 2018 because the  requirement has decreased by about 60 percent from the previous year.", "However, the Marine Corps has leveraged lateral personnel transfers  from other occupations to meet approximately 33 to 89 percent of its  yearly retention quotas for first-term UAS operator reenlistments since  fiscal year 2010 (see fig. 3 above). A Marine Corps personnel planning  official told us that personnel transfers have been helpful and necessary  for meeting retention quotas. However, other Marine Corps officials told  us that heavily leveraging transfers shows that the UAS community is not  retaining its own experienced operators\u2014that is, UAS operators who  have attained proficiency and advanced skills and been deployed. For  more senior enlisted UAS operators eligible for a second reenlistment or  beyond, the Marine Corps has fallen short of its retention quotas for fiscal  years 2015 through 2017."], "subsections": []}, {"section_title": "The Navy and the Marine Corps Have Not Assessed Commercial Supply, Demand, and Wages to Inform Staffing Approaches for UAS Operator Requirements", "paragraphs": ["Despite the current and future challenges previously discussed, Navy and  Marine Corps officials told us that the services have not used information  about the commercial drone industry to inform their use of special and  incentive pays because they did not believe doing so was needed. Marine  Corps officials told us that they have not observed a retention problem for  UAS operators and officers and unless they miss retention goals in 3  consecutive years they will not consider changing financial incentives\u2014 i.e., increasing bonuses to enlisted UAS operators or offering special and  incentive pays to UAS officers. Until such time, pilots who are selected for  the UAS career field are informed by the Marine Corps that their flight pay  and aviation continuation pay bonus eligibility will be terminated. Another  Marine Corps official with knowledge of the UAS community told us that  studying the commercial drone industry and the potential effect on  retention is timely because the services must program for the necessary  resources for financial incentives 2 years in advance of the budget year.  They stated that after 3 years of missing retention goals the problem  could persist for another 2 years before additional funds were available to  increase retention bonuses given the programming and budget cycle.", "Navy workforce planning officials acknowledged that they are concerned  about increasing difficulty in providing sufficient numbers of mid-career  pilots to meet the Navy\u2019s aviation requirements over future years, which  includes UAS operator requirements. In addition to competition from  commercial airlines, Navy officials told us a growing labor market in the  commercial drone industry could exacerbate pilot retention challenges for  those with secondary qualifications to operate UAS. However, they added  that little is known about the demand and available wages in that industry.", "Likewise, Marine Corps officials told us that past challenges in meeting  requirements and retaining experienced operators could persist in future  years, and hiring in the commercial drone industry could affect retention.  These officials stated that the Air Force could also pose a future retention  challenge for the Marine Corps\u2019 UAS operator community. The Air Force  offers the potential for higher pay to its UAS operators than the Marine  Corps along with larger and more capable types of UAS. The Air Force  reported to Congress in July 2017 that its projections of enlisted UAS  operator retention indicate that a bonus may be necessary as soon as  2022. During discussion groups we held with Marine Corps UAS  operators, enlisted operators cited the potential for higher pay for their  skills outside the Marine Corps as a factor that has influenced  reenlistment decisions among them or their peers. Operators in one  group told us that three of their five RQ-21 Blackjack instructors were  former enlisted operators from their squadron who secured employment  with the RQ-21 Blackjack\u2019s manufacturer as private sector contractors.", "DOD\u2019s 2012 Eleventh Quadrennial Review of Military Compensation  determined that organizations should assess civilian supply and demand  and civilian wages to develop the most cost effective special and  incentive pay strategies. We reported in February 2017 that conducting  such an assessment is a key principle of effective human capital  management by which to evaluate DOD\u2019s special and incentive pay  programs. Our report also found that the services do conduct such  assessments for aviation, nuclear propulsion, and cybersecurity  occupations. Without assessing the commercial drone industry and  using such information to inform retention approaches, including the use  of special and incentive pays, the Navy and the Marine Corps may not  know if their approaches are effectively tailored to ensure a sufficient  number of UAS operators are available to meet future requirements."], "subsections": []}]}, {"section_title": "Marine Corps UAS Operators and Officers Report Low Morale and Career Satisfaction, but the Marine Corps Has Not Fully Examined Human Capital Flexibilities to Address These Issues", "paragraphs": ["The Marine Corps has experienced workforce challenges with its career  field for UAS officers and enlisted operators, including diminished morale  and career satisfaction and short periods of time in which operators are  trained and available to UAS squadrons before their contract or squadron  assignment ends. Results of a 2015 Marine Corps survey of UAS officers  showed that about 65 percent of captains and first lieutenants who  responded were dissatisfied with their career and about 75 percent of that  group cited low job satisfaction as influencing their decision to leave the  Marine Corps.", "UAS officers and enlisted operators in all eight discussion groups we held  told us about factors that enhance their morale, including the  opportunities to learn and to shape their community and their positive  deployment experiences, but they also discussed factors that negatively  affect their job satisfaction. UAS operators in all enlisted groups cited the  frequency of personnel turnover in the squadron as a source of frustration  in developing and retaining expertise with the RQ-21 Blackjack. Officers  told us they feel like a lower tier priority in Marine Corps aviation for  reasons ranging from the lack of a uniform insignia device akin to those  awarded to manned aircraft pilots (i.e., pilot \u201cwings\u201d), to confusion over  the strategy and missions for Marine Corps UAS now and in future years.  UAS officers also told us they desired assignments to positions outside  the UAS squadrons that they believed would enhance their leadership  ability, but such positions had not consistently been available to them  because they were needed to fill squadron billets. For example, the  Marine Corps has limited or restricted UAS officers from applying for in- residence professional military education opportunities in past years  because they could not be diverted from billets requiring their  qualifications due to inventory shortages.", "UAS operators and officers spend approximately 2 years or more of their  3-year squadron assignment awaiting and completing training to attain  proficiency and advanced skills with the RQ-21 Blackjack UAS. After  training and deployment, they may have about 4 months or fewer to  impart their knowledge and deployment experience to others in the  squadron before they reach the end of their squadron assignment, the  end of their service obligation, or both (see fig. 4).", "According to Marine Corps officials we spoke with, the loss of  experienced UAS operators who do not reenlist and are replaced by  lateral transfers from other careers results in diminished UAS expertise  among mid-career enlisted members in the squadrons. These officials  told us that personnel who transfer to the UAS career to replace  experienced operators must spend at least 2 years in training for initial  qualification and then proficiency on the RQ-21 Blackjack. Moreover,  Marine Corps officials told us that a portion of the UAS operators who  reenlist past their first contract must fulfill 3-year special duty assignments  outside the UAS community. They stated that this exacerbates the  diminished squadron expertise and is the reason that some operators  leave rather than reenlist in the Marine Corps.", "Although the Marine Corps has taken steps to address challenges with  UAS operator inventories by using special and incentive pays for enlisted  operators and limiting opportunities that would divert officers away from  squadrons, as previously discussed, it has not fully explored flexibilities  for managing its UAS career fields more effectively to help meet  requirements. Employing flexibilities to improve job satisfaction could help  improve retention of experienced personnel in an already-challenged  environment. For example, the Marine Corps has not authorized available  aviation special and incentives pays for UAS officers in spite of  challenges meeting personnel requirements. As mentioned previously,  pilots who are selected for the UAS career field are informed by the  Marine Corps that their flight pay and aviation continuation pay bonus  eligibility will be terminated. The Marine Corps has incentivized enlisted  personnel from certain specialties, such as aircraft maintenance, to both  reenlist and to remain in a specified unit as recently as fiscal year 2018,  but has not offered this opportunity to UAS operators. By considering  longer UAS operator contracts, the Marine Corps could increase the  availability of experienced operators to squadrons, where they can pass  on their knowledge and skills to junior enlisted personnel.", "Our prior work has identified that a key principle for effective strategic  human capital planning is that organizations should ensure that  flexibilities are part of the overall human capital strategy to ensure  effective workforce planning. According to Marine Corps officials, they  have not taken additional steps to address workforce challenges in part  because inventories of UAS operators and officers have grown and  squadrons have generally attained readiness goals and accomplished  their deployment missions despite personnel shortages. Further, these  officials stated that low morale and career satisfaction could be partially  caused by the current transition from the RQ-7 Shadow UAS to the RQ- 21 Blackjack, and to the relative newness of the officer career field.  Without exploring these or other human capital flexibilities to improve  morale and career satisfaction and maximize operators\u2019 availability to  squadrons, the Marine Corps may face continued challenges in meeting  personnel requirements and the growing demands of expanding  operations and increasing UAS inventories. Moreover, as the Marine  Corps budgets for additional resources to establish its own school for  UAS operator training, flexibilities that could improve retention and  maximize operator availability could also help ensure the greatest return  on its investment in the UAS operator workforce."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["For almost 20 years we have identified strategic management of human  capital as a high-risk area across government in part because of  persistent gaps in mission critical skills. With the Navy\u2019s commitment to  accelerate the delivery of unmanned systems to the fleet and its budget of  nearly $10 billion to develop and procure those systems in fiscal years  2018 through 2022, having sufficient personnel with the appropriate skills  at the right time will be critical. To that end, without additional actions to  improve their workforce planning the Navy and the Marine Corps may not  be positioned to support their expanding unmanned systems operations.  Specifically, lacking clear workforce planning policies, decision makers  may not know when they should consider using federal civilian employees  and private sector contractors as alternatives in determining the most  appropriate and cost-effective workforces for their unmanned system  operators.", "With respect to personnel requirements development, until the Marine  Corps\u2019 requirements and related cost estimates for the RQ-21 Blackjack  UAS are updated, the services will lack current information about the  number of operators needed and their affordability. Further, unless the  Navy and the Marine Corps prioritize policy updates for operating and  maintaining UAS of different sizes and capabilities they may miss  opportunities to effectively and efficiently use personnel resources as  system inventories grow. Without assessing the commercial drone  industry and using that information to inform retention approaches, the  Navy and Marine Corps may not know whether special and incentive  pays are effectively tailored to ensure a sufficient number of UAS  operators are available to meet future requirements. The Marine Corps, in  particular, may continue to face challenges in meeting requirements and  growing operational demands until it examines additional flexibilities to  improve morale and career satisfaction among its UAS operator  workforce and maximize the availability of operators serving in its  squadrons. Overall, unmanned systems are key to future Navy and  Marine Corps operations, but for these systems to be effective the  services need to ensure that they take the necessary actions to provide  sufficient personnel."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following ten recommendations to DOD. The  Secretary of the Navy ensures that:", "The Chief of Naval Operations should clarify workforce planning  policies to identify circumstances in which federal civilian employees  and private sector contractors may serve in operational roles and  what the benefits and limitations are of using federal civilians and  private sector contractors as alternative workforces.  (Recommendation 1)", "The Chief of Naval Operations should, after clarifying workforce  planning policies, apply the revised policies to evaluate the use of  alternative workforces (including federal civilian employees and  private sector contractors) for future unmanned system operators.  (Recommendation 2)", "The Commandant of the Marine Corps should clarify workforce  planning policies to identify circumstances in which federal civilian  employees and private sector contractors may serve in operational  roles and what the benefits and limitations are of using federal  civilians and private sector contractors as alternative workforces.  (Recommendation 3)", "The Commandant of the Marine Corps should, after clarifying  workforce planning policies, apply the revised policies to evaluate the  use of alternative workforces (including federal civilian employees and  private sector contractors) for future unmanned system operators.  (Recommendation 4)", "The Commander, Naval Air Systems Command, in coordination with  the Deputy Commandant of the Marine Corps for Combat  Development and Integration, should update the Marine Corps  personnel requirements associated with the RQ-21 Blackjack UAS  based on the most current and enduring concept of operations and  utilize the updated requirements in planning for UAS squadron  personnel requirements. (Recommendation 5)", "The Commander, Naval Air Systems Command, should update the  life cycle cost estimate for the RQ-21 Blackjack UAS to make  adjustments as appropriate after updating the personnel requirements  for the system. (Recommendation 6)", "The Deputy Chief of Naval Operations for Warfare Systems (N9), in  coordination with the Deputy Commandant for Aviation, should  prioritize continued efforts to fully evaluate policies for operating and  maintaining UAS of different sizes and capabilities, such as group 3  UAS\u2014to include establishing completion time frames, determining  whether reductions to personnel requirements could be accomplished,  and identifying any associated cost savings and the benefits to the  UAS squadrons\u2019 ability to complete missions\u2014and update such  policies as needed. (Recommendation 7)", "The Secretary of the Navy should clarify overarching goals for  unmanned systems\u2019 personnel requirements, including related priority  levels for resourcing purposes, and communicate them to  requirements planners and budget decision makers.  (Recommendation 8)", "The Chief of Naval Personnel and the Deputy Commandant for  Manpower and Reserve Affairs should assess civilian supply,  demand, and wages in the commercial drone industry and use the  results to inform retention approaches, including the use of special  and incentive pays for UAS operators. (Recommendation 9)", "The Deputy Commandant for Aviation and the Deputy Commandant  for Manpower and Reserve Affairs should examine the use of  additional human capital flexibilities that could improve the career  satisfaction and retention of experienced UAS operators and  maximize their availability to squadrons. Such flexibilities could  include authorizing available special and incentive pays; permitting  UAS operators to extend their enlistments to serve longer within  squadrons; ensuring the availability of career- and promotion- enhancing opportunities for professional military education;  considering the use of a potential insignia device for operators; or  extending UAS operator contract lengths. (Recommendation 10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix III, DOD concurred with eight  of our recommendations and partially concurred with two  recommendations. DOD also provided technical comments on the draft  report, which we incorporated as appropriate.", "With regard to our recommendation to assess civilian supply, demand,  and wages in the commercial drone industry and use the results to inform  retention approaches, DOD partially concurred. DOD stated that it will  assess competitive markets, both externally and internally, and then  analyze the usage of incentive pays for UAS operators when retention  rates and inventory levels of personnel display decreasing trends. DOD  added that such analysis would be premature if conducted before initial  operational capability is attained for each UAS because retention  behaviors and air crew dynamics are not yet established. As noted in our  report, the Navy and the Marine Corps have each attained initial  operational capability with one UAS (i.e., the MQ-8 Fire Scout B-variant  and the RQ-21 Blackjack) and quantities of these and other UAS are  expected to increase in future years. Additionally, the Marine Corps has  designated UAS officer inventories as unhealthy since fiscal year 2013.  Accordingly, we continue to believe that conducting such assessments  and using the results are timely and important steps to ensure enough  personnel to meet future operator requirements.", "DOD partially concurred with our recommendation to examine the use of  additional human capital flexibilities that could improve the career  satisfaction and retention of experienced UAS operators. DOD stated that  human capital flexibilities are constantly under review. Further, DOD  stated that the UAS community is still in its infancy, but as it continues to  grow and become healthier, assignment opportunities and flexibilities will  become more prevalent and special and incentive pays will be examined  as retention rates dictate. Such efforts would meet the intent of our  recommendation if the opportunities and flexibilities DOD considers  include other examples cited in our recommendation. That is, we continue  to believe that DOD should also consider permitting UAS operators to  extend their enlistments to serve longer within squadrons; ensuring the  availability of career- and promotion-enhancing opportunities for  professional military education; considering the use of a potential insignia  device for operators; and extending UAS operator contract lengths.", "We are providing copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Navy, and the  Commandant of the Marine Corps. 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) 512-3604 or farrellb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Characteristics of Selected Navy and Marine Corps Unmanned Systems", "paragraphs": [], "subsections": [{"section_title": "Navy MQ-8 Fire Scout Unmanned Aerial System", "paragraphs": ["The Navy\u2019s MQ-8 Fire Scout unmanned aerial system (UAS) (B and C  variants) is intended to provide real-time imagery and data in support of  intelligence, surveillance, and reconnaissance missions for surface, anti- submarine, and mine warfare. The system is part of the surface warfare  and mine countermeasures mission packages of the littoral combat ships.  The MQ-8 system comprises one or more air vehicles with sensors, a  control station, and ship equipment to aid in vertical launch and recovery.  According to the program office, the MQ-8C has 90 percent commonality  with the previously developed MQ-8B. The primary differences between  the two are structural modifications to accommodate the MQ- 8C\u2019s larger  airframe and fuel system."], "subsections": [{"section_title": "Delivery Status and Schedule", "paragraphs": ["The manufacturer has delivered 49 aircraft to the Navy as of September  2017 (including 30 B variants and 19 C variants), and 11 more aircraft (C  variants) are scheduled to be delivered by fiscal year 2019.", "The Navy attained initial operational capability with the B variant of the  Fire Scout in fiscal year 2014, and plans to attain initial operational  capability with the C variant in December 2018, depending on the  availability of the littoral combat ship from which it deploys."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": ["A composite aviation detachment embarked on a littoral combat ship  consists of up to 24 personnel, including operator air crews equipped with  one MH-60 helicopter and one MQ-8 Fire Scout UAS. An air crew  consists of two personnel: one air vehicle operator and one mission  payload operator. There is no additive personnel requirement associated  with operators of the MQ-8 Fire Scout because these personnel already  reside within existing expeditionary MH-60 helicopter squadron  detachments. The littoral combat ships\u2019 crew berthing constraints was a  key limiting factor in creating the personnel requirements for the number  of air crew in a single composite aviation detachment.", "Navy officials told us that they believe, based on deployment experiences  and available data, that the personnel requirements for the MQ-8 Fire  Scout are correct, although they stated that the operational tempo has  been very limited to date due to problems with the littoral combat ship that  have reduced the number of deployments."], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["MH-60 helicopter pilots and enlisted aircrewmen from expeditionary  helicopter squadrons attend 8 and 6 weeks, respectively, of MQ-8 Fire  Scout UAS training. During deployments, these personnel serve dual  roles as air crew of both the MH-60 and the MQ-8 Fire Scout.", "MQ-8 Fire Scout air vehicle operators hold primary career designators as  Navy helicopter pilots, and after their UAS training they are identified with  an additional qualification designator of DY8. According to a senior Navy  official, private sector contractors trained 126 air vehicle operators prior to  February 2015, and since then Navy has trained another 91 air vehicle  operators as of May 2017.", "MQ-8 Fire Scout mission payload operators have an enlisted rating as a  helicopter aircrewman, and after their UAS training they are identified with  a Navy enlisted classification code of 8367. According to a senior Navy  official, private sector contractors trained 148 mission payload operators  through March 2017, and the Navy has trained another 68 mission  payload operators since February 2017 (as of May 2017).", "According to Navy officials, they do not expect that the approach for  staffing MQ-8 Fire Scout aircrew to negatively affect accessions or  retention in the helicopter community, even when operational tempo  increases, but they are continuing to monitor feedback from deployments."], "subsections": []}]}, {"section_title": "Navy MQ-4 Triton UAS", "paragraphs": ["The Navy\u2019s MQ-4 Triton UAS is intended to provide persistent maritime  intelligence, surveillance, and reconnaissance data collection and  dissemination capability in an operating area of a 2,000 nautical miles  radius. Based on the Air Force\u2019s RQ-4B Global Hawk air vehicle, the MQ- 4 Triton was formerly known as the Broad Area Maritime Surveillance  UAS. Triton UAS sensors can provide detection, classification, tracking,  and identification of maritime targets. Additionally, the MQ-4 Triton is  designed with a communications relay capability that can link dispersed  forces in the theater of operation. The system will cue other Navy assets  for further situational investigation and/or attack, and will also provide a  battle damage assessment of the area of interest. Tactical-level data  analysis will occur in real-time at shore-based mission control systems via  satellite communications.", "The MQ-4 Triton is planned to operate from five shore-based sites  worldwide as part of the Navy\u2019s family of maritime patrol and  reconnaissance systems. From these sites, five MQ-4 Triton air vehicles  will be airborne concurrently, 24 hours a day and 7 days a week (see  fig.6).", "As a precursor to the MQ-4 Triton, the Navy\u2019s RQ-4A Broad Area  Maritime Surveillance System-Demonstrator has been continuously  deployed to the U.S. Central Command area since January 2009. All four  of those planned demonstrator systems have been delivered to the Navy."], "subsections": [{"section_title": "Planned Quantity", "paragraphs": ["The manufacturer has delivered 2 systems to the Navy as of September  2017 and the Navy expects 10 more systems to be delivered through  fiscal year 2021. At the time of this report, no air vehicles had yet been  delivered to the Navy\u2019s first unmanned patrol squadron; the 2 systems  were being utilized for testing.", "The Navy has estimated that it will attain initial operational capability with  the MQ-4 Triton UAS in 2021."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": ["One of the Navy\u2019s two planned unmanned patrol squadrons (referred to  as VUPs) will have 30 mission crews, the other squadron will have 20  mission crews, and both squadrons will have additional launch and  recovery operators. A MQ-4 Triton mission crew will consist of four  personnel: one air vehicle operator, one tactical coordinator, and two  mission payload operators. Future upgrades to the MQ-4 Triton will  require a fifth mission crew member to fill a signals intelligence capability  operator position. The number of required mission crew members was  based in part upon a model that Naval Air Systems Command utilizes to  project the number of air crew personnel to support a system.", "According to Navy officials, the additional personnel requirements for the  Navy associated with the establishment of Triton squadrons are offset by  realignments of the Maritime Patrol and Reconnaissance Force, including  the retirement of the P-3 Orion aircraft and reduction of associated  personnel requirements.", "Navy officials told us that they believe, based in part on experience with  the Broad Area Maritime Surveillance - Demonstrator, that the personnel  requirements for the MQ-4 Triton are adequate, although they stated that  they will continue to review and monitor the requirements for sufficiency in  future years as the Navy attains steady state operations with the system\u2019s  five continuous orbits."], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["The Navy\u2019s approach for staffing operator aircrew for the MQ-4 Triton is  to utilize a portion of its naval aviators, naval flight officers, and enlisted  aircrew whose qualification is on a maritime patrol and reconnaissance  force aircraft (e.g., the P-8A Poseidon) and assign them to an unmanned  patrol squadron following a sea tour with their primary aircraft. According  to Navy officials, the career path for all its aviators generally includes a  number of shore duty options following a first deployment. The unmanned  patrol squadron assignments will be an additional option for aviators\u2019 first  shore tour. The Navy will provide Triton aircrew members with  approximately 3 months of training to qualify on the UAS in connection  with their unmanned patrol squadron assignment. Air vehicle operators  and tactical coordinators who are trained and qualified on the MQ-4 Triton  will be identified with an additional qualification designator of DC5.  Trained and qualified mission payload operators will be identified with a  Navy enlisted classification of 7828.", "According to Navy officials, they do not expect the approach for staffing  MQ-4 Triton aircrew to affect accessions or retention in the maritime  patrol and reconnaissance community at this time, but it is too soon to be  certain. In the meantime, the officials stated that they will continue to  monitor personnel feedback and reassure personnel about the career  value of experience in a MQ-4 Triton squadron. In addition, the Navy  plans to leverage members of its reserve component to augment the pool  of available personnel who can be assigned to its VUP squadrons."], "subsections": []}]}, {"section_title": "Navy MQ-25 Stingray UAS", "paragraphs": ["The Navy\u2019s MQ-25 Stingray UAS will be the first UAS to operate from  aircraft carriers. According to Navy officials, the MQ-25 Stingray\u2019s primary  mission will be to provide a robust refueling capability to extend the range  and reach of the carrier air wing and reduce the need for F/A-18E/F  Super Hornets to perform refueling missions, freeing them for strike  missions, and preserving service life. As a secondary mission, the MQ-25  Stingray will also provide an intelligence, surveillance, and  reconnaissance capability. The Navy previously referred to the MQ-25  Stingray as the Carrier Based Aerial Refueling System, a program that  followed a restructuring of the former Unmanned Carrier-Launched  Airborne Surveillance and Strike program."], "subsections": [{"section_title": "Planned Quantity", "paragraphs": ["The Navy\u2019s initial plan is to purchase 72 MQ-25 Stingray air vehicles."], "subsections": []}, {"section_title": "Delivery Status and Schedule", "paragraphs": ["No systems have been delivered and a delivery schedule has not been  established because the system is still in an early stage of DOD\u2019s  acquisition process, with a contract award for system development  scheduled for the fourth quarter of fiscal year 2018.", "The Navy has estimated attaining initial operational capability with the  system by the mid-2020s time frame."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": [], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["The Navy has not yet developed a staffing approach for MQ-25 Stingray  operators. According to Navy officials involved in establishing plans and  requirements for the system, they are considering different options for the  systems\u2019 operators, including using enlsited personnel or an approach  similar to that used for the MQ-8 Fire Scout operators in which a  population of aviation personnel, including pilots, would be identified from  a related, existing aircraft community\u2014such as the E-2 Hawkeye  aircraft\u2014and provided with UAS qualification training if they were  assigned to operate the MQ-25 Stingray in a composite squadron along  with their other primary aircraft. According to these officials, at the  direction of the Commander of Naval Air Forces, they have considered  establishing a new UAS operator career field and surveyed midshipmen  at the U.S. Naval Academy to gauge their interest in such a career."], "subsections": []}]}, {"section_title": "Marine Corps RQ-21 Blackjack UAS", "paragraphs": ["The Marine Corps\u2019 RQ-21 Blackjack UAS provides units with a dedicated  intelligence, surveillance, and reconnaissance capability for tactical  commanders in real time by providing actionable intelligence and  communications relay for 12-hour continuous operations per day, with a  short surge capability of 24-hours of continuous operations for a 10-day  period, during any 30-day cycle.", "An RQ-21 Blackjack system consists of five air vehicles, two ground  control stations, multi-mission payloads, one launcher, one recovery  system, data links, and support systems. Standard payloads include  electro-optical and infrared cameras, communications relay payload, and  automatic identification system. Future upgraded capabilities may include  command and control integration, weapons integration, heavy fuel  engine, laser designator, frequency agile communications relay, digital  common data link, and cyclic refresh of the electro-optical and infrared  cameras.", "The RQ-21 Blackjack can be launched and recovered from land or from  air-capable ships, including L-class ships (e.g., amphibious transport  docks) (see fig. 7)."], "subsections": [{"section_title": "Delivery Status and Schedule", "paragraphs": ["The manufacturer has delivered 11 systems to the Marine Corps as of  September 2017 and the Marine Corps expects the other 21 planned  systems to be delivered through 2022.", "The Marine Corps attained initial operational capability with the RQ-21  Blackjack in 2016."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": ["The Marine Corps has three active duty unmanned aerial vehicle  squadrons (VMU 1, 2, and 3) and one reserve VMU squadron (VMU 4)  that will operate the RQ-21 Blackjack UAS. Each active duty VMU will  contain nine detachments and each detachment will comprise 9  personnel\u2014including 1 UAS officer and 3 enlisted UAS operators\u2014and  one RQ-21 Blackjack UAS. The Marine Corps Reserve\u2019s VMU 4 will  contain three detachments.", "The Marine Corps\u2019 does not distinguish between requirements for air  vehicle operators and mission payload operators for the RQ-21 Blackjack  because those functions are performed by the same operator."], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["The Marine Corps has a primary career field for operating UAS, including  enlisted UAS operators and UAS officers. The Marine Corps replenishes  its UAS operator and officer personnel inventories by selecting from  eligible applicant groups. For enlisted UAS operators, eligible groups  include new graduates of recruit training and experienced marines who  apply for a lateral transfer from another occupational specialty. UAS  officers are selected from three sources: new graduates of officer training;  pilot or flight officer trainees who do not complete their manned aircraft  qualification; and experienced officers seeking a transfer from another  occupational specialty, including pilots of manned aircraft.", "The Marine Corps requires certain minimum test scores before marines  can be selected for UAS training. Enlisted marines must achieve  minimum test scores comparable to those required for other high-skill  occupations, such as intelligence specialists. Officers take a separate  test battery and must attain the same minimum scores as other officers  who are selected for manned naval aviation training. Following their  selection for UAS training, enlisted personnel must complete 5 months of  Army UAS training courses to attain their military occupational specialty  as a UAS operator. Officers attend 6 months of Air Force training courses  to attain their occupational specialty. The Marine Corps then assigns a  primary occupation identification code to trained personnel, which is 7314  for enlisted UAS operators or 7315 for UAS officers.", "The Marine Corps assigns enlisted personnel and officers to one of its  UAS squadrons after they attain their occupational specialty, where they  continue their UAS training to attain and maintain proficiency and  advanced qualifications. As discussed earlier in this report, Marine Corps  UAS squadrons believe that an RQ-21 Blackjack detachment requirement  of 9 personnel is not sufficient to meet their workloads. Since 2015,  squadrons have staffed their deploying detachments with up to 30  personnel each to support the workload and levels of supervision they  believe are necessary to operate and maintain an RQ-21 Blackjack UAS  and avoid mishaps and damage to the aircraft during recovery to meet  operating and maintenance standards, among other reasons."], "subsections": []}]}, {"section_title": "Navy Mine Countermeasures Unmanned Surface Vehicle and Unmanned Influence Sweep System", "paragraphs": ["The Navy\u2019s Mine Countermeasures Unmanned Surface Vehicle (USV)  and Unmanned Influence Sweep System will be part of the mine  countermeasures mission package of the Navy\u2019s littoral combat ships  (see fig. 8).", "The Mine Countermeasures USV will tow a sonar payload for mine  hunting. The Unmanned Influence Sweep System will use the same USV  platform to tow an acoustic and magnetic influence sweep payload to  clear bottom and moored mines. Both systems will be launched and  recovered from littoral combat ships."], "subsections": [{"section_title": "Planned Quantity", "paragraphs": ["For the Mine Countermeasures USV, the projected inventory is 2 systems  per mine countermeasures mission package for a total of 48 systems, in  addition to systems needed for training.", "For the Unmanned Influence Sweep System, the projected inventory is 1  per mine countermeasures mission package for a total of 24 payloads, in  addition to payloads for training."], "subsections": []}, {"section_title": "Delivery Status and Schedule", "paragraphs": ["As of September 2017, two Mine Countermeasures USVs were under  construction, but neither had been delivered to the Navy. The Navy plans  to attain initial operational capability with the Mine Countermeasures  USVs in fiscal year 2021.", "As of September 2017, one Unmanned Influence Sweep System had  been constructed and the Navy expects it to be delivered for testing by  fiscal year 2018. The Navy plans to attain initial operational capability with  the Unmanned Influence Sweep System in fiscal year 2019."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": ["The Mine Countermeasures USV and Unmanned Influence Sweep  System will be operated by littoral combat ship mine countermeasures  mission package crews of 20 personnel each. The precise number of  operators per system will be determined and updated as the systems  progress through acquisition."], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["According to Navy officials, USV operators associated with the littoral  combat ships\u2019 mine countermeasures mission package crews will not be  directly accessed and recruited to such positions. Instead, these officials  stated that enlisted sailors from related primary career ratings will be  assigned to the crews and trained on the USVs along with other systems  as part of a longer training pipeline. Upon their completion of training, the  Navy plans to identify them with a Navy enlisted classification code of  1206, Littoral Combat Ship Mine Warfare Mission Package Specialist."], "subsections": []}]}, {"section_title": "Navy MK 18 Unmanned Underwater Vehicle Family of Systems", "paragraphs": ["The Navy\u2019s MK 18 Unmanned Underwater Vehicle (UUV) family of  systems consists of the MK 18 \u201cMod 1\u201d Swordfish UUV and the MK 18  \u201cMod 2\u201d Kingfish UUV. The MK 18 Mod 1 Swordfish is a man-portable  system that performs autonomous, low-visibility exploration and  reconnaissance missions in support of amphibious landings and mine  countermeasures operations, among other things. The MK 18 Mod 2  Kingfish UUV is a larger vehicle with increased endurance and depth, and  more advanced sensors to improve mine countermeasures capabilities.  The Mod 1 Swordfish and the Mod 2 Kingfish operate in very shallow  water and shallow water zones, and will be tactically integrated to enable  detection of moored and bottom mines at increased standoff and reduced  risk to operators and systems that would otherwise be operating in the  minefield.", "The MK 18 systems can be launched and recovered from shore, from  rigid hull inflatable boats or from ships (see fig. 9).  41 (25 Mod 1 Swordfish and 16 Mod 2 Kingfish)"], "subsections": [{"section_title": "Delivery Status and Schedule", "paragraphs": ["The manufacturer has delivered 33 systems (21 Mod 1 Swordfish and 12  Mod 2 Kingfish) to the Navy as of fiscal year 2017. The Navy attained full  operational capability with the first increment of the Mod 1 Swordfish in  fiscal year 2007 and expects to attain initial operational capability with the  first increment of the Mod 2 Kingfish in fiscal year 2019."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": ["MK 18 UUVs are operated by platoons within three different Navy units:  Explosive Ordinance Disposal Mobile Unit One, Mobile Diving and  Salvage Unit Two, and the Naval Oceanography Mine Warfare Center.  According to Navy officials, the establishment of such platoons did not  generate an additive personnel requirement to those units. The minimal  personnel requirement for MK 18 operations includes three UUV  operators and a UUV supervisor, along with an officer-in-charge, a boat  coxswain, and a boat engineer."], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["According to Navy officials, the Navy does not directly access or recruit  personnel to fill its requirements for operators of the MK 18 UUVs. These  officials stated that, instead, enlisted sailors from related primary career  ratings, including special warfare boat operator and aerographer\u2019s mate  ratings, can be assigned to a unit that operates the UUVs either on their  first tour or later in their career on a subsequent assignment. Navy  officials also stated that Navy Expeditionary Combat Command is  coordinating with the Commander, Submarine Forces, to potentially utilize  the Navy enlisted classification code of 9550 for its UUV operators."], "subsections": []}]}, {"section_title": "Navy Snakehead Large Displacement UUV", "paragraphs": ["The Navy\u2019s Snakehead Large Displacement UUV will be a long- endurance, off-board system that will conduct reconnaissance and  surveillance missions in denied areas and in waters too shallow or  otherwise inaccessible for conventional platforms (see fig. 10).", "The Snakehead Large Displacement UUV will be launched and recovered  from submarines and surface ships."], "subsections": [{"section_title": "Planned Quantity", "paragraphs": ["No systems have been delivered to the Navy. The Navy is planning for  the first 2 systems to be delivered in fiscal year 2020 and for another 2  systems to be delivered in fiscal year 2023. The Navy will attain initial  operational capability with the first phase systems when two of them are  delivered and tested on a host platform, a life-cycle sustainment plan is in  place, and personnel are trained and equipped to operate and maintain  the system from a host platform."], "subsections": []}, {"section_title": "Operator Personnel Requirements", "paragraphs": ["The Navy plans to field the Snakehead Large Displacement UUVs to  UUV Squadron 1. According to Navy officials, the squadron is also testing  or operating more than 10 other types of UUVs and expects to receive 2  or more other new types of UUVs  through approximately fiscal year  2020, along with the Snakehead. Although Navy officials told us that it is  too soon to analyze and determine the numbers of personnel required for  the system at the time of this report, they plan to utilize forward-deployed  operators to launch and recover the vehicle, an operator to control the  vehicle from an operations center on land, and a mission payload  operator as needed depending on the mission. The precise number of  operators per system will be determined and updated as the systems  progress through acquisition."], "subsections": []}, {"section_title": "Operator Staffing Approach", "paragraphs": ["In staffing personnel to meet requirements for UUV Squadron 1, Navy  officials stated that they do not directly access or recruit personnel to fill  such positions. Instead, these officials told us that enlisted sailors from  related career ratings within the submarine community, such as sonar  technicians, are assigned to the squadron generally after they have  completed at least one previous assignment and have approximately 5  years of experience in the Navy. According to the officials, once  personnel are assigned to the squadron, they receive UUV training to  qualify on the systems they will operate, and they will be identified with a  Navy enlisted classification code of 9550 for UUV operators."], "subsections": []}]}]}, {"section_title": "Appendix II: Objectives, Scope, and Methodology", "paragraphs": ["This report addresses the extent to which the Navy and the Marine Corps  have (1) evaluated workforce alternatives for their unmanned system  operators, including the use of federal civilian employees and private  sector contractors; (2) developed and updated personnel requirements  and related policies and goals that affect requirements for operators,  maintainers, and other support personnel for selected unmanned  systems; and (3) developed approaches for staffing unmanned system  operators to meet personnel requirements and have met those  requirements.", "To address these objectives, we included in the scope of our review the  Navy\u2019s and the Marine Corps\u2019 unmanned aerial systems (UAS),  unmanned surface vehicles (USV), and unmanned underwater vehicles  (UUV) that were programs of record in calendar year 2016. On the basis  of Department of the Navy documentation and interviews with  knowledgeable officials, we identified 24 such systems. To provide  illustrative examples for our first and third objectives and to address the  entirety of our second objective, we further narrowed our scope to those  systems that had progressed far enough through DOD\u2019s acquisition  process to be part of a program of record within the purview of the  services\u2019 system commands. Additionally, we narrowed our scope for  UASs, in particular, to those categorized as group 3 or above. We  omitted smaller group 1 UASs because service officials told us that those  systems are fielded in larger numbers as additional capabilities for  existing units in accomplishing their missions and entail a small workload  for operating and maintaining them relative to UASs of group 3 and  above. Group 2 UASs that the Navy and the Marine Corps utilize are  contractor-owned and operated, which was outside the scope of our  review.", "From the remaining unmanned systems in our scope, we selected eight  case studies to review the services\u2019 evaluations of workforce alternatives,  development and updates of personnel requirements and related policies  and goals, and staffing approaches: four UASs\u2014the Navy\u2019s MQ-4 Triton,  MQ-8 Fire Scout, MQ-25 Stingray, and the Marine Corps\u2019 RQ-21  Blackjack; the two USVs\u2014the Unmanned Influence Sweep System and  the Mine Countermeasures USV\u2014associated with the Navy\u2019s littoral  combat ships; and two types of the Navy\u2019s UUVs\u2014the MK 18 family of  UUV systems and the Snakehead Large Displacement UUV\u2014based on  their size and missions. Although the results of the UUV case studies  cannot be generalized to all UUVs across the Navy, they illustrate  different characteristics of and approaches used for workforce mix,  requirements, and staffing for such systems.", "To address our first objective, we compared any Navy and Marine Corps  efforts to evaluate federal civilian employees and private sector  contractors as workforce alternatives for operators of all of their  unmanned systems, including those from our case study sample, with  criteria from (1) DOD Directive 1100.4, Guidance for Manpower  Management, which directs, among other things, that authorities consider  all available sources when determining workforce mix, and that  workforces be designated as federal civilians except in certain  circumstances, and (2) DOD Instruction 1100.22, Policy and Procedures  for Determining Workforce Mix, which establishes the workforce mix  decision process and directs that workforce planning authorities consider  all available personnel when determining the workforce mix\u2014that is, the  combination of military servicemembers, federal civilians, and private  sector contractors. Specifically, we analyzed available documentation for  the selected case study systems on any evaluations the services  performed of alternative workforces and the related decisions made about  eligible personnel categories, and interviewed knowledgeable service  officials about factors that informed those evaluations and decisions and  any reasons for not evaluating workforce alternatives.", "We also interviewed officials from the Navy and OUSD(P&R) who are  responsible for reviewing workforce and personnel planning documents  for Navy and Marine Corps programs to understand any broader DOD or  service workforce planning efforts for unmanned systems, and reasons  for omitting certain personnel categories from consideration for systems  that are in development. We reviewed our prior reports on workforce mix  and DOD-commissioned workforce mix studies and interviewed officials  from OUSD(P&R) to identify limitations and benefits associated with  different categories of personnel, including military servicemembers,  federal civilian employees of DOD, and private sector contractors. We  reviewed the Navy\u2019s and the Marine Corps\u2019 policies on workforce  planning to determine whether those policies provide more detailed  guidance or criteria relative to those available in DOD\u2019s policies on  circumstances for which alternative personnel sources should be  considered or on the limitations and benefits associated with different  workforce mix options. We also compared these service-level workforce  planning policies with federal internal controls standards that emphasize  the importance of having clear, updated policies that align with an  organization\u2019s mission and goals.", "To address our second objective, we reviewed the Navy\u2019s and the Marine  Corps\u2019 efforts to develop and update personnel requirements for our  selected case study systems, including documentation of steps taken to  analyze and determine personnel requirements levels. We interviewed  service officials about their views of the sufficiency of those personnel  requirements for supporting training and deployment requirements for the  selected systems. For any systems that service officials were concerned  about the sufficiency of related personnel requirements, we compared  documentation of the requirements with DOD Directive 1100.4 and with a  Navy instruction. The DOD policy states that personnel requirements  should be driven by workload and established at the minimum levels  necessary to accomplish mission and performance objectives. Navy  Instruction 1000.16L states that personnel requirements must be validated as program changes dictate and at a minimum annually over a  system\u2019s lifecycle to determine if a personnel update is required. Further,  we reviewed documentation of the life cycle cost estimate for the number  of Marine Corps personnel required to operate and maintain the RQ-21  Blackjack, and of UAS squadrons\u2019 position on the sufficiency of those  personnel requirements, and compared those documents with DOD  guidance requiring that components determine a weapon system  program\u2019s life cycle costs by planning for the many factors needed to  support the system, including personnel, and with Office of Management  and Budget guidance that states that to keep the cost analyses for capital  assets, such as weapon systems, current, accurate, and valid, cost  estimating should be continuously updated based on the latest  information available as programs mature.", "In addition, we reviewed Navy policies on operating and maintaining UAS  and documentation from the Marine Corps about the effect of those  policies on UAS squadron personnel workload, and interviewed Navy and  Marine Corps headquarters- and unit-level officials about those effects  and any efforts underway to review and update policies. We then  compared those efforts to review and update policies with DOD Directive  1100.4 stating that existing policies, procedures, and structures should be  periodically evaluated to ensure efficient and effective use of personnel  resources, and with federal internal controls standards that emphasize  the importance of having clear, updated policies that align with an  organization\u2019s mission and goals. Finally, we compared goals  established in DOD\u2019s Unmanned Systems Integrated Roadmap, FY2013- 2038 and Department of the Navy strategy documents on unmanned  systems with federal internal controls standards that state than an  agency\u2019s management should define objectives clearly to enable the  identification of risk.", "For our third objective, we reviewed the Navy\u2019s and the Marine Corps\u2019  steps to select, train, and track unmanned system operators to identify  any challenges. We reviewed for the selected systems a combination of  manpower estimate reports and personnel and training plan documents to  identify approaches for staffing operators. We also reviewed personnel  and training manuals describing prerequisites for related military  qualifications and occupations. We interviewed command- and unit-level  officials from the Navy and the Marine Corps to discuss the effectiveness  of current staffing approaches for meeting their training and deployment  requirements.", "Focusing on challenges with providing enough personnel to serve as UAS  operators in particular, we also reviewed Navy reports on the retention of  certain aviation personnel to serve as UAS operators and we reviewed  Marine Corps data on its UAS operator inventory and retention levels  relative to its requirements and goals. Specifically, we reviewed Navy  reports on retention for fiscal years 2015 through 2017 because data from  earlier years were less relevant given the lower numbers of UAS  inventories. We requested data from the Marine Corps on its inventories  of and requirements for enlisted UAS operators for fiscal years 2007  through 2017 and on UAS officers for fiscal years 2013 (the first year of  available data) through 2017. We requested retention data\u2014actual  numbers of personnel who reenlisted versus annual quotas\u2014on enlisted  UAS operators for fiscal years 2010 (the earliest year for which data were  available) through 2017.", "We assessed the reliability of these Marine Corps data by administering  questionnaires and interviewing relevant personnel responsible for  maintaining and overseeing the systems that supplied the data and  manually checking the data for errors or omissions. Through these  methods, we obtained information on the systems\u2019 ability to record, track,  and report on these data, as well as on the quality control measures in  place. We found the inventory and requirements data to be sufficiently  reliable for the purposes of describing personnel inventory trends and the  sufficiency of operator personnel to meet requirements. We found that the  retention data are of undetermined reliability but are reporting them  because they are the data of record used by Marine Corps planning  officials. We also reviewed Navy and Marine Corps financial incentives for  retaining sufficient personnel to serve as UAS operators and compared  those approaches with criteria from DOD\u2019s 2012 Eleventh Quadrennial  Review of Military Compensation, which established that organizations  should assess civilian supply and demand and civilian wages to  determine the most cost effective special and incentive pay strategies.", "Further, we compared the Marine Corps\u2019 efforts to address workforce  challenges specific to the Marine Corps\u2019 UAS operator career field with a  key principle of strategic human capital planning from our prior work,  which states that agencies should ensure that flexibilities are part of their  overall human capital strategy. In our prior work, we found that strategic  human capital planning is an important component of an agency\u2019s effort  to develop long-term strategies for acquiring, developing, and retaining  staff needed for an agency to achieve its goals and of an agency\u2019s effort  to align human capital activities with the agency\u2019s current and emerging  mission. Specifically, we have found that an agency\u2019s efforts to conduct  strategic human capital planning should include, among other things,  building the capability needed to address administrative, educational, and  other requirements important to supporting workforce strategies by  ensuring that flexibilities are part of the overall human capital strategy.  We focused on workforce challenges in the Marine Corps, in particular,  because it has a long-established career field for UAS operators, and the  Navy does not yet have a separate career field for any of its unmanned  systems operators.", "We identified workforce challenges within the Marine Corps\u2019 UAS  operator career field by reviewing a 2015 Marine Corps-sponsored survey  of its pilot and UAS officer workforce. The survey included questions  about satisfaction with career and benefits, and intentions to stay in the  Marine Corps and the underlying reasons for these. Although officers in  ranks of first lieutenant through lieutenant colonel were surveyed, we  were unable to include majors and lieutenant colonels in reporting results  for UAS officers because the Marine Corps aggregated those officers\u2019  responses with those of majors and lieutenant colonels who operate other  types of aircraft. By reviewing the survey methodology and interviewing  an official involved in administering the survey and analyzing the results,  we determined that the survey results were sufficiently reliable for  reporting the perceptions about career satisfaction at a single point in  time for UAS operators who answered those questions.", "In addition, we visited one of three active duty Marine Corps UAS  squadrons, which we chose because it had the most deployment  experience with the RQ-21 Blackjack UAS. We met with squadron  leaders to discuss their views about UAS personnel requirements and  staffing approaches. We also conducted eight small group discussions  with active duty UAS operators and officers\u2014separately for enlisted  personnel and officers\u2014to gain their perspectives on topics such as  morale, workload, and career satisfaction. The opinions of Marine Corps  UAS operators we obtained during our discussion groups are not  generalizable to the population of UAS operators in the Marine Corps."], "subsections": [{"section_title": "Office of the Secretary of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Joint Staff", "paragraphs": [], "subsections": []}, {"section_title": "Marine Corps", "paragraphs": ["Office of the Deputy Commandant for Aviation", "Office of the Deputy Commandant for Combat Development and", "Office of the Deputy Commandant for Manpower and Reserve Affairs", "Marine Corps Systems Command", "Marine Unmanned Aerial Vehicle Squadron 2  We conducted this performance audit from September 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Lori Atkinson, (Assistant Director), Melissa Blanco, Tim Carr, Mae  Jones, Amie Lesser, Felicia Lopez, Ben Sclafani, Mike Silver, and Paul  Sturm."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.", "Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.", "High Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Military Compensation: Additional Actions Are Needed to Better Manage  Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.:  February 3, 2017.", "Unmanned Aerial Systems: Air Force and Army Should Improve Human  Capital Planning for Pilot Workforces. GAO-17-53. Washington, D.C.:  January 31, 2017.", "Unmanned Aerial Systems: Further Actions Needed to Fully Address Air  Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington,  D.C.: March 16, 2016.", "Military Personnel: Army Needs a Requirement for Capturing Data and  Clear Guidance on the Use of Military for Civilian or Contractor Positions.  GAO-15-349. Washington, D.C.: June 15, 2015.", "Unmanned Aerial Systems: Actions Needed to Improve DOD Pilot  Training. GAO-15-461. Washington, D.C.: May 14, 2015.", "Air Force: Actions Needed to Strengthen Management of Unmanned  Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014.", "Human Capital: Additional Steps Needed to Help Determine the Right  Size and Composition of DOD\u2019s Total Workforce. GAO-13-470.  Washington, D.C.: May 29, 2013.", "Unmanned Aircraft Systems: Comprehensive Planning and a Results- Oriented Training Strategy Are Needed to Support Growing Inventories.  GAO-10-331. Washington, D.C.: March 26, 2010.", "Human Capital: Key Principles for Effective Strategic Workforce Planning.  GAO-04-39. Washington, D.C.: December 11, 2003."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-546", "url": "https://www.gao.gov/products/GAO-18-546", "title": "Data Act: Reported Quality of Agencies' Spending Data Reviewed by OIGs Varied Because of Government-wide and Agency Issues", "published_date": "2018-07-23T00:00:00", "released_date": "2018-07-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The DATA Act was enacted to increase accountability and transparency and, among other things, expanded on the required federal spending information that agencies are to submit to Treasury for posting to a publicly available website. The act also includes provisions requiring a series of oversight reports by agencies' OIGs and GAO.", "The objectives of this report are to describe (1) the reported scope of work covered and type of audit standards OIGs used in their reviews of agencies' DATA Act spending data; (2) any variations in the reported implementation and use of data standards and quality of agencies' data, and any common issues and recommendations reported by the OIGs; and (3) the actions, if any, OMB and Treasury have reported taking or planning to take to use the results of OIG reviews to help monitor agencies' implementation of the act.", "To address these objectives, GAO reviewed 53 OIG reports issued on or before January 31, 2018, that assessed agencies' first submissions of spending data for the second quarter of fiscal year 2017 and surveyed the OIGs to obtain additional information."]}, {"section_title": "What GAO Found", "paragraphs": ["The Digital Accountability and Transparency Act of 2014 (DATA Act) requires agencies' Offices of Inspector General (OIG) to issue reports on their assessments of the quality of the agencies' spending data submissions and compliance with the DATA Act. The scope of all OIG reviews covered their agencies' second quarter fiscal year 2017 submissions. The files the OIGs used to select and review sample transactions varied based on data availability, and OIGs performed different types of reviews under generally accepted government auditing standards. Some OIGs reported testing a statistical sample of transactions that their agencies submitted and other OIGs reported testing the full population of submitted transactions. Because of these variations, the overall error rates reported by the OIGs are not fully comparable and a government-wide error rate cannot be projected.", "According to the OIG reports, about half of the agencies met Office of Management and Budget (OMB) and Department of the Treasury (Treasury) requirements for the implementation and use of data standards. The OIGs also reported that most agencies' first data submissions were not complete, timely, accurate, or of quality.", "OIG survey responses show that OIGs generally reported higher (projected) overall error rates for the accuracy of data than for completeness and timeliness. OIGs reported certain errors that involve inconsistencies in how the Treasury broker (system that collects and validates agency-submitted data) extracted data from certain federal award systems that resulted in government-wide issues outside the agencies' control, while other errors may have been caused by agency-specific control deficiencies. For example, OIGs reported deficiencies related to agencies' lack of effective procedures or controls and systems issues. Most OIGs made recommendations to agencies to address identified concerns.", "OMB staff and Treasury officials told GAO that they reviewed the OIG reports to better understand issues identified by the OIGs. OMB issued new guidance in June 2018 requiring agencies to develop data quality plans intended to achieve the objectives of the DATA Act. Treasury officials told GAO that they are collaborating with OMB and the Chief Financial Officers Council DATA Act Audit Collaboration working group to identify and resolve government-wide issues."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report. The Council of the Inspectors General on Integrity and Efficiency (CIGIE) noted that GAO's report provides useful information on OIG efforts to meet oversight and reporting responsibilities under the DATA Act. OMB, Treasury, and CIGIE also provided technical comments that GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Digital Accountability and Transparency Act of 2014 (DATA Act) was  enacted, in part, to increase accountability and transparency of federal  spending, which totaled almost $4 trillion for fiscal year 2017. Among  other things, the DATA Act includes provisions requiring a series of Office  of Inspector General (OIG) and GAO oversight reports evaluating the  completeness, timeliness, quality, and accuracy of federal agencies\u2019  spending data and the implementation and use of data standards. The  act also requires the Office of Management and Budget (OMB) and  Department of the Treasury (Treasury) to establish data standards to  generate uniform agency data that are consistent and comparable.", "In accordance with the DATA Act and OMB and Treasury guidance,  federal agencies submitted their first round of spending data in May 2017  for the second quarter of fiscal year 2017, and the OIGs issued their first  mandated data quality oversight reports beginning in October 2017. This  report is part of our ongoing monitoring of DATA Act implementation in  response to provisions in the DATA Act that call for us to review OIG  reports and issue reports assessing and comparing the quality of agency  data submitted under the act and agencies\u2019 implementation and use of  data standards.", "The objectives of this report are to describe (1) the reported scope of  work covered and type of audit standards OIGs used in their reviews of  agencies\u2019 DATA Act spending data; (2) any variations in the reported  implementation and use of data standards and quality of agencies\u2019 data,  and any common issues and recommendations reported by the OIGs;  and (3) the actions, if any, that OMB and Treasury have reported taking  or planning to take to use the results of OIG DATA Act reviews to help  monitor agencies\u2019 implementation of the act.", "To address these objectives, we obtained and reviewed 53 OIG DATA  Act reports that were issued on or before January 31, 2018, from 24  Chief Financial Officers Act of 1990 (CFO Act) agency OIGs and 29 non- CFO Act agency OIGs. We identified the OIGs\u2019 reported (1) scope of  work and type of audit standards OIGs used in their reviews,   (2) conclusions about agencies\u2019 implementation and use of the data  standards and the quality of the agencies\u2019 data, (3) government-wide and  agency-specific issues identified, and (4) recommendations to address  identified deficiencies. We also surveyed OIGs to obtain additional  information regarding error rates, sample sizes, control deficiencies  identified, and other items associated with the reviews they conducted.  We received and reviewed responses from the 53 OIGs that we obtained  reports from and followed up with OIGs for clarification and corroboration,  as necessary. Finally, we interviewed OMB staff and Treasury officials to  determine how they used or plan to use the results of the OIG reviews in  monitoring agencies\u2019 implementation of the DATA Act. Appendix I  provides additional details on our scope and methodology.", "We conducted this performance audit from September 2017 to July 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The DATA Act was enacted May 9, 2014, for purposes that include  expanding on previous federal transparency legislation by requiring the  disclosure of federal agency expenditures and linking agency spending  information to federal program activities, so that both policymakers and  the public can more effectively track federal spending. The act also calls  for improving the quality of data submitted to USAspending.gov by  holding federal agencies accountable for the completeness and accuracy  of the data submitted. The Federal Funding Accountability and  Transparency Act of 2006 (FFATA), as amended by the DATA Act,  identifies OMB and Treasury as the two agencies responsible for leading  government-wide implementation. For example, the DATA Act requires  OMB and Treasury to establish government-wide financial data standards  that shall, to the extent reasonable and practicable, provide consistent,  reliable, and searchable spending data for any federal funds made  available to or expended by federal agencies. These standards specify  the data elements to be reported under the DATA Act and define and  describe what is to be included in each data element, with the aim of  ensuring that information will be consistent and comparable. The DATA  Act also requires OMB and Treasury to ensure that the standards are  applied to the data made available on USAspending.gov."], "subsections": [{"section_title": "Sources of Data on USAspending.gov", "paragraphs": ["USAspending.gov has many sources of data. For example, agencies  submit data from their financial management systems, and other data are  extracted from government-wide federal financial award reporting  systems populated by federal agencies and external award recipients. A  key component of the reporting framework is Treasury\u2019s DATA Act broker  (broker)\u2014a system that collects and validates agency-submitted data to  create linkages between the financial and award data prior to their  publication on the USAspending.gov website.", "According to Treasury guidance documents, agencies are expected to  submit three data files with specific details and data elements to the  broker from their financial management systems.", "File A: Appropriations account. This includes summary information  such as the fiscal year cumulative federal appropriations account  balances and includes data elements such as the agency identifier,  main account code, budget authority appropriated amount, gross  outlay amount, and unobligated balance.", "File B: Object class and program activity. This includes summary data  such as the names of specific activities or projects as listed in the  program and financing schedules of the annual budget of the U.S.  government.", "File C: Award financial. This includes award transaction data such as  the obligation amounts for each federal financial award made or  modified during the reporting quarter (e.g., January 1, 2017, through  March 31, 2017).", "The broker also extracts spending information from government-wide  award reporting systems that supply award data (e.g., federal grants,  loans, and contracts) to USAspending.gov. These systems\u2014including the  Federal Procurement Data System-Next Generation (FPDS-NG), System  for Award Management (SAM), Financial Assistance Broker Submission  (FABS), and the FFATA Subaward Reporting System (FSRS)\u2014compile  information that agencies and external federal award recipients submit to  report, among other things, procurement and financial assistance award  information required under FFATA. The four files produced with  information extracted by the broker from the four systems are as follows:", "File D1: Procurement. This includes award and awardee attribute  information (extracted from FPDS-NG) on procurement (contract)  awards and contains elements such as the total dollars obligated,  current total value of award, potential total value of award, period of  performance start date, and other information to identify the  procurement award.", "File D2: Financial assistance. This includes award and awardee  attribute information (extracted from FABS) on financial assistance  awards and contains elements such as the federal award identification  number, the total funding amount, the amount of principal to be repaid  for the direct loan or loan guarantee, the funding agency name, and  other information to identify the financial assistance award.", "File E: Additional awardee attributes. This includes additional  information (extracted from SAM) on the award recipients and  contains elements such as the awardee or recipient unique identifier;  the awardee or recipient legal entity name; and information on the  award recipient\u2019s five most highly compensated officers, managing  partners, or other employees in management positions.", "File F: Subaward attributes. This includes information (extracted from  FSRS) on awards made to subrecipients under a prime award and  contains elements such as the subaward number, the subcontract  award amount, total funding amount, the award description, and other  information to facilitate the tracking of subawards.", "The key components of the broker and how the broker operated when the  agencies submitted their data for the second quarter fiscal year 2017 are  shown in figure 1.", "After agencies submit the three files to the DATA Act broker, it runs a  series of validations and produces warnings and error reports for  agencies to review. After passing validations for these three files, the  agencies are to generate Files D1 and D2, the files containing details on  procurement and assistance awards. Before the data are displayed on  USAspending.gov, agency senior accountable officials are required to  certify the data submissions in accordance with OMB guidance.  Certification is intended to assure alignment among Files A, B, C, D1, D2,  E, and F, and to provide assurance that the data are valid and reliable.  According to Treasury officials, once the certification is submitted a  sequence of computer program instructions or scripts are issued to  transfer and map the data from broker data tables to tables set up in a  database used as a source for the information on the website. Certified  data are then displayed on USAspending.gov along with certain historical  information from other sources, including Monthly Treasury Statements."], "subsections": []}, {"section_title": "OIG Methodology and Reporting Guidance for Assessing Agencies\u2019 DATA Act Submissions", "paragraphs": ["The DATA Act requires each OIG to issue three reports on its  assessment of the quality of the agency\u2019s data submission and  compliance with the DATA Act. The first report was due November 8,  2016; however, agencies were not required to submit spending data in  compliance with the DATA Act until May 2017. Therefore, the Council of  the Inspectors General on Integrity and Efficiency (CIGIE) developed an  approach to address what it described as a reporting date anomaly;  encouraged interim OIG readiness reviews and related reports on  agencies\u2019 implementation efforts; and delayed issuance of the mandated  reports to November 2017, with subsequent reports following a 2-year  cycle and due November 2019 and 2021.", "CIGIE established the Federal Audit Executive Council (FAEC) to discuss  and coordinate issues affecting the federal audit community, with special  emphasis on audit policy and operations of common interest to FAEC  members. FAEC formed the FAEC DATA Act Working Group to assist the  OIG community in understanding and meeting its DATA Act oversight  requirements by (1) serving as a working-level liaison with Treasury,   (2) consulting with GAO, (3) developing a common approach and  methodology for conducting the readiness reviews and mandated  reviews, and (4) coordinating key communications with other  stakeholders. To assist the OIG community, the FAEC DATA Act Working  Group developed a common methodology and published the Inspectors  General Guide to Compliance Under the DATA Act (IG Guide) for use in  conducting mandated reviews.", "The IG Guide includes procedures to test data in agencies\u2019 Files A and B  by reconciling these data to the information that agencies report in their  quarterly SF 133, Report on Budget Execution and Budgetary  Resources. The IG Guide also instructs OIGs to select a statistically  valid sample of spending data from the agencies\u2019 available award-level  transactions in File C, and among other procedures, to confirm whether  these data are also included in the agencies\u2019 Files D1 and D2. The OIGs  are also to confirm whether the transactions in the sample were linked to  the award and awardee attributes in Files E and F. The data in Files E  and F are reported by award recipients in two external government-wide  systems, and are outside the direct control of the federal agencies, except  for the General Services Administration, which manages these external  systems. Based on additional guidance from the FAEC DATA Act  Working Group, OIGs are not required to assess the quality of the award  recipient-entered data that the broker extracted from the two external  government-wide systems used to create Files E and F.", "According to the IG Guide, the sampled spending data and testing results  are to be evaluated using the following definitions for the requirements  being assessed:", "Completeness is measured in two ways: (1) all transactions that  should have been recorded are recorded in the proper reporting  period, and (2) as the percentage of transactions containing all  applicable data elements required by the DATA Act.", "Timeliness is measured as the percentage of transactions reported  within 30 days of the end of the quarter.", "Accuracy is measured as the percentage of transactions that are  complete and agree with the systems of record or other authoritative  sources.", "Quality is defined in OMB guidance as a combination of utility,  objectivity, and integrity. Utility refers to the usefulness of the  information to the intended users. Objectivity refers to whether the  disseminated information is being presented in an accurate, clear,  complete, and unbiased manner. Integrity refers to the protection of  information from unauthorized access or revision.", "The IG Guide also states that OIGs should assess agencies\u2019  implementation and use of the data standards, including evaluating each  agency\u2019s process for reviewing the 57 required data elements and  associated definitions that OMB and Treasury established and  documenting any variances."], "subsections": []}, {"section_title": "Prior GAO Reports Related to the DATA Act and Data Quality", "paragraphs": ["In November 2017, we issued our first report on data quality as required  by the DATA Act, which identified issues with the completeness and  accuracy of the data that agencies submitted for the second quarter of  fiscal year 2017, use of data elements, and presentation of the data on  Beta.USAspending.gov. Among other things, we recommended that  Treasury disclose known data quality issues and limitations on the new  USAspending.gov website. Treasury agreed with that recommendation  and stated that it would develop a plan to better disclose known data  quality issues. Since the DATA Act\u2019s enactment in 2014, we have issued  a series of interim reports on our ongoing monitoring of the  implementation of the DATA Act and made recommendations intended to  help ensure effective government-wide implementation. However, many  of those recommendations still remain open.", "These reports identified a number of challenges related to OMB\u2019s and  Treasury\u2019s efforts to facilitate agency reporting of federal spending, as  well as internal control weaknesses and challenges related to agency  financial management systems that we and agency auditors reported that  present risks to agencies\u2019 ability to submit quality data as required under  the act. For example, our prior work has identified issues with agency  source systems that could affect the quality of spending data made  available to the public. In April 2017, we reported a number of  weaknesses and issues previously identified by agencies\u2019 auditors and  OIGs that affect agencies\u2019 financial reporting and may affect the quality of  the information reported under the DATA Act. We also reported on  findings and recommendations from prior reports with issues on the four  key award systems\u2014FPDS-NG, SAM, the Award Submission Portal  (ASP), and FSRS\u2014which increase the risk that the data submitted to  USAspending.gov may not be complete, accurate, and timely."], "subsections": []}]}, {"section_title": "OIG Reviews of Agencies\u2019 DATA Act Submissions Varied in Scope and Type of Standards Used", "paragraphs": ["Based on our review of the 53 OIG reports, the scope of all of the OIG  reviews covered their agencies\u2019 submission of spending data for the  second quarter of fiscal year 2017 (i.e., January through March 2017).  However, the files that the OIGs included in their scope to select and  review sample transactions and the type of audit standards used\u2014such  as attestation examination engagement or performance audit\u2014varied  among the OIGs.", "According to the IG Guide, the OIGs were to select and review a  statistically valid sample of transactions, preferably from the agencies\u2019  File C certified data submissions; if File C was unavailable or did not  contain data, they were to select their sample test items from Files D1  and D2. Based on their survey responses, we found that most OIGs  tested data from File C, File D1, File D2, or some combination of these  agency file submissions. We also found that some OIGs tested a  statistical sample of transactions in these files, while others tested all the  transactions in the files because of the small population size. Further, we  found that some OIGs used different files when testing for completeness,  timeliness, or accuracy. For example, one OIG used File C when testing  for completeness, File D1 when testing for timeliness, and File D2 when  testing for accuracy. Overall, as shown in figure 2, the source files that 47  of the 53 OIGs used for testing accuracy were as follows.", "Twenty-eight OIGs selected items for testing accuracy from File C.", "Twelve OIGs selected items for testing accuracy from Files D1, D2, or  both.", "Seven OIGs selected items for testing accuracy from a combination of  Files C, D1, and D2.", "The IG Guide also states that OIGs should conduct either attestation  examination engagements or performance audits in accordance with  generally accepted government auditing standards (GAGAS).  Performance audits are audits that provide findings or conclusions based  on an evaluation of sufficient, appropriate evidence against criteria.  Attestation examination engagements involve obtaining sufficient,  appropriate evidence with which to express an opinion stating whether  the subject matter is in conformity with the identified criteria. In contrast to  these two types of engagements that provide conclusions or opinions,  agreed-upon procedures attestation engagements do not result in  opinions or conclusions, but instead involve auditors performing specific  procedures on the subject matter and issuing a report of findings.", "All 53 OIGs reported that they performed their engagements in  accordance with GAGAS; 47 OIGs reported that they conducted a  performance audit, 5 reported that they performed an attestation  examination engagement, and 1 reported that it performed an agreed- upon procedures attestation engagement. Twenty-one CFO Act agency  OIGs and 26 non-CFO Act agency OIGs conducted performance audits,  3 CFO Act agency OIGs and 2 non-CFO Act agency OIGs conducted  attestation examination engagements, and 1 non-CFO Act agency OIG  conducted an agreed-upon procedures attestation engagement."], "subsections": []}, {"section_title": "OIG Reports Show Variations in Agencies\u2019 Use of Data Standards and Quality of Data, and Most OIGs Made Recommendations to Address Identified Deficiencies", "paragraphs": ["According to the OIG reports, about half of the agencies met the OMB  and Treasury requirements for implementation and use of data standards.  However, almost three-fourths of OIGs determined that their respective  agencies\u2019 submissions were not complete, timely, accurate, or of quality.  Based on their reports and survey responses, certain OIGs also found  data errors related to problems with how Treasury\u2019s DATA Act broker  extracted information from external award reporting systems. The FAEC  DATA Act Working Group considered these data errors to be a  government-wide issue. Other errors that the OIGs identified may have  been caused by agency-specific internal control deficiencies. Most of the  OIGs made recommendations to agencies to help address the concerns  they identified in their reports."], "subsections": [{"section_title": "OIG Reports Show About Half of the Agencies Met Requirements for Implementation and Use of Data Standards", "paragraphs": ["Based on our review of the 53 OIG reports, we found that 27 OIGs  determined that their agencies met OMB and Treasury requirements for  implementation and use of the data standards, whereas 23 OIGs  determined that their agencies did not meet these requirements. In  addition, 3 CFO Act agency OIGs did not include an assessment of their  agencies\u2019 implementation and use of the data standards in their reports.", "The OIG reports described reasons why the 23 agencies did not meet the  implementation and use of data standards requirements, including data  submissions that did not include required data elements or included data  elements that did not conform with the established data standards. For  example, one OIG reported that 74 percent of transactions it tested did  not contain program activity names or codes aligned with the President\u2019s  Budget, and as a result, 39 percent of total obligations and 57 percent of  total expenditures from that agency\u2019s data submission could not be  aligned with established programs. Another OIG reported that because of  inconsistent application of data standards and definitions across award  systems, the agency\u2019s spending data were not complete, timely, or  accurate.", "In their survey responses, certain OIGs identified additional concerns  about their agencies\u2019 implementation and use of data standards and  related data elements. Specifically, six OIGs identified differences  between their agencies\u2019 definitions of the data standards and OMB  guidance. For example, two OIGs noted differences between definitions  in OMB guidance and their agencies\u2019 definitions of \u201cprimary place of  performance address.\u201d One of these OIGs noted that its agency  submitted the wrong data, providing the address of the legal entity  receiving the award instead of the address of the primary place where  performance of the award will be accomplished or take place. In our  November 2017 report, we also noted that OMB guidance for this data  element was unclear and recommended that OMB clarify and align  existing guidance regarding the appropriate definitions agencies should  use to collect and report on primary place of performance and establish  monitoring mechanisms to foster consistent application and compliance.", "In addition, based on their survey responses, 21 OIGs reported error  rates over 50 percent for 25 data elements. This includes 10 data  elements that were reported by multiple OIGs and 15 data elements only  reported by one OIG, as shown in table 1. There were five other data  elements with error rates over 50 percent that the FAEC DATA Act  Working Group determined to be government-wide broker-related data  reporting issues, as discussed later in this report. The OIGs\u2019 survey  responses did not indicate whether the data elements with errors were  the result of issues related to the agencies\u2019 implementation or use of  required data standards."], "subsections": []}, {"section_title": "OIG Reports and Survey Responses Show Most Agencies Did Not Submit Complete, Timely, Accurate, or Quality Data", "paragraphs": ["Based on the OIG reports, we found that 15 of the 53 OIGs determined  that their agencies\u2019 data were generally complete, timely, accurate, or of  quality, comprising 6 CFO Act agency OIGs and 9 non-CFO Act agency  OIGs (see fig. 3). Conversely, 38 of 53 OIGs determined that their  agencies\u2019 data were not complete, timely, accurate, or of quality,  comprising 18 CFO Act agency OIGs and 20 non-CFO Act agency OIGs.  OIG reports did not always include separate assessments for  completeness, timeliness, and accuracy, but gave an overall assessment  of the quality of the data.", "As part of our OIG survey, we requested the overall error rates, agency- specific error rates, and broker error rates for each requirement\u2014 completeness, timeliness, and accuracy\u2014used to evaluate the quality of  data tested to help provide more insights on the nature and extent of  errors that the OIGs identified. For the purposes of our survey, based on  guidance from the FAEC DATA Act Working Group and in the IG Guide,  these error rates were defined as follows:", "Overall error rate is the percentage of transactions tested that were  not in accordance with policy, and includes errors due to the agency,  broker, and external award reporting systems.", "Agency error rate is the percentage of transactions tested that were  not in accordance with policy, and includes only errors that were  within the agency\u2019s control.", "Broker error rate is the percentage of transactions tested that were  not in accordance with policy, and includes only errors due to the  broker and external award reporting systems.", "With regard to overall error rates and the tests conducted, 40 OIGs  reported that they tested a statistical sample of transactions, 9 OIGs  reported that they tested all transactions in the populations of data, and 4  OIGs reported that they did not test any transactions or were unable to  complete their testing. As shown in figure 4, our survey results show that  the 40 OIGs that tested a statistical sample of transactions generally  reported higher (projected) overall error rates for the accuracy and  completeness of data than for the timeliness of data. We found similar  results based on our tests to assess the completeness, timeliness, and  accuracy of government-wide spending data that we tested for the same  time period, as described in our November 2017 report. More than half  of the 40 OIGs reported projected overall error rates of 25 percent or  greater for accuracy, including 8 OIGs reporting projected accuracy error  rates of over 75 percent. In contrast, more than three-fourths of the OIGs  projected overall error rates of less than 25 percent for completeness and  timeliness of their agencies\u2019 data.", "See appendix II for more details on the 53 OIGs\u2019 individual agency testing  results, including the actual overall error rates for those OIGs that tested  the full population of transactions included in their agencies\u2019 data  submissions and the estimated range of projected overall error rates for  OIGs that conducted a statistical sample.", "The OIG survey responses that included agency-specific error rates  showed that the agency-specific error rates were similar to the overall  error rates, with accuracy of data having higher error rates than those for  completeness and timeliness. Fourteen OIGs provided agency-specific  error rates for accuracy, 13 OIGs provided agency-specific error rates for  completeness, and 12 OIGs provided agency-specific error rates for  timeliness of the data sampled.", "In addition, nine OIGs reported error rates for broker-related errors that,  similar to the overall and agency-specific error rates, had higher error  rates for accuracy of data than for completeness and timeliness. The  FAEC DATA Act Working Group determined that the broker-related errors  had a government-wide impact, as discussed further below. In October  2017\u20141 month before the mandated reports were to be issued\u2014the  working group provided guidance to the OIGs suggesting that they  determine and report these additional broker error rates separately  because they were not within the agencies\u2019 control. Some OIGs may not  have reported separate agency-specific and broker error rates as their  work was already substantially completed.", "Of the nine OIGs that reported they tested all transactions in the  populations of their agencies\u2019 data, five OIGs reported actual overall error  rates and found that overall error rates for accuracy were higher than the  error rates for completeness or timeliness. Of the four OIGs that reported  agency-specific error rates, only one OIG reported an error rate for  accuracy, and it was greater than 75 percent. One OIG reported a broker  error rate, and it was higher for accuracy than for completeness or  timeliness.", "In addition to using different testing methodologies (e.g., statistical  sampling or testing the full population of transactions) and source files, as  previously discussed, the OIGs also used different assumptions and  sampling criteria to design and select sample items for testing. As a  result, the overall error rates are not comparable and a government-wide  error rate cannot be projected."], "subsections": []}, {"section_title": "DATA Act Broker-Related Issues Caused Certain Government-wide Data Reporting Errors", "paragraphs": ["Based on discussions with OIGs, the FAEC DATA Act Working Group  identified certain data errors caused by broker-related issues that it  determined to be government-wide data reporting issues. Also, because  the broker is maintained by Treasury, these issues were beyond the  control of the affected agencies. According to the working group, these  issues involve inconsistencies in data the broker extracted from  government-wide federal financial award reporting systems, as described  in table 2. To help provide consistency in reporting these issues, the  working group developed standard report language used by OIGs in their  reports to describe the errors caused by the broker. The standard  reporting language stated that because agencies do not have  responsibility for how the broker extracts data, the working group did not  expect agency OIGs to evaluate the reasonableness of Treasury\u2019s  planned corrective actions.", "In April 2018, a Treasury official told us that the issues causing these  problems have been resolved. To address these issues, the Treasury  official stated that, among other things, Treasury implemented the DATA  Act Information Model Schema version 1.1, loaded previously missing  historical procurement data to USAspending.gov, updated how  information from FPDS-NG is mapped to File D1, and replaced ASP with  FABS. However, we plan to follow up on these efforts as a part of our  ongoing monitoring efforts."], "subsections": []}, {"section_title": "OIGs Identified Agency- Specific Control Deficiencies That May Have Contributed to Data Errors", "paragraphs": ["In their survey responses and OIG reports, 43 OIGs reported agency- specific control deficiencies that may have contributed to or increased the  risk of data errors. Of these 43 OIGs, 37 OIGs identified deficiencies  affecting accuracy, 32 OIGs identified deficiencies affecting  completeness, and 14 OIGs identified deficiencies affecting timeliness. A  few OIGs reported that they leveraged their financial statement audit  results, which found deficiencies in certain financial reporting controls, in  conducting their DATA Act reviews. We categorized the OIGs\u2019 reported  control deficiencies and found that the categories with the most frequently  reported deficiencies related to their agencies\u2019 lack of effective  procedures or controls, such as conducting reviews and reconciliations of  data submissions to source systems, and information technology system  deficiencies, as shown in figure 5. In their survey responses, OIGs  provided additional information about whether their agencies\u2019 controls  over agency source systems and controls over the DATA Act submission  processes were properly designed, implemented, and operating  effectively to achieve their objectives. For both CFO Act and non-CFO Act  agencies, OIGs generally reported that agencies\u2019 internal controls over  source systems and the DATA Act submission process were designed  effectively but were not implemented or operating effectively as designed.", "Some examples of agency-specific control deficiencies reported by the  OIGs are as follows.", "Lack of effective procedures or controls. Deficiencies where agency  procedures for reviewing and reconciling data and files to different  sources were not performed, or were performed ineffectively, or standard  operating procedures for data submissions had not been designed and  implemented. For example, some of these deficiencies related to  agencies\u2019 lack of review or reconciliation of data in Files A and B to data  in Files D1 and D2. Further, two OIGs found that their agencies did not  perform any sort of quality review of their data until after they were  submitted to the broker. Another OIG found that its agency did not ensure  that its components developed objectives for accomplishing its data  submissions, assessed the risks to achieving those objectives, or  established corresponding controls to address them. As a result, the  agency\u2019s DATA Act submissions included errors.", "Information technology system deficiencies. Deficiencies related to  the lack of effective automated systems controls necessary to ensure  proper system user access or automated quality control procedures and  the accuracy and completeness of data, as well as systems that are not  compliant with federal financial management system requirements. For  example, one OIG noted that its agency experienced issues related to  segregation of duties and access controls that affected the agency\u2019s  ability to ensure completeness and accuracy of data in its financial,  procurement, and grant processing systems. Another OIG found that its  agency did not complete necessary system updates to ensure that all  data were certified prior to submission. Further, an OIG reported that its  agency\u2019s information system was unable to combine transactions with the  same unique identifiers, resulting in over 12,000 transactions being  removed because of broker warnings.", "Insufficient documentation. Deficiencies related to agencies\u2019 production  and retention of documentary evidence supporting their DATA Act  submissions. For example, three OIGs found that their agencies were  unable to provide supporting documentation for various portions of their  DATA Act submissions. Another OIG reported that one of its agency\u2019s  components did not take effective steps to ensure that procurement and  grant personnel understood the specific documentation that should be  maintained to support data entered in grant and contract files. Further,  another OIG found that its agency did not document the process for  compiling the agency\u2019s DATA Act submission files.", "Inappropriate application of data standards and data elements.  Deficiencies related to the inappropriate use of data definition standards  or the misapplication of data elements. For example, one OIG found that  its agency did not identify the prior year funding activity names or codes  for all transactions included in its spending data submission. Another OIG  found that its agency did not consistently apply standardized object class  codes in compliance with OMB guidance, as well as standardized U.S.  Standard General Ledger account codes as outlined in Treasury  guidance. Similarly, an OIG reported instances where agency users of  certain award systems were not knowledgeable about how required  DATA Act elements were reported in their procurement system.", "Data entry errors or incomplete data. Deficiencies related to controls  over data entry and errors or incomplete data in agency or government- wide external systems. For example, an OIG found that its agency did not  include purchase card transactions greater than $3,500, which  represented about 1 percent of the agency\u2019s data submission. Another  OIG reported that its agency\u2019s service provider did not enter  miscellaneous obligations in the data submission file because it expected  the agency to enter such transactions in the federal procurement data  system.", "Timing errors. Deficiencies related to delays in reporting information to  external government-wide systems that result in errors in the data  submitted. For example, one OIG reported that its agency did not take  effective steps to ensure that contracting officers timely report required  DATA Act award attribute information in FPDS-NG. Another OIG reported  that a bureau in its agency consistently submitted certain payment files 2  months late, resulting in incomplete Files C and D2 in the agency\u2019s data  submission.", "Inaccurate broker uploads. Deficiencies related to agencies uploading  data to the broker. For example, one OIG found a lack of effective internal  controls over data reporting from its agency\u2019s source systems to the  DATA Act broker for ensuring that the data reported are complete, timely,  accurate, and of quality. Specifically, certain components were not able to  consolidate data from multiple source systems and upload accurate data  to the broker for File C. Another OIG reported that the broker could not  identify and separate an individual component\u2019s award data from agency- wide award data. Specifically, the broker recognized only agency-wide  award data and did not include award data from its agency\u2019s individual  components. As a result, the OIG reported that the component did not  comply with the DATA Act requirements because its submission did not  include all of the agency\u2019s required award data.", "Reliance on manual processes. Deficiencies that cause agencies to  rely on manual processes and work-arounds. For example, one OIG  found that in the absence of system patches to map data elements  directly from feeder award systems to financial systems, its agency  developed an interim solution that relied heavily on manual processes to  collect data from multiple owners and systems and increased the risk for  data quality to be compromised. Another OIG reported that its agency\u2019s  financial management systems are outdated and unable to meet DATA  Act requirements without extensive manual efforts, resulting in  inefficiencies in preparing data submissions.", "Other. Other deficiencies including, among other things, instances where  an agency\u2019s senior accountable official did not submit a statement of  assurance certifying the reliability and validity of the agency account-level  and award-level data submitted to the DATA Act broker, an agency did  not provide adequate training and cross-training of personnel on the  various DATA Act roles, and certain components of one agency were not  included in the agency\u2019s DATA Act executive governance structure."], "subsections": []}, {"section_title": "Most OIGs Made Recommendations to Agencies to Improve Data Quality and Controls", "paragraphs": ["To help address control deficiencies and other issues that resulted in data  errors, 48 of the 53 OIGs (23 CFO Act agency OIGs and 25 non-CFO Act  agency OIGs) included recommendations in their reports. As shown in  figure 6, the most common recommendations OIGs made to their  agencies related to the need for agencies to develop controls over their  data submissions, develop procedures to address errors, and finalize or  implement procedures or guidance.", "Some examples of OIG recommendations made to agencies to improve  data quality and controls are as follows.", "Develop controls over submission process. Recommendations related  to controls or processes to resolve issues in submitting agency financial  system data to the broker. For example, one OIG recommended that its  agency develop and implement a formal process to appropriately address  significant items on broker warning reports, which could indicate systemic  issues.", "Develop procedures to address errors. Recommendations related to  procedures to address data errors in the agency\u2019s internal systems. For  example, one OIG recommended that its agency correct queries to  extract the correct information and ensure that all reportable  procurements are included in its DATA Act submissions.", "Finalize or implement procedures or guidance. Recommendations  related to establishing and documenting an agency\u2019s DATA Act-related  standard operating procedures or agency guidance, including the roles  and responsibilities of agency stakeholders. For example, one OIG  recommended that its agency update its guidance on what address to use  for primary place of performance to be consistent with OMB and Treasury  guidance.", "Maintain documentation. Recommendations related to establishing or  maintaining documentation of the agency\u2019s procedures, controls, and  related roles and responsibilities for performing them. For example, one  OIG recommended that its agency develop a central repository for grant  award documentation and maintain documentation to support its DATA  Act submissions.", "Provide training. Recommendations related to developing,  implementing, and documenting training for an agency\u2019s DATA Act  stakeholders. For example, one OIG recommended that its agency  provide mandatory training to all contracting officers and grant program  staff to ensure their understanding of DATA Act requirements.", "Work with Treasury, OMB, and other external stakeholders.  Recommendations for the agency to work with Treasury, OMB, or other  stakeholders external to the agency to resolve government-wide issues.  For example, one OIG recommended that its agency work closely with its  federal shared service provider to address timing and coding errors that  the service provider caused for future DATA Act submissions.", "Implement systems controls or modify systems. Recommendations  related to developing and implementing automated systems and controls.  For example, one OIG recommended that its agency complete the  implementation of system interfaces and new procedures that are  designed to improve collection of certain data that were not reported  timely to FPDS-NG and improve linkages of certain financial transactions  and procurement awards using a unique procurement instrument  identifier.", "Increase resources. Recommendations related to increasing the staff,  resources, or both necessary to fully implement DATA Act requirements.  For example, one OIG recommended that its agency allocate the  resources to ensure that reconciliations are performed when  consolidating source system data to the DATA Act submission files.", "Management for 36 agencies stated that they concurred or generally  concurred with the recommendations of their OIGs (see fig. 7).  Management at many of these agencies stated that they continued to  improve their processes and controls for subsequent data submissions. In  addition, management for seven agencies stated that they partially  concurred with the recommendations that their OIGs made. Management  for two agencies did not concur with their OIGs\u2019 recommendations.  Management for one agency that did not concur with the  recommendations stated that they should not be held responsible for data  discrepancies that other agencies caused, and management for the other  agency stated that they followed authoritative guidance that OMB and  Treasury issued related to warnings and error messages."], "subsections": []}]}, {"section_title": "OMB Staff and Treasury Officials Said They Use OIG Reports to Identify and Resolve Issues and Determine the Need for Additional Guidance", "paragraphs": ["OMB staff told us that they reviewed the OIG reports\u2014focusing on the 24  CFO Act agencies\u2014to better understand issues that the OIGs identified  and to determine whether additional guidance is needed to help agencies  improve the completeness, timeliness, accuracy, and quality of their  DATA Act submissions. OMB staff explained to us how they have or are  planning to address OIG-identified issues. OMB staff told us that in April  2017 the CFO Council\u2019s DATA Act Audit Collaboration working group was  formed, which includes officials from OMB, Treasury, and the Chief  Financial Officers (CFO) Council to foster collaboration and  understanding of the risks that were being identified as agencies  prepared and submitted their data. The working group also consults with  CIGIE, which is not a member of the working group, but its  representatives attend meetings to help the group members better  understand issues involving the OIG reviews and the IG guide. According  to OMB staff, the working group is the focal point to identify government- wide issues and identify guidance that can be clarified. They also told us  that OMB continues to meet with this working group to determine what  new guidance is needed to meet the DATA Act requirement to ensure  that the standards are applied to the data available on the website. In  June 2018, OMB issued new guidance requiring agencies to develop data  quality plans intended to achieve the objectives of the DATA Act.  According to OMB staff, OMB is committed to ensuring integrity and  providing technical assistance to ensure data quality.", "Treasury officials told us that they reviewed OIG reports that were publicly  available on Oversight.gov and are collaborating with OMB and the CFO  Council to identify and resolve government-wide issues, including issues  related to the broker, so that agencies can focus on resolving their  agency-specific issues. In February 2018, the working group documented  certain topics identified for improving data quality and value.", "OMB staff and Treasury officials also told us that OMB and Treasury have  taken steps to address issues we previously reported related to their  oversight of agencies\u2019 implementation of the DATA Act. For example, we  recommended in April 2017 that OMB and Treasury take appropriate  actions to establish mechanisms to assess the results of independent  audits and reviews of agencies\u2019 compliance with the DATA Act  requirements. The DATA Act Audit Collaboration working group is one  of the mechanisms OMB and Treasury use to assess and discuss the  results of independent audits and to address identified issues.", "In November 2017, we also recommended, among other things, that  Treasury (1) reasonably assure that ongoing monitoring controls to help  ensure the completeness and accuracy of agency submissions are  designed, implemented, and operating as designed, and (2) disclose  known data quality issues and limitations on the new USAspending.gov.  Treasury has taken some steps and is continuing to take steps to address  these recommendations. For example, under the data quality section of  the About page on USAspending.gov, Treasury disclosed the requirement  for each agency OIG to report on its agency\u2019s compliance with the DATA  Act and noted the availability of the reports at Oversight.gov."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to OMB, Treasury, and CIGIE for  comment. We received written comments from CIGIE that are reproduced  in appendix III and summarized below. In addition, OMB, Treasury, and  CIGIE provided technical comments, which we incorporated as  appropriate.", "In its written comments, CIGIE noted that the report provides useful  information on OIG efforts to meet oversight and reporting responsibilities  under the DATA Act. CIGIE further stated that it believes that the report  will contribute to a greater understanding of the oversight work that the  OIG community performs and of agency efforts to report and track  government-wide spending more effectively.", "We are sending copies of this report to the Director of the Office of  Management and Budget, the Secretary of the Treasury, the Chairperson  and Vice Chairperson of the Council of the Inspectors General on  Integrity and Efficiency, as well as interested congressional committees  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 staffs have any questions about this report, please contact  me at (202) 512-9816 or rasconap@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Digital Accountability and Transparency Act of 2014 (DATA Act)  includes provisions requiring us to review the Offices of Inspector  Generals\u2019 (OIG) mandated reports and issue our own reports assessing  and comparing the completeness, timeliness, accuracy, and quality of the  data that federal agencies submit under the act and the federal agencies\u2019  implementation and use of data standards. We issued our first report on  data quality in November 2017, as required. This report includes our  review of the OIGs\u2019 mandated reports, which were also issued primarily in  November 2017. Our reporting objectives were to describe  1.  the reported scope of work covered and type of audit standards OIGs  used in their reviews of agencies\u2019 DATA Act spending data;  2.  any variations in the reported implementation and use of data  standards and quality of agencies\u2019 data, and any common issues and  recommendations reported by the OIGs; and  3.  the actions, if any, that the Office of Management and Budget (OMB)  and the Department of the Treasury (Treasury) have reported taking  or planning to take to use the results of OIG reviews to help monitor  agencies\u2019 implementation of the act.", "To address our first and second objectives, we obtained and reviewed 53  OIG reports that were issued on or before January 31, 2018, including  reports related to 24 Chief Financial Officers Act of 1990 (CFO Act)  agencies and 29 non-CFO Act agencies. Of 91 entities for which  second quarter fiscal year 2017 spending data were submitted, we did not  obtain and review OIG DATA Act reports for 38 entities with obligations  totaling at least $1.2 billion (as displayed on USAspending.gov on May  23, 2018) because no reports for those entities were publicly available by  our January 31, 2018, cutoff date.", "Table 3 lists the 53 agencies for which we obtained and reviewed the OIG  reports on the quality of data that agencies submitted in accordance with  DATA Act requirements.", "We also developed and conducted a survey of OIGs to provide further  details on the design and results of their efforts to conduct statistical  samples to select and test agencies\u2019 data submissions and reviews of  internal controls. In November 2017, we sent the survey to those OIGs  whose agencies originally submitted DATA Act data to Treasury\u2019s DATA  Act broker. We received and reviewed responses from the 53 OIGs that  we obtained reports from, with 9 OIGs including the completed surveys in  their published reports and the others providing us their completed survey  responses separately. We analyzed 53 OIG reports and survey  responses, following up with OIGs for clarification when necessary.", "We reviewed each of the 53 OIG reports we obtained and identified the  reported scope of work covered (e.g., the quarter of data reviewed) and  the type of audit standards OIGs used to conduct their reviews (e.g.,  performance audit or attestation examination engagement). We also  developed and used a data collection instrument to compile and  summarize the conclusions and opinions included in the OIG reports on  the completeness, timeliness, accuracy, and quality of agencies\u2019 data  submissions and their implementation and use of data standards. During  this process, GAO analysts worked in teams of three to reach a  consensus on how these OIG conclusions and opinions were  categorized. For OIG reports that did not specifically state whether the  agencies met the DATA Act requirements, we considered the reported  results in conjunction with the more detailed information provided in the  OIG responses to our survey and made conclusions about the OIGs\u2019  assessments based on our professional judgment.", "We also reviewed the OIG reports and survey responses and used two  data collection instruments to compile, analyze, and categorize common  issues or agency-specific control deficiencies the OIGs identified in their  reviews and recommendations they made to address them. During this  process, GAO analysts worked in teams of three to obtain a consensus in  how these issues and deficiencies were categorized.", "To address our third objective, we interviewed OMB staff and Treasury  officials about how they used or planned to use the results of the OIG  DATA Act reviews to assist them in their monitoring of agencies\u2019  implementation of the act.", "We conducted this performance audit from September 2017 to July 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Offices of Inspector General Digital Accountability and Transparency Act of 2014 Testing Results", "paragraphs": ["In their survey responses, Offices of Inspector General (OIG) for 45  agencies reported actual overall error rates or estimated error rates and  estimated ranges of errors associated with the spending data transactions  they tested for accuracy, completeness, or timeliness (see table 4).  These results include OIGs that tested a statistical sample of  transactions, tested the full population, and conducted an assessment of  internal controls without additional substantive testing. OIGs that tested a  sample responded that they used different sampling criteria, and the  sources of files they used to select their statistical samples varied based  on the files that were available. Regardless of whether the OIG tested a  sample or the full population, some of the OIGs selected items for testing  from File C, File D1, File D2, or some combination thereof. As a result,  the overall error rates the OIGs reported are not from the same data  submission files and are not fully comparable, but are intended to provide  additional information on the individual results of the completeness,  timeliness, and accuracy of the data each agency OIG tested."], "subsections": []}, {"section_title": "Appendix III: Comments from the Council of the Inspectors General on Integrity and Efficiency", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michael LaForge (Assistant  Director), Diane Morris (Auditor in Charge), Umesh Basnet, Thomas  Hackney, and Laura Pacheco made major contributions to this report.  Other key contributors include Dave Ballard, Carl Barden, Maria Belaval,  Jenny Chanley, Patrick Frey, Ricky Harrison, Jason Kelly, Jason Kirwan,  Quang Nguyen, Samuel Portnow, Carl Ramirez, Anne Rhodes-Kline, and  Dacia Stewart."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness  and Accuracy of Spending Data and Disclose Limitations. GAO-18-138.  Washington, D.C.: November 8, 2017.", "DATA Act: As Reporting Deadline Nears, Challenges Remain That Will  Affect Data Quality. GAO-17-496. Washington, D.C.: April 28, 2017.", "DATA Act: Office of Inspector General Reports Help Identify Agencies\u2019  Implementation Challenges. GAO-17-460. Washington, D.C.: April 26,  2017.", "DATA Act: Implementation Progresses but Challenges Remain. GAO-17- 282T. Washington, D.C.: December 8, 2016.", "DATA Act: OMB and Treasury Have Issued Additional Guidance and  Have Improved Pilot Design but Implementation Challenges Remain.  GAO-17-156. Washington, D.C.: December 8, 2016.", "DATA Act: Initial Observations on Technical Implementation. GAO-16- 824R. Washington, D.C.: August 3, 2016.", "DATA Act: Improvements Needed in Reviewing Agency Implementation  Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29,  2016.", "DATA Act: Progress Made but Significant Challenges Must Be Addressed  to Ensure Full and Effective Implementation. GAO-16-556T. Washington,  D.C.: April 19, 2016.", "DATA Act: Data Standards Established, but More Complete and Timely  Guidance Is Needed to Ensure Effective Implementation. GAO-16-261.  Washington, D.C.: January 29, 2016.", "DATA Act: Progress Made in Initial Implementation but Challenges Must  be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.:   July 29, 2015."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-160", "url": "https://www.gao.gov/products/GAO-18-160", "title": "U.S. Territories: Public Debt Outlook", "published_date": "2017-10-02T00:00:00", "released_date": "2017-10-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The United States has five territories: Puerto Rico, American Samoa, CNMI, Guam, and USVI. The territories, like U.S. states in some cases, borrow through financial markets. Puerto Rico in particular has amassed large amounts of debt, and defaulted on billions of dollars of debt payments. In response to the fiscal crisis in Puerto Rico, Congress enacted and the President signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in June of 2016, which established an Oversight Board with broad powers of budgetary and financial control over Puerto Rico and requires GAO to study fiscal issues in all five U.S. territories.", "In this report, for each territory for fiscal years 2005-2015, GAO examined (1) trends in public debt and its composition, (2) trends in revenue and its composition, (3) the major reported drivers of the territory's public debt, and (4) what is known about the ability of each territory to repay public debt.", "GAO analyzed the territories' single audit reports; interviewed officials from the territories' governments, ratings agencies, and subject matter experts; and reviewed documents and prior GAO work."]}, {"section_title": "What GAO Found", "paragraphs": ["Puerto Rico: Between fiscal years 2005 and 2014, the latest figures available, Puerto Rico's total public debt outstanding (public debt) grew from $39.2 billion to $67.8 billion, reaching 66 percent of Gross Domestic Product (GDP). Despite some revenue growth, Puerto Rico's net position was negative and declining during the period, reflecting its deteriorating financial position. Experts pointed to several factors as contributing to Puerto Rico's high debt levels, and in September 2016 Puerto Rico missed up to $1.5 billion in debt payments. The outcome of the ongoing debt restructuring process will determine future debt repayment.", "American Samoa: American Samoa's public debt more than doubled in fiscal year 2015 to $69.5 million, but remained small relative to its economy, with a debt to GDP ratio of 10.9 percent. American Samoa's debt was primarily used to fund infrastructure projects. Between fiscal years 2005 and 2015, revenues grew and the government's net position was positive and generally improving. GAO previously reported that American Samoa relies heavily on the tuna processing and canning industry. Disruptions in this industry could affect its ability to repay debt.", "Commonwealth of the Northern Mariana Islands (CNMI): CNMI's public debt declined from $251.7 million to $144.7 million between fiscal years 2005 and 2015, decreasing CNMI's debt to GDP ratio to 16 percent. Most of CNMI's debt was used to refinance prior debt and fund infrastructure projects. Despite revenue growth since fiscal year 2011, CNMI's net position was negative and generally declining during the period. GAO previously reported that labor shortages may affect GDP. This could impede CNMI's ability to repay debt in the future.", "Guam: Between fiscal years 2005 and 2015, Guam's public debt more than doubled from almost $1 billion to $2.5 billion, with a debt to GDP ratio of 44 percent for fiscal year 2015. Most of Guam's debt was used to comply with federal requirements and court orders. Revenue grew during this period, and net position fluctuated significantly, with a negative balance in fiscal year 2015. Despite recent and expected economic growth, GAO found that large unfunded pension and other post-employment benefit (OPEB) liabilities may present a risk.", "U.S. Virgin Islands (USVI): Between fiscal years 2005 and 2015, USVI's public debt nearly doubled, reaching $2.6 billion and a debt to GDP ratio of 72 percent. Since 2010, most of USVI's debt was used to fund general government operations. Revenue remained stagnant and net position was negative and declining during the period, reflecting a deteriorating financial position. While USVI holds a year's worth of debt service payments in reserve, GAO found that economic uncertainty and looming government pension fund insolvency by 2023 may hamper repayment. In early 2017, USVI was unable to access capital markets to issue new debt at favorable rates. Although the government adopted a financial plan intended to reduce expenditures and increase revenue, the plan does not address USVI's significant unfunded pension and OPEB liabilities and it is unclear whether the plan will produce the intended level of savings."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The United States has five territories\u2014Puerto Rico, American Samoa, the  Commonwealth of the Northern Mariana Islands (CNMI), Guam, and the  U.S. Virgin Islands (USVI)\u2014that are permanently inhabited and have  elected governors, territorial legislatures, and non-voting members in the  U.S. House of Representatives. Local officials make budgetary decisions  about borrowing and therefore the level of debt held by the public in each  territory. These territories, like U.S. states in some cases, borrow through  financial markets for long-term investments, such as infrastructure  projects, or when their budgets are in deficit. The territories, like other  borrowers, pay interest on their debt. Both the amounts borrowed and the  interest rates determine the amount of interest spending. If unchecked,  interest spending can absorb resources that could be used instead to  provide government services. In extreme situations, borrowers might be  unable to borrow at favorable rates if the market loses confidence in their  ability to repay the debt.", "Puerto Rico, in particular, has amassed large amounts of debt. In  February 2014, Puerto Rico\u2019s general obligation bonds were downgraded  to speculative\u2014noninvestment grade\u2014 by two ratings agencies, Fitch  and Standard and Poor\u2019s, and to the lowest rating of investment grade by  Moody\u2019s. Since August 2015, Puerto Rico has defaulted on up to $1.5  billion in debt payments. In response to the crisis in Puerto Rico,  Congress passed and the President signed the Puerto Rico Oversight,  Management, and Economic Stability Act (PROMESA) in June 2016.   PROMESA established a Financial Management and Oversight Board  (Board) with broad powers of budgetary and financial control over Puerto  Rico. PROMESA also requires us to study fiscal issues in the territories  and periodically report on the public debt of each U.S. territory.", "For Puerto Rico, American Samoa, CNMI, Guam, and USVI, this report  describes (1) trends in public debt and its composition between fiscal  years 2005 and 2015, (2) trends in revenue and its composition between  fiscal years 2005 and 2015, (3) the major reported drivers of the territory\u2019s  public debt, and (4) what is known about the ability of the territory to  repay public debt.", "This report is organized by territory. Because of the wide variation  amongst the territories, including differences in their sizes, populations,  locations, and economies, it is important to consider each territory as a  distinct entity.", "To describe trends in each territory\u2019s public debt, revenue, and  composition, we reviewed the audited financial statements included within  each territory\u2019s single audit reporting package,  hereinafter referred to as the single audit reports, fiscal years 2005 through 2015  and analyzed  data on public debt\u2014specifically, bonds, loans, and notes for both the  primary government and component units\u2014for each of those years. In  addition, we obtained and reviewed data on each of the territories\u2019  revenue from the same single audit reports for each fiscal year for both  the primary governments and component units.  Our analysis primarily  focused on trends in general revenues  because the territories\u2019 public  debt is either explicitly or implicitly backed by general revenues. We also  included total revenue\u2014general revenues and program revenues   combined\u2014in our analysis because it includes revenue generated by the  territories\u2019 component units and could be used to service debt payments.", "For each territory, we obtained and reviewed the independent auditor\u2019s  report corresponding to each single audit and noted the type of opinion  that was expressed on the financial statements and accompanying note  disclosures.  With the exception of Puerto Rico each of the territories  received modified opinions by auditors on one or more of the single audit  reports included in our analysis. We reviewed each of these opinions and  determined that despite the modified opinions the data we obtained from  each of the single audit reports was reliable for the purpose of describing  trends in debt and revenue and their composition for the fiscal years  included in our analysis.", "To determine the major reported drivers of public debt and what is known  about the territories\u2019 ability to repay, we interviewed officials from the  territories\u2019 governments, including officials from the Governors\u2019 offices,  departments of finance or treasury, and the agency responsible for  issuing and marketing bonded debt. In addition, we interviewed  representatives of the three rating agencies\u2014 Fitch, Moody\u2019s and  Standard and Poor\u2019s\u2014that provide credit ratings for the territories\u2019  securities and an investment bank involved with underwriting the  territories\u2019 bonds. We also interviewed subject matter experts and officials  at the Department of the Interior\u2019s Office of Insular Affairs (OIA), which  provides grant aid and technical assistance and support to the  territories.  In addition, we obtained and reviewed relevant  documentation, reports, and analyses from the territorial governments  and ratings agencies. We also obtained and reviewed information on  territorial bond issuances from 2005 through 2015 from the Electronic  Municipal Market Access (EMMA) database of the Municipal Securities  Rulemaking Board, the primary regulator of the municipal securities  market.", "In addition, to determine what is known about the territories\u2019 ability to  repay public debt we analyzed common factors\u2014identified through prior  work, documents, and interviews with the three rating agencies\u2014that  indicate territories\u2019 potential vulnerability to debt crises. These factors  included 1) the extent to which territories consistently issued debt to fund  general government operations, 2) the extent to which territories\u2019  economies were vulnerable to shocks due to a heavy dependence on a  single or limited industry, and 3) the extent to which territories faced large  fiscal risks such as pension liabilities.", "We conducted this performance audit from September 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Public Debt and Revenue", "paragraphs": ["Territorial governments issue debt securities and receive loans for a  variety of purposes, including to finance long-term investments, such as  infrastructure projects, and to fund government operating costs. For the  purposes of this report, total public debt outstanding refers to the sum of  bonds and other debt held by and payable to the public, as reported in the  territories\u2019 single audit reports. Bonds payable are marketable bonded  debt securities issued by the territories\u2019 primary governments or their  component units and held by investors outside those governments. The  primary government is generally comprised of governmental activities  (generally financed with taxes and intergovernmental aid) and business- type activities (generally financed with charges for goods and services).  Component units are legally separate entities for which a government is  financially accountable. For the purposes of this report, any reference to  total government activity and balances includes both the primary  government and component units. Other debt payable may include  shorter term marketable notes and bills issued by territorial governments  and held by investors outside those governments, non-marketable  intragovernmental notes, notes held by local banks, federal loans,  intragovernmental loans, and loans issued by local banks. Pension  liabilities and other post-employment benefits (OPEB)  are not included  in our definition of total public debt.", "Marketable debt securities, primarily bonds with long-term maturities, are  the main vehicle by which the territories access capital markets. Municipal  bonds issued by all five territories have traditionally been attractive to  investors because they are triple tax exempt; interest from the bonds is  generally not subject to federal, state, and local income taxes regardless  of an investor\u2019s state of residence. There are several different types of  marketable debt securities:", "General obligation bonds are bonds issued by territorial governments  that are payable from the general funds of the issuer, although the  precise source and priority of payment for general obligation bonds  may vary considerably from issuer to issuer depending on applicable  law. Most general obligation bonds are said to entail the full faith and  credit (and in many cases the taxing power) of the issuer, depending  on applicable law. In USVI, unlike in the other four territories in which  general obligations bonds are backed by the full faith and credit of the  government, debt issued by the primary government is either backed  by 1) both a general obligation of the government and revenue from  USVI\u2019s gross receipts tax, or 2) revenue from the federal excise tax on  rum rebated to the territory.", "Limited obligation bonds are bonds payable from specific taxes that  are limited by law in rate or amount, while revenue bonds are payable  from specific sources of revenue.", "Marketable notes differ from bonds in that they are short-term  obligations of an issuer to repay a specified principal amount on a  certain date, together with interest at a stated rate, usually payable  from a defined source of anticipated revenues. Notes usually mature  in 1 year or less, although notes of longer maturities are also issued.", "Bonds and notes may be issued by both the territories\u2019 primary  governments and by their component units. Examples of the territories\u2019  component units are USVI\u2019s Water and Power Authority, Guam\u2019s Airport  Authority, CNMI\u2019s Ports Authority, and Puerto Rico\u2019s Electric Power  Authority.", "Unlike the states, territories are prohibited from authorizing their  component units to seek debt restructuring under Chapter 9 of the federal  bankruptcy code, which can be used to extend the timeline for debt  repayment, refinance debt, or reduce the principal or interest on existing  debt.", "U.S. law restricts the territories\u2019 authority to impose certain territorial  taxes. Three territories\u2014Guam, CNMI, and USVI\u2014are required by U.S.  law to have a mirror tax code.  In general this means that these  territories must use the U.S. Internal Revenue Code (IRC) as their  territorial income tax law. In contrast, American Samoa and Puerto Rico,  which are not bound by a mirror tax code, have established and  promulgated their own income tax regulations. Although Guam and CNMI  are mirror-code jurisdictions, they are authorized under the Tax Reform  Act of 1986 to delink from the IRC if certain conditions are met.", "Revenues are amounts that result from governments\u2019 exercise of their  sovereign power to tax or otherwise compel payment. Revenues also  include income generated by the territories\u2019 component units. While our  analysis primarily focuses on trends in general revenues, we also include  total revenue\u2014general revenues and program revenues combined\u2014in  our analysis. In addition to general revenue levels, another measure of  fiscal health is the net position for primary government activities, which  represents the difference between the primary government\u2019s assets  (including the deferred outflows of resources) and the primary  government\u2019s liabilities (including the deferred inflows of resources). In  other words, the net position for primary government activities reflects  what the primary government would have left after satisfying its liabilities.  A negative net position means that the primary government has more  liabilities than assets. A decline in net position may indicate a  deteriorating financial position. While our analysis primarily focuses on  trends in the net position for the primary government, we also include  certain information on trends in the total net position\u2014primary  government net position and component unit net position combined\u2014 for  the government.", "Fiscal risks refer to responsibilities, programs, and activities that may  legally commit or create the expectation for future government spending.  Fiscal risks may be explicit in that the government is legally required to  fund the commitment, or implicit in that an exposure arises not from a  legal commitment, but from current policy, past practices, or other factors  that may create the expectation for future spending. Civilian pension  benefits are typically an example of an explicit fiscal risk because the  government has a legal commitment to pay pension benefits earned by  current government employees who will receive benefits in the future and  to pay retirees who currently receive benefits."], "subsections": []}]}, {"section_title": "Puerto Rico", "paragraphs": [], "subsections": [{"section_title": "Puerto Rico\u2019s Total Public Debt Increased by 73 Percent and It Grew from 47 to 66 Percent of GDP between Fiscal Years 2005 and 2014", "paragraphs": [], "subsections": [{"section_title": "Total Public Debt Outstanding", "paragraphs": ["Puerto Rico\u2019s total public debt outstanding increased continuously  between fiscal years 2005 and 2014.  (See figure 2.) Total public debt  grew from $39.2 billion in fiscal year 2005 to $67.8 billion at the end of  fiscal year 2014 \u2014an average rate of 6.3 percent per year. Bonded  debt outstanding \u2014including mainly general obligation and revenue  bonds\u2014represented the majority of total public debt outstanding for all  years. Bonded debt outstanding averaged 86 percent of total public debt  between fiscal years 2005 and 2014, increasing from a total of $35 billion  in fiscal year 2005 to $58.5 billion in fiscal year 2014. Puerto Rico\u2019s  Consolidated Audited Financial Report for fiscal year 2015 was not  available as of June 2017. However, in the March 13, 2017, fiscal plan  released by the Government of Puerto Rico, total public debt outstanding  was listed as $74.3 billion as of February 2017.", "As of fiscal year 2014, the primary government\u2019s bonded debt outstanding  was mainly comprised of revenue bonds. These accounted for $24.3  billion of the $37.9 billion in total bonded debt. In contrast, between fiscal  years 2005 and 2008, general obligation bonds represented the majority  of the primary government\u2019s bonded debt. In fiscal year 2009, the amount  of revenue bonds outstanding tripled. The risks of general obligation  bonds and revenue bonds are different. A revenue bond is secured by a  specific revenue stream, identified in the bond contract, whereas a  general obligation bond is secured by the full taxing power of the  government, but also reliant on the full faith and credit of the issuing  government. Puerto Rico also issued notes between fiscal years 2005  and 2014.", "Puerto Rico\u2019s primary government and the three largest component  units\u2014the Puerto Rico Electric Power Authority (PREPA), the Puerto Rico  Aqueduct and Sewage Authority (PRASA), and the Puerto Rico Highways  and Transportation Authority (PRHTA)\u2014owed the majority of Puerto  Rico\u2019s public debt outstanding in fiscal year 2014. (See table 1.) These  component units mostly issued debt backed by their own resources,  including the revenue generated from their operations. Other component  units also held public debt in fiscal year 2014, including the Government  Development Bank, State Insurance Fund Corporation and the Puerto  Rico Trade and Export Company, among others. The primary  government\u2019s share of total public debt outstanding grew relative to debt  owed by all of the component units from 44 percent in fiscal year 2005 to  59 percent in fiscal year 2014.", "Puerto Rico\u2019s total public debt outstanding as a percentage of Gross  Domestic Product (GDP) grew from 47 percent in fiscal year 2005 to 66  percent in fiscal year 2014, and its ratio of total public debt outstanding to  Gross National Product (GNP) grew from 71 percent of GNP in fiscal year  2005 to 99 percent in fiscal year 2014.  (See figure 3.) GDP measures  the value of goods and services produced inside a country, or for the  purpose of this report, a territory. In contrast, GNP measures the value of  goods and services produced by its residents. GNP includes production  from residents abroad and excludes production by foreign companies in a  country. In Puerto Rico, GDP has consistently been greater than GNP,  which means that production by foreign companies in Puerto Rico is  larger than production by Puerto Rican residents in the territory and  abroad. For this reason, according to the U.S. Department of the  Treasury, GNP is generally a more representative measure of Puerto  Rico\u2019s economic activity than GDP.", "A July 2014 report by the Federal Reserve Bank of New York stated that  debt to GNP ratios above just 60 percent can inhibit economic growth  because they generally lead to higher financing costs and limit access to  other sources of financing.  Puerto Rico\u2019s share of total public debt  outstanding to GNP has remained above 90 percent since 2010.", "Puerto Rico\u2019s total public debt outstanding per capita has almost doubled  since fiscal year 2005, rising from $10,000 per person in fiscal year 2005  to $19,000 per person in fiscal year 2014. (See figure 4.)"], "subsections": []}]}, {"section_title": "Despite Some Growth in General Revenue, Puerto Rico\u2019s Net Position Declined between Fiscal Years 2005 and 2014", "paragraphs": ["Puerto Rico\u2019s general revenue fluctuated between fiscal years 2005 and  2014, with lows around $11.6 billion between fiscal years 2008 and 2010  and again in 2013. Puerto Rico\u2019s general revenue in fiscal year 2014 was  $13.8 billion, of which 75 percent or $10.3 billion was tax revenue. Most  of the tax revenue for the same year was reported as income taxes (52  percent of the total or $5.4 billion) and excise taxes (33 percent of the  total or $3.4 billion.) Revenue in fiscal year 2014 increased by over $2  billion from the prior year. The majority of this growth was due to  increases in income and excise taxes. Puerto Rico\u2019s total revenue (i.e.  general revenue and program revenue combined) also fluctuated but  grew slightly by 3 percent on average, per year, from $25.5 billion in fiscal  year 2005 to $32.5 billion in fiscal year 2014. (See figure 5.)", "Despite the growth in revenue in fiscal year 2014, Puerto Rico\u2019s net  position for the primary government as of fiscal year end 2014 was a  negative $49.7 billion, declining from a negative $46.4 billion as of fiscal  year end 2013. Moreover, despite the fluctuations in revenue between  fiscal years 2005 and 2014, Puerto Rico\u2019s net position for the primary  government declined year over year from a negative $15.2 billion as of  fiscal year end 2005 to a negative $49.7 billion as of fiscal year end  2014.  Puerto Rico\u2019s declining net position for the primary government  reflects its deteriorating financial position. Further, the effect of Puerto  Rico implementing Governmental Accounting Standards Board (GASB)", "Statement No. 68, Accounting and Financial Reporting for Pensions \u2014An  Amendment of GASB Statement No. 27, is not yet known. GASB  Statement No. 68 was in effect for fiscal years beginning after June 15,  2014, and established standards for measuring and recognizing liabilities,  deferred outflows of resources, and deferred inflows of resources related  to pensions. For each of the other territories that implemented GASB  Statement No. 68, implementing the statement resulted in the territory  recognizing previously unrecognized net pension liabilities and, therefore,  a decline in ending net position in the year of recognition.", "Puerto Rico\u2019s total net position for the primary government and  component units combined also declined year over year between fiscal  years 2005 and 2014, from a positive $2.5 billion as of fiscal year end  2005 to a negative $43.6 billion as of fiscal year end 2014."], "subsections": []}, {"section_title": "Experts Identified Several Factors That Have Contributed to Puerto Rico\u2019s High Debt Levels", "paragraphs": ["Puerto Rico officials, representatives from ratings agencies that we spoke  to, and publically available reports that we reviewed cited various major  factors as contributors to Puerto Rico\u2019s high debt levels.  The factors  cited include the following:", "Public debt financing government operations: Ratings agency  officials told us that Puerto Rico has long used public debt as a means  to finance general government operations and indicated that debt has  been used for this purpose in Puerto Rico since at least 2000.  According to these officials, the sustained use of debt to finance  general government operations is unusual when compared to states  and was considered a \u201cred flag\u201d in the case of Puerto Rico. As Puerto  Rico\u2019s debt grew, the government found it increasingly difficult to meet  other responsibilities, including paying tax returns, settling accounts  payable, and fulfilling pension obligations.", "Triple tax exempt status: Debt in Puerto Rico was attractive to  investors for its triple tax exempt status. Over time, Puerto Rico\u2019s  primary government accumulated debt from investors without  addressing its persistent deficits. According to the February 28, 2017,  version of the Puerto Rico government\u2019s fiscal plan, Puerto Rico\u2019s  capacity to issue debt at favorable rates postponed the  implementation of fiscal reforms and controls necessary to balance  Puerto Rico\u2019s budget.", "Financial data limitations: A lack of comprehensive, timely, and  accurate financial data from Puerto Rico may have limited the ability  of some investors to anticipate or fully understand the economic crisis  in the territory. For example, according to the Government of Puerto  Rico\u2019s February 28, 2017, version of the fiscal plan, audited financial  statements for Puerto Rico were only issued on time three times from  2005 to 2014. Audited financial statements are still currently pending  for fiscal years 2015 and 2016. In addition, forecasts routinely  overestimated revenue.", "Recession and outmigration: Recession and outmigration have  resulted in reduced tax revenue. A recession in Puerto Rico began in  2006 and continued through the period we reviewed. Outmigration  also accelerated most years since 2005 as Puerto Ricans migrated to  the U.S. mainland and elsewhere. According to U.S. Census Bureau  estimates, Puerto Rico lost 14 percent of its population, more than  550,000 individuals, between July 2009 and July 2016.", "936 tax credit phase out: The phase out of the section 936 tax credit  is often cited by Puerto Rico officials for its negative effect on Puerto  Rico\u2019s economy. Other experts said the effect was not as significant.  In addition, in 2006, we reported that the expiration of the benefit did  not ultimately lead to a reduction in income and value added.  A  substantial share of production in Puerto Rico is carried out by U.S.  multinational corporations, in part because of federal corporate  income tax benefits, once available to firms located in Puerto Rico.  Prior to 1994, certain U.S. corporations could claim the possessions  tax credit under section 936 of the Internal Revenue Code (IRC). In  general, the credit equaled the full amount of federal tax liability  related to an eligible corporation\u2019s income from its operations in a  possession\u2014including Puerto Rico\u2014effectively making such income  tax-free. In 1993, caps were placed on the amount of possessions  credits that corporations could earn. In 1996, the credit was repealed,  although corporations that were existing credit claimants were eligible  to claim credits through 2005."], "subsections": []}, {"section_title": "Outcomes of Restructuring Process Will Determine Outlook for Repayment of Debt", "paragraphs": ["Puerto Rico had missed up to $1.5 billion in debt service payments as of  September 2016. Puerto Rico\u2019s government is working with the Financial  Management and Oversight Board (Board) to implement plans for long- term financial reform and to adjust debts accrued by both the primary  government and public corporations. The Board has the power to approve  or certify fiscal plans, budgets, voluntary agreements with bondholders,  debt restructuring plans, and critical projects within Puerto Rico. As the  first step in a process to adjust debts in Puerto Rico, the Board certified  the current Governor\u2019s fiscal plan in March 2017, which outlines  strategies for financial reform. The fiscal plan includes estimates for  how much each year can be allocated for debt payments, which average  23 percent of total debt payments due for the years 2018 through 2026.  (See figure 6.)", "On May 3, 2017, the Board filed an initial petition for restructuring Puerto  Rico\u2019s debt and pension liabilities. Puerto Rico\u2019s ultimate liability for its  outstanding debt will be determined based on the outcome of this process  in federal court."], "subsections": []}]}, {"section_title": "American Samoa", "paragraphs": [], "subsections": [{"section_title": "American Samoa\u2019s Total Public Debt More Than Doubled and It Grew from 5 to 11 Percent of GDP between Fiscal Years 2005 and 2015", "paragraphs": [], "subsections": [{"section_title": "Total Public Debt Outstanding", "paragraphs": ["American Samoa\u2019s total public debt outstanding grew from $27 million in  fiscal year 2005 to $69.5 million in fiscal year 2015.  Until fiscal year  2015, the portion of American Samoa\u2019s total public debt outstanding that  was bonded debt outstanding was limited. (See figure 7.) In fiscal year  2007, the territory paid off a general obligation bond that was issued in  fiscal year 2000 to refinance prior debt. Between fiscal years 2008 and  2014, American Samoa had no outstanding bonded public debt. In fiscal  year 2015, American Samoa\u2019s primary government issued a general  obligation bond for about $55 million, and in January 2016 a second bond  was issued for $23 million. Most of American Samoa\u2019s bonded debt  outstanding is scheduled to mature by 2035.", "Between fiscal years 2005 and 2015, American Samoa\u2019s loan balance  was significantly greater than bonded debt outstanding for all years  except fiscal year 2015. American Samoa\u2019s loan balance consists of both  loans from the U.S. government and intragovernmental loans, or loans  between the territory\u2019s primary government and component units.  Between fiscal years 2005 and 2015, this included 1993 and 1994  Federal Emergency Management Agency community disaster loans  totaling $10.2 million and a 1999 Department of the Interior loan in the  amount of $18.6 million.  In 2006 and 2007, the primary government also entered into two loan agreements with the government retirement fund, in  the amounts of $10 million and $20 million, in part to finance  infrastructure projects.", "American Samoa\u2019s total public debt outstanding has remained small  relative to its economy between fiscal years 2005 and 2015. During this  period, American Samoa\u2019s total public debt outstanding as a percentage  of GDP was 5.3 percent in fiscal year 2005, reached a low of 4.4 percent  in fiscal year 2014, and grew to 10.9 percent in fiscal year 2015. During  this same period, bonded debt outstanding as a share of GDP was 1.3  percent in fiscal year 2005, declined to 0.44 percent in fiscal year 2007  and remained at 0 percent between fiscal years 2008 and 2014. The new  bond issuance in fiscal year 2015 increased the share to 8.6 percent.  (See figure 8.)", "Total public debt per capita grew from $414 per person in fiscal year 2005  to $1,212.8 in fiscal year 2015. (See figure 9.)"], "subsections": []}]}, {"section_title": "American Samoa\u2019s General Revenue Grew and Net Position Was Positive and Generally Improving between Fiscal Years 2005 and 2015", "paragraphs": ["American Samoa\u2019s general revenue fluctuated, but trended upward  between fiscal years 2005 and 2015. American Samoa\u2019s general revenue  of $116.5 million in fiscal year 2015 represented a 20 percent increase  over its revenue of $97.4 million in fiscal year 2005. Approximately 55  percent of the general revenue earned by American Samoa during this  period was comprised of tax revenue, and all of the tax revenue was from  income and excise taxes. American Samoa\u2019s total revenue (i.e. general  revenue and program revenue combined) also fluctuated but trended  upward between fiscal years 2005 and 2015. Its total revenue of $436.4  million in fiscal year 2015 represented a 55 percent increase over its total  revenue of $281.8 million in fiscal year 2005. According to territory  officials, growth in revenue during this period can be attributed in part to  revenue generated by stimulus funding the territory received as part of  the American Recovery and Reinvestment Act of 2009.  (See figure 10.)", "Along with the growth in revenue, American Samoa\u2019s net position for the  primary government was consistently positive and generally improving  between fiscal years 2005 and 2014. American Samoa\u2019s net position for  the primary government generally improved year over year from a  positive $217.7 million as of fiscal year end 2005 to a positive $291.9 as  of fiscal year end 2014; it then declined to a positive $245.1 million as of  fiscal year end 2015. American Samoa\u2019s net position for the primary  government as of fiscal year end 2014 is shown prior to restatement. In  fiscal year 2015, American Samoa implemented GASB Statement No. 68  and adjusted its beginning net position by $60.1 million, resulting in a  restated net position as of fiscal year end 2014 of a positive $240.8  million. The implementation of GASB Statement No. 68 resulted in the  territory recognizing previously unrecognized net pension liabilities and,  therefore, a decline in ending net position in the year of recognition.", "American Samoa\u2019s total net position for the primary government and  component units combined was also consistently positive and generally  improving between fiscal years 2005 and 2015. It increased from $317.9  million as of fiscal year end 2005 to $450.2 million as of fiscal year end  2015.", "The territory has previously faced financial management challenges,  including failures to meet revenue projections and deficiencies in  forecasting expenditures. Territory officials said, however, that they are  taking a number of steps to improve forecasting. In early 2015, officials  convened a task force in Hawaii to develop a plan to improve the  management of American Samoa\u2019s finances. As part of the effort to  improve forecasting, the plan requires the treasury and budget  departments to meet on a monthly basis to reconcile actual revenues and  expenditures and brief the Governor. If revenues are below projections,  the Governor may instruct all government departments to reduce  spending by an additional 5-10 percent. In addition, officials told us that  the territory is planning to procure a contractor in fiscal year 2017 to help  further improve its revenue and spending forecasts."], "subsections": []}, {"section_title": "American Samoa\u2019s Bonded Debt Was Issued Primarily to Fund Infrastructure Projects", "paragraphs": ["According to territory officials, American Samoa has never issued debt to  fund government operating costs and does not intend to do so. Territory  officials confirmed that the fiscal year 2015 and 2016 general obligation  bonds were issued primarily to fund various infrastructure projects,  including relocating airport fuel tanks, constructing an inter-island ferry,  and establishing a territorial charter bank."], "subsections": []}, {"section_title": "American Samoa Faces Economic Vulnerabilities That May Affect Its Ability to Repay Public Debt", "paragraphs": ["While American Samoa\u2019s level of public debt is relatively low compared to  other territories, we found that it faces significant economic vulnerabilities  that may hamper its ability to repay that debt. According to territory  officials and our prior work, American Samoa\u2019s economy relies heavily on  the tuna processing and canning industry.  In December 2016, we  reported that canneries employed about 14 percent of American Samoa\u2019s  workforce in 2014.  Moreover, we found that the canneries provided a  number of indirect benefits to other industries and the economy in  American Samoa. For example, other businesses exist because of the  canneries, such as the company that manufactures the cans.  Maintenance for the canneries and for the vessels that supply the  canneries also has brought business and jobs to the island. Cannery  workers spend money at local establishments, such as restaurants and  retail stores. Additionally, exported cannery products and delivery of  materials to the canneries reduced the shipping cost of bringing other  goods to American Samoa. We also reported that the tuna canning  industry faces a number of challenges; in addition territory officials  expressed concerns about federal policies that may hamper American  Samoa\u2019s tuna industry, such as scheduled minimum wage increases that  increase labor costs for tuna canning in American Samoa relative to other  locations, decreased access to fishing grounds in the Pacific due to  environmental regulations, and potential erosion of the territory\u2019s  preferential trade status. In October 2016, one of the two companies with  canning operations in American Samoa announced that it would  indefinitely suspend its operations in the territory, and the other  temporarily suspended operations twice during the same year. Changes  in American Samoa\u2019s tuna industry have been important determinants of  changes in its GDP, and additional disruptions in the industry would  reduce revenue and hamper GDP growth, which, if severe enough, could  impede the repayment of existing debt.", "In part because of such challenges, Moody\u2019s Investor Services assigned  a noninvestment grade rating to the territory\u2019s bonds in early 2016.  According to the rating agency, this downgrade reflected concerns  associated with the territory\u2019s small and volatile economy, low income  levels, weak financial position, and financial management challenges.  Territory officials told us that the Puerto Rico debt crisis has affected their  access to favorable rates in capital markets, and said that they currently  do not have plans to issue any more bonded debt."], "subsections": []}]}, {"section_title": "Commonwealth of the Northern Mariana Islands (CNMI)", "paragraphs": [], "subsections": [{"section_title": "CNMI\u2019s Total Public Debt Declined by $100 million, Decreasing to 16 Percent of GDP between Fiscal Years 2005 and 2015", "paragraphs": [], "subsections": [{"section_title": "Total Public Debt Outstanding", "paragraphs": ["CNMI\u2019s total public debt outstanding declined from $251.7 million in fiscal  year 2005 to $144.7 million in fiscal year 2015.  (See figure 11.) During  this time, CNMI\u2019s primary government issued one general obligation bond  in the amount of about $100.5 million in fiscal year 2007. This general  obligation bond refinanced two prior bonds that were issued in fiscal  years 2000 and 2003. Most of CNMI\u2019s bonded debt outstanding is  scheduled to mature in 2030 or later.", "Between fiscal years 2005 and 2015, CNMI\u2019s total public debt outstanding  as a share of GDP grew from 23 percent in fiscal year 2005 to 26 percent  in fiscal year 2007, and then declined to 16 percent in fiscal year 2015.  Bonded debt outstanding as a share of GDP was 14 percent in both fiscal  years 2005 and 2015, but reached 19 percent in fiscal year 2011. (See  figure 12.)", "CNMI\u2019s total public debt outstanding per capita declined from about  $4,199 per person in fiscal year 2007 to about $2,776 per person in fiscal  year 2015. (See figure 13.)"], "subsections": []}]}, {"section_title": "CNMI\u2019s General Revenue Fluctuated and Net Position Was Generally Declining between Fiscal Years 2005 and 2015", "paragraphs": ["CNMI\u2019s general revenue fluctuated between fiscal years 2005 and 2015.  General revenues declined by about 39 percent between fiscal years  2005 and 2011, largely due to the decline in the territory\u2019s garment  industry. (See figure 14.) General revenues have steadily increased since  fiscal year 2011, primarily as a result of growth in the tourism sector.   Data from the Marianas Visitor Authority show that the downward trend in  Japanese visitors from 2013 to 2016 was offset by the growth in visitors from China and South Korea. The tourist industry has also been  boosted by the introduction of a new casino. In August 2014, the CNMI  government entered into a casino license agreement to construct a  development project that will include a hotel with a minimum of 2,004  guest rooms and areas for gaming, food, retail, and entertainment, among  other things. CNMI\u2019s total revenue (i.e. general revenue and program  revenue combined) also fluctuated between fiscal years 2005 and 2015.  Total revenue reached a high of $635.7 million in fiscal year 2014 and  then declined to $573.8 million in fiscal year 2015, which represented only  a one percent increase over the fiscal year 2005 revenue of $567.9  million.", "While general revenue fluctuated, dipping then rebounding between fiscal  years 2005 and 2015, CNMI\u2019s net position for the primary government  has been negative and generally trending downward. Specifically, CNMI\u2019s  net position for the primary government declined from a negative $38.1  million as of fiscal year end 2005 to a negative $215.4 million as of fiscal  year end 2015.  CNMI\u2019s net position for the primary government has  been negative by over $200 million for each fiscal year since 2010, but it  showed a slight improvement between fiscal years 2011 and 2013 and in  fiscal year 2015.", "CNMI\u2019s total net position for the primary government and component units  combined fluctuated but generally remained stagnant, increasing slightly  from $281.6 million as of fiscal year end 2005 to $284.8 million as of fiscal  year end 2015."], "subsections": []}, {"section_title": "Between Fiscal Years 2005 and 2015, CNMI Issued Public Debt to Refinance Prior Debt and to Fund Infrastructure Projects", "paragraphs": ["CNMI\u2019s Constitution prohibits public indebtedness for operating expenses  of the CNMI government or its political subdivisions.  In addition, the  territory\u2019s legislature must approve any bond issuances and the value of  any bonds issued cannot exceed 10 percent of the assessed value of real  property within CNMI. In fiscal year 2007, the primary government of  CNMI issued one general obligation bond to refinance two bonds  originally issued in 2000 and 2003. Both the 2000 and 2003 bonds were  issued to finance various infrastructure improvement projects. The 2003  issuance was also used for a onetime payment to settle land claims for  the appropriation of private lands for public use.", "Component units in CNMI also issue debt. In 2007, the Commonwealth  Ports Authority, which is responsible for operating, maintaining, and  improving all airports and seaports in CNMI, issued a bond for about $7.2  million. The proceeds of the bond were used in part to pay for  improvements to seaport facilities at Saipan Harbor."], "subsections": []}, {"section_title": "Despite Economic Growth, CNMI Faces Labor Shortages and Fiscal Risks That May Affect Its Ability to Repay Public Debt", "paragraphs": ["While CNMI\u2019s economic outlook has improved, with GDP increasing 3  years in a row since 2013,  we found that the territory faces growing  labor shortages that may affect its ability to repay public debt in the future.  In May 2017, we reported that CNMI\u2019s economy relies heavily on a  foreign workforce and foreign workers comprised a majority of the  territory\u2019s workforce in 2015. The Consolidated Natural Resources Act of  2008, among other things, established federal control of CNMI  immigration beginning in 2009. The act established a transition period  with special provisions for foreign visitors, investors, and workers.   Specifically, it required the U.S. Department of Homeland Security (DHS)  to establish a temporary work permit program for foreign workers and to  reduce annually the number of permits issued, reaching zero by the end  of the transition period\u2014now set to occur on December 31, 2019. We  analyzed the economic effect of removing all permitted foreign workers  from CNMI\u2019s economy using the most recent GDP information available  from calendar year 2015. Depending on assumptions made, with no  permitted workers CNMI\u2019s GDP in 2015 would have hypothetically  declined by 26 to 62 percent. Planned reductions in permitted workers could worsen the effect on GDP going forward and hamper the territory\u2019s  ability to repay existing debt.", "CNMI also has significant pension liabilities, but the exact amount of the  net pension liability is not included in the territory\u2019s most recent single  audit report because the government has not complied with accounting  standards that require it to do so. In 2013, a U.S. district court approved a  settlement agreement with the territory\u2019s government pension plan, which  applied for bankruptcy in 2012. As part of the settlement, CNMI agreed to  make minimum annual payments to the fund to allow members to receive  75 percent of their full benefits. In addition to the settlement plan, CNMI  appropriated $25 million of casino license fees to fund the restoration of  the 25 percent reduction of the retirees\u2019 and beneficiaries\u2019 pensions,  among other purposes. CNMI made one payment of $27 million and  another payment of $19.4 million to the fund in fiscal year 2015. Territory  officials told us they are planning to market a $45 million general  obligation bond in 2017 to provide additional financing for the pension  fund. They added, however, that they currently have no plans to issue  debt for other purposes, such as infrastructure projects, because of  uncertainty in the labor market.", "In 2012, Moody\u2019s Investor Services confirmed CNMI\u2019s general obligation  bond ratings as non-investment grade, which was downgraded in 2009.  According to the rating agency, the 2012 rating was due to losses in the  territory\u2019s garment industry, consistent operating deficits, and increasing  unfunded pension liabilities."], "subsections": []}]}, {"section_title": "Guam", "paragraphs": [], "subsections": [{"section_title": "Guam\u2019s Total Public Debt More Than Doubled and It Grew from 24 to 44 Percent of GDP between Fiscal Years 2005 and 2015", "paragraphs": [], "subsections": [{"section_title": "Total Public Debt Outstanding", "paragraphs": ["Guam\u2019s total public debt outstanding increased from almost $1 billion in  fiscal year 2005 to $2.5 billion fiscal year 2015, with the majority of the  increase occurring between fiscal years 2008 and 2015 when total  outstanding public debt grew 13 percent on average per year. (See figure  15.) In fiscal year 2015, 54 percent of Guam\u2019s total public debt  outstanding was issued by component units. Territory officials told us  component unit debt is backed solely by the revenue component units  generate and cannot be used to service debt issued by the primary  government.", "The majority of Guam\u2019s total public debt is in the form of bonds. Bonded  debt outstanding comprised between 93 and 97 percent of total public  debt outstanding from fiscal years 2005 through 2015. Most of Guam\u2019s  bonded debt outstanding will mature in 2027 or afterwards. The  remainder of Guam\u2019s public debt outstanding between fiscal years 2005  and 2015 was primarily comprised of notes and loans, including loans  from the federal government.", "Between fiscal years 2005 and 2015, Guam\u2019s total public debt  outstanding as a share of GDP increased from 24 percent to 44 percent,  with bonded debt outstanding growing similarly from 22 percent of GDP to  42 percent. (See figure 16.)", "Both total public debt and bonded public debt outstanding per capita more  than doubled between fiscal years 2005 and 2015. Total public debt  outstanding per capita rose from about $6,270 per person to $15,323 per  person, while bonded public debt outstanding increased from $5,810 per  person to $14,759 per person. (See figure 17.)"], "subsections": []}]}, {"section_title": "Guam\u2019s General Revenue Grew and Net Position Fluctuated Significantly between Fiscal Years 2005 and 2015", "paragraphs": ["Guam\u2019s general revenue grew by 6 percent on average, per year,  between fiscal years 2005 and 2015, from $573.2 million to $862.7  million. General revenue declined sharply in fiscal year 2006, recovered  in fiscal year 2007, and then increased steadily through fiscal year 2015.  According to territory officials, this increase in revenue can largely be  attributed to economic development, with significant growth in tourism  and new construction. A 2015 report to Guam\u2019s bondholders noted that  there was an increase in visitors to the island each month between 2014  and 2015. The report attributed this increase to several factors, such as  the expanded number of airline routes to Guam, the favorable exchange  rate for Asian visitors, and the relative improvement of the overall global  economy.  Guam\u2019s total revenue, or general revenue and program  revenue combined, also grew by 5 percent on average, per year, between  fiscal years 2005 and 2015, from $1.4 billion to $2.2 billion. (See figure  18.)", "To project revenues, Guam officials use a model comprised of statistical  weights that are calculated and assigned to each revenue source, which  is derived from historical collections data from the prior fiscal years.", "While revenue generally grew, Guam\u2019s net position for the primary  government fluctuated significantly between fiscal years 2005 and 2015.  Since fiscal year end 2006, Guam\u2019s net position for the primary  government has been negative and trending downward. Specifically,  Guam\u2019s net position for the primary government declined from a positive  $79.8 million as of fiscal year end 2005 to a negative $194.2 million as of  fiscal year end 2012. Net position improved significantly and was positive  in fiscal years 2013 and 2014, but then declined from a positive $174.4  million as of fiscal year end 2014 to a 10-year low of a negative $670.9  million as of fiscal year end 2015. Guam\u2019s net position for the primary  government as of fiscal year end 2014 is shown prior to restatement. In  fiscal year 2015, Guam implemented GASB Statement No. 68 and  adjusted its beginning net position by $815.6 million, resulting in a  restated net position as of fiscal year end 2014 of a negative $641.2  million. The implementation of GASB Statement No. 68 resulted in the  territory recognizing previously unrecognized net pension liabilities and,  therefore, a decline in ending net position in the year of recognition.", "Guam\u2019s total net position for the primary government and component  units combined also fluctuated significantly. Specifically, Guam\u2019s total net  position increased from a positive $788.8 million as of fiscal year end  2012 to a 10-year high of positive $1.2 billion as of fiscal year end 2014. It  declined to a 10-year low of positive $47.3 million as of fiscal year end  2015 due to the implementation of GASB Statement No. 68."], "subsections": []}, {"section_title": "Guam Has Used Public Debt to Meet Federal Requirements and Court Orders", "paragraphs": ["According to territory officials, Guam\u2019s bonded debt outstanding has  primarily been used to comply with federal requirements and court  orders.  Guam has issued debt in several cases when compelled to  meet federal and territorial requirements. For example, since Guam  adheres to the mirror tax code, the territory is required to fund the Earned  Income Tax Credit (EITC) and is not reimbursed for this by the federal  government. In June 2004, the territory agreed to pay $60 million over 9  years in settlement of unpaid EITC refunds from 1996, and in September  2006, the territory reached a new settlement replacing the 2004  agreement in which it agreed to pay up to $90 million.", "Moreover, in 2006, the Superior Court of Guam held that a territorial  statutory provision  required the retirement fund for government  employees to pay past due annual lump sum Cost of Living (COLA)  payments plus interest to eligible retirees and survivors. This resulted in  an award of $123.5 million plus interest to those individuals. In response,  Guam issued a general obligation bond in 2007 in the amount of $151.9  million to finance these past due tax refunds and outstanding COLA  settlement payments, as well as to refinance prior debt and help fund  infrastructure projects. In 2009, it issued another general obligation bond in the amount of $271 million for similar purposes. According to a Guam  government report, the largest increase in the territory\u2019s indebtedness  occurred between fiscal year 2008 and fiscal year 2009, and was due in  part to issuing bonds to pay for past due tax refunds and unpaid COLA  expenses.  In Guam\u2019s 2017 draft debt management policy, the Governor  cited the administration\u2019s commitment to ensuring that tax refunds will be  paid on time and no later than 6 months after filing.", "In addition, in February 2004 the U.S. Environmental Protection Agency  (EPA) and the Department of Justice filed a consent decree in the U.S.  District Court of Guam.  The consent decree set forth the settlement  terms agreed to by the federal government and Guam settling a lawsuit  alleging Guam violated the Clean Water Act. The consent decree  included deadlines for opening a new landfill and adopting a dump  closure plan. In response to a 2009 District Court order that Guam comply  with the terms of the consent order, the territory chose to issue a $202.4  million limited obligation bond to fund closing the Ordot dump and  constructing a new landfill to meet the terms of the settlement agreement.", "Guam also issued revenue bonds between fiscal years 2005 and 2015 to  finance infrastructure projects. For example, in 2011 a revenue bond  backed by hotel occupancy taxes was issued in the amount of $90.6  million in part to fund the construction of a museum on the island and  other projects to benefit Guam\u2019s tourism industry. In addition, in 2013  Guam\u2019s Airport Authority issued $247 million in bonds that were used, in  part, to fund airport enhancements.", "As established under its Organic Act, Guam has the authority to issue  bonds, but Guam\u2019s public indebtedness is not authorized or allowed to  exceed 10 percent of the aggregate tax valuation of property in the  territory; tax valuation of property is currently set at 90 percent of  appraised value of property.  The limit applies to both general obligation  and limited obligation debt. In fiscal year 2007, to increase borrowing  capacity to address a $524 million deficit, the government changed the  percentage of appraised value which constitutes the assessed value.   The debt ceiling still limits the amount of public debt Guam can issue to  10 percent of the aggregate tax valuation of property. However, in  September 2007, Guam amended its statutory definition of assessed  value from 35 percent of appraised property values to 70 percent.  In  May 2009, the definition tax valuation of property was again amended to  90 percent of appraised property values.  This second increase was  imposed so Guam could issue bonds to comply with the requirement to  close the Ordot dump and open a new landfill. In fiscal year 2012, the  government increased borrowing capacity a third time by amending the  definition of assessed value to 100 percent of appraised value in order to  fund past due tax refunds.  In fiscal year 2016, the statutory definition of  assessed value was decreased back down to 90 percent of appraised  value."], "subsections": []}, {"section_title": "Despite Guam\u2019s Recent and Expected Economic Growth, Growing Pension Fund Liabilities May Present a Risk", "paragraphs": ["Despite economic growth, we found that Guam faces large fiscal risks  related to unfunded pension liabilities and other post-employment benefits  (OPEB) that, if unaddressed, may hamper its ability to repay existing debt  and increase its need to issue debt. A number of factors may contribute to  continued economic growth in Guam. Specifically, according to a  government report, visitor arrivals to Guam are projected to continue  increasing and higher room rates and occupancy are leading to continued  hotel development. Moreover, the Marine Corps has plans to consolidate  bases in Okinawa, Japan, and relocate 4,100 Marines to Guam. The  Department of Defense (DOD) expects this relocation to Guam to occur  between fiscal years 2022 and 2026. Officials from Guam predict that the  military buildup will result in significant additional investment in Guam\u2019s  economy. In July 2016, DOD agreed to give Guam approximately $55.6  million in grants to fund civilian water and wastewater projects linked to  the military buildup; additional investments in the power infrastructure will  also be funded by DOD. A 2014 study conducted by the Department of  the Navy on the effect of the military buildup on Guam\u2019s economy  concluded that it would increase civilian labor force demand, increase  civilian labor force income, and increase tax revenues.", "While it maintained Guam\u2019s debt as investment grade as of 2017, the  rating agency Standard and Poor\u2019s expressed concern about Guam\u2019s  extremely high debt burden and vulnerability to economic changes in its  tourism and military industries. In addition, Guam has large pension and  OPEB liabilities that may stress current debt service payment  arrangements if anticipated savings from changes to the government  pension system are not realized. In fiscal year 2015, pension liabilities  were $1.2 billion and OPEB liabilities were $2 billion, 22 and 37 percent of  GDP, respectively. Territory officials told us that they have taken a variety  of steps to address their unfunded pension and OPEB liabilities. In 1995,  the government closed the defined benefit plan  to new members with all  new employees participating in a defined contribution plan,   which  resulted in a decrease in accrued liabilities. To address insufficient  savings by members in the defined contribution plan, the legislature  created two new retirement plans in 2016. The government estimates  that the new retirement plans could add an additional $173 million to the  pension fund. Territory officials said the government is meeting its  actuarial contributions on an annual basis and is on track to pay off the  existing unfunded pension liability in approximately 15 years."], "subsections": []}]}, {"section_title": "United States Virgin Islands (USVI)", "paragraphs": [], "subsections": [{"section_title": "USVI\u2019s Total Public Debt Nearly Doubled and Grew from 32 to 72 Percent of GDP between Fiscal Years 2005 and 2015", "paragraphs": [], "subsections": [{"section_title": "Total Public Debt Outstanding", "paragraphs": ["Between fiscal years 2005 and 2015,  USVI\u2019s total public debt  outstanding grew by 84 percent, from $1.4 billion to $2.6 billion.  (See  figure 19.) The sharpest increase was between fiscal years 2008 and  2010. During this period, total public debt outstanding increased by about  $800 million, and almost all of USVI\u2019s public debt was in the form of  bonds. Bonds issued by USVI\u2019s primary government are either backed by  1) both a general obligation of the government and a gross receipts tax,  or 2) an excise tax on rum produced in USVI.   Bonds issued by  component units are backed by their revenues. Approximately half of  USVI\u2019s bonded debt is backed by revenues generated from the excise tax  placed on rum imports to the U.S. mainland. Both the primary government  and component units issued notes and took out loans during this period.  Most of USVI\u2019s bonded debt outstanding is scheduled to mature in 2027  or afterward.", "USVI\u2019s total public debt outstanding as a percentage of GDP doubled  between fiscal years 2005 and 2015, growing from 34 percent to 72  percent. The steepest increases were between 2008 and 2010, when  total public debt outstanding as a percentage of GDP increased by 19  percent, and between 2011 and 2014, when it increased by 16 percent.  Total public debt outstanding as a share of GDP reached 72 percent in  fiscal year 2015. Bonded debt outstanding was 63 percent of GDP in  fiscal year 2015. (See figure 20.)", "Total public debt outstanding per capita also increased during this period.  It ranged from about $13,063 per person in fiscal year 2005 to about  $25,739 per person in fiscal year 2015. (See figure 21.)"], "subsections": []}]}, {"section_title": "USVI\u2019s General Revenue Remained Stagnant and Net Position Was Generally Declining between Fiscal Years 2005 and 2015", "paragraphs": ["USVI\u2019s general revenue showed almost no growth in the 10-year period  between fiscal years 2005 and 2015. USVI\u2019s general revenue declined  from fiscal years 2008 to 2009 due to the 2008 recession and operating  losses at the Hovensa oil refinery, and rebounded in fiscal year 2010 as  the economy recovered. General revenue decreased again from fiscal  year 2010 to 2011. Between fiscal years 2011 and 2014 revenue  increased again. Despite the increase, the fiscal year 2015 general  revenue of $919.4 million was only about $43 million greater than that  collected 10 years prior. In contrast USVI\u2019s total revenue (i.e. general  revenue and program revenue combined) grew slightly by 2 percent on  average, per year, between fiscal years 2005 and 2015, from $1.6 billion  to $1.9 billion. (See figure 22.)", "USVI has a statutory requirement that a team, composed of senior  executives and legislative officials, meet at least twice a year to establish  an official economic forecast of the territorial economy, including  estimates of the following year\u2019s revenue.  Territory officials  acknowledged that in recent years actual revenues have been less than  had been estimated, citing both adverse economic conditions and  litigation that had blocked the collection of property taxes for several  years. These officials said that a new estimation methodology has been  devised which uses a weighted average of the prior 5 years of actual  revenue.", "USVI\u2019s net position for the primary government declined year over year  from a negative $215.0 million as of fiscal year end 2008 to a negative  $1.5 billion as of fiscal year end 2014; continuing to decline to a negative  $3.7 billion as of fiscal year end 2015.  USVI\u2019s net position for the  primary government as of fiscal year end 2014 is shown prior to  restatement implementing GASB Statement No. 68. In fiscal year 2015,  USVI implemented GASB Statement No. 68 and adjusted its beginning  net position by $2.0 billion, resulting in a restated net position as of fiscal  year end 2014 of a negative $3.5 billion. The implementation of GASB  Statement No. 68 resulted in the territory recognizing previously  unrecognized net pension liabilities and, therefore, a decline in ending net  position in the year of recognition. USVI\u2019s declining net position for its  primary government reflects its deteriorating financial position.", "USVI\u2019s total net position for the primary government and component units  combined increased between fiscal year end 2005 and 2007; it then  declined year over year from positive $490.9 million as of fiscal year end  2008 to negative $3.6 billion as of fiscal year end 2015."], "subsections": []}, {"section_title": "Since 2010, USVI\u2019s Public Debt Has Been Used Primarily for General Government Operations", "paragraphs": ["More than a third of USVI\u2019s current bonded debt outstanding as of fiscal  year 2015 was issued to fund government operating costs. Before that  time bonded debt outstanding issued on behalf of the primary government  was used either to refinance earlier bond issues; fund infrastructure  projects such as improvements to schools, public safety facilities, and  transportation infrastructure; or to assist privately-owned industrial  enterprises, specifically construction at the Cruzan and Diageo rum  distilleries and payment of a portion of the costs of sewage and solid  waste disposal at the Hovensa oil refinery.", "In the period following the recession of 2008, revenues declined and  there were continuing demands for spending. In response, USVI issued  debt for the purpose of financing regular government operating expenses.  Between July 2010 and December 2014, USVI issued almost $850 million  in bonds for this purpose with maturities ranging between 1 and 20  years.", "According to territory officials, several factors contributed to USVI\u2019s  increasing reliance on debt to fund government operations, including the  recession of 2008, the 2012 closure of the Hovensa oil refinery, a decline  in USVI\u2019s share of worldwide rum sales, and a decline in visits from cruise  ship passengers. According to a senior government official, the closure of  the Hovensa refinery was particularly detrimental to the territory\u2019s  economy and resulted in the loss of 2,000 jobs on St. Croix and a  significant decrease in revenue. As of April 2017, USVI\u2019s unemployment  rate was 10.3 percent.", "USVI officials cited several federal requirements that contributed to  USVI\u2019s need to issue debt. Because USVI is part of the mirror tax code,  officials noted that USVI is required to pay the EITC to its residents, but is  not reimbursed for this by the federal government. In contrast, state  governments do not pay EITC because it is a federal benefit administered  through the federal tax code.  EPA directives for improving landfills and  water projects and federal banking regulations that treat branches of U.S.  banks placed in USVI as non-U.S. banks\u2014thereby discouraging large  banks from having branches in USVI\u2014were also cited as reasons that  USVI has issued debt."], "subsections": []}, {"section_title": "Economic Uncertainty and Large Fiscal Risks May Significantly Limit USVI\u2019s Ability to Repay Public Debt", "paragraphs": ["USVI officials expressed confidence in the territory\u2019s ability to repay public  debt, but we found that large fiscal risks and exclusion from capital  markets may hamper its ability to do so. USVI\u2019s bonds are backed by the  gross receipts tax on some individuals and entities doing business in  USVI and by excise tax revenues collected by the federal government  and remitted to USVI as required by statute. Officials said that revenues  from the gross receipts tax and excise tax rebates\u2014from which debt  service payments are made\u2014are monitored on a month-by-month basis.  Also, officials cited as a protection against default the \u201clockbox\u201d provisions  that USVI has had contractually for some time and that were written into  its statutes in 2016. According to these provisions, gross receipts tax  and excise rebate revenue go directly to an escrow account in a New  York bank, and the escrow agent makes debt service payments twice a  year from the account; a year\u2019s worth of payments is held in reserve at all  times.", "USVI officials expressed confidence that these provisions make it difficult  for USVI to default on its debt payments. However, in a recent statement,  Moody\u2019s rating service said that these security provisions have not been  tested in a stress scenario where the government faces a lack of funds to  provide basic services. This observation was part of a statement issued  by Moody\u2019s in late January 2017 in which it announced it had  downgraded USVI\u2019s matching fund bonds (those backed by excise tax  rebates) to noninvestment grade.", "Other rating agencies expressed similar concerns. For example, Standard  & Poor\u2019s cited 1) the government\u2019s fiscal distress, as evidenced by its  significant structural imbalance and continued reliance on deficit financing  to fund operations; 2) revenue backed bond issues that have exhibited  either declining or flat growth absent tax rate increases and are levied on  a limited and concentrated base; 3) adequate, but substantially reduced,  debt service coverage; and 4) a limited economy, concentrated in rum  production, tourism, and government.", "In late January 2017, USVI cancelled a new bond issuance it was  attempting to market to provide additional financing for general  government operations. The bond issuance was authorized by the USVI  legislature in 2016, but according to a senior bank official involved in  underwriting USVI bonds, delays in bringing the issuance to market, and  the legislature\u2019s delay in enacting so-called \u201csin taxes\u201d on items such as  beer, cigarettes, and liquor, reduced the chances of successfully  marketing the bond issue to investors. By the time USVI made an effort to  market the bonds in late 2016 and January 2017, the Puerto Rico debt  crisis had increased investors\u2019 concerns about USVI\u2019s debt as well. The  rating downgrades of existing USVI debt, while not the decisive factor  according to the bank official, did reinforce existing skepticism on the part  of potential investors. Ultimately, the early 2017 bond issuance was not  adequately subscribed and the offer failed. USVI effectively lost market  access to new debt even at high interest rates.", "In September 2016, the administration released its 5-year financial plan.  The two major features of this plan were a reduction in government  expenditures by limiting hiring and reducing non-personnel costs, and a  proposal for increasing revenue through taxes on beer, rum, wine,  brandy, sugar-laden carbonated beverages, and cigarettes, among other  revenue generating measures. The legislature passed the tax increase  bill, with some modification of the Governor\u2019s proposal, in early March  and the Governor signed it into law on March 22, 2017.", "In the 5-year financial plan, the administration said that adopting austerity  and tax measures would eliminate future deficits, which otherwise would  amount to more than $130 million for each fiscal year between 2017 and  2021. A senior USVI official expressed a belief that the level of  consumption of cigarettes, for example, will remain at pretax levels  despite the higher cost. However, due to elasticity of demand, an  increase in the price of cigarettes could decrease cigarette consumption  and therefore revenues. If the tax increases do not produce the  anticipated level of revenue, and if USVI is not able to regain access to  capital markets, it will place even more stress on the debt service  arrangements currently in effect.", "Moreover, the recent measures do not address the fiscal risk presented  by unfunded pension liabilities and OPEB for government employees.  USVI reported an unfunded pension liability of over $3 billion, which was  83 percent of GDP in fiscal year 2015.  According to an independent  consulting firm\u2019s August 2016 report conducted for the USVI Government  Employees Retirement System, the retirement fund will become insolvent  in 2023 without adding financial resources and adjusting benefit levels.", "Territory officials cited several reasons for the large unfunded pension  and OPEB benefit liabilities. These include recent legislation that resulted in more retirees eligible for pensions and a decline in the active USVI  government workforce that resulted in a narrower ratio of retirees to  workers, dropping from 6-to-1 in fiscal year 1982 to almost 1-to-1 in fiscal  year 2015. In addition, officials told us that the most significant cause for  the current condition of the retirement system is the primary government  making contributions to the system below the amounts required by law.", "Some measures have been taken to address the retirement fund\u2019s  impending insolvency, and other steps have been recommended.  According to territory officials, USVI law changed in 2005, resulting in  increased required pension contributions from all newly hired employees  except for judges and legislators. In 2013, a Pension Reform Task Force  (Task Force) recommended legislation that would 1) increase government  and employee contributions towards pension benefits, 2) raise  contribution rates for senators and judges, 3) reduce retiree current  benefits by 10 percent, 4) increase the early retirement age from 50 to 55  and the regular retirement age from 60 to 65, 5) limit cost of living  increases, and 6) change the formula used to calculate benefits.", "In October 2015, the Legislature enacted and the Governor signed  legislation that raised retirement ages for some employees, changed the  basis for determining pension levels to career earnings, and allowed the  retirement system to invest funds in lower-rated securities. This did not,  however, address most of the Task Force recommendations. Territory  officials told us that the administration will put forward additional pension  reform proposals in the near future, however it remains unclear what  those reforms will entail and when they will take effect.", "Moreover, territory officials told us that since 2011 the government has  paid less than half of actual post-employment benefit costs, leaving an  unpaid current obligation of $357 million as of fiscal year 2015. The  unfunded liability for post-employment benefits, projecting anticipated  future costs, was most recently calculated in October 2013; at that time it  was just over $1 billion. USVI\u2019s pension and OPEB obligations are  already contributing to the territory\u2019s debt burden, and will likely continue  to do so at an increasing rate. If unaddressed, they may place additional  stress on the debt service arrangements currently in effect and hamper  the territory\u2019s ability to repay debt."], "subsections": []}]}, {"section_title": "Agency Comments, Third Party Views, and our Evaluation", "paragraphs": ["We provided a draft of this report for review to the U.S. Departments of  the Interior and Treasury. We also provided, to the governments of Puerto  Rico, American Samoa, the Commonwealth of the Northern Mariana  Islands (CNMI), Guam, and the United States Virgin Islands (USVI),  portions of the draft that were relevant to them. We received written  comments from each of the five territories\u2019 governments, which are  reprinted in appendixes II, III, IV, V, and VI, respectively. We also  received technical comments from American Samoa, Guam, USVI, and  Treasury, which we incorporated as appropriate. We did not receive any  comments from the Department of the Interior. In the letter from the  Governor of Guam, the territory raised some issues, which we  subsequently discussed in depth with territory officials. Following these  discussions, we made modifications to the draft to provide additional  context by broadening our coverage of revenue for Guam and for other  territories, as applicable. We provide additional information about  changes that we made or did not make at the end of Appendix V.", "We will provide copies of this report to the Governor of each territory and  the U.S. Secretaries of the Interior and Treasury. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staffs have questions about this report, please contact  Susan J. Irving at (202) 512-6806, or David Gootnick at (202) 512-3149.  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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were, for each U.S. territory\u2014Puerto Rico, American  Samoa, the Commonwealth of the Northern Mariana Islands (CNMI),  Guam and the U.S. Virgin Islands (USVI)\u2014 to describe: (1) trends in  public debt and its composition between fiscal years 2005 and 2015, (2)  trends in revenue and its composition between fiscal years 2005 and  2015, (3) the major reported drivers of the territory\u2019s public debt, and (4)  what is known about the ability of the territory to repay public debt.", "For the purposes of this report, total debt held by the public (public debt)  refers to the sum of bonds payable and other debt payable as described  in the audited financial statements included within the territories\u2019 single  audit reporting packages, hereinafter referred to as the single audit  reports. Bonds payable are marketable bonded debt securities issued by  territorial governments or their component units and held by investors  outside those governments. Other debt payable may include marketable  notes issued by territorial governments and held by investors outside  those governments; non-marketable intragovernmental notes; and notes  held by local banks, federal loans, intragovernmental loans, and loans  issued by local banks. Pension liabilities and other post-employment  benefits (OPEB) are not included in the definition of total public debt but  are considered and discussed in the sections of the report that describe  the territories\u2019 ability to repay their public debt.", "To describe trends in public debt and its composition for each territory, we  reviewed the territories\u2019 single audit reports. These single audits are  conducted each year by independent accounting firms in accordance with  government accounting standards. We obtained single audits for  American Samoa, CNMI, Guam, and USVI for fiscal years 2005 through  2015. We also obtained and analyzed consolidated audited financial  statements for Puerto Rico from the Commonwealth of Puerto Rico\u2019s  Treasury Department website for fiscal years 2005 through 2014.  For  each territory, we reviewed the independent auditor\u2019s report  corresponding to each single audit and noted the type of opinion that was  expressed on the financial statements and accompanying note  disclosures.  With the exception of Puerto Rico, each of the territories  received modified opinions by auditors on one or more of the single audit  reports included in our analysis. We reviewed each of these opinions and  determined that despite the modified opinions the data we obtained from  each of the single audit reports was reliable for the purpose of describing  trends in debt and revenue and their composition for the fiscal years  included in our analysis.", "For each territory, we extracted information on public debt\u2014specifically  bonds, loans, and notes for both the primary government and component  units\u2014for each fiscal year and recorded the data on spreadsheets, which  were then independently verified by other analysts. For American Samoa,  CNMI, Guam, and USVI, we calculated debt per capita and debt as a  percentage of nominal Gross Domestic Product (GDP)  using nominal  GDP and population data from the U.S. Department of Commerce\u2019s  Bureau of Economic Analysis. For Puerto Rico, we obtained data on  Gross National Product (GNP) and nominal GDP from the  Commonwealth of Puerto Rico Office of the Governor\u2019s Planning Board  and data on population from the U. S. Census Bureau.", "To identify trends in revenue and its composition for each territory, we  obtained and recorded information from the single audit reports on  general revenues. All tax revenues, including tax revenues that are  dedicated to particular purposes, are reported in general revenues. Tax  revenues represent the largest component of general revenues and  include both derived tax revenues (resulting from assessments imposed  on exchange transactions, such as income taxes and sales taxes) and  imposed nonexchange revenues (resulting from assessments imposed on  non-exchange transactions, such as property taxes and fines). General  revenues also include other forms of revenue, such as unrestricted aid  from other governments and investment earnings. Our analysis primarily  focused on trends in general revenues because the territories\u2019 public debt  is either explicitly or implicitly backed by general revenues. We also  included total revenue\u2014general revenues and program revenues   combined\u2014in our analysis because it reflects revenue generated by the  territories\u2019 component units and could be used to service debt payments.", "In addition to general revenue levels, another measure of fiscal health is  the net position for primary government activities, which represents the  difference between the primary government\u2019s assets (including the  deferred outflows of resources) and the primary government\u2019s liabilities  (including the deferred inflows of resources). In other words, the net  position for primary government activities reflects what the primary  government would have left after satisfying its liabilities. A negative net  position means that the primary government has more liabilities than  assets. A decline in net position may be indicative of a deteriorating  financial position. While our analysis primarily focuses on trends in the net  position for the primary government, we also include certain information  on trends in the total net position for the primary government and  component units combined.", "To determine the major reported drivers of public debt and what is known  about the territories\u2019 ability to repay this debt, we interviewed officials from  the territories\u2019 governments, including officials from the Governors\u2019  offices, departments of finance or treasury, and the agency responsible  for issuing and marketing bonded debt. We also spoke to officials in  territorial public audit offices. In addition, we interviewed representatives  of the three rating agencies that provide credit ratings for the territories\u2019  securities: Fitch, Moody\u2019s, and Standard and Poor\u2019s.", "In addition, to determine what is known about the territories\u2019 ability to  repay public debt we analyzed common factors\u2014identified through prior  work, documents, and interviews with the three rating agencies\u2014that  indicate territories\u2019 potential vulnerability to debt crises. These factors  included 1) the extent to which territories consistently issued debt to fund  general government operations, 2) the extent to which territories\u2019  economies were vulnerable to shocks due to a heavy dependence on a  single or limited industry, and 3) the extent to which territories faced large  fiscal risks such as pension liabilities.", "We also interviewed officials from the Department of the Interior\u2019s Office  of Insular Affairs, which provides grant aid and technical assistance and  support to the territories, and the Pacific and Virgin Islands Training  Initiatives, which provides training and technical assistance on fiscal  management to the Pacific territories and USVI, and directs the  preparation of an annual report on the fiscal condition of these territories.  In addition, we spoke with subject matter experts on territorial debt,  officials from an investment bank involved in underwriting the territories\u2019  bonds, and officials from the three rating agencies that rate the  marketability of the territories\u2019 bonds.", "We obtained and reviewed information on territorial bond issuances from  fiscal years 2005 through 2015 from the Electronic Municipal Market  Access (EMMA) database of the Municipal Securities Rulemaking Board,  the primary regulator of the municipal securities market. We reviewed  information from EMMA on bonds issued by the territories from fiscal  years 2005 through 2015, including memoranda of offering for individual  bond issuances.", "We conducted this performance audit from September 2016 to October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained for the purpose of addressing our audit  objectives provides a reasonable basis for our findings and conclusions."], "subsections": []}, {"section_title": "Appendix II: Comments from the Government of Puerto Rico", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Government of American Samoa", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Government of the Commonwealth of the Northern Mariana Islands", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Government of Guam", "paragraphs": [], "subsections": [{"section_title": "See comment 2", "paragraphs": [], "subsections": []}, {"section_title": "See comment 7", "paragraphs": [], "subsections": []}, {"section_title": "See comment 10", "paragraphs": [], "subsections": []}, {"section_title": "See comment 11", "paragraphs": ["The following are GAO\u2019s comments on Guam\u2019s letter that supplement the  comments in the text.  1.  Our responses to Guam\u2019s technical comments are not corrections.", "After reviewing Guam\u2019s comments, we expanded the information  provided on revenue and net position for all 5 territories. For example,  for Guam, we included on pages 41 and 42 of this report, additional  information on revenue where we combine primary government  revenue and component unit revenue.  2.  Since our objective was to provide the most comprehensive metric of  total public debt, it would have been incorrect for us to exclude public  enterprise and revenue bond debt in our measure.  3.  We do not compare the relative public debt burdens of the territories  in this report. Further, pension liabilities are not included in our  definition of public debt. Our definition of total public debt does include  component unit debt, which Guam excludes from the calculations  presented in its response.  4.  On pages 41 and 42 of this report we include both a measure of  primary government revenue, and a measure of primary government  revenue and component unit revenue combined; an \u201capples-to- apples\u201d comparison can be made to our total public debt figure, which  includes component unit debt.  5.  Our calculation of total public debt outstanding for Guam is the total of  bonds payable and notes payable, both the current and noncurrent  portions, and other debt as defined on page 8 of this report. Guam\u2019s  calculation of total public debt outstanding as shown in the table is all  noncurrent liabilities except the net pension liability and results in a  higher amount for fiscal year 2015 than our calculation. For bonds  payable, our calculation includes both the current and noncurrent  portions of bonds payable. Guam\u2019s calculation of bonds payable as  shown in the table only includes the noncurrent portion and results in  a lower amount for fiscal year 2015 than our calculation. As a result of  these differences, our calculation of bonded debt outstanding as a  percentage of total public debt outstanding for fiscal year 2015 is  higher than Guam\u2019s calculation.  6.  As noted on page 42 of this report, while revenue generally grew,  Guam\u2019s net position for the primary government fluctuated  significantly between fiscal years 2005 and 2015. Since fiscal year  end 2006, Guam\u2019s net position for the primary government has been  negative and trending downward. Guam\u2019s total net position for the  primary government and component units also combined fluctuated  significantly. On page 41 and 42 of this report, we explicitly note the  increase in revenue, however in the long-term significant financial  risks may outweigh any given year\u2019s revenue increase.  7.  Based on our methodology, which includes component unit debt,  Guam\u2019s total public debt outstanding was $2.5 billion for fiscal year  2015.  8.  We used total public debt outstanding, not solely tax-supported debt  to calculate the debt-to-GDP ratio for all 5 territories. As reported on  page 39 of this report, Guam\u2019s debt to GDP ratio is 44 percent for total  public debt and 42 percent for bonded debt for fiscal year 2015. We  do not rank the U.S. territories in this report.  9.  The per capita amounts presented in the report are based on debt  amounts from Guam\u2019s fiscal year 2015 audit as reported in the single  audit report. However, the debt amounts and population figure shown  in the table differ from those used in our calculations. Total public debt  and bonded public debt outstanding used in our per capita  calculations are calculated as discussed in comment 5 above, which  differ by about $7 million from the amounts cited in the table. In  addition, the population figure used in our per capita calculations is on  a fiscal year basis, which results in 161,500 for fiscal year 2015.  10. Pension liabilities are not included in our definition of public debt. The  debt per capita numbers that we present in this report are based on   total public debt. For Guam that figure for fiscal year 2015 was $2.5  billion.  11. We disagree with Guam\u2019s comment that the presentation in this report  is negative. The final section in the discussion of Guam notes both the  elements that may contribute to continued economic growth in Guam  and the vulnerabilities and risks to the future: a high total debt burden  and vulnerability to economic changes in its tourism and military  industries. In addition, we note that Guam has large pension and  other post-employment benefits liabilities that may stress current debt  service payment arrangements if anticipated savings from changes to  the government pension system are not realized."], "subsections": []}]}, {"section_title": "Appendix VI: Comments from the Government of the United States Virgin Islands", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Tara Carter, Assistant Director;  Emil Friberg, Assistant Director; Divya Bali, Analyst-in-Charge; and  Steven Berke, Karen Cassidy, and Eddie Uyekawa made significant  contributions to this report. Dawn Simpson, Director; Nicole Burkart,  Assistant Director; and J. Mark Yoder provided accounting expertise. Also  contributing to this report were Pedro Almoguera, Jeffrey Arkin, Ann  Czapiewski, John Hussey, Heather Krause, Donna Miller, Amy Radovich,  Justin Snover, and A.J. Stephens."], "subsections": []}]}], "fastfact": ["U.S. territories, like states, borrow through financial markets. We reviewed the territories' fiscal year 2005-2015 public debt.", "Puerto Rico's debt grew to 66% of GDP and the territory is now in default. Its financial future is unclear until debt restructuring is complete.", "Guam's debt increased to 44% of GDP. Large unfunded pensions, if unaddressed, may hamper repayment.", "The U.S. Virgin Islands' debt grew to 72% of GDP. It's uncertain if financial reform will let the territory borrow at favorable rates again.", "At 11% and 16% of GDP, respectively, American Samoa and Northern Mariana Islands had lower debt relative to the size of their economies."]}
{"id": "GAO-19-189", "url": "https://www.gao.gov/products/GAO-19-189", "title": "James Webb Space Telescope: Opportunity Nears to Provide Additional Assurance That Project Can Meet New Cost and Schedule Commitments", "published_date": "2019-03-26T00:00:00", "released_date": "2019-03-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["JWST, a large, deployable telescope, is one of NASA's most complex projects and top priorities. The project has delayed its planned launch three times since September 2017 due to problems discovered in testing. In June 2018, NASA approved new cost and schedule estimates for JWST. Since the project established its cost and schedule baselines in 2009, the project's costs have increased by 95 percent and the launch date has been moved back by 81 months.", "Conference Report No. 112-284, accompanying the Consolidated and Further Continuing Appropriations Act, 2012, included a provision for GAO to assess the project annually and report on its progress. This is the seventh report. This report assesses (1) the considerations NASA took into account when updating the project's cost and schedule commitments and (2) the extent to which NASA has taken steps to improve oversight and performance of JWST, among other issues. GAO reviewed relevant NASA policies, analyzed NASA and contractor data, and interviewed NASA and contractor officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In June 2018, the National Aeronautics and Space Administration (NASA) revised the cost and schedule commitments for the James Webb Space Telescope (JWST) to reflect known technical challenges, as well as provide additional time to address unanticipated challenges. For example, the revised launch readiness date of March 2021 included 5.5 months to address a design issue for the cover of the sunshield (see image). The purpose of the sunshield is to protect the telescope's mirrors and instruments from the sun's heat. NASA found that hardware on the cover came loose during testing in April 2018. The new cost estimate of $9.7 billion is driven by the schedule extension, which requires keeping the contractor's workforce on board longer than expected.", "Before the project enters its final phase of integration and test, it must conduct a review to determine if it can launch within its cost and schedule commitments. As part of this review, the project is not required to update its joint cost and schedule confidence level analysis\u2014an analysis that provides the probability the project can meet its cost and schedule commitments\u2014but government and industry cost and schedule experts have found it is a best practice to do so. Such analysis would provide NASA officials with better information to support decisions on allocating resources, especially in light of the project's recent cost and schedule growth.", "NASA has taken steps to improve oversight and performance of JWST, and identified the JWST project manager as responsible for monitoring the continued implementation of these changes. Examples of recent changes include increasing on-site presence at the contractor facility and conducting comprehensive audits of design processes. Sustaining focus on these changes through launch will be important if schedule pressures arise later and because of past challenges with communications. GAO will follow up on the project's monitoring of these improvements in future reviews."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends NASA update the project's joint cost and schedule confidence level analysis. NASA concurred with the recommendation made in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The James Webb Space Telescope (JWST) is one of the National  Aeronautics and Space Administration\u2019s (NASA) most complex projects  and top priorities. It is intended to revolutionize our understanding of star  and planet formation and advance the search for the origins of our  universe. The innovative technologies within the telescope, as well as the  sheer size of some of its components\u2014such as the tennis-court-sized  sunshield\u2014illustrate some of the immense development challenges. The  project has experienced significant cost and schedule growth in recent  years due to problems discovered during integration and testing. In June  2018, NASA approved new cost and schedule commitments for JWST  with a cost of $9.7 billion and a launch readiness date of March 2021.  This represents a total of 95 percent of cost growth and 81 months of  schedule delays since the project\u2019s cost and schedule baselines were first  established in 2009.", "Conference Report No. 112-284 included a provision for GAO to assess  the JWST program annually and to report to the Committees on  Appropriations on key issues relating to program and risk management,  achievement of cost and schedule goals, program technical status, and  oversight mechanisms. This report is our seventh in response to that  provision. For this report, we assessed (1) the considerations that NASA  took into account when updating the JWST project\u2019s cost and schedule  commitments, (2) the technical and integration challenges, if any, that are  affecting the execution of the JWST project, and (3) the extent to which  NASA has taken steps to improve oversight and performance of the  JWST project.", "To address these objectives, we examined the schedule, technical, and  cost performance of the project since our last report in February 2018.  To determine the considerations that NASA took into account when  updating the JWST project\u2019s cost and schedule commitments, we  analyzed the JWST project\u2019s proposed changes to its 2011 rebaseline.  We compared the project\u2019s prior cost and schedule baseline to the  project\u2019s new cost and schedule estimates to determine what changes  were made, including changes to workforce projections. In addition, we  compared the process the project used to update cost and schedule  estimates with NASA guidance and policies on updating cost and  schedule estimates and best practices identified in GAO\u2019s Cost  Estimating and Assessment Guide. We discussed the project\u2019s cost and  schedule estimates from the 2018 replan with NASA, Northrop Grumman  Aerospace Systems (Northrop Grumman), and the James Webb Space  Telescope Independent Review Board (IRB) and interviewed officials  within the Office of the Chief Financial Officer on relevant NASA  guidance.", "To assess the extent to which technical challenges and integration risks  are affecting the execution of the JWST project, we reviewed project and  contractor schedule documentation to identify the progress made and any  challenges faced since our last report in February 2018. We examined  monthly project status reports to management to monitor schedule  reserve levels and usage, identify potential risks and technical challenges  that may affect the project\u2019s schedule, and gain insights on the project\u2019s  progress. We interviewed project officials at Goddard Space Flight Center  and contractor officials from Northrop Grumman and the Association of  Universities for Research in Astronomy\u2019s Space Telescope Science  Institute concerning the challenges that have affected schedule, and the  project\u2019s and contractor\u2019s plans to address these challenges. We also  discussed what benefits exist, if any, of conducting cost and schedule risk  analyses during integration and test with government and industry cost  and schedule experts. Further, we attended two project reviews, where  project and program officials briefed NASA headquarters officials on the  current status of the project. We examined project risks from monthly risk  registers to understand the likelihood of occurrence, the potential effect  on cost and schedule, and the steps the project plans to take to mitigate  the risks. We also requested updates on the status of project risks and  top issues that affected technical challenges the project was working to  mitigate during the course of our review. We also obtained information on  the status of project software and challenges from independent NASA  reviewers with NASA\u2019s Independent Verification and Validation program.", "Finally, to assess the extent to which NASA has taken steps to improve  oversight and performance of the JWST project, we reviewed  documentation on changes that NASA made to contractor oversight and  project oversight activities between April and November 2018. We also  reviewed the May 2018 IRB final report. We discussed these changes  and the implementation of related IRB recommendations with Goddard  Space Flight Center and NASA headquarters project officials; Northrop  Grumman and Space Telescope Science Institute contractor officials; IRB  members; and Defense Contract Management Agency officials who are  responsible for providing oversight of software and quality assurance  processes at the Northrop Grumman facility on behalf of NASA. In  addition, we reviewed project and Northrop Grumman documentation that  described or tracked changes to oversight and implementation of IRB  recommendations. We also reviewed award fee documentation to  examine NASA\u2019s determination of the percentage of the available award  fee Northrop Grumman earned in two award fee periods\u2014April 1, 2017 to  September 30, 2017 and October 1, 2017 to March 31, 2018. These  award fee periods are inclusive of the time period in which NASA first  started identifying that additional schedule slips would be likely. We  compared the findings and recommendations of a 2010 independent  review report to the 2018 independent review report to determine whether  there were similar findings or recommendations. Further, we discussed  challenges of workmanship errors and steps projects and companies can  take to avoid them with an expert on quality in NASA\u2019s Office of Safety  and Mission Assurance and experts at the Aerospace Corporation.", "Our work was performed primarily at NASA headquarters in Washington,  D.C.; Goddard Space Flight Center in Greenbelt, Maryland; and Northrop  Grumman Corporation in Redondo Beach, California. We met with  officials from the Space Telescope Science Institute in Baltimore,  Maryland, which will be responsible for operating the observatory on  behalf of NASA, among other things. We also obtained information from  officials at the Independent Verification and Validation facility in Fairmont,  West Virginia. This facility is responsible for providing independent review  of project safety and mission critical software.", "We conducted this performance audit from April 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."], "subsections": [{"section_title": "Background", "paragraphs": ["JWST is envisioned to be a large deployable space telescope, optimized  for infrared observations, and the scientific successor to the aging Hubble  Space Telescope. JWST is being designed for a 5-year mission to find  the first stars, study planets in other solar systems to search for the  building blocks of life elsewhere in the universe, and trace the evolution of  galaxies from their beginning to their current formation. JWST is intended  to operate in an orbit approximately 1.5 million kilometers\u2014or 1 million  miles\u2014from the Earth. With a 6.5-meter primary mirror, JWST is  expected to operate at about 100 times the sensitivity of the Hubble  Space Telescope. JWST\u2019s science instruments are designed to observe  very faint infrared sources and therefore are required to operate at  extremely cold temperatures. To help keep these instruments cold, a  multi-layered tennis court-sized sunshield is being developed to protect  the mirrors and instruments from the sun\u2019s heat.", "The JWST project is divided into three major segments: the observatory  segment, the ground segment, and the launch segment. When complete,  the observatory segment of JWST is to include several elements (Optical  Telescope Element (OTE), Integrated Science Instrument Module (ISIM),  and spacecraft) and major subsystems (sunshield and cryocooler). The  hardware configuration referred to as OTIS was created when the Optical  Telescope Element and the Integrated Science Instrument Module were  integrated. Additionally, JWST is dependent on software to deploy and  control various components of the telescope, and to collect and transmit  data back to Earth. The elements, major subsystems, and software are  being developed through a mixture of NASA, contractor, and international  partner efforts. See figure 1 for the elements and major subsystems of  JWST and appendix 1 for more details, including a description of the  elements, major subsystems, and JWST\u2019s instruments.", "For the majority of work remaining, the JWST project is relying on two  contractors: Northrop Grumman and the Association of Universities for  Research in Astronomy\u2019s Space Telescope Science Institute. Northrop  Grumman plays the largest role, developing the sunshield, the Optical  Telescope Element, the spacecraft, and the Mid-Infrared Instrument\u2019s  cryocooler, in addition to integrating and testing the observatory. Space  Telescope Science Institute\u2019s role includes soliciting and evaluating  research proposals from the scientific community, and receiving and  storing the scientific data collected, both of which are services that it  currently provides for the Hubble Space Telescope. Additionally, the  Institute is developing the ground system that manages and controls the  telescope\u2019s observations and will operate the observatory on behalf of  NASA. JWST will be launched on an Ariane 5 rocket, provided by the  European Space Agency.", "JWST depends on 22 deployment events\u2014more than a typical science  mission\u2014to prepare the observatory for normal operations on orbit. For  example, the sunshield and primary mirror are designed to fold and stow  for launch and deploy once in space. Due to its large size, it is nearly  impossible to perform deployment tests of the fully assembled  observatory, so the verification of deployment elements is accomplished  by a combination of lower level component tests in flight-simulated  environments; ambient deployment tests for assembly, element, and  observatory levels; and detailed analysis and simulations at various levels  of assembly."], "subsections": [{"section_title": "Schedule and Cost Reserves for NASA Projects", "paragraphs": ["We have previously found that complex development efforts like JWST  face numerous risks and unforeseen technical challenges, which can  often become apparent during integration and testing. To accommodate  unanticipated challenges and manage risk, projects reserve extra time in  their schedules, which is referred to as schedule reserve, and extra funds  in their budgets, which is referred to as cost reserve.", "Schedule reserve is allocated to specific activities, elements, and major  subsystems in the event of delays or to address unforeseen risks. Each  JWST element and major subsystem has been allocated schedule  reserve. When an element or major subsystem exhausts schedule  reserve, it may begin to affect schedule reserve on other elements or  major subsystems whose progress is dependent on prior work being  finished for its activities to proceed.", "Cost reserves are additional funds within the project manager\u2019s budget  that can be used to address unanticipated issues for any element or  major subsystem, and are used to mitigate issues during the development  of a project. For example, cost reserves can be used to buy additional  materials to replace a component or, if a project needs to preserve  schedule reserve, reserves can be used to accelerate work by adding  shifts to expedite manufacturing. NASA\u2019s Goddard Space Flight Center\u2014 the NASA center with responsibility for managing JWST\u2014has issued  procedures that establish the requirements for cost and schedule  reserves. In addition to cost reserves held by the project manager,  management reserves are funds held by the contractors that allow them  to manage program risks and to address unanticipated cost increases  throughout development. We have previously found that management  reserves should contain 10 percent or more of the cost to complete a  project and are generally used to address various issues tied to the  contract\u2019s scope."], "subsections": []}, {"section_title": "JWST\u2019s Use of Award Fees", "paragraphs": ["NASA\u2019s cost-plus-award-fee contract with Northrop Grumman has  spanned almost two decades, during which there have been significant  variances in contractor performance. Cost-reimbursement contracts are  suitable when uncertainties in the scope of work or cost of services  prevent the use of contract types in which prices are fixed, known as  fixed-price contracts. Award fee contracts provide contractors the  opportunity to obtain monetary incentives for performance in designated  areas identified in the award fee plan. Award fees may be used when key  elements of performance cannot be defined objectively, and, as such,  require the project officials\u2019 judgment to assess contractor performance.  For JWST\u2019s contract with Northrop Grumman, these areas include cost,  schedule, technical, and business management and are established in  the contracts\u2019 performance evaluation plans.", "In December 2013, the JWST program and the contractor agreed to  replace a $56 million on-orbit incentive\u2014incentives based on successful  performance in space\u2014with award fees. The award fees are to  incentivize cost and schedule performance during development. This  shift increased the available award fee for the entire contract to almost a  quarter of a billion dollars. According to officials, restructuring the  incentives gave NASA more flexibility to incentivize the contractor to  prioritize the cost and schedule performance over exceeding technical  requirements. In December 2014, we found that NASA award fee letters  of award fee periods from February 2013 to March 2014 indicated that the  contractor had been responsive to interim award fee period criteria  provided by NASA and that contractor officials confirmed that they pay  close attention to this guidance in prioritizing their work. For example,  Northrop Grumman officials reported that they had made specific  changes to improve communications in direct response to this guidance,  which was validated by award fee letters from NASA."], "subsections": []}, {"section_title": "History of Cost Growth and Schedule Delays", "paragraphs": ["The JWST program has a history of significant schedule delays and  increases to project costs, which resulted in replans in 2011 and 2018.  Before 2011, early technical and management challenges, contractor  performance issues, low levels of cost reserves, and poorly phased  funding caused the JWST program to delay work. As a result, the  program experienced schedule overruns, including launch delays, and  cost growth. The JWST program underwent a replan in September  2011, and a rebaseline in November of that same year, and Congress  placed an $8 billion cap on the formulation and development costs for the  project. On the basis of the replan, NASA rebaselined JWST with a life- cycle cost estimate of $8.835 billion, which included additional money for  operations and a planned launch in October 2018.", "Congress also required that NASA treat any cost increase above the cap  according to procedures established for projects that exceed their  development cost estimates by at least 30 percent. This process is known  as a rebaseline. Congress must authorize continuation of the JWST  program if formulation and development costs increase over the $8 billion  cost cap.", "In June 2018, after a series of launch delay announcements due to  technical and workmanship issues identified during spacecraft element  integration, NASA notified Congress that it had again revised the JWST  program\u2019s cost and schedule estimates. NASA estimated that it now  required $828 million in additional resources and 29 more months to  complete beyond those estimates agreed to in the 2011 rebaseline. As of  November 2018, NASA had funding to continue to execute the program  and was waiting to see if Congress would authorize the program\u2019s  continuation and appropriate funds for the program in fiscal year 2019.  Figure 2 shows the project\u2019s history of changes to its cost or schedule  and key findings from two external independent review teams and our  prior work.", "As discussed above, various technical and workmanship errors drove  some of the more recent delays. Examples of some of the workmanship  issues we found in the past include:  In October 2015, the project reported that a piece of flight hardware  for the sunshield\u2019s mid-boom assembly was irreparably damaged  during vacuum sealing in preparation for shipping. The damaged  piece had to be remanufactured, which consumed 3 weeks of  schedule reserve.", "In April 2017, a contractor technician applied too much voltage and  irreparably damaged the spacecraft\u2019s pressure transducers,  components of the propulsion system that help monitor spacecraft fuel  levels. The transducers had to be replaced and reattached in a  complicated welding process. At the same time, Northrop Grumman  also addressed several challenges with integrating sunshield  hardware. These issues combined took up another 1.25 months of  schedule reserve.", "In May 2017, some of the valves in the spacecraft propulsion system\u2019s  thruster modules were leaking beyond permissible levels. Northrop  Grumman determined that the most likely cause was the use of an  improper cleaning solution, and the thruster modules were returned to  the vendor for investigation and refurbishment. Reattaching the  refurbished modules was expected to be complete by February 2018,  but was delayed by one month when a technician applied too much  voltage to one of the components in a recently refurbished thruster  module. NASA and Northrop Grumman reported that resolving the  thruster module issue resulted in a 2-month delay to the project\u2019s  overall schedule.", "In October 2017, when conducting folding and deployment exercises  on the sunshield, Northrop Grumman discovered several tears in the  sunshield membrane layers. According to program officials, a  workmanship error contributed to the tears. The tears resulted in  another 2-month delay to the project\u2019s overall schedule.", "In addition, some first-time efforts took longer than planned. For example,  in fall 2017, the project determined that it would need to use up to 3  months of schedule reserve based upon lessons learned from the  contractor\u2019s initial sunshield folding operation. This first deployment, or  unfolding, took 30 days longer than planned. The sunshield has since  undergone another deployment, and will be deployed twice more before  launch.", "The IRB took into account these technical and workmanship errors, as  well as other considerations, when it analyzed the project\u2019s organizational  and technical issues. The board\u2019s final report, issued in May 2018,  included 31 recommendations that addressed a range of factors. For  example, the IRB recommended that the project:", "Conduct an audit to identify potential embedded design flaws\u2014 problems that have not been detected through analysis, inspection, or  test activities and pose a significant risk to JWST schedule, cost, and  mission success;", "Establish corrective actions to detect and correct human mistakes  during integration and test;", "Establish a coherent, agreed-upon, and factual narrative on project  status and communicate that status regularly across to all relevant  stakeholders; and", "Augment integration and test staff to ensure adequate long-term  staffing and improve employee morale.", "In its response to the IRB\u2019s report, NASA stated that it accepted the  report\u2019s recommendations and had already begun implementing action in  response to many of them. Further, project officials told us that some of  the actions were underway before the IRB completed its review."], "subsections": []}]}, {"section_title": "NASA Revised Schedule and Cost Commitments to Reflect Prior and Ongoing Technical Challenges", "paragraphs": ["To develop a new schedule for JWST\u2019s 2018 replan, NASA took into  account the remaining integration and test work and added time to the  schedule to address threats that were not yet mitigated. This includes 5.5  months to address an anomaly that occurred on the sunshield\u2019s cover in  2018. The project also replenished its schedule reserves\u2014which we  found in February 2018 had been consumed\u2014so that they now exceed  the recommended levels. Both the project and IRB conducted schedule  risk assessments that produced similar launch dates. The project relied  on the replan schedule to determine its remaining costs because the  workforce necessary to complete the observatory represents most of the  remaining cost.", "Following is additional information on the schedule and cost  considerations.", "Schedule: JWST\u2019s revised launch readiness date of March 2021 reflects  a consideration of the hardware integration and test challenges the  project has experienced, including adding time to:", "Add snag guards for the membrane tensioning system\u2014which helps  deploy the sunshield and maintain its correct shape\u2014to prevent  excess cable from snagging,", "Repair tears of the sunshield membrane,", "Deploy, fold, and stow the sunshield, and", "Mitigate contractor schedule threats.", "In addition, the project added extra time to the schedule to complete  repairs to the membrane cover assembly, which did not perform as  expected during acoustics testing in April 2018. The membrane cover  assembly shown in figure 3 is used to cover the sunshield membrane  when in the stowed position to provide thermal protection during launch.", "After the anomaly occurred, the project halted spacecraft element testing,  investigated the anomaly, and found that the fasteners had come loose  due to a design change made to prevent the fasteners from damaging the  sunshield membrane. The design change caused the nuts to not lock  properly. According to project officials, due to the design of the membrane  cover assembly, the project was not able to conduct flight-like, stand- alone testing on the cover prior to spacecraft element testing. As a result,  the project did not discover the design issue until the hardware came  loose while installed on the spacecraft element. The project determined  that the repairs would take approximately 5.5 months.", "The project\u2019s replan also reflected schedule reserves above the level  required by Goddard Space Flight Center policy, which would have been  approximately 5 months at that time. The new schedule includes a total  of 293 days or 9.6 months of schedule reserves leading up to its  committed launch readiness date of March 2021. NASA approved a  JWST launch date of March 2021, but the project and the contractor are  working toward a launch date in November 2020. Figure 4 shows the  project\u2019s new schedule following the 2018 replan, including how the  project distributed its schedule reserves through different integration and  test activities.", "As part of its May 2018 study, the IRB reviewed the project\u2019s schedule  and recommended a launch date of March 2021, which was subsequently  reflected in NASA\u2019s new schedule for the program. In reviewing the  project\u2019s schedule, the IRB found that the project had robust scheduling  practices for ensuring that the schedule represented a complete and  dynamic network of tasks that could respond automatically to changes.", "This schedule also passed a standard health check with minimal errors  indicating that it was well constructed. However, the IRB noted that this  schedule does not account for certain types of unknown risks to the  program such as integration and test errors which can take many months  to resolve, or the potential need to remove a science instrument from the  observatory, which can have about a 1 year impact. As a result, the  program could experience additional delays if a risk of this magnitude is  realized.", "Cost: The project\u2019s new $9.7 billion life-cycle cost estimate is principally  driven by the schedule extension, which requires keeping the contractor\u2019s  workforce to complete integration and test longer than expected.  Specifically, the project determined that almost all of the hardware had  been delivered and the remaining cost was predominantly the cost for the  workforce necessary to complete and test the observatory.", "For the past 3 years, we have reported that Northrop Grumman\u2019s ability to  decrease its workforce was central to JWST\u2019s capacity to meet its long- term cost commitments. However, Northrop Grumman\u2019s actual  workforce continued to exceed its projections. This was because it  needed to maintain higher workforce levels due to technical challenges,  including problems with spacecraft and sunshield integration and test. It  also needed to keep specialized engineers available when needed during  final assembly and test activities.", "In developing the cost estimate supporting the 2018 replan, the project  used a Northrop Grumman workforce profile that is higher than previous  projections because Northrop Grumman now plans to maintain personnel  longer during integration and test. According to project officials, the  planned reduction of Northrop Grumman\u2019s workforce is now more gradual  and conservative than the prior plan. For example, the Northrop  Grumman workforce will not start to significantly decline until the  observatory ships to the launch site, which is expected to occur in August  2020. As shown in Figure 5, the JWST workforce assembling the  observatory declines and the government and contractor workforce  necessary to manage and operate the observatory remains after the  internal launch readiness date of November 2020.", "As seen in the above figure, the Space Telescope Science Institute  workforce, the contractor responsible for operating JWST, will remain  generally flat between fiscal years 2021 to 2026 when it operates the  observatory. The NASA civil service and support contractor will remain  relatively flat through November 2020 launch date and then decline. In  addition, the new cost estimate also took into account $61 million for  implementing the IRB recommendations and mission success  enhancements, funding for project cost reserves, and operations costs.", "In June 2018, the NASA associate administrator\u2014who is the project\u2019s  decision authority\u2014approved the project to proceed with its replan with a  March 2021 launch date and $9.7 billion in life-cycle costs based on the  Agency Program Management Council review and replan documents.  The associate administrator did not require the project to conduct an  updated Joint Cost and Schedule Confidence Level (JCL) analysis for this  replan. A JCL is an integrated analysis of a project\u2019s cost, schedule, risk,  and uncertainty whose result indicates the probability of a project\u2019s  success of meeting cost and schedule targets. NASA policy states that a  JCL should be recalculated and approved as a part of the rebaselining  approval process, but it is not required. In its replan decision memo,  NASA\u2019s associate administrator explained that he did not require the  project to update the JCL because project costs are almost entirely  related to the workforce and most of the remaining planned activities will  be performed generally in sequence. Therefore, according to NASA\u2019s  associate administrator, the total cost would be driven almost entirely by  the schedule because the workforce levels will remain the same through  delivery of the observatory. Both the project and independent estimators  used multiple schedule estimating methods to analyze the schedule for  the remaining work, and NASA\u2019s associate administrator said these  analyses returned consistent, high confidence launch dates."], "subsections": []}, {"section_title": "Project Has Used Some Schedule Reserve from Its 2018 Replanned Schedule with Challenging Integration and Test Work Remaining", "paragraphs": ["The project\u2019s ability to execute to its new schedule will be tested as it  progresses through the remainder of challenging integration and test  work. The project has yet to complete three of five integration and test  phases. The remaining phases include integration and test of OTIS, the  spacecraft element, and the observatory. Our prior work has shown that  integration and testing is the phase in which problems are most likely to  be found and schedules tend to slip. For a uniquely complex project  such as JWST, this risk is magnified as events start to become more  sequential in nature. As a result, it will continue to become more difficult  for the project to avoid schedule delays by mitigating issues in parallel.", "As of November 2018, the project is about a week behind its replanned  schedule because repairs on the membrane cover assembly took longer  than planned. Completing the membrane cover assembly repairs and  returning the spacecraft to vibration testing was a key event for the  project to demonstrate that it could execute to its new schedule. When  the project developed its 2018 replanned schedule, it had planned to  complete the membrane cover assembly repairs and reinstall the  assembly onto the sunshield and restart spacecraft element integration  and test activities by November 6, 2018. The project allocated 4 weeks of  schedule reserves specifically for these repairs. However, the membrane  cover repairs proved more difficult than anticipated. For example, the  program had to address unanticipated technical challenges on the  membrane cover assemblies, including repairing tears and pin holes in  the covers discovered after the covers were removed. The project also  had to allot time to install bumpers, which are kapton tubes, to the  assembly to protect the composite material on a sunshield structure  during launch. The project identified the need to add the bumpers during  subassembly vibration testing.", "As a result, as of November 2018, the project had used about 4.5 weeks  of schedule reserves to cover delays associated with these activities. The  use of reserves beyond what the project had planned for the repairs  pushed the restart of spacecraft element integration and test activities out  about a week to November 14, 2018. Figure 6 compares the project\u2019s  initial membrane cover assembly schedule in June 2018 to the actual  schedule in November 2018.", "While the project repaired the membrane cover assembly, it also used  this time to conduct risk mitigation activities on OTIS. For example, the  project worked to mitigate a design issue on the frill connections. The frill  is composed of a single layer of blankets placed around the outside of the  primary mirror used to block stray light (see figure 7).", "A combination of modeling and inspections revealed that most of the frill  sections did not have as much slack as expected at the near-absolute  zero cryogenic temperatures of space. This caused shrinkage that put  stress on the edges of the outer ring of mirrors, which could affect the  stability of the optical mirror and image quality. The project loosened  these outer connections by adding a ring to the connecting points. As of  November 2018, project officials said they were in the process of verifying  the fix through inspections.", "Examples of technical issues and risks that the project continues to face  during the remaining phases of integration and test include:", "The project is working to mitigate a design issue on the sunshield  membrane tensioning system\u2014which helps deploy the sunshield and  maintain its correct shape. In our February 2018 report, we found that  Northrop Grumman was planning to modify the design of the  membrane tensioning system after one of the sunshield\u2019s six  membrane tensioning systems experienced a snag when conducting  folding and deployment exercises on the sunshield in October 2017.  The project and Northrop Grumman determined that a design  modification was necessary to fully mitigate the issue, which includes  modifying clips used to progressively release the cable tension and  adding guards to control the excess cable.", "The project identified a concern that the depressurization of trapped  air in the folded sunshield membrane when the fairing separates to  release the JWST observatory may overly stress the membrane  material. The project is working with Arianespace\u2014the company  responsible for operating JWST\u2019s launch vehicle\u2014and experts at the  Kennedy Space Center to resolve this concern. Officials estimated  that a design solution would be in place in mid-2019. However, if the  project determines that it needs to reinforce the membrane covers to  survive excessive residual pressure as it works on this design  solution, a multi-month schedule delay could occur.", "As of November 2018, the project has mitigated 21 of its 47 hardware  and software risks to acceptable levels, and reviews these risks  monthly for any changes that might affect the continued acceptability  of the risk. Five of these 21 risks are related to the project\u2019s more  than 300 potential single point failures\u2014several of which are related  to the deployment of the sunshield. The project is actively working to  mitigate the remaining 26 risks to acceptable levels or closure prior to  launching.", "The project also has several first-time and challenging integration and test  activities remaining. For example, the project must integrate OTIS and the  completed spacecraft element and test the full observatory in the final  integration phase, which includes another set of challenging  environmental tests. See figure 8 for an image of OTIS and the spacecraft  element prior to being integrated.", "As previously discussed, the project also has two remaining deployments  of the sunshield, and prior deployments have taken longer than planned.  To help mitigate the risks associated with the deployments, the project  added additional time for deployments in the 2018 replanned schedule  based on lessons learned from prior deployments. The two remaining  deployments are to occur after spacecraft element integration and test  and again after observatory integration and test.", "The JWST project office is required to evaluate whether the project can  complete development within its revised cost and schedule commitments  at its next major review\u2014the system integration review\u2014planned for  August 2019. This review is to occur after the project has completed two  major tasks\u2014OTIS and spacecraft element integration and test. The  review is to evaluate whether the project (1) is ready to enter observatory  integration and test, and (2) can complete remaining project development  with acceptable risk and within its cost and schedule constraints. NASA  guidance does not require projects to conduct a JCL at this review.  However, project officials said that they plan to conduct another schedule  risk analysis in the future. They do not intend to complete a new JCL for  the same reasons they did not complete one for the 2018 replan\u2014 because costs are almost entirely related to the workforce and can be  derived from a schedule that takes into account known risk.", "While not required, conducting a JCL prior to the system integration  review would inform NASA about the probability of meeting both its cost  and schedule commitments. If the project proceeds with its plan to  conduct only a schedule risk analysis, NASA would be provided only with  an updated probability of meeting its schedule commitments. Our cost  estimating best practices recommend that cost estimates should be  updated to reflect changes to a program or kept current as it moves  through milestones and as new risks emerge. In addition, government  and industry cost and schedule experts we spoke with noted that  integration and testing is a critical time for a project when problems can  develop. These experts told us that completing a JCL is a best practice  for analyzing major risks at the most uncertain part of project execution.  Conducting a JCL at system integration review\u2014a review that occurs  during the riskiest phase of development, the integration and test phase\u2014 would allow the project to update its assumptions of risk and uncertainty  based on its experiences in OTIS and spacecraft element integration and  test. The project could then determine how those updated assumptions  affect overall cost and schedule for the JWST project.", "As noted above, the project has many risks to mitigate, technical  challenges to overcome, and challenging test events to complete, which  could affect the project\u2019s schedule and risk posture. Further, the project  has an established history of significant cost growth and schedule delays.  In its June 2018 letter notifying an appropriate congressional committee  of its updated cost and schedule commitments, NASA acknowledged that  recent cost growth for the project will likely impact other science missions.  Conducting a JCL at system integration review would provide NASA and  Congress with critical information for making informed resource decisions  on the JWST project and its affordability within NASA\u2019s portfolio of  projects more broadly."], "subsections": []}, {"section_title": "NASA Is Augmenting Oversight of Contractor and Project Performance, and Identified the JWST Project Manager as Responsible for Sustaining Changes", "paragraphs": ["NASA has taken steps to augment oversight of the contractor and project  following the discovery of the embedded design flaws and workmanship  errors that contributed to the project\u2019s most recent schedule delays and  cost increases. See table 1 for examples of changes NASA has made to  contractor and project oversight\u2014some of which NASA self-identified and  others that were in response to IRB recommendations. The IRB made 31  recommendations that ranged from improving employee morale to  improving security during transporting JWST to its launch site.", "NASA has also used award fees to try to incentivize Northrop Grumman  to improve its performance. In a July 2018 hearing on the JWST program  before the House Science, Space, and Technology Committee,  Administrator Bridenstine stated that NASA had reduced the available  award fee through commissioning by $28 million out of a total of about  $60 million. Northrop Grumman also did not earn its full award fee in the  two most recent periods of performance that NASA assessed.", "For the performance period of April 1, 2017 to September 30, 2017,  Northrop Grumman earned approximately 56 percent of the available  award fee. Reasons that NASA cited for its evaluation of award fees  in this period included workmanship errors on the propulsion system,  schedule delays, as well as issues with schedule execution,  management, and quality control.", "For the period of October 1, 2017 to March 31, 2018, Northrop  Grumman earned none of the available award fee. Northrop  Grumman\u2019s overall score was driven by an \u201cunacceptable\u201d rating in  schedule and cost due to delays and in anticipation of exceeding the  project\u2019s $8 billion cost cap. Northrop Grumman received an  \u201cexcellent\u201d rating under the technical category, but the evaluation  noted ongoing issues with quality controls, which resulted in delays.  For example, the process steps for applying voltage to the  spacecraft\u2019s pressure transducers were not clear enough, which  resulted in technician error and irreparable damage to the hardware.", "According to Northrop Grumman officials, the contractor has started to  take action to try to improve its quality assurance processes. Officials  described actions that ranged from rewriting hardware integration and test  procedures to starting efforts to change aspects of the company\u2019s culture  that contributed to quality control issues. For example, in July 2018,  Northrop Grumman initiated a JWST mission assurance culture change  campaign to increase focus on product quality and process compliance.  This effort includes having inspectors affirm by signature that they have  personally inspected, verified, and confirmed that all aspects of an activity  meet quality standards. According to the form instructions, if the inspector  is uncertain on compliance or if instructions are unclear, workers are to  halt work, investigate and assess the situation, and request help to  resolve the situation. Project and Northrop Grumman officials provided an  example of these changes working. During a manual deployment of a  radiator panel, a Northrop Grumman employee discovered that a flap  used as thermal protection for a radiator was installed incorrectly and  reported the error. Northrop Grumman technicians found that this flap had  been swapped with another flap in the process of moving them to be  installed and corrected the problem before work proceeded.", "Further, NASA and Northrop Grumman are conducting audits to try to  minimize the risk of failures during the remaining phases of integration  and test. These audits are conducted on items that have not been fully  tested, are in workmanship-sensitive areas, or have had a late design  change. The first phase of the audit was completed in September 2018  and found no major design issues or hardware rework required. The  project plans to audit other areas through at least spring 2019, but will  add audits if needed.", "The JWST oversight structure includes a number of positions that could  be responsible for ensuring that the recent augmentations to contractor  and project oversight are sustained through launch (see table 2).", "In response to our review, NASA officials clarified that the project  manager has sole responsibility for ensuring that these improvements are  sustained through launch. Further, these officials stated that the project  office is responsible for monitoring these changes at the project level and  at Northrop Grumman. The project manager\u2019s continued focus on these  efforts will be important because:", "The project is implementing a wide span of improvement efforts,  ranging from more on-site coverage at the contractor facility to cultural  improvements, which will now need to be sustained for an additional  29 months.", "The project has had recurring issues with effective internal and  external communication as well as defining key management and  oversight responsibilities, both of which are important to sustaining  oversight. For example, the Independent Comprehensive Review  Panel identified communication problems\u2014between the JWST project  and Science Mission Directorate management as well as between  NASA and Northrop Grumman\u2014and that the project\u2019s governance  structure lacked clear lines of authority and accountability. In  December 2012, we found the JWST project had taken several steps  to improve communication\u2014such as instituting meetings that include  various levels of NASA, contractor, and subcontractor management\u2014 but the IRB\u2019s findings in 2018 indicate that communication and  governance issues have resurfaced in some areas. For example,  the IRB found that communication with key stakeholders including the  science community, Congress, and NASA leadership, has been  variable and at times inconsistent.", "The project may encounter new schedule pressures as it proceeds  through integration and test. A senior NASA official with expertise in  workmanship issues told us that schedule pressure is a key reason for  increased quality problems on projects. For example, this official said  that companies tend to give experts leniency to operate without the  burden of quality assurance paperwork when schedule pressures  arise, which can lead to workmanship errors. While JWST project  officials told us they do not view this as applicable to their project, the  perspective regarding potential schedule pressures and workmanship  is important to keep focus on given the magnitude of technical  challenges and delays the project has faced.", "We will continue to monitor the project\u2019s efforts at maintaining these  oversight augmentations in future reviews, given that less than a year has  passed since the project began implementing many of them. Moreover,  the project may find that some actions will be required of officials outside  the project, particularly since the communication problems identified by  the IRB may well extend to headquarters\u2019 interaction with stakeholders  from the science community, industry, and the Congress."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["JWST is one of NASA\u2019s most expensive and complex science projects,  and NASA has invested considerable time and resources on it. The  project first established its cost and schedule baseline in 2009. Since  then, the project made progress by completing two of five phases of  integration and test, but has also experienced significant cost growth and  schedule delays. However, the project did not complete a JCL analysis as  part of its second replan. Between now and its system integration review  planned for August 2019, the JWST program will have to continue to  address technical challenges and mitigate risks. Conducting a JCL would  better inform decision makers on the status of the project as they  determine whether the project can complete remaining project  development with acceptable risk and within its cost and schedule  constraints. Given the project is now on its third iteration of cost and  schedule commitments, conducting a JCL is a small step that NASA can  take to demonstrate it is on track to meet these new commitments."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making the following recommendation to NASA:  The NASA Administrator should direct the JWST project office to conduct  a JCL prior to its system integration review. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this report to NASA for comment. In written  comments, NASA agreed with our recommendation. NASA expects to  complete the JCL by September 2019, prior to the system integration  review. The comments are reprinted in appendix II. NASA also provided  technical comments, which have been addressed in the report, as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the NASA Administrator, 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 on matters discussed in this report,  please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Elements and Major Subsystems of the James Webb Space Telescope (JWST) Observatory", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Comments from the National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Molly Traci (Assistant Director),  Karen Richey (Assistant Director), Jay Tallon (Assistant Director), Brian  Bothwell, Daniel Emirkhanian, Laura Greifner, Erin Kennedy, Jose  Ramos, Sylvia Schatz, Roxanna Sun, and Alyssa Weir made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The James Webb Space Telescope, the planned successor to the Hubble Telescope, is one of NASA's most complex projects.", "Since fall 2017, NASA has delayed the telescope's planned launch 3 times, due to factors like workmanship errors. NASA has taken some steps to ensure that the telescope can meet its new launch date of March 2021, such as increasing its oversight of contractors.", "We recommended NASA update an analysis to determine the likelihood of meeting its new launch date and cost estimate for the James Webb Space Telescope.", "NASA's acquisition management has been on our High Risk list since 1990 due to persistent cost and schedule growth."]}
{"id": "GAO-18-470", "url": "https://www.gao.gov/products/GAO-18-470", "title": "Border Security and Immigration: Initial Executive Order Actions and Resource Implications", "published_date": "2018-06-12T00:00:00", "released_date": "2018-07-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In January and March 2017, the President issued a series of executive orders related to border security and immigration. The orders direct federal agencies to take a broad range of actions with potential resource implications. For example, Executive Order 13767 instructs DHS to construct a wall or other physical barriers along the U.S. southern border and to hire an additional 5,000 U.S. Border Patrol agents. Executive Order 13768 instructs federal agencies, including DHS and DOJ, to ensure that U.S immigration law is enforced against all removable individuals and directs ICE to hire an additional 10,000 immigration officers. Executive Order 13780 directs agencies to develop a uniform baseline for screening and vetting standards and procedures; and established nationality-based entry restrictions with respect to visa travelers for a 90-day period, and refugees for 120 days.", "GAO was asked to review agencies' implementation of the executive orders and related spending. This report addresses (1) actions DHS, DOJ, and State have taken, or plan to take, to implement provisions of the executive orders; and (2) resources to implement provisions of the executive orders, particularly funds DHS, DOJ, and State have obligated, expended, or shifted. GAO reviewed agency planning, tracking, and guidance documents related to the orders, as well as budget requests, appropriations acts, and internal budget information. GAO also interviewed agency officials regarding actions and budgetary costs associated with implementing the orders."]}, {"section_title": "What GAO Found", "paragraphs": ["The Departments of Homeland Security (DHS), Justice (DOJ), and State issued internal and public reports such as studies and progress updates, developed or revised policies, and took initial planning and programmatic actions to implement Executive Orders 13767, 13768, and 13780. For example:", "DHS's U.S. Customs and Border Protection (CBP) started the acquisition process for a Border Wall System Program and issued task orders to design and construct barrier prototypes. In November 2017, CBP awarded a contract worth up to $297 million to help with hiring 5,000 U.S. Border Patrol agents, 2,000 CBP officers, and 500 Air and Marine Operations agents.", "DOJ issued memoranda providing guidance for federal prosecutors on prioritizing certain immigration-related criminal offenses. Additionally, from March through October 2017, DOJ detailed approximately 40 immigration judge positions to detention centers and to the southern border to conduct removal and other related proceedings, according to DOJ officials.", "State participated in an interagency working group to develop uniform standards related to the adjudication of visa applications, interviews, and system security checks. State also implemented visa and refugee entry restrictions in accordance with the Supreme Court's June 26, 2017, ruling.", "Agency officials anticipate that implementing the executive orders will be a multi-year endeavor comprising additional reporting, planning, and other actions.", "DHS, DOJ, and State used existing fiscal year 2017 resources to support initial executive order actions that fit within their established mission areas. GAO found that it was not always possible to disaggregate which fiscal year 2017 funds were used for implementation of the orders versus other agency activities. All three agencies indicated that they used existing personnel to implement the orders and, in some cases, these efforts took substantial time. For example, according to ICE data, personnel spent about 14,000 regular hours (the equivalent of 1,750 8-hour days) and 2,400 overtime hours planning for the ICE hiring surge from January 2017 through January 2018.", "In March 2017, the President submitted a budget amendment along with a request for $3 billion in supplemental appropriations for DHS to implement the orders. In May 2017, DHS received an appropriation of just over $1.1 billion, some of which DHS used to fund actions to implement the orders. For example, CBP received $65 million for hiring and, according to CBP officials, used these funds to plan and prepare for the surge in U.S. Border Patrol agents. As of January 2018, CBP had obligated $18.8 million of the $65 million.", "Agencies plan to continue to use their base budgets and request additional funds as needed to carry out their missions and implement the orders. For example, for fiscal year 2018, CBP requested approximately $1.6 billion and received (in March 2018) approximately $1.3 billion to build new and replace existing sections of physical barriers along the southern border. For fiscal year 2019, ICE requested $571 million to hire 2,000 immigration officers and DOJ requested approximately $40 million to hire new immigration judges and supporting staff."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2017, the President issued a series of executive orders related to  border security and immigration. The orders direct federal agencies to  take a broad range of actions with potential resource implications.  Specifically, Executive Order 13767, Border Security and Immigration  Enforcement Improvements, instructs the Department of Homeland  Security (DHS) to immediately plan, design, and construct a wall or other  physical barriers along the U.S. southern border and to hire an additional  5,000 U.S. Border Patrol (Border Patrol) agents, among other border  security initiatives. Executive Order 13768, Enhancing Public Safety in  the Interior of the United States, instructs federal agencies, including DHS  and the Department of Justice (DOJ), to ensure that U.S immigration law  is enforced against all removable individuals; establishes the  administration\u2019s enforcement priorities; and directs U.S. Immigration and  Customs Enforcement (ICE) to hire an additional 10,000 immigration  officers, among other things. Finally, Executive Order 13780, Protecting  the Nation from Foreign Terrorist Entry into the United States, among  other things, states that it is U.S. policy to improve the screening and  vetting protocols and procedures associated with the visa-issuance  process and U.S. Refugee Admissions Program; imposed visa entry  restrictions on foreign nationals from certain listed countries for a 90-day  period; and suspended all refugee admissions for 120 days.", "In light of the number of policy and programmatic requirements in the  executive orders, you asked us to review federal agency actions and  budgetary costs associated with implementation. This report examines (1)  actions DHS, DOJ, and the Department of State (State) have taken, or  plan to take, to implement provisions of the executive orders; and (2)  resources to implement provisions of the executive orders, particularly  funds DHS, DOJ, and State have obligated, expended, or shifted.", "For the purposes of this review, we focused our audit work on DHS, DOJ,  and State because they are responsible for implementing the majority of  the provisions in the three executive orders. To address the first  objective, we identified actions planned, completed, or underway at DHS,  DOJ, and State as of March 2018 by reviewing and cataloguing specific  provisions included in the executive orders and by reviewing available  agency-wide planning and tracking documents, such as a DHS inventory  of tasks related to the executive orders and their implementation status.  We also obtained and reviewed executive order-related memoranda  issued by agency leadership to identify actions they directed within their  respective departments. We conducted semi-structured interviews with  officials at key components, program offices, and bureaus at the three  agencies, and utilized a data collection instrument in which we asked  agencies to identify actions either planned, completed, or underway to  implement the executive orders. We corroborated actions identified with  documentation, such as recruiting and hiring plans and statements of  work. Additionally, we reviewed strategic and operational policies,  guidance, and memoranda that agencies developed or revised in  response to executive order provisions.", "To address the second objective, we worked to identify any funds DHS,  DOJ, and State obligated, expended, or shifted within or between  appropriation accounts to implement tangible, measurable, and  quantifiable executive order provisions. Specifically, we reviewed the  executive orders and placed each provision into one of three categories:  (1) analyses and reports, (2) policies, and (3) programs. We defined the  analyses and reports category as executive order provisions that direct  agencies to review and analyze data, policies, processes, and operational  mission areas and produce reports. We defined the policies category as  executive order provisions that establish new or modify existing policies,  guidance, or processes related to border security or immigration. We  defined the programs category as tangible, measurable, and quantifiable  executive order provisions that implement policies. We confirmed our  categorization with each agency, particularly for the programs category,  since the extent to which a provision is tangible, measurable, and  quantifiable was not always clearly discernable. To confirm the programs  category for DHS, we conducted a crosswalk between our internal  categorization, actions in the DHS inventory of tasks, and provisions that  the DHS Office of Budget identified as requiring resources. To confirm the  programs category for DOJ and State, we corroborated our categorization  by asking officials from each agency if actions taken or planned to  implement the provisions required resources. In some cases, we moved  policy provisions to the program category if agency efforts underway to  implement the policy were programmatic in nature.", "For each agency, we collected available budgetary information\u2014 specifically, any funds requested, appropriated, obligated, and  expended\u2014from January 2017 through March 2018 for the  implementation of executive order provisions that we categorized as  programs. We reviewed publicly available budget requests, congressional  budget justifications, appropriations acts, and budgetary data from  agencies\u2019 internal data systems. While we were able to identify certain  funds requested, provided, or designated for executive order  implementation from these documents, it was not always possible to  extract funds specifically meant for implementing the executive orders  from budget requests, appropriations, or expenditures for more general  purposes. To specifically identify funds used for executive order  implementation, we reviewed agency documentation, interviewed agency  budget and program officials, and submitted written questions as  necessary. In instances where there was no explicit distinction between  funds for executive order implementation and funds for regular  operations, we identified, and made note of, the larger account used for  executive order implementation. In addition, where agencies identified  that they used personnel resources to implement the executive orders,  we collected related data as available. We analyzed agency  documentation on the policies, procedures, and processes for maintaining  internal data and interviewed agency officials about their data collection  practices to assess the reliability of these data. We determined that the  data were sufficiently reliable for the purposes of our reporting objectives.", "To further address our second objective, we identified official  reprogramming or transfer requests and approvals specifically for  implementation of executive order provisions that we categorized as  programs. We also interviewed DHS, DOJ, and State budget officials to  identify any funds that were re-classified, reallocated, or otherwise shifted  for different programs, activities, or purposes at lower thresholds not  subject to time and condition limitations for official reprogramming or  transfer requests. Additionally, we collected and reviewed documentation  related to funds moved from existing programs to implement the  executive orders from January 2017 through March 2018. We  corroborated this information by interviewing agency budget and program  officials to determine resource prioritization and what funds, if any,  agencies reprogrammed or transferred\u2014or planned to reprogram or  transfer\u2014from other existing programs to implement the executive orders.", "We conducted this performance audit from October 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Executive Order Summaries", "paragraphs": ["The President issued two executive orders addressing border security  and immigration enforcement on January 25, 2017. These orders direct  executive branch agencies to implement a series of reporting, policy, and  programmatic provisions to carry out the administration\u2019s border security  and immigration policies and priorities.", "Executive Order 13767 lays out key policies of the executive branch  with regard to securing the southern border, preventing further  unlawful entry into the United States, and repatriating removable  foreign nationals. To support these purposes, the order directs DHS  to, among other actions, produce a comprehensive study of the  security of the southern border; issue new policy guidance regarding  the appropriate and consistent use of detention of foreign nationals for  violations of immigration law; plan, design, and construct a wall or  other physical barriers along the southern border; and hire and on- board, as soon as practicable, 5,000 additional Border Patrol agents.", "Executive Order 13767 also directs DOJ to assign immigration judges  to immigration detention facilities in order to conduct removal and  other related proceedings.", "Executive Order 13768 focuses on immigration enforcement within  the United States. Among other things, the order lays out the  administration\u2019s immigration enforcement priorities for removable  foreign nationals; directs ICE to hire 10,000 additional immigration  officers; states that, as permitted by law, it is the policy of the  executive branch to empower state and local law enforcement officials  to perform the functions of immigration officers; calls for weekly public  reports on criminal actions committed by foreign nationals and any  jurisdictions that do not honor ICE detainers with respect to such  individuals; and terminates the Priority Enforcement Program while  reinstituting Secure Communities. The order also directs DHS and  DOJ to ensure that jurisdictions that willfully prohibit or otherwise  restrict communication with DHS regarding immigration status  information are not eligible to receive federal grants, except as  determined necessary for law enforcement purposes.", "On March 6, 2017, the President issued Executive Order 13780. This  order directed agencies to take various actions to improve the screening  and vetting protocols and procedures associated with the visa-issuance  process and the U.S. Refugee Admissions Program. Specifically, the  order directed agencies to conduct a worldwide review to identify any  additional information needed from each foreign country to adjudicate  visas and other immigration benefits to ensure that individuals applying  for such benefits are not a security or public-safety threat. The order  also instituted visa entry restrictions for nationals from certain listed  countries for a 90-day period; directed agencies to develop a uniform  baseline for screening and vetting standards and procedures; and  suspended the U.S. Refugee Admissions Program for 120 days in order  to review refugee application and adjudication procedures. The order  further directed DHS to expedite the completion and implementation of a  biometric entry-exit tracking system for travelers to the United States.  Implementation of Executive Order 13780 entry restrictions for visa  travelers and refugees commenced on June 29, 2017, subject to a June  26 ruling of the U.S. Supreme Court prohibiting enforcement of such  restrictions against foreign nationals with a credible claim of a bona fide  relationship to a person or entity in the United States."], "subsections": []}, {"section_title": "Federal Budget Process and Status Since Executive Order Issuance", "paragraphs": ["The federal budget process provides the means for the President and  Congress to make informed decisions between competing national needs  and policies, allocate resources among federal agencies, and ensure  laws are executed according to established priorities. The President  generally submits the budget request for the upcoming fiscal year to  Congress no later than the first Monday of February (e.g. the fiscal year  2019 budget request was submitted in February 2018). To ensure there is  not a lapse in appropriations for one or more federal departments or  agencies, regular appropriations bills must be enacted to fund the  government before the expiration of the prior appropriations, which would  typically be in effect through September 30 in a regular appropriations  cycle. If these regular full-year appropriations bills are not enacted by the  deadline, Congress must pass a continuing appropriation (or resolution)  to temporarily fund government operations into the next fiscal year. For  fiscal year 2017, multiple continuing appropriations were enacted to  extend funding until the Consolidated Appropriations Act, 2017, was  enacted in May 2017.", "At the time the President issued the executive orders in January and  March of 2017, agencies were operating under a continuing appropriation  which did not incorporate any funding explicitly for the administration\u2019s  immigration and border security priorities, such as hiring 5,000 additional  Border Patrol agents. The administration sought additional funds to  implement the executive orders through an out-of-cycle March 2017  budget amendment and supplemental appropriations request for the  remainder of fiscal year 2017. In May 2017, Congress provided funding  for selected priorities through the Consolidated Appropriations Act,  2017. The administration submitted additional funding requests related  to the executive orders through the President\u2019s fiscal year 2018 and 2019  budget requests. A number of continuing appropriations acts were  enacted from September 2017 through February 2018, providing fiscal  year 2018 funding at fiscal year 2017 levels through March 23, 2018. The  Consolidated Appropriations Act, 2018, was signed into law on March 23,  2018, providing funding for government operations for the remainder of  fiscal year 2018. Figure 1 below provides a timeline of executive order  issuance and key milestones in the budget process from December 2016  through March 2018."], "subsections": []}, {"section_title": "Agency Roles and Responsibilities", "paragraphs": ["DHS, DOJ, and State each play key roles in enforcing U.S. immigration  law and securing U.S. borders. Key components and bureaus at the three  agencies, and their general roles and responsibilities with regard to  border security and immigration enforcement, are described in table 1."], "subsections": []}]}, {"section_title": "DHS, DOJ, and State Took Initial Planning and Programming Actions to Implement Provisions of the Executive Orders", "paragraphs": ["DHS, DOJ, and State issued reports, developed or revised policies, and  took initial planning and programmatic actions in response to the  executive orders. Each agency took a distinct approach to implementing  the orders based on its organizational structure and the scope of its  responsibilities. Each executive order established near-term reporting  requirements for agencies, including updates on the status of their efforts,  studies to inform planning and implementation, and reports for the public.  According to officials, agencies focused part of their initial implementation  efforts on meeting these reporting requirements. In addition, agencies  developed and revised policies, initiated planning efforts, and made initial  program changes (such as expanding or expediting programs) to reflect  the administration\u2019s priorities.", "DHS: DHS established an Executive Order Task Force (EOTF), which  was responsible for coordinating and tracking initial component actions to  implement the executive orders. The EOTF assembled an operational  planning team with representatives from key DHS components, such as  U.S. Customs and Border Protection (CBP) and ICE. The EOTF and the  planning team inventoried tasks in the orders, assigned component  responsibilities for tasks, and monitored the status of the tasks through an  online tracking mechanism and weekly coordination meetings.  Additionally, the EOTF coordinated and moved reports required by the  orders through DHS. For example, Section 4 of Executive Order 13767  directed DHS to produce a comprehensive study of the security of the  southern border. DHS completed and submitted this report to the White  House on November 22, 2017, according to EOTF officials. DHS also  publicly issued three Declined Detainer Outcome Reports pursuant to  Section 9 of Executive Order 13768. Additionally, EOTF officials stated  that, in 2017, DHS produced and submitted to the White House 90-day  and 180-day reports on the progress of implementing Executive Orders  13767 and 13768.", "The Secretary of Homeland Security issued two memoranda establishing  policy and providing guidance related to Executive Orders 13767 and  13768 in February 2017. One memorandum implemented Executive  Order 13767 by outlining new policies designed to stem illegal entry into  the United States and to facilitate the detection, apprehension, detention,  and removal of foreign nationals seeking to unlawfully enter or remain in  the United States. For example, the memorandum directed U.S.  Citizenship and Immigration Services (USCIS), CBP, and ICE to ensure  that appropriate guidance and training is provided to agency officials to  ensure proper exercise of parole in accordance with existing statue. The  other memorandum implemented Executive Order 13768 and provided  additional guidance with respect to the enforcement of immigration laws.  For example, it terminated the Priority Enforcement Program, under which  ICE prioritized the apprehension, detention, and removal of foreign  nationals who posed threats to national security, public safety, or border  security, including convicted felons; and restored the Secure  Communities Program, pursuant to which ICE may also target for removal  those charged, but not yet convicted, of criminal offenses, among others.  Additionally, the memorandum reiterated DHS\u2019s general enforcement  priorities. ICE, CBP, and USCIS may allocate resources to prioritize  enforcement activities as they deem appropriate, such as by prioritizing  enforcement against convicted felons or gang members.", "DHS components subsequently issued additional guidance further  directing efforts to implement the executive orders and apply the  guidance from the memoranda. For example, ICE issued guidance to its  legal program to review all cases previously administratively closed based  on prosecutorial discretion. ICE\u2019s new guidance requested its attorneys  to determine whether the basis for closure remains appropriate under  DHS\u2019s new enforcement priorities. USCIS also reviewed its guidance for  credible and reasonable fear determinations\u2014the initial step for certain  removable individuals to demonstrate they are eligible to be considered  for particular forms of relief or protection from removal in immigration  court. As a result, USCIS made select modifications pursuant to  Executive Order 13767, including adding language related to evaluating  an applicant\u2019s credibility based on prior statements made to other DHS  officials, such as CBP and ICE officers.", "DHS also initiated a number of planning and programmatic actions to  implement the executive orders. In some cases DHS components  expanded or enhanced existing regular, ongoing agency activities and  programs in response to the orders. For example, in response to  Executive Order 13768, ICE officials reported that they expanded the use  of the existing Criminal Alien Program. In other instances, DHS  components altered their activities consistent with the administration\u2019s  immigration priorities. For instance, in response to Executive Order 13768, the Secretary of Homeland Security directed ICE to terminate  outreach or advocacy services to potentially removable foreign nationals,  and reallocate all resources currently used for such purposes to a new  office to assist victims of crimes allegedly perpetrated by removable  foreign nationals (the Victims of Immigration Crime Engagement, or  VOICE, office, established in April 2017). Additional examples of planning  and programmatic actions that DHS took, or officials reported taking, in  response to the executive orders are described in table 2.", "DOJ: Within DOJ, the Office of the Deputy Attorney General coordinated  and oversaw DOJ\u2019s initial implementation of key provisions in the  executive orders, according to DOJ officials. Specifically, DOJ officials  said that the Office of the Deputy Attorney General coordinated and  collected information for executive order reporting requirements and  participated in an interagency working group related to Executive Order  13780, and interagency meetings related to Executive Order 13767.  However, DOJ components were responsible for implementing the  provisions and ensuring that they met executive order requirements. In  addition, DOJ assisted in the creation and issuance of various reports.  For example, officials told us that DOJ provided data to State for a report  on foreign assistance to the Mexican government, as required by Section  9 of Executive Order 13767. DOJ also jointly issued three reports with  DHS in response to Executive Order 13768 Section 16, which included  information regarding the immigration status of foreign-born individuals  incarcerated under the supervision of the Federal Bureau of Prisons and  in pre-trial detention in U.S. Marshals Service (USMS) custody.", "The Attorney General issued two memoranda providing policy and  guidance related to Executive Orders 13767 and 13768 in April and May  of 2017. The April 2017 memorandum contains guidance for federal  prosecutors on prioritizing certain immigration-related criminal offenses.  For example, the memorandum requires that federal prosecutors consider  prosecution of foreign nationals who illegally re-enter the United States  after prior removal, and prioritize defendants with criminal histories. The  May 2017 memorandum addresses Executive Order 13768\u2019s provision  directing DOJ and DHS to ensure that jurisdictions willfully prohibiting  immigration status-related communication with the federal government  (referred to as \u201csanctuary jurisdictions\u201d) are not eligible for federal grants.  It requires jurisdictions to certify their compliance with 8 U.S.C \u00a71373,  under which a federal, state, or local government entity or official may not  prohibit, or in any way restrict the exchange of citizenship or immigration  status information with DHS.", "Additionally, DOJ took a number of initial planning and programmatic  steps to implement the executive orders. DOJ officials stated that some  provisions outlined in the executive orders represent regular, ongoing  agency activities and did not require any major changes to be  implemented. For example, DOJ detailed Assistant United States  Attorneys (AUSAs) and immigration judges to southern border districts  and detention centers to assist in prosecutions and to conduct removal  proceedings in response to the executive orders. However, while they  expanded their efforts, DOJ officials said that detailing immigration judges  and AUSAs to the border districts is a regular practice, and not a new  function created by the executive orders. Examples of actions that DOJ  took, or officials reported taking, in response to the executive orders are  described in table 3.", "State: State\u2019s Bureaus of Population, Refugees, and Migration and  Consular Affairs led efforts to implement key provisions in Executive  Order 13780. Several legal challenges and resulting federal court  injunctions affected State\u2019s implementation of Executive Order 13780 and  at times curtailed specific provisions. Initial State actions included  conducting reviews and contributing to reports required by the order. For  instance, while State generally suspended refugee travel for 120 days,  the department, in conjunction with DHS and the Office of the Director of  National Intelligence, conducted a review to determine what, if any,  additional procedures should be implemented in the U.S. Refugee  Admissions Program. According to State officials, the agencies provided  a joint memorandum to the President in October 2017 that contained  recommendations regarding resumption of the program, specific changes  to refugee processing, and further reviews and steps that the interagency  group should take. Additionally, State worked with DHS and the Office of  the Director of National Intelligence to conduct a worldwide review. This  review identified any additional information that the United States may  need from each foreign country to adjudicate visas and other immigration  benefit applications and ensure that individuals seeking to enter the  United States do not pose a threat to public safety or national security. In  July 2017, upon completion of this review, DHS, in consultation with State  and other interagency partners, issued a report to the President  cataloguing information needed from each country and listing countries  not providing adequate information.", "State also issued a number of policies and guidance in response to the  executive orders; however, guidance on how to implement certain  provisions often changed due to legal challenges. For example, the  Bureau of Population, Refugees, and Migration issued 23 iterations of  refugee travel restrictions guidance to overseas refugee processing  centers in response to federal litigation and budgetary uncertainties.  Similarly, the Secretary of State issued a number of cables to visa-issuing  foreign posts on implementing travel restrictions for nationals of selected  countries following court orders limiting the implementation of such  restrictions.", "Executive Order 13780 contained several time-sensitive provisions  directed to the Secretary of State. State focused on first addressing these  provisions while working towards longer-term priorities outlined in the  order. For instance, Executive Order 13780 Sections 2 and 6 established  visa and refugee entry restrictions, which contained near-term timelines.  State implemented these provisions, consistent with judicial decisions.  Examples of planning and programmatic actions that State took, or  officials reported taking, to implement Executive Order 13780 are  described in table 4.", "For more information on specific planning or programmatic actions DHS,  DOJ, and State have taken to implement the executive orders, see  appendix I.", "The examples we provided for DHS, DOJ, and State represent initial  actions and do not constitute an exhaustive list of actions that agencies  have taken, or may take in the future, to fully implement the executive  orders. Agency officials anticipate that implementation of the executive  orders will be a multi-year endeavor comprising present and future  reporting, planning, and other actions. For example, DOJ officials noted  that many of the actions that they took to implement the orders will be  ongoing and responsive to additional DHS actions. Specifically, DOJ  bases the number of immigration judges and AUSAs detailed to the  southern border districts on court caseloads driven by ICE. If ICE hires  additional officers and attorneys and arrests and files charges of  removability against more foreign nationals, then DOJ may need to staff  additional judges and AUSAs to meet caseload needs."], "subsections": []}, {"section_title": "DHS, DOJ, and State Used Existing Fiscal Year 2017 Resources to Support Initial Executive Order Actions; DHS also Received and Expended Supplemental Funds", "paragraphs": ["Existing Fiscal Year 2017 Resources: Many of the initial actions  agencies and components took in response to the executive orders fit  within their existing fiscal year 2017 budget framework and aligned with  their established missions. At the time the executive orders were issued  in January and March of 2017, federal agencies were operating under  existing continuing appropriations pending enactment of fiscal year 2017  appropriations; therefore the new administration\u2019s border security and  immigration priorities and policies had not yet been incorporated into the  budget process. As a result, it is not always possible to disaggregate  which fiscal year 2017 funds were used for implementation of the  executive orders versus other agency activities. For example, while the  orders call for a surge in hiring at CBP and ICE, these agencies regularly  hire additional personnel to offset attrition or to meet budget hiring targets  as part of their normal operations.", "We asked agencies to identify budgetary resources they used specifically  to address the executive orders. In some cases agencies were able to  quantify their expenditures; however in other cases they could not. For  example, according to DOJ officials, the Executive Office for Immigration  Review, which conducts immigration court proceedings, spent close to  $2.4 million in existing funds to surge approximately 40 immigration judge  positions to detention centers and the southwest border from March  through October 2017 in response to Executive Order 13768. DHS\u2019s  USCIS reported expending approximately $4.2 million detailing asylum  officers to immigration detention facilities along the southern border from  February 2017 through February 2018. Additionally, as a result of the  120-day suspension of refugee admissions, State cancelled airline tickets  for previously approved refugee applicants, which resulted in a cost of  nearly $2.4 million in cancellation and unused ticket fees. State officials  noted that, aside from the ticket costs, other budgetary costs associated  with implementing the order are difficult to disaggregate from other  processing activities. For example, any budgetary costs associated with  refugees who were admitted on a case-by-case basis were absorbed into  overseas processing budgets. In some cases, agencies also identified  cost savings or avoidances. For example, State reported a total cost  avoidance of over $160 million in fiscal year 2017, partially as a result of  admitting fewer refugees than originally planned under the prior  administration.", "While the costs above were part of agencies\u2019 normal operations, we  identified one case where Congress approved a DHS request to  reprogram $20 million from existing programs to fund the planning and  design of new physical barriers along the border, including prototype  design and construction. Specifically, CBP reprogrammed $15 million  from funds originally requested for Mobile Video Surveillance System  deployments and $5 million from a border fence replacement project in  Naco, Arizona. Additionally, we identified another case where DHS  shifted funds and notified Congress, but determined Congressional  approval for reprogramming was not required. Specifically, in response to  Executive Order 13768, the Secretary of Homeland Security directed ICE to reallocate any and all resources used to advocate on behalf of  potentially removable foreign nationals (except as necessary to comply  with a judicial order) to the new VOICE office. As part of this effort, ICE\u2019s  Office of the Principal Legal Advisor determined that the creation of the  VOICE office fell within ICE\u2019s authority to carry out routine or small  reallocations of personnel or functions. According to officials at DHS,  DOJ, and State, there were no additional requests to reprogram or  transfer funds to implement the executive orders. DHS budget officials  stated that any future requests from DHS components to reprogram or  transfer funds would typically be considered at the midway point in the  budget cycle.", "All three agencies indicated that they used existing personnel to  implement the executive orders and, in some cases, a substantial amount  of time was spent preparing reports, planning to implement provisions,  and responding to changes or new developments in the executive orders.  For example, USCIS officials noted that the agency devoted a significant  number of manpower hours to aligning USCIS priorities to the executive  orders. ICE\u2019s Office of Human Capital established a dedicated executive  order hiring team to plan for the hiring surge directed by Executive Order  13768. Additionally, officials at State told us that personnel were diverted  from normal operations in order to implement executive order policy  actions and that there were overtime costs associated with some  provisions. In most cases, agencies did not specifically track or quantify  the amount of time spent on these efforts; however, ICE\u2019s Office of  Human Capital tracked the amount of time spent on planning for the  potential surge in ICE hiring in its human resource data system.  According to ICE information, ICE personnel charged approximately  14,000 regular hours (the equivalent of 1,750 8-hour days) and 2,400  overtime hours to this effort from January 2017 through January 2018.", "Fiscal Year 2017 Request for Supplemental Appropriations: In March  2017, the President submitted a budget amendment along with a request  for $3 billion in supplemental appropriations for DHS to implement the  executive orders and address border protection activities. In May 2017,  an additional appropriation of approximately $1.1 billion was provided in  response to this request, some of which DHS used to fund actions to  implement the orders. For example, CBP received $65.4 million for  hiring and, according to CBP officials, used these funds to plan and  prepare for the surge in Border Patrol agents directed by Executive Order  13767. As of January 2018, CBP had obligated $18.8 million and  expended $14.1 million of the $65.4 million it received. Additionally, ICE  received $147.9 million for custody operations. At the end of fiscal year  2017, ICE had obligated and expended nearly all\u2014over 99.9 percent\u2014of  the funds it received.", "Fiscal Years 2018 and 2019 Budget Requests and Fiscal Year 2018  Appropriations: Agency officials anticipate additional costs to further  implement the executive orders and expect that certain provisions will  require a multi-year effort. According to DHS officials, the agency expects  to incorporate executive order implementation into its annual strategic  and budgetary planning processes. DHS officials also noted that  additional future planning and funds will be needed to fully implement  actions in the orders. Agencies plan to continue to use their base budgets  as well as request additional funds as needed to carry out their mission.  Examples of DHS and DOJ fiscal year 2018 budget requests and  appropriations to implement executive order provisions are listed below.", "CBP requested $1.6 billion and in the Consolidated Appropriations  Act, 2018, received approximately $1.3 billion to build new and  replace existing sections of physical barriers along the southern  border. CBP also projected out-year funding for construction along  certain segments of the border through 2024.", "ICE requested $185.9 million for approximately 1,000 new  immigration officers and 606 support staff. ICE\u2019s fiscal year 2018  appropriation included $15.6 million to support the hiring of 65  additional investigative agents, as well as 70 attorneys and support  staff.", "DOJ requested approximately $7.2 million to hire additional attorneys  in support of the orders. According to DOJ officials, DOJ received  sufficient funds in the fiscal year 2018 budget to meet the hiring goal  for attorneys.", "DHS and DOJ also requested funds for fiscal year 2019 to implement  executive order provisions, examples of which are listed below.", "ICE requested $571 million to hire 2,000 immigration officers  (including 1,700 deportation officers and 300 criminal investigators)  and 1,312 support staff (including attorneys).", "DOJ requested $1.1 million for 17 paralegal support positions to  support the additional attorneys requested in the fiscal year 2018  request. DOJ also requested approximately $40 million to hire new  immigration judges and their supporting staff, citing an over 25  percent increase in new cases brought forward by DHS over the  course of fiscal year 2017.", "DHS and DOJ components that were not directly tasked with  responsibilities in the executive orders have also begun to plan for  potential effects as agencies implement the orders. For example, as CBP  and ICE work to meet the hiring surge in the orders, USMS anticipates a  likely increase in the number of individuals who are charged with criminal  immigration offenses and detained pending trial, resulting in a  corresponding increase in its workload. USMS developed a multi-year  impact statement which projected possible effects on USMS prisoner  operations, judicial security, and investigative operations. According to  DOJ officials, these efforts may inform USMS\u2019s budget requests and  future year planning. For example, for fiscal year 2018 USMS requested  approximately $9 million to hire 40 USMS deputies to support the  executive orders. For fiscal year 2019, USMS projected that the  administration\u2019s policies to increase immigration enforcement and  immigration-related prosecutions could result in an increase of nearly  19,000 prisoners between fiscal year 2017 and fiscal year 2019 and a  corresponding budget increase of approximately $105 million for  immigration expenses. In addition, officials at the Federal Law  Enforcement Training Centers stated that they coordinated with Border  Patrol and ICE to assess future training needs and project future resource  requirements based on the hiring assumptions in the executive orders.  For example, the Federal Law Enforcement Training Centers requested  an increase of $29 million in fiscal year 2018 and $25.7 million in fiscal  year 2019 for tuition and training requirements to implement the executive  orders, among other funding requested.", "Appendix I includes additional information on funds DHS, DOJ, and State  have obligated, expended, or shifted, to implement provisions of the  executive orders."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DHS, DOJ, and State for review and  comment. DHS provided written comments, which are reproduced in  appendix III; DOJ and State did not provide written comments. In its  written comments, DHS discussed resources and legislative authorities  the department believes it needs to carry out executive order  requirements. All three agencies provided technical comments, which we  incorporated as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Homeland Security, the  Attorney General, and the Secretary of State. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made significant contributions  to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Key Actions and Budgetary Costs Related to Implementing Executive Order 13767, 13768, and 13780 Provisions", "paragraphs": [], "subsections": [{"section_title": "Purpose", "paragraphs": ["This appendix contains summaries of initial actions that the Department  of Homeland Security (DHS), Department of Justice (DOJ), and  Department of State (State) took to implement selected programmatic  provisions of the President\u2019s executive orders on border security and  immigration. These orders include Executive Order 13767, Border  Security and Immigration Enforcement Improvements; Executive Order  13768, Enhancing Public Safety in the Interior of the United States; and  Executive Order 13780, Protecting the Nation from Foreign Terrorist Entry  into the United States. These summaries also contain overviews of  budget information related to implementing the executive orders,  including obligations, expenditures, and budget requests where available,  among other things. Table 5 lists the summaries and the executive order  provisions on which they focus."], "subsections": []}, {"section_title": "Methodology for Selecting Executive Order Provisions", "paragraphs": ["We reviewed the executive orders and placed each provision directed at  DHS, DOJ, and State into one of three categories: (1) analyses and  reports, (2) policies, and (3) programs. We defined the analyses and  reports category as executive order provisions that direct agencies to  review and analyze data, policies, processes, and operational mission  areas and produce reports. We defined the policies category as executive  order provisions that establish new or modify existing policies, guidance,  or processes related to border security or immigration. We defined the  programs category as tangible, measurable, and quantifiable executive  order provisions that implement policies. We confirmed our categorization  with each agency, particularly for the programs category, since it was  sometimes ambiguous whether provisions would lead to actions that were  tangible, measurable, and quantifiable. Specifically, we reviewed agency  documentation, such as a DHS inventory of tasks related to the executive  orders, and interviewed agency officials. In some cases, we moved policy  provisions to the programs category if agency efforts to implement the  policy were underway.", "We prepared summaries for each executive order provision(s) we  categorized as a program. For each program, we identified actions  planned, completed, or underway at DHS, DOJ, and State as of March  2018 through reviewing documentation, interviewing agency officials, and  submitting data collection instruments. For each program we also  collected available budgetary costs\u2014specifically, any funds requested,  appropriated, obligated, and expended for executive order  implementation from January 2017 through March 2018. We reviewed  publicly available budget requests, congressional budget justifications,  public laws, and budgetary data from agencies\u2019 internal data systems.  While we were able to identify certain funds directly attributed to the  executive order provisions from these documents, it was not always  possible to extract funds specifically meant for implementing the  executive order provisions from more general budget increase requests,  appropriations, or expenditures. To specifically identify funds used for the  executive order provisions, we reviewed agency documentation,  interviewed agency budget and program officials, and submitted written  questions as necessary. In instances where we were unable to  differentiate executive order provision funds from regular operating funds,  we identified the larger account used for executive order funds and noted  this distinction. We analyzed agency documentation on the policies,  procedures, and processes for maintaining budgetary data and  interviewed agency officials about their data collection practices to assess  the reliability of these data. We determined that the data were sufficiently  reliable for our purposes."], "subsections": [{"section_title": "Executive Order: 13767", "paragraphs": [], "subsections": []}, {"section_title": "Provision Summary:", "paragraphs": [], "subsections": []}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": [], "subsections": []}, {"section_title": "Program Context:", "paragraphs": [], "subsections": [{"section_title": "Statutes enacted from 1996 through 2007 authorize DHS, subject to certain criteria, to take necessary actions to construct physical barriers and roads to deter illegal crossings in border areas experiencing high levels of illegal entry. As we previously reported in 2017, from fiscal years 2005 through 2015, CBP increased the total miles of primary border fencing on the southwest border from 119 miles to 654 miles.", "paragraphs": ["Action Overview  CBP has taken initial steps to plan, design, and construct new and  replacement physical barriers on the southern border.", "For instance, CBP began the acquisition process for a Border Wall  System Program, including developing plans to construct barrier  segments and awarding eight task orders with a total value of over $3  million to design and construct barrier prototypes (four made from  concrete and four made from non-concrete materials).", "CBP selected San Diego, California as the first segment and plans to  replace an existing 14 miles of primary and secondary barriers.   DHS plans to use fiscal year 2017 funding for the replacement of the  primary barrier which it plans to rebuild to existing\u2014as opposed to  prototype\u2014design standards.", "In January 2018, DHS leadership also approved cost, schedule, and  performance goals for a second segment in the Rio Grande Valley in  Texas, which will extend an existing barrier with 60 miles of new  fencing.", "The Consolidated Appropriations Act, 2018, stated that fiscal year 2018 funds for primary pedestrian fencing are  only available for \u201coperationally effective designs deployed as of ,\u201d such as steel bollard fencing  currently deployed in areas of the border. As of April 2018, CBP and DHS were evaluating what, if any, impact  this direction will have on the department\u2019s plans, according to DHS officials.", "Additionally, DHS waived specific legal restrictions, such as environmental restrictions, in order to begin  construction of barriers in the El Centro and San Diego Border Patrol sectors in California; and the Santa  Teresa, New Mexico segment of the El Paso Border Patrol Sector. DHS also completed a categorical  exclusion for replacement of a segment of existing barriers in El Paso, Texas.", "Budget Overview  To fund the barrier prototypes, Congress approved a DHS request to reprogram $20 million in fiscal year 2017.  Specifically:", "CBP reprogrammed $15 million from funds originally requested for Mobile Video Surveillance System  deployments. The funds were originally part of the fiscal year 2015/2017 Border Security Fencing,  Infrastructure, and Technology (BSFIT) Development and Deployment funding and were available due to a  contract bid protest and delays associated with the Mobile Video Surveillance System Program.", "CBP also reprogrammed $5 million from funds originally intended for a fence replacement project in Naco,  Arizona. The funds were part of fiscal year 2016 BSFIT Operations and Maintenance funding and were available  as a result of unanticipated contract savings. The Naco Fence Replacement project will be completed within its  original scope, according to CBP documentation.", "DHS also received an appropriation in fiscal year 2017 to replace existing fencing and to install new gates; and an  appropriation in fiscal year 2018 for border barrier planning and design, and to replace existing fencing and build  new barriers. As previously discussed, the Consolidated Appropriations Act, 2018, limited the use of funds provided  for construction of new and replacement primary pedestrian fencing to previously deployed fencing designs. DHS  has requested, but has not received, fiscal year 2019 funds for building new barriers. For more information  regarding funding for future barrier construction projects along the southern border, see table 6.", "According to CBP documentation, the total cost to construct the Border Wall System Program over approximately 10  years is $18 billion. DHS headquarters conducted an independent cost estimate for the San Diego and Rio Grande  Valley segments of the program, which CBP adopted as the program\u2019s life cycle cost estimate. Acquisition and  operations and maintenance costs for the Rio Grande Valley segment were separately described in other DHS  documents and are shown in table 7 below.", "Provision: Sections 5 and 6  Sections 5 and 6 pertain to detention  facilities and detention of foreign  nationals for violations of immigration  law, pending the outcome of their  proceedings or to facilitate removal.  The order directs the Department of  Homeland Security (DHS) to take  immediate actions to construct,  operate, or control facilities to detain  foreign nationals at or near the  southern border, and assign asylum  officers to immigration detention  facilities, among other things.  Additionally, the order directs the  Department of Justice (DOJ) to  immediately assign immigration  judges to immigration detention  facilities.", "DHS: U.S. Customs and Border  Protection (CBP), U.S. Immigration  and Customs Enforcement (ICE),  U.S. Citizenship and Immigration  Services (USCIS)", "DOJ: Executive Office for  Immigration Review (EOIR)", "ICE and U.S. Border Patrol officials stated they consider custody  determinations on a case by case basis. Additionally, officials from CBP\u2019s  Office of Field Operations stated they inspect all applicants for admission  in accordance with the Immigration and Nationality Act, as prescribed by  the executive order and a February 2017 memorandum the Secretary of  Homeland Security issued.", "ICE, through its Enforcement and  Removal Operations directorate,  manages the nation\u2019s immigration  detention system, which houses  foreign nationals detained while their  immigration cases are pending or  after being ordered removed from  the country. DOJ\u2019s EOIR is  responsible for conducting  immigration court proceedings,  appellate reviews, and administrative  hearings, pursuant to U.S.  immigration law and regulation.", "ICE initially intended to increase bed capacity at detention facilities in  order to accommodate potential surges in apprehensions that could  result from implementation of the executive order. According to ICE  officials, ICE identified 1,100 additional beds available at detention  facilities already in use. However, officials also stated that, as of February  2018, ICE has not needed to use these additional beds due to a  decrease in the number of apprehensions.", "Additionally, ICE officials indicated no acquisition actions were needed because contracts and agreements are  in place at existing detention facilities and additional beds are available for excess capacity. CBP and ICE are  continuously monitoring bed space requirements based on migration volume. According to ICE officials, as of  February 2018, ICE had no additional actions planned to increase bed capacity.", "DHS\u2019s Office of Strategy, Policy and Plans convened a cross-component meeting to discuss detention  standards, which govern the conditions of detainee confinement, according to DHS officials. ICE officials  reported that ICE is currently re-writing its national detention standards (the standards applicable at most county  jails housing immigration detainees). According to officials, the new standards are intended to make it easier for  local jurisdictions to comply with standards without completely re-writing their existing policies to conform to  ICE\u2019s requirements.", "USCIS officials told us they began working with ICE to identify where additional asylum officers were needed  based on workload needs and space availability as soon as the executive order was issued in January 2017.  From February 2017 through February 2018, USCIS deployed between 30 and 64 asylum officers during any  given week along the southern border and continues to do so in response to caseload needs. USCIS continues  to monitor and periodically adjust asylum officer staffing requirements, according to USCIS officials.", "DOJ officials stated that DOJ components coordinated with ICE to identify removal caseloads along the southern  border that were large enough to warrant additional immigration judges. According to DOJ officials, from March  2017 through October 2017, EOIR detailed approximately 40 immigration judge positions, both in person and by  video teleconference, to 19 DHS detention facilities, including many along the southern border, in response to the  executive order. DOJ officials further explained that as caseloads fluctuated, some of the details ended, some in- person details were converted to video teleconference, and some details were converted to permanent immigration  judge positions. EOIR often details immigration judges for operational reasons; however officials noted that the  scale of this detail mobilization was larger because of the executive order.", "Fiscal Year 2017: Because Executive Orders 13767 and 13768 were issued during fiscal year 2017, DHS  submitted a budget amendment and requested supplemental appropriations to address the needs of the  department in support of executive order implementation. The request proposed funding to increase daily  immigration detention capacity to 45,700 detention beds by the end of fiscal year 2017. The request stated that  the detention capacity was necessary to implement the administration\u2019s immigration enforcement policies for  removing foreign nationals illegally entering or residing in the United States.", "ICE: On May 5, 2017, ICE received a supplemental appropriation of $236.9 million for enforcement and  removal operations, including $147.9 million for custody operations, $57.4 million for alternatives to  detention, and $31.6 million for transportation and removal operations. According to ICE documentation,  almost all of the funds from that additional appropriation were obligated and expended at the conclusion of  fiscal year 2017, as shown in table 8.", "USCIS: USCIS documentation estimated that it expended at least $4.2 million detailing asylum officers to  immigration detention facilities along the southern border from February 2017 through February 2018.", "Fiscal Year 2018: The President\u2019s budget requested an additional $1.5 billion above the 2017 annualized  continuing appropriations level, for expanded detention, transportation, and removal of foreign nationals who  enter, or remain in, the United States, in violation of U.S. immigration law. As part of the $1.5 billion requested,  the ICE congressional budget justification requested $1.2 billion in additional funds to support an average daily  population (ADP) of detainees of 51,379\u2014a 49 percent increase over fiscal year 2016 ADP (34,376). The  request stated that Executive Order 13768 and subsequent department guidance were expected to drive  increases in the ADP due to the increase in ICE law enforcement officers and an expected increase in the  average length of stay at detention facilities. ICE also requested funds for transportation and alternatives to  detention. In fiscal year 2018, ICE was appropriated $4.1 billion to support enforcement and removal operations.  According to DHS officials, the Consolidated Appropriations Act, 2018, provides funds for an ADP of 40,520 total  beds, 10,859 lower than requested.", "Fiscal Year 2019: The President\u2019s budget requested $2.5 billion for detention and removal capacity. As part of  the $2.5 billion requested, ICE\u2019s congressional budget justification states $2.3 billion will support an ADP of  47,000. According to the ICE congressional budget justification, the number of beds will sustain the fiscal year  2017 ADP level (38,106) and provide additional detention capacity stemming from the continued implementation  of Executive Order 13768. ICE also requested funds for transportation and alternatives to detention.", "Prior GAO Work: Our prior work on immigration detention examined ICE\u2019s formulation of its budget request and  cost estimate for detention resources. In April 2018, we found errors and inconsistencies in ICE\u2019s calculations  for its congressional budget justifications and bed rate model. Specifically, we found that ICE made errors in its  budget justifications, underestimated the actual bed rate, and its methods for estimating detention costs did not  meet the characteristics of a reliable cost estimate. We also found ICE did not document its methodology for its  projected ADP. We recommended that ICE assess and update its adult bed rate and ADP methodology and  take steps to ensure that its budget estimating process fully addresses cost estimating best practices. DHS  concurred with our recommendations and plans to take actions in response to them.", "Fiscal Year 2017: DOJ documentation showed it expended approximately $2.4 million detailing immigration  judge positions to immigration detention facilities from March 2017 through October 2017, either through video  teleconferencing, or in-person, to adjudicate removal proceedings. EOIR officials explained the funds used were  unobligated balances carried over from a prior fiscal year.", "Fiscal Year 2018: For fiscal year 2018, DOJ requested an increase of $75 million to hire 75 additional  immigration judge teams to enhance public safety and law enforcement. According to DOJ officials, the  agency received sufficient funds in the fiscal year 2018 budget to meet this hiring goal.", "Fiscal Year 2019: The fiscal year 2019 President\u2019s budget also requests an increase of $40 million for 75 new  immigration judge teams at EOIR and nearly $40 million for 338 new prosecuting attorneys at ICE to ensure  immigration cases are heard expeditiously. According to the President\u2019s budget, these investments are critical to  the prompt resolution of newly-brought immigration charges and to reduce the 650,000 backlog of cases  currently pending in the immigration courts. EOIR\u2019s fiscal year 2019 congressional budget justification includes a  program increase totaling almost $65 million to provide funding for immigration judges and support staff, as well  as information technology efforts. This increase supports initiatives that implement Presidential and Attorney  General priority areas, among other things."], "subsections": []}]}, {"section_title": "Provision Summary:", "paragraphs": [], "subsections": [{"section_title": "Section 11 directs the Department of Homeland Security (DHS) to ensure that parole is exercised on a case- by-case basis in accordance with existing statutory criteria, and that asylum referrals and credible and reasonable fear determinations are conducted in a manner consistent with relevant statute and regulation.", "paragraphs": [], "subsections": []}]}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": [], "subsections": []}, {"section_title": "Program Context:", "paragraphs": ["USCIS has discretion to authorize  parole for urgent humanitarian  reasons or significant public benefit,  which it uses to allow an individual,  who may be inadmissible or  otherwise ineligible for admission to  come to the United States for a  temporary period. USCIS asylum  officers adjudicate asylum  applications filed with USCIS, and  conduct credible and reasonable fear  screenings to determine if certain  removable foreign nationals may be  eligible to seek particular forms of  relief or protection in immigration  court."], "subsections": []}, {"section_title": "In fiscal year 2019, USCIS requested a total increase of $287.5 million for all programs, projects, and activities to support changes in operational requirements driven by changes to benefit request receipt volumes and complexity of work, including implementing the executive orders.", "paragraphs": ["Additional Funds Saved and Expended:", "According to USCIS officials, USCIS saved approximately $274,000 from not renewing contracts to  administer the Central American Minors Parole Program.", "According to USCIS documentation, USCIS expended approximately $70,300 to deploy FDNS officers along  the southern border from March 2017 to February 2018."], "subsections": []}, {"section_title": "Executive Order: 13767 and 13768", "paragraphs": [], "subsections": []}, {"section_title": "Provision Summary:", "paragraphs": [], "subsections": []}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": [], "subsections": []}, {"section_title": "Program Context:", "paragraphs": [], "subsections": [{"section_title": "CBP and ICE hiring demands are driven by various factors, such as national security objectives, executive-level policies, legislative mandates, and component-specific operational requirements. Border Patrol agents are to respond to, and interdict, cross-border threats and ICE officers are responsible for apprehending individuals within the United States who may be removable for various reasons, including entering the country illegally or being convicted of certain crimes.", "paragraphs": ["Action Overview  DHS has taken a number of actions to implement the executive order hiring  provisions. Specifically, DHS requested and the Office of Personnel  Management approved a number of changes to assist DHS and its  components with the executive order hiring directives. These changes  include granting CBP and ICE direct hire authority and a special salary rate  for polygraphers, among others. DHS\u2019s Office of the Chief Human Capital  Officer and DHS components\u2019 human capital offices also began additional  hiring planning, such as refining component-level hiring plans, coordinating  on potential joint hiring events, and targeting specific recruitment efforts,  such as military veterans. CBP and ICE have also taken the following  additional actions:", "CBP: In November 2017, CBP awarded a contract not to exceed $297  million to Accenture Federal Service LLC to help with law enforcement  hiring for all CBP components. The contract is structured so the  contractor receives a set dollar amount for each law enforcement officer  hired\u201480 percent for each final offer letter and 20 percent for each law  enforcement officer who enters on duty. The contractor is to assist CBP in hiring 7,500 qualified agents and officers, including 5,000 Border Patrol agents, 2,000 CBP officers, and 500 Air  and Marine Interdiction agents over 5 years. CBP expects Accenture to be fully operational and effectively provide  surge hiring capacity by June 2018, according to CBP officials.", "ICE: According to ICE Office of Human Capital (OHC) officials, OHC is ensuring policies and procedures are in  place so that ICE is ready to begin hiring additional immigration officers and support staff if funds are  appropriated. In January 2018, ICE OHC also issued a contract solicitation for recruitment, market research,  data analytics, marketing, hiring, and onboarding activities. ICE OHC sought to procure comprehensive hiring  and recruitment services to assist ICE OHC in meeting the demands required to achieve the executive order\u2019s  hiring goals and develop efficiencies to current OHC processes. ICE aimed to have a similar pricing structure as  CBP\u2019s Accenture contract, according to the solicitation. Specifically, according to the solicitation, the yet to be  selected contractor would receive a set dollar amount for each frontline officer hired\u201380 percent for each  preliminary offer letter and 20 percent for each frontline officer who enters on duty. The contractor would assist  ICE in hiring 10,000 law enforcement agents, including 8,500 deportation officers and 1,500 criminal  investigators. It would also assist in the hiring of approximately 6,500 support personnel positions. In May 2018,  the contract solicitation was cancelled; however, the government anticipates re-soliciting the requirement in  fiscal year 2019. According to the contract cancellation notice and an ICE OHC official, DHS cancelled the  contract due to delays associated with the fiscal year 2018 budget and hiring timelines, as well as the limited  number of additional ICE positions funded in the fiscal year 2018 budget. In the interim, ICE is partnering with  the Office of Personnel Management to meet the executive order\u2019s hiring goals and develop efficiencies to  current OHC processes, according to ICE officials.", "Because Executive Orders 13767 and 13768 were issued during fiscal year 2017, DHS submitted a budget  amendment and requested supplemental appropriations to help address the needs of the department in support  of executive order implementation. The request included funding for DHS agencies to begin building the  administrative capacity necessary to recruit, hire, train and equip the additional 5,000 Border Patrol agents and  10,000 ICE officers. The Federal Law Enforcement Training Centers (FLETC), which provides training to law  enforcement professionals who protect the homeland, including any new ICE and CBP personnel hired as result  of the executive orders, also requested funds to support these efforts.", "On May 5, 2017, CBP received an additional appropriation of $65.4 million to improve hiring processes for  Border Patrol agents, CBP officers, and Air and Marine Operations personnel, and for officer relocation  enhancements. Of the $65.4 million appropriated in fiscal year 2017, CBP obligated $18.8 million and  expended $14.1 million as of January 2018. While ICE also received additional funding for custody operations,  alternatives to detention, and transportation and removal, it did not receive supplemental funds in fiscal year  2017 specifically for hiring. DHS also requested funds for CBP, ICE, and FLETC hiring and training in fiscal year  2018 and fiscal year 2019. For additional details, see table 9.", "According to FLETC officials, the total average cost to provide basic law enforcement training varies by  agencies and position, as shown in table 10. FLETC officials noted their partners also provide additional training  unique to their missions, which is not included in the costs below.", "Action Overview  ICE officials reported expediting review of pending 287(g) requests and  approved 46 additional state and local jurisdictions for the program from  February 2017 through March 2018, bringing the total to 76 law enforcement  agencies in 20 states. See figure 2 for a map of additional jurisdictions  approved.", "Section 10 and Section 8 of  Executive Orders 13767 and 13768,  respectively, direct the Department  of Homeland Security (DHS) to  engage with state and local entities  to enter into agreements under  Section 287(g) of the Immigration  and Nationality Act.", "DHS: U.S. Immigration and Customs  Enforcement (ICE)", "The Illegal Immigration Reform and  Immigrant Responsibility Act of 1996  added Section 287(g) to the  Immigration and Nationality Act,  which authorizes ICE to enter into  agreements with state and local law  enforcement agencies, permitting  designated state and local officers to  perform immigration law enforcement  functions.", "According to ICE officials, ICE also conducted outreach with state and  local officials and identified potential law enforcement partners with whom  to enter into possible future 287(g) agreements. U.S. Customs and  Border Protection (CBP) officials stated that they agreed to support ICE\u2019s  program expansion efforts and provided hundreds of viable state and  local law enforcement referrals to ICE to assist with this effort. For  example, CBP reviewed data and conducted a gap analysis, to include a  survey, to identify potential law enforcement partners for future 287(g)  memorandums of agreement.", "CBP officials further noted that they introduced new language into Operation Stonegarden grant guidance that  allows the use of grant funding to support CBP-identified, 287(g) law enforcement operational activities.  According to CBP and ICE officials, efforts to develop a 287(g) enforcement model that can be used for this  purpose are pending.", "According to ICE officials, the agency is considering developing a program under which designated local law  enforcement officers would be trained and authorized to serve and execute administrative warrants for  individuals who are in violation of U.S. immigration laws at the time they are released from state criminal  custody. ICE officials indicated that program participants would have limited authority under 287(g). For  example, they would not interview individuals regarding nationality and removability, lodge detainers, or process  individuals for removal. ICE has not yet finalized the program and it may evolve as ICE further develops the  program, according to ICE officials.", "ICE is also leveraging an existing Basic Ordering Agreement, a procurement tool to expedite acquisition of a  substantial, but presently unknown, quantity of supplies or services, according to ICE officials. A Basic  Ordering Agreement is not a contract, but rather, is a written instrument of understanding, negotiated between  ICE and state and local jurisdictions, to house detainees upon ICE\u2019s issuance and their acceptance of an  Immigration Detainer and either a Warrant for Arrest of Alien or Warrant of Removal. For any order placed under  the agreement, ICE will reimburse the provider, such as a state or local jurisdiction, for up to 48 hours of  detention, under applicable regulations. The rate will be fixed at $50.00 for up to 48 hours of detention. No  payment will be made for any detention beyond 48 hours.", "The Secretary of Homeland Security vested authority in CBP to accept state services to carry out certain  immigration enforcement functions pursuant to Title 8, United States Code Section 1357(g). According to CBP  officials, CBP also joined a 287(g) Program Advisory Board, which reviews and assesses ICE field office  recommendations about pending 287(g) applications.", "Participation in the 287(g) program is expected to expand further in fiscal years 2018 and 2019, according to  ICE. Additionally, ICE anticipates further increase in the number of 287(g) memorandums of agreement in fiscal  years 2018 and 2019.", "In fiscal year 2018, ICE requested $24.3 million for ICE 287(g) program funding. According to the  explanatory statement accompanying the Consolidated Appropriations Act, 2018, the 287(g) program was  fully funded at the requested level.", "In fiscal year 2019, ICE requested $75.5 million for ICE 287(g) program funding."], "subsections": []}]}, {"section_title": "Executive Order: 13767 and 13768", "paragraphs": [], "subsections": [{"section_title": "Provision: Sections 13 and 11", "paragraphs": [], "subsections": []}]}, {"section_title": "Provision Summary:", "paragraphs": [], "subsections": [{"section_title": "Section 13 of Executive Order 13767 directs the Department of Justice (DOJ) to establish prosecution guidelines and allocate appropriate resources to ensure that federal prosecutors prioritize offenses with a nexus to the southern border.", "paragraphs": ["Section 11 of Executive Order 13768  directs DOJ and the Department of  Homeland Security (DHS) to develop  and implement a program to ensure  that adequate resources are devoted  to prosecuting criminal immigration  offenses, and to develop cooperative  strategies to reduce the reach of  transnational criminal organizations  and violent crime."], "subsections": []}]}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": ["border districts developed guidelines for prioritizing misdemeanor cases  involving individuals illegally entering the United States for the first time.  However, according to these officials, southern border districts developed  these guidelines based on an initial high volume of apprehensions, and  when apprehensions decreased the guidelines were no longer necessary  and never published.", "DOJ: Executive Office for United  States Attorneys (EOUSA)", "DHS: Immigration and Customs  Enforcement  (ICE)", "EOUSA provides executive and  administrative support for United  States Attorneys and Assistant  United States Attorneys (AUSAs).  AUSAs conduct trial work, as  prosecutors, in which the United  States is a party, including  prosecution of criminal immigration  offenses.", "Western District of Texas and Arizona, and two AUSAs each to the  Southern District of California, the District of New Mexico, and the  Southern District of Texas, for a total of 12 details according to DOJ  officials. The first round of details lasted for 6 months, and EOUSA  extended the details of one AUSA at each southern border district for an  additional 6 months. DOJ officials told us that EOUSA will continue to  evaluate the need for additional details along the southern border based  on the needs of the districts, as determined by the number of DHS  apprehensions. According to DOJ officials, implementation of these  provisions is ongoing and will depend largely upon DHS executive order  actions\u2014for instance, as DHS hires more enforcement personnel,  criminal immigration cases may increase which could spur a need for  more AUSAs.", "ICE litigates charges of removability  against foreign nationals and  conducts criminal investigations,  including investigations of  immigration fraud.", "The Secretary of Homeland Security released a memorandum with  guidance on the enforcement of immigration laws in the United States on  February 20, 2017. In response to this memorandum, ICE\u2019s Office of  the Principal Legal Advisor sent guidance to its attorneys directing them  to prioritize legal services supporting the timely removal of foreign  nationals in accordance with Executive Order 13768. The guidance directed ICE to review all cases previously  administratively closed based on prosecutorial discretion to determine whether the basis for closure remains  appropriate under DHS\u2019s enforcement priorities. The guidance also directed ICE to coordinate with the  Executive Office for Immigration Review to ensure that foreign nationals charged as removable and who meet  the enforcement priorities remain on active immigration court dockets and that their cases are completed as  expeditiously as possible.", "In response to the executive orders, ICE Homeland Security Investigations officials stated that the agency  began to focus more of its resources on the investigation and criminal prosecution of immigration fraud. ICE  Homeland Security Investigations added five new Document and Benefit Fraud Task Forces throughout the  nation and directed field offices to increase staffing of task forces. Additionally, ICE is in the process of  combining five Benefit Fraud Units into an immigration fraud center\u2014the National Lead Development Center\u2014  that will serve as a new centralized entity that will refer cases to the task forces for enforcement action.", "A summary of DOJ budget increase requests, appropriations, and expenditures related to prosecution priorities in  the executive orders that we identified can be found in table 11.", "The fiscal year 2018 President\u2019s budget request included $19.3 million for 195 attorney positions in ICE\u2019s Office of  the Principal Legal Advisor. According to ICE officials, while the Consolidated Appropriations Act, 2018, included  funds for 70 positions for the Homeland Security Investigations Law Division, it did not include funds for additional  attorney positions for immigration litigation within the Office of the Principal Legal Advisor.", "The fiscal year 2019 President\u2019s budget request included $39.7 million for additional attorney resources in ICE\u2019s  Office of the Principal Legal Advisor.", "Provision: Sections 5 and 10  Sections 5 and 10 direct the  Department of Homeland Security  (DHS) to take action related to  immigration enforcement.  Specifically, Section 5 directs DHS to  prioritize the removal of certain  categories of removable foreign  nationals. Section 10 directs DHS to  terminate the Priority Enforcement  Program (PEP) and reinstitute  Secure Communities, among other  things.", "DHS: U.S. Immigration and Customs  Enforcement (ICE), U.S. Customs  and Border Protection (CBP)", "Under PEP (from 2015 to 2017), ICE  issued a request for detainer (with  probable cause of removability) or  information or transfer, for a priority  removable individual, such as one  posing a threat to national security or  public safety, including a foreign  national convicted of a felony, among  others, under DHS\u2019s former tiered  civil enforcement categories. Under  Secure Communities, ICE may issue  detainers for removable individuals  charged, but not yet convicted, of  criminal offenses, in addition to  individuals subject to a final order of  removal whether or not they have a  criminal history.", "Pursuant to Executive Order 13768, the Secretary of Homeland Security  terminated PEP and reinstituted the Secure Communities program. As  such, DHS is no longer required to utilize a tiered approach to civil  immigration enforcement with direction to dedicate resources to those  deemed of highest priority. Instead, under Section 5 of the executive  order, various categories of removable individuals are general priorities  for removal, and DHS personnel may initiate enforcement actions against  all removable persons they encounter. Further, the DHS memorandum  implementing this executive order allows ICE, CBP, and USCIS to  allocate resources to prioritize enforcement activities within these  categories, such as by prioritizing enforcement against convicted felons  or gang members.", "As part of this effort, ICE reported it reviewed policies, regulations, and  forms relevant to enforcement priorities. ICE subsequently rescinded  prior enforcement priority guidance and issued new guidance directing  application of the new approach to immigration enforcement prioritization.  Additionally, ICE eliminated existing forms and created a new form to  place detainers on foreign nationals who have been arrested on local  criminal charges and for whom ICE possesses probable cause to believe  that they are removable from the United States, so that ICE can take  custody of such individuals upon release.", "According to ICE officials, more than 43,300 convicted criminal aliens have been identified and removed through  Secure Communities from January 25, 2017 through the end of fiscal year 2017.", "Pursuant to Executive Order 13768 and in accordance with the Secretary of Homeland Security\u2019s memorandum  entitled, Enforcement of the Immigration Laws to Serve the National Interest, ICE\u2019s Enforcement and Removal  Operations (ERO) expanded the use of the Criminal Alien Program (CAP) by increasing the use of Criminal  Alien Program Surge Enforcement Team (CAPSET) operations, traditional CAP Surge operations, and the  Institutional Hearing Program. Specifically, ICE took the following actions:  ICE ERO conducted four CAPSET operations in Louisiana, Georgia, and California in fiscal year 2017,  resulting in a total of 386 encounters, 275 detainers, and 261 charging documents issued, according to ICE  documentation.", "ICE ERO field offices conducted CAP Surge operations, which concluded in March 2017. According to ICE  documentation, the operations collectively resulted in 2,061 encounters, 668 arrests, 1,307 detainers issued,  and 614 charging documents issued.", "ICE, along with the Department of Justice\u2019s Executive Office for Immigration Review and the Federal Bureau  of Prisons, expanded the number of Institutional Hearing Program sites by nine, from 12 to 21. As of  January 22, 2018, five of the nine Institutional Hearing Program expansion sites were operational.", "ICE officials reported that ICE also detailed over 30 percent more officers (79 officers) to support Community  Shield efforts, an international law enforcement initiative to combat the growth and proliferation of transnational  criminal street gangs, prison gangs, and outlaw motorcycle gangs throughout the United States.", "According to ICE officials, CAP used existing resources in fiscal year 2017 to support the efforts required by  Executive Order 13768.", "ICE also requested funds in fiscal years 2018 and 2019 for CAP. Specifically, ICE stated in its fiscal year 2018  and 2019 congressional budget justifications that CAP performs its duties in accordance with immigration  enforcement priorities defined by Executive Order 13768.", "In fiscal year 2018, ICE requested $412.1 million for CAP. The Consolidated Appropriations Act, 2018,  funded $319.4 million for CAP, $92.6 million less than requested.", "Section 9 directs the Department of  Justice (DOJ) and the Department of  Homeland Security (DHS) to ensure  that jurisdictions in willful  noncompliance with 8 U.S.C. \u00a7 1373  (section 1373) are ineligible to  receive federal grants. The section  also directs DOJ to take appropriate  enforcement action against any  entity that violates section 1373, or  which has in effect a policy, statute,  or practice that prevents or hinders  the enforcement of federal law."], "subsections": []}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": [], "subsections": []}, {"section_title": "Program Context:", "paragraphs": ["conducted a compliance review of certain jurisdictions relative to 8 U.S.C.  \u00a7 1373, and issued a report in May 2016 finding that 10 jurisdictions  raised compliance concerns. In response, DOJ placed a special  condition on certain fiscal year 2016 grant awards, requiring recipients to  submit an assessment of their compliance with section 1373. In  November 2017, as part of the section 1373 compliance effort predating  Executive Order 13768, DOJ sent letters to 29 jurisdictions expressing  concern that they may not be in compliance with section 1373, and  requesting responses regarding compliance. In January 2018, DOJ  sent 23 follow-up demand letters to jurisdictions seeking further  documents to determine whether they are unlawfully restricting  information sharing by their law enforcement officers with federal  immigration authorities, and stating that failure to respond will result in  records being subpoenaed.", "The Attorney General determined  that Section 9 will be applied solely  to DOJ or DHS federal grants for  jurisdictions willfully refusing to  comply with section 1373. Under  section 1373, a federal, state, or  local government entity or official  may not prohibit, or in any way  restrict the exchange of information  regarding citizenship or immigration  status with DHS.", "ICE developed weekly Declined Detainer Outcome Reports detailing jurisdictions with the highest volume of  declined detainers and a list of sample crimes suspected or determined to have been committed by released  individuals. According to ICE officials, ICE identified data processing errors and incorrect detainer  information and is working to correct these issues. ICE officials noted that they temporarily suspended the  reports, and have not yet determined a specific time frame for future publications.", "DHS reviewed all DHS grant programs to determine which programs could be conditioned to require compliance  with section 1373 and plans to provide this information to the Office of Management and Budget, according to  DHS officials.", "DOJ has not obligated, expended, or requested any additional funds to implement Executive Order 13768, section  9(a).", "The fiscal year 2019 President\u2019s budget proposed to amend the Illegal Immigration Reform and Immigrant  Responsibility Act of 1996 to condition DHS and DOJ grants and cooperative agreements on state and local  governments\u2019 cooperation with immigration enforcement.", "Section 2 directed multiple agencies,  including the Department of State  (State) and Department of Homeland  Security (DHS), to conduct a  worldwide review to identify any  additional information needed from  each foreign country to adjudicate  immigration benefit applications and  ensure that individuals applying for a  visa or other immigration benefit are  not a security or public safety threat.  It also directed the agencies to send  a report of the findings of the  worldwide review to the President.  This section further established visa  entry restrictions applicable to  foreign nationals from Iran, Libya,  Somalia, Sudan, Syria, and Yemen  for a 90-day period. It also stated  that agencies, including State and  DHS, could continue to submit  additional countries for inclusion in  visa entry restrictions.", "Section 5 required agencies,  including State, DHS, and the  Department of Justice (DOJ), to  develop a uniform baseline for  screening and vetting to identify  individuals seeking to enter the  United States on a fraudulent basis  or who support terrorism or  otherwise pose a danger to national  security or public safety. practices based on the criteria identified above. In July 2017, State  directed its posts to inform their respective host governments of the new  information-sharing criteria and request that host governments provide  the required information or develop a plan to do so. CA directed posts to  engage more intensively with countries whose information-sharing and  identity-management practices were preliminarily deemed \u201cinadequate\u201d  or \u201cat risk\u201d and submit an assessment of mitigating factors or specific  interests that should be considered in the deliberations regarding any  travel restrictions. According to officials, State and its posts will continue  to engage with foreign countries to address information-sharing and  identify management deficiencies."], "subsections": []}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": ["State: Bureau of Consular Affairs  (CA), DHS, and DOJ  CA provides consular services in  reviewing and adjudicating visa  applications for those seeking to  enter the United States. DHS  adjudicates visa petitions, and DHS  and DOJ also play roles in screening  and vetting applicants. DHS and  DOJ, along with State, are  responsible for implementing the  enhanced screening and vetting  protocols established under the  executive order.", "June 29, 2017 through September 24, 2017. During the implementation  period, if an applicant was found ineligible for a visa on other grounds  unrelated to the executive order, such as prior criminal activity or  immigration violations, the applicant would be refused the visa on those  grounds, according to State officials. If the applicant was found to be  otherwise eligible for the visa and did not qualify for an exemption or a  waiver under the executive order, he or she would be refused on the  basis of the executive order. CA sent several cables to posts with  guidance on implementing the 90-day travel restriction, including  operational guidance and updated guidance following court decisions. CA  also offered trainings to consular posts on implementation of the order.", "A series of legal challenges ultimately led to the June 26, 2017 Supreme Court decision prohibiting enforcement  of entry restrictions against foreign nationals who could credibly claim a bona fide relationship with a person or  entity in the United States.", "On September 24, 2017, pursuant to section 2(e) of Executive Order 13780, the President issued Presidential  Proclamation 9645, which established conditional restrictions on U.S. entry for certain categories of nationals  from Chad, Iran, Libya, North Korea, Syria, Venezuela, Yemen and Somalia, for an indefinite period.", "According to State officials, State, DHS, DOJ, and other agencies formed a working group and developed a  uniform baseline for screening and vetting standards and procedures to ensure ineligible individuals are not  permitted to enter the United States, and are implementing the new requirements. The working group conducted  a review of the visa screening and vetting process and established uniform standards for (1) applications, (2)  interviews, and (3) system security checks, including biographic and biometric checks. According to State  officials, for applications, the group identified data elements against which applicants are to be screened and  vetted. For interviews, the working group established a requirement for all applicants to undergo a baseline  uniform national security and public safety interview. The working group modeled its interview baseline on  elements of the refugee screening interview.", "As of June 2017, State collected most of the data elements online for immigrant and nonimmigrant visas,  according to State officials.", "The President issued a memorandum on February 6, 2018, directing DHS, in coordination with State, DOJ, and  the Office of the Director of National Intelligence to establish a national vetting center to coordinate agency  vetting efforts to identify individuals who pose a threat to national security, border security, homeland security,  and public safety. The National Vetting Center will be housed in DHS, and will leverage the capabilities of the  U.S. intelligence community to identify, and prevent entry of, individuals that may pose a threat to national  security. On February 14, 2018, the Secretary of Homeland Security appointed a director for the National Vetting  Center. The Secretary also delegated authorities of the National Vetting Center to the Commissioner of U.S.  Customs and Border Protection.", "State officials said that personnel worked overtime to implement Section 2 and the following Presidential  Proclamation, but did not identify monetary costs or budget increases associated with implementation. DHS also  dedicated several full-time staff positions to developing and implementing enhanced screening and vetting  protocols, and DHS employees worked overtime to implement these provisions, according to officials.", "Section 6 directed the Department of  State (State) to suspend travel of  refugees seeking to enter the United  States, and the Department of  Homeland Security (DHS) to  suspend adjudications on refugee  applications, for 120 days. Section 6  further ordered that during the 120- day period, State, together with DHS,  and the Office of the Director of  National Intelligence review the  refugee application and adjudication  process to identify and implement  additional procedures to ensure that  refugees seeking entry into the  United States under the United  States Refugee Admissions Program  (USRAP) do not pose a threat to  U.S. security and welfare. This  section also capped annual refugee  admission at 50,000 in fiscal year  2017.", "State generally suspended travel of refugees into the United States from  June 29, 2017 through October 24, 2017.", "State coordinated with DHS, the Office of the Director of National  Intelligence, and other security vetting agencies on the 120-day review of  the USRAP application and adjudication process to determine what  additional procedures should be used to ensure that individuals seeking  admission as refugees do not pose a threat to the security and welfare of  the United States, according to State officials. Upon completion of the  review, the agencies submitted a joint memorandum to the President.", "The United States admitted 53,716 refugees in fiscal year 2017,  according to State officials. Throughout fiscal year 2017, State issued  guidance that steered the refugee admissions program to different  refugee arrival goals during different periods of time due to court  decisions and budget considerations. Prior to the issuance of Executive  Order 13769, which, after largely being blocked nationwide by a federal  court injunction was revoked and replaced by Executive Order 13780,  PRM operated at the rate of 110,000 refugees per year. After the  issuance of Executive Orders 13769 and 13780, PRM officials noted that  at times, State made no bookings for refugee arrivals, and also made  bookings based on 50,000 arrivals, as well as 110,000 arrivals."], "subsections": []}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": [], "subsections": []}, {"section_title": "Program Context:", "paragraphs": ["A series of legal challenges and resulting court injunctions culminated in the  June 26, 2017, Supreme Court order limiting State\u2019s implementation of this  section to prospective refugees without bona fide ties to the United States.   Together with budget uncertainties, State could not enact the refugee travel  suspension or 50,000-person admissions cap based on the timeline set in  the executive order. Figure 3 below shows key milestones related to this  section of the order.", "The USRAP resettles refugees to the  United States in accordance with a  refugee admission ceiling set by the  President each year. PRM is  responsible for coordinating and  managing the USRAP. USCIS is  responsible for adjudicating refugee  applications.", "According to USCIS officials, USCIS is implementing new requirements and vetting procedures for refugees. For  example, these officials stated that USCIS is accessing more detailed biographical information earlier in the  vetting process. Additionally, these officials noted that USCIS\u2019s Fraud Detection and National Security unit is  conducting additional reviews of applicants, including social media and other information against various  databases. USCIS officials further noted that USCIS\u2019s International Operations office sent guidance to the field  that established the logistical requirements of the new procedures. As of April 2018, USCIS was finalizing further  guidance and training officers for the enhanced review and vetting procedures, according to USCIS officials.", "State officials said that State and DHS executed four categories of exemptions during the 120-day USRAP  suspension: a Congolese woman with a life-threatening illness and her family; 29 unaccompanied refugee  minors; 17 Yezidis and other religious minorities in northern Iraq who had been victims of ISIS; and 53  individuals on Nauru and Manus Islands."], "subsections": []}, {"section_title": "Provision Summary:", "paragraphs": [], "subsections": [{"section_title": "Section 9 directs the Department of State (State) to suspend the Visa Interview Waiver Program, subject to certain exceptions. To support this, the provision also directs State to expand the Consular Fellows program so that visa wait times are not unduly affected. The provision also directs State to make language training available to Consular Fellows outside of their core linguistic abilities.", "paragraphs": [], "subsections": []}]}, {"section_title": "Key Agency(ies) Responsible:", "paragraphs": [], "subsections": []}, {"section_title": "Program Context:", "paragraphs": ["appointments by 12 months. In October 2017, State approved extending  offers for follow-on 60-month Limited Non-Career Appointments to  Consular Fellows who complete a successful initial 60-month  appointment. State officials noted the first officer to accept a follow-on  appointment was sworn in during April 2018. CA and State\u2019s Bureau of  Human Resources updated the CA Limited Non-Career Appointments  handbook to include an implementation plan for extending such  appointments, and according to officials, providing language training  outside of the applicant\u2019s area of core linguistic ability.", "Consular Fellows serve in U.S.  embassies and consulates overseas  and primarily adjudicate visa  applications for foreign nationals.  The Visa Interview Waiver Program  formerly waived in-person interviews  for certain categories of visa  applicants.", "In early 2017, State streamlined the application process for Consular  Fellows and realigned resources to expedite their security clearance  process, according to CA officials. From February 2017 through February  2018, State hired 134 new Consular Fellows, according to CA officials.  Additionally, State officials said that they expect to hire 120 more  Consular Fellows for the remainder of fiscal year 2018.", "In August 2017, the Foreign Service Institute created a 12-week Spanish  Language program for Consular Fellows who received certain scores on  the Spanish language exam, according to CA officials. Eleven Consular  Fellows completed the program in January 2018 and 20 more are  expected to complete the program in July 2018, according to CA officials.  As of January 2018, five Consular fellows were being trained in a  language outside their core linguistic ability, according to CA officials.", "While these actions were taken to support implementation of the  executive order, CA officials also told us that hiring Consular Fellows has  been a State priority for some time. CA officials said that the bureau has  hired an increasing number of Consular Fellows to meet worldwide visa  demand since 2012, and that providing consular services is one of  State\u2019s highest priorities, as well as a national security imperative.", "According to CA officials, because the Consular Fellows program is  entirely funded by non-appropriated consular fees, subject to fluctuating  demand for passports and visas, the expansion of the program did not  have appropriations impacts. However, officials did provide per unit costs  associated with aspects of expanding the Consular Fellows program. For  example, Consular Fellows salaries range from approximately $48,000 to  approximately $98,000 and Foreign Service Institute language courses  last from 24 to 36 weeks, at a cost of $1,700 per week, per student."], "subsections": []}]}]}, {"section_title": "Appendix II: Executive Order Reports", "paragraphs": ["Executive orders 13767 (Border Security and Immigration Enforcement  Improvements), 13768 (Enhancing Public Safety in the Interior of the  United States), and 13780 (Protecting the Nation from Foreign Terrorist  Entry into the United States) include reporting requirements for the  Department of Homeland Security (DHS), the Department of State  (State), and the Department of Justice (DOJ). Table 13 lists completed  reports as of April 2018, according to DHS, State, and DOJ officials."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Taylor Matheson (Assistant  Director), Sarah Turpin (Analyst-in-Charge), Isabel Band, and Kelsey  Hawley made key contributions to this report, along with David Alexander,  Eric Hauswirth, Sasan J. \u201cJon\u201d Najmi, Kevin Reeves, and Adam Vogt."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-645T", "url": "https://www.gao.gov/products/GAO-18-645T", "title": "High-Risk Series: Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation", "published_date": "2018-07-25T00:00:00", "released_date": "2018-07-25T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies and the nation's critical infrastructures\u2014such as energy, transportation systems, communications, and financial services\u2014are dependent on information technology systems to carry out operations. The security of these systems and the data they use is vital to public confidence and national security, prosperity, and well-being.", "The risks to these systems are increasing as security threats evolve and become more sophisticated. GAO first designated information security as a government-wide high-risk area in 1997. This was expanded to include protecting cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015.", "GAO was asked to update its information security high-risk area. To do so, GAO identified the actions the federal government and other entities need to take to address cybersecurity challenges. GAO primarily reviewed prior work issued since the start of fiscal year 2016 related to privacy, critical federal functions, and cybersecurity incidents, among other areas. GAO also reviewed recent cybersecurity policy and strategy documents, as well as information security industry reports of recent cyberattacks and security breaches."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO has identified four major cybersecurity challenges and 10 critical actions that the federal government and other entities need to take to address them. GAO continues to designate information security as a government-wide high-risk area due to increasing cyber-based threats and the persistent nature of security vulnerabilities.", "GAO has made over 3,000 recommendations to agencies aimed at addressing cybersecurity shortcomings in each of these action areas, including protecting cyber critical infrastructure, managing the cybersecurity workforce, and responding to cybersecurity incidents. Although many recommendations have been addressed, about 1,000 have not yet been implemented. Until these shortcomings are addressed, federal agencies' information and systems will be increasingly susceptible to the multitude of cyber-related threats that exist."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made over 3,000 recommendations to agencies since 2010 aimed at addressing cybersecurity shortcomings. As of July 2018, about 1,000 still needed to be implemented."]}], "report": [{"section_title": "Letter", "paragraphs": ["I appreciate the opportunity to be here today to participate in your hearing  on cybersecurity challenges. Federal agencies and our nation\u2019s critical  infrastructures\u2014such as energy, transportation systems,  communications, and financial services\u2014are dependent on information  technology (IT) systems and electronic data to carry out operations and to  process, maintain, and report essential information. The security of these  systems and data is vital to public confidence and national security,  prosperity, and well-being.", "Many of these systems contain vast amounts of personally identifiable  information (PII), thus making it imperative to protect the confidentiality,  integrity, and availability of this information and effectively respond to data  breaches and security incidents, when they occur. Underscoring the  importance of this issue, we continue to designate information security as  a government-wide high-risk area in our most recent biennial report to  Congress\u2014a designation we have made in each report since 1997.", "The risks to IT systems supporting the federal government and the  nation\u2019s critical infrastructure are increasing as security threats continue  to evolve and become more sophisticated. These risks include insider  threats from witting or unwitting employees, escalating and emerging  threats from around the globe, steady advances in the sophistication of  attack technology, and the emergence of new and more destructive  attacks.", "In particular, foreign nations\u2014where adversaries may possess  sophisticated levels of expertise and significant resources to pursue their  objectives\u2014pose increasing risks. Rapid developments in new  technologies, such as artificial intelligence and the Internet of Things  (IoT), makes the threat landscape even more complex and can also  potentially introduce security, privacy, and safety issues that were  previously unknown.", "Compounding these risks, IT systems are often riddled with security  vulnerabilities\u2014both known and unknown. These vulnerabilities can  facilitate security incidents and cyberattacks that disrupt critical  operations; lead to inappropriate access to and disclosure, modification,  or destruction of sensitive information; and threaten national security,  economic well-being, and public health and safety. This is illustrated by  significant security breaches reported by the Office of Personnel  Management (OPM) in 2015 that resulted in the loss of PII for an  estimated 22.1 million individuals and, more recently, in 2017, a security  breach reported by Equifax\u2014one of the nation\u2019s largest credit bureaus\u2014 that resulted in the loss of PII for an estimated 148 million U.S.  consumers.", "At your request, my testimony updates the information security high-risk  area by identifying actions that the federal government and other entities  need to take to address cybersecurity challenges facing the nation. This  statement reflects work we conducted since the prior high-risk update  was issued in February 2017, among other things. We also plan to issue  an updated assessment of this high-risk area in February 2019.", "In conducting the work for this update, we first identified cybersecurity  areas in which the federal government has experienced challenges. To  do so, we primarily reviewed our prior work issued since the start of fiscal  year 2016 related to privacy, critical federal functions, and cybersecurity  incidents, among other areas (see appendix I for a list of our prior work).  We also reviewed recent cybersecurity policy and strategy documents  issued by the current administration, such as Executive Order 13800,  Strengthening the Cybersecurity of Federal Networks and Critical  Infrastructure, the National Security Strategy, and the Department of  Homeland Security\u2019s (DHS) May 2018 cybersecurity strategy. We then  analyzed these documents to determine the extent to which they included  GAO\u2019s desirable characteristics of a national strategy. We also reviewed  recent media and information security industry reports of cyberattacks  and security breaches. Based on these actions, we identified four  cybersecurity areas in which federal agencies had experience challenges.", "To identify the actions needed to address each challenge area, we  reviewed the findings of our work specific to each challenge, the status of  our prior recommendations to the Executive Office of the President and  federal agencies, and any actions taken by these entities to address our  recommendations. In reviewing the status of prior recommendations, we  also determined which recommendations had not been implemented and  what additional actions, if any, the Executive Office of the President and  federal agencies needed to take in order to address them. We then  summarized the actions needed and the status of our prior  recommendations. We also identified our ongoing work related to each  action.", "We conducted the work on which this testimony is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["IT systems supporting federal agencies and our nation\u2019s critical  infrastructures are inherently at risk. These systems are highly complex  and dynamic, technologically diverse, and often geographically dispersed.  This complexity increases the difficulty in identifying, managing, and  protecting the numerous operating systems, applications, and devices  comprising the systems and networks.", "Compounding the risk, federal systems and networks are also often  interconnected with other internal and external systems and networks,  including the Internet. This increases the number of avenues of attack  and expands their attack surface. As systems become more integrated,  cyber threats will pose an increasing risk to national security, economic  well-being, and public health and safety.", "Advancements in technology, such as data analytics software for  searching and collecting information, have also made it easier for  individuals and organizations to correlate data (including PII) and track it  across large and numerous databases. For example, social media has  been used as a mass communication tool where PII can be gathered in  vast amounts. In addition, ubiquitous Internet and cellular connectivity  makes it easier to track individuals by allowing easy access to information  pinpointing their locations. These advances\u2014combined with the  increasing sophistication of hackers and others with malicious intent, and  the extent to which both federal agencies and private companies collect  sensitive information about individuals\u2014have increased the risk of PII  being exposed and compromised.", "Cybersecurity incidents continue to impact entities across various critical  infrastructure sectors. For example, in its 2018 annual data breach  investigations report, Verizon reported that 53,308 security incidents  and 2,216 data breaches were identified across 65 countries in the 12  months since its prior report. Further, the report noted that cybercriminals  can often compromise a system in just a matter of minutes\u2014or even  seconds, but that it can take an organization significantly longer to  discover the breach. Specifically, the report stated nearly 90 percent of  the reported breaches occurred within minutes, while nearly 70 percent  went undiscovered for months.", "These concerns are further highlighted by the number of information  security incidents reported by federal executive branch civilian agencies  to DHS\u2019s U.S. Computer Emergency Readiness Team (US-CERT). For  fiscal year 2017, 35,277 such incidents were reported by the Office of  Management and Budget (OMB) in its 2018 annual report to Congress,  as mandated by the Federal Information Security Modernization Act  (FISMA). These incidents include, for example, web-based attacks,  phishing, and the loss or theft of computing equipment.", "Different types of incidents merit different response strategies. However,  if an agency cannot identify the threat vector (or avenue of attack), it  could be difficult for that agency to define more specific handling  procedures to respond to the incident and take actions to minimize similar  future attacks. In this regard, incidents with a threat vector categorized as  \u201cother\u201d (which includes avenues of attacks that are unidentified) made up  31 percent of the various incidents reported to US-CERT. Figure 1 shows  the percentage of the different types of incidents reported across each of  the nine threat vector categories for fiscal year 2017, as reported by  OMB.", "These incidents and others like them can pose a serious challenge to  economic, national, and personal privacy and security. The following  examples highlight the impact of such incidents:  In March 2018, the Mayor of Atlanta, Georgia reported that the city  was victimized by a ransomware cyberattack. As a result, city  government officials stated that customers were not able to access  multiple applications that are used to pay bills or access court related  information. In response to the attack, the officials noted that they  were working with numerous private and governmental partners,  including DHS, to assess what occurred and determine how best to  protect the city from future attacks.", "In March 2018, the Department of Justice reported that it had indicted  nine Iranians for conducting a massive cybersecurity theft campaign  on behalf of the Islamic Revolutionary Guard Corps. According to the  department, the nine Iranians allegedly stole more than 31 terabytes  of documents and data from more than 140 American universities, 30  U.S. companies, and five federal government agencies, among other  entities.", "In March 2018, a joint alert from DHS and the Federal Bureau of  Investigation (FBI) stated that, since at least March 2016, Russian  government actors had targeted the systems of multiple U.S.  government entities and critical infrastructure sectors. Specifically, the  alert stated that Russian government actors had affected multiple  organizations in the energy, nuclear, water, aviation, construction, and  critical manufacturing sectors.", "In July 2017, a breach at Equifax resulted in the loss of PII for an  estimated 148 million U.S. consumers. According to Equifax, the  hackers accessed people\u2019s names, Social Security numbers (SSN),  birth dates, addresses and, in some instances, driver\u2019s license  numbers.", "In April 2017, the Commissioner of the Internal Revenue Service  (IRS) testified that the IRS had disabled its data retrieval tool in early  March 2017 after becoming concerned about the misuse of taxpayer  data. Specifically, the agency suspected that PII obtained outside the  agency\u2019s tax system was used to access the agency\u2019s online federal  student aid application in an attempt to secure tax information through  the data retrieval tool. In April 2017, the agency began notifying  taxpayers who could have been affected by the breach.", "In June 2015, OPM reported that an intrusion into its systems had  affected the personnel records of about 4.2 million current and former  federal employees. Then, in July 2015, the agency reported that a  separate, but related, incident had compromised its systems and the  files related to background investigations for 21.5 million individuals.  In total, OPM estimated 22.1 million individuals had some form of PII  stolen, with 3.6 million being a victim of both breaches."], "subsections": [{"section_title": "Federal Information Security Included on GAO\u2019s High-Risk List Since 1997", "paragraphs": ["Safeguarding federal IT systems and the systems that support critical  infrastructures has been a long-standing concern of GAO. Due to  increasing cyber-based threats and the persistent nature of information  security vulnerabilities, we have designated information security as a  government-wide high-risk area since 1997. In 2003, we expanded the  information security high-risk area to include the protection of critical  cyber infrastructure. At that time, we highlighted the need to manage  critical infrastructure protection activities that enhance the security of the  cyber and physical public and private infrastructures that are essential to  national security, national economic security, and/or national public health  and safety.", "We further expanded the information security high-risk area in 2015 to  include protecting the privacy of PII. Since then, advances in technology  have enhanced the ability of government and private sector entities to  collect and process extensive amounts of PII, which has posed  challenges to ensuring the privacy of such information. In addition, high- profile PII breaches at commercial entities, such as Equifax, heightened  concerns that personal privacy is not being adequately protected.", "Our experience has shown that the key elements needed to make  progress toward being removed from the High-Risk List are top-level  attention by the administration and agency leaders grounded in the five  criteria for removal, as well as any needed congressional action. The five  criteria for removal that we identified in November 2000 are as follows:", "Leadership Commitment. Demonstrated strong commitment and top  leadership support.", "Capacity. The agency has the capacity (i.e., people and resources) to  resolve the risk(s).", "Action Plan. A corrective action plan exists that defines the root  cause, solutions, and provides for substantially completing corrective  measures, including steps necessary to implement solutions we  recommended.", "Monitoring. A program has been instituted to monitor and  independently validate the effectiveness and sustainability of  corrective measures.", "Demonstrated Progress. Ability to demonstrate progress in  implementing corrective measures and in resolving the high-risk area.", "These five criteria form a road map for efforts to improve and ultimately  address high-risk issues. Addressing some of the criteria leads to  progress, while satisfying all of the criteria is central to removal from the  list. Figure 2 shows the five criteria and illustrative actions taken by  agencies to address the criteria. Importantly, the actions listed are not  \u201cstand alone\u201d efforts taken in isolation from other actions to address high- risk issues. That is, actions taken under one criterion may be important to  meeting other criteria as well. For example, top leadership can  demonstrate its commitment by establishing a corrective action plan  including long-term priorities and goals to address the high-risk issue and  using data to gauge progress\u2014actions which are also vital to monitoring  criteria.", "As we reported in the February 2017 high-risk report, the federal  government\u2019s efforts to address information security deficiencies had fully  met one of the five criteria for removal from the High-Risk List\u2014 leadership commitment\u2014and partially met the other four, as shown in  figure 3. We plan to update our assessment of this high-risk area against  the five criteria in February 2019."], "subsections": []}]}, {"section_title": "Ten Critical Actions Needed to Address Major Cybersecurity Challenges", "paragraphs": ["Based on our prior work, we have identified four major cybersecurity  challenges: (1) establishing a comprehensive cybersecurity strategy and  performing effective oversight, (2) securing federal systems and  information, (3) protecting cyber critical infrastructure, and (4) protecting  privacy and sensitive data. To address these challenges, we have  identified 10 critical actions that the federal government and other entities  need to take (see figure 4). The four challenges and the 10 actions  needed to address them are summarized following the table."], "subsections": [{"section_title": "Establishing a Comprehensive Cybersecurity Strategy and Performing Effective Oversight", "paragraphs": ["The federal government has been challenged in establishing a  comprehensive cybersecurity strategy and in performing effective  oversight as called for by federal law and policy. Specifically, we have  previously reported that the federal government has faced challenges in  establishing a comprehensive strategy to provide a framework for how the  United States will engage both domestically and internationally on  cybersecurity related matters. We have also reported on challenges in  performing oversight, including monitoring the global supply chain,  ensuring a highly skilled cyber workforce, and addressing risks  associated with emerging technologies. The federal government can take  four key actions to improve the nation\u2019s strategic approach to, and  oversight of, cybersecurity.", "Develop and execute a more comprehensive federal strategy for  national cybersecurity and global cyberspace. In February 2013  we reported that the government had issued a variety of strategy- related documents that addressed priorities for enhancing  cybersecurity within the federal government as well as for  encouraging improvements in the cybersecurity of critical  infrastructure within the private sector; however, no overarching  cybersecurity strategy had been developed that articulated priority  actions, assigned responsibilities for performing them, and set  timeframes for their completion. Accordingly, we recommended that  the White House Cybersecurity Coordinator in the Executive Office  of the President develop an overarching federal cybersecurity strategy  that included all key elements of the desirable characteristics of a  national strategy including, among other things, milestones and  performance measures for major activities to address stated priorities;  cost and resources needed to accomplish stated priorities; and  specific roles and responsibilities of federal organizations related to  the strategy\u2019s stated priorities.", "In response to our recommendation, in October 2015, the Director of  OMB and the Federal Chief Information Officer, issued a  Cybersecurity Strategy and Implementation Plan for the Federal  Civilian Government. The plan directed a series of actions to  improve capabilities for identifying and detecting vulnerabilities and  threats, enhance protections of government assets and information,  and further develop robust response and recovery capabilities to  ensure readiness and resilience when incidents inevitably occur. The  plan also identified key milestones for major activities, resources  needed to accomplish milestones, and specific roles and  responsibilities of federal organizations related to the strategy\u2019s  milestones.", "Since that time, the executive branch has made progress toward  outlining a federal strategy for confronting cyber threats. Table 1  identifies these recent efforts and a description of their related  contents.", "These efforts provide a good foundation toward establishing a more  comprehensive strategy, but more effort is needed to address all of  the desirable characteristics of a national strategy that we  recommended. The recently issued executive branch strategy  documents did not include key elements of desirable characteristics  that can enhance the usefulness of a national strategy as guidance for  decision makers in allocating resources, defining policies, and helping  to ensure accountability. Specifically:", "Milestones and performance measures to gauge results were  generally not included in strategy documents. For example,  although the DHS Cybersecurity Strategy stated that its  implementation would be assessed on an annual basis, it did not  describe the milestones and performance measures for tracking  the effectiveness of the activities intended to meet the stated  goals (e.g., protecting critical infrastructure and responding  effectively to cyber incidents). Without such performance  measures, DHS will lack a means to ensure that the goals and  objectives discussed in the document are accomplished and that  responsible parties are held accountable.", "According to officials from DHS\u2019s Office of Cybersecurity and  Communications, the department is developing a plan for  implementing the DHS Cybersecurity Strategy and expects to  issue the plan by mid-August 2018. The officials stated that the  plan is expected to identify milestones, roles, and responsibilities  across DHS to inform the prioritization of future efforts.", "The strategy documents generally did not include information  regarding the resources needed to carry out the goals and  objectives. For example, although the DHS Cybersecurity Strategy  identified a variety of actions the agency planned to take to  perform their cybersecurity mission, it did not articulate the  resources needed to carry out these actions and requirements.  Without information on the specific resources needed, federal  agencies may not be positioned to allocate such resources and  investments and, therefore, may be hindered in their ability to  meet national priorities.", "Most of the strategy documents lacked clearly defined roles and  responsibilities for key agencies, such as DHS, DOD, and OMB.  These agencies contribute substantially to the nation\u2019s  cybersecurity programs. For example, although the National  Security Strategy discusses multiple priority actions needed to  address the nation\u2019s cybersecurity challenges (e.g. building  defensible government networks and deterring and disrupting  malicious cyber actors), it does not describe the roles,  responsibilities, or the expected coordination of any specific  federal agencies, including DHS, DOD, or OMB, or other non- federal entities needed to carry out those actions. Without this  information, the federal government may not be able to foster  effective coordination, particularly where there is overlap in  responsibilities, or hold agencies accountable for carrying out  planned activities.", "Ultimately, a more clearly defined, coordinated, and comprehensive  approach to planning and executing an overall strategy would likely  lead to significant progress in furthering strategic goals and lessening  persistent weaknesses.", "Mitigate global supply chain risks. The global, geographically  disperse nature of the producers and suppliers of IT products is a  growing concern. We have previously reported on potential issues  associated with IT supply chain and risks originating from foreign- manufactured equipment. For example, in July 2017, we reported that  the Department of State had relied on certain device manufacturers,  software developers, and contractor support which had suppliers that  were reported to be headquartered in a cyber-threat nation (e.g.,  China and Russia). We further pointed out that the reliance on  complex, global IT supply chains introduces multiple risks to federal  agencies, including insertion of counterfeits, tampering, or installation  of malicious software or hardware.", "Earlier this month, we testified that if such global IT supply chain risks  are realized, they could jeopardize the confidentiality, integrity, and  availability of federal information systems. Thus, the potential exists  for serious adverse impact on an agency\u2019s operations, assets, and  employees. These factors highlight the importance and urgency of  federal agencies appropriately assessing, managing, and monitoring  IT supply chain risk as part of their agencywide information security  programs.", "Address cybersecurity workforce management challenges. The  federal government faces challenges in ensuring that the nation\u2019s  cybersecurity workforce has the appropriate skills. For example, in  June 2018, we reported on federal efforts to implement the  requirements of the Federal Cybersecurity Workforce Assessment Act  of 2015. We determined that most of the Chief Financial Officers  (CFO) Act agencies had not fully implemented all statutory  requirements, such as developing procedures for assigning codes to  cybersecurity positions. Further, we have previously reported that  DHS and DOD had not addressed cybersecurity workforce  management requirements set forth in federal laws. In addition, we  have reported in the last 2 years that federal agencies (1) had not  identified and closed cybersecurity skills gaps, (2) had been  challenged with recruiting and retaining qualified staff, and (3) had  difficulty navigating the federal hiring process.", "A recent executive branch report also discussed challenges  associated with the cybersecurity workforce. Specifically, in response  to Executive Order 13800, the Department of Commerce and DHS led  an interagency working group exploring how to support the growth  and sustainment of future cybersecurity employees in the public and  private sectors. In May 2018, the departments issued a report that  identified key findings, including:  the U.S. cybersecurity workforce needs immediate and sustained  improvements;  the pool of cybersecurity candidates needs to be expanded  through retraining and by increasing the participation of women,  minorities, and veterans; a shortage exists of cybersecurity teachers at the primary and  secondary levels, faculty in higher education, and training  instructors; and  comprehensive and reliable data about cybersecurity workforce  position needs and education and training programs are lacking.", "The report also included recommendations and proposed actions to  address the findings, including that private and public sectors should  (1) align education and training with employers\u2019 cybersecurity  workforce needs by applying the National Initiative for Cybersecurity  Education Cybersecurity Workforce Framework; (2) develop  cybersecurity career model paths; and (3) establish a clearinghouse  of information on cybersecurity workforce development education,  training, and workforce development programs and initiatives.", "In addition, in June 2018, the executive branch issued a government  reform plan and reorganization recommendations that included,  among other things, proposals for solving the federal cybersecurity  workforce shortage. In particular, the plan notes that the  administration intends to prioritize and accelerate ongoing efforts to  reform the way that the federal government recruits, evaluates,  selects, pays, and places cyber talent across the enterprise. The plan  further states that, by the end of the first quarter of fiscal year 2019, all  CFO Act agencies, in coordination with DHS and OMB, are to develop  a critical list of vacancies across their organizations. Subsequently,  OMB and DHS are to analyze these lists and work with OPM to  develop a government-wide approach to identifying or recruiting new  employees or reskilling existing employees. Regarding cybersecurity  training, the plan notes that OMB is to consult with DHS to  standardize training for cybersecurity employees, and should work to  develop an enterprise-wide training process for government  cybersecurity employees.", "Ensure the security of emerging technologies. As the devices  used in daily life become increasingly integrated with technology, the  risk to sensitive data and PII also grows. Over the last several years,  we have reported on weaknesses in addressing vulnerabilities  associated with emerging technologies, including:  IoT devices, such as fitness trackers, cameras, and thermostats,  that continuously collect and process information are potentially  vulnerable to cyber-attacks;  IoT devices, such as those acquired and used by DOD employees  or that DOD itself acquires (e.g., smartphones), may increase the  security risks to the department;  vehicles that are potentially susceptible to cyber-attack through  technology, such as Bluetooth;  the unknown impact of artificial intelligence cybersecurity; and advances in cryptocurrencies and blockchain technologies.", "Executive branch agencies have also highlighted the challenges  associated with ensuring the security of emerging technologies.  Specifically, in a May 2018 report issued in response to Executive  Order 13800, the Department of Commerce and DHS issued a report  on the opportunities and challenges in reducing the botnet threat.  The opportunities and challenges are centered on six principal  themes, including the global nature of automated, distributed attacks;  effective tools; and awareness and education. The report also  provides recommended actions, including that federal agencies  should increase their understanding of what software components  have been incorporated into acquired products and establish a public  campaign to support awareness of IoT security.", "In our previously discussed reports related to this cybersecurity  challenge, we made a total of 50 recommendations to federal agencies to  address the weaknesses identified. As of July 2018, 48 recommendations  had not been implemented. These outstanding recommendations include  8 priority recommendations, meaning that we believe that they warrant  priority attention from heads of key departments and agencies. These  priority recommendations include addressing weaknesses associated  with, among other things, agency-specific cybersecurity workforce  challenges and agency responsibilities for supporting mitigation of vehicle  network attacks. Until our recommendations are fully implemented,  federal agencies may be limited in their ability to provide effective  oversight of critical government-wide initiatives, address challenges with  cybersecurity workforce management, and better ensure the security of  emerging technologies.", "In addition to our prior work related to the federal government\u2019s efforts to  establish key strategy documents and implement effective oversight, we  also have several ongoing reviews related to this challenge. These  include reviews of:  the CFO Act agencies\u2019 efforts to submit complete and reliable  baseline assessment reports of their cybersecurity workforces;  the extent to which DOD has established training standards for cyber  mission force personnel, and efforts the department has made to  achieve its goal of a trained cyber mission force;  selected agencies\u2019 ability to implement cloud service technologies and  notable benefits this might have on agencies; and  the federal approach and strategy to securing agency information  systems, to include federal intrusion detection and prevention  capabilities and the intrusion assessment plan."], "subsections": []}, {"section_title": "Securing Federal Systems and Information", "paragraphs": ["The federal government has been challenged in securing federal systems  and information. Specifically, we have reported that federal agencies  have experienced challenges in implementing government-wide  cybersecurity initiatives, addressing weaknesses in their information  systems and responding to cyber incidents on their systems. This is  particularly concerning given that the emergence of increasingly  sophisticated threats and continuous reporting of cyber incidents  underscores the continuing and urgent need for effective information  security. As such, it is important that federal agencies take appropriate  steps to better ensure they have effectively implemented programs to  protect their information and systems. We have identified three actions  that the agencies can take.", "Improve implementation of government-wide cybersecurity  initiatives. Specifically, in January 2016, we reported that DHS had  not ensured that the National Cybersecurity Protection System  (NCPS) had fully satisfied all intended system objectives related to  intrusion detection and prevention, information sharing, and  analytics. In addition, in February 2017, we reported that the DHS  National Cybersecurity and Communications Integration Center\u2019s  (NCCIC) functions were not being performed in adherence with the  principles set forth in federal laws. We noted that, although NCCIC  was sharing information about cyber threats in the way it should, the  center did not have metrics to measure that the information was  timely, relevant and actionable, as prescribed by law.", "Address weaknesses in federal information security programs.  We have previously identified a number of weaknesses in agencies\u2019  protection of their information and information systems. For example,  over the past 2 years, we have reported that: most of the 24 agencies covered by the CFO Act had weaknesses  in each of the five major categories of information system controls  (i.e., access controls, configuration management controls,  segregation of duties, contingency planning, and agency-wide  security management);  three agencies\u2014the Securities Exchange Commission, the  Federal Deposit Insurance Corporation, and the Food and Drug  Administration\u2014had not effectively implemented aspects of their  information security programs, which resulted in weaknesses in  these agencies\u2019 security controls;  information security weaknesses in selected high-impact systems  at four agencies\u2014the National Aeronautics and Space  Administration, the Nuclear Regulatory Commission, OPM, and  the Department of Veterans Affairs\u2014were cited as a key reason  that the agencies had not effectively implemented elements of  their information security programs;", "DOD\u2019s process for monitoring the implementation of cybersecurity  guidance had weaknesses and resulted in the closure of certain  tasks (such as completing cyber risk assessments) before they  were fully implemented; and agencies had not fully defined the role of their Chief Information  Security Officers, as required by FISMA.", "We also recently testified that, although the government had acted to  protect federal information systems, additional work was needed to  improve agency security programs and cyber capabilities. In  particular, we noted that further efforts were needed by agencies to  implement our prior recommendations in order to strengthen their  information security programs and technical controls over their  computer networks and systems.", "Enhance the federal response to cyber incidents. We have  reported that certain agencies have had weaknesses in responding to  cyber incidents. For example, as of August 2017, OPM had not fully implemented controls to  address deficiencies identified as a result of its 2015 cyber  incidents;", "DOD had not identified the National Guard\u2019s cyber capabilities  (e.g., computer network defense teams) or addressed challenges  in its exercises. as of April 2016, DOD had not identified, clarified, or implemented  all components of its support of civil authorities during cyber  incidents; and as of January 2016, DHS\u2019s NCPS had limited capabilities for  detecting and preventing intrusions, conducting analytics, and  sharing information.", "In the public versions of the reports previously discussed for this  challenge area, we made a total of 101 recommendations to federal  agencies to address the weaknesses identified. As of July 2018, 61  recommendations had not been implemented. These outstanding  recommendations include 14 priority recommendations to address  weaknesses associated with, among other things, the information security  programs at the National Aeronautics and Space Administration, OPM,  and the Security Exchange Commission. Until these recommendations  are implemented, these federal agencies will be limited in their ability to  ensure the effectiveness of their programs for protecting information and  systems.", "In addition to our prior work, we also have several ongoing reviews  related to the federal government\u2019s efforts to protect its information and  systems. These include reviews of:", "Federal Risk and Authorization Management Program (FedRAMP)  implementation, including an assessment of the implementation of the  program\u2019s authorization process for protecting federal data in cloud  environments;  the Equifax data breach, including an assessment of federal oversight  of credit reporting agencies\u2019 collection, use, and protection of  consumer PII;  the Federal Communication Commission\u2019s Electronic Comment Filing  System security, to include a review of the agency\u2019s detection of and  response to a May 2017 incident that reportedly impacted the system;", "DOD\u2019s efforts to improve the cybersecurity of its major weapon", "DOD\u2019s whistleblower program, including an assessment of the  policies, procedures, and controls related to the access and storage of  sensitive and classified information needed for the program;  IRS\u2019s efforts to (1) implement security controls and the agency\u2019s  information security program, (2) authenticate taxpayers, and (3)  secure tax information; and  federal intrusion detection and prevention capabilities."], "subsections": []}, {"section_title": "Protecting Cyber Critical Infrastructure", "paragraphs": ["The federal government has been challenged in working with the private  sector to protect critical infrastructure. This infrastructure includes both  public and private systems vital to national security and other efforts, such  as providing the essential services that underpin American society. As the  cybersecurity threat to these systems continues to grow, federal agencies  have millions of sensitive records that must be protected. Specifically, this  critical infrastructure threat could have national security implications and  more efforts should be made to ensure that it is not breached.", "To help address this issue, NIST developed the cybersecurity  framework\u2014a voluntary set of cybersecurity standards and procedures  for industry to adopt as a means of taking a risk-based approach to  managing cybersecurity.", "However, additional action is needed to strengthen the federal role in  protecting the critical infrastructure. Specifically, we have reported on  other critical infrastructure protection issues that need to be addressed.  For example:", "Entities within the 16 critical infrastructure sectors reported  encountering four challenges to adopting the cybersecurity  framework, such as being limited in their ability to commit necessary  resources towards framework adoption and not having the necessary  knowledge and skills to effectively implement the framework.", "Major challenges existed to securing the electricity grid against cyber  threats. These challenges included monitoring implementation of  cybersecurity standards, ensuring security features are built into smart  grid systems, and establishing metrics for cybersecurity.", "DHS and other agencies needed to enhance cybersecurity in the  maritime environment. Specifically, DHS did not include cyber risks in  its risk assessments that were already in place nor did it address  cyber risks in guidance for port security plans.", "Sector-specific agencies were not properly addressing progress or  metrics to measure their progress in cybersecurity.", "DOD and the Federal Aviation Administration identified a variety of  operations and physical security risks that could adversely affect DOD  missions.", "We made a total of 19 recommendations to federal agencies to address  these weaknesses and others. These recommendations include, for  example, a total of 9 recommendations to 9 sector-specific agencies to  develop methods to determine the level and type of cybersecurity  framework adoption across their respective sectors. As of July 2018, all  19 recommendations had not been implemented. Until these  recommendations are implemented, the federal government will continue  to be challenged in fulfilling its role in protecting the nation\u2019s critical  infrastructure.", "In addition to our prior work related to the federal government\u2019s efforts to  protect critical infrastructure, we also have several ongoing reviews  focusing on:  the physical and cybersecurity risks to pipelines across the country  responsible for transmitting oil, natural gas, and other hazardous  liquids;  the cybersecurity risks to the electric grid; and  the privatization of utilities at DOD installations."], "subsections": []}, {"section_title": "Protecting Privacy and Sensitive Data", "paragraphs": ["The federal government has been challenged in protecting privacy and  sensitive data. Advances in technology, including powerful search  technology and data analytics software, have made it easy to correlate  information about individuals across large and numerous databases,  which have become very inexpensive to maintain. In addition, ubiquitous  Internet connectivity has facilitated sophisticated tracking of individuals  and their activities through mobile devices such as smartphones and  fitness trackers.", "Given that access to data is so pervasive, personal privacy hinges on  ensuring that databases of PII maintained by government agencies or on  their behalf are protected both from inappropriate access (i.e., data  breaches) as well as inappropriate use (i.e., for purposes not originally  specified when the information was collected). Likewise, the trend in the  private sector of collecting extensive and detailed information about  individuals needs appropriate limits. The vast number of individuals  potentially affected by data breaches at federal agencies and private  sector entities in recent years increases concerns that PII is not being  properly protected.", "Federal agencies should take two types of actions to address this  challenge area. In addition, we have previously proposed two matters for  congressional consideration aimed toward better protecting PII.", "Improve federal efforts to protect privacy and sensitive data. We  have issued several reports noting that agencies had deficiencies in  protecting privacy and sensitive data that needed to be addressed.  For example:", "The Department of Health and Human Services\u2019 (HHS) Centers  for Medicare and Medicaid Services (CMS) and external entities  were at risk of compromising Medicare Beneficiary Data due to a  lack of guidance and proper oversight.", "The Department of Education\u2019s Office of Federal Student Aid had  not properly overseen its school partners\u2019 records or information  security programs.", "HHS had not fully addressed key security elements in its guidance  for protecting the security and privacy of electronic health  information.", "CMS had not fully protected the privacy of users\u2019 data on state- based marketplaces.", "Poor planning and ineffective monitoring had resulted in the  unsuccessful implementation of government initiatives aimed at  eliminating the unnecessary collection, use, and display of  SSNs.", "Appropriately limit the collection and use of personal information  and ensure that it is obtained with appropriate knowledge or  consent. We have issued a series of reports that highlight a number  of the key concerns in this area. For example:", "The emergence of IoT devices can facilitate the collection of  information about individuals without their knowledge or consent;", "Federal laws for smartphone tracking applications have not  generally been well enforced.", "The FBI has not fully ensured privacy and accuracy related to the  use of face recognition technology.", "We have previously suggested that Congress consider amending laws,  such as the Privacy Act of 1974 and the E-Government Act of 2002,  because they may not consistently protect PII. Specifically, we found  that while these laws and guidance set minimum requirements for  agencies, they may not consistently protect PII in all circumstances of its  collection and use throughout the federal government and may not fully  adhere to key privacy principles. However, revisions to the Privacy Act  and the E-Government Act have not yet been enacted.", "Further, we also suggested that Congress consider strengthening the  consumer privacy framework and review issues such as the adequacy  of consumers\u2019 ability to access, correct, and control their personal  information; and privacy controls related to new technologies such as web  tracking and mobile devices. However, these suggested changes have  not yet been enacted.", "We also made a total of 29 recommendations to federal agencies to  address the weaknesses identified. As of July 2018, 28 recommendations  had not been implemented. These outstanding recommendations include  6 priority recommendations to address weaknesses associated with,  among other things, publishing privacy impact assessments and  improving the accuracy of the FBI\u2019s face recognition services. Until these  recommendations are implemented, federal agencies will be challenged  in their ability to protect privacy and sensitive data and ensure that its  collection and use is appropriately limited.", "In addition to our prior work, we have several ongoing reviews related to  protecting privacy and sensitive data. These include reviews of:  IRS\u2019s taxpayer authentication efforts, including what steps the agency  is taking to monitor and improve its authentication methods;  the extent to which the Department of Education\u2019s Office of Federal  Student Aid\u2019s policies and procedures for overseeing non-school  partners\u2019 protection of federal student aid data align with federal  requirements and guidance; data security issues related to credit reporting agencies, including a  review of the causes and impacts of the August 2017 Equifax data  breach;  the extent to which Equifax assessed, responded to, and recovered  from its August 2017 data breach;  federal agencies\u2019 efforts to remove PII from shared cyber threat  indicators; and how the federal government has overseen Internet privacy, including  the roles of the Federal Communications Commission and the Federal  Trade Commission, and strengths and weaknesses of the current  oversight authorities.", "In summary, since 2010, we have made over 3,000 recommendations to  agencies aimed at addressing the four cybersecurity challenges.  Nevertheless, many agencies continue to be challenged in safeguarding  their information systems and information, in part because many of these  recommendations have not been implemented. Of the roughly 3,000  recommendations made since 2010, nearly 1,000 had not been  implemented as of July 2018. We have also designated 35 as priority  recommendations, and as of July 2018, 31 had not been implemented.", "The federal government and the nation\u2019s critical infrastructure are  dependent on IT systems and electronic data, which make them highly  vulnerable to a wide and evolving array of cyber-based threats. Securing  these systems and data is vital to the nation\u2019s security, prosperity, and  well-being. Nevertheless, the security over these systems and data is  inconsistent and urgent actions are needed to address ongoing  cybersecurity and privacy challenges. Specifically, the federal  government needs to implement a more comprehensive cybersecurity  strategy and improve its oversight, including maintaining a qualified  cybersecurity workforce; address security weaknesses in federal systems  and information and enhance cyber incident response efforts; bolster the  protection of cyber critical infrastructure; and prioritize efforts to protect  individual\u2019s privacy and PII. Until our recommendations are addressed  and actions are taken to address the four challenges we identified, the  federal government, the national critical infrastructure, and the personal  information of U.S. citizens will be increasingly susceptible to the  multitude of cyber-related threats that exist.", "Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly,  and Members of the Subcommittees, this completes my prepared  statement. I would be pleased to respond to any questions that you may  have at this time."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["Questions about this testimony can be directed to Nick Marinos, Director,  Cybersecurity and Data Protection Issues, at (202) 512-9342 or  marinosn@gao.gov; and Gregory C. Wilshusen, Director, Information  Security Issues, at (202) 512-6244 or wilshuseng@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. GAO staff who made key  contributions to this testimony are Jon Ticehurst, Assistant Director; Kush  K. Malhotra, Analyst-In-Charge; Chris Businsky; Alan Daigle; Rebecca  Eyler; Chaz Hubbard; David Plocher; Bradley Roach; Sukhjoot Singh;  Di\u2019Mond Spencer; and Umesh Thakkar."], "subsections": []}]}, {"section_title": "Related GAO Reports", "paragraphs": ["Information Security: Supply Chain Risks Affecting Federal Agencies.  GAO-18-667T. Washington, D.C.: July 12, 2018.", "Information Technology: Continued Implementation of High-Risk  Recommendations Is Needed to Better Manage Acquisitions, Operations,  and Cybersecurity. GAO-18-566T. Washington, D.C.: May 23, 2018.", "Electronic Health Information: CMS Oversight of Medicare Beneficiary  Data Security Needs Improvement. GAO-18-210. Washington, D.C.: April  5, 2018.", "Technology Assessment: Artificial Intelligence, Emerging Opportunities,  Challenges, and Implications. GAO-18-142SP. Washington, D.C.: March  28, 2018.", "GAO Strategic Plan 2018-2023: Trends Affecting Government and  Society. GAO-18-396SP. Washington, D.C.: February 22, 2018.", "Critical Infrastructure Protection: Additional Actions are Essential for  Assessing Cybersecurity Framework Adoption. GAO-18-211.   Washington, D.C.: February 15, 2018.", "Cybersecurity Workforce: Urgent Need for DHS to Take Actions to  Identify Its Position and Critical Skill Requirements. GAO-18-175.   Washington, D.C.: February 6, 2018.", "Homeland Defense: Urgent Need for DOD and FAA to Address Risks and  Improve Planning for Technology That Tracks Military Aircraft.  GAO-18-177. Washington, D.C.: January 18, 2018.", "Federal Student Aid: Better Program Management and Oversight of  Postsecondary Schools Needed to Protect Student Information.  GAO-18-121. Washington, D.C.: December 15, 2017.", "Defense Civil Support: DOD Needs to Address Cyber Incident Training  Requirements. GAO-18-47. Washington, D.C.: November 30, 2017.", "Federal Information Security: Weaknesses Continue to Indicate Need for  Effective Implementation of Policies and Practices. GAO-17-549.  Washington, D.C.: September 28, 2017.", "Information Security: OPM Has Improved Controls, but Further Efforts Are  Needed. GAO-17-614. Washington, D.C.: August 3, 2017.", "Defense Cybersecurity: DOD\u2019s Monitoring of Progress in Implementing  Cyber Strategies Can Be Strengthened. GAO-17-512. Washington, D.C.:  August 1, 2017.", "State Department Telecommunications: Information on Vendors and  Cyber-Threat Nations. GAO-17-688R. Washington, D.C.: July 27, 2017.", "Internet of Things: Enhanced Assessments and Guidance Are Needed to  Address Security Risks in DOD. GAO-17-668. Washington, D.C.: July 27,  2017.", "Information Security: SEC Improved Control of Financial Systems but  Needs to Take Additional Actions. GAO-17-469. Washington, D.C.: July  27, 2017.", "Information Security: Control Deficiencies Continue to Limit IRS\u2019s  Effectiveness in Protecting Sensitive Financial and Taxpayer Data.  GAO-17-395. Washington, D.C.: July 26, 2017.", "Social Security Numbers: OMB Actions Needed to Strengthen Federal  Efforts to Limit Identity Theft Risks by Reducing Collection, Use, and  Display. GAO-17-553. Washington, D.C.: July 25, 2017.", "Information Security: FDIC Needs to Improve Controls over Financial  Systems and Information. GAO-17-436. Washington, D.C.: May 31, 2017.", "Technology Assessment: Internet of Things: Status and Implications of an  Increasingly Connected World. GAO-17-75. Washington, D.C.: May 15,  2017.", "Cybersecurity: DHS\u2019s National Integration Center Generally Performs  Required Functions but Needs to Evaluate Its Activities More Completely.  GAO-17-163. Washington, D.C.: February 1, 2017.", "High-Risk Series: An Update. GAO-17-317. Washington, D.C.: February  2017.", "IT Workforce: Key Practices Help Ensure Strong Integrated Program  Teams; Selected Departments Need to Assess Skill Gaps. GAO-17-8.  Washington, D.C.: November 30, 2016.", "Electronic Health Information: HHS Needs to Strengthen Security and  Privacy Guidance and Oversight. GAO-16-771. Washington, D.C.:  September 26, 2016.", "Defense Civil Support: DOD Needs to Identify National Guard\u2019s Cyber  Capabilities and Address Challenges in Its Exercises. GAO-16-574.   Washington, D.C.: September 6, 2016.", "Information Security: FDA Needs to Rectify Control Weaknesses That  Place Industry and Public Health Data at Risk. GAO-16-513. Washington,  D.C.: August 30, 2016.", "Federal Chief Information Security Officers: Opportunities Exist to  Improve Roles and Address Challenges to Authority. GAO-16-686.  Washington, D.C.: August 26, 2016.", "Federal Hiring: OPM Needs to Improve Management and Oversight of  Hiring Authorities. GAO-16-521. Washington, D.C.: August 2, 2016.", "Information Security: Agencies Need to Improve Controls over Selected  High-Impact Systems. GAO-16-501. Washington, D.C.: May 18, 2016.", "Face Recognition Technology: FBI Should Better Ensure Privacy and  Accuracy. GAO-16-267. Washington, D.C.: May 16, 2016.", "Smartphone Data: Information and Issues Regarding Surreptitious  Tracking Apps That Can Facilitate Stalking. GAO-16-317. Washington,  D.C.: May 9, 2016.", "Vehicle Cybersecurity: DOT and Industry Have Efforts Under Way, but  DOT Needs to Define Its Role in Responding to a Real-world Attack.  GAO-16-350. Washington, D.C.: April 25, 2016.", "Civil Support: DOD Needs to Clarify Its Roles and Responsibilities for  Defense Support of Civil Authorities during Cyber Incidents. GAO-16-332.  Washington, D.C.: April 4, 2016.", "Healthcare.gov: Actions Needed to Enhance Information Security and  Privacy Controls. GAO-16-265. Washington, D.C.: March 23, 2016.", "Information Security: DHS Needs to Enhance Capabilities, Improve  Planning, and Support Greater Adoption of Its National Cybersecurity  Protection System. GAO-16-294. Washington, D.C.: January 28, 2016.", "Critical Infrastructure Protection: Sector-Specific Agencies Need to Better  Measure Cybersecurity Progress. GAO-16-79. Washington, D.C.:  November 19, 2015.", "Critical Infrastructure Protection: Cybersecurity of the Nation\u2019s Electricity  Grid Requires Continued Attention. GAO-16-174T. Washington, D.C.:  October 21, 2015.", "Maritime Critical Infrastructure Protection: DHS Needs to Enhance Efforts  to Address Port Cybersecurity. GAO-16-116T. Washington, D.C.: October  8, 2015.", "Cybersecurity: National Strategy, Roles, and Responsibilities Need to Be  Better Defined and More Effectively Implemented. GAO-13-187.  Washington, D.C.: February 14, 2014.", "Information Resellers: Consumer Privacy Framework Needs to Reflect  Changes in Technology and the Marketplace. GAO-13-663. Washington,  D.C.: September 25, 2013.", "Cyberspace: United States Faces Challenges in Addressing Global  Cybersecurity and Governance. GAO-10-606. Washington, D.C.: July 2,  2010.", "Privacy: Alternatives Exist for Enhancing Protection of Personally  Identifiable Information. GAO-08-536. Washington, D.C.: May 19, 2008.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-164", "url": "https://www.gao.gov/products/GAO-19-164", "title": "FEMA Grants Modernization: Improvements Needed to Strengthen Program Management and Cybersecurity", "published_date": "2019-04-09T00:00:00", "released_date": "2019-04-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FEMA, a component of DHS, annually awards billions of dollars in grants to help communities prepare for, mitigate the effects of, and recover from major disasters. However, FEMA's complex IT environment supporting grants management consists of many disparate systems. In 2008, the agency attempted to modernize these systems but experienced significant challenges. In 2015, FEMA initiated a new endeavor (the GMM program) aimed at streamlining and modernizing the grants management IT environment.", "GAO was asked to review the GMM program. GAO's objectives were to (1) determine the extent to which FEMA is implementing leading practices for reengineering its grants management processes and incorporating needs into IT requirements; (2) assess the reliability of the program's estimated costs and schedule; and (3) determine the extent to which FEMA is addressing key cybersecurity practices. GAO compared program documentation to leading practices for process reengineering and requirements management, cost and schedule estimation, and cybersecurity risk management, as established by the Software Engineering Institute, National Institute of Standards and Technology, and GAO."]}, {"section_title": "What GAO Found", "paragraphs": ["Of six important leading practices for effective business process reengineering and information technology (IT) requirements management, the Federal Emergency Management Agency (FEMA) fully implemented four and partially implemented two for the Grants Management Modernization (GMM) program (see table). Specifically, FEMA ensured senior leadership commitment, took steps to assess its business environment and performance goals, took recent actions to track progress in delivering IT requirements, and incorporated input from end user stakeholders. However, FEMA has not yet fully established plans for implementing new business processes or established complete traceability of IT requirements.", "Until FEMA fully implements the remaining two practices, it risks delivering an IT solution that does not fully modernize FEMA's grants management systems.", "While GMM's initial May 2017 cost estimate of about $251 million was generally consistent with leading practices for a reliable, high-quality estimate, it no longer reflects current assumptions about the program. FEMA officials stated in December 2018 that they had completed a revised cost estimate, but it was undergoing departmental approval. GMM's program schedule was inconsistent with leading practices; of particular concern was that the program's final delivery date of September 2020 was not informed by a realistic assessment of GMM development activities, and rather was determined by imposing an unsubstantiated delivery date. Developing sound cost and schedule estimates is necessary to ensure that FEMA has a clear understanding of program risks.", "Of five key cybersecurity practices, FEMA fully addressed three and partially addressed two for GMM. Specifically, it categorized GMM's system based on security risk, selected and implemented security controls, and monitored security controls on an ongoing basis. However, the program had not initially established corrective action plans for 13 medium- and low-risk vulnerabilities. This conflicts with the Department of Homeland Security's (DHS) guidance that specifies that corrective action plans must be developed for every weakness identified. Until FEMA, among other things, ensures that the program consistently follows the department's guidance on preparing corrective action plans for all security vulnerabilities, GMM's system will remain at increased risk of exploits."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making eight recommendations to FEMA to implement leading practices related to reengineering processes, managing requirements, scheduling, and implementing cybersecurity. DHS concurred with all recommendations and provided estimated dates for implementing each of them."]}], "report": [{"section_title": "Letter", "paragraphs": ["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. FEMA is responsible for  saving lives and protecting property, public health, and safety in a natural  disaster, act of terrorism, or other manmade disaster.", "FEMA accomplishes a large part of its mission through awarding grants to  state, local, and tribal governments and nongovernmental entities to help  communities prevent, prepare for, protect against, mitigate the effects of,  respond to, and recover from disasters and terrorist attacks. According to  the agency, these grants represent about 70 percent of its annual  budget\u2014FEMA\u2019s annual budget averaged about $15 billion per year for  the past 3 fiscal years (2016, 2017, and 2018).", "The federal government, including FEMA, obligates billions of dollars in  grants each year for disaster assistance, and the increases in the number  and severity of disasters has become a key source of federal fiscal  exposure. We reported in September 2016 that the federal government  had obligated at least $277.6 billion in disaster assistance grants during  fiscal years 2005 through 2014. Of this amount, FEMA had obligated  about $104.5 billion in disaster assistance grants.", "FEMA relies heavily on the use of information technology (IT) to support  its grant award processes. According to its IT investment portfolio for  fiscal year 2018, the agency reported spending about $405 million on  these investments.", "However, the agency has long reported that its grants management IT  environment is highly complex and consists of many disparate systems  and labor-intensive manual processes. This has led to poor information  sharing and reporting capabilities, difficulties in reconciling financial data,  and an increased burden on grant recipients.", "In 2008, FEMA attempted to develop and implement a single grants  processing solution, referred to as the Emergency Management Mission  Integrated Environment (EMMIE), to address these IT concerns and  modernize its legacy grants management systems. However, as we have  previously reported, the program experienced significant implementation  challenges, which resulted in a solution that was missing important  capabilities. Subsequently, in 2015, FEMA initiated a new endeavor to  modernize and streamline the agency\u2019s grants management IT  environment. This most recent initiative is referred to as the Grants  Management Modernization (GMM) program.", "Given the importance of having modernized grants management systems  and FEMA\u2019s past system implementation challenges, you asked us to  review the GMM program. Our specific objectives were to (1) determine  the extent to which FEMA is implementing leading practices for  reengineering its grants management business processes and  incorporating business needs into IT requirements for GMM; (2) assess  the reliability of the GMM program\u2019s estimated costs and schedule; and  (3) determine the extent to which FEMA is addressing key cybersecurity  practices for GMM.", "To address the first objective, we reviewed leading practices and  guidance that GAO and the Software Engineering Institute have  developed, and from these sources, identified six practice areas  associated with business process reengineering and IT requirements  management. These selected areas, in our professional judgment,  represented foundational practices that were of particular importance to  the successful implementation of an IT modernization effort that is using  incremental software development processes.", "We then reviewed relevant GMM program documentation, such as grants  management business processes, the acquisition program baseline, IT  requirements documents, and a concept of operations. We assessed the  program documentation against the six selected practice areas and made  determinations on the extent to which the agency had  fully implemented the practice area (FEMA provided complete  evidence showing that it fully implemented the practice area); partially implemented the practice area (FEMA provided evidence  showing that it partially implemented the practice area); or not implemented the practice area (FEMA did not provide evidence  showing that it implemented any of the practice area).", "We also observed the program\u2019s incremental software development  activities and a demonstration of the program\u2019s automated requirements  management tool at GMM facilities in Washington, D.C. Further, we  interviewed FEMA officials regarding their efforts to streamline grants  management business processes, collect and incorporate stakeholder  input, and manage GMM\u2019s IT requirements.", "To assess the reliability of data from the program\u2019s automated IT  requirements management tool, we interviewed knowledgeable officials  about the quality control procedures used by the program to ensure  accuracy and completeness of the data. In addition, we assessed the  data against other relevant program documentation on GMM\u2019s  requirements. We determined that the data used were sufficiently reliable  for the purpose of evaluating GMM\u2019s practices for managing IT  requirements.", "For the second objective, we reviewed documentation supporting GMM\u2019s  lifecycle cost estimate and schedule. Specifically, we evaluated  documentation regarding the program\u2019s May 2017 lifecycle cost estimate  against the leading practices for developing a comprehensive, accurate,  well-documented, and credible cost estimate identified in GAO\u2019s Cost  Estimating and Assessment Guide.", "Additionally, we evaluated documentation regarding GMM\u2019s integrated  master schedule, dated May 2018, against the leading practices for  developing a comprehensive, well-constructed, credible, and controlled  schedule identified in GAO\u2019s Schedule Assessment Guide. We also  interviewed responsible GMM program officials to understand their  practices for developing and maintaining the program cost estimate and  schedule. We found that the cost data were sufficiently reliable and we  noted in our report the instances where the quality of the schedule data  impacted the reliability of the program\u2019s schedule.", "To address the third objective, we reviewed the National Institute of  Standards and Technology\u2019s (NIST) risk management framework and  identified key cybersecurity practices. Next, we reviewed DHS\u2019s and  FEMA\u2019s cybersecurity policies and guidance, as well as documentation  on FEMA\u2019s authorization to operate for GMM\u2019s engineering and test  environment. This environment went live in February 2018 and had  obtained authorization to operate at the time that we began our review.", "We assessed FEMA\u2019s cybersecurity documentation against the NIST  framework\u2019s five key cybersecurity practices and assessed the extent to  which the agency had  fully addressed the practice area (FEMA provided complete evidence  which showed that it fully implemented the practice area), partially addressed the practice area (FEMA provided evidence which  showed that it partially implemented the practice area), or not addressed the practice area (FEMA did not provide evidence  which showed that it implemented any of the practice area).", "We also interviewed cognizant officials in the GMM program office and  FEMA\u2019s Office of the Chief Information Officer (OCIO). We obtained  information from these officials about their efforts to assess, document,  and review cybersecurity controls for GMM.", "To assess the reliability of data from the program\u2019s automated security  controls management tool, we interviewed knowledgeable officials about  the quality control procedures used by the program to assure accuracy  and completeness of the data. We also compared the data to other  relevant program documentation on GMM security controls for the  engineering and test environment. We found that some of the security  controls data we examined were sufficiently reliable for the purpose of  evaluating FEMA\u2019s cybersecurity practices for GMM, and we noted in our  report the instances where the accuracy of the data impacted the  program\u2019s ability to address key cybersecurity practices. Additional details  on our objectives, scope, and methodology can be found in appendix I.", "We conducted this performance audit from December 2017 to April 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."], "subsections": [{"section_title": "Background", "paragraphs": ["FEMA\u2019s mission is to help people before, during, and after disasters. It  provides assistance to those affected by emergencies and disasters by  supplying immediate needs (e.g., ice, water, food, and temporary  housing) and providing financial assistance grants for damage to personal  or public property. FEMA also provides non-disaster assistance grants to  improve the nation\u2019s preparedness, readiness, and resilience to all  hazards.", "FEMA accomplishes a large part of its mission through awarding grants to  state, local, and tribal governments and nongovernmental entities to help  communities prevent, prepare for, protect against, mitigate the effects of,  respond to, and recover from disasters and terrorist attacks. As previously  mentioned, for fiscal years 2005 through 2014, the agency obligated  about $104.5 billion in disaster relief grants. In addition, as of April 2018,  the four major disasters in 2017\u2014hurricanes Harvey, Irma, and Maria;  and the California wildfires\u2014had resulted in over $22 billion in FEMA  grants."], "subsections": [{"section_title": "Overview of FEMA\u2019s Grants Management Programs and Administration", "paragraphs": ["The current FEMA grants management environment is highly complex  with many stakeholders, IT systems, and users. Specifically, this  environment is comprised of 45 active disaster and non-disaster grant  programs, which are grouped into 12 distinct grant categories.", "For example, one program in the Preparedness: Fire category is the  Assistance to Firefighters Grants (AFG) program, which provides grants  to fire departments, nonaffiliated emergency medical service  organizations, and state fire training academies to support firefighting and  emergency response needs. As another example, the Housing  Assistance grant program is in the Recovery Assistance for Individuals  category and provides financial assistance to individuals and households  in geographical areas that have been declared an emergency or major  disaster by the President.", "Table 1 lists FEMA\u2019s non-disaster and disaster-based grant categories.", "According to FEMA, the processes for managing these different types of  grants vary because the grant programs were developed independently  by at least 18 separate authorizing laws that were enacted over a 62-year  period (from 1947 through 2009). The various laws call for different  administrative and reporting requirements.", "For example, the Robert T. Stafford Disaster Relief and Emergency  Assistance Act, as amended, established the statutory authority for 11  of the grant programs, such as the administration of Public Assistance  and Individual Assistance grant programs after a presidentially declared  disaster. The act also requires the FEMA Administrator to submit an  annual report to the President and Congress covering FEMA\u2019s  expenditures, contributions, work, and accomplishments, pursuant to the  act. As another example, the National Dam Safety Program Act  established one of the grant programs aimed at providing financial  assistance to improve dam safety.", "Key stakeholders in modernizing the IT grants management environment  include the internal FEMA officials that review, approve, and monitor the  grants awarded, such as grant specialists, program analysts, and  supervisors. FEMA has estimated that it will need to support about 5,000  simultaneous internal users of its grants management systems.", "Other users include the grant recipients that apply for, receive, and  submit reports on their grant awards; these are considered the external  system users. These grant recipients can include individuals, states, local  governments, Indian tribes, institutions of higher education, and nonprofit  organizations. FEMA has estimated that there are hundreds of thousands  of external users of its grants systems.", "The administration of the many different grant programs is distributed  across four divisions within FEMA\u2019s organizational structure. Figure 1  provides an overview of FEMA\u2019s organizational structure and the divisions  that are responsible for administering grants.", "Within three of the four divisions\u2014Resilience, United States Fire  Administration, and Office of Response and Recovery\u201416 different grant  program offices are collectively responsible for administering the 45 grant  programs. The fourth division consists of 10 regional offices that help  administer grants within their designated geographical regions. For  example, the Office of Response and Recovery division oversees three  different offices that administer 13 grant programs that are largely related  to providing assistance in response to presidentially declared disasters.", "Figure 2 shows the number of grant programs administered by each of  the four divisions\u2019 grant program and regional offices. In addition,  appendix II lists the names of the 45 grant programs.", "FEMA\u2019s OCIO is responsible for developing, enhancing, and maintaining  the agency\u2019s IT systems, and for increasing efficiencies and cooperation  across the entire organization. However, we and the DHS Office of  Inspector General (OIG) have previously reported that the grant programs  and regional offices develop information systems independent of the  OCIO and that this has contributed to the agency\u2019s disparate IT  environment.", "We and the DHS OIG have reported that this disparate IT environment  was due, in part, to FEMA\u2019s decentralized IT budget and acquisition  practices. For example, from fiscal years 2010 through 2015, the OCIO\u2019s  budget represented about one-third of the agency\u2019s IT budget, with the  grant program offices accounting for the remaining two-thirds of that  budget.", "In February 2018, the OIG found that FEMA had shown limited progress  in improving its IT management and that many of the issues reported in  prior audits remained unchanged. As such, the OIG initiated a more  comprehensive audit of the agency\u2019s IT management that is ongoing."], "subsections": []}, {"section_title": "Overview of FEMA\u2019s Legacy Grants Management Systems", "paragraphs": ["FEMA has identified 10 primary legacy IT systems that support its grants  management activities. According to the agency, most of these systems  were developed to support specific grant programs or grant categories.  Table 2 summarizes the 10 primary legacy systems.", "According to FEMA officials, the 10 primary grant systems are all in  operation (several have been for decades) and are not interoperable. As  a result, individual grant programs and regional offices have  independently developed work arounds intended to address existing  capability gaps with the primary systems.", "FEMA officials stated that while these work arounds have helped the  agency partially address capability gaps with its primary systems, they  are often nonstandardized processes, and introduce the potential for  information security risks and errors. This environment has contributed to  labor-intensive manual processes and an increased burden for grant  recipients. The disparate systems have also led to poor information  sharing and reporting capabilities, as well as difficulty reconciling financial  data.", "The DHS OIG and we have previously highlighted challenges with  FEMA\u2019s past attempts to modernize its grant management systems. For  example,  In December 2006, the DHS OIG reported that EMMIE, an effort to  modernize its grants management systems and provide a single  grants processing solution, was being developed without a clear  understanding and definition of the future solution. The report also  identified the need to ensure crosscutting participation from  headquarters, regions, and states in developing and maintaining a  complete, documented set of FEMA business and system  requirements.", "In April 2016, we found weaknesses in FEMA\u2019s development of the  EMMIE system. For example, we noted that the system was  implemented without sufficient documentation of system  requirements, an acquisition strategy, up-to-date cost estimate and  schedule, total amount spent to develop the system, or a systems  integration plan. In response to our findings and related  recommendations, FEMA took action to address these issues. For  example, the agency implemented a requirements management  process that, among other things, provided guidance to programs on  analyzing requirements to ensure that they are complete and  verifiable.", "We reported in November 2017 that EMMIE lacked the ability to  collect information on all pre-award activities and, as a result, agency  officials said that they and applicants used ad hoc reports and  personal tracking documents to manage and monitor the progress of  grant applications. FEMA officials added that applicants often  struggled to access the system and that the system was not user  friendly. Due to EMMIE\u2019s shortfalls, the agency had to develop  another system in 2017 to supplement EMMIE with additional grant  tracking and case management capabilities."], "subsections": []}, {"section_title": "GMM Is to Address FEMA\u2019s Shortcomings with Grants Management", "paragraphs": ["FEMA initiated GMM in 2015, in part, due to EMMIE\u2019s failed attempt to  modernize the agency\u2019s grants management environment. The program  is intended to modernize and streamline the agency\u2019s grants  management environment.", "To help streamline the agency\u2019s grants management processes, the  program established a standard framework intended to represent a  common grants management lifecycle. The framework consists of five  sequential phases\u2014pre-award, award, post-award, closeout, and post- closeout\u2014along with a sixth phase dedicated to continuous grant  program management activities, such as analyzing data and producing  reports on grant awards and managing IT systems.", "FEMA also established 43 distinct business functions associated with  these six lifecycle phases. Figure 3 provides the general activities that  may occur in each of the grant lifecycle phases, but specific activities  would depend on the type of grant being administered (i.e., disaster  versus non-disaster).", "GMM is expected to be implemented within the complex IT environment  that currently exists at FEMA. For example, the program is intended to  replace the 10 legacy grants management systems, and potentially many  additional subsystems, with a single IT system. Each of the 10 legacy  systems was developed with its own database(s) and with no  standardization of the grants management data and, according to FEMA  officials, this legacy data has grown significantly over time.", "Accordingly, FEMA will need to migrate, analyze, and standardize the  grants management data before transitioning it to GMM. The agency  awarded a contract in June 2016 to support the data migration efforts for  GMM. The agency also implemented a data staging environment in  October 2017 to migrate the legacy data and identify opportunities to  improve the quality of the data.", "Further, the GMM system is expected to interface with a total of 38 other  systems. These include 19 systems external to DHS (e.g., those provided  by commercial entities or other federal government agencies) and 19  systems internal to DHS or FEMA. Some of the internal FEMA systems  are undergoing their own modernization efforts and will need to be  coordinated with GMM, such as the agency\u2019s financial management  systems, national flood insurance systems, and enterprise data  warehouses.", "For example, FEMA\u2019s Financial Systems Modernization Program was  originally expected to deliver a new financial system in time to interface  with GMM. However, the financial modernization has been delayed until  after GMM is to be fully implemented; thus, GMM will instead need to  interface with the legacy financial system. As a result, GMM is in the  process of removing one of its key performance parameters in the  acquisition program baseline related to financial systems interoperability  and timeliness of data exchanged.", "In May 2017, DHS approved the acquisition program baseline for GMM.  The baseline estimated the total lifecycle costs to be about $251 million,  initial operational capability to be achieved by September 2019, and full  operational capability to be achieved by September 2020."], "subsections": []}, {"section_title": "GMM\u2019s Agile Software Development and Acquisition Approach", "paragraphs": ["FEMA intends to develop and deploy its own software applications for  GMM using a combination of commercial-off-the-shelf software, open  source software, and custom developed code. The agency plans to rely  on an Agile software development approach. According to FEMA  planning documentation, the agency plans to fully deliver GMM by  September 2020 over eight Agile development increments.", "Agile development is a type of incremental development, which calls for  the rapid delivery of software in small, short increments. Many  organizations, especially in the federal government, are accustomed to  using a waterfall software development model. This type of model  typically consists of long, sequential phases, and differs significantly from  the Agile development approach. We have previously reported that DHS  has sought to establish Agile software development as the preferred  method for acquiring and delivering IT capabilities. However, the  department has not yet completed critical actions necessary to update its  guidance, policies, and practices for Agile programs, in areas such as,  developing lifecycle cost estimates, managing IT requirements, testing  and evaluation, oversight at key decision points, and ensuring  cybersecurity. (See appendix III for more details on the Agile software  development approach.)", "FEMA\u2019s acquisition approach includes using contract support to assist  with the development and deployment efforts. The agency selected a  public cloud environment to host the computing infrastructure. In  addition, from March through July 2017, the agency used a short-term  contract aimed at developing prototypes of GMM functionality for grant tracking and monitoring, case management of disaster survivors, grant  reporting, and grant closeout. The agency planned to award a second  development contract by December 2017 to complete the GMM system  (beyond the prototypes) and to begin this work in September 2018.", "However, due to delays in awarding the second contract to develop the  complete GMM system, in January 2018, the program extended the  scope and time frames of the initial short-term prototype contract for an  additional year to develop the first increment of the GMM system\u2014 referred to as the AFG pilot.", "On August 31, 2018, FEMA awarded the second development contract,  which is intended to deliver the remaining functionality beyond the AFG  pilot (i.e., increments 2 through 8). FEMA officials subsequently issued a  90-day planning task order for the Agile development contractor to define  the work that needs to be done to deliver GMM and the level of effort  needed to accomplish that work. However, the planning task order was  paused after a bid protest was filed with GAO in September 2018.  According to FEMA officials, they resumed work on the planning task  order after the bid protest was withdrawn by the protester on November  20, 2018, and then the work was paused again during the partial  government shutdown from December 22, 2018, through January 25,  2019."], "subsections": []}, {"section_title": "Assistance to Firefighters Grants Pilot", "paragraphs": ["FEMA began working on the AFG pilot\u2014GMM\u2019s first increment\u2014in  January 2018. This increment was intended to pilot GMM\u2019s use of Agile  development methods to replace core functionality for the AFG system  (i.e., one of the 10 legacy systems).This system supports three  preparedness/fire-related grant programs\u2014Assistance to Firefighters  Grants Program, Fire Prevention and Safety Grant Program, and Staffing  for Adequate Fire and Emergency Response Grant Program. According  to FEMA officials, the AFG system was selected as the first system to be  replaced because it is costly to maintain and the DHS OIG had identified  cybersecurity concerns with the system.", "Among the 43 GMM business functions discussed earlier in this report,  FEMA officials specified 19 functions to be delivered in the AFG pilot.  Figure 4 shows the planned time frames for delivering the AFG pilot in  increment 1 (which consisted of four 3-month Agile development sub- increments), as of August 2018.", "As of August 2018, the program was working on sub-increment 1C of the  pilot. In September 2018, GMM deployed its first set of functionality to a  total of 19 AFG users\u2014which included seven of 169 total internal AFG  users, and 12 of more than 153,000 external AFG users. The functionality  supported four of the 19 business functions that are related to the  closeout of grants (i.e., the process by which all applicable administrative  actions and all required work to award a grant have been completed).  This functionality included tasks such as evaluation of final financial  reports submitted by grant recipients and final reconciliation of finances  (e.g., final disbursement to recipients and return of unobligated federal  funds).", "According to FEMA officials, closeout functionality was selected first for  deployment because it was the most costly component of the legacy AFG  system to maintain, as it is an entirely manual and labor-intensive  process. The remaining AFG functionality and remaining AFG users are  to be deployed by the end of the AFG pilot."], "subsections": []}, {"section_title": "GMM Oversight Structure", "paragraphs": ["The GMM program is executed by a program management office, which  is overseen by a program manager and program executive. This office is  responsible for directing the day-to-day operations and ensuring  completion of GMM program goals and objectives. The program office  resides within the Office of Response and Recovery, which is headed by  an Associate Administrator who reports to the FEMA Administrator. In  addition, the GMM program executive (who is also the Regional  Administrator for FEMA Region IX) reports directly to the FEMA  Administrator.", "GMM is designated as a level 2 major acquisition, which means that it is  subject to oversight by the DHS acquisition review board. The board is  chaired by the DHS Undersecretary for Management and is made up of  executive-level members, such as the DHS Chief Information Officer.", "The acquisition review board serves as the departmental executive board  that decides whether to approve GMM through key acquisition milestones  and reviews the program\u2019s progress and its compliance with approved  documentation every 6 months. The board approved the acquisition  program baseline for GMM in May 2017 (i.e., estimated costs to be about  $251 million and full operational capability to be achieved by September  2020).", "In addition, the program is reviewed on a monthly basis by FEMA\u2019s  Grants Management Executive Steering Group. This group is chaired by  the Deputy Administrator of FEMA. Further, DHS\u2019s Financial Systems  Modernization Executive Steering Committee, chaired by the DHS Chief  Financial Officer, meets monthly and is to provide guidance, oversight,  and support to GMM."], "subsections": []}, {"section_title": "Cybersecurity Risk Management Framework", "paragraphs": ["For government organizations, including FEMA, cybersecurity is a key  element in maintaining the public trust. Inadequately protected systems  may be vulnerable to insider threats. Such systems are also vulnerable to  the risk of intrusion by individuals or groups with malicious intent who  could unlawfully access the systems to obtain sensitive information,  disrupt operations, or launch attacks against other computer systems and  networks. Moreover, cyber-based threats to federal information systems  are evolving and growing. Accordingly, we designated cybersecurity as a  government-wide high risk area 22 years ago, in 1997, and it has since  remained on our high-risk list.", "Federal law and guidance specify requirements for protecting federal  information and information systems. The Federal Information Security  Modernization Act (FISMA) of 2014 requires executive branch agencies  to develop, document, and implement an agency-wide cybersecurity  program to provide security for the information and information systems  that support operations and assets of the agency.", "The act also tasks NIST with developing, for systems other than those for  national security, standards and guidelines to be used by all agencies to  establish minimum cybersecurity requirements for information and  information systems based on their level of cybersecurity risk.  Accordingly, NIST developed a risk management framework of standards  and guidelines for agencies to follow in developing cybersecurity  programs.", "The framework addresses broad cybersecurity and risk management  activities, including categorizing the system\u2019s impact level; selecting,  implementing, and assessing security controls; authorizing the system to  operate (based on progress in remediating control weaknesses and an  assessment of residual risk); and monitoring the efficacy of controls on an  ongoing basis. Figure 5 provides an overview of this framework.", "Prior DHS OIG assessments, such as the annual evaluation of DHS\u2019s  cybersecurity program, have identified issues with FEMA\u2019s cybersecurity  practices. For example, in 2016, the OIG reported that FEMA was  operating 111 systems without an authorization to operate. In addition,  the agency had not created any corrective action plans for 11 of the  systems that were classified as \u201cSecret\u201d or \u201cTop Secret,\u201d thus limiting its  ability to ensure that all identified cybersecurity weaknesses were  mitigated in a timely manner. The OIG further reported that, for several years, FEMA was consistently below DHS\u2019s 90 percent target for  remediating corrective action plans, with scores ranging from 73 to 84  percent. Further, the OIG reported that FEMA had a significant number of  open corrective action plans (18,654) and that most of these plans did not  contain sufficient information to address identified weaknesses.", "In 2017, the OIG reported that FEMA had made progress in addressing  security weaknesses. For example, it reported that the agency had  reduced the number of systems it was operating without an authorization  to operate from 111 to 15 systems."], "subsections": []}]}, {"section_title": "FEMA Has Implemented Most Leading Practices for Reengineering Grants Management Business Processes and Managing IT Requirements", "paragraphs": ["According to GAO\u2019s Business Process Reengineering Assessment Guide  and the Software Engineering Institute\u2019s Capability Maturity Model  Integration\u00ae for Development, successful business process reengineering  can enable agencies to replace their inefficient and outmoded processes  with streamlined processes that can more effectively serve the needs of  the public and significantly reduce costs and improve performance.  Many times, new IT systems are implemented to support these improved  business processes. Thus, effective management of IT requirements is  critical for ensuring the successful design, development, and delivery of  such new systems.", "These leading practices state that effective business process  reengineering and IT requirements management involve, among other  things, (1) ensuring strong executive leadership support for process  reengineering; (2) assessing the current and target business environment  and business performance goals; (3) establishing plans for implementing  new business processes; (4) establishing clear, prioritized, and traceable  IT requirements; (5) tracking progress in delivering IT requirements; and  (6) incorporating input from end user stakeholders.", "Among these six selected leading practices for reengineering business  processes and managing IT requirements, FEMA fully implemented four  and partially implemented two of them for its GMM program. For example,  the agency ensured strong senior leadership commitment to changing the  way it manages its grants, took steps to assess and document its  business environment and performance goals, defined initial IT  requirements for GMM, took recent actions to better track progress in  delivering planned IT requirements, and incorporated input from end user  stakeholders.", "In addition, FEMA had begun planning for business process  reengineering; however, it had not finalized plans for transitioning users to  the new business processes. Further, while GMM took steps to establish  clearly defined and prioritized IT requirements, key requirements were not  always traceable. Table 3 summarizes the extent to which FEMA  implemented the selected leading practices."], "subsections": [{"section_title": "FEMA Executive Leadership Demonstrated Strong Commitment to Reengineering Grants Management Processes", "paragraphs": ["According to GAO\u2019s Business Process Reengineering Assessment  Guide, the most critical factor for engaging in a reengineering effort is  having strong executive leadership support to establish credibility  regarding the seriousness of the effort and to maintain the momentum as  the agency faces potentially extensive changes to its organizational  structure and values. Without such leadership, even the best process  design may fail to be accepted and implemented. Agencies should also  ensure that there is ongoing executive support (e.g., executive steering  committee meetings headed by the agency leader) to oversee the  reengineering effort from start to finish.", "FEMA senior leadership consistently demonstrated its commitment and  support for streamlining the agency\u2019s grants management business  processes and provided ongoing executive support. For example, one of  the Administrator\u2019s top priorities highlighted in FEMA\u2019s 2014 through 2022  strategic plans was to strengthen grants management through innovative  systems and business processes to rapidly and effectively deliver the  agency\u2019s mission. In accordance with this strategic priority, FEMA  initiated GMM with the intent to streamline and modernize grants  management across the agency.", "In addition, FEMA established the Grants Management Executive  Steering Group in September 2015. This group is responsible for  transforming the agency\u2019s grants management capabilities through its  evaluation, prioritization, and oversight of grants management  modernization programs, such as GMM. The group\u2019s membership  consists of FEMA senior leaders from across the agency\u2019s program and  business support areas, such as FEMA regions, Individual Assistance,  Public Assistance, Preparedness, Office of the Chief Financial Officer,  Office of Chief Counsel, OCIO, and the Office of Policy and Program  Analysis. In this group\u2019s ongoing commitment to reengineering grants  management processes, it meets monthly to review GMM\u2019s updates,  risks, and action items, as well as the program\u2019s budget, schedule, and  acquisition activities. For example, the group reviewed the status of key  acquisition activities and program milestones, such as the follow-on  award for the pilot contractor and the program\u2019s initial operational  capability date. The group also reviewed GMM\u2019s program risks, such as  data migration challenges (discussed later in this report) and delays in the  Agile development contract award. With this continuous executive  involvement, FEMA is better positioned to maintain momentum for  reengineering the new grants management business processes that the  GMM system is intended to support."], "subsections": []}, {"section_title": "FEMA Documented Its Current and Target Grants Management Business Processes and Performance Improvement Goals", "paragraphs": ["GAO\u2019s Business Process Reengineering Assessment Guide states that  agencies undergoing business process reengineering should develop a  common understanding of the current environment by documenting  existing core business processes to show how the processes work and  how they are interconnected. The agencies should then develop a deeper  understanding of the target environment by modeling the workflow of  each target business process in enough detail to provide a common  understanding of exactly what will be changed and who will be affected by  a future solution. Agencies should also assess the performance of their  current major business processes to identify problem areas that need to  be changed or eliminated and to set realistically achievable, customer- oriented, and measurable business performance improvement goals.", "FEMA has taken steps to document the current and target grants  management business processes. Specifically,", "The agency took steps to develop a common understanding of its  grants management processes by documenting each of the 12 grant  categories. For example, in 2016 and 2017, the agency conducted  several nationwide user outreach sessions with representatives from  FEMA headquarters, the 10 regional offices, and state and local grant  recipients to discuss the grant categories and the current grants  management business environment.", "In addition, FEMA\u2019s Office of Chief Counsel developed a Grants  Management Manual in January 2018 that outlined the authorizing  laws, regulations, and agency policies for all of its grant programs.  According to the Grants Management Executive Steering Group, the  manual is intended to promote standardized grants management  procedures across the agency. Additionally, the group expects grant  program and regional offices to assess the manual against their own  practices, make updates as needed, and ensure that their staff are  properly informed and trained.", "FEMA also documented target grants management business process  workflows for 18 of the 19 business functions that were notionally  planned to be developed and deployed in the AFG pilot by December  2018. However, the program experienced delays in developing the  AFG pilot (discussed later in this report) and, thus, deferred defining  the remaining business function until the program gets closer to  developing that function, which is now planned for August 2019.", "In addition, FEMA established measurable business performance goals  for GMM that are aimed at addressing problem areas and improving  grants management processes. Specifically, the agency established 14  business performance goals and associated thresholds in an October  2017 acquisition program baseline addendum, as well as 126  performance metrics for all 43 of the target grants management business  functions in its March 2017 test and evaluation master plan.", "According to FEMA, the 14 business performance goals are intended to  represent essential outcomes that will indicate whether GMM has  successfully met critical, business-focused mission needs. GMM  performance goals include areas such as improvements in the  satisfaction level of users with GMM compared to the legacy systems and  improvements in the timeliness of grant award processing. For example,  one of GMM\u2019s goals is to get at least 40 percent of users surveyed to  agree or strongly agree that their grants management business  processes are easier to accomplish with GMM, compared to the legacy  systems.", "Program officials stated that they plan to work with the Agile development  contractor to refine their performance goals and target thresholds,  develop a plan for collecting the data and calculating the metrics, and  establish a performance baseline with the legacy systems. Program  officials also stated that they plan to complete these steps by September  2019\u2014GMM\u2019s initial operational capability date\u2014which is when they are  required to begin reporting these metrics to the DHS acquisition review  board."], "subsections": []}, {"section_title": "FEMA Has Begun Planning Its Grants Management Business Process Reengineering, but Has Not Finalized Plans for Transition Activities", "paragraphs": ["According to GAO\u2019s Business Process Reengineering Assessment  Guide, agencies undergoing business process reengineering should (1)  establish an overall plan to guide the effort (commonly referred to as an  organizational change management plan) and (2) provide a common  understanding for stakeholders of what to expect and how to plan for  process changes. Agencies should develop the plan at the beginning of  the reengineering effort and provide specific details on upcoming process  changes, such as critical milestones and deliverables for an orderly  transition, roles and responsibilities for change management activities,  reengineering goals, skills and resource needs, key barriers to change,  communication expectations, training, and any staff redeployments or  reductions-in-force. The agency should develop and begin implementing  its change management plan ahead of introducing new processes to  ensure sufficient support among stakeholders for the reengineered  processes.", "While FEMA has begun planning its business process reengineering  activities, it has not finalized its plans or established time frames for their  completion. Specifically, as of September 2018, program officials were in  the process of drafting an organizational change management plan that is  intended to establish an approach for preparing grants management  stakeholders for upcoming changes. According to FEMA, this document  is intended to help avoid uncertainty and confusion among stakeholders  as changes are made to the agency\u2019s grant programs, and ensure  successful adoption of new business processes, strategies, and  technologies.", "As discussed previously in this report, the transition to GMM will involve  changes to FEMA\u2019s disparate grants management processes that are  managed by many different stakeholders across the agency. Program  officials acknowledged that change management is the biggest challenge  they face in implementing GMM and said they had begun taking several  actions intended to support the agency\u2019s change management activities.  For example, program officials reported in October 2018 that they had  recently created an executive-level working group intended to address  FEMA\u2019s policy challenges related to the standardization of grants  management processes. Additionally, program officials reported that they  planned to: (1) hire additional support staff focused on coordinating grants  change management activities; and (2) pursue regional office outreach to  encourage broad support among GMM\u2019s decentralized stakeholders,  such as state, local, and tribal territories.", "However, despite these actions, the officials were unable to provide time  frames for completing the organizational change management plan or the  additional actions. Until the plan and actions are complete, the program  lacks assurance that it will have sufficient support among stakeholders for  the reengineered processes.", "In addition, GMM did not establish plans and time frames for the activities  that needed to take place prior to, during, and after the transition from the  legacy AFG to GMM. Instead, program officials stated that they had  worked collaboratively with the legacy AFG program and planned these  details informally by discussing them in various communications, such as  emails and meetings. However, this informal planning approach is not a  repeatable process, which is essential to this program as FEMA plans to  transition many sets of functionality to many different users during the  lifecycle of this program.", "Program officials acknowledged that for future transitions they will need  more repeatable transition planning and stated that they intend to  establish such plans, but did not provide a time frame for when such  changes would be made. Until FEMA develops a repeatable process, with  established time frames for communicating the transition details to its  customers prior to each transition, the agency risks that the transition  from the legacy systems to GMM will not occur as intended. It also  increases its risk that stakeholders will not support the implementation of  reengineered grants management processes."], "subsections": []}, {"section_title": "GMM Took Steps to Establish Clearly Defined and Prioritized IT Requirements, but Key Requirements Were Not Always Traceable", "paragraphs": ["Leading practices for software development efforts state that IT  requirements are to be clearly defined and prioritized. This includes,  among other things, maintaining bidirectional traceability as the  requirements evolve, to ensure there are no inconsistencies among  program plans and requirements. In addition, programs using Agile  software development are to maintain a product vision, or roadmap, to  guide the planning of major program milestones and provide a high-level  view of planned requirements.", "Programs should also maintain a prioritized list (referred to as a backlog)  of narrowly defined requirements (referred to as lower-level requirements)  that are to be delivered. Programs should maintain this backlog with the  product owner to ensure the program is always working on the highest  priority requirements that will deliver the most value to the users.", "The GMM program established clearly defined and prioritized  requirements and maintained bidirectional traceability among the various  levels of requirements:", "Grant lifecycle phases: In its Concept of Operations document, the  program established six grants management lifecycle phases that  represent the highest level of GMM\u2019s requirements, through which it  derives lower-level requirements.", "Business functions: The Concept of Operations document also  identifies the next level of GMM requirements\u2014the 43 business  functions that describe how FEMA officials, grant recipients, and other  stakeholders are to manage grants. According to program officials,  the 43 business functions are to be refined, prioritized, and delivered  to GMM customers iteratively. Further, for the AFG pilot, the GMM  program office prioritized 19 business functions with the product  owner and planned the development of these functions in a roadmap.", "Epics: GMM\u2019s business functions are decomposed into epics, which  represent smaller portions of functionality that can be developed over  multiple increments. According to program officials, GMM intends to  develop, refine, and prioritize the epics iteratively. As of August 2018,  the program had developed 67 epics in the program backlog. An  example of one of the epics for the AFG pilot is to prepare and submit  grant closeout materials.", "User stories: The epics are decomposed into user stories, which  convey the customers\u2019 requirements at the smallest and most discrete  unit of work that must be done within a single sprint to create working  software. GMM develops, refines, and prioritizes the user stories  iteratively. As of August 2018, the program had developed 1,118 user  stories in the backlog. An example of a user story is \u201cAs an external  user, I can log in with a username and password.\u201d", "Figure 6 provides an example of how GMM\u2019s different levels of  requirements are decomposed.", "Nevertheless, while we found requirements to be traceable at the sprint- level (i.e., epics and user stories), traceability of requirements at the  increment-level (i.e., business functions) were inconsistent among  different requirements planning documents. Specifically, the capabilities  and constraints document shows that five business functions are planned  to be developed within sub-increment 1A, whereas the other key planning  document\u2014the roadmap for the AFG pilot\u2014showed one of those five  functions as being planned for the sub-increment 1B. In addition, the  capabilities and constraints document shows that nine business functions  are planned to be developed within sub-increment 1B, but the roadmap  showed one of those nine functions as being planned for the sub- increment 1C.", "Program officials stated that they decided to defer these functions to later  sub-increments due to unexpected technical difficulties encountered  when developing functionality and reprioritizing functions with the product  owners. While the officials updated the roadmap to reflect the deferred  functionality, they did not update the capabilities and constraints  document to maintain traceability between these two important  requirements planning documents.", "Program officials stated that they learned during the AFG pilot that the  use of a capabilities and constraints document for increment-level scope  planning was not ideal and that they intended to change the process for  how they documented planned requirements for future increments.  However, program officials did not provide a time frame for when this  change would be made. Until the program makes this change and then  ensures it maintains traceability of increment-level requirements between  requirements planning documents, it will continue to risk confusion among  stakeholders about what is to be delivered.", "In addition, until recently, GMM\u2019s planning documents were missing up- to-date information regarding when most of the legacy systems will be  transitioned to GMM. Specifically, while the program\u2019s planning  documents (including the GMM roadmap) provided key milestones for the  entire lifecycle of the program and high-level capabilities to be delivered  in the AFG pilot, these documents lacked up-to-date time frames for when  FEMA planned to transition the nine remaining legacy systems. For  example, in May 2017, GMM drafted notional time frames for transitioning  the legacy systems, including plans for AFG to be the seventh system  replaced by GMM. However, in December 2017, the program decided to  reprioritize the legacy systems so that AFG would be replaced first\u2014yet  this major change was not reflected in the program\u2019s roadmap.", "Moreover, while AFG program officials were informed of the decision to  transition the AFG program first, in June 2018 officials from other grant  programs told us that they had not been informed on when their systems  were to be replaced. As a result, these programs were uncertain about  when they should start planning for their respective transitions. In August  2018, GMM program officials acknowledged that they were delayed in  deciding the sequencing order for the legacy system transitions. Program officials stated that the delay was due to their need to factor the Agile  development contractor\u2019s perspective into these decisions; yet, at that  time, the contract award had been delayed by approximately 8 months.  Subsequently, in October 2018, program officials identified tentative time  frames for transitioning the remaining legacy systems.", "Program officials stated that they determined the tentative time frames for  transitioning the legacy systems based on key factors, such as mission  need, cost, security vulnerabilities, and technical obsolescence, and that  they had shared these new time frames with grant program officials. The  officials also stated that, once the Agile contractor begins contract  performance, they expect to be able to validate the contractor\u2019s capacity  and finalize these time frames by obtaining approval from the Grants  Management Executive Steering Group. By taking steps to update and  communicate these important time frames, FEMA should be better  positioned to ensure that each of the grant programs are prepared for  transitioning to GMM."], "subsections": []}, {"section_title": "GMM Recently Began Tracking Progress in Delivering Planned IT Requirements", "paragraphs": ["According to leading practices, Agile programs should track their  progress in delivering planned IT requirements within a sprint (i.e., short  iterations that produce working software). Given that sprints are very  short cycles of development (e.g., 2 weeks), the efficiency of completing  planned work within a sprint relies on a disciplined approach that includes  using a fixed pace, referred to as the sprint cadence, that provides a  consistent and predictable development routine. A disciplined approach  also includes identifying by the start of a sprint which user stories will be  developed, developing those stories to completion (e.g., fully tested and  demonstrated to, and accepted by, the product owner), and tracking  completion progress of those stories. Progress should be communicated  to relevant stakeholders and used by the development teams to better  understand their capacity to develop stories, continuously improve on  their processes, and forecast how long it will take to deliver all remaining  capabilities.", "The GMM program did not effectively track progress in delivering IT  requirements during the first nine sprints, which occurred from January to  June 2018. These gaps in tracking the progress of requirements, in part, had an impact on the program\u2019s progress in delivering the 19 AFG  business functions that were originally planned by December 2018 and  are now deferred to August 2019. However, beginning in July 2018, in  response to our ongoing review, the program took steps to improve in  these areas. Specifically,", "GMM did not communicate the status of its Agile development  progress to program stakeholders, such as the grant programs, the  regional offices, and the development teams, during most of the first  nine sprints. Program officials acknowledged that they should use  metrics to track development progress and, in July 2018, they began  reporting metrics to program stakeholders. For example, they began  collecting and providing data on the number of stories planned and  delivered, estimated capacity for development teams, and the number  of days spent working on the sprint, as part of the program\u2019s weekly  status reports to program stakeholders, such as product owners.", "Rather than using a fixed, predictable sprint cadence, GMM allowed a  variable development cadence, meaning that sprint durations varied  from 1 to 4 weeks throughout the first nine sprints. Program officials  noted that they had experimented with the use of a variable cadence  to allow more time to complete complex technical work. Program  officials stated that they realized that varying the sprints was not  effective and, in July 2018 for sprint 10, they reverted back to a fixed,  2 week cadence.", "GMM added a significant amount of scope during its first nine sprints,  after the development work had already begun. For example, the  program committed to 28 user stories at the beginning of sprint eight,  and then nearly doubled the work by adding 25 additional stories in  the middle of the sprint. Program officials cited multiple reasons for  adding more stories, including that an insufficient number of stories  had been defined in the backlog when the sprint began, the realization  that planned stories were too large and needed to be decomposed  into smaller stories, and the realization that other work would be  needed in addition to what was originally planned. Program officials  recognized that, by the start of a sprint, the requirements should be  sufficiently defined, such that they are ready for development without  requiring major changes during the sprint. The program made recent  improvements in sprints 11 and 12, which had only five stories added  after the start of a sprint.", "By taking these steps to establish consistency among sprints, the  program has better positioned itself to more effectively monitor and  manage the remaining IT development work. In addition, this  improvement in consistency should help the program avoid future  deferments of functionality."], "subsections": []}, {"section_title": "GMM Is Involving Stakeholders and Incorporating Input", "paragraphs": ["Leading practices state that programs should regularly collaborate with,  and collect input from, relevant stakeholders; monitor the status of  stakeholder involvement; incorporate stakeholder input; and measure  how well stakeholders\u2019 needs are being met. For Agile programs, it is  especially important to track user satisfaction to determine how well the  program has met stakeholders\u2019 needs. Consistent stakeholder  participation ensures that the program meets its stakeholders\u2019 needs.", "FEMA implemented its responsibilities in this area through several  means, such as stakeholder outreach activities; development of a  strategic communications plan; and continuous monitoring, solicitation,  and recording of stakeholder involvement and feedback. For example, the  agency conducted nationwide outreach sessions from January 2016  through August 2017 and began conducting additional outreach sessions  in April 2018. These outreach sessions involved hundreds of  representatives from FEMA headquarters, the 10 regional offices, and  state and local grant recipients to collect information on the current grants  management environment and opportunities for streamlining grants  management processes.", "FEMA also held oversight and stakeholder outreach activities and actively  solicited and recorded feedback from its stakeholders on a regular basis.  For example, GMM regularly verified with users that the new functionality  met their IT requirements, as part of the Agile development cycle.  Additionally, we observed several GMM biweekly requirements validation  sessions where the program\u2019s stakeholders were involved and provided  feedback as part of the requirements development and refinement  process.", "In addition, FEMA identified GMM stakeholders and tracked its  engagement with these stakeholders using a stakeholder register. The  agency also defined processes for how the GMM program is to  collaborate with its stakeholders in a stakeholder communication plan and  Agile development team agreement. Also, while several officials from the selected grant program and regional offices that we interviewed indicated  that the program could improve in communicating its plans for GMM and  incorporating stakeholder input, most of the representatives from these  offices stated that GMM is doing well at interacting with its stakeholders.", "Finally, in October 2018, program officials reported that they had recently  begun measuring user satisfaction by conducting surveys and interviews  with users that have utilized the new functionality within GMM. The  program\u2019s outreach activities, collection of stakeholder input, and  measurement of user satisfaction demonstrate that the program is taking  the appropriate steps to incorporate stakeholder input."], "subsections": []}]}, {"section_title": "FEMA Lacks a Current Cost Estimate and Reliable Schedule for GMM", "paragraphs": [], "subsections": [{"section_title": "GMM\u2019s Initial Cost Estimate Was Reliable, but Is Now Outdated", "paragraphs": ["Reliable cost estimates are critical for successfully delivering IT  programs. Such estimates provide the basis for informed decision  making, realistic budget formulation, meaningful progress measurement,  and accountability for results. GAO\u2019s Cost Estimating and Assessment  Guide defines leading practices related to the following four  characteristics of a high-quality, reliable estimate.", "Comprehensive. The estimate accounts for all possible costs  associated with a program, is structured in sufficient detail to ensure  that costs are neither omitted nor double counted, and documents all  cost-influencing assumptions.", "Well-documented. Supporting documentation explains the process,  sources, and methods used to create the estimate; contains the  underlying data used to develop the estimate; and is adequately  reviewed and approved by management.", "Accurate. The estimate is not overly conservative or optimistic, is  based on an assessment of the costs most likely to be incurred, and is  regularly updated so that it always reflects the program\u2019s current  status.", "Credible. Discusses any limitations of the analysis because of  uncertainty or sensitivity surrounding data or assumptions, the  estimate\u2019s results are cross-checked, and an independent cost  estimate is conducted by a group outside the acquiring organization to  determine whether other estimating methods produce similar results.", "In May 2017, DHS approved GMM\u2019s lifecycle cost estimate of about $251  million for fiscal years 2015 through 2030. We found this initial estimate to  be reliable because it fully or substantially addressed all the  characteristics associated with a reliable cost estimate. For example, the  estimate comprehensively included government and contractor costs, all  elements of the program\u2019s work breakdown structure, and all phases of  the system lifecycle; and was aligned with the program\u2019s technical  documentation at the time the estimate was developed. GMM also fully  documented the key assumptions, data sources, estimating methodology,  and calculations for the estimate. Further, the program conducted a risk  assessment and sensitivity analysis, and DHS conducted an independent  assessment of the cost estimate to validate the accuracy and credibility of  the cost estimate.", "However, key assumptions that FEMA made about the program changed  soon after DHS approved the cost estimate in May 2017. Thus, the initial  cost estimate no longer reflects the current approach for the program. For  example, key assumptions about the program that changed include:", "Change in the technical approach: The initial cost estimate assumed  that GMM would implement a software-as-a-service model, meaning  that FEMA would rely on a service provider to deliver software  applications and the underlying infrastructure to run them. However, in  December 2017, the program instead decided to implement an  infrastructure-as-a-service model, meaning that FEMA would develop  and deploy its own software application and rely on a service provider  to deliver and manage the computing infrastructure (e.g., servers,  software, storage, and network equipment). According to program  officials, this decision was made after learning from the Agile  prototypes that the infrastructure-as-a-service model would allow  GMM to develop the system in a more flexible environment.", "Increase in the number of system development personnel: A key  factor with Agile development is the number of development teams  (each consisting of experts in software development, testing, and  cybersecurity) that are operating concurrently and producing separate  portions of software functionality. Program officials initially assumed  that they would need three to four concurrent Agile development  teams, but subsequently realized that they would instead need to  expend more resources to achieve GMM\u2019s original completion date.  Specifically, program officials now expect they will need to at least  double, and potentially triple, the number of concurrent development  teams to meet GMM\u2019s original target dates.", "Significant delays and complexities with data migration: In 2016 and  2017, GMM experienced various technical challenges in its effort to  transfer legacy system data to a data staging platform. This data  transfer effort needed to be done to standardize the data before  eventually migrating the data to GMM. These challenges resulted in  significant delays and cost increases. Program officials reported that,  by February 2018\u2014at least 9 months later than planned\u2014all legacy  data had been transferred to a data staging platform so that FEMA  officials could begin analyzing and standardizing the data prior to  migrating it into GMM.", "FEMA officials reported that they anticipated the cost estimate to  increase, and for this increase to be high enough to breach the $251  million threshold set in GMM\u2019s May 2017 acquisition program baseline.  Thus, consistent with DHS\u2019s acquisition guidance, the program informed  the DHS acquisition review board of this anticipated breach. The board  declared that the program was in a cost breach status, as of September  12, 2018.", "As of October 2018, program officials stated that they were in the process  of revising the cost estimate to reflect the changes in the program and to  incorporate actual costs. In addition, the officials stated that the program  was applying a new cost estimating methodology tailored for Agile  programs that DHS\u2019s Cost Analysis Division had been developing. In  December 2018, program officials stated that they had completed the  revised cost estimate but it was still undergoing departmental approval.  Establishing an updated cost estimate should help FEMA better  understand the expected costs to deliver GMM under the program\u2019s  current approach and time frames."], "subsections": []}, {"section_title": "GMM\u2019s Schedule Is Unreliable", "paragraphs": ["The success of an IT program depends, in part, on having an integrated  and reliable master schedule that defines when the program\u2019s set of work  activities and milestone events are to occur, how long they will take, and  how they are related to one another. Among other things, a reliable  schedule provides a roadmap for systematic execution of an IT program  and the means by which to gauge progress, identify and address potential  problems, and promote accountability.", "GAO\u2019s Schedule Assessment Guide defines leading practices related to  the following four characteristics that are vital to having a reliable  integrated master schedule.", "Comprehensive. A comprehensive schedule reflects all activities for  both the government and its contractors that are necessary to  accomplish a program\u2019s objectives, as defined in the program\u2019s work  breakdown structure. The schedule also includes the labor, materials,  and overhead needed to do the work and depicts when those  resources are needed and when they will be available. It realistically  reflects how long each activity will take and allows for discrete  progress measurement.", "Well-constructed. A schedule is well-constructed if all of its activities  are logically sequenced with the most straightforward logic possible.  Unusual or complicated logic techniques are used judiciously and  justified in the schedule documentation. The schedule\u2019s critical path  represents a true model of the activities that drive the program\u2019s  earliest completion date and total float accurately depicts schedule  flexibility.", "Credible. A schedule that is credible is horizontally traceable\u2014that is,  it reflects the order of events necessary to achieve aggregated  products or outcomes. It is also vertically traceable\u2014that is, activities  in varying levels of the schedule map to one another and key dates  presented to management in periodic briefings are consistent with the  schedule. Data about risks are used to predict a level of confidence in  meeting the program\u2019s completion date. The level of necessary  schedule contingency and high-priority risks are identified by  conducting a robust schedule risk analysis.", "Controlled. A schedule is controlled if it is updated regularly by trained  schedulers using actual progress and logic to realistically forecast  dates for program activities. It is compared to a designated baseline  schedule to measure, monitor, and report the program\u2019s progress.  The baseline schedule is accompanied by a baseline document that  explains the overall approach to the program, defines ground rules  and assumptions, and describes the unique features of the schedule.  The baseline schedule and current schedule are subject to a  configuration management control process.", "GMM\u2019s schedule was unreliable because it minimally addressed three  characteristics\u2014comprehensive, credible, and controlled\u2014and did not  address the fourth characteristic of a reliable estimate\u2014well-constructed.  One of the most significant issues was that the program\u2019s fast  approaching, final delivery date of September 2020 was not informed by a  realistic assessment of GMM development activities, and rather was  determined by imposing an unsubstantiated delivery date. Table 4  summarizes our assessment of GMM\u2019s schedule.", "In discussing the reasons for the shortfalls in these practices, program  officials stated that they had been uncertain about the level of rigor that  should be applied to the GMM schedule, given their use of Agile  development. However, leading practices state that program schedules  should meet all the scheduling practices, regardless of whether a  program is using Agile development. As discussed earlier in this report,  GMM has already experienced significant schedule delays. For example,  the legacy data migration effort, the AFG pilot, and the Agile development  contract have been delayed.", "Program officials also stated that the delay in awarding and starting the  Agile contract has delayed other important activities, such as establishing  time frames for transitioning legacy systems. A more robust schedule  could have helped FEMA predict the impact of delays on remaining  activities and identify which activities appeared most critical so that the  program could ensure that any risks in delaying those activities were  properly mitigated.", "In response to our review and findings, program officials recognized the  need to continually enhance their schedule practices to improve the  management and communication of program activities. As a result, in  August 2018, the officials stated that they planned to add a master  scheduler to the team to improve the program\u2019s schedule practices and  ensure that all of the areas of concern we identified are adequately  addressed. In October 2018, the officials reported that they had recently  added two master schedulers to GMM. According to the statement of  objectives, the Agile contractor is expected to develop an integrated  master schedule soon after it begins performance.", "However, program officials stated that GMM is schedule-driven\u2014due to  the Executive Steering Group\u2019s expectation that the solution will be  delivered by September 2020. The officials added that, if GMM  encounters challenges in meeting this time frame, the program plans to  seek additional resources to allow it to meet the 2020 target.", "GMM\u2019s schedule-driven approach has already led to an increase in  estimated costs and resources. For example, as previously mentioned,  the program has determined that, to meet its original target dates, GMM  needs to at least double, and possibly triple, the number of concurrent  Agile development teams. In addition, we have previously reported that  schedule pressure on federal IT programs can lead to omissions and  skipping of key activities, especially system testing.", "In August 2018, program officials acknowledged that September 2020  may not be feasible and that the overall completion time frames  established in the acquisition program baseline may eventually need to  be rebaselined. Without a robust schedule to forecast whether FEMA\u2019s  aggressive delivery goal for GMM is realistic to achieve, leadership will be  limited in its ability to make informed decisions on what additional  increases in cost or reductions in scope might be needed to fully deliver  the system."], "subsections": []}]}, {"section_title": "FEMA Fully Addressed Three Key Cybersecurity Practices and Partially Addressed Two Others", "paragraphs": ["NIST\u2019s risk management framework establishes standards and guidelines  for agencies to follow in developing cybersecurity programs. Agencies  are expected to use this framework to achieve more secure information  and information systems through the implementation of appropriate risk  mitigation strategies and by performing activities that ensure that  necessary security controls are integrated into agencies\u2019 processes. The  framework addresses broad cybersecurity and risk management  activities, which include the following:", "Categorize the system: Programs are to categorize systems by  identifying the types of information used, selecting a potential impact  level (e.g., low, moderate, or high), and assigning a category based  on the highest level of impact to the system\u2019s confidentiality, integrity,  and availability, if the system was compromised. Programs are also to  document a description of the information system and its boundaries  and should register the system with appropriate program  management offices. System categorization is documented in a  system security plan.", "Select and implement security controls: Programs are to determine  protective measures, or security controls, to be implemented based  on the system categorization results. These security controls are  documented in a system security plan. For example, control areas  include access controls, incident response, security assessment and  authorization, identification and authentication, and configuration  management. Once controls are identified, programs are to determine  planned implementation actions for each of the designated controls.  These implementation actions are also specified in the system  security plan.", "Assess security controls: Programs are to develop, review, and  approve a security assessment plan. The purpose of the security  assessment plan approval is to establish the appropriate expectations  for the security control assessment. Programs are to also perform a  security control assessment by evaluating the security controls in  accordance with the procedures defined in the security assessment  plan, in order to determine the extent to which the controls were  implemented correctly. The output of this process is intended to  produce a security assessment report to document the issues,  findings, and recommendations. Programs are to conduct initial  remediation actions on security controls and reassess those security  controls, as appropriate.", "Obtain an authorization to operate the system: Programs are to obtain  security authorization approval in order to operate a system.  Resolving weaknesses and vulnerabilities identified during testing is  an important step leading up to achieving an authorization to operate.  Programs are to establish corrective action plans to address any  deficiencies in cybersecurity policies, procedures, and practices. DHS  guidance also states that corrective action plans must be developed  for every weakness identified during a security control assessment  and within a security assessment report.", "Monitor security controls on an ongoing basis: Programs are to  monitor their security controls on an ongoing basis after deployment,  including determining the security impact of proposed or actual  changes to the information system and assessing the security controls  in accordance with a monitoring strategy that determines the  frequency of monitoring the controls.", "For the GMM program\u2019s engineering and test environment, which went  live in February 2018, FEMA fully addressed three of the five key  cybersecurity practices in NIST\u2019s risk management framework and  partially addressed two of the practices. Specifically, FEMA categorized  GMM\u2019s environment based on security risk, implemented select security  controls, and monitored security controls on an ongoing basis. However,  the agency partially addressed the areas of assessing security controls  and obtaining an authorization to operate the system. Table 5 provides a  summary of the extent to which FEMA addressed NIST\u2019s key  cybersecurity practices for GMM\u2019s engineering and test environment."], "subsections": [{"section_title": "GMM Categorized the System Based on Security Risk", "paragraphs": ["Consistent with NIST\u2019s framework, GMM categorized the security risk of  its engineering and test environment and identified it as a moderate- impact environment. A moderate-impact environment is one where the  loss of confidentiality, integrity, or availability could be expected to have a  serious or adverse effect on organizational operations, organizational  assets, or individuals. GMM completed the following steps leading to this  categorization:", "The program documented in its System Security Plan the various  types of data and information that the environment will collect,  process, and store, such as conducting technology research, building  or enhancing technology, and maintaining IT networks.", "The program established three information types and assigned  security levels of low, moderate, or high impact in the areas of  confidentiality, availability, and integrity. A low-impact security level  was assigned to two information types: (1) conducting technology  research and (2) building or enhancing technology; and a moderate- impact security level was assigned to the third information type:  maintaining IT networks.", "The engineering and test environment was categorized as an overall  moderate-impact system, based on the highest security impact level  assignment.", "GMM documented a description of the environment, including a  diagram depicting the system\u2019s boundaries, which illustrates, among  other things, databases and firewalls.", "GMM properly registered its engineering and test environment with  FEMA\u2019s Chief Information Officer, Chief Financial Officer, and acting  Chief Information Security Officer.", "By conducting the security categorization process, GMM has taken steps  that should ensure that the appropriate security controls are selected for  the program\u2019s engineering and test environment."], "subsections": []}, {"section_title": "GMM Selected and Planned for the Implementation of Controls in Its System Security Plan", "paragraphs": ["Consistent with NIST\u2019s framework and the system categorization results,  GMM appropriately determined which security controls to implement and  planned actions for implementing those controls in its System Security  Plan for the engineering and test environment. For example, the program  utilized NIST guidance to select standard controls for a system  categorized with a moderate-impact security level. These control areas  include, for example, access controls, risk assessment, incident  response, identification and authentication, and configuration  management.", "Further, the program documented its planned actions to implement each  control in its System Security Plan. For example, GMM documented that  the program plans to implement its Incident Response Testing control by  participating in an agency-wide exercise and unannounced vulnerability  scans. As another example, GMM documented that the program plans to  implement its Contingency Plan Testing control by testing the contingency  plan annually, reviewing the test results, and preparing after action  reports. By selecting and planning for the implementation of security  controls, GMM has taken steps to mitigate its security risks and protect  the confidentiality, integrity, and availability of the information system."], "subsections": []}, {"section_title": "GMM Developed a Security Assessment Plan, but It Lacked Essential Details and Approvals", "paragraphs": ["Consistent with NIST\u2019s framework, in January 2018, GMM program  officials developed a security assessment plan for the engineering and  test environment. According to GMM program officials, this plan was  reviewed by the security assessment team.", "However, the security assessment plan lacked essential details.  Specifically, while the plan included the general process for evaluating the  environment\u2019s security controls, the planned assessment procedures for  all 964 security controls were not sufficiently defined. Specifically, GMM  program officials copied example assessment procedures from NIST  guidance and inserted them into its security assessment documentation  for all of its 964 controls, without making further adjustments to explain  the steps that should be taken specific to GMM. Table 6 shows an  example of a security assessment procedure copied from the NIST  guidance that should have been further adjusted for GMM.", "In addition, the actual assessment procedures that the GMM assessors  used to evaluate the security controls were not documented. Instead, the  program only documented whether each control passed or failed each  test.", "GMM program officials stated that the planned assessment procedures  are based on an agency template that was exported from a DHS  compliance tool, and that FEMA security officials have been instructed by  the DHS OCIO not to tailor or make any adjustments to the template  language. However, the assessment procedures outlined in NIST\u2019s  guidance are to serve as a starting point for organizations preparing their  program specific assessments. According to NIST, organizations are  expected to select and tailor their assessment procedures for each  security control from NIST\u2019s list of suggested assessment options (e.g.,  review, analyze, or inspect policies, procedures, and related  documentation options).", "DHS OCIO officials stated that, consistent with NIST\u2019s guidance, they  expect that components will ensure they are in compliance with the  minimum standards and will also add details and additional rigor, as  appropriate, to tailor the planned security assessment procedures to fit  their unique missions or needs. In November 2018, in response to our  audit, DHS OCIO officials stated that they were meeting with FEMA OCIO  officials to understand why they did not document the planned and actual  assessment procedures performed by the assessors for GMM. Until  FEMA ensures that detailed planned evaluation methods and actual  evaluation procedures specific to GMM are defined, the program risks  assessing security controls incorrectly, having controls that do not work  as intended, and producing undesirable outcomes with respect to meeting  the security requirements.", "In addition, the security assessment plan was not approved by FEMA\u2019s  OCIO before proceeding with the security assessment. Program officials  stated that approval was not required for the security assessment plan  prior to the development of the security assessment report. However,  NIST guidance states that the purpose of the security assessment plan  approval is to establish the appropriate expectations for the security  control assessment. By not getting the security assessment plan  approved by FEMA\u2019s OCIO before security assessment reviews were  conducted, GMM risks inconsistencies with the plan and security  objectives of the organization.", "Finally, consistent with NIST guidance, GMM performed a security  assessment in December 2017 of the engineering and test environment\u2019s  controls, which identified 36 vulnerabilities (23 critical- and high-impact  vulnerabilities and 13 medium- and low-impact vulnerabilities). The  program also documented these vulnerabilities and associated findings  and recommendations in a security assessment report. GMM conducted  initial remediation actions (i.e., remediation of vulnerabilities that should  be corrected immediately) for 12 of the critical- and high-impact  vulnerabilities and a reassessment of those security controls confirmed  that they were resolved by January 2018. Remediation of the remaining  11 critical- and high-impact vulnerabilities and 13 medium- and low- impact vulnerabilities were to be addressed by corrective action plans as  part of the authorization to operate process, which is discussed in the  next section."], "subsections": []}, {"section_title": "GMM Obtained Authorization to Operate, but Had Not Addressed Known Vulnerabilities or Tested All Controls", "paragraphs": ["The authorization to operate GMM\u2019s engineering and test environment  was granted on February 5, 2018. Among other things, this decision was  based on the important stipulation that the remaining 11 critical- and high- impact vulnerabilities associated with multifactor authentication would be  addressed within 45 days, or by March 22, 2018. However, the program  did not meet this deadline and, instead, approximately 2 months after this  deadline passed, obtained a waiver to remediate these vulnerabilities by  May 9, 2019.", "These vulnerabilities are related to a multifactor authentication  capability. Program officials stated that they worked with FEMA OCIO  officials to attempt to address these vulnerabilities by the initial deadline,  but they were unsuccessful in finding a viable solution. Therefore, GMM  program officials developed a waiver at the recommendation of the OCIO  to provide additional time to develop a viable solution. However, a  multifactor authentication capability is essential to ensuring that users are  who they say they are, prior to granting users access to the GMM  engineering and test environment, in order to reduce the risk of harmful  actors accessing the system.", "In addition, as of September 2018, the program had not established  corrective action plans for the 13 medium- and low-impact vulnerabilities.  Program officials stated that they do not typically address low-impact  vulnerabilities; however, this is in conflict with DHS guidance that  specifies that corrective action plans must be developed for every  weakness identified during a security control assessment and within a  security assessment report. In response to our audit, in October 2018,  GMM program officials developed these remaining corrective action  plans. The plans indicated that these vulnerabilities were to be fully  addressed by January 2019 and April 2019.", "While the program eventually took corrective actions in response to our  audit by developing the missing plans, the GMM program initially failed to  follow DHS\u2019s guidance on preparing corrective actions plans for all  security vulnerabilities. Until GMM consistently follows DHS\u2019s guidance, it  will be difficult for FEMA to determine the extent to which GMM\u2019s security  weaknesses identified during its security control assessments are  remediated. Additionally, as we have reported at other agencies,  vulnerabilities can be indicators of more significant underlying issues and,  thus, without appropriate management attention or prompt remediation,  GMM is at risk of unnecessarily exposing the program to potential  exploits.", "Moreover, GMM was required to assess all untested controls by March 7,  2018, or no later than 30 days after the approval of the authorization to  operate; however, it did not meet this deadline. Specifically, we found  that, by October 2018, FEMA had not fully tested 190 security controls in  the GMM engineering and test environment. These controls were related  to areas such as security incident handling and allocation of resources  required to protect an information system. In response to our findings, in  October 2018, GMM program officials reported that they had since fully  tested 27 controls and partially tested the remaining 163 controls.", "Program officials stated that testing of the 163 controls is a shared  responsibility between GMM and other parties (e.g., the cloud service  provider). They added that GMM had completed its portion of the testing  but was in the process of verifying the completion of testing by other  parties. Program officials stated that the untested controls were not  addressed sooner, in part, because of errors resulting from configuration  changes in the program\u2019s compliance tool during a system upgrade,  which have now been resolved. Until GMM ensures that all security  controls have been tested, it remains at an increased risk of exposing  programs to potential exploits."], "subsections": []}, {"section_title": "GMM Is Using Processes for Monitoring Controls", "paragraphs": ["Consistent with the NIST framework, GMM established methods for  assessing and monitoring security controls to be conducted after an  authorization to operate has been approved. GMM has tailored its  cybersecurity policies and practices for monitoring its controls to take into  account the frequent and iterative pace with which system functionality is  continuously being introduced into the GMM environment.", "Specifically, the GMM program established a process for assessing  security impact changes to the system and conducting reauthorizations to  operate within the rapid Agile delivery environment. As part of this  process, GMM embedded cybersecurity experts on each Agile  development team so that they are involved early and can impact security  considerations from the beginning of requirements development through  testing and deployment of system functionality.", "In addition, the process involves important steps for ensuring that the  system moves from development to completion, while producing a secure  and reliable system. For example, it includes procedures for creating,  reviewing, and testing new system functionality. As the new system  functionality is integrated with existing system functionality, it is to  undergo automated testing and security scans in order to ensure that the  integrity of the security of the system has not been compromised. Further,  an automated process is to deploy the code if it passes all security scans,  code tests, and code quality checks.", "GMM\u2019s process for conducting a reauthorization to operate within the  rapid delivery Agile development environment is to follow FEMA guidance  that states that all high-level changes made to a FEMA IT system must  receive approval from both a change advisory board and the FEMA Chief  Information Officer. The board and FEMA Chief Information Officer are to  focus their review and approval on scheduled releases and epics (i.e.,  collections of user stories). Additionally, the Information System Security  Officer is to review each planned user story and, if it is determined that  the proposed changes may impact the integrity of the authorization, the  Information System Security Officer is to work with the development team  to begin the process of updating the system authorization.", "Finally, GMM uses automated tools to track the frequency in which  security controls are assessed and to ensure that required scanning data  are received by FEMA for reporting purposes. Program officials stated  that, in the absence of department-level and agency-level guidance, they  have coordinated with DHS and FEMA OCIO officials to ensure that these  officials are in agreement with GMM\u2019s approach to continuous monitoring.  By having monitoring control policies and procedures in place, FEMA  management is positioned to more effectively prioritize and plan its risk  response to current threats and vulnerabilities for the GMM program."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given FEMA\u2019s highly complex grants management environment, with its  many stakeholders, IT systems, and internal and external users,  implementing leading practices for business process reengineering and IT  requirements management is critical for success. FEMA has taken many  positive steps, including ensuring executive leadership support for  business process reengineering, documenting the agency\u2019s grants  management processes and performance improvement goals, defining  initial IT requirements for the program, incorporating input from end user  stakeholders into the development and implementation process, and  taking recent actions to improve its delivery of planned IT requirements.  Nevertheless, until the GMM program finalizes plans and time frames for  implementing its organizational change management actions, plans and  communicates system transition activities, and maintains clear traceability  of IT requirements, FEMA will be limited in its ability to provide  streamlined grants management processes and effectively deliver a  modernized IT system to meet the needs of its large range of users.", "While GMM\u2019s initial cost estimate was reliable, key assumptions about the  program since the initial estimate had changed and, therefore, it no longer  reflected the current approach for the program. The forthcoming updated  cost schedule is expected to better reflect the current approach. However,  the program\u2019s unreliable schedule to fully deliver GMM by September  2020 is aggressive and unrealistic. The delays the program has  experienced to date further compound GMM\u2019s schedule issues. Without a  robust schedule that has been informed by a realistic assessment of  GMM\u2019s development activities, leadership will be limited in its ability to  make informed decisions on what additional increases in cost or  reductions in scope might be needed to achieve their goals.", "Further, FEMA\u2019s implementation of cybersecurity practices for GMM in  the areas of system categorization, selection and implementation, and  monitoring will help the program. However, GMM lacked essential details  for evaluating security controls, did not approve the security assessment  plan before proceeding with the security assessment, did not follow  DHS\u2019s guidance to develop corrective action plans for all security  vulnerabilities, and did not fully test all security controls. As a result, the  GMM engineering and test environment remains at an increased risk of  exploitations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making eight recommendations to FEMA:  The FEMA Administrator should ensure that the GMM program  management office finalizes the organizational change management plan  and time frames for implementing change management actions.  (Recommendation 1)", "The FEMA Administrator should ensure that the GMM program  management office plans and communicates its detailed transition  activities to its affected customers before they transition to GMM and  undergo significant changes to their processes. (Recommendation 2)", "The FEMA Administrator should ensure that the GMM program  management office implements its planned changes to its processes for  documenting requirements for future increments and ensures it maintains  traceability among key IT requirements documents. (Recommendation 3)", "The FEMA Administrator should ensure that the GMM program  management office updates the program schedule to address the leading  practices for a reliable schedule identified in this report.  (Recommendation 4)", "The FEMA Administrator should ensure that the FEMA OCIO defines  sufficiently detailed planned evaluation methods and actual evaluation  methods for assessing security controls. (Recommendation 5)", "The FEMA Administrator should ensure that the FEMA OCIO approves a  security assessment plan before security assessment reviews are  conducted. (Recommendation 6)", "The FEMA Administrator should ensure that the GMM program  management office follows DHS guidance on preparing corrective action  plans for all security vulnerabilities. (Recommendation 7)", "The FEMA Administrator should ensure that the GMM program  management office fully tests all of its security controls for the system.  (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["DHS provided written comments on a draft of this report, which are  reprinted in appendix IV. In its comments, the department concurred with  all eight of our recommendations and provided estimated completion  dates for implementing each of them.", "For example, with regard to recommendation 4, the department stated  that FEMA plans to update the GMM program schedule to address the  leading practices for a reliable schedule by April 30, 2019. In addition, for  recommendation 7, the department stated that FEMA plans to ensure that  corrective action plans are prepared by July 31, 2019, to address all  identified security vulnerabilities for GMM. If implemented effectively, the  actions that FEMA plans to take in response to the recommendations  should address the weaknesses we identified.", "We also received technical comments from DHS and FEMA officials,  which we incorporated, as appropriate.", "We are sending copies of this report to the Secretary of Homeland  Security and interested congressional committees. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) determine the extent to which the Federal  Emergency Management Agency (FEMA) is implementing leading  practices for reengineering its grants management business processes  and incorporating business needs into Grants Management  Modernization (GMM) information technology (IT) requirements; (2)  assess the reliability of the program\u2019s estimated costs and schedule; and  (3) determine the extent to which FEMA is addressing key cybersecurity  practices for GMM.", "To address the first objective, we reviewed GAO\u2019s Business Process  Reengineering Assessment Guide and Software Engineering Institute\u2019s  Capability Maturity Model for Integration for Development to identify  practices associated with business process reengineering and IT  requirements management. We then selected six areas that, in our  professional judgment, represented foundational practices that were of  particular importance to the successful implementation of an IT  modernization effort that is using Agile development processes. We also  selected the practices that were most relevant based on where GMM was  in the system development lifecycle and we discussed the practice areas  with FEMA officials. The practices are:", "Ensuring executive leadership support for process reengineering", "Assessing the current and target business environment and business", "Establishing plans for implementing new business processes", "Establishing clear, prioritized, and traceable IT requirements", "Tracking progress in delivering IT requirements  Incorporating input from end user stakeholders  We also reviewed selected chapters of GAO\u2019s draft Agile Assessment  Guide (Version 6A), which is intended to establish a consistent framework  based on best practices that can be used across the federal government  for developing, implementing, managing, and evaluating agencies\u2019 IT  investments that rely on Agile methods. To develop this guide, GAO  worked closely with Agile experts in the public and private sector; some chapters of the guide are considered more mature because they have  been reviewed by the expert panel. We reviewed these chapters to  ensure that our expectations for how FEMA should apply the six practices  for business process reengineering and IT requirements management are  appropriate for an Agile program and are consistent with the draft  guidance that is under development. Additionally, since Agile  development programs may use different terminology to describe their  software development processes, the Agile terms used in this report (e.g.,  increment, sprint, epic, etc.) are specific to the GMM program.", "We obtained and analyzed FEMA grants management modernization  documentation, such as current and target grants management business  processes, acquisition program baseline, operational requirements  document, concept of operations, requirements analyses workbooks,  Grants Management Executive Steering Group artifacts, stakeholder  outreach artifacts, Agile increment- and sprint-level planning and  development artifacts, and the requirements backlog.", "We assessed the program documentation against the selected practices  to determine the extent to which the agency had implemented them. We  then assessed each practice area as:  fully implemented\u2014FEMA provided complete evidence that showed it  fully implemented the practice area; partially implemented\u2014FEMA provided evidence that showed it  partially implemented the practice area; not implemented\u2014FEMA did not provide evidence that showed it  implemented any of the practice area.", "Additionally, we observed Agile increment and sprint development  activities at GMM facilities in Washington, D.C. We also observed a  demonstration of how the program manages its lower level requirements  (i.e., user stories and epics) and maintains traceability of the  requirements using an automated tool at GMM facilities in Washington,  D.C.", "We also interviewed FEMA officials, including the GMM Program  Executive, GMM Program Manager, GMM Business Transformation  Team Lead, and Product Owner regarding their efforts to streamline  grants management business processes, collect and incorporate  stakeholder input, and manage GMM\u2019s requirements. In addition, we  interviewed FEMA officials from four out of 16 grant program offices and  two out of 10 regional offices to obtain contextual information and  illustrative examples of FEMA\u2019s efforts to reengineer grants management  business processes and collect business requirements for GMM.  Specifically,", "We selected the four grant program offices based on a range of grant  programs managed, legacy systems used, and the amount of grant  funding awarded. We also sought to select a cross section of different  characteristics, such as selecting larger grant program offices, as well  as smaller offices. In addition, we ensured that our selection included  the Assistance to Firefighters Grants (AFG) program office because  officials in this office represent the first GMM users and, therefore, are  more actively involved with the program\u2019s Agile development  practices. Based on these factors, we selected: Public Assistance  Division, Individual Assistance Division, AFG, and National Fire  Academy. Additionally, the four selected grant program offices are  responsible for 16 of the total 45 grant programs and are users of five  of the nine primary legacy IT systems. The four selected grant  program offices also represent about 68 percent of the total grant  funding awarded by FEMA from fiscal years 2005 through 2016.", "We selected two regional offices based on (1) the largest amount of  total FEMA grant funding for fiscal years 2005 through 2016\u2014Region  6 located in Denton, Texas; and (2) the highest percentage of AFG  funding compared to the office\u2019s total grant funding awarded from  fiscal years 2005 through 2016\u2014Region 5 located in Chicago, Illinois.", "To assess the reliability of data from the program\u2019s automated IT  requirements management tool, we interviewed knowledgeable officials  about the quality control procedures used by the program to assure  accuracy and completeness of the data. We also compared the data to  other relevant program documentation on GMM requirements. We  determined that the data used were sufficiently reliable for the purpose of  evaluating GMM\u2019s practices for managing IT requirements.", "For our second objective, to assess the reliability of GMM\u2019s estimated  costs and schedule, we reviewed documentation on GMM\u2019s May 2017  lifecycle cost estimate and on the program\u2019s schedule, dated May 2018.", "To assess the reliability of the May 2017 lifecycle cost estimate, we  evaluated documentation supporting the estimate, such as the cost  estimating model, the report on GMM\u2019s Cost Estimating Baseline  Document and Life Cycle Cost Estimate, and briefings provided to the  Department of Homeland Security (DHS) and FEMA management  regarding the cost estimate. We assessed the cost estimating  methodologies, assumptions, and results against leading practices for  developing a comprehensive, accurate, well-documented, and  credible cost estimate, identified in GAO\u2019s Cost Estimating and  Assessment Guide. We also interviewed program officials  responsible for developing and reviewing the cost estimate to  understand their methodology, data, and approach for developing the  estimate. We found that the cost data were sufficiently reliable.", "To assess the reliability of the May 2018 GMM program schedule, we  evaluated documentation supporting the schedule, such as the  integrated master schedule, acquisition program baseline, and Agile  artifacts. We assessed the schedule documentation against leading  practices for developing a comprehensive, well-constructed, credible,  and controlled schedule, identified in GAO\u2019s Schedule Assessment  Guide. We also interviewed GMM program officials responsible for  developing and managing the program schedule to understand their  practices for creating and maintaining the schedule. We noted in our  report the instances where the quality of the schedule data impacted  the reliability of the program\u2019s schedule.", "For both the cost estimate and program schedule, we assessed each  leading practice as:  fully addressed\u2014FEMA provided complete evidence that showed it  implemented the entire practice area;  substantially addressed\u2014FEMA provided evidence that showed it  implemented more than half of the practice area; partially addressed\u2014FEMA provided evidence that showed it  implemented about half of the practice area; minimally addressed\u2014FEMA provided evidence that showed it  implemented less than half of the practice area; not addressed\u2014FEMA did not provide evidence that showed it  implemented any of the practice area.", "Finally, we provided FEMA with draft versions of our detailed analyses of  the GMM cost estimate and schedule. This was done to verify that the  information on which we based our findings was complete, accurate, and  up-to-date.", "Regarding our third objective, to determine the extent to which FEMA is  addressing key cybersecurity practices for GMM, we reviewed  documentation regarding DHS and FEMA cybersecurity policies and  guidance, and FEMA\u2019s authorization to operate for the program\u2019s  engineering and test environment. We evaluated the documentation  against all six cybersecurity practices identified in the National Institute of  Standards and Technology\u2019s (NIST) Risk Management Framework.  While NIST\u2019s Risk Management Framework identifies six total practices,  for reporting purposes, we combined two interrelated practices\u2014selection  of security controls and implementation of security controls\u2014into a single  practice. The resulting five practices were: categorizing the system based  on security risk, selecting and implementing security controls, assessing  security controls, obtaining an authorization to operate the system, and  monitoring security controls on an ongoing basis.", "We obtained and analyzed key artifacts supporting the program\u2019s efforts  to address these risk management practices, including the program\u2019s  System Security Plan, the Security Assessment Plan and Report,  Authorization to Operate documentation, and the program\u2019s continuous  monitoring documentation. We also interviewed officials from the GMM  program office and FEMA\u2019s Office of the Chief Information Officer, such  as the GMM Security Engineering Lead, GMM Information System  Security Officer, and FEMA\u2019s Acting Chief Information Security Officer,  regarding their efforts to assess, document, and review security controls  for GMM. We assessed the evidence against the five practices to  determine the extent to which the agency had addressed them. We then  assessed each practice area as:  fully addressed\u2014FEMA provided complete evidence that showed it  fully implemented the practice area; partially addressed\u2014FEMA provided evidence that showed it partially  implemented the practice area; not addressed\u2014FEMA did not provide evidence that showed it  implemented any of the practice area.", "To assess the reliability of data from the program\u2019s automated security  controls management tool, we interviewed knowledgeable officials about  the quality control procedures used by the program to assure accuracy  and completeness of the data. We also compared the data to other  relevant program documentation on GMM security controls for the  engineering and test environment. We found that some of the security  controls data we examined were sufficiently reliable for the purpose of  evaluating FEMA\u2019s cybersecurity practices for GMM, and we noted in our  report the instances where the accuracy of the data impacted the  program\u2019s ability to address key cybersecurity practices.", "We conducted this performance audit from December 2017 to April 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."], "subsections": []}, {"section_title": "Appendix II: Federal Emergency Management Agency\u2019s Grant Programs", "paragraphs": ["The Federal Emergency Management Agency (FEMA) awards many  different types of grants to state, local, and tribal governments and  nongovernmental entities. These grants are to help communities prevent,  prepare for, protect against, mitigate the effects of, respond to, and  recover from disasters and terrorist attacks."], "subsections": []}, {"section_title": "Appendix III: Overview of Agile Software Development", "paragraphs": ["Agile software development is a type of incremental development that  calls for the rapid delivery of software in small, short increments. The use  of an incremental approach is consistent with the Office of Management  and Budget\u2019s guidance as specified in its information technology (IT)  Reform Plan, as well as the legislation commonly referred to as the  Federal Information Technology Acquisition Reform Act.", "Many organizations, especially in the federal government, are  accustomed to using a waterfall software development model, which  typically consists of long, sequential phases, and differs significantly from  the Agile development approach. Agile practices integrate planning,  design, development, and testing into an iterative lifecycle to deliver  software early and often. Figure 7 provides a depiction of software  development using the Agile approach, as compared to a waterfall  approach.", "The frequent iterations of Agile development are intended to effectively  measure progress, reduce technical and programmatic risk, and respond  to feedback from stakeholders in changes to IT requirements more  quickly than traditional methods. Despite these intended benefits,  organizations adopting Agile must overcome challenges in making  significant changes to how they are accustomed to developing software.", "The significant differences between Agile and waterfall development  impact how IT programs are planned, implemented, and monitored in  terms of cost, schedule, and scope. For example, in waterfall  development, significant effort is devoted upfront to document detailed  plans and all IT requirements for the entire scope of work at the beginning  of the program, and cost and schedule can be varied to complete that  work.", "However, for Agile programs the precise details are unknown upfront, so  initial planning of cost, scope, and timing would be conducted at a high  level, and then supplemented with more specific plans for each iteration.  While cost and schedule are set for each iteration, requirements for each  iteration (or increment) can be variable as they are learned over time and  revised to reflect experiences from completed iterations and to  accommodate changing priorities of the end users. The differences in  these two software development approaches are shown in figure 8.", "Looking at figure 8, the benefit provided from using traditional program  management practices such as establishing a cost estimate or a robust  schedule, is not obvious. However, unlike a theoretical environment,  many government programs may not have the autonomy to manage  completely flexible scope, as they must deliver certain minimal  specifications with the cost and schedule provided. In those cases, it is  vital for the team to understand and differentiate the IT requirements that  are \u201cmust haves\u201d from the \u201cnice to haves\u201d early in the planning effort. This  would help facilitate delivery of the \u201cmust-haves\u201d requirements first,  thereby providing users with the greatest benefits as soon as possible."], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": [{"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following staff made key  contributions to this report: Shannin G. O\u2019Neill (Assistant Director),  Jeanne Sung (Analyst in Charge), Andrew Beggs, Rebecca Eyler,  Kendrick Johnson, Thomas J. Johnson, Jason Lee, Jennifer Leotta, and  Melissa Melvin."], "subsections": []}]}]}], "fastfact": ["FEMA awarded more than $22 billion in grants for four major disasters in 2017 alone. It manages these and other grants in numerous, disparate information technology systems that it has been attempting to modernize.", "We reviewed FEMA's Grants Management Modernization program. Among other things, we found", "The program's cost estimate in 2017 appeared to be sound but now must be updated", "Its schedule is not realistic", "It addressed some key cybersecurity practices but needs to improve how it assesses security controls and addresses known vulnerabilities", "We made 8 recommendations, including that FEMA improve its schedule."]}
{"id": "GAO-19-31", "url": "https://www.gao.gov/products/GAO-19-31", "title": "Offshore Oil Spills: Restoration and Federal Research Efforts Continue, but Opportunities to Improve Coordination Remain", "published_date": "2019-01-03T00:00:00", "released_date": "2019-02-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Exxon Valdez and Deepwater Horizon oil spills are two of the largest offshore oil spills in U.S. history, causing long-lasting damage to marine and coastal resources. OPA includes provisions to prevent and respond to such oil spills by authorizing (1) federal-state trustee councils that manage billions of dollars from legal settlements and (2) an interagency committee to coordinate oil pollution research, among other things.", "GAO was asked to review the federal government's response, restoration, and research efforts after the Exxon Valdez and Deepwater Horizon oil spills. This report examines, among other things, (1) how the trustee councils have used the restoration trust funds and the status of restoration and (2) the interagency committee's coordination of oil spill research efforts.", "GAO reviewed the councils' plans for the funds and how they were used, federal funding of oil spill research by member agencies, and key laws. Also, GAO evaluated the coordination of such efforts against a leading collaboration practice. GAO interviewed members of the trustee councils and the interagency committee."]}, {"section_title": "What GAO Found", "paragraphs": ["The trustee councils, composed of federal and state members, have used portions of the restoration trust funds from the Exxon Valdez and Deepwater Horizon oil spill settlements to restore natural resources. From October 1992 to January 2018, the Exxon Valdez Oil Spill Trustee Council used about 86 percent of the fund's roughly $1 billion, primarily on habitat protection and restoration of damaged natural resources. According to the council, all but 5 of the 32 natural resources and human services identified as damaged by the spill have recovered or are recovering. The health of Pacific herring is one example of a resource that has not yet recovered. Further, the presence of lingering oil remains a concern almost 30 years after the spill. In May 2018, GAO accompanied trustee council researchers to the spill area and observed the excavation of three pits that revealed lingering oil roughly 6 inches below the surface of the beach, as captured in the photo below. The Deepwater Horizon Natural Resource Damage Assessment Trustee Council finalized a programmatic restoration plan in 2016; four trustee implementation groups have since issued initial restoration plans for designated restoration areas, and three anticipate issuing restoration plans in 2019 or later. From April 2012 to December 2017, the council used 13 percent of the at least $8.1 billion restoration trust fund, mostly on habitat protection, enhancing recreation, and marine wildlife and fishery restoration.", "The Oil Pollution Act of 1990 (OPA), which was enacted after the Exxon Valdez spill in 1989, established the Interagency Coordinating Committee on Oil Pollution Research (interagency committee) to coordinate oil pollution research among federal agencies and with relevant external entities, among other things. However according to the trustee council members that manage the restoration trust funds, the committee does not coordinate with the trustee councils and some were not aware that the interagency committee existed. The research of the member agencies could be relevant to the trustee councils' work on restoration. By coordinating directly with the trustee councils, the interagency committee could ensure better knowledge sharing between groups and leverage its member agencies' resources to inform and support the work of the councils."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends, among other things, that the interagency committee coordinate with the trustee councils to support their work and research needs. The agency agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["In March 1989, the supertanker Exxon Valdez ran aground in Alaska\u2019s  Prince William Sound, spilling an estimated 11 million gallons of oil and  contaminating about 1,500 miles of Alaska\u2019s south central coastline. At  the time, this was the largest offshore oil spill in U.S. history. Enacted  following the Exxon Valdez oil spill, the Oil Pollution Act of 1990 (OPA)  included several provisions to prevent and respond to oil spills, such as  requirements to assess damages to natural resources from oil  discharges, including spills, and to develop and implement plans for  restoration. Approximately 20 years later, in April 2010, an explosion on  the BP America Production Company\u2019s (BP) leased Deepwater Horizon  oil rig spilled over 200 million gallons of oil into the Gulf of Mexico, setting  a new record as the largest oil spill in U.S. waters.", "OPA established a \u201cpolluter pays\u201d system, placing the primary burden of  liability and costs of oil spills on the responsible party for the vessel or  facility from which oil is discharged. Under this system, the responsible  party assumes, up to a specified limit, the burden of paying for spill costs,  including both removal costs (for cleaning up the spill) and damage  claims (for restoring the environment and paying compensation to parties  economically harmed by the spill). Above specified limits, a responsible  party is no longer financially liable, although there are exceptions if, for  example, the oil discharge is the result of gross negligence.", "Following initial response and cleanup efforts, restoration activities related  to a significant offshore oil spill, such as those from Exxon Valdez or  Deepwater Horizon, can endure for decades. Under OPA, federal, state,  tribal, and foreign government officials may be designated to act on  behalf of the public as trustees of natural resources. In the wake of both  oil spills, federal and state trustees entered into legal settlements with  responsible parties to resolve certain claims. In October 1992, the federal  government and the state of Alaska created the Exxon Valdez Oil Spill  Trustee Council (Exxon Valdez Trustee Council) to administer the $900  million civil settlement designated for cleanup costs, damage  assessment, litigation, and restoration after the Exxon Valdez oil spill. In  April 2016, the federal government and affected states established a  memorandum of understanding that created the Deepwater Horizon  Natural Resource Damage Assessment Trustee Council (Deepwater  Horizon Trustee Council) to administer the eventual $8.8 billion  restoration fund to address natural resource damages resulting from the  Deepwater Horizon oil spill.", "OPA also established the Interagency Coordinating Committee on Oil  Pollution Research (interagency committee) to coordinate a  comprehensive program of oil pollution research, technology  development, and demonstration among federal agencies in cooperation  and coordination with external entities, such as industry, universities,  research institutions, state governments, and other nations, as  appropriate. Federal agencies of the interagency committee conduct and  fund research projects related to preventing, preparing for, responding to,  and restoring the environment after oil spills. Later in this report, we  describe in more detail the extent of research funded by the interagency  committee. In accordance with OPA, the chair of the interagency  committee\u2014a representative of the U.S. Coast Guard (Coast Guard)\u2014 must submit a report to Congress every 2 years on its past and planned  activities for oil pollution research. Under OPA, one of the interagency  committee\u2019s responsibilities is to coordinate with federal agencies and  external entities on an oil pollution research and development program  that includes methods to restore and rehabilitate natural resources  damaged by oil spills.", "In March 2011, we reported that the interagency committee had taken  limited actions to foster communication and coordination among member  agencies and nonfederal stakeholders. Among other things, we  recommended that the Commandant of the Coast Guard direct the chair  of the interagency committee, in coordination with member agencies, to  provide a status update regarding the revisions of the committee\u2019s  research plan and establish a more systematic process to identify and  consult with key nonfederal stakeholders. The agency agreed with the  recommendations, and the interagency committee implemented them by  publishing an updated Oil Pollution Research and Technology Plan  (research and technology plan) that includes a retrospective analysis of  completed research as well as a forecast of new research needs. In  addition, the interagency committee has employed several sources of  information to better understand ongoing research needs and activities  within industry, academia, and the government.", "To help inform offshore oil spill response efforts and decision making,  government, industry, and academic scientists conduct research on the  use and effect of various response techniques in different situations and  environments, such as the icy waters of the Alaskan Arctic and the deep  waters of the Gulf of Mexico. One such response technique used to  manage the environmental impacts after the Deepwater Horizon oil spill  was the application of chemical dispersants. In May 2012, we reported  on the use of dispersants and recommended that the Commandant of the  Coast Guard direct the chair of the interagency committee in coordination  with member agencies to, among other things, identify information on key  dispersant research in its research and technology plans and periodically  update and disseminate this information in its biennial reports to  Congress. We also recommended that the application of dispersants in  subsurface and Arctic conditions be among the areas prioritized in future  research. The member agencies generally concurred with our  recommendations. In its research and technology plan for fiscal years  2015 through 2021, the interagency committee identified dispersants as  one of the committee\u2019s standing research areas, specifically noting the  use of dispersants in cold weather conditions and deep sea  environments.", "You asked us to review issues related to the federal government\u2019s  response, restoration, and research efforts following the Exxon Valdez  and Deepwater Horizon oil spills. This report examines (1) how the  Natural Resource Damage Assessment (NRDA) trustee councils have  used the restoration trust funds from the Exxon Valdez and Deepwater  Horizon oil spills and the status of the restoration efforts, (2) the status of  the interagency committee\u2019s oil spill research efforts and how  coordination of such efforts has changed since we last reported on them  in March 2011, and (3) what literature suggests about the effectiveness of  various oil spill response techniques in the Arctic and the Gulf of Mexico.", "To examine how the NRDA trustee councils used the restoration funds  from the Exxon Valdez oil spill (from October 1992 to January 2018) and  Deepwater Horizon oil spill (from April 2012 to December 2017) for  restoration and the status of the restoration efforts, we obtained data from  each trustee council on the amount of funds (1) ordered by the settlement  for each restoration type; (2) authorized by the trustees for, but not yet  spent on, restoration activities (authorizations); (3) spent on restoration  activities (expenditures); and (4) not yet authorized for restoration  activities (remaining balance) through calendar year 2017 for Deepwater  Horizon and through January 31, 2018, for Exxon Valdez. We assessed  the reliability of the financial data that the NRDA trustee councils provided  by, among other things, reviewing the annual reports for each trustee  council and interviewing knowledgeable council staff about the steps they  took to maintain these data and determined that the data were sufficiently  reliable for the purposes of our report. We also examined the approved  restoration plans and, when available, annual reports on restoration activities, as well as reports and scientific studies that the trustee councils  funded. We met with officials from the Exxon Valdez Trustee Council to  discuss the distribution of settlement money for restoration purposes after  the Exxon Valdez oil spill, and with officials from the Deepwater Horizon  Trustee Council, the Gulf Coast Ecosystem Restoration Council  (RESTORE Council), and the National Fish and Wildlife Foundation to  discuss the distribution of settlement money for restoration purposes after  the Deepwater Horizon oil spill. We also traveled to Alaska and the Gulf  of Mexico to better understand the status of restoration.", "To examine the status of federal oil spill research efforts by the  interagency committee and how coordination of such efforts has changed  since we last reported on it in March 2011, we requested funding data  and project information on oil spill research from all 15 member agencies  of the interagency committee. We received data from the nine member  agencies that reported funding oil spill research projects from fiscal years  2011 through 2017. These agencies provided data on agency expenditures on oil spill research and the research category of any  projects funded. We assessed the reliability of these data by, among  other things, reviewing related documentation and interviewing  knowledgeable agency officials from the nine member agencies that  provided data on the steps they took to maintain this information and  determined that in most cases the data were sufficiently reliable for the  purposes of our report.", "We also interviewed officials at each of the 15 member agencies and  compared their coordination practices to one of our federal leading  practices for interagency collaboration to evaluate the interagency  committee\u2019s efforts to coordinate oil spill research. We chose to focus  on the collaboration practice pertaining to participants. In addition, we  reviewed the 2013 interagency committee charter, the committee\u2019s most  recent biennial reports to Congress covering fiscal years 2008 through  2017, and the committee\u2019s third multi-year research and technology plan  for fiscal years 2015 through 2021. We also attended two committee  meetings and reviewed minutes of eight past meetings. We reviewed  OPA\u2019s provisions that established and govern the interagency  committee\u2019s coordination efforts and membership, as well as various  related executive documents.", "To examine what literature suggests about the effectiveness of various oil  spill response techniques in the Arctic and the Gulf of Mexico, we  conducted a literature search for studies that analyzed and summarized  the effectiveness of various oil spill response techniques in those regions.  We identified existing literature from 1989 (the year of the Exxon Valdez  oil spill) to March 2018 by conducting searches of various databases,  such as Scopus and ProQuest. We chose to focus on three primary  response techniques\u2014mechanical recovery, in-situ burning, and the use  of dispersants\u2014used to clean up offshore oil spills. Our subject matter  expert helped the team narrow the list of literature results and we relied  on 16 studies and articles that we determined were relevant to our  research objective. These studies and articles covered both regions and  the three response techniques, but each study did not cover the entire range of these topics. For example, some of the studies were focused on  one response technique in a specific region or environment. We  supplemented the list of studies from these databases with information  from our previous reports and those of the Congressional Research  Service, the National Academies Press, the Environmental Protection  Agency (EPA), the National Oceanic and Atmospheric Administration  (NOAA), the Coast Guard, the American Academy of Microbiology, and  the Arctic Oil Spill Response Joint Industry Program. For a complete list  of the literature, see the bibliography. We shared our summary of the  literature search findings with agency officials representing some of the  interagency committee members and included their perspectives where  relevant. We did not independently evaluate the effectiveness of these  response techniques.", "For more details on our objectives, scope, and methodology, see  appendix I.", "We conducted this performance audit from July 2017 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": ["OPA amended the Clean Water Act and established provisions  expanding and consolidating the federal government\u2019s authority to  prevent and respond to oil spills. This includes providing the federal  government with the authority to perform cleanup immediately after a spill  using federal resources, monitor the response efforts of the spiller, or  direct the spiller\u2019s cleanup activities. OPA also established a \u201cpolluter  pays\u201d system, placing the primary burden of liability and costs of oil spills  on the responsible party for the vessel or facility from which oil is  discharged. Under this system, the responsible party assumes, up to a  specified limit, the burden of paying for spill costs, including both removal  costs (for cleaning up the spill) and damage claims (for restoring the  environment and paying compensation to parties economically harmed by  the spill).", "OPA authorized the use of the Oil Spill Liability Trust Fund to fund up to  $1 billion per spill incident for pollution removal costs and damages  resulting from oil spills and mitigation of a substantial threat of an oil spill  in navigable U.S. waters when a responsible party cannot or does not pay  for the cleanup. After the Deepwater Horizon oil spill, the Resources  and Ecosystems Sustainability, Tourist Opportunities, and Revived  Economies of the Gulf Coast States Act of 2012 (RESTORE Act)  established a new trust fund for programs, projects, and activities that  restore and protect the environment and economy of the Gulf Coast  region as well as the RESTORE Council, which is to summarize its  activities for each calendar year\u2019s activities in an annual report to  Congress.", "In addition, NOAA finalized regulations in 1996 for assessing natural  resource damages resulting from a discharge or substantial threat of a  discharge of oil. The NRDA regulations recognize that OPA provides for  designating federal, state, and tribal officials as natural resource trustees  and authorizes them to make claims against the parties responsible for  the injuries23, 24 Under NRDA regulations, a trustee council\u2019s work usually  occurs in three steps: (1) a pre-assessment phase, (2) the restoration  planning phase, and (3) the restoration implementation phase. During  the pre-assessment phase the trustees are to determine whether they  have jurisdiction to pursue restoration. In the restoration planning phase  the trustees are to evaluate information on potential injuries and use that  information to determine the need for, type of, and scale of restoration.  Finally, the restoration implementation phase describes the process for  implementing restoration.", "The NRDA regulations define injury as an observable or measurable adverse change in  a natural resource or impairment of a natural resource service.  15 C.F.R. 990.11. federal and state trustees entered into legal settlements with responsible  parties to resolve certain claims. The Exxon Valdez Trustee Council is in  the restoration implementation phase, while the Deepwater Horizon  Trustee Council is in both the restoration planning and implementation  phases. The National Oil and Hazardous Substances Pollution  Contingency Plan, commonly known as the National Contingency Plan,  contains the federal government\u2019s framework and operative requirements  for preparing and responding to discharges of oil and releases of  hazardous substances, pollutants, and contaminants. It establishes that  federal oil spill response authority is determined by the location of the  spill: the Coast Guard has response authority in the U.S. coastal zone,  and EPA covers the inland zone. In addition, NOAA is to provide  scientific analysis and consultation during oil spill response activities in  the coastal zones."], "subsections": [{"section_title": "Exxon Valdez Oil Spill", "paragraphs": ["The Exxon Valdez oil spill in Alaska\u2019s Prince William Sound in 1989  contaminated portions of national wildlife refuges, national and state  parks, a national forest, and a state game sanctuary\u2014killing or injuring  thousands of sea birds, marine mammals, and fish and disrupting the  ecosystem in its path. In October 1991, the U.S. District Court for the  District of Alaska approved a civil settlement and criminal plea agreement  among Exxon, the federal government, and the state of Alaska for  recovery of natural resource damages resulting from the oil spill. Exxon  agreed to pay $900 million in civil claims in 11 annual payments and $125  million to resolve various criminal charges.", "In August 1991, the federal government and the state of Alaska signed a  memorandum of agreement and consent decree to act as co-trustees in  collecting and using natural resource damage payments from the spill.  The 1991 memorandum states that all decisions related to injury  assessment, restoration activities, or other use of the natural resource  damage payments are to be made by unanimous agreement of the  trustees. According to the memorandum, the trustees are to use the  natural resource damage payments to restore, replace, rehabilitate,  enhance, or acquire the equivalent of the natural resources injured as a  result of the oil spill and the reduced or lost services provided by such  resources. The memorandum also recognized that EPA was designated  to coordinate restoration activities on behalf of the federal government. In  1992, the trustees established the Exxon Valdez Trustee Council to  ensure coordination and cooperation in restoring the natural resources  injured, lost, or destroyed by the spill.", "In 1994, the Exxon Valdez Trustee Council prepared a restoration plan for  use of the funds, which consisted of five categories: (1) general  restoration; (2) habitat protection and acquisition; (3) monitoring and  research; (4) restoration reserve; and (5) public information, science  management, and administration. The restoration plan noted that in  addition to restoring natural resources, funds may be used to restore  reduced or lost services (including human uses) from injured natural  resources, which includes subsistence, commercial fishing, recreation,  and tourism services. The Exxon Valdez Trustee Council is advised by  members of the public and a panel of scientists, and its Executive  Director manages the day-to-day administrative functions. The Exxon  Valdez Trustee Council has published documents that are on the  council\u2019s public website, such as the Injured Resources and Services list  (current as of 2014), lingering oil updates (current as of 2016), annual  reports (current as of 2018), and annual project work plans (current as of  2018)."], "subsections": []}, {"section_title": "Deepwater Horizon Oil Spill", "paragraphs": ["The Deepwater Horizon oil spill in the Gulf of Mexico in 2010 resulted in  the tragic loss of 11 lives and a devastating environmental impact and  affected the livelihoods of thousands of Gulf Coast citizens and  businesses. In April 2016, BP, the federal government, and the five Gulf  Coast states agreed to a settlement resolving multiple claims for federal  civil penalties and natural resource damages related to the spill totaling  up to $14.9 billion. Under the terms of the consent decree for the  settlement, BP must pay up to $8.8 billion in natural resource damages  under OPA, which includes $1 billion BP previously committed to pay for  early restoration projects, and up to $700 million to address injuries that  were unknown to the trustees as of July 2, 2015, including for any  associated Natural Resource Damage assessment and planning  activities, or to adapt, enhance, supplement, or replace restoration  projects or approaches that the trustees initially selected. BP is to make  these payments into the Deepwater Horizon Oil Spill Natural Resource  Damages Fund managed by the Department of the Interior (Interior), to  be used jointly by the federal and state trustees of the Deepwater Horizon  Trustee Council for restoration of injured or lost natural resources.", "Two additional, separate restoration funds are to receive money from the  BP civil and criminal penalties: (1) the Gulf Coast Restoration Trust Fund  established under the RESTORE Act is to receive 80 percent of the $5.5  billion Clean Water Act civil penalty paid by BP to support environmental  restoration and economic recovery projects in the Gulf Coast region and  (2) the Gulf Environmental Benefit Fund managed by the nonprofit  National Fish and Wildlife Foundation is to receive $2.394 billion in  criminal penalties. For more information on the amount and distribution of  the BP civil and criminal payments, see figure 1.", "Prior to reaching the settlement in 2016, BP signed an agreement in April  2011 to provide $1 billion toward early restoration projects in the Gulf of  Mexico to address injuries to natural resources caused by the spill. Early  restoration projects may be developed prior to the completion of the injury  assessment, which can take months or years to complete. Payments by  BP for early restoration projects are counted towards its liability for the  $8.8 billion in natural resource damages resulting from the spill.", "The designated trustees are to administer these payments for natural  resources, according to OPA. The designated trustees include federal  officials from Interior, NOAA, the U.S. Department of Agriculture, and  EPA, as well as state officials from the five Gulf States that were affected  by the spill\u2014Alabama, Florida, Louisiana, Mississippi, and Texas. In  February 2016, the Deepwater Horizon Trustee Council finalized the  Programmatic Damage Assessment and Restoration Plan (programmatic  restoration plan) that provided the council\u2019s injury assessment and  proposed a framework for identifying and developing project-specific  restoration plans. The five goals of the programmatic restoration plan  are to (1) restore and conserve habitat; (2) restore water quality; (3)  replenish and protect living coastal and marine resources; (4) provide and  enhance recreational opportunities; and (5) provide for monitoring,  adaptive management, and administrative oversight to support restoration  implementation. According to the 2016 programmatic restoration plan, the  Deepwater Horizon Trustee Council is to coordinate with other Deepwater  Horizon restoration programs, such as those funded by the RESTORE  Act, the National Fish and Wildlife Foundation, and other entities.", "The 2016 programmatic restoration plan established Trustee  Implementation Groups for each of the seven designated restoration  areas\u2014one for each of the five Gulf States, the Region-Wide  implementation group, and the Open Ocean implementation group.  Each trustee implementation group is to plan, decide on, and implement  restoration activities, including monitoring and adaptive management, for  the funding that the consent decree allocated to its restoration area.  Federal trustees serve in all the trustee implementation groups, and state  trustees serve on the Region-Wide implementation group and the trustee  implementation groups for their states; decisions are to be made by  consensus. The Deepwater Horizon Trustee Council is to coordinate the  work of the trustee implementation groups by establishing standard  procedures and practices to ensure consistency in developing and  implementing restoration activities."], "subsections": []}, {"section_title": "Interagency Coordinating Committee on Oil Pollution Research", "paragraphs": ["OPA created the interagency committee to provide a comprehensive,  coordinated federal oil pollution research program and promote  cooperation with industry, universities, research institutions, state  governments, and other nations through information sharing, coordinated  planning, and joint funding of projects. It also designated member  agencies and authorized the President to designate other federal  agencies as members of the interagency committee. As of November  2018, the interagency committee consisted of 15 federal members  representing independent agencies, departments, and department  components. OPA directs that a representative from the Coast Guard  serve as the chair, and the interagency committee charter designates that  a representative from NOAA, EPA, or the Bureau of Safety and  Environmental Enforcement (BSEE) serve as the vice-chair and that the  committee\u2019s Executive Director provide staff support. The interagency  committee\u2019s charter notes that it shall meet at least semi-annually or at  the decision of the chair. According to OPA, the chair\u2019s duties include  reporting biennially to Congress on the interagency committee\u2019s activities  related to oil pollution research, development, and demonstration  programs. OPA also required the interagency committee to prepare and  submit a research and technology plan, which has been updated  periodically.", "In September 2015, the interagency committee released the research and  technology plan for fiscal years 2015 through 2021. This research and  technology plan updates the interagency committee\u2019s 1992 plan, revised  in 1997, and provides a new baseline of the nation\u2019s oil pollution research  needs. The plan is primarily directed at federal agencies with  responsibilities for conducting or funding such research, but it can also  serve as a research planning guide for nonfederal stakeholders such as,  industry, academia, state governments, research institutions, and other  nations, according to interagency committee documents. The 2015  research and technology plan established a common language and  planning framework to enable researchers and interested parties to  identify and track research in four classes or categories that represent  general groupings of oil spill research:", "Prevention: Research that supports developing practices and  technologies designed to predict, reduce, or eliminate the likelihood of  discharges or minimize the volume of oil discharges into the  environment.", "Preparedness: Research that supports the activities, programs, and  systems developed prior to an oil spill to improve the planning,  decision-making, and management processes needed for responding  to and recovering from oil spills.", "Response: Research that supports techniques and technologies that  address the immediate and short-term effects of an oil spill and  encompasses all activities involved in containing, cleaning up,  treating, and disposing of oil to (1) maintain the safety of human life,  (2) stabilize a situation to preclude further damage, and (3) minimize  adverse environmental and socioeconomic effects.", "Injury assessment and restoration: Research that involves collecting  and analyzing information to (1) evaluate the nature and extent of  environmental, human health, and socioeconomic injuries resulting  from an incident; (2) determine the actions needed to restore natural  resources and their services to pre-spill conditions; and (3) make the  environment and public whole after interim losses."], "subsections": []}]}, {"section_title": "Trustee Councils Use Restoration Trust Funds for Approved Activities, Which Are Largely Completed for Exxon Valdez and in the Early Stages for Deepwater Horizon", "paragraphs": ["In response to the Exxon Valdez and Deepwater Horizon oil spills and by  forming trustee councils, federal and state trustees have used the  restoration trust funds to authorize money for activities in accordance with  approved restoration plans. The Exxon Valdez Trustee Council has  largely completed restoration work and authorized approximately $985  million, roughly 86 percent of the restoration trust fund, primarily on  habitat protection and general restoration, research, and monitoring  activities. As a result of these restoration activities and natural recovery,  the majority of the injured natural resources and human services in the  spill area has recovered or is recovering, according to the council\u2019s  assessment. However, the Exxon Valdez Trustee Council continues to  monitor the lack of recovery of Pacific herring and the presence of  lingering oil in the spill area. The Deepwater Horizon Trustee Council is  completing early restoration work and initial post-settlement restoration  planning. It has authorized approximately $1.1 billion for restoration  activities, roughly 13 percent of the restoration trust fund, and spent $368  million, roughly 5 percent of the restoration trust fund, primarily on habitat  protection and enhancing recreation, such as building boat ramps and  other recreational facilities."], "subsections": [{"section_title": "The Exxon Valdez Trustee Council Has Used 86 Percent of the Restoration Trust Fund, and Most Injured Natural Resources Have Recovered", "paragraphs": ["Exxon\u2019s payments to the restoration trust fund totaled approximately $900  million, and the interest earnings, as of January 2016, totaled $247  million. From 1992 to 2018, the Exxon Valdez Trustee Council authorized  the expenditure of approximately $985 million or 86 percent of the roughly  $1.15 billion in principal funds plus interest from the restoration trust fund,  primarily on habitat protection ($445 million) and general restoration,  research, and monitoring of injured natural resources ($234 million). The  remaining unspent restoration trust fund balance as of January 2018 was  $210 million, split evenly between the habitat investment subaccount for  future habitat protection activities and the research investment  subaccount for future general restoration activities (see fig. 2).", "According to the Exxon Valdez Trustee Council, as of January 2018, it  had spent approximately $445 million to protect and enhance habitat,  including acquiring 628,000 acres of lands and interest in lands. As  outlined in the trustee council\u2019s 1994 restoration plan, the habitat program  is intended to minimize further injury to resources and services and allow  recovery to continue with the least interference by authorizing funds for  federal and state resource agencies to acquire title or conservation  easements on ecologically valuable lands. For example, in 2017 the  Exxon Valdez Trustee Council authorized about $5.5 million to acquire a  conservation easement on 1,060 acres at the northeastern end of Kodiak  Island in the Gulf of Alaska, known as Termination Point. The trustee  council authorized funds for this acquisition to (1) protect the property  from timber logging and development and (2) provide habitat and feeding  areas for marine birds injured by the spill, such as marbled murrelets and  pigeon guillemots. According to the Exxon Valdez Trustee Council,  habitat acquisitions prevent additional injury to species during recovery,  promote restoration of spill-affected resources and services, and are the  primary tool for acquiring equivalent resources harmed by the spill. The  habitat program also supports habitat enhancement projects, which,  according to the Exxon Valdez Trustee Council, aim to repair human- caused harm to natural resources, their habitats, and the services they  provide to humans. For example, the trustee council authorized $2.2  million to the Alaska Department of Natural Resources to stabilize stream  bank vegetation and install elevated steel walkways to provide less- damaging access to the Kenai River, a popular fishing destination.", "The Exxon Valdez Trustee Council has spent roughly $234 million from  October 1992 to January 2018 on hundreds of general restoration,  monitoring, and research activities. As outlined in the 1994 restoration  plan, general restoration includes activities that manipulate the  environment, manage human use, and reduce marine pollution. Research  and monitoring activities also provide information on the status and  condition of resources and services, including (1) whether they are  recovering, (2) whether restoration activities are successful, and (3)  factors that may be constraining recovery, according to the 1994 plan. For  example, since 2012, the trustee council has authorized money for a  program called Gulf Watch Alaska that provides long-term monitoring  data on the status of environmental conditions\u2014such as waters  temperature and salinity\u2014and the marine and nearshore ecosystems.  Gulf Watch Alaska provides data to federal, state, and tribal agencies, as  well as the public, that informs resource conservation programs and aid in  the management of species injured by the spill. According to the trustee  council, its expenditures for research projects have resulted in hundreds  of peer-reviewed scientific studies and increased knowledge about the  marine environment that benefits the injured resources.", "The Exxon Valdez Trustee Council has spent roughly $89 million from  October 1992 to January 2018 on administration, science management,  and public information. According to the 1994 restoration plan,  expenditures under this category cover the cost to (1) prepare work plans,  (2) negotiate habitat purchases, (3) provide independent scientific review,  (4) involve the public, and (5) operate the restoration program. Although  the Exxon Valdez Trustee Council set a target of 5 percent administrative  costs in the 1994 restoration plan, according to a written statement that  the trustee council provided, administrative costs averaged around 6  percent from 1994 through 2001. The trustees and council staff we  interviewed told us that in hindsight the 5 percent target was unrealistic as  it did not reflect the actual administrative costs at that time, although such  costs were included in project budgets or were absorbed by federal and  state agencies. Therefore, in 2012, the Exxon Valdez Trustee Council  changed the way it accounted for administrative costs and has included  these costs in the administrative budget. According to the trustee council,  under the new accounting policy, administrative costs were recalculated  and estimated at around 19 percent for the period 2002 through 2018.", "The remaining $210 million Exxon Valdez restoration trust fund balance is  held by the Alaska Department of Revenue in two interest-bearing  subaccounts. As of January 2018, the research subaccount and the  habitat subaccount each held approximately $105 million. In the 1994  restoration plan, the Exxon Valdez Trustee Council established the need  for a restoration reserve to ensure that restoration activities could  continue to be supported after the final annual payments from the Exxon  Corporation were received in September 2001. According to the 1994  restoration plan, the trustee council planned to set aside $12 million per  year for a period of 9 years into the restoration reserve, totaling $108  million plus interest. In 1999, the Exxon Valdez Trustee Council resolved  to transfer the estimated remaining balance of $170 million to the  restoration reserve and split the money into two subaccounts. Since  2002, the trustee council is to make allocations for its annual work plans  and ongoing habitat acquisition using these accounts.", "In 2010, the trustee council established a 20-year strategic plan to spend  the remaining trust funds using four 5-year incremental work plans. In  November 2010, the trustee council issued a call for project proposals for  the first 5-year work plan, for fiscal years 2012 through 2016. Although  the Exxon Valdez Trustee Council solicited invitations on a 5-year cycle, it  has authorized money for each project annually. In a written statement,  the trustee council also stated that it continues to pursue and acquire  from willing sellers remaining parcels of land that prior studies have  identified as high-priority habitat. According to the Exxon Valdez Trustee  Council\u2019s long-term spending scenario, both of the subaccounts are  expected to be depleted by 2032 or earlier as determined by the market\u2019s  performance."], "subsections": [{"section_title": "The Status of Restoration Efforts", "paragraphs": ["According to the Exxon Valdez Trustee Council\u2019s 2014 restoration plan  update\u2014its most recent assessment of injured resources and services\u2014 all but 5 of the 32 natural resources and human services identified as  injured by the spill have recovered, are recovering, or are very likely  recovered. In the 1994 restoration plan, the trustee council established  a list of resources and services that suffered injuries from the spill, and  developed specific, measurable recovery objectives for each injured  resource and service. The Exxon Valdez Trustee Council has  periodically assessed the status of those resources, most recently in  2014. As of the 2014 assessment, the following 4 resources were listed  as not recovering: (1) marbled murrelets, (2) Pacific herring, (3) pigeon  guillemots, and (4) one group of killer whales. In addition, the recovery of  Kittlitz\u2019s murrelets was listed as unknown. According to the Exxon  Valdez Trustee Council, the status of these resources in 2018 is largely  similar to their status in 2014 except that one population of pigeon  guillemots has likely increased as a result of a predator-control project  that the council supported. However, the overall status of this species has  not been determined. In a written statement, the trustees stated that the  trustee council plans to initiate its next assessment of injured resources in  late 2018.", "The Exxon Valdez Trustee Council remains particularly concerned about  the health of the Pacific herring population and the presence of lingering  oil. According to the trustee council\u2019s 2014 restoration plan update,  Pacific herring are considered an ecologically and commercially important  species that in addition to being fished for human consumption is a  source of food for various marine species. The assessment noted a  combination of factors, including disease, predation, and poor recruitment  of additional fish to the stock through growth or migration, appear to have  contributed to the continued suppression of herring populations. As a  result, the herring fishery has been closed for 23 of the 29 years since the  oil spill and has not met the trustee council\u2019s recovery objective. To  address concerns regarding the Pacific herring, the trustee council plans  to authorize additional money for ongoing Pacific herring research and  monitoring through the anticipated end date for the fund in fiscal year  2032, for an estimated total cost of roughly $23 million over 20 years.", "The Exxon Valdez Trustee Council also has concerns regarding the  presence of lingering oil in the spill area. According to a March 2016  report for the trustee council, approximately 27,000 gallons of lightly  weathered oil from the Exxon Valdez spill remains, located along almost  22 miles of shoreline at a small number of subsurface sites, where  oxygen and nutrients are at levels too low to support microbial  degradation. In May 2018, we accompanied researchers working with  the trustee council to the spill area and observed the excavation of three  pits that revealed lingering oil roughly 6 inches below the surface of the  beach, as captured in figure 3. According to the researchers, oil  previously recovered from this location was identified as belonging to the  Exxon Valdez oil spill. Evidence of exposure to lingering oil was observed  as recently as 2009 in a variety of marine species, including sea otters  and harlequin ducks, according to the 2016 lingering oil report. The report  also noted that the most recent studies show that the sea otter and  harlequin duck populations have recovered and that lingering oil is no  longer causing ecological damage. Further, studies demonstrated that  minimally intrusive remediation of the oil would only be effective at a small  number of sites, according to the 2016 report. Therefore, although the  trustee council has decided not to pursue remediation of the oil, it stated  that it has authorized money for projects to study the effects of oil and  lingering oil totaling over $16 million and will continue to monitor the oil to  document its physical and chemical changes over time. The Exxon  Valdez Trustee Council expects that lingering oil will persist for decades;  however, its representatives said that the evidence indicates that there  are no current biological effects of the oil.", "The Exxon Valdez Trustee Council\u2019s priorities for future spending are  outlined in the 2014 restoration plan update, and in addition to long-term  herring research and lingering oil, the priorities include long-term  monitoring of marine conditions and injured resources, shorter-term  harbor restoration projects, and habitat protection."], "subsections": []}]}, {"section_title": "The Deepwater Horizon Trustee Council Has Used 13 Percent of the Restoration Trust Fund, and Most Restoration Activities Are in the Initial Planning Phase", "paragraphs": ["Since the federal and state governments reached a final settlement with  BP in 2016 and the Deepwater Horizon Trustee Council finalized a  programmatic restoration plan, four trustee implementation groups have  issued initial independent restoration plans. Specifically, the Alabama,  Louisiana, Mississippi, and Texas trustee implementation groups have  issued initial restoration plans. According to the Deepwater Horizon  Trustee Council, the trustee implementation groups covering Florida,  Open Ocean, and Region-Wide restoration are in the midst of a multiyear  planning effort and anticipate issuing initial restoration plans in 2019 or  later. The trustee implementation groups are responsible for developing  and approving restoration plans and resolutions, which, when approved,  authorize money to be spent on restoration projects. This process  includes soliciting project ideas, submitting proposed plans for public  comment, and ensuring compliance with applicable laws and regulations,  such as the National Environmental Policy Act. According to the trustee  council, there is no specific timetable for approving future restoration  plans, as plans are approved on an ongoing basis\u2014typically for several  projects at a time. The four completed restoration plans, together with  early restoration spending and other activities, including planning and  administrative efforts, account for all authorizations made by the  Deepwater Horizon Trustee Council as of December 31, 2017, according  to NOAA\u2014the agency that manages the system the trustee councils uses  for financial reporting. As shown in figure 4, these authorizations include  approximately $1.1 billion, or 13 percent, of the $8.1 billion restoration  trust fund on five goals.", "The Deepwater Horizon Trustee Council has authorized roughly $460  million for habitat protection\u2014about 10 percent of the almost $4.7 billion  ordered for this use by the settlement. According to the 2016  programmatic restoration plan, habitat protection includes both  conservation acquisition and habitat enhancement, such as creating,  restoring, or enhancing coastal wetlands. For example, during the first  phase of early restoration in 2012, the trustee council authorized $14.4  million to the Louisiana Coastal Protection and Restoration Authority to  create 104 acres of new brackish marsh at Lake Hermitage in Barataria  Bay, Louisiana. The project involved dredging sediment and planting  native marsh vegetation to restore marsh habitat damaged by the spill.  The project is currently in the monitoring phase. As of the end of 2017,  the Deepwater Horizon Trustee Council had approved 34 habitat  protection projects, many of which were still in progress as of December  2017. The initial results of these projects include the restoration of over  4,000 acres of habitat and the creation of over 40 artificial reefs,  according to a written statement by the federal trustees.", "The trustee council has authorized roughly $349 million to enhance  recreational use\u2014about 83 percent of the almost $420 million ordered for  this use by the settlement. According to the 2016 programmatic  restoration plan, enhancing recreational use includes acquiring land along  the coast, building improved or new infrastructure, and improving  navigation for on-water recreation. For example, during the first phase of  early restoration in 2012, the Deepwater Horizon Trustee Council  authorized approximately $5.3 million to the Florida Department of  Environmental Protection to repair and construct boat ramps in Pensacola  Bay and Perdido Bay, Florida. Construction was completed in 2016, and  the project is currently in the monitoring and operations and maintenance  phase. As of the end of 2017, the Deepwater Horizon Trustee Council  had approved 43 projects to enhance recreational use, many of which  were still in progress as of December 2017. These projects have provided  new or enhanced facilities, such as pavilions, picnic areas, and boat  ramps, according to a written statement by the federal trustees.", "The Deepwater Horizon Trustee Council has authorized roughly $218  million to restore coastal and marine wildlife\u2014about 12 percent of the  almost $1.8 billion ordered for this use by the settlement, primarily for  birds ($108 million), sea turtles ($50 million), oysters ($38 million), and  fish ($20 million). According to the 2016 programmatic restoration plan,  restoring coastal and marine wildlife includes activities that restore the  resources, such as fish, sea turtles, and deep coral communities, which  contribute to a productive, biologically diverse, and resilient ecosystem.  For example, during the first phase of early restoration in 2012, the  trustee council authorized $11 million to the Mississippi Department of  Environmental Quality to deploy a mixture of oyster shells, limestone, and  concrete on 1,430 acres in waters off Hancock and Harrison Counties in  Mississippi. This material, when placed in oyster spawning areas,  provides a surface for free swimming oyster larvae to attach and grow  into oysters. The project is currently in the monitoring and operations and  maintenance phase. As of the end of 2017, the Deepwater Horizon  Trustee Council had approved 32 projects to restore coastal and marine  wildlife.", "Although the trustee council authorized millions of dollars to restore  coastal and marine wildlife, it authorized 1 percent or less of funds  ordered by the settlement for sturgeon, marine mammals, submerged  aquatic vegetation, and other seafloor species\u2014such as corals.  According to the 2016 consent decree, the Open Ocean implementation  group is responsible for authorizing the majority of the restoration funds  for these types of wildlife, but that trustee implementation group has not  yet completed its initial restoration plan. According to NOAA, the  complexity of restoring several of these resources necessitated additional  preplanning and restoration technique development prior to considering  specific restoration projects for several of these types of wildlife. The  trustee implementation group is developing two restoration plans that will  include projects for birds and sturgeon, as well as for sea turtles, fish,  marine mammals, and corals, according to a Deepwater Horizon Trustee  Council press release. The trustee council released the first draft plan for  public comment in October 2018, and plans to release the second plan in  early 2019. In August 2017, the Deepwater Horizon Trustee Council  announced that the Louisiana implementation group was soliciting project  ideas to fund the restoration of submerged aquatic vegetation, among  other types, to include in a future restoration plan but has not yet  submitted such a plan for public review.", "Roughly $27 million has been authorized for administrative oversight and  monitoring activities, or about 3 percent of the almost $810 million that the  settlement ordered for this use. The majority of the funding ($25 million)  was for administrative oversight activities, and the balance was for  monitoring. According to the 2016 programmatic restoration plan,  administrative oversight includes the costs for trustees to guide project  selection, implementation, and adaptive management. For the state  trustees, all administrative costs are covered by their respective trustee  implementation groups, and for federal trustees, all administrative costs  are covered by the Open Ocean implementation group. For example,  during the postsettlement phase, the trustee council authorized  approximately $6.6 million to Interior for (1) participation on the trustee  council; (2) restoration planning, plan development, and coordination with  other trustees; (3) environmental compliance reviews; (4) technical  assistance; and (5) financial management, among other uses. As of the end of 2017, the Deepwater Horizon Trustee Council had approved nine  administrative oversight and monitoring projects, which remained ongoing  as of December 31, 2017. The results of the trustee council\u2019s activities in  this area so far include the completion of a monitoring and adaptive  management manual and its standard operating procedures.", "The Deepwater Horizon Trustee Council has authorized $4 million to  restore water quality\u2014about 1 percent of the $410 million that the  settlement ordered for this use. According to the 2016 programmatic  restoration plan, restoring water quality includes both reducing nonpoint  nutrient pollution to coastal watersheds and improving water quality in  Florida through efforts such as stormwater control and erosion control. As  of the end of 2017, the Deepwater Horizon Trustee Council approved two  nonpoint nutrient reduction projects to address excessive nutrient loads in  Gulf waters but no water quality projects in Florida. For example, in  2017, the Deepwater Horizon Trustee Council authorized approximately  $224,000 to conduct restoration planning to develop, draft, and finalize a  restoration plan addressing nonpoint nutrient reduction, among other  goals. The trustee council has authorized few funds to date for this  restoration goal because, in part, the Florida implementation group has  not yet completed its first postsettlement restoration plan. In September  2017, the trustee council announced that the Florida implementation  group was reviewing water quality project ideas for its initial restoration  plan, and it released a draft of the plan for public comment in September  2018. According to the Deepwater Horizon Trustee Council, the final plan  will be released in January 2019."], "subsections": []}]}, {"section_title": "Interagency Committee Members Funded Oil Spill Research Projects from Fiscal Years 2011 through 2017, but the Committee Did Not Coordinate with All Relevant Entities", "paragraphs": ["Nine of the interagency committee member agencies funded over 100 oil  spill research projects per year from fiscal years 2011 through 2017, for a  total cost of about $200 million; however, we found that the interagency  committee did not coordinate its research with some key entities. More  specifically, approximately half of the interagency committee members  said internal coordination on such research improved during this time, but  the committee may not have included all relevant agencies, and we found  that the committee did not coordinate with relevant trustee councils."], "subsections": [{"section_title": "Nine Member Agencies Funded over 100 Oil Spill Research Projects per Year for a Cost of About $200 Million from Fiscal Years 2011 through 2017", "paragraphs": ["During fiscal years 2011 through 2017, 9 of the 15 interagency committee  member agencies funded oil spill research projects, spending about $200  million on this research, based on our review of agency data from the  member agencies. These nine agencies were the Bureau of Ocean  Energy Management, BSEE, the Coast Guard, the Department of Energy,  EPA, NASA, NOAA, the Pipeline and Hazardous Materials Safety  Administration, and the U.S. Arctic Research Commission. One of these  agencies\u2014BSEE\u2014spent about $84 million, or about 40 percent of the  total amount spent by all nine agencies (see table 1).", "In March 2011 we reported that during fiscal years 2000 through 2010,  seven interagency committee member agencies spent about $163 million  on oil pollution research, according to officials from those agencies. Since  we last reported on the interagency committee, three additional agencies  told us that they also fund oil spill research\u2014the Department of Energy,  BSEE, and the U.S. Arctic Research Commission\u2014while the U.S. Navy  told us that it no longer funds oil spill research projects.", "According to agency officials, the nine interagency committee member  agencies funded from 100 to 200 research projects annually from fiscal  years 2011 through 2017. These nine agencies reported funding research  projects in one or more of the interagency committee\u2019s four oil spill  research categories: prevention, preparedness, response, and injury  assessment and restoration (see table 2)."], "subsections": []}, {"section_title": "The Interagency Committee Improved Internal Research Coordination Efforts but May Not Have Included All Relevant Agencies and Did Not Include the NRDA Trustee Councils", "paragraphs": ["We reported in March 2011 that federal agencies conducted oil pollution  research but that the interagency committee had taken limited actions to  foster the communication and coordination of this research among  member agencies and nonfederal stakeholders. More specifically, we  noted that member agencies were not consistently represented on the  interagency committee and interested nonfederal stakeholders reported  limited contact with the interagency committee. We recommended,  among other things, that the Commandant of the Coast Guard direct the  chair of the interagency committee, in coordination with member  agencies, establish a more systematic process to identify and consult with  key nonfederal stakeholders.", "Officials from 8 of the 15 member agencies said they believe that the  interagency committee\u2019s coordination efforts have improved since the  Deepwater Horizon oil spill in 2010. In response to our recommendation  on coordination with nonfederal stakeholders, we found that members  consistently attend major oil spill conferences and workshops. In addition,  we observed that the interagency committee invites outside speakers and  researchers to its meetings to update the membership on ongoing  research activities in academia, industry, and the government. The  committee charter calls for meetings at least semiannually, but since  fiscal year 2011 the interagency committee has held quarterly meetings  with member agencies as well as meetings with outside groups of  knowledgeable stakeholders.", "At the meetings, member agencies have the opportunity to present  information on oil spill research they are conducting, share information  about upcoming research conferences, and listen to presentations by  outside groups. According to member agency officials, some of the  benefits of the interagency committee\u2019s improved coordination efforts  include a reduction in research redundancies,  increased understanding of the broader oil spill research community,  the facilitation of relationships,  the identification of research gaps, and  the ability to leverage resources.", "U.S. Navy officials said that the interagency committee facilitated  communication between member agencies that use the Navy\u2019s  equipment for research purposes. As a result of discussions that took  place at an interagency meeting, the Navy offered the use of a hydraulic  power unit to the Coast Guard for hydraulic testing in Arctic conditions in  Alaska. Officials from a few of the member agencies, including the Coast  Guard, BSEE, EPA, and NOAA, told us that they collaborate on oil spill- related research efforts with other member agencies of the interagency  committee.", "In addition, the release of the 2015-2021 research and technology plan  provides a new baseline for research, including 150 priority oil pollution  research needs within 25 research areas. According to the research and  technology plan, future updates will reflect advancements in oil pollution  technology and changing research needs by capitalizing on the unique  roles and responsibilities of each member agency. According to officials  from one member agency, the revised research and technology plan has  helped member agencies coordinate with other member agencies to  leverage funding and expertise. Member agencies also cooperate with  nonfederal research entities on research needs and activities.", "The interagency committee has demonstrated key practices that  strengthen coordination, such as agreeing on common terminology and  priorities for oil spill research in its revised research and technology plan.  However, the committee could enhance coordination by ensuring that  relevant participants have been included\u2014another key practice. Under  OPA, certain federal agencies are members of the interagency  committee, but member agencies may choose which office or official  represents them at meetings and coordinates with other members on  committee-related work. Officials from 6 of the 15 member agencies told  us that their particular research efforts are not the focus of ICCOPR  meetings, and therefore ICCOPR\u2019s ability to coordinate their research  efforts are less valuable. For example, NASA officials said the office  representing their agency at meetings is not involved in oil spill research,  but other offices within their agency fund or conduct relevant research.", "In addition, 7 of the 15 officials we interviewed from member agencies  suggested that other federal agencies could be relevant to the  committee\u2019s research efforts. For example, officials we interviewed from  several member agencies suggested including the U.S. Geological  Survey (USGS) as a full member because of its relevant research and  mapping expertise. According to committee documents, the interagency  committee considered adding USGS in 2015 but has not made a decision  on USGS\u2019s membership. The Commandant of the Coast Guard, under his  or her capacity as chair of the interagency committee, has been  delegated authority to appoint additional agencies to the committee as  appropriate.", "A leading practice for collaboration calls for interagency groups to ensure  that all relevant participants have been included in collaborative efforts.  According to this leading practice, participants should have the  appropriate knowledge, skills, and abilities to contribute to the outcomes  of the collaborative effort.", "However, interagency committee member agency officials said the  committee has not systematically reviewed its membership to determine  which offices within current member agencies are the most relevant to its  mission and whether adding other federal agencies as members would be  beneficial. By systematically reviewing its membership to determine  whether any additional agencies should be involved in coordinating oil  spill research and that the most appropriate offices within member  agencies are represented, the interagency committee could improve its  ability to coordinate research among federal agencies.", "In addition, agency officials knowledgeable about the work of the NRDA  trustee councils are not the same officials representing their agency as  members on the interagency committee. The research and technology  plan notes that the interagency committee\u2019s injury assessment and  restoration research is intended to support the NRDA process. However,  the NRDA trustees who manage the restoration funds for the Exxon  Valdez and Deepwater Horizon oil spills told us that they have not  coordinated or communicated on oil spill research or restoration efforts  with the interagency committee; therefore, they would not have been  involved with developing the research and technology plan. In addition,  some trustee council members told us that they were not even aware that  the interagency committee existed.", "Under OPA, one of the interagency committee\u2019s responsibilities is to  coordinate with federal agencies and external entities on an oil pollution  research program that includes methods to restore and rehabilitate  natural resources damaged by oil spills. As previously discussed, the  NRDA trustee councils are charged with assessing natural resource  damages for the natural resources under their trusteeship and developing  and implementing plans for restoration efforts. The research that the  interagency committee members fund includes research on restoration  that could be pertinent to the work of the NRDA trustee councils. For  example, following the oil spill in 2010, the Deepwater Horizon Trustee  Council evaluated baseline conditions for several different representative  species, such as sea turtles and Gulf sturgeon, to quantify the extent of  injury as part of the restoration planning process that OPA regulations  required. Some interagency committee member agencies, such as NOAA  and BOEM, fund research on baseline data that could inform the NRDA  trustee councils\u2019 injury assessment work. In turn, the NRDA trustee  councils\u2019 work could also inform the interagency committee\u2019s coordination  of future oil spill research by, for example, identifying gaps in research as  identified and prioritized in updates to the research and technology plan.  By coordinating with the NRDA trustee councils, the interagency  committee could ensure that its research informs and supports the  councils\u2019 damage assessment and restoration efforts and better  leverages members\u2019 resources."], "subsections": []}]}, {"section_title": "Literature Suggests the Effectiveness of Offshore Oil Spill Response Techniques Varies Based on Regional Environmental Differences and Other Factors", "paragraphs": ["According to the literature we reviewed, environmental differences  between the Gulf of Mexico and Arctic regions, as well as factors such as  the type of oil, influence the potential effectiveness of various oil spill  response techniques. In each region, environmental conditions, such as  water and air temperature, water movement, and salinity, influence how  effective oil spill response techniques can be. Further, according to the  literature we reviewed, these conditions determine which response  techniques are appropriate.", "Environmental conditions, such as ocean water and air temperature, can  influence the effectiveness of natural oil removal through evaporation or  biodegradation. These processes may occur more quickly in warmer  climates, such as in the Gulf of Mexico. In the event of an oil spill,  communities of microbes can bloom to respond to the new supply of oil.  According to a 2011 report from the American Academy of Microbiology,  these microbes can biodegrade up to 90 percent of some light crude oil,  but the largest and most complex molecules\u2013\u2013such as the ones that  make up road asphalt\u2013\u2013are not significantly biodegradable. A 2016  study found that higher temperatures lead to increased biodegradation,  and increased salinity had a small positive impact on crude oil removal.  However, the American Academy of Microbiology report also states that  while microbes can biodegrade oil over time, the process may not be fast  enough to prevent ecological damage. Therefore, immediate containment  or physical removal of the oil is an important first response.", "The effectiveness of oil removal is also influenced by conditions of the  water, determined by wind, waves, and currents. According to literature  we reviewed, winds and currents can make it more difficult to remove the  oil, increasing the likelihood of the oil spill affecting larger areas and  additional plant and animal populations. Further, high seas and rough  waters can make some response techniques less effective. According to  a 2017 study that estimates the effect of environmental conditions on  deploying oil spill response techniques in the Arctic Ocean, most  response techniques are not suitable during Arctic winters, between  November and June.", "Literature we reviewed also shows that other factors influence the  effectiveness of response techniques, including oil type, oil thickness, and  the location and depth of oil spill events. Light crude oil typically  evaporates and biodegrades more quickly than heavy crude oil, which is  more viscous. However, if the oil slick is too thin, it becomes difficult to  contain and limits response options. Oil spilled in a remote location, such  as the place where the Exxon Valdez oil spill occurred, may complicate  response efforts because equipment and personnel are far away and may  not be able to respond within the window of opportunity before the oil  spreads.", "According to Coast Guard officials, during an oil spill response, various  response techniques are used to minimize the negative effects on the  water surface, water column, and shorelines, each with different  applications, advantages, disadvantages, and risks. The response  techniques we reviewed are:", "Mechanical recovery in the marine environment uses a variety of  containment booms, barriers, and skimmers, as well as natural and  synthetic absorbent materials to capture and store the spilled oil until  it can be disposed of properly.", "In-situ burning, meaning in-place burning, is the process of igniting  and burning oil slicks in a controlled environment.", "Dispersants are chemicals that can mitigate the immediate damage  caused by oil at the surface and help accelerate the natural removal  of the spilled oil. Dispersants work similarly to dish soap, breaking up  the oil into small droplets that can more easily spread through the  water."], "subsections": [{"section_title": "Mechanical Recovery Safely Removes Spilled Oil but Has Limitations in Certain Conditions", "paragraphs": ["The advantage of mechanical recovery is that it physically removes the oil  from the water, minimizing the negative effects of the oil. Mechanical  recovery can be used to safely remove oil where other methods might  cause health risks or environmental damage, according to a 2013 report  published by the National Academies Press.", "However, mechanical recovery has limitations in some conditions. If the  oil slick is thin, it is difficult to achieve a significant rate of recovery and  requires a lot of equipment to concentrate the slick so it is thick enough to  be collected. According to literature we reviewed, mechanical recovery is  less effective during inclement weather or high seas because the oil  spreads and can emulsify in these conditions and is difficult to contain.  Low temperatures and the presence of ice also make it challenging to  achieve high recovery rates, and mechanical recovery becomes  increasingly ineffective as wave heights increase, according to literature  we reviewed.", "Furthermore, the process of recovering the oil is labor- and cost-intensive,  and recovery can be delayed if the equipment is not readily available.  Mechanical recovery is especially challenging to implement quickly when  spills occur in remote areas, such as with Exxon Valdez, or where the oil  is traveling quickly and broadly, such as with Deepwater Horizon. For  example, according to a 1999 EPA report, skimmers were not readily  available during the first 24 hours following the Exxon Valdez oil spill,  repairs to damaged skimmers were time-consuming, and continued  inclement weather slowed down the recovery efforts. In addition, a  disadvantage of mechanical recovery is that temporary storage for large  amounts of oil is frequently needed and recovered oil is generally brought  back to the shore for disposal, according to Interior officials. Because of  the resources required to physically remove the oil, it is difficult to recover  a large percentage of the spilled oil through mechanical recovery in large  oil spills."], "subsections": []}, {"section_title": "In-Situ Burning Can Efficiently Eliminate Oil but Has Potential Side Effects", "paragraphs": ["According to two studies and an agency document we reviewed, in-situ  burning can be a highly effective technique for eliminating spilled oil from  the sea surface. In response to the Deepwater Horizon oil spill, roughly  5 to 6 percent of all of the spilled oil was burned, about double the  amount of oil removed with skimmers, according to a 2013 National  Academies Press report.", "The primary advantage of in-situ burning is its efficiency. In ideal  conditions, this method can quickly eliminate spilled oil. According to  several reports we reviewed, in optimal conditions, in-situ burning can  eliminate up to 90 percent of the spilled oil contained for burning with a  relatively minimal investment of equipment or manpower. Literature we  reviewed suggests that it is especially suited for response in Arctic  conditions, particularly in ice-covered water where logistics and  environmental conditions may preclude other options and where the ice  can act as a natural barrier to help keep the oil slick thick enough to burn.", "However, in-situ burning also has its disadvantages. Burning has a  narrow window of opportunity, and if the approval process takes longer  than it takes to prepare for the burn, the opportunity for using in-situ  burning may be lost, according to a NOAA document. Similar to  mechanical recovery, burning can only be used if the oil slick is a certain  thickness and when waves, wind, and currents are not too strong. In-situ  burning becomes increasingly difficult in strong winds or with waves over  3 feet tall. A second disadvantage is that the burn residue caused by in- situ burning may have negative effects on ocean life, though studies we  reviewed differed on this matter. According to a 2014 National Academies  Press report about oil spills in the U.S. Arctic environment, a series of  studies in the 1990s found that burn residues have little to no impact on  oceanic organisms. However, a 2015 review on burn residues from in- situ burning in Arctic waters concluded that not enough research has  been done on the side effects of burn residue from in-situ burning.  According to NOAA officials, another disadvantage of in-situ burning is  that the soot from inefficient combustion can result in unsightly and  unhealthy particulates that may affect any downwind populations before  the smoke dissipates."], "subsections": []}, {"section_title": "Use of Dispersants Is Versatile but Its Effectiveness Depends on Several Factors", "paragraphs": ["According to Coast Guard officials, chemical dispersants are typically  used in conjunction with mechanical means and are considered when  offshore mechanical methods are recognized as inadequate because of  the spill volume, the geographical extent of the slicks, or specific on- scene environmental conditions.", "According to the literature we reviewed, an advantage of dispersants is  their versatility. Dispersants are not as limited by environmental  conditions as other response techniques, and they can be applied on  surface or underwater environments. Further, dispersants can be applied  through a variety of mechanisms. For example, they can be applied on oil  slicks at the water\u2019s surface by boats, planes, or helicopters. Dispersants  can also be used below the surface, through subsea injection at the site  of the spill, as was applied in response to the Deepwater Horizon oil spill.", "However, the literature suggests that the effectiveness of dispersants  depends on many factors, such as the type of oil, type of dispersant used,  and sea and weather conditions. According to Coast Guard officials, the  decision to use dispersants is made after careful consideration of the  location of the spill, type of oil spilled, seasonal resources at risk, and the  environmental conditions at the time, as these factors influence the  effectiveness and practicality of using dispersants, as well as the  advisability of the tactic in the face of other options and risks. These  officials also noted that dispersants are rarely used in the United States,  but in certain situations, where mechanical means such as booming and  skimming may not be effective, dispersants may be considered.", "In addition to the uncertainty of their effectiveness, the potential  environmental risks associated with dispersants are also uncertain. One  2014 study states that while dispersants were thought to undergo rapid  degradation in the water column, there was evidence that the dispersants  remained on Gulf of Mexico beaches almost 4 years after the Deepwater  Horizon oil spill. During the Deepwater Horizon oil spill, responders  applied over 1.8 million gallons of chemical dispersants to the spilled oil\u2014 an unprecedented volume in the United States. It was the first major oil  spill to use dispersants on such a large scale, and approximately 42 percent of these dispersants were applied sub-sea in the first operational  sub-sea application of this technique. According to Coast Guard  officials, the toxicity and long-term effects of large-scale application of  dispersants on the ecology of marine life are unknown. According to  literature we reviewed, there is evidence that chemically dispersed oil and  some dispersant compounds may be toxic to some marine life, especially  those in early life stages. Coast Guard officials also said that continued  monitoring and further review of scientific research should improve the  understanding of the impact of dispersants on mitigating the effects of oil  spills as well as their overall environmental impact."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Following initial response and cleanup efforts, restoration activities related  to a significant offshore oil spill, such as those from Exxon Valdez or  Deepwater Horizon, can endure for decades. Federal agencies of the  interagency committee conduct and fund research projects related to  preventing, preparing for, responding to, and restoring the environment  after oil spills. The interagency committee has improved the coordination  of federal oil spill research efforts since the Deepwater Horizon oil spill in  2010. However, the interagency committee has not systematically  reviewed its membership to determine which offices within current  member agencies are the most relevant to its mission and whether  adding other federal agencies as members would be beneficial. By  systematically reviewing its membership to determine whether any  additional agencies should be involved in coordinating oil spill research  and that the most appropriate offices within member agencies are  represented, the interagency committee could improve its ability to  coordinate research among federal agencies.", "In addition, the interagency committee does not coordinate with the  NRDA trustee councils that manage the large restoration funds and  monitor the restoration of damaged resources after a specific spill, such  as the Exxon Valdez and Deepwater Horizon oil spills. Coordinating with  the NRDA trustee councils could help ensure that the interagency  committee\u2019s oil spill research program is effectively supporting the  damage assessment and restoration efforts of the councils, and better  knowledge sharing between groups and leveraging its members\u2019 oil spill  research resources."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Commandant  of the U.S. Coast Guard at the Department of Homeland Security:  The Commandant of the U.S. Coast Guard should direct the chair of the  Interagency Coordinating Committee on Oil Pollution Research, in  coordination with member agencies, to systematically review its  membership to determine whether any additional agencies should be  involved in coordinating oil spill research and that the most appropriate  offices within member agencies are represented. (Recommendation 1)", "The Commandant of the U.S. Coast Guard should direct the chair of the  Interagency Coordinating Committee on Oil Pollution Research, in  coordination with member agencies, to coordinate with the relevant  Natural Resource Damage Assessment trustee councils to help ensure  that the interagency committee\u2019s research informs and supports the  councils\u2019 damage assessment and restoration efforts. (Recommendation  2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided our draft report to the Department of Agriculture,  Department of Commerce, Department of Defense, Department of  Energy, Department of Homeland Security, Department of the Interior,  Department of Transportation, Environmental Protection Agency, National  Aeronautics and Space Administration, and U.S. Arctic Research  Commission for review and comment. In comments reprinted in appendix  II, the Department of Homeland Security concurred with our  recommendations. In addition, the departments of Commerce, Homeland  Security, Interior, and EPA provided technical comments, which we  incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of the report to the  appropriate congressional committees; the Secretaries of Agriculture,  Commerce, Defense, Energy, Homeland Security, the Interior, and  Transportation; the Administrators of EPA and NASA; the Executive  Director of the U.S. Arctic Research Commission; and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how the Natural Resource Damage Assessment  (NRDA) trustee councils have used the restoration trust funds for the  Exxon Valdez and Deepwater Horizon oil spills and the status of the  restoration efforts; (2) the status of the Interagency Coordinating  Committee on Oil Pollution Research\u2019s (interagency committee) oil spill  research efforts and how coordination of such efforts has changed since  we last reported on it in March 2011; and (3) what literature suggests  about the effectiveness of various oil spill response techniques in the  Arctic and the Gulf of Mexico.", "To examine how the NRDA trustee councils used the restoration funds  from the Exxon Valdez oil spill (from October 1992 to January 2018) and  the Deepwater Horizon oil spill (from April 2012 to December 2017) for  restoration and the status of the restoration efforts, we obtained data from  each trustee council on the amount of funds (1) ordered by the settlement  for each restoration type; (2) authorized by the trustees for, but not yet  spent on, restoration activities (authorizations); (3) spent on restoration  activities (expenditures); and (4) not yet authorized for restoration  activities (remaining balance) through calendar year 2017 for Deepwater  Horizon and through January 31, 2018, for Exxon Valdez. To assess the  reliability of the financial data, we reviewed related budget  documentation; interviewed knowledgeable council staff about how fund  balances are recorded and reported; reviewed the totals for obvious  errors and inconsistencies; and reviewed internal control documents,  such as a database manual and standard operating procedures. We  determined that the data were sufficiently reliable for the purposes of our  report.", "We examined the approved restoration plans (1994 restoration plan and  2014 restoration plan update for the Exxon Valdez oil spill, and the 2016  programmatic damage assessment and restoration plan for the  Deepwater Horizon oil spill) and, when available, annual reports on  restoration activities (1994 through 2018 annual reports for the Exxon  Valdez Oil Spill Trustee Council (Exxon Valdez Trustee Council) and  2016 and 2017 annual financial reports for the Deepwater Horizon  Natural Resource Damage Assessment Trustee Council (Deepwater  Horizon Trustee Council)). We also reviewed project reports and scientific  studies that the trustee councils funded to gain a better understanding of  the status of restoration of injured natural resources, restoration priorities,  activities, and progress made by the trustee councils. We reviewed laws  and regulations that provide the legal authority for federal agencies to  intervene and respond after an oil spill, such as the Oil Pollution Act of  1990 (OPA), the Clean Water Act, and NRDA regulations. We met with  officials from the Exxon Valdez Trustee Council to discuss the distribution  of settlement money for restoration purposes after the Exxon Valdez oil  spill, and with officials from the Deepwater Horizon Trustee Council, Gulf  Coast Ecosystem Restoration Council (RESTORE Council), and the  National Fish and Wildlife Foundation to discuss the distribution of  settlement money for restoration purposes after the Deepwater Horizon  oil spill. Additionally, in May 2018, we traveled to multiple locations in the  former spill area in Alaska to observe the extent of restoration efforts and  ongoing issues. Along with researchers sent by the Exxon Valdez Trustee  Council, we excavated three pits that revealed lingering oil about 6 inches  below the surface of the beach on Eleanor Island in Prince William  Sound. These researchers told us that oil previously uncovered at this  location had been linked to the Exxon Valdez oil spill. In addition to  fieldwork in Alaska, in November 2017 and February 2018, we attended  public meetings in Alabama and Louisiana to learn about restoration  plans for the Gulf States.", "To examine the status of the interagency committee\u2019s federal oil spill  research efforts and how coordination of such efforts has changed since  we last reported on it in March 2011, we requested funding data and  project information on oil spill research from all 15 member agencies of  the interagency committee. We received data from the 9 member agencies that reported funding oil spill research projects from fiscal years  2011 through 2017. These 9 agencies provided data on agency  expenditures on oil spill research and the research category of any  projects funded.  We assessed the reliability of the data by reviewing  related documentation, interviewing knowledgeable agency officials, and  reviewing agency internal controls for each of the 9 member agencies  that provided us data about the steps they take to maintain this  information. We determined that in most cases the data were sufficiently  reliable for the purposes of our report. However, we chose not to provide  the National Oceanic and Atmospheric Administration\u2019s (NOAA) agency  expenditures for oil spill research because NOAA officials were unable to  provide reliable data on the actual amount the agency spent on such  research during the time period we requested. In addition, some agency  officials we interviewed raised the concern that their agencies do not track  oil spill research funding and therefore the information they provided on  expenditures for such research may not include all relevant efforts that  could inform oil spill prevention, preparedness, response, and restoration.", "We also interviewed officials from the 15 member agencies to learn about  each agency\u2019s oil spill research efforts and participation in and  coordination through the interagency committee, and compared their  coordination practices to one of our federal leading practices for  collaboration for interagency groups to evaluate the interagency  committee\u2019s efforts to coordinate such research. We chose to focus on  the collaboration practice pertaining to participants because it appeared  to be the most challenging for the interagency committee based on the  findings of our previous March 2011 report, the actions taken by the  interagency committee to address our recommendations from that report,  and our own findings from our research for this report. In addition, we  reviewed the 2013 interagency committee charter, the committee\u2019s most  recent biennial reports to Congress covering fiscal years 2008 through  2017, and the committee\u2019s third multiyear research and technology plan  for fiscal years 2015 through 2021; attended two committee meetings;  and reviewed minutes of eight past meetings. We also reviewed OPA\u2019s  provisions that established and govern the interagency committee\u2019s  coordination efforts and membership, as well as various related executive  documents.", "To examine what literature suggests about the effectiveness of various oil  spill response techniques in the Arctic and the Gulf of Mexico, we  conducted a literature search for studies and articles that analyzed and  summarized the effectiveness of various oil spill response techniques in  those regions. We identified existing literature from 1989 (the year of the  Exxon Valdez oil spill) to March 2018 by searching various databases,  such as Scopus and ProQuest. We chose to focus on three primary  response techniques\u2014mechanical recovery, in-situ burning, and the use  of dispersants\u2014used to clean up after offshore oil spills according to  knowledgeable stakeholders and the literature we reviewed. The  database search produced over 800 results. Our subject matter expert  helped the team narrow this list to 50 results, of which we relied on 16  studies and articles that we determined were most relevant to our  research objective of determining the effectiveness of various oil spill  response techniques in the Arctic and the Gulf of Mexico. Some literature  was not included if it was too specific for the scope of our review.  Literature published recently, generally within the past 10 years, was  considered more relevant. We supplemented the list of studies from these  databases with literature from the Congressional Research Service, the  National Academies Press, the Environmental Protection Agency (EPA),  NOAA, the American Academy of Microbiology, the Arctic Oil Spill  Response Joint Industry Programme, and our previous report on oil  dispersants. In total, we relied upon 22 literature results to inform the  findings of our objective. For a complete list of the literature, see the  bibliography. We shared our summary of the literature search findings  with agency officials representing some of the interagency committee  member agencies. The following agencies responded with comments and  we included their perspectives where relevant: the Department of the Interior, EPA, NOAA, and the U.S. Coast Guard. We did not  independently evaluate the effectiveness of these response techniques.", "We conducted this performance audit from July 2017 to January 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Christine Kehr (Assistant  Director), Amy Ward-Meier (Analyst-in-Charge), Colleen Candrl, Nirmal  Chaudhary, Juan Garay, Cindy Gilbert, Matt Hunter, Jessica Lewis, Joe  Maher, Greg Marchand, Kimberly (Kim) McGatlin, Cynthia Norris, Travis  Schwartz, Sheryl Stein, Sara Sullivan, Vasiliki (Kiki) Theodoropoulos,  Matthew Valenta, Sarah Veale, and Dan Will made key contributions to  this report."], "subsections": []}]}, {"section_title": "Bibliography", "paragraphs": ["We reviewed literature to examine what it suggests about the  effectiveness of various oil spill response techniques in the Arctic and the  Gulf of Mexico. This bibliography contains citations for the studies and  articles that contributed to these findings.", "American Academy of Microbiology, Microbes and Oil Spills FAQ  (Washington, D.C.: 2011).", "Arctic Oil Spill Response Technology Joint Industry Programme,  Synthesis Report, D. Dickens-DF Dickens Associates, LLC (May 3,  2017).", "Belore, Randy C., Ken Trudel, Joseph V. Mullin, and Alan Guarino.  \u201cLarge-scale Cold Water Dispersant Effectiveness Experiments with  Alaskan Crude Oils and Corexit 9500 and 9527 Dispersants.\u201d Marine  Pollution Bulletin, vol. 58 (2009): 118-128.", "Boufadel, Michel C., Xiaolong Geng, and Jeff Short. \u201cBioremediation of  the Exxon Valdez Oil in Prince William Sound Beaches.\u201d Marine Pollution  Bulletin, vol. 113 (2016): 156-164.", "Brakstad, Odd G., Trond Nordtug, and Mimmi Throne-Holst.  \u201cBiodegradation of Dispersed Macondo Oil in Seawater at Low  Temperature and Different Oil Droplet Sizes.\u201d Marine Pollution Bulletin,  vol. 93 (2015): 144-152.", "Committee on Responding to Oil Spills in the U.S. Arctic Marine  Environment; Ocean Studies Board; Polar Research Board; Division on  Earth and Life Studies; Marine Board; Transportation Research Board;  National Research Council, Responding to Oil Spills in U.S. Arctic Marine  Environment. National Academies Press (US) (Washington, D.C.: 2014).", "Committee on the Effects of the Deepwater Horizon Mississippi Canyon- 252 Oil Spill on Ecosystem Services in the Gulf of Mexico, Ocean Studies  Board, Division on Earth and Life Studies, National Research Council, An  Ecosystem Services Approach to Assessing the Impacts of the  Deepwater Horizon Oil Spill in the Gulf of Mexico. National Academies  Press (US) (Washington, D.C.: December 20, 2013).", "Corn, Lynne M., Claudia Copeland, The Deepwater Horizon Oil Spill:  Coastal Wetland and Wildlife Impacts and Response. Congressional  Research Service (July 7, 2010).", "Environmental Protection Agency, Office of Emergency and Remedial  Response, Understanding Oil Spills and Oil Spill Response, EPA 540-K- 99-007 (Dec 1999).", "Fletcher, Sierra, Tim Robertson, Bretwood Higman, and Elise DeCola.  Estimating Impact of Environmental Conditions on Deployment of Marine  Oil Spill Response Tactics in the U.S. Arctic Ocean, proceedings of the  Fortieth AMOP Technical Seminar. Ottawa: Environment and Climate  Change Canada, 2017, 246-264.", "Fritt-Rasmussen, Janne, Susse Wegeberg, d Kim Gustavson, \u201cReview on  Burn Residues from In Situ Burning of Oil Spills in Relation to Arctic  Waters.\u201d Water Air Soil Pollution, vol. 226 (2015).", "GAO, Oil Dispersants: Additional Research Needed, Particularly on  Subsurface and Arctic Applications, GAO-12-585 (Washington, D.C.: May  30, 2012).", "Naseri, M., and J. Barabady, Safety and Reliability: Methodology and  Applications\u2014Performance of Skimmers in the Arctic Offshore Oil Spills.  London: Taylor & Francis Group, 2015, 607-614.", "National Oceanic and Atmospheric Administration, Oil Spill - Behavior,  Response and Planning: Open-water Response Strategies: In-situ  Burning, (August 1997).", "Nedwed, Tim, Tom Coolbaugh, and Amy Tidwell. Subsea Dispersant Use  during the Deepwater Horizon Incident, proceedings of the Thirty-Fifth  AMOP Technical Seminar on Environmental Contamination and  Response. Vancouver, BC; Canada, ExxonMobil Upstream Research  Company, 2012, 506-518.", "Nyankson, Emmanuel, Dylan Rodene, and Ram B. Gupta.  \u201cAdvancements in Crude Oil Spill Remediation Research After the  Deepwater Horizon Oil Spill.\u201d Water Air Soil Pollution (2016).", "Rahsepar, Shokouh, Martijn P.J. Smit, Albertinka J. Murk, Huub H.M.  Rijnaarts, and Alette A.M. Langenhoff. \u201cChemical Dispersants: Oil  Biodegradation Friend or Foe?\u201d Marine Pollution Bulletin, vol. 108 (2016):  113-119.", "Ramseur, Jonathan L., Oil Spills: Background and Governance.  Congressional Research Service (Sept 15, 2017).", "Sharma, Priyamvada, and Silke Schiewer. \u201cAssessment of Crude Oil  Biodegradation in Arctic Seashore Sediments: Effects of Temperature,  Salinity, and Crude Oil Concentration.\u201d Environmental Science and  Pollution Research (2016): 14881-14888.", "Shi, X., P.W. Bellino, A. Simeoni, and A.S. Rangwala. \u201cExperimental  Study of Burning Behavior of Large-scale Crude Oil Fires in Ice Cavities.\u201d  Fire Safety Journal, vol. 79 (2016): 91-99.", "United States Coast Guard, On Scene Coordinator Report Deepwater  Horizon Oil Spill, (September 2011).", "White, Helen K., Shelby L. Lyons, Sarah J. Harrison, David M. Findley,  Yina Liu, and Elizabeth B. Kujawinski. \u201cLong-Term Persistence of  Dispersants Following the Deepwater Horizon Oil Spill.\u201d Environmental  Science & Technology Letters (2014): 295-299."], "subsections": []}], "fastfact": ["After a significant offshore oil spill\u2014such as the Exxon Valdez or Deepwater Horizon incidents\u2014it can take decades and billions of dollars to undo the environmental damage. A federal-state trustee council is set up after a spill to manage the money for related environmental restoration projects.", "Federal research on environmental restoration after an oil spill could be relevant to the trustee councils' work. But we found that the committee that coordinates federal oil spill research doesn't collaborate with the trustee councils. We recommended that it do so."]}
{"id": "GAO-18-474", "url": "https://www.gao.gov/products/GAO-18-474", "title": "VA Health Care: Improved Oversight Needed for Reusable Medical Equipment", "published_date": "2018-08-03T00:00:00", "released_date": "2018-09-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VHA operates one of the largest health care delivery systems in the nation, serving over 9 million enrolled veterans. In providing health care services to veterans, VAMCs use RME which must be reprocessed\u2014that is, cleaned, disinfected, or sterilized\u2014between uses. Improper reprocessing of RME can negatively affect patient care. To help ensure the safety of veterans, VHA policy establishes requirements VAMCs must follow when reprocessing RME and requires a number of related oversight efforts.", "GAO was asked to review VHA's reprocessing of RME. This report examines (1) VHA's oversight of VAMCs' adherence to RME policies and (2) challenges VAMCs face in operating their Sterile Processing Services programs, and any efforts by VHA to address these challenges. GAO reviewed relevant VHA documents including RME policies and VISN inspection results for fiscal year 2017. GAO interviewed officials from VHA, all 18 VISNs, and four VAMCs, selected based on geographic variation, VAMC complexity, and data on operating room delays. GAO examined VHA's oversight in the context of federal internal control standards on communication, monitoring, and information."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that the Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) does not have reasonable assurance that VA Medical Centers (VAMC) are following policies related to reprocessing reusable medical equipment (RME). Reprocessing involves cleaning, sterilizing, and storing surgical instruments and other RME, such as endoscopes. VHA has not ensured that all VAMCs' RME inspections have been conducted because it has incomplete information from the annual inspections by Veterans Integrated Service Networks (VISN), which oversee VAMCs. For fiscal year 2017, VHA did not have 39 of the 144 VISN reports from the VISNs' inspections of their VAMCs' Sterile Processing Services departments. VISNs were able to provide GAO with evidence that they had conducted 27 of the 39 missing inspections; top areas of non-adherence in these inspections were related to quality and training, among other things. Although VHA has ultimate oversight responsibility, a VHA official told GAO that VHA had not been aware it lacked complete inspection results because it has largely relied on the VISNs to ensure complete inspection result reporting. Without analyzing and sharing complete information from inspections, VHA does not have assurance that its VAMCs are following RME policies designed to ensure that veterans receive safe care.", "GAO also found that VAMCs face challenges operating their Sterile Processing Services programs\u2014notably, addressing workforce needs. Almost all of the officials from all 18 VISNs and selected VAMCs GAO interviewed reported Sterile Processing Services workforce challenges, such as lengthy hiring timeframes and limited pay and professional growth potential. According to officials, these challenges result in programs having difficulty maintaining sufficient staffing. VHA officials told GAO that the office is considering studying Sterile Processing Services staffing at VAMCs, although VHA does not have definitive plans to do so. VHA's Sterile Processing Services workforce challenges pose a potential risk to VAMCs' ability to ensure access to sterilized medical equipment, and VHA's failure to address this risk is inconsistent with standards for internal control in the federal government. Until VHA examines these workforce needs, VHA won't know whether or to what extent the reported challenges adversely affect VAMCs' ability to effectively operate their Sterile Processing Services programs and ensure access to safe care for veterans."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to VHA, including that it ensure all RME inspections are being conducted and complete results reported, and that it examine Sterile Processing Services workforce needs and make adjustments, as appropriate. VA concurred with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs\u2019 (VA) Veterans Health Administration  (VHA) operates one of the largest health care delivery systems in the  nation, serving over 9 million enrolled veterans. In providing health care  services to veterans, VA medical centers (VAMC) use reusable medical  equipment (RME), such as endoscopes and surgical instruments, which  must be reprocessed\u2014that is, cleaned, disinfected, or sterilized\u2014 between uses. As medical instruments have become more complex,  reprocessing has become more complicated and time consuming. For  example, reprocessing an endoscope after a colonoscopy requires eight  detailed cleaning steps and, on average, over 1 hour and 15 minutes of  hands-on staff time. Improper reprocessing of RME creates risks to  patient safety\u2014exposing patients to infection, for example\u2014and can  adversely affect timely access to care, such as when surgeries are  delayed or canceled due to the lack of properly reprocessed medical  equipment. The reprocessing of RME occurs at VAMCs within their  Sterile Processing Services (SPS) programs. To help ensure the safety  of veterans who receive care at its facilities, VHA policy establishes  requirements VAMCs must follow when reprocessing RME. Further, VHA  policy requires inspections to be completed each year to determine the  extent to which VAMCs are following these RME requirements and that  incidents involving improperly reprocessed RME are reported.", "VHA has had ongoing challenges with RME reprocessing. For example,  in 2009, two VAMCs notified about 10,000 veterans of their potential  exposure to hepatitis B, hepatitis C, and HIV, because they received care  using improperly reprocessed endoscopes. In 2011 we found that VHA  had not provided sufficient guidance to VAMC staff operating the SPS  programs to ensure that staff were reprocessing RME correctly, which  posed potential safety risks to veterans. In 2016, the VHA Office of the  Medical Inspector reviewed and corroborated allegations that the SPS  department at a VAMC failed to provide surgeons with RME free of  bioburden, debris, or both. Further, in March 2018, the VA Office of  Inspector General reported on problems at a VAMC that included RME- specific issues, such as delays and cancellations of procedures due to  unavailable instruments because of improper reprocessing.", "You asked us to review RME reprocessing within VHA. In this report, we  examine:  1.  VHA\u2019s oversight of VAMCs\u2019 adherence to RME policies and  2.  challenges VAMCs face in operating their SPS programs, and any  efforts by VHA to address these challenges.", "To examine VHA\u2019s oversight, we assessed its efforts to oversee VHA\u2019s 18  Veterans Integrated Service Networks (VISN) and its efforts to directly  ensure that VHA\u2019s 170 VAMCs are adhering to RME policies. We  reviewed VHA Directive 1116(2), which describes RME policy  requirements and instructions for how inspections of VAMCs\u2019 adherence  to these requirements should be conducted, and VHA\u2019s guide to issue  briefs, which are reports that provide information on incidents involving  improperly processed RME. We reviewed summary data from VHA on  inspections of VAMCs conducted by their respective VISNs in fiscal year  2017. These summary data came from inspection reports submitted to  VHA by the VISNs for which VHA had records as of February 2018. We  also reviewed the full inspection reports that we obtained from the VISNs  for inspections VISNs had conducted in fiscal year 2017, but for which  VHA did not have records, which identified information about non- adherence to RME policy requirements. Finally, we reviewed VHA\u2019s  summary of issue briefs, including those related to the improper  reprocessing of RME, for fiscal years 2015 through 2017.", "To assess the reliability of the inspection and issue brief data, we  reviewed the data to identify missing information and discrepancies, and  we interviewed VHA officials regarding the processes for collecting and  verifying the data. Based on these efforts, we determined that VHA data  on the number of VISN inspection reports for which they had records,  VISN inspection reports, and VHA summary data from issue briefs were  reliable for the purposes of our reporting objectives. In addition to our  review of inspection and issue brief data, we interviewed VHA, VISN, and  VAMC officials. Specifically, we interviewed VHA officials from the  National Program Office for Sterile Processing, which is responsible for  developing RME policies and overseeing VAMCs\u2019 adherence to these  policies. We also interviewed officials from the 18 VISNs and four  selected VAMCs to get their views on VHA\u2019s oversight. We assessed  VHA\u2019s oversight efforts in the context of federal standards for internal  control for monitoring, information, and communication.", "To examine challenges VAMCs face in operating their SPS programs, we  reviewed VHA\u2019s RME policy and other documents to identify the  requirements VAMCs must follow in operating their SPS programs, and  we interviewed officials with direct knowledge of these efforts at all 18  VISNs and the four selected VAMCs. In addition, we asked operating  room nurse managers from 20 selected VAMCs to identify in writing any  RME-related challenges they faced as a result of the SPS department at  their VAMC, such as delays in operating room procedures due to RME  issues. We discussed the challenges identified with officials from VHA\u2019s  National Program Office for Sterile Processing and the Workforce  Management and Consulting Office. We assessed VHA\u2019s efforts to  address RME-related challenges in the context of federal standards for  internal control for risk assessment.", "Finally, to provide a contextual understanding of RME issues across both  objectives, we visited a VAMC with a large SPS program and interviewed  officials outside of VHA with relevant knowledge. Specifically, we  conducted an in-person site visit at the Seattle VAMC and spoke to  officials involved in the SPS program, such as the SPS Chief and staff,  VAMC leadership, and the Chief of Surgery and operating room Nurse  Manager. Further, we spoke with officials from organizations with RME  industry knowledge, such as the International Association of Healthcare  Central Service Materiel Management and the Association for the  Advancement of Medical Instrumentation\u2014two professional associations  that set RME reprocessing standards used by VHA and others, offer RME  certification, and provide information and support regarding RME  reprocessing to those working in the industry. We also interviewed  officials from the Joint Commission and the VA Office of Inspector  General who periodically review VAMCs\u2019 SPS programs and contacted  three Veterans Service Organizations to obtain their views on concerns  related to RME reprocessing and suggestions for addressing those  concerns.", "We conducted this performance audit from April 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In providing health care services to veterans, clinicians at VAMCs use  RME, such as endoscopes and surgical instruments, which must be  reprocessed between uses. Reprocessing covers a wide range of  instruments and has become increasingly complex. VHA has developed  policies that VAMCs are required to follow to help ensure that RME is  reprocessed correctly. In addition, VHA policy requires that VHA and  VISNs oversee VAMCs\u2019 reprocessing of RME and that VAMCs report  incidents involving improperly reprocessed RME."], "subsections": [{"section_title": "Complexity of RME Reprocessing", "paragraphs": ["According to reports from RME professional associations, the complexity  of RME reprocessing has increased as the complexity of medical  instruments has increased. While at one time reprocessing surgical and  dental instruments such as scalpels and retractors might have been the  bulk of a SPS program\u2019s tasks, now SPS programs are responsible for  reprocessing complex instruments such as endoscopes. Reprocessing  these instruments is a detailed and time-consuming process, and their  increasing complexity requires a corresponding increase in the skills and  time required to safely reprocess them. (See figure 1 for an example of  steps that can be required for endoscope reprocessing.)"], "subsections": []}, {"section_title": "VHA Roles and Responsibilities for RME Reprocessing", "paragraphs": ["Within VHA, the National Program Office for Sterile Processing under the  VHA Deputy Under Secretary of Health for Operations and Management  is responsible for developing RME reprocessing policies. It is also  responsible for ensuring that VISNs and their respective VAMCs are  adhering to its policies. Each of the 18 VISNs are responsible for ensuring  adherence with VHA\u2019s RME policies at the VAMCs within its region. In  turn, each of the 170 VAMCs are responsible for implementing VHA\u2019s  policies related to RME. Within each VAMC, the SPS department is  primarily responsible for reprocessing RME, which is used by clinicians in  the operating room and other clinical service lines such as the dental and  gastroenterology service. (See fig. 2.) Additionally, the SPS department  collaborates with other VAMC departments such as the Environmental  Management and Engineering Services on variables that affect RME  reprocessing, such as the climate where RME is reprocessed."], "subsections": []}, {"section_title": "VHA Policies for RME Reprocessing and Related Oversight", "paragraphs": ["In March 2016 VHA issued Directive 1116(2)\u2014a comprehensive policy  outlining requirements for SPS programs and for overseeing RME  reprocessing efforts.", "SPS program operation requirements. To help ensure that VAMCs are  reprocessing RME correctly, VHA policy establishes various requirements  for the SPS programs in VAMCs to follow, such as a requirement that  SPS staff monitor sterilizers to ensure that they are functioning properly,  use personal protective equipment when performing reprocessing  activities, separate dirty and clean RME, and maintain environmental  controls. For example, VAMCs are required to maintain certain  temperature, humidity, and air flow standards in areas where RME is  reprocessed and stored. Additionally, in order to ensure that RME is  reprocessed in accordance with manufacturers\u2019 guidelines, VAMCs are  required to assess staff on their competence in following the related  reprocessing steps.", "Oversight requirements. To help ensure that VAMCs are adhering to  VHA\u2019s RME policies, VHA requires inspections, reports on incidents of  improperly reprocessed RME, and corrective action plans for both non- adherent inspection results and incidents of improperly reprocessed  RME.", "Inspections. VISNs are required to conduct annual inspections at  each VAMC within their VISN and to report their inspection results to  the VHA National Program Office for Sterile Processing. The VISN  inspections are a key oversight tool for regularly assessing adherence  to RME policies in the SPS, gastroenterology, and dental areas within  VAMCs and use a standardized inspection checklist known as the  SPS Inspection Tool. According to VHA officials, VHA developed the  SPS Inspection Tool and generally updates it annually. The most  recent fiscal year 2017 SPS Inspection Tool contained 148  requirements. Examples of requirements include those regarding  proper storage of RME and following manufacturers\u2019 instructions  when reprocessing RME. Although VAMCs are also required to  conduct annual self-inspections using the SPS Inspection Tool and  report the results to VHA, the VISN annual inspections are a separate  and important level of oversight. Finally, according to VHA officials,  while not a formal policy, VHA\u2019s National Program Office for Sterile  Processing also inspects each VAMC at least once every 3 years.  VHA requires VISNs and VAMCs to conduct their own inspections  even in years when VHA also conducts inspections.", "Incident Reports. VHA collects incident reports or \u201cissue briefs\u201d  generated by VAMCs on incidents involving RME to help determine  the extent to which VAMCs are adhering to RME policies, among  other things. VHA requires VAMCs to report significant clinical  incidents or outcomes involving RME that negatively affect groups or  a cohort of veterans in an issue brief. According to a VHA official,  when VAMC staff report incidents involving RME to their facility  leadership, these officials should follow VHA guidance to determine  which incidents, if any, should be reported in an issue brief to the  VAMC\u2019s VISN. Similarly, VISN officials, in turn, are responsible for  determining whether an incident should be reported in an issue brief  to VHA.", "Corrective Action Plans. Corrective action plans\u2014which detail an  approach for addressing any areas of policy non-adherence identified  in inspections or incidents identified in issue briefs\u2014are required at  both the VISN and VAMC levels. Specifically, both VISNs and VAMCs  are required to develop corrective action plans for any deficiencies  identified through their inspections, and VAMCs are required to  develop corrective action plans for incidents identified in issue briefs.  According to a VHA official, VISNs and VAMCs are not required to  send corrective action plans from inspections to VHA; however,  VAMCs must send their correction action plans to the VISN and also  any related to issue briefs to VHA. Further, according to a VHA  official, although neither the VAMC nor VISN corrective action plans  from inspections are monitored by VHA, VHA does expect VISN  officials to inform it of any critical issues that VISNs believe warrant  VHA attention. For example, VHA officials would expect VISNs to  report instances when RME issues result in the cancellation of  procedures for multiple patients or when the VISN discovers a VAMC  is lacking documentation of RME reprocessing competency  assessments for a large number of their SPS staff."], "subsections": []}, {"section_title": "Reports on Issues Related to RME Reprocessing", "paragraphs": ["A number of recent reports have identified several RME-related issues at  VAMCs, including non-adherence to RME policies. The issues have  ranged from improperly reprocessed RME being used on patients to the  cancellation of medical procedures due to lack of available RME. For  example:  In March 2018, the VA Office of Inspector General released a report  describing problems identified at the Washington, D.C. VAMC, some  of which were RME-related. For example, the office determined that  ineffective sterile processing contributed to procedure delays due to  unavailable RME. The report included specific recommendations,  such as ensuring there are clearly defined and effective procedures  for replacing missing or broken instruments and implementing a  quality assurance program to verify the cleanliness, functionality, and  completeness of instrument sets before they are used in clinical  areas. The VAMC Director agreed with those recommendations.", "In fiscal year 2017, the VA Office of Inspector General reviewed 29  VAMCs and issued reports for each in response to several RME- related complaints received through its reporting hotline. The office  identified issues such as staff failure to perform quality control testing  on endoscopes or document their competency assessments of SPS  staff in employee files. Many of the reports included specific  recommendations, such as performing quality control testing on all  endoscopes and ensuring SPS staff are assessed for competency at  orientation and annually for the types of RME they reprocess. The  VAMC Directors agreed with those recommendations.", "In 2016, the VA Office of the Medical Inspector released a report that  substantiated allegations that SPS practices led to the delivery of  RME with bioburden, debris, or both to the operating room. The  report included specific recommendations, such as reeducating SPS  staff on proper SPS standards and ensuring that all training and  assessments of RME reprocessing competency of SPS staff are  completed as required. The VAMC Director agreed with those  recommendations.", "In 2011, we released a report on VA RME that found issues with RME  reprocessing. We found, for example, that VHA did not provide  specific guidance on the types of RME that require device-specific  training and that the guidance VHA did provide on RME reprocessing  training was conflicting. We issued several recommendations for  improvement, which VA has implemented."], "subsections": []}]}, {"section_title": "VHA\u2019s Oversight Does Not Provide Reasonable Assurance that VAMCs Are Following RME Policies", "paragraphs": [], "subsections": [{"section_title": "VHA Does Not Have Complete Information on Adherence to RME Policies from Inspections of VAMCs", "paragraphs": ["VHA has not ensured that it has complete information from the annual  inspections VISNs conduct\u2014a key oversight tool providing the most  current VA-wide information on adherence to RME policies\u2014and  therefore does not have reasonable assurance that VAMCs are following  RME policies intended to ensure veterans are receiving safe care.", "For fiscal year 2017, we determined that VHA should have had records of  144 VISN SPS inspection reports to have assurance that all required  VISN SPS inspections had been conducted. However, our review shows  that as of February 2018, VHA had 105 VISN SPS inspection reports and  was missing 39, or more than one quarter of the required inspection  reports. We also determined that there were two VISNs from which VHA  did not have any fiscal year 2017 reports. For the missing SPS inspection  reports, VISN officials suggested several reasons why the inspections  were either not conducted or conducted but the reports were not  submitted to VHA. For example, officials from one of the VISNs from  which VHA had no SPS inspection reports told us that VISN management  staffing vacancies prevented it from conducting all of its inspections. An  official from the other VISN from which VHA had no SPS inspection  reports provided evidence that it had conducted all but one of the  inspections, but the official told us the VISN did not submit reports  because it has yet to receive information from VHA regarding VISN  inspection outcomes, common findings, or best practices and therefore  sees no value in submitting them.", "VISNs provided us with evidence showing that they conducted 27 of 39  inspections that were missing from VHA\u2019s data. We analyzed these 27  reports to identify the information about non-adherence to RME policy  requirements that VHA does not have from these missing VISN  inspections. We determined the 10 requirements for which these VAMCs  had the most non-adherence were related to quality, training, and  environmental issues, among other things, with the extent of non- adherence ranging from 19 to 38 percent. For example, there were 19 and 26 percent non-adherence rates to the requirements that instrument  and equipment levels be sufficient to meet workloads and having a  process in place to ensure staff receive make-up/repeat training,  respectively. (See Appendix I.)", "We also found that variation in SPS Inspection Tools and related  guidance from VHA resulted in incomplete inspection results for the  gastroenterology and dental areas. VHA provided VISNs with three  different SPS Inspection Tools throughout the course of fiscal year  2017. Although VHA guidance stated otherwise, only the third SPS  Inspection Tool\u2014which was used during the second half of the fiscal  year\u2014contained requirements specific to the gastroenterology and dental  areas.", "A VHA Central Office official told us the office hadn\u2019t been aware that it  did not have all of the VISN inspection reports until it took steps to  respond to our data request. The official told us VHA granted VISNs a 3- month extension for fiscal year 2017\u2014meaning that VISNs had until the  end of December 2017 to submit their inspection results\u2014and had  granted similar extensions for at least the past 4 fiscal years as well. For  all of those years, the VHA official told us that the office didn\u2019t have all  VISN inspection reports, even after granting extensions. As a result, VHA  did not have assurance that all of the inspections had been conducted.  When asked why VHA hadn\u2019t been aware that it didn\u2019t have all VISN SPS  inspection reports, a VHA official said that the office has largely relied on  the VISNs to ensure complete inspection result reporting because it  hasn\u2019t had the resources to dedicate to monitoring inspections. The  official told us that VHA has asked for and just recently received approval  to hire a data analyst who could potentially be responsible for monitoring  the VISN inspection reports. VHA\u2019s lack of complete information from  inspection results is inconsistent with standards for internal control in the  federal government regarding monitoring and information that state  management should establish and operate monitoring activities and use  quality information to achieve the entity\u2019s objectives. Without such  controls, VHA lacks reasonable assurance that VAMCs are following  RME policies designed to ensure that veterans are receiving safe care."], "subsections": []}, {"section_title": "VHA Does Not Consistently Share Information that Could Help VAMCs Follow RME Policies", "paragraphs": ["We also found that VHA does not consistently share information,  particularly inspection results, with VISNs and VAMCs, and that VISNs  and VAMCs would like more of this information. Specifically, about two- thirds of VISN and VAMC officials told us that sharing information on the  common issues identified in the inspections of other VAMCs as well as  potential solutions developed to address these issues would allow  VAMCs to be proactive in strengthening their adherence to RME policies  and ensuring patient safety. For example, a VAMC official told us that  there were problems with equipment designed to sterilize heat- and  moisture sensitive devices, and seeing how other VAMCs addressed the  problem was helpful for their VAMC. Further, officials from some VISNs  said VHA cited their VAMCs for issues that had been found at other  facilities and, had the VAMCs been aware of the issue beforehand, they  could have corrected or improved their processes earlier.", "When asked about sharing inspection results and other information, VHA  Central Office officials told us the office doesn\u2019t analyze or share  information from VISN inspections because of a lack of resources. A VHA  official told us that the office does create an internal report of common  issues identified through the third of VAMCs it inspects each year, but the  office doesn\u2019t share this report with VISNs and VAMCs because the office  lacks the resources needed to prepare reports that are detailed enough to  be understood correctly by recipients. According to this official, VHA has  occasionally shared information it has identified on common inspection  issues through newsletters, national calls, and trainings; however, VHA  officials at close to half of the VISNs and VAMCs we spoke to said that  they rarely or never get this information. For example, officials from one  VISN told us they recall only one or two instances where VHA sent a  summary of the top five RME-related issues found during inspections.  Insufficient sharing of information is inconsistent with standards for  internal control in the federal government regarding communication,  which state that management should internally communicate the  necessary quality information to achieve the entity\u2019s objectives. Until this  sharing becomes a regular practice, VHA is missing an opportunity to  help ensure adherence to its RME policies, which are intended to ensure  that veterans receive safe care."], "subsections": []}]}, {"section_title": "VAMCs Report Facing Challenges Related to RME Policies and Workforce Needs, but VHA Has Not Sufficiently Addressed These Challenges", "paragraphs": ["According to interviews with officials from all of the VISNs and selected  VAMCs, the top five challenges VAMCs face in operating their SPS  programs are related to meeting certain RME policies and challenges  addressing SPS workforce needs. In particular, officials told us that  VAMCs have challenges (1) meeting two RME policy requirements  related to climate control monitoring and a reprocessing transportation  deadline, and (2) addressing SPS workforce needs related to lengthy  hiring timeframes, the need for consistent overtime, and limited pay and  professional growth. (See Table 1.)", "Regarding the challenges VAMCs face in meeting RME policy  requirements, the majority of VISN and selected VAMC officials  interviewed reported experiencing challenges adhering to two  requirements from 2016 VHA issued Directive 1116(2).", "Climate control monitoring requirement. Officials reported that  meeting the climate control monitoring requirement related to airflow  and humidity is challenging for their VAMCs. Under the requirement  VAMCs must monitor the humidity and airflow in facility areas where  RME is reprocessed and stored in order to ensure that humidity levels  do not exceed a certain threshold and thereby allow the growth of  microorganisms. According to almost all VISN officials, meeting the  requirement is a challenge for some, if not all, of their VAMCs and in  particular for older VAMCs that lack proper ventilation systems. We  also found some instances of non-adherence on this issue in the  group of VISN inspection reports we reviewed. In a September 2017  memorandum, VHA relaxed the requirement (e.g., adjusted the  thresholds). Additionally, according to a VHA official, VHA wants to  renovate all outdated VAMC heating, ventilation, and air conditioning  systems to help VAMCs meet the requirement. Further, according to  VHA officials, VHA also allows VAMCs to apply for a waiver  exempting them from having to meet this requirement if they have an  action plan in place that shows they are working toward meeting the  requirement.", "Reprocessing transportation deadline requirement. Officials reported  that meeting the reprocessing transportation deadline was also  challenging for their VAMCs. Under the requirement, used RME  must be transported to the location where it will be reprocessed within  4 hours of use to prevent bioburden or debris from drying on the  instrument and causing challenges with reprocessing. Officials  reported this requirement as particularly challenging for VAMCs that  must transport their RME to another facility for cleaning, such as  community based outpatient clinics in rural areas that must transport  their RME to their VAMC\u2019s SPS department. We also found some  instances of non-adherence on this issue in the group of VISN  inspection reports we reviewed. In June 2016, VHA issued a  memorandum allowing the use of a pre-cleaning spray solution that, if  used, allows offsite facilities such as community based outpatient  clinics to transport that RME within 12 hours instead of the required 4  hours.", "VHA has made some adjustments to these requirements, although some  officials told us the requirements remain difficult to meet. Specifically,  over half of the VISN officials reported that the climate control monitoring  requirement continues to be a challenge for their VAMCs. Further, some  of the officials told us that meeting the 12-hour reprocessing  transportation requirement using the pre-cleaning spray was still  challenging, due to the distance between clinics and their VAMC\u2019s SPS  department; as a result, some facilities have decided to use disposable  medical equipment that does not require reprocessing to avoid this  requirement completely. When we shared this information with a VHA  official, the official stated that providing general information on how all  facilities can meet the climate control monitoring requirement is  impossible due to the uniqueness of each facility and that VHA has no  further plans to adjust the reprocessing transportation deadline  requirement. However, these challenges remain and some officials have  expressed frustration with the limited support they\u2019ve received from VHA.  In September 2017 we recommended that VHA establish a mechanism  by which program offices systematically obtain feedback from VISNs and  VAMCs on national policy after implementation and take the appropriate  actions. Our findings provide further evidence of the need for VA to  address this recommendation.", "Regarding the challenges VAMCs face in meeting SPS workforce needs,  almost all of the 18 VISN officials and officials from the three selected  VAMCs reported experiencing challenges related to lengthy hiring  timeframes, need for consistent overtime, and limited pay and  professional growth. According to officials, these challenges result in SPS  programs having difficulty maintaining sufficient staffing levels.", "Lengthy hiring timeframes. Officials reported that the lengthy hiring  process for SPS staff creates challenges in maintaining sufficient SPS  workforce. For example, officials from one VISN estimated that on  average it can take 3 to 4 months for a person to be hired. Officials  from a few other VISNs noted that not only does the lengthy hiring  process create challenges in recruiting qualified candidates (because  they accept other positions where they can be more quickly  employed), but that it also results in long periods of time when SPS  programs are short-staffed.", "Need for overtime. Officials reported that needing their SPS staff to  work overtime is a challenge. Specifically, 16 of the 18 VISN officials  stated that there is a need for staff at their VAMCs to work overtime  either \u201call, most, or some of the time.\u201d Further, officials from one VISN  told us their VAMCs have used overtime to meet the increased  workload required to implement VHA\u2019s RME policies; one official  noted that the overtime has led to dissatisfaction and retention issues  among SPS staff.", "Limited pay and professional growth. Officials identified limited pay  and professional growth associated with the current pay grade as the  biggest SPS workforce challenge. Almost all officials stated that the  current pay grade limits the pay and potential for professional growth  for the two main SPS positions\u2014medical supply technicians, who are  responsible for reprocessing RME, and SPS Chiefs, who have  supervisory responsibility. Specifically, the relatively low maximum  allowable pay discourages staff from accepting or staying in positions  and the current pay grade does not create a career path for SPS  medical supply technicians to grow within the SPS department.  Officials from one VISN told us that all VAMCs in their VISN have lost  SPS staff due to the low pay grade for both positions. VHA officials  said a proposed increase in the pay grade for SPS staff has been  drafted; however, they do not know when or if it will be made effective.", "Further, according to officials with knowledge of the proposed  changes, the changes could still be insufficient to recruit and retain  SPS staff with the necessary skills and experience.", "Some VISN and VAMC officials told us that difficulties maintaining  sufficient SPS staff levels have in some instances adversely affected  patients\u2019 access to care and increased the potential for reprocessing  errors that could affect patient safety. According to these officials, staffing  challenges can affect access to care when facilities have to limit or delay  care\u2014such as surgeries\u2014because there aren\u2019t enough staff available to  process all the necessary RME. An official at one VAMC told us that their  SPS staff must review available RME daily to determine whether  scheduled surgeries or other procedures can proceed. Further, among  the 18 operating room nurse managers who responded to our inquiries,  15 indicated they have experienced operating room delays because of  RME issues. In addition, some VISN and VAMC officials told us staffing  challenges can potentially have an impact on patient safety, because  when SPS staffing is not sufficient, mistakes are more likely to occur. For  example, officials told us that if SPS staffing levels are low, particularly if  they are low for an extended period of time, there is an increased chance  RME will be improperly reprocessed and, if used on a patient, put that  patient\u2019s safety at risk. A 2018 VA Office of Inspector General report on  the Washington D.C. VAMC found that consistent SPS understaffing was  a factor in SPS staff not being available to meet providers\u2019 need for  reprocessed RME; according to the report, \u201cveterans were put at risk  because important supplies and instruments were not consistently  available in patient care areas.\u201d", "While VHA is aware of these workforce challenges cited by VISN and  VAMC officials, it has not studied SPS staffing at VAMCs. As a result, it  does not know whether or to what extent the workforce challenges VISNs  and VAMCs report adversely affect VAMCs\u2019 ability to effectively operate  their SPS programs and ensure safe care for veterans. A National  Program Office of Sterile Processing official indicated that while the office  might have access to some of the necessary data from VAMC SPS  departments, it does not have all the necessary data or staff needed to  assess SPS staffing levels. Furthermore, the official added, conducting  such a study would not be the responsibility of her office. Officials from  the Workforce Management and Consulting Office said VHA is  considering a study of SPS staffing, given the results of the VA Office of  Inspector General 2018 review that identified high vacancy rates as a  contributing factor to the challenges with the SPS program at the  Washington D.C. VAMC. However, VHA does not have definitive plans to  complete this type of study or a timeframe for when the decision will be  made. Until the study is conducted and actions are taken based on the  study, as appropriate, VHA will not have addressed a potential risk to its  SPS programs. This is inconsistent with standards for internal control in  the federal government for risk assessment, which state that  management should identify, analyze, and respond to risks related to  achieving defined objectives. Without examining SPS workforce needs,  and taking action based on this assessment, as appropriate, VHA lacks  reasonable assurance that its approach to SPS staffing helps ensure  veterans\u2019 access to care and safety."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The proper reprocessing of surgical instruments and other RME used in  medical procedures is critical for ensuring veterans\u2019 access to safe care.  We have previously found that VA had not provided enough guidance to  ensure SPS staff were reprocessing RME correctly; in 2016, VA issued  Directive 1116(2)\u2014with requirements for the SPS program. While this is a  good step, our current review shows that VHA needs to strengthen its  oversight of VAMCs\u2019 adherence to these requirements. VHA has not  ensured that it has complete information from inspections of VAMCs, nor  does VHA consistently share inspection results and other information that  could help VAMCs meet the requirements. Without analysis of complete  information from inspections and consistent sharing of this information,  VHA does not have reasonable assurance that VAMCs are following all  RME policies, and VHA is missing an opportunity to strengthen VAMCs\u2019  adherence to RME requirements.", "Furthermore, officials from some VISNs and selected VAMCs report  challenges meeting two RME policy requirements\u2014the climate control  and the reprocessing transportation deadline requirements. If VHA  implements a recommendation we made in 2017 for the agency to obtain  feedback from VISNs and VAMCs on their efforts to implement VHA  policies and take the appropriate actions, it could help with these  challenges. Additionally, while nearly all of the officials from the 18 VISNs  and selected VAMCs interviewed reported challenges maintaining a  sufficient SPS workforce, VHA does not know whether the current SPS  workforce addresses VAMCs\u2019 SPS workforce needs. VHA officials say  that VHA is considering studying its SPS workforce; however, it has not  done so or announced a timeframe for doing so. Until it conducts such a  study, VHA will not know whether or to what extent reported SPS  workforce challenges adversely affect the ability of VAMCs to effectively  operate their SPS programs and ensure access to safe care for veterans."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to VHA:", "The Under Secretary of Health should ensure all RME inspections are  being conducted and reported as required and that the inspection  results VHA has are complete. (Recommendation 1)", "The Under Secretary of Health should consistently analyze and share  top common RME inspection findings and possible solutions with  VISNs and VAMCs. (Recommendation 2)", "The Under Secretary of Health should examine the SPS workforce  needs and take action based on this assessment, as appropriate.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to VA for comment. In its written  comments, which are provided in appendix III, VA concurred with our  recommendations.", "In its comments, VA acknowledged the need for complete RME  inspection information, stating that VHA will establish an oversight  process for reviewing and monitoring findings from site inspections and  for reporting this information to VHA leadership. Further, VA noted that  VHA will analyze data from RME inspections and share findings and  possible solutions with VISNs and VAMCs via a written briefing that will  be published on VHA\u2019s website and discussed during educational  sessions and national calls. VA also noted that VHA has an  interdisciplinary work group that has identified actions it can take to  address SPS workforce needs, including implementing an enhanced  market-based approach for determining pay levels and developing a  staffing model so VAMCs can determine what staffing levels they need to  more effectively operate their SPS programs. VA expects VHA to  complete all of these actions by July 2019 or earlier.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of Veterans Affairs. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs can be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Top VHA Reusable Medical Equipment Issues among Select Veterans Affairs Medical Centers, Fiscal Year 2017", "paragraphs": ["Our review of the 27 fiscal year 2017 inspections of VAMCs conducted by  Veterans Integrated Service Networks (VISN) for which VHA did not have  inspection reports identified a number of common reusable medical  equipment (RME) issues among the select VAMCs. The top 10 are listed  in table 2 below."], "subsections": []}, {"section_title": "Appendix II: Percentage of Issue Briefs Related to Reusable Medical Equipment by Category, Fiscal Years 2015-2017", "paragraphs": ["Our review of the Veterans Health Administration (VHA) summary of  issue briefs for fiscal years 2015 through 2017 identified three major  categories of issues related to reusable medical equipment (RME). See  table 3 below for the percentage of all issue briefs that fell into each of  these three categories."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karin Wallestad (Assistant  Director), Teresa Tam (Analyst-in-Charge), Kenisha Cantrell, Michael  Zose, and Krister Friday made major contributions to this report. Also  contributing were Kaitlin Farquharson, Diona Martyn, and Muriel Brown."], "subsections": []}]}], "fastfact": ["Reusable medical equipment, such as a flexible, camera-bearing endoscope, must be reprocessed between uses. It must be cleaned, disinfected or sterilized. The Veterans Health Administration has rules for such steps and oversees the process in VA Medical Centers.", "We found VHA did not have complete reprocessing inspection results and can't ensure that its medical centers are following its rules. We also found VHA does not know whether its current workforce is adequate to operate reprocessing programs and ensure access to safe care for veterans.", "We recommended that VHA take steps to ensure inspections occur and that it examine workforce needs."]}
{"id": "GAO-18-520T", "url": "https://www.gao.gov/products/GAO-18-520T", "title": "Cybersecurity: DHS Needs to Enhance Efforts to Improve and Promote the Security of Federal and Private-Sector Networks", "published_date": "2018-04-24T00:00:00", "released_date": "2018-04-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The emergence of increasingly sophisticated threats and continuous reporting of cyber incidents underscores the continuing and urgent need for effective information security. GAO first designated information security as a government-wide high- risk area in 1997. GAO expanded the high-risk area to include the protection of cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015.", "Federal law and policy provide DHS with broad authorities to improve and promote cybersecurity. DHS plays a key role in strengthening the cybersecurity posture of the federal government and promoting cybersecurity of systems supporting the nation's critical infrastructures.", "This statement highlights GAO's work related to federal programs implemented by DHS that are intended to improve federal cybersecurity and cybersecurity over systems supporting critical infrastructure. In preparing this statement, GAO relied on a body of work issued since fiscal year 2016 that highlighted, among other programs, DHS's NCPS, national integration center activities, and cybersecurity workforce assessment efforts."]}, {"section_title": "What GAO Found", "paragraphs": ["In recent years, the Department of Homeland Security (DHS) has acted to improve and promote the cybersecurity of federal and private-sector computer systems and networks, but further improvements are needed. Specifically, consistent with its statutory authorities, DHS has made important progress in implementing programs and activities that are intended to mitigate cybersecurity risks on the computer systems and networks supporting federal operations and our nation's critical infrastructure. For example, the department has:", "issued cybersecurity related binding operational directives to federal agencies;", "served as the federal-civilian interface for sharing cybersecurity related information with federal and nonfederal entities;", "Framework for Improving Critical Infrastructure Cybersecurity ; and", "Nevertheless, the department has not taken sufficient actions to ensure that it successfully mitigates cybersecurity risks on federal and private-sector computer systems and networks. For example, GAO reported in 2016 that DHS's National Cybersecurity Protection System (NCPS) had only partially met its stated system objectives of detecting and preventing intrusions, analyzing malicious content, and sharing information. GAO recommended that DHS enhance capabilities, improve planning, and support greater adoption of NCPS.", "In addition, although the department's National Cybersecurity and Communications Integration Center generally performed required functions such as collecting and sharing cybersecurity related information with federal and non-federal entities, GAO reported in 2017 that the center needed to evaluate its activities more completely. For example, the extent to which the center had performed its required functions in accordance with statutorily defined implementing principles was unclear, in part, because the center had not established metrics and methods by which to evaluate its performance against the principles. Further, in its role as the lead federal agency for collaborating with eight critical infrastructure sectors including the communications and dams sectors, DHS had not developed metrics to measure and report on the effectiveness of its cyber risk mitigation activities or on the cybersecurity posture of the eight sectors.", "GAO reported in 2018 that DHS had taken steps to assess its cybersecurity workforce; however, it had not identified all of its cybersecurity positions and critical skill requirements.", "Until DHS fully and effectively implements its cybersecurity authorities and responsibilities, the department's ability to improve and promote the cybersecurity of federal and private-sector networks will be limited."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Since fiscal year 2016, GAO has made 29 recommendations to DHS to enhance the capabilities of NCPS, establish metrics and methods for evaluating performance, and fully assess its cybersecurity workforce, among other things. As of April 2018, DHS had not demonstrated that it had fully implemented most of the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to appear at today\u2019s hearing on how federal  government programs implemented by the Department of Homeland  Security (DHS) are mitigating cybersecurity risk for federal and private- sector networks. As recent cyberattacks have illustrated, the need for  robust and effective cybersecurity has never been greater.", "At your request, I will provide an overview of our work issued since 2016  related to federal programs implemented by DHS that are intended to  improve federal cybersecurity and cybersecurity over systems supporting  critical infrastructure. My statement highlights our cybersecurity audit  findings and recommendations, including recommendations for improving  DHS\u2019s implementation of its cybersecurity authorities and management of  federal programs to mitigate cyber risks on networks.", "In developing this testimony, we relied on our previous reports, as well as  information provided by DHS on its actions in response to our previous  recommendations. We also considered information security related  information that the Office of Management and Budget reported to  Congress for fiscal year 2017. A more detailed discussion of the  objectives, scope, and methodology for this work is included in each of  the reports that are cited throughout this statement.", "We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform audits 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 such a reasonable basis for our findings and conclusions based  on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies and our nation\u2019s critical infrastructures\u2014such as  energy, transportation systems, communications networks, and financial  services\u2014are dependent on computerized (cyber) information systems  and electronic data to process, maintain, and report essential information,  and to operate and control physical processes. Virtually all federal  operations are supported by computer systems and electronic data, and  agencies would find it difficult, if not impossible, to carry out their missions  and account for their resources without these information assets. Hence,  the security of these systems and data is vital to public confidence and  the nation\u2019s safety, prosperity, and well-being. Ineffective security controls  to protect these systems and data could have a significant impact on a  broad array of government operations and assets.", "Yet, computer networks and systems used by federal agencies are often  riddled with security vulnerabilities\u2014both known and unknown. These  systems are often interconnected with other internal and external systems  and networks, including the Internet, thereby increasing the number of  avenues of attack and expanding their attack surface.", "Furthermore, safeguarding federal computer systems has been a long- standing concern. This year marks the 21st anniversary of when GAO  first designated information security as a government-wide high-risk area  in 1997. We expanded this high-risk area to include safeguarding the  systems supporting our nation\u2019s critical infrastructure in 2003 and  protecting the privacy of personally identifiable information in 2015.", "Over the last several years, we have made about 2,500  recommendations to agencies aimed at improving the security of federal  systems and information. These recommendations identified actions for  agencies to take to strengthen their information security programs and  technical controls over their computer networks and systems.  Nevertheless, many agencies continue to be challenged in safeguarding  their information systems and information, in part because they have not  implemented many of these recommendations. As of March 2018, about  885 of our prior information security-related recommendations had not  been implemented."], "subsections": [{"section_title": "Federal Law and Policy Provide DHS with Broad Authorities to Improve and Promote Cybersecurity", "paragraphs": ["DHS has broad authorities to improve and promote cybersecurity of  federal and private-sector networks. The federal laws and policies that  underpin these authorities include the following:", "The Federal Information Security Modernization Act (FISMA) of  2014 clarified and expanded DHS\u2019s responsibilities for assisting with  the implementation of, and overseeing, information security at federal  agencies. These responsibilities include requirements to: develop, issue, and oversee agencies\u2019 implementation of binding  operational directives to agencies, including directives for incident  reporting, contents of annual agency reports, and other  operational requirements; monitor agencies\u2019 implementation of information security policies provide operational and technical assistance to agencies,  including by operating the federal information security incident  center, deploying technology to continuously diagnose and  mitigate threats, and conducting threat and vulnerability  assessments of systems.", "Act of 2014, among other things, requires DHS to assess its  cybersecurity workforce. In this regard, the Secretary of Homeland  Security is to identify all positions in DHS that perform cybersecurity  functions and to identify cybersecurity work categories and specialty  areas of critical need.", "The National Cybersecurity Protection Act of 2014 codified the  role of the National Cybersecurity and Communications Integration  Center (NCCIC)\u2014a center established by DHS in 2009\u2014as the  federal civilian interface for sharing information concerning  cybersecurity risks, incidents, analysis, and warnings to federal and  non-federal entities, including owners and operators of information  systems supporting critical infrastructure.", "The Cybersecurity Act of 2015, among other things, sets forth  authority for enhancing the sharing of cybersecurity-related  information among federal and non-federal entities. The act gives  DHS\u2019s NCCIC responsibility for implementing this information sharing  authority. The act also requires DHS to:  Jointly develop with other specified agencies and submit to  Congress, procedures for sharing federal cybersecurity threat  information and defensive measures with federal and non-federal  entities.", "Deploy, operate, and maintain capabilities to prevent and detect  cybersecurity risks in network traffic traveling to or from an  agency\u2019s information system. DHS is to make these capabilities  available for use by any agency. In addition, the act requires DHS  to improve intrusion detection and prevention capabilities, as  appropriate, by regularly deploying new technologies and  modifying existing technologies.", "Long-standing federal policy as promulgated by a presidential  policy directive, executive orders, and the National Infrastructure  Protection Plan have designated DHS as a lead federal agency for  coordinating, assisting, and sharing information with the private-sector  to protect critical infrastructure from cyber threats."], "subsections": []}]}, {"section_title": "DHS Has Acted to Improve and Promote the Cybersecurity of Federal and Private- Sector Computer Systems, but Further Improvements Are Needed", "paragraphs": ["We have reviewed several federal programs and activities implemented  by DHS that are intended to mitigate cybersecurity risk for the computer  systems and networks supporting federal operations and our nation\u2019s  critical infrastructure. These programs and activities include deploying the  National Cybersecurity Protection System, providing continuous  diagnostic and mitigation services, issuing binding operational directives,  sharing information through the National Cybersecurity and  Communications Integration Center, promoting adoption of a  cybersecurity framework, and assisting private-sector partners with cyber  risk mitigation activities. We also examined DHS\u2019s efforts to assess its  cybersecurity workforce. DHS has made important progress in  implementing these programs and activities. However, the department  needs to take additional actions to ensure that it successfully mitigates  cybersecurity risks on federal and private-sector computer systems and  networks."], "subsections": [{"section_title": "DHS Needs to Enhance Capabilities, Improve Planning, and Support Greater Adoption of Its National Cybersecurity Protection System", "paragraphs": ["DHS is responsible for operating its National Cybersecurity Protection  System (NCPS), operationally known as EINSTEIN. NCPS is intended to  provide intrusion detection and prevention capabilities to entities across  the federal government. It also is intended to provide DHS with  capabilities to detect malicious traffic traversing federal agencies\u2019  computer networks, prevent intrusions, and support data analytics and  information sharing.", "In January 2016, we reported that the NCPS was partially, but not fully,  meeting most of its stated four system objectives:  Intrusion detection: We noted that NCPS provided DHS with a  limited ability to detect potentially malicious activity entering and  exiting computer networks at federal agencies. Specifically, NCPS  compared network traffic to known patterns of malicious data, or  \u201csignatures,\u201d but did not detect deviations from predefined baselines  of normal network behavior. In addition, the system did not monitor  several types of network traffic and its \u201csignatures\u201d did not address  threats that exploited many common security vulnerabilities and, thus  was not effective in detecting certain types of malicious traffic.", "Intrusion prevention: The capability of NCPS to prevent intrusions  (e.g., blocking an e-mail determined to be malicious) was limited to  the types of network traffic that it monitored. For example, the  intrusion prevention function monitored and blocked e-mail. However,  it did not address malicious content from other types of network traffic.", "Analytics: NCPS supports a variety of data analytical tools, including  a centralized platform for aggregating data and a capability for  analyzing the characteristics of malicious code. In addition, DHS had  further enhancements to this capability planned through 2018.", "Information sharing: DHS had not developed most of the planned  functionality for NCPS\u2019s information-sharing capability, and  requirements had only recently been approved. Moreover, we noted  that agencies and DHS did not always agree about whether  notifications of potentially malicious activity had been sent or received,  and agencies had mixed views about the usefulness of these  notifications. Further, DHS did not always solicit\u2014and agencies did  not always provide\u2014feedback on the notifications.", "We recommended that DHS take nine actions to enhance NCPS\u2019s  capabilities for meeting its objectives, better define requirements for  future capabilities, and develop network routing guidance. The  department agreed with our recommendations; however, as of April 2018,  it had not fully implemented 8 of the 9 recommendations. As part of a  review mandated by the Federal Cybersecurity Enhancement Act of  2015, we are currently examining DHS\u2019s efforts to improve its intrusion  detection and prevention capabilities."], "subsections": []}, {"section_title": "DHS Needs to Continue to Advance CDM Program to Protect Federal Systems", "paragraphs": ["The Continuous Diagnostics and Mitigation (CDM) program was  established to provide federal agencies with tools and services that have  the intended capability to automate network monitoring, correlate and  analyze security-related information, and enhance risk-based decision  making at agency and government-wide levels. These tools include  sensors that perform automated scans or searches for known cyber  vulnerabilities, the results of which can feed into a dashboard that alerts  network managers and enables the agency to allocate resources based  on the risk.", "DHS, in partnership with, and through the General Services  Administration, established a government-wide acquisition vehicle for  acquiring CDM capabilities and tools. The CDM blanket purchase  agreement is available to federal, state, local, and tribal government  entities for acquiring these capabilities.", "There are three phases of CDM implementation and the dates for  implementing Phase 2 and Phase 3 appear to be slipping:  Phase 1: This phase involves deploying products to automate hardware  and software asset management, configuration settings, and common  vulnerability management capabilities. According to the Cybersecurity  Strategy and Implementation Plan, DHS purchased Phase 1 tools and  integration services for all participating agencies in fiscal year 2015.", "Phase 2: This phase intends to address privilege management and  infrastructure integrity by allowing agencies to monitor users on their  networks and to detect whether users are engaging in unauthorized  activity. According to the Cybersecurity Strategy and Implementation  Plan, DHS was to provide agencies with additional Phase 2 capabilities  throughout fiscal year 2016, with the full suite of CDM phase 2  capabilities delivered by the end of that fiscal year. However, according to  the Office of Management and Budget\u2019s (OMB) FISMA Annual Report to  Congress for Fiscal Year 2017, the CDM program began deploying  Phase 2 tools and sensors during fiscal year 2017.", "Phase 3: According to DHS, this phase is intended to address boundary  protection and event management throughout the security life cycle. It  focuses on detecting unusual activity inside agency networks and alerting  security personnel. The agency had planned to provide 97 percent of  federal agencies the services they need for CDM Phase 3 in fiscal year  2017. However, according to OMB\u2019s FISMA report for fiscal year 2017,  the CDM program will continue to incorporate additional capabilities,  including Phase 3, in fiscal year 2018.", "In May 2016, we reported that most of the 18 agencies covered by the  CFO Act that had high-impact systems were in the early stages of  implementing CDM. All 17 of the civilian agencies that we surveyed  indicated they had developed their own strategy for information security  continuous monitoring. Additionally, according to the survey responses,  14 of the 17 civilian agencies had deployed products to automate  hardware and software asset configuration settings and common  vulnerability management.", "Further, more than half of these agencies noted that they had leveraged  products/tools provided through the General Services Administration\u2019s  acquisition vehicle. However, only 2 of the 17 agencies reported that they  had completed installation of agency and bureau/component-level  dashboards and monitored attributes of authorized users operating in  their agency\u2019s computing environment. Agencies noted that expediting the implementation of the CDM phases could be of benefit to them in  further protecting their high-impact systems.", "Subsequently, in March 2017, we reported that the effective  implementation of the CDM tools and capabilities can assist agencies in  overcoming the challenges of securing their information systems and  information. We noted that our audits often identify insecure  configurations, unpatched or unsupported software, and other  vulnerabilities in agency systems. Thus, the tools and capabilities  available under the CDM program, when effectively used by agencies,  can help them to diagnose and mitigate vulnerabilities to their systems.  We reported that, by continuing to make these tools and capabilities  available to federal agencies, DHS can also have additional assurance  that agencies are better positioned to protect their information systems  and information."], "subsections": []}, {"section_title": "Other DHS Services Are Available to Help Protect Systems but Are Not Always Used by Agencies", "paragraphs": ["Beyond the NCPS and CDM programs, DHS also provides a number of  services that could help agencies protect their information systems. Such  services include, but are not limited to:", "US-CERT monthly operational bulletins, which are intended to provide  senior federal government information security officials and staff with  actionable information to improve their organization\u2019s cybersecurity  posture based on incidents observed, reported, or acted on by DHS  and US-CERT.", "CyberStat reviews, which are in-depth sessions attended by National  Security Staff, as well as officials from OMB, DHS, and an agency to  discuss that agency\u2019s cybersecurity posture and opportunities for  collaboration. According to OMB, these interviews are face-to-face,  evidence-based meetings intended to ensure agencies are  accountable for their cybersecurity posture. The sessions are  intended to assist the agencies in developing focused strategies for  improving their information security posture in areas where there are  challenges.", "DHS Red and Blue Team exercises that are intended to provide  services to agencies for testing their systems with regard to potential  attacks. A Red Team emulates a potential adversary\u2019s attack or  exploitation capabilities against an agency\u2019s cybersecurity posture.  The Blue Team defends an agency\u2019s information systems when the  Red Team attacks, typically as part of an operational exercise  conducted according to rules established and monitored by a neutral  group.", "In May 2016, we reported that, although participation in these services  varied among the 18 agencies we surveyed, most of those that chose to  participate reported that they generally found these services to be useful  in aiding the cybersecurity protection of their high-impact systems.  Specifically,", "15 of 18 agencies reported that they participated in US-CERT monthly  operational bulletins, and most said they found the service very or  somewhat useful.", "All 18 agencies reported that they participated in the CyberStat  reviews, and most said they found the service very or somewhat  useful.", "9 of 18 agencies reported that they participated in DHS\u2019 Red/Blue  team exercises, and most said they found the exercises to be very or  somewhat useful.", "Half of the 18 agencies in our survey reported that they wanted an  expansion of federal initiatives and services to help protect their high- impact systems. For example, these agencies noted that expediting the  implementation of CDM phases, sharing threat intelligence information,  and sharing attack vectors, could be of benefit to them in further  protecting their high-impact systems. We believe that by continuing to  make these services available to agencies, DHS will be better able to  assist agencies in strengthening the security of their information systems."], "subsections": []}, {"section_title": "DHS Has Issued Binding Operational Directives to Federal Agencies", "paragraphs": ["FISMA authorizes DHS to develop and issue binding operational  directives to federal agencies and oversee their implementation by  agencies. The directives are compulsory and require agencies to take  specific actions that are intended to safeguard federal information and  information systems from a known threat, vulnerability, or risk.", "In September 2017, we reported that DHS had developed and issued  four binding operational directives as of July 2017, instructing agencies  to: mitigate critical vulnerabilities discovered by DHS\u2019s NCCIC through its  scanning of agencies\u2019 Internet-accessible systems; participate in risk and vulnerability assessments as well as DHS  security architecture assessments conducted on agencies\u2019 high-value  assets; address several urgent vulnerabilities in network infrastructure  devices identified in a NCCIC analysis report within 45 days of the  directive\u2019s issuance; and  report cyber incidents and comply with annual FISMA reporting  requirements.", "Since July 2017, DHS has issued two additional binding operational  directives instructing agencies to:  identify and remove the presence of any information security products  developed by AO Kaspersky Lab on their information systems and  discontinue the use of such products; and enhance e-mail by, among other things, removing certain insecure  protocols, and ensure public facing web sites provide services through  a secure connection.", "We plan to initiate work later this year to identify and assess DHS\u2019s  process for developing and overseeing agencies\u2019 implementation of  binding operational directives."], "subsections": []}, {"section_title": "DHS\u2019s National Integration Center Generally Performs Required Functions but Needs to Evaluate Its Activities More Completely", "paragraphs": ["In February 2017, we reported that NCCIC had taken steps to perform  each of its 11 statutorily required cybersecurity functions, such as being  a federal civilian interface for sharing cybersecurity-related information  with federal and nonfederal entities. NCCIC managed several programs  that provided data used in developing 43 products and services that the  center made available to its customers in the private-sector; federal,  state, local, tribal and territorial government entities; and other partner  organizations. For example, NCCIC issued indicator bulletins, which  could contain information related to cyber threat indicators, defensive  measures, and cybersecurity risks and incidents, and helped to fulfill its  function to coordinate the sharing of such information across the  government. Respondents to a survey that we administered to NCCIC\u2019s  customers varied in their reported use of NCCIC\u2019s products but had  generally favorable views of the center\u2019s activities.", "The National Cybersecurity Protection Act also required NCCIC to carry  out its functions in accordance with nine implementing principles, to the  extent practicable. However, as we reported, the extent to which NCCIC  adhered to the 9 principles when performing the functions was unclear  because the center had not yet determined the applicability of the  principles to all 11 functions. It also had not established metrics and  methods by which to evaluate its performance against the principles.", "We also identified several impediments to NCCIC performing its  cybersecurity functions more efficiently. For example, the center did not  have a centralized system for tracking security incidents and, as a result,  could not produce a report on the status of all incidents reported to the  center. In addition, the center did not keep current and reliable customer  information and was unable to demonstrate that it had contact information  for all owners and operators of the most critical cyber-dependent  infrastructure assets.", "We made nine recommendations to DHS for enhancing the effectiveness  and efficiency of NCCIC. Among other activities, these recommendations  called for the department to determine the applicability of the  implementing principles and establish metrics and methods for evaluating  performance; and address identified impediments. DHS agreed with the  recommendations; however, as of April 2018, all nine recommendations  remained unimplemented."], "subsections": []}, {"section_title": "Additional Actions by DHS Are Needed for Promoting and Assessing Private- Sector Adoption of the Cybersecurity Framework", "paragraphs": ["An executive order issued by the President in February 2013 (E.O.  13636) states that sector-specific agencies (SSA), which include DHS,  are to review the National Institute of Standards and Technology  Framework for Improving Critical Infrastructure Cybersecurity  (cybersecurity framework)  and, if necessary, develop implementation  guidance or supplemental materials to address sector-specific risks and  operating environments.", "In February 2014, DHS launched the Critical Infrastructure Cyber  Community Voluntary Program to assist the enhancement of critical  infrastructure cybersecurity and to encourage adoption of the framework  across the critical infrastructure sectors. In addition, DHS, as the SSA  and co-SSA for 10 critical infrastructure sectors, had developed  framework implementation guidance for some of the sectors it leads.", "Nevertheless, we reported weaknesses in DHS\u2019s efforts to promote the  use of the framework across the sectors and within the sectors it leads.  Specifically, in December 2015, we reported that DHS did not measure  the effectiveness of cyber community voluntary program to encourage  use of the Cybersecurity Framework. In addition, DHS and GSA, which  are the co-SSAs for the government facilities sector, had yet to determine  if sector implementation guidance should be developed for the  government facilities sector. Further, in February 2018, we reported that  none of the SSAs, to include DHS, had measured the cybersecurity  framework\u2019s implementation by entities within their respective sectors, in  accordance with the nation\u2019s plan for national critical infrastructure  protection efforts.", "We made two recommendations to DHS to better facilitate adoption of the  Cybersecurity Framework across the critical infrastructure sectors and  within the government facilities sector. We also recommended that DHS  develop methods for determining the level and type of framework  adoption by entities across their respective sectors. DHS concurred with  the three recommendations. As of April 2018, only the recommendation  related to the government facilities sector has been implemented."], "subsections": []}, {"section_title": "DHS Needs to Better Measure Effectiveness of Cyber Risk Mitigation Activities with Critical Infrastructure Sector Partners", "paragraphs": ["Presidential Policy Directive-21 issued by the President in February 2013,  states that SSAs are to collaborate with critical infrastructure owners and  operators to strengthen the security and resiliency of the nation\u2019s critical  infrastructure.", "In November 2015, we reported that the SSAs, including DHS, generally  used multiple public-private mechanisms to facilitate the sharing of  cybersecurity related information. For example, DHS used coordinating  councils and working groups of federal and nonfederal stakeholders to  facilitate coordination with each other. In addition, the department\u2019s  NCCIC received and disseminated cyber-related information for public  and private-sector partners.", "Nevertheless, we identified deficiencies in critical infrastructure partners\u2019  efforts to collaborate to monitor progress towards improving cybersecurity  within the sectors. Specifically, the SSAs for 12 sectors, including DHS  for 8 sectors, had not developed metrics to measure and report on the  effectiveness of their cyber risk mitigation activities or their sectors\u2019  cybersecurity posture. This was because, among other reasons, the  SSAs rely on their private-sector partners to voluntarily share information  needed to measure efforts.", "We made two recommendations to DHS\u2014one recommendation based on  its role as the SSA for 8 sectors and one recommendation based on its  role as the co-SSA for 1 sector\u2014to collaborate with sector partners to  develop performance metrics and determine how to overcome challenges  to reporting the results of their cyber risk mitigation activities. DHS  concurred with the two recommendations. As of April 2018, DHS has not  demonstrated that it has implemented these recommendations."], "subsections": []}, {"section_title": "DHS has taken Steps to Identify its Workforce Gaps; However, It Urgently Needs to Take Actions to Identify Its Position and Critical Skill Requirements", "paragraphs": ["In February 2018, we reported that DHS had taken actions to identify,  categorize, and assign employment codes to its cybersecurity positions,  as required by the Homeland Security Cybersecurity Workforce  Assessment Act of 2014. However, its actions had not been timely and  complete. For example, DHS had not met statutorily defined deadlines  for completing actions to identify and assign codes to cybersecurity  positions or ensured that its procedures to identify, categorize, and code  its cybersecurity positions addressed vacant positions, as required by the  act. The department also had not (1) identified the individual within each  DHS component agency who was responsible for leading and overseeing  the identification and coding of the component\u2019s cybersecurity positions or  (2) reviewed the components\u2019 procedures for consistency with  departmental guidance.", "In addition, DHS had not yet completed its efforts to identify all of the  department\u2019s cybersecurity positions and accurately assign codes to all  filled and vacant cybersecurity positions. In August 2017, DHS reported to  the Congress that it had coded 95 percent of the department\u2019s identified  cybersecurity positions. However, we determined that the department  had, at that time, coded approximately 79 percent of the positions. DHS  overstated the percentage of coded positions primarily because it  excluded vacant positions, even though the act required the department  to report such positions.", "Further, although DHS had taken steps to identify its workforce capability  gaps, it had not identified or reported to the Congress on its department- wide cybersecurity critical needs that align with specialty areas. The  department also had not annually reported its cybersecurity critical needs  to the Office of Personnel Management (OPM), as required; and it had  not developed plans with clearly defined time frames for doing so.", "We recommended that DHS take six actions, including ensuring that its  cybersecurity workforce procedures identify position vacancies and  responsibilities; reported workforce data are complete and accurate; and  plans for reporting on critical needs are developed. DHS concurred with  the six recommendations and stated that it plans to take actions to  address them by June 2018.", "In conclusion, DHS is unique among federal civilian agencies in that it is  responsible for improving and promoting the cybersecurity of not only its  own internal computer systems and networks but also those of other  federal agencies and the private-sector owners and operators of critical  infrastructure. Consistent with its statutory authorities and responsibilities  under federal policy, the department has acted to assist federal agencies  and private-sector partners in bolstering their cybersecurity capabilities.", "However, the effectiveness of DHS\u2019s activities has been limited or not  clearly understood because of shortcomings with its programs and a lack  of useful performance measures. DHS needs to enhance its capabilities;  expedite delivery of services; continue to provide guidance and  assistance to federal agencies and private-sector partners; and establish  useful performance metrics to assess the effectiveness of its  cybersecurity-related activities. In addition, developing and maintaining a  qualified cybersecurity workforce needs to be a priority for the  department. Until it fully and effectively performs its cybersecurity  authorities and responsibilities, DHS\u2019s ability to improve and promote the  cybersecurity of federal and private-sector networks will be limited.", "Chairman Johnson, Ranking Member McCaskill, and Members of the  Committee, this concludes my statement. I would be pleased to respond  to your questions."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact Gregory C. Wilshusen at (202) 512-6244 or  wilshuseng@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement.", "GAO staff who made key contributions to this testimony are Nabajyoti  Barkakati, Chris Currie, Larry Crosland, Tammi Kalugdan, David Plocher,  Di\u2019Mond Spencer, and Priscilla Smith."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["GAO, Critical Infrastructure Protection: Additional Actions Are Essential  for Assessing Cybersecurity Framework Adoption, GAO-18-211  (Washington, D.C.: Feb. 15, 2018).", "GAO, Cybersecurity Workforce: Urgent Need for DHS to Take Actions to  Identify Its Position and Critical Skill Requirements, GAO-18-175  (Washington, D.C.: Feb. 6, 2018).", "GAO, Federal Information Security: Weaknesses Continue to Indicate  Need for Effective Implementation of Policies and Practices, GAO-17-549  (Washington, D.C.: Sept. 28, 2017).", "GAO, Cybersecurity: Federal Efforts Are Under Way That May Address  Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017).", "GAO, Information Security: DHS Needs to Continue to Advance Initiatives  to Protect Federal Systems, GAO-17-518T (Washington, D.C.: Mar. 28,  2017).", "GAO, High-Risk Series: Progress on Many High-Risk Areas, While  Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.:  Feb. 15, 2017).", "GAO, Cybersecurity: Actions Needed to Strengthen U.S. Capabilities,  GAO-17-440T (Washington, D.C.: Feb. 14, 2017).", "GAO, Cybersecurity: DHS\u2019s National Integration Center Generally  Performs Required Functions but Needs to Evaluate Its Activities More  Completely, GAO-17-163 (Washington, D.C.: Feb. 1, 2017).", "GAO, Information Security: DHS Needs to Enhance Capabilities, Improve  Planning, and Support Greater Adoption of Its National Cybersecurity  Protection System, GAO-16-294 (Washington, D.C.: Jan. 28, 2016).", "GAO, Critical Infrastructure Protection: Measures Needed to Assess  Agencies\u2019 Promotion of the Cybersecurity Framework, GAO-16-152  (Washington, D.C.: Dec. 17, 2015).", "GAO, Critical Infrastructure Protection: Sector-Specific Agencies Need to  Better Measure Cybersecurity Progress, GAO-16-79 (Washington, D.C.:  Nov. 19, 2015).", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-217", "url": "https://www.gao.gov/products/GAO-18-217", "title": "Defense Acquisition Workforce: Opportunities Exist to Improve Practices for Developing Program Managers", "published_date": "2018-02-15T00:00:00", "released_date": "2018-02-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of Defense's (DOD) major acquisition programs continue to experience cost and schedule overruns. GAO previously found that selecting skilled program managers is a key factor to achieving successful program outcomes. DOD relies on military and civilian program managers to deliver its most expensive new weapon systems, meaning its approach to training, mentoring, retaining, and selecting program managers is critical.", "House Report 114-537 included a provision for GAO to review the career paths, development, and incentives for program managers. This report addresses how leading organizations train, mentor, retain, and ultimately select program managers; and the extent to which military service practices align with those leading practices. To conduct this work, GAO identified leading practices documented in prior work and by the Project Management Institute, and interviewed commercial companies identified by the Institute as leaders in this field. GAO also analyzed military service practices for developing program managers and compared those to leading practices."]}, {"section_title": "What GAO Found", "paragraphs": ["Leading organizations use 10 key practices to train, mentor, retain, and ultimately select skilled program managers. GAO found that military service practices for developing program managers align extensively with four of the leading practices, as shown in the table below.", "At least one military service's practices do not align extensively with five of the leading practices, as shown in the table below.", "For the remaining leading practice, none of the military services' practices align extensively, as shown in the table below.", "Military service officials generally agreed with the assessments. More consistent alignment with leading practices\u2014adapted for military and civilian personnel as appropriate and including greater use of existing financial rewards\u2014would enhance the services' ability to manage acquisition programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making eight recommendations, including that the military services improve practices that do not align extensively with leading practices and make greater use of existing financial rewards for good performance. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Our most recent assessment of the Department of Defense\u2019s (DOD)  current portfolio of major defense acquisition programs found that it  consists of 78 programs, including aircraft, missile interceptors,  submarines, and space-based sensors. We also found that the programs  are now expected to cost over $1.46 trillion to acquire, which is $484  billion more than was expected when they established their first full  estimates. Further, programs are now incurring an average delay of 31  months to deliver initial operating capability to the warfighter. We  previously found that key factors to achieving successful cost and  schedule outcomes include sound business cases, disciplined  requirements setting, long-term investment strategies, and the selection  of skilled, experienced, and well-trained program managers.", "To run these 78 major defense acquisition programs, DOD relies on  military and civilian program managers tasked with developing and  delivering new weapon systems while balancing factors that influence  cost, schedule, and performance and ensuring that systems are high  quality, supportable, and effective. To fulfill these responsibilities,  program managers require a certain scope of expertise to coordinate with  a broad array of military service and DOD officials, outside suppliers, and  internal and external oversight entities. Therefore, DOD\u2019s approach to  talent management\u2014which we define as training, mentoring, retaining,  and then selecting program managers\u2014is critical for developing the right  people.", "The House Committee on Armed Services, in House Report 114-537,  accompanying H.R. 4909 (National Defense Authorization Act for Fiscal  Year 2017), included a provision for GAO to conduct a study of the career  paths, development, and incentives for DOD program managers, and  identify opportunities for more effective approaches. This report  addresses (1) how leading organizations train, mentor, retain, and select  program managers and (2) the extent to which the military services\u2019  practices for training, mentoring, retaining, and selecting program  managers align with those of leading organizations.", "To identify how leading organizations train, mentor, retain, and select  program managers, we first reviewed GAO\u2019s Standards for Internal  Control in the Federal Government and prior GAO reports to identify  criteria regarding the controls that federal agencies such as DOD should  have in place to manage talent. We reviewed documentation from the  Project Management Institute, a not-for-profit association that provides  global standards for project and program management. We also selected  and spoke with four commercial companies identified by the Project  Management Institute as leading organizations for developing program  managers to learn about their practices. These companies were  AstraZeneca, a biopharmaceutical company; Boeing, a global aerospace  company; DXC Technology, an information technology services  company; and Rio Tinto, a mining company. Based on these reviews and  discussions, we identified a set of leading practices for developing  program managers in the areas of training, mentoring, retaining, and  selecting.", "To identify the extent to which the military services\u2019 practices align with  those of these leading organizations, we analyzed DOD, military service,  and relevant sub-component documentation on training, mentoring,  retaining, and selecting program managers for major defense acquisition  programs. We also interviewed the Directors for Acquisition Career  Management for the military services and officials from the Defense  Acquisition University and the Office of Human Capital Initiatives, among  others. See appendix I for more information about our scope and  methodology.", "We conducted this performance audit from August 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["GAO\u2019s Standards for Internal Control in the Federal Government state  that federal agencies\u2014such as DOD\u2014must demonstrate a commitment  to training, mentoring, retaining, and selecting competent individuals,  which would include program managers. These standards explain that  federal agencies like DOD should provide training that enables individuals to develop competencies  appropriate for key roles, reinforces standards of conduct, and can be  tailored based on the needs of the role; mentor individuals by providing guidance on their performance based  on standards of conduct and expectations of competence;  retain individuals by providing incentives to motivate and reinforce  expected levels of performance and desired conduct; and  select individuals for key roles by conducting procedures to determine  whether a particular candidate fits the organization\u2019s needs and has  the competence for the proposed role.", "The Project Management Institute, as well as four companies that we  included in this review, have also identified these activities as critical for  developing program managers.", "Program managers for DOD\u2019s 78 major defense acquisition programs,  along with program executive officers, their respective deputies, and  program managers for certain non-major programs, occupy what DOD  refers to as program management key leadership positions. There were  446 program management key leadership positions at the end of fiscal  year 2016. They are in turn part of a broader program management  career field, which numbers approximately 17,000 civilian and military  personnel.", "The Air Force typically brings its future program managers for major  defense acquisition programs into the career field early in their careers,  and then provides training and experiences to prepare them for the role.  In contrast, the Army and Navy typically bring their future program  managers into the career field later in their careers and from other fields,  such as engineering. As shown in table 1, at the end of fiscal year 2016,  most program manager positions for major defense acquisition programs  were held by military personnel.", "According to military service officials, when a military officer fills a  program manager position, a civilian usually fills the deputy program  manager position for that program and vice versa.", "Overarching guidance, training, and oversight for the defense acquisition  workforce is provided centrally by DOD in the Office of the Under  Secretary of Defense for Acquisition, Technology and Logistics, which  includes Human Capital Initiatives and the Defense Acquisition University.  Other officials and organizations that play key roles include  the Defense Acquisition Functional leader for program management,  who is responsible for establishing a competency model that reflects  the knowledge and skills required to be successful in the career field,  as well as position descriptions, requirements for key leadership  positions, certification standards, and continuous learning activities;  the Directors for Acquisition Career Management in each of the  military services, who serve as key advisors for policy, coordination,  implementation, and oversight of acquisition workforce programs  within their services; and acquisition commands and program executive offices within each  military service, which work together to manage acquisition programs  and initiatives to improve the workforce.", "Over the last decade, Congress has passed several laws aimed at  bolstering the acquisition workforce and specifically the program  management career field. Provisions have included requiring DOD to  develop a comprehensive strategy for enhancing the role of program  managers, provide advancement opportunities for military personnel, and  establish training programs for the acquisition workforce.", "Congress also established the Defense Acquisition Workforce  Development Fund (DAWDF) in 2008 to provide funds for the recruitment,  training, and retention of DOD acquisition personnel. Since the  establishment of DAWDF, DOD has obligated more than $3.5 billion in  DAWDF funds for these purposes. Of the more than $440 million in  DAWDF funds obligated in fiscal year 2016, almost $12 million was  obligated for the program management career field: $0.4 million was  obligated for recruitment, $10.5 million was obligated for training, and  $0.9 million was obligated for retention and recognition. Additional funds  supported the salaries of 33 people hired into the career field during fiscal  year 2016.", "To bolster the number of civilian personnel that could be selected for a  program manager position, the National Defense Authorization Act for  Fiscal Year 2018 requires DOD to implement a civilian program manager  development program. The act states that the plan for such a program  shall include consideration of qualifications, training, assignments and  rotations, and retention benefits, among other things."], "subsections": []}, {"section_title": "Leading Organizations Use a Combination of Practices to Develop Program Manager Talent", "paragraphs": ["We identified 10 practices, across four distinct areas, used by leading  organizations to develop program manager talent based on our extensive  review of Project Management Institute documents and discussions with  AstraZeneca, Boeing, DXC Technology, and Rio Tinto. These four  areas correspond to the internal control standards discussed previously.  Program managers at these companies share similar basic  responsibilities with DOD program managers, including overseeing the  development and production of goods and services in a timely and cost- effective manner. As shown in figure 1 below, leading organizations provide a mix of formal and informal training opportunities focused on  sharing knowledge and providing experiences that prepare people for  program management, offer mentoring opportunities to guide people along career paths use a mix of financial and nonfinancial incentives to retain high  select program managers based on identification of high-potential  talent and then assign program managers based on program needs.", "Boeing representatives noted that by using a combination of these  practices, over the past 15 years, their program managers have primarily  left positions due to promotion or retirement. Rio Tinto representatives  noted that in a challenging environment for finding suitable external talent,  they have been able to use these practices to successfully develop most  of the talent they need internally. DXC Technology representatives noted  that these practices enabled their program managers to receive better  feedback and address skill gaps. An AstraZeneca representative noted  that these practices have made it easier for people to get the range of  experiences they need to move into leadership positions."], "subsections": [{"section_title": "Leading Organizations Focus Training on Sharing Knowledge and Gaining Experience", "paragraphs": ["The Project Management Institute identifies training as the most common  component of development. Leading organizations we spoke with use  venues like training classes to share knowledge and experiences. These  organizations also expand people\u2019s knowledge and experience by  encouraging rotation of talent across organizational boundaries. Leading  organizations also provide access to on-the-job learning opportunities and  repositories of best practices and lessons learned. Examples of practices  used by commercial companies we spoke with are described below.", "Practice #1\u2014Training classes that allow program managers to share  experiences: Boeing representatives told us that the company sends  employees aspiring to be program managers to a 5-day, in-residence  program manager workshop. Attendees simulate challenging program  management scenarios and get exposure to senior executives who  discuss best practices and share experiences. They are expected to  make decisions quickly, and play different roles throughout the simulation  so they can gain a better understanding of the consequences of their  decisions. Similarly, DXC Technology holds multiday workshops for  program managers where they participate in role-playing scenarios in  which they have to react to a given situation that a program manager  could face. One of the key benefits of the workshop noted by DXC  Technology representatives is that they receive individual feedback on  areas for improvement.", "Practice #2\u2014Rotational assignments: According to Boeing  representatives, the company selects high-performing midcareer  employees interested in program management for a 2-year rotation  program in which they take leadership roles and solve difficult challenges  facing a part of the business. These could be internal assignments within  an individual\u2019s current business unit, or external assignments that cross  organizational boundaries, for example, between Boeing\u2019s commercial,  defense, and services businesses. Boeing representatives noted this as a  valuable leadership opportunity for the people involved, which helps drive  change in the organizations to which they are assigned. In order to  expand people\u2019s capabilities and give them a broader perspective on the  business, AstraZeneca regularly notifies its workforce\u2014via a monthly  newsletter and an online portal\u2014of rotational opportunities lasting 6  months to a year. These rotations could be within an individual\u2019s business  unit, or in a different location or part of the business.", "Practice #3\u2014On-the-job learning and information repositories: Rio  Tinto representatives told us that the company has managers from one  project participate in reviews and events for other projects in order to  transfer knowledge. For example, a manager from a mining operation  based in one country might visit a mining operation in another country to  share ideas. Rio Tinto also retains the formal reviews that take place at  the end of each project, as well as the lessons learned by the team itself,  in an accessible document management system. Similarly, AstraZeneca  uses online collaboration software to house project information that might  help others. It has also established a community of practice and  networking groups to share knowledge, and provides people moving into  management positions a checklist of tasks and meetings to complete  within their first 6 months. Boeing representatives told us that one way the  company provides on-the-job training and support to program managers  is by temporarily bringing in experts with prior experience to participate in  a wide variety of activities across all types of programs. These activities  include verifying designs and proactively identifying and resolving  challenges such as manufacturing problems."], "subsections": []}, {"section_title": "Leading Organizations Facilitate Mentoring Relationships and Establish Program Management Career Paths", "paragraphs": ["The Project Management Institute identifies mentoring as a way of  encouraging and supporting people. Leading organizations we spoke with  have programs in place to facilitate mentor and mentee relationships.  They expect senior people to serve as mentors. The organizations we  spoke with also mentor employees by laying out the career paths they  might need to follow to achieve the highest levels of program  management within the organization. Examples of practices used by  commercial companies we spoke with are described below.", "Practice #4\u2014Mentoring programs with senior leader involvement:  According to Boeing representatives, the company offers voluntary  mentoring programs\u2014both formal and informal\u2014at different points  throughout an employee\u2019s career cycle, including the early stages.  Depending on the career goals of an individual, Boeing offers both  mentors and sponsors, who are senior leaders that nominate people\u2014 especially high performers\u2014for specific opportunities. At Boeing, there is  an expectation that senior leaders will be involved in mentoring. For  example, midcareer program managers can be matched with executives  based on the preferences of the two parties. Relationships are  reevaluated annually. Through these relationships, mentees get exposure  to critical decisions, as well as other parts of the business. Rio Tinto  representatives told us that the company has a formal mentoring program  targeted at high-potential talent that partners people with senior leaders,  including those from different departments. Senior leaders at Rio Tinto  are expected to participate in long-term career development discussions  for people two levels below them. The company also provides senior  executives and other lower-level managers access to external coaches  who focus more on leadership than technical company matters.", "Practice #5\u2014Career paths that describe skills needed to advance:  According to DXC Technology representatives, the company has  documented a program management career path that details the skills  needed to be a program manager. The company annually identifies the  developmental needs of employees, who can then take steps such as  moving to another program to gain the required experience to address  any gaps. This helps management make decisions that benefit both the  individual and the company. Boeing representatives told us that the  company has developed a general career path for many of its career  fields, including program management, and encourages people to  develop the skills they need by gaining experience in different career  fields and business units. Boeing program managers we met with  described the range of experiences they had within the company that  equipped them for their roles, such as working on different kinds of  aircraft and in technical and business functions."], "subsections": []}, {"section_title": "Leading Organizations Use a Mix of Financial and Nonfinancial Incentives to Retain People", "paragraphs": ["Leading practices identified by us and the Project Management Institute  suggest that a combination of financial and nonfinancial incentives can be  used to retain high performers. For example, leading organizations we  spoke with offer student loan repayments and financing of higher  education in compensation packages as financial incentives. They also  provide monetary awards to recognize excellence in job performance and  contributions to organizational goals. Nonfinancial incentives could  include senior leadership recognizing strong performance in program  management and emphasizing the idea that program management is  prestigious, challenging, and key to business success. Examples of  practices used by commercial companies we spoke with are described  below.", "Practice #6\u2014Financial rewards for good performance: Rio Tinto  representatives told us that the company offers incentives that are based  on performance. The company includes pay raises linked to annual  performance ratings, which are determined by the extent to which a  program manager meets objectives including cost and schedule goals.", "According to Boeing representatives, the company annually assesses  program managers based on technical and financial performance  measures and employee feedback. These assessments help determine  annual salary increases and bonuses.", "Practice #7\u2014Education subsidies: Boeing offers tuition assistance to  all people after they have been at the company for at least 1 year. This  can support degree programs, professional certificates, and individual  courses in fields of study at over 270 colleges and universities. Boeing  representatives noted that this has helped foster a high degree of loyalty  from people.", "Practice #8\u2014Recognition: Boeing representatives told us that program  managers for major programs hold a high level of responsibility and  accountability. When program managers are successful at running  effective programs, they are often moved to larger and more complex  programs with much greater responsibility. AstraZeneca announces  recognition for program achievements such as meeting delivery targets  via e-mail and at town hall meetings, and significant achievements can  also be recognized through nomination for annual company-wide awards."], "subsections": []}, {"section_title": "Leading Organizations Select Program Managers Based on Identification of High-Potential Talent and Alignment with Program Needs", "paragraphs": ["The Project Management Institute emphasizes the importance of  identifying top talent and future high performers for key roles. Leading  practices for selecting program managers are rooted in the identification  of high-potential talent and the alignment of that talent with program  needs. Leading organizations we spoke with engage senior management  in identifying high performing people and monitoring their job  assignments, performance, and career progression. They also select  program managers with the blend of skills, experience, knowledge, and  expertise required to be effective within a particular program environment.  Examples of practices used by commercial companies we spoke with are  described below.", "Practice #9\u2014Identification of high-potential talent by senior leaders:  Rio Tinto representatives told us that senior leaders at the company  annually assess the potential and performance of its people and then  classify them in one of nine categories that include those who need  additional experiences and developmental opportunities, those in the right  role and at the right level that need to be kept engaged, and those  considered high potential who need challenging opportunities.  AstraZeneca identifies and keeps track of high-potential people through  annual talent assessments addressing each person\u2019s strengths and gaps,  as well as potential roles, development actions, and associated time  frames. The assessments also include an individual\u2019s professional  aspirations. According to Boeing representatives, the company uses its  succession planning process to identify a pool of qualified people able to  step into executive and program manager positions, including those who  are ready to step into a role immediately, and those who need some  additional development.", "Practice #10\u2014Assignment based on skills, experiences, and  program needs: According to DXC Technology representatives, the  company assigns program managers to roles based on a review of their  demonstrated management and subject matter competencies. For  example, an individual is evaluated on experience such as managing  programs of a certain size or level of complexity, as well as the outcomes  they achieved on those programs in terms of cost, schedule, and client  feedback. An individual is also evaluated on whether he or she has the  specific skills needed to manage a particular program, such as those  related to data migration or software application design. Boeing  representatives told us that the company takes into account a wide  variety of factors when assigning a program manager to a program.  Factors could include the size, dollar value, and complexity of a program,  as well as the developmental needs of a program manager."], "subsections": []}]}, {"section_title": "Military Service Practices Show a Mixed Level of Alignment with Leading Practices", "paragraphs": ["Our analysis of the practices used by the military services to train,  mentor, retain, and select program managers for major defense  acquisition programs shows a mix in the level of alignment with the  leading practices. We based our analysis on a review of DOD, military  service, and relevant sub-component documentation on training,  mentoring, retaining, and selecting program managers, including policies,  guidance, strategic plans, curricula, online portals, and acquisition  workforce data. Table 2 provides our assessment of the alignment of  military service practices with the 10 leading practices.", "Practices used by each of the military services align extensively with 4 of  the 10 leading practices. For 5 of the 10, practices used by at least one of  the military services do not align extensively with leading practices, and  for the remaining practice related to financial rewards for good  performance, none of the services\u2019 practices align extensively. We  discussed these assessments with each military service Director for  Acquisition Career Management, and they generally agreed with our  assessments."], "subsections": [{"section_title": "Practices for All of the Military Services Align Extensively with 4 of the 10 Leading Practices", "paragraphs": ["Military service practices align extensively with four of the leading  practices, as shown in table 3 below.", "For the first practice, alignment is largely the result of steps taken by DOD  to comply with the Defense Acquisition Workforce Improvement Act,  enacted as part of the National Defense Authorization Act for Fiscal Year  1991. This legislation set forth education, training, and experience  requirements that program managers must meet prior to being assigned  to a major defense acquisition program or significant non-major defense  acquisition program. All four practices that have extensive alignment  reflect a combination of DOD-wide initiatives and approaches unique to  the military services. The following summarizes our assessment of these  practices.", "Practice #1\u2014Training classes that allow program managers to share  experiences: DOD provides centralized training that brings together  current and prospective program managers to strengthen their skill sets  and share their experiences. The Defense Acquisition University has  developed a training curriculum of courses that people must complete\u2014in  conjunction with experience and education standards\u2014to be certified as  ready to take on increasingly challenging assignments. The highest  level courses required for program managers incorporate simulations,  case studies, senior agency and industry speakers, and team projects to  strengthen participants\u2019 analytical, critical thinking, and decision-making  skills. According to a Defense Acquisition University official, each year  approximately 350 people attend these courses. According to the military  services\u2019 Directors for Acquisition Career Management, all current major  defense acquisition program managers met their certification  requirements.", "The military services have also developed their own training for program  managers that brings peers together and addresses service-specific  issues. For example, the Navy has established program management  colleges at its largest systems commands. These colleges teach  curricula specific to Navy processes. The Navy also provides  approximately 200 program managers each year with training courses  focused on understanding commercial industry and managing  relationships with contractors. These classes, offered through business  schools, are taught by academic faculty, senior naval officials, and private  sector executives and focus on factors program managers need to be  aware of to understand industry behavior and decision-making.", "According to DOD\u2019s acquisition workforce strategic plan for fiscal years  2016 through 2021, the department intends to improve the type of training  it provides program managers, the timing of when courses are provided,  and the delivery method. The plan also noted DOD\u2019s intent to strengthen  qualification requirements for program management positions by further  developing the list of proficiencies associated with certifications, including  leadership skills for all levels and technical skills needed by those in the  \u201cbeginner\u201d and \u201cintermediate\u201d level program management positions. In  September 2016, the defense acquisition functional leader for program  management finalized and issued this list.", "Practice #3\u2014On-the-job learning and information repositories: Each  of the services provides its own unique on-the-job training or repositories  to share lessons learned from acquisition programs. The Air Force  provides people in the program management career field with detailed  task lists that support on-the-job learning along their career paths. For  example, people are encouraged to demonstrate competence in areas  such as schedule management. The Army has developed an online portal  that houses lessons learned from acquisition programs that were  documented around program milestones or upon termination. Users can  view and search lessons submitted by others, participate in discussion  forums, and reference acquisition case histories. The portal contains over  800 lessons learned, with over 400 relating specifically to program  management. The Navy has created a series of physical \u201cwar rooms\u201d that  display materials on the evolution and organization of the Navy, the  service\u2019s acquisition history, how to manage a major program, the unique  challenges of ship building, and case studies. The Navy hosts a 5-day  training program for program managers in these rooms in order to  transfer lessons learned from previous acquisition programs. The  Defense Acquisition University has also established an online program  management community of practice that houses a range of tools and  documents that communicate lessons learned.", "Practice #8\u2014Recognition: DOD leadership acknowledges the  challenges and importance of program management by designating the  most senior positions in the career field\u2014including program managers\u2014 as key leadership positions. These positions require a significant level of  authority commensurate with the responsibility and accountability for  acquisition program success. Based on our analysis of DOD acquisition  workforce data, while the program management career field represents  just over 10 percent of the overall acquisition workforce, it accounts for  almost 40 percent of key leadership positions.", "Senior leadership in each of the services also provides their own types of  recognition for good performance in program management. For example,  each service has an annual award recognizing high-performing program  managers. In addition, program management is an award category for the  DOD-wide Defense Acquisition Workforce Individual Achievement Award,  which includes recognition for winners at an awards ceremony held at the  Pentagon.", "Practice #10\u2014Assignment based on skills, experiences, and  program needs: All of the services evaluate the skills and experiences of  candidates for program manager roles, and ensure they have the  required qualifications. As part of their processes for filling these roles,  the services take note of specific needs associated with a program. In the  Army, civilian and military personnel apply each year and are  competitively selected by a board of senior Army acquisition leaders who  use instructions from the Secretary of the Army to select the best qualified  individuals. Once selected by the board, the Army uses another process  to match the skills and experience of the individual to those required by  the program manager position based on factors such as functional,  technical, and educational experience.", "In the Navy, civilian and military personnel apply and compete for specific  programs. As part of the documentation of candidate selection, the Navy  requires a description of how the candidate\u2019s skills align with the current  status of the program. The Air Force designates whether a program will  have a military or civilian program manager in advance. The senior official  who approves program manager selections considers program needs  along with individual qualifications and functional requirements. In  addition, the military services consult with the Office of the Under  Secretary of Defense for Acquisition, Technology and Logistics on the  selection of program managers for those programs where that office is  the decision authority."], "subsections": []}, {"section_title": "For Half the Leading Practices, There Is at Least One Military Service with Practices That Do Not Align Extensively", "paragraphs": ["For five of the leading practices, at least one of the military services\u2019  practices do not align extensively, as shown in table 4 below.", "The following summarizes our assessment of instances in which one or  two military services may be using a leading practice, but not all three  services. We also identify examples of military service actions that could  serve as a model for meeting those leading practices.", "Practice #2\u2014Rotational assignments: Each of the services provides  civilian and military program management personnel with opportunities to  rotate internally among other units or functions. However, while the  military services have identified external rotations with industry as a way  to gain valuable experience and improve people\u2019s business acumen,  practices in this area vary. For example,", "The Air Force has an external industry rotation program that is open  to both civilian and military personnel. In total, about seven military  and civilian program management personnel participate in this  program each year, according to the Air Force Director for Acquisition  Career Management.", "The Army\u2019s external industry rotation program is open only to military  personnel, and approximately 11 program management personnel  participate each year, according to the Army Director for Acquisition  Career Management. The Director also noted that some local Army  organizations send civilian personnel on industry rotations, but was  not aware of participation by civilian personnel in the program  management career field.", "The Navy uses the Secretary of Defense Executive Fellows program  to provide experience with commercial industry. This program is open  to participants from all the military services. Until 2017, participation in  the program was restricted to only military personnel. Over the past  5 years, between two and five Navy military acquisition personnel per  year participated in the program, according to the Navy Director for  Acquisition Career Management.", "The Directors for Acquisition Career Management noted that two of the  inherent difficulties with sending civilians on potentially year-long industry  rotations are that their organizational unit would need to fund the  participant\u2019s travel costs, and would also need to find people to perform  the participant\u2019s duties in their absence. The Air Force\u2019s industry  rotation program avoids the travel cost problem by finding civilians  opportunities with local companies. In addition, the program is targeted at  more junior personnel than the programs used by either the Army or  Navy, reducing the difficulty of filling their position while they are on a  rotation. As a result of the focus on military personnel participating in  industry rotations, civilian personnel in the Army and Navy miss an  opportunity to improve their business acumen and gain valuable  experience that would better prepare them for program manager roles.  They could benefit from consideration of the approaches taken by the Air  Force.", "Practice #4\u2014Mentoring programs with senior leader involvement:  Each of the services offers some kind of voluntary mentoring program.  However, only the Air Force and Army have a documented expectation  that senior civilian and military personnel serve as mentors. The Navy  provides a range of mentoring resources, but only has a documented  expectation that senior military personnel serve as mentors. The Navy  Director for Acquisition Career Management agrees that this expectation  is not documented for civilians, but believes that senior civilian leaders in  program management are aware that mentoring is a responsibility.  However, because it is not documented, some senior civilian leaders  might not be aware of this expectation.", "Practice #5\u2014Career paths that describe skills needed to advance:  Each of the services has outlined the steps people need to take to  become program managers and provided opportunities for both civilians  and military to advance to these and even higher level positions.  However, the descriptions of the skills people should obtain to advance  along the various career paths are inconsistent among the services.", "The Air Force includes the skills and competencies people need to  achieve specific career goals in the competency-based task lists  previously discussed as a tool to support on-the-job learning. The task  lists are the same for civilian and military personnel.", "The Army describes the skills and competencies civilians need to  advance via a one-page roadmap. While there is a one-page roadmap  for military personnel, it does not discuss or link to skills and  competencies. The online version of the civilian roadmap includes  direct links to an existing DOD tool that people can use to identify and  address gaps in their experience and capture demonstrated  experience in a wide range of program management competencies,  such as stakeholder management. People and their supervisors are  encouraged to use this tool to develop individual career development  plans. The tool also provides a common set of standards that  organizations can use to mitigate skill gaps through hiring or using  developmental opportunities.", "The Navy\u2019s systems command responsible for delivering and  supporting aircraft provides a career roadmap for the program  management career field, as well as detailed descriptions of the  different levels of skills and competencies needed to advance.", "However, the systems command responsible for delivering and  supporting ships does not have a formal career roadmap.", "Both Army and Navy Directors for Acquisition Career Management are  aware of these inconsistencies, and are working to put approaches in  place in fiscal year 2018 to address them and ensure that key groups in  the program management career field are not missing important  information about skills they should develop.", "Practice #7\u2014Education subsidies: All the services offer tuition  assistance to military and civilian personnel to further their education,  which has helped increase the percentage of program management  personnel with a graduate degree from 46 percent in fiscal year 2008 to  57 percent in fiscal year 2016. The services also offer student loan  repayments, but use them for different purposes. The Army and Navy use  DAWDF-funded student loan repayments\u2014and the requirement that  recipients sign an agreement to serve for 3 years\u2014as a retention tool for  program management personnel.", "However, the Air Force only uses these repayments as a recruiting tool,  despite the fact that they can be used for both recruitment and retention.  This decision stems from the results of a 2016 study the Air Force  commissioned from the RAND Corporation that found limited utility in  offering retention bonuses as a tool to retain talent. The Director for  Acquisition Career Management told us that the Air Force is scaling back  its use of all financial retention incentives and prefers to use student loan  repayments as a recruiting tool. The service agreement therefore only  covers the early part of someone\u2019s career with the Air Force, instead of  being a way to drive retention of more senior personnel. Prior GAO work  has found that financial retention incentives are among the most effective  flexibilities that agencies have for managing their workforce, and that  insufficient use of existing flexibilities can significantly hinder the ability of  agencies to retain and manage personnel.", "Practice #9\u2014Identification of high-potential talent by senior leaders:  The Army regularly and systematically involves senior management in  identifying high-potential program management talent among civilian and  military personnel. It requires senior managers to annually evaluate the  leadership potential of all civilian acquisition personnel at midcareer or  above, and the Army\u2019s annual evaluation for all military officers assesses  their potential for positions of greater responsibility. The Air Force has a  similar process for military personnel, but not civilians. The onus is on  civilian personnel to nominate themselves for development programs and  resources, rather than being identified and guided toward those  opportunities by senior leaders. The Navy only identifies high-potential  military and civilian talent on an informal basis, which varies across the  service. The Air Force and Navy risk overlooking high-potential talent as a  result of their approaches. The Directors for Acquisition Career  Management for both services acknowledge the ad hoc nature of their  practices, and are looking into steps they could take in fiscal year 2018 to  more systematically identify high-potential talent."], "subsections": []}, {"section_title": "None of the Military Services\u2019 Practices Align Extensively with the Practice of Providing Financial Rewards for Good Performance", "paragraphs": ["None of the military services\u2019 practices align extensively with leading  practices for providing financial rewards for good performance, as shown  in table 5 below.", "Commercial companies have more flexibility than DOD to financially  reward good performance. They are not subject to the legal restrictions  on compensation that federal agencies must consider, and can offer  types of compensation, such as stock options, that federal agencies  cannot. Despite this, DOD has mechanisms to financially reward high- performing people. However, these incentives are either unavailable to all  program management personnel because of the various pay systems  used by DOD, or are underutilized by the military services. For example,  military and civilian personnel are compensated under different systems.  Military pay and allowances are delineated in Title 37 of the U.S. Code,  and while there are provisions for retention bonuses that would cover  acquisition officers, there are none that reward high performance.", "Most DOD civilian personnel, on the other hand, are covered by the  General Schedule classification, a pay system that is used in many  agencies across the federal government. For the most part, people in this  pay system receive set pay increases as long as their performance is at  an acceptable level. The military services also have the option to convert  civilian personnel to the Civilian Acquisition Workforce Personnel  Demonstration Project, known as AcqDemo, where people including  those in the program management career field have the opportunity to  earn varying levels of pay increases or bonuses based on their  performance.", "The military services\u2019 use of AcqDemo varies. According to AcqDemo  data collected by DOD\u2019s Human Capital Initiatives office, as of the end of  fiscal year 2016, approximately 64 percent of the Army\u2019s civilian program  management workforce is covered by the system. Army officials told us  that the level of coverage has increased since then, and that  organizations containing the remaining eligible workforce are considering  participation in fiscal year 2018. Furthermore, officials told us that all  Army program managers are covered by AcqDemo. However, only 38  percent of the Navy\u2019s civilian program management workforce is covered  by the system, and 29 percent of the Air Force\u2019s. According to the  AcqDemo program manager and the Air Force and Navy Directors for  Acquisition Career Management, organizations are hesitant to extend  coverage because they are apprehensive about whether what is currently  a demonstration program will become permanent, and the time it takes  management to reach formal agreement with local bargaining units. The  greater coverage of AcqDemo across the Army\u2019s civilian program  management workforce compared to the Air Force and Navy suggests  that these two services may have opportunities to learn lessons from the  Army\u2019s experience.", "Congress recently took actions that could address some of the concerns  about AcqDemo. The National Defense Authorization Act for Fiscal Year  2018, for example, extends the authorized timeline for AcqDemo use from  December 31, 2020 to December 31, 2023, and increases the total  number of people who may participate in the program at any one time  from 120,000 to 130,000. As of February 2017, a total of approximately  36,000 people across DOD were participating in AcqDemo.", "The military services can also use DAWDF funding to recognize high- performing civilian personnel, but have only made limited use of this  funding for program management personnel. The Directors for Acquisition  Career Management reported the following awards between fiscal years  2008 and 2017:", "The Air Force awarded $5,000 to one recipient in fiscal year 2017.", "The Army awarded a total of $70,000 to 351 recipients on one team in  fiscal year 2015.", "The Navy awarded a total of $10,000 to seven recipients between  fiscal years 2008 and 2017.", "Requests for DAWDF funds are left to the discretion of acquisition  commands. According to the military services\u2019 Directors for Acquisition  Career Management, local commanders are not frequently requesting  DAWDF funds for program management recognition awards. One director  stated that this was because they want to avoid the perception of treating  civilian personnel differently from military personnel. As a result, the  military services are missing an opportunity to financially reward good  performance and potentially losing talented civilians by not using all  available retention tools. The Army Director stated that Army  organizations have also used other financial performance incentives,  such as spot awards for civilian program management personnel that are  not funded by DAWDF. This director also noted that government-wide  budgetary limitations for individual monetary awards have reduced the  flexibility to offer rewards for performance.", "The National Defense Authorization Act for Fiscal Year 2018 requires  DOD to commission a review of military and civilian program manager  incentives, including a financial incentive structure to reward program  managers for delivering capabilities on budget and on time. This  represents an opportunity for DOD to identify and begin to address  concerns about the equitable treatment of civilian and military program  management personnel."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The military services recognize that they need skilled program managers  to develop acquisition programs and have taken steps to develop that  top-notch talent. Of note, DOD has developed a solid training regimen  and established minimum training, experience, and education  requirements for people to manage acquisitions of various dollar  thresholds. The services have also established repositories that share  lessons learned and provide on-the-job learning opportunities to  supplement the formal training.", "Yet, when compared to leading practices, we found that several practices  used by the military services for training, mentoring, retaining, and  selecting people for program manager positions could be improved. For  instance, the Air Force has practices that extensively align with all leading  practices for training and mentoring, but we identified some practices for  retaining and selecting program managers that do not. We assessed the  Army as having practices that extensively align with all leading practices  for selecting program managers, but identified some practices for training,  mentoring, and retaining program managers that do not. We assessed  the Navy as having practices that do not extensively align with leading  practices in each of the areas of training, mentoring, retaining, and  selecting program managers.", "In nearly all cases, the military services could improve their practices by  learning from ideas and initiatives being used by another military service  or by commercial companies and ensuring that civilian and military  personnel have similar opportunities to develop. While commercial  companies have more flexibility in providing financial incentives to their  program managers, the military services could make greater use of  financial mechanisms provided by Congress\u2014such as DAWDF and  AcqDemo\u2014to reward high performing civilian personnel. DOD also has  an opportunity to identify for Congress any concerns about the equitable  treatment of civilian and military program management personnel when it  comes to rewarding good performance. Taking these actions could  encourage high-potential talent to remain in the program management  career field and strengthen the next generation of program managers."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of eight recommendations, including three to the  Air Force, two to the Army, and three to the Navy. Specifically:  The Secretary of the Air Force should take steps to address areas of  civilian and military program manager retention and selection that do not  align extensively with leading practices. This could include using  approaches already used by the other military services or commercial  companies. (Recommendation 1)", "The Secretary of the Air Force should make greater use of existing  financial mechanisms such as DAWDF to recognize high performers.  (Recommendation 2)", "The Secretary of the Air Force should identify lessons learned by the  Army related to the Army\u2019s experience to extend coverage of AcqDemo  across the civilian program management workforce. (Recommendation 3)", "The Secretary of the Army should take steps to address areas of civilian  and military program manager training, mentoring, and retention that do  not align extensively with leading practices. This could include using  approaches already used by the other military services or commercial  companies. (Recommendation 4)", "The Secretary of the Army should make greater use of existing financial  mechanisms such as DAWDF to recognize high performers.  (Recommendation 5)", "The Secretary of the Navy should take steps to address areas of civilian  and military program manager training, mentoring, retention, and  selection that do not align extensively with leading practices. This could  include using approaches already used by the other military services or  commercial companies. (Recommendation 6)", "The Secretary of the Navy should make greater use of existing financial  mechanisms such as DAWDF to recognize high performers.  (Recommendation 7)", "The Secretary of the Navy should identify lessons learned by the Army  related to the Army\u2019s experience to extend coverage of AcqDemo across  the civilian program management workforce. (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix II, DOD concurred with our  eight recommendations and in some cases identified ongoing efforts  among the military services to address the recommendations and  increase alignment with leading practices. In addition, DOD noted the  importance of addressing restrictions on how it can reward and retain  military personnel, and requested that this issue be included in an  ongoing study of DOD workforce incentives.", "DOD also stated that some of its recent accomplishments and  improvements were not mentioned in the report. For example, DOD noted  that representatives from the program management community meet  regularly to discuss and share lessons learned and best practices. Recent  accomplishments include updated competencies, career tracking and  development tools, and improvements to classroom and online training.  Our report recognizes the progress made by DOD in these areas and  highlights some specific examples. We also agree that there is a broader  range of efforts underway to enhance the development of program  managers.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; and the Secretaries of the Air  Force, Army, and Navy. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or sullivanm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report addresses (1) how leading organizations train, mentor, retain,  and select program managers and (2) the extent to which military service  practices for training, mentoring, retaining, and selecting program  managers align with those of leading organizations.", "To identify how leading organizations train, mentor, retain, and select  program managers, we first reviewed GAO\u2019s Standards for Internal  Control in the Federal Government to identify criteria regarding the  controls that federal agencies such as the Department of Defense (DOD)  should have in place to manage talent. To identify leading practices for  implementing these internal control standards, we first reviewed key  documentation, including relevant legislation and prior GAO reports  related to program management. We also reviewed prior GAO reports on  managing the federal workforce, and in particular those reports that  addressed retention mechanisms. We obtained and reviewed  documentation from the Project Management Institute, a not-for-profit  association that provides global standards for project and program  management, related to program management and managing talent. We  also worked with the Project Management Institute to identify suitable  companies for us to approach to learn about leading practices, based on  their membership in the Project Management Institute\u2019s Global Executive  Council, and insights from Project Management Institute representatives  regarding these companies\u2019 practices for training, mentoring, retaining, or selecting program managers. We spoke with or visited these companies,  and where possible, companies provided relevant documentation to  support their examples. The selected companies were the following:", "AstraZeneca is a biopharmaceutical company that focuses on the  discovery, development, and commercialization of prescription  medicines. AstraZeneca reported total revenues of $23 billion in 2016.", "Boeing Company is a global aerospace company and manufacturer of  commercial airplanes and defense, space, and security platforms and  systems. Boeing reported total revenues of $94.6 billion in 2016.", "DXC Technology is an end-to-end information technology services  company. Created by the merger of CSC and the Enterprise Services  business of Hewlett Packard Enterprise, DXC Technology serves  nearly 6,000 private and public sector clients across 70 countries,  delivering next-generation information technology services and  solutions.", "Rio Tinto is a metal and minerals mining company that finds, mines,  processes, and markets mineral resources including iron ore,  aluminum, copper, diamonds, and energy. Rio Tinto reported total  revenues of $33.8 billion in 2016.", "Based on our review of Project Management Institute documentation and  prior GAO reports, as well as our discussions with commercial  companies, we identified a set of leading practices for training, mentoring,  retaining, and selecting program managers. We shared this set of leading  practices with Project Management Institute representatives and made  adjustments based on their feedback.", "To identify the extent to which military service practices align with those of  leading organizations, we analyzed DOD, military service, and relevant  sub-component documentation on training, mentoring, retaining, and  selecting program managers for DOD\u2019s current portfolio of 78 major  defense acquisition programs as defined in our most recent assessment  of the portfolio. We also interviewed the following DOD and military  service organizations during our review:", "Office of the Under Secretary of Defense for Acquisition, Technology  and Logistics, Office of Human Capital Initiatives.", "Office of the Under Secretary of Defense for Personnel and  Readiness, Office of the Defense Civilian Personnel Advisory Service.", "Office of the Assistant Secretary of Defense for Acquisition", "Defense Acquisition University.", "Department of the Air Force Director for Acquisition Career  Management.", "Department of the Army Director for Acquisition Career Management.", "Department of the Navy Director for Acquisition Career Management.", "4th Estate Director for Acquisition Career Management.", "Naval Air Systems Command.", "Naval Sea Systems Command.", "We also interviewed a former Assistant Secretary of the Army and Deputy  Assistant Secretary of the Air Force with expertise in defense acquisition.  We used pertinent documentation and information from interviews with  officials to assess the extent to which each of the services\u2019 practices  aligned with leading practices. Specifically, we assigned ratings for three  levels of alignment. Extensive alignment means that the service\u2019s practice  contains all of the elements of the leading practice and is not limited to a  subset of the population. Partial alignment means that the service\u2019s  practice contains some, but not all, elements of the leading practice, or is  limited to a subset of the population, such as military or civilian personnel  only, or a particular organization within the service. Little to no alignment  means that the service\u2019s practice contains minimal or no elements of the  leading practice. The following is a list of elements for each practice:  1.  Training classes that allow program managers to share experiences:  Training classes that involve current or prospective program  managers and that allow for knowledge and experience sharing.  2.  Rotational assignments: Internal and external\u2014that is, industry\u2014 rotational assignments available to military and civilian personnel.  3.  On-the-job learning and information repositories: Resources that  provide access to guidance on how to perform program management  activities and learn from past program management experiences.  4.  Mentoring programs with senior leader involvement: Existence of  programs that facilitate mentor-mentee relationships and expectation  that senior personnel serve as mentors.  5.  Career paths that describe skills needed to advance: Documentation  for military and civilian personnel of skills needed at different stages of  career path(s) to becoming a program manager.  6.  Financial rewards for good performance: Consistent use of DAWDF to  fund recognition awards for 1 percent or more of civilian program  management personnel and AcqDemo coverage of a majority of the  civilian program management workforce.  7.  Education subsidies: Tuition assistance for further education and use  of DAWDF-funded student loan repayments as a retention\u2014versus  recruitment\u2014tool.  8.  Recognition: Senior-level recognition of prestige and challenging  nature of program manager role and of good performance in the role.  9.  Identification of high-potential talent by senior leaders: Processes for  senior leaders to assess military and civilian program management  personnel and identify those considered high potential.  10. Assignment based on skills, experiences, and program needs:  Program manager selection processes that assess candidate skills  and experiences and specific needs of a program.", "One analyst performed the initial assessment for each service, and the  supporting evidence was then reviewed by the Assistant Director, with  any disagreement discussed and resolved as a team. These discussions  also informed requests for more information and documentation from  each of the services. Assessments were updated based on what was  provided by the services. We also reviewed the military services\u2019  practices for approaches that one or more services had adopted that  aligned with leading practices, and that could potentially be adopted by  the other services to improve their alignment. We shared our  assessments with the military service Directors for Acquisition Career  Management to give them the opportunity to note additional approaches  or initiatives that might inform our assessments, and incorporated their  input as appropriate.", "We reviewed data from DataMart, DOD\u2019s acquisition workforce database,  on the composition of the acquisition workforce and the program  management career field as of the end of fiscal year 2016, including the  extent of coverage of the Civilian Acquisition Workforce Personnel  Development (AcqDemo) project. To assess the reliability of DOD\u2019s  DataMart data, we (1) reviewed existing information about the data and  the system that produced them, (2) interviewed knowledgeable agency  officials, and (3) reviewed written answers to questions about the  system\u2019s data reliability, including data collection and entry, underlying  data sources, and use of internal controls. We determined that the data  were sufficiently reliable for the purposes of our reporting objectives.", "We conducted this performance audit from August 2016 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Michael J. Sullivan, (202) 512-4841 or sullivanm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Cheryl Andrew (Assistant  Director), Emily Bond, Robert Bullock, Lorraine Ettaro, Kurt Gurka, Ruben  Gzirian, Ashley Rawson, Lucas Scarasso, and Robin Wilson made key  contributions to this report."], "subsections": []}]}], "fastfact": ["Cost and schedule overruns have plagued DOD\u2019s major defense acquisition programs, with current projected costs exceeding initial expectations by $484 billion and delays averaging 31 months. To keep programs on track, DOD relies on program managers who can balance factors that influence cost, schedule, and performance.", "The military services have taken steps to develop top-notch talent for this role. We compared their practices for training, mentoring, retaining, and selecting program managers to those of leading organizations and found shortfalls.", "We made recommendations for improvements, such as making more use of financial incentives."]}
{"id": "GAO-17-781T", "url": "https://www.gao.gov/products/GAO-17-781T", "title": "DOD Excess Property: Enhanced Controls Needed for Access to Excess Controlled Property", "published_date": "2017-07-27T00:00:00", "released_date": "2017-07-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's July 2017 report, entitled DOD Excess Property: Enhanced Controls Needed for Access to Excess Controlled Property ( GAO-17-532 ).", "merrittz@gao.gov or Wayne A. McElrath at (202) 512-2905 or mcelrathw@gao.gov ."]}, {"section_title": "What GAO Found", "paragraphs": ["The Defense Logistics Agency (DLA) has taken some actions and is planning additional actions to address identified weaknesses in its excess controlled property program. However, internal control deficiencies exist for, among other things, ensuring that only eligible applicants are approved to participate in the Law Enforcement Support Office (LESO) program and receive transfers of excess controlled property. DLA is establishing memorandums of understanding with participating federal agencies intended to, among other things, establish general terms and conditions for participation, revise its program application to require additional prospective participant information, and plans to provide additional online training for participating agencies that is expected to begin in late 2017. However, GAO created a fictitious federal agency to conduct independent testing of the LESO program's internal controls and DLA's transfer of controlled property to law enforcement agencies.", "Through the testing, GAO gained access to the LESO program and obtained over 100 controlled items with an estimated value of $1.2 million, including night-vision goggles, simulated rifles, and simulated pipe bombs, which could be potentially lethal items if modified with commercially available items . GAO's testing identified that DLA has deficiencies in the processes for verification and approval of federal law enforcement agency applications and in the transfer of controlled property, such as DLA personnel not routinely requesting and verifying identification of individuals picking up controlled property or verifying the quantity of approved items prior to transfer. Further, GAO found that DLA has not conducted a fraud risk assessment on the LESO program, including the application process. Without strengthening DLA and LESO program internal controls over the approval and transfer of controlled property to law enforcement agencies, such as reviewing and revising policy or procedures for verifying and approving federal agency applications and enrollment, DLA lacks reasonable assurance that it has the ability to prevent, detect, and respond to potential fraud and minimize associated security risks.", "Examples of Controlled Property Items Obtained", "DLA maintains a public Internet site to address statutory requirements to provide information on all property transfers to law enforcement agencies. DLA's public Internet site shows all transferred property, and, as of April 2017, in response to GAO's findings, has included a definition of controlled property to distinguish for the general public what items are considered controlled."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to be here today with my colleague, Wayne  McElrath, with whom I am jointly providing this statement. Today, we will  discuss our July 2017 report on the Department of Defense (DOD) Law  Enforcement Support Office (LESO) program, also known as the 1033  program in reference to the section of the law authorizing it. Under this  authority, DOD can transfer excess personal property to federal, state,  and local law enforcement agencies. The Defense Logistics Agency  (DLA) Disposition Services administers the LESO Program for DOD.", "Since 1991, DOD has reported transferring more than $6 billion worth of  its excess personal property to more than 8,600 federal, state, and local  law enforcement agencies. According to DOD, about 4 to 7 percent of the  total excess property transferred is controlled property, which typically  involves sensitive equipment and items that cannot be released to the  public. Examples of controlled items available include night-vision  goggles, thermal imaging equipment, specialized printers, and explosive  ordnance detonation robots, as well as certain high-visibility items, such  as small arms, High Mobility Multipurpose Wheeled Vehicles (HMMWVs),  Mine\u2010Resistant Ambush Protected Vehicles (MRAPs), and aircraft. LESO  program data shows that during calendar years 2013 through 2015,  approximately $1.1 billion of excess controlled property was transferred to  federal, state, and local law enforcement agencies. Approximately two- thirds of the 388,000 DOD excess controlled property items had been  transferred to state and local agencies, and one-third had been  transferred to federal agencies.", "Over the past 15 years, we have examined DOD\u2019s excess property  reutilization program and reported deficiencies, including unauthorized  parties obtaining excess controlled property and internal control  breakdowns with regard to the security of sensitive excess military  equipment. We have made over 20 recommendations aimed at enhancing internal controls over DOD\u2019s disposal and accountability of its  excess property and improving the overall economy and efficiency of the  reutilization program. The department has implemented most of the  recommendations. Likewise, the DOD Office of Inspector General has  reported on internal control deficiencies, such as the distribution of  excess property to law enforcement agencies without the accountability  necessary to ensure that the released property had the proper  authorization. The Inspector General has made recommendations, which  the department has also implemented.", "Our testimony today summarizes key findings from our July 2017 report  on DOD excess property. Accordingly, our testimony addresses (1) how  federal, state, and local law enforcement agencies reported using and  benefiting from excess controlled property transferred to them through the  LESO program; and (2) the extent to which DLA has taken actions to  enhance processes, including internal controls, related to its transfers of  excess controlled property.", "To conduct our work, we reviewed DOD policies and procedures,  interviewed and surveyed cognizant officials, and conducted independent  testing of LESO\u2019s application and DLA\u2019s transfer process. Specifically, we  conducted a survey of 15 participating federal law enforcement agencies  as well as 53 state coordinators who had controlled property transferred  to their offices through the LESO program during calendar years 2013,  2014, and 2015 to gain an understanding of their use of the LESO  program. Also, we conducted non-generalizable case studies of five  states: Arizona, Georgia, Maryland, Michigan, and Texas. We interviewed  federal, state, and local law enforcement officials in each of the selected  states to gain an understanding of how property is transferred to them,  including how they screen for, obtain, and dispose of DOD excess  controlled property.", "Additionally, our investigators created a fictitious federal agency to  conduct independent testing of the LESO program\u2019s internal controls and  DLA\u2019s transfer of controlled property to law enforcement agencies. We  also compared DLA and LESO practices to those identified in GAO\u2019s A  Framework for Managing Fraud Risks in Federal Programs (hereafter  cited as the Fraud Risk Framework). Issued in July 2015, GAO\u2019s Fraud  Risk Framework is a comprehensive set of leading practices that serves  as a guide for program managers to use when developing efforts to  combat fraud in a strategic, risk-based manner. Further details on our  scope and methodology are included in our report. The work on which  this statement is based was conducted in accordance with generally  accepted government auditing standards and our investigative work was  performed in accordance with the Council of Inspector General on  Integrity and Efficiency standards for investigations."], "subsections": [{"section_title": "Law Enforcement Agencies Reported Various Uses and Benefits from the Transfer of the DOD Excess Controlled Property", "paragraphs": ["Federal law enforcement agencies and state coordinators in our survey\u2014 as well as officials we interviewed from federal, state, and local law  enforcement agencies\u2014reported various uses of DOD excess controlled  property for law enforcement activities. The reported uses included  enhancing counterdrug, counterterrorism, and border-security activities.  Also, law enforcement agencies reported using DOD\u2019s excess controlled  property for other law enforcement activities, such as search and rescue,  natural disaster response, surveillance, reaching barricaded suspects,  police training, and the serving of warrants.", "Federal, state, and local agencies cited a number of ways in which they  had benefited from LESO program, with several reporting that the  transfers of controlled property allowed them to save money. For  example, a local law enforcement official in Texas reported that 96  percent of the department budget goes to salaries and that the LESO  program helped the department acquire items that it would otherwise not  be able to afford, saving the department an estimated $2 million to $3  million. Additionally, agencies provided examples of how property they  received through the LESO program have been used. For example, the  Bureau of Indian Affairs officials reported they have used vehicles to  support their Office of Justice Services\u2019 drug unit during marijuana  eradication and border operations by providing transport to agents over  inhospitable terrain in mountainous and desert environments. In another  example, Texas law enforcement officials reported that the San Marcos  and Hays County police departments used their issued Mine Resistant  Ambush Protected (MRAP) vehicles to rescue more than 600 stranded  people from floodwaters in October 2015. Moreover, the Los Angeles  County Sheriff\u2019s Department reported that it used a robot to remove a rifle  from an attempted murder suspect who had barricaded himself."], "subsections": []}, {"section_title": "DLA Has Taken Some Actions to Address Weaknesses in Its Excess Controlled Property Program, but Deficiencies Exist in Key Processes", "paragraphs": [], "subsections": [{"section_title": "DLA Actions to Address Weaknesses in LESO Program", "paragraphs": ["DLA has taken some steps to address previously identified weaknesses  in its processes for transferring and monitoring its excess controlled  property through revisions to its policy and procedures on the  management, oversight, and accountability of the LESO program. Such  revisions were made, in part, because of recommendations made by the  DOD and DLA Offices of Inspector General. The DOD and DLA Offices of  Inspector General conducted four audits of the LESO program between  2003 and 2013 that identified more than a dozen recommendations, such  as developing and implementing written standard operating procedures  for the approval and disapproval of law enforcement agency property  requests and issuance, transfer, turn-in and disposal of LESO property. In  our July 2017 report, we found the department had taken the following  actions to enhance its transfer process through revisions to policy and  procedures:  transitioned full management responsibility of the LESO Program to DLA Disposition Services in 2009; developed LESO Program Standard Operating Procedures in 2012 and updated them in 2013; transitioned to a new data system in 2013 after identifying that the old system was not capable of post-issue tracking;revised the DLA instruction that provides policy, responsibility, and procedures for DLA\u2019s management responsibilities of the LESO program in 2014 and 2016; and revised LESO program processes in 2016 to incorporate recommendations made by the Federal Interagency Law Enforcement Equipment Working Group, such as defining executive order controlled property or prohibiting schools K-12 from participating in the program.", "In addition, DLA is in the process of developing additional training on  LESO program policies and procedures, and is establishing  memorandums of understanding with federal law enforcement agencies  on the general terms and conditions of participating in the program,  including the restrictions on the transfer and sale of controlled property."], "subsections": []}, {"section_title": "DLA Has Deficiencies in Its Processes for Verifying and Approving Applications and Transferring Property and Has Not Conducted a Risk Assessment", "paragraphs": ["We found weaknesses in three areas: (1) verifying and approving  applications, (2) transferring property, and (3) the assessment of risk.  First, our independent testing of the LESO program\u2019s internal controls  identified deficiencies in the processes for verification and approval of  federal law enforcement agency applications. Specifically, our  investigators posing as authorized federal law enforcement officials of a  fictitious agency applied and were granted access to the LESO program  in early 2017. In late 2016, we emailed our completed application to the  LESO program office. Our application contained fictitious information  including agency name, number of employees, point of contact, and  physical location. In early 2017, after revising our application at the  direction of LESO officials we were notified that our fictitious law  enforcement agency was approved to participate in the LESO program.  LESO officials also emailed us to request confirmation of our agency\u2019s  authorizing statute; in response, our investigators submitted fictitious  authorizing provisions as provisions in the U.S. Code. At no point during  the application process did LESO officials verbally contact officials at the  agency we created\u2014either the main point of contact listed on the  application or the designated point of contact at a headquarters\u2019 level\u2014to  verify the legitimacy of our application or to discuss establishing a  memorandum of understanding with our agency.", "DLA\u2019s internal controls for verifying and approving federal agency  applications and enrollment in the LESO program were not adequate to  prevent the approval of a fraudulent application to obtain excess  controlled property. Specifically, LESO\u2019s reliance on electronic  communications without actual verification does not allow it to properly  vet for potentially fraudulent activity. For example, DLA did not require  supervisory approval for all federal agency applications, or require  confirmation of the application with designated points of contact at the  headquarters of participating federal agencies. Additionally, at the time  we submitted our application, DLA officials did not visit the location of the  applying federal law enforcement agency to help verify the legitimacy of  the application. After our briefing of DLA officials in March 2017 on the  results of our investigative work, DLA officials stated they took immediate  action, and in April 2017 visited 13 participating federal law enforcement  agencies. However, at this time DLA has not reviewed and revised the  policy or procedures for verifying and approving federal agency  applications and enrollment in the LESO program.", "Second, our independent testing also identified deficiencies in the transfer  of controlled property, such as DLA personnel not routinely requesting  and verifying identification of individuals picking up controlled property or  verifying the quantity of approved items prior to transfer. Our  investigators, after being approved to participate in the LESO program,  obtained access to the department\u2019s online systems to view and request  controlled property. We subsequently submitted requests to obtain  controlled property, including non-lethal items and potentially-lethal items  if modified with commercially available items. In less than a week after  submitting the requests, our fictitious agency was approved for the  transfer of over 100 controlled property items with a total estimated value  of about $1.2 million. The estimated value of each item ranged from $277  to over $600,000, including items such as night-vision goggles, reflex  (also known as reflector) sights, infrared illuminators, simulated pipe  bombs, and simulated rifles. Our investigator scheduled appointments  and obtained the controlled property items, such as those shown in the  photos below.", "Using fictitious identification and law enforcement credentials, along with  the LESO-approved documentation, our investigator was able to pass  security checks and enter the DLA Disposition Service warehouse sites.  Personnel at two of the three sites did not request or check for valid  identification of our investigator picking up the property. According to DLA  guidance, direct pickup of allocated property may be made by an  individual with valid identification and the appropriate DOD authorization  form that is signed by the authorized individual listed in the letter.", "DLA has not taken steps to reasonably ensure that onsite officials  routinely request and verify valid identification of the individual(s)  authorized to pick up allocated property from the LESO program, as  required by the guidance. DLA officials acknowledged they could take  additional steps to ensure compliance with the requirements in the  handbook. Furthermore, although we were approved to receive over 100  items and the transfer documentation reflects this amount, we were  provided more items than we were approved to receive. The discrepancy  involved one type of item\u2014infrared illuminators. We requested 48 infrared  illuminators but onsite officials at one Disposition Services site provided  us with 51 infrared illuminators in 52 pouches, of which one pouch was  empty. Additionally, we found that one DLA Disposition Services site had  a checklist as a part of their transfer documentation for their personnel to  complete. The checklist required manual completion of several items,  including quantity, date, and who fulfilled the order. The other two DLA  Disposition Services sites, including the site that transferred the wrong  quantity, did not include this checklist with the transfer documentation we  received. DLA guidance states that accountability records be maintained  in auditable condition to allow property to be traced from receipt to final  disposition. We concluded that without guidance that specifically  requires DLA Disposition Services\u2019 on-site officials to verify the type and  quantity of approved items against the actual items being transferred prior  to removal from the sites, DLA will lack reasonable assurance that the  approved items transferred are appropriately reflected in their inventory  records.", "Third, while DLA has taken some steps, mostly in early 2017, to address  identified deficiencies in the LESO program, DLA lacks a comprehensive  framework for instituting fraud prevention and mitigation measures.  During the course of our review, DLA revised the LESO program  applications by requiring applicants to sign an attestation that the agency  that they represent is a legitimate law enforcement agency. Further, DLA  officials stated they are more carefully reviewing the legitimacy of some  information on the application such as email addresses and physically  visiting federal agencies that enter into memorandums of understanding  with the LESO program.", "However, as previously discussed, we identified internal controls  weakness in the policy and procedures for verifying and approving federal  agency applications and enrollment as well as weakness throughout the  process from approval to the actual transfer of the items to the agencies,  which indicates that DLA has not examined potential risks for all stages of  the process. According to GAO\u2019s Fraud Risk Framework, effective fraud  risk managers collect and analyze data on identified fraud schemes, use  these lessons learned to improve fraud risk management activities, and  plan and conduct fraud risk assessments that are tailored to their  programs. The framework states there is no universally accepted  approach for conducting fraud risk assessments since circumstances  among programs vary. However, per leading practices, assessing fraud  risks generally involves five actions: (1) identifying inherent fraud risks  affecting the program, (2) assessing the likelihood and effect of those  fraud risks, (3) determining fraud risk tolerance, (4) examining the  suitability of existing fraud controls and prioritizing residual fraud risks,  and (5) documenting the program\u2019s fraud risk profile.", "DLA has begun to examine some fraud risks associated with the LESO  program. However, DLA officials acknowledged during our March 2017  meeting that they have not conducted a fraud risk assessment on the  LESO program to include the application process, and as such, has not  designed or implemented a strategy with specific control activities to  mitigate risks to the program. We concluded that conducting such an  assessment could have program-wide improvements, including  strengthening the controls to verify the legitimacy of applicants.", "Overall, we concluded in our July 2017 report that DLA\u2019s internal controls  did not provide reasonable assurance in preventing fraud. Therefore, we  made four recommendations for DLA to:  review and revise policy or procedures for verifying and approving federal agency applications and enrollment; ensure compliance that DLA Disposition Services on-site officials transferring controlled property verify that persons picking up items have valid identification and are authorized to pick up allocated property from the LESO program; issue guidance that requires DLA Disposition Services on-site officials to verify the type and quantity of approved items against the actual items being transferred prior to removal from the sites; and conduct a fraud risk assessment to design and implement a strategy with specific internal control activities to mitigate assessed fraud risks.", "DOD concurred with all of our recommendations and highlighted actions  to address each one.", "Chairman Wilson, Ranking Member Bordallo, and Members of the  Subcommittee, this concludes our prepared statement. My colleague, Mr.  McElrath, and I would be pleased to respond to any questions that you  may have at this time."], "subsections": []}]}, {"section_title": "Contacts and Acknowledgments", "paragraphs": ["For questions about this statement, please contact Zina D. Merritt at (202)  512-5257 or merrittz@gao.gov or Wayne A. McElrath at (202) 512-2905  or mcelrathw@gao.gov. In addition, individuals making significant  contributions to this statement include: Marilyn Wasleski, Assistant  Director; Laura Czohara, Martin de Alteriis, Barbara Lewis, Felicia Lopez,  Maria McMullen, George Ogilvie, Richard Powelson, and Samuel Woo.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-92", "url": "https://www.gao.gov/products/GAO-18-92", "title": "Federal Housing Administration: Capital Requirements and Stress Testing Practices Need Strengthening", "published_date": "2017-11-09T00:00:00", "released_date": "2017-12-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FHA insures private lenders against losses from defaults on single-family mortgages. According to independent actuarial reviews, in fiscal years 2009\u20132014, FHA's MMI Fund (which insures $1.2 trillion in single-family traditional and reverse mortgages) did not meet its statutory 2 percent capital requirement. Also, a budgetary review determined that the fund required $1.69 billion in supplemental funds in fiscal year 2013.", "GAO was asked to examine issues concerning the MMI Fund's capital requirement and actuarial reviews. This report examines the types of information provided by assessments of the fund's financial condition, FHA's capital requirement and stress testing practices, and trade-offs associated with including reverse mortgages in the fund's capital assessment.", "GAO analyzed actuarial and budgetary assessments of the MMI Fund. GAO reviewed financial institution and regulatory capital and stress testing principles to develop an evaluative framework and applied it to FHA. GAO also interviewed federal and mortgage industry officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Housing Administration's (FHA) budgetary reviews of the Mutual Mortgage Insurance Fund (MMI Fund) assess whether it needs more budget authority to cover expected future costs, and independent actuarial reviews provide complementary information on the fund's finances. FHA uses the actuarial reviews to assess whether the MMI Fund's capital ratio (economic value divided by insurance obligations) meets the 2 percent requirement and how fund components would perform under alternative economic scenarios. While the actuarial assessment does not directly determine the need for additional budget authority, it evaluates the fund's ability to absorb unexpected losses and may prompt changes in FHA policies and insurance premiums.", "Capital requirements and stress testing practices\u2014tools for managing financial risks\u2014for the MMI Fund are not consistent with all elements of a framework GAO developed to help assess these tools in the context of FHA's single-family mortgage insurance programs. In accordance with the framework, FHA's capital assessments and stress tests are transparent and incorporate a number of relevant risk factors. However, areas of inconsistency include the following:", "Scenario-based requirement . The statutory capital requirement is intended to help ensure the fund can absorb unexpected losses but is not based on a specified risk threshold, such as an adverse economic scenario the fund would be expected to withstand without requiring supplemental funds.", "Accountability mechanisms . The capital requirement also does not include accountability mechanisms, such as a set of steps FHA would have to take if the capital ratio again fell below the 2 percent minimum.", "Fund-wide stress tests . FHA has conducted separate stress tests\u2014projections of financial condition under adverse scenarios\u2014of its forward (traditional) and reverse mortgage (loans against home equity available to seniors) portfolios, but has not performed tests on a fund-wide basis.", "Stress test objectives . FHA has not defined specific objectives for its stress tests such as determining the amount of additional capital, if any, that would be needed to withstand conditions similar to the last housing crisis.", "Strengthening FHA's capital requirement and stress testing practices could help ensure that the MMI Fund is able to withstand economic downturns and that stress test results are as relevant and useful as possible for risk management.", "Including reverse mortgages in the fund's capital assessment has advantages and disadvantages. Unlike for stress tests, FHA jointly assesses forward and reverse mortgages to calculate a combined capital ratio. Subjecting the reverse mortgage portfolio to capital assessment has made its financial condition more transparent. But, the portfolio's sensitivity to changes in economic assumptions makes the combined ratio more unpredictable. Alternative approaches also pose trade-offs. For example, a separate reverse mortgage capital requirement may help ensure the financial transparency of both portfolios, but requiring FHA to hold more capital to account for the volatility of the reverse mortgage portfolio could compel FHA to raise insurance premiums or lower borrowing limits."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider specifying the economic conditions the MMI Fund would be expected to withstand without supplemental funds, and FHA should conduct stress tests on a fund-wide basis and specify the objectives of its stress tests. GAO also continues to maintain that Congress should incorporate accountability mechanisms into FHA's capital requirement (as stated in GAO-13-722 ). FHA agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Housing and Urban Development\u2019s (HUD) Federal  Housing Administration (FHA) administers single-family forward and  reverse mortgage programs that insure private lenders against losses on  mortgages that finance home purchases, refinance existing mortgages,  and convert home equity into cash advances. These programs have  helped millions of households achieve homeownership or benefit from  home equity while living in their homes. FHA insures almost all of its  single-family mortgages under its Mutual Mortgage Insurance Fund (MMI  Fund). As of the end of fiscal year 2016, the fund\u2019s insurance-in-force  (total insured mortgage balances outstanding) was about $1.2 trillion.", "The MMI Fund is statutorily required to maintain at least a 2 percent  capital ratio, defined as the economic net worth (economic value) of the  fund divided by the amortized insurance-in-force. The fund\u2019s economic  value depends on actual and estimated cash inflows (for example  insurance premiums collected from borrowers) and outflows (for example,  claim payments to lenders on defaulted loans). Therefore, FHA must  manage the fund such that, on average, the inflows exceed the outflows  by enough to maintain the required capital reserve. However, in fiscal  year 2009, in the midst of the 2007\u20132011 housing crisis, the MMI Fund\u2019s  capital ratio fell below 2 percent and did not meet the statutory  requirement again until fiscal year 2015, according to independent  actuarial reviews. Additionally, at the end of fiscal year 2013, the MMI  Fund required supplemental funds\u2014about $1.7 billion\u2014for the first time in  its history to help ensure that it had sufficient resources to cover expected  net future costs on outstanding insurance. These developments highlight  a key challenge FHA and Congress face in balancing the fund\u2019s financial  self-sufficiency with FHA\u2019s role in facilitating mortgage credit to  underserved borrowers and stabilizing the housing market during  economic downturns.", "In light of the MMI Fund\u2019s recent fiscal challenges, you asked us to  examine issues pertaining to the MMI Fund\u2019s actuarial reviews, capital  requirement, and stress tests. This report examines (1) the types of  information actuarial reviews and other assessments provide about the  MMI Fund\u2019s financial condition, including its ability to remain self- sufficient; (2) the extent to which the capital requirement and stress  testing practices for the MMI Fund are consistent with principles and  practices underlying those of other financial institutions; and (3) key  advantages and disadvantages of including both forward and reverse  mortgages in the MMI Fund\u2019s capital assessment.", "To examine the types of information actuarial reviews and other  assessments provide about the MMI Fund\u2019s financial condition, including  its ability to remain self-sufficient, we reviewed actuarial reports of the  fund prepared by an FHA contractor and related FHA reports to  Congress. Additionally, we reviewed FHA budget documents and audited  financial statements containing assessments of the fund, as well as FHA  documents and our prior reports describing the mechanisms used to  provide supplemental resources to the fund, if necessary.", "To assess the extent to which capital requirements and stress testing  practices for the MMI Fund are consistent with principles underlying  requirements for other institutions, we developed and applied two  evaluative frameworks. We developed draft frameworks by reviewing  documents on the requirements and practices of financial regulators and  institutions, and by identifying key common elements that could apply to  the MMI Fund, assuming the fund would continue to operate under  federal accounting standards and budgeting requirements. In addition to  FHA, we shared the draft frameworks with the Federal Housing Finance  Agency (FHFA), the National Association of Insurance Commissioners,  and the American Academy of Actuaries and interviewed officials from  these organizations to obtain their input on the frameworks. We chose  these organizations based on their expertise in financial assessments of  housing finance and mortgage insurance institutions. To provide  additional perspective on stress tests of the MMI Fund, we compared the  two most stressful economic scenarios from the fiscal year 2016 actuarial  review of FHA\u2019s forward mortgage portfolio with the severely adverse  scenario used by the Board of Governors of the Federal Reserve System  (Federal Reserve) in its 2016 supervisory stress tests of large banking  organizations.", "To identify key advantages and disadvantages of jointly considering  forward and reverse mortgages in the MMI Fund\u2019s capital assessment,  we reviewed actuarial results for both mortgage portfolios for fiscal years  2009\u20132016 and recent FHA reports to Congress discussing this issue.  Using information from the actuarial reviews, we analyzed the  implications of including the reverse mortgage portfolio in the joint capital  assessment and of holding the reverse mortgage portfolio to a separate  capital requirement. We also interviewed FHA officials and five mortgage  industry associations and stakeholders (selected based on their  knowledge of FHA and reverse mortgages) to obtain their views on the  joint capital assessment and possible alternative approaches. Appendix I  describes our objectives, scope, and methodology in greater detail.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FHA\u2019s Role and Insured Portfolio", "paragraphs": ["FHA\u2019s single-family mortgage insurance programs insure private lenders  against losses from borrower defaults on mortgages that meet FHA  criteria for properties with one to four housing units. FHA insures a  variety of mortgage types, including loans for initial home purchases,  construction and rehabilitation, and refinancing. In fiscal year 2016, FHA  insured roughly 1.3 million single-family mortgages with total initial  balances of approximately $260 billion. Partly because of its low 3.5  percent minimum down-payment requirement, FHA has played a  particularly large role among groups with lower average levels of  accumulated wealth, including minority, lower-income, and first-time  home buyers. For example, in fiscal year 2016, roughly 82 percent of  FHA-insured home purchase loans went to first-time home buyers and  more than 33 percent went to minority home buyers.", "FHA also generally is thought to promote stability in the housing market  by helping to ensure the availability of mortgage credit in areas that may  be underserved by the private sector or that are experiencing economic  downturns. Consistent with this view, the volume of FHA-insured forward  mortgages peaked in fiscal year 2009, toward the end of the 2007\u20132009  recession and in the midst of the 2007\u20132011 housing crisis. In terms of  loan originations, the share of the single-family home purchase mortgage  market insured by FHA reached nearly 30 percent in fiscal year 2009,  while in more recent years it has been about 20 percent."], "subsections": []}, {"section_title": "FHA\u2019s Mutual Mortgage Insurance Fund", "paragraphs": ["The MMI Fund includes almost all of FHA\u2019s single-family mortgage  insurance programs, the largest of which is the 203(b) program. The  Housing and Economic Recovery Act of 2008 (HERA) moved a number  of other programs that were previously under the General and Special  Risk Insurance Fund to the MMI Fund. These included programs for  insuring mortgages on condominium units, mortgages that simultaneously  finance home purchase and rehabilitation costs, and reverse  mortgages.", "A reverse mortgage is a type of loan against the borrower\u2019s home equity.  With a reverse mortgage, borrowers do not need to repay the loan as  long as they meet certain conditions. These conditions, among others,  require the borrower to live in the home, pay property taxes and  homeowners\u2019 insurance, maintain the property, and retain the title in his  or her name. Unlike forward mortgages, where the borrower makes  monthly payments to the lender, increasing equity and decreasing the  loan balance over time, reverse mortgages typically are \u201crising debt,  falling equity\u201d loans. For reverse mortgages, the loan balance increases  and the home equity decreases over time. As the borrower receives  payments from the lender, the lender adds the principal and interest to  the loan balance, reducing the homeowner\u2019s equity. FHA insures reverse  mortgages under its Home Equity Conversion Mortgage (HECM)  program, which serves eligible borrowers aged 62 or older. Congress  established the HECM program in 1988 as a way to alleviate economic  hardship caused by the increasing costs of health care, housing, and  subsistence needs at a time in life when income is reduced, while  protecting reverse mortgage lenders and borrowers from financial  losses.", "The MMI Fund is supported by insurance premiums paid by borrowers.  For forward mortgages, FHA has the authority to establish and collect a  single up-front premium (in an amount not to exceed 3.0 percent of the  amount of the original insured principal of the mortgage) and annual  premiums of up to 1.5 percent of the remaining insured principal balance,  or 1.55 percent for borrowers with down payments of less than 5.0  percent. As of September 2017, FHA charged a 1.75 percent up-front  premium and either a 0.80 percent or 0.85 percent annual premium,  depending on the size of the down payment. As of the same date, FHA  charged HECM borrowers an initial premium of either 0.50 percent or 2.5  percent, depending on how they draw down available funds, and an  annual premium equal to 1.25 percent of the outstanding HECM  balance."], "subsections": []}, {"section_title": "Reviews of the MMI Fund", "paragraphs": ["Each year, the MMI Fund is subject to three different financial  assessments:  Independent actuarial review. The National Housing Act requires an  annual independent actuarial review of the MMI Fund\u2019s financial  position. FHA uses the results of the actuarial review to determine  whether the MMI Fund is meeting the act\u2019s requirement that it maintain a  capital ratio of at least 2 percent. Each year, an independent actuarial  contractor conducts two separate actuarial reviews\u2014one for forward  mortgages and one for HECMs\u2014to estimate the economic value of the  two portfolios. In a separate annual report to Congress, FHA combines  the findings of the forward mortgage and HECM actuarial reviews to  determine the capital ratio for the MMI Fund as a whole. As previously  noted, the capital ratio is the fund\u2019s economic value divided by the  insurance-in-force.", "Budgetary review. FHA estimates and reestimates the net lifetime  costs\u2014known as credit subsidy costs\u2014of the mortgages it insures as part  of the MMI Fund\u2019s annual budgetary review. Under the Federal Credit  Reform Act of 1990 (FCRA), FHA and other federal agencies must  estimate the credit subsidy costs of their direct loan or loan guarantee  programs in their annual budgets. Credit subsidy costs represent the  present value of estimated cash flows to the government minus the  present value of estimated cash flows from the government over the life  of the loan, excluding administrative costs. For a mortgage insurance  program, cash inflows consist primarily of insurance premiums charged to  borrowers and proceeds from sales of foreclosed properties, and cash  outflows consist mostly of insurance claim payments to lenders. Annually,  agencies estimate credit subsidy costs for new loan cohorts\u2014the loans  agencies commit to guarantee in a given fiscal year. When estimated  cash inflows exceed expected cash outflows, a cohort is said to have a  negative credit subsidy cost, meaning that the cohort is estimated to  generate income. When the opposite is true, the cohort is said to have a  positive credit subsidy cost.", "Generally, agencies also are required to produce annual updates of their  subsidy estimates\u2014known as reestimates\u2014for each loan cohort on the  basis of information on actual performance and estimated changes in  future loan performance. Each additional year provides more historical  data on loan performance that may influence estimates of the amount and  timing of future claims. Additionally, economic assumptions (such as  house prices and interest rates) also can change from year to year, which  would affect estimates of future loan performance. In recognition of the  difficulty in making credit subsidy estimates that mirror actual loan  performance, FCRA provides permanent and indefinite budget authority  for reestimates that reflect increased credit subsidy costs (upward  reestimates). While FHA has had a number of upward reestimates, the  only year in which the MMI Fund has needed to draw on permanent and  indefinite budget authority was fiscal year 2013, when it received $1.69  billion. All other upward reestimates were covered by funds held in the  MMI Fund\u2019s capital reserve account.", "Financial accounting review. The preparation of FHA\u2019s financial  statements also provides a review of the MMI Fund. FHA is required to  prepare financial statements in accordance with generally accepted  accounting principles for the federal government (federal GAAP). The  financial statements provide information on the overall financial position of  the MMI Fund, including its assets, liabilities, and actual cash flows during  the year. In addition, federal GAAP requires FHA to calculate a liability for  loan guarantees, which represents the estimated net present value of  expected future cash flows for outstanding insurance."], "subsections": []}, {"section_title": "Capital Requirements and Stress Testing", "paragraphs": ["In general, capital exists to absorb unexpected losses and allow a  financial institution to continue operations during economic downturns.  The MMI Fund plays a key role during such periods by helping to  maintain the flow of mortgage credit to areas that may be underserved by  the private sector. As previously noted, the MMI Fund is statutorily  required to maintain at least a 2 percent capital ratio. It also is the only  federal credit program with a capital requirement. Because the MMI  Fund can draw on permanent and indefinite budget authority, if  necessary, it has greater ability to weather adverse economic conditions  than a private entity. However, the capital requirement is intended to help  ensure that the fund remains self-sufficient by creating a reserve for  unexpected losses. The size of the MMI Fund\u2019s capital reserve can be  expected to fluctuate depending on economic conditions and other  factors. For example, the reserve may tend to grow when the economy is  strong (limiting borrower defaults and FHA insurance losses), and may  tend to shrink when the economy is weak (increasing borrower defaults  and FHA insurance losses).", "Stress tests are a risk management tool used by banks and other  financial institutions. The International Actuarial Association defines  stress testing as a projection of the financial condition of an institution  under a specific set of adverse conditions. While there is no requirement  that FHA stress test the MMI Fund, actuarial reviews of the MMI Fund  have included analyses of the MMI Fund\u2019s economic value and  insurance-in-force under alternative scenarios, including adverse  scenarios. As discussed later in this report, the alternative scenarios  include selected economic paths used in estimating the economic value  of the MMI Fund\u2019s forward mortgage and HECM portfolios, as well as  baseline and economic slump paths produced by Moody\u2019s Analytics.  FHA considers these analyses to be a form of stress testing."], "subsections": []}]}, {"section_title": "Budgetary and Actuarial Assessments of the Fund Serve Different but Complementary Functions", "paragraphs": [], "subsections": [{"section_title": "Supplemental Funding Is Determined by Budgetary Assessments, and Actuarial Reviews Provide Complementary Information", "paragraphs": ["FHA assessments performed as part of the MMI Fund\u2019s annual budgetary  review\u2014specifically, the credit subsidy estimates and reestimates  discussed previously\u2014determine the fund\u2019s financing account and capital  reserve account balances. The financing account is designed to hold  sufficient funds to cover anticipated net future costs on outstanding  insurance. The capital reserve account holds additional funds that could  be used to cover unexpected losses (for example, due to higher-than- anticipated mortgage defaults). If the capital reserve account had  insufficient funds to cover an upward credit subsidy reestimate (that is, an  increase in expected lifetime costs), FHA would draw on permanent and  indefinite budget authority. As previously noted, this has occurred one  time (fiscal year 2013) since the implementation of FCRA. Drawing on  permanent and indefinite budget authority means that the MMI Fund is  not self-sufficient under FCRA requirements. However, it does not  indicate that the fund is unable to pay insurance claims in the near-term  without supplemental funding, because the fund\u2019s financing account holds  balances to cover the anticipated net future costs on claims expected in  the near-term and over the long-term for the existing insurance portfolio.", "In contrast, the actuarial reviews do not directly determine the need for  additional budget authority; rather, they are used to assess whether the  MMI Fund is in compliance with the requirement to maintain at least a 2  percent capital ratio. Additionally, the reviews are statutorily required to  be conducted by an independent actuary rather than by FHA. As  previously noted, the actuarial reviews estimate the economic value of the  forward mortgage and HECM portfolios separately, and FHA combines  these estimates to calculate the capital ratio (that is, the economic value  divided by the insurance-in-force) for the MMI Fund as a whole. The  economic value of each portfolio consists of existing net capital resources  (assets less liabilities) plus the net present value of anticipated future  cash inflows and outflows on outstanding insurance.", "To determine existing net capital resources, FHA\u2019s actuarial contractor  uses information on the assets and liabilities of the financing and capital  reserve accounts previously discussed. Beginning with the fiscal year  2012 actuarial review and continuing through the fiscal year 2016 review  (the most recently completed one), FHA\u2019s actuarial contractor has  estimated the net present value of cash flows using Monte Carlo  simulation\u2014a methodology that involves running simulations of multiple  economic paths. Specifically, for the forward mortgage and HECM  portfolios separately, the contractor generated 100 economic paths,  centered around Moody\u2019s Analytics\u2019 baseline economic scenario, and  computed a net present value of future cash flows for each of these  paths. The contractor added the average of these 100 numbers to the  existing net capital resources to produce the economic value used to  assess compliance with the MMI Fund\u2019s 2 percent capital requirement.  Table 1 shows the fiscal year 2016 economic value, insurance-in-force,  and capital ratio for the forward mortgage and HECM portfolios, as well  as for the MMI Fund as a whole.", "Under the independent actuarial reviews, an economic value of zero\u2014 and therefore a capital ratio of zero\u2014for the MMI Fund as a whole  indicates that estimated resources are enough to cover anticipated net  future costs and no more. Specifically, if the capital ratio is zero, the MMI  Fund\u2019s existing net capital resources (for example, cash and Treasury  investments) and the net present value of future cash inflows (for  example, premium revenue and proceeds from sales of foreclosed  homes) are estimated to be equal to the net present value of future cash  outflows (for example, insurance claim payments and costs to maintain  foreclosed properties). Therefore, in concept, a positive economic value is  similar to a positive balance in the capital reserve account under the  budget process\u2014that is, it projects the availability of funds above what is  needed to cover expected net future costs on outstanding insurance.", "However, the independent actuarial reviews have used different  estimation models and economic assumptions from those used in FHA\u2019s  budgetary assessment to estimate the present value of future cash flows;  therefore, the actuarial and budgetary reviews have not produced  identical capital estimates. (See app. II for more information on the  related components of the budgetary and actuarial reviews.) A capital  ratio below 2 percent, or even below zero, does not directly determine the  need for permanent and indefinite budget authority. However, it indicates  that according to the models and assumptions of the actuarial reviews,  the MMI Fund\u2019s ability to absorb unexpected losses may be limited and  that premium and policy changes designed to bolster the fund\u2019s capital  position may be needed."], "subsections": []}, {"section_title": "Actuarial Reviews Also Include Stress Tests of the MMI Fund and Other Insights", "paragraphs": ["In addition to the capital assessment, the actuarial reviews also have  projected the MMI Fund\u2019s performance under alternative economic  scenarios, including stress scenarios. For example, the fiscal year 2016  actuarial reviews estimated the economic value and insurance-in-force of  the MMI Fund under eight alternative scenarios, including both strong  economic conditions and economic downturns. Specifically, the fiscal  year 2016 reviews estimated the 10th best and worst, 25th best and  worst, and worst economic values produced by the Monte Carlo  simulation, along with the economic values resulting from Moody\u2019s  Analytics\u2019 baseline and protracted slump scenarios. In addition, the  fiscal year 2016 reviews included a low-interest-rate scenario, which  assumes that low interest rates persist for 2 years, before resuming on  the path of the Moody\u2019s Analytics\u2019 baseline scenario. The reviews also  include information on the house price index values, interest rates, and  unemployment rates from the economic paths that produced these  alternative economic values.", "The actuarial reviews have analyzed the economic value under  alternative scenarios separately for the forward mortgage and HECM  portfolios. The estimated economic values for the forward mortgage and  HECM portfolios can be combined to arrive at fund-wide capital ratios for  the average of the 100 economic values produced by the simulation\u2014 Monte Carlo average\u2014and all of the Moody\u2019s Analytics\u2019 scenarios (see  table 2). However, the 10th best and worst, 25th best and worst, and  worst economic values produced by the Monte Carlo simulations cannot  be combined. This limitation is due to the fact that the economic scenario  that led to the 10th best forward mortgage economic value, for example,  may be different from the scenario that led to the 10th best HECM  economic value.", "In contrast, the budgetary reviews do not include analysis of future loan  performance under alternative economic scenarios. The budgetary  reviews are required to use the President\u2019s economic assumptions, which  the Office of Management and Budget provides to agencies for budget  formulation.", "In addition to the actuarial reviews prepared by FHA\u2019s contractor, FHA  compiles statutorily required annual reports for Congress based on the  results of the actuarial analysis. These reports include the calculation of  the MMI Fund\u2019s overall capital ratio and some additional analyses of the  MMI Fund\u2019s financial condition. Statutory requirements for the content of  the reports to Congress are broad, and each year, FHA determines the  types of information it believes will be most useful to Congress. FHA  officials said they consider what they reported in the previous year,  events from the past year, and feedback from readers to determine what would be most useful to include. For example, in its fiscal year 2015  report to Congress, FHA discussed the amount of additional capital that  would have been needed for the forward mortgage portfolio to achieve a  2 percent capital ratio and withstand losses in the event of an economic  downturn similar to the last economic crisis."], "subsections": []}, {"section_title": "Financial Statements and Quarterly Reports Provide Additional Perspectives on the MMI Fund\u2019s Financial Condition", "paragraphs": ["FHA\u2019s financial statements present the MMI Fund from a financial  accounting perspective and are prepared according to federal GAAP. The  financial statements are composed of year-end balance sheets, the  related statements of net cost and changes in net position, and the  combined statements of budgetary resources. As with the budgetary and  actuarial reviews, FHA\u2019s annual management reports, which include the  financial statements, also include information on the MMI Fund\u2019s capital  resources and a net present value calculation of cash flows from  outstanding insurance. Information used in preparing the financial  statements\u2014specifically, the MMI Fund\u2019s assets and liabilities (excluding  the liability for loan guarantees)\u2014is used in the budgetary review to  inform the amount needed in the financing account and is used by the  actuarial review to determine the existing capital resources component of  the economic value calculation. Like the budgetary reviews, the financial  statement reviews do not include analysis of future loan performance  under alternative economic scenarios.", "Another source of information on the MMI Fund\u2019s financial status is  quarterly reports FHA issues to Congress, as required by HERA. The  quarterly reports can help provide early insight into whether there are  potential deviations from the prior year\u2019s projections before the next  annual budgetary and actuarial reviews are completed. Among other  topics, the reports must include information on any significant changes  between actual and projected claim and prepayment activity, and  projected versus actual loss rates. However, while the quarterly reports  update certain measures of the MMI Fund\u2019s performance and financial  condition, they are not intended to provide a full actuarial or budgetary  analysis."], "subsections": []}]}, {"section_title": "The MMI Fund\u2019s Capital Requirement Lacks Accountability Mechanisms, and Stress Tests Are Not Fund-Wide", "paragraphs": ["The MMI Fund\u2019s capital requirement and stress tests are consistent with  some principles and practices promulgated or used by financial  institutions and regulators, but are not consistent with others. To assess  the MMI Fund\u2019s consistency with these principles and practices, we  developed a framework of important considerations in designing capital  requirements and another for designing stress tests. Our frameworks  include underlying principles or key features of the requirements and  practices of institutions we reviewed\u2014such as transparency and  accountability\u2014that could also be applied to the MMI Fund. See appendix  I for further details on our methodology."], "subsections": [{"section_title": "The Capital Requirement Is Not Based on a Specified Risk Threshold and Lacks Accountability Mechanisms", "paragraphs": ["The MMI Fund\u2019s capital requirement is consistent with our framework  element on transparency and partially consistent with two other  elements\u2014that the requirement include both risk-based and fixed  components and that the requirement be designed to cover unexpected  losses and be based on specified risk thresholds. However, the MMI  Fund\u2019s capital requirement is not consistent with the element on including  accountability mechanisms. We were unable to determine whether the  requirement is consistent with the element on balancing financial  soundness with the entity\u2019s role and mission because such an  assessment would require more information about the severity of the  economic conditions the capital requirement was designed to withstand  without supplemental funding. Table 3 summarizes our assessments.", "The MMI Fund\u2019s capital requirement is consistent with the framework  element of being transparent so that external parties can understand the  financial risks facing the entity. FHA\u2019s actuarial reports and  accompanying report to Congress provide specific information about the  MMI Fund\u2019s capital requirement and capital assessment results. For  example, the actuarial reports describe how the capital ratio is calculated,  the models and data sources used to calculate the net present value of  future cash flows, key economic assumptions used in calculating the MMI  Fund\u2019s economic value, and estimated economic values of the forward  mortgage and HECM portfolios. Additionally, FHA\u2019s reports to Congress  include calculations of the Fund-wide capital ratio based on these values,  as well as analyses of factors affecting the past performance of the  forward mortgage and HECM portfolios and factors that could affect their  future performance. The actuarial reviews and reports to Congress are  publicly available on HUD\u2019s website."], "subsections": [{"section_title": "Risk-Based and Fixed Components", "paragraphs": ["The MMI Fund\u2019s capital requirement is partially consistent with the  framework element of having both a risk-based and a fixed component.  For capital requirements with this feature, whichever component requires  the greater level of capital is the binding minimum requirement. Among  other things, a risk-based component helps to ensure that the entity holds  more capital as the asset quality of its portfolio (credit quality, specifically,  in the case of a mortgage portfolio) decreases. A fixed component is  insensitive to asset quality; it therefore is not subject to the potential for  estimation errors of risk-based assessments and serves as a backstop to  the risk-based component.", "While the MMI Fund\u2019s capital requirement is statutorily set at 2 percent, it  is risk-based because the calculation of the capital ratio\u2019s numerator  (economic value) accounts for loan and borrower quality. As loan and  borrower characteristics, such as loan-to-value ratios and borrower credit  scores, get riskier, the models used to estimate the MMI Fund\u2019s economic value predict higher insurance claims and higher net losses on claims  (due to increased foreclosures and decreased returns on sales of  foreclosed properties). This, in turn, reduces the MMI Fund\u2019s estimated  economic value and makes it more difficult for the fund to meet the 2  percent capital requirement. The MMI Fund\u2019s capital requirement also has  attributes similar to a fixed component in that the fund\u2019s economic value  must be at least 2 percent of the insurance-in-force, regardless of the  credit quality of the insurance portfolio. However, the requirement does  not have a separate fixed component that backstops the risk-based  component (that is, becomes binding when it is the more stringent of the  two).", "Developing and implementing a separate fixed component to the MMI  Fund\u2019s capital requirement would pose challenges. For example, a  requirement that was insensitive to portfolio credit quality would not align  with the FCRA requirements and accounting principles that FHA must  follow. These requirements and principles emphasize the consideration of  risk factors in estimating potential financial losses. Additionally,  substantial additional analysis would be required to determine the  structure of a separate fixed component, the level at which it should be  set, under what conditions it might become binding, and how it might  affect FHA\u2019s ability to fulfill its mission. As a result, it is unclear whether  developing a separate fixed component to the MMI Fund\u2019s capital  requirement would be beneficial."], "subsections": []}, {"section_title": "Unexpected Losses and Specified Risk Thresholds", "paragraphs": ["The MMI Fund\u2019s capital requirement is partially consistent with the  framework element of being able to cover unexpected losses and being  based on a specified risk threshold, such as an adverse economic  scenario that the entity would be expected to withstand. The MMI Fund\u2019s  capital requirement is designed to cover some unexpected losses. As  previously noted, the MMI Fund\u2019s capital ratio is calculated by dividing the  economic value of the fund by the amortized insurance-in-force. The  economic value is determined by adding existing capital resources to the  net present value of future cash flows on outstanding insurance. An  economic value of zero (and therefore a capital ratio of zero) indicates  that based on the actuarial calculations, the sum of the MMI Fund\u2019s  existing capital resources and the present value of expected cash inflows  (for example, premium income) is exactly the amount needed to cover the  present value of expected cash outflows (for example, claim payments).  Therefore, a 2 percent capital requirement serves the purpose of covering  some losses above expected amounts. However, the requirement was  not designed to absorb losses associated with a specified economic  scenario, so the extent of loss protection it provides is unclear.", "In a February 2001 report, we concluded that neither the statute that  created the 2 percent capital requirement nor FHA had established  criteria to determine how severe of a stress the MMI Fund should be able  to withstand. Accordingly, we recommended that Congress or FHA  specify the economic conditions that the MMI Fund would be expected to  withstand. In March 2002, a legislative proposal was introduced in the  House of Representatives that would have required a capital ratio  sufficient to withstand a broad range of adverse economic circumstances,  but it was not enacted. Neither Congress nor FHA has subsequently  specified the economic conditions the MMI Fund should be able to  withstand or corresponding minimum capital ratios. FHA officials said they  did not consider it their role to define those economic conditions and  would comply with any requirement Congress established. Because the  MMI Fund\u2019s capital requirement is not based on a specified risk threshold,  it may not provide an adequate financial cushion under economic  scenarios in which Congress may anticipate that the fund would be self- sufficient."], "subsections": []}, {"section_title": "Accountability Mechanisms", "paragraphs": ["The MMI Fund\u2019s capital requirement is not consistent with the framework  element of having accountability mechanisms such as additional reporting  requirements, remediation plans, and operational restrictions that are  triggered if capital requirements are not met. Failure to comply with the  MMI Fund\u2019s capital requirement does not trigger a defined process or set  of steps to be taken by FHA. In a September 2010 report, we stated that  Congress should consider establishing a minimum time frame for  restoring the capital ratio to 2 percent should the ratio fall below that  level. A legislative proposal was introduced in Congress in December  2011 that, among other things, would have required FHA to return the  MMI Fund\u2019s capital ratio to the statutorily required level within 2 years, but  it was not enacted. In addition, in a September 2013 report, we stated  that Congress should consider requiring FHA to submit a capital  restoration plan and regular updates on plan implementation whenever  the capital ratio falls below 2 percent. Congress has not yet acted on  this suggestion, but doing so could help ensure prompt action by FHA  and focus Congress\u2019s monitoring efforts should this situation arise in the  future."], "subsections": []}, {"section_title": "Balancing Financial Soundness and Mission", "paragraphs": ["We could not assess the consistency of the MMI Fund\u2019s capital  requirement with the framework element of balancing financial soundness  with the entity\u2019s role and mission. Such an assessment would require  more information about the severity of the economic conditions the capital  requirement was designed to withstand without supplemental funding. As  previously discussed, the statute that created the requirement did not  specify those conditions. As a result, it is unclear whether FHA\u2019s  difficulties in maintaining the financial soundness of the MMI Fund while  carrying out its public mission during and after the 2007\u20132011 housing  crisis indicate that the 2 percent capital requirement is insufficient.", "Any reconsideration of the capital requirement would involve policy  decisions that would need to be made through congressional  deliberations. These decisions center on the relative weight FHA should  place on its financial and mission goals and requirements. On the one  hand, FHA has a statutory operational goal to minimize mortgage default  risk to the MMI Fund and a statutory requirement to maintain a capital  ratio of at least 2 percent. A minimum capital requirement that is too low  may result in FHA taking on too much risk and having an insufficient  capital buffer to withstand an economic downturn without requiring  supplemental funding. On the other hand, FHA also has a statutory  operational goal to provide mortgage insurance to traditionally  underserved borrowers\u2014such as low-income, minority, and first-time  home buyers\u2014and historically has played a role in stabilizing housing  markets during economic downturns. Setting a minimum capital  requirement that is too high may limit FHA\u2019s ability to serve the borrowers  for which it was intended or play its market-stabilizing role, because it  might require FHA to charge insurance premiums that many borrowers  cannot afford or impose underwriting standards they cannot meet. The  tension between the financial and mission aspects of FHA\u2019s goals and  requirements poses trade-offs that must be weighed by policymakers in  setting the MMI Fund\u2019s capital requirement."], "subsections": []}]}, {"section_title": "FHA Has Not Conducted Fund-Wide Stress Tests or Specified the Objectives of Its Tests", "paragraphs": ["Stress testing practices for the MMI Fund are consistent with two of the  five elements in our stress testing framework\u2014that stress testing  methods and results be transparent and stress testing scenarios capture  relevant risks. The stress testing practices are inconsistent with two other  elements\u2014that the scope of testing includes entity-wide assessments  and that the specific objectives of the tests be defined. We were unable to  determine the consistency of MMI Fund stress testing practices with the  framework element that methods and scenarios be consistent with the  objectives of the tests because FHA has not defined specific objectives.  Table 4 summarizes our assessments.", "Stress tests of the MMI Fund are consistent with the framework element  of transparency. Specifically, stress testing methods, scenarios, and  results should be specific and available for review. Actuarial reports on  the MMI Fund provide detailed information on the methodology and  results of fund stress tests. For example, the actuarial reports describe  the stress testing method of estimating economic values for the forward  mortgage and HECM portfolios using hypothetical scenarios based on  projected unemployment, house price appreciation, and interest rates.  The reports also describe sources for these projections, including  scenarios developed by Moody\u2019s Analytics and generated by the actuarial  contractor through Monte Carlo simulation. In addition, for each variable,  the reports present graphics showing their projected paths under each  scenario over the stress period. Furthermore, for each scenario, the  reports provide quantitative results and an accompanying narrative  discussion highlighting key drivers of the results. The reports are publicly  available on HUD\u2019s website."], "subsections": [{"section_title": "Risks Relevant to Entity", "paragraphs": ["Stress tests of the MMI Fund are consistent with the framework element  of capturing risks that are relevant to the entity. The stress scenarios  used in the actuarial reviews have incorporated risks the MMI Fund faces  by considering changes in economic conditions that would negatively  affect the fund\u2019s cash flows and, by extension, the fund\u2019s economic value.  More specifically, they include declines in house prices and rises in  unemployment, which can be expected to increase borrower defaults on  FHA-insured mortgages and increase the number and severity of  insurance claims FHA pays to lenders. In addition, the scenarios include  declines in interest rates, which can be expected to increase the number  of FHA-insured mortgages that are paid off before maturity\u2014for example,  as borrowers refinance out of their FHA-insured mortgages into  conventional mortgages (those without government insurance or  guarantees)\u2014thus reducing the amount of insurance premiums FHA  collects. To examine these risks, the stress scenarios in recent FHA  actuarial reviews have included substantial declines in a Federal Housing  Finance Agency national house price index, increases in unemployment  rates, and decreases in interest rates for 30-year home mortgages.", "To provide additional perspective on the severity, duration, and timing of  scenarios used to stress test the MMI Fund, appendix III compares  selected MMI Fund stress scenarios to the severely adverse scenario  used by the Federal Reserve in conducting annual supervisory stress  tests of large banking organizations."], "subsections": []}, {"section_title": "Entity-Wide Scope", "paragraphs": ["Stress tests of the MMI Fund are not consistent with the framework  element of including entity-wide assessments to provide a complete  picture of risk. Since fiscal year 2009, when the HECM portfolio was first  included in the MMI Fund, stress tests of the MMI Fund have analyzed  the forward mortgage and HECM portfolios separately, but not on a fund- wide basis. This practice partly reflects the way in which capital  assessments of the MMI Fund are performed\u2014through separate  assessments of the forward mortgage and HECM portfolios. Additionally,  an FHA official said the agency has been reluctant to report combined  ratios for stress scenarios because the results could be misinterpreted  (for example, result in too much or too little confidence in the fund\u2019s ability  to withstand stress) if the scenarios are not viewed in the proper historical  context. However, without the combined analysis, it is unclear what the  capital position of the MMI Fund as a whole would be under stressful  conditions. As a result, FHA and Congress may lack information that  could be useful in assessing risks to the MMI Fund, including  circumstances that could cause the fund\u2019s capital ratio to fall below the  statutory minimum."], "subsections": []}, {"section_title": "Defined Objectives", "paragraphs": ["Stress testing of the MMI Fund is not consistent with the framework  element of defining the specific objectives of the tests. According to  guidance from federal banking regulators, large banking organizations  should indicate the specific purpose and focus of stress tests within a  framework that allows for consistent, repeatable exercises. Additionally,  this guidance and stress testing principles and practices from two  international financial organizations provide examples of stress testing  objectives such as informing assessment of vulnerabilities, contingency  planning, identifying and monitoring risk concentrations, and determining  the level of risk the entity is willing to accept (risk appetite).", "The MMI Fund actuarial reviews have included the broad statement that  the stress tests performed as part of the reviews provide insights into the  sensitivity of the MMI Fund\u2019s economic value under different economic  conditions. In addition, FHA has included some information from the  stress tests in recent annual reports to Congress to highlight different  points. However, FHA has not articulated specific objectives for the stress  tests, in part because a key use of the actuarial reviews is to help  determine the MMI Fund\u2019s compliance with the capital requirement under  a baseline economic scenario (which, in recent actuarial reviews, has  been the Monte Carlo average). Accordingly, the types of information  FHA has reported to Congress have varied from year to year. For  example, in recent years, FHA\u2019s reporting on stress test results has  ranged from no information (fiscal year 2016), to how much additional  capital the forward mortgage portfolio would need to withstand losses  comparable to the last economic crisis (fiscal year 2015), to the  probability that the economic value of the HECM portfolio would fall below  zero under deteriorating economic conditions (fiscal year 2013). Without  specific objectives for its stress testing, FHA has limited assurance that its  stress tests are targeted to risk-management needs and that its reporting  to Congress provides consistent information on the MMI Fund\u2019s ability to  withstand adverse conditions."], "subsections": []}, {"section_title": "Methods and Scenarios Consistent with Objectives", "paragraphs": ["Because FHA has not defined specific objectives for MMI Fund stress  tests, we could not assess whether existing tests were consistent with the  framework element of using stress testing methods and scenarios that  are consistent with stated objectives. Entities should use stress testing  methods\u2014such as conventional stress testing (which looks at the effect  of specified hypothetical or historical stress scenarios) or reverse stress  testing (which assumes a negative outcome and identifies scenarios that  would lead to that outcome)\u2014that yield information responsive to the  objectives of the stress tests.", "Actuarial reviews of the MMI Fund have used conventional stress testing  and a range of stress scenarios developed by Moody\u2019s Analytics and  generated by Monte Carlo simulation. But, depending on how FHA  defines the specific objectives of the MMI Fund\u2019s stress tests, other stress  testing methods or scenarios might provide useful information for risk  management. For example, if the objective of the stress testing was to  identify the conditions that might cause the MMI Fund\u2019s capital ratio to fall  below 2 percent or require supplemental funding, reverse stress testing  would be an appropriate method. If the objective was to assess the MMI  Fund\u2019s ability to withstand conditions similar to those of the Great  Depression or the 2007\u20132011 housing crisis, developing historical stress  scenarios would be appropriate. Additionally, if the objective was to  assess the effect of changes to a particular variable or input (as opposed  to a broader economic scenario), sensitivity stress tests would be  appropriate."], "subsections": []}]}]}, {"section_title": "Joint Capital Assessment Has Advantages and Disadvantages", "paragraphs": [], "subsections": [{"section_title": "Advantages of Including Reverse Mortgages in the Fund\u2019s Capital Requirement Include Greater Transparency", "paragraphs": ["Beginning with the 2009 loan cohort, HERA placed new HECMs (FHA- insured reverse mortgages) in the MMI Fund, while previous HECMs  remained in the General and Special Risk Insurance Fund. When the  post-2008 HECM portfolio became part of the MMI Fund, it also was  included in the MMI Fund\u2019s capital ratio assessment and became subject  to annual actuarial review requirements. These changes have had some  advantages. First, subjecting HECMs to the annual actuarial review  requirements has improved the transparency of the program\u2019s financial  condition. For example, the actuarial reviews have included estimates of  the HECM portfolio\u2019s economic value and performance under alternative  economic conditions, which were not available prior to 2009.", "Second, jointly considering the forward mortgage and HECM portfolios in  the MMI Fund\u2019s capital assessment mitigates the potential difficulty of  independently holding the HECM portfolio to a specified capital ratio. The  economic value of the HECM portfolio is more sensitive to changes in  economic conditions and inputs to the models than the forward mortgage  portfolio. As a result, the capital ratio for the HECM portfolio is more  volatile, and requiring HECMs to independently meet a capital ratio would  be difficult. Specifically, it could be difficult to manage HECM insurance  premiums, loan limits, and other program requirements to ensure that a  capital requirement is consistently met. Estimates of HECM capital ratios  under alternative economic scenarios from the fiscal year 2016 actuarial  review illustrate the sensitivity of this portfolio\u2019s economic value\u2014and  therefore its capital ratio\u2014to changes in economic conditions (see fig.1).  While the capital ratio for forward mortgages ranged from negative 3.3  percent to positive 4.17 percent under all of the economic scenarios, the  corresponding range for HECMs was negative 38.74 percent to positive  3.07 percent.", "Under the current approach of jointly considering the HECM and forward  mortgage portfolios in the capital assessment, both portfolios in  combination are subject to the capital requirement, but the volatility of the  HECM portfolio\u2019s economic value is mitigated by the relative stability of  the forward mortgage portfolio. More specifically, because the forward  mortgage portfolio is substantially larger than the HECM portfolio (with the  HECM portfolio accounting for roughly 10 percent of the MMI Fund\u2019s  insurance-in-force in fiscal year 2016), the combined capital ratio more  closely follows the generally less volatile capital ratio for forward  mortgages (see fig. 2). As a result, the combined capital ratio is less  uncertain than the HECM capital ratio, and managing the HECM portfolio  within that combined framework is more feasible than managing it to a  separate capital requirement.", "Finally, another possible advantage of the joint assessment is some  degree of risk diversification. The cash inflows and outflows of the forward  mortgage and HECM portfolios do not necessarily rise and fall in tandem  in response to changes in macroeconomic conditions. For example, all  other things being equal, rising mortgage interest rates tend to increase  the economic value of the forward mortgage portfolio but tend to  decrease the economic value of the HECM portfolio. Because the cash  flows of the two portfolios are not fully correlated, the amount of capital  needed for the two portfolios in combination may be less than the sum of  the amount of capital needed for each portfolio separately."], "subsections": []}, {"section_title": "Disadvantages of Including HECMs in the MMI Fund Include More Uncertainty about the MMI Fund\u2019s Financial Condition", "paragraphs": ["Joint assessment of the forward mortgage and HECM portfolios in  determining compliance with the capital requirement also has some  disadvantages. First, including HECMs in the MMI Fund can result in  more uncertainty about the Fund\u2019s expected performance. As previously  discussed, the economic value of HECMs is more volatile and sensitive to  economic conditions than the economic value of forward mortgages. As a  result, estimates of the MMI Fund\u2019s economic value and capital ratio and  its potential performance under alternative economic scenarios are less  predictable and more difficult to interpret with the inclusion of HECMs.", "Although the combined capital ratio generally tracks with the forward  mortgage capital ratio, the inclusion of HECMs in the assessment can  affect the combined capital ratio. For example, in fiscal year 2015, a high  HECM capital ratio (6.44 percent) pulled the combined capital ratio above  2 percent (2.07 percent), even though the forward mortgage capital ratio  was below 2 percent (1.63 percent). In this case, the inclusion of the  HECM portfolio in the capital ratio resulted in the MMI Fund meeting the 2  percent capital requirement for the first time in 6 years. In its fiscal year  2014 report to Congress, FHA concluded that the HECM portfolio was  over 10 times more volatile than the forward mortgage portfolio, noting  that small changes to the HECM program can affect the overall value of  the MMI Fund. Further, in its fiscal year 2015 report to Congress, FHA  noted that because the HECM portfolio is projected to continue growing at  a faster rate than the forward portfolio, year-to-year HECM volatility is  likely to contribute more uncertainty to future actuarial valuations of the  MMI Fund. In recent years, HECMs have accounted for an increasing percentage of the MMI Fund\u2019s insurance-in-force, rising from 4.01 percent  in fiscal year 2009 to 9.42 percent in fiscal year 2016.", "Second, relying on a combined capital ratio to assess the MMI Fund\u2019s  compliance with the capital requirement could mask the financial  condition of the individual portfolios. Information on the performance of  each portfolio is available in separate actuarial reports, but differences  between the financial health of the two portfolios may be overlooked  because compliance with the 2 percent capital requirement is determined  by the combined capital ratio. For example, in fiscal year 2013, the  combined capital ratio was below 2 percent (negative 0.11 percent), while  the HECM capital ratio was 7.50 percent. In contrast, in fiscal year 2016,  the combined ratio was above 2 percent (2.32 percent), while the HECM  capital ratio was below 2 percent (negative 6.90 percent). In those years,  the substantial difference between the financial condition of the HECM  portfolio and the overall MMI Fund would not have been evident from the  combined capital ratio.", "Even in years when the capital ratios of both the forward mortgage and  HECM portfolios are above or below the 2 percent level, the combined  capital ratio may still hide important differences between the two. For  example, in fiscal year 2014, the capital ratios for both the forward  mortgage and HECM portfolios were below 2 percent. However, the  forward mortgage capital ratio was positive (0.56 percent), while the  HECM capital ratio was negative (-1.20 percent). This difference may be  important to policymakers because a positive capital ratio indicates that  the portfolio has some capital cushion to absorb unexpected losses, even  if it is small. In contrast, a negative ratio suggests the portfolio may not  have sufficient capital to independently cover all expected net losses on  outstanding insurance, and may essentially be financially supported by  the other portfolio in the MMI Fund.", "Finally, in certain circumstances, the joint capital assessment could  create pressure to raise insurance premiums or tighten underwriting  standards in one program to compensate for the weaker financial  performance of another program. For example, if the forward mortgage  capital ratio were above 2 percent, but the HECM capital ratio pulled the  combined ratio below 2 percent, raising insurance premium rates for  forward mortgages could be the quickest way to regain a 2 percent capital  ratio. In this example, a portion of the premiums paid by the forward  mortgage borrower would essentially support the HECM program. While  this situation would benefit HECM borrowers (because their insurance  premiums would not increase), it would potentially create a burden for  forward mortgage borrowers and could reduce the number of prospective  borrowers who are able to afford FHA mortgage insurance. However, as  of September 2017, FHA officials said that the agency had not increased  forward mortgage premiums to support the HECM program or vice versa."], "subsections": []}, {"section_title": "Alternative Approaches to Managing the HECM Program and Assessing the Capital Requirement Pose Trade-offs", "paragraphs": ["Alternatives to the MMI Fund\u2019s joint capital assessment could address  some of the disadvantages of this approach but would also involve  potential trade-offs between mission, financial soundness, and  transparency goals. Policy decisions about these trade-offs could have  significant implications for the management of FHA\u2019s programs and for  potential FHA borrowers.", "If Congress wishes to place additional emphasis on the financial self- sufficiency of the HECM program, it may be appropriate to hold the  HECM portfolio to a capital requirement separate from that of forward  mortgages. Under this option, future HECMs could either remain in the  MMI Fund or be placed under a different insurance fund. The capital  requirement could be set at the same congressionally defined level as the  one for forward mortgages, or it could be tailored to the risks and volatility  of the HECM portfolio. A separate HECM capital requirement would help  ensure that the forward mortgage portfolio is not supporting the HECM  portfolio, or vice versa. Decisions about premiums and other program  requirements could be based solely on each portfolio\u2019s financial condition  and would not be influenced by a need to keep a combined capital ratio  sufficiently high.", "In addition, a separate HECM capital requirement would help ensure that  for future loan cohorts, the financial conditions of the individual portfolios  are not masked by a combined capital ratio. However, if the HECM  portfolio was required to independently meet a minimum capital ratio, the  volatility of the portfolio\u2019s economic value could make it difficult for FHA to  consistently meet the requirement without targeting a capital level  substantially above the minimum requirement. Doing so may require FHA  to raise insurance premiums or place greater restrictions on the amount  seniors can borrow, which would limit the program\u2019s ability to serve its  goal of alleviating economic hardship.", "In comparison, if Congress wishes to place greater emphasis on  maximizing the benefits of the HECM program for seniors, another option  may be to exempt the HECM portfolio from a capital requirement. Under  this option, future HECMs would not be part of the MMI Fund and would  not be subject to the MMI Fund\u2019s capital requirement. As with a separate  HECM capital requirement, this option would help ensure that the  financial condition of future loan cohorts in the forward mortgage portfolio  is not masked by a combined capital ratio. But, the financial condition of  the HECM portfolio would not be as transparent, unless FHA continued to  conduct HECM actuarial assessments. In addition, FHA could set  premiums and program limits without consideration for building a capital  buffer, which might decrease the likelihood that the HECM program would  operate on at least a break-even basis over the long run. Some industry  participants we spoke with did not think that HECMs should be exempted  from a capital requirement, noting that the increased transparency and  accountability of HECMs were important. However, even without a capital  requirement, FHA could choose to continue conducting actuarial  assessments of the HECM program for continued transparency."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The programs FHA administers under its MMI Fund play an important role  in the mortgage market by expanding homeownership opportunities and  helping stabilize housing markets during economic downturns. However,  the MMI Fund\u2019s financial challenges in the wake of the 2007\u20132011  housing crisis illustrate the fund\u2019s vulnerability to severely adverse  economic conditions and underscore the importance of capital  requirements and stress testing practices for this $1.2 trillion mortgage  insurance portfolio. Opportunities exist to strengthen these requirements  and practices by making them more consistent with those used by  financial institutions and regulators, as reflected in our two evaluative  frameworks.", "As we concluded in our September 2013 report, and consistent with the  capital requirements framework in this report, including accountability  mechanisms in FHA\u2019s capital requirement could enhance management  and oversight of the MMI Fund. Therefore, as we suggested in our 2013  report, we maintain that Congress should consider requiring FHA to  submit a capital restoration plan and regular updates on plan  implementation whenever the fund\u2019s capital ratio falls below the required  level. In our current review, we identified three additional areas where  the capital requirement and stress testing practices for the MMI Fund  could be strengthened in accordance with our frameworks. Specifically,  the statutory 2 percent capital requirement does not specify the economic  conditions the fund would be expected to withstand. As a result, it may  not provide an adequate financial cushion under scenarios in which  Congress may anticipate that the fund would be self-sufficient. In addition,  FHA has not analyzed or reported stress test results on a fund-wide  basis, making it unclear what the capital position of the fund as a whole  would be under stressful conditions. Finally, FHA has not defined the  specific objectives of the fund\u2019s stress tests and therefore has limited  assurance that its stress testing methods and scenarios are targeted to  risk-management needs."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider amending the National Housing Act to specify  the economic conditions the MMI Fund would be expected to withstand  without substantial risk of drawing on permanent and indefinite budget  authority, and require FHA to specify and comply with a capital ratio  consistent with these conditions. In specifying the economic conditions,  Congress should take into account FHA\u2019s statutory operational goals and  role in supporting the mortgage market during periods of economic stress.  (Matter for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to FHA:  The Commissioner of FHA should combine stress test results for the  forward mortgage and HECM portfolios, where possible, and report  estimated MMI Fund-wide capital ratios for the stress scenarios  examined. (Recommendation 1)", "The Commissioner of FHA should develop specific objectives for stress  tests of the MMI Fund and apply stress testing methods and scenarios  consistent with those objectives. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HUD, the Federal Reserve, and  FHFA for their review and comment. The Federal Reserve and FHFA had  no comments. In its comments, reproduced in appendix IV, HUD agreed  with our recommendations. HUD said that FHA\u2019s forthcoming annual  actuarial reports and report to Congress on the MMI Fund would include  stress test results for forward mortgages and HECMs, but HUD did not  state whether the reports would address our recommendations. By  analyzing and reporting stress test results on a fund-wide basis and  defining the specific objectives of its stress tests, FHA would better  understand the capital position of the MMI Fund as a whole under  stressful conditions and have greater assurance that its stress testing  methods and scenarios are targeted to risk-management needs.", "HUD also said it was important to recognize the trade-offs between FHA\u2019s  mission and insurance policy holders when considering financial  soundness. HUD said it appreciated our report\u2019s statement that minimum  capital requirements that are too high may limit FHA\u2019s ability to serve its  mission and market role and recommended that we make this statement  more prominent. While our report does contain that statement, it also  states that a minimum capital requirement that is too low may result in  FHA taking on too much risk and having an insufficient capital buffer to  withstand an economic downturn without requiring supplemental funding.  Accordingly, we added language to the introduction of the report noting  the challenge FHA and Congress face in balancing the fund\u2019s financial  self-sufficiency with FHA\u2019s role in facilitating mortgage credit to  underserved borrowers and stabilizing the housing market during  economic downturns.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Housing and Urban  Development, the Chair of the Board of Governors of the Federal  Reserve System, the Director of the Federal Housing Finance Agency,  and other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to examine (1) the types of information actuarial  reviews and other assessments provide about the Mutual Mortgage  Insurance Fund\u2019s (MMI Fund) financial condition, including its ability to  remain self-sufficient; (2) the extent to which the capital requirement and  stress testing practices for the MMI Fund are consistent with principles  and practices underlying those of other financial institutions; and (3) key  advantages and disadvantages of including both forward and Home  Equity Conversion Mortgages (HECM) in the MMI Fund\u2019s capital  assessment."], "subsections": [{"section_title": "Information Provided by Reviews of the MMI Fund", "paragraphs": ["To examine the types of information actuarial reviews and other  assessments provide about the MMI Fund\u2019s financial condition, including  its ability to remain self-sufficient, we reviewed actuarial reports of the  fund prepared by a Federal Housing Administration (FHA) contractor and  related FHA reports to Congress. We focused on reports for fiscal year  2009 (the first year HECMs were part of the MMI Fund) through fiscal  year 2016 (the most recently completed report). Additionally, we reviewed  FHA budget and financial documents containing assessments of the fund.  Specifically, we reviewed the Department of Housing and Urban  Development (HUD) appendix from the President\u2019s budgets for fiscal year  2011 through fiscal year 2018 (the most recent available) and FHA\u2019s  audited financial statements for fiscal year 2011 through fiscal year 2016  (the most recent available). We also reviewed FHA documents and prior  GAO reports describing the mechanisms used to provide supplemental  resources to the fund, if necessary.", "We determined the extent to which the actuarial, budgetary, and financial  accounting reviews contained information pertinent to assessing the MMI  Fund\u2019s financial condition, such as the amount of funds needed and  available to cover expected net future costs on outstanding insurance, the  amount of funds available to cover unexpected losses, and the projected  performance of the MMI Fund under alternative economic scenarios. We  compared the types of information available in the actuarial reviews with  the types of information in the budgetary and financial accounting reviews  of the fund, as well as in FHA\u2019s quarterly reports to Congress, focusing on  information that could help inform whether the MMI Fund is likely to  remain self-sufficient. Additionally, we interviewed FHA headquarters  officials about the content and interpretation of the various reviews of the  fund.", "To illustrate the similarities and differences between the MMI Fund\u2019s  actuarial and budgetary reviews, we summarized information about the  two reviews, including their purposes and the sources of their  requirements (see app. II). In addition, we reviewed recent actuarial  reports and HUD budget appendixes and spoke with FHA officials to  understand their similarities and differences. We developed a hypothetical  illustration of how certain components of the budgetary review are used in  the actuarial review."], "subsections": []}, {"section_title": "Capital Requirements and Stress Tests", "paragraphs": ["To assess the extent to which the MMI Fund\u2019s capital requirement and  FHA\u2019s stress testing approach are consistent with principles underlying  such requirements for other financial institutions, we developed two  evaluative frameworks and assessed requirements and practices for the  MMI Fund against them. For the capital requirements framework, we  reviewed publicly available documents on requirements and capital  assessment practices from financial regulators and institutions, including  the Bank for International Settlements, Fannie Mae and Freddie Mac  (specifically, their capital requirements for private mortgage insurers), the  Federal Deposit Insurance Corporation, and the Federal Housing Finance  Agency (FHFA). For the stress testing framework, we reviewed articles on  principles and practices from financial regulators and institutions,  including the Bank for International Settlements, the Board of Governors  of the Federal Reserve System (Federal Reserve), and the International  Monetary Fund. We included in our frameworks key common elements in  designing capital requirements and stress tests that could apply to the  MMI Fund, assuming the fund would continue to operate under federal  accounting standards and budgeting requirements.", "In addition to FHA, we shared the draft frameworks with FHFA, the  National Association of Insurance Commissioners, and the American  Academy of Actuaries and interviewed officials from these organizations  to obtain their input on the frameworks. We chose these organizations  based on their expertise in financial assessments of housing finance and  mortgage insurance institutions. We then reviewed publicly available  reports and documents, including relevant statutory provisions and FHA\u2019s  annual actuarial reviews and reports to Congress, to assess whether the  requirements and practices of the MMI Fund were consistent with our  framework elements.", "To provide additional perspective on stress tests of the MMI Fund, we  compared variables in selected economic scenarios from the fiscal year  2016 actuarial review of FHA\u2019s forward mortgage portfolio with  corresponding variables in one of the scenarios used by the Federal  Reserve in its 2016 supervisory stress tests of large banking  organizations (see app. III). Specifically, we graphed the projected paths  of the house price index, 30-year fixed mortgage rate, and unemployment  rate for the two most stressful MMI Fund scenarios\u2014the Monte Carlo  simulation path producing the lowest economic value for forward  mortgages and the Moody\u2019s Analytics\u2019 protracted slump scenario\u2014and  the Federal Reserve\u2019s severely adverse scenario. We chose to highlight  the worst simulation path and the Moody\u2019s Analytics protracted slump  scenarios because they are generally the two most severe scenarios  used in stress tests of the MMI Fund. The Federal Reserve\u2019s severely  adverse scenario was the most analogous to the two MMI Fund scenarios  and has been referenced in Fannie Mae\u2019s and Freddie Mac\u2019s financial  requirements for private mortgage insurers. We analyzed the similarities  and differences in the severity, duration, and timing of the three variables  discussed above. To assess the reliability of FHA\u2019s data on its stress  scenarios, we compared the data we received from the agency with  published information in FHA\u2019s actuarial reviews. We determined the data  were sufficiently reliable for the purposes of illustrating similarities and  differences with the Federal Reserve\u2019s severely adverse scenario."], "subsections": []}, {"section_title": "Consideration of Forward Mortgages and HECMs in Capital Assessment", "paragraphs": ["To identify key advantages and disadvantages of including both forward  mortgages and HECMs in the MMI Fund\u2019s capital assessment, we  reviewed actuarial results for both portfolios from fiscal year 2009 through  fiscal year 2016. Using information from the actuarial reviews, we  calculated and compared the separate and combined capital ratios for  forward mortgages and HECMs to determine the effect of including the  reverse mortgage portfolio in the MMI Fund capital calculation, as well as  the potential effects of holding the HECM portfolio to a separate capital  requirement. We also reviewed discussions in FHA\u2019s annual reports to  Congress describing the effect of including the forward mortgage and  HECM portfolios in the same fund. In addition, we interviewed FHA  officials and other industry participants and stakeholders, including the  National Reverse Mortgage Lenders Association, Mortgage Bankers  Association, U.S. Mortgage Insurers, American Bankers Association, and  the American Association of Retired Persons, about the advantages and  disadvantages of jointly considering both portfolios in assessing the MMI  Fund\u2019s capital ratio as well as of alternative approaches.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Mutual Mortgage Insurance Fund Budgetary and Actuarial Reviews", "paragraphs": ["The budgetary and actuarial reviews of the Mutual Mortgage Insurance  Fund (MMI Fund) serve different purposes, stem from different  requirements, and are conducted by different entities. See table 5 for a  summary of these two reviews of the fund.", "However, the two reviews share some concepts and numbers. For  example, the actuarial analysis of the MMI Fund\u2019s economic value  includes an existing capital resources component, which can be  calculated from information on assets and liabilities presented in the  budgetary review. In addition, both reviews include a calculation of the  present value of future cash flows on outstanding insurance, though the  two reviews use different models and economic assumptions to perform  these calculations. Both reviews also provide estimates of the amount of resources the MMI Fund has, in excess of what is needed to cover  estimated credit subsidy costs (that is, the net present value of expected  future cash flows on outstanding insurance). Figure 3 provides a  simplified, hypothetical illustration of the relationship between the MMI  Fund\u2019s budgetary and actuarial reviews."], "subsections": []}, {"section_title": "Appendix III: Comparison of Economic Scenarios Used in Mutual Mortgage Insurance Fund and Federal Reserve Supervisory Stress Tests", "paragraphs": ["We compared selected economic scenarios used in stress tests of the  Federal Housing Administration\u2019s (FHA) Mutual Mortgage Insurance Fund  (MMI Fund) with the severely adverse scenario developed by the Board  of Governors of the Federal Reserve System (Federal Reserve) for its  supervisory stress tests of large banking institutions. (Under the direction  of the Federal Housing Finance Agency, the housing enterprises Fannie  Mae and Freddie Mac incorporated the Federal Reserve scenario into  financial criteria that private mortgage insurance companies must meet to  be an approved insurer of mortgages acquired by the housing  enterprises.) Our analysis focused on scenarios used in the fiscal year  2016 actuarial review of the MMI Fund\u2019s forward mortgage portfolio (the  most recently completed review) and the Federal Reserve\u2019s 2016  supervisory stress tests, because these scenarios all used projections of  economic variables beginning in calendar year 2016. We examined  similarities and differences in the severity, duration, and timing of these  scenarios\u2019 projections of three variables most pertinent to the MMI Fund\u2019s  economic value: single-family home prices, 30-year fixed mortgage  interest rates, and unemployment rates. These comparisons should be  treated as illustrative because the MMI Fund and Federal Reserve stress  tests have different intended uses and time horizons. For example, the  Federal Reserve stress scenarios last 3 years and one quarter, whereas  the MMI Fund scenarios last nearly 12 years. In addition, because both  the MMI Fund and Federal Reserve stress scenarios change from year to  year, the similarities and differences we discuss are not representative of  those that might be observed for other time periods.", "The following analysis compares the projected quarterly paths of the  three variables under two economic scenarios used in stress tests of  FHA\u2019s forward mortgage portfolio\u2014the Monte Carlo simulation path  producing the lowest economic value for forward mortgages (MMI Fund  worst simulation path) and the modified Moody\u2019s Analytics protracted  slump scenario (MMI Fund protracted slump)\u2014with the projected paths of  the variables under the Federal Reserve\u2019s severely adverse scenario.  We chose to highlight these MMI Fund stress scenarios because they  generally have been the two most adverse scenarios considered in the  actuarial reviews and are therefore the most analogous to the Federal  Reserve\u2019s severely adverse scenario. The projections for the MMI Fund  scenarios and the Federal Reserve scenario start 6 months apart (third  quarter and first quarter of calendar year 2016, respectively). We treated  the starting quarter of each scenario as the first quarter of the  comparative analysis."], "subsections": [{"section_title": "House Price Index", "paragraphs": ["As shown in figure 4, the MMI Fund and Federal Reserve scenarios differ  in terms of the severity, duration, and timing of projected changes in  house prices (as measured by house price indexes). All other things  being equal, falling house prices negatively affect the MMI Fund because  they increase the number of mortgage foreclosures and the severity of  insurance losses on those foreclosures. The MMI Fund protracted slump  and Federal Reserve severely adverse scenarios assume similar sharp  declines in house prices during the first 2 years\u2014about negative 20  percent and negative 23 percent, respectively. However, under the MMI  Fund protracted slump scenario, house prices begin to recover in the third  year and rise steadily thereafter, ending 15 percent higher than they were  at the start of the scenario. In contrast, under the Federal Reserve  scenario, house prices decline about an additional 2 percentage points,  then recover slightly before the scenario ends in the fourth year.", "The MMI Fund worst simulation path features a substantially different  house price path than the other two scenarios. It shows a small initial  increase in house prices over the first 2 years, before projecting an  extended 6-year decline, resulting in a peak-to-trough drop of about 18  percent. Thereafter, house prices recover somewhat, but end up about 10  percent below their level at the start of the scenario."], "subsections": []}, {"section_title": "Thirty-Year Mortgage Interest Rate", "paragraphs": ["The projected path of 30-year fixed mortgage interest rates also differs  among the three stress scenarios. Changes in mortgage interest rates  can have varying effects on the MMI Fund. On the one hand, lower  interest rates can negatively affect the fund by incentivizing borrowers to  prepay their mortgages (for example, through refinancing), which reduces  the fund\u2019s income from insurance premiums. On the other hand, if  coupled with conditions that increase foreclosure risk (such as low house  price growth), higher interest rates can negatively affect the fund by  reducing prepayments, resulting in more mortgages remaining in the fund  that could lead to foreclosures and insurance claims.", "As shown in figure 5, the three scenarios exhibit differences in the  severity and timing of interest rate changes and the overall volatility of the  interest rate path. The mortgage interest rate under the Federal  Reserve\u2019s severely adverse scenario increases by about 1 percentage  point over the first year, then essentially levels off through the end of the  scenario in the fourth year. In contrast, the MMI Fund protracted slump  scenario projects an initial 1.5 percentage point decline in the interest rate  over about the first 2 years, followed by an extended increase that leaves  the interest rate almost 2 percentage points higher at the end of the 12- year scenario than it was at the start. The MMI Fund worst simulation  path features the most dramatic interest rate changes of the three  scenarios. It begins with a sharp increase of more than 3.5 percentage  points over about the first 2 years, then assumes several up and down  spikes over about the next 10 years, before ending with an interest rate  about 3 percentage points higher than it was at the start of the scenario."], "subsections": []}, {"section_title": "Unemployment Rate", "paragraphs": ["As shown in figure 6, all three scenarios feature a steep increase and  subsequent decline in the unemployment rate, but the timing and duration  of the changes differ. All other things being equal, increases in the  unemployment rate adversely affect the MMI Fund because of the  negative effect that job loss has on a borrower\u2019s ability to make monthly  mortgage payments and avoid foreclosure. The unemployment rate under  the Federal Reserve severely adverse scenario and the MMI Fund  protracted slump scenario follows similar paths. Both start with nearly  identical increases of about 4 percentage points within the first 2 years,  followed by declines of roughly 1 percentage point over the subsequent  six quarters, at which juncture the Federal Reserve scenario ends. In the  longer MMI Fund protracted slump scenario, the unemployment rate  continues to fall gradually through the 12th year, ending about 1  percentage point lower than it was at the beginning of the scenario. In  contrast, the MMI Fund worst simulation path features a more gradual  and less even increase in the unemployment rate\u2014about a 3.25  percentage point rise over about the first 5 years. The unemployment rate  then slides below the starting level by year 10, before rebounding past the  starting level by the end of the scenario."], "subsections": []}]}, {"section_title": "Appendix IV: Comments from the Department of Housing and Urban Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Steven Westley (Assistant  Director), Winnie Tsen (Analyst in Charge), Stephen Brown, Marcia  Carlsen, William Chatlos, Robert Dacey, Emei Li, John McGrail, Angela  Pun, Jennifer Schwartz, Jena Sinkfield, and Frank Todisco made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-409", "url": "https://www.gao.gov/products/GAO-18-409", "title": "Gas Pipeline Safety: Stakeholders' and Officials' Views on Federal Odorizing Requirements", "published_date": "2018-04-18T00:00:00", "released_date": "2018-04-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The nation's gas pipeline network moves about 74 billion cubic feet of combustible gas to homes and businesses daily. To alert the public of a gas leak before an explosion occurs, PHMSA has different requirements for odorizing gas. All gas transported by distribution pipelines throughout communities must be odorized. Gas transported across many miles by transmission pipelines is required to be odorized only in certain populated areas. There are no requirements to odorize gas in gathering pipelines. Congress included a provision in statute for GAO to review odor requirements for all pipelines.", "This report presents the views of federal and state pipeline safety officials and industry and safety stakeholders on: (1) the advantages and disadvantages of odorizing combustible gases in pipelines; and (2) whether and how federal requirements for odorizing pipelines should be modified. GAO reviewed relevant regulations and reports; surveyed officials in 48 states and the District of Columbia; and interviewed PHMSA and NTSB officials. GAO also interviewed 34 stakeholders, including 14 experts identified by the National Academies, and 20 other industry and safety stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["Pipeline and Hazardous Materials Safety Administration (PHMSA) and National Transportation Safety Board (NTSB) officials, state officials, and stakeholders GAO contacted cited safety as the main advantage to odorizing combustible gases in pipelines, primarily for distribution pipelines in densely populated areas (see figure). Specifically, adding a chemical with a distinctive odor to gas allows the public to generally detect leaks before an explosion can occur. The most frequently cited disadvantage was that commonly used sulfur-based odorants must be removed\u2014primarily from gas in transmission pipelines\u2014before the gas can be used in certain processes, such as producing fertilizer.", "While federal odorization requirements follow a risk-based approach by focusing on pipelines in populated areas, the officials and stakeholders GAO contacted disagreed on the need to modify these requirements for some pipelines. Specifically, because distribution pipelines run through populated areas, everyone GAO contacted generally agreed that these pipelines should be odorized for safety, as currently required. For gathering pipelines, the majority of officials and stakeholders did not see a need to modify regulations because these pipelines would be technically challenging to odorize and are primarily located in rural areas. However, about two-thirds of state officials and about half of stakeholders said that additional transmission pipelines should be odorized for public safety.", "Conversely, officials from PHMSA and NTSB and about half of the stakeholders contacted noted that, because transmission pipelines operate at high pressure and generally rupture rather than leak, it is unlikely that odorant could mitigate risk. Instead, other required safety practices\u2014such as internal pipeline inspections\u2014can provide more preventative, risk-based safety management, according to PHMSA officials. In this regard, PHMSA officials said that they plan to strengthen risk-based safety requirements for transmission and gathering pipelines as part of on-going rulemakings. PHMSA anticipates issuing these rules in 2019."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2017, the nation\u2019s gas pipeline network moved about 73.6 billion cubic  feet per day of dry natural gas to homes, schools, and businesses.  Pipelines are relatively safe when compared with other modes of  transporting hazardous goods. However, a pipeline leak could allow these  colorless, odorless gases to seep undetected into areas where people  live or work, with potentially devastating results. To alert the public of a  dangerous buildup of gas before an explosion can occur, federal pipeline  safety regulations\u2014established by the Department of Transportation\u2019s  Pipeline and Hazardous Materials Safety Administration (PHMSA)\u2014 require that combustible gases transported by certain pipelines be  odorized by adding a chemical with a distinctive odor that can be easily  recognizable by a person with a normal sense of smell. Specifically, all  gases in distribution pipelines, which run throughout cities and  communities, must be odorized. Gases transported by large, high- pressure transmission pipelines, which run across the country, are  required to be odorized only in certain populated areas. Gases collected  by gathering pipelines from wells in gas drilling areas are not required to  be odorized.", "The Protecting our Infrastructure of Pipelines and Enhancing Safety  (PIPES) Act of 2016 included a provision for us to review the potential  impact of requiring that combustible gases transported by all pipelines be  odorized. This report presents the views of federal and state officials and  industry and safety stakeholders on:  1.  the advantages and disadvantages of odorizing combustible gases  transported by pipeline; and  2.  whether and how federal pipeline odorization requirements should be  modified.", "To address both objectives, we reviewed relevant statutes, regulations,  and our prior work related to federal and state gas pipeline odorization  requirements. We also collected data from PHMSA on pipeline miles by  pipeline type, the gases odorized, and the odorant types for fiscal year  2016 through 2018. We assessed the reliability of these data by  interviewing PHMSA officials on how it was collected and verified and  determined that the data were sufficiently reliable for our purposes. We  interviewed PHMSA and National Transportation Safety Board (NTSB)  officials on the current federal odorization requirements, as well as  whether and how they should be modified.", "We also surveyed pipeline safety officials in the contiguous 48 states and  the District of Columbia to collect information on both objectives. We  received a 100 percent response rate. To develop the survey questions,  we conducted initial interviews with state pipeline safety officials and  stakeholders to identify issues regarding pipeline odorization  requirements. We also reviewed key literature to ascertain the  advantages and disadvantages of odorizing gas transported by pipelines.  The survey was reviewed by an internal, independent survey expert and  pretested with three potential respondents from state pipeline safety  agencies. We did this to ensure that:  1.  the questions were clear and unambiguous,  2.  the terms we used were precise,  3.  the survey did not place an undue burden on the agency officials  4.  the survey was independent and unbiased.", "We took steps in survey design, data collection, and analysis to minimize  non-sampling errors. Our results are not subject to sampling error  because we administered our survey to all 48 lower contiguous state  pipeline safety agencies and the District of Columbia. The survey data  were collected from September through November 2017.", "In addition, we interviewed 34 stakeholders. We worked with the National  Academies of Science to identify 14 experts that we interviewed to  discuss their views on both objectives. These experts were selected  based on their expertise in the following areas: chemistry, gas industry,  odorant industry, chemical manufacturing industry, and public health and  safety, with all areas of expertise balanced to obtain a wide variety of  viewpoints. Finally, we interviewed 20 other industry and safety  stakeholders including: representatives from chemical manufacturing  associations, gas pipeline operators, odorant manufacturers, and pipeline  safety groups to discuss both objectives. These interviews with experts  and stakeholders are not generalizable to the entire population of  possible experts and stakeholders. For reporting purposes, we developed  the following series of indefinite quantifiers to describe the 34 total  stakeholder responses from the 14 experts and 20 other industry and  safety stakeholders we interviewed:", "6 or less of the 34 total is described as \u201ca few\u201d;", "7 to 13 is described as \u201csome\u201d;", "14 to 19 is described as \u201cabout half\u201d;", "20 to 26 is described as \u201cmany\u201d; and", "27 or more is described as \u201cmost\u201d.", "See appendix II for a list of experts and other stakeholders interviewed.", "We conducted this performance audit from June 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Roughly two-thirds of domestic energy supplies are transported through  over 2.6 million miles of pipelines throughout the United States. These  pipelines carry hazardous liquids and natural gas from producing wells to  end users (residences and businesses). Natural gas, which is  combustible, accounts for 99.8 percent of all gas distributed in the United  States. Other combustible gases transported by pipeline include  hydrogen, landfill gas, synthetic gas, and propane. Within this nationwide  system, three main types of pipelines serve different purposes and users  (see fig. 1):", "Gathering pipelines. The estimated 11,500 miles of onshore gas  gathering pipelines subject to PHMSA regulation collect natural gas  from wells in production areas. These pipelines then typically  transport the gas to processing facilities, which in turn refine it and  send the gas to transmission pipelines. Gathering pipelines range in  diameter from about 2 to 12 inches and operate at pressures that  range from about 5 to 1,400 pounds per square inch (psi). These  pipelines tend to be located in rural areas but can also be located in  urban areas. PHMSA estimates that another 230,000 miles of gas  gathering pipelines are not subject to federal regulation based on their  generally rural location and low operating pressures.", "Transmission pipelines. The estimated 298,000 miles of onshore  transmission pipelines carry natural gas, sometimes over hundreds of  miles, to communities and large-volume users (e.g., factories).  Transmission pipelines tend to have the largest diameters and  pressures of any type of pipeline, generally ranging from 12 inches to  42 inches in diameter and operating at higher pressures ranging from  400 to 1,440 psi.", "Distribution pipelines. The estimated 2,170,000 miles of natural gas  distribution and service pipelines transport natural gas from  transmission pipelines to residential, commercial, and industrial  customers. These pipelines tend to be smaller, sometimes less than 1  inch in diameter, and operate at lower pressures, from 0.25 to 100 psi.", "A specific pipeline only carries one type of gas. These gases may be  colorless and odorless, which is why odorizing them may be necessary to  safely alert people of a leak.", "All odorants used in the United States contain sulfur. According to  PHMSA officials, there are nine primary sulfur-based odorants used  domestically for transporting combustible gas, all but one contain  mercaptan\u2014a type of chemical with a distinctive sulfur smell\u2014which is  blended with other chemicals for stability. Pipeline operators select the  odorant blend that works best for their pipeline network. Distribution  pipeline operators add the odorant to their gas, usually at the \u201ccity gate\u201d,  or the place where transmission pipelines connect to a distribution  pipeline network. The odorant is transported and stored in a concentrated  liquid form that has a strong smell, is flammable, and is toxic. The odorant  is injected into the gas stream at the \u201ccity gate\u201d odorization station and  vaporizes into the gas. In its diluted form, the odorants are nontoxic.", "PHMSA, within the Department of Transportation (DOT), administers  DOT\u2019s national regulatory program to ensure the safe transportation of  natural gas by pipeline. PHMSA oversees and enforces pipeline  operators\u2019 compliance with federal odorization requirements for interstate  pipelines, which are primarily transmission pipelines. Most states have  agreements with PHMSA to oversee and enforce pipeline operators\u2019  compliance with federal requirements\u2014including odorization  requirements\u2014for intrastate pipelines, which are primarily distribution  pipelines. These states may also impose safety requirements that are  more stringent than federal requirements. Under the current regulatory  system, most gathering pipelines are not subject to federal safety  requirements, based on their location. Only gathering pipelines close to  populated areas or waterways are currently subject to federal  requirements.", "In March 2012, we reported that land use changes have resulted in  development encroaching on existing gathering pipelines and the  increased extraction of oil and natural gas from shale deposits has  resulted in the development of new gathering pipelines, some of which  are larger in diameter and operate at higher pressure than older pipelines.  Therefore, we recommended that PHMSA collect data on gathering  pipelines to help determine whether to expand regulation of these  pipelines. In April, 2016, PHMSA issued the Gas Transmission and  Gathering Notice of Proposed Rulemaking that would: 1) require all gas  gathering pipeline operators to submit operating and accident data to  PHMSA, 2) more clearly define \u201cgathering pipeline\u201d to better identify  pipelines subject to PHMSA\u2019s requirements, and 3) increase the number  of gathering pipeline miles under PHMSA\u2019s jurisdiction. PHMSA  estimates that the new rule would increase the number of gathering  pipeline miles with reporting requirements by 344,000 and the number of  gathering pipeline miles subject to additional safety measures by almost  70,000.", "The overall framework for federal gas pipeline regulations\u2014including  odorization requirements\u2014is designed to mitigate risk. All pipelines  regulated by PHMSA are required to meet uniform, minimum safety  standards. Regarding odorization, these minimum standards prescribe  that a combustible gas must be odorized so that at a concentration in air  of one-fifth of the lower explosive limit, the gas is readily detectable by a  person with a normal sense of smell. The proximity of pipelines to  populated areas, where leaks present the greatest risk, determines  whether or not the gas needs to be odorized. Since 1970, PHMSA has  categorized pipelines into four classes based on their proximity to  populated areas to determine the odorization requirements for gas  transported by distribution and transmission pipeline. Class 1 locations  are in rural areas and Class 4 locations are in densely populated areas  (see table 1.). All combustible gases transported by distribution pipelines  are required to be odorized because these pipelines are primarily in  populated areas. Some transmission pipelines in highly populated\u2014Class  3 and 4\u2014areas are also required to be odorized.", "In addition, PHMSA has a supplemental risk-based regulatory program  termed \u201cintegrity management\u201d for pipelines in \u201chigh-consequence areas\u201d  where an incident would have greater consequences for public safety or  the environment. Integrity management has been a part of PHMSA\u2019s risk- based regulatory approach for natural gas transmission pipelines since  2004, and for natural gas distribution pipelines since 2011. The risk- based integrity management programs for natural gas transmission  pipelines require operators to systematically identify and mitigate risks to  pipeline segments located in high-consequence areas. For example, in  these areas operators must monitor their pipelines for signs of corrosion  and repair corroded lines within a specified period of time. High- consequence areas for natural gas pipelines include highly populated or  frequently used areas, such as parks. These areas may overlap with  Class 3 or Class 4 locations. The integrity management program for  distribution pipelines applies to all distribution pipelines due to their  proximity to populated areas."], "subsections": []}, {"section_title": "Officials and Stakeholders Said That Odorizing Gas in Pipelines Improves Public Safety, but Can Impede Some Industrial Processes", "paragraphs": [], "subsections": [{"section_title": "Pipeline Gas Odorization Facilitates Early Detection, Particularly in Populated Areas", "paragraphs": ["Almost all officials and stakeholders we interviewed and the state pipeline  safety officials we surveyed told us that the advantage of using sulfur- based odorants to odorize combustible gas transported by pipeline is  public safety. Sulfur-based odorants have a low-odor threshold, so are  easily detected at low concentrations. With a smell similar to that of rotten  eggs, this odor is particularly advantageous when used in distribution  pipelines that are located in areas where people congregate (e.g., homes,  businesses and hospitals). If individuals smell an odorant, they can call  emergency services and alert those nearby of a potential gas leak,  possibly helping to prevent an explosion that could result in the loss of life  and property.", "According to federal regulations, all local distribution companies must  conduct outreach to educate the public and others on what to do when  they smell a gas leak. To this end, the 2017 American Gas Association  Odorization Manual (manual) states that some local distribution  companies have gone beyond placing the traditional scratch-and-sniff  insert in customers\u2019 billing statements\u2014to inform them about gas leaks and odor\u2014to implementing \u201cSmell Gas Act Fast!\u201d campaigns. According  to the manual, these campaigns are designed to better educate the public  on the smell and nature of natural gas, along with the need to quickly take  action if the odor is detected. Responding immediately to the smell of  natural gas can help to prevent possible accidents. For example, when  authorities were reportedly called to a Rockville, Maryland home in  November 2017 to investigate an odor from a natural gas leak, authorities  evacuated several nearby homes as a safety precaution in the event of  an explosion, until the source of the leak could be identified and  addressed.", "While nearly all stakeholders we interviewed said that public safety was  the key advantage associated with odorizing combustible gases (in  particular, combustible gases transported by distribution pipeline), some  experts expressed differing opinions on the use of handheld electronic  combustible gas detection devices as an alternative to detect gas leaks.  According to one expert, these devices are better suited to detect gas at  levels much lower than an individual\u2019s sense of smell would allow. This  expert also noted that odor does not wake a sleeping individual so a gas  leak could go undetected for hours. However, a second expert noted that  during his experience with pipeline accident investigations over the past  40 years, he was aware of about 10 cases in which deceased individuals  were found after a gas leak accident holding a portable combustible gas  detector because (1) the device may not have indicated the presence of  gas in one location while a nearby location may have been explosive due  to a gas leak; or (2) the user may not have been properly trained on the  instrument\u2019s limitations to identify a safe area. Accordingly, that expert  stated that odorization is the most effective safety method for alerting the  public of a possible gas leak. Additionally, a third expert noted that (1)  electronic detectors can be difficult to place in certain areas and (2)  odorants allow the public to quickly detect gas leaks without acquiring or  maintaining external equipment."], "subsections": []}, {"section_title": "The Primary Disadvantages Officials and Stakeholders Cited Are Odor Removal for Some Industries and False Alarms", "paragraphs": ["The most common disadvantage of sulfur-based odorants cited by  officials and stakeholders we contacted is the need to remove the odorant  for some industrial processes. Officials from both federal safety regulatory  agencies we interviewed (PHMSA and NTSB); approximately half of state  pipeline safety officials surveyed; and about half of the stakeholders  interviewed reported that sulfur-based odorants used in transmission  pipelines can cause an adverse chemical reaction during processing for  some industries. For example, sulfur in natural gas can be detrimental in  the production of electricity, fertilizer, and glass because it interferes with  the catalyst used during production. PHMSA and NTSB officials and  about half of the stakeholders said that before these items are produced,  operators must remove any added (or naturally occurring) sulfur from  their combustible gas, adding another step to production. One expert and  three stakeholders told us that removing the odorant also resulted in  added cost for some operators. However, because most transmission  pipelines are in less populated areas and not odorized, many  manufacturers currently receive unodorized gas from transmission  pipelines and do not need to remove odorant, according to the industry  associations we interviewed.", "In addition, some stakeholders warned that accidental spills of  concentrated odorant, using more odorant than needed, or releasing  excessive amounts of odorant during operators\u2019 maintenance activities  can lead to false alarm calls. One pipeline operator told us that an  employee spilled odorant on a glove and the public made several false  alarm calls due to the odorant\u2019s potent smell as the employee drove  through town with the glove on the back of a truck. Officials from PHMSA,  an official from a pipeline safety organization and representatives from  two pipeline industry associations told us that the public could get  accustomed to these types of odorant leaks and begin to ignore them or  have a false sense of security when a real gas leak does occur. For  example, the official from the pipeline safety organization told us that he  has heard of at least one location where odorant leaks frequently  occurred, and the public began to ignore the smell.", "Additionally, under certain conditions, sulfur-based odorants can be  hazardous to human health and the environment. A few stakeholders told  us that odorants released in excessive amounts may cause health  concerns. For example, during a presentation before the Pipeline Safety  Trust, a Los Angeles County public health official stated that it appears a  sulfur-based odorant was related to public health complaints made in  2015 after a 4-month long natural gas leak from a natural gas storage  facility in California\u2019s Aliso Canyon. Many of the reported symptoms  matched those made after a 2008 natural gas storage tank leak in  Alabama, which included respiratory problems; eye, nose, and throat  irritation; headache; nausea; and dizziness. While at least one study has  been conducted and another is planned on the long-term effects of sulfur- based odorants on human health, no direct cause and effect relationships  have been established.", "Finally, a few stakeholders noted potential environmental hazards  regarding the use of odorants. For example, one stakeholder told us that  odorants can become a hazardous waste depending on the quantity used  and the amount of time the chemical remains in one location prior to use;  one expert and another stakeholder noted that sulfur-based odorants  when spilled may contaminate waterways; and four experts and two  stakeholders warned that when combusted, sulfur-based odorants can  produce acid rain. Also, according to PHMSA officials, these odorants are  both toxic and flammable in their concentrated state. However, none of  the stakeholders provided specific examples of when an odorant caused  environmental damage."], "subsections": []}]}, {"section_title": "Officials and Stakeholders Had Mixed Views on Need to Modify Odorization Requirements", "paragraphs": [], "subsections": [{"section_title": "Many Officials and Stakeholders Agreed That Federal Distribution Pipeline Odorization Regulations Do Not Need to be Modified", "paragraphs": ["General consensus exists among those we spoke with (including federal  regulatory and safety officials, experts identified by the National  Academies, and industry stakeholders) that federal requirements to  odorize all gases in distribution pipelines are sufficient as written and do  not need to be modified. PHMSA and NTSB officials we interviewed and  many commenting stakeholders articulated this view. In addition, state  pipeline officials we surveyed generally did not indicate a need to change  federal regulations for odorizing distribution pipelines. Due to the  proximity of distribution pipelines to areas where people live and work,  officials, experts, and stakeholders we interviewed emphasized the  importance of odorizing gas in distribution pipelines to reduce the safety  risk to the public.", "As we have previously reported, the operating characteristics of  distribution pipelines make odorant a key factor in reducing safety risk. In  2012 we reported that distribution pipelines operate at lower pressures,  so pipeline failures are more likely to involve slow leaks rather than  explosive ruptures. Leaking gas can accumulate in confined spaces, or  migrate away from the pipeline until it finds an ignition source and  potentially causes injury, death, and/or property damage. These slow  leaks are difficult to see or hear, so odorants provide a critical warning to  call emergency services and inform those nearby of a potential gas leak  before it ignites."], "subsections": []}, {"section_title": "Many Officials and Stakeholders Agreed That Odorizing Gathering Pipelines Could Be Technically Challenging with Little Added Safety Benefit", "paragraphs": ["Of those we interviewed or surveyed, about half of stakeholders and a  third of state pipeline safety officials did not indicate a need to modify  existing regulations for odorizing gas in gathering pipelines. Further, a  few commenting experts said odorizing those pipelines would be  technically challenging. According to the experts, technological  challenges stem from the fact that gas contains natural sulfur at many of  the wells where gathering pipelines collect the raw gas. The natural sulfur  in the raw gas could counteract the added chemical sulfur odorant,  masking the smell of each and lowering the effectiveness of the odorant.  Further, one stakeholder said that odorizing gathering pipelines would be  logistically difficult and expensive given the number of wells that would  each need an odorization station. For example, according to this  stakeholder, there are roughly 500,000 gas wells nationwide and each  odorizer would cost $2,000 as a capital investment. In addition, this  stakeholder said that any safety benefit of adding odorant would be  limited because most gas wellheads and gathering pipelines are located  in sparsely populated rural areas.", "While the majority of stakeholders and state survey respondents did not  see a need to odorize gas in gathering pipelines, a third of the state  safety officials and three other stakeholders said all gathering pipelines  should be odorized for additional safety regardless of any technical  challenge. However, requiring all gathering pipelines to be odorized at  the federal level would have to be consistent with federal pipeline safety  regulations. According to the safety regulations, a risk assessment,  including an assessment of the benefits and costs of proposed regulatory  standards, is required to be considered in any decision on whether to  impose a new safety standard. According to PHMSA officials, they do  not have the data to report on any incidents on gathering pipelines where  odorant may have made a difference. Moreover, PHMSA officials stated  that they do not have the data to formulate an educated opinion or  viewpoint as to the need to odorize gathering pipelines. To address this  lack of data, the Pipeline Safety -Safety of Gas Gathering Pipelines  rulemaking, if approved, will provide PHMSA with more data on gas  gathering pipeline infrastructure and incident data. According to PHMSA  officials, the data collected will inform PHMSA on the best path forward  regarding further regulation of gas gathering pipelines, including the need  for odorization. Officials anticipate publishing the final rule in summer  2019."], "subsections": []}, {"section_title": "Officials\u2019 and Stakeholders\u2019 Views Differed on Need to Odorize Transmission Pipeline Gas", "paragraphs": ["Officials, stakeholders and survey respondents generally disagreed about  the need to odorize all transmission pipelines. Officials from NTSB as well  as about half of the stakeholders we contacted said the current  regulations for odorizing gas in certain transmission pipelines in  populated areas were sufficient. Additionally, NTSB officials said they  were not aware of incidents where odorants in a transmission pipeline  would have alerted the public in time to prevent the incident. These  officials and stakeholders generally said that odorizing gas in  transmission pipelines is not an effective means of reducing the risk of an  incident. For example, one stakeholder said that at the typically high  pressure at which most transmission pipelines operate, even a relatively  small hole in the pipeline would cause a rupture that would excavate the  earth around it so people would hear and see the evidence of the leak.  Some experts also said that odorizing gas in all transmission pipelines  could have increased costs and other challenges for pipeline operators or  gas end users. For example, one expert said that odorizing all gas  transported in the transmission pipeline system would require tens of  thousands of odorization facilities. This expert also said that if gas is  odorized in transmission pipelines, some industries currently receiving  unodorized gas will be affected negatively because they either must incur  the additional processing and cost of removing the odorant or find new  ways to receive gas that is not odorized.", "Further, PHMSA officials and representatives from the Interstate Natural  Gas Association of America said that the integrity management program  for transmission pipelines provides more preventative, risk-based safety  management than odorants, which rely on reducing risk through early  detection of a leak that has already occurred. The integrity management  program requires operators to assess the integrity of their pipelines within  high consequence areas\u2014which, by definition, encompass Class 3 and 4  locations\u2014on a regular basis using any of three approved methods: (1)  running an in-line inspection tool, or \u201csmart pig\u201d, through the pipeline to  detect anomalies, such as corrosion, that can cause leaks (2) conducting  a direct assessment using data and direct examination of the pipeline  from aboveground to identify problem areas, or (3) hydrostatically testing  a portion of the pipeline by removing the gas product, replacing it with  water, and increasing the pressure of the water above the maximum  allowable operating pressure of the pipeline to test its integrity. These  inspection methods are designed to detect issues that could cause a gas  leak before the leak occurs. Following the assessments, pipeline  operators are required to prioritize and repair anomalies found during  assessments.", "While odorants could be added in addition to integrity management  requirements, PHMSA officials said that integrity management more  effectively helps assure an acceptable level of safety for transmission  pipelines than an odorant could because the risk assessments focus on  the potential causes of leaks and ruptures for these types of pipelines  and, therefore, are more preventative than odorizing. In a September  2006 report, we found that PHMSA\u2019s gas pipeline integrity management  program benefits public safety by incorporating risk-based management  principles into pipeline safety oversight, and in June 2013, we reported  that transmission pipeline operators were conducting periodic  assessments and making repairs to pipelines in high consequence  areas.", "Transmission pipeline operators are also required through the integrity  management program to proactively take measures to reduce the risk or  potential impact of an accident. Based on inspections of interstate  transmission operators\u2019 integrity management programs, PHMSA officials  noted that\u2014while transmission pipeline operators could opt to odorize  gas in a transmission pipeline\u2014they are not aware of any operator to  date that has concluded that odorizing transmission pipelines was  necessary to reduce risk. Instead, operators use tools such as electronic  leak detection and remotely-controlled valves to detect potential leaks  and shut down the pipeline if needed.", "While the preventative safety practices required under the gas  transmission pipeline integrity management program are designed to  mitigate risk without requiring the use of odorant, officials from two states  and one stakeholder questioned the sufficiency of integrity management  practices. However, as part of the ongoing two rulemakings: the Pipeline  Safety: Safety of Gas Transmission Pipelines, MAOP Reconfirmation,  Expansion of Assessment Requirements and Other Related Amendments  and the Pipeline Safety - Safety of Gas Transmission Pipelines, Repair  Criteria, Integrity Management Improvements, Cathodic Protection,  Management of Change, and Other Related Amendments Rulemaking,  PHMSA also plans to strengthen and expand requirements for the gas  integrity management program for transmission pipelines. For example,  PHMSA plans to expand the requirements for periodic assessments and  subsequent repairs to additional pipeline mileage beyond that located in  high consequence areas. PHMSA plans to publish these rulemaking in  March and June, 2019, respectively. The 2016 PIPES Act includes a  mandate for GAO to review PHMSA\u2019s gas integrity management program  as soon as PHMSA publishes the final rule.", "In contrast to the opinions expressed above that transmission pipeline  odorization requirements are sufficient, 31 of 49 state pipeline safety  officials surveyed responded that these requirements are not stringent  enough for safety. Of these respondents, several said that exemptions  that currently apply to some operators with transmission pipelines in  Class 3 and Class 4 locations should not be allowed. There are several  exemptions, determined by the overall class location of the pipeline or  end use of the gas. For example, one class location exemption is that  when at least 50 percent of the length of the pipeline downstream from  the more populated Class 3 or Class 4 location is in a less populated  Class 1 or Class 2 location, the gas does not need to be odorized (see  fig. 2).", "Eliminating the current regulatory exemptions for certain transmission  pipelines and requiring operators to odorize all gas transported by  transmission pipeline through Class 3 or Class 4 locations may not be  cost-beneficial under federal regulatory risk assessment principles, which  direct the agency to assess the benefits and costs of changes in  regulatory standards. For example, while four states cited increased  public safety as the reason to remove the existing exemption, PHMSA  and NTSB officials could not identify any incidents where odorants in a  transmission pipeline would have prevented damage. In addition, as  described above, some experts told us that removing the exemptions could have increased costs and other challenges for pipeline operators or  gas end users. PHMSA officials also said that the definition of a high- consequence area under the gas integrity management program  encompasses all Class 3 and Class 4 locations, so the risk-based  preventative measures required under that program apply to the areas  exempt from odorization requirements."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to DOT for review and comment. DOT  provided technical comments that were incorporated, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Transportation, 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) 512-2834 or FlemingS@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Advantages and Disadvantages of Non-sulfur Based Odorants", "paragraphs": ["While our report focuses on sulfur-based odorants, which are used in the  United States, we also asked experts and stakeholders about the  advantages and disadvantages of non-sulfur based odorants. According  to a German-based manufacturer of non-sulfur odorants, these odorants  are used in some European countries, including Germany and Austria.  This manufacturer also told us that the German energy industry has  embraced using non-sulfur based odorants, in part, to meet German  emissions regulations, as these odorants do not produce sulfur dioxide  and contribute to acid rain when burned.", "Most of the experts and stakeholders that we interviewed were generally  unfamiliar with non-sulfur based odorants. Those with some familiarity  offered the following advantages and disadvantages."], "subsections": [{"section_title": "Advantages:", "paragraphs": ["Three experts and stakeholders reported that non-sulfur based odorants: have less adverse impact on the environment; for example, no acid may cost less for some operators because less product may be  needed than sulfur-based odorants; and do not adversely impact some operators\u2019 processes."], "subsections": []}, {"section_title": "Disadvantages:", "paragraphs": ["Four experts noted that non-sulfur based odorants: have a smell that the American public does not associate with a gas  leak.", "Two experts commented that non-sulfur based odorants: may be chemically unstable; and  can react with other compounds.", "Two experts noted that non-sulfur based odorants: may have a higher level of toxicity."], "subsections": []}]}, {"section_title": "Appendix II: Experts and Other Industry and Safety Stakeholders Interviewed by GAO", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "Contact", "paragraphs": ["Susan Fleming, (202) 512-2834 or FlemingS@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the individual named above, other key contributors to this  report were Sara Vermillion, Assistant Director; Sarah Jones, Analyst in  Charge; Jennifer W. Clayborne; Timothy J. Guinane; David K. Hooper;  Delwen A. Jones; Josh Ormond; Rebecca R. Parkhurst; and Kelly L.  Rubin."], "subsections": []}]}], "fastfact": ["A sulfur-like odor can be added to natural gas to help people detect leaks and prevent explosions. Gas is odorized in certain pipelines according to risk-based federal requirements.", "Half of stakeholders and 2/3 of state officials we spoke to said that more transmission pipelines should be odorized. These are the pipelines that run between gas processing plants and more populated areas.", "Federal officials and the remaining stakeholders noted that transmission pipelines are pressurized and usually rupture rather than leak, so other required safety practices such as inspections could better address risks."]}
{"id": "GAO-19-87", "url": "https://www.gao.gov/products/GAO-19-87", "title": "Indian Programs: Interior Should Address Factors Hindering Tribal Administration of Federal Programs", "published_date": "2019-01-03T00:00:00", "released_date": "2019-01-29T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["For more than 4 decades, federal Indian policy has promoted tribal self-government\u2014the practical exercise of Indian tribes and nations' inherent sovereign authority. Under ISDEAA, federally recognized tribes may request to enter into self-determination contracts and self-governance compacts with Interior, transferring the administration of federal programs to the tribe. Under the HEARTH Act, tribes may issue certain leases on their lands without Interior approval if such leases are executed under approved tribal regulations.", "GAO was asked to evaluate issues related to tribal self-government. This report examines factors affecting tribes' use of self-determination contracts, self-governance compacts, and tribal leasing authority under the HEARTH Act. GAO reviewed key legislation and regulations, relevant literature, federal and tribal documents; analyzed agency data; and interviewed federal officials at 12 BIA regional offices, 29 tribes that used at least one of these mechanisms, and 7 tribal organizations."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO found that various factors can affect tribes' use of self-determination contracts and self-governance compacts under the Indian Self-Determination and Education Assistance Act of 1975 (ISDEAA), as amended, and tribal leasing under the Helping Expedite and Advance Responsible Tribal Home Ownership Act of 2012 (HEARTH Act). A key factor that helps tribes use these self-governance mechanisms is tribal government capacity to administer a federal program or manage these resources. Federal efforts that have helped build this capacity have included training, such as that offered by the Bureau of Indian Affairs (BIA) in 2014 and 2015 to educate tribes on the benefits of developing tribal leasing regulations under the HEARTH Act. In contrast, GAO found that other factors can hinder tribes' use of these mechanisms including:", "Inadequate Information Sharing. The Department of the Interior's (Interior) policy and guidance states that tribes should be provided necessary information to design programs they would like to self-administer, such as the amount of funding available to the tribes for the programs and the amount retained by Interior for inherently federal functions. However, according to several tribal stakeholders and some BIA regional officials GAO spoke to, some of this information is not made available to the tribes prior to self-determination contract negotiations, such as information on funding calculations and determinations of inherently federal functions. Without this information, according to a tribal stakeholder, tribes may be at a disadvantage when negotiating with BIA and designing programs for self-determination contracts.", "Delays in Disbursing Funds. According to tribal stakeholders, Interior's process does not ensure that funds associated with their self-determination contracts and self-governance compacts are disbursed in a timely manner. These funding delays can therefore be a factor that hinders their use of self-government mechanisms. Some tribal stakeholders said that disbursement delays have ranged from weeks to months. GAO was unable to determine the extent to which Interior disburses funds in accordance with ISDEAA or within agreed-upon time frames with the tribes, because Interior does not systematically track and monitor the disbursement of these funds.", "Lengthy Review of Proposed Tribal Leasing Regulations. Interior does not have a clearly documented process for reviewing proposed tribal leasing regulations submitted under the HEARTH Act with identified time frames associated with each step of the process. As a result, tribal stakeholders told GAO that they are uncertain about how long the process will take and how it aligns with the 120 day requirement in the Act. According to tribal stakeholders and GAO's analysis of proposed regulations submitted from 2012 through 2017, Interior's review process has resulted in lengthy review times\u2014in some cases, multiple years. Some tribal officials told GAO that Interior's lengthy review process had delayed the tribe's ability to make decisions about the use of their resources. By developing a clearly documented process that includes established time frames for each step in the review, Interior can help eliminate uncertainty and improve the transparency of the review process for the tribes."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that Interior develop processes to share how it makes funding and inherently federal function determinations with tribes, to track and monitor the disbursement of funds within agreed upon time frames, and for the review of proposed tribal leasing regulations including review time frames. Interior concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For more than 4 decades, federal Indian policy has promoted tribal self- government\u2014the practical exercise of Indian tribes and nations\u2019 inherent  sovereign authority. For example, the Indian Self-Determination and  Education Assistance Act of 1975 (ISDEAA), as amended, authorizes  federally recognized tribes to assume the administration of a variety of  federal programs\u2014or portions thereof\u2014that were previously managed  by the Department of the Interior (Interior). Title I of ISDEAA allows tribes  to enter into agreements with Interior, referred to as self-determination  contracts, and transfers the administration of particular federal programs  from Interior to the tribe. In 1988, Congress amended ISDEAA to  authorize a tribal self-governance demonstration project, giving selected  federally recognized tribes the option of entering into self-governance  compacts. Following the demonstration project, in 1994, Congress  amended ISDEAA again, establishing self-governance compacts as a  permanent option for tribes. Title IV of ISDEAA, as amended, created  self-governance compacts as an option for tribes to negotiate broad  agreements with Interior that could cover multiple programs, allowing  tribes to assume the administration of all programs, functions, services,  activities, and competitive grants or portions thereof. Each federally  recognized tribe voluntarily decides whether, and to what extent, to  pursue the administration of federal programs. According to a recent law  journal article, by 2017, nearly all tribes had used a self-determination  contract or self-governance compact to take over the administration for  one or more federal programs, and nearly all tribes had decided to retain  the administration for one or more programs with Interior\u2019s Bureau of  Indian Affairs (BIA)\u2014the agency with primary responsibility to administer  federal Indian programs.", "Tribal self-government can provide numerous benefits to a tribe. For  instance, a 2004 report commissioned by the Department of Health and  Human Services found that the Citizen Potawatomi Nation experienced a  300 percent increase in revenues after taking over the management of  tribal funds from Interior. The Citizen Potawatomi Nation achieved higher  revenues by investing the funds in money market and other low-risk  instruments that pay higher interest than was earned when the funds  were managed by Interior.", "In addition to ISDEAA, the Helping Expedite and Advance Responsible  Tribal Home Ownership Act of 2012 (HEARTH Act) enables tribal self- government by authorizing federally recognized tribes to issue leases of  restricted Indian lands for residential, business, agriculture, wind, and  solar use without the approval of the Secretary of the Interior if such  leases are executed under tribal regulations that have been approved by  the Secretary. According to BIA, as of June 2018, there were leasing  regulations approved under the HEARTH Act from 42 tribes. According to  BIA, the potential tribal benefits of developing tribal leasing regulations for  approval under the HEARTH Act include more efficient and timely  execution of leases that can encourage investment and economic  development in tribal communities. At a December 2017 webinar one  tribal stakeholder provided an example of such a benefit, stating that  when the tribe took over the review and approval of business leases on  its lands from the federal government, the tribe reduced the review time  from 8 to 9 months to about 1 month, allowing it to more quickly pursue  economic development opportunities.", "According to Cohen\u2019s Handbook of Federal Indian Law, the history of  federal control over the administration of programs that serve tribes and  its management of tribal resources has limited growth for some tribal  economies. In our June 2015 report on energy development, for  example, we found that BIA had mismanaged Indian energy resources  and thereby limited opportunities for tribes and their members to use  those resources to create economic benefits and improve the well-being  of their communities. In February 2017, we added federal management  of programs that serve Indian tribes and their members to our biennial  update of high-risk areas, in part, because of long-standing problems with  Interior\u2019s management of these programs.", "You asked us to review issues related to tribal self-determination  contracts, self-governance compacts, and leasing authority under the  HEARTH Act. This report examines factors that have affected tribes\u2019 use  of these mechanisms to further tribal self-government.", "To identify factors that have affected tribes\u2019 use of self-determination  contracts, self-governance compacts, and leasing authority under the  HEARTH Act, we reviewed federal laws, regulations, and guidance;  reviewed reports, congressional testimony, and other articles; reviewed  federal data; and interviewed tribal leaders and officials and federal  officials from Interior and the Environmental Protection Agency (EPA).  Based on information found in the literature we reviewed and views  provided during our interviews, we identified a number of factors that can  affect tribes\u2019 use of self-determination contracts, self-governance  compacts, and the HEARTH Act. The factors we included in this report  are those that were most frequently mentioned in interviews with tribal  and federal officials and that are specifically related to federal government  policies and processes. Any factors identified by tribes we interviewed  that are not related to the federal government were not included in our  scope.", "We first reviewed ISDEAA, the HEARTH Act, and associated federal  regulations and guidance, such as BIA\u2019s handbook for implementation of  ISDEAA, to understand attributes associated with each self-governance  mechanism. We reviewed federal reports, congressional testimony, and  other articles that provided general background information, historical  perspectives, and examples of factors that can affect tribes\u2019 decisions to  use self-determination contracts, self-governance compacts, and  authority under the HEARTH Act. In addition, we reviewed federal data  that included, among other things, data on tribal participation and key  dates associated with BIA\u2019s review of tribal leasing regulations. To assess  the reliability of the federal data we obtained, we consulted with  knowledgeable officials who are responsible for the programs and  corroborated the data with various sources. Based on these steps, we  determined that the data were sufficiently reliable for the purposes of this  report.", "We also interviewed or received written responses from Interior officials  representing, among others, Interior\u2019s Office of Self-Governance (OSG),  BIA\u2019s Office of Trust Services, and all 12 BIA regions that provided  information on federal processes and activities related to tribes\u2019 use of the  mechanisms included in our review. We interviewed leaders and officials  from 29 Indian tribes and nations, selected to ensure a representation of  tribes with a range of experience using one or more of the three  mechanisms included in our review. In addition, we interviewed  representatives from 5 tribal consortia\u2014the Coalition of Large Tribes; the  Great Plains Tribal Chairmen\u2019s Association; the United Indian Nations of  Oklahoma, Kansas, and Texas; the United South and Eastern Tribes; and  the Department of the Interior Tribal Self-Governance Advisory  Committee. We also met with non-profit organizations such as the  National Congress of American Indians\u2014and the Native Governance  Center, a non-profit organization focused on tribal government capacity  building. For the purposes of this review, we refer to tribal leaders, tribal  government officials, and representatives from tribal consortia as tribal  stakeholders.", "Throughout the report, we use the following categories to quantify  statements made by stakeholders: \u201csome\u201d is defined as statements made  by 2 to 5 entities, and \u201cseveral\u201d is defined as statements made by 6 to 10  entities. Each of the 573 federally recognized Indian tribes and nations is  unique. Therefore, the information obtained in our discussions with tribal  stakeholders is not generalizable but provides examples of tribes\u2019  experiences with self-determination contracts, self-governance compacts,  and the HEARTH Act. In addition, given our methodology, it is possible  we did not identify every factor that can affect a tribe\u2019s use of self- determination contracts, self-governance compacts, or the HEARTH Act.", "We conducted this performance audit from February 2017 to January  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."], "subsections": [{"section_title": "Background", "paragraphs": ["Indian tribes and nations are recognized as \u201cdistinct, independent political  communities\u201d that are part of the unique political structure of layered  sovereigns and internal governments that comprise the U.S. system of  government. Tribal powers of self-government are recognized by the  Constitution, legislation, treaties, judicial decision, and administrative  practice. Tribal governments have many of the same responsibilities as  state and local governments. However, tribes are generally unable to  establish a strong tax base structured around the property taxes and  income taxes typically available to state and local governments,  according to a 2016 joint report from the Native Nations Institute and the  Harvard Project on American Indian Economic Development and a 2003  report from the U.S. Commission on Civil Rights. For example, the  reports found that tribes are unable to levy property taxes on some of  their lands because of the legal status of the land. In addition, most tribes  have a limited land base. Tribes generally do not levy income taxes  because many tribal communities have disproportionately high levels of  unemployment and a lack of employment opportunities. To the degree  that they are able, some tribes use sales and excise taxes, but these do  not generally generate enough revenue to fully support tribal  governments. Therefore, some tribes rely on a combination of federal  funds and economic development initiatives as fundamental sources of  financial support for the government programs and services provided to  their communities.", "According to Cohen\u2019s Handbook of Federal Indian Law, \u201cfederal services  to Indians were never mere gratuities. Instead, they were provided in  exchange for cessions of land and rights, and to achieve distinctly federal  purposes.\u201d Generally, the programs that provide basic tribal services are  supported through tribal priority allocation (TPA) funds that Congress  appropriates. TPA funds are used to provide a wide variety of services to  tribal communities\u2014either through BIA-administered programs or self- determination contracts and self-governance compacts\u2014and all federally  recognized tribes are eligible to receive those funds."], "subsections": [{"section_title": "Bureau of Indian Affairs", "paragraphs": ["BIA, through its 12 regional offices and more than 80 agency offices,  administers programs that provide services and funding to tribes. For  example, BIA programs include social services, natural resources  management, economic development, law enforcement and detention  services, tribal court administration, implementation of land and water  claim settlements, repair and maintenance of roads and bridges, repair of  structural deficiencies on high hazard dams, land consolidation activities,  and electric utilities. In some cases, a BIA agency office may serve one  tribe, and in other cases, a BIA agency office may administer programs  on behalf of more than one tribe. For example, BIA\u2019s Central California  Agency administers programs to 56 tribes, the largest multi-tribal field  office in the contiguous 48 states.", "These programs may also be administered by tribal governments under a  self-determination contract or self-governance compact. BIA is  responsible for administering self-determination contracts, including  negotiating and approving each contract and its associated annual  funding agreement and disbursing funds to the tribes. For instance, under  its procedures, BIA is to provide tribes that are interested in pursuing a  self-determination contract with key information about the program and  available funding. ISDEAA transfers control over programs to tribes, but  as stated in Cohen\u2019s Handbook of Federal Indian Law, \u201cfinancial  responsibility remains with the federal government.\u201d ISDEAA provides  that tribes who decide to administer federal programs are to receive the  same funds that would have been provided had the federal government  operated the programs.", "BIA identifies the amount of funds available to a tribe under a self- determination contract or self-governance compact for the administration  of a federal program. In general, the most basic process for calculating  the program amount is as follows:  The program amount equals the total amount of funds Interior used to  operate a program minus residual funds.", "Residual funds are the funds necessary for the federal government to  carry out residual functions. Residual functions are inherently federal  functions that only federal employees\u2019 may perform if all tribes were to  assume responsibilities for all programs that ISDEAA permits. Inherently  federal functions are not defined in Title I or Title IV of the ISDEAA, and a  1994 Solicitor of the Interior memo reports that inherently federal  functions are to be determined on a case-by-case basis when they fall  outside certain defined categories. BIA officials told us the basic  calculation is most likely to be used when a tribe is served by an agency  office that only serves one tribe and the tribe took over administration of a  program from that agency office.", "In cases where the total amount of funds BIA used to operate a program  serves more than one tribe, additional data and factors may be included  in the methodology to calculate the amount of funds available to  administer the program. This is needed to ensure BIA can continue to  provide services to the tribes that did not take over administration of the  program. A BIA official told us that some regions and agency offices may  divide the total amount by the number of tribes served, as shown in the  following example:  The program amount equals the total amount of funds Interior used to  operate a program minus residual funds divided by the number of  tribes served by the program.", "In other cases, regions and agency offices may include additional data to  weight the calculation, such as tribal population or tribal land acres. When  a tribe elects to pursue a self-determination contract, BIA is to meet with  tribal officials to discuss and negotiate the terms of the contract, including  what functions will be retained by BIA, the annual funding amount, and  terms for the frequency of disbursing funds\u2014that is, disbursed in a single  lump sum or other intervals, such as quarterly payments.", "According to Interior budget officials responsible for BIA\u2019s budget, after  Interior receives its appropriations, departmental budget officials  determine how to distribute any changes between the Administration\u2019s  budget and the final budget among BIA offices that deliver direct services  to tribes and to tribes that contract the services through self-determination  contracts. According to Interior budget officials, they calculate changes in  the budget amounts for each contract after consulting BIA program  officials and based on statutory requirements, historical percentages, or  other distribution factors. After the budget calculations are completed, Interior officials transfer funds to BIA regional offices to distribute to BIA  agency offices and tribes. An awarding official in the regional or agency  office then provides contracting tribes an updated annual funding  agreement that identifies the amount of funds for that fiscal year."], "subsections": []}, {"section_title": "Self-Determination Contracts and Self- Governance Compacts", "paragraphs": ["ISDEAA authorizes federally-recognized tribes to assume administration  of certain federal programs and functions that were previously managed  by the federal government. It is Interior policy to facilitate tribal  administration of programs through self-determination contracts and  remove obstacles that hinder tribal autonomy and flexibility to administer  such programs.", "Under Title I of ISDEAA, an interested tribe may request by tribal  resolution to enter into a self-determination contract with BIA. ISDEAA  requires the parties to such contracts to negotiate annual funding  agreements and determine the frequency and timing of payments under  the contract. Payments may occur throughout the fiscal year in  accordance with terms identified in the annual funding agreements as  Interior\u2019s Indian Affairs Office of Budget and Performance Management  makes appropriated funds available.", "Under Title IV of ISDEAA, an interested tribe may request to enter into a  self-governance compact. Under the law, to be eligible for participation in  self-governance compacting, a tribe must, among other things,  demonstrate financial stability and management capability, which can be  evidenced by participating in a self-determination contract for at least 3  years with no material audit exceptions. Interior\u2019s Office of Self- Governance (OSG) is responsible for administering self-governance  compacts and funding agreements for Interior programs. OSG assists  tribes that want to enter into self-governance compacts by providing  training, determining eligibility, participating in negotiations with the tribes  and Interior agencies to identify the amount of funds that will be included  in the self-governance compacts, and approving tribes to participate in  self-governance. In addition, tribes with self-governance compacts  negotiate annual funding agreements with OSG rather than BIA. OSG is  also responsible for transferring funds from Interior to tribes with a self- governance compact, ensuring audit compliance, and processing waivers  of BIA regulations. Further, OSG is responsible for preparing an annual  report to Congress on the costs and benefits of self-governance. As of  fiscal year 2016, OSG has entered into self-governance compacts that  cover 47 percent of federally recognized tribes (267 tribes).", "For additional information on the differences between self-determination  contracts and self-governance compacts, see table 1."], "subsections": []}]}, {"section_title": "Several Factors, Including Certain Federal Actions, Can Affect Tribes\u2019 Use of Self-Determination Contracts, Self- Governance Compacts, and the HEARTH Act", "paragraphs": ["Several factors, including federal agencies\u2019 processes and actions can  affect tribes\u2019 use of mechanisms that further tribal self-government such  as self-determination contracts, self-governance compacts, or leasing  authority under the HEARTH Act that further tribal self-government. Some  of these factors, such as federal training and resources, can help tribes  develop the tribal capacity needed to take over administration of federal  programs and thereby facilitate tribes\u2019 use of these mechanisms. In  contrast, other factors, specifically federal processes and actions, can  hinder or delay tribes\u2019 use of these mechanisms. Some of these  processes include: (1) BIA\u2019s approach for sharing information with tribes,  (2) Interior\u2019s process to disburse funds, and (3) Interior\u2019s process to  review proposed tribal leasing regulations submitted under the HEARTH  Act. In addition, the adequacy of federal resources needed to administer  a program is a factor that can affect tribes\u2019 use of self-determination  contracts and self-governance compacts, according to several tribal  stakeholders and federal officials we spoke with, government reports, our  prior reports, and other articles we reviewed."], "subsections": [{"section_title": "Tribal Capacity is a Key Factor That Can Facilitate Tribes\u2019 Use of Self- Determination Contracts, Self-Governance Compacts, and Authority under the HEARTH Act", "paragraphs": ["The capacity of a tribal government to administer a federal program or  manage its resources is a key factor that can affect a tribe\u2019s decision to  enter into a self-determination contract or self-governance compact, or to  use the authority available under the HEARTH Act, according to some  reports we reviewed. For example, the Harvard Project on American  Indian Economic Development found that successful tribal assertions of  sovereignty and self-government are backed by capable institutions of  governance that contribute to tribal capacity.", "According to federal officials and agency training documents we  reviewed, Interior has contributed to the capacity of tribal governments by  increasing tribes\u2019 knowledge about self-governance compacting and the  HEARTH Act. For example, Interior\u2019s OSG provides opportunities for  tribes to learn about self-governance compacting and build capacity by  partnering with a non-profit organization to conduct training events,  including an annual week-long training program. In addition, BIA offered  several training sessions in 2014 and 2015 on the HEARTH Act to  educate tribes on the benefits of developing tribal leasing regulations.  Furthermore, Interior\u2019s Office of Indian Energy and Economic  Development administers a grant program, Tribal Energy Development  Capacity, intended to help tribes build the capacity to enter into a tribal  energy resource agreement (TERA) or develop leasing regulations under  the HEARTH Act.", "Some tribal stakeholders identified the EPA\u2019s Indian Environmental  General Assistance Program (GAP) as a model for a federal program that  helped their tribes build the capacity needed to administer environmental  programs from EPA. These tribal stakeholders also told us this capacity  benefitted the tribes as they sought to take over similar programs from  Interior. Some tribal stakeholders told us the GAP program is effective in  assisting tribal governments build capacity because it is designed to  provide consistent funding over multiple years. According to reports we  reviewed that discuss building tribal capacity, effective capacity building  efforts should both provide for sustained, consistent funding over time,  since developing capacity can be an ongoing effort that may take longer  than 1 year to achieve and facilitate a tribe\u2019s ability to develop a program  that is responsive to each tribe\u2019s unique conditions and priorities."], "subsections": []}, {"section_title": "Factors That Can Hinder Tribes\u2019 Use of Self- Determination Contracts, Self-Governance Compacts, and Authority under the HEARTH Act", "paragraphs": ["We found that several factors can hinder tribes\u2019 ability to use self- determination contracts, self-governance compacts, or leasing authorities  under the HEARTH Act, including: (1) BIA\u2019s approach for sharing key  information with tribes seeking to develop a program using a self- determination contract, (2) Interior\u2019s process to disburse funds to tribes  associated with self-determination contracts and self-governance  compacts, (3) Interior\u2019s review of tribal leasing regulations submitted  under the HEARTH Act, and (4) BIA\u2019s management and maintenance of  federal programs that tribes may pursue to take over under a self- determination contract."], "subsections": [{"section_title": "BIA\u2019s Approach for Sharing Key Information with Tribes", "paragraphs": ["According to several tribal stakeholders, BIA\u2019s approach for sharing key  information with tribes does not always ensure that tribes have the  information they need to design programs under self-determination  contracts prior to negotiations. As a result, this has been a factor that has  hindered or delayed tribes\u2019 use of self-determination contracts for  administering programs.", "Interior guidance and policy call for BIA to provide tribes information that  includes, among other things, calculations BIA uses to identify the amount  of funds available to a tribe if it takes over administration of a program. In  accordance with Interior\u2019s policy, BIA should provide tribes with the  information necessary to design programs those tribes would like to  administer under a self-determination contract to meet the needs of their  communities consistent with their diverse demographic, geographic,  economic, cultural, health, social, religious, and institutional needs. Also  in accordance with Interior guidance, when a tribe requests to enter into a  self-determination contract with Interior, BIA should disclose information  to the tribe that identifies the amount of program funding available, the  methodology used to identify available amounts, the process used to  arrive at available amounts, an identification of the amount of funding  retained by BIA, and any other information useful to understand how  contract amounts were calculated. Moreover, Interior regulations call for  BIA to provide to tribes, for the negotiation of annual funding agreements  for self-governance compacts, a brief justification as to why specific  functions have been determined inherently federal. However, according  to several tribal stakeholders, they do not receive this information,  including calculations BIA uses to identify the amount of funds available  to tribes, prior to negotiating their self-determination contracts.", "Some BIA regional and agency office officials we interviewed told us they  do not generally provide information to tribes prior to negotiating the  terms of a self-determination contract because the determinations of  inherently federal functions and the amount of funding the bureau would  retain to perform such functions generally occurs during meetings with  BIA and the tribe. A tribal stakeholder told us that without documentation  on funding calculations and methodologies, tribes are at a disadvantage  and have little basis to negotiate during these meetings. A tribal  stakeholder told us that, in practice, the negotiation generally consists of  BIA informing the tribe of the amount of funds to request in its proposal  and what federal functions BIA will retain without any documentation to  support its determination of inherently federal functions or the resources  to be made available to the tribe to administer a program using a self- determination contract.", "BIA\u2019s approach is not consistent with Interior\u2019s policy of sharing  information so tribes can develop programs. By developing a process that  results in BIA\u2019s regional and agency offices providing tribes with  documentation on calculations and methodologies to identify resources  available to administer a program using a self-determination contract, BIA  would be adhering to Interior\u2019s policy and have greater assurance that  tribes have the information they need to design the programs that they  would like to pursue under a self-determination contract.", "In addition, BIA guidance states the bureau will ensure functional  consistency in the determination of inherently federal functions when the  Central Office and all regional offices are compiling that information for  negotiating annual funding agreements with tribes. We found examples  that suggest that BIA has not consistently determined whether programs  and functions are inherently federal, which can affect some tribes\u2019 use of  self-determination contracts. For example, a BIA official in one regional  office told us that the region had previously decided all functions  associated with the Land Titles and Records Offices were inherently  federal and told tribes that BIA would not approve a self-determination  contract for those functions. However, other BIA regional offices did not  consider the functions of the Land Titles and Records Offices as  inherently federal, and some tribes in those regions had taken over  administration of those functions.", "BIA does not have a process that results in consistent determinations of  inherently federal functions and does not provide tribes with information  on its prior determinations. A BIA official told us that determinations of  inherently federal functions are made on a case-by-case basis because  each tribe and its circumstances are unique. However, this approach  does not provide BIA leadership with reasonable assurance of functional  consistency throughout the bureau in the determination of inherently  federal functions\u2014consistent with bureau guidance. By developing a  process that results in consistent determinations of inherently federal  functions, BIA could have greater assurance that these decisions are  being made appropriately across the agency. BIA could also increase  transparency in the process by providing tribes with documentation on  activities and functions previously determined to be inherently federal and  the basis for making these determinations."], "subsections": []}, {"section_title": "Interior\u2019s Process to Disburse Funds", "paragraphs": ["According to tribal stakeholders we spoke with, Interior\u2019s process to  disburse funds associated with the tribes\u2019 self-determination contracts  and self-governance compacts is a factor that hinders expansion of self- determination contracts or self-governance compacts. Several tribal  stakeholders and federal officials we interviewed said that the process  does not ensure that tribes receive funds within the time frame specified  in ISDEAA\u2019s Model Agreement for self-determination contracts or as  agreed to by Interior and the tribes in their annual funding agreements.  Two tribal stakeholders stated that in prior years, funds were disbursed  several weeks or months after Interior received its apportionment from the  Office of Management and Budget.", "We were unable to determine the extent to which Interior disburses funds  for self-determination contracts within the time frame agreed to in a self- determination contract because Interior does not systematically track the  disbursement of funds from the date it received its appropriations through  the date that it made funds available to tribes and does not compare its  actual performance to expected performance. Not tracking this  information and comparing actual performance to expected performance  is contrary to federal internal control standards, which state that agency  management should design control activities to achieve objectives and  respond to risks, such as by comparing actual performance to planned or  expected results and analyzing significant differences.", "This is not a new issue for Interior. Specifically, in 2015, an Interior  contractor reported on an evaluation of Interior\u2019s process for disbursing  funds and identified opportunities for improvement. Consistent with our  findings, the report also found that, among other things, the process used  by Interior to disburse funds is a manual process that does not include a  real-time tracking mechanism. Without such a mechanism, the report  found that officials must spend time trying to determine the status of  documents and finding misplaced or lost documents. For example, the  report found that in fiscal year 2014, Interior had more than 6,000  scanned documents that required up to 6 signatures each, for a total of  up to 36,000 signatures, to disburse funds including funds to tribes for  self-determination contracts or self-governance compacts. To finalize  these documents, the report estimates that 600 hours of staff time were  spent scanning, uploading, and printing the documents. Several Interior  officials told us they conduct monitoring activities within a specific BIA  region or BIA agency office, such as tracking disbursement information  through an Excel spreadsheet, but these activities were not part of a  systematic process. An Interior official told us there are no plans to  develop a real-time tracking mechanism.", "Interior officials we interviewed cited several reasons why some funds  associated with self-determination contracts and self-governance  compacts were not disbursed in accordance with time frames outlined in  its Model Agreement or negotiated in funding agreements. The reasons  include the following:  Interior\u2019s financial data management system. Interior officials told us  that the agency\u2019s financial data management system is used for all of  Interior and is not equipped for the unique aspects of self- determination contracts and self-governance compacts\u2014making it  difficult to properly track and monitor key actions.", "Prior use of an inefficient process. An Interior official told us that prior  to fiscal year 2017, BIA used several spreadsheets to coordinate TPA  information for distributions. The official stated that these  spreadsheets were over 15 years old, and they made the process  inefficient and time-consuming. To distribute funds, officials would use  one spreadsheet to gather information and another to summarize the  amounts by functional area and region. The official stated that BIA  updated the process in fiscal year 2018 and does not expect it to  delay funding in the future.", "Staff shortages in key positions. BIA officials in several regions told us  they are experiencing staff shortages in key positions that are  responsible for the transfer of funds from BIA to tribal governments,  such as awarding officials. Interior officials said the Office of Self  Governance also needs additional awarding officials with only one  awarding official for self-governance compacts. Interior officials stated  that the challenges from staff shortages are compounded by  Congress\u2019 use of continuing resolutions that result in BIA repeating its  fund distribution process multiple times in a single year.", "Delays in receiving tribal signatures. Interior officials we interviewed  told us that they have experienced delays disbursing funds to a tribe  because they must wait for tribal officials to sign documents before  funds may be disbursed.", "When funds are not disbursed in a timely manner, a tribal stakeholder told  us that tribes may have to use funds from their general revenue accounts  to cover expenses for federal programs or seek other sources, such as  loans, to cover program expenses. According to several tribal  stakeholders, when a tribe has to use its own funds for the administration  of programs\u2014even temporarily\u2014it can adversely affect the tribe in  various ways, including lost opportunities to use tribal funds for improving  the tribes\u2019 economic conditions, reducing other services provided to tribal  communities, and furloughing tribal government employees. In addition,  several tribal stakeholders told us that the timeliness of disbursements for self-determination contracts is a factor they consider when deciding  whether to take over additional programs under a self-determination  contract. The tribal stakeholders said that the tribe must consider if it is  able to use tribal funds or willing to obtain a loan to fund a program when  the federal government is late disbursing funds. Without establishing a  process for tracking and monitoring the disbursement of funds associated  with self-determination contracts and self-governance compacts, Interior  will not have reasonable assurance it disburses funds in a systematic way  or in accordance with agreed upon time frames."], "subsections": []}, {"section_title": "Interior\u2019s Process for Reviewing Proposed Tribal Leasing Regulations", "paragraphs": ["Interior has not clearly documented its process for reviewing proposed  tribal leasing regulations with timeframes associated with each step of the  process. The process can often be lengthy and time consuming;  according to tribal stakeholders, this can be a factor that hinders the  tribes\u2019 ability to make decisions about the use of tribal resources. Under  the HEARTH Act, tribes are to submit proposed leasing regulations for  Interior\u2019s review and approval before a tribe can approve leases for the  use of tribal lands, and Interior\u2019s review is to be completed within 120  days after the dates on which the tribal regulations are submitted to the  agency. Interior officials told us they interpret the statutory review time  frame requirements of the HEARTH Act as applying only to the agency\u2019s  review to ensure tribes incorporated all changes identified in prior  reviews. Specifically, Interior officials told us the agency does not  consider the statutory time frame to begin until it has received a final  version of the proposed tribal leasing regulations. These officials  described the final version of proposed tribal leasing regulations as  regulations that have already undergone review by BIA and Interior\u2019s  Solicitor\u2019s office, have been revised by the tribe, and have been  resubmitted for additional review by BIA and the Solicitor\u2019s office. This  process can be repeated multiple times before Interior considers the  tribe\u2019s proposed leasing regulations to be final.", "In contrast, a tribal stakeholder told us that Interior\u2019s interpretation of how  to measure the time frame is inconsistent with the tribe\u2019s interpretation of  the statutory time frame. The tribal stakeholder told us that a tribe  considers its leasing regulations initially submitted to Interior as final,  although the tribe understands that BIA and the Solicitor\u2019s office may  request revisions. Some tribal stakeholders told us that because Interior  is not considering the 120 days as a time frame from first submission until  approval, tribes do not know when to expect a final decision on draft tribal  regulations.", "We found that some of this confusion could be attributed to the fact that  Interior has not clearly documented its review process to include  established time frames associated with each step of the process. Under  federal standards for internal control, management should design control  activities, such as clearly documenting internal control in management  directives, administrative policies, or operating manuals. The HEARTH  Act seeks to expand tribal self-government and promote economic  development by shifting the authority for leasing from the Secretary to the  tribes. By developing a clearly documented review process that includes  established time frames for each step in the process for reviewing  proposed tribal leasing regulations submitted under the HEARTH Act,  Interior can better ensure that it is eliminating uncertainty and better  communicating the process for approval to the tribes.", "We also found that the approval process can be lengthy in some cases.  Our review of 42 tribal leasing regulations submitted to Interior for review  from 2012 through 2017 for which BIA provided us with data on the date  the tribe submitted the regulations to Interior and the date of Interior\u2019s  approval found that 4 of the 42 leasing regulations were approved within  120 days. For the other 38 proposed regulations, the time from when the  tribe submitted the regulations to Interior to when the agency approved  the regulations ranged from 134 days to 980 days. Half of the 42  proposed regulations were under review by Interior for a year or longer,  with 5 of the 21 under review for more than 2 years. Interior\u2019s review was  generally not continuous during the entire period; instead, these time  periods included review by BIA and the Solicitor\u2019s office and the time  spent by the tribe revising its leasing regulations in response to Interior\u2019s  review.", "Tribal stakeholders also shared with us several examples that illustrate  Interior\u2019s lengthy review process for tribal governments\u2019 use of the  HEARTH Act. For example, in one case, Interior received a tribe\u2019s leasing  regulations for review and approval in May 2015. Interior approved the  tribe\u2019s leasing regulations and published the decision in the Federal  Register in April 2018\u2014more than 2 years later. Officials representing this tribe told us they considered the leasing regulations initially submitted  on May 18, 2015, as final, though they understood that Interior could  request revisions. These officials explained that the tribe has its own  extensive process and procedures for lawmaking and developed its  leasing regulations consistent with its Constitution, Legislative Procedures  Act, and Administrative Rulemaking Procedure, which take into account  comments from tribal members and tribal agencies and includes a judicial  review, legislative analysis, fiscal impact review, and adoption by the  tribe\u2019s elected business committee.", "Tribal stakeholders told us that after each communication with BIA about  the leasing regulations, they believed the regulations were satisfactory for  approval. For example, the tribe received preliminary approval from BIA in  October 2016. Then, tribal stakeholders said in August 2017\u2014nearly 10  months later\u2014the tribe received correspondence from BIA stating that the  tribe needed to add several additional provisions, including language  regarding Indian irrigation projects and districts even though the tribe  does not have any irrigation projects or districts within its boundaries.  Additional correspondence took place between the tribe and Interior,  resulting in final approval in January 2018. Tribal stakeholders told us that  the lengthy review delayed the tribe\u2019s ability to implement leasing  regulations and delayed the tribe\u2019s ability to make decisions about the use  of tribal resources.", "In another case, Interior received tribal leasing regulations for review and  approval on January 17, 2014. The tribe stated in documentation  submitted to Interior that it was seeking increased decision-making  authority under the HEARTH Act because it had finalized various  construction agreements and needed to approve surface leases for an  economic development project. During the time that the tribe\u2019s leasing  regulations were under review at Interior, BIA asked the tribe to submit  multiple versions of its leasing regulations.", "According to BIA documents, the bureau took approximately 2 months to  transfer the tribe\u2019s regulations from BIA headquarters to a regional office  for its review. Once the regional office received the tribal leasing  regulations, the office conducted its review over a 3-month period and  provided comments to BIA\u2019s headquarters. BIA\u2019s data show that  headquarters sent the tribe\u2019s leasing regulations to the Solicitor\u2019s office  nearly 5 months after it received the tribal leasing regulations. Over the  next couple of years, Interior requested the tribe make changes to its  leasing regulations three more times and resubmit revised versions for  review.", "On March 3, 2016\u2014more than 2 years after receiving the tribe\u2019s leasing  regulations\u2014Interior documented that it had \u201cone small change\u201d it would  like the tribe to make to the regulations. The tribe made the requested  change and resubmitted the leasing regulations to Interior via certified  mail, which showed receipt at Interior on July 1, 2016. Interior approved  the tribal leasing regulations on October 7, 2016\u2014more than 3 months  after the tribe submitted regulations with the \u201csmall change.\u201d Interior  approved the tribe\u2019s leasing regulations and published the decision in the  Federal Register in October 2016\u2014more than 2 years after Interior first  received the tribe\u2019s leasing regulations.", "Interior officials told us there was not a single reason for the lengthy  review times. In some cases, Interior officials said the review times were  long because the BIA official responsible for managing Interior\u2019s review  had left the bureau. In other cases, Interior officials told us they were  short-staffed in the Office of the Solicitor and the legal review took longer  than anticipated. However, they acknowledged that the uncertainty  associated with how long Interior\u2019s review will take can make it difficult for  tribes to plan and execute economic development projects. For example,  a BIA official told us that a tribe was unable to pursue an economic  development opportunity because of the time it took for Interior to  complete the process to review the tribe\u2019s regulations.", "In contrast, a timely review of a tribe\u2019s proposed leasing regulations can  positively affect tribal control and decision making. For example, a tribal  stakeholder said after several months waiting for BIA to approve a  surface lease needed for a tribe to develop a wind farm, the tribe decided  to pursue authority under the HEARTH Act so that it could review and  approve the lease without waiting for BIA\u2019s review of the surface lease.  Interior reviewed and approved the tribe\u2019s leasing regulations submitted  under the HEARTH Act authority in 31 days. According to the tribal  stakeholder, the timely review and approval of the tribe\u2019s leasing  regulations allowed the tribe to review and approve the surface lease  needed for construction of the wind farm to commence before the  expiration of tax credits\u2014a key component that made the project feasible."], "subsections": []}, {"section_title": "BIA\u2019s Past Management of Federal Programs", "paragraphs": ["Past mismanagement of federal programs under the administration of BIA  is a factor that can affect tribes\u2019 decisions whether to take over federal programs through self-determination contracts, according to several tribal  stakeholders and BIA officials. As documented in a 2003 report by the  U.S. Commission on Civil Rights, decades of general mismanagement of  infrastructure and programs under BIA\u2019s administration can hinder a  tribes\u2019 use of self-determination contracts. In 1999, BIA reported to  Congress that funds provided under self-determination must be used not  only for current operations but also \u201cto repair 150 years of general  neglect\u201d of Indian programs. In these cases, taking over programs with  long-standing neglect is a liability that some tribes are not willing to  assume. For example, a tribal stakeholder told us that its BIA agency  office neglected tribal land records for many years. As a result, the tribe  is reluctant to assume the liability associated with administering a real  estate program without accurate property records.", "In another example, BIA operates an irrigation project that provides  electric utility service to two tribes. Both tribes have taken over certain  functions associated with the utility service provided to their communities  through self-determination contracts, and both tribes have expressed  interest in expanding the functions they administer. However, BIA and  tribal officials said that concerns over infrastructure that needs to be  repaired or replaced and the liability associated with rights-of-way have  deterred both tribes from taking over the remaining functions of the utility.  For example, many utility poles on the project\u2019s transmission lines are  more than 50 years old and are in need of replacement, and the project  has over 1,500 miles of transmission lines and 2,000 miles of distribution  lines. According to a BIA document, these lines might have been  extended without receiving a formal right-of-way. The report states that  \u201cmany of \u2019s rights-of-way are unperfected  and there are no supporting documents evidencing a legal right-of-way.\u201d  According to tribal stakeholders these kinds of uncertainties are  significant factors they must consider in their decisions related to self- governance of BIA programs."], "subsections": []}]}]}, {"section_title": "Adequacy of Resources Affects Tribes\u2019 Use of Self- Determination Contracts and Self- Governance Compacts", "paragraphs": ["The adequacy of resources is a long-standing concern that has been a  factor affecting tribal participation in self-determination contracts and self- governance compacts, according to several tribal stakeholders and  federal officials we interviewed, government reports, our prior reports,  and articles we reviewed. Specifically, a lack of adequate resources has  been a long-standing concern that can limit the number of programs  tribes take over using self-determination contracts and self-governance  compacts. For example, the U.S. Commission on Civil Rights 2003 report  noted that the authority tribes have to take over the administration of  federal programs is useful to the extent that adequate funds are made  available to the tribes to operate the program. According to Interior  officials, Interior does not have an estimate on the extent to which it can  provide adequate resources to tribes that want to administer federal  programs. For one program, BIA estimated in a report to Congress that  the dollars BIA expended in fiscal year 2013 for BIA and tribes to operate  detention and corrections centers fund about forty percent of the  estimated operating needs.", "Faced with funding shortfalls from the BIA budget to administer federal  programs under federal self-determination contracts or self-governance  compacts, many tribal stakeholders told us that they supplement federal  funding. Officials from one tribe told us that the tribe has supplemented all  the programs it has taken over from BIA. For example, the tribe reported  that the Land Titles and Records Program has a shortfall of about  $300,000 annually; the Law Enforcement program with about $564,000  annually; and the Probate Program with about $129,000 annually.  Officials from the tribe told us that tribes may rely on revenues generated  from economic development or tax revenue to supplement federal dollars  for programs they have taken over from the federal government.", "However, tribal stakeholders we interviewed told us that not all tribes are  in a position to supplement additional federal programs because of limited  economic development opportunities and tax revenue; therefore, those  tribes may not have the option to take over additional federal programs.  According to a tribal stakeholder, dual-taxation\u2014when both a tribe and  state tax the same non-tribal members and businesses on tribal land\u2014 can significantly limit a tribe\u2019s tax revenue because tribes must reduce or  eliminate their taxes to stay competitive and attract business and  enterprise to their lands. Furthermore, the funds tribes may use to  supplement federal programs are needed to fund other governmental  services and activities, which place tribal leaders in the position of  deciding whether to use funds to provide governmental services not  funded by the federal government or to increase self-governance by  administering additional federal programs. As we have previously  reported, when tribes supplement the federal program they take over, it  diverts funds away from other economic development opportunities and  other government functions and services they provide to their  communities and citizens.", "Lastly, several tribal stakeholders told us that not receiving adequate  resources from the federal government to administer federal programs  makes them reluctant to administer additional federal programs because  they believe BIA has a better chance than the tribe to obtain additional  resources that can be used to supplement program shortfalls. This is, in  part, because they believe that BIA agency offices and regional offices  have access to funding sources that are not available to tribes and  because BIA does not always make tribes aware of funds that are  available. For example, the Department of the Interior\u2019s Self-Governance  Advisory Committee reported in 2015 that the distribution of year-end  funds is entirely within the discretion of the local awarding official and that  not all tribes are notified that these funds are available."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Interior has taken steps to assist tribes pursuing tribal self-government by  providing training opportunities focused on self-governance compacts and  the use of the HEARTH Act to help increase tribal capacity. However, several factors have continued to hinder tribes\u2019 use of these mechanisms  to further tribal self-government. First, BIA\u2019s approach for sharing key  information with tribes when tribes seek to administer a program using a  self-determination contract does not provide the tribes with the  information they need to understand how the self-determination contract  amounts were calculated. As a result, tribal leaders are at a disadvantage  in making sound decisions regarding the feasibility of taking over the  administration of federal programs.", "Second, BIA does not have a process that results in consistent  determinations of inherently federal functions and does not provide tribes  with information on its prior determinations. By developing a process that  results in consistent determinations of inherently federal functions, BIA  could have greater assurance that such determinations are being made  appropriately across the agency and BIA could increase the transparency  of the process by providing tribes with documentation on activities and  functions previously determined to be inherently federal and the basis for  the determinations.", "Third, Interior does not have an effective process for tracking and  monitoring the disbursement of funds associated with tribes\u2019 self- determination contracts and self-governance compacts or as agreed to  with the tribes. Without establishing an effective tracking and monitoring  process, Interior does not have reasonable assurance that it is disbursing  funds in accordance with ISDEAA or time frames agreed to with the  tribes.", "Lastly, Interior has not documented its process to include established  time frames associated with each step of the process to review proposed  tribal leasing regulations submitted under the authority provided by the  HEARTH Act. This has resulted in lengthy review times\u2014in some cases,  multiple years. By developing a clearly documented review process that  includes established time frames for each step in the process for  reviewing proposed tribal leasing regulations submitted under the  HEARTH Act, Interior can better ensure that it is eliminating uncertainty in  the process to approve tribal leasing regulations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to Interior:", "The Assistant Secretary of Indian Affairs should develop a process so  that all regional and agency offices consistently provide tribes with  documentation on calculations and methodologies to identify  resources available to administer a program using a self- determination contract. (Recommendation 1)", "The Assistant Secretary of Indian Affairs should develop a process  that results in consistent determinations for inherently federal  functions and to provide documentation to tribes on specific activities  and functions determined to be inherently federal. (Recommendation  2)", "The Assistant Secretary of Indian Affairs should establish a process to  track and monitor the disbursement of funds associated with self- determination contracts and self-governance compacts.  (Recommendation 3)", "The Assistant Secretary of Indian Affairs should coordinate with the  Office of Solicitor and BIA to develop a clearly documented process  with established time frames for each step in the process for  reviewing proposed tribal leasing regulations submitted under the  HEARTH Act. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to Interior for comment. In its comments  reproduced in appendix II, Interior generally concurred with our  recommendations. Interior also provided technical comments, which we  incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 28 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, the Assistant  Secretary of Indian Affairs, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last   page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["For this report, we reviewed a range of reports, articles, conference  proceedings, congressional testimony, and other publications from federal  and tribal governments, academics, and nonprofit organizations. These  publications included general background information related to tribal self- government and tribes\u2019 use of self-determination contracts, self- governance compacts, and the HEARTH Act, as well as historical  perspectives, successes and challenges, and identified some factors that  can affect a tribe\u2019s decision to use one of these mechanisms. We  identified these articles and publications by searching various Web-based  databases, such as ProQuest, Scopus, DIALOG, Academic OneFile,  JSTOR, and Lexis to identify existing studies from articles, peer-reviewed  and other journals, including law review journals, and government and  academic publications. We searched terms such as tribal sovereignty,  self-governance, self-determination, and capacity, as well as relevant acts  or program names. We also asked tribal stakeholders that we interviewed  to recommend additional reports, congressional testimony, and other  articles on the topic. We did not set specific time frames for the search,  and identified more than 50 articles from 1982 to 2017. We examined  summary-level information about the literature identified in our search and  identified a few of the articles as directly related to our report. These five  publications are identified throughout this report. Other articles provided  beneficial context and historical information but did not contribute to us  identifying factors to include in this report.", "We reviewed relevant laws and regulations including the Indian Self- Determination and Education Assistance Act of 1975 (ISDEAA), as  amended and Helping Expedite and Advance Responsible Tribal Home  Ownership Act of 2012 (HEARTH Act). We also reviewed Interior\u2019s policy  manual, Interior\u2019s procedures handbook for contracting under Title I of  ISDEAA, the Interior Solicitor\u2019s opinions on inherently federal functions,  and other guidance documents. We reviewed Interior reports and audits  related to self-determination contracts, self-governance compacts, and  the Hearth Act, including Interior budget justification reports and  evaluations of tribes\u2019 performance with trust programs administered under  a self-governance compact. ISDEAA also allows tribal governments to  take over administration of certain programs from the Department of  Health and Human Service\u2019s Indian Health Service. For this review, we  focused on tribes\u2019 use of self-determination contracts and self- governance compacts to administer Bureau of Indian Affairs (BIA)  programs.", "To determine tribes\u2019 use of self-determination contracts, we obtained data  from Indian Affairs\u2019 Office of Chief Financial Officer for all current  contracts as of November 2017. The data provided included the contract  number, the tribe or tribal organization with the contract, and the program  included in the contract. To assess the reliability of the data, we consulted  with knowledgeable federal officials and found examples in one of our  prior reports that generally supported the data we obtained from the  Office of Chief Financial Officer. To determine tribes\u2019 use of self- governance compacts, we reviewed data that Interior provides to  Congress in annual reports that cover tribal use of self-governance  compacts. To assess the reliability of the data, we consulted with  Interior\u2019s Office of Self Governance officials and tribal stakeholders and  compared information provided to us from Interior with information  obtained from the Tribal Self-Governance Communication and Education  Consortium. We determined that the data were sufficiently reliable for the  purpose of our report.", "To obtain a better understanding of the information found in self- determination contracts, we requested BIA provide information from self- determination contract files. We requested contract files that would  represent a range of BIA regions and programs. We also sought to use  this information to identify examples from the contract file where BIA  documented the amount of program funding available to the tribe and  retained by BIA, and the methodology BIA used to identify available  amounts. Through our review of several contract files, we were able to  corroborate information from BIA officials and tribal stakeholders, who  told us that BIA does not systematically document the amount of program  funding available to the tribe and retained by BIA and the methodology  BIA used to identify available amounts. The findings from the contract  reviews are not generalizable to those we did not request and obtain. We  also collected information from 9 BIA regions on the number of  retrocessions (tribes that voluntarily turned back administration of a  program to BIA), reassumptions (programs where BIA took back  administration from a tribe because of noncompliance with contract  requirements), and declinations (programs that tribes requested to take  over administration but BIA declined) from 2012 through 2017. BIA does  not have a centralized data system to collect this information and through  consultations with knowledgeable federal officials, we determined that  each of BIA\u2019s regions was in the best position to provide us with this  information.", "To determine tribal participation with the HEARTH Act and the extent to  which Interior\u2019s review is consistent with the Act, we collected data from  BIA on the number of tribes that have submitted leasing regulations for  BIA\u2019s review, and the number of tribal leasing regulations BIA approved  under the HEARTH Act. In most cases, Interior provided an internal  checklist that included, among other things, the dates tribes submitted  information and dates of Interior responses. We used this information to  identify the amount of time associated with BIA\u2019s review of tribal leasing  regulations. In some cases, we also gathered information from tribes. We  determined that the data were sufficiently reliable for the purposes of this  report.", "We interviewed federal officials from Interior\u2019s Office of Solicitor, Indian  Affair\u2019s Office of Self Governance, Office of the Chief Financial Officer,  and Office of Budget and Performance Management. Within BIA, we met  with officials from Office of Trust Services, the Office of Indian Services  and interviewed or received written responses from regional officials in all  12 BIA regions. Through these interactions we asked officials to identify  processes associated with tribes entering into, negotiating, and  administering federal programs under a self-determination contract or  self-governance compact. We also discussed processes associated with  Interior\u2019s disbursement of funds agreed upon in contracts and compacts.  In addition, we discussed processes for tribes to submit leasing  regulations to BIA and for BIA\u2019s review of tribal leasing regulations. We  compared the information collected through discussions with federal  officials and federal documents with Interior guidance documents and  Standards for Internal Control in the Federal Government. We also  discussed the use of self-determination contracts and self-governance  compacts with Interior\u2019s Bureau of Land Management and Bureau of  Reclamation, and interviewed officials from the Environmental Protection  Agency to discuss tribes\u2019 use of existing authorities to administer  environmental programs and the agency\u2019s efforts to build tribal capacity.", "To identify factors that can affect a tribe\u2019s decision to use self- determination contracts, self-governance compacts, and the HEARTH  Act\u2014as well as tribes\u2019 experience with these mechanisms\u2014we  interviewed leaders and officials from 29 federally recognized Indian  tribes and nations, the Department of the Interior Self-Governance  Advisory Committee, and non-profits representing tribal interests, such as  the National Congress of American Indians (NCAI) and the Native  Governance Center. The key factors we included in this report are those  that were most frequently mentioned and that are specifically related to  federal government policies and processes. During the review, we  identified factors that tribes may consider but that are not related to the  federal government; because these factors were outside of the scope of  this review, we did not include them in our report. We selected Indian  tribes and nations to ensure a representation of tribes with a range of  experience using self-determination contracts and self-governance  compacts, tribal size, and geographic location. We also selected tribes to  ensure we had representation from tribes that developed leasing  regulations under the HEARTH Act and those that have elected to not yet  develop or submit leasing regulations under the HEARTH Act.", "We also met with representatives from tribal consortia, such as the  Coalition of Large Tribes; the Great Plains Tribal Chairman\u2019s Association;  the Department of the Interior Tribal Self-Governance Advisory  Committee; the United South and Eastern Tribes; and the United Indian  Nations of Oklahoma, Kansas, and Texas to gather additional  perspectives on factors that can affect tribal participation. To encourage  increased participation and perspectives from tribal leaders and officials,  we provided opportunities for tribes to contact us for individual  discussions by requesting that tribal consortia, as well as NCAI, include  information about our review in their newsletters or other correspondence  with tribal stakeholders. As a result of these efforts, several additional  tribes contacted us to share information about their experiences.", "For the purposes of this review, we refer to tribal leaders, tribal  government officials, and representatives from tribal consortia as tribal  stakeholders. Throughout the report, we use the following categories to  quantify statements made by stakeholders: \u201csome\u201d is defined as two to  five entities and \u201cseveral\u201d is defined as six to 10 entities. Because each of  the federally recognized tribes and nations are unique, the information  obtained in our discussions with tribal stakeholders is not generalizable,  but provides examples of tribes\u2019 experiences with self-determination  contracts, self-governance compacts, and the HEARTH Act. It is possible  we did not identify all of the factors that can affect a tribe\u2019s decision to use  self-determination contracts, self-governance compacts, or the HEARTH  Act and there may be other factors we did not present.", "We conducted this performance audit from February 2017 to January  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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Christine Kehr (Assistant  Director); Jay Spaan (Analyst in Charge); John Delicath, William Gerard,  Cindy Gilbert, Greg Marchand, Dan Purdy, Vasiliki Theodoropoulos, and  Leigh White made key contributions to this report."], "subsections": []}]}], "fastfact": ["Indian tribes are sovereign nations with the authority to govern and protect their own citizens. However, we found several factors that prevent tribes from taking full advantage of that authority. For example:", "When a tribe pursues a contract to administer certain federal programs, tribal leaders aren't given enough information to make a decision or negotiate the contract well.", "When a tribe wants authority to approve land leasing agreements for economic development, lengthy federal reviews of tribes' leasing regulations can make them miss business opportunities.", "We recommended ways to address these and the other factors we identified."]}
{"id": "GAO-18-407", "url": "https://www.gao.gov/products/GAO-18-407", "title": "Protecting Classified Information: Defense Security Service Should Address Challenges as New Approach Is Piloted", "published_date": "2018-05-14T00:00:00", "released_date": "2018-05-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Industrial security addresses the information systems, personnel, and physical security of facilities and their cleared employees who have access to or handle classified information. The National Industrial Security Program was established in 1993 to safeguard federal government classified information that may be or has been released to contractors, among others. GAO last reported on this program in 2005 and the Department of Defense has since implemented 13 of the 16 related recommendations.", "GAO was asked to examine how DSS administers the program. This report assesses to what extent DSS: 1) changed how it administers the program since GAO's last report; and 2) addressed challenges as it pilots a new approach to monitoring contractors with access to classified information.", "GAO reviewed guidance and regulations since 2005, including the program's operating manual. GAO analyzed data from DSS's electronic databases and also selected a non-generalizable sample of contractor facilities based on clearance level, geographic location, and type of agreement to address foreign influence. We also reviewed documents and interviewed relevant government and contractor officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Defense Security Service (DSS) has upgraded its capabilities but also faces challenges in administering the National Industrial Security Program, which applies to all executive branch departments and agencies, and was established to safeguard federal government classified information that current or prospective contractors may access. Since we last reported on this program in 2005, DSS has:", "streamlined facility clearance and monitoring processes, and", "strengthened the process for identifying contractors with potential foreign influence.", "However, under its current approach, DSS officials indicated that they face resource constraints, such as an inability to manage workloads and complete training necessary to stay informed on current threats and technologies. In its most recent report to Congress, DSS stated that it was unable to conduct security reviews at about 60 percent of cleared facilities in fiscal year 2016. Further, DSS recently declared that the United States is facing the most significant foreign intelligence threat it has ever encountered. As a result, in 2017, DSS announced plans to transition to a new monitoring approach to address emerging threats at facilities in the program. For a comparison of the current and new approaches, see below.", "DSS has not addressed immediate challenges that are critical to piloting this new approach. For example, GAO found it is unclear how DSS will determine what resources it needs as it has not identified roles and responsibilities. Moreover, DSS has not established how it will collaborate with stakeholders\u2014government contracting activities, the government intelligence community, other government agencies, and contractors\u2014under the new approach. Federal Internal Control Standards establish the importance of coordinating with stakeholders, including clearly defining roles and responsibilities. In addition, GAO's leading practices for interagency collaboration state that it is important for organizations to identify the resources necessary to accomplish objectives. Until DSS identifies roles and responsibilities and determines how it will collaborate with stakeholders for the piloting effort, it will be difficult to assess whether the new approach is effective in protecting classified information."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends DSS determine how it will collaborate with stakeholders, including identifying roles and responsibilities and related resources, as it pilots a new approach. DSS concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["Protecting classified information from compromise and exploitation is  essential for the U.S. government to maintain its technological advantage  over potential adversaries. In recent years, there have been high profile  leaks of classified information by contractors, and there are heightened  concerns about foreign adversaries\u2019 ability to access classified  information and evade detection. Industrial security addresses the  information systems, personnel, and physical security of facilities and  their cleared employees who have access to or handle classified  information. In 1993, the National Industrial Security Program, which  applies to all executive branch departments and agencies, was  established to safeguard federal government classified information that  may be or has been released to current, prospective, or former  contractors, among others, and is administered by the Defense Security  Service (DSS) within the Department of Defense. DSS determines the  eligibility of contractors to access classified information, known as the  facility security clearance process, and contractors may have one or  multiple facilities that participate in the program. Once a contractor is  cleared and enters the program, DSS is responsible for ensuring that  cleared contractors meet the requirements to safeguard classified  information through periodic security reviews.", "You requested that we examine how the Department of Defense, through  DSS, administers the National Industrial Security Program to protect  classified information. This report assesses to what extent DSS: 1)  changed how it administers the program since our last report in 2005; and  2) addressed challenges as it pilots a new approach to monitoring  contractors with access to classified information.", "To determine the extent to which DSS changed how it administers the  National Industrial Security Program, we reviewed relevant guidance and  regulations including changes made since we last reported in 2005, such  as DSS\u2019s Industrial Security Operating Manual. We also reviewed the  National Industrial Security Program Operating Manual (operating  manual), which describes the requirements for contractors to safeguard  classified information under the program. We also viewed  demonstrations of DSS\u2019s various electronic systems, including the  Industrial Security Facilities Database. To learn about changes to how  DSS processes facility security clearances, we selected a non- generalizable sample of 13 contractor facilities based on 3 criteria:  security clearance level, geographic location, and type of mitigation  agreements. Mitigation agreements that address foreign ownership,  control, or influence are intended to prevent situations in which a foreign  interest has the power to decide matters affecting a contractor\u2019s  operations and that could result in unauthorized access to U.S. classified  information or adversely affect the performance of classified contracts.  For the purposes of this report, we will use \u201cforeign influence\u201d when  referring to contractors with foreign ownership, control, or influence. Our  sample included at least two contractor facilities from each of DSS\u2019s four  regions (Capital, North, South, and West) with active secret or top secret  clearances (as of June 29, 2017) that were operating with mitigation  agreements to address foreign influence.", "We reviewed documents from DSS\u2019s facility clearance process, including  the agency\u2019s analysis of potential foreign influence along with mitigation  agreements and supplemental plans. We conducted site visits at all four  regional offices and met with industrial security representatives, regional  leadership staff, counterintelligence special agents, and information  system security professionals who worked with these facilities. We also  analyzed data from DSS\u2019s Industrial Security Facilities Database,  including the number of clearances granted to facilities with contractor  mitigation agreements from fiscal year 2007 through 2016. We took steps  to assess the reliability of the data, including comparing selected data  fields against DSS documentation and conducting interviews with DSS  officials. We determined that the data were sufficiently reliable to  understand how many facility clearances DSS processed for facilities with  and without contractor mitigation agreements during this period.", "To assess the extent to which DSS has addressed challenges as it pilots  a new approach to monitoring contractors with access to classified  information, we reviewed documents, analyzed DSS data, and conducted  interviews with officials involved in DSS\u2019s monitoring process. We  reviewed documents related to DSS\u2019s current process, such as security  reviews, and DSS\u2019s new approach (DSS in Transition), including  documents distributed to cleared contractors. We also conducted  interviews with officials from DSS headquarters, including those involved  with DSS in Transition, DSS field offices, government contracting  activities, cleared contractor facilities, and defense industrial trade  associations.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The goal of federal government industrial security is to ensure that  contractors\u2019 security programs detect, deter, and counter the threat posed   by adversaries seeking classified information. The National Industrial   Security Program was established by executive order in 1993 to replace  industrial security programs operated separately by various federal  agencies and ensure that contractors, among others, were adequately  protecting classified information. For the purposes of this report, we will  use \u201ccontractor\u201d to refer to any party that the program applies to, including  contractors, grantees, licensees, certificate holders, and their respective  employees."], "subsections": [{"section_title": "DSS Responsibilities", "paragraphs": ["DSS is responsible for administering the National Industrial Security  Program on behalf of the Department of Defense and, by mutual  agreement, 32 other federal departments and agencies. Headquartered  in Quantico, Virginia, and with staff in 26 field offices across four regions,  DSS provides oversight, advice, and assistance to more than 12,000 U.S.  facilities that are cleared for access to classified information under the  program. Facilities can range in size and be located anywhere in the  United States, and include manufacturing plants, laboratories, and  universities. In addition, they can also include contractor personnel who  travel to U.S. government sites to access classified information but do not  store any classified information at their facility. There are multiple reasons  why a contractor may need access to classified government information.  For example, a factory may produce parts for a major weapons system  using a production process that is classified, or a contractor may have  employees who deliver their technical expertise in a classified  environment at a military installation."], "subsections": []}, {"section_title": "National Industrial Security Program Operating Manual", "paragraphs": ["As part of the facility clearance process, DSS is responsible for ensuring  that cleared contractors safeguard classified information under the  program by meeting requirements, which are outlined in the National  Industrial Security Program Operating Manual. The Secretary of  Defense, in consultation with all affected agencies and with the  concurrence of the Secretary of Energy, the Nuclear Regulatory  Commission, the Director of National Intelligence, and the Secretary of  Homeland Security, issues and maintains the operating manual. The  operating manual addresses the contractors\u2019 key responsibilities such as  reporting incidents of suspected loss of classified information. The  Information Security Oversight Office of the National Archives and  Records Administration, an agency separate from the Department of  Defense, monitors the National Industrial Security Program and issues  implementing directives for agencies. The Information Security Oversight  Office also chairs the program\u2019s policy advisory council, which is  comprised of government and industry representatives who recommend  changes to industrial security policy. The Department of Defense,  including DSS, has periodically issued information for contractors in the  program, such as industrial security letters, to clarify the operating  manual.", "The operating manual states that a contractor or prospective contractor is  eligible for a facility clearance if it has a need for access to classified  information in connection with a legitimate U.S. government contracting  requirement. A facility clearance is an administrative determination that,  from a national security standpoint, a contractor or prospective contractor  is eligible to access classified information at a specified level. A  contractor\u2019s employees cannot begin accessing classified information  until the facility clearance has been granted, even if that results in  delayed performance of a contract."], "subsections": []}, {"section_title": "Facility Clearance Process", "paragraphs": ["According to the operating manual, in order for a contractor or  prospective contractor to enter the program, it may be sponsored by an  already cleared contractor or the government contracting activity. DSS  requires information about the contract, subcontract, or solicitation that  necessitates a clearance, such as level of safeguarding required and a  brief description of the procurement. Within the government contracting  activity, the information may be provided by the contracting office,  program office, or security office. DSS begins its facility clearance  process once it receives the information and assigns the case to an  industrial security representative at a local DSS field office. The industrial  security representative serves as the primary point of contact for the  sponsored facility during the clearance process and once the contractor is  eligible to access classified information. Across DSS field offices and  headquarters, multiple people are involved in the facility clearance  process, including those who specialize in information systems or others  who have experience with analyzing contractors for indicators of foreign  influence. See figure 1 for more details about how DSS processes a  facility clearance.", "As shown in the figure above, DSS also reviews the contractor\u2019s  ownership and business structure to assess whether foreign interests  indicate a contractor is under foreign influence, which could lead to  disclosure of classified information to foreign nationals. Contractors are  required to answer questions about whether there is foreign involvement  in their ownership, board composition, debt, source of revenues, and any  other situations where foreign nationals might be in a position to influence  their operations. If DSS determines that there is a risk for foreign  influence, the contractor is ineligible for a facility clearance unless, and  until, security measures are put in place, such as negotiating a mitigation  agreement with DSS. As of June 2017, approximately 630 of the over  12,000 cleared facilities in the program have mitigation agreements in  place to address foreign influence.", "As part of the facility clearance process, certain personnel, such as the  facility security officer, must receive personnel clearances to the level of  the facility clearance. In the personnel clearance process, specialists at  DSS headquarters grant interim clearances to U.S. citizens based on  national security standards and information from background  investigations conducted by the Office of Personnel Management, if there  is no adverse information of material significance. Before the facility  clearance can be granted, a DSS industrial security representative  verifies that the key management personnel have received their  permanent clearance."], "subsections": []}, {"section_title": "Contractor Responsibilities for Cleared Facilities", "paragraphs": ["After DSS completes the facility clearance process and determines that a  contractor is eligible to access classified information and grants the facility  security clearance, the cleared contractor officially enters the National  Industrial Security Program. Once in the program, contractors establish a  security program at cleared facilities or implement security measures  required by the Department of Defense security agreement, as well as  any elements required by DSS. Depending on the facility, security  measures may address a variety of industrial security issues. For  example, a contractor may be required to start using visitor logs or  badges to track every person with physical access to a facility or establish  separate computer systems for the sole purpose of storing classified  information. In addition, contractors are required to implement insider  threat programs, which are meant to prevent persons with approved  access to classified information, such as contractor employees, from  causing harm to national security through unauthorized disclosures. The  insider threat programs may include activities such as training programs  about reporting requirements or monitoring classified information  systems.", "DSS monitors cleared contractor facilities to determine their compliance  with the program\u2019s requirements for protecting classified information by  conducting periodic security reviews. DSS determines the frequency of  these reviews, although they generally cannot take place more than once  in a 12-month period, according to the operating manual. The duration of  security reviews and the size of the team conducting them vary by facility.  For example, a single industrial security representative can perform a  review of a small facility with no classified information stored on site in  one day. By comparison, a large facility may require a lengthier review  that involves additional DSS officials, such as information system security  professionals who review a facility\u2019s information systems if they are  needed to store or process classified information. Moreover,  counterintelligence officials may also participate and provide threat  information about the facility. Security reviews are generally led by staff  located in DSS\u2019s 26 field offices across the country. A contractor\u2019s facility  clearance may be subject to invalidation or revocation if DSS identifies  certain vulnerabilities, among other things. See figure 2 for more  information about DSS\u2019s process for monitoring contractor facilities in the  program.", "In addition to administering the facility clearance process and conducting  security reviews at cleared facilities, DSS also collects information from  cleared contractors about suspicious contacts, which may involve efforts  by an individual to obtain illegal or unauthorized access to classified  information, among other things. DSS aggregates this information to  identify counterintelligence trends among cleared contractors and refers  cases to the relevant agency for further investigation or action.", "We last issued reports about the National Industrial Security Program in  2004 and 2005. In 2004, we made eight recommendations for DSS to  improve its processes for conducting security reviews, such as taking  steps to quickly notify government contracting activities when classified  information has been lost or compromised. The Department of Defense  agreed with our recommendations. In 2005, we made eight  recommendations about DSS\u2019s oversight of contractors under foreign  influence. For example, we recommended that DSS collect and analyze  data about foreign business transactions in order to improve its oversight  of contractors under foreign influence. The Department of Defense  partially agreed with our recommendations and subsequently took action  to address them. As of April 2018, 13 of 16 of the recommendations have  been implemented. For more detail on our prior recommendations, please  see appendix II."], "subsections": []}]}, {"section_title": "DSS Upgraded Capabilities for the National Industrial Security Program but Faces Challenges Monitoring Contractors Streamlined Clearance Processes", "paragraphs": ["Since 2005, when we last reviewed how DSS administered the National  Industrial Security Program, it has streamlined its facility clearance  process in order to make it more efficient. DSS has also strengthened the  process to analyze contractors for foreign influence and the Department  of Defense issued a rule to clarify policies and procedures for mitigating  foreign influence concerns. Despite upgrading its capabilities, DSS  continues to face challenges in monitoring cleared contractors with  access to classified information.", "In 2004 and 2005, we reported that DSS did not collect and analyze data  on contractors operating in the National Industrial Security Program. For  example, DSS was not able to analyze data to make informed resource  decisions or track key changes that affect contractors operating under  foreign influence. In our 2005 report, we recommended that DSS collect  and analyze data about foreign business transactions, among other  things. As a result, DSS streamlined its facility clearance process by  developing two electronic systems for tracking the facility clearance  requests and maintaining information on cleared facilities.  1.  The Electronic Facility Clearance System is a web-based system that  contractors or prospective contractors use to submit their required  information, such as key management personnel and other staff who  need to be cleared for access as well as business-related items like  articles of incorporation, bylaws, and other supporting documentation.  2.  The Industrial Security Facilities Database is another web-based  system that serves as a repository for information about cleared  facilities.", "DSS field office and contractor officials we spoke with noted that the web- based systems help them do their job more efficiently. For example,  DSS\u2019s industrial security representatives stated that these systems make  the facility clearance and monitoring process more efficient because it is  easier to track the status of documentation received. Industrial security  representatives also track conditions that may require changes to their  monitoring process through this database, such as a change in ownership  or key management personnel. Industrial security representatives noted  that being able to track this information electronically is helpful because  the facility clearance and monitoring processes involve numerous officials  within DSS, as well as other parties, such as the government contracting  activity and the contractor. For example, a government contracting activity  can use the database to check whether a facility has been cleared to  store classified information onsite before sending materials to them.", "In 2017, DSS started the process of modernizing these systems by  developing two new systems. DSS officials stated that these two new  systems will provide additional automation that can be used in the facility  clearance and monitoring processes. The new systems are:", "National Industrial Security Program Contracts Classification  System. This system collects detailed information about classified  contract(s) a facility will support during the initial clearance  process as well as throughout the duration of the facility\u2019s  clearance, to include the facility\u2019s assets (e.g. technology  produced or expertise provided), and enables the government  contracting activity to gain visibility into the subcontractors  performing work for each classified contract.", "National Industrial Security System. This system will be the  official repository for data on cleared facilities. DSS officials noted  that the system will help identify foreign influence concerns, such  as changes in a contractor\u2019s ownership, because they will be more  centrally tracked.", "Further, in 2017, DSS also issued a manual to reflect an updated process  for assessing and authorizing cleared contractors\u2019 information systems  that process classified information. DSS changed its process to align with  the intelligence community, the Department of Defense, and other federal  government agencies\u2019 standards. DSS previously reviewed systems on  regular cycles and is shifting to reflect practices in the intelligence  community that are based on assessed threats and target the information  systems that pose the most significant risk of losing information. DSS  information security system professionals told us that this new  authorization process is helping them clarify and communicate the nature  of security risks to the contractor. The updated process is intended to  include the identification of cybersecurity concerns earlier than the prior approach and enables DSS\u2019s information system security professionals to  adjust their monitoring to meet emerging cyber threats."], "subsections": [{"section_title": "Centralized Support and Strengthened Its Process to Identify Foreign Influence", "paragraphs": ["In response to recommendations we made in 2005, DSS has centralized  its support related to identifying and mitigating foreign influence and  strengthened its process, including issuing a rule to make the process of  mitigation of foreign influence clearer to contractors. Since our last review  of the program in 2005, DSS has centralized staff expertise in  headquarters to improve the identification and mitigation of foreign  influence concerns. Whereas DSS used to rely primarily on field staff to  negotiate and oversee individual facilities in their respective regions, it  now has staff in headquarters, including specialists in law and other  areas, who have an agency-wide view of threats and who understand the  portfolio of contractors that may be at risk of foreign influence. DSS  officials said that this is important because a contractor may have multiple  cleared facilities across several regions. They noted that an agency-wide  view helps DSS identify trends across facilities that may be tied to a  single contractor. The headquarters staff: negotiate and put in place mitigation agreements that require  contractors under foreign influence to acknowledge and mitigate  foreign influence risks, including the development of protective  measures to reduce the risk of foreign interests gaining access to  classified information;  identify foreign influence within cleared contractors and provide  written analysis to DSS field offices when foreign influence concerns  are identified, such as when a foreign contractor acquires a majority  or substantial minority position in a U.S. contractor with a cleared  facility; and provide subject matter expertise in the areas of business, acquisition,  intelligence, and international law to develop a comprehensive  understanding of companies, their industries and technologies, as well  as the regulatory environments in foreign countries.", "DSS officials acknowledged that the establishment of a headquarters  division in 2008 focused on analyzing foreign influence and issuing  related publications was in response to recommendations we made in  2005. DSS\u2019s field office industrial security representatives said that the  written products and specialized foreign influence analysis prepared and  disseminated by DSS headquarters has resulted in more timely  identification and mitigation of these issues. Examples include:", "NISP in the News, an internal weekly publication that provides a  summary of business transactions that may result in the need for a  mitigation agreement to address foreign influence. Industrial security  representatives we spoke with said this publication helps them identify  and proactively address issues with their contractors. DSS officials  told us the publication is helpful because it can result in more timely  identification and initiate the process for negotiating a mitigation  agreement, particularly in cases where a foreign company acquires a  facility previously owned by a U.S. contractor. Copies of NISP in the  News that we reviewed also included information that may affect  contractors that are not under a mitigation agreement for foreign  influence, such as changes in key management personnel. We  previously reported that DSS had challenges identifying these  transactions or facility security officers would neglect to report them,  which led to delays in putting protective measures in place to prevent  unauthorized access to classified information.", "Assessments of new contractors that have been sponsored for  clearances, which are used to identify and mitigate foreign influence.  DSS industrial security representatives stated that this analysis used  to be performed in the field but now they can use time previously  spent preparing analysis of foreign influence to work with contractors  to implement security measures. Further, the assessments help them  work more effectively with contractors because they draw upon  expertise across different disciplines. For example, 7 of the 13 facility  case files we reviewed contained a summary of analysis conducted by  specialists in DSS headquarters. The summaries also noted that the  specialists reviewed classified and unclassified information on the  contractor, including counterintelligence information and other U.S.  government information, as applicable.", "In April 2014, the Department of Defense issued a rule about policies and  procedures for mitigating foreign ownership, control, or influence. This  rule was issued in order to ensure maximum uniformity and effectiveness  in the Department of Defense implementation of the National Industrial  Security Program. The rule detailed specific mitigation approaches for  addressing concerns about foreign ownership, control, or influence, which  we cover in detail in appendix I. The rule clarified the role of DSS, the  government contracting activity, and the contractor during the process  when DSS determines that the contractor needs to mitigate potential  foreign ownership, control, or influence. The rule also documented  policies and procedures regarding how decisions will be made on the  appropriate method to mitigate foreign ownership, control, or influence.  These include the timing of agency and contractor actions involved in  mitigation of foreign ownership, control, or influence and how to proceed  in cases where the contractor had not worked out a mitigation agreement  with DSS before changed conditions (e.g. indebtedness, ownership, or  foreign intelligence threat) occurred, among other things. The rule further  stated that DSS, in consultation with the government contracting activity,  has discretion to modify or reject the contractor\u2019s outlined action plan to  mitigate foreign ownership, control, or influence."], "subsections": []}, {"section_title": "Challenges Remain", "paragraphs": ["Despite upgrading its capabilities, DSS officials indicated that they face  resource constraints, such as an inability to manage workloads and  complete training necessary to stay informed on current threats and  technologies. DSS\u2019s current resource challenges include:", "Managing staff workloads. DSS field officials acknowledged that  they have historically faced workload challenges. DSS officials said  that their limited staff carry heavy workloads and, according to DSS\u2019s  most recent biennial report to Congress, were unable to conduct  security reviews at about 60 percent of cleared facilities in fiscal year  2016. In addition to their official security reviews, industrial security  representatives also conduct informal \u201cadvise and assist\u201d efforts when  facility officials inquire about a range of security issues, from  preparing employees for overseas travel to providing training on  reporting suspicious contacts. In fiscal year 2016, industrial security  representatives conducted about 22,000 \u201cadvise and assist\u201d efforts.  DSS officials attribute the heavy workload to the current staffing levels  of their field offices and frequent turnover among the industrial  security representatives.", "DSS officials noted that both hiring and retention are difficult and that  these challenges are exacerbated by the fact that it is a relatively  small agency with field offices with limited staff. For example, an  average field office oversees about 470 facilities and has about 8  industrial security representatives on staff. As a result, if a person  leaves, it adds strain to the remaining staff. Most of the contractors\u2019  facility security officers we spoke with noted that DSS field officials  have heavy workloads that could affect their ability to respond to  threats at cleared facilities. Further, DSS indicated that it has limited  resources to analyze, process, and distribute counterintelligence to  the cleared facilities. For example, DSS received more than 46,000  reports from cleared contractors about suspicious contacts in fiscal  year 2016, which was an almost 18 percent increase over the prior  year. In comparison, during the same time period, DSS\u2019s  counterintelligence directorate, which analyzes suspicious contact  reports, grew by 7 percent. In addition, DSS\u2019s ability to distribute  counterintelligence is limited by the geographic distribution of over  12,000 cleared facilities and each facility\u2019s capability to receive or  store classified communication.", "Developing foreign influence mitigation agreements. Multiple DSS  industrial security representatives and contractors\u2019 facility security  officers stated that mitigation agreements to address the risk of  foreign influence, including supplemental plans, have become more  detailed and the process to develop and implement them has required  additional time and resources. For example, DSS may require a  contractor to develop an electronic communications plan, which must  include details about which networks will be protected from access by  a foreign parent contractor, including monitoring, maintaining, and  establishing separate email servers, as appropriate. DSS reported in  its 2015 biennial report to Congress that the average amount of time  to approve and implement a foreign influence mitigation plan was 93  days. The length of time to approve and implement a foreign  influence mitigation plan more than doubled to 204 days, according to  the 2017 biennial report. DSS officials stated that this increase is  due, in part, to increased complexity of the agreements and the  amount of coordination required between the government contracting  activity, DSS, and the contractor. A DSS official also noted that over  time, the agency has incorporated more information in its analysis and  sometimes needs more time to review all the information that may be  relevant.", "Attending relevant trainings. DSS officials in three of four regions  noted that staffing challenges affect their ability to take training, even  though industrial security matters continue to become more  sophisticated. Information system security professionals said they  face challenges in learning technology that continues to evolve. For  example, they cited the multiple software products such as operating  systems and configurations of information networks that are used in a  facility\u2019s daily operations. In addition, they need to understand other  technologies that can pose risks to industrial security, such as devices  that are capable of transmitting data, like cellular phones, and  therefore might need to be prohibited from areas where classified  information is discussed. As a result, the lack of expertise in multiple  technologies hampers their ability to identify vulnerabilities that might  leave a facility at risk for loss of classified information. We have  previously reported that training staff in new skills, such as  cybersecurity, remains an ongoing challenge for the federal  government. For example, in 2016, we found that chief information  officers throughout the government identified difficulties related to  recruiting, hiring, and retaining qualified personnel, as well as  ensuring they have the appropriate skills and expertise."], "subsections": []}]}, {"section_title": "DSS Has Not Determined How It Will Collaborate with Stakeholders As It Pilots a New Approach", "paragraphs": ["In 2017, DSS announced its plans to transition to a new approach to  monitoring cleared facilities in order to address emerging threats to  classified information. DSS faces challenges as it pilots its new  approach\u2014DSS in Transition. DSS has taken steps to begin addressing  challenges, including scheduling training for its staff, but has not  documented how it will collaborate with its stakeholders or identified the  resources needed to monitor cleared facilities."], "subsections": [{"section_title": "New Approach to Monitoring Cleared Facilities", "paragraphs": ["In 2017, DSS announced that it would begin transitioning to an asset-and- threat-based monitoring approach. DSS has reported that the United  States is facing the most significant foreign intelligence threat it has ever  encountered and adversaries are attacking cleared facilities at  unprecedented rates. In fact, adversaries are varying their methods and  adjusting their priorities based on the targeted information they need. The  new approach is expected to involve DSS working collaboratively with  contractors and government contracting activities to design a customized  security plan for each facility based on threats specific to its assets rather  than using a standardized worksheet to perform security reviews. DSS  officials said that customized security plans will be developed based on  assets at the specific facilities. For example, a contractor providing  information technology services may need the latest software to thwart  cyberattacks while a contractor that engineers weapons systems may  need additional secure storage facilities and work areas to ensure an  adversary cannot physically extract classified information or technology.  As a result, according to agency officials, these customized security plans  represent a departure from a \u201cone size fits all\u201d or schedule-driven  approach to overseeing contractors\u2019 protection of classified information.  According to DSS officials, this new approach, DSS in Transition will use  the Department of Defense\u2019s list of critical technologies and programs,  along with counterintelligence, to prioritize facilities for security reviews  based on their assets and the severity of the threats to them. See table 1  for more information about the monitoring approaches.", "After announcing DSS in Transition in 2017, DSS began taking steps to  develop its methodology for the new approach, including prioritization of  facilities and developing procedures for executing customized security  plans. In a January 2018 letter to industry, DSS stated that it plans to pilot  the new approach by working with one facility in each of its four regions to  develop a customized security plan and use the lessons learned to refine  the process. While it is piloting the approach at four facilities, DSS notified  contractors not participating in the pilot that DSS would partner with  selected facilities to identify and document their critical assets. Industry,  including contractors and prospective contractors that are interested in  U.S. government contract awards in the future, are awaiting more details  on how DSS plans to implement DSS in Transition, including who would  be responsible for the costs of additional security requirements, according  to a March 2018 statement from the industry spokesperson of the  National Industrial Security Program Policy Advisory Committee."], "subsections": []}, {"section_title": "Collaboration Needed with Stakeholders As It Pilots the New Approach", "paragraphs": ["Although DSS began piloting DSS in Transition in January 2018, it has  not determined how it will collaborate with government contracting  activities, the intelligence community, other federal agencies, and  contractors. In particular, DSS has not identified its stakeholders\u2019 roles  and responsibilities in terms of who needs to communicate and  coordinate with whom and when, which is necessary to successfully  implement the new approach. For example, DSS needs to establish  agreed-upon criteria for what information a government contracting  activity would need to provide to DSS in order to develop a customized  security plan for a facility. GAO\u2019s Federal Internal Control Standards  establish the need to coordinate with stakeholders and clearly define  roles and responsibilities, among other things. In addition, our leading  practices for interagency collaboration state that successful collaborative  working relationships require organizations to agree on roles and  responsibilities and identify the resources necessary to accomplish  objectives. For example, GAO found it is unclear how DSS will  determine what resources it needs as it has not identified the necessary  roles and responsibilities. DSS has taken steps to begin addressing these  challenges by establishing an office dedicated to documenting processes  and procedures for how DSS in Transition will be implemented, providing  a concept of operations, and scheduling training for its staff. However, to  monitor cleared facilities, DSS needs information from the various  National Industrial Security Program stakeholders, including:", "Government contracting activity. DSS officials stated that, under  the new approach to monitoring cleared facilities, they will need to  better communicate and coordinate with the government contracting  activity. For example, in some circumstances, DSS officials will have  to collaborate with government contracting activities to determine  when a security plan is no longer sufficient as threats and mitigation  methods evolve. DSS officials stated that communication and  coordination with government contracting activities has been a  challenge because industrial security is often considered an added  duty on top of their contract management responsibilities. Further,  DSS officials indicated that staff turnover at government contracting  activities and the lack of clear roles and responsibilities have led to  delays in resolving a facility\u2019s vulnerabilities. According to DSS  officials, it is difficult to determine whether they have the correct point  of contact at the government contracting activity to discuss  vulnerabilities at a facility, which, if left unaddressed, can leave  classified information at risk for loss. There are no formal agreements  about how a case should be elevated and resolved if DSS identifies  vulnerabilities and is unable to elicit a response from the government  contracting activity about further action, according to DSS officials. In  addition, DSS officials stated that they will need to work with the  government contracting activity to assess the risk of security  vulnerabilities that involve subcontractors working on contracts  containing classified information. In the past, a government  contracting activity might not know the identities of subcontractors if  they were sponsored by a cleared contractor. Given the adversaries\u2019  ability to vary its methods to target information it needs, the  government needs to know who\u2014regardless of subcontracting tier\u2014is  accessing classified information.", "Government intelligence community. We found DSS has not  established how it will collaborate with the intelligence community,  including formalizing roles and responsibilities for its new approach. A  DSS counterintelligence official told us that DSS currently relies on a  combination of its own counterintelligence staff and informal  coordination with other agencies, such as the Federal Bureau of  Investigation. Another DSS official stated that they have worked with  the Federal Bureau of Investigation to deliver counterintelligence  when a facility does not have the capacity to receive classified  information electronically. According to DSS field officials, the current  process is handled on a case-by-case basis, depending on the  availability of resources. Although DSS\u2019s Counterintelligence  Directorate recently became part of the intelligence community and  will potentially have greater access to counterintelligence data, it will  need to determine how to regularly communicate with the intelligence  community to fully understand their products and share current threats  and vulnerabilities with certain contractors under DSS in Transition.", "Other government agencies. DSS relies on collaborating with other  cognizant security agencies to develop a complete picture of the  threats to contractors. In addition to the Department of Defense, there  are four other federal agencies that have authority to inspect and  monitor facilities to ensure the protection of classified information.  DSS may only conduct security reviews for facilities performing  contracts awarded by these agencies if the Department of Defense is  the cognizant security agency for that facility. Contracts where  another agency is the cognizant security agency may involve  information coveted by adversaries, but DSS industrial security  representatives have acknowledged that they may not know why the  information is coveted or that it exists. Given the new approach to  develop a complete picture of threats to a facility, DSS will need  additional information from other cognizant security agencies that it  may not have sought in the past. As a result, DSS needs to establish  how best to collaborate with other agencies, such as identifying  appropriate points of contacts and specific time frames to conduct  outreach, to effectively implement DSS\u2019s new approach to monitor  contractors.", "Cleared contractors. DSS officials said that DSS in Transition will  require contractors to identify assets in a greater level of detail than  what was previously expected of them. In order to develop a security  plan unique to the facility, the contractor\u2019s facility security officers will  need to understand these assets and why adversaries would want to  target them in order to develop and implement specific security  measures. Since DSS officials cannot be onsite every day, they have  to rely on the contractor\u2019s facility security officer or other key  management personnel at cleared facilities to identify and report  potential problems. However, DSS officials noted that convincing  facility staff to spend more time on security-related matters may be  difficult at facilities where one employee may serve as the contractor\u2019s  facility security officer in addition to having other responsibilities. In  addition, DSS officials stated that contractors\u2019 security costs are  typically not profit-generators and realize that DSS in Transition may  require the contractor to expend more time, money, and energy to  address vulnerabilities or enact policies to safeguard against  adversaries.", "DSS recognizes the need to keep industry informed and its  implementation plans for DSS in Transition need to address what  level of communication and coordination is required. For example,  DSS currently uses a rating system to indicate how well a contractor  is meeting the requirements of the operating manual as a metric for  how it is protecting classified information. As DSS moves toward  developing customized security plans that are unique to each facility\u2019s  threats and assets, it needs to formalize new approaches to  communicate with contractors how well they are protecting classified  information.", "In addition to piloting DSS in Transition, DSS is reassuming responsibility  for conducting background and security investigations for the Department  of Defense, which could potentially magnify its workload challenges.  DSS previously held these responsibilities but they were transitioned to  the Office of Personnel Management in 2005. The National Defense  Authorization Act of Fiscal Year 2018 required DSS to reassume this  background and security investigations mission by implementing a  phased transition by October 1, 2020. This phased transition will overlap  with DSS\u2019s piloting of DSS in Transition and may create disruptions as an  agency of over 700 employees assumes responsibility for a background  and security investigations mission that currently has more than 7,000  employees and contractors. In January 2018, we added personnel  security clearances to our high-risk list, a list of federal areas in need of  either broad-based transformation or specific reforms to prevent waste,  fraud, and abuse. This issue is on the list because we identified: (1) a  significant backlog of background investigations; (2) a lack of long-term  goals for increasing federal and contractor-provided investigator capacity  to address the backlog; and (3) delays in the timely processing of security  clearances among other factors. DSS officials have identified potential  benefits and challenges with reassuming the background investigations  mission, and, in August 2017, the Department of Defense submitted a  plan for a 3-year phased transition to assume the background and  security investigations mission. In March 2018, we reported that this  transition could potentially affect the timely processing of personnel  security clearances, the backlog, and other reform initiatives but the effect  is unknown at this time."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Given the changing nature of threats to classified information, DSS needs  to ensure that classified information is protected from unauthorized  access. While DSS has upgraded its capabilities for identifying foreign  influence, DSS officials acknowledged that adversaries continue to  evolve, and classified information and technologies remain vulnerable to  exploitation. In response, in 2017, DSS launched a new approach (DSS  in Transition) to change how it oversees contractors with access to  classified information. As DSS pilots the new approach, it will need to  work with government contracting activities, the intelligence community,  other agencies, and cleared contractors to determine their roles and  responsibilities in protecting classified information at every facility in the  program. Without the necessary information\u2014that is gained through  communicating and coordinating with stakeholders\u2014to assess the threats  to the nation\u2019s most critical technologies and programs, DSS will be  unable to provide appropriate oversight that addresses the most  significant threats to industrial security. Also, DSS has not identified the  resources necessary, including the number of personnel needed to  implement its new approach, which will add pressure to an agency  accepting a background and security investigations mission that has  significant backlog and timeliness challenges. Until DSS identifies roles  and responsibilities and determines how it will collaborate with  stakeholders for the pilot, it will be difficult to assess whether the new  approach is effective in protecting classified information."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making one recommendation to the Director of the Defense  Security Service:  Determine how it will collaborate with stakeholders as it pilots a new  approach to overseeing contractors with cleared facilities (DSS in  Transition), including identifying roles and responsibilities and the related  resources needed. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DSS.", "DSS provided written comments, which are reproduced in appendix III. In  its comments, DSS concurred with the recommendation and summarized  actions it is taking to pilot its new approach (DSS in Transition). DSS also  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, Director of DSS, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Methods for Mitigating Foreign Influence", "paragraphs": ["Since our July 2005 report, the Defense Security Service (DSS) has  taken additional steps to address oversight of contractors with foreign  influence. In April 2014, the Department of Defense issued a rule that  clarified policies for oversight of contractors under foreign ownership,  control, or influence. The rule detailed specific mitigation approaches for  addressing foreign ownership, control, or influence concerns. The rule  provided detail regarding the terms of each of these types of foreign  ownership, control, or influence mitigation agreements and the  circumstances under which each may be appropriate. The types of  mitigation specified in the rule are:", "Board Resolution. The board resolution may be used when a foreign  entity does not own voting interests sufficient to elect a representative  to the company\u2019s governing board.", "Security Control Agreement. The security control agreement is a  tailored foreign ownership, control, or influence mitigation agreement,  often used when a foreign interest does not effectively own or control  a company or corporate family but the foreign interest is entitled to  representation on the company\u2019s board.", "Special Security Agreement. The special security agreement may be  used when a company is effectively owned or controlled by a foreign  interest. Access to certain proscribed classified information by a  company cleared under this agreement may require that the  government contracting activity complete a National Interest  Determination to determine that the release of proscribed information  to the company is consistent with the national security interests of the  United States.", "Voting Trust Agreement and Proxy Agreement. These foreign  ownership, control, or influence mitigation agreements may be used  when a foreign interest effectively owns or controls a company or  corporate family. Under these agreements, the foreign owner  relinquishes most rights associated with ownership of the company to  cleared United States citizens approved by the U.S. government.", "DSS has clarified the types of supplemental plans that companies must  submit to document specific steps that it will take to mitigate foreign  influence. Table 2 describes the types of plans and provides examples of  how they mitigate foreign influence."], "subsections": []}, {"section_title": "Appendix II: Status of Prior GAO Recommendations Related to the National Industrial Security Program", "paragraphs": ["In 2004 and 2005, GAO issued reports about the National Industrial  Security Program and made 16 recommendations. Prior to the start of  our review, the Department of Defense, through the Defense Security  Service (DSS), implemented two of the recommendations. Below is our  assessment of whether DSS addressed the remaining 14  recommendations that had been previously recorded as \u201cclosed \u2013 not  implemented\u201d.", "Table 3 provides a summary of those recommendations and the actions  that DSS has taken in response to the recommendations. A number of  the recommendations we made were aimed at clarifying policies related  to contractors under foreign influence that were part of the National  Industrial Security Program. The primary evidence to support our  conclusions is cited in the last column.", "In GAO-04-332, we made eight recommendations that were recorded as  closed not implemented prior to the start of this review. Based on  information obtained during this review, seven of the recommendations  will be closed as implemented. The recommendation that remains closed  as not implemented was outside of the scope of the current review.", "In GAO-05-681, we made eight recommendations and two of the  recommendations were closed as implemented prior to this review. Based  on information obtained during this review, four of the remaining six  recommendations will be closed as implemented. We were unable to  close two of the six recommendations as implemented based on the  information provided during this review."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Marie A. Mak, (202) 512-4841 or makm@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Penny Berrier (Assistant  Director), Lorraine Ettaro, Gina Flacco, Stephanie Gustafson, John  Rastler, Sylvia Schatz, Roxanna Sun, Alyssa Weir, and Jocelyn Yin made  key contributions to this report."], "subsections": []}]}], "fastfact": ["DOD's Defense Security Service determines government contractors' eligibility to access classified information and monitors over 12,000 contractor facilities. It is facing new challenges as adversaries try to steal national security information and technology at unprecedented rates.", "DSS is piloting a new approach that requires collaboration with stakeholders such as other federal agencies and contractors. However, we found that it has not established how it will do this.", "We recommended that DSS work with stakeholders to determine roles and responsibilities as it pilots its new approach."]}
{"id": "GAO-18-78", "url": "https://www.gao.gov/products/GAO-18-78", "title": "Drinking Water: DOD Has Acted on Some Emerging Contaminants but Should Improve Internal Reporting on Regulatory Compliance", "published_date": "2017-10-18T00:00:00", "released_date": "2017-10-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to DOD, about 3 million people in the United States receive drinking water from DOD public water systems, which are to comply with EPA and state health-based regulations. EPA and DOD have detected elevated levels of two unregulated, DOD-identified emerging contaminants found in firefighting foam\u2014PFOS and PFOA\u2014in drinking water at or near installations. Perchlorate, an unregulated chemical used by DOD in rocket fuel, can also be found in drinking water.", "The Senate Report accompanying a bill for national defense authorization for fiscal year 2017 included a provision for GAO to review DOD management of drinking water contaminants. This report examines the extent to which DOD has (1) internally reported data on compliance with health-based drinking water regulations at military installations and used those data to assess compliance at its two types of public water systems, and (2) taken actions to address concerns with its firefighting foam and elevated levels of PFOS, PFOA, and perchlorate in drinking water at or near military installations. GAO reviewed DOD guidance and EPA drinking water regulations, advisories, and orders; analyzed DOD and EPA drinking water data; and visited seven installations from among those addressing emerging contaminants in drinking water."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has not internally reported all data on compliance with health-based drinking water regulations or used available data to assess compliance. DOD data for fiscal years 2013-2015 indicate that DOD public water systems complied with Environmental Protection Agency (EPA) and state health-based drinking water regulations at levels comparable with other systems in the United States. However, the military departments did not report all violations to DOD, i.e., while 77 installations reported violations to DOD, GAO found that at least 16 additional installations did not. Until DOD takes steps to increase the clarity and understanding of its internal reporting requirements, it may not have the data it needs to fully oversee compliance. DOD also has not used its data to determine why its two types of systems\u2014one that provides DOD-treated water and another that provides non-DOD-treated water\u2014have different compliance rates. Specifically, DOD's data indicate that about 99 percent of the people who received non-DOD-treated drinking water were served by systems with no violations, while about 89 percent of the people who received DOD-treated drinking water were served by systems with no violations. Absent further analysis of its data, DOD may not be able to improve overall compliance.", "DOD has initiated actions to address concerns with both its firefighting foam and also with elevated levels in drinking water of perfluorooctane sulfonate (PFOS), perfluorooctanoic acid (PFOA), and perchlorate, which are DOD-identified emerging contaminants. PFOS and PFOA can be found in DOD's firefighting foam. DOD has restricted its use of this foam and is funding efforts to develop a new foam that meets DOD performance requirements. Additionally, at 11 military installations (see fig.), DOD has shut down wells, provided alternate water sources, or installed water treatment systems to respond to elevated levels of PFOS and PFOA, at times in response to EPA and state orders."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations to improve DOD's reporting and use of data on compliance with health-based drinking water regulations. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Every year about 3 million people who live and work on military  installations in the United States receive drinking water from a  Department of Defense (DOD) public water system, according to the  department. These people are served by two different types of public  water systems. Specifically, about two-thirds of these people are provided  DOD-treated drinking water, and about one-third are provided non-DOD- treated drinking water\u2014that is, drinking water from DOD systems that  have been privatized or that obtain treated drinking water from a local  utility. DOD\u2019s public water systems, like all public water systems, are  required to comply with legally enforceable drinking water regulations that  are issued by the Environmental Protection Agency (EPA) under the Safe  Drinking Water Act, as well as with any additional regulations issued by  state environmental agencies. DOD policy also requires the military  departments to report annually on compliance with health-based  regulations at their installations\u2019 public water systems to the Assistant  Secretary of Defense for Energy, Installations, and Environment (ASD  (EI&E)) within the Office of the Secretary of Defense.", "In May 2016, EPA issued a drinking water health advisory\u2014 nonenforceable technical guidance\u2014for perfluorooctane sulfonate  (PFOS) and perfluorooctanoic acid (PFOA), which are part of a larger  group of manufactured compounds called perfluorinated chemicals  (PFCs) and can be found in firefighting foam used by DOD since the  1970s. PFCs are widely used to make everyday products more resistant  to stains, grease, and water, such as by keeping food from sticking to  cookware and making clothes and mattresses more waterproof.  According to the Agency for Toxic Substances and Disease Registry,  exposure to elevated levels of PFOS and PFOA could cause increased  cancer risk and other health issues in humans. EPA and DOD have  detected elevated levels of PFOS and PFOA in drinking water at or near  DOD installations, and EPA has also found these chemicals in drinking  water at non-DOD public water systems across the United States.", "DOD has included PFOS and PFOA on its list of emerging contaminants.  DOD defines emerging contaminants as chemicals or materials that the  department currently uses or plans to use that present a potentially  unacceptable human health or environmental risk; have a reasonably  possible pathway to enter the environment; and either do not have  regulatory standards based on peer-reviewed science, or their regulatory  standards are evolving due to new science, detection capabilities, or  pathways. DOD has also included perchlorate, which is a chemical that  DOD uses in rocket fuel, on its list of emerging contaminants. Like PFOS  and PFOA, perchlorate has not been regulated by EPA under the Safe  Drinking Water Act but does have an EPA-issued interim drinking water  health advisory. Overall, DOD\u2019s list of emerging contaminants includes 21 contaminants that can be found in drinking water: 10 that have been  regulated by EPA under the Safe Drinking Water Act and 11 that are  currently unregulated but have an EPA-issued drinking water health  advisory.", "Senate Report 114-255 accompanying a bill for national defense  authorization for fiscal year 2017 included a provision for us to review  DOD\u2019s efforts to manage contaminants in drinking water. This report  examines the extent to which DOD has (1) internally reported data on  compliance with health-based drinking water regulations at military  installations and used those data to assess compliance at its two types of  public water systems and (2) taken actions to address concerns with its  firefighting foam containing PFCs and elevated levels of PFOS, PFOA,  and perchlorate in drinking water at or near military installations.", "For objective one, we analyzed data reported by the military departments  to ASD (EI&E) on compliance with and violations of health-based drinking  water regulations at DOD public water systems for fiscal years 2013  through 2015 (the most recent data available at the time of our review).  We compared data from EPA\u2019s Safe Drinking Water Information System  for the same time frame to determine the extent to which violations  recorded in the EPA system were also reported by the military  departments to ASD (EI&E). We also analyzed the data to identify any  differences in violations between DOD- and non-DOD-treated drinking  water. We assessed the reliability of the DOD and EPA data on violations  of health-based drinking water regulations by reviewing relevant  documentation, testing the data for obvious errors, and interviewing  knowledgeable officials. As we have previously found, EPA\u2019s data system  may not contain all public water system violations because states have  generally under-reported violations. During this review, we also found  that some public water system identification numbers for DOD  installations could not be matched with EPA\u2019s data system and, therefore,  these identification numbers were excluded from our analysis. As a  result, some DOD installation violations may be missing from the data,  and we may not have comprehensive violations data for health-based  drinking water regulations at DOD installations. Nonetheless, we  determined that DOD and EPA data were sufficiently reliable for the  purposes of identifying whether any drinking water violations were  recorded in EPA\u2019s system but not internally reported within DOD, as well  as to indicate possible differences in reported violations for DOD\u2019s two  types of public water systems. We evaluated the military departments\u2019  reported data and DOD\u2019s use of these data to determine compliance with  DOD\u2019s reporting requirements as defined by DOD\u2019s environmental  compliance instruction and with Standards for Internal Control in the  Federal Government. According to these standards, quality information is  needed to achieve an organization\u2019s objectives, management is to  monitor performance over time and promptly resolve any findings, and  actions such as improved communication to and additional training for  personnel are helpful for an organization to meet its objectives. We also  discussed our analysis with ASD (EI&E) and military department officials.", "For objective two, we reviewed DOD policies on and requirements for  firefighting foam, as well as documents related to the research and  development of a PFC-free firefighting foam. We also interviewed military  department and installation officials to discuss DOD actions regarding  current and future use of firefighting foam. Additionally, we reviewed  administrative orders issued by EPA and one state regulator (Ohio)  directing DOD to address elevated levels of PFOS and PFOA, and we  interviewed officials from the EPA regions (1 and 3) and the state (Ohio)  that issued those orders, as well as DOD officials responsible for  responding to those orders. We also reviewed drinking water guidance  documents from ASD (EI&E) and the military departments on PFOS,  PFOA, and perchlorate and obtained DOD data as of December 2016  (the most recent data available at the time of our review) on testing and  response activities for those contaminants. We assessed the reliability of  the data by examining the data for obvious errors and inconsistencies;  comparing the data, where applicable, with other information collected;  and interviewing knowledgeable officials. We found the data to be  sufficiently reliable for our purposes of describing DOD-reported actions  and costs for addressing PFOS and PFOA. To obtain additional  information on DOD actions to address emerging contaminants, we  visited at least two installations per military department\u2014seven  installations total\u2014that we selected because DOD was investigating or  responding to unregulated DOD-identified emerging contaminants in  drinking water at those installations. We provide further details on our  scope and methodology in appendix I.", "We conducted this performance audit from June 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DOD Public Water Systems", "paragraphs": ["DOD has two types of public water systems that provide drinking water to  people that live and work on military installations. The first type provides  drinking water that has been treated by DOD. The second type provides  water treated by a private company or a local utility, which we refer to as  \u201cnon-DOD-treated\u201d drinking water. Drinking water systems vary by size  and other factors, but they most typically include a supply source,  treatment facility, and distribution system. A water system\u2019s supply source  may be a reservoir, aquifer, well, or a combination of these sources. The  treatment process for surface water generally uses sedimentation,  filtration, and other processes to remove impurities and harmful agents,  and disinfection processes such as chlorination to eliminate biological  contaminants. Distribution systems are comprised of water towers, piping  grids, pumps, and other components to deliver treated water from  treatment systems to consumers."], "subsections": []}, {"section_title": "Drinking Water Regulations and Administrative Orders", "paragraphs": ["EPA regulates drinking water contaminants under the Safe Drinking  Water Act by issuing legally enforceable standards, known as National  Primary Drinking Water Regulations, which generally limit the levels of  these contaminants in public water systems. EPA has issued such  regulations for approximately 90 drinking water contaminants. In  accordance with the Safe Drinking Water Act, EPA may authorize a state  to have primary enforcement responsibility for drinking water regulations,  as long as the state has, among other things, drinking water regulations  that are no less stringent than the National Primary Drinking Water  Regulations.", "The Safe Drinking Water Act also authorizes EPA to take emergency  actions necessary to protect public health when informed that a  contaminant is present in or is likely to enter a public water system or an  underground source of drinking water that may present an imminent and  substantial endangerment. For example, EPA may issue administrative  orders, which generally include actions to be taken, such as remediating  contaminated sources of drinking water or requiring the provision of  alternative water supplies. State regulators may also issue orders to  public water systems to address contaminated drinking water.", "Public water systems, including the DOD public water systems that  provide drinking water to about 3 million people living and working on  military installations, are required to comply with EPA and state drinking  water regulations. EPA divides violations of drinking water regulations  into two types: (1) health-based violations and (2) other types of  violations that include violations of monitoring, reporting, and public  notification requirements. Under the Safe Drinking Water Act, EPA also  is required to identify unregulated contaminants that present the greatest  health concern, establish a program to monitor drinking water for  unregulated contaminants, and decide whether or not to regulate at least  five such contaminants every 5 years. EPA has not regulated any new  contaminants using this process since 1996.", "DOD\u2019s environmental compliance policy states that ASD (EI&E) is  responsible for providing guidance, oversight, advocacy, and  representation for environmental compliance programs\u2014to include  overseeing the military departments\u2019 compliance with health-based  drinking water regulations at DOD public water systems. The policy  directs the military departments to annually report to ASD (EI&E) the total  population receiving water from both \u201cregulated\u201d and \u201cother\u201d DOD public  water systems\u2014referred to in this report as DOD public water systems  that provide DOD- and non-DOD-treated drinking water, respectively\u2014 that did and did not attain all Safe Drinking Water Act health-based  drinking water standards. The policy also requires the military  departments to report information regarding each instance health-based  drinking water standards were not attained during the reporting period, to  include the name and location of the military installation; the nature of the  issue (e.g., the contaminant type); the DOD population affected; the  duration of the issue; the corrective actions taken or planned (e.g.,  flushing the system, resampling the water, or implementing system  upgrades); and the estimated date for achieving the standard."], "subsections": []}, {"section_title": "EPA Health Advisories", "paragraphs": ["In addition to issuing drinking water regulations, EPA may also publish  drinking water health advisories. In contrast to drinking water regulations,  health advisories are nonenforceable. Drinking water health advisories  provide technical guidance on health effects, analytical methodologies,  and treatment technologies. These advisories recommend the amount of  these contaminants that can be present in drinking water\u2014\u201dhealth  advisory levels\u201d\u2014at which adverse health effects are not anticipated to  occur over specific exposure durations, to include 1 day, 10 days, several  years, or over a lifetime. EPA issues provisional health advisories to  provide information in response to an urgent or rapidly developing  situation. DOD\u2019s list of emerging contaminants includes 11  contaminants, including PFOS, PFOA, and perchlorate, for which EPA  has issued a drinking water health advisory. Specifically,", "PFOS. PFOS is part of a larger group of fluorinated organic chemicals  that have been incorporated into an array of consumer products (i.e.,  to make some more resistant to stains, grease, and water) and also in  firefighting foam used by DOD and civilian airports. According to EPA,  the major manufacturer of PFOS in the United States voluntarily  agreed to phase out production of the chemical in 2002. According to  EPA\u2019s health advisory, exposure to PFOS may remain possible due to  legacy uses, existing and legacy use in imported goods, and the  chemical\u2019s \u201cextremely high persistence\u201d in the environment. According  to the EPA, exposure to PFOS may result in adverse health effects,  such as fetal developmental effects during pregnancy or to breastfed  infants, cancer, liver damage, immune effects, thyroid effects, and  other effects. See table 1 for details of the EPA provisional health  advisory that was issued in 2009 and the lifetime health advisory that  was issued in 2016, which superseded the provisional health  advisory.", "PFOA. PFOA is a fluorinated organic chemical that has been used in  generally the same products as PFOS, including firefighting foam  used by DOD and civilian airports. According to EPA, PFOA was  voluntarily phased out by eight major companies in the manufacturing  of their products at the end of 2015. According to the EPA, adverse  health effects from exposure to PFOA are similar to those for PFOS.  See table 1 for details of the EPA provisional health advisory that was  issued in 2009 and the lifetime health advisory that was issued in  2016, which superseded the provisional health advisory.", "Perchlorate. Perchlorate is commonly used in solid propellants,  fireworks, matches, signal flares, and some fertilizers, and has been  used by DOD for rocket fuel and ammunition. EPA published an  interim health advisory for perchlorate in 2008; the interim health  advisory level was set at 15 parts per billion. According to the health  advisory, perchlorate can disrupt the functions of the thyroid gland."], "subsections": []}, {"section_title": "DOD-Identified Emerging Contaminants", "paragraphs": ["In 2009, DOD issued a policy on the identification, assessment, and risk  management of emerging contaminants that have the potential to impact  DOD. According to that policy, chemicals and materials used or planned  for use by DOD that meet the definition of an emerging contaminant  should be identified as early as possible. The policy further states that  DOD is to assess and, when appropriate, take action to reduce risks  posed by its emerging contaminants to people; the environment; and  DOD missions, programs, and resources. Where necessary, DOD is to  perform sampling, conduct site-specific risk assessments, and take  response actions for emerging contaminants released from DOD facilities,  in accordance with relevant statutes.", "According to the DOD policy on emerging contaminants, ASD (EI&E) is to  develop and maintain a list of emerging contaminants with potential or  probable high risk to the department\u2019s personnel and functions. As of  April 2017, DOD\u2019s list of emerging contaminants comprised 49 chemicals  or substances. According to our analysis of EPA documents, DOD\u2019s list  includes 21 contaminants that can be found in drinking water. Of these 21  contaminants, 10 contaminants have been regulated by EPA under the  Safe Drinking Water Act, and 11 contaminants are currently unregulated  but have an EPA-issued drinking water health advisory. The other 28  DOD-identified emerging contaminants do not have EPA drinking water  regulations or health advisories. Appendix II provides more information on  the drinking water regulatory status of DOD-identified emerging  contaminants."], "subsections": []}]}, {"section_title": "DOD Has Not Internally Reported All Data on Compliance with Drinking Water Regulations or Used Available Data to Evaluate Differences between Its Drinking Water Systems", "paragraphs": ["For the years we reviewed\u2014fiscal years 2013 through 2015\u2014the military  departments annually reported information internally to ASD (EI&E) on  compliance with EPA and state health-based drinking water regulations,  which indicate that drinking water quality at DOD public water systems  was similar to other systems in the United States. However, not all  violations of health-based regulations were reported to ASD (EI&E) during  this time frame, as is required by DOD policy. The military departments  reported that a total of 77 military installations had at least one violation at  some point from fiscal year 2013 through fiscal year 2015, but we found  that at least 16 additional installations had violations that were reported to  EPA but were not internally reported to ASD (EI&E). DOD also has not  used available compliance data to identify why DOD public water systems  that provide DOD-treated drinking water appear to have more violations  of health-based regulations than DOD systems that provide non-DOD- treated drinking water."], "subsections": [{"section_title": "Military Departments Have Internally Reported Data on Compliance with Health-Based Drinking Water Regulations, but Have Not Reported All Violations", "paragraphs": ["For the years we reviewed\u2014fiscal years 2013 through 2015\u2014the military  departments annually reported information to ASD (EI&E) on compliance  with and violations of EPA and state health-based drinking water  regulations at the DOD public water systems that provide drinking water  to military installations. The military departments\u2019 data for fiscal years  2013 through 2015 indicate that about 92 percent of people who received  drinking water from DOD public water systems were served by a system  that complied with EPA and state health-based regulations. This is similar  to the percentage of people in the United States\u2014also about 92 percent,  according to EPA\u2014who received drinking water during that time frame  from a community public water system with no health-based violations.  The data for that time period also indicate that about 8 percent of people  were provided drinking water from a DOD public water system that had at  least one violation of a health-based regulation. Health-based violations  can be for any length of time during a fiscal year\u2014for example, a violation  lasting 1 day is counted the same as a violation lasting for 1 month.  Across the 3 fiscal years, the military departments reported that a total of  77 military installations had at least one violation at some point during that  time period: 35 in fiscal year 2013, 25 in fiscal year 2014, and 17 in fiscal  year 2015. The most common types of contaminants for which the military  departments reported violations were coliform and two disinfection  byproducts\u2014trihalomethanes and haloacetic acids\u2014which, according to EPA, are among the most common types of contaminants for which  health-based drinking water violations occur across the United States.", "However, we found that the military departments have not always  reported all violations to ASD (EI&E), as required by DOD policy. Based  on our review of data in EPA\u2019s Safe Drinking Water Information System  for fiscal years 2013 through 2015, we found that the military departments  did not report violations to ASD (EI&E) for at least 16 installations\u20149 Air  Force installations, 5 Navy installations, and 2 Army installations.  According to EPA\u2019s database, the total population served by DOD public  water systems at these installations is approximately 180,000 people, and  most of the violations that went unreported involved coliform and  disinfection byproduct contaminants. However, the actual population  number affected by these violations and the contaminants involved\u2014 along with other information such as the duration of the contamination  and the corrective actions planned or taken\u2014were not included in the  military departments\u2019 annual reports to ASD (EI&E). These violations  were recorded in EPA\u2019s system, which indicates that the installations  reported the violations to the appropriate state regulatory agencies, who  then reported them to EPA\u2019s database. However, the violations were not  reported to ASD (EI&E), as required by DOD policy.", "According to military department officials, violations of health-based  drinking water regulations went unreported to ASD (EI&E) due to a lack of  clarity in DOD\u2019s reporting requirements and misunderstandings of the  requirements on the part of installations and the military departments. We  found that violations were either not reported by the military installations  where the violations occurred or that they were not reported by the  installations\u2019 chains of command. Navy officials cited turnover of  installation personnel as the reason some violations went unreported, as  well as misinterpretations by installation personnel of DOD\u2019s reporting  requirements. Air Force officials also told us that most of their unreported  violations were not reported to ASD (EI&E) because the Air Force did not  interpret them as health-based violations, although DOD policy requires  these types of violations to be reported. Army officials told us that,  based on their interpretation of DOD\u2019s policy, the policy did not require  them to report violations at installations where formal, written notification  was not received from the state regulatory agency. However, ASD (EI&E)  officials stated that all violations of health-based regulations should be  reported, whether or not the state provides formal, written notification of  the violation. Navy officials also told us that they have not reported  violations at some of the Navy\u2019s smaller systems that purchase drinking  water from non-DOD public water systems, due in part to  misinterpretation of DOD\u2019s internal reporting requirements. However,  Navy officials told us that ASD (EI&E) had instructed them to begin  reporting these types of violations in fiscal year 2016, and the Navy is  working with ASD (EI&E) and the other military departments to determine  whether these types of systems should regularly report health-based  violations.", "Currently, ASD (EI&E) does not have complete data in accordance with  DOD\u2019s policy, limiting its ability to conduct oversight and analyze how  many people at military installations receive drinking water with health- based violations, what contaminants were involved, the duration of the  contamination, or what corrective actions the military departments have  planned or taken to address the violation. Standards for Internal Control  in the Federal Government states that quality information is needed to  achieve an organization\u2019s objectives. Those standards also indicate that  actions such as improved communication to and additional training for  personnel are helpful for an organization to meet its objectives.  According to DOD officials, a committee comprised of ASD (EI&E) and  military department officials began a review in 2016 of DOD\u2019s internal  reporting requirements for drinking water compliance data. While such a  committee could be in a position to make recommendations on clarifying  the annual reporting requirements, no documentation on the committee\u2019s  efforts was yet available at the time of our review as the committee\u2019s work  was still in progress. In addition, at present, there are no firm dates for  when its work will be completed or when any potential changes would be  implemented. Absent actions by ASD (EI&E) to identify and implement  any necessary changes to clarify annual reporting requirements in its  environmental compliance policy, and absent actions by the military  departments to increase understanding at their installations and  commands about the requirements, adherence to DOD\u2019s environmental  compliance policy will remain limited and DOD will lack complete data to  conduct oversight of regulatory compliance at its public water systems."], "subsections": []}, {"section_title": "DOD Has Not Used Available Data to Assess Why DOD-Treated Water Appears to Have More Health-Based Violations Than Non-DOD-Treated Drinking Water", "paragraphs": ["DOD has not used available data to assess why DOD public water  systems providing DOD-treated drinking water appear to have more  violations of health-based drinking water regulations than systems  providing non-DOD-treated drinking water. Although we found that not all  violations were reported by the military departments to ASD (EI&E), the  data that were reported during fiscal years 2013 through 2015 indicated  that about 99 percent of the people who received non-DOD-treated  drinking water were served by systems with no violations, while about 89  percent of the people who received DOD-treated drinking water were  served by systems with no violations.", "When we asked ASD (EI&E) and military department officials why these  differences may exist, they were unable to provide an explanation  because they had not used the reported water quality data to identify the  reasons why DOD public water systems providing DOD-treated water  appear to have more violations than systems providing non-DOD-treated  water. Although some officials offered ideas on the reasons for  differences in compliance\u2014including the relative expertise of utilities and  private companies, versus DOD, in providing drinking water\u2014DOD  officials acknowledged that the agency has not evaluated the data to  identify specific reasons for why the differences may exist. All public  water systems, including DOD public water systems, are required to  comply with applicable EPA and state drinking water regulations.  According to Standards for Internal Control in the Federal Government,  management should establish and operate activities to monitor the  internal control system and evaluate the results. Such monitoring should  assess the quality of performance over time and promptly resolve any  findings. Without reviewing the data reported by the military  departments to identify why there appear to be differences in violations  between DOD\u2019s two types of public water systems and without identifying  and implementing any actions to address any differences, ASD (EI&E)  and the military departments may not be able to improve overall  compliance with health-based drinking water regulations."], "subsections": []}]}, {"section_title": "DOD Has Initiated Actions to Address Concerns with Its Firefighting Foam as Well as Elevated Levels of PFOS, PFOA, and Perchlorate in Drinking Water", "paragraphs": ["DOD is taking steps to address health and environmental concerns with  its use of firefighting foam that contains PFCs\u2014including PFOS and  PFOA\u2014to include restricting the use of foam at its installations and  funding research into the development of a PFC-free foam that can meet  DOD performance requirements. DOD also has responded to EPA and  state orders and initiated additional actions to address elevated levels of  PFOS, PFOA, and perchlorate."], "subsections": [{"section_title": "DOD Is Taking Steps to Address Health and Environmental Concerns with Firefighting Foam That Contains PFCs", "paragraphs": ["DOD is taking steps to address PFOS- and PFOA-related health and  environmental concerns with its use of firefighting foam that contains  PFCs. Firefighting foam is used by DOD to put fires out quickly while  also ensuring that they do not reignite. This is critical if, for example, there  is a fire from a fighter jet on the deck of an aircraft carrier. DOD has  outlined performance requirements in its military specification for  firefighting foam, which was authored by the Navy\u2019s Naval Sea Systems  Command but is approved for use in all of DOD. For example, the  military specification states how long it should take for firefighting foam to  extinguish a fire\u2014based on the size of the fire and the amount of foam  used\u2014and how long the foam should prevent the extinguished fire from  reigniting. DOD\u2019s military specification also requires that firefighting  foam purchased and used by the department must contain PFCs.", "DOD\u2019s steps to address concerns with the use of firefighting foam include  restricting the use of existing foams that contain PFCs; testing its current  foams to identify the amount of PFCs they contain; and funding research  into the future development of PFC-free foam that can meet DOD\u2019s  performance and compatibility requirements (see table 2). Some of these  steps, such as limiting the use of firefighting foam containing PFCs, are in  place. Others, such as determining the specific amount of PFCs in  existing firefighting foams or researching potential PFC-free firefighting  foams, are in progress with targets, in some cases, but no firm completion  dates.", "Navy officials stated that they are planning to revise the military  specification after they have completed their testing\u2014to be completed in  late 2017 or 2018\u2014on the amounts of PFOS, PFOA, and other PFCs  found in the firefighting foam currently used by DOD. That revision,  according to Navy officials, is intended to set limits for the amount of  PFCs that are allowed in firefighting foam. According to DOD, at present  there is no PFC-free firefighting foam that meets DOD\u2019s performance and  compatibility requirements. As a result, the Navy has no plans to remove  the requirement for firefighting foam to contain PFCs at this time.  However, if a PFC-free foam is developed in the future that can meet  DOD performance and compatibility requirements, Navy officials said that  any necessary revisions to the military specification would be made at  that time\u2014a process that could take months to complete."], "subsections": []}, {"section_title": "DOD Has Responded to Orders from EPA and a State Regulator and Has Initiated Additional Actions to Address Elevated Levels of PFOS and PFOA in Drinking Water at or near Military Installations", "paragraphs": ["DOD has taken steps to respond to four administrative orders directing  the department to address PFOS and PFOA levels that exceeded EPA\u2019s  health advisory levels for drinking water. One order was issued by the  Ohio Environmental Protection Agency at Wright-Patterson Air Force  Base in Ohio, and three orders were issued by the EPA directed at: the  former Pease Air Force Base in New Hampshire; Horsham Air Guard  Station in Pennsylvania; and the former Naval Air Warfare Center  Warminster in Pennsylvania. Under Section 1431 of the Safe Drinking  Water Act, EPA may issue orders necessary to protect human health  where a contaminant in a public water system presents an imminent and  substantial endangerment. EPA may do so if appropriate state and local  authorities have not acted to protect human health. These orders may  require, among other things, carrying out cleanup studies, providing  alternate water supplies, notifying the public of the emergency, and  halting disposal of the contaminants threatening human health. The Ohio  Environmental Protection Agency has similar authority.", "According to information provided by officials from the Ohio  Environmental Protection Agency, EPA, and DOD, DOD has taken steps  to respond to the administrative orders. Table 3 provides further details  on each order and examples of actions by DOD to address the orders.", "In addition to actions specific to these four installations, DOD has initiated  other actions to test for, investigate, and mitigate elevated levels of PFOS  and PFOA at or near installations across the military departments.  Following the release of EPA\u2019s lifetime health advisory for PFOS and  PFOA in May 2016, each of the military departments issued guidance  directing installations to, among other things, test for PFOS and PFOA in  their drinking water and take steps to address drinking water that  contained amounts of PFOS and PFOA above the EPA\u2019s lifetime health  advisory level. The military departments also directed their installations to  identify locations with a known or suspected prior release of PFOS and  PFOA and to address any releases that pose a risk to human health\u2014 which can include people living outside DOD installations.", "As a result of these efforts, DOD has initiated actions to address PFOS  and PFOA in drinking water both on military installations and outside  military installations. As of March 2017, DOD data indicated that the  department was taking steps to address levels of PFOS and PFOA above  the EPA\u2019s lifetime health advisory level in drinking water on 11 military  installations in the United States, 2 of which we visited during the course  of this review (see fig. 1).", "According to DOD data, these installations took various corrective actions  to mitigate the presence of PFOS and PFOA in the drinking water,  including shutting down drinking water wells, providing alternative drinking  water, and installing treatment systems. For example, at Eielson Air Force  Base in Alaska, the Air Force reported shutting down three of the  installation\u2019s six drinking water wells and installing a treatment system to  remove PFOS and PFOA from the drinking water. At Marine Corps Base  Camp Pendleton in California, the Navy reported that a well contaminated  with PFOS and PFOA was taken out of service and that the affected  reservoir was drained and replaced with water from another source;  follow-on testing showed that the presence of PFOS and PFOA were  returned to below the EPA\u2019s lifetime health advisory level. At Fort  Leavenworth in Kansas, the Army reported that the private company that  operates the installation\u2019s drinking water system had shut down two wells  contaminated with PFOS and PFOA and plans to install a treatment  system before returning those wells to service.", "Additionally, according to DOD data as of December 2016 the military  departments had identified 391 active and closed installations with  known or suspected releases of PFOS and PFOA, and had reported  spending almost $200 million on environmental investigations and  mitigation actions at or near 263 (or about 67 percent) of those  installations. In particular, DOD had initiated mitigation actions, which  include installing treatment systems or supplying bottled water, to address  PFOS and PFOA in drinking water for people living outside 19  installations\u20145 of which we visited during the course of this review (see  fig. 2).", "The following cost data provided by DOD were current as of December  2016, and are supplemented by additional information we obtained during  our installation visits.", "The Air Force identified 203 installations with known or suspected  releases of PFOS and PFOA, spent about $120 million on  environmental investigations at those installations, and spent about  $33 million on mitigation actions at or near 14 of the 203 installations.  For example, the Air Force reported spending over $5 million on  environmental investigations and mitigation actions at Peterson Air  Force Base in Colorado. During our visit to that installation, officials  showed us the sites they are investigating\u2014to include the current (see  fig. 3 below) and former fire training areas\u2014to determine the extent to  which their prior use of firefighting foam may have contributed to the  discovery of PFOS and PFOA in the drinking water of three nearby  communities. Additionally, the Air Force has awarded a contract for,  among other things, installing treatment systems in those  communities. In another example, the Air Force reported spending  about $800,000 on environmental investigations at Joint Base  Langley-Eustis in Virginia, but nothing yet on mitigation actions.  During our visit to this installation, officials told us that they had not  taken any mitigation actions because they do not use the installation\u2019s  groundwater as a drinking water source; the utility that serves the  installation, as well as the nearby city of Newport News, obtains its  drinking water primarily from a surface water source, which officials  said was approximately 20 miles from the installation.", "The Navy identified 127 installations with known or suspected  releases of PFOS and PFOA, spent about $20.5 million on  environmental investigations at 47 of those installations, and spent  about $24 million on mitigation actions at or near 5 of those  installations. For example, the Navy reported spending about $15  million on environmental investigations and mitigation actions at the  former Naval Air Station Joint Reserve Base Willow Grove in  Pennsylvania. During our visit to this installation, officials told us that  the Navy is investigating the extent to which PFOS and PFOA on the  installation may have contaminated a nearby town\u2019s drinking water.  The Navy has agreed to fund installation of treatment systems and  connections of private well owners to the town\u2019s drinking water  system, among other things. In another example, the Navy reported  spending nearly $3 million on environmental investigations and  mitigation actions at Naval Auxiliary Landing Field Fentress in  Virginia. During our visit to this installation, officials told us that the  Navy is providing bottled water to the approximately 20 to 30  personnel who work there and plans to install a treatment system to  treat for PFOS and PFOA.", "The Army identified 61 installations with known or suspected releases  of PFOS and PFOA, spent about $1.6 million on environmental  investigations at 13 of those installations, and has not yet begun any  mitigation actions at or near the identified installations. For example,  the Army reported spending about $26,000 on environmental  investigations at Fort Carson in Colorado, but nothing yet on  mitigation actions. During our visit to this installation, officials told us  that they had found PFOS and PFOA in groundwater near their  previous fire training area but that the installation does not use that  groundwater as a drinking water source, and state officials told us that  it is unlikely that PFOS and PFOA from Fort Carson had affected any  nearby drinking water sources.", "According to DOD, it may take several years for the department to  determine how much it will cost to cleanup PFOS and PFOA  contamination at or near its military installations. In January 2017, we  reported that DOD had not notified Congress that the costs for  environmental cleanup at closed installations will significantly increase  due to the high cost of remediating emerging contaminants\u2014including  PFOS and PFOA. We also reported that DOD officials had not  determined the total costs for cleaning up emerging contaminants at  closed installations. We recommended that DOD include in future annual  reports to Congress best estimates of the environmental cleanup costs for  emerging contaminants as additional information becomes available, and  DOD concurred with the recommendation and stated its commitment to  do so."], "subsections": []}, {"section_title": "DOD Previously Directed Installations to Test for Perchlorate in Drinking Water", "paragraphs": ["DOD previously directed installations to test for perchlorate in drinking  water. Following the EPA\u2019s issuance of an interim drinking water health  advisory for perchlorate in 2008, DOD issued policy in April 2009\u2014which  superseded similar policy that was issued in January 2006\u2014directing  DOD-owned drinking water systems that were testing for inorganic  substances to also test for perchlorate. Installations that found  perchlorate in their drinking water were to consult with their leadership on  appropriate actions to take and to continue testing on a quarterly basis  until they determined that perchlorate levels were likely to remain below  EPA\u2019s health advisory level, or any applicable federal or state regulation.  Citing congressional and regulatory agency concerns related to  perchlorate, DOD developed a database for storing the results of  perchlorate testing. According to ASD (EI&E), the database was last  updated in 2009 and is no longer being used by the department.", "ASD (EI&E) officials stated that they are no longer regularly testing  drinking water for perchlorate unless there is a state requirement to do so;  previous testing indicated that DOD was not a primary source of  perchlorate in drinking water and that known releases of perchlorate did  not currently pose a threat to drinking water. According to EPA, the  agency expects to issue a final drinking water regulation for perchlorate  by the end of 2019. ASD (EI&E) officials told us that, once EPA has  issued a final regulation, DOD is committed to complying with it."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["During the period we reviewed, DOD data indicate that DOD public water  systems complied with EPA and state health-based drinking water  regulations at a level comparable with other systems in the United States.  However, we found that the military departments did not report all  violations of these regulations to ASD (EI&E) during that period, which  illustrates that DOD\u2019s internal reporting requirements for drinking water  data are either not clear in DOD regulations or are not clearly understood  by those implementing them. Unless ASD (EI&E) and the military  departments act to make any necessary clarifications to and increase  understanding of DOD\u2019s annual reporting requirements, ASD (EI&E) may  not have complete data to effectively oversee the military departments\u2019  compliance with drinking water regulations. Further, the data indicated  that systems providing DOD-treated drinking water had more reported  health-based violations than DOD systems providing non-DOD-treated  drinking water. However, DOD has not used these data to identify the  reasons that these differences may exist. Without using available data to  identify why differences in violations appear to exist between DOD\u2019s two  types of public water systems, DOD will likely be hampered in its ability to  identify what actions, if any, could be taken to address any differences  and improve overall compliance with health-based drinking water  regulations."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of five recommendations to DOD.", "The Assistant Secretary of Defense for Energy, Installations, and  Environment, in consultation with the Secretaries of the military  departments, should identify and implement any necessary changes to  DOD\u2019s environmental compliance policy to clarify DOD\u2019s reporting  requirements for violations of health-based drinking water regulations.  (Recommendation 1)", "The Secretary of the Army should identify and implement actions to  increase understanding at Army installations and commands about  DOD\u2019s reporting requirements for violations of health-based drinking  water regulations. These actions may include improved communication to  or additional training for personnel. (Recommendation 2)", "The Secretary of the Navy should identify and implement actions to  increase understanding at Navy installations and commands about DOD\u2019s  reporting requirements for violations of health-based drinking water  regulations. These actions may include improved communication to or  additional training for personnel. (Recommendation 3)", "The Secretary of the Air Force should identify and implement actions to  increase understanding at Air Force installations and commands about  DOD\u2019s reporting requirements for violations of health-based drinking  water regulations. These actions may include improved communication to  or additional training for personnel. (Recommendation 4)", "The Assistant Secretary of Defense for Energy, Installations, and  Environment, in consultation with the Secretaries of the military  departments, should (a) review reported compliance data to identify the  reasons for any differences in the number of violations of health-based  drinking water regulations between DOD\u2019s two types of public water  systems and (b) identify and implement any actions needed to address  the causes of any differences in the number of violations between DOD\u2019s  two types of public water systems. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD and EPA for review and  comment. In its written comments, reproduced in appendix III, DOD  concurred with our recommendations. DOD and EPA also provided  technical comments, which we incorporated as appropriate. Based on  technical comments from DOD, we revised the title of the report to more  clearly specify the actions DOD should take to address the findings in our  report.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Assistant Secretary of Defense  for Energy, Installations, and Environment; the Secretaries of the Army,  the Navy, and the Air Force; and the Administrator of EPA. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  us at J. Alfredo G\u00f3mez, (202) 512-3841 or gomezj@gao.gov, or Brian J.  Lepore, (202) 512-4523 or leporeb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Senate Report 114-255 accompanying a bill for the national defense  authorization for fiscal year 2017 included a provision for us to review the  Department of Defense\u2019s (DOD) efforts to manage contaminants in  drinking water. This report examines the extent to which DOD has (1)  internally reported data on compliance with health-based drinking water  regulations at military installations and used those data to assess  compliance at its two types of public water systems and (2) taken actions  to address concerns with its firefighting foam containing perfluorinated  chemicals (PFCs) and to address elevated levels of  perfluorooctanesulfonic acid (PFOS), perfluorooctanoic acid (PFOA), and  perchlorate in drinking water at or near military installations.", "For objective one, we reviewed DOD\u2019s policy on environmental  compliance in the United States, which directs the military departments to  annually report data to the Assistant Secretary of Defense for Energy,  Installations, and Environment (ASD (EI&E)) on compliance with and  violations of Environmental Protection Agency (EPA) and state health- based drinking water regulations at military installations. We analyzed  data reported by the military departments to ASD (EI&E) on compliance  with and violations of health-based drinking water regulations at DOD  public water systems located at military installations in the United States  for fiscal years 2013 through 2015, the most recent data available at the  time of our review. We analyzed the data to identify (1) the number of  people served by DOD public water systems that complied with  applicable EPA and state health-based drinking water regulations during  the fiscal year and (2) the number of people served by DOD public water  systems that violated at least one of these regulations sometime during  the fiscal year. We performed this analysis for both types of DOD public  water systems\u2014those that provide DOD-treated drinking water, and  those that provide non-DOD-treated drinking water. We also used the  data to identify the military installations where the reported violations  occurred; the nature of the violation (including the contaminant involved);  and the number of people affected. Next, we collected data from EPA\u2019s  Safe Drinking Water Information System for all public water systems in  the United States. We used DOD-provided public water system  identification numbers to identify in the EPA system any violations for  health-based drinking water regulations at those DOD systems for fiscal  years 2013 through 2015. We then compared the violations found in  EPA\u2019s data to the data reported by the military departments to ASD  (EI&E) to determine the extent to which the military departments were  reporting all violations of health-based drinking water regulations to ASD  (EI&E).", "We also analyzed DOD\u2019s data to identify any differences in violations  between DOD- and non-DOD-treated drinking water. We evaluated the  military departments\u2019 reported data and DOD\u2019s use of these data to  determine compliance with DOD\u2019s reporting requirements in the  department\u2019s environmental compliance instruction and Standards for  Internal Control in the Federal Government. According to these  standards, quality information is needed to achieve an organization\u2019s  objectives, management is to monitor performance over time and  promptly resolve any findings, and actions such as improved  communication to and additional training for personnel are helpful for an  organization to meet its objectives. We also discussed our analysis with  ASD (EI&E) and military department officials, and discussed possible  reasons for why any violations went unreported to ASD (EI&E) and why  there may be differences in violations between DOD- and non-DOD- treated drinking water. We assessed the reliability of the DOD and EPA  data on violations of health-based drinking water regulations by reviewing  relevant documentation, testing the data for obvious errors, and  interviewing knowledgeable officials. As we have previously found, EPA\u2019s  data system may not contain all public water violations as states have  under-reported the violations. During this review, we found that some  public water system identification numbers for DOD installations could not  be matched with EPA\u2019s system and, therefore, were excluded from our  analysis. As a result, some DOD installation violations may be missing  from the data, and we may not have comprehensive violations data for  health-based drinking water regulations at DOD installations.  Nonetheless, we determined that DOD and EPA data were sufficiently  reliable for the purpose of identifying whether any drinking water  violations were recorded in EPA\u2019s system but not internally reported  within DOD, and to indicate possible differences in drinking water  violations, as reported by the military departments, between DOD\u2019s two  types of public water systems.", "For objective two, we reviewed policies issued by the military  departments on the use of firefighting foam that contains PFCs. We also  reviewed DOD documents related to research into PFC-free firefighting  foams that can meet the department\u2019s performance and compatibility  requirements, as well as DOD\u2019s military specification document that  outlines those requirements. We met with officials from ASD (EI&E) and  the military departments to discuss their policies on the use of firefighting  foam and actions taken to address concerns with the use of firefighting  foam containing PFCs, including the future use of firefighting foam.  Additionally, we met with Navy officials responsible for testing existing  firefighting foam products and setting the military specifications for  firefighting foam use in DOD.", "Additionally, we obtained and reviewed four regulatory administrative  orders\u2014three from EPA and one from the Ohio Environmental Protection  Agency\u2014directing DOD to address elevated levels of PFOS and PFOA  contamination in drinking water at or near four active and closed military  installations, and reviewed documentation related to DOD\u2019s efforts to  address these administrative orders. We also met with officials from Ohio  and the EPA regions that issued the orders\u2014EPA Regions 1 and 3\u2014as  well as DOD officials who responded to the orders, to discuss DOD\u2019s  response to the orders. We reviewed drinking water guidance issued by  ASD (EI&E) and the military departments on testing installation drinking  water for PFOS and PFOA and responding to known or suspected  releases of PFOS and PFOA. We analyzed DOD-provided data on the  installations where DOD-conducted testing showed the presence of  PFOS and PFOA in drinking water above the EPA\u2019s health advisory level  for those contaminants (as of March 2017) and on the costs and actions  taken to investigate and mitigate PFOS and PFOA at or near military  installations (as of December 2016). We assessed the reliability of the  data by examining the data for obvious errors and inconsistencies,  comparing the data, where applicable, with other information collected,  and by interviewing knowledgeable officials; we found the data to be  sufficiently reliable for our purposes of describing what DOD has reported  on its actions and costs for responding to PFOS and PFOA.", "Additionally, we reviewed DOD policy and our prior work on testing for  and responding to perchlorate at military installations. We met with ASD  (EI&E) and military department officials to discuss DOD actions to  address PFOS, PFOA, and perchlorate. To obtain additional information  on DOD actions to address emerging contaminants in drinking water, we  conducted site visits to a nongeneralizable sample of seven current and  former military installations\u2014at least two installations per military  department\u2014that were selected because they were investigating or  responding to unregulated DOD-identified emerging contaminants in  drinking water; these installations are listed below. We also met with  EPA and state regulatory officials to better understand how DOD was  responding to administrative orders and addressing PFOS, PFOA, and  perchlorate at or near DOD installations. Specifically, we met with officials  from selected EPA regions and state regulatory offices that had issued an  administrative order for PFOS and PFOA or whose region or state  included the installations we visited; those EPA regions and states are  listed below. We also compared DOD\u2019s list of emerging contaminants with  EPA documentation to determine how many DOD-identified emerging  contaminants (1) have been regulated by EPA under the Safe Drinking  Water Act or (2) are currently unregulated but have an EPA-issued  drinking water health advisory.", "We visited or contacted the following offices and locations during our  review. Unless otherwise specified, these organizations are located in or  near Washington, D.C.", "Office of the Secretary of Defense", "Office of the Assistant Secretary of Defense for Energy, Installations,", "Office of the Deputy Assistant Secretary of Defense for Environment,  Safety, and Occupational Health", "Office of the Assistant Chief of Staff of the Army for Installation", "U.S. Army Installations Management Command, Fort Sam Houston,", "U.S. Army Environmental Command, Fort Sam Houston, Texas", "Fort Carson, Colorado", "Fort Jackson, South Carolina", "Office of the Assistant Secretary of the Navy for Energy, Installations,", "Office of the Chief of Naval Operations, Energy and Environmental", "Commander, Navy Installations Command", "Marine Corps Installations Command", "Naval Facilities Engineering Command", "Naval Sea Systems Command", "Former Naval Air Station Joint Reserve Base Willow Grove,", "Naval Auxiliary Landing Field Fentress, Virginia  Department of the Air Force", "Office of the Assistant Secretary of the Air Force for Installations,", "Air Force Civil Engineer Center, Joint Base San Antonio, Texas", "Former Pease Air Force Base, New Hampshire  Joint Base Langley-Eustis, Virginia", "Peterson Air Force Base, Colorado", "Wright-Patterson Air Force Base, Ohio", "Office of Research and Development", "Office of Land and Emergency Management", "Office of Enforcement and Compliance Assurance", "EPA Region 1, Boston, Massachusetts", "EPA Region 3, Philadelphia, Pennsylvania", "EPA Region 4, Atlanta, Georgia", "EPA Region 5, Chicago, Illinois", "EPA Region 8, Denver, Colorado", "EPA Region 9, San Francisco, California", "Colorado Department of Public Health and Environment", "Ohio Environmental Protection Agency", "Pennsylvania Department of Environmental Protection", "South Carolina Department of Health and Environmental Control  We conducted this performance audit from June 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Drinking Water Regulatory Status for Department of Defense-Identified Emerging Contaminants", "paragraphs": ["The Department of Defense\u2019s (DOD) list of emerging contaminants  includes 21 contaminants that can be found in drinking water: 10 that  have been regulated by the Environmental Protection Agency (EPA)  under the Safe Drinking Water Act and 11 that are currently unregulated  but have an EPA-issued drinking water health advisory. Table 4 shows  the regulatory status for each of the 21 contaminants."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Maria Storts (Assistant  Director), Diane B. Raynes (Assistant Director), Kazue Chinen, Michele  Fejfar, Jennifer Gould, Karen Howard, Richard P. Johnson, Mae Jones,  Daniel Kuhn, Summer Lingard-Smith, Daniel Longo, Felicia Lopez,  Geoffrey Peck, Ophelia Robinson, Jerry Sandau, and Sara Sullivan made  key contributions to this report."], "subsections": []}]}], "fastfact": ["DOD and EPA have found chemicals in drinking water at or near military installations that may cause cancer and other health issues. Some of these chemicals can be found in firefighting foam and rocket propellants.", "DOD has taken steps to limit individuals' exposure to some chemicals, including providing alternative drinking water supplies and installing water treatment systems. Still, DOD's incomplete internal reporting limits its ability to monitor installation compliance with safe drinking water regulations.", "This report makes 5 recommendations to improve DOD's data, reporting, and oversight of drinking water regulations."]}
{"id": "GAO-18-151SP", "url": "https://www.gao.gov/products/GAO-18-151SP", "title": " Assessment Methodology for Economic Analysis", "published_date": "2018-04-10T00:00:00", "released_date": "2018-04-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["We prepared this report to answer the question: What are key methodological elements of an economic analysis that is intended to inform decision-makers and stakeholders?"]}, {"section_title": "What GAO Found", "paragraphs": ["GAO identifies five key methodological elements to the baseline structure of an economic analysis: Objective and scope, Methodology, Analysis of effects, Transparency and Documentation. GAO's assessment methodology evaluates each key element and provides an overall assessment based on the assessment of the individual key elements."]}], "report": [{"section_title": "Letter", "paragraphs": ["In its engagements, GAO may review economic analyses that are  intended to inform decision-makers and stakeholders about the economic  effects of a public action. The economic analyses that GAO reviews may  have been performed to meet requirements described in Executive Order  or related statutes, to propose or support an action, or to examine an  action that has already been taken. The purpose of this report is to inform  the public about the methodology that GAO may use to assess these  economic analyses.", "We prepared this report under the authority of the Comptroller General to  answer the question: What are key methodological elements of an  economic analysis that is intended to inform decision-makers and  stakeholders? We answered this question by reviewing economic  elements and concepts that serve as the basis for sound economic  analysis. We considered a wide range of economics documents prepared  by various government agencies and institutions on how economic  analysis should be performed. These documents included, among others,  Circulars released by the Office of Management and Budget (OMB) and  handbooks for economic analysis from federal and international agencies,  such as the U.S. Environmental Protection Agency, the U.S. Department  of Defense, the U.S. Department of Transportation, the Organization for  Economic Co-operation and Development (OECD), and HM Treasury  Government of the United Kingdom. In addition, we consulted with  experts on economic analysis of public actions. We synthesized  economic concepts embodied in these documents into the present report  for use by GAO in assessing economic analyses.", "GAO\u2019s commitment to informative and transparent economic analysis is  in line with the Office of Management and Budget\u2019s guidelines on  achieving a high degree of transparency in data and methods in scientific  information.  An important benefit of transparency is that the public can  assess the structure of an analysis and, in particular, how much of an  analytic result hinges on the specific choices made by the authors. This  transparency indicates the solidity of the analytic choices. For example, it  allows the implication of these choices, related risks, and uncertainties to  be readily assessed. This type of sensitivity analysis is regarded as an  essential feature of high-quality analysis, and it cannot be undertaken  without a high degree of transparency.", "The key methodological elements we identify in this report are not  intended to be exhaustive and to supplant or alter relevant federal and  agency requirements for economic analysis. They simply serve to  establish a sound baseline framework for the assessment of an economic  analysis. GAO\u2019s assessment methodology examines the extent to which  an economic analysis properly dealt with these key elements and,  accordingly, informed decision-makers and stakeholders about the  economic effects analyzed.", "We conducted our work from June 2017 to April 2018 in accordance with  all sections of GAO\u2019s Quality Assurance Framework that are relevant to  our objectives. The framework requires that we plan and perform the  engagement to obtain sufficient and appropriate evidence to meet our  stated objectives and to discuss any limitations in our work. We believe  that the information and data obtained, and the analysis conducted,  provide a reasonable basis for any findings and conclusions in this  product."], "subsections": [{"section_title": "Section 1: Economic Analysis", "paragraphs": ["For the purpose of this report, an economic analysis is defined as an  analysis that is intended to inform decision-makers and stakeholders  about the economic effects of an action. Economic effects (hereafter also  called \u201ceffects\u201d) commonly include costs, benefits, and/or economic  transfers (for example, transfer payments). Action is defined to include a  government law, rule, regulation, project, policy, or program. An action  may be examined in the context of legislation, regulation, advocacy,  agency operations, or in response to certain events (such as a natural  disaster, for example). An economic analysis may be prospective,  examining an action that could be taken, or retrospective, examining the  outcome of an action that has already been taken. Examples of economic  analyses include:   1.  An economic analysis of the costs of a government program, project,  2.  An economic analysis of the benefits and costs of a government rule  3.  An economic analysis of the impact of a proposed or existing  regulation on regulated entities and consumers.  4.  An economic analysis of an action in response to an event (for  example, an analysis of a federal response to a natural disaster);  5.  A benefit-cost analysis or cost-effectiveness analysis."], "subsections": []}, {"section_title": "Section 2: Key Elements of an Economic Analysis", "paragraphs": ["GAO reviewed handbooks and guidance on economic analysis that have  been issued by various government agencies and institutions and  consulted with experts.  (Appendix 1 details GAO\u2019s objective, scope, and  methodology.) In this Section, GAO synthetizes economic elements and  concepts embodied in this literature for use by GAO in its assessment  methodology for the review of an economic analysis.", "GAO identifies five key methodological elements to the baseline structure  of an economic analysis. These key elements are:   1.  Objective and scope\u2014 the objective and scope of the analysis.    2.  Methodology\u2014 the methodology used to examine the economic  effects.   3.  Analysis of effects \u2014 the analysis of economic effects.   4.  Transparency\u2014 the transparency of the analysis of economic effects.   5.  Documentation\u2014 the documentation included in the analysis.", "These key elements are standard to the structure of analyses, generally  speaking. That is, an analysis is performed to address an objective; the  analysis is scoped to address that objective; the analysis adopts a  methodology, which is used to analyze the economic effects of interest;  and the analysis is transparent and properly documented. The emphasis  on transparency is consistent with the final implementation guidelines of  the Office of Management and Budget (OMB). \u201cThe primary benefit of public transparency is not necessarily that errors in analytic results  will be detected, although error correction is clearly valuable. The more important benefit  of transparency is that the public will be able to assess how much of an agency\u2019s analytic  result hinges on the specific analytic choices made by the agency.\u201d", "Having identified key elements to the structure of an economic analysis  we synthetized for each key element, economic concepts embodied in the  literature that we reviewed. For example, what might we be assessing  under the key element: Objective and Scope? We considered economic  concepts commonly identified across the documents we reviewed, and  incorporated feedback from the experts and agencies with whom  we  consulted. The documents that we reviewed included, among others,  Circulars A-94 and A-4 released by OMB, handbooks for economic  analysis from federal and international agencies, such as the U.S.  Environmental Protection Agency, the U.S. Department of Defense, the  U.S. Department of Transportation, the Organization for Economic Co- operation and Development (OECD), and the United Kingdom\u2019s HM  Treasury.", "These documents generally outline a methodical structure to an economic  analysis. This methodical structure takes the form of a set of issues or  sequence of steps to address while conducting the analysis. These  issues or steps, in turn, embody economic concepts. For the purpose of  developing our assessment methodology, we synthetized and  categorized these economic concepts with the key elements that we  identified\u2014as listed below. The concepts for each listed key element are  not intended to be exhaustive and do not supplant or alter existing  requirements for economic analysis. Depending on the context in which  an action is examined, GAO\u2019s assessment of a key element could  exclude some concepts, or extend beyond the concepts listed for that  element. In such cases, GAO\u2019s written assessment of the relevant key  element will specify the concepts that were actually considered in the  review process.", "The five key elements and economic concepts in GAO\u2019s assessment  methodology for an economic analysis are:  1.  Key Element: Objective and Scope\u2014the objective and scope of the  analysis.", "The economic analysis explains the action examined and includes a  rationale and justification for the action. The analysis states its  objective. The scope of the analysis is designed to address this  objective. Unless otherwise justified, the analysis focuses on  economic effects that accrue to citizens and residents of the United  States, and its time horizon is long enough to encompass the  important economic effects of the action.  2.  Key Element: Methodology\u2014the methodology used to examine the  economic effects.", "The economic analysis examines the effects of the action by  comparing alternatives, using one of them as the baseline. Unless  otherwise justified, it considers alternatives that represent all relevant  alternatives, including that of no action. The analysis defines an  appropriate baseline. The analysis justifies that the world specified  under each alternative considered (including the baseline) represents  the best assessment of what the world would be like under that  alternative. The analysis identifies the important economic effects for  each alternative considered, their timing, and whether they are direct  or ancillary effects.  3.  Key Element: Analysis of Effects\u2014the analysis of economic effects.", "Where feasible, the economic analysis quantifies the important  economic effects and monetizes them using the concept of  opportunity cost. The analysis applies the criterion of net present  value, or related outcome measures, to compare these effects across  alternatives. It controls for inflation and uses economically justified  discount rates. Where important economic effects cannot be  quantified, the analysis explains how they affect the comparison of  alternatives. Where the equity and distributional impacts are  important, the full range of these impacts is separately detailed and  quantified, where feasible.  4.  Key Element: Transparency\u2014the transparency of the analysis of  economic effects.", "The economic analysis describes and justifies the analytical choices,  assumptions, and data used. The analysis assesses how plausible  adjustments to each important analytical choice and assumption affect  the estimates of the economic effects and the results of the  comparison of alternatives. The analysis explains the implications of  the key limitations in the data used. Where feasible, the analysis  adequately quantifies how the statistical variability of the key data  elements underlying the estimates of the economic analysis impacts  these estimates, and the results of the comparison of alternatives.  5.  Key Element: Documentation\u2014the documentation included in the  analysis.", "The economic analysis is clearly written, with a plain language  summary, clearly labeled tables that describe the data used and  results, and a conclusion that is consistent with these results. The  analysis cites all sources used and documents that it is based on the  best available economic information. The analysis documents that it  complies with a robust quality assurance process and, where  applicable, the Information Quality Act.  The analysis discloses the  use and contributions of contractors and outside consultants.", "In summary, GAO identifies five key elements, with associated economic  concepts, to the structure of an economic analysis. GAO\u2019s assessment  methodology then examines the extent to which an economic analysis  properly dealt with these key elements."], "subsections": []}, {"section_title": "Section 3: Assessment Methodology", "paragraphs": ["GAO\u2019s assessment methodology has two steps: (1) an assessment of  each individual key element and (2) an overall assessment based on the  assessment of the individual key elements. Below, these two types of  assessment are discussed. While GAO\u2019s assessment methodology  typically considers all five key elements, there may be cases, for example  depending on the scope of an engagement, where it may consider only  certain key elements. In those cases, GAO may not be able to make an  overall assessment."], "subsections": [{"section_title": "Step 1: Assessing Each Individual Element", "paragraphs": ["The first step in the review process is an assessment of the extent to  which the economic analysis has considered and properly dealt with each  key element. For each element, the outcome of the review is a written  assessment and an assessment score. The written assessment details  the extent to which the analysis considered and properly dealt with the  element. To the extent that important limitations are identified in the  review, the written assessment describes these limitations. This written  assessment informs the assessment score, which is one of three mutually  exclusive scores:  1.  fully met\u2014that is, the economic analysis has considered and properly  dealt with the element;  2.  partly met\u2014that is, the economic analysis has only partly considered  and properly dealt with the element;   3.  not met\u2014that is, the economic analysis has not considered or not  properly dealt with the element.", "If the outcome is \u201cpartly met\u201d or \u201cnot met,\u201d the written assessment should  describe the limitations of the analysis.", "Assessments are made from expertise in economics and with  professional judgment. The guiding principles of a review are objectivity,  integrity, and compliance with generally accepted government auditing  standards (GAGAS). An assessment is contextual\u2014that is, it is  conditional on the evidence underlying the action examined, and the  context in which it takes place. The assessment is also conditional on the  reasonably obtainable information available at the time of the economic  analysis that is being reviewed. A caveat may be added to the  assessment if new information that would affect it, has become available  and is reasonably obtainable since the analysis was made. Should the  review of a key element exclude certain concepts, or extend beyond the  concepts listed for that key element, GAO\u2019s written assessment of the key  element will specify the concepts that were actually considered in the  assessment process."], "subsections": []}, {"section_title": "Step 2: Overall Assessment", "paragraphs": ["Once each element has been individually reviewed, an overall  assessment is made of the extent to which the economic analysis  accordingly informs decision-makers and stakeholders about the  economic effects of the action examined. Four outcomes are possible:   1.  The analysis informs decision-makers and stakeholders about the  economic effects of the action examined.  2.  The analysis informs, with caveats, decision-makers and stakeholders  about the economic effects of the action examined. (If this is the  outcome, the review should describe the caveats in writing.)  3.  The analysis needs additional work to inform decision-makers and  stakeholders about the economic effects of the action examined. (If  this is the outcome, the review should describe in writing the important  limitations of the economic analysis.)  4.  The analysis does not inform decision-makers and stakeholders about  the economic effects of the action examined. (If this is the outcome,  the review should describe in writing the deficiencies of the analysis.)", "An economic analysis that has fully met all the key elements should be  identified as informing decision-makers and stakeholders about the  economic effects of the action examined (this is outcome 1). This  determination is neither an endorsement of the specific findings and  conclusions of the analysis, nor is it a determination that these are  correct. For example, a prospective analysis is predictive of a potential  result, but cannot definitively determine the result. It is a determination  that the analysis is adequately and properly designed, and accordingly, it  can inform the public discourse about the economic effects of the action  examined.", "The written statements added to outcomes 2\u20134 should refer to the review  of the individual elements. The difference between outcomes 2 and 3 is a  matter of degree and professional judgment. Generally speaking, the  caveats under outcome 2 will be relatively minor or few, whereas the  important limitations under outcome 3 are likely to be more consequential.  Should the economic analysis suffer from major deficiencies in meeting  the key elements, then outcome 4 may be appropriate."], "subsections": []}]}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["Our objective was to identify, for the purpose of developing GAO\u2019s  assessment methodology for the review of economic analysis, key  methodological elements to the structure of an economic analysis that is  intended to inform decision-makers and stakeholders about the economic  effects of a public action.", "To address this objective, we reviewed existing Circulars issued by the  Office of Management and Budget (OMB), handbooks for economic  analysis issued by federal agencies, international government agencies  and institutions, and established textbooks on economic theory and  benefit-cost analysis. We also solicited feedback from economics experts  (in academia and public policy) and international audit agencies.", "We identified in our document review, five key elements to the structure  of an economic analysis. These key elements are: (1) objective and  scope; (2) methodology; (3) analysis of effects; (4) transparency; (5)  documentation. These key elements are standard to the structure of  analyses, generally speaking. That is, an analysis is performed to  address an objective; the analysis is scoped to address that objective; the  analysis adopts a methodology, which is used to analyze the economic  effects of interest; and the analysis is transparent and properly  documented.", "Having identified key elements to the structure of an economic analysis,  we synthetized for each key element economic concepts embodied in the  literature we reviewed. For example, what might we be assessing under  the key element objective and scope? To do so, we looked for economic  concepts commonly identified across the documents we reviewed and  incorporated feedback from the experts and agencies that we consulted  with. We then categorized these economic concepts across the key  elements that we identified.", "Among the documents we reviewed in our process were the following:", "OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost  Analysis of Federal Programs, Revised (Oct. 29, 1992). Circular A-94  provides a checklist of whether an agency has considered and  properly dealt with all the elements for sound benefit-cost and cost- effectiveness analyses.", "OMB Circular A-4, Regulatory Analysis, (Sept. 17, 2003). Circular A-4,  released in collaboration with the Council of Economic Advisors,  identifies key elements to the structure of economic analyses in  regulatory proceedings.", "Office of Management and Budget, Office of Information and  Regulatory Affairs, Regulatory Impact Analysis: A Primer  (Washington, D.C.: The White House). The purpose of the primer is to  offer a summary of OMB Circular A-4.", "Agency-issued handbooks for economic analysis, such as, for  example, those issued by the U.S. Environmental Protection Agency,   the U.S. Department of Defense, the U.S. Department of  Transportation, and the Organization for Economic Co-operation and  Development (OECD). We also reviewed The Green Book: appraisal  and evaluation in central government, issued by HM Treasury,  Government of the United Kingdom, (London; July, 2011). HM  Treasury describes The Green Book as a best practice guide for all  central departments and executive agencies, and covers projects of  all types and size. The guide applies to appraisals\u2014defined as any  analysis used to support a government decision to adopt a new policy,  or to initiate, renew, expand or re-orientate programs or projects that  would result in measurable benefits and/or costs to the public\u2014and  evaluations\u2014defined as retrospective analysis of a policy, program or  project at its completion, conclusion or revision.", "The National Academies of Sciences, Engineering, and Medicine,  Guidelines for the review of Reports of the National Academies of  Sciences, Engineering, and Medicine. While these guidelines are  specific to the review of reports issued by the National Academies and  outline review criteria that apply across a broad range of disciplines,  not just economics, they provide review criteria for scientific analysis.", "We conducted our work from June 2017 to April 2018 in accordance with  all sections of GAO\u2019s Quality Assurance Framework that are relevant to  our objectives. The framework requires that we plan and perform the  engagement to obtain sufficient and appropriate evidence to meet our  stated objectives and to discuss any limitations in our work. We believe  that the information and data obtained, and the analysis conducted,  provide a reasonable basis for any findings and conclusions in this  product."], "subsections": [{"section_title": "Third-party Comments", "paragraphs": ["We provided a draft of this product for third-party outside review to  experts at various U.S. and international government agencies and  specialists. Reviewers provided technical comments which we  incorporated as appropriate."], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Carol Bray, Timothy Carr, Tim  Guinane, Kathleen Scholl, Paola Tena and Elaine Vaurio made key  contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-447", "url": "https://www.gao.gov/products/GAO-18-447", "title": "Military Readiness: Analysis of Maintenance Delays Needed to Improve Availability of Patriot Equipment for Training", "published_date": "2018-06-20T00:00:00", "released_date": "2018-06-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Patriot is a mobile Army surface-to-air missile system deployed worldwide to defend critical assets and forces. The Army plans to extend the life of Patriot equipment until at least 2048 through maintaining and modernizing the system. To achieve this, the Army performs two maintenance processes, restoring equipment returning from combat back to pre-deployment conditions (\u201creset\u201d) and comprehensively overhauling (\"recapitalizing\") a portion of its equipment annually.", "The conference report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017 included a provision that GAO assess the Army's Patriot maintenance and recapitalization plans to ensure that operational needs are met. This report (1) evaluates the extent to which the Army's reset process supports the timely delivery of Patriot equipment back to units; and (2) describes the Army's plans for supporting the long-term viability of the Patriot system through recapitalization and any challenges associated with its plans. GAO analyzed Army guidance and equipment and maintenance data; interviewed Army officials; and assessed the Army's recapitalization plans."]}, {"section_title": "What GAO Found", "paragraphs": ["The Army uses reset and recapitalization to extend the life of its Patriot surface-to-air missile system. The reset process\u2014which is intended to repair recently-deployed equipment\u2014has often returned equipment to Patriot units late, which has affected unit training. GAO found that of the seven Patriot battalions that underwent reset from fiscal years 2014 through 2017, only one received its equipment within 180 days, in accordance with Army policy (see figure). Patriot unit officials told GAO that such delays reduced the time available for unit training, creating challenges in meeting training requirements as units prepare for their next mission. The Army has identified and analyzed several factors affecting reset timeliness, ranging from supply chain issues to transportation. However, the Army has not comprehensively analyzed the relative importance of these factors. Such an analysis would better position the Army to target its efforts effectively to ensure units receive equipment back in a timely manner.", "Patriot Equipment Reset Timeliness for Units, Fiscal Years 2014-2017", "With respect to recapitalization, the Army has decided to recapitalize each battalion set of Patriot equipment once every 15 years to support the system's long-term viability through 2048, while recognizing that this approach introduces some challenges. The Army would prefer to recapitalize Patriot equipment every 10 years, but Army officials stated this is not feasible for the following reasons:", "Reducing the amount of equipment for ongoing operational commitments to increase the pace of recapitalization is not feasible given current commitments and the projected security environment.", "Buying extra equipment to provide to additional units undergoing recapitalization is not feasible because the Army has prioritized replacing the Patriot radar to improve its capability to defend against advanced threats.", "Army officials told GAO that the current pace of recapitalization is not optimal and could introduce challenges, such as the possibility of equipment failure and increased maintenance costs. However, the Army has concluded that the current pace is the best path forward."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Army conduct an analysis of the primary factors affecting the Patriot program's reset timeliness to identify their relative importance and develop and implement appropriate corrective actions. The Department of the Army concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Army\u2019s Patriot surface-to-air missile system was first fielded in the  early 1980s and has been in high demand, with more than half of the  Patriot force currently deployed, forward stationed, or prepared to deploy  on short notice. While there have been upgrades to the system, the age  of the equipment and high pace of operations create risks that the Army  attempts to mitigate through maintenance. This maintenance, designed to  extend the life of the system until at least 2048, includes restoring  equipment returning from combat back to pre-deployment condition  (\u201creset\u201d) and comprehensively overhauling (\u201crecapitalization\u201d) a portion of  the equipment annually. However, the current global threat environment  has the potential to further increase demands for the Patriot system and  result in additional maintenance requirements. The Department of  Defense\u2019s 2018 National Defense Strategy, for instance, notes the  Democratic People\u2019s Republic of Korea\u2019s growing ballistic missile  capability. As we have previously found, with a limited fleet of 15  battalions, the Army has struggled to keep up with demands, so  increased operations could be unsustainable.", "We have also previously reported that the Army\u2019s current maintenance  schedule for the Patriot system presents an elevated risk of equipment  failure due to the pace of recapitalization and the Army\u2019s fielding plan for  system upgrades. Congress has expressed additional concerns that  potential delays in modernizing Patriot systems, components, and  software will amplify these risks as units continue to train, deploy, and  operate legacy Patriot equipment at a high pace over an extended period.  The conference report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2017 included a provision that we  assess the Army\u2019s Patriot maintenance and recapitalization plans to  ensure that operational needs are met. This report (1) evaluates the  extent to which the Army\u2019s reset process supports the timely delivery of  Patriot equipment back to units; and (2) describes the Army\u2019s plans for  supporting the long-term viability of the Patriot system through  recapitalization and any challenges associated with its plans.", "For our first objective, we analyzed Army reset and recapitalization  processes and collected and analyzed data on the timeliness and quality  of Army Patriot reset and recapitalization activities from fiscal years 2014  through 2017. We selected these years to identify any trends in the  timeliness and quality of the maintenance activities and because this was  the most recent data available. We assessed the reliability of these data  by reviewing available documentation and interviewing officials, among  other things. We found the data to be sufficiently reliable for our  purposes, to include reporting on battalion-specific reset timeliness and  the time spent by the depot on correcting quality defects identified during  internal inspections. We compared the data on reset timeliness against  Army policy. We also interviewed cognizant Army personnel involved in  the planning and conduct of Patriot reset and recapitalization, as well as  officials from two Patriot battalions and their higher headquarters that  recently underwent reset to identify challenges, if any, with respect to  reset timeliness, such as equipment transfer delays and any effects on  training. We also evaluated the Army\u2019s processes to identify and correct  factors causing any reset delays against Army guidance on program  performance improvement.", "For our second objective, we identified and analyzed\u2014via a review of  recapitalization schedules, briefings, and other documentation\u2014the  Army\u2019s current processes and planning for future Patriot recapitalization  activities, including Army assessments of the feasibility of adjusting the  pace of recapitalization. We also interviewed, among others, cognizant  officials from operational units, the Patriot program office, and  Letterkenny Army Depot (Letterkenny), which conducts Patriot reset and  recapitalization, to obtain their views on considerations influencing the  Army\u2019s recapitalization planning and the current and optimal paces of  recapitalizing Patriot equipment. For more information on our scope and  methodology, see appendix I.", "We conducted this performance audit from June 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Patriot Weapon System and Equipment", "paragraphs": ["The Patriot weapon system is a mobile Army surface-to-air missile  system designed to counter tactical ballistic missiles; cruise missiles; and  other threats such as airplanes, helicopters, and unmanned aerial  vehicles. The Patriot system was first deployed in the early 1980s; since  that time, it has received a number of substantial updates to keep pace  with growing threats. Patriot units are deployed worldwide\u2014in Germany  and South Korea, for example\u2014in defense of the United States\u2019 and its  allies\u2019 key national interests, ground forces, and critical assets.", "The Army currently has 15 Patriot battalions, all in its active component.  Each battalion is organized into groups known as fire units, along with a  headquarters and headquarters battery. Each battalion is controlled by its  own command and control station and can manage up to six fire units,  although a battalion is typically deployed with four. A fire unit is made up  of four basic components: (1) a ground-based radar to detect and track  targets; (2) launchers; (3) interceptor missiles; and (4) a command,  control, and communication station. Overall, a fire unit\u2019s equipment  includes eleven unique major end items, including the radar, the  launchers, and an electric power plant, among other items. Figure 1  provides a listing of the major end items in a Patriot fire unit (top) along  with the notional employment of some of these items (bottom)."], "subsections": []}, {"section_title": "Reset and Recapitalization Processes", "paragraphs": ["Two of the primary processes the Army utilizes to maintain the Patriot  system are reset and recapitalization, summarized in Table 1.", "The Army\u2019s reset program seeks to bring Patriot equipment returning from  the U.S. Central Command area of responsibility back to Army standards.  The reset process seeks to return Patriot equipment to a pre-deployment  condition in order to prevent Patriot units from having to spend home  station training funds to keep their equipment functional after returning  from operations in austere environments for extended periods.", "The Army also relies heavily on recapitalization to restore Patriot  equipment. A longer and more intensive process than reset,  recapitalization seeks to restore equipment to what the Army considers a  \u201clike-new\u201d condition, and according to Army guidance is a \u201cnear zero time  or zero mile\u201d maintenance process. The recapitalization process seeks  to add life to the system, and it provides an opportunity for the Army to  make incremental modernization upgrades, such as the insertion of new  software, technology insertions, or replacing obsolete parts. For example,  the Army is upgrading the Patriot system to prepare for its integration into  the Integrated Air and Missile Defense Battle Command System.", "As the Army fields this modernized command and control system, the  Patriot equipment undergoing recapitalization will also change, but the  Army plans to continue recapitalization to support the Patriot system\u2019s  mission through 2048. Specifically, the Army expects that the transition to  the Integrated Air and Missile Defense Battle Command System will allow  it to replace current command and control elements. However, remaining  end items, such as launchers, would continue to require recapitalization  through the full life of the system to 2048. If the Integrated Air and Missile  Defense Battle Command System, which is currently planned for initial  fielding in 2022, is delayed, program and depot officials expect that they  can continue to recapitalize current Patriot equipment as long as needed  to support the Army\u2019s long-term goal. However, Army officials noted that  delays could require mitigation actions, such as the need to continue  repairing parts that the Army would otherwise have replaced.", "Aside from the degree of work performed, the recapitalization and reset  processes differ in several other key ways. For instance, the Army  generally provides units undergoing recapitalization with another set of  Patriot equipment in a one-for-one exchange. In contrast, units  undergoing reset receive the same set of equipment back after work is  completed and are not provided other equipment while the unit\u2019s  equipment undergoes reset at the depot. Additionally, the target length for  each process differs; the Army aims to recapitalize one battalion\u2019s worth  of equipment each year, while reset work is expected to be completed in  180 days to meet the timelines of the Army\u2019s process to prepare units for  potential deployment. Letterkenny Army Depot primarily conducts the  maintenance work for both of these efforts under the management of  Army Materiel Command and via coordination with the Patriot program  office."], "subsections": []}, {"section_title": "Patriot Demands and Equipment Mission Capable Rates", "paragraphs": ["Patriot units are in high demand. As we found in October 2017, the Army  believes its Patriot force is operating at capacity given a consistently high  pace of operations, and Army studies have found that any additional  operational demands and potential wartime demands would exceed  current capacity. We also found that the Army was planning to increase  the capacity of its Patriot force in two ways: first, by fielding five small  detachments in fiscal year 2018 that would provide the ability to deploy a  Patriot battery without a full battalion-level command and control element,  and second, by increasing the size of an existing test detachment in order  to relieve the Patriot battalion currently assigned to conduct testing for  Patriot modernization efforts of that mission. The Army intends for the  test detachment to begin supporting Patriot modernization test events  starting in the second quarter of fiscal year 2019.", "From fiscal years 2014 through 2017, Patriot equipment across the force  was reported to be fully mission capable at least 90 percent of the time on  average, in accordance with the Army\u2019s goal, as established in Army  regulation. These fully mission capable rates continue an overall trend  since 2009, which a 2014 Army assessment of Patriot readiness  attributed to the recapitalization program. Specifically, this assessment  noted that the worldwide average for Patriot unit fully mission capable  levels was above 90 percent, and that units that underwent  recapitalization consistently experienced positive spikes in readiness.  Further, this assessment highlighted the importance of the Army\u2019s reset  program, noting that it must be sustained because deployed Patriot units  are subjected to the highest pace of operations in the Patriot force."], "subsections": []}]}, {"section_title": "Reset Equipment Is Often Returned Late to Units, and the Army Has Not Analyzed the Relative Importance of Factors Contributing to the Delays", "paragraphs": ["During the period we reviewed, the Army often did not return reset  equipment to units in accordance with the timelines established in Army  regulation, which affected unit training. Although the Army has identified  several factors that caused delays in returning equipment to units and  monitors these factors, it has not assessed their relative importance."], "subsections": [{"section_title": "The Army Often Returns Reset Equipment to Patriot Units Late, Which Affects Training", "paragraphs": ["From fiscal years 2014 through 2017, the Army often did not return reset  equipment to units in accordance with the timelines established in the  Army\u2019s keystone regulation governing its process to build ready forces.  This regulation establishes phases through which a unit passes as it  prepares for a potential deployment. The first of these, the reset phase,  begins when a majority of the unit\u2019s personnel have returned from  deployment and must last a minimum of 180 days. At the conclusion of  the 180 days, the unit enters the train/ready phase, at which point it may  be deployed again, and needs to have its equipment back in order to do  so. Because of this standard, the Army must return a unit\u2019s equipment  from reset within 180 days from the start of the unit\u2019s reset phase. From  fiscal years 2014 through 2017, the Army reset seven battalions and for  six of these battalions the Army did not return all of the units\u2019 equipment  within 180 days. Two of these battalions\u2014the 2-43 Air Defense Artillery  and 4-3 Air Defense Artillery\u2014experienced delays that were deliberately  planned. Specifically, Army officials told us that the installation of system  upgrades for these battalions extended the overall reset timeline by 60  days. One official stated that this was requested and approved, and  explained that if the upgrades had been installed separately after  equipment had been reset, it would have taken 4 months to conduct the  work. However, as shown in figure 2, of the remaining five Patriot units  that completed reset during the period we reviewed, only one received all  of its returned equipment within 180 days.", "Patriot battalion officials we interviewed told us that delays in the receipt  of reset equipment forced them to modify their scheduling and execution  of required collective training. For example, one battalion commander we  spoke with said that without equipment his battalion could not effectively  train for some collective tasks, such as exercises that require moving the  system. Additionally, leadership from two battalions we spoke with told us  that the late return of reset equipment compressed the training time  available for them to conduct field exercises. This can create  unnecessary challenges in meeting Army training requirements as units  progress through the Army\u2019s process for building ready units. Specifically,  according to the Army\u2019s force generation guidance, a unit is expected to  be ready to redeploy on day 181 after returning from its last deployment  to its home station. As one battalion commander described, the  collective-level training that units conduct during these shortened  windows is \u201csufficient, but not optimal.\u201d", "Patriot units have utilized a series of actions to mitigate the impact of  delays in equipment receipt after maintenance, but such mitigation  actions are sometimes not feasible or optimal. For example, Patriot unit  officials told us that the Army shares equipment between battalions that  are collocated on the same installation, but at different points in the  readiness building timeline. Specifically, when one battalion turns in  equipment for reset, certain pieces of equipment from another battalion  on the same installation, if available, might be borrowed to conduct  training. Battalion officials noted, however, that this measure may not  always be feasible. Leadership from two Patriot battalions, for example,  cited instances where their units were unable to train during their reset  periods and could not borrow equipment from other battalions located on  the same installation because those battalions were deployed. In addition,  units use simulators to conduct individual-level training to give personnel  experience with new system upgrades, though Patriot brigade officials  noted this is a stopgap measure while units are without equipment and  does not allow for collective training. Lastly, Patriot units can\u2014once  delayed equipment arrives or via borrowing equipment\u2014conduct some  collective training for extended hours (i.e. during evenings) each day  while at their home station, but a battalion official noted that doing so is  also not optimal for unit morale.", "Battalion commanders we spoke with told us that their units were  sufficiently trained and ready to deploy, despite the delays in the return of  the equipment to the units. However, a memorandum from a brigade  commander noted that given the high pace of operations, it is important  that units receive their equipment in a timely manner to enable them to  complete training for their next deployment, as delays can create a  notable impact on crew and collective training. The late return of reset  equipment could therefore have a detrimental impact on units\u2019 ability to  conduct training to meet assigned missions."], "subsections": []}, {"section_title": "The Army Has Identified Factors Affecting Maintenance Timeliness", "paragraphs": ["The Army has identified several factors affecting the timeliness of Patriot  maintenance as shown in table 2.", "Some of the factors affecting timeliness, as identified by Army officials,  are directly within the control of Letterkenny, where reset is conducted,  and some are not. Specifically, Army officials stated that U.S.  Transportation Command and the Defense Logistics Agency also have  responsibilities related to some of the factors that can affect timeliness,  such as the transport of equipment and availability of parts, respectively.  These factors are discussed in more detail below.", "Preventive maintenance. According to Army officials and Army  documentation, the unit leadership of some deployed Patriot  battalions do not emphasize preventive maintenance. As a result,  equipment may not be properly maintained to Army standards and  can create additional work tasks for depot personnel when they  receive it, such as conducting additional or more detailed inspections.", "Unexpected damage. Army officials cited some instances where  equipment sent to the depot arrives in worse than expected condition,  either due to damage incurred during transport or because unit  personnel did not accurately report the condition of the equipment  prior to turning it in. For example, in December 2017 Letterkenny  officials documented that a battalion\u2019s missile launcher was returned  to the depot with unexpected severe corrosion on power cables, and  certain equipment items, such as generators, were completely  inoperable. Officials cited another instance where a radar was  pressure-washed prior to its return to the depot, causing extensive  damage. These kinds of unexpected conditions result in greater repair  work than anticipated for depot employees.", "Supply chain challenges. Officials at Letterkenny told us that their  forecasts for parts orders have not been consistently met via Army  and Department of Defense supply chain processes, but that the  depot was taking steps to improve its own forecasting. An official  also noted that problems can arise if sole-source suppliers for critical  parts go out of business, or if they have to order parts that are no  longer regularly produced by vendors due to obsolescence. Patriot  program office officials provided an example of a radio that is part of  the Patriot system and is no longer in production, and noted that the  program office was working with Army headquarters officials to  identify a solution.", "The Army uses a series of measures to mitigate parts availability issues,  such as having the depot utilize its own equipment to fabricate some  items on short notice (see fig. 3) and, according to Army officials, by  taking parts from incoming equipment and using them for equipment  nearing completion of maintenance. Additionally, in July 2017, the depot  received permission to purchase critical \u201clong-lead\u201d parts for specific  Patriot items in advance of anticipated need, although, according to  officials, as a general rule and practice, the depot is not allowed to  purchase items without funding in place. Letterkenny officials told us  that in cases where they are unable to acquire critical parts, or lack the  funds to do so, delays can occur.", "Depot quality controls. Time spent remedying maintenance errors and  quality defects\u2014such as incorrect assemblies, defective parts, or  improper painting during depot operations\u2014may contribute to the  depot\u2019s timeliness challenges. Army officials stressed that the  Patriot system is complex, and certain maintenance tasks can be  challenging because it can be difficult to isolate equipment faults. For  example, the Patriot radar system is composed of thousands of  elements (see fig. 4), which, according to officials, requires extensive  testing to ensure that each element is operational. Depot officials told  us that their processes are designed to ensure that finished products  meet operational standards, and that doing so sometimes takes  longer than expected. Letterkenny uses a series of metrics and  reporting methods, such as internal tracking of defects and surveys  and reports from customers, to monitor, document, and correct quality  defects during the Patriot maintenance process to ensure that any  maintenance errors or defects are identified before the equipment is  returned to units.", "However, quality defects that may affect timeliness can still arise. Each  fiscal year Letterkenny establishes a target for hours spent at the depot  correcting quality defects that arise during maintenance, which are then  tracked and used as indicators of the overall quality of the maintenance  process. As tracked by the depot, the monthly time spent correcting  quality defects varied, when averaged across each year. Specifically, the  average in fiscal year 2015 was below the depot\u2019s set target, but the  averages in fiscal years 2014, 2016, and 2017 exceeded the targets. For  example, the time spent correcting quality defects ranged from 846 hours  a month in fiscal year 2016 to 1,242 hours a month in fiscal year 2017,  above those years\u2019 monthly target of 800 hours.", "Equipment transportation. Transportation time is included in the 180- day policy for returning equipment from reset to Patriot units, and it  often takes a significant amount of time before equipment is  transported to the depot from theater. As such, according to Army  documentation, the depot can be left with only 120 days to complete  reset work before it has to return equipment back to units if it is to  meet the 180-day policy. According to Army documentation, to  mitigate this issue the Army airlifts a number of critical Patriot  equipment items, such as radars, from theater to the depot so that  reset work can begin earlier on these items. Additionally, unit officials  and a program official involved in planning for the Army\u2019s reset  process noted that equipment items are sent back from the depot as  soon as reset work is completed; the depot does not wait until the  entire unit equipment set is complete. However, as shown previously  in figure 2, these kinds of mitigation actions with respect to  transportation have not been sufficient in ensuring that units receive  all of their equipment back within the 180 days allowed by policy."], "subsections": []}, {"section_title": "Army Monitors Factors Affecting Maintenance Timeliness, but Has Not Conducted an Analysis of Their Relative Importance", "paragraphs": ["Although the Army monitors the factors that have affected maintenance  timeliness, it has not conducted an analysis to identify their relative  importance. According to Army documents and officials we interviewed,  the Army monitors and uses a number of processes to identify, discuss,  and select mitigation actions for factors affecting maintenance timeliness,  such as:", "Quarterly working group meetings of Patriot stakeholders. The Army  monitors maintenance timeliness via a quarterly working group, which  includes representatives from key Army Patriot stakeholder  organizations such as Training and Doctrine Command, Aviation and  Missile Command, Letterkenny, and Patriot unit higher command  headquarters. Any timeliness issues discussed at such meetings,  such as potential training impacts and transportation delays, are  conveyed to units afterwards.", "Letterkenny weekly production meetings. Letterkenny command staff  hold weekly production meetings to discuss various issues affecting  maintenance production, identify potential factors that could delay  depot work, and select mitigation measures against such factors.", "Army Materiel Command oversight of Letterkenny production. Army  Materiel Command monitors and tracks Letterkenny\u2019s actual and  projected maintenance performance against the scheduled  completion dates for Patriot maintenance projects, and depot officials  internally review the depot\u2019s performance for each Patriot equipment  item each week before submitting the results to Army commands  monthly.", "Although Army officials are aware of challenges in returning reset  equipment to Patriot units within the 180-day policy and have taken some  steps to minimize these impacts, they could not quantify how much each  of the factors affecting timeliness contributes to delays in completing  maintenance and returning equipment to units. Moreover, based on our  discussions with different stakeholders associated with the sustainment of  the Patriot system, there are different perceptions as to the degree to  which the various factors contributed to delays in completing maintenance  and returning reset equipment to units. For example, during our meetings,  depot officials indicated that supply chain issues were the primary  timeliness challenge. In contrast, a senior program office official and unit  officials emphasized the importance of transportation of equipment and its  effects on timeliness. In addition, Letterkenny and Army stakeholders told  us that while they work to identify and correct issues as they arise through  the processes described above, their efforts to remedy these issues are  conducted in isolation from one another and not compiled and compared  to enable the Army to identify their relative importance in terms of each  factor\u2019s effect on timeliness.", "Although aware of the challenges of returning equipment to units in a  timely manner, the Army has not comprehensively analyzed the relative  importance of the various factors identified above that affect Patriot  maintenance timeliness. Army Regulation 702-11 states that fact-based  decision-making and the use of performance information to foster  continuous improvement are essential activities of quality management  and assurance. Specifically, activities supporting logistics missions  should engage in continued review, evaluation, and improvement. This  regulation further states that Army Material Command, as the manager of  the Army\u2019s quality program, should conduct performance reviews and  assist other applicable organizations in developing corrective action  plans, such as establishing protocols to mitigate risks and prevent  recurrence of issues when nonconforming performance is identified.  Although not required by Army regulation, one means of doing this is  through conducting comprehensive analysis, such as comparing the  relative importance of factors affecting performance in order to target  improvement efforts.", "A comprehensive analysis to identify the relative importance of factors  could better position the Army to fully understand current and historic  issues affecting its ability to complete Patriot equipment maintenance in a  timely manner. Such an understanding would better inform corrective  actions than isolated efforts and would position the Army to determine  where best to target its efforts in order to ensure units receive equipment  back in a timely manner to conduct training."], "subsections": []}]}, {"section_title": "The Army Plans to Recapitalize Patriot Equipment Every 15 Years, but This Approach Introduces Some Challenges", "paragraphs": ["The Army has decided to recapitalize each battalion set of Patriot  equipment once every 15 years, while recognizing that this approach  introduces some challenges to upgrading and supporting the system\u2019s  readiness to meet its assigned missions through 2048. While the Army  would prefer to recapitalize Patriot equipment every 10 years, the Army  has reviewed two options for recapitalizing Patriot equipment more  frequently and determined that these options are not feasible. According  to Army documentation, the Army plans to continue sustaining and  upgrading Patriot equipment to meet its long-term goal\u2014which is to keep  the system viable through 2048\u2014by, for example, improving system  reliability and enhancing its warfighting capabilities. The Army considers  recapitalization a key program to achieve this goal. Specifically, in its  2014 readiness assessment of the Patriot force, the Army concluded that  recapitalization is the single most important program with respect to  keeping Patriot equipment viable and sustainable. Officials from multiple  Army organizations also told us that the age of the Patriot system makes  replacement of expendable and aged components and insertion of new  technology during recapitalization important to Patriot sustainment,  readiness, and its ability to meet emerging threats.", "While the Army has emphasized the importance of recapitalization in  achieving its long-term goals for the Patriot system, the Army is not  planning to adjust its recapitalization pace in the near term, as of March  2018. According to Army documentation, recapitalizing equipment every  10 years would maintain the equipment at the Army\u2019s desired condition.  However, the Army\u2019s near-term schedule for recapitalization in fiscal  years 2018 through 2022 and its long-term notional schedule for  recapitalization of Patriot equipment through fiscal year 2031 both outline  cycling one battalion per year through recapitalization. With 15 Patriot  battalions, the pace of one battalion per year does not restore the  equipment to its desired condition every 10 years.", "According to Army Patriot officials, there are two main options for the  Army to increase the pace of recapitalization, but each of these options  poses challenges. These two options are:", "Reduce the amount of equipment available for ongoing commitments  and recapitalize it at the depot. Officials told us that one way the Army  could increase the pace of recapitalization would be to reduce the  amount of equipment available for ongoing commitments, but that this  is not feasible given the current high pace of operations. Further, the  Army does not anticipate that operational requirements will lessen  under the projected security environment. The near-term schedule  assumes that ongoing operational commitments will not change and is  designed to synchronize recapitalization with currently scheduled  operational deployments and training. Army officials responsible for  coordinating the near-term schedule told us that the near-term  schedule has little flexibility given the Army\u2019s limited force structure of  15 battalions, and program and depot officials stated that if the Army  were to recapitalize more than one battalion per year, the pool of  battalions available to meet these current commitments would  decrease.", "Procure additional equipment to provide to units turning in equipment  for recapitalization. Army officials said that the Army could buy extra  equipment to provide to additional units turning in their equipment for  recapitalization if the Army wanted to accelerate the recapitalization  pace. At the current pace of recapitalization, the Army has sufficient  quantities of major equipment items to ensure that as a Patriot  battalion turns in equipment for recapitalization it receives recently  recapitalized equipment back on a one-to-one basis and thus is  generally not without equipment. This process prevents removing  Patriot battalions from operational rotations during the recapitalization  period. However, officials stated that if the Army were to adjust the  pace to recapitalize more than the current one battalion per year, it  would require buying more equipment to ensure that any additional  units undergoing recapitalization would not be left without equipment.  Army documents indicate that the Army has assessed whether to  acquire additional equipment to enable an accelerated pace of  recapitalization. However, an official with responsibility for the Patriot  capability and senior Army headquarters officials with responsibility for  Patriot resourcing and planning told us that the Army instead has  prioritized developing a replacement for the Patriot radar. This  replacement radar is expected to address capability needs related to  radar reliability and range to better defend against advanced threats.  Army documentation indicates that this replacement radar is expected  to reach initial operational capability in fiscal year 2025.", "If the Army decided to reduce the amount of equipment available for  ongoing commitments or buy more equipment, then the Army would also  need to make additional investments in depot resources to support  accelerating the pace of recapitalization. According to Army documents  and officials we interviewed, these include personnel, facilities, and  equipment. However, there are a number of challenges related to putting  these resources in place.", "Personnel. Army documentation shows and depot officials stated that  they would likely hire contractors to meet workload demands and the  depot could add shifts if the Army decided to adjust the pace of  recapitalization to what it considers an optimal pace. Depot officials  also told us they would try to hire contractors with some Patriot  experience and place them alongside more experienced personnel in  order to preserve work quality, as they have done in response to  previous surges in reset work. However, the Army recognizes that  Letterkenny faces challenges in expanding its workforce due to a  limited pool of available workers in the area around the depot.", "Developing skilled Patriot maintenance personnel is also difficult. An  Army study of the organic industrial base found that 11 of the 15 most  critical personnel positions at Letterkenny are directly associated with  Patriot maintenance and officials noted that, due to the complexity of  the system, it can take up to 5 years for Patriot maintenance  personnel to become proficient.", "Facilities and equipment. Depot officials stated that if the Army  decided to adjust the pace of recapitalization to what it considers  optimal, they would likely need to review, among other things, the  tools, equipment, and facilities needed to support such an adjustment,  as well as supply availability. They also told us that Letterkenny  already has proposed expanding its facilities to meet projected future  work, and the depot has planned for the plant equipment it will need to  continue maintaining the Patriot system as upgrades are incorporated.  However, they noted that it takes a full year to recapitalize the Patriot  radar, including 3 months of testing, and that Letterkenny has one of  only two radar test sites. Given the time required and the single test  site, if the Army wanted to recapitalize more than one battalion a year,  program officials stated that current conditions probably would not  support doing so.", "Continuing the current pace of recapitalization could introduce other  challenges in meeting the Army\u2019s long-term goals for the Patriot system,  and Army officials stated they are aware of these challenges. Specifically,  Army documentation shows, and Army officials told us, that the current  pace is not optimal and that it could introduce the possibility of equipment  failure as specific items remain in use past the Army\u2019s desired timeframe  for recapitalizing equipment every 10 years. Additionally, depot officials  told us that their biggest concern with continuing recapitalization at its  current pace is that there may be increased costs to conduct  recapitalization due to the system\u2019s increasing age. As an example, they  stated that there may be increased corrosion issues, adding that they  have already seen a significant deterioration in the condition of some  trailers. Also, the Army\u2019s decision to continue recapitalizing equipment  every 15 years instead of every 10 years provides fewer opportunities to  conduct modernization, which is often done in conjunction with  recapitalization. Program officials stated that modernizing the system is  important because upgrades reduce the number of items that can fail,  thereby making field maintenance easier. Moreover, officials from one  Patriot brigade stated that their main concern with respect to Patriot is  that additional operational commitments could potentially slow  modernization progress and affect the Army\u2019s capability to meet threats,  particularly since the capabilities and sophistication of enemy threats  continue to increase.", "The Army has reviewed its options and the associated challenges related  to increasing the pace of recapitalization and has decided the best path  forward based on its review is to continue recapitalizing Patriot battalion  equipment sets once every 15 years. However, this pace of  recapitalization includes some risk\u2014as identified by Army officials\u2014and  will likely create challenges in meeting the Army\u2019s long-term goals for the  system."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Maintaining good equipment condition is particularly important given the  current high pace of operations for Patriot units, as well as the potential  for a further increase in operational requirements. However, the Army\u2019s  reset process has often delivered equipment to units late, affecting units\u2019  ability to schedule and execute training as they prepare for their next  mission. The Army is aware of the challenges in completing maintenance  and returning reset equipment to units, and has identified several factors  that contribute to delays, but has not analyzed how much each of the  factors contribute to delays. Unless the Army conducts a comprehensive  analysis of the relative importance of the factors affecting Patriot reset  timeliness and develops and implements appropriate corrective actions to  address the results of the analysis, it will not be positioned to target its  efforts most effectively to take corrective actions."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Secretary of the Army ensure that Army Materiel  Command, in coordination with its subordinate and other Army  organizations as appropriate, conducts a comprehensive analysis of the  primary factors affecting timeliness to identify their relative importance in  the Army\u2019s Patriot reset program and develops and implements  appropriate corrective actions. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["In written comments on a draft of this report, the Department of the Army  concurred with our recommendation. The department stated that it is  taking steps to address the recommendation, noting that it will continue  analysis between Army Materiel Command, Headquarters Department of  the Army, and the Patriot program office to identify and address factors  that may affect reset timeliness. The Department of the Army\u2019s comments  are reprinted in their entirety in appendix II. The department also provided  technical comments, which we incorporated into the report as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretary of the Army. 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) 512-3489 or pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To evaluate the extent to which the Army\u2019s reset process supports the  timely delivery of Patriot equipment back to units, we analyzed Army  documents concerning recapitalization and reset activities. This included  analysis of, among other things, documents describing the processes for  Patriot battalion equipment transfers to and from Letterkenny Army Depot  (Letterkenny), depot activities to recapitalize and reset equipment, and  testing to ensure the equipment\u2019s proper operation. We also reviewed,  among other documents, Army guidance on Patriot equipment status  reporting, reset, materiel maintenance, and on ensuring the quality of  Army programs; as well as planning schedules and documents on  backorders and critical items. We evaluated the Army\u2019s processes to  identify and correct factors causing any reset delays against Army  guidance on program performance improvement.", "Additionally, we analyzed data provided by the Army on Patriot equipment  fully mission capable rates and the timeliness of Army Patriot reset  activities from fiscal years 2014 through 2017\u2014the most recent data  available\u2014to identify any trends. Specifically, we analyzed Patriot unit  fully mission capable data as recorded by Army Aviation and Missile  Command G-3 (Readiness) based on data submitted by Patriot  operational units. We analyzed it to corroborate statements regarding  equipment readiness and the quality of maintenance work made by  program and operational unit officials and to compare against the Army\u2019s  goal for fully mission capable rates. To determine depot timeliness, we  analyzed aggregate monthly data provided by the Army on Letterkenny\u2019s  timeliness in completing Patriot maintenance activities against  performance schedules. We also analyzed Patriot battalion-specific Army  data on reset timeliness in order to determine the frequency with which  Letterkenny met the reset timeliness policy. Finally, we reviewed Army  data on the time spent re-working and re-inspecting equipment with  quality deficiencies found during internal inspections at Letterkenny in  order to inform our assessment of the potential effects of addressing  quality deficiencies on depot timeliness.", "We assessed the reliability of these data by reviewing available system  documentation, such as user manuals and data dictionaries for each of the automated information systems from which the respective data were  drawn. We manually checked the data for obvious errors and missing or  outlier values. We administered data reliability questionnaires to officials  familiar with the data systems and assessed their responses and answers  to follow-up questions, and we interviewed cognizant officials about their  data management practices and use of the data. Based on these steps,  we found these data to be sufficiently reliable for our purposes, to include  providing fiscal years 2014 through 2017 Patriot equipment fully mission  capable rates, battalion-specific reset timeliness, and the time spent by  the depot on correcting quality defects identified during internal  inspections.", "To describe the Army\u2019s plans for supporting the long-term viability of the  Patriot system through recapitalization and any challenges associated  with its plans, we analyzed Army regulations, guidance, and planning  documents, as well as Army studies. These included, among others, the  Army\u2019s recapitalization management policy; Army documents proposing  and approving a recapitalization program for Patriot; Army studies of its  depot workforce, worldwide Patriot equipment readiness, and Patriot  operational demands in relation to available assets; and Army guidance  on materiel maintenance and useful equipment life. We also analyzed,  among other documents, the Army\u2019s near-term schedule synchronizing  Patriot recapitalization, reset, incremental modernization, training, and  deployment schedules for fiscal years 2018 through 2022 and a long-term  notional schedule for the recapitalization of Patriot equipment, by  battalion set, through 2031. We also reviewed depot equipment and  personnel planning documents and the Patriot life-cycle management  plan, among other planning documents.", "For both objectives, we interviewed cognizant Army personnel involved in  the planning and conduct of Patriot recapitalization and reset. We visited  Letterkenny to speak with officials and observe the facilities and the  conduct of Patriot maintenance activities. In addition, we interviewed  officials with responsibility for Patriot funding; for monitoring Patriot unit  readiness; as well as officials from two Patriot battalions that recently underwent reset and their brigade headquarters; and one Patriot battalion  that recently underwent recapitalization and its brigade headquarters to  identify challenges, if any, with respect to these maintenance processes,  such as any training or equipment transfer delays or maintenance  deficiencies. The list of the organizations and offices we interviewed  during the course of our review is below.", "Assistant Secretary of the Army for Acquisition, Logistics, and", "Acquisition Policy and Logistics Group", "Program Executive Office, Missiles and Space, Redstone  Arsenal, Huntsville, Alabama", "Lower Tier Project Office, Redstone Arsenal, Huntsville,", "Headquarters, Department of the Army", "G-3, Readiness Directorate", "G-4, Logistics Maintenance Directorate: G-44 (M) Maintenance", "G-4, 3/5/7, Current Operations and Strategic Readiness Division", "G-8, Programs and Priorities, Fires Division", "Army Aviation and Missile Life Cycle Management Command,  Redstone Arsenal, Huntsville, Alabama", "Army Aviation and Missile Command Logistics Center,  Redstone Arsenal, Huntsville, Alabama", "Letterkenny Army Depot, Chambersburg, Pennsylvania", "32nd Army Air and Missile Defense Command, Fort Bliss, Texas", "11th Air Defense Artillery Brigade, Fort Bliss, Texas", "3-43 Air Defense Artillery Battalion, 11th Air Defense Artillery  Brigade, Fort Bliss, Texas", "31st Air Defense Artillery Brigade, Fort Sill, Oklahoma", "3-2 Air Defense Artillery Battalion, 31st Air Defense Artillery  Brigade, Fort Sill, Oklahoma", "4-3 Air Defense Artillery Battalion, 31st Air Defense Artillery  Brigade, Fort Sill, Oklahoma", "U.S. Army Training and Doctrine Command", "Fires Center of Excellence, Fort Sill, Oklahoma", "Training and Doctrine Command Capability Manager \u2013 Army Air  and Missile Defense Command, Fort Sill, Oklahoma  We conducted this performance audit from June 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of the Army", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": ["Appendix III: GAO Contact and Staff  Acknowledgments Error! No text of specified style in document."], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals who made key  contributions to this report include Kevin O\u2019Neill, Assistant Director; Jason  Blake, Vincent Buquicchio, Clarice Ransom, Michael Silver, Erik Wilkins- McKee, and Matthew Young."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-522", "url": "https://www.gao.gov/products/GAO-18-522", "title": "Securities Regulation: SEC Inspections of Financial Industry Regulatory Authority's Governance Were Consistent with Internal Guidance", "published_date": "2018-07-18T00:00:00", "released_date": "2018-07-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The securities industry is generally regulated by a combination of federal and industry oversight. FINRA, a self-regulatory organization, is responsible for regulating securities firms doing business with the public in the United States. SEC oversees FINRA's operations and programs.", "Section 964 of the Dodd-Frank Act includes a provision for GAO, following an initial report, to triennially review and report on aspects of SEC's oversight of FINRA. GAO issued its first report in May 2012 ( GAO-12-625 ) and its second report in April 2015 ( GAO-15-376 ).", "This report (1) determines if SEC's oversight of FINRA included the 10 areas specified in Section 964 of the Dodd-Frank Act and (2) evaluates the extent to which selected SEC internal guidance for examinations of FINRA follows generally accepted government auditing standards and the extent to which SEC's examinations of FINRA's governance practices followed SEC internal guidance. GAO reviewed all SEC examinations relating to a Section 964 area completed since fiscal year 2015 (including five that were governance-related), reviewed certain SEC procedures used to examine self-regulatory organizations against Government Auditing Standards , and compared completed inspections against SEC guidance. GAO also interviewed SEC and FINRA staff."]}, {"section_title": "What GAO Found", "paragraphs": ["Since fiscal year 2015, Securities and Exchange Commission (SEC) examinations of the Financial Industry Regulatory Authority, Inc. (FINRA) covered each of the 10 areas specified in Section 964 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), such as governance, funding, and transparency. The most commonly covered area was FINRA examinations of its members.", "Selected SEC guidance used to examine FINRA, including requirements for planning, prefieldwork scoping, and communicating findings, was consistent with generally accepted government auditing standards, and SEC inspections of FINRA were consistent with SEC's guidance. The five governance-related inspections of FINRA that GAO reviewed were consistent with SEC guidance for planning examinations and communicating findings (see fig.). Not all the requirements were applicable (because in certain instances completion of one requirement eliminated the need to satisfy others)."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations. SEC agreed with GAO's findings."]}], "report": [{"section_title": "Letter", "paragraphs": ["The securities industry is generally regulated by direct Securities and  Exchange Commission (SEC) regulation and industry self-regulation with  SEC oversight. Self-regulatory organizations (SRO), such as national  securities exchanges and associations, perform much of the day-to-day  oversight of the securities markets. SROs are primarily responsible for  establishing standards under which members conduct business;  monitoring the conduct of business; and bringing disciplinary actions  against members for violating applicable federal statutes, SEC rules, and  SRO rules. SEC oversees SROs to ensure that they carry out their  regulatory responsibilities.", "The Financial Industry Regulatory Authority, Inc. (FINRA) is an SRO  registered with SEC as a national securities association. All securities  broker-dealers doing business with the public in the United States\u2014 approximately 3,700 firms with 630,000 brokers\u2014must be registered with  FINRA. Among other activities, FINRA writes rules to govern these firms  and their representatives, examines for and enforces broker-dealer  compliance with FINRA rules and federal securities laws, and conducts  surveillance of the over-the-counter securities market. FINRA also  provides regulatory services to other SROs\u2014specifically, U.S. equities  and options exchanges. Through its relationships with exchanges, FINRA  conducts market surveillance on more than 99 percent of U.S.-listed  equities and 50 percent of U.S.-listed options. Given the scope of  FINRA\u2019s regulatory responsibilities, ensuring that it carries out these  responsibilities is critical to SEC\u2019s mission to protect investors; maintain  fair, orderly, and efficient markets; and facilitate capital formation.", "Section 964 of the Dodd-Frank Wall Street Reform and Consumer  Protection Act (Dodd-Frank Act) includes a provision for GAO to evaluate  SEC\u2019s oversight of national securities associations registered under  Section 15A of the Securities Exchange Act of 1934 (Exchange Act), a  provision that currently applies to FINRA. Specifically, Section 964  identifies 10 aspects of SEC\u2019s oversight of FINRA for our review:  1.  Governance of FINRA, including the identification and management of  conflicts of interest.  2.  Examinations performed by FINRA, including the expertise of  examiners.  3.  Executive compensation practices of FINRA.  4.  Arbitration services provided by FINRA.  5.  Reviews performed by FINRA of advertising by its members.  6.  Cooperation with and assistance to state securities regulators by  FINRA.  7.  Use of funding to support FINRA\u2019s mission, including the methods and  sufficiency of funding, how FINRA invests funds pending use, and the  impact of these aspects on FINRA\u2019s regulatory enforcement.  8.  Policies on the employment of former employees of FINRA by  regulated entities.  9.  Effectiveness of FINRA\u2019s rules.  10. Transparency of FINRA\u2019s governance and activities.", "Section 964 also specified that GAO was to conduct an initial review no  later than 2 years after the enactment of the Dodd-Frank Act and every 3  years thereafter. We issued our first report in 2012 and the second in  2015. The first report examined how SEC conducted oversight of FINRA  and planned to enhance such oversight and the second report included  an examination of SEC\u2019s implementation of a risk-based framework for  overseeing FINRA.", "This report generally focuses on SEC oversight of FINRA\u2019s governance.  Specifically, this report (1) determines if SEC oversight of FINRA  operations and programs since fiscal year 2015 included the 10 areas  specified in Section 964 of the Dodd-Frank Act, (2) evaluates the extent  to which selected SEC internal guidance on conducting examinations of  FINRA follows generally accepted government auditing standards, and  (3) evaluates the extent to which SEC examinations of FINRA\u2019s  governance practices followed SEC\u2019s internal guidelines.", "To assess SEC oversight of FINRA since fiscal year 2015 as it relates to  Section 964 areas, we requested and reviewed materials for SEC  examinations (a term we use to include program inspections,  examinations, and oversight activities stemming from tips and referrals)  that addressed those areas. To determine the extent to which selected  SEC internal guidance for FINRA examinations followed generally  accepted government auditing standards, we compared the current  version of SEC\u2019s internal guidance (examination manual) to an earlier  version that we previously determined had done so. Any differences or  additions were then assessed for compliance with government auditing  standards. To determine the extent to which SEC\u2019s program inspections  of FINRA\u2019s governance (in fiscal years 2015\u20132017) followed SEC\u2019s  internal guidance, we compared SEC internal guidance (examination  manual) with examination documents that included scope memorandums,  letters to FINRA describing any deficiencies found, and closing letters to  the file explaining disposition of examinations. We only reviewed the  extent to which examinations followed specified guidelines and did not  evaluate the analysis, findings, or disposition of the examinations. We  also interviewed SEC staff about the examination process and  documentation requirements.", "We conducted this performance audit from November 2017 to July 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "SEC Examinations of FINRA", "paragraphs": ["The Office of Compliance Inspections and Examinations (OCIE)  administers SEC\u2019s nationwide examination and inspection program for  registered SROs, broker-dealers, transfer agents, clearing agencies,  investment companies, and investment advisers. OCIE conducts  examinations and inspections to improve compliance, prevent fraud,  monitor risk, and inform policy. Individual groups in OCIE have oversight  responsibility for the various registered entities. The FINRA and  Securities Industry Oversight (FSIO) program within OCIE performs  examinations of FINRA and the Municipal Securities Rulemaking Board,  an SRO that regulates the municipal bond market.", "As part of its FINRA oversight activities, FSIO conducts four types of  reviews that may involve Section 964 areas.", "Program inspections are reviews of FINRA operations and program  areas (for example, FINRA\u2019s review of applications by broker-dealers  seeking to become members).", "Oversight examinations are single, stand-alone examinations of  specific examinations that FINRA conducts of its member firms. FSIO  initiates an oversight examination when its examinations of a broker- dealer find deficiencies FSIO believes should have been identified by  FINRA in its own examination of the broker-dealer.", "Thematic oversight examinations are a series of oversight  examinations that evaluate FINRA\u2019s review of a particular regulatory  area across a number of its member firms.", "Tips, complaints, and referrals are allegations or statements of  concern about possible violations of securities laws or risky conduct  received by SEC. FSIO reviews FINRA-related tips, complaints, and  referrals by evaluating facts and circumstances and conducting  background research. The reviews may result in FINRA-related  inspections or examinations or may be used for inspection planning  purposes.", "To help identify the FINRA programs and topics that it will review, FSIO  uses a risk-based approach that includes an annual assessment of high- risk areas and consideration of the areas specified in Section 964.  According to SEC staff, FSIO also conducts ongoing monitoring of  FINRA\u2019s activities through reviews of information provided by FINRA and  meetings with FINRA officials."], "subsections": []}, {"section_title": "Standards Useful for Assessing Examination Policies and Procedures", "paragraphs": ["Generally accepted government auditing standards define performance  audits as those that provide findings or conclusions based on an  evaluation of sufficient, appropriate evidence against criteria.  Performance audit objectives can include assessments of program  effectiveness, economy, and efficiency; internal control; compliance; and  prospective analyses.", "SEC\u2019s examinations of SROs share many of the attributes of performance  audits, including their objectives. For example, examinations (including  inspections) of FINRA enable FSIO staff to evaluate compliance with  applicable laws and regulations; FINRA rules, regulations, or by-laws; or  both. Although SEC is not required to follow the auditing standards when  examining SROs, these standards and guidance provide a framework for  conducting high-quality reviews that can serve as useful criteria in  evaluating a regulatory agency\u2019s examination or inspection programs.", "Areas of generally accepted government auditing standards relevant to  SRO examinations include independence, competence, quality control  and assurance, planning, supervision, evidence, documentation, and  reporting:  Independence refers to the audit organization and individual auditor\u2019s  need to be independent and include documentation proving  independence.", "Competence refers to the extent to which audit staff collectively  should possess adequate professional competence and technical  knowledge, skills, and expertise.", "Quality control and assurance refers to a system of quality control that  an organization should establish that is designed to provide the  organization with reasonable assurance that its personnel comply with  professional standards and legal requirements.", "Planning includes creating a written audit plan for each audit.", "Supervision requirements include sufficient guidance and direction to  the staff assigned to the audit to address the audit objectives and  follow applicable requirements, while staying informed about  significant problems encountered, reviewing the work performed, and  providing effective on-the-job training.", "Evidence refers to sufficient, appropriate evidence to provide a  reasonable basis for the auditor\u2019s findings and conclusions.", "Audit documentation requirements state that auditors must prepare  documentation related to planning, conducting, and reporting for each  audit.", "Finally, communication of the results entails auditors issuing audit  reports."], "subsections": []}]}, {"section_title": "SEC\u2019s FINRA Oversight Activities Covered Key Areas Identified in the Dodd- Frank Act", "paragraphs": ["Since fiscal year 2015, SEC examinations related to FINRA included  reviews of all areas identified in Section 964. We determined that FSIO  completed at least one examination covering each of the Section 964  areas since fiscal year 2015 (see table 1). In total, FSIO began or  completed 61 examinations (program inspections, oversight  examinations, and thematic oversight examinations) related to FINRA  programs and operations in that period. Some examinations evaluated  other aspects of FINRA\u2019s programs and operations (those not specifically  identified in Section 964), such as market surveillance and restitution for  harmed investors.", "FSIO examinations either focused on a single Section 964 area or  considered multiple areas.", "Some examinations focused specifically on a single Section 964 area.", "For example, in 2017 FSIO reviewed FINRA\u2019s arbitration program,  which provides retail investors a venue for resolving disputes with  their brokers.", "Other examinations considered one or more of the areas as part of a  broader scope. For instance, a program inspection completed in 2016  touched on FINRA\u2019s arbitration services, cooperation with state  securities regulators, transparency, and other topics. Another program  inspection involved governance, policies on former employees, and  other topics.", "FSIO examinations most frequently covered FINRA examinations (41  of 61). Nearly all of the oversight examinations reviewed at least some  aspect of FINRA examinations. In two cases, the oversight  examinations also covered another area\u2014review of advertising by  FINRA members."], "subsections": []}, {"section_title": "Selected Guidance Used for FINRA Governance Inspections Generally Was Consistent with Relevant Auditing Standards", "paragraphs": ["We found that OCIE policies and procedures used for examining FINRA  since fiscal year 2015 generally were consistent with the requirements of  generally accepted government auditing standards. SEC uses an  examination manual to conduct its SRO examinations. We previously  found that OCIE policies and procedures (including the prior version of  the manual) generally were consistent with the requirements of the  auditing standards that we determined were most relevant to assessing  examination policies and procedures: independence, competence, quality  control and assurance, planning, supervision, evidence, documentation,  and reporting.", "We compared the current and prior versions of the examination manual.  More specifically, we selected requirements for planning, prefieldwork  scoping, and communicating findings from the current manual and  compared those with similar sections in the prior version of the manual.  We found that the new version includes the same material as the prior  version while also incorporating additional guidance in certain areas. The  planning section of the current version includes two additional  requirements on the inclusion of non-National Examination Program  staff. The communicating findings section of the current version  included two additional requirements related to extensions of time to  respond to disposition letters. Two of the four additional requirements  were generally consistent with government auditing standards, and the  remaining two additional requirements were minor adjustments that did  not materially change the requirements. Therefore, we deemed the  selected sections of the current version of the manual to also be  consistent with the auditing standards."], "subsections": []}, {"section_title": "Inspections of FINRA Governance Were Consistent with SEC Internal Guidance", "paragraphs": ["OCIE (and from 2016, FSIO) program inspections of FINRA governance  in fiscal years 2015\u20132017 were consistent with internal examination  guidance. OCIE identified five inspections in that period that related to  FINRA governance. Each of the inspections focused on one of the  following areas: (1) code of conduct, (2) executive and employee  compensation practices, (3) investment portfolio, (4) compliance resource  provider program, and (5) the funding mechanism for its regulatory  services agreement.", "FINRA\u2019s code of conduct imposes restrictions on employees\u2019  investments and requires financial disclosures that are uniquely  related to its role as a securities regulator. The code also outlines  FINRA\u2019s ethical commitments and expectations and provides  guidance on what employees must do to meet them.", "FINRA\u2019s executive and employee compensation practices consist of  salary and incentive compensation determined by FINRA\u2019s  Management Compensation Committee using operational, strategic,  and financial factors, in addition to individual performance.", "FINRA\u2019s investment portfolio is governed by a policy based on the  degree of risk appropriate for FINRA assets, as applied by its board to  its investment objectives.", "In the compliance resource provider program, FINRA worked with  organizations to offer firms compliance-related products and services  at a discounted price or with additional features. According to FINRA  staff, this program was discontinued in May 2017 and replaced with  FINRA\u2019s Compliance Vendor Directory.", "FINRA\u2019s regulatory service agreements are designed to provide  market surveillance, financial surveillance, examinations,  investigations, and disciplinary services to other entities, including the  New York Stock Exchange LLC and the Chicago Board Options  Exchange.", "For our review, we judgmentally selected the most relevant requirements  from the section of the examination manual related to planning  inspections and the most relevant requirements from the section of the manual related to communicating inspection findings to determine if OCIE  conducted the inspections in accordance with its guidance.", "The planning section covers planning examinations and prefieldwork  scoping and requires the examination team to discuss the results of  background research and determine an appropriate scope for the  examination as early as possible.", "The communicating findings section requires entities to be provided  with timely and concise communications on the results. It also  discusses how examination staff should take further actions for those  findings that could involve notifications to other regulators.", "We reviewed relevant inspection-related documentation (including scope  memorandums, disposition letters, emails, and information extracted from  an examination database) and compared them against the selected  requirements to determine if the guidance was followed. We tallied our  results with a scorecard methodology (see fig. 1).", "We found that all five inspections we reviewed met all requirements  applicable to that particular inspection. For example, across all the  inspections, OCIE examiners held prefieldwork meetings and  documented and received approval for the scope of the examinations.  Additionally, all five inspections met the required 180-day completion  deadline and closed the inspection with a disposition letter. In cases in  which requirements were not applicable, the reasons generally were that  a triggering event had not occurred and no further action was needed. For  instance, the scope was not modified in any of the inspections, so the  requirement for approval of such modifications did not apply.  Furthermore, none of the inspections included non-National Examination  Program staff (such as personnel from SEC\u2019s Enforcement Division), and  so requirements surrounding participation by those groups did not apply."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to SEC for their review and comment. In  its comment letter, which is reprinted in appendix II, SEC concurred with  our findings and appreciated our attention to the issues discussed in the  report. SEC also provided technical comments on the draft report, which  we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Securities and Exchange Commission, the Financial  Industry Regulatory Authority, Inc., and other interested parties. In  addition, this report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or clementsm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) determines if the Securities and Exchange Commission\u2019s  (SEC) oversight of the Financial Industry Regulatory Authority, Inc.\u2019s  (FINRA) operations and programs since fiscal year 2015 included the 10  areas specified in Section 964 of the Dodd\u2013Frank Wall Street Reform and  Consumer Protection Act (Dodd-Frank Act), (2) evaluates the extent to  which selected SEC internal guidance on conducting examinations of  FINRA follows generally accepted government auditing standards, and  (3) evaluates the extent to which examinations of FINRA\u2019s governance  practices followed SEC\u2019s internal guidance.", "To assess whether oversight of FINRA by SEC\u2019s Office of Compliance  Inspections and Examinations (OCIE) included the Section 964 areas, we  requested and reviewed documentation for all examinations since fiscal  year 2015 (from October 2014 through April 2018) that OCIE staff  identified as relating to Section 964 areas. We use the term  \u201cexamination\u201d to include program inspections, two types of oversight  examinations, and oversight activities stemming from tips and referrals.  The documentation included scope memorandums, deficiency letters, and  closing letters to the file for OCIE examinations. We evaluated whether  the documentation indicated that an examination\u2019s scope and findings  covered one or more Section 964 areas or included other areas related to  FINRA oversight that were not specified in Section 964.", "To determine the extent to which OCIE\u2019s internal guidance on conducting  examinations of FINRA followed generally accepted government auditing  standards, we compared SEC\u2019s examination manual against generally  accepted auditing standards. We reviewed selected sections of the  current version of the manual and the earlier version. We judgmentally  selected the two sections that most directly related to our focus on self- regulatory organization (SRO) inspections, which focused on preparing  for examinations and communicating examination findings. Other areas of  the examination manual that were not relevant focused on administration  and organizational issues. We relied on our work that found that the  earlier version of the manual followed the auditing standards and also  interviewed pertinent staff within OCIE to discuss the guidance and why it  did or did not include certain elements. We analyzed any differences  between the versions to determine whether changes or additions in the  current version of the manual also followed auditing standards. In  addition, we interviewed FINRA staff to gain a general understanding of  how OCIE staff work with them to conduct examinations.", "To determine the extent to which OCIE\u2019s program inspections of FINRA\u2019s  governance in fiscal years 2015\u20132017 followed OCIE\u2019s internal guidance,  we used a scorecard methodology to compare inspections of FINRA\u2019s  governance with the examination manual and draft updates. We only  reviewed the extent to which examinations followed specified guidelines  and did not evaluate the analysis, findings, or disposition of the  examinations. We created a checklist of relevant elements from the  examination manual by judgmentally selecting 6 requirements from the  planning inspections section of the manual and 11 requirements from the  communicating findings section of the manual that were most applicable  to our focus on the actual SRO inspection process. Other requirements  that we deemed less relevant include examinations of exempt reporting  advisers and the process for approving examination documents.", "The planning section of the manual covers planning examinations and  prefieldwork scoping and requires the examination team to discuss  the results of background research and determine an appropriate  scope for the examination as early as possible.", "The communication of examination findings section requires entities  to be provided with timely and concise communications on the results.  It also discusses how examination staff should take further actions for  those findings that could involve notifications to other regulators.", "We then reviewed different types of inspection-related documentation to  determine whether the guidance was followed. For instance, we assessed  certain inspection requirements, such as compliance with changing the  scope of the inspection, based on formal written documentation such as  scope memorandums and disposition letters. We assessed other  requirements (such as whether prefieldwork team meetings were held)  based on informal documentation, such as email appointments. We also  relied on other internal documentation, which included the examination  tracking database, which is used to certify compliance with a requirement  to complete an inspection within 180 days from the completion of audit  work.", "Two analysts then independently compared the elements against  documentation for the five OCIE inspections to determine the extent to  which the inspections documented the requirements outlined in the  examination manual. Analysts assigned a rating of \u201cyes\u201d if the element  was found in the inspection materials we reviewed, \u201cno\u201d if there was no  mention of the element in the inspection materials we reviewed, \u201cpartially\u201d  if the element was not fully addressed in the inspection materials we  reviewed, and \u201cn/a\u201d if the element was not applicable to the inspection.  We also interviewed pertinent staff within OCIE to discuss the guidance  and why it did or did not include certain elements.", "We conducted this performance audit from November 2017 to July 2018  in accordance with generally accepted government auditing standards.  These 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Securities and Exchange Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karen Tremba (Assistant  Director), Jon D. Menaster (Analyst in Charge), Kevin Averyt, Farrah  Graham, Marc Molino, Akiko Ohnuma, Barbara Roesmann, and Jessica  Sandler made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-290", "url": "https://www.gao.gov/products/GAO-18-290", "title": "Science, Technology, Engineering, and Mathematics Education: Actions Needed to Better Assess the Federal Investment", "published_date": "2018-03-23T00:00:00", "released_date": "2018-03-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Education programs in STEM fields are intended to enhance the nation's global competitiveness. GAO reported in 2012 that there were more than 200 federal STEM education programs in fiscal year 2010. Since then, this portfolio of programs has changed. GAO was asked to review the landscape of federal STEM education programs.", "This report examines (1) how the federal investment in STEM education programs changed from 2010 to 2016, and (2) the extent to which the STEM education portfolio has been assessed.To answer these questions, GAO administered a web-based questionnaire to all federal STEM education programs funded in fiscal year 2016 and analyzed the results. GAO also reviewed relevant federal laws and agency documents, examined the implementation of relevant assessment requirements, and interviewed officials from relevant federal agencies."]}, {"section_title": "What GAO Found", "paragraphs": ["The federal investment in science, technology, engineering, and mathematics (STEM) education programs remained relatively stable from fiscal years 2010 to 2016, although the number of programs declined from 209 to 163 (see figure). While agencies reported that many of the same STEM education programs existed during this time period, the portfolio underwent various changes, including program consolidations, creations, and terminations. Nearly all STEM education programs in fiscal year 2016 overlapped to some degree with at least one other program in that they offered similar services to similar groups in similar STEM fields to achieve similar objectives. The Committee on STEM Education, an interagency body responsible for implementing the federal STEM education strategic plan, reported it managed this overlap through coordination with agencies administering these programs.", "The Committee on STEM Education has not fully met its responsibilities to assess the federal STEM education portfolio. Specifically, the Committee has not reviewed programs' performance assessments, as required by its authorizing charter, nor has it documented those assessments in its inventory, as required by law. Such efforts could encourage the use of evidenced-based practices across the portfolio\u2014a key national goal of the STEM education strategic plan. These efforts could also enhance public awareness of the administering agencies' efforts to assess programs' performance. In addition, the Committee has not reported the participation rates of underrepresented groups in federal STEM education programs, as required by law. By reporting this information, the Committee could better assess whether programs are broadening access to groups historically underrepresented in STEM fields\u2014another key goal of the strategic plan."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including three to the Committee on STEM Education to review performance assessments of STEM education programs, document those assessments, and report programs' participation rates of underrepresented groups. The Committee on STEM Education agreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Education programs in science, technology, engineering, and  mathematics (STEM) play an important role by preparing students for  careers in STEM fields and are intended to enhance the nation\u2019s global  competitiveness. Various levels of government foster STEM education, as  do other stakeholders, including institutions of higher education,  professional and scientific societies, and private industries. In 2012, we  reported that more than 200 federal STEM education programs across 13  different agencies spent more than $3 billion in fiscal year 2010. We also  found a high degree of overlap among those programs and made several  recommendations to improve their coordination and management. You  asked us to review the current landscape of federal STEM education  programs. This report examines: 1) how the federal investment in STEM  education programs changed from 2010 to 2016, and 2) to what extent  the STEM education portfolio has been assessed.", "To gather information on how the federal investment in STEM education  changed from 2010 to 2016, we administered a web-based questionnaire  to STEM education programs funded in fiscal year 2016. We identified  these programs based on input from the 13 agencies that administered  the STEM education programs we previously reported for fiscal year  2010. Program officials provided information on all 163 programs funded  in fiscal year 2016 that we determined met our definition of a STEM  education program. For more information on our definition, program  identification, and data collection, see appendix I. The questionnaire  solicited information on the programs\u2019 objectives, groups served, services  provided, and spending, among other things, and we analyzed program  officials\u2019 responses. We used this information to gauge the level of  overlap among programs funded in fiscal year 2016. We also compared  the results to similar data previously collected for programs funded in  fiscal year 2010.", "To understand the extent to which the federal programs within the STEM  education portfolio had been assessed, we reviewed the requirements in  the America COMPETES Reauthorization Act of 2010 (COMPETES Act)  regarding federal STEM education program assessment. Subsequently,  we examined the information produced to fulfill these requirements,  including a strategic plan and annual progress reports. We sent our initial  determination of whether these COMPETES Act requirements had been  fulfilled to the entities responsible for implementing them and solicited  their views. We obtained a response from the Office of Science and  Technology Policy as to whether the requirements had been fulfilled and  considered any additional information the agencies provided in finalizing  our analysis. In addition, we reviewed the assessment responsibilities of  the Committee on STEM Education as specified in its authorizing charter  and examined its efforts to meet those responsibilities. Further, we  conducted a limited review to test whether program assessment  information was routinely contained within agency budget documents. In  response to our questionnaire, program officials reported that 73 of the  163 STEM education programs had been evaluated since fiscal year  2010. From those 73, we randomly selected a nongeneralizable sample  of 10 STEM education programs\u2014one from each agency that reported it  had evaluated at least one of its STEM education programs recently. We  then searched for supporting information within the agencies\u2019 budget  documents.", "In addition, we interviewed officials responsible for coordinating federal  STEM education efforts from the National Science Foundation and the  Office of Science and Technology Policy. We also interviewed officials  from the Office of Management and Budget and other federal agencies  leading strategic interagency efforts on STEM education, including the  National Aeronautics and Space Administration, the Departments of  Education, Energy, Health and Human Services, and the Smithsonian  Institution. Further, to inform both of our objectives, we reviewed relevant  federal laws and regulations as well as reports on STEM education.", "We conducted this performance audit from October 2016 to March 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "STEM Education", "paragraphs": ["The term \u201cSTEM education\u201d includes educational activities across all  grade levels\u2014from preschool to graduate school. STEM education  programs have a variety of primary objectives, which include preparing  students for STEM coursework, providing postsecondary students with  grants or fellowships in STEM fields, and improving STEM teacher  training (see appendix I for our definition of STEM education programs).", "Federal STEM education programs have been created in two ways\u2014 either by law or by federal agencies under their statutory authorities.", "We previously reported that most federal STEM education programs  overlapped to some degree with at least one other program, in that they  offered similar services to similar groups in similar STEM fields to achieve  similar objectives (see sidebar for definition of overlap).", "Duplication occurs when two or more  agencies or programs are engaged in  the same activities or provide the same  services to the same beneficiaries.", "Overlap occurs when multiple agencies  or programs have similar goals, engage  in similar activities or strategies to  achieve their goals, or aim to serve  similar beneficiaries.  Fragmentation refers to those  circumstances in which more than  one federal agency (or more than one  organization within an agency) is  involved in the same broad area of  national need and opportunities exist  to improve service delivery.", "Although those programs may not be duplicative, we reported that they  were similar enough that they needed to be well coordinated and guided  by a robust strategic plan. And, through its strategic planning and other  coordination efforts, the Office of Science and Technology Policy and the  National Science and Technology Council implemented our  recommendations to work with agencies to better align their activities with  a government-wide strategy; develop a plan for sustained coordination;  identify programs for potential consolidation or elimination; and assist  agencies in determining how to better evaluate their programs."], "subsections": []}, {"section_title": "America COMPETES Reauthorization Act of 2010", "paragraphs": ["Enacted in 2007, the America COMPETES Act authorized several  programs to promote STEM education. The America COMPETES  Reauthorization Act of 2010 (COMPETES Act) reauthorized the America  COMPETES Act and addresses coordination and oversight issues,  including those associated with the coordination and potential duplication  of federal STEM education efforts. The COMPETES Act required the  Director of the Office of Science and Technology Policy to establish,  under the National Science and Technology Council, the Committee on  STEM Education to serve as the interagency coordination body for STEM  education in the federal government (see fig. 1).", "In May 2013, the Committee on STEM Education issued a 5-year  Strategic Plan for federal STEM education efforts, as required by the  COMPETES Act. To improve collaboration across the portfolio, the  Strategic Plan identified five priority investment areas and two  coordination objectives, specifying national goals for each (see fig. 2).", "The COMPETES Act also requires that the Committee create, and  periodically update, an inventory of federal STEM education programs  that includes documentation of program assessments and the  participation rates of women, underrepresented minorities, and persons in  rural areas.", "In addition, the COMPETES Act requires that the Office of Science and  Technology Policy publish annual reports on coordinating federal STEM  education efforts. The law mandates that these reports include specific  information, such as: a description of each federal agency\u2019s STEM education programs  funded in the previous and current fiscal years, as well as those  proposed under the President\u2019s budget request;  the levels of funding for each participating federal agency\u2019s programs  described above; an evaluation of the levels of duplication and fragmentation of the  programs described above; and a description of the progress made implementing the Strategic Plan,  including a description of the outcome of any program assessments  completed in the previous year, and any changes made to the  Strategic Plan since the previous annual report.", "In January 2017, the President signed into law the American Innovation  and Competitiveness Act, which, among other things, amended certain  provisions of the COMPETES Act. The Act added some requirements  for both the Office of Science and Technology Policy and the Committee  on STEM Education. For example, it created new mandates for the  Committee to:  review the measures federal agencies use to evaluate their STEM  education programs, and make recommendations for reforming, terminating, or consolidating  the federal STEM portfolio.", "Any such recommendations for an upcoming fiscal year are to be  included in the Office of Science and Technology Policy\u2019s annual report."], "subsections": []}, {"section_title": "Cross-agency Priority Goal on STEM Education", "paragraphs": ["In 2014, the Office of Management and Budget, in consultation with the  federal agencies that administer STEM education programs, established  STEM education as a cross-agency priority goal. The Office of Science  and Technology Policy and the National Science Foundation led the  oversight and management of this goal, and as part of this work, goal  leaders from these agencies identified milestones that aligned with the  Strategic Plan\u2019s priority investment areas and coordination objectives  (see fig. 2). For example, goal leaders reported progress toward meeting  key milestones associated with improving STEM instruction. In 2017, to  ensure alignment with the current administration\u2019s priorities, the Office of  Management and Budget removed the priority status of all cross-agency  priority goals, including STEM education; this ended the required public  issuance of quarterly priority goal reports. The STEM Education goal\u2019s  final quarterly progress report was issued at the end of fiscal year 2016."], "subsections": []}, {"section_title": "Other Data and Transparency Requirements", "paragraphs": ["Other government-wide efforts are underway to improve the transparency  around federal programs in general. These efforts are not directed at the  STEM education programs specifically, but may assist in managing the  STEM education portfolio. The GPRA Modernization Act of 2010 requires  the Office of Management and Budget to present a coherent inventory of  all federal programs by making information about each federal program  available on a website. However, we previously reported that, because  agencies used different approaches to define their programs,  comparability of programs within and across agencies on this inventory  was limited. We recently identified a potential framework for the  development of a useful federal program inventory. The Office of  Management and Budget decided to postpone further development of the  inventory in order to coordinate with the implementation of related  requirements of the Digital Accountability and Transparency Act of  2014. Once fully implemented, this act is expected to expand the types  and transparency of public information on federal spending to make it  easier to track it to specific federal programs. The act requires  government-wide reporting on a greater variety of data related to federal  spending, such as budget and financial information, as well as tracking of  these data at multiple points in the federal spending lifecycle."], "subsections": []}]}, {"section_title": "From 2010 to 2016, the Number of STEM Education Programs Decreased While Spending Remained Stable, and Most Programs Continued to Overlap", "paragraphs": [], "subsections": [{"section_title": "Agencies Reported Fewer STEM Education Programs and Relatively Stable Levels of Spending in Fiscal Year 2016 Compared to Fiscal Year 2010", "paragraphs": ["Program officials from the 13 federal agencies that administer STEM  education programs reported a total of 163 STEM education programs in  fiscal year 2016, compared to 209 programs in fiscal year 2010. Three  agencies\u2014the Department of Energy, the Department of Health and  Human Services, and the National Science Foundation\u2014administered  more than half of all STEM education programs in fiscal years 2010 and  2016.", "Despite collectively reporting fewer STEM education programs, program  officials responding to our questionnaire reported spending about the  same amount in fiscal year 2016 as they did in fiscal year 2010. In fiscal  year 2016, program officials reported spending about $2.9 billion on the  163 programs. Spending by individual programs ranged from about  $14,000 annually to hundreds of millions of dollars. The National  Science Foundation and the Department of Health and Human Services  programs account for about 60 percent of this spending. Figure 3  provides an agency-level summary of the number of programs and their  reported spending. Appendix II contains a complete list of the 163 STEM  education programs and their reported spending for fiscal year 2016.", "While agencies reported many of the same STEM education programs in  fiscal years 2010 and 2016, the federal portfolio evolved in various ways.  About half of the 209 programs previously reported for fiscal year 2010  were reported again for fiscal year 2016\u2014accounting for about two-thirds  (109 programs) of the fiscal year 2016 portfolio. The remaining third (54  programs) were newly reported for fiscal year 2016. (See appendix I for  more information on changes to the STEM portfolio between fiscal years  2010 and 2016.)", "The portfolio underwent various changes from fiscal years 2010 to 2016,  including program consolidations, creations, and terminations.  According to leadership of the Committee on STEM Education, these  changes were due to many factors. One key factor is the STEM  Education Strategic Plan, which, among other things, calls for greater  efficiency and cohesion across federal STEM education programs. Other  factors include agencies\u2019 individual priorities, including their mission and  budget, and congressional interest in specific programs. For example,  agencies reported:", "Consolidations. Starting in 2014, for greater efficiency and cohesion,  the National Science Foundation consolidated a number of related  undergraduate STEM education programs, including STEM Talent  Expansion Programs, Transforming Undergrad Education in STEM,  and Nanotechnology Undergraduate Education in Engineering.", "Creations. Department of Health and Human Services officials  reported administering 28 new STEM education programs. These  programs are housed in the Department\u2019s National Institutes of  Health, which generally bases its funding decisions on scientific  opportunities and its own peer review process. One new program is  the Building Infrastructure Leading to Diversity Initiative. This program  supports undergraduate institutions in implementing and studying  approaches to engaging and retaining students from diverse  backgrounds in biomedical research.", "Terminations. Department of Education officials reported that four  STEM education programs funded in fiscal year 2010 were terminated  before fiscal year 2016. One such program was the Women\u2019s  Educational Equity program. Congress last funded this program in  fiscal year 2010."], "subsections": []}, {"section_title": "Significant Overlap Continued to Exist Among STEM Education Programs, Although Programs May Differ in Meaningful Ways", "paragraphs": ["Based on our analysis of questionnaire responses, nearly all STEM  education programs in fiscal year 2016 overlapped with at least one other  STEM education program, in that they offered at least one similar service  to at least one similar group in at least one similar STEM field to achieve  at least one similar objective (see text box). Similar levels of overlap  occurred among programs funded in fiscal year 2010.", "Similarities Among Overlapping Federal Science, Technology, Engineering, and Mathematics (STEM) Education Programs  Similar Services  Many of the 163 STEM education programs provided similar services. To support students, most programs (143) provided research  opportunities, internships, mentorships, or career guidance. In addition, 110 programs supported short-term experiential learning  activities, and 99 programs supported long-term experiential learning activities. Short-term experiential learning activities include field  trips, guest speakers, workshops, and summer camps. Long-term experiential learning activities last throughout a semester in length  or longer. To support teachers, 77 programs provided curriculum development and 45 programs supported teacher in-service training,  professional development, or retention activities.", "Similar Groups Intended to be Served  Many programs also provided services to similar groups, such as K-12 students, postsecondary students, K-12 teachers, and college  faculty. A majority of STEM programs reported primarily benefiting postsecondary students; specifically, 103 programs intended to  serve 4-year undergraduate students, 76 intended to serve Master\u2019s degree students, and 83 intended to serve doctoral students.  Most programs also intended to serve multiple groups; 137 of the 163 programs served two or more groups.", "Similar STEM Fields  More than 75 percent of programs focused on specific STEM academic fields of study. The most common fields were biology (85  programs), technology (75 programs), engineering (72 programs), and computer science (71 programs). Of those programs that  focused on specific STEM fields of study, about 55 percent (68 programs) focused on 5 or more different fields.", "Similar Objectives  Many STEM education programs had similar objectives. An objective of a majority of programs (115) was to provide training  opportunities for undergraduate or graduate students in STEM fields. Most programs (139) also reported having multiple primary  STEM objectives.", "Despite these similarities, overlapping programs may differ in meaningful  ways, such as their specific field of focus and those programs\u2019 stated  goals. For example, a primary objective of the Department of Health and  Human Services\u2019 Cancer Education Grants program and the National  Aeronautics and Space Administration\u2019s National Space Grant College  and Fellowship Project is to provide training opportunities for  undergraduate or graduate students in biological sciences, among other  fields. However, these programs have different program goals:", "The Cancer Education Grants program aims to develop innovative  cancer education programs and cancer research dissemination  projects.", "The National Space Grant College and Fellowship Project encourages  interdisciplinary education, research, and public service programs  related to aerospace.", "Although many STEM education programs are designed to provide  similar services to similar groups, some programs serve distinct  populations within those broader groups, such as minority,  disadvantaged, or underrepresented groups. Within the broad group\u2014 middle and high school students, an individual program may focus on  serving only minority, disadvantaged, or underrepresented students. For  example, the Department of Transportation\u2019s Garrett A. Morgan  Technology and Transportation Education program focuses services on  students who are girls and minorities, whereas the Department of  Education\u2019s Upward Bound Math-Science program aims to serve  students who are economically disadvantaged.", "The Committee on STEM Education and the Office of Science and  Technology Policy reported managing overlap in the portfolio by  coordinating with other agencies through a:", "Cross-agency priority goal. Project management and oversight of  this goal provided an additional mechanism to facilitate coordination.  Goal leaders published quarterly progress reports describing their  efforts to achieve each of the five priority investment areas and two  coordination objectives.", "Federal coordination subcommittee. Creating a federal  coordination subcommittee and various interagency working groups  helped to advance goals identified in the Strategic Plan. Committee  leadership structured working groups to connect agencies with similar  programs (see fig. 4)."], "subsections": []}]}, {"section_title": "Efforts to Assess Programs\u2019 Performance and Participation Rates of Underrepresented Minorities Are Limited", "paragraphs": [], "subsections": [{"section_title": "Performance Assessments of STEM Education Programs Are Not Reviewed or Documented", "paragraphs": ["The Committee on STEM Education and Office of Science and  Technology Policy have not fully met their responsibilities to assess the  STEM education portfolio. Specifically, the Committee on STEM  Education has not reviewed performance assessments of STEM  education programs to ensure effectiveness\u2014a primary function of its  authorizing charter. Committee leadership acknowledged that they have  not conducted such reviews. Overall, the Committee made limited  progress advancing its strategic goal of increasing the use of evidence- based approaches because, according to Committee leadership, they  focused on achieving other strategic goals. By reviewing programs\u2019  performance assessments, the Committee could leverage existing  performance information to identify and share promising practices that  agencies could use in designing or revising their programs. Moreover, in  doing so, the Committee could further its strategic goal of increasing the  use of evidence-based approaches across the portfolio of STEM  education programs. We previously have reported that managers can use  performance information to identify and increase the use of program  approaches that are working well. Additionally, such a review could help  the Committee meet its new responsibilities under the 2017 American  Innovation and Competitiveness Act, including reviewing the measures  federal agencies use to evaluate their STEM education programs and  making recommendations for terminating, consolidating, and reforming  programs in the federal STEM education portfolio.", "Further, the Committee on STEM Education has not met the COMPETES  Act requirement to document the performance assessments of STEM  education programs in its federal STEM inventory (see sidebar).", "In 2011, the Committee on STEM Education reported summary  information on programs\u2019 performance assessments, including the total  number of programs funded in fiscal year 2010 that had been evaluated  since 2005. However, the information provided was not program- specific; therefore, it is unclear which programs were assessed for  effectiveness. Further, that information is outdated, as the STEM  education portfolio has changed considerably since 2010, as we have  discussed in this report. Committee leadership said they do not have  plans to update the summary information provided in 2011, noting that  agency budget justifications include program performance assessments.  However, we reviewed the budget justifications for 10 STEM education  programs that program officials reported had been recently evaluated and  found that 8 had no information on performance assessments. By  periodically documenting in its federal STEM education inventory whether  programs have been assessed for effectiveness, the Committee can  enhance communication of performance information among agency  officials and stakeholders. This could facilitate the use of performance  information by agency managers and lead to greater public awareness  regarding the effectiveness of many of the nation\u2019s STEM education  programs.", "The Office of Science and Technology Policy has not done everything  required of it either. It has not described the outcomes of programs\u2019  performance assessments completed in the previous year in its annual  reports, as required by the COMPETES Act (see sidebar).", "Office of Science and Technology Policy officials said that they have not  reported on recent program assessments, and added that many STEM  education programs were not mature enough to provide sufficient data for  a definitive assessment. However, many of the 2016 programs that we  identified were at least 7 years old and had been assessed. Specifically,  67 percent (109) of the programs reported by program officials for fiscal  year 2016 had also been reported for fiscal year 2010. Of the programs in  existence since 2010, 49 percent (53) have been assessed, according to  program officials\u2019 questionnaire responses. By reporting information on  the outcomes of performance assessments completed in the previous  year, the Office of Science and Technology Policy could enhance  awareness of promising practices in federal STEM education programs."], "subsections": []}, {"section_title": "Program Participation Rates of Underrepresented Groups Are Not Reported", "paragraphs": ["The Committee on STEM Education has not reported STEM education  programs\u2019 participation rates of groups historically underrepresented in  STEM fields, although broadening participation of those groups is one of  the Committee\u2019s strategic goals. Moreover, the COMPETES Act  requires that the Committee report the participation rates of women,  underrepresented minorities, and persons in rural areas in its inventory of  federal programs (see sidebar).", "Committee leadership acknowledged they have not reported these data,  and added that such participation data are not fully available across all  STEM education programs. However, we found that such participation  data were generally available. an inventory of federal STEM education  programs that includes documentation of  participation rates of women,  underrepresented minorities, and persons  in rural areas.", "In response to our questionnaire, nearly three-quarters of STEM  education programs (120 of 163) reported tracking participants in fiscal  year 2016. Of those programs, many also tracked specific participant  characteristics. For example, 61 percent (73) of programs that tracked  participants also captured whether their participants were women and 54  percent (65) documented those who were African American. Programs  primarily intended to serve minority, disadvantaged, or underrepresented  groups tracked participant characteristics at higher rates than programs  that intended to serve broader groups of beneficiaries (see fig. 5).", "In addition, 7 of the 13 administering agencies, such as the Department of  Health and Human Services, reported that they tracked participation in  fiscal year 2016 for at least two-thirds of their STEM education  programs. Officials from the Department of Health and Human Services said that the department maintains data for many of its STEM education  programs in a database that captures individual participants\u2019 demographic  data, including race and gender, and aggregates such information for  internal reporting. Officials also said they use this information to evaluate  whether individual programs are meeting their goals of serving particular  groups. Although we found that many agencies reported collecting data  on participants in their STEM education programs, the Committee on  STEM Education has not reported such information in its inventory, as  required.", "Reporting information on the participation rates of women,  underrepresented minorities, and persons in rural areas could help the  Committee assess whether STEM education programs have broadened  participation to groups historically underrepresented in STEM fields\u2014a  key goal of the Strategic Plan. Committee leadership said they measured  progress toward this goal with general performance indicators, such as  the number of women who earned STEM degrees, regardless of  participation in federal programs, because such data were readily  available. However, those performance indicators are influenced by  various factors, including some external to federal STEM education  efforts. For example, the number of women earning STEM degrees could  be affected by broader economic factors or college enrollment trends,  rather than the activities of the agencies."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The federal government continues to invest billions of dollars annually in  STEM education programs to enhance the nation\u2019s economic and  educational competitiveness. Since 2010, the federal portfolio of STEM  education programs has evolved considerably. The Committee on STEM  Education reported that, through its leadership and strategic planning  efforts, it fostered coordination among agencies administering STEM  education programs, which helped them implement the STEM Education  Strategic Plan. Such efforts to encourage interagency coordination can  help ensure efficient use of resources, particularly given the overlap of  programs in the STEM education portfolio.", "The Committee on STEM Education and the Office of Science and  Technology Policy have not fulfilled their responsibilities to review,  document, and report performance information on STEM education  programs. Reviewing performance assessments of the many programs in  the federal STEM education portfolio is a vital management responsibility  that could, for example, improve the Committee\u2019s ability to disseminate  information on promising practices or make recommendations that  agencies can use to make well-informed decisions about designing or  revising their programs. Further, documenting programs\u2019 performance  assessments in the Committee\u2019s federal STEM education inventory and  reporting the outcomes of recent assessments in the Office of Science  and Technology Policy\u2019s annual reports could enhance the availability of  performance information.", "In addition, the Committee falls short in reporting required information on  programs\u2019 participation rates of women, underrepresented minorities, and  persons from rural areas. Without such information, it is unclear whether  the federal investment in STEM education is ultimately supporting its  strategic goal of broadening participation to groups historically  underrepresented in STEM fields.", "Moreover, as the Committee on STEM Education begins to implement its  new responsibilities prescribed by the American Innovation and  Competitiveness Act, its efforts to review programs\u2019 performance  assessments could improve its capacity to make well-informed  recommendations to further enhance the portfolio of STEM education  programs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of four recommendations, including three to the  Committee on STEM Education and one to the Office of Science and  Technology Policy. Specifically:  The leadership of the Committee on STEM Education should  review performance assessments of federal STEM education  programs and then take appropriate steps to enhance  effectiveness of the portfolio, such as by sharing promising  practices that agencies could use in designing or revising their  programs. (Recommendation 1)", "The leadership of the Committee on STEM Education should  improve public awareness of information on programs\u2019  performance assessments by documenting program-level  information on performance assessments in its federal STEM  education inventory. (Recommendation 2)", "The leadership of the Committee on STEM Education should  report required information on the participation rates of women,  underrepresented minorities, and persons from rural areas in  federal STEM education programs that collect this information.  (Recommendation 3)", "The Director of the Office of Science and Technology Policy  should report the outcomes of programs\u2019 performance  assessments completed in the previous year in its annual report.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the National Science and Technology  Council\u2019s Committee on STEM Education and the Office of Science and  Technology Policy for review and comment. These entities jointly  provided written comments, which are reproduced in appendix IV, and  technical comments, which we incorporated, as appropriate. They agreed  with all four of our recommendations and noted initial strategies for how  they would implement three of them. Regarding implementation of the  fourth recommendation to report on participation rates of  underrepresented groups in federal STEM education programs, they  noted plans to examine confounding factors inhibiting the reporting of the  information required under the COMPETES Act. Gaining insight on the  challenges agencies face collecting this information is an important first  step. However, to comply with the requirement of the COMPETES Act  and help ensure programs reach populations historically  underrepresented in STEM fields, we continue to believe that the  Committee should report  the participation rates of women,  underrepresented minorities, and persons from rural areas in federal  STEM education programs that collect this information. To do so, the  Committee may also need to develop strategies to help agencies  overcome some of these confounding factors.", "We are sending copies of this report to leadership of the Committee on  STEM Education, and the Assistant Director of STEM Education at the  Office of Science and Technology Policy, and the appropriate  congressional committees. In addition, the report will be available at no  charge on GAO\u2019s website at http://www.gao.gov.", "If you or your staff should have any questions about this report, please  contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: GAO\u2019s Methodology for Program Identification and Data Collection", "paragraphs": [], "subsections": [{"section_title": "How GAO Identified Federal Education Programs on Science, Technology, Engineering, and Mathematics", "paragraphs": ["To identify the programs that should receive our questionnaire, we sought  input from the 13 agencies that administer federal science, technology,  engineering, and mathematics (STEM) education programs. We provided  each of the agencies with our definition of a STEM education program  and asked agency officials to identify programs funded in fiscal year 2016  that met this definition (see text box). We also asked agency officials to  provide information on the status of the 209 STEM education programs  we included in our previous report on STEM education programs.  Specifically, we asked whether the programs were funded in fiscal year  2016 and, if not, whether they were consolidated or terminated.", "Definition of Science, Technology, Engineering, and Mathematics (STEM) Education Program  GAO defined \u201cSTEM education program\u201d as a program funded by allocation or congressional appropriation. An organized set of  activities was considered a single program even when its funds were also allocated to other programs. A STEM education program  that met the definition had one or more of the following as a primary objective:  attract or prepare students to pursue classes or coursework in STEM areas through formal or informal education activities  (informal education programs provide support for activities that offer students learning opportunities outside of formal schooling  through contests, science fairs, summer programs, and other means; outreach programs aimed at the general public were not  included);  attract students to pursue degrees (2-year, 4-year, graduate, or doctoral degrees) in STEM fields through formal or informal  education activities;  provide training opportunities for undergraduate or graduate students in STEM fields (this can include grants, fellowships,  internships, and traineeships that are intended for students; general research grants that involve hiring a student for  lab work  were not considered a STEM education program);  attract graduates to pursue careers in STEM fields;  improve teacher (preservice or in-service) education in STEM fields;  improve or expand the capacity of K-12 schools or postsecondary institutions to promote or foster education in STEM fields; and   conduct research to enhance the quality of STEM education programs provided to students.", "Programs designed to retain current employees in STEM fields were not included. Programs that fund retraining of workers to pursue a  degree in a STEM field were included because these programs help increase the number of students and professionals in STEM fields  by helping retrain non-STEM workers to work in STEM fields. Also included were health care programs that train students for careers  that are primarily in scientific research, but not those that train students for careers that are primarily in patient care (e.g. those that  trained nurses, doctors, dentists, psychologists, or veterinarians).", "Lastly, GAO considered STEM fields to include any of the following broad disciplines: agricultural sciences; astronomy; biological  sciences; chemistry; computer science; earth, atmospheric, and ocean sciences; engineering; material science; mathematical  sciences; physics; social sciences (e.g., psychology, sociology, anthropology, cognitive science, economics, behavioral sciences); and  technology.", "GAO used this same definition of STEM education program in its 2012 report. However, in the current report, GAO explicitly specified  astronomy and material science as STEM fields and also revised \u201cmathematics\u201d to be \u201cmathematical sciences\u201d based on feedback  from agency officials.", "We reviewed the information agencies submitted and took steps to  corroborate it, such as by reviewing program descriptions and budget  documents. Based on our analysis of this information, we sent a web- based questionnaire to 198 programs (see table 1).", "To develop the questionnaire and collect the data, we used recognized  survey design practices to enhance data quality. For instance, we ordered  the questionnaire appropriately and ensured the questions were clearly  stated and easy to understand. The questionnaire solicited information on  federal STEM education programs, including programs\u2019 objectives,  intended groups served, services provided, STEM fields, and obligations.  We did not conduct pretests because most of the questions were included  in our prior questionnaire and had already been pretested.", "On May 8, 2017, we sent an email announcing the online questionnaire to  the officials responsible for programs identified as STEM education and  also notifying them that the questionnaire would be activated that week.  On May 10, 2017, we sent a second message to officials informing them  that the questionnaire was activated and providing them with unique  usernames and passwords. As necessary, we followed-up with program  officials by telephone and email. We collected responses through August  31, 2017.", "Based on our analysis of the questionnaire responses and other  information we received from program officials, we excluded 35 programs  from our inventory. (See table 2 for a summary of those 35 programs and  the reasons we excluded them.)", "Nine of the 35 excluded programs had been reported by agency officials  as STEM education programs in our previous report. In most cases (8 of  9), we excluded these programs in this report because the programs did  not include STEM education as a primary objective in fiscal year 2016. In  the remaining case, we excluded the program because it was a  component of another fiscal year 2016 STEM education program, and  thus would be duplicative. We confirmed this information and the  programs\u2019 exclusion with the administering agencies.", "After we completed our analysis, we identified 163 programs as STEM  education for fiscal year 2016. Programs officials responsible for all 163  of these programs completed our questionnaire. We used standard  descriptive statistics to analyze responses to these completed  questionnaires. We also used recognized survey design practices to  process and analyze data collected via the questionnaire. For instance,  we performed automated checks to review the data and identify  inappropriate answers. We also reviewed the data for missing or  ambiguous responses and followed up with program officials when  necessary to clarify their responses. We did not verify all responses since  we had applied recognized survey design practices and follow-up  procedures, and had determined that the data used in this report were of  sufficient quality for the purposes of our reporting objectives."], "subsections": []}]}, {"section_title": "Appendix II: Federal Science, Technology, Engineering, and Mathematics (STEM) Education Programs and Reported Fiscal Year 2016 Obligations", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Current Implementation Status of Selected COMPETES Act Provisions to Coordinate Federal Science, Technology, Engineering, and Mathematics Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Office of Science and Technology Policy and the Committee on Science, Technology, Engineering, and Mathematics Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Bill J. Keller (Assistant Director),  Kathryn O\u2019Dea Lamas (Analyst-in-Charge), Morgan Jones, and Karissa  Robie made significant contributions. Also contributing to this report were  James Bennett, Deborah Bland, Charles Culverwell, Jill Lacey, Sheila  McCoy, James Rebbe, Kathleen van Gelder, and Sarah Veale."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-440", "url": "https://www.gao.gov/products/GAO-18-440", "title": "Law Enforcement: Few Individuals Denied Firearms Purchases Are Prosecuted and ATF Should Assess Use of Warning Notices in Lieu of Prosecutions", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2017, approximately 25.6 million firearm-related background checks were processed through NICS, and about 181,000 of the attempted purchases at the federal and state levels combined were denied because the individual was prohibited from possessing a firearm under federal or state law. Individuals who certify that they are not prohibited from purchasing or receiving a firearm and are subsequently determined to be prohibited could be subject to investigation, and if prosecuted, a fine, imprisonment, or both.", "GAO was asked to examine firearms denials. This report (1) describes the extent to which federal and selected state law enforcement agencies investigate and prosecute firearms denial cases; (2) examines related challenges faced by these agencies; and (3) describes the circumstances that lead to investigations and prosecutions. GAO reviewed laws and regulations; analyzed federal and state data from 2011 through 2017; and interviewed officials from ATF headquarters, 6 of 25 ATF field divisions (the 6 that investigated the most cases), and the 13 states that process all NICS checks within their state. Results from state interviews are not generalizable but provide insights on state practices."]}, {"section_title": "What GAO Found", "paragraphs": ["Investigations and prosecutions. Federal and selected state law enforcement agencies that process firearm-related background checks through the National Instant Criminal Background Check System (NICS) collectively investigate and prosecute a small percentage of individuals who falsify information on a firearms form (e.g., do not disclose a felony conviction) and are denied a purchase. Federal NICS checks resulted in about 112,000 denied transactions in fiscal year 2017, of which the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) referred about 12,700 to its field divisions for further investigation. U.S. Attorney's Offices (USAO) had prosecuted 12 of these cases as of June 2018.", "At the state level, officials from 10 of 13 selected states said they did not investigate or prosecute firearm denials, some citing competing resource demands and the lack of statutes with which states prosecute as reasons. The remaining 3 states investigated a high proportion of firearms denials. One of the 3 states reported about 1,900 referrals for prosecution in 2017 and about 470 convictions.", "Challenges. ATF and selected states reported challenges in investigating and prosecuting firearms denials. Officials from six selected ATF field divisions said that investigating the increasing number of denial cases referred to field divisions\u2014which increased from about 5,200 in fiscal year 2011 to about 12,700 in fiscal year 2017\u2014has been time intensive and required use of their limited resources. ATF policy provides that field divisions may send \u201cwarning notices\u201d to denied persons in lieu of prosecution, but ATF has not assessed field divisions' use of these notices, which could provide greater awareness of their deterrence value and inform whether any policy changes are needed. Officials from the Executive Office for United States Attorneys said that prosecuting denial cases can require significant effort and may offer little value to public safety compared to other cases involving gun violence. Selected state officials said that denial investigations can take law enforcement officials away from their core duties. State prosecutors said gathering evidence to prove individuals knew they were prohibited was a challenge.", "Types of cases. ATF field divisions investigate denial cases based on USAO criteria and generally only refer cases to USAOs for prosecution when aggravating circumstances exist, such as violent felonies or multiple serious offenses over a short period of time. Officials from two of three selected states refer all denial cases for investigation, while one state uses risk-based criteria for selecting cases that include conditions such as felony convictions and misdemeanor crimes of domestic violence. Prosecutors from these three states said they generally pursue cases that involve indications of violence, though individual prosecutors had differing priorities based on public safety concerns."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that ATF assess the extent to which ATF field divisions use warning notifications as an enforcement tool, which would inform whether changes to policy are needed. DOJ concurred with GAO's recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["In 2017, approximately 25.6 million firearm-related background checks  were processed through the Federal Bureau of Investigation\u2019s (FBI)  National Instant Criminal Background Check System (NICS), and about  181,000 (about 1 percent) of the attempted purchases were denied  because the individual was prohibited from possessing a firearm under  federal or state law. To purchase a firearm from a federal firearms  licensee (FFL)\u2014or gun dealer\u2014individuals are required to complete the  Alcohol, Tobacco, Firearms and Explosives (ATF) Form 4473, certifying  that they are not prohibited from purchasing or receiving a firearm under  federal or state law. Individuals who sign the form and are later  determined through a background check to be prohibited could be subject  to investigation, and if prosecuted, a fine, imprisonment, or both.", "For 29 states, the District of Columbia, and U.S. territories, the FBI\u2019s  NICS Section is responsible for processing all NICS background checks  and referring denied transactions to ATF. ATF is responsible for  determining which denied transactions to investigate and refer to a United  States Attorney\u2019s Office (USAO) for prosecution. The other 21 states use  state or local criminal justice agencies to process some or all of their own  NICS background checks. Thirteen of these 21 states process all of their  own NICS checks, and are known as point-of-contact (POC) states. The  remaining 8 states conduct NICS checks on persons who attempt to  purchase a handgun, while the FBI conducts checks on long gun  purchasers. These states are known as partial POC states.", "You requested that we examine the extent to which individuals who are  prohibited from purchasing firearms and attempt to purchase a firearm  face investigation and prosecution. This report: describes the extent to which federal and selected state law  enforcement agencies investigate and prosecute firearms denial  cases, examines the challenges, if any, that federal and selected state law  enforcement agencies face in investigating and prosecuting firearms  denial cases, and describes the circumstances that lead to the investigation and  prosecution of persons denied firearms.", "To address the first objective, we analyzed federal data from the FBI\u2019s  NICS system and ATF\u2019s case management systems for fiscal years 2011  through 2017 to determine the number of firearms denials by state and  prohibiting category and identify trends in the number of denials the ATF\u2019s  Denial Enforcement NICS Intelligence (DENI) Branch referred to ATF  field divisions. For federal prosecutions, we reviewed information from  ATF\u2019s case management system that identified NICS cases that were  prosecuted. For state investigations and prosecutions, we selected the 13  POC states that perform their own background checks for all firearms  transactions to determine their policies regarding the investigation and  prosecution of persons denied firearms purchases. For the states that  investigate firearms denials, we analyzed state police data on the number  of denials, the prohibiting category for the denials, and the number of  these denials that were referred to state or local law enforcement for  investigation for fiscal years 2011 through 2017. We spoke to  investigators and prosecutors in these states to discuss the investigative  processes followed and the frequency of prosecution.", "To address the second objective, for federal denial investigations, we  interviewed officials from the six ATF field divisions that received  approximately 60 percent of the total standard denial referrals across  ATF\u2019s 25 field divisions from fiscal years 2011 through 2017 about the  investigative process for standard and delayed denial investigations and  the challenges, if any, these investigations posed to ATF staff. We also  discussed the types of cases that each of these field divisions referred to  the USAO for prosecution. Further, we interviewed Executive Office for  United States Attorneys (EOUSA) officials to discuss the circumstances  that would lead a USAO to prosecute a firearms denial case and the  challenges, if any, faced in these prosecutions. We also evaluated ATF\u2019s  investigative procedures and internal controls in place against the  Standards for Internal Control in the Federal Government. For state  denial investigations, we interviewed state troopers and local law  enforcement to learn about their investigative procedures, and any  challenges investigators may face. We also spoke with multiple  prosecutors from each of these states and discussed the prosecutor  offices\u2019 policy for accepting these denial cases, how often these cases  were prosecuted in these localities and the challenges each faced when  prosecuting these cases.", "To address the third objective, for federal denials, we analyzed criteria  that the 34 USAO districts within our six selected ATF field divisions have  established to determine which denials ATF should send to its field offices  for further investigation. We then visited ATF\u2019s DENI Branch to observe  how denials are screened and discuss internal controls for ensuring that  ATF referrals to its field divisions follow the criteria. We also analyzed  ATF data on denials to identify the prohibited categories of the cases that  were referred to ATF field divisions from 2011 through 2017, the  investigations that were referred to USAOs for prosecution and those that  were ultimately prosecuted by USAOs. Officials from our six selected ATF  field divisions also provided examples of denial cases investigated and  referred for prosecution. These case examples included the specific  circumstances that convinced the field division to investigate and refer the  case for prosecution. We also researched legal databases to identify the  specific circumstances of the cases prosecuted, the statutes used to  charge the defendants, and the outcome of the cases. Further, we  interviewed EOUSA officials about how USAOs determine the  circumstances that would lead a USAO to prosecute a firearms denial  case. For state denial investigations, we spoke with state and local  investigators from the three states that investigate and prosecute firearms  denials to determine the circumstances that may lead to a prosecution.  We also spoke with multiple prosecutors from the same states and asked  them to describe the characteristics of cases they are more likely to  prosecute, as well as those they are less likely to prosecute.", "To assess the reliability of federal and state data on investigations and  prosecutions of individuals denied firearms purchases related to all three  objectives, we reviewed the internal controls in place within these  systems and interviewed federal and state officials about their procedures  for creating these data. We determined that these data were sufficiently  reliable for the purpose of our reporting objectives. Also, for all objectives,  while we did not speak to a representative sample of federal and state  investigators and prosecutors, our interviews provided valuable insights  about how these investigations and prosecutions are conducted and  prioritized. Appendix I contains a more detailed discussion of our scope  and methodology.", "We conducted this performance audit from March 2017 through  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Roles and Responsibilities", "paragraphs": ["Under the Brady Handgun Violence Prevention Act of 1993 (referred to  hereafter as the \u201cBrady Act\u201d) and implementing regulations, the FBI and  designated state and local criminal justice agencies use NICS to conduct  background checks on individuals seeking to purchase firearms from an  FFL or obtain permits to possess, acquire, or carry firearms. The mission  of the FBI\u2019s NICS Section is to enhance national security and public  safety by providing the timely and accurate determination of a person\u2019s  eligibility to possess firearms in accordance with federal law. Figure 1  shows the states where the FBI performs background checks for all  transactions, as well as POC and partial POC states.", "ATF\u2014one of several Department of Justice law enforcement  components\u2014is responsible for investigating criminals and criminal  organizations that use firearms, arson, or explosives in violent criminal  activity, among other things. ATF is also responsible for investigating  criminal and regulatory violations of federal firearms, explosives, arson,  and alcohol and tobacco-smuggling laws subject to the direction of the  Attorney General, as well as any other function related to the investigation  of violent crime or domestic terrorism that is delegated to ATF by the  Attorney General.", "U.S. Attorneys prosecute criminal cases brought forward by the federal  government, prosecute and defend civil cases in which the United States  is a party, and collect debts owed to the federal government that are  administratively uncollectible. U.S. Attorneys investigate and prosecute a  wide range of criminal activities\u2014including, but not limited to, international  and domestic terrorism, corporate fraud, public corruption, violent crime,  and drug trafficking. Each U.S. Attorney exercises wide discretion in the  use of his or her resources to further the priorities of the local jurisdictions  and needs of their communities. The Executive Office for United States  Attorneys (EOUSA) represents the 93 U.S. Attorneys that prosecute  federal cases. Among other things, EOUSA provides guidance,  management direction, and oversight to USAOs."], "subsections": []}, {"section_title": "Firearms Purchase Background Check Process", "paragraphs": ["During a NICS check, the FBI and POC states use descriptive data  provided by an individual\u2014such as name and date of birth\u2014to search  various databases containing criminal history and other relevant records.  These databases include the Interstate Identification Index, the National  Crime Information Center, and the NICS Indices.", "The Interstate Identification Index includes, among other things,  information on persons who are indicted for, or have been convicted  of, a crime punishable by imprisonment for a term exceeding 1 year or  have been convicted of a misdemeanor crime of domestic violence.", "The National Crime Information Center includes criminal justice- related records pertaining to wanted persons (fugitives) and persons  subject to protection orders, among other things.", "The NICS Indices were created for use in connection with NICS  background checks and contain information on persons determined to  be prohibited from possessing or receiving a firearm.", "NICS checks determine whether or not an individual is disqualified by  federal or state law from possessing firearms. As shown in figure 2:", "Federal NICS transactions increased from about 6.5 million in fiscal  year 2011 to about 8.6 million in fiscal year 2017. Federal NICS  denials increased from about 77,000 in fiscal year 2011 to about  112,000 in fiscal year 2017.", "POC state transactions\u2014which include both full and partial POC  states\u2014increased from about 9.3 million in fiscal year 2011 to about  17 million in fiscal year 2017. POC state denials increased from  about 45,000 in fiscal year 2011 to about 69,000 in fiscal year 2017.", "If the FBI or state agency completes a background check within 3  business days and determines that a person should be denied, such  denials are referred to as \u201cstandard denials\u201d and do not involve the  potential transfer of a firearm. If the FBI or state agency cannot complete  a background check within 3 business days, the FFL may transfer the  firearm pursuant to federal law, unless state law provides otherwise.  When the FBI makes a denial determination after 3 business days\u2014 called a \u201cdelayed denial\u201d\u2014the FBI determines if the FFL transferred the  firearm to the individual, and if so, refers these cases to ATF for retrieval  of the firearm if the individual is confirmed to be prohibited from  possessing a firearm.", "States may establish requirements regarding background check  processing times, including waiting periods, beyond the federal  requirement. States also may include state databases in addition to NICS  indices when conducting background checks. In POC states, FFLs initiate  a NICS check by contacting one or more state organizations, such as a  state or local law enforcement agency, to query NICS databases and  related state files. If necessary, the state organization then conducts any  required follow-up research.", "States may use different methods to conduct background checks.  Examples of these varying methods include the following:  Instant Check: Requires an FFL to transmit a buyer\u2019s application to a  checking agency by telephone or computer. The agency is required to  respond immediately or as soon as possible.", "Purchase Permit: Requires a buyer to obtain, after a background  check, a government-issued document (such as a permit, license, or  identification card) that must be presented to an FFL before the buyer  can receive a firearm.", "Exempt Carry Permit: State concealed weapons permits, issued after  a background check, exempt the holder from a new check at the time  of purchase under an ATF ruling or state law.", "Other: Requires an FFL to transmit an application to a checking  agency, which delays transfer until a waiting period expires or the  agency completes a check."], "subsections": []}, {"section_title": "Federal Process After a Firearm Denial", "paragraphs": ["After a federal NICS denial, ATF can take enforcement actions through  criminal investigation and referral for prosecution to a USAO, as making  false written statements on the ATF Form 4473 is a crime punishable as a  felony under federal law by up to 10 years in prison and up to a $250,000  fine. Any fines that result from a firearm denial are criminal fines  assessed through prosecution as part of a plea agreement or  sentencing. ATF does not have the statutory authority to issue fines or  take any civil action against individuals whose firearm applications are  denied and are suspected of providing false information during the  attempted purchase."], "subsections": [{"section_title": "Investigations", "paragraphs": ["For federal denied transactions, the FBI\u2019s NICS Section sends  information about each denial to ATF\u2019s DENI Branch. The DENI Branch is  responsible for researching each transaction to determine whether the  case should be referred to one of ATF\u2019s 25 field divisions for possible  investigation. The DENI Branch is to refer all delayed denial cases\u2014 which may require recovery of a firearm\u2014and standard denial cases that  meet USAO investigative referral criteria for each corresponding judicial  district. An ATF NICS coordinator in each field division is to distribute  the referred denial cases to the appropriate field office within each field  division.", "In addition to recovery of a firearm for delayed denial cases, all firearms  denial investigations may involve verifying the purchaser\u2019s prohibited  status, gathering relevant supporting documentation such as mental  health or court files, and communicating with prosecutors regarding the  prosecutorial merit of the case, according to ATF officials. Figure 3  shows the general NICS background check process when purchasing a  firearm from an FFL in either a NICS or POC state.", "Among the denials that ATF investigates (delayed and standard), each  field office also determines which cases should be referred to a USAO for  possible prosecution. If the ATF field office determines that the subject is  a prohibited person and local prosecutorial guidelines are met, the field  office may refer the case for prosecution. ATF agents may discuss  potential referrals with prosecutors to try to obtain USAO acceptance  before ATF formally refers a case for possible prosecution. A case that is  not deemed appropriate for federal prosecution may be referred to a state  prosecutor. If the U.S. Attorney decides to prosecute, an arrest is made or  a warrant is issued. Figure 4 shows the general process for the  investigation and prosecution of standard firearms denials."], "subsections": []}]}, {"section_title": "State Processes After a Firearm Denial", "paragraphs": ["POC states vary in their procedures and standards for investigating and  prosecuting persons denied firearms transactions. For example, these  states may or may not investigate and prosecute prohibited persons who  violate state gun control laws. In some states, the agency conducting  background checks notifies the state or local police, depending on which  has jurisdiction, where the transaction occurred. The local agency is then  responsible for investigating and assisting in the prosecution of the case  by state or local prosecutors. Other states have units with statewide  jurisdiction that screen cases before deciding whether a referral should be  made to a state police trooper or local law enforcement agency for  investigation. A POC state may also refer denials for further investigation  to the nearest ATF field office. In POC states, a firearm retrieval  associated with a delayed denial may be handled by local law  enforcement, a statewide firearms unit, or ATF. State and local  prosecutors, whether the district attorney, county or city prosecutor, or the  state Attorney General\u2019s office, represent the state for cases arising under  state law. Occasionally, federal and state law may prohibit similar types of  criminal conduct, allowing both federal and state prosecutors to pursue  the case."], "subsections": []}]}, {"section_title": "Federal and Selected State Law Enforcement Agencies Collectively Investigate and Prosecute a Small Percentage of Firearms Denials", "paragraphs": ["In fiscal year 2017, ATF referred about 13,000 firearms denials to its field  divisions for investigation, of which USAOs had prosecuted 12 cases as  of June 2018. In March 2018, the Attorney General issued a memo that  directed all United States Attorneys to enhance prosecution of cases  involving individuals who make false statements on the ATF Form 4473.  Officials from 10 of our 13 selected POC states said that they do not  investigate or prosecute NICS denials."], "subsections": [{"section_title": "ATF Referred about 13,000 Firearms Denials to Its Field Divisions for Investigation in Fiscal Year 2017, of Which USAOs Have Prosecuted 12 Cases", "paragraphs": ["At the federal level, the FBI\u2019s NICS Section referred 112,090 denied  transactions to ATF\u2019s DENI Branch in fiscal year 2017, of which ATF  referred 12,710 (about 11 percent) to its field divisions for further  investigation. The 12,710 referred cases consisted of 3,993 delayed  denials and 8,717 standard denials. According to ATF headquarters  officials, the DENI Branch refers all delayed denials to ATF field divisions  for additional investigation because these cases could potentially require  the recovery of a firearm that was transferred to a prohibited person. The  DENI Branch uses investigative guidelines established by USAOs that  cover 94 judicial districts to determine if standard denials should be  referred to the respective ATF field division for investigation. USAO  criteria may include individuals who are violent felons, have an active  protection order, or have made multiple attempts to purchase a firearm in  the past after being denied, among other offenses. Based on our  analysis of ATF data, the number of firearms denials the DENI Branch  referred to ATF field divisions for investigation increased from 5,208 in  fiscal year 2011 to 12,710 in fiscal year 2017\u2014an increase of 141  percent. We discuss the reported impact of this increase in referrals on  ATF staff later in the report.", "Of the 12,710 referrals ATF sent to its field divisions in fiscal year 2017  for investigation, USAOs considered 50 cases for prosecution, and  prosecuted a total of 12 cases (9 delayed denial and 3 standard denial)  as of June 2018, according to ATF data (see table 1). An additional 10  cases were pending or awaiting prosecution as of June 2018. Overall,  USAOs filed about 54,000 criminal cases in fiscal year 2016, of which  about 9,200 involved firearm-related matters. According to Department  of Justice officials, in fiscal year 2017, USAOs also filed about 54,000  criminal cases, of which about 10,400 involved firearm-related matters.", "We also asked state officials from states within our six selected ATF field  divisions whether they investigated and prosecuted these denials.  Officials from four of these six states said that ATF has not been referring  firearms denials to them, so investigation and prosecution of firearms  denials was not being done in their state. State officials from two of the  six states said that they either occasionally receive referrals from ATF,  which are investigated and submitted for local prosecution or they are not  aware whether they receive referrals from ATF because they do have a  dedicated team to investigate these cases. Officials from all 6 states said  they have laws that prohibit persons from purchasing and/or possessing  firearms based on prohibitions, such as a prior felony or misdemeanor  convictions, but do not have laws that prohibit persons from falsifying  information on ATF\u2019s form 4473 during the NICS background check.  These states also cited some limitations for investigating these referrals  such as lack of statutory authority within their state agency and resource  constraints."], "subsections": []}, {"section_title": "Attorney General Memo to Enhance Prosecution of Persons Denied Firearms Purchases", "paragraphs": ["On March 12, 2018, the Attorney General issued a memo that directed all  United States Attorneys to enhance prosecution of cases involving false  statements on the ATF Form 4473, which the memo refers to as \u201clie-and- try\u201d cases. The memo specifically stated that every United States  Attorney must coordinate with the ATF Special Agent-in-Charge in the  local district to review and revise, as necessary, local prosecution and  referral guidelines to ensure vigorous and appropriate prosecution of  these cases. The memo also stated that these guidelines should place  particular emphasis on cases against violent persons, including\u2014but not  limited to\u2014denials involving individuals convicted of violent felonies,  misdemeanor crimes of domestic violence, or subject to protective orders,  and denials involving fugitives where the underlying offense is a violent  felony or misdemeanor crime of domestic violence. Further, the memo  stated that the review and any resulting revisions should ensure that  district-specific prosecution and referral guidelines reflect the Department  of Justice\u2019s renewed commitment to reducing violent crime. The memo  required that all United States Attorneys certify that the review has been  completed and all necessary adjustments made within 45 days.", "According to EOUSA officials, as of early May 2018, about 90 percent of  USAOs had coordinated with their respective ATF field divisions to  discuss revisions in USAO referral guidelines for standard denial cases.  The officials added that in response to the Attorney General\u2019s memo,  some USAOs narrowed criteria to focus resources on particular denials,  such as those involving an attempted purchaser with a history of violent  crime, or prioritized denials with recent prohibitions, such as a domestic  violence conviction in the past year. In other cases, ATF officials said that  USAOs broadened criteria, which may result in more potential cases from  which to select for investigation and referral for prosecution. ATF officials  also said that some USAOs added investigation referral criteria (for  individuals prohibited from possessing firearms) to include elements  outside the list of federal prohibitors, such as denied individuals with ties  to gang activity or terrorism. These attributes outside of NICS prohibiting  categories would require further investigation at the local level by ATF,  according to officials. While ATF officials have the expectation that the  revised criteria would increase the overall workload on ATF field divisions,  ATF officials said that it is too early to discern how these changes will  impact ATF and the number of denial cases prosecuted by USAOs.  EOUSA officials suggested that firearm-related prosecutions may well  increase in the future, but added that any increase that results does not  necessarily mean that firearms denial prosecutions would increase."], "subsections": []}, {"section_title": "Ten of 13 POC States Do Not Investigate Firearms Denials, But the Remaining 3 Investigate a High Percentage of Denials", "paragraphs": ["Officials from 10 of our 13 selected POC states said that they do not  investigate or prosecute any NICS denials, sometimes citing resource  availability or the lack of state statutes as the reason. Officials from these  10 states said that while their state does not investigate or prosecute  firearms denials, their state may take other actions following a denial.  These possible actions may include informing local jurisdictions of the  denial for possible investigation, and possible arrest if the denied  individual has an active warrant. Other actions cited include revoking a  state firearms owner identification card and possibly seizing any firearms;  informing ATF of a delayed denial so ATF can retrieve the firearm; and  providing the information on each denial to the FBI for input into FBI  databases used to perform NICS checks.", "Officials and data from the remaining three POC states\u2014Oregon,  Pennsylvania, and Virginia\u2014indicate that these states investigate a high  proportion of firearms denials. These states have statutes that prohibit  providing falsified information on a state or federal firearms form as well  as statutes that penalize the attempt to purchase firearms by individuals  prohibited from such purchases.", "Oregon: Prior to 2014, the state generally did not investigate firearms  denials, according to state officials. In 2014, the state changed its policy  based on concerns about firearm-related crimes. Specifically, beginning  in late 2014, Oregon began investigating all firearms denials, which  resulted in more than 2,500 firearms denial investigations in both 2016  and 2017. According to state data, there were between 2,000 and 2,400  firearms denials annually from 2011 to 2013. According to the two Oregon  county prosecutors we interviewed, from late 2014 through 2017, their  offices accepted about 141 of the more than 700 firearms denial  investigations referred to their offices, with most prosecuted successfully.", "Pennsylvania: Prior to 2014, the state investigated a relatively small  percentage of firearms denials per year using risk-based criteria,  according to state police officials. In 2014, the state changed its policy to  investigate all firearms denials. According to state police reports, in 2016,  approximately 6,500 denial cases were referred for investigation, of which  about 1,600 were referred for prosecution and 356 resulted in convictions.  For 2017, the state reported that approximately 5,500 denial cases were  referred for investigations, of which 1,907 investigations were referred for  prosecution, resulting in 472 convictions.", "Virginia: Virginia has investigated firearms denials since 1989, according  to state officials. Virginia does not refer all firearms denials for  investigation, but instead uses risk-based criteria to refer a subset of  prohibited categories for investigation, according to these officials. The  number of referrals for investigation in Virginia has increased from about  770 in 2011 to around 1,700 in 2016 and 2017. Virginia prosecutors we  interviewed in three jurisdictions from localities where a high volume of  firearms denial referrals occur said they tend to work with Virginia state  troopers who specialize in denial investigations and reported high  prosecution rates for the cases they accept. The prosecutors noted that  most convictions do not go to trial and are reduced to less severe  violations and most of the penalties imposed tend to be probation, but  there is the occasional jail term. For example, one Virginia prosecutor  said that jail sentences are rare, but for a felon with a record of violence,  sentences of 7 to more than 24 months in jail have been imposed.", "Unlike federal denial investigation referrals where about 30 percent of the  total is for delayed denials, the vast majority of investigations and  prosecutions within these three states are related to standard denials.  Officials within these states explained that background checks that result  in delayed denials are fairly uncommon. According to Pennsylvania  officials, in Pennsylvania this is because of state background check  policies that provide additional time, 15 days, to complete background  checks if a denial is possible, but not clear initially. If the 15-day period  expires without an approved transfer, the transaction is not denied, but  the firearm is not transferred. According to officials in all three states,  FFLs generally will not transfer a firearm until the background checks are  completed."], "subsections": []}]}, {"section_title": "ATF and Selected States Cited Challenges Investigating and Prosecuting Firearms Denials; ATF Has Not Assessed Field Divisions\u2019 Use of Warning Notices", "paragraphs": ["ATF officials from our six selected field divisions said that investigating  firearms denials can be challenging because of the high volume and  require use of their limited resources. ATF has not assessed field  divisions\u2019 use of warning notices in lieu of prosecution, which could  provide greater awareness of their deterrence value. EOUSA officials  said that denial cases are difficult to prosecute and offer less value for  public safety than other prosecutions. State officials said that denial  investigations compete with other investigations and can be difficult to  successfully prosecute."], "subsections": [{"section_title": "ATF and EOUSA Officials Described Denial Investigations and Prosecutions as High Volume and Require Use of Their Limited Resources", "paragraphs": [], "subsections": [{"section_title": "Federal Denial Investigations", "paragraphs": ["ATF officials from our six selected field divisions\u2014which combined  received approximately 60 percent of the total standard denials that ATF  referred to field divisions from fiscal years 2011 through 2017\u2014said that  investigating firearms denials can be challenging for various reasons.  ATF field divisions have taken some steps to help mitigate these  challenges, but ATF headquarters could benefit from enhancing its  oversight of some aspects of the investigations process.", "According to officials from our six selected field divisions, one challenge  to investigating and prosecuting firearms denials is the high volume of  firearms denial referrals for investigation that ATF sends to field divisions.  According to ATF headquarters officials, the DENI Branch has agreed to  send these referrals to field divisions based on criteria each ATF field  division has established with USAOs within their division. In fiscal year  2017, ATF\u2019s DENI Branch referred 1,889 delayed denial cases to our six  selected field divisions\u2014which field divisions are required to investigate\u2014 and 5,435 standard denials cases, which they are to consider for further  investigation. In the six field divisions, the number of standard denial  referrals more than tripled from fiscal years 2011 to 2017, and in two field  divisions, the number of standard referrals in 2017 was more than five  times the number in 2011. For example, in one field division, the number  of standard referrals was 166 in 2011 and increased to 1,064 in 2017.  ATF officials did not know why the number of standard and delayed  denials had increased during this period.", "Officials from all six of our selected ATF field divisions also said that  investigating denial cases can be time-intensive and require use of their  limited resources. The officials said that delayed denials can be  particularly time-intensive because they are required to be investigated  and the investigation involves a defined set of actions, including the  possible retrieval of the firearm. For example, these investigations  typically involve steps to verify the prohibition of the individual, including  obtaining court records; contacting the individual and FFL that sold the  firearm; and arranging to retrieve the firearm for those individuals found to  be prohibited. A fiscal year 2016 ATF funding request through the  annual congressional budget justification submission noted the drain on  investigative resources because of the requirement for ATF to follow-up  on delayed denials. While the investigation of standard denials also can  take time, officials from our six selected field divisions said they have  greater discretion over whether or not to investigate these denials. For  example, each field division has discretion to screen all or some of the  standard denials, which can include confirming the person was correctly  denied and contacting the denied individual and the firearms dealer.", "Officials from all of the six selected field divisions said that, in light of the  high volume and time-intensiveness of denial cases, they have taken  various steps to prioritize the types of cases to investigate. For example,  per ATF policy, field divisions prioritize delayed denials over standard  denials because a prohibited person may be in possession of a firearm.", "Officials from three of the six field divisions said that after verifying that  the applicant is prohibited by reviewing the criminal history attached to the  case file, they generally close standard denials without further  investigation. The officials added that while these cases may meet USAO  criteria and be referred to a field division for investigation, they ultimately  do not have prosecutive merit based on coordination with prosecutors  who have experience in prosecuting these cases. Officials from one field  division said that they typically do not devote resources to verifying the  prohibited status, and instead triage standard denials based on certain  criteria, such as a recent violent felony or domestic violence conviction.  Accordingly, officials in that field division only refer to a criminal  investigator for further review what they consider the greatest threats to  public safety."], "subsections": []}, {"section_title": "Federal Prosecutions of Firearms Denials", "paragraphs": ["EOUSA officials said that USAOs generally do not accept and prosecute  denial cases that do not involve aggravating circumstances, as these  cases can require significant effort for prosecutors relative to the short  length of punishment and may offer little value to public safety because  the offender does not obtain the firearm, compared to other cases  involving gun violence. The officials added that USAOs filed about 9,200  firearm-related cases in fiscal year 2016 and about 10,400 in fiscal year  2017, but that cases involving falsifying information when attempting to  purchase a firearm generally are only a small fraction of USAO efforts.  Instead, USAOs primarily focus on cases where persons obtain firearms  and are prohibited persons or use the firearms in connection with a  criminal offense. According to ATF DENI Branch data, the majority of  the 25 cases that USAOs prosecuted in fiscal years 2016 and 2017 that  involved firearms denials (standard and delayed) resulted in reaching  plea agreements with the defendants.", "Federal law provides that it is unlawful \u201cfor any person in connection with  the acquisition or attempted acquisition of any firearm or ammunition from  a licensed importer, licensed manufacturer, licensed dealer, or licensed  collector, knowingly to make any false or fictitious oral or written  statement or to furnish or exhibit any false, fictitious, or misrepresented  identification, intended or likely to deceive such importer, manufacturer,  dealer, or collector with respect to any fact material to the lawfulness of  the sale or other disposition of such firearm or ammunition \u2026.\u201d  Generally, to convict someone for making a false statement on the ATF  Form 4473, the prosecutor must establish beyond a reasonable doubt  that the seller was a FFL; the defendant made a false statement or used  a false identification while acquiring or attempting to acquire a firearm; the  defendant knew the statement or identification was false; and the false  statement or identification was intended to, or likely to, deceive a FFL  about the lawfulness of the firearm sale. EOUSA officials said that  prosecutions for falsifying information are very challenging because of the  requirement to prove intent, and can become further complicated  because the purchaser may not know that he or she is prohibited and was  not intentionally trying to deceive an FFL. The officials added that these  cases are not appealing to judges and juries from a public safety  standpoint. They also said that they find juries questioning why the case  is being prosecuted in instances when the individual did not get the gun,  resulting in juries refusing to convict these individuals or jury  nullification.", "EOUSA officials said that the number of prosecutions of firearms denials  can be low, particularly in standard denial cases where the system  worked and the subject did not obtain a firearm, and because of the  priority often given to other cases involving gun violence. EOUSA officials  said that delayed denial cases can require less effort to prosecute than  standard denials, since USAOs do not need to prove an individual\u2019s intent  in making a false statement in purchasing the firearm, only that the  prohibited individual is intentionally in possession of a firearm. For  instance, generally, to obtain a conviction for a felon in possession of a  firearm, the prosecution must establish beyond a reasonable doubt that  the defendant had previously been convicted of a crime punishable by  imprisonment for a term of more than 1 year; the defendant knowingly  possessed a firearm; and the firearm previously passed in interstate  commerce. However, officials from our six selected field divisions said  that as long as a firearm is recovered from the prohibited person and the  person is cooperative, ATF is unlikely to refer delayed denial  investigations to USAOs for prosecution."], "subsections": []}]}, {"section_title": "ATF Has Not Assessed Field Divisions\u2019 Use of Warning Notices in Lieu of Prosecution", "paragraphs": ["While officials from all six selected ATF field divisions said that  investigating the increasing number of denial cases can be time-intensive  and require use of their limited resources, ATF headquarters has not  assessed the extent to which field divisions\u2019 use warning notices in lieu of  prosecutions or whether any policy changes could enhance their use as a  deterrence tool."], "subsections": [{"section_title": "Increase in Denial Investigations", "paragraphs": ["Standard denial cases ATF referred to field divisions for investigation  grew by more than 200 percent ATF-wide from fiscal years 2011 through  2017, and by more than 300 percent within our six selected field divisions.  Moreover, delayed denial referrals grew by about 70 percent ATF-wide  and by 70 percent within our six selected field divisions during this period.  Figure 5 shows the increase in standard and delayed denial cases ATF  referred to its field divisions for investigation from fiscal years 2011  through 2017.", "At the same time, ATF data show that special agent staffing across our  six selected field divisions collectively only increased by one special  agent from fiscal years 2011 through 2017. Officials from five of our six  selected field divisions said that the increasing number of NICS denial  cases received from ATF headquarters for investigation has posed a  burden on staff resources.", "Field divisions are required to investigate all delayed denial referrals, but  have discretion as to how thoroughly they investigate standard denial  referrals. Officials from all six selected field divisions said that, to date,  one of the ways they have been able to adjust to the increasing volume of  standard denial referrals has been by closing them with limited  investigation or sending warning notices to the prohibited individuals.  However, based on trends over the last 7 years, the number of standard  and delayed denial referrals for investigation could continue to increase.  In addition, the Attorney General\u2019s March 2018 memo to USAOs directing  that the prosecution of false statements on the ATF Form 4473 be  enhanced may impact how, and how many, denial investigations ATF  performs."], "subsections": []}, {"section_title": "Use of Warning Notices", "paragraphs": ["For all delayed denials, ATF policy requires field divisions to contact  prohibited persons within three days of being assigned the case to advise  the person of their prohibition. According to ATF headquarters officials,  warning notices are intended to inform the individual that he or she is  prohibited from purchasing a firearm, should not attempt to purchase a  firearm again, and may be subject to prosecution. For delayed denials,  ATF policy also requires field divisions to send a written warning notice in  all instances where the special agent is unable to make contact with the  prohibited person within 3 business days, or when other circumstances  exist, such as extraordinary distance or inclement weather. Officials from  our six selected field divisions said that while warning notices for delayed  denials are not always delivered in writing, all individuals involved in  delayed denials receive a warning in some form\u2014e.g., written, oral, or via  text message\u2014from the ATF special agent investigating the denial.  Officials from one field division said that they send text messages to  denied purchasers in lieu of warning letters because they are less  intimidating to prohibited persons, the texts save time and money, and  are more effective in helping retrieve firearms.", "For standard denials, warning notifications are not required. Specifically,  ATF policy provides that field divisions may send warning notices to  denied persons \u201cwhere appropriate and in lieu of prosecution.\u201d  However, in instances where aggravating circumstances exist, such as if  the prohibited person committed a violent felony or made multiple  attempts to purchase firearms, ATF policy provides that consideration  should be given to hand-deliver the notice to the prohibited person. The 6  selected field divisions varied in the extent to which they sent warning  notices related to standard denials. Specifically, three of the six divisions  had established a practice to send notices to all prohibited persons.  Officials from these three divisions said that such letters are intended to  (1) educate the denied person that he or she is prohibited from  purchasing firearms, (2) deter the individual from attempting future  purchases, and (3) serve as evidence during any subsequent  investigation or prosecution that the individual knew that he or she was  prohibited from purchasing a firearm. Officials from one of these field  divisions also said that the practice of addressing standard denials by  sending warning notices is a good use of limited resources while  addressing a public safety concern.", "Of the three field divisions that routinely send warning notices for all  standard denials, two send them via certified mail, while the other sends  letters via standard mail due to limited resources. According to officials  from these three field divisions, the costs associated with mailing warning  notices also includes staff time to locate recipient information and mail the  letters, in addition to supervisory review, as is done in at least one field  division. A group supervisor in one of these field division\u2019s sub-offices  said that while their field division primarily uses certified mail, the sub- office hand delivers these notices for all standard and delayed denials.  Officials from one of these three field divisions said that they confirm the  prohibited status of individuals before sending the warning notices, while  officials at another field division said they do not confirm the prohibited  status prior to mailing but that the notice includes information on how to  appeal the denial. These three divisions received an average of about  800 standard denials in fiscal year 2017.", "Officials from the three divisions that do not routinely send warning  notices for standard denials said that notices are only sent for standard  denials in rare cases. Such cases can include when there are aggravating  circumstances. Criminal activity or not cooperating with the ATF\u2014after  the attempted purchase are examples of aggravating circumstances.", "Officials from one field division stated that warning notices were used for  standard denials by individual agents in the past, but there was no field  division policy to do so routinely. Officials from another field division said  that due to limited resources, the decision was made to not send these  notices, though they said the notices could be an effective deterrent for  prohibited individuals from trying to possess a firearm or attempting to  purchase from an FFL. ATF headquarters officials said that under ATF  policy, the decision whether to send warning notices for all standard  denials is made by individual field divisions. Therefore, they did not  know the extent to which each of the 25 divisions used this practice.", "Standards for Internal Control in the Federal Government call on federal  managers to design control activities to achieve an agency\u2019s objectives.  These controls can include using quality information to make informed  decisions, such as how best to achieve ATF\u2019s objectives given limited  resources; evaluating ATF\u2019s performance in achieving key objectives; and  addressing risks, including its limited resources to investigate or  prosecute denial cases. While ATF policy provides that individual field  divisions determine their use of warning notices, ATF headquarters is  uniquely positioned to assess use of the notices across all field divisions.  Assessing the extent to which ATF field divisions use warning notices for  standard denials would provide ATF headquarters with greater  awareness regarding agency-wide efforts to use the notices as a  deterrence tool in lieu of prosecution. As assessment could also better  inform ATF as to whether the application of certain practices to all field  divisions could be a feasible and effective use of limited investigative  resources, given the small number of standard denial cases prosecuted  each year, and revise related policies if appropriate."], "subsections": []}]}, {"section_title": "Selected States Reported That Denial Investigations Compete with Other Investigations and Cases Can Be Difficult to Successfully Prosecute", "paragraphs": [], "subsections": [{"section_title": "State Denial Investigations", "paragraphs": ["State police supervisors in all three states (Oregon, Pennsylvania, and  Virginia) that investigate denials said investigators are generally assigned  to denial investigations as their time permits. Supervisors also said these  investigations are generally considered time consuming and can  sometimes impact other duties. State police supervisors said that these  investigations can be disruptive to operations by taking troopers away  from their core duties, such as traffic enforcement and response, except  where troopers are dedicated to conducting these investigations. State  troopers echoed this point, adding that denial investigations are difficult to  conduct given the amount of documentation needed for prosecution when  they have other duties. Local law enforcement officials in Oregon and  Pennsylvania also said that denial investigations are disruptive, as they  are usually forwarded to officers when they are on patrol, sometimes  many weeks or months after the firearms background check was initiated.", "Investigators in all three states also said they face challenges assisting  with prosecutions of denied persons, including gathering the necessary  documentation to prove the individual knew they were prohibited. For  example, Virginia troopers said that obtaining records on out-of-state  convictions and mental health prohibitions, and locating documentation  on older convictions, can be especially difficult. Troopers in Oregon and  Virginia commented that in their experience, there can be some degree of  inaccuracy in the criminal records in their state. For example, they said  that arrests and prosecution results may not be accurately reflected in the  criminal history of the denied person. When the trooper checks the actual  record, it is sometimes discovered that the person is not prohibited. A  Virginia trooper said this is especially common for juvenile convictions.", "Oregon and Virginia officials said they have been able to mitigate these  challenges by utilizing specialized troopers to conduct denial  investigations. These troopers are taken off line and generally perform  denial investigations almost exclusively. In both states, these specialized  troopers conduct a large portion of the denial investigations in these  states or in designated locations within the state. Virginia State Police  officials told us that some areas within police divisions that receive a high  volume of denials for investigation use specialized troopers that spend all  or most of their time investigating firearms denials. These Virginia  troopers reported that they have become more efficient than troopers that  do not specialize because the repetition of performing multiple  investigations improves the learning curve and the quality of their  investigations. Virginia State Police officials said that while any area may  assign troopers to work exclusively on denial investigations, most areas  either cannot afford to remove a trooper from road coverage or do not  investigate enough cases involving persons denied firearms to make it an  effective use of resources. According to Oregon officials, five specialized  troopers in the state investigated more than 1,100 of the almost 2,600  firearms denials referred for investigation in 2016. These troopers  covered the denials for several metropolitan areas in Oregon and cited  efficiencies in conducting and referring investigations for prosecution."], "subsections": []}, {"section_title": "State Denial Prosecutions", "paragraphs": ["State prosecutors we interviewed in the three states that conducted  denial investigations said the primary challenge in prosecuting denial  cases is in gathering the evidence needed to prove that the individuals  knew they were prohibited. They added that the difficulty in gathering  evidence for certain prohibited categories also make those prosecutions  more difficult. For example, obtaining records related to old convictions,  out of state convictions, and mental health prohibitions are common  challenges. There are also challenges due to record retention policies for  specific prohibitions. For example, a Virginia prosecutor said that  prosecuting denials for misdemeanor crimes of domestic violence  convictions in Virginia that are more than 10 years old is difficult because  these records may be destroyed under state law after 10 years. Oregon  state investigators we interviewed said that, under state statutes,  successfully prosecuting someone for falsifying information on firearms  purchase forms requires proving that the person \u201cknowingly and willingly\u201d  falsified information on the form, which can be difficult to prove. One  Pennsylvania investigator also said that denied individuals may not  understand the questions on the forms and genuinely believe they are not  prohibited.", "Prosecutors we interviewed who worked with specialized investigators  reported that they have worked closely with these troopers to facilitate  successful prosecutions. For example, an Oregon prosecutor we spoke to  utilizes a case reporting process where the trooper advises the  prosecutor of the strong cases to be considered for prosecution. This  allows prosecutors to focus their attention on the cases more likely to be  successfully prosecuted. In one Virginia county, the prosecutor\u2019s office  provides troopers a checklist of important points the trooper should  address to make a strong case for prosecution. Virginia prosecutors in  jurisdictions served by a specialized trooper said that they confer with the  troopers regularly and are able to successfully prosecute a high  percentage of the denial investigations these troopers conduct."], "subsections": []}]}]}, {"section_title": "Firearms Denial Investigations and Prosecutions Are Generally Based on Aggravating Circumstances in Addition to Criminal Records", "paragraphs": ["While individuals are denied firearms purchases because they are  prohibited from possessing firearms under federal or state law, federal  denial investigations and prosecutions are generally based on additional  aggravating circumstances. The three states that investigate denial cases  have established priorities for investigating and prosecuting such cases."], "subsections": [{"section_title": "ATF Investigations Most Frequently Involve Convicted Felons, but Aggravating Circumstances Are Generally Needed for Prosecution Referrals", "paragraphs": ["The types of standard and delayed denial cases investigated by ATF field  divisions and referred to USAOs for prosecution are determined by  multiple factors, including the prohibiting category (e.g., felony  conviction), criminal history of the denied individual, USAO investigative  referral criteria, and the nature of the ATF investigation itself.", "Of the almost 21,000 delayed denials the ATF DENI Branch referred  to ATF field divisions for investigation from fiscal years 2011 through  2017, 32 percent were denied for being convicted felons, 23 percent  for a qualifying misdemeanor crime of domestic violence, and 19  percent for being an unlawful user of, or addicted to, a controlled  substance. As discussed earlier, all delayed denials are referred to  the appropriate field division for investigation.", "Of the almost 36,000 standard denials the ATF DENI Branch referred  to field divisions for investigation during this time period, 36 percent  were denied for being convicted felons, 30 percent for a qualifying  protective order, and 16 percent for a conviction for a qualifying  misdemeanor crime of domestic violence. For standard denials,  USAO investigative referral criteria, not the prohibiting category itself,  determines which cases are referred for investigation.", "From fiscal years 2015 through 2017, the number of delayed denials  referred to ATF field divisions for investigation increased by 46 percent  (from 2,742 to 3,993). This increase was driven by cases in which the  prohibiting category was drug-related, which increased by about 300  referrals (60 percent increase); involved misdemeanor crimes of domestic  violence, which increased by about 250 referrals (34 percent increase);  and involved felony convictions, which increased by about 280 referrals  (34 percent increase). Also during this period, the number of standard  denials referred to ATF field divisions for investigation increased by 30  percent (from 6,715 to 8,717). This increase was driven by misdemeanor  crimes of domestic violence, which increased by about 626 referrals (62  percent increase), and felony convictions, which increased by about 659  referrals (25 percent increase). Cases in which the prohibiting category  was related to mental health or protection orders also increased by 42  percent (about 200 referrals) and 21 percent (about 300 referrals),  respectively. Figure 6 shows the breakdown of investigation referrals by  prohibiting category from fiscal years 2011 through 2017.", "The types of denial cases that ATF\u2019s DENI Branch refers to field divisions  for investigation are determined by the USAO referral criteria established  in the district in which the purchase took place. Based on our analysis of  the standard denial referral criteria for the 34 USAO districts that cover  the six selected ATF field divisions as of February 2017, there are  similarities in the criteria used across these USAO districts. For example,  most of the 34 districts direct ATF to refer standard denials for  investigation if the cases involved recent convictions for violent crimes or  convictions for misdemeanor crimes of domestic violence. Also, about  two-thirds of the 34 USAO districts direct ATF to refer cases in which  prohibited persons have made two or more attempts to buy firearms while  prohibited. In addition to the 10 prohibitions listed under federal law, other  referral criteria used by USAO districts include prohibited individuals who  are also suspected terrorists or associates of suspected terrorists; known  gang members or members of criminal organizations; or suspected of gun  trafficking.", "Aggravating Circumstances Resulting in a  Prosecuted Firearms Denial Case  An individual attempted to purchase a firearm  while under indictment for first degree  robbery, in which the subject used a woman  to set up an exchange of sex for marijuana.  During the exchange, the subject robbed and  shot the victim. The subject was charged with  two felonies\u2014falsifying information on the  background check form and illegal possession  of a firearm while under indictment. The  subject pled guilty to both charges and was  sentenced to 24 months in prison and 3 years  supervisory release.", "The denial cases ATF field divisions refer to USAOs for prosecution  generally include aggravating circumstances in addition to the factors  discussed above related to an individual\u2019s criminal history. According to  ATF officials in one field division, these aggravating circumstances could  include violent felonies or multiple serious offenses in a short period of  time, especially if these occurred in close proximity to the timing of the  attempted firearms purchase. For example, a prohibited person with  multiple armed robberies or actively involved in gang activity could be  considered to have aggravating circumstances. The officials described a  recent incident where an individual was found in possession of PCP three  times in a span of a couple months, then bought a firearm and fired it at  an occupied dwelling. This was considered a clear example, and the  individual was prosecuted for making a false statement as well as illegal  possession of a firearm stemming from the delayed denial. Additional  examples provided by ATF officials from our 6 selected field divisions of  recent cases ATF referred for prosecution include:", "An individual purchased a firearm from an FFL and sold that firearm to  a prohibited person. The original purchaser was later denied (delayed  denial) due to a prior drug conviction. The purchaser was charged  with illegally possessing a firearm, making a false statement in the  purchase of a firearm, and making a \u201cstraw purchase,\u201d which is when  an individual illegally purchases a firearm on behalf of another person.  According to ATF, this individual was sentenced to 1 year in federal  custody and 3 years of supervisory release.", "An individual was charged with making false statements in the  attempted purchase of a firearm. The individual did not receive the  firearm as a result of a standard denial. During the investigation, the  subject was not cooperative, and had an extensive criminal history in  multiple states dating back 35 years, including several contacts with  law enforcement on domestic violence and protective orders. The  subject was charged with falsifying a background check form, to which  he pled guilty and was sentenced to 12 months in prison.", "An individual under indictment for armed criminal action committed  first-degree robbery in which he used a woman to set up an exchange  of sex for marijuana. During the exchange, the subject robbed and  shot the victim. The subject later attempted to purchase a firearm and  was able to obtain the firearm as a result of a delayed denial. Later, a  completed NICS check revealed that he was a prohibited person for  being under indictment, and was subsequently arrested later that  week. The subject was perceived as a threat to the community and  charged with two felonies, falsifying the background check form, and  illegal possession of a firearm while under indictment. He pled guilty  to both charges and was sentenced to 24 months in prison and 3  years supervisory release.", "Of the 12 examples from our six selected field divisions provided, 9  involved delayed denials and 3 involved standard denials. Eleven of the  12 cases have been completed as of May 2018. Of the 9 cases charged  in federal court, 1 case was declined by prosecutors, and the other 8  resulted in guilty pleas. These guilty pleas resulted in penalties ranging  from time served to 33 months in prison, along with additional  punishments such as probation, fines, and mandated treatment  programs. Of the 3 cases charged in state court, 2 resulted in guilty pleas  and 1 had not been resolved as of May 2018. Of the 10 cases pursued by  federal and state prosecutors that resulted in guilty pleas, 7 cases  involved a subject with a history of drug crimes, 6 involved violent crimes,  and 4 involved domestic violence. Additional information on these case  examples can be found in appendix VI.", "According to officials from our six selected ATF field divisions, standard  denial referrals may meet USAOs criteria and be referred to a field  division for investigation, but almost always do not have prosecutive merit  based on coordination with prosecutors. The officials noted that USAOs  generally do not accept standard denials that only involve a violation  related to falsified information. The officials also said that minor crimes,  such as burglary, from decades ago would likely not be a high enough  threat for prosecution. For delayed denial cases, officials from the 6 field  divisions said that if a firearm is retrieved or otherwise recovered from the  prohibited person\u2014and the person is cooperative\u2014ATF is unlikely to  refer these investigations to USAOs for prosecution unless there are  aggravating circumstances."], "subsections": []}, {"section_title": "Oregon, Pennsylvania, and Virginia Investigate a Large Proportion of Firearms Denials and Prioritize Certain Prohibitions, but a Small Number are Prosecuted", "paragraphs": [], "subsections": [{"section_title": "State Investigations", "paragraphs": ["The types of denial cases that are referred for investigation in Oregon,  Pennsylvania, and Virginia are determined in part by the priorities the  states have set for such referrals. For Oregon and Pennsylvania, which  investigate all firearms denials, these priorities include cases involving  stolen guns, purchasers with active warrants, active protection orders,  and prior felony convictions. In these states, convictions of a crime  punishable by more than one year (i.e. felony convictions) are the most  common reasons for denial. Virginia investigates a subset of all denials  based on risk, and has a policy to prioritize denials that is similar to  Oregon and Pennsylvania\u2014active warrants, active protection orders, as  well as mental health issues.", "According to Virginia state police officials, denials can be referred for  investigation if they involve one or more of a set of prohibiting  categories. In 2017, these amounted to about 50 percent of the almost  3,600 denials recorded. Virginia state police officials said that  investigations tend to be handled in the order they arrive, regardless of  prohibited category. Two troopers said that Virginia residents with  exclusive Virginia criminal histories jump to the top of their lists because  the records for these individuals will be easiest to obtain. The  investigators in these Virginia jurisdictions said they tend to refer most of  their investigations for prosecution, regardless of the prohibited category,  if there is evidence to support the falsified information charge.  Pennsylvania investigators and supervisors generally said that no priority  is given to the denial investigation referrals they receive. They said  investigations tend to be handled on a first in first out basis, regardless of  the prohibiting category of the denied person. One supervisory trooper  said that since these investigations are usually sent to the field 2 to 3  months after the transaction has occurred, they are generally considered  low priority when compared to assaults, robberies, and other crimes a  trooper investigates. Oregon state police management and troopers told  us they prioritize cases involving stolen guns, purchasers with active  warrants, active protection orders, and prior felony convictions. Local law  enforcement agencies that investigate denial cases in Oregon told us  they do not prioritize any cases\u2014except for active warrants\u2014handling  them in order as they are received.", "Investigators in all three states said that the criminal histories of those  investigated tend to be minor. For example, outside of the prohibiting  offenses that led to persons being denied, most of these individuals\u2019  criminal histories tend to consist of old prohibiting offenses like non- violent felonies, or drug possession, with few gun violations noted.  Investigators in these three states said that this may be because  individuals with the most severe criminal histories do not attempt to  purchase firearms through FFLs. However, one investigator said that  individuals who were denied based on misdemeanor crimes of domestic  violence tend to have multiple charges in their background."], "subsections": []}, {"section_title": "State Prosecutions", "paragraphs": ["State investigators said prosecutors\u2019 interest or willingness to prosecute is  a key determinant for whether a case is referred for prosecution. One  investigator also said he may check with prosecutors early in an  investigation to determine the likelihood of prosecution. According to  Oregon troopers, denial investigations that are recommended for  prosecution often involve convictions for felonies, misdemeanor crimes of  domestic violence, and restraining orders. The troopers said that the  strength of the case\u2014including the adequacy and availability of proof the  individual knew he or she was prohibited and falsified information\u2014 determines which cases are referred to prosecutors.", "Prosecutors from all three states said that they generally pursue cases  against individuals who have indications of violence, including protection  orders, domestic violence, and felony convictions. Individual prosecutors  also identified specific prohibiting categories, based on public safety  concerns, as their priorities for prosecution. An Oregon prosecutor said  there is a good public safety argument for prosecuting denials based on  domestic violence, mental health, and felony prohibitions when there is  probable cause. However, for other prohibiting categories, such as being  on probation or being a drug user, the officials said that prosecuting these  denial cases is not very useful based on the amount of effort required to  prosecute. A Virginia prosecutor cited domestic violence and protection  orders as being prosecuted most often. A Pennsylvania prosecutor said  that his county prosecutes most of the referrals it receives, with denials  for multiple instances of driving under the influence, mental health, and  domestic violence being the most common.", "State prosecutors we interviewed also said the cases they accept for  prosecution may be influenced by the fact that certain types of cases are  harder to prove. For example, they said that denials involving mental  health, drug users, and misdemeanor crimes of domestic violence are  often harder to prove, due in part to the difficulty in obtaining related  records. The officials added that cases involving out-of-state and older  convictions are also not prosecuted as often as other cases due to the  difficulty in obtaining records. State prosecutors also said that there are  certain circumstances where prosecutors are reluctant to pursue  prosecution\u2014such as cases where prohibitions occurred as a juvenile\u2014 where a firearms denial conviction would establish an adult criminal  record where no criminal record had previously existed.", "According to the prosecutors we contacted, the criminal histories of  denied individuals generally involved minor violations other than the  prohibiting offense. Prosecutors said the criminal history of the individual  can play a role in whether felony charges are filed, as opposed to  misdemeanor charges, and for sentencing. For example, one Virginia  prosecutor said that he will file felony charges for a denial case only for  cases in which an individual was denied based on an active protection  order or serious felony in his county. Another Virginia prosecutor said that  there is consideration of both criminal history\u2014convictions for violent  felonies or misdemeanors, especially\u2014as well as multiple arrests where  no conviction resulted, when deciding whether to charge the denied  person with a felony or misdemeanor. The prosecutor noted, however,  that denial cases tend not to be violent felons or hardened criminals.  According to a Pennsylvania prosecutor, almost all cases are ultimately  charged with misdemeanors. The prosecutor noted, however, that the  state recently brought multiple felony charges against a person who was  denied a firearms purchase based on a murder conviction in 1973.", "These prosecutors also stated that they often try to plead denial cases  whenever possible, as these cases often do not result in convictions  when they go to trial. For example, a prosecutor in Pennsylvania told us  about one denial case that went to trial where the jury found the denied  person not guilty. The defendant was prohibited from purchasing a  firearm based on convictions for repeatedly driving while under the  influence, a misdemeanor with a potential prison term of 5 years in that  state. The attorney said the jury believed that it was a pointless  prosecution for a firearm\u2019s denial offense. In Virginia, one prosecutor also  described a case where a person was denied because of a mental health  prohibition, and the person was found not guilty of the charges of  falsifying information when attempting to purchase the firearm. He  attributed this to a sympathetic defendant and jury reluctance to impose a  criminal conviction on an individual without a criminal record.", "Further, state officials said that the penalties handed down when denied  individuals are convicted tended to be minor. The Oregon prosecutors  said that common penalties are fines (usually in the hundreds of dollars)  and probation ranging up to 1 year depending on the criminal background  of the denied person. According to a Pennsylvania state police official, in  some instances the charges are pled down to a lesser violation, such as  disorderly conduct, which result in an approximately $300 fine. The two  Pennsylvania prosecutors we interviewed said that most denial  prosecutions in their jurisdictions are pled down to misdemeanors,  eliminating the need for a trial. According to the prosecutors, common  penalties for misdemeanor convictions include probation and the  requirement to pay court costs (upwards of $1,000 in one county). The  prosecutors added that there is an occasional jail sentence for denied  felons with substantial criminal records that can result in about 1 to almost  2 years in jail. Prosecutors across the states said that they try to plead  cases\u2014thus avoiding trial\u2014whenever possible. One Pennsylvania  prosecutor said that cases without strong evidence that cannot be pled  are sometimes dropped because conviction would be difficult. Another  Pennsylvania prosecutor said jury apathy in one strong case led to fewer  denial cases. Virginia prosecutors said that most convictions are for  misdemeanor charges and result in probation, fines, and court costs.  They did say, however, that jail time has resulted for denied individuals  with violent felony convictions."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["At the federal level, the number of firearms denial cases ATF has referred  to its field divisions for investigation has increased substantially over  recent years, which has placed a burden on field division resources. At  the same time, field division resources have not increased, and the  number of USAO prosecutions remains low\u2014totaling 12 in fiscal year  2017. Assessing the extent to which ATF field divisions use warning  notices for standard denials in lieu of prosecution would provide ATF  headquarters greater awareness of agency-wide deterrence efforts, and  better inform the agency as to whether any policy changes are needed."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We recommend that the Deputy Director, Head of the Bureau of Alcohol,  Tobacco, Firearms and Explosives assess the extent to which ATF field  divisions use warning notices for standard denials in lieu of prosecution  and determine whether any policy changes are needed.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOJ for review and comment. DOJ  concurred with our recommendation to ATF and provided technical  comments, which we incorporated in this report where appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Attorney General, the Deputy Director, Head of the  Bureau of Alcohol, Tobacco, Firearms and Explosives, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512- 8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions are  listed in appendix VII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["Our objectives in this report were to (1) describe the extent to which  federal and selected state law enforcement agencies investigate and  prosecute firearms denial cases; (2) examine the challenges, if any, that  federal and selected federal and selected state law enforcement agencies  face in investigating and prosecuting firearms denial cases; and (3)  describe the circumstances that lead to the investigation and prosecution  of persons denied firearms.", "To describe the extent that federal and selected state law enforcement  agencies investigate and prosecute firearms denials, we reviewed  published reports regarding federal and state law enforcement efforts to  investigate and prosecute firearms denials. For federal efforts, we  requested data from the Federal Bureau of Investigation\u2019s (FBI) National  Instant Criminal Background Check System (NICS) regarding firearms  denials provided to the Bureau of Alcohol, Tobacco, Firearms, and  Explosives (ATF) by state and prohibiting category for fiscal years 2011  through 2017. We reviewed the internal controls in place for these data  and determined that the data were reliable for our purposes. We  requested and received data from the ATF Automated National Instant  Criminal Background Check System Referral Application and the NForce  Case Management System that showed how many of these denials, both  standard and delayed, were forwarded from ATF\u2019s Denial Enforcement  NICS Intelligence (DENI) Branch to ATF field divisions, broken out by the  prohibiting category of the denials. This provided us the total count of  denials that ATF may investigate nationwide. To assess the reliability of  these data we reviewed internal controls and the data quality assurance  program of ATF. We determined that these data were reliable for the  purpose of our reporting objectives.", "To examine federal prosecutions of denied persons, we requested  information from ATF\u2019s case management system that identified the NICS  cases that were prosecuted, including those instances where a conviction  was recorded. For state investigations and prosecutions, we selected the  13 states that perform their own background checks for all firearms  transactions and searched their state police and state agency websites to  identify the state\u2019s background check units, or staff associated with this  function and inquired about their policy regarding the investigation of  persons denied firearms purchase. From these contacts we determined  that 10 of these selected states did not perform investigations, while 3  point-of-contact (POC) states did investigate these denials.", "We analyzed data from the state police in Oregon, Pennsylvania and  Virginia that identified the number of firearms denials recorded, the  prohibiting category of the denials, and the number of these denials  referred to state or local law enforcement for investigation. To assess the  reliability of these data we interviewed knowledgeable individuals about  the procedures for creating these data, and reviewed the internal controls  in place within these systems. We determined that this data was reliable  for the purpose of our reporting objectives. We spoke to state and local  investigators and prosecutors in these states to discuss the investigative  processes followed and the frequency of prosecution. Though these  prosecutors tended to lack hard data on the number of these cases  prosecuted and the outcome of these prosecutions, they were able to  share their experiences prosecuting these cases, and to estimate the  approximate quantity of these cases that have been addressed by their  offices. We believe their experiences provide an understanding of the  demands these prosecutions place on prosecutors\u2019 offices and the value  these prosecutions have for the jurisdiction in question.", "To describe the challenges, if any, federal and selected state law  enforcement agencies face in investigating and prosecuting firearms  denials, for federal denial investigations, we used the denial referral data  provided by ATF to identify the field divisions that received the most  denial referrals for investigation. We found that 6 field divisions received  about 60 percent of the total ATF standard denial referrals over the 2011  through 2017 fiscal year period. These six field divisions also received  more than half of the delayed denial referrals distributed to the 25 ATF  field divisions over that time period. To assess the reliability of the referral  data and the case data, we discussed the internal controls in place with  knowledgeable officials and received a copy of the ATF quality assurance  plan for review. We determined that the data was reliable for the  purposes of our reporting objectives.", "We contacted officials in these six field divisions and discussed the  investigative process for standard and delayed denial investigations as  well as the challenges these investigations posed to the ATF staff in  these field divisions. We also evaluated ATF\u2019s investigative procedures  and internal controls in place against the Standards for Internal Control in  the Federal Government. We also discussed the types of cases that  each field division referred to the appropriate USAO for prosecution, and  were provided detailed examples from ATF headquarters of these denial  cases for each of the six field divisions. We spoke to EOUSA officials to  discuss the circumstances that would lead a USAO to prosecute a  firearms denial and the challenges faced in these prosecutions. For state  denial investigation challenges we spoke to state troopers and local law  enforcement to learn about the procedures for conducting these  investigations, the challenges that investigators face, and how and when  these firearms denial investigations are referred to prosecutors. We also  spoke with multiple prosecutors from each of these states and discussed  their offices\u2019 policies for accepting these denial cases, how often these  cases were prosecuted in these localities and the general outcome of the  cases. Though we did not speak to a representative sample of  prosecutors across our selected states, we believe their views provide  insights into the types of challenges faced by prosecutors in those states.", "To identify the circumstances that lead to investigations and prosecutions  of firearms denials, we reviewed federal denial investigations by visiting  the ATF DENI Branch, the office that uses USAO criteria to screen  federal NICS denials for referral to ATF field divisions. There, we  observed how denials are screened and discussed internal controls. We  also requested USAO referral criteria from the 34 USAO districts that  comprise the six ATF field divisions that received the most denial referrals  from 2011 to 2017. We also analyzed standard and delayed denial  referral data that captured the prohibited categories of the referrals to  those field divisions. Further, we analyzed standard and delayed denial  case data for the investigations that were referred for prosecution for  fiscal years 2015 through 2017, and those that were ultimately  prosecuted. To assess the reliability of the data we discussed the internal  controls in place for entering the data and the quality assurance plan in  place after data was entered. We determined that the data was reliable  for the purposes of our reporting objectives.", "Officials from our 6 selected ATF field divisions also provided examples of  denial cases investigated and referred for prosecution. These case  examples included the specific circumstances that convinced the field  division to investigate and refer the case for prosecution. For these  federal denial prosecutions, we identified firearms denial cases in PACER  and LEXIS for the years 2015, 2016 and 2017 to identify the specific  circumstances of the cases prosecuted, the statutes used to charge the  defendants, and the outcome of the cases. We also spoke to EOUSA  officials and discussed the reasons that certain denial cases were  prosecuted while thousands of others are not. For state denial  investigation circumstances, we spoke with state and local investigators  from the three selected states that investigate and prosecute denials and  discussed the circumstances\u2014to include state priorities, the prohibiting  category and criminal history of those investigated\u2014that resulted in state  firearms denial to be referred for prosecution. We also spoke with multiple  prosecutors from the same states and asked them to describe the  characteristics of cases they are more likely to prosecute, as well as  those they are less likely to prosecute. While we did not speak to a  representative sample of investigators and prosecutors from these states,  we believe their experiences and viewpoints provide insights into how  these investigations and prosecutions are conducted and prioritized in  these states.", "We conducted this performance audit from March 2017 through  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Bureau of Alcohol, Tobacco, Firearms and Explosives Form 4473", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Investigation and Prosecution of Firearms Denials in Oregon", "paragraphs": ["This appendix includes information on the investigation and prosecution  of individuals denied firearms purchases in the state of Oregon."], "subsections": [{"section_title": "Firearms Background Checks", "paragraphs": ["In the state of Oregon, the Oregon State Police (OSP) Firearms Unit  serves as the point of contact responsible for conducting background  checks for firearms transactions. OSP\u2019s Firearms Instant Check System  (FICS) unit conducts criminal background checks to determine the  eligibility of individuals attempting to transfer or purchase a firearm.  Oregon law requires that gun dealers request that the OSP conduct a  criminal history record check on the purchaser before a firearm is  delivered to a purchaser. Dealers may submit these requests either by  telephone or online. The FICS unit determines from criminal records and  other available information whether the purchaser is disqualified under  state or federal law from completing the transfer or is otherwise prohibited  by state or federal law from possessing a firearm.", "Generally, for gun shows, Oregon law prohibits a transferor who is not a  gun dealer from transferring a firearm unless the transferor requests a  criminal background check prior to completing the transfer, receives a  unique approval number from OSP indicating that the recipient is qualified  to complete the transfer, and has the recipient complete the form for  transfer of a firearm at a gun show, or completes the transfer through a  gun dealer. Generally, for private firearms sales, Oregon law requires a  transferor to complete the transfer of a firearm to a transferee through a  gun dealer. Prior to the transfer of the firearm, both the transferor and  the transferee must appear in person before a gun dealer, with certain  exceptions, with the firearm and request that the gun dealer perform a  criminal background check on the transferee.", "Process for Conducting a Background Check  When a FICS background check is requested, Oregon law requires the  seller to provide information about the firearm\u2014so OSP can ensure it has  not been reported stolen\u2014and the purchaser in order to conduct a  criminal history check. If the purchaser is qualified, a unique approval  number is provided to complete the transaction. The dealer then enters  this number on the Bureau of Alcohol, Tobacco, Firearms, and Explosives  (ATF) background check form (Form 4473), and a thumbprint form, which  is attached to the Form 4473 and retained for 5 years. By statute, if OSP  is unable to determine if the purchaser is approved or denied within 30  minutes, OSP is required to notify the dealer and provide an estimate of  when the check will be completed. These checks are placed in a  pended/delayed status until sufficient record information can be obtained  to complete the request.", "Federal law provides that if the FBI or state agency cannot complete a  background check within 3 business days and make a final determination  (i.e., proceed or denied), the Federal Firearms Licensee (FFL) may  transfer the firearm pursuant to federal law, unless state law provides  otherwise. Regardless of the FFL\u2019s decision to transfer or not transfer  the firearm, OSP will continue to research missing information in order to  complete the background check request and provide either an approval  number or notice that the person is denied for the FFL\u2019s records.  Typically, a case is placed in \u201cpend\u201d status because the record is missing  information necessary to make a final determination. For example,  domestic violence charges may not include details about the relationship  needed to make a determination; state, local, or federal agencies may not  have the resources to respond in a timely manner to requests for missing  information; or it may be unclear whether prior charges were a felony or  misdemeanor.", "When a transaction is denied, it is either labeled a Priority FICS Call, and  is dispatched to the first available trooper or local law enforcement officer,  or it is labeled a Cold FICS Call, and dispatched to the appropriate OSP  office and next available trooper or local law enforcement officer. Priority  calls are those that involve a convicted felon, a serviceable warrant, a  stolen gun, or a restraining/stalking order. Oregon Executive Order 16-12  requires notification of certain officials after a transaction is denied if the  prohibited person is on probation, on parole or post-prison supervision,  subject to a court-issued release agreement or protective order, or  subject to supervision by a Psychiatric Security Review Board. Figure 7  shows the process for purchasing a firearm from a dealer in Oregon.", "According to OSP officials, 95 to 97 percent of background checks are  approved and less than 1 percent are denied within minutes of initiation,  while roughly 3 to 5 percent are placed in pend/delay status. According to  FICS officials, about 95 percent of pend/delay transactions are ultimately  approved.", "A challenge phone line is available for individuals who have been denied  or pended and wish to find out the reason, or to challenge a denial  determination. The gun dealer may be asked to fax the ATF form 4473  and thumbprint form to the FICS Unit to assist in the challenge process.  The purchaser is provided a reference number upon request to be used  to appeal the determination through the Federal Bureau of Investigation\u2019s  (FBI) National Instant Criminal Background Check System (NICS)  program."], "subsections": []}, {"section_title": "Denials and Prohibited Categories", "paragraphs": ["Oregon law prohibits individuals that have been convicted of certain  offenses from possessing firearms. For example, Oregon prohibits the  possession of a firearm by any person found to have mental illness and  subject to a court order for treatment or commitment that prohibits them  from purchasing or possessing a firearm as a result of mental illness.  Finally, an individual is prohibited if while a minor, was found to be within  the jurisdiction of the juvenile court for having committed an act which, if  committed by an adult, would constitute a felony or misdemeanor  involving violence and was discharged from the jurisdiction of the juvenile  court within the last 4 years. Table 2 shows Oregon firearms denials by  prohibiting categories.", "From 2011 through 2017, prohibited persons convicted of a felony was  the most common category among firearm denials, followed by  individuals on probation, individuals convicted of a violent misdemeanor  in the previous 4 years, and wanted persons. The two largest prohibiting  categories, convicted felons and individuals on probation, made up 32  percent and 24 percent, respectively, of all denials in 2016. In 2017,  convicted felons fell to 29 percent and individuals on probation increased  to 28 percent. Wanted persons, the fourth largest group in 2016, made up  10 percent of all denials that year, but fell to less than 5 percent of all  denials in 2017. Total firearms denials fluctuated during that span from  more than 2,400 denials in 2012, to 1,050 in 2017. From 2015 to 2017,  denials declined each year. Total firearm transactions fluctuated as well,  but generally increased during that span, increasing from less than  200,000 in 2011 to over 287,000 in 2017. From 2015 to 2017, denials fell  by 45 percent while total transactions increased by 9 percent."], "subsections": []}, {"section_title": "Investigations of Denials", "paragraphs": ["Oregon has had the policy of investigating all persons denied a firearms  purchase since 2014. Prior to 2014, OSP only investigated a small  percentage of persons denied firearms purchases, with a priority placed  on denied persons with an active warrant.", "According to OSP, the FICS unit provides the initial source of information  in a denial investigation packet, which generally includes but is not limited  to:", "FICS Transaction Report, which includes information regarding the  denied transfer, the subject firearm, the point of sale location, the  denied transferee, and the specific reason for denial;", "Oregon Criminal History data;  Interstate Identification Index information;", "FBI\u2019s NICS information; and", "Court records, police reports, or other records specific to the individual  transferee and the denial in question.", "Before an investigation is started, OSP must determine whether the  investigation should be conducted by OSP or local law enforcement. If the  jurisdiction where the transaction took place has an agreement with OSP  to receive training on firearms investigations, then the local law  enforcement agency will conduct the investigation. Otherwise, OSP will  conduct the investigation. In 2016, 26 percent of denial investigations  were conducted by local law enforcement, up from 22 percent in 2015.  The percentage covered by local law enforcement rose to 28 percent in  2017. In September 2017, three large local jurisdictions agreed to receive  firearms denial referrals from OSP. For the last three months of 2017 the  proportion of denials referred to local law enforcement was about 33  percent.", "OSP has five troopers dedicated full-time to FICS denial investigations in  specific locations across the state. These troopers have essentially been  pulled off of regular patrol duties and dedicated full-time to firearms denial  investigations, according to OSP officials. These troopers cover the  denials for most of the major metropolitan areas in Oregon. Except for the  highest priority cases, the denial cases are tasked to the dedicated FICS  troopers if the case falls within their geographical area of responsibility.  According to Oregon officials, the five specialized troopers in the state  investigated more than 1,100 of the almost 2,600 firearms denials  referred for investigation in 2016.", "OSP troopers are required through OSP executive leadership directives  to investigate each FICS case and submit the case, with all available  facts and evidence, to the appropriate District Attorney\u2019s Office for review,  regardless of findings. With this information, the prosecutor makes an  independent charging decision. When there is a recommendation  included with the investigator\u2019s report, it is most often to not file charges,  either because the evidence indicates no crime was committed, or  because there are specific mitigating circumstances involved in the case.  Finally, OSP generates a report tracking denial investigations and the  dispositions of any new criminal cases initiated after the investigation is  completed. There is no current mechanism for reporting actions taken  following an investigation and therefore OSP has no data regarding the  total number of prosecutions accepted and convictions obtained."], "subsections": []}, {"section_title": "Statutes Used", "paragraphs": ["According to OSP officials, potential state level criminal conduct  associated with denied firearm transfers are established in Oregon  Revised Statutes Chapters 162 and 166. These crimes include but are  not limited to:", "Or. Rev. Stat. \u00a7 162.075 False swearing.", "Or. Rev. Stat. \u00a7 166.250 Unlawful possession of firearms.", "Or. Rev. Stat. \u00a7 166.270 Possession of weapons by certain felons.", "Or. Rev. Stat. \u00a7 166.416 Providing false information in connection with  a firearm transfer.", "Or. Rev. Stat. \u00a7 166.418 Improperly transferring a firearm.", "Or. Rev. Stat. \u00a7 166.425 Unlawfully purchasing a firearm.", "Or. Rev. Stat. \u00a7 166.435 Firearm transfers by unlicensed persons;  requirements; exceptions; penalties.", "Or. Rev. Stat. \u00a7 166.470 Limitations and conditions for sales of  firearms."], "subsections": []}, {"section_title": "Prosecution of Firearm Denials", "paragraphs": ["Generally, Oregon\u2019s Constitution requires the election by districts of a  sufficient number of prosecuting attorneys (District Attorneys), who are  the law officers of the state, and of the counties within their respective  districts, and are to perform duties pertaining to the administration of  law. District Attorney responsibilities may include, but are not limited to,  representing the district in felony prosecutions, misdemeanor  prosecutions, grand jury proceedings, mental commitment hearings,  family abuse prevention hearings, and juvenile delinquency hearings.", "After a trooper completes an investigation, they submit a report to the  District Attorney\u2019s office. A prosecuting attorney then reviews the case  and decides whether to charge an individual or individuals with a crime.  When a case is not prosecuted, a rejection memo is provided to the  trooper that submitted the report. According to two Oregon county  prosecutors we interviewed, from late 2014 through 2017, their offices  accepted about 140 of the more than 700 firearms denial investigations  referred to their offices, with most prosecuted successfully. According to  OSP officials, the most common types of cases resulting in convictions  are related to misdemeanor domestic violence convictions, followed  closely by prior felony convictions. The officials said that a new working  group was created in 2016 to review gun relinquishment protocols in  domestic violence cases, review outcomes and make recommendations  to improve the safety of domestic violence survivors. With regard to  sentencing, these prosecutors said common penalties in firearms denial  cases include fines (usually in the hundreds of dollars), and probation  ranging up to 1 year, depending on the criminal background of the denied  individual.", "According to OSP, data is not collected on what prosecutions and  convictions result from investigations by prohibited category. However,  anecdotally, investigators and prosecutors said the prohibiting category of  convicted felons is the most common among persons prosecuted for  FICS denials. Prosecution outcomes are not automatically reported back  to OSP; each county\u2019s District Attorney must be contacted to obtain their  agency\u2019s respective case outcome data. Reporting disposition of firearms  denial cases back to FICS is voluntary and can be done via an online  form. The participating local agencies are requested to report back to  OSP on the findings of their investigations; however, this reporting is  voluntary and according to FICS officials, many agencies do not  consistently submit this information."], "subsections": []}]}, {"section_title": "Appendix IV: Investigation and Prosecution of Firearms Denials in Pennsylvania", "paragraphs": ["This appendix includes information on the investigation and prosecution  of individuals denied firearms purchases in the state of Pennsylvania."], "subsections": [{"section_title": "State Firearms Background Checks", "paragraphs": ["Since 1998, Pennsylvania has served as a Point-of-Contact (POC) state  for the National Instant Criminal Background Check System (NICS)  operated by the Federal Bureau of Investigation (FBI). The Pennsylvania  State Police (PSP) acts as the state point of contact for NICS for  determining an individual\u2019s eligibility to acquire, possess, transfer, and  carry firearms. PSP conducts instant records checks using the  Pennsylvania Instant Check System (PICS). PICS uses a voice response  component and a web-based application that allows users to initiate  firearm and license to carry (also known as concealed carry) background  check requests.", "In Pennsylvania, a licensed importer, manufacturer or dealer is required  to request by means of a telephone call that the PSP conduct a criminal  history, juvenile delinquency history and a mental health check prior to  selling or delivering any firearm to another unlicensed person. In  addition, the firearm may not be transferred until the licensed importer,  manufacturer or dealer has received a unique approval number for that  inquiry from the PSP and recorded the date and number on the  application or record of sale form. Generally, for any person that is not a  licensed importer, manufacturer or dealer who wants to sell or transfer a  firearm to an unlicensed person, the person must do so at the place of  business of a licensed importer, manufacturer, dealer or county sheriff\u2019s  office and follow the procedures related to the transfer of a firearm for a  licensed importer, manufacturer or dealer.", "Process for Conducting a Background Check  At the point of purchase, once the Bureau of Alcohol, Tobacco, Firearms,  and Explosives (ATF) Form 4473 background check form is submitted, a  PICS automated firearms check is initiated. The licensed firearms dealer  contacts the PICS unit to determine if the applicant is eligible to purchase  a firearm. The initial PICS check, which takes about 10 to15 minutes,  searches the state\u2019s repositories and NICS to identify any criminal history  records or prohibitions. State databases searched as part of the check  includes but are not limited to:", "Pennsylvania criminal history records;  Juvenile records, contained within the criminal history record file;", "Mental Health File, containing involuntary commitment information  and adjudication of incompetence;", "Pennsylvania Protection From Abuse File;", "Pennsylvania Wanted/Missing Persons File; and", "Bureau of Motor Vehicle records.", "If there is no record in the system for the applicant, the transaction can be  approved automatically without any manual evaluation. The gun dealer is  provided a unique approval number, which is required to authorize the  transfer of the firearm.", "Any firearm purchase check that hits on a record is transferred to a PICS  operator. According to PSP officials, if a PICS operator cannot  immediately approve or deny a firearm purchase on the phone, the  firearm purchase application is put in \u201cresearch\u201d status, and the PICS unit  has 15 days to determine if the firearm purchase can proceed. During this  period, the PICS staff attempts to obtain clarifying information from the  state\u2019s repositories. In many of these instances, the PICS staff needs to  obtain the final disposition to an arrest, according to PICS officials. If after  15 days, PICS staff cannot make a determination, the applicant\u2019s status  becomes \u201cundetermined\u201d and the applicant is not allowed to purchase the  firearm.", "If the automated check comes back with a red flag, the applicant is  denied the purchase, and the information is sent to the PICS Challenge  Unit, according to PSP officials. Generally, any person who is denied the  right to receive, sell, transfer, possess or carry a firearm as a result of the  procedures may challenge the accuracy of that person\u2019s criminal history,  juvenile delinquency history or mental health record pursuant to a denial  by the instant records check by submitting a challenge to PSP within 30  days from the date of the denial. If challenged, PSP is required to  conduct a review of the accuracy of the information forming the basis for  the denial and has the burden of proving the accuracy of the record.  Within 20 days after receiving the challenge, PSP is required to notify the  challenger of the basis for the denial and provide the challenger an  opportunity to provide additional information for the purposes of the  review. PSP is to communicate its final decision to the challenger within  60 days of the receipt of the challenge with the decision containing all of  the information which formed a basis for the decision. If after the  challenge period the denial is upheld, the PICS Section sends the denied  firearm application to the local police department or state police field  station to investigate for falsification of the background check form and  potentially refer the case for prosecution, according to PSP officials.", "In addition to handling firearms denial appeals, the Challenge Unit  prepares case files for appeals through the Office of the Attorney  General, testifies at appeal hearings when required, and attends and  testifies at relief hearings for restoration of firearms rights, which are  conducted in the various county courts of common pleas throughout the  state. Finally, the Challenge Unit handles enforcement investigations  involving individuals who knowingly and intentionally provide false  information in the attempt to acquire a firearm in violation of Pennsylvania  law. Figure 8 shows the process for purchasing a firearm from a dealer in  Pennsylvania.", "According to PSP officials, in 2017, the PICS conducted about 1.1 million  background checks for licensed firearm dealers, sheriffs and law  enforcement throughout the state. Of these requests, 56 percent were  approved within minutes by the system, while an additional 41 percent  were approved during the initial check with operator assistance. The  remaining 3 percent were placed in research status to obtain additional  information. The Challenge Unit reversed 32 percent of all state  background check denial challenges, which include licenses to carry, in  2017.", "According to Pennsylvania officials, the state of Pennsylvania does not  have delayed denials, in which a firearm is transferred to an individual  before determining whether the individual is prohibited from purchasing or  possessing a firearm under state or federal law, and the purchase is  subsequently denied. Generally, under Pennsylvania law, a licensed  importer, manufacturer or dealer may not sell or deliver any firearm to an  unlicensed person until having received a unique approval number from  PSP."], "subsections": []}, {"section_title": "State History of Denials and Prohibited Categories", "paragraphs": ["Pennsylvania law prohibits individuals that have been convicted of certain  offenses from possessing firearms. For example, under Pennsylvania  law, an individual who has been convicted of driving under the influence  of alcohol or controlled substance on three or more separate occasions  within a 5-year period is prohibited from possessing a firearm. One  prosecutor told us that most of the denials in his county stemmed from  second and third offense DUI convictions. Table 3 shows Pennsylvania  firearms denials by prohibiting category.", "According to PSP officials, from 2014\u2014when Pennsylvania began  investigating denials\u2014through 2017, the most common category was  \u201cpersons convicted of a crime punishable by more than one year or a  misdemeanor punishable by more than two years,\u201d which comprised 42  percent of all denials. The second most common prohibiting category was  mental health-related denials, at 16 percent. During this span, the number  of denials increased from 2014 to 2016, only to decline in 2017."], "subsections": []}, {"section_title": "State Investigation of Denials", "paragraphs": ["Since 2014, PICS policy has been to investigate all firearm denials,  according to PSP officials. Prior to 2013, Pennsylvania used risk-based  criteria to investigate a much smaller percentage of denials. Criteria used  included violent felonies, drug trafficking, domestic violence, involuntary  mental health commitment, active warrants, and straw purchases, among  others. After PSP began investigating all firearms denials in 2014,  according to PSP officials, the number of denials remained largely the  same, but the number of investigations rose from 620 to 4,154. PSP  officials told us they believe that the policy to investigate all denials acts  as a deterrent, and that as prohibited individuals learn that investigations  follow a denial these individuals will not attempt to purchase a firearm.", "According to PSP officials, as PICS refers all confirmed firearms denials  for investigation, PICS does not use screening criteria to make  determinations about whether firearms denials should be referred for  investigation, or which denials are more likely to be accepted for  prosecution. However, PICS does prioritize and determine which denials  involve more serious criminal violations. According to PSP\u2019s Firearms  Unit staff, many referrals are not pursued based on the investigator\u2019s  assessment of the case or a prosecutor\u2019s declination of the case when  the referral was received.", "The PSP partners with local law enforcement to investigate firearms  denials. Investigations are split up between the PSP and municipal police  departments based on the jurisdiction of where the applicant submitted  the firearms purchase. In 2016, 68 percent of cases referred for  investigation were referred to state police, while 32 percent were referred  to local law enforcement. In 2017, cases referred to local law enforcement  increased to 62 percent, while 38 percent were referred to state police. If  the subject is federally prohibited, a case may be referred to ATF for  investigation, though based on our analysis this is relatively uncommon.  In 2015 and 2016, 16 and 5 cases, respectively, were referred to ATF for  investigation, while in 2017 one case was referred to ATF.", "Firearms denials are automatically funneled into a state investigative  database where an investigation file is created according to PSP officials.  When a denial is referred to a PSP troop for investigation, it is assigned  to a state investigator if the state police has jurisdiction. If local law  enforcement has jurisdiction, the PSP troop or PSP investigation staff will  pass the referral to local law enforcement, according to PSP officials.  Though some PSP units have investigators that specialize in firearm  denials cases, generally denial investigations are assigned to the next  available investigator, according to PSP officials.", "After an investigation is assigned, the investigator will review all provided  documentation and verify that the subject is actually prohibited, according  to PSP officials. The investigator will then pull an incident number and  take steps to obtain necessary documentation. The investigator will then  respond to the location of the violation, review the ATF Form 4473, and  attempt to interview the employee who handled the attempted  transaction. Finally, the investigator will locate and interview the subject of  the denial. Cases are not prioritized for investigation because all firearms  denials are investigated and are immediately assigned to an investigator  upon receipt from PICS, according to PSP officials. While no denial  categories are designated as priority, protective orders may be  investigated more vigorously when there is an indication of violence,  according to PSP officials. PSP does not track the length of time or  resources required for conducting investigations of firearms purchase  denials, according to PSP officials.", "Some jurisdictions may send the subject a letter to notify them that they  are prohibited and under investigation, according to PSP officials. Other  jurisdictions may send a letter only when prosecutors decide not to press  charges, explaining to the recipient why they were denied, that they are  not eligible to purchase a firearm, and that they could have been  prosecuted for that reason.", "If the case is considered for prosecution, the investigator may meet with  the District Attorney\u2019s office and review the case for prosecutorial merit,  according to PSP officials. If prosecution is sought, the investigator will  type up the charges, process the subject, and arraign. If prosecution is  approved, the investigator will notify the Firearms Unit and attend all court  proceedings. The investigating unit is to inform PSP\u2019s Firearms Unit of the  outcome of the prosecution."], "subsections": []}, {"section_title": "Statutes Used", "paragraphs": ["According to prosecutors and PSP officials, denials are primarily referred  for prosecution on the basis of the violations under:", "18 Pa. Cons. Stat. \u00a7 4904 - Unsworn falsification to authorities", "18 Pa. Cons. Stat. \u00a7 6111(g)(4) - Sale or transfer of firearms.", "18 Pa. Cons. Stat. \u00a7 6105 - Persons not to possess, use,  manufacture, control, sell or transfer firearms."], "subsections": []}, {"section_title": "Prosecution of Firearms Denials", "paragraphs": ["According to PSP officials, in Pennsylvania, the District Attorney is the  chief law enforcement officer for each county, and in most instances,  cases are accepted for prosecution based on their discretion. As such,  discretionary decisions vary by county, and there are no internal criteria.  District Attorneys may also refer cases for prosecution to the State  Attorney General due to lack of resources or a conflict of interest. Trials  for firearms denials are extremely rare in Pennsylvania, according to  prosecutors that we spoke with. Only a small percentage of referred  denials are ultimately prosecuted, mostly due to the difficulty proving the  suspect \u201cknowingly and willingly\u201d provided false information on the  background check application, according to PSP officials.", "According to PSP officials, the conviction rate for firearms denial cases is  about 10 percent of all denials referred for investigation. Based on our  discussions with Pennsylvania prosecutors and PSP Firearms Division  staff, most cases that are prosecuted result in misdemeanor pleas, rather  than felony convictions, and common penalties are probation and fines.  One county prosecutor told us that most convictions reduced to a  misdemeanor are for \u201cstatement under penalty,\u201d a third degree  misdemeanor. Other cases might be pled down to misdemeanor  disorderly conduct, which carries a $300 fine, according to PSP officials.  According to county prosecutors that we spoke with, there is an  occasional prison sentence for denied felons which can result in about 12  months in prison, and have resulted in sentences of almost 2 years in  prison.", "One prosecutor told us the most frequent firearms prohibitor among  convictions is a crime punishable by greater than 1 year in prison, such  as a second or subsequent DUI conviction within 10 years, as many of  those are graded as misdemeanors of the first degree, punishable by up  to 5 years in prison. Typically, when asked, these individuals are unaware  of the maximum penalty. Another state prosecutor we spoke with stated  that the most prosecuted prohibiting categories also involved felony DUIs,  as well as matters related to mental health and domestic violence. He  added that, typically, more recent crimes are treated with more severity.  One county prosecutor told us they prioritize prosecution of persons with  a history of violent behavior.", "According to state police officials, upon conclusion of a prosecuted case,  the investigator will document the disposition of the court. The entire  investigative process is documented in a PSP incident report, which  includes all interviews, queries made, investigative steps taken, and  consultation with the District Attorney. The result of the investigation is  then forwarded to the PSP investigation staff. Finally, an email  summarizing the entire investigative process is sent to the Troop Crime  Commander, Troop Administrative Manager, and the PSP Firearms Unit.  Table 4 shows the disposition of firearms denial cases in Pennsylvania.", "While no annual statistics are recorded at the unit level, according to PSP  officials, the state of Pennsylvania does track prosecutions resulting from  firearms denials. In 2016, there were convictions in about half of the  approximately 730 arrests made and about 6,500 denials referred for  investigation. This represents a 39 percent increase in referrals over  2015, but a 67 percent decline in convictions and 68 percent decline in  arrests. In 2017, the number of cases referred for investigation declined  by 16 percent to about 5,500. Numbers for 2016 and 2017, including  arrests, convictions, and prosecutions returned to numbers more  representative of a typical year, according to PSP officials. Neither PSP  nor the municipal departments track enforcement actions associated with  investigations, or the specific sentencing results of investigations referred  for prosecution beyond whether the investigation resulted in a conviction  or declination."], "subsections": []}]}, {"section_title": "Appendix V: Investigation and Prosecution of Firearms Denials in Virginia", "paragraphs": ["This appendix includes information on the investigation and prosecution  of individuals denied firearms purchases in the state of Virginia."], "subsections": [{"section_title": "State Firearms Background Checks", "paragraphs": ["The Virginia Firearms Transaction Center (FTC), established in 1989,  performs background checks at the point of sale by accessing state and  federal databases. The FTC is the federally designated point of contact  for the National Instant Criminal Background Check System (NICS), and  is responsible for any investigations of firearms denials. The Virginia  State Police (VSP) is responsible for conducting background checks  using VCheck, Virginia\u2019s Internet-based instant background check  program, and for enforcing state and federal laws related to firearms  purchases in Virginia. Under Virginia law, generally, a licensed dealer is  required to obtain written consent and other identifying information\u2014 including but not limited to the name, date of birth, gender, race,  citizenship, and Social Security number of a potential unlicensed  purchaser\u2014and provide the Department of State Police with this  information and request criminal history record information by a telephone  call to or other communication authorized by the State Police prior to  selling, renting, trading, or transferring any firearm from the dealer\u2019s  inventory.", "The FTC provides personnel to conduct transactions onsite at anticipated  high volume gun shows. Pursuant to Virginia law, the Department of State  Police are to be available at every firearms show held in Virginia to make  determinations, in accordance with the procedures set out for background  checks required for the transfer of certain firearms, of whether a  prospective purchaser or transferee is prohibited under state or federal  law from possessing a firearm. One prosecutor we spoke with estimated  that 25 percent of his illegal possession cases are from private sales at  gun shows. At a gun show, when an individual attempts to purchase a  firearm from a licensed dealer, the individual has to complete the state  background check form (SP-65B) and the federal form (ATF 4473) and  the FTC will conduct a full NICS check. Should the transaction be denied,  the trooper may arrest the applicant depending on the reason for the  denial. A Virginia prosecutor explained that in his jurisdiction when two  private parties, neither of whom is a FFL, initiate a sale outside of the  state transaction system, troopers may approach the purchaser and ask  questions related to his or her eligibility to purchase a firearm. If the  purchaser appears to be prohibited based on their testimony they may be  subject to arrest as well.", "Process for Conducting a Background Check  For transactions conducted through an FFL, the gun dealer submits a  background check request to VSP via a toll free number or through an  online application. Upon receipt of the request, VSP reviews the  applicant\u2019s criminal record information to determine if the applicant is  prohibited from possessing or transporting a firearm by state or federal  law. This check includes a review of an applicant\u2019s entire criminal history,  with no exclusion based on when the prohibiting offense occurred,  according to FTC officials. For example, a recent prohibiting felony  conviction is treated the same as the same conviction from decades ago.", "The applicant\u2019s information is submitted to the FTC, where it is checked  against databases at the federal and state level. Information is screened  through NICS, National Crime Information Center, and the Virginia  Criminal Information Network. The FTC provides an instant response to  approve the transaction or place it in delayed, research status. Databases  maintained by VSP and accessible by the Virginia Criminal Information  Network include:", "Virginia\u2019s wanted and missing persons files and protective orders;", "Virginia\u2019s criminal history record files; and", "Virginia\u2019s database of adjudications of legal incompetence and  incapacity, and involuntary commitments to mental institutions.", "If the instant VCheck search indicates that the purchaser is approved, a  unique computer-generated approval number that is required to transfer  the firearm is provided to the dealer to complete the transaction. If a  possible identification is made in the state or federal databases, the  instant check produces a \u201cdelayed\u201d status and a review is conducted to  determine identification and eligibility of the purchaser. If a background  check enters delayed status, the dealer will be requested to provide  additional information about the purchaser. The dealer is to be notified  immediately upon a final determination of eligibility. Pursuant to federal  law, if the dealer has not been notified of a final determination by the end  of the third business day, the dealer may complete the sale and transfer  of the firearm. If a firearm is transferred prior to a final determination of  eligibility, the dealer is requested to notify VSP immediately. When a  delayed transaction is ultimately approved or denied, the FTC updates  the dealer on the status of the transaction by telephone or online  depending on how it was entered. When research efforts have been  exhausted, if no clear reason to deny is identified, the transaction is  approved. More than 99 percent of delayed applications are resolved  before 30 days, according to FTC officials.", "All transactions that are not immediately approved and enter delayed  status are assigned a priority level, based on the possible prohibiting  category. Virginia investigates a subset of all denials based on risk, but  prioritizes denials with active warrants, active protection orders, mental  health issues, and certain felony convictions. According to VSP officials, a  \u201cpriority 1\u201d transaction is a possible hit for mental health reasons, a  protective order, or a possible wanted subject. A \u201cpriority 2\u201d transaction is  any possible hit in NICS, such as convicted felons and out-of-state mental  health cases. A \u201cpriority 3\u201d transaction is any hit in the Interstate  Identification Index, or Virginia\u2019s Computerized Criminal History.  According to VSP officials, convicted felons are normally a priority 3  unless they appear in the NICS database. A \u201cpriority 4\u201d transaction is a hit  from U.S. Immigration and Customs Enforcement, namely an alien or  immigrant attempting to purchase a firearm, or a possible request for  information, such as a Be On The Lookout or Alert notice, from a police  agency or the Bureau of Alcohol, Tobacco, Firearms and Explosives  (ATF). According to VSP officials, while a transaction may be given an  initial priority level, VSP moves some priority 3 and 4 hits to the front of  the list, such as those involving recent felony indictments or a  misdemeanor crime of domestic violence. Denial decisions undergo  supervisory review to verify that the denial is correct and accurate,  including a review of the police report to document findings, and to ensure  that the prohibited person\u2019s rights have not been restored, according to  VSP officials.", "According to a VSP official, in practice, there are rarely any transactions  in Virginia in which a firearm is transferred before the purchaser is  determined to be ineligible, known as a delayed denial. According to an  FTC official, there were no delayed denials in the previous 2 years. After  3 business days of conducting a background check, at which time  firearms dealers may transfer a firearm, firearms dealers typically contact  the FTC to notify them of the possible transfer, and ask whether to hold  the gun for a few more days, according to VSP officials. If the FTC  believes the purchaser will ultimately be denied, they will suggest the  firearm be held, but it is up to the dealer to decide whether to do so. The  FTC will also ask to speak with the purchaser to explain that if they  accept the firearm and are later denied, VSP would have to send an  officer to retrieve the firearm and charges may be filed against the  purchaser for illegal possession of the firearm. VSP will then advise that if  unsure of his or her prohibited status, the applicant should wait until the  background check is complete.", "According to a VSP official, there are advantages to being a point-of- contact state, such as the ability to provide better service to citizens and  to build relationships with FFLs that would not be possible as a NICS  state. For example, VSP conducts training sessions and regular outreach  to firearms dealers. VSP officials estimate that in 80 percent of cases  involving firearms purchases on behalf of a prohibited person, sometimes  referred to as \u201cstraw purchases,\u201d leads come from dealers notifying VSP  of something suspicious. According to VSP officials, straw purchases are  treated very seriously, and can result in prison sentences of 5 to 10  years. Figure 9 shows the process for purchasing a firearm from a dealer  in Virginia.", "Individuals denied the right to purchase a firearm may exercise a right of  access, review, and correction of criminal history record information or  institute a civil action within 30 days of the denial. Typically, after a  denial, individuals are provided a Virginia Firearms Transaction Program  brochure or referred to the VSP website for appeal procedures if they  believe that they are not prohibited by state or federal law from  purchasing or possessing a firearm. These individuals may contact the  FTC via phone or e-mail to discuss the determination and provide  additional information, provide fingerprinting to facilitate future  transactions, request a correction of record, or institute a civil action.  Denied persons may also challenge the accuracy of the record in writing  to the FBI."], "subsections": []}, {"section_title": "State History of Denials and Prohibited Categories", "paragraphs": ["Generally, individuals prohibited from either purchasing or possessing a  firearm under Virginia law include, but are not limited to: any person who has been convicted of a felony, or adjudicated  delinquent as a juvenile 14 years of age or older at the time of certain  offenses (including murder, kidnapping, robbery by threat or  presentation of firearms, or rape), or under the age of 29 who was  adjudicated delinquent as a juvenile14 years of age or older at the  time of the offense of a delinquent act which would be a felony if  committed by an adult; any person who has been acquitted by reason of insanity and  committed to the custody of the Commissioner of Behavioral Health  and Developmental Services on a charge of treason, any felony or  certain offenses punishable as a misdemeanor or certain ordinances  of any county, city, or town similar to other outlined offenses; any person who is subject to certain protective orders; or any person who, within a 36 consecutive month period, has been  convicted under Virginia law of two misdemeanor offenses for  possession of controlled substance or marijuana without a valid  prescription or order of a practitioner while acting in the course of his  professional practice within 5 years from the date of the second  conviction.", "The top prohibiting categories for individuals denied firearms purchases  are felony convictions, which comprise 21 percent of all denials from 2011  through 2017, followed by drug-related prohibitions (19 percent), and  mental health-related prohibitions (13 percent). One prosecutor we spoke  with said that denials tend to not involve violent career criminals, and  typically involve non-violent felonies, such as grand larceny, or involve  drugs, and most occurred 20 years ago or more. From 2011 to 2017, the  total number of denials increased from about 2,000 to about 3,600, an  increase of almost 80 percent, while the total number of transactions  increased from about 320,000 to about 500,000, an increase of more than  50 percent. Table 5 shows Virginia firearms denials by prohibiting  category."], "subsections": []}, {"section_title": "State Investigation of Denials", "paragraphs": ["Virginia has investigated firearms denials since its instant check system  was introduced in 1989. Virginia does not refer all firearms denials for  investigation, instead using risk-based criteria to refer a sub-set of  prohibited categories for investigation. The following conditions trigger an  automatic investigation for a firearms denial:  felony conviction, including juvenile felony conviction, or felony  indictment; misdemeanor crime of domestic violence;  involuntary mental health treatment; nonimmigrant or illegal alien; and dishonorable discharge from the military.", "All Virginia denial investigations are handled by VSP with the exception of  some fugitive and warrant-related, protective order, and mental health  cases, as well as purchases at gun shows, which may involve municipal  or local police, according to VSP officials. When FTC\u2019s background check  unit refers a case for investigation involving mental health or protective  orders (both which are priority 1), the package is sent to both the VSP  division and the local police department.", "According to VSP officials, to initiate a denial investigation, FTC sends  requests for investigation to the VSP division headquarters, where it is  referred to the appropriate section where the gun transaction took place,  then to a state trooper to conduct the investigation. A file with a copy of  both the federal background form, ATF Form 4473, and the state  background check form, SP-65, is sent to the investigating trooper. The  trooper then collects necessary information, such as information about  the denial from VCheck, the criminal history of the purchaser, and court  records. As necessary, the investigator verifies the information in the FTC  file at the FFL, and interviews the subject. Part of the investigation  involves trying to prove the purchaser \u201cwillingly and knowingly\u201d answered  falsely on the state and federal forms.", "Some VSP sections, typically those in more densely populated areas,  have troopers dedicated exclusively to firearms denial investigations due  to the higher volume of denials in those areas.", "According to VSP officials, every area may assign troopers to work  exclusively on firearms denial investigations. However, most areas either  cannot afford to remove a trooper from road coverage availability, or don\u2019t  investigate enough firearms denial cases to make it an effective use of  resources. These sections assign denial investigations to troopers on a  case by case basis.", "Prosecutors are often consulted as to whether a case will be prosecuted,  where the prosecutor comments on the strength of the case based on the  evidence available, according to investigators and prosecutors we spoke  with. Investigators told us that prosecutors are generally more agreeable  to taking on firearms denial cases involving recent felony convictions.", "They also said that if the case is accepted for prosecution, the trooper will  obtain warrants to make an arrest. If the Commonwealth Attorney finds  that the case does not have prosecutorial merit, the case is closed and  the name of the Commonwealth Attorney consulted is put in the case  management system report, according to a VSP official. Table 6 shows  Virginia denial investigations from fiscal years 2011 through 2017.", "According to VSP officials, the time spent on denial investigations  depends on the type of denial, location, and the information needed to  bring charges or close the case. However, on average a case may  involve about 4 hours of investigation. Officials in another division stated  that in-state convictions can range from 4 to 6 hours of investigative work,  while out-of-state convictions can take significantly more time, from 4 to  15 hours. Obtaining records from out of state can be difficult, and can  take weeks or months. For example, one state requires a fee per  conviction copy, which requires a check to be mailed, processed, and  then for the files to be mailed back to the investigator. VSP officials told  us that cases involving straw purchases can take 50 hours or more,  however, these cases can result in longer prison sentences of 5 to 10  years. They added that additional time may be spent on search  warrants, examining video from firearms stores, reviewing phone records,  and conducting interviews. Further, denial investigations involving  dishonorable discharges and mental health denials from out of state  typically take the longest to investigate, in part because some states  won\u2019t release these records for the purpose of prosecution. Locating old  felony documentation is also a challenge for investigators, according to  VSP officials."], "subsections": []}, {"section_title": "Statutes Used", "paragraphs": ["According to investigators and prosecutors, the most common state  statutes used for attempted firearm purchases include:", "Va. Code Ann. \u00a7 18.2-308.2:2(K) Willfully and intentionally making a  materially false statement on the consent form;", "Va. Code Ann. \u00a7 18.2-308.1:3 (Usually prosecuted as an attempt)", "Prohibition against purchase or possession of a firearm by someone  involuntarily admitted or ordered to outpatient mental health  treatment; and", "Va. Code Ann. \u00a7 18.2-308.1:4 (Usually prosecuted as an attempt)  Prohibition against purchase or transport of a firearm by someone  subject to a protective order."], "subsections": []}, {"section_title": "State Prosecution of Firearms Denials", "paragraphs": ["Virginia\u2019s chief prosecutors, the Commonwealth\u2019s Attorneys, are elected  at-large for a 4-year term. They are responsible for prosecuting all  felonies and some misdemeanors, in addition to handling certain civil  matters. According to a prosecutor we spoke with, Commonwealth\u2019s  Attorneys offices receive referrals for prosecution directly from state  troopers.", "We interviewed Virginia investigators and prosecutors from four counties,  including from localities where a high volume of firearms denial referrals  occur. These prosecutors said they tend to work with Virginia troopers  who specialize in denial investigations and report high prosecution rates  for the cases they accept. One investigator with a high referral rate to  prosecutors told us he benefits from operating in a high-volume, relatively  compact jurisdiction, while in other parts of the state, investigators may  have to cross several counties to gather the paperwork needed to  establish a denial case, interview the purchaser, and make an arrest.  According to a county prosecutor, a key component of successful  prosecutions is a willing Commonwealth Attorney because charging  decisions are at their discretion. An investigator and prosecutor that work  together stated that in some jurisdictions, attorneys may not welcome  firearms denial cases, while in other jurisdictions specialized investigators  working with an attorney willing to prosecute these cases for public safety  and deterrence value can yield a high prosecution rate.", "Two county prosecutors we spoke with said approximately 90 percent of  firearms denial convictions are pled down to misdemeanors, and the  penalties imposed tend to include probation or community service, but  there is an occasional prison sentence. According to investigators and  prosecutors we spoke with, some prosecutors prefer to avoid the use of  fines while others may use them occasionally.", "Of the few cases that go to trial, according to prosecutors, most go before  a judge rather than a jury, and typically involve a felon in possession of a  firearm, resulting in a felony conviction and likely probation. Judges have  discretion to reduce sentences, while juries are constrained to issuing  more severe sentences if they find the defendant guilty, and typically  hand down more prison time, according to prosecutors we spoke with.", "The severity of penalties handed down for firearms denials depends on  the prohibited category, according to one county prosecutor. Another  prosecutor said protective order violations tend to be easier to prosecute  because the records are available and indicate a clear violation. Other  cases where accurate records are difficult to obtain, such as juvenile  denials, mental health denials, and out of state cases, prosecutions are  difficult to prosecute, according to investigators and prosecutors.", "One prosecutor told us that a subject\u2019s criminal history also makes a big  difference as to whether they might receive a harsher or more lenient  sentence. Several prosecutors we spoke with said that while prison  sentences are rare, for a felon with a history of violence, sentences of 7  months to more than 24 months in prison have been imposed. One  prosecutor told us they typically agree to no prison time on a felony  conviction unless there are indicators of violence on the record, such as  destruction of property or assault and battery. If a person has no record,  the prosecutor would be far more willing to forego a felony and  sometimes even a misdemeanor, and propose community service  instead. One prosecutor questioned whether it makes sense to make a  person a felon over a firearms denial; however, if a person has a  consistent misdemeanor history of getting into trouble then they would be  less convinced that this particular offense is out of character and may not  make any non-felony offers. Prosecutors also may reduce the charges to  disorderly conduct or providing false information to police during a plea in  these cases to try to get a conviction, according to one prosecutor.", "Data on prosecutions, dismissals, and convictions resulting from  investigations, are not collected at the state level, and are only accessible  at the VSP divisions that conduct investigations and the courts where  they are prosecuted, according to Virginia officials."], "subsections": []}]}, {"section_title": "Appendix VI: Examples of Firearms Denial Cases Referred for Prosecution", "paragraphs": ["Table 7 shows examples of firearms denial cases that our six selected  ATF field divisions referred to U.S. Attorney\u2019s Offices for prosecution  during fiscal years 2014 through 2017, including the types of  circumstances that could lead to referral for prosecution, the range of  charges filed, and the severity of sentences that resulted. All the cases  involved 18 U.S.C. \u00a7 922(a)(6), falsifying a background check form. While  all were not ultimately charged under that statute, they were selected for  investigation by ATF for that reason. Occasionally, federal and state law  may prohibit similar types of criminal conduct, allowing both federal and  state prosecutors to pursue the case. U.S. Attorney\u2019s Offices may also  refer a case to a state prosecutor that is not deemed appropriate for  federal prosecution."], "subsections": []}, {"section_title": "Appendix VII: GAO Contacts and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above Eric Erdman (Assistant Director)  and Anthony DeFrank (Analyst-in-Charge) managed this assignment.  Daniel Kuhn, James Lawson, Billy Commons, Susan Hsu, Michele C.  Fejfar, and Eric D. Hauswirth made significant contributions to the work."], "subsections": []}]}], "fastfact": ["Individuals who submit falsified information on a form needed to purchase a firearm (e.g., do not disclose a felony conviction) may be subject to investigation and prosecution.", "In fiscal 2017, the Bureau of Alcohol, Tobacco, Firearms and Explosives referred about 12,700 denied purchases to its field divisions for investigation. As of June 2018, U.S. Attorney\u2019s Offices prosecuted 12 of these cases.", "ATF field divisions may send warning notices to denied persons in lieu of prosecution, but this practice varies across divisions.", "We recommended that ATF assess field divisions' use of warning notices and determine if policy changes are needed."]}
{"id": "GAO-18-481", "url": "https://www.gao.gov/products/GAO-18-481", "title": "Federal Student Aid: Education's Postsecondary School Certification Process", "published_date": "2018-07-17T00:00:00", "released_date": "2018-07-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Education provided over $122 billion in grants, loans and work study funds to help students pay for college at about 6,000 schools in fiscal year 2017. Education is responsible for certifying that these schools are eligible for and capable of properly administering federal student aid funds. Schools are required to submit an annual compliance audit that provides information on schools' administrative capability, which Education considers in its school certification decisions. GAO was asked to review Education's process for certifying schools to receive federal student aid.", "This report examines (1) how Education certifies schools to administer federal student aid and how frequently schools are approved and denied certification; and (2) the role of compliance audits in the certification process and what, if any, steps Education has taken to address the quality of the audit information. GAO analyzed data on school certification outcomes for calendar years 2006-2017 (when GAO determined data were most reliable); reviewed data and reports summarizing Education's reviews of compliance audit quality for fiscal years 2006-2017; reviewed a non-generalizable sample of 21 school certification decisions from fiscal years 2015 and 2016, selected for a mix of decisions, school characteristics, and geographic regions; examined relevant federal laws, regulations, policy manuals and guidance; and interviewed Education officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Education (Education) is responsible for evaluating a variety of information to determine whether a postsecondary school should be certified to administer federal student aid programs, and agency data show that it approves most schools that apply. Education procedures instruct regional office staff to review school policies, financial statements, and compliance audits prepared by independent auditors, among other things. Education can certify schools to participate in federal student aid programs for up to 6 years, or it can provisionally certify them for less time if it determines that increased oversight is needed\u2014for example, when a school applies for certification for the first time or when it has met some but not all requirements to be fully certified. In calendar years 2006 through 2017, Education fully or provisionally approved most schools applying for initial or recertification to receive federal student aid (see figure).", "Note: Schools applying for certification for the first time and approved are placed in provisional certification.", "In deciding whether to certify schools, Education particularly relies on compliance audits for direct information about how well schools are administering federal student aid, and Education's offices of Federal Student Aid and Inspector General have taken steps to address audit quality. The Inspector General annually selects a sample of compliance audits for quality reviews based on risk factors, such as auditors previously cited for errors. In fiscal years 2006 through 2017, 59 percent of the 739 selected audits received failing scores. Audits that fail must be corrected; if not, the school generally must repay federal student aid covered by the audit. Because higher risk audits are selected for review, Inspector General officials said they cannot assess the overall prevalence of quality problems in compliance audits. These two Education offices have taken steps to improve audit quality. For example, the Inspector General offered additional training to auditors on its revised 2016 audit guide and provided guidance to schools on hiring an auditor, while Federal Student Aid created a working group to strengthen its procedures for addressing poor quality compliance audits. Education's efforts to address audit quality could help ensure that these audits provide reliable information for school certification decisions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["In fiscal year 2017, the federal government provided over $122 billion in  grants, loans, and work study funds through federal student aid programs  to help students pay tuition, fees, and other expenses at almost 6,000  postsecondary schools. The Department of Education (Education) is  responsible for certifying that schools with access to this aid are eligible  and capable of properly administering these funds. Schools that are  certified to receive federal student aid are generally required to provide  Education with an annual compliance audit conducted by an independent  auditor that provides information on schools\u2019 administrative capabilities.  Education\u2019s certification of schools is critical to help ensure that federal  funds are used to support students in sufficiently high-quality educational  programs at responsible schools. You asked us to review Education\u2019s  process for certifying schools to receive federal student aid.", "This report examines (1) how Education certifies schools to administer  federal student aid and how frequently schools are approved and denied  certification; and (2) the role of compliance audits in the certification  process and what, if any, steps Education has taken to address the  quality of the audit information.", "To address these questions, we used the following approaches:", "To determine how Education certifies schools to administer federal  student aid, we reviewed laws, regulations, policy manuals, and other  agency documents describing Education\u2019s certification process. We  also interviewed staff from Education\u2019s Office of Federal Student Aid  (FSA) in headquarters and managers and analysts in four of its eight  regional offices to learn more about how they implement the school  certification process. We selected these regional offices based on  high certification decision volume and geographic dispersion. We also  reviewed case file documents for a non-generalizable sample of 21  certification decisions from fiscal years 2015 and 2016, selecting  cases that included a mix of certification decisions, regional offices,  and school characteristics (e.g., 2-year and 4-year, and public,  nonprofit, and for-profit). To determine how often schools are  approved and denied certification, we obtained and analyzed data  from Education\u2019s Postsecondary Education Participants System  (PEPS) on school certification outcomes for calendar years 2006  through 2017. We assessed the reliability of these data by reviewing  Education\u2019s PEPS data system documentation; testing the data for  outliers, obvious errors, or missing data; and interviewing Education  officials, and determined that the data were sufficiently reliable for our  reporting purposes.", "To determine the role of compliance audits in the certification process  and the steps Education has taken to address the quality of the audit  information, we reviewed laws, regulations, policy manuals, training  materials, and other agency documents related to compliance audits  and compliance audit quality. We also reviewed Education\u2019s Office of  Inspector General (OIG) data and reports summarizing its quality  reviews of selected compliance audits for fiscal years 2006 through  2017. We assessed the reliability of these data by interviewing agency  officials knowledgeable about the data, and determined that the data  were sufficiently reliable for our reporting purposes. Additionally, we  interviewed staff from FSA and the OIG about the role of compliance  audits in the certification process and actions taken to address the  quality of the audit information.", "We conducted this performance audit from May 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["To participate in federal student aid programs, postsecondary schools  must be 1) certified by Education as eligible to participate in federal  student aid programs, 2) accredited by a recognized accrediting agency\u2014  generally nongovernmental, nonprofit entities\u2014and 3) authorized by the  state in which the school is physically located. (See table 1.)", "FSA is responsible for ensuring that schools with access to federal  student aid are eligible and capable of properly administering federal  student aid funds, according to standards established by Education and  authorized by the Higher Education Act. These standards include  requirements for schools related to communication, personnel, policies,  procedures and reporting, and adequate checks and balances in a  system of internal controls, among others. FSA is also responsible for  conducting ongoing financial oversight of schools that receive federal  student aid. This includes reviewing annual financial statement audits to  assess a school\u2019s financial responsibility and providing additional  oversight to schools that do not meet financial responsibility standards  outlined in the Higher Education Act.", "Schools that participate in federal student aid programs generally are  required to submit annual compliance audits. The compliance audit  provides information that FSA can use to assess the school\u2019s  administration of federal student aid programs and to identify schools that  require additional oversight because they do not fully comply with federal  student aid administrative requirements. The OIG is required to assess  the quality of school compliance audits and selects a sample to review  each year. The OIG reviews the audit documentation to ensure that it  supports the auditor\u2019s opinions and that the audit results are reliable.  According to agency guidance, FSA staff should refer compliance audits  to the OIG for a quality review if they have any concerns about the quality  of the audits. Both FSA and OIG officials stated that the OIG has primary  responsibility for issues related to audit quality."], "subsections": [{"section_title": "General Certification Process", "paragraphs": ["When a school first applies to be certified to administer federal student  aid, FSA will either approve the school for provisional certification\u2014 generally for 1 year\u2014or deny certification (see fig. 1). Once a school is  approved for initial certification and applies for recertification, FSA will  provisionally or fully recertify the school, or deny certification.", "According to FSA procedures, FSA uses provisional certification for initial,  or first time, applicants, as well as schools that are applying for  recertification. Provisional certification is the only approval status  available to new schools. In addition, FSA may decide to recertify a  school provisionally if it determines that a school has not fully complied  with federal student aid requirements. FSA prohibits provisionally  certified schools from opening new campus locations or offering new  programs without approval from FSA, and provisionally certified schools  that are denied recertification have a less substantive appeals process  than fully certified schools. Further, recertified schools in provisional  status are subject to more FSA oversight than schools that are fully  certified. FSA procedures allow for some discretion in determining for  how long to certify a school. Provisional recertification generally lasts 1 to  3 years, while full recertification generally lasts 4 to 6 years."], "subsections": []}, {"section_title": "Education Evaluates a Variety of Information during the Certification Process and Approves Most Schools Education Reviews Information from Multiple Sources to Assess a School\u2019s Capability to Administer Federal Student Aid", "paragraphs": ["Education\u2019s FSA regional staff draw information from a variety of sources  during the certification process to assess a school\u2019s capability to  administer federal student aid. According to FSA documents, regional  staff are to review information collected from schools and third parties,  such as annual compliance audits conducted by independent auditors,  among other information sources. FSA staff responsible for different  functional areas, such as financial and compliance audits, accreditation  status, and student loan default rates, compile and review information on  schools, according to FSA procedures. FSA officials told us that these  staff meet to discuss any potential program eligibility issues and to ensure  that all information relevant to a school is considered before making a  certification decision. FSA\u2019s certification procedures outline some of the  key information that regional staff should assess, some of which is  relevant to both initial and recertification decisions, and some of which is  specific to each type of certification process (see fig. 2).", "Documents and policies provided by schools: FSA regional staff  are directed to review documents submitted by schools, including  school catalogs, and certain school policies\u2014such as admissions and  student refund policies\u2014that are relevant to assessing administrative  capability.", "Proof of accreditation: School accreditors are responsible for  applying and enforcing standards to help ensure that the education  offered by schools is of sufficient quality to achieve program  objectives. Accreditation of schools, which generally includes a site  visit, takes place on a cycle that may range from every few years to as  many as 10 years.", "Proof of state authorization: States are responsible for authorizing  schools to offer postsecondary education and respond to student  complaints. The process for approving schools varies from state to  state and may include on-site visits.", "Audited financial statements: FSA regional staff are directed to  review information in audited financial statements to assess schools\u2019  financial health. Schools are required to have annual audited financial  statements issued by an independent certified public accountant or a  government auditor."], "subsections": [{"section_title": "Key Information Required for Initial Certification", "paragraphs": ["Self-reported school data: FSA regional staff are instructed to  review data on continual student enrollment in eligible academic  programs and student withdrawal rates.", "Pre-certification review and school outreach: FSA staff are  responsible for contacting school personnel to verify the school\u2019s  application information and discuss relevant policies, procedures, and  other materials relevant to administering federal student aid.", "FSA visits to newly certified schools: After schools first apply and  are provisionally certified, Education requires FSA regional staff to  contact them within 3 months and schedule an on-site school visit.  Schools cannot administer federal student aid until they are certified,  so FSA has limited information on how newly certified schools are  administering federal student aid programs. School visits provide FSA  with an opportunity to collect additional information about a  provisionally certified school\u2019s ability to administer federal student aid.  Some FSA regional staff we interviewed told us that on-site visits to  newly certified schools provide valuable first-hand information about  whether these schools are administering federal student aid in  accordance with program requirements. If FSA regional staff find that  a school is having difficulties administering federal student aid, FSA  procedures direct regional staff to assist schools by providing  clarification and guidance on federal student aid policies,  recommending additional training for school officials, and helping  schools develop a plan to track and report on their corrective actions,  among other things."], "subsections": []}, {"section_title": "Key Information Required for Recertification", "paragraphs": ["Compliance audits: FSA staff are directed to review information in  compliance audits to determine if schools are complying with specific  federal student aid requirements. Generally, compliance audits are  required to be conducted annually by an independent auditor, and  submitted with the school\u2019s audited financial statements.", "Program reviews: FSA regional staff are also responsible for  conducting program reviews, usually on site, which evaluate school  compliance with federal requirements and can provide more in-depth  information on schools than compliance audits, according to some  FSA staff we interviewed. Generally, FSA selects schools for program  reviews that it considers to be at risk for noncompliance, according to  Education documents. FSA conducts approximately 250 to 300  program reviews per year, according to FSA documentation. FSA  staff from all four of our selected regional offices told us they consider  results from any recent program review in decisions about  recertification and noted that such information, when available, is  valuable for assessing schools\u2019 administrative capability.", "Education data: FSA regional office staff are also directed to review  data on student loan default rates."], "subsections": []}]}, {"section_title": "Most Schools Are Provisionally or Fully Certified to Receive Federal Student Aid", "paragraphs": ["From calendar years 2006 through 2017, FSA approved most schools  applying for certification to receive federal student aid, according to  Education data."], "subsections": [{"section_title": "Initial Certification Applications", "paragraphs": ["From 2006 through 2017, FSA approved 89 percent of schools new to  administering federal student aid for provisional certification and denied  11 percent of schools overall (see fig. 3). Denial rates for initial  certification were 11 percent for public and for-profit schools and 14  percent for nonprofit schools. For more information on 2006-2017 school  certification outcomes by year, see appendix I.", "FSA regional staff responsible for reviewing school applications told us  that schools are denied initial certification for issues such as a lack of  accreditation, not offering eligible programs for federal student aid, or not  meeting other statutory eligibility requirements. For example, FSA staff  said that for-profit and vocational schools that apply for initial certification  are required to provide an eligible program continuously for 2 years prior  to their initial application. FSA staff may also advise schools that do not  meet basic eligibility requirements not to apply, which could result in  fewer initial certification denials overall. In addition, FSA staff said they  often work with schools to address compliance problems, for example, by  providing guidance on revising school policies that do not meet  requirements, so that the schools are able to meet FSA\u2019s certification  requirements."], "subsections": []}, {"section_title": "Recertification Applications", "paragraphs": ["From 2006 through 2017, 76 percent of schools applying for  recertification were fully recertified, 21 percent were provisionally  recertified, and 3 percent were denied recertification. Sixty-six percent of  for-profit schools were fully recertified, 28 percent were provisionally  recertified, and 6 percent were denied. In comparison, 86 percent of  public schools were fully recertified, 14 percent were provisionally  recertified, and fewer than 1 percent were denied. Nonprofit schools had  rates similar to public schools, with 80 percent fully recertified, 18 percent  provisionally recertified, and 2 percent denied (see fig 4).", "FSA staff from all four of our selected regional offices told us that they  typically deny recertification when a school no longer meets eligibility  requirements, such as losing accreditation, or when there is significant  evidence of serious issues or massive wrongdoing, such as fraud. For  example, managers in one regional office told us they denied  recertification for a school because they had evidence that the school was  accepting students without valid high school diplomas and referring them  to diploma mills to boost enrollment.", "Staff in two FSA regional offices told us that they can also choose to fully  recertify a school for shorter periods of time if they uncover issues related  to administrative capability. For example, one regional staff member told  us that when they found a school\u2019s default rate for one federal student  loan program had been high for the prior 3 years, the regional office  decided to shorten the school\u2019s full recertification period from 6 to 4 years,  to allow FSA staff to review the school again sooner."], "subsections": []}, {"section_title": "Reasons for Provisional Certification", "paragraphs": ["FSA staff from all four of our selected regional offices told us that they  provisionally certify schools for a variety of reasons, including when a  school submits a late compliance audit or when a recent compliance audit  indicates that a school could potentially have significant problems.  Generally, schools in provisional certification status are subject to  additional monitoring by FSA compared to schools that have been fully  certified. For example, Education officials said that if they have concerns  about a provisionally certified school\u2019s student withdrawal rate, they can  add provisional conditions requiring the school to submit monthly  enrollment rosters for review. Staff in two FSA regional offices told us that  in other cases, if they have concerns about how a school is administering  federal student aid or suspected fraud, they can put a school on  provisional status and conduct a program review to collect more detailed  information on compliance with federal requirements.", "Education data also show that most schools remain in provisional status  the first time they are recertified\u201462 percent from 2006 to 2017. In  contrast, FSA staff fully recertified over three-quarters of schools that  applied for recertification a second time during the same time period (see  table 2). For more information on first and second recertification  outcomes by school sector, see appendix II."], "subsections": []}]}]}, {"section_title": "Compliance Audits Are Key to Certification Process and Education Has Taken Steps to Address Audit Quality", "paragraphs": ["We found that FSA generally relies on compliance audits as the only  annual on-site review to determine how schools applying for  recertification administer federal student aid. The audits provide direct  information collected by independent auditors from school visits and file  reviews examining how schools administer federal student aid and  comply with program requirements. For example, OIG audit guidance  directs auditors to check whether schools are distributing federal student  aid to eligible students and accurately calculating student loan amounts.  FSA officials and staff from all four of our selected regional offices said  that compliance audits are a key source of information they use to assess  a school\u2019s administrative capability.", "Officials from Education\u2019s OIG said that the quality of information in  compliance audits varies substantially and depends on the auditor. The  OIG has found quality problems in some of the compliance audits it  selects\u2014based on auditor and school risk factors\u2014for its annual quality  control reviews. Because the OIG selects higher risk audits to review, its  reviews are more likely to detect problems, and OIG officials said they  cannot make any conclusions about the overall prevalence of quality  problems in compliance audits. However, our analysis of OIG quality  review data found that of the 739 compliance audits reviewed by the OIG  from fiscal years 2006 through 2017, the OIG passed 23 percent (173)  and failed 59 percent (436). An additional 18 percent (130) passed with  deficiencies. For example, across the 41 compliance audits it reviewed  in fiscal year 2016, the OIG identified 264 quality deficiencies with the  auditor\u2019s work, according to our analysis of quality reviews provided by  the OIG. The most frequently cited issues in these 41 audits were:  reporting (24 audits), such as lack of evidence that the auditor tested  whether the school correctly reported student enrollment status;  student eligibility (20 audits), such as lack of evidence that the auditor  verified student school attendance; and administrative capability (19 audits), such as lack of evidence that the  auditor determined whether the accreditor had been notified about a  change in school ownership within 10 days.", "FSA officials also identified quality issues with the compliance audits of  some schools. FSA headquarters officials and staff we interviewed in  several regional offices said they have seen schools with significant  program review findings that had not been identified in annual compliance  audits. FSA staff said they have referred some compliance audits to the  OIG for quality reviews when they have had questions about the  thoroughness of an audit. We also found a couple of examples in our  review of school certification documents in which the findings identified in  a school\u2019s compliance audit were different from the findings identified by  FSA in a program review of the same school covering the same time  period. In one case, FSA staff said they probably would have fully  recertified the school if they had relied solely on the compliance audit.  Instead, they used the program review to determine that the school  should be provisionally recertified. Compliance audits and program review  findings are based on a sample of student records, and FSA staff said  some differences in findings might be explained by differences in the  records reviewed.", "FSA and OIG officials cited several issues that can affect the quality of  compliance audits. FSA and OIG officials we interviewed said that some  auditors conducting compliance audits have insufficient training in federal  student aid, which contributes to audit quality problems. OIG staff also  said that even if an auditor meets the general training hour requirements  for auditors, the training content may not be relevant for federal student  aid audits. In addition, FSA and OIG officials said some schools\u2014 particularly smaller schools\u2014tend to hire less experienced auditors in  order to save money, often resulting in poor quality audits. FSA officials in  most selected regional offices said that additional training on federal  student aid for auditors who are new to or unfamiliar with federal student  aid could help improve audit quality.", "FSA and the OIG recently have taken steps to address audit quality and  the information available to FSA staff when making certification decisions.  These efforts include:", "Training for auditors: The OIG has taken steps to enhance training  offered to auditors of schools\u2019 administration of federal student aid  and is exploring opportunities to provide additional training. In  December 2017, the OIG and the American Institute of Certified  Public Accountants cosponsored training for auditors on the OIG\u2019s  2016 revised guide for audits of for-profit schools, and other topics  related to auditing federal student aid. The training included  discussion of common audit quality issues and areas of highest risk.  According to an OIG official, about 200 auditors attended, and after  the event, the American Institute of Certified Public Accountants and  the OIG posted a recording of the training to their websites to make it  available to additional auditors. In addition, OIG officials said they  maintain an email account\u2014listed on the OIG website\u2014through which  auditors can ask questions and receive responses. In March 2018, the  OIG posted frequently asked questions and answers to the website.", "Timeliness of OIG quality reviews: Both FSA and OIG officials said  that the OIG has recently renewed efforts to issue compliance audit  quality reviews more quickly, after several years in which staffing  shortages and other issues led to some delayed quality reviews.", "Guidance to schools on selecting an auditor: OIG officials said  that at the 2017 FSA training conference for school financial aid staff,  they presented to more than 400 participants about factors schools  should consider when hiring an auditor. For example, they suggested  that schools verify the licenses of certified public accountants, ask  about the types of engagements an auditing firm has conducted,  request and check references, check for any actions that may have  been taken against a firm, and ask whether the auditor has been  subject to a previous review by the OIG or another agency. FSA  officials said they expected to invite the OIG to present at future FSA  conferences, and OIG officials said they were seeking additional  opportunities to share information on auditor selection with schools,  including a planned presentation to an association of postsecondary  schools.", "FSA working group: FSA recently established a working group to  update its guidance to FSA staff on how to coordinate with the OIG to  address compliance audits with quality problems. Among other topics,  the working group has consulted with the OIG about how schools are  made aware of the OIG\u2019s findings regarding the quality of their audits.  FSA officials said that OIG officials have provided input and feedback  on FSA\u2019s proposed changes to the guidance.", "Audit guide revisions: In addition, OIG and FSA staff told us they  expected the OIG\u2019s 2016 revisions to the for-profit school audit guide  to improve the quality of compliance audits for those schools. They  said that because the revised guide clarified some issues that were  confusing to auditors in the previous guide issued in 2000, auditors  might be better able to implement the guidance. The audit guide  revisions include more testing and reporting requirements, clarified  procedures, and guidance on issues such as fraud reporting and  coordinating financial and compliance audits. The 2016 revisions first  applied to audits for fiscal years beginning after June 30, 2016, and  FSA began receiving those audits at the end of 2017. In addition,  although the OIG\u2019s 2016 revisions only apply to audits of for-profit  schools, FSA officials said they planned to establish a working group  to consider improvements to audit guidance for public and nonprofit  schools.", "FSA and OIG efforts to address audit quality could help ensure that  compliance audits provide accurate and reliable information on school  administrative capability for Education\u2019s recertification decisions."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education for review and comment.  Education\u2019s Office of Inspector General provided technical comments,  which we considered and incorporated as appropriate. Education did not  provide other comments on the report.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Education; 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 (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: School Certification Outcomes, Calendar Years 2006-2017", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: Distribution of First and Second Recertification Outcomes by School Sector, Calendar Years 2006-2017", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michelle St. Pierre (Assistant  Director), Kristy Kennedy (Analyst-in-Charge), Edward Bodine, Marissa  Jones, and Mark Ward made significant contributions. Also contributing to  this report were Susan Aschoff, Deborah Bland, Nagla\u2019a El-Hodiri, Monika  Gomez, Sheila R. McCoy, Jessica Orr, Mimi Nguyen, John Mingus,  Rhiannon Patterson, Monica Savoy, Benjamin Sinoff, and Rosemary  Torres Lerma."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-374T", "url": "https://www.gao.gov/products/GAO-18-374T", "title": "Department of Energy: Continued Actions Needed to Modernize Nuclear Infrastructure and Address Management Challenges", "published_date": "2018-02-06T00:00:00", "released_date": "2018-02-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOE's NNSA is responsible for managing the nuclear weapons stockpile and supporting nuclear nonproliferation efforts. DOE's Office of Environmental Management's mission includes decontaminating and decommissioning facilities that are contaminated from decades of nuclear weapons production.", "Over the last few years, GAO has reported on a wide range of challenges facing DOE and NNSA. These challenges contribute to GAO's continuing inclusion of DOE's and NNSA's management of major contracts and projects on the list of agencies and program areas that are at high risk of fraud, waste, abuse, and mismanagement, or are in need of transformation. GAO also recently added the U.S. government's environmental liabilities to this list.", "This statement is based on 25 GAO reports issued from April 2011 through January 2018 and discusses (1) challenges related to the affordability of NNSA's nuclear modernization plans; (2) challenges related to DOE's environmental liability; (3) the status of DOE's efforts to improve its management of contracts, projects, and programs; and (4) challenges facing NNSA's nonproliferation programs."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) faces challenges related to the affordability of its nuclear modernization programs. In April 2017, GAO found a misalignment between NNSA's modernization plans and the estimated budgetary resources needed to carry out those plans. Specifically, GAO found that NNSA's estimates of funding needed for its modernization plans sometimes exceeded the budgetary projections included in the President's planned near-term and long-term modernization budgets by billions of dollars. GAO also found that the costs of some major modernization programs\u2014such as for nuclear weapon refurbishments\u2014may also increase and further strain future modernization budgets. GAO recommended in April 2017 that NNSA include an assessment of the affordability of its modernization programs in future versions of its annual plan on stockpile stewardship; NNSA neither agreed nor disagreed with that recommendation.", "DOE also faces challenges with addressing its environmental liabilities\u2014the total cost of its cleanup responsibilities. In February 2017, GAO found that DOE was responsible for over 80 percent ($372 billion) of the U.S. government's estimated $450 billion environmental liability. However, this estimate does not reflect all of DOE's cleanup responsibilities. Notably, this estimate does not reflect all of the future cleanup responsibilities that DOE may face. For example, in January 2017, GAO found that the cost estimate for DOE's proposal for separate defense and commercial nuclear waste repositories excluded the costs and time frames for site selection and site characterization, and therefore full costs are likely to be billions of dollars more than DOE's reported environmental liabilities. To effectively address cleanup, GAO has made at least 28 recommendations to DOE and other federal agencies, which could reduce long-term costs as well as environmental risks more quickly. Of these, 13 remain not implemented.", "DOE has taken several important steps that demonstrate its commitment to improving contract and project management, but challenges persist. Specifically, DOE's revised project management order, issued in May 2016, made several changes in response to recommendations GAO made in prior years, such as requiring that projects develop cost estimates and analyses of alternatives according to our best practices. However, DOE's recent efforts do not address several areas, such as acquisition planning for major contracts and aspects of program and project management, where the department continues to struggle. GAO has made several recommendations related to these areas, and DOE has generally agreed with and begun to take action on most of them.", "Finally, NNSA faces challenges in implementing its nonproliferation programs. For example, in September 2017, GAO found that selected programs in NNSA's Office of Defense Nuclear Nonproliferation (DNN) did not measure performance against schedule and cost baselines, as recommended by program management leading practices because DNN's program management policy did not require programs to measure performance in this way. GAO recommended that DNN revise its policy to require programs to measure performance against cost and schedule baselines. NNSA indicated it plans to take action to revise its policy."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has previously suggested that Congress consider changes to the laws governing environmental cleanup activities. In addition to these suggestions, GAO has made numerous recommendations to DOE to address its management challenges."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our recent work on some of the  pressing management challenges facing the Department of Energy\u2019s  (DOE) National Nuclear Security Administration (NNSA) and Office of  Environmental Management (EM). NNSA is responsible for managing  the nation\u2019s three nuclear security missions: ensuring a safe, secure, and  reliable nuclear deterrent; achieving designated reductions in the nuclear  weapons stockpile; and supporting the nation\u2019s nuclear nonproliferation  efforts. In support of these missions, NNSA\u2019s February 2016 budget  justification for the Weapons Activities appropriations account included  about $49.4 billion for fiscal years 2017 through 2021 to implement its  weapons modernization plans. More recently, in November 2017, NNSA  issued its Stockpile Stewardship and Management Plan, which included  about $10.2 billion for weapons activities for fiscal year 2018.", "In support of its missions, NNSA implements a range of nonproliferation  programs under its Office of Defense Nuclear Nonproliferation. These  programs include efforts to secure, consolidate, and dispose of weapons- usable nuclear materials and radiological sources; reduce the risks of  nuclear smuggling; enhance international export controls and  International Atomic Energy Agency nuclear safeguards; and support  research and development of new nonproliferation technologies.", "EM is responsible for decontaminating and decommissioning nuclear  facilities and sites that are contaminated from decades of nuclear  weapons production and nuclear energy research. In February 2017, we  reported that, since its inception in 1989, EM has spent over $164 billion  on cleanup efforts, which include retrieving, treating, and disposing of  nuclear waste.", "Both NNSA and EM face critical challenges in fulfilling their missions.  Since the end of the Cold War, key portions of the nuclear security  enterprise\u2019s weapons production infrastructure have become outdated,  prompting congressional and executive branch decision makers to call on  DOE to develop plans to modernize this infrastructure. The Department  of Defense\u2019s (DOD) 2010 Nuclear Posture Review identified long-term  modernization goals and requirements, including sustaining a safe,  secure, and effective nuclear arsenal through increasing investments to  rebuild and modernize the nation\u2019s nuclear infrastructure, some of which  dates back to the 1940s. In January 2017, the President directed the  Secretary of Defense to initiate a new Nuclear Posture Review to ensure  that the U.S. nuclear deterrent is modern, robust, flexible, resilient, ready,  and appropriately tailored to deter 21st-century threats and reassure our  allies. This review was released in February 2018.", "As NNSA works to modernize the nuclear security enterprise, EM must  address the legacy of 70 years of nuclear weapons production and  energy research by DOE and its predecessor agencies. These activities  generated large amounts of radioactive waste, spent nuclear fuel, excess  plutonium and uranium, and contaminated soil and groundwater. They  also contaminated thousands of sites and facilities, including land,  buildings, and other structures and their systems and equipment. Various  federal laws, agreements with states, and court decisions require the  federal government to clean up environmental hazards at federal sites  and facilities, such as nuclear weapons production facilities. DOE\u2019s  approach to addressing these environmental liabilities is often influenced  by numerous site-specific factors, stakeholder agreements, and legal  provisions. For years, we and others have reported on shortcomings in  DOE\u2019s approach to addressing its environmental liabilities, including  incomplete data on the extent of cleanup needed.", "DOE relies primarily on contractors to carry out its programs, and it is the  largest civilian contracting agency in the federal government. In fiscal  year 2017, it spent approximately 90 percent of its $32 billion in annual  funding on contracts and major capital asset projects. We designated  DOE\u2019s contract management\u2014which has included both contract  administration and project management\u2014as a high-risk area in 1990  because DOE\u2019s record of inadequate management and oversight of  contractors had left it vulnerable to fraud, waste, abuse, and  mismanagement. In our 2017 high-risk update, we reported that NNSA  and EM continued to demonstrate a strong commitment and top  leadership support to improve contract and project management\u2014a key  criterion for removing agencies and program areas from our High-Risk  List. However, we also found that DOE still needs to make more  progress on the other four criteria for removal: organizational capacity,  corrective action planning, monitoring effectiveness, and demonstrating  progress.", "Further, in our 2017 high-risk update, we added the federal government\u2019s  environmental liabilities to our High-Risk List. More than 80 percent of  these liabilities are DOE\u2019s responsibility. In our 2017 high-risk update,  we reported that because of incomplete information and often  inconsistent approaches to making cleanup decisions, DOE does not  always approach environmental cleanup using a risk-informed approach  to reduce health and safety risks in a cost-effective manner.", "My testimony today discusses (1) challenges related to the affordability of  NNSA\u2019s nuclear weapons modernization plans; (2) challenges in  addressing DOE\u2019s environmental liabilities; (3) the status of DOE\u2019s efforts  to improve its management of contracts, projects, and programs; and (4)  challenges facing NNSA\u2019s nonproliferation program. My statement is  based primarily on our work from 25 GAO reports issued from April 2011  to January 2018\u2014including 5 reports issued since I last testified on this  issue in May 2017 (see the end of this testimony for a list of related  reports). Detailed information about the scope and methodology we  used to conduct our prior work can be found in each of our issued reports.  The work upon which this testimony is based was conducted 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."], "subsections": [{"section_title": "Misalignment between NNSA\u2019s Modernization Budget Estimates and Plans Raises Affordability Concerns", "paragraphs": ["In April 2017, we issued our latest report on NNSA\u2019s 25-year plans to  modernize the nation\u2019s nuclear weapons stockpile and its supporting  infrastructure. In that report, we identified two areas of misalignment  between NNSA\u2019s modernization plans and the estimated budgetary  resources needed to carry out those plans, which could result in  challenges to NNSA in affording its planned portfolio of modernization  programs. First, we found that NNSA\u2019s estimates of funding needed for its  modernization plans sometimes exceeded the budgetary projections  included in the President\u2019s planned near- and long-term modernization  budgets. In the near-term (fiscal years 2018 through 2021), we found that  NNSA may have to defer certain modernization work beyond that time  period to execute its program within the planned budget, which could  increase modernization costs and schedule risks. This is a pattern we  have previously identified as a \u201cbow wave\u201d\u2014an increase in future years\u2019  estimated budget needs that occurs when agencies are undertaking more  programs than their resources can support. In the long-term (fiscal years  2022 through 2026), we found that NNSA\u2019s modernization program  budget estimates sometimes exceeded the projected budgetary  resources planned for inclusion in the President\u2019s budget, raising  additional questions about whether NNSA will be able to afford the scope  of its modernization program. Second, the costs of some major  modernization programs\u2014such as for nuclear weapon refurbishments\u2014 may also increase and further strain future modernization budgets. We  are currently reviewing NNSA\u2019s Fiscal Year 2018 Stockpile Stewardship  and Management Plan."], "subsections": [{"section_title": "Misalignment between Estimates and Plans May Result in Increased Cost and Schedule Risks and Raises Affordability Concerns", "paragraphs": ["As we reported in April 2017, NNSA estimates of funding needed for its  modernization plans sometimes exceeded the budgetary projections  included in the President\u2019s planned near- and long-term modernization  budgets."], "subsections": [{"section_title": "Near-term Misalignment between Modernization Plans and Estimated Budgetary Resources", "paragraphs": ["We found that NNSA may have to defer certain modernization work  planned for fiscal years 2018 through 2021 beyond its current 5-year  planning period, called the Future-Years Nuclear Security Program  (FYNSP). As we reported in April 2017, this is caused by a misalignment  between NNSA\u2019s budget estimates for certain nuclear modernization  programs and the President\u2019s budgets for that period. We concluded  that this deferral could exacerbate a significant bow wave of  modernization funding needs that NNSA projects for the out-years  beyond the FYNSP and could potentially increase modernization costs  and schedule risks.", "As we have previously reported, such bow waves occur when agencies  defer costs of their programs to the future, beyond their programming  periods, and they often occur when agencies are undertaking more  programs than their resources can support. As NNSA\u2019s fiscal year 2017  budget materials show, its modernization budget estimates for fiscal  years 2022 through 2026\u2014the first 5 years beyond the FYNSP\u2014may  require significant funding increases. For example, in fiscal year 2022,  NNSA\u2019s estimates of its modernization budget needs are projected to rise  about 7 percent compared with the budget estimates for fiscal year 2021,  the last year of the FYNSP, as shown in figure 1.", "The analysis in our April 2017 report showed that NNSA has shifted this  modernization bow wave to the period beyond the FYNSP time frame in  each of the past four versions of the annual Stockpile Stewardship and  Management Plan. For example, in the Fiscal Year 2014 Stockpile  Stewardship and Management Plan, NNSA\u2019s budget estimates for its  modernization programs increased from a total of about $9.3 billion in  fiscal year 2018, the last year of the FYNSP, to about $10.5 billion in  fiscal year 2019, the first year after the FYNSP\u2014an increase of about 13  percent. Similar patterns showing a jump in funding needs immediately  after the last year of the FYNSP are repeated in the funding profiles  contained in the fiscal year 2015, 2016, and 2017 plans. As we have  previously reported, deferring more work to future years can increase cost  and schedule risks and can put programs in the position of potentially  facing a backlog of deferred work that grows beyond what can be  accommodated in future years."], "subsections": []}, {"section_title": "Long-term Misalignment between Modernization Plans and Estimated Budgetary Resources", "paragraphs": ["The Fiscal Year 2017 Stockpile Stewardship and Management Plan  shows that NNSA\u2019s overall modernization budget estimates for fiscal  years 2022 through 2026\u2014the out-years beyond the FYNSP\u2014may  exceed the projected funding levels in the President\u2019s budgets for that  period, raising further questions about the affordability of NNSA\u2019s nuclear  modernization plans. According to NNSA\u2019s data, the agency\u2019s estimated  budget needed to support modernization totals about $58.4 billion for  fiscal years 2022 through 2026, and the out-year funding projections  contained in the President\u2019s fiscal year 2017 budget for the same period  total about $55.5 billion. The President\u2019s out-year funding projections,  therefore, are approximately $2.9 billion, or about 5.2 percent, less than  NNSA estimates it will need over the same period.", "Despite this potential shortfall, NNSA\u2019s Fiscal Year 2017 Stockpile  Stewardship and Management Plan concludes that the modernization  program is generally affordable in the years beyond the FYNSP for two  reasons. First, the President\u2019s out-year funding projections are sufficient  to support NNSA\u2019s low-range cost estimates for its modernization  programs for fiscal years 2022 through 2026. Based on NNSA data, the  low-range cost estimates for fiscal years 2022 through 2026 total  approximately $54.4 billion and the President\u2019s out-year funding  projections total about $55.5 billion. Figure 2 illustrates data from the  2017 plan showing NNSA\u2019s budget estimates in nominal dollars, including  high- and low-range cost estimates for its modernization program, along  with the out-year funding projections from the President\u2019s fiscal year 2017  budget, for fiscal years 2022 to 2026. Second, NNSA concludes that its  modernization programs are generally affordable beyond the FYNSP  because the agency\u2019s estimated modernization budget needs will begin to  decrease in fiscal year 2027.", "In our April 2017 report, we noted that NNSA\u2019s conclusion\u2014that its  modernization program is affordable because the President\u2019s out-year  funding projections fall within NNSA\u2019s modernization cost ranges\u2014is  overly optimistic. This is because the conclusion is predicated on  optimistic assumptions regarding the cost of the modernization program  beyond the FYNSP, particularly for fiscal years 2022 through 2026. For  the program to be affordable, NNSA\u2019s modernization programs would  need to be collectively executed at the low end of their estimated cost  ranges. The plan does not discuss any options NNSA would pursue to  support or modify its modernization program if costs exceeded its low- range cost estimates. In addition, the Fiscal Year 2017 Stockpile  Stewardship and Management Plan states that the nominal cost of  NNSA\u2019s modernization program is expected to decrease by  approximately $1 billion in fiscal year 2027. In that year, according to the  2017 plan, it is anticipated that NNSA\u2019s estimated budgets for its  modernization program will begin to fall in line with projections of future  presidential budgets. However, as we noted in our April 2017 report, the  decrease that NNSA anticipates in its modernization funding needs  beginning in fiscal year 2027 may not be achievable if the projected  mismatch between NNSA\u2019s estimates of its modernization budget needs  and the projections of the President\u2019s modernization budget for fiscal  years 2022 through 2026 is not resolved. This mismatch creates  concerns that NNSA will not be able to afford planned modernization  costs during fiscal years 2022 through 2026 and will be forced to defer  them to fiscal year 2027 and beyond, continuing the bow wave patterns  discussed above."], "subsections": []}]}, {"section_title": "Potential Rising Costs of Some Modernization Programs May Further Strain NNSA\u2019s Modernization Budgets", "paragraphs": ["Our April 2017 report identified misalignment between NNSA\u2019s estimate  of its budget needs and NNSA\u2019s internal cost range estimates for several  of its major modernization programs. Further, we found that the costs of  some major life extension programs (LEP) may increase in the future,  which may further strain NNSA\u2019s planned modernization budgets.", "With respect to the alignment of NNSA\u2019s estimate of its budget needs and  NNSA\u2019s internal cost range estimates, in April 2017 we found that  NNSA\u2019s budget estimates were generally consistent with NNSA\u2019s high-  and low-range cost estimates. However, for some years, NNSA\u2019s low- range cost estimates exceeded the budget estimates for some of the  programs, suggesting the potential for a funding shortfall for those  programs in those years. Specifically, we found that the low-range cost  estimates for the W88 Alteration 370 program and all LEPs discussed in  our April 2017 report exceeded their budget estimates for some fiscal  years within the 10-year time period from fiscal year 2017 to 2026. As  we reported in 2013 and 2016, this misalignment indicates that NNSA\u2019s  estimated budgets may not be sufficient to fully execute program plans  and that NNSA may need to increase funding for these programs in the  future.", "Additionally, in April 2017 we found that the costs of two ongoing nuclear  weapon LEPs and the W88 Alteration 370 program may increase in the  future, based on NNSA information that was produced after the release of  the fiscal year 2017 budget materials. These potential cost increases  could further challenge the extent to which NNSA\u2019s budget estimates  support the scope of modernization efforts. The LEPs facing potential  cost increases include:", "B61-12 LEP. An independent cost estimate for the program  completed in October 2016 exceeded the program\u2019s self-conducted  cost estimate from June 2016 by $2.6 billion.", "W80-4 LEP. Officials from NNSA\u2019s Office of Cost Policy and Analysis  told us that this program may be underfunded by at least $1 billion to  meet the program\u2019s existing schedule.", "W88 Alteration 370. According to officials from NNSA\u2019s Office of Cost  Policy and Analysis, this program\u2019s expanded scope of work may  result in about $1 billion in additional costs.", "To help NNSA put forth more credible modernization plans, we  recommended in our April 2017 report that the NNSA Administrator  include an assessment of the affordability of NNSA\u2019s portfolio of  modernization programs in future versions of the Stockpile Stewardship  and Management Plan, such as by presenting options (e.g., potentially  deferring the start of or canceling specific modernization programs) that  NNSA could consider taking to bring its estimates of modernization  funding needs into alignment with potential future budgets. In commenting  on our report, NNSA neither agreed nor disagreed with our  recommendation."], "subsections": []}]}, {"section_title": "DOE Annually Spends Billions on Cleanup, but the Cost of Its Environmental Liabilities Continues to Increase", "paragraphs": ["DOE also faces challenges with addressing its environmental liabilities  and its cleanup mission. In February 2017, we added the federal  government\u2019s environmental liabilities to our High-Risk List. Specifically,  we found that the federal government\u2019s environmental liability has been  growing for the past 20 years\u2014and is likely to continue to increase\u2014and  that DOE is responsible for over 80 percent ($372 billion) of the nearly  $450 billion reported environmental liability. Notably, this estimate does  not reflect all of the future cleanup responsibilities that DOE may face.  In addition, DOE has not consistently taken a risk-informed approach to  decision-making for environmental cleanup, and DOE may therefore be  missing opportunities to reduce costs while also reducing environmental  risks more quickly. Our recent work in this area has also identified  opportunities where DOE may be able to save tens of billions of dollars.", "As we have previously reported, DOE\u2019s total reported environmental  liability has generally increased over time. Since 1989, EM has spent over  $164 billion to retrieve, treat, and dispose of nuclear and hazardous  waste and, as of 2017, it had completed cleanup at 91 of 107 sites across  the country (the 91 sites were generally viewed by DOE as the smallest  and least contaminated sites to address). Despite billions spent on  environmental cleanup, DOE\u2019s environmental liability has roughly doubled  from $176 billion in fiscal year 1997 to the fiscal year 2016 estimate of  $372 billion. Between 2011 and 2016, EM spent $35 billion, primarily to  treat and dispose of nuclear and hazardous waste and construct capital  asset projects to treat the waste (see fig. 3 for EM\u2019s annual spending and  growing environmental liability). According to documents related to DOE\u2019s fiscal year 2016 financial statements, half of DOE\u2019s environmental liability  resides at two cleanup sites: the Hanford Site in Washington State and  the Savannah River Site in South Carolina.", "In its fiscal year 2016 financial statement, DOE attributed recent  environmental liability increases to (1) inflation adjustments for the current  year; (2) improved and updated estimates for the same scope of work,  including changes resulting from deferral or acceleration of work; (3)  revisions in technical approach or scope for cleanup activities; and (4)  regulatory and legal changes. Notably, in recent annual financial reports,  DOE has cited other significant causes for increases in its liability. Other  causes have included the lack of a disposal path for high-level radioactive  waste\u2014because of the termination of the Yucca Mountain repository  program\u2014and delays and scope changes for major construction projects  at the Hanford and Savannah River sites.", "We also reported in February 2017 that DOE\u2019s estimated liability does not  include billions in expected costs. According to federal accounting  standards, environmental liability estimates should include costs that are  probable and reasonably estimable, meaning that costs that cannot yet  be reasonably estimated should not be included in total environmental  liability. Examples of costs that DOE cannot yet estimate include the  following:", "DOE has not yet developed a cleanup plan or cost estimate for the  Nevada National Security Site and, as a result, the cost of future  cleanup of this site was not included in DOE\u2019s fiscal year 2015  reported environmental liability. The nearly 1,400-square-mile site has  been used for hundreds of nuclear weapons tests since 1951. These  activities have resulted in more than 45 million cubic feet of  radioactive waste at the site. According to DOE\u2019s financial statement,  since DOE is not yet required to establish a plan to clean up the site,  the costs for this work are excluded from DOE\u2019s annually reported  environmental liability.", "DOE\u2019s reported environmental liability includes an estimate for the  cost of a permanent nuclear waste repository, but these estimates are  highly uncertain and likely to increase. In March 2015, in response to  the termination of the Yucca Mountain repository program, DOE  proposed separate repositories for defense high-level and commercial  waste. In January 2017, we reported that the cost estimate for DOE\u2019s  new approach excluded the costs and time frames for site selection  and site characterization. As a result, the full cost of these activities  is likely billions of dollars more than what is reflected in DOE\u2019s  environmental liability. In our annual report on Fragmentation,  Overlap, and Duplication in the federal government that we issued in  May 2017, we reported that DOE may be able to save billions of  dollars by reassessing the rationale for its March 2015 proposal. In  June 2017, a bill that could result in renewed efforts to open the  Yucca Mountain repository was introduced in the House of  Representatives.", "In addition, according to the DOE Inspector General, DOE may have  insufficient controls in place to accurately account for its environmental  liabilities. In November 2016, the DOE Inspector General reported a  significant deficiency in internal controls related to the reconciliation of  environmental liabilities.", "Moreover, DOE does not consistently take a risk-informed decision- making approach to its environmental cleanup mission to more efficiently  use resources. As our reports and those by other organizations issued  over the last 2 decades have found, DOE\u2019s environmental cleanup  decisions have not been risk-based, and there have been inconsistencies  in the regulatory approaches followed at different sites. We and others  have pointed out that DOE needs to take a nation-wide, risk-based  approach to cleaning up these sites, which could reduce costs while also  reducing environmental risks more quickly.", "In 2006, the National Research Council reported that the nation\u2019s  approach to cleaning up nuclear waste\u2014primarily carried out by  DOE\u2014was complex, inconsistent, and not systematically risk- based. For example, the National Research Council noted that the  current regulatory structure for low-activity waste is based primarily on  the waste\u2019s origins rather than on its actual radiological risks. The  National Research Council concluded that by working with regulators,  public authorities, and local citizens to implement risk-informed  practices, waste cleanup efforts can be done more cost-effectively.  The report also suggested that statutory changes were likely needed.", "In 2015, a review organized by the Consortium for Risk Evaluation  with Stakeholder Participation reported that DOE was not optimally  using available resources to reduce risk. According to the report,  factors such as inconsistent regulatory approaches and certain  requirements in federal facility agreements caused disproportionate  resources to be directed at lower-priority risks. The report called for a  more systematic effort to assess and rank risks within and among  sites, including through headquarters guidance to sites, and to  allocate federal taxpayer monies to remedy the highest priority risks  through the most efficient means.", "In May 2017, we reported on DOE\u2019s efforts to treat a significant  portion of the waste in underground tanks at the Hanford Site. We  found that DOE chose different approaches to treat the less  radioactive portion of its tank waste\u2014which DOE refers to as \u201clow- activity waste\u201d (LAW)\u2014at the Hanford and Savannah River Sites. At  the Savannah River Site, DOE has grouted about 4 million gallons of  LAW since 2007. DOE plans to treat a portion of the Hanford Site\u2019s  LAW with vitrification, but it has not yet treated any of Hanford\u2019s LAW  and faces significant unresolved technical challenges in doing so. In  addition, we found that the best available information indicates that  DOE\u2019s estimated costs to grout LAW at the Savannah River Site are  substantially lower than its estimated costs to vitrify LAW at Hanford,  and DOE may be able to save tens of billions of dollars by  reconsidering its waste treatment approach for a portion of the LAW at  Hanford. Moreover, according to experts that attended a meeting we  convened with the National Academies of Sciences, Engineering, and  Medicine, both vitrification and grout could effectively treat Hanford\u2019s  LAW. Experts at our meeting also stated that developing updated  information on the effectiveness of treating a portion of Hanford\u2019s  waste, called supplemental LAW, with other methods, such as grout,  may enable DOE to consider waste treatment approaches that would  accelerate DOE\u2019s tank waste treatment mission, thereby potentially  reducing certain risks and lifecycle treatment costs. We recommended  that DOE (1) develop updated information on the performance of  treating supplemental LAW with alternate methods, such as grout,  before it selects an approach for treating supplemental LAW; and (2)  have an independent entity develop updated information on the  lifecycle costs of treating Hanford\u2019s supplemental LAW with alternate  methods. DOE agreed with both recommendations.", "Since 1994, we have made at least 28 recommendations related to  addressing the federal government\u2019s environmental liability to DOE and  others and 4 suggestions to Congress to consider changes to the laws  governing cleanup activities. Of these, 13 recommendations remain  unimplemented. If implemented, these steps would improve the  completeness and reliability of the estimated costs of future federal  cleanup responsibilities and lead to more risk-based management of the  cleanup work. We believe these recommendations are as relevant, if not  more so, today."], "subsections": []}, {"section_title": "DOE Has Taken Steps to Improve Management of Contracts, Projects, and Programs, but Challenges Remain", "paragraphs": ["The Secretary of Energy has taken several important steps that  demonstrate DOE\u2019s commitment to improving management of contracts  and projects. However, our recent work indicates that, even with these  efforts, NNSA and EM continue to face long-standing challenges in  several areas."], "subsections": [{"section_title": "DOE Has Made Progress in Managing Contracts and Projects", "paragraphs": ["As we noted in our 2017 high-risk report, DOE has made progress in its  contract and project management. DOE continued to meet the criterion  for demonstrating a strong commitment and top leadership support for  improving project management. The Secretary of Energy issued two memorandums, in December 2014 and June 2015, that lay out a series of  changes to policies and procedures to improve project management.  These changes were included in DOE\u2019s revised project management  order, DOE Order 413.3B, issued in May 2016. As noted in the  memorandums, some of these changes are in response to  recommendations we made in prior years, such as requiring that projects  develop cost estimates and analyses of alternatives according to our best  practices.", "DOE also made significant efforts to improve its performance in  monitoring and independently validating the effectiveness and  sustainability of corrective measures and now partially meets our  monitoring criterion for removing agencies and program areas from our  High-Risk List. For example, the Secretary improved the department\u2019s  senior-level monitoring capability. The Secretary strengthened the Energy  Systems Acquisition Advisory Board by changing it from an ad hoc body  to an institutionalized board responsible for reviewing all capital asset  projects with a total project cost of $100 million or more. The Secretary  also created the Project Management Risk Committee, which includes  senior DOE officials and is chaired by a new departmental position\u2014the  Chief Risk Officer. The committee is chartered to assess the risks of  projects across DOE and advise DOE senior leaders on cost, schedule,  and technical issues for projects."], "subsections": []}, {"section_title": "Challenges Persist in Several Areas", "paragraphs": ["DOE\u2019s recent efforts do not address several areas where it continues to  have challenges including (1) acquisition planning for its major contracts,  (2) the quality of enterprise-wide cost information available to DOE  managers and key stakeholders, (3) program and project management,  and (4) major legacy projects."], "subsections": [{"section_title": "Acquisition Planning for Major Contracts", "paragraphs": ["As we have previously reported, during the acquisition-planning phase for  contracts, DOE makes critical decisions that have significant implications  for the cost and overall success of an acquisition. The size and duration  of DOE\u2019s management and operating (M&O) contracts\u201422 M&O  contracts with an average potential duration of 17 years, representing  almost three-quarters of DOE\u2019s spending in fiscal year 2015\u2014underscore  the importance of planning for every M&O acquisition. In August 2016, we  examined DOE\u2019s use of M&O contracts. According to DOE officials we  interviewed at that time, one of the primary reasons DOE uses M&O  contracts is because they are easier to manage with fewer DOE  personnel because they are less frequently competed and have broadly  written scopes of work, among other attributes. We found that DOE did  not consider acquisition alternatives beyond continuing its long-standing  M&O contract approach for 16 of its 22 M&O contracts. We concluded  that without considering broader alternatives in the acquisition planning  phase, DOE cannot ensure that it is selecting the most effective scope  and form of contract, raising risks for both contract cost and performance.  We recommended in our August 2016 report that DOE establish a  process to analyze and apply its experience with contracting alternatives.  DOE generally concurred with our recommendation, and, in November  2016, issued updated guidance requiring acquisition planning documents  to contain a thorough discussion of alternatives beyond simply extending  or competing M&O contracts."], "subsections": []}, {"section_title": "Quality of Enterprise-Wide Cost Information", "paragraphs": ["We have previously reported that the effectiveness of DOE\u2019s monitoring  of its contracts, projects, and programs depends upon the availability of  reliable enterprise-wide cost information on which to base oversight  activities. For example, reliable enterprise-wide cost information is  needed to identify the cost of activities, ensure the validity of cost  estimates, and provide information to Congress to make budgetary  decisions. However, we have found that meaningful cost analyses across  programs, contractors, and sites are not usually possible because  NNSA\u2019s contractors use different methods of accounting for and tracking  costs. NNSA developed a plan to improve and integrate its cost reporting  structures; however, we found in January 2017 that this plan did not  provide a useful road map for guiding NNSA\u2019s effort. For example, we  found that NNSA did not define strategies and identify resources needed  to achieve its goals, which is a leading practice for strategic planning.  NNSA\u2019s plan contained few details on the elements it must include, such  as its feasibility assessment, estimated costs, expected results, and an  implementation timeline. We concluded that, until a plan is in place that  incorporates leading strategic planning practices, NNSA cannot be  assured that its efforts will result in a cost collection tool that produces  reliable enterprise-wide cost information that satisfies the information  needs of Congress and program managers. We recommended that  NNSA develop a plan for producing cost information that fully  incorporates leading planning practices. NNSA agreed with our  recommendation.", "In addition, as we have previously noted, quality data are needed for DOE  to manage its risk of fraud. The Fraud Reduction and Data Analytics Act  of 2015 establishes requirements aimed at improving federal agencies\u2019  controls and procedures for assessing and mitigating fraud risks through  the use of data analytics. In a March 2017 report, however, we found  that because DOE does not require its contractors to maintain sufficiently  detailed transaction-level cost data that are reconcilable with amounts  charged to DOE, it is not well positioned to employ data analytics as a  fraud detection tool. We found that the data were not suitable either  because they were not for a complete universe of transactions that was  reconcilable with amounts billed to DOE or because they were not  sufficiently detailed to determine the nature of costs charged to DOE. We  concluded that, without requiring contractors to maintain such data, DOE  will not be well positioned to meet the requirements of the Fraud  Reduction and Data Analytics Act of 2015 and manage its risk of fraud  and other improper payments. We recommended that DOE require contractors to maintain sufficiently detailed transaction-level cost data that  are reconcilable with amounts charged to the government.", "DOE did not concur with our recommendation. This is because, according  to DOE, the recommendation establishes agency-specific requirements  for DOE contractors that are more prescriptive than current federal  requirements and that its M&O contractors, not DOE, are responsible for  performing data analytics and determining what data are needed to do so.  DOE\u2019s response to our recommendation is concerning because it  demonstrates that DOE does not fully appreciate its responsibility for  overseeing contractor costs. We believe that the use of data-analytic  techniques by DOE employees could help mitigate some of the  challenges that limit the effectiveness of DOE\u2019s approach for overseeing  M&O contractor costs. However, effectively applying data-analytics  depends on the availability of complete and sufficiently detailed contractor  data. Therefore, by implementing our recommendation DOE could take  the important steps necessary to require contractors maintain sufficiently  detailed transaction-level cost data that are reconcilable with amounts  charged to the government."], "subsections": []}, {"section_title": "Program and Project Management", "paragraphs": ["Although, as mentioned previously, DOE has taken some steps to  improve program and project management, our recent work has shown  that DOE continues to face several challenges in these areas. Specifically  on program management:  In November 2017, we found that NNSA had established program  management requirements, such as developing cost and schedule  estimates for its uranium, plutonium, tritium, and lithium programs and  had established managers\u2019 roles and responsibilities for these  programs. However, officials told us that the programs had not fully  met these requirements primarily because of staff shortages. We  recommended that NNSA determine the critical staff skills it will need  for these programs and use that information to address staffing  shortages. NNSA agreed with our recommendation.", "In a September 2017 report on the NNSA\u2019s uranium program, we  found that NNSA had not developed a complete scope of work, a life- cycle cost estimate, or an integrated master schedule for the overall  uranium program\u2014all of which are considered leading practices\u2014and  it had no time frame for doing so. We reported that NNSA plans to  do so for the specific Uranium Processing Facility project, as  required by DOE\u2019s project management order. However, NNSA had  not developed a complete scope of work for key program  requirements, including important and potentially costly repairs and  upgrades to existing buildings in which NNSA intends to house some  uranium processing capabilities. We concluded that because NNSA  had not developed a complete scope of work for the overall uranium  program, it did not have the basis to develop a life-cycle cost estimate  or an integrated master schedule for the entire uranium program,  which runs counter to best practices identified in GAO\u2019s cost  estimating and scheduling guides. We recommended that NNSA set a  time frame for completing the scope of work, life-cycle cost estimate,  and integrated master schedule for the overall uranium program.  NNSA generally agreed with this recommendation and has ongoing  efforts to complete these actions.", "In September 2017, we found that DOE\u2019s program to re-establish the  production of a plutonium isotope used to provide electrical power for  the National Aeronautics and Space Administration missions had  made progress but that it faced a number of technical and  organizational challenges to meeting production goals. Specifically,  we found that NNSA had not developed an implementation plan that  identifies milestones and interim steps that can be used to  demonstrate progress in meeting production goals. Our prior work has  shown that plans that include milestones and interim steps help an  agency to set priorities, use resources efficiently, and monitor  progress in achieving agency goals. In our September 2017 report,  we made three recommendations, including that DOE develop such a  plan for its plutonium isotope production approach and that DOE  assess the long-term effects of known production challenges and  communicate these effects to the National Aeronautics and Space  Administration. DOE concurred with our recommendations.", "Our prior work also demonstrates that DOE continues to face project  management challenges in terms of having reliable performance data or  conducting reliable analyses of alternatives. Specifically,  In a January 2018 report, we found management challenges  associated with NNSA\u2019s life extension programs (LEP). For  example, we found that NNSA had begun implementing requirements  for using earned value management (EVM) \u2014a tool used across  industry and government for conducting cost and schedule  performance analysis\u2014in three LEPs, but it had not adopted a key  best practice that could help the agency better manage risk for LEPs.  Specifically, we found that NNSA does not require an independent  team to validate the EVM systems used by NNSA\u2019s contractors for  LEPs against the national EVM standard. We concluded that without  requiring validation of EVM systems, NNSA may not have assurance  that its LEPs are obtaining reliable EVM data for managing their  programs and reporting their status. We recommended that NNSA  require an independent team to validate contractor EVM systems  used for LEPs. NNSA agreed with our recommendation but stated  that it already relies on a DOE project management office to  independently validate contractor EVM systems. However, as we  reported, DOE has not independently validated contractor EVM  systems at six of the seven contractor sites that are responsible for  conducting LEP activities.", "In May 2015, we reported that DOE initiated a new project, the Low  Activity Waste Pretreatment System project, to accelerate waste  treatment at Hanford. We found that this project was selected on the  basis of similar past proposals without consideration of other  potentially viable alternatives, contrary to requirements in DOE\u2019s  project management order. We also reported that DOE\u2019s cost and  schedule estimates for completion of the project were not conducted  according to best practices and were therefore not reliable. We  recommended that DOE re-evaluate alternatives and that it revise the  cost and schedule estimates in line with best practices. DOE generally  agreed with our recommendations but not some of the conclusions. In  September 2017, amid concerns about project cost growth and  schedule delays, DOE directed the contractor to conduct a new  analysis of alternatives to identify options that will allow the project to  be completed within current cost and schedule estimates. The  department has suspended work on the project pending a decision on  its design.", "We will continue to monitor EM\u2019s management and oversight of its  operations activities and DOE\u2019s risk-informed cleanup decisions to  address environmental liabilities, as part of our ongoing work for this  subcommittee."], "subsections": []}, {"section_title": "Major Legacy Projects", "paragraphs": ["As previously mentioned, in response to a 2015 memorandum on project  management policies from the Secretary of Energy, DOE instituted  project management reforms that\u2014if fully implemented\u2014will help ensure  that future projects are not affected by the challenges that have persisted  for DOE\u2019s major legacy projects. Although DOE has taken action on  certain major projects, we found that it has not consistently applied these  reforms, and in particular, DOE has not applied such reforms to its largest  legacy cleanup project at its Hanford Site in Washington state. As we  found in a May 2015 report, DOE continues to allow construction of  certain Waste Treatment and Immobilization Plant (WTP) facilities at  DOE\u2019s Hanford Site before designs are 90 percent complete. This  contrasts with DOE\u2019s revised project management order that now  requires a facility\u2019s design to be at least 90 percent complete before  establishing cost and schedule baselines and cost and schedule  estimates that meet industry best practices. The WTP is DOE\u2019s largest  project, and it has faced numerous technical and management challenges  that have added decades to its schedule and billions of dollars to its cost.  We recommended in May 2015 that DOE (1) consider whether to limit  construction on the WTP until risk mitigation strategies are developed to  address known technical challenges, and (2) determine the extent to  which the quality problems exist, in accordance with its quality assurance  policy, for the facilities\u2019 systems that have not been reviewed to determine  if additional vulnerabilities exist. However, as of September 2016, DOE  had not yet implemented our recommendations. In December 2016, DOE  announced that the cost estimate for one portion of the WTP\u2014the part  needed to treat a fraction of the low-activity waste\u2014had increased to  nearly $17 billion. We are currently in the process of completing a report  on DOE\u2019s WTP quality assurance program."], "subsections": []}]}]}, {"section_title": "NNSA\u2019s Nonproliferation Program Faces Performance Measurement and Program Management Challenges", "paragraphs": ["Our previous work has found that NNSA also faces challenges  implementing its nonproliferation programs under its Office of Defense  Nuclear Nonproliferation (DNN), which implements nuclear  nonproliferation programs worldwide. In recently completed reviews of  DNN programs, we have identified several challenges NNSA faces in how  it measures performance and conducts program management of these  efforts. Specifically,  In September 2017, we found that four DNN programs did not have  schedule and cost estimates covering their planned life cycles and did  not measure performance against schedule and cost baselines as is  recommended by program management leading practices. NNSA  officials explained that in general this is due in part to high levels of  uncertainty in planning the selected programs\u2019 work scope or  schedules, particularly in working with partner countries; however, we  noted that uncertainty should not prevent these programs from  establishing more complete or longer-term estimates to account for  the time and resources they need to achieve their goals and track  their performance. In addition, we observed that DOE\u2019s cost  estimating guide, which applies to NNSA programs, describes  approaches for programs to incorporate risk and uncertainty in  estimates. But we found that DNN\u2019s program management policy,  which was updated in February 2017, did not outline requirements for  programs to establish life-cycle estimates or measure performance  against schedule and cost baselines. We recommended that DNN  revise its program management policy to require DNN programs to  follow life-cycle program management, such as requiring life-cycle  estimates and measuring against baselines. Updating the DNN policy  to include requirements and guidance on cost estimating and tracking  performance against schedule and cost baselines could help ensure  that NNSA managers and Congress have better information on (1)  how much DNN programs may cost, (2) the time they may need to  achieve their goals, and (3) how effectively they are being executed  compared to plans. Although NNSA neither agreed nor disagreed with  the recommendation, it indicated that it plans to take action to revise  its policy to address the recommendation.", "In February 2017, we found that NNSA was unable to demonstrate  the full results of its research and development technology for  preventing nuclear proliferation. Specifically, we reported that DNN\u2019s  Research and Development program did not consistently track and  document projects that result in technologies being transitioned or  deployed. Furthermore, we found that DNN\u2019s Research and  Development project performance was difficult to interpret because  the program\u2019s performance measures did not define criteria or provide  context justifying how the program determined that it met its targets.  We concluded that this, in turn, could hinder users\u2019 ability to determine  the program\u2019s progress. NNSA officials said that final project reports  did not document their assessment of performance against baseline  targets and that there was no common template for final project  reports. We noted that documenting assessments that compare final  project performance results against baseline targets for scope of work  and completion date could enhance NNSA\u2019s ability to manage its  programs in accordance with these standards. We also concluded  that more consistently tracking and documenting the transitioned and  deployed technologies that result from DNN\u2019s projects could also  facilitate knowledge sharing within DNN. This would also provide a  means by which to present valuable information to Congress and  other decision makers about the programs\u2019 results and overall value.  We recommended that NNSA consistently track and document results  of DNN Research and Development projects and document  assessments of final project results against baseline performance  targets. NNSA agreed to take actions in response to both  recommendations.", "In June 2016, we found that the Nuclear Smuggling Detection and  Deterrence (NSDD) program had developed a program plan but that  the plan did not include measurable goals and performance measures  aligned to the goals. As a result, we concluded that the NSDD  program may not be able to determine when it has fully accomplished  its mission and risked continuing to deploy equipment past the point of  diminishing returns. We recommended that NSDD develop a more  detailed pr ogram plan that articulates when and how it will achieve its  goals, including completing key activities, such as the deployment of  radiation detection equipment to partner countries. NNSA agreed with  this recommendation.", "Chairman Upton, Ranking Member Rush, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgements", "paragraphs": ["If you or your staff members have any questions about this testimony,  please contact me at (202) 512-3841 or trimbled@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. GAO staff who made key  contributions to this testimony are Nico Sloss, Assistant Director; Nathan  Anderson; Allison Bawden; Natalie Block; Mark Braza; Antoinette  Capaccio; Jenny Chow; Ricki Gaber; Jonathan Gill; William Hoehn;  Cristian Ion; Amanda Kolling; and Diane LoFaro."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["The following is a selection of GAO\u2019s recent work assessing the  Department of Energy\u2019s management efforts, including at the National  Nuclear Security Administration and at the Office of Environmental  Management:  Nuclear Weapons: NNSA Should Adopt Additional Best Practices to  Better Manage Risk for Life Extension Programs. GAO-18-129.  Washington, D.C.: January 30, 2018.", "Nuclear Weapons: NNSA Needs to Determine Critical Skills and  Competencies for Its Strategic Materials Programs. GAO-18-99.  Washington, D.C.: November 14, 2017.", "Nuclear Nonproliferation: NNSA Needs to Improve Its Program  Management Policy and Practices. GAO-17-773. Washington, D.C.:  September 28, 2017.", "Modernizing the Nuclear Security Enterprise: A Complete Scope of Work  Is Needed to Develop Timely Cost and Schedule Information for the  Uranium Program. GAO-17-577. Washington, D.C.: September 8, 2017.", "Space Exploration: DOE Could Improve Planning and Communication  Related to Plutonium-238 and Radioisotope Power Systems Production  Challenges. GAO-17-673. Washington, D.C.: September 8, 2017.", "Nuclear Waste: Opportunities Exist to Reduce Risks and Costs by  Evaluating Different Waste Treatment Approaches at Hanford.   GAO-17-306. Washington, D.C.: May 3, 2017.  2017 Annual Report: Additional Opportunities to Reduce Fragmentation,  Overlap, and Duplication and Achieve Other Financial Benefits.   GAO-17-491SP. Washington, D.C.: April 26, 2017.", "National Nuclear Security Administration: Action Needed to Address  Affordability of Nuclear Modernization Programs. GAO-17-341.  Washington, D.C.: April 26, 2017.", "Department of Energy: Use of Leading Practices Could Help Manage the  Risk of Fraud and Other Improper Payments. GAO-17-235. Washington,  D.C.: March 30, 2017.", "High-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.", "Nuclear Nonproliferation: Better Information Needed on Results of  National Nuclear Security Administration\u2019s Research and Technology  Development Projects. GAO-17-210. Washington, D.C.: February 3,  2017.", "Nuclear Waste: Benefits and Costs Should Be Better Understood Before  DOE Commits to a Separate Repository for Defense Waste.   GAO-17-174.Washington, D.C.: January 31, 2017.", "National Nuclear Security Administration: A Plan Incorporating Leading  Practices Is Needed to Guide Cost Reporting Improvement Effort.   GAO-17-141. Washington, D.C.: January 19, 2017.", "Program Management: DOE Needs to Develop a Comprehensive Policy  and Training Program. GAO-17-51. Washington, D.C.: November 21,  2016.", "Department of Energy: Actions Needed to Strengthen Acquisition  Planning for Management and Operating Contracts. GAO-16-529.  Washington, D.C.: August 9, 2016.", "DOE Project Management: NNSA Needs to Clarify Requirements for Its  Plutonium Analysis Project at Los Alamos. GAO-16-585. Washington,  D.C.: August 9, 2016.", "Orion Multi-Purpose Crew Vehicle: Action Needed to Improve Visibility  into Cost, Schedule, and Capacity to Resolve Technical Challenges.  GAO-16-620. Washington, D.C.: July 27, 2016.", "Department of Energy: Whistleblower Protections Need Strengthening.  GAO-16-618. Washington, D.C.: July 11, 2016.", "Combating Nuclear Smuggling: NNSA\u2019s Detection and Deterrence  Program Is Addressing Challenges but Should Improve Its Program Plan.  GAO-16-460. Washington, D.C.: June 17, 2016.", "Modernizing the Nuclear Security Enterprise: NNSA\u2019s Budget Estimates  Increased but May Not Align with All Anticipated Costs. GAO-16-290.  Washington, D.C.: March 4, 2016.", "Weapons System Acquisitions: Opportunities Exist to Improve the  Department of Defense\u2019s Portfolio Management. GAO-15-466.  Washington, D.C.: August 27, 2015.", "Hanford Waste Treatment: DOE Needs to Evaluate Alternatives to  Recently Proposed Projects and Address Technical and Management  Challenges. GAO-15-354. Washington, D.C.: May 7, 2015.", "DOE and NNSA Project Management: Analysis of Alternatives Could Be  Improved by Incorporating Best Practices. GAO-15-37. Washington, D.C.:  December 11, 2014.", "Modernizing the Nuclear Security Enterprise: NNSA\u2019s Budget Estimates  Do Not Fully Align with Plans. GAO-14-45. Washington, D.C.: December  11, 2013.", "Commercial Nuclear Waste: Effects of a Termination of the Yucca  Mountain Repository Program and Lessons Learned. GAO-11-229.  Washington, D.C.: April 8, 2011.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) manages the U.S. nuclear weapons stockpile and supports nonproliferation efforts. DOE's Office of Environmental Management addresses contamination at nuclear weapons production sites. We testified that", "NNSA\u2019s plans to modernize its nuclear weapons do not align with its budget, raising affordability concerns", "DOE's environmental cleanup liability may cost billions more than anticipated", "DOE continues to face challenges managing its contracts, projects, and programs", "NNSA has faced management challenges implementing its nonproliferation programs"]}
{"id": "GAO-18-347", "url": "https://www.gao.gov/products/GAO-18-347", "title": "Event Ticket Sales: Market Characteristics and Consumer Protection Issues", "published_date": "2018-04-12T00:00:00", "released_date": "2018-05-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Tickets for concerts, theater, and sporting events can be purchased\u2014typically online\u2014from the original seller (primary market) or a reseller (secondary market). Some state and federal officials and others have raised issues about ticketing fees, the effect of the secondary market on ticket prices, and the transparency and business practices of some industry participants. Event ticketing is not federally regulated. However, federal legislation enacted in 2016 restricts bots (ticket-buying software). Also, the Federal Trade Commission (FTC) has taken two enforcement actions related to deceptive marketing by ticket sellers under its broad FTC Act authority.", "GAO was asked to review issues around online ticket sales. This report examines (1) what is known about online ticket sales, (2) consumer protection issues related to such sales, and (3) potential advantages and disadvantages of selected approaches to address these issues.", "GAO focused on concert, theater, and major league sporting events for which there is a resale market. GAO analyzed data on fees, ticket volume, and resale prices from a variety of sources; reviewed the largest ticket sellers' websites and purchase processes; and reviewed federal and state laws and relevant academic literature. GAO also interviewed and reviewed documentation from government agencies; consumer organizations; ticket sellers; venue operators; promoters and managers; sports leagues; and academics (selected for their experience and to provide a range of perspectives)."]}, {"section_title": "What GAO Found", "paragraphs": ["Ticket pricing, resale activity, and fees for events vary. Tickets to popular events sold on the primary market sometimes are priced below the market price, partly because performers want to make tickets affordable and maintain fans' goodwill, according to industry representatives. Tickets are often resold on the secondary market at prices above face value. In a nongeneralizable sample of events GAO reviewed, primary and secondary market ticketing companies charged total fees averaging 27 percent and 31 percent, respectively, of the ticket's price.", "Consumer protection issues include difficulty buying tickets at face value and the fees and marketing practices of some market participants.", "Professional resellers, or brokers, have a competitive advantage over consumers in buying tickets as soon as they are released. Brokers can use numerous staff and software (\u201cbots\u201d) to rapidly buy many tickets. As a result, many consumers can buy tickets only on the resale market at a substantial markup.", "Some ticket websites GAO reviewed did not clearly display fees or disclosed them only after users entered payment information.", "\u201cWhite-label\u201d resale sites, which often appear as paid results of Internet searches for venues and events, often charged higher fees than other ticket websites\u2014sometimes in excess of 40 percent of the ticket price\u2014and used marketing that might mislead users to think they were buying tickets from the venue.", "Selected approaches GAO reviewed, such as ticket resale restrictions and disclosure requirements, would have varying effects on consumers and businesses.", "Nontransferable tickets. At least three states restrict nontransferable tickets\u2014that is, tickets whose terms do not allow resale. Nontransferable tickets allow more consumers to access tickets at a face-value price. However, they also limit consumers' ability to sell tickets they cannot use, can create inconvenience by requiring identification at the venue, and according to economists, prevent efficient allocation of tickets.", "Price caps. Several states cap the price at which tickets can be resold. But according to some state government studies, the caps generally are not effective because they are difficult to enforce.", "Disclosure requirements. Stakeholders and government research GAO consulted generally supported measures to ensure clearer and earlier disclosure of ticket fees, although views varied on the best approach (for example, to include fees in an \u201call-in\u201d price or disclose them separately).", "Some market-based approaches are being used or explored that seek to address concerns about secondary market activity. These approaches include technological tools and ticket-buyer verification to better combat bots. In addition, a major search engine recently required enhanced disclosures from ticket resellers using its advertising platform. The disclosures are intended to protect consumers from scams and prevent potential confusion about who is selling the tickets."]}], "report": [{"section_title": "Letter", "paragraphs": ["In recent years, consumers and others have raised issues about the  online ticket marketplace for concerts, commercial theater, and sporting  events. For example, some consumers have complained about difficulty  obtaining face-value tickets for popular events at the primary, or initial,  sale to the general public\u2014only to find the tickets immediately available at  high markups on the secondary, or resale, market. In response, event  organizers and legislators have targeted ticket bots\u2014automated software  that ticket brokers can use to buy large volumes of tickets. The Better  Online Ticket Sales Act of 2016 (BOTS Act) restricted the use of bots and  gave the Federal Trade Commission (FTC) and state attorneys general  the authority to pursue violators with civil actions. Other issues that have  been raised include the amount of ticket fees and restrictions on  transferring some tickets.", "You asked us to review the marketplace and consumer protection issues  related to online ticket sales. This report examines (1) what is known  about primary and secondary online ticket sales, (2) the consumer  protection concerns that exist related to online ticket sales, and (3)  potential advantages and disadvantages of selected approaches to  address these concerns.", "To address the first objective, we obtained and analyzed data on ticket  volume and resale prices obtained from ticket sellers\u2019 websites for a  nonprobability sample of 22 events, which were selected to represent a  variety of event types and popularity levels. We collected data from  October 16 through December 20, 2017. We also reviewed trade industry  data on ticket prices and sales.", "To address the second objective, we reviewed the websites of 6 primary  market ticket sellers, 11 secondary ticket exchanges, and 8 ticket sellers  using \u201cwhite-label\u201d websites. For a sample of 31 events, chosen to reflect  a mix of event types and venue sizes (e.g., arenas, theaters), we  reviewed the process of purchasing tickets online and documented when  and how clearly fees and restrictions were disclosed. In addition, we  assessed the accuracy of information that customer service departments  of three large secondary ticket exchanges provided. We also reviewed  relevant enforcement activity by federal and state agencies and obtained  and analyzed summary complaint data from FTC\u2019s Consumer Sentinel  Network database.", "To address the third objective, we reviewed federal and selected state  laws and examined the experiences of three U.S. states (Connecticut,  Georgia, and New York) with relevant event ticketing laws. We also  reviewed foreign government reports to obtain information on relevant  ticketing restrictions in two foreign countries (Canada and the United  Kingdom) with similar consumer protection issues reviewed in this report.  For all three objectives, we reviewed documentary evidence (such as  academic studies, trade reports and databases, and industry literature)  and interviewed staff from FTC, Department of Justice (DOJ), and three  state offices of attorney general; consumer organizations; primary and  secondary ticket sellers; venue operators, event promoters, and artists\u2019  managers and agents; major sports leagues; and academics who have  studied the ticket marketplace\u2014all of whom were selected for their  experience and to provide a range of perspectives. For more information  on our scope and methodology, see appendix I.", "We conducted this performance audit from November 2016 to April 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work in accordance with investigative standards prescribed  by the Council of the Inspectors General on Integrity and Efficiency."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The Ticketing Marketplace", "paragraphs": ["The marketplace for primary and secondary ticketing services consists of  several types of participants, including primary market ticketing  companies, professional ticket brokers, secondary market ticket  exchanges, and ticket aggregators (see table 1). Other parties that play a  role in event ticketing, as discussed later in this report, include artists and  their managers, booking agents, sports teams, producers, promoters, and  operators of event venues (such as clubs, theaters, arenas, or  stadiums).", "The private research firm IBISWorld estimated that online ticketing  services (including ticketing for concerts, sporting events, live theater,  fairs, and festivals) represented a $9 billion market in 2017, which  included both the primary and secondary markets. Another private  research firm, Statista, estimated that U.S. online ticketing revenues for  sports and music events totaled about $7.1 billion in 2017. Estimates of  the total number of professional ticket sellers vary. IBISWorld estimated  that the U.S. market for online event ticket sales included 2,571  businesses in 2017. The Census Bureau lists more than 1,500 ticket  services companies as of 2015 based on the business classification code  for ticket services. However, this does not provide a reliable count of  companies in the event ticketing industry because it includes companies  selling tickets for services such as bus, airline, and cruise ship travel,  among other services.", "However, a small number of companies conducts the majority of event  ticket sales. In the primary ticket market\u2014where tickets originate and are  available at initial sale\u2014Ticketmaster is the largest ticketing company.  DOJ estimated that Ticketmaster (whose parent company is now Live  Nation Entertainment) held more than 80 percent of market share in  2008, and it was still the market leader as of 2017. Less than a dozen  other companies control most of the rest of the primary market, by our  estimates. In the secondary market\u2014where resale occurs\u2014more  companies are active, but StubHub estimated it held roughly 50 percent  of market share as of 2017. According to Moody\u2019s Investors Service,  Ticketmaster, which in addition to its primary market ticketing has a U.S.  resale subsidiary, held the second-largest market share as of 2016.", "The majority of ticket sales occur online, through a website or mobile  application. Ticketmaster\u2019s parent company reported that 93 percent of its  primary tickets were sold online in 2017. The industry research group  LiveAnalytics reported that in 2014, 68 percent, 50 percent, and 49  percent of people attending concerts, sporting events, and live theater or  arts events, respectively, had recently purchased a ticket online."], "subsections": []}, {"section_title": "Regulation", "paragraphs": ["The event ticketing industry is not federally regulated. However, the  Federal Trade Commission Act prohibits unfair or deceptive acts or  practices in or affecting commerce, and FTC can enforce the act for  issues related to event ticketing and ticketing companies. One federal  statute specifically addresses ticketing issues\u2014the BOTS Act, which  prohibits, among other things, circumventing security measures or other  systems intended to enforce ticket purchasing limits or order rules. The  act also makes it illegal to sell or offer to sell any event ticket obtained  through these illegal methods and granted enforcement authority to FTC  and state attorneys general.", "The Department of Justice\u2019s Antitrust Division plays a role in monitoring  competition in the event ticketing industry. In 2010, Live Nation and  Ticketmaster\u2014respectively, the largest concert promoter and primary  ticket seller in the United States\u2014merged to form Live Nation  Entertainment, Inc. DOJ approved the merger after requiring Ticketmaster  to license its primary ticketing software to a competitor, sell off one  ticketing unit, and agree to be barred from certain forms of retaliation  against venue owners who use a competing ticket service. DOJ may also  inspect Live Nation\u2019s records and interview its employees to determine or  secure compliance with the terms of the final judgment clearing the  merger.", "State government agencies generally invoke state laws on unfair and  deceptive acts and practices to address ticketing violations, according to  representatives of two state attorney general offices. In addition, several  states have laws that directly apply to event ticketing. For example, some  states restrict the use of bots, several other states impose price caps (or  upper limits) on ticket resale prices, and states including Connecticut,  New York, and Virginia restrict the use of nontransferable tickets (tickets  with terms that do not allow resale). Several states require brokers to be  licensed and adhere to certain professional standards, such as  maintaining a physical place of business and a toll-free telephone  number, and offering a standard refund policy."], "subsections": []}]}, {"section_title": "Ticketing Practices, Prices, Fees, and Resale Vary by Industry and Event", "paragraphs": ["The concert, sports, and theater industries vary in how they price and  distribute tickets. Many tickets are resold on the secondary market,  typically at a higher price. Among a nongeneralizable sample of events  we reviewed, we observed that primary and secondary market ticketing  companies charged total fees averaging 27 percent and 31 percent,  respectively, of the ticket\u2019s price."], "subsections": [{"section_title": "On the Primary Market, Ticketing Practices Vary by Industry and Popular Events Are Sometimes Priced below Market", "paragraphs": [], "subsections": [{"section_title": "Concerts", "paragraphs": ["Ticketing practices for major concerts include presales and pricing that  varies based on factors like location and the popularity of the performer.  Tickets to popular concerts are often first sold through presales, which  allow certain customers to purchase tickets before the general on-sale.  Common presales include those for holders of certain credit cards or  members of the artist\u2019s fan club, although promoters, venues, or other  groups also may offer presales. Credit card companies might provide free  marketing for events or other compensation in exchange for exclusive  early access to tickets for their cardholders. In addition, the artist usually  has the option to sell a portion of tickets to its fan club. The venue\u2019s  ticketing company might want to limit the number of tickets allocated to  fan clubs because the artist and manager can sell them through a  separate ticketing platform, according to three event organizers we  interviewed.", "There are no comprehensive data on the proportion of tickets sold  through presales because this information is usually confidential. Industry  representatives told us that 10 percent to 30 percent of tickets for major  concerts typically are offered through presales, although it can be as  many as about 65 percent of tickets for major artists performing at large  venues. In addition, fan club presales usually represent 8 percent of  tickets, although it may be more if the fan club presale uses the venue\u2019s  ticketing company, according to two event organizers. A large ticketing  company told us that 10 percent of tickets may be available for fan club  presales. A 2016 study by the New York State Office of the Attorney  General found that an average of 38 percent of tickets were allotted to  presales for the 74 highest-grossing concerts at selected New York State  venues in 2012\u20132015.", "Additionally, venues, promoters, agents, and artists commonly hold back  a small portion of tickets from public sale. \u201cHolds\u201d may be given or sold to  media outlets, high-profile guests, or friends and family of the artist. They  also may be used to provide flexibility when the seating configuration is  not yet final. Promoters typically will release unused holds before the  event, offering the tickets to the public at face value.", "As with presales, little comprehensive data exist on the proportion of  tickets reserved for holds. Industry representatives told us holds typically  represent a relatively small number of tickets\u2014a few hundred for major  events or perhaps a thousand for a stadium concert. The New York  Attorney General report\u2019s review of a sample of high-grossing New York  State concerts found that approximately 16 percent of tickets, on average,  were allocated for holds. Of those holds, many went to venue operators\u2014 for example, one arena with around 21,000 seats usually received more  than 900 holds per concert held there.", "The average face-value ticket price in 2017 among the top 100 grossing  concert tours in North America was $78.93, according to Pollstar.  Concert ticket prices vary by city or day of the week, based on anticipated  demand. The main parties involved in price setting are the artist and her  or his management team, promoter, and booking agent. Venues  sometimes provide input based on their knowledge of prevailing prices in  the local market. Ticketing companies sometimes offer tools or support to  help event organizers price tickets based on their analysis of sales trends.", "Concert ticket prices are generally set to maximize profits, according to  event organizers. In terms of production costs, the artist\u2019s guarantee\u2014the  amount the artist is paid for each performance\u2014is usually the largest  expense. The most popular artists can command the highest guarantees  and their concerts also tend to have the highest production costs.", "However, for some high-demand events, tickets might be \u201cunderpriced\u201d\u2014 that is, knowingly set below the market clearing price that would provide  the greatest revenue. Artists may underprice their tickets for a variety of  reasons, according to industry stakeholders and our literature review:", "Reputation risk. Artists may avoid very high prices because they do  not want to be perceived as gouging fans. Similarly, event organizers  told us some artists have a certain brand or image\u2014such as working- class appeal\u2014that could be harmed by charging very high ticket  prices.", "Affordability. Some event organizers told us that artists want to price  tickets below market to provide access to fans at all income levels.", "Sold-out show. Event organizers may price tickets lower to ensure a  sold-out show, which can improve the artist and event organizers\u2019  reputations and might help future sales.", "Audience mix. Some artists prefer to have the most enthusiastic fans  at their shows, rather than just those able to pay the most, especially  in the front rows, where tickets are generally the most expensive.", "Ancillary revenue. Better attendance through lower ticket prices can  increase merchandise and concession sales, which can be a  substantial source of revenue.", "In addition, event organizers may unintentionally underprice concert  tickets because of imperfect information about what consumers are willing  to pay. Tickets are also priced based on the prices and sales of the  artist\u2019s (or similar artists\u2019) past tours, but demand can be hard to predict.  Three event organizers told us that they have started using data from the  ticket resale market to help set prices because that is a good gauge of the  true market price."], "subsections": []}, {"section_title": "Sporting Events", "paragraphs": ["For major league professional sports, most decisions about ticket pricing  and ticket distribution are made by the individual teams rather than by the  league. According to the three major sports leagues we interviewed,  their teams generally sell most of their tickets through season packages,  with the remainder sold for individual games. Teams favor packages  because they guarantee a certain level of revenue for the season.  Representatives of two major sports leagues told us that their teams sold  an average of 85 percent and 55 percent, respectively, of their tickets  through season packages. One league told us that some of its teams  increasingly offer not only full-season packages, but also partial-season  packages. Another league said that in some cases, its teams might need  to reserve a certain number of single game-day tickets\u2014for example, as  part of an agreement when public funds helped build a new stadium.", "Representatives of the three sports leagues we interviewed told us that  their teams do not use presales and holds to the same extent as the  concert industry. Although teams do not sell a significant number of  tickets through presales, they might offer first choice of seats to season  ticket holders or individuals who purchased tickets in the past. In terms of  holds, one league told us it requires its teams to hold a small number of  tickets for the visiting team and teams might also hold a few tickets for  sponsors and performers. Another league told us it does not have league- wide requirements on holds, but its teams sometimes hold a small  number of seats for media.", "Sports teams generally set their ticket prices to maximize revenue, based  on supply and anticipated demand, according to the leagues we  interviewed. Ticket prices typically vary year-to-year, based on factors  such as the team\u2019s performance the previous season and playing in a  new stadium. Teams in many leagues use \u201cdynamic pricing\u201d for  individual game tickets. They adjust prices as the game approaches  based on changing demand factors, such as team performance and the  weather forecast. The sports leagues with whom we spoke said teams\u2019  pricing considerations are based in part on a desire to have affordable  tickets for fans of different income levels. In addition, one league told us  its teams rely heavily on revenues other than ticket sales, such as from  television deals and sponsorships."], "subsections": []}, {"section_title": "Theater", "paragraphs": ["Tickets for Broadway and national touring shows are distributed through  direct online sales as well as several additional channels, including day- of-show discount booths, group packages, and call centers. Industry  representatives told us that these shows use presales and holds, but not  as extensively as the concert industry. At our request, a company  provided us with data for five Broadway shows from June 2016 to  September 2017. Approximately 13 percent of tickets in this sample  were sold through presales, almost all of which were group sales (offered  to particular groups prior to the general on-sale). Less than 1 percent of  tickets in this sample were sold through presales offered to specific credit  cardholders. Two shows in high demand held back an average of about 6  percent of tickets, while the other three shows held back about 1 percent.", "Producers and venue operators generally set prices, which are influenced  by factors like venue capacity and the length of run needed to recoup  expenses, according to industry representatives. According to the  Broadway League, from May 22, 2017, to February 11, 2018, the average  face-value price of a Broadway show was $123\u2014an average of $127 for  musicals and $81 for plays. Industry representatives told us they sell  about 10 percent of tickets through day-of-show discount booths. Even  the most popular shows typically offer steep discounts for a small number  of tickets through lotteries or other means.", "Tickets for some of the most popular Broadway shows have sometimes  been underpriced, according to Broadway theater representatives, who  told us they feel obligated to maintain relatively reasonable prices and to  allow consumers of varying financial resources to attend their shows.  Additionally, some shows are underpriced because their popularity was  not anticipated. At the same time, in recent years, producers have started  charging much higher prices (sometimes exceeding $500) for premium  seats or for shows in very high demand, which allows productions to  capture proceeds that would otherwise be lost to the secondary market."], "subsections": []}, {"section_title": "Relationships between Event Organizers and Brokers", "paragraphs": ["Sometimes event organizers work directly with brokers to distribute  tickets on the secondary market. For high-demand events, event  organizers may seek to capture a share of higher secondary market  prices without the reputation risk of raising an event\u2019s ticket prices  directly. For lower-demand events, selling tickets directly to brokers can  guarantee a certain level of revenue and increase exposure (by using  multiple resale platforms rather than a single ticketing site).", "In major league sports, teams sell up to 30 percent of seats directly to  brokers, according to a large primary ticket seller.", "For Broadway theater, one company told us it regularly distributes  about 8 percent to 10 percent of its tickets to a few authorized  secondary market brokers.", "In the concert industry, it is unclear how often artists and event  organizers sell tickets directly through the secondary market. Any  formal agreements would be in business-confidential contracts,  according to industry representatives, and artists may be concerned  about disclosing them for fear of appearing to profit from high resale  prices.", "All the artists\u2019 representatives with whom we spoke denied that their  clients sold tickets directly to secondary market companies. However, a  Vice President of the National Consumers League has cited evidence of  cases in which ticket holds reserved for an artist were listed on the  secondary market. A representative of one secondary market company  told us of two cases in which representatives of popular artists  approached his company about selling blocks of tickets for upcoming  tours."], "subsections": []}]}, {"section_title": "Tickets to Popular Events Are Often Resold on the Secondary Market at Prices above Face Value", "paragraphs": ["Ticket resale prices can be significantly higher than primary market prices  and brokers account for most sales on major ticket exchanges. When  tickets on the primary market are priced below market value\u2014that is,  priced less than what consumers are willing to pay\u2014it creates greater  opportunities for profit on the secondary market. Resale transactions  typically occur on secondary ticket exchanges\u2014websites where multiple  sellers can list their tickets for resale and connect with potential buyers.  Primary ticketing companies have also entered the resale market. For  example, Ticketmaster allows buyers to resell tickets through its TM+  program, which lists resale inventory next to primary market inventory,  and it owns the secondary ticket exchange TicketsNow.com.", "Generally speaking, the secondary market serves two types of sellers: (1)  those who buy or otherwise obtain tickets with the intent of reselling them  at a profit (typically, professional brokers), and (2) individuals trying to  recoup their money for an event they cannot attend (or sports season  ticket holders who do not want to attend all games or use resale to  finance part of their season package). Representatives from the four  secondary ticket exchanges with whom we spoke each said that  professional brokers represent either the majority or overwhelming  majority of ticket sales on their sites.", "Sellers set their own prices on secondary ticket exchanges, but some  exchanges offer pricing recommendations. The exchanges allow  adjustment of prices over time, and sellers can lower prices if tickets are  not selling, or raise prices if demand warrants. Software tools exist that  assist sellers in setting prices and in automatically adjusting prices for  multiple ticket listings.", "However, resale prices are not always higher than the original price, and  thus brokers assume some risk. In some cases, the market price declines  below the ticket\u2019s face value\u2014for example, for a poorly performing sports  team. The leading ticket exchange network has publicly stated that it  estimates that 50 percent of tickets resold on its site sell for less than face  value. However, we were unable to obtain data that corroborated this  statement.", "Relatively few studies have looked at the ticket resale market for major  concert, sporting, or theatrical events. Our review of relevant economic  literature identified six studies that looked at ticket resale prices, one of  which also looked at the extent of resale (see table 2). In general, the  studies found a wide range of resale prices, perhaps reflecting the  different methodologies and samples used or the limited amount of  information on ticket resale. Additionally, the data reported are several  years old and will not fully reflect the current market.", "For illustrative purposes, we reviewed secondary market ticket availability  and prices for a nongeneralizable sample of 22 events. Among our  selected events, the proportion of seats that were listed for resale ranged  from 3 percent to 38 percent. In general, among the 22 events we  reviewed, listed resale prices tended to be higher than primary market  prices. For example, tickets for one sold-out rock concert had been about  $50 to $100 on the primary market but ranged from about $90 to $790 in  secondary market listings.", "For 7 of the 22 events, we observed instances in which tickets were listed  on the resale market even when tickets were still available from primary  sellers at a lower face-value price. For example, one theater event had  secondary market tickets listed at prices ranging from $248 to $1,080  (average of $763), while a substantial number of tickets for comparable  seats were still available on the primary market at $198 to $398. We did not have data to determine whether the resale tickets actually sold at their  listed price. However, as discussed later, it is possible that some  consumers buy on the secondary market, at a higher price, because they  are not aware that they are purchasing from a resale site rather than the  primary seller."], "subsections": []}, {"section_title": "Total Ticket Fees Averaged 27 Percent on the Primary Market and 31 Percent on the Secondary Market for Events We Reviewed", "paragraphs": ["Ticket fees vary in amount and type among the primary and secondary  markets, and among different ticketing companies and events."], "subsections": [{"section_title": "Primary Market Fees", "paragraphs": ["Companies that provide ticketing services on the primary market typically  charge fees to the buyer that are added to the ticket\u2019s list price and can  vary considerably. A single ticket can have multiple fees, commonly  including a \u201cservice fee,\u201d a per-order \u201cprocessing fee,\u201d and a \u201cfacility fee\u201d  charged by the venue. Most primary ticketing companies offer free  delivery options, such as print-at-home or mobile tickets, but charge  additional fees for delivery of physical tickets.", "Venues usually have an exclusive contract with a single ticketing  company and typically negotiate fees for all events at the venue, though  in some cases they do so by category of event. Ticketing companies and  venues usually share fee revenue and in some cases, the venue receives  the majority of the fee revenue, according to primary ticketing  companies. In addition, event organizers told us that promoters  occasionally negotiate with the venue to add ticket fees or receive fee  revenue.", "Ticketing companies told us that they do not have a set fee schedule and  amounts and types of fees vary among venues. Fees can be set as a  fixed amount, a fixed amount that varies with the ticket\u2019s face value (for  example, $5 for tickets below $50 and $10 for tickets above $50), a  percentage of face value, or other variations.", "While ticketing fees vary considerably, the 2016 New York Attorney  General report found average ticket fees of 21 percent based on its  review of ticket information for more than 800 tickets at 150 New York  State venues. (In other words, a ticketing company would add $21 in  fees to a $100 ticket, for a total price to the buyer of $121.) The 21  percent figure encompassed all additional fees, including service fees and  flat fees, like delivery or order processing fees.", "We conducted our own review of ticketing fees for a nongeneralizable  sample of a total of 31 concert, theater, and sporting events across five  primary ticket sellers\u2019 websites:  In total, the combined fees averaged 27 percent of the ticket\u2019s face  value, and we observed values ranging from 13 percent to 58  percent.", "Service fees were, on average, 22 percent of the ticket\u2019s face value,  and we observed values ranging from 8 percent to 37 percent.", "Fourteen of the events we reviewed had an additional order  processing fee, ranging from $1.00 to $8.20.", "Five of the events we reviewed had an additional facility fee, ranging  from $2.00 to $5.10.", "Table 3 shows the ticketing fees observed for events sold through three  of the largest ticket companies we reviewed.", "A sixth ticketing company that focuses on theater uses a different fee  structure. It simply charges two flat service fees across all of its events  ($7 for tickets below $50 and $11 for tickets above $50), plus a base per- order handling charge of $3. Additionally, we noted that the 6 sporting  events we observed tended to have lower fees than the 16 concerts and  9 theater events we observed. Specifically, sporting events had total fees  averaging roughly 20 percent, compared to about 30 percent for concerts  and theater."], "subsections": []}, {"section_title": "Secondary Market Fees", "paragraphs": ["Fees charged by secondary ticket exchanges we reviewed were higher  than those charged by primary market ticket companies. Secondary  ticket exchanges often charge service and delivery fees to ticket buyers  on top of the ticket\u2019s listed price. For 7 of the 11 secondary ticket  exchanges we reviewed, the service fee was a set percentage of the  ticket\u2019s list price. Three of the remaining exchanges charged fees that  varied across events, and the fourth did not charge service fees. Among  the 10 exchanges that charged fees:  In total, the combined fees averaged 31 percent of the ticket\u2019s listed  price, and we observed values ranging from 20 percent to 56 percent.", "Service fees, on average, were 22 percent of the ticket\u2019s listed price,  and we observed values ranging from 15 percent to 29 percent.", "In addition to the service fee, 8 of the 10 exchanges charged a  delivery fee for mobile or print-at-home tickets, ranging from $2.50 to  $7.95.", "Eight of the exchanges also charged a fee to the seller (in addition to  the buyer), which was typically 10 percent of the ticket\u2019s sale price.  (For example, if a ticket sells for $100, the seller would receive $90  and the exchange $10.)", "Table 4 provides additional information about the fees charged by three of  the largest ticket resale exchanges."], "subsections": []}]}]}, {"section_title": "Consumer Protection Concerns Include the Ability to Access Face-Value Tickets and the Fees and Clarity of Some Resale Websites", "paragraphs": ["The technology and other resources of professional brokers give them a  competitive advantage over individual consumers in purchasing tickets at  their face-value price. Views vary on the extent to which the use of holds  and presales also affect consumers. Many ticketing websites we reviewed  did not clearly display their fees up front, and a subset of websites\u2014 referred to as white-label\u2014used marketing practices that might confuse  consumers. Other consumer protection concerns that have been raised  involve the amount charged for ticketing fees, speculative and fraudulent  tickets, and designated resale exchanges (resale platforms linked to the  primary ticket seller)."], "subsections": [{"section_title": "For Tickets to Popular Events, Consumers Often Must Pay More Than Face Value", "paragraphs": ["Tickets to popular events often are not available to consumers at their  face-value price, frequently because seats sell out in the primary market  almost as soon as the venue puts them on sale."], "subsections": [{"section_title": "Brokers\u2019 Competitive Advantage", "paragraphs": ["Brokers whose business is to purchase and resell tickets have a  competitive advantage over individual consumers because they have the  technology and resources to purchase large numbers of tickets as soon  as they go on sale. Some consumer advocates, state officials, and event  organizers believe that brokers unfairly use this advantage to obtain  tickets from the primary market, which restricts ordinary consumers from  buying tickets at face value. As a result, consumers may pay higher  prices than they would if tickets were available on the primary market. In  addition, some event organizers and primary ticket sellers have  expressed frustration that the profits from the higher resale price accrue  to brokers who have not played a role in creating or producing the event.", "Some professional brokers use software programs known as bots to  purchase large numbers of tickets very quickly. When tickets first go on  sale, bots can complete multiple simultaneous searches of the primary  ticket seller\u2019s website and reserve or purchase hundreds of tickets,  according to the 2016 report by the New York State Office of the Attorney  General. Seats reserved by a bot\u2014even if ultimately not purchased\u2014 appear online to a consumer as unavailable. This, in turn, can make  inventory appear artificially low during the first minutes of the sale and  lead consumers to the secondary market to seek available seats,  according to event organizers we interviewed. Bots can also automate  the ticket-buying process, as well as identify when additional tickets are  released and available for purchase. During its investigation of the  ticketing industry, the New York State Office of the Attorney General  identified an instance in which a bot bought more than 1,000 tickets to a  single event in 1 minute.", "In addition, bots can be used to bypass security measures that are  designed to enforce ticket purchase limits. For example, bots can use  advanced character recognition to \u201cread\u201d the characters in a test  designed to ensure that the buyer is human. Although the BOTS Act of  2016 restricts the use of bots, as discussed later, it is not yet clear the  extent to which the act has reduced their use.", "Brokers have other advantages over consumers in the ticket buying  process, according to the New York State Attorney General\u2019s report and  industry stakeholders we interviewed. For example, some brokers employ  multiple staff, who purchase tickets as soon as an event goes on sale. In  addition, brokers can bypass sellers\u2019 limits on the number of tickets  allowed to be purchased by using multiple names, addresses, credit card  numbers, or IP (Internet protocol) addresses. Finally, to access tickets  during a presale, some brokers join artists\u2019 fan clubs or hold multiple  credit cards from the company sponsoring the presale."], "subsections": []}, {"section_title": "Role of Holds and Presales", "paragraphs": ["Holds and presales may limit the number of tickets available to  consumers at face value, according to some consumer groups,  secondary market companies, and other parties. For example, the  National Consumers League testified that events with many holds and  presales sell out more quickly during the general on-sale because fewer  seats are available. Consumers may not be aware that many seats are  no longer available by the time of the general on-sale. In addition, the  National Consumers League and New York State Office of the Attorney  General said they believe the use of holds and presales raise concerns  about equity and fairness. They noted that most holds go to industry  insiders who have a connection to the promoter or venue, while credit  card presales are available only to cardholders, who typically are higher- income. The New York State Attorney General\u2019s office and seven event  organizers with whom we spoke expressed concerns that presales benefit  brokers, who take special measures to access tickets during presales.", "However, other industry representatives told us that holds and presales  do not adversely affect consumers. They noted that for most events, the  number of tickets sold through presales is not very high and few tickets  are held back. Additionally, two event organizers and representatives  from a primary ticketing company noted that most presales are accessible  to a broad range of consumers\u2014such as tens of millions of cardholders.  As a result, the distinction between what constitutes a presale and a  general on-sale can be slim. Furthermore, some fan clubs may try to limit  brokers\u2019 use of presales. For example, one manager said his artist\u2019s fan  club gives priority for presales to long-time fan club members.", "In addition, some industry representatives noted that holds and presales  serve important functions that can benefit consumers. For example, credit  card presales can reduce event prices by funding certain marketing costs,  and fan club presales can offer better access to tickets to artists\u2019 most  enthusiastic fans, according to event organizers with whom we spoke.  And as noted earlier, holds serve various functions, such as providing  flexibility for seating configuration."], "subsections": []}]}, {"section_title": "Some Ticketing Websites We Reviewed Were Not Fully Transparent about Ticket Fees and Relevant Disclosures", "paragraphs": ["Among the largest primary and several secondary market ticketing  companies, we identified instances in which fee information was not fully  transparent. We reviewed the ticket purchasing process for a selection of  primary and secondary ticketing companies\u2019 websites, including a subset  of secondary market websites known as \u201cwhite-label\u201d websites. We  reviewed the extent to which the companies\u2019 websites clearly and  conspicuously presented their fees and other relevant information and  also recorded the point at which fees were disclosed in the purchase  process. While FTC staff guidance states that there is no set formula for  a clear and conspicuous disclosure, it states that among several key  factors are whether the disclosure is legible, in clear wording, and  proximate to the relevant information. In recent reports, the National  Economic Council (which advises the President on economic policy) and  FTC staff have expressed concern about businesses that use \u201cdrip  pricing,\u201d the practice of advertising only part of a product\u2019s price up front  and revealing additional charges later as consumers go through the  buying process."], "subsections": [{"section_title": "Primary Market Ticketing Companies", "paragraphs": ["For the 23 events we reviewed, the largest ticketing company\u2014believed  to have the majority of the U.S. market share\u2014frequently did not display  its fees prominently or early in the purchase process.", "For 14 of 23 events we reviewed, fees could be learned only by (1)  selecting a seat; (2) clicking through one or two additional screens; (3)  creating a user name and password (or logging in); and (4) clicking an  icon labeled \u201cOrder Details,\u201d which displayed the face-value price and  the fees.", "For 5 of the 23 events, the customer did not have to log in to see the  fees, but the fees were visible only by clicking the \u201cOrder Details\u201d icon.", "For 4 of the 23 events, fees were displayed before log-in and without  the need to take additional steps.", "Additionally, for 21 of the 23 events, ticket fees were displayed in a  significantly smaller font size than the ticket price.", "For the five other primary market ticketing companies whose ticketing  process we reviewed, fees were displayed earlier in the purchase process  and more conspicuously. All five companies displayed fees before  asking users to log in, including one that displayed fees during the initial  seat selection process. Four of the five companies displayed fees in a  font size similar to that of other price information and in locations on the  page that were generally proximate to relevant information. However, for  all companies we reviewed, fees and total ticket prices were not displayed  during the process of browsing for different events.", "We found that two primary ticket sellers that sometimes offer  nontransferable tickets (that is, tickets whose terms and conditions  prohibit transfer) had prominently and clearly disclosed the special terms  of those tickets\u2014for example, that the buyer\u2019s credit card had to be  presented at the venue and the entire party had to enter at the same  time. One company\u2019s website displayed these conditions on a separate  screen for 10 seconds before allowing the buyer to proceed. The other  company\u2019s website similarly displayed information about the tickets\u2019  nontransferability on a separate page in clear language in a font size  similar to the pricing information."], "subsections": []}, {"section_title": "Secondary Ticket Exchanges", "paragraphs": ["We also reviewed disclosure of fees and other relevant information on the  websites of 11 secondary ticket exchanges and resale aggregators.  Two of the 11 websites displayed their fees conspicuously and early in  the purchase process, and a third site did not charge ticketing fees.  However, we found that ticket resale exchanges sometimes lacked  transparency about their fees:", "Fees often were revealed only near the end. Seven of the 11  websites disclosed ticket fees only near the end of the purchase  process, after the consumer entered an e-mail or logged in. Three of  those seven websites displayed fee information only after the credit  card number or other payment information was submitted.", "Fees sometimes were not conspicuously located. On 2 of the 11  websites, some fees were not displayed alongside the ticket price, but  instead were only visible by clicking a specific button.", "Font sizes were small in two cases. On 2 of the 11 websites, fees  were displayed in a font size significantly smaller than other text.", "In contrast to primary market sellers, secondary market sellers\u2019 websites  sometimes did not clearly disclose when a ticket was nontransferable.  Disclosures on secondary market ticket exchanges varied, in part  because individual sellers are permitted to enter their own descriptions  about ticket characteristics. In some cases, the seller identified  nontransferable tickets only by labeling them \u201cgc,\u201d indicating that a gift  card would be mailed to the buyer to present for entry to the venue.", "To further review nontransferable ticket listings, we contacted the  customer service representatives of three large secondary ticket  exchanges to ask about a nontransferable ticket listing. We asked if we  would have difficulty using the ticket because the venue\u2019s or ticket seller\u2019s  website stated that only the original buyer could use the ticket, with one  website noting that picture identification might be required for entry.  Customer service representatives of all three exchanges told us that  despite the purported restrictions, we would be able to use the ticket to  gain entry to the venue. To confirm these statements, we contacted  officials of these venues, who acknowledged that picture identification  had not been required for entry at these events.", "Consumers may not always be aware they are purchasing tickets from a  secondary market site at a marked-up price. In a 2010 enforcement  action, FTC settled a complaint against Ticketmaster after alleging,  among other things, that the company steered consumers to its resale  site, TicketsNow, without clear disclosures that the consumer was being  directed to a resale website. The settlement requires Ticketmaster,  TicketsNow, and any other Ticketmaster resale websites to clearly and  conspicuously disclose when a consumer is on a resale site and that  prices may exceed face value, and to include \u201creseller price\u201d or \u201cresale  price\u201d with ticket listings. In addition, in January 2018, the National  Advertising Division, a self-regulatory organization, asked FTC to  investigate the fee disclosure practices of StubHub, a large secondary  ticket exchange, alleging the company did not clearly and conspicuously  disclose its service fees when it provides ticket prices."], "subsections": []}, {"section_title": "White-Label Websites for Ticket Resale", "paragraphs": ["A subset of ticket resale websites, known as \u201cwhite label,\u201d used marketing  practices that might confuse consumers. A company providing white-label  support allows affiliates to connect its software to their own, uniquely  branded website. This is sometimes also described as a \u201cprivate label\u201d  service in the industry. For event ticketing, a ticket exchange offering  white-label support provides the affiliate company with access to its ticket  inventory and services, such as order processing and customer service.  However, the affiliate uses its own URL (website address), sets the ticket  prices and fees, and conducts its own marketing and advertising. Two  secondary ticket exchanges operate white-label affiliate programs, under  which affiliates create unique white-label websites for ticket resale.", "While we did not identify data on the number of white-label websites for  event ticketing, they commonly appear in the search results for all types  of venues, including smaller venues like clubs and theaters. White-label  websites often market themselves through paid advertising on Internet  search engines, appearing at the top of search results for venues. Thus,  they are often the first search results consumers see when searching for  event tickets. Figure 1 provides a hypothetical example of a white-label  advertisement on a search engine, as well as the typical appearance of a  white-label website.", "In 2014, FTC and the State of Connecticut announced settlements with  TicketNetwork\u2014one of the exchanges operating a white-label program\u2014 and two of its affiliates after charges of deceptively marketing resale  tickets. The complaint alleged that these companies\u2019 advertisements and websites misled consumers into thinking they were buying tickets  from the original venue at face value when they were actually purchasing  resale tickets at prices often above face value. According to the  complaint, the affiliate websites frequently used URLs that included the  venue\u2019s name and displayed the venue\u2019s name prominently on their  websites in ways that could lead consumers to believe they were on the  venue\u2019s website. The settlements prohibited the company and its affiliates  from misrepresenting that they are a venue website or that they are  offering face-value tickets, and from using the word \u201cofficial\u201d on the  websites, advertisements, and URLs unless the word is part of the event,  performer, or venue name. They also required that the websites disclose  that they are resale marketplaces, that ticket prices may exceed the  ticket\u2019s face value, and that the website is not owned by the venue or  other event organizers.", "FTC staff with whom we spoke told us that they were aware that similar  practices have continued among other white-label companies. Staff told  us they have continued to monitor white-label websites and related  consumer complaints. Additionally, a wide range of stakeholders with  whom we spoke\u2014including government officials, event organizers, and  other secondary ticket sellers\u2014expressed concerns about these  websites. In particular, they were concerned that consumers confused  white-label websites for the venue\u2019s website.", "We reviewed 17 websites belonging to eight companies that were  affiliates of the two secondary ticket exchanges offering white-label  programs. We identified the sites by conducting online searches for nine  venues (including stadiums, clubs, and theaters) on two of the largest  search engines. All nine of the venues had at least one white-label site  appear in the paid advertising above the search results. We observed the  following:", "Sites could be confused with that of the official venue. Fourteen  of the 17 white-label websites we reviewed used the venue\u2019s name in  the search engine\u2019s display URL, in a manner that could lead a  consumer to believe it was the venue\u2019s official website. In addition, 5  of the 17 webpages used photographs of the venue and 11 provided  descriptions of the venue (such as its history) that could imply an  association with the venue.", "Fees were higher than on other resale sites. Total ticketing fees  (such as \u201cservice charges\u201d) for the white-label sites ranged from 32  percent to 46 percent of the ticket\u2019s list price, with an average of 38  percent. These fees were generally higher than those of other ticket  resellers\u2014for example, the secondary ticket exchanges that we  reviewed charged average fees of 31 percent.", "Fees were revealed only near the end. All 17 of the white-label sites  we reviewed disclosed their fees late in the purchase process.  Ticketing fees and total prices were provided only after the consumer  had entered either an e-mail address or credit card information.", "Other key disclosures were present but varied in their  conspicuousness. All 17 of the white label webpages we reviewed  disclosed on their landing page and check-out page that they were not  associated with the venue and were resale sites whose prices may be  above face value. However, this information was presented in a small  font or in an inconspicuous location (not near the top of the page) for  the landing page of 7 of these webpages, as well as for the check-out  page of 12 of the 17 webpages.", "Ticket prices were higher than other resale sites. The ticket price  charged for the events we reviewed on the white-label sites had an  average markup of about 180 percent over the primary market price.  By comparison, other ticket resale websites we reviewed had an  average markup of 74 percent.", "In some cases, we observed white-label websites selling event tickets  when comparable tickets were still available from the primary seller at a  lower price. For example, two white-label sites were offering tickets to an  event for $90 and $111, respectively, whereas the venue\u2019s official  ticketing website was offering comparable seats for $34. (All figures  include applicable fees). Given the significantly higher cost for the same  product, some consumers may be purchasing tickets from a white-label  site only because they mistakenly believe it to be the official venue\u2019s site.  As we discuss in greater detail later in this report, in February 2018,  Google implemented requirements for resellers using its AdWords service  that are intended, among other things, to prevent consumer confusion  related to white-label sites."], "subsections": []}]}, {"section_title": "Other Consumer Protection Issues Have Been Identified", "paragraphs": ["Ticket fees, the use of speculative tickets, ticket fraud, and designated  resale exchanges have raised consumer protection concerns among  government agencies, industry stakeholders, and consumer advocates."], "subsections": [{"section_title": "Amount Charged for Ticket Fees", "paragraphs": ["Consumer protection advocates, event organizers, and some government  entities have expressed concerns about high ticket fees. For example,  the New York State Attorney General\u2019s report expressed concern about  what it deemed high ticketing fees charged for unclear purposes. The  report found that among online platforms, vendors of event tickets  appeared to charge fees to consumers higher than most other online  vendors. Concerns about high ticket fees also were frequently cited in  2009 congressional hearings on the proposed merger of Live Nation and  Ticketmaster. In addition, some managers and agents we interviewed  said their clients were dissatisfied with high ticket fees. Data we received  from FTC\u2019s Consumer Sentinel Network indicated 67 complaints related  specifically to event ticket fees from 2014 through 2016.", "A 2010 analysis by the Department of Justice said that the dominance of  one company, Ticketmaster, in the primary ticketing market allowed the  company to maintain high ticket fees. The report noted high barriers to  entry for competitors, among which were high startup costs,  Ticketmaster\u2019s reputation for providing quality service to venues, and  long-term exclusive contracts that large venues typically sign with one  ticketing company. In addition, with the merger, Live Nation Entertainment  owns both the largest primary ticket seller (Ticketmaster) and largest  promoter (Live Nation), and owns many large venues and an artist  management company. When the ticketing company is owned by a major  promoter, the combined firm\u2019s ability to bundle ticketing services and  access to artists would require competitors to offer similar services in  order to compete effectively, according to the Department of Justice  analysis. In an attempt to mitigate these potential effects, the Department  of Justice final judgment on the merger prohibited certain forms of  retaliation against venues that contract with other ticketing companies. In  the United Kingdom, where the venue and promoter typically contract with  multiple ticket sellers, ticket fees are lower than in the United States\u2014 around 10 percent to 15 percent of the ticket\u2019s face value, according to a  recent study.", "Industry experts generally consider the secondary market for event  ticketing to be more competitive than the primary market because of the  large number of brokers participating in the industry. According to a  report by the National Economic Council, fees in this market may be  higher than expected because of the lack of transparency described  earlier\u2014consumers may be more willing to accept high fees and less  likely to comparison shop when fees are disclosed at the end of a  multistep purchase process. An FTC staff report made a similar point  regarding hotel resort fees, noting that fees disclosed only at the end of  the shopping process could harm consumers by making it more difficult to  comparison shop for hotels. In addition, consumers who are led to  believe that white-label ticketing sites are the official venue site may  accept high fees because they think they are buying tickets from the  primary ticketing provider, according to two industry representatives with  whom we spoke.", "The level of fees in the secondary market might also be affected by  partnerships between the primary and secondary ticket seller. Primary  ticketing companies sometimes offer resale options or use of designated  resale exchanges (discussed below). The American Antitrust Institute has  expressed the view that these relationships can reduce inventory for rival  secondary sellers and in turn, can result in higher fees, as the primary  ticket seller essentially has a monopoly over both markets."], "subsections": []}, {"section_title": "Speculative Tickets", "paragraphs": ["A speculative ticket refers to a ticket put up for sale by a broker when the  broker does not yet have the ticket in hand, perhaps because the event  has not yet gone on sale. Brokers may sell speculative tickets because  they anticipate they will be able to secure the tickets (whether on the  primary or secondary market) and sell them for a profit. The terms of use  of most secondary sites we reviewed did not allow speculative ticket  listings. However, while we were unable to identify comprehensive data  on the extent of speculative tickets, numerous industry representatives  told us that these sites commonly do not enforce this prohibition and  listing of speculative tickets was widespread. One common form of  speculative ticketing occurs when brokers offer tickets after a popular  artist has announced a concert schedule but not yet begun ticket sales,  according to industry representatives.", "Several concerns exist around the use of speculative ticketing:", "The buyer may never get the ticket. Speculative ticket listings can  result in canceled orders if the broker cannot obtain the ticket, or  cannot obtain it at a price that would result in a profit. For example, it  was reported that many fans who thought they purchased tickets to  the 2015 Super Bowl actually purchased speculative tickets that were  subsequently canceled when the supply of tickets was less than  expected. According to industry stakeholders, consumers can  typically obtain a refund on a canceled order from the broker or  secondary ticket exchange, but may still face disappointment,  inconvenience, or costs associated with nonrefundable travel to the  planned event.", "The seat location is not guaranteed. Brokers selling speculative  tickets typically do not specify the seat number but rather promise a  certain section of the venue, according to two event organizers we  interviewed. However, because the broker does not have the ticket in  hand, consumers can receive seats that are worse or different than  advertised.", "Speculative ticketing can cause consumer confusion. One large  ticket resale exchange told us it only allows trusted brokers to sell  speculative tickets under certain circumstances and requires sellers to  use a special label for these listings. However, we observed other  exchanges that are less transparent and do not make clear to the  buyer that the ticket is speculative. Consumers may not be aware that  tickets have not officially gone on sale yet and eventually may be  available on the primary market at a lower price.", "In its 2010 enforcement action against Ticketmaster and its resale  exchange, TicketsNow.com, FTC alleged that the companies failed to tell  buyers that many of the resale tickets advertised were being sold  speculatively. The settlement required Ticketmaster and its affiliates to  disclose if a ticket was being sold speculatively and to otherwise refrain  from misrepresenting the status of tickets. FTC staff also sent warning  letters to other resale companies that may have been at risk of violating  the FTC Act with regard to their speculative ticketing practices. More  recently, in 2015 a request by the New York State Attorney General  resulted in three major ticket exchanges removing speculative ticket  listings for an upcoming tour. Representatives from one of the secondary  ticket exchanges told us that while it is difficult to determine if a listing is  truly speculative, they have removed listings when they have information  from event organizers to indicate that no one could have obtained the  tickets.", "Posing as a consumer, a GAO investigator made 11 inquiries to customer  service representatives of two of the largest secondary ticket exchanges  about two events listing tickets that appeared to be speculative. The  customer service representatives generally acknowledged that the sellers  did not yet have the tickets in hand but assured the investigator that the  tickets would be provided."], "subsections": []}, {"section_title": "Fraudulent Tickets", "paragraphs": ["Event tickets are sometimes fraudulent\u2014for example, a fraudster may  create and sell a counterfeit ticket or multiple copies of the same print-at- home ticket, according to industry representatives. We did not identify  comprehensive data on the extent of ticket fraud. Event organizers with  whom we spoke said that they typically only see a handful of fraudulent  tickets at popular events, and do not consider fraudulent ticketing to be a  widespread problem. A limited search of FTC\u2019s Consumer Sentinel  Network data identified relatively few complaints\u2014an estimated 19  related to fraudulent tickets from 2014 through 2016. Industry  representatives told us fraudulent tickets are most common for the most  popular events and were often purchased on the street outside the venue  or through an online classified advertisement.", "According to industry representatives, fraudulent ticketing is rare on  secondary market exchanges, in part because the exchanges can take  action against sellers of fraudulent tickets, such as fining them or banning  them from future sales. The National Association of Ticket Brokers  requires its members to have a policy to reimburse consumers for  fraudulent tickets. Two secondary market participants told us the most  common fraudulent activity they must address is credit card fraud by  buyers rather than invalid tickets posted by sellers."], "subsections": []}, {"section_title": "Designated Resale Exchanges", "paragraphs": ["Designated resale exchanges are resale platforms that are linked to the  primary ticket seller. They are most commonly used in major league  sports. The four major sports leagues have agreements with one of two  ticketing companies that allow consumers to buy and sell tickets through  an official \u201cfan-to-fan\u201d resale marketplace. In addition, some individual  teams and venues have an agreement with a third company to use its  resale platform, which uses paperless tickets and can facilitate ticket  transfers from one consumer to another or restrict transfers altogether  (such as with nontransferable tickets).", "On these exchanges, when a consumer lists a ticket for resale, the  exchange electronically confirms the seller\u2019s identity, then cancels the  original ticket information (such as a barcode) and reissues the ticket with  the new buyer\u2019s name. According to the three sports leagues we  interviewed, designated resale exchanges are generally optional\u2014for  example, the sports leagues allow brokers and consumers to use other  secondary market exchanges as well.", "A representative of one of the major sports leagues told us the exchanges  provide added revenue to teams because the teams receive some of the  fee revenues from sales on the exchanges. The exchanges provide data  on event attendees, which is valuable for marketing and security  purposes, according to another sports league and a primary ticket seller.  In addition, the exchanges can reduce resale fraud because the primary  seller verifies the legitimacy of the ticket being resold, according to  representatives of the three leagues we interviewed.", "However, some academics and secondary market participants we  interviewed have argued that designated resale exchanges work to the  detriment of consumers. For example, one academic study stated that a  primary ticket seller\u2019s dominance in the secondary market can  substantially reduce inventory for rival secondary sellers, thus impeding  competition in the resale market. The study stated that reduced  secondary market competition, in turn, can result in higher fees.", "In 2015, a U.S. district court dismissed StubHub\u2019s antitrust complaint  against the Golden State Warriors basketball team and Ticketmaster,  LLC. StubHub claimed that the Warriors\u2019 and Ticketmaster\u2019s exclusive  resale agreement restricted secondary market competition for  professional basketball tickets in the Bay Area, but the court disagreed.", "Some designated resale exchanges use price floors, below which  consumers may not sell their tickets. One sports league\u2019s exchange has a  price floor of $6, while the exchanges of two other sports leagues do not  have league-wide price floors, according to league representatives. In  addition, we identified instances of individual teams using price floors on  their designated resale exchanges. One purpose of price floors is to  protect brand reputation, according to league representatives, because  too low a ticket price can lessen an event\u2019s perceived value. Price floors  also can prevent the secondary market from undercutting a team\u2019s own  (primary market) price. However, some consumer organizations and  secondary ticket sellers said price floors were unfriendly to consumers.  Season ticket holders might be unable to sell tickets for low-demand  games for which market prices were lower than the floors. In addition, the  New York State Attorney General\u2019s office noted that consumers might not  always be aware that price floors were in effect and thus pay more than  they would on another exchange."], "subsections": []}]}]}, {"section_title": "Effects of Ticket Resale Restrictions and Disclosures on Consumers and Business Would Vary", "paragraphs": ["Policymakers, consumer organizations, and industry participants have  proposed or implemented a number of ticket resale restrictions and  disclosure requirements, each of which have or would have advantages  and disadvantages for consumers or industry participants (see table 5).  Event ticketing is not federally regulated and some industry participants  are using or exploring technology and other market-based approaches to  address concerns related to secondary market activity."], "subsections": [{"section_title": "Nontransferable Tickets Can Reduce the Price Some Consumers Pay but Also Limit Flexibility", "paragraphs": ["Some event organizers make tickets to their events nontransferable\u2014that  is, the terms and conditions of the ticket prohibit its transfer from one  person (in whose name the ticket is issued) to another. The prohibition  can be enforced by requiring consumers to bring to the venue the credit  or debit card used for purchase and matching photo identification. The  consumer then receives a seat locator slip\u2014akin to a consumer swiping a  credit card at the airport to retrieve a boarding pass.", "At least three states\u2014Connecticut, New York, and Virginia\u2014have laws  that restrict ticket issuers\u2019 ability to sell nontransferable tickets. Similar  legislation has been introduced in several other states in recent years.", "The use of nontransferable tickets, even in states where they are legal, is  relatively uncommon. For example, an artist advocacy group told us that  some events that use them make only the first several rows of seats  nontransferable. One large primary ticketing company told us it estimated  that less than 5 percent of its events used nontransferable tickets, while  another told us nontransferable tickets represented less than 1 percent of  its tickets in total. Almost all nontransferable tickets are for concerts; the  practice is rare for sporting events and theater, according to industry  stakeholders with whom we spoke."], "subsections": [{"section_title": "Advantages of Nontransferable Tickets", "paragraphs": ["Advantages to consumers of nontransferable tickets stem from the goal of  preventing ticket resale\u2014allowing consumers to pay face value rather  than a higher price on the secondary market. As described earlier,  markups on the secondary market can be substantial. Proponents of  nontransferable tickets, which include a large primary ticket seller and  some event organizers and well-known artists, have argued they are an  important tool that makes it harder for brokers to resell tickets for profit.", "We identified one empirical study on the effects of nontransferable tickets  on resale activity. A 2013 study in the Journal of Competition Law and  Economics compared two events using nontransferable tickets to  comparable events using transferable tickets at the same venues. It found  that nontransferable tickets significantly reduced resale and that prices  were significantly higher for the relatively small portion of nontransferable  tickets that were resold.", "In addition, there is anecdotal evidence that nontransferable tickets  reduce the rate of resale and allow more consumers to access tickets at  face-value prices. Many stakeholders told us that making tickets  nontransferable reduces secondary market activity, with some  stakeholders citing specific examples. For instance, the manager of a  large concert venue that primarily uses nontransferable tickets told us that  resale is much less common for the venue\u2019s events than for comparable  events at similar venues. Similarly, the manager of a major musical artist  told us that using nontransferable tickets for a subset of seats on a recent  arena tour resulted in minimal listings for those seats on the secondary  market. The New York State Attorney General\u2019s report stated that  nontransferable paperless tickets \u201cappear to be one of the few measures  to have any clear effect in reducing the excessive prices charged on the  secondary markets and increasing the odds of fans buying tickets at face  value.\u201d But, while we identified evidence that nontransferable tickets  limit resale, they may not eliminate resale because sellers may not follow  the restriction."], "subsections": []}, {"section_title": "Disadvantages of Nontransferable Tickets", "paragraphs": ["However, other parties\u2014including primary and secondary market  participants, consumer advocacy groups, academics, and government  agencies\u2014have noted that nontransferable tickets can have the following  disadvantages to consumers and adverse effects on markets:  Financial loss. With nontransferable tickets, ticket buyers who cannot  attend an event can lose the ability to recoup their money through resale.", "Inconvenience. Nontransferable tickets can be inconvenient because the  buyer may need to present identification, a debit or credit card, or both, to  gain entry to the venue, which can create delays. Nontransferable tickets  also can create challenges for consumers buying tickets for others  (including as a gift) because the ticket terms may require the buyer and  original purchase card be present to gain entry. However, a primary ticket  seller and a promoter told us these obstacles can be overcome\u2014for  example, through mechanisms allowing buyers to transfer tickets upon  request, and by using processes to speed venue entry (such as  automated kiosks).", "Economic inefficiency. When nontransferable tickets are priced below  the prevailing market price in the primary market, this creates excess  demand, and tickets are sold without regard to consumers\u2019 willingness to  pay. Traditional economics maintains that an efficient market would  result in tickets going to those willing to pay the highest price, which  nontransferability inhibits by restricting a secondary market. In addition,  some academics have noted that consumers may be less willing to buy  nontransferable tickets because they do not offer the \u201cinsurance\u201d that  comes with the ability to resell them.", "Potential impingement on property rights. Some consumer groups  and secondary market participants have argued that nontransferable  ticket policies impinge on consumers\u2019 property rights. These parties argue  that once consumers buy a ticket, they should be able to do whatever  they like with it.", "Effect on competition. The New York State Attorney General\u2019s office  and some economics literature have cautioned that use of  nontransferable tickets by primary ticketing companies can impede  competition in the secondary market by making these companies\u2019 own  resale exchanges the only way to transfer tickets."], "subsections": []}]}, {"section_title": "Caps on Resale Prices Can Have Advantages and Disadvantages", "paragraphs": ["Several states have caps on the price at which tickets can be resold,  while others have repealed caps and some studies have questioned their  enforceability. For example, Kentucky generally prohibits the resale of  event tickets for more than either face value or the amount charged by  the venue, and Massachusetts prohibits resale by brokers of most tickets  for more than $2 above face value, with the exception of relevant service  charges. New Jersey allows a maximum markup of 20 percent or $3  (whichever is greater) for nonbrokers and a maximum markup of 50  percent for registered brokers, but does not limit resale prices for  nonbrokers for sales over the Internet. A number of other states\u2014 including Minnesota, Missouri, New York, and Connecticut\u2014repealed  their price cap laws in the 2000s. However, the New York State Attorney  General\u2019s 2016 report recommended bringing back a price cap, through a  \u201creasonable limit\u201d on resale markups.", "Price caps are generally intended to protect consumers from high  markups and increase the fairness of ticket distribution so that the  wealthiest consumers do not have disproportionate access to tickets. In  theory, price caps offer consumers the advantages of nontransferable  tickets without the disadvantages: they limit high secondary-market prices  but still allow consumers to transfer tickets to others or resell tickets they  cannot use.", "However, three government studies we reviewed stated that price caps  are difficult to enforce and are rarely complied with. A 1999 report by the  New York Attorney General noted that ticket resellers \u201calmost universally  disregarded\u201d a cap in place at the time. Representatives from the office told us enforcement of such a cap might be easier now because the  secondary market is largely on the Internet, which offers greater price  transparency. A 2016 study of the United Kingdom\u2019s ticket market noted  that enforcement of a price cap was complicated by the fact that ticket  resellers were not a well-defined group and sales could occur on various  platforms and across jurisdictions. Similarly, the New York State  Department of State noted in 2010 that enforcement of price caps can be  challenging.", "In addition, critics of price caps have said that caps might force resale  activity underground, which would reduce transparency and protections  (such as refund guarantees) that legitimate secondary market exchanges  provide. Both the largest ticket exchange and the largest primary market  ticket company have opposed price caps, with the ticket exchange  arguing that they would result in street-corner transactions, where the risk  of counterfeit and fraud would be significant. On formal exchanges,  transactions can be monitored and regulated. As with nontransferable  tickets, price caps also can create economic inefficiencies because  tickets are not necessarily allocated to those willing to pay the highest  price.", "A 2010 study by the New York State Department of State compared  publicly available secondary market listings for high-demand concerts in  New York to the same artists\u2019 concerts in nearby states with price caps. It  found no definitive evidence that price caps resulted in greater or lesser  availability on the secondary market or in lower resale prices. The study  noted that online resale prices routinely exceeded the price caps.  However, the authors of the study acknowledged that their findings were  limited by their inability to obtain data on ticket sales and availability from  secondary sellers."], "subsections": []}, {"section_title": "Stakeholder Views Vary on Effects of Additional Disclosure Requirements", "paragraphs": ["Legislative or regulatory actions to improve disclosure and transparency  of ticket fees, resale markups, and ticket availability have advantages and  disadvantages."], "subsections": [{"section_title": "Up-front Fee Disclosure", "paragraphs": ["Some government stakeholders have suggested improving fee  transparency through a legal requirement to disclose ticket fees earlier in  the purchase process. As discussed earlier, ticketing companies in the  primary and secondary markets vary on when and how they disclose their  fees, and some disclose fees only upon checkout. No federal law  expressly addresses fee disclosure in event ticketing. However, at least  one state requires disclosure of fees at the beginning of the purchase  process.", "On the primary market, up-front fee disclosure helps decision making by  informing consumers of the total ticket price early in the process. It also  helps consumers decide whether to buy from the ticketer\u2019s website or at  the box office, where there typically are no fees. On the secondary  market, up-front fee disclosure aids comparison shopping by helping  consumers identify the resale exchange with the best total price. Sellers  that do not provide enough or full information on prices through hidden  fees could have competitive advantage because they would be perceived  as offering lower prices over their competitors who do provide full  information showing the price. For products and services in general, FTC  staff guidance advocates that fees be disclosed up front, particularly  before the point at which the consumer has decided to make a  purchase.", "Figure 2 provides examples of different approaches to displaying prices  and fees.", "Currently, FTC relies on the Federal Trade Commission Act\u2014which  prohibits unfair or deceptive acts or practices\u2014to address problems  related to fee disclosures. But FTC staff said it is challenging and  resource-intensive to use the act to address inadequate fee disclosures  industry-wide because it requires proving violations on a case-by-case  basis. FTC staff told us that, depending on the circumstances, a  legislative disclosure requirement that specified requirements for fees  could facilitate enforcement activity and create a more level playing field  for consumers and sellers. Eleven industry stakeholders and three  consumer advocacy groups with whom we spoke similarly expressed  support for a requirement that ticketing fees be disclosed up front. Many  noted that fees should be fully transparent to consumers.", "However, a primary ticket seller, two venue managers, and a secondary  ticket seller we interviewed questioned the need for an up-front fee  disclosure requirement. For example, a primary ticket seller stated that  knowing fees up front would not affect a consumer\u2019s decision of whether  or not to buy a ticket. The two venue managers believed that the timing of  the fee disclosure was not important, as long as fees are disclosed before  consumers complete the purchase. Representatives of one secondary  ticket exchange said that up-front disclosure of fees could be challenging  because a ticket\u2019s fee is not stable\u2014for example, the fee can change  based on price fluctuations, different delivery methods, and the use of  promotion codes.", "The National Economic Council has stated that \u201call-in pricing,\u201d a form of  up-front pricing, may be preferable to other methods of fee disclosure.  All-in pricing incorporates the ticket\u2019s face value and all mandatory fees  and taxes, as illustrated in figure 2 above. According to the National  Economic Council, all-in pricing eases comparison across vendors. The  FTC staff report analyzing hotel resort fees supported all-in pricing for that  industry because it said that breaking out fees, instead of providing a  single total price, hindered consumer decision making and often resulted  in consumers underestimating the total price. Officials from two state  attorney general offices told us that all-in pricing could be advantageous,  noting that fee disclosures represent their most significant enforcement  issue related to the ticketing industry.", "Three secondary ticket sellers told us they might support a requirement to  provide all-in pricing, but only if it was required of all ticket sellers. In  2014, the largest secondary market ticketing company began using all-in  pricing, with its listings displaying a single total price that incorporated  fees. However, the company soon discontinued all-in pricing as the  default because, it told us, it put the company at a competitive  disadvantage with other secondary market providers whose fees were not  included in the initial ticket price displayed to consumers. A requirement  that all ticket sellers provide up-front fee disclosure would mitigate or  resolve that issue.", "One argument against a requirement for all-in pricing is that such  regulation would restrict ticket companies\u2019 flexibility in choosing how to  disclose fees. In addition, a manager, a promoter, and two artist advocacy  groups said all-in pricing could give fans the incorrect impression that the  artist was charging the full ticket price and receiving its revenues,  because the portion of the price going toward ticketing fees would not be  transparent."], "subsections": []}, {"section_title": "Disclosing Face Value on Resale Sites", "paragraphs": ["Some federal and state policymakers have proposed requirements for  resellers to disclose a ticket\u2019s face value on secondary ticket websites.  Georgia and New York State have enacted similar requirements, with  statutes requiring resellers to disclose both the face value of tickets and  their list price.", "Requiring that ticket resellers disclose the ticket\u2019s face value can have  several advantages. First, it makes the reseller\u2019s markup transparent.  Second, it can help consumers assess the quality of the seat location and  compare similar seats across resale listings. Third, it might reduce the  possibility that consumers mistake a reseller\u2019s website for a venue  website, as described earlier. This, in turn, could encourage consumers to  recognize they are viewing a secondary market exchange and  comparison shop for a better price elsewhere.", "However, a requirement that resellers disclose a ticket\u2019s face value can  present challenges because the definition of \u201cface value\u201d may not always  be clear, according to three ticket resellers and FTC Bureau of Consumer  Protection staff. If the face value does not incorporate fees and taxes  charged on the primary market, it would not reflect the full amount paid by  the original buyer. Similarly, some tickets are sold through VIP packages  that do not itemize the price of the ticket and other components, such as  backstage access or parking. In addition, with dynamic pricing, a ticket\u2019s  face value can change frequently. Furthermore, season tickets may  display a higher face value than the season ticket holder paid because  teams usually sell the packages at a discount.", "A requirement to disclose a ticket\u2019s face value also could create  compliance costs for secondary ticket exchanges, and could be difficult to  enforce, according to some stakeholders. Three secondary ticket  exchanges told us they do not currently collect information on a ticket\u2019s  face value and would have difficulty verifying the value provided by the  listing broker\u2014in part because of the challenges in defining face value, as  described above. The New York State Office of the Attorney General  stated in its 2016 report that most resellers cannot comply with the state\u2019s  disclosure requirement because most secondary ticket exchanges do not  offer the option to show the ticket\u2019s face value alongside its list price,  despite having the capability to add such functionality. In addition, an  official from Georgia\u2019s Athletic and Entertainment Commission told us that  resellers largely disregarded the state\u2019s requirement to disclose face  value."], "subsections": []}, {"section_title": "Disclosing Ticket Availability", "paragraphs": ["Another proposal, advocated by secondary market stakeholders, among  others, would require primary ticket sellers to disclose how many tickets  are available when an event first goes on sale to the general public. For  instance, a venue or ticket seller might be required to provide the venue  capacity and number of tickets available for sale after accounting for  presales and holds. A 2017 law in Ontario, Canada, requires primary  ticket sellers to provide certain information about venue capacity and  presales, according to testimony by the Ontario Attorney General.", "Such a disclosure would provide consumers a clearer picture of ticket  availability and help them manage expectations and make informed  decisions, according to three consumer advocacy groups and two  academics with whom we spoke. In addition, the National Association of  Ticket Brokers and a secondary ticket exchange stated that disclosing  ticket availability would shed light on what some consider excessive holds  and presales by the primary market. They said that brokers often are  blamed when events quickly sell out on the primary market, whereas  there may have been relatively few tickets available for sale in the first  place. The New York State Office of the Attorney General stated that the  lack of transparency about the manner in which tickets are distributed  creates a level of mistrust among consumers.", "However, many primary market stakeholders with whom we spoke\u2014 including promoters, managers, venue operators, and primary ticket  sellers\u2014said such a disclosure would have little-to-no benefit. First, some  of them noted that ticket inventory can change as event production details  evolve and holds are released, making it difficult to provide an accurate  number of tickets available at any one time. Second, some said this  disclosure would be confusing or meaningless for consumers, with one  promoter noting that for high-demand events, a consumer\u2019s odds of  getting a ticket are low regardless of whether he or she knows the  number of available tickets. Another promoter noted that the seat maps  used to select seats when purchasing tickets already provide information  on ticket availability. Many stakeholders also told us such a disclosure  would only help brokers by giving them information useful in buying  tickets and setting resale prices. In addition, a venue manager noted that  information on ticket sales is considered proprietary and artists and event  organizers should not be required to disclose confidential business  information."], "subsections": []}]}, {"section_title": "Event Ticketing Is Not Federally Regulated and Some Stakeholders Cite Market-Based Approaches to Address Concerns about Secondary Market Activity", "paragraphs": ["Federal agencies face constraints in addressing ticketing issues. Some  industry players are implementing technological and market-based  approaches that seek to address concerns about secondary market  activity."], "subsections": [{"section_title": "Federal Regulatory Environment", "paragraphs": ["As noted earlier, the event ticketing industry is not federally regulated. In  contrast, in the airline industry, the Department of Transportation can  issue regulations regarding the disclosure of airline fees. Staff from  FTC\u2019s Bureau of Consumer Protection told us that\u2014in addition to the  enforcement activity noted earlier\u2014they monitor consumer complaints  related to the event ticket industry. However, they said they have  resource and other constraints that make it difficult to conduct industry- wide investigations related to ticketing practices.", "Issues around the level and transparency of fees are not unique to the  event ticketing industry. For example, as noted earlier, FTC staff have  raised concerns about mandatory \u201cresort fees\u201d charged by many hotels  but not immediately disclosed (such as in online price search results).  In addition, according to the National Economic Council, sellers of other  goods and services\u2014such as car dealers and telecommunications  companies\u2014sometimes offer low prices up front that rise substantially  with the addition of mandatory fees revealed later in the purchase  process. As such, options for regulating the transparency of fees can  have applicability broader than that of event ticketing.", "As noted earlier, the BOTS Act, which prohibits circumventing security  measures or other systems intended to enforce ticket purchasing limits or  order rules, went into effect in December 2016. However, a variety of  industry, consumer, academic, and government stakeholders have  expressed doubt that the BOTS Act would have much of an effect on  prohibited bot use. Several of these stakeholders told us that bot users  can easily evade detection and that enforcement of the act would be  extremely difficult, in part because a lot of bot use occurs\u2014or could  shift\u2014outside the United States. As of February 2018, FTC had not taken  any enforcement action related to the act, but FTC staff told us they were  monitoring the situation.", "The degree to which legislation combatting bots is effective may depend  in part on the extent to which state attorneys general pursue enforcement  actions. As of February 2018, we identified two states that had taken  enforcement actions related to bot use. In May 2017, the New York State  Office of the Attorney General announced settlements totaling $4.11  million with five ticket brokers which, among other offenses, violated New  York State law by using bots to purchase and resell tickets. In April  2016, the office announced settlements totaling $2.7 million with six ticket  brokers for similar violations. In February 2018, the Washington State  Office of the Attorney General announced settlements totaling $60,000  with two ticket companies that used bots in violation of the state\u2019s  ticketing law."], "subsections": []}, {"section_title": "Market-Based Approaches", "paragraphs": ["Industry players, including ticket companies and event organizers, are  using or exploring technology and market-based approaches that seek to  address concerns about secondary market activity. Examples of these  approaches and their potential effects include the following:", "Delivery delays. Ticket sellers sometimes use delivery delays,  meaning they do not provide the ticket immediately upon purchase.  Instead, buyers receive their tickets (in paper or print-at-home form)  closer to the day of the event. Delivery delays can inhibit resale  activity because they give brokers less time to buy and resell tickets,  and allow primary ticket sellers to review whether brokers and bots  made bulk purchases, according to some promoters and primary  ticket sellers. However, secondary market sellers we interviewed  generally argued against delivery delays, with two sellers saying it can  be inconvenient and stressful for consumers to receive a ticket just a  few days before an event.", "Dynamic pricing. The use of dynamic pricing\u2014which adjusts prices  over time based on demand\u2014can reduce secondary market activity  by pricing tickets closer to their market clearing price. Raising primary  market ticket prices, such as through dynamic pricing, does not  necessarily benefit consumers but can help ensure that more ticket  revenue accrues to the artist or team rather than ticket resellers.", "Verified fan program. At least one major ticket company has a  program to sell tickets to pre-approved \u201cverified fans,\u201d to help ensure  that more consumers and fewer brokers can access tickets on the  primary market.", "New technology. Two stakeholders noted the potential for distributed  ledger technology in ticketing. The technology associates a unique  identification code with the ticket and its owner, which can help restrict  transfer of the ticket and ensure its authenticity.", "Adding concerts. Artists can seek to make their ticket prices  accessible by increasing the supply of seats\u2014for example, one major  artist has added concert dates with the express purpose of matching  ticket supply to demand to prevent higher resale prices.", "Face-value resale exchanges. Resale exchanges used by some  artists only allow resale at face value (plus a limited amount to  account for primary market fees). This allows consumers to recoup  their ticket costs if their plans change, while preventing resale  markups.", "Market-based approaches also may augment regulatory and enforcement  action with regard to problems discussed earlier around transparency. In  February 2018, Google\u2019s AdWords service\u2014which offers paid advertising  alongside search results\u2014implemented new certification requirements for  businesses that resell event tickets. First, resellers using AdWords must  clearly disclose on their website or mobile application that they are a  secondary market company and not the primary provider of the tickets.", "They cannot imply they are the primary provider by using words such as  \u201cofficial\u201d or by including the artist or venue name in their website\u2019s URL\u2014 practices we noted earlier that were being used by some white-label  websites. Second, resellers must prominently disclose when their ticket  prices are higher than face value and disclose a price breakdown,  including any fees, before the customer provides payment information.  Google said in a statement that these measures were intended to protect  customers from scams and prevent potential confusion. However, due to  the recency of this change, it is too early to determine how it will affect the  marketplace.", "In addition, the advertising industry\u2019s self-regulatory organization has  taken steps to address potentially misleading pricing practices in the  ticket industry. The Advertising Self-Regulatory Council sets standards for  truth and accuracy for national advertisers, monitors the marketplace, and  holds advertisers responsible for their claims. As noted earlier, the  organization recently referred a major ticket company to FTC for not  following its recommendations to conspicuously disclose its fees.  Although the council can play a role in monitoring deceptive advertising  related to ticketing, it also faces constraints\u2014for example, it addresses  practices case-by-case and its recommendations depend on voluntary  compliance by the advertiser.", "No matter what efforts are made to address concerns about the ticket  marketplace, some of the consumer dissatisfaction with event ticketing  stems from an intractable issue: demand for tickets to highly popular  events exceeds supply. As such, no activity, outside of expanding the  supply, is likely to effectively address one key source of consumer  dissatisfaction: that tickets are not available to popular sold-out events."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOJ and FTC for review and  comment. We received technical comments from FTC, which we  incorporated as appropriate. We also provided relevant excerpts of the  draft for technical review to selected private parties cited in our report,  and included their technical comments as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to DOJ, FTC, the  appropriate congressional committees and members, and others. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-8678 or clementsm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to examine (1) what is known about  primary and secondary online ticket sales, (2) the consumer protection  concerns that exist related to online ticket sales, and (3) potential  advantages and disadvantages of selected approaches to address these  concerns. The scope of our work generally focused on ticketing for large  concert, theater, and sporting events for which there is a resale market.", "To develop background information on the U.S. ticketing industry, we  analyzed business classification codes from the North American Industry  Classification System, which assigns a 6-digit code to each industry  based on its primary activity that generates the most revenue. The code  we selected, \u201cAll Other Travel Arrangement and Reservation Services,\u201d  includes theatrical and sports ticket agencies, as well as automobile club  road and travel services and ticket offices for airline, bus, and cruise ship  travel. Because the Census data do not distinguish event ticketing from  other services in particular, we determined the data do not provide a  reliable count of companies in the event ticketing industry. In addition, we  obtained publicly available data from private research firms and reviewed  the largest publicly held ticketing companies\u2019 annual public filings with the  Securities and Exchange Commission (Form 10-K). We also collected  information from firms that collect data related to the ticketing industry,  such as IBISWorld and LiveAnalytics.", "To examine what is known about primary and secondary online ticket  sales, we reviewed data related to ticket prices and sales published by  Pollstar, a concert industry trade publication, and the Broadway League,  a trade organization representing commercial theater. In addition, we  obtained and analyzed data on ticket volume and resale prices for a  nongeneralizable sample of 22 events. These events were selected  because they (1) occurred in relatively large venues (more than 500  seats) that typically experience ticket resale activity; (2) represented a mix  of event types (13 concerts, 3 commercial theater productions, and 6  sporting events); and (3) represented a mix of popularity, including 17  events that would be expected to be in high demand. We defined high- demand events as those that were likely to sell out, which we assessed  by reviewing past attendance at other events for the same artist or  theatrical event. For sports, we assessed demand by reviewing team  performance and rankings. We collected data from October 16 through  December 20, 2017. For each event, we analyzed:  resale prices and volume, through data obtained from publicly  available listings on the websites of two secondary ticket exchanges; primary market prices and availability, through data obtained from  the websites of primary market ticket sellers; and event capacity, through data obtained from Billboard or Pollstar  (trade publications) for concerts, the Broadway League for theater,  and ESPN.com (a media company) for sporting events.", "To examine consumer protection concerns, we reviewed the websites of  6 primary market ticket sellers, 11 secondary ticket exchanges, and 8  \u201cwhite-label\u201d ticket websites. We collected data from June 19, 2017,  through January 16, 2018.", "For the primary market ticket seller that represents the majority of  market share, we observed the online ticket purchase process for 23  events. Three events were selected using the process described  below and the remaining 20 were chosen to reflect 2 events at each of  10 venues, selected because they were among the 200 top-selling  arenas or 200 top-selling theaters in the United States in 2017,  according to Pollstar.", "For each of the 5 other primary market ticket sellers and the 11  secondary ticket exchanges, we observed the online ticket purchase  process for 1\u20135 events. For each primary ticket seller, we selected  one event per category (concert, theater, and sports). For consistency  and comparability across companies, we also limited events to the  same state (which did not extensively limit ticket resale) and time  period. We also selected 2 events in another state because they used  nontransferable tickets. For the secondary ticket exchanges, we used  3\u20135 events from our review of primary ticket sellers\u2019 websites. If the  event was no longer available, we selected an alternative event at the  same venue.", "For each of the 8 white-label ticket sellers, we reviewed 1\u20134 events  from the events described above. In some cases, the same event was  not available so we selected an alternative event at the same venue.", "For these events\u201431 events in total\u2014we documented (1) the ticket fees  charged, (2) at what point in the purchase process the fees were  disclosed, and (3) any restrictions to the ticket. In addition, we assessed  the clarity, placement, and font size of the fees, restriction information,  and\u2014for white-label websites\u2014disclaimers that the website was a ticket  resale website. We worked with a GAO investigator to review the  websites that required users to provide an e-mail address or credit card  information before viewing fees. Analysts followed a protocol to help  ensure consistency of observations and completed a data collection  instrument for each website. A second analyst independently reviewed  each website to verify the accuracy of information collected by the first  analyst. Any discrepancies between the two analysts were identified,  discussed, and resolved by referring to the source websites.", "A GAO investigator acting in an undercover capacity contacted the  customer service departments of three large secondary ticket exchanges  to inquire about two events for which tickets were nontransferable (not  allowed to be resold) and two events for which listed tickets were  speculative (not yet in-hand by the seller). The nontransferable tickets  were identified through press releases and articles about popular touring  artists and the speculative tickets were identified by searching for events  that had been announced but were not yet for sale on the primary market.  The investigator contacted customer service through 16 e-mails to one  company and 8 online \u201clive chats\u201d with another company. For the third  company, the investigator sent 8 e-mails about nontransferable tickets  and did not inquire about speculative tickets because this company  labeled such tickets. We also contacted the venues hosting these events  to help assess the accuracy of the information provided by the ticket  companies\u2019 customer service departments.", "In addition, we reviewed enforcement activity by federal and state  agencies related to ticketing and ticket companies. We also collected  information on the number of consumer complaints by requesting the  Federal Trade Commission (FTC) conduct a search of its Consumer  Sentinel Network database, which includes complaints submitted to FTC,  the Consumer Financial Protection Bureau, the Better Business Bureaus,  and other sources. The search results covered calendar years 2014\u2013 2016 and used the term \u201cticket\u201d with terms related to events (e.g.,  \u201cconcert,\u201d \u201csport,\u201d \u201ctheater\u201d), sold-out events (e.g., \u201csold-out\u201d); fees;  fraudulent tickets (e.g., \u201cfake\u201d); delayed delivery (e.g., \u201clate,\u201d); or  nontransferable tickets (e.g. \u201cpaperless\u201d). We selected our initial search  terms by reviewing terms used in similar complaints on the Better  Business Bureau website. We made modifications to our search string  based on suggestions from FTC staff who reviewed the results of a  preliminary search. To help ensure that results were related to event  ticket sellers, we limited the search to complaints against the 6 primary  ticket sellers and 11 secondary ticket exchanges in our scope. We  assessed the reliability of the complaint data by interviewing agency  officials. In addition, we have assessed the reliability of Consumer  Sentinel Network data as part of previous studies related to consumer  protection and found the data to be reliable for the purposes of gauging  the extent of consumer complaints about event ticketing. However, in  general, consumer complaint data have limitations as an indicator of the  extent of problems. For example, not all consumers who experience  problems may file a complaint, and not all complaints are necessarily  legitimate or categorized appropriately. In addition, a consumer could  submit a complaint more than once, or to more than one entity, potentially  resulting in duplicate complaints.", "To examine the potential advantages and disadvantages of selected  approaches to address consumer protection concerns, we reviewed  federal and selected state laws related to event ticket sales. At the federal  level, these included the Better Online Ticket Sales Act of 2016 and  relevant provisions of the Federal Trade Commission Act. To determine  which states had laws related to ticket resale or disclosure, we reviewed  compilations of state ticketing laws from the National Association of Ticket  Brokers, a secondary ticket seller\u2019s website, and a law firm publication,  and we conducted independent research and verification. We reviewed  ticketing-related legislation\u2014selected for its relevance to the approaches  covered in our review\u2014in Connecticut, New York, and Georgia. We  reviewed state government reports and interviewed state officials to get  information on the states\u2019 experiences with these laws. We also consulted  foreign government reports to obtain information on relevant laws or  regulations in Canada and the United Kingdom, which have reported  similar consumer protection issues as we reviewed in our report.", "To address all of our objectives, we conducted searches of various  databases, such as ProQuest, Academic OneFile, Nexis, Scopus, and the  National Bureau of Economic Research, to identify sources such as peer- reviewed academic studies; law review articles; news and trade journal  articles; government reports; and hearings and transcripts related to  ticketing issues. We examined summary-level information about each  piece of literature, and from this review, identified articles that were  germane to our report. We generally focused on articles from 2009 and  later. We identified additional articles and reports through citations in  literature we reviewed and from expert recommendations.", "For the articles we used to cite empirical findings or to support arguments  on advantages and disadvantages of selected resale restrictions or  disclosure requirements, we conducted a methodology and soundness  review. We eliminated one study on pricing and one study on price caps  because we believed the methods were not sufficiently rigorous.", "In addition, we identified and reviewed relevant congressional testimony  on proposed ticketing legislation. We reviewed the Department of  Justice\u2019s competitive impact statement and testimonies with regard to the  2010 merger of Ticketmaster and Live Nation. We interviewed staff from  the FTC\u2019s Bureau of Consumer Protection and Bureau of Economics, the  Department of Justice\u2019s Antitrust Division, and the New York State Office  of the Attorney General, and we conducted a group interview, coordinated  by the National Association of Attorneys General, with staff from the  offices of the attorney general of Pennsylvania and Texas. We also  interviewed representatives of three consumer organizations: Consumer  Action, the National Association of Consumer Advocates, and the  National Consumers League; four trade associations: the Broadway  League, Future of Music Coalition, National Association of Ticket Brokers,  and the Recording Academy; as well as four primary ticket sellers, five  secondary ticket exchanges and aggregators, one broker, five venue  operators, three event promoters (who also operate venues), five artists\u2019  managers and booking agents, three major sports leagues, and three  academics who have studied the ticket marketplace. These organizations  and individuals were selected based on their experience and prominence  in the marketplace and to provide a range of perspectives.", "We conducted this performance audit from November 2016 to April 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Our investigative staff agent  conducted all related investigative work in accordance with investigative  standards prescribed by the Council of the Inspectors General on Integrity  and Efficiency."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Jason Bromberg (Assistant  Director), Lisa Reynolds (Analyst in Charge), and Miranda Berry made  key contributions to this report. Also contributing were Enyinnaya David  Aja, Maurice Belding, JoAnna Berry, Farrah Graham, John Karikari,  Barbara Roesmann, Jena Sinkfield, and Tyler Spunaugle."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-523", "url": "https://www.gao.gov/products/GAO-18-523", "title": "Aircraft Carrier Dismantlement and Disposal: Options Warrant Additional Oversight and Raise Regulatory Questions", "published_date": "2018-08-02T00:00:00", "released_date": "2018-08-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Navy is planning to dismantle and dispose of CVN 65 after 51 years of service. In 2013, the estimated cost to complete the CVN 65 work as originally planned increased to well over $1 billion, leading the Navy to consider different dismantlement and disposal options.", "The Senate Report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the Navy's plans for CVN 65. This report addresses (1) dismantlement and disposal options under consideration; (2) nuclear regulatory authority considerations; and (3) funding and reporting practices.", "GAO reviewed budget, cost, and schedule documentation, as well as applicable laws, regulations, executive orders, policies, and guidance. GAO interviewed officials from the Navy and commercial companies about the dismantlement and disposal options, and NRC and state agencies about regulatory considerations."]}, {"section_title": "What GAO Found", "paragraphs": ["The Navy is assessing two options to dismantle and dispose of its first nuclear-powered aircraft carrier\u2014ex-USS Enterprise (also known as CVN 65). CVN 65 dismantlement and disposal will set precedents for processes and oversight that may inform future aircraft carrier dismantlement decisions.", "Characteristics of the Navy's Potential CVN 65 Dismantlement and Disposal Options", "Source: GAO analysis of Navy and Nuclear Regulatory Commission information. | GAO-18-523", "The Navy could rely on its extensive regulatory experience for the naval shipyard option. However, the Navy's ability to effectively evaluate the full commercial option is hampered by a disagreement with the Nuclear Regulatory Commission (NRC), which oversees the commercial nuclear industry. Naval Reactors officials assert that NRC's regulatory authority should apply to the full commercial option. NRC disagrees with this position. Coordination between the two agencies to identify the applicable regulatory authority and craft a regulatory plan would help ensure accountability, solidify cost estimates, and facilitate a CVN 65 decision.", "The budget documentation and reporting that the Navy typically uses for ship dismantlement and disposal projects will not enable adequate oversight of CVN 65\u2014a multi-year project with a cost that may exceed $1 billion. The documents that support Navy budget requests for dismantlement and disposal funding do not provide data that decision makers can readily use to track dismantlement costs against an established baseline or to evaluate funding plans for future years. Further, the Navy has no reporting requirements to support accountability for CVN 65 activities. Large defense acquisition programs generally are required to submit more detailed budget information and report on cost, schedule, and performance. These practices could be adapted for CVN 65 to provide information that will facilitate oversight commensurate with the scale of the effort."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider requiring Naval Reactors to coordinate with NRC to identify the applicable regulatory authority for a CVN 65 commercial dismantlement and disposal. GAO is also making four recommendations, including that the Navy take action to provide additional budget information and reporting to facilitate improved transparency and accountability for the CVN 65 cost, schedule, and risks. The Department of Defense agreed with all four recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["After 51 years of service, ex-USS Enterprise (also known as CVN 65)\u2014 the Navy\u2019s first nuclear-powered aircraft carrier\u2014is being prepared for  dismantlement and disposal. At approximately 76,000 tons, CVN 65 will  require an unprecedented level of work to dismantle and dispose of as  compared to previous ships. The Navy originally intended to dismantle  the entire CVN 65, both nuclear and non-nuclear components, at Puget  Sound Naval Shipyard and Intermediate Maintenance Facility (hereafter  referred to as Puget Sound Naval Shipyard), which is its usual facility for  this type of activity. However, in 2013, the Navy\u2019s cost estimate for the  shipyard to perform all CVN 65 dismantlement and disposal activities  increased\u2014from a range of $500 million to $750 million\u2014to well over $1  billion. This led the Navy to consider alternatives. In 2016, the Navy  issued a request for proposals to have a commercial company recycle the  non-nuclear portions of the ship. The Navy also sought information from  industry at that time on the potential for a commercial company to  dismantle and dispose of the entire ship. In February 2017, the Navy  announced it canceled its request for proposals on commercial recycling  of non-nuclear portions of the ship and continued assessing its options.", "As part of this assessment, the Navy determined it will not dismantle the  entire ship at Puget Sound Naval Shipyard. Instead, it is focused on two  potential options. One involves Puget Sound Naval Shipyard dismantling  and disposing of a section of the ship that contains the nuclear material\u2014 referred to as the propulsion space section\u2014with disposal at the  Department of Energy\u2019s Hanford low-level radioactive waste disposal site  in the state of Washington. The other entails the Navy awarding a  contract for commercial industry to fully dismantle and dispose of the  nuclear and non-nuclear materials for the entire ship. For the purposes of  this report, we refer to these two options as (1) the naval shipyard option  and (2) the full commercial option, respectively.", "Regardless of the approach the Navy chooses, CVN 65 will set  precedents for the processes, costs, and oversight that may be used to  dismantle and dispose of nuclear-powered aircraft carriers in the future,  such as the Nimitz-class carriers which the Navy will begin to retire in the  mid-2020s. Senate Report 115-125 accompanying a bill for the National  Defense Authorization Act for Fiscal Year 2018 included a provision for  GAO to review the Navy\u2019s plans for CVN 65 dismantlement and disposal.", "This report (1) describes the differences between the dismantlement and  disposal options under consideration, including cost and schedule as well  as workload and facilities; (2) evaluates the Navy\u2019s funding and reporting  practices for dismantlement and disposal activities; and (3) assesses the  effect that nuclear regulatory authority considerations have on  dismantlement and disposal options for CVN 65.", "To conduct our work, we reviewed documentation on prior, ongoing, and  future Navy ship dismantlement and disposal plans and activities, as well  as information specific to the different CVN 65 options the Navy has  considered or is considering. We used this information to evaluate the  Navy\u2019s history with ship dismantlement and disposal, how its plans for  CVN 65 have evolved, and what is currently known about the different  options the Navy is considering for the ship. We also reviewed the Navy\u2019s  preliminary cost and schedule information and assessed naval shipyard  workload and facility data. This included workload data for fiscal years  2006 through 2025 and facility data for fiscal years 2018 through 2035.  To assess the reliability of these data, we interviewed knowledgeable  officials and reviewed documentation to verify the controls and measures  used to validate and maintain the data. We determined these data to be  reliable for our purposes of discussing the existing and planned workload  at Puget Sound Naval Shipyard. We also reviewed documentation on the  Navy\u2019s funding and reporting practices, as well as regulatory authorities  and processes for nuclear materials that may apply to CVN 65  dismantlement and disposal. This included a review of applicable laws,  regulations, executive orders, policies, and guidance. Further, we  assessed the typical budget information and reporting requirements for  dismantlement and disposal in relation to federal internal control  standards. Additionally, we reviewed past GAO reports that addressed  operation and maintenance activities at naval shipyards, and the  processes, facilities, and requirements for nuclear materials. We also  reviewed federal and Department of Defense (DOD) budget, financial,  and acquisition policies and guidance, as well as relevant reports from  DOD and other nuclear energy-related organizations, such as the  Organisation for Economic Co-operation and Development\u2019s Nuclear  Energy Agency.", "In addition to reviewing documentation that addresses these areas, we  interviewed officials from the Naval Sea Systems Command\u2014which  includes Naval Reactors\u2014Puget Sound Naval Shipyard, and the Nuclear  Regulatory Commission (NRC). We also interviewed officials from health  and environmental agencies for the states of Texas and Washington.  Ship dismantlement activities have occurred in these states and both  have nuclear waste disposal sites. Additionally, we interviewed officials  and reviewed documentation from commercial companies involved in  shipbreaking or nuclear-related industries. These companies include  Atkins Global; EnergySolutions; Huntington Ingalls Industries (HII \u2013  Nuclear); International Shipbreaking Limited; NorthStar Group Services;  and Waste Control Specialists. For more information on our scope and  methodology, see appendix I.", "We conducted this performance audit from August 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In 1961, the Navy commissioned the first and only Enterprise-class  aircraft carrier, CVN 65, which was the world\u2019s first nuclear-powered  aircraft carrier. CVN 65 served the Navy\u2019s needs for 51 years, deploying  25 times and sailing more than 1 million miles during that time. The  carrier, which was powered by eight nuclear reactors, was the  predecessor of the two-reactor Nimitz-class aircraft carriers that followed it into service. The Navy plans to begin retiring the Nimitz-class carriers in  the next decade.", "Following the retirement of CVN 65 in 2012, the Navy began preparing  the ship for dismantlement and disposal in a process called inactivation.  These inactivation activities\u2014which Navy officials stated cost $863 million  to complete\u2014included removing the nuclear fuel from the ship\u2019s reactors  and taking off equipment and other materials in preparation for  dismantlement of the ship. The Navy\u2019s next steps include planning efforts  to meet the environmental requirements associated with dismantling and  disposing of a nuclear-powered ship, such as handling of radioactive and  other hazardous materials. The final step for CVN 65 will be  dismantlement, including the recycling of non-nuclear portions of the ship  and safe disposal of nuclear and other hazardous materials. Figure 1  provides a timeline of CVN 65 events.", "CVN 65 is the largest nuclear-powered ship that has been retired by the  Navy. Figure 2 compares the size of CVN 65 to previous and future Navy  vessels requiring dismantlement and disposal, as well as other relatable  structures."], "subsections": [{"section_title": "Puget Sound Naval Shipyard Dismantlement and Disposal Activities", "paragraphs": ["In 1990, the Navy authorized a program to recycle decommissioned  submarines at Puget Sound Naval Shipyard in Bremerton, Washington.  According to Navy officials, the Department of Energy\u2019s low-level waste  site in Hanford, Washington, was the only practical site at the time for  disposal of the defueled submarine reactor compartments, which included  low-level radioactive waste. Puget Sound Naval Shipyard is the largest  shipyard on the U.S. West Coast, and while it is equipped and staffed to  work on all classes of Navy vessels, it primarily conducts maintenance on  nuclear-powered aircraft carriers and submarines, which the Navy  considers a priority. This shipyard has the only dry dock on the West  Coast capable of servicing an aircraft carrier and is the Navy\u2019s only site  for dismantlement and disposal of nuclear-powered ships.", "Since 1990, the Navy has inactivated over 130 nuclear-powered vessels.  Inactivation is the process used to prepare a ship for disposing of the  compartments that house the reactors and recycling the hull or for safe  storage pending dismantlement and disposal at a later date. Inactivation  includes draining hydraulic systems and tanks, and removing hazardous  and expendable materials, tools, spare parts, and furnishings from the  ship. The removal of the spent fuel from a ship\u2019s nuclear reactor(s),  referred to as defueling, usually happens as part of inactivation.  Historically, when a ship is dismantled at Puget Sound Naval Shipyard,  the reactor compartments are removed and packaged for transport to the  Hanford low-level radioactive waste disposal site. Figure 3 shows the  typical path followed for dismantlement and disposal at the shipyard."], "subsections": []}, {"section_title": "Dismantlement and Disposal by Commercial Industry", "paragraphs": ["The Navy often uses commercial industry to dismantle and recycle its  non-nuclear ships, including aircraft carriers, such as ex-USS  Constellation and ex-USS Ranger completed in 2017. Navy officials noted  that the cost to the government in recycling recent ships has been  minimal\u2014ranging from 1\u00a2 to $6 million\u2014because of the resale value of  their scrap metal.", "Commercial companies have decommissioned 32 civilian nuclear reactor  plants\u2014work that the Navy has noted is comparable to nuclear-powered  ship dismantlement and disposal. Commercial industry uses a  component-based process for commercial nuclear plant  decommissioning. This process breaks the reactor down into smaller  components for transport and disposal, and separates nuclear waste from  non-nuclear waste as much as possible to reduce disposal costs."], "subsections": []}, {"section_title": "Requirements Related to Dismantlement and Disposal of Nuclear- Powered Ships", "paragraphs": ["Several laws and an executive order have established the regulatory  authority and requirements underlying the dismantlement and disposal of  nuclear-powered Navy vessels. The Atomic Energy Commission  exercised control of nuclear technology primarily for military purposes  until 1954, when the Atomic Energy Act was amended. These  amendments allowed for the possibility of a privatized nuclear energy  industry. Twenty years later, the Atomic Energy Commission was  abolished and split into the Nuclear Regulatory Commission (NRC) and  the Energy Research and Development Administration\u2014which was later  absorbed into the Department of Energy.", "Under this structure, NRC is responsible for overseeing commercial  nuclear reactor safety, licensing reactors, and establishing regulations  and guidelines for radioactive waste disposal for the commercial nuclear  industry. The National Nuclear Security Administration, a separately  organized agency within the Department of Energy, is responsible for the  management and security of the nation\u2019s nuclear weapons, as well as  nonproliferation programs. The Naval Nuclear Propulsion Program\u2014also  known as Naval Reactors\u2014is a joint program of the Department of  Energy and DOD that has cradle-to-grave responsibility for all naval  nuclear propulsion matters. Figure 4 provides a brief description of laws  and orders related to nuclear materials.", "In addition to the nuclear-specific requirements guiding the dismantlement  and disposal process, the Navy must comply with the National  Environmental Policy Act. Specifically, this act requires federal agencies  to evaluate the likely environmental effects of projects they are proposing,  generally by preparing either an environmental assessment or a more  detailed environmental impact statement. An environmental impact  statement must, among other things, (1) describe the environment that  will be affected, (2) identify alternatives to the proposed action and  identify the agency\u2019s preferred alternative, (3) present the environmental  impacts of the proposed action and alternatives, and (4) identify any  adverse environmental impacts that cannot be avoided should the  proposed action be implemented. The Act\u2019s requirements are invoked for  major federal actions, such as the construction of buildings or highways,  or the dismantlement and disposal of reactor compartments from nuclear- powered vessels.", "Since 1996, nuclear-related dismantlement and disposal activities  performed by Puget Sound Naval Shipyard have been based on the  same environmental impact statement\u2014which addresses the effects of  disposing of submarine and cruiser reactor compartments. In 2012, the  Navy produced an environmental assessment analyzing the effects of  removing and preparing the reactor compartments of CVN 65 for disposal  at Puget Sound Naval Shipyard and transporting the compartment  packages to the Hanford site for disposal. It found that these activities  would have no significant impact on the environment beyond existing  activity. Naval Reactors subsequently decided, however, that a new  environmental impact statement is required for CVN 65 because the  alternatives identified for dismantling and disposing of the ship could  potentially have significant impacts on the environment that are not  captured by the existing environmental assessment. As part of the new  statement for CVN 65, Navy officials said environmental factors that  account for the naval shipyard and full commercial options will be  reviewed, as well as indefinite waterborne storage of the ship pending  dismantlement and disposal at a later date."], "subsections": []}]}, {"section_title": "Naval Shipyard Option for CVN 65 Is More Defined than Full Commercial Option but May Pose Challenges for Meeting Navy Priorities", "paragraphs": ["The Navy is weighing a number of considerations before making a  decision for CVN 65 dismantlement and disposal. The naval shipyard  option offers well-established processes for dismantlement and disposal  of the ship\u2019s nuclear material and better understood cost and schedule  estimates than the full commercial option. Our analysis of available data,  however, found that the naval shipyard option would contribute to existing  workload backlogs and exacerbate facility challenges at the shipyard that  could affect its work maintaining the active fleet\u2014a Navy priority. While  the Navy has not defined its requirements for the full commercial option,  industry does not expect to face workload or facility challenges. Navy  officials also believe that the full commercial option potentially could  shorten the timeline for completing the work and reduce the total cost."], "subsections": [{"section_title": "Naval Shipyard Option Is Based on a Well- Established Process, While Navy Has Yet to Characterize Full Commercial Option", "paragraphs": ["Although CVN 65 is the first nuclear-powered aircraft carrier requiring  dismantlement and disposal, the Navy has well-established processes for  dismantling and disposing of nuclear-powered submarines and cruisers.  Navy officials explained that the shipyard\u2019s extensive dismantlement and  disposal experience with these vessels has resulted in a strong  understanding of how to accomplish the work. Further, the Navy has been  working on plans to address the ship-specific needs of CVN 65 for many  years. If the Navy chooses the naval shipyard option for CVN 65, it  expects to adapt and use these well-established processes to dismantle  the 28,000-ton nuclear propulsion space section at Puget Sound Naval  Shipyard. This section would contain the 8 defueled reactors and all other  nuclear-related material that remains on the ship. To separate the  propulsion space from the ship, a commercial company would perform  \u201cship-shaping\u201d to create a dedicated ship section for all of the nuclear- related work. This activity would minimize the portion of the ship  transported to the naval shipyard for dismantlement and disposal. The  remaining ship sections would be commercially recycled. The shipyard is  evaluating two designs for reactor compartment packages that could be  used for transport and disposal of the ship\u2019s nuclear material. One  design\u2014based on a package previously used for cruiser reactors\u2014would  involve the shipyard preparing 8 single reactor packages. The other  includes a new design that would enclose 2 reactors in dual reactor  packages. Figure 5 shows how the Navy anticipates the ship would be  divided into sections through this process.", "In contrast, the Navy formally began considering the potential for a full  commercial option for CVN 65 within the past 4 years. According to Navy  officials, although information received through previous requests for  information and hosting discussions with commercial industry helped  shape their understanding of the potential for a commercial ship  dismantlement, they ultimately have had relatively limited interaction with  commercial companies to determine their potential plans and processes  for CVN 65 dismantlement and disposal. Naval Reactors officials stated  they are waiting for the environmental impact statement process to  officially begin before further engaging with prospective commercial  companies and the public.", "Many of the details for a full commercial option will depend upon Navy  requirements, such as standards, technology, or specific procedures  required to do the work; data and analysis in the environmental impact  statement; and preferred work practices and facilities of prospective  companies. Officials we interviewed from companies with potential  interest in the work stated that because the Navy has not communicated  its CVN 65 requirements for a full commercial option, any commercial  approach described for the work would be hypothetical at this point,  relying on their extensive prior experience with nuclear materials  handling, packaging, shipping, and disposal\u2014including nuclear ship  maintenance and decommissioning of commercial reactors\u2014or ship  recycling. Commercial company officials noted that despite the lack of  definitive information available, they would anticipate employing typical  practices used for commercial nuclear reactor decommissioning, ship  dismantlement, and control of nuclear materials to complete CVN 65  work. In terms of locations for the work, Naval Reactors officials noted  that many coastal sites in the United States could potentially  accommodate CVN 65 dismantlement activities, and the location of the  work site would affect the proposed disposal site or sites. Table 1  provides characteristics of the two options that the Navy is considering for  CVN 65 dismantlement and disposal."], "subsections": []}, {"section_title": "Estimates for Both Dismantlement Options Require Further Development", "paragraphs": ["Cost and schedule estimates for both CVN 65 options have yet to be  formally established by the Navy. Puget Sound Naval Shipyard has been  refining CVN 65 plans and estimates over many years. However, its most  recent estimates for cost and schedule still may not fully account for  uncertainties in completing the work because it represents a first-of-its- kind project with an unprecedented scale. The Navy\u2019s notional estimates  for the commercial option are a first step in establishing expectations and  will evolve as requirements for the work are better understood. The Navy  awarded a contract in July 2018 to the Center for Naval Analyses\u2014a  federally funded research and development center serving the Navy and  other defense agencies\u2014to complete a cost analysis for the full  commercial option. This effort is expected to provide the Navy with a cost  estimate for CVN 65 in October 2018, followed by a model through which  the Navy can develop cost estimates for future Nimitz-class  dismantlement and disposal efforts. The findings from the CVN 65  environmental impact statement may contribute to the final cost and  schedule estimates for either option.", "Better Fidelity in Existing Naval Shipyard Option Estimates  Puget Sound Naval Shipyard officials explained that as their planning has  progressed, they have refined their cost and schedule estimates for CVN  65 dismantlement and disposal. Overall, the Navy\u2019s cost estimates have  increased significantly from initial estimates but have been relatively  stable since 2016. The schedule went through similar fluctuations but has  steadied. Table 2 outlines changes in the shipyard\u2019s plans and how they  affected cost and schedule.", "The schedule for starting the work at the naval shipyard also changed.  Navy officials stated that as a result of the Navy\u2019s decision in early 2017  to reassess its options for CVN 65, it delayed the expected start date for  the naval shipyard option from 2019 to 2034 based on analysis of the  workload at the naval shipyard, which we discuss below.", "Although Puget Sound Naval Shipyard officials noted their cost estimate  includes some margin to account for CVN 65 being the first project of its  kind, it may not adequately account for the extent of unknown facts or  circumstances that could affect cost. For example, unrecognized  hazardous materials may exist in inaccessible areas of the CVN 65  propulsion space section that will only be discovered once the work is  underway, which could affect cost and schedule. Execution of the work in  support of a new dual reactor compartment package design also could  lead to unanticipated challenges that cause deviations from estimates.", "No Formal Estimates for Full Commercial Option  The Navy has notionally estimated cost and schedule for a full  commercial option to be $750 million to $1.4 billion and about 5 years to  complete. These estimates suggest that the commercial option could cost  less and take less time to complete than the naval shipyard option. Navy  officials stated that the notional cost estimate is derived from data  reported by nuclear power plant operators, with differences in size and  scope for the nuclear reactors incorporated. They also said that the  notional estimate will be updated once it receives additional information  from industry during the planning process.", "Navy officials told us they expect the cost per reactor for CVN 65 would  be significantly less than the NRC decommissioning average for a  commercial facility because CVN 65 reactor compartments are smaller,  the reactors are more compact, and they have already been through the  costly defueling activity. A 2016 international study on the cost of  decommissioning nuclear power plants identified several high-level  categories and their contribution to total costs for reactors  decommissioned in the United States, such as project management, site  restoration, and waste packaging, transportation, and disposal.  According to this study, about 25 percent of decommissioning costs can  be attributed to reactor decontamination and dismantling. Using this  percentage and the average cost to decommission a commercial nuclear  reactor, we estimate the cost to dismantle the eight CVN 65 defueled  reactors to range from $1.2 billion to 1.3 billion, which is at the higher end  of the Navy\u2019s notional estimated range for the full commercial option.", "In addition to the potential cost, the Navy initially projected about a 5-year  period of performance for the full commercial option based on limited  industry input. Navy officials told us the full commercial option start date,  beginning no earlier than 2024, is contingent on the finalization of the  environmental impact statement and a record of decision that chooses  this option as the Navy\u2019s path forward. The Navy\u2019s intent would be to  award a contract shortly after the environmental impact statement is  completed if the Navy decides to pursue the full commercial option.  Commercial officials told us they do not anticipate a need for significant  lead time before starting work, though the need will be better understood  once the Navy outlines requirements for the work.", "Finally, the cost for a full commercial option could be influenced by the  contract type selected by the Navy. Contract type selection is a key factor  in determining how cost risk is shared between the Navy and the  contractor. Firm-fixed-price contracts are suitable for situations where the  risk involved is minimal or can be predicted with an acceptable degree of  certainty. Conversely, cost-type contracts are used when either  requirements are not sufficiently defined or uncertainties with contract  performance do not permit costs to be sufficiently estimated to use a  fixed-price contract. Although no decision has been made, Navy officials  told us they are interested in using a firm-fixed-price contract\u2014a contract  type that has been used for commercial reactor decommissioning. Under  a firm-fixed-price contract, the contractor agrees to perform the work for a  price that is not subject to change based on the contractor\u2019s cost  experience in performing the contract, placing full responsibility for all  costs and resulting profit on the contractor. Navy officials stated that  because CVN 65 is the first nuclear-powered aircraft carrier to be  disposed of, the scope of the effort will need to be better defined before  they could reliably conclude that firm-fixed-price contracting would be  appropriate. Specifically, insufficiently understood risks may make  potential contractors unwilling to accept the risks associated with a firm- fixed-price contract."], "subsections": []}, {"section_title": "The Navy\u2019s Priorities for Puget Sound Naval Shipyard Present Challenges Not Expected for Full Commercial Option", "paragraphs": ["The Navy has stated its priority for Puget Sound Naval Shipyard is the  work associated with maintaining nuclear-powered aircraft carriers and  submarines currently in the fleet. However, as we reported in 2017, Puget  Sound Naval Shipyard has had significant fleet maintenance delays since  fiscal year 2000. These delays resulted in 4,720 lost operational days  for nuclear-powered aircraft carriers and submarines. The addition of  CVN 65 would contribute to challenges in the naval shipyard\u2019s ability to  meet workload demands and further constrain its available facilities. In  comparison, despite the lack of detail about the Navy\u2019s requirements,  commercial company officials we interviewed stated they currently do not  anticipate any major workload challenges or conflicts with other ongoing  or future work in completing the work on CVN 65 based on their existing  workforce and potential facilities for performing the work.", "Puget Sound Naval Shipyard Workload and Facility Challenges  Based on our analysis of workload and resources data from Puget Sound  Naval Shipyard, we found that the shipyard consistently operates at its  maximum annual workload level and this likely will continue regardless of  the Navy\u2019s decision for CVN 65. A Naval Reactors analysis of the  shipyard\u2019s workload data also shows the workload meeting or exceeding  capacity for the foreseeable future. The shipyard\u2019s workload projections  that we reviewed show it will be working at or near capacity through fiscal  year 2025\u2014the last year for which data were available. Adding the work  associated with dismantlement and disposal of CVN 65 would put the  shipyard over current workload capacity.", "Shipyard officials explained that historically, the workload projection for a  given year matures as that year approaches, and the dips that sometimes  are depicted in future-year workload projections generally vanish.  Workload maturity or growth can be attributed to changes in the Navy\u2019s  maintenance plans, deferred maintenance, growth from the previous  year, and overall shipyard productivity. The condition of a ship when it  arrives for maintenance can also contribute to growth if inspections of  systems or components reveal a need for unplanned repairs. To account  for historical variability and improve projections of overall workload, in  2015 shipyard officials began including 10 percent in unallocated  workload to projections.", "In reviewing the shipyard workload and resources data, we also found  that the shipyard regularly underestimates workload for future years\u2014 especially 5 years or more out\u2014with workload growth for future years  consistently exceeding 15 percent. Even without the CVN 65 work at the  naval shipyard, projections show its workload with average notional  growth will meet or exceed the workforce available to complete the work,  as shown in figure 6.", "According to the Navy, it is typical for naval shipyards to continually shift  resources across projects to align worker-specific trade skills to the type  of work executed on any hull in the shipyard, at any particular time. To  achieve a level and sustainable workforce across the fiscal years, the  number of full-time employees required to support planned work is sized  as part of the total workforce. The shipyard mitigates peaks in workload  (above the available workforce) through the use of additional overtime,  loans from other naval shipyards, and contracting. When that cannot  occur, the shipyard will defer workload until it can be executed.", "The CVN 65 dismantlement and disposal work could affect the shipyard\u2019s  ability to complete active fleet maintenance. We found that the addition of  the CVN 65 dismantlement and disposal would add almost a year\u2019s worth  of work across the estimated 10-year dismantlement and disposal period  to an already busy shipyard that has demonstrated difficulties in  accurately projecting its future work. The Navy prioritizes maintenance of  the active fleet, but the scale of the CVN 65 work would reduce the  shipyard\u2019s ability to delay or reprioritize dismantlement and disposal.  Shipyard officials noted that the Navy often defers planned dismantlement  and disposal to address higher-priority active fleet maintenance. For  example, smaller submarines prepared for dismantlement can instead be  stored at the shipyard until workforce and space are available to complete  the work. However, an aircraft carrier\u2014even when reduced to a  propulsion space section as proposed for CVN 65\u2014would not offer the  same level of flexibility to defer work. CVN 65 would involve a more  extensive resource commitment because of its increased size relative to  past ship dismantlement projects and would occupy limited facilities at the  shipyard. Specifically, current plans require 3 years pier side to prepare  the propulsion space section for dismantlement and reactor compartment  disposal and about 5 years in a dry dock for the actual dismantlement.", "Further, the shipyard expects a significant increase in its submarine  inactivation and reactor compartment disposal and hull recycling workload  due to the end of service for an additional class of submarines\u2014 specifically, the Ohio-class submarines starting in 2027. The estimated  increase in inactivation and reactor recycling workload would overlap with  the planned start for CVN 65 dismantlement and disposal in 2034, if the  Navy elects to pursue this option. In addition, the shipyard already has a  backlog of 10 submarines and the ex-USS Long Beach cruiser in storage  awaiting disposal and recycling at its long-term storage facility for  defueled, decommissioned, and inactivated nuclear-powered ships.  Another 3 submarines are pier-side at Puget Sound Naval Shipyard. This  backlog is not expected to subside as submarines continue to be retired,  and each vessel represents thousands of workdays that the shipyard has  to commit to its dismantlement and disposal.", "Navy and Industry Expect Full Commercial Option to Face Fewer  Challenges  While the Navy has not established specific requirements for the full  commercial option, Navy officials maintain that it does not present the  same workload and facility challenges that exist for the naval shipyard  option. Commercial companies have flexibility in selecting a location for  CVN 65 dismantlement activities based on facility and workforce  availability considerations. Some company officials we spoke with also  noted they have existing worksites\u2014which are audited and approved by  Naval Reactors\u2014where they process, package, and transport low-level  radioactive waste or operate low-level radioactive waste disposal sites  licensed by NRC. These include facilities for radioactive waste processing  and decontamination of materials for recycling. Additionally, company  officials said they anticipate that a substantial amount of the work could  be performed with the ship in the water\u2014similar to the traditional  approach used to dismantle non-nuclear vessels for recycling\u2014and  existing contractor facilities likely would not require major upgrades or  improvements other than to provide for the radiological-based waste  handling and packaging considerations.", "Commercial company officials told us that they would not expect  significant additional hiring needs based on their limited understanding of  the potential CVN 65 work and their existing workforce capacity. They  added that the nuclear dismantlement and disposal industry has an  available, qualified workforce that could easily be employed if additional  workforce were needed. Given the early stage of the Navy\u2019s planning for  CVN 65 and the Navy\u2019s lack of formal engagement with commercial  companies at the time of our review, we did not assess the current or  future commercial workforce capacity. Any details on potential CVN 65  facility and workforce plans from commercial companies will be  hypothetical until the Navy formally begins efforts to seek input from  commercial companies and communicate requirements."], "subsections": []}]}, {"section_title": "Budget Documentation and Reporting Does Not Include Sufficient Information to Facilitate Transparency and Oversight for CVN 65", "paragraphs": ["The Navy\u2019s approach typically used to budget for and report on ship  dismantlement and disposal does not provide sufficient information to  support decision makers\u2019 oversight of CVN 65\u2014a multi-year project that  may require more than $1 billion to complete. We found the Navy is not  required to provide detailed budget information or report dismantlement  and disposal cost, schedule, and programmatic information to decision  makers. Providing additional information through budget requests and  reporting would help ensure that decision makers have sufficient  information to oversee CVN 65 dismantlement and disposal activities and  to support future decisions."], "subsections": [{"section_title": "Budget Exhibits for Dismantlement and Disposal Lack Ship- Specific Details", "paragraphs": ["The Navy uses budget exhibits to provide congressional decision makers  information about dismantlement and disposal efforts. If no changes are  made to the information provided within the Operation and Maintenance,  Navy (OMN) budget exhibits, the CVN 65 dismantlement and disposal  budget request will include limited details for planned work, funding  needs, and total estimated costs. The bulk of the Navy\u2019s past  dismantlement and disposal work is comprised of comparatively low-cost  projects\u2014particularly submarines\u2014with limited resource demands  compared to a nuclear-powered aircraft carrier like CVN 65, a multi-year  project with a cost that will potentially exceed $1 billion. For example,  nuclear-powered submarines have an average dismantlement and  disposal cost of about $26 million and average about 50,000 workdays.  Federal internal control standards recommend that agency management  communicate with external stakeholders the necessary quality  information\u2014such as complete cost and schedule information for CVN 65  dismantlement and disposal\u2014to achieve objectives. Budget exhibits are  a primary source of information about all programs and other activities  during budget planning and congressional appropriation decisions. Well- prepared budget exhibits help provide a rationale for the amount and  timing of funding requests. Given that this multi-year, large-scale project  is the first of its kind, more detailed information would facilitate greater  transparency and oversight of cost, schedule, and performance.", "Limited Budget Information Provided for Dismantlement and  Disposal  The Navy uses the OMN appropriation account to fund dismantlement  and disposal activities. The Navy\u2019s Financial Management Policy  Manual provides overall summary guidance on OMN budget formulation,  but it does not provide specific guidance on reporting criteria for  dismantlement and disposal of Navy ships. Budget exhibits are  prepared to justify appropriation requests and are key documents that can  be used to support congressional oversight. DOD acquisition training  materials state that well prepared budget exhibits make programs more  defensible. However, in assessing the OMN budget exhibits associated  with dismantlement activities for fiscal years 2007-2018, we found they  provide little ship-specific detail that could be used to monitor a significant  project such as the planned effort for CVN 65 dismantlement and  disposal, which may begin requesting funding as soon as fiscal year  2023.", "Specifically, we reviewed the dismantlement and disposal funding  requests from the past several years, which reside within the Navy\u2019s OMN  budget exhibits under the Ship Activations/Inactivations sub-activity group  of the Mobilization budget activity. In doing so, we found these exhibits  generally contain high-level information with a summary of funding  changes for the current fiscal year and the requested funding estimate for  the budget year. We could not definitively identify or track dismantlement  and disposal of specific ships because  key work activities are not described by ship,  cost and schedule for individual ships are not presented, and prior year costs and cost to complete a specific ship\u2019s dismantlement  and disposal are not provided.", "In reviewing programmatic documentation other than the budget  requests, such as Puget Sound Naval Shipyard dismantlement planning  documents and the Navy\u2019s long-range shipbuilding plans, we found  instances of submarine inactivation costs significantly exceeding  estimates and notable delays to the start dates for work activities. We  found that, although not required, this information was not reflected in the  budget exhibit documents we reviewed. As another example we  previously noted, Navy officials stated that CVN 65 inactivation\u2014already  completed in December 2017\u2014cost $863 million. We could not track this  cost from the budget exhibits because of their limited detail. As a  consequence of the general lack of detail in the budget exhibits, decision  makers cannot readily identify if cost growth occurred or if a specific ship  was dismantled when planned, hindering oversight of dismantlement and  disposal projects.", "The Navy\u2019s OMN annual appropriations fund work activities on a year-by- year basis, which does not necessarily allow for tracking of the full  resource commitment of a project over time or enable monitoring of cost  growth to determine if additional funds are needed. Navy officials stated  that they fully fund dismantlement and disposal efforts that span multiple  fiscal years. They added that for CVN 65, the Navy may divide the work  into multiple discrete phases that are separately funded due to the  lengthy projected schedule. This approach could require the Navy to seek  OMN appropriations in several non-consecutive years. Such an approach  could make tracking CVN 65 dismantlement and disposal funding  challenging, as the total cost and any changes would be obscured among  the multiple funded activities that collectively compose the total  dismantlement and disposal effort. Navy officials acknowledged that they  could provide further information, such as total project cost and an overall  schedule for CVN 65, in the OMN budget exhibits. However, without  direction from DOD leadership or Congress, Navy officials stated that  they have no plans to deviate from providing the traditional OMN budget  exhibit information. Providing additional information in the CVN 65 budget  exhibit could enable decision makers to track total cost, any cost  changes, schedule progress, and general performance for the CVN 65  dismantlement and disposal.", "Navy Could Provide More Budget Details for CVN 65  While the Navy funds ship dismantlement and disposal from the OMN  account, budget exhibits for other accounts\u2014such as the Shipbuilding  and Conversion, Navy (SCN) account typically used for major investment  items\u2014offer examples of how to provide decision makers with more  detailed information. Budget exhibits for SCN appropriations are  structured to identify major elements of cost and track those costs over  time, consistent with DOD Financial Management Regulations. For  example, the SCN budget exhibits typically contain specific information  for each ship being procured with a distinct funding line for major cost  categories such as basic construction, propulsion, and electronics.  Additionally, these budget exhibits describe the program with specific  plans for the upcoming budget year and estimate across 5 fiscal years  (known as DOD\u2019s Future Years Defense Program), including the total  cost to complete the program. While some of the SCN budget exhibit  elements are not applicable to dismantlement and disposal, others could  be adapted and used in an OMN budget exhibit for CVN 65 to provide  information that would enable better oversight, such as work activities planned and performed by fiscal year; prior years\u2019 funding data;  future years\u2019 funding plans;  cost to complete dismantlement;  schedule of key events; and  information on the contractor(s), contract type, and contract award  and completion dates.", "Navy officials said they typically would not provide the level of detail found  in SCN budget exhibits or the exhibits for other DOD acquisition programs  because OMN exhibits are not designed to support the same level of  oversight. Unlike DOD acquisition programs, DOD projects completed  with operation and maintenance funds typically are not investment  programs and generally do not require the same level of oversight.  However, as we previously indicated, Navy officials noted that if DOD  leadership or Congress provided clear direction on what additional details  related to CVN 65 dismantlement and disposal should be included in  OMN budget exhibits, it could provide that additional information to  support oversight. Navy officials stated that given the considerable  funding needs and congressional interest with CVN 65, they were assessing options for providing specific detail in the OMN budget exhibit  for its dismantlement and disposal activities. They added that no specific  decisions had been made on what additional information, if any, would be  included for CVN 65."], "subsections": []}, {"section_title": "Lack of Reporting Requirements Limits Opportunities for Insight into CVN 65 Dismantlement and Disposal Cost, Schedule, and Performance", "paragraphs": ["Despite being a part of the final phase in the program\u2019s life cycle, we  found no specific reporting requirement related to the cost, schedule, risk  management, and general performance of dismantlement and disposal  activities in DOD or Navy policy that would support oversight by DOD or  Congress. Officials from Naval Reactors and the Naval Sea Systems  Command confirmed that there is no reporting requirement for  performance of dismantlement and disposal of Navy ships. Navy officials  noted that dismantlement and disposal activities are included in their  annual briefings to Congress that support the Navy\u2019s budget requests, but  acknowledged that the typical comparatively low-cost ship dismantlement  and disposal activities are generally of less interest when combined with a  briefing on shipbuilding and other high-dollar acquisition investments.  This approach may be appropriate for submarine dismantlement and  disposal activities that have lower costs, shorter periods of performance,  and a well-established history. However, the magnitude of CVN 65\u2019s  anticipated cost of dismantlement and disposal is comparable to that of  large DOD acquisition programs. Such programs generally are expected  to provide more information to decision makers within DOD and Congress  through formal reporting on plans, activities, and performance to support  accountability than what has traditionally been provided with respect to  Navy dismantlement and disposal activities.", "The precedent-setting nature of the CVN 65 dismantlement and disposal  adds a level of risk and heightens the importance of having sufficient  accountability measures to facilitate oversight. There is greater potential  for unexpected challenges to arise because a nuclear-powered aircraft  carrier has not been dismantled and disposed of before. Additionally,  CVN 65 provides an opportunity to establish a foundation for  management and oversight of future aircraft carrier dismantlement and  disposal efforts, with the first of 10 Nimitz-class carriers expected to reach  the end of its service life in the next decade. Standards for internal control  in federal government state that in order to identify and mitigate risk,  program objectives such as a baseline for cost and schedule, should be  clearly defined in measurable terms so performance in attempting to  achieve those objectives can be assessed. Doing so would also provide  the Navy with the ability to collect important historical cost data that could  be used to inform cost estimates for future aircraft carrier dismantlement  and disposal efforts.", "DOD acquisition programs could serve as a model to identify appropriate  cost and schedule objectives for the CVN 65 dismantlement and disposal,  even though it is not an acquisition program and not subject to these  requirements. DOD acquisition programs with significant resource  commitments comparable to that expected of CVN 65 are generally  subject to structured oversight and have reporting requirements to  support performance transparency and accountability. As discussed  earlier, preliminary cost estimates for CVN 65 dismantlement and  disposal may exceed $1 billion, regardless of the option the Navy  ultimately selects. While many requirements for DOD acquisition  programs are not relevant to dismantlement and disposal, even when  costs may reach similar levels, we found elements of the reporting  requirements associated with larger DOD acquisition category (ACAT)  programs that the Navy could leverage to facilitate oversight of CVN 65  dismantlement and disposal. For example, ACAT II programs\u2014which  have estimated costs comparable to CVN 65 dismantlement and disposal  cost expectations\u2014are required by DOD policy to establish a program  cost and schedule baseline prior to program start and report any  significant deviations from the established baseline. They also are  required by statute to provide information on risk management. Table 3  highlights some DOD acquisition program reporting elements that could  support oversight of CVN 65 dismantlement and disposal.", "For example, once a cost baseline is established, comparison to an  independent cost estimate or assessment could provide greater  assurance that the risks associated with performing CVN 65\u2019s large-scale,  first-of-a-kind dismantlement activities were adequately considered and  appropriately estimated. GAO\u2019s Cost Estimating and Assessment Guide  states an independent review of a program\u2019s cost estimate is crucial to  establishing confidence in the estimate. It provides an unbiased test of  whether the program cost estimate is reasonable and can be used to  identify risks related to budget shortfalls or excesses. The Naval Center  for Cost Analysis is responsible for developing independent cost  assessments for ACAT II Navy programs, while the Office of the  Secretary of Defense\u2019s Office of Cost Assessment and Program  Evaluation develops independent cost estimates for major defense  programs.", "As noted earlier, the Navy continues to refine its cost estimate of the  naval shipyard option and expects to receive an estimate for the full  commercial option from the Center for Naval Analyses in October 2018.  The Navy stated it considers the anticipated cost estimate and model  from the Center for Naval Analyses to be the independent cost estimate  for the full commercial option. We view this estimate as a valuable step in  establishing cost expectations for the full commercial option, but believe it  is inadequate because it will determine the Navy\u2019s cost expectations as  opposed to validating an existing estimate\u2014the intent of having an  independent assessment. For the naval shipyard option, the Navy  suggested no plans for an independent cost estimate as it continues to  refine the current cost estimate prior to a decision for CVN 65.  Completing an independent cost estimate for both CVN 65 options prior  to a Navy decision on its dismantlement and disposal approach would  provide additional information to inform a decision that could have  repercussions for carrier dismantlement and disposal activities for years  to come. Adapting certain acquisition program requirements to the CVN  65 effort, as described above, would help the Navy establish baselines  that can be tracked by decision makers to assess cost and schedule, and  help identify deviations, if any. These types of reporting requirements  would provide decision makers with greater information to support their  oversight and hold the Navy accountable for meeting CVN 65  dismantlement and disposal expectations."], "subsections": []}]}, {"section_title": "The Navy\u2019s Evaluation of CVN 65 Dismantlement and Disposal Options Is Hampered by a Regulatory Authority Disagreement", "paragraphs": ["The regulatory authority determines the rules, procedures, and oversight  that will guide the dismantlement and disposal process for CVN 65. The  Navy is considering three regulatory authority scenarios related to the  naval shipyard or full commercial options, as discussed in table 4."], "subsections": [{"section_title": "The Navy Has Regulatory Precedent for the Naval Shipyard Option", "paragraphs": ["If the Navy chooses the naval shipyard option, it can rely on Naval  Reactors\u2019 extensive experience serving as the regulatory authority for  dismantlement activities conducted at Puget Sound Naval Shipyard.  Naval Reactors has overseen the dismantlement and disposal of roughly  130 reactors from submarines and cruisers by the naval shipyard. Many  shipyard oversight organizations and activities, as well as on-site Naval  Reactors personnel, help control environmental and human health  exposures. For example, the Radiological Controls Office is responsible  for monitoring radiation exposure to the workforce and ensuring  radioactivity is confined to controlled work areas. The Nuclear Quality  Division employs nuclear auditors who review performance, processes,  and instructions for all nuclear work at the shipyard.", "Although the scale and design of CVN 65 creates some unique  dismantlement and disposal considerations as compared to the  submarine and cruiser activities, Navy officials stated they plan to use the  same organizations located at the shipyard and practices to oversee  performance if they decide to complete the CVN 65 work at the shipyard.  The environmental impact statement planned for CVN 65 is expected to  outline the different needs that the aircraft carrier presents for the  dismantlement process and disposal path, such as changes related to the  transportation of CVN 65 reactor packages required if the Navy chooses  to use four larger dual reactor compartment disposal packages instead of  eight single packages to dispose of the carrier\u2019s reactors. While the Navy  can rely on familiar regulatory practices to support the naval shipyard  option, as discussed earlier, this option includes potential workload and  schedule disadvantages."], "subsections": []}, {"section_title": "Disagreement Persists about the Appropriate Regulatory Authority for the Full Commercial Option", "paragraphs": ["Agreement State Program  The Atomic Energy Act gives the Nuclear  Regulatory Commission (NRC) authority over  domestic industrial, medical, and research  uses of radioactive materials. The act also  authorizes NRC to enter into agreements with  states (called agreement states) so they  assume, and NRC relinquishes, regulatory  authority over specified radioactive materials.  Specifically, NRC is authorized to enter into  agreements to allow states to assume  regulatory authority over source, byproduct,  and special nuclear materials in quantities  insufficient to form a critical mass. NRC must  find a state program adequate to protect  public health and safety and compatible with  NRC\u2019s program for regulating such materials  before entering into these agreements. The  mechanism for the transfer of NRC's authority  to a state is an agreement signed by the  governor of the state and the chair of the  Commission.", "Naval Reactors\u2019 position is that a commercial company could dismantle  and dispose of CVN 65 under the regulatory authority of NRC or an  agreement state. According to Naval Reactors officials, the full  commercial option would represent a continuation of Naval Reactors\u2019 long  history of nuclear-related activities with vendors licensed and regulated by  NRC or agreement states. For example, Naval Reactors officials noted  they commonly have used facilities licensed by NRC or agreement states   for a range of manufacturing, processing, and disposal activities available  for naval nuclear materials. Naval Reactor officials specifically assert that,  as CVN 65 has already been defueled, such a facility should be able to  process the byproduct material on the ship. However, NRC stated its  disagreement that it or an agreement state is able to serve as the  regulatory authority for CVN 65, emphasizing that regulatory responsibility  for the safe processing and disposal of Navy ships falls to Naval Reactors  under its Department of Energy authority. NRC officials also noted that  Naval Reactors has been regulating nuclear-powered ship dismantlement  and disposal activities exclusively at Puget Sound Navy Shipyard for  decades.", "Coordination between Naval Reactors and NRC to identify the applicable  regulatory authority and establish a regulatory plan for the CVN 65 full  commercial option would help ensure accountability for safe  dismantlement and disposal of CVN 65 under the full commercial option.  It would also enable the Navy and commercial companies to effectively  estimate costs. Without a resolution, the Navy could face challenges in  estimating the cost and completing a comprehensive business case  analysis of costs, benefits, and risks for the full commercial option if it is  unsure of which regulatory authority will be responsible for enforcement.  Furthermore, companies with potential interest in the CVN 65 work may  not be able to effectively estimate the workload and associated cost  without a clearly identified regulatory authority. Resolution of this  disagreement also has relevance for other future ship dismantlement and  disposal activities, such as with the Surface Ship Support Barge in the  near term and the Nimitz-class aircraft carriers in the long term.", "Navy Surface Ship Support Barge  The Surface Ship Support Barge is a  dockside refueling facility constructed from a  converted Navy tanker vessel used to  disassemble spent nuclear fuel for shipment  within a water pool. Naval Reactors noted this  facility is now obsolete, with no further use  planned, and the Navy is interested in  dismantling and disposing of it commercially.    According to Naval Reactors officials, the  barge contains very low radioactivity in the  water pool and fluid systems, which requires  appropriate dismantlement and disposal  measures.   The Navy halted its pursuit of a contract  award to dismantle and dispose of the barge  in early 2017 based on NRC formally stating  it has no regulatory authority over the  dismantlement and disposal of naval vessels.  A Naval Reactors official stated a request for  information may be issued in 2018 to solicit  input from commercial companies for  dismantlement and disposal of this barge, but  plans remain unsettled.", "Naval Reactors could use its own authority to regulate a full commercial  dismantlement of CVN 65. Naval Reactors officials stated, however, that  NRC or agreement states\u2014which regulate industrial, medical, and  research uses of radioactive materials\u2014also have authority to regulate  commercial dismantlement and disposal of CVN 65, and the Navy would  benefit from leveraging their regulatory experience and structure. In  particular, Naval Reactors officials stated that for the full commercial  option, their responsibility to provide for processing and disposal of the  byproduct material\u2014which Naval Reactors indicated is what remains on  CVN 65\u2014can be best met by contracting with commercial companies  licensed by NRC or an agreement state.", "According to Naval Reactors officials, even if NRC maintains that it  cannot regulate material from CVN 65, some states may do so under their  own authority. Specifically, Naval Reactors\u2019 position is that states that had  agreements with the old Atomic Energy Commission prior to its  abolishment and the creation of NRC in 1974 were granted\u2014and  continue to maintain\u2014authority to process naval nuclear propulsion  waste. Accordingly, Naval Reactors officials stated that these states could  serve as the sole regulatory authority over commercially-performed CVN  65 dismantlement and disposal.", "Naval Reactors officials also asserted specific potential advantages of  having NRC or an agreement state regulate commercial dismantlement  and disposal of CVN 65. First, they said the regulatory structure that NRC  and agreement states apply to commercial nuclear-related activities  includes an enforcement process to impose fines for violations, which  Naval Reactors does not have.", "Additionally, Naval Reactors officials noted the Navy\u2019s contract strategy  options could be improved if NRC or an agreement state serves as the  regulatory authority for CVN 65. Specifically, they stated that a reason for  the Navy\u2019s interest in using NRC or agreement state authority is the  possibility of emulating the firm-fixed-price contract currently being used  to decommission a commercial nuclear power plant. In this example, the  operating license was transferred from the utility that owns the plant and  site to a dismantlement contractor to more quickly complete the  decommissioning. This effectively gave a dismantlement and disposal  company the power plant owner\u2019s responsibility for the safe  dismantlement and disposal of the power plant, with NRC continuing to  act as the regulatory authority. According to Naval Reactors, the firm- fixed-price contract used in this case was viable because the  dismantlement contractor had total responsibility independent of the plant  owner to perform the work in accordance with the regulations and  requirements of NRC. Naval Reactors officials stated that the firm-fixed- price contract created an incentive for the company to thoroughly  understand what the work entailed and perform the work efficiently to  maximize its profit.", "Naval Reactors officials stated that a total separation of the owner from  regulatory decisions and interpretations, like the one currently being used  for the commercial nuclear power plant, is the Navy\u2019s best means to  facilitate the potential use of a firm-fixed-price dismantlement contract for  CVN 65. They further stated that an approach wherein Naval Reactors  retained regulatory authority could undercut the prospect of a firm-fixed- price contract by eliminating the clear division between regulator and  owner. In taking this position, Naval Reactors officials suggest that a  conflict of interest exists in being both the owner who wants to establish a  fixed price for the work as well as the regulator with the potential to affect  costs. Naval Reactors officials also noted that if Naval Reactors were the  regulator, with no experience in regulating this type of work, commercial  companies could have difficulty pricing such regulatory risk. In contrast,  they stated that in NRC-regulated commercial plant dismantlement, as  well as agreement state-regulated, large-scale radioactive waste  processing work, commercial companies have demonstrated that they are  willing to accept this regulatory risk, agreeing to contracts on a fixed-price  basis.", "Nuclear Regulatory Commission\u2019s Position  In February 2017, NRC formally stated its position in a letter responding  to a congressional inquiry that it has no regulatory authority for Navy  ships, such as CVN 65. NRC said that under the Atomic Energy Act it is  the responsibility of the Department of Energy, and accordingly Naval  Reactors, to provide for processing and disposal of naval nuclear  propulsion waste. NRC stated that agreement states also lack  jurisdiction because their authority derives from NRC\u2019s authority. NRC  officials we interviewed also disputed Naval Reactors\u2019 position that states  have independent authority to process naval nuclear propulsion waste for  two reasons. First, they stated that regulation of reactor dismantlement is  not an activity that can be relinquished to the states. Second, they  pointed out that the authorities that can be relinquished to the states  under the Atomic Energy Act are licensing activities conducted under  specific provisions of the act, and that the responsibility to safely process  and dispose of naval nuclear propulsion waste is conducted under a  different set of provisions which are not subject to licensing.", "NRC officials acknowledged that naval nuclear propulsion waste has  been processed at facilities licensed by NRC or an agreement state, but  distinguished such examples from CVN 65. Specifically, they noted that  no additional regulatory oversight was required to process incidental  amounts of such waste at facilities licensed to process commercial waste,  but CVN 65 is not licensed by NRC or an agreement state and would  involve only naval nuclear propulsion waste. NRC officials emphasized  that the additional work that would be required to regulate the  dismantlement of CVN 65\u2014an unlicensed facility\u2014puts it beyond NRC\u2019s  jurisdiction. Additionally, NRC stated that while such work could be  carried out by a contractor, including a contractor with an NRC or  agreement state license, the work would not be covered by that license,  as NRC and agreement states do not have authority to regulate such  activity. Essentially, NRC\u2019s position is that while Naval Reactors can  contract to have the dismantlement and disposal performed by a  commercial entity, Naval Reactors would retain its own regulatory  responsibility for enforcing that contract.", "NRC stated that if Naval Reactors desired technical support in regulating  a commercial dismantlement, NRC or an agreement state could provide  such services through a contract. This approach, according to NRC  officials, would offer Naval Reactors a regulatory consultant familiar with  commercial dismantlement while maintaining Naval Reactors as the  regulatory enforcement authority. In such an arrangement, NRC or an  agreement state could identify regulatory concerns, but Naval Reactors  would be responsible for determining what corrective action is taken to  address those concerns. Naval Reactors officials stated they are in  ongoing discussions with NRC about this potential approach. They also  asserted that this potential approach is not optimal because, as  previously discussed, it could create regulatory uncertainty for  commercial companies by preventing a clear separation of the regulator  and owner."], "subsections": []}, {"section_title": "Naval Reactors Lacks Regulatory Experience and Structure for Commercial Dismantlement and Disposal", "paragraphs": ["Since Naval Reactors has its own authority as part of the Department of  Energy, it could choose to regulate a CVN 65 commercial dismantlement.  However, with Puget Sound Naval Shipyard having performed the  dismantlement and disposal work for previous nuclear-powered vessels,  Naval Reactors lacks experience to draw upon for a full commercial  option. It also cannot rely on the organizational structure and practices in  place at Puget Sound Naval Shipyard to support a commercial CVN 65  dismantlement that will be conducted at an offsite facility. If Naval  Reactors serves as the regulatory authority for a full commercial  dismantlement, it will have to determine what mechanisms are needed to  provide sufficient monitoring of the work and how they will fulfill the roles  and responsibilities typically filled by the naval shipyard\u2019s support. These  mechanisms may include elements similar to those used by the naval  shipyard as well as new ones unique to the dismantlement practices used  by commercial companies.", "A significant consideration for Naval Reactors when working to establish  an approach to monitor commercial dismantlement and disposal is the  component-based dismantlement process that companies may use. This  process, which is commonly used to dismantle commercial nuclear power  reactors, involves segmenting reactor components (i.e., cutting to reduce  in size) so the pieces can be put in standardized containers for transport  and disposal. This process is a contrast to the traditional dismantlement  approach that Nuclear Reactors uses at Puget Sound Naval Shipyard\u2014 an approach that would leave CVN 65\u2019s reactors largely intact by  encasing them in packages for disposal. As noted by Naval Reactors  officials, commercial dismantlement practices potentially could require the  Navy to decide whether to adjust its standard radiological work practices  to better align with different dismantlement and disposal activities or use  the same practices it uses for work performed at Puget Sound Naval  Shipyard. Using the same practices could affect cost expectations for the  Navy and commercial companies by changing the way the work is  performed. As an example, applying the Navy\u2019s standard practices for  total containment of radionuclides to a dismantlement process that  involves increased cutting could require additional measures to control  the work environment."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Over 50 years ago, CVN 65 set a precedent as the Navy\u2019s first nuclear- powered aircraft carrier. The Navy\u2019s plans and decisions for this aircraft  carrier\u2019s dismantlement and disposal represent an opportunity to create a  standard that the Navy may use for decades to come as the Nimitz-class  carriers enter retirement. As the Navy considers how to proceed, it will be  critical to ensure that there is sufficient oversight and accountability for  what likely will be an effort greater than $1 billion that lasts the better part  of a decade. Since budget exhibits are a primary tool to aid Congress in  making well-informed funding decisions, without additional details,  transparency and the ability to assess CVN 65 progress could be limited.  In particular, a more robust budget exhibit for CVN 65 that includes cost  and schedule information across the Future Years Defense Program, as  well as the status of activities\u2014including any contract awards and a  tracking of high level changes in cost and schedule\u2014could help increase  transparency for oversight.", "Reporting requirements for DOD acquisition programs, which are not  required or currently planned for CVN 65 dismantlement and disposal,  provide examples of the types of information that decision makers can  use to ensure that resource-intensive programs are meeting expectations  or make changes as necessary. Without establishing a cost and schedule  baseline that has been validated by an independent cost estimate or  assessment, it will be difficult for decision makers to track cost and  schedule performance or have confidence in CVN 65 costs. The Navy  has indicated it is receptive to providing additional information to support  oversight that is commensurate with other Navy programs of a similar  funding level. However, the Navy also stated that it requires clear  direction from DOD leadership or Congress on what additional  accountability measures are desired before it would make any changes to  current budget exhibits and reporting.", "Naval Reactors is charged with cradle-to-grave responsibility for our  nation\u2019s naval nuclear propulsion material. The disagreement between  Naval Reactors and NRC about the regulatory authority for commercial  dismantlement and disposal of Navy nuclear ships persists. Coordination  between the two agencies to identify the applicable regulatory authority  for a full commercial dismantlement and disposal of CVN 65 and to  develop a regulatory plan would help establish which practices and  standards will apply to uphold nuclear safety and security. It would also  help ensure the Navy\u2019s selection of a dismantlement and disposal plan for  CVN 65 is informed by well understood regulatory expectations and cost  and schedule estimates that reflect those expectations."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making one matter for congressional consideration.", "Congress should consider requiring Naval Reactors to coordinate with the  Nuclear Regulatory Commission for any CVN 65 dismantlement and  disposal performed commercially to identify the applicable regulatory  authority. In the event that an entity other than Naval Reactors will serve  as the regulatory authority, Naval Reactors should submit to Congress a  plan that identifies the regulatory authority for CVN 65 activities, and  includes acknowledgement from that regulatory entity of its agreement  with Naval Reactors and the legal basis for its authority. If the regulatory  entity is an agreement state, such acknowledgment should be  coordinated with the Nuclear Regulatory Commission. (Matter 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DOD.", "The Secretary of Defense should ensure that the Navy provides  additional information in the annual President\u2019s budget exhibits  associated with CVN 65 dismantlement and disposal to facilitate  improved transparency and accountability. Additions should, at a  minimum, include the CVN 65 funding estimate across the Future Years  Defense Program, activities planned or performed for applicable fiscal  years, tracking of total cost and high level changes in cost and schedule  from the prior year with explanations for changes, and if applicable,  contract type, awardee, award value, and award and completion date  estimates. (Recommendation 1)", "The Secretary of Defense should require the Navy to obtain an  independent cost estimate, performed by DOD\u2019s Office of Cost Analysis  and Program Evaluation or the Naval Center for Cost Analysis, for both  the naval shipyard and full commercial options before choosing a  dismantlement and disposal approach for CVN 65. (Recommendation 2)", "The Secretary of Defense should require the Navy to complete a risk  management plan prior to beginning the CVN 65 dismantlement and  disposal. (Recommendation 3)", "The Secretary of Defense should require the Navy to approve a cost and  schedule baseline prior to beginning the CVN 65 dismantlement and  disposal. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD and NRC for comment. Both  DOD and NRC agreed with the draft report and its findings, and DOD  concurred with the four recommendations we directed to the department.  DOD and NRC provided written comments, which have been reproduced  in appendix II and appendix III, respectively. DOD and NRC also provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense, the Secretary of the Navy, the  Nuclear Regulatory Commission, and other interested parties. This report  will also be available at no charge on GAO\u2019s website at  http://www.gao.gov.", "If you or your staff members have any questions regarding this report,  please contact me at (202) 512-4841 or oakleys@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 the report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I \u2013 Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes the differences between the dismantlement and  disposal options under consideration, including cost and schedule as well  as workload and facilities; (2) evaluates the Navy\u2019s funding and reporting  practices for dismantlement and disposal activities; and (3) assesses the  effect that nuclear regulatory authority considerations have on  dismantlement and disposal options for CVN 65.", "To identify the differences between the potential CVN 65 dismantlement  and disposal options, we reviewed Navy documentation on prior, ongoing,  and future dismantlement and disposal activities, as well as information  related to the different options the Navy has considered or is considering  for CVN 65. We interviewed Navy officials and reviewed documentation  from the Naval Sea Systems Command, which includes Naval Reactors,  and Puget Sound Naval Shipyard and Intermediate Maintenance Facility  (hereafter referred to as Puget Sound Naval Shipyard). To obtain an  understanding of the full commercial dismantlement and disposal  approach, including work practices and potential work sites, we  interviewed officials and reviewed documentation from commercial  companies that the Navy identified as having involvement in shipbreaking  or nuclear-related industries and potential interest in CVN 65. These  companies include Atkins Global; EnergySolutions; Huntington Ingalls  Industries (HII \u2013 Nuclear); International Shipbreaking Limited; NorthStar  Group Services; and Waste Control Specialists.", "For CVN 65 cost and schedule estimates, the Navy considers all  estimates to still be preliminary because the Navy has yet to formally  begin the environmental impact statement process and remains years  away from a decision on its dismantlement and disposal approach. As a  result, we did not formally evaluate the reasonableness of any cost or  schedule estimates. However, we did review the initial estimates to gain  insight on historical and current cost expectations. To assess the Navy\u2019s  preliminary cost estimates for the naval shipyard option, we reviewed  Navy data on the basis for the cost estimates, particularly estimates since  2011. This included reviewing the cost factors that contributed to each  estimate to understand how the shipyard\u2019s increasing knowledge of CVN  65\u2019s ship characteristics and changes to the planned dismantlement  approach fed into the different estimates. For the Navy\u2019s notional cost  estimate of the CVN 65 full commercial option, we reviewed the data and  approach used by the Navy to develop initial cost information. This  included commercial decommissioning data, which the Navy used to  establish a rough order of magnitude cost estimate based on the limited  information available that is comparable to CVN 65 dismantlement and  disposal.", "We used the same data to generate our own notional estimated cost  range based on a Nuclear Regulatory Commission (NRC) cost formula,  as well as published data from the Organisation for Economic Co- operation and Development\u2019s Nuclear Energy Agency. This included  analysis of costs reported by operating power reactor licensees in NRC\u2019s  2015 decommissioning funding status report to comply with  decommissioning financial assurance reporting requirements. Our review  of historical data from the Nuclear Energy Agency and a 2011 report on  nuclear decommissioning by an independent panel established by the  California Public Utilities Commission helped us identify cost drivers and  categories of costs attributed to specific activities that occur when  decommissioning commercial power plants.", "To assess workload and facility considerations related to CVN 65, we  analyzed Puget Sound Naval Shipyard workload and resource  requirements data for fiscal years 2006 through 2025, and facility data for  fiscal years 2018 through 2035. To assess the reliability of these data, we  interviewed knowledgeable officials and reviewed documentation to verify  the controls and measures used to validate and maintain the data. We  determined these data to be reliable for our purposes of discussing the  existing and planned workload at Puget Sound Naval Shipyard. We  compared projections to actual workload when available to identify  differences and compared the average amount of annual projected  workload to the average amount of annual projected workforce available.  We also reviewed a 2018 report on the Navy\u2019s strategic plan for  addressing the infrastructure deficiencies at the public naval shipyards as  well as the Navy\u2019s long-range shipbuilding plans for fiscal years 2011,  2016, and 2019. Additionally, we reviewed past GAO reports that  addressed operation and maintenance activities at naval shipyards, and  the related workload demands and facilities\u2019 requirements.", "To identify the Navy\u2019s funding and reporting practices for dismantlement  and disposal activities, we reviewed Navy documentation on prior,  ongoing, and future ship dismantlement and disposal activities, as well as  Navy procurement and operation and maintenance budget exhibits\u2014 fiscal years 2016 and 2017 for procurement exhibits and fiscal years 2007  through 2017 for operation and maintenance budget exhibits. We also  reviewed Federal Acquisition Regulations, Office of Management and  Budget guidance on budget information, and the Department of Defense  and Navy acquisition regulations. We interviewed officials from Naval  Reactors and the Program Executive Office for Aircraft Carriers. Based  on these efforts, we evaluated the Navy\u2019s historical approach for funding,  conducting oversight, and reporting on dismantlement and disposal  activities. We assessed the Navy\u2019s approach against federal standards  for internal control. Additionally, we assessed how funding and typical  reporting requirements for Department of Defense acquisition programs  align with the potential need to facilitate oversight for CVN 65  dismantlement and disposal.", "To determine the effect that nuclear regulatory authority considerations  have on dismantlement and disposal for CVN 65, we examined applicable  laws, regulations, executive orders, policies, and guidance documents  related to nuclear-powered ships. We also reviewed past GAO reports  related to environmental and nuclear requirements. We reviewed Navy  documentation on prior, ongoing, and future ship dismantlement and  disposal activities. We also interviewed officials and reviewed  documentation from Naval Reactors; the Assistant Secretary of the Navy  for Energy, Installations, and Environment; the Chief of Naval Operations  Environmental Readiness Division; the Program Executive Office for  Aircraft Carriers; Puget Sound Naval Shipyard; and the Nuclear  Regulatory Commission. Additionally, we interviewed officials from the  Washington State Departments of Health and Ecology, the Texas  Commission on Environmental Quality, and the Texas Department of  State Health Services\u2014two states in which ship dismantlement activities  have recently occurred and that have nuclear waste disposal sites.", "We conducted this performance audit from August 2017 to August 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II \u2013 Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III \u2013 Comments from the Nuclear Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV \u2013 GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Shelby S. Oakley, (202) 512-4841 or oakleys@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, key contributors to this report  were Diana Moldafsky, Assistant Director; Antoinette Capaccio; Kurt  Gurka; Stephanie Gustafson; Kristine Hassinger; Jean Lee; Sean Merrill;  LeAnna Parkey; Karen Richey; and Roxanna Sun."], "subsections": []}]}], "fastfact": ["Dismantling and disposing of the ex-USS Enterprise nuclear aircraft carrier may cost the Navy more than $1 billion.", "We found that typical budget and reporting on dismantlement and disposal does not give enough information to support oversight for a project of this size and cost. We recommended the Navy provide additional budget information and reporting for the project.", "We also found that using commercial industry to dismantle and dispose of the aircraft carrier may offer many benefits to the Navy. At present, a regulatory disagreement between agencies hampers this possibility. We suggested that Congress consider action to resolve this."]}
{"id": "GAO-18-552", "url": "https://www.gao.gov/products/GAO-18-552", "title": "Aviation Security: Basic Training Program for Transportation Security Officers Would Benefit from Performance Goals and Measures", "published_date": "2018-07-26T00:00:00", "released_date": "2018-07-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TSA is responsible for ensuring that all airline passengers and their property are screened for items that could pose a threat to airplanes and passengers at 440 airports across the United States. Since 2016, TSO Basic Training\u2014initial training for newly hired TSOs, including both TSA-employed and private screeners\u2014has consisted of an intensive two-week course at the TSA Academy located at FLETC. TSA has obligated about $53 million for the program from its inception through March 2018. In 2015 and 2017, the Department of Homeland Security Inspector General raised questions about the effectiveness of checkpoint screening, which prompted concerns about training.", "GAO was asked to review TSA's training of new TSOs. This report (1) describes the reasons why TSA established the TSO Basic Training program; (2) discusses factors OTD considers when updating TSO Basic Training curriculum; and (3) assesses the extent to which TSA evaluates its TSO Basic Training program. GAO reviewed documents on the development and modification of TSO Basic Training curriculum; visited FLETC; interviewed TSA officials; and compared TSA's program evaluation to leading practices."]}, {"section_title": "What GAO Found", "paragraphs": ["The Transportation Security Administration (TSA) established the Transportation Security Officer (TSO) Basic Training program at the TSA Academy at the Federal Law Enforcement Training Centers (FLETC) in Glynco, Georgia to obtain benefits from centralized training. Prior to the Basic Training program, TSO training was conducted at individual airports, often by TSOs for whom instruction was a collateral duty. According to a business case developed by TSA for Congress in 2017 and TSA officials, TSA expected implementation of the TSO Basic Training program to provide efficiencies to the delivery of new-hire training for TSOs and to enhance the professionalism and morale of newly hired screeners. For example, GAO observed that TSO Basic Training facilities have airport checkpoint equipment and x-ray image simulators for students to practice skills, eliminating the challenge of finding available equipment and training times in a busy airport environment. According to program officials, centralized training also provides trainees with an increased focus on the TSA mission and instills a common culture among TSOs.", "TSA's Office of Training and Development (OTD) updates and modifies the TSO Basic Training curriculum in response to evolving security threats and evaluations of effectiveness, among other factors. For example, OTD holds regular meetings with TSA's Office of Security Operations\u2014the office responsible for managing TSO performance\u2014to discuss issues such as imminent threats. The offices also discuss analyses of TSO effectiveness identified through covert tests, in which role players attempt to pass threat objects\u2014such as knives, guns, or simulated improvised explosive devices\u2014through the screening checkpoints. The two offices identify ways to address issues identified in covert testing, which are then incorporated into TSO Basic Training. OTD also gathers input from TSO Basic Training instructors and from participants to adjust training curriculum.", "TSA has implemented a training evaluation model but has not yet established specific program goals and performance measures to assess TSO Basic Training. The Kirkpatrick model used by TSA is a commonly-accepted training evaluation model endorsed by the Office of Personnel Management and used throughout the federal government. While TSA reported expected benefits of TSO Basic Training in its business case and implemented the Kirkpatrick model to begin assessing training, it has not yet identified specific goals that the program is expected to achieve, nor has it developed applicable performance measures to evaluate progress toward goals, as called for by leading management practices for training evaluation. TSA officials told GAO that TSO Basic Training is a relatively new program and they planned to collect more data on TSO screening performance before further evaluating the potential impacts of the training program. However, TSO Basic Training serves as the foundation for TSOs to learn core skills and procedures, and it is important to establish goals and measures to better assess the effectiveness of the training they receive. This will help TSA determine the extent to which TSOs are able to fulfill their important role in ensuring passenger safety while also showing results for the funds spent on such training each year."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that TSA establish specific goals and performance measures for the TSO Basic Training program. TSA concurred with the recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The screening of airport passengers and their property is a critical  component in securing our nation\u2019s commercial aviation system. Since  the terrorist attacks of September 11, 2001, the Transportation Security  Administration (TSA) has been tasked with screening airline passengers  and their carry-on and checked baggage for prohibited and other  potentially dangerous items that could pose a threat to aircraft and  passengers. According to TSA, in fiscal year 2017, more than 771 million  passengers were screened at 440 airports across the United States.", "Since its inception, TSA has frequently adapted its standard operating  procedures (SOP) to address new and evolving threats to aviation  security. For instance, after the discovery of a plot to take the ingredients  for an improvised explosive device\u2014including hydrogen peroxide  disguised as soda\u2014onto multiple aircraft, TSA limited the amount of  liquids passengers could bring onto planes from outside the airport.  Transportation Security Officers (TSOs) at airports follow SOPs that guide  screening processes and utilize technology such as advanced imaging  technology (AIT) scanners or walk-through metal detectors to screen  passengers and their accessible property. TSOs have annual training  requirements, which are developed and implemented by TSA\u2019s Office of  Training and Development (OTD). TSOs also receive basic training upon  being hired. Through 2015, basic training was provided at TSOs\u2019 home  airports through TSA\u2019s New Hire Training Program (NHTP). As of January  2016, NHTP was replaced by TSO Basic Training, an intensive two-week  training program at the TSA Academy (Academy) located at the Federal  Law Enforcement Training Centers (FLETC) campus in Glynco, Georgia.", "In 2015 and 2017, the Department of Homeland Security (DHS) Inspector  General identified vulnerabilities in TSA checkpoint screening, after  agents carried metallic (inoperable handguns) and nonmetallic (simulated  explosive) test items concealed on their body through TSA passenger  security checkpoints and into the sterile areas of airports. The results of  these covert tests also sparked concerns about the training of TSOs. As a  result, you asked us to review TSA\u2019s training of new TSOs through the  TSO Basic Training program. This report: (1) describes the reasons why  TSA established TSO Basic Training; (2) discusses factors OTD  considers when updating the TSO Basic Training curriculum; and (3)  assesses the extent to which TSA evaluates its TSO Basic Training  program.", "To describe the reasons TSA established the TSO Basic Training  program at the TSA Academy, we reviewed documents related to the  establishment of the program, such as agency training plans, a management directive, and the business case for TSO Basic Training  submitted by TSA to Congress. We also visited the Academy to better  understand the benefits of establishing TSO Basic at FLETC. In addition,  we interviewed OTD officials at headquarters and at the Academy,  instructors at the Academy, and union officials representing TSOs  employed by TSA to better understand the benefits and challenges of  training all new TSOs at the Academy and how TSO Basic Training  differs from NHTP in place prior to TSO Basic Training.", "To discuss what factors OTD considers when updating the TSO Basic  Training curriculum, we reviewed documentation from OTD regarding  changes made to TSO Basic Training since its inception, including a list  of changes to the curriculum and a contractor\u2019s report that recommended  some of those changes. We also interviewed officials from the Office of  Security Operations (OSO), the office that manages TSOs at the nation\u2019s  airports, the Office of Inspection (OOI), which conducts covert testing to  evaluate checkpoint effectiveness, and OTD to determine why  modifications were made and how the offices communicate regarding  updates to standard operating procedures and other processes that may  impact TSO Basic Training.", "To assess the extent to which TSA evaluates TSO Basic Training, we  reviewed TSA documents used for evaluating training courses, including  end-of-course surveys administered to participants and surveys  distributed to participants and their supervisors approximately 3 months  after course completion. We also interviewed TSA headquarters officials  responsible for evaluating TSO Basic Training and for developing and  implementing TSO Basic Training as well as TSO Basic Training  instructors. We compared the training evaluation documentation to the  Kirkpatrick Model for training evaluation, which TSA uses as the model for  its evaluations of TSO training, and to leading practices in evaluating  training and development efforts.", "We conducted this performance audit from November 2017 through July  2018, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["After the terrorist attacks of September 11, 2001, Congress passed and  the President signed the Aviation and Transportation Security Act into law  on November 19, 2001, with the primary goal of strengthening the  security of the nation\u2019s civil aviation system. The act established TSA as  the agency with responsibility for securing all modes of transportation,  including civil aviation. As part of this responsibility, TSA performs or  oversees security operations at the nation\u2019s nearly 440 commercial  airports, including managing passenger and checked baggage screening  operations.", "TSOs inspect individuals and property to deter and prevent passengers  from bringing prohibited items on board an aircraft or into the airport  sterile area\u2014in general, an area of an airport to which access is  controlled through the screening of persons and property. While working  at an airport checkpoint as shown in figure 1, TSOs perform a variety of  tasks, which include:", "Travel document verification: a TSO checks passengers\u2019 identification  against the boarding pass and the individual presenting the  identification.", "Divestiture: a TSO assists passengers by informing them what items  need to be placed on the x-ray conveyor belt.", "X-ray interpretation: TSOs screen passengers\u2019 carry-on baggage and  personal property by interpreting x-ray images to identify any  prohibited items.", "Advanced imaging technology operations: Passengers are screened  via advanced imaging technology (often referred to as body  scanners), which identifies areas where they may be concealing  prohibited items.", "Walk-through metal detector operation: a TSO operates the walk- through metal detector.", "Physical searches: Passengers can opt to be screened through a  physical search, or TSOs may perform a physical search to resolve an  alarm triggered by the AIT system or the walk-through metal detector,  among other reasons.", "Explosive trace detection and manual searches of property: TSOs use  an explosives trace detection system by swabbing carry-on baggage  and testing the sample for explosive residue or vapors. This test is  usually performed in conjunction with a manual search of the carry-on  baggage.", "Exit lane monitoring: a TSO watches the lane through which  passengers exit the sterile area to ensure that no one enters the  sterile area through that passage.", "Within TSA, two offices work together to manage TSOs and ensure their  training is current and relevant. OSO is responsible for allocating TSO  staff to airports, scheduling TSO work hours and training availability, and  developing SOPs that govern how TSOs screen passengers and  baggage. OTD is responsible for developing initial and ongoing training  curricula for TSOs based in part on SOPs. Within OTD, a dedicated team  is located at the Academy to manage updates at TSO Basic Training.", "In accordance with the Aviation and Transportation Security Act,  screeners must complete a minimum of 40 hours of classroom instruction,  60 hours of on-the-job training, and successfully complete an on-the-job  training examination. Until 2016, new TSOs completed these training  requirements at or near their home airports through the New Hire Training  Program (NHTP). Since TSA centralized the TSO Basic Training program  in January 2016, TSOs fulfill these training requirements through  classroom training at the Academy as well as training at their home  airports prior to the Academy and on-the-job training after completion of  TSO Basic Training. During the 2 weeks spent at the Academy, TSOs  receive 80 hours of training on standard operating procedures, threat  detection, and the use of screening equipment. Prior to attending TSO  Basic Training, new TSOs complete computer-based prerequisite training  and may shadow experienced TSOs at a checkpoint. TSO Basic Training  allows for participants to be trained at a dedicated facility with more  hands-on training than was possible for NHTP (see Appendix I for a  comparison of the two programs).", "As shown in table 1, of the $53 million obligated from January 2016  through March 2018, TSA obligated $18.2 million for procurement and  development of the modular buildings on the FLETC campus used for  TSA training, as well as associated hardware and set-up obligations such  as audio/video equipment and fully operational simulated checkpoints.  TSA obligated an additional $12 million in fiscal year 2016 and $13.7  million in fiscal year 2017 for the delivery of TSO Basic Training, including  associated student travel and related equipment. TSA officials told us  that due to continuing budget resolutions that funded the government  between October 2017 and March 2018, TSA was not able to fully fund  the interagency contract between TSA and FLETC to support the TSO  Basic Training course in fiscal year 2018 at the beginning of the year. For  this reason, TSA does not yet have 2018 training obligations available for  reporting through its accounting system. However, based on the average  cost per student in fiscal year 2017 of about $2,300 to attend TSO Basic  Training, TSA estimates total training obligations of approximately $9.1  million in the first half of fiscal year 2018."], "subsections": []}, {"section_title": "TSA Established the TSO Basic Training Program at the Academy to Obtain Benefits from Centralized Training", "paragraphs": ["According to the business case for TSO Basic Training and TSA officials,  implementation of the TSO Basic Training program at the Academy was  anticipated to provide a number of potential benefits. The anticipated  benefits identified generally align under two distinct categories: (1)  efficiencies and improvements obtained through the centralized delivery  of training, and (2) enhanced professionalism and \u201cesprit de corps\u201d  obtained through bringing newly hired screeners together for centralized  training. Collectively, these benefits were also envisioned by TSA  headquarters officials to have a positive impact on screening  effectiveness and public perception of the TSA workforce.", "Based on several analyses of training delivery options that TSA has  conducted since 2008, TSA determined that a centralized training  academy would have a number of potential benefits relative to the  decentralized training previously administered at field airports through  NHTP. Among the potential efficiencies and improvements cited by TSA  are:  Increased consistency and standardization. According to TSA  documents and OTD headquarters officials, centralized training  provides a standardized curriculum that serves as a foundation for the  skills, knowledge, and equipment used across an array of different  airport environments. The TSA business case and other supporting  analyses note that such an approach offers greater consistency of  training delivery and a better mechanism for developing, delivering,  and evaluating course content.", "Equipment availability and expanded course content. TSO Basic  Training includes a full suite of dedicated checkpoint equipment and  x-ray image simulators for students to practice learned skills,  eliminating the challenge of finding available equipment and training  times in a busy airport environment (see figure 2). Officials told us that  being more familiar with the screening equipment increases TSOs\u2019  readiness for on-the-job training when they return to their home  airports. Initial test results also indicate that participants trained at the  Academy receive higher pass rates on end-of course assessments of  x-ray image interpretation skills than those who received their initial  training at their home airports. Specifically, according to TSA data, of  the 5,877 test-takers who received training at TSO Basic Training in  2016, 91.5 percent passed the Image Interpretation Test on their first  attempt. In contrast, 83.2 percent of the 1,458 test-takers who  received training at local airports in 2016 passed the test on their first  attempt. In addition, the Academy curriculum incorporates new  learning opportunities, including a live demonstration of improvised  explosive devices and an active shooter drill, both of which would be  difficult to reproduce within the airport environment, according to TSA  officials.", "Dedicated faculty and instructor development. TSO Basic Training  offers a dedicated faculty and support staff focused exclusively on  training TSOs. According to TSA officials, before TSO Basic Training,  training at individual airports was often conducted by TSOs for whom  instruction was a collateral duty, whereas instructors at the Academy  have full-time training responsibilities and enhanced opportunities to  learn from each other, increase their professional training skills, and  provide feedback on the delivery of course curriculum.", "Centralized facility and shared logistics. By locating the TSA Academy  at FLETC, TSA is able to take advantage of the services and logistical  support that FLETC provides. Specifically, FLETC services and  logistics include accommodations, meals, and transportation, thereby  reducing the administrative demands on TSA personnel and allowing  students a focused and efficient training experience. Additional  efficiencies cited by TSA officials include lower overall costs for office  space, janitorial services, and other operational costs because such  costs are shared by the 96 agencies that use FLETC. According to  TSA officials, conducting training at FLETC can also help TSA  accommodate hiring surges and better augment future training, if  needed. For example, TSA officials reported that the facility has surge  capacity from its current capacity of 240 students up to 300 new  students if sufficient instructors are available.", "According to TSA documents and training officials, another key benefit of  centralized training is the opportunity to enhance professionalism and  help foster camaraderie and esprit de corps. TSA anticipates that  centralized, standardized training will not only provide trainees with an  increased focus on the TSA mission and operational environment, but  can serve to instill a common culture and sense of belonging among the  broader community of TSOs nationwide. In its business case, TSA notes  that centralized training of new recruits is a common model employed by  the armed forces and other federal law enforcement agencies within  DHS, such as U.S. Customs and Border Protection and the U.S. Coast  Guard. According to the business case, by bringing together newly hired  TSOs from around the country, TSA also hopes to inspire in its trainees a  singular identity and unity of purpose, which previous analyses generally  found lacking as part of the decentralized training approach.", "The business case also associates such increases in professionalism and  esprit de corps with greater employee satisfaction and the potential for  reduced attrition. Analysis conducted by TSA in 2017 provides some  initial support for positive trends in these areas. For example, results of a  2017 TSA employee engagement survey indicated that respondents who  attended TSO Basic Training reported higher scores in categories  including Organizational Commitment, Job Satisfaction, and Overall  Morale versus respondents who did not attend. TSA also reported a 19  percent reduction in the attrition rate during the first 180 days of being  hired for those attending TSO Basic Training at the Academy in 2016  versus those who received their initial training at field airports through the  New Hire Training Program."], "subsections": []}, {"section_title": "Factors Considered in Updating the TSO Basic Training Curriculum Include Evolving Security Threats and Input from Course Participants", "paragraphs": [], "subsections": [{"section_title": "OTD Uses Information from OSO to Update the TSO Basic Training Curriculum to Address Evolving Security Threats", "paragraphs": ["OTD updates and modifies the TSO Basic Training curriculum based, in  part, on regular communications from OSO, the office responsible for  developing SOPs for screening operations and managing TSO  performance. Officials from both offices told us that OSO provides  information to OTD on changes to SOPs as soon as changes are made  so they can update the TSO Basic Training curriculum. For instance, in  2017, when OSO began planning major changes to the SOPs, the office  gave OTD information about the planned SOP revisions, as well as the  airports where the new SOPs would be piloted. In response, OTD  modified its curriculum and was able to provide revised training for new  TSOs based at airports that were piloting the program, while providing  TSOs at all other airports the prior version of training. OTD officials noted  that in some cases TSA must quickly update SOPs to reflect imminent  threats. According to officials, a plan is in place to make changes to TSO  Basic Training curriculum in response to emerging or imminent threats,  although such threats have not been experienced since the establishment  of TSO Basic Training in 2016.", "In addition to changes in SOPs, OSO officials indicated they may also  change the timing of when TSOs employed by TSA attend TSO Basic  Training. Specifically, officials told us that OSO plans to implement a new  model for TSO Basic Training in which TSOs will attend TSO Basic  Training 2 to 6 months after they are hired rather than as soon as is  practical. According to TSA, the agency is pursuing this change to,  among other things, implement a transparent career path for TSOs  employed by TSA and to encourage and reward skill development. During  the 2 to 6 months prior to attending TSO Basic Training, TSOs will  perform checkpoint tasks that require training that can be delivered at the  airport as soon as they are hired, such as checking passengers\u2019 travel  documents and helping passengers move through the checkpoint. Once  TSOs are able to perform these initial tasks, they will attend TSO Basic  Training at the Academy, Officials told us they are preparing for the  change by modifying the TSO Basic Training curriculum to eliminate  subjects that will be covered at the airports and to emphasize skills that  more experienced TSOs will need, such as performing physical searches  of passengers. TSA plans to implement the revised model beginning in  August 2018.", "Finally, OTD receives information on TSO performance and uses that  information to inform TSO Basic Training curriculum. For example, two  TSA offices\u2014OSO and the Office of Inspections\u2014perform regular  effectiveness testing of airport checkpoints through covert testing and  share the results with OTD. After each covert testing event, each office  conducts interviews with TSOs to determine the factors that contributed to  their effectiveness at identifying prohibited items. Officials told us that  OSO and OTD hold regular meetings to discuss the analyses of covert  testing failures and ways in which training curriculum can be modified to  address the reasons for the failures, which are then incorporated into the  TSO Basic Training curriculum. Office of Inspections officials noted that  they participated in the development of the TSO Basic Training curriculum  and provide regular reports to OTD on covert testing results."], "subsections": []}, {"section_title": "When Making Updates to TSO Basic Training Curriculum, OTD Considers Feedback from Instructors, Course Participants, and Contractors", "paragraphs": ["OTD gathers input from TSO Basic Training participants, instructors, and  contractors on ways to update the curriculum. For instance, TSO Basic  Training instructors told us they submit \u201cwhite paper proposals\u201d to TSO  Basic Training course managers detailing their suggested changes to the  course. They can also provide feedback and suggestions during \u201ctrain the  trainer\u201d sessions, in which all instructors participate when TSO Basic  Training is updated. Instructors told us that all sessions include an  opportunity for instructors to provide feedback after reviewing the new  curriculum. Officials told us that they take instructors\u2019 feedback into  account when implementing new curriculum. For instance, officials told us  that at the suggestion of instructors, they added time for discussion at the  end of each checkpoint lab to help capture and share lessons learned.", "OTD also collects feedback from TSOs who have participated in the  course, both at the end of their two weeks at the Academy and several  months after their completion of the course. At the end of TSO Basic  Training, OTD collects feedback from participants through a survey with  both multiple choice and open-ended questions. The survey includes  questions on the course curriculum and instructor performance. Officials  told us that they regularly review the results of the survey and consider  whether it is appropriate to address the feedback by modifying TSO Basic  Training. For instance, the most often provided feedback for altering the  curriculum was to increase the time in hands-on training using screening  equipment in the Academy\u2019s simulated checkpoints. In response, OTD  officials told us they added nearly 5 hours of hands-on training to the 80- hour program in addition to the 6 hours that had previously been a part of  the curriculum.", "In addition to collecting feedback from TSO Basic Training participants  and instructors, TSA officials told us that TSA regularly uses a contractor  to support the design and development of training courses and to assess  existing courses, including TSO Basic Training. In 2016, the contractor  conducted an evaluation of the instructional integrity of the TSO Basic  Training curriculum. The resulting report made a number of  recommendations to improve the curriculum and structure of TSO Basic  Training, many of which OTD has implemented. For instance, the  contractor recommended that TSO Basic Training include more  opportunities for review of the material to reinforce TSOs\u2019 understanding.  In response, OTD implemented a review session at the end of the first  week of training so TSOs have an opportunity to clarify information  presented over the first week."], "subsections": []}]}, {"section_title": "TSA Has Made Progress in Implementing a Training Evaluation Model but Has Not Established Specific Goals and Performance Measures to Assess TSO Basic Training", "paragraphs": ["TSA has implemented three of the four levels of the Kirkpatrick Model, a  training evaluation model that, in part, helps TSA collect feedback from  course participants and evaluate the impact on individual development.  However, the agency has not developed goals for the program or related  performance metrics to demonstrate progress toward goals."], "subsections": [{"section_title": "TSA Has Made Progress in Implementing the Kirkpatrick Model to Evaluate Its TSO Basic Training Program", "paragraphs": ["To evaluate the TSO Basic Training program, TSA uses the Kirkpatrick  Model, which is a commonly accepted training evaluation model endorsed  by the Office of Personnel Management and used throughout the federal  government. The Kirkpatrick Model consists of a four-level approach for  soliciting feedback from training course participants and evaluating the  impact the training had on individual development, among other things.  To date, TSA has implemented the first three levels of the model by  administering (1) course surveys to participants at the end of the training  program; (2) an end-of-course written exam and an x-ray image  interpretation test to assess achievement of learning objectives; and (3)  course surveys to participants and their supervisors several months after  completing training to collect information regarding how the training  affected behavior or performance on the job. OTD officials told us that  they have not yet implemented Level 4 of the model because they do not  believe they have enough data. Table 2 provides a description of what  each level within the Kirkpatrick model is to accomplish and TSA\u2019s  progress in implementing the levels."], "subsections": []}, {"section_title": "TSA Has Not Yet Developed Goals and Performance Measures for TSO Basic Training", "paragraphs": ["While TSA reported potential benefits of TSO Basic Training in its  business case and implemented the Kirkpatrick Model to assess training,  it has not yet identified specific goals that the TSO Basic Training  program is expected to achieve, nor has it developed performance  measures to evaluate progress toward goals. The business case and the  Kirkpatrick Model are positive steps and document certain benefits of  TSO Basic Training, but without a set of specific training goals and  associated performance measures for the program, TSA is not able to  fully evaluate the program\u2019s effectiveness and ensure accountability  toward results. Such goals are important to help ensure alignment with  course objectives and the end-of course examinations administered as  part of Level 2 of the Kirkpatrick Model. In addition, without the  development of specific goals, it is not possible to determine what types  of performance measures should be used to help show progress toward  such goals. For example, in its business case, TSA identified improved  employee morale as one of the anticipated benefits of TSO Basic  Training. However, there are no goals or metrics specifically related to  this benefit. If TSA believes improved morale should be something for  which TSO Basic Training aims, goals and measures could help them  demonstrate the extent to which this benefit is being realized by the  training program.", "Leading management practices related to training evaluation guidance  identifies the importance of agencies developing and using performance  measures regularly to ensure accountability and assess progress toward  achieving results that are aligned with the agency\u2019s mission and goals.  In addition, these practices highlight the importance of agencies having  clear goals about what the training or development program is expected  to achieve as a precursor to developing such measures. When designed  effectively, performance measures help decision makers (1) determine  the contributions that training makes to improve results, (2) identify  potential gaps in performance, and (3) determine where to focus  resources to improve results. In particular, incorporating valid measures  of effectiveness into training programs can enable an organization to  better ensure that desired changes occur in trainees\u2019 skills, knowledge,  and abilities.", "According to OTD officials, the TSO Basic Training program was  established on an accelerated schedule in late 2015 as one of multiple  efforts to improve training delivery and help enhance screener  effectiveness. Officials stated that the program is still relatively new and  they plan to collect several additional years of data on system-wide  screening performance before conducting efforts to further evaluate the impact of the training. They reported that the lack of performance  measures is also due to the inherent difficulty of tying specific training  initiatives to broader organizational results. Officials told us that once  TSOs return to their home airports after TSO Basic Training, they are  exposed to additional on-the-job training and differing airport cultures,  which make it difficult to isolate the effects of TSO Basic Training.  However, senior training officials agreed that establishing applicable  goals and performance measures for the TSO Basic Training program  would be helpful to support ongoing efforts and better measure program  progress.", "We recognize that developing metrics to assess the performance of  training programs on broad organizational results can be challenging.  However, there are additional opportunities to develop program goals and  performance measures as part of the training evaluation efforts at the  Academy to help ensure that participants can demonstrate proficiency in  performing core technical skills before returning to their home airports.  We believe that developing goals for a training program does not need to  wait for years of data. Goals reflect desired results, connected to an  agency\u2019s mission, which a program plans to achieve. In the over 2 years  of using TSO Basic Training, TSA has not stated what results the training  program is to achieve.", "TSOs provide a crucial function to help ensure passenger safety, and it is  important to have goals aligned with this mission, as well as associated  measures of effectiveness of the training they receive at TSO Basic  Training to determine the extent to which they are able to fulfill their  important role. As noted by leading management practices for training  evaluation, agencies need credible information to demonstrate a training  program is contributing to a goal and they can develop such data through  a mix of quantitative and qualitative indicators. We found that options for  assessing the effectiveness of TSO Basic Training could include  measuring TSO performance by leveraging data from end of course  examinations, such as the x-ray image interpretation test, and introducing  similar additional tests or mechanisms to further evaluate trainees\u2019  knowledge and skills in effective screening procedures. Additional options  could include measuring employee morale as indicated by TSOs on their  Kirkpatrick Level 1 surveys at the completion of the training program, and  comparing these results against applicable program goals for employee  morale that TSA could establish related to TSO Basic Training. By  identifying annual goals and measures for TSO Basic Training, TSA will  also be better positioned to move forward with Level 4 of the Kirkpatrick  Model to evaluate the impact of training on broader organizational results.  Given that over $50 million has been obligated to set up and operate the  TSO Basic Training program to date, it is important that TSA incorporate  annual goals and measures into the training program to be better  informed when making training decisions and to help hold itself  accountable for training results on a regular basis."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["TSOs perform a critical role in securing our nation\u2019s commercial aviation  system and often represent the most visible face of TSA to the public. For  this reason, new hire training is an integral function to ensure that TSOs  are obtaining the foundational skills and knowledge to help prepare them  to perform their jobs effectively. In 2016, TSA initiated a major change to  its training approach for new hires to help ensure a consistent and  standardized training experience and promote enhanced camaraderie  and esprit de corps. Although TSA has implemented a framework to  assess participant reactions to the training and their knowledge of course  content, it has not yet established goals for the TSO Basic Training  program or measures to gauge effectiveness of the training TSOs receive  to determine the extent to which they can fulfill their crucial role in  ensuring passenger safety. By taking these steps, TSA will be better  positioned to determine if the program is improving trainees\u2019 skills,  knowledge, and abilities and whether additional skill development, or  other training modifications, may be needed."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["We are making one recommendation to the Administrator of TSA.  Specifically, the Administrator of TSA should establish specific goals for  the TSO Basic Training program and develop performance measures that  can be used to assess if the program is achieving desired outcomes and  help ensure accountability for training results on a regular basis.  (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS for review and comment. DHS  provided written comments, which are reprinted in appendix II, and  technical comments, which we incorporated as appropriate. DHS agreed  with our recommendation that TSA establish specific goals for the TSO  Basic Training program and develop performance measures that can be  used to assess if the program is achieving desired outcomes. In addition,  in its written comments DHS outlined steps to address this  recommendation.", "With regard to performance goals, TSA plans to establish broad goals  that include successful screening and improved morale, among others.   The stated goals are an appropriate response to our recommendation  that TSA develop goals specifically for TSO Basic Training.  These  actions, if implemented effectively, should address the intent of our  recommendation.", "With regard to developing performance measures that can be used to  assess program outcomes, TSA intends to leverage existing mechanisms  through its Kirkpatrick Model evaluations to measure program success.   As we noted in the report, implementing the first three levels of the  Kirkpatrick Model are positive steps that document certain benefits of  TSO Basic Training, but they do not address specific goals or  performance measures. Kirkpatrick Model Level 2 evaluations include  proficiency exams administered prior to TSOs\u2019 departure from the  Academy. Data from these evaluations, in conjunction with specific goals,  may provide quantifiable metrics that could inform further refinement of  the TSO Basic Training curriculum. However, the surveys being used by  TSA for Level 3 of the Kirkpatrick Model do not include metrics that would  allow TSA to measure the program\u2019s effectiveness and ensure  accountability toward results. Specifically, the surveys do not demonstrate  whether TSO Basic Training is reaching goals related to successful  screening or improved morale because survey results are influenced by  factors outside of the training program. We will continue to monitor TSA\u2019s  efforts in this area.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, 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 (206) 287-4804 or AndersonN@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Comparison of New Hire Training Program and Transportation Security Officer (TSO) Basic Training", "paragraphs": ["In 2016, the Transportation Security Administration (TSA) established the  TSO Basic Training program at the TSA Academy, located at the Federal  Law Enforcement Training Centers in Glynco, Georgia. TSO Basic  Training allows new TSOs to be trained at a dedicated facility with  simulated checkpoints. Previously, TSOs\u2019 initial training was delivered  through the New Hire Training Program at or near their home airports, at  which they were able to practice using checkpoint equipment only when  the equipment was not being used, such as after hours. For further  comparison of the two programs, see Table 3."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Acknowledgements", "paragraphs": ["In addition to the contact named above, Dawn Locke, Assistant Director;  Miriam Hill, Analyst in Charge; and Ryan Lambert made key contributions  to this report. Also contributing to the report were Elizabeth Dretsch, Eric  Hauswirth, Susan Hsu, Heidi Nielson, and Adam Vogt."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-52", "url": "https://www.gao.gov/products/GAO-18-52", "title": "Federal Employees Health Benefits Program: Enrollment Remains Concentrated Despite More Plan Offerings and Effects of Adding Plan Types Are Uncertain", "published_date": "2017-10-05T00:00:00", "released_date": "2017-11-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FEHBP provides health care coverage to about 8 million federal employees, retirees, and their dependents through carriers that contract with OPM. The Federal Employees Health Benefits Act of 1959 limited the types of plans OPM could offer. OPM has reported that the program needs more competition between plans and more diverse health plan choices and has proposed that its contracting authority be expanded to allow a greater variety of types of health plans to participate in FEHBP than are currently allowed.", "GAO was asked to examine FEHBP plan participation and the potential impact of OPM adding new plan types to the program. This report describes, among other things: (1) how the number of plans and market shares of carriers participating in FEHBP changed in recent years, and (2) what is known about the potential effects of allowing OPM to contract with a greater variety of types of health plans than are currently offered. GAO requested OPM plan availability and enrollment data by county for 2000 through 2015, but county-level availability data were only available for 2007 and 2009 through 2015. Therefore, plan availability and market share analysis timeframes differ. GAO also interviewed OPM officials, 11 FEHBP stakeholders, such as carriers and federal employee and retiree organizations, and reviewed relevant documentation and research, such as cost estimates of the potential effects of expanding OPM's authority.", "GAO provided a draft of this product to OPM for comment. The agency did not provide any comments."]}, {"section_title": "What GAO Found", "paragraphs": ["Federal Employees Health Benefits Program (FEHBP) enrollees can choose from a number of health plan offerings depending on where they live. From 2007 to 2015, the median number of plan offerings available in a county increased from 19 to 24. Of the 24 plan offerings in 2015, 19 were available nationwide and 5 were health maintenance organization plans offered in specific geographic areas. Yet despite more available plan offerings in recent years, enrollment has become more concentrated within the largest health insurance carrier in a county. Specifically, the median share of enrollment held by the largest carrier in a county increased from 58 percent in 2000 to 72 percent in 2015. Further, one carrier\u2014the Blue Cross Blue Shield Association\u2014was the largest carrier in 93 percent of counties in 2000 and 98 percent of counties in 2015.", "The stakeholders GAO interviewed and the cost estimates GAO reviewed about the potential effects of expanding the Office of Personnel Management's (OPM) authority to contract with more plan types than currently offered in FEHBP did not offer clear consensus about the effects. Most stakeholders supported expanding OPM's authority; those opposed were primarily concerned about OPM adding regional preferred provider organization plans, saying this could cause program instability and higher premiums. Estimates by OPM and others differed significantly on whether the expansion would increase or decrease costs. This is because they used differing assumptions about premiums, enrollment, and other factors, and it is unclear whether the assumptions used in these estimates will be realized."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Federal Employees Health Benefits Program (FEHBP) is the largest  employer-sponsored health insurance program in the country, providing  coverage to about 8.2 million federal employees, retirees, and their  dependents in 2016. The Office of Personnel Management (OPM)  administers FEHBP in part by entering into contracts with qualified health  insurance carriers, negotiating plan benefits and premiums as part of that  process. The statute that established FEHBP in 1959 authorized OPM to  contract with four specific plan types, each of which must meet different  requirements for their service areas and benefits, among other things.  Today OPM generally groups these plan types into two main categories  of plans\u2014fee-for-service (FFS) plans and health maintenance  organization (HMO) plans. FFS plans are offered nationwide to all  participants, while HMO plans offer coverage in selected geographic  areas. Despite having a number of plans to choose from, about two- thirds of FEHBP participants in 2015 were enrolled in one of the two  options offered as part of the Blue Cross Blue Shield Association\u2019s  (BCBSA) nationwide FFS plan.", "OPM has reported that the health insurance marketplace has changed  significantly since the statute establishing FEHBP in 1959 defined the  plan types with which the agency could contract. According to OPM, this  constrains it from responding to this changed marketplace. Specifically, a  Director at OPM has testified that the program needs more competition  between plans and more diverse health plan choices. To enhance  program competition and modernize FEHBP, OPM and some  stakeholders have proposed that OPM\u2019s contracting authority be  expanded to allow a greater variety of health plan types to participate in  FEHBP than are provided for under current law. For example, OPM has  indicated that it does not have authority under current law to allow carriers  to offer regional preferred provider organization (PPO) plans, which would  be an additional kind of FFS plan. According to OPM, unlike the existing  nationwide FFS plans, regional PPO plans would cover smaller regions  and would not have nationwide premiums. However, some stakeholders  have raised concerns with the proposal, noting, for example, that if  regional PPO plans were added to the program they might have a  competitive advantage over the nationwide plans.", "With these issues in mind, you asked us to examine plan participation in  FEHBP and the potential impact of OPM adding new plan types to the  program. This report describes  1.  how plans and market shares of carriers participating in FEHBP  changed in recent years, and how FEHBP market shares compare to  other selected markets; and  2.  what is known about the potential effects of allowing OPM to contract  with a greater variety of health plan types than are currently offered in  FEHBP.", "To describe how plans and market shares of insurers participating in  FEHBP have changed in recent years, and how changes to FEHBP  market shares compare to trends in other selected markets, we analyzed  OPM data on zip code-level plan availability for 2007 and 2009 through  2015. (We requested data for 2000 through 2015, but OPM was not able  to provide zip code-level plan availability data prior to 2007, or for year  2008.) Using a publicly available zip code conversion file, we converted  these data from zip codes to counties. We then cross-referenced plan  codes to other data provided by OPM to classify plans and determine, for  each year, the number of plan offerings available in each county. To  assess the reliability of the data, we reviewed relevant documentation,  interviewed OPM officials involved in compiling the data, compared the  data against FEHBP enrollment records and published plan brochures,  and conducted data checks for reasonableness, outliers, and  completeness. Based on our review of the data and discussions with  OPM, we determined that our summaries and medians accurately  reflected HMO plan availability across counties over time. Therefore, we  determined that these data were sufficiently reliable for our purposes.", "To determine FEHBP carrier market share, we analyzed OPM data on  county-level enrollments for active employees and annuitants from 2000  to 2015. We used an OPM-provided crosswalk to identify a parent  company, or carrier, for each plan, allowing us to calculate enrollment  market shares for carriers at the county, state, and national levels. We  calculated county-level carrier market share in three ways: (1) the market  share held by the largest, three largest, and five largest carriers in each  county (regardless of which carriers held that position), (2) the market  share held by certain specific carriers in each county (e.g., BCBSA and  Kaiser Permanente), and (3) the combined market share held by plans  categorized as HMO or FFS plans in each county. We assessed the  reliability of the data by interviewing OPM officials who regularly use the  data, testing for missing data, and reviewing the assignment of plans to  insurance carriers. We determined these data were sufficiently reliable for  our purposes.", "To compare FEHBP market shares to those in other selected markets, we  analyzed 2010 through 2014 data for the large group market and  Medicare Advantage. We selected the years of comparison based on  data available for the large group market from prior GAO reports issued in  2014 and 2016. We selected the large group market (coverage offered  by large employers) as a comparison market because it includes other  large public and private employers offering coverage from private carriers  and plans. In prior GAO reports, we analyzed data reported annually by  carriers and identified the market share held by the largest and three  largest carriers in each state. We relied on reliability testing conducted  for those prior reports and determined that they were sufficiently reliable  for our purposes. We selected the Medicare Advantage program\u2014a  private health plan alternative to the original Medicare program\u2014as a  comparison market because it is another federal program with nationwide  enrollees who can choose a plan from a number of options. To  determine Medicare Advantage carrier market shares, we obtained  enrollment data from the Centers for Medicare & Medicaid Services  (CMS) for each year from 2010 through 2014 that provides enrollment by  plan for each state, as of April. Using additional CMS data, we identified  the parent carrier for each plan and calculated the market share held by  the largest and the three largest Medicare Advantage carriers in each  state for each year. We conducted reliability testing of the Medicare  Advantage state level enrollment data, including tests for missing data  and comparisons to previously published information related to market  share, and determined that it was sufficiently reliable for our purposes.  While we present data from these markets as points of comparison with  FEHBP, the markets have substantive differences and do not offer perfect  comparisons. For example, in the large group market data, federal  agencies participating in FEHBP were considered large group employers  and FEHBP\u2019s approximately 8 million enrollments were included in the  data carriers reported for the large group market. In addition, employers  participating in the large group market are providing coverage options for  many fewer employees than FEHBP, while often offering fewer plan  options. Medicare Advantage provides coverage for a larger population of  enrollees (17.6 million) compared to FEHBP. Medicare Advantage  enrollees are typically older and more likely to be on a fixed income than  federal employees and their dependents. Additionally, the 17.6 million  Medicare Advantage enrollees in 2016 represents about one-third of all  Medicare enrollees; the remaining two-thirds are enrolled in traditional  Medicare.", "To describe the potential effects of allowing OPM to contract with a  greater variety of health plan types than are currently offered in FEHBP,  we interviewed OPM officials and reviewed relevant federal laws, FEHBP  policies, and other documents related to the potential effects of expanding  OPM\u2019s contracting authority. We also interviewed 11 FEHBP  stakeholders and experts (stakeholders)\u2014the Association of Federal  Health Organizations, two federal employee and retiree organizations, six  FEHBP carriers, and two FEHBP subject matter experts\u2014and reviewed  supplementary documents the stakeholders provided. For additional  context on the effects of adding new plans to a health care market, we  interviewed members of the American Academy of Actuaries and officials  from the California Public Employees\u2019 Retirement System. In addition to  the information obtained from OPM and FEHBP stakeholders, we also  reviewed available estimates of the financial effects of expanding OPM\u2019s  contracting authority, including two studies we identified from Avalere  Health and the Center for Health and Economy on the potential effects if  OPM were to use such authority to add regional PPO plans to FEHBP.  We also reviewed relevant research related to consumer choice and  decision-making in health care.", "We conducted this performance audit from April 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["FEHBP was established primarily to help the government compete with  private-sector employers in attracting and retaining talented and qualified  workers. As indicated by the legislative history of the original FEHBP  statute, lawmakers wanted enrollees to exercise choice among various  plan types and, by using their own judgment, select health plans that best  meet their specific needs. While participation in FEHBP is voluntary, in  2015, 85 percent of federal workers and 90 percent of federal retirees  were enrolled in the program.", "Each FEHBP carrier offers one or more plans, and these plans can have  up to three options, or levels of benefits, depending on which type of plan  is being offered. Although they may differ in the specific benefits they  provide, all FEHBP plans cover basic hospital, surgical, physician,  emergency, and mental health care, as well as childhood immunizations  and certain prescription drugs. However, FEHBP plans offer different  levels of benefits, with many plans offering a choice between a more expensive plan option, which offers a higher level of coverage, and a less  expensive plan option, which offers a lower level of coverage. FEHBP  enrollees can purchase individual or family coverage. Beginning in 2016,  enrollees could also purchase coverage for themselves and one eligible  family member, referred to as \u201cself plus one\u201d coverage. FEHBP enrollees  can change health care plans during an annual open enrollment period or  at other times if they experience a qualifying life event, such as a change  in family status. OPM data indicates that between 2005 and 2015, the  annual percentage of FEHBP enrollees who changed their plan  enrollment by choice\u2014rather than because of mergers or plan  terminations\u2014ranged from 5 to 7 percent.", "The FEHBP statute limits the program to four specific plan types: (1) one  service benefit plan\u2014a government-wide plan with two levels of benefits;  (2) one government-wide indemnity benefit plan; (3) employee  organization plans; and (4) and comprehensive medical plans\u2014also  known as HMO plans. OPM generally refers to these plan types as  either FFS plans (the service benefit plan and the employee organization  plans), or HMO plans (comprehensive medical plans). Within the  categories of FFS and HMO plans, there can be significant variation in  the plan designs and enrollee cost sharing. Most FFS plans have PPO  arrangements, which usually have lower out-of-pocket expenses (i.e., a  smaller copayment and/or a reduced or waived deductible) when  enrollees use providers within the plan\u2019s preferred network. Compared  with HMOs, PPOs typically offer their enrollees a greater choice of  providers and have less plan management of the care that enrollees  receive. HMOs provide or arrange for comprehensive health care  services on a prepaid basis through designated plan physicians,  hospitals, and other providers in particular locations. Each HMO sets a  geographic area for which health care services will be available. Some  HMOs offer a point of service product that offers FEHBP enrollees the  choice of using a designated network of providers or using non-network  providers at an additional cost.", "Additionally, in 2003 and 2005 respectively, FEHBP also began offering  consumer-driven health plan (CDHP) and high-deductible health plan  (HDHP) designs that are coupled with a tax-advantaged account to help  enrollees pay for qualified medical expenses. Any of the FEHBP plan  types may be offered with a CDHP or HDHP design, and therefore  CDHPs and HDHPs can be either FFS or HMO plans. Enrollees in  typical CDHPs have responsibility for certain up-front medical costs, an  employer-funded account that enrollees may use to pay these up-front  costs, and catastrophic coverage with a high deductible. CDHP enrollees  receive full coverage of in-network preventive care. HDHPs offer low  premiums but higher deductibles and annual out-of-pockets limits  combined with a tax-advantaged account. HDHPs can have first dollar  coverage (no deductible) for preventive care and higher out-of-pocket  copayments and coinsurance for services received from non-network  providers.", "OPM is responsible for negotiating health benefits and premiums with  FFS and HMO plans. Each year, OPM sends a letter to all approved and  participating FFS and HMO plans\u2014its annual \u201ccall letter\u201d\u2014to solicit  proposed benefit and premium changes for the next calendar year, which  are due by the end of May. The descriptions of both covered and  excluded benefits are incorporated into the final contracts. Each plan  subsequently prints brochures describing the benefits and costs  according to a standard format, as specified by OPM. The brochures are  binding statements of benefits and exclusions that plans must follow as  parties to FEHBP contracts. Those plans meeting the minimum  requirements specified in the statute and regulations may participate in  the program and their contracts may be automatically renewed each year.", "The federal government and FEHBP enrollees generally each bear a  portion of the cost of FEHBP plan premiums. By statute, the  government generally pays 72 percent of the weighted average premium  of all health benefit plans participating in FEHBP, but no more than 75  percent of any particular plan\u2019s premium, while enrollees pay the  balance. Premium prices vary across plans and within plans and  depend on whether an enrollee is enrolled in self-only, family, or self plus  one coverage. The premiums are intended to cover enrollees\u2019 health care  costs, plans\u2019 expenses, reserves, and OPM\u2019s administrative costs.", "Although there has been some minor fluctuation in the number of FEHBP  enrollees over time, total program enrollment has remained around 8  million enrollees since 2000. As the Congressional Research Service has  reported previously, FEHBP enrollment is concentrated among a small  number of carriers and BCBSA has the largest share of total program  enrollment by far. See figure 1 for the total FEHBP enrollment and  enrollment market share of the top five carriers in the program from 2000  through 2015."], "subsections": []}, {"section_title": "The Number of Available FEHBP Plan Offerings Increased Since 2007 and Enrollment Was Increasingly Concentrated Available FEHBP Plan Offerings Generally Increased in Recent Years, although Variation Existed among Counties", "paragraphs": ["The number of plan offerings available to FEHBP enrollees generally  increased from 2007 through 2015. In 99 percent of counties nationwide,  enrollees had more plan offerings in 2015 than they had in 2007. The  median number of plan offerings available in a county increased from 19  in 2007 to 24 in 2015. Most of these offerings were the nationwide FFS  plans that are available in all counties. There were 17 such plan  offerings in 2007 and 19 in 2015. The remaining plan offerings were  HMOs that were available in more limited areas. While the total number of  HMO plans that participated in FEHBP decreased from 2007 through  2015, the median number of HMO plan offerings in a county increased.  This suggests that those HMO plans in FEHBP in 2015 generally  participated in more counties than was the case in 2007. (See table 1 for  a comparison of plan offerings in 2007 and 2015.)", "Despite increases in the availability of the median number of HMO plan  offerings in a county, there was wide variation in the number of HMO  offerings available to enrollees in a given county. For example, while FFS  plan offerings were available nationwide, in some counties enrollees had  no HMO plan offerings. Since 2007, however, the number of counties  without any HMO plan offerings available declined from 18 percent to less  than 2 percent in 2015. Most counties had a couple of HMO plan  offerings, and some counties had at least 10 HMO offerings. For  example, in 2015, enrollees in one county in New York had 15 HMO plan  offerings, giving enrollees a total of 34 offerings from which to select  coverage. (See fig. 2 for the range of available HMO plan offerings  among counties across all years.)", "Regarding reasons for the variation in available FFS and HMO plan  offerings, OPM officials told us that plans participating in FEHBP enter  and withdraw based on internal business decisions and often in response  to changing economic conditions. For example, according to OPM  officials, some plans may enter the program with the expectation of  gaining a target market share. OPM officials also noted that decreases in  plan participation in the past may have been a response to premium  increases that impacted plans\u2019 ability to effectively compete. In addition,  a 2012 OPM report noted that many prominent HMO plan carriers have  reduced the number of states in which they participated since 1985."], "subsections": [{"section_title": "Market Share Held by the Largest FEHBP Carrier in Each County, Generally BCBSA, Increased from 2000 through 2015", "paragraphs": ["FEHBP enrollment within counties generally became more concentrated  from 2000 through 2015, although most of that growth occurred prior to  2007. The share of the market held by the largest carrier increased from a  county median of 58 percent in 2000 to 70 percent in 2007, to 72 percent  in 2015. Similarly, the combined median county market share of the three  largest carriers increased from 86 to 90 percent over the same time  period. However, we observed that the median market share held by the  second and third largest carrier generally decreased over time. This  suggests that the increases in combined market share held by the three  largest carriers were generally due to increases observed in the single  largest carrier. Although there was little change in the median county  market share of the top five carriers, these carriers accounted for nearly  all enrollments in a county in each of the years we examined. (See fig. 3  for a comparison of the market share held by the three largest carriers  over time.)", "We found that these increases in concentration were widespread. Overall,  from 2000 through 2015, almost 90 percent of counties experienced an  increase in the market share held by the largest carrier. Over this period,  the percentage of counties in which the largest carrier held at least half of  the market also increased\u2014from 70 percent in 2000 to 93 percent in  2015. Additionally, the proportion of counties where at least 80 percent of  the market share was held by the top three carriers increased from about  76 percent of counties in 2000 to 94 percent of counties in 2015. (See  fig. 4 for maps showing the market share of the largest carrier in each  county in 2000 and 2015.)", "Similar to the combined median county market share of the top five  carriers, nationwide FFS plans\u2019 combined median county market share  accounted for almost all FEHBP enrollment and showed a slight increase  from 97 percent in 2000 to 99 percent in 2015, although variation existed  in some counties. Comparatively, the combined median county market  share held by HMO plans decreased from 6 percent to 2 percent. In  addition, in each year since 2000, 16 to 30 percent of counties had all of  their FEHBP enrollment in FFS plans, and, in years for which we had  HMO plan availability data, almost all of these counties offered at least  one HMO plan offering. At the same time, we observed a small number  of counties each year where HMO plans\u2019 combined market share was at  least 50 percent.", "BCBSA was the largest carrier in almost all counties nationwide and the  share of these markets held by its two nationwide FFS plan options  increased from 2000 through 2015. While BCBSA was already the largest  carrier in 93 percent of counties in 2000, by 2015 it was the largest in 98  percent of counties. Over this same time period, the median county  market share held by BCBSA also increased\u2014from 58 percent in 2000 to  72 percent in 2015. Most of BCBSA\u2019s 14 percent market share increase  occurred between 2000 and 2008.", "Other carriers had significantly smaller median county market shares, but  they had the highest share in a certain limited number of counties.", "The Government Employees Health Association, Inc. (GEHA),  another carrier offering nationwide FFS plans, had the second highest  program-wide market share in 2015, and an 8 percent median county  market share. GEHA held the second or third largest market share in  77 percent of counties in 2015, reaching as high as 65 percent of the  county market share, for example, in a county in Texas, but was the  largest carrier in less than 1 percent of counties.", "Kaiser Permanente\u2014which offers HMO plans\u2014was the third largest  carrier program-wide in 2015 and held the largest market share  among HMOs (6 percent), though its market share decreased slightly  over time. In counties where a Kaiser Permanente plan was available  in 2015 (fewer than 200 out of more than 3,000 counties nationwide),  those plans had a median county market share of 8 percent; however,  in some counties Kaiser Permanente plans held a larger market  share, for example, reaching as high as 64 percent in one county in  California. In counties where Kaiser Permanente plans were available  in 2015, it was the largest carrier 8 percent of the time and the second  or third largest carrier in a majority of cases.  (See table 2 for a description of market share and position for the three  carriers with the largest program-wide market share within FEHBP.)", "BCBSA\u2019s increased FEHBP market share may be due to a number of  factors. For example, officials from several FEHBP carriers told us that  BCBSA\u2019s market share performance was tied to several factors, including  brand recognition, comparably favorable plan premiums, and enrollee  population characteristics. According to an OPM report, another factor  contributing to BCBSA\u2019s increased market share was the introduction of  the Basic option to the Service Benefit Plan in 2002. Compared to its  Standard option, this nationwide FFS plan option restricts enrollees to a  more narrowly defined provider network (with some limited exceptions)  and offers lower premiums, thereby broadening BCBSA\u2019s ability to  compete with other lower cost plans. As shown in table 3, while  program-wide enrollments in BCBSA\u2019s nationwide FFS plan options have  increased by 32 percent following the introduction of the Basic option,  enrollments in the Standard option decreased, suggesting that enrollees  are shifting to the Basic option or plans offered by other carriers.", "In addition, a study published in 2012 noted that BCBSA market  concentration was the possible outcome of the carrier\u2019s established  provider network and lower relative administrative costs. For examples  of BCBSA\u2019s and other carriers\u2019 premiums, plan offerings, and market  shares in 2015, in select counties, see appendix I."], "subsections": []}, {"section_title": "FEHBP Market Share Concentration among the Largest Carriers Was Generally Similar to the Large Group Market and More Concentrated than Medicare Advantage", "paragraphs": ["The combined market share for the three largest FEHBP carriers in a  state was generally similar to the large group market and higher than  Medicare Advantage. As shown in figure 5, in 2014, the median state  market share for FEHBP was 89 percent compared to 90 percent in the  large group market and 74 percent for Medicare Advantage. And, the  range of state market shares held by the three largest carriers in  Medicare Advantage and the large group market (69 and 62 percentage  points, respectively) was wider than in FEHBP (23 percentage points).  However, programmatic differences between the three selected markets,  such as varying enrollee demographics, market sizes, and program  designs, make it difficult to draw conclusions about these contrasting  market trends.", "For each market and each year, the 50 states and the District of  Columbia were ranked from highest to lowest market share for the  combined three largest carriers in each state and then divided into four  groups based on those rankings.", "FEHBP enrollment data could not be separated from the overall large  group market data used to calculate state-level market share in prior GAO  reports. In 2014, we estimated that FEHBP plans accounted for about 20  percent of the 44 million total enrollments in the large group market  nationally.", "Compared to Medicare Advantage and the large group market, the state  market shares held by the largest carrier in FEHBP generally held a  larger share of the market. For example, in 2014, the median market  share held by the largest carrier in a state was higher in FEHBP (75  percent) than both Medicare Advantage (35 percent) and the large group  market (59 percent)."], "subsections": []}]}, {"section_title": "Stakeholder Opinions and Cost Estimates Do Not Offer Clear Consensus about the Potential Effects of Expanding OPM\u2019s Contracting Authority", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Generally Supported Expanding OPM\u2019s Authority, but Said Using That Authority to Add Regional PPO Plans Could Have Negative Effects", "paragraphs": ["Seven of the 10 stakeholders we interviewed, and who commented on  OPM\u2019s contracting authority, generally supported expanding OPM\u2019s  contracting authority to allow it to contract with a greater variety of health  plan types than are currently offered in FEHBP. Stakeholders we  interviewed that offer HMO plans generally supported this expansion.  However, the 2 stakeholders that offer nationwide FFS plans and 1  stakeholder that represents federal employees opposed it. Most of the  concerns expressed by these 3 stakeholders were related specifically to  the potential effects of OPM adding regional PPO plans to FEHBP.", "Five of the seven stakeholders we interviewed who supported expanding  OPM\u2019s contracting authority said that adding additional plan types could  result in both positive and negative effects. In terms of positive effects,  one stakeholder said the authority could potentially allow OPM to offer  different types of plans\u2014such as value-based plan designs and  accountable care organizations\u2014that could lead to improved benefit  options and health outcomes for enrollees. One stakeholder also told us  that OPM\u2019s expanded authority would enable the agency to improve  transparency by allowing plans to contract with OPM as the type of plan  they actually are, rather than fitting into outdated statutorily established  categories, which the stakeholder characterized as an \u201cantiquated  labeling system.\u201d Another stakeholder said that participation by new plans  in FEHBP would foster competition and help keep health plan costs  down. One stakeholder also noted that if plan expansion would only be  undertaken when it is in the best interests of FEHBP and its enrollees\u2014 as OPM has indicated would be the case\u2014there was little or no downside  to such expanded authority. Additionally, in April 2013, three FEHBP  carriers that offer HMO plans sent a letter to Congress in favor of  expanding OPM\u2019s authority, citing that it would \u201censure OPM has the tools  it needs to lower costs and provide federal workers access to innovation,  choice, and value\u201d and would allow more competition in the program.", "Some stakeholders we interviewed, however, suggested that any positive  effects of expanding OPM\u2019s authority and adding new plan types could be  limited due to other aspects of FEHBP that affect competition and  discourage participation by carriers. In particular, these stakeholders cited  concerns related to costs associated with FEHBP enrollees who are  Medicare-eligible but who do not enroll in Medicare, and the formula that  determines the government\u2019s contributions to enrollee premiums.  According to these stakeholders, this creates unfair competitive  advantages for the nationwide plans and BCBSA in particular. They also  cited FEHBP\u2019s system for assessing the performance of participating  carriers, which they said discourages competition and participation by  carriers in FEHBP, particularly for certain HMO plans. OPM reported that  it was open to considering some program changes related to these  concerns; however, some proposed changes could require changes to  the FEHBP statute. For more information about stakeholder comments  regarding these other aspects of FEHBP, see appendix II.", "Some of the 10 stakeholders we interviewed and who commented on  OPM\u2019s contracting authority also identified other potential negative effects  that could occur with expanding OPM\u2019s contracting authority. For  example, 1 stakeholder said that an increase in plan types offered could  lead to a subsequent increase in OPM\u2019s administrative costs. In addition,  several of these stakeholders said that adding more plans to FEHBP  would exacerbate an existing problem of choice overload for enrollees.  One of the stakeholders said that FEHBP enrollees are already confused  by the number of available plan offerings, and that the current information  provided to enrollees does not allow for easy comparison of their choices.  They noted that additional expansion of offerings will only complicate  enrollees\u2019 plan analysis.", "Consistent with these concerns, studies that we reviewed related to  consumer choice and decision-making processes in health insurance  markets suggest that adding additional plans may not always yield  positive effects or improve competition. For example, a 2016 report by the  RAND Corporation found that health insurance consumers are unlikely to  change plans, even as better choices become available. Additionally, a  2009 study examining the Swiss health insurance market similarly found  that as the number of choices offered to individuals grows their  willingness to switch plans declines. The study found persistently low  rates of plan switching despite high variation in premiums between plans,  and found that more choice inhibited plan switching. It concluded that  having a large number of plans to choose from likely reduces the  effectiveness of consumer decision making, and that simplifying health  plan decision making by reducing the number of choices might result in  more price competition among insurers, and benefit consumers.", "Additionally, 6 of the 10 stakeholders we interviewed and who  commented on OPM\u2019s contracting authority said that there would  potentially be negative effects if OPM were to use the expanded authority  to add regional PPO plans to FEHBP. For example, 5 of these 6  stakeholders said there could be instability and higher premiums in  FEHBP if new regional PPO plans were able to \u201ccherry pick\u201d low cost  areas in which to participate. This was of particular concern to 1 of the 2  stakeholders we spoke to who offer nationwide plans. Because they offer  the same premiums nationally, they said the lower-cost areas of the  country help subsidize the premiums of the higher-cost areas. If these  nationwide plans lost customers in lower-cost areas to regional PPO  plans, then their premiums would likely rise. These 2 stakeholders and a  third said, therefore, that adding regional PPO plans could result in  nationwide carriers discontinuing their coverage due to their inability to  compete with regional plans. According to 1 stakeholder that offers a  nationwide FFS plan, if the nationwide carriers dropped out of the  program, plan offerings would be significantly reduced in certain areas of  the country and some areas could potentially be left with no offerings at  all. Additionally, in 2014 and 2015, six nationwide FEHBP carriers,  including the two we interviewed, sent letters to Congress expressing  their opposition to legislation that would add new plan types in FEHBP. In  the letters, they cited negative effects such as program destabilization,  increased premiums, and fewer consumer choices\u2014all of which were  specifically tied to the proposal to add regional PPO plans to FEHBP.", "Two of the 10 stakeholders we interviewed and who commented on  OPM\u2019s contracting authority, however, said that adding regional PPO  plans to FEHBP would have positive effects. For example, 1 of these  stakeholders that offers HMO plans and referred to FEHBP\u2019s plan type  labels as antiquated noted that this would enable them to promote their  existing FEHBP products\u2014currently categorized as HMO plans\u2014more  appropriately as regional PPO plans. This stakeholder said the current  categorization causes enrollees to erroneously believe their plans are  more restrictive than the plans listed as nationwide FFS plans.", "When we shared these stakeholder concerns about expanding OPM\u2019s  contracting authority with OPM officials, they told us that the agency has  existing strategies and is working towards implementing additional ones,  which officials said should allow it to address many of these concerns.  For example, OPM officials said in January 2017 that the agency was in  the process of building models that would allow it to simulate the impact  that adding new plan types would have on FEHBP, but that the agency is  still years away from being able to make such assessments. The officials  said that the agency would only seek to introduce new plan types that it  determines to be in the best interests of FEHBP enrollees and the federal  government. With regards to enrollee confusion over the number of plan  choices, the OPM officials said that the agency is improving the tools  enrollees can use to learn about the available plans. For open season in  2016, the agency released what it considers to be a new and improved  Plan Comparison Tool on its website that enables enrollees to gain more  knowledge about their health plan options before making a selection.  According to the officials, some of the improved functions of the tool  include more details about the plan benefits and services, clearer  definitions of the health insurance terms, and easier ability to compare the  plans. Officials also told us that they expect to make more improvements  to the tool in future years based on feedback from the FEHBP enrollees  who use it. OPM officials said the agency would continue existing plan  negotiation strategies that, among other things, would prevent plans from  \u201ccherry picking\u201d\u2014that is, offering products in only the most profitable  service areas\u2014by ensuring that new carriers provide services in  contiguous regions that include both low- and high-cost areas.  Additionally, related to the concern that nationwide plans might withdraw  from the program if regional PPO plans were introduced, OPM officials  noted that if, for example, BCBSA were to cancel its nationwide plan  options, another carrier might step up to gain the service benefit plan  designation and provide nationwide service."], "subsections": []}, {"section_title": "Estimates of the Financial Effects of Expanding OPM\u2019s Contracting Authority Differed on Whether Costs Will Increase or Decrease", "paragraphs": ["We identified three significantly differing estimates of the financial effects  on the federal budget that expanding OPM\u2019s FEHBP contracting authority  would have. However, these estimates are based on different  assumptions about a variety of factors such as premium changes,  administrative costs, and enrollment, and only limited information was  available about the methodologies used for each set of estimates. It is  also important to note that the assumptions used in developing these  estimates are subject to professional judgment and have inherent  uncertainty regarding whether the assumed scenarios will be realized.  The three estimates include:", "The President\u2019s Budget for fiscal year 2017 estimated that expanding  FEHBP to a greater variety of plan types would save $88 million from  2017 through 2026. According to information provided by OPM, the  estimate considered the effect of a broad expansion of OPM\u2019s  authority to add new plan types, and OPM did not indicate whether  the agency specifically considered the effect of adding regional PPOs  to FEHBP when developing this estimate. OPM officials told us that  these savings were based on a number of assumptions, including an  estimate of the number of enrollees that will migrate to new plan types  based on previous FEHBP experience and projecting a medical loss  ratio of 90 percent for the new plan types added to FEHBP.  However, in follow-up with the agency, OPM officials were not able to  provide us with more detailed information about how these savings  were calculated. The Congressional Budget Office, in its analysis of  the budget proposal, estimated a range from $50 million in savings to  $50 million in costs over the 10-year period.", "A 2014 study from the Center for Health and Economy that examined  the effects of introducing regional PPOs to FEHBP across three  scenarios estimated cost savings ranging from $1.2 to $2.1 billion  over 7 years (2015 to 2021). The study provided limited information  about the data, assumptions, and methodology the center used to  develop its estimates. The study did explain that the center modeled  the projected impact on enrollment, average premiums, and the  federal budget of adding regional PPOs to FEHBP using three  different sets of assumptions about how expensive the newly  introduced regional PPO plans would be. Under each scenario, the  center estimated shifts over time in enrollment from existing FEHBP  plan designs (FFS, HMO, CDHP, and HDHP) to the new PPO plans\u2014 and assumed that these new plans would achieve 10 percent of the  market share throughout the analysis period. The study also projected  decreases in average FEHBP premiums and a corresponding  reduction in total government contributions in each scenario.", "A December 2013 study conducted by Avalere Health at BCBSA\u2019s  request specifically examined the effect of adding regional PPOs into  FEHBP and estimated an increase in spending of $7.8 billion over 10  years (2014 to 2023). In developing its estimates, the study noted that it  assumed that the BCBSA national plans dissolve and would break into  regional plans in response to new regional plan competition. The study  stated that the $7.8 billion in increased costs was based on an  assumption that both regional PPOs and BCBSA regional plans would  have higher administrative costs as compared to BCBSA\u2019s national plans.  The study estimated that these costs would be offset slightly by an initial  anticipated decrease in premiums resulting from new plans introducing  competition into these regions."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to OPM for comment. The agency did  not provide any comments.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to OPM 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) 512-7114 or  dickenj@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  III."], "subsections": []}]}, {"section_title": "Appendix I: Federal Employees Health Benefits Program (FEHBP) Plan Attributes for Selected Counties in 2015", "paragraphs": ["In table 4, we present information about a selection of counties that reflect  a range of FEHBP attributes, but which are not intended to be a  representative sample of all counties. We chose counties with a range of  total enrollments, market shares held by different plan offerings (with  different enrollee premiums), and number of health maintenance  organization (HMO) plan offerings."], "subsections": []}, {"section_title": "Appendix II: Stakeholder Opinions about Other Federal Employees Health Benefits Program Aspects That Affect Competition", "paragraphs": ["Some of the stakeholders we interviewed suggested that any positive  effects of expanding the Office of Personnel Management\u2019s (OPM)  contracting authority and adding additional plan types to the Federal  Employees Health Benefits Program (FEHBP) could be limited because  of other aspects of the program that affect competition and discourage  carrier participation. In particular, stakeholders cited concerns related to:  Medicare-eligible enrollees, the government contribution formula for  FEHBP premiums, and FEHBP\u2019s plan performance assessment system.", "Medicare-eligible enrollees. Six of the 11 stakeholders we interviewed  suggested that problems associated with Medicare-eligible enrollees  negatively affect FEHBP premiums, and 5 of the 6 noted these problems  create an unfair competitive advantage for the nationwide FEHBP plans.  These stakeholders suggested that because certain older, Medicare- eligible FEHBP enrollees tend to incur higher health care costs, they drive  up premiums. Some stakeholders noted that plans\u2014in particular, health  maintenance organizations (HMOs) that offer service in areas with higher  concentrations of older enrollees\u2014experience challenges keeping  premium rates competitive with the nationwide plans like those offered by  the Blue Cross Blue Shield Association (BCBSA). Additionally, 3  stakeholders we interviewed that offer HMO plans pointed specifically to  costly retirees who opt not to enroll in in Medicare coverage of outpatient  services, known as Part B, making it difficult for them to compete. FEHBP  retirees eligible to enroll in Medicare are not required to do so, and some  maintain only their FEHBP coverage instead. While there is no penalty for choosing not to enroll in Medicare, retirees who later decide to enroll  in Part B must pay a penalty. For retirees in FEHBP who choose not to  enroll in Medicare, their FEHBP plan remains the primary payer and they  continue to receive the same level of coverage through that plan as they  did prior to becoming eligible for Medicare. Two stakeholders said that  charging the same rates to the retiree population without Part B and the  active employee population\u2014a scenario that occurs in FEHBP\u2014is not  typical of the private, commercial insurance market.", "In a recent publication, one of the stakeholders we interviewed reported  that these types of issues have been a problem for FEHBP since its  inception, and that it is therefore in the interest of every enrollee to join  plans with the lowest proportion of high-cost retirees. The stakeholder  noted that this distorts plan selection and alters results, noting that while  the Kaiser plans on the West Coast do an outstanding job of keeping  costs low for enrollees, they have a disproportionate number of retirees  who correctly understand that they do not need to enroll in Medicare.  According to the stakeholder, this puts Kaiser at a disadvantage since it  has to cover the age-related costs of these enrollees.", "Stakeholders we interviewed offered a number of potential solutions for  OPM to address these challenges. For example, two stakeholders  suggested that OPM could introduce some form of risk adjustment into  FEHBP to assist plans that have a disproportionate number of Medicare- eligible enrollees. Risk adjustment provides a way to correct for  imbalances that occur when some carriers attract a larger share of  enrollees at low risk for expensive claims and other carriers attract a  larger share of enrollees at high risk for expensive claims. One of the two  stakeholders suggested that FEHBP could introduce a budget-neutral risk  adjustment program that adjusts the amount of a plan\u2019s premium that is  paid by the government based on a plan\u2019s ratio of age-65 retirees with  Medicare (Parts A, B, or both) to those without. The stakeholder said that  this would greatly improve plan competition over time.", "OPM officials agreed with stakeholders that providing nationwide service  is an advantage for carriers like BCBSA in high cost areas, but noted that  it is a disadvantage in low cost areas, and said that, similarly, a lack of  risk adjustment in the program works both in favor of and against BCBSA  and HMOs. OPM officials said, for example, that the BCBSA Standard  option would likely benefit from risk adjustment, while the BCBSA Basic  option would likely be negatively impacted. OPM officials also said that  risk adjustment could be a way for the agency to compensate plans that  have enrollees with higher than average risk and to improve competition  by discouraging plans from avoiding those higher risk enrollees. However,  officials noted that risk adjustment would require the agency to have  reliable claims-level data from each of the plans, which the agency does  not have. In January 2017, OPM officials said that the agency is in the  process of collecting claims data from FEHBP carriers and expects to  have a sufficiently reliable data set by July 2018. OPM officials also noted  that before implementing any form of risk adjustment in FEHBP they  would have to use that data to determine the effects on the program, and  they would also need to determine whether doing so would require any  legislative changes.", "Some stakeholders we interviewed also suggested retirees could be  incentivized to enroll in Medicare Part B (for example, by waiving the  Medicare Part B late enrollment fee for FEHBP retirees, or by having  FEHBP plans subsidize Part B premiums), and two stakeholders went as  far as suggesting that Medicare enrollment should be required for those  eligible. OPM officials said that they already encourage enrollment in  Medicare Part B; in particular, they noted that in their annual call letters  they have encouraged carriers to offer benefits in their plans that  incentivize Medicare enrollment for eligible FEHBP enrollees. However,  OPM officials said that they are open to pursuing additional approaches  that would encourage FEHBP retirees to fully participate in Medicare  coverage.", "The government contribution formula for FEHBP premiums. Five of  the 11 stakeholders we interviewed suggested that the government  contribution formula for FEHBP premiums negatively impacts program  competition. The FEHBP statute establishes the amount the government  contributes towards the costs of FEHBP plan premiums. By statute, the  government pays an amount equal to 72 percent of the weighted average  premium across all FEHBP plans, but no more than 75 percent of any  particular plan\u2019s premium. Enrollees generally pay the remaining  premium. As such, enrollee contributions will generally be 25 percent for  lower-premium plans and can be higher than 28 percent if their plan\u2019s  premiums are significantly higher than the weighted average FEHBP  plan.", "Some stakeholders we interviewed noted that BCBSA has an advantage  under the contribution formula, and that the existing formula does not  incentivize enrollees to choose low cost plans. Two stakeholders noted  that BCBSA\u2019s large program market share\u201466 percent of total program  enrollment in 2015\u2014allows it significant influence over the government  contribution amount. Therefore, several stakeholders suggested that  BCBSA\u2019s enrollees end up paying closer to the minimum of 25 to 28  percent of their premium\u2019s costs. Conversely, other plans\u2014particularly  HMOs operating in high cost areas\u2014may have premiums that are higher  than BCBSA\u2019s and the weighted program average, resulting in their  enrollees having to pay considerably more than 28 percent of their total  premium\u2019s costs. Two stakeholders said that, as a result, carriers may  exit the program once their premiums exceed the weighted program  average. Additionally, two stakeholders we interviewed suggested that  the formula does not incentivize enrollees to choose lower cost plans  because the maximum government contribution amount is 75 percent\u2014 regardless of whether the plan\u2019s premiums are less than the weighted  FEHBP average. See table 5 for examples of how the government  contribution formula affects the share of premiums that enrollees pay.", "Some stakeholders we interviewed proposed solutions to the concerns  they identified with the government contribution formula. For example,  two stakeholders suggested that the formula be changed so that plans  that cost less than 72 percent of the weighted average would be covered  either in full or to a greater extent by the government. They noted that this  would incentivize enrollees to choose lower cost plan options and would  strengthen the competitiveness of lower-cost plans\u2014particularly as  compared to the BCBSA options. One stakeholder also suggested that  the government contribution formula could be varied by metropolitan  regions (i.e., vary government and enrollee premium contributions based  on regional health care costs), which they suggested would lead to more  carriers introducing more plan offerings overall. While the government  contribution formula is set in statute, OPM officials said that they are open  to pursuing changes that would encourage FEHBP enrollees to select the  health plans that meet their current and expected health care needs at  affordable costs.", "FEHBP plan performance assessment system. Five of the 11  stakeholders we interviewed cited concerns with OPM\u2019s system for  assessing FEHBP plan performance, with 2 noting that it discourages  competition and participation in FEHBP. OPM announced a new  methodology for assessing plan performance in a letter to carriers in  2015, noting that the agency would use a discrete set of quantifiable  measures to examine aspects of contract performance and link this  performance assessment to the profit plans receive. OPM reported in  the letter that it implemented performance assessment to move away  from paying for procedures or services and towards paying for value and  prevention of disease. It also noted that the system was intended to  create a more objective performance standard and provide more  transparency for enrollees. Stakeholders we interviewed, however, were  particularly critical of the way in which community-rated plans are  assessed in this new system, noting that plans are penalized rather than  rewarded. Regulations specify a process by which OPM may withhold a  portion of payments to a community-rated carrier based on plan  performance thereby reducing the carrier\u2019s profits.  Two of these  stakeholders said that the only way for a plan to not receive a financial  penalty is to get a perfect score on the assessment and said that it is  impossible to receive such a score. Therefore, one stakeholder noted that  the system is extremely discouraging to carriers, particularly to new  carriers considering joining FEHBP. Additionally, two stakeholders said  that the measures used in the assessment\u2014Healthcare Effectiveness  Data and Information Set (HEDIS) and Consumer Assessment of  Healthcare Providers and Systems (CAHPS) measures\u2014favor certain  types of HMOs. For example, one stakeholder noted that some carriers  can have problems meeting the HEDIS measure for breast cancer  screening rates, because they have to get patients to go to a separate  mammography center while carriers that are part of more integrated  health systems can offer mammograms in-house.", "With regard to how the plan performance assessment system could be  improved, stakeholders we interviewed suggested that OPM should  switch to a reward or incentive-based system for community-rated  carriers. Several stakeholders suggested that OPM could implement a  system similar to the Medicare Advantage star ratings system. In  December 2016, OPM officials told us that they were listening to  community-rated plans\u2019 concerns regarding the performance assessment  penalty and would consider adjustments to address these concerns. Then  in March 2017, in response to some of these concerns, OPM issued a  letter to FEHBP carriers proposing an update to the assessment of  community-rated plans that would allow carriers with high-performing  plans to avoid any financial penalties. Regarding the concern about the  use of HEDIS and CAHPS measures, OPM officials said that these  measures are well-established and commonly required by other  commercial and government payers, such as Medicare Advantage.  Nonetheless, OPM officials said that the plan performance system will  continuously be improved through the introduction of new measures and  the retirement of measures on which all FEHBP plans have achieved  satisfactory performance."], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, William Hadley (Assistant  Director), Kristi Peterson (Assistant Director), Christina Ritchie (Analyst in  Charge), Leonard Brown, William Garrard, Daniel Ries, and Said  Sariolghalam made key contributions to this report. Also contributing were  Sandra George, Emei Li, Yesook Merrill, Laurie Pachter, Vikki Porter,  Jennifer Rudisill, Frank Todisco, and Merrile Sing."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Private Health Insurance: In Most States and New Exchanges, Enrollees  Continued to be Concentrated among Few Insurers in 2014.  GAO-16-724. Washington, D.C.: September 6, 2016.", "Private Health Insurance: The Range of Premiums and Plan Availability  for Individuals in 2014 and 2015. GAO-15-687. Washington, D.C.: August  10, 2015.", "Private Health Insurance: Concentration of Enrollees among Individual,  Small Group, and Large Group Insurers from 2010 through 2013.  GAO-15-101R. Washington, D.C.: December 1, 2014.", "Federal Employees Health Benefits Program: Oversight of Carriers\u2019 Fraud  and Abuse Programs. GAO-14-39. Washington, D.C.: November 14,  2013.", "U.S. Postal Service: Proposed Health Plan Could Improve Financial  Condition, but Impact on Medicare and Other Issues Should Be Weighed  before Approval. GAO-13-658. Washington, D.C.: July 18, 2013.", "Federal Employees Health Benefits Program: Premium Growth Has  Recently Slowed, and Varies among Participating Plans. GAO-07-141.  Washington, D.C.: December 22, 2006.", "Federal Employees Health Benefits Program: First-Year Experience with  High-Deductible Health Plans and Health Savings Accounts.  GAO-06-271. Washington, D.C.: January 31, 2006.", "Federal Employees Health Benefits Program: Early Experience with a  Consumer-Directed Health Plan. GAO-06-143. Washington, D.C.:  November 21, 2005.", "Federal Employees Health Benefits Program: Competition and Other  Factors Linked to Wide Variation in Health Care Prices. GAO-05-856.  Washington, D.C.: August 15, 2005.", "Federal Employees\u2019 Health Plans: Premium Growth and OPM\u2019s Role in  Negotiating Benefits. GAO-03-236. Washington, D.C.: December 31,  2002.", "Federal Employees\u2019 Health Program: Reasons Why HMOs Withdrew in  1999 and 2000. GAO/GGD-00-100. Washington, D.C.: May 2, 2000."], "subsections": []}], "fastfact": ["The Federal Employees Health Benefits Program (FEHBP) provides healthcare coverage to 8 million federal employees, retirees, and their dependents through health insurers that contract with the Office of Personnel Management.", "OPM has reported that more health plan choice would benefit FEHBP. We found that, although more plan offerings have been available in recent years, enrollment has become increasingly concentrated. The median share of enrollment held by the largest FEHBP insurer in a county increased from 58% in 2000 to 72% in 2015. Blue Cross Blue Shield was the largest FEHBP insurer in 93% of counties in 2000 and 98% of counties in 2015."]}
{"id": "GAO-18-353", "url": "https://www.gao.gov/products/GAO-18-353", "title": "KC-46 Tanker Modernization: Program Cost Is Stable, but Schedule May Be Further Delayed", "published_date": "2018-04-18T00:00:00", "released_date": "2018-04-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The KC-46 tanker modernization program, valued at about $44 billion, is among the Air Force's highest acquisition priorities. Aerial refueling\u2014the transfer of fuel from airborne tankers to combat and airlift forces\u2014is critical to the U.S. military's ability to effectively operate globally. The Air Force initiated the KC-46 program to replace about a third of its aging KC-135 aerial refueling fleet. Boeing was awarded a fixed-price-incentive contract to develop the aircraft. Among other things, Boeing was contractually required to deliver 18 fully capable aircraft (KC-46 aircraft with 9 sets of wing aerial refueling pods that allow for simultaneous refueling of 2 aircraft) by August 2017. The program plans to eventually field 179 aircraft in total.", "GAO was asked to monitor the KC-46 program because of problems Boeing is experiencing developing the aircraft. This is GAO's 7th report on the KC-46 program. This report assesses program progress and challenges toward achieving its cost goals and delivery schedule.", "GAO analyzed cost, schedule, development, and test information contained in program documents; and discussed results with officials from the KC-46 program office, other defense offices, the Federal Aviation Administration (responsible for certifying the design of the KC-46), and Boeing."]}, {"section_title": "What GAO Found", "paragraphs": ["The total acquisition cost estimate for the KC-46 refueling tanker aircraft remained stable over the last year at $44.4 billion. As shown in the table below, the estimate has decreased about $7.3 billion, or 14 percent, since the initial estimate. This decrease is due in part to stable requirements.", "The program updated its delivery schedule in 2017 to allow Boeing to delay delivery of the first 18 fully capable aircraft from August 2017 to October 2018\u2014 14 months. A schedule risk assessment, as well as GAO's analysis, however projects that deliveries could slip to May 2019, 21 months from the original schedule, if risks are not mitigated. See figure.", "Boeing faces the following risks and challenges and is trying to address them:", "updating test aircraft to the correct configuration to complete remaining tests;", "completing flight tests at a pace that is almost double its monthly average;", "updating test plans to reflect a more realistic schedule for certifying aircraft, such as F-16 fighters and C-17 cargo planes, to be refueled by a KC-46;", "retrofitting production aircraft to their final configuration for delivery; and", "fixing a critical deficiency to keep the boom from contacting receiver aircraft outside the refueling receptacle.", "Because of the terms of the contract, Boeing, not the government, is responsible for nearly $1 billion in additional development costs already incurred. Boeing is also providing additional training for KC-46 pilots, among other things, to compensate the Air Force for delivery delays. Meanwhile, the Air Force is continuing to use KC-135 and KC-10 tankers for refueling missions."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO believes the Department of Defense should implement a prior recommendation to document lessons learned given the program's challenges."]}], "report": [{"section_title": "Letter", "paragraphs": ["The KC-46 aerial refueling tanker modernization program, valued at about  $44 billion, is one of the Air Force\u2019s highest acquisition priorities and will  provide aerial refueling to Air Force, Navy, Marine Corps, and allied  aircraft. The program recently completed its seventh year of a 9-year  development program to convert an aircraft designed for commercial use  into an aerial refueling tanker. Aerial refueling\u2014the transfer of fuel from  airborne tankers to combat and airlift forces\u2014is critical to the U.S.  military\u2019s ability to effectively operate globally. The Air Force contracted  with Boeing to develop, test, and provide initial delivery of 18 KC-46  tankers by August 2017. The program plans to eventually field 179 KC-46  aircraft in total. These aircraft are intended to replace roughly one-third of  the Air Force\u2019s aging aerial refueling tanker fleet, comprised mostly of KC- 135 Stratotankers.", "You requested that we continue monitoring the KC-46 program because  of problems Boeing is experiencing developing the aircraft. In this report,  we evaluate program progress and challenges toward (1) achieving cost  and performance goals and (2) meeting the delivery schedule. This is  GAO\u2019s 7th report on the KC-46 program. See the Related GAO Products  page for a list of our previous KC-46 reports.", "To assess progress toward achieving cost and performance goals, we  compared cost estimates established at the start of development to  current estimates. This data was contained in program documents such  as a defense acquisition executive summary report and acquisition  program baseline document. We also compared the latest estimates of  technical performance capabilities contained in program briefings to the  original goals. To assess progress toward meeting the delivery schedule,  we reviewed monthly schedule updates and compared them to the  original and current delivery schedule plans. We also tracked Boeing\u2019s  planned and actual flight test activities and examined the risks to test  completion. We reviewed the 2017 Annual Report of the Director of  Operational Test and Evaluation. As part of our overall review, we  examined Defense Contract Management Agency quarterly assessments  of the KC-46 program and attended monthly meetings between the  program office and Boeing to obtain additional insight on program  progress. We visited two Boeing production facilities in Everett,  Washington. Finally, we interviewed officials from the Air Force\u2019s KC-46  program office, other defense offices, the 412th test wing, the Federal  Aviation Administration (which is responsible for certifying the design of  the KC-46), and Boeing on progress made in 2017. We assessed the  reliability of cost, schedule, and test data by interviewing agency officials  knowledgeable about the data, and determined that the data were  sufficiently reliable for the purposes of this report.", "We conducted this performance audit from August 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In February 2011, Boeing won the competition to develop the Air Force\u2019s  next generation aerial refueling tanker aircraft, the KC-46. The KC-46 will  allow for two types of refueling to be employed in the same mission\u2014a  refueling boom that is integrated with a computer assisted control system  and a permanent hose and drogue refueling system. The boom is a rigid,  telescoping tube that an operator on the tanker aircraft extends and  inserts into a receptacle on the aircraft being refueled. See figure 1 for an  example of boom refueling.", "The hose and drogue system is comprised of a long, flexible refueling  hose and a parachute-like metal basket that provides stability. Drogue  refueling is available via the centerline drogue system in the middle of the  aircraft, or via wing aerial refueling pods located on each wing. The pods  are used for simultaneous refueling of two aircraft.", "To develop a KC-46 tanker, Boeing modified a commercial 767 aircraft in  two phases. In the first phase, Boeing modified the design of the 767 with  a cargo door and an advanced flight deck display borrowed from its 787  aircraft and is calling this modified version the 767-2C. The 767-2C is built  on Boeing\u2019s existing production line. In the second phase, the 767-2C  was militarized and brought to a KC-46 configuration in a separate Boeing  facility. See figure 2 for a depiction of the conversion of the 767 aircraft  into the KC-46 tanker with the boom deployed and the flight certifications  needed at each stage.", "The Federal Aviation Administration has previously certified the  airworthiness of Boeing\u2019s 767 commercial passenger airplane (referred to  as a type certificate) and in December 2017, awarded the amended type  certificate for the 767-2C aircraft to Boeing. It is also responsible for  certifying the design of the KC-46 with a supplemental type certificate.  The Air Force is then responsible for certifying the airworthiness of the  KC-46 with a military certification, as well as certifying the KC-46 and  various receiver aircraft, such as F-16 fighters and C-17 cargo planes, for  refueling operations. Boeing must complete developmental testing to  support these certifications as well as to demonstrate that contract  specifications have been met. After the first 4 KC-46 aircraft are  delivered, the Air Force will complete operational testing to determine the  KC-46\u2019s operational effectiveness and operational suitability for combat.", "Boeing was awarded a fixed-price-incentive (firm target) contract for KC- 46 development, which includes the design, manufacture, and delivery of  four test aircraft. Barring any changes, the contract specifies a ceiling  price of $4.9 billion for Boeing to develop the first 4 aircraft, at which point  Boeing must assume responsibility for all additional costs. The contract  includes options to manufacture the remaining 175 aircraft with firm-fixed- price contract options for the first 2 production lots, and options with not- to-exceed fixed prices for production lots 3 through 13. For purposes of  this report, a production lot refers to a set number of aircraft that must be  built and delivered in a given time frame and procured with a specific year  of funding. For example, the first production lot includes 7 aircraft  procured with fiscal year 2015 funding that are to be built and then  delivered to the Air Force starting in 2018. The original contract also  required Boeing to deliver 18 fully capable aircraft by August 2017.", "The Under Secretary for Acquisition, Technology and Logistics approved  the KC-46 program to enter low-rate initial production in August 2016.  Since then, the Air Force has exercised options for the first 3 production  lots for 34 aircraft totaling about $4.9 billion. Previously we reported that  in January 2017, Boeing and the program office updated the schedule to  reflect a 14-month delivery delay due to problems Boeing experienced  wiring the aircraft, design issues discovered with fuel system  components, a fuel contamination event, and test delays (see figure 3).", "As we reported, instead of meeting the original August 2017 date, the  updated schedule shows Boeing would deliver the first 18 aircraft with  booms and centerline drogue systems between September 2017 and  February 2018. Then, the 9 wing aerial refueling pod sets would be  delivered separately by October 2018, at which point Boeing will have  delivered 18 fully capable aircraft."], "subsections": []}, {"section_title": "Cost Estimates and Performance Capability Goals Remain Favorable, but a Critical Deficiency Has Not Yet Been Resolved", "paragraphs": ["The KC-46 program\u2019s total acquisition cost estimate remained stable over  the past year at $44.4 billion, which is about $7.3 billion less than the  original estimate. In addition, the aircraft is projected to meet all  performance capabilities. However, Boeing is currently trying to resolve a  critical deficiency it discovered in testing, which could affect performance."], "subsections": [{"section_title": "Cost Estimates Remain Stable", "paragraphs": ["Similar to last year, the Air Force estimates that the total program  acquisition cost for the KC-46, which includes development, procurement,  and military construction costs will be $44.4 billion. This is about $7.3  billion, or about 14 percent, less than the original estimate of $51.7 billion.  Average program acquisition unit costs have decreased by the same  percent because quantities have remained the same. Table 1 provides a  comparison of the initial and current quantity and cost estimates.", "The Air Force decreased its cost estimate primarily because it has not  added or changed requirements and therefore there were fewer  engineering changes than expected. Program officials said the initial cost  estimate included a large amount of funding for possible requirements  changes, based on the Air Force\u2019s experience with prior major acquisition  programs. Military construction cost estimates also decreased as the Air  Force has decided, for example, to reuse existing facilities at its operating  bases rather than build new ones."], "subsections": []}, {"section_title": "Boeing Has Achieved Some Performance Goals and Others Are Projected to Be Met, though Additional Testing Is Needed", "paragraphs": ["The program expects to meet all of its 21 performance goals. For  example, the aircraft is expected to be ready for operational use when  required at least 89 percent of the time and, once it is deployed for an  aerial refueling mission, be able to complete that mission 92 percent of  the time. In addition, the aircraft is now using less than 1,557 gallons of  fuel per flight hour, its fuel usage rate target. The program also closely  tracks the actual weight of the aircraft because weight has a direct effect  on the amount of fuel that can be carried. As of January 2018, program  officials told us that there are approximately 176 pounds of margin to the  operational empty weight target of 204,000 pounds. When we met with  them in December 2017, Boeing officials told us they do not expect the  aircraft to exceed the target weight. Appendix I provides a description of  each of the performance capabilities.", "In some cases, the program will be tracking progress towards achieving  performance capabilities while the aircraft is in operation. For example,  the program set a reliability growth goal of 2.83 flight hours between  unscheduled maintenance events due to equipment failure by the time  the aircraft reaches 50,000 flight hours. As of November 2017, the  program had completed about 2,159 flight hours, achieving 1.8 hours at  that time. Program officials believe that the reliability will improve as  additional flight hours are completed and as unreliable parts are identified  and replaced.", "The 2017 Annual Report by the Office of the Director of Operational Test  and Evaluation included a recommendation that the Air Force re-test the  KC-46 in an operationally representative condition to demonstrate that  aerial refueling systems could perform their required missions following  an electromagnetic pulse event. This type of testing is related to the  aircraft\u2019s survivability performance goal, meaning the aircraft should be  capable of operating in a hostile environment, including after a nuclear  incident that delivers an electromagnetic pulse. The report stated that the  program powered down or removed critical mission systems during this  testing and that therefore, the KC-46\u2019s capability to deliver fuel during or  immediately following an electromagnetic pulse was not fully tested.  Program officials stated that this testing was adequate to meet the initial  contract specifications. They also stated that the program is assessing  whether additional tests are needed to meet the new, more stringent  standards that were issued by the Department of Defense after the fixed- price contract was signed."], "subsections": []}, {"section_title": "A Critical Deficiency Has Not Been Resolved", "paragraphs": ["Boeing is currently working to resolve a high-priority deficiency related to  the performance of the aerial refueling boom that it discovered during  testing. According to the 2017 Annual Report by the Director of  Operational Test and Evaluation, analysis of boom aerial refueling testing  to date showed a significant number of instances where the boom nozzle  contacted the receiver aircraft outside the refueling receptacle. In many of  those instances, the aerial refueling operators were unaware that those  contacts had occurred. Boom nozzle contact outside the receptacle can  damage antennae or other nearby structures. It is especially problematic  for low-observable receiver aircraft, such as the F-22 fighter, because it  can damage radar-absorbing coatings. Program officials said that Boeing  is currently developing a software fix for the remote vision system that  would provide aerial refueling operators better visibility for refueling  operations to help avoid unintended boom contacts with receiver aircraft.  The officials also said that Boeing is responsible for the costs to develop  and retrofit the fix onto existing aircraft."], "subsections": []}]}, {"section_title": "Boeing Is Likely to Experience Additional Delays in Delivering the First 18 Aircraft", "paragraphs": ["Although Boeing schedule documents indicate that the company remains  committed to delivering 18 fully capable aircraft by October 2018, a  program office risk assessment, as well as our own analysis, project that  Boeing will not deliver the aircraft until around May 2019, if risks are not  mitigated. The company is taking steps to address several risks  associated with developmental testing, but challenges remain. Boeing,  not the government, is responsible for the cost of development delays  based on the terms of the fixed-price contract."], "subsections": [{"section_title": "Schedule Risk Assessment Projects Additional Delays", "paragraphs": ["A program office schedule risk assessment from June 2017 projects that  Boeing will not deliver the first 18 fully capable aircraft until May 2019, 7  months after the updated schedule and about 21 months later than the  original plan, if Boeing does not mitigate existing program risks. Boeing  has already missed delivery milestones in the updated schedule shown  earlier in figure 3, because it had not yet completed developmental  testing. Boeing still plans to deliver 18 fully capable aircraft by October  2018, but in a compressed time period. A comparison of the original,  updated, and schedule risk assessment delivery schedules are shown in  figure 4."], "subsections": []}, {"section_title": "Boeing Is Taking Steps to Mitigate Schedule Risks", "paragraphs": ["Boeing has efforts underway to mitigate several risks that threaten its  ability to deliver the first 18 fully capable aircraft by October 2018. These  key risks and efforts to address them are discussed below.", "Test aircraft configuration: Boeing needs to update test aircraft to the  correct configuration before it can complete different types of testing  that remain. For example, according to program officials, Boeing  needs to ensure that test aircraft have up-to-date and approved  wiring, software versions, and aircraft parts prior to Federal Aviation  Administration testing for the supplemental type certificate and Air  Force testing for the required military certificate. At a more basic level,  Boeing also needs to finalize the design of the wing aerial refueling  pods to start developmental testing on that subsystem. According to  Boeing officials, the company and its wing aerial refueling pod  supplier had underestimated the level of design drawing details the  Federal Aviation Administration needed to review to certify that the  parts conformed to the approved design. Over the past 4 years, this  supplier has been negotiating with several key sub-tier suppliers for  the necessary documentation and has obtained most of it. Boeing has  co-located some of its employees with the supplier to provide  technical support to complete the remaining documentation for  certification. Boeing and the program office disagree on how long it  will take to reach that certification milestone. Boeing projects it will  have conformed wing aerial refueling pods to test in March 2018 and  program officials said there is risk to that time frame.", "Flight test pace: Boeing plans to complete about 6,550 remaining  developmental flight test points by the end of June 2018 at a pace that  is nearly double its current average. For example, some test points  involve a KC-46 and receiver aircraft maintaining a specific airspeed  and altitude during refueling. On average, from February 2016  through January 2018, Boeing has completed about 689 test points  per month. It would need to almost double this pace to about 1,310  test points and sustain that pace for a 5-month period to complete  testing by June. Based on the average number of tests points that  Boeing has completed per month, as shown in figure 5, we project  Boeing would finish the remaining test points about 5 months later  than expected in early November 2018. We also project that delivery  of 18 fully capable aircraft would occur around May 2019, assuming  the same 5.5 month delivery time frame included in the updated  schedule.", "Boeing recognizes that achieving its planned flight test pace is one of  the most significant program risks and has taken several actions to  address this risk. For example, last year, Boeing moved from a \u201ctest  once\u201d approach\u2014where testing would begin once a series of tests  was approved by the Federal Aviation Administration and Department  of Defense\u2014towards a more incremental testing approach where a  smaller set of tests could be conducted as soon as they are approved  by a single entity. Program officials pointed out that, where possible,  Boeing is still using a single test point to satisfy more than one  requirement from both regulators. As of January 2018, Boeing also  identified about 440 test points that could be eliminated because,  according to program officials, data collected in other tests may  provide sufficient knowledge to cover the eliminated test points.  Boeing has also consolidated a large percentage of qualification  testing resources at a single location to improve efficiency.", "Test planning: According to program officials, Boeing\u2019s test plans do  not fully account for the time needed to complete receiver aircraft  certification testing. Program officials, government test officials, and  Boeing officials said that tests for certifying F-16 fighters, C-17 cargo  planes, and other aircraft to receive fuel from a KC-46 will take  between 3 and 5 weeks to complete for each aircraft. This is longer  than the 1 week for each aircraft that is currently included in Boeing\u2019s  test plan, according to company officials. Boeing officials said the  company intends to update the test schedule in Spring 2018 to reflect  more time to complete receiver aircraft certifications. Boeing has not  yet quantified how much time will be added to the test schedule for  these certifications or determined whether it will affect the overall  delivery schedule. According to program officials, Boeing is required  to have 8 receiver aircraft certified by the first KC-46 delivery. These  officials stated that to avoid the risk of further delivery delays, the Air  Force is discussing the possibility of reducing the number of receiver  aircraft certifications needed if some, but not all, receiver aircraft are  certified prior to first KC-46 delivery. This would allow the warfighter to  start using KC-46 aircraft sooner rather than wait for all 8 receiver  aircraft to be certified. Air Force officials still maintain, however, that 8  receiver certifications are required prior to operational testing, which is  slated to begin in October 2018 and last for about 7 months.", "Retrofitting already produced aircraft: Based on the updated schedule,  Boeing will be producing 49 aircraft, or about 27 percent of the total  aircraft the Air Force plans to buy, before developmental testing is  complete. Originally, the Air Force planned to buy 19 aircraft or about  11 percent of the total number concurrent with developmental testing.  In general, DOD tries to limit the amount of concurrency because  testing can reveal design or performance problems that need to be  fixed, which could lead to costly retrofits or schedule delays. For  example, Boeing already needs to retrofit 18 aircraft it has produced  with an updated wiring design and 6 aircraft with new flooring and  tires. The Under Secretary for Acquisition, Technology and Logistics  allowed 27 percent concurrency on this program to avoid a break in  production. Cost risk to the government is low because the KC-46  development contract specifies that Boeing must correct any  deficiencies and bring development and production aircraft to the final  configuration at no additional cost to the government. However, there  could be schedule delays if continued testing reveals problems that  need to be corrected on aircraft already built. As of January 2018,  Boeing estimates KC-46 development will cost about $5.9 billion or  about $1 billion over the contract ceiling price."], "subsections": []}, {"section_title": "KC-46 Development Problems Have Resulted in Less Refueling Capacity Than Currently Anticipated", "paragraphs": ["KC-46 development problems have resulted in delivery delays and kept  the Air Force from achieving a higher level of refueling capacity it  expected to achieve by this time. These problems have not resulted in  additional costs to the government. However, if delivery delays continue  past October 2018, the Air Force will need to maintain legacy aircraft  such as the KC-135 longer than planned.", "The Air Force expected to have 470 tankers in January 2018\u2014a  combination of KC-46, KC-135, and KC-10 aircraft\u2014for refueling  missions, but only had 455 of these aircraft at that time. Since no KC-46  aircraft have been delivered, the Air Force has had to use KC-135 and  KC-10 aircraft at a higher rate than expected. Air Force officials  negotiated non-monetary considerations from Boeing to offset the lost  military tanker capacity associated with the delay, such as obtaining  additional training at no cost to the government for KC-46 pilots and  maintenance personnel and support for the aircrew training system.  According to program officials, Boeing has already provided almost all of  these considerations even though the contract modification that includes  them has not yet been signed by Boeing.", "According to Air Mobility Command officials, if there are delivery delays  past October 2018, the Air Force would need to keep some KC-135  aircraft operational longer than planned. The cost of maintaining those  KC-135 aircraft is estimated to be about $10.3 million per year per  aircraft. Additionally, about $12 million per aircraft may also be needed,  according to Command officials, for depot maintenance activities that are  scheduled every 5 years. Command officials stated that the number of  depot events that are needed will depend on how quickly Boeing can  deliver expected KC-46 aircraft.", "We are not making any recommendations in this report, but believe the  Under Secretary of Defense for Acquisition, Technology and Logistics  should implement a prior recommendation to closely monitor the cost,  schedule, and performance outcomes of the KC-46 program to identify  positive or negative lessons learned. As one of only a few major  acquisition programs to award a fixed-price incentive (firm target)  development contract in recent years, evaluating performance and  identifying lessons learned will be illustrative, important for informing  decision makers, and help guide and improve future defense acquisition  programs."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD for comment. DOD did not  provide any written comments, but the KC-46 program office provided  technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; and the Secretary of the Air Force.  The report is also available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or sullivanm@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found   on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: KC-46 Performance Capabilities", "paragraphs": ["The program office has 21 performance goals that are critical to the KC- 46 aircraft\u2019s military capability and track progress in meeting contract  specifications. These performance goals include nine key performance  parameters, five key system attributes, and seven technical performance  measures. Table 2 provides a description of each key performance  parameter and key system attribute and table 3 provides a description  and status of each technical performance measure."], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Cheryl Andrew, Assistant  Director; Matt Crosby; Kurt Gurka; Stephanie Gustafson; Katheryn  Hubbell; Zachary Sivo; Nate Vaught; and Robin Wilson made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["KC-46 Tanker Modernization: Delivery of First Fully Capable Aircraft Has  Been Delayed Over One Year and Additional Delays are Possible.  GAO-17-370. Washington, D.C.: March 24, 2017.", "KC-46 Tanker Aircraft: Challenging Testing and Delivery Schedules Lie  Ahead. GAO-16-346. Washington, D.C.: April 8, 2016.", "KC-46 Tanker Aircraft: Key Aerial Refueling Capabilities Should Be  Demonstrated Prior to the Production Decision. GAO-15-308.  Washington, D.C.: April 9, 2015.", "KC-46 Tanker Aircraft: Program Generally on Track, but Upcoming  Schedule Remains Challenging. GAO-14-190. Washington, D.C.: April  10, 2014.", "KC-46 Tanker Aircraft: Program Generally Stable but Improvements in  Managing Schedule Are Needed. GAO-13-258. Washington, D.C.:  February 27, 2013.", "KC-46 Tanker Aircraft: Acquisition Plans Have Good Features but  Contain Schedule Risk. GAO-12-366. Washington, D.C.: March 26, 2012."], "subsections": []}], "fastfact": ["Under the Air Force's KC-46 modernization program, commercial aircraft are being converted by Boeing into aerial refueling tankers. The program is one of the Air Force's highest acquisition priorities, and will replace a third of the aging fleet.", "We found that the program, now in its seventh year, is meeting its estimated acquisition cost. However, the program office projects that Boeing will not deliver the first 18 fully capable aircraft until May 2019\u201421 months later than initially planned."]}
{"id": "GAO-18-445", "url": "https://www.gao.gov/products/GAO-18-445", "title": "National Institute of Standards and Technology: Additional Review and Coordination Could Help Meet Measurement Service Needs and Strengthen Standards Activities", "published_date": "2018-07-26T00:00:00", "released_date": "2018-07-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The U.S. Department of Commerce's NIST provides measurement services and supports standards that promote U.S. competitiveness. For example, NIST provides calibrations for manufacturing equipment and reference materials used in testing. NIST also supports private sector organizations in developing standards to help ensure product performance, among other things, such as Wi-Fi. In recent years, NIST has sought to improve the delivery of its services and documentary standards activities.", "GAO was asked to review NIST measurement services and standards-support activities. This report examines (1) the challenges NIST faces in providing measurement services and supporting documentary standards development, and (2) the extent to which NIST has taken steps to address these challenges and how those steps align with federal guidance and policy. GAO analyzed testimony, reports, laws, and policies; conducted focus groups with academics and industry representatives; and interviewed various stakeholders."]}, {"section_title": "What GAO Found", "paragraphs": ["The National Institute of Standards and Technology (NIST) faces challenges in providing measurement services and supporting private sector development of specifications for products' designs or performance\u2014referred to as \u201cdocumentary standards.\u201d Based on reviews of relevant testimony, reports, and other documents; interviews with stakeholders; and focus groups with academics and industry representatives, GAO identified challenges including:", "Identifying and prioritizing what measurement services, such as calibrating large force-measurement tools used by aerospace manufacturers, or what documentary standards activities, such as serving as a technical advisor on fire safety standards, are most needed by U.S. industry, and", "Coordinating with other federal agencies on standards development issues.", "NIST has taken steps to address these challenges, including industry outreach and reviews of measurement services and standards activities. However, some efforts do not fully align with federal guidance or NIST policy. For example, NIST's measurement-services and standards-activity reviews have not included a comprehensive examination of how these services and standards activities align with stakeholder needs. Federal internal control standards call for managers to use quality information to determine if the agency is meeting its objectives. Comprehensively reviewing NIST's measurement services and documentary-standards activities would provide NIST with greater confidence that its services and activities align with stakeholders' needs.", "GAO also found that NIST coordinates with other agencies on standards development and related activities, but that some efforts do not fully align with specific leading practices GAO has previously identified for enhancing and sustaining interagency collaboration. For example, NIST and other agencies coordinate on standards activities through a NIST-chaired interagency committee. However, GAO found that the committee has not updated its charter since 2000\u2014contrary to leading practices to update and monitor collaborative agreements. GAO also found that NIST has not worked with other committee members to fully clarify agencies' roles and responsibilities. Without ensuring that member agencies' roles and responsibilities are current and fully clarified, NIST and other agencies may miss opportunities to strengthen coordination."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that NIST comprehensively review measurement services and documentary-standards activities, and work with other agencies to take steps to strengthen interagency coordination. The Department of Commerce agreed with six recommendations and disagreed with one, citing risks to the private-sector-led U.S. standards system. GAO clarified its recommendation and continues to believe this action is needed, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Commercial transactions rely on a buyer and seller having a shared  understanding about certain aspects of the goods being exchanged, such  as their size or other technical specifications. For example, motorists  expect that the volume of fuel dispensed from a gasoline pump accurately  matches the volume for which they are charged. Standards help define  the technical aspects or capabilities of materials, devices, machines, and  other products to ensure their performance and interoperability.  Standards include units of measurement, such as the gallon, and  standards that can describe the performance or design of a product,  process, or test\u2014referred to as \u201cdocumentary standards.\u201d Wi-Fi, for  example, is a set of documentary standards that define a particular type  of wireless communication network. Devices that follow the same Wi-Fi  standard will be compatible regardless of manufacturer, thus providing  consumers with more choices among similar products.", "The National Institute of Standards and Technology (NIST) is an agency  within the Department of Commerce (Commerce) that, since 1901, has  provided measurement services and tools and has helped develop and  maintain key measurement and documentary standards to help U.S.  industry compete. Specifically, NIST\u2019s mission is to promote U.S.  innovation and industrial competitiveness by advancing measurement  science, standards, and technology in ways that enhance economic  security and improve quality of life. NIST\u2019s measurement services include,  among other things, calibrating equipment, such as industrial  thermometers, to ensure their accuracy and precision. NIST also sells  standard reference materials that researchers and manufacturers can use  to test the purity, strength, or other attributes of their products. NIST\u2019s  measurement services help businesses ensure that their products meet  relevant standards and give consumers confidence in the products they  purchase. Similarly, NIST supports the development of measurement and  documentary standards in many ways. NIST plays a leading role in  developing some standards, such as standards that support many basic  units of measurement and certain documentary standards on the  operation of federal information technology systems. However, the United  States has a voluntary, consensus-based standards system, whereby  most documentary standards are developed collaboratively by producers  and users through private-sector standards development organizations  (SDO). Consequently, NIST staff may participate in SDO-led standards  development activities by, for example, serving as technical advisors.", "Because advances in science and technology continue to drive growth in  many commercial sectors, NIST\u2019s measurement services and support for  developing documentary standards can directly affect innovation and the  nation\u2019s economy. To fulfill its mission, NIST relies on the expertise and  research of its staff across a number of laboratories. NIST reorganized its  laboratory structure in 2010, in part, to improve the delivery of the  agency\u2019s services. Under the previous laboratory structure, mission- based activities were often spread across numerous laboratories. In  testimony before the House Committee on Science and Technology\u2019s  Subcommittee on Technology and Innovation in March 2010, the Director  of NIST stated that restructuring the agency\u2019s laboratories would make  NIST more effective in delivering its services to customers. Since that  time, NIST has taken additional steps designed to improve its  measurement services and documentary standards activities.", "You asked us to examine NIST\u2019s measurement services and standards  development activities. This report examines (1) the challenges NIST  faces in providing measurement services and supporting documentary- standards development; and (2) the extent to which NIST has taken steps  to address any challenges and how those steps align with relevant federal  guidance and policy.", "To identify any challenges NIST may face in providing measurement  services and supporting documentary-standards development, we began  by performing a literature review, including reports on NIST from the  National Academies of Sciences, Engineering, and Medicine (National  Academies); NIST\u2019s Visiting Committee on Advanced Technology  (VCAT); and other sources. We supplemented our review of the  challenges identified in these sources by analyzing the responses of  participants in focus groups we organized of NIST stakeholders  comprised of: (1) researchers and (2) representatives working with  industry, including commercial entities and state metrology laboratories.", "We selected researchers to participate in our focus groups from university  scientists in engineering and the physical and biological sciences. We  selected industry participants for the focus groups to reflect a range of  industrial sectors, including (1) sectors that contribute the most to U.S.  gross domestic product, and (2) sectors that Commerce has identified as  representing U.S. export opportunities. We also included representatives  from the National Conference on Weights and Measures, a nonprofit  association of state and local weights and measures officials, federal  agencies, manufacturers, retailers, and consumers that addresses  consumer measurement needs. We conducted 3 focus groups for  representatives from industry and 2 focus groups for researchers. Each  focus group included from 5 to 8 individuals. In total, our focus groups  included 31 stakeholders.", "We also collected information on the challenges that NIST faces during  36 interviews, including 17 interviews with current and former NIST  officials, 10 interviews with officials from other federal agencies, and 9  interviews with representatives from SDOs and other stakeholders. The  10 interviews we conducted with other federal agency officials included 8  agency standards executives\u2014senior level officials with knowledge of,  and experience in, standards-related issues at their agencies and who  are responsible for coordinating their agency\u2019s participation in SDOs,  among other responsibilities.", "To evaluate the steps NIST has taken to address challenges in providing  measurement services and in supporting documentary-standards  development, we drew upon our focus groups, interviews with NIST staff,  and reviews of NIST documentation that described the agency\u2019s  measurement services and standards development activities, such as  agency policies, orders, and publications. We also conducted a review of  existing literature as well as relevant laws, NIST policies, and other  agency guidance documents. We compared the steps NIST has taken to  address the challenges it faces in providing measurement services and  supporting standards development to these policies and guidance. We  also assessed how well NIST\u2019s efforts align with Standards for Internal  Control in the Federal Government and selected leading practices for  sustaining and enhancing interagency collaboration that we identified in  previous work.", "We conducted this performance audit from July 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["NIST carries out its measurement services and documentary-standards  development activities across several agency laboratories. NIST\u2019s  standards activities include participation in private-sector standards  development organizations that conduct most standards development in  the United States, and federal law and guidance provide direction to  agencies when they participate in this process."], "subsections": [{"section_title": "NIST\u2019s Management of Measurement Services and Documentary Standards Activities", "paragraphs": ["NIST\u2019s work underlies much of our nation\u2019s business and public  infrastructure, from helping to ensure the quality of air and water to  helping to ensure the security of online financial transactions. This work  includes providing measurement services, such as calibrations of  equipment and reference materials used to ensure the accuracy and  reliability of a wide range of scientific and industrial devices, and support  for the development of documentary standards by the private sector. As  of July 2017, NIST employed approximately 3,500 federal personnel and  hosted 4,000 associates, who include guest researchers and  collaborators, student interns, facility users, and contractors at its  locations in Gaithersburg, MD and Boulder, CO.", "Under its Associate Director for Laboratory Programs, NIST\u2019s activities  span seven laboratory programs that cover a wide range of subject  matter, such as bioscience and health, energy, manufacturing, and public  safety and security (see figure 1). The seven laboratories are divided into  divisions and groups of scientists and engineers who perform research in  a certain field or discipline, and may also provide measurement services  or participate in standards activities. In addition, NIST has three offices  that primarily deal with measurement services: (1) the Office of Reference  Materials within the Material Measurement Laboratory; (2) Calibrations  Services within the Physical Measurement Laboratory; and (3) the Office  of Weights and Measures also within the Physical Measurement  Laboratory. Further, the Standards Coordination Office, which is also  under the Associate Director for Laboratory Programs, conducts  standards-related activities and provides guidance to NIST staff on  participation in documentary standards activities.", "In 2010, NIST reorganized its laboratory structure, in part to improve the  agency\u2019s provision of measurement services. Under the new structure,  the Physical Measurement Laboratory includes staff that handles most of  the agency\u2019s measurement standards and calibrations. The Material  Measurement Laboratory includes staff supporting materials science and  produces most of the agency\u2019s standard reference materials. According to  the NIST Director at the time of the reorganization, managing related  research and measurement services together would allow the agency to  improve its services.", "NIST\u2019s measurement services encompass calibrations, standard  reference materials, and standard reference data, among others. NIST  provides calibration services for about 700 different types of devices and  has over 1,200 different types of reference materials available (see figure  2). For example, NIST performs calibrations on many different types of  thermometers for both scientific and industrial uses. For customers that  have unique calibration needs, NIST can perform special tests tailored to  their specific circumstances. NIST also performs detailed analysis of  certain materials to precisely characterize their properties and makeup  and provides these reference materials for use by others. For example,  NIST produces a number of food-related reference materials that allow  companies to accurately determine the nutritional content of their  products.", "NIST has established a formal quality-control system covering the  calibrations, special tests, and standard reference materials provided by  the agency. The NIST quality system is intended to provide customers  with confidence in the quality of NIST\u2019s measurement services and create  an environment of continual improvement for NIST management and  staff. The quality system is described in policies and procedures  governing the agency\u2019s measurement services. Specifically, the NIST  Quality Manual for Measurement Services, NIST-QM-I, contains NIST- wide policies and procedures and additional sub-level quality  documentation contains policies and procedures established and  maintained by each Division or Office to meet its technical needs. The system is overseen by the NIST Quality Manager, a position within the  Standards Coordination Office, and the NIST Measurement Services  Council, comprised of the Quality Manager and other agency officials,  who report to the Associate Director for Laboratory Programs.", "Private sector calibration and testing companies may use NIST\u2019s  measurement services to provide NIST-traceable services, meaning that  the accuracy and precision of the private company\u2019s service has been  documented and compared to NIST\u2019s capabilities. This process allows  these companies to provide services to consumers who do not need the  high level of certainty provided by NIST while still providing assurance  that their measurements are sufficient for their needs. As shown in figure  3, NIST performed calibrations on about 13,000 individual devices per  year and provided about 30,000 reference materials per year or more  from fiscal year 2006 to fiscal year 2016. NIST also provides standard  reference data\u2014such as detailed technical data on various elements,  materials, and chemicals\u2014and keeps time with its atomic clock in  Boulder, CO, and broadcasts it. NIST also accredits public and private- sector laboratories to perform calibrations and other tests through the  National Voluntary Laboratory Accreditation Program. Such accreditation  shows, among other things, that the measurement services provided by  these labs comports with certain federal and international requirements  for calibration and testing.", "NIST\u2019s standards activities support the development and use of standards  to enhance the economic and technological competitiveness of the United  States. There are various types of standards including measurement  standards that define specific units, such as the kilogram, and  documentary standards that describe the performance or design of a  particular product, process, or test. NIST develops and refines numerous  measurement standards and collaborates with other national metrology  institutes across the world through the General Conference on Weights  and Measures, the Bureau International des Poids et Mesures, and other  organizations. This work includes supporting the International System of  Units, which includes the kilogram, meter, second, and other units of  measurement that form the basis for NIST\u2019s calibration services.  Measurement standards ensure that these units are consistently used  and applied around the world. Documentary standards, in comparison,  can specify how a product is designed or made, or they may establish  performance standards that define the product by function rather than  material. For example, documentary standards define Wi-Fi radios,  certain aspects of building codes, and safe design for children\u2019s toys,  among other things. Both of these standards help define the properties  and functions of today\u2019s products and provide businesses and consumers  with confidence that products will work as expected before purchase."], "subsections": []}, {"section_title": "The U.S. Documentary Standards-Setting Process and NIST Participation", "paragraphs": ["In the United States, documentary standards are generally developed by  the private sector through an open, consensus-based process overseen  by various SDOs. Private sector companies in the United States choose  when it is in their interest to participate in standards development. Many  SDOs follow similar processes in the development of standards, and  generally adhere to certain principles, including openness, balance of  interests, and consensus. Specifically, once an SDO agrees to develop a  new or revised standard, a committee is formed of representatives with  subject-matter expertise from companies, nonprofit organizations, and  government agencies. The representatives serve on a voluntary basis,  and the committee drafts the standard. SDOs may have certain  requirements for participants, such as payment of membership dues, to  fully participate. In the process of creating or revising documentary  standards, certain committee members will take on leadership roles, such  as chairing committee meetings or leading writing of draft standards or  other documents. Generally, a committee will use a consensus-based  process to vote on whether to approve the draft standard. For example, to  approve a draft standard, some SDOs require a supermajority, at least  two-thirds, of the members who cast ballots as well as resolution of any  negative comments.", "Documentary standards define the technical  aspects or capabilities of materials, devices,  machines, and other products to ensure their  performance and interoperability. For  example, in 1990, the IEEE Standards  Association began work to develop a  documentary standard for allowing devices to  connect wirelessly to the internet. The IEEE  wireless networking working group,  designated as 802.11, approved its first  standard in 1997 and has since approved a  series of amendments and improvements to  the standard. In 1999, a group of companies  formed the Wi-Fi Alliance to help drive usage  of the 802.11 standard and provide  consumers with information on products that  implement the standard. The Wi-Fi Alliance  coined the brand Wi-Fi and developed  certification procedures to show that devices  using the 802.11 standard from different  vendors are interoperable and provide a  consistent user experience. Devices that  comply with the standard are able to  wirelessly transfer data within a local area.  Within 2 years of the standard\u2019s initial  approval, the first devices using the standard  were available to consumers and 21 years  later wireless networks have become  commonplace in libraries, coffee shops, and  homes around the world. Originally intended  for linking home or office computers, the  standard has been implemented in a growing  array of devices including lightbulbs and other  household items. Hundreds of companies now  incorporate Wi-Fi into their products,  leveraging the ubiquity of the standard to  improve the value of their products and give  consumers options for meeting their  networking needs.", "Several, large private sector organizations help create documentary  standards in the United States. The American National Standards  Institute (ANSI) is a membership organization that accredits numerous  U.S. SDOs that oversee the creation, promulgation, and use of over  10,000 American National Standards. Other U.S.-based organizations  that develop standards for domestic and international use include ASTM  International, IEEE, and the National Fire Protection Association. ANSI  also serves as the U.S. representative to two Geneva-based international  organizations that support the creation of global standards, the  International Organization for Standardization (ISO) and the International  Electrotechnical Commission (IEC). When followed, international  standards may reduce technical barriers to trade by reducing conflict  among domestic standards in various nations and allowing companies to  produce a single product for multiple markets. For example, ISO  encompasses 163 national standards organizations and is a major source  of international standards. In 2000, NIST and ANSI signed a  memorandum of understanding to, among other things, improve  communication and coordination among the private and public sector on  voluntary standards issues.", "Staff across many of NIST\u2019s laboratories participate in documentary- standards development activities. NIST policy encourages staff  participation in domestic- and international-standards activities whenever  such participation is in the public interest and is compatible with NIST\u2019s  mission, policies, positions, priorities, and available resources. In 2016,  NIST reported that staff participated in 114 SDOs. In limited policy areas,  where a national priority has been identified in statute, regulation, or  administration policy, active engagement or a convening role by the  federal government may be needed to accelerate standards development  and implementation."], "subsections": []}, {"section_title": "Federal Agencies\u2019 Documentary Standards Activities and Relevant Law and Guidance", "paragraphs": ["Federal agencies may use or help develop documentary standards for  several reasons, including (1) to procure goods or services, (2) to  incorporate standards into agency regulations, or (3) to improve agency  operations or further agency policy goals. For example, the General  Services Administration uses standards to specify packaging, marking,  and labeling of products purchased for government use and for  descriptions of the products themselves; the Consumer Product Safety  Commission has incorporated various consensus standards into its  regulations of consumer products; and the Department of Energy uses a  number of consensus standards to help operate its contractor-run  laboratories, among other uses. As a result, a number of federal agencies  participate in a range of standards development activities that span many  different areas of national need.", "Federal law and guidance provide that where possible, agencies are to  use voluntary, private sector standards instead of creating their own  unique standards and are to establish certain responsibilities in  overseeing and coordinating these efforts. The National Technology  Transfer and Advancement Act of 1995 (NTTAA) states that federal  agencies are generally to use technical standards developed or adopted  by voluntary-consensus standards bodies, and in doing so are to consult  with voluntary, private-sector consensus standards bodies and participate  with such bodies in the development of technical standards when such  participation meets certain conditions. NTTAA, as amended, also  provides that it is a function of NIST to coordinate the use of private  sector standards by federal agencies emphasizing where possible the  use of standards developed by private-sector, consensus organizations.", "Furthermore, the Trade Agreements Act of 1979 (1979 act) directs the  Secretary of Commerce to keep adequately informed regarding  international standards-related activities and identify those that may  substantially affect the commerce of the United States. The Secretary is  also to monitor the adequacy of U.S. representation in private  international standards activities. The 1979 act says that the  representation of U.S. interests before any private international standards  organizations is to be carried out by a private person recognized as an  organization member. Further, the 1979 act establishes a process for  the Secretary to follow if the Secretary has reason to believe that such  participation will not result in the adequate representation of U.S. interests  or if there is no current organization member. These tasks have been  delegated to NIST. NIST\u2019s memorandum of understanding with ANSI also  describes NIST\u2019s role under the NTTAA, OMB Circular A-119, and the  1979 act to, among other things, ensure adequate representation of U.S.  interests in all relevant international standards organizations and to  coordinate federal activities in voluntary standards.", "In addition, Office of Management and Budget (OMB) Circular A-119, as  revised in 2016, sets forth the policy for federal participation in the  development and use of voluntary consensus standards. Federal  representatives are encouraged to participate actively in standards  development activities and to be fully involved in discussions and  technical debates, register opinions, and serve in leadership positions if  selected, among other things. A-119 directs the Secretary of Commerce,  who has delegated this responsibility to NIST, to foster implementation of  the Circular. Further, A-119 provides for a NIST-chaired interagency  group called the Interagency Committee on Standards Policy (ICSP). The  ICSP is composed of agency standards executives\u2014senior-level officials  who are broadly engaged in the agencies\u2019 standards activities. A-119  directs standards executives to coordinate their agencies\u2019 views when  they participate in the same standards activities so as to present,  whenever feasible, a unified position and, when not feasible, mutual  recognition of differences. A-119 directs the ICSP to coordinate with  certain entities with a view to encouraging more strategic and coordinated  federal participation in the development and use of standards in regard to  regulatory policy. According to the ICSP charter, the ICSP has the  objective to promote effective and consistent standards policies in  furtherance of U.S. domestic and foreign goals and, to this end, to foster  cooperative participation by the federal government and U.S. industry and  other private organizations in standards activities, and its purpose is to  ensure effective federal participation in domestic- and international- standards activities.", "Further, in 2012 the Executive Office of the President (EOP) issued a  memo for federal agencies to clarify principles guiding federal  government engagement in standards activities that can help address  national priorities. According to the memo and A-119, federal  engagement in standards activities should be guided by the following  strategic objectives:", "Produce timely, effective standards and efficient conformity  assessment schemes that are essential to addressing an identified  need.", "Achieve cost-efficient, timely, and effective solutions to legitimate  regulatory, procurement, and policy objectives.", "Promote standards and standardization systems that promote and  sustain innovation and foster competition.", "Enhance U.S. growth and competitiveness and ensure non- discrimination, consistent with international obligations.", "Facilitate international trade and avoid the creation of unnecessary  obstacles to trade.", "To address these strategic objectives, the memo notes that the federal  government works with the private sector to address common standards- related needs, while taking on a more active role where necessary to  ensure a rapid, coherent response to national challenges. The memo also  identifies responsibilities for agencies, such as periodically reviewing their  standards activities to identify gaps in representation for mission-critical  areas as part of their long-range planning and ensuring effective intra-  and inter-agency coordination of engagement in standards development  activities."], "subsections": []}]}, {"section_title": "NIST Faces Several Challenges in Providing Measurement Services and Supporting Documentary- Standards Development", "paragraphs": ["We identified three areas where NIST faces challenges in providing  measurement services and supporting documentary-standards  development, based on our literature review, NIST stakeholder focus  groups, and interviews with stakeholders and agency officials. First, the  breadth of U.S. industry and the number of SDOs, among other factors,  make identifying and prioritizing measurement service and standards  needs and communicating with stakeholders about NIST\u2019s services  challenging. Second, ensuring adequate U.S. representation in  international standards activities can be challenging due to the number of  activities and other factors. Third, the involvement of multiple agencies  and interdisciplinary issues makes coordinating among federal agencies  on documentary standards challenging."], "subsections": [{"section_title": "NIST Faces Challenges Identifying and Prioritizing Measurement Services and Documentary- Standards Activities, and Communicating with Stakeholders Can Be Challenging", "paragraphs": ["The breadth of U.S. industries and commercial sectors with  measurement-service and documentary-standards needs, and other  factors, make it challenging to identify and prioritize among these needs,  and make it challenging for NIST to ensure stakeholders are aware of the  agency\u2019s services.", "Identifying measurement-service and documentary-standards  needs: Identifying measurement-service and documentary-standards  support needs can be challenging, according to participants in all five of  our focus groups and other NIST stakeholders we interviewed.  Participants and stakeholders identified several factors that contribute to  these challenges, including difficulty identifying needs across the breadth  of U.S. industries and standards development activities, and difficulties  presented by emerging, crosscutting, or interdisciplinary technology  areas.", "The breadth of U.S. industries and standards development activities can  make it difficult to identify their measurement service needs. NIST\u2019s  potential customer base covers the entirety of the U.S. manufacturing  sector and many service sectors, including small- and medium-sized  enterprises, as well as federal agencies and state and local governments.  Identifying needs across the full range of this customer base can be a  challenge, according to participants in all five of our focus groups and  other stakeholders. Further, NIST officials noted that even within an  industry sector, stakeholders may have differing views on the industry\u2019s  measurement service needs, which can make it harder to determine  whether or how NIST should take action to meet those needs.", "Similarly, the diversity of documentary standards activities across many  SDOs may make it difficult to identify when industry needs NIST staff  participation in documentary standards efforts. There are no restrictions  on which organizations may develop standards, and therefore, the total  number of SDOs is not precisely known. However, ANSI estimates that  there are hundreds of such bodies in the United States, and NIST has  reported participating in 114 separate SDOs. Participants in four of our  focus groups and two agency standards executives said that it can be  difficult to keep track of SDOs or standards development activities, and  NIST standards officials noted that the breadth of active SDOs and  volume of their activities was an ongoing challenge. Similarly, three  agency standards executives we interviewed said that identifying  standards activities of interest to their agencies is challenging due to the  large number of activities.", "Furthermore, emerging, crosscutting, or interdisciplinary technology areas  can be a challenge, according to participants in all five of our focus  groups. For example, participants in three focus groups discussed the  difficulties faced by organizations that work in areas that combine multiple  areas of technical expertise. A participant in one focus group cited  electronic health records as an example of an interdisciplinary  technology, as it includes biomedical research, public health research,  and information technology. Another participant cited increasingly high- tech development in biological devices that involve physics, engineering,  and mathematics. Participants said that organizations need to coordinate  across disciplines and break down communication barriers to address  these challenges. Additionally, representatives from one SDO we  interviewed as well as an agency standards executive we spoke with  highlighted the difficulty associated with predicting the trajectory of future  change in emerging technologies. NIST officials noted that taking action  to support the measurement service and standards needs of emerging  technologies may be more challenging where there is a lack of industry  consensus on how a technology will develop.", "Prioritizing among needs: Prioritizing among different measurement  services can also be challenging. Participants in all of our five focus  groups said that NIST must prioritize among measurement service needs  because it does not have the resources to provide services for all industry  needs. Participants in three of our five focus groups described challenges  balancing between continuing older measurement services that serve  current needs and creating new services. Further, a 2017 review of the  activities of NIST\u2019s Material Measurement Laboratory by the National  Academies found that stakeholders have high demands for the laboratory  and that it faces challenges balancing between maintaining ongoing  efforts and initiating new efforts. A participant in one focus group also said  that it can be difficult to prioritize between services that have broad use  and those that are vital to narrower customer bases. For example, NIST  performs calibrations for thermometers across a wide range of  temperatures for use in many different sectors. On the other hand, NIST\u2019s  million-pound deadweight machine provides calibrations for very large  force gauges used by aerospace manufacturers and the U.S. military.  Focus group participants and NIST officials said that the volume of  services provided may not reflect the value of the service to the industry,  because a single calibration can support many millions of dollars of  economic activity.", "When prioritizing staff participation in documentary standards activities,  NIST faces a similar challenge. Specifically, the abundance of ongoing  standards development activities means NIST staff may have to choose  among several standards development activities in their areas of  expertise. While some staff may have expertise that is closely linked to a  small number of SDOs and activities, others may have expertise in  foundational technologies that have relevance to numerous activities.  Further, a participant in one focus group and two agency standards  executives we interviewed stated that standards need to be revised from  time to time, for example, to incorporate new technologies, and these  revisions may compete for time and attention against new standards  efforts in related areas. While individual SDOs can plan for and prioritize  among their new standards efforts and revisions, NIST staff who  participate in standards development efforts across a number of SDOs  may still have to choose among contemporaneous efforts.", "Communicating with stakeholders: Communicating with stakeholders  about NIST\u2019s measurement services can be challenging, according to  participants in all five of our focus groups and other stakeholders.  Specifically, the breadth of potential users of NIST\u2019s measurement  services makes it more difficult for NIST to communicate with industry  about its needs and NIST\u2019s services.", "Participants in four of the five focus groups said that it can be difficult for  potential users to be aware of and understand the services NIST provides  relevant to their needs. For example, participants in one focus group  described concerns regarding how well they, and industry stakeholders  generally, understand the extent of NIST\u2019s capabilities within their areas  of expertise. Participants in this focus group cited benefits of having NIST  and industry staff perform site visits to elucidate each other\u2019s needs and  capabilities. One NIST calibrations official we interviewed said that some  commercial sectors, such as the automotive industry, may be  underserved by NIST\u2019s services due to a limited understanding of how  NIST could help companies remain innovative and competitive. However,  participants in one focus group said that NIST\u2019s engagement with the  industrial community is generally quite strong.", "Other stakeholders suggested that NIST faces an increasingly difficult  task educating potential customers about its services because those  customers may have less technical expertise today than they did in the  past. Participants in one focus group, officials from the Department of  Energy, and a NIST reference material official said that the portion of the  nation\u2019s workforce trained in measurement and standards issues is  shrinking and that industry representatives now have less experience in  these matters than they used to. Accordingly, NIST now communicates  with stakeholders who have less expertise about its measurement  services."], "subsections": []}, {"section_title": "Ensuring Adequate U.S. Representation in International Documentary-Standards Activities Can Be Challenging", "paragraphs": ["According to NIST standards officials, focus group participants, other  stakeholders, and a NIST report on U.S. representation in international  documentary-standards activities, ensuring adequate U.S. representation  in these activities can be challenging. Several factors, such as the large  number of international standards activities occurring across numerous  industry sectors, underlie this challenge and make it difficult for NIST to  ensure adequate U.S. representation.", "First, the breadth of the global economy and the volume of international  documentary-standards development activities make ensuring adequate  U.S. representation challenging, according to NIST standards officials,  stakeholders, participants in two focus groups, and literature we  reviewed. For example, NIST standards officials, two agency standards  executives, participants in one focus group, and literature we reviewed  said that the large number of SDOs and volume of international standards  activities presents a challenge to NIST. A participant in a different focus  group also said that in some cases, industry is reliant on NIST to provide  them with information on international standards activities relevant to  them. As the number of activities increase, it can be difficult to maintain a  comprehensive understanding of what is happening in various industry  sectors and standards areas. Further adding to this challenge, several  sources of information we collected identified a significant increase in the  number of international standards activities or the relative participation of  other countries in these activities, for example:", "NIST officials and participants in one focus group said that  international SDOs, such as the ISO, are expanding their efforts to  create global standards. Participants said that ISO\u2019s efforts could  conflict with existing standards that U.S. industry uses.", "Two stakeholders we interviewed said that U.S. industry also faces  increasing competition from other countries, such as China, which, in  some cases, is overwhelming the ability of U.S. industry to participate.  Further, according to a 2012 testimony to Congress by the director of  NIST\u2019s Standards Coordination Office, other countries have made  significant investments in their standards efforts and have attempted  to increase their participation in international standards activities.  According to the testimony, other countries increasingly view  standards as a tool to increase their international competitiveness and  are developing strategies and tactics to play a greater role in  standardization, such as increasing their participation and leadership  in international standards bodies.", "A 2014 NIST report on U.S. representation in international SDOs  showed that the United States fell from first in 2005 to second in 2012  in the number of experts participating in one international SDO, the  IEC, which produces standards for electric and electronic products,  systems, and services. Specifically, the number of technical experts  from the top ten countries that participate in the IEC was 5,528 in  2005 and 9,199 in 2012\u2014an increase of 66 percent. However,  participants from outside the United States were responsible for 85  percent of the increase. Additionally, the report showed that the  United States fell from third in 1999 to fourth in 2012 in the number of  IEC standards proposals submitted. The report showed that the  number of new IEC standards proposed by all countries was 70  proposals in 1999 and 124 proposals in 2012\u2014an increase of 77  percent. However, the percentage of U.S. country proposals out of all  country proposals fell from 19 percent in 1999 to 14 percent in 2012.", "NIST standards officials said that there could be additional factors driving  changes in U.S. stakeholder participation in international SDO activities.  For example, NIST officials said that while U.S. stakeholder participation  in ISO and IEC may have declined in some cases, some U.S.  stakeholders have increased participation in other international SDOs  whose standards are better suited for their industry.", "Second, what constitutes adequate representation is currently unclear,  according to NIST\u2019s 2014 report on U.S. representation in ISO and IEC  activities and NIST standards officials we interviewed. According to  NIST\u2019s 2014 report, there are no guidelines or definitions given for what is  deemed to be adequate representation of U.S. interests in international  standards activities. Further, NIST standards officials said that it was not  clear what circumstances would lead NIST to use the process established  under the 1979 act if U.S. representation in an international SDO may be  potentially inadequate. NIST officials also said that defining what would  constitute adequate U.S. representation at international SDOs and  collecting the information to help assess the adequacy of U.S.  representation would be difficult and the definition and metrics could vary  by industrial sector.", "Third, according to participants in two focus groups, the large number of  companies and other stakeholders that could be involved in or have an  interest in various international SDO activities under the U.S. system of  private-sector-led standards development can make ensuring adequate  U.S. representation a challenge. For example, participants in two focus  groups said that NIST would need to consult with numerous industry  stakeholders or SDOs to facilitate representation in situations where U.S.  representation was inadequate. Further, as we mentioned above,  documentary standards needs in emerging, crosscutting, or  interdisciplinary technology areas can be a challenge. Literature we reviewed highlighted the need for NIST or other agencies to help bring  together industries or other stakeholders that may not have a history of  collaborating to resolve standards issues."], "subsections": []}, {"section_title": "Coordinating Federal Agencies\u2019 Participation in Developing Documentary Standards Can Be Challenging", "paragraphs": ["Fulfilling NIST\u2019s role to work with other agencies to coordinate use of and  participation in standards activities under the NTTAA, as chair of the  ICSP, and in implementing OMB Circular A-119 is challenging due to (1)  the involvement of multiple federal agencies in documentary standards  activities, and (2) increasingly interdisciplinary technology areas.", "Multiple agency involvement: Multiple federal agencies are involved in  documentary standards activities, a situation that can make coordinating  agencies\u2019 activities challenging, according to participants in all five of our  focus groups, and some stakeholders and agency standards executives  we interviewed. Because multiple agencies are involved in documentary  standards, agency efforts can be fragmented. Fragmentation refers to  those circumstances in which more than one federal agency (or more  than one organization within an agency) is involved in the same broad  area of national need and opportunities exist to improve service  delivery. We have previously reported that fragmentation of federal  efforts occurs in a number of areas and can lead to challenges to  effective coordination. As we mentioned earlier, federal agencies may  use or help develop documentary standards for several reasons,  including (1) to procure goods or services, (2) to incorporate standards  into agency regulations, or (3) to improve agency operations or further  agency policy goals. As a result, a number of federal agencies participate  in a range of standards development activities that span many different  areas of national need. Further, while some documentary standards  issues may only affect the mission or activities of a limited number of  agencies, other issues may affect many agencies.", "Participation by multiple federal agencies in documentary standards  activities can be beneficial, according to some focus group participants,  stakeholders, and agency standards executives. Some focus group  participants, stakeholders, and agency standards executives identified  examples of federal participation in which agencies could leverage their  different strengths and expertise. For example, participants in four focus  groups and some stakeholders we interviewed noted NIST\u2019s unique role  as a non-regulatory and neutral agency in facilitating the development of  standards. These participants and stakeholders said that, in combination  with NIST\u2019s technical capability, this role allowed NIST to gain trust and  cooperation from industry in advancing standards development, whereas  industry may view regulatory agencies as less neutral. Participants in one  focus group said that this role was also helpful to regulatory agencies  because these agencies, such as the Food and Drug Administration,  would not be able to work as closely with industry in regard to solving  technical standards problems or assisting industry because of their  regulatory role. Further, two agency standards executives said that some  standards activities benefit from the expertise of multiple agencies. For  example, one agency standards executive said that evaluating whether  standards or product specifications in other countries constituted a barrier  to trade required the expertise and participation of different agencies. Two  stakeholders we spoke to also said that participation by all relevant  federal agencies in standards activities is beneficial because the agencies  can provide technical expertise and are important stakeholders for  standards efforts because agencies regulate industry, develop policy, and  procure goods from the private sector.", "At the same time, participants in all five of our focus groups, some  stakeholders, agency standards executives, and NIST officials we  interviewed cited challenges in coordinating documentary standards  among multiple federal agencies, for example:", "Some stakeholders, agency standards executives, and another  federal standards official we interviewed said that communication  between federal agencies on their standards activities can be a  challenge. For instance, three agency standards executives and one  stakeholder said that it can be difficult to identify when other agencies  are working on the same standards areas, and two of the standards  executives said it can be difficult to know who to contact in other  agencies to coordinate efforts.", "Three agency standards executives said that it can be difficult for  standards executives to be fully aware of all standards activities in  their department or agency. One standards executive also said that  some standards executives have split responsibilities and are not full  time, a situation that may make it difficult for these executives to  devote sufficient time to understanding their agencies\u2019 standards  activities, particularly in large agencies. Further, NIST officials said  that there is an uneven level of interest and focus on standards as a  policy issue among federal agencies, generally.", "Participants in three focus groups cited differing priorities and  interests among federal agencies as a challenge to coordinating on  standards activities. For example, participants in one focus group said  that different interests and priorities among financial regulatory  agencies posed a challenge to coordination on cybersecurity  standards. As we reported in December 2015, NIST undertook a  collaborative process that involved federal agencies as well as  nonfederal stakeholders in developing a cybersecurity framework in  response to executive order and legislative requirements.  Participants in one focus group noted NIST\u2019s efforts to work with a  variety of public and private-sector stakeholders but also said that  financial regulatory agencies have their own cybersecurity regulations  that may not align with NIST\u2019s framework. In a February 2018 report  on implementation of the cybersecurity framework, we noted the  complex regulatory and cybersecurity environment of the financial  sector and noted that sector representatives said that agencies\u2019  differing cybersecurity requirements led to competition among various  cybersecurity frameworks.", "NIST officials also said that it can be challenging for federal agencies  to harmonize their views on standards because they each have  individual missions and priorities that may lead to varying views.  Similarly, a 2011 National Science and Technology Council report  cited a lack of coordination among agencies with interests in  standards activities as having a negative impact on government  effectiveness. The report noted that agency objectives may not  always be aligned and that they may be providing redundant support  or competing with one another.", "An additional complexity to coordination of federal agencies\u2019 documentary  standards activities is that some standards issues may have multiple  venues for interagency coordination. NIST officials said that agencies  participated in the U.S. private-sector-led standards system and that there  were a number of different organizations and groups through which  federal agencies shared information, depending on the standards activity.  There are at least four groups including the ICSP that provide interagency  coordination on standards issues generally. According to NIST officials,  interagency coordination also occurs through the National Science and  Technology Council\u2019s committees and subcommittees. Further, individual  documentary standards areas may have additional interagency  coordination venues. For instance, interagency coordination on  cybersecurity standards also occurs through the Interagency International  Cybersecurity Standardization Working Group, according to a NIST 2018  draft report. This group was established by the National Security  Council\u2019s Cyber Interagency Policy Committee to coordinate on major  issues in international cybersecurity standardization and enhance U.S.  federal agencies\u2019 participation in these efforts. Furthermore, agencies  may coordinate amongst themselves informally on specific standards  interests, according to two standards executives.", "Interdisciplinary technology areas: Documentary standards  development issues have become increasingly interdisciplinary\u2014 potentially creating challenges to coordinating agencies\u2019 standards  activities, according to our prior work, literature we reviewed, focus  groups we conducted, and stakeholders we interviewed. As described  above, technology areas, including emerging areas of technology such as  electronic health records, can cut across disciplines. According to  literature we reviewed, our prior work, and stakeholders we interviewed,  interdisciplinary standards can be more difficult to develop or implement  because they can be complex and involve a broader range of industry  and government stakeholders with potentially different interests and  needs. Standards areas are also becoming increasingly interdisciplinary,  according to literature we reviewed, one stakeholder, and participants in  one focus group. In addition, participants in all five focus groups and  some stakeholders we interviewed said that it can be challenging to  facilitate interagency coordination on interdisciplinary standards areas.  For example, some participants and some stakeholders said that these  standards areas can involve the need for collaboration among multiple  agencies that can have different roles and responsibilities, priorities, or  levels of expertise. Further, two stakeholders said that it could be a  challenge for federal agencies to identify these areas.", "Our prior work, participants in two of our focus groups, and an agency  standards executive identified several examples of interdisciplinary  standards areas that present challenges to interagency coordination:  In February 2018, we reported that protecting the nation against  complex and growing cybersecurity threats required coordination  between 10 different agencies, 9 of which had responsibility for  coordinating implementation of NIST\u2019s cybersecurity framework  across 16 different critical infrastructure sectors.", "In November 2016, we reported that improved interagency  coordination could help to address challenges SDOs face in using  forward-looking climate information\u2014an interdisciplinary standards   area that requires expertise from multiple agencies\u2014and we made a  related recommendation.", "One focus group participant identified open source software and a  participant in a different focus group identified machine learning and  artificial intelligence as interdisciplinary standards areas needing  increased coordination among federal agencies.", "One agency standards executive also said that federal coordination  could be beneficial for developing standards for \u201cBig Data\u201d because  multiple federal agencies have expertise in Big Data that is not being  leveraged to create standards that could facilitate appropriate use of  Big Data-related technology and techniques.", "Establishing a private-public partnership  to coordinate standards development with  different stakeholders.   Implementing a testing framework.", "According to NIST officials, developing documentary standards for  interdisciplinary technologies can be more resource intensive because of  the need to pull together expertise from different disciplines and potential  competition among SDOs in developing a standard. However, NIST  officials also noted that standards development for interdisciplinary  technologies may not always be more challenging than other types of  standards development efforts, when an SDO has willing participants with  the necessary expertise. For example, according to a 2010 VCAT report,  NIST established a public-private Smart Grid Interoperability Panel to  identify, prioritize, and address new and emerging requirements for this  interdisciplinary standards area involving many stakeholders and  agencies. According to VCAT, the panel allowed for a wide range of  participating stakeholders and served as an effective way to determine  and incorporate the different needs and interests of participants in a  framework that enabled further development of smart grid standards."], "subsections": []}]}, {"section_title": "NIST Has Taken Steps to Address Challenges in Providing Measurement Services and Supporting Documentary Standards, but Some Efforts Could Be Improved NIST\u2019s Efforts Help Address Challenges to Identifying and Prioritizing Needs but Could More Fully Align with Federal Guidance and NIST Policy", "paragraphs": ["NIST works to address the challenges it faces in providing measurement  services and supporting documentary-standards development in a variety  of ways, but opportunities exist to improve some efforts. First, NIST\u2019s  efforts help address challenges to identifying and prioritizing  measurement-service and documentary-standards needs, but some  efforts do not fully align with federal guidance or NIST policy. Second,  NIST\u2019s efforts help support U.S. representation in international standards  organizations but may not fully implement its role and address the  challenge it faces. Third, NIST\u2019s efforts support federal agency  coordination on standards issues but do not fully align with selected  leading collaboration practices.", "NIST takes a variety of steps to identify agency stakeholders\u2019  measurement-service and documentary-standards needs, has  procedures to support the prioritization of measurement services and  standards activities in the agency, and has developed mechanisms for  communicating with stakeholders. While these steps help NIST address  challenges to identifying and prioritizing needs and communicating with  stakeholders, some aspects of these efforts do not fully align with federal  guidance or NIST policy.", "Identifying measurement-service and documentary-standards  needs: NIST identifies stakeholders\u2019 measurement-service or  documentary-standards needs in various ways, including discussions with  industry by NIST technical staff, attendance at trade shows and scientific  professional society meetings, workshops hosted by NIST on technology  areas of interest, and participation in planning activities of SDOs, among  other ways. However, NIST does not regularly perform a comprehensive  assessment of its measurement services and standards activities to  identify and address any gaps between the agency\u2019s efforts and industry  needs.", "Genome in a Bottle   The Genome in a Bottle consortium is one of  several ongoing collaborations among the  National Institute of Standards and  Technology (NIST), Stanford University, and  various industry and government partners that  focus on measurements and standards  supporting the newest developments in  biology. Genome sequencing involves  determining the chemical building blocks of  deoxyribonucleic acid (DNA) or ribonucleic  acid (RNA) and can give insights into the  genes carried by an individual and how and  when they are activated. Since the completion  of the Human Genome Project in 2003 which  first sequenced the whole genome of a  human, scientists have worked to make whole  human genome sequencing faster and less  expensive. Genome in a Bottle aims to  develop the tools needed to allow clinical use  of whole human genome sequencing. These  tools include reference materials that allow  laboratories to ensure the reliability and  accuracy of their sequencing equipment,  increasing laboratories\u2019 capability to perform  genetic testing, medical diagnoses, and  customize drug therapies.", "NIST\u2019s primary method for assessing stakeholders\u2019 needs is through  outreach by individual technical staff and their expertise in relevant  disciplines and related industries. Measurement services officials said  that NIST\u2019s staff work closely with their respective industry stakeholders  and others to understand their measurement service needs. They stated  that NIST staff engage with industry through direct contact at conferences  and trade shows, company and NIST laboratory visits, training, NIST-led  workshops, through their ongoing research activities, and other activities.  NIST also collaborates with other metrology organizations to identify  measurement service needs and advance measurement science. For  example, measurement services officials described NIST\u2019s participation in  international organizations that develop strategic plans for calibrations  and measurement standards, such as the Bureau International des Poids  et Mesures and Inter-American Metrology System. These organizations  allow national metrology institutes, like NIST, to collaborate with their  peers and other stakeholders to improve the world\u2019s measurement  standards and services.", "NIST also collaborates with government, industry, and research  institutions on emerging issues through various collaboration  mechanisms. For example, NIST formed the Genome in a Bottle  Consortium in 2011. It provides an open forum for discussion and  planning for reference materials and other measurement infrastructure  needed to use human genomic sequencing in clinical settings. Similarly,  NIST\u2019s Advanced Materials Center of Excellence allows the agency to  work with universities, a government lab, and others to address research  and development needs related to designing novel materials for  manufacturing. Furthermore, since 1905 NIST has participated in  activities of the National Conference on Weights and Measures. Recent  activities of this group include developing measurement practices and  measurement standards to ensure that ride-sharing companies accurately  measure time and distance charges.", "The National Institute of Standards and  Technology (NIST) began an active mercury  reduction campaign in 2007 and stopped  calibrating mercury thermometers entirely on  March 1, 2011. NIST's Temperature and  Humidity Group is actively participating in  several U.S. and international phasing out  efforts to identify alternative thermometers for  a broad range of measurement applications,  and to coordinate efforts to replace mercury- based instruments. For example, the  Minamata Convention on Mercury is a global  treaty to protect human health and the  environment from the adverse effects of  mercury and includes a phase out of the use  of mercury in products and processes.  According to NIST officials, NIST worked  closely with one standards development  organization, ASTM International, to develop a  new standard for the manufacture and  selection of digital thermometers. This  standard describes three different types of  digital-thermometer sensors and defines  different classes of devices based on  accuracy and, according to NIST, allowed  ASTM to revise over 750 additional standards  to replace required mercury thermometers  with digital thermometers. NIST provides  calibrations for all three types of sensors to  the worldwide measurement standard, the  International Temperature Scale.", "Furthermore, NIST examines trends in the measurement services it  provides to better understand industry needs. In particular, NIST conducts  individualized testing for companies known as special tests that can give  the agency insight into industry\u2019s needs. Special tests comprise  calibrations and related measurements that are unique to the customer  and are not part of NIST\u2019s regular catalogue. A company may request a  special test, for example, to evaluate a prototype product or measurement  technology. According to NIST officials, NIST uses special tests as a way  to meet industry needs and also understand what kinds of measurement  services industry may need more of in the future.", "Similarly, NIST standards officials also described staff expertise as  important for identifying stakeholders\u2019 needs for support in the  development of documentary standards. In particular, standards officials  described staff participation in roadmapping activities\u2014used to identify  and plan for future standards activities in certain fields\u2014sponsored by  NIST or SDOs as important opportunities for staff to assess the standards  landscape and identify needs. For example, NIST officials noted the  importance of NIST participation in ANSI\u2019s standards panels and  collaboratives, some of which are co-led by NIST staff, for identifying  standards needs. NIST also participates in SDO administrative groups,  such as the ANSI Government Members Forum, that can alert NIST to  important international and domestic standards activities. Through  participation in SDOs, NIST standards officials said that NIST may obtain  information on international standards activities in which U.S. industry  representation is needed. NIST officials said that developing new  documentary standards can take from a year and a half up to a decade to  complete, and accordingly, NIST considers what the standards industry is  likely to need in the next 1 to 5 years.", "Various thermometers at NIST\u2019s temperature  calibration lab.", "In addition, NIST gathers information on how its efforts align with  stakeholders\u2019 needs through feedback from industry customers and  external reviews by the National Academies, VCAT, and others. For  example, NIST asks the users of its calibration services and standard  reference materials to respond to customer satisfaction surveys. NIST  measurement services officials said that while a small percentage of  customers respond to the surveys, the information gathered provides  useful input on what new services customers need. By 2018, NIST  implemented new information systems to track its measurement services\u2019  sales and customers, and is evaluating if the agency\u2019s outreach to these  customers can be improved using the new systems. According to NIST  officials, NIST also receives feedback when stakeholders contact the  agency through phone, email, or the NIST website. Further, the National  Academies evaluated NIST\u2019s Material Measurement Laboratory in 2017  and has reviewed every NIST laboratory since the 2010 reorganization. In  a 2017 report, the National Academies recommended that NIST\u2019s  Material Measurement Laboratory develop a strategy to balance between  existing product support and the research, production, and certification of  new standard reference materials. Recent VCAT reports have also  considered how well NIST identifies measurement-service and  documentary-standards needs of its customers and assessed the  agency\u2019s services:  In a 2009 report, VCAT examined NIST\u2019s participation in standards  development in three specific areas and found that NIST\u2019s technical  expertise, its reputation as an unbiased and neutral party, and its  extensive participation in standards activities strongly position NIST to  address the standards-related challenges of the 21st century.", "In a 2010 report, the VCAT found that NIST\u2019s analysis and planning  practices for its measurement services tended to be driven by bottom- up initiatives more than high level strategy and in 2010 and 2011  reports the VCAT recommended, among other things, that NIST  perform additional assessments of its measurement services.", "In 2012 and 2013 reports, the VCAT found that NIST\u2019s participation in  standards activities has helped the agency identify industry needs  related to advanced manufacturing.", "Additionally, in 2015, NIST received a peer review of its measurement  services by experts from other national metrology institutes. According to  the peer review summary, most of the eight individuals from other  national metrology institutes who reviewed NIST\u2019s measurement services  found that the agency covered major needs, and the reviewers gave NIST  additional feedback on areas for expansion the agency should consider.", "Participants in three of our five focus groups said that when NIST focuses  on a specific area, its efforts to understand industry needs can be very  effective. For example, participants in one group said that NIST creates  an open environment for discussions with industry and companies feel  comfortable approaching the agency with their needs. Participants in  another group said NIST\u2019s regular contact with and surveys of state  metrology labs help the agency understand their needs. However,  participants in all five of the focus groups said that NIST\u2019s capacity for  outreach is limited. For example, participants in one focus group said that  NIST\u2019s outreach efforts can be driven by the personal relationships NIST  staff develop with stakeholders and therefore do not scale to the large  size of U.S. industry. NIST officials said that its measurement services  and documentary-standards support activities serve different populations  of stakeholders and that identifying the needs of NIST\u2019s measurement  services\u2019 stakeholders is more manageable than with documentary  standards. Specifically, by working with measurement equipment  manufacturers, NIST officials said that understanding the needs of its  measurement services\u2019 stakeholders was manageable. However, NIST  officials said it is more difficult to know the measurement-service needs of  industry stakeholders that work with equipment manufacturers rather than  with NIST directly.", "NIST\u2019s efforts to identify industry needs are supported by agency policy,  and NIST has controls in place to evaluate the efficacy of the  measurement services it provides. NIST policy directs staff to consider  stakeholders\u2019 measurement service needs and assign responsibility for  assessing measurement services to agency management. Specifically,  the NIST Quality Manual, which contains the agency\u2019s policies and  procedures governing its measurement services, describes meeting and  anticipating the needs of measurement services\u2019 users as a goal for the  agency. The manual encourages staff to identify improvements to  measurement services and assigns ultimate responsibility for providing  services that meet industry, academia, and other government agency  needs to the Associate Director for Laboratory Programs. Further, the  Quality Manual requires multiple levels of review of the agency\u2019s  measurement services, including internal audits at the division level,  quarterly management review by measurement services officials, and  peer-review by a team of experts from other NIST divisions. The  assessments are to provide NIST with assurance that its measurement  services, and especially the calibration and measurement capabilities,  continue to be in compliance with its quality management system.  Further, NIST officials told us that the agency was considering  measurement services as part of its strategic-planning efforts, but those  efforts were preliminary at the time of our review.", "For documentary standards, NIST\u2019s policies for staff participation in  standards development encourages staff participation in domestic- and  international-standards development activities whenever such  participation is in the public interest and is compatible with NIST\u2019s  mission, policies, positions, priorities, and available resources. NIST\u2019s  standards participation policy also provides that the Associate Director for  Laboratory Programs conduct periodic reviews of the effectiveness of  NIST\u2019s participation in documentary standards activities, with support  from the Standards Coordination Office. Additionally, the policy directs  NIST managers to annually review records of SDO participation by staff in  their divisions and calls for laboratory and division managers to  periodically review activities to identify gaps in representation for mission- critical areas. Further, NIST officials said that across both measurement  services and documentary-standards support activities, the efforts of its  staff to meet stakeholders\u2019 needs are assessed via employee  performance reviews, among other means.", "NIST\u2019s multi-level assessments of its measurement services and  documentary standard development activities help ensure their quality  and help to identify stakeholders\u2019 needs; however, these assessments do  not comprehensively identify and assess gaps in NIST\u2019s services or how  well they align with stakeholder needs. For example, NIST\u2019s efforts to  identify measurement service needs for individual technology areas or  industries, or to evaluate the services provided by its labs\u2014both areas of  strength for NIST\u2014may not identify gaps in service needs for technology  areas not evaluated or that cut across NIST\u2019s labs. Officials working on  calibration services and reference materials told us that NIST has not  performed a comprehensive assessment of how well its services address  industry needs since a 2006 assessment of the U.S. measurement  system. NIST measurement services officials raised concerns about the  value of this type of review, describing the agency\u2019s 2006 assessment as  time consuming and ultimately of limited use in identifying unmet  measurement needs. However, members of the 2015 peer review of  measurement services said that NIST would benefit from strategic  assessments to identify and assess gaps in programs and a calibration  official told us that it is difficult for NIST to recognize if it is not effectively  reaching stakeholders. Similarly, NIST officials told us that the Associate  Director for Laboratory Programs does not perform a periodic review of  the effectiveness of NIST\u2019s standards participation, despite the agency\u2019s  standards participation policy calling for such a review. One standards  official said NIST generally does not comprehensively assess standards  needs because of the number and diverse nature of standards activities.", "Federal standards for internal control direct management to use quality  information to determine if the agency is meeting its objectives and to  identify, analyze, and respond to significant changes that could present  risks to achieving its objectives. In addition, the 2012 EOP memo on  standards activities in areas of national priority states that agencies  should periodically review their standards activities to identify gaps in  representation for mission-critical areas as part of their long-range  planning. Revising NIST\u2019s policies to provide for periodic comprehensive  management reviews of NIST\u2019s measurement services would augment  NIST\u2019s ongoing efforts to assess how well its services align with  stakeholder needs and identify any gaps. Conducting comprehensive  reviews of NIST\u2019s measurement services and documentary standards  activities would provide NIST with greater confidence that its activities align with stakeholders\u2019 needs, consistent with internal control standards.  Conducting such reviews would also help NIST address the  recommendations made by its recent external reviews and could be used  to support NIST\u2019s efforts to develop the strategic plan called for by the  American Innovation and Competitiveness Act.", "Prioritizing among needs: NIST has a process for deciding when new  measurement services are warranted; however, decision-making about  documentary-standards development activities is decentralized, and NIST  management and staff may not have clear guidelines or sufficient  information to support decision-making about new standards activities.", "NIST has processes to guide decision-making about measurement  services; this guidance helps address the challenges focus group  participants identified given that NIST cannot address all needs. Before  choosing to develop a new measurement service, such as a new  standard reference material or calibration service, NIST\u2019s Office of  Reference Materials and Calibration Services office, respectively,  consider the need for and priority of the service. One NIST official said  that because NIST cannot cover all measurement services that may be  needed by the private sector, the measurement services program focuses  on the areas where NIST may have the most impact. NIST has  procedures in place to evaluate proposals for new services. For example,  before NIST develops a new reference material, Office of Reference  Materials and relevant laboratory staff annually review proposals for new  materials by evaluating factors such as the potential user base for the  material, related legislative or regulatory requirements, and whether the  material could be produced by other organizations, such as private  companies. The Office of Reference Materials also considers these  factors when considering extending reference materials it already  provides. Further, because developing a new reference material can be  time consuming, NIST is currently evaluating the creation of a suite of  reference materials called \u201cresearch-grade materials\u201d that could address  high priority areas with a lower level of precision than NIST\u2019s standard  reference materials. According to NIST officials, research-grade materials  are one way of providing this type of measurement service faster to meet  the needs of U.S. industry.", "Similarly, new calibration proposals are reviewed by Calibration Services  management on a quarterly basis and are evaluated on factors such as  stakeholder need and potential impact. In addition, NIST extends its  reach through its work with private sector test and calibration companies  that also serve the needs of U.S. industry. For example, the National  Voluntary Laboratory Accreditation Program allows NIST staff to directly  interact with test and calibration laboratories and provides opportunities to  share NIST\u2019s expertise and improve services offered by these  laboratories. Further, a focus group participant and government  laboratory officials described industry association meetings as important  opportunities to find out about cutting-edge capabilities and potential  future measurement capabilities offered by NIST and others.", "NIST does not have a similar formalized process to support consistent  decision-making across NIST laboratories and divisions about  participation in new documentary standards activities. As described  previously, NIST\u2019s policy for staff participation in standards development  encourages staff participation in domestic- and international-standards  development activities. Additionally, NIST guidance directs staff to  participate in SDO activities based on their unit\u2019s mission and goals, and  the technical competence required, among other factors, and advises that  staff may choose to accept leadership positions in these activities, such  as the secretary or chair of a standards committee. OMB Circular A-119  and the 2012 EOP memo on standards also encourage agencies to play  a variety of roles in the standards process, such as serving as  chairpersons or other official capacities. Focus group participants had  mixed opinions on when NIST staff should take on leadership roles.  Participants in four of our focus groups said that NIST staff are  particularly suited to leadership roles, and some attributed this conclusion  to the technical expertise of NIST staff or their ability to act neutrally  among competing companies. However, participants in two focus groups  said that NIST is better suited to a technical advisor role.", "However, NIST policy and guidance do not describe when it is  appropriate for staff to take leadership roles in standards development  activities. Individual staff in consultation with their supervisors determine  what standards activities, if any, they should participate in and their  appropriate role in the standards development activity. According to NIST  officials, other levels of management may be involved in the decision- making process to varying degrees depending upon whether participation  in an SDO activity aligns with a NIST priority or where involvement entails  international travel, among other factors. A guidance document for staff  encourages them to attend additional training provided by the Standards  Coordination Office, and standards officials we interviewed told us that  the training and informal guidance provided by the office could help staff  in leadership positions; however, such roles may entail additional time  commitments. Although some stakeholders have expressed interest in  increasing NIST\u2019s participation and leadership in standards activities,  doing so could entail tradeoffs between these activities and other NIST  priorities. Without clear agency guidance on staff participation in  standards development activities, such as the factors staff could consider  when deciding to take on leadership or other more active roles, NIST  cannot be assured that decisions on the time staff commit to standards  activities are being made consistently across the agency and in  accordance with agency priorities.", "Further, NIST\u2019s ability to ensure participation is appropriately prioritized  across the many documentary-standards development activities in which  its staff could be involved is limited by incomplete information. Staff are  directed in NIST policy to record their participation in standards activities  in a centralized database, including a description of the SDO, specific  activity, and role of the NIST participant. According to a NIST standards  official, the database may be used by laboratory managers to assess the  standards activities of their staff. However, NIST\u2019s database does not  contain information regarding NIST staffs\u2019 time commitment, information  that could be used by management to assess the resources required for  participation in these activities. NIST guidelines also direct staff to  document their goals and time commitments for standards activities in  their individual performance plans, but the data are not included in the  standards participation database.", "According to NIST officials, determining the time spent on documentary  standards can be difficult. Specifically, staff participate in standards  development within their areas of expertise and often this work is closely  related to their research activities at NIST. Because of this confluence,  the amount of time staff spend on a particular standards activity may be  unclear. The time spent at meetings or directly drafting or responding to  standards documents will also depend on the amount of consensus on  the standards committee, consensus that may not be known ahead of  time. NIST standards officials told us that the self-reported data currently  in the database are sufficient for laboratory management to identify what  activities staff are participating in, and that management can then ask  individual staff for additional information. However, NIST does not have  data at an aggregate level on the time staff commit to or expect to commit  to these activities. Standards for internal control require agencies to use  quality information to achieve the entity\u2019s objectives, such as by using  relevant data from reliable internal and external sources in a timely  manner based on the identified information requirements. While staff  document their roles in documentary standards activities, without  information on the estimated amount of time staff commit to these  activities, NIST management may not have the information needed to  comprehensively assess how staff distribute their limited time and  attention. Although it may not be feasible to determine the exact amount  of time spent on documentary standards activities, information on  estimated amount of time could help inform staff decision-making on  when to accept leadership roles in standards development activities and  could inform management on trends in time commitments to these  activities across the agency\u2019s laboratories and divisions.", "Communicating with stakeholders: NIST takes a number of steps to  address the challenges it faces communicating with its diverse  stakeholders about its measurement services and documentary  standards activities. NIST measurement services officials described the  primary goal of their stakeholder outreach efforts as informing potential  customers of the services NIST provides. The officials described multiple  avenues for reaching potential customers of NIST\u2019s measurement  services, including: attendance at workshops, trade shows, and professional societies;", "NIST\u2019s measurement services websites; email and newsletter correspondence with current customers; direct contacts between individual staff and stakeholders; and  research papers and other scholarly activities.", "For example, NIST distributes a newsletter to customers that includes  information on upcoming changes to the agency\u2019s standard reference  materials.", "NIST has also taken steps to better target its stakeholder communication.  For example, NIST measurement services officials described an effort to  evaluate customer interest in NIST\u2019s standard reference materials, as  expressed through contact with NIST staff at trade shows. As a result of  this analysis, NIST reduced the number of trade shows at which it  advertised these materials\u2014focusing on those trade shows that were  identified as having the greatest number of interested attendees. More  broadly, by 2018 NIST implemented new information systems supporting  its measurement services sales, inventory, and customer relationship  management. Measurement services officials described efforts currently  underway to take advantage of these systems to better target customers  by, for example, providing email notifications to customers of new  materials or improved measurements of current materials."], "subsections": [{"section_title": "NIST\u2019s Efforts Help Support U.S. Representation in International Documentary Standards Activities but May Not Fully Address the Challenge", "paragraphs": ["NIST\u2019s efforts help support U.S. representation in international standards  organizations but may not fully implement its role and address the  challenges it faces.", "NIST works to support U.S. industry\u2019s efforts to ensure that its interests  are adequately represented in international standards activities. For  example, NIST officials said that NIST staff participate broadly in  international standards activities that are aligned with NIST\u2019s priorities  and share their technical expertise in various committees. Through its  participation in SDOs, NIST may obtain information on international  standards activities in which U.S. industry representation is needed. NIST  also shares information on international standards activities with U.S.  industry. NIST hosts the World Trade Organization Inquiry Point, a U.S.  government website that serves as a communications hub for information  on international standards and related issues. Through the website, U.S.  industry and other stakeholders receive notifications of standards-related  regulations and procedures, as well as the basis and objective for  proposed measures, among other information provided. The website also  provides a mechanism to circulate comments on proposed measures.  Further, we noted above that NIST participates in ANSI standards panels  and collaboratives and the ANSI Government Members Forum. NIST\u2019s  participation in these bodies can alert NIST to important international  standards activities.", "NIST officials said that when NIST has become aware of concerns about  U.S. representation at an international standards activity within a federal  government area of responsibility, it has led efforts to ensure adequate  representation in those activities. For example, according to NIST  officials, NIST:", "Worked with the U.S. Patent and Trademark Office to help identify  another organization to represent U.S. interests in a standards activity  that affected U.S. intellectual property after the original organization  decided not to continue participating.", "Established and administered the U.S. technical advisory group for a  new ISO technical committee on biotechnology after industry and  many federal agencies chose not to participate.", "Took on a leadership role to represent U.S. interests in a standards  activity at the International Telecommunication Union when no U.S.  telecommunications companies took on responsibility for representing  U.S. industry in the activity.", "NIST has also issued three reports on U.S. representation in international  SDOs. In June 2014 NIST issued its most recent report on U.S.  representation in two international SDOs, the ISO and IEC\u2014its two prior  reports were published in 2000 and 1988. The 2014 report describes  U.S. representation in ISO and IEC activities from 1966 through 2012. As  noted previously, the report also describes U.S. memberships and roles  in ISO and IEC standards development committees, and includes data  comparing U.S. representation on these committees with representation  from other countries.", "While NIST has helped support U.S. representation in international  documentary standards activities, NIST has not developed a mechanism  to implement the role delegated to it under the 1979 act to address  circumstances when U.S. representation at international standards  organizations may be inadequate. As noted previously, the 1979 act  directs the Secretary of Commerce to coordinate with the U.S. Trade  Representative (USTR) and keep adequately informed regarding  international standards-related activities and identify those that may  substantially affect the commerce of the United States. The Secretary is  also to monitor the adequacy of U.S. representation in private  international standards activities. Further, the 1979 act establishes a  process for the Secretary to follow to address circumstances in which  U.S. representation may be inadequate, specifically:  If the Secretary, after an inquiry, has reason to believe that the  participation by an organization member in the proceedings of a  private international standards organization will not result in the  adequate representation of United States interests that are, or may  be, affected by the activities of such organization (particularly with  regard to the potential impact of such activity on the international  trade of the United States) the Secretary shall immediately notify the  organization member concerned.", "The organization member has a 90-day period following the  Secretary\u2019s notification to demonstrate its willingness and ability to  represent adequately U.S. interests. If the organization member  demonstrates willingness and ability, the Secretary should take no  further action.", "If the organization member either does not respond or does not  demonstrate the requisite willingness or ability to represent U.S.  interests or there is no organization member of the private  international standards organization\u2014the Secretary is to make  arrangements to provide for the adequate representation of U.S.  interests.", "Although NIST has reported on the extent to which the U.S. participates  in some Geneva-based international standards development activities,  these reports do not assess the adequacy of this participation. NIST  officials we interviewed said that the agency does not assess whether  U.S. interests are adequately represented and does not have definitions  of or guidelines for what constitutes adequate representation. NIST  officials also told us that the agency has not evaluated the circumstances  under which it would follow the procedures under the act for addressing  inadequate representation. Federal standards for internal control indicate  that management should identify, analyze, and respond to risks related to  achieving an agency\u2019s objectives. As noted previously, the large number  of international standards activities occurring across numerous industry  sectors, among other factors, present challenges to ensuring adequate  U.S. representation in international standards activities.", "In commenting on a draft of this report, Commerce stated that a  determination to follow the statutory process in the 1979 act would carry  significant risk of being perceived by the national and international  standards community as a U.S. government change of policy relating to  the nation\u2019s private-sector-led standards system. However, the  memorandum of understanding between NIST and ANSI states that  NIST\u2019s role, under the NTTAA, OMB A-119, and the 1979 act is \u201cto  ensure adequate representation of U.S. interests in all relevant  international standards organizations.\u201d Further, NIST has previously taken  action in some cases in international standards activities within a federal  government area of responsibility, as described above. Additionally, the  ongoing contacts between NIST and SDOs and staff participation in  standards activities can help NIST keep adequately informed on  international-standards-related activities.", "Without a mechanism to identify and respond to circumstances when U.S.  representation at international SDOs may be inadequate, such as  guidelines for what constitutes adequate representation and when and  how to follow the process under the 1979 act, NIST may miss  opportunities to take action in furtherance of its mission to support U.S.  competitiveness by helping to ensure adequate U.S. representation in  international standards activities. Alternatively, given Commerce\u2019s  concerns about the statutory process in the 1979 act, NIST could develop  a legislative proposal that allows NIST to ensure adequate U.S.  participation in international standards activities while addressing those  concerns."], "subsections": []}, {"section_title": "NIST\u2019s Efforts Help Support Interagency Coordination, but Opportunities Exist to Better Follow Leading Practices for Enhancing Collaboration", "paragraphs": ["NIST supports coordination among federal agencies on documentary  standards issues as chair of the ICSP, as well as additional coordination  efforts outside of the ICSP. However, aspects of the ICSP\u2019s efforts do not  fully align with selected leading practices for enhancing and sustaining  interagency collaboration. These practices can help agencies manage  fragmentation and other coordination challenges.", "NIST has taken several steps to address the challenge of interagency  coordination on documentary standards issues through its efforts as chair  of the ICSP:", "NIST and member agencies have a charter that outlines the purpose,  functions, and membership of the ICSP, among other information.  According to the charter, the ICSP was established to advise the  Secretary of Commerce and the heads of other federal agencies in  matters relating to standards policy. The ICSP\u2019s purpose under the  charter is to ensure effective participation by the federal government  in domestic- and international-standards activities, among other  things. NIST officials we interviewed said that the ICSP meets three to  four times per year and that the purpose of the ICSP is to promote  effective participation by federal agencies in the standards process\u2014 when it is within an agency\u2019s mission and in the public interest\u2014but  not to force their participation. According to NIST officials, NIST tries  to demonstrate the benefits of participation and encourages other  agencies to participate actively in relevant standards activities.", "NIST chairs and supports ICSP activities, including providing  administrative services, organizing meetings, and developing agendas  and reports. We previously reported in 2012 that designating a lead  agency can assist in driving accountability and providing for continuity  of leadership for a collaborative effort. According to NIST officials we  interviewed, ICSP meetings are open to agencies outside of the  member agencies. Further, NIST officials said they routinely invite  staff from non-member agencies when the committee plans to discuss  items of particular interest to them. NIST officials said that the ICSP  network allows NIST to provide a knowledge base for other federal  agencies, and to help federal staff understand standards policy and  participation in SDOs, among other things.", "According to ICSP members and NIST officials, NIST facilitates the  sharing of best practices on broad standards topics affecting multiple  agencies through the ICSP. As of June 2018, 30 federal agencies  have identified participants to the ICSP, while 5 agencies have vacant  positions on the committee. NIST officials provided several examples  of its information-sharing activities:", "NIST led ICSP efforts to facilitate discussion on, and manage  revisions to, key guidance regarding federal agencies\u2019 standards  efforts in OMB Circular A-119.", "NIST led ICSP efforts to promote awareness on and share  information related to the development of corporate social  responsibility standards in ISO.", "NIST created an ICSP working group on conformity assessment  to help address issues that were frequently being raised during  ICSP meetings.", "NIST invites speakers to share information with ICSP members on  various standards-related issues. For example, NIST invited  officials from ANSI to present information on standards areas of  agency interest and also invited the members of the SDO leading  efforts on smart grid standards to brief agencies on the SDO\u2019s  efforts.", "According to six agency standards executives we interviewed, the ICSP  helps members to share information, including best practices and to have  a general awareness of pertinent documentary standards topics. Three  agency standards executives said that the ICSP helps standards  executives to know each other on a personal basis so that they know  whom to contact to coordinate on standards activities. Bringing agency  standards executives together through the ICSP can also spur  coordination among agencies if a topic of mutual interest is identified. For  example, two agency standards executives said that questions and  suggestions raised by agencies at the ICSP led to coordination with other  agencies on a standards area of mutual interest.", "NIST also coordinates with individual agencies on documentary  standards activities outside of the ICSP. For example, according to  participants in four focus groups, relevant NIST and VCAT reports, and  congressional testimonies we reviewed, NIST is particularly strong in  bringing relevant federal agencies and other stakeholders together to  develop standards and frameworks for individual interdisciplinary  technology areas. Such coordination can occur through a variety of  methods or groups, such as workshops, that address standards-related  issues. Additionally, four agencies\u2019 standards executives said that they  coordinated extensively with NIST on specific standards activities. Two of  the agency standards executives described how collaboration with NIST  on research helped inform their agencies\u2019 standards activities. NIST also  offers training, such as NIST\u2019s standards boot camp, according to federal  standards executives. Five agency standards executives said staff from  their agencies attended the training and four standards executives said  the training had improved their staff\u2019s competence in standards.", "While coordination between NIST and other federal agencies on  documentary standards issues occurs in a variety of ways, the ICSP is  the primary body established to facilitate interagency coordination on  standards policy, according to NIST standards officials. However, some of  the ICSP\u2019s efforts to support coordination among federal agencies on  standards issues do not fully align with selected leading practices for  interagency collaboration we identified in our previous work. Specifically,  the ICSP charter has not been updated; ICSP member agencies\u2019 roles  and responsibilities have not been fully clarified; and the ICSP may not  include relevant members to carry out its functions. Additionally, we  reported in 2015 that while collaborative mechanisms differ in complexity  and scope, following leading practices can help manage fragmentation  and other coordination challenges.", "ICSP charter: The ICSP charter has not been updated since it was  signed in October 2000. According to the charter, the need for and  mission of the ICSP was to be reexamined 3 years after the charter was  created. However, NIST officials said that the ICSP charter has not been  reexamined. We reported in 2012 that agencies that articulate their  agreements in formal documents can strengthen their commitment to  working collaboratively. We also reported that written agreements are  most effective when they are regularly updated and monitored. Further,  updating written agreements, such as the ICSP charter, can be an  opportunity for members to define common goals and purpose. In  addition, focus group participants, stakeholders we interviewed, and  literature we reviewed described broad changes in documentary  standards that have led to new challenges. For example, we previously  noted the challenges related to emerging interdisciplinary standards  issues and the increase in the number of international standards  activities, and both of these areas can benefit from federal coordination.", "Further, the ICSP charter has not been updated to reflect the 2016  revisions to OMB Circular A-119 or the guidelines provided to agencies in  the 2012 EOP memo on engagement in standards activities to address  national priorities. For example, the revised A-119 notes several  executive orders relating to review and coordination that were not in  existence at the time of the charter\u2019s creation. Additionally, the EOP  memo that outlines agency responsibilities for standards areas of national  priority was also not in existence at the time of the ICSP charter\u2019s  creation. The EOP memo calls on agencies to ensure effective intra and  interagency coordination of engagement in standards development  activities. Without reexamining and updating the ICSP charter, as  necessary, NIST and other ICSP member agencies cannot be assured  that their collaborative efforts are best structured to address current  standards challenges.", "ICSP member roles and responsibilities: ICSP member agencies\u2019 roles  and responsibilities have not been fully clarified to an extent that would  help the ICSP fulfil its purpose, objectives, and functions to gather  information and make recommendations to the Secretary of Commerce to  strengthen standards policy and coordination. The ICSP charter outlines  two basic functions for the committee: (1) gathering, analyzing, and  maintaining current information about standards and other specified  related information and (2) on the basis of such information, and when  appropriate, making recommendations to the Secretary of Commerce to  achieve various standards-related objectives, such as strengthening  coordination of standards-related policies and activities among federal  agencies. The charter also specifies that the ICSP may create task  groups as appropriate. However, we found several areas in which the  ICSP charter could more fully clarify member agencies\u2019 roles and  responsibilities in regard to implementing its functions, purpose, and  objectives, for example:", "The ICSP charter does not fully clarify the ICSP role and member  agencies\u2019 responsibilities for identifying and coordinating on  interdisciplinary standards issues that cross agency boundaries. Five  agency standards executives we interviewed as well as NIST  standards officials described the ICSP as primarily an information- sharing or networking body, with little role in establishing federal  positions on standards activities or policy, or making joint policy  decisions with respect to specific standards issues. While information  sharing is an important component of interagency coordination, OMB  Circular A-119 gives agency standards executives responsibility for  consulting with other relevant agencies on standards issues to avoid,  to the extent practicable, expressing inconsistent views on standards  issues. Furthermore, the 2012 EOP memo specifies that agencies  should periodically review their standards activities to identify gaps in  representation for mission-critical areas and should ensure effective  coordination of engagement in standards development activities. NIST  officials and one standards executive said that the ICSP could identify  emerging or interdisciplinary standards issues that may require more  active federal roles and coordination; however, the charter does not  specify the ICSP\u2019s role and member responsibilities regarding  interdisciplinary standards areas that may cut across agencies.", "The ICSP charter does not fully identify member agencies\u2019  responsibilities for coordinating on international standards issues.  OMB Circular A-119 and the ICSP charter specify that the ICSP has a  role in coordinating federal agencies\u2019 international standards activities.  However, the ICSP charter does not fully identify member agencies\u2019  responsibilities toward fulfilling this role. NIST standards officials and  one agency standards executive said that the ICSP does not typically  address international standards issues, or policy, or coordinate federal  positions on international standards. While NIST officials said other  USTR-led efforts could help coordinate agencies\u2019 international  standards activities, a USTR official told us that USTR does not have  the technical expertise needed to effectively coordinate multiple  agencies\u2019 views on standards. Further, the USTR official, one NIST  standards official, and representatives from ANSI said that different  agencies\u2019 positions are taken into account as part of the standards  development process at SDOs that have an open process, such as  ANSI. However, as mentioned previously, A-119 specifies that the  ICSP is to coordinate with other interagency entities with a view to  encouraging more strategic and coordinated federal participation in  the development and use of standards. Further, the ICSP charter also  specifies that the ICSP is to ensure effective federal participation in  international standards activities.", "The ICSP charter does not fully identify member agencies\u2019  responsibilities for developing joint recommendations to the Secretary  of Commerce. The charter describes eight areas in which the ICSP  shall make recommendations when appropriate, including to  strengthen agency coordination and to improve the efficiency of  standardization efforts within the federal government. Further, the  charter specifies an administrative process for voting on ICSP  recommendations. However, according to NIST officials, the ICSP has  never made a recommendation to the Secretary of Commerce to  address a standards-related issue. Further, NIST officials said that the  ICSP agencies have not shown interest in acting jointly. NIST officials  said that there may be circumstances in which making such a  recommendation would be appropriate, for example, to strengthen  interagency coordination on interdisciplinary standards issues,  although the officials said that the ICSP would try to address issues at  a lower level before elevating them to the Secretary of Commerce.  Further clarifying agencies\u2019 responsibilities may help ensure that the  ICSP is able to meet this function of its charter.", "The ICSP charter does not fully identify member agencies\u2019 roles and  responsibilities for creating and participating in ICSP\u2019s task groups.  We have previously reported that task groups can be an effective  mechanism for agencies to collaborate on joint challenges. NIST  standards officials said that one task group has been created and that  task groups may be appropriate either (1) when a standards issue  may require more focused and sustained monitoring to understand  possible effects on U.S. government activities and missions or (2)  when an ICSP member suggests the need for a task group and there  is a consensus among membership. However, these reasons are not  specified in the charter or other documents available on the ICSP  website. Further, while NIST officials said that no member has  requested the creation of a task group, two standards executives  identified standards coordination issues that they thought may benefit  from the creation of an ICSP task group. The charter specifies an  administrative process for voting to create an ICSP task group but  does not specify what the role of task groups are, why they would be  created, or ICSP member agencies\u2019 responsibilities in determining the  need for and participating in task groups.", "We have previously reported that to achieve a common outcome,  participating agencies should consider clarifying roles and  responsibilities. By agreeing on and clearly defining the roles and  responsibilities of the members as well as documenting those decisions,  collaborating agencies can clarify which agency will do what, organize  their joint and individual efforts, and facilitate decision-making. Without  ensuring that member agencies\u2019 roles and responsibilities have been fully  clarified, NIST and the ICSP may miss opportunities to strengthen  agencies\u2019 coordination on standards issues, and better ensure effective  coordination related to standards activities. Further, without fully clarifying  federal agencies\u2019 roles and responsibilities, the ICSP may also miss  opportunities to address standards challenges noted above, which limit its  ability to support U.S. competitiveness.", "ICSP membership: The ICSP may not include all relevant agencies as  members or invited observers. The ICSP is comprised of certain specified  agencies that are represented by their standards executives as described  in OMB Circular A-119. A-119 provides that federal standards  executives should be broadly engaged in the agency\u2019s standards-related  activities so as to ensure intra-agency coordination and have sufficient  authority to ensure compliance with Circular A-119. In addition, the ICSP  charter allows the Secretary of Commerce to invite additional members\u2014 a role which has been delegated to NIST as chair of the ICSP. Consistent  with leading collaboration practices, it is important to ensure that all  relevant agencies are included in a collaborative effort. In addition,  participants should also have full knowledge of relevant resources in their  agency, and the skills and abilities to commit relevant resources and  contribute to the outcomes of the collaborative effort, among other  attributes.", "While the chair of the ICSP said that agency standards executives are  engaged in understanding their standards activities and that participation  in the ICSP is strong, as we noted above, it can be difficult for standards  executives to be fully aware of all standards activities in their department  or agency, particularly in large agencies. In addition, an agency standards  executive, a NIST stakeholder, and NIST standards officials raised  concerns about whether standards executives have sufficient time to  understand all their agencies\u2019 activities and needs, given their other  duties, or whether standards executives have the authority to fully  coordinate on standards activities. In some cases, agency officials other  than the standards executive may have greater knowledge and expertise  about specific standards issues. For example, sub-component offices and  agencies may have numerous standards-related activities, such as the  Food and Drug Administration within Health and Human Services.  According to interviews with two agency standards executives, some sub- component agencies may also have more knowledge and expertise in  significant standards areas, and some of these areas can affect multiple  agencies. According to one NIST standards official, NIST invites  additional agencies when it learns that an agency could potentially add  value but has not conducted a comprehensive assessment of ICSP  membership within the last 5 years. By assessing whether relevant  agencies and offices have been invited to participate as members or  observers, the ICSP would have greater assurance of its ability to ensure  effective participation by the federal government in domestic- and  international-standards activities. Further, having relevant parties involved  at the ICSP could enhance the ICSP\u2019s efforts by ensuring the viewpoints  of all relevant agencies are considered."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In NIST\u2019s role as the nation\u2019s measurement science laboratory, NIST  works to improve how we design, build, and test the technologies around  us. Further, NIST\u2019s measurement services and support of documentary  standards development can directly affect innovation and the nation\u2019s  economy by helping companies produce better products and compete in  the global economy. However, factors such as the breadth of industry  needs, number of domestic- and international-standards development  activities, and the fragmented nature of federal agencies\u2019 involvement in  documentary standards development create challenges to NIST\u2019s ability  to fulfill its mission of promoting U.S. innovation and industrial  competitiveness.", "NIST has taken steps to address these challenges. For example, NIST\u2019s  expert scientists and engineers maintain close contact with industry  through a variety of mechanisms, and use their expertise to help identify  industry needs and to communicate about NIST\u2019s services. NIST has also  established procedures to help the agency prioritize and evaluate the  effectiveness of its measurement services and ensure that supervisors  and laboratory management oversee agency staff participation in  documentary standards activities. However, NIST has not  comprehensively evaluated the extent to which its efforts align with  stakeholder needs. Conducting comprehensive reviews of its activities  would provide NIST with greater confidence that its activities align with  stakeholder needs and may help identify areas not currently served by  NIST.", "Similarly, NIST could gain confidence in the effectiveness of its  participation in documentary-standards development activities: by completing the comprehensive review called for in NIST policy, by improving its guidance to staff, and by taking steps to enhance agency management\u2019s understanding of  the time devoted to NIST\u2019s current efforts.", "NIST staff\u2019s expertise and lack of bias make them valuable contributors in  documentary-standards development activities, but these individuals have  limited time for such activities. Without additional guidance regarding the  factors staff could consider when deciding to take more active roles in  standards development activities, NIST cannot be assured that decisions  on when to participate in such activities are made consistently. Further,  while determining the exact amount of time spent on any one standards  activity may not be possible due to overlap with other employee duties,  examining to the extent possible the aggregate amount of time NIST staff  expect to commit to standards development activities could help NIST  management assess the agency\u2019s participation in these activities.", "Further, NIST has a role, delegated by the Secretary of Commerce, to  ensure U.S. interests are adequately represented at private international  standards organizations but does not currently have a mechanism to use  the process under the Trade Agreements Act of 1979 to identify or  respond to circumstances when U.S. representation in international  standards activities may be inadequate. Developing a mechanism could  help ensure that NIST does not miss opportunities to ensure that the  United States is adequately represented in international standards  activities. Alternatively, NIST could develop a legislative proposal that  allows NIST to ensure adequate U.S. participation in international  standards activities while addressing any concerns.", "Finally, as chair of the ICSP, NIST provides leadership to enhance  interagency coordination on documentary standards issues. However,  some of the ICSP\u2019s efforts do not fully align with selected leading  practices for enhancing and sustaining interagency collaboration, as  identified in our previous work. Specifically, the ICSP charter has not  been updated since 2000 and certain roles and responsibilities for the  ICSP and its members are unclear. Further, the ICSP membership may  not include relevant members or observers to ensure effective  participation by the federal government in domestic- and international- standards activities. Updating the ICSP charter to affirm its mission and to  delineate appropriate roles and responsibilities of participating agencies  could strengthen interagency coordination through the ICSP on standards  development issues and help the ICSP fulfill its role as envisioned under  OMB guidance. Moreover, assessing whether relevant agencies or sub- component offices are invited to participate in the ICSP could provide the  ICSP with better assurance of its ability to effectively coordinate agencies\u2019  standards activities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of seven recommendations to NIST, specifically:  The NIST Associate Director for Laboratory Programs should: update NIST policy to include periodic comprehensive management  review of the agency\u2019s measurement services to assess gaps and  ensure alignment with stakeholders\u2019 needs, and take steps to ensure  that the Associate Director completes the review of NIST\u2019s standards  development activities (Recommendation 1).", "The NIST Standards Coordination Office Director should: update NIST policy for staff participation in standards development  activities to provide additional guidance, such as the factors staff  could consider when deciding to take more active roles, including  leading efforts to develop standards (Recommendation 2); and assess the feasibility of collecting aggregate data on the estimated  amount of time staff spend on documentary standards activities  (Recommendation 3).", "The Director of NIST should establish a mechanism\u2014such as guidelines  for what constitutes adequate U.S. representation\u2014to assess whether  U.S. representation in international SDOs is adequate, and when to follow  the statutory process for addressing inadequate U.S. representation. If  NIST determines that it is unable to implement the process described in  the 1979 act without conflicting with current standards policy, the Director  of NIST should develop a legislative proposal to address those concerns  (Recommendation 4).", "The NIST Standards Coordination Office Director, working with other  ICSP member agencies, should:  review and, as necessary, update the ICSP charter (Recommendation  5);  clearly define ICSP roles and member agencies\u2019 responsibilities, such  as for identifying and coordinating on interdisciplinary documentary- standards issues and for making recommendations, as appropriate, to  the Secretary of Commerce (Recommendation 6); and, assess whether additional agencies or sub-component offices should  be invited to participate as ICSP members or observers  (Recommendation 7)."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Departments of Commerce,  Defense, Energy, and Homeland Security, and Health and Human  Services, as well as the Consumer Product Safety Commission,  Environmental Protection Agency, General Services Administration, and  USTR for their reviews and comments. Commerce provided written  comments, which are reproduced in appendix III, in which it generally  concurred with six recommendations and disagreed with one. USTR  provided technical comments, which we incorporated as appropriate. The  remaining seven agencies informed us that they had no comments.", "Commerce agreed with our recommendation regarding comprehensive  reviews of the agency\u2019s measurement services and standards  participation, and stated that it will include requiring management review  of its measurement services in a future agency order and will have the  Standards Coordination Office support the Associate Director\u2019s review of  staff participation in standards activities. Commerce also agreed with our  recommendations regarding guidance on staff participation in standards  activities and assessing the feasibility of collecting data on the time spent  on documentary standards activities. Specifically, Commerce said that it  will consider updates to guidance to staff and will report on the feasibility  of collecting data on the time spent on standards activities.", "Commerce also agreed with recommendations on improving interagency  coordination in the ICSP. It stated that the chair of the ICSP will review  the charter and recommend any updates to the committee and will work  with existing ICSP members, alternates, and observers to identify other  agencies or sub-component offices that may be invited to participate.  While Commerce agreed with our recommendation on roles and  responsibilities of the ICSP and its members, it stated that the roles and  responsibilities of standards executives are effectively stated in OMB A- 119. A-119 describes the roles and responsibilities of standards  executives in general, such as their responsibilities to promote effective  use of agency resources and participation in standards bodies. However,  A-119 does not address specific roles and responsibilities with respect to  the activities of the ICSP, such as defining the role of the ICSP in  establishing federal positions on standards issues. In our 2012 report on  interagency collaborative mechanisms, we state that agencies working  together to define and agree on their respective roles and responsibilities  can help clarify who will do what and identify how to organize individual  and joint efforts. We believe that additional efforts by ICSP members to  clarify their roles and responsibilities within the framework of the ICSP will  improve the effectiveness of the ICSP as a coordinating body.", "Commerce disagreed with the recommendation on ensuring adequate  U.S. representation in international SDOs, stating that any determination  to follow statutory process would itself carry significant risk of being  perceived by the national and international standards community as a  U.S. government change of policy relating to our private-sector-led  standards system. However, we do not perceive a conflict between the  private sector leading U.S. standards development, and NIST developing  a mechanism to respond to any instances where U.S. representation in  international standards efforts are inadequate. NIST has already taken  steps, in some cases, to identify or encourage private sector participation  in international standards efforts that lacked U.S. participation. Further,  the 1979 act does not define what constitutes adequate representation;  NIST can develop criteria to allow the agency to take action when  appropriate.", "In carrying out the 1979 act, the agency could continue to encourage  private-sector stakeholders to address any areas determined to be  inadequate, allowing NIST to step in only as necessary when the relevant  private-sector entities are not adequately representing, and are not willing  and able to adequately represent, U.S. interests. We continue to believe  that a mechanism to identify and respond to circumstances when U.S.  representation at international SDOs may be inadequate would allow  NIST to consistently take action in furtherance of its mission to support  U.S. competitiveness. However, in consideration of the concerns raised  by Commerce, we have clarified our recommendation that NIST either  develop a mechanism to carry out the process described by the 1979 act,  or develop a legislative proposal to address any concerns arising from the  implementation of the act.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Commerce, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or neumannj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the challenges the National Institute of  Standards and Technology (NIST) faces in providing measurement  services and supporting documentary-standards development and (2) the  extent to which NIST has taken steps to address any challenges and how  those steps align with relevant federal guidance and policy.", "To identify any challenges NIST may face in providing measurement  services and supporting documentary-standards development, we began  by performing a literature review, including reports on NIST from the  National Academies of Sciences, Engineering, and Medicine, NIST\u2019s  Visiting Committee on Advanced Technology (VCAT), congressional  committee hearings on NIST\u2019s measurement services, and other  sources. We reviewed these sources to identify statements regarding  any challenges to NIST\u2019s current measurement services and  documentary standards activities or statements recommending  improvements to these services or activities. For purposes of our  analysis, we included NIST\u2019s efforts to support measurement standards  as a component of NIST\u2019s measurement services.", "We supplemented our literature review by holding focus groups with NIST  stakeholders including: (1) researchers and (2) representatives working  with industry, including commercial entities and states\u2019 metrology  laboratories. To ensure our focus groups contained a diverse group of  stakeholders and viewpoints on NIST\u2019s measurement services and  documentary standards activities, we included participants from a variety  of backgrounds. We selected researchers to participate in our focus  groups from university scientists in engineering and the physical and  biological sciences. We selected industry participants for the focus groups  to reflect a range of industrial sectors, including (1) sectors that comprise  greater than 1 percent of U.S. gross domestic product, according to  Bureau of Economic Analysis data and (2) sectors that the Department of  Commerce\u2019s International Trade Agency has identified as U.S. export  opportunities. Across these sectors we selected industry participants  from the following categories: broadcasting and telecommunications;  chemical products and pharmaceuticals; computer and electronic  products and related services; building products and construction; finance  and insurance; food and beverage and tobacco products; health care and  social assistance; transportation; utilities and energy; defense products;  and other manufacturing. We also included representatives from the  National Conference on Weights and Measures, an organization of  commercial entities and state metrology laboratories, among others, that  addresses measurement of commercial products.", "After developing our focus group structure and determining our participant  categories, we obtained feedback on our approach during discussions  with NIST officials and with representatives from standards development  organizations (SDO) selected from those that NIST most often  collaborates with\u2014the American National Standards Institute, ASTM  International, and IEEE. We then used a snowball approach to identify  and invite individuals from across our participant categories. Starting with  individuals from several SDOs and the VCAT, we asked for suggestions  of individuals knowledgeable in measurement services and standards  needs of our participant categories. As we received responses and  contacted those individuals, we asked them to recommend additional  participants. Through this process, we identified and invited nearly 100  individuals to participate in our focus groups, and 58 individuals agreed to  participate. To organize our focus groups we asked the individuals who  agreed to participate to describe their expertise regarding measurement  services and standards development and familiarity with the industrial  sectors we identified. We then selected individuals for each focus group  based on availability and to include a mix of expertise. We conducted 3  focus groups for representatives from industry and 2 focus groups for  researchers. Each focus group included from 5 to 8 individuals. In total,  our focus groups included 31 stakeholders. We reviewed transcripts of  the focus groups to identify the challenges NIST faces in providing  measurement services and supporting documentary-standards  development.", "We also collected information on the challenges that NIST faces during  36 interviews, including 17 interviews with current and former NIST  officials, 10 interviews with officials from other federal agencies, and 9  interviews with representatives from SDOs and other stakeholders. The  10 interviews we conducted with other federal agency officials included 8  agency standards executives\u2014senior level officials with knowledge of,  and experience in, standards-related issues at their agencies and who  are responsible for coordinating their agency\u2019s participation in SDOs,  among other responsibilities\u2014or their alternates on the ICSP. The  agencies whose standards executives or other officials we interviewed  included the Departments of Defense, Energy, and Homeland Security,  and Health and Human Services, as well as the Consumer Product  Safety Commission, Environmental Protection Agency, General Services  Administration, and Office of the U.S. Trade Representative. GAO  reviewed our interview notes to identify challenges and NIST\u2019s efforts to  address these challenges.", "To evaluate the steps NIST has taken to address challenges in providing  measurement services and supporting documentary-standards  development, we drew upon our focus groups, interviews with NIST staff,  and reviews of NIST documentation that described the agency\u2019s  measurement services and standards activities, such as agency policies,  orders, and publications. We also conducted a review of existing  literature, relevant laws, NIST policy, and other guidance documents to  identify federal requirements and guidance. For example, we reviewed  the National Technology Transfer and Advancement Act of 1995, Office  of Management and Budget\u2019s Circular A-119, and Executive Office of the  President\u2019s Memo on Principles for Federal Engagement in Standards  Activities to Address National Priorities, among other sources. We  compared the steps NIST has taken to address the challenges it faces in  providing measurement services and supporting standards development  to these policies and guidance.", "To evaluate NIST\u2019s current steps, we also considered our prior work on  federal standards for internal control and on interagency collaboration.  Internal control is a process created by an agency\u2019s management and  other personnel that provides reasonable assurance that the objectives of  the agency will be achieved and comprises the plans, methods, policies,  and procedures used to fulfill the mission and objectives of the agency.  Standards for Internal Control in the Federal Government (known as the  Green Book), provide the overall framework for establishing and  maintaining an effective internal control system and require that agencies  perform and document certain actions to establish an effective internal  control system. These requirements include:  that management should identify, analyze, and respond to risks  related to achieving the defined objectives;  that management should use quality information to achieve the  entity\u2019s objectives; and  that management documents the results of evaluations to identify  internal control issues.", "Our work on interagency collaboration describes leading practices  agencies can engage in to enhance and sustain collaborative efforts and  describes seven key features to consider to implement these practices.  We selected the following five features relevant to NIST\u2019s leadership of  the Interagency Committee on Standards Policy (ICSP) for review:", "Outcomes and Accountability: Have short-term and long-term  outcomes been clearly defined? Is there a way to track and monitor  their progress?", "Leadership: How will leadership be sustained over the long-term? If  leadership is shared, have roles and responsibilities been clearly  identified and agreed upon?", "Clarity of Roles and Responsibilities: Have participating agencies  clarified roles and responsibilities?", "Participants: Have all relevant participants been included? Do they  have the ability to commit resources for their agency?", "Written Guidance and Agreements: If appropriate, have participating  agencies documented their agreement regarding how they will be  collaborating? Have they developed ways to continually update and  monitor these agreements?", "We did not review ICSP collaboration with respect to key features  regarding resources or bridging organizational culture because we did not  fully examine the activities of all agencies participating in the ICSP.", "We conducted this performance audit from July 2016 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Focus Group Participants", "paragraphs": ["The following individuals participated in GAO\u2019s five focus groups:  Allen Adler, Former Vice President of Enterprise Technology Strategy,  Boeing  Kathleen Almand, Vice President for Research, Data, and Analytics,  National Fire Protection Association  Karin Athanas, Government and Regulatory Affairs Manager, American  Association for Laboratory Accreditation (A2LA)", "Robert Austin, Professor of Physics, Princeton University  Karl Bly, Quality Assurance Director, Vermont Thread Gage  Jerry Buendel, Weights and Measures Program Manager, Washington  State Department of Agriculture  Rita Colwell, Professor, University of Maryland, and Johns Hopkins  University School of Public Health  Ross Corotis, Professor of Engineering, University of Colorado Boulder  Denyette DePierro, Vice President and Senior Counsel, Center for  Payments and Cybersecurity, American Bankers Association  Don Detmer, Professor of Public Health Sciences, University of Virginia  Gail Folena-Wasserman, Senior Vice President, Biopharmaceutical  Development, MedImmune  Ruben G. Carbonell, Professor of Chemical Engineering, North Carolina  State University and Chief Technology Officer, National Institute for  Innovation in Manufacturing Biopharmaceuticals (NIIMBL)", "Christopher Guay, Regulatory Fellow, Procter and Gamble  Kelvin H. Lee, Professor of Chemical and Biomolecular Engineering,  University of Delaware and Director, National Institute for Innovation in  Manufacturing Biopharmaceuticals (NIIMBL)", "Hani Haider, Director of Orthopaedics Biomechanics & Advanced  Surgical Technologies Laboratory, University of Nebraska  Jennie Hwang, CEO and Principal, H-Technologies Group  Walter Jager, Principal, Environmentally Conscious Design (ECD)  Compliance  Karen Kafadar, Professor and Chair of Department of Statistics,  University of Virginia  Dave Kreitlow, Operations Manager, MTS Systems Corporation  Zhiyong Ma, Vice President and Director of Technology and  Manufacturing Labs, Intel  Kristin Macey, Director of Division of Measurement Standards, California  Department of Food and Agriculture  Josh Magri, Vice President and Counsel for Regulation and Developing  Technologies, Financial Services Roundtable  Dave Maisch, Director of Engineering and Industrial Affairs, PMC Lone  Star  Tod Sizer, Vice President of Mobile Radio Research Laboratory, Nokia  Bell Labs  Clifford Spiegelman, Distinguished Professor of Statistics, Texas A&M  University  Lonnie Spires, President and CEO, American Association for Laboratory  Accreditation (A2LA)"], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Chris Murray (Assistant Director),  Tind Shepper Ryen (Analyst-in-Charge), John Delicath, Justin Fisher, Eli  Harpst, Tricia Moye, Danny Royer, Andrew Stavisky, and Sarah Veale  made key contributions to this report."], "subsections": []}]}], "fastfact": ["The National Institute of Standards and Technology helps promote U.S. innovation and industrial competitiveness by providing measurement services and supporting the development of standards in collaboration with the private sector. For example, it provides calibrations for equipment used in high-precision manufacturing and it helps industry develop standards for fire safety, among other things.", "We found NIST has taken steps to address challenges it faces in prioritizing and coordinating its work, but that it could better align its work with its policies and best practices. We made several recommendations on how to address these challenges."]}
{"id": "GAO-18-430T", "url": "https://www.gao.gov/products/GAO-18-430T", "title": "Cybersecurity Workforce: DHS Needs to Take Urgent Action to Identify Its Position and Critical Skill Requirements", "published_date": "2018-03-07T00:00:00", "released_date": "2018-03-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DHS is the lead agency tasked with protecting the nation's critical infrastructure from cyber threats. The Homeland Security Cybersecurity Workforce Assessment Act of 2014 required DHS to identify, categorize, and assign employment codes to all of the department's cybersecurity workforce positions. These codes define work roles and tasks for cybersecurity specialty areas such as program management and system administration. Further, the act required DHS to identify and report its cybersecurity workforce critical needs.", "GAO was asked to testify on the extent to which DHS has (1) identified, categorized, and assigned employment codes to its cybersecurity positions and (2) identified its cybersecurity workforce areas of critical need. To do so, GAO summarized the findings discussed in its February 2018 report on DHS's cybersecurity workforce ( GAO-18-175 )."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Homeland Security (DHS) has taken actions to identify, categorize, and assign employment codes to its cybersecurity positions, as required by the Homeland Security Cybersecurity Workforce Assessment Act of 2014 ; however, its actions have not been timely and complete. For example, DHS did not establish timely and complete procedures to identify, categorize, and code its cybersecurity position vacancies and responsibilities. Further, DHS did not complete efforts to identify all of the department's cybersecurity positions and accurately assign codes to all filled and vacant cybersecurity positions. In August 2017, DHS reported to Congress that it had coded 95 percent of the department's identified cybersecurity positions. However, the department had, at that time, coded approximately 79 percent of the positions. DHS's 95 percent estimate was overstated primarily because it excluded vacant positions, even though the act required DHS to report these positions.", "In addition, although DHS has taken steps to identify its workforce capability gaps, it has not identified or reported to Congress on its departmentwide cybersecurity critical needs that align with specialty areas. The department also has not reported annually its cybersecurity critical needs to the Office of Personnel Management (OPM), as required, and has not developed plans with clearly defined time frames for doing so. (See table).", "Without ensuring that its procedures are complete and that its progress in identifying and assigning codes to its cybersecurity positions is accurately reported, DHS will not be positioned to effectively examine its cybersecurity workforce, identify critical skill gaps, or improve its workforce planning. Further, until DHS establishes plans and time frames for reporting on its critical needs, the department may not be able to ensure that it has the necessary cybersecurity personnel to help protect the department's and the nation's federal networks and critical infrastructure from cyber threats. The commitment of DHS's leadership to addressing these matters is essential to helping the department fulfill the act's requirements."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its February 2018 report, GAO recommended that DHS take six actions, including ensuring that its cybersecurity workforce procedures identify position vacancies and responsibilities; reported workforce data are complete and accurate; and plans for reporting on critical needs are developed. DHS concurred with the six recommendations and described actions the department plans to take to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to appear at today\u2019s hearing to discuss the  Department of Homeland Security\u2019s (DHS) efforts to strengthen its  cybersecurity workforce. In its important role of securing the nation\u2019s  cyberspace, DHS is responsible for protecting the confidentiality, integrity,  and availability of its own computer systems and information, and for  leading the coordination with partners in the public and private sectors to  protect the computer networks of federal civilian agencies and the  nation\u2019s critical infrastructure from threats. As such, having an effective  cybersecurity workforce is essential to accomplishing the department\u2019s  mission.", "Toward ensuring that it has an effective workforce, the Homeland  Security Cybersecurity Workforce Assessment Act of 2014 (hereafter  referred to as \u201cthe act\u201d) required DHS to identify all cybersecurity  workforce positions within the department, determine the cybersecurity  work category and specialty area of such positions, and assign the  corresponding employment code to each cybersecurity position. The act  also required DHS to identify and report on its cybersecurity workforce  areas of critical need.", "In addition to the aforementioned requirements for DHS, the act included  a provision for GAO to analyze and monitor the department\u2019s efforts to  address its requirements. My testimony today provides an overview of our  recently issued (February 2018) report, Cybersecurity Workforce: Urgent  Need for DHS to Take Actions to Identify Its Position and Critical Skill  Requirements, based on our review of the its efforts.", "In preparing this statement, we relied on our work supporting the  February report. This work included comparing the department\u2019s actions  to identify, categorize, and assign employment codes to its cybersecurity  positions and to identify its cybersecurity workforce areas of critical need  with the required activities specified in the act. We analyzed that  information, including data on the coding of cybersecurity workforce  positions, and also administered a data collection instrument to six  components of DHS. Further, we interviewed relevant officials from the  DHS Office of Chief Human Capital Officer (OCHCO) and from the  selected DHS components. We also interviewed relevant officials at the  Office of Personnel Management (OPM).", "The work on which this statement is based was conducted in accordance  with generally accepted government auditing standards, which require  audits to be planned and performed 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 such a reasonable basis for our findings and conclusions based  on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["DHS leads the federal government\u2019s efforts to secure our nation\u2019s public  and private critical infrastructure information systems against cyber  threats. As part of these efforts, cybersecurity professionals can help to  prevent or mitigate the vulnerabilities that could allow malicious  individuals and groups access to federal information technology (IT)  systems. The ability to secure federal systems depends on the  knowledge, skills, and abilities of the federal and contractor workforce that  designs, develops, implements, secures, maintains, and uses these  systems.", "The Office of Management and Budget has noted that the federal  government and private industry face a persistent shortage of  cybersecurity and IT talent to implement and oversee information security  protections. This shortage may leave federal IT systems vulnerable to  malicious attacks. Experienced and qualified cybersecurity professionals  are essential in performing DHS\u2019s work to mitigate vulnerabilities in its  own and other agencies\u2019 computer systems and to defend against cyber  threats.", "Since 1997, we have identified the protection of federal information  systems as a governmentwide high-risk area. In addition, in 2001, we  introduced strategic governmentwide human capital management as  another area of high risk. We have also identified a number of  challenges federal agencies are facing to ensure that they have a  sufficient cybersecurity workforce with the skills necessary to protect their  information and networks from cyber threats. These challenges pertain  to identifying and closing skill gaps as part of a comprehensive workforce  planning process, recruiting and retaining qualified staff, and navigating  the federal hiring process."], "subsections": [{"section_title": "Federal Initiative and Guidance Are Intended to Improve Cybersecurity Workforces", "paragraphs": ["In recent years, the federal government has taken various steps aimed at  improving the cybersecurity workforce. These include establishing a  national initiative to promote cybersecurity training and skills and  developing guidance to address cybersecurity workforce challenges.", "Founded in 2010, the National Initiative for Cybersecurity Education  (NICE) is a partnership among government, academia, and the private  sector, and is coordinated by the National Institute of Standards and  Technology (NIST). The NICE mission promotes cybersecurity education,  training, and workforce development in coordination with its partners. The  initiative\u2019s goal is to increase the number of skilled cybersecurity  professionals in order to boost national IT security.", "In 2013, NICE published the National Cybersecurity Workforce  Framework to provide a consistent way to define and describe  cybersecurity work at any public or private organization, including federal  agencies. In 2014, OPM developed guidance for assigning 2-digit  employment codes for each cybersecurity work category and specialty  area identified in the 2013 NICE framework. Federal agencies can use  the codes to identify cybersecurity positions in personnel and payroll  systems, such the system of the National Finance Center.", "To further enhance efforts to strengthen the cybersecurity workforce,  NICE subsequently revised the framework in 2017 to include 33  cybersecurity-related specialty areas organized into 7 categories\u2014 securely provision, operate and maintain, protect and defend, investigate,  collect and operate, analyze, and oversee and govern. The revision  defined work roles in specialty areas and cybersecurity tasks for each  work role, as well as the knowledge, skills, and abilities that a person  should have in order to perform each work role. Also, in 2017, OPM  issued guidance creating a unique 3-digit employment code for each  cybersecurity work role. In October 2017, NIST issued guidance that  reflected the finalized 2017 NICE framework and included a crosswalk of  OPM\u2019s 2-digit employment codes to the 3-digit codes."], "subsections": []}, {"section_title": "DHS\u2019s Cybersecurity Workforce Performs a Wide Range of Critical Missions", "paragraphs": ["DHS is the third largest department in the federal government, employing  approximately 240,000 people, and operating with an annual budget of  about $60 billion, of which about $6.4 billion was reportedly spent on IT in  fiscal year 2017. In leading the federal government\u2019s efforts to secure our  nation\u2019s public and private critical infrastructure information systems, the  department, among other things, collects and shares information related  to cyber threats and cybersecurity risks and incidents with other federal  partners to enable real-time actions to address these risks and incidents.", "The department is made up of 15 operational and support components  that perform its critical mission functions. Table 1 describes the 6  components that we included in our review."], "subsections": []}, {"section_title": "DHS Is Required to Assess Its Cybersecurity Workforce", "paragraphs": ["The Homeland Security Cybersecurity Workforce Assessment Act of  2014 required DHS to perform workforce assessment-related activities to  identify and assign employment codes to its cybersecurity positions.  Specifically, the act called for DHS to:  1.  Establish procedures for identifying and categorizing cybersecurity  positions and assigning codes to positions (within 90 days of law\u2019s  enactment).  2.  Identify all filled and vacant positions with cybersecurity functions and  determine the work category and specialty area of each.  3.  Assign OPM 2-digit employment codes to all filled and vacant  cybersecurity positions based on the position\u2019s primary cybersecurity  work category and specialty areas, as set forth in OPM\u2019s Guide to  Data Standards.", "In addition, after completing the aforementioned activities, the act called  for the department to take steps to identify and report its cybersecurity  workforce areas of critical need. Specifically, DHS was to:  4.  Identify the cybersecurity work categories and specialty areas of  critical need in the department\u2019s cybersecurity workforce and report to  Congress.  5.  Submit to OPM an annual report through 2021 that describes work  categories and specialty areas of critical need and substantiates the  critical need designations.", "The act required DHS to complete the majority of these activities by  specific due dates between March 2015 and September 2016.", "Within DHS, OCHCO is responsible for carrying out these provisions,  including the coordination of the department\u2019s overall efforts to identify,  categorize, code, and report its cybersecurity workforce assessment  progress to OPM and Congress."], "subsections": []}]}, {"section_title": "DHS Has Not Fully Identified Cybersecurity Positions or Assigned Employment Codes in a Complete and Reliable Manner", "paragraphs": ["The act required DHS to establish procedures to identify and assign the  appropriate employment code, in accordance with OPM\u2019s Guide to Data  Standards, to all filled and vacant positions with cybersecurity functions  by March 2015. In addition, DHS\u2019s April 2016 Cybersecurity Workforce  Coding guidance states that components should ensure procedures are  in place to monitor and to update the employment codes as positions  change over time.", "Further, the Standards for Internal Control in the Federal Government  recommends that management assign responsibility and delegate  authority to key roles and that each component develop individual  procedures to implement objectives. The standards also recommend that  management periodically review such procedures to see that they are  developed, relevant, and effective.", "DHS OCHCO developed departmental procedures in May 2014 and  recommended implementation steps for coding positions with  cybersecurity functions for the department\u2019s components. However,  OCHCO did not update its procedures to include information on  identifying positions and assigning codes until April 2016\u201413 months  after the due date specified by the act.", "In addition, the procedures were not complete because they did not  include information related to identifying and coding vacant positions, as  the act required. Moreover, the departmental procedures did not identify  the individual within each DHS component who was responsible for  leading and overseeing the identification and coding of the component\u2019s  cybersecurity positions.", "Further, although components were able to supplement the departmental  procedures by developing their own component-specific procedures for  identifying and coding their cybersecurity positions, OCHCO did not  review those procedures for consistency with departmental guidance. The  department could not provide documentation that OCHCO had verified or  reviewed component-developed procedures. In addition, OCHCO officials  acknowledged that they had not reviewed the components\u2019 procedures  and had not developed a process for conducting such reviews.", "OCHCO officials stated that several factors had limited their ability to  develop the procedures and to review component-developed procedures  in a timely and complete manner. These factors were (1) a delayed  departmental decision until April 2016 as to whether certain positions  should be considered cybersecurity positions; (2) a belief that each  component had the best understanding of their human capital systems,  so procedure development was best left up to each component; (3) a  condition where each of the six selected DHS components recorded and  tracked vacant positions differently; and (4) cybersecurity specialty areas  for vacant positions were not known until a position description was  developed or verified and a hiring action was imminent. Without  assurance that procedures are timely, complete, and reviewed, DHS  cannot be certain that its components have the procedures to identify and  code all positions with cybersecurity functions, as required by the act.", "Accordingly, our February 2018 report included recommendations that  DHS 1) develop procedures on how to identify and code vacant  cybersecurity positions, 2) identify the individual in each component who  is responsible for leading that component\u2019s efforts in identifying and  coding cybersecurity positions, and 3) establish and implement a process  to periodically review each component\u2019s procedures for identifying  component cybersecurity positions and maintaining accurate coding.  DHS concurred with the recommendations and stated that it would  implement them by April 30, 2018."], "subsections": [{"section_title": "DHS Has Not Yet Completed Required Identification Activities", "paragraphs": ["The act required DHS to identify all of its cybersecurity positions,  including vacant positions, by September 2015. Further, the act called for  the department to use OPM\u2019s Guide to Data Standards to categorize the  identified positions and determine the work category or specialty area of  each position.", "As of December 2016, the department reported that it had identified  10,725 cybersecurity positions, including 6,734 federal civilian positions,  584 military positions, and 3,407 contractor positions. Nevertheless, as  of November 2017, the department had not completed identifying all of its  cybersecurity positions and it had not determined the work categories or  specialty areas of the positions. In explaining why the department had not  identified all its positions, OCHCO officials stated that components varied  in reporting their identified vacant positions because the department did  not have a system to track vacancies.", "Of the 7 work categories and 33 specialty areas in the NICE framework,  DHS reported that its 3 most common work categories were \u201cprotect and  defend\u201d, \u201csecurely provision,\u201d and \u201coversight and development;\u201d and its 2  most common specialty areas were \u201csecurity program management\u201d and  \u201cvulnerability assessment and management.\u201d However, DHS could not  provide data to show the actual numbers of positions in each of these  categories and specialty areas.", "According to OCHCO officials, the department was still in the process of  identifying positions for the 2-digit codes and would continue this effort  until the 3-digit codes were available in the National Finance Center  personnel and payroll system in December 2017. At that time, OCHCO  officials stated that the department intends to start developing procedures  for identifying and coding positions using the 3-digit codes."], "subsections": []}, {"section_title": "DHS Has Not Completely and Accurately Assigned Employment Codes", "paragraphs": ["The act also required DHS to assign 2-digit employment codes to all of its  identified cybersecurity positions. This action was to be completed by  September 2015.", "However, as of August 2017\u201423 months after the due date\u2014the  department had not completed the coding assignment process. Although,  in August 2017, OPM provided a progress report to Congress containing  DHS data which stated that 95 percent of DHS-identified cybersecurity  positions had been coded, our analysis determined that the department  had assigned cybersecurity position codes to approximately 79 percent of  its identified federal civilian cybersecurity positions. The primary reason  for this discrepancy was that DHS did not include the coding of vacant  positions, as required by the act. Further, OCHCO officials stated they did  not verify the accuracy of the components\u2019 cybersecurity workforce data.  Without coding cybersecurity positions in a complete and accurate  manner, DHS will not be able to effectively examine its cybersecurity  workforce; identify skill gaps; and improve workforce planning.", "Thus, in our recently issued report, we recommended that OCHCO collect  complete and accurate data on all filled and vacant cybersecurity  positions when it conducts its cybersecurity identification and coding  efforts. DHS concurred with the recommendation and stated that, by June  29, 2018, it intends to issue memorandums to its components that  provide instructions for the components to periodically review compliance  and cybersecurity workforce data concerns to ensure data accuracy."], "subsections": []}]}, {"section_title": "DHS Has Not Identified or Reported Its Cybersecurity Workforce Areas of Critical Need", "paragraphs": ["According to the act, DHS was to identify its cybersecurity work  categories and specialty areas of critical need in alignment with the NICE  framework and to report this information to the appropriate congressional  committees by June 2016. In addition, a DHS directive required the DHS  Chief Human Capital Officer to provide guidance to the department\u2019s  components on human resources procedures, including identifying  workforce needs.", "As of February 2018, the department had not fulfilled its requirements to  identify and report its critical needs. Although DHS identified workforce  skills gaps in a report that it submitted to congressional committees in  March 2017, the department did not align the skills gaps to the NICE  framework\u2019s defined work categories and specialty areas of critical need.", "In September 2017, OCHCO developed a draft document that attempted  to crosswalk identified department-wide cybersecurity skills gaps to one  or more specialty areas in the NICE framework. However, the document  did not adequately help components identify their critical needs by  aligning their gaps with the NICE framework because it did not provide  clear guidance to help components determine a critical need in cases in  which a skills gap is mapped to multiple work categories.", "According to OCHCO officials, DHS had not identified department-wide  cybersecurity critical needs that aligned with the framework partly  because OPM did not provide DHS with guidance for identifying  cybersecurity critical needs. In addition, OCHCO officials stated that the  components did not generally view critical skills gaps in terms of the  categories or specialty areas as defined in the NICE framework, but  instead, described their skills gaps using position titles that are familiar to  them. In the absence of relevant guidance to help components identify  their critical needs, DHS and the components are hindered from  effectively identifying and prioritizing workforce efforts to recruit, hire,  train, develop, and retain cybersecurity personnel.", "DHS also did not report cybersecurity critical needs to OPM in September  2016 or September 2017, as required. Instead, the department first  reported its cybersecurity coding progress and skills gaps in a March  2017 report that it sent to OPM and Congress to address several of the  act\u2019s requirements. However, the report did not describe or substantiate  critical need designations because DHS has not yet identified them.", "Additionally, DHS had not developed plans or time frames to complete  priority actions\u2014developing a DHS cybersecurity workforce strategy and  completing its initial cybersecurity workforce research\u2014 that OCHCO  officials said must be completed before it can report its cybersecurity  critical needs to OPM. According to OCHCO officials, the report that the  department submitted to Congress in March 2017 had contained plans  and schedules. However, we found that the March 2017 report did not  capture and sequence all of the activities that DHS officials said must be  completed in order to report critical needs. Until DHS develops plans and  schedules with time frames for reporting its cybersecurity critical needs,  DHS may not have insight into its needs for ensuring that it has the  workforce necessary to carry out its critical role of helping to secure the  nation\u2019s cyberspace.", "In our report, we recommended that DHS 1) develop guidance to assist  DHS components in identifying their cybersecurity work categories and  specialty areas of critical need that align to the NICE framework and 2)  develop plans with time frames to identify priority actions to report on  specialty areas of critical need. DHS concurred with the  recommendations and stated that it plans to implement them by June  2018.", "In summary, DHS needs to act now to completely and accurately identify,  categorize, and assign codes to all of its cybersecurity positions, and to  identify and report on its cybersecurity workforce areas of critical need.  Implementing the six recommendations we made in our February 2018  report should better position the department to meet the requirements of  the 2014 act. Further, doing so will help DHS understand its needs for  recruiting, hiring, developing, and retaining a cybersecurity workforce with  the skills necessary to accomplish the department\u2019s varied and essential  cybersecurity mission. Until DHS implements our recommendations, it  will not be able to ensure that it has the necessary cybersecurity  personnel to help protect the department\u2019s and federal networks and the  nation\u2019s critical infrastructure from cyber threats.", "Chairmen Ratcliffe and Perry, Ranking Members Richmond and Correa,  and Members of the Subcommittees, this concludes my statement. I  would be pleased to respond to your questions."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staffs have any questions about this testimony, please  contact Gregory C. Wilshusen at (202) 512-6244 or  wilshuseng@gao.gov, or Chris P. Currie 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  statement.", "GAO staff who made key contributions to this testimony are Alexander  Anderegg, Ben Atwater, David Blanding, Jr., Chris Businsky, Wayne  Emilien, Jr., Nancy Glover, David Hong, Tammi Kalugdan, David Plocher,  Luis E. Rodriguez, and Priscilla Smith."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["GAO, Cybersecurity: Federal Efforts Are Under Way That May Address  Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017).", "GAO, Information Security: DHS Needs to Continue to Advance Initiatives  to Protect Federal Systems, GAO-17-518T (Washington, D.C.: Mar. 28,  2017).", "GAO, High-Risk Series: Progress on Many High-Risk Areas, While  Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.:  Feb. 15, 2017).", "GAO, Cybersecurity: Actions Needed to Strengthen U.S. Capabilities,  GAO-17-440T (Washington, D.C.: Feb. 14, 2017).", "GAO IT Workforce: Key Practices Help Ensure Strong Integrated  Program Teams; Selected Departments Need to Assess Skill Gaps,  GAO-17-8 (Washington, D.C.: Nov. 30, 2016).", "GAO, Federal Chief Information Security Officers: Opportunities Exist to  Improve Roles and Address Challenges to Authority, GAO-16-686  (Washington, D.C.: Aug. 26, 2016).", "GAO, Federal Hiring: OPM Needs to Improve Management and Oversight  of Hiring Authorities, GAO-16-521 (Washington, D.C.: Aug. 2, 2016).", "GAO, Information Security: DHS Needs to Enhance Capabilities, Improve  Planning, and Support Greater Adoption of Its National Cybersecurity  Protection System, GAO-16-294 (Washington, D.C.: Jan. 28, 2016).", "GAO, Federal Workforce: OPM and Agencies Need to Strengthen Efforts  to Identify and Close Mission-Critical Skills Gaps, GAO-15-223  (Washington, D.C.: Jan. 30, 2015).", "GAO, Cybersecurity Human Capital: Initiatives Need Better Planning and  Coordination, GAO-12-8 (Washington, D.C.: Nov. 29, 2011).", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-188", "url": "https://www.gao.gov/products/GAO-18-188", "title": "Climate-Related Risks: SEC Has Taken Steps to Clarify Disclosure Requirements", "published_date": "2018-02-20T00:00:00", "released_date": "2018-03-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Impacts from a changing climate can pose serious risks to the global economy and affect many economic sectors, according to reports. Public companies are generally required to disclose certain risks in their SEC filings. In 2010, SEC issued guidance to clarify how existing disclosure requirements apply for climate-related matters.", "GAO was asked to review (1) steps SEC has taken to clarify to companies their disclosure requirements for climate-related risks, (2) steps SEC has taken to examine changes companies may have made to their climate-related disclosures since the release of its 2010 Guidance, and (3) constraints SEC faces when reviewing climate-related disclosures and stakeholders' views of those disclosures.", "GAO reviewed SEC's disclosure requirements, guidance, and reports on changes in climate-related disclosures; queried SEC's filings system to identify comment letters with issues on climate-related disclosures; identified examples of climate-related disclosures in companies' filings; and interviewed SEC staff and representatives of stakeholder groups, such as industry associations from five industry groups, and nonprofit organizations that work with investors. We selected these stakeholders because they either were from industries likely to be affected by climate change-related matters due to the nature of their operations, or have a key interest in climate-related issues.", "Senior staff from SEC's Division of Corporation Finance generally agreed with GAO's findings."]}, {"section_title": "What GAO Found", "paragraphs": ["To help clarify to companies their disclosure requirements for climate-related matters, the Securities and Exchange Commission (SEC) issued the Commission Guidance Regarding Disclosure Related to Climate Change in 2010 (2010 Guidance). The 2010 Guidance was SEC's primary form of communication to clarify companies' climate-related disclosure requirements. In addition, SEC issued individual comment letters to specific companies on their climate-related disclosures. These letters are publicly available and companies can view these letters to understand SEC's assessment of a particular company's disclosures. Representatives from industry associations with whom GAO spoke stated that they consider the disclosure requirements for climate-related risks to be clear and have no need for additional guidance.", "SEC issued two reports to Congress in 2012 and 2014 that examined changes in climate-related disclosures in select industries. SEC found that most of these filings included some level of climate-related disclosures and reported that there were no notable year-to-year changes. SEC staff also continue to periodically assess climate-related disclosures in addition to its regular disclosure review process. Additionally, in April 2016, SEC requested public input on modernizing certain business and financial disclosure requirements, including potential changes on reporting climate-related risks in SEC's filings. As of December 2017, SEC staff said they are considering recommendations for the Commission's consideration based on comments received.", "SEC faces constraints in reviewing climate-related and other disclosures because it primarily relies on information that companies provide. SEC senior staff explained that SEC's Division of Corporation Finance staff assess companies' filings for compliance with federal securities laws\u2014which require companies to disclose material risks\u2014but do not have the authority to subpoena additional information from companies. Additionally, companies may report similar climate-related disclosures in different sections of the filings, and climate-related disclosures in some filings contain disclosures using generic language, not tailored to the company, and do not include quantitative metrics. When companies report climate-related disclosures in varying formats and specificity, SEC reviewers and investors may find it difficult to compare and analyze related disclosures across companies' filings. SEC has tools, mechanisms, and resources\u2014including internal supervisory controls, regulations and guidance, a two-level filing review process, internal and external data, and staff training and experience\u2014that help SEC staff consistently review filing disclosures, according to SEC documents and staff. Representatives of industry associations told GAO that they consider the current climate-related disclosure requirements adequate and no additional climate-related disclosures are needed. However, some investor groups and asset management firms have highlighted the need for companies to disclose more climate-related information. But, members of SEC's Investor Advisory Committee told GAO that investors have not agreed on the priority of climate-related disclosures. Also, additional disclosure requirements or increased scrutiny of companies' climate-related information\u2014which, if necessary, SEC and Congress can consider\u2014could have mission and resource implications for SEC's Division of Corporation Finance."]}], "report": [{"section_title": "Letter", "paragraphs": ["Impacts from a changing climate can pose serious risks to the global  economy and affect many economic sectors, according to reports. For  example, as observed by the United States Global Change Research  Program, U.S. energy facilities and systems, especially those located in  coastal areas, are vulnerable to extreme weather events. Wind and  storm surge damage by hurricanes already causes significant  infrastructure losses on the Gulf Coast. The impacts and costs of floods,  droughts, and other weather events will increase in significance as what  are considered \u201crare\u201d events become more common and intense.   Superstorm Sandy in 2012, for example, cost the United States an  estimated $70 billion in direct damages and lost economic output. In the  first 6 months of 2017, the United States had 10 weather and climate  disasters with losses reaching or exceeding $1 billion each. More  recently, in August and September 2017, Hurricanes Harvey, Irma, and  Maria caused significant damage to parts of the United States, and, as of  October 3, 2017, the Federal Emergency Management Agency has  approved over $1 billion in assistance funds in response to these three  hurricanes.", "In February 2013, we recognized that climate change presents a  significant financial risk to the federal government and added the area of  limiting the federal government\u2019s fiscal exposure by better managing  climate change risks as a high-risk area. In the February 2015 and 2017  updates to our high risk list, we recognized that climate change also  poses risks to private-sector decision makers such as public companies,  and these decision makers can also drive federal climate-related fiscal  exposures because they are responsible for planning, constructing, and  maintaining certain types of vulnerable infrastructure paid for with federal  funds, insured by federal programs, or eligible for federal disaster  assistance.", "Public companies are generally required to disclose, among other things,  known trends, events, and uncertainties that are reasonably likely to have  a material effect on the company\u2019s financial condition or operating  performance through annual and other periodic filings with the Securities  and Exchange Commission (SEC). These disclosures may include  information on climate-related risks. In February 2010, SEC issued  Commission Guidance Regarding Disclosure Related to Climate Change  (hereafter referred to as the 2010 Guidance) to provide guidance to  companies on how existing disclosure requirements apply for climate- related matters. We reported in 2016 that SEC considers climate-related  information as part of its routine filing review process. Furthermore,  SEC\u2019s Office of Inspector General (OIG) examined SEC\u2019s process for  comment letters issued to individual companies on issues identified  through the filing review and reported in September 2017 that SEC\u2019s  Division of Corporation Finance\u2019s (Corporation Finance) controls over its  comment letter process are generally effective.", "You asked us to review SEC\u2019s efforts to implement its 2010 Guidance.  This report examines: (1) steps SEC has taken to help companies  understand disclosure requirements for climate-related risks, (2) steps  SEC has taken to examine changes companies may have made to their  climate-related disclosures since the release of its 2010 Guidance, and  (3) constraints SEC faces when reviewing climate-related disclosures and  stakeholders\u2019 views of those disclosures.", "To address all three objectives, we reviewed SEC documents, including  the 2010 Guidance and internal filing review guidance, related to  companies\u2019 annual filings. We also reviewed SEC\u2019s 2012 and 2014  congressional reports and additional information on SEC staff\u2019s ongoing  reviews of climate-related disclosures. In addition, we reviewed prior  GAO and SEC OIG reports related to the 2010 Guidance and SEC\u2019s filing  review process, and reports from stakeholders, including the report on  recommendations from the Financial Stability Board Task Force on  Climate-related Financial Disclosures (FSB Task Force). We selected  five industries to focus on for this report: oil and gas, mining, insurance,  electric and gas utilities, and food and beverage. We selected these  industries because they were generally identified by SEC staff as more  likely than other industries to be affected by climate change-related  matters due to the nature of their operations or because we identified  companies in the industry that have submitted climate-related disclosures  and can provide perspectives on these disclosures. Views from the  selected industries are not generalizable to other industries we did not  include in our review.", "To address the first objective, we determined the number of comment  letters SEC issued to companies on climate-related disclosures from  February 2, 2010, through August 11, 2017. We reviewed all these  comment letters to understand the climate-related disclosure issues SEC  staff has identified. We also interviewed SEC senior staff from the  Division of Corporation Finance and representatives from a  nongeneralizable sample of industry groups representing companies in  the five industries we selected. Views from these industry representatives  cannot be generalized to those we did not include in our review.", "To address the second objective, we reviewed SEC\u2019s April 2016 Concept  Release related to business and financial disclosures in Regulation S-K.  Further, we interviewed SEC senior staff to understand steps SEC has  taken to examine changes in climate-related disclosures since the 2010  Guidance and planned actions related to the April 2016 Concept Release.", "To address the third objective, we reviewed information on the New York  State Attorney General\u2019s investigation of and agreement with Peabody  Energy on the company\u2019s SEC climate-related disclosures. To identify  illustrative examples of climate-related disclosures, we used Ceres\u2019 SEC  Sustainability Disclosure Search Tool to search annual filings of S&P 500  Index companies, filed in 2016, in the five industries we selected.  Additionally, we reviewed comments on SEC\u2019s Concept Release  submitted by organizations that represent investors, companies in the five  industries we selected, or organizations that have a key interest in  climate-related issues. We interviewed SEC senior staff to obtain  information on SEC\u2019s filing reviews and enforcement authority. We also  interviewed representatives from the organizations representing investors  or focusing on climate-related issues. Views from the representatives of  these investor groups cannot be generalized to those we did not include  in our review.", "Throughout this report, we use certain qualifiers when describing results  from interview participants, such as \u201cfew,\u201d \u201csome,\u201d and \u201cmost.\u201d We define  few as two or three; some as four or more but less than most; and most  as more than half or nearly all relative to the total number possible. The  views of interviewees we selected cannot be generalized to all SEC staff  or stakeholders on issues related to climate-related disclosures. See  appendix I for more information on our scope and methodology.", "We conducted this performance audit from November 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of SEC", "paragraphs": ["SEC\u2019s mission is to protect investors; maintain fair, orderly, and efficient  markets; and facilitate capital formation. As part of SEC\u2019s strategic plan,  SEC strives to promote a securities market that is worthy of the public\u2019s  trust and is characterized by, among other things, transparent disclosure  to investors of the risks of particular investments.", "SEC is headed by a five-member Commission composed of the Chair  and four Commissioners. SEC\u2019s responsibilities are divided among five  divisions and 24 offices, including the following offices that are  responsible for filing review or investor outreach:", "Corporation Finance is responsible for reviewing documents that  publicly-held companies are required to file with SEC, which may  include climate-related disclosures. Corporation Finance reviews  disclosure documents that companies are required to file, including  annual reports. Corporation Finance performs its filing review  responsibilities through accounting and legal staff in 11 offices,  organized by industry. The division\u2019s staff also provides companies  with assistance interpreting the Commission\u2019s rules and assists the  Commission with rule making.", "The Investor Advisory Committee was established under the 2010  Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act) to advise the Commission on regulatory priorities, the  effectiveness of disclosure, and initiatives to protect investor interests  and to promote investor confidence, among other things. The  committee has the authority to submit findings and recommendations  for review and consideration by the Commission.", "The Office of the Investor Advocate was established in 2014 pursuant  to the Dodd-Frank Act to provide a voice for investors, assist retail  investors, study investor behavior, and support the Investor Advisory  Committee. The Investor Advocate is required to submit reports  directly to Congress, without any prior review or comment from the  Commissioners or SEC staff."], "subsections": []}, {"section_title": "SEC Disclosure Requirements, Rule Making, and Guidance", "paragraphs": ["SEC rules generally require public companies to disclose, among other  things, known trends, events, and uncertainties that are reasonably likely  to have a material effect on the company\u2019s financial condition or operating  performance through annual and other periodic filings. Information is  material if there is a substantial likelihood that a reasonable investor  would consider it important in making an investment decision.  Regulation S-K, promulgated by SEC, contains disclosure requirements  that are applicable to the nonfinancial statement portion of annual filings  and other periodic reports filed with SEC.", "The Commission occasionally provides guidance on topics of general  interest to the business and investment communities by issuing  interpretive releases, which publish the Commission\u2019s views and interpret  federal securities laws and SEC regulations. The 2010 Guidance was  published by the Commission to provide guidance to companies on how  existing disclosure requirements apply for climate-related matters.", "The 2010 Guidance identifies four items in Regulation S-K that may be  most likely to require climate-related disclosure in companies\u2019 annual  filings. The four items are as follows:", "Description of business. This section of a company\u2019s annual filing  requires a description of the company\u2019s business, including its main  products and services, and what markets it operates in. This item  expressly requires disclosure of certain material effects of complying  with environmental laws.", "Legal proceedings. This section requires a company to include  information about certain material pending legal proceedings,  including, in certain circumstances, those arising under any federal,  state, or local provisions that have been enacted or adopted  regulating the discharge of materials into the environment or primarily  for the purpose of protecting the environment.", "Risk factors. This section discusses the most significant factors that  make investment in the company speculative or risky. Disclosure  under this section should clearly state risks and specify how each risk  affects the particular company and should not present risks that could  apply to any company.", "Management\u2019s discussion and analysis. This section presents  management\u2019s perspective on material past and anticipated future  business results. The information provided in this section is intended  to give the investor an opportunity to look at the company through the  eyes of management by providing both a short- and long-term  analysis of the company\u2019s financial condition. Additionally, in this  section companies must identify and disclose known trends, events,  demands, commitments, and uncertainties that are reasonably likely  to have a material effect on their financial condition or operating  performance.", "The 2010 Guidance also identifies four different topics under which  climate-related risks can be categorized (see table 1). Regardless of  whether a company\u2019s identified risk falls under one of these categories,  companies need to disclose the information required by the federal  securities laws and regulations, and any additional material information  necessary to make the required statements, in light of the circumstances  under which they are made, not misleading.", "Additionally, SEC staff may issue guidance that includes a summary or  explanation of rules adopted or amended by the Commission. For  example, SEC staff issued a Staff Accounting Bulletin on materiality that  provides guidance in applying quantitative materiality thresholds to the  preparation of financial statements filed with SEC. According to SEC, staff  guidance is not a substitute for any rule, and only the rule itself can  provide complete and definitive information on its requirements.", "The Commission can adopt new rules through the rule-making process.  According to SEC, rule making can involve several steps: concept  release, rule proposal, and rule adoption.", "Concept release. The Commission at times issues a concept release  to seek public input to help identify the appropriate regulatory  approach, if any, prior to issuing a rule proposal. In a concept release,  SEC describes the area of interest and the Commission\u2019s concerns;  identifies different approaches to address the problem; and includes a  series of questions that seek the views of the public on the issue.", "Rule proposal. The Commission publishes a detailed formal rule  proposal for public comment. A rule proposal advances specific  objectives and methods for achieving them. The Commission typically  provides between 30 and 90 days for public review and comment.  Public comment is considered vital to the formulation of a final rule.", "Rule adoption. The Commissioners consider what they have learned  from public input on the rule proposal and seek to agree on the  specifics of a final rule. If a final rule is adopted by the Commission, it  becomes part of the official rules that govern the securities industry."], "subsections": []}, {"section_title": "SEC\u2019s Annual Filing and Disclosure Review Process", "paragraphs": ["According to SEC senior staff, SEC reviewers examine climate-related  disclosures as part of their review of all disclosures included in the  companies\u2019 annual filings. Corporation Finance selects annual filings for  review and determines the extent to which annual filings are reviewed  based on the requirements of the Sarbanes-Oxley Act of 2002 and review  goals established by senior leadership (see fig. 1). The Sarbanes-Oxley  Act requires SEC to review the financial statements of each reporting  company at least once every 3 years. According to SEC senior staff, SEC  staff review the financial statements of a significant number of companies  more frequently. SEC staff may also review companies\u2019 nonfinancial  disclosures, which may be reviewed as (a) a part of a full cover-to-cover  review or (b) a targeted issue review. SEC reviewed the disclosures of  approximately 4,400 companies each in fiscal years 2015 and 2016 and  approximately 4,200 companies in fiscal year 2017. Of the reviews in  fiscal years 2016 and 2017, over 1,400 and 1,250 resulted in comment  letters, respectively.", "Corporation Finance generally conducts two levels of review at key steps  in the filing review process. Once selected for review, a filing enters the  review cycle, which generally includes evaluating the disclosure for  material compliance with securities laws, preparation and review of  comments, review of company responses to comments, and public  posting of filing review correspondence on the SEC website. For most  filings, a second-level review is required during each of these phases.", "According to some SEC staff, as part of SEC\u2019s filing reviews, SEC staff  focus on the company\u2019s filing for the current year and can supplement the  review with information from the company\u2019s prior years\u2019 filings, filings of  other companies in the same industry, SEC\u2019s prior filing review reports,  and other external data outside of the filings, including companies\u2019  sustainability and earning reports and financial analyst reports.  Companies may voluntarily disclose climate-related risks through  channels outside of SEC filings, including nongovernmental  organizations, company websites, and in response to reporting  requirements in foreign countries.", "As part of the review process, SEC staff may issue \u201ccomment letters\u201d to  companies to obtain additional information, clarification on the companies\u2019  disclosures, or elicit better compliance with applicable requirements. In a  review of Corporation Finance\u2019s comment letter process, SEC\u2019s OIG  reported in September 2017 that Corporation Finance has established  policies, procedures, and internal controls that provide overall guidance  for how staff should conduct disclosure reviews and for how information,  including comments, should be documented, tracked, and disseminated  to companies and the public. However, the report also found, among  other things, that SEC reviewers (1) did not always properly document  comments before issuing comment letters to companies and (2)  inconsistently documented oral comments to companies. The report  recommended that Corporation Finance establish mechanisms or  controls and provide detailed guidance to staff to improve documentation  in the comment letter process. SEC management agreed with these  recommendations.", "Furthermore, if SEC reviewers find a material inadequacy in a company\u2019s  disclosures, the reviewers may refer the potential violations to the  Division of Enforcement for investigation. If the Division of Enforcement  finds sufficient evidence of a potential violation, SEC may file an action in  federal district court or institute an administrative proceeding.", "Corporation Finance maintains four distinct electronic databases to track,  document, and report on different aspects of its filing review program.  One of these is Electronic Data Gathering, Analysis, and Retrieval  (EDGAR), which is Corporation Finance\u2019s primary record-keeping system  of documents related to filing reviews, including companies\u2019 filings, SEC\u2019s  comment letters to companies and their responses to the letters, and  SEC staff\u2019s filing review reports."], "subsections": []}, {"section_title": "Developments Associated with Climate-Related Disclosures since the 2010 Guidance", "paragraphs": ["In April 2016, SEC published a Concept Release to seek public comment  on modernizing certain business and financial disclosure requirements in  Regulation S-K. The 2016 Concept Release specifically requested  comments about \u201cDisclosure of Information Relating to Public Policy and  Sustainability Matters.\u201d Sustainability disclosures\u2014including topics on  climate change, resource scarcity, corporate social responsibility, and  good corporate citizenship\u2014are often characterized broadly as  environmental, social, or governance concerns. The public comment  period for the Concept Release ended on July 21, 2016. According to  SEC staff, the agency received approximately 370 unique comment  letters on the Concept Release.", "Since 2010, several voluntary reporting frameworks are available for  companies to use to report climate-related information, including the  following:  In June 2017, the FSB Task Force issued final recommendations for  four areas of voluntary climate-related disclosures that companies can  choose to adopt, which are applicable to organizations across sectors  and jurisdictions.", "In October 2016, the Sustainability Accounting Standards Board  (SASB) developed a Climate Risk Framework that enables, among  other things, the identification of climate-related risks and the  development of metrics that help companies disclose material  sustainability information to investors.", "In May 2013, the Global Reporting Initiative and CDP (formerly known  as the Carbon Disclosure Project) signed a Memorandum of  Understanding for the two organizations to work together to align  areas of their reporting frameworks. This will provide more  consistency in companies\u2019 voluntary climate-related disclosures and  improve comparability of data for investors."], "subsections": []}]}, {"section_title": "SEC Issued the 2010 Guidance and Comment Letters to Specific Companies to Clarify Climate- Related Disclosure Requirements", "paragraphs": ["SEC issued the 2010 Guidance, and comment letters to specific  companies, to clarify their existing disclosure requirements as they apply  to climate-related matters. SEC staff said the issuance of the 2010  Guidance was the primary form of communication it used to clarify to  companies their climate-related disclosure requirements. However, SEC  staff also noted that companies should consider the 2010 Guidance along  with all other guidance and securities laws and regulations applicable to  their filings. In addition to publishing the 2010 Guidance, SEC staff  discussed it immediately following its release in webinars and other public  events. For example, an SEC staff member presented information on the  2010 Guidance at a panel discussion for an October 2010 webinar hosted  by the National Asian Pacific American Bar Association. Representatives  from the industry associations with whom we spoke, which represent the  five industries we selected, all agreed that the 2010 Guidance helped  clarify climate-related disclosure requirements and stated that they  consider the disclosure requirements for climate-related risks to be clear  and have no need for additional guidance.", "In addition, since the release of the 2010 Guidance, SEC staff has issued  individual comment letters to specific companies on their climate-related  disclosures. For example, on September 26, 2016, SEC staff issued a  comment letter to an oil company requesting that the company expand on  its disclosures in the risk factor section of the filing to provide a more in- depth description of its climate-related compliance obligations. SEC  publishes comment letters in EDGAR, and other interested companies  can view these letters to understand SEC\u2019s assessment of a particular  company\u2019s disclosures. Ceres, a nonprofit organization that advocates for  climate-related disclosure, analyzed SEC\u2019s comment letters from  February 2, 2010\u2014the release date of the 2010 Guidance\u2014to December  31, 2013, to determine how many were related to climate-related  disclosures. Ceres reported that SEC staff sent 25 letters relating to  climate-related disclosures to 23 companies (2 companies received two  letters as a result of back-and-forth correspondence) out of the more than  45,000 comment letters sent during this period. Using the same specific  keyword search terms\u2014such as \u201cclimate change\u201d and \u201cclimate  mitigation\u201d\u2014that were identified in the Ceres report, we found 14  comment letters to 14 companies that SEC staff issued relating to  climate-related disclosures out of the over 41,000 comment letters issued  from January 1, 2014, through August 11, 2017. These comment letters  were found during our search but may not represent all climate-related  comment letters SEC staff has issued during that time frame."], "subsections": []}, {"section_title": "SEC Examined Climate-Related Disclosures for Reports to Congress and Issued a Concept Release Seeking Public Input on Disclosure Requirements", "paragraphs": ["After the issuance of the 2010 Guidance, the Senate Committee on  Appropriations directed SEC to conduct two reviews of climate-related  disclosures in 2012 and 2014. In response, SEC staff examined climate- related disclosures of a total of 60 companies in six industries each year  in 2012 and 2014. In both reports, SEC staff focused on the business  description, risk factors, and management\u2019s discussion and analysis  sections of companies\u2019 filings and found that most of the filings included  some level of climate-related disclosure in one or more of these areas.  SEC staff also found that the disclosures they reviewed varied in the level  of details provided. Additionally, in the 2012 report, SEC staff reported  that they did not find any notable year-to-year changes in the disclosures  reviewed from the year before the 2010 Guidance to the year after.  According to SEC senior staff, in addition to its regular evaluation of  climate-related disclosures in individual filing reviews, SEC staff continues  to periodically assess climate-related disclosures within these industries.", "SEC senior staff said they did not expect changes in companies\u2019 climate- related disclosures as a result of the 2010 Guidance since SEC did not  adopt any new disclosure requirements. As previously mentioned, SEC  published the 2010 Guidance to provide guidance to companies on how  existing disclosure requirements apply for climate-related matters. At the  time the 2010 Guidance was issued, \u201ccap and trade\u201d legislation was  pending in Congress; the Environmental Protection Agency was taking  steps to regulate greenhouse gas emissions; and there were efforts to  launch an international \u201ccap and trade\u201d system. The 2010 Guidance in  part provided clarification on how such changes\u2014if they took place\u2014 could be incorporated into companies\u2019 filings. However, some of these  changes did not occur.", "Through the April 2016 Concept Release related to business and financial  disclosures in Regulation S-K, SEC sought input from investors,  companies, and other interested parties on the effectiveness of its  disclosure requirements, including a request for comment on climate- related disclosures in SEC\u2019s filings. In the April 2016 Concept Release,  SEC discussed comments previously received that both noted a growing  interest in environmental, social, or governance disclosure among  investors and recommended increased sustainability disclosure  requirements. According to SEC staff, some comments criticized the  primarily voluntary nature of current corporate sustainability reporting  outside of companies\u2019 SEC filings. As of December 2017, SEC senior  staff said they are considering recommendations for the Commission\u2019s  consideration based on comments received on the Concept Release."], "subsections": []}, {"section_title": "SEC Faces Constraints in Reviewing Climate- Related Disclosures as It Primarily Relies on Information That Companies Determine Is Material", "paragraphs": ["As SEC reviews climate-related and other disclosures in companies\u2019  filings, SEC relies primarily on information that companies determine is  material. SEC may not have details of the information companies used to  support their determination of material climate-related risks. Also, this  climate-related information varies in format and specificity among  companies. SEC has tools, mechanisms, and resources to help ensure  that its staff conducts reviews consistently across filings. Stakeholders,  including investor and industry groups, have mixed views on the need for  more climate-related disclosures with additional specificity and a  consistent format for these disclosures to allow for comparison across  filings. Additional disclosure requirements or increased scrutiny of  companies\u2019 climate-related information\u2014which, if necessary, SEC and  Congress can consider\u2014could have mission and resource implications  for SEC\u2019s Division of Corporation Finance."], "subsections": [{"section_title": "SEC May Not Have the Details of the Information Companies Rely on in Determining Materiality", "paragraphs": ["SEC reviewers may not have access to the detailed information that  companies use to arrive at their determination of whether risks, including  climate-related risks, must be disclosed in their SEC filings. SEC\u2019s scope  of review of companies\u2019 disclosures under federal securities laws differs  from the scope of review that may be possible through the investigative  authority of the state attorneys general under state laws. SEC senior staff  further noted that Corporation Finance staff assess companies\u2019 filings for  compliance with the disclosure requirements under federal securities laws  but do not have the authority to subpoena companies\u2019 information. As  previously noted, if SEC reviewers find a material inadequacy in a  company\u2019s disclosures, the reviewers can refer potential violations to the  Division of Enforcement for investigation. SEC senior staff stated that the  Division of Enforcement can subpoena company information only after  obtaining a formal order of investigation.", "In an investigation of Peabody Energy under a New York State law, the  Attorney General of New York State subpoenaed the company\u2019s internal  documents and found that although the company\u2019s disclosures denied it  had the ability to reasonably predict the impact of future climate change  laws and regulations on its business, Peabody had made internal market  projections showing severe negative impacts from certain potential laws  and regulations and failed to disclose those projections to the public. As a  result of this investigation, Peabody agreed to disclose, among other  things, concerns that the environmental impacts of coal combustion are  resulting in increased regulation, which could affect demand for  Peabody\u2019s products or services. SEC staff explained that when they  become aware of an investigation of a company, they look for and assess  disclosures related to any pending legal proceedings and the potential  impacts. SEC senior staff told us SEC staff reviewed Peabody Energy\u2019s  filings and other publicly available information, including its climate- related disclosures, and did not issue climate-related comments in its  review of Peabody Energy\u2019s filings; SEC has not taken any public actions  against Peabody Energy following the New York Attorney General\u2019s  investigation. Also, SEC staff noted that the additional disclosures  Peabody Energy is asked to provide by the New York Attorney General  may not be applicable for other companies, but these disclosures may be  required if the information is material and necessary to make the  disclosures not misleading under the current federal disclosure rules.", "If SEC reviewers are aware of publicly-available information outside of the  filings that is contradictory to companies\u2019 disclosures, they can request  additional information or clarification from companies on their climate- related and other disclosures through comment letters. However, a  company possesses information necessary to determine whether  environmental regulations will have a material effect on the company\u2019s  financial condition or results of operations and may claim that the effect of  environmental regulations raised by SEC is not material and hence does  not need further disclosure. For example, in a 2016 comment letter, SEC  staff requested that an oil company expand and clarify its discussion of  climate-related compliance with a California environmental law. The  company responded that the current costs and impact of compliance with  the state law have not been material to the company and it would seek to  more clearly disclose such information in its annual filing for the coming  year. SEC staff did not issue any further comment on this issue. SEC  senior staff told us that they determine whether further comments are  needed based on whether the company\u2019s response is consistent with  other information the companies reported in other publicly available  documents, such as financial analyst reports or the company\u2019s  sustainability report."], "subsections": []}, {"section_title": "Climate-Related Disclosures Vary in Format and Specificity", "paragraphs": ["Climate-related disclosures vary in format because companies may report  similar climate-related disclosures in different sections of the annual  filings. We reviewed and identified illustrative examples of climate-related  disclosures in the annual filings of 116 S&P 500 Index companies, filed  with SEC in 2016, in the five industries in our review (see app. II for  additional information). We found, for example, one beverage company  reported its goal to reduce greenhouse gas emissions in the business  description section of its filing while another beverage company reported  a similar goal on carbon footprint reduction in the risk factors section of its  filing. As previously noted, SEC reviewers may compare a company\u2019s  disclosures to other companies\u2019 disclosures in the same industry to  identify potential missing disclosures if other companies in the same  industry have made similar disclosures. When companies report climate- related disclosures in varying format, SEC reviewers and investors may  find it difficult to navigate through the filings to identify, compare, and  analyze the climate-related disclosures across filings, especially given the  size of each individual filing. In addition, companies\u2019 filings may include  only a few mentions of climate-related disclosures. For instance, the  annual filings we reviewed for an insurance company, an oil company,  and a food company, respectively, were 389 pages, 117 pages, and 136  pages long. Within these filings, the corresponding number of mentions of  climate-related disclosures was 9, 13, and 6, respectively, based on our  analysis using Ceres\u2019 SEC Sustainability Disclosure Search Tool. Given  that SEC reviewers primarily rely on information companies disclose in  filings, it may be difficult to determine whether a low level of disclosure  indicates that the company does not face any climate-related risks or  does not consider the risks to be material.", "Also, climate-related disclosures in some companies\u2019 filings use  boilerplate language, which is not specific to the company, and the  information is unquantified. Our review of the annual filings of 116 S&P  500 Index companies found that some companies\u2019 climate-related  disclosures provided some quantitative information, while some other  companies\u2019 disclosures listed existing environmental regulations without  specifying the associated impacts on the companies. For example, one oil  and gas company stated in its annual filing that the imposition and  enforcement of stringent greenhouse gas emissions reduction targets  could severely and adversely impact the oil and gas industry and  significantly reduce the value of the company\u2019s business. However, the  company did not provide any quantitative information on such impacts on  its business. Additionally, SASB reported in October 2016 that its analysis  of almost 1,500 disclosures in annual filings of 637 companies in 72  industries found that almost 30 percent of the disclosures SASB reviewed  did not include any climate-related information, some contained  boilerplate language or company-tailored narratives, and less than 20  percent of these disclosures included quantitative metrics."], "subsections": []}, {"section_title": "SEC Has Mechanisms, Tools, and Resources to Help Its Staff Consistently Review Filing Disclosures", "paragraphs": ["Although SEC relies primarily on information companies provide in their  filings when reviewing climate-related and other disclosures, it has  mechanisms, tools, and resources to help its staff consistently review  filing disclosures, according to SEC documents and SEC staff we  interviewed.", "Internal supervisory control testing. As we reported in 2016,  Corporation Finance\u2019s Disclosure Standards Office (DSO) helps improve  consistency in oversight of filing reviews by conducting testing of internal  supervisory controls throughout the year. DSO is responsible for  managing Corporation Finance\u2019s internal supervisory control and  contributes to Corporation Finance\u2019s quality and process improvement  efforts. DSO senior staff told us that the office examined filing reviews  conducted by SEC staff on a random sample of filings in each year from  2014 through 2016. In DSO\u2019s reviews, DSO examined the documents  that are part of the filing reviews conducted by SEC staff, including the  underlying filings, filing review reports prepared by SEC staff, comment  letters issued, and the associated responses, among other things. Also,  DSO staff assessed whether SEC staff had followed the relevant  Corporation Finance policies and procedures. For example, DSO  checked whether staff followed procedures for second-level reviews and  issuing comment letters. However, DSO senior staff said they have not  conducted any review specific to climate-related disclosures. Corporation  Finance senior staff said DSO submits the results of its testing to its  managing executive for use in the division\u2019s management assurance  statements. We also reported in 2016 that DSO helped strengthen  components of Corporation Finance\u2019s internal control.", "Two-level review process. As discussed earlier, SEC generally  conducts two levels of review at key steps in the filing review process.  The two-level review process helps ensure that staff consistently review  disclosures across filings, according to SEC staff we interviewed. For  example, the second-level reviewers review the comment letters prepared  by the first-level reviewers before sending the letters to companies,  according to SEC\u2019s internal policies and procedures. Also, assistant  directors and senior assistant chief accountants of the 11 Corporation  Finance offices generally meet monthly to discuss recent trends and  issues identified in filing reviews in general, which helps ensure that staff  assess materiality consistently across industries, according to some SEC  staff.", "Regulations and guidance. SEC staff can consult regulations and  formal and informal SEC guidance for their filing reviews (see table 2 for  examples), according to SEC documents and staff we interviewed. SEC  posts relevant guidance and other information on its intranet site. Nearly  all SEC staff we interviewed said current guidance was sufficient to guide  their filing reviews, including the reviews of climate-related disclosures.", "Internal and external data. According to SEC\u2019s internal review guidance,  SEC staff are expected to consider internal and external data as part of  the filing review. As previously noted, some SEC staff told us they  consider information from prior filings, internal filing review reports, other  filings of companies in the same industry, and external data outside of the  filings to supplement their filing reviews. For example, SEC staff can  generally use internal and external databases to search prior years\u2019 filings  and filing-review-related comments and correspondence with companies.  Some SEC reviewers told us that they also compare disclosures with  external information, such as companies\u2019 voluntary sustainability reports  and financial analyst reports on companies\u2019 earnings and operations, to  look for inconsistencies in the companies\u2019 reporting. Although SEC  Corporation Finance staff can review external information such as the  company\u2019s sustainability report, they do not have the underlying  information the company used to determine whether a potential  disclosure was material or prepare the sustainability report and cannot  perform an independent assessment of the disclosure based on the  materiality of the underlying information. For example, SEC staff noted in  a 2016 comment letter to an oil company that SEC has compared and  identified potential inconsistency between the company\u2019s disclosures on  uncertainty about a new climate-related regulation and physical risks and  information in the company\u2019s sustainability report. The company stated  the climate-related regulatory risks were not material and climate-related  risks in their filing were consistent with information in its sustainability  report. SEC did not issue any further comments.", "Staff training. SEC staff have had some training on assessing materiality  and industry-specific issues but fewer training that discussed climate- related disclosures, according to SEC staff.", "Training on materiality. Most SEC staff we interviewed said training  on materiality assessment was part of staff training or their ongoing  on-the-job learning in their day-to-day work. Our review of some SEC  training materials showed that training discussions covered federal  securities laws and disclosure requirements, disclosure review, and  materiality but did not focus specifically on climate-related issues.  Also, some SEC staff said they consider materiality based on a given  company\u2019s specific facts and circumstances as they review filings in  their day-to-day work. For example, two SEC staff we interviewed  explained that second-level reviewers help first-level reviewers  understand how to apply specific facts and circumstances as they  consider materiality when they review filings.", "Training on industry-specific issues. All SEC staff we interviewed  noted that industry-specific training is provided by individual assistant  director offices. For example, some staff mentioned training on  disclosures for the oil and gas industry. Other staff noted that they  also share information on industry-specific issues as part of their  communication or meetings with supervisory staff. However, SEC  staff we interviewed did not recall any industry-specific training on  climate-related disclosures offered by individual assistant director  offices.", "Training on climate-related disclosures. Some SEC staff we  interviewed identified training on the 2010 Guidance when the  guidance was issued or a brownbag discussion on climate-related  disclosure issues including the Peabody Energy investigation in 2016.  According to SEC senior staff, the 2016 brownbag included a  discussion of the 2010 Guidance and was offered to all Corporation  Finance staff. In addition, our review of some meeting agendas  showed that these meetings sometimes included discussion items on  issues related to climate-related disclosures, such as the Peabody  Energy investigation and a proposed environmental regulation.  Furthermore, new SEC staff receive training on how to conduct filing  reviews in general but not specifically on climate-related disclosures,  according to some SEC staff.", "Most of the SEC staff we interviewed told us they consider the training  they have received to be sufficient for conducting filing reviews.  Additionally, an SEC OIG survey of SEC staff published in September  2017 asked both first- and second-level reviewers if they felt they had  received adequate training and guidance from SEC on how to conduct a  disclosure review. Of the 159 who answered as first-level reviewers, 82  percent said that they felt they received adequate training and guidance  to conduct disclosure reviews; and of the 130 who answered as second- level reviewers, 83 percent said that they felt they received adequate  training and guidance to conduct disclosure reviews. Other staff we  interviewed also noted that they receive training through their day-to-day  work on an ongoing basis or when new regulations are issued or the need  arises.", "Staff experience. All eight supervisory staff we interviewed indicated  that, as of August 2017, they had at least 10 years of experience at SEC  as filing reviewers, while the 12 nonsupervisory staff we interviewed  noted that they had from 2 to 18 years of such experience. Also, most of  the SEC staff we interviewed indicated that they had some prior  accounting or legal experience related to annual filing preparation or  review, but they did not have any direct prior experience on climate- related disclosures. However, most SEC staff we interviewed said they  generally do not need technical expertise to understand climate-related  disclosures. Some staff said they can consult mining or petroleum  engineers within Corporation Finance if the disclosures relate to other  subjects, such as oil and gas reserves."], "subsections": []}, {"section_title": "Stakeholders Have Mixed Views on the Amount and Specificity of the Current Climate-Related Disclosures", "paragraphs": ["Stakeholders, including investor and industry groups, have different views  on whether additional climate-related disclosures, including the amount  and specificity, are needed. Some asset management firms and investor  groups have highlighted the need for companies to disclose more climate- related information to help investors make more informed investment  decisions. Three large asset management firms stated that they are  committed to engaging with and encouraging companies to provide  additional climate-related disclosures. For example, in 2017, one firm  supported shareholder proposals for two companies to report the impacts  of climate change on their operations. The proposals passed with  majority shareholder support. The Council of Institutional Investors and  Ceres stated in their letters commenting on SEC\u2019s April 2016 Concept  Release and also told us that the information on environmental risks,  including climate risks, has become more significant for investors and  companies. The two investor associations also noted that companies\u2019  climate-related disclosures in the risk factors and management\u2019s  discussion and analysis sections of the filings generally do not provide  investors with sufficient details. They further stated in their letters  commenting on SEC\u2019s April 2016 Concept Release that current climate- related disclosures are generally not comparable across companies\u2019  filings. Additionally, SASB reported that climate-related disclosures using  quantitative metrics may not be comparable because they lack  standardization.", "In contrast, representatives from the five industry associations with whom  we spoke all noted that they consider the current requirements for  climate-related disclosures adequate. They also do not believe additional  climate-related disclosures are needed in SEC filings as the filings should  include only climate-related information if it is material. Additionally, some  companies are providing climate-related information through channels  outside of SEC filings. Three of these industry associations also stated in  their letters commenting on SEC\u2019s April 2016 Concept Release that they  would like to keep the existing requirements for climate-related  disclosures.", "While some investor organizations we spoke with generally believe more  climate-related disclosures are needed, investors have not reached  agreement on the priority of advocating for climate-related disclosures or  the framework for companies to use to report these disclosures. For  example, some members of a subcommittee of SEC\u2019s Investor Advisory  Committee have identified climate-related disclosures as a priority issue,  but the subcommittee as a whole did not reach agreement that climate- related disclosures should be among its highest priorities. In addition, as  previously described, existing reporting frameworks include those  developed by CDP, Global Reporting Initiative, SASB, and the June 2017  FSB Task Force final recommendations. Given that these are voluntary  frameworks, companies can report climate-related information using any  of the frameworks or not use a framework at all. Further, stakeholders  advocating for climate-related disclosures have not agreed on whether to  adopt one of the existing reporting frameworks or develop a new  framework for companies to use in reporting climate-related disclosures.  For example, companies have not determined which of the existing  reporting frameworks to use or are uncertain on which framework is  preferred by investors for reporting climate-related disclosures, according  to one investor association, representatives of SEC\u2019s Investor Advisory  Committee, and an SEC senior staff of the Office of Investor Advocate.", "The SEC senior staff further stated that SEC may be hesitant to  recommend a particular framework for companies to use given the  uncertainties. Another organization focusing on climate-related  disclosures in its letter commenting on SEC\u2019s April 2016 Concept  Release suggested that SEC review and consider elements of existing  reporting frameworks. Furthermore, SEC\u2019s Investor Advisory Committee,  in its letter commenting on the Concept Release, recommended SEC  develop an analytical framework on climate-related disclosures, among  other things. Most recently in June 2017, the FSB Task Force reported  that its recommendations aim to provide a framework to help companies  more consistently disclose climate-related information and align their  reporting frameworks over time. In particular, the Task Force  recommends that companies include material climate-related disclosures  in their public filings and encourages standard-setting bodies to support  adoption of the recommendations. According to SEC senior staff, while  the Task Force recommendations may be helpful if the Commission were  to consider new rules on climate-related disclosures in the future, SEC  staff is not aware of any specific SEC actions or plans based on the  recommendations. Also, additional disclosure requirements or increased  scrutiny of companies\u2019 climate-related information\u2014which, if necessary,  SEC and Congress can consider\u2014could have mission and resource  implications for SEC\u2019s Division of Corporation Finance."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to SEC for review and comment. In oral  comments provided on January 10, 2018, senior staff in SEC\u2019s Division of  Corporation Finance generally agreed with our findings and provided  technical comments, which we incorporated into the report, as  appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to interested congressional  committees, the Chair of SEC, and other interested parties. In addition,  this report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Michael Clements at (202) 512-8678 or clementsm@gao.gov, or J.  Alfredo G\u00f3mez at (202) 512-3841 or gomezj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines: (1) steps the Securities and Exchange Commission  (SEC) has taken to help companies understand disclosure requirements  for climate-related risks, (2) steps SEC has taken to examine changes in  climate-related disclosures since the release of its 2010 Commission  Guidance Regarding Disclosure Related to Climate Change (hereafter  referred to as the 2010 Guidance), and (3) constraints SEC faces when  reviewing climate-related disclosures and stakeholders\u2019 views of those  disclosures.", "To address all objectives, we reviewed SEC documents, including the  2010 Guidance and internal filing review guidance, related to SEC\u2019s  review of climate-related and other disclosures in companies\u2019 annual  filings. We also reviewed SEC\u2019s 2012 and 2014 congressional reports,  titled Staff Report to the Senate Committee on Appropriations Regarding  Climate Change Disclosure, and additional information on SEC staff\u2019s  ongoing reviews of climate-related disclosures. In addition, we reviewed  prior GAO and SEC Office of Inspector General reports related to the  2010 Guidance, climate-related risks, and SEC\u2019s filing review process  and reports from stakeholders, including the report on recommendations  from the Financial Stability Board Task Force on Climate-related Financial  Disclosures (FSB Task Force).", "We selected five industries to focus on for this report: oil and gas, mining,  insurance, electric and gas utilities, and food and beverage. We selected  the first four industries because they were identified by SEC staff, in its  2012 and 2014 congressional reports, as more likely than other industries  to be affected by climate change-related matters due to the nature of their  operations. We also selected the food and beverage industry because we  identified companies in this industry that have submitted climate-related  disclosures and can provide perspectives on these disclosures, and SEC  had not selected companies in this industry for review in its 2012 and  2014 congressional reports or ongoing periodic reviews of climate-related  disclosures. For all five industries, we searched companies\u2019 annual filings  to determine whether the industries include companies that have  submitted climate-related disclosures in SEC filings or are represented by  associations that have submitted comments on SEC\u2019s April 2016 Concept  Release related to business and financial disclosures in Regulation S-K.  Because we did not search companies\u2019 filings of all industries, industries  we focused on in this report may not be a comprehensive list of industries  that are affected by climate-related risks and views on the selected  industries are not generalizable to other industries we did not include in  our review.", "To address the first objective, we reviewed SEC\u2019s 2010 Guidance and  Division of Corporation Finance (Corporation Finance) policies and  procedures on review of disclosures. We determined the number of  comment letters SEC issued to individual companies on climate-related  disclosures from February 2010 to August 2017. Specifically, we  reviewed a 2014 report by Ceres, a nonprofit organization that works with  investors, companies, and public interest groups on sustainable business  practices, that analyzed and determined the number of SEC comment  letters to companies from February 2, 2010 (the date the 2010 Guidance  was released) to December 31, 2013. Additionally, using the same  keyword search terms\u2014such as \u201cclimate change\u201d and \u201cclimate  mitigation\u201d\u2014that were used in the Ceres report, we determined the  number of SEC comment letters issued to individual companies on issues  related to climate-related disclosures from January 1, 2014, through  August 11, 2017. Specifically, we searched for SEC\u2019s comment letters in  its EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system\u2014 which is SEC\u2019s record-keeping system for comment letters to companies,  among other things\u2014using the keyword search functionality. The search  terms we used were not intended to represent a comprehensive list of  keywords that may relate to climate-related issues. Therefore, the  nongeneralizable sample of comment letters we identified is not intended  to be a comprehensive list or representative sample of comment letters  on climate-related information in SEC filings. We reviewed the comment  letters identified through our search to understand the climate-related  disclosure issues SEC staff has identified.", "To understand SEC\u2019s efforts to clarify climate-related disclosure  requirements for companies and industry groups\u2019 views on SEC\u2019s efforts,  we interviewed SEC staff from Corporation Finance and representatives  from a nongeneralizable sample of industry groups representing  companies in the five industries we selected. Specifically, we interviewed  representatives from the following industry groups: American Insurance  Association, American Petroleum Institute, Edison Electric Institute,  Grocery Manufacturers Association, and National Mining Association. We  selected these groups because they represent companies in the five  industries in our review and they or their members submitted letters  commenting on SEC\u2019s April 2016 Concept Release or their members  submitted climate-related disclosures to SEC in 2016. Additionally, we  reviewed the letters these groups submitted commenting on the Concept  Release to understand their views on climate-related disclosures. Views  from the industry representatives with whom we spoke cannot be  generalized to those we did not include in our review.", "To address the second objective, we reviewed SEC\u2019s 2012 and 2014  congressional reports and additional information on ongoing periodic  reviews of climate-related disclosures. We also reviewed SEC\u2019s April  2016 Concept Release, particularly the section that focuses on climate- related disclosures in SEC\u2019s filings. Further, we interviewed Corporation  Finance staff to understand steps SEC has taken to assess the effect of  the 2010 Guidance and planned actions related to comments on climate- related disclosures for the Concept Release.", "To address the third objective, we reviewed SEC documents on the  review of climate-related and other disclosures in companies\u2019 filings,  including the 2010 Guidance, filing review guidance, and examples of  staff training materials. We also reviewed information related to the New  York State Attorney General\u2019s investigation of and agreement with  Peabody Energy on the company\u2019s climate-related disclosures in SEC  filings. To understand the specificity of companies\u2019 climate-related  disclosures in annual filings, we reviewed the Sustainability Accounting  Standards Board\u2019s (SASB) October 2016 report that analyzed and  categorized selected companies\u2019 climate-related disclosures according to  their level of specificity. To identify illustrative examples of climate- related disclosures, we used Ceres\u2019 SEC Sustainability Disclosure Search  Tool to search annual filings of S&P 500 Index companies, filed with SEC  in 2016, in the five industries we selected. We used Ceres\u2019 SEC  Sustainability Disclosure Search Tool because it searches companies\u2019  SEC annual filings by industry, identifies relevant climate-related  disclosures and their locations within the filings, and reproduces the  excerpts of these disclosures in a single report. In a search of Ceres\u2019  database on September 20, 2017, we identified 116 S&P 500 Index  companies that included climate-related disclosures in their annual filings  filed in 2016. See appendix II for examples of disclosures with varying  levels of specificity.", "To obtain information on SEC staff\u2019s review of climate-related  disclosures\u2014including information on the review process, tools and  guidance used in the review, and staff training and experience\u2014we  interviewed 20 Corporation Finance staff. Specifically, we interviewed 8  senior supervisory staff from the four Corporation Finance offices that  cover reviews of filings of companies in the five industries we selected.  We also randomly selected 12 nonsupervisory staff from these same four  offices, with a mix of accountants and attorneys and years of experience  at SEC. In addition, we interviewed senior staff from Corporation  Finance\u2019s Disclosure Standards Office to obtain information on the  office\u2019s examinations of the filing review process conducted in 2014  through 2016. Furthermore, we interviewed Corporation Finance senior  staff to obtain an understanding of SEC\u2019s enforcement authority in its  filing review program and how that differs from the investigation power of  state attorney generals.", "To understand stakeholders\u2019 views on climate-related disclosures, we  reviewed SEC\u2019s April 2016 Concept Release and individual letters  commenting on the Concept Release from organizations that represent  investors, companies in the five industries we selected, or organizations  that focus on climate-related issues. We also reviewed the websites and  documents of three investment management firms\u2014BlackRock Advisors  LLC, State Street Global Advisors Limited, and Vanguard Group, Inc.\u2014on  their efforts to seek additional climate-related disclosures from  companies. We reviewed reports by stakeholders, including SASB and  the FSB Task Force, to provide perspectives on investors\u2019 views on the  current state of climate-related disclosures. We identified these  stakeholders because they represent major investor interests or have  submitted letters commenting on SEC\u2019s April 2016 Concept Release.", "Furthermore, we interviewed representatives from the five industry groups  we selected and other nonprofit organizations representing investors or  focusing on climate-related issues. Specifically, we interviewed  representatives from the following organizations representing investors or  focusing on climate-related issues: Center for Climate and Energy  Solutions (C2ES)\u2014an independent, nonpartisan, nonprofit organization  that works to address climate and energy challenges; Ceres; and the  Council of Institutional Investors\u2014a nonprofit, nonpartisan association  that represents corporate, public, and union employee benefit funds and  endowments. We selected these organizations because they represent  investors or focus on climate-related issues and have submitted letters  commenting on SEC\u2019s April 2016 Concept Release. Views from the  representatives of investor groups with whom we spoke cannot be  generalized to those we did not include in our review. Additionally, we  interviewed SEC senior staff from the Investor Advisory Committee and  the Office of Investor Advocate and an industry representative who is a  member of the Investor Advisory Committee to obtain information on  investors\u2019 views on climate-related disclosures. We also interviewed  Corporation Finance senior staff to understand SEC\u2019s planned efforts, if  any, on climate-related disclosures.", "Throughout this report, we use certain qualifiers when describing results  from interview participants, such as \u201cfew,\u201d \u201csome,\u201d and \u201cmost.\u201d We define  few as two or three; some as four or more but less than most; and most  as more than half or nearly all relative to the total number possible. The  views of interviewees we selected cannot be generalized to all SEC staff  or stakeholders on issues related to climate-related disclosures.", "We conducted this performance audit from November 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Examples of Climate-Related Disclosures in Securities and Exchange Commission (SEC) Form 10-K Filings", "paragraphs": ["This appendix provides illustrative examples of climate-related  disclosures by two companies in the oil and gas industry. The first  example contains boilerplate and unquantified information. The second  example contains some quantitative information and metrics. Filings we  identified are not intended to be a comprehensive list or representative  sample of companies that disclose climate-related information in SEC  filings. See appendix I for additional information on the analysis.", "Other Items  The amount of insurance covering physical damage to our property and liability related  to negative environmental effects resulting from a sudden and accidental pollution  event, excluding Atlantic Named Windstorm coverage for which we are self insured,  varies by asset, based on the asset\u2019s estimated replacement value or the estimated  maximum loss.", "Risk Factors  Climate change initiatives may result in significant operational changes and  expenditures, reduced demand for our products and adversely affect our business. We  recognize that climate change is a global environmental concern. Continuing political  and social attention to the issue of climate change has resulted in both existing and  pending international agreements and national, regional or local legislation and  regulatory measures to limit greenhouse gas emissions. These agreements and  measures may require significant equipment modifications, operational changes, taxes,  or purchase of emission credits to reduce emission of greenhouse gases from our  operations, which may result in substantial capital expenditures and compliance,  operating, maintenance and remediation costs. In addition, our production is used to  produce petroleum fuels, which through normal customer use may result in the  emission of greenhouse gases. Regulatory initiatives to reduce the use of these fuels  may reduce demand for crude oil and other hydrocarbons and have an adverse effect  on our sales volumes, revenues and margins. The imposition and enforcement of  stringent greenhouse gas emissions reduction targets could severely and adversely  impact the oil and gas industry and significantly reduce the value of our business.", "Management\u2019s Discussion and Analysis of Financial Condition and Results of  Operations  We recognize that climate change is a global environmental concern. We assess,  monitor and take measures to reduce our carbon footprint at existing and planned  operations. We are committed to complying with all Greenhouse Gas (GHG) emissions  mandates and the responsible management of GHG emissions at our facilities.", "Risk Factors  We expect to continue to incur substantial capital expenditures and operating costs as a  result of our compliance with existing and future environmental laws and regulations.  Likewise, future environmental laws and regulations, such as limitations on greenhouse  gas emissions, may impact or limit our current business plans and reduce demand for our  products.  Our businesses are subject to numerous laws and regulations relating to the protection of  the environment. These laws and regulations continue to increase in both number and  complexity and affect our operations with respect to, among other things:  The discharge of pollutants into the environment.  Emissions into the atmosphere, such as nitrogen oxides, sulfur dioxide, mercury and  greenhouse gas emissions.", "Carbon taxes.", "The handling, use, storage, transportation, disposal and cleanup of hazardous  materials and hazardous and nonhazardous wastes.  The dismantlement, abandonment and restoration of our properties and facilities at  the end of their useful lives.  Exploration and production activities in certain areas, such as offshore environments,  arctic fields, oil sands reservoirs and tight oil plays.", "We have incurred and will continue to incur substantial capital, operating and  maintenance, and remediation expenditures as a result of these laws and regulations. To  the extent these expenditures, as with all costs, are not ultimately reflected in the prices  of our products and services, our business, financial condition, results of operations and  cash flows in future periods could be materially adversely affected.  Although our business operations are designed and operated to accommodate expected  climatic conditions, to the extent there are significant changes in the Earth\u2019s climate, such  as more severe or frequent weather conditions in the markets we serve or the areas  where our assets reside, we could incur increased expenses, our operations could be  materially impacted, and demand for our products could fall. Demand for our products  may also be adversely affected by conservation plans and efforts undertaken in response  to global climate change, including plans developed in connection with the recent Paris  climate conference in December 2015. Many governments also provide, or may in the  future provide, tax advantages and other subsidies to support the use and development  of alternative energy technologies.", "Management\u2019s Discussion and Analysis of Financial Condition and Results of  Operations  Climate Change  There has been a broad range of proposed or promulgated state, national and  international laws focusing on greenhouse gas (GHG) reduction. These proposed or  promulgated laws apply or could apply in countries where we have interests or may have  interests in the future. Laws in this field continue to evolve, and while it is not possible to  accurately estimate either a timetable for implementation or our future compliance costs  relating to implementation, such laws, if enacted, could have a material impact on our  results of operations and financial condition. Examples of legislation or precursors for  possible regulation that do or could affect our operations include:  European Emissions Trading Scheme (ETS), the program through which many of  the European Union (EU) member states are implementing the Kyoto Protocol. Our  cost of compliance with the EU ETS in 2015 was approximately $0.4 million (net  share pre-tax).  In Canada during 2015, the Alberta government amended the regulations of the  Climate Change and Emissions Act. The regulations now require any existing facility  with emissions equal to or greater than 100,000 metric tonnes of carbon dioxide or  equivalent per year to reduce its net emissions intensity from its baseline. The  reduction is increasing from the current 12 percent in 2015, to 15 percent in 2016  and to 20 percent in 2017. We also incur a carbon tax for emissions from fossil fuel  combustion in our British Columbia operations. The total cost of compliance with  these regulations in 2015 was approximately $4.7 million.  The U.S. Supreme Court decision in Massachusetts v. EPA, 549 U.S. 497, 127 S.Ct.  1438 (2007), confirming that the EPA has the authority to regulate carbon dioxide as  an \u201cair pollutant\u201d under the Federal Clean Air Act.  The U.S. EPA\u2019s announcement on March 29, 2010 (published as \u201cInterpretation of  Regulations that Determine Pollutants Covered by Clean Air Act Permitting  Programs,\u201d 75 Fed. Reg. 17004 (April 2, 2010)), and the EPA\u2019s and U.S. Department  of Transportation\u2019s joint promulgation of a Final Rule on April 1, 2010, that triggers  regulation of GHGs under the Clean Air Act, may trigger more climate based claims  for damages, and may result in longer agency review time for development projects.  The U.S. EPA\u2019s announcement on January 14, 2015, outlining a series of steps it  plans to take to address methane and smog-forming volatile organic compound  emissions from the oil and gas industry. The current U.S. administration has  established a goal of reducing the 2012 levels in methane emissions from the oil and  gas industry by 40 to 45 percent by 2025.", "Carbon taxes in certain jurisdictions. Our cost of compliance with Norwegian carbon  tax legislation in 2015 was approximately $31 million (net share pre-tax).  The agreement reached in Paris in December 2015 at the 21st Conference of the  Parties to the United Nations Framework on Climate Change, setting out a new  process for achieving global emission reductions.", "In the United States, some additional form of regulation may be forthcoming in the future  at the federal and state levels with respect to GHG emissions. Such regulation could take  any of several forms that may result in the creation of additional costs in the form of  taxes, the restriction of output, investments of capital to maintain compliance with laws  and regulations, or required acquisition or trading of emission allowances. We are  working to continuously improve operational and energy efficiency through resource and  energy conservation throughout our operations.  Compliance with changes in laws and regulations that create a GHG emission trading  scheme or GHG reduction policies could significantly increase our costs, reduce demand  for fossil energy derived products, impact the cost and availability of capital and increase  our exposure to litigation. Such laws and regulations could also increase demand for less  carbon intensive energy sources, including natural gas. The ultimate impact on our  financial performance, either positive or negative, will depend on a number of factors,  including but not limited to:", "Whether and to what extent legislation or regulation is enacted.", "The timing of the introduction of such legislation or regulation.", "The nature of the legislation (such as a cap and trade system or a tax on emissions)  or regulation.  The price placed on GHG emissions (either by the market or through a tax).  The GHG reductions required.  The price and availability of offsets.  The amount and allocation of allowances.  Technological and scientific developments leading to new products or services.  Any potential significant physical effects of climate change (such as increased  severe weather events, changes in sea levels and changes in temperature).", "Whether, and the extent to which, increased compliance costs are ultimately  reflected in the prices of our products and services.", "The company has responded by putting in place a corporate Climate Change Action  Plan, together with individual business unit climate change management plans in order to  undertake actions in four major areas:  Equipping the company for a low emission world, for example by integrating GHG  forecasting and reporting into company procedures; utilizing GHG pricing in planning  economics; developing systems to handle GHG market transactions.", "Reducing GHG emissions\u2014In 2014, the company reduced or avoided GHG  emissions by approximately 900,000 metric tonnes by carrying out a range of  programs across a number of business units.  Evaluating business opportunities such as the creation of offsets and allowances;  carbon capture and storage; the use of low carbon energy and the development of  low carbon technologies.  Engaging externally\u2014The company is a sponsor of MIT\u2019s Joint Program on the  Science and Policy of Global Change; constructively engages in the development of  climate change legislation and regulation; and discloses our progress and  performance through the Carbon Disclosure Project and the Dow Jones  Sustainability Index.", "The company uses an estimated market cost of GHG emissions in the range of $8 to $35  per tonne depending on the timing and country or region to evaluate future opportunities."], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Barbara L. Patterson (Assistant  Director), Giselle Cubillos-Moraga (Analyst in Charge), Anna Chung,  Cindy Gilbert, Jesse Lamarre-Vincent, Marc Molino, Tovah Rom, Grant  Simmons, and Tyler Spunaugle made key contributions to this report."], "subsections": []}]}], "fastfact": ["Public companies are required to disclose material risks that could affect their finances or operations in their Securities and Exchange Commission filings. These may include climate-related risks\u2014for example, a need to improve facilities to meet emission requirements.", "We reviewed steps SEC has taken to clarify companies' climate-related disclosure requirements. Industry representatives told us that they consider the requirements to be clear and adequate. At the same time, some investor groups expressed a need for more information. SEC has no current plans to modify its climate-related disclosure requirements."]}
{"id": "GAO-18-196", "url": "https://www.gao.gov/products/GAO-18-196", "title": "Substance-Affected Infants: Additional Guidance Would Help States Better Implement Protections for Children", "published_date": "2018-01-19T00:00:00", "released_date": "2018-02-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Under CAPTA, states perform a range of prevention activities, including addressing the needs of infants born with prenatal drug exposure. The number of children under the age of 1 entering foster care increased by about 15 percent from fiscal years 2012 through 2015. Child welfare professionals attribute the increase to the opioid epidemic. GAO was asked to examine the steps states are taking to implement CAPTA requirements on substance-affected infants and related amendments enacted in 2016.", "This report examines (1) the extent to which states have adopted policies and procedures to notify CPS of substance-affected infants; (2) state efforts to develop plans of safe care, and associated challenges; and (3) steps HHS has taken to help states implement the provisions.", "To obtain this information, GAO surveyed state CPS directors in all 50 states and the District of Columbia and reached a 100 percent response rate. GAO also visited 3 states (Kentucky, Massachusetts, and Pennsylvania); reviewed relevant documents such as federal laws and regulations, and HHS guidance; and interviewed HHS officials. GAO did not assess states' compliance with CAPTA requirements."]}, {"section_title": "What GAO Found", "paragraphs": ["All states reported adopting, to varying degrees, policies and procedures regarding health care providers notifying child protective services (CPS) about infants affected by opioids or other substances. Under the Child Abuse Prevention and Treatment Act (CAPTA), as amended, governors are required to provide assurances that the states have laws or programs that include policies and procedures to address the needs of infants affected by prenatal substance use. This is to include health care providers notifying CPS of substance-affected infants. In response to GAO's survey, 42 states reported having policies and procedures that require health care providers to notify CPS about substance-affected infants and 8 states reported having policies that encourage notification. The remaining 1 state has a policy requiring health care providers to assess the needs of mothers and infants and if they conclude that infants are at risk for abuse or neglect, CPS is notified.", "In response to GAO's survey, 49 states reported that their CPS agency has policies to develop a plan of safe care; 2 reported not having such a requirement. Under CAPTA, states are required to develop a plan of safe care for substance-affected infants. Although not defined in law, a plan of safe care generally entails an assessment of the family's situation and a plan for connecting families to appropriate services to stabilize the family and ensure the child's safety and well-being. States reported that plans typically address the infant's safety needs, immediate medical needs, and the caregiver's substance use treatment needs. However, officials in the 3 states GAO visited noted challenges, including uncertainty about what to include in plans and the level of intervention needed for infants at low risk of abuse or neglect.", "The Department of Health and Human Services (HHS) has provided technical assistance and guidance to states to implement these CAPTA requirements. Most states reported in GAO's survey that additional guidance and assistance would be very or extremely helpful for addressing their challenges. Nevertheless, HHS officials told GAO that the agency does not anticipate issuing additional written guidance, but that states can access technical assistance through their regional offices and the National Center on Substance Abuse and Child Welfare\u2014a resource center funded by HHS. However, of the 37 states that reported on the helpfulness of the assistance they have received, 19 said it was only moderately helpful to not helpful. States offered suggestions for improving the assistance, such as developing substance abuse training materials for staff and holding video conferences with other states to share information. In October 2017, HHS officials explained that some states have submitted plans that include details on how they are addressing the CAPTA requirements. HHS officials reported that some of the plans submitted to date indicated that states are not meeting the requirements and those states have been asked to develop program improvement plans. Without more specific guidance and assistance to enhance states' understanding of CAPTA requirements and better address known challenges such as the ones described in this report, states may miss an opportunity to provide more effective protections and services for the children and families most in need."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that HHS provide additional guidance and technical assistance to states to address known challenges and enhance their understanding of requirements. HHS did not concur with the recommendation. As discussed in the report, GAO continues to believe that added guidance would benefit states."]}], "report": [{"section_title": "Letter", "paragraphs": ["States reported that parental drug abuse was a factor associated with the  removal of 32 percent of the children entering foster care in fiscal year  2015. In addition, the number of children under the age of 1 entering  foster care increased by about 15 percent (from 41,235 to 47,219) from  fiscal year 2012 through fiscal year 2015\u2014an increase that many  researchers and child welfare professionals attribute to the opioid  epidemic. Infants born to women who misuse drugs or alcohol during  their pregnancy are particularly vulnerable. Many infants are born affected  by substance exposure and experience withdrawal symptoms, referred to  as substance-affected infants. A subset of these infants who were  exposed to opioids in utero may be diagnosed with neonatal abstinence  syndrome (NAS), a condition characterized by a range of symptoms,  including excessive crying, irritability, and difficulties with breathing and  feeding. The health, well-being, and safety of these infants may be  jeopardized if they are sent home with parents with substance use  disorders who do not have a system of support and are not in treatment  or recovery.", "The Child Abuse Prevention and Treatment Act (CAPTA) is one of the  key pieces of federal legislation that guides child protection and includes  provisions related to substance-affected infants. Under CAPTA, state  governors are required to provide an assurance to the Secretary of the  Department of Health and Human Services (HHS) that their states have  in effect and are enforcing a law or statewide program that requires (1)  health care providers to notify child protective services (CPS) of all  infants affected by substance use or withdrawal symptoms resulting from  prenatal drug exposure, and (2) a plan of safe care be developed for all  such infants, including the affected caregiver.", "You asked us to examine how states are implementing these CAPTA  requirements. In this review, we examine (1) the extent to which states  have adopted policies and procedures to notify CPS of substance- affected infants, and to guide how CPS officials respond once they  receive a notification; (2) the extent to which states have adopted policies  and procedures to develop plans of safe care for substance-affected  infants, and any challenges associated with implementing such policies  and procedures; and (3) steps HHS has taken to assist and monitor  states\u2019 efforts in implementing CAPTA provisions related to substance- affected infants.", "To address these questions, we collected and analyzed information using  several methods. To obtain information on all three research questions,  we designed and administered a web-based survey of states directed  toward CPS directors in all 50 states and the District of Columbia. The  survey was conducted between March and May 2017, with 100 percent of  states responding to the survey. The survey included open-ended and  closed-ended questions about state laws, policies, and procedures  regarding substance-affected infants; specific requirements or processes  relating to infants affected by opioids; plans for ensuring the safety and  well-being of substance-affected infants; data collection efforts;  challenges to implementing CAPTA requirements; and assistance and  guidance provided by HHS.", "To minimize nonsampling errors, we pretested the questionnaire with four  states via telephone. We chose the pretest sites to include states with  moderate to high rates of drug mortalities, moderate to high NAS rates,  variation in state CPS administrative frameworks (two state-administered,  one county-administered, and one hybrid partially administered by the  state and partially administered by counties), and geographic variation  (states from the mid-Atlantic, north, south, and west). In the pretests and  expert reviews, we were generally interested in the clarity of the questions  and the flow and layout of the survey. For example, we wanted to ensure  that terms used in the survey were clear and known to the respondents,  categories provided in closed-ended questions were complete and  exclusive, and the ordering of survey sections and the questions within  each section were appropriate. The web instrument was revised based on  the pretests and expert reviews. We reviewed state officials\u2019 responses  and conducted follow-up, as necessary, to determine that their responses  were complete, reasonable, and sufficiently reliable for the purposes of  this report. Specifically, we followed up with nine states via email and, in  August 2017, conducted a semi-structured phone interview with one  state.", "To obtain more in-depth information on all three research questions about  state laws, policies or procedures, as well as challenges to implementing  the CAPTA provisions, we conducted site visits to three states (Kentucky,  Massachusetts, and Pennsylvania). These states were selected based on  their high rates of drug mortalities in 2014 and NAS in 2012, the most  recent and comprehensive publicly available data at the time of our  analysis; recommendations from subject matter experts; and for variation in state CPS administrative frameworks (two state-administered or one  county-administered). We also visited two localities in each state,  selected based on their high rates of drug mortalities and counties with a  high incidence of neonatal abstinence syndrome (NAS) or infants born  drug exposed. During the site visits we interviewed state CPS directors,  alcohol and drug abuse directors, and maternal and child health directors;  local CPS staff; and hospital staff, including hospital social workers. The  information gathered from interviews with officials from selected states  and localities is not generalizable to all states and localities and is meant  to provide illustrative examples.", "To learn about the steps HHS has taken to assist and monitor states\u2019  efforts in implementing CAPTA provisions related to substance-affected  infants, we reviewed relevant documents, federal laws and regulations,  guidance, and other information. In addition, we interviewed officials from  the Department of Health and Human Services\u2019 (HHS) Administration for  Children and Families (ACF) and the Substance Abuse and Mental  Health Services Administration (SAMHSA) about oversight, technical  assistance, and guidance regarding CAPTA provisions related to  substance-affected infants. We also interviewed officials from the National  Center on Substance Abuse and Child Welfare\u2014the technical assistance  provider under contract with HHS.", "We conducted this performance audit from June 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Child Abuse Prevention and Treatment Act", "paragraphs": ["CAPTA, originally enacted in 1974, provides formula grants to states to  improve child protective service systems. ACF administers the CAPTA  state grant program and provides guidance and oversight to states. In  fiscal year 2017, Congress provided about $25 million for the program.", "As part of the CAPTA state grant program, states are required to submit  to the Secretary of HHS plans outlining how they intend to use CAPTA  funds to improve their child protective service systems, among other  things. State plans remain in effect for the duration of states\u2019 participation  in the grant program; if modifications are needed, these must be  submitted. In addition to state plans, states are required to submit to HHS  an annual data report providing information on agency decisions made in  response to referrals of child abuse and neglect, as well as preventive  services provided to families, among other things.", "CAPTA requires state governors to provide a series of assurances in their  state plans. Since 2003, governors have had to provide an assurance that  states have in effect and are enforcing a state law or program that  includes policies and procedures to address the needs of infants affected  by prenatal substance abuse or displaying withdrawal symptoms at birth.  Under states\u2019 policies and procedures, health care providers are required  to notify CPS of such infants. Governors must also assure that a plan of  safe care is developed for these infants. Although CAPTA does not define  \u201cplans of safe care,\u201d for the purposes of this report we define them as  plans to ensure the safety and well-being of infants who are born  substance-affected.", "The Comprehensive Addiction and Recovery Act of 2016 (CARA)  amended certain provisions of CAPTA that relate to substance-affected  infants (see table 1).", "In addition to provisions related to substance-affected infants, CAPTA  also requires governors to provide an assurance to the Secretary of HHS  that they have provisions or procedures for certain individuals to report  known and suspected instances of child abuse and neglect, which are  generally referred to as mandated reporter laws. All states have statutes  identifying persons who are required to report suspected child  maltreatment to an appropriate agency, such as child protective services,  a law enforcement agency, or a state\u2019s toll-free child abuse reporting  hotline, according to a 2016 HHS report. Mandatory reporters often  include social workers; teachers, principals, and other school personnel;  physicians, nurses, and other health care workers; and counselors,  therapists, and other mental health professionals. The circumstances  under which a mandatory reporter must make a report vary from state to  state, according to HHS. Typically, a report must be made when the  reporter, in his or her official capacity, suspects or has reason to believe  that a child has been abused or neglected. State laws require mandatory  reporters to report the facts and circumstances that led them to suspect  that a child has been abused or neglected; they do not have the burden of  providing proof that abuse or neglect has occurred."], "subsections": []}, {"section_title": "CPS Notification and Screening Process", "paragraphs": ["CPS, a division within state and local social services, is generally the  agency that conducts an initial assessment or investigation of reports of  child abuse and neglect. It also offers services to families and children  where maltreatment has occurred or is likely to occur. Typically, when  CPS agencies receive a notification about suspected child abuse,  including a substance-affected infant, social workers review the referral to  determine if it should be accepted for investigation. During an  investigation, social workers determine, among other things, the nature,  extent, and cause of abuse or neglect, and identify the person  responsible for the maltreatment. An investigation may include the  following: a visit to the hospital and/or infant\u2019s home; observation of the  infant; risk and safety assessments; evaluation of the home environment;  background checks, including criminal record checks of adults that reside  with the family; as well as mental health evaluations.", "If social workers determine that there is enough evidence to suggest that  an infant is at risk for harm or neglect, or that abuse or neglect occurred,  the case is substantiated. Once a case is substantiated, CPS develops a  case plan with the family outlining objectives and tasks for the family.  Among other things, CPS may refer the family to services in the  community, such as early intervention services, parenting classes, and  substance abuse treatment. Generally, CPS attempts to strengthen the  family and alleviate the problems which led to maltreatment. If the case is  not substantiated, but there is genuine concern about the child\u2019s situation  and the family may benefit from services in the community, the case may  be closed and/or the family may be referred for voluntary services (see  figure 1)."], "subsections": []}, {"section_title": "Neonatal Abstinence Syndrome and Prenatal Drug Use", "paragraphs": ["Prenatal maternal opioid use has increased considerably in recent years.  This increase has contributed to a significant rise in the rate of NAS.  According to a recent study, the rate of NAS has increased from 1.2 per  1,000 hospital births in 2000 to 5.8 per 1,000 hospital births in 2012,  reaching a total of 21,732 infants diagnosed with NAS.", "NAS occurs with considerable variability. According to a recent HHS  report, various studies indicate that anywhere from 55 to 94 percent of  infants exposed to opioids in-utero exhibit some degree of symptoms.  Typically, infants with NAS develop symptoms within 72 hours of birth, but  may develop symptoms within the first 2 weeks of life, including after  hospital discharge. For the purpose of this report, infants exposed to  opioids ingested by mothers in utero are considered substance-exposed,  and those born negatively affected by exposure or experiencing  withdrawal symptoms are considered substance-affected. According to  experts, NAS is considered an expected and treatable result of women\u2019s  prenatal opioid use.", "Opioid exposure during pregnancy may occur for the following reasons:", "Women receiving pain medication with a prescription under the care  of a physician. Medications can include fentanyl and oxycodone.", "Women under the care of a physician and undergoing treatment for  an opioid use disorder with medications, such as methadone or  buprenorphine. This type of treatment is generally referred to as  medication-assisted treatment (MAT).", "Women misusing opioid pain medications with or without a  prescription (such as using without a prescription, using a different  dosage than prescribed, or continuing to use a drug when no longer  needed for pain).", "Women using or abusing illicit opioid, such as heroin."], "subsections": []}]}, {"section_title": "Most States Reported Having Policies About Notification and Investigation of Substance-Affected Infants", "paragraphs": [], "subsections": [{"section_title": "State Policies Generally Require or Encourage Health Care Providers to Notify Child Protective Services of Substance- Affected Infants", "paragraphs": ["In response to our survey, 42 states reported that state policies and  procedures require health care providers to notify CPS about substance- affected infants. Some states reported that they explicitly require health  care providers to notify CPS of substance-affected infants. For example,  Wisconsin reported that under its state law if tests indicate that infants  have controlled substances or controlled substance analogs in their bodily  fluids, the health care provider shall report the occurrence of that  condition to CPS.  Others reported that the requirement is met by their  states\u2019 mandated reporter law\u2014whereby people in certain positions,  including health care providers, are required to notify CPS about  substance-affected infants, similar to the manner in which other  mandatory reporters, like school teachers, day care personnel, and social  workers are required to report other instances of child abuse and neglect.  For example, Kentucky statute requires that \u201cany person who knows or  has reasonable cause to believe that a child is dependent, neglected, or  abused shall immediately\u201d make a report to the police or CPS. The  statutory definition for an abused or neglected child in Kentucky includes  situations where a child\u2019s health or welfare is harmed or threatened with  harm because of parental incapacity due to alcohol and other drug abuse.", "Of the 42 states that require health care providers to notify CPS of  substance-affected infants, 21 reported that notification is required for  infants affected by both illegal and legal use of opioids. For example, in  Massachusetts health care providers are required to notify CPS orally  and, in writing within 48 hours, about substance-affected infants  physically dependent on drugs, even if the drugs were legally obtained  and the mother is under the care of a prescribing medical professional.  Sixteen of the 42 states reported that health care providers are required  to notify CPS of infants affected only by the illegal use of opioids, and five  of the 42 states reported that they did not know if health care providers  were required to notify CPS of infants affected by the illegal and legal use  of opioids.", "The other eight states reported that although they did not have policies  and procedures that require health care providers to notify CPS about  substance-affected infants, they have laws or policies that encourage  notification. Specifically, in written responses to our survey:", "Two states reported that under their state mandated reporter laws  health care providers are encouraged, but not required, to notify CPS  about substance-affected infants.", "Four states reported that they are working to amend their states\u2019  policies and procedures to require that health care providers refer  substance-affected infants to CPS.", "Another state reported that it encourages the notification from health  care providers, but has not sought legislation to require health care  providers to report substance-affected infants to CPS because of  concerns that any laws that criminalize prenatal substance use would  further deter substance-using pregnant women from seeking prenatal  care. The state\u2019s law requires all hospital personnel who suspect  abuse and neglect or observe conditions that are likely to result in  abuse or neglect to notify CPS.", "One state reported that all persons, including health care providers,  are required to report child abuse and neglect, but reporting depends  on whether a hospital\u2019s policy indicates substance abuse is child  abuse or neglect. Further, the state CPS director reported  collaboration with the health care community on reporting substance  exposed infants to its child abuse hotline.", "Although one state reported in our survey that it does not require or  encourage health care providers to notify CPS about substance-affected  infants, in an interview, state officials explained that its policy requires that  health care providers notify CPS if, through an assessment, they  conclude that infants are at risk for abuse and neglect. Under the state\u2019s  law, health care providers in each county are required to assess the  needs of mothers and substance-affected infants using a protocol  established by county health departments, CPS agencies, and hospitals.  State officials told us that under the state\u2019s law, the birth of a substance- affected infant is not in and of itself a sufficient basis for reporting child  abuse or neglect.", "In addition to having policies and procedures regarding the reporting of  substance-affected infants, in written responses to our survey some  states reported providing training and guidance to support the efforts of  health care providers to notify CPS about these infants. Three states  reported that they offer mandatory reporter training to inform health care  providers that they are obligated to notify CPS about substance-affected  infants. Another state reported that its Department of Human Services  developed a guide for mandated reporters that discusses what needs to  be reported and where to make reports. Also, one state reported that it  sent a formal letter to its state hospital association about how to report  substance-affected infants to CPS. This state also sent a memo to its  CPS county directors instructing them to contact their local health care  providers on the importance of reporting substance-affected infants to  CPS and the process for doing so. In addition, during our Massachusetts  site visit, officials shared with us a memo that was sent to mandated  reporters, community partners, and other stakeholders that offered  guidance on when to file a report about substance-exposed infants.  Further, local CPS staff at one Massachusetts field office told us that  upon request they provide mandated reporter training to health care  providers.", "Despite these policies, procedures, and guidance, in written responses to  our survey, a few states reported concerns about requiring health care  providers to notify CPS about substance-affected infants and the  definition of substance-affected. All of the hospitals that we visited have  policies consistent with their state\u2019s law that require that health care  providers, primarily hospital social workers, to notify CPS about  substance-affected infants. However, one state reported that some  medical personnel have been reluctant to report some infants that are  positive for illegal and legal substances due to fears of mothers being  arrested. Another state reported that stakeholders are concerned that  having to notify CPS about substance-affected infants will have a chilling  effect on the willingness of pregnant women who use substances to be  honest with providers and seek the help and support they need and  deserve. According to one state, there is often an inherent resistance to  contacting CPS in these cases as health care providers tend to view child  welfare involvement as punitive rather than a potential resource for the  family.", "In addition, three states reported in written responses to our survey  challenges understanding how to define terms, such as substance- affected, under CAPTA. For example, the Pennsylvania CPS director  expressed concerns during our site visit, suggesting that CAPTA raises  many unanswered questions, such as (1) if \u201caffected by substances\u201d  means at-risk of being or physically affected by substances, (2) what  policies relating to substance-affected infants should look like and  include, and (3) whether \u201caffected by substances\u201d should include women  who are under the care of health care or treatment providers and taking  their medications as prescribed. A Kentucky public health official told us  that a drug test, or whether the infant is affected by legal or illegal  substances, should not be the sole factor in determining CPS\u2019  involvement with a family. Rather, a holistic view of the family, whether  the substance prohibits the mother\u2019s ability to care for her child, and any  risk factors present that places the infant at risk should also be  considered. According to officials, an infant that is exposed to  substances, but has not been affected by the substance, can still be at  risk for child abuse and neglect."], "subsections": []}, {"section_title": "States Reported Having Policies That Guide Decisions About Investigating Substance- Affected Infants and Their Families", "paragraphs": ["In response to our survey, 46 states reported that they have policies and  procedures for deciding which notifications about substance-affected  infants are accepted for investigation. Seventeen of those states reported  that all notifications of substance-affected infants are accepted for  investigation, regardless of the circumstances. The remaining 29 states  reported that they apply specific criteria to determine if children who  present as substance-affected are accepted for investigation by CPS.", "Several states reported in written responses to our survey that they  base their criteria for accepting notifications on the infant\u2019s safety. For  these states, drug exposure does not by itself indicate that an infant\u2019s  safety is at risk. For example, one state explained that in determining  a child\u2019s safety risk, staff evaluate a number of factors including the  history of the family; the family\u2019s presentation at the birthing hospital  (appearance of chaotic behavior, suspected intoxication of adults, lack  of appropriate concern or bonding with the infant); the presentation of  the infant\u2019s physical condition; the results of any testing of parent or  child (blood, urine, etc.); discrepancies identified in the parent\u2019s  representation of their substance use or substance use treatment; and  any other concerns noted by the reporting source.", "Other states reported that their criteria for accepting notifications for  investigation are based on the degree or type of drug exposure in  question. For example, one state reported that its policy directs CPS  agencies to accept notifications for investigation when a parent has  used illegal substances or non-medical use of prescribed medication  during the last trimester of pregnancy. Another state reported that it  will accept notifications for investigation if the infant is born with a  positive toxicology or is experiencing drug withdrawal, or if the mother  tests positive for substances.", "A few states reported using both risk to the safety of infants as well as  degree or type of drug as their criteria for accepting notifications. For  example, one state reported that it considers factors, such as the type  of drug, the parent\u2019s ability to care for the child, addiction history, and  the parent\u2019s readiness and preparation to care for the infant.", "In follow-up correspondences with states that reported that they do not  have policies and procedures to decide whether to accept for  investigation notices about substance-affected infants, one state reported  that decisions are made on a case-by-case basis.", "A few states reported that after receiving notifications about substance- affected infants, CPS agencies may decide to opt out of investigating  some families, referred to as \u201cscreening out\u201d families. For example, in  Massachusetts, CPS can \u201cscreen out\u201d referrals of mothers if the only  substance affecting the infants was used by the mothers as prescribed by  their physician. In these instances, when CPS in Massachusetts is  notified by the hospital about an infant, the screener gathers information  from the caller and consults with a supervisor to determine whether the  referral should be accepted for investigation or screened out. If the  mother is on methadone, for example, but is involved with services and is  in a treatment plan, CPS verifies with medical or other qualified providers  that the mother used the drug as part of substance abuse or medical  treatment as authorized. Additionally, CPS confirms that there are no  other concerns of child abuse and/or neglect. If CPS officials in  Massachusetts are unable to collect all the information that they need to  screen out families, for example when a mother does not sign a release  allowing CPS officials to speak with her health care providers,  notifications about substance-affected infants are accepted for  investigation."], "subsections": []}]}, {"section_title": "Most States Reported Having Requirements to Develop Plans of Safe Care, but Officials We Interviewed Reported Challenges Meeting the Needs of All Families States Reported That CPS Agencies Develop Plans to Primarily Address Infants\u2019 Immediate Safety and Medical Needs and Caregivers\u2019 Substance Use", "paragraphs": ["In response to our survey, 49 states reported that their CPS agency has  policies to develop a plan to ensure the safety and well-being of  substance-affected infants who meet the state\u2019s criteria for investigation.  Two states reported that CPS staff are not required to develop such a  plan, even if a notification is accepted for an investigation or an  assessment. For purposes of this report, we are defining a plan of safe  care as a plan to ensure the safety and well-being of the infant. States\u2019  approaches to identifying children and families who will receive a plan of  safe care generally fall into two categories:", "38 states reported that CPS is required to develop a plan of safe care  for all notifications of substance-affected infants that are accepted for  investigation, including those that are not substantiated.", "11 states reported that CPS staff are required to develop a plan of  safe care only in those instances where an investigation substantiates  the notification or uncovers an unmet need or present or emerging  danger. For example, local Pennsylvania CPS officials told us that  they only develop plans when there is a safety threat or other concern  about the infant.", "Most states reported that after a notification of a substance-affected infant  is accepted for investigation, CPS always conducts a needs assessment  for the infant and caregivers. For example, one local CPS office that we  visited told us that social workers assess risk to and safety of infants, their  function (development, age appropriate behavior, etc.), and environment.  In addition, workers assess the caregiver\u2019s ability to parent and  employment status, as well as housing. The assessments conducted as  part of the investigation inform the development of plans of safe care, as  well as decisions about the removal of infants from the home.", "Among the 49 states that reported that plans of safe care are developed  for all or some substance-affected infants, 47 reported that these plans  either always or sometimes address infants\u2019 safety needs. Plans also  address other needs, such as infants\u2019 immediate medical and longer-term  developmental needs, as well as caregiver\u2019s substance use treatment  needs. See figure 2 for the number of states whose plans of safe care  address various issues facing the infant and parent.", "In written responses to our survey and during our site visits, officials  reported that plans of safe care and referrals for services included in the  plans are individualized based on the infant and family\u2019s needs. For  example, Massachusetts state CPS officials told us that plans of safe  care are developed for each family based on the information that staff  collect from the safety, risk, and family assessments, as well as  information collected from individuals who may have knowledge that  would inform the family assessments, such as medical and treatment  providers, and family members. Kentucky state CPS officials told us that  the local organizations and service providers that they collaborate with to  develop the plan of safe care also vary based on the family\u2019s needs. For  example, Kentucky will only collaborate with substance use treatment  providers to develop the plan of safe care when families have substance  use disorders.", "Similarly, during our site visits, officials from two states told us that the  decision to place an infant in foster care is based on the individualized  needs of the infant and caregiver. For example, Massachusetts state  officials told us that their decision to remove a baby from the home  depends on a myriad of factors and is determined on a case-by-case  basis. Officials explained that if a mother is discharged from the hospital  and begins using drugs again and does not have adequate supports in  place to care for her baby, CPS may decide to place the infant in foster  care. However, if a mother has existing support systems in place to  mitigate safety risks, CPS may decide to keep the baby in the home.", "In our survey, all 51 states reported that their agencies either always or  sometimes refer parents or caregivers to substance use treatment  programs, and most states reported that they always or sometimes refer  parents or caregivers to parenting classes or programs (49), and other  supportive services (49). CPS officials in each of the three states that  we visited told us that their plans of safe care include referrals to address  not only the immediate needs of the infants, but also the needs of the  parent or caregiver. For example, officials from a local Kentucky CPS  agency told us that staff refer mothers of substance-exposed infants to a  program called Sobriety Treatment and Recovery Team (START).  START is comprised of a social worker and a peer support mentor who  has at least 3 years of sobriety, previous involvement with CPS, and was  successfully able to regain or keep custody of her own children.  According to officials, the START program has been able to provide  participants with quick access to substance use disorder treatment.", "Officials from a Massachusetts local CPS agency told us that one of the  services that they provide to parents of substance-affected infants is a  parent aide who can help monitor how the parent is caring for the infant,  such as administering the infant\u2019s medications appropriately and ensuring  the parent is not abusing the infant\u2019s drugs. In addition, a parent aide can  provide emotional support and help parents adjust after the infant is  discharged from the hospital. Kentucky officials noted the effect that a  healthy caregiver has on the outcome of the infant and emphasized that a  baby cannot be healthy if the mother is not. Kentucky CPS officials said  that they have found that the earlier caregivers enter treatment, the better  the outcomes are for mothers and babies. According to Kentucky officials,  parents who participate in the START program are less likely to have their  child placed in foster care."], "subsections": [{"section_title": "CPS Officials Reported Challenges Involving Caseloads, Developing Plans, and Confidentiality Restrictions", "paragraphs": ["Officials from the states that we visited told us that developing and  monitoring plans of safe care under CAPTA\u2019s new requirements for  infants affected by their mother\u2019s legal use of prescribed medications, as  well as plans for these infants\u2019 caregivers, present challenges.  Specifically, officials reported concerns about increased caseloads,  particularly if they are required to provide plans and services for infants at  low risk of abuse or neglect, the content of plans, and confidentiality  restrictions."], "subsections": [{"section_title": "Increased Caseloads", "paragraphs": ["Thirty-one of 50 states reported on our survey that staffing or resource  limitations was very or extremely challenging, and CPS officials across  the 3 states we visited said that the opioid epidemic has directly  contributed to increased caseloads. According to a local Kentucky CPS  office, the number of babies that met criteria for being accepted for  investigation has increased about 55 percent from 2011 to 2016, while  the number of staff has remained the same. Similarly, hospitals reported  being impacted by this challenge. For example, staff at four hospitals we  visited told us that they have delayed discharging infants from the hospital  because CPS social workers did not identify caregivers to whom infants  may be released or make plans for infants in a timely manner. In addition,  staff from three hospitals told us that some CPS workers are difficult to  contact and not especially responsive to their questions. One hospital  social worker told us that she is concerned that the changes to CAPTA  that require notifying CPS of all substance-affected newborns will  inundate the agencies with cases.", "Officials from two of the three states we visited anticipated that providing  services to infants affected by the legal use of prescribed medications,  but not likely to be at risk for child abuse and neglect, will result in an  increase in the number of families referred to CPS. This, in turn, will  require a plan of safe care and further strain limited resources. Twenty- five states reported in our survey that the plan they develop for  substance-affected infants is the same as for other children in CPS care,  suggesting that states devote the same level of resources to these infants  as other cases.", "The states we visited interpret CAPTA to require that plans of safe care  be developed for all substance-affected infants who are referred to CPS,  including those who may not meet usual criteria to be accepted for an  investigation. Some state officials we interviewed questioned whether the  new CAPTA requirements would allow for the best use of limited  resources. For example, one senior state CPS official questioned whether  it would be a good use of resources to develop plans of safe care for  mothers in substance use disorder treatment or mothers using opioid  medications due to chronic pain. A local CPS official we interviewed  stated that drug exposure, in and of itself, is not necessarily a safety risk,  and CPS should not intervene with families who are not at risk for child  abuse or neglect. Instead, hospitals or treatment providers should  intervene and refer families who do not meet criteria for CPS involvement,  but could benefit from additional supports, to voluntary services. Kentucky  public health officials told us that the period after a woman gives birth is a  critical time for families as mothers may be stressed, sleep-deprived,  exhausted, and may have other children in the home. This period may be  especially challenging for mothers with substance use disorders, if  adequate supports are not in place. According to officials women are  typically covered for substance use treatment during pregnancy; however,  this coverage ends roughly 60 days after the baby is born.", "In written responses to our survey, some states reported that they would  rely on other agencies to develop plans of safe care. Similarly, in order to  manage limited CPS resources, officials from two of the three states that  we visited said they are considering having hospitals or other agencies  assume responsibility for developing plans of safe care when there is no  evidence of abuse or neglect and there appears to be minimal risk to the  safety and well-being of the infant. Kentucky officials told us that they  envision that CPS will be responsible for developing a plan of safe care  for notifications that are accepted for investigation, while hospitals, or  another agency, will be responsible for developing plans of safe care for  referrals that are screened out by CPS. According to CPS state officials,  the plan of safe care for the infant and the family can be part of the  discharge plan prior to the family leaving the hospital. However, officials  reported that obtaining cooperation from other agencies may be difficult.  Some state officials reported being concerned that other agencies may  not feel obligated to develop these plans, in part, because CAPTA  provides funding to child welfare, and other agencies may therefore  believe that child welfare should be responsible for developing the plan of  safe care."], "subsections": []}, {"section_title": "Determining What to Include in the Plan of Safe Care", "paragraphs": ["CPS officials we interviewed in two of our site visit states, as well as one  state we followed up with, told us that they were unsure of whether their  current plans will meet new CAPTA requirements because CAPTA does  not define a plan of safe care. For example, Massachusetts officials said  that their plans include everything that a family might need to ensure the  safety of the child, including resources to ensure stabilization and  reunification of a family, but they are not sure whether the plans meet  new CAPTA requirements, in part because they are not familiar with the  term \u201cplan of safe care.\u201d An official in another state was also unsure about  whether his state\u2019s \u201csafety plans\u201d would meet CAPTA requirements.  According to the official, safety plans may include a treatment plan for  mothers, and referral services, such as early intervention for the child. In  practice, plans of safe care generally address gaps that place an infant at  risk for harm or neglect. However, state officials we interviewed reported  being unsure about what a plan of safe care should look like for families  where these gaps do not exist. Also, in a written response to our survey,  one state expressed uncertainty about CPS\u2019 role if required to work with  infants who do not typically receive CPS services. For example, a  Pennsylvania official said that it is unclear what types of interventions  child welfare should conduct with families of infants exposed to legal  substances, such as medications prescribed by doctors, when the  caregivers are taking their medications correctly.", "Similarly, officials also questioned whether a plan would be necessary,  and what the plan would entail, for caregivers who are already addressing  their substance use disorder and taking steps to ensure their infant\u2019s  safety. Officials from a local Kentucky CPS office described a case in  which a mother was participating in medication-assisted treatment, had  attended counseling three times per week throughout her pregnancy, and  was continuing treatment in the postpartum period. Through CPS\u2019  investigation, the agency found that the case was not substantiated, in  part, because there were no additional services that CPS could connect  her with that she was not already receiving."], "subsections": []}, {"section_title": "Confidentiality Restrictions", "paragraphs": ["Officials across the three states we visited also said that state and federal  drug and alcohol confidentiality restrictions may challenge their ability to  monitor plans of safe care. To monitor plans of safe care, CPS staff may  need access to confidential information in order to know how caregivers  are progressing in treatment, particularly now that these plans must  address the substance use disorder needs of the caregiver. However,  federal law restricts the disclosure and use of alcohol and drug patient  records maintained in connection with the performance of any federal- assisted alcohol and drug abuse program. Generally, confidential  information may be disclosed in accordance with the prior written consent  of the patient. State and local CPS staff we interviewed said that strict  confidentiality requirements make it challenging for drug and alcohol  treatment providers to share information about mothers and infants. A  CPS state director from Pennsylvania said that treatment providers are  often reluctant to provide CPS case workers with information or updates  on a mother\u2019s treatment, which prevents child welfare workers from fully  understanding how mothers are progressing with their treatment and the  extent to which those in treatment are adhering to prescribed directions  as outlined by treatment providers.", "In addition, one official from a state we visited said state statutes  regarding sharing of drug and alcohol treatment information may be more  restrictive than the federal statute. Some states have developed ways to  obtain confidential information about mothers in substance use disorder  treatment. For example, officials from one local CPS office told us that in  instances when they have to develop a long-term plan of safe care for  families, they have mothers sign a release of information form in order to  obtain updates about her treatment adherence from the medication- assisted treatment provider. Similarly, a local Massachusetts CPS office  told us that typically staff obtain releases from mothers so that they can  verify whether mothers are actively participating in their treatment and  that there are no records of relapse."], "subsections": []}]}]}, {"section_title": "Although HHS Has Provided Technical Assistance and Guidance to Assist States\u2019 Efforts to Implement CAPTA, States Want More Help", "paragraphs": [], "subsections": [{"section_title": "HHS Provided Technical Assistance Through a Resource Center and ACF Issued Formal Guidance and Began Its Oversight Efforts", "paragraphs": ["In HHS\u2019 role to assist states in the delivery of child welfare services, two  agencies\u2014ACF and the Substance Abuse and Mental Health Services  Administration (SAMHSA)\u2014provided technical assistance to states  through the National Center on Substance Abuse and Child Welfare  (NCSACW). In addition, in ACF\u2019s role to administer and monitor states\u2019  implementation of CAPTA, the agency has provided some guidance to  states on the provisions pertaining to substance-affected infants and has  begun its monitoring responsibilities."], "subsections": [{"section_title": "Technical Assistance", "paragraphs": ["ACF and SAMHSA, which leads public health efforts to reduce the impact  of substance abuse and mental illness, established the NCSACW in  2002. The NCSACW provides technical assistance to states, and has  issued publications and hosted forums to help states develop policies and  procedures around issues affecting substance-affected infants. The  technical assistance has focused on a broad range of issues, including  collaboration among service providers, and plans of safe care. With  respect to collaboration, NCSACW has issued several studies that  identify opportunities for strengthening interagency efforts to prevent,  intervene, identify, and treat prenatal substance exposure. The NCSACW  collaboration guides encourage states to involve CPS agencies with  medical providers in an interagency collaborative setting, thereby  facilitating the process for CPS agencies to be notified of substance- affected infants. Regarding plans of safe care, NCSACW has provided  technical assistance and best practices to states around development of these plans. For example, in one state it has facilitated discussion groups  to help the state develop a model plan.", "From calendar year 2011 to 2016, NCSACW processed approximately  600 requests from state CPS agencies for short-term technical assistance  related to improving care for substance-affected infants and their families.  This short-term technical assistance included activities such as  responding to telephone inquiries, mailing information, identifying needed  resources, and making referrals. The NCSACW has also provided in- depth assistance to 16 states to strengthen collaboration and linkages  across child welfare, addiction treatment, medical communities, early care  and education systems, and family courts to improve outcomes for  substance-affected infants and their families. Through this in-depth  assistance, NCSACW identified areas for improvement in states,  including a lack of clarity regarding compliance with CAPTA requirements  (such as identification, notification, and developing plans of safe care)  and the need for state models to comply with CAPTA requirements to  develop plans of safe care. In one state, the project overview report  indicated that a next step for the in-depth technical assistance is to  continue development of the plan of safe care model and ensure  practices and protocols are in place across systems to meet CAPTA  requirements. The report indicated that this will include ongoing work with  hospitals to ensure consistent identification of infants with prenatal  exposure and notifications to CPS.", "Although18 states reported in our survey that technical assistance from  the NCSACW was very or extremely helpful, 11 reported that it was  moderately helpful, 7 reported that it was slightly helpful, and 1 reported  that it was not at all helpful. Eleven states reported that they were not  familiar with this assistance."], "subsections": []}, {"section_title": "Guidance", "paragraphs": ["Since July 2016, when the most recent amendments to CAPTA were  enacted, ACF has issued one information memorandum and two program  instructions to states about provisions relating to substance-affected  infants. According to an ACF official, information memoranda share  information with states, while program instructions provide interpretations  of the law and inform states of actions they must take. ACF issued an  August 2016 information memorandum informing states of the 2016  amendments to CAPTA. The August 2016 information memorandum also  provided states with best practices, drawing on an NCSACW guide on  collaboration for developing multi-systemic approaches to assist child  welfare, medical, substance use disorder treatment, and other systems to  support families affected by opioid use disorders.", "In January 2017, ACF issued a program instruction which provided  guidance to states on implementing the 2016 amendments to CAPTA  made by CARA and informed states of the flexibilities that they have  under the law. Particularly, the guidance noted that:  \u201cCAPTA does not define \u2018substance abuse\u2019 or \u2018withdrawal symptoms  resulting from prenatal drug exposure.\u2019 We recognize that by deleting  the term \u2018illegal\u2019 as applied to substance abuse affecting infants, the  amendment potentially expands the population of infants and families  subject to the provision [that states have policies and procedures in  place to address their needs]. States have flexibility to define the  phrase, \u2018infants born and identified as being affected by substance  abuse or withdrawal symptoms resulting from prenatal drug  exposure,\u2019 so long as the state\u2019s policies and procedures address the  needs of infants born affected by both legal (e.g., prescribed drugs)  and illegal substance abuse.\u201d  \u201cWhile CAPTA does not specifically define a \u2018plan of safe care,\u2019 CARA  amended the CAPTA state plan requirement . . . to require that a plan  of safe care address the health and substance use disorder treatment  needs of the infant and affected family or caregiver.\u201d  \u201cCAPTA does not specify which agency or entity must develop the  plan of safe care; therefore the state may determine which agency will  develop the plans. We understand that in most instances the state  already has identified the responsible agency in its procedures. When  the state reviews and modifies its policies and procedures to  incorporate the new safe care plan requirements in CARA, the state  may wish to revisit its procedures regarding which agency develops  the plan of safe care, including any role for agencies collaborating  with CPS in caring for the infant and family.\u201d", "In addition, in April 2017, ACF issued a program instruction on reporting  requirements, including changes in those requirements brought about by  the 2016 amendments to CAPTA."], "subsections": []}, {"section_title": "Monitoring", "paragraphs": ["ACF conducted limited monitoring of states prior to the amendments  passed in 2016. According to ACF officials, if presented with evidence of  potential deficiencies, the agency would attempt to learn more about the  state\u2019s activities. In one instance, ACF reviewed South Carolina\u2019s policies  and found them to not be in compliance with the notification and safe care  plan requirements of CAPTA. It directed the state to develop a program  improvement plan to bring it into full compliance, which South Carolina  submitted in April 2016. In a recent progress report (February\u2013April  2017), South Carolina reported that it was focused on updating statutes,  developing policies and procedures, training child protective service  workers, and building relations with health care providers.", "In response to the 2016 amendments to CAPTA that added the  requirement for HHS to monitor state policies and procedures to address  the needs of substance-affected infants, ACF officials told us that staff in  regional offices will review states\u2019 annual reports, submitted in June 2017.  In its program instruction describing the reporting requirements, ACF  asked each state to submit a new Governor\u2019s Assurance, as well as a  narrative explaining what they have done in response to the  amendments. Specifically, ACF asked states to provide information on  any changes that were made in state laws, policies, or procedures related  to identifying and referring infants affected by substance abuse to CPS as  a result of prenatal drug exposure. It also requested updates on states\u2019  policies and procedures regarding the development of plans of safe care;  a description of how states have developed systems to monitor plans of  safe care; and a description of any outreach or coordination efforts the  states have taken to implement the amendments, among other things.  According to ACF officials, as of October 1, 2017, some states have  provided information and a Governor\u2019s Assurance demonstrating  compliance with the amended provisions and some states have been  placed on Program Improvement Plans, but the agency does not yet have  information on the status of all states. An ACF official explained that, in  their annual reports, some states either acknowledged that they are trying  to get legislation enacted to bring them into compliance with the law and it  has failed, or that they are not in compliance, for example, because they  were limiting their policies to those infants affected only by illegal  substances.", "In addition, in May 2017, ACF issued a technical bulletin informing states  of the new data collection requirements that resulted from the 2016  amendments to CAPTA. ACF stated that it intends to collect data required  by the amendments to CAPTA through the National Child Abuse and  Neglect Data System, beginning with states\u2019 submission of fiscal year  2018 data. This system is maintained by ACF and contains data from  states about children who have been abused or neglected. ACF issued a  Federal Register notice about the proposed data elements and requested  comments on the accuracy and quality of the proposed data collection,  among other things; the comment period closed in July 2017. In the  Federal Register notice, ACF notes that the 2016 amendments to CAPTA  require it to collect information from state CPS agencies on the number of  notifications from health care providers that are accepted for investigation  or screened out. Further, of those infants screened in, ACF is required to  collect data on the number of safe care plans developed for substance- affected infants as well as the number of infants for whom a referral was  made for appropriate services, including services for the affected family or  caregiver. In the Federal Register notice, ACF proposed to collect this  information using a combination of existing and new data from states.", "Thirty-two states reported in our survey that they already collect data on  the incidence of substance-affected and/or substance-exposed infants; 15  of those 32 states also collect data on the incidence of NAS. Further, 18  states reported that they collect data on the number of notifications health  care providers make to CPS. Of those states, 8 reported that they collect  specific data on notifications related to infants diagnosed with NAS."], "subsections": []}]}, {"section_title": "States Reported the Need for Additional Guidance and Assistance from HHS to Address Implementation Challenges", "paragraphs": ["Most states reported in our survey that additional guidance and  assistance would be extremely or very helpful (see figure 3). For  example, 38 states reported that additional guidance on requirements for  health care providers to notify CPS of substance-affected infants would  be extremely or very helpful. Similarly, 37 states reported that additional  guidance on developing, implementing, and monitoring plans to ensure  the safety and well-being of substance-affected infants would be  extremely or very helpful.", "In written responses to our survey, states suggested ideas for additional  guidance, training, and technical assistance to help them address the  needs of substance-affected infants. States\u2019 suggestions ranged from  assisting in the development of substance abuse training curriculum for  staff to video conferences with other states to share information about  implementing CAPTA. A few states suggested that the guidance ACF has  provided to date is not clear and reported grappling with the meaning of  terms such as \u201caffected\u201d and \u201clegal vs. illegal\u201d substances, and two states  requested \u201cconcrete guidance\u201d and \u201cspecificity.\u201d A few other states  suggested that it would be helpful to obtain additional information about  meeting the requirements of plans of safe care within the constraints of  state and federal confidentiality laws, technical assistance on what plans  of safe care look like, and a format for a plan of safe care.", "ACF officials told us that states have flexibility with implementing the law  and the agency does not anticipate issuing additional written guidance on  the amendments to CAPTA made by CARA. ACF officials explained, in  October 2017, that they were finalizing their review of the plans that  states were required to submit. These plans are expected to include  details on how the states are addressing the CAPTA requirements. While  ACF could not provide the number, officials reported that some of the  state plans submitted to date did not meet the requirements and those  states have been asked to develop program improvement plans. They  expect states to work with the ACF regional offices, which will provide or  facilitate technical assistance to states on their implementation of the  provisions, as needed. In addition to the review of state plans, ACF  officials explained that regional officials may learn about states\u2019 needs for  technical assistance through meetings or informational exchanges.", "Finally, the NCSACW is expected to review and prepare a summary of  CAPTA state plans, current state statutes and policies and procedures  relating to amended CAPTA requirements. In addition, according to ACF,  NCSACW will continue to offer technical assistance on the development  and implementation of plans of safe care to states. Technical assistance  may include responding to requests for information, disseminating written  materials and resources, and conducting webinars/conference calls.  Further, ACF reported that some states will receive more in-depth  technical assistance, albeit in some instances on a time-limited basis.  Undertaking these actions can enhance states\u2019 understanding of CAPTA  requirements and better address known challenges such as the ones  described in this report. However, more specific guidance from HHS on  the issues which states have expressed confusion can assist them in  better understanding CAPTA requirements and providing more effective  protections and services for the children and families most in need."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The opioid epidemic has generated a significant increase in the number  of substance-affected infants born and diagnosed with NAS. These  vulnerable infants may be at risk for child abuse and neglect if adequate  supports and services are not available to ensure their safety. CAPTA  requires states to have policies and procedures to address the needs of  these infants and their families, including mothers with a substance use  disorder. However, states have experienced challenges implementing  new CAPTA requirements. Many states reported in our survey that they  are not completely adhering to the law. This is reflected in ACF\u2019s review  of state plans, some of which are resulting in program improvement  plans. States cite challenges that stem, in part, from ACF\u2019s lack of  specificity in providing guidance on implementing CAPTA requirements.  Specifically, states report that ACF has not provided clear guidance about  which substance-affected infants health care providers are required to  notify CPS about, as well what a plan of safe care is and for whom it  should be developed. Given the challenges that states reported facing in  implementing the provisions, a majority reported wanting more help from  ACF, such as trainings and teleconferences with other states, to help  overcome their challenges. Additional guidance and assistance from HHS  would help states better understand what they need to do to develop  policies and procedures that meet the needs of children and families  affected by substance use."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Secretary of HHS should direct ACF to provide additional guidance  and technical assistance to states to address known challenges and  enhance their understanding of CAPTA requirements, including the  requirements for health care providers to notify CPS of substance- affected infants and the development of a plan of safe care for these  infants."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHS\u2019s  comments are reproduced in appendix I. HHS also provided technical  comments, which we incorporated into our report where appropriate.", "HHS did not concur with our recommendation. HHS stated that:  in January 2017, ACF clarified in guidance several of the issues  raised in the report, including the population of infants and families  covered by the provision and the state flexibility inherent in  determining which infants are \u201caffected by\u201d substance abuse, and the  terminology used in the federal law of what a \u201cplan of safe care\u201d is;", "ACF believes it is necessary to allow states the flexibility to meet the  requirements in the context of their state CPS program; several of the challenges that the GAO notes are not specific to  CAPTA compliance with the safe care plan and notification  requirements; and  it does see the value in continuing to provide technical assistance to  states to address known challenges and to enhance their  understanding of CAPTA requirements.", "With respect to HHS\u2019 January 2017 guidance, state officials reported in  our survey and during site visits that they found some terms unclear and  were uncertain about what is required of them. In written responses to our  survey, states reported challenges understanding how to define  substance-affected under CAPTA. In addition, as we note in our report,  the guidance about plans of safe care described the following: \u201cWhile  CAPTA does not specifically define a \u2018plan of safe care,\u2019 CARA amended  the CAPTA state plan requirement . . . to require that a plan of safe care  address the health and substance use disorder treatment needs of the  infant and affected family or caregiver.\u201d States reported in our survey and  in follow-up discussions that this lack of specificity remained an ongoing  challenge for them. For example, as we discuss in our report, one state  that we followed up with in August 2017 was still unsure about whether its  safety plans would meet CAPTA requirements for plans of safe care. In  addition, as of October 2017, HHS confirmed that some state plans did  not meet CAPTA requirements and that the states were asked to develop  program improvement plans. Accordingly, a key ongoing challenge was  not addressed by the January guidance.", "Regarding allowing states flexibility to meet CAPTA requirements, we  acknowledge in our report that HHS said that states have flexibility.  However, in our survey and site visits, states indicated that they would  find it helpful for HHS to provide them with greater specificity around  terms, including the degree of flexibility they are allowed. States added  that this would include parameters within which they can develop policies  and procedures that meet CAPTA requirements. We continue to believe  that additional guidance addressing these concerns would benefit states  and could be provided without imposing additional mandates.", "Concerning HHS\u2019 third point that some of the issues raised in the report  are not specific to CAPTA, the states we visited interpret CAPTA to  require that plans of safe care be developed for all substance-affected  infants who are referred to CPS. During our discussions with states and in  responses to our survey, state officials did not delineate which federal  requirement impacted their approach to serving children and families. As  stated in our conclusion, vulnerable infants may be at risk for child abuse  and neglect if adequate supports and services are not available to ensure  their safety.", "Lastly, HHS indicated that it will continue to provide technical assistance  to states and fund demonstration sites to establish or enhance  collaboration across community agencies and courts. Although continuing  to provide technical assistance to states should be beneficial, our findings  demonstrate that additional guidance is also needed. For example, 38  states reported that additional guidance on requirements for health care  providers to notify CPS of substance-affected infants would be extremely  or very helpful. Similarly, 37 states reported that additional guidance on  developing, implementing, and monitoring plans to ensure the safety and  well-being of substance-affected infants would be extremely or very  helpful.", "Overall, given the results of our review, we continue to believe our  recommendation is warranted. Effective implementation of our  recommendation should help states better implement protections for  children.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees and the Secretary of Health and  Human Services. 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) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Kathryn A. Larin, (202) 512-7215 or larink@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Sara Schibanoff Kelly (Assistant  Director), Ramona L. Burton (Analyst-in-Charge), Kay E. Brown, Hannah  Dodd, Ada Nwadugbo, and Srinidhi Vijaykumar made key contributions to  this report. Also contributing to this report were Sandra L. Baxter, James  Bennett, Gina Hoover, Jessica Orr, Rhiannon Patterson, Jean McSween,  and James Rebbe."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-616T", "url": "https://www.gao.gov/products/GAO-18-616T", "title": "High Risk: Agencies Need to Continue Efforts to Address Management Weaknesses of Federal Programs Serving Indian Tribes", "published_date": "2018-06-13T00:00:00", "released_date": "2018-06-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["GAO's High Risk List identifies federal program areas that are high risk due to their vulnerability to mismanagement, among other things. GAO added the federal management of programs that serve Indian tribes and their members to its February 2017 biennial update of high-risk areas in response to management weaknesses at Interior and HHS.", "This testimony provides examples of actions taken and progress made by these agencies to address the five criteria GAO uses for determining whether to remove a high-risk designation (leadership commitment, capacity, action plan, monitoring, and demonstrated progress).", "To conduct this work, GAO drew on findings from GAO reports issued from September 2011 through September 2017 and updated that work by reviewing agency documentation and interviewing agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO designated the federal management of programs that serve tribes and their members as high risk, and officials from the Department of the Interior's Office of the Assistant Secretary-Indian Affairs (Indian Affairs), the Bureau of Indian Education (BIE), the Bureau of Indian Affairs (BIA), and the Department of Health and Human Services' (HHS) Indian Health Service (IHS) expressed their commitment to addressing the issues that led to the designation. Since GAO last testified before this committee on September 13, 2017, Indian Affairs, BIE, BIA, and IHS have demonstrated varying levels of progress to partially meet most or all of the criteria for removing a high-risk designation. However, additional progress is needed to fully address management weaknesses, particularly in the areas of leadership commitment and capacity.", "Leadership commitment . To meet the leadership commitment criterion for removal of a high-risk designation, the agency needs to have demonstrated strong commitment and top leadership support to address management weaknesses. Indian Affairs, BIE, BIA, and IHS each took some actions to partially meet the leadership criterion. For example, the BIE Director formed an internal working group, convened meetings with other senior leaders within Indian Affairs, and publicly stated that his agency is committed to ensuring the implementation of prior GAO recommendations on Indian education. In addition, BIA officials demonstrated leadership commitment by, for example, issuing a memorandum requiring the use of a centralized data management system to track requests for land ownership records. To fully meet the leadership commitment criterion, all the agencies need, among other things, stable, permanent leadership that has assigned the tasks needed to address weaknesses and that holds those assigned accountable for progress.", "Capacity . To meet the capacity criterion, an agency needs to demonstrate that it has the capacity (i.e., people and other resources) to resolve its management weaknesses. Indian Affairs, BIE, BIA, and IHS each made progress identifying capacity and resources to partially meet the capacity criterion. For example, BIE hired school safety officers and personnel in offices supporting the oversight of school spending. BIA conducted a survey to identify workforce needs related to energy development to support staffing decisions for the recently created Indian Energy Service Center. IHS officials told us that the agency is expanding the role of internal audit staff within its enterprise risk management program to augment internal audits and complement audits by the HHS Inspector General and GAO. However, all the agencies have vacancies in key offices. For example, BIA officials said the agency does not have the staff or resources to implement a comprehensive workforce planning system to ensure it has staff in place at its agency offices to meet its organizational needs concerning numerous activities, including energy resources. To fully meet the capacity criterion, all the agencies need to assess tradeoffs between these and other administration priorities in terms of people and resources, and should provide key information to decision makers on resources needed to address the criteria and related management weaknesses."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made 52 recommendations to improve management weaknesses at some Interior and HHS agencies, of which 34 are still open. Some of these weaknesses led to the agencies' placement on the High Risk List. GAO sees varying levels of progress at the agencies in understanding what they need to do to be removed from the list and will continue to closely monitor their progress."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the status of actions by the  Departments of the Interior (Interior) and Health and Human Services  (HHS) to address issues that led to the high-risk designation we made  related to the federal management of programs that serve tribes and their  members. We added this area to our High Risk List in February 2017  because of our concern about the ability of agencies within these  departments to manage (1) education and health care programs that  serve tribes and their members and (2) Indian energy resources. In  particular, we found numerous weaknesses in how Interior\u2019s Bureau of  Indian Education (BIE) and Bureau of Indian Affairs (BIA)\u2014under the  office of the Assistant Secretary-Indian Affairs (Indian Affairs)\u2014managed  education programs and energy resources and how HHS\u2019s Indian Health  Service (IHS) managed health care services. We reported that these  management weaknesses jeopardized the health and safety of American  Indians served by these programs and limited opportunities for tribes and  their members to use energy resources to create economic benefits and  improve the well-being of their communities. This testimony provides  examples of actions taken and progress made by these agencies to  address the five criteria we use for determining whether to remove a high- risk designation (leadership commitment, capacity, action plan,  monitoring, and demonstrated progress).", "In 2016, Congress found in the Indian Trust Asset Reform Act that  \u201cthrough treaties, statutes, and historical relations with Indian tribes, the  United States has undertaken a unique trust responsibility to protect and  support Indian tribes and Indians.\u201d As further stated in that act, the  fiduciary responsibilities of the United States to Indians arise in part from  commitments made in treaties and agreements, in exchange for which  Indians surrendered claims to vast tracts of land. The act notes that this  history of federal-tribal relations and understandings has benefitted the  people of the United States and established \u201cenduring and enforceable  ederal obligations to which the national honor has been committed.\u201d  Through improvements to federal management of programs that serve  tribes and their members, agencies can improve the efficiency of federal  programs under which services are provided to tribes and their members.", "Such improvements would be consistent with the expressed view of  Congress as to the federal government\u2019s trust responsibilities and would  strengthen confidence in the performance and accountability of the  federal government. In light of this unique trust responsibility and  concerns about the federal government\u2019s management of Indian  education and health care programs and Indian energy resources, and  because these issues uniquely affect tribal nations and their members,  we added the federal management of programs serving tribes and their  members as a high-risk area in February 2017.", "The focus of this high-risk area is on management weaknesses within  federal agencies that administer programs that serve tribes and their  members. However, not all federal programs are administered by federal  agencies. In accordance with federal Indian policy that recognizes the  right of Indian tribes to self-government and that supports tribal self- determination, a number of tribes have elected to take over the  administration of certain federal programs and services from BIA, BIE,  and IHS. Our recommendations identified in the high-risk area are neither  reflective of the performance of programs administered by tribes nor  directed at any tribally operated programs and activities.", "We have ongoing work reviewing tribes\u2019 use of selected legal  mechanisms to take over the administration of federal programs from BIA  and assume control and decision-making authority over surface leasing of  their lands. In addition, we have ongoing work related to health care  programs that serve tribes and their members. Specifically, we are  reviewing: (1) provider vacancies in IHS; (2) the use of advance  appropriation authority for federal health programs and any applications  to IHS; (3) how IHS compares with the Veterans Health Administration,  Medicare, and Medicaid in terms of overall structure, user characteristics  and service utilization, and funding levels; and (4) access to care for  American Indian veterans. The results of these reviews will help inform  future updates to the High Risk List.", "For this statement, we drew on findings from our reports issued from  September 2011 through September 2017 and updated that work by  reviewing agency documentation and interviewing agency officials. To  conduct our previously issued work, on which this testimony draws, we  reviewed relevant federal laws, regulations, and policies; reviewed  agency documentation; and interviewed tribal, federal, and industry  officials, among others. More detailed information on the scope and  methodology of our work can be found in each of the reports cited in our  High-Risk Series report. We conducted the work on which this statement  is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Since 1990, generally every 2 years at the start of a new Congress, we  call attention to agencies and program areas that are high risk due to their  vulnerability to mismanagement or that are most in need of  transformation. Our high-risk program is intended to help inform the  congressional oversight agenda and to improve government  performance. Since 1990, a total of 61 different areas have appeared on  the High-Risk List. Of these, 24 areas have been removed, and 2 areas  have been consolidated. On average, the high-risk areas that were  removed from the list had been on it for 9 years.", "Our experience with the High-Risk List over the past 25 years has shown  that the key elements needed to make progress in high-risk areas are  top-level attention by the administration and agency leaders grounded in  the five criteria for removing high-risk designations, which we reported on  in November 2000. When legislative and agency actions, including those  in response to our recommendations, result in significant progress toward  resolving a high-risk problem, we will remove the high-risk designation.  However, implementing our recommendations alone will not result in the  removal of the designation, because the condition that led to the  recommendations is symptomatic of systemic management weaknesses.  In cases in which we remove the high-risk designation, we continue to  closely monitor the areas. If significant problems again arise, we will  consider reapplying the high-risk designation. The five criteria for  removing high-risk designations are:", "Leadership commitment. Demonstrated strong commitment and top  leadership support to address the risks.", "Capacity. Agency has the capacity (i.e., people and other resources)  to resolve the risk(s).", "Action plan. A corrective action plan that defines the root causes,  identifies effective solutions, and provides for substantially completing  corrective measures in the near term, including steps necessary to  implement solutions we recommended.", "Monitoring. A program has been instituted to monitor and  independently validate the effectiveness and sustainability of  corrective measures.", "Demonstrated progress. Ability to demonstrate progress in  implementing corrective measures and in resolving the high-risk area.", "These five criteria form a road map for efforts to improve and ultimately  address high-risk issues. Addressing some of the criteria leads to  progress, and satisfying all of the criteria is central to removal from the  list. Figure 1 shows the five criteria for removal for a designated high-risk  area and examples of agency actions leading to progress toward  removal.", "Importantly, the actions listed are not \u201cstand alone\u201d efforts taken in  isolation of other actions to address high-risk issues. That is, actions  taken under one criterion may be important to meeting other criteria as  well. For example, top leadership can demonstrate its commitment by  establishing a corrective action plan, including long-term priorities and  goals to address the high-risk issue and by using data to gauge  progress\u2014actions that are also vital to addressing the action plan and  monitoring criteria. When an agency meets all five of these criteria, we  can remove the agency from the High Risk List. We rate agency progress  on the criteria using the following definitions:", "Met. Actions have been taken that meet the criterion. There are no  significant actions that need to be taken to further address this  criterion.", "Partially Met. Some, but not all, actions necessary to meet the  criterion have been taken.", "Not Met. Few, if any, actions toward meeting the criterion have been  taken."], "subsections": []}, {"section_title": "Agencies Made Some Progress Addressing the Management Weaknesses That Led to the 2017 High Risk Designation", "paragraphs": ["Officials from Indian Affairs, BIE, BIA, and IHS expressed their  commitment to addressing the issues that led to the high-risk designation  for federal management of programs that serve tribes and their members.  Since we last testified before this committee on September 13, 2017, we  met with agency leaders and worked with each agency to identify actions  the agencies took or plan to take to address the concerns that contributed  to the designation. We determined that Indian Affairs, BIE, BIA, and IHS  demonstrated varying levels of progress to partially meet most or all of  the criteria for removing a high-risk designation. However, additional  progress is needed for the agencies to fully address the criteria and  related management weaknesses, particularly in the areas of leadership  commitment and capacity."], "subsections": [{"section_title": "Leadership Commitment", "paragraphs": ["To meet the leadership commitment criterion for removal of a high-risk  designation, an agency needs to have demonstrated strong commitment  and top leadership support to address management weaknesses. The  following examples show actions Indian Affairs, BIE, BIA, and IHS took to  partially meet the leadership commitment criterion.", "Education. Indian Affairs\u2019 leaders have demonstrated commitment to  addressing key weaknesses in the management of BIE schools in  several ways. For example, the BIE Director formed an internal  working group, convened meetings with other senior leaders within  Indian Affairs, and publicly stated that his agency is committed to  ensuring implementation of our recommendations on Indian  education. In addition, the BIE Director and other Indian Affairs  leaders and senior managers have met with us frequently to discuss  outstanding recommendations, actions they have taken to address  these recommendations, and additional actions they could take. In  particular, the BIE Director met with us on nine occasions over the  past year to discuss our recommendations and instructed his staff to  provide us draft policies and procedures related to our  recommendations. However, it is important that Indian Affairs leaders  be able to sustain this level of commitment to solving problems in  Indian education. Since 2012, there have been six Assistant- Secretaries of Indian Affairs and five BIE Directors. There has also  been leadership turnover in other key offices responsible for  implementing our recommendations on Indian education. We have  previously reported that leadership turnover hampered Indian Affairs\u2019  efforts to make improvements to Indian education. We believe that  ensuring stable leadership and a sustained focus on needed changes  is vital to the successful management of BIE schools.", "Energy. BIA officials demonstrated leadership commitment by, for  example, issuing a memorandum requiring all regions and their  agency offices to use a centralized data management system to track  requests for land title status reports. Using this type of centralized  approach for tracking such requests may improve BIA\u2019s ability to  provide needed oversight of federal actions associated with energy  development and ensure documents needed for the development of  energy resources are provided in a timely manner. In addition, BIA  officials frequently met with us over the last 9 months to discuss the  bureau\u2019s progress in addressing recommendations related to Indian  energy. However, Indian Affairs does not have a permanent Assistant  Secretary. BIA does not have a permanent Director, and BIA\u2019s Office  of Trust Services\u2014which has significant responsibility over Indian  energy activities\u2014does not have a permanent Director or Deputy  Director. We have seen turnover in these leadership positions as  officials have been brought in to temporarily fill these roles. As officials  are brought in temporarily, previously identified plans and time frames  for completing some activities have changed, and BIA has found itself  starting over to identify or implement corrective actions.", "Health Care. IHS officials demonstrated leadership commitment by  regularly meeting with us to discuss the agency\u2019s progress in  addressing our recommendations. IHS has continued to implement its  Quality Framework by acquiring a software system to centralize the  credentialing of clinical providers, developing a patient experience of  care survey, and developing standards for limiting patient wait time.  However, IHS still does not have permanent leadership\u2014including a  Director of IHS\u2014which is necessary for the agency to demonstrate its  commitment to improvement. Since 2012, there have been five IHS  Acting Directors, and there has been leadership turnover in other key  positions, such as area directors. For example, in January 2017 we  reported that officials from four of the nine area offices in our review  reported that they had at least three area directors over the prior 5  years. We also reported that inconsistent area office and health care  facility leadership is detrimental to the oversight of facility operations  and the supervision of personnel.", "To fully meet the leadership commitment criterion, all agencies will need,  among other things, stable, permanent leadership that has assigned the  tasks needed to address weaknesses and that holds those assigned  accountable for progress. For a timeline of senior leadership turnover in  Indian Affairs, BIE, BIA, and IHS from 2012 through 2018, see Figure 2."], "subsections": []}, {"section_title": "Capacity", "paragraphs": ["To meet the capacity criterion, an agency needs to demonstrate that it  has the capacity (i.e., people and other resources) to resolve its  management weaknesses. Indian Affairs, BIE, BIA, and IHS each made  some progress in identifying capacity and resources to implement some  of our recommendations, but BIA officials reported to us that the agency  does not have the people and resources needed to fully implement other  recommendations. The following examples show actions Indian Affairs,  BIE, BIA, and IHS took to partially meet the capacity criterion.", "Education. BIE and other Indian Affairs offices that support BIE  schools have made some progress in demonstrating capacity to  address risks to Indian education. For example, BIE hired a full-time  program analyst to coordinate its working group and help oversee the  implementation of our recommendations on Indian education. This  official has played a key role in coordinating the agency\u2019s  implementation efforts and has provided us with regular updates on  the status of these efforts. BIE has also conducted hiring in various  offices in recent years as part of a 2014 Secretarial Order to  reorganize the bureau. For example, it has hired school safety  officers and personnel in offices supporting the oversight of school  spending. However, about 50 percent of all BIE positions have not  been filled, including new positions that have been added as a result  of the agency\u2019s restructuring, according to a BIE official. Moreover,  agency officials told us that vacancies remain in several key positions,  including the Chief Academic Officer and the Associate Deputy  Director for Bureau Operated Schools. Furthermore, BIE and other  Indian Affairs offices that support BIE schools have not developed a  workforce plan to address staffing and training gaps with key staff,  which we previously recommended. Such a plan is important to allow  BIE and other Indian Affairs offices to better understand workforce  needs and leverage resources to meet them. BIE officials told us they  have held workforce planning sessions and anticipate completing  work on our recommendation to develop a workforce plan at the end  of 2018.", "Energy. In November 2016, we recommended that BIA establish a  documented process for assessing the workforce at its agency  offices. BIA has taken a number of actions, such as conducting an  internal survey to identify general workforce needs related to oil and  gas development. This survey information supported staffing  decisions for the recently created Indian Energy Service Center.  However, BIA officials told us the bureau does not have the staff or  resources to implement a comprehensive workforce planning system  that would be needed to ensure it has staff in place to meet its  organizational needs.", "Health Care. IHS has made some progress in demonstrating it has  the capacity and resources necessary to address the program risks  we identified in our reports. For example, IHS officials stated that the  agency is expanding the role of internal audit staff within its enterprise  risk management program to augment internal audits and  complement audits by the HHS Inspector General and GAO.  However, according to IHS, there are still vacancies in several key  positions, including the Director of the Office of Resource Access and  Partnerships, and the Office of Finance and Accounting.", "To fully meet the capacity criterion, all of the agencies need to assess  tradeoffs between these and other administration priorities in terms of  people and resources, and the agencies should provide to decision  makers with key information on resources needed to address  management weaknesses."], "subsections": []}, {"section_title": "Action Plan", "paragraphs": ["To meet the action plan criterion, an agency needs to have a corrective  action plan that defines the root causes, identifies effective solutions, and  provides for substantially completing corrective measures in the near  term, including steps necessary to implement the solutions we  recommended. Indian Affairs, BIE, BIA, and IHS have shown progress in  identifying actions to address many of our recommendations\u2014leading us  to believe they can partially meet the action plan criterion before our next  update of the High Risk List. For example:", "Education. BIE has taken several steps to develop action plans to  address management weaknesses. For example, BIE implemented a  new policy for overseeing BIE school spending, including developing  written procedures and risk criteria for monitoring school  expenditures. BIE also developed a strategic plan, which we  recommended in September 2013. The plan provides the agency  with goals and strategies for improving its management and oversight  of Indian education, and establishes detailed actions and milestones  for the implementation. BIE notified us that it has completed the plan  and expects to publish it on June 11, 2018, and will begin  implementation starting in July 2018. We will review the strategic plan  once it has been published. In addition, Indian Affairs\u2019 Office of  Facilities, Property & Safety Management has developed and  implemented revised comprehensive guidelines that addressed  several of our findings on weaknesses with BIE school safety  identified in our March 2016 report. However, Indian Affairs has not  provided us with evidence that it has developed and put in place  action plans on other important issues, such as a comprehensive,  long-term capital asset plan to inform its allocation of school  construction funds, which we recommended in May 2017.", "Energy. BIA officials met with us several times over the past few  months to discuss planned actions for addressing management  weaknesses related to Indian energy resources, and they identified  actions they have taken to help implement some of our  recommendations. For instance, BIA officials told us they have  proposed several modifications to the bureau\u2019s land records data  management system that will enable increased tracking and  monitoring of key documents that BIA must review prior to the  development of Indian energy resources. BIA officials we met with  have demonstrated an understanding that addressing long-standing  management weaknesses is not accomplished through a single action  but through comprehensive planning and continued movement toward  a goal. However, the agency does not have a comprehensive plan to  address the root causes of all identified management shortcomings.", "Health Care. Senior leaders in IHS have prioritized addressing our  recommendations by implementing four recommendations we  highlighted in our February 2017 update to the High Risk List. IHS  incorporated our recommendations into its risk management work  plan starting in 2017, and according to IHS officials, they will annually  review the effectiveness of the agency\u2019s internal controls, and where  controls are deemed insufficient, take actions to strengthen them. IHS  officials we met with have demonstrated an understanding that  addressing long-standing management weaknesses requires that they  develop a corrective action plan that defines root causes, identifies  solutions, and provides for substantially completing corrective  measures. However, agency officials have not yet developed a  corrective action plan.", "To fully meet the action plan criterion, a comprehensive plan that  identifies actions to address the root causes of its management  shortcomings would have to come from top leadership with a commitment  to provide sufficient capacity and resources to take the necessary actions  to address management shortcomings and risks."], "subsections": []}, {"section_title": "Monitoring", "paragraphs": ["To meet the monitoring criterion, an agency needs to demonstrate that a  program has been instituted to monitor and independently validate the  effectiveness and sustainability of corrective measures. For example,  agencies can demonstrate that they have a systematic way to track  performance measures and progress against goals identified in their  action plans. We have been working with the agencies to help clarify the  need to establish a framework for monitoring progress that includes goals  and performance measures to track their efforts and ultimately verify the  effectiveness of their efforts. BIA and IHS made progress in holding  frequent review meetings to assess the status of implementing our  recommendations but have not yet taken needed steps to monitor their  progress in addressing the root causes of their management  weaknesses. In addition, Indian Affairs has made some progress in  meeting the monitoring criterion on Indian education. For example, the  agency has implemented a plan to monitor the effectiveness of corrective  measures to address school safety program weaknesses. However, the  agency has not yet demonstrated that it is monitoring other areas, such  as showing that it is using safety program outcomes to evaluate and  manage the performance of regional safety inspectors. To fully meet the  monitoring criterion, the agencies need to set up goals and performance  measures as they develop action plans and take further actions to  monitor the effectiveness of actions to address root causes of identified  management shortcomings."], "subsections": []}, {"section_title": "Demonstrated Progress", "paragraphs": ["To meet the demonstrated progress criterion, an agency needs to  demonstrate progress in implementing corrective measures and in  resolving the high-risk area. We made 52 recommendations to improve  management weaknesses at Indian Affairs, BIE, BIA, and IHS, of which  34 are still open. Since our testimony in September 2017, we found that  Indian Affairs has made significant progress in implementing corrective  actions in education as demonstrated by our closure of nearly a third of  our recommendations directed to Indian Affairs related to education  programs. We found that BIA and IHS also made some progress in  implementing corrective actions related to the management of energy  resources and healthcare programs. Specifically, since our testimony in  September 2017, BIA took actions resulting in the implementation of 2 of  14 recommendations, and IHS took actions that resulted in the  implementation of four recommendations. The following examples show  actions Indian Affairs, BIA, and IHS took to partially meet the  demonstrated progress criterion.", "Education. As of early June 2018, Indian Affairs had fully addressed  8 of the 23 outstanding education recommendations we identified in  our September 2017 testimony, and we have closed them. BIE  implemented half of the closed recommendations, including 2 on  oversight of BIE school spending identified as high priority in a March  2018 letter from the Comptroller General to the Secretary of the  Interior. The rest of the recommendations we closed were  implemented by personnel in Indian Affairs\u2019 Office of Facilities,  Property & Safety Management and related to oversight of school  safety and construction. Overall, Indian Affairs\u2019 efforts since we issued  our High Risk List update in February 2017 represent a significant  increase in activity implementing our recommendations.  Substantial  work, however, remains to address our outstanding recommendations  in several key areas, such as in accountability for BIE school safety  and school construction projects. For example, BIA has reported  taking some actions to address recommendations in our May 2017  report on improving accountability of its safety employees who inspect  BIE schools. However, it has not provided us with documentation of  these actions.", "Energy. In June 2015, we recommended that BIA take steps to  improve its geographic information system (GIS) capabilities to ensure  it can verify ownership in a timely manner. Since our last update in  September 2017, BIA has made significant progress in enhancing its  GIS capabilities by integrating map-viewing technology and  capabilities into its land management data system. In addition, we  recommended that BIA take steps to identify cadastral survey  needs. BIA\u2019s enhanced map-viewing technology also allows the  bureau to identify land boundary discrepancies, which can then be  researched and corrected. Further, BIA identified unmet survey needs  that were contained within the defunct cadastral request system and  developed a new mechanism for its regions and agency offices to  make survey requests. We believe these actions show significant  progress in addressing management weaknesses associated with  data limitations and outdated technology.", "Health Care. In April 2013, we recommended that IHS monitor patient  access to physician and other nonhospital care to assess how capped  payment rates may benefit or impede the availability of care. In  response to our recommendation, IHS developed an online tracking  tool that enables the agency to document providers that refuse to  contract for lower rates. In October 2017, IHS officials met in person  with us and provided a demonstration of the tracking tool.", "To fully meet the demonstrating progress criterion, agencies need to  continue taking actions to ensure sustained progress and show that  management shortcomings are being effectively managed and root  causes are being addressed.", "In conclusion, we see some progress in all of the criteria, including  leadership commitment, at all agencies, especially related to education  programs. However, permanent leadership that provides continuing  oversight and accountability is needed. We also see varying levels of  progress at all of the agencies in understanding what they need to do to  be removed from the High Risk List by identifying steps that can be  incorporated into corrective action plans to address most  recommendations. We look forward to working with the agencies to track  their progress in implementing a framework for monitoring and validating  the effectiveness of planned corrective actions. In addition, all the  agencies have made progress in implementing some key  recommendations. Perhaps the biggest challenge for the agencies will be  achieving the capacity and identifying the resources required to address  the deficiencies in their programs and activities. This challenge cannot be  overcome by the agencies without a commitment from the administration  to prioritize fixing management weaknesses in programs and activities  that serve tribes and their members.", "Chairman Hoeven, Vice Chairman Udall, and Members of the Committee,  this completes my prepared statement. I would be pleased to respond to  any questions that you may have."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about education issues in this  testimony or the related reports, please contact Melissa Emrey-Arras at  (617) 788-0534 or emreyarrasm@gao.gov. For questions about energy  resource development, please contact Frank Rusco at (202) 512-3841 or  ruscof@gao.gov. For questions about health care, please contact Jessica  Farb at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this statement. Key contributors to this statement include  Christine Kehr (Assistant Director), Jay Spaan (Analyst-in-Charge),  Edward Bodine, Kelly DeMots, William Gerard, Greg Marchand, Elizabeth  Sirois, and Kiki Theodoropoulos.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["We added the federal management of programs that serve Indian tribes and their members to our High Risk List in February 2017. We found numerous weaknesses in how the Interior Department's Bureaus of Indian Education and Indian Affairs managed education, how the Bureau of Indian Affairs managed energy resources, and how the Department of Health and Human Services' Indian Health Services managed health care.", "We testified that, since being added to the High Risk List, Interior and HHS have partially met most or all criteria for coming off our List. However, more progress is needed for the agencies to fully address their management weaknesses."]}
{"id": "GAO-17-795T", "url": "https://www.gao.gov/products/GAO-17-795T", "title": "SSA's Compassionate Allowance Initiative: Actions Needed to Improve the Accuracy and Consistency of Expedited Processing of Disability Claims", "published_date": "2017-09-06T00:00:00", "released_date": "2017-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["SSA in October 2008 implemented CAL to fast track individuals with certain conditions through the disability determination process by prioritizing their disability benefit claims. Since then, SSA has expanded its list of CAL conditions from 50 to 225.", "This testimony summarizes the information contained in GAO's August 2017 report entitled SSA's Compassionate Allowance Initiative: Improvements Needed to Make Expedited Processing of Disability Claims More Consistent and Accurate , GAO-17-625 . It examines the extent to which SSA has procedures for (1) identifying conditions for the CAL list; (2) identifying claims for CAL processing; and (3) ensuring the accuracy and consistency of CAL decisions.", "For its August 2017 report, GAO reviewed relevant federal laws, regulations, and guidance; analyzed SSA data on disability decisions for CAL claims from fiscal years 2009 through 2016 and on CAL claims with manual actions in fiscal year 2016; reviewed a nongeneralizable sample of 74 claim files with fiscal year 2016 initial determinations; and interviewed medical experts, representatives from patient advocacy groups, and SSA officials in headquarters and six DDS offices selected for geographic dispersion and varied CAL caseloads."]}, {"section_title": "What GAO Found", "paragraphs": ["The Social Security Administration (SSA) does not have a formal or systematic approach for designating certain medical conditions for the Compassionate Allowance initiative (CAL). CAL was established in 2008 to fast-track through the disability determination process claimants who are likely to be approved because they have certain eligible medical conditions. SSA has in recent years relied on advocates for individuals with certain diseases and disorders to bring conditions to its attention for potential inclusion in CAL. However, by relying on advocates, SSA may overlook disabling conditions that have no advocates, potentially resulting in individuals with these conditions not receiving expedited processing. Further, SSA does not have clear, consistent criteria for designating conditions for potential CAL inclusion, which is inconsistent with federal internal control standards. As a result, external stakeholders lack key information about how to recommend conditions for inclusion on the CAL list.", "To identify disability claims for expedited CAL processing, SSA primarily relies on software that searches for key words in claims. However, if claimants include incorrect or misspelled information in their claims the software is hindered in its ability to flag all claimants with CAL conditions or may flag claimants for CAL processing that should not be flagged. SSA has guidance for disability determination services (DDS) staff on how to manually correct errors made by the software, but the guidance does not address when such corrections should occur. Without clear guidance on when to make manual changes, DDS examiners may not take timely actions and may hinder expedited processing for appropriate claims.", "SSA has taken some steps to ensure the accuracy and consistency of decisions on CAL claims, including developing detailed descriptions of CAL conditions, known as impairment summaries. These summaries help examiners make decisions about whether to allow or deny a claim. However, nearly one-third of the summaries are 5 or more years old. Experts and advocates that GAO spoke to suggested that summaries should be updated every 1 to 3 years to reduce the risk of SSA making disability determinations using medically outdated information. In addition, GAO found that SSA does not leverage data it collects to identify potential challenges to accurate and consistent decision-making on CAL claims. Without regular analyses of available data, SSA is missing an opportunity to ensure the accuracy and consistency of CAL decision-making."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its August 2017 report, GAO made eight recommendations, including that SSA develop a process to systematically gather information on potential CAL conditions, communicate criteria for designating CAL conditions, clarify guidance for manual corrections on CAL claims, update CAL impairment summaries, and use available data to ensure accurate, consistent decision-making. SSA agreed with all of GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the Social Security  Administration\u2019s (SSA) Compassionate Allowance initiative (CAL). SSA  oversees two key federal programs for individuals with disabilities\u2014 Disability Insurance (DI) and Supplemental Security Income (SSI). In  December 2016, these programs provided about $15.7 billion in disability  benefits to nearly 17.4 million individuals. In order to be eligible for these  programs on the basis of a disability, applicants must be determined to  have a qualifying disability through a complex, multi-step process. As we  have noted in our prior work, SSA has historically faced challenges with  processing applications for benefits in a timely manner, resulting in  significant backlogs and long waits for applicants to learn whether they  qualify to obtain disability benefits.", "In light of these challenges, SSA in October 2008 implemented CAL,  which fast-tracks through the disability determination process those  applicants who are likely to be approved because they have certain  medical conditions, such as specific cancers, Amyotrophic Lateral  Sclerosis (ALS), or early-onset Alzheimer\u2019s disease. Since 2008, SSA  has expanded its list of CAL conditions from 50 to 225, resulting in  increasing numbers of individuals qualifying for disability benefits through  CAL. From the initiative\u2019s inception through the end of fiscal year 2016,  SSA had approved more than 500,000 applications, or claims, for  disability benefits through CAL. However, a few years after CAL began,  concerns were raised that SSA had not identified all cases that qualified  for CAL processing and processed some cases through CAL that did not  qualify. More recently, concerns have been raised that SSA does not  have a transparent process for identifying conditions for inclusion on the  CAL list and its descriptions of certain CAL conditions may be medically  out of date.", "To apply for disability benefits through either of SSA\u2019s disability programs,  individuals submit a claim, which includes the claimant\u2019s description of his  or her impairment (or impairments), among other relevant information.  SSA assesses the claimant\u2019s non-medical eligibility for benefits and  sends the claim to a state disability determination services (DDS) office  for a review of the claimant\u2019s medical eligibility and initial determination of  disability. Although SSA is responsible for the programs, the law  generally calls for initial determinations of disability to be made by state  agencies. DDS examiners assess the applicant\u2019s medical condition  against SSA\u2019s Listings of Impairments (medical listings), which contain  medical conditions that have been determined by the agency to be severe  enough to qualify an applicant for disability benefits. Based on this  assessment, a DDS examiner decides whether to medically allow or deny  a claim for DI or SSI benefits.", "CAL claims may be processed more quickly than other claims, in part  because they are given priority status. When a claimant submits a claim  for disability benefits, it is flagged as CAL if the claimant\u2019s description of  his or her impairment includes certain key words or phrases indicating the  claimant has a CAL condition. These claims are given priority in disability  examiners\u2019 and medical consultants\u2019 queues of incoming claims, and SSA  guidance directs DDS offices to initiate development of CAL claims within  one work day of receipt. Examiners may only require a minimal amount of  medical evidence, for example, a biopsy report, to confirm the claimant\u2019s  diagnosis of a CAL condition.", "My testimony today summarizes findings from our August 2017 report on  CAL that is being released today. This statement addresses the extent to  which SSA has procedures for (1) identifying conditions for the CAL list;  (2) identifying claims for CAL processing; and (3) ensuring the accuracy  and consistency of CAL decisions. To address these objectives, we  reviewed relevant federal laws, regulations, and guidance; analyzed SSA  data on disability decisions for CAL claims from fiscal years 2009 through  2016 and on CAL claims flagged by staff for manual addition or removal  of the CAL designation in fiscal year 2016; reviewed a nongeneralizable  sample of 74 claim files with fiscal year 2016 initial determinations; and  interviewed medical experts, representatives from patient advocacy  groups, and SSA officials in headquarters and six DDS offices selected  for geographic dispersion and varied CAL caseloads. Our work was  performed in accordance with generally accepted government auditing  standards. More details on our scope and methodology can be found in  the issued report.", "In brief, although CAL appears to be effectively expediting benefit  processing for disability claims receiving this designation, we found  several weaknesses in SSA\u2019s procedures for identifying conditions for the  CAL list and claims for CAL processing. We also found weakness in the  agency\u2019s procedures for ensuring the accuracy and consistency of CAL  decisions. My statement will highlight eight recommendations that SSA  can implement to make the expedited processing of disability claims  through CAL more consistent and accurate."], "subsections": [{"section_title": "SSA Lacks a Formal and Systematic Approach for Identifying CAL Conditions", "paragraphs": ["SSA has in recent years relied on advocates for individuals with certain  diseases and disorders to bring potential CAL conditions to its attention.  However, SSA has not clearly communicated this or provided guidance  on how to make suggestions through its CAL webpage, which  communicates information to the public. Without more explicit  instructions, we noted that advocates may not present information that is  relevant for SSA\u2019s decision-making or that most strongly makes the case  for these conditions to be included on the CAL list. One representative  from an advocacy organization, for example, described meeting with  agency officials and being surprised by SSA\u2019s focus on cancer grades\u2014 an indicator of how quickly cancer is likely to grow and spread\u2014as she  was not accustomed to discussing the condition she represents in these  terms. Federal internal control standards state that agencies should use  quality information to achieve their objectives. We concluded that  absent clear guidance to advocates on how to make suggestions through  its CAL webpage, SSA is missing an opportunity to gather quality  information to inform its selection of CAL conditions.", "In addition, we found that relying on advocates to bring conditions to  SSA\u2019s attention also introduces potential bias toward certain conditions  and the possibility of missing others. Some conditions that are potentially  deserving of CAL consideration may not have advocacy organizations  affiliated with them, and some advocates may be unaware of CAL. As a  result, some conditions may have a better chance of being considered  than other, equally deserving ones that are not proposed, and individuals  with those conditions may have to wait longer to receive approval for  disability benefits. Federal internal control standards state that agencies  should collect complete and unbiased information and consider the  reliability of their information sources. According to some external  researchers who work with SSA, an approach leveraging SSA\u2019s  administrative data may help address the bias that is introduced by only  using advocates. SSA has contracted with the National Institutes of  Health and the National Academies of Sciences, Engineering, and  Medicine for research using SSA administrative data, which has led to the  identification of potential CAL conditions. However, we noted that to date,  the research SSA has contracted has not been sufficiently targeted to  generate more than a small number of additions to the CAL list. In our  August 2017 report, we recommended that SSA develop a formal and  systematic approach to gathering information to identify potential  conditions for the CAL list, including sharing information through SSA\u2019s  website on how to propose conditions for the list and using research that  is directly applicable to identifying CAL conditions. SSA agreed with this  recommendation and has begun to make revisions to its website.", "We also found that SSA has also not consistently communicated with  advocates who have suggested conditions to add to the CAL list about  the status of their recommendations, leading to uncertainty for some. SSA  officials told us that they provide a written or oral response to advocacy  organizations that have suggested a condition for inclusion on the CAL  list to inform them whether the condition is approved. However, some of  the advocates we spoke to had not received such a response from SSA  and found it challenging to connect with SSA officials to obtain  information about the status of their suggestions. For example, one  representative from an advocacy organization told us that she was unable  to reach SSA officials to obtain any information on the status of her  suggestion despite repeated attempts. In the absence of a response from  SSA, she had resubmitted her condition and supporting documents to  SSA every six months for three years since her initial submission in 2014.  Federal internal control standards state that agencies should  communicate quality information externally so that external parties can  help the agency achieve its objectives. We concluded that without two- way communication between SSA and advocates, advocates are unclear  on the status of their proposed CAL conditions and SSA may be missing  an opportunity to improve the quality of the information it obtains from  advocates. In our August 2017 report, we recommended that SSA  develop formal procedures for consistently notifying those who propose  conditions for the CAL list of the status of their proposals. SSA agreed  with this recommendation.", "Our review also found that SSA has not developed or communicated  clear, consistent criteria for deciding which potential conditions will be  included on the CAL list. Officials told us that they have informally  considered criteria such as allowance rates\u2014the percentage of claimants  asserting a certain condition who are approved for benefits\u2014when  identifying potential CAL conditions. However, we reviewed 31  assessments of potential CAL conditions prepared by SSA medical  consultants and found that they did not cite consistent criteria. There was  no standard format used for these reports, and SSA does not have a  template, checklist, or guidance\u2014other than the medical listings\u2014that its  staff consult when preparing them. Further, SSA officials have cited  different reasons for not designating conditions as CAL in  communications with those who proposed conditions, which led to  confusion regarding CAL condition criteria for staff from some advocacy  organizations we interviewed. Federal internal control standards state that  agencies should define objectives in specific and measurable terms so  that they are understood at all levels of the agency and performance  toward achieving these objectives can be assessed. To help achieve  these objectives, the standards state that agencies should also  communicate key information to their internal and external stakeholders.  We concluded that absent clear criteria for designating CAL conditions,  advocates and other stakeholders may be confused as to why some  conditions are not included on the CAL list and SSA may miss conditions  that could qualify for CAL. In our August 2017 report, we recommended  that SSA develop and communicate internally and externally criteria for  selecting conditions for the CAL list. SSA agreed with this  recommendation."], "subsections": []}, {"section_title": "SSA\u2019s Procedures Do Not Ensure All Claims are Accurately Identified for Expedited CAL Processing", "paragraphs": ["To identify disability claims for expedited CAL processing, SSA primarily  relies on software that searches for key words in claims. However,  because text provided by claimants may be ambiguous, incomplete,  inaccurate, or misspelled, the software is hindered in its ability to flag all  claimants with CAL conditions and may also flag claimants for CAL  processing that should not be flagged. For example, officials we  interviewed at 5 of the 6 selected DDS offices said that they have seen  claims inaccurately flagged for CAL when the claim text included words  like \u201cfamily history of \u201d though the CAL condition was not  asserted by the claimant. In addition, in our claim file review, we found a  claimant asserting a leiomyosarcoma, a soft tissue cancerous tumor that  may be found in organs including the liver, lungs, and uterus, who  misspelled the term as \u201cleiomysarcoma\u201d on the disability claim, which  resulted in the software not flagging the claim as CAL, although liver and  lung cancers are CAL conditions.", "SSA officials told us that they have not established a feedback loop to  capture observations from DDS officials on weaknesses in the software.  However, DDS officials we spoke with have observed weaknesses in the  software that, if shared, could assist SSA in improving its accuracy in  identifying CAL claims. For example, an official at one DDS office noted  that the software appears to identify CAL conditions using words from the  claim text out of order or without regard to specific phrases. Specifically,  the official stated that some claims with \u201cpancreatitis\u201d or \u201cpancreatic pain\u201d  have been incorrectly flagged for the CAL condition \u201cpancreatic cancer.\u201d  According to federal internal control standards, quality information about  the agency\u2019s operational processes should flow up the reporting lines  from personnel to management to help management achieve the  agency\u2019s objectives. We concluded that absent a mechanism to gather  feedback from DDS offices nationwide, the agency may be missing an  opportunity to obtain important information that could help improve the  software. In our August 2017 report, we recommended that SSA take  steps to obtain information that can help refine the selection software for  CAL claims, for example by using management data, research, or DDS  office feedback. SSA agreed with this recommendation.", "We also found that DDS offices play an important role in helping to  ensure that claims are accurately flagged for CAL by manually correcting  flagging errors made by the software, but SSA\u2019s guidance on how to  make such corrections does not address when they should occur. For  example, instructions on the mechanical process for removing the flag  based on the DDS examiner\u2019s review of the medical evidence in the  claimant\u2019s file does not indicate how quickly this should be done after  CAL status is clarified. Based on our discussions with officials in the 6  selected DDS offices, we found that some examiners did not understand  the importance of making timely changes to a CAL flag designation to  ensure faster claim processing and accurate tracking of CAL claims. For  example, examiners at one DDS office said that they do not always add  or remove a CAL flag when they determine a claim is erroneously  designated because it adds another step to claim processing and the step  seems unnecessary. Ensuring claims are correctly flagged for or not  flagged for CAL is important because the CAL flag reduces DDS  processing time by about 10 weeks on average compared to the  processing time for all claims, according to SSA data. According to  federal internal control standards, agencies should record transactions in  an accurate and timely fashion, and communicate quality information  throughout the agency. We concluded that without clear guidance on  when to make manual changes, DDS examiners may continue to take  actions that are not timely and may hinder expedited processing and  accurate tracking of CAL claims. In our August 2017 report, we  recommended that SSA clarify written policies and procedures regarding  when manual addition and removal of CAL flags should occur on  individual claims. SSA agreed with this recommendation.", "In addition, our analysis of SSA\u2019s data shows that DDS offices varied in  their use of manual actions to add the CAL flag to claims that were not  initially flagged for CAL by the software. Specifically, we found that over  half of DDS offices nationwide that processed disability claims in fiscal  year 2016 had one or zero claims with a manually added CAL designation  in that year. In comparison, 5 DDS offices together accounted for over  50 percent of all claims with a manual addition. Such variance could  result in some claimants who assert a CAL condition not receiving  expedited processing because their claims were not flagged for CAL by  the selection software or DDS examiners. We found that because SSA  had not undertaken a study of its manual action procedures on such  claims, it was unclear why this variance existed among DDS offices.  Federal internal control standards state that agencies should establish  and operate monitoring activities to monitor operations and evaluate  results. In our August 2017 report, we recommended that SSA assess  the reasons why the uses of manual actions vary across DDS offices.  SSA agreed with this recommendation."], "subsections": []}, {"section_title": "SSA Takes Some Steps to Ensure Accurate and Consistent CAL Decisions But Does Not Regularly Update Condition Descriptions or Leverage Data", "paragraphs": ["In our August 2017 report, we found that SSA has taken some steps to  ensure the accuracy and consistency of decisions on CAL claims,  including developing detailed descriptions of CAL conditions, known as  impairment summaries, but has not regularly updated the summaries.  These summaries suggest specific medical evidence for the DDS  examiner to obtain to verify the claimant\u2019s asserted CAL condition and  help examiners make decisions about whether to allow or deny a claim.  However, we found that because SSA has not regularly updated the  impairment summaries, nearly one-third are 5 or more years old. Several  advocates (4 of 6) and medical experts (2 of 3) we interviewed suggested  that the impairment summaries should be updated every 1 to 3 years  because medical research and advancements may have implications for  disability determinations. In addition, federal internal control standards  state that as changes in the agency\u2019s environment occur, management  should make necessary changes to the information requirements to  address the modified risks. We concluded that given the pace of  medical research for certain CAL conditions, in the absence of a  systematic and regular mechanism to update CAL impairment  summaries, SSA potentially faces the risk of making inaccurate and  inconsistent disability determinations based on outdated information. In  our August 2017 report, we recommended that SSA develop a schedule  and a plan for updates to the CAL impairment summaries to ensure that  information is medically up to date. SSA agreed with this  recommendation.", "We also found that SSA does not leverage data it collects to identify  potential challenges to accurate and consistent decision-making on CAL  claims. SSA and DDS officials review some data to monitor CAL claims  processing, such as the total number of CAL claims and claims flagged  for CAL by the selection software, but these efforts do not address the  accuracy and consistency of decisions on CAL claims. In contrast, our  analysis of SSA\u2019s data on outcomes for claims with asserted CAL  conditions suggested that a review of data on allowance and denial rates  for these claims may help identify conditions that are challenging to  accurately and consistently adjudicate. For example, while the vast  majority of claims asserting CAL conditions are allowed\u2014about 92  percent were approved in fiscal year 2016\u2014data we reviewed showed  that there was a lower percentage of claims allowed for certain asserted  CAL conditions. Specifically, SSA denied more than 30 percent of claims  asserting 37 CAL conditions, and 17 of these conditions had denial rates  that were greater than 50 percent. Advocates we spoke to who  represent some of these conditions explained why challenges  adjudicating these claims may exist. For example, officials from one of  these advocacy groups told us that the CAL condition they represent is  frequently confused with a much more common and non-life threatening  condition that is less likely to be allowed. According to federal internal  control standards, management should obtain relevant data based on  identified information requirements, process these data into quality  information that can be used to make informed decisions, and evaluate  the agency\u2019s performance in achieving key objectives and addressing  risks. We concluded that without regular analyses of available data,  SSA is missing an opportunity to ensure the accuracy and consistency of  CAL decision-making. In our August 2017 report, we recommended that  SSA develop a plan to regularly review and use available data to assess  the accuracy and consistency of CAL decision-making. SSA agreed with  this recommendation.", "Chairman Johnson, Ranking Member Larson, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact Kathryn A. Larin at  (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  include Rachel Frisk, Assistant Director; Kristen Jones, Analyst-in- Charge; and Michelle Loutoo Wilson.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-137", "url": "https://www.gao.gov/products/GAO-18-137", "title": "Department of Veterans Affairs: Actions Needed to Address Employee Misconduct Process and Ensure Accountability", "published_date": "2018-07-19T00:00:00", "released_date": "2018-07-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA provides services and benefits to veterans through hospitals and other facilities nationwide. Misconduct by VA employees can have serious consequences for some veterans, including poor quality of care. GAO was asked to review employee misconduct across VA. This report reviews the extent to which VA (1) collects reliable information associated with employee misconduct and disciplinary actions, (2) adheres to documentation-retention procedures when adjudicating cases of employee misconduct, (3) ensures allegations of misconduct involving senior officials are reviewed according to VA investigative standards and these officials are held accountable, and (4) has procedures to investigate whistle-blower allegations of misconduct; and the extent to which (5) data and whistle-blower testimony indicate whether retaliation for disclosing misconduct occurs at VA.", "GAO analyzed 12 information systems across VA to assess the reliability of misconduct data, examined a stratified random sample of 544 misconduct cases from 2009 through 2015, analyzed data and reviewed cases pertaining to senior officials involved in misconduct, reviewed procedures pertaining to whistle-blower investigations, and examined a nongeneralizable sample of whistle-blower disclosures from 2010 to 2014."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Veterans Affairs (VA) collects data related to employee misconduct and disciplinary actions, but fragmentation and data-reliability issues impede department-wide analysis of those data. VA maintains six information systems that include partial data related to employee misconduct. For example, VA's Personnel and Accounting Integrated Data system collects information on disciplinary actions that affect employee leave and pay, but the system does not collect information on other types of disciplinary actions. The system also does not collect information such as the offense or date of occurrence. GAO also identified six other information systems that various VA administrations and program offices use to collect specific information regarding their respective employees' misconduct and disciplinary actions. GAO's analysis of all 12 information systems found data-reliability issues\u2014such as missing data, lack of identifiers, and lack of standardization among fields. Without collecting reliable misconduct and disciplinary action data on all cases department-wide, VA's reporting and decision making on misconduct are impaired.", "VA inconsistently adhered to its guidance for documentation retention when adjudicating misconduct allegations, based on GAO's review of a generalizable sample of 544 out of 23,622 misconduct case files associated with employee disciplinary actions affecting employee pay. GAO estimates that VA would not be able to account for approximately 1,800 case files. Further, GAO estimates that approximately 3,600 of the files did not contain required documentation that employees were adequately informed of their rights during adjudication procedures\u2014such as their entitlement to be represented by an attorney. The absence of files and associated documentation suggests that individuals may not have always received fair and reasonable due process as allegations of misconduct were adjudicated. Nevertheless, VA's Office of Human Resource Management does not regularly assess the extent to which files and documentation are retained consistently with applicable requirements.", "VA did not consistently ensure that allegations of misconduct involving senior officials were reviewed according to investigative standards and these officials were held accountable. For example, based on a review of 23 cases of alleged misconduct by senior officials that the VA Office of Inspector General (OIG) referred to VA facility and program offices for additional investigation, GAO found VA frequently did not include sufficient documentation for its findings, or provide a timely response to the OIG. In addition, VA was unable to produce any documentation used to close 2 cases. Further, OIG policy does not require the OIG to verify the completeness of investigations, which would help ensure that facility and program offices had met the requirements for investigating allegations of misconduct. Regarding senior officials, VA did not always take necessary measures to ensure they were held accountable for substantiated misconduct. As the figure below shows, GAO found that the disciplinary action proposed was not taken for 5 of 17 senior officials with substantiated misconduct.", "As a result of June 2017 legislation, a new office within VA\u2014the Office of Accountability and Whistleblower Protection\u2014will be responsible for receiving and investigating allegations of misconduct involving senior officials.", "VA has procedures for investigating whistle-blower complaints, but the procedures allow the program office or facility where a whistle-blower has reported misconduct to conduct the investigation. According to the OIG, it has the option of investigating allegations of misconduct, or exercising a \u201cright of first refusal\u201d whereby it refers allegations of misconduct to the VA facility or program office where the allegation originated. VA does not have oversight measures to ensure that all referred allegations of misconduct are investigated by an entity outside the control of the facility or program office involved in the misconduct, to ensure independence. As a result, GAO found instances where managers investigated themselves for misconduct, presenting a conflict of interest.", "Data and whistle-blower testimony indicate that retaliation may have occurred at VA. As the table below shows, individuals who filed a disclosure of misconduct with the Office of Special Counsel (OSC) received disciplinary action at a much higher rate than the peer average for the rest of VA in fiscal years 2010\u20132014.", "Additionally, GAO's interviews with six VA whistle-blowers who claim to have been retaliated against provided anecdotal evidence that retaliation may be occurring. These whistle-blowers alleged that managers in their chain of command took several untraceable actions to retaliate against the whistle-blowers, such as being denied access to computer equipment necessary to complete assignments."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes numerous recommendations to VA to help enhance its ability to address misconduct issues (several of the recommendations are detailed on the following page).", "GAO recommends, among other things, that the Secretary of Veterans Affairs", "develop and implement guidance to collect complete and reliable misconduct and disciplinary-action data department-wide; such guidance should include direction and procedures on addressing blank fields, lack of personnel identifiers, and standardization among fields;", "direct applicable facility and program offices to adhere to VA's policies regarding misconduct adjudication documentation;", "direct the Office of Human Resource Management to routinely assess the extent to which misconduct-related files and documents are retained consistently with applicable requirements;", "direct the Office of Accountability and Whistleblower Protection (OAWP) to review responses submitted by facility or program offices to ensure evidence produced in senior-official case referrals demonstrates that the required elements have been addressed;", "direct OAWP to issue written guidance on how OAWP will verify whether appropriate disciplinary action has been implemented; and", "develop procedures to ensure (1) whistle-blower investigations are reviewed by an official independent of and at least one level above the individual involved in the allegation, and (2) VA employees who report wrongdoing are treated fairly and protected against retaliation.", "GAO also recommends, among other things, that the VA OIG", "revise its policy and require verification of evidence produced in senior-official case referrals.", "VA concurred with nine recommendations and partially concurred with five. In response, GAO modified three of the recommendations. The VA OIG concurred with one recommendation and partially concurred with the other. GAO continues to believe that both are warranted."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs (VA) provides a wide range of health  services and benefits to 9 million veterans through a nationwide network  of hospitals, outpatient clinics, and other facilities. In 2016, VA accounted  for 18 percent of the executive-branch employee workforce, employing  350,000 federal workers, including approximately 30,000 senior officials.  In that same year, VA employees accounted for about 31 percent of  cases submitted from across the federal government to the Office of  Special Counsel (OSC)\u2014an independent agency where federal  employees can report evidence of waste, fraud, abuse, and retaliation.  These cases pertained to various types of misconduct including gross  mismanagement, waste, fraud, abuse, illegality, and prohibited personnel  practices such as whistle-blower retaliation.", "GAO\u2019s prior related work at VA focused on the use of administrative  investigation boards (AIB) to conduct investigations of alleged employee  misconduct. An AIB may be convened by the heads of VA  administrations and staff offices, chief executives of VA facilities, and all  authorities senior to any of these officials. The purpose of an AIB is to  conduct a fact-finding investigation under the standard procedures laid  out in VA Directive 0700, Administrative Investigations, and VA Handbook  0700, Administrative Investigations. We recommended in 2012 that VA  establish a process to collect and analyze aggregate data from these  investigations, and to share data that informed changes to policies and  procedures implemented in response to these investigations. VA  concurred with our recommendations and identified several activities that  the Veterans Health Administration (VHA) uses to share information  about systemic issues in facilities and VHA program offices.", "You asked us to review the issue of allegations of VA employee  misconduct. This report reviews the extent to which VA (1) collects  reliable information associated with employee misconduct and disciplinary  actions that are accessible and could be used to analyze misconduct  department-wide; (2) retains documentation that demonstrates VA  adheres to its policies when adjudicating cases of employee misconduct;  (3) ensures allegations of misconduct involving senior officials are  reviewed in accordance with VA investigative standards, and these  officials are held accountable; (4) has procedures to investigate whistle- blower allegations of misconduct; and the extent to which (5) data and  whistle-blower testimony indicate whether retaliation for disclosing  misconduct occurs at VA.", "To determine the extent to which VA collects reliable information  associated with employee misconduct and disciplinary actions that are  accessible and could be used to analyze misconduct department-wide,  we analyzed the contents of 12 information systems operated by various  VA components during portions of the period covering October 2009  through July 2017. We obtained data in these 12 information systems  from VA officials who oversee data related to misconduct or disciplinary  actions. We assessed the data and the reliability of each system through  electronic data testing, interviews with knowledgeable agency officials,  and comparison to source documentation for the purposes of identifying  and tracking misconduct cases. As discussed further in this report, the  data were generally not reliable for a department-wide assessment of all  misconduct and disciplinary actions due to the lack of completeness and  compatibility of the data across all information systems. However, we  found the data sufficiently reliable for conducting analysis where fields  were populated and field definition concurrence was obtained by the  program offices.", "To determine the extent to which VA retains documentation that  demonstrates VA adheres to its policies when adjudicating cases of  employee misconduct, we selected a generalizable stratified random  sample of 544 misconduct cases from the Office of Human Resource  Management\u2019s (OHRM) Personnel and Accounting Integrated Data  (PAID) information system covering October 2009 through May 2015 from  23,622 misconduct cases. We determined the data to be sufficiently  reliable for analysis of disciplinary actions affecting leave or salary. We  examined evidentiary files associated with these disciplinary actions for  the 489 of 544 cases for which VA was able to locate documentation (90  percent of sampled cases) to determine the extent to which VA\u2019s actions  were consistent with policies contained in VA Directive 5021,  Employee/Management Relations.", "To determine the extent to which VA ensures allegations of misconduct  involving senior officials are reviewed in accordance with VA investigative  standards and these officials are held accountable, we obtained data from  the Office of Accountability Review (OAR) Legacy Referral Tracking List  for the period of January 2011 through May 2015. We analyzed the OAR  Legacy Referral Tracking List and reviewed cases involving senior  officials that were referred to program offices for further investigation by  VA\u2019s Office of Inspector General (OIG). As further discussed in the  report, we assessed the data and identified data-quality issues, which  included blank fields within OAR\u2019s information system. However, we  found the data to be sufficiently reliable, for fields that were satisfactorily  populated, for conducting analysis of the investigative process for  referring and reviewing cases of misconduct.", "To determine the extent to which VA follows procedures to investigate  whistle-blower allegations of misconduct, we interviewed senior officials  from VA and the OSC responsible for investigating whistle-blower  complaints. We also reviewed the OSC\u2019s procedures for referring  disclosures and VA\u2019s policy for investigating these disclosures once  received at the agency. In addition, we obtained whistle-blower  disclosure data from the OSC covering calendar years 2010 through  2014, where available. To determine the reliability of the data, we  conducted electronic testing and traced data elements to source  documentation. We determined the data to be sufficiently reliable for  determining the universe of disclosure cases involving VA. We selected  the 135 whistle-blower disclosure cases that were reported to the OSC  and indicated an investigation was completed by VA. These cases  represent the universe of VA disclosures and are nongeneralizable to the  entire population of disclosures received by the OSC. We reviewed the  results of OSC\u2019s assessment of investigative documentation developed  by VA for a sample of these whistle-blower disclosure cases. We also  attended a course to assess VA\u2019s training provided to VA employees  conducting investigations.", "To determine the extent to which VA data and whistle-blower testimony  indicate whether retaliation for disclosing misconduct occurs at VA, we  selected the same 135 whistle-blower disclosure cases that were  reported to the OSC as indicated above. To estimate the difference in  rates of misconduct and attrition between whistle-blowers and the entire  population, we matched the employees associated with these cases to  employee rosters and adverse disciplinary actions from the PAID system  for the period of fiscal years 2010 through 2014. We also interviewed  representatives from different whistle-blower advocacy groups, and  individuals who disclosed wrongdoing or retaliation at VA who were  referred to us by one advocacy group.", "To address all objectives, we interviewed senior officials from VA\u2019s major  components responsible for investigating and adjudicating cases of  employee misconduct. We also reviewed standard operating procedures,  policy statements, and guidance for staff charged with investigating and  adjudicating allegations of employee misconduct. Further details about  our scope and methodology can be found in appendix I.", "We conducted this performance audit from January 2015 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["VA comprises a Veterans Affairs Central Office (VACO) and over 1,000  facilities and offices throughout the nation, as well as the U.S. territories  and the Philippines. As shown in figure 1, VA\u2019s three major  administrations are the Veterans Health Administration (VHA), Veterans  Benefits Administration (VBA), and National Cemetery Administration  (NCA). The largest of the administrations, in terms of workforce, is VHA  and its associated Veterans Integrated Service Networks (VISN). VHA is  estimated to employ about 316,800 employees in 2017, followed by the  VBA and NCA with about 22,700 and 1,850 employees, respectively.  The remaining 15,000 employees are in various staff offices. VA\u2019s budget  request for fiscal year 2018 of $186.4 billion includes $82.1 billion in  discretionary resources and $104.3 billion in mandatory funding.", "The following offices are involved in addressing misconduct at VA.", "Office of Human Resource Management (OHRM): OHRM develops  policies with regard to performance management and assesses the  effectiveness of department-wide human-resource programs and policies.", "Office of Accountability Review (OAR): OAR was established in 2014  within VA\u2019s Office of General Counsel and was intended to ensure  leadership accountability for improprieties related to patient scheduling  and access to care, whistle-blower retaliation, and related disciplinary  matters that affect public trust in VA.", "Office of Inspector General (OIG): The VA OIG provides oversight  through independent audits, inspections, and investigations to prevent  and detect criminal activity, waste, abuse, and mismanagement in VA  programs and operations.", "Office of Accountability and Whistleblower Protection (OAWP): As  required by the Department of Veterans Affairs Accountability and  Whistleblower Protection Act of 2017, OAWP will take on the  responsibility of, among other things, receiving whistle-blower  complaints.", "Corporate Senior Executive Management Office (CSEMO): CSEMO  supports the entire life-cycle management of VA\u2019s senior executives by  developing policy and providing corporate-level personnel services, such  as training and coaching to VA\u2019s senior executive workforce.", "Client Services Response Team (CSRT): CSRT serves to centralize  and streamline internal processes to improve VHA\u2019s overall  responsiveness to concerns of veterans, employees, and other internal  and external stakeholders. This office works closely with VA and VHA  program offices and facilities to review, research, and respond to inquiries  sent to the Office of the Under Secretary for Health, Office of the  Secretary, and other concerns received via program offices within VACO,  which lack a formalized response process.", "National Cemetery Administration (NCA): NCA honors veterans and  their families with final resting places in national shrines that  commemorate their service. NCA\u2019s Office of Management oversees and  administers all human-resource management, including activities  associated with labor and employee relations.", "Office of the Medical Inspector (OMI): OMI is responsible for assessing  the quality of VA health care through investigations of VA facilities  nationwide, which include employee whistle-blower allegations referred to  VA by the OSC; veteran complaints referred by the OIG, Congress, or  other stakeholders; and site-specific internal reviews directed by the  Office of the Under Secretary for Health.", "Office of Research Oversight (ORO): ORO promotes the responsible  conduct of research, serves as the primary VHA office in advising the  Office of the Under Secretary for Health on matters of research  compliance, and is to provide oversight of compliance with VA and other  federal requirements related to research misconduct.", "Office of Resolution Management (ORM): ORM provides Equal  Employment Opportunity (EEO) discrimination complaint processing  services to VA employees, applicants for employment, and former  employees, which include counseling, investigation, and final agency  procedural decisions.", "Office of Security and Law Enforcement (OS&LE): OS&LE develops  policies, procedures, and standards that govern VA\u2019s infrastructure law- enforcement program. The Law Enforcement Oversight and Criminal  Investigations Division is responsible for conducting investigations of  serious incidents of misconduct.", "Veterans Benefits Administration (VBA): VBA provides benefits and  services to veterans, their families and survivors. VBA\u2019s Office of  Management directs and oversees nationwide human-resources activities  and supports ORM in processing EEO complaints filed by employees and  applicants who allege employment discrimination.", "The process for addressing employee misconduct involves various  components within VA that are responsible for investigating and  adjudicating allegations, as shown in figure 2.", "Receipt of Allegation: The OIG receives allegations of criminal activity  and employee misconduct from VA employees, the OSC, members of  Congress, the public, or other stakeholders. The allegations received by  the OIG are initially routed to the OIG Hotline Division. The OIG also  receives other types of allegations outside the scope of this review, such  as issues pertaining to VA employee benefits and contracts. In addition to  reporting allegations of employee misconduct to the OIG, VA employees  may also report allegations of misconduct directly to their supervisors.", "Review and Referral of Allegation: Due to the substantial number of  allegations received through the OIG Hotline Division, the OIG exercises  a \u201cright of first refusal\u201d on misconduct cases, which allows it to take no  further action, refer the case to program offices within VA for review and  response, or open an investigation. For example, the OIG can either  decide to (1) take no further action on matters not within the OIG\u2019s  jurisdiction or too vague to warrant further review; (2) refer allegations  that warrant some action to the OMI, OAR, or VA facilities or program  offices within each administration to conduct an independent review of the  allegations; or (3) open cases for further review for serious allegations of  criminal activity, fraud, waste, abuse, and mismanagement. Cases  opened by the OIG typically involve misconduct by senior officials, or  matters relating to the quality of care provided by licensed professionals.  In contrast, the OIG typically refers allegations to VA facility or program  offices for matters where the OIG does not have sufficient resources to  open an internal case. The OIG generally does not review matters that  are addressed in other legal or administrative forums, such as allegations  of discrimination or whistle-blower retaliation.", "Notice to Employee Once Allegations Are Substantiated: The type of  appointment an employee holds determines whether an employee is to  be provided advance notice of planned disciplinary action once  misconduct is substantiated at the conclusion of an investigation.  Employees holding a permanent appointment are entitled to receive a  notice of proposed action that states the specific charges for which the  proposed disciplinary action is based and informs the employee of his or  her right to review the material that is relied upon to support the reasons for the action. Employees in the competitive service serving in a  permanent appointment (who have completed their probationary period)  are treated differently than those who are still in their probationary period  or serving under temporary appointments. An employee serving a  probationary period or under a temporary appointment does not receive a  notice of proposed action and may be immediately terminated because  his or her work performance or conduct fails to demonstrate fitness or  qualifications for continued employment. Temporary employees are  terminated by notifying employees in writing as to why they are being  separated and the effective date of the action.", "Disciplinary Action: VA Handbook 5021, Employee/Management  Relations, governs policy for disciplinary and grievance procedures for all  employees. Supervisory staff or appropriate higher-level officials use the  results from investigations to help determine whether any disciplinary  actions are warranted and, if so, the type and severity of each action.  Other VA staff, such as human-resources and general-counsel staff may  also provide guidance to management in determining appropriate  disciplinary actions. After determining the facts in a case, VA may employ  either disciplinary or adverse action. Adverse action involves a more- severe type of discipline (e.g., removal, suspension more than 14 days, or  reduction in grade) as described in table 1."], "subsections": []}, {"section_title": "Employee Misconduct and Disciplinary- Action Data Are Hampered by Completeness and Data-Reliability Issues VA Collects Misconduct and Disciplinary-Action Data Using Fragmented Systems", "paragraphs": ["As a federal agency, VA is required to report department-wide information  on certain disciplinary personnel actions to the Office of Personnel  Management (OPM). OPM\u2019s Enterprise Human Resources Integration  (EHRI) system currently collects, integrates, and publishes data for  executive-branch employees on a biweekly basis. This system provides  federal workforce data to other government systems and the public. To  adhere to this reporting requirement, VA provides information on certain  disciplinary actions such as terminations and removals to OPM. The  Department of Veterans Affairs Accountability and Whistleblower  Protection Act of 2017 also requires the Secretary to provide a report on  the disciplinary procedures and actions of the department to Congress.", "To understand the depth and breadth of misconduct and related issues in  a large entity, such as VA, comprehensive and reliable information is  needed. Standards for Internal Control in the Federal Government states  that an information system represents the life cycle of information used  for the entity\u2019s operational processes that enables the entity to obtain,  store, and process quality information. Therefore, management should  design the entity\u2019s information system to obtain and process information  to meet each operational process\u2019s information requirements and to  respond to the entity\u2019s objectives and risks, such as the ability to  systematically analyze misconduct department-wide to identify trends and  make management decisions regarding misconduct. A deficiency exists  when (1) a control necessary to meet an objective is missing or (2) an  existing control is not properly designed, so that even if the control  operates as designed, the objective would not be met.", "We identified 12 fragmented information systems that VA has used, or  continues to use, to collect employee misconduct and disciplinary  actions. Although VA has made efforts to develop repositories to collect  information pertaining to misconduct and disciplinary action, none of the  12 information systems contain complete information. Six of these  systems collect partial misconduct and disciplinary action information and  contain fields that could potentially be shared with other systems to obtain  additional information, while the other six systems are intended for  internal office use only, each containing their own unique fields and  values tailored to the needs of that particular office, which are not shared.  Therefore, the number of eligible fields for each information system was  also limited to those not specifically designated for internal use. On the  basis of our review, the 12 information systems are not currently able to  communicate, or interoperate, with one another to provide a complete  picture of misconduct and disciplinary actions across VA.", "Table 2 provides an overview of VA\u2019s six information systems and  associated data files that collect partial misconduct and disciplinary-action  data that could potentially be shared with other systems.", "According to OHRM officials, VA\u2019s information system for recording  adverse disciplinary actions\u2014the Personnel and Accounting Integrated  Data (PAID) system\u2014was not designed to track all misconduct cases. In  addition, OHRM stated that the 53-year-old PAID system was developed  primarily to track payroll actions for all employees and is the system of  record that holds department-wide personnel information that is reported  to OPM\u2019s EHRI system. It contains information about adverse disciplinary  actions that affect employee leave or salary, or result in a Notification of  Personnel Action Form (Standard Form 50). However, PAID does not  track comprehensive information on instances of misconduct such as the  offense, or the date of occurrence, and it does not include instances of  other types of disciplinary actions, such as admonishments or reprimands  that would not affect leave or salary, or result in a Standard Form 50.", "OHRM officials stated VA implemented a system called HR Smart in June  2016 that is intended to replace PAID, but the agency does not plan to  upgrade the functionality of the new system to enable reliable collection of  misconduct information. According to OHRM, HR Smart includes the  same personnel-processing functions as PAID but will allow for tracking  data changes and transaction history over time. However, as with the  PAID system, adverse disciplinary actions involving leave and salary will  be tracked, but other actions, such as reprimands and admonishments,  will not. It also will not track information related to the offense that  prompted the disciplinary action.", "While the HR Smart system has the capability to include modules to  enhance performance features, such as the ability to track misconduct,  according to OHRM officials VA does not currently have plans to  implement these modules. As a result, the HR Smart system will not have  the capability to track all employee misconduct department-wide and will  not improve VA management\u2019s visibility over the depth and breadth of  misconduct so that it can systematically understand misconduct  department-wide.", "VA has five additional information systems for tracking complaints or  allegations of misconduct and disciplinary actions, but, similar to the  agency\u2019s PAID information system, each of these information systems  contains a subset of the information that would be needed to understand  all misconduct department-wide."], "subsections": [{"section_title": "Data-Reliability Issues Impair VA\u2019s Ability to Systematically Analyze Data to Evaluate Department-Wide Employee Misconduct", "paragraphs": ["According to Standards for Internal Control in the Federal Government,  systems should include relevant data from reliable internal sources that  are reasonably free from error and faithfully represent what they purport  to represent. Additionally, management is advised to process data into  quality information that is appropriate, current, complete, accurate,  accessible, and provided on a timely basis. Management should also  evaluate processed information, make revisions when necessary so that  the information is quality information, and use the information to make  informed decisions.", "Additionally, according to Standards for Internal Control in the Federal  Government, management should design the entity\u2019s information system  and related control activities to achieve objectives and respond to risks.  The standards add that the information system design should consider  defined information requirements for each of the entity\u2019s operational  processes. Defined information requirements allow management to obtain  relevant data from reliable internal and external sources. In order to  achieve complete and accurate data, internal controls are needed, among  other things, to ensure that fields are not left blank, data elements are  clearly defined and standardized, and common data elements are  included across data systems to allow for interoperability and  aggregation.", "Our analysis of VA\u2019s 14 data files identified the following three categories  that reduced the reliability of the data:  lack of data standardization, and  lack of identifiers."], "subsections": [{"section_title": "Missing Data", "paragraphs": ["We found that 7 data files we reviewed contained a majority of data within  fields, but 5 data files were missing a significant amount of data within  certain fields. We were unable to analyze the remaining two files due to a  number of data-quality issues. Among the fields that were missing data  were several that would be useful for analyzing misconduct, including  complainant name, proposed action, and person of interest, as shown in  table 4. For example, we found that in the OAR Legacy Referral Tracking  List, 97 percent of the entries for the Proposed Action field (1,210 of  1,245) and 96 percent for the Disciplinary Action field (1,190 of 1,245)  were blank. If available, comparison of the proposed and disciplinary  action-taken fields would allow VA to assess whether actions are  consistently implemented department-wide. However, the high  percentages of blank values in multiple fields impair VA\u2019s ability to  conduct a comprehensive analysis of misconduct to identify and address  trends.", "See appendix II for a further listing of the five data files and the  corresponding fields that were missing data.", "In addition, we found that several data files had options such as \u201cnot  applicable\u201d or \u201cno\u201d for certain fields so that the field would not be left  blank, but these options were not consistently used. For example, the  Complainant Name field within the Legacy Referral Tracking List was  blank for some entries and not applicable (N/A) for others. Accordingly,  we did not know whether data were intentionally omitted or not entered by  mistake. In addition, the Offense Sustained field found within the VA-Wide  Adverse Employment Action and Performance Improvement Plan  Database was blank for some entries and either a yes or no for others."], "subsections": []}, {"section_title": "Lack of Data Definition Standardization", "paragraphs": ["Eight of the 14 data files we reviewed did not have key data elements that  were defined within and across information systems. In other words, the  data files contained entries that described similar information in different  ways. For example:", "The Complaints Automated Tracking System (CATS) Employment  data were not mutually exclusive, or independent of one another. For  example, this field includes two distinct categories of information:  employment status, such as full time or part time; or hiring authority,  such as Title 5 or Title 38. This method of storing information resulted  in undercounting each of the separate values due to the system\u2019s  inability to account for expected overlap. For instance, an employee  could be both a full-time and Title 5 employee and the field only tracks  one or the other. ORM officials stated that this field has since been  modified to capture more options to account for the overlap.", "The NCA data file\u2019s Action Proposed/Decided/Taken data were  tracked in a single field and updated with the most-recent action,  rather than capturing proposed actions, decided actions, and actions  taken in separate fields.", "We also identified standardization issues with the newly updated VA- Wide Adverse Employment Action and Performance Improvement Plan  Database. For example, we found 15 different variations of Registered  Nurse, such as \u201cRegistered Nurse,\u201d \u201cStaff RN,\u201d and \u201cRN\u201d position names.  In addition, we found 28 alternate values that identified Diagnostic  Radiologic Technologists (e.g., Diagnostic Radiologic Technologist,  Diagnostic Radiological Technologist, and Radiologic Technologist).", "See appendix III for a description of the fields that did not have  standardization within the eight data files."], "subsections": []}, {"section_title": "Lack of Identifiers", "paragraphs": ["We determined that 5 out of the 14 data files did not have identifiers that  would allow comparisons of information across systems. Identifiers are  important because they reference one unique individual or case, which  makes it possible to analyze historical data pertaining to all records with  the same identifier and analyze trends in employee misconduct over time.  For example:", "The OAR VA-Wide Adverse Employment Action Database and the  VBA data files had a combined total of 4,487 closed cases of  misconduct that received adverse corrective action during the  combined period of November 2013 through December 2016. We  found that these two data files did not contain unique identifiers for  complainants or accused individuals for a given case. OAR officials  stated that this system does not contain Personal Identifying  Information since its purpose is to track proposed and taken adverse  actions. If more-specific information is needed, OAR staff coordinate  with the human-resource point of contact. Although OAR may obtain  additional information, this information is not entered into the OAR  VA-Wide Adverse Employment Action Database, which would assist  with conducting analysis.", "VAPS tracks misconduct in two separate subsystems, one of which  tracks traffic violations and other administrative offenses, and one of  which also tracks more-egregious offenses such as criminal  violations. These subsystems also do not have unique identifiers  that would allow data matching between the two subsystems, which  could impede the analysis of this information. Even with both files,  there is no ready way to capture the complete number of individuals  with misconduct in both files due to the lack of a shared identifier.", "The newly updated VA-Wide Adverse Employment Action and  Performance Improvement Plan Database does not contain unique  identifiers, such as employee identification number, name of the  complainant or accused, or other linking variables, to allow for the  analysis of historical trends or comparison of information among other  information systems.", "The data-quality issues described above are due in part to most of VA  information systems not having data dictionaries, field definitions, or other  documented guidance and procedures on data entry and automated edit  checks to control for erroneous entries and blank fields. Absent guidance  and procedures, VA lacks assurance that employees will enter complete  and accurate information in the various data systems. Further, the lack of  unique identifiers such as employee identification number, case number,  or other linking variables for each of the records does not allow for  analysis of historical trends or comparison of information among different  information systems. Consequently, this precludes VA from determining  the frequency and nature of allegations by specified category, or  identifying trends, thus impeding senior officials\u2019 ability to analyze  misconduct department-wide and develop corrective actions."], "subsections": []}]}]}, {"section_title": "VA Does Not Consistently Adhere to Policies for File Retention and Adjudication Documentation Pertaining to Employee Misconduct Allegations", "paragraphs": ["VA Directive 5021, Employee/Management Relations, governs policy for  disciplinary procedures for all employees and outlines the provisions for  the adjudication of each disciplinary action and associated file  documentation requirements. Specifically, files must be established  before a notice of proposed adverse action is issued to the employee to  document that the adjudication procedures were followed. The file must  contain all available evidence upon which the notice of proposed action is  based and that supports the reasons in that notice. In addition, each file  should contain specific documentation related to the adjudication of  employee misconduct.", "VA Handbook 5021 states that disciplinary actions and associated  adjudication procedures for all VA employees appointed under Title 5 are  governed by three basic principles: (1) an employee shall be informed in  writing honestly and specifically why the action is being brought against  him or her; (2) an employee shall be given a reasonable opportunity to  present his or her side of the case; and (3) the employee and  representative shall have assurance of freedom from restraint,  interference, coercion, discrimination, or reprisal in discussing, preparing,  and presenting a defense.", "Our review of a generalizable sample of 544 misconduct case files (from  a universe of 23,622 files) associated with disciplinary actions that affect  pay from October 2009 through May 2015 revealed that VA officials did  not consistently adhere to VA\u2019s policy for retaining files containing  evidence of misconduct. Specifically, VA was unable to provide the files  for 10 percent (55 of 544) of the files we requested. We determined that  administrations and program offices within VA have various record- retention schedules. Offices that have not established a record-retention  schedule refer to the general records schedule developed by the National  Archives and Records Administration (NARA). However, we found that  some offices are misinterpreting OPM and NARA guidance and specify  the record retention period for adverse action files as a range between 4  to 7 years rather than selecting a specific number of years in their record- retention schedules. All of the files were within VA\u2019s record-retention  range specified during the time of our review. The files that were  unaccounted for were dispersed throughout most of the VISNs, but one  VISN was not able to account for 19 of the missing files in our sample.", "On the basis of our weighted analysis of the generalizable sample, we  estimate that VA would not be able to account for approximately 1,800  files in the full population that were within the record-retention period  specified.", "In addition, VA officials did not consistently adhere to VA\u2019s policy for  documenting that procedures were followed in the adjudication of  misconduct cases. We identified 22 out of 36 file requirements where VA  was not able to consistently demonstrate compliance with VA policy due  to the lack of documentation contained in files, based on our  generalizable sample. Specific to both Title 5 and Title 38 permanent- employee misconduct case files, table 5 shows the estimated number and  percentage that deviated from file documentation requirements. A list of  the 22 identified requirements and the percentage of files not in  compliance can be found in appendix IV.", "As table 5 indicates, Title 5 and Title 38 permanent employee files did not  always contain documentation that employees were informed of the  reason the action was brought against them. For example, on the basis of  our generalizable sample, we estimate that the advance notice of  proposed action, which includes a statement of the specific alleged  misconduct upon which the proposed action is based, was not included in  16 percent of the files department-wide. A final decision letter, which  contains a statement of the decision official\u2019s determination regarding  which charges, if any, in the advance notice were sustained, was not  included for an estimated 15 percent of all files. Further, an estimated 35  percent of all files did not include a written acknowledgement from the  employees that they received the final decision letter in person, and an  estimated 23 percent of all files did not include the required return receipt  for certified mail indicating that the decision letter was mailed to the  employee.", "In addition, Title 5 and Title 38 permanent employee files did not always  contain documentation that employees were provided a reasonable  opportunity to present their side of the case. Our review found that  permanent-employee disciplinary files did not adhere to basic principles  outlined in VA Handbook 5021 and lacked evidence to demonstrate that  employees were adequately informed regarding their rights during the  adjudication procedure. Specifically, our generalizable sample found that  an estimated 21 percent of all files did not include statements regarding  the employee\u2019s rights to due process, such as his or her entitlement to be  represented by an attorney or other representative. In addition, an  estimated 8 percent of all files did not mention that more information  regarding appeal rights could be obtained by consulting Human  Resources Management offices. For files where the employee provided  an oral reply in response to proposed disciplinary action, an estimated 29  percent of files did not include the required written summary, which is to  be signed by the official hearing the oral reply. Where a written reply  was submitted, an estimated 11 percent of files did not include a copy of  the employee\u2019s written reply.", "Further, VA officials did not consistently adhere to VA\u2019s best practices  specific to Title 5 permanent employees only. We found that in a majority  of these files (an estimated 72 percent) the proposal letters did not  include a statement that assured the employee he or she had freedom  from restraint, discrimination, or reprisal in discussing, preparing, and  presenting a defense. VA Handbook 5021, Employee/Management  Relations, also states that Title 5 employees should provide their written  responses through supervisory channels to the decision official. We  estimate that a total of 6,819 files (47 percent) of Title 5 permanent  employee files did not provide their written reply through supervisory  channels to the decision official.", "Although OHRM is responsible for assessing the effectiveness of  department-wide human resource programs and policies of VA Handbook  5021, according to OHRM officials, each facility is responsible for  oversight of implementing policies and guidelines pertaining to how  disciplinary actions are processed. We found no evidence that OHRM has  assessed whether documentation exists that demonstrates adherence to  policy governing cases involving disciplinary actions or provided oversight  of VA\u2019s implementation of record-retention requirements, or that human- resource personnel adhere to basic principles outlined in policy to ensure  employees are informed of their rights during the adjudication process.", "The resulting lack of oversight to HR policies increases the risk that  employees will not be adequately informed of their rights during the  adjudication process. Accordingly, employees may not (1) be provided  with information on why an action is being brought against them, (2) be  provided with a reasonable opportunity to present their case, and (3) be  adequately protected from potential reprisal in preparing their defense.", "Regarding retention of records, according to NARA, disciplinary and  adverse action case files should be destroyed no sooner than 4 years but  no later than 7 years after the case is closed. According to OPM, to  implement this authority, each agency must select one fixed retention  period between 4 and 7 years and publish the retention in the agency\u2019s  records disposition manual.", "We determined that some offices are misinterpreting OPM and NARA  guidance by not selecting a specific number of years in their record- retention schedules. For example, three of the six policy record-retention  schedules we reviewed did not establish a specific number of years for  record retention. Specifically, record-retention policies for the Office of  Information and Technology, VACO staff offices, and VBA specified the  record-retention period for adverse action files as a range between 4 to 7  years rather than selecting a fixed retention period. For example, we  found that the Records Control Schedule pertinent to VACO was dated  June 30, 1967, without references to new or revised items since 1969.", "Our results are consistent with an October 2016 inspection conducted by  NARA. The inspection report contained 16 findings and 19  recommendations for improvement of the records-management program  at VA. Among the findings and recommendations were the following.", "Finding: The VA records management program has not ensured  that the VACO maintains a current Records Management  Handbook and a current Records Control Schedule, which  together establish program objectives, responsibilities, and  authorities for the creation, maintenance, and disposition of  agency records.", "Recommendation: The Department Records Office must update  and maintain the VACO handbook and the Records Control  Schedule for Central Office Staff Offices and the Offices of the  Assistant Secretaries to include specific Records Management  roles and responsibilities for all VACO staff and to include  mandates for implementation of records management policies and  procedures in accordance with Federal statutes and regulations.", "Finding: The VA Departmental Records Management program  does not conduct regular records management evaluations within  VACO and the Offices of the Secretary and Assistant Secretaries  or monitor the oversight activities of the Administrations.", "Recommendation: The VA Departmental Records Management  program, working with the Administrations, VACO, and Enterprise  Risk Management, must establish effective Records Management  evaluation programs to monitor VA compliance with Federal  regulations.", "Recommendation: The VA Departmental Records Management  program, working with the Senior Agency Official for Records  Management, must establish effective Records Management  evaluation programs to monitor the records management  practices within the Office of the Secretary and Assistant  Secretaries to ensure compliance with Federal regulations.", "Finding: VACO Staff Offices and the Offices of the Assistant  Secretaries are not routinely conducting records inventories.", "Recommendation: VACO Staff Offices and the Offices of the  Assistant Secretaries, with support from the Department Records  Management program, must conduct inventories of existing  electronic and non-electronic records to identify scheduled,  unscheduled, and vital records.", "In response to NARA findings, VA is to submit a plan of corrective action  that specifies how the agency will address each inspection report  recommendation, including a timeline for completion and proposed  progress reporting dates.", "VA does not have a method in place to evaluate the implementation of  records-management practices outside of those being conducted by VHA  and VBA. Accordingly, VA has not been conducting records-management  oversight with any uniformity department-wide. Further, VA\u2019s use of  multiple retention periods for adverse action files, and in some cases the  lack of adherence to OPM and NARA guidance in defining a specific  retention period for these files, results in inconsistent retention of these  files across VA."], "subsections": []}, {"section_title": "Investigative Standards Were Not Consistently Followed to Ensure That Senior Officials Were Held Accountable VA Facility and Program- Office Responses to Allegations of Misconduct Did Not Consistently Follow OIG Policy", "paragraphs": ["The OIG receives allegations of employee misconduct from VA  employees, the OSC, members of Congress, the public, and other  stakeholders. When the OIG receives allegations it can either take no  further action, open an investigation, or refer the case to facility or  program offices within VA for review and response. For cases referred to  facility or program offices, the OIG has developed a policy for VA facilities  and program offices to use when investigating allegations of  misconduct. This policy includes six elements that VA facility and  program officials are to incorporate in their investigations, as shown in  table 6. According to OIG officials, if the reviewing employees have  concerns about the adequacy of the response provided, the OIG can  either ask for additional information to supplement the response or open  an internal case. Departmental heads (Under Secretaries for Health,  Benefits, and Memorial Affairs, Assistant Secretaries, and other key  officials) are responsible for ensuring that referrals are properly reviewed,  documented, and answered within specified time frames.", "Our review of the 23 OIG cases of alleged misconduct between calendar  years 2011 and 2014 involving senior officials found that VA facility and  program offices did not consistently follow policies and procedures  established by the OIG for investigating such allegations. In several  instances, VA facility and program offices did not include one or more of  the six elements required in their investigative response to allegations of  misconduct. In addition, our review of the 23 cases found instances in  which VA facility and program offices did not include sufficient  documentation for their findings, or provide a timely response to the OIG.  The OIG was not able to produce the documentation provided by the  facility or program office that was used to close 2 of the 23 cases in our  review. All of the requested files were within the OIG\u2019s 7-year record- retention period during the time of our review.", "As shown in table 7, we identified four cases that did not contain evidence  of an independent review by an official separate from and at a higher pay  grade than the accused.", "In three of the four cases that were not reviewed by an independent  official at a higher grade, the review was performed by the medical center  director, who was one of the accused named in the allegation. For  example, in one case involving alleged time-and-attendance abuse by a  physician, the medical center director, who was also named in the  allegation as having received a similar complaint against the physician 2  years earlier, reviewed the allegations made against the physician and  himself. The documentation provided showed that the medical center  director conducted the investigation of allegations and found the  allegations were not substantiated and no corrective actions were  implemented. In all four cases, both the independence and higher-grade  criteria were not followed when the accused senior officials investigated  allegations against themselves.", "As shown in table 8, we generally found that VA facility and program  offices reviewed each allegation contained in the original referrals,  although in one case the reviewer did not respond directly to all  allegations.", "As shown in table 9, VA facility and program offices clearly indicated their  findings for each allegation in 14 of the 21 cases of misconduct involving  senior officials for which files could be located, as well as their  assessment of whether the allegations were substantiated or  unsubstantiated. However, we identified seven cases in which VA  discussed its findings but did not provide a clear indication of whether all  allegations were substantiated or unsubstantiated.", "Responses lacking a clear statement of substantiation may be more  difficult for subsequent reviewers, including OIG and OAR investigators,  to track and perform follow-up where necessary. For example, in one  case involving 11 allegations, no statement of substantiation was  provided, but VA\u2019s response included seven recommendations, three of  which involved disciplinary action. We did not find evidence in the case  file that follow-up was performed by the OIG personnel to clarify this  discrepancy, and the case was closed.", "As shown in table 10, most allegations involving senior officials (16 of 21  cases for which files could be found) were not formally substantiated and  did not require a recommendation for corrective action based on OIG  case-referral criteria. Specifically, the criteria require a description of  corrective actions taken or proposed as a result of substantiated  allegations, but make no mention of allegations that were not  substantiated as part of VA\u2019s response. For one substantiated allegation,  however, we found no evidence of a recommendation for corrective  action.", "Table 11 shows that 17 cases from VA facility and program offices did not  provide the supporting documentation they used to reach their  conclusions about the OIG case referrals.", "In 17 cases, including one case reviewed by an AIB panel, VA referenced  documents reviewed but did not attach any of the supporting evidence.  OIG case-referral criteria state that VA facility or program offices must  provide supporting documentation used in their review, such as copies of  pertinent documents. However, the criteria do not specify whether copies  of all documentation reviewed must be included in the file. Supporting  documentation, which must be provided according to OIG policy, will vary  depending on the circumstances of the case, but those used to support  the findings and recommendations should be included.", "For example, we reviewed one case where pertinent documents were  referenced to support the allegation, but documents supporting the  findings and recommendation were not included. The case contained  allegations involving false patient wait-time documentation and abuse of  authority. Specifically, a medical center director instructed staff to review  patient wait times between follow-up appointments in order to meet VA\u2019s  14-day timeliness metric. The investigation revealed that VA staff had  changed several hundred veteran appointment wait times. The  investigation concluded that the false documentation allegation was  substantiated, but attributed the cause to the staff not understanding how  to enter a follow-up appointment date into the system. However, there  was no documentation in the files to support (1) that the medical center  director had not abused his authority by instructing staff to review wait  times greater than 14 days to determine how they could be reduced, and  (2) findings for the conclusion that the original wait times were entered in  error.", "Absent supporting documentation, it is difficult for the OIG to determine  whether enough evidence was gathered before closing alleged cases of  misconduct that were found to be unsubstantiated or closing  substantiated cases of misconduct that required further action. VA  Directive 0701 states that copies of voluminous transcripts of interviews,  the entire claims folder, and medical charts are not necessary. However,  VA Directive 0701 further states that such materials should be available if  the OIG subsequently requests them within the record-retention period.  Case examples of allegations reviewed, and subsequently closed, by the  VA OIG based on its evaluation of evidence provided by facility and  program offices in response to allegations of misconduct can be found in  appendix V.", "As shown in table 12, VA facilities\u2019 or program offices\u2019 response letters,  which were sent to the OIG, included a point of contact for further  questions in 15 of the 21 OIG case referrals involving senior officials,  including the individual\u2019s name and a means of contact (phone or e-mail).", "In 2 of the 15 cases where a point of contact was provided, the contact  was also one of the accused in the allegation. Although that is not  technically a violation of OIG criteria, it likely presents a conflict of interest  in regard to independent reviewers obtaining objective case information.  In six other cases, no contact was listed, although the letter was signed  by the reviewer. If a specific point of contact is not identified, including  position title, it may be assumed erroneously by employees involved in  the case, or following up on the case, that the default contact is the  reviewer, who may not be the appropriate point of contact, and may or  may not be able to provide objective case information.", "OIG guidelines state that VA facilities and program offices assigned  Hotline case referrals are responsible for reporting written findings to the  Hotline Division within 60 days, unless an extension is requested. Our  review of the 21 cases found instances in which VA facility or program  offices did not always provide a timely response to the OIG. Table 13  shows five instances in which VA facility or program offices submitted a  response after the deadline requested by the OIG. One response was not  reported timely after an extension was provided by the OIG.", "In one of the five cases involving allegations of abuse of authority by a VA  medical center director, the reviewer requested an extension, which is  permitted by OIG policy, but still missed the revised deadline. The five  case files did not contain any information regarding any follow-up actions  taken in response to delays.", "According to OIG officials, when a case has been referred to a program  office for investigation, the OIG reviews the program office\u2019s response for  completeness and sufficiency before closing the case. However, there is  no requirement for the OIG to ensure that the responses contain the six  elements listed in VA Directive 0701 and confirm that case referral  allegations have been addressed. Consequently, the lack of verification  could have contributed to insufficient evidence that does not meet the  requirements outlined by the OIG.", "Additionally, VA facility and program offices have not consistently  adhered to VA Directive 0701 policy and do not always provide  supporting documentation for their findings and recommendations, or  always provide a timely response when reporting findings to the OIG\u2019s  Hotline division. Inconsistent adherence to the reporting standards  provided by the OIG to VA facilities and program offices for investigating  and resolving misconduct case referrals from the OIG Hotline impedes  VA\u2019s ability to ensure that misconduct cases are being handled  appropriately.", "According to OIG officials, the OIG has taken steps to enhance the review  of case responses. Specifically, OIG officials stated that in April 2018 the  OIG implemented a new Enterprise Management System to reduce  reliance on certain manual processes. According to OIG officials, Hotline  analysts will now have more time to review their work and perform other  quality-assurance activities. In implementing this new system, it will be  important for the OIG to consider how the system can assist in ensuring  requirements are met and responses are received timely."], "subsections": [{"section_title": "OAR Data Indicate That Senior Officials Involved in Substantiated Cases of Misconduct May Not Always Be Held Accountable", "paragraphs": ["Our review of VA\u2019s information systems that track misconduct involving  senior officials department-wide indicates that they may not always be  held accountable for misconduct. Specifically, (1) misconduct was  sometimes substantiated, but the proposed disciplinary action was not  taken; (2) misconduct was sometimes substantiated, but no disciplinary  action was recommended; (3) previous penalties did not have the  corrective effect for officials found to have engaged in repeated acts of  misconduct and who have remained in VA management positions; and  (4) senior officials violated separation-of-duty policy when taking  disciplinary action.", "VA Handbook 5021 allows the deciding official to determine the  appropriate disciplinary action if one or more allegations are  substantiated. However, the disciplinary action may not be more severe  than what had been proposed."], "subsections": [{"section_title": "Misconduct Substantiated, but Proposed Action Not Always Taken", "paragraphs": ["In several cases, misconduct was substantiated, but the proposed action  was not always taken. Our review of the OAR Legacy Referral Tracking  List identified 17 officials between calendar year 2011 through May 2015  with substantiated misconduct where action was proposed. However, in  some of these cases, the officials were given a lesser penalty than the  one proposed, while in other cases there is no evidence that action was  taken. As shown in figure 3, we found that for 12 of the 17 officials with  substantiated misconduct, an adverse disciplinary action (removal) was  proposed. Of those 12 officials, 3 were removed, 2 received a  suspension, 4 received a reprimand or admonishment, 2 were allowed to  resign or retire before receiving disciplinary action, and we found no  evidence of disciplinary action for the remaining individual. For the other 5  officials, actions such as counseling, admonishment, suspension, or  reprimand were proposed. Of the 5 officials, 2 received the actions that were proposed, 1 received a lesser penalty than what had been  proposed, 1 was allowed to retire before receiving action, and we found  no evidence of the proposed action for the remaining individual.", "For the two officials for whom there was no evidence that disciplinary  action was taken, we found no evidence within the PAID information  system or personnel files that these officials received the action proposed  in the OAR Legacy Referral Tracking List. Counseling was proposed for  one official, and removal from the position for the other official. OAR did  not provide us with evidence that the officials had received the action  proposed.", "We also reviewed an additional 15 cases that involved a fact-finding or an  AIB. Our review of these cases found that 11 out of 23 officials were  associated with instances of substantiated misconduct and proposed  action was recommended. For 4 of the 23 officials where the proposed  action field was populated, the information within the OAR Legacy  Referral Tracking List reflected the action recommended. The applicable  data fields for the remaining 19 officials within the OAR Legacy Referral  Tracking List were not in agreement with the action recommended, or  blank. This review also identified two officials with substantiated  misconduct where OAR did not provide evidence that the disciplinary  action proposed was taken:", "Two officials were involved in a case concerning alleged whistle- blower retaliation at the Phoenix VA Health Care System. The  investigative report documented that allegations were sustained. The  retaliation included allegations of involuntary reassigning the whistle- blower to another position, placement of the whistle-blower on  administrative leave, and lowered performance pay ratings following  disclosures regarding poor patient care and nursing triage errors.  Appropriate administrative action for persons identified as having  engaged in retaliation was recommended. We did not find any  evidence in the PAID system that these two officials involved in  retaliation received disciplinary action. OAR provided documentation  to show that no action was taken against one official, and was unable  to provide documentation to show that the disciplinary action had  been taken for the other. The official who received no action received  approximately $11,500 in performance pay during a 2-year period  following the allegations."], "subsections": []}, {"section_title": "Misconduct Substantiated, but No Action Recommended", "paragraphs": ["OAR\u2019s quality-review process for investigative reports does not ensure  that reports with findings of substantiated misconduct include  recommendations for action. Our review of OAR\u2019s Legacy Referral  Tracking List identified 70 out of 1,245 closed cases involving officials  where misconduct was either substantiated, or partially substantiated, but  no disciplinary action was recommended. One case involved three  allegations of poor dental care provided to patients by three different  senior officials. One physician cut underneath a patient\u2019s tongue with the  bur of a hand-piece drill (substantiated), another administered medication  the patient was allergic to (partially substantiated), and the final senior  official extracted the wrong tooth (substantiated). We did not find any  evidence in the PAID system that these senior officials received  disciplinary action. Further, OAR did not provide documentation to show  that any disciplinary action had been proposed or taken. The physician  that cut underneath a patient\u2019s tongue received performance pay totaling  $15,000 approximately 6 days after the investigation had concluded that  misconduct was substantiated. As of March 2018, two of these senior  officials received performance pay, and appear to still be employed at VA.", "While an investigation was conducted that substantiated (or partially  substantiated) the allegations, there is an increased risk that some  substantiated misconduct will go unaddressed if there is no  recommendation for corrective action."], "subsections": []}, {"section_title": "Senior Officials with Misconduct Remain in Management Positions", "paragraphs": ["Our review of OAR\u2019s Legacy Referral Tracking List indicated that some  officials who had been disciplined for misconduct remained in positions  where they were responsible for proposing or deciding disciplinary action  for other employees. We identified 15 officials in the OAR VA-Wide  Adverse Employment Action Database who received disciplinary action  between 14 days to 1 year prior to proposing disciplinary action for  another employee. Most of the 15 officials (12 officials) had received a  suspension.", "We also found that five officials in the OAR Legacy Referral Tracking List  had received prior disciplinary actions for offenses unrelated to the new  OAR allegations. A prior history of disciplinary actions indicates that some  officials may be repeat offenders for whom the previous penalties did not  have the desired corrective effect. For example, 4 out of 5 officials were suspended for a different offense prior to being the subject of a new  allegation. One of the four officials was suspended less than 2 months  prior to being the subject of a new allegation, while another received a  suspension before, and again approximately 7 months following, the OAR  allegation. According to VA Handbook 5021, the deciding official must  use the \u201cDouglas\u201d factors, which include the employee\u2019s past disciplinary  record, to determine a reasonable penalty. One of the five VA officials  was eventually removed approximately 6 months after the new OAR  allegation.", "In analyzing cases involving senior management, we noted that the OAR  Legacy Referral Tracking List often did not accurately reflect the  disciplinary action that was decided based on the results of the  investigation. In numerous instances for the OAR Legacy Referral  Tracking List, the applicable data fields indicating the proposed and final  disciplinary action were blank. In these cases where the disciplinary fields  were populated, the data usually did not agree. Specifically, for 32 out of  the 40 records we reviewed where misconduct was substantiated, the  final disciplinary action taken did not reflect the information within the  OAR Legacy Referral Tracking List. When disciplinary actions are taken  in response to findings of misconduct but are not entered within an  appropriate information system, or are inaccurately recorded, it is more  difficult to (1) monitor whether disciplinary actions have been  implemented, and (2) ensure information relevant to management for  making decisions is available. Further, without a prior record of  misconduct or disciplinary action, senior officials who are repeat offenders  may not receive the appropriate penalty required.", "Pursuant to the Department of Veterans Affairs Accountability and  Whistleblower Protection Act of 2017, OAWP will now be responsible for  receiving, reviewing, and investigating allegations of misconduct,  retaliation, or poor performance involving senior officials. According to  OAWP officials, their office investigates allegations of misconduct at the  senior level only. OAWP officials also stated that misconduct issues that  occur below the senior level will be referred to each of the three major VA  administrations for investigation and resolution. In addition to the VA- Wide Adverse Employment Action and Performance Improvement Plan  Database, OAWP officials stated that it has implemented two additional  information systems that are used concurrently to capture case  information. OAWP officials stated that they are currently working with VA  Information Technology to assess options for other case-management  systems that could consolidate these three information systems into one  comprehensive system."], "subsections": []}, {"section_title": "VA Officials Violated Separation-of-Duty Policy When Taking Disciplinary Action against VA Employees", "paragraphs": ["VA Handbook 5021, Employee/Management Relations, states that the  decision on a proposed major adverse action will be made by an official  who is in a higher position than the official who proposed the action,  unless the action is proposed by the Secretary. Standards for Internal  Control in the Federal Government states that management should divide  or segregate duties among different people.", "Our review of the OAR VA-Wide Adverse Employment Action Database,  OAWP VA-Wide Adverse Employment Action and Performance  Improvement Plan Database, and VBA data file identified examples  where VA officials did not follow separation-of-duty requirements. As  shown in table 14, 73 (out of an estimated 7,886) VA officials acted as  both the proposing and deciding official in cases involving removals for  employees found to have engaged in misconduct.", "Fourteen VA officials acted as both the proposing and deciding official in  two or more cases. One of these 14 officials acted as both the proposing  and deciding official for seven different removal cases. Further, our  review of 29 VA officials found that none received disciplinary action for  violating separation-of-duty policy.", "The systemic lack of adherence to VA\u2019s separation-of-duty policy is  reflective of a lack of controls that would allow such activity to occur.  Focusing on ensuring such controls are implemented would help ensure  that VA decreases the risk of abuse when officials act as both proposing  and deciding officials."], "subsections": []}]}]}, {"section_title": "VA Has Procedures for Investigating Whistle-Blower Allegations of Misconduct, but Investigations Can Lead to Potential Conflicts of Interest", "paragraphs": ["VA has procedures in place to ensure that allegations of misconduct are  investigated, but these procedures allow VA program offices or facilities  where a whistle-blower has reported misconduct to conduct the  investigation. According to VA officials, investigations that are deemed  necessary are occasionally ordered directly from the head of the facility or  VA leadership, which takes the lead on an investigation into the  allegation. Alternatively, an OIG official stated if allegations of misconduct  are received by the OIG, the OIG has the option of investigating the  allegation or exercising a \u201cright of first refusal\u201d whereby it refers  allegations of misconduct to VA facilities or program offices where the  allegation originated to complete an independent review and provide a  response to the OIG.", "As shown in figure 4, the majority of contacts the OIG received (127,265  out of 133,435) from calendar years 2010 through 2014 were not  investigated due to several reasons, such as insufficient evidence or lack  of jurisdiction. Of those contacts that were investigated, the majority  (4,208 of 6,170 investigated contacts) were not investigated by the OIG  but rather were referred to facility or program offices for investigation.", "Whistle-blowers also have the option of reporting alleged misconduct  outside VA by filing a disclosure with the OSC, and may do so if they  believe there has not been a resolution to their complaint internally. If the  OSC determines that there is substantial likelihood of wrongdoing, it may  refer the disclosure back to the Secretary of Veterans Affairs for further  investigation. According to OSC officials, as a general policy, the OSC  will not refer a disclosure to the Secretary if the OIG is already conducting  an investigation of that particular complaint and defers to the OIG to  finalize the investigation. According to OIG officials, the OIG may, in turn,  exercise its \u201cright of first refusal\u201d when cases are referred from the OSC.  Consequently, this process can result in a disclosure that was originally  made to the OSC being referred back to the facility or program office  where the allegation originated.", "As shown in figure 4, the OSC referred 172 of 942 disclosures (18  percent) filed by VA employees back to the Secretary of Veterans Affairs  for further investigation from calendar years 2010 through 2014. Of the  172 disclosures referred, VA referred 53 back to the facility or program  offices where the complaint originated and 119 to the OIG.", "The independence of officials conducting or reviewing the results is  paramount to the integrity of the process both in deed and appearance.  According to VA Directive 0700, the decision whether to conduct an  investigation should not be made by an official who may be a subject of  the investigation, or who appears to have a personal stake or bias in the  matter to be investigated. Moreover, according to OIG policy,  investigations referred to VA offices must be reviewed by an official  independent of and at least one level above the individual involved in the  allegation.", "VA does not have oversight measures to ensure that all referred  allegations of misconduct are investigated by an entity outside the control  of the facility or program office involved in the misconduct, to ensure  independence. VA OIG officials acknowledged that there have been  concerns about referring cases back to the chain of command because  the OIG is unsure where cases go once they are referred. The  investigation of allegations of misconduct by the program office or facility  where the complaint originated may present the appearance of a conflict  of interest in which managers and staff at facilities may investigate  themselves or other allegations where they may have a personal stake or  bias in the matter to be investigated. Consequently, there may be an  increased risk that the results of the investigation are minimized, not  handled adequately, or questioned by the OSC or the individual who  made the original allegation."], "subsections": [{"section_title": "Disclosures Investigated by VA Facility and Program Offices", "paragraphs": ["According to VA Directive 0700, significant incidents occurring, and  issues arising, within VA facilities or offices shall be reported and  investigated as necessary to meet the informational and decision-making  needs of VA. Primary responsibility in this regard rests with the chief  executives of the facility or staff office involved, and with their supervisors  in VA and its administrations. According to an OIG official, VA (the  Secretary or a delegate) sends disclosures received from the OSC to the  OIG, which may then refer to VA facility or program offices for further  review and investigation. According to OSC officials, for cases that are  referred to a program office, the OSC requires that the Secretary or  delegate provide a report that outlines its conclusions and findings. This  reporting is not required for disclosures where an ongoing OIG  investigation is already under way.", "According to OSC officials, for each disclosure, the OSC is to review the  report for statutory sufficiency and determine whether the findings of the  agency head appear reasonable. The OSC is to send its final  determination, report, and any comments made by the whistle-blower to  the President and responsible congressional oversight committees.", "The OSC has raised concerns in its reports to the President about  investigations conducted by VA program offices and facilities. Of the 172  whistle-blower disclosures referred by the OSC between calendar years  2010 through 2014, the Secretary of Veterans Affairs referred 53 to  facility and program offices. Our review of these 53 OSC reports found  that the OSC had concerns about the conclusions VA reached in 21 (40  percent) of the 53 disclosure cases. For example, the OSC found that the  conclusions in some VA reports were unreasonable because VA  reached its conclusion without interviewing the witness, provided shifting explanations that strained credibility and did not  provide evidence of an unbiased investigation,  ignored whistle-blower concerns by refusing to investigate allegations,  and  refused to acknowledge the impact on the health and safety of  veterans seeking care after confirming problems in these areas.", "For disclosure cases that were referred from the OIG to facility and  program offices during the 2010\u20132014 time frame of our review, the OIG  acknowledged that these concerns arose because of a lack of  communication between the department and the OIG regarding the scope  of the review. At the time of our review, VA did not have a procedure in  place to ensure the conclusions reached for investigations involving OSC  disclosure cases are reasonable and meet the informational and decision- making needs of VA whereby all allegations are addressed. More  recently, the OIG has started to communicate the scope of its reviews  that involve matters referred by the OSC to the Office of the Secretary. In  implementing this new process, it will be important for the Office of the  Secretary to ensure that any allegations outside the purview of the OIG\u2019s  investigation are fully addressed by a departmental entity in accordance  with OSC requirements."], "subsections": []}, {"section_title": "Disclosures Investigated by the VA OIG", "paragraphs": ["As shown in figure 4, of the 172 disclosure cases referred to VA by the  OSC, a total of 119 cases were referred to the OIG. The OIG had  conducted, or was already conducting, an investigation of the particular  allegations for all 119 disclosures. Since these 119 disclosure cases were  already under investigation by the OIG, the OSC deferred to the OIG\u2019s  investigation for these cases. A total of 37 of these 119 disclosure cases  that were referred to the VA OIG were submitted to the OSC  anonymously. Therefore, we were unable to conduct a review of these  investigations because there was no information available to identify the  individuals involved.", "According to Standards for Internal Control in the Federal Government,  management\u2019s ability to make informed decisions is affected by the  quality of information. Accordingly, the information should be appropriate,  timely, current, accurate, and accessible. The oversight body oversees  management\u2019s design, implementation, and operation of the entity\u2019s  organizational structure so that the processes necessary to enable the  oversight body to fulfill its responsibilities exist and are operating  effectively.", "Our review of the remaining 82 disclosure cases determined that the OIG  does not have procedures in place to track cases that were referred from  the OSC for further investigation. According to OIG officials, the OIG\u2019s  information system did not have a method in place to ensure that OSC  case numbers are linked to the OIG investigative case number and final  report. Consequently, the OIG was unable to produce the investigative  documentation for these 82 disclosures. According to OIG officials, OSC  case numbers and associated Hotline numbers are currently tracked in a  spreadsheet until the implementation of a new system.", "The inability to locate investigative documentation prevents a third party  from verifying whether the OIG examined the disclosures, whether any  recommendations were addressed, or whether appropriate disciplinary  action was taken for these cases. In addition, because the OSC defers to  the OIG\u2019s investigation for allegations that were already conducted, or  being conducted, the OSC and individuals that made the allegations do  not have documentation to demonstrate that the allegations were  addressed. This information, or lack of it, has direct influence on  management\u2019s ability to make sound decisions relating to investigative  matters.", "Pursuant to the Department of Veterans Affairs Accountability and  Whistleblower Protection Act of 2017, OAWP will be responsible for  recording, tracking, reviewing, and confirming implementation of  recommendations from audits and investigations involving whistle-blower  disclosures, including the imposition of disciplinary actions and other  corrective actions contained in such recommendations. According to  OAWP officials, the whistle-blower disclosure process will be similar to  the current process when cases are referred to facility and program  offices for investigation. OAWP will follow up on any open points with the  level of leadership that is most appropriate in each case, such as the  medical center or VISN director. Case details will be tracked through the  three active databases that are being used concurrently.", "OAWP is currently working to develop an internal process that will bring  the investigative communities together. For instance, OAWP would like to  monitor cases that are referred to VA facility and program offices, but it  does not currently have documented criteria to guide the process.  According to OAWP officials, OAWP is finalizing new policies in the form  of a policy manual and handbook. However, these officials were unable to  provide a time frame for completion of the published guidance."], "subsections": []}]}, {"section_title": "VA Data and Whistle- Blower Testimony Indicate That Retaliation May Be Occurring", "paragraphs": [], "subsections": [{"section_title": "Individuals Who Reported Wrongdoing Are More Likely to Receive Disciplinary Action and Leave the Agency Than Their Peers", "paragraphs": ["Our analysis of VA data shows that individuals who filed a disclosure of  misconduct with the OSC received disciplinary action, and left the  agency, at a higher rate than the peer average for the rest of VA. We  identified 135 disclosure cases that were received by the OSC between  calendar years 2010 and 2014 and were alleging misconduct. Of the 135  disclosures, a total of 129 employees made a total of 130 disclosures  nonanonymously. We compared the 129 employees who made  nonanonymous disclosures to the PAID information system using the  complainants\u2019 information.", "As shown in table 15, on average approximately 1 percent of all  employees in the VA roster received an adverse action in any given fiscal  year. For the 129 nonanonymous whistle-blowers, we found that  approximately 2 percent received an adverse action in the fiscal year prior  to their disclosure, while 10 percent had received an adverse action in the  fiscal year of their disclosure, and 8 percent received an adverse action in  the year subsequent to this disclosure. While the fact that nonanonymous  whistle-blowers faced higher rates of adverse action subsequent to their  disclosure than the VA population as a whole is consistent with a pattern  of retaliation for nonanonymous whistle-blowers, it is only an indication  that retaliation could be occurring.", "Our analysis also showed that among employees who could be matched  to the PAID end-of-year roster, attrition rates were higher for those  individuals who filed a nonanonymous disclosure with the OSC. On  average, approximately 9 percent of all VA employees on the end-of-year  roster in one fiscal year were not on the subsequent year\u2019s roster. In  contrast, 66 percent of the 129 nonanonymous whistle-blowers did not  appear in the subsequent year\u2019s roster. Attrition rates were higher among  employees who had filed a disclosure than among their peers who had  not filed disclosures, for all fiscal years in our review (see table 16).", "Our analysis did not confirm the reasons for disciplinary action or attrition  involving any of the 129 employees who made nonanonymous  disclosures to the OSC. According to VA officials, employees who have a  history of poor performance or conduct may be more likely to file a  disclosure with the OSC or allege misconduct, which could explain some  of the disparities between whistle-blowers and other employees.  However, we also could not rule out instances where retaliation by senior  officials may have occurred after misconduct was disclosed."], "subsections": []}, {"section_title": "Testimony of Whistle- Blowers Describes Retaliation and Lack of Understanding of the Disclosure Process", "paragraphs": ["The Civil Service Reform Act of 1978, as amended, states, among other  things, that federal personnel management should be free from prohibited  personnel practices (PPP). The law also authorizes the OSC to  investigate allegations involving PPP that include reprisals against  employees for the lawful disclosure of certain information pertaining to  individuals who engage in such conduct or other wrongdoing. According  to Standards for Internal Control in the Federal Government, laws and  regulations may require entities to establish separate lines of  communication, such as whistle-blower and ethics hotlines, for  communicating confidential information. Management informs  employees of these separate reporting lines, how they operate, and how  they are used, and how the information will remain confidential. Reporting  lines are defined at all levels of the organization and provide methods of  communication that can flow down, across, up, and around the structure.", "Our interviews with six VA whistle-blowers who claim to have been  retaliated against provided anecdotal evidence that retaliation may be  occurring. Whistle-blowers we spoke to alleged that managers in their  chain of command took a number of actions that were not traceable to  retaliate against the whistle-blowers after they reported misconduct.  These alleged actions included being reassigned to other duty locations  or denied access to computer equipment necessary to complete  assignments, and socially isolating these individuals from their peers,  among other things.", "Whistle-blowers we spoke to also expressed concerns regarding the lack  of guidance available to employees about how to file a disclosure through  VA and the OSC. Whistle-blowers stated that employees are not provided  adequate information on how to document or file a claim of misconduct or  retaliation. Employees can file disclosures regarding misconduct and  complaints of retaliation through multiple reporting lines. As mentioned  previously, however, the OSC will generally not refer to the Secretary  under its statutory process a disclosure if the OIG has conducted or is  already conducting an investigation of that particular complaint. Thus,  whistle-blowers may limit their chance of having an independent, non-VA  entity oversee their complaint if they file a complaint with the OIG first.", "The Department of Veterans Affairs Accountability and Whistleblower  Protection Act of 2017 requires the Secretary, in coordination with the  Whistleblower Protection Ombudsman, to provide training regarding  whistle-blower disclosures to each employee of VA. This information  shall include, among other items, an explanation of each method  established by law in which an employee may file a whistle-blower  disclosure, an explanation that the employee may not be prosecuted or  reprisal taken against him or her for disclosing information, and language  that is required to be included in all nondisclosure policies, forms, and  agreements. The Secretary shall also publish a website and display the  rights of an employee making a whistle-blower disclosure.", "In August 2017, VA began providing additional information on its website  for potential whistle-blowers who wish to report criminal or other activity to  the OIG. The information provided focuses on reporting misconduct to the  OIG and provides other lines of reporting established by law in which an  employee may file a whistle-blower disclosure, such as directly to an  immediate supervisor or the OSC. In addition, the information provided  explains the process after misconduct is reported through the OIG  Hotline, but does not clarify the process for referred disclosure cases  received from the OSC. As mentioned previously, OIG officials stated that  a disclosure made to the OSC or the OIG can be referred back to the  facility or program office where the allegation originated, which may  compromise confidentiality.", "Consequently, employees may not be aware that their information may be  shared among the OSC, the OIG, OAWP, or VA facility and program  offices when a disclosure is made to the OSC. Adequately  communicating the investigative process to employees may alter their  decision to report wrongdoing. Without a clear understanding of the lines  for reporting misconduct and how they operate, whistle-blowers may be  uncertain as to their options for reporting misconduct, which increases the  risk that they may not report workplace misconduct.", "According to OSC, it has learned through its cases that OAWP has a  practice of allowing VA employees, who are the subject of the allegations  brought forward by whistle-blowers to review or participate in  investigations, or both, which could make the whistle-blower feel  uncomfortable or intimidated. This practice has led to confusion regarding  the role and responsibilities of OAWP personnel. OAWP\u2019s use of VA  employees that are employed at the facility under investigation in the  review of allegations creates the possibility of a conflict of interest or an  appearance of a conflict of interest. For example, in a case OSC  described in its comments on a draft of our report, an OAWP  representative who was also associated with the human-resource office  at the VISN that oversees the whistle-blower\u2019s facility, placed the whistle- blower under oath and questioned her about issues unrelated to the  referred allegations. OSC has since sought clarification of OAWP\u2019s role  and the OAWP employee\u2019s possible connection to the VISN."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While VA collects data on some types of disciplinary actions, it is limited  in its ability to use those data because it does not collect all misconduct  and associated disciplinary-action data through a single information  system, or multiple interoperable systems. Absent a process to collect  such data department-wide, VA does not have the ability to analyze and  report data systematically. In addition, the data currently collected are not  always reliable or useful. The inclusion of appropriate documented  guidance and standardized field definitions would help to ensure VA  collects reliable misconduct and associated disciplinary-action data. With  high-quality information that is accurate and comprehensive, VA  management would be better positioned to make knowledgeable  decisions regarding the extent of misconduct occurring and how it was  addressed, department-wide.", "VA has not ensured that program and facility human-resources personnel  adhere to policy governing documentation contained within evidence files  to support conclusions reached. In addition, VA often had no record of the  evidence involved with the adjudication of these actions and could not  verify whether these individuals received reasonable and fair due  process. The absence of documentation in some files also raises the  possibility that VA may not always be in compliance with its procedures  for governing the adjudication of alleged employee misconduct.  Additionally, ensuring that human-resources personnel adequately inform  employees of their rights during the adjudication process would provide  them with a reasonable opportunity to present their case when preparing  their defense. VA also does not consistently adhere to OPM and NARA  guidance in defining a specific retention period for adverse action files.  This results in an inconsistent retention of these files across VA which  complicates department-wide analysis.", "VA\u2019s inconsistent adherence to the standards provided by the OIG to  facilities and program offices for investigating and resolving misconduct  cases increases the risk that misconduct case are not being handled  appropriately. Additionally, the lack of verification of responses received  to ensure documentation supports findings and recommendations has  contributed to evidence that does not always meet the requirements  outlined by the OIG. Finally, timely responses are not consistently  provided when facility and program offices report findings to the OIG\u2019s  Hotline Division.", "OAR did not monitor whether substantiated instances of misconduct  involving senior officials received disciplinary action. OAR\u2019s Legacy  Referral Tracking List also did not accurately reflect the disciplinary action  that was decided based on the results of the investigation. When  disciplinary actions are taken, in response to findings of misconduct, but  are not entered within an appropriate information system, or are  inaccurately recorded, it is more difficult to monitor whether disciplinary  actions have been implemented in substantiated instances of misconduct  involving senior officials. As demonstrated, this may result in no action  being taken for substantiated misconduct or the previous penalties not  having the corrective effect for repeat offenders. There is also an  increased risk that substantiated misconduct will go unaddressed if there  is no recommendation for corrective action. Further, VA also does not  have internal controls to ensure adherence to proper separation-of-duty  standards involving the removal of an employee. Such controls would  minimize the risk of abuse when officials act as both proposing and  deciding officials.", "In addition, VA does not have oversight measures to ensure that all  allegations of misconduct referred by the OIG to facility and program  offices are investigated by an entity outside the control of the facility or  program office involved in the misconduct. The investigation of allegations  of misconduct by the program office or facility where the complaint  originated may present the appearance of a conflict of interest in which  managers and staff at facilities may investigate themselves or other  allegations where they may have a personal stake or bias in the matter to  be investigated. Therefore, the risk that the results of the investigation are  minimized, or not handled adequately, is increased. VA\u2019s newly  developed process to communicate the scope of its reviews that involve  matters referred by the OSC to the Office of the Secretary will be  important to ensure any allegations outside the purview of the OIG\u2019s  investigation are fully addressed by a departmental entity in accordance  with OSC requirements.", "Further, the OIG\u2019s inability to locate investigative documentation prevents  a third party from verifying whether the OIG examined the disclosures,  whether any recommendations were addressed, or whether appropriate  disciplinary action was taken for these cases. This lack of information has  direct influence on management\u2019s ability to make sound decisions relating  to investigative matters. According to OIG officials, a spreadsheet is being  used for tracking case numbers associated with disclosures, but plans to  implement a process within the new system.", "Nonanonymous whistle-blowers faced higher rates of adverse action  subsequent to their disclosure than the VA population as a whole. In  addition, these individuals also had attrition rates higher than their peers  who had not filed a disclosure. The disparities between whistle-blowers  and other employees may be an indication that retaliation by senior  officials may have occurred after misconduct was disclosed. Although VA  has started to provide additional information for potential whistle-blowers  who wish to report criminal or other activity to the OIG, VA does not have  a process to inform employees of how their information may be shared  between organizations when misconduct is reported. Without a clear  understanding of how the lines for reporting misconduct operate, whistle- blowers may be uncertain as to their options for reporting misconduct,  increasing the risk that they may not report workplace misconduct."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following 16 recommendations to VA.", "The Secretary of Veterans Affairs should develop and implement  guidance to collect complete and reliable misconduct and associated  disciplinary-action data department-wide, whether through a single  information system, or multiple interoperable systems. Such guidance  should include direction and procedures on addressing blank data fields,  lack of personnel identifiers, and standardization among fields, and on  accessibility. (Recommendation 1)", "The Secretary of Veterans Affairs should direct applicable facility and  program offices to adhere to VA\u2019s policies regarding employee  misconduct adjudication documentation. (Recommendation 2)", "The Secretary of Veterans Affairs should direct the Office of Human  Resource Management (OHRM) to routinely assess the extent to which  misconduct-related files and documents are retained consistently with  VA\u2019s applicable documentation requirements. (Recommendation 3)", "The Secretary of Veterans Affairs should direct OHRM to assess whether  human-resources personnel adhere to basic principles outlined in VA  Handbook 5021 when informing employees of their rights during the  adjudication process for alleged misconduct. (Recommendation 4)", "The Secretary of Veterans Affairs should adhere to OPM and NARA  guidance and establish a specific record-retention period for adverse  action files. In doing so, the Secretary should direct applicable  administration, facility, and program offices that have developed their own  record-retention schedules to then adhere to the newly established  record-retention period. (Recommendation 5)", "The Department of Veterans Affairs (VA) Inspector General should revise  its policy to include a requirement to verify whether evidence produced in  senior-official case referrals demonstrates that the six elements required  in VA Directive 0701 have been addressed. (Recommendation 6)", "The Secretary of Veterans Affairs should direct the Office of  Accountability and Whistleblower Protection (OAWP) to review responses  submitted by facility or program offices to ensure evidence produced in  senior-official case referrals demonstrates that the six elements required  in VA Directive 0701 have been addressed. (Recommendation 7)", "The Secretary of Veterans Affairs should direct OAWP to issue written  guidance on how OAWP will verify whether appropriate disciplinary action  has been implemented for all substantiated misconduct by senior officials.  (Recommendation 8)", "The Secretary of Veterans Affairs should direct OAWP to develop a  process to ensure disciplinary actions proposed in response to findings of  misconduct are recorded within appropriate information systems to  maintain their relevance and value to management for making decisions  and take steps to monitor whether the disciplinary actions are  implemented. (Recommendation 9)", "The Secretary of Veterans Affairs should direct OAWP to issue written  guidance on how OAWP will review the disposition of accountability  actions for all substantiated misconduct cases involving senior officials  resulting from investigations. (Recommendation 10)", "The Secretary of Veterans Affairs should implement internal controls to  ensure that proper adherence to separation-of-duty standards involving  the removal of an employee are consistent with policy. (Recommendation  11)", "The Secretary of Veterans Affairs should develop oversight measures to  ensure all investigations referred to facility and program offices are  consistent with policy and reviewed by an official independent of and at  least one level above the individual involved in the allegation. To ensure  independence, referred allegations of misconduct should be investigated  by an entity outside the control of the facility or program office involved in  the misconduct. (Recommendation 12)", "The VA Inspector General, in consultation with the Assistant Secretary of  OAWP, should develop a process to ensure that OSC case numbers are  linked to the investigative case number and final report.  (Recommendation 13)", "The Secretary of Veterans Affairs should direct OAWP to develop a time  frame for the completion of published guidance that would develop an  internal process to monitor cases referred to facility and program offices.  (Recommendation 14)", "The Secretary of Veterans Affairs should ensure that employees who  report wrongdoing are treated fairly and protected against retaliation.  (Recommendation 15)", "The Secretary of Veterans Affairs should direct OAWP to develop a  process to inform employees of how reporting lines operate, how they are  used, and how the information may be shared between the OSC, the  OIG, OAWP, or VA facility and program offices when misconduct is  reported. (Recommendation 16)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  (VA), VA Office of Inspector General (OIG), and the Office of Special  Counsel (OSC) for review and comment. In its comments, VA concurred  with nine of our recommendations and partially concurred with five (see  app. VI for a copy of VA\u2019s letter). Regarding our recommendations to the  Inspector General, the OIG concurred with one recommendation and  partially concurred with the other. The OIG also provided comments on  our findings (see app. VII for a copy of the OIG\u2019s letter). We received  technical comments by e-mail from OSC\u2019s Principal Deputy Special  Counsel, which we incorporated in the report as appropriate.", "Regarding VA\u2019s comments, in its response to our first recommendation  that the Secretary develop and implement guidance to collect complete  and reliable misconduct and associated disciplinary-action data  department-wide, VA concurred and outlined steps it plans to take to  address our recommendations. These steps include the creation of new  policies to address blank data fields, lack of personnel identifiers, lack of  standardization among fields, and accessibility issues related to  misconduct and associated disciplinary-action data department-wide. The  target date for system implementation, dependent on approved funding  and acquisition-related requirements, is January 1, 2020.", "On our second recommendation, that the Secretary direct applicable  facility and program offices to adhere to VA\u2019s policies regarding  employee-misconduct adjudication documentation, VA concurred. It  stated that a memorandum will be distributed to reiterate facility and  program-office requirements to adhere to VA Handbook 5021,  Employee/Management Relations, no later than October 1, 2018.", "VA also concurred with our third recommendation, that the Secretary  direct the Office of Human Resource Management (OHRM) to routinely  assess the extent to which misconduct-related files and documents are  retained. According to VA, OHRM will assess, during periodic Oversight  and Effectiveness Service reviews, the extent to which misconduct- related files and documents are retained. The first assessment is to be  incorporated into the fiscal year 2019 Oversight and Effectiveness  Service schedule no later than November 1, 2018.", "VA concurred with our fourth recommendation, that the Secretary direct  OHRM to assess whether human-resources personnel adhere to basic  principles outlined in VA Handbook 5021. VA stated that OHRM will  assess, during periodic Oversight and Effectiveness Service reviews,  whether human-resources and administration personnel adhere to basic  principles outlined in VA Handbook 5021. The first assessment is to be  incorporated into the fiscal year 2019 Oversight and Effectiveness  schedule no later than November 1, 2018.", "In its response to our fifth recommendation, that the Secretary adhere to  Office of Personnel Management (OPM) and National Archives and  Records Administration (NARA) guidance and establish a specific record- retention period for adverse-action files, VA concurred and indicated that  the Human Resources and Administration Assistant Secretary will  establish VA guidance regarding the retention period for adverse-action  files. In addition, the Human Resources and Administration Assistant  Secretary is to advise applicable administration, facility, and program  offices that have developed their own record-retention schedules to  adhere to the newly established directive. According to VA, the directive  will be established no later than November 1, 2018.", "VA partially concurred with our seventh recommendation, that the  Secretary direct departmental heads to review responses submitted by  facility or program offices to ensure evidence produced in senior-official  case referrals demonstrates that the six elements required in VA Directive  0701 have been addressed. VA stated that the process described in our  report pertaining to OIG findings or results will be changed to require all  such reports to be submitted to OAWP. VA also indicated that it expects  to publish new guidance by October 1, 2018, that will require the Office of  Accountability and Whistleblower Protection (OAWP) to review responses  and recommendations from facilities or program offices. Given VA\u2019s  comments, we have revised our draft recommendation to have the  Secretary direct OAWP, not the department heads, to ensure evidence  demonstrates that the six elements have been addressed.", "VA also partially concurred with our eighth recommendation, that the  Assistant Secretary of OAWP review all substantiated misconduct by  senior officials to verify whether disciplinary action has been  implemented. VA stated that all substantiated misconduct by senior  leaders in VA is handled by OAWP from intake, through investigation,  working with the proposing and deciding officials. VA also stated that it  expects to publish written guidance by October 1, 2018, that will clarify  how OAWP will work with the appropriate servicing personnel office to  ensure that the recommended disciplinary actions decided are  implemented for substantiated misconduct involving senior officials. Given  VA\u2019s comments, we have revised our draft recommendation to have the  Secretary of Veterans Affairs direct OAWP to issue written guidance on  how OAWP will verify that appropriate disciplinary action has been  implemented for all substantiated misconduct by senior officials.", "VA partially concurred with our ninth recommendation, that the Assistant  Secretary of OAWP develop a process to ensure disciplinary actions  proposed are recorded within appropriate information systems. VA  stated that the VA-wide discipline tracking system currently used by  OAWP will eventually be phased out. It added that once the Human  Resources Information System (HRSmart) is capable of capturing and  recording similar data, it will be used for this purpose. Accordingly, we  have not revised our draft recommendation.", "VA partially concurred with our 10th recommendation, that the Assistant  Secretary of OAWP assess all misconduct cases involving senior officials  to ensure investigative reports with findings of substantiated misconduct  include recommendations for action. According to VA, OAWP has  instituted several processes since our review. VA plans to issue written  guidance that outlines the process for the review and disposition of  appropriate accountability actions for allegations of misconduct by senior  officials by October 1, 2018. Given VA\u2019s comments, we have revised our  draft recommendation to have the Secretary of Veterans Affairs direct  OAWP to issue written guidance on how OAWP will review the disposition  of accountability actions for all substantiated misconduct cases involving  senior officials resulting from investigations.", "In its response to our 11th recommendation, that the Secretary implement  internal controls to ensure that separation-of-duty standards involving the  removal of an employee are consistent with policy, VA concurred. It  stated that it will also establish and distribute internal controls to ensure  that separation-of-duty standards involving the removal of an employee  are consistent with policy no later than November 1, 2018.", "VA partially concurred with our 12th recommendation, that the Secretary  take steps to ensure independence of referred allegations of misconduct  by requiring that investigations be conducted outside the control of the  facility or program office involved in the misconduct. VA stated that  OAWP is responsible for recording, tracking, reviewing, and confirming  the implementation of recommendations from audits and investigations.  However, VA did not address how it will ensure the independence of the  entity responsible for conducting an investigation. As we discuss in our  report, during the review OAWP officials stated that the process of  referring cases of misconduct back to facilities and program offices where  the misconduct occurred will continue. Accordingly, we have not revised  our draft recommendation and believe implementation of it will help  ensure independence.", "VA concurred with our 14th recommendation, that the Assistant Secretary  of OAWP develop a time frame for the completion of published guidance  for the development of an internal process to monitor cases referred to  facility and program offices. VA provided an expected date of October 1,  2018, for publishing the internal VA guidance, with the subsequent  Directive and Handbook to be published as rapidly as staff coordination  permits.", "In its response to our 15th recommendation, that the Secretary ensure  that employees who report wrongdoing are treated fairly and protected  against retaliation, VA concurred. It stated that OAWP and OSC have  developed a functional process to ensure whistle-blower protections are  implemented, but did not indicate what the process entails. The VA  Secretary has also delegated authority to the Executive Director, OAWP,  to put individual personnel actions on hold if the actions appear motivated  by whistle-blower retaliation. VA added that OAWP has also hired two  whistle-blower program specialists specifically to increase awareness of  whistle-blower protections and work with individuals that disclose  employee wrongdoing to ensure individuals are treated fairly and  protected from retaliation for their disclosures.", "VA concurred with our 16th recommendation, that the Assistant Secretary  of OAWP develop a process to inform employees of how reporting lines  operate. VA stated that it will provide whistle-blower training to all  employees on a biennial basis, which will include the reporting lines for  disclosures of wrongdoing, the manner in which disclosures flow once  they are made, how information is shared among the whistle-blower  entities, and what protections exists for those who disclose wrongdoing.", "Regarding our recommendations to the Inspector General, the OIG  partially concurred with our sixth recommendation, to revise its policy to  include a requirement to verify whether evidence produced in senior- official case referrals demonstrates that the six elements required in VA  Directive 0701 have been addressed. The OIG indicated that VA Directive  0701 is currently being updated to require a written or electronic signature  from the person preparing the responses as an attestation that the  specific requirements of the directive were met. The OIG also indicated in  its letter that the OIG\u2019s Hotline staff carefully review the case response  but Hotline staff are not required to request an updated response from VA  to address matters not necessary to the resolution to the referral. The  OIG asserted that requesting an update would detract from the resources  for other important VA activities. On page 4 of the OIG\u2019s letter, the OIG  states that Hotline analysts are allowed to exercise some discretion in  accepting responses that may include minor departures from the six  elements.", "We continue to believe that, in order to have a complete response to a  referral, all six elements required by the directive should be addressed. In  addition, Directive 0701 does not allow for the use of professional  judgement to decide which elements to include or not to include in a  response. While we agree that requiring a written or electronic signature  from the person preparing the responses as an attestation will help  ensure that the specific requirements of the directive were met, we  maintain that not requiring Hotline analysts to review responses to ensure  that all elements of the directive are addressed is inconsistent with the  intent of the directive.", "In its response to our 13th recommendation, that the OIG develop a  process to ensure that an OSC case number is linked to the investigative  case number and the final report, the OIG concurred. It stated that it will  engage with the Executive Director of OAWP to develop a process to  ensure that OSC case numbers are linked to OIG and OAWP  investigative case numbers, as appropriate, and linked to any final report  of investigation.", "In addition to its response to recommendations, the VA OIG also raised a  number of concerns with our findings. Page 1 of its letter summarizes  some of these concerns and then provides more detail on each concern  raised, starting on page 2. Our responses to each of these detailed  concerns are provided below.", "The OIG stated that our report does not focus on the most important  cases, but focuses primarily on case referrals regarding senior officials  that were not handled by the OIG because the allegations were lower risk  or because of resource constraints. In addition, the OIG stated that GAO  risks presenting a skewed picture of the OIG\u2019s oversight work. We  disagree with this characterization of our findings. We requested that the  OIG provide us with data from the OIG\u2019s Master Case Index (MCI)  information system that would allow us to select a sample of cases, in  accordance with the scope of our review. The OIG was unable to provide  the requested information due to several reasons. Instead, the OIG  provided data from the OIG Hotline and Office of Investigations case- management systems (subsystems within MCI) that contained a limited  number of fields for analysis and 23 cases pertaining to SES misconduct  that were referred to VA for investigation during GAO\u2019s period of review.  Therefore, as we discuss in the report, we were only able to review the 23  senior-official misconduct cases included in our report because the OIG  was only able to provide related documentation for these cases. The OIG  stated that we only reviewed a sample of just 23 case referrals from fiscal  years 2011 through 2014. As described, we reviewed all 23 senior-official  misconduct cases that were referred to VA for investigation that the OIG  was able to provide us, not a sample.", "The OIG stated that our report inaccurately states that the extracts  received from the MCI information system contained missing information.  We disagree with this characterization of our findings. Our review  included a comprehensive assessment of the reliability of the OIG\u2019s data.  To conduct this assessment, we requested an explanation of each data  field to clarify when fields are normally populated and how they are used.  Our findings are consistent with the information provided in response to  this request. For example, the OIG\u2019s response to our data-reliability  assessment stated that the data field used to identify the type of  allegations being investigated should never be blank. However, we found  that field to be blank in some cases in the data that were provided to us,  though the OIG asserted that the MCI information system is a relational  database where each case may be associated with multiple allegations  and codes. In response to the OIG\u2019s comments on our report, we  requested supporting documentation to demonstrate that the fields  analyzed during our period of review did not contain missing data. The  OIG provided the MCI information system user\u2019s manual that contains  detailed procedures for accessing and entering data into the MCI  information system, and a compilation of various internal documents.  However, the documentation did not provide evidence of the  completeness of data entered into the MCI information system as part of  quality-assurance reviews performed by the OIG or other designated  entity. Absent evidence of data-quality reviews aimed at assessing the  accuracy and completeness of data contained in the MCI information  system, we did not change the conclusions based on our previous  analysis.", "The OIG stated that our report provides incomplete information regarding  sampled cases and mischaracterized one of the OIG\u2019s case referrals in  the body of the report. We disagree with this characterization of our  findings. Specifically, the OIG said that we inaccurately stated that a  medical center director conducted the investigation into his own alleged  misconduct and found no allegations were substantiated. The synopsis  included in our report clearly articulates that the medical center director  was named in the allegation for having received a similar complaint  involving time and attendance abuse by a physician. The medical center  director, who provided the response to the OIG, was implicated in the  allegation as having not addressed a similar time and attendance  complaint regarding the same physician 2 years earlier. The OIG did not  provide any supporting documentation to demonstrate that the alleged  time and attendance abuse allegations against the physician were not  substantiated.", "The OIG stated that our report inaccurately stated that the medical center  director conducted his own investigation of himself and found no  allegations were substantiated. We disagree. In response to the OIG\u2019s  comments on our report, we requested that the OIG provide additional  support used to determine that the medical center director did not  investigate the allegation in which he was named. The additional case  documentation provided by the OIG further reaffirmed our assessment  that the medical center director performed his own investigation and  found no allegations were substantiated. Additional documentation  provided by the OIG indicated that the OIG referred the case to the  Veterans Integrated Service Network (VISN) for a response. However,  documentation we examined during the course of our audit, and the  documentation provided in response to our draft report, indicates that the  medical center director performed the investigation of the allegations and  then the results were routed through the VISN back to the OIG. The OIG  stated that routing the response through the VISN should address our  concerns of independence. This process does not address our concerns  regarding independence because VA Directive 0701 states that all  responses to Hotline case referrals must contain evidence of an  independent review by an official separate from and at a higher grade  than the subject / alleged wrongdoer. In this case, the name of the  medical center director who signed the facility response provided to the  OIG was the same individual named in the allegations.", "The OIG stated that the report does not provide a balanced presentation  of the rigor with which the OIG reviews all incoming Hotline contacts and  case responses. We disagree with this characterization of our findings. As  described above, the OIG was unable to provide comprehensive data to  select a sample of OIG audits, evaluations, and inspections for review  due to the limitations cited. We focused on misconduct involving senior  officials consistently with the scope of our review and thoroughly reviewed  all 23 senior-official misconduct cases that were referred to VA for  investigation, which were the only cases that the OIG was able to provide.", "The OIG stated that the description for one of the cases included in  appendix V of the draft report was incomplete because we misunderstood  the OIG\u2019s process. We disagree with this characterization. In response to  the OIG\u2019s comments on our report, we requested additional supporting  documentation. The documentation provided reaffirmed our assessment  that another medical center director performed his own investigation and  found no allegations were substantiated. Similar to the case described  above, the medical center director completed his own investigation and  then routed the response through the VISN back to the OIG. In contrast to  the previous case, however, the Hotline Workgroup reviewed the  response to the OIG and found it to be insufficient. Specifically, the OIG  noted that the medical center director who provided the response was the  subject of the complaint, despite the response being directed to the VISN,  and requested clarification. The VISN informed the OIG that it is not its  policy for the complainant to have any involvement in the review and data  submission on a case in which the complainant is involved. The VISN  stated that while this did obviously occur in this instance, it has taken  steps to ensure it does not occur in the future. The supporting evidence  provided for the case included in appendix V also contradicts the OIG\u2019s  previous assertion that the routing of a response through the entity with  oversight (VISN) over the medical center director should have addressed  GAO\u2019s concerns of independence.", "The OIG stated our report provides a misrepresentation of the OIG\u2019s  failure to follow internal policies for department responses. We disagree.  According to OIG statements on page 4 of the OIG\u2019s letter, Hotline  analysts are allowed to exercise some discretion in accepting responses  that may include minor departures from the six elements required in VA  Directive 0701. We continue to believe that in order to have a complete  response to a referral, all six elements required by the directive should be  addressed. On the basis of our review, the OIG does not have an  effective method to ensure that cases referred to VA are reviewed in  accordance with VA Directive 0701. Out of the 23 cases we reviewed,  only 4 included sufficient documentation needed to support VA\u2019s findings,  and we could not identify a case that contained all six elements required  in VA Directive 0701. This suggests that the current OIG review process  is not adequately resolving case referrals, as asserted by the OIG\u2019s  response. In addition, VA Directive 0701 does not currently include a  provision that would allow Hotline analysts to deviate from the six  required elements. As stated in our report, the OSC also raised concerns  regarding 40 percent of disclosure cases that were referred to VA facility  and program offices.", "The OIG stated that much of the information in the draft report is dated  and ignores system updates, specifically several key Hotline-related  process improvements since 2014. Although our review began in 2015,  we disagree with this characterization of our findings. In our report, we  included relevant improvements to demonstrate where the OIG was able  to provide support for those improvements. For example, our report  discusses: (1) a new process for communicating the scope of reviews that  involve matters referred by the OSC to the Office of the Secretary, (2) a  description on the VA website of the process for employees who wish to  report criminal or other activity to the OIG, (3) a new Enterprise  Management System, and (4) a new process for receiving whistle-blower  disclosures by the Secretary. In response to the OIG\u2019s comments on our  report, we requested additional documentation for any systems, practices,  or personnel changes that have been implemented since 2011, including  improvements to Hotline-related processes since 2014 that were not  included in our report. In response, the OIG provided a copy of the OIG\u2019s  organizational chart (current as of Apr. 23, 2018), described the oversight  responsibilities of each OIG component, and summarized the pertinent  staff positions within each component. On the basis of this  documentation, we identified a new office (the Office of Special Reviews),  a promotion, staff reassignments, and numerous vacancies during our  review period. However, the OIG did not provide evidence of any  measures to improve the MCI information system, case-referral  processes, or relevant staff roles that were not already included in our  report.", "As described above, the OIG was unable to provide comprehensive data  to select a sample of OIG audits, evaluations, and inspections for our  initial review due to the limitations cited. In response to the OIG\u2019s  comments on our report, we requested documentation related to any  significant changes that have been made to the MCI information system  that allows the OIG to identify all allegations of misconduct for export and  analysis. The OIG provided additional information regarding overall  departmental achievements that are highlighted in the OIG\u2019s Semiannual  Report to Congress, and other products from its website published  between fiscal years 2011 through 2018. We recognize the OIG\u2019s broader  administrative and oversight work described in the published reports.  However, this information does not address changes specifically made to  the MCI information system that would enable the OIG to analyze cases  pertaining to alleged misconduct by senior officials that we requested.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-5045 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine the extent to which the Department of  Veterans Affairs (VA) (1) collects reliable information associated with  employee misconduct and disciplinary actions that is accessible and  could be used to analyze misconduct department-wide; (2) retains  documentation that demonstrates VA adheres to its policies when  adjudicating cases of employee misconduct; (3) ensures allegations of  misconduct involving senior officials are reviewed in accordance with VA  investigative standards, and these officials are held accountable; (4) has  procedures to investigate whistle-blower allegations of misconduct; and  the extent to which (5) data and whistle-blower testimony indicate  whether retaliation for disclosing misconduct occurs at VA.", "For the first objective, we obtained VA employee misconduct data from 12  information systems operated by various VA components covering  October 2009 through July 2017, where available. To determine the  reliability of VA\u2019s misconduct data, we analyzed the contents of the 12  information systems operated by various offices across VA. These data  encompass each of the three major administrations that constitute VA\u2014 the National Cemetery Administration (NCA), Veterans Benefits  Administration (VBA), and Veterans Health Administration (VHA). We  selected the information systems based on our discussions with VA  officials and staff that oversee the data and, hence, identified databases  capable of collecting information pertaining to either employee  misconduct or disciplinary actions. Data fields were selected based on  whether they would provide beneficial information to better understand  the disciplinary process.", "VA\u2019s Personnel and Accounting Integrated Data (PAID) system, which  was developed to track payroll actions, contains information about  adverse disciplinary actions that affect employee salary department-wide.  We obtained an extract of all adverse disciplinary actions from the PAID  system.", "We assessed the reliability of each system for the purposes of identifying  and tracking misconduct cases. To do this, we performed electronic tests  on 12 information systems to determine the completeness and accuracy  of the fields contained in the data files. We also submitted to the  overseeing offices for all 12 information systems general data-quality  questions regarding the purpose of the data, their structure, definitions  and values for certain fields, automated and manual data-quality checks  to ensure the accuracy of the data, and limitations. As discussed further,  the data were generally not reliable for a department-wide assessment of  all misconduct and disciplinary actions due to the lack of completeness  and compatibility of the data across all information systems. VA staff  could not confirm whether some of the missing data we identified were  artifacts of the database extraction process VA used to assemble the data  files we used in our review. Despite challenges with aspects of the data,  we found the data sufficiently reliable for conducting analysis where fields  were populated and field definition concurrence was obtained by program  offices.", "For the second objective, we selected a generalizable stratified random  sample of 544 misconduct cases from October 2009 through May 2015.  Where available, we reviewed the employees\u2019 disciplinary-action files and  Electronic Official Personnel Folders to determine the extent to which  VA\u2019s actions were consistent with disciplinary policy outlined in VA  Handbook 5021, Employee/Management Relations. These data  encompass each of the three major administrations that constitute VA\u2014 NCA, VBA, and VHA. We determined the data to be sufficiently reliable  for analysis of disciplinary actions affecting salary that resulted from  misconduct that was not reported to supervisors directly from employees.  Accordingly, our sample only includes misconduct cases that resulted in a  change in salary or were reported to departmental organizations within  the 12 information systems selected.", "We developed a data-collection instrument to document the results of our  case reviews. We revised our data-collection instrument to address  issues found during the course of our analysis, and developed a  companion document that outlined the decision rules for reviewing cases.", "We also designated two primary reviewers to ensure the decision rules  were consistently applied across all cases.", "Our review of laws and regulations revealed that disciplinary rules  sometimes vary depending on whether employees fall under Title 5, Title  38, or hybrid Title 5 and Title 38 hiring authority. To minimize confusion  associated with these differences, we incorporated criteria into our data- collection instrument. In addition, we were unable to obtain complete case  information for 25 percent of the cases. For these cases, we obtained  direct access to the Office of Personnel Management\u2019s (OPM) Electronic  Official Personnel Folders system to attempt to recover some of the  missing information. Ultimately, we were unable to complete our review  for 10 percent of cases in our sample because of missing files.", "In addition to reporting missing case information, we used our  generalizable analysis results to project VA-wide figures for several data  elements that were not in compliance with VA policy. Unless otherwise  noted, estimates in this report have a margin of error of +/-7.4 percentage  points or less for a 95 percent confidence interval.", "For the third objective, we analyzed data from the Office of Accountability  Review (OAR) Legacy Referral Tracking List and VA Office of Inspector  General (OIG) case-referral and investigative case-management  systems, and we selected cases for in-depth review. We selected these  two systems based on discussions with VA officials who were  knowledgeable with databases that have the capacity to track misconduct  information pertaining to senior officials. The OAR Legacy Referral  Tracking List comprises referrals from January 2011 through May 2015.  The OIG provided 23 case-referral files involving senior officials from  calendar years 2011 through 2014. As part of our review of the OIG case  files, we evaluated specific data elements contained in VA\u2019s response  documents using VA policy for referring and reviewing misconduct  cases.", "We assessed the reliability of the OAR Legacy Referral Tracking List and  OIG case-management systems for the purposes of identifying and  tracking misconduct cases. To do this, we performed electronic tests on  each database to determine the completeness and accuracy of the fields  contained in the data files, including senior-official indicators. Where  feasible, we opted to match individual datasets to PAID to determine  whether disciplinary actions were administered as prescribed. We also  submitted to OAR and the OIG general data-quality questions regarding  the purpose of the data, their structure, definitions and values for certain  fields, automated and manual data-quality checks to ensure the accuracy  of the data, and limitations. On the basis of this information, we found the  OAR data to be sufficiently reliable for conducting analysis where fields  were sufficiently populated.", "For the OAR data, we matched the persons of interest to adverse-action  files from PAID to determine whether adverse disciplinary actions were  administered as prescribed during the available time frame (January 2011  through May 2015). We also obtained VA\u2019s response documents for the  23 case-referral files provided by the OIG to evaluate whether VA was  adhering to its own policy for referring and reviewing misconduct cases.", "Through our OAR Legacy Referral Tracking List analysis, we identified  illustrative case examples of misconduct involving senior officials. Further,  based on our evaluation of the 23 OIG case referrals using VA\u2019s referral  policy, we developed several illustrative case examples.", "For the fourth objective, we interviewed senior officials from VA and the  OSC responsible for investigating whistle-blower complaints. We obtained  the OSC\u2019s procedures for referring disclosure complaints and VA\u2019s policy  for investigating these complaints once received at the agency. In  addition, we obtained whistle-blower disclosure data from the Office of  Special Counsel (OSC) covering calendar years 2010 through 2014. To  determine the reliability of the data, we conducted electronic testing and  traced data elements to source documentation. We determined the data  to be sufficiently reliable to identify the total number of cases that were  investigated by the OIG, or referred to facility and program offices. We  also observed a course to assess VA\u2019s training provided to VA employees  conducting investigations.", "We identified 135 OSC disclosure cases for analysis based on two  criteria: (1) they contained at least partial complainant information (i.e.,  the allegations were not anonymously reported or could be identified with  supplemental information) and (2) they contained an indicator that the  case had been closed by the OSC pending an ongoing investigation by  VA or the OIG. These cases represent the universe of VA disclosures  accepted by the OSC. Of the 135 disclosure cases referred to VA, 53  cases were referred to VA facility and program offices for further  investigation. The remaining 82 disclosure cases indicated that they were  investigated by the OIG. We reviewed the results of OSC\u2019s assessment of  investigative documentation developed by VA for these whistle-blower  disclosure cases.", "For the fifth objective, we analyzed the 135 whistle-blower disclosure  cases obtained from the OSC. These cases represent the universe of VA  disclosures accepted by the OSC from calendar years 2010 through  2014, which were investigated by VA. We obtained an extract of year-end  rosters from the PAID system as of September for fiscal years 2010  through 2014, with a final extract through May 30, 2015. Finally, we  interviewed representatives from whistle-blower advocacy groups, as well  as established whistle-blowers who disclosed wrongdoing or retaliation at  VA and who were referred to us by one advocacy group.", "Of the 135 disclosures received by the OSC, a total of 129 employees  made a total of 130 disclosures nonanonymously. For these 130  disclosure cases, we reviewed OSC and OIG investigative reports, as  well as PAID roster files, to gather additional information to perform  analysis of potential retaliation. We also interviewed six individual whistle- blowers with formal disclosure cases accepted by the OSC, indicating  that the OSC had previously reviewed the case and determined that it  contained sufficient evidence and merit to warrant further investigation.", "Our analysis of potential retaliation comprised two parts. First, we  compared the 129 employees associated with the selected OSC cases to  the PAID rosters using the complainants\u2019 information to determine  whether employees associated with the selected OSC cases were more  likely to leave the agency. We identified the overall count and proportion  (across years) of roster-matched employees who made a disclosure  between fiscal years 2010 through 2014 but were not employed at VA the  following fiscal year. Second, to determine whether employees  associated with the selected OSC cases were more likely to receive  disciplinary action, we also calculated the yearly totals and proportion of  roster-matched employees identified above for whom a record existed in  the PAID disciplinary action information system. We did this by comparing  the proportion of employees who received one or more disciplinary  actions in the year prior to the appearance in the roster, in the same fiscal  year as the roster, and in the subsequent fiscal year. We also completed  this analysis utilizing the PAID roster file to determine the yearly  proportion of all VA employees who left the agency. On the basis of the  results of our analysis, we reported by fiscal year the percentage of  whistle-blowers that received disciplinary action or left VA at a higher rate  than the overall VA population following a disclosure.", "To address all objectives, we interviewed senior officials from VA\u2019s major  components responsible for investigating and adjudicating cases of  employee misconduct. We also reviewed standard operating procedures,  policy statements, and guidance for staff charged with investigating and  adjudicating allegations of employee misconduct.", "We conducted this performance audit from January 2015 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Department of Veterans Affairs (VA) Data Files and Corresponding Data Fields That Are Missing Information", "paragraphs": [], "subsections": [{"section_title": "Office of Accountability Review (OAR)\u2014Legacy Referral Tracking List", "paragraphs": ["This data file is designed to track referrals made to OAR, including  allegations of misconduct related to senior officials. Through our analysis  of this spreadsheet, we identified 11 fields out of 92 that were missing  information that could be used to analyze misconduct.", "Complainant #1 (First Name) (20 percent of 1,245 blank)\u2014 According to OAR, this field is populated when there is a known  complainant for a matter. Some matters referred to OAR may be  anonymously disclosed and not contain complainant information. This  file also contains a case-origin field that specifies whether a case was  anonymous. Our review of both the complainant and case-origin field  indicated that only 11 percent of the complaints were generated from  an anonymous source, and the remaining records should have  included a complainant name.", "Disciplinary Action (96 percent of 1,245 blank)\u2014This field should  be populated to indicate whether a disciplinary action was taken after  the completion of an investigation.", "Grade (97 percent of 1,245 blank)\u2014According to OAR, this field  should be populated with the grade of the Person of Interest (POI), if  known. Our review of this field indicated that 97 percent were blank,  therefore we were unable to analyze the variation in grade level for  officials who were the subject of complaints.", "OAR Action (77 percent of 1,245 blank)\u2014According to OAR, this  field should be populated as an internal reference to describe what  stage in the administrative process the matter was in when received.  The lack of information did not allow for analysis of the types of  actions taken for each case.", "Person of Interest (POI) (47 percent of 1,245 blank)\u2014This field  specifies the first and last name of the Department of Veterans Affairs  (VA) employee who is the subject of an allegation.", "POI (Person of Interest) Last Name 1\u20135 (51 to 99 percent of 1,245  blank)\u2014This field specifies the last name of VA employee who is the  subject of an allegation. There are a total of five person-of-interest  (POI) fields for each matter. According to OAR, blank POI fields occur  when the case has fewer than five POIs or the POI was not specified  in the matter referred. Our review of the five POI fields indicated that  more than half of the records did not contain at least one POI because  no individual was specified. The lack of information did not allow for  further investigation of senior-level officials involved in misconduct.", "Proposed Action (97 percent of 1,245 blank)\u2014According to OAR,  this field should be populated to notify OAR staff if any disciplinary  action was proposed. Our review of this field indicated that 97 percent  were blank, suggesting that very few high-level officials received  corrective action, or the field was not consistently completed for each  record. Due to the large share of blank values, the data posed  limitations when analyzing how many senior officials received  corrective action as a result of a complaint."], "subsections": []}, {"section_title": "Office of Accountability Review (OAR)\u2014VA-Wide Adverse Employment Action Database", "paragraphs": ["This data file is designed to track misconduct and disciplinary actions  taken against VA employees. Through our analysis of this spreadsheet,  we identified 9 fields out of 21 that were missing information that could be  used to analyze misconduct.", "Action Taken (3 percent of 9,851 blank)\u2014According to OAR, this  field should be populated with the action that the deciding official  takes, with the exception of pending actions. If there is a pending  action, this field will remain blank. Our review of the action-taken field  found three records that were annotated as a \u201cpending decision\u201d  within this field, which indicates that there is an option for entering  information into this field when there is an action pending and the field  should never be blank.", "Admin Leave (30 percent of 9,851 blank)\u2014According to OAR, this  field should be populated if an employee is placed on administrative  leave while an adverse action is pending. If an employee is not placed  on administrative leave, the field may be left blank. Our review of the  admin-leave field found that about 66 percent of the records were  annotated as \u201cno\u201d within this field, which indicates that there is an  option for entering information into this field when an employee was  not placed on administrative leave.", "Date Proposed (11 percent of 9,851 blank)\u2014According to OAR, this  field is used when an adverse action is proposed for an employee.  There are some actions that are not proposed, such as probationary  terminations or admonishments that may be taken without being  proposed, and therefore result in this field being blank. Our analysis  found that about 95 percent of these records containing blank  proposed date fields also had an entry in the proposed adverse-action  field, which contained such entries as removals, suspensions, and  demotions that require a proposed date.", "Deciding Official (14 percent of 9,851 blank)\u2014According to OAR,  this field should be populated with the name of the official who issued  the action taken.", "Effective Date (5 percent of 9,851 blank)\u2014According to OAR, this  field should be populated with the date of the action taken. Some  entries will not have an effective date if an entry is pending decision.  Also, if no action is taken, the decision was counseling, or the  proposed action was rescinded, this field may not have an effective  date. Our review found that about 14 percent of the cases that  included adverse actions, such as a suspension, removal,  reassignment, or demotion, and that should have included a date of  action, were blank.", "Offense 2 and 3 (79 and 95 percent of 9,851 blank)\u2014According to  OAR, this field tracks the second- and third-most-significant charge  against the employee when applicable.", "Proposing Official (16 percent of 9,851 blank)\u2014According to OAR,  this field should be populated with the name of the official who makes  the proposed adverse action. Instances where a proposing official has  left the agency at the time of entry and could not be found in the  lookup feature that relies on the e-mail global address list may  produce blank fields. Also, disciplinary actions that were taken without  proposal would not have a proposing official. In these instances, the  human-resources specialists who enter the actions are instructed to  include the name in the other-comments box. Our review of these  records indicated that a majority of records lacking an entry in the  proposing official field also lacked an annotation in the other- comments field to accurately identify the proposing official.", "Settlement (14 percent of 9,851 blank)\u2014According to OAR, this  field tracks whether a settlement agreement occurred."], "subsections": []}, {"section_title": "Office of Inspector General (OIG)\u2014 Master Case Index", "paragraphs": ["This data file is designed to collect allegations of criminal activity, waste,  abuse, and mismanagement received by the OIG Hotline Division.  Through our analysis of this information system, we identified one field  out of seven that was missing information that could be used to analyze  misconduct.", "Nature of Complaint (54 percent of 896 blank)\u2014According to the  OIG, this field should contain a brief description of the issue that most  closely matches the allegation. Each case can have more than one  nature of complaint and corresponding administrative action, if any.  OIG officials stated that this field identifies the type of allegations  being investigated and should never be blank. Our review of these  cases found that over half of the cases involving the OIG contained  entries for administrative action taken, but the nature-of-complaint  fields corresponding to these actions were blank."], "subsections": []}, {"section_title": "Veterans Benefit Administration (VBA)\u2014Misconduct and Disciplinary Action Report", "paragraphs": ["This data file is designed to track misconduct and disciplinary action  taken against VBA employees. Through our analysis of this spreadsheet,  we identified 3 fields out of 20 that were missing information that could be  used to analyze misconduct.", "Alleged Offense 2 and 3 (92 and 99 percent of 1,375 blank)\u2014 According to VBA officials, this field should be populated if an  individual is charged with multiple offenses, or has additional offenses  in the same reporting period. In most instances, there is typically only  one offense at the time of reporting.", "Sustained (52 percent of 1,375 blank)\u2014According to VBA, this field  should be populated if an offense is sustained at the time of reporting."], "subsections": []}, {"section_title": "Office of Accountability and Whistleblower Protection (OAWP)\u2014 VA-Wide Adverse Employment Action and Performance Improvement Plan Database", "paragraphs": ["This data file is designed to track all allegations of misconduct and  associated disciplinary actions taken against VA employees. Through our  analysis of this spreadsheet, we identified 8 fields out of 34 that were  missing information that could be used to analyze misconduct.", "Deciding Official (3 percent of 5,571 blank)\u2014According to OAWP,  this field should be populated with the name of the official who makes  the decision for adverse action.", "Detail Position (89 percent of 5,571 blank)\u2014According to OAWP,  this field should be populated with the position an employee was  detailed to if removed from official position.", "Offense 2 and 3 (69 and 91 percent of 5,571 blank)\u2014According to  OAWP, this field tracks the most-significant charges against the  employee. If there are fewer than three charges, these fields are left  blank.", "Offense 1 Sustained (14 percent of 5,571 blank)\u2014According to  OAWP, this field should be populated if an individual\u2019s first offense  has been sustained.", "Offense 2 and 3 Sustained (73 and 91 percent of 5,571 blank)\u2014 According to OAWP, these fields should be populated if an  individual\u2019s second and third offenses have been sustained. The  majority of cases only involve one offense.", "Proposing Official (9 percent of 5,571 blank)\u2014According to OAWP,  this field should be populated with the name of the official who makes  the proposed adverse action."], "subsections": []}]}, {"section_title": "Appendix III: Department of Veterans Affairs (VA) Data Files and Corresponding Data Fields That Lack Standardization", "paragraphs": [], "subsections": [{"section_title": "Office of Resolution Management (ORM)\u2014Complaints Automated Tracking System", "paragraphs": ["This data file tracks Equal Employment Opportunity (EEO) discrimination  complaints. Through our analysis of this information system, we identified  1 field out of 66 that did not have standardization that could be useful to  analyze misconduct.", "Employment\u2014We found that the values for this field were not  mutually exclusive, or independent of one another. For example, this  field includes two distinct categories of information: employment  status, such as full time or part time; and hiring authority, such as Title  5 or Title 38. This method of storing information resulted in  undercounting each of the separate values due to the system\u2019s failure  to account for expected overlap. For instance, an employee could be  both a full-time and Title 5 employee and the field only tracks one or  the other. ORM officials stated that this field has since been modified  to capture more options to account for the overlap."], "subsections": []}, {"section_title": "Office of Accountability Review (OAR)\u2014VA-Wide Adverse Employment Action Database", "paragraphs": ["This data file is designed to track misconduct and disciplinary actions  taken against Department of Veterans Affairs (VA) employees. Through  our analysis of this spreadsheet, we identified 1 field out of 21 that did not  have standardization that could be useful to analyze misconduct.", "Position\u2014We found the VA-Wide Adverse Employment Action  Database contained variations within this field, such as multiple  values for the \u201cCemetery Caretaker\u201d position name. According to  OAR, this field is a free-text field, and the office conducts manual  searches to review and analyze position titles when needed. Our  review found that the different variations in position titles made it  difficult to successfully determine the frequency and nature of  allegations by position."], "subsections": []}, {"section_title": "Office of Inspector General (OIG)\u2014 Master Case Index", "paragraphs": ["This is an information system designed to collect allegations of criminal  activity, waste, abuse, and mismanagement received by the OIG Hotline  Division. Through our analysis of this data file, we identified 1 field out of  7 that did not have standardization that could be useful to analyze  misconduct.", "Nature of Complaint\u2014Our review of the Master Case Index file  found variations of similar values in this field. For example, this field  contained 21 different claim types pertaining to similar types of fraud,  which made it difficult to assess the frequency and nature of claims  entered into the system. OIG officials stated that they do not attempt  to account for these variations or assess the frequency of use  because they are assigned based on a \u201cbest match\u201d to the allegations  of the case."], "subsections": []}, {"section_title": "Veterans Benefit Administration (VBA)", "paragraphs": ["This data file is designed to track misconduct and disciplinary action  taken against VBA employees. Through our analysis of this spreadsheet,  we identified 1 field out of 20 that did not have standardization that could  be useful to analyze misconduct.", "Position\u2014Our review found some duplication and overlapping values  among this field. For example, the position title for \u201cservice  representative\u201d contained 21 similar categories with numerous  variations in spelling (i.e., Veteran Service Representative vs.  Veterans Service Representative, and Rating Veteran Service  Representative vs. Rating Veterans Service Representative). We  were unable to verify the number of distinct positions due to the lack  of standardization within this field."], "subsections": []}, {"section_title": "National Cemetery Administration (NCA)", "paragraphs": ["This data file is a tracking spreadsheet for monitoring misconduct and  disciplinary action workload. Through our analysis of this spreadsheet, we  identified 5 fields out of 12 that did not have standardization that could be  useful to analyze misconduct.", "Action Proposed/Decided/Taken\u2014We were unable to analyze this  data field because the action taken was tracked in one single field and  updated with the most-recent action, rather than each distinct action  being entered in a separate field. Consequently, we were not able to  distinguish those cases where corrective action may have been taken,  to verify whether the corrective action had been implemented.", "Current Status\u2014We were unable to analyze this data field because it  was not a standardized field. For example, we were unable to  determine the total number of cases that were closed, open, or  pending due to the variations in the data field (e.g., Open, open, open  \u2013 pending, open-pending).", "Full Name of Employee, Grievant, Appellant, Complainant, Non- Employee\u2014We were unable to distinguish whether the individual  filing a complaint was an employee, grievant, appellant, complainant,  or nonemployee because the information entered into this single field  only provided the employee\u2019s full name and did not provide a  distinction as to which category the record was assigned, as indicated  by the field name.", "NCA Facility\u2014We were unable to analyze this data field because it  was not a standardized field. For example, we were unable to run  demographic information on the different facilities involved because  this field contained erroneous information. Examples of erroneous  information included the name of the Memorial Service Network in  one case, and the region, rather than the facility name, in another.", "Supervisor Name\u2014We were unable to analyze this data field  because it was not a standardized field. For example, we were unable  to determine the total number of supervisors that were associated with  each case due to the variations in the names entered within this field,  which included misspelled first or last names, addition/omission of  middle initials, or no first name."], "subsections": []}, {"section_title": "Client Service Response Team (CSRT)\u2014ExecVA", "paragraphs": ["This data file is a tracking spreadsheet for all allegations received by the  VA Secretary regarding misconduct, patient care, or other wrongdoing.  Through our analysis of this spreadsheet, we identified 1 field out of 9 that  did not have standardization that could be useful to analyze misconduct.", "Subject\u2014Our review of this tracking spreadsheet found over 380  different possible categories that could be assigned to one record.  These categories contained a significant number of variations. For  example, we found 38 different categories that contained possible  EEO-related issues such as \u201cEEO/Whistleblower,\u201d \u201cPotential EEO,\u201d  and \u201cEEO Violations.\u201d We were unable to distinguish the different  subject categories for this field due to the lack of standardization.  CSRT officials stated that ExecVA reports contain only data  corresponding to specific search criteria."], "subsections": []}, {"section_title": "Office of Security and Law Enforcement (OS&LE)\u2014Veterans Affairs Police System (VAPS)", "paragraphs": ["This is an information system for tracking allegations of misconduct at all  VA facilities that include violation of law and misdemeanors. Through our  analysis of this data file, we identified 3 fields out of 29 that did not have  standardization that could be useful to analyze misconduct.", "Classification\u2014We found that this field contained at least three  different variations of assault categories (i.e., assault, assault-other,  and assault-aggravated). VAPS officials stated that this field is  determined and entered by the user.", "Crime Type\u2014We found this field contained at least five different  variations of alcohol-consumption categories, such as \u201centering  premises under the influence\u201d and \u201calcohol \u2013 under the influence.\u201d  VAPS officials stated that this field is determined and entered by the  user.", "Final Disposition\u2014We found this field contained at least two  different variations of charge type (i.e., charged, charged \u2013 Issued  Ticket), six different variations of open type (for example,  open/referred to Court, open/cvb), and two different variations of  closed type (i.e., closed, case closed). VAPS officials stated that this  field is determined and entered by the user."], "subsections": []}, {"section_title": "Office of Accountability and Whistleblower Protection (OAWP)\u2014 VA-Wide Adverse Employment Action and Performance Improvement Plan Database", "paragraphs": ["This data file is designed to track all allegations of misconduct and  associated disciplinary actions taken against VA employees. Through our  analysis of this spreadsheet, we identified 1 field out of 34 that did not  have standardization that could be useful to analyze misconduct.", "Position Title\u2014We found this field contained at least 15 different  variations of Registered Nurse, such as \u201cRegistered Nurse,\u201d \u201cStaff  RN,\u201d and \u201cRN.\u201d"], "subsections": []}]}, {"section_title": "Appendix IV: Misconduct File Review", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Illustrative Case Examples of Senior-Official Misconduct during Calendar Years 2011 through 2014", "paragraphs": [], "subsections": [{"section_title": "Case 1", "paragraphs": ["Allegations surrounding inadequate staffing, patient care, and safety at a  Department of Veterans Affairs (VA) emergency room were investigated  by the medical center director of the facility. The medical center director  found that the inadequate patient care and safety issue was  unsubstantiated based on a review of patient safety incidents for the last  6 months. The medical center director did not provide a copy of her report  review to support this conclusion. She also indicated that an external  consultant was hired to assess staffing issues, and found generally that  improvements could be made for staffing to address surge capacity. The  director stated the medical center was in the process of implementing the  recommendations made by the consultant, but her response did not  discuss the specific improvements planned or include the external  consultant\u2019s report."], "subsections": []}, {"section_title": "Case 2", "paragraphs": ["A fact-finding was performed by a panel comprised of VA Connecticut  Healthcare System officials in response to alleged violations of law, gross  mismanagement, and waste of funds that included the improper billing of  services for a Las Vegas conference and paying contracts through a VA  nonprofit corporation to handle such expenditures. The allegations  specifically requested a cost-benefit analysis for the conference location.  The response received from the program office stated that an outside  accounting firm performs an annual financial audit of the VA nonprofit  corporation and found no material issues. Neither a copy of the annual  financial audit nor a cost-benefit analysis was provided in the response as  support. Additionally, the response did not address allegations regarding  the status of several essential positions vacated over the prior 3 years."], "subsections": []}, {"section_title": "Case 3", "paragraphs": ["Allegations involved time-and-attendance abuse by a physician who was  accused of not responding to calls from peers or coming into the clinic, in  favor of his private practice. According to the complainant, physician  assistants (PA) examine the physician\u2019s patients at the clinic for him. The  medical center director, who was also named in the allegation as having  received a similar complaint against the physician 2 years earlier,  reviewed the case against the physician and himself. The medical center  director\u2019s response claimed that the location indicated in the allegation  was not a private practice, but rather a location where the physician  reviews medical records and sometimes serves as an expert witness. He  did not provide evidence to support his claim. The medical center director  also stated that he had not received any reports against the physician for  missed calls or clinics and that PAs are expected to participate in these  activities. However, he did not provide the physician\u2019s work log, or the PA  position descriptions showing that they are allowed to perform these  functions autonomously. Finally, the medical center director claimed he  did not recall the allegation made against the physician 2 years prior and  neither formally substantiated nor disproved the current allegations  against the physician. No recommendations were made."], "subsections": []}, {"section_title": "Case 4", "paragraphs": ["The medical center director was accused of hiring an unqualified  individual to a Quality Manager position due to their romantic relationship.  The response received from the human-resources consultant noted that it  was unusual to find a Nurse II manager with only an associate\u2019s degree,  but was not illegal, and the employee was qualified based on prior  experience. Concerns were also raised concerning the medical center  director\u2019s use of over $400 in government funds to \u201csoundproof\u201d the  Quality Manager\u2019s office, including having panels attached to one wall  and the hollow office door replaced with a solid door. The Chief of  Engineering Services was interviewed regarding the request and stated it  was an odd request, and the first time he was asked to soundproof an  administrative employee\u2019s office. The response provided by the program  office did not address why the director used government funds to  soundproof the Quality Manager\u2019s office. The response provided also did  not address whether recommendations that the Quality Manager\u2019s  retention allowance be reviewed for compliance and that she be  counseled for appropriate office dress code were implemented."], "subsections": []}, {"section_title": "Case 5", "paragraphs": ["The medical center director was alleged to have misrepresented a plan to  track and provide mental-health services to veterans in non-VA hospitals  and created a hostile work environment against African-American  veterans and employees. The medical center director investigated the  allegations against himself and provided a response that was eventually  submitted late to the OIG. His response indicated that a review was  completed and all allegations were unsubstantiated. Several documents  provided with his response showed that only 12 contacts were made to  veterans with mental-health care needs during the requested 24-month  period, the percentage of patients experiencing wait times greater than 14  days before receiving mental-health services averaged 18 percent, and  two veteran suicides occurred. The medical center director did not  address allegations of creating a hostile work environment for African  American veterans and employees."], "subsections": []}, {"section_title": "Case 6", "paragraphs": ["The medical center director improperly reannounced a vacancy in order  to hire an individual with whom he allegedly had a close personal  relationship to an Assistant Director position. He also requested the  master key to the facility be issued to her against regulations. The  allegation involving the master key was substantiated, but the Deputy  Under Secretary who conducted the investigation stated that while there  was no record of the key being returned, the key was returned and the  general engineer brought the facility into compliance with VA regulations.  Nonetheless, the Deputy Under Secretary found that a master key was  issued in violation of policy, but no recommendations were made to the  medical center director for corrective action."], "subsections": []}, {"section_title": "Case 7", "paragraphs": ["Allegations involved false patient wait-time documentation and abuse of  authority. Specifically, a medical center director instructed staff to falsify  patient wait times between follow-up appointments in order to meet VA\u2019s  14-day timeliness metric. The investigation concluded that the false  documentation allegation was substantiated, but attributed the cause to  staff not understanding how to enter a follow-up appointment date into the  system. It was also concluded that the correction of several hundred  dates in the system improved the performance of the department for the  national wait-time metric. However, no documentation was provided to (1)  prove the medical center director had not abused his authority by  instructing staff to review wait times greater than 14 days to determine  how they could be reduced, and (2) support the conclusion that the  original wait times were entered in error."], "subsections": []}]}, {"section_title": "Appendix VI: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of Veterans Affairs Office of Inspector General", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Dave Bruno (Assistant Director), Erica  Varner (Analyst in Charge), Hiwotte Amare, Chris Cronin, Carrie  Davidson, Ranya Elias, Colin Fallon, Mitch Karpman, Grant Mallie, Anna  Maria Ortiz, Sabrina Streagle, Reed Van Beveren, and April Van Cleef  made key contributions to this report."], "subsections": []}]}], "fastfact": ["Employee misconduct at VA's medical facilities can have serious consequences for veterans. We looked at how VA deals with employee misconduct and found several opportunities for improvement. For example:", "VA doesn't always maintain required files and documents for adjudication, suggesting that employees may not have received due process.", "VA officials found guilty of misconduct sometimes received a lesser punishment than recommended or no punishment.", "Whistleblowers were 10 times more likely than their peers to receive disciplinary action within a year of reporting misconduct.", "We made recommendations to address these and other issues we found."]}
{"id": "GAO-18-628", "url": "https://www.gao.gov/products/GAO-18-628", "title": "Medicaid Home- and Community-Based Services: Selected States' Program Structures and Challenges Providing Services", "published_date": "2018-08-30T00:00:00", "released_date": "2018-10-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The need for LTSS to assist individuals with limited abilities for self-care is expected to increase, in part due to the aging of the population. Medicaid is the nation's primary payer of LTSS, with spending estimated at $167 billion in 2016. State Medicaid programs are generally required to cover LTSS provided in institutions, such as nursing homes, but coverage of the same services outside of institutions\u2014that is, HCBS\u2014is generally optional. In recent years there have been efforts to shift the balance of LTSS away from institutions through the expanded use of HCBS. National spending for HCBS has increased and now exceeds that for services in an institution. However, the extent to which Medicaid programs cover HCBS varies by state, as does the structure of states' HCBS programs.", "GAO was asked to review the approaches states use to provide coverage for HCBS in the Medicaid program. For selected states, this report describes (1) decisions that influenced the structure of Medicaid HCBS programs, and (2) challenges providing HCBS to Medicaid beneficiaries and efforts to respond to these challenges. GAO reviewed information and conducted interviews with officials from a nongeneralizable sample of five states, which GAO selected to obtain variation in the percentage of total Medicaid LTSS expenditures used for HCBS, geography, and other factors. GAO also reviewed information and interviewed officials from four MCOs\u2014two in each of the two selected states that used managed care to provide HCBS. The MCOs varied in enrollment size and population served."]}, {"section_title": "What GAO Found", "paragraphs": ["All state Medicaid programs finance coverage of long-term services and supports (LTSS), which help beneficiaries with physical, cognitive, or other limitations perform routine daily activities, such as eating, dressing, and making meals. When these services are provided in beneficiaries' homes or other community settings instead of nursing homes, the services are known as home- and community-based services (HCBS). The structure of the 26 HCBS programs we reviewed in five states\u2014Arizona, Florida, Mississippi, Montana, and Oregon\u2014reflected decisions about which populations to cover, whether to limit eligibility or enrollment, and whether to use managed care.", "Populations: Four of the five states had multiple HCBS programs that targeted specific populations. For example, Mississippi had separate HCBS programs for aged or physically disabled individuals and individuals with intellectual or developmental disabilities. The fifth state, Arizona, had one program that targeted two specific populations.", "Eligibility: All five states had at least one HCBS program that limited eligibility to beneficiaries whose needs would otherwise require care in a nursing home or other institutional setting.", "Enrollment: Four of the five states limited enrollment in one or more of their HCBS programs; 19 of the 26 programs had enrollment caps, and 12 of these programs maintained a waiting list.", "Managed care: Two of the five states used managed care to provide HCBS, paying managed care organizations (MCO) a fixed fee for each beneficiary rather than paying providers for each service delivered.", "State and MCO officials identified several challenges providing HCBS and described their efforts to respond to them:", "HCBS workforce: Officials cited challenges recruiting and retaining HCBS providers, particularly given the low wages these providers typically receive. To respond to this, officials from Mississippi, Montana, and two of the MCOs reported offering providers higher payment rates.", "Complex needs: Officials described challenges serving beneficiaries with complex medical and behavioral health needs, including individuals who display aggressive or other challenging behaviors. Officials from Montana and one MCO reported responding to this challenge by providing behavioral health training for providers.", "HCBS funding: State officials reported that limitations on overall HCBS funding levels posed a challenge, which they responded to by providing their state legislatures with information on the projected need for HCBS to inform future funding decisions, and leveraging other available resources, such as federal grants.", "The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["In the coming decades, the need for long-term services and supports  (LTSS) to assist individuals with limited abilities for self-care is expected  to increase, in part due to the aging of the population. Medicaid, a federal- state health financing program for low-income and medically needy  individuals, is the nation\u2019s primary payer of LTSS. LTSS comprise a broad  range of health care, personal care, and supportive services to help  individuals with physical, developmental, or cognitive disabilities maintain  their quality of life. For example, LTSS can help individuals perform  routine daily activities, such as eating, dressing, bathing, and making  meals. Many individuals prefer to receive LTSS in home- and community- based settings, rather than receiving care in a nursing home or other  institutional setting, because it can help them maintain their  independence and participate in community life to the fullest extent  possible. LTSS delivered outside of institutional settings are known as  home- and community-based services (HCBS), and include adult day  care, personal care services, and services provided in assisted living.", "While state Medicaid programs are required to finance coverage for  beneficiary care in nursing homes, coverage for most HCBS is optional,  which creates incentives for Medicaid to deliver LTSS in institutional  settings. In recent years the Congress, the Centers for Medicare &  Medicaid Services (CMS)\u2014the federal agency within the Department of  Health and Human Services (HHS) responsible for overseeing states\u2019  Medicaid programs\u2014and states have taken steps to expand the use of  HCBS and shift the provision of LTSS away from institutional settings.  For example, the Patient Protection and Affordable Care Act, enacted in  2010, created new options and provided additional funding for states to  make HCBS available to eligible Medicaid beneficiaries. In concert with  these efforts, the proportion of LTSS spending for HCBS has increased  nationwide. In fiscal year 2016, the most recent year of data available,  Medicaid spent an estimated $167 billion on LTSS. Of that amount, 57  percent\u2014or $94 billion\u2014was spent on HCBS. However, the extent to  which states cover HCBS in their Medicaid programs varies, as does the  proportion of LTSS spending used for HCBS; the proportion of Medicaid  LTSS spending on HCBS ranged from 27 percent to 81 percent among  states in 2016, a three-fold difference.", "States have a number of different options to provide Medicaid coverage  of HCBS. As a result, states vary in the structure of their HCBS programs.  States can provide certain types of HCBS under their state Medicaid  plans. In addition, states may seek permission from CMS to provide  HCBS under waivers of traditional Medicaid requirements; for example, in  order to provide services to a specific population, such as individuals with  intellectual or developmental disabilities, or to limit the number of  beneficiaries who can receive HCBS.", "Given the variety of options available for providing HCBS and the wide  variation in HCBS spending among states, questions arise about how  states are structuring their HCBS programs, as well as challenges they  may face in providing access to these services. You asked us to review  the approaches states use to provide coverage for HCBS in the Medicaid  program. This report describes  1.  decisions that influenced the structure of selected states\u2019 Medicaid  2.  selected states\u2019 challenges providing HCBS to Medicaid beneficiaries  and efforts to respond to these challenges.", "To address these objectives, we selected a nongeneralizeable sample of  five states: Arizona, Florida, Mississippi, Montana, and Oregon. We  selected these states to obtain variation in several factors, including  geographic location, the percentage of the state\u2019s population that resides  in a rural area, the proportion of the state\u2019s LTSS spending for HCBS, and  the state\u2019s use of various HCBS authorities and managed care. We  focused our work on the optional authorities the selected states used to  provide HCBS within Medicaid, including waivers and state plan options.  For the selected states, we reviewed documentation for the 26 HCBS  programs operated under these authorities at the time of our review,  including waiver applications, state plan amendments, and information  about program enrollment and waiting lists. We also conducted interviews  with state Medicaid officials in the five selected states and, as applicable,  officials from other state agencies, such as state aging or behavioral  health agencies that operate Medicaid HCBS programs, to understand  how states structured and delivered their HCBS benefits and any  challenges faced in providing HCBS. Additionally, we interviewed  officials from two managed care organizations (MCO) in each of the two  states (Arizona and Florida) that used a managed care delivery system to  provide LTSS, also referred to as managed long-term services and  supports (MLTSS). We selected the MCOs to include an MCO that serves  a large proportion of LTSS Medicaid beneficiaries in the state and to  achieve diversity in population served. To gather additional information  on factors and challenges that affect Medicaid HCBS programs, we also  interviewed CMS officials, the CMS contractor who produces an annual  report on LTSS expenditures in Medicaid, and representatives from two  aging and developmental disability professional groups.", "We conducted our performance audit from July 2017 through August  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Individuals who have a limited ability to care for themselves due to  physical, cognitive, or mental disabilities or conditions may require a  range of LTSS that include hands-on assistance with, or supervision of,  daily tasks. Individuals with LTSS needs range from young children to  older adults, and they have varying degrees of difficulty performing  without assistance (1) activities of daily living (ADL), such as bathing,  dressing, toileting, and eating, or (2) instrumental activities of daily living  (IADL), such as preparing meals, housekeeping, using the telephone, and  managing money; they may require full or partial assistance to complete  some\u2014or all\u2014of the ADLs and IADLs.", "LTSS are generally provided in two settings: (1) institutional settings,  such as nursing facilities and intermediate care facilities for individuals  with intellectual disabilities; and (2) home and community settings, such  as homes or assisted living facilities. LTSS provided in home- and  community-based settings comprise a wide range of services and  supports to help individuals remain in or return to their homes or  communities. HCBS include personal care services to provide assistance  with ADLs or IADLs, adult day care services, certain home modifications  that allow beneficiaries to remain in their home, non-medical  transportation, respite care for caregivers, and case management  services to coordinate services and supports. Direct care workers\u2014 personal care aides, homemakers, companions, and others\u2014provide the  majority of the paid care for individuals with LTSS needs."], "subsections": [{"section_title": "Medicaid Coverage of HCBS", "paragraphs": ["Medicaid provides states with a number of options for providing HCBS,  including through state plan benefits and through waivers and  demonstrations. Since 1975, states have had the option to offer personal  care services under their state Medicaid plan, which covers assistance  with ADLs and IADLs, either at home or in another location. States also  have the option to cover HCBS for Medicaid beneficiaries through waivers  and demonstrations, under which states may, for example, provide  services not otherwise covered by Medicaid to designated populations  who may or may not otherwise be eligible for Medicaid services. States  have the option to seek approval for waivers and demonstrations that  allow them to target HCBS to specific populations or conditions, limit the  availability of those services geographically, and limit the number of  individuals served through the use of enrollment caps\u2014actions that are  generally not otherwise allowed under Medicaid, but may enable states to  control costs. Table 1 below summarizes key characteristics of selected  state plan and waiver authorities that states can use to provide HCBS.", "The 1915(c) waiver, named for the statutory provision authorizing it in the  Social Security Act, is the primary means through which states provide  HCBS coverage for Medicaid beneficiaries. Added as an option in 1981,  these waivers account for the majority of Medicaid HCBS expenditures.", "Under 1915(c) waivers, states may cover a broad range of services for  participants, as long as these services are required to prevent  institutionalization. Therefore, to be eligible, individuals must demonstrate  the need for an institutional level of care by meeting state eligibility  requirements for services in an institutional setting, such as a nursing  facility. Prior to 2014, states were required to have multiple 1915(c)  waivers if they chose to target different populations\u2014using, for example,  one waiver for individuals with developmental disabilities and another for  individuals with physical disabilities. However, beginning in March 2014,  CMS permitted states to combine target groups within a single 1915(c)  waiver as long as the services offered were the same for all groups.", "States\u2019 1915(c) waivers are required by federal law to be cost neutral; that  is, states must show that the average Medicaid expenditures for the  services provided under the waiver are equal to or less than what  average expenditures would be if that same population were to be served  in an institutional setting. States may apply cost neutrality in the  aggregate across all waiver participants\u2014meaning that some individuals  can be more costly to serve in home- and community-based settings than  in an institution\u2014or individually, meaning that spending for each waiver  participant can be no more than what it would cost to serve the individual  in an institution. States also have the option to limit the number of  beneficiaries served under a 1915(c) waiver by establishing a predefined  enrollment cap. States with enrollment caps may establish a waiting list,  and a nationwide survey of state Medicaid officials estimated that there  were over 600,000 individuals on waiting lists for 1915(c) waiver services  in 2015.", "The newest Medicaid option for covering HCBS\u2014the Community First  Choice state plan option under section 1915(k) of the Social Security  Act\u2014was established by the Patient Protection and Affordable Care Act  in 2010. Under this option, states must provide personal care services to  assist beneficiaries with ADLs and IADLs and services to support the acquisition of skills necessary for beneficiaries to accomplish these daily  activities, among other things. The Community First Choice option also  allows for the coverage of other services, such as the costs associated  with moving a beneficiary from an institution to a home- or community- based setting. Like the 1915(c) waiver, this option is limited to individuals  who meet the state\u2019s institutional level-of-care criteria, but unlike the  1915(c) waiver, enrollment in a 1915(k) Community First Choice program  cannot be capped. States that offer this benefit receive a 6 percentage  point increase in their federal medical assistance percentage for services  provided under this option."], "subsections": []}, {"section_title": "Medicaid Spending on LTSS", "paragraphs": ["Medicaid spending on LTSS is significant, representing about 30 percent  of total Medicaid program spending in fiscal year 2016, and the  percentage of LTSS spending used for HCBS has grown over time.  CMS\u2019s annual reports on LTSS expenditures have shown that national  spending for HCBS as a percentage of LTSS spending surpassed the  percentage spent on institutional care in fiscal year 2013 and has  continued to grow, climbing to 53 percent in fiscal year 2014, 54 percent  in 2015, and 57 percent in 2016. At the state level, 29 states spent more   on HCBS than institutional care in fiscal year 2016, but the percentage of  HCBS spending varied widely across states. (See fig. 1.)", "As states\u2019 options for providing HCBS within Medicaid and spending on  HCBS have grown, Congress has also authorized temporary programs  aimed at increasing the provision of HCBS.", "Money Follows the Person was established by the Deficit Reduction  Act of 2005 as a demonstration grant program to support states\u2019  transition of eligible individuals who want to move from institutional  settings back to the community. As of September 2016, CMS had  awarded a total of about $3.7 billion in grant funding to 44 states.  According to CMS, as of December 2016, funding from the program  had been used to support the transition of more than 75,000  individuals back into the community. Authorization for the Money  Follows the Person program expired at the end of fiscal year 2016,  but states have through fiscal year 2018 to transition new  beneficiaries and through fiscal year 2020 to spend any remaining  grant funds.", "The Balancing Incentive Program was created by the Patient  Protection and Affordable Care Act to help states rebalance their  provision of LTSS toward greater use of HCBS. Under the program,  states that spent under 25 percent of their LTSS expenditures on  HCBS in fiscal year 2009 qualified for a 5 percentage point increase in  their federal medical assistance percentage for state HCBS  expenditures. States that spent between 25 and 50 percent were  eligible for a 2 percentage point increase. In return, states agreed to  increase the percentage of LTSS spending for HCBS to achieve a  specific benchmark. Under the program, CMS provided $2.4 billion  in enhanced federal matching payments over 4 years (October 2011 \u2013  September 2015) to 21 states. According to CMS, 15 of the 21 states  met their balancing benchmark by September 2015, when the  program ended."], "subsections": []}, {"section_title": "HCBS Delivery Systems", "paragraphs": ["States can choose among delivery systems, such as fee-for-service and  MLTSS (i.e., managed care), to provide HCBS. Under fee-for-service,  states pay providers directly and on a retrospective basis for each  covered service they deliver. In contrast, in MLTSS, states contract with  MCOs to provide a specific set of covered services to beneficiaries in  return for one fixed periodic payment per beneficiary, typically per  member per month. These payments are referred to as capitation  payments. The use of MLTSS has increased over time; MLTSS spending  rose from $10 billion in fiscal year 2012 to about $39 billion in 2016.  According to a 2018 CMS report, 24 states had implemented 41 MLTSS  programs as of August 2017, and there were about 1.8 million Medicaid  beneficiaries enrolled in MLTSS programs."], "subsections": []}]}, {"section_title": "Selected States\u2019 HCBS Program Structures Reflect Decisions about Populations to Cover, Whether to Limit Eligibility or Enrollment, and Managed Care Preferences", "paragraphs": ["The structure of the 26 HCBS programs we reviewed in selected states  reflected decisions about which populations states wanted to cover,  whether to limit eligibility for or enrollment in HCBS programs, and  whether the state wanted to provide HCBS through managed care (i.e.,  MLTSS). In two states, settlements resulting from litigation also affected  the structure of HCBS programs."], "subsections": [{"section_title": "Decisions about Which Populations to Cover", "paragraphs": ["Four of our five selected states\u2014Florida, Mississippi, Montana, and  Oregon\u2014had multiple HCBS programs (21 in total) that targeted specific  populations. The fifth state, Arizona, used one program to provide HCBS  to individuals who are aged or disabled and those with intellectual or  developmental disabilities. The remaining four programs were not  targeted to specific populations. (See appendix I for a list of the HCBS  programs and populations served in each of the selected states.)", "All four of Florida\u2019s HCBS waiver programs targeted specific  populations, such as individuals with intellectual or developmental  disabilities and individuals with familial dysautonomia. Florida\u2019s  HCBS program for intellectually and developmentally disabled  individuals included an individual budgeting model through which the  beneficiaries and their guardians could choose which services they  received and which providers would deliver the services. Such  individual budgeting also allowed beneficiaries the flexibility to make  adjustments in services and providers as their needs changed.", "All of Mississippi\u2019s six HCBS programs provided services to targeted  populations, including the aged or disabled and individuals with  severe orthopedic and neurological impairment. Two of the programs  were targeted to individuals with intellectual or developmental  disabilities, including a state plan benefit that provided services that  help beneficiaries develop daily living and social skills, as well as  opportunities to participate in community activities, and promote an  individual\u2019s ability to obtain and maintain employment.", "Four of Montana\u2019s six HCBS programs targeted specific populations,  including those with severe disabling mental illness and children with  autism. Officials from Montana told us that one of the reasons for  implementing the program for children with autism was to provide  early intensive treatment to lessen the degree of services needed  later in life. In addition to its programs for specific populations,  Montana also operated two programs that provided personal care  services to a broader Medicaid population requiring assistance with  ADLs and IADLs\u2014the personal care state plan benefit and the  Community First Choice program. Montana officials told us that one of  the factors the state considered when implementing the Community  First Choice program was the 6 percent enhanced federal match for  this program; before implementing the program, Montana projected  that the increase in federal funds would allow the state to serve an  additional 150 beneficiaries per year.", "Oregon had nine different HCBS programs, seven of which targeted  specific populations, including children with LTSS needs and different  populations of individuals with intellectual or developmental  disabilities. Like Montana, Oregon also had two personal care  services programs that served all eligible Medicaid beneficiaries\u2014a  state plan benefit and a Community First Choice program. Oregon  officials explained that they were also attracted to the Community First  Choice option due to the enhanced federal match, as well as the  opportunity to expand the array of services available. For example, in  addition to providing personal care services, Oregon\u2019s Community  First Choice program also covers costs associated with transitioning  beneficiaries from institutions to home- or community-based settings,  such as the first month\u2019s rent, utility deposits, bedding, and basic  kitchen supplies."], "subsections": []}, {"section_title": "Decisions about Whether to Limit Eligibility or Enrollment", "paragraphs": ["All five of the selected states had at least 1 HCBS program that limited  eligibility to individuals who require an institutional level of care.  Specifically, 22 of the 26 HCBS programs we reviewed limited eligibility to  this population. The remaining 4 programs\u2014in Mississippi, Montana, and  Oregon\u2014were state plan HCBS or personal care services programs,  which were operated under authorities that do not permit limiting  enrollment to individuals with an institutional level-of-care need.", "Four of the selected states\u2014Florida, Mississippi, Montana, and Oregon\u2014 had enrollment caps for 1 or more of their HCBS programs, namely all of  the 19 HCBS programs operated under 1915(c) waivers. Some of the  state officials we spoke with told us that they used historical data on  utilization, cost-of-care per person, and the annual number of requests for  enrollment, as well as information on available funding, when determining  their enrollment caps. However, states can also obtain CMS approval to  change their enrollment caps over time to respond to increased demand  or to include additional populations. Oregon officials told us that the state  has generally been able to increase the enrollment cap for the aged or  disabled program as needed in order to meet demand. Montana officials  told us that the enrollment cap for their HCBS program for individuals with  intellectual or developmental disabilities\u2014originally limited to children\u2014 was increased when the state decided to expand the program to serve  adults.", "The four selected states maintained waiting lists for 12 of the 19 HCBS  programs that limited enrollment through enrollment caps. However,  because states differed on whether they determined eligibility before  adding individuals to the waiting list, information on the number of  individuals on these waiting lists is not comparable across states. For  example, Florida did not screen for eligibility prior to placing individuals on  the waiting list of its aged or disabled waiver, which totaled over 48,000  individuals as of December 2017. By contrast, individuals on Montana\u2019s  much smaller aged or disabled waiting list were pre-screened for  eligibility. In addition, states varied on whether and how they set priorities  for enrollment in the waiver for individuals on the waiting list. For  example, the Montana aged or disabled waiver set priorities for an  individual\u2019s enrollment according to various state criteria, including risk of  institutionalization, and an assessment of informal supports. By contrast,  in Mississippi, individuals on the intellectual or developmental disabilities  waiting list generally gained enrollment into the waiver in order of their  date of eligibility."], "subsections": []}, {"section_title": "Decisions about Whether to Use MLTSS", "paragraphs": ["Two of the selected states we reviewed\u2014Arizona and Florida\u2014used  MLTSS for one HCBS program. Officials from these states told us the  ability to use managed care contracts to (1) set incentives aimed at  transitioning individuals from institutions to home- and community-based  settings and (2) increase oversight of providers were important factors in  choosing MLTSS to provide HCBS.", "Setting incentives for transitions. State officials told us that they  used contract incentives to shift services from nursing facilities to  community-based care in their MLTSS programs. Specifically,  Arizona and Florida used blended capitation rates, meaning that the  rate or amount the states pay MCOs to cover expected costs for each  LTSS beneficiary is the same for all beneficiaries regardless of  whether they are in a nursing home or in a home- and community- based setting. Because HCBS is generally less expensive than LTSS  delivered in institutional settings, blended rates can create a financial  advantage for the MCO to serve as many beneficiaries as possible in  home- and community-based settings. Three of the MCOs we spoke  with provided examples of how they have responded to these  incentives to provide HCBS. For example, an official from one MCO  told us that the MCO had created new positions for \u201ctransition  clinicians,\u201d registered nurses who use their medical knowledge to  systematically evaluate beneficiaries in an institution to determine if  they may be a candidate for transition to a community-based setting.  The official explained that after the transition clinician identifies a  potential candidate, the clinician will evaluate other factors, including  the candidate\u2019s current housing options and level of familial support,  in order to ensure that necessary resources are in place when the  beneficiary leaves the institution. In addition, the official said they  facilitated transitions by providing beneficiaries leaving nursing  facilities with a one-time $2,500 transition allowance that can be used  for expenses such as security or utility deposits, furniture, or new  resident fees at an assisted living facility.", "Oversight of MCOs. According to officials from Arizona and Florida,  the states chose to use MLTSS because it afforded better oversight of  providers and had the potential to improve patient outcomes.  Specifically, officials said that managing a limited number of MCOs,  who in turn have contracts with HCBS providers, allows for better  oversight and outcomes, and has led to service delivery  improvements, compared to paying providers on a fee-for-service  basis. For example, Florida officials explained that they recently  consolidated three smaller fee-for-service programs into their MLTSS  program. Prior to that consolidation, the three fee-for-service  programs provided HCBS to approximately 7,500 individuals with  AIDS, traumatic brain injury/spinal cord injury, and individuals with  cystic fibrosis. Officials said that they did not believe providers in  these smaller fee-for-service programs were providing good care,  based on service utilization analyses that showed some beneficiaries  were not accessing any services beyond one case management  service per month. Furthermore, the officials also told us that it was  harder to assess quality of care in the fee-for-service programs  compared to MLTSS. Officials said that now that these beneficiaries  receive care under the MLTSS waiver, there is more accountability  and improved quality of care.", "Representatives from aging and developmental disability professional  groups we interviewed said that states may also choose to implement  MLTSS programs to achieve greater budget predictability and control  costs. CMS\u2019s recent report on the growth of MLTSS also notes states\u2019  desire for improvements in quality of care and outcomes; increased  access to HCBS providers; and better care coordination, among other  factors. We have previously reported that although MLTSS can provide  states with the opportunity to enhance and encourage the provision of  HCBS, oversight at the state and federal levels is critical to ensure that  individuals with LTSS needs are able to obtain needed care in a timely  fashion. In addition, our prior work on MLTSS payment rates found that  five states\u2014including Arizona and Florida\u2014set clear financial incentives  in their MCO payment rates for greater use of community-based care,  while one state\u2019s rate structure included higher payments for beneficiaries  receiving institutional care. This state\u2019s rate structure could have created  an incentive for MCOs to move higher-cost beneficiaries from the  community to an institution. Additionally, we found that most of the states  reviewed for that prior work were not specifically linking payments with  MLTSS program goals such as beneficiary outcomes and that federal  oversight of states\u2019 MLTSS payment structures was limited. We made  several recommendations to improve CMS\u2019s oversight of states\u2019 payment  structures for MLTSS. CMS agreed with our recommendations and  reported actions it planned to take to address them.", "Officials from the three selected states that do not use MLTSS cited  various reasons for this, such as stakeholder opposition and state law  restrictions on enrolling individuals receiving LTSS in managed care. For  example, officials in Oregon explained that stakeholders objected to the  profit motive they assumed an MCO would have, which the stakeholders  believed would compromise quality of care and reduce beneficiaries\u2019  choice of providers. Officials in Montana said that because the state was  rural and had relatively few Medicaid beneficiaries, MLTSS would not be  cost effective."], "subsections": []}, {"section_title": "The Effects of Litigation on the Structure of HCBS Programs", "paragraphs": ["Officials from two of the selected states\u2014Oregon and Mississippi\u2014told  us that settlements resulting from litigation have shaped the structure of  their HCBS programs for certain populations. Oregon officials explained  that a legal settlement in 2001 resulted in the creation of an additional  HCBS program for individuals with intellectual or developmental  disabilities and the elimination of an HCBS waiting list for this population.  In Mississippi, officials explained that as a result of a legal settlement in  2005, the state increased enrollment in certain HCBS programs. As a  result of the settlement, officials said that state case managers contacted  all 1,900 individuals who resided in institutions at the time to determine  their interest in living in a home- and community-based setting. Those  who expressed interest were evaluated to determine if they could live  outside an institution and whether adequate familial or other support was  available. Based on this information, and as a result of additional funding  from the state legislature as a result of the lawsuit, the state was able to  add new beneficiaries to several of its HCBS programs."], "subsections": []}]}, {"section_title": "Selected States Described Challenges Providing HCBS, Such As Workforce Issues, and Steps Taken to Respond to These Challenges", "paragraphs": ["Officials from the five selected states and MCOs we interviewed  described challenges with providing HCBS, including workforce issues,  such as recruiting and retaining direct care workers; serving beneficiaries  with complex medical and behavioral health needs; and other challenges.  The officials also reported taking steps to respond to these challenges."], "subsections": [{"section_title": "HCBS Workforce Challenges", "paragraphs": ["Officials from all five selected states and three of the four MCOs we  interviewed described workforce challenges, such as recruiting and  retaining direct care workers and ensuring the availability of HCBS  providers in rural and remote areas. For example, officials from Montana  and Oregon noted that the low wages paid to direct care workers, who  provide hands-on care and assistance with ADLs and IADLs, contribute to  workforce shortages. According to the officials, direct care workers can  typically earn more by working at a fast food restaurant. Officials from  Montana and Mississippi and officials from three of the MCOs said the  workforce shortages are often worse in rural or remote areas, where  travel across long distances is common. For example, the state officials  said that it can be hard to find a provider willing to drive a long distance  each way to work for only a few hours.", "To respond to these workforce issues, officials from Montana and  Mississippi and two MCOs reported offering higher payment rates to  providers. In 2017, the Montana legislature approved special funding to  raise the hourly wage for direct care workers providing care in certain  Medicaid HCBS programs in state fiscal year 2019. Officials from  Mississippi said that based on a study of provider reimbursement rates in  one of their HCBS waiver programs, the state raised payment rates for  agencies that employ direct care workers and other providers in 2017.  Officials said they hoped the increase would create an incentive to recruit  and develop providers in more rural areas. Officials from Arizona and  Montana and one MCO also mentioned that Medicaid\u2019s participant- directed options\u2014which allow beneficiaries to draw paid caregivers from  among their family members, friends, and neighbors\u2014had helped to  address HCBS workforce shortages. Arizona officials said that roughly  half of beneficiaries in its HCBS program who were receiving personal  care services got their care from family members, including spouses and  parents of adult children living in the home."], "subsections": []}, {"section_title": "Serving HCBS Beneficiaries with Complex Needs", "paragraphs": ["Officials from four of the five selected states and all four MCOs we spoke  with said they faced challenges providing HCBS for beneficiaries with  complex medical or behavioral health needs. Officials we interviewed said  that complex medical conditions can be hard to accommodate in home-  and community-based settings. For example, officials from Mississippi  and one MCO mentioned difficulties finding appropriate placements for  individuals requiring ventilator services. State and MCO officials also  reported that complex conditions that affect beneficiaries\u2019 behavior, such  as co-occurring developmental disabilities and behavioral health  conditions, dementia, and traumatic brain injury can also create  challenges for providing HCBS, particularly when beneficiaries display  aggressive or other challenging behaviors. Officials from one MCO  explained that these beneficiaries\u2019 challenging behaviors can cause  friction between beneficiaries and their providers and make it harder for  beneficiaries to sustain good relationships with providers.", "Officials from the selected states and MCOs we interviewed said that they  have responded to the challenge of serving HCBS beneficiaries with  complex medical or behavioral health needs by (1) supporting the  development of locations in the community to serve individuals with  specific complex needs, (2) training providers, and (3) increasing care  coordination.", "Officials from one MCO said that they worked with nurses in the  community to support the development of adult foster homes as an  alternative to institutional care for beneficiaries who require ventilator  services. Similarly, Montana officials said they had reached out to  community partners, such as assisted living facility owners, to educate  them on what Medicaid can and cannot pay for in order to aid them in  developing multiple funding streams for specialized programs for  individuals with traumatic brain injury.", "Montana officials and officials from an MCO said they had offered  behavioral health training for providers; Montana offered a mental  health first aid class for providers, and MCO officials reported sending  behavioral health specialists into assisted living facilities to help train  staff on handling challenging behaviors in an effort to avoid  beneficiaries being moved out of the assisted living facility and into an  institutional setting.", "Regarding care coordination, Arizona officials reported that the state  is planning to offer beneficiaries with intellectual or developmental  disabilities the choice of a model of care that integrates medical care,  behavioral health care, and certain LTSS, under a single,  comprehensive managed care contract beginning in October 2019.  Officials from one MCO said this model of care will help better identify  needs and coordinate care, for example, for children with autism and  a co-occurring behavioral health condition."], "subsections": []}, {"section_title": "Limited Funding for HCBS Programs", "paragraphs": ["Officials from four selected states and officials from one of the MCOs in  the fifth state told us that limits on funding for HCBS programs were a  challenge, particularly in the context of the growing number of individuals  with LTSS needs.", "Officials from Mississippi said that lack of funding from the state  legislature had affected the enrollment of beneficiaries in certain  HCBS waivers. Specifically, officials said that the state was unable  to enroll as many beneficiaries in certain waivers as were approved by  CMS, and that only a limited number of beneficiaries had been added  to these programs for the past 2 or 3 years.", "Officials from one MCO in Arizona said that state budget constraints  had led to past reductions in the amount of certain HCBS, such as  respite care.", "Oregon officials said that the state experienced budgetary pressures  as a result of implementing its 1915(k) Community First Choice state  plan program, namely, that the increase in federal funding the state  received did not fully cover the increased cost of serving all eligible  beneficiaries as required under this option.", "Florida officials said that the state has experienced rapid growth in the  population with LTSS needs and that this growth, combined with  medical advances that prolong life and reduce attrition from waiver  programs, had contributed to a growing waiting list for HCBS.", "Officials who cited HCBS funding as a challenge said that they responded  to these challenges by, among other things, providing information to their  legislatures on the projected need for HCBS to inform future funding  decisions. For example, Florida officials said that they educate the  legislature about funding needs by conducting estimating conferences  that produce information that is provided to the Governor and both  legislative houses to use when deciding funding amounts. The  information provided includes the growth in the population of frail elders,  the projected demand for Medicaid, the cost of providing HCBS, and the  cost avoidance achieved by keeping people out of nursing homes.", "State officials have also leveraged alternative funding sources\u2014including  federal grants\u2014to help respond to funding limits for HCBS. Officials from  Montana and Mississippi said that CMS\u2019s Money Follows the Person  grant program\u2014which provided state Medicaid programs with funding for  beneficiaries to transition out of institutions\u2014had helped them to serve  more individuals in home- and community-based settings. Montana  officials noted that Money Follows the Person provided the state with  extra help to transition beneficiaries who were the most difficult to serve  and often had multiple co-occurring conditions from institutions to  community-based settings. Mississippi\u2019s Money Follows the Person  program\u2014Bridge to Independence\u2014resulted in a total of 540  beneficiaries moving from institutions to home- and community-based  settings, according to state officials. Mississippi officials also noted that  they maximize HCBS waiver funding by leveraging other potential funding  sources, such as charitable organizations, that could pay for items such  as a wheelchair ramp for a beneficiary before waiver funds were  expended."], "subsections": []}, {"section_title": "Other Challenges", "paragraphs": ["State and MCO officials also mentioned other challenges providing  HCBS:", "Affordable housing. Officials from Mississippi and Montana and one  MCO cited the lack of affordable housing as a barrier for beneficiaries  wishing to transition out of an institution. The MCO officials we spoke  with said their transitions team, which assists beneficiaries who are  moving out of an institution into the community, includes a housing  coordinator whose job it is to track available housing and help  beneficiaries find housing they can afford.", "Limits on HCBS spending per beneficiary. Officials from one MCO  said that the state\u2019s limit on HCBS waiver spending per beneficiary\u2014 requiring that spending for HCBS does not exceed the cost of  institutional care\u2014was a challenge, particularly for beneficiaries with  high needs. The officials indicated that the MCO tracks HCBS  spending for each beneficiary and reviews plans of care when a  beneficiary reached 80 percent and 95 percent of the spending limit.  Beneficiaries whose spending exceeds 100 percent for more than a 6- month period can choose to move to an institutional setting, or to  continue to receive more limited HCBS that do not exceed the cost of  care in an institution. In cases where the MCO believed the  beneficiary could not be safely served in the community at that level of  spending, officials said that beneficiaries and their families were  required to sign a form acknowledging the safety risks."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["HHS provided technical comments on a draft of this report, which we  incorporated as appropriate.", "As discussed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution until 30 days after its  issuance date. At that time, we will send copies of this report to the  Secretary of Health and Human Services and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions, please contact me at  (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are listed in appendix II."], "subsections": []}]}, {"section_title": "Appendix I: Home- and Community-Based Services Programs in Selected States", "paragraphs": ["Developmental Disabilities  Individual Budgeting Waiver  1915(c)  1915(c) and  1915(j)", "Familial Dysautonomia Waiver  1915(c)", "Individuals diagnosed with familial  dysautonomia  1915(c)", "Children under 21 years of age with  degenerative spinocerebellar disease   1915(c)   1915(c) 1915(c)", "Intellectual Disabilities/  Developmental Disabilities  Waiver   1915(c)", "Traumatic Brain Injury/Spinal  Cord Injury Waiver   1915(c)", "Individuals with traumatic brain injury or  spinal cord injury   1915(i)", "Individuals with intellectual or  developmental disabilities  1915(c)", "Home and Community-Based  Waiver for Individuals with  Developmental Disabilities   1915(c)", "Children\u2019s Autism Waiver   1915(c)", "Behavioral Health Severe and  Disabling Mental Illness HCBS  Waiver   1915(c)", "State Plan Personal Care  Services   1905(a)(24)   N/A   1915(k)   1915(c)"], "subsections": [{"section_title": "State", "paragraphs": ["Authorizing  statute  1915(c)", "Medically Involved Children\u2019s  Waiver   1915(c)", "Behavioral Intermediate Care  Facility for Individuals with  Intellectual Disabilities Model  Waiver   1915(c)", "Intermediate Care Facility for  Individuals with Intellectual  Disabilities (ICF/IID)  Comprehensive Waiver   1915(c)", "Intermediate Care Facility for  Individuals with Intellectual  Disabilities (ICF/IID) Support  Services Waiver   1915(c)", "Individuals 18 years of age or older with  intellectual or developmental disabilities   1915(i)", "State Plan Personal Care  Services   1905(a)(24)  N/A   1915(k)"], "subsections": []}]}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Michelle Rosenberg, Assistant  Director; Hannah Locke, Analyst-in-Charge; Romonda McKinney  Bumpus; Krister Friday; Vikki Porter; and Jennifer Whitworth made key  contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Medicaid Assisted Living Services: Improved Federal Oversight of  Beneficiary Health and Welfare Is Needed. GAO-18-179. Washington,  D.C.: January 5, 2018.", "Medicaid: CMS Should Take Additional Steps to Improve Assessments of  Individuals\u2019 Needs for Home- and Community-Based Services.  GAO-18-103. Washington, D.C.: December 14, 2017.", "Medicaid Managed Care: CMS Should Improve Oversight of Access and  Quality in States\u2019 Long-Term Services and Supports Programs.  GAO-17-632. Washington, D.C.: August 14, 2017.", "Medicaid: CMS Needs Better Data to Monitor the Provision of and  Spending on Personal Care Services. GAO-17-169. Washington, D.C.:  January 12, 2017.", "Medicaid Managed Care: Improved Oversight Needed of Payment Rates  for Long-Term Services and Supports. GAO-17-145. Washington, D.C.:  January 9, 2017.", "Medicaid Personal Care Services: CMS Could Do More to Harmonize  Requirements across Programs. GAO-17-28. Washington, D.C.:  November 23, 2016.", "Long-Term Care Workforce: Better Information Needed on Nursing  Assistants, Home Health Aides, and Other Direct Care Workers.  GAO-16-718. Washington, D.C.: August 16, 2016.", "Older Adults: Federal Strategy Needed to Help Ensure Efficient and  Effective Delivery of Home- and Community-Based Services and  Supports. GAO-15-190. Washington, D.C.: May 20, 2015.", "Medicaid: States\u2019 Plans to Pursue New and Revised Options for Home-  and Community-Based Services. GAO-12-649. Washington, D.C.: June  13, 2012."], "subsections": []}], "fastfact": ["People who need long-term services to help with routine daily activities, such as bathing and eating, often prefer to remain in their homes and communities rather than receive care in nursing homes or other institutions. State Medicaid programs must cover nursing home care, but can choose to cover most home- and community-based care\u2014and they\u2019re increasingly opting to do so.", "States have faced challenges in providing these services, however, including finding and keeping home care workers, due to the low wages for these services. We found that states have made efforts to respond to these challenges."]}
{"id": "GAO-18-694T", "url": "https://www.gao.gov/products/GAO-18-694T", "title": "Nursing Home Quality: Continued Improvements Needed in CMS's Data and Oversight", "published_date": "2018-09-06T00:00:00", "released_date": "2018-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Approximately 15,600 nursing homes participating in the Medicare and Medicaid programs provide care to 1.4 million residents\u2014a population of elderly and disabled individuals. To help ensure nursing home residents receive quality care, CMS defines quality standards that homes must meet to participate in the Medicare and Medicaid programs. To monitor compliance with these standards, CMS enters into agreements with state survey agencies to conduct on-site surveys of the state's homes and also collects other data on nursing home quality.", "Although CMS and others have reported some potential improvements in nursing home quality, questions have been raised about nursing home quality and weaknesses in CMS oversight.", "This statement summarizes GAO's October 2015 report, GAO-16-33 . Specifically, it describes (1) trends in nursing home quality through 2014, and (2) changes CMS had made to its oversight activities as of October 2015. It also includes the status of GAO's recommendations associated with these findings. GAO recently obtained information from CMS officials about steps they have taken to implement the 2015 GAO recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's October 2015 report found mixed results in nursing home quality based on its analysis of trends reflected in key sources of quality data that the Centers for Medicare & Medicaid Services (CMS) collects.", "An increase in reported consumer complaints suggested that consumers' concerns about nursing home quality increased.", "In contrast, trends in care deficiencies, nurse staffing levels, and clinical quality measures indicated potential improvement in nursing home quality.", "GAO also found that data issues complicated CMS's ability to assess nursing home quality trends. For example:", "CMS allowed states to use different survey methodologies to measure deficiencies in nursing home care, which complicates the ability to make comparisons nationwide. GAO recommended that CMS implement a standardized survey methodology across states, and in November 2017 CMS completed national implementation.", "CMS did not regularly audit selected quality data including nurse staffing and clinical data (for example, on residents with pressure ulcers) to ensure their accuracy. GAO recommended CMS implement a plan for ongoing auditing of quality data. The agency concurred with this recommendation and has been conducting regular audits of nurse staffing data but does not have a plan to audit other quality data on a continuing basis. GAO continues to believe that regular audits are needed to ensure the accuracy and comparability of nursing home quality data.", "GAO's October 2015 report found that CMS had made numerous modifications to its nursing home oversight activities. However, CMS had not monitored how the modifications might affect its ability to assess nursing home quality. GAO found that some modifications expanded or added new activities\u2014such as creating new training for state surveyors on unnecessary medication usage\u2014while others reduced existing activities. For example, CMS reduced the number of nursing homes participating in the Special Focus Facility program\u2014which provides additional oversight of certain homes with a history of poor performance\u2014by over half from 2013 to 2014. CMS officials told GAO that some of the reductions to oversight activities were in response to an increase in oversight responsibilities and a limited number of staff and financial resources. To help ensure modifications do not adversely affect CMS's ability to assess nursing home quality, GAO recommended that CMS monitor modifications of essential oversight activities to better understand the effects on nursing home quality oversight. CMS concurred with this recommendation and told us it has begun to take steps to address it. Such monitoring is important for CMS to better understand how its oversight modifications affect nursing home quality and to improve its oversight given limited resources."]}], "report": [{"section_title": "Letter", "paragraphs": ["I\u2019m pleased to be here today to discuss our work on nursing home quality  and the Centers for Medicare & Medicaid Services\u2019 (CMS) oversight of  nursing homes. Nationwide, approximately 15,600 nursing homes provide  care to about 1.4 million nursing home residents\u2014a population of elderly  and disabled individuals. To help ensure this population receives quality  care, CMS defines the quality standards nursing homes must meet in  order to participate in the Medicare and Medicaid programs. To monitor  compliance with these standards, CMS enters into agreements with state  survey agencies to conduct required surveys, or evaluations, of the  state\u2019s nursing homes.", "For many years, we and the Department of Health and Human Services  (HHS) Office of the Inspector General (OIG) have reported on problems  in nursing home quality and on weaknesses in CMS\u2019s oversight. As early  as 1998, GAO reported on residents in California nursing homes who  received unacceptable care that sometimes endangered their health and  safety. In the intervening two decades, across more than 20 reports,  GAO has repeatedly reported on shortcomings both in the care some  nursing home residents received and in the federal and state oversight of  nursing home care. For example, a 1999 report found that complaint  investigation processes were often inadequate to protect residents, and a  2008 report found federal oversight continued to demonstrate that state  inspections understated serious care problems. In response to identified  weaknesses, CMS and state survey agencies have made some changes in how they conduct oversight of nursing home quality, and some  potential improvements in nursing home quality have been reported in  recent years. For example, CMS has reported a decrease in the  percentage of homes that were cited for serious health deficiencies from  2006 to 2014. In addition, CMS and others have reported on  improvements in specific nursing home clinical measures, such as  reductions in the use of physical restraints, which can be a sign of  improved quality of care.", "However, as you know, news stories and reports continue to identify  potential problems in nursing homes. For example, a July 2018 article  from Kaiser Health News highlighted that new data collected by CMS to  evaluate nurse staffing showed most nursing homes had fewer nurses  and caretaking staff than they had previously reported to CMS, with  frequent and significant fluctuations in day-to-day staffing. As part of its  ongoing work, the OIG determined CMS does not have adequate  procedures in place to ensure incidents of potential abuse or neglect of  Medicare beneficiaries in nursing homes are identified and reported. In  light of these concerns and a delay in enforcement of 2016 long-term care  regulatory reforms, as well as a reduction in civil money penalties for non- compliance with federal health and safety requirements, 17 state  attorneys general sent a letter urging CMS to implement the strengthened  regulations and maintain penalties for non-compliance in May 2018.", "To help inform today\u2019s discussion, my testimony will focus on the findings  from our October 2015 report examining CMS\u2019s oversight of nursing  home quality. In particular, this statement will address:  1.  trends in nursing home quality through 2014, and  2.  changes CMS had made to its oversight activities as of October 2015.", "In addition, I will highlight key actions that we recommended HHS take,  including HHS\u2019s response and the current status of those  recommendations.", "While my comments today focus on the findings of our October 2015  report, they are also informed by our large body of work examining  nursing home quality. (See Appendix I for a list of related GAO reports.)", "In our October 2015 report, we analyzed four key sets of quality data from  CMS using the most recent data available at that time. We also reviewed  relevant oversight and data documents and interviewed officials from  CMS central office, CMS regional offices, and state survey agencies for a  selected group of states. The 2015 report includes a full description of our  scope and methodology. We also obtained information from CMS on the  status of our 2015 recommendations, as of 2018. We conducted the work  on which this statement is based 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Oversight of nursing homes is a shared federal-state responsibility, with  CMS central and regional offices overseeing activities completed by state  survey agencies. Specifically, CMS central office (1) oversees the federal  quality standards nursing homes must meet to participate in the Medicare  and Medicaid programs and (2) establishes the responsibilities of CMS\u2019s  regional offices and state survey agencies to ensure federal quality  standards for nursing homes are met. CMS regional offices oversee state  activities and report results back to CMS central office. Specifically,  regional offices are required to conduct annual federal monitoring surveys  to assess the adequacy of surveys conducted by state survey agencies.  CMS regional offices also evaluate state surveyors\u2019 performance on  factors such as the frequency and quality of state surveys. Finally, in each  state, under agreement with CMS, a state survey agency assesses  whether nursing homes meet CMS\u2019s standards by conducting regular  surveys and investigations of complaints regarding resident care or  safety, as needed.", "CMS collects data on nursing home quality through annual standard  surveys and complaint investigations, as well as other sources, such as  staffing data and clinical quality measures.", "Standard surveys. By law, every nursing home receiving Medicare or  Medicaid payment must undergo a standard survey during which  teams of state surveyors conduct a comprehensive on-site evaluation  of compliance with federal quality standards. Nursing homes with  consistently poor performance can be selected for the Special Focus  Facility (SFF) program, which requires more intensive oversight,  including more frequent surveys.", "Complaint investigations. Nursing homes also are surveyed on an  as-needed basis with investigations of consumer complaints. These  complaints can be filed with state survey agencies by residents,  families, ombudsmen, or others acting on a resident\u2019s behalf. During  an investigation, state surveyors evaluate the nursing home\u2019s  compliance with a specific federal quality standard.", "Staffing data. Nurse staffing levels are considered a key component  of nursing home quality and are often measured in total nurse hours  per resident day. Higher nurse staffing levels are typically linked with  higher quality nursing home care.", "Clinical quality measures. Nursing homes are required to provide  data on certain clinical quality measures\u2014such as the incidence of  pressure ulcers\u2014for all residents to CMS. CMS currently tracks data  for 18 clinical quality measures.", "CMS publicly reports a summary of each nursing home\u2019s quality data on  its Nursing Home Compare website using a five-star quality rating. The  Five-Star Quality Rating System assigns each nursing home an overall  rating and three component ratings\u2014surveys (standard and complaint),  staffing, and quality measures\u2014based on the extent to which the nursing  home meets CMS\u2019s quality standards and other measures. In a 2016  report, we found that CMS did not have a systematic process for  prioritizing recommended changes to improve its Nursing Home Compare  website and that several factors limited the ability of CMS\u2019s Five-Star  Quality Rating System to help consumers understand nursing home  quality and choose a home. We recommended that CMS establish a  process to evaluate and prioritize website improvements and add  explanatory information about the Five-Star System to Nursing Home  Compare.  HHS agreed and in 2018 completed actions on these  recommendations, but has not yet acted on the other recommendations,  including providing national comparison information that we maintain are  important to help enable consumers to understand nursing home quality  and make distinctions between nursing homes."], "subsections": []}, {"section_title": "Nursing Home Quality Data Show Mixed Results, Although Data Issues Complicate Ability to Assess Quality Trends Data on Nursing Home Quality Showed Mixed Results", "paragraphs": ["In our October 2015 report examining trend data that give insight into  nursing home quality, we found that four key data sets showed mixed  results, and data issues complicated the ability to assess quality trends.", "Nationally, one of the four data sets\u2014consumer complaints\u2014suggested  consumers\u2019 concerns over nursing home quality increased from 2005 to  2014. However, the other three data sets\u2014deficiencies, staffing levels,  and clinical quality measures\u2014indicated potential improvement in nursing  home quality (see Table 1). Specifically, we found consumer  complaints\u2014which can originate from residents, families, ombudsmen, or  others acting on a resident\u2019s behalf\u2014had a 21 percent increase from  2005 to 2014. In contrast, nurse staffing levels increased 9 percent from  2009 to 2014 and selected quality measure scores showed decreases in  the number of reported quality problems, such as falls resulting in major  injury from 2011 to 2014.", "In addition, we identified 416 homes in 36 states that had consistently  poor performance across the four data sets we examined. Of the 416  homes, 71 (17 percent) were included in the Special Focus Facility (SFF)  program at some point between 2005 and 2014."], "subsections": [{"section_title": "Data Issues Complicated CMS\u2019s Ability to Assess Quality Trends", "paragraphs": ["In our October 2015 report, we found CMS\u2019s ability to use available data  to assess nursing home quality trends was complicated by various issues  with these data, which made it difficult to determine whether observed  trends reflect actual changes in quality, data issues, or both. CMS has  taken some actions to address these data complications, however, more  work is needed.", "Consumer complaints: The average number of consumer complaints  reported per nursing home increased in the 10 years of data we  examined, although it is unclear to what extent this can be attributed to a  change in quality or to state variation in the recording of complaints.  Some state survey agency officials explained that changes in how they  recorded complaints into CMS\u2019s complaint tracking system could in part  account for the jump in reported complaints. In addition, officials at one  state survey agency explained the increase in complaints could also  reflect state-level efforts to provide consumers with more user-friendly  options for filing complaints. Similarly, in April 2011, we found differences  in how states record and track complaints.", "Deficiencies cited on standard surveys: The decline in the number of  serious deficiencies\u2014deficiencies that at a minimum caused a harm to  the resident\u2014in the data we examined may have indicated an  improvement in quality, although it may also be attributed to  inconsistencies in measurement. For example, the use of multiple survey  types, such as both traditional paper-based surveys and electronic  surveys, to conduct the standard survey that every nursing home  receiving Medicare or Medicaid payment must undergo complicates the  ability to compare the results of these surveys nationally. In our October  2015 report, we recommended CMS implement the same survey  methodology across all states; HHS agreed with this recommendation  and in November 2017 completed its national implementation of this  electronic survey methodology.", "Nurse staffing: CMS data showed the average total nurse hours per  resident day increased from 2009 through 2014, although CMS did not  have assurance these data were accurate. Many of the regional office  and state survey agency officials we spoke with expressed concern over  the self-reported nature of these data, noting that it may be easy to  misrepresent nurse staff hours. At the time of our 2015 report, CMS was  in the process of implementing a system to collect staffing information  based on payroll and other verifiable data and has now completed that  implementation, as required by law. We recommended in 2015 that CMS  establish and implement a clear plan for ongoing auditing of its staffing  data and other quality data. HHS agreed with this recommendation and in  July 2018 CMS provided us with documentation that it was conducting  regular audits of this new nurse staffing data. According to CMS, facilities  experienced challenges submitting complete and accurate data in the  early stages, however, as of April 2018 the agency has begun relying on  the payroll data to calculate the staffing measures that it posts in Nursing  Home Compare and uses in the Five-Star Quality Rating System.", "Selected quality measures: Nursing homes generally improved their  performance on the eight selected quality measures we reviewed,  although it is unclear to what extent this can be attributed to a change in  quality or possible inaccuracies in self-reported data. Like the nurse  staffing data used by CMS, data on nursing homes\u2019 performance on these  measures were self-reported, and until 2014 CMS conducted little to no  auditing of these data to ensure their accuracy. In our 2015 report, we  found CMS had begun taking steps to help mitigate the problem with self- reported data by starting to audit the data in 2015; however, the agency  did not have clear plans to continue the audits beyond 2016. As such, in  our recommendation we indicated the need for ongoing auditing of data  used to calculate clinical quality measures. As of August 2018, CMS has  not provided us a plan for ongoing auditing of its clinical quality measures  and we continue to believe that CMS should establish and carry out such  a plan.", "Collectively, these data issues have broader implications related to  nursing home quality trends, including potential effects on the quality  benchmarks CMS sets and consumers\u2019 decisions about which nursing  home to select. Furthermore, data used by CMS to assess quality  measures are also used when determining Medicare payments to nursing  homes, so data issues\u2014and CMS\u2019s internal controls related to the data\u2014 could affect the accuracy of payments. Moreover, the use of quality data  for payment purposes will expand in fiscal year 2019 when a nursing  home value-based purchasing program will be implemented, which will  increase or reduce Medicare payments to nursing homes based on  certain quality measures."], "subsections": []}]}, {"section_title": "CMS Had Modified Oversight Activities by 2015, But Had Not Monitored Potential Effect on Nursing Home Quality Oversight", "paragraphs": ["Our 2015 report found that CMS had made numerous modifications to its  nursing home oversight activities in recent years, but had not monitored  the potential effect of these modifications on nursing home quality  oversight. Some of these modifications expanded or added new oversight  activities\u2014for example, CMS expanded the number of tools available to  state surveyors when investigating medication-related adverse events,  increased the amount of nursing home quality data available to the public,  and created new trainings for surveyors on unnecessary medication  usage. However, other modifications reduced existing oversight  activities.", "In 2015, we highlighted modifications that reduced two existing oversight  activities\u2014the federal monitoring survey program and the SFF program.", "Federal monitoring surveys: CMS reduced the scope of the federal  monitoring surveys regional offices use to evaluate state surveyors\u2019  skills in assessing nursing home quality. CMS requires regional  offices to complete federal monitoring surveys in at least 5 percent of  nursing homes surveyed by the state each year. Starting in 2013,  CMS required fewer federal monitoring surveys to be standard  surveys and allowed more monitoring surveys to be the narrower  scoped and less-resource intensive revisits and complaint  investigations.", "Special Focus Facilities: CMS reduced the number of nursing  homes participating in the SFF program. In 2013, CMS began to  reduce the number of homes in the program by instructing states to  terminate homes that had been in the program for 18 months without  improvement from participating in Medicare and Medicaid. As we  have previously reported, between 2013 and 2014, the number of  nursing homes in the SFF program dropped by more than half\u2014from  152 to 62. In 2014, CMS began the process of re-building the number  of facilities in the SFF program; however, according to CMS officials,  the process would be slow, and as of August 2018 there were 85  SFFs.", "In 2015, CMS said some of the reductions to oversight activities were in  response to an increase in oversight responsibilities and limited number  of staff and financial resources. Specifically, CMS officials said increasing  oversight responsibilities and a limited number of staff and financial  resources at the central, regional, and state levels required the agency to  evaluate its activities and reduce the scope of some activities. In the  October 2015 report, we recommended CMS monitor oversight  modifications to better assess their effects; HHS agreed with the  recommendation and told us they are beginning to take steps to address  this issue. We maintain the importance of monitoring to help CMS better  understand how its oversight modifications affect nursing home quality  and to improve its oversight given limited resources.", "Chairman Harper, Ranking Member DeGette, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information about this statement, please contact John E.  Dicken at (202) 512-7114 or dickenj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony. In addition to the contact named above,  key contributors to this statement were Karin Wallestad (Assistant  Director), Sam Amrhein, Summar Corley, Pam Dooley, Will Simerl, and  Jennifer Whitworth."], "subsections": []}]}, {"section_title": "Appendix I: Related GAO Reports", "paragraphs": ["Nursing Homes: Consumers Could Benefit from Improvements to the  Nursing Home Compare Website and Five-Star Quality Rating System.  GAO-17-61. Washington, D.C.: November 18, 2016.", "Skilled Nursing Facilities: CMS Should Improve Accessibility and  Reliability of Expenditure Data. GAO-16-700. Washington, D.C.:  September 7, 2016.", "Nursing Home Quality: CMS Should Continue to Improve Data and  Oversight. GAO-16-33. Washington, D.C.: October 30, 2015.", "Health Care Transparency: Actions Needed to Improve Cost and Quality  Information for Consumers. GAO-15-11. Washington, D.C.: October 20,  2014.", "Nursing Homes: More Reliable Data and Consistent Guidance Would  Improve CMS Oversight of State Complaint Investigations. GAO-11-280.  Washington, D.C.: April 7, 2011.", "Nursing Homes: Complexity of Private Investment Purchases  Demonstrates Need for CMS to Improve the Usability and Completeness  of Ownership Data. GAO-10-710. Washington, D.C.: September 30,  2010.", "Poorly Performing Nursing Homes: Special Focus Facilities Are Often  Improving, but CMS\u2019s Program Could Be Strengthened. GAO-10-197.  Washington, D.C.: March 19, 2010.", "Nursing Homes: Addressing the Factors Underlying Understatement of  Serious Care Problems Requires Sustained CMS and State Commitment.  GAO-10-70. Washington, D.C.: November 24, 2009.", "Nursing Homes: Opportunities Exist to Facilitate the Use of the  Temporary Management Sanction. GAO-10-37R. Washington, D.C.:  November 20, 2009.", "Nursing Homes: CMS\u2019s Special Focus Facility Methodology Should Better  Target the Most Poorly Performing Homes, Which Tended to Be Chain  Affiliated and For-Profit. GAO-09-689. Washington, D.C.: August 28,  2009.", "Medicare and Medicaid Participating Facilities: CMS Needs to Reexamine  Its Approach for Funding State Oversight of Health Care Facilities.  GAO-09-64. Washington, D.C.: February 13, 2009.", "Nursing Homes: Federal Monitoring Surveys Demonstrate Continued  Understatement of Serious Care Problems and CMS Oversight  Weaknesses. GAO-08-517. Washington, D.C.: May 9, 2008.", "Nursing Homes: Efforts to Strengthen Federal Enforcement Have Not  Deterred Some Homes from Repeatedly Harming Residents.  GAO-07-241. Washington, D.C.: March 26, 2007.", "Nursing Homes: Complaint Investigation Processes Often Inadequate to  Protect Residents. GAO/HEHS-99-80. Washington, D.C.: March 22,  1999.", "California Nursing Homes: Care Problems Persist Despite Federal and  State Oversight. GAO/HEHS-98-202. Washington, D.C.: July 27, 1998.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": ["About 15,600 nursing homes participate in Medicare and Medicaid. To help ensure that residents receive quality care, the Centers for Medicare & Medicaid Services (CMS) collect data (such as nurse staffing levels) on these nursing homes.", "We testified that CMS's data showed mixed results\u2014they showed an increase in consumer complaints along with improvements in the quality of care. We found that data issues (e.g., different states using different data collection methods) complicated CMS\u2019s ability to assess whether the results reflected actual changes. We made recommendations to address these issues in the report on which this testimony is based."]}
{"id": "GAO-18-303", "url": "https://www.gao.gov/products/GAO-18-303", "title": "Wildlife and Sport Fish Restoration: Competitive Grant Programs Managed Consistently with Relevant Regulations, but Monitoring Could Be Improved", "published_date": "2018-02-22T00:00:00", "released_date": "2018-02-22T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FWS awarded $1.5 billion in grants in fiscal year 2016, which represented about half of the agency's budget. In general, FWS awards two types of grants: (1) formula grants, which are distributed to recipients based on a required formula, and (2) competitive grants, where potential recipients submit an application for funding that is reviewed and scored against criteria. Within FWS, WSFR manages several grant programs.", "GAO was asked to review WSFR's management of its competitive grant programs. This report (1) identifies and describes competitive grant programs that WSFR awards and monitors; (2) examines how WSFR awards grants under these programs and the extent to which this is consistent with relevant regulations; and (3) examines how WSFR monitors grants under these programs and the extent to which this is consistent with relevant regulations. GAO reviewed relevant federal laws, regulations, and FWS guidance; analyzed agency data for fiscal years 2012-2016; reviewed award documents for fiscal year 2016 and a sample of monitoring documents for grants awarded in fiscal year 2015 (selected to ensure sufficient time for required reports to be submitted) and compared these with requirements from relevant regulations; interviewed WSFR headquarters and regional officials and grant recipients."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Fish and Wildlife Service's (FWS) Wildlife and Sport Fish Restoration (WSFR) program, within the Department of the Interior, awards and monitors five competitive grant programs. These grant programs fund different types of projects ranging from building docks to acquiring wetlands. GAO found that the number of grants and funding awarded varied by grant program from fiscal years 2012 through 2016.", "Dollars in thousands", "The award process WSFR uses for the five competitive grant programs generally involves publicly announcing the grant opportunity through a Notice of Funding Opportunity, which contains information applicants need to consider when applying, such as available funding and criteria that will be used to score applications. A panel comprised of WSFR staff, and in some cases other FWS staff or a third party organization, reviews and scores the applications based on the criteria in the Notice of Funding Opportunity and develops a list of recommended projects and funding amounts. The list is forwarded to the Director of FWS for review and approval. GAO found that WSFR's grant award process is consistent with federal regulations for awarding federal grants.", "WSFR monitors its competitive grants by reviewing financial and performance reports submitted by grant recipients. In general, this process is consistent with relevant regulations, but some of the performance reports were missing required information. Specifically, for fiscal year 2015 grants GAO reviewed, financial and performance reports were generally submitted on time by grant recipients, but several performance reports (9 of 51) did not include a comparison of actual accomplishments to the goals of the grant, as required by regulations. WSFR does not have a template for grant recipients to follow in preparing these reports for most of the grant programs, and the template used by one region does not clearly ask for all required information. WSFR officials have said the agency plans to develop a more standardized reporting process but no timeline has been established. According to Standards for Internal Control in the Federal Government , management should design control activities to achieve objectives and respond to risks, including designing mechanisms to help monitor performance. Without a template or standardized method that facilitates the collection of performance information, WSFR grant recipients may continue to submit performance reports that are missing information needed by FWS to monitor its competitive grant programs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that FWS develop a template or other standardized method to facilitate collection of all required information for grant performance reports. The Department of the Interior concurred with this recommendation."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Fish and Wildlife Service (FWS), within the Department of the  Interior (Interior), awarded $1.5 billion in grants in fiscal year 2016, which  represented about 50 percent of the FWS budget. In general, FWS  awards two types of grants: (1) formula grants, which are distributed to  recipients based on a required formula, and (2) competitive grants, where  potential recipients submit an application for funding that is reviewed and  scored against criteria. Within FWS, the Wildlife and Sport Fish  Restoration (WSFR) Program is responsible for managing several of the  agency\u2019s grant programs, including two formula grant programs\u2014the  Wildlife Restoration Program and the Sport Fish Restoration Program. In  addition, WSFR awards and monitors several competitive grants to  recipients, which include state agencies and nongovernmental  organizations. In fiscal year 2016, WSFR awarded about $54 million in  these competitive grants. Competitive grant programs provide support for  various activities, such as helping to construct boat docks or acquiring  wetlands, and these grants are awarded annually.", "Our prior work has highlighted the importance of both awarding  competitive grants in a fair and transparent way and monitoring federal  grants. In recent years, the Office of Management and Budget (OMB)  has taken actions to help improve the effectiveness and efficiency of  grant-making across the federal government. Specifically, in 2011, OMB  created the Council on Financial Assistance Reform, an interagency  council charged with providing policy-level leadership for the grants  community and supporting reforms to improve the effectiveness and  efficiency of federal grants. Further, in December 2014, OMB\u2019s Uniform  Administrative Requirements, Cost Principles, and Audit Requirements  for Federal Awards (Uniform Guidance) became effective for new grant  awards after being adopted by federal grant-making agencies, including  Interior. The Uniform Guidance requires, among other things, that federal  agencies design and execute a merit review process for competitive grant  applications. A merit review process is characterized by the  establishment of criteria applied by the agency to evaluate the merit of  competitive grant applications and seeks to ensure that grant applications  are reviewed in a fair, competitive, and transparent manner. The Uniform  Guidance also requires certain monitoring activities for federal grants,  such as requiring grant recipients to submit financial and performance  reports.", "You asked us to review WSFR\u2019s management of its competitive grant  programs. This report (1) identifies and describes the competitive grant  programs that WSFR awards and monitors; (2) examines how WSFR  awards grants under these programs and the extent to which this is  consistent with relevant regulations; and (3) examines how WSFR  monitors grants under these programs and the extent to which this is  consistent with relevant regulations.", "To identify the competitive grant programs that WSFR both awards and  monitors, we reviewed federal laws, regulations, agency guidance,  budget documents, and grant program descriptions in the Catalog of  Federal Domestic Assistance, which is a compilation of federal assistance  programs including grants. We developed a list of competitive grant  programs that WSFR awards and monitors and corroborated the list with  WSFR officials. We also analyzed data on these grant programs from  Interior\u2019s Financial and Business Management System for fiscal years  2012 through 2016, the most recent five-year period for when the award  process had been completed. To determine the reliability of these data,  we interviewed agency officials and conducted electronic testing of the  data, and we determined the data were sufficiently reliable for our  purposes.", "To examine how WSFR awards competitive grants and how this  compares with relevant regulations, we reviewed agency regulations and  guidance along with the Uniform Guidance. We also reviewed award  documents for the fiscal year 2016 grant cycle for the competitive grant  programs we identified. These documents included the Notice of Funding  Opportunity (NOFO), which describes the funding opportunity to  applicants; documentation of the scoring of applications; and memos that  documented the results of the scoring process. We also reviewed eight  complete grant files for grants awarded in 2016. In addition to looking at  these fiscal year 2016 documents, we also examined memos that  documented the results of the award process for the grants awarded in  fiscal years 2012 through 2015. To assess the extent to which the award  process is consistent with relevant regulations, we compared the process  WSFR uses to award grants with OMB\u2019s Uniform Guidance.", "To examine how WSFR monitors competitive grants and how this  compares with relevant regulations, we reviewed agency regulations and  guidance along with the Uniform Guidance. We also examined financial  and performance reports for 32 selected grants awarded in fiscal year  2015. We selected fiscal year 2015 to ensure that enough time had  elapsed under these grants for financial and performance reports to have  been required and submitted. In selecting this non-probability sample of  files, we ensured that we had at least one file for each of the grant  programs in our review and at least one file from each of the eight FWS  regional offices. The results from our analysis of these documents are not  generalizable to all monitoring documents for grants awarded in fiscal  year 2015, but allowed us to examine how WSFR monitored selected  grants. To assess the extent to which the monitoring process is consistent  with relevant regulations, we compared the process WSFR uses to  monitor grants with OMB\u2019s Uniform Guidance.", "For all three objectives, we interviewed WSFR staff responsible for  overseeing WSFR grant programs, including program leaders for the  competitive grant programs at headquarters and WSFR staff in each of  the eight FWS regional offices. We asked these officials about the role  they played in awarding and monitoring competitive grants. In addition,  we interviewed other officials at FWS and nongovernmental organizations  involved in awarding or monitoring competitive grants. We also  interviewed grant applicants, including state fish and wildlife agency  officials and nongovernmental organizations, to learn about their  experiences during the award and monitoring process for WSFR grants.  We selected applicants that had various experiences with the grant  programs in fiscal year 2016, including those that applied and did not  receive funding and those that applied and received funding. The results  of these interviews with grant applicants cannot be generalized to other  applicants. Appendix I contains a more detailed description of our scope  and methodology.", "We conducted this performance audit from March 2017 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["FWS provides grants to a variety of recipients, including state agencies,  tribal governments, and nongovernmental organizations. In fiscal year  2016, FWS awarded $1.5 billion in grants, which was about 50 percent of  the agency\u2019s total $2.9 billion budget authority. Within FWS, WSFR is  responsible for awarding most of the grant funding available from FWS,  and in fiscal year 2016, WSFR awarded $1.2 billion in grants.", "As we have previously reported, most federal grant-making agencies  generally follow a grants management process that includes awarding  grant funds and monitoring grant projects. The award process generally  involves announcing the grant opportunities, reviewing applications, and  making award decisions. During the monitoring process, the agency  oversees the implementation of the grant project and periodically reviews  financial and performance reports from grant recipients. In our past  reports, we have found that it is important for federal agencies to employ  a fair and transparent process to make award selections for competitive  grant programs and to monitor federal grant funds to ensure that they are  used properly and effectively to achieve program goals.", "In general, WSFR awards two types of grants: formula and competitive  grants.", "Formula grants: WSFR awards these grants to recipients in amounts  based on required formulas. The two largest formula grant programs  WSFR manages are the Wildlife Restoration Program and Sport Fish  Restoration Program, which provided $699 million and $356 million,  respectively, in grants to states in fiscal year 2016. According to  WSFR documents and officials, these grants are often used by states  to help their fish and wildlife agencies restore, enhance, and manage  wildlife and sport fish resources and provide public access to those  resources. Each state\u2019s use of certain funds and each state\u2019s wildlife  and sport fish activities are to be audited every 5 years, and these  audits have generally been conducted by Interior\u2019s Office of Inspector  General (OIG). According to Interior OIG officials, these audits have  been conducted since 2002, and each state has been audited three  times over the past 15 years.", "Competitive grants: WSFR awards these grants to eligible  applicants for specific projects based on a competitive process in  which grant applications are scored against certain criteria.  Competitive grants comprise a much smaller portion of the grant  funding that WSFR awards; in fiscal year 2016, WSFR awarded about  $54 million in competitive grants. Competitive grants, unlike the  formula grants, are not required under their program-specific statutes  to be regularly audited. According to the Interior OIG and WSFR  officials, the OIG has conducted few audits of these programs.", "Funding for most of WSFR\u2019s grant programs comes from two sources: the  Wildlife Restoration Account and the Sport Fish Restoration and Boating  Trust Fund. These accounts are generally funded by industries paying  excise taxes and import duties on certain equipment and gear  manufactured for purchase by hunters, anglers, boaters, archers, and  recreational shooters, including pistols, bows and arrows, and fishing rods  and reels, among other items. Federal taxes on fuel for motorboats and  small engines are also a source of funding.", "In administering grant programs, WSFR adheres to federal laws and  regulations, as well as agency policies and guidance.", "Federal laws: The 1937 Pittman-Robertson Wildlife Restoration Act  and the 1950 Dingell-Johnson Sport Fish Restoration Act established  the Wildlife Restoration Program and the Sport Fish Restoration  Program, respectively. The Pittman-Robertson and Dingell-Johnson  Acts have been amended to, among other things, establish additional  grant programs, many of which are competitive programs. For  example, the Clean Vessel Act of 1992 amended the Dingell-Johnson  Act and created the Clean Vessel Act Grant Program. In addition, in  1998, the Sportfishing and Boating Safety Act amended the Dingell- Johnson Act and established the Boating Infrastructure Grant  Program.", "Federal government-wide grant regulations: The Uniform  Guidance, issued by OMB and adopted by federal grant-making  agencies, includes requirements for several aspects of the federal  grants management process, including the award and monitoring  processes. For example, sections 327 and 328 lay out general  requirements for financial and performance reporting by grant  recipients.", "Agency regulations: Some of the WSFR grant programs have  specific regulations that, among other things, define eligible activities,  application procedures, and the conditions for using grant funding. For  example, the Boating Infrastructure Grant Program, the Clean Vessel  Act Grant Program, and the National Coastal Wetlands Conservation  Grant Program have program-specific regulations that govern aspects  of the grant process, such as the eligible uses of grant funding.", "Agency policies and guidance: WSFR also has agency guidance  found in the FWS Service Manual, along with other guidance on  grants. The manual describes the structure and functions of FWS\u2019s  organization and contains policies and procedures that govern  administrative activities and program operations. For example, the  FWS Service Manual contains a chapter focused on the Multistate  Conservation Grant Program that reiterates or clarifies requirements,  including program-specific statutory requirements as well as those  found in the Uniform Guidance. In addition to the FWS Service  Manual, the FWS, and WSFR within it, is subject to grant  management guidance issued by the Department of the Interior. For  example, in December 2014, Interior\u2019s Office of Acquisition and  Property Management issued a memorandum that required (1)  maximum competition in grant awards through a fair and impartial  competitive process, and (2) a comprehensive, impartial, and  objective grant application review process based on criteria contained  in the grant award announcement."], "subsections": []}, {"section_title": "WSFR Program Awards and Monitors Five Competitive Grant Programs", "paragraphs": ["WSFR awards and monitors five competitive grant programs, according  to agency documents and officials we interviewed. These five grant  programs are (1) the Boating Infrastructure Tier 2 Grant Program, (2) the  Clean Vessel Act Grant Program, (3) the Competitive State Wildlife Grant  Program, (4) the Multistate Conservation Grant Program, and (5) the  National Coastal Wetlands Conservation Grant Program. While these  grant programs support different types of projects, they generally are  funded from the Sport Fish Restoration and Boating Trust Fund, and most  require non-federal matching funds from the grant recipient based on  statute. The exceptions to this are the Multistate Conservation Grant  Program, which also receives funds from the Wildlife Restoration Account  and does not require matching funds, and the Competitive State Wildlife  Grant Program, which receives funding from annual appropriations. Table  1 provides summary information on these five competitive grant  programs.", "Across the five competitive grant programs, the number of grants and the  funding awarded varied by program. In fiscal years 2012 through 2016,  the largest amount of federal grant funding was awarded through the  National Coastal Wetlands Conservation Grant Program\u2014about $94  million total\u2014while the least amount of grant funding was awarded  through the Competitive State Wildlife Grant Program\u2014about $24 million  total, as shown in table 2.", "Based on our review of competitive grant award documentation for fiscal  years 2012 through 2016, the percentage of projects selected from the  applications received ranged from 63 percent for the Competitive State  Wildlife Grant Program to 100 percent for the Clean Vessel Act Grant  Program. While all Clean Vessel Act grant applicants received funding,  they did not all receive the total amount of funding requested; rather, the  amount of funding was based on the total amount of funding available  and the score the application received. The same applies for other grant  programs, as the agency sometimes provides less funding to a recipient  than was requested depending on various factors, such as the total  amount of funding available. For more information on the number of  applications received and awards for each grant program, see  appendixes II through VI.", "In fiscal year 2016, the five WSFR competitive grant programs funded a  variety of projects according to our review of the list of awarded projects.", "Boating Infrastructure Tier 2 Grant Program. Grants were awarded  to states for projects focused on improving facilities for recreational  boaters. These projects included installing docks, installing boat slips,  and constructing restroom and shower facilities for boaters. For more  information on this grant program, see appendix II.", "Clean Vessel Act Grant Program. Grants were awarded to states for  projects focused on constructing and maintaining facilities to accept  sewage from recreational boats, including sewage pumpout stations  and floating restrooms. In addition, some of the grants were to be  used for public education materials on the importance of properly  disposing sewage from boats. For more information on this grant  program, see appendix III.", "Competitive State Wildlife Grant Program. Grants were awarded to  states and a nongovernmental organization for projects focused on  state-identified species of greatest conservation need, which may  include endangered or threatened species. These projects included  conducting research on these species along with creating and  enhancing habitat for these species. For more information on this  grant program, see appendix IV.", "Multistate Conservation Grant Program. Grants were awarded to  nongovernmental organizations and federal agencies for a variety of  projects that were national or regional in scope, such as providing  training to state fish and wildlife officials. Over half of the grants  awarded (11 of 18) were awarded to the Association of Fish and  Wildlife Agencies (AFWA), but most of the funding went towards the  administration of the National Survey of Fishing, Hunting and Wildlife- Associated Recreation ($6.4 million of the $7.7 million). According to  AFWA and WSFR officials, the reason many grants are awarded to  AFWA is because this organization is in a unique position to carry out  projects that benefit multiple states as required by law. For more  information on this grant program, see appendix V.", "National Coastal Wetlands Conservation Grant Program. Grants  were awarded to states for projects focused on acquiring and  restoring wetlands. Many of these projects focused on acquiring  wetlands that benefit wildlife. For more information on this grant  program, see appendix VI.", "Under these five grant programs, state agencies often partner with  subgrantees to carry out grant projects. According to WSFR officials,  subgrants are common in the Boating Infrastructure Tier 2, Clean Vessel  Act, and Competitive State Wildlife grant programs. For example, states  are the recipients of Boating Infrastructure Tier 2 grants, but they can  subgrant the money to marina operators to oversee the construction of  dock facilities."], "subsections": []}, {"section_title": "Grant Award Process Involves Announcing Grant Opportunity, Reviewing Applications, and Making Award Decisions and Is Generally Consistent with Regulations", "paragraphs": ["The award process WSFR uses for the five competitive grant programs  generally involves announcing the grant opportunity and reviewing  applications to make award decisions, and in some cases federal  agencies or third parties are involved in these activities. The award  process used for the five competitive WSFR grant programs is generally  consistent with federal grant regulations in the Uniform Guidance."], "subsections": [{"section_title": "Award Process Involves Announcing Opportunities, Reviewing Applications, and Making Award Decisions, and Third Parties Play a Role in this Process for Some Grant Programs", "paragraphs": ["The award process WSFR uses for the five competitive grant programs  we reviewed involves announcing the grant opportunity and reviewing  applications to make award decisions, and third parties are involved in  these activities for some grant programs. Based on our review of agency  guidance and interviews with WSFR officials, announcing a grant  opportunity begins with developing a Notice of Funding Opportunity  (NOFO). The NOFO contains information for applicants to consider when  deciding whether to apply, including the amount of funding available, the  types of applicants that are eligible, the process to apply, and the criteria  that will be used to score applications. NOFOs are available publicly at  www.grants.gov. Interested parties then submit grant applications, which  WSFR reviews for eligibility by examining the project\u2019s goals, budget, and  environmental impact, among other things. A review panel comprised of  WSFR staff, and in some cases other FWS staff or a third party  organization, reviews and scores the applications based on criteria in the  NOFO and develops a list of recommended projects and funding amounts  for these projects. This list is forwarded to the Director of FWS for review  and approval and if approved, FWS then awards the grant.", "For all of the grant programs except for the Competitive State Wildlife  Grant Program, other federal agencies or third party organizations are  involved in some aspects of the award process (as shown in table 3). In  general, these entities are more involved in reviewing grant applications  than in developing the NOFOs for the grant programs.", "AFWA, a third party, has the largest involvement in the award process for  the Multistate Conservation Grant Program, and implements most  aspects of the award process. Specifically, the Wildlife and Sport Fish  Restoration Programs Improvement Act of 2000, which established this  grant program, requires that FWS only fund grant projects that are on a  priority list established by AFWA. To develop this list, AFWA has  developed a process to review and score applications, and the highest-scoring applications are put on a priority list. This list is presented to all  AFWA members at their annual meeting and if approved by the  membership, AFWA forwards the priority project list to the Director of the  U.S. Fish and Wildlife Service for review and approval. The Multistate  Conservation program leader at WSFR said he also reviews grant  applications to determine whether the project\u2019s budget is reasonable and  whether the project is eligible for funding.", "Other federal agencies and third party organizations are also involved in  the award process for other WSFR competitive grants programs as  follows:", "Boating Infrastructure Tier 2 Grant Program: The Sport Fishing  and Boating Partnership Council reviews and scores each grant  application and provides these scores to WSFR. The scores from  the Council are averaged with WSFR\u2019s scores to develop a final  ranked list of grant projects. Officials from the Council said that they  provide expertise to the review process since Council members are  often engineers or members of boating organizations.", "Clean Vessel Act Grant Program: Program regulations state that  WSFR will convene a review panel to include representatives from  WSFR, the U.S. Environmental Protection Agency (EPA), the U.S.  Coast Guard, and the National Oceanic and Atmospheric  Administration (NOAA). WSFR provides the grant applications and  WSFR\u2019s proposed list of recommended projects to these agencies for  review. According to WSFR officials, they have received limited input  from these agencies, due in part to staff turnover at these agencies in  recent years. For example, in fiscal year 2016, EPA indicated in an  email to WSFR that it agreed with the proposed funding decisions for  the program, and NOAA sent a letter to WSFR indicating that it had  not reviewed all of the applications but it supported the program and  did not object to the agency\u2019s scoring of the applications.", "National Coastal Wetlands Conservation Grant Program: Staff  from FWS\u2019 Coastal Program partner with WSFR in developing the  NOFO, reviewing applications, and scoring applications. For  example, the review panel for fiscal year 2016 included seven staff  from the Coastal Program and four staff from WSFR."], "subsections": []}, {"section_title": "Award Process Is Generally Consistent with Federal Grant Regulations", "paragraphs": ["The five competitive WSFR grant programs we reviewed follow an award  process that is generally consistent with federal grant regulations found in  the Uniform Guidance. Specifically, the Uniform Guidance requires that  grant funding opportunities be publicly announced and that the NOFO  contains certain information, including the criteria and process used to  evaluate applications. In reviewing the five NOFOs used for the fiscal  year 2016 grant cycle for the five competitive grant programs, we found  that all five NOFOs were made publicly available on the website  www.grants.gov, and the NOFOs contained the information required by  the Uniform Guidance. These NOFOs contained criteria for scoring  applications that matched the criteria in program-specific regulations for  the grant programs that have them. For example, the regulations for the  National Coastal Wetlands Conservation Grant Program contain 13  different scoring criteria, which were listed in the NOFO for that program.", "The Uniform Guidance also contains provisions regarding a review  process for grant applications. Specifically, the Uniform Guidance  requires that, unless prohibited by federal statute, the agencies must  design and execute a merit review process for competitive grant  applications, and that this process must be described in the NOFO. In  accordance with the Uniform Guidance, Interior issued guidance on  implementing a merit review process in December 2014. This guidance  requires that the \u201ccompetitive process be fair and impartial\u201d and that all  applicants be evaluated based on the criteria in the funding  announcement. In reviewing the five competitive grant programs, we  found that there was a merit review process and that this process was  described in the five NOFOs for fiscal year 2016 that we reviewed. As  part of the merit review process, four of the competitive grant programs  convened review panels attended by those that scored applications for  the fiscal year 2016 grant cycle, and these panels developed a  recommended list of projects, according to our review of award  documents. The exception was the Clean Vessel Act Grant Program,  where an in-person review panel meeting was not held but rather projects  were scored separately within each region, and regional officials  submitted their scores to WSFR headquarters. These two sets of scores  were combined and the WSFR program leader developed a  recommended list of projects, according to WSFR officials.", "The Uniform Guidance also requires that federal agencies must establish  conflict of interest policies for federal awards. As a result, in December  2014, Interior established a policy requiring agency officials who evaluate  grant applications as part of a review panel to sign a conflict of interest  certificate. In our review of the award documents for the fiscal year 2016  grant cycle, we generally found signed copies of these certificates for  members of the review panels, except for the Multistate Conservation  Grant Program. This program did not have certificates for the fiscal year  2016 grant cycle because AFWA, which oversees the scoring of  applications, did not require these forms until the fiscal year 2017 grant  cycle. We reviewed these forms for the fiscal year 2017 grant cycle and  found that each member of the AFWA review panel had submitted a form.  AFWA officials said that the organization had previously required a  general conflict of interest form to be signed by its members, and they  started requiring a specific form for review panel members in fiscal year  2017 to align with Interior\u2019s policy."], "subsections": []}]}, {"section_title": "WSFR Monitors Grants in a Manner Consistent with Federal Grant Regulations, but Performance Reports Were Sometimes Missing Required Information WSFR Monitors Grants through Review of Financial and Performance Reports", "paragraphs": ["WSFR monitors its competitive grants primarily by reviewing annual  financial and performance reports submitted by grant recipients, which is  consistent with federal regulations. We found in our review of these  reports for a sample of grant projects awarded funds in fiscal year 2015  that grant recipients generally submitted them on time, but that some  performance reports were missing required information.", "According to WSFR officials, their primary method for monitoring projects  funded by competitive grants is to review financial and performance  reports submitted by grant recipients. Grant recipients submit these  reports to WSFR staff in FWS regional offices. According to regional  WSFR officials, regional staff who specialize in financial matters review  the financial reports to ensure they are filled out correctly. Staff do this by  comparing financial information on the amount of federal funding reported  by recipients with amounts found in Interior\u2019s Financial and Business  Management System, which is used to track grants. In addition, WSFR  grant specialists review the performance reports to ensure they contain  required information, such as an update on the progress of meeting the  specified goals of a grant project. If WSFR staff identify discrepancies in  the financial reports or deficiencies in the performance reports, WSFR  regional staff work with the grant recipients to resolve them. WSFR  regional staff occasionally perform site visits to grant projects to verify  grant activities described in the performance reports. WSFR regional staff  said they perform site visits as funding and time allow and that recently  they have had to limit site visits due to budget and staffing constraints."], "subsections": [{"section_title": "Actions to Monitor Grants Are Consistent with Federal Grant Regulations, but Some Performance Reports Were Missing Required Information", "paragraphs": ["The Uniform Guidance contains requirements for financial and  performance reports for monitoring federal grants. Specifically, the  Uniform Guidance requires federal agencies to collect financial  information from grant recipients at least annually. The Uniform  Guidance also requires grant recipients to submit performance reports at  least annually, and these reports are to include certain information, such  as a comparison of the actual accomplishments of a grant with its goals  and the reasons why goals were not met, if appropriate. To further guide  FWS staff in implementing these requirements, the FWS Service Manual  provides additional information on the agency\u2019s expectations for these  reports, including the required content. For example, the Service Manual  states that recipients should submit financial information, including the  amount of federal and matching funds spent and remaining on a grant.  The Service Manual also identifies the standard federal form that should  be used for this report. For performance reports, the FWS Service  Manual states that FWS must require certain information from grant  recipients, including a comparison of actual accomplishments to the goals  of the grant projects, and if the goals were not met, the reasons why.", "In our review of the agency\u2019s monitoring process for selected grants  awarded in fiscal year 2015, we found that WSFR required both  financial and performance reports at least annually, as required by the  Uniform Guidance. In addition, the number and due dates of these reports  were specified in the letters provided to grant recipients when they were  awarded the grant. These award letters also specified the amount of  federal funding for the grant along with any required non-federal matching  funds. We reviewed 53 financial reports and 51 performance reports for a  sample of 32 grants awarded in fiscal year 2015 and found that most  reports were submitted by their due date or within 2 weeks of this date, as  table 4 shows.", "In addition, the majority of the reports we reviewed met the content  requirements found in the Uniform Guidance and the FWS Service  Manual. Specifically, all 53 financial reports were submitted on the  standard form prescribed by the Service Manual. In addition, the financial  information on the amount of the grant and non-federal matching funds  aligned with the amounts specified in the award letter for nearly all the  financial reports we reviewed. In our review of performance reports, we  found that most contained information required by the Uniform Guidance  on the grant project\u2019s goals, progress toward those goals, and an  explanation for why the goals had not been met, if applicable. However, in  our sample, nine performance reports submitted for six awarded grants  were missing some of this information. For example, one performance  report stated that \u201cno activities had occurred\u201d under the grant, but it did  not specify what the goals of the grant were or why no progress had been  made, as required by the Uniform Guidance. Additionally, two annual  performance reports for another grant described the goals of the grant  and said they had not been met, but did not provide information as to  why. Officials from one state fish and wildlife agency said that there was  not a template to follow when preparing performance reports. Officials  from another state agency said that while the requirements for  performance reporting were laid out clearly in most NOFOs, they could be  interpreted differently by different state officials, and these officials  needed to ask for clarification from WSFR officials.", "The format and content of the performance reports is generally left for  grant recipients to choose, according to WSFR officials, because neither  the Uniform Guidance nor internal FWS guidance recommends a specific  template for the performance reports. However, the program leader for  the Multistate Conservation Grant Program provides grant recipients with  a suggested template to follow when preparing performance reports. The  template contains areas in which to describe the goals and objectives of  the grant along with progress made towards these. The seven  performance reports we reviewed for the Multistate Conservation Grant  Program followed this template and, as a result, all contained the  information required by the Uniform Guidance. We also found that Region  8 developed a suggested template for performance reports, but the  template did not explicitly ask for grant recipients to explain why the goals  of a grant had not been met. The lack of a clear performance report  template may have contributed to 2 of the 10 performance reports from  region 8 we reviewed not including clear explanations of why the goals of  the grant had not been met, as required by the Uniform Guidance.  According to WSFR officials, the agency is planning to develop a more  standardized reporting process for performance reports but the timeline  for completion of this has not been formally established and remains  uncertain.", "According to Standards for Internal Control in the Federal Government,  management should design control activities to achieve objectives and  respond to risks. This includes designing mechanisms to help monitor  performance to ensure the objectives of the program are being  achieved. As noted previously, the Uniform Guidance specifies that  grant performance reports contain a comparison of actual  accomplishments to the goals of the project, and the reasons why the  goals were not met, as appropriate. The absence of a clear format for  these reports may have contributed to some reports not containing all the  information needed to comply with federal grant requirements. Without a  template or some other standardized method for performance reporting  across competitive grant programs, WSFR grant recipients may continue  to submit performance reports to WSFR that do not meet all of the  content requirements of the Uniform Guidance and do not convey all the  information needed for FWS to oversee its competitive grant programs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["WSFR awards and monitors five competitive grant programs and, in  general, WSFR\u2019s process for awarding and monitoring these grants is  consistent with regulations for federal grants established in OMB\u2019s  Uniform Guidance. However, there were instances in which the  performance reports submitted by grant recipients did not include a  comparison of actual accomplishments to the goals of the project, as  required by the Uniform Guidance. WSFR does not have a template for  performance reporting for four of the five competitive grant programs we  reviewed, and the template used by one region does not clearly ask for all  required information. Without a template or standardized method that  facilitates the collection of performance information, WSFR grant  recipients may continue to submit performance reports to WSFR that do  not contain the information required by the Uniform Guidance and do not  convey all the needed information for FWS to oversee its competitive  grant programs."], "subsections": []}, {"section_title": "Recommendation for Executive Action", "paragraphs": ["The Director of the U.S. Fish and Wildlife Service should direct WSFR to  develop a template or other standardized method to facilitate collection of  all required information for grant performance reports. (Recommendation  1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of the Interior for  review and comment. In its written comments, reproduced in appendix  VII, the Department of the Interior agreed with our recommendation and  described actions it plans to take.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Interior, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or fennella@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to (1) identify and describe the competitive grant  programs that the Wildlife and Sport Fish Restoration (WSFR) program  awards and monitors; (2) examine how WSFR awards grants under these  programs and the extent to which this is consistent with relevant federal  regulations; and (3) examine how WSFR monitors grants under these  programs and the extent to which this is consistent with relevant federal  regulations.", "To identify the competitive grant programs that WSFR both awards and  monitors, we reviewed federal laws and regulations related to WSFR  grant programs. In particular, we reviewed the 1937 Pittman-Robertson  Wildlife Restoration Act and the 1950 Dingell-Johnson Sportfish  Restoration Act and amendments to these laws, along with associated  regulations for these laws. We also reviewed OMB\u2019s Uniform  Administrative Requirements, Cost Principles, and Audit Requirements  for Federal Awards (Uniform Guidance) for federal grant awards. In  addition, we reviewed agency guidance and information on grant  programs; agency budget documents; and grant program descriptions in  the Catalog of Federal Domestic Assistance, a compilation of federal  assistance programs that includes grants. Based on our review of these  materials, we developed an initial list of grant programs that WSFR had a  role in managing, and we spoke with WSFR officials to gather information  on which competitive grant programs met the criteria of WSFR being  responsible for both awarding and monitoring grants. We corroborated  this list of grant programs with WSFR officials. We analyzed data on the  competitive grant programs we identified from Interior\u2019s Financial and  Business Management System for fiscal years 2012 through 2016, the  most recent five-year period for when the award process had been  completed. To determine the reliability of these data, we interviewed  agency officials and conducted electronic testing of the data, and we  determined the data were sufficiently reliable for our purposes.", "To examine the process WSFR uses to award competitive grants and the  extent to which this is consistent with relevant federal regulations, we  reviewed relevant agency regulations and guidance along with relevant  sections of the Uniform Guidance. To assess the extent to which the  award process is consistent with relevant regulations, we compared the  process WSFR uses to award grants with OMB\u2019s Uniform Guidance. In addition, we reviewed award documents for grants awarded in fiscal year  2016 for the competitive grant programs we identified. We selected fiscal  year 2016 because it was the most recently completed award cycle.  These documents included the Notice of Funding Opportunity, which  described the funding opportunity to applicants; documentation of the  scoring of applications; and memos that documented the results of the  scoring process. We also reviewed the entire grant files for eight grants  awarded in fiscal year 2016 to determine what documents were contained  in these files. In selecting this non-probability sample of files, we selected  at least one file for each of the grant programs we examined and at least  one file from each of the FWS regional offices that had a grant awarded in  fiscal year 2016. However, one of these files was misclassified under an  incorrect grant program, so we excluded it from our review. As a result,  we did not examine an entire file from the FWS Region 8 office. We  reviewed the award documents and files using a standard document  review tool to examine specific parts of these documents, such as the  descriptions of the process used to review and score applications. To  ensure that this review tool was filled out correctly, two GAO staff  members reviewed the documents: one filled out the data collection  instrument and the other verified this work. In addition to looking at award  documents for fiscal year 2016, we also examined memos that  documented the results of the grant scoring process for fiscal years 2012  through 2015 for the grant programs we identified. We reviewed the grant  scoring memos from fiscal years 2012 through 2016 grants cycles  because they comprise the most recent five-year period for when the  award process had been completed.", "To examine the process WSFR uses to monitor competitive grants and  the extent to which those processes are consistent with relevant federal  regulations, we reviewed relevant agency regulations and guidance along  with relevant sections of the Uniform Guidance. To assess the extent to  which the monitoring process is consistent with relevant regulations, we  compared the process WSFR uses to monitor grants with OMB\u2019s Uniform  Guidance. We used a standard document review tool to review financial  and performance reports for 32 of 129 grants that were awarded in fiscal  year 2015 to determine the extent to which these reports contained  information required by the Uniform Guidance. We selected fiscal year  2015 to ensure that enough time had elapsed under these grants for financial and performance reports to have been required and submitted.  In selecting this non-probability sample of files, we ensured that we had at  least one file for each of the grant programs and at least one file from  each of the eight FWS regional offices. For financial reports, we  determined whether reported financial information on the grant award and  matching funds aligned with the dollar amounts in their award letters,  whether the reports were submitted by their due dates, and whether they  were submitted on the correct form. For performance reports, we  determined whether they were submitted by their due dates and whether  they contained information on the grant project\u2019s goals, progress toward  those goals, and an explanation why the goals had not been met, if  applicable. The Uniform Guidance requires this information to be in  performance reports. The results from our analysis of these documents  are not generalizable to all monitoring documents for grants awarded in  fiscal year 2015, but allowed us to examine how WSFR monitored  selected grants.", "For all three objectives, we interviewed WSFR staff responsible for  managing WSFR grant programs. These included WSFR program  leaders at headquarters and WSFR staff in each of the eight FWS  regional offices that are responsible for the five competitive grant  programs we reviewed. We asked these officials about the role they  played in awarding and monitoring competitive grants. In addition, we  interviewed other FWS officials that were involved with managing grants  and officials from select third party organizations that played a role in  awarding grants, including the Association of Fish and Wildlife Agencies  and the Sport Fishing and Boating Partnership Council. We also  interviewed grant applicants, including state fish and wildlife agency  officials and nongovernmental organizations to learn about their  experiences during the award and monitoring process for WSFR grants.  We selected applicants that had various experiences with the grant  programs in fiscal year 2016, including those that applied and did not  receive funding and those that applied and received funding. The results  of the interviews with grant applicants cannot be generalized to other  applicants, but were used to obtain perspectives on the grant award and  monitoring processes.", "We conducted this performance audit from March 2017 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Information on the Boating Infrastructure Tier 2 Grant Program", "paragraphs": ["Below is summary information on the Boating Infrastructure Tier 2 Grant  Program that we compiled from reviewing relevant laws and regulations,  reviewing agency documents, and interviewing agency officials.", "Establishment and goals of the program:", "The program was established by the Sportfishing and Boating Safety  Act of 1998, which amended the Dingell-Johnson Sport Fish  Restoration Act.", "The program provides grants to be used for constructing, renovating,  or maintaining docking or mooring facilities for transient, nontrailerable  recreational vessels that are 26 feet or greater in length. These  facilities generally must allow public access, and examples of facilities  that can be built with these funds include boat slips, piers, buoys, fuel  stations, restrooms, bulkheads, dredging, or laundry facilities. Grants  can also be awarded to produce information and education materials  specific to the program or projects funded by the program.", "Governor-designated agencies in a state of the United States, the  District of Columbia, American Samoa, Guam, the Northern Mariana  Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this  grant program. The designated agency is often a state natural  resource or fish and wildlife agency.", "Subgrants to other entities are allowed. According to Wildlife and  Sport Fish Restoration (WSFR) officials, subgrants under this program  are common.", "About 2 percent of the Sport Fish Restoration and Boating Trust Fund  is devoted to the grant program. In fiscal year 2016, there was $8.6  million in federal funds available for the Tier 2 program.", "The maximum grant award is $1.5 million per project, and recipients  generally must provide matching funds worth at least 25 percent of  the total cost of projects.", "Funds not obligated within three fiscal years shall be transferred to the  Coast Guard and expended for state recreational boating safety  programs.", "Highlights from the award process used in fiscal year 2016:", "The Notice of Funding Opportunity for fiscal year 2016 was posted on  www.grants.gov on June 22, 2015, and applications were due by  September 18, 2015.", "Thirteen states submitted a total of 22 applications for projects.", "Regional staff for the Wildlife and Sport Fish Restoration Program and  members from the Sport Fishing and Boating Partnership Council  scored the applications and recommended that 10 projects be fully  funded and one be partially funded. The Deputy Director of the U.S.  Fish and Wildlife Service approved the list of recommended projects  on March 11, 2016.", "The U.S. Fish and Wildlife Service announced the selected projects  on March 17, 2016.", "Information on past applications and selected projects:  Table 5 shows the number of applications received and selected projects  under the Boating Infrastructure Tier 2 Grant Program in fiscal years 2012  through 2016."], "subsections": []}, {"section_title": "Appendix III: Information on the Clean Vessel Act Grant Program", "paragraphs": ["Below is summary information on the Clean Vessel Act Grant Program  that we compiled from reviewing relevant laws and regulations, reviewing  agency documents, and interviewing agency officials.", "Establishment and goals of the program:", "The program was established by the Clean Vessel Act of 1992, which  amended the Dingell-Johnson Sport Fish Restoration Act.", "This program funds grants to coastal states for certain activities, such  as constructing and renovating pumpout stations and waste reception  facilities and conducting a program to educate recreational boaters  about the problem of human body waste discharges from vessels and  inform them of the locations of pumpout stations and waste reception  facilities. The program also funds grants to inland states meeting  certain criteria. Under program regulations, facilities need to be open  to the public in order to be eligible for a grant.", "Since the program was established, over 6,000 dump or pumpout  facilities have been built and over 3,700 of these facilities have been  operated or maintained using grant funds.", "Governor-designated agencies in a state of the United States, the  District of Columbia, American Samoa, Guam, the Northern Mariana  Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this  grant program. The designated agency is often a state natural  resource or fish and wildlife agency.", "Subgrants to other entities are allowed. According to Wildlife and  Sport Fish Restoration (WSFR) officials, subgrants under this program  are common.", "About 2 percent of the Sport Fish Restoration and Boating Trust Fund  is devoted to the grant program. In fiscal year 2016, there was $13.7  million in federal funds available for the program.", "The maximum award amount is generally $1.5 million, and recipients  generally must provide matching funds worth at least 25 percent of  the total cost of projects.", "Funds not obligated within three fiscal years shall be transferred to the  U.S. Coast Guard and expended for state recreational boating safety  programs.", "Highlights from the award process used in fiscal year 2016:", "The Notice of Funding Opportunity (NOFO) for fiscal year 2016 was  posted on www.grants.gov on August 12, 2015, and applications were  due by December 2, 2015.", "A total of 21 states and the District of Columbia submitted 33  applications. WSFR staff from the U.S. Fish and Wildlife Service  regions scored applications in their regions; then, these scores were  averaged with scores from the WSFR program leader for the Clean  Vessel Act grant program, who scored all of the applications. WSFR  provided copies of grant applications to the U.S. Environmental  Protection Agency (EPA), U.S. Coast Guard, and National Oceanic  and Atmospheric Administration (NOAA) for them to review and score  the applications. WSFR also provided its scores on the applications to  these agencies. EPA informed WSFR in an email that it agreed with  the proposed funding decisions for the program. According to WSFR,  the Coast Guard did not provide comments on the proposed scores.  NOAA sent a letter to WSFR indicating that it had not reviewed all of  the applications but it supported the program and did not object to the  agency\u2019s scoring of the applications. The Deputy Director of the U.S.", "Fish and Wildlife Service approved the list of recommended projects  on April 28, 2016.", "The U.S. Fish and Wildlife Service announced the winning grant  awards on May 11, 2016.", "According to the fiscal year 2016 NOFO, this program attempts to  provide support to as many eligible projects as possible. In practice,  all eligible applications have been awarded funds from fiscal year  2012 through fiscal year 2016. If funding requests exceed available  funds, WSFR applies a formula to allocate funding based on the score  the application receives.", "Information on past applications and selected projects:  Table 6 shows the number of applications received and selected projects  under the Clean Vessel Act Grant Program in fiscal years 2012 through  2016."], "subsections": []}, {"section_title": "Appendix IV: Information on the Competitive State Wildlife Grant Program", "paragraphs": ["Below is summary information on the Competitive State Wildlife Grant  Program that we compiled from reviewing relevant laws and regulations,  reviewing agency documents, and interviewing agency officials.", "Establishment and goals of the program:", "The State Wildlife Grant Program provides grants for the development  and implementation of programs for the benefit of wildlife and their  habitats, including species that are not hunted or fished. Eligible  activities include planning and conservation implementation.", "The competitive portion of the State Wildlife Grant Program was  established by the Consolidated Appropriations Act, 2008.", "Fish and wildlife agencies in a state of the United States, the District  of Columbia, American Samoa, Guam, the Northern Mariana Islands,  Puerto Rico, or the U.S. Virgin Islands and at the discretion of affected  states, the regional Association of Fish and Wildlife Agencies are  eligible for this grant program. According to the Notice of Funding  Opportunity (NOFO) for this program, for each of the 48 contiguous  United States and the District of Columbia, at least two states must be  active participants in proposed conservation actions.", "Applicants are also encouraged to engage with other partners on  projects. Potential partners include tribes, federal agencies, other  state agencies, local governments, nongovernmental organizations,  academic institutions, private landowners, industry groups, and  international partners.", "The program is governed and funded through annual appropriations  acts. In fiscal year 2016, there was about $5.6 million available for the  program.", "For most applicants proposing a multi-state project, the maximum  award is $500,000 and the minimum award is $50,000. Applicants  must provide matching funds worth at least 25 percent of the total cost  of projects.", "Past appropriations for these grants have been appropriated to  remain available until expended. The appropriations acts governing  the program have generally provided that any amount apportioned in  one fiscal year that remains unobligated by the end of the next fiscal  year are to be reapportioned in the following fiscal year.", "Highlights from the award process used in fiscal year 2016:", "The NOFO for fiscal year 2016 was posted on www.grants.gov on  November 20, 2015, and applications were due by February 19, 2016.", "The Wildlife and Sport Fish Restoration Program (WSFR) received 21  eligible applications. Applications were reviewed by a panel consisting  of WSFR staff from each region of the U.S. Fish and Wildlife Service  (FWS). The panel recommended fully funding 14 projects and partially  funding 1 project, for a total of $5.6 million, with $2.9 million in non- federal matching funds. The Deputy Director of the U.S. Fish and  Wildlife Service approved the list of recommended projects on May  19, 2016.", "FWS announced the selected projects on May 20, 2016.", "Information on past applications and selected projects:  Table 7 shows the number of applications received and selected projects  under the Competitive State Wildlife Grant Program in fiscal years 2012  through 2016."], "subsections": []}, {"section_title": "Appendix V: Information on the Multistate Conservation Grant Program", "paragraphs": ["Below is summary information on the Multistate Conservation Grant  Program that we compiled from reviewing relevant laws and regulations,  reviewing agency documents, and interviewing agency officials.", "Establishment and goals of the program:", "The program was established by the Wildlife and Sport Fish  Restoration Programs Improvement Act of 2000, which amended the  Pittman-Roberts Wildlife Restoration Act and the Dingell-Johnson  Sport Fish Restoration Act.", "The program focuses on funding multistate conservation projects that  benefit a certain number of states or a regional association of state  fish and game departments.", "Fish and wildlife agencies in a state of the United States, the District  of Columbia, American Samoa, Guam, the Northern Mariana Islands,  Puerto Rico, or the U.S. Virgin Islands are eligible for this grant  program. The U.S. Fish and Wildlife Service (FWS) is also an eligible  applicant for the purpose of carrying out the National Survey of  Fishing, Hunting, and Wildlife-Associated Recreation, which is  conducted every five years. Nongovernmental organizations are also  eligible, provided that they submit a certification that they will not use  the grant funds to fund, in whole or in part, any activity of the  organization that promotes or encourages opposition to the regulated  hunting or trapping of wildlife or the regulated taking of fish.", "Grant projects shall not be eligible unless they will benefit at least 26  states, a majority of states in a FWS region, or a regional association  of state fish and wildlife agencies.", "By statute, FWS may only make grants for projects identified on a  priority list prepared by the Association of Fish and Wildlife Agencies  (AFWA), a nongovernmental organization that represents state fish  and wildlife agencies on conservation and land management issues,  after following certain procedures.", "Up to $6 million annually is authorized to fund grants, with no more  than $3 million from the Wildlife Restoration Account and $3 million  from the Sport Fish Restoration Trust Fund. In practice, some of the  grant funds are carried over to future years to fund certain multi-year  projects, such as the National Survey of Fishing, Hunting, and  Wildlife-Associated Recreation.", "This program does not have a matching funds requirement.", "Funds not obligated within two fiscal years revert back to the Wildlife  Restoration and Sport Fish Restoration programs for apportionment to  the states.", "Highlights from the award process used in fiscal year 2016:", "The Notice of Funding Opportunity for fiscal year 2016 was posted on  www.grants.gov on April 13, 2015, and the deadline for submitting  letters of intent to AFWA was May 11, 2015. These letters of intent  provide a summary of the grant project, and they were scored by  AFWA\u2019s national grants committee. The highest-scoring applicants  were invited to submit a full grant application to AFWA by August 14,  2015. The national grants committee scored these applications and  presented these scores to AFWA members at its annual meeting in  September 2015. Members voted to approve the priority list at this  meeting.", "AFWA provided the priority list containing 18 projects to FWS. The  Deputy Director of Program Management and Policy of the U.S. Fish  and Wildlife Service approved the list of recommended projects on  December 7, 2015.", "During the award process, Wildlife and Sport Fish Restoration staff  also reviewed the grant applications.", "FWS announced the selected projects on February 11, 2016.", "Information on past applications and selected projects:  Table 8 shows the number of applications received and selected projects  under the Multistate Conservation Grant Program in fiscal years 2012  through 2016."], "subsections": []}, {"section_title": "Appendix VI: Information on the National Coastal Wetlands Conservation Grant Program", "paragraphs": ["Below is summary information on the National Coastal Wetlands  Conservation Grant Program that we compiled from reviewing relevant  laws and regulations, reviewing agency documents, and interviewing  agency officials.", "Establishment and goals of the program:", "The program was established by the Coastal Wetlands Planning,  Protection and Restoration Act.", "This program\u2019s primary goal is the long-term conservation of coastal  wetlands\u2019 ecosystems. It accomplishes this by helping states protect,  restore, and enhance their coastal habitats through a competitive  grants program.", "Since 1992, the U.S. Fish and Wildlife Service (FWS) has awarded  over $377 million through these grants.", "Governor-designated agencies of an eligible coastal state are eligible  for this grant program. The designated agency is often a state natural  resource or fish and wildlife agency.", "Subgrants are allowed, are relatively common, and can be awarded to  local governments and nonprofit organizations.", "About 3 percent of the Sport Fish Restoration and Boating Trust Fund  is devoted to the grant program. In fiscal year 2016, there was about  $20.3 million in federal funds available for the program.", "The maximum award amount is $1 million, and states generally must  provide 50 percent of the total cost of the project. However, states that  have established and are using a state fund for the purpose of  acquiring coastal wetlands must provide a minimum of 25 percent of  the total cost of projects.", "Projects are generally funded through annual proposals. Funds must  be obligated by December 31st of the year after funds were allocated,  meaning that, for example, fiscal year 2015 funds must be obligated  by December 31, 2016. Funds not obligated during the specified time  frame return to the FWS program account.", "Highlights from the award process used in fiscal year 2016:", "The Notice of Funding Opportunity for fiscal year 2016 was posted on  www.grants.gov on February 5, 2015, and applications were due by  June 24, 2015.", "The FWS Wildlife Sport Fish Restoration Program (WSFR) received  32 applications. A panel of WSFR and FWS Coastal Program regional  officials scored and ranked the applications, and recommended 28  projects for funding. The Deputy Director of the U.S. Fish and Wildlife  Service approved the list of recommended projects on January 13,  2016.", "WSFR awarded $20 million in grant funding, which was supplemented  by $20.5 million in non-federal matching funds.", "FWS announced the selected projects on February 2, 2016.", "Information on past applications and selected projects:  Table 9 shows the number of applications received and selected projects  under the National Coastal Wetlands Conservation Grant Program in  fiscal years 2012 through 2016."], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above Elizabeth Erdmann (Assistant  Director), Steven Bagley, and Scott Heacock made key contributions to  this report. Additional contributions were made by Thomas M. James,  Ying Long, Kim McGatlin, Patricia Moye, Anne Rhodes-Kline, and Sheryl  Stein."], "subsections": []}]}], "fastfact": ["The Wildlife and Sport Fish Restoration (WSFR) Program, part of the Fish and Wildlife Service, awarded $54 million in FY 2016 in competitive grants for projects ranging from building boat docks to acquiring wetlands.", "We looked at WSFR\u2019s process for awarding and monitoring grants through five competitive grant programs it manages. Our review found that, although WSFR's process was consistent with federal regulations, some performance reports WSFR uses to monitor grants were missing required information. We recommended that WSFR develop a standardized way to collect required information to ensure effective oversight.", "(This photo was updated to show an example of a dock that was eligible for one of the grant programs.)"]}
{"id": "GAO-18-589", "url": "https://www.gao.gov/products/GAO-18-589", "title": "2020 Census: Bureau Has Made Progress with Its Scheduling, but Further Improvement Will Help Inform Management Decisions", "published_date": "2018-07-26T00:00:00", "released_date": "2018-07-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Bureau is required by law to count the population as of April 1, 2020; deliver state apportionment counts to the President by December 31, 2020; and provide redistricting data to the states within 1 year of Census Day, April 1, 2021. To meet these statutory deadlines, the Bureau carries out hundreds of projects, which it manages with an integrated master schedule. Because census operations need to proceed in concert with one another, significant delays could propagate to other activities resulting in increased costs, reduced operational quality, or changes to the design of the census in order to compensate for lost time.", "This report determines the extent to which the Bureau is using leading practices for scheduling key projects.", "GAO selected three projects for review based on their cost and in-progress status. GAO analyzed schedules and their supporting documents against GAO's Schedule Assessment Guide. GAO also spoke with relevant Bureau officials regarding the three selected projects.", "GAO provided a draft of this report to the Department of Commerce, which agreed with the findings."]}, {"section_title": "What GAO Found", "paragraphs": ["The three census project schedules GAO reviewed better reflect characteristics of a reliable schedule compared to a GAO schedule assessment performed in 2013, but weaknesses remain. GAO reviewed three projects that contribute to two of the Census Bureau's (Bureau) largest field operations\u2014address canvassing and nonresponse follow-up. The schedules for all three projects are better constructed and more credible than previously reviewed project schedules. For example, the Bureau has improved the logic of the relationship between activities, and better ensured that all schedules are linked together in a master schedule so that their interactions can be better managed.", "However, the three selected schedules have some of the same weaknesses GAO identified in other Bureau schedules in 2009 and 2013. For example, none of the selected schedules contain information on resource needs and availability. GAO has reported that such information assists program offices in forecasting the likelihood that activities will be completed as scheduled. It can also help management compute total labor and equipment hours, calculate total project and per-period cost, resolve resource conflicts, and establish the reasonableness of the plan. If the schedule does not allow insight into current or projected allocation of resources, then the likelihood is significantly increased that the program may slip or need additional resources to complete on time.", "In GAO's 2009 review of the Bureau's schedule, GAO recommended that the Bureau include in the 2020 master schedule estimates of the resources, such as labor, materials, and overhead costs for each activity as the 2020 schedule was built. The Department of Commerce did not respond to the recommendation at that time. Then, regarding GAO's 2013 assessment of the Bureau's schedule, Bureau officials stated that they hoped to begin identifying the resources needed for each activity in their schedules by early 2014. However, as of May 2018, the Bureau had not taken these steps. Senior Bureau officials have now stated that it would require additional staffing in order to plan for and implement this recommendation.", "Additionally, the Bureau has not conducted risk assessments for the project schedules GAO assessed. Schedule risk analysis\u2014the systematic analysis of \u201cwhat if\u201d scenarios\u2014is an established leading practice. Risk assessments are needed to determine the likelihood of the project's completion date; how much schedule risk contingency is needed to provide an acceptable level of certainty for completion by a specific date; risks most likely to delay the project; how much contingency reserve each risk requires; and the paths or activities that are most likely to delay the project.", "In 2013, GAO recommended the Bureau conduct risk assessments for its schedules. The Bureau said it had no disagreement with this recommendation. However, while Senior Bureau officials stated that a schedule risk assessment plan and process were approved by Bureau management in late May 2018, it has not yet implemented this recommendation.", "GAO believes that these prior recommendations still apply and can help the Bureau improve the reliability of its 2020 schedule."]}], "report": [{"section_title": "Letter", "paragraphs": ["The decennial census is a crucial, constitutionally mandated activity with  immutable deadlines. The U.S. Census Bureau (Bureau) is required by  law to count the population as of April 1, 2020; deliver state  apportionment counts to the President by December 31, 2020; and  provide redistricting data to the states within 1 year of Census Day, April  1, 2021. To meet these statutory deadlines, the Bureau carries out  thousands of interrelated activities, which it manages with an integrated  master schedule. The Bureau\u2019s schedule is essential to help manage the  risks to preparing and implementing a successful decennial census.  Because census operations need to proceed in concert with one another,  significant delays could propagate to other activities and increase costs,  reduce operational quality, or force the Bureau to change the design of  the census in order to compensate for lost time.", "Over the years, we have reported on significant weaknesses in the  Bureau\u2019s scheduling practices, leading to recommendations for the  Bureau to improve the comprehensiveness, construction, and credibility  of its schedule, and ensure that it includes estimates of the resources and  a qualitative risk assessment. The Bureau said that it had no  disagreement with these recommendations, yet these recommendations  have not been implemented. With less than 2 years until Census Day, there is little time remaining for the Bureau to deal with any unexpected  problems that may arise. Accordingly, early recognition of potential delays  is essential, and remaining activities need to begin and end on schedule  and in the proper operational sequence.", "In response to your request, our objective was to determine the extent to  which the Bureau is using leading practices for scheduling key projects. In  order to meet this objective, we selected the following three projects for  review: 2018 End-to-End Census Test Address Canvassing, 2018 End-to- End Census Test Nonresponse Follow-up, and 2020 Census Geographic  Programs. These projects are critical to the Bureau\u2019s ability to build and  maintain an accurate address list, and help ensure that households  respond to the census. We selected these projects based on their high  cost, their significance to the 2020 Census, and that they were still in  progress.", "We compared the schedules for each of these projects to the leading  practices in our Schedule Assessment Guide. We spoke with relevant  Bureau officials regarding these project schedules. We scored each  scheduling leading practice on a five-point scale ranging from \u201cnot met\u201d to  \u201cmet.\u201d Finally, we compared these results with our prior assessments of  the Bureau\u2019s schedule, particularly those where we made  recommendations, and we updated the status of those recommendations.", "Assessing only three key projects limits possible statements about the  Bureau\u2019s entire schedule. For example, if the Bureau is not following best  practices in creating and maintaining these three project schedules, we  can conclude that the larger integrated schedule is unreliable. This is  because an integrated master schedule consolidates lower-level project  schedules. Thus, errors and reliability issues in lower levels will be  transferred to higher-level schedules. However, if the selected lower-level  projects are deemed reliable, we cannot definitively determine the  reliability of the integrated master schedule because the other projects  that were not assessed may be unreliable. For more details on our scope  and methodology, see appendix I.", "We conducted our performance audit from July 2017 to July 2018 in  accordance with generally accepted government auditing standards.", "Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["A reliable schedule is critically important for a successful 2020 Census. In  February 2017, we added the 2020 Census to our High-Risk List because  operational and other issues including scheduling are threatening the  Bureau\u2019s ability to deliver a cost-effective enumeration. We reported on  concerns about the quality of the Bureau\u2019s schedule and cost  assessment, the Bureau\u2019s capacity to implement innovative census-taking  methods, and uncertainties surrounding critical information technology  systems. Underlying these issues are challenges in such essential  management functions as the Bureau\u2019s ability to  collect and use real-time indicators of schedule, cost, and  performance;  follow leading practices for scheduling, cost estimation, risk  management, and IT acquisition, development, testing, and security;  and  cost effectively deal with contingencies including, for example, fiscal  constraints, potential changes in design, and natural disasters that  could affect the enumeration.", "Reliable scheduling practices are essential for managing tradeoffs  between cost, schedule, and scope. Among other things, scheduling  allows program managers to decide between possible sequences of  activities, determine the flexibility of the schedule according to available  resources, predict the consequences of managerial action or inaction in  events, and allocate contingency plans to mitigate risk. Following  changes in a program, the schedule is used to forecast the effects of  delayed, deleted, and added effort, as well as possible avenues for time  and cost recovery.", "Scheduling is important because the cost of counting the nation\u2019s  population has been escalating with each decade. The 2010 Census was  the most expensive in U.S. history at about $12.3 billion, and was about  31 percent more costly than the $9.4 billion 2000 Census (in 2020  constant dollars). According to the Bureau, the total cost of the 2020  Census is now estimated to be approximately $15.6 billion dollars, more  than $3 billion higher than previously estimated by the Bureau.", "Moreover, as shown in figure 1, the average cost for counting a housing  unit increased from about $16 in 1970 to around $92 in 2010 (in 2020  constant dollars). At the same time, the return of census questionnaires  by mail (the primary mode of data collection) declined over this period  from 78 percent in 1970 to 63 percent in 2010. Declining mail response  rates have led to higher costs because the Bureau needs to send  temporary workers to each nonresponding household to obtain census  data.", "The schedules we reviewed for this report\u20142020 Census Geographic  Programs, 2018 End-to-End Test Address Canvassing, and 2018 End-to- End Census Test Nonresponse Follow-up\u2014relate to the key activities of  developing an accurate address list and following up with households that  did not mail back their census forms. The Bureau relies on a complete  and accurate address list to maximize the more cost-efficient self- response rate.", "The three projects we selected contribute to two of the Census Bureau\u2019s  largest field operations. The Bureau\u2019s Geographic Programs Operation  maintains the Bureau\u2019s master address file and mapping data used to  conduct the 2020 Census. The Bureau\u2019s Geographic Programs Operation  provides the most current address list to the Bureau\u2019s Address  Canvassing Operation, where Bureau staff make updates to the address  list via in-office and in-field procedures. These updates are processed on  an ongoing basis throughout the decade. The Bureau conducts its  Nonresponse Follow-up Operation after Census Day by having  enumerators go door-to-door to determine the housing unit status for  addresses that do not self-respond to the 2020 Census, and enumerate  households that are determined to be occupied."], "subsections": []}, {"section_title": "Selected Census Schedules Better Reflect Characteristics of a Reliable Schedule Compared to Prior Assessment, though Weaknesses Remain", "paragraphs": ["We have previously reported in our Schedule Assessment Guide that a  reliable schedule can provide a road map for systematic execution of a  program, and the means by which to gauge progress, identify and  address potential problems, and promote accountability. The guide  identifies four characteristics of a reliable schedule:", "Comprehensive: The schedule should identify all activities and  resources necessary to accomplish the project. The schedule should  cover the scope of work to be performed so that the full picture is  available to managers.", "Well-constructed: Activities should be logically sequenced and critical  activities that would affect the timelines of the schedule should be  identified.", "Credible: All schedules should be linked to a complete master  schedule for managers to reference and analyzed for how risk  impacts the outcome of the schedule.", "Controlled: There should be a documented process for changes to the  schedule so that the integrity of the schedule is assured.", "For a schedule to be reliable, it must substantially or fully meet all criteria  for these four characteristics. These characteristics, their related leading  practices, and their criteria are described in more detail in appendix II.", "In 2013, we assessed the Bureau\u2019s 2020 Research and Testing and  Geographic Support System Initiative schedules using these criteria.  While the results exhibited some of the characteristics of a reliable  schedule, important weaknesses remained. Both schedules substantially  met one of the four characteristics (controlled) and minimally or partially  met the other three characteristics (comprehensive, well-constructed, and  credible).", "For this review, we assessed the 2018 End-to-End Census Test Address  Canvassing, 2018 End-to-End Census Test Nonresponse Follow-up, and  2020 Census Geographic Programs projects\u2019 schedules. We found that  overall the selected schedules better reflected two of the four  characteristics of a reliable schedule compared to our 2013 assessment  (see figure 2).", "Examples of the extent to which these characteristics were met are  provided below. For a more detailed explanation of our assessment  results, see appendix III."], "subsections": [{"section_title": "Comprehensive\u2013Selected Schedules Partially Meet Characteristic but Do Not Identify Needed Resources", "paragraphs": ["As with our 2013 schedule assessment, our 2018 analysis found that the  Bureau is partially meeting the characteristics of a comprehensive  schedule. For example, the projects we assessed reflect the work to be  accomplished for the project schedules, and each project schedule  includes estimates of the duration of each activity. Additionally, the 2018  End-to-End Census Test Address Canvassing and the 2018 End-to-End  Census Test Nonresponse Follow-up project schedules contain clear start  and finish milestones, and map to the census program work breakdown  structure\u2014a detailed definition of the work necessary to accomplish a  program\u2019s objectives.", "This leading practice of capturing all activities was substantially met, not  fully met (see appendix III for a more detailed explanation), because while  for each project all activities and milestones are mapped to their work  breakdown structures by codes, there are no corresponding dictionaries  to define the work. The absence of such a dictionary could potentially  lead to confusion among staff in different census offices about the scope  of the work they are responsible for performing.", "Our schedule guide states that a work breakdown structure dictionary is a  valuable communication tool between systems engineers, program  management, and other stakeholders because it provides a clear picture  of what efforts have to be accomplished. Bureau officials stated that  although their 2020 Schedule Management Plan requires each project to  have a schedule work breakdown structure dictionary, as project  schedules are updated, they have not created these required dictionaries.  As an alternative, they noted that the 2020 Census Operational Plan  includes details and definitions of the projects.", "Additionally, none of the three schedules we assessed include  information about what levels of resources, such as labor and equipment,  are required to complete the planned work\u2014including this information is  called resource loading. The Bureau\u2019s 2020 Schedule Management Plan  states that it is the responsibility of a representative from a project team  and the schedule staff to assign resources to an individual project  schedule, and that defining and assigning resources should be done  following the testing phase of the 2020 Census Lifecycle.", "The Bureau is now in its implementation phase (see figure 3 below), so  according to its management plan, resource loading should have begun.  But it has not. For example, the 2018 End-to-End Census Test Address  Canvassing project schedule did not include any resource information on  the recruiting and hiring goals for the address canvassing field work.", "Instead, Bureau officials stated that they are estimating the cost of  activities using a software tool separate from the current schedule  management tool. They further stated that this Bureau-wide solution  includes all 2020 Decennial Census staff as Decennial funded resources.  However, the information in this separate tool has no effect on the  durations or forecasted start and finish dates of detailed activities within  individual projects. Furthermore, the separate tool does not always track  all activities at the lowest level in the schedule, so that Bureau managers  do not have reliable visibility with it on the efforts of the lowest level of  detailed activities.", "Resource loading is important for any agency, but is particularly important  for the Census Bureau, given its statutorily mandated deadlines. Missed  deadlines or schedule slippage can easily jeopardize the quality of the  2020 Census, and there is little room for error given that census data are  used to apportion the seats of the House of Representatives, redraw  congressional districts, and allocate billions of dollars each year in federal  financial assistance. In our schedule guide, we reported that including  resources such as labor, materials, and overhead costs can make a  schedule a more useful management tool.", "A resource-loaded schedule can help management with things such as  computing labor and equipment hours, calculating total project and per- period cost, resolving resource allocation conflicts, determining whether  all required resources will be available when they are needed, and  establishing the reasonableness of the plan. For example, information on  the resource needs of field operations in the 2018 End-to-End Census  Test would assist management in determining if the appropriate resource  allocations have been made for any given test activity. It would also aide  in forecasting the likelihood that those resources will be available to  complete the 2018 End-to-End Census Test Address Canvassing and  Nonresponse Follow-up activities as scheduled. If the schedule does not  allow insight into the current or projected allocation of resources for these  test activities, the Bureau\u2019s risk of key end-to-end test milestones slipping  increases significantly.", "In 2009, we reviewed the Bureau\u2019s schedule and recommended that the  Bureau include estimates of the resources in the 2020 integrated  schedule for each activity as the schedule was built. The Department of  Commerce did not respond to the recommendation at that time. In our  2013 assessment of the Bureau\u2019s schedule, Bureau officials stated that  they hoped to begin identifying the resources needed for each activity in  their schedules by early 2014. However, as of May 2018, the Bureau  has not yet implemented this recommendation. Senior Bureau officials  have now stated that the Bureau would require additional staffing in the  Schedule Management Branch in the Decennial Census Management  Division in order to plan for and implement resource loading. When the  Bureau has resource loaded its schedule, it will be able to use the  schedule more effectively as a management tool."], "subsections": []}, {"section_title": "Well-Constructed\u2013The Bureau Demonstrated Improvement in Selected Schedules Compared to Prior Assessment", "paragraphs": ["Our 2013 assessment of the Bureau\u2019s schedule reported that the Bureau  only minimally met the characteristics of a well-constructed schedule. Our  2018 assessment found that two of the selected project schedules now  substantially met this characteristic and one partially met it. In this  assessment, Bureau officials linked many of the activities clearly and in a  straightforward sequence in the schedule, which was not always the case  in prior assessments.", "This improvement is important because it helps staff identify next steps as  they progress through such things as acquiring and mobilizing the staff  needed to conduct the address canvassing and nonresponse follow-up  test field work, and helps managers identify the impact of changes in one  activity on subsequent activities. For example, the schedule lays out the  sequence of activities needed, such as developing training materials,  recruiting field staff, training staff and equipping them with the tools  needed to complete the test. Our assessment also concluded that two of  the three project schedules we assessed have valid critical paths, which  is the sequence of activities in the schedule that, according to their  current status, lead to the program\u2019s earliest completion date. A valid  critical path allows management to focus on activities that will lead to the  project\u2019s success.", "The 2020 Census Geographic Programs project schedule partially met  the well-constructed characteristic due to problems existing within the  schedule\u2019s sequencing logic. In particular, we found a large number of  unjustified date constraints and lags. In part because of these  sequencing issues, total float calculations\u2014that is, the amount of time a  predecessor activity can slip before its delay affects the program\u2019s  estimated finish date\u2014appear unreasonably high. Additionally, this  project schedule has activities on the critical path with long durations. For  example, the project schedule for Geographic Programs included several  long-duration activities on its critical path that relate to the Bureau\u2019s  collection of community boundary data\u2014information essential to  delineating geographic boundaries used in the tabulation of census data.  These critical long-duration activities make it difficult to measure time- critical progress on such activities in the near term.", "These issues with how the schedule is constructed can also cause  schedule users to lack confidence in the forecasted dates. Bureau  officials acknowledged that the 2020 Census Geographic Programs  project schedule had logic issues at the time because it was in the middle  of a revision. Bureau officials stated that the standard process is to  update the project schedule in an offline version and then assess the  quality and impacts of changes before acceptance. According to Bureau  officials, the Geographic Programs project schedule did not follow this  process and was instead updated in the live version of the schedule  because of time constraints."], "subsections": []}, {"section_title": "Credible\u2013Selected Schedules Partially Meet Characteristic, but the Bureau Has Not Carried Out a Schedule Risk Analysis", "paragraphs": ["Our 2013 assessment of the Bureau\u2019s schedule found that the Bureau  minimally met the characteristics of a credible schedule. Our 2018  assessment of the Bureau\u2019s schedule found that the Bureau\u2019s scheduling  practices for a credible schedule have improved. We found that there is  now a clear relationship between lower-level activities and higher-level  activities and milestones, and there is generally better consistency of  dates between the project schedule and higher-level management  documents.", "However, the Bureau has not carried out a systematic quantitative risk  analysis on its schedule. A schedule risk analysis is a statistical  simulation of the possible effects of threats, opportunities, and general  uncertainty to a program\u2019s schedule that results in a quantifiable level of  confidence in meeting the program\u2019s key milestone dates. While the  Bureau has identified and continues to track risks to its 2018 End-to-End  Test address canvasing and nonresponse follow-up efforts in risk  registers, a quantitative risk analysis would illustrate the impact of risks on  the project schedule, and how those risks would affect the Bureau\u2019s ability  to meet milestones on time. Such an analysis would also provide a  measure of how much time contingency should be built in the schedule to  help manage prioritized risks, and, implicitly, provide indications of where  additional resources might be needed to stay on schedule.", "In response to our 2013 schedule assessment, Bureau officials said they  were waiting for decisions about scheduling software before making  decisions about a schedule risk analysis. As of May 2018, the Bureau has  conducted three risk analyses to prove the software\u2019s capability.  However, the Bureau still had not conducted a schedule risk assessment  on the current integrated master schedule used to manage the 2020  Census program.", "Without a schedule risk analysis, the Bureau cannot determine the  likelihood of each project\u2019s completion date; how much schedule risk  contingency is needed to provide an acceptable level of certainty for  completion by a specific date; which risks are most likely to affect the  schedule; how much contingency time each risk requires; and the  sequence of activities that are most likely to delay the project. Senior  Bureau officials stated that a schedule risk assessment plan and process  was approved by Bureau management in late May 2018 and that they  hope to implement this plan in summer 2018. They intend to conduct an  internal review over the next couple months to determine how to best use  the information this risk assessment would yield. Follow through on their  plans is critical to ensuring our recommendation is implemented."], "subsections": []}, {"section_title": "Controlled\u2013Selected Schedules Substantially Meet the Characteristic", "paragraphs": ["As with our 2013 schedule assessment, our 2018 analysis reported that  the Bureau\u2019s scheduling practices are substantially meeting the  characteristics of a controlled schedule. Our analysis determined that  there are no date anomalies in the project schedules, such as planned  dates in the past or actual dates in the future. We found the schedule was  current as of the date delivered to us, and according to Bureau  documents, the schedule is updated weekly following an established  schedule process.", "Additionally, the Bureau reported that it has a schedule management  process in place and a method for logging changes to the schedule in  accordance with leading practices. Bureau officials reported that they  monitor schedule trends, including bi-weekly schedule reliability checks  using the Defense Contract Management Agency 14-Point assessment, a  commonly used set of schedule integrity and reliability measures. Bureau  officials also provided the May 2014 Program Change Management  Process Strategy which defines the process for initiating changes to the  integrated performance measurement baseline configuration; analyzing  the impact of changes to project cost, schedule and scope; approving or  disapproving changes; and updating project or product specifications and  baselines.", "However, our assessment found that the Bureau did not fully meet this  characteristic for a controlled schedule. The Bureau lacked sound  documentation of the schedule in the form of a schedule basis document,  and changes to the current schedules in the form of a schedule narrative.  The current schedule should be documented in a schedule narrative with  each update, including changes made to the schedule during status  updates and changes that are justified along with their likely effect on  future activities. The Bureau had not prepared such narratives.  Additionally, none of the three schedules were supported by a schedule  baseline document\u2014a single document that defines the organization of a  schedule, describes the logic of the network, describes the basic  approach to managing resources, and provides a basis for all parameters  used to calculate dates. Sound documentation helps with analyzing  changes in the program schedule and identifying the reasons why actual  schedule results vary from their estimates, thereby contributing to the  collection of data that can be useful to evaluations of schedule efforts,  and that can be used to support future estimates.", "While the Bureau has made improvements to implement the  recommendations regarding the comprehensiveness and construction  characteristics of the Bureau\u2019s scheduling practices, the Bureau\u2019s lack of  resource loading and a risk assessment of the schedule continue to affect  the reliability of the Bureau\u2019s schedule. The schedule would be a more  useful management tool if the Bureau increased the schedule\u2019s reliability  by addressing these weaknesses. To address these remaining  weaknesses, we continue to believe that these recommendations are  valid in order to ensure the 2020 schedule can support key management  decisions."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Commerce. In its  written comments, reproduced in appendix IV the Department of  Commerce agreed with our findings.", "We are sending copies of this report to the Secretary of Commerce, the  Under Secretary of Economic Affairs, the Acting Director of the U.S.  Census Bureau, and interested congressional committees. The report  also is available at no charge on GAO\u2019s website at http://www.gao.gov.", "If you have any questions about this report, please contact me at (202)  512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made major contributions to this report are  listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objective, Scope, and Methodology", "paragraphs": ["This report assesses the extent to which the Bureau is using leading  practices for scheduling key projects. We did this by focusing on three  2020 projects. We selected the three projects from the December 17,  2017, version of the 2020 Census integrated master schedule. That  schedule consists of 255 total projects, of which 134 were remaining to be  completed. We made our selections based on the cost of the projects,  their significance to the 2020 Census, and the fact that they were in  progress. The 3 projects selected for review are 2018 End-to-End Census  Test Address Canvassing, 2018 End-to-End Census Test Nonresponse  Follow-up, and 2020 Census Geographic Programs.", "We reviewed the project schedules and underlying sub-schedules to  assess them against the 10 scheduling leading practices by:", "Checking for specific problems that could hinder the schedule\u2019s ability  to respond to changes. For example, we:", "Examined if there are any open-ended activities (i.e., activities  with no predecessor and/or successors),", "Searched for activities with poor logic:", "For example, Start to Start successor only or Finish to Finish  predecessor only which represent dangling logic, or", "Logic on summary tasks rather than attached to detailed tasks  (summary tasks are for organizing the schedule and should  not drive the logic).", "Looked for activities with constraints which keep the schedule rigid  (e.g., start no earlier than, finish no later than, etc.),  Identified any lags or leads which should only be used to show  how two tasks interact and not to represent work,", "Determined if activities were resource loaded\u2014which helps to cost  out the schedule\u2014and examine whether resources are over  allocated or not available when needed,", "Examined the length of activity durations and compared them to  the program management review cycle,", "Checked for horizontal and vertical integration within the schedule,", "Examined the schedule critical path to determine whether or not it  was reliable and logical,", "Examined schedule float and determine if it was reasonable, and", "Examined whether the schedule was baselined, its status cycle,  and what deviations there were from the original plan. We also  determined if there were any actual start or finish dates recorded  in the future and whether there was any broken logic between  planned tasks.", "We also interviewed Bureau officials responsible for the 2020 schedule.  We scored each scheduling leading practice on a five-point scale ranging  from \u201cnot met\u201d to \u201cmet.\u201d We determined the characteristic assessment  rating by assigning each best practice rating a number and taking the  average. The numerical ratings and ranges of the resulting averages are  as follows.", "We then compared these results with our prior assessments of the  Bureau\u2019s schedule, particularly those where recommendations were  made, and we updated the status of those recommendations.", "Assessing only three key projects limits possible statements about the  Bureau\u2019s entire schedule. For example, if the Bureau is not following best  practices in creating and maintaining the three project schedules, we can  conclude that the larger integrated schedule is unreliable. This is because  an integrated master schedule consolidates lower-level project schedules;  errors and reliability issues in lower levels will be transferred to higher- level schedules. However, if the selected lower-level projects are deemed  reliable, we cannot definitively determine the reliability of the integrated  master schedule because the other projects that were not assessed may  be unreliable."], "subsections": []}, {"section_title": "Appendix II: Description of Scheduling Leading Practices", "paragraphs": [], "subsections": [{"section_title": "Characteristic Comprehensive Capturing all activities", "paragraphs": ["Description  A schedule should reflect all activities defined in the project\u2019s work breakdown  structure and include all activities to be performed by the government and contractor.", "The schedule should realistically reflect the resources (i.e., labor, material, and  overhead) needed to do the work, whether all required resources will be available  when needed, and whether any funding or time constraints exist.", "The schedule should reflect how long each activity will take to execute.", "The schedule should be planned so that all activities are logically sequenced in the  order they are to be carried out.", "The schedule should identify the critical path, or those activities that, if delayed, will  negatively impact the overall project completion date. The critical path enables  analysis of the effect delays may have on the overall schedule.", "The schedule should identify float\u2014the amount of time an activity can slip in the  schedule before it affects other activities\u2014so that flexibility in the schedule can be  determined. As a general rule, activities along the critical path have the least amount  of float."], "subsections": []}, {"section_title": "Credible", "paragraphs": ["The detailed schedule should be horizontally traceable, meaning that it should link  products and outcomes associated with other sequenced activities. The integrated  master schedule should also be vertically traceable\u2014that is, varying levels of  activities and supporting subactivities can be traced. Such mapping or alignment of  levels enables different groups to work to the same master schedule.", "The schedule should include a schedule risk analysis that uses statistical techniques  to predict the probability of meeting a completion date. A schedule risk analysis can  help management identify high priority risks and opportunities."], "subsections": []}, {"section_title": "Controlled", "paragraphs": ["Progress updates and logic provide a realistic forecast of start and completion dates  for program activities. Maintaining the integrity of the schedule logic at regular  intervals is necessary to reflect the true status of the program. To ensure that the  schedule is properly updated, people responsible for updating should be trained in  critical path method scheduling.", "A baseline schedule represents the original configuration of the program plan and is  the basis for managing the project scope, the time period for accomplishing it, and  the required resources. Comparing the current status of the schedule to the baseline  can help managers target areas for mitigation."], "subsections": []}]}, {"section_title": "Appendix III: Assessment of the Extent to Which the Bureau Followed Scheduling Leading Practices", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["Other key contributors to this report include Ty Mitchell, Assistant  Director; Juan\u00e1 Collymore; Rob Gebhart; Yvette Gutierrez; Jason Lee;  Kayla Robinson; Cynthia Saunders; and Timothy Wexler."], "subsections": []}]}], "fastfact": ["The Census Bureau is required to count the population as of April 1, 2020; deliver state counts to the President by December 31, 2020; and provide redistricting data to the states by April 1, 2021. To meet these deadlines, the Bureau manages an integrated master schedule with hundreds of projects that must proceed in concert with each other.", "We looked at the reliability of the Bureau's project schedules and found ongoing issues. For example, none of the schedules we reviewed contained information on resource needs and availability. We've previously recommended that the Bureau include resource estimates in the 2020 master schedule."]}
{"id": "GAO-18-679", "url": "https://www.gao.gov/products/GAO-18-679", "title": "Private School Choice: Requirements for Students and Donors Participating in State Tax Credit Scholarship Programs", "published_date": "2018-09-18T00:00:00", "released_date": "2018-09-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["TCS programs offer state tax credits to individuals or businesses that donate to scholarship funds for students to attend private elementary and secondary schools. Through these credits, donors may reduce the amount they owe in state taxes by the full or a partial amount of their donation, depending on each program's rules. Designing a TCS program requires that many decisions be made, such as which students will be eligible to receive scholarships and the effect donations will have on donors' state taxes. GAO was asked to review key characteristics of TCS programs.", "This report examines (1) state TCS programs' policies regarding student eligibility and scholarship awards, and (2) how donating to a TCS program could affect the amount of state and federal taxes owed by donors.", "For both objectives, GAO reviewed publicly-available documents about student eligibility and tax provisions for all 22 programs authorized as of January 2018 and verified the accuracy of the information with state program officials. GAO did not conduct an independent legal review of state laws and regulations. GAO also interviewed federal officials and reviewed relevant federal guidance and policy documents."]}, {"section_title": "What GAO Found", "paragraphs": ["In 2018, there were 22 tax credit scholarship (TCS) programs authorized across 18 states, which provide state tax credits for individual and business donations that fund scholarships for students to attend elementary and secondary private schools (see figure).", "To determine the eligibility of students for these scholarships, most TCS programs use household income and have various approaches to determine scholarship award amounts. Income limits vary widely among programs, ranging from approximately $32,000 to $136,500 per year for students from a four-person household in school year 2017-2018. Programs have different requirements for how students can use their scholarships and different methods for calculating scholarship amounts. More than half of the programs (13 of 22) allow students to use their scholarship money for costs like transportation and books in addition to tuition, whereas the remaining programs (9 of 22) require scholarships funds to be used for tuition only. Average scholarship awards in school year 2016-2017 ranged from $500 to $5,468 per student among the 16 programs that published or provided GAO with such information.", "The effect of TCS donations on donors' tax liability depends on program characteristics and donors' financial circumstances. Specifically, half of the 22 programs allow eligible donors to claim 100 percent of their donations as state tax credits, meaning that for each dollar donated, state taxes owed are reduced by a dollar, up to any maximum set by the state. The remaining 11 programs allow donors to claim from 50 to 85 percent of their donations as state tax credits. Programs often specify a maximum tax credit that may be claimed each year by a donor, by all donors combined, or both. Individual donors may also reduce their federal tax liabilities through the federal deduction for charitable contributions, depending on their financial circumstances and applicable tax provisions."]}], "report": [{"section_title": "Letter", "paragraphs": ["State tax credit scholarship (TCS) programs offer tax credits to individuals  or businesses that donate to scholarship funds for students to attend  private elementary and secondary schools. Through these credits, donors  may reduce the amount they owe in state taxes by the full or a partial  amount of their donation, depending on each program\u2019s rules. In some  cases, TCS program donations may also affect the amount of federal  taxes donors owe, through the federal deduction for charitable  contributions. TCS programs are one type of private school choice  program that states have established to help fund students\u2019 attendance at  private schools. Other types of private school choice programs include  school voucher and education savings account programs. As of January  2018, there were 22 TCS programs authorized across 18 states, with an  additional program enacted later in the year. In school year (SY) 2016- 2017 (the most recent year for which information was available), TCS  programs collectively awarded scholarships totaling more than $856  million, according to state-reported data.", "Designing a TCS program requires that many decisions be made, such  as who will be eligible to receive scholarships and the effect donations will  have on the amount donors owe in state taxes. You asked us to review  key characteristics of state-administered TCS programs.", "This report examines (1) state TCS programs\u2019 policies regarding student  eligibility and scholarship awards, and (2) how donating to a TCS  program could affect the amount of state and federal taxes owed by  donors.", "To complete our work for both objectives, we reviewed publicly-available  information about student eligibility, scholarship awards, and tax  provisions for the 22 TCS programs that were authorized by the  beginning of 2018. We verified the accuracy of this information with state  officials from each program. We did not conduct an independent review  of state laws and regulations. Throughout the report, we provide the most  recent and complete information available for the various types of  information. Specifically, unless otherwise noted, student eligibility  requirements are as of SY 2017-2018 and tax provisions are as of  calendar year (CY) 2018. Scholarship amount information is from SY  2016-2017 and program donations made by taxpayers are from CY 2016.", "We also used economic data from the 2012-2016 American Community  Survey (ACS) 5-year estimates administered by the U.S. Census  Bureau. ACS is a national survey that collects information about social,  economic, demographic, and housing characteristics from a sample of  households. For this report, we used ACS estimates of the state level  median income for a four-person household to provide context for TCS  program income eligibility requirements in relation to state income  distributions. For the TCS programs with income eligibility requirements,  we calculated program income limits for a four-person household based  on each TCS program\u2019s income eligibility requirements for SY 2016-2017  and 2017-2018. We then compared these limits to 2012-2016 5-year ACS  estimates of state median household income for four-person households.  In addition to verifying the program data we collected with state officials,  we reviewed ACS documentation on survey design and methodology  used to produce the estimates of state median household income. We  concluded that the data presented in this report were sufficiently reliable  for the purposes of our reporting objectives.", "In addition, we spoke with officials at the U.S. Department of Education to  obtain their observations about the state programs, and identify whether  the department had conducted research related to TCS programs. We  also spoke with other stakeholders such as TCS program researchers to  understand current research and emerging issues regarding these  programs.", "For the second objective, in addition to reviewing program documents  and verifying the information with state officials, we developed illustrative examples of how TCS donations may affect state and federal tax liabilities  for donors with varying tax circumstances\u2014including examples that  assume different percentages of a donation that donors are allowed to  claim as a state tax credit (referred to in this report as tax credit  percentages). Specifically we developed examples that assume a 50  percent TCS program tax credit and examples that assume a 100 percent  TCS program tax credit, which represent the smallest and largest tax  credit percentages offered by existing TCS programs. In August 2018, the  Internal Revenue Service (IRS) and Treasury published proposed  regulations that, if finalized without modification, would change the extent  to which individuals who make TCS program donations can reduce their  federal tax liability. We did not address the proposed regulations in our  analysis because they were not final at the time this report was published  and are therefore subject to change. We also reviewed relevant federal  laws, regulations, and other documents related to federal tax policy and  spoke with the IRS regarding federal deductions for charitable  contributions and state and local taxes.", "We conducted this performance audit from January 2018 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["As of January 2018, there were 22 TCS programs authorized across 18  states (see fig. 1). All TCS programs are state programs; there are no  federal TCS programs. Decisions about whether to develop and operate a  TCS program (and how to structure the program) are completely at the  discretion of each state; there is no federal role in establishing these  programs. Most TCS programs began within the last 10 years; the first  TCS program awarded scholarships in Arizona in 1998 and Florida  created the newest program in 2018, according to state program  documents and officials.", "Scholarships are funded through donations from private individuals and  businesses, and the financial impact to states from TCS programs  primarily occurs through forgone revenue resulting from the associated  tax credits. In all 22 programs, state agencies and nonprofit  organizations both play a role in administering the programs, with the  specific responsibilities varying by program:", "State departments or agencies responsible for tax administration,  education, or both, generally administer these programs. For  example, they may approve schools or nonprofit scholarship granting  organizations or disseminate program information or guidance to  potential donors, scholarship students, or the public.", "Nonprofit scholarship granting organizations (SGO) are generally  responsible for managing some aspects of the donation process\u2014 such as collecting donations\u2014as well as awarding scholarships to  students."], "subsections": []}, {"section_title": "Most Programs Use Income to Determine Student Eligibility and Consider Various Factors When Setting Scholarship Award Amounts", "paragraphs": ["States\u2019 TCS programs often determine student eligibility for scholarships  based on household income and use a range of factors to determine  scholarship award amounts."], "subsections": [{"section_title": "Eligibility Requirements", "paragraphs": ["Income requirements: Seventeen of the 22 TCS programs have income  limits (i.e., the maximum amount of household income a student can have  and still be eligible for a scholarship). As shown in figure 2, income  limits varied widely among programs, ranging from just under $32,000 to  about $136,500 per year for students from a four-person household in SY  2017-2018. For context, we compared these income limits to the 2012- 2016 5-year ACS estimates of state median household income for four- person households. Six of the 17 programs had household income limits  in SY 2017-2018 above their state\u2019s median income. This included two  programs each in Arizona and Pennsylvania which collectively accounted  for about one-third of all TCS scholarships awarded to students in SY  2016-2017, according to state-reported data. Of the 17 programs that  have household income limits, 6 also require SGOs to further consider  income when selecting scholarship recipients among eligible students.", "Such requirements include giving preference to scholarship applicants  from lower-income households or ensuring that a certain percentage of  scholarship recipients come from lower-income households.", "Of the remaining five TCS programs that do not use income to determine  eligibility, three use one or more other types of eligibility criteria, such as  whether the student has a disability, and two\u2014Montana\u2019s TCS program  and Arizona\u2019s Original Individual Income Tax Credit program\u2014are open  to all school-aged residents.", "TCS programs collected limited information on the household incomes of  scholarship recipients. The 11 programs that had income information on  recipient families collected and reported it in different ways. For example,  the Alabama program requires SGOs to report the total number and  amount of scholarships awarded to students qualifying for the federal free  and reduced-price lunch program and makes the information publicly  available. Arizona makes an annual report publicly available on the  state\u2019s four TCS programs, including breakdowns of the number of  students receiving scholarships from various income levels.", "Other eligibility requirements: Some TCS programs\u2019 eligibility criteria  for student scholarship recipients include other factors, such as students\u2019  disability status or previous schooling. Specifically, 7 of 22 programs are  limited to students with disabilities or allow students with disabilities to  qualify for a scholarship even if they do not meet some requirements for  students without disabilities. For example, to be eligible for Virginia\u2019s  program, all students must have a household income below a certain  amount, but that amount is higher for students with disabilities. South  Carolina\u2019s program is limited to students with disabilities. In addition,  some programs may require students to have previously attended a  public school (9 of 22) or live in the attendance area of a public school  with performance challenges (5 of 22). See appendix II for more  information on the eligibility criteria of TCS programs."], "subsections": []}, {"section_title": "Scholarship Uses and Amounts", "paragraphs": ["TCS programs have different requirements for how students can use their  scholarships and different methods for calculating scholarship amounts.  More than half of the programs (13 of 22) allow students to use their  scholarship money for costs like transportation and books in addition to  tuition, whereas the remaining programs (9 of 22) require scholarships  funds to be used for tuition only. Four programs allow donors to  recommend that their donations fund scholarships for specific students.  Average scholarship awards in SY 2016-2017 ranged from $500 to  $5,468 per student among the 16 programs that published such  information or provided it to us. (See appendix II for more information).", "Most programs require SGOs to consider one or more factors related to  student or school characteristics when determining scholarship award  amounts. As shown in table 1, these factors may include the cost of  private school tuition or the state funding amounts for public school  students, among other factors.", "See appendix II for more information on program requirements related to  scholarship amounts."], "subsections": []}]}, {"section_title": "Effect of TCS Donations on Taxes Owed Depends on Factors Such as Tax Credit Percentages and Individual Circumstances", "paragraphs": ["The extent to which TCS program donations affect the amount that  donors owe in state and federal taxes depends on program  characteristics\u2014such as the percentage of the donation that the rules of  the program allow donors to claim as a state tax credit (referred to in this  report as \u201ctax credit percentages\u201d) and limits on donation amounts\u2014along  with donors\u2019 financial circumstances. Almost all of the TCS programs  (20 of 22) offer tax credits to businesses for income or other types of  taxes, while more than half offer tax credits to individuals for their income  taxes (13 of 22). More than half of programs (13 of 22) offer tax credits  for cash donations only, while the remaining 9 programs also allow for at  least one type of \u201cin kind\u201d donation, such as a property donation."], "subsections": [{"section_title": "Tax Credit Percentages", "paragraphs": ["Eleven of the 22 programs allow eligible donors (either individuals,  businesses, or both) to claim 100 percent of their donations as state tax  credits, meaning that, for each dollar donated, the amount of state taxes  owed (i.e., the donor\u2019s tax liability) is reduced by a dollar, up to any  maximum donation limits set by the program. The other 11 programs offer  tax credits of 50 percent to 85 percent of donations (see table 2). For  example, Indiana and Oklahoma offer tax credits of 50 percent of the  donation value, meaning that donors can reduce their state tax liability by  50 cents for every dollar donated. All but one of the programs prohibit  donors from receiving a tax credit greater than their tax liability in a given  year, although two thirds of the programs allow donors to carry forward  portions of the credits to use in future years."], "subsections": []}, {"section_title": "Limits on Tax Credit Amounts", "paragraphs": ["Sixteen of the 22 programs limit the amount of tax credits each donor  may claim per year and programs vary in how they structure these  limits. The programs that set annual limits for donors generally do so in  one or both of the following ways:", "Dollar amount limits: Thirteen programs limit the dollar amount of  TCS program tax credits that donors can claim in a given year. These  limits ranged from a maximum tax credit of $150 for either individuals  or businesses in Montana\u2019s program, to a maximum tax credit of $1  million for either individuals or businesses in Illinois\u2019 program in CY  2018.", "Limits based on percentage of tax liability: Four programs limit the  amount of the TCS program tax credits a donor can claim to a  percentage of the donor\u2019s total income tax liability. These limits  ranged from 50 to 90 percent of a donor\u2019s income tax liability in CY  2018. For example, in South Carolina donors could receive a tax  credit up to 60 percent of their total income tax liability for the year of  the donation.", "All but three programs specify a maximum total amount, or cap, of TCS  program tax credits that may be claimed each year for the program as a  whole (see table 3). Programs\u2019 procedures vary if the cap is reached in  a given year. For example, in Rhode Island, potential donors may apply  for credits on a \u201cfirst come, first served\u201d basis once the application period  starts until all credits are taken. In 2018, all of the credits were claimed on  the first day of the application period and a drawing was held to determine  who would receive credits among those who applied on that first day.", "Georgia\u2019s TCS program offers a maximum tax credit percentage of 100  percent when total donations do not exceed the donation cap. However, if  total donations exceed the program cap, the allowable tax credit  percentage is prorated among donors who apply on the day the program- wide cap on tax credits is reached.", "Twenty programs published or provided us with information on donation  amounts, such as total donations and average donations. Among these  programs, total program-wide donation amounts in CY 2016 ranged from  $43,865 to $553 million. (See appendix III for more information about  donation amounts.)"], "subsections": []}, {"section_title": "TCS Donations and Federal Taxes for Individual Donors", "paragraphs": ["In addition to reducing their state tax liabilities, some individuals who  make TCS program donations may also be able to reduce their federal  income tax liabilities through the federal tax deduction for charitable  contributions. In August 2018, IRS and Treasury published proposed  regulations that, if finalized without modification, would change the extent  to which individuals who make TCS program donations can reduce their  federal tax liability. However, the proposed regulations were not final at  the time this report was published and are therefore subject to change. As  a result, the information we present below does not address the proposed  regulations.", "Currently, the extent to which individuals may reduce their federal income  tax liabilities as a result of their TCS donation depends on their specific  circumstances, such as whether they itemize their deductions (versus  taking the standard deduction), the federal rates at which their income is  taxed, and the amount of federal deductions they take for state and local  taxes. More specifically, the effect of a TCS donation on an individual  donor\u2019s federal tax liability depends on the following:  Itemizing federal deductions and taking the deduction for  charitable contributions: Taxpayers benefit from itemizing  deductions\u2014such as those for state and local taxes, mortgage  interest, and charitable contributions\u2014if they exceed the standard  deduction. Taxpayers, including TCS donors, may only claim a  federal deduction for charitable contributions if they itemize.", "Federal tax rate: The reduction in federal taxes owed as a result of  the federal deduction for charitable contributions depends on the  donor\u2019s applicable federal tax rate. Given the same deduction amount,  taxpayers subject to higher tax rates will generally reduce their tax  liabilities by larger amounts than taxpayers subject to lower tax rates.", "Deduction for state and local taxes: When filing federal taxes,  taxpayers who itemize may take a deduction for state and local taxes  they have paid during the tax year. Beginning in tax year 2018,  individual taxpayers may deduct no more than $10,000 in state and  local taxes on their federal tax returns. Taxpayers who claim state  tax credits for TCS program donations reduce their state tax liability,  which may in turn reduce the amount they may deduct on their federal  tax return for state and local taxes paid.", "Interaction between the federal deduction for charitable  contributions and the federal deduction for state and local  taxes: Generally, if a donor pays $10,000 or less in state and local  taxes, the amount of the deduction for charitable contributions may be  fully or partially offset (i.e., canceled out) by a decrease in the  deduction for state and local taxes paid as a result of the TCS  program tax credit. Conversely, taxpayers who pay more than  $10,000 in state and local taxes cannot deduct the full amount of state  and local taxes they paid. Therefore, the reduced state and local  taxes paid as a result of the tax credit generally may not offset the  amount of the deduction for charitable contributions for these  taxpayers.", "See figure 3 for a description of how individuals\u2019 TCS program donations  could affect their federal tax liabilities."], "subsections": []}, {"section_title": "Combined Reduction in State and Federal Tax Liability", "paragraphs": ["TCS program donations can lead to a range of possible changes to an  individual\u2019s state and federal income tax liabilities, including some  scenarios where donors could reduce their combined state and federal  tax liability by an amount that is greater than the amount of their donation  (see for example, Donor A in figure 4). Figure 4 shows four examples of  how state and federal income taxes may be reduced for hypothetical  individual donors in states with 100 percent and 50 percent tax credit  scholarship programs."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education and IRS for review and  comment. While the draft was under review at these agencies, IRS and  Treasury issued proposed regulations related to state tax credits and the  federal deduction for charitable contributions. We updated the report to  include information about these proposed regulations but did not alter our  analysis to reflect the proposed regulations because they were not final at  the time this report was published and are therefore subject to change.  We provided a revised draft to IRS as the revisions directly relate to IRS\u2019s  areas of responsibility, and informed Education about our approach to  addressing the proposed regulations.", "IRS did not provide formal comments on the draft report.", "Education\u2019s comments are reproduced in appendix I. Education also  provided technical comments, which we incorporated as appropriate. In  its comments, Education noted that it has no role in developing,  operating, or overseeing TCS programs, and provided a variety of  comments and observations on the draft report. For example, Education  suggested that we add additional details about certain TCS program  requirements, such as more information about state tax rules and  permissible uses of scholarship funds. We incorporated these comments  as appropriate.", "Education also suggested that we delay publication of this report until the  IRS regulations are finalized, as Education thought that the report could  be more helpful at that time. GAO policy is to communicate audit and  evaluation results in a timely manner to decision makers and others who  either requested the work or may need the information to bring about  needed changes. Therefore, we are issuing the report as planned.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Education, and the Commissioner of  Internal Revenue. 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 (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: State Tax Credit Scholarship Program Eligibility and Scholarship Award Characteristics", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Information About Tax Credit Scholarship Program Tax Provisions", "paragraphs": ["Program name  Programs available for both individual and business donors  Alabama Educational  Scholarship Program  $50,000 or 50% of tax  liability, whichever is lower  (individual)  50% of business tax liability  $1,000 (individual)  75% of business tax liability   $1 million (individual and  business) $350,000 (Individual and  business)  $150 (Individual and  business)  $1,000 (individual)  $100,000 (business)   60% of tax liability (Individual  and business)", "Virginia Education  Improvement  Scholarships Tax Credits  Program  Programs available for individual donors only  Arizona Original  Individual Income Tax  Credit Program  $81,250 (individual)  No limit for business donors  $555 (individual)  $552 (individual)"], "subsections": [{"section_title": "Percent of donation that may be claimed as a credit", "paragraphs": ["Maximum donation amounts  vary from 50% to 100% of  tax liability  $510,000 or no more than  10% of program credits  2 percent of wages paid  no  In Oklahoma, Pennsylvania, and Rhode Island, the percentage of donations that can be claimed as a  tax credit increases if donors commit to donating for 2 years. In Oklahoma, that percentage increases  from 50 percent to 75 percent. In the two Pennsylvania programs and the Rhode Island program, the  percentage increases from 75 percent to 90 percent."], "subsections": []}, {"section_title": "Program name Programs available for both individual and business donors Alabama Educational Scholarship Program", "paragraphs": ["Total donations  in CY 2016 (rounded)"], "subsections": []}]}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the individual named above, Nagla\u2019a El-Hodiri (Assistant  Director), Barbara Steel-Lowney (Analyst-in-Charge), Jeff Arkin, and  Jessica L. Yutzy made key contributions to this report. Also contributing to  this report were Deborah Bland, Lilia Chaidez, Sarah Cornetto, Caitlin  Cusati, Paulissa Earl, Alison Grantham, Kirsten Lauber, Sheila R. McCoy,  Mimi Nguyen, Jessica Orr, Michelle Philpott, Paul Schearf, and Andrew J.  Stephens."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-386", "url": "https://www.gao.gov/products/GAO-18-386", "title": "Medical Records: Fees and Challenges Associated with Patients' Access", "published_date": "2018-05-14T00:00:00", "released_date": "2018-05-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["HIPAA and its implementing regulations, as amended by the Health Information Technology for Economic and Clinical Health Act, require health care providers to give patients, upon request, access to their medical records, which contain protected health information (i.e., diagnoses, billing information, medications, and test results). This right of access allows patients to obtain their records or have them forwarded to a person or entity of their choice\u2014such as another provider\u2014in a timely manner while being charged a reasonable, cost-based fee. Third parties, such as a lawyer or someone processing disability claims, may also request copies of a patient's medical records with permission from the patient.", "The 21st Century Cures Act included a provision for GAO to study patient access to medical records. Among other things, this report describes (1) what is known about the fees for accessing patients' medical records and (2) challenges identified by patients and providers when patients request access to their medical records. GAO reviewed selected HIPAA requirements and implementing regulations and guidance, and relevant laws in four states selected in part because they established a range of fees associated with obtaining copies of medical records. GAO also interviewed four provider associations, seven vendors that work for providers, six patient advocates, state officials, and Department of Health and Human Services' (HHS) officials. The information GAO obtained and its analysis of laws in the selected states are not generalizable. HHS provided technical comments on this report."]}, {"section_title": "What GAO Found", "paragraphs": ["Available information suggests that the fees charged for accessing medical records can vary depending on the type of request and the state in which the request is made. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing regulations, providers are authorized to charge a reasonable, cost-based fee when patients request copies of their medical records or request that their records be forwarded to another provider or entity. In the case of third-party requests, when a patient gives permission for another entity\u2014for example, an attorney\u2014to request copies of the patient's medical records, the fees are not subject to the reasonable cost-based standard and are generally governed by state law. According to stakeholders GAO interviewed, the fees for third-party requests are generally higher than the fees charged to patients and can vary significantly across states.", "The four states GAO reviewed have state laws that vary in terms of the fees allowed for patient and third-party requests for medical records. For example, three of the states have per-page fee amounts for patient and third-party records requests. The amounts charged are based on the number of pages requested and vary across the three states.", "One of the three states has established a different per-page fee amount for third-party requests. The other two do not authorize a different fee for patient and third-party requests.", "One of the three states also specifies a maximum allowable fee if the provider uses an electronic health records system. The other two do not differentiate costs for electronic or paper records.", "In the fourth state, state law entitles individuals to one free copy of their medical record. The statute allows a charge of up to $1 per page for additional copies.", "Patient advocates, provider associations, and other stakeholders GAO interviewed identified challenges that patients and providers face when patients request access to their medical records.", "Patients' challenges include incurring what they believe to be high fees when requesting medical records\u2014for example, when facing severe medical issues that have generated a high number of medical records. Additionally, not all patients are aware that they have a right to challenge providers who deny them access to their medical records.", "Providers' challenges include the costs of responding to patient requests for records due to the allocation of staff time and other resources. In addition, according to provider associations and others GAO interviewed, fulfilling requests for medical records has become more complex and challenging for providers, in part because providers may store this information in multiple electronic record systems or in a mix of paper and electronic records."]}], "report": [{"section_title": "Letter", "paragraphs": ["In the course of seeking or obtaining health care, patients may request  and obtain their medical records. They may, for example, want to take  their medical records to another health care provider, or use the records  to apply for disability coverage or resolve a dispute over insurance  coverage. Patients may obtain their records directly in an electronic or  paper form or direct one provider to send these records to another  provider or entity, such as an insurer or lawyer. In other cases, a third  party, such as a lawyer or someone processing disability claims, may  directly contact a provider to request access to a patient\u2019s medical  records with permission from the patient.", "The Health Insurance Portability and Accountability Act of 1996 (HIPAA),  as amended, and its implementing regulations, require HIPAA-covered  entities (e.g., providers and insurers) to provide individuals, upon request,  with access to their medical records, which contain protected health  information (e.g., information on diagnoses, billing, medications, and test  results). This right of access allows patients to obtain their medical  records in a timely manner while being charged a reasonable, cost-based  fee. Federal law also states that an individual can direct a provider to  send the records to a person of the individual\u2019s choice. In 2016, the  Department of Health and Human Services\u2019 (HHS) Office for Civil Rights  (OCR), which is responsible for enforcing the rights established under  HIPAA, issued guidance about the right of access. Among other things,  the guidance states that when a patient requests that his or her medical  records be forwarded to a person or entity, a reasonable, cost-based fee  can be charged.", "The 21st Century Cures Act included a provision for us to study patient  access to medical records and issue a report by June 13, 2018. In this  report we describe  1.  what is known about the fees charged for accessing patients\u2019 medical  2.  challenges identified by patients and providers when patients request  access to their medical records, and  3.  efforts by OCR to ensure patients\u2019 access to their medical records.", "To describe what is known about the fees charged for accessing patients\u2019  medical records, we reviewed selected HIPAA requirements and  implementing regulations and guidance. We conducted interviews with  relevant stakeholders, including representatives from seven release-of- information (ROI) vendors and nine individuals or entities with expertise in  HIPAA, including HIPAA lawyers in both private practice and who work in  health policy. We selected these stakeholders based on our initial  background research, prior work, and input from other stakeholders.  During our interviews, we asked about examples of state laws that govern  the fees for obtaining copies of medical records. Using this information,  we judgmentally selected four states for closer review\u2014Kentucky, Ohio,  Rhode Island, and Wisconsin. We selected these states based on input  from stakeholders, a review of state laws, and because these states have  a range of different types of fees. In Ohio, Rhode Island, and Wisconsin,  we interviewed officials in the state agencies responsible for oversight of  patients\u2019 access to medical records. Officials from Kentucky declined an  interview but provided written responses to our questions. The  information we obtained from stakeholders and our analysis of laws in the  selected states are not generalizable.", "To describe challenges identified by patients and providers when patients  request access to their medical records, we interviewed relevant  stakeholders. Specifically, we interviewed individuals or entities with  expertise in the topic of patients\u2019 access to health information (referred to  hereafter as experts), six patient advocates, representatives from four  organizations that represent providers (provider representatives), and  representatives from seven ROI vendor companies. We judgmentally  selected these stakeholders based on our previous studies, presentations  at conferences, relevant testimony at Congressional hearings, and  recommendations by other interviewees. We also interviewed officials  from HHS\u2019s OCR, Office of the National Coordinator for Health  Information Technology (ONC), and Office of Inspector General (OIG).  We obtained specific examples of situations when patients have faced  challenges accessing their medical records; these examples were  provided to us by OCR and an organization that collects anecdotes from  patients about their experiences. The information we obtained from  stakeholders is not generalizable.", "To describe efforts by OCR to ensure patients\u2019 access to their medical  records, we reviewed data from OCR on all patient access complaints  received between February 2016 and June 2017. We assessed the  reliability of these data by (1) performing electronic testing of required  data elements, (2) reviewing existing information about the data and the  system that produced them, and (3) consulting agency officials who are  knowledgeable about the data. We determined that these data were  sufficiently reliable for the purposes of our reporting objectives. We also  reviewed relevant OCR documentation, including policies and  procedures, audit guidelines, and reports on HIPAA violations, as well as  10 examples of patient access complaints provided to us by OCR. Finally,  we interviewed officials from OCR and ONC.", "We conducted this performance audit from March 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Medical Record Requests", "paragraphs": ["Patients may request copies of their medical records, or request that  copies of their records be sent to a designated person or entity of their  choice.", "In a patient request, a patient or former patient requests access to or  copies of some or all of her medical records, in either paper or  electronic format. For example, a patient might want to keep copies  for her own personal use or to bring with her when moving or  changing providers.", "In a patient-directed request, a patient or former patient requests  that a provider or other covered entity send a copy of the patient\u2019s  medical records directly to another person or entity, such as another  provider. For example, a patient might request that her medical  records be forwarded to another provider because the patient is  moving or wants to seek a second opinion.", "In a third-party request, a third party, such as an attorney, obtains  permission from a patient (via a HIPAA authorization form that is  signed by the patient) to access the patient\u2019s medical records. For  example, with permission from the patient, a lawyer might request  copies of a patient\u2019s medical records to pursue a malpractice case.", "HIPAA\u2019s Privacy Rule\u2014the regulations that implement HIPAA\u2019s privacy  protections\u2014requires that upon request, HIPAA-covered entities, such as  health care providers and health plans, provide individuals with access to  their medical records. Under HIPAA\u2019s implementing regulations,  providers and other covered entities must respond to a patient or patient- directed request for medical records within 30 days. The Privacy Rule  also establishes an individual\u2019s right to inspect or obtain a copy of his or  her medical records which, as amended in 2013, includes the right to  direct a covered entity to transmit a copy of the medical records to a  designated person or entity of the individual\u2019s choice. Individuals have  the right to access their medical records for as long as the information is  maintained by a covered entity or by a business associate on behalf of a  covered entity, regardless of when the information was created; whether  the information is maintained in paper or electronic systems onsite,  remotely, or is archived; or where the information originated. Finally, the  HIPAA Privacy Rule also describes the circumstances under which  protected health information in medical records may be released to  patients and third parties.", "In February 2016, OCR issued guidance to explain its 2013 regulations.  Among other things, this guidance states that as part of a patient\u2019s right of  access, patients have the right to obtain copies of their medical records  and the right to have their records forwarded to a person or entity of their choice; in these circumstances, patients are only to be charged a  \u201creasonable, cost-based fee.\u201d The guidance further notes that state laws  that provide individuals with greater rights of access to their medical  records are not preempted by HIPAA and still apply. With respect to fees,  patients may not be charged more than allowed under the Privacy Rule,  even if state law provides for higher or different fees."], "subsections": []}, {"section_title": "Fulfilling Medical Record Requests", "paragraphs": ["To respond to medical record requests, providers either use staff within  their organization or may contract with ROI vendors to conduct this work.  In general, both providers\u2019 staff and ROI vendors follow the same process  when fulfilling requests for medical records for both individual patients  and third parties. (See fig. 1.)"], "subsections": []}]}, {"section_title": "Available Information Suggests That Fees for Accessing Patient Medical Records Vary by Type of Request and State", "paragraphs": ["Available information suggests that the allowable fees for accessing  medical records vary by type of request\u2014that is, whether a patient or  third party is making the request\u2014and by state. Federal laws establish  limits on the fees that may be charged for two of the three types of  requests for medical records: (1) patient requests, when patients request  access to their medical records, and (2) patient-directed requests, when  patients request that their records be sent to another person or entity,  such as another provider. HIPAA does not establish limits on fees for  third-party requests.", "For patient and patient-directed requests, providers may charge a  \u201creasonable, cost-based fee\u201d under HIPAA\u2019s implementing regulations.  OCR\u2019s 2016 guidance gives examples of options providers (or a ROI  vendor responding to requests for medical records on behalf of a  provider) may use in determining a \u201creasonable cost-based fee.\u201d (See  table 1.)", "In addition to the HIPAA requirements, some states have established  their own fee schedules, formulas, or limits on the allowable fees for  patient and patient-directed requests. State laws that allow for higher fees  than permitted under HIPAA are preempted by the federal law, but those  providing for lower fees are not preempted. Representatives from ROI  vendors, provider representatives, and other stakeholders we interviewed  told us that not all states have established their own requirements  governing the fees for medical record requests and, among the states  that have, the laws can vary. For example, states can vary as to whether  they set a maximum fee that may be charged or whether they establish a  fee schedule that is applicable to paper records, electronic records, or  both. While states may establish per-page amounts that can be charged  for a copy of a patient\u2019s medical records, these per-page amounts can  vary.", "In contrast with patient and patient-directed requests, the fees for third- party requests are not limited by HIPAA\u2019s reasonable, cost-based  standard for access requests and are instead governed by state laws,  regulations, or other requirements. For third-party requests, providers and  vendors working on their behalf may charge whatever is allowed under  these state requirements. According to ROI vendors and other  stakeholders we interviewed, such fees are typically higher than the  reasonable, cost-based fees permitted under HIPAA for patient and  patient-directed requests and may be established by formulas that vary  by state. For example, states can vary as to whether they establish per- page copy fees, allow providers to charge a flat fee, or charge different  fees based on the type of media requested (e.g., electronic copies, X- rays, microfilm, paper, etc.). Additionally, state laws of general  applicability (for example, the commercial code) may govern the  permissible fees applicable to ROI release of records. Representatives of  ROI vendors we interviewed stated that there is significant variation in the  state laws that govern the fees for third-party requests, and companies  employ staff to track the different frameworks.", "Across the four selected states, we found examples of the kinds of  variation stakeholders have described in the allowable fees for patient  and third-party requests for medical records. (See table 2.)", "Three of the states\u2014 Ohio, Rhode Island, and Wisconsin\u2014have  established per-page fee amounts. The amounts charged are based  on the number of pages requested and vary across the three states.  These three states have also established specific fee rates for  requesting media such as X-ray or magnetic resonance imaging scan  images.", "One state\u2014Ohio\u2014has established a different per-page fee amount  for third-party requests. The other three states have not established  different fees for different types of requests (i.e., between patient and  third-party requests).", "One state\u2014Rhode Island\u2014specifies a maximum allowable fee if the  provider uses an electronic health records (EHR) system for patient  and patient-directed requests.", "One state\u2014Kentucky\u2014entitles individuals to one free copy of their  medical record under state law. The statute allows a charge of up to  $1 per page for additional copies of a patient\u2019s medical records.", "In some cases, questions have been raised about the fee structure that  should be applied to certain types of requests. Representatives from ROI  vendors we interviewed told us that they have seen an increase in third  parties (primarily law firms) submitting requests for medical records and  indicating that the requests are patient-directed and therefore subject to  HIPAA\u2019s reasonable, cost-based fee standard. According to these  representatives, it is sometimes difficult for them to determine whether it  is an attorney making a third-party request or an attorney submitting a  patient-directed request because, for example, patient-directed requests  are submitted by a patient\u2019s attorney and appear similar to traditional  third-party requests (e.g., they appear on legal letterhead). As a result,  the representatives said that they are often unsure about which fee  structure to apply to the request: a reasonable, cost-based fee or a fee for  a third-party request, which ROI vendors told us is typically higher.", "When asked about the reported distinction between fees for patient- directed and third-party requests, OCR officials told us that they are in the  process of considering whether any clarification is needed to their 2016  guidance. This guidance describes the requirements of HIPAA and the  Health Information Technology for Economic and Clinical Health  (HITECH) Act, as well as their implementing regulations. HIPAA provides  patients with a legally enforceable right of access to their medical records.  OCR officials explained that the HITECH Act amended HIPAA and specifies that a patient\u2019s right of access includes the right to direct a  provider to transmit the records directly to an entity or individual  designated by the individual. According to OCR officials, the same  requirements for providing a medical record to an individual, such as the  limits on allowable fees and the format and timeliness requirements,  apply to patient-directed requests. OCR officials told us that they are  considering whether\u2014and if so, how\u2014they could clarify the 2016  guidance within the constraints of HIPAA and the HITECH Act."], "subsections": []}, {"section_title": "Stakeholders Identified Fees and Other Challenges for Patients Accessing Medical Records and Challenges for Providers in Allocating Resources to Respond to Requests", "paragraphs": ["Patient advocates and others we interviewed described challenges  patients face accessing medical records, such as high fees. Provider  representatives described challenges providers face, including allocating  staff time and other resources to respond to requests for medical records."], "subsections": [{"section_title": "Patient Advocates and Other Stakeholders Described High Fees for Obtaining Medical Records, While Providers and Patients May Be Unaware of Patients\u2019 Access Rights", "paragraphs": ["Multiple stakeholders we interviewed\u2014patient advocates, a provider  representative, experts, and a representative from an ROI vendor\u2014told  us that some patients have incurred high fees when requesting access to  their medical records. Stakeholders noted that in some cases the fees  reported by patients appear to exceed the reasonable, cost-based  standard established under HIPAA. One patient advocacy organization,  which collects information on patients\u2019 access to their medical records,  described the following examples reported to them by patients:", "Two patients described being charged fees exceeding $500 for a  single medical record request.", "One patient was charged $148 for a PDF version of her medical  record.", "Two patients were directed to pay an annual subscription fee in order  to access their medical records.", "One patient was charged a retrieval fee by a hospital\u2019s ROI vendor for  a copy of her medical records. Retrieval fees are prohibited under  HIPAA.", "In addition, according to patient advocates we interviewed, high fees can  adversely affect patients\u2019 access to their medical records. For example,  one patient advocate told us that some patients simply cancel their  requests after learning about the potential costs associated with their  request. Another patient advocate told us that patients are often unable to  afford the fees charged for accessing their medical records, even in cases  when the fees are allowed under HIPAA or applicable state law. This  advocate explained that per-page fees, even if legally authorized, can  pose challenges for patients; in particular, patients who have been  seriously ill can accumulate medical records that number in the  thousands of pages and can, as a result, face fees in excess of $1,000 for  a single copy of their records.", "Stakeholders we interviewed told us that in many cases, providers may  also be unaware of patients\u2019 right to access their medical records and the  laws governing the fees for doing so.", "Two patient advocates and an expert said that patients are sometimes  denied access to their medical records.", "Patient advocates and experts told us that some providers are not  aware of the 2016 OCR guidance, which describes patients\u2019 rights to  access their medical records, as well as the permitted fees for such  access.", "One patient advocate and a provider representative also noted that  providers may be confused about caregivers\u2019 and family members\u2019  access to medical records. For example, providers sometimes  incorrectly deny family members\u2019 access to a patient\u2019s health  information, which HIPAA allows under certain circumstances.", "Provider representatives, patient advocates, and an expert agreed  that providers could benefit from more training on medical record  access issues, including training on the options patients have for  accessing their medical records.", "Stakeholders we interviewed also noted that patients themselves are not  always aware of their right to access their medical records, do not always  know that they can submit a formal complaint to HHS\u2019s OCR when denied  access, and could benefit from specific educational efforts that raise  awareness of these issues. For example, patient advocates said that the  \u201cnotice of privacy practices\u201d form that patients receive and are asked to  sign when they first seek care from a provider could be improved to raise  awareness of the rights associated with accessing medical records. This  form is used to explain a provider\u2019s privacy policies and obligations, and  what patients have to do to obtain access to their medical records.  However, a provider association and an expert told us that these forms  are not always easy for patients to understand, and patients might not  always read them. OCR has developed a standard privacy notice that  providers may adopt if they choose. However, a patient advocate told us  that most providers are still using their own versions of the notice."], "subsections": []}, {"section_title": "Provider Representatives and Other Stakeholders Described Challenges of Allocating Staff Time and Other Resources, While Technology Has Improved Patients\u2019 Ability to Access Records", "paragraphs": ["Multiple stakeholders we interviewed told us that responding to patient  requests for medical records can be challenging because it requires the  allocation of staff and other resources and as a result, responding to such  requests can be costly. Furthermore, a provider representative, three  representatives from ROI vendors, and a patient advocate confirmed that  providers and their staff may lack the expertise needed for responding to  requests for medical records in a manner that complies with HIPAA and  applicable state laws. Providers can receive training on HIPAA related  issues; however, a patient advocate told us that this training, which may  be provided by private companies, often focuses on security issues (i.e.,  maintaining secure medical record systems) and not on the rights of  patients.", "In addition, stakeholders we interviewed commonly stated that the  increased use of electronically stored health information in EHRs has  resulted in a more complex and challenging environment when  responding to requests for patients\u2019 medical records. For example, these  stakeholders noted the following:", "Extracting medical records from EHRs is not a simple \u201cpush of a  button\u201d and often requires providers or their ROI vendors to go  through multiple systems to compile the requested information.  Stakeholders noted that printing a complete record from an EHR  system can result in a document that is hundreds of pages long due to  the amount of data stored in EHR systems.", "Representatives from three ROI vendors told us that as providers  have transitioned from using paper records to using EHR systems,  information has been scanned into electronic medical records. This  has, in some cases, resulted in records being incorrectly merged  (e.g., the records of two patients merged into a single record). As a  result, when responding to a medical record request, providers or their  vendors must carefully go through each page of the record to ensure  only the correct patient\u2019s medical records are being released.", "A provider representative, representatives from four ROI vendors, and  two experts noted that providers often have multiple active EHR  systems, or have legacy EHR systems in which some medical records  are stored. This requires providers and their vendors to go through  multiple EHR systems to extract information in response to a medical  record request.", "Some providers still have a mix of paper and electronic records, which  ROI vendors and provider representatives told us makes responding  to medical record requests more difficult and time consuming.", "A provider representative and other stakeholders said that while  patients can request copies of their records in an electronic format,  providers may have security concerns about sending information via  unsecured email or providing electronic information via a patient\u2019s  USB stick, which increases the risk of a provider\u2019s system becoming  infected with malware.", "While health information technology has created some challenges for  providers, numerous stakeholders we interviewed told us that the  technologies have made accessing medical records and other information  easier and less costly for patients. For example, multiple stakeholders we  interviewed told us that an increase in the use of patient portals has  reduced the number of patient requests for access to their medical  records because patients are able to directly access some health  information through the portals. As we have previously reported, patient  portals have facilitated patient access to medical records and patients  have noted the benefits from having such electronic access, even though  portals do not always contain all the information patients need. The use  of patient portals has not eliminated patient requests for access to their  medical records; a provider representative we interviewed said that many  patients still prefer to obtain paper copies of their records."], "subsections": []}]}, {"section_title": "OCR Investigates Complaints, Audits Providers, and Educates Patients and Providers about Patient Access", "paragraphs": ["To enforce patients\u2019 right of access under HIPAA\u2019s Privacy Rule, the HHS  OCR undertakes four types of efforts. OCR (1) investigates complaints it  receives from patients and others regarding access to patient medical  records, (2) audits a sample of providers to determine the extent to which  their policies and procedures are compliant with HIPAA, (3) reports to  Congress on compliance with HIPAA, and (4) educates patients and  providers about patients\u2019 rights to access their medical records."], "subsections": [{"section_title": "Investigation of Patient Complaints", "paragraphs": ["OCR has established a process for investigating patients\u2019 complaints over  access to their medical records. Via an online portal on its website, OCR  receives complaints submitted by patients. Staff in OCR\u2019s headquarters  office conduct an initial review of the information provided by the  complainant. According to OCR officials, complaints that cannot be  immediately resolved are generally assigned to a regional office  investigator, who is responsible for reviewing the complaint and obtaining  additional information from the complainant and provider, if needed.  After the investigator completes the investigation, OCR issues a letter to  both the provider and patient explaining what OCR has found. Depending  on the nature of the findings, OCR may, for example, issue technical  assistance to the provider; close the complaint without identifying a  violation; require the provider to implement a corrective action plan;  conduct a more detailed investigation; and, if warranted, levy a civil  monetary penalty. According to OCR officials, the use of civil monetary  penalties is rare and reserved for situations where providers\u2019 behavior is  particularly egregious.", "Examples of patient access complaints provided to us by OCR included  complaints about the following: providers not responding even after the patient made multiple  requests, or providers taking longer than 30 days to respond to a  request for medical records or other information ; providers charging excessive fees for copies of patients\u2019 medical providers not responding to requests from personal representatives or providers denying medical records requests from a parent or parents  of children.", "Our analysis of OCR data also shows that the amount of time OCR takes  to investigate and close a patient access complaint varies. OCR received  a total of 583 patient access complaints between February 2016 and  June 2017, closing 437 of these complaints during that same time period.  These 437 complaints took anywhere from 11 to 497 days to close. (See  fig. 2.) The majority of these 437 complaints (63 percent) were closed in  200 or fewer days. OCR officials stated that while there is no required  time frame for closing a complaint involving patients\u2019 access to their  medical records, they aim to close cases in fewer than 365 days.", "According to OCR officials, while there is no required time frame for  closing a patient access case, investigators aim to get patients access to  their medical records as soon as possible, which typically occurs before  the case is formally closed (i.e., a formal letter is issued to provider and  patient). OCR officials noted a number of reasons why complaints can  take a significant amount of time to close. In some cases, the patient  receives her records early in the investigation, but the complaint is kept  open by OCR to ensure that agreed-upon or recommended corrective  actions are taken by the provider\u2014for example, training staff on patient  access rights or demonstrating that the provider\u2019s policies pertaining to  patient access have been changed. In other complaints, time is needed  for OCR to obtain consent from the patient who filed the complaint. OCR  officials noted that in some instances, patients ultimately decide they do  not want to give OCR consent to investigate their complaint, due to  concerns that the provider will learn their identity. OCR officials also noted  that complaints that are moving towards more serious enforcement  actions, such as civil monetary penalties, may also take a long time to  close. Finally, OCR officials noted that their own staffing limitations in  regional offices can sometimes result in complaints taking additional time  to close."], "subsections": []}, {"section_title": "OCR Audits", "paragraphs": ["The HITECH Act requires OCR to conduct periodic audits of selected  covered entities in order to review the policies and procedures the  covered entities have established to meet HIPAA requirements and  standards. The right of patients to access their medical records is  included in these requirements. As part of its most recent audit, OCR  officials stated that they reviewed 103 covered entities regarding their  policies related to patient access to health information, including the  entities\u2019 notice of privacy practices. In addition, OCR reviewed any  access requests the covered entities received from patients, including  both requests that were granted and requests that were denied. OCR  examined these access requests to determine whether access was  provided in a manner that was consistent with the covered entities\u2019  policies and procedures and whether the entities fulfilled the requests  they received within the 30-day time frame established under the Privacy  Rule. OCR also examined any fees that were charged for access and  whether those fees met HIPAA\u2019s reasonable, cost-based standard. OCR  officials said that after completing each audit, OCR submitted a draft  report for the audited entity for review. The entity had 10 days to review  and submit any feedback to OCR, which OCR reviewed and incorporated  into the entity\u2019s final audit report. According to OCR officials, OCR has  completed this phase of the audit program and will release a final report  in 2018."], "subsections": []}, {"section_title": "Annual Report to Congress", "paragraphs": ["The HITECH Act directs HHS to submit an annual report to Congress on  compliance with HIPAA that includes details about complaints of alleged  violations of the Privacy Rule and the resolution of these complaints.  The patient right of access is part of the HIPAA and Privacy Rule  requirements. The report, which is issued by OCR, includes information  on the patient access complaints OCR has received, the number of  investigations it has conducted, and the fines OCR has levied. OCR  issued its most recent report in 2016. The report summarized complaints  and enforcement actions for the 2013 through 2014 calendar years. OCR  officials stated that they are in the process of reviewing a draft report that  will be released in mid-2018 and contain information and data from  calendar years 2015 and 2016."], "subsections": []}, {"section_title": "Provider and Patient Education Efforts", "paragraphs": ["As part of its responsibilities to enforce HIPAA\u2019s Privacy Rule, OCR also  provides a variety of educational materials that aim to educate both  patients and providers about patients\u2019 right to access their medical  records. These materials include the following:  In September 2017, OCR published a pamphlet that aims to educate  consumers, particularly caregivers, about patients\u2019 rights to access  their medical records, including how to file a complaint if denied  access.", "OCR has worked with ONC to produce three videos (\u201cYour Health  Information, Your Rights!\u201d) and an infographic aimed at educating  patients and others about patients\u2019 rights to access their medical  records.", "OCR has developed provider education videos that aim to educate  providers on the rights of patients to access their medical records and  how such access can enable patients to be more involved in their own  care. Providers can receive continuing education credits for watching  these videos.", "To assist providers, OCR has worked with ONC to develop a model  notice of privacy practices to help providers adequately communicate  access rights to patients in a standardized, easy-to-understand way."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for review. HHS provided us  with technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, 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 staffs have any questions about this report, please contact  me at (202) 512-7114 or at yocomc@gao.gov. Contact points for our  Office of Congressional Relations and Office of Public Affairs can be  found on the last page of this report. Other major contributors to this  report are listed in appendix I."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tom Conahan, Assistant  Director; Andrea E. Richardson, Analyst-in-Charge; Krister Friday; and  Monica Perez-Nelson made key contributions to this report."], "subsections": []}]}], "fastfact": ["Federal law requires health care providers to give patients access to their medical records.", "We found that some patients incurred fees they believed to be excessive to access their records; for example, patients with chronic conditions can have lengthy records, and copying costs can be significant. Also, some patients are unaware that they can challenge providers who deny them access.", "We also found that providers may bear costs for responding to record requests, including staff time. Fulfilling requests can be complex, as information may be stored in multiple electronic records or in a mix of paper and electronic records."]}
{"id": "GAO-18-610", "url": "https://www.gao.gov/products/GAO-18-610", "title": "Great Lakes-St. Lawrence Seaway: Assessing Risks and Measuring Performance Could Improve Maritime Transportation", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Great Lakes-Seaway system extends 2,300 miles and serves more than 100 ports in the United States and Canada. Four of the 17 locks that enable navigation are managed by the Army Corps (within the Department of Defense) and U.S. Seaway Corporation (within the Department of Transportation). The rest are managed by Canada. A 2007 U.S.-Canada study noted the system could absorb additional traffic and led to U.S. asset renewal plans to improve lock infrastructure condition.", "GAO was asked to review efforts to modernize the Great Lakes-Seaway. This report examines (1) shipping trends since 1980 and factors affecting recent trends, (2) stakeholder views on challenges to use, and (3) the extent to which the Army Corps and the U.S. Seaway Corporation have made progress on and measure performance of lock renewal efforts. GAO analyzed Seaway and Army Corps shipping data from 1980 through 2016, the agencies' asset renewal plans, and interviewed 24 stakeholders, including port and shipper representatives, selected to represent a range of perspectives."]}, {"section_title": "What GAO Found", "paragraphs": ["The tons of cargo moved by domestic Great Lakes and St. Lawrence Seaway traffic have declined since 1980\u2014by 32 and 48 percent, respectively, according to U.S. Army Corps of Engineers (Army Corps) and Saint Lawrence Seaway Development Corporation (U.S. Seaway Corporation) data. Stakeholders identified various factors for this decrease such as the U.S. economy's shift away from manufacturing. Traffic on the Great Lakes-St. Lawrence Seaway (Great Lakes-Seaway) is traditionally dominated by bulk commodities like iron ore, although stakeholders noted emerging uses like containerized cargo and cruises.", "Stakeholders identified a range of challenges to using the Great Lakes- Seaway\u2014such as inadequate portside infrastructure for intermodal transfers of shipping containers\u2014that together pose risks for both traditional bulk cargos and emerging uses. Although the U.S. Seaway Corporation's mission is to improve the system's utilization and reliability, the Corporation has not fully assessed the risks that challenges pose to the system's users. Establishing a process to assess and monitor risks, in accordance with federal internal control standards, would help inform future actions to address identified and emerging challenges.", "The U.S. Seaway Corporation and the Army Corps have made progress on lock asset renewal efforts, but the Army Corps lacks goals and measures to assess performance and outcomes of these efforts. According to estimates provided by the Army Corps, it has completed 18 projects totaling about $53 million to date, and has about $257 million in remaining and ongoing work through 2035. Meanwhile, the U.S. Seaway Corporation has completed 16 projects totaling $45 million and has almost $144 million in remaining and ongoing work through 2023. The Army Corps has not developed goals and measures to assess its asset renewal results, as the U.S. Seaway Corporation has done. As a result, the Army Corps lacks tools to assess the outcomes of these efforts and demonstrate the extent to which its asset renewal efforts have improved operational performance of the Soo Locks."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that (1) the U.S. Seaway Corporation establish a process to identify, analyze, and monitor risks to the system's use to inform future actions, and (2) the Army Corps develop and adopt goals and measures to assess the performance of the Soo Locks and assess of asset renewal outcomes. The Departments of Transportation and Defense concurred with our recommendations and provided technical comments which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since 1959, the Great Lakes-St. Lawrence Seaway (Great Lakes- Seaway) navigation system has provided an important transportation  route to the manufacturing and agricultural heartland of North America.  The Great Lakes-Seaway extends 2,300 miles from Duluth, Minnesota to  the Atlantic Ocean and serves more than 100 ports in eight U.S. states  and two Canadian provinces (see fig. 1). In 2007, a joint U.S.-Canadian  study found that the Great Lakes-Seaway was operating at about half of  its potential capacity and could absorb additional traffic. Further, in 2016  the Congressional Research Service reported that U.S. domestic cargo  volume within the Great Lakes was about half that of the 1950s and  1960s. The 2007 study also led to U.S. asset renewal plans to improve  the system\u2019s lock infrastructure condition\u2014at the time, the first  coordinated effort to assess and improve the system\u2019s infrastructure in its  50 year existence. Now over a decade after the 2007 report and almost 60 years since the opening of the system, the Great Lakes-Seaway\u2019s  potential as America\u2019s \u201cfourth coast\u201d remains, as it provides direct access  to a region that is home to 107 million people, including major cities such  as Chicago, Detroit, Cleveland, and Toronto.", "The Great Lakes-Seaway has been managed jointly between the U.S.  and Canada throughout its history. A series of 17 locks enables  commercial vessels to navigate a change in elevation of over 600 feet  between the Atlantic Ocean and Lake Superior. The primary purpose of  a lock is to raise and lower vessels to bypass river rapids or overcome  changes in water levels (see fig. 2 for how a lock operates). The 17 locks  are divided between U.S. and Canadian management, with 4 locks  managed by two U.S. federal agencies. Specifically, the Saint Lawrence  Seaway Development Corporation (U.S. Seaway Corporation) manages 2  locks in Massena, New York, that are located among the 13 locks that are  managed by Canada\u2019s St. Lawrence Seaway Management Corporation  (Canadian Seaway Corporation). Meanwhile the U.S. Army Corps of  Engineers (Army Corps) manages the Soo locks\u2014two parallel locks in  Sault Ste. Marie, Michigan, that connect Lake Superior with the rest of the  Great Lakes. In addition to its binational management, another critical  feature of the Great Lakes-Seaway is that the system is closed to  navigation for 2 to 3 months in the winter due to weather conditions and in  order to complete maintenance on the locks.", "You asked us to review efforts to modernize the Great-Lakes Seaway.  This report examines (1) how Great Lakes-Seaway shipping trends have  changed since 1980 and what factors have shaped recent trends, (2)  selected stakeholders\u2019 perspectives on challenges to using the Great  Lakes-Seaway, and (3) to what extent Army Corps and the U.S. Seaway  Corporation have made progress on lock infrastructure renewal efforts  and how the agencies measure performance of these efforts.", "To understand shipping trends, we analyzed cargo traffic by tonnage from  1980 to 2016 for the St. Lawrence Seaway (published by the Canadian  and U.S. Seaway Corporations) and for domestic cargo traffic on the  Great Lakes (from the Army Corps\u2019 Waterborne Commerce Statistics  Center). Although the Seaway data represent all cargo traffic that travels  on the St. Lawrence Seaway, the Army Corps data we analyzed  exclusively represent traffic between U.S. ports on the Great Lakes  system. As a result, some cargos that travel on the Great Lakes\u2014such as  between Canadian ports or U.S. and Canadian ports\u2014are not included in  this report. We selected the 1980 to 2016 timeframe to describe long-term  trends using data that both sources collected consistently, and since 2016  was the most recent year available from both data sources. We also  analyzed recent cargo traffic trends for the top five commodities that  comprised domestic Great Lakes and St. Lawrence Seaway cargo traffic  by tonnage from 2001 to 2016. These years were selected to represent  the past approximately 15 years of traffic. We assessed the data\u2019s  reliability by reviewing documentation and interviewing Army Corps and  U.S. and Canadian Seaway Corporation officials and determined the data  were sufficiently reliable for our purpose of describing trends.", "To obtain selected stakeholders\u2019 perspectives on factors shaping recent  trends and challenges, we interviewed 24 stakeholders, including industry  associations, carriers (companies that transport goods), shippers  (companies that own the transported goods), ports, maritime  transportation experts, and regional and maritime stakeholder groups.  Stakeholders were selected to represent a range of types of traffic (such  as U.S. vessels travelling within the Great Lakes and foreign ocean-going  vessels) and a range in use of the system (shipping of traditional bulk  goods as well as emerging uses such as containers and cruises). We  grouped the challenges identified by stakeholders based on whether they  affect traditional use of the system or emerging use of the system.  Although the results are non-generalizable, stakeholders were selected to  represent a range of known perspectives.", "To understand the U.S. Seaway Corporation\u2019s and Army Corps\u2019 progress  on asset renewal efforts and how they measure performance of these  efforts, we analyzed available information on asset renewal projects, their  status, and estimated cost from both agencies. We also reviewed U.S.  Seaway Corporation\u2019s and Army Corps\u2019 relevant reports, asset renewal  plans, and documentation related to program goals and performance  measures, such as annual financial and performance reports, from 2007  through 2018 and interviewed officials from both agencies. We compared  agencies\u2019 efforts to GAO\u2019s Standards for Internal Control in the Federal  Government and Leading Practices in Capital Decision-Making. We did  not evaluate the Canadian agencies responsible for overseeing  Canadian-managed Seaway locks. For more information on our scope  and methodology, see appendix I.", "We conducted this performance audit from June 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Great Lakes-Seaway system\u2019s commercial shipping has traditionally  been dominated by vessels carrying bulk commodities such as grain,  coal, and iron ore, although there are differences between the shipping on  the Great Lakes versus the St. Lawrence Seaway portions of the system.  On the Great Lakes side, U.S.-flag (meaning registered in the United  States) vessels are primarily \u201clakers\u201d\u2014meaning they stay on the Great  Lakes and generally do not enter the St. Lawrence Seaway. This  domestic Great Lakes traffic primarily consists of iron ore, limestone, and  coal that are transported to serve the U.S. steelmaking industry. For  example, U.S. lakers transport iron ore, mined in northern Minnesota,  from Duluth to steel manufacturers at ports such as Burns Harbor,  Indiana, and Toledo, Ohio, in the lower Great Lakes. U.S. law requires  that maritime transport of cargo between U.S. ports be carried by U.S.- flag vessels.", "In contrast to the Great Lakes, the St. Lawrence Seaway is used primarily  by Canadian- or foreign-flag vessels that carry cargo between and among  U.S., Canadian, and overseas ports. For example, in 2015, 40 percent of  St. Lawrence Seaway traffic, as measured by tonnage moved, consisted  of cargos shipped between Canadian ports. Another 34 percent of 2015  Seaway traffic consisted of cross-border trade between U.S. and  Canadian ports. Only 10 percent of Seaway traffic in 2015 was between  overseas and U.S. ports. This trade is generally characterized as \u201csteel  in/ grain out\u201d\u2014with imported iron and steel products entering the system  destined for U.S. ports and U.S. grain leaving the system destined for  overseas ports. For example, foreign vessels transport fabricated steel  through the Seaway to manufacturing facilities in the Great Lakes region  and then carry grain from the region back through the Seaway to  overseas destinations such as Europe.", "The Great Lakes and St. Lawrence Seaway portions of the system also  differ in how they are managed. On the St. Lawrence Seaway, which  opened in 1959, the U.S. Seaway Corporation manages the Snell and  Eisenhower locks, which are located in Massena, New York. Like all locks  on the St. Lawrence Seaway, the Snell and Eisenhower are single locks  without parallel locks for redundancy and are the same dimensions\u2014 about 766 feet long and 80 feet wide. On the Great Lakes, the Army  Corps manages the Soo locks, which consist of two parallel locks: the  larger Poe lock, completed in 1968 (1,200 feet long and 110 feet wide)  and the smaller MacArthur lock, completed in 1943 (800 feet long and 80  feet wide). Many U.S.-flag laker vessels are restricted to using the Poe  lock, as they are too large to fit in the MacArthur lock.", "The construction of a second Poe-sized lock at the Soo locks is currently  under consideration. In 1986, Congress authorized the construction of a  second Poe-sized lock, but funds sufficient to begin construction were  never appropriated. In 2005, the Army Corps calculated a benefit-cost ratio of 0.73 associated with the construction of a second Poe-sized lock,  which was not high enough to request funding. In January 2016, the  Army Corps initiated an economic reevaluation of the project\u2019s benefit- cost ratio to update assumptions of the 2005 study. In July 2018, the  Army Corps released its reevaluation study, which estimated the cost of  constructing a new Poe-sized lock to be approximately $922 million with  an updated benefit-cost ratio of 2.42. According to the Army Corps, the  project will compete with other construction projects throughout the  country through the agency\u2019s budgeting process. The decision to fund the  new lock also involves review by the Office of Management and Budget  for inclusion in the President\u2019s budget, and Congress will need to  appropriate funds.", "The U.S. Seaway Corporation and Army Corps also differ in their size and  role, for example:", "The U.S. Seaway Corporation. In addition to managing the two U.S.- operated locks on the St. Lawrence Seaway, the U.S. Seaway  Corporation has a role in enhancing utilization of the entire Great  Lakes- Seaway system. Its stated mission is to improve the operation  and maintenance of a safe, reliable, and efficient waterway and to  perform economic and trade development activities with the aim of  enhancing utilization. In doing so, the Corporation works closely with  its Canadian counterpart (the Canadian Seaway Corporation) to  manage the binational St. Lawrence Seaway and provide information  on the system to potential users. The U.S. Seaway Corporation is  located within the U.S. Department of Transportation and has  approximately 140 employees.", "The Army Corps. The Army Corps, located within the Department of  Defense, maintains a wide range of water resources projects across  the country\u2014including the Soo locks\u2014under its Civil Works Program.  These projects include over 200 inland waterway locks, such as those  along the Mississippi river and its tributaries. The Army Corps\u2019 Civil  Works Program is supported by approximately 22,000 civilian  employees and is organized into three tiers: a national headquarters  in Washington, D.C., eight regional divisions, and 38 local district  offices. The Detroit District, which is responsible for the day-to-day  maintenance and operation of the Soo locks, falls under the Great  Lakes and Ohio River Division.", "Following the 2007 joint U.S.-Canadian study, the Army Corps and the  U.S. Seaway Corporation developed asset renewal plans, which were  originally intended to cover approximately 10 years and which focused on  replacing or rehabilitating existing lock components to avoid unexpected  lock closures. Both agencies complete routine maintenance and capital  improvements on the locks during the 2\u20133 winter months the locks are  closed to navigation every year due to weather conditions.", "Congress appropriates funding for both Army Corps\u2019 and U.S. Seaway  Corporation\u2019s lock operations and maintenance from the Harbor  Maintenance Trust Fund (trust fund). The trust fund is supported  through collections of the Harbor Maintenance Tax (also sometimes  called a fee), which is charged to vessels carrying U.S. domestic or  imported cargo or passengers, primarily at coastal and Great Lakes  ports. Congress also appropriates funds from the trust fund for other  Great Lakes-Seaway purposes, including dredging (underwater debris  removal) to maintain the depth of ports and channels for navigation. In the  U.S. portions of the Great Lakes-Seaway, including ports and channels,  dredging is primarily conducted by the Army Corps and to a lesser extent  the U.S. Seaway Corporation. As of July 2013, the trust fund built up a  balance of $8.5 billion. In 2014, Congress authorized targets to annually  increase appropriations from the fund to reduce the balance, and required  the Army Corps to allocate annually a minimum amount of funds for the  Great Lakes-Seaway system.", "Two federal agencies within the Department of Homeland Security also  have roles in the Great Lakes-Seaway. The U.S. Coast Guard ensures  safety in various ways, including by ensuring a sufficient supply of  certified U.S. pilots who board foreign vessels to ensure safe navigation.  Specifically, the Coast Guard is responsible for annually setting the rates  U.S. pilots on the Great Lakes-Seaway charge carriers (referred to as  pilotage rates for the remainder of this report). In addition, the Coast  Guard is also required by law to maintain heavy icebreaking capability on  the Great Lakes to assist in keeping channels and ports open to  navigation. Meanwhile U.S. Customs and Border Protection is  responsible for screening cargo and passengers entering the United  States at ports of entry, including Great Lakes ports."], "subsections": []}, {"section_title": "Great Lakes-Seaway Cargo Levels Have Decreased since 1980 due to Various Economic Factors but Selected Stakeholders Report Recent Increased Diversity of Uses", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Identified a Variety of Economic Factors Associated with Decreased Cargo Levels on the Great Lakes- Seaway since 1980", "paragraphs": ["The amount of cargo transported annually on the Great Lakes-Seaway\u2014 specifically for U.S. Great Lakes domestic and Seaway cargo\u2014has  generally declined since 1980 (see fig. 3). The Great Lakes U.S. domestic  \u201claker\u201d cargo traffic declined from about 115 million tons in 1980 to about  78 million tons in 2016\u2014a decline of 32 percent\u2014according to data from  the Army Corps\u2019 Waterborne Commerce Statistics Center. As noted in  figure 3, the trend includes many noticeable year-to-year changes over  this time period, which may be in response to broader economic factors,  as discussed below. Meanwhile, cargo traffic on the St. Lawrence  Seaway, which as described earlier is primarily transported by Canadian  and foreign vessels, declined by 48 percent over the same time period,  from about 74 million tons in 1980 to about 39 million tons in 2016,  according to Seaway Traffic Data.", "Between 2001 and 2016, domestic Great Lakes cargo traffic levels were  driven primarily by iron ore, limestone, and coal\u2014three commodities that  are closely tied to the steel industry (see fig. 4). Specifically, these three  commodities accounted for 90 percent of the total of about 78 million tons  in domestic Great Lakes traffic in 2016\u2014iron ore alone comprised 50  percent. Great Lakes domestic tonnage declined by about 22 million tons  overall from 2001 to 2016, with declines in iron ore, limestone, and coal  totaling about 21 million tons. Army Corps officials noted that other  commodities such as wheat also have a presence on the Great Lakes,  with over 5 million tons of wheat traveling on the Great Lakes in 2017  according to these officials.", "In contrast to the domestic Great Lakes cargo traffic, the top five  commodities on the St. Lawrence Seaway, which comprised 70 percent  of total cargo traffic in 2016, show a more varied picture of the types of  commodities and trends from 2001 to 2016 (see fig. 5). Grain, the top  commodity transported on the St. Lawrence Seaway, comprised nearly a  third of total Seaway traffic in 2016. Like the domestic Great Lakes traffic,  iron ore and coal have a significant presence on the St. Lawrence  Seaway, together comprising 24 percent of cargo traffic in 2016. In  contrast to domestic Great Lakes traffic, iron and steel constitute key  commodities on the St. Lawrence Seaway, declining from about 3.2  million tons in 2001 to about 2.4 million tons in 2016. Nearly all such iron  and steel transports are imports destined for U.S. or Canadian ports. For  example, some specialty steel used to package food in cans is  manufactured in Europe and imported for use in the United States.  Several stakeholders we interviewed told us that a balance between  inbound iron and steel shipments and outbound grain exports are  important in providing shipping capacity in both directions.", "Stakeholders identified various economic factors that have affected Great  Lakes-Seaway cargo traffic levels since the 1980s:", "Global economic factors. Many stakeholders noted that year-to-year  trends in global prices for commodities such as grain, iron ore, and  steel affect Great Lakes-Seaway cargo traffic levels. For example, two  stakeholders told us that U.S. iron ore is exported through the St.  Lawrence Seaway when global iron ore prices are high, allowing  producers to cover the costs of shipping while also being price  competitive internationally. Further, some stakeholders reported that  the increase in globalization since 1980 has resulted in greater foreign  competition to U.S. and Canadian commodities exported via the Great  Lakes-Seaway. For example, one stakeholder noted that countries  that were grain importers in the 1980s, such as Russia, have since  become grain exporters, competing with U.S. and Canadian grain  internationally. Grain traffic on the St. Lawrence Seaway fell by over  60 percent from about 32 million tons in 1980 to about 12 million tons  in 2016, with nearly the entire decline occurring prior to 2001.", "Domestic economic factors. Several stakeholders told us that Great  Lakes-Seaway cargo traffic rises and falls in conjunction with general  economic conditions and trends, such as a sharp decline during the  recession in 2009 (see fig. 3 above). For example, one stakeholder  reported that a trend in the U.S. economy toward a more service- based rather than manufacturing-based economy has affected Great  Lakes-Seaway traffic, reducing demand for manufacturing inputs such  as iron ore. As we reported in 2013, manufacturing has accounted for  a decreasing share of U.S. employment and economic output over the  last several decades.", "Industry-specific changes. Changes in industries that have relied on  the Great Lakes-Seaway for the transportation of input materials have  affected cargo trends, according to several stakeholders. For  example, demand for iron ore has been affected by the U.S. steel  industry\u2019s move towards smaller manufacturing plants, which are  located away from the Great Lakes and which use recycled metal and  do not require iron ore. Between 2001 and 2016, domestic Great  Lakes tonnage of iron ore declined by 14 percent, from about 45  million to about 39 million tons (see fig. 4 above). Several  stakeholders also told us that changes in the power generation  industry have reduced shipments of coal. For example, environmental  concerns and competitive natural gas prices have led some utilities in  Canada and the United States to close coal-fired facilities. St.  Lawrence Seaway coal tonnage from 2001 to 2016 declined by 53  percent, from about 5.3 million to about 2.5 million tons (see fig. 5  above).", "Greater competition among modes. Several stakeholders said that  certain other transportation modes have become more competitive  with the Great Lakes-Seaway. For example, several told us that the  use of shipping containers\u2014which enable easy intermodal transfer  between waterways, highway, and rail\u2014has grown dramatically  worldwide in the past several decades with implications for modal  competition and the Great Lakes-Seaway. As we previously reported,  the largest container vessels in 2016 could carry nearly 18,000  standard 20-foot shipping containers, roughly twice as many as in  2005. However, most modern containerships are too large to use  the Great Lakes-Seaway locks and container service on the system is  limited. Three stakeholders that sometimes use the Great Lakes- Seaway to import cargo reported that they can also import cargo to  the Midwest via coastal ports, where containers can be transferred  from container ship to truck or rail for inland delivery. While traffic on  the Great Lakes-Seaway has generally declined since 1980,  according to data published by the U.S. Bureau of Transportation  Statistics, U.S. railroad freight nearly doubled from 1980 to 2015, from  932,000 to 1.7 million ton-miles."], "subsections": []}, {"section_title": "Stakeholders Report Recent Increased Diversity in Uses of the Great Lakes-Seaway", "paragraphs": ["Stakeholders reported a recent increase in the diversity in the use of the  Great Lakes-Seaway, although bulk commodities continue to constitute  the majority of the 78 million and 39 million tons of domestic Great Lakes  and St. Lawrence Seaway cargo traffic in 2016, respectively. The  reported increase in the diversity of uses includes:", "Project cargo. Some stakeholders told us shipments of project  cargo\u2014specialty items that may be difficult to move by rail or truck  due to width or weight limits, such as windmill blades, beer  fermentation tanks, and mining equipment\u2014have increased in recent  years. The tonnage of St. Lawrence Seaway traffic comprised of  machinery and other manufactured products, which encompass  project cargo, grew from about 657,000 tons in 2001 to about 1.1  million tons in 2016. Project cargos are typically chartered on an as- needed basis. One stakeholder said that carriers would need to offer  more ships capable of carrying project cargo as a prerequisite for any  large future increases in project cargo.", "Containers. Although containers continue to represent a small fraction  of total cargos on the St. Lawrence Seaway, container traffic on the  Seaway more than tripled from 18,156 tons in 2001 to 64,984 tons in  2016. The only regular container service on the system began in  2014 and operates between ports in Cleveland and Antwerp, Belgium.  The service is offered through a partnership between the Port of  Cleveland, where officials told us they view the service as a way to  attract traffic, and a Dutch carrier, whose representatives view it as a  way to educate U.S. manufacturers on the advantages of maritime  transportation. Representatives from the carrier said that the service  offers 44 sailings annually.", "Cruises. Several stakeholders said that there is recent growth of small  passenger cruises on the Great Lakes-Seaway with the potential for  further growth. Some of those stakeholders said that the region  affords advantages including a variety of scenic destinations. A typical  cruise may begin and end in Chicago and Toronto, both of which have  air connections for arriving and departing passengers. An official from  the U.S. Seaway Corporation said that the number of cruise ships  operating on the system grew from 5 to 8 and the number of voyages  offered grew from 54 to 92 between 2014 and 2018. The official said  that additional ships and voyages are expected in the future."], "subsections": []}]}, {"section_title": "Selected Stakeholders Identified Various Challenges to Using the Great Lakes- Seaway, but the U.S. Seaway Corporation Has Not Fully Assessed Risks", "paragraphs": [], "subsections": [{"section_title": "Traditional and Emerging Great-Lakes Seaway Uses Face a Range of Challenges, according to Stakeholders", "paragraphs": ["Stakeholders we met with identified a range of challenges to using the  Great Lakes-Seaway and noted that these challenges pose risks to the  future use of the system. Although many of the challenges that  stakeholders identified\u2014such as the annual winter closure\u2014affect all  users of the system, some challenges may impact the system\u2019s various  users differently. Specifically, some challenges directly affect the  \u201ctraditional use\u201d of the system\u2014including the transport of bulk cargos  such as iron ore, grain, and steel\u2014while other challenges primarily affect  \u201cemerging use\u201d of the system, such as the cruise industry and container  market, as discussed below. The cumulative effect of all the challenges  represents costs and system reliability risks to shippers that can erode  the advantages that the system has traditionally offered over other  transportation modes. For example, a representative from one shipping  company told us the company frequently compares the cost of using the  Great Lakes-Seaway to other modes and noted that the margin favoring  the Great Lakes-Seaway is becoming narrower due to the system\u2019s  various challenges."], "subsections": [{"section_title": "Challenges to Traditional System Use", "paragraphs": ["Stakeholders identified several challenges that affect traditional uses of  the Great Lakes-Seaway, including transport of dry bulk commodities and  imported steel.", "Recent Increase of Pilotage Rates: The majority of stakeholders we  interviewed reported that recent rate increases in the costs of  securing pilots, who are intended to ensure safe navigation, have  significantly increased costs for foreign ocean going vessels operating  in the Great Lakes-Seaway. Federal law requires that certified pilots  board foreign vessels while in the Great Lakes-Seaway. A pilot may  be on board for multiple days on a single voyage, given the size of the  system. As part of its responsibility to set rates that pilots charge  carriers for the Great Lakes-Seaway, the U.S. Coast Guard revised  the methodology used to calculate the rates in 2016. Coast Guard  officials told us the methodology had not changed since the mid- 1990s and changes were needed to bring rates up to a sufficient level  to attract and retain pilots. Specifically, according to the Coast Guard  the number of pilots in the region decreased from 44 in 2007 to 36 in  2014, resulting in pilot shortages and traffic delays. In response, the  Coast Guard raised rates. For example, in the St. Lawrence River  portion of the system, pilotage rates increased 23 percent between  2014 and 2016. According to one carrier association we interviewed,  pilotage is one of the single largest cost items for foreign vessels  entering the system. Similarly, representatives from a carrier  association told us pilotage rates are a primary challenge affecting the  cost competitiveness of the system compared to truck and rail. The  methodology used to calculate rates was revised further in 2017 and  2018 and Coast Guard officials report that the recent updates have  accounted for factors, such as eliminating a weighting factor based on  the size of the vessel. According to Coast Guard officials, these  changes corrected factors that were not properly accounted for in  previous years and effectively lowered rates compared with 2016. The  Coast Guard also authorized an increase in the number of registered  pilots, from 36 in 2014 to 45 in 2017.", "Condition of the Poe-lock Infrastructure: Several stakeholders that  operate on the Great Lakes told us that they are concerned about the  condition of the Poe lock (see fig. 6). One Great Lakes shipper  representative told us that they believe the Poe lock is at critical risk of  lock failure that could result in an unplanned outage and disrupt the  U.S. steel industry, which has limited alternatives (rail or truck) to  move large amounts of iron ore from Minnesota and Michigan\u2019s Upper  Peninsula to steel manufacturing plants in the lower Great Lakes. As  mentioned previously, many U.S. laker vessels can only fit in the  larger Poe lock at the Soo locks due to vessel size. For example, the  Army Corps estimated that 85 percent of the tons of cargo travelling  through the Soo locks in 2017 were restricted to using the Poe lock. A  representative from a Great Lakes carrier told us that a closure of the  Poe lock for repairs during the shipping season could pose further  challenges to using the system, since there is currently no redundant  Poe-sized lock to which traffic could be diverted. As discussed  below, Army Corps officials note they currently lack the means to  replace the Poe lock\u2019s upper miter gate\u2014which was identified as  critical in 2007\u2014without disrupting navigation. The Army Corps\u2019 asset  renewal efforts to improve lock condition, including the Poe lock, are  discussed in greater detail below.", "Regulatory Complexity Related to Ballast Water: Several agencies are  involved in regulating ballast water in the Great Lakes-Seaway, and  several stakeholders reported that the complexity of the regulatory  environment poses a challenge to using the system. Ballast water is  taken up or discharged in a vessel\u2019s tanks to improve stability during  voyages and when cargo is loaded or unloaded. Ballast water  regulations are aimed at preventing the introduction of invasive  species collected in foreign waters from transoceanic vessels and  discharging them into the Great Lakes. These regulations involve  joint U.S.-Canadian Seaway regulations as well as requirements from  the U.S. Coast Guard, U.S. Environmental Protection Agency (EPA),  and some states. Specifically, under the current framework, all  oceanic vessels bound for the Great Lakes-Seaway are tested to  meet the ballast water discharge standards established by the U.S.  Coast Guard and the EPA. Most lakers, which are confined to the  Great Lakes and unlikely to introduce new aquatic invasive species  from outside the Lakes, are not subject to the Coast Guard and EPA  requirements. In addition, states are authorized to establish their  own vessel discharge control measures, and according to an industry  association, several Great Lakes states have their own ballast water  requirements. One carrier association representative told us that the  various ballast water regulations can cause confusion over how the  regulations apply across the system.", "U.S. Seaway Corporation officials said they are aware of these issues  and since 2007, the U.S. and Canadian Seaway Corporations have  been operating under harmonized, joint ballast water regulations  intended to eliminate confusion among users of the system. In  addition, both Corporations participate in the Great Lakes Seaway  Ballast Water Working Group, which is comprised of representatives  from the U.S. Coast Guard and others. The group\u2019s mission is to  coordinate regulatory, compliance, and research efforts to reduce the  introduction of aquatic invasive species via ballast water. The working  group reported in 2018 that such coordination will help minimize the  creation of a patchwork of inconsistent regulations.", "Effect of insufficient dredging: Several stakeholders we met with said  that insufficient dredging\u2014removal of sediment and debris from the  bottom of ports to maintain water levels for maximum vessel load\u2014 can pose a challenge to using the Great Lakes-Seaway. In particular,  a stakeholder noted the Army Corps, which is responsible for  dredging the major U.S. ports on the Great Lakes, has limited  capacity to keep up with all ports\u2019 dredging needs, and that this  situation can lead to vessels having to engage in \u201clight loading\u201d\u2014  filling to a lower capacity to reduce vessel weight\u2014to access affected  ports. The Army Corps reported in 2018 that its dredging backlog  has decreased to 13.5 million cubic yards from a high of 18 million in  2013. One stakeholder that uses the Great-Lakes Seaway to ship iron  ore told us that light loading causes steel mills to operate at lower  capacity when they do not receive the required amount of iron ore.  Army Corps officials told us that high water levels in recent years have  allowed vessels to carry more tons of cargo. However, because water  levels fluctuate over time, those conditions could change and affect  load efficiency."], "subsections": []}, {"section_title": "Challenges to Emerging System Use", "paragraphs": ["Stakeholders also identified challenges that particularly affect emerging  uses of the Great Lakes-Seaway, such as the cruise industry and  container market.", "Winter closure: The majority of stakeholders we interviewed told us  the annual winter closure hurts the system\u2019s competitiveness because  shippers must either stockpile their cargo or find alternative modes of  transport during the winter months. While winter closure has been a  long-standing feature of the system, it poses a particular challenge for  the emerging container market since, as a stakeholder from a carrier  association noted, containerized cargo is often time-sensitive and  cannot be stockpiled. Securing an alternative transportation mode  during the winter closure may be challenging because railroads, for  example, prefer to sign year-round contracts for shipping rather than  shorter-term winter arrangements. Additionally, some stakeholders  told us lack of icebreaking during the start and end of the season,  particularly during severe winters, has caused vessel delays. The  U.S. Coast Guard\u2019s icebreaking fleet consists of nine vessels on the  Great Lakes. In 2016, a U.S. Coast Guard report identified some ice  breaking issues that led to 3- and 6-week delays in 2010. The report  detailed actions the U.S. Coast Guard took to mitigate future delays,  including moving an icebreaking vessel\u2019s home port to a Great Lakes  port, but also noted that procuring an additional heavy icebreaker is  not cost-effective. An example of potential delays caused by ice was  demonstrated in January 2018 when a vessel became frozen in the  U.S. Seaway Corporation\u2019s Snell lock during extreme weather  conditions, delaying five vessels and necessitating the system\u2019s  closure for 11 days. Efforts to free the vessel included ice melting  equipment and tug boats.", "Limited U.S. Customs and Border Protection resources for clearing  passengers and container cargo: Several stakeholders we interviewed  told us that the limited capacity of U.S. Customs and Border  Protection\u2019s processing of container cargo and passengers poses a  challenge for emerging system uses. U.S. Customs and Border  Protection is responsible for inspecting travelers and imported cargo  that enters the U.S., including at the ports of entry in the Great Lakes  regions. U.S. Customs and Border Protection officials told us that their  procedures for processing containers and passengers are more  involved than traditional bulk cargos and that processes differ by port.  For example at the Port of Detroit, cruise passengers are transported  by bus to facilities a few miles away for processing. According to a  representative from a cruise industry association, this processing  creates delays and poses a challenge to the developing cruise  industry. Officials from U.S. Customs Border and Protection offices in  the Great Lakes region told us that their resources for processing  passengers and cargos are located at main ports of entry (such as  airports) and that at the Great Lakes ports are lacking appropriate  facilities, tools, technology, equipment, and personnel. These same  officials said that if the Great Lakes ports were to handle increasing  numbers of passengers and containers, U.S. Customs and Border  Protection would need sufficient time and budget to add inspection  equipment, but that port operators would need to bear the costs of  upgrading their facilities.", "Inadequate portside infrastructure: Some stakeholders told us that  many of the ports along the Great Lakes-Seaway were developed to  support bulk commodities\u2014such as iron ore, coal, and grain\u2014and are  not equipped to easily handle containers. Bulk commodities do not  require portside equipment at destination ports since they are  transported by self-unloading vessels and are often delivered straight  to private docks, such as iron ore delivered to a steel manufacturing  facility. As such, Great Lakes ports generally lack multimodal  connections that enable transfer of containers from vessel to truck  and rail routes. A representative from a company that ships containers  on the Great Lakes-Seaway told us that the port nearest its location  does not have cranes to handle containers. Instead, the company  uses a different port that is further away because it has the  infrastructure necessary to ship containers. Port representatives told  us that financing options exist to make upgrades to port infrastructure  but consistent and sustainable traffic levels are needed in order to  justify investments. For example, an official from the Port of Cleveland  told us they have access to their own financing and have added  infrastructure to create their container business, including cranes,  storage warehouses, and right-of-way for rail connections using  revenue bonds issued by the board that oversees the port. An official  from the Port of Indiana told us that the port lacks infrastructure to  handle containers, but it would find the financing to make investments  in container equipment if there were a consistent stream of business."], "subsections": []}]}, {"section_title": "The U.S. Seaway Corporation Has Not Fully Assessed the Risks That Challenges Pose to System Utilization", "paragraphs": ["Although U.S Seaway Corporation officials told us they are aware of  system challenges cited by stakeholders, the Corporation has not fully  assessed the extent to which the challenges pose risks to the use of the  Great Lakes-Seaway. As previously noted, the U.S. Seaway  Corporation\u2019s stated mission is to improve the operation and maintenance  of a safe, reliable, and efficient waterway and to improve regional  economic and trade development by enhancing utilization of the entire  Great Lakes Seaway system. To achieve this mission, the U.S. Seaway  Corporation\u2019s strategic plan includes several goals, such as increasing  the volume and value of commercial trade through the Great Lakes  Seaway System, while promoting cost-effective competition for all users.  To achieve these goals, the plan lists several actions, including  developing initiatives to improve capacity of the system, and working with  carriers, ports, pilots, and other stakeholders to contain costs and foster  increased trade in the region. For example, the U.S. Seaway  Corporation has taken steps to improve the condition of lock  infrastructure\u2014as discussed in greater detail below\u2014and in 2015, hired a  full-time employee, stationed in Cleveland, Ohio, who is responsible for  advancing the Corporation\u2019s trade and economic development activities in  the Great Lakes region. However, the Corporation has not taken steps to  identify, analyze and monitor challenges that affect use of the system,  such as those identified by the stakeholders we interviewed.", "The Standards for Internal Control in the Federal Government states that  assessing risks and monitoring changes are key to achieving objectives.  Specifically, management should analyze identified risks to estimate their  significance, which provides a basis for responding to the risks, and  design responses to the analyzed risks so that risks are within the defined  risk tolerance for the defined objective. The standards also note that  monitoring is key to ensuring that the process used by management to  help achieve its objectives remains aligned with changing environments,  laws, and resources. The importance of understanding risks to system  use in the Great Lakes Seaway was also emphasized by the Conference  of Great Lakes and St. Lawrence Governors and Premiers. This  conference, made up of Governors and Premiers of the eight states and  two Canadian provinces along the Great Lakes-Seaway, developed a  2016 strategy that delineated system challenges and called for an  analysis of the total costs of moving cargo through the system and how  this compares to other modes. U.S. Seaway Corporation officials told us  they are supportive of the Conference\u2019s strategy but are not working to  implement this analysis or other elements of the strategy.", "Although some actions have been taken to address challenges, officials  from the U.S. Seaway Corporation told us that the Corporation has not  fully assessed risks to Great Lakes-Seaway use, in part because the  Corporation does not have a formal or standing process to monitor risks  over time. The U.S. Seaway Corporation has worked closely with other  federal agencies over the years, including the Army Corps and Coast  Guard, to address challenges. For example, in 2007, it played a role in  the joint U.S.-Canadian study that focused attention on the system\u2019s  infrastructure, and the Corporation has worked with the Coast Guard  and others in the Great Lakes Seaway Ballast Water Working Group. In  addition, although U.S. Seaway Corporation officials told us that they  have a limited role in addressing challenges involving other agencies, the  U.S. Seaway Corporation has some experience assessing system risks  that could be useful in better understanding and addressing challenges  facing system users. For example, in 2012, the U.S. Seaway Corporation  was involved in a study led by the Canadian Seaway Corporation that  examined the cost-competitiveness of the Great Lakes-Seaway and  included a discussion of risks. These efforts could be useful in developing  a process to track risks and monitor how they evolve over time and in  relation to current shipping trends so that further actions could be taken to  address challenges faced by traditional and emerging users of the  system.", "Establishing a process to assess and monitor system risks would provide  the U.S. Seaway Corporation with greater assurance that the actions  taken by the Corporation, including those listed in its strategic plan, and  by other stakeholders are working to improve future utilization and ensure  efficient use of the system. Without a formal assessment of risks, the U.S.  Seaway Corporation lacks information on the cumulative effect of the  challenges faced by users of the system, limiting its ability to inform its  future actions to help address those challenges."], "subsections": []}]}, {"section_title": "The U.S. Seaway Corporation and the Army Corps Have Made Progress on Lock Asset Renewal Efforts, but the Army Corps Lacks Associated Goals and Measures", "paragraphs": [], "subsections": [{"section_title": "Both Agencies Have Made Progress on Lock Asset Renewal Efforts, but the Army Corps Has Yet to Start Work on a Project Identified as Critical in 2007", "paragraphs": ["The Army Corps and the U.S. Seaway Corporation developed asset  renewal plans, in fiscal year 2007 and 2009 respectively, which were  originally intended to cover approximately 10 years and focused on  modernizing, rehabilitating, or replacing existing lock components to avoid  unexpected lock closures. Within a lock there are a number of  structural, mechanical, and electrical components that must work together  (see fig. 7). Key lock components included in the agencies\u2019 asset renewal  plans include:", "Approach walls\u2014Help guide the vessel as it approaches the lock  chamber and provides a place for the vessel to tie up to wait to enter  the lock chamber.", "Lock chamber\u2014Concrete structure with rock or concrete floors that  contain the vessel while water flows to empty or fill the chamber. The  lock structure houses the culvert valves, which fill and empty the lock.", "Miter gates\u2014Steel structures that first function as a dam to prevent  free flow of water through a lock, then open and close to allow vessels  to transit through the lock. The end of the gates are mitered (angled)  and use the difference in water levels to provide the force necessary  to achieve a nearly water-tight seal.", "Embedded anchorages\u2014The connection point between the miter  gates and lock walls, which transfers the load from the gate to the lock  wall during the opening and closing of the gates.", "Over the past decade since beginning these efforts, the Army Corps and  U.S. Seaway Corporation have made progress on asset renewal efforts.  The Army Corps\u2019 asset renewal efforts have a total estimated cost of  about $310 million for work through 2035. Meanwhile the U.S. Seaway  Corporation\u2019s asset renewal efforts have a total estimated cost of $189  million for work through 2023 (see fig. 8). (See appendix II for a  complete list of both agencies\u2019 asset renewal projects.) According to the  Army Corps\u2019 most recent asset renewal plan from 2016 and updates  provided by Army Corps officials in May 2018, to date, the Army Corps  has spent about $53 million on 18 completed projects out of the about  $86 million it has received since 2008 (see below for more information on  funding received per year for both agencies). The U.S. Seaway  Corporation estimates it has spent $45 million on 16 completed projects  of the about $137 million it has received since 2009. According to the  Army Corps\u2019 estimates, it has about $257 million in remaining and  ongoing work through 2035. Meanwhile, the U.S. Seaway Corporation  estimates it has almost $144 million in remaining and ongoing work  through 2023. Officials from both agencies stated that asset renewal  plans will transition to ongoing capital investment programs that will  continue into the foreseeable future. Army Corps Detroit District Officials  also emphasized that the list of asset renewal projects frequently changes  to account for new information such as results of facility inspections.  These officials also noted that a project\u2019s inclusion in the asset renewal  plan does not obligate future funds on behalf of the Army Corps, since all  projects must compete for funding as part of the annual budget process.  Furthermore, these Army Corps officials noted that the total cost estimate  could decrease if a second Poe-sized lock is constructed, since traffic  could be diverted to the new lock, allowing the current lock to be taken  out of service for repairs.", "Both agencies have also made progress addressing critical projects  identified in the 2007 study, but the Army Corps faces obstacles in  finishing key projects without disrupting traffic through the Poe Lock. In  the 2007 study, the U.S. Seaway Corporation and the Army Corps  identified several critical projects to improve the condition of their  respective locks (see table 1). The U.S. Seaway Corporation has  completed its rehabilitation of the downstream miter gates on both locks  and started work on a long-term project to rehabilitate concrete on the  Eisenhower lock. Of the three key Army Corps projects identified in the  2007 study, one is complete, one is ongoing, and the other is remaining.  Specifically, the Army Corps has not started work to replace the Poe  lock\u2019s upper miter gate because Army Corps officials say they lack the  means to replace the gate without disrupting navigation. In the short term,  Army Corps officials say they now plan to repair the gate and have requested $2 million in appropriated funds in fiscal year 2019 for the first  phase of this work. Army Corps officials also noted they have ongoing  work to reinforce the West Center Pier, which has eroded over time and  which forms the approach channel for both the Poe and MacArthur locks.  However, these officials reported that the cost to complete the work  differs greatly ($82.6 million versus $7.5 million) depending on whether a  second Poe-sized lock is constructed, since more expensive construction  methods are currently needed to avoid disrupting traffic.", "In addition to addressing key projects from the 2007 report, over the past  decade the Army Corps and U.S. Seaway Corporation have undertaken  projects to address emergent issues and make operational improvements  to lock infrastructure. For example, in late July 2015, the Army Corps  identified the MacArthur lock\u2019s embedded gate anchorages as a critical  issue requiring immediate attention. It closed the MacArthur lock for 19  days during the navigation season in August 2015 in order to address the  issue at a project cost of $5.8 million. Meanwhile, the U.S. Seaway  Corporation is working to install \u201chands-free mooring\u201d at both of its locks,  which is intended to improve the efficiency of lock operations. Hands-free  mooring was developed by the Canadian Seaway Corporation, is being  deployed on all Seaway locks, and eliminates the need for conventional  lines to secure a vessel during the lockage process\u2014instead, arms along  the side of the locks extend and secure the vessel using vacuum pads.  Once fully implemented, the system is expected to produce benefits such  as improved workplace safety and reducing the time to transit a Seaway  lock by approximately 7\u201310 minutes each direction. The U.S. Seaway  Corporation expects to have the system completed by the end of the  2019 shipping season, at a total cost of about $18 million, about $7  million of which had been spent through 2016.", "The Army Corps and the U.S. Seaway Corporation differ in the level of  funding they have received for asset renewal efforts in the past decade,  which may have influenced the agencies\u2019 pace of asset renewal efforts.  Through fiscal year 2017, the Army Corps received about $86 million  (starting in fiscal year 2008) and the U.S. Seaway Corporation received  about $137 million (starting in fiscal year 2009) (see fig. 9). Army Corps  officials noted they received an increase in funds in 2009 due to the  American Recovery and Reinvestment Act of 2009 as well as more  stable recent funding due to the Water Resources and Development Act  of 2014 which, as mentioned earlier, required the Army Corps to  allocate annually a minimum amount of funds for the Great Lakes- Seaway. However, individual Soo Lock asset renewal projects must  compete for funding with other Army Corps projects across the country at  the district, division, and headquarters level, based in part on a project\u2019s  risk rating. In contrast, the U.S. Seaway Corporation is a much smaller  organization and directly allocates its funding to projects based on its own  condition assessments."], "subsections": []}, {"section_title": "The U.S. Seaway Corporation Has Established Goals and Measures for Asset Renewal Efforts but the Army Corps Lacks Goals and Measures for the Soo Locks", "paragraphs": ["The U.S. Seaway Corporation has a lock performance goal and measure  that officials use to monitor its asset renewal efforts, in accordance with  government internal control standards, but the Army Corps does not have  such a goal specific to the Soo locks. Standards for Internal Control in the  Federal Government states that agencies should define objectives  clearly and in measurable terms so that performance toward achieving  those objectives can be assessed. Similarly, Leading Practices in Capital  Decision-Making states that organizational goals should be integrated  into the capital decision-making process and that agencies should use  performance measures to evaluate results of capital projects to determine  if goals have been met. As part of the Department of Transportation\u2019s  annual performance reports, the U.S. Seaway Corporation reports its  annual progress toward its goal of maintaining 99 percent system  availability of the U.S. portion of the Seaway during the navigation  season. This measure includes times the system is unavailable for three  key reasons: vessel incidents, weather, and lock outages. Of these  reasons, the U.S. Seaway Corporation has the most direct control over  lock outages. U.S. Seaway Corporation officials told us they use this  information, particularly on lock outages, to assess the effect of its asset  renewal efforts on lock performance, as part of its agency goal to reduce  the risk of delays due to lock equipment failure.", "The Army Corps has not established specific operational goals or metrics  for the Soo locks that can be used to evaluate the outcomes of its asset  renewal efforts. In its annual financial report, the Army Corps Civil Works  program has a nationwide strategic goal to facilitate the transportation of  commerce goods on the nation\u2019s coastal channels and inland waterways  and a corresponding goal and measure for the number of instances  where mechanically-driven failure at locks resulted in delays of more than  a day or week. This national measure aggregates Army Corps locks  across the country, including over 200 in the inland waterways such as  the Mississippi River. However, this national goal and measure does not  provide information on the operational performance of individual locks,  including the Soo locks.", "Detroit District Army Corps officials told us that they have not established  operational goals or measures specific to the Soo Locks because the  Army Corps\u2019 project approval process involves prioritization based on risk  rather than operational performance. Specifically, these officials noted  that asset renewal efforts are measured by improved risk scores, which  indicate higher reliability and less likelihood of unscheduled outages.  While this process allows the Army Corps to prioritize individual  investment decisions according to risk, it does not define a specific  measurable goal for the operational performance of the Soo Locks. As a  result, the Army Corps lacks a key tool to assess whether the investments  made in the locks have resulted in improved lock performance, such as  reductions in outages and delays to its users. Furthermore, the Detroit  District has access to information that could be used to develop measure  performances for the Soo Locks\u2014specifically the Lock Performance  Monitoring System, which contains lock operations data such as  scheduled and unscheduled outages. According to Detroit District  officials, these data are used for the Army Corps\u2019 nationwide lock  performance measure.", "The Army Corps has previously noted the need for local lock performance  goals and measures to improve asset management. In December 2006,  the Great Lakes and Ohio River Division, which has the Soo locks in its  jurisdiction, recommended in a 5-year plan the development of specific  goals for the Great Lakes navigation system for use in prioritizing  investments, but the plan has not been updated since then.  Furthermore, a 2013 Army Corps commissioned report on best practices  in asset management recommended the development of key  performance indicator target values to monitor the effectiveness of asset  management. Likewise a senior official in the Army Corps\u2019 Asset  Management Program Office\u2014which shares leading asset management  practices across the Corps\u2014 stated that local and regional offices have  the ability to develop local lock performance goals and measures to  assess the local results. This official also noted the goals and measures  to evaluate the progress of asset renewal efforts and lock performance  would allow for greater transparency to stakeholders. Without goals and  associated measures for the Soo locks, the Army Corps cannot link its  asset renewal efforts to improved lock performance and cannot  demonstrate the effect of these efforts to stakeholders."], "subsections": []}]}, {"section_title": "Conclusion", "paragraphs": ["The Great Lakes-Seaway serves as an essential transportation route  linking U.S. manufacturing, agricultural, and other industries in the  nation\u2019s interior to the global economy. Yet, this system faces various  challenges that, according to stakeholders, pose risks to traditional and  emerging uses that could limit the system\u2019s ability to enhance the region\u2019s  economy. The U.S. Seaway Corporation\u2019s mission to improve the  system\u2019s utilization and reliability provides it with a unique vantage point  for assessing the cumulative risks that these challenges pose on the  system\u2019s current and future utilization. Establishing a process for  identifying, analyzing, and monitoring the system\u2019s risks would better  enable the U.S. Seaway Corporation to design future actions that it, and  other stakeholders, could take to address those risks. Similarly, the Army  Corps\u2019 efforts to rehabilitate the Soo locks are critical to U.S.  manufacturing and trade in the Great Lakes region. Regardless of the  outcome of the decision on whether to build another Soo lock, the  importance of the Poe lock remains, as indicated by the concerns raised  by stakeholders regarding its condition. Given the criticality of the Poe  lock and the more stable funding for asset renewal since 2014, it is  important that the Army Corps assess these funds\u2019 potential effect on the  Soo locks\u2019 performance. Without establishing goals and measures for the  Soo locks, the Army Corps is not able to demonstrate whether the  substantial investments made so far and planned in the future will  improve the Soo locks\u2019 performance and by extension, the reliability of the  Great Lakes navigation infrastructure."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations:  The Administrator of the U.S. Seaway Corporation should establish a  process to identify, analyze, and monitor risks to the system\u2019s use to  inform future actions to address those risks. (Recommendation 1)", "The Army Corps Director of Civil Works should, in coordination with the  Commanders of the Great Lakes and Ohio River Division and the Detroit  District, develop and adopt goals and measures to assess the  performance of the Soo Locks and assess outcomes of asset renewal  efforts. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this product to the Departments of Defense,  Transportation, and Homeland Security for comment. In comments,  reproduced in appendixes III and IV, the Departments of Transportation  and Defense concurred with our recommendations. All three departments  also provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Transportation, the Secretary of Defense,  the Secretary of Homeland Security, and other interested parties. In  addition, this report is available at no charge on our website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how Great Lakes-St. Lawrence Seaway (Great  Lakes-Seaway) shipping trends have changed since 1980 and what  factors have shaped recent trends, (2) selected stakeholders\u2019  perspectives on challenges to using the Great Lakes-Seaway, and (3) to  what extent the U.S. Army Corps of Engineers (Army Corps) and the  Saint Lawrence Seaway Development Corporation (U.S. Seaway  Corporation) have made progress on lock infrastructure renewal efforts  and how the agencies measure performance of these efforts.", "To understand shipping trends, we analyzed cargo traffic by tonnage for  both the St. Lawrence Seaway (published jointly by Canada\u2019s St.  Lawrence Seaway Management Corporation and the U.S. Seaway  Corporation) and for domestic Great Lakes cargo traffic (from the Army  Corps\u2019 Waterborne Commerce Statistics Center) from 1980 to 2016.  Although the Seaway data represents all cargo traffic that travels on the  St. Lawrence Seaway, we analyzed the Army Corps\u2019 domestic data,  which accounts exclusively for traffic between U.S. ports on the Great  Lakes system. As a result, some cargos that travel on the Great Lakes\u2014 such as between U.S. and Canadian ports or between Canadian ports\u2014 are not included, although such movements would be captured in the  Seaway data to the extent they enter the Seaway. Although the Army  Corps\u2019 data include information on Canadian and foreign cargo, we did  not analyze or report this information because (1) of the limitation, which  we confirmed with Army Corps officials, that the data exclude Great  Lakes cargo movements between Canadian ports and (2) including this  information would potentially double-count trips that also entered the St.  Lawrence Seaway. We selected the 1980 to 2016 timeframe because it  provides a sufficient timeframe to describe long-term trends using  consistently collected data from both sources and 2016 is the most recent  year for which both sources have published data. We also analyzed cargo  trends for the top five commodities by tonnage from 2001 to 2016 for  domestic Great Lakes and St. Lawrence Seaway traffic. We selected the  years 2001 to 2016 to capture trends over the past approximately 15  years. The selected commodities represent the majority of cargo traffic for  both sources. Specifically, the top five domestic Great Lakes commodities  made up 96 percent of total cargo tonnage from 2001 to 2016, while the  five commodities for the St. Lawrence Seaway represented 71 percent of  total St. Lawrence Seaway cargo tonnage for the same time period. We  assessed the reliability of the data by reviewing documentation and  interviewing Army Corps and U.S. and Canadian Seaway Corporation  officials and determined these data were sufficiently reliable for our  purpose of describing trends. To describe factors that have shaped recent  trends, we reviewed available government and industry reports, such as  the 2007 Great Lakes-Seaway study, the 2013 U.S. Department of  Transportation Maritime Administration\u2019s Status of the U.S.-Flag Great  Lakes Water Transportation Industry, and the 2016 Conference of Great  Lakes and St. Lawrence Governors and Premiers\u2019 Strategy for the Great  Lakes-St. Lawrence River Maritime Transportation System.", "To understand factors affecting recent trends and challenges to using the  system, we interviewed 24 stakeholders representing a range of  traditional and emerging system users and experts. We interviewed  representatives from three carriers that transport goods on the system  and three associations that represent current U.S., Canadian, and foreign  vessel traffic: Interlake Steamship Company, FedNav, Spliethoff, Lake  Carriers Association, Chamber of Marine Commerce, and the Shipping  Federation of Canada. We interviewed four Great Lake ports  stakeholders, including three ports that represent a range of cargo levels  and mix of cargos\u2014Port of Duluth, Port of Cleveland, and Port of Indiana,  Burns Harbor\u2014and their association, the American Great Lake Ports  Association. We interviewed six stakeholders that represent traditional or  emerging shipping uses (e.g., cruises and containers) on the system:  Cleveland-Cliffs Inc.; Tata Steel; CHS Inc.; General Motors; American  Iron and Steel Institute; and the Great Lakes Cruising Coalition. We  interviewed two maritime experts and a freight forwarder which helps  arrange shipping logistics: Dr. Walter Kemmsies, Martin Associates, and  Midwest Transatlantic Lines. Lastly, we interviewed representatives from  five Great-Lakes Seaway region and maritime stakeholder groups:  Conference of Great Lakes and St. Lawrence Governors and Premiers,  Great Lakes Commission, Council of the Great Lakes Region, Committee  on the Marine Transportation System, and the American Pilots\u2019  Association. We grouped the challenges identified by stakeholders based  on whether challenges affect traditional use of the system or emerging  use of the system. Although the results are non-generalizable,  stakeholders were selected to represent a range of known perspectives.  To better understand the context of these challenges, we interviewed  officials from the Army Corps, U.S. Seaway Corporation, U.S. Coast  Guard, and Customs and Border Protection.", "To understand the agencies\u2019 progress on asset renewal efforts and how  they measure performance of these efforts, we analyzed available  information on projects, status, and estimated cost from both agencies.  To assess the agencies\u2019 asset renewal progress we reviewed the Army  Corps\u2019 most recent asset renewal plan from 2016 with updates provided  by the Army Corps in May 2018. Likewise, we analyzed information  provided by U.S. Seaway Corporation officials in March 2018 on project- by-project expenditures from 2009 to 2016 and cost estimates from 2017  to 2023. Although we describe the agencies\u2019 cost estimates for their asset  renewal efforts, it was beyond the scope of this engagement to check  these cost estimates for accuracy and completeness. Likewise, although  we describe the agencies\u2019 processes for selecting projects for funding, we  did not verify these processes by, for example, selecting projects and  ensuring the selection met the agencies\u2019 established procedures for  selection. We reviewed U.S. Seaway Corporation and Army Corps  relevant reports, available asset renewal plans, and documentation  related to program goals and performance measures, such as annual  financial and performance reports, from 2007 through 2018. We also  visited the Soo locks at Sault Ste. Marie, Michigan, and the Seaway locks  at Massena, New York, in summer 2017 and interviewed officials from  both agencies. For example, within the Army Corps we interviewed  officials from the Detroit District, headquarters\u2019 navigation and Asset  Management Program offices, the Inland Navigation Design Center, and  the Institute for Water Resources. We compared agencies\u2019 efforts to  GAO\u2019s Standards for Internal Control in the Federal Government and to  Leading Practices in Capital Decision-Making. Although the Great Lakes- Seaway system is binational, we are not evaluating the Canadian  agencies, although we did interview officials from the Canadian St.  Lawrence Seaway Management Corporation to understand their process  for asset renewal."], "subsections": []}, {"section_title": "Appendix II: List of Asset Renewal Projects", "paragraphs": ["The Army Corps information below is based on the most recent asset  renewal plan report from 2016 for the Soo locks, with updates provided by  the Army Corps in May 2018. The U.S. Seaway Corporation information  includes project-by-project expenditures for fiscal years 2009 through  2016 and cost estimates for work from fiscal years 2017 through 2023  provided by U.S. Seaway Corporation officials in March 2018. To align  projects between the two agencies, we removed from the U.S. Seaway  Corporation list: a dredging project (since the Army Corps information  does not include dredging), one Seaway International Bridge project that  lacked an associated cost estimate, and discontinued projects. It was  beyond the scope of this review to check these cost estimates for  accuracy and completeness.", "Replace lock utility lines and steam system, used for de-icing   Fabrication of second set of stoplogs to allow for full dewatering of the lock  Poe   Replacement of quoin and miter blocks that help transfer load from the gate  to the lock wall  Replace gate latches to protect the miter gates  Replace bevel gears that help move the miter gates  Replace protective relays for power plant  Replace switchgear assembly B, to assist with de-watering  Replace sluice gate valves for Poe and Davis pump well which are used to  dewater the locks  Repair west center pier, which forms the north wall of the approach channel  (outer portion of the wall)", "Modernize steamplant, which supports de-icing   Repair west center pier, which forms the north wall of the approach channel  (inner portion of wall closest to lock chamber)", "Rehabilitation of Davis pump well which is used to dewater locks for winter  maintenance  Rehabilitate ship arrestor booms that are designed to protect miter gates  from vessel impact  Gate 1 coating/ weld repairs (upstream end of lock)", "New miter gate replacement (spare) for upstream end  Rehabilitation of Poe pump well used to dewater Poe lock for winter  maintenance  Fabrication of replacement stoplogs (replacement for originals from initial  Poe Lock construction)", "Rehabilitate ship arrestor booms that are designed to protect miter gates   Rehabilitate lock fill/ empty valve machinery  Rehabilitate gate skin plate and replace gate coating  Repair southwest pier, which serves as south upstream approach wall  Reinforce piers mooring bollards along approach wall (Southwest Pier)"], "subsections": [{"section_title": "Project", "paragraphs": [], "subsections": []}, {"section_title": "Project", "paragraphs": [], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Transportation", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Matt Barranca (Assistant  Director), Emily Larson (Analyst in Charge), Amy Abramowitz, Melissa  Bodeau, Michelle Everett, Aaron Gluck, David Hooper, Alyssa Hundrup,  SaraAnn Moessbauer, Joshua Ormond, and Shane Spencer made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Great Lakes-St. Lawrence Seaway has connected U.S. and Canadian ports to the world since 1959\u2014but traffic has declined since 1980.", "Stakeholders identified many challenges to using the seaway. For example, the cost of hiring pilots to navigate the system increased in 2016; older lock infrastructure is at risk of failure; and ports aren't set up to clear passengers and container cargo for travel.", "We reviewed modernization efforts and found that U.S. agencies have completed almost $100 million in projects to improve locks over the past decade. We recommended better monitoring of the challenges and assessment of improvement efforts."]}
{"id": "GAO-19-231", "url": "https://www.gao.gov/products/GAO-19-231", "title": "Advance Care Planning: Selected States' Efforts to Educate and Address Access Challenges", "published_date": "2019-02-21T00:00:00", "released_date": "2019-02-21T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Many individuals receive medical care for a serious or life-limiting condition during the last months of life, which may involve making difficult decisions about life-sustaining treatment. Advance care planning helps ensure that physicians, families, and friends have documentation outlining individuals' wishes under these circumstances.", "GAO was asked to identify issues related to completing and accessing advance care planning documents. This report describes, among other things, (1) the challenges individuals and providers face completing and accessing the documents, and (2) selected states' strategies for improving individuals' and providers' understanding of and access to advance care planning documents.", "GAO reviewed documents and interviewed officials from national stakeholder organizations involved in advance care planning or aging issues, and conducted a literature review of relevant articles published from January 2012 to April 2018 in peer-reviewed and other publications. In addition, GAO interviewed officials from state agencies and stakeholder organizations in California, Idaho, Oregon, and West Virginia. GAO selected those four states because they were active in encouraging advance care planning and had registries for completed documents that were in different stages of development.", "The Department of Health and Human Services, states, and stakeholders provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Advance care planning documents\u2014including advance directives and physician orders for life sustaining treatment (POLST)\u2014allow individuals to express their wishes for end-of-life care. Advance directives, which include living wills and health care power of attorney, provide direction regarding care when an individual becomes incapacitated. POLST documents are appropriate for seriously ill individuals whose health status indicates the need for medical orders to be documented in their medical records.", "Stakeholders from national organizations and officials in the four states GAO selected to review cited several challenges\u2014affecting both individuals and health care providers\u2014related to the use of advance care planning documents. In particular, they noted a lack of understanding about how to complete the documents and how to initiate conversations about advance care planning. They also cited challenges related to the difficulty of ensuring access to completed documents when needed, such as in an emergency situation.", "Officials from state agencies and stakeholder organizations in the four selected states reported pursuing various strategies to improve understanding of advance care planning documents by conducting education efforts for individuals and providers. In addition, the states utilized strategies to improve access to completed documents, such as improving the electronic exchange of information between health records and a state registry, which is a central repository intended to improve access to the documents. Further, stakeholder officials reported strategies related to the acceptance of out-of-state advance care planning documents; all four selected states had statutory provisions that address the validity of documents executed in another state."]}], "report": [{"section_title": "Letter", "paragraphs": ["Many individuals receive medical care for a serious or life-limiting  condition during the last 6 months of life that may involve making difficult  decisions about life-sustaining treatment. Advance care planning helps  ensure that physicians, families, and friends have documentation outlining  individuals\u2019 wishes under these circumstances. Advance care planning  documents include advance directives and physician orders for life- sustaining treatment (POLST) forms. Advance directives, such as living  wills or health care power of attorney, specify\u2014consistent with applicable  state law\u2014how individuals want medical decisions to be made for them  should they become unable to communicate their wishes. POLST  forms\u2014typically used for seriously ill or frail individuals\u2014instruct health  care providers which specific medical actions, such as cardiopulmonary  resuscitation (CPR), to take or not to take in the event of a medical  emergency.", "Some blank advance care planning documents can be downloaded from  state government or other websites to be voluntarily completed by  individuals or by health care providers after consultation with the  individual or their representative. Completed documents may be added to  an individual\u2019s medical records or, depending on the state, stored in a  state registry, which is a central repository of advance care planning  documents intended to facilitate individuals\u2019 and providers\u2019 access to  these documents when needed. Depending on the state, and how and  where advance care planning documents are stored, providers and others  may not be aware that the documents exist or have access to them when  needed; as a result, providers may not follow individuals\u2019 documented  wishes for end-of-life care. Also, state laws vary in what is considered a  valid advance directive and POLST form, and whether these documents  can be used in a state other than the state in which the document was  executed. Although advance directives and POLST forms have been  available for at least 20 years and 15 years, respectively, there is still  interest in the strategies used at the state-level to help promote the  voluntary completion of these documents, and strategies to provide  access through medical records or a state registry to help ensure the  documents are readily available to individuals and providers. At the  federal level, several agencies within the Department of Health and  Human Services (HHS) play a role in providing or collecting information  on advance care planning, including the Centers for Medicare & Medicaid  Services (CMS), which provides incentives to encourage use of electronic  health records.", "You asked us to identify issues and states\u2019 strategies related to  completing and accessing advance care planning documents. In this  report, we describe  1.  state-level advance care planning information available online, and  which states have registries for completed documents;  2.  challenges individuals and providers face in completing and accessing  advance care planning documents; and  3.  selected states\u2019 strategies for improving individuals\u2019 and providers\u2019  understanding of and access to completed advance care planning  documents.", "To describe the state-level advance care planning information available  online, and which states have registries of completed documents, we  reviewed reports and studies by national organizations, including the  American Bar Association Commission on Law and Aging, and the  National POLST Paradigm. We also conducted searches of informational  websites provided by state governments and non-government  organizations operating within each state for available advance care  planning information, including documents.", "To describe the challenges individuals and providers face in completing  and accessing advance care planning documents, we reviewed  documents and interviewed officials from six national stakeholder  organizations involved with advance care planning or aging issues: Aging  with Dignity; the American Bar Association Commission on Law and  Aging; the Coalition to Transform Advanced Care; the National Hospice  and Palliative Care Organization; the National POLST Paradigm; and the  Pew Charitable Trusts, which administered a project on improving end-of- life care. We also conducted a literature review of relevant articles  published in peer-reviewed and other publications from January 2012 to  April 2018. We identified publications through a search of bibliographic  databases, including AgeLine, MEDLINE, and Scopus, using terms such  as \u201cadvance directive,\u201d \u201cPOLST,\u201d and \u201cdocumentation.\u201d Of the 253  citations we reviewed, we determined there were 92 relevant articles. We  reviewed the 92 articles for information related to advance care planning,  including prevalence of advance care planning documents, as well as  challenges to access and voluntary and informed completion of  documents. We also reviewed relevant GAO and other reports. In  addition, we reviewed documents and interviewed officials from federal  agencies that play a role in providing or collecting information on advance  care planning, including CMS, the Office of the National Coordinator for  Health Information Technology, and the National Institutes of Health\u2019s  National Institute on Aging. Finally, we reviewed documents and  interviewed officials in four states\u2014California, Idaho, Oregon, and West  Virginia. We selected the four states because they were active in  encouraging the use of advance care planning and had registries for  completed advance care planning documents that varied in type or stage  of development, based on our literature review and interviews with  national stakeholder organizations. The officials we interviewed or  obtained information from included those from state agencies, such as  the state agency responsible for emergency medical services (EMS), and  other non-governmental stakeholder organizations that were involved in  advance care planning activities (state stakeholder organizations). The  perspectives of the officials from the national stakeholder organizations  and those interviewed in the selected states are not generalizable, but  provided us with valuable insight on the challenges individuals and  providers face in completing and accessing advance care planning  documents.", "To describe selected states\u2019 strategies for improving the understanding of  advance care planning documents and information, and access to  completed documents, we reviewed documents and interviewed officials  from state agencies and state stakeholder organizations in our four  selected states. Specifically, for each state, we interviewed officials  representing EMS providers and the state registry (registries for advance  directives, POLST forms, or both). We also reviewed selected states\u2019  statutes related to advance care planning documents, reviewed articles from our literature review, and reviewed documents and interviewed  officials from national stakeholder organizations, CMS, and the Office of  the National Coordinator for Health Information Technology.", "We conducted this performance audit from October 2017 to February  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Advance Directives and POLST Forms", "paragraphs": ["Decisions about end-of-life care are based on an individual\u2019s personal  beliefs and values. Advance care planning documents, including advance  directives and POLST forms, allow individuals to express their wishes for  end-of-life care. These documents serve different purposes depending on  an individual\u2019s stage of life or health condition. (See fig. 1.)", "According to a report by the Institutes of Medicine, advance care planning  documents are most effective when used as part of broader advance care  planning efforts, which may involve multiple, in-depth discussions with  family members and health care providers. The report also stated that  multiple discussions at various stages of life are needed, with greater  specificity as an individual\u2019s health deteriorates, because an individual\u2019s  medical conditions and treatment preferences may change over time.  Therefore, a comprehensive approach to end-of-life care, rather than any  one document, helps to ensure that medical treatment given at the end of  life is consistent with an individual\u2019s preferences."], "subsections": [{"section_title": "Advance Directive", "paragraphs": ["An advance directive is a written instruction recognized under state law  and relating to the provision of health care when an individual is  incapacitated. For example, an advance directive may be used to record  an individual\u2019s wish to receive all available medical treatment, to withdraw  or withhold certain life-sustaining treatments, or to identify an agent to  make medical decisions on the individual\u2019s behalf if necessary. The most  common advance directive documents are living wills and health care  power of attorney.", "Life-Sustaining Treatment   Life-sustaining treatment means the use of  available medical machinery and techniques,  such as heart-lung machines, ventilators, and  other medical equipment and techniques, that  may sustain and possibly extend life, but  which may not by themselves cure the  condition.", "Living will. A living will is a written expression of how an individual  wants to be treated in certain medical circumstances. Depending on  state law, a living will may permit an individual to express whether  they wish to be given life-sustaining treatment in the event they are  terminally ill or injured, to decide in advance whether they wish to be  provided food and water via intravenous devices (known as tube  feeding), and to give other medical directions that affect their health  care, including at the end of life. A living will applies to situations in  which the decision to use life-sustaining treatments may prolong an  individual\u2019s life for a limited period of time and not obtaining such  treatment would result in death. Having a living will does not mean  that medical providers would deny medications and other treatments  that would relieve pain or otherwise help an individual be more  comfortable.", "Health care power of attorney. A health care power of attorney is a  document that identifies a health care agent\u2014also called a health  care proxy\u2014as the decision maker for the patient. Under state law,  the health care power of attorney typically becomes operative when  an individual is medically determined as unable to make decisions.  Most commonly, this situation occurs either because the individual is  unconscious or because the individual\u2019s mental state is such that they  do not have the legal capacity to make decisions. As with living wills,  the process for validly executing a health care power of attorney  depends on the state of residence. The health care power of attorney  may be designated by using a model form in state statute or it may be  drafted specifically for an individual by a lawyer. Similar to the living  will, medical providers will make the initial determination as to whether  an individual has the capacity to make their own medical treatment  decisions.", "Most adults in the United States do not have an advance directive.  According to a 2017 study, about 37 percent of adults had an advance  directive. However, the proportion of individuals with an advance  directive can vary by demographic group. See appendix I for more  information related to the prevalence of advance directives."], "subsections": []}, {"section_title": "POLST Form", "paragraphs": ["POLST forms differ from advance directives in that they are medical  orders used to communicate an individual\u2019s treatment wishes, and are  appropriate for individuals with a serious illness or advanced frailty near  the end-of-life. For these individuals, their current health status indicates  the need for medical orders. In the event of a medical emergency, the  POLST form serves as an immediately available and recognizable  medical order in a standardized format to aid emergency personnel.  Following the POLST form orders, emergency personnel can honor the  individual\u2019s treatment wishes as communicated to and documented by the  individual\u2019s health care provider. See appendix II for information on the  types of information included on a POLST form."], "subsections": []}]}, {"section_title": "Information on Completing and Storing Advance Care Planning Documents", "paragraphs": ["Both government and non-government organizations, such as state  agencies or the National POLST Paradigm, provide individuals and  providers information on how to access or download blank advance care  planning documents through their websites and education campaigns.  For Medicare and Medicaid providers, the Patient Self Determination Act  requires certain providers participating in these programs\u2014such as  hospitals and nursing homes\u2014to maintain written policies and procedures  to inform individuals about advance directives, and document information  about individuals\u2019 advance directives in their medical records. Once the  advance care planning documents are completed, individuals and  providers can access them through various systems. For example, an  individual may have their advance directive or POLST form in their  electronic health record (EHR), which can be accessed by their provider  or other medical personnel in the event that the individual has a medical  emergency. In addition, advance directives can be stored in a lawyer\u2019s  office or in an individual\u2019s home; these documents would have to be  found and transported to the medical setting if needed. Some states have  registries (either electronic or paper-based) for advance directives or  POLST forms, whereby individuals and providers can access the registry  and obtain the necessary documents."], "subsections": []}]}, {"section_title": "Websites Related to Advance Care Planning Were Available for All States; About One Quarter of States Had Registries for Completed Documents For All States, Advance Care Planning Information, Such as Blank Documents, Was Available Online", "paragraphs": ["We found websites related to advance care planning for every state;  however, the amount of information on these websites varied. In addition,  about a quarter of states had registries to provide access to completed  advance directives, POLST forms, or both.", "For all states, either government or non-government websites provided  information, which could include blank documents, on advance care  planning for individuals and providers within the state. However, the  amount of available information about advance care planning varied by  state. The information available online varied from having an advance  care planning document available to download, to extensive information  on advance care planning. For example, in Mississippi, the State Board  of Medical Licensure provided a POLST document that could be  downloaded from its webpage with no additional information. In contrast,  California\u2014through its state attorney general\u2019s website\u2014offered a blank  advance directive document that could be downloaded, as well as  additional information on advance directives, including who should fill out particular types of advance care planning  documents, and the importance of filling out these documents; and other resources, including brochures or information packets detailing  advance care planning and other relevant documents."], "subsections": [{"section_title": "About One-Quarter of States Had Registries for Completed Advance Directives, POLST Forms, or Both", "paragraphs": ["To give providers, individuals, or both access to completed advance care  planning documents, about one-quarter of states (14) had active  registries (either electronic or paper-based) of completed advance  directives, POLST forms, or both, as of November 2018. (See fig. 2.)  Specifically,", "3 states had active registries for both completed advance directives", "8 states had active registries solely for completed advance directives;", "2 states had active registries solely for completed POLST forms,", "1 state had an active registry for completed advance directives and  was piloting registries for completed POLST forms, and", "37 states did not have active registries for either advance directives or  POLST forms.", "The 14 states with active registries varied in how they administered them.  Some states\u2019 registries were administered through state agencies or by  contracting with an outside organization. For example, in Oregon, the  state contracted with a large health system in the state to operate the  technical aspects of the state\u2019s POLST registry, while in Vermont, the  Department of Health administered the state\u2019s registry with technical  support from a private national document registry company. For other  states\u2014such as New York, Virginia, and West Virginia\u2014the state  registries were administered through non-government organizations in  collaboration with state agencies."], "subsections": []}]}, {"section_title": "Challenges to Advance Care Planning Include Understanding the Types of Documents and Ensuring Access to Completed Documents", "paragraphs": ["Based on our interviews with officials from national stakeholder  organizations, state agencies and stakeholder organizations in selected  states, and articles we reviewed, we identified two broad challenges to  advance care planning: (1) a lack of understanding about advance care  planning, including how to initiate conversations about advance care  planning and how to complete and follow advance care planning  documents; and (2) ensuring access to completed documents. In addition  to these two broad challenges, the officials we interviewed identified  challenges related to resources and the portability of advance care  planning documents.", "Individuals and providers may struggle with how and when to initiate  advance care planning conversations. We previously reported that  providers identified informing individuals about advance care planning as  a challenge due to reluctance to talk about end-of-life issues. In  addition, officials from both national and state stakeholder organizations  identified challenges to providers properly counseling their patients about  advance care planning, either to avoid discussing death and dying with  their patients, or because of their own uncertainties regarding the timing  of when to hold such discussions. In addition to challenges related to  having advance care planning conversations, individuals and providers  may not understand that filling out the document is voluntary or how to complete and follow the advance care planning document, according to  officials from national stakeholder organizations and officials in the four  selected states. Officials from national stakeholder organizations and  articles we reviewed noted that challenges with voluntarily completing  advance care planning documents can arise when there are language or  cultural barriers to understanding these documents. When individuals or  providers do not understand the information being requested in advance  care planning documents, it can affect whether an individual\u2019s wishes for  care are accurately represented. A state agency official in one state  identified challenges in ensuring EMS providers understand the  appropriate actions to take when they encounter a document that is  different from a traditional POLST form. For example, the state official  noted that EMS providers might assume that individuals who have a  wallet card on their person do not want CPR when the card actually  indicates that the individual has completed an advance directive or  POLST form to express their care wishes. This could result in treatment  that does not match the individual\u2019s expressed wishes.", "Once advance care planning documents are completed, additional  challenges exist to ensuring that providers have access to these  documents when needed, such as in an emergency situation. Officials  from the national stakeholder organizations, state agencies, and state  stakeholder organizations we interviewed identified challenges related to  accessing advance directives and POLST forms stored in EHRs.  Specifically, stakeholders identified challenges related to EHR  interoperability, such as where a provider in one health system cannot  access advance care planning documents recorded in an EHR at a  different health care system. While interoperability is not limited to  advance care planning documents, the challenges associated with  accessing advance care planning documents in EHRs can affect  providers\u2019 abilities to honor an individual\u2019s wishes in an emergency if they  do not have ready access to the documents. For example, when  emergency providers cannot readily access advance care planning  documents in another health system\u2019s EHR, the providers might not be  aware of and provide treatment inconsistent with the wishes of someone  they are treating in the emergency room. National stakeholder officials  also noted challenges due to a lack of standardization in EHR systems.  For example, one national stakeholder official noted that EHR systems in  health care facilities do not always have standardized processes for  storing advance care planning documents\u2014that is, one health care facility  might enter advance directive information into a physician\u2019s notes section  of the EHR, while another might have a specific tab in the EHR for  advance directives. Due to the lack of standardization, providers might  not be able to find an individual\u2019s advance care planning document, and  consequently provide treatment inconsistent with the individual\u2019s  expressed wishes.", "In addition to challenges related to understanding and accessing advance  care planning documents, officials from the national stakeholder  organizations, state agencies, and state stakeholder organizations we  interviewed identified other challenges related to resources and portability  of advance care planning documents.", "State agency officials told us that the lack of dedicated resources for  advance care planning efforts, such as maintaining a registry, can be  challenging. For example, an Idaho official stated that, due to  resource constraints within the Secretary of State\u2019s Office\u2014which  administers its Health Care Directive registry\u2014the office does not  have the personnel to maintain the registry at current document  submission rates.", "National stakeholder officials discussed challenges with states\u2019 legal  structures for accepting advance care planning documents\u2014that is,  the portability of documents across state lines. For example, an  individual might fill out an advance directive or POLST form in one  state, but become ill in another state where these documents may not  be valid."], "subsections": []}, {"section_title": "Various Strategies Used in Selected States to Improve Individuals\u2019 and Providers\u2019 Understanding of and Access to Advance Care Planning Documents", "paragraphs": ["In our four selected states\u2014California, Idaho, Oregon, and West  Virginia\u2014state agencies and state stakeholder organizations pursued  various strategies to improve individuals\u2019 and providers\u2019 understanding of  advance care planning documents, as well as to improve their access to  completed advance care planning documents."], "subsections": [{"section_title": "Selected States Used Education and Training to Increase Understanding of the Need for and Use of Advance Care Planning Documents", "paragraphs": ["Officials from state agencies and stakeholder organizations in our  selected states described efforts to educate individuals about the  importance of advance care planning and train providers on the use of  advance care planning documents."], "subsections": [{"section_title": "Educating Individuals", "paragraphs": ["To address individuals\u2019 lack of understanding of advance care planning,  state agency officials and stakeholders in our selected states used  strategies to inform them about the purpose of the documents and how to  fill them out. The following are some examples of these efforts.", "Oregon. The Oregon POLST Coalition used its relationship with  stakeholder groups in the state\u2014a large health system, and the state  health authority\u2014to educate individuals about POLST forms. These  efforts included online videos and brochures intended to improve  individuals\u2019 voluntary and informed completion of the documents.", "West Virginia. The West Virginia Center for End-of-Life Care\u2014which  administers the state\u2019s advance care planning registry\u2014collaborated  with the West Virginia Network of Ethics Committees and a national  organization to conduct public education presentations and  webinars.", "For three of our selected states, educational efforts also included making  information about advance care planning available in other languages.  For example, in California, Idaho, and Oregon, POLST forms and other  information on advance care planning are available in Spanish. Articles  we reviewed stated that providing culturally sensitive documents that  communicate how to fill out the documents could help improve voluntary  and informed completion of advance care planning documents."], "subsections": []}, {"section_title": "Training Providers", "paragraphs": ["Officials from state agencies and state stakeholder organizations in all  four selected states reported conducting provider training, which included  working with EMS and hospital providers to train them on advance care  planning documents, such as how to use advance directives and POLST  forms and when to conduct end-of-life care conversations. The following  are examples of these efforts.", "California. A state stakeholder organization in California conducted  train-the-trainer sessions to educate providers about POLST forms, so  the providers could subsequently conduct community training events.  The organization also published decision aids for providers and  individuals to help facilitate advance care planning conversations. The  organization, which focused on POLST education and training, noted  that it holds periodic conference calls with previous session  participants to provide ongoing support and continue discussions  about advance care planning.", "Idaho. The state\u2014through collaborations with stakeholder  organizations in Idaho\u2014focused on improving advance care planning  through education efforts. Specifically, the state collaborated with  stakeholder organizations to conduct trainings on locating and  understanding advance care planning documents. In addition, the  organizations created EMS protocols related to accessing individuals\u2019  wishes during emergencies. An Idaho official noted that successful  advance care planning education and outreach within the state has  led to a large increase in the number of advance care planning  documents submitted to the state\u2019s registry.", "Oregon. State stakeholder organizations conducted provider training  on advance directives and POLST forms. For example, an  organization that focused on improving advance care planning  education in the state developed an initiative, which included  educational materials and training programs, to improve patient  understanding of filling out and updating advance directives through  health care organizations and provider training. Further, according to  an official from the state health authority, POLST information is  included in the curriculum for all medical education in the state  ranging from emergency medical technicians to physicians.", "West Virginia. The West Virginia Center for End-of-Life Care created  training manuals, led EMS training webinars, and provided other  online education materials to improve provider education about using  POLST forms and related protocols in the field.", "National stakeholder organizations we interviewed and articles we  reviewed also noted that increasing the quality of the advance care  planning conversations between providers and their patients is an  important aspect of successful advance care planning efforts. One  strategy to improve the advance care planning conversations is to  conduct the conversations over multiple visits, according to national  stakeholders and articles."], "subsections": []}]}, {"section_title": "Selected States\u2019 Strategies to Improve Access to Completed Documents Included Interoperability between Electronic Health Records and Registries", "paragraphs": ["Officials from state agencies and stakeholder organizations in our  selected states utilized strategies to improve access to current advance  care planning documents, including better interoperability between EHRs  and a state registry, and access to completed documents stored in  registries."], "subsections": [{"section_title": "Access in Electronic Health Records", "paragraphs": ["Officials from state agencies and stakeholder organizations identified  strategies to improve providers\u2019 access to advance care planning  documents stored in an EHR and to ensure the EHR has the most current  copy of the document. One strategy used in Oregon enabled information  sharing between EHR systems and the state\u2019s electronic registry of  completed POLST forms, allowing providers access to the most current  POLST forms, according to state officials. Certain EHR systems\u2014 including those in three large health systems in the state\u2014are  interoperable with the state\u2019s electronic POLST registry using bidirectional  technology, meaning that the systems are coded in a way that they can  seamlessly exchange information with each other. This allows providers  to receive updated POLST forms from the registry upon the individual\u2019s  admission to the hospital. It also updates the POLST forms in the registry  when changes are made in the EHR by the provider in the hospital. The  Oregon officials described another strategy taken within a large health  system in the state, which allows providers to quickly know whether a  patient has an advance directive in an EHR by using a tab in the medical  record indicating that the documents are in the EHR. Stakeholder  organizations identified other strategies for increasing access to  completed advance care planning documents, such as standardizing  information. For example, one national stakeholder organization noted  that advance care planning documents could be in a standardized  location within an EHR to help providers find these documents more  easily.", "Another strategy used in our selected states is the use of a health  information exchange to facilitate access to advance care planning  documents. According to a West Virginia stakeholder organization,  using the state\u2019s health information exchange allowed West Virginia to  easily provide authorized individuals with direct access to completed  advance care planning documents\u2014both advance directives and POLST  forms\u2014in its registry."], "subsections": []}, {"section_title": "Access to Registry Information", "paragraphs": ["Officials from state agencies and stakeholder organizations also  developed strategies to improve access to completed advance care  planning documents in their state registries. All four selected states used  registries to facilitate access to completed advance care planning  documents: two states (Idaho and West Virginia) had registries for both  advance directives and POLST forms, one state (California) had an  advance directive registry and was piloting an electronic POLST registry  in two communities, and the remaining state (Oregon) had a POLST  registry. Officials in these states reported strategies to facilitate access  through their registries. Below are examples of these strategies.", "California. To test whether partnering with a health information  exchange organization would provide benefits to the state\u2019s POLST  eRegistry uptake and expansion, one of the two California  communities chosen to pilot the POLST eRegistry was led by a health  information exchange. The other community selected for the pilot was  led by a for-profit commercial service. According to a California EMS  official, using the health information exchange allowed advance care  planning documents to be exchanged quickly between ambulances  and hospitals.", "West Virginia. West Virginia\u2019s registry used the state-wide EMS  structure, enabling EMS providers to access the information in an  individual\u2019s POLST form while en route to an emergency call. The  medical director at the EMS state office noted that EMS providers  could call one of its five medical command centers, which could  access the registry online to \u201cpre-screen\u201d individuals, to determine if  there was a valid advance care planning document on file. EMS  providers then received the individual\u2019s information from the medical  command center. According to an official involved with the state  registry, authorized individuals\u2014i.e., individuals with a registry-issued  username and password\u2014could also directly view registry  documents.", "Oregon. State officials reported using an opt-out strategy for the  submission of POLST forms to the state\u2019s registry to help ensure that  the information in the registry was current. That is, the state has a  legislative mandate for providers to submit all POLST forms to the  state\u2019s POLST registry unless the patient elected to opt out of the  submission. According to Oregon stakeholders, Oregon attributes  the widespread use and adoption of the registry to this strategy. One  article noted that, in Oregon, successful access to POLST forms  through the registry by EMS providers influenced the treatment of  individuals. Oregon officials and stakeholders told us that they have  not experienced many challenges related to administering its POLST  registry and providing access to completed POLST forms, because  they leveraged their existing centralized EMS system and created a  state administered registry that is interoperable and available to all  health systems within the state. Oregon officials stated that the state\u2019s  registry success is largely attributable to the fact that it was designed  to meet the access and workflow needs of both EMS providers in the  field and acute care providers.", "At the federal level, to support state registry efforts, in February 2016,  CMS published a State Medicaid Director letter alerting states to the  availability of federal Medicaid funding for the development of and  connection to public health systems, such as registries. A July 2018  report by the Office of the National Coordinator for Health Information  Technology noted that end-of-life care advocacy groups should consider  working with State Medicaid Directors to apply for CMS funding to pilot  POLST registries. According to CMS, as of October 2018, one state,  Louisiana, received approval to fund an electronic registry for advance  directives."], "subsections": []}]}, {"section_title": "Additional Strategies Used in Selected States Address Resource Needs for Advance Care Planning Registries and the Portability of Documents.", "paragraphs": ["Officials from state agencies and stakeholder organizations in our  selected states discussed the importance of having adequate funding and  staff resources to administer their registries. For example, according to an  Oregon stakeholder organization, dedicated state funding for the state\u2019s  registry allows multiple benefits, such as continuous availability of the  registry for individuals and providers. Oregon POLST officials stated that  in order to ensure access to individuals\u2019 POLST forms between health  systems within a state, they believe POLST registries should be state  funded and administered. According to the Office of the National  Coordinator for Health Information Technology report and a West Virginia  registry official, the state\u2019s registry, which received state-funding from  2009 until 2017, functioned as a central source of information on  individuals\u2019 wishes, which were recorded in documents such as advance  directives and POLST forms and alleviated multiple access issues.  However, officials involved in receiving and providing registry services  reported challenges when the registry did not receive state funding in  2018. As a result, online access to advance directives and POLST forms  through the registry was discontinued. In California, officials involved  with the POLST eRegistry pilot stated that one goal of the pilot project  was to identify potential plans for sustainable funding of a registry.", "Regarding acceptance of out-of-state advance care planning  documents\u2014that is, the portability of documents across state lines\u2014we  found that all four selected states have statutes that address the validity  of advance care planning documents executed in another state. To  ensure individuals\u2019 wishes are honored, according to an American Bar  Association official, states need to engage in efforts to develop processes  and protocols that will allow advance care planning documents to be  accepted between states. While the states\u2019 language varies, all selected  states allow use of out-of-state documents. Under Idaho\u2019s statute, out-of- state documents that substantially comply with Idaho\u2019s requirements are  deemed to be compliant with Idaho\u2019s statute. California\u2019s, Oregon\u2019s, and  West Virginia\u2019s statutes note that out-of-state documents executed in  compliance with that state\u2019s laws are valid within their states. For more  information on the states\u2019 statues related to advance care planning, see  appendix IV."], "subsections": []}]}, {"section_title": "Agency and Third Party Comments", "paragraphs": ["We provided a draft of this report to the Department of Health and Human  Services. HHS provided technical comments, which we incorporated as  appropriate. We also provided relevant information from the draft report to  state officials and stakeholders in each of the four selected states in our  review (California, Idaho, Oregon, and West Virginia), and to one national  stakeholder organization (the National POLST Paradigm), and  incorporated their technical comments, as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, the  Administrator of the Centers for Medicare & Medicaid Services, the  National Coordinator for Health Information Technology, the National  Institute on Aging, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Information on the Extent to Which Individuals Have Advance Directives", "paragraphs": ["Officials from the National Institutes of Health\u2019s National Institute on  Aging, the Centers for Disease Control and Prevention\u2019s National Center  for Health Statistics, and representatives of national stakeholder  organizations identified specific surveys and a comprehensive national  study of the prevalence of individuals who have completed advance  directives. Table 1 provides information from selected research on the  prevalence of advance directives. Table 2, below, shows the percentage  of individuals age 65 and older responding to the Health and Retirement  Survey who reported having a living will or power of attorney in 2012,  2014, and 2016."], "subsections": []}, {"section_title": "Appendix II: Types of Information Found on a POLST Form", "paragraphs": ["Physician orders for life-sustaining treatment (POLST) forms are different  in each state, and the order of the sections or the options within a section  may differ. However, according to the National POLST Paradigm,  POLST forms cover the same information. Information about the forms,  including sections on cardiopulmonary resuscitation (CPR), medical  interventions, artificially administered nutrition, and signatures, is provided  below."], "subsections": [{"section_title": "Section A: Cardiopulmonary Resuscitation", "paragraphs": ["This section only applies when the individual is unresponsive, has no  pulse, and is not breathing. This is similar to a do-not-resuscitate order,  but the individual only has a do-not-resuscitate order when they do not  want CPR. The POLST form allows individuals to clearly show they do  want CPR. If this is left blank, the standard protocol is for emergency  personnel to provide CPR if medically indicated. (See fig. 3.)"], "subsections": []}, {"section_title": "Section B: Medical Interventions", "paragraphs": ["This section gives medical orders when CPR is not required, but the  individual still has a medical emergency and cannot communicate. There  are three options and a space for a health care professional to write in  orders specific for the individual. Care is always provided to individuals.  This section is for letting emergency personnel know what treatments the  individual wants to have. (See fig. 4.)  1.  Full treatment. The goal of this option is to provide all treatments  necessary (and medically appropriate) to keep the individual alive. In  a medical emergency, individuals want to go to the hospital and, if  necessary, be put in the intensive care unit and on a breathing  machine.  2.  Limited treatment / select treatment. The goal of this option is to  provide basic medical treatments. These individuals want to go to the  hospital, but do not want to be put in the intensive care unit or on a  breathing machine. They are okay with antibiotics and intravenous  fluids.  3.  Comfort measures only. The goal of this option is to focus on  making the individual as comfortable as possible where they are.  These individuals do not want to go to the hospital. If the individual\u2019s  comfort cannot be taken care of where they are, transfer to the  hospital may be necessary.", "According to the National POLST Paradigm, in many states, if an  individual chooses CPR\u2014or leaves Section A blank\u2014the individual is  required to choose \u201cFull Treatment\u201d in Section B. This is because CPR  usually requires intubation and a breathing machine, which are only  options under \u201cFull Treatment.\u201d If an individual has a medical emergency,  but does not want CPR, this is the section emergency personnel will look  at to see whether the individual wants to go to the hospital or not (for Full  Treatment and Limited Interventions: yes; for Comfort Measures Only:  no). If the individual only has a do-not-resuscitate order, emergency  personnel would take them to the hospital."], "subsections": []}, {"section_title": "Section C: Artificially Administered Nutrition", "paragraphs": ["This section is where orders are given about artificially administered  nutrition (and in some states artificially administered hydration) for when  the individual cannot eat. All POLST forms note that individuals should  always be offered food by mouth, if possible. (See fig. 5.)"], "subsections": []}, {"section_title": "Other Section: Signatures", "paragraphs": ["Health care professional. Since this document is a medical order, a  health care professional is required to sign it in order for it to be valid.  Which health care professionals can sign (e.g., physician, nurse  practitioner) varies by state. The document has a statement saying  that, by signing the form, the health care professional agrees that the  orders on the document match what treatments the individual said  they wanted during a medical emergency based on their current  medical condition.", "Patient or surrogate. According to the National POLST Paradigm,  most states require the patient or the surrogate to sign this form. This  helps to show the patient or surrogate was part of the conversation  and agrees with the orders listed on the form."], "subsections": []}, {"section_title": "Backside of a POLST Form", "paragraphs": ["The backside of the POLST form has directions and information, usually  for health care professionals. Other information it may have includes  information on how to void a POLST form;  contact information for surrogates; and  information on who completed the POLST form."], "subsections": []}]}, {"section_title": "Appendix III: Information on CMS\u2019s Promoting Interoperability Programs Related to Advance Care Planning Documents", "paragraphs": ["This appendix provides information about incentive programs provided by  the Centers for Medicare & Medicaid Services (CMS) to encourage  providers to use electronic health records related to advance care  planning documents. CMS provided incentive payments to eligible  providers who reported certain measures through its Medicare electronic  health records (EHR) Incentive Program (meaningful use program), which  started in 2011. At certain points in the program, measures related to  advance care planning were optional measures. In 2017, eligible  professionals (physicians) began reporting \u201cpromoting interoperability\u201d  measures through the Merit-based Incentive Payment System (MIPS).", "The American Recovery and Reinvestment Act of 2009 established the  Medicare and Medicaid EHR Incentive Program. This program provided  incentive payments for certain eligible providers\u2014certain hospitals and  physicians\u2014that successfully demonstrated meaningful use of certified  EHR technology and met other program requirements established by  CMS. The program was implemented in three stages\u2014measures were  established at each stage to promote the use of EHRs in the delivery of  health care and to ensure that providers capture information in their EHRs  consistently. For example, one measure assessed whether providers  have the technical capability in their EHRs to notify the provider of  potential interactions among the patients\u2019 medications and with patients\u2019  allergies. In all three stages of meaningful use, providers had to report  certain mandatory or core measures, as well as on a set of optional or  menu measures.", "The recording of advance directives was not included as a mandatory  measure for eligible providers during any stage of meaningful use. For  stages 1 and 2 of meaningful use (2011 through 2015) the recording of  advance directives was an optional measure, meaning hospitals could  choose to report it or could choose to report a different measure. This  optional measure for eligible hospitals was a yes/no measure of whether  users could record whether a patient has an advance directive. In  October 2015, CMS released the stage 3 final rule that also modified  elements of stage 2 reporting; this modification eased reporting  requirements and aligned them with other quality reporting programs,  according to agency officials. For both modified stage 2 and stage 3  (2015 through 2017), the original advance directive measures were no  longer included. CMS noted that a goal for stage 3 measures was to  include more advanced EHR functions, and one stage 3 measure  addressed capturing and incorporating a broad range of data into the  EHR, including advance directives.", "One national stakeholder organization recommended a measure to  ensure that if there are any advance care planning documents in the  medical record, that the documents be accessible to all health care  providers. CMS noted that advance care planning directives can be  included in the notes and is addressed by certification requirements  applicable to EHRs. Participants in these CMS programs must use  certified EHR technology, which is technology that has been determined  to conform to certification criteria developed by the Department of Health  and Human Services\u2019 Office of the National Coordinator for Health  Information Technology. The 2015 certified EHR technology criteria\u2014the  most recent edition\u2014includes a criterion that relates to advance care  planning documents.", "The Medicare Access and CHIP Reauthorization Act of 2015 established  the Quality Payment Program, which consolidated components of three  previously used payment incentive programs, including the Medicare  EHR Incentive Program, into MIPS. Under the MIPS program, which  affects clinician payments beginning in 2019, participating clinicians will  generally be assessed in four areas, one of which is the \u201cpromoting  interoperability\u201d performance category that aims to achieve the same  objectives as the original meaningful use program. MIPS-eligible  clinicians report measures and activities to earn a score in the  performance categories. Under the \u201cimprovement activities\u201d performance  category, one optional activity\u2014advance care planning\u2014covers items  such as implementation of practices or processes to develop advance  care planning that includes documenting the advance care plan or living  will, and educating clinicians about advance care planning. Clinicians who  meet the criteria for this activity can report this advance care planning  activity to earn credit for the \u201cimprovement activities\u201d performance  category. Further, the advance care planning activity could earn bonus  points in the \u201cpromoting interoperability\u201d category, if the activity was  conducted using certified EHR technology in 2017 and 2018."], "subsections": []}, {"section_title": "Appendix IV: Selected State Statutes Related to Advance Care Planning Documents", "paragraphs": ["Our four selected states\u2014California, Idaho, Oregon, and West Virginia\u2014 had statutes with similar provisions that affected access to advance care  planning documents; however, the statutes differed in the specificity of  these provisions. This appendix provides information on provisions  related to (1) document execution requirements, such as signature and  witness requirements; (2) the validity of other advance care planning  documents; (3) provider objections to advance care planning directions;  and (4) provider liability protections."], "subsections": [{"section_title": "Document Execution Requirements", "paragraphs": ["Statutes in the four selected states required advance care planning  documents to contain specific elements for the documents to be valid.  The document requirements included the following:", "Signature requirements. All four selected states required individuals  or designated representatives to sign the advance care planning  document for the document to be legally valid. In addition, California  allows individuals to sign the documents with a digital signature.", "Witness requirements. Three of the states (California, Oregon, and  West Virginia) have statutes that require at least one witness to be  present during the completion of advance care planning documents  for that document to be legally valid. These states varied regarding  the relationship the witness could have with the individual and number  of required witnesses. For example, for advance care planning  documents that were signed by witnesses, California required that at  least one of the witnesses not be related to the individual by blood,  marriage, or adoption, nor be entitled to any portion of the individual\u2019s  estate upon the individual\u2019s death under an existing will. In contrast,  according to state officials in Idaho, the state removed witness  requirements from its advance care planning documents in 2012 to  make the documents easier to complete."], "subsections": []}, {"section_title": "Format of Advance Care Planning Documents", "paragraphs": ["All four selected states\u2019 statutes contained model forms that could be  used as a valid advance care planning document. All of the states  contained provisions regarding the acceptance of documents other than  the forms set out in statute. A document other than the model form is  valid if it includes required statutory elements (e.g., signature  requirements). For example, in Idaho, the document must be substantially  like the model form or contain the elements laid out in the statute. In  Oregon, the advance directive statute states that, except as otherwise  provided, Oregon residents\u2019 advance directives must be the same as the  statutory model form to be valid."], "subsections": []}, {"section_title": "Provider Objections to Advance Care Planning Directions", "paragraphs": ["All four selected states\u2019 advance care planning statutes had provisions  related to provider objections\u2014the statutes address situations in which  the provider is unable or unwilling to comply with advance care planning  directions. However, the statutes varied on the grounds for provider  objection, the required steps to be taken, and the extent to which  providers were responsible for taking those steps. For example,  California\u2019s and Idaho\u2019s statutes allow providers to object on ethical and  professional grounds; and California\u2019s, Idaho\u2019s, and West Virginia\u2019s  statutes allow providers to object on reasons of conscience. In addition,  the four states\u2019 statutes specified the steps that providers or health  systems must take after an objection is made. For example, all four  selected states require that specified steps be taken with regard to  transferring the individual to a provider that will honor their wishes.  Further, California and Oregon explicitly require patient or health care  representative notification as soon as provider objections are made."], "subsections": []}, {"section_title": "Provider Liability Protections", "paragraphs": ["All four states also had statutes that addressed the circumstances under  which providers would not be subject to civil or criminal liability, or  professional disciplinary action with regard to administering advance care  planning documents and directions. The states\u2019 statutes varied with  regard to the actions that were covered under these liability provisions.  For example, California\u2019s statute addresses situations in which a provider  or institution either complied with or objected to the directions provided in  advance care planning documents, while Idaho\u2019s, Oregon\u2019s, and West  Virginia\u2019s statutes only addressed situations in which providers and other  parties complied in good faith with the directions."], "subsections": []}]}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Kim Yamane (Assistant Director),  Shirin Hormozi (Analyst-in-Charge), Leia Dickerson, Drew Long, Ian P.  Moloney, Monica Perez-Nelson, and Vikki Porter made key contributions  to this report."], "subsections": []}]}], "fastfact": ["In a medical emergency, do you want CPR, a feeding tube, or other life-sustaining treatment?", "You can plan for what you want (or don't want) using documents such as:", "Advance directives\u2014living wills and health care power of attorney\u2014to document your health care wishes", "Physician orders for life-sustaining treatment to document end-of-life treatment orders if you're seriously ill", "If you have these documents, doctors and emergency techs may not know they exist or be able to find them. And many people don't have them.", "Some states are educating health care providers and patients and maintaining document registries to address these issues."]}
{"id": "GAO-19-105", "url": "https://www.gao.gov/products/GAO-19-105", "title": "Information Security: Agencies Need to Improve Implementation of Federal Approach to Securing Systems and Protecting against Intrusions", "published_date": "2018-12-18T00:00:00", "released_date": "2018-12-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Federal agencies are dependent on information systems to carry out operations. The risks to these systems are increasing as security threats evolve and become more sophisticated. To reduce the risk of a successful cyberattack, agencies can deploy intrusion detection and prevention capabilities on their networks and systems.", "GAO first designated federal information security as a government-wide high-risk area in 1997. In 2015, GAO expanded this area to include protecting the privacy of personally identifiable information. Most recently, in September 2018, GAO updated the area to identify 10 critical actions that the federal government and other entities need to take to address major cybersecurity challenges.", "The federal approach and strategy for securing information systems is grounded in the provisions of the Federal Information Security Modernization Act of 2014 and Executive Order 13800. The act requires agencies to develop, document, and implement an agency-wide program to secure their information systems. The Executive Order, issued in May 2017, directs agencies to use the National Institute of Standards and Technology's cybersecurity framework to manage cybersecurity risks.", "The Federal Cybersecurity Enhancement Act of 2015 contained a provision for GAO to report on the effectiveness of the government's approach and strategy for securing its systems. GAO determined (1) the reported effectiveness of agencies' implementation of the government's approach and strategy; (2) the extent to which DHS and OMB have taken steps to facilitate the use of intrusion detection and prevention capabilities to secure federal systems; and (3) the extent to which agencies reported implementing capabilities to detect and prevent intrusions.", "To address these objectives, GAO analyzed OMB reports related to agencies' information security practices including OMB's annual report to Congress for fiscal year 2017. GAO also analyzed and summarized agency-reported security performance metrics and IG-reported information for the 23 civilian CFO Act agencies. In addition, GAO evaluated plans, reports, and other documents related to DHS intrusion detection and prevention programs, and interviewed OMB, DHS, and agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The 23 civilian agencies covered by the Chief Financial Officers Act of 1990 (CFO Act) have often not effectively implemented the federal government's approach and strategy for securing information systems (see figure below). Until agencies more effectively implement the government's approach and strategy, federal systems will remain at risk. To illustrate:", "As required by Office of Management and Budget (OMB), inspectors general (IGs) evaluated the maturity of their agencies' information security programs using performance measures associated with the five core security functions\u2014identify, protect, detect, respond, and recover. The IGs at 17 of the 23 agencies reported that their agencies' programs were not effectively implemented.", "IGs also evaluated information security controls as part of the annual audit of their agencies' financial statements, identifying material weaknesses or significant deficiencies in internal controls for financial reporting at 17 of the 23 civilian CFO Act agencies.", "Chief information officers (CIOs) for 17 of the 23 agencies reported not meeting all elements of the government's cybersecurity cross-agency priority goal. The goal was intended to improve cybersecurity performance through, among other things, maintaining ongoing awareness of information security, vulnerabilities, and threats; and implementing technologies and processes that reduce malware risk.", "Executive Order 13800 directed OMB, in coordination with the Department of Homeland Security (DHS), to assess and report on the sufficiency and appropriateness of federal agencies' processes for managing cybersecurity risks. Using performance measures for each of the five core security functions, OMB determined that 13 of the 23 agencies were managing overall enterprise risks, while the other 10 agencies were at risk. In assessing agency risk by core security function, OMB identified a few agencies to be at high risk (see figure at the top of next page).", "DHS and OMB facilitated the use of intrusion detection and prevention capabilities to secure federal agency systems, but further efforts remain. For example, in response to prior GAO recommendations, DHS had improved the capabilities of the National Cybersecurity Protection System (NCPS), which is intended to detect and prevent malicious traffic from entering agencies' computer networks. However, the system still had limitations, such as not having the capability to scan encrypted traffic. The department was also in the process of enhancing the capabilities of federal agencies to automate network monitoring for malicious activity through its Continuous Diagnostics and Mitigation (CDM) program. However, the program was running behind schedule and officials at most agencies indicated the need for additional training and guidance. Further, the Federal CIO issued a mandated report assessing agencies' intrusion detection and prevention capabilities, but the report did not address required information, such as the capability of NCPS to detect advanced persistent threats, and a cost/benefit comparison of capabilities to commercial technologies and tools.", "Selected agencies had not consistently implemented capabilities to detect and prevent intrusions into their computer networks. Specifically, the agencies told GAO that they had not fully implemented required actions for protecting email, cloud services, host-based systems, and network traffic from malicious activity. For example, 21 of 23 agencies had not, as of September 2018, sufficiently enhanced email protection through implementation of DHS' directive on enhanced email security. In addition, less than half of the agencies that use cloud services reported monitoring these services. Further, most of the selected 23 agencies had not fully implemented the tools and services available through the first two phases of DHS's CDM program. Until agencies more thoroughly implement capabilities to detect and prevent intrusions, federal systems and the information they process will be vulnerable to malicious threats."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations to DHS, to among other things, coordinate with agencies to identify additional needs for training and guidance. GAO is also making seven recommendations to OMB to, among other things, direct the Federal CIO to update the mandated report with required information, such as detecting advanced persistent threats. DHS concurred with GAO's recommendations. OMB did not indicate whether it concurred with the recommendations or not."]}], "report": [{"section_title": "Letter", "paragraphs": ["Federal agencies are dependent on computerized (cyber) information  systems and electronic data to carry out operations and to process,  maintain, and report essential information. Virtually all federal operations  are supported by computer systems and electronic data, and agencies  would find it difficult, if not impossible, to carry out their missions and  account for their resources without these information assets. Hence, the  security of these systems and data is vital to public confidence and the  nation\u2019s safety, prosperity, and well-being. Further, many of these  systems contain vast amounts of personally identifiable information,  thus, making it imperative to protect the confidentiality, integrity, and  availability of this information and effectively respond to data breaches  and security incidents when they occur.", "The risks to information systems supporting the federal government are  increasing as security threats continue to evolve and become more  sophisticated. These risks include escalating and emerging threats from  around the globe, steady advances in the sophistication of attack  technology, and the emergence of new and more destructive attacks.", "Compounding these risks, computer networks and systems used by  federal agencies are often riddled with security vulnerabilities\u2014both  known and unknown. These systems are often interconnected with other  internal and external systems and networks, including the Internet,  thereby increasing the number of avenues of attack and expanding their  attack surface.", "Our previous reports, and those by federal inspectors general, describe  persistent information security weaknesses that place federal agencies at  risk of disruption or inappropriate disclosure of sensitive information.  Accordingly, GAO made more than 3,000 recommendations to agencies  since 2010 aimed at addressing cybersecurity shortcomings. Although  many of these recommendations have been addressed, approximately  700 had not been implemented as of November 2018.", "The federal approach and strategy for securing information systems is  grounded in the provisions of the Federal Information Security  Modernization Act of 2014 (FISMA) and Executive Order 13800. FISMA  requires agencies to develop, document, and implement an agency-wide  information security program to secure federal information systems, and  assigns oversight responsibilities to the Department of Homeland Security  (DHS) and the Office of Management and Budget (OMB). The executive  order establishes a policy for managing cybersecurity risk and directs  agencies to use the National Institute of Standards and Technology  (NIST) cybersecurity framework to manage these risks.", "GAO first designated federal information security as a government-wide  high-risk area almost 22 years ago in 1997. In 2003, we expanded this  area to include computerized systems supporting the nation\u2019s critical  infrastructure and, in 2015, we further expanded this area to include  protecting the privacy of personally identifiable information. We continued  to identify federal information security as a government-wide high-risk  area in our February 2017 high-risk update report.", "Most recently, in September 2018, we provided an update to the  information security high-risk area by identifying four major cybersecurity  challenges facing the nation and 10 critical actions that the federal  government and other entities needed to take to address them. These  actions included developing and executing a more comprehensive federal  strategy for national cybersecurity and global cyberspace. In this update,  we noted that establishing a comprehensive cybersecurity strategy and  performing effective oversight were a major challenge.", "The Federal Cybersecurity Enhancement Act of 2015, which was  enacted December 18, 2015, included a provision for GAO to report on  the effectiveness of the federal government\u2019s approach and strategy for  securing agency information systems, including intrusion detection and  prevention capabilities. Our specific objectives were to assess: (1) the  reported effectiveness of selected agencies\u2019 implementation of the federal  government\u2019s approach and strategy to securing agency information  systems; (2) the extent to which OMB and DHS have facilitated the use of  intrusion detection and prevention capabilities to secure federal agency information systems; and (3) the extent to which selected agencies  reported implementing capabilities to detect and prevent intrusions.", "To address the first objective, we reviewed annual reports from OMB and  the 23 civilian agencies covered by the Chief Financial Officers Act of  1990 (CFO Act). These reports were related to the implementation of  FISMA for fiscal year 2017, which was the most recent fiscal year for  which the reports were available. In addition, we examined performance  metrics related to the cybersecurity cross-agency priority (CAP) goal for  fiscal years 2016 and 2017 for the 23 agencies. We also reviewed the  financial statement audit reports for the 23 civilian agencies for fiscal  years 2016 and 2017. Because we focused our work on the 23 civilian  agencies, results from these reviews are not generalizable to the entire  federal government.", "For the second objective, we collected and reviewed information security- related documents from OMB and DHS and compared them to  requirements of the Federal Cybersecurity Enhancement Act of 2015. We  also interviewed knowledgeable officials from OMB and DHS regarding  their agencies\u2019 efforts to fulfill requirements of the act.", "In addition, we assessed the extent to which DHS had improved the  capabilities of the National Cybersecurity Protection System (NCPS). To  do this, we assessed the department\u2019s actions to implement nine  recommendations GAO previously made to, among other things, enhance  the system and better define requirements for future capabilities. We  also reviewed documents and interviewed DHS officials to determine  other actions, beyond those related to our recommendations, that the  department had taken to improve the system. Further, we held semi- structured interviews with knowledgeable officials from the 23 civilian  CFO Act agencies to obtain their views on the intrusion detection and  prevention capabilities made available by DHS. The results of these  interviews are not generalizable to all federal agencies.", "To address the third objective, we summarized information from our semi- structured interviews about reported capabilities implemented at the 23  civilian CFO Act agencies to detect and prevent intrusions. We also  analyzed security status reports from DHS. See appendix I for additional  details on our objectives, scope, and methodology.", "We conducted this performance audit from December 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Cybersecurity incidents continue to impact federal entities and the  information they maintain. According to OMB\u2019s 2018 annual FISMA report  to Congress, agencies reported 35,277 information security incidents to  DHS\u2019s U.S. Computer Emergency Readiness Team (US-CERT) in fiscal  year 2017. As shown in figure 1, these incidents involved threat vectors,  such as web-based attacks, phishing attacks, and the loss or theft of  computer equipment, among others.", "These incidents and others like them can pose a serious challenge to  economic, national, and personal privacy and security. The following  examples highlight the impact of such incidents:  In March 2018, the Department of Justice reported that it had indicted  nine Iranians for conducting a massive cybersecurity theft campaign  on behalf of the Islamic Revolutionary Guard Corps. According to the  department, the Iranians allegedly stole more than 31 terabytes of  documents and data from more than 140 American universities, 30  U.S. companies, and 5 federal government agencies, among other  entities.", "In March 2018, a joint alert from DHS and the Federal Bureau of  Investigation stated that, since at least March 2016, Russian  government actors had targeted U.S. government entities and critical  infrastructure sectors, including the energy, nuclear, water, aviation,  and critical manufacturing sectors.", "In June 2015, the Office of Personnel Management reported that an  intrusion into its systems had affected the personnel records of about  4.2 million current and former federal employees. Then, in July 2015,  the agency reported that a separate but related incident had  compromised its systems and the files related to background  investigations for at least 21.5 million individuals."], "subsections": [{"section_title": "Federal Law and Policy Prescribe the Federal Approach and Strategy for Securing Information Systems", "paragraphs": ["The federal approach and strategy for securing information systems is  prescribed by federal law and policy. FISMA sets requirements for  effectively securing federal systems and information. In addition, the  Federal Cybersecurity Enhancement Act of 2015 requires protecting  federal networks through the use of federal intrusion prevention and  detection capabilities. Further, Executive Order 13800, Strengthening the  Cybersecurity of Federal Networks and Critical Infrastructure, directs  agencies to manage cybersecurity risks to the federal enterprise by,  among other things, using the NIST Framework for Improving Critical  Infrastructure Cybersecurity (cybersecurity framework)."], "subsections": [{"section_title": "The Federal Information Security Modernization Act of 2014 Sets Requirements for Securing Federal Systems and Information", "paragraphs": ["FISMA was enacted to improve federal cybersecurity and clarify  government-wide responsibilities. The law is intended to provide for  improved oversight of federal agencies\u2019 information security programs.  Specifically, the law provides a comprehensive framework for ensuring  the effectiveness of information security controls over information  resources that support federal operations and assets. The law is also  intended to ensure the effective oversight of information security risks,  including those throughout civilian, national security, and law enforcement  agencies.", "FISMA assigns OMB and DHS oversight roles in ensuring federal  agencies\u2019 compliance with the law. Among other things, FISMA requires  OMB to develop and oversee the implementation of policies, principles,  standards, and guidelines on information security in federal agencies,  except with regard to national security systems. The law also assigns  OMB the responsibility of requiring agencies to identify and provide  information security protections commensurate with assessments of risk  to their information and information systems. The law further requires  DHS to administer the implementation of agency information security  policies and practices for non-national security information systems, in  consultation with OMB, by developing, issuing, and overseeing  implementation of binding operational directives; monitoring agency  implementation of information security policies and practices; and  convening meetings with senior agency officials to help ensure their  effective implementation of information security policies and practices,  among other things.", "FISMA assigned to NIST the responsibility for developing standards and  guidelines that include minimum information security requirements. To  this end, NIST has issued several publications to provide guidance for  agencies in implementing an information security program. For example,  NIST Special Publication (SP) 800-53 provides guidance to agencies on the selection and implementation of information security and privacy  controls for systems.", "FISMA also assigns to the head of each executive branch agency,  responsibility for providing information security protections commensurate  with the risk and magnitude of harm resulting from unauthorized access,  use, disclosure, disruption, modification, or destruction of information  systems used or operated by an agency or by a contractor of an agency  or other organization on behalf of an agency. The law also delegates to  the agency chief information officer (CIO), or comparable official, the  authority to ensure compliance with FISMA requirements. The CIO is  responsible for designating a senior agency information security officer  whose primary duty is information security.", "In addition, the law requires agencies to develop, document, and  implement an agency-wide information security program to secure federal  information systems. Specifically, these information security programs are  to provide risk-based protections for the information and information  systems that support the operations and assets of the agency. Further,  FISMA requires agencies to comply with DHS binding operational  directives, OMB policies and procedures, and NIST federal information  processing standards.", "FISMA also has reporting requirements for OMB and federal agencies.  Specifically, OMB is to report annually, in consultation with DHS, on the  effectiveness of agency information security policies and practices,  including a summary of major agency information security incidents and  an assessment of agency compliance with NIST standards. Further, the  law requires agencies to report annually to OMB, DHS, certain  congressional committees, and the Comptroller General of the United  States on the adequacy and effectiveness of their information security  policies, procedures, and practices, as well as their compliance with  FISMA."], "subsections": []}, {"section_title": "The Federal Cybersecurity Enhancement Act of 2015 Articulates Requirements for Protecting Federal Networks through the Use of Federal Intrusion Prevention and Detection Capabilities", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015, among other  things, sets forth authority for enhancing federal intrusion prevention and  detection capabilities among federal entities. The act contains several  provisions for DHS and OMB. Specifically, the act requires that DHS  deploy, operate, and maintain capabilities to prevent and detect  cybersecurity risks in network traffic traveling to or from an agency\u2019s  information system. DHS is to make these capabilities available for use  by any agency.", "In addition, the act requires DHS to improve intrusion detection and  prevention capabilities, as appropriate, by regularly deploying new  technologies and modifying existing technologies. The act also requires  OMB and DHS, in consultation with appropriate agencies, to review and  update government-wide policies and programs to ensure appropriate  prioritization and use of network security monitoring tools within agency  networks, and to brief appropriate congressional committees."], "subsections": []}, {"section_title": "The Executive Order on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure Directs Agencies to Use the Cybersecurity Framework for Managing Risks", "paragraphs": ["In May 2017, the President signed Executive Order 13800, which sets  policy for managing cybersecurity risk as an executive branch enterprise.  Specifically, it outlines actions to enhance cybersecurity across federal  agencies and critical infrastructure to improve the nation\u2019s cyber posture  and capabilities against cybersecurity threats. To this end, the order  states that the President will hold executive agency heads accountable  for managing agency-wide cybersecurity risk and directs each executive  agency to use the NIST cybersecurity framework to manage those risks.", "The cybersecurity framework, which provides guidance for cybersecurity  activities, is based on five core security functions:  Identify: Develop an organizational understanding to manage  cybersecurity risk to systems, people, assets, data, and capabilities.", "Protect: Develop and implement appropriate safeguards to ensure  delivery of critical services.", "Detect: Develop and implement appropriate activities to identify the  occurrence of a cybersecurity event.", "Respond: Develop and implement appropriate activities to take action  regarding a detected cybersecurity incident.", "Recover: Develop and implement appropriate activities to maintain  plans for resilience and to restore capabilities or services that were  impaired due to a cybersecurity incident.", "According to NIST, these five functions should be performed concurrently  and continuously to address cybersecurity risk. In addition, when  considered together, they provide a high-level, strategic view of the life  cycle of an organization\u2019s management of cybersecurity risk. Within the  five functions are 23 categories and 108 subcategories that include  controls for achieving the intent of each function. Appendix II provides a  description of the cybersecurity framework categories and subcategories  of controls."], "subsections": []}]}, {"section_title": "GAO Has Reported on Challenges Related to Establishing a Comprehensive Cybersecurity Strategy", "paragraphs": ["In February 2013, we reported that the government had issued a variety  of strategy-related documents that addressed priorities for enhancing  cybersecurity within the federal government, as well as for encouraging  improvements in the cybersecurity of critical infrastructure within the  private sector. However, we noted that no overarching cybersecurity  strategy had been developed that articulated priority actions, assigned  responsibilities for performing them, and set time frames for their  completion. Accordingly, we recommended that the White House  Cybersecurity Coordinator in the Executive Office of the President  develop an overarching federal cybersecurity strategy that included all  key elements of the desirable characteristics of a national strategy.  These characteristics would include, among other things, milestones and  performance measures for major activities to address stated priorities;  cost and resources needed to accomplish stated priorities; and specific  roles and responsibilities of federal organizations related to the strategy\u2019s  stated priorities.", "Since that time, the executive branch has made progress toward outlining  a federal strategy for confronting cyber threats. For example, in  September 2018, we reported that recent executive branch initiatives  that identify cybersecurity priorities for the federal government provide a  good foundation toward establishing a more comprehensive strategy.  Nevertheless, we pointed out that additional efforts were needed to  address all of the desirable characteristics of a national strategy that we  recommended.", "Specifically, recently issued executive branch strategy documents did  not include key elements of desirable characteristics that can enhance  the usefulness of a national strategy as guidance for decision makers in  allocating resources, defining policies, and helping to ensure  accountability. For example, these strategy documents did not generally  include: milestones and performance measures to gauge results;  resources needed to carry out the goals and objectives; and  clearly defined roles and responsibilities for key agencies, such as  DHS, the Department of Defense, and OMB.", "Ultimately, we determined that a more clearly defined, coordinated, and  comprehensive approach to planning and executing an overall strategy  would likely lead to significant progress in furthering strategic goals and  lessening persistent weaknesses.", "Subsequent to our September 2018 report, the President issued the  National Cyber Strategy on September 20, 2018. The strategy builds  upon Executive Order 13800 and describes actions that federal agencies  and the administration are to take to, among other things, secure federal  information systems. For example, the strategy states that the  administration is expected to further enable DHS to secure federal  department and agency networks, to include ensuring that DHS has  appropriate access to agency information systems for cybersecurity  purposes and can take and direct action to safeguard systems. In addition, the strategy states that the administration plans to continue with  its existing efforts underway to transition agencies to shared services and  infrastructure and that DHS is to have appropriate visibility into those  services and infrastructure to improve cybersecurity posture."], "subsections": []}, {"section_title": "DHS Offers Federal Agencies Capabilities Intended to Detect and Prevent Intrusions to Federal Information Systems", "paragraphs": ["DHS\u2019s Network Security Deployment (NSD) division manages  cybersecurity programs that are intended to improve the cybersecurity  posture of the federal government. Among these programs, NCPS  provides a capability to detect and prevent potentially malicious network  traffic from entering agencies\u2019 networks. In addition, the Continuous  Diagnostics and Mitigation (CDM) program provides tools to agencies  intended to identify and resolve cyber vulnerabilities on an ongoing basis."], "subsections": [{"section_title": "DHS\u2019s National Cybersecurity Protection System Is Intended to Detect and Prevent Cyber Intrusions", "paragraphs": ["Operated by DHS\u2019s US-CERT, NCPS is intended to detect and prevent  cyber intrusions into agency networks, analyze network data for trends  and anomalous data, and share information with agencies on cyber  threats and incidents. Deployed in stages, this system, operationally  known as EINSTEIN, has provided increasing capabilities to detect and  prevent potential cyberattacks involving the network traffic entering or  exiting the networks of participating federal agencies. Table 1 provides an  overview of the EINSTEIN deployment stages to date.", "In January 2016, we reported the projected total life-cycle cost of the  program was approximately $5.7 billion through fiscal year 2018. In  addition, according to the Federal CIO, Congress appropriated $468  million in fiscal year 2017 and $402 million in fiscal year 2018 for NCPS.", "In that report, we also noted that NCPS was partially, but not fully,  meeting most of its stated system objectives. Although the system\u2019s  intrusion detection capabilities provided the ability to detect known  patterns of malicious activity on agency networks, it was limited in its  capabilities to identify potential threats using anomaly-based detection.  We also reported that although DHS had developed metrics for  measuring the performance of NCPS, the metrics did not gauge the quality, accuracy, or effectiveness of the system\u2019s intrusion detection and  prevention capabilities.", "The department had also identified needs for future capabilities, but had  not defined requirements for the capability to detect threats entering and  exiting cloud service providers. Further, DHS had not considered specific  vulnerability information for agency information systems in making risk- based decisions about future intrusion prevention capabilities.", "Accordingly, we made nine recommendations to DHS to, among other  things, enhance the NCPS capabilities for meeting its objectives and  better define requirements for future capabilities. DHS agreed with each  of our nine recommendations and indicated that it would take steps to  address them."], "subsections": []}, {"section_title": "DHS\u2019s Continuous Diagnostics and Mitigation Program Provides Agencies with Tools and Services Intended to Secure Agency Systems", "paragraphs": ["DHS\u2019s CDM program provides federal agencies with tools and services  that have the intended capability to automate network monitoring,  correlate and analyze security-related information, and enhance risk- based decision making at agency and government-wide levels. These  tools include sensors that perform automated scans or searches for  known cyber vulnerabilities, the results of which can feed into a  dashboard that, at an agency level, is intended to alert network managers  and enable the agency to allocate resources based on the risk. Summary  data from each participating agency\u2019s dashboard is expected to be  transmitted to the Federal Dashboard where the data can be used to  inform decisions about cybersecurity risks across the federal government.", "There are four phases of CDM implementation:", "Phase 1\u2014involves deploying products to automate hardware and  software asset management, configuration settings, and common  vulnerability management capabilities. According to the Cybersecurity  Strategy and Implementation Plan, DHS purchased phase 1 tools  and integration services for all participating agencies in fiscal year  2015. DHS plans to have all phase 1 tools deployed at participating  agencies by the end of the second quarter of fiscal year 2019.", "Phase 2\u2014intends to address privilege management and  infrastructure integrity by allowing agencies to monitor users on their  networks and to detect whether users are engaging in unauthorized  activity. According to the Cybersecurity Strategy and Implementation  Plan, DHS was to provide agencies with additional phase 2  capabilities throughout fiscal year 2016, with the full suite of CDM  phase 2 capabilities delivered by the end of that fiscal year. However,  according to the OMB FISMA Annual Report to Congress for Fiscal  Year 2017, the CDM program began deploying Phase 2 tools and  sensors during fiscal year 2017. DHS plans to have all phase 2 tools  deployed at participating agencies by the end of fiscal year 2019.", "Phase 3\u2014includes detection capabilities that are intended to assess  agency network activity and identify any anomalies that may indicate  a cybersecurity compromise. Full operating capability for phases 1,  2, and 3 is planned to be achieved by the end of fiscal year 2022.", "Phase 4\u2014intends to provide tools to (1) protect data at rest, in transit,  and in use; (2) prevent loss of data; and (3) manage and mitigate data  breaches. According to CDM program officials, phase 4 has not been  approved and no tools have been selected."], "subsections": []}]}, {"section_title": "NIST Recommends That Federal Agencies Deploy Intrusion Detection and Prevention Capabilities", "paragraphs": ["An approach for protecting systems against cybersecurity compromise is  for federal agencies to build successive layers of defense mechanisms at  strategic points in their information technology infrastructures. This  approach, commonly referred to as defense in depth, entails  implementing a series of protective mechanisms so that if one  mechanism fails to detect and prevent an attack, another will provide a  backup defense. By utilizing defense in depth, federal agencies can  reduce the risk of a successful cyberattack by implementing intrusion  detection and prevention capabilities.", "NIST has developed guidelines for protecting agency information systems  using intrusion detection and prevention capabilities. For example, NIST  SP 800-53 recommends that agencies strategically deploy capabilities  and perform monitoring of their systems to include observation of events  occurring on their network and at the external boundary of their network.  In addition, NIST SP 800-94 provides agencies with guidance in  designing, implementing, configuring, securing, monitoring, and  maintaining such capabilities.", "As part of their defense-in-depth approach and, as recommended by the  NIST guidelines, agencies can deploy the following list of capabilities,  among others, on their networks to detect and prevent an attack:", "Protecting email from intrusions: According to OMB, email, by  way of phishing attacks, remains one of the most common threat  vectors across the government. Methods for protecting email include  encryption, false email alerts, and anti-spear-phishing training.", "Monitoring cloud services: Cloud vendors provide services to  agencies, including Software as a Service, Platform as a Service,  and Infrastructure as a Service. As agencies increasingly rely on  cloud services, monitoring traffic to and from their cloud service  providers helps to ensure that agencies detect malicious traffic.", "Using host-based intrusion prevention: Host-based intrusion  prevention systems provide defense at an individual system or device  level by protecting against malicious activities. Host-based capabilities  include memory-based protection and application whitelisting.", "Monitoring external and internal traffic: Agencies can monitor  external and internal traffic, including: encrypted traffic, traffic between  workstations and servers on the network, and direct connections to  outside entities such as universities. Monitoring traffic helps to ensure  that agencies detect malicious activity.", "Using security information and event management: A security  information and event management capability produces real-time  alerts and notifications of significant security events. Security alerts  and notifications can provide the agency with better situational  awareness regarding possible intrusion activity."], "subsections": []}]}, {"section_title": "Selected Agencies Were Not Effectively Implementing the Federal Government\u2019s Approach and Strategy to Securing Information Systems", "paragraphs": ["According to inspectors general, agency CIOs, and OMB reports on  federal information security practices, many agencies were not effectively  implementing the federal government\u2019s approach and strategy to securing  information systems as of fiscal year 2017. Agencies\u2019 inspectors general  determined that most of the 23 civilian CFO Act agencies did not have  effective agency-wide information security programs. They also reported  that agencies did not have effective information security controls in place,  leading to deficiencies in internal control over financial reporting. In  addition, the CIOs demonstrated that, during fiscal years 2016 and 2017,  most agencies had not met all targets for the cybersecurity CAP goal for  improving cybersecurity performance. Further, based on FISMA metrics  reported for fiscal year 2017, OMB determined that 13 of the 23 agencies  were managing risks to their enterprise, while the other 10 agencies were  at risk of ineffectively identifying, protecting, detecting, responding to, and  if necessary, recovering from cyber intrusions. Figure 2 summarizes  agencies\u2019 efforts to implement the government\u2019s approach and strategy  for securing information systems as of fiscal year 2017.", "Appendix III includes a table that provides an additional overview of the  effectiveness of each agency\u2019s implementation of the government\u2019s  approach and strategy to securing information systems."], "subsections": [{"section_title": "Inspectors General Determined That Most Selected Agencies Did Not Have Effective Information Security Programs or Controls in Place as of Fiscal Year 2017", "paragraphs": ["Inspectors general determined that more than half of the 23 civilian CFO  Act agencies did not have effective agency-wide information security  programs as of fiscal year 2017. Further, in agency financial statement  audit reports for fiscal year 2017, inspectors general reported that,  despite improvements being made in information security practices, most  of the civilian CFO Act agencies continued to exhibit deficiencies in  information security controls. As a result of these deficiencies, inspectors  general reported material weaknesses or significant deficiencies in  internal control over financial reporting."], "subsections": [{"section_title": "Inspectors General Indicate That Few Agencies Had Effective Information Security Programs", "paragraphs": ["FISMA requires inspectors general to determine the effectiveness of their  respective agencies\u2019 information security programs. To do so, FISMA  reporting instructions direct inspectors general to provide a maturity  rating for agency information security policies, procedures, and practices  related to the five core security functions established in the NIST  cybersecurity framework, as well as for the agency-wide information  security program.", "The ratings used to evaluate the effectiveness of agencies\u2019 information  security programs are based on a five-level maturity model, as described  in table 2.", "According to this maturity model, Level 4 (managed and measurable)  represents an effective level of security. Therefore, if an inspector  general rates the agency\u2019s information security program at Level 4 or  Level 5, then that agency is considered to have an effective information  security program.", "For fiscal year 2017, the inspectors general for 6 of the 23 civilian CFO  Act agencies reported that their agencies had an effective agency-wide  information security program. More specifically, for the 5 core security  functions, most inspectors general reported that their agency was at Level  3 (consistently implemented) for the identify, protect, and recover  functions, and at Level 2 (defined) for the detect and respond functions,  as shown in figure 3.", "Inspectors general report on the effectiveness of agencies\u2019 information  security controls as part of the annual audits of the agencies\u2019 financial  statements. The reports resulting from these audits include a description  of information security control deficiencies related to the five major control  categories defined by the Federal Information System Controls Audit  Manual (FISCAM)\u2014access controls, configuration management,  segregation of duties, contingency planning, and security management.  The reports also identify the inspectors general\u2019s designation of  information security as a significant deficiency or material weakness in  internal control over financial reporting systems.", "For fiscal year 2017, inspectors general continued to identify information  security control deficiencies in each of the five major control categories  across the 23 civilian CFO Act agencies. The number of agencies with  deficiencies in the access control and contingency planning information  security control categories decreased between fiscal years 2016 and  2017, according to the inspectors general.", "Nevertheless, the inspectors general reported that agencies continued to  exhibit deficiencies in these two control categories. In addition, the  number of agencies with deficiencies in the security management and  segregation of duties control categories increased from the prior year.  The number of agencies reported as having deficiencies in the  configuration management control category remained the same. Figure 4  shows the number of agencies that reported deficiencies in each of the  information security control categories for fiscal years 2016 and 2017.", "Overall, inspectors general for the 23 civilian CFO Act agencies reported  progress in agencies\u2019 information security practices for fiscal year 2017.  Specifically, during that time, 17 inspectors general designated  information security as either a significant deficiency (11) or material  weakness (6) in internal control over financial reporting systems for their  agencies. This is a decrease from the previous fiscal year when 19  inspectors general designated information security as a significant  deficiency (12) or material weakness (7)."], "subsections": []}]}, {"section_title": "Most Agencies Reported Not Meeting All Targets for the Cybersecurity Cross- Agency Priority Goal in Fiscal Years 2016 and 2017", "paragraphs": ["Reporting instructions contained in the fiscal year 2017 FISMA metrics  directed CIOs to assess their agencies\u2019 progress toward achieving  outcomes that strengthen federal cybersecurity. To do this, CIOs  evaluated their agencies\u2019 performance in reaching targets for specific  FISMA reporting metrics. According to the reporting instructions, certain  metrics were selected to represent the administration\u2019s cybersecurity CAP  goal. These selected metrics allowed CIOs to evaluate their agencies  progress in meeting targets for that goal.", "The cybersecurity CAP goal for fiscal years 2015 through 2017 was to  improve cybersecurity performance by having an ongoing awareness of  information security, vulnerabilities, and threats impacting the operating  information environment; ensuring that only authorized users have access  to resources and information; and implementing technologies and  processes that reduce the risk of malware. The cybersecurity CAP goal  consisted of three priority areas with a total of nine performance  indicators. Each of the nine performance indicators had an expected level  of performance, or target, for implementation. Table 3 shows the three  priority areas and related performance indicators and targets of the  cybersecurity CAP goal for fiscal years 2015 through 2017.", "According to agency CIO assessments for fiscal year 2017, 6 of the 23  agencies met all 9 targets for the cybersecurity CAP goal. More  specifically,", "8 agencies met all four targets for the information security continuous", "16 agencies met the two targets for the identity, credential, and  access management priority area; and", "17 agencies met all three targets for the anti-phishing and malware  defense priority area.", "In addition, CIOs reported that agencies were making progress in meeting  the targets for the nine performance indicators for fiscal years 2016 and  2017, with increases in the number of agencies meeting the targets within  each of the three priority areas.", "However, although the number of agencies that met the targets in  individual priority areas showed a net increase, not all agencies  maintained their status. For example, the CIO for one agency reported  meeting all three targets for the anti-phishing and malware defense  priority area in fiscal year 2016, but reported that the agency only met two  of the three targets in fiscal year 2017. Figure 5 shows the number of  agencies that reported meeting each of the targets within the individual  cybersecurity CAP goal priority areas for fiscal years 2016 and 2017.", "Although the CIOs for only six agencies reported meeting each of the  targets associated with all nine performance indicators for the three  cybersecurity CAP goal priority areas, the CIOs at an additional eight  agencies reported meeting each target for two of the three priority areas.  Specifically, one CIO reported that its agency met each of the targets for the (1)  information security continuous monitoring and (2) identity, credential,  and access management priority areas; another CIO reported that its agency met each of the targets for the  (1) information security continuous monitoring and (2) anti-phishing  and malware defense priority areas; and  the CIOs at six other agencies met each of the targets for the (1)  identity, credential, and access management and (2) anti-phishing  and malware defense priority areas.", "In fiscal year 2018, the President\u2019s Management Agenda replaced the  three cybersecurity-focused CAP goal priority areas with updated  performance indicators, most of which are to be met by 2020:  1.  the manage asset security priority area is similar to the information  security continuous monitoring priority area from the previous CAP  goal and has a focus on understanding the assets and users on  agency networks. In addition to hardware asset and software asset  management, this priority area includes performance indicators for  authorization and mobile device management.  2.  the limit personnel access priority area focuses on issues of access  management. This area includes performance indicators for using  automated access management and managing access for privileged  network and high-impact system users. The privileged network access  management performance indicator is a continuation of the identity,  credential, and access management priority area of the previous  cybersecurity CAP goal. Therefore, agencies are expected to  complete this metric by the end of the fiscal year 2018 FISMA  reporting year.  3.  the protect networks and data priority area, which is similar to the  anti-phishing and malware defense priority area from the previous  cybersecurity CAP goal, has three new performance indicators:  intrusion detection and prevention, exfiltration and enhanced  defenses, and data protection.", "Appendix IV describes the updated cybersecurity-focused CAP priority  areas and performance indicators in more detail."], "subsections": []}, {"section_title": "OMB Determined That 13 of the 23 Civilian CFO Act Agencies Were Managing Cybersecurity Risk", "paragraphs": ["In Executive Order 13800, the President directed OMB, in coordination  with DHS, to assess and report to the executive branch on the sufficiency  and appropriateness of federal agencies\u2019 processes for managing  cybersecurity risks. For these risk management assessments, OMB  leveraged the FISMA metrics reported by agency CIOs and inspectors  general for fiscal year 2017. The metrics addressed domains that  correspond with the five core security functions identified in the  cybersecurity framework. Table 4 lists these domains and their  relationship to the core functions.", "Based on OMB\u2019s evaluation of these domains, agency risk management  processes related to the five core security functions and overall agency  enterprise fell into one of the following three rating categories: managing risk: required cybersecurity policies, procedures, and tools  are in use and the agency actively manages cybersecurity risks; at risk: some essential policies, processes, and tools are in place to  mitigate overall cybersecurity risk, but significant gaps remain; and high risk: key fundamental cybersecurity policies, processes, and  tools are either not in place or not deployed sufficiently.", "For fiscal year 2017, OMB reported that not all agencies were managing  risk. When considering each of the five core security functions, OMB  reported that most of the 23 agencies were at risk or at high risk with  regard to the identify and protect core security functions. Less than half of  the 23 agencies were at risk with regard to the detect, respond, and  recover core security functions. Overall, OMB determined that 13  agencies were managing risk and that the remaining 10 agencies were at  risk of not effectively identifying, protecting, detecting, responding to, and  if necessary, recovering from cyber intrusions. Figure 6 shows OMB\u2019s risk  management assessment ratings by core security function across the 23  agencies for fiscal year 2017."], "subsections": []}]}, {"section_title": "DHS and OMB Facilitated the Use of Intrusion Detection and Prevention Capabilities to Secure Federal Agency Systems, but Further Efforts Remain", "paragraphs": ["DHS and OMB, as required by law and policy, have taken various actions  to facilitate the agencies\u2019 use of intrusion detection and prevention  capabilities to secure federal systems. For example, DHS has developed  an intrusion assessment plan, deployed NCPS to offer intrusion detection  and prevention capabilities to agencies, and is providing tools and  services to agencies to monitor their networks through its CDM program.  However, NCPS still had limitations in detecting certain types of traffic  and agencies were not sending all appropriate traffic through the system.  Further, CDM was behind at meeting planned implementation dates, and  agencies have requested additional training and guidance for these  services. OMB has taken steps to improve upon agencies\u2019 capabilities,  but has not completed a policy and strategy to do so, or fully reported on  its assessment of agencies\u2019 capabilities."], "subsections": [{"section_title": "DHS Has Taken Actions to Facilitate the Use of Intrusion Detection and Prevention Capabilities and to Make Improvements to Those Capabilities", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015 requires DHS, in  coordination with OMB, to develop and implement an intrusion  assessment plan to proactively detect, identify, and remove intruders in  agency information systems on a routine basis. The act also requires that  the plan be updated, as necessary.", "In December 2016, DHS documented its Intrusion Assessment Plan. In  the plan, DHS outlined tools, platforms, resources, and ongoing work that  the department provides, and that are intended to help agencies detect,  identify, and remove intruders on their networks and systems. The  intrusion assessment plan also outlines a defense-in-depth strategy,  which utilizes multiple layers of cybersecurity and deploys multiple  capabilities in combination, to secure agencies\u2019 networks and information  systems. For example, the plan calls for DHS to implement NCPS to  provide a perimeter defense for the networks of federal civilian executive  branch agencies, while the agencies are to deploy their own intrusion  detection and prevention capabilities inside their networks. DHS  submitted its intrusion assessment plan to OMB in January 2017."], "subsections": []}, {"section_title": "DHS Has Worked to Improve NCPS, but Agencies Did Not Route All Traffic through Intrusion Detection and Prevention Capabilities Offered by this System", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015 also requires DHS  to deploy, operate, and maintain a capability to detect cybersecurity risks  and prevent network traffic associated with such risks from transiting to or  from an agency information system. In addition, the act requires that DHS  make regular improvements to intrusion detection and prevention  capabilities by deploying new technologies and modifying existing  technologies. Further, the act requires agencies to use this capability on  all information traveling between their information systems and any  information system other than an agency information system.", "DHS developed NCPS, operationally known as EINSTEIN, to provide the  capabilities to detect and prevent potentially malicious network traffic from  entering agency networks. Consistent with recommendations we made to  DHS in January 2016, DHS has taken actions to improve these  capabilities and has other actions underway. For example, the  department determined that enhancing NCPS\u2019s current intrusion detection  approach to include functionality that would detect deviations from  normal network behavior baselines would be feasible. In addition,  according to DHS officials, the department was operationalizing  functionality intended to identify malicious activity in network traffic  otherwise missed by signature-based methods. determined that developing enhancements to current intrusion  detection capabilities to facilitate the scanning of Internet Protocol  Version 6 (IPv6) traffic would be feasible. According to DHS officials,  the department has developed plans to fully support IPv6 for several  of its NCPS intrusion detection capabilities. Further, the department  has developed implementation schedules and begun roll-out of the  enhancements. updated the tool it uses to manage and deploy intrusion detection  signatures to include a mechanism to clearly link signatures to publicly  available, open-source information. developed clearly defined requirements for detecting threats on  agency internal networks and at cloud service providers to help better  ensure effective support of information security activities. According to  DHS officials, the department was also continuing pilot activities with  cloud service providers to enhance protections of agency assets. developed processes and procedures for using vulnerability  information, such as data from the CDM program as it becomes  available, to help ensure the department is using a risk-based  approach for the selection/development of future NCPS intrusion  prevention capabilities.", "Nevertheless, NCPS continues to have known limitations in its ability to  identify potential threats. For example:", "NCPS does not have the ability to effectively detect intrusions across  multiple types of traffic. Specifically, DHS determined that developing  enhancements to current intrusion detection capabilities to facilitate  the scanning of traffic related to supervisory control and data  acquisition (SCADA) control systems would not be feasible.  However, according to DHS officials, the department is exploring  capabilities that are intended to provide critical, cross-sector, real-time  visibility into critical infrastructure companies that utilize SCADA  systems. In addition, DHS determined that the scanning of encrypted  traffic would not be feasible. Nevertheless, according to its officials,  the department performed research on potential architectural,  technical, and policy mitigation strategies that could provide both the  protection and situational awareness for encrypted traffic. The  department has actions under way to continue its research in this  area.", "DHS does not always explicitly ask agencies for feedback or  confirmation of receipt of NCPS-related notification. While the  department had drafted a standard operating procedure related to its  incident notification process, the policy did not instruct DHS analysts  specifically to include a solicitation of feedback from agencies within  the notification. Further, US-CERT could not provide any information  regarding the timetable for when these procedures would take effect.", "Metrics for NCPS, as provided by DHS, do not provide information  about how well the system is enhancing government information  security or the quality, efficiency and accuracy of supporting actions.  Without the deployment of comprehensive measures, DHS cannot  appropriately articulate the value provided by NCPS. While the  department had taken actions to develop new measures, these  measures did not provide a qualitative or quantitative assessment of  the system\u2019s ability to fulfill the system\u2019s objectives.", "NSD did not provide guidance to agencies on how to securely route  their information to their Internet service providers. Without providing  network routing guidance, NSD has no assurance that the traffic it  sees constitutes all or only a subset of the traffic the customer  agencies intend to send.", "As shown in table 5, as of October 2018, the department had  implemented five of the nine recommendations and was in the process of  implementing the remainder. However, until DHS completes  implementation of the remaining recommendations, the effectiveness of  NCPS\u2019s intrusion detection and prevention capabilities may be hindered.", "In addition, the 23 civilian CFO Act agencies had implemented NCPS  capabilities to varying degrees. In a March 2018 report, OMB reported  that 21 (about 91 percent) of the 23 agencies had implemented the first  two iterations of the NCPS capabilities. In addition, 15 (about 65  percent) of the 23 agencies had implemented all three NCPS capabilities,  as shown in table 6 below.", "However, agencies did not route all network traffic for all information  traveling between their information systems and any information system  other than an agency information system through NCPS sensors. For  example, officials at 13 of 23 agencies stated that not all of their agency  external network traffic flowed through NCPS. To illustrate, officials at  one agency estimated that 20 percent of their external network traffic did  not flow through the system. In addition, 4 of the agencies in our review  previously cited several challenges in routing all of their traffic through  NCPS intrusion detection sensors, including capacity limitations of the  sensors, agreements with external business partners that use direct  network connections, interagency network connections that do not route  through Internet gateways, use of encrypted communications  mechanisms, and backup network circuits that are not used regularly.  NSD officials stated that agencies are responsible for routing their traffic  to the intrusion detection sensors, and DHS does not have a role in that  aspect of NCPS implementation. As a result, potential cyberattacks may  not be detected or prevented for a portion of the external traffic at federal  agencies. As noted above, we previously recommended that DHS work  with agencies to better ensure the complete routing of information to  NCPS sensors."], "subsections": [{"section_title": "DHS Has Taken Steps to Provide Advanced Network Security Tools, but Has Not Met Planned Implementation Dates", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015 requires DHS to  include, in the efforts of the department to continuously diagnose and  mitigate cybersecurity risks, advanced network security tools to improve  the visibility of network activity and to detect and mitigate intrusions and  anomalous activity.", "According to DHS officials, the department is addressing the requirement  to improve the visibility of network activity by including advanced network  security tools as a part of CDM phase 3. In April 2018, we testified that  DHS had previously planned to provide 97 percent of federal agencies  with the services they needed for CDM phase 3 in fiscal year 2017. In  addition, according to OMB\u2019s annual FISMA report for fiscal year 2017,  the CDM program was to continue to incorporate additional capabilities,  including phase 3, in fiscal year 2018.", "However, DHS now expects initial operational capabilities to be in place  for phase 3 in fiscal year 2019. The department has awarded contracts of  approximately $3.26 billion to support its Dynamic and Evolving Federal  Enterprise Network Defense (also known as DEFEND) aspect of the  CDM program, which is to include phase 3. DEFEND also is to provide  coverage for existing agency deployments. According to DHS  documentation, the task orders associated with DEFEND are to be issued  between the second quarter of fiscal year 2018 and the second quarter of  fiscal year 2024."], "subsections": []}, {"section_title": "Agencies Indicated the Need for Additional Training and Guidance Related to NCPS and CDM", "paragraphs": ["FISMA requires that DHS provide operational and technical assistance to  agencies in implementing policies, principles, standards, and guidelines  on information security. Toward this end, DHS has available training and  guidance related to the implementation of the capabilities of NCPS (i.e.,  EINSTEIN) and CDM. Specifically:", "According the DHS officials, the department offers training and  guidance to agencies on EINSTEIN 1 implementation. For example,  DHS established a program in which the Software Engineering  Institute will provide training and mentoring to agencies looking to  enhance their understanding of, and proficiency with, the EINSTEIN 1  capability (e.g., network traffic information). NCPS program officials  stated that agencies can use this service, which is available at no  charge to them, on an unlimited basis as long as the requests relate  to EINSTEIN 1. According to the officials, training and guidance  related to EINSTEIN 2 and EINSTEIN 3 Accelerated is limited  because DHS intentionally restricts the amount of data provided to  agencies.", "According to DHS officials, the department also offers training and  guidance to assist agencies with the implementation and use of  resources associated with the CDM program, including webinars,  guides, and computer-based training. The DEFEND contracts that the  department awarded also include a mechanism for agencies to  procure specialized tailored training, such as on the use of CDM tools.  The department also offers customer advisory forums every other  month that agencies are invited to attend. According to CDM program  officials, the program\u2019s governance, among other topics, is commonly  discussed during these forums. Further, the department provides  agencies with guidance, such as various governance documents, best  practices, and frequently asked questions, through a web portal that is  made available by OMB. In addition, US-CERT offers the CDM  training program, which is to provide CDM implementation resources.", "Nevertheless, most agencies told us that they wanted DHS to provide  more training and guidance as it relates to their implementation of the  capabilities made available by NCPS and CDM. Specifically,", "Officials from 16 of 23 agencies reported that they wanted to receive  additional training on NCPS capabilities. For example, officials at 5  agencies stated that they would like to receive training related to using  network traffic information, understanding alerts, or implementing  capabilities for cloud services. The officials also stated that they  wanted training specific to agency security personnel.", "Officials from 19 of 23 agencies stated that they wanted to receive  additional guidance related to NCPS\u2019s capabilities, but not all of the  19 provided specific details. For example, officials from at least 3  agencies stated that they wanted additional guidance such as, \u201chow  to\u201d documents, descriptions of architecture details, or guidance  documents that explain NCPS\u2019s capabilities so that agencies can  gauge the gap between the security that the system provides and the  security being provided by their own agency\u2019s capabilities.", "Officials from 21 of 23 agencies reported that they wanted to receive  additional training on implementing CDM at their agencies. For  example, officials from 7 agencies suggested that additional training  on the use of the tools would be beneficial.", "Officials from 22 of 23 agencies stated that they wanted additional  guidance as it relates to CDM implementation. For example, officials  from one agency stated that they would like examples of best  practices and successful deployments.", "These requests for additional training and guidance demonstrate that  agencies are either unaware of the available training and guidance, or  that the training may not meet their needs. Until DHS coordinates with  agencies to determine if additional training and guidance are needed,  agencies may not be able to fully realize the benefits of the capabilities  provided by the NCPS and CDM programs."], "subsections": []}]}, {"section_title": "OMB Took Actions to Oversee Agency Implementation of Intrusion Detection and Prevention Capabilities and Report to Congress, but Did Not Fully Complete Required Actions OMB Did Not Submit the Intrusion Assessment Plan to Congress or Fully Describe the Plan\u2019s Implementation in Other Reports", "paragraphs": ["Although OMB took steps to report on agencies\u2019 implementation of  intrusion detection and prevention capabilities, it did not report on all  required actions. For example, the office did not submit DHS\u2019s intrusion  plan to Congress as required by the Federal Cybersecurity Enhancement  Act of 2015. In addition, OMB provided various reports to Congress that  described agencies\u2019 intrusion detection and prevention capabilities, but  the reports did not always include all information required by the act.  Further, OMB developed a draft policy and strategy that were intended to  improve agency capabilities, but it had not finalized these documents.", "The Federal Cybersecurity Enhancement Act of 2015 requires OMB to  submit the intrusion assessment plan developed by DHS to the  appropriate congressional committees no later than 6 months after the  date of enactment of the act. The act also required OMB to submit to  Congress a description of the implementation of the intrusion assessment  plan and the findings of the intrusion assessments conducted pursuant  to the intrusion assessment plan no later than 1 year after the date of  enactment of the act, and annually thereafter.", "Although DHS developed and documented an intrusion assessment plan,  which described a defense-in-depth approach to security, OMB did not  submit the plan to Congress, as called for in the act. Even though DHS  submitted the plan to OMB in January 2017, OMB had not submitted it to  Congress as of October 2018 (21 months after DHS submitted the plan  and 28 months past the due date).", "On the other hand, OMB did submit its own reports to Congress which  generally described elements of the implementation of DHS\u2019s intrusion  assessment plan and intrusion assessment findings. In September 2017,  OMB issued its analysis of agencies\u2019 implementation of intrusion  detection and prevention capabilities, or more specifically, agencies\u2019 implementation of the various versions of NCPS. In addition, the office\u2019s  annual FISMA report, issued most recently in March 2018, generally  covered elements of the intrusion assessment plan. OMB personnel  within the Office of the Federal CIO believed that these two reports, along  with a process the office had initiated to validate incidents across the  government, addressed the requirement for OMB to submit to Congress a  description of the implementation of the intrusion assessment plan and  the findings of the intrusion assessments conducted pursuant to the plan.", "However, the September 2017 and March 2018 reports did not address  other elements described in DHS\u2019s intrusion assessment plan. For  example, OMB did not describe agency roles associated with segmenting  their networks, identifying key servers based on threat and impact,  ensuring all applications are appropriately tracked and configured, and  categorizing and tagging data based on threat and impact. While OMB  has provided important information to congressional stakeholders through  its own reports, until it submits the plan and addresses all elements  described in DHS\u2019s intrusion assessment plan, it will continue to be  remiss in providing timely and sufficiently detailed information regarding  the intrusion assessment plan to congressional stakeholders to support  their oversight responsibilities."], "subsections": [{"section_title": "OMB Submitted Its Analysis of Agencies\u2019 Application of Intrusion Detection and Prevention Capabilities, but Did Not Include the Degree to Which the Capabilities Had Been Applied", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015 also required that  OMB submit an analysis of agencies\u2019 application of the intrusion detection  and prevention capabilities to Congress no later than 18 months after the  date of enactment of the act, and annually thereafter. OMB was to include  a list of federal agencies and the degree to which each agency had  applied the intrusion detection and prevention capabilities in this analysis.", "As discussed previously in this report, OMB issued its analysis of  agencies\u2019 implementation of intrusion detection and prevention  capabilities in September 2017. However, the analysis did not include the  degree to which agencies had applied the intrusion detection and  prevention capabilities. For example, the analysis did not reflect that not  all agencies were using this capability on all information traveling between  their systems and any system other than an agency system, as required by the act. Until OMB includes the degree to which agencies have applied  intrusion detection and prevention capabilities in its analysis, it cannot  provide congressional stakeholders with an accurate portrayal of the  extent to which the capabilities are detecting and preventing potential  intrusions."], "subsections": []}, {"section_title": "The Federal Chief Information Officer Reported on Intrusion Detection and Prevention Capabilities, but Did Not Address All Elements Required by the Federal Cybersecurity Enhancement Act of 2015", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015 further required that  the Federal Chief Information Officer, within OMB, submit a report to  Congress no earlier than 18 months after the date of enactment, but no  later than 2 years after that date, assessing the intrusion detection and  intrusion prevention capabilities that DHS made available to agencies.  The act required that the report address (1) the effectiveness of DHS\u2019s  system used for detecting, disrupting, and preventing cyber-threat actors,  including advanced persistent threats, from accessing agency information  and agency information systems; (2) whether the intrusion detection and  prevention capabilities, continuous diagnostics and mitigation, and other  systems deployed are effective in securing federal information systems;  (3) the costs and benefits of the intrusion detection and prevention  capabilities, including as compared to commercial technologies and tools,  and including the value of classified cyber threat indicators; and (4) the  capability of agencies to protect sensitive cyber threat indicators and  defensive measures if they were shared through unclassified  mechanisms for use in commercial technologies and tools.", "In a report issued in September 2018 (about 8 months past the required  due date), the Federal Chief Information Officer provided Congress an  assessment of intrusion detection and intrusion prevention capabilities  across the federal enterprise. The report pointed out, among other things,  that agencies did not possess or properly deploy capabilities to detect or  prevent intrusions or minimize the impact of intrusions when they occur.  In addition, the report acknowledged the need to improve the  effectiveness of intrusion detection and intrusion prevention capabilities  and stated that OMB would track performance through the CAP goal and  annual FISMA reports.", "However, the report did not address all of the requirements specified in  the act. For example, the report did not address whether DHS\u2019s system  (i.e., NCPS) was effective in detecting advanced persistent threats. In  addition, the report did not include a comparison of the costs and benefits  of the intrusion detection and prevention capabilities versus commercial  technologies and tools, or the value of classified cyber threat indicators.  Further, the report did not address the capability of agencies to protect  sensitive cyber threat indicators and defensive measures. Until OMB  updates the Federal CIO report to address all of the requirements  specified in the act, it will continue to be remiss in providing timely and  sufficiently detailed information, such as that related to costs and benefits,  among other elements in the act, to congressional stakeholders to  support their oversight responsibilities."], "subsections": []}, {"section_title": "OMB Initiated Plans for Improving Agencies\u2019 Implementation of Intrusion Detection and Prevention Capabilities, but Has Not Completed a Policy and Strategy", "paragraphs": ["In addition to OMB\u2019s responsibilities in the Federal Cybersecurity  Enhancement Act of 2015, OMB has initiated plans for further improving  agencies\u2019 intrusion detection and prevention capabilities. In response to a  tasking in Executive Order 13800, the Director of the American  Technology Council coordinated the development of a report to the  President from the Secretary of DHS, the Director of OMB, and the  Administrator of the General Services Administration, regarding the  modernization of federal information technology (IT).", "The report, Report to the President on Federal IT Modernization,  identified actions that OMB should take for (1) prioritizing the  modernization of high-risk, high-value assets and (2) modernizing the  Trusted Internet Connection (TIC) program and NCPS to improve  protections, remove barriers, and enable commercial cloud migration.  For example, OMB was to take the following actions subsequent to the  December 13, 2017 report issuance date:", "Within 60 days: Update a TIC policy to address challenges with  agencies\u2019 perimeter-based architectures, such as the modernization  of NCPS. In addition, introduce a \u201c90 day sprint\u201d during which  approved projects would pilot proposed changes in TIC requirements.", "Within 90 days: Update the annual FISMA and CAP goal metrics to  focus on those critical capabilities that were most commonly lacking  among agencies and focus oversight assessments on high-value  assets.", "Within 120 days: In conjunction with DHS, develop a strategy for  optimally realigning resources across agencies to reduce the risk to  high-value assets and respond to cybersecurity incidents for those  assets.", "OMB has taken steps toward implementing several, but not all, of these  actions. For example, it introduced a \u201c90 day sprint\u201d and, according to  knowledgeable OMB staff, the outcomes of this action are directly  informing changes in TIC requirements. In addition, OMB updated the  annual FISMA and CAP goal metrics by including several metrics that  focus on high-value assets. The updated FISMA and CAP goal metrics  went into effect in April 2018.", "However, while OMB had taken steps toward updating the TIC policy and  developing a strategy for optimally realigning resources, the policy and  strategy were in draft and had not yet been finalized as of October 2018.  The agency did not specify a time frame for finalizing the policy and  strategy. Until OMB finalizes the TIC policy and the strategy for optimally  realigning resources, the enhancements offered through the policy and  strategy are unlikely to be realized."], "subsections": []}]}]}, {"section_title": "Selected Agencies Had Not Consistently Implemented Capabilities to Detect and Prevent Intrusions", "paragraphs": ["FISMA requires agencies to provide information security protections to  prevent unauthorized access to their systems and information. Officials  from the 23 selected agencies reported to us that they generally took  steps to meet this requirement by augmenting the tools and services  provided by DHS with their own intrusion detection and prevention  capabilities. However, agencies did not consistently implement five key  capabilities specified by DHS and NIST guidance. In addition, most of the  agencies did not fully implement any of the phases of DHS\u2019s CDM  program that is intended to improve their capabilities to detect and  prevent intrusions."], "subsections": [{"section_title": "Few Agencies Had Fully Implemented Required Email Protections", "paragraphs": ["Binding Operational Directive (BOD) 18-01 instructs agencies to enhance  email security. These enhancements include enabling encrypted email  transmission, ensuring that receiving mail servers know what actions the  agency would like taken when an email falsely claims to have originated  from the agency, and removing certain insecure protocols, among  others. The final deadline for implementing all BOD 18-01 requirements  was October 16, 2018. Additionally, NIST SP 800-53 Revision 4  recommends that security awareness training include training on how to  recognize and prevent spear-phishing attempts.", "As of September 2018, only 2 of the 23 agencies reported implementing  all of the email requirements. For the remaining 21 agencies:", "9 agencies stated that their agency had plans to implement all  enhancements by the October 2018 deadline,", "1 agency was uncertain whether it would meet the deadline, and", "11 stated they would not be able to meet the deadline.", "By contrast, the majority of agencies (22 of 23) reported that they had  trained staff on spear-phishing exercises, as recommended by NIST SP  800-53 Revision 4. Officials at the remaining agency told us that the  agency planned to have spear-phishing exercises in fiscal year 2019.  Such training should help ensure that phishing will be a less effective  attack vector against the majority of agencies. While agencies benefit  from secure protocols and spear-phishing training, implementing the  remaining BOD 18-01 email requirements would provide additional  protection to agency information systems."], "subsections": []}, {"section_title": "Agencies Informed GAO That They Often Had Not Implemented Four Key Capabilities", "paragraphs": ["NIST recommends that federal agencies deploy intrusion detection and  prevention capabilities. These capabilities include monitoring cloud  services, using host-based intrusion prevention systems, monitoring  external and internal network traffic, and using a security information and  event management (SIEM) system. However, in our semi-structured  interviews of the 23 agencies, officials told us that they often had not  implemented many of these capabilities. Such inconsistent  implementation exposes federal systems and the information they contain  to additional risk. As part of their continuing oversight efforts, OMB and  DHS can use the information below to work with agencies to identify  obstacles and impediments affecting the agencies\u2019 abilities to implement  these capabilities."], "subsections": [{"section_title": "Less Than Half of the Selected Agencies That Used Cloud Services Monitored Their Cloud-Related Traffic", "paragraphs": ["NIST SP 800-53 Revision 4 states that agencies should monitor and  control communications at the external boundary of the network.  However, as of June 2018, fewer than half of the agencies that used  cloud computing services were monitoring cloud traffic. Specifically:", "10 of 22 agencies that used Infrastructure as a Service were  monitoring inbound and outbound Infrastructure as a Service traffic,", "7 of 21 agencies that used Platform as a Service were monitoring  inbound and outbound Platform as a Service traffic, and", "10 of 23 agencies that used Software as a Service were monitoring  inbound and outbound Software as a Service traffic.", "Without monitoring traffic to and from cloud service providers, agencies  risk a greater chance of malicious cloud activity detrimentally affecting  agency information security."], "subsections": []}, {"section_title": "Several Selected Agencies Had Not Fully Deployed Host- Based Capabilities", "paragraphs": ["NIST SP 800-53 Revision 4 states that agency internal monitoring may be  achieved by utilizing intrusion prevention capabilities. These capabilities  include using host-based intrusion prevention systems to provide defense  at an individual system or device level by protecting against malicious  activities. Host-based capabilities include memory-based protection and  application whitelisting.", "As of June 2018, officials at the 23 agencies reported the following to us:", "16 agencies used host-based intrusion prevention capabilities,", "15 agencies used memory-based protection, and", "8 agencies used host-based application whitelisting.", "Until host-based intrusion protections are fully deployed, agencies will be  at greater risk of malicious activity adversely affecting agency operations."], "subsections": []}, {"section_title": "Not All Selected Agencies Monitored External and Internal Traffic", "paragraphs": ["NIST SP 800-53 Revision 4 also states that agencies should monitor and  control communications at the external boundary of the network and at  key internal boundaries (e.g., network traffic). NIST guidance also stated  that an agency should deploy monitoring devices strategically within the  network to detect essential information.", "However, the agencies in our review did not always monitor external and  internal traffic. For example, of the 23 agencies:", "5 reported that they were not monitoring inbound or outbound direct  connections to outside entities.", "11 reported that they were not persistently monitoring inbound  encrypted traffic.", "8 reported that they were not persistently monitoring outbound  encrypted traffic.", "In addition, 13 agencies reported they were not using a network-based  session capture solution. Of the 10 agencies that reported using this  solution, officials from 2 agencies stated that they were not capturing  workstation-to-workstation connections. Without thorough monitoring of  external and internal traffic, agencies will have less assurance that they  are aware of compromised or potentially compromised traffic within their  network."], "subsections": []}, {"section_title": "Most Agencies Reported Using a Security Information and Event Management Capability, but Did Not Always Use this Capability to Analyze Potential Threats", "paragraphs": ["NIST SP 800-53 Revision 4 states that agencies should establish  enhanced monitoring capabilities. Such capabilities should include  automated mechanisms that collect and analyze incident data for  increased threat and situational awareness. According to NIST, a security  information and event management (SIEM) system analyzes data from  different sources and identifies and prioritizes significant events. Sources  of data used by SIEM systems include logs from database systems,  network devices, security systems, web applications, and workstation  operating systems.", "Of the 23 agencies that we reviewed, 21 reported using a SIEM  capability. Over half of the agencies employing a SIEM used one or more  of their logs to match against known vulnerabilities and advanced  persistent threats, as well as to create real-time alerts. For example, of  the 21 agencies:", "14 agencies reported collecting database logs, but only 7 agencies  reported using the logs to match against known vulnerabilities and  persistent threats and to create real-time alerts;", "20 agencies reported collecting network logs, but only 13 agencies  reported using them to match against known vulnerabilities and  persistent threats and to create real-time alerts;", "21 agencies reported collecting security logs, but only 13 reported  using them to match against known vulnerabilities and persistent  threats and to create real-time alerts;", "15 agencies reported collecting web application logs, but only 9  agencies reported using them to match against known vulnerabilities  and persistent threats and to create real-time alerts; and", "13 agencies reported collecting workstation logs, but only 8 agencies  reported using them to match against known vulnerabilities and  persistent threats and to create real-time alerts.", "Only 5 agencies collected all 5 types of logs and used them to match  against known vulnerabilities and persistent threats and to create real- time alerts.", "By not fully using SIEM capabilities, agencies will have less assurance  that relevant personnel will be aware of possible weaknesses or  intrusions."], "subsections": []}]}, {"section_title": "Agencies Are in the Process of Implementing DHS\u2019 CDM Program, but Most Agencies Have Not Fully Implemented Any of the Program Phases", "paragraphs": ["To further enhance their intrusion detection and prevention capabilities,  the 23 civilian CFO Act agencies were in the process of implementing  DHS\u2019s CDM program. As previously discussed, Phase 1 of the program  involves deploying products to automate hardware and software asset  management, configuration settings, and common vulnerability  management capabilities. Phase 2 intends to address privilege  management and infrastructure integrity by allowing agencies to monitor  users on their networks and to detect whether users are engaging in  unauthorized activity. Phase 3 is intended to assess agency network  activity and identify any anomalies that may indicate a cybersecurity  compromise.", "As of June 2018, most agencies had not fully implemented any of the  three phases. As shown in Figure 7, 15 agencies had partially  implemented phase 1, 21 had partially or not yet begun to implement  phase 2, and none of the agencies had fully implemented phase 3.", "Agencies\u2019 implementation status has been affected, at least in part, due  to delays in DHS\u2019s deployment of the program phases. As a result,  federal systems will remain at risk until the program is fully deployed."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Many agencies have not effectively implemented the federal approach  and strategy for securing information systems. For example, the  inspectors general for 17 of the 23 selected agencies reported that their  agencies had not effectively implemented their information security  programs and had significant information security deficiencies associated  with internal control over financial reporting. In addition, CIOs for 17  agencies reported not meeting all nine targets for the cybersecurity cross- agency priority goal. Further, OMB determined that that only 13 of the 23  agencies were managing risks to their overall enterprise, while the other  10 agencies were at risk. Until agencies more effectively implement the  government\u2019s approach and strategy, federal systems will remain at risk.", "DHS and OMB have initiatives underway that are intended to further  improve agencies\u2019 security posture. However, although DHS had  provided training and guidance for NCPS and CDM, agencies expressed  the need for more. In addition, OMB had also not finalized its policy and  strategy aimed at addressing challenges with perimeter security and  protecting high value assets, respectively. OMB had also not provided  useful information to Congress, such as a description of agencies\u2019  implementation of DHS\u2019s intrusion assessment plan, the degree to which  agencies are using NCPS, a complete analysis of agencies\u2019  implementation of DHS\u2019s intrusion assessment plan, or the costs and  benefits of using commercial tools.", "Although agencies\u2019 officials reported various efforts underway to enhance  their agency\u2019s intrusion detection and prevention capabilities,  implementation efforts across the federal government were not  consistent. OMB and DHS can use the information provided in this report  to work with agencies to identify obstacles and impediments affecting the  agencies\u2019 abilities to implement these capabilities."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of nine recommendations, including two to DHS  and seven to OMB. Specifically:", "The Secretary of DHS should direct the Network Security Deployment  division to coordinate further with federal agencies to identify training  and guidance needs for implementing NCPS and CDM.  (Recommendation 1)", "The Secretary of DHS should direct the appropriate staff to work with  OMB to follow up with agencies to identify obstacles and impediments  affecting their abilities to implement intrusion detection and prevention  capabilities. (Recommendation 2)", "The Director of OMB should submit the intrusion assessment plan to  the appropriate congressional committees. (Recommendation 3)", "The Director of OMB should report on implementation of the defense- in-depth strategy described in the intrusion assessment plan,  including all elements described in the plan. (Recommendation 4)", "The Director of OMB should update the analysis of agencies\u2019 intrusion  detection and prevention capabilities to include the degree to which  agencies are using NCPS. (Recommendation 5)", "The Director of OMB should direct the Federal CIO to update her  report to Congress to include required information, such as detecting  advanced persistent threats, a comparison of the costs and benefits of  the capabilities versus commercial technologies and tools, and the  capability of agencies to protect sensitive cyber threat indicators and  defense measures. (Recommendation 6)", "The Director of OMB should establish a time frame for finalizing the  Trusted Internet Connections policy intended to address challenges  with agencies\u2019 perimeter-based architectures and issue it when  finalized. (Recommendation 7)", "The Director of OMB should establish a time frame for finalizing the  strategy for realigning resources across agencies to protect high- value assets and issue it when finalized. (Recommendation 8)", "The Director of OMB should direct the Federal CIO to work with DHS  to follow-up with agencies to identify obstacles and impediments  affecting their abilities to implement intrusion detection and prevention  capabilities. (Recommendation 9)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to OMB and the 23 civilian CFO Act  agencies, including DHS, covered by our review. In response, OMB  provided comments via email, and DHS and three other agencies (the  Department of Commerce, Social Security Administration, and U.S.  Agency for International Development) provided written comments, which  are reprinted in appendices V through VIII, respectively. The 19 remaining  agencies (the Departments of Agriculture, Education, Energy, Health and  Human Services, Housing and Urban Development, the Interior, Justice,  Labor, State, Transportation, the Treasury, and Veterans Affairs; as well  as the Environmental Protection Agency, General Services  Administration, National Aeronautics and Space Administration, National  Science Foundation, Nuclear Regulatory Commission, Office of  Personnel Management, and Small Business Administration) stated via  email that they had no comments.", "In its comments, which the OMB liaison provided to GAO via email on  December 7, 2018, OMB did not state whether it agreed or disagreed with  the seven recommendations that we made to it. Rather, according to the  liaison, OMB agreed with the facts in our draft report, but found that the  report did not reflect the agency\u2019s rationale for not submitting the DHS  intrusion assessment plan to Congress and a report on the  implementation of the plan, as required by the Federal Cybersecurity  Enhancement Act of 2015. The liaison stated that OMB is working closely  with DHS to provide strategic direction in assessing gaps in, and  modernizing, the manner in which intrusion detection and prevention  capabilities are delivered to the federal government. Further, in a  subsequent email on December 10, 2018, OMB said it believes the  Federal CIO\u2019s September 2018 report to Congress, along with data  provided in OMB\u2019s fiscal year 2017 FISMA report to Congress, achieves  the outcomes sought by the Federal Cybersecurity Enhancement Act of  2015 and demonstrates OMB's continuous engagement with DHS across  the evolution of the intrusion detection and prevention program.", "As stated in our report, we acknowledge that OMB has provided  important information to congressional stakeholders through its reports.  However, OMB\u2019s reports did not cover all outcomes described in the act.  For example, as we pointed out, these reports did not fully address  implementation of the defense-in-depth strategy described in DHS\u2019s  intrusion assessment plan. In addition, although OMB reported on several  elements required by the Federal Cybersecurity Enhancement Act of  2015, it did not report on all of the required elements. For example, the  reports did not address whether DHS\u2019s NCPS was effective in detecting  advanced persistent threats. The reports also did not include a  comparison of the costs and benefits of the intrusion detection and  prevention capabilities versus commercial technologies and tools, or the  value of classified cyber threat indicators. Further, the reports did not  address the capability of agencies to protect sensitive cyber threat  indicators and defensive measures. Accordingly, we maintain that our  recommendations for OMB to report on required elements in the Federal  Cybersecurity Enhancement Act of 2015 are warranted.", "In addition, OMB suggested that we revise our recommendations to the  agency to include a shared responsibility with DHS to help drive desired  outcomes. However, six of the seven recommendations we are making to  OMB are related to specific OMB responsibilities cited in either the  Federal Cybersecurity Enhancement Act of 2015 or the Report to the  President on Federal IT Modernization. As such, we believe the  recommendations are appropriately addressed to OMB. Furthermore, our  recommendations do not prevent OMB from working with DHS to  implement them. Our seventh recommendation to OMB\u2014to work with  DHS to follow up with agencies to identify obstacles and impediments  affecting their abilities to implement intrusion detection and prevention  capabilities\u2014includes a shared responsibility with DHS. OMB also  provided technical comments, which we incorporated into the report, as  appropriate.", "Subsequent to providing initial comments on our draft report, OMB issued  a memorandum intended to provide a strategy for realigning resources  across agencies to protect high-value assets. This action addresses our  recommendation 8, which called for the Director of OMB to establish a  time frame for finalizing the strategy for realigning resources across  agencies to protect high-value assets, and to issue the strategy when  finalized.", "In its comments, DHS stated that it concurred with the two  recommendations we made to the department. DHS stated that it expects  to implement the recommendations in 2019.", "The Department of Commerce commented that the report was  reasonable and that the department agreed with the findings and  recommendations.", "In its comments, the Social Security Administration stated that protecting  its networks and information is a critical priority. According to the agency,  it continued to make improvements in fiscal year 2018, such as  improvements and progress in securing applications, leveraging the  cloud, managing its assets and vulnerabilities, strengthening its network  and incident response capabilities, improving its security training, and  enhancing the overall effectiveness of its cybersecurity program.", "Finally, the U.S. Agency for International Development commented that  its inspector general had improved the agency\u2019s capability maturity  ratings for core security functions in fiscal year 2018. The agency also  pointed out that it was the only selected agency in which fiscal year 2017  indicators of effectiveness in implementing the federal approach and  strategy for securing information systems were all positive (as noted in  Appendix III).", "We are sending copies of this report to appropriate congressional  committees, the Director of OMB, the heads of the 23 civilian CFO Act  agencies and their inspectors general, and other interested congressional  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  Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix IX."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Federal Cybersecurity Enhancement Act of 2015, which was enacted  December 18, 2015, included a provision for GAO to report on the  effectiveness of the federal government\u2019s approach and strategy for  securing agency information systems, including intrusion detection and  prevention capabilities. The objectives of our review were to assess: (1)  the reported effectiveness of selected agencies\u2019 implementation of the  federal government\u2019s approach and strategy to securing agency  information systems; (2) the extent to which the Office of Management  and Budget (OMB) and the Department of Homeland Security (DHS)  have facilitated the use of intrusion detection and prevention capabilities  to secure federal agency information systems; and (3) the extent to which  selected agencies reported implementing intrusion detection and  prevention capabilities.", "Selected agencies for our review were the 23 civilian agencies covered  by the Chief Financial Officers Act of 1990 (CFO Act). We did not include  the Department of Defense because the Federal Cybersecurity  Enhancement Act of 2015 only pertains to civilian agencies. Because we  focused our work on the 23 civilian agencies, results from these reviews  are not generalizable to the entire federal government.", "To assess the reported effectiveness of agencies\u2019 implementation of the  federal government\u2019s approach and strategy to securing agency  information systems, we described the federal government\u2019s approach and strategy by  summarizing the Federal Information Security Modernization Act of  2014 (FISMA), Executive Order 13800, Strengthening the  Cybersecurity of Federal Networks and Critical Infrastructure, and the  National Institute of Standards and Technology\u2019s (NIST) Framework  for Improving Critical Infrastructure Cybersecurity (cybersecurity  framework). assessed the reported effectiveness of agencies\u2019 implementation of  the approach and strategy by reviewing annual reports from OMB and  the inspectors general (IG) of the 23 civilian CFO Act agencies  regarding the reported implementation of FISMA for fiscal year 2017.  We described the IG reported maturity levels, including the Office of  Inspectors General FISMA Reporting Metrics definition of  \u201ceffectiveness.\u201d These maturity levels are based on security domains  aligned with the five core functions in NIST\u2019s cybersecurity framework.  We also summarized IG reported conclusions on the effectiveness of  agencies\u2019 information security programs for fiscal year 2017.  reviewed the fiscal year 2016 and 2017 financial statement audit  reports for each of the 23 civilian CFO Act agencies to identify the  extent to which any significant deficiencies or material weaknesses  related to information security over financial systems had been  reported and to identify information security control weaknesses  reported by the IGs.  identified whether agencies had met the targets for the cybersecurity- focused cross-agency priority goal for fiscal years 2016 and 2017 by  examining agency-reported performance metrics for fiscal years 2016  and 2017. evaluated OMB\u2019s agency risk management assessment ratings to  make a determination on how agencies were managing risk to their  enterprise. These conclusions were based on FISMA metrics, and are  aligned with the five core security functions defined in the  cybersecurity framework.  interviewed knowledgeable OMB officials and staff to obtain their  views on the reported effectiveness of the federal government\u2019s  approach and strategy to securing agency information systems.", "To assess the extent to which OMB and DHS have facilitated the use of  intrusion detection and prevention capabilities to secure federal agency  information systems, we determined the extent OMB and DHS fulfilled their requirements  described in the Federal Cybersecurity Enhancement Act of 2015 by  collecting and reviewing artifacts from OMB and DHS and comparing  them to the provisions outlined in the act. We also interviewed  knowledgeable officials from OMB and DHS regarding their efforts to  fulfill their requirements described in the act. determined the effectiveness of corrective actions taken by DHS to  address nine previously reported recommendations we made in our  report related to NCPS. Specifically, we collected appropriate  artifacts and assessed the artifacts against the criteria used in that  report, and determined the extent to which the actions taken by DHS  met the intent of the recommendations, and we met with DHS staff  responsible for the remediation activities and obtained their views of  the status of actions taken to address the recommendations. held semi-structured interviews with knowledgeable officials from the  23 civilian CFO Act agencies. During these interviews, we obtained  the agency\u2019s views on whether they need more training and guidance  from DHS for NCPS and CDM. We also interviewed knowledgeable  officials and staff at DHS to obtain their views on how DHS had  improved the intrusion detection and prevention capabilities it  provides to federal agencies. We also interviewed DHS officials to  obtain their views on the training and guidance that the department  makes available to agencies.", "To assess the extent to which selected agencies reported implementing  intrusion detection and prevention capabilities, we described the reported  intrusion detection and prevention capabilities implemented by the 23  civilian CFO Act civilian agencies by  summarizing implemented intrusion detection and prevention  capability information obtained from the semi-structured interviews at  the 23 civilian CFO Act agencies described above;  identifying the extent to which the 23 civilian CFO Act agencies were  in compliance with DHS\u2019s binding operating directive (BOD) pertaining  to enhanced email and web security (BOD 18-01) by collecting and  summarizing Cyber Hygiene Trustworthy Email reports from the 23  agencies and determining the extent to which the agencies had taken  required actions to implement the BOD.", "During the semi-structured interviews, we also obtained the agency\u2019s  views and experiences with other programs and services provided by  DHS, including the extent to which agencies had implemented the tools  offered by the department\u2019s Continuous Diagnostics and Mitigation (CDM)  program.", "To determine the reliability of submitted data and obtain clarification about  agencies\u2019 processes to ensure the accuracy and completeness of data  used in their respective FISMA reports, we analyzed documents and  conducted interviews with officials from 6 of the 23 civilian CFO Act  agencies. To select these six agencies, we sorted agency fiscal year  2017 information technology budget data from highest to lowest amount  and then divided the data into three tiers: high spending, medium  spending, and low spending. We then randomly selected two agencies  from each of the three tiers. The selected agencies were the Departments  of Agriculture, Commerce, Housing and Urban Development,  Transportation, and Veterans Affairs, and the U.S. Agency for  International Development. While not generalizable to all agencies, the  information we collected and analyzed about the six selected agencies  provided insights into various processes in place to produce FISMA  reports. Based on this assessment, we determined that the data were  sufficiently reliable for the purposes of our reporting objectives.", "We conducted this performance audit from December 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Cybersecurity Framework", "paragraphs": ["The National Institute of Standards and Technology established the  cybersecurity framework to provide guidance for cybersecurity activities  within the private sector and government agencies at all levels. The  cybersecurity framework consists of five core functions: identify, protect,  detect, respond, and recover. Within the five functions are 23 categories  and 108 subcategories that define discrete outcomes for each function,  as described in table 7."], "subsections": []}, {"section_title": "Appendix III: Reported Effectiveness of Agencies\u2019 Implementation of the Federal Approach for Securing Information Systems", "paragraphs": ["The federal approach and strategy for securing information systems is  prescribed by federal law and policy, including the Federal Information  Security Modernization Act of 2014 and the presidential executive order  on Strengthening the Cybersecurity of Federal Networks and Critical  Infrastructure. Accordingly, federal reports describing agency  implementation of this law and policy, and reports of related agency  information security activities, indicated the effectiveness of agencies\u2019  efforts to implement the federal approach and strategy. Table 8  summarizes the reported effectiveness of the 23 civilian Chief Financial  Officers Act of 1990 agencies to implement the government\u2019s approach  and strategy to securing information systems."], "subsections": []}, {"section_title": "Appendix IV: Updated Cybersecurity- Focused Cross-Agency Priority Goal", "paragraphs": ["The President\u2019s Management Agenda identifies cross-agency priority  (CAP) goals to target areas where multiple agencies must collaborate to  effect change. The agenda issued in fiscal year 2018 established an  information technology modernization goal that includes a cybersecurity  objective with specific priority areas and performance indicators. This  cybersecurity-focused goal is intended to drive progress in the  government\u2019s efforts to modernize information technology to increase  productivity and security. Figure 8 describes the 3 updated cybersecurity- focused cross-agency priority areas and 10 performance indicators. Each  federal agency is expected to meet one of the 10 new performance  indicators by the end of fiscal year 2018 and the remainder by 2020."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Jeffrey Knott (assistant  director), Daniel Swartz (analyst-in-charge), David Blanding, Chris  Businsky, Kristi Dorsey, Di\u2019Mond Spencer, Priscilla Smith, and Edward  Varty made key contributions to this report. West Coile, Franklin Jackson,  and Chris Warweg also provided assistance."], "subsections": []}]}], "fastfact": ["Federal agencies reported 35,277 cybersecurity incidents for their IT systems in FY 2017.", "While agencies have gotten better at preventing and detecting intrusions into their systems, they are still vulnerable to attacks such as \"phishing\"\u2014emails designed to trick staff into clicking malicious links. Moreover, many agencies have not yet fully implemented effective security programs or practices, leaving them vulnerable to future attacks.", "We recommended that the Department of Homeland Security and the Office of Management and Budget help agencies improve their intrusion detection and prevention capabilities."]}
{"id": "GAO-19-15", "url": "https://www.gao.gov/products/GAO-19-15", "title": "Veterans' Disability Benefits: Better Measures Needed to Assess Regional Office Performance in Processing Claims", "published_date": "2018-10-03T00:00:00", "released_date": "2018-10-03T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Each year, VBA processes more than 1 million disability compensation claims and provides about $65 billion in benefits to veterans. The Jeff Miller and Richard Blumenthal Veterans Health Care and Benefits Improvement Act of 2016 includes a provision for GAO to review VBA's regional offices to help VBA achieve more consistent performance in processing disability compensation claims.", "This report examines (1) how VBA manages workload and performance for the disability compensation claims process, (2) how well VBA's timeliness and accuracy measures capture its regional offices' performance in processing these claims, and (3) how well selected regional offices communicate with VSOs and congressional caseworkers about these claims. GAO reviewed VBA policies and procedures; visited four regional offices selected to represent a range of performance scores and claims processing volume in fiscal year 2017; and interviewed VBA headquarters officials and management and staff from the selected regional offices. GAO also interviewed VSOs and congressional caseworkers\u2014selected for House, Senate, and bipartisan representation\u2014to learn more about their communication with VBA."]}, {"section_title": "What GAO Found", "paragraphs": ["In 2016, the Veterans Benefits Administration (VBA) centralized distribution of the disability compensation claims workload through the National Work Queue, which prioritizes and distributes claims to regional offices based on their capacity; however, there are gaps in VBA's guidance for processing claims with errors. Under the National Work Queue, multiple regional offices can work on a single claim instead of the claim remaining at one office for the duration of processing (see figure). GAO found gaps in guidance about whether a claims processor should fix an error made by another regional office, or return the claim to that office to be corrected. The former could result in missed opportunities to train staff who made the error, while the latter could result in processing delays.", "VBA primarily uses timeliness and accuracy measures to assess its regional offices' performance in processing disability compensation claims, but these measures do not adequately capture performance. The timeliness measure can be skewed because it is a snapshot of how long claims have been pending at an office on the last day of the month, and does not capture performance over a period of time. The accuracy measure is attributed to the office that finishes the claim, even though 88 percent of claims completed in fiscal year 2017 were processed at more than one office. VBA officials acknowledged that these measures are limited and said the agency is exploring alternatives, but VBA has no specific plan or time frame for determining and implementing new measures. Without measures to more accurately assess regional office performance, VBA may be limited in its ability to make efficient and effective decisions.", "Veterans service organizations (VSO) and staff working for Members of Congress (congressional caseworkers) interviewed by GAO were generally satisfied with regional office communication regarding disability compensation claims. However, VBA's policy on whom VSOs should contact during different points in the process did not always align with what occurs at the offices we visited or with VSO needs. This could result in VSOs not receiving consistent and timely responses from VBA. Evaluating this policy could help VBA assist VSOs in better serving veterans. In addition, congressional caseworkers GAO interviewed identified ways that communication could be improved or that additional support could be provided, such as a list of contacts at all regional offices for claim inquiries. VBA officials GAO interviewed described an open-door policy through which they may receive feedback from caseworkers, but the agency does not formally solicit periodic feedback from them. Without such feedback, the agency may miss opportunities to identify and address caseworker communication needs that could help them better serve veterans."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making five recommendations to VBA to clarify guidance for correcting errors, develop and implement measures to better assess timeliness and accuracy at regional offices, and evaluate communication with VSOs and caseworkers. The Department of Veterans Affairs concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Veterans Affairs\u2019 (VA) Veterans Benefits  Administration (VBA) provides roughly $65 billion in disability  compensation benefits to more than 4 million veterans each year. VBA  primarily relies on its 57 regional offices to determine veterans\u2019 eligibility  for disability compensation and, since 2010, these offices have processed  an average of more than 1 million claims each year. Prior to 2016, a  veteran\u2019s claim was generally processed by the veteran\u2019s local regional  office. However, in 2016, VBA implemented the National Work Queue to  centralize the distribution of claims to regional offices. Now, a claim can  be processed by multiple regional offices, and claims are distributed  based on regional office capacity. In order to monitor and improve its  claims processing performance, VBA sets goals for both processing time  and accuracy in disability determinations, and tracks this performance  across regional offices.", "VBA\u2019s disability compensation claims process can be challenging for  veterans. Therefore, independent veterans service organizations (VSO)  and staff working for Members of Congress (congressional caseworkers)  support veterans in navigating the claims process. VBA requires regional  offices to communicate with these VSOs and congressional caseworkers  as they work on behalf of veterans.", "The Jeff Miller and Richard Blumenthal Veterans Health Care and  Benefits Improvement Act of 2016 includes a provision for GAO to review  VBA\u2019s regional offices to help VBA achieve more consistent performance  in processing disability compensation claims. This report addresses (1)  how VBA manages workload and performance for the disability  compensation claims process, (2) how well VBA\u2019s timeliness and  accuracy measures capture its regional offices\u2019 performance in  processing these claims, and (3) how well selected VBA regional offices  communicate with VSOs and congressional caseworkers about these  claims.", "To address these objectives, we reviewed VBA headquarters policies and  procedures related to management practices, performance, and  communication. We also visited four regional offices\u2014Columbia, SC;  Montgomery, AL; St. Paul, MN; and Wichita, KS\u2014selected to represent a  range of VBA-reported performance measure scores and claims  processing volume in fiscal year 2017. We assessed the reliability of data  on performance scores and claims volume by reviewing relevant  documentation, interviewing VBA staff, and performing electronic testing  for obvious errors in accuracy and completeness, and concluded that  these data were sufficiently reliable for the purposes of selecting regional  offices to visit. We interviewed VBA headquarters and district office  officials, and various groups of management and staff from the selected  regional offices regarding VBA and regional office management, regional  office performance measurement, and regional office communication with  VSOs and congressional caseworkers.", "Specifically, to address the first objective, we reviewed VBA headquarters  documentation related to management practices for disability  compensation claims. We also reviewed VBA headquarters and district  office reports on site visits to regional offices. In addition, we reviewed  regional office-level policy and procedure documents related to managing  workload and performance from the four selected regional offices. We  discussed with VBA officials the National Work Queue and how it affects  VBA\u2019s management of workload and performance. We did not assess the  extent to which the use of the National Work Queue affected performance  outcomes, in part, because performance changes may be attributed to  several factors, such as VBA\u2019s move from a paper- to electronic-based  claims process, mandatory and voluntary overtime for claims processors,  and an agency-wide focus on reducing the claims backlog. In addition,  we compared management practices for identifying and correcting claims  processing errors to federal internal control standards related to the  design of control activities.", "To address the second objective, we reviewed VBA\u2019s policy and  documentation on performance measurement, such as the Director\u2019s  Performance Plans for fiscal years 2017 and 2018, agency budget and  performance reports, and VBA-reported regional office performance data  related to timeliness and accuracy of disability compensation claims for  fiscal year 2017. We discuss the reliability of the timeliness data and the  regional office-level accuracy scores later in this report. We assessed the  reliability of the accuracy data related to the frequency of specific errors  nationwide by interviewing VBA staff, performing electronic testing for obvious errors in accuracy and completeness, and reviewing our prior  analyses of these data. We concluded that these data on errors were  sufficiently reliable for the purposes of our report. We compared VBA\u2019s  regional office performance measures to federal internal control  standards on using quality information to achieve agency objectives.", "To address the third objective, we reviewed VBA policies on  communication with VSOs and congressional caseworkers. We also  reviewed VA Office of Inspector General reports on regional offices, and  VBA headquarters reports on site visits to regional offices. In addition, we  reviewed congressional testimony from national VSOs related to  communication with regional offices. We interviewed officials from VA\u2019s  Office of Inspector General and Office of Congressional and Legislative  Affairs. We also interviewed national officials from three congressionally  chartered VSOs, that are also recognized by VA\u2014The American Legion,  Disabled American Veterans, and Veterans of Foreign Wars\u2014and were  selected because of their size and the scope of veterans\u2019 issues they  represent. During our visits to the four selected regional offices, we  interviewed 23 local VSO staff, selected for local VSOs\u2019 availability to  meet with us during our visits. During our visits, we also interviewed 22  congressional caseworkers working for 16 Members of Congress. The  caseworkers were selected to include House, Senate, and bipartisan  representation, and for the volume of cases the caseworkers were  involved in at the regional offices we visited. We compared the regional  offices\u2019 communication with VSOs and congressional caseworkers to  VA\u2019s policies and federal internal control standards on communication.", "We conducted this performance audit from July 2017 through October  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Disability Compensation Claims Process", "paragraphs": ["VA pays monthly disability compensation to veterans with service- connected disabilities (i.e., injuries or diseases incurred or aggravated  while on active military duty) according to the severity of the disability.  VBA\u2019s Compensation Service sets policy and oversees the delivery of  disability compensation. VBA\u2019s Office of Performance Analysis and  Integrity analyzes performance information related to claims. VBA\u2019s Office  of Field Operations provides operational oversight to district and regional  offices. The 57 regional offices are grouped into five district offices, which  manage the regional offices in their areas. VBA staff in the Veterans  Service Centers of the regional offices process disability compensation  claims. These claims processors include Veterans Service  Representatives who gather evidence needed to determine entitlement  and review the amount of the award and authorize payment, if any, and  Rating Veterans Service Representatives who decide entitlement and the  rating percentage. Veterans may claim more than one medical  condition, and VBA assigns a rating percentage for each claimed medical  condition, as well as for the claim overall.", "As shown in figure 1, after a veteran submits a claim to VBA, a Veterans  Service Representative reviews the claim and helps the veteran gather  the relevant evidence needed to evaluate the claim. Such evidence  includes the veteran\u2019s military service records, medical examinations, and  treatment records from Veterans Health Administration medical facilities  and private medical service providers. Also, if necessary to provide  support to substantiate the claim, VA will provide a medical examination for the veteran. Once VBA has gathered the supporting evidence, a  Rating Veterans Service Representative\u2014who typically has more  experience at VBA than a Veterans Service Representative\u2014evaluates  the claim and determines whether the veteran is eligible for benefits and,  if so, assigns a percentage rating. A Veterans Service Representative  then determines the amount of the award, if any, and drafts a decision  notice. A senior Veterans Service Representative then authorizes the  award and releases the decision notice to the veteran following a review  of both for accuracy."], "subsections": []}, {"section_title": "National Work Queue", "paragraphs": ["In May 2016, VBA completed implementation of the National Work  Queue\u2014an electronic workload management initiative that prioritizes and  distributes claims across regional offices. Previously, a veteran\u2019s claim  was generally processed from start to finish (i.e., awarding of benefits or  notification of denial) by the veteran\u2019s local regional office of jurisdiction,  and the regional office\u2019s workload generally depended on how many  claims were filed by veterans within its area of jurisdiction. Now, a claim  can be processed by multiple regional offices, and claims are distributed  based on regional office capacity (see fig. 2)."], "subsections": []}, {"section_title": "National Trends in Disability Compensation Claims Processing", "paragraphs": ["VBA establishes national targets and tracks performance for disability  compensation claims processing. Since fiscal year 2014, national claims  processing timeliness has improved substantially, and accuracy scores  have decreased slightly, as shown in table 1. VBA\u2019s 12-month issue- based accuracy target for fiscal year 2017 was 96 percent and its target  for fiscal year 2018 was the same. From fiscal year 2014 to 2017, VBA\u2019s  national accuracy estimate decreased from about 96 percent to about 94  percent. In addition, VBA\u2019s target for backlog claims\u2014defined by VBA  as those pending for more than 125 days\u2014for fiscal year 2017 was no  more than 15 percent of claims inventory and its target for fiscal year  2018 was no more than 21 percent of claims. In fiscal year 2017, VBA\u2019s  reported percentage of backlog claims was 23 percent, with a reduction  from 240,443 to 70,965 total reported backlog claims from fiscal years  2014 to 2017."], "subsections": []}, {"section_title": "Regional Office Performance Measures for Disability Compensation Claims Processing", "paragraphs": ["VBA\u2019s Office of Performance Analysis and Integrity collects a variety of  data on timeliness and accuracy, including on VBA\u2019s claims backlog, so  that VBA can monitor regional office performance. To improve timeliness  and accuracy, and reduce the claims backlog, VBA sets performance  standards for the directors of regional offices. In fiscal year 2018, regional  office performance was assessed using two primary metrics\u2014timeliness  (Time-in-Queue) and accuracy (12-month issue-based accuracy). Since  1999, VBA has assessed the accuracy of disability compensation claims  decisions at the national and regional office level using its Systematic  Technical Accuracy Review (STAR). With this tool, VBA reviews a  stratified random sample of completed claims, and certified reviewers use  a checklist to assess specific aspects of each claim."], "subsections": []}, {"section_title": "Veterans Service Organizations and Congressional Caseworkers", "paragraphs": ["According to VA, as of October 2017, 31 congressionally chartered VSOs  were recognized by VA under federal statute to help veterans navigate  the claims process. VSOs commonly are private nonprofit groups that  advocate without fees on behalf of veterans. VSOs employ individuals,  called veterans service officers, whose offices often are located at a VBA  regional office. Through a power of attorney, VSOs can represent  veterans before VA, and assist them and their families with disability  compensation claims, among other things. VSO staff are trained to help  veterans understand and apply for any VA benefits to which they may be  entitled, including disability compensation. In addition to helping veterans  submit claims to VBA, VSOs are allowed to communicate with VBA on  behalf of the veteran throughout the life of the claim, and are given up to  48 hours to review the claim decision before it is finalized (after the Rating  phase in figure 1 above). VSOs can have access to VBA\u2019s electronic  claims management system to view claims status and submit claims  documents.", "According to a Congressional Research Service report, as of March 2016,  919 congressional caseworkers were working for constituents on a variety  of issue areas, including veterans\u2019 disability compensation claims. Also  according to the report, congressional caseworkers cannot legally  represent veterans, but with a privacy release form from the veteran, VBA  may respond to a congressional inquiry. According to VA officials,  congressional caseworkers can then obtain certain claim-related  information from VA, such as the status of the veteran\u2019s claim. VA\u2019s  guidance on \u201cspecial controlled correspondence\u201d governs VBA\u2019s  communication with congressional caseworkers, including required time  frames for responding to congressional inquiries. Congressional  caseworkers generally work out of Congressional Members\u2019 state and  district offices."], "subsections": []}]}, {"section_title": "VBA Manages Workload and Performance through Established Processes, but Guidance for Claims with Errors Has Gaps", "paragraphs": [], "subsections": [{"section_title": "VBA Allocates Claims Workload across Offices Based on Their Capacity, but Guidance for Processing Claims with Errors Has Gaps", "paragraphs": ["The National Work Queue, which VBA uses to distribute disability  compensation claims, was designed to even out the differences in claims  workload across regional offices by having multiple offices complete parts  of a claim and allocating claims based on each office\u2019s capacity. For  example, as shown in figure 3, in fiscal year 2017, about 88 percent of all  disability compensation claims were processed by more than one office,  and over 75 percent were processed by three or more offices. This  distribution method is intended to keep all offices working at their  capacity, regardless of the volume of claims filed by veterans in each  region. While VBA officials stated that they had initially planned to  continue to have a majority of claims processed at veterans\u2019 local regional  offices, after implementation of the National Work Queue they determined  that the system operates more effectively if veteran location is a lower  priority factor for claims distribution. Thus, very few claims are processed  entirely at a veteran\u2019s local regional office, unless the veteran has a  documented hardship that may necessitate expediting the claim or face- to-face interaction.", "VBA officials added that the National Work Queue formula distributes  claims based on VBA priorities. For example, VBA prioritizes claims for  veterans with documented hardships (e.g., terminal illness, financial  hardship). In addition, the National Work Queue formula takes into  account the length of time since the claim was received and prioritizes  backlog claims\u2014defined by VBA as claims that have been open for more  than 125 days.", "Once the National Work Queue allocates claims to a regional office, the  office has some discretion in managing the distribution of claims to its  staff and managing the claims review process. For example, while VBA  determines how the claims workload is allocated across offices, regional  office managers decide which claims within the office\u2019s queue to work  first, how to program the office\u2019s queue for distributing claims to individual  claims processors\u2019 electronic work queues, and whether any changes to  this distribution are needed throughout the day. Regional office managers  at each of the four offices we visited reported using VBA\u2019s timeliness  goals and daily data on claims processing timeliness to prioritize claims.  Managers at the offices we visited also described additional strategies to  manage their work queue, including:", "At two of the four offices we visited, managers said that they provide a  list of claims to claims processors to prioritize, such as those that are  older or have been in the office\u2019s work queue for multiple days.", "Managers at one office said that they manually alter individual claims  processors\u2019 electronic work queues so that older claims are  processed first.", "Managers at one office stated that because they instruct claims  processors to focus on meeting timeliness targets for the office, all  claims are worked within a few days; thus, they encourage their staff  to focus on meeting the office timeliness goals rather than requiring  them to work the claims in their queue in a specified order.", "VBA officials acknowledged that regional office managers may have  different strategies for managing workload, but noted that all offices are  expected to respond to VA national priorities\u2014such as decreasing the  claims backlog\u2014while also meeting their individual office performance  goals.", "While VBA officials noted that having discretion in workload management  can be beneficial, such discretion can also lead to inconsistent handling  of the claims workload. In particular, we found gaps in guidance for  managing deferrals\u2014actions taken by claims processors in VBA\u2019s  electronic claims management system when they identify claims errors  that occurred earlier in the claims process. The deferral process began  with the National Work Queue since claims were, for the first time,  routinely being processed by multiple regional offices. Through deferrals,  when claims processors identify errors in a claim, they can use the  National Work Queue to return the claim for correction to the office that  made the error. According to VBA data, in fiscal year 2017, VBA claims  processors deferred claims in 450,305 instances, which represented  almost 4 percent of the total disability claims processing work  completed.", "While VBA officials said that claims processors who find errors are  generally expected to defer a claim, managers and claims processors at  the regional offices we visited had different perspectives regarding when  Veterans Service Representatives should do this. At all four of the  regional offices we visited, managers and claims processors said that  they generally would not defer a claim if the error could be corrected and  the claim moved forward. At one regional office, managers and claims  processors said that they would log a deferral in the electronic claims  management system, so the error would be tracked and the previous  claims processor could be notified and trained, but that they would also  correct the error themselves to move the claim forward.", "VBA provides some guidance to Rating Veterans Service  Representatives regarding the circumstances in which they should defer  claims, but does not have corresponding guidance for Veterans Service  Representatives. However, according to our analysis of VBA data from  fiscal year 2017, more than 75 percent of deferrals are logged during the  Initial Development, Supplemental Development, Award, or Authorization  phases\u2014when Veterans Service Representatives are typically processing  claims. Existing guidance for Veterans Service Representatives on  deferrals in the National Work Queue Playbook and other documents  focuses on the process for deferring a claim in the electronic claims  management system, rather than on situations that merit a deferral.  Specifically, VBA does not provide guidance on when Veterans Service  Representatives should defer a claim or consider other options, such as  correcting the error and moving the claim forward, with or without a  deferral. VBA officials stated that the policy regarding when to defer  claims is not prescriptive\u2014and they do not plan to provide additional  guidance\u2014because they want to allow regional offices the discretion to  decide what action is best for the veteran. However, federal internal  control standards state that agencies should design control activities to  achieve objectives and respond to risks. For example, a control activity  that is performed routinely and consistently generally is more precise than  one performed sporadically. As such, deferrals may not serve as an  effective control without being used consistently across VBA\u2019s regional  offices.", "VBA\u2019s lack of guidance on when to defer claims may lead to delays for  veterans and missed opportunities to train individuals who make errors. In  some cases, differences in regional office practices for when to defer  claims may lead to situations in which claims that could move forward are  instead sent back to the previous office, causing unnecessary delays for  veterans. In addition, we heard from managers or claims processors at  three offices we visited that claims may not always be deferred for  legitimate reasons and that the ability to defer claims may create  incentives for employees to defer a claim based on an insignificant error if  they want to avoid working on a complex claim. In other cases, more  significant errors may end up being fixed at a regional office without  providing feedback to the office that made the mistake. While the practice  of fixing the error rather than deferring the claim may keep the claim  moving for the veteran, it also means that claims processors who make  errors may repeat the same mistakes in the future."], "subsections": []}, {"section_title": "VBA Sets Regional Office Performance Goals and Individual Expectations and Has Developed Processes for Managing Performance", "paragraphs": ["VBA sets regional office goals and individual claims processor  expectations that align with national efforts to increase timeliness and  accuracy of claims decisions. VBA holds regional offices accountable for  meeting performance goals through the Director\u2019s Performance Plan. For  disability compensation claims in fiscal year 2018, VBA assessed regional  office performance using the Time-in-Queue and 12-month issue-based  accuracy measures. VBA has developed processes and tools for  communicating performance information to regional offices and for  identifying common errors. For example, VBA sets timeliness goals for  regional offices and generates daily claims processing timeliness data for  each office. At the regional offices we visited, we observed that VBA  displays these data on monitors so that managers and employees can  see how their office is performing on a daily basis. In addition, VBA has  created performance reporting tools that allow regional office managers,  claims processors, and various VBA workgroups to download regional  office performance information and analyze office performance issues at  their discretion.", "At the regional offices we visited, quality review teams analyze claims  processing errors made by their employees, such as those identified in  STAR reviews and through the deferral process. Based on common  mistakes they identify, quality review staff at all four offices we visited said  that they incorporate topics related to the errors into training sessions, or  provide direct coaching to individual employees. VBA also conducted an  In-Process Review pilot from November 2017 through May 2018 at  selected regional offices. The pilot involved a quality review for two  phases of the claims process. The purpose of the pilot was for employees  to learn from and correct mistakes in a non-punitive setting while the  claim was being processed. VBA officials reported that VBA discontinued  the pilot in May 2018\u2014prior to its scheduled completion date\u2014because  the pilot was not demonstrating the anticipated benefit of reducing the  number of errors at pilot offices that resulted in deferrals.", "VBA also develops practices at the national level for managing individual  employee performance and, in some cases, provides regional office  managers with discretion for implementing those practices. In support of  the regional office performance standards, VBA sets individual employee  performance standards in the following five areas: (1) quality of work; (2)  timeliness of corrective actions and responsiveness to workload  assignments; (3) production (i.e., the number of transactions, or tasks,  completed within the assessment period); (4) completion of training; and  (5) organizational support. The production standards include a goal for  the number of credits, or points, that employees are expected to earn  during each pay period for their work activities. According to VBA  officials, regional office managers are held accountable for providing  feedback to employees on a regular basis and addressing performance  deficiencies appropriately and in a timely manner. In addition, according  to VBA officials, VA\u2019s policy allows regional office managers \u201cbroad  discretion\u201d in determining when a performance deficiency exists.", "Employee performance incentive programs, which provide monetary  awards to top performers in each regional office, are also managed at the  national level. However, within regional offices, some managers told us  that they also occasionally provide small incentives or celebrations to  show appreciation for staffs\u2019 contributions."], "subsections": []}]}, {"section_title": "VBA\u2019s Timeliness and Accuracy Measures Do Not Adequately Reflect Regional Office Performance for Disability Compensation Claims Processing", "paragraphs": [], "subsections": [{"section_title": "Regional Office Timeliness Measure Does Not Capture Performance over a Period of Time", "paragraphs": ["VBA uses Time-in-Queue\u2014the average number of business days that  claims have been pending at a regional office\u2014to measure overall  regional office timeliness for processing disability compensation claims.  Time-in-Queue is measured separately for each phase of the claims  process\u2014Initial Development, Supplemental Development, Rating,  Award, and Authorization\u2014and VBA has established timeliness goals for  each of these phases. VBA holds regional offices accountable for meeting  timeliness goals through the Director\u2019s Performance Plan, which rates  offices as successful if they meet Time-in-Queue standards for each  phase of the claims process in 10 out of 12 months. For this purpose, the  measure is a snapshot on the last day of each month that shows how  long, on average, claims have been pending at each office; however, it  does not capture regional office performance over a period of time.  Consequently, Time-in-Queue can provide a skewed picture for a period  of time, depending on the work that is assigned to the office toward the  end of the month and the speed with which claims are processed during  that limited time period.", "Moreover, according to VBA officials, the agency used Time-in-Queue  scores and additional factors\u2014such as space considerations and training  capacity\u2014to determine the amount of new resources to allocate to its  regional offices in May 2017, and the agency will continue to consider  such performance information when allocating resources in the future.", "However, federal internal control standards state that agencies should  use quality information to achieve objectives. For example, an agency  should obtain data from reliable sources in a timely manner and based on  identified requirements, and reliable sources are those that provide data  that are reasonably free from error and bias and faithfully represent what  they purport to represent. In addition, our prior work has shown that  practices for improving the usefulness of performance data include using  new methods of measurement to address data limitations, such as Time- in-Queue only capturing performance as a snapshot on 1 day.", "VBA officials acknowledged that the Time-in-Queue performance  measure does not reflect the complete timeliness of a regional office.  These officials said that the agency is exploring adding a Time-to-Exit- Queue measure that could capture regional office timeliness over a  period of time. For example, Time-to-Exit-Queue could measure the  timeliness of all claims processing work completed throughout the month  instead of work pending on the last day of the month. However, VBA has  not yet completed the development of the Time-to-Exit-Queue  performance measure. VBA has also not determined whether or when it  will replace or supplement Time-in-Queue with a new primary metric\u2014 Time-to-Exit-Queue or something else\u2014to measure regional office  timeliness. Until VBA implements a new measure to more fully assess  regional offices\u2019 timeliness, the agency will not have a complete picture of  regional office performance over time, which could impair decision- making related to regional office performance, such as decisions about  targeting resources to high- or low-performing offices."], "subsections": []}, {"section_title": "A Regional Office\u2019s Accuracy Score Does Not Always Reflect the Work Completed in That Office", "paragraphs": ["VBA uses the STAR 12-month issue-based accuracy score to measure  regional office accuracy in processing disability compensation claims, but  this score could provide a misleading picture of an office\u2019s performance.  VBA\u2019s accuracy measure attributes the accuracy of sampled claims to the  regional office that finishes the claim even though, under the National  Work Queue, that office may not have done all of the work on the claim.  In fiscal year 2017, about 88 percent of all disability compensation claims were processed by more than one office, and about 43 percent were  processed by five or more offices, as shown earlier in figure 3. As a  result, the scores attributed to each office may not reflect the true  accuracy of the office\u2019s work. In addition, any errors made by other offices  earlier in the claims process would not be reflected in those offices\u2019  accuracy scores. Therefore, the current regional office accuracy measure  does not reflect the accuracy of each office\u2019s work and may skew the  score negatively or positively. According to VBA officials, the agency uses  issue-based accuracy scores, among other things, to determine how to  allocate resources to regional offices. However, federal internal control  standards state that agencies should use quality information to achieve  objectives. For example, an agency obtains data from reliable sources in  a timely manner based on identified requirements, and reliable sources  provide data that are reasonably free from error and bias and faithfully  represent what they purport to represent. In addition, our prior work has  shown that practices for improving the usefulness of performance data  include using new methods of measurement to address data limitations.", "VBA officials said that they recognize the limitations of the agency\u2019s  regional office accuracy measure, but VBA officials also said it is  reasonable to hold the office that completes the claim accountable  because Veterans Service Representatives are responsible for checking  for errors in the claims process before completing the claim during the  Authorization phase. However, according to VBA officials, some areas on  VBA\u2019s accuracy checklist\u2014such as whether the claimed conditions were  correctly granted or denied, and whether the correct percentage  evaluation was assigned\u2014are beyond the scope of the Veterans Service  Representatives\u2019 review or qualifications. These tasks are completed by  Rating Veterans Service Representatives. In fiscal year 2017, these two  areas\u2014whether the claimed conditions were correctly granted or denied,  and whether the correct percentage was assigned\u2014accounted for an  estimated 28 percent of all errors nationwide. In addition, these two areas  ranged from an estimated low of about 13 percent (5 of 40) of all errors  attributed to one regional office to an estimated high of about 55 percent  (16 of 29) of all errors attributed to another regional office. In addition,  while VBA officials said that it is reasonable to hold the office that  completes the claim accountable for errors, officials also said that when  STAR errors are identified, only the regional offices that actually made the errors are told about them in order to improve staff performance. This  suggests that VBA does not view the Veterans Service Representative  who completes the claim as fully responsible for all errors in the claims  process.", "According to VBA officials, the agency has been exploring the  development of a new accuracy measure that would enable it to assign  error scores to the offices that actually made the errors. For example,  VBA is considering using the STAR reviews to produce a claims phase- based score that would attribute the accuracy of individual phases of the  claims process to the offices completing those phases. However,  according to VBA officials, sampling by each phase of the claims process  would be more complicated than the current system of sampling by  regional office and would require additional staff. In addition, the agency  is also exploring leveraging its existing Individual Quality Reviews\u2014 currently used to assess the accuracy of individual staff\u2019s work\u2014to create  individual regional office accuracy scores. VBA officials added, however,  that there are challenges with converting these individual accuracy scores  to office scores, such as calculating scores by claims phase instead of by  employee position since an employee may conduct work in various  phases. VBA has not determined which alternate measure, if any, to use,  and does not have a timeline for addressing the challenges it has  identified with the alternate measures being considered, or for  implementing a new accuracy measure. Until VBA implements a new  measure to assess regional offices\u2019 accuracy, it will not have an accurate  picture of individual regional offices\u2019 performance, which could impair  decision-making, such as targeting resources to high- or low-performing  offices."], "subsections": []}]}, {"section_title": "Stakeholders Were Generally Satisfied with Communication at Selected Regional Offices, but VBA\u2019s Communication Policies Are Applied Inconsistently", "paragraphs": [], "subsections": [{"section_title": "Selected Veterans Service Organizations Were Generally Satisfied with Access to Regional Office Staff, but VBA\u2019s Communication Policy and Practice Are Not Aligned", "paragraphs": ["Despite being generally satisfied with regional office communication,  VSOs we spoke with also expressed some frustrations. VSOs we spoke  with at all four offices reported generally being able to contact someone to  answer their questions. Moreover, VBA staff we spoke with reported  being flexible in communicating with VSOs in the manner in which they  preferred. In addition, Compensation Service and Benefits Assistance  Service site visit reports found that VSOs are generally satisfied with  regional office communication. However, VSOs at all four offices we  visited expressed some frustrations with communication, but they varied  some by offices. Examples of communication issues included:", "Diminished contact. VSOs noted that the National Work Queue  reduced personal relationships and collaboration between VSOs and  regional office staff since claims are no longer fully processed at the  local regional office, and therefore VSOs can no longer simply walk  across the office to discuss a claim.", "Delayed responses. VSOs said there sometimes are delays in  receiving responses from regional offices, with staff taking different  lengths of time to respond to an inquiry, or not responding at all.  Sometimes, once VSOs receive a response, the claim is no longer  being processed at the regional office they contacted, so the response  is no longer useful.", "Decreased notice of activity. VSOs said that with the advent of  electronic claims processing, they no longer receive paper copies of  disability ratings and other documents that VBA sends to the veteran.  VSOs have access to such information in VBA\u2019s electronic claims  management system, but the system does not notify them when VBA  has sent documents to the veteran, such as requests for information  and evidence. VSOs said it is time-consuming for them to proactively  monitor a large number of veterans\u2019 electronic claims files for new  documents.", "VSOs may communicate with a regional office throughout the life of a  claim for various purposes and, according to VBA officials, regional  offices generally have discretion in establishing local policies for handling  VSO questions or inquiries. One exception to this local discretion is  during the 48-hour review period when VSOs can review a completed  disability rating before it is finalized. A November 2016 VBA policy states  that during the 48-hour review period, VSOs may contact a regional  office\u2019s Change Management Agent. The policy also states that VSOs  should not contact the Change Management Agent for claim status  updates, evidence submission, or any other type of inquiry unrelated to a  rating decision discrepancy. According to VBA officials, the policy to  contact the Change Management Agent during the 48-hour review period  was intended to streamline the inquiry process for VSOs, provide  consistent responses to them, and minimize disruptions for claims  processors. The previous policy required VSOs to first contact the Rating  Veterans Service Representative before the Change Management Agent  during the 48-hour review period.", "VSOs at three offices we visited reported contacting the Change  Management Agent for inquiries during the 48-hour review period, but  also reported contacting the Change Management Agent at other points  during the claims process. VSOs at all four offices we visited also  reported contacting other staff, such as claims processors or their  supervisors at their local regional offices, during the 48-hour review  period, unrelated to the Change Management Agent\u2019s availability or a  particular type of claim, which VBA officials stated were reasons for which  VSOs might contact an alternate VBA official. Federal standards for  internal control state that an agency should externally communicate the  necessary quality information to achieve an entity\u2019s objectives, for  example, communicating with external parties using established reporting  lines, and periodically evaluating its communication methods.", "VBA officials told us that the November 2016 policy was intended to  address communication during the 48-hour review period, and that  regional office discretion for communication with VSOs outside of this  period was still in place, including contacting Change Management  Agents if regional offices determined this was best. However, regional  offices and VSOs do not consistently implement this policy. Moreover, the  policy states that VSOs are not to contact Change Management Agents  for claim status updates, evidence submission, or any other question  unrelated to a rating decision discrepancy. These types of inquiries  generally occur outside of the 48-hour review period, so this portion of the  policy conflicts with VBA officials\u2019 description of regional office discretion  for communication with VSOs throughout the life of a claim.", "Although VSO communication with Change Management Agents did not  always appear to match VBA\u2019s policy for communication during or outside  of the 48-hour review period, VSOs we spoke with seemed to value  regional offices\u2019 flexibility in communicating with them. However, it is  possible that the policy\u2019s lack of clarity or inconsistent application could  contribute to communication frustrations for VSOs, and that changes to  either the policy or its enforcement could better serve VSOs and regional  office staff. Evaluating its regional office communication policy with VSOs  and ensuring that the policy is clear, that it aligns with regional offices\u2019  practices, and that it effectively meets VSOs\u2019 communication needs,  could help VBA ensure that it is providing timely and consistent  responses to VSOs on behalf of the veterans they represent, while  minimizing disruptions to regional office staff. Such alignment could be  achieved either by adjusting the communication policy or better enforcing  the existing policy."], "subsections": []}, {"section_title": "Selected Congressional Caseworkers Were Satisfied with Communication with Regional Offices, but VBA\u2019s Communication Was Not Always Timely or Accurate", "paragraphs": ["Congressional caseworkers we spoke with at all four offices we visited  were satisfied with regional office communication regarding disability  compensation claims, though some regional office responses were not  timely or accurate, according to VA Inspector General reports. VBA has  congressional liaisons at each of its regional offices to answer inquiries  from congressional caseworkers. Caseworkers generally contact the VBA  liaison at their local regional office when they inquire about claims\u2014 whether the claims are being processed at the local regional office or  another regional office. Caseworkers may also contact the VBA liaison at  the office where the claim is being processed once they find out from VBA  where that is. According to regional office officials at the four offices we  visited, most congressional inquiries received at the regional offices are  by email or phone, although some are by regular mail; the congressional  inquiries are most often regarding the status of a veteran\u2019s claim.", "While caseworkers we spoke with were satisfied with their communication  with regional offices, VA\u2019s Office of Inspector General found that in some  instances, VBA regional offices had not provided timely or accurate  responses to special controlled correspondence, which includes  congressional inquiries. According to VBA guidance on special  controlled correspondence in fiscal year 2017, VBA liaisons are to  respond to caseworkers\u2019 inquiries within 5 business days with a full or  interim response, for example. During its inspections of regional offices  during fiscal year 2017, the Office of Inspector General found that some  offices had not provided interim responses within 5 business days and, in  a few cases, had provided inaccurate responses. At some offices, the  Office of Inspector General made recommendations for improving  regional offices\u2019 responses to inquiries and, according to its reports,  regional offices planned and implemented changes, such as providing  additional training to staff and improving oversight of correspondence.", "Caseworkers we spoke with at three offices we visited identified ways that  regional offices could improve communication with them or ways that  VBA could provide them with additional information or support. For  example, while caseworkers generally contact their local regional office  with inquiries, caseworkers at two offices said that a regularly updated  contact list of VBA liaisons at all VBA regional offices could be helpful so  that they can immediately contact another regional office if they learn that  a claim is being processed there, or if their local VBA liaison is unable to  provide sufficient specifics on a claim. Some of these caseworkers  suggested that the list could either be posted to a non-public website or  sent to VBA regional offices to distribute to local caseworkers. According  to VBA officials, the agency does maintain a list of regional office VBA  liaisons, and updates it quarterly. The list is provided upon request, both  electronically and in hard copy, and caseworkers frequently request the  list, according to VBA officials. However, the caseworkers we spoke with  at all four offices we visited were not aware of this list.", "In September 2017, VBA developed an online toolkit for congressional  caseworkers to better assist them in serving their veteran  constituencies. The toolkit webpage provides a central location for  caseworkers to quickly locate information regarding available VA benefits  and services. For example, the toolkit provides a link to a description of  the disability compensation program and how to apply for benefits. VBA  officials reported that in September 2017, they provided information on  the toolkit to VA\u2019s Office of Congressional and Legislative Affairs for  distribution to congressional staff. However, caseworkers and VBA  liaisons at all four offices we visited were not aware of this online toolkit,  and caseworkers we spoke with at two offices we visited said that it could  have been useful to them if they had been aware of it or if it had  additional elements, such as regional office expectations for caseworker  inquiries.", "According to VBA officials, they have not received any feedback on the  toolkit beyond that initially provided by another VA office. This could be, in  part, because VBA does not have an outreach mechanism to actively  obtain perspectives from congressional caseworkers on their  communication with regional offices or their information or support needs,  or to determine whether the findings from the Office of Inspector General  are typical across regional offices. The Office of Inspector General  stopped performing its reviews of regional offices\u2014including evaluations  of communication with congressional caseworkers\u2014in fiscal year 2017 to  focus its efforts on VBA-wide audits, so this information is no longer  available to VBA. Federal standards for internal control state that an  agency should externally communicate the necessary quality information  to achieve an entity\u2019s objectives, for example, selecting the appropriate  methods to communicate externally, and periodically evaluating its  methods of communication so that the agency has the appropriate tools  to communicate quality information outside the agency.", "VBA officials reported an open-door policy in which caseworkers can  share concerns and requests as needed, and said that a formal outreach  mechanism is not necessary. Although caseworkers can approach  regional office staff with ideas for improvement, this informal mechanism  is not a consistent process and does not facilitate candid feedback, nor  does it include documentation of potential improvements and actions  taken. By creating an outreach mechanism to solicit periodic feedback  from congressional caseworkers, VBA could streamline the inquiry  process and enable them to provide more accurate and timely information  to veterans."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["VBA\u2019s National Work Queue has been in place for more than 2 years and  provides opportunities for a higher level of service to veterans. However,  with claims moving among regional offices, the individual performance of  regional offices remains critical to VBA\u2019s success. For example, regional  offices\u2019 inconsistent use of deferrals when claims processors identify  errors could unnecessarily delay the decision on a veteran\u2019s claim or  prevent staff from receiving needed training. In addition, VBA has  developed several practices to assess performance at regional offices,  but some of this information could be of limited use if the agency  continues using its existing measures. Specifically, VBA\u2019s two primary  performance measures for regional offices do not allow the agency to  adequately measure claims timeliness and accuracy. Finally,  communication with VSOs and congressional caseworkers could be  improved by clarifying the VSO communication policy and aligning it with  practice and VSO needs, and conducting caseworker outreach in order to  provide more consistent and timely information to VSOs and  caseworkers. Without these improvements, VSOs and caseworkers may  not be able to serve veterans in as timely a manner as possible."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following five recommendations to VBA:", "The Under Secretary for Benefits should clarify how Veterans Service  Representatives should handle claims when they identify an error,  including when to defer a claim and when to correct the error on their  own. (Recommendation 1)", "The Under Secretary for Benefits should develop and implement a  new regional office performance measure that allows it to better  assess each regional office\u2019s timeliness over a period of time.  (Recommendation 2)", "The Under Secretary for Benefits should develop and implement a  new regional office performance measure that allows it to better  measure the accuracy of each regional office\u2019s work.  (Recommendation 3)", "The Under Secretary for Benefits should evaluate its policy for  regional office communication with VSOs to ensure that it is clear, that  it aligns with practice, and that it meets the communication needs of  VSOs. (Recommendation 4)", "The Under Secretary for Benefits should develop and implement a  mechanism to obtain periodic feedback from congressional  caseworkers on their communication with regional offices regarding  claims and needed information or support. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Veterans Affairs  for review and comment. VA provided written comments, which are  reproduced in appendix I. VA concurred with all of our recommendations  and described VBA\u2019s plans for taking action to address them. Regarding  Recommendation 1, VA stated that VBA is working to clarify guidance to  regional offices for handling claims when errors are identified. Regarding  Recommendations 2 and 3, VA stated that VBA is working to develop and  implement new performance measures for regional office timeliness and  accuracy. Regarding Recommendation 4, VA stated that VBA will review  and enhance its policy for communication with VSOs. Regarding  Recommendation 5, VA stated that VBA will review existing practices on  support for congressional caseworkers, and develop and implement  mechanisms to strengthen this support. VA also reported that regional  office managers have been directed to meet at least quarterly with  congressional caseworkers to gather feedback and resolve issues. If VBA  can demonstrate that it is consistently using such feedback mechanisms  across regional offices to identify and address caseworker concerns, this  will meet the intent of our recommendation.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, 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) 512-7215 or curdae@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Department of Veterans Affairs", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Nyree Ryder Tee (Assistant  Director), Rebecca Kuhlmann Taylor (Analyst-in-Charge), Justin  Gordinas, and Martin E. Scire made significant contributions to the report.  Also contributing to the report were James E. Bennett, Alex Galuten,  Benjamin T. Licht, Liam O\u2019Laughlin, David Perkins, Almeta Spencer,  Walter K. Vance, and Kathleen van Gelder."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-12", "url": "https://www.gao.gov/products/GAO-18-12", "title": "Workplace Safety and Health: Better Outreach, Collaboration, and Information Needed to Help Protect Workers at Meat and Poultry Plants", "published_date": "2017-11-09T00:00:00", "released_date": "2017-12-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Meat and poultry slaughter and processing is one of the most hazardous industries in the United States. GAO was asked to review federal efforts to help ensure meat and poultry worker safety and health.", "This report (1) describes the efforts OSHA has made to help ensure worker safety and assesses any challenges to these efforts, (2) examines how OSHA and FSIS have collaborated to ensure worker safety, and (3) assesses factors that may affect OSHA and FSIS efforts to protect workers from chemical hazards. GAO analyzed OSHA inspection data from 2005\u2014when GAO last reported on this issue\u2014through 2016. GAO also interviewed OSHA staff in headquarters and six field offices; officials at four other federal agencies; worker advocates; and industry representatives. GAO visited four plants and interviewed workers at six sites in five states selected based on factors such as meat or poultry production."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Labor's Occupational Safety and Health Administration (OSHA) increased its annual inspections of the meat and poultry industry from 177 in 2005 to 244 in 2016. OSHA officials told GAO that this increase was related to several new enforcement programs focusing on the poultry industry, as well as new reporting requirements that prompt additional inspections. However, OSHA faces challenges identifying and addressing worker safety concerns because workers may be reluctant to contact OSHA for fear of employer retaliation, although employers are prohibited from doing so by federal law. If workers are afraid to share concerns, OSHA may not be able to identify or address conditions that endanger them. In particular, OSHA may not be aware of the scope of problems workers could face gaining timely access to bathrooms. When asked by GAO, workers in five selected states cited bathroom access as a concern and said they fear speaking up at work, where OSHA inspectors typically interview them. Taking additional steps to encourage workers to disclose sensitive concerns and gathering additional information to determine the scope of bathroom access issues could enable OSHA to better identify worker safety and health concerns.", "OSHA's and the Department of Agriculture's Food Safety and Inspection Service's (FSIS) main vehicle for collaboration on worker safety is their 1994 memorandum of understanding (MOU), but efforts to implement and evaluate the MOU have been limited. The MOU outlines plans for collaboration, such as referrals of plant hazards to OSHA by FSIS inspectors, training of FSIS staff, and information sharing. OSHA and FSIS have taken some steps to implement the policies and procedures outlined in the MOU. However, GAO found issues with the MOU's implementation in these three areas, hampering achievement of the MOU's goals. For example, according to FSIS officials, FSIS inspectors may be reluctant to make referrals to OSHA about hazards in plants because they fear it could trigger an OSHA inspection of FSIS. Further, the agencies have not evaluated the implementation of the MOU. Evaluating the implementation of the MOU and making any needed changes would help ensure the goals of the MOU are met and further protect the safety and health of both plant workers and FSIS inspectors.", "Gaps in federal efforts create challenges to protecting workers from certain chemical hazards. For example, depending on a chemical's intended use, it may not undergo a federal review of the risks it poses to worker safety and health before it is used in a plant. FSIS collects information on how to protect its inspectors from new chemicals, but it does not have a process to share this information with OSHA or plants, among others, so that plant workers can be similarly protected. By FSIS establishing a process to regularly share the worker safety information it collects, the federal government will be better positioned to use existing resources to support the safety and health of plant workers and FSIS inspectors."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making seven recommendations, including that OSHA encourage workers to disclose sensitive concerns and gather bathroom access information; OSHA and FSIS strengthen their MOU; and FSIS share worker safety information. OSHA had concerns about two of these recommendations and did not address one. FSIS expressed concerns but described planned actions to address the recommendations. GAO believes the recommendations should be fully implemented."]}], "report": [{"section_title": "Letter", "paragraphs": ["Although injury and illness rates among workers at meat and poultry  slaughter and processing plants declined from 2004 through 2015,  according to U.S. Department of Labor (DOL) data, in 2015 the meat and  poultry industry had the 8th-highest number of severe injury reports of all  industries. In 2016, we reported that workers in meat and poultry  slaughter and processing plants continue to face hazardous conditions,  including sharp knives used in close quarters, slippery floors, and  chemical exposures. In the 2016 report, we found that additional data  are needed to address these hazardous conditions and recommended  that DOL improve its data on musculoskeletal disorders and sanitation  workers in the meat and poultry industry.", "DOL\u2019s Occupational Safety and Health Administration (OSHA) is the  federal agency charged with assuring safe and healthful working  conditions for the nation\u2019s workers. Some worker advocacy groups have  expressed concern that OSHA has not effectively addressed hazards in  the meat and poultry industry. Meat and poultry industry representatives  have noted that OSHA could do more to support the industry\u2019s worker  safety efforts. Food safety inspection personnel from the U.S. Department  of Agriculture\u2019s (USDA) Food Safety and Inspection Service (FSIS), which  is responsible for ensuring the food safety of meat and poultry products,  are present in most plants and are also potentially vulnerable to  workplace hazards. Some FSIS officials and worker safety advocates  have expressed concern about the increasing use of antimicrobials such  as peracetic acid, which are used to kill microorganisms or stop their  growth.", "You asked us to review issues related to worker safety in meat and  poultry slaughter and processing plants. This report (1) describes the  efforts OSHA has made to help ensure meat and poultry workers\u2019 safety  and health, and assesses what, if any, challenges OSHA faces in carrying  out these efforts; (2) examines how OSHA and FSIS have collaborated to  help ensure meat and poultry worker safety and health; and (3) assesses  any factors that may affect OSHA and FSIS efforts to protect meat and  poultry workers from chemical hazards.", "To address all three objectives, we reviewed relevant federal laws,  regulations, and documentation, and we interviewed officials from OSHA  and FSIS. We also interviewed and reviewed information from additional  stakeholders, including experts in issues related to worker safety, as well  as representatives of worker advocacy groups. We visited four states\u2014 Arkansas, Georgia, Minnesota, and Texas\u2014selected based on factors  such as high production of meat or poultry and presence of an OSHA  regional or area office. As appropriate for each state visit, we met with  either local OSHA or state occupational safety and health (OSH) agency  officials, as well as FSIS officials (including inspectors), industry  representatives, experts in issues related to worker safety, and  representatives of worker advocacy groups. We also visited four meat  and poultry plants. We also conducted group and individual interviews  with meat and poultry workers in six locations in five states: Arkansas,  Delaware, Nebraska, North Carolina, and Virginia. We selected sites  based on a variety of factors, such as states with a relatively high level of  meat or poultry slaughter, and type of plant (meat or poultry). The  information gathered from these interviews is not generalizable to all  plants or all meat or poultry workers.", "To examine the efforts OSHA has made to help ensure meat and poultry  workers\u2019 safety and health, we also analyzed enforcement data from two  OSHA databases: the OSHA Information System and OSHA Legacy  Data. To assess the reliability of the data, we reviewed relevant agency  documentation, conducted electronic data testing, and interviewed  agency officials knowledgeable about these data. Based on these  reviews, we determined that the data were sufficiently reliable for our  purposes. We also interviewed representatives of the meat and poultry  industry.", "To examine how OSHA and FSIS have collaborated to help ensure meat  and poultry worker safety and health, we also analyzed information on  OSHA inspections of FSIS in meat and poultry plants, using the OSHA  Information System and OSHA Legacy Data. In assessing agency efforts,  we reviewed the 1994 memorandum of understanding (MOU) agreed to  by OSHA and FSIS, and prior GAO reports that highlight interagency  collaboration.", "To assess any factors that may affect OSHA and FSIS efforts to protect  meat and poultry workers from chemical hazards, we reviewed  Environmental Protection Agency (EPA), Food and Drug Administration  (FDA), and FSIS processes for reviewing new chemicals, including any  efforts to coordinate or share information; and reports dealing with  chemical hazards. We also reviewed documentation and interviewed officials from OSHA\u2019s Salt Lake Technical Center regarding validated  sampling and analytical methods for measuring chemicals used in plants.  Further, we reviewed the Centers for Disease Control and Prevention\u2019s  National Institute for Occupational Safety and Health\u2019s (NIOSH) health  hazard evaluations to understand the extent of concerns related to  chemicals and we reviewed NIOSH\u2019s research agenda and goals for  studying chemicals and their potential impact on the safety and health of  workers. We also interviewed representatives of the meat and poultry  industry. See appendix I for more information on our objectives, scope,  and methodology.", "We conducted this performance audit from May 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["An estimated 481,000 workers were employed in the animal slaughtering  and processing industry in 2016, according to the Current Population  Survey, which is jointly sponsored by DOL\u2019s Bureau of Labor Statistics  and the U.S. Census Bureau. There were 5,282 meat and poultry plants  in the United States, of which 4,133 conducted processing only, 14  conducted slaughter only, and 1,135 conducted both slaughter and  processing, as of February 2017, according to FSIS (see fig. 1). More  than 30 million beef cattle, 117 million hogs, 243 million turkeys, and 8  billion chickens were slaughtered in the United States in 2016, according  to USDA\u2019s National Agricultural Statistics Service data. As of June 2017,  almost 7,500 FSIS inspectors worked in meat and poultry plants,  according to FSIS. These inspectors are generally exposed to the same  types of hazards as plant employees.", "Meat and poultry plants are generally designed for an orderly flow from  point of entry of the living animal to the finished food product (see fig. 2).  Typically, the animal is brought to the meat or poultry plant and taken to  the kill floor area, where the animal is rendered unconscious and  slaughter occurs. Workers and machines behead and eviscerate the  animal, among other things, after which it is chilled for several hours.  FSIS inspectors ensure that the carcass meets federal food safety  standards. Workers and machines then process the carcass and may  break it into small portions that can be transported directly to  supermarkets. Slaughter and processing of meat and poultry require  workers to perform a high number of repetitive motions. Although plants  have increased automation, much of the work is still done by hand using  saws, knives, and other tools."], "subsections": [{"section_title": "Federal Roles Related to Meat and Poultry Worker Safety and Health", "paragraphs": ["OSHA helps ensure safe and healthful working conditions for workers in  the meat and poultry industry and other industries, in part by setting and  enforcing workplace safety and health standards. To carry out its  responsibilities under the Occupational Safety and Health Act of 1970, as  amended (OSH Act), OSHA establishes workplace safety and health  standards; conducts inspections; investigates complaints from workers  and reports of fatalities and severe injuries at worksites; and offers  cooperative programs, training, and outreach, among other efforts.  OSHA is responsible for enforcing private sector employers\u2019 compliance  with these standards in about half the states, while the remaining states  have assumed that responsibility under a state plan approved by OSHA.  These \u201cstate-plan states\u201d adopt and enforce their own standards (which  must be \u201cat least as effective\u201d in providing safe and healthful employment  conditions as the federal standards). With respect to federal employers,  federal agencies are generally required to establish and maintain a  comprehensive and effective occupational safety and health program that  is consistent with OSHA\u2019s standards. OSHA is generally responsible for  inspecting federal employers in all states, including state-plan states.", "As part of its enforcement, OSHA conducts on-site inspections of federal  and non-federal employers, collecting evidence through methods such as  observation, document review, and interviews. Steps in an inspection  may include an opening conference, a walkaround by inspectors, worker  interviews, and a closing conference. Based on evidence developed  during the inspection, OSHA evaluates whether the employer has violated  any safety or health standards. The inspection may result in issuance of a  citation if appropriate, and possible appeals by the employer (see fig. 3).", "Although OSHA does not fine federal agencies, it does monitor these  agencies and conducts federal workplace inspections in response to  workers\u2019 reports of hazards. Since workers at meat and poultry plants  include both plant employees and FSIS employees, OSHA officials may  inspect FSIS, the plant employer, or both when it receives a complaint or  referral about hazards at the plant.", "OSHA conducts both programmed and unprogrammed inspections.  Programmed inspections are planned based on injury incidence rates,  previous citation history, or random selection. For example, OSHA\u2019s  emphasis programs focus inspections on a particular safety or health  hazard or a specific industry. Unprogrammed inspections are conducted  in response to imminent danger, fatalities, worker complaints, referrals,  and catastrophic events (such as hospitalizations).", "FSIS inspects each meat and poultry carcass at the majority of meat and  poultry plants throughout the United States. The Federal Meat Inspection  Act and the Poultry Products Inspection Act give FSIS responsibility for  ensuring the safety and wholesomeness of meat and poultry that enter  interstate commerce. As a federal employer, FSIS is also required to  establish and maintain a comprehensive and effective occupational safety  and health program for its employees that is consistent with OSHA\u2019s  standards. However, OSHA (or a state agency in a state-plan state) is  responsible for overseeing the safety and health of non-federal plant  workers. FSIS\u2019s Environmental, Safety, and Health Group administers  FSIS\u2019s occupational safety and health program and investigates safety  concerns of FSIS inspectors.", "Within the Department of Health and Human Services, NIOSH conducts  occupational safety and health research and workplace evaluations, and  makes recommendations to prevent worker injuries and illnesses. In  2016, we reviewed NIOSH evaluations on hazards in the meat and  poultry industry such as those associated with musculoskeletal disorders  (MSD), chemical exposure, and pathogens and animals, and  recommended in our report that NIOSH conduct a study of the injuries  and illnesses experienced by meat and poultry sanitation workers.", "In 1994, after a workplace fire in 1991 that killed 25 poultry workers in  North Carolina, OSHA and FSIS signed an MOU on how the two  agencies could work together on worker safety and health at meat and  poultry plants. The MOU outlines the policies and procedures the  agencies agreed to use, including a process for FSIS to refer serious  hazards to OSHA, plans for OSHA and FSIS to develop and implement  training on hazard recognition for FSIS staff, an agreement to coordinate  on the development of standards and share information on common  concerns, and plans for evaluating implementation of the MOU."], "subsections": []}, {"section_title": "Federal Role in Chemical Safety at Meat and Poultry Plants", "paragraphs": ["Meat and poultry plants use chemicals such as antimicrobials to reduce  potential contamination on food and machinery during processing.  Antimicrobials may be sprayed directly on meat or poultry, or may be  used to clean machinery. FSIS officials and worker advocates have  raised worker safety concerns about peracetic acid, an antimicrobial  chemical that is being used by the meat and poultry industry for both of  these purposes. Peracetic acid has recently become the antimicrobial of  choice, according to an FSIS official and a representative from an  advocacy group. An FSIS official told us that this was because it is cheap  and effective at reducing potential contamination on food. In addition, it is  safe to use on food because it generally degrades before consumption,  according to FDA officials.", "FDA, FSIS, EPA, and OSHA all play a role in regulating the use of  chemicals at meat and poultry plants. Under the Federal Food, Drug, and  Cosmetic Act (FFDCA), as amended, FDA approves food additives,  which include antimicrobial food additives, to ensure the food to which  they are applied is safe for human consumption. Antimicrobial food  additives such as peracetic acid are applied to meat or poultry to reduce  the incidence of human illness from food-borne pathogens, such as  Salmonella and Campylobacter.", "FSIS reviews new ingredients and new technology, including new  substances or new applications of substances, to determine whether they  are safe and suitable for use in meat and poultry products. FSIS\u2019s  review includes an assessment of whether the substance could affect  food safety, FSIS regulations, inspection procedures, or the safety or  health of FSIS inspection personnel. FSIS coordinates its reviews of  new ingredients with FDA\u2019s reviews, in accordance with an MOU between  FSIS and FDA, most recently amended in January 2000.", "EPA is responsible for regulating chemicals that meet the definition of a  pesticide under the FFDCA and the Federal Insecticide, Fungicide, and  Rodenticide Act (FIFRA), as amended. Peracetic acid meets the  definition of an \u201cantimicrobial pesticide\u201d regulated by EPA when it is used  to disinfect, sanitize, or inhibit the growth of microorganisms on surfaces  and machinery used in meat and poultry plants.", "OSHA may regulate the use of chemicals as part of its responsibility for  overseeing workplace safety and health. For example, the hazard  communication standard requires chemical manufacturers and importers  to develop Safety Data Sheets that describe the chemicals\u2019 hazards and  include information on safe handling, among other things. The standard  also requires employers to ensure their employees have access to these  sheets and to provide training on handling these chemicals  appropriately.", "Each agency has a different review or oversight responsibility. The same  chemical may undergo different types of review, depending on its  intended use in meat or poultry plants. For example, as part of EPA\u2019s  pesticide registration process, EPA conducts risk assessments to  estimate the nature and probability of harmful effects on the environment  and human health, which may include people who may be exposed to the  pesticides through their work. FDA\u2019s review of antimicrobial food  additives, as mentioned above, focuses on safety to consumers, and  does not include a worker safety component."], "subsections": []}]}, {"section_title": "OSHA Increased Meat and Poultry Industry Inspections Since 2005, but Faces Challenges Identifying Worker Concerns", "paragraphs": [], "subsections": [{"section_title": "OSHA Increased Its Annual Inspections Since 2005 and Provided Compliance Assistance", "paragraphs": [], "subsections": [{"section_title": "Inspections", "paragraphs": ["OSHA\u2019s inspections of the meat and poultry slaughter and processing  industry increased from 177 in 2005 to 244 in 2016, due primarily to an  increase in poultry inspections (see fig. 4). Officials explained that the  increase in meat inspections from 2009 to 2010 and poultry inspections  from 2008 to 2012 were associated with increases in complaints during  those time periods. OSHA officials said that all inspections decreased in  2013 partly due to the federal government shutdown that year. They  added that poultry inspections increased from 2013 to 2016, which  officials attributed to the introduction of new severe injury reporting  requirements, as well as several emphasis programs focusing inspections  on the poultry industry. OSHA consistently conducted more meat than  poultry inspections, due to the greater number of meat plants than  poultry, according to OSHA officials.", "In states with state OSH plans, inspection numbers increased from 183  inspections in 2005 to 212 in 2016, due primarily to an increase in meat  inspections (see fig. 5). State-plan states conducted almost three times  as many total meat inspections as poultry from 2005 through 2016. The  number of state poultry inspections has remained steady over the time  period, in contrast with the increase seen in federal OSHA poultry  inspections. OSHA officials said they did not believe there is an  overarching explanation for the trend in state-plan state inspections,  because each state plan is independently run, and added that publicly  available data show the increase in meat inspections from 2008 to 2010  could have been driven by a large increase in programmed inspections  conducted by state-plan states during that time, along with increases in  several types of unprogrammed inspections in 2010. in the meat and poultry industry. These programs instruct inspectors to  investigate potential hazards such as chemical exposure, noise, and  ergonomic hazards. Two of the four programs also focus on issues such  as bathroom access, temperature of the plant, and employer recording of  injuries and illnesses, to check for recordkeeping violations. OSHA  inspections incorporated three of these emphasis programs in 2016; the  remaining program did not have inspections that year. OSHA\u2019s most  frequently used national and regional emphasis programs in meat and  poultry plants in 2016 are shown below (see fig. 6). failing to inspect and test equipment  failing to investigate an ammonia leak,  and to investigate ammonia vapor  releases from pipes and valves within 48  hours  without input from at least one employee  having experience and knowledge  specific to the process being evaluated,  and failing to ensure the findings of the  process hazard analysis were resolved in  a timely manner and actions documented  failing to provide workers with an  appropriate respirator for chlorine and  sodium hydroxide releases  failing to provide workers adequate  training and information regarding the  hazards of  ammonia  lack of control procedures to protect  workers from electrical hazards and being  struck or caught by machine parts exposing employees to trip hazards and  potential electrical hazards by obstructing  passageways  failing to conduct fire, chemical release,  and extreme weather evacuation drills.", "OSHA initiates unprogrammed inspections in response to required  employer reporting of fatalities or severe injuries and complaints or  referrals from sources such as employees, union representatives, media  reports, or others. Unprogrammed inspections may include issues  covered by a relevant emphasis program as well. OSHA\u2019s unprogrammed  inspections of the meat and poultry industry recently increased sharply\u2014 from 95 in 2014 to 210 in 2015\u2014mainly due to the new severe injury  reporting requirements (see fig. 7). According to agency officials, OSHA  decreased the number of planned programmed inspections in order to  reallocate resources as the number of unprogrammed inspections  increased.", "If OSHA determines that a meat or poultry plant has violated a workplace  safety or health standard, it may cite the plant, specifying which standard  or standards were violated (see fig. 8). The most frequently cited standard  for employers in the meat and poultry industry, the control of hazardous  energy (lockout/tagout), relates to safely shutting down a machine, and  ensuring it remains shut off, while the machine is being serviced. OSHA  inspects safety controls related to this standard as part of its emphasis  program for amputations.", "In cases where an applicable standard does not exist, OSHA may use the  general duty clause of the OSH Act to cite a plant for exposing its  employees to a hazard. For example, OSHA does not have a specific  standard related to ergonomic hazards, which may cause MSDs.  Workers we interviewed in all five states said they frequently experience  pain related to postures or movements, and medical experts we  interviewed said that meat and poultry workers experience high rates of  MSDs. Citing the general duty clause can be challenging and resource  intensive due to the high burden of proof necessary to establish each  element of the violation, such as the difficulty in showing that work  hazards caused an injury, according to OSHA officials.", "In 2016, OSHA proposed initial meat and poultry plant penalties with a  median of $7,000 and assessed final penalties with a median of $4,900  for inspections where violations were found (see fig. 9). Proposed  penalties may be reduced after employers contest them before an  administrative law judge, or as a result of negotiating penalty amounts  with OSHA through an informal settlement process. A representative of  one worker advocacy group we interviewed said lowering penalties  weakens OSHA\u2019s deterrence capabilities. OSHA officials and one worker  advocate said that allowing companies to negotiate lower penalties can  benefit workers because it may result in companies agreeing to create  safety programs or finding other solutions that improve worker safety.  One OSHA official said that citations may affect a company\u2019s workers\u2019  compensation insurance rate, magnifying the financial impact of the  violation. According to OSHA officials, initial and final penalties  increased in 2010 due to administrative adjustments that had the effect of  raising penalties on average. We previously reported that, according to an  OSHA official, OSHA increased penalties in 2010 after it determined that  penalties were too low to deter employer violations. In addition, officials  said that a few large penalties raised average penalties in 2010-2013.", "OSHA compliance assistance efforts during the years 2005-2016  included worker outreach through local foreign consulates, support for  training meat and poultry workers, administering employer recognition  programs, and supporting state consultation programs that provide  technical assistance to small and medium-sized businesses. OSHA has  not comprehensively tracked its compliance assistance activities in the  past, but officials told us the agency launched a database module that  started tracking these activities in fiscal year 2017. Recent examples of  OSHA\u2019s compliance assistance efforts related to meat and poultry plants  include the following:", "OSHA officials stated that in fiscal years 2011-2015, states provided  558 on-site consultation visits, largely funded by OSHA, to small and  medium-sized meat and poultry plants. The visits provide confidential  safety and occupational health advice to small and medium-sized  businesses in all states across the country, according to OSHA, with  priority given to high-hazard worksites. These on-site consultation  programs, at no cost to employers, work with employers to develop or  maintain injury and illness prevention programs, which included  assisting employers on identifying potential hazards to prevent  injuries, according to OSHA officials.", "OSHA officials stated that, as of July 2016, six meat and poultry  plants were participating in the Safety and Health Achievement  Recognition Program, which recognizes small and medium-sized  businesses that have used OSHA's on-site consultation program  services and operate an exemplary injury and illness prevention  program, according to OSHA officials.", "OSHA officials stated that, as of July 2016, eleven meat and poultry  plants participated in OSHA\u2019s Voluntary Protection Programs (VPP),  which aim to recognize employers that implement effective safety and  health management systems and maintain worker injury and illness  rates below average for their industry.", "OSHA has published guidance and other resources related to safety  and health in the meat and poultry industry, such as a 2013  publication on preventing musculoskeletal injuries in poultry  processing, and a poultry processing safety and health topics web  page.", "OSHA provided grants for worker safety and health education to  nonprofit organizations through the Susan Harwood Training Grant  Program. These grants target underserved or low-literacy workers and  workers in high-hazard industries. For example, in fiscal year 2016,  OSHA awarded a grant to the Western North Carolina Workers  Center to train poultry workers on topics including personal protective  equipment, hazard mapping, ergonomics, and sanitation worker  safety.", "OSHA officials stated that the agency conducted outreach with poultry  industry representatives to discuss common hazards, such as MSDs  and infectious pathogens, among others. For example, according to  OSHA officials, in support of a Regional Emphasis Program on poultry  processing, OSHA\u2019s Dallas Regional Office conducted workshops in  the southwestern United States in December 2015 to share safety  and health information with employers in the poultry processing  industry.", "OSHA worked with groups such as unions, trade or professional  organizations, and educational institutions through its Alliance  program to develop compliance assistance tools and share  information with employers and workers to help prevent injuries,  illnesses, and fatalities in the workplace. For example, OSHA officials  said that the agency has formed alliances with foreign consulates to  reach workers with limited English proficiency. Also, OSHA\u2019s Omaha  Area Office has an alliance with local organizations to help protect  workers in the meat packing industry."], "subsections": []}]}, {"section_title": "OSHA Faces Challenges Identifying Worker Concerns, Responding to Medical Mismanagement, and Gaining Entry to Some Plants", "paragraphs": [], "subsections": [{"section_title": "Identifying Worker Concerns", "paragraphs": ["OSHA faces challenges identifying and addressing meat and poultry  worker safety and health concerns because workers may be reluctant to  speak with inspectors, according to workers we interviewed in four states,  as well as worker advocates. Workers we interviewed in four states said  they fear dismissal or other punishment if they complain to OSHA or their  state OSH agency about their workplace concerns, such as sustaining  injuries or being discouraged from using the bathroom. We reported in  2016 that meat and poultry worker vulnerability may hinder reporting of  work-related illnesses and injuries, according to federal officials and  worker advocacy groups. In particular, these officials and advocates said  that some meat and poultry workers may be less likely to report or seek  treatment for injuries and illnesses because of their vulnerable status as  undocumented or foreign-born workers and because of their economic  vulnerability.", "Meat and poultry workers may also be reluctant to share information with  OSHA at their workplace, as on-site interviews often do not allow workers  to remain anonymous, even when conducted in private, according to  workers in one state, as well as worker advocates we interviewed.  According to OSHA officials, OSHA generally conducts worker interviews  on-site during inspections. Officials added that, when OSHA conducts on- site interviews, inspectors tell plant supervisors which workers they wish  to speak with, so the supervisors can find replacements for these workers  on the production line. Therefore, the supervisor knows the identities of  interviewed workers, even if the interview itself is private. Officials added  that if workers cannot be pulled from the line, they are sometimes  interviewed in front of other workers as they continue working. The OSH  Act prohibits employers from retaliating against employees for filing  complaints with OSHA. However, OSHA officials, workers from two  states, and worker advocates we spoke with noted that workers may feel  more comfortable sharing concerns about hazards if they are interviewed  off-site.", "The OSHA Field Operations Manual, which sets forth OSHA\u2019s  enforcement policies and procedures, allows inspectors to interview  workers in locations other than the workplace, and states that, \u201ca free and  open exchange of information between OSHA inspectors and employees  is essential to effective inspections.\u201d OSHA\u2019s performance goals in  DOL\u2019s Strategic Plan include preventing discrimination against workers  who report hazards. According to OSHA officials, they will try to  schedule an interview off-site if an employee expresses discomfort or if a  union arranges it. Officials stated that they do not automatically offer off- site interviews to each employee; rather, inspectors should consult with  their Area Directors before offering to conduct an interview off-site.  However, OSHA officials told us that inspectors interview meat and  poultry workers off-site infrequently, since off-site interviews can be  challenging and take additional time, as workers may be difficult to  contact or may have ceased working with the company.  OSHA also may  be challenged to find an acceptable venue when the employee is  available. They added that conducting interviews off-site is more feasible  in cases when unions or worker advocacy groups have facilitated these  meetings, and that interviewing workers on the production line may be  advantageous in some cases, as it allows workers to clarify some  uncertainties by showing the inspector how their work is done. According  to federal internal control standards, agencies should use quality  information to achieve their objectives. Although OSHA officials stated  that OSHA has taken steps to enable the collection of quality information  from workers, such as conducting a representative number of interviews  and refraining from reporting information from specific interviews to  employers, officials acknowledged that some workers may feel more  comfortable sharing concerns about hazards if they are interviewed off- site. Taking additional steps to encourage workers to disclose sensitive  concerns, such as by considering off-site interviews or exploring other  options to obtain the information anonymously, would help OSHA learn  details about hazards, injuries, and illnesses during an inspection and  provide additional information to help improve the agency\u2019s efforts to  identify or address conditions that endanger worker safety and health.", "In particular, OSHA may not be aware of the scope of bathroom access  issues, which meat and poultry workers we interviewed in all five states  said was a concern, because the agency\u2019s reliance on interviewing  workers on-site may cause it to miss concerns of workers who are afraid  to speak up. In addition, OSHA inspectors do not always ask specifically  about bathroom access, and workers who experience bathroom access  problems may not volunteer this information. OSHA\u2019s sanitation standard  provides that \u201ctoilet facilities, in toilet rooms separate for each sex, shall  be provided in all places of employment,\u201d based on the number of  employees of each sex. According to OSHA guidance, this standard requires employers to make toilet facilities available so that employees  can use them when they need to, and may not impose unreasonable  restrictions on employee use of the facilities. OSHA guidance also  states that denial or delay of bathroom access can result in various  serious health effects, such as urinary tract infections, constipation,  abdominal pain, and hemorrhoids.", "Meat and poultry workers may be denied timely bathroom breaks  because they work in an assembly line environment, which generally  requires workers to be replaced if they leave their station. Workers we  interviewed in all five states said their requests to use the bathroom are  often delayed or denied, and workers in two states said they fear  punishment if they ask to use the bathroom too frequently or complain  about lack of bathroom access to their supervisors or to OSHA. Worker  advocates we spoke with reported hearing similar concerns on a frequent  basis and four worker advocacy groups in different regions of the country  reported concerns related to the timeliness of workers\u2019 access to  bathrooms based on non-generalizable interviews of poultry workers.  For example, workers we interviewed in three states said they had  suffered negative health effects, such as kidney problems, from delayed  or denied bathroom breaks. One worker said she refrained from eating or  drinking until she had completed her shift, to avoid needing a bathroom  break. Also, workers we interviewed in all five states said that long lines  at the bathroom further limited bathroom access.", "Meat and poultry industry representatives we interviewed said that  bathroom access is not a problem because companies provide bathroom  access when needed. They said companies take different approaches to  ensuring bathroom access, such as having a supervisor fill in for a worker  who leaves the line, establishing scheduled breaks, or allowing workers to  leave the line as needed, even without a replacement. However,  according to worker advocates, supervisors may vary in implementing  plant policy and may feel pressure to fulfill production quotas. One  industry representative told us they believe some supervisors in meat and  poultry plants deny bathroom access in order to maximize production  output.", "OSHA officials said they did not believe lack of bathroom access was a  widespread problem in the meat and poultry industry. However, OSHA  officials said they have not compared bathroom access practices in the  meat and poultry industry with other industries involving moving  production lines because they vary by establishment even within a single  industry. OSHA issued a citation in March 2016 to a meat plant related to  bathroom access, although that citation is currently being contested by  the employer, and is pending as of September 15, 2017, according to  officials. From 2005 through 2016, OSHA issued three additional citations  to meat and poultry plants related to bathroom access; however, these  citations were withdrawn after the employers reached formal or informal  settlements with OSHA. OSHA guidance for inspecting poultry plants  allows inspectors to ask specifically about bathroom access when there  are complaints about it or prior problems, or in the context of specific  regional emphasis programs, such as the poultry emphasis program in  the southeast United States. In addition, OSHA\u2019s poultry processing  regional emphasis programs in regions IV and VI require the inspector to  assess the adequacy of toilet and sanitary facilities, and of worker access  to them. If there are no prior complaints or relevant emphasis programs,  OSHA officials said inspectors ask workers about any other concerns, but  do not always specifically ask about bathroom access. Officials said that  requiring inspectors to investigate bathroom access would divert  inspectors\u2019 limited resources from higher-priority hazards and could result  in companies\u2019 claiming that the line of questioning is unsubstantiated.  OSHA requires inspectors at poultry plants to consistently investigate  other specific hazards, such as ergonomics hazards. According to OSHA  officials, the agency selected these hazards based on prior inspection  and illness and injury data showing the hazards to be widespread in the  industry. Officials contrasted these with the small number of citations  issued related to bathroom access.", "However, given that workers whom we asked about bathroom access  during off-site interviews in all five states said that bathroom access is a  problem, and worker advocates we interviewed stated it was as well, it is  possible that OSHA is missing instances of this hazard, resulting in  incomplete data to guide its inspections. According to federal internal  control standards, managers should use quality information to achieve the  agency\u2019s objectives. While officials stated they believe that inspectors\u2019  open-ended questions will prompt workers to share any concerns they  have with bathroom access, workers may not volunteer this information  unless specifically asked. For example, workers may not be aware that  they have the right to access bathrooms and so may not realize that such  information would be of interest to OSHA, according to one worker  advocate we interviewed. Gathering additional information about whether  meat and poultry workers experience delayed or denied access to  bathrooms could help OSHA determine the extent of the problem and be  better positioned to protect worker safety and health."], "subsections": []}, {"section_title": "Addressing Medical Mismanagement at Plant Health Units", "paragraphs": ["OSHA officials told us that addressing medical mismanagement at meat  and poultry plants is challenging because of the complex issues involved  and OSHA\u2019s limited oversight of plants\u2019 health unit staff. Specifically, they  said that ensuring proper certification for medical providers is the  responsibility of state authorities. In hazard alert letters to four meat and  poultry plants, OSHA noted its concern that plant health unit staff were or  may have been inappropriately supervised and working beyond the scope  of their medical license. Officials said OSHA contacted state authorities  who oversee health unit staff in one state about licensing concerns, and  they planned to contact additional states.", "OSHA officials we interviewed expressed concern about meat and poultry  workers\u2019 access to plant first aid stations or health units and the quality of  medical treatment workers receive. OSHA issued one general duty  clause citation and four hazard alert letters to five meat and poultry plants  in 2015-2016 related to medical mismanagement issues, which describe OSHA\u2019s findings or concerns about inappropriate medical treatment, lack  of worker access to health care, underqualified practitioners, and  challenges to reporting (see sidebar).", "In the citation, OSHA found that the plant delayed care for injured  workers, stating these actions could result in risk of further injury or  exacerbated pain, among other conditions.", "In a 2015 hazard alert letter to a poultry plant, OSHA noted that it  appeared the plant used its first aid station to prevent injuries from  appearing on the plant\u2019s OSHA log, such as by failing to refer workers  to a physician for evaluation or treatment when appropriate. In  addition, OSHA noted that a number of workers were fired after  suffering MSDs, sometimes on the same day of the MSD occurrence,  and further noted workers\u2019 fears of being fired for visiting the first aid  station. OSHA recommended voluntary improvements to the plant\u2019s  medical management practices.", "In a 2014 hazard alert letter to another poultry plant, OSHA identified  practices that it determined were contrary to good medical practice for  managing work-related MSDs, including prolonged treatment by  nursing station staff without referral to a physician. The letter included  one example in which a worker made over 90 visits to the nursing  station before referral to a physician.", "Meat and poultry workers we interviewed in all five states reported  problems with on-site medical care; for example, workers said their  supervisor or plant nurse may not take appropriate steps when a worker  is injured or ill, such as not referring the worker to a doctor or failing to  move the worker to a different work station on the line. Worker advocates  we spoke with reported hearing similar concerns. One worker we  interviewed said that she experienced severe pain in her wrist and visited  the on-site medical unit over the course of 3 months before they referred  her to a doctor affiliated with the plant, during which time she continued to  work. When the doctor did not find any problems on her X-ray, she went  to a doctor unaffiliated with the plant, who found a bone fracture. Meat  and poultry workers in three states also said that fear of being  reprimanded or losing their jobs sometimes compels them to refrain from  accessing care at a plant health unit, or from complaining about  inadequate medical care. Workers in one state said they are penalized  every time they visit their plant health unit.", "Amputation Leads to OSHA Detection of  Medical Mismanagement and Other  Hazards  Following the amputation of a worker\u2019s finger  at a poultry plant in 2016, the Occupational  Safety and Health Administration (OSHA)  conducted inspections and cited the plant for  violations related to: deficiencies with the procedures meant to  stressors as they performed tasks  requiring repetitive, forceful motion for  extended periods of time, often in  awkward positions  failure to comply with generally accepted  good engineering practices with respect  to exhaust systems, ammonia sensors,  and alarms, exposing workers to the  hazards posed by a potential ammonia  release  failure to provide free personal protective  equipment to workers  failure to repair or replace damaged  electrical equipment, exposing workers to  the risk of electrical shock.", "According to one industry representative, plants do not have enough  guidance on how to ensure their health units are properly staffed and  operated. OSHA issued guidance in 1999 about occupational health  professionals\u2019 qualifications and scope of practice, as well as a 2006 best  practices guide on the fundamentals of a workplace first aid program.  However, OSHA officials told us these guidance documents do not  address many of the medical management issues they are currently  observing in plant health units, which include lack of supervision of  medical personnel, personnel working outside their scope of practice, out- of-date health unit protocols, inappropriate response to injuries and  illness, lack of quality assurance, poor worker access to health units, and  inadequate recordkeeping. OSHA officials told us that the agency has  recently begun updating its guidance related to health units to help clarify  employers\u2019 responsibilities with regard to the personnel in these units and  the services they provide. However, these updates have not been  completed, according to officials. Federal internal control standards call  for agencies to externally communicate the information needed to achieve  their objectives. By updating and issuing its guidance, OSHA could help  plant health units be better positioned to provide appropriate care to  injured and ill workers.", "OSHA also issued hazard alert letters  recommending the plant take steps to address  the following hazards: medical management practices that  prevent appropriate standards of care,  increase the likelihood of workers  developing serious musculoskeletal  disorders, restrict referrals to physicians,  and discourage employees from reporting  symptoms and injuries.", "In some cases, plant management may deny entry to OSHA inspectors  attempting to conduct an inspection, and resolving these issues can  create delays. Although the OSH Act authorizes OSHA inspectors to  enter plants \u201cwithout delay\u201d at reasonable times to conduct inspections,  employers have the right to refuse entry, in which case OSHA may seek  an inspection warrant. If the employer denies entry after OSHA obtains  a warrant, OSHA determines its response on a case-by-case basis.  Denials of OSHA inspector entry to meat and poultry plants increased in  2016. All 15 denials in that year occurred in region IV, which includes the  Southeast United States. In contrast, from 2005-2015, there were 16  denials of entry in the meat and poultry industry. The denials in 2016 took  place in Georgia (6), Alabama (5), Florida (2) and Mississippi (2).  According to OSHA officials, the agency experienced denials in all 15  cases when it inspected a plant in response to a complaint or referral and  moved to expand the inspection to incorporate its regional emphasis  program for the poultry industry. OSHA has not been able to expand its  inspections in any of these cases, according to OSHA officials. These  denials of entry have the potential to limit OSHA\u2019s understanding of  worker safety and health in plants during the days or months prior to  gaining entry, and addressing denials is resource-intensive, according to  OSHA officials. There is currently ongoing litigation in a case in which  OSHA was inspecting a plant after an employee was burned by an  electrical fire. OSHA attempted to expand the inspection under a relevant  emphasis program, and the plant contested the expansion in court. OSHA  officials said that the case is pending as of September 15, 2017, and they  will consider the outcome of the case when determining their response to  any similar denials of entry in the future."], "subsections": []}]}]}, {"section_title": "OSHA and FSIS Have Not Fully Implemented MOU That Outlines Collaboration on Worker Safety and Health", "paragraphs": ["OSHA and FSIS\u2019s main vehicle for collaboration on worker safety and  health is their 1994 MOU, but efforts to implement and evaluate this  agreement have been limited. The MOU outlines the policies and  procedures the agencies agreed to use, including (1) a process for FSIS  to refer serious hazards facing plant workers or FSIS inspectors to OSHA,  (2) plans for OSHA and FSIS to develop and implement training for FSIS  staff in hazard recognition, and (3) an agreement to coordinate standards  development and exchange information on matters of common concern.  In 2005, we found that agency efforts to implement this MOU had lapsed,  and we recommended that OSHA and FSIS revisit and update certain  aspects of their MOU, as discussed below. OSHA and FSIS have taken  some steps to implement the policies and procedures outlined in the  MOU. However, we found issues with the MOU\u2019s implementation in these  three areas, hampering achievement of the MOU\u2019s goals. Further, OSHA  and FSIS have not evaluated the implementation of the MOU."], "subsections": [{"section_title": "Making Referrals to OSHA", "paragraphs": ["The 1994 MOU calls for FSIS inspectors\u2014who may observe hazards to  both plant workers and inspectors\u2014to refer serious workplace hazards to  OSHA, via FSIS headquarters. Serious hazards are defined in the MOU  as those for which there is a substantial probability that death or serious  physical harm could result. The two agencies have established a process  for these referrals, but according to FSIS officials its inspectors are  reluctant to make them, as discussed below. Until 2014, FSIS inspectors  were to refer these hazards to OSHA by sending a referral to OSHA via  FSIS headquarters, but, according to FSIS officials, inspectors rarely  made referrals under the former system. In 2014, FSIS established a  procedure for its inspectors to notify OSHA directly of serious workplace  hazards that may affect both FSIS inspectors and plant workers and  issued a notice that provides instructions for inspectors to use OSHA\u2019s  nationwide public toll-free number to report such hazards. Because the  agencies are not able to track all of these referrals, as callers can remain  anonymous, it is not possible to assess the extent to which FSIS  inspectors are making them, according to OSHA officials. OSHA data  show that since 2012, OSHA had received 14 complaints and 2 referrals  about FSIS, of which 5 phone calls were from FSIS current or former  employees, but these data are likely incomplete.", "According to FSIS officials, its inspectors may be reluctant to make these  referrals because they fear it could trigger an OSHA inspection of FSIS.  As a federal employer, FSIS is responsible for ensuring its own  employees are protected from plant hazards, and is subject to OSHA  inspection and notification of safety and health hazards faced by its  employees. OSHA data show that from 2005 to 2016, OSHA inspected  FSIS in meat and poultry plants 105 times, of which 14 were in response  to complaints and referrals. FSIS occupational safety and health  specialists said these inspections can be a drain on their resources  because they are time-consuming and there are very few FSIS safety and  health specialists to respond to them. FSIS employs three occupational  safety and health specialists, along with one team lead, resulting in a ratio  of one specialist for every 3,100 employees, according to FSIS officials.  FSIS inspectors we contacted did not report communicating with OSHA,  and stated that they share any worker safety concerns they might have  with their management or with plant contacts. FSIS occupational safety  and health specialists told us that FSIS requests technical assistance  from OSHA to address hazards that may affect both plant workers and  FSIS inspectors. However, they said that OSHA may inspect FSIS  instead of providing assistance, even though OSHA has other ways of  offering technical assistance to federal agencies. For example, FSIS  occupational safety and health specialists told us that when they reached  out to OSHA for assistance with hazards posed by peracetic acid, OSHA  instead inspected FSIS for what FSIS considered to be unrelated  hazards.", "According to OSHA officials, their enforcement team is obligated to  respond to complaints and referrals, including calls to their toll-free  number, and may inspect FSIS if there is a report of a hazard at a meat or  poultry plant to which FSIS employees are exposed. OSHA officials noted  that FSIS employees should not be reluctant to report hazards because  OSHA inspections can protect FSIS workers. OSHA officials told us that  they are able to provide assistance with hazards if FSIS contacts OSHA\u2019s  area offices, but if in the process, OSHA learns about a potential hazard  that is FSIS\u2019s responsibility, then OSHA may investigate the agency.  FSIS officials told us they did not believe this process would ensure a  quick enough response by OSHA to provide FSIS assistance with urgent  hazards that could be harming FSIS inspectors and plant workers."], "subsections": []}, {"section_title": "Training FSIS Staff", "paragraphs": ["OSHA and FSIS agreed under the 1994 MOU to provide training to FSIS  inspectors so that they could recognize serious workplace hazards faced  by plant workers and FSIS inspectors. OSHA officials told us they  developed such training for FSIS in the mid to late 1990s, but according  to FSIS officials the course was too excessive and burdensome for FSIS  inspectors, whose main responsibility is food safety. In 2005, we  recommended that OSHA and FSIS revisit and update their MOU to  ensure that FSIS inspectors receive training in recognizing and referring  workplace hazards to OSHA. The two agencies did not update their MOU,  but FSIS officials told us the agency strengthened its training of FSIS  inspectors and OSHA officials told us that the agency planned to  cooperate with FSIS to encourage revitalization of FSIS\u2019s inspector  training. According to FSIS officials, in 2013, FSIS began requiring its  inspectors whose duties were not limited to being on the line to take  AgLearn 8500, an FSIS course on identifying and reporting hazards that  was reviewed by OSHA. This course\u2014which is now available only on  CD\u2014is required for inspectors who do not work on the line and is optional  for those who do. In 2014, OSHA provided three training sessions on  identifying workplace hazards to FSIS managers, according to OSHA  officials. However, FSIS was not able to provide information on whether  or how the managers who received the training had shared what they  learned with FSIS inspectors because it did not track this information."], "subsections": []}, {"section_title": "Coordinating Standards Development", "paragraphs": ["Line Speed  Meat and poultry slaughter and processing  generally occurs along a \u201cdisassembly line,\u201d  on which workers and machines produce  various cuts of meat. These lines can include  live hang in poultry plants, evisceration lines,  and \u201ccone\u201d lines where deboning occurs. The  Food Safety and Inspection Service (FSIS)  sets maximum evisceration line speed in  order to ensure its inspectors can effectively  perform their inspection procedures.  According to FSIS officials, FSIS does not  regulate the speed of other lines, which may  run slower than evisceration lines due to  complex worker tasks. The Occupational  Safety and Health Administration (OSHA)\u2014 which is responsible for overseeing worker  safety and health\u2014does not play a role in  regulating line speed, according to FSIS and  OSHA officials.  GAO reported in 2016 on concerns that high  line speeds may exacerbate existing hazards  that can cause musculoskeletal disorders  (MSD). OSHA and National Institute for  Occupational Safety and Health (NIOSH)  officials told us that line speed\u2014in conjunction  with forceful exertions, awkward postures, and  other factors\u2014affects the risk of MSDs. When  plants increase line speed, they may address  worker safety by increasing staffing or  creating new lines. speed may affect worker safety (see sidebar). FSIS officials told us that  OSHA provided comments after the proposed poultry modernization rule  was published in the Federal Register. According to the fall 2016 unified  regulatory agenda, FSIS is working on a proposed rule to amend the  federal meat inspection regulations to establish a new inspection system  for hog slaughter establishments. FSIS officials told us they consulted  with OSHA officials about the possible worker safety implications of the  proposed rule on hog slaughter prior to the rule being sent to OMB.  However, they also stated that\u2014contrary to the OSHA officials cited  above\u2014they believed the OMB review process was sufficient for  addressing any worker safety implications in rules proposed by FSIS."], "subsections": []}, {"section_title": "Evaluating the Implementation of the MOU", "paragraphs": ["FSIS and OSHA agreed to jointly evaluate the effectiveness and impact  of the actions taken under the MOU\u2014in part by tracking the number of  FSIS referrals to OSHA, inspections made in response to these referrals,  and the number and types of hazards cited in these inspections\u2014and to  make adjustments to the MOU as appropriate. According to FSIS and  OSHA officials we spoke with, this has not been done. Neither OSHA nor  FSIS was able to tell us why these evaluations did not take place. For  example, the MOU states that when training has been completed, OSHA  and FSIS will analyze field-level evaluations to assess whether the  training has raised FSIS inspectors\u2019 awareness and reporting of serious  workplace hazards. OSHA officials said they do not know if FSIS used the  training materials they provided to FSIS to train FSIS field inspectors.  FSIS officials said the training OSHA provided was too time-consuming,  so they did not use it. Further, FSIS officials told us the agency does not  formally survey staff who complete AgLearn 8500 because it is available  only on CD. Our prior work has noted that developing mechanisms to  monitor, evaluate, and report results can help enhance and sustain  collaboration. Evaluating the implementation of the MOU and making  any needed changes, including setting specific timeframes for periodic  evaluations of actions taken under the MOU, would help ensure the goals  of collaboration are fully met."], "subsections": []}]}, {"section_title": "Gaps in Federal Review, Safety Information, Measurement, and Research May Put Meat and Poultry Workers at Risk of Harm from Certain Chemicals", "paragraphs": [], "subsections": [{"section_title": "Federal Reviews of Certain Chemicals Leave Gaps Related to Plant Worker Safety", "paragraphs": ["Federal reviews of certain antimicrobial chemicals before they are used in  meat and poultry plants leave gaps with respect to worker safety and  health. FSIS inspectors and workers in meat and poultry plants are  exposed to antimicrobial chemicals every day, as they are commonly  used during all work shifts, both on animal and bird carcasses and on  work surfaces and machinery. In general, the potential for chemical  exposure is greater for plant workers than for FSIS inspectors. According  to officials we spoke with at various plants, plant workers handle these  chemicals by receiving shipments, opening containers, and filling  machines with the chemical, among other ways, while FSIS inspectors  are generally not present at various times that workers are using the  chemical, most notably, when the plant is being cleaned between shifts.", "Depending on a chemical\u2019s intended use, it may or may not undergo a  federal review of the risks it poses to worker safety and health before it is  used in the plant. The regulation of chemicals used in meat and poultry  plants is complex, as several federal agencies have their own specific  areas of jurisdiction with regard to their oversight. OSHA does not  conduct reviews of chemicals before they are used in the workplace,  according to OSHA officials. OSHA officials stated that the agency is  limited from taking such an approach, because doing so would  overwhelm the agency\u2019s resources. In addition, OSHA is charged with  oversight of workers in multiple industries\u2014not just the meat and poultry  industry\u2014which would make it difficult for them to utilize a review process  that examines all chemicals before they are used in the workplace.", "Antimicrobial chemicals intended for use as sanitizers in plants to clean  machines and surfaces are generally subject to EPA\u2019s pesticide  registration process, which considers user or worker safety (see fig. 10).  This review does not generally include antimicrobial chemicals applied  directly to meat and poultry in plants.", "When antimicrobials are proposed for use directly on meat or poultry to  combat foodborne pathogens, FDA and FSIS both conduct reviews  before they are used in the plant, but neither review specifically focuses  on plant worker safety or health. FDA\u2019s review of antimicrobial food  additives is focused on ensuring they are safe for consumers to eat.  FSIS\u2019s review is focused on ensuring that the antimicrobials do not affect  the safety of meat and poultry products or interfere with inspections and  that they comply with other FSIS regulations; it also includes an  assessment of any adverse effects on FSIS inspector safety and health  as they perform their duties. Since these federal reviews do not generally  take into consideration the occupational risk of chemicals to plant  workers, who make up the majority of personnel in a plant, these  chemicals could be used in plants directly on meat or poultry to combat  foodborne pathogens without a federal assessment of their potential  effects on plant worker safety and health or how these effects may be  prevented or addressed. As a result, plant workers may be put at risk of  chemical hazards.", "During its review of antimicrobial chemicals proposed for use directly on  meat or poultry, FSIS receives information from chemical manufacturers  that could be relevant to chemical safety for both FSIS plant-level officials  and meat and poultry workers. FSIS occupational safety and health  officials told us that the information they request goes beyond what is  included in the chemicals\u2019 Safety Data Sheets, and may include directions  for use or safety information that is specific for dilution levels and  conditions of use at plants. However, this information is not shared with  OSHA, NIOSH, at the local level with FSIS in-plant inspectors, or with  plant management because FSIS does not have a process for doing so.  OSHA and FSIS occupational safety and health officials and an industry  representative we interviewed told us that this information would be useful  to them when it is available. OSHA officials told us that information on  chemical hazards, employee exposure, and safety controls and practices  would enable it to strengthen its response to protecting all workers from  these chemical hazards and develop outreach and technical assistance  for the meat and poultry industry.", "An FSIS safety and health official told us that this information would have  been useful at one plant, because neither plant management nor FSIS  inspectors at the plant had received information to adequately protect  FSIS employees from the effects of peracetic acid, and there had been  complaints from inspectors about the chemical. In addition, NIOSH  conducts occupational safety and health research, among other things,  and could benefit from such information. Federal internal control  standards call for agencies to internally and externally communicate the  necessary quality information to achieve the entity\u2019s objectives. By FSIS  establishing a process to regularly share the worker safety information it  collects during reviews of new chemicals\u2014internally with FSIS inspectors  and externally with plant management, OSHA, and NIOSH\u2014the federal  government will be better positioned to use existing resources to support  the safety and health of plant workers and FSIS inspectors."], "subsections": []}, {"section_title": "Gaps in Inspector Safety Information", "paragraphs": ["As discussed above, FSIS conducts reviews of new ingredients and  technologies, including antimicrobial chemicals, proposed for use on meat  and poultry products8. However, there may be information gaps in FSIS\u2019s  examination of the potential risks these new chemicals may pose to  inspector safety and health. As part of this review, FSIS requests  information from chemical manufacturers or plants describing how the  new chemicals will not adversely affect the safety and health of FSIS  inspectors. As FSIS\u2019s Environmental, Safety, and Health Group reviews  this information, other program areas within FSIS also review the  submission to determine whether the chemical is otherwise safe and  suitable under the conditions of its intended use\u2014i.e., that it will not  adversely affect product safety, violate FSIS regulations, or interfere with  inspection procedures. If FSIS determines that the chemical will not have  these effects, the agency will issue a letter of \u201cno objection\u201d for the use of  the new chemical.", "It is unclear whether FSIS consistently reviews these chemicals to ensure  they will not adversely affect inspector safety and health because the  agency does not have a robust process for tracking and sharing  information needed to make this determination among the various  program areas within the agency participating in the review. Officials in  FSIS\u2019s Environmental, Safety, and Health Group told us that they often  initially receive inadequate information to make this determination,  despite new guidance developed in 2015 on the type of information that  chemical manufacturers and plants may submit to enable FSIS to  evaluate potential adverse effects to inspector safety. In cases where  they do not receive sufficient information, the Environmental, Safety, and  Health Group will ask the FSIS program area that is leading the review to  request additional information from the manufacturer or plant. However,  FSIS does not have a process that seamlessly tracks the worker safety  information it receives as part of its review process, and FSIS  occupational safety and health officials told us it is not clear whether  submissions contain complete inspector safety information before a \u201cno  objection\u201d letter is issued. In response, other FSIS officials told us that  they would not approve a new chemical until they have adequate  information that shows it will not adversely affect the safety and health of  FSIS inspectors, among other things.", "Improving communication within FSIS about this review process is one  goal of FSIS\u2019s 2017 Annual Plan. To help implement this goal, FSIS  formed a working group in April 2017 that is developing a draft directive to  facilitate improved coordination among the program areas involved in the  review process, including the Environmental, Safety, and Health Group.  More specifically, the draft directive provides procedures and protocols  and describes an electronic system for tracking information submitted.  According to FSIS officials coordinating reviews, the electronic system will  replace the current manual system and will be accessible to all program  areas involved in the review process. Further, the draft of a \u201cno objection\u201d  letter will be distributed to the program areas involved in the review to  ensure that all remaining outstanding questions or issues related to the  notification have been addressed prior to issuing the letter to the  submitter. According to an FSIS official, the agency plans to finalize and  issue the draft directive by the end of calendar year 2017 and anticipates  converting to the electronic tracking system in fiscal year 2018."], "subsections": []}, {"section_title": "Gaps in Measurement", "paragraphs": ["OSHA and FSIS officials told us that they have faced challenges  responding to complaints about air quality in meat and poultry plants,  because it is hard to measure airborne peracetic acid. According to  OSHA, FSIS, and NIOSH officials, there is no sufficiently reliable method  to measure peracetic acid in plants, in part because peracetic acid is not  stable and breaks down quickly. As a result, it is harder to assess the  extent of worker exposure to this chemical and plan for an appropriate  response. Some plants currently use monitors to sample for the  components of commercial peracetic acid (acetic acid and hydrogen  peroxide); however, the effects of peracetic acid exposure on workers can  be different than those caused by either of these individual chemicals or  by mixtures of peracetic acid with other chemicals.", "In 2013, OSHA\u2019s Salt Lake Technical Center began working to develop a  validated sampling and analytical method that would permit measurement  of airborne peracetic acid with a high degree of confidence. Work on the  method continues, according to OSHA officials. NIOSH has begun  evaluating a range of commercially available peracetic acid monitors and  is planning to evaluate an air sampling method for peracetic acid.  The  lack of a reliable way to measure peracetic acid could also affect any  efforts by OSHA to develop a permissible exposure limit (PEL), a type of  workplace safety and health standard that officials said would enable the  agency to more easily cite employers for exposing their workers to  peracetic acid hazards, compared to using the general duty clause.  According to OSHA officials, the process for developing PELs is arduous,  and peracetic acid is one of many chemicals without such a limit or with  one that is outdated. In response to our 2012 report, which found  OSHA\u2019s standard-setting process to be challenging and lengthy, OSHA  and NIOSH developed an MOU to support their research on developing  potential standards."], "subsections": []}, {"section_title": "Gaps in Peracetic Acid Research", "paragraphs": ["In March 2017, NIOSH announced its intent to initiate a study of  workplace uses of and occupational exposure to peracetic acid, but this  study will not examine the safety and health hazards this chemical may  pose if it is combined with other chemicals, as can happen in slaughter  plants. The NIOSH study aims to develop an immediately dangerous to  life or health (IDLH) value and an effective workplace measurement  method, among other things. While the focus of this research is the  characterization of workplace exposure to peracetic acid, the study is not  intended to address the extent and consequences of mixing peracetic  acid with other substances, which can occur in several ways in meat and  poultry plants. As carcasses move from one stage of processing to  another, peracetic acid can come into contact with other substances,  such as when there are spills or in drainage systems. FSIS officials, a worker advocate, and plant workers we interviewed expressed concern  that the mixing of chemicals can create new safety and health risks for  workers. For example, an FSIS official said that an inspector at a poultry  plant complained about effects from airborne chemicals that appeared to  be related to the location of her work station, directly over a drain in which  multiple substances were pooling. In 2011, 152 workers at an Arkansas  poultry plant reported being hospitalized from effects of chlorine gas  created after a supervisor added sodium hypochlorite (bleach) into a  container holding a residual acidic antimicrobial solution, creating a  chemical reaction.", "NIOSH officials told us they are aware that chemicals can be used in  plants alongside peracetic acid and result in a mixed exposure, and that  this may be a serious problem. Although the focus of the current peracetic  acid study is primarily on the health effects of and exposures to peracetic  acid alone, NIOSH officials said that NIOSH has the capability to assist in  characterizing worker exposures of concern, and could consider such  research in a follow-on study, depending on available resources. In  addition, NIOSH officials told us that the agency will consider whether  potential health hazards exist from other chemicals in the environment,  particularly if they interfere with measuring peracetic acid exposures and  assessing health effects in workers. Moreover, officials told us that their  current study could provide the basis of follow-on research into other  workplace chemical hazards, including mixtures.", "In 2004, NIOSH recognized mixed exposures as a priority area for the  occupational safety and health research community and identified  significant gaps and research needs. According to the report, workers  from agriculture, construction, mining, and other industries are commonly  exposed to combinations of chemical substances, biological or physical  agents, and other stressors, and knowledge is limited regarding the  potential health effects of mixed exposures. Identifying these effects can  help characterize worker exposure and develop hazard controls that take  into account the components of the mixtures. According to NIOSH  officials, mixed exposures continue to be important to study because they  may represent a health hazard to workers, and employers should prevent or control workplace exposures to such mixtures. By considering the  addition to the agency\u2019s research agenda of a proposal to examine  peracetic acid\u2019s use in combination with other chemicals, NIOSH will be  better able to characterize worker exposure to such scenarios and  develop controls to reduce this hazard for workers."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["While OSHA\u2019s enforcement efforts in the meat and poultry industry have  increased since we reported in 2005, worker safety and health problems  persist and improvements are needed in identifying worker concerns,  strengthening federal collaboration, and protecting workers from certain  chemicals. Workers we spoke with reported they are reluctant to report  injuries, illnesses, and hazards because they fear losing their jobs. There  is a mismatch between concerns we heard from workers and the  problems reported by OSHA, particularly in the area of bathroom access.  Taking additional steps to encourage workers to disclose sensitive  concerns and gathering additional information to determine the scope of  bathroom access issues could enable OSHA to better identify worker  safety and health concerns. OSHA\u2019s efforts to address medical  mismanagement at plants\u2014which has resulted in poor medical care for  workers\u2014could be improved by issuing updated guidance for employers  on how to manage their health units. Collaboration between OSHA and  FSIS is limited and has improved little since we recommended in 2005  that the two agencies strengthen their 1994 MOU on worker safety. Since  FSIS is already present in many plants, the federal government is missing  out on a cost-effective opportunity to further protect the safety and health  of both plant workers and FSIS inspectors by leveraging resources in this  fiscally constrained environment. Evaluating the implementation of the  MOU and making any needed changes would help ensure the agencies  improve their collaboration. With regard to chemicals, there are gaps in  information sharing and research that have heightened the risk of  chemical hazards for plant workers and FSIS inspectors. In particular,  FSIS collects information on how to protect its inspectors from new  chemicals, but it does not have a process to share this information with its  own inspectors, plant management, OSHA, or NIOSH. By FSIS  establishing a process to regularly share the worker safety information it  collects during reviews of new chemicals, the federal government will be  better positioned to use existing resources to support the safety and  health of plant workers and FSIS inspectors. Finally, NIOSH\u2019s plan to  conduct a study on peracetic acid will likely yield useful information for  meat and poultry worker safety, but it is not intended to address the  potential consequences of mixing peracetic acid with other substances,  which can occur in several ways in meat and poultry plants. By  considering the addition to the agency\u2019s research agenda of a proposal to  examine peracetic acid\u2019s use in combination with other chemicals in meat  and poultry plants, NIOSH will be better able to characterize worker  exposure to such scenarios and develop controls to reduce this hazard  for workers."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making seven recommendations, including four to OSHA, two to  FSIS, and one to NIOSH. Specifically:  The Assistant Secretary of Labor for Occupational Safety and Health  should take additional steps to encourage workers to disclose sensitive  concerns during OSHA inspections of meat and poultry plants; for  example, by considering additional off-site interviews or exploring other  options to obtain information anonymously. (Recommendation 1)", "The Assistant Secretary of Labor for Occupational Safety and Health  should gather more information, such as by asking workers during meat  and poultry plant inspections, to determine the extent to which bathroom  access is a problem and how to address any identified issues.  (Recommendation 2)", "The Assistant Secretary of Labor for Occupational Safety and Health  should update its guidance for employers on how to manage their health  units to address the challenges of managing these units.  (Recommendation 3)", "The Assistant Secretary of Labor for Occupational Safety and Health  should work with FSIS to assess the implementation of the MOU and  make any needed changes to ensure improved collaboration; and set  specific timeframes for periodic evaluations of the MOU.  (Recommendation 4)", "The FSIS Administrator should work with OSHA to assess the  implementation of the MOU and make any needed changes to ensure  improved collaboration; and set specific timeframes for periodic  evaluations of the MOU. (Recommendation 5)", "The FSIS Administrator should develop a process to regularly share the  worker safety information it collects during its review of new chemicals  with FSIS inspectors, plant management, OSHA, and NIOSH.  (Recommendation 6)", "The Director of NIOSH should consider including in the agency\u2019s research  agenda a proposal for examining the extent of peracetic acid\u2019s use in  combination with other chemicals in meat and poultry plants, and any  safety and health hazards these combinations may pose to workers.  (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the U.S. Department of Labor (DOL),  the U.S. Department of Agriculture (USDA), the U.S. Department of  Health and Human Services (HHS), and the Environmental Protection  Agency (EPA) for their review. DOL\u2019s Occupational Safety and Health  Administration (OSHA), USDA\u2019s Food Safety and Inspection Service  (FSIS), and HHS provided written comments that are reprinted in  appendixes II, III, and IV, respectively. In an e-mail dated October 5,  2017, an EPA audit liaison indicated that EPA had no comments. OSHA  did not state whether it concurred or not with the four recommendations  made to it. USDA expressed concern with the draft report\u2019s  characterization of FSIS\u2019s collaborative efforts and also described  planned actions to address the two recommendations we made to it. HHS  agreed with the one recommendation we made to it. DOL and HHS  provided technical comments, which we incorporated as appropriate.", "With respect to our first recommendation that OSHA take additional steps  to encourage workers to share information during meat and poultry  inspections, OSHA stated that it fully supports the idea of continuous  improvement of its processes that would expand its ability to identify and  address hazards before an injury, illness, or fatality occurs. However,  OSHA noted that it would be challenging to conduct offsite interviews in  terms of witness cooperation, resources, and inspector safety. We  continue to believe that OSHA should take steps to enhance reporting by  meat and poultry workers. Our report describes meat and poultry workers\u2019  reluctance to report injuries, illnesses, and hazards to OSHA because of  their fear of employer retaliation. OSHA\u2019s Field Operations Manual  highlights the importance of a free and open exchange of information  between OSHA inspectors and employees for conducting effective  inspections. Conducting additional offsite interviews is one way to  encourage employee reporting. However, there may be alternative  additional steps OSHA could take to better position it to encourage  workers to disclose sensitive concerns, consistent with our  recommendation.", "With respect to our second recommendation that OSHA gather additional  information to determine the extent to which bathroom access is a  problem in meat and poultry plants, OSHA stated it could not commit to  routinely asking about bathroom access at each meat and poultry  inspection. OSHA stated that each inspection requires a flexible approach  to address unique worksite hazards. It further stated that OSHA does not  routinely ask questions about any potential hazards that go beyond the  scope of a complaint inspection, unless those hazards are in plain sight.  However, as noted in the report, OSHA does require inspectors at poultry  plants to consistently investigate other specific hazards, such as  ergonomics hazards. Our report highlights the challenges meat and  poultry workers may face gaining timely access to bathrooms. However,  workers might not volunteer access information to OSHA. Our work  identified a mismatch between the concerns we heard from workers and  the problems reported by OSHA. Better understanding the scope of  bathroom access problems would better position OSHA to respond  appropriately. Further, OSHA may choose to address this issue without  routinely asking workers about bathroom access, such as by selectively  querying workers based on criteria determined by the agency.", "With respect to our third recommendation to update its guidance for  employers on management of plant health units, OSHA stated that it  intends to revisit its guidance.", "With respect to our fourth and fifth recommendations for OSHA and FSIS  to work together to assess the MOU\u2019s implementation, make changes to  improve collaboration, and set timeframes for periodic evaluations of the  MOU, neither agency stated whether it agreed or not. OSHA stated that  meat and poultry plants provide an opportunity for the two agencies to  work collaboratively to identify employee hazards and promote safety and  health, but OSHA did not comment specifically on the recommendation.  FSIS stated that it already has directives in place to recognize and report  hazards affecting FSIS employees, and acknowledged that the MOU was  designed to additionally have FSIS employees report hazards affecting  plant employees due to the regular presence of its inspectors in plants.  FSIS noted that in collaborating with OSHA, FSIS will need to ensure its  primary mission is not compromised by undertaking activities that take  time and resources away from its food safety inspection responsibilities.  We continue to believe that strengthening the MOU and developing a  mechanism to regularly evaluate it would help ensure that the goals of the  MOU are met, and that leveraging FSIS\u2019s presence in plants provides the  federal government with a cost-effective opportunity to protect worker  safety and health.", "With respect to our sixth recommendation that FSIS regularly share the  worker safety information it collects during its review of new chemicals  with FSIS inspectors, plant managers, OSHA, and National Institute for  Occupational Safety and Health (NIOSH), FSIS stated that the agency  already has a process for sharing chemical safety information with its  inspectors. However, FSIS has not provided us with evidence that it has  shared the worker safety information it collects related to new chemicals,  such as safety information that is specific for dilution levels and conditions  of use at plants, as noted in the report. FSIS also stated that it would take  certain steps to share information about approval of chemicals with other  agencies such as OSHA and NIOSH, but the steps identified did not  include sharing worker safety information. Incorporating worker safety  information would further help enhance this information sharing. FSIS  further stated that some of the information collected during its review of  new chemicals may be proprietary.", "In addition, FSIS also expressed concern with how we characterized its  collaboration with OSHA and NIOSH on worker safety. Specifically, in  reference to the report\u2019s discussion of the development of the poultry  inspection modernization rule, FSIS stated that it consulted with and  included OSHA and NIOSH during the appropriate step of the rulemaking  process, and that the agency followed the Administrative Procedure Act in  proposing the rule. We do not intend to suggest any deficiencies with  FSIS\u2019s rulemaking procedures. Rather, our report points out possible  opportunities for earlier and enhanced collaboration with OSHA on  standards development. FSIS also requested that GAO include  information in the report about the directive FSIS issued to implement the  annual attestation on work-related conditions required by the poultry  modernization final rule, and that the agency is sharing the information it  receives as part of this process with OSHA. We have incorporated this  information into the report.", "In its written comments, HHS agreed with our seventh recommendation  that it consider including in NIOSH\u2019s research agenda a proposal for  examining the extent of peracetic acid\u2019s use in combination with other  chemicals in meat and poultry plants, and any safety and health hazards  these combinations may pose to workers.", "As agreed with your office, unless you publicly announce the comments  of this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees; the secretaries of Labor,  Agriculture, and Health and Human Services; and the Administrator of  EPA. 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) 512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report (1) describes the efforts the Occupational Safety and Health  Administration (OSHA) in the U.S. Department of Labor (DOL) has made  to help ensure meat and poultry workers\u2019 safety and health, and assesses  what, if any, challenges OSHA faces in carrying out these efforts; (2)  examines how OSHA and the U.S. Department of Agriculture\u2019s (USDA)  Food Safety and Inspection Service (FSIS) have collaborated to help  ensure meat and poultry worker safety and health; and (3) assesses any  factors that may affect OSHA and FSIS efforts to protect meat and poultry  workers from chemical hazards.", "The estimated total employment for the animal slaughtering and  processing industry in this report is an annual average calculated from  household data collected by the Current Population Survey (CPS) in  2016. The CPS is a probability sample and estimates derived from its  data have sampling errors associated with them. We followed the DOL  Bureau of Labor Statistics (BLS) technical guidance for estimating the  standard error of annual average totals from CPS data. We express our  confidence in the precision of our estimate as a 95 percent confidence  interval. This is the interval that would contain the actual population value  for 95 percent of the CPS samples that the U.S. Census Bureau could  have drawn.", "To describe injury and illness rates in the meat and poultry industry, we  analyzed and reported survey data from the BLS Survey of Occupational  Injuries and Illnesses (SOII) for calendar years 2004 through 2015 (the  most recent year for which data were available). The SOII provides  estimates of the number and frequency (incidence rates) of workplace  injuries and illnesses by industry and also by detailed case  circumstances, such as injury type and event, and worker characteristics  for cases that result in days away from work, based on data from logs  kept by employers (survey respondents)\u2014private industry and state and  local governments. Survey respondents provide counts for all recordable  injuries and illnesses under OSHA recordkeeping regulations.", "To report SOII data from the meat and poultry industry (using North  American Industry Classification System (NAICS) code 31161 for the  animal slaughtering and processing industry), BLS provided estimates of  each industry\u2019s injury and illness incidence rates and their associated  relative standard errors. All estimates produced from the analysis of the  SOII data are subject to sampling errors. We express our confidence in  the precision of the results as a 95 percent confidence interval. This is the  interval that would contain the actual population value for 95 percent of  the samples the respective agency could have drawn. For estimates  derived from BLS\u2019s SOII data, we used the agency-provided relative  standard errors to estimate the associated confidence intervals. All  estimates we report have the associated 95 percent confidence interval  provided.", "To assess the reliability of BLS SOII data, we reviewed documents  related to the data sources, such as BLS\u2019s Handbook of Methods, and we  interviewed agency officials knowledgeable about these data. We found  that SOII data were sufficiently reliable for our purposes in generally  reporting estimated incidence rates of injuries and illnesses in the meat  and poultry industry.", "To address all three objectives, we reviewed relevant federal laws and  regulations and interviewed officials from OSHA and FSIS. We also  visited four states\u2014Arkansas, Georgia, Minnesota, and Texas\u2014selected  based on factors such as high production of meat or poultry; regional  emphasis programs focusing on meat or poultry; presence of an OSHA  regional or area office; presence of industry and worker advocate  contacts; and access to meat or poultry plants participating in the  Voluntary Protection Program or the Safety and Health Achievement  Recognition Program. We used USDA statistics on the numbers of  cattle, hogs, chicken, and turkeys slaughtered annually in the United  States as a proxy for meat and poultry production for each state. As  appropriate for each site visit, we met with either local OSHA or state  Occupational Safety and Health (OSH) agency officials, as well as FSIS  officials (including inspectors, supervisors, and an occupational safety  and health official), industry representatives, experts in issues related to  worker safety, and representatives of worker advocacy groups; and we  visited four meat and poultry plants. At each plant, we met with plant  management, FSIS management and inspectors, and plant safety and  health staff, as available. The information gathered from these interviews  is not generalizable to all plants or meat or poultry workers.", "We also interviewed and reviewed information from additional  stakeholders, including experts in issues related to worker safety, as well  as representatives of worker advocacy groups. We identified and  interviewed these stakeholders based on previous work and on referrals  from other stakeholders. We also attended worker safety conferences  hosted by the meat industry, the poultry industry, and worker advocates.", "We also conducted group and individual interviews with meat and poultry  workers in six locations in five states: Arkansas, Delaware, Nebraska,  North Carolina, and Virginia. We interviewed between six and  approximately 30 workers per state, totaling approximately 72 workers  across all 5 interviews. We selected sites based on a variety of factors,  such as states with a relatively high level of meat or poultry slaughter,  according to USDA data; type of plant (meat or poultry); and geographic  diversity. We also considered resource availability and the ability of  supporting organizations to coordinate worker interviews. We coordinated  with worker advocacy groups or worker centers to identify meat and  poultry workers who were available and willing to meet with us. Interviews  were conducted in English or Spanish. The information gathered from  these interviews is not generalizable to all meat or poultry workers.", "To describe the efforts OSHA has made to help ensure meat and poultry  workers\u2019 safety and health and assess any challenges, we reviewed  relevant documentation, such as agency guidance and information about  enforcement and compliance assistance activities. We interviewed  officials from OSHA and FSIS, as well as representatives of the meat and  poultry industry. We also analyzed enforcement data from calendar years  2005-2016 from two OSHA databases: the OSHA Information System  and OSHA Legacy Data. We examined data starting in 2005 because our  previous report on OSHA inspections in the meat and poultry industry  examined inspections data through 2004. We analyzed enforcement  data on federal and state inspections of meat and poultry plants, including  data on the type of inspection, violations found, standards cited, penalties  assessed, and whether inspectors were denied entry into the plant. To  analyze the number of inspections and the results of OSHA inspections of  meat and poultry plants, we analyzed inspections of plants with NAICS  codes 311611, 311612, and 311613 for meat plants, and NAICS code  311615 for poultry plants. To assess the reliability of the data, we  reviewed relevant agency documentation, conducted electronic data  testing, and interviewed agency officials knowledgeable about these data.  Based on these reviews, we determined that the data were sufficiently  reliable for our purposes. To assess OSHA\u2019s efforts, we compared  information we learned to internal controls from Standards for Internal  Control in the Federal Government that call for agencies to use quality  information and to internally and externally communicate the necessary  quality information to achieve the entity\u2019s objectives.", "To examine how OSHA and FSIS have collaborated to help ensure meat  and poultry worker safety and health, we reviewed relevant  documentation, such as information about OSHA\u2019s and FSIS\u2019s  collaborative activities, and we interviewed officials from OSHA and FSIS.  To analyze information on OSHA inspections of FSIS in meat and poultry  plants, we used the most recent data available for calendar years 2005- 2016 from the OSHA Information System and OSHA Legacy Data. We  also requested FSIS confirm which establishments pertained to the meat  and poultry industry. In assessing agency efforts, we reviewed the 1994  memorandum of understanding (MOU) agreed to by OSHA and FSIS,  and prior GAO reports that highlight interagency collaboration. We also  compared information we learned from officials to internal controls from  Standards for Internal Control in the Federal Government that call for  agencies to internally and externally communicate the necessary quality  information to achieve the entity\u2019s objectives.", "To assess any factors that may affect OSHA and FSIS efforts to protect  meat and poultry workers from chemical hazards, we reviewed relevant  documentation, such as Environmental Protection Agency (EPA), Food  and Drug Administration (FDA), and FSIS processes for reviewing new  workplace chemicals, including FSIS\u2019s Compliance Guideline Procedures  for New Technology Notifications and Protocols. We interviewed officials  from OSHA, EPA, FDA, and FSIS to understand how these reviews are  carried out and the extent to which agencies coordinate and share  information. We also interviewed representatives of the meat and poultry  industry. We compared information we learned from our review of  documents and interviews with officials to internal controls from  Standards for Internal Control in the Federal Government that call for  agencies to internally and externally communicate the necessary quality  information to achieve the entity\u2019s objectives. To understand efforts  underway to develop tools to measure the presence of chemicals used in  plants, we reviewed scientific information on chemicals, such as peracetic  acid, and interviewed officials from OSHA\u2019s Salt Lake Technical Center  regarding validated sampling and analytical methods.", "Focus shifted to peracetic acid during the course of our review because it  was identified by FSIS officials and worker advocates as a chemical  commonly used in plants for which OSHA had no permissible exposure  limit, and FSIS officials told us there were complaints the new chemical  was causing illnesses. We reviewed National Institute for Occupational  Safety and Health (NIOSH) health hazard evaluations to understand the  extent of concerns related to chemicals, including peracetic acid. To  identify any gaps in peracetic acid research, we reviewed documents,  including NIOSH\u2019s 2017 Request for Information on peracetic acid, as  well as NIOSH\u2019s research agenda and goals for studying the mixture of  chemicals, including its 2004 Mixed Exposures Research Agenda. We  also interviewed officials from NIOSH\u2019s Education and Information  Division.", "We conducted this performance audit from May 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Blake Ainsworth, (Assistant  Director), Mary Denigan-Macauley, Eve Weisberg (Analyst-in-Charge),  Rosemary Torres Lerma, Monika Gomez, Linda Collins, Erik Kjeldgaard,  Cathy Roark, Susan Aschoff, James Bennett, Almeta Spencer, Sarah  Cornetto, Monica Savoy, and Hiwotte Amare made significant  contributions to this report.", "Also contributing to this report were Ivelisse Aviles, Carl Barden, Tim  Bober, Kevin Bray, Marcia Crosse, John Mingus, Steve Morris, Ardith  Spence, and Mark Ward."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Workplace Safety and Health: Additional Data Needed to Address  Continued Hazards in the Meat and Poultry Industry. GAO-16-337.  Washington, D.C.: April 25, 2016.", "Regulatory Guidance Processes: Selected Departments Could  Strengthen Internal Control and Dissemination Practices. GAO-15-368.  Washington, D.C.: April 16, 2015.", "Chemical Assessments: Agencies Coordinate Activities, But Additional  Action Could Enhance Efforts. GAO-14-763. Washington, D.C.:  September 29, 2014.", "Food Safety: USDA Needs to Strengthen Its Approach to Protecting  Human Health from Pathogens in Poultry Products. GAO-14-744.  Washington, D.C.: September 30, 2014.", "Food Safety: More Disclosure and Data Needed to Clarify Impact of  Changes to Poultry and Hog Inspections. GAO-13-775. Washington,  D.C.: August 22, 2013.", "Workplace Safety and Health: OSHA Can Better Respond to State-Run  Programs Facing Challenges. GAO-13-320. Washington, D.C.: April 16,  2013.", "Workplace Safety and Health: Further Steps by OSHA Would Enhance  Monitoring of Enforcement and Effectiveness. GAO-13-61. Washington,  D.C.: January 24, 2013.", "Managing for Results: Key Considerations for Implementing Interagency  Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September  27, 2012.", "Workplace Safety and Health: Multiple Challenges Lengthen OSHA\u2019s  Standard Setting. GAO-12-330. Washington, D.C.: April 2, 2012.", "Workplace Safety and Health: Better OSHA Guidance Needed on Safety  Incentive Programs. GAO-12-329. Washington, D.C.: April 9, 2012.", "Workplace Safety and Health: Enhancing OSHA\u2019s Records Audit Process  Could Improve the Accuracy of Worker Injury and Illness Data.   GAO-10-10. Washington, D.C.: October 15, 2009.", "OSHA\u2019s Voluntary Protection Programs: Improved Oversight and Controls  Would Better Ensure Program Quality. GAO-09-395. Washington, D.C.:  May 20, 2009.", "Whistleblower Protection Program: Better Data and Improved Oversight  Would Help Ensure Program Quality and Consistency. GAO-09-106.  Washington, D.C.: January 27, 2009.", "Workplace Safety and Health: OSHA Could Improve Federal Agencies\u2019  Safety Programs with a More Strategic Approach to Its Oversight.   GAO-06-379. Washington, D.C.: April 21, 2006.", "Results-Oriented Government: Practices That Can Help Enhance and  Sustain Collaboration among Federal Agencies. GAO-06-15. Washington,  D.C.: October 21, 2005.", "Workplace Safety and Health: Safety in the Meat and Poultry Industry,  While Improving, Could Be Further Strengthened. GAO-05-96.  Washington, D.C.: January 12, 2005.", "Workplace Safety and Health: OSHA\u2019s Voluntary Compliance Strategies  Show Promising Results, But Should Be Fully Evaluated before They Are  Expanded, GAO-04-378. Washington, D.C.: March 19, 2004.", "Workplace Safety and Health: OSHA Can Strengthen Enforcement  through Improved Program Management. GAO-03-45. Washington, D.C.:  November 22, 2002.", "Workplace Safety and Health: OSHA Should Strengthen the Management  of Its Consultation Program. GAO-02-60. Washington, D.C.: October 12,  2001.", "Food Safety: Weaknesses in Meat and Poultry Inspection Pilot Should Be  Addressed Before Implementation. GAO-02-59. Washington, D.C.:  December 17, 2001.", "Worker Protection: Better Coordination Can Improve Safety at Hazardous  Material Facilities. GAO-01-62. Washington, D.C.: October 26, 2000.", "Community Development: Changes in Nebraska\u2019s and Iowa\u2019s Counties  with Large Meatpacking Plant Workforces. GAO/RCED-98-62.  Washington, D.C.: February 27, 1998."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-575", "url": "https://www.gao.gov/products/GAO-18-575", "title": "North American Energy Integration: Information about Cooperation with Canada and Mexico and among U.S. Agencies", "published_date": "2018-08-02T00:00:00", "released_date": "2018-08-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to a U.S. government study, increased U.S. energy trade with Canada and Mexico\u2014two of the United States' top energy trade partners\u2014is viewed as a major contributor to U.S. economic prosperity and energy security. In recent years, North American energy production has experienced changes. For example, the United States has become the world's top oil producer, Canada has substantially increased its oil outputs, and Mexico has implemented energy reforms. To address energy production and trade issues, the public sector and private sector stakeholders have advocated for further integration of the three North American countries' energy sectors.", "GAO was asked to review the role of U.S. agencies in supporting energy integration in North America. This report examines (1) ways in which the U.S., Canadian, and Mexican governments cooperate on North American energy integration; (2) U.S. agencies' activities to facilitate North American energy integration; (3) U.S. agencies' efforts to coordinate among themselves on North American energy integration; (4) ways in which U.S. agencies receive feedback from U.S. industry and civil society regarding North American energy integration; and (5) steps that U.S., Canadian, and Mexican officials suggested to further facilitate North American energy integration. GAO reviewed bilateral and trilateral cooperation activities and mechanisms; surveyed U.S. agencies involved in energy integration; and interviewed U.S., Canadian, and Mexican energy officials.", "GAO is not making any recommendations in this report."]}, {"section_title": "What GAO Found", "paragraphs": ["Cooperation. The United States cooperates with Canada and Mexico on integrating North American energy markets and infrastructure (energy integration). Cooperation occurs at the presidential and ministerial levels (e.g., the countries' secretaries or ministers of energy) for strategic issues and at the agency level for technical issues. However, progress on some strategic issues has been limited. For example, development of a North American energy strategy, which the U.S. Department of Energy (DOE) proposed in March 2017, was suspended later that year because of disagreement about its scope. Discussions of the strategy resumed in 2018, according to DOE officials.", "Agency activities. Eight U.S. agencies have engaged in multiple efforts to facilitate North American energy integration. DOE generally serves as the lead agency on energy integration issues, while the Department of State\u2014the lead agency on foreign policy\u2014also leads some bilateral and trilateral efforts. Other agencies play roles in areas such as regulatory compliance or efforts to open energy markets. Agency officials GAO surveyed and interviewed identified 81 energy integration\u2013related activities conducted in 2014 through 2017, including international agreements and other instruments, research and development, technical forums and assistance, regulatory cooperation, and trade promotion.", "Interagency coordination. U.S. agency officials reported coordinating on energy integration through high-level U.S. interagency meetings, summits, and other means. For example, agencies participating in a National Security Council\u2013led working group share information, provide advice, and coordinate on activities. Agency officials also reported using mechanisms such as stakeholder forums and staff discussions to coordinate on energy integration issues.", "Stakeholder feedback. U.S. agencies receive feedback on energy integration issues from the private sector and civil society through formal mechanisms such as comments in the Federal Register and public\u2013private advisory entities. For example, the U.S.\u2013Mexico Energy Business Council is designed to capture private sector feedback. Informal feedback comes through activities such as emails, phone calls, and letters.", "Steps suggested by U.S., Canadian, and Mexican officials . Officials in the three countries expressed general satisfaction with intergovernmental cooperation on energy integration and said cooperative activities had helped foster integration. They also suggested further work in areas such as aligning energy regulations.", "Source: GAO analysis of information provided by U.S, Canadian, and Mexican officials. | GAO-18-575"]}], "report": [{"section_title": "Letter", "paragraphs": ["Increased energy trade with Canada and Mexico\u2014both of which have  open, stable, diversified, and market-driven economies\u2014is viewed as a  major contributor to U.S. economic prosperity and energy security,  according to a U.S. government study. The energy sector across North  America is extensively integrated, with billions of dollars traded in oil,  natural gas and petroleum products each year that are transported  through various modes of infrastructure. Moreover, the United States\u2019  energy trade relationships with Canada and Mexico have undergone  important changes. For example, in recent years, the United States has  become the world\u2019s top oil producer, Canada has increased its oil output  substantially, and Mexico has implemented energy reforms. While the  United States\u2019 energy trade with Canada and Mexico has helped to  promote general economic growth in all three countries, it has also  prompted debate on topics such as the environmental impacts of energy  resource development and the expansion of energy infrastructure. To  address issues related to regional energy production and trade and  support regional prosperity and energy security, stakeholders from the  public and private sectors in all three North American countries have  expressed support for further integration of the countries\u2019 energy sectors.", "We were asked to review the role of U.S. agencies in supporting the  integration of North American energy markets and infrastructure (North  American energy integration). This report examines (1) ways in which  the U.S., Canadian, and Mexican governments cooperate on North  American energy integration; (2) U.S. agencies\u2019 activities to facilitate  North American energy integration; (3) U.S. agencies\u2019 efforts to  coordinate among themselves on North American energy integration; (4)  ways in which U.S. agencies obtain feedback and input from U.S. industry  and civil society regarding North American energy integration; and (5)  steps that U.S., Canadian, and Mexican officials suggested to further  facilitate North American energy integration.", "To examine the ways in which the U.S., Canadian, and Mexican  governments cooperate on North American energy integration, we  interviewed U.S., Canadian, and Mexican officials about the processes  used to cooperate on energy integration at the strategic and technical  levels. We also reviewed documents and information on cooperation  mechanisms provided by these officials. To examine agencies\u2019 activities  to facilitate North American energy integration, we reviewed U.S. agency  documents and interviewed officials regarding agencies\u2019 roles and  responsibilities related to energy integration. We also developed an  inventory of U.S. agencies\u2019 activities related to energy integration, based  on information that agencies provided in response to a survey in which  we asked about their activities during 2014 through 2017.To examine  U.S. federal agencies\u2019 efforts to coordinate among themselves and obtain  feedback and input from industry and civil society regarding North  American energy integration, we interviewed cognizant U.S. government  officials and a nongeneralizable sample of private sector and civil society  representatives. We used information obtained through these discussions  to describe the various mechanisms and processes that U.S. agencies  use to coordinate among themselves and to communicate with industry  and civil society. In addition, we interviewed participants of an ongoing  interagency working group to obtain their perspectives related to key  considerations in implementing interagency collaboration. To examine  steps suggested by U.S., Canadian, and Mexican officials to further  facilitate North American energy integration, we asked officials in each  country to suggest steps to further facilitate integration; we report  suggestions discussed by at least one official in all three countries. See  appendix I for a more detailed description of our scope and methodology.", "We conducted this performance audit from April 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "North American Energy Trade", "paragraphs": ["Energy markets across the United States, Canada, and Mexico are  extensively integrated. For example, Canada and Mexico\u2014respectively,  the largest and fourth largest foreign suppliers of crude oil to the United  States\u2014together supply almost half of total U.S. petroleum imports,  according to DOE data. The United States is by far Canada\u2019s most  significant crude-oil customer. In addition, Canada and Mexico are major  buyers of petroleum products refined in the United States. A growing  trade in natural gas produced in the United States is also increasingly  important to the energy relationship among the three countries, according  to a government report. Moreover, trade in the other energy  commodities, such as electricity, natural gas liquids, and coal, is  comparatively small yet important to some U.S. regions. In 2017, the  value of the energy trade between the United States and its North  American neighbors exceeded $125 billion, with almost $83 billion in U.S.  energy imports and almost $43 billion in exports, according to U.S.  Census data (see fig. 1)."], "subsections": []}, {"section_title": "Cross-Border Energy Infrastructure", "paragraphs": ["Extensive cross-border infrastructure is used to transport oil, refined  petroleum products, and natural gas between the United States and both  Canada and Mexico. Pipelines are the primary means of transporting  crude oil from Canada to the United States; at present, six pipeline  systems link the petroleum-producing regions in western Canada to U.S.  markets. Marine vessels are the primary means used to convey Mexican  crude oil imported by the United States. Marine vessels are also used to  transport more than 75 percent of refined petroleum products exported by  the United States to Canada and Mexico, and pipelines, rail, or trucks are  used to transport the remainder. Pipelines are also used to transport all  U.S. exports of natural gas to Canada and Mexico as well as Canadian  gas exports to the United States, with 24 pipelines crossing the U.S.\u2013 Canadian border and 16 pipelines crossing the U.S.\u2013Mexican border.", "Cross-border electrical infrastructure is significant between the United  States and Canada but is limited between the United States and Mexico.  There are 30 major U.S.\u2013Canadian transmission connections, while  synchronized U.S.\u2013Mexican connections exist only at the border between  Mexico and the state of California."], "subsections": []}, {"section_title": "North American Energy Integration and Security", "paragraphs": ["According to the U.S. Department of Energy (DOE), energy integration is  in the interest of all North American countries because it expands the size  of energy markets, creates economies of scale to attract private  investment, lowers capital costs, and can reduce energy costs for  consumers. Expanding energy systems may also allow for the  development of a more diverse mix of energy resources, processing  facilities, and end uses, all of which increase energy security.", "The International Energy Agency defines energy security as the  uninterrupted availability of energy sources at an affordable price.  According to agency documents, long-term energy security primarily  involves timely investments to supply energy to meet economic  development and environmental needs. Short-term energy security  focuses on the ability of the energy system to react promptly to sudden  changes in the supply-demand balance."], "subsections": []}, {"section_title": "Mexico\u2019s Energy Reform", "paragraphs": ["Energy reforms in Mexico\u2019s oil and gas sector, which received limited  capital investment for decades, could contribute to North American  energy and security as well as cross-border energy trade, according to  government reports. Until 2013, Mexico\u2019s constitution prohibited foreign  involvement in most activities in the oil and power sectors, according to a  think-tank report. According to the report, the Mexican congress enacted a sweeping energy reform in 2013 that ended the state-owned oil  company PEMEX\u2019s monopoly over oil exploration and production and the  state-owned electric company Federal Electricity Commission\u2019s control  over electricity generation. As a result, Mexico\u2019s energy sector opened to  foreign investment in ways not possible since the sector was nationalized  in 1938, providing new opportunities for U.S. investors, according to the  think-tank report and the Congressional Research Service. According to  Mexican government officials, since that time Mexico has established or  revamped a number of agencies to govern and operate its energy sector  and has awarded leases and contracts to expand exploration, production,  and distribution of energy supplies. Since Mexico\u2019s reform was enacted,  U.S. companies have participated in winning bids for each of Mexico\u2019s oil  and gas tenders, with $6.5 billion pledged in upstream investment,  according to the think-tank report."], "subsections": []}, {"section_title": "North American Free Trade Agreement Renegotiation", "paragraphs": ["The current administration has made the renegotiation of the North  American Free Trade Agreement (NAFTA) a priority; as of April 2018,  negotiations to renew NAFTA had been ongoing since August 2017.  According to a January 2017 Congressional Research Service report,  since NAFTA entered into force on January 1, 1994, its market-opening  provisions have gradually eliminated nearly all tariff and most nontariff  barriers on goods produced and traded within North America, including  energy commodities. In addition, according to energy industry  representatives, despite previous limited investment opportunities in  Mexico, NAFTA has enhanced North American energy integration,  facilitating a greater flow of oil, natural gas, and petroleum-derived  products among all three North American countries."], "subsections": []}, {"section_title": "U.S. Agencies\u2019 Roles and Responsibilities Related to North American Energy Integration", "paragraphs": ["A number of U.S. agencies oversee activities related to energy  collaboration efforts with Mexico and Canada. We identified the following  eight agencies as having a role in energy cooperation efforts that may  support North American energy integration.", "Department of Energy (DOE). DOE is responsible for advancing the  energy, environmental, and nuclear security of the United States.  DOE also plays a lead role in North American energy integration  activities. DOE has established partnerships with its primary  government partners in Canada and Mexico\u2014the Department of  Natural Resources of Canada (Natural Resources Canada) and  Mexico\u2019s Secretariat of Energy\u2014through various memorandums of  understanding (MOU). While multiple DOE offices engage in energy  integration activities, the Office of International Affairs has primary  responsibility for international energy cooperation and leads key  cooperation initiatives. The Office of International Affairs is  responsible for coordinating the framework for bilateral collaboration  between DOE and Natural Resources Canada. According to DOE,  areas of U.S.\u2013Canadian cooperation include responsible development  of unconventional oil and gas, safe and modern infrastructure,  responsible use of energy and energy efficiency, and carbon capture  and storage. DOE issues presidential permits for cross-border electric  transmission lines and associated facilities, authorizes electricity  export and is responsible for authorizing natural gas exports from the  United States. Authorization for natural gas exports is granted  without modification or delay for U.S. partner countries in free trade  agreements that provide for national treatment for trade in natural gas,  which, according to Congressional Research Service, presently  includes Canada and Mexico.", "Department of the Interior (Interior). Interior plays an important role  in domestic energy production, managing energy produced on  America\u2019s federally managed lands and the U.S. outer continental  shelf, including oil, gas, coal, wind, solar, and hydropower. Interior  also has important cooperative relationships with counterpart  agencies in Canada and Mexico, according to Interior officials. As  subject matter experts, various Interior offices, such as the Bureau of  Ocean Energy Management, and the Bureau of Safety and  Environmental Enforcement collaborate with their counterparts in  Canada and Mexico to share information, experience, and best  practices and provide advice and technical assistance. Interior\u2019s  Office of International Affairs is responsible for providing coordination  and support as needed on cross-cutting international issues that  relate to more than one bureau, including energy cooperation.", "Department of Commerce (Commerce). Commerce\u2019s International  Trade Administration works to remove barriers to U.S. energy  development and trade, notably U.S. exports of energy resources and  products to Mexico and Canada. The International Trade  Administration also works to open markets for energy products in  Mexico and Canada, and organizes trade missions.", "Department of State (State). As the lead agency for foreign policy  related to energy, State may play a part in most bilateral and trilateral  efforts. State\u2019s role related to North American energy integration  includes that of a convening or facilitating authority. State\u2019s Bureau of  Energy Resources typically leads these activities but also works  closely with State\u2019s Bureau of Western Hemisphere Affairs. In  addition, as subject matter experts, State energy and economic  officers at embassies in Canada and Mexico report on energy policy  and market developments and play a role in communicating, and  helping to facilitate interactions, with other U.S. federal agencies and  their foreign counterparts. Further, the Secretary of State plays a key  role in energy infrastructure because of his or her responsibility in  issuing or denying presidential permits for liquid petroleum pipelines  that cross U.S. international borders.", "Department of Transportation (DOT). DOT plays a role in regulating  and enforcing safety standards for the transportation of energy  products, including crude oil and gas, ethanol, and natural gas.  According to DOT, its Pipeline and Hazardous Materials Safety  Administration is responsible for regulating and ensuring the safe and  secure movement of energy and other hazardous materials to industry  and consumers by all modes of transportation, including pipelines.  DOT officials work closely with their counterparts in Canada and  Mexico when developing draft regulations related to various energy  transportation issues, notably those that could affect cross-border  trade and safety.", "Federal Energy Regulatory Commission (FERC). As an  independent regulatory agency, FERC has authority to regulate the  transmission of electricity, natural gas, and oil between U.S. states  and plays a role in facilitating cross-border natural gas pipelines.  FERC has responsibility for issuing or denying presidential permit  applications for natural gas pipelines that cross the U.S. border with  Mexico or Canada.", "United States Agency for International Development (USAID).  As  part of its mission and in support of U.S. foreign policy, USAID leads  the U.S. government's international development through partnerships  and investments. According to USAID officials, USAID has played a  role in integrating the electricity markets of the United States and  Mexico by supporting the synchronization of regulations, enhancing  investment opportunities, and creating easier transmission  interconnections between the two countries.  As part of those efforts,  USAID facilitated technical exchanges between Mexican officials and  U.S. grid operators, universities, and other stakeholders.", "Department of the Treasury (Treasury). The role of Treasury\u2019s  newly reorganized Office of Investment, Energy, and Infrastructure  includes developing a multipart approach that seeks to promote U.S.  exports of energy and energy infrastructure; attract investments in the  areas of energy and infrastructure; and catalyze private capital for the  financing of exports and investment projects. As part of that approach,  the office is in the process of formulating and negotiating energy  frameworks with foreign partners, including Mexico, according to  officials."], "subsections": []}]}, {"section_title": "U.S., Canadian, and Mexican Governments Cooperate on Energy Integration, although Some Strategic Efforts Have Made Limited Progress", "paragraphs": ["Generally speaking, the United States cooperates on energy integration  with Canada and Mexico strategically at the presidential and ministry  levels and technically at the agency level, although progress on some  strategic efforts has been limited. At the presidential level, trilateral  cooperation has occurred mainly through the North American Leaders\u2019  Summit, where the leaders of the three countries discuss economic  issues, including energy, according to U.S. government officials. The last  summit was in 2016, and as of April 2018 a future summit had not been  scheduled. At the ministry level, DOE and State have recently conducted  meetings with their Canadian and Mexican counterparts. However, efforts  to develop a North American Energy Strategy were placed on hold in late  2017 because of disagreement about its scope, although discussions  resumed in 2018, according DOE officials. At the agency level, U.S.  officials and their counterparts in Mexico and Canada cooperate  technically to address specific issues related to North American energy  integration. Figure 2 illustrates the three levels of cooperation on energy  integration between the U.S., Canadian, and Mexican governments."], "subsections": [{"section_title": "Presidential-Level Cooperation", "paragraphs": ["U.S. cooperation with Canada and Mexico at the presidential level has  occurred primarily through the North American Leaders\u2019 Summit,  according to U.S. government officials. During the summits, the leaders of  the three countries meet to discuss economic, social, and political  issues\u2014including energy\u2014on which the three countries can cooperate.  The summits have taken place every 1 or 2 years since 2005; the last  summit was held in June 2016, in Ottawa. State officials said that if past  patterns were followed, the next summit would be scheduled in 2018 and  hosted by the United States. However, a future summit had not been  scheduled as of April 2018. State officials told us that it is the  responsibility of the White House to decide whether a North American  Leaders\u2019 Summit will take place and that they therefore would not  comment on whether a summit will be scheduled in 2018.", "The 2016 summit, which focused on energy, formalized the North  American Climate, Clean Energy, and Environment Partnership Action  Plan (Action Plan), which included pledges to cut greenhouse gas  emissions from the oil and gas sectors, boost the development of clean  power, and support the development of cross-border transmission lines.  However, according to State officials, implementation by each country is  voluntary, because the commitments in the Action Plan are not binding.  According to State officials, the National Security Council (NSC)\u2014the  agency responsible for implementing the Action Plan\u2014has indicated that  specific aspects of the plan are being reviewed to ensure alignment with  the current administration\u2019s policy priorities. Officials from State, Interior,  and Energy\u2014which are among the agencies responsible for developing  or implementing certain Action Plan commitments\u2014said that, although  they have continued to work with Mexico and Canada on energy-related  issues, efforts to implement the plan had not been conducted since  January 2017.", "The United States has also engaged at the presidential level bilaterally  with Mexico and Canada to address issues that include energy  integration. In a February 2017 meeting\u2014their first during the current  administration\u2014the U.S. President and the Canadian Prime Minister  identified a number of areas in which the two countries agreed to  cooperate, including improving energy security. As of April 2018, the  current administration had not held a presidential meeting with Mexico.  The previous administration held bilateral presidential meetings with both  Mexico and Canada that resulted in the initiation of efforts to improve  energy integration. For example, meetings in 2010 and 2011 led to the  establishment of, respectively, the U.S.\u2013Mexico High-Level Regulatory  Cooperation Council and the U.S.\u2013Canada Regulatory Cooperation  Council to help align the countries\u2019 regulatory principles."], "subsections": []}, {"section_title": "Ministry-Level Cooperation", "paragraphs": ["The U.S. Secretaries of Energy and State cooperate with their Canadian  and Mexican counterparts (i.e., ministers) through meetings focused to  varying extents on energy, according to DOE and State officials. DOE  cooperates with Natural Resources Canada and Mexico\u2019s Secretariat of  Energy through various bilateral and trilateral meetings that focus on  energy collaboration and integration. State holds bilateral and trilateral  ministry-level meetings with its Canadian and Mexican counterparts,  where discussions may include energy cooperation. For example, in  February 2018, State attended the North American Foreign Ministers\u2019  Meeting in Mexico, where energy and the renegotiation of NAFTA were  topics of discussion. State also co-chairs, with Commerce and the United  States Trade Representative, the High Level Economic Dialogue with  Mexico. However, according to Commerce officials, High Level Economic  Dialogue meetings have not been held since 2016.", "According to DOE officials, ministry-level meetings result in important  exchanges of information and collaborative efforts. DOE officials indicated  that ministry-level cooperation on energy integration with Mexico and  Canada has been consistent. For example, soon after his confirmation in  March 2017, the U.S. Secretary of Energy visited Mexico to initiate talks  on cooperation, where he made statements recognizing Mexico\u2019s  importance both as an economic partner and, along with Canada, in  promoting regional energy security. During this visit, the Secretary  announced a proposal to pursue a North American energy strategy that  would promote comprehensive energy and economic security for the  three countries. Characterizing its development as a top priority, the  Secretary stated that the North American energy strategy was meant to  establish a robust trilateral work plan to guide trilateral cooperation on  shared energy interests, such as developing North America\u2019s untapped  energy resources, diversifying energy supplies, and supporting the growth  of each country\u2019s energy industries. Canadian and Mexican energy  officials whom we interviewed expressed agreement with the proposal to  develop a North American energy strategy and indicated that a regional  energy strategy would further facilitate energy integration efforts.", "DOE officials stated that DOE, Natural Resources Canada, and Mexico\u2019s  Secretariat of Energy held a ministry-level meeting in November 2017\u2014 the North American Energy Ministerial\u2014in part to discuss the proposed  trilateral energy strategy. However, efforts to formalize the strategy were  subsequently suspended because of a lack of agreement on its scope,  according to U.S., Canadian, and Mexican officials. Instead, the three  ministries released a joint summary outlining their discussions on efforts  to address regional energy security. According to DOE officials, the  ministries resumed discussions of the strategy in 2018 and are continuing  to work on developing either a joint energy strategy or a separate  document that would accomplish the objective of such a strategy.  However, Canadian officials told us that any expected document on  cooperation may not be comprehensive enough to be labeled a strategy.  Officials of DOE, Natural Resources Canada, and Mexican Secretariat of  Energy said that, despite not having a formal North American energy  strategy, the three countries maintain a cooperative ministry-level  relationship."], "subsections": []}, {"section_title": "Agency-Level Cooperation", "paragraphs": ["U.S. agency staff and their counterparts in Mexico and Canada cooperate  to address specific, technical issues related to North American energy  integration, according to U.S., Canadian, and Mexican officials. According  to DOE officials, cooperation may be trilateral or bilateral and may be led  by various U.S. agencies with the required technical expertise. For  example, according to DOE staff, they are working on a technical project  with Canada and Mexico to improve energy import and export data that  all three countries can use. According to DOE officials, involvement in  agency-level technical cooperation can occur apart from higher-level  strategic or political cooperation and often addresses ongoing issues  essential to the industry\u2019s functioning, such as transborder industry  inspections and information sharing. According to Interior officials,  involvement in agency-level technical cooperation almost always occurs  apart from higher-level strategic or political cooperation.", "Some U.S. agencies\u2019 technical cooperation with their Mexican  counterparts is more recent than their cooperation with their Canadian  counterparts, according to U.S. agency officials. Officials from Interior,  one of the agencies involved in providing technical assistance to Mexico,  explained that since 2013, when Mexico\u2019s energy reform began allowing  private investment in its oil, gas, and electricity sectors, Mexico has  sought to establish regulatory frameworks and oversight mechanisms  comparable to those in the United States and Canada. For example,  according to Mexican officials, Interior assisted Mexico\u2019s regulatory agencies in developing oversight regulations for their oil and gas sectors,  while USAID helped Mexico\u2019s Secretariat of Energy to plan future  electricity infrastructure development and meet its clean energy goals. In  contrast, U.S. agencies\u2019 technical cooperation with Canadian agencies  was already well established, according to some U.S. agency officials."], "subsections": []}]}, {"section_title": "U.S. Agencies Reported Numerous Activities Related to North American Energy Integration", "paragraphs": ["The eight federal agencies that we identified as having a role in North  American energy integration\u2014DOE, Interior, Commerce, State, DOT,  FERC, USAID, and Treasury\u2014reported involvement in 81 activities  related to facilitating energy integration from 2014 through 2017. While  some of these activities had multiple purposes or goals, the activities  generally comprised five types: technical discussions and assistance,  regulatory cooperation, international agreements and other instruments,  trade promotion, and research and development. In addition, agencies  reported having undertaken other activities, such as internal policy  reviews. Table 1 shows the types and numbers of activities that each  agency reported. (See app. III for a full listing of these agencies and  descriptions of their activities)."], "subsections": [{"section_title": "Technical Discussions and Assistance", "paragraphs": ["Several of the U.S. agencies we surveyed reported having participated in  technical discussions that provided a forum for exchanging information  and best practices with their Canadian and Mexican counterparts. Four  agencies\u2014DOE, Interior, State, and USAID\u2014identified a total of 33  technical forums and assistance activities, such as consultative  mechanisms, technical committees, and assistance programs. For  example:", "DOE. Since 2015, DOE has participated with Natural Resources  Canada and Mexico\u2019s Secretariat of Energy in a trilateral working  group focused on carbon capture, utilization, and storage (CCUS)  initiatives. According to DOE officials, the group meets twice per year  to exchange information about each country\u2019s CCUS programs. DOE  officials reported that the group\u2019s primary focus has included carbon- capture technologies, with an emphasis on industrial CCUS, CCUS on  power systems and carbon dioxide utilization in enhanced oil  recovery, and consistent and harmonized messaging regarding  CCUS. DOE also engages in bilateral nuclear security cooperation  with Mexico, supporting two to three workshops with Mexico annually  on topics such as nuclear security culture and cybersecurity for  nuclear facilities.", "Interior. Since Mexico\u2019s energy reforms, Interior has held discussions  with Mexican agencies about environmental and other matters related  to offshore oil and gas extraction. Interior also participates in a  number of international multilateral forums, including the International  Regulators Forum, the International Offshore Petroleum  Environmental Regulators and the International Upstream Forum,  which bring together government regulators from multiple countries,  including Mexico and Canada.", "State. State has provided technical assistance to Mexico through the  Power Sector Program, which supplies guidance and training on a  number of regulatory frameworks, market processes, and software  tools to support Mexico\u2019s transition to a competitive power market. For  example, the program has supported the development of a  competitive wholesale power market through technical support to  Mexico\u2019s Energy Regulatory Commission, the National Center for  Energy Control, and Mexico\u2019s Secretariat of Energy.", "USAID. According to USAID officials, the agency\u2019s Mexico mission  energy program has provided technical assistance to Mexico's  Secretariat of Energy, its National Energy Control Center, its Energy  Regulatory Commission, and the Federal Electricity Commission.  USAID officials reported that this assistance focused on a wide range  of energy-integration activities, including the design and  implementation of four energy auctions, as well as the development of  a public\u2013private contract mechanism to tap private sector resources  for energy-transmission construction. As part of this program, USAID  also designed, and is currently managing, an activity to reduce social  impacts associated with energy-infrastructure projects. USAID also  provided technical assistance on grid integration and the planning and  development of infrastructure, according to officials."], "subsections": []}, {"section_title": "Regulatory Cooperation", "paragraphs": ["U.S. agencies engage in regulatory cooperation to support coordination in  the various energy sectors and to try to identify gaps, best practices, and  inconsistencies among U.S., Canadian, and Mexican regulations. Four of  the agencies we surveyed\u2014DOE, DOT, FERC, and USAID\u2014reported 13   regulatory cooperation efforts, including discussions between regulators  and trilateral and bilateral working groups focused on the various energy  sectors and the development of reliability standards. For example:", "DOE. In 2011, the U.S. President and Canadian Prime Minister  created the Canada\u2013United States Regulatory Cooperation Council to  facilitate closer cooperation between the countries to develop more  effective approaches to regulation. As part of that effort, DOE and  Natural Resources Canada have cooperated on two joint energy  initiatives, according to DOE officials. First, DOE and Natural  Resources Canada have cooperated on energy efficiency standards,  with the goal of aligning new and updated standards and test methods  for energy-using equipment through enhanced information sharing.  Second, DOE and Natural Resources Canada have cooperated on  developing natural gas\u2013transportation standards. According to DOE  officials, DOE and Natural Resources Canada will continue to build on  previous work, facilitate the development of common codes and  standards by industry organizations, and explore opportunities for  alignment among stakeholders.", "DOT. DOT officials reported having worked with Canadian and  Mexican agencies to collaborate on regulations and standards related  to various modes of transportation. For example, DOT has engaged in  the North American Pipeline Safety Regulator Initiative. According to  DOT\u2019s survey response, the goal of this initiative is to share  perspectives, experience, and information on regulatory activities as  well as effective strategies for improving pipeline safety for each  participating agency and for cross-border energy pipelines. According  to officials, DOT also collaborates with Transport Canada on certain  facility investigations.", "FERC. FERC officials reported that FERC has represented the U.S.  government at meetings of the Trilateral Electric Reliability Working  Group, where U.S., Canadian, and Mexican regulators coordinate on  electric grid reliability issues.", "USAID. According to USAID officials, under a mechanism financed  and managed by USAID, the National Association of Regulatory Utility  Commissioners provided technical assistance to the Mexican Energy  Regulatory Commission on energy-integration topics, such as  auctions, reducing barriers to investment and competitive market  restructuring."], "subsections": []}, {"section_title": "International Agreements and Other Instruments", "paragraphs": ["According to agency officials the U.S. government and individual U.S.  agencies have entered into various formal agreements to engage Canada  and Mexico on energy integration. Three of the agencies we surveyed\u2014 DOE, Interior, and State\u2014identified 11 international agreements and  other instruments related to North American energy integration, including  several MOUs with Canadian and Mexican counterpart agencies.", "According to officials, such agreements often include a framework under  which bilateral and trilateral cooperation can proceed and can serve to  highlight areas of priority or focus for the countries. According to one  official, the MOUs are based on need and create a mechanism for  technical experts to collaborate on specific topics or action items. Other  officials noted that periodic renewals of MOUs can provide opportunities  to decide whether agreed-on activities have been completed, are  obsolete and should be discontinued, or should be continued. The  following are examples of the agencies\u2019 reported activities:", "DOE. In 2014, DOE, Natural Resources Canada, and the Mexican  Secretariat of Energy signed an MOU to further collaboration on data  and information sharing and to create a trilateral framework for  sharing publicly available information. The MOU outlined several  areas of cooperation, including systematic comparison of energy  export and import flow data; sharing of publicly available geospatial  information related to utility infrastructure; exchange of views and  projections of cross-border flows of natural gas, electricity, crude oil,  and refined products; and development of a cross-reference for the  three countries\u2019 energy sector terminology. According to DOE officials,  as a result of this MOU, an integrated trilateral energy information  website was launched in November 2017. The website consolidates  energy-related data, integrated maps, analyses, and references from  the three countries in English, French, and Spanish.", "Interior. Interior officials reported that since 2014, Interior has signed  several binding and nonbinding instruments, including two MOUs, to  facilitate cooperation with Mexico on energy and environmental  matters. In 2016, Interior signed two MOUs with its counterparts in  Mexico to facilitate bilateral cooperation on energy and environmental  cooperation. Moreover, Interior helped to negotiate the Agreement  between the United States and Mexico Concerning Transboundary  Hydrocarbon Reservoirs in the Gulf of Mexico, which entered into  force in 2014. According to Interior officials, the department, in  coordination with State, implements the agreement, which addresses  the development of oil and gas reservoirs that span the international  maritime boundary between the two countries in the Gulf of Mexico.", "State. State has played a role in finalizing a United States\u2013Mexico  agreement on peaceful nuclear cooperation, according to State  officials. The officials said that the U.S. and Mexican governments  have agreed on the final text of the agreement, which is awaiting  approval by the countries\u2019 legislatures."], "subsections": []}, {"section_title": "Trade Promotion", "paragraphs": ["Commerce leads U.S. trade promotion efforts related to energy  integration. In response to our survey, Commerce officials reported  having engaged in at least 10 trade promotion activities and Treasury  officials reported one additional effort.", "Commerce. Commerce activities include trade missions to Canada  and Mexico, seminar and event presentations, and buyers\u2019 programs.  For example, Commerce officials have organized export promotion  activities targeting the Canadian and Mexican markets and led  delegations of Canadian and Mexican executives to attend major U.S.  trade shows in the energy sector to facilitate business partnerships  with U.S. firms through its International Buyers Program. According to  Commerce officials, Canadian delegations typically consist of 15 to 20  executives and Mexican delegations typically consist of 25 to 100  executives. In addition, Commerce officials reported that the  department\u2019s Foreign Commercial Service in Canada has organized  and staged annual country briefings and interactions with trade  associations from multiple countries at two lead events\u2014the Global  Petroleum Show and the Atlantic Petroleum Show. Further, according  to Commerce officials, the International Trade Administration  conducted two energy-related trade missions to Mexico in 2017\u2014a  civil nuclear trade mission and a renewable energy trade mission.", "Treasury. Treasury\u2019s Office of Investment, Infrastructure, and Energy  has formulated and negotiated a framework for energy activities with  Mexico\u2019s Secretariat of Energy and the National Center for Energy  Control. This energy framework is designed to achieve a high degree  of energy integration, growth, and security through initiatives in the  energy and infrastructure areas, to be jointly pursued by the United  States and the host country partner, according to a Treasury official.  The effort will involve Treasury\u2019s Office of Technical Assistance and is  envisioned to include activities such as assisting the Mexican  government to realize more value and impact with various  procurement projects related to the energy value chains."], "subsections": []}, {"section_title": "Research and Development", "paragraphs": ["U.S. agency officials and their foreign counterparts cited research and  development activities as an important aspect of cooperation to facilitate  North American energy integration. Three of the agencies we surveyed\u2014 DOE, Interior, and DOT\u2014reported having engaged in seven scientific  research and development activities. Examples include the following:", "DOE. DOE officials reported that the department plans to explore  areas of mutual interest for trilateral cooperation in the area of civil  nuclear research and development with Natural Resources Canada  and Mexico\u2019s Secretariat of Energy. In addition, DOE is engaged  bilaterally with Canada in research and development on topics such  as nuclear reactor technologies, including small modular reactors.", "Interior. In 2014, Interior\u2019s U.S. Geological Survey issued a report on  the assessment of unconventional oil and gas resources in northeast  Mexico. In addition, Interior officials reported that the U.S.  Geological Survey has collaborated with Canada on scientific  research to better understand the geological framework from eastern  Arctic Alaska to the Canadian Arctic Islands.", "DOT. DOT has engaged with its Canadian counterpart in research  and development activities focused on alternative fuels. For example,  DOT officials reported that its Federal Aviation Administration Center  of Excellence for Alternative Jet Fuels and Environment and Canada\u2019s  Transport Canada are undertaking cooperative research and  development that primarily focuses on the development of sustainable  alternative jet fuels and technical research on aviation noise and  emissions mitigation."], "subsections": []}, {"section_title": "Other Efforts", "paragraphs": ["Three agencies\u2014DOE, Commerce, and State\u2014reported engaging in a  total of six other efforts related to North American energy integration. For  example:", "DOE. A Joint U.S.\u2013Canada Electric Grid Security and Resilience  Strategy was released in December 2016. DOE and Natural  Resources Canada developed this strategy and its accompanying  plans to improve the grid security of the countries\u2019 shared electric  system. The three goals of the strategy are to protect today\u2019s electric  grid and enhance preparedness, to manage contingencies and  enhance response and recovery efforts, and to build a more secure  and resilient future electric grid. According to DOE officials, DOE is  working to implement numerous items from an accompanying action  plan over multiple years.", "Commerce and DOE. Commerce and DOE lead the United States\u2013 Mexico Energy Business Council with their Mexican counterparts.  According to Commerce officials, the council is a unique effort to  gather consensus recommendations from the council\u2019s private sector  representatives on ways to strengthen the economic and commercial  ties between energy industries in the two countries. The council has  met twice a year since its creation in 2016 and has developed a set of  recommendations for consideration by U.S. and Mexican government  officials. According to DOE officials, these recommendations were  discussed at the Council meeting on June 15, 2018.", "State. State officials reported that the department is engaged in an  ongoing effort to streamline its review process for presidential permit  applications for cross-border energy infrastructure."], "subsections": []}]}, {"section_title": "U.S. Agencies Reported Coordinating through High-Level Interagency Meetings and Working-Level Efforts", "paragraphs": ["Agency officials reported coordinating their energy integration\u2013related  activities through a number of coordination efforts and mechanisms. First,  an interagency working group at NSC represents a high-level interagency  coordination effort. In addition, staff preparations for high-profile bilateral  and trilateral summits present further opportunities for high-level  interagency coordination. Moreover, agency staff engage in working-level  efforts such as serving on formal coordinating bodies that bring together  stakeholders in the energy sector; soliciting input from, or providing input  to, other agencies; and participating in direct coordination activities at the  program level."], "subsections": [{"section_title": "Coordination at National Security Council Interagency Meetings", "paragraphs": ["According to participating agency officials, NSC created a working group  in May 2017 to facilitate formal interagency coordination on North  American energy integration. Officials reported that the working group  comprises representatives of NSC, DOE, Interior, Commerce, and State  and has met five times since it was formed, most recently in November  2017. According to officials from participating agencies, the group\u2019s  primary purpose is to bring together the key agencies that have a stake in  North American energy integration and to receive guidance and input  from NSC and other agencies on related activities. Consequently, the  group also serves advisory, information-sharing, and coordination  purposes.", "We spoke with agency officials who participate in the working group,  asking in particular about their experiences in several aspects that we  have previously identified as key to interagency collaboration\u2014identifying  outcomes, establishing leadership, involving relevant participants and  clarifying their roles and responsibilities, and obtaining necessary  resources. Some officials noted the value of the group\u2019s meetings. The  following summarizes the officials\u2019 comments.", "Outcomes. Officials of agencies participating in the NSC-led working  group reported that it served primarily as a mechanism to promote  coordination and to bring awareness of agencies\u2019 bilateral and  trilateral engagement with Canada and Mexico to the NSC and to the  other agencies participating in the group. Agency officials identified  this high-level, in-person coordination as valuable and as one of the  group\u2019s primary outcomes. For example, according to the officials,  agencies contributed to, and developed, a matrix of cross-border  energy activities with Mexico and Canada, which helps to make the  administration and other agencies aware of each other\u2019s efforts and to  see the bigger picture of those efforts. Agencies also developed a  coordinated set of talking points on energy integration. One official  noted that, because staff from the various participating agencies often  work with the same Canadian and Mexican counterparts, coordinating  the talking points is useful for ensuring that messages are presented  in a consistent and substantive way.", "Leadership. Participating agency officials indicated that NSC has a  clear leadership role in the interagency group and is responsible for  calling the meetings, setting the agenda, and assigning tasks to  participants. Officials noted that NSC appropriately assigned tasks  based on agencies\u2019 particular expertise and capabilities. Officials also  reported being generally satisfied with NSC\u2019s leadership and noted  that this group has created a needed space for high-level interagency  coordination.", "Roles and responsibilities. Agency officials did not report any  confusion about their roles and responsibilities in the NSC-led working  group. According to agency officials, the agencies generally served in  a primarily informational and advisory role, sharing information with  each other about their respective agencies and providing input both  during and outside the group\u2019s meetings. Participating agency officials  are responsible for providing updates on relevant energy-related  activities at each meeting. Other assigned tasks include drafting and  clearing coordination documents, talking points, and policy papers.", "Participants. According to participating agency officials, the agencies  invited to participate in the NSC-led working group\u2014DOE, Interior,  Commerce, and State\u2014were those with the most relevant roles  related to North American energy integration. Officials noted that they  communicated with each other regularly to follow up on issues raised  at a meeting or as a part of normal agency coordination.", "Resources. Participating agency officials generally reported that,  because the NSC working group\u2019s meetings aligned with their regular  and ongoing responsibilities, additional resources were not required."], "subsections": []}, {"section_title": "Coordination in Connection with Bilateral and Trilateral Summits", "paragraphs": ["Bilateral and trilateral summits can be important methods of collaboration  with Mexico and Canada and also serve as episodic or event-related  mechanisms for U.S. interagency coordination on energy integration\u2013 related activities. According to U.S. agency officials we interviewed,  multiple agencies have provided input and advice in preparation for  summits and meetings such as the North American Leaders\u2019 Summit, the  North American Energy Ministerial, the North American Foreign Ministers\u2019  Meeting, and the U.S.\u2013Mexico High Level Economic Dialogue. According  to officials, broadly focused ministerial meetings such as these have  included participation from multiple agencies. For example, the U.S.\u2013 Mexico High Level Economic Dialogue\u2014a whole-of-government effort  that included energy as one its priorities\u2014led to the development of the  U.S.\u2013Mexico Energy Business Council, which is cochaired by DOE,  Commerce, Mexico\u2019s Secretariat of Energy, and Mexico\u2019s Secretariat of  Economy. Agency officials we interviewed stated that they also  coordinate on follow-up efforts after these meetings. For example, DOE  and Commerce officials said that they conduct ongoing coordination on  council business, holding weekly calls with each other and their Mexican  counterparts to coordinate the council\u2019s implementation. In addition,  Commerce officials told us that they report on the council\u2019s progress to  other agencies at the NSC working group."], "subsections": []}, {"section_title": "Other Interagency Coordination Efforts", "paragraphs": ["Officials of multiple agencies we surveyed reported other interagency  coordination efforts related to North American energy integration. These  efforts included participating in formal coordinating bodies, soliciting and  providing input, collaborating directly with other agencies\u2019 staff, and  collaborating at U.S. embassies.", "Participating in formal coordinating bodies. Multiple U.S. agencies  (e.g., DOT, FERC, and the Department of Homeland Security)  participate in the Electricity Sub-Sector Coordinating Council, the  Energy Sector Government Coordinating Council, and the Oil and  Natural Gas Sector Coordinating Council, according to DOE officials.  The Electricity Sub-Sector Coordinating Council\u2019s charter states that  the council\u2019s purpose includes coordinating activities and initiatives  designed to improve the reliability and resilience of the electricity  subsector and serving as the principal liaison between the council\u2019s  membership and the Energy Sector Government Coordinating  Council. The Energy Sector Government Coordinating Council\u2014the  government counterpart of the Electricity Sub-Sector Coordinating  Council and the Oil and Natural Gas Sector Coordinating Council \u2014 enables interagency and cross-jurisdictional coordination on planning,  implementing, and executing resilience programs for the nation\u2019s  critical energy infrastructure. Agency officials reported that the Oil and  Natural Gas Sector Coordinating Council serves as the principal  liaison between the U.S government and representatives for oil and  natural gas companies and major trade associations on matters  related to oil and natural gas physical and cyber security.", "Soliciting and providing input. Multiple agencies reported soliciting  or providing input regarding certain energy integration efforts. For  example, multiple agencies contributed to the development of the U.S.  Quadrennial Energy Review, which explicitly discusses North  American energy integration and how to better assess and promote  opportunities for better coordination between U.S., Canadian, and  Mexican energy systems. In addition, DOE, State, and FERC officials  reported coordinating with each other and with the Department of  Defense to obtain required concurrence on presidential permit  applications. For example, when State was reviewing the presidential  permit for the Keystone XL pipeline, State asked seven other  agencies to provide their insights and opinions, according to State  officials.", "Collaborating directly with other agencies\u2019 staff. Multiple agency  officials reported working with other agencies as needed. For  example, Treasury officials reported working with staff from State,  Interior, and DOE to formulate and negotiate a framework of energy-  and infrastructure-related initiatives with Mexico. Agency officials also  reported that agency staff responsible for various energy integration  activities have engaged in a number of informal activities\u2014including  periodic meetings, telephone calls, and e-mails\u2014to directly coordinate  these efforts with related federal and industry efforts.", "Collaboration at U.S. embassies. Agency officials we interviewed at  the U.S. embassies in Canada and Mexico stated that they have  routinely collaborated and coordinated on energy integration\u2013related  activities with staff of other relevant U.S. agencies who were also  stationed at the embassies or who visited the embassies from the  United States."], "subsections": []}]}, {"section_title": "U.S. Agencies Obtain Feedback and Input from Private Sector and Civil Society Stakeholders through Both Formal and Informal Mechanisms", "paragraphs": ["U.S. agencies reportedly obtain feedback and input from private sector  and civil society stakeholders through a variety of formal and informal  mechanisms. To gather this input, agencies use formalized mechanisms  such as requests for public comment through the Federal Register, public  hearings, public-private bodies, and joint stakeholder events. Civil society  and private industries also employ informal methods to communicate their  positions to agencies and individual agency staff."], "subsections": [{"section_title": "Formal Mechanisms", "paragraphs": ["U.S. agencies solicit and consider private sector and civil society input  related to North American energy integration through formal mechanisms  that include provisions for public comments in response to Federal  Register notices; open hearings, where public comment is allowed; and  public\u2013private input entities. The Administrative Procedure Act of 1946  generally requires agencies to publish a notice of proposed rulemaking  and to provide an opportunity for public comment through the Federal  Register. The private sector and civil society use this process to formally  issue public statements on various topics related to energy integration.  For example, with regard to the renegotiation of NAFTA, private sector  entities and environmental groups have sent letters to the U.S. Trade  Representative expressing their respective concerns about negotiations  related to the energy sector. Agencies can also hold public hearings  where stakeholders can make statements and submit data. According to  the Office of the Federal Register, some agencies operate under laws  that require rulemaking hearings, while others may hold public meetings  to obtain public input or to help affected groups better understand the  proposed rule. Moreover, Office of the Federal Register documents state  that many agencies are beginning to use webcasts and interactive  Internet sessions to broaden the audience attending public meetings.  Further, under the National Environmental Policy Act, a process exists  through which stakeholders can provide input during the consideration of  environmental effects of proposed projects for which the agency has  prepared an environmental impact statement.", "Additionally, agencies may use formal public\u2013private bodies and  collaborations that gather private sector and civil society input on energy  integration issues. For example, the private sector members of the U.S.\u2013 Mexico Energy Business Council are able to provide recommendations to  U.S. and Mexican agencies. The council\u2019s stated objectives are to (1)  bring together representatives of the respective energy industries of the  United States and Mexico to discuss issues of mutual interest, particularly  ways to strengthen the economic and commercial ties between energy  industries in the two countries, and (2) communicate actionable,  nonbinding recommendations to the U.S. and Mexican governments.  According to officials, the council comprises 20 private sector  representatives\u201410 from the United States and 10 from Mexico\u2014and is  co-chaired by DOE, Commerce, and the Mexican ministries of economy  and energy. Officials reported that the council is to meet twice each year  to provide consensus recommendations to both governments on ways to  improve the safety and efficiency of energy-related activities, improve the  commercial environment and investment climate, and enhance collective  energy security.", "Civil society representatives also participate in some formal advisory and  information-gathering collaborations. For example, in 2015, the United  States and Mexico held an energy education roundtable that brought  together key stakeholders to explore possible areas for cooperation,  including sharing best practices in energy education, developing  vocational and polytechnic-level energy skills training programs,  examining joint industry certifications, and promoting greater  communication among key players in both countries. In another example,  the 2016 North American Leaders\u2019 Summit announced the first annual  Stakeholder Dialogue on North American Competitiveness, with a goal of  providing private sector, local government, labor, and civil society  representatives an opportunity to contribute ideas on increasing North  American competitiveness. In response, the Wilson Center, a think tank,  in coordination with the three North American governments, assembled a  group of more than 40 representatives of entities engaged in North  American issues. The results of this dialogue included recommendations  on energy integration\u2013related issues, such as energy infrastructure and  the U.S. presidential permitting process. Civil society stakeholders also  provide expertise by participating in activities such as the U.S.\u2013Canada  Northern Oil and Gas Research Forum. According to agency officials, this  forum has typically been held every 2 years at locations in the United  States and Canada since its founding in 2008 by Interior\u2019s Bureau of  Ocean Energy Management and Canada\u2019s Indigenous and Northern  Affairs Canada. The forum provides an opportunity for decision-makers,  regulators, industry members, nongovernmental organizations, and  scientists to discuss current scientific research and future directions for  northern oil and gas activities, according to Interior officials."], "subsections": []}, {"section_title": "Informal Mechanisms", "paragraphs": ["Agencies receive input on North American energy integration from the  private sector and civil society through informal mechanisms such as  letters, emails, phone calls, interactions at various related events,  personal connections, and reports. According to private sector and civil  society representatives we interviewed, open letters (e.g., letters to the  editor) and letters sent to agencies allow such groups to describe their  perspectives on policy choices and advocate for preferred solutions. One  civil society stakeholder noted that think tanks and trade association  reports and forums also play an important role in allowing civil society and  industry to communicate their perspectives and positions to Congress  and federal agencies. Another civil society stakeholder reported having  directly contacted State officials responsible for issuing presidential  permits for the Keystone XL pipeline. Industry association representatives  noted that they also have opportunities for informal meetings with agency  officials at various events or through phone calls. During our discussions  with civil society and private sector organizations, we heard that informal  feedback or input mechanisms between stakeholders and agencies were  available and functional."], "subsections": []}]}, {"section_title": "U.S., Canadian, and Mexican Officials Suggested Steps to Further Energy Integration but Expressed General Satisfaction with Intergovernmental Cooperation", "paragraphs": ["Some of the officials we interviewed from all three countries suggested  several new or additional steps that the U.S. government could take, in  cooperation with Canada and Mexico, to address factors that might  impede energy integration and to facilitate a more integrated and secure  energy market in North America. Suggestions mentioned by officials in all  three countries included aligning energy-related regulations, streamlining  the U.S. presidential permitting process, facilitating cross-border  transportation of equipment and workers, and involving states and  provinces in energy integration efforts. However, U.S., Canadian, and  Mexican officials we interviewed expressed general satisfaction with  bilateral and trilateral strategic and technical cooperation regarding efforts  to facilitate North American energy integration."], "subsections": [{"section_title": "U.S., Canadian, and Mexican Officials Suggested Steps to Enhance North American Energy Integration", "paragraphs": ["Some U.S., Canadian, and Mexican officials we interviewed suggested  several new or additional steps that the U.S. government, in cooperation  with Canada and Mexico, could take to address several factors that may  impede energy integration and to facilitate a more integrated and secure  energy market in North America. According to some officials, factors that  may impede energy integration include duplicative or inconsistent energy  regulations, inconsistent cross-border permitting processes, difficulties in  cross-border movement of equipment and workers, and the need to  involve states and provinces in transborder issues. The text box shows  steps suggested by at least one official in all three countries to address  these factors.", "Steps Suggested by U.S., Canadian, and Mexican Officials to Further North American Energy Integration", "Align energy-related regulations. To reduce the burden on energy companies conducting transborder activities, align  regulations, codes, and standards in appropriate sectors in all three countries, to the extent possible.", "Streamline the U.S. presidential permitting process. To assure that requirements are consistently implemented, by having a  set process for obtaining presidential permits for transborder energy infrastructure projects.", "Facilitate cross-border movement of equipment and workers. To avoid delays in business and trade transactions,  implement processes to facilitate movement of energy company personnel and equipment across borders.", "Involve states and provinces in energy integration efforts. Given states\u2019 and provinces\u2019 control over local regulations,  resources, and markets, increase their involvement in efforts to advance North American energy integration.", "U.S., Canadian, and Mexican officials suggested that the three countries  should continue working together to eliminate unnecessary differences in  energy sector regulations. Some officials indicated that harmonizing,  when appropriate, or establishing comparable regulations, codes, and  standards in all three countries could reduce the burden on energy  companies conducting transborder activities and enhance regulatory  cooperation. According to some government officials and private sector  representatives we interviewed, the need to align U.S., Canadian, and  Mexican energy-related regulations is generally recognized by industry  stakeholders as a factor that could be addressed to further facilitate  regional energy integration.", "Several government initiatives have been undertaken to increase  alignment or reduce differences among the countries\u2019 regulatory  frameworks, such as the creation of the U.S.\u2013Canada Regulatory  Cooperation Council and the U.S.\u2013Mexico High-Level Regulatory  Cooperation Council. Nevertheless, officials in the three countries  identified a need to expand efforts in certain areas. For example,  according to one Canadian official, because of the large number of  energy regulations, much remains to be done to align them. According to  an industry association representative in Mexico, eliminating duplicative  regulations is very challenging and efforts to align them have sometimes  not been sufficient. For example, he explained that one company\u2014a  member of his association\u2014embarking on a transborder project reported  having to conduct extensive work to meet Mexican regulations, despite an  earlier effort by Mexico\u2019s Agency for Safety, Energy, and Environment  and Interior\u2019s Bureau of Safety and Environmental Enforcement to  develop similar regulations for safety and environmental management  systems."], "subsections": [{"section_title": "Streamline the U.S. Presidential Permitting Process", "paragraphs": ["Some U.S., Canadian, and Mexican government officials suggested that  the U.S. government should streamline its presidential permitting process  to ensure that requirements for obtaining permits for transborder energy  infrastructure projects are consistently implemented. U.S. presidential  permits are required for the construction, connection, operation, and  maintenance of certain facilities that cross the United States\u2019 borders with  Canada and Mexico. Issuance or denial of permits is delegated to the  U.S. Secretary of State for pipelines that transport liquids such as  petroleum and petroleum products, to FERC for natural gas pipelines,  and to DOE for electricity transmission lines.", "Some officials in Canada and Mexico explained that industry sector  representatives have expressed concerns about the process for obtaining  the permits. Members of a Canadian energy association expressed  concern that requirements for the presidential permits have not been  implemented consistently or in a timely manner. According to a  representative from the association, in some cases presidential permits  have been granted in a relatively short period of time, while in other cases  the process has taken over 2 years. For example, members of the  Canadian energy association said that the company developing the  Keystone XL pipeline spent a significant amount of money and time trying  to navigate the permit process before receiving permits in March 2017. A  representative from a Mexican energy association told us that, whereas  Mexico\u2019s energy reforms were aimed at increasing efficiency to attract  investment, the processing time for U.S. presidential permits\u2014up to 2  years, according to the representative\u2014can both interfere with the  Mexican government\u2019s efforts and hinder more integration between the  two countries.", "Some U.S. government officials acknowledged a need for streamlining  the presidential permitting process. State and DOE officials informed us  that they had initiated internal reviews to streamline the process but that  as of April 2018, these reviews were ongoing and a completion date had  not been set."], "subsections": []}, {"section_title": "Facilitate Cross-Border Movement of Equipment and Workers", "paragraphs": ["U.S., Canadian, and Mexican government officials suggested  implementing processes to facilitate the movement of energy company  personnel and equipment across borders to reduce delays in business  and trade transactions. In a discussion among stakeholders after the  2016 North American Leaders\u2019 Summit, participants agreed that there is a  significant need to increase the efficiency with which cargo and  individuals cross North America\u2019s land borders and that border efficiency and the competitiveness of North America as a region are strongly  linked. In addition, a U.S. official working with small and midsize U.S.  energy companies with operations in the United States and Canada told  us that moving equipment and personnel across the border can be  challenging. The official explained that equipment has sometimes crossed  the border with minimal delays but at other times has been detained for  hours or days.", "Energy associations from the United States, Canada, and Mexico have  advocated jointly for NAFTA negotiations to include provisions that would  facilitate the movement of equipment, such as drilling rigs and vessels,  and personnel\u2014including for emergency response\u2014across the U.S.\u2013 Canadian and U.S.\u2013Mexican borders. These associations have also  advocated for a NAFTA visa program to provide access for skilled energy  professionals."], "subsections": []}, {"section_title": "Involve States and Provinces in Energy Integration Efforts", "paragraphs": ["U.S., Canadian, and Mexican government officials suggested increasing  the involvement of states and provinces in energy integration efforts,  given their control over local regulations, resources, and markets. The  roles played by states and provinces in the countries\u2019 energy sectors vary  by country. Canada\u2019s system, where provinces have control over natural  resources and specific related procedures such as approval process for  local permits, is less centralized than the United States\u2019 system,  according to a Canadian government official. In contrast, Mexico\u2019s system  is more centralized than the United States\u2019, with Mexican states\u2019 having  less control over natural resources, according to a Mexican government  official. In addition, the official stated that, while discussion of North  American energy integration often focuses on the role of national  governments, the inclusion of U.S. and Mexican states and Canadian  provinces\u2014especially those on the border\u2014in discussions of regional  energy integration is essential.", "Moreover, the electricity sector is particularly influenced by the  participation of states and provinces because of the sector\u2019s dependence  on regional markets and interconnected infrastructure, according to an  electricity sector representative. For example, the representative stated  that the design of Canada\u2019s electrical transmission system sometimes  facilitates the transport of electricity more easily from north to south, to  the United States, than from east to west, across Canadian provinces. As  a result, U.S. markets are an important outlet for Canadian generators in  eastern Canada and the Pacific Northwest.", "Currently, little cross-border electricity trade takes place between the  United States and Mexico, other than the importation of electricity from a  few power plants in Baja California, Mexico, to supply demand in the San  Diego area. A Mexican government official stated that the limited level  of electricity integration between the United States and Mexico is due in  part to the role of the U.S. states in regulating the electricity industry,  since their regulations and plans for working with Mexico may differ.  According to the official, it is therefore essential to include the states in  any discussions about promoting integration of the U.S. and Mexican  electricity sectors. According to USAID officials, a public\u2013private  contractual mechanism developed by USAID to tap private sector  resources for constructing electricity transmission will be used for the first  time to build a project to connect the Mexican state of Baja California with  the rest of the Mexican grid, which had previously been isolated from Baja  California and the market in the U.S. state of California. According to  these officials, the transmission line could also connect the Mexican state  of Sonora with the U.S. state of Arizona."], "subsections": []}]}, {"section_title": "U.S., Canadian, and Mexican Officials\u2019 Views on Bilateral and Trilateral Cooperation", "paragraphs": ["U.S., Canadian, and Mexican energy officials we interviewed indicated  that they were generally satisfied with bilateral and trilateral strategic and  technical cooperation to facilitate North American energy integration.  According to U.S. officials, energy is an area in which the interests of the  United States, Canada, and Mexico align and cooperation has been well  established. U.S. officials also stated that trilateral cooperation works well  at both the strategic and technical levels and that regional cooperation  enhances energy security for all three countries. Canadian officials stated  that cooperation with the United States at the strategic level has often  served as a springboard for purposeful action to address shared priorities.  Mexican officials stated that there has been extensive communication  with the United States on energy issues, in particular at the ministerial  and agency levels, which has led to activities to improve integration.", "Some officials also identified changes in the overall foreign policy context  that could affect cooperation in the future.", "Some Canadian and Mexican government officials we interviewed  expressed concern that the renegotiation of NAFTA and the  administration\u2019s decision to withdraw from the Paris Agreement could  create uncertainty among investors in the energy sector. U.S.,  Canadian, and Mexican officials , as well as private sector  representatives we interviewed, stated that they viewed NAFTA  renegotiation as an opportunity to improve the agreement and that  any changes to NAFTA should \u201cdo no harm\u201d to free-trade  arrangements in energy commodities. However, a Canadian official  told us industry representatives had expressed concern that the issue  of energy could be used as a pawn in NAFTA renegotiations, resulting  in harm to the sector. Furthermore, some Mexican officials stated that  they were particularly concerned that any change in Mexico\u2019s status  as a U.S. free-trade partner could complicate flows of natural gas from  the United States, which has assumed a more important role as an  energy source for Mexico.", "Some Canadian and Mexican officials we interviewed expressed  concern that the June 2017 announcement of the United States\u2019  intention to withdrawal from the Paris Agreement could create a  perception of an uneven playing field and uncertainty among energy  sector investors, given Canada\u2019s and Mexico\u2019s continued participation  in the accord. However, the officials noted that the commitment of  some U.S. states, cities, and private sector companies to adhere to  the accord\u2019s tenets may minimize any negative impacts of the U.S.  government\u2019s withdrawal on their countries\u2019 energy sectors. State and  DOE officials we interviewed said they did not expect the U.S.  renegotiation of NAFTA and withdrawal from the Paris Agreement to  have a significant impact and stated that the energy sector in North  America is already well integrated and well positioned to address  these changes.", "U.S. government officials we interviewed noted that the United States\u2019  energy sector is already extensively integrated with both Canada\u2019s and  Mexico\u2019s. The officials stated that most easily accomplished actions to  promote integration have already been taken and that they are primarily  looking for ways to enhance a system that is working well. They also  stated that it is important not to disrupt the advances that have already been made. Further, they stated that, to enhance integration, it is  necessary to focus on practical steps that result in concrete changes to  further facilitate cross-border production and trade."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOE, Interior, Commerce, State,  DOT, FERC, USAID, Treasury, the Environmental Protection Agency,  and the Department of Homeland Security for review and comment. We  received comments from USAID, which are reproduced in appendix IV. In  its comments, USAID provided additional information about the agency\u2019s  contributions to North American energy integration, which we  incorporated in the report as appropriate. DOE, Interior, Commerce, DOT,  FERC and Treasury provided technical comments, which we also  incorporated as appropriate. State, the Environmental Protection Agency,  and the Department of Homeland Security informed us that they had no  comments.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Energy, the Interior, Commerce, State,  Transportation, the Treasury, and Homeland Security; the Executive  Director of FERC; the Administrators of USAID and the Environmental  Protection Agency; 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) 512-8612 or gianopoulosk@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."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["This report examines (1) ways in which the U.S., Canadian, and Mexican  governments cooperate on North American energy integration; (2) U.S.  agencies\u2019 activities to facilitate North American energy integration; (3)  U.S. agencies\u2019 efforts to coordinate among themselves on North  American energy integration; (4) ways in which U.S. agencies obtain  feedback and input from U.S. industry and civil society regarding North  American energy integration; and (5) steps that U.S., Canadian, and  Mexican officials suggested to further facilitate North American energy  integration.", "To address these objectives, we reviewed documents and information  provided by cognizant U.S., Canadian, and Mexican government officials;  U.S., Canadian, and Mexican energy sector associations; and U.S. civil  society groups such as think tanks and environmental nongovernmental  organizations. We conducted field work in Mexico City, Mexico, and in  Ottawa, Canada, where we met with government and energy sector  association representatives. We also collected information on activities  related to North American energy integration from U.S. agencies  implementing such activities. In addition, we obtained and analyzed data  from the U.S. Census Bureau regarding the extent of the United States\u2019  energy trade with Canada and Mexico.", "To examine the ways in which the U.S., Canadian, and Mexican  governments cooperate on North American energy integration, we  interviewed officials in each country who were responsible for energy- related cooperation, asking about the processes they follow to cooperate  on energy integration at the strategic and technical levels. In the United  States, we spoke with officials from the Departments of Energy (DOE),  State (State), Interior (Interior), Commerce (Commerce), the Treasury  (Treasury), Transportation (DOT), and Homeland Security (DHS); the  U.S. Agency for International Development (USAID); and the Federal  Energy Regulatory Commission (FERC). We also corresponded with  officials from the Environmental Protection Agency. In addition, we spoke  with officials of the North American Electric Reliability Corporation.  Further, we met with Canadian and Mexican embassy officials in  Washington, D.C. In Canada, we met with officials from Natural  Resources Canada and Global Affairs Canada and spoke with officials  from the Alberta provincial government. In Mexico, we met with officials  from Mexico\u2019s Secretariat of Energy; National Hydrocarbons Commission;  Energy Regulatory Commission; National Gas Control Center; National  Center for Energy Control; and Agency for Safety, Energy and  Environment. We also reviewed documents developed to formalize  bilateral and trilateral cooperation, such as the 2016 North American  Climate, Clean Energy, and Environment Partnership Action Plan;  documents related to the U.S.\u2013Mexico High Level Economic Dialogue;  and the \u201c2017 North American Energy Ministerial Joint Summary.\u201d", "To examine U.S. agencies\u2019 energy integration activities implemented  since 2014, we reviewed agency documents; interviewed DOE, Interior,  Commerce, State, DOT, FERC, USAID, and DHS officials; and  corresponded with officials from the Environmental Protection Agency.  Also, in May 2018, we contacted Treasury officials after learning about  recent Treasury activities related to North American energy integration.  In addition, we sent a survey to DOE, Interior, Commerce, State, DOT,  FERC, USAID, and DHS, asking them to, among other things, identify  their energy integration activities implemented from 2014 through 2017;  describe each activity, including its purpose; identify the type of activity  (e.g., joint research and development, trade mission, forum for technical  discussion, regulatory cooperation, technical assistance, other); and  identify other agencies participating in the activity. The survey also asked  whether the identified activities were bilateral with Canada or Mexico,  trilateral, multilateral, or unilateral. We followed up with the agencies to  ask for clarifications. We did not independently determine whether the  agencies had identified all relevant activities.", "In addition, we reviewed agencies\u2019 responses to identify any overlap and  duplication among federal energy integration efforts. We focused on the  goals and outcomes of energy integration activities as described in the  agency-provided descriptions and in background material, as needed. We  also focused on the activities\u2019 target populations, or intended  beneficiaries, since a bilateral U.S.\u2013Canadian activity would have a  different target population than a bilateral U.S.\u2013Mexican activity. We  compared activities within categories to look for evidence of duplication or  overlap based on the description provided by the agency or other  background material (i.e., agency website and documents). We  determined, in accordance with GAO\u2019s definitions of duplication and  overlap, that no two of the agency activities were duplicative or  overlapping because the activities did not have the same or similar goals  or the same or similar beneficiaries.", "To examine U.S. agencies\u2019 efforts to coordinate with each other on North  American energy integration, we conducted interviews with DOE, Interior,  Commerce, and State officials, asking them to identify and discuss any  mechanisms, such as interagency groups, offices, activities, or initiatives,  used for collaboration for the purposes of energy integration. To conduct  a more detailed analysis of interagency coordination on North American  integration, we interviewed participants in a National Security Council  (NSC)\u2013led interagency working group using a standard set of questions  about interagency coordination and collaboration. We selected the NSC  working group because it provides an example of very high-level  interagency collaboration, could address multiple aspects of energy  integration, and had a specific focus and effect on energy-integration  efforts. Although we had intended to interview NSC officials, as of April  2018, NSC had not responded to our requests for documents and an  interview. As a result, we were unable to include NSC views about the  interagency collaboration considerations discussed. However, we were  able to mitigate this limitation by interviewing and comparing the  testimonial evidence of officials from the four participating agencies. We  provided agency officials a structured set of questions about interagency  coordination and collaboration that were based on key considerations for  implementing interagency collaboration identified in a prior GAO report.", "To examine the ways in which U.S. agencies obtain feedback and input  from U.S. industry and civil society, we conducted several informational  interviews with industry associations and civil society organizations, such  as think tanks and other environmental groups. To identify these  organizations, we reviewed witness lists at relevant congressional and  agency hearings, panel lists at energy-related conferences, and  recommendations from agency officials. In addition, as we interviewed  representatives of these organizations, we asked them to identify other  groups that might provide further information. Using this approach, we  interviewed representatives from seven civil society groups and 10  industry associations, including organizations based in Mexico and  Canada. However, our sample was judgmentally selected and their  opinions are not generalizable to all private industry and civil society  stakeholders.", "To report on steps suggested by U.S., Canadian, and Mexican officials to  further facilitate North American energy integration, we interviewed  officials in each country who were responsible for energy-related  cooperation and asked them to suggest additional steps or options that  the United States, in collaboration with Canada and Mexico, could take to  facilitate building a more integrated and secure energy market in North  America. In the United States, we spoke with officials from DOE, Interior,  Commerce, State, DOT, FERC, USAID, Treasury, and DHS. We also  spoke with Canadian and Mexican embassy officials in Washington, D.C.  Additionally, in Canada, we spoke with officials from Natural Resources  Canada, Global Affairs Canada, and the Alberta provincial government. In  Mexico, we spoke with officials from Mexico\u2019s Secretariat of Energy,  National Hydrocarbons Commission, Energy Regulatory Commission,  National Gas Control Center, National Center for Energy Control, and  Agency Energy and Environment Safety. We analyzed responses  provided by officials in the three countries and identified four steps  suggested by one or more officials in each of the countries: (1) aligning  energy regulatory cooperation, (2) streamlining the presidential permitting  process, (3) facilitating cross-border movement of equipment and  workers, and (4) involving states and provinces in energy integration  efforts. After identifying these four steps, we elaborated on each one by  reviewing related documents and reports and discussing them with  private sector representatives and researchers in nongovernmental  organizations. We did not elaborate on steps suggested by U.S.,  Canadian, or Mexican officials that were not suggested by at least one  official in all three countries.", "We conducted this performance audit from April 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: North American Electric Reliability Corporation", "paragraphs": ["The North American Electric Reliability Corporation (NERC) is a not-for- profit international corporation that plays a role in regulating and  establishing reliability standards for cross-border North American  electricity markets. NERC\u2019s mission is to assure the effective and efficient  reduction of risks to the reliability and security of the bulk power system in  the United States, Canada, and part of Mexico. While not a federal  agency, in July 2006, NERC was certified by the Federal Energy  Regulatory Commission (FERC) as the electric reliability organization for  the United States. Subsequently, compliance with NERC reliability  standards became a legal requirement for certain bulk power system  owners, operators, and users. NERC is subject to oversight by FERC  and governmental authorities in Canada. NERC has a trilateral focus,  which enables it to more easily forge partnerships in Canada and Mexico,  according to NERC officials. The officials stated that NERC\u2019s work has  primarily focused on electrical grid reliability in Canada and the United  States, as Mexico\u2019s electricity market was restricted until its recent  reforms.", "NERC identified several activities related to North American energy  integration. For example:", "NERC leads GridEX, a biennial electrical grid security exercise  involving industry and government from the United States,  Canada, and Mexico. The exercise attempts to execute the  electricity sector\u2019s emergency response to simulated cyber and  physical security threats and incidents, strengthen utilities\u2019 crisis  response functions, and provide input for lessons learned.", "NERC engages in regulatory cooperation with government entities  in Canada and Mexico to improve the reliability of the electric grid.  As the electric reliability organization certified by FERC, NERC  convenes stakeholders from across the interconnected North  American bulk power system to develop continent-wide reliability  standards.", "NERC has entered into a number of memorandums of  understanding (MOU) with Canada and Mexico. In September  2006, NERC signed an MOU with Canada\u2019s National Energy  Board that committed the parties to work together to promote a  reliable bulk electric system in North America through a  cooperative relationship. Moreover, NERC officials stated that  because electricity is the domain of Canadian provinces, NERC  signed an MOU with the responsible organization in a number of  provinces. Further, the Mexican government recently began to  engage with NERC to bring certain areas into compliance with  NERC standards, and officials reported that in March 2017, NERC  and Mexico\u2019s Energy Regulatory Commission and National Center  for Energy Control signed an MOU as a framework for, and to  facilitate, cooperation. According to NERC officials, the MOU with  these Mexico energy agencies defines roles and responsibilities,  states Mexico\u2019s general commitment for Mexico to use NERC  standards as a basis for Mexico\u2019s electric reliability system, and  identifies some technical areas in which NERC will provide  capacity-building assistance."], "subsections": []}, {"section_title": "Appendix III: U.S. Agencies\u2019 North American Energy Integration Activities, 2014-1017", "paragraphs": ["Table 2 describes activities related to North American energy integration  in 2014 through 2017 reported by eight U.S. agencies\u2014the Departments  of Energy, Interior, Commerce, State, Transportation, and the Treasury;  the U.S. Agency for International Development; and the Federal Energy  Regulatory Commission."], "subsections": []}, {"section_title": "Appendix IV: Comments from U.S. Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Kimberly Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Kim Frankena (Assistant  Director), Francisco M. Enriquez (Analyst-in-Charge), Brian Tremblay,  Martin De Alteriis, Philip Farah, Christopher Keblitis, Reid Lowe, Grace  Lui, Franklin Rusco, and Sarah Veale made key contributions to this  report."], "subsections": []}]}], "fastfact": ["Canada and Mexico are two of the U.S.'s top energy trading partners. We looked at how federal agencies are supporting efforts to further integrate the energy sectors of these 3 countries.", "We found that federal agencies (such as the Department of Energy) have engaged in multiple efforts since 2014 to facilitate energy integration, such as international agreements, technical assistance, and regulatory cooperation. Officials from the 3 countries suggested further steps, such as facilitating the cross-border movement of equipment and workers, to promote integration efforts.", "(The original photo was replaced to provide additional information.)"]}
{"id": "GAO-19-20", "url": "https://www.gao.gov/products/GAO-19-20", "title": "Inland Waterways: Actions Needed to Increase Budget Transparency and Contracting Efficiency", "published_date": "2018-11-07T00:00:00", "released_date": "2018-11-07T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Corps is primarily responsible for operating and maintaining the nation's inland waterways, including maintaining locks and dams as well as rehabilitating, modernizing, or constructing new infrastructure as needed. Persistent schedule delays and cost overruns for inland-waterways construction projects have prompted some in Congress to explore funding and management alternatives.", "GAO was asked to review options to change the management of inland waterways. Among other things, this report assesses how the Corps allocates funds for operations and maintenance for the inland waterways, describes how the Corps funds construction projects, and assesses the effect of the current funding approach on projects' costs and schedules. GAO reviewed Corps documents and data; interviewed officials from Corps headquarters, six districts, and representatives of regional and national stakeholder groups\u2014including commercial and recreational interests as well as contributors to relevant literature\u2014selected to achieve a variety of viewpoints; and developed a simulation of the effect of various funding approaches on the total funding requirements and timelines for a set of hypothetical construction projects."]}, {"section_title": "What GAO Found", "paragraphs": ["The U.S. Army Corps of Engineers (Corps) allocates its appropriated funding for operations and maintenance projects for the inland waterways based on risk and economic benefits. However, the Corps does not know how much deferred maintenance exists for inland waterways because there is no agreed upon definition for deferred maintenance. Corps and ASA-CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance. For example, a single measure may not be useful to gauge the condition of the waterways because the effect of deferred maintenance projects on the reliability of the waterways will vary. However, without a measure or measures of deferred maintenance for inland waterways that (1) the Corps finds useful, (2) reflects its priorities, and (3) accurately conveys a consistent and well-defined measure of deferred maintenance, the Corps is limited in its ability to manage its maintenance efforts and accurately communicate its estimated maintenance costs to OMB and the Congress.", "With regard to inland-waterways construction projects, the Corps prioritizes them based on expected costs and benefits. The Corps assesses the net economic benefits of inland-waterways construction projects' alternatives by comparing estimated direct costs (e.g., construction costs to build a new lock chamber) to estimated reductions in the waterway transportation costs (e.g., reduced travel costs related to a reduction in the time it might take for a barge to pass through a larger lock chamber). According to Corps officials and stakeholders, the current incremental-funding approach for prioritized projects, among other things, has resulted in schedule delays (as shown below) and cost increases. Although full upfront funding for capital projects is an important tool for effective management, inland-waterways construction projects have been funded incrementally, meaning the Corps requests\u2014and Congress appropriates\u2014annual funding that covers a portion of a project's estimated costs. Corps reports and academic studies have found that this approach results in increased project costs because the Corps must contract for construction in separable pieces. This approach is less efficient than contracting for the entire project at once. For example, Corps officials currently expect that the Kentucky Lock Addition project will cost at least $229 million more than the originally estimated cost as a direct result of this contracting approach. Without some change in the way inland-waterways construction projects are funded to either provide full funding or reduce the effects of incremental funding by concentrating funding on fewer projects at one time, current cost increases and schedule delays resulting from inefficient contracting are likely to continue."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations: that the Corps define and measure deferred maintenance for inland waterways and that it pursue changes to increase its ability to more efficiently use available funding for construction. The Department of Defense concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["U.S. inland waterways are a critical component of the nation\u2019s freight  transportation system, providing benefits related to the U.S. economy as  well as national defense. According to the U.S. Army Corps of Engineers  (the Corps), commercial operators transported approximately $194 billion  worth of cargo throughout the inland waterways system in 2016.  Additionally, the National Grain and Feed Association estimates that  nearly 60 percent of U.S. grain and soybean exports are transported via  waterways to ports in the Gulf of Mexico, with another 27 percent  transported via waterways to ports in the Pacific Northwest. Inland  waterways are especially important in transporting heavy, bulk  commodities including coal, petroleum, chemicals, and grain, as the  waterways provide cost-effective transportation while limiting the  congestion and safety risks posed by transporting these goods via rail  and truck. Navigation on the inland waterways for waterborne vessels,  such as towboats and barges, is made possible by locks and dams: dams  create pools for navigation and locks allow vessels to move from one river  or pool to another. In addition to commercial transportation, other  beneficiaries of the inland waterways system include recreational boaters,  companies that provide hydroelectric power generated by dams, and  municipal water supply and treatment facilities, among others. The Corps  is primarily responsible for managing the nation\u2019s inland waterways,  including operating and maintaining the system of locks and dams as well  as constructing new infrastructure or rehabilitating existing infrastructure  when needed. Commercial vessel operators that travel on portions of the  inland waterways help pay the costs of constructing and rehabilitating  inland waterways infrastructure by paying a tax on diesel fuel, and this  revenue is deposited into the Inland Waterways Trust Fund (Trust Fund).", "Persistent schedule delays and cost overruns for inland-waterways  construction projects have prompted some in Congress to explore  alternative approaches for managing and funding the Trust Fund. Among  other things, you asked us to review options to change the management  of inland waterways. In this report, we:  1.  assess how the Corps allocates funds for operations and  maintenance projects for the inland waterways system;  2.  describe how the Corps prioritizes and funds construction projects,  and assess the effect of the current funding approach on projects\u2019  costs and schedules; and  3.  present stakeholders\u2019 opinions on proposed options for increasing  available funding for inland-waterways construction projects and any  associated limitations or tradeoffs.", "The scope of our review focuses on Corps activities related to commercial  navigation\u2014including operations, maintenance, and construction\u2014on the  27 inland waterways subject to the diesel fuel tax. These waterways  include the navigable waterways of the Mississippi River and its  tributaries, the Ohio River basin, the Gulf and Atlantic Intracoastal  Waterways, and the Columbia-Snake Rivers (see app. I for a complete  list of fuel-taxed inland waterways).", "For all objectives, we interviewed a range of Corps officials at the  headquarters, division, and district levels, as well as national and regional  stakeholders. We interviewed district officials from a non-generalizable  sample of 6 of the 24 Corps districts that manage fuel-taxed waterways  within their district boundaries, which we selected to include a variety of  geographic regions, waterway characteristics, primary commodities  shipped, and history of construction projects funded through the Trust  Fund. Based on these criteria, we selected the Corps districts in Little  Rock, Arkansas; Mobile, Alabama; New Orleans, Louisiana; Pittsburgh,  Pennsylvania; Rock Island, Illinois; and Walla Walla, Washington. In  addition, we interviewed officials from the Corps\u2019 Northwestern Division  office, which oversees the Walla Walla District, to understand the division- level role in coordinating districts\u2019 inland-waterways infrastructure  projects. We also conducted semi-structured interviews with waterways  stakeholders representing 43 national and regional entities and 12  researchers (academics, economists, and engineers). National  stakeholders were identified by reviewing related literature and our prior  reports and recommendations from the Transportation Research Board  and the Waterways Council, Inc. Regional stakeholders in the six  selected districts were identified through recommendations from the  Corps and national waterways-stakeholder organizations to represent a  mix of commercial (such as barge companies and shippers with  commercial interests in the U.S. inland waterways system); recreational;  and industrial water users (such as municipal water authorities and  hydropower entities). From those stakeholders, we selected entities to  interview to achieve diversity of waterway user perspectives, and  conducted interviews with both individual entities as well as associations  representing a variety of users and companies. In addition to waterways  users, we interviewed stakeholders who have conducted research  regarding the management and funding of fuel-taxed waterways. See  appendix II for a list of entities represented among the stakeholders we  interviewed. We analyzed interviewee responses to identify common  themes and the range of opinions that arose. Because we selected a non- generalizable sample of stakeholders, their responses should not be used  to make inferences about a population. To characterize stakeholders\u2019  views throughout this report, we defined modifiers (e.g., \u201csome\u201d) to  quantify stakeholders as follows:  \u201csome\u201d stakeholders represents stakeholders in 3 to 14 of the 42  interviews  \u201cmany\u201d stakeholders represents stakeholders in 15 or more of the 42  interviews.", "To examine how the Corps allocates funds for operations and  maintenance projects for the inland-waterways navigation system, we  examined amounts requested for civil works in the President\u2019s budget  requests and appropriations for civil works for fiscal years 1997 through  2018 as well as the Corps\u2019 budget-request development guidance to  understand how the Corps develops its budget request and prioritizes  operations and maintenance projects. We also interviewed officials from  the Office of the Assistant Secretary of the Army for Civil Works (ASA- CW); the Office of Management and Budget (OMB); the Department of  Transportation\u2019s Maritime Administration; and the Department of  Homeland Security\u2019s U.S. Coast Guard to understand how the Corps  coordinates with other agencies to fulfill its inland-waterways navigation  mission. To assess the Corps\u2019 efforts related to deferred maintenance, we  interviewed Corps officials about how deferred maintenance is measured  and defined and compared these practices with pertinent federal internal- control standards.", "To describe how the Corps prioritizes and funds inland-waterways  construction projects, we reviewed relevant statutes and agency policies  and guidance related to planning and budgeting for inland-waterways  construction projects. We compared the established method of funding  inland-waterways construction projects with federal internal-control  standards, OMB guidance, and prior GAO work related to funding capital  projects. To examine the effect of the current funding approach on  projects\u2019 costs and schedules, we reviewed relevant Corps documents,  such as reports on ongoing construction projects and studies on  construction cost increases, prior GAO reports, OMB guidance, and other  academic studies. As part of our examination of the effect of the current  funding approach on costs and schedules for inland-waterways  construction projects, we developed a simulation of the effect of various  funding approaches on the total funding requirements for a set of  hypothetical construction projects. The simulation incorporates assumptions regarding the amount of total funding a project would require  (including any cost overruns) due to the pattern and timing of funding  made available. Additional information on our simulation methodology  and the full results are included in appendix III.", "Finally, to identify proposed options to alter inland waterways funding and  management, we conducted a literature search to identify relevant studies  and proposals. We reviewed relevant literature to identify the options  most commonly proposed, reviewed proposals by recent administrations,  and interviewed Corps officials and seven other entities including the  Transportation Research Board and district and agency stakeholders to  verify that we identified commonly proposed options. We interviewed the  55 stakeholders noted above about their general views on the potential  benefits, limitations, and trade-offs of those options. We also reviewed  available literature\u2014including our prior reports\u2014to identify potential  benefits, limitations, and trade-offs of these options. Appendix IV provides  additional information about our objectives, scope, and methodology.", "We conducted this performance audit from June 2017 through November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Although less visible than other transportation modes and not as vast as  they are, inland waterways allow shippers to transport goods, particularly  bulk commodities, in a relatively cost-effective and environmentally  friendly method between ports all along the waterways, and to coastal  ports for transportation to international markets. For example, in a report  prepared for the National Waterways Foundation, the Texas A&M  Transportation Institute found that, for every gallon of fuel burned, 647  tons of cargo can be carried 1 mile by barge, but only 477 tons by train or  145 tons by truck. Additionally, if cargo transported on inland waterways  each year were to be moved by truck, it would take an additional tens of  millions of truck trips to carry that cargo\u2014more than doubling the number  of trucks per day, per lane on a typical rural interstate. Most of the goods  moved on the inland and intracoastal waterways are bulk commodities,  including coal; petroleum products; chemicals; aggregate construction  materials such as sand, gravel and stone; as well as grain, soybeans, and  other agricultural products.", "Approximately 12,000 miles of inland and intracoastal waterways and  channels in the United States are commercially navigable and  approximately 11,000 miles make up the fuel-taxed portion of the system,  shown in figure 1. The remaining approximately 1,000 miles of inland  and intracoastal waterways and channels are not part of the taxable  waterways and contain very few significant lock and dam structures.  Some commercial waterways users, especially those on the Upper  Mississippi and Ohio Rivers, may never leave the taxable portion of the  system, but other vessel operators may navigate through taxable and  non-taxable waterways, including connecting deep draft waterways.", "Navigation on inland waterways is made possible by locks and dams,  navigation structures and aids (such as buoys), as well as channel  maintenance and dredging where necessary to maintain a minimum  channel depth of 9 feet to support commercial barge traffic. Dams form  the foundation of the inland waterways system and create \u201cpools\u201d for  navigation during periods of low and medium river flow. Locks at dam  sites allow river traffic to move up or down from one pool to another much  like a stairway of water. See figure 2 below.", "As part of its Civil Works Program, the Corps operates and maintains the  fuel-taxed inland waterways for the purpose of facilitating navigation. The  Corps is responsible for balancing its navigation mission with other civil  works missions, including hydropower generation, flood risk  management, emergency response, environmental stewardship, and  recreation (see fig. 3). For example, the Corps may consider the  migration of fish when designing locks and dams that facilitate navigation.", "Congress appropriates funding for the Corps\u2019 Civil Works Program. For  inland waterways, the Corps uses funding for two main purposes: (1)  inland waterways operations and maintenance and (2) inland waterways  construction. From fiscal years 2006\u20132017 (the years for which data were  available), the Corps obligated an average of $690 million annually for  operations and maintenance of the fuel-taxed inland waterways.  Funding for operations and maintenance is appropriated entirely from  general revenues. Figure 4 shows annual obligations for inland  waterways operations and maintenance for fiscal years 2006 through  2017.", "For construction projects, Congress appropriates funding from the Inland  Waterways Trust Fund (Trust Fund) in addition to funds from general  revenues. Since the Inland Waterways Revenue Act of 1978 (1978 Act),  commercial waterway users have paid taxes on fuel used by commercial  towboats and other vessels that typically move barges, revenues from  which are deposited in the Trust Fund. The Water Resources  Development Act of 1986 (1986 Act) increased the initial fuel-tax rate per  gallon and established a cost-sharing process for inland waterways  expenditures. Together, the 1978 Act and the 1986 Act established a  means for the inland waterways industry to provide economic support for infrastructure development. These users currently pay a $0.29 per gallon  tax on diesel fuel used on the fuel-taxed portion of the inland waterways,  revenue from which is then deposited into the Trust Fund. Traditionally,  50 percent of a project\u2019s funding is appropriated from general revenues  and 50 percent is appropriated from the Trust Fund, though Congress  reduced the Trust Fund\u2019s cost share for the ongoing new construction of  the Olmsted Locks and Dam project to 25 percent for fiscal year 2014 and  to 15 percent for subsequent fiscal years. In fiscal year 2018,  commercial waterway users contributed about 35 percent of the $399  million allocated to various construction projects (see fig. 5). On average,  from fiscal years 1997 through 2018, the Corps has allocated about $240  million annually for construction to repair or improve existing inland- waterways navigation infrastructure.", "In its 2017 annual financial report, the Corps notes that the number of  instances of lock closures on inland waterways (including the fuel taxed  inland waterways) due to preventable mechanical breakdowns and  failures lasting longer than one day and lasting longer than one week  have decreased since fiscal year 2010, but that the lock closures that do  occur can result in substantial delays to shippers, carriers, and users, and  are a factor in the cost of shipping commodities on waterways.  According to the Inland Waterways Users Board (Board)\u2014an advisory  committee made up of industry stakeholders\u2014U.S. inland waterways  infrastructure is in need of modernization. The Corps currently manages  construction projects aimed at replacing, expanding, and modernizing  existing locks and dams. For fiscal year 2018, the Corps has allocated  about $399 million from money Congress appropriated for civil works  construction for a total of five inland waterways construction projects: four  ongoing projects and one new project (see fig. 6). According to the Board,  as of December 2017, 14 new lock and dam construction projects have  been authorized by Congress but have not yet received construction  funding.", "In addition to the Corps and the Board, several entities have roles related  to the inland waterways:", "The Assistant Secretary of the Army for Civil Works (ASA-CW): the  ASA-CW establishes policy direction and provides supervision of the  Department of the Army functions relating to all aspects of the Corps\u2019  Civil Works program.", "Maritime Administration: within the Department of Transportation, the  Maritime Administration promotes the use of waterborne  transportation and its integration with other segments of the  transportation system. It is also charged with maintaining the health of  the merchant marine, since commercial mariners, vessels, and  intermodal facilities are vital for supporting national security.", "The U.S. Coast Guard (Coast Guard): within the Department of  Homeland Security, the Coast Guard is responsible for, among other  things, facilitating the safe and efficient flow of commerce on the  navigable waterways of the United States. For example, the Coast  Guard regulates and enforces safety standards for inland waterways  vessels and operator licensing, conducts icebreaking to facilitate the  flow of commerce and relieve flooding from ice dams, and installs and  monitors aids to navigation that mark the navigable channel (such as  buoys, beacons, and lights) to facilitate the safe movement of vessels.  The Coast Guard coordinates with the Corps to ensure aids-to- navigation are properly installed and makes adjustments as channel  conditions may dictate.", "Office of Management and Budget (OMB): Within the Executive Office  of the President, OMB oversees the implementation of the President\u2019s  policy, budget, management, and regulatory objectives. Related to  inland waterways, OMB works with the Corps and the ASA-CW to  formulate the annual President\u2019s budget request and issues policies  related to the budget\u2019s implementation, project study, and  prioritization."], "subsections": []}, {"section_title": "The Corps Allocates Funds for Operations and Maintenance Based on Economic Benefits and Risk but Lacks a Method of Tracking Deferred Maintenance for Inland Waterways", "paragraphs": [], "subsections": [{"section_title": "The Corps Allocates Funds for Operations and Maintenance Projects Based on Economic Benefit and Risk", "paragraphs": ["As part of its management of the inland waterways, the Corps budgets for  the costs of operations and maintenance (which are funded from one  appropriation account) and construction (funded from a separate  appropriation account) and develops an annual budget request to submit  to OMB. The Corps develops this budget request for all its civil works  activities, including locks and dams on the fuel-taxed inland waterways  system; this request is reviewed and finalized by the ASA-CW and OMB  before being submitted to Congress as part of the annual President\u2019s  budget request.", "To prepare its annual budget request, the Corps identifies potential  operations activities and maintenance projects and submits estimates of  the costs to complete those activities, but not all identified maintenance  projects are included in the budget request. According to Corps officials,  as part of the budget request development process, the Corps provides  OMB and the ASA-CW with a variety of funding proposals that would  enable different levels of service for all of its civil works assets, including  inland waterways. However, according to Corps officials, the President\u2019s  budget request for civil works\u2014including funding for inland-waterways  maintenance projects\u2014is based on broader administration priorities and  does not request funding to complete all identified maintenance projects.  The Corps then receives annual appropriations for its Civil Works  Program, from which it allocates funding to each of its missions, including  inland waterways navigation. Figure 7 illustrates the Corps\u2019 budget  formulation and execution process.", "In 2008, the Corps began implementing an asset management process to  guide its management of the Civil Works Program, including inland  waterways. Under this process, the Corps determines the hours of  operation for each lock, which maintenance activities to perform, and  which construction projects to prioritize based on the economic value  these activities will provide. The Corps ranks maintenance projects  identified during the budget formulation process based on the value or  level of service the project is expected to provide as well as how critical  they are and funds as many of the priority projects as possible given  available funding and the rest are deferred. The Corps assesses the  value of inland waterways assets (such as waterways, locks, and dams)  based primarily on the economic benefits derived from improved  commercial navigation\u2014that is, the benefits achieved by allowing  shippers to transport commodities to both domestic and foreign markets  more cost effectively than they would using other modes of transportation  (such as truck and rail). Economic benefits are generally determined  using measures of commercial use, and assets are categorized as high,  moderate, and low commercial use. The Corps\u2019 approach to operations  and maintenance is as follows:", "Operations: The Corps allocates funding for operations based on  service priorities. The Corps operates locks at varying levels of  service (i.e., hours of operation) based primarily on past commercial  traffic volume, but also considering the volume of recreational traffic  and available resources. The Corps operates high-use locks  continuously (24/7), while operating those with less commercial traffic  and fewer economic benefits less frequently, sometimes by  appointment only.", "Maintenance: The Corps allocates funding for maintenance projects  based on the risk of not performing maintenance; this risk is  determined by considering both the condition of an asset as well as  the economic impact of a reduction in service should the asset fail  (that is, the traffic that would be affected if a lock or dam were to  become unusable)."], "subsections": []}, {"section_title": "Lack of a Deferred Maintenance Measure for Inland Waterways Limits the Corps\u2019 Ability to Identify and Communicate Estimated Maintenance Costs", "paragraphs": ["According to Corps and ASA-CW officials, the Corps does not know how  much deferred maintenance exists for inland waterways, because there is  no agreed upon definition for deferred maintenance. Corps and ASA- CW officials identified several challenges related to developing a useful  definition with which to measure deferred maintenance:", "Using the total cost to conduct all maintenance identified during the  budget formulation process may not be useful as a budget tool  because the Corps would not have the capacity to conduct all  identified maintenance in one fiscal year.", "A single measure may not be useful to gauge the condition of the  system, because not all deferred maintenance projects have the same  effect on system reliability, for example:", "Some identified maintenance, such as preventive maintenance  conducted less frequently than preferred (like painting lock  components to prevent future corrosion), may not affect reliability  or function in the short term.", "Deferring the replacement or rehabilitation of broken or  malfunctioning components\u2014such as a lock gate arm\u2014on low  use waterways may result in closures on those waterways or  delays related to the condition of the lock, but would affect a  relatively small amount of cargo and vessels and have a smaller  economic impact than closures on high-use waterways.", "Deferring the replacement or rehabilitation of broken or  malfunctioning components on high-use waterways may result in  closures that prevent traffic to large sections of the inland  waterways system and affect a large portion of cargo transported  via waterways.", "Some deferred maintenance projects may never be undertaken, while  others are planned for the near future. Corps officials told us that,  depending on the risk associated with not completing a particular  maintenance project, the Corps may choose to never complete the  project, such as mowing the grass at a low-use lock and dam facility.  Conversely, some incomplete projects represent later phases of  projects that are already under way and are planned for completion in  the near term.", "The lack of a definition and measure of deferred maintenance for inland  waterways projects is inconsistent with federal internal-control standards,  which call for agencies to identify information requirements needed to  achieve objectives and address identified risks (such as reliability of the  waterways) and to process relevant data to develop that information.  Further, internal control standards call for agencies to communicate  information externally\u2014such as to Congress and OMB\u2014to achieve  agencies\u2019 objectives. Corps and ASA-CW officials acknowledged that  there is a lack of information on deferred maintenance provided to  Congress. One Corps official suggested that the Corps may need more  than one measure of deferred maintenance to capture differences in the  type and consequences of various projects. Additionally, ASA-CW  officials noted that once a meaningful definition or metric for deferred  maintenance is identified, the Corps lacks a way to track this information.  Without a measure\u2014or measures\u2014of deferred maintenance for inland  waterways (1) that the Corps can use to budget for and manage the  inland waterways, (2) that reflects its priorities, and (3) that accurately  conveys a consistent and well-defined measure of deferred maintenance  that can be communicated to outside stakeholders, the Corps is limited in  its ability to identify preventive maintenance that could forestall more  costly maintenance or rehabilitation in the future and communicate its  estimated maintenance costs to OMB and the Congress. In turn, the lack  of a measure could limit the ability of Congress to make informed funding  decisions pertaining to the Corps.", "Both the stakeholders we interviewed and the Corps have identified  effects on the reliability of the inland waterways related to current funding  levels for operations and maintenance. For instance, many stakeholders  we spoke to said the funding the Corps receives for operations and  maintenance on inland waterways has not been sufficient to maintain the  stakeholders\u2019 desired level of reliability. Some stated that the Corps is  currently operating using a \u201cfix as fails\u201d approach: that is, requesting  enough funding to be able to respond to crises but not to conduct  preventive maintenance. Further, many stakeholders said there is  potential for some waterway users to switch to other modes of  transportation based on unreliability. For instance, two stakeholders  stated that businesses may be \u201cchased away\u201d because the inland  waterways system continues to be unreliable due to unscheduled  closures for maintenance. For example, during the course of our review,  one lock on the Ohio River experienced repeated unscheduled closures.  One such closure lasted from September 6, 2017, through September 14,  2017, during which time no vessels were able to travel through the lock.  According to a June 2017 Corps report on the causes of mechanical  breakdowns leading to unscheduled lock closures, routine maintenance  occurs less frequently than in the past due to a lack of funding, and that  delayed maintenance increases the risk of operational or catastrophic  failure that results in lock closures. Figure 8 illustrates the condition of  both deteriorating and recently rehabilitated inland waterways\u2019 navigation  facilities. Identifying and communicating about deferred maintenance  could help Congress and OMB understand the extent of any problems  with reliability that could affect the inland waterways system."], "subsections": []}]}, {"section_title": "Incremental-Funding Approach for Inland- Waterway Construction Projects Contributes to Cost Overruns and Schedule Delays", "paragraphs": [], "subsections": [{"section_title": "Inland-Waterways Construction Projects Are Individually Funded according to Various Priorities", "paragraphs": ["The Corps manages inland-waterways construction projects\u2014the  modernization and rehabilitation of existing locks and dams (called major  rehabilitation), or the construction of new structures\u2014to ensure the  facilities continue to function and meet future requirements, and prioritizes  these projects based on expected costs and benefits. As shown in figure  9, construction projects are developed in response to an identified  problem. Congress then authorizes inland-waterways construction  projects for study and construction and provides funding through the  annual appropriations process, although some authorized projects may  not receive funding. Since 1996, Congress has appropriated  construction funding that the Corps has allocated toward 20 projects, of  which 15 have been completed.", "The Corps assesses the net economic benefits of inland-waterways  construction-project alternatives by comparing estimated direct costs  (e.g., construction costs to build a new lock chamber) to estimated  reductions in the waterway transportation costs (e.g., reduced travel costs  related to a reduction in the time it might take for a barge to pass through  a larger lock chamber). For the Corps to recommend construction, the  project must have a benefit-cost ratio\u2014that is, the ratio of estimated  benefits to estimated costs\u2014greater than 1 to 1 using a statutorily defined  discount rate that varies from year to year. The project must then be  authorized for construction by Congress through legislation to be eligible  for funding, which typically occurs in a Water Resources Development  Act.", "The Corps\u2014with advice from the Inland Waterways Users Board  (Board)\u2014prioritizes authorized inland-waterways construction projects  according to estimated net economic benefits and an assessment of the  economic and safety consequences of not doing the project. In  collaboration with Corps headquarters, division, and district offices, the  ASA-CW determines which civil works construction projects will be  prioritized to include in the budget request to OMB. OMB considers the  recommendations of the ASA-CW and the Corps in deciding which  projects to include in the President\u2019s budget request. While Corps  projects with a benefit-cost ratio of at least 1 to 1 at the statutorily defined  discount rate are eligible to seek funding, OMB assesses projects against  a different threshold in determining which projects are included in the  President\u2019s budget request. In line with OMB practice since the mid- 2000s (and, according to OMB officials, consistent with their evaluation of  most federal programs per their guidance set in 1992), generally only  inland-waterways construction projects with a benefit-cost ratio of at least  2.5 to 1 using a 7 percent discount rate are included in the annual  President\u2019s budget request. In recent years, only one of the Corps\u2019  ongoing construction projects\u2014the Olmsted Locks and Dam project\u2014has  met this threshold.", "Congress appropriates funds to the Corps\u2019 Civil Works construction  account, and the Corps allocates some of that funding to inland- waterways construction projects. In recent years, Congress has appropriated funds for projects included in the President\u2019s budget request  and has directed the Corps to allocate appropriated amounts that exceed  the amount requested in the President\u2019s budget request to other projects  as depicted in step 8 in figure 9. For example, in fiscal year 2018, the  Administration requested $175 million for the Olmsted Locks and Dam  project, but five projects were funded that year. In the Joint Explanatory  Statement accompanying the appropriations, Congress directed the  Corps to allocate funds to inland-waterways construction projects  prioritized by economic effect in such a way that the Corps uses all  estimated Trust Fund revenues. In accordance with this direction, the  Corps allocated $399 million to inland-waterways construction projects,  with more than half\u2014$224 million\u2014 going toward the other three ongoing  inland-waterways projects and a new major rehabilitation project (see fig.  10).", "Stakeholders we spoke to stated that the process for determining which  construction projects receive funding can be challenging. Some stated  that the use of different discount rates and benefit-cost ratio thresholds for  authorization and budgeting purposes can create confusion as to whether  projects will be funded. Also, some stakeholders stated that because the  7 percent discount rate used by OMB to calculate the benefit-cost ratio is  higher than the statutory rate used in recent years, use of the OMB  discount rate can result in projects being excluded from the President\u2019s  budget request, an exclusion that can reduce the likelihood of the project  receiving funding. According to the Board, as of December 2017, 14  construction projects have been authorized for construction but have not  been allocated construction funding, and an additional 7 major  rehabilitation projects are also candidates for construction over the next  20 years. However, Corps officials stated that, once the Olmsted Locks  and Dam project is completed, none of the currently authorized projects  will meet OMB\u2019s threshold for inclusion in the President\u2019s budget request.  Further, some stakeholders told us that the Corps\u2019 policy\u2014developed to  provide additional information to OMB during budget development\u2014to  recalculate a project\u2019s benefit-cost ratio every few years, including while  the project is under construction, can create challenges. For one, ongoing  projects included in the President\u2019s budget request have subsequently  been excluded in later years due to a lower updated benefit-cost ratio,  which might reduce the likelihood of the project\u2019s being allocated  funding. For example, the Lower Monongahela Locks and Dams project  had a benefit-cost ratio of 6.7 to 1 at a 7.75 percent discount rate when  construction funds were first expended in fiscal year 1995 (based on  benefits and costs as estimated when the project was authorized in fiscal  year 1992) and has been allocated funding every year since. However,  this project was not included in either the fiscal year 2017 or 2018  President\u2019s budget requests due in part to its updated benefit-cost ratio  having fallen below the 2.5 to 1 threshold because of increased costs and  changes to the expected benefits. Although it was not included in the  President\u2019s budget request, the Corps ultimately allocated funding for the  project in fiscal years 2017 and 2018 based on congressional direction."], "subsections": []}, {"section_title": "Incremental Funding of Inland-Waterways Construction Projects Contributes to Cost Overruns and Schedule Delays", "paragraphs": ["Since at least 1995, all inland-waterways construction projects have been  funded incrementally, meaning that annual appropriations have covered a  portion of the project\u2019s estimated costs. There are several reasons that  the Administration may request and Congress may appropriate funding  for inland-waterways construction projects incrementally\u2014as they both  have done in recent years\u2014in lieu of full upfront funding.", "Available annual funding is generally less than the amount required to  cover the full cost of one new construction project. In addition, the  Corps (like other federal agencies) cannot enter a contract that  exceeds available funding unless authorized by law. For example,  based on average annual Trust Fund revenues since 2015 of about  $107 million, a 50-50 cost share would provide about $214 million in  construction funding annually, whereas the four ongoing construction  projects were each originally estimated to cost more than that amount.  Further, of the 10 new construction projects prioritized to be  completed next in the Corps\u2019 capital investment strategy, as of 2016,  7 of them are estimated to cost at least $350 million.", "Additionally, these projects\u2014even once begun\u2014must compete  annually with other funding priorities across the federal government.  We have previously reported that full upfront funding of capital assets  can be challenging to obtain in an era of resource constraints;  incremental funding can make it easier for agencies to meet mission  capital demands within the constraints of their appropriation.", "Further, while the Corps could carry over appropriations until they  accrue sufficient funds to fully fund a project upfront (because their  construction appropriations historically have not expired), Corps  officials we spoke to had concerns about this practice. They stated  that carryover funds may be seen as available and reprogrammed to  other civil works efforts (such as rebuilding infrastructure in the wake  of a natural disaster) and that Congress and the Board both expect  the Corps to obligate appropriated funds. In addition, some  stakeholders had concerns that delaying the start of construction until  full upfront funding was appropriated could result in further  deterioration or increased maintenance costs for those facilities.", "Finally, according to some stakeholders we spoke to, the current  incremental funding approach has allowed construction projects on  multiple waterways to occur at once\u2014a way of spreading benefits  across the system and providing some indication to local users and  beneficiaries that their local facility will be repaired or replaced.", "Nonetheless, incremental funding for inland waterways projects\u2014among  other factors such as engineering design changes\u2014has contributed to  increased costs and schedule delays because it results in inefficient  contracting practices. Corps reports and academic studies have found  that incremental funding has resulted in inefficient contracting for  construction projects, in part because funding is not guaranteed beyond  the current year and contractors must stop working once funds are  exhausted. Because the Corps receives annual appropriations for a  portion of the total estimated cost of a project, the Corps awards contracts  for separable elements that can be constructed and left for a period of  time with minimal damage and safety risks if further funding is unavailable  (such as a contract to build part of a lock wall). According to Corps district  officials, this practice has resulted in the Corps entering into many more  contracts for each project than they would if they had full upfront funding.  For example, Corps officials told us that due to incremental funding, the  Lower Monongahela Locks and Dams project is currently on its 14th  construction contract even though it was originally planned to be  completed using only two contracts. Corps officials told us that this  contracting practice is inefficient and can lead to cost overruns due to, for  example:  contractor mobilization and demobilization, such as moving heavy  equipment on and off the construction site, at the beginning and end  of each contract; prolonged construction due to multiple contractors unable to work at  the same worksite during the same time; extra administrative expenses associated with letting multiple  increased cost of fuel and construction materials (e.g., steel and  cement) from year to year; higher costs of buying construction materials in smaller quantities;  inflation due to prolonged construction.", "Further, according to Corps officials and stakeholders, additional  challenges related to the timing and amount of funding allocated in a  given fiscal year can exacerbate inefficiency related to incremental  funding. For example, while under a continuing resolution, the Corps does  not allocate funding to projects that were not included in the President\u2019s  budget, per OMB policy, which can delay funding for projects until  Congress provides appropriations for the remainder of the fiscal year.  Thus, in fiscal year 2018, funding was delayed for the three ongoing  projects that were not included in the President\u2019s budget request.  Although project work can continue if the Corps has some carryover  funds, Corps officials told us that, if they exhaust their funds, a continuing  resolution could mean they won\u2019t be able to exercise the next option on a  construction contract. As a result, the contractor would have to stop  work and shut down the construction site, and the Corps would need to  close the existing contract, repackage the remaining work, and re- advertise the contract\u2014all tasks that can increase the full cost of a  project. Additionally, according to Corps officials, when projects receive  smaller portions of funding than estimated for the upcoming fiscal year,  the amount may not be enough to allow a contractor to continue on the  most efficient construction schedule for that contract or contract option  which can have the effect of increasing costs. Moreover, according to  Corps district officials, the benefit-cost ratios for some ongoing projects  have decreased in recent years in part because the projects have  experienced increased costs (relative to expected benefits) due to a  number of factors, including inefficient contracting stemming from  incremental funding, which may affect the project\u2019s priority status and  inclusion in the President\u2019s budget request.", "All four of the Corps\u2019 ongoing construction projects have experienced cost  overruns and, as shown in figure 11, schedule delays. According to Corps  officials, some of these cost increases and delays were due to inefficient  contracting stemming from incremental funding. For example, Corps  officials currently expect that the Kentucky Lock Addition project will  require at least $229 million more (about 19 percent above the original  estimated cost) as a direct result of inefficient contracting and be  completed 17 years later than planned. Similarly, the Corps estimates  that the Chickamauga Lock project will need at least $170 million more  (about 24 percent above the original estimated cost) due to inefficient  contracting and be completed at least 13 years later than planned. The  amount of estimated cost overruns for just these two projects could  potentially fund an entire additional project."], "subsections": []}, {"section_title": "Timing and Distribution of Funding Could Reduce Cost Increases and Schedule Delays for Inland-Waterways Construction Projects", "paragraphs": ["In the absence of full funding, our funding simulation demonstrates that  contracting efficiency for inland-waterways construction projects could be  increased by funding fewer projects at a time. We developed a simulation  for a set of four hypothetical new construction projects under different  funding approaches to explore the effects of different funding patterns  and timing on total project costs and timeframes. We assumed that all  four hypothetical projects could be completed for $2 billion ($500 million  each, with expected funding of $100 million per year) within 5 years of  construction. For our simulation, we assumed that $200 million would be  available to allocate each year across the four projects\u2014an amount  roughly similar to recent funding levels for actual inland waterways  projects. We developed five funding approaches that varied in the pattern  and timing of funding allocated toward each project. Given these patterns  of funding, we also incorporated cost effects that we hypothesized would  occur. For example, for each year that a project did not receive full  funding\u2014that is, the entire remaining costs of the project were not  provided\u2014we assumed the remaining funding required to complete the  project would increase to account for contracting inefficiencies that were  likely to occur due to incremental funding, such as increased contractor  mobilization and demobilization. Also, for any year that a project received  funding in smaller amounts than expected, we assumed that funding  required to complete the project would rise due to exacerbated contract  inefficiencies due to such factors as having to buy materials in smaller  quantities or break work into smaller separable elements. In addition, we  incorporated inflation into projects\u2019 remaining costs when funding for  those projects was delayed. See appendix III for more detailed  information regarding our methodology for this simulation.", "While fully funding projects up front would help to avoid cost increases or  delays due to inefficient contracting, we found that, even with incremental  funding, varying the timing and amount of funding can reduce inefficiency  (see fig. 12). For example, we found that compared to other approaches,  an incremental funding approach that concentrates all available funding to  one of the four projects at a time\u2014as in Approach A, shown in figure 12\u2014 results in lower cost overruns and faster construction than an approach  that funds more projects simultaneously with smaller amounts of funding,  as in Approach B (see app. III for results for all five approaches). In  addition, concentrating funding toward one project could lead to greater  years of benefits\u2014as measured by the Corps as the number of years a  facility has been constructed and available for use by vessels. However,  according to Corps officials and stakeholders we spoke to, there may be  risks associated with concentrating funding on one project at a time due  to concerns with delaying the start of other high priority projects. For  example, during the time in which a project is waiting for funding, the  infrastructure may experience further deterioration, and vessels using the  facility may experience increased delays. Corps officials we spoke to  about this simulation generally agreed that the Corps\u2019 current funding  approach most closely resembles Approach B, with most funding going to  the Olmsted Locks and Dam project while the remaining three ongoing  projects receive smaller amounts (see also fig. 6).", "OMB and GAO have advocated for full upfront funding of capital projects  as a way to recognize full budgetary commitments, but, as discussed,  fiscal pressures on both the Corps and Congress may make it difficult to  request and appropriate full funding. OMB\u2019s Capital Programming Guide  states that full funding can help ensure that all costs and benefits are taken into account at the  time decisions are made to provide resources,  increase the opportunity to use more competitive contracts, and allow for more efficient work planning.", "Further, we have previously reported that full funding is an important tool  for maintaining government-wide fiscal control, because failure to  recognize the full costs of proposed commitments during budget  decisions could lead to distortions in the allocation of resources. We  have also reported that incremental funding of capital projects can reduce  available funding for future projects and erodes future program flexibility  because funding is dedicated to projects begun in previous years.  Though providing full upfront funding would likely reduce the overall costs  of inland waterways construction over the long term, it may require a  significant increase in annual appropriations in the short term, which  Corps officials consider to be highly unlikely.", "Both OMB and GAO have acknowledged the challenges associated with  \u201cspikes\u201d in appropriations that would be required for full funding and have  suggested that innovative funding mechanisms could be used to mitigate  this challenge. In 2010, we recommended that the Corps work with  Congress to develop a more stable project-funding approach for Civil  Works projects that provides more efficient use of funds, but the  Department of Defense only partially concurred with the recommendation,  stating that it will support budget decisions made by the administration.  However, without some change in the way inland-waterways construction  projects are funded to either provide full funding or reduce the effects of  incremental funding by concentrating on fewer projects at one time,  current cost increases and schedule delays resulting from inefficient  contracting are likely to continue. For example, according to the Corps\u2019  2016 capital investment strategy, under a scenario in which construction  funding is limited only by available Trust Fund revenues, in the next 20  years the Corps could complete 16 of the 22 major rehabilitation and new  construction projects identified as priority projects for approximately $7  billion; however, because these estimates do not account for cost  overruns due to the current incremental funding approach, the Corps is  unlikely to meet this goal."], "subsections": []}]}, {"section_title": "Stakeholders Identified Limitations and Trade-offs Associated with Proposed Options for Increasing Available Funding for Inland- Waterways Construction", "paragraphs": ["In addition to adjusting the timing and distribution of funding, according to  some of the stakeholders we interviewed, increasing available funding for  construction would provide more upfront funding to enable more efficient  contracting. Stakeholders said that with additional funding, the Corps may  be able to complete ongoing inland waterways projects more quickly and  begin other construction projects. We asked stakeholders representing 55  national and regional entities and researchers about options to increase  available funding for inland waterways construction that have been  proposed by policymakers and in relevant literature including: altering the cost share between the Trust Fund and federal  requiring other users and beneficiaries of the waterways to contribute  to the Trust Fund,  increasing or adding fees for commercial users, expanding opportunities for local sponsors to contribute to funding pursuing alternative financing arrangements.", "While each option has potential benefits, stakeholders we interviewed  identified limitations or trade-offs that could affect the feasibility of each  option.", "Altering the Trust Fund cost share. Altering the percentage of the Trust  Fund cost share for construction projects could increase available funding  to complete construction projects. For example, in 2014 the Trust Fund\u2019s  cost share for the Olmsted Locks and Dam project was reduced by  statute from 50 to 25 percent for fiscal year 2014, and to 15 percent for  subsequent fiscal years\u2014thereby increasing the federal share to 85  percent\u2014to speed the pace of other inland-waterways construction  projects (by increasing the overall funding available for those projects)  and to reduce the costs to commercial users. The Inland Waterways  Users Board (Board), in its April 2018 annual letter to Congress,  proposed making such a change for all future projects. Specifically, the  Board proposed increasing the federal government\u2019s share of  construction costs from 50 percent to 75 percent. According to the  Board and some stakeholders, this could increase the available funding  for Corps construction projects on the inland waterways system. Because  each Trust Fund dollar would be matched by three dollars from general  revenues as opposed to one dollar under a 50/50 split, overall funding  may be increased. The Board stated that this approach may also enable  the Corps to start and complete projects more quickly. For example, as  shown in figure 12, with more upfront funding available for each project,  the Corps may be able to contract for projects more efficiently than if it  received smaller amounts of funding each year. However, some  stakeholders said additional appropriations for inland waterways  construction from general revenues would be required to achieve the  benefits of this option, an approach that could, in turn, reduce funding  available for other congressional priorities or increase the federal deficit.  Absent additional appropriations, however, the amount of funding for  construction could be reduced. For example, if appropriations from  general revenues were $100 million per year under both scenarios, total  funding for inland waterways under a 75/25 split would be only about  $133 million, instead of $200 million under the traditional 50/50 split. To  provide the same $200 million for construction, but reduce the costs to  commercial users under a 75/25 split, appropriations from general  revenues would need to increase to $150 million.", "Require other users and beneficiaries of the waterways to contribute  to the Trust Fund. Some stakeholders we spoke to proposed requiring  that other users of the waterways contribute to the Trust Fund.  Recreational boaters, municipal water utilities, and hydropower utilities  already pay fees associated with their use of inland waterways, but this  revenue is not directed toward the Trust Fund, for example:  recreational users, such as recreational boaters and fishermen, on all  waterways pay fees of about $628 million annually on fishing  equipment and taxes on fuel used in motorboats that are currently  deposited into the U.S. Fish and Wildlife Sport Fish Restoration and  Boating Trust Fund, which is used to sustain sport-fishing  populations; municipal water utilities that have Corps\u2019 water storage contracts on  the inland waterways pay fees that are currently deposited into the  general fund of the Treasury; and power generated by federally owned hydroelectric dams (including  those owned by the Corps on the inland waterways) is sold at rates  intended to cover the government\u2019s costs of operating and  maintaining the dams, among other things.", "Other infrastructure trust funds are supported in part through user fees  paid by both commercial and non-commercial users. For example, excise  taxes, primarily on motor fuels and commercial trucks and tires, are  deposited into the Highway Trust Fund, which is used to provide grants to  state highway or transportation agencies. Some stakeholders said that all  users who benefit from the pools created by navigation dams should bear  some portion of the costs of the infrastructure, and revenue collected from  these users could potentially be redirected to the Trust Fund. However,  some other stakeholders said that these users as well as U.S. taxpayers  that do not use the waterways already contribute to inland waterways  construction, operations, and maintenance costs through their federal tax  contributions to general revenues. We have previously found that in  theory, the extent to which a program is funded by user fees should  generally be guided by who primarily benefits from the program; however,  the extent to which a program benefits users or the general public is not  usually clear cut. In addition, redirecting revenue from fees currently  paid by other users of the waterways to inland waterways would reduce  funding available for other congressional priorities, as these funds are  currently being directed towards other uses.", "Increasing or adding fees for commercial users. Past administrations  as well as entities such as the Congressional Budget Office have  proposed increasing revenue for inland waterways construction by  increasing existing fees or imposing additional fees, such as lockage  fees, for commercial users of the inland waterways\u2014the only group that  is currently paying the fuel tax\u2014as they are the primary beneficiaries.  For instance, in a legislative proposal accompanying the fiscal year 2019  President\u2019s budget request, the current administration proposed  increasing the number of waterways subject to the fuel tax, which could  have the effect of increasing the amount some users pay or increasing  the number of commercial users subject to the tax. However, some  stakeholders pointed out that increasing or adding fees for these users  would raise the costs of transportation on the waterways, which could  lead shippers to switch to other modes of transportation (such as trucks  and rail, which are less efficient) and ultimately reduce both waterways  traffic and Trust Fund revenue. Specific proposals for increasing or  adding to existing fees are described in more detail below.", "Index fuel tax to inflation: Two stakeholders said that indexing the fuel  tax to inflation could help the Trust Fund retain its purchasing  capability over time. In fiscal year 1994, the fuel tax was set at $0.20  per gallon, and it was not raised again until 2015, when Congress  increased the tax to $0.29 per gallon with the support of commercial  users\u2013close to the inflation adjusted-level of the 1994 rate.  However, the rate was not set to automatically rise with future  inflation, which reduces the purchasing power of the fuel tax over  time. For example, according to our analysis of fuel tax revenue for  1994\u20132014, if the fuel tax had been indexed to inflation as of 1994,  about $400 million in additional revenues would have been raised  over the 20-year period between 1994 and 2014. If the additional  $400 million were matched by general revenues dollar for dollar, a  total of $800 million more would have been available to the Corps for  construction projects.", "Annual vessel fee: Citing the insufficiency of existing revenue to pay  the users\u2019 share of capital investment costs, the current administration  has proposed a new annual per vessel fee for commercial users to  help finance future construction projects and cover a portion of the  cost of operating and maintaining them (operations and maintenance  has historically been a federal responsibility). The current  administration expects this fee would raise approximately $1.78 billion  in new revenue from fiscal years 2019\u20132028 ($178 million annually) to  supplement revenue from the existing fuel tax. In its annual letter to  Congress, the Board said this proposal is similar to what the prior  administration proposed and that Congress has repeatedly rejected  because it would more than double the amount collected from  commercial users of the inland waterways system each year, with  associated consequences for shipping costs and traffic diverted to  other modes.", "Lockage fees: Various groups have proposed collecting lockage fees  from commercial users to tie fees more closely to use of the  infrastructure and increase available funding. For example, prior  administrations\u2019 budget proposals have recommended replacing or  supplementing the fuel tax with lockage fees. According to the  Transportation Research Board, lockage fees could increase available  funding for construction, are moderately easy to administer, and could  be implemented on a system-wide basis, with lock operators keeping  track of lock use. However, some stakeholders stated that the relative  unknowns of how a lockage fee would be implemented make it less  appealing than the current, familiar fuel tax, which they are able to  incorporate into their operating budgets. Additionally, some  stakeholders told us adding lockage fees\u2014just like increasing the fuel  tax or adding other fees\u2014would increase shipping costs, and could  reduce traffic on the inland waterways. Further, some stakeholders  raised concerns about the equity of lockage fees, as all users benefit  from the system as a whole, but not all users frequently pass through  locks. For example, as one stakeholder pointed out: the Mississippi  River has zero locks and dams from St. Louis to New Orleans, so  users that operate chiefly on that part of the system may not need to  pay lockage fees. As such, lockage fees would affect some  commercial users more than others: if the fuel tax were replaced with  lockage fees, some users (those that do not routinely pass through  locks, but benefit from the pools created) may ultimately pay much  less than they currently do, while others (those operating on areas of  the system with a high number of locks) would pay much more.", "Expanding the use of contributed funds. Expanding the Corps\u2019  authority to allow local sponsors\u2014generally state and local governments  or interstate agencies\u2014to contribute to the costs of project construction,  as is the case for other types of water resource projects, could increase  available funding. The Water Resources Reform and Development Act  of 2014 established a pilot project that enabled the Corps to accept  contributed funds from nonfederal interests to pay for the costs of  operating inland waterways facilities but does not allow such contributions  for maintenance or construction.", "Some stakeholders said expanding the current use of contributed funds  for operations expenses by enabling local sponsors to contribute funds for  construction could potentially benefit some communities and increase  available funding. However, the costs for construction and maintenance  of facilities on high-use waterways would likely be too high for local  sponsors to offset. Moreover, we have reported that state and local  governments face long-term fiscal pressures, which may limit their ability  to contribute to costs for navigation locks in their jurisdictions.", "Pursuing alternative-financing arrangements. The current  administration and others have proposed alternative-financing options  that could enable the Corps to leverage either private capital or other  available funds in order to provide full upfront funding for inland  waterways construction projects. Numerous proposals call for the Corps  to leverage private capital, such as public-private partnerships or debt  financing, to access full funding at the beginning of inland-waterways  construction projects. The Water Resources Redevelopment Act of 2014  authorized the Corps to implement pilot programs to explore the use of  debt financing, such as low interest loans provided under the Water  Infrastructure Finance and Innovation Act of 2014, and public-private  partnerships for civil works water resources projects. Similarly, the current  administration\u2019s 2018 Legislative Outline for Rebuilding Infrastructure in  America proposes authorizing the Secretary of the Army to execute  agreements with non-federal public or private entities for civil works water  resources construction projects.", "While some stakeholders stated that alternative-financing arrangements  could increase available funding for inland-waterways construction  projects, they were unsure of whether these agreements would work in  practice. According to some stakeholders, public-private partnerships and  debt-financing would provide upfront funding with an expectation of either  a profitable return to a private equity partner or repayment of debt;  however, according to some stakeholders, there is limited interest in  entering into these financing arrangements among private sector  investors because there is no clear and viable revenue stream to provide  such returns. For instance, some stakeholders told us that increasing  fees for commercial users to provide a revenue stream could have the  effect of reducing traffic on waterways, which would reduce the revenue  potential of fees.", "Alternative-financing arrangements would also require congressional  action to implement. Specifically, depending on the structure of these  financing agreements, alternative financing would require legislative  changes, which could include granting the Corps authority to: (1) enter  into public-private partnerships, (2) use debt financing, (3) use contract  authority to obligate funding beyond what is appropriated in a given  year, or (4) collect and retain revenue such as lockage fees. While the  Water Resources Reform and Development Act of 2014 authorized the  pilot programs to explore the use of public private partnerships and debt  financing, Corps officials told us that they cannot enter into agreements of  this type without specific appropriations, which they have not yet  received. Corps officials stated that they are currently developing a high  level policy to provide general direction about the use of alternative  financing but according to them, the lack of a clear revenue source may  make it more difficult to execute alternative-financing strategies that  include private partners for inland waterways infrastructure.", "In contrast, the President recently proposed establishment of a Federal  Capital Revolving Fund, which could enable federal agencies to access  full upfront funding for certain construction projects without leveraging  private capital. According to the proposal, the revolving fund would  transfer funding to agencies to finance large-dollar real-property capital  projects designated in appropriations acts if the project receives an  appropriation for the first of a maximum of 15 required annual  repayments. If those conditions are met, the revolving fund would transfer  funds to agencies to cover the full cost to acquire the capital asset\u2014in the  case of inland waterways, the full cost to construct the project.  Purchasing agencies would repay the fund using annual appropriations\u2014 for inland waterways, this approach likely would mean that repayments  could be made using appropriations from either the Trust Fund or general  revenues. While Corps inland-waterways construction projects would not  be eligible for funding under this proposal, this type of approach to  alternative financing could potentially be used to enable the Corps to  contract for inland waterways construction more efficiently. However, only  projects included in the President\u2019s budget request would be eligible to  receive this funding. At present, only one inland waterway project\u2014 Olmsted Locks and Dam\u2014meets that requirement, and the Corps does  not anticipate other authorized projects meeting the current benefit-cost  ratio threshold for inclusion. Congressional action would be required to  implement the proposed Federal Capital Revolving Fund, as well as  authorize eligibility of inland-waterways construction projects, or a  separate fund that would include Corps infrastructure projects."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The inland waterways are a critical component of the nation\u2019s freight  transportation system, and the Corps must manage the system within the  context of competing priorities and limited resources. To effectively  manage those resources, the Corps must accurately identify, assess, and  communicate its priorities for operations, maintenance, and construction  funding. The Corps cannot quantify deferred maintenance for inland  waterways because it lacks a definition and measure (or measures) of  deferred maintenance that reflects priorities and how deferral will affect  system reliability. As such, the Corps is unable to clearly communicate its  funding needs related to operating and maintaining the inland waterways.", "As with many federal programs, the Corps manages inland-waterways- construction and major-rehabilitation projects within some fundamental  constraints, including available Trust Fund revenue, which is less than the  amount that would be needed to fully fund the estimated costs of any of  the four ongoing new construction projects. Accordingly, Congress and  the President have instead incrementally funded multiple construction  projects at a time. However, this incremental-funding approach can lead  to construction delays and increasing costs. As a result, other priority  projects cannot be started, construction backlogs grow, and delays and  closures continue to affect vessels at locks and dams that continue to  deteriorate while waiting for replacement or rehabilitation. The Corps\u2019  capital investment strategy identifies an approach to funding priority  projects given estimated Trust Fund revenue, but given the constrained  fiscal environment and the unpredictable nature of the annual  appropriations process, cost increases and schedule delays are likely to  continue. Should Congress decide that additional funding is warranted to  reduce this inefficiency, our report includes several options stakeholders  have identified for doing so, such as increasing the federal share of  construction costs for these projects. In the absence of increased funding,  however, stakeholders we spoke to identified actions the Corps could  take in coordination with Congress to increase the efficiency of  contracting for inland waterways projects. The Corps could explore  changes\u2014such as sequencing project construction or legislative changes  to enable more upfront funding prior to starting construction, among other  options discussed in this report\u2014that would enable the Corps to contract  for inland waterways construction in a more efficient way. However, all of  the options we discuss have important policy trade-offs and other  challenges that the Corps and Congress would need to carefully consider."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to the Corps:  The Chief of Engineers and Commanding General of the U.S. Army  Corps of Engineers should define and measure deferred maintenance for  inland waterways in a way that enables the Corps to clearly communicate  estimated costs for maintenance needs. (Recommendation 1)", "The Chief of Engineers and Commanding General of the U.S. Army  Corps of Engineers should pursue ways to increase the Corps\u2019 ability to  use available funding for inland waterways construction more efficiently  and, should changes to the Corps\u2019 authority be necessary, develop a  legislative proposal to request such authority. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Secretaries of Defense,  Transportation, and Homeland Security and the Director of the Office of  Management and Budget for review and comment. The Department of  Defense provided written comments that are reprinted in appendix V; the  department concurred with our recommendations. The Department of  Homeland Security and Office of Management and Budget provided  technical comments, which we incorporated as appropriate. The  Department of Transportation had no comments on the draft report.", "We are sending copies of this report to appropriate congressional  committees; the Secretaries of Defense, Transportation, and Homeland  Security; and the Director of the Office of Management and Budget. 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) 512-2834 or VonAhA@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Inland and Intracoastal Fuel- Taxed Waterways of the United States", "paragraphs": ["1.  Alabama-Coosa Rivers: From junction with the Tombigbee River at  river mile (hereinafter referred to as RM) 0 to junction with Coosa  River at RM 314.  2.  Allegheny River: From confluence with the Monongahela River to form  the Ohio River at RM 0 to the head of the existing project at East  Brady, Pennsylvania, RM 72.  3.  Apalachicola-Chattahoochee and Flint Rivers (ACF): Apalachicola  River from mouth at Apalachicola Bay (intersection with the Gulf  Intracoastal Waterway) RM 0 to junction with Chattahoochee and Flint  Rivers at RM 107.8. Chattahoochee River from junction with  Apalachicola and Flint Rivers at RM 0 to Columbus, Georgia at  RM155 and Flint River, from junction with Apalachicola and  Chattahoochee Rivers at RM 0 to Bainbridge, Georgia, at RM 28.  4.  Arkansas River (McClellan-Kerr Arkansas River Navigation System):  From junction with Mississippi River at RM 0 to Port of Catoosa,  Oklahoma, at RM 448.2.  5.  Atchafalaya River: From RM 0 at its intersection with the Gulf  Intracoastal Waterway at Morgan City, Louisiana, upstream to junction  with Red River at RM 116.8.  6.  Atlantic Intracoastal Waterway: Two inland waterway routes  approximately paralleling the Atlantic coast between Norfolk, Virginia,  and Miami, Florida, for 1,192 miles via both the Albermarle and  Chesapeake Canal and Great Dismal Swamp Canal routes.  7.  Black Warrior-Tombigbee-Mobile Rivers: Black Warrior River System  from RM 2.9, Mobile River (at Chickasaw Creek) to confluence with  Tombigbee River at RM 45. Tombigbee River (to Demopolis at RM  215.4) to port of Birmingham, RM\u2019s 374-411 and upstream to head of  navigation on Mulberry Fork (RM 429.6), Locust Fork (RM 407.8), and  Sipsey Fork (RM 430.4).  8.  Columbia River (Columbia-Snake Rivers Inland Waterways): From the  Dalles at RM 191.5 to Pasco, Washington (McNary Pool), at RM 330,  Snake River from RM 0 at the mouth to RM 231.5 at Johnson Bar  Landing, Idaho.  9.  Cumberland River: Junction with Ohio River at RM 0 to head of  navigation, upstream to Carthage, Tennessee, at RM 313.5.  10. Green and Barren Rivers: Green River from junction with the Ohio  River at RM 0 to head of navigation at RM 149.1.  11. Gulf Intracoastal Waterway: From St. Mark\u2019s River, Florida, to  Brownsville, Texas, 1,134.5 miles.  12. Illinois Waterway (Calumet-Sag Channel): From the junction of the  Illinois River with the Mississippi River RM 0 to Chicago Harbor at  Lake Michigan, approximately RM 350.  13. Kanawha River: From junction with Ohio River at RM 0 to RM 90.6 at  Deepwater, West Virginia.  14. Kaskaskia River: From junction with Mississippi River at RM 0 to RM  36.2 at Fayetteville, Illinois.  15. Kentucky River: From junction with Ohio River at RM 0 to confluence  of Middle and North Forks at RM 258.6.  16. Lower Mississippi River: From Baton Rouge, Louisiana, RM 233.9 to  Cairo, Illinois, RM 953.8.  17. Upper Mississippi River: From Cairo, Illinois, RM 953.8 to  Minneapolis, Minnesota, RM 1,811.4  18. Missouri River: From junction with Mississippi River at RM 0 to Sioux  City, Iowa, at RM 734.8.  19. Monongahela River: From junction with Allegheny River to form the  Ohio River at RM 0 to junction of the Tygart and West Fork Rivers,  Fairmont, West Virginia, at RM 128.7.  20. Ohio River: From junction with the Mississippi River at RM 0 to  junction of the Allegheny and Monongahela Rivers at Pittsburgh,  Pennsylvania, at RM 981.  21. Ouachita-Black Rivers: From the mouth of the Black River at its  junction with the Red River at RM 0 to RM 351 at Camden, Arkansas.  22. Pearl River: From junction of West Pearl River with the Rigolets at RM  0 to Bogalusa, Louisiana, RM 58.  23. Red River: From RM 0 to the mouth of Cypress Bayou at RM 236.  24. Tennessee River: From junction with Ohio River at RM 0 to  confluence with Holstein and French Rivers at RM 652.  25. White River: From RM 9.8 to RM 255 at Newport, Arkansas.  26. Willamette River: From RM 21 upstream of Portland, Oregon, to  Harrisburg, Oregon, at RM 194.  27. Tennessee-Tombigbee Waterway: From its confluence with the  Tennessee River to the Warrior River at Demopolis, Alabama."], "subsections": []}, {"section_title": "Appendix II: Inland Waterways Stakeholders GAO Interviewed", "paragraphs": ["Appendix II: Inland Waterways Stakeholders  GAO Interviewed Entity  American Association of State Highway and Transportation Officials  American Society of Civil Engineers  Big River Coalition (New Orleans)", "Gulf Intracoastal Canal Association (New Orleans)", "Illinois Corn Growers Association (Rock Island)", "National Grain and Feed Association  Pacific Northwest Waterways Association (Walla Walla)", "River Industry Action Committee (Rock Island)", "Warrior-Tombigbee Waterway Association (Mobile)", "Waterways Association of Pittsburgh (Pittsburgh)", "Waterways Council, Inc.", "Archer Daniels Midland Company (Rock Island)", "Campbell Transportation Company, Inc. (Pittsburgh)", "Canal Barge Company, Inc. (New Orleans)", "Channel Shipyard Companies (New Orleans)", "Cooper Marine & Timberlands Corp (Mobile)", "J. Craig Stepan, formerly of U.S. Steel (Mobile)", "Parker Towing Company (Mobile)", "Shaver Transportation (Walla Walla)", "Tidewater Barge Lines (Walla Walla)", "Turn Services (New Orleans)", "Arkansas Waterways Commission (Little Rock)", "Little Rock Port Authority (Little Rock)", "The Port of New Orleans (New Orleans)", "The Port of Pittsburgh Commission (Pittsburgh)", "Washington Grain Commission (Walla Walla)", "Alabama Scenic River Trail (Mobile)", "Allegheny River Development Corporation (Pittsburgh)"], "subsections": [{"section_title": "Stakeholder Type", "paragraphs": ["Entity  Boat Owners Association of the United States (BoatUS)", "Little Rock Yacht Club (Little Rock)", "Upper Monongahela River Association (Pittsburgh)", "Allegheny County Sanitary Authority (Pittsburgh)", "Clarksville Light & Water Company (Little Rock)", "Southwestern Power Resources Association (Little Rock)", "C. James Kruse, Texas A&M University  Chris Hendrickson, Ph.D., Carnegie Mellon University   Craig Philip, Ph.D., Vanderbilt University  Dennis Lambert, COWI Marine North America  Edward Dickey, Ph.D., Dawson & Associates  Gary Loew, Dawson & Associates  Jill Jamieson, Jones Lang LaSalle  Leonard Shabman, Ph.D., Resources for the Future   Paul Bingham, Economic Development Research Group, Inc.", "B. Starr McMullen, Ph.D., Oregon State University  Stephen Fitzroy, Ph.D., Economic Development Research Group, Inc."], "subsections": []}]}, {"section_title": "Appendix III: Technical Appendix for GAO\u2019s Funding Simulation for Inland-Waterways Construction Projects", "paragraphs": ["To illustrate the effects associated with the current-funding approach,  which was consistently discussed as a challenge in interviews with  agency officials and stakeholders, we developed a funding simulation for  hypothetical projects using assumptions that were anchored in findings  from a 2008 Corps study on factors contributing to cost increases for  inland-waterways construction projects. This funding simulation was  intended to demonstrate the effects of the pattern and timing of funding  on total project costs and construction schedules. To inform our  assumptions, we analyzed the results of the Corps study, which  examined three inland-waterways construction projects and identified the  many factors that contributed to cost increases and schedule delays for  each project. One of the factors the report identified that led to higher  funding requirements (that is, cost overruns) was inefficient contracting  driven by the amount and timing of funding provided to each project.", "We developed five hypothetical scenarios that represent different funding  approaches of a set of four identical construction projects (including a  control scenario in which full upfront funding for all projects is available)  based on the following information: each project requires $500 million in funding; each project takes 5 years to construct if it is fully funded with $500 absent full upfront funding, projects were structured to expect funding  of $100 million per year for the project; once started, funding is not interrupted over the period of our  total amount of available funding to fund these projects is $200 million  per year; and;  the number of years the projects provide benefits\u2014that is, the number  of years a facility has been constructed and is available for use by  vessels\u2014varies within the period of time selected for the simulation  (2020 through 2034).", "To illustrate the effects of the different funding approaches on total project  costs and time frames, we made assumptions about the effect of various  funding structures on total funding requirements. These assumptions  were informed by our review of the findings of the Corps\u2019 study related to  the effects of incremental funding and discussions of these issues with  Corps officials. These assumptions include:", "Remaining required project funding was assumed to increase by 2  percent each year due to inefficient contracting that results from less  than full upfront funding\u2014that is, if the full $500 million of estimated  project funding is not provided in year 1.", "Remaining required project funding was also assumed to increase by  0.5 percent each year if projects received less funding than is  expected in a given year (less than $100 million) due to exacerbated  project-contracting inefficiencies.", "An increase of 2 percent per year of remaining required project  funding was applied if the project\u2019s start was delayed beyond its  intended starting year due to inflation.", "We applied increases to funding requirements where appropriate under  the five different funding approaches:", "Approach A: Fund One Project at a Time\u2014Funding only one project  at a time with all available funding ($200 million). Once the first project  has been fully funded, all available funding is provided to the second  project, and so on.", "Approach B: Fund Multiple Projects at Different Amounts\u2014Funding  one project at a time at the expected level\u2014that is, at $100 million  each year until it is finished\u2014then dividing remaining available funding  equally to the remaining three projects. After the first project is  complete, the second project receives $100 million each year until  completion and the remaining funding is divided evenly, and so on.", "Approach C: Fund Two Projects at a Time\u2014Available funding is  divided among two projects; two projects receive funding at the  expected level ($100 million) and the start of funding for the remaining  projects is delayed until the first 2 are completed.", "Approach D: Delay Construction to Fully Fund One Project at a  Time\u2014Full upfront funding for one project at a time: allocation of  funds is delayed until the entire remaining funding required ($500  million plus increases due to inflation) is available.", "Approach E: Fund Multiple Projects Equally\u2014Equally funding all four  projects at once: since the overall budget is $200 million, each project  is funded at $50 million per year.", "We found that the timing and amount of incremental funding resulted in  varying degrees of cost overruns (see fig. 13). In addition, the different  funding approaches led to varying years of benefits\u2014as measured by the  Corps as the number of years a facility has been constructed and  available for use by vessels\u2014counted over a 15-year span of our  simulation. This variation is shown in figure 13, but these projects would  provide many years of benefits beyond this timeframe. For example, we  found that\u2014compared to other approaches\u2014an incremental funding  approach that concentrates all available funding to one of the four  projects at a time, as in Approach A, below, can reduce inefficiency.", "To validate our findings, we solicited feedback from Corps officials from  the Pittsburgh District, Pennsylvania and Rock Island District, Illinois\u2014 based on their past and current experience with inland-waterways  construction projects\u2014from the Corps\u2019 Cost Estimating Center of  Expertise in Walla Walla, Washington; and representatives from the  Waterways Council, Inc. to understand the perspectives of industry  stakeholders. They all generally agreed that our assumptions,  approaches, and results were reasonable."], "subsections": []}, {"section_title": "Appendix IV: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we (1) assess how the Corps allocates funds for operations  and maintenance projects for the inland waterways system; (2) describe  how the Corps prioritizes and funds construction projects, and assess the  effect of the current-funding approach on projects\u2019 costs and schedules;  and (3) present stakeholder opinions on proposed options to alter the  funding and management of inland waterways and any associated  limitations or trade-offs. The scope of our review includes Corps activities  related to managing commercial navigation\u2014including operations,  maintenance, and construction\u2014on the 27 inland waterways subject to  the inland waterways diesel fuel tax. The fuel-taxed inland waterways  system is made up of the navigable waterways of the Mississippi River  and its tributaries, the Ohio River basin, the Gulf and Atlantic Intracoastal  Waterways, and the Columbia-Snake Rivers, among others (see app. I  for a list of fuel-taxed inland waterways). Commercial navigation activities  are those that facilitate the movement of traffic along the waterways for  commercial purposes, such as the transportation of goods for sale. For  contextual information on operations, maintenance, and construction  spending, we analyzed Corps financial data on obligations for operations  and maintenance for inland-waterways navigation projects for fiscal years  2006 through 2017 (the only years for which data were available) and  allocations for construction and major rehabilitation of locks and dams for  fiscal years 1997 through 2018 from the Corps of Engineers Financial  Management System. To determine the reliability of this data for the  purposes of this report, we reviewed the data to identify obvious errors  and missing data and interviewed appropriate Corps officials about  related internal controls and procedures and the limitations of the data.  We found these data to be sufficiently reliable for the purpose of providing  contextual information about funding for inland waterways operations and  maintenance and construction over time.", "With regard to all of our reporting objectives, we interviewed a range of  Corps officials at the headquarters, division, and district levels, as well as  national and regional stakeholders. We interviewed district officials from  a non-generalizable sample of 6 of the 24 Corps districts that manage  fuel-taxed waterways within their district boundaries; we selected the districts to include a variety of geographic regions, waterway  characteristics, primary commodities shipped, and history of construction  projects funded through the Trust Fund. Based on these criteria, we  selected the Corps districts in Little Rock, Arkansas; Mobile, Alabama;  New Orleans, Louisiana; Pittsburgh, Pennsylvania; Rock Island, Illinois;  and Walla Walla, Washington. In addition, we interviewed officials from  the Corps\u2019 Northwestern Division office, which oversees the Walla Walla  District, to understand the division-level role in coordinating districts\u2019  inland-waterways infrastructure projects. We also conducted a total of 42  semi-structured interviews with waterways stakeholders representing 43  different regional and national entities including commercial, recreational,  and other waterway users and 12 researchers (academics, economists,  and engineers) for a total of 55 stakeholders. National stakeholders were  identified by reviewing related literature and our prior reports and  recommendations from the Transportation Research Board and the  Waterways Council, Inc. (an industry organization representing a range of  waterway users including shippers, ports, energy providers, waterways  operators, and other advocacy groups). Regional stakeholders in the six  selected districts were identified through recommendations from agencies  and national waterways stakeholder organizations to represent a mix of  commercial users (such as barge companies and shippers with  commercial interests in the U.S. inland waterways system); recreational  users; and industrial water users (such as municipal water authorities and  hydropower entities). From those stakeholders identified, we selected  entities to interview to achieve diversity of waterway users\u2019 perspectives  and conducted interviews with both individual entities as well as  associations representing a variety of users and companies. In addition  to waterways\u2019 users, we also interviewed stakeholders who have  conducted research regarding the management of and allocation of  funding for fuel-taxed waterways, selected based on their contributions to  the relevant literature on options for funding and managing inland  waterways, including academics, economists, and engineers who were  knowledgeable about a range of topics including commodities  transportation (agricultural, energy products, and other materials),  engineering, and water resources. See appendix II for a list of entities  represented among the stakeholders we interviewed.", "We asked agency officials and stakeholders open-ended questions and  did not conduct a survey in which a response was provided irrespective of  whether a certain issue was relevant to the interviewee, so not every topic  was brought up or discussed by every interviewee. We analyzed the  responses to identify common themes and the range of opinions that  arose in interviews, which we have reported on. To identify these themes  and summarize the opinions of agency officials and stakeholders,  potential themes were identified via review of a sample of interviews. Two  analysts then conducted a content analysis to identify the themes  discussed in each interview and categorize the opinions of the  interviewees. For each interview, one analyst independently reviewed the  record of interview, and the other analyst later verified that coding. If there  was disagreement, the analysis discussed their assessment and came to  a final determination on the categorization. Because we selected a non- generalizable sample of stakeholders, their responses should not be used  to make inferences about a population. To characterize stakeholders\u2019  views throughout this report, we defined modifiers (e.g., \u201csome\u201d) to  quantify stakeholders as follows:  \u201csome\u201d stakeholders represents stakeholders in 3 to 14 of the 42  interviews  \u201cmany\u201d stakeholders represents stakeholders in 15 or more of the 42  interviews.", "To examine how the Corps allocates funds for operations and  maintenance projects for the inland waterways system, we examined the  President\u2019s budget request for civil works and appropriations for fiscal  years 1997 through 2018 as well as the Corps\u2019 budget request  development guidance to understand how the Corps develops its budget  request and prioritizes operations and maintenance projects. We  conducted site visits to Mobile, Alabama; New Orleans, Louisiana; and  Pittsburgh, Pennsylvania, to interview Corps officials and various regional  stakeholder groups in person, and to observe the condition of waterway  infrastructure. We also interviewed officials from the Office of the  Assistant Secretary of the Army for Civil Works (ASA-CW), the Office of  Management and Budget (OMB), the Department of Transportation\u2019s  Maritime Administration, and the Department of Homeland Security\u2019s U.S.  Coast Guard to understand how the Corps coordinates with other  agencies to fulfill its inland-waterways navigation mission. To assess the  Corps\u2019 efforts related to deferred maintenance we interviewed Corps  officials about how the Corps measures and defines deferred  maintenance and compared these practices with federal internal-control  standards related to control activities and quality information.", "To describe how the Corps prioritizes and funds inland-waterways  construction projects and to examine the effect of the current funding  approach on projects\u2019 costs and schedules, we reviewed relevant  statutes, agency policies and guidance, the Corps\u2019 capital-investment  strategy documents prepared in conjunction with the Inland Waterways  Users Board, as well as the Corps\u2019 Civil Works budget justification  documents in support of President\u2019s budget requests, congressional  appropriations, and accompanying conference reports. We also reviewed  relevant Corps documents, such as reports on ongoing construction  projects and studies on construction cost increases; prior GAO reports;  OMB capital funding guidance; and other academic studies to gather  information on capital project funding approaches, including for inland  waterways projects. We analyzed data from the Corps of Engineers  Financial Management System to identify sources of funding for inland- waterways construction projects from fiscal years 1996 through 2018. As  discussed above, we found these data sufficiently reliable for the  purposes of providing contextual information about the Corps\u2019 funding  sources. In addition to interviewing Corps officials and stakeholders, as  described above, we also interviewed officials from the office of the ASA- CW and OMB for their views regarding the prioritization and funding  processes for inland waterways-infrastructure projects, and the roles their  organizations play in those processes. We compared the established  method of funding inland-waterways construction projects with federal  internal-control standards, OMB guidance, and prior GAO work related to  funding capital projects.", "To illustrate the effects of the current funding approach on costs and  schedules for inland-waterways construction projects, we developed a  simulation of the effects of various funding approaches on the total  funding requirements for a set of hypothetical construction projects. The  simulation incorporates assumptions regarding the amount of total  funding a project would require (including any cost overruns) due to the  pattern and timing of funding made available. Our assumptions were  anchored in findings from a 2008 Corps study on factors contributing to  cost increases for three inland-waterways construction projects, and  Corps officials and other industry stakeholders generally agreed that our  assumptions and results were reasonable. Additional information on our  methodology for developing this simulation and the full results are  included in appendix III.", "Finally, to identify proposed options to alter the funding and management  of inland waterways, we conducted a literature search\u2014including  scholarly/peer-reviewed journals, government reports, congressional  hearings\u2019 transcripts, and associations\u2019 and think tanks\u2019 publications\u2014to  identify relevant studies and proposals about inland waterways\u2019 financing  in the United States, published between 2007 and 2017. Through our  literature search, we reviewed the abstracts for 103 potentially relevant  studies and identified 24 for further review. For each of these 24 studies,  we reviewed the entire study and determined 13 studies were relevant.  We then reviewed these 13 studies to identify the options most commonly  discussed or proposed. For the purposes of this report, we have divided  those options into broad categories: altering the cost sharing between the Trust Fund and federal  requiring other users and beneficiaries of the waterways to contribute  to the Trust Fund,  increasing or adding fees for commercial users, expanding opportunities for local sponsors to contribute to funding pursuing alternative-financing arrangements.", "In addition, we reviewed proposals by recent administrations, including  the fiscal year 2018 President\u2019s budget request, and interviewed Corps  officials and other entities including the Transportation Research Board  and district and agency stakeholders selected as described above to  ensure we had identified the most relevant options. During interviews with  stakeholders (as discussed above) we asked about their general views on  the potential benefits limitations, and trade-offs of those options. See  appendix II for a list of the stakeholders we interviewed.", "We conducted this performance audit from June 2017 through November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Andrew Von Ah, (202) 512-2834 or Vonaha@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, the following individuals made  important contributions to this report: Susan Zimmerman, Assistant  Director; Katie Hamer, Analyst-In-Charge; Amy Abramowitz; Faisal Amin;  Krister Friday; Carol Henn; Hannah Laufe; Sara Ann Moessbauer; Josh  Ormond; Cheryl Peterson; Amy Rosewarne; Alexandra Rouse; Lisa  Shibata; and Pamela Snedden."], "subsections": []}]}], "fastfact": ["The U.S. Army Corps of Engineers maintains the nation's inland waterways, including locks and dams. Its inland waterways construction projects have often seen delays and cost overruns.", "Corps reports and academic studies say the Corps faces higher costs and delays because it receives funding for only a part of a project each year, so it must contract for projects in pieces. Corps officials estimate that this inefficient approach will add $229 million to the cost of one project alone.", "We recommended the Corps seek ways to use construction funds more efficiently."]}
{"id": "GAO-18-512T", "url": "https://www.gao.gov/products/GAO-18-512T", "title": "National Preparedness: FEMA Has Taken Steps to Strengthen Grant Management, But Challenges Remain in Assessing Capabilities", "published_date": "2018-04-23T00:00:00", "released_date": "2018-04-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of Homeland Security (DHS), through FEMA, provides preparedness grants to state, local, tribal, and territorial governments to improve the nation's readiness in preventing, protecting against, responding to, recovering from and mitigating terrorist attacks, major disasters and other emergencies.", "According to DHS, the department has awarded over $49 billion to a variety of DHS preparedness grant programs from fiscal years 2002 through 2017, to enhance the capabilities of grant recipients. For example, the State Homeland Security Program which awards grants to the nation's 56 states and territories, and the Urban Areas Security Initiative which awards grants to urban areas based on DHS's risk methodology, are the largest of the preparedness grant programs (see figure).", "This statement addresses progress and challenges in FEMA's efforts to manage preparedness grants and GAO's prior recommendations to strengthen these programs. This statement is based on prior GAO reports issued from March 2011 through February 2016 and selected updates conducted in December 2017 through April 2018. To conduct the prior work and updates, GAO analyzed relevant FEMA data and documentation and interviewed relevant officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In February 2012, GAO identified coordination challenges among Federal Emergency Management Agency (FEMA) grant programs that share similar goals and fund similar projects, which contribute to the risk of duplication among the programs. GAO recommended that FEMA take steps, as it develops its new grant management system, to collect project information with sufficient detail to identify potential duplication among the grant programs. FEMA has since addressed these recommendations. Specifically, in 2014, FEMA modified a legacy grants data system to capture more robust grant project-level data, and in fiscal year 2017, procured a software tool and developed a set of standard operating procedures to assist its staff in identifying potentially duplicative projects. These actions should help FEMA strengthen the administration and oversight of its grant programs. Furthermore, FEMA is also developing a new grants management modernization system to consolidate and better manage its grants. GAO is currently reviewing the system for this Committee and will report out next year.", "GAO reported in March 2011 on the need for FEMA to improve its oversight of preparedness grants by establishing a framework with measurable performance objectives for assessing urban area, state, territory, and tribal capabilities to identify gaps and prioritize investments. Specifically, GAO recommended that FEMA complete a national preparedness assessment of capability gaps at each level based on tiered, capability-specific performance objectives to enable prioritization of grant funding. FEMA has taken some steps to address GAO's prior recommendation. Specifically, in February 2018, FEMA reported developing capability-specific performance objectives that will enable a national preparedness assessment of capability gaps. However, FEMA plans to finalize these efforts in 2020 and it is too early to tell how this will impact grant allocations. Until these efforts are completed, GAO will not be able to determine the extent that they address past challenges and recommendations."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO has made prior recommendations designed to address the challenges discussed in this statement. FEMA has taken actions to address some but not all of these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I appreciate the opportunity to participate in today\u2019s hearing to provide an  update on the efforts of the Federal Emergency Management Agency  (FEMA)\u2014a component of the Department of Homeland Security (DHS)\u2014 to manage preparedness grants and measure and assess national  preparedness capabilities. Our work over the last seven years has  focused on FEMA\u2019s efforts to coordinate federal interagency  preparedness and manage and assess the impact of FEMA\u2019s  preparedness grants on state and local preparedness. As described in  more detail below, our recommendations have identified additional steps  FEMA can take to improve the efficiency and effectiveness of these  efforts, including enhancing coordination and providing guidance on  preparedness. FEMA has taken actions to address some of these  recommendations, but more fully addressing all of them could lead to  additional savings, better services to the public, improved program  performance and accountability, and, ultimately, a better prepared nation.", "Following the federal response to Hurricane Katrina in 2005, Congress  enacted the Post-Katrina Emergency Management Reform Act of 2006  (Post-Katrina Act). In response to the act, among other things, DHS  centralized its preparedness grants under FEMA\u2019s Grant Programs  Directorate (GPD) to better integrate and coordinate grant management.  The act also requires that FEMA develop a national preparedness system  and assess preparedness capabilities to determine the nation\u2019s  preparedness. GPD provides preparedness grants to state, local, tribal,  and territorial governments, as well as transportation authorities, nonprofit  organizations, and the private sector, to improve the nation\u2019s readiness in  preventing, protecting against, responding to, recovering from and  mitigating terrorist attacks, major disasters and other emergencies. In  fiscal year 2017, DHS announced the availability of 10 preparedness  grant programs totaling more than $1.6 billion for fiscal year 2017.  According to DHS, from fiscal years 2002 through 2017 the department  has awarded over $49 billion to a variety of DHS preparedness grant  programs to enhance the capabilities of state, local, tribal, and territorial  grant recipients to carry out the above activities related to terrorist attacks  and other disasters.", "My testimony today covers our prior work on FEMA preparedness efforts  from March 2011 through February 2016 and selected updates conducted  in December 2017 and February 2018. This statement specifically  addresses FEMA\u2019s efforts to manage preparedness grants and our prior  recommendations.", "To conduct our prior work, we reviewed relevant presidential directives,  laws, regulations, policies, strategic plans, and key program documents;  and interviewed federal, state, and local officials, among others. More  detailed information on our scope and methodology can be found in each  of the reports cited throughout this statement. To update our work, we  interviewed relevant FEMA officials to obtain updates on efforts to  improve coordination among preparedness grant programs. The work  upon which this testimony is based was conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Over the past decade, the federal government has expanded financial  assistance to public and private stakeholders for preparedness activities  through various grant programs administered by DHS through its  component agency, FEMA. Through these grant programs, DHS has  sought to enhance the capacity of states, localities, and other entities,  such as ports or transit agencies, to prevent, respond to, and recover  from a natural or manmade disaster, including terrorist incidents. Two of  the largest preparedness grant programs are the State Homeland  Security Program and the Urban Areas Security Initiative.", "The State Homeland Security Program provides funding to support  states\u2019 implementation of homeland security strategies to address the  identified planning, organization, equipment, training, and exercise  needs at the state and local levels to prevent, protect against, respond  to, and recover from acts of terrorism and other catastrophic events.  FEMA allocated $402 million for the program in fiscal year 2017.", "The Urban Areas Security Initiative provides federal assistance to  address the unique needs of high-threat, high-density urban areas,  and assists the areas in building an enhanced and sustainable  capacity to prevent, protect, respond to, and recover from acts of  terrorism. FEMA allocated $580 million for the program in fiscal year  2017.", "The State Homeland Security Program (SHSP), awarded to the nation\u2019s  56 states and territories, and the Urban Areas Security Initiative (UASI),  awarded to urban areas based on DHS\u2019s risk assessment methodology,  are the largest of the preparedness grant programs, accounting for about  60 percent of Fiscal Year 2017 grant funding. See figure 1 for a history of  funding levels for these programs. Eligible candidates for the FY 2017  UASI program are determined through an assessment of relative risk of  terrorism faced by the 100 most populous metropolitan statistical areas in  the United States, in accordance with the Homeland Security Act of 2002,  as amended."], "subsections": []}, {"section_title": "FEMA Has Strengthened Its Coordination, Oversight, and Assessments of Grants But Challenges Remain in the Effectiveness of FEMA\u2019s Grant Management", "paragraphs": [], "subsections": [{"section_title": "FEMA Has Taken Some Steps to Address Coordination Challenges Between Headquarters and Regional Offices, But Some Challenges Still Remain", "paragraphs": ["In February 2016, we reported that FEMA has taken some steps, but has  not fully addressed longstanding preparedness grant management  coordination challenges between its headquarters and regional offices.  We found that for several preparedness grant programs, FEMA  headquarters staff in GPD and regional staff share management and  monitoring responsibilities. For example, we found that assessments by  GPD and others since 2009 had recommended that regional offices,  rather than headquarters offices, be responsible for managing and  monitoring preparedness grants to avoid confusion and duplication, and  to strengthen coordination with state and local grantees. Further, in July  2011, we found that GPD had efforts underway to regionalize grant  management responsibilities and improve coordination of preparedness  grants, and that these efforts were consistent with internal control  standards. However, GPD officials reported that in 2012 it changed course and decided to continue sharing grant management roles between  headquarters and regions, referred to as a hybrid grant management  structure. GPD officials told us that they changed course because, among  other things, estimates that the costs of regionalization would be greater  than the annual savings FEMA identified in an earlier study and concerns  that inconsistent program implementation would occur across the regions,  and outweighed the potential benefits. GPD officials at that time said they  had taken steps to address coordination challenges associated with this  hybrid grant management structure.", "However, we found in February 2016 that these challenges continue. For  example, states and FEMA regional officials told us that GPD staffs in  headquarters and regions did not always coordinate their monitoring  visits, which can be disruptive to the state emergency management  agency\u2019s day-to-day operations. FEMA regional officials also reported  that GPD staffs in headquarters and regions sometimes provided  inconsistent guidance to grantees. Further, while GPD officials identified  some steps they plan to take to address the challenges, we found that  GPD lacked a plan with time frames and goals for addressing them. We  recommended that FEMA develop a plan with time frames, goals,  metrics, and milestones detailing how GPD intends to resolve  longstanding challenges associated with its existing hybrid grants  management model, which divides responsibilities between regional and  headquarters staff. FEMA, however, did not concur with our  recommendation, stating that it disagreed with our characterization of  longstanding challenges in managing preparedness grants. As we stated  in the report, multiple assessments dating back to 2009 have reported  challenges with the hybrid model. As also noted in our report, officials  from four FEMA regional offices and officials from three states within  those regions provided various examples of a lack of coordination  between headquarters and regional staff in managing preparedness  grants, including instances that took place in 2014 and as recently as  September 2015.", "In October 2017, FEMA developed a plan\u2014the Milestone Action Plan\u2014to  track efforts aimed at improving coordination issues associated with its  hybrid grants management model, as we recommended in February  2016. The plan divides responsibilities for the management of  preparedness grants between regional and headquarters staff and  describes completed, ongoing, and planned efforts taken by FEMA to  improve grants management coordination along with steps taken, goals,  and time frames, among other things. For example, the plan shows that  FEMA developed and finalized the Monitoring Actions Tracker in August  2016, a tool shared by GPD in FEMA headquarters and staff in regional  offices. Through the tracker, GPD headquarters and regional staffs are  able to view planned and completed monitoring activities related to grants  management, as well as the status of any open corrective actions. In  addition to developing the Milestone Action Plan, FEMA officials  described other efforts taken to improve coordination issues. For  example, FEMA officials told us they increased the use of an online  collaboration tool, which allows for instant information sharing between  GPD and the regions. By taking these steps, FEMA should be better  positioned to track and evaluate efforts to improve regional coordination,  as we recommended in 2016."], "subsections": []}, {"section_title": "FEMA Has Taken Steps to Increase Oversight Across Preparedness Grant Programs", "paragraphs": ["FEMA has been delayed in addressing the need for improved  coordination among grant programs identified in our prior work.  Specifically, we found in February 2012 that multiple factors contribute to  the risk of duplication among four FEMA preparedness grant programs\u2014 the State Homeland Security Program, Urban Areas Security Initiative,  Port Security Grant Program, and Transit Security Grant Program\u2014as  these programs share similar goals, fund similar projects, and provide  funds in the same geographic regions. Further, we found that DHS\u2019s  ability to track grant funding, specific funding recipients, and funding  purposes varies among the programs, giving FEMA less visibility over  some grant programs. Also, DHS\u2019s award process for some programs  based allocation decisions on high-level, rather than specific, project  information, which could further contribute to the risk of duplication.  Although our February 2012 analysis identified no cases of duplication  among a sample of grant projects, the above factors collectively put  FEMA at risk of funding duplicative projects. As a result, in 2012, we  included these challenges in our annual report on duplication, overlap,  and fragmentation in federal programs, agencies, offices, and initiatives.  FEMA has not yet taken action to fully address our concerns.", "We recommended in February 2012 that as FEMA developed its new  grants management information system (the Non-Disaster Grants  Management System, or ND Grants at that time), that the agency collect  project information with the level of detail needed to better position the  agency to identify any potential unnecessary duplication within and  across the four grant programs. In December 2012, FEMA officials  reported that the agency intended to start collecting and analyzing  project-level data from grantees in fiscal year 2014. Further, in December  2017, FEMA took actions to identify potential unnecessary duplication  across four preparedness grant programs, as we recommended in  February 2012. Although the development of FEMA\u2019s grants  management information system is ongoing, FEMA issued guidance and  adopted interim processes to help identify potential duplication across  these preparedness grant programs until the system\u2019s capabilities are  upgraded over the next several years. For example, in fiscal year 2014,  FEMA modified a legacy grants data system to capture more robust  project-level data\u2014such as project budget data\u2014for the Homeland  Security Grant Program, which includes the State Homeland Security  Grant Program and the Urban Areas Security Initiative.", "In addition, in fiscal year 2017, FEMA procured a software visualization  tool and developed a set of standard operating procedures to assist staff  in identifying potentially duplicative projects. Specifically, the visualization  tool will use grants award data from the Port Security Grant Program, the  Transit Security Grant Program, and compare the grant programs named  above to highlight ZIP codes that contain multiple projects. These projects  will then be analyzed by FEMA officials. According to the standard  operating procedure, if duplication is suspected within a particular  geographic area, further collaborative reviews should be conducted in  coordination with the Office of Chief Counsel to determine appropriate  remedies. Using an interim approach to collect more specific project-level  data during the grant application process and utilizing the new software  visualization tool should help FEMA strengthen the administration and  oversight of its grant programs until FEMA implements its long-term  solution for the agency\u2019s grants management information system."], "subsections": []}, {"section_title": "FEMA Is Validating Grant Performance Data,", "paragraphs": ["In the area of performance assessment, we reported in June 2013 on  limitations in FEMA\u2019s ability to validate the performance data it collects.  Specifically, we found that two of FEMA\u2019s preparedness grant  programs\u2014Emergency Management Performance Grants (EMPG) and  Assistance to Firefighters Grants (AFG) programs\u2014collect performance  information through a variety of reporting mechanisms but face  challenges in identifying verifiable program outcomes. These reporting  mechanisms collect performance data used by FEMA regional offices and  headquarters for different purposes. For example, headquarters focuses  on the development of future program priorities and on reporting progress  toward the National Preparedness Goal, while regions use program  information to monitor primary grant recipients for compliance. DHS  developed agency priority goals that reflect agency-wide, near-term  priorities. According to FEMA officials, the EMPG and AFG programs  have an indirect link to a DHS agency priority goal, as well as the National  Preparedness Goal, because they support states\u2019 level of preparedness  for disasters. According to FEMA officials, neither program has a  standardized tool with which to validate the performance data that are  self-reported by recipients; additionally, the regions are inconsistent in  their approaches to verifying program performance data. We concluded  that the absence of a formal established validation and verification  procedure, as directed by the Office of Management and Budget\u2019s  Circular No. A-11, could lead to the collection of erroneous performance  data.", "In our June 2013 report, we recommended that FEMA ensure that there  are consistent procedures in place at the headquarters\u2019 office and  regional level to ensure verification and validation of grant performance  data that allow the agency to attest to the reliability of EMPG and AFG  grant data used for reporting progress toward goals. DHS concurred with  our recommendation and stated that FEMA would explore effective and  affordable ways to verify and validate EMPG and AFG grant performance  data. In April 2015, FEMA officials reported that FEMA was in the process  of developing the data verification and validation checks of EMPG  grantee performance reporting. For example, according to FEMA officials,  they have revised reporting templates and uniform table definitions to  make it easier for grantees to submit accurate, complete, and consistent  information on programmatic activities such as the completion of training  and exercise requirements. However, these processes have not yet been  fully implemented, and FEMA officials have not yet provided similar tools  and checklists for the AFG program. In March 2017, FEMA grants  management staff provided us with documentation on the process FEMA  uses to verify and validate grantee data from the EMPG and AFG grant  programs, as we recommended. As a result of having a consistent  approach to verifying data, FEMA\u2019s efforts should reduce the collection of  erroneous performance data.", "In addition, as part of our September 2016 review of FEMA Fire  Assistance Grant program, we reported that FEMA officials said they  planned to develop and implement a consolidated grant management  system to integrate data used to manage fire grant programs with the  data gathered for FEMA\u2019s other preparedness grants, and ultimately  better measure the impact of fire grants on national preparedness  efforts. Specifically, as we reported in May 2016, FEMA plans to develop  and implement a new Grants Management Modernization system to  provide agency-wide management for all of FEMA\u2019s disaster and  preparedness grants. Further, we are currently performing an on-going  review of FEMA\u2019s consolidated grant management system and plan to  report on this effort later this year."], "subsections": []}, {"section_title": "FEMA Has Made Progress Assessing Its Grant Preparedness Capabilities, but Continues to Face Challenges Developing a National Preparedness System", "paragraphs": ["We also reported in March 2011 that FEMA needed to improve its  oversight of preparedness grants by establishing a framework with  measurable performance objectives for assessing urban area, state,  territory, and tribal capabilities to identify gaps and prioritize investments.  Specifically, we recommended that FEMA complete a national  preparedness assessment of capability gaps at each level based on  tiered, capability-specific performance objectives to enable prioritization of  grant funding. With such an assessment, FEMA could identify the  potential costs for establishing and maintaining capabilities at each level  and determine what capabilities federal agencies should provide. We  reported in March 2013 that FEMA has made some progress in assessing  its preparedness capabilities, but continued to face challenges developing  a national preparedness system that could assist FEMA in prioritizing  preparedness grant funding. For example, in March 2012, FEMA issued  the first National Preparedness Report, which describes progress made  to build, sustain, and deliver capabilities. In April 2012, FEMA issued  guidance on developing Threat and Hazard Identification and Risk  Assessments (THIRA) to facilitate the self-assessments of regional, state,  and local capabilities. FEMA requires state, territory, tribal, and urban  area governments receiving homeland security funding to annually  complete THIRAs and use the results to determine the resources required  to achieve the capability targets they set for their jurisdiction. However,  we found in March 2013 that FEMA faced challenges that may reduce the  usefulness of these efforts. For example, the National Preparedness  Report noted that while many programs exist to build and sustain  preparedness capabilities, challenges remain in measuring their progress  over time. According to the report, in many cases, measures do not yet  exist to gauge the performance of these programs, either quantitatively or  qualitatively.", "FEMA has taken some steps to address our recommendation.  Specifically, FEMA reported in February 2018 that the agency has  developed capability-specific performance objectives that will enable a  national preparedness assessment of capability gaps, but no such report  has been issued at this time. FEMA reported that it plans on  implementing new methodology for some core capabilities in December  2018 and for all core capabilities by December 2019, and will be able to  provide complete results in 2020. In addition, FEMA reported that they  are developing a new Threat and Hazard Identification and Risk  Assessment (THIRA) methodology that will assist in measuring the  effectiveness of state and urban areas\u2019 grant projects in reducing risk.  According to FEMA, the new methodology will measure changes in state  and urban area preparedness through the use of standardized capability  targets and key indicators that will show how FEMA preparedness grants  are being used to address gaps in capability targets. This should also  lead to a better understanding of the Nation\u2019s overall preparedness.  Regardless, as of February 2018, FEMA had taken steps to assess  preparedness capabilities, but had not yet completed a national  preparedness assessment with clear, objective, and quantifiable  capability requirements against which to assess preparedness, as we  recommended. Developing such an assessment would help FEMA to  identify what capability gaps exist at the federal level and what level of  resources are needed to close such gaps.", "Chairman Donovan, Ranking Member Payne, and Members of the  Subcommittee, this concludes my prepared statement. I would be happy  to respond to any questions you may have."], "subsections": []}]}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For questions about this statement, please contact Chris Currie 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 statement. Individuals making key contributions to this statement  include Aditi Archer (Assistant Director), John Vocino (Analyst-In- Charge), Dorian Dunbar, Alexandra Gebhard, Eric Hauswirth, Chuck  Bausell, Heidi Nielson, and Adam Vogt."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Federal Emergency Management Agency: Progress and Continuing  Challenges in National Preparedness Efforts GAO-16-560T: Washington,  D.C.: Apr 12, 2016.", "Fire Grants: FEMA Could Enhance Program Administration and  Performance Assessment GAO-16-744: Washington, D.C.: Sep 15, 2016.", "Federal Emergency Management Agency: Strengthening Regional  Coordination Could Enhance Preparedness Efforts. GAO-16-38,  .Washington, D.C.: February 4, 2016.", "Emergency Management: FEMA Has Made Progress since Hurricanes  Katrina and Sandy, but Challenges Remain. GAO-16-90T. Washington,  D.C.: October 22, 2015.", "Emergency Management: FEMA Collaborates Effectively with Logistics  Partners but Could Strengthen Implementation of Its Capabilities  Assessment Tool. GAO-15-781. Washington, D.C.: September 10, 2015.", "Emergency Preparedness: Opportunities Exist to Strengthen Interagency  Assessments and Accountability for Closing Capability Gaps. GAO-15-20.  . Washington, D.C.: December 4, 2014.", "Federal Emergency Management Agency: Opportunities to Achieve  Efficiencies and Strengthen Operations. GAO-14-687T. Washington,  D.C.: July 24, 2014.", "National Preparedness: Actions Taken by FEMA to Implement Select  Provisions of the Post-Katrina Emergency Management Reform Act of  2006. GAO-14-99R. Washington, D.C.: November 26, 2013.", "National Preparedness: FEMA Has Made Progress, but Additional Steps  Are Needed to Improve Grant Management and Assess Capabilities.  GAO-13-637T. Washington, D.C.: June 25, 2013.", "Grants Performance: Justice and FEMA Collect Performance Data for  Selected Grants, but Action Needed to Validate FEMA Performance Data.  GAO-13-552. Washington, D.C.: June 24, 2013.", "Managing Preparedness Grants and Assessing National Capabilities:  Continuing Challenges Impede FEMA\u2019s Progress. GAO-12-526T.  Washington, D.C.: March 20, 2012.", "Homeland Security: DHS Needs Better Project Information and  Coordination among Four Overlapping Grant Programs. GAO-12-303.  Washington, D.C.: February 28, 2012.  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue.  GAO-12- 342SP. Washington, D.C.: February 28, 2012.", "Port Security Grant Program: Risk Model, Grant Management, and  Effectiveness Measures Could Be Strengthened. GAO-12-47.", "Washington, D.C.: November 17, 2011. FEMA Has Made Progress in  Managing Regionalization of Preparedness Grants. GAO-11-732R.  Washington, D.C.: July 29, 2011.", "Measuring Disaster Preparedness: FEMA Has Made Limited Progress in  Assessing National Capabilities. GAO-11-260T. Washington, D.C.: March  17, 2011.", "Opportunities to Reduce Potential Duplication in Government Programs,  Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington,  D.C.: March 1, 2011.", "FEMA Has Made Limited Progress in Efforts to Develop and Implement a  System to Assess National Preparedness Capabilities. GAO-11-51R.  Washington, D.C.: October 29, 2010.", "Urban Area Security Initiative: FEMA Lacks Measures to Assess How  Regional Collaboration Efforts Build Preparedness Capabilities.   GAO-09-651. Washington, D.C.: July 2, 2009.", "Transit Security Grant Program: DHS Allocates Grants Based on Risk,  but Its Risk Methodology, Management Controls, and Grant Oversight  Can Be Strengthened. GAO-09-491. Washington, D.C.: June 8, 2009.", "National Preparedness: FEMA Has Made Progress, but Needs to  Complete and Integrate Planning, Exercise, and Assessment Efforts.  GAO-09-369. Washington, D.C.: April 30, 2009.", "Homeland Security: DHS Improved its Risk-Based Grant Programs\u2019  Allocation and Management Methods, But Measuring Programs\u2019 Impact  on National Capabilities Remains a Challenge. GAO-08-488T.  Washington, D.C.: March 11, 2008.", "Homeland Security: DHS\u2019 Efforts to Enhance First Responders\u2019 All-  Hazards Capabilities Continue to Evolve. GAO-05-652. Washington,  D.C.: July 11, 2005.", "Homeland Security: Management of First Responder Grant Programs  Has Improved, but Challenges Remain. GAO-05-121. Washington, D.C.:  February 2, 2005.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}], "fastfact": []}
{"id": "GAO-18-197T", "url": "https://www.gao.gov/products/GAO-18-197T", "title": "High-Containment Laboratories: Coordinated Efforts Needed to Further Strengthen Oversight of Select Agents", "published_date": "2017-11-02T00:00:00", "released_date": "2017-11-02T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Safety lapses have occurred at laboratories in the United States that conduct research on select agents\u2014such as Ebola virus or anthrax bacteria\u2014that may cause serious or lethal infection in humans, animals, or plants, raising concerns about whether oversight is effective. This statement summarizes information contained in GAO's October 2017 report, titled High-Containment Laboratories: Coordinated Actions Needed to Enhance the Select Agent Program's Oversight of Hazardous Pathogens ( GAO-18-145 )."]}, {"section_title": "What GAO Found", "paragraphs": ["The Federal Select Agent Program\u2014jointly managed by the Departments of Health and Human Services (HHS) and Agriculture (USDA)\u2014oversees laboratories' handling of certain hazardous pathogens known as select agents. However, the program does not fully meet all key elements of effective oversight. For example, the program is not structurally independent from all laboratories it oversees and has not assessed risks posed by its current structure or the effectiveness of mechanisms it has to reduce organizational conflicts of interest. Without conducting such assessments and taking actions as needed to address risks, the program may not effectively mitigate impairments to its independence.", "In addition, some experts and laboratory representatives GAO interviewed raised concerns that the program's reviews may not target the highest-risk activities, in part because it has not formally assessed which activities pose the highest risk. Without assessing the risk of activities it oversees and targeting its resources appropriately, the program cannot ensure it is balancing its resources against their impact.", "Moreover, the program does not have strategic planning documents, such as a joint strategic plan and workforce plan, to guide its oversight. Although it began taking steps to develop a joint strategic plan, the program is not developing workforce plans as part of this effort. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program leverage resources to ensure all workforce and training needs are met.", "Selected countries and regulatory sectors GAO reviewed employ other approaches to promote effective oversight. For example, in Great Britain, an independent government agency focused on health and safety oversees laboratories that work with pathogens. In addition, in both Great Britain and Canada, regulators (1) focus their oversight on biological safety, because safety incidents provided the impetus for laboratory oversight in these countries and (2) regulate all potentially hazardous pathogens and activities in laboratories."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO's recommendations in GAO-18-145 included that the Federal Select Agent Program (1) assess risks posed by its current structure and address risks as needed; (2) assess the risk of activities it oversees and target reviews to the highest-risk activities; and (3) develop a joint workforce plan. HHS and USDA agreed with GAO's recommendations and outlined actions they are taking, or plan to take, to address them, which GAO will continue to monitor."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our recent work on the oversight  of select agents in high-containment laboratories in the United States.  Safety lapses have occurred at laboratories in the United States that  conduct research on hazardous pathogens and toxins (known as select  agents) that may pose a serious threat to humans, animals, or plants.  These lapses raise concerns about whether federal oversight of these  laboratories is effective. For example, in November 2016, the Department  of Homeland Security discovered that a private laboratory had  inadvertently sent a toxic form of ricin (a potentially lethal poison) to one  of its training centers multiple times since 2011, potentially putting training  participants at risk. In May 2015, the Department of Defense (DOD)  discovered that a DOD laboratory had inadvertently shipped live anthrax  bacteria to nearly 200 other laboratories worldwide over the course of 12  years. And in July 2014, the National Institutes of Health discovered  decades-old vials of smallpox in a storage room of a Food and Drug  Administration laboratory on its campus.", "We have, for many years, identified challenges and areas for  improvement related to the safety, security, and oversight of high- containment laboratories. In 2009, for example, we found a proliferation of  high-containment laboratories across the United States, with the number  of such laboratories in the government, academic, and private sectors  increasing since 2001. In addition, we found that there was no single  entity overseeing this proliferation, and that no federal agency knew how  many such laboratories existed in the United States or the aggregate  risks associated with the proliferation. We also found in 2009 and 2014  that, for the subset of these laboratories subject to federal oversight, the  oversight was duplicative, fragmented, and dependent on self-policing.  More recently, we found in 2016 that stronger oversight mechanisms for  federal high-containment laboratories were needed at the individual  federal department and component agency levels. We have made  numerous recommendations over the years, including that a single entity  be identified to determine the number of high-containment laboratories  needed to meet national goals, the aggregate risks associated with the  proliferation of laboratories, and the type of oversight needed. Federal  departments have made some progress in implementing  recommendations from our past reports, including addressing issues we  identified regarding duplicative oversight. However, the United States still  has not identified a single entity to perform the functions we  recommended.", "All high-containment laboratories in the United States that register to work  with select agents are regulated by the Federal Select Agent Program  (which this statement subsequently refers to as the Select Agent  Program), through which two agencies share oversight responsibility.", "Specifically, oversight is shared by the Division of Select Agents and  Toxins within the Department of Health and Human Services\u2019 (HHS)  Centers for Disease Control and Prevention (CDC) and the Agriculture  Select Agent Services within the U.S. Department of Agriculture\u2019s (USDA)  Animal and Plant Health Inspection Service (APHIS). The program was  established to regulate the possession, use, and transfer of select agents  in response to security concerns following bioterrorism attacks in the  1990s and early 2000s.", "Other countries also regulate and oversee hazardous pathogens handled  in high-containment laboratories, and they sometimes take approaches  that differ from that of the United States. Moreover, other high-risk sectors  in the United States, such as the nuclear industry, sometimes take  different approaches to oversight. Notwithstanding such differences, our  past work reviewing some of these sectors has identified five key  elements of effective oversight in areas where low-probability adverse  events can have significant and far-reaching effects. These elements are  as follows:  Independence: The organization conducting oversight should be  structurally distinct and separate from the entities it oversees.", "Ability to perform reviews: The organization should have the access  and working knowledge necessary to review compliance with  requirements.", "Technical expertise: The organization should have sufficient staff  with the expertise to perform sound safety and security assessments.", "Transparency: The organization should provide access to key  information, as applicable, to those most affected by operations.", "Enforcement authority: The organization should have clear and  sufficient authority to require that entities achieve compliance with  requirements.", "My remarks today are based on our October 2017 report on the oversight  of select agents in high-containment laboratories. Our report  (1) examined the extent to which the Select Agent Program has the  elements of effective oversight and has strategic planning documents to  guide its oversight efforts, and (2) described approaches that selected  countries and regulatory sectors have used to promote effective  oversight. Today, I will discuss key findings and recommendations from  that report.", "For our report, we discussed the five key elements of effective oversight  above with agency officials, experts, and representatives from  nongovernmental organizations to ensure their applicability to the  oversight of select agents. We reviewed laws, regulations, and  documents related to the Select Agent Program to determine the extent to  which the program met the key elements. We also interviewed officials  from CDC and APHIS and registered laboratories to discuss the  program\u2019s inspections and other oversight responsibilities and other  issues related to the five key elements. To obtain expert views on the  effectiveness of the approaches the Select Agent Program and other  selected countries and regulatory sectors have used to promote effective  oversight, we worked with the National Academy of Sciences to convene  a 2-day meeting with 18 experts. We also reviewed relevant  documentation and interviewed regulatory officials from selected  countries\u2014including the United Kingdom and Canada\u2014and other sectors  such as nuclear energy. More detailed information on the scope and  methodology of our work can be found in the October report. The work  upon which this statement is based was conducted in accordance with  generally accepted government auditing standards.", "In summary, we found that the Select Agent Program does not fully meet  all key elements of effective oversight. For example, the program is not  structurally distinct and separate from all laboratories it oversees and,  therefore, does not meet the key element of independence. Regarding  another key element\u2014the ability to perform reviews\u2014some experts and  laboratory representatives raised concerns that the program\u2019s reviews  may not target the highest-risk activities, in part because it has not  formally assessed which activities pose the highest risk. Moreover, the  program does not have joint strategic planning documents, including a  joint workforce plan, to guide its shared oversight efforts. We made 11  recommendations to address these issues. HHS and USDA agreed with  our recommendations and outlined actions they are taking, or plan to  take, to address them."], "subsections": [{"section_title": "Select Agent Program Does Not Fully Meet Key Elements of Effective Oversight or Have Joint Strategic Planning Documents to Guide Its Efforts", "paragraphs": ["The Select Agent Program does not fully meet key elements of effective  oversight. In particular, the program has oversight shortcomings related to  each of our five key elements: independence, performing reviews,  technical expertise, transparency, and enforcement. In addition, the  program does not have joint strategic planning documents to guide its  oversight efforts, such as a joint strategic plan and workforce plan. It did,  however, begin taking steps to develop a joint strategic plan during the  summer of 2017.", "First, regarding independence, the Select Agent Program is not  structurally distinct and separate from all of the laboratories it oversees  because the two components of the Select Agent Program are located in  CDC and APHIS, both of which also have high-containment laboratories  registered with the program. Many experts at our meeting raised  concerns that the Select Agent Program cannot be entirely independent  in its oversight of CDC and APHIS laboratories because the Select Agent  Program is composed of divisions of those agencies. To help reduce  conflicts of interest, the program has taken steps such as having APHIS  lead inspections of CDC laboratories. However, it has generally done so  in response to concerns raised by others. The program itself has not  formally assessed all potential risks posed by its current structure and the  effectiveness of its mechanisms to address those risks. The Office of  Management and Budget\u2019s Circular A-123 requires federal agencies to  integrate risk management activities into their program management to  help ensure they are effectively managing risks that could affect the  achievement of agency objectives. In addition, federal internal control  standards state that management should identify, analyze, and respond  to risks related to achieving defined objectives. Without (1) regularly  assessing the potential risks posed by the program\u2019s current structure  and the effectiveness of its mechanisms to address them and (2) taking  actions as necessary to ensure any identified risks are addressed, the  program may not be aware of or effectively mitigate impairments to its  independence that could affect its ability to achieve its objectives.", "Second, regarding the ability to perform reviews, we found that the Select  Agent Program performs several types of reviews to ensure compliance  with regulatory and program requirements. However, the program may  not target the highest-risk activities in its inspections, in part because it  has not formally assessed which activities pose the highest risk to  biological safety and security. For example, many experts at our  meeting and laboratory representatives we interviewed raised concerns  about the amount of time inspectors spend assessing compliance with  inventory controls (e.g., by counting and examining vials containing select  agents) and reviewing inventory records during the inspection process,  which takes time away from inspecting other aspects of biological safety  and security. Experts at our meeting said that these activities do little to  reduce the risk of theft of select agents (a security concern) because  samples could be clandestinely removed from vials and replicated without  being detected by the inventory controls currently in place. Further, other  laboratory representatives told us that activities to assess compliance  with certain program requirements, such as time-consuming reviews of  records, did little to reduce risk and were unnecessarily burdensome to  both researchers and inspectors. These inspection activities are generally  intended to address biological security concerns; however, recent high- profile incidents at registered laboratories have concerned biological  safety rather than security.", "To improve the inspection process and identify trends and associations  between inspection findings and risk, a 2015 internal review of the CDC  component of the Select Agent Program recommended that the CDC and  APHIS components of the program work together to analyze inspection  and investigation data. According to program officials, they have not yet  addressed the recommendation because they do not currently have  adequate tools to do so, but the program is transitioning to a new  database that will enhance their ability to identify trends and associations  and thereby guide improvements to the inspection process. However, the  program did not provide a plan for when or how the program will carry out  these analyses to improve the inspection process. Federal internal control  standards state that management should identify, analyze, and respond  to risks related to achieving defined objectives. Without developing and  implementing a plan to identify which laboratory activities carry the  highest biological safety and security risks and to respond to those risks  by aligning inspections and other oversight efforts to target those  activities, the Select Agent Program will not have assurance that it is  effectively balancing the potential safety and security gains from its  oversight efforts against the use of program resources and the effect on  laboratories\u2019 research.", "We also found that the Select Agent Program did not fully meet the other  three key elements of effective oversight: technical expertise,  transparency, and enforcement. For example, although the program has  taken steps to hire additional staff and enhance the technical expertise of  its staff, workforce and training gaps remain. In addition, although the  program has increased transparency about registered laboratories and  violations of the select agent regulations to the public and registered  laboratories since 2016, the information it shares is limited and there is no  consensus about what additional information could be shared, given  security concerns. Lastly, although the program has authority to enforce  compliance with program requirements, it is still working to address past  concerns about the need for greater consistency and clarity in actions it  takes in exercising this authority.", "In addition to not fully meeting the five key elements of effective oversight,  we found that the Select Agent Program does not have joint strategic  planning documents to guide its shared oversight efforts across CDC and  APHIS. For example, the program does not have a joint mission  statement to collectively define what the program seeks to accomplish  through its oversight. It also does not yet have a strategic plan. Agencies  can use strategic plans to set goals and identify performance measures  for gauging progress towards those goals. Strategic plans can also  outline how agencies plan to collaborate with each other to help achieve  goals and objectives. The program began taking steps to develop a joint  strategic plan during the course of our review and, in August 2017, began  soliciting bids from contractors for the plan\u2019s development. The statement  of work for the contract stipulates that the contractor shall develop guiding  principles for the Select Agent Program along with a mission statement  and strategic goals and objectives, among other requirements. However,  it does not have any requirements related to development of a joint  workforce plan. We have found in the past that agencies\u2019 strategic  workforce planning should be clearly linked to the agency\u2019s mission and  long-term goals developed during the strategic planning process.  Developing a joint workforce plan that assesses workforce and training  needs for the program as a whole would help the program to better  manage fragmentation by improving how it leverages resources to ensure  all workforce and training needs are met. Leveraging resources is  especially important given fiscal constraints.", "In our report, we recommended that CDC and APHIS take several steps  to address these findings. First, we made five recommendations to  improve independence, including that CDC and APHIS regularly assess  the potential risks posed by the program\u2019s structure and the effectiveness  of its mechanisms to address those risks, and take actions as necessary  to ensure any identified risks are addressed so that impairments to  independence do not affect its ability to achieve its objectives. Second, to  improve the ability to perform reviews, we recommended that the  directors of the Select Agent Program work together to develop and  implement a plan to identify which laboratory activities carry the highest  biological safety and security risks and to respond to those risks by  aligning inspections and other oversight efforts to target those activities.  We also made several other recommendations, including recommending  that the directors of the Select Agent Program develop a joint workforce  plan that assesses workforce and training needs for the program as a  whole."], "subsections": []}, {"section_title": "Selected Countries and Regulatory Sectors Employ Other Approaches to Promote Effective Oversight", "paragraphs": ["Selected countries and regulatory sectors employ approaches to promote  effective oversight that sometimes differ from those of the Select Agent  Program by, for example, having regulatory bodies that are structurally  independent from the entities they oversee or taking a risk-based  approach to performing reviews. To illustrate, with regard to  independence, Great Britain\u2019s Health and Safety Executive, whose  mission is to protect worker and public health and safety and which  oversees laboratories that work with pathogens, is an independent  government agency. According to officials from the Health and Safety  Executive and laboratory representatives, one strength of this approach is  that it avoids potential organizational conflicts of interest because none of  the laboratories it oversees are part of the same agency. Some other  regulatory sectors in the United States, including the Nuclear Regulatory  Commission (NRC), are also structurally independent from regulated  facilities as a mechanism to ensure independence. Prior to the creation of  NRC in 1974, the U.S. Atomic Energy Commission was responsible for  both promotion and oversight of the nuclear industry. The Energy  Reorganization Act of 1974 established NRC as a separate, independent  entity. According to a Senate committee report, this was a response to  growing criticism that there was a basic conflict between the U.S. Atomic  Energy Commission\u2019s regulation of the nuclear power industry and its  development and promotion of new technology for the industry.", "Related to the ability to perform reviews, regulators in Great Britain and  Canada apply a risk-based approach by targeting laboratories with a  documented history of performance issues or those conducting higher- risk activities. In both Great Britain and Canada, the organizations that  oversee laboratories generally focus their oversight on (1) biological  safety, and (2) regulation of all potentially hazardous pathogens in  laboratories. In contrast, the Select Agent Program originated from  security-related concerns and regulates only those pathogens identified  on the U.S. select agent list and no other pathogens that may be handled  in high-containment but are not select agents, such as West Nile virus.", "Other differences we found in approaches include relying on scientists  and other laboratory personnel to have requisite technical expertise on  the pathogens and activities in their laboratories, sharing incident  information on their public websites, and having prosecutorial authority  when incidents occur.", "In conclusion, CDC and APHIS share a critical role in ensuring that  important research on select agents can be conducted in high- containment laboratories in a safe and secure manner. The Select Agent  Program has made a number of improvements over the past few years,  such as hiring additional staff and improving training to enhance  expertise. Nevertheless, the program does not fully meet all key elements  of effective oversight and more is needed to develop joint strategic plans  to collectively guide its shared oversight efforts. In our prior work, we  have found that existing federal oversight of high-containment  laboratories is fragmented and largely self-policing, among other things.  Our October 2017 report, in combination with these past findings,  continues to raise questions about whether the current government  framework and oversight are adequate.", "Vice Chairman Griffith, Ranking Member DeGette, and Members of the  Subcommittee, this concludes our prepared statement. We would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this statement, please  contact Mary Denigan-Macauley, Ph.D., Acting Director, Health Care, at  (202) 512-7114 or deniganmacauleym@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. Individuals who made key contributions to  this statement include Sushil Sharma, Ph.D., Dr.PH (Assistant Director);  Amy Bowser; Caitlin Dardenne, Ph.D.; John Neumann; Cynthia Norris;  Timothy M. Persons, Ph.D.; and Lesley Rinner. Staff who made key  contributions to the report(s) cited in the statement are identified in the  source products.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Laboratories conduct research on hazardous pathogens\u2014such as Ebola virus or anthrax bacteria\u2014in more than 200 labs in the United States. Safety lapses have occurred at some of these labs, raising concerns about whether oversight is effective.", "For this testimony, we looked at the Federal Select Agent Program, which is responsible for overseeing these labs, and found room for improvement. For example, the program allows some agencies to oversee their own labs, which could potentially lead to conflicts of interest. In the report on which this testimony is based, we recommended 11 actions to improve oversight."]}
{"id": "GAO-17-802T", "url": "https://www.gao.gov/products/GAO-17-802T", "title": "Telecommunications: Additional Action Needed to Address Significant Risks in FCC's Lifeline Program", "published_date": "2017-09-06T00:00:00", "released_date": "2017-09-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Created in the mid-1980s, FCC's Lifeline program provides discounts to eligible low-income households for home or wireless telephone and, as of December 2016, broadband service. Lifeline reimburses telephone companies that offer discounts through the USF, which in turn is generally supported by consumers by means of a fee charged on their telephone bills.", "This testimony is based on GAO's May 2017 report and discusses steps FCC has taken to measure Lifeline's performance in meeting goals; steps FCC and USAC have taken to enhance controls over finances, subscribers, and providers; and any weaknesses that might remain.", "For the May 2017 report, GAO analyzed documents and interviewed officials from FCC and USAC. GAO also analyzed subscriber data from 2014 and performed undercover tests to identify potential improper payment vulnerabilities. The results of this analysis and testing are illustrative, not generalizable."]}, {"section_title": "What GAO Found", "paragraphs": ["In its May 2017 report, GAO found the Federal Communications Commission (FCC) has not evaluated the Lifeline program's (Lifeline) performance in meeting its goals of increasing telephone and broadband subscribership among low-income households by providing financial support, but it has recently taken steps to begin to do so. FCC does not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service, or whether participants are using Lifeline as a secondary phone service. FCC revamped Lifeline in March 2016 to focus on broadband adoption; however, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. Without an evaluation, which GAO recommended in March 2015, FCC is limited in its ability to demonstrate whether Lifeline is efficiently and effectively meeting its program goals. In a March 2016 Order, FCC announced plans for an independent third party to evaluate Lifeline design, function, and administration by December 2020.", "FCC and the Universal Service Administrative Company (USAC)\u2014the not-for-profit organization that administers the Lifeline program\u2014have taken some steps to enhance controls over finances and subscriber enrollment. For example, FCC and USAC established some financial and management controls regarding billing, collection, and disbursement of funds for Lifeline. To enhance the program's ability to detect and prevent ineligible subscribers from enrolling, FCC oversaw completion in 2014 of an enrollment database and, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules.", "Nevertheless, in its May 2017 report, GAO found weaknesses in several areas. For example, Lifeline's structure relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility. This complex internal control environment is susceptible to risk of fraud, waste, and abuse as companies may have financial incentives to enroll as many customers as possible. On the basis of its matching of subscriber to benefit data, GAO was unable to confirm whether about 1.2 million individuals of the 3.5 million it reviewed, or 36 percent, participated in a qualifying benefit program, such as Medicaid, as stated on their Lifeline enrollment application. FCC's 2016 Order calls for the creation of a third-party national eligibility verifier by the end of 2019 to determine subscriber eligibility. Further, FCC maintains the Universal Service Fund (USF)\u2014with net assets of $9 billion, as of September 2016\u2014outside the Department of the Treasury in a private bank account. In 2005, GAO recommended that FCC reconsider this arrangement given that the USF consists of federal funds. In addition to addressing any risks associated with having the funds outside the Treasury, FCC identified potential benefits of moving the funds. For example, by having the funds in the Treasury, USAC would have better tools for fiscal management of the funds. In March 2017, FCC developed a preliminary plan to move the USF to the Treasury. Until FCC finalizes and implements its plan and actually moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In its May 2017 report, GAO made seven recommendations, including that FCC ensure plans to transfer the USF from the private bank to the Treasury are finalized and implemented expeditiously. FCC generally agreed with all the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the Federal Communications  Commission\u2019s (FCC) oversight of the Lifeline program (Lifeline). Over the  past two decades, telecommunications carriers and their customers have  paid over $100 billion to support the federal policy of \u201cuniversal service.\u201d  Universal service is the principle that all Americans should have access to  communications services. FCC carries out this policy through four  programs, including Lifeline. Lifeline was created in the mid-1980s to  promote telephone subscribership among low-income households. In the  mid-2000s, such service came to include wireless communications, and,  in December 2016, FCC also began including broadband service.  Average Lifeline enrollment as of the fourth quarter of calendar year 2016  was approximately 12.3 million subscribers.", "To participate in Lifeline, households must either have an income that is  at or below 135 percent of the Federal Poverty Guidelines or participate in  one of several qualifying assistance programs, such as Medicaid or the  Supplemental Nutrition Assistance Program (SNAP). After subscribers  are enrolled in Lifeline, they receive a monthly benefit on home or  wireless phone and broadband service. The Lifeline benefit can lower or  eliminate the cost of a subscriber\u2019s monthly phone or Internet bill.", "By statute, every telecommunications carrier providing interstate  telecommunications services\u2014including Lifeline providers\u2014must  contribute to federal universal service unless exempted by FCC.  Contributions are deposited into the Universal Service Fund (USF).  Although not required to do so, carriers typically pass on the cost of USF  fees as a separate line item to their customers\u2019 phone bills. A not-for- profit, private corporation designated by FCC as the administrator of  universal service programs, the Universal Service Administrative  Company (USAC) pays Lifeline providers a subsidy from the USF for  each subscriber to offset forgone revenues. From calendar year 1998  through 2016, USAC had disbursed approximately $20.2 billion to Lifeline  providers.", "In May 2017, we published a report on FCC\u2019s oversight of Lifeline that  identified steps FCC has taken in the last few years to enhance the  integrity of the program and stated the weaknesses that remained. We  also made seven recommendations to improve FCC\u2019s oversight of the  program, which the agency agreed to implement.", "My statement today discusses key findings from our May 2017 report, as  well as steps FCC has taken and the related recommendations we made.  Specifically, this testimony discusses (1) the extent to which Lifeline  demonstrates effective performance towards program goals; (2) steps  FCC and USAC have taken to improve financial controls in place for  Lifeline and the USF, and any remaining weaknesses that might exist; (3)  steps FCC and USAC have taken to improve subscriber eligibility  verification, and any remaining weaknesses that might exist; and (4)  steps FCC and USAC have taken to improve oversight of Lifeline  providers, and any remaining weaknesses that might exist.", "For our May 2017 report, we reviewed documents and interviewed  multiple stakeholders associated with Lifeline, including FCC, FCC\u2019s  Office of Inspector General (OIG), and USAC, among others. We also  examined USAC financial data, including USF bank account statements  and payment data, and interviewed USF account managers at the bank  that holds USF funding. Further, we reviewed internal financial controls  established by FCC and USAC and performed data matching and  analysis to identify potential improper payments using Lifeline\u2019s  enrollment data from the National Lifeline Accountability Database  (NLAD) and relevant beneficiary databases. The results of the data  analysis are illustrative rather than generalizable. We also performed  undercover work to test the vulnerability for improper payments of funds  disbursed to both subscribers and Lifeline providers. For example, we  submitted 21 Lifeline applications using false information and fabricated  supporting documents to determine whether we could obtain Lifeline  benefits. These undercover tests were for illustrative purposes to highlight  any potential internal control vulnerabilities and are not generalizable to  the broader universe of subscribers and providers. Additional information  on our scope and methodology is available in our May 2017 report. Our  audit work was performed in accordance with generally accepted  government auditing standards, and our related investigative work was  done in accordance with investigative standards prescribed by the  Council of the Inspectors General on Integrity and Efficiency."], "subsections": [{"section_title": "FCC Has Not Evaluated Lifeline\u2019s Performance in Meeting Program Goals but Has Taken Recent Steps toward Evaluation", "paragraphs": ["FCC has not evaluated Lifeline\u2019s performance in meeting program goals  but, as we found in May 2017, has taken recent steps toward evaluation.  According to GAO\u2019s Cost Estimating and Assessment Guide, to use  public funds effectively the government must meet the demands of  today\u2019s changing world by employing effective management practices and  processes, including the measurement of government program  performance. In the past, FCC has called for program evaluations to  review the administration of universal service generally, including Lifeline,  but has not completed such evaluations. For example, FCC specified that  it would review USAC 1 year after USAC was appointed as the  permanent administrator to determine whether the universal service  programs were being administered effectively. This review, which was  planned to have been completed by 1999, was never done. In 2005, FCC  awarded a contract to the National Academy of Public Administration to  study the administration of the USF programs generally, examine the  tradeoffs of continuing with the current structure, and identify ways to  improve the oversight and operation of universal service programs.  However, we reported in May 2017 that FCC officials stated FCC  subsequently terminated the contract and the study was not conducted.", "In March 2015, we found that FCC had not evaluated Lifeline\u2019s  effectiveness in achieving its performance goals of ensuring the  availability of voice service for low-income Americans, while minimizing  the burden on those who contribute to the USF. We recommended, and  FCC agreed, to conduct a program evaluation to determine the extent to  which Lifeline is efficiently and effectively reaching its performance goals.", "Our May 2017 report raised additional questions about Lifeline\u2019s  effectiveness in meeting its program goals. For example, we reported  that:", "FCC did not know how many of the 12.3 million households receiving  Lifeline as of December 2016 also have non-Lifeline phone service  (for which they pay out of pocket) along with their Lifeline benefit.  Without knowing whether participants are using Lifeline as a primary  or secondary phone service, we concluded that it is difficult for FCC to  determine whether it is achieving the program\u2019s goal of increasing  telephone subscribership among low-income consumers while  minimizing the USF contribution burden.", "FCC revamped Lifeline in March 2016 to focus on broadband  adoption and generally phase out phone service, in part because FCC  recognized that most eligible consumers have phones without Lifeline  and to also close the \u201cdigital divide\u201d of broadband adoption between  low-income households and the rest of the country. However,  broadband adoption rates have steadily increased for the low-income  population absent a Lifeline subsidy for broadband. We found that at  least two companies operating in a total of at least 21 states had  begun offering in-home non-Lifeline broadband wireline support for  less than $10 per month to individuals that participate in public- assistance programs, such as SNAP or public housing. The offered  rate of these providers\u2019 own low-income broadband service of $10 per  month was less expensive than FCC\u2019s broadband reasonable- comparability cost benchmark of approximately $55 per month, which  Lifeline subscribers would be paying for a similar level of service.", "Our May 2017 report also found that FCC has recently taken some steps  toward evaluating Lifeline\u2019s performance in meeting program goals.  Specifically, in the 2016 Lifeline Modernization Order, FCC instructed  USAC to hire an outside, independent, third-party evaluator to complete a  program evaluation of Lifeline\u2019s design, function, and administration. The  order stipulated the outside evaluator must complete the evaluation and  USAC must submit the findings to FCC by December 2020. As FCC  expects Lifeline enrollment to increase as the program is expanded to  include broadband service, this expansion could carry with it increased  risks for fraud, waste, and abuse, as was the case with past expansions  of the program. Completing the program evaluation as planned, and as  we recommended in 2015, would help FCC determine whether Lifeline is  meeting its stated goals of increasing telephone and broadband  subscribership among low-income consumers, while minimizing the  burden on those who contribute to the USF."], "subsections": []}, {"section_title": "Financial Controls Exist, with Others Planned, for the Lifeline Program, but Weaknesses Remain", "paragraphs": ["In our May 2017 report we found that FCC and USAC have established  financial controls for Lifeline, including obtaining and reviewing  information about billing, collecting, and disbursing funds. They have also  developed plans to establish other controls, such as establishing a  national eligibility verifier (National Verifier) for Lifeline providers to  determine the eligibility of applicants seeking Lifeline service. However,  as discussed in our May 2017 report, we found that weaknesses remain,  including the lack of requirements to effectively control program  expenditures above approved levels, concerns about the transparency of  fees on customers\u2019 telephone bills, and a lack of FCC guidance that could  result in Lifeline and other providers paying inconsistent USF  contributions. To address these concerns, we recommended the  Chairman of FCC (1) require Commissioners to review and approve, as  appropriate, spending above the budget in a timely manner; (2) require a  review of customer bills as part of the contribution audit to include an  assessment of whether the charges, including USF fees, meet FCC  Truth-in-billing rules with regard to labeling, so customer bills are  transparent, and appropriately labeled and described, to help consumers  detect and prevent unauthorized changes; and (3) respond to USAC  requests for guidance and address pending requests concerning USF  contribution requirements to ensure the contribution factor is based on  complete information and that USF pass-through charges are equitable.  FCC generally agreed with those recommendations.", "In addition, we found that USAC\u2019s banking practices for the USF result in  oversight and accountability risks that FCC has plans to mitigate.  Specifically, FCC maintains USF funds\u2014whose net assets as of  September 2016 exceeded $9 billion\u2014outside of the U.S. Treasury  pursuant to Office of Management and Budget (OMB) advice provided in  April 2000. OMB had concluded that the USF does not constitute public  money subject to the Miscellaneous Receipts Statute, 31 U.S.C. \u00a7 3302,  a statute that requires that money received for the use of the United  States be deposited in the Treasury unless otherwise authorized by law.  As such, USF balances are held in a private bank account. However,  subsequent to this OMB advice, in February 2005 we reported that FCC  should reconsider this determination in light of the status of universal  service monies as federal funds.", "As discussed in our May report, according to correspondence we  received from the FCC Chairman\u2019s Senior Legal Counsel, as of March  2017, FCC had decided to move the funds to the Treasury. FCC identified  potential benefits of moving the funds to the Treasury. For example, FCC  explained that having the funds in the Treasury would provide USAC with  better tools for fiscal management of the funds, including access to real- time data and more accurate and transparent data. According to FCC,  until the USF is moved into the Treasury, there are also some oversight  risks associated with holding the fund in a private account. For example,  the contract governing the account does not provide FCC with authority to  direct bank activities with respect to the funds in the event USAC ceases  to be the administrator of the USF. After we raised this matter with FCC  officials during the course of our review, beginning in November 2016,  FCC sought to amend the contract between USAC and the bank to  enable the bank to act on FCC instructions independently of USAC in the  event USAC ceases to be the administrator. However, as of May 2017,  the amended contract had not yet been signed.", "While FCC has put in place a preliminary plan to move the USF funds to  the Treasury, as well as plans to amend the existing contract with the  bank as an interim measure, several years have passed since this issue  was brought to FCC\u2019s attention without corrective actions being  implemented. Further, under FCC\u2019s preliminary plan, it would not be until  next year, at the earliest, that the funds would be moved to the Treasury.  In May 2017, while reviewing a draft of this report, a senior FCC official  informed us that FCC experienced some challenges associated with  moving the funds to the Treasury, such as coordinating across the  various entities involved, which raised some questions as to when and  perhaps whether the funds would be moved. Until FCC finalizes and  implements its plan and moves the USF funds, the risks that FCC  identified will persist and the benefits of having the funds in the Treasury  will not be realized. As a result, in our May 2017 report, we recommended  that the Chairman of FCC take action to ensure that the preliminary plans  to transfer the USF funds from the private bank to the Treasury are  finalized and implemented as expeditiously as possible. FCC agreed with  this recommendation."], "subsections": []}, {"section_title": "FCC and USAC Have Implemented Some Controls to Improve Subscriber Eligibility Verification, but Weaknesses Remain", "paragraphs": ["FCC and USAC have implemented controls to improve subscriber  eligibility verification, such as implementing the NLAD database in 2014,  which helps carriers identify and resolve duplicate claims for Lifeline- supported services. However, as discussed in our May 2017 report, our  analysis of data from 2014, as well as our undercover attempts to obtain  Lifeline service, revealed significant weaknesses in subscriber eligibility  verification. Lifeline providers are generally responsible for verifying the  eligibility of potential subscribers, but we found that their ability to do so is  hindered by a lack of access to, or awareness of, state eligibility  databases that can be used to confirm eligibility prior to enrollment. For  example, not all states have databases that Lifeline providers can use to  confirm eligibility and some providers with whom we spoke were unaware  of databases that were potentially available to them. These challenges  might be overcome if FCC establishes a National Verifier, as it plans to do  nationwide by the end of 2019, to remove responsibility for verifying  eligibility from the providers. Additionally, since USAC was not  maintaining and providing information to providers about these  databases, we recommended they maintain and disseminate an updated  list of state eligibility databases available to Lifeline providers that  includes the qualifying programs those databases access to confirm  eligibility, to help ensure Lifeline providers are aware of state eligibility  databases and USAC audits of Lifeline providers can verify that available  state databases are being utilized to verify subscriber eligibility. FCC  agreed with the recommendation.", "For our May 2017 report, to identify Lifeline subscribers who were  potentially ineligible to participate in the program, we tested the eligibility  of subscribers who claimed participation in Medicaid, SNAP, and  Supplemental Security Income (SSI) using NLAD data as of November  2014. We focused our analysis on these three programs because FCC  reported in 2012 that these were the three qualifying programs through  which most subscribers qualify for Lifeline. We compared approximately  3.4 million subscribers who, according to information entered in NLAD,  were eligible for Lifeline due to enrollment in one of these three programs  to eligibility data for these programs.", "On the basis of our analysis of NLAD and public-assistance data, we  could not confirm that a substantial portion of selected Lifeline  beneficiaries were enrolled in the Medicaid, SNAP, and SSI programs,  even though, according to the data, they qualified for Lifeline by stating on  their applications that they participated in one of these programs. In  total, we were unable to confirm whether 1,234,929 subscribers out of the  3,474,672 who we reviewed, or about 36 percent, participated in the  qualifying benefit programs they stated on their Lifeline enrollment  applications or were recorded as such by Lifeline providers.", "If providers claimed and received reimbursement for each of the 1.2  million subscribers, then the subsidy amount associated with these  individuals equals $11.4 million per month, or $137 million annually, at the  current subsidy rate of $9.25 per subscriber. Because Lifeline  disbursements are based on providers\u2019 reimbursement claims, not the  number of subscribers a provider has in NLAD, our analysis of NLAD data  could not confirm actual disbursements associated with these individuals.  Given that our review was limited to those enrolled in SNAP or Medicaid  in selected case-study states, and SSI in states that participated in NLAD  at the time of our analysis, our data results are likely understated  compared to the entire population of Lifeline subscribers. These results  indicate that potential improper payments have occurred and have gone  undetected. We plan to refer potentially ineligible subscribers identified  through our analysis for appropriate action as warranted.", "Our undercover testing, as discussed in our May 2017 report, also found  that Lifeline may be vulnerable to ineligible subscribers obtaining service  and the testing found examples of Lifeline providers being nonresponsive,  or providing inaccurate information. To conduct our 21 tests, we  contacted 19 separate providers to apply for Lifeline service. We applied  using documentation fictitiously stating that we were enrolled in an eligible  public-assistance program or met the Lifeline income requirements. We  were approved to receive Lifeline services by 12 of the 19 Lifeline  providers using fictitious eligibility documentation. We also experienced  instances during our undercover tests where our calls to providers were  disconnected, and where Lifeline provider representatives transmitted  erroneous information, or were unable to provide assistance on questions  about the status of our application. For example, one Lifeline provider told  us that our application was not accepted by the company because our  signature had eraser marks; however our application had been submitted  via an electronic form on the provider\u2019s website and was not physically  signed. While our tests are illustrative and not representative of all Lifeline  providers or applications submitted, these results suggest that Lifeline  providers do not always properly verify eligibility and that applicants may  potentially encounter similar difficulties when applying for Lifeline benefits.  As described above, these challenges might be overcome if FCC  establishes a National Verifier, as it plans to do nationwide by the end of  2019, to remove responsibility for verifying eligibility from the providers."], "subsections": []}, {"section_title": "FCC and USAC Have Taken Some Steps to Improve Oversight of Lifeline Providers, but Remaining Gaps Could Allow Noncompliance with Program Rules", "paragraphs": ["FCC and USAC have implemented some mechanisms to enhance  oversight of Lifeline providers, as discussed in our May 2017 report, but  we found that remaining gaps could allow noncompliance with program  rules. For example, in July 2014, FCC took additional measures to  combat fraud, waste, and abuse by creating a strike force to investigate  violations of USF program rules and laws. According to FCC, the creation  of the strike force is part of the agency\u2019s commitment to stopping fraud,  waste, and abuse and policing the integrity of USF programs and funds.  Similarly, in June 2015, FCC adopted a rule requiring Lifeline providers to  retain eligibility documentation used to qualify consumers for Lifeline  support to improve the auditability and enforcement of FCC rules.", "However, we found FCC and USAC have limited oversight of Lifeline  provider operations and the internal controls used to manage those  operations. The current structure of the program relied throughout 2015  and 2016 on over 2,000 Eligible Telecommunication Carriers (ETC) to  provide Lifeline service to eligible beneficiaries. These companies are  relied on to not only provide telephone service, but also to create Lifeline  applications, train employees and subcontractors, and make eligibility  determinations for millions of applicants. USAC\u2019s reliance on Lifeline  providers to determine eligibility and subsequently submit accurate and  factual invoices is a significant risk for allowing potentially improper  payments to occur, and under current reporting guidelines these  occurrences would likely go undetected and unreported. Federal internal  control standards state that management retains responsibility for the  performance and processes assigned to service organizations performing  operational functions. Consistent with internal control standards, FCC and  USAC would need to understand the extent to which a sample of these  internal controls are designed and implemented effectively to ensure  these controls are sufficient to address program risks and achieve the  program\u2019s objectives.", "We identified key Lifeline functions for which FCC and USAC had limited  visibility. For example, we found instances of Lifeline providers utilizing  domestic or foreign-operated call centers for Lifeline enrollment. When we  asked FCC officials about Lifeline providers that outsource program  functions to call centers, including those overseas, they told us that such  information is not tracked by FCC or USAC. With no visibility over these  call centers, FCC and USAC do not have a way to verify whether such  call centers comply with Lifeline rules. FCC and USAC have limited  knowledge about potentially adverse incentives that providers might offer  employees to enroll subscribers. For example, some Lifeline providers  pay commissions to third-party agents to enroll subscribers, creating a  financial incentive to enroll as many subscribers as possible. Companies  responsible for distributing Lifeline phones and service that use incentives  for employees to enroll subscribers for monetary benefit increase the  possibility of fictitious or ineligible individuals being enrolled into Lifeline.  Highlighting the extent of the potential risk for companies, in April 2016  FCC announced approximately $51 million in proposed fines against one  Lifeline provider, due to, among other things, its sales agents purposely  enrolling tens of thousands of ineligible and duplicate subscribers in  Lifeline using shared or improper eligibility documentation.", "To test internal controls over employees associated with Lifeline for our  May 2017 report, we sought employment with a company that enrolls  individuals to Lifeline. We were hired by a company and were allowed to  enroll individuals in Lifeline without ever meeting any company  representatives, conducting an employment interview, or completing a  background check. After we were hired, we completed two fictitious  Lifeline applications as an employee of the company, successfully  enrolled both of these fictitious subscribers into Lifeline using fabricated  eligibility documentation, and received compensation for these  enrollments. The results of these tests are illustrative and cannot be  generalized to any other Lifeline provider. We plan to refer this company  for appropriate action as warranted. As stated above, these challenges  might be overcome if FCC establishes a National Verifier, as it plans to do  nationwide by the end of 2019, to remove responsibility for verifying  eligibility from the providers. In addition, in May 2017, we made two  recommendations to help address control weaknesses and related  program-integrity risks. Specifically, we recommended that FCC establish  time frames to evaluate compliance plans and develop instructions with  criteria for FCC reviewers how to evaluate these plans to meet Lifeline\u2019s  program goals. We also recommended that FCC develop an enforcement  strategy that details what violations lead to penalties and apply this as  consistently as possible to all Lifeline providers to ensure consistent  enforcement of program violations. FCC generally agreed with these  recommendations.", "In conclusion, Lifeline\u2019s large and diffuse administrative structure creates  a complex internal control environment susceptible to significant risk of  fraud, waste, and abuse. FCC\u2019s and USAC\u2019s limited oversight of  important aspects of program operations further complicates the control  environment\u2014heightening program risk. We are encouraged by FCC\u2019s  recent steps to address weaknesses we identified, such as the 2016  order establishing a National Verifier, which, if implemented as planned,  could further help to address weaknesses in the eligibility-determination  process. We also plan to monitor the implementation status of the  recommendations we made in May 2017.", "Chairman Thune, Ranking Member Nelson, and members of the  Committee, this concludes my prepared remarks. I would be happy to  answer any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information regarding this testimony, please contact Seto J.  Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov. In addition, contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Individuals who made key  contributions to this testimony are Dave Bruno (Assistant Director), Scott  Clayton (Analyst-in-Charge), and Daniel Silva.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-281", "url": "https://www.gao.gov/products/GAO-18-281", "title": "Veterans Choice Program: Improvements Needed to Address Access-Related Challenges as VA Plans Consolidation of its Community Care Programs", "published_date": "2018-06-04T00:00:00", "released_date": "2018-06-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress created the Choice Program in 2014 to address longstanding challenges with veterans' access to care at VHA medical facilities. The Joint Explanatory Statement for the Consolidated Appropriations Act, 2016 included provisions for GAO to review veterans' access to care through the Choice Program.", "This report examines for Choice Program care (1) VA's appointment scheduling process, (2) the timeliness of appointments and the information VHA uses to monitor veterans' access; and (3) the factors that have adversely affected veterans' access and the steps VA and VHA have taken to address them for VA's future community care program.", "GAO reviewed applicable laws and regulations, VA's TPA contracts, and relevant VHA policies and guidance. Absent reliable national data, GAO also selected 6 of 170 VAMCs (selected for variation in geographic location and the TPAs that served them) and manually reviewed a random, non-generalizable sample of 196 Choice Program authorizations. The authorizations were created for veterans who were referred to the program between January and April of 2016, the most recent period for which data were available when GAO began its review. The sample of authorizations included 55 for routine care, 53 for urgent care, and 88 that the TPAs returned without scheduling appointments. GAO also obtained the results of VHA's non-generalizable analysis of wait times for a nationwide sample of about 5,000 Choice Program authorizations that were created for selected services between July and September of 2016."]}, {"section_title": "What GAO Found", "paragraphs": ["Through the Veterans Choice Program (Choice Program), eligible veterans may receive care from community providers when it is not readily accessible at Veterans' Health Administration (VHA) medical facilities. The Department of Veterans Affairs (VA) uses two contractors\u2014or third party administrators (TPA)\u2014to schedule most veterans' Choice Program appointments after receiving referrals from VA medical centers (VAMC). GAO found that veterans who are referred to the Choice Program for routine care because services are not available at VA in a timely manner could potentially wait up to 70 calendar days for care if VAMCs and the TPAs take the maximum amount of time VA allows to complete its appointment scheduling process. This is not consistent with the statutory requirement that veterans receive Choice Program care within 30 days of their clinically indicated date (when available), which is the soonest date that it would be appropriate for the veteran to receive care, according to a VHA clinician. Without designing appointment scheduling processes that are consistent with this requirement, VA lacks assurance that veterans will receive Choice Program care in a timely manner.", "GAO and VHA found that selected veterans experienced lengthy actual wait times for appointments in 2016, after manually reviewing separate samples of Choice Program authorizations. For example, when GAO analyzed 55 routine care authorizations that were created between January and April of 2016, it found that the process took at least 64 calendar days, on average. When VHA analyzed about 5,000 authorizations created between July and September of 2016, it took an average of 51 calendar days for veterans to receive care.", "a GAO excluded from its analysis the amount of time the TPA took to schedule the appointment and the overall wait time because its sample selection methodology differed from VHA's in a way that would have skewed these two averages but not the averages for the other segments of the process.", "GAO also found that VHA cannot systematically monitor the timeliness of veterans\u2019 access to Choice Program care because it lacks complete, reliable data to do so. The data limitations GAO identified include:", "A lack of data on the timeliness of referring and opting veterans in to the program. GAO found that the data VHA uses to monitor the timeliness of Choice Program appointments do not capture the time it takes VAMCs to prepare veterans\u2019 referrals and send them to the TPAs, nor do they capture the time spent by the TPAs in accepting VAMCs\u2019 referrals and opting veterans in to the Choice Program. VHA has implemented an interim solution to monitor overall wait times that relies on VAMC staff consistently and accurately entering unique identification numbers on VHA clinicians\u2019 requests for care and on Choice Program referrals, a process that is prone to error.", "Inaccuracy of clinically indicated dates. GAO found that clinically indicated dates (which are used to measure the timeliness of care) are sometimes changed by VAMC staff before they send Choice Program referrals to the TPAs, which could mask veterans\u2019 true wait times. GAO found that VAMC staff entered later clinically indicated dates on referrals for about 23 percent of the 196 authorizations it reviewed. It is unclear if VAMC staff mistakenly entered incorrect dates manually, or if they inappropriately entered later dates when the VAMC was delayed in contacting the veteran, compiling relevant clinical information, and sending the referral to the TPA.", "Unreliable data on the timeliness of urgent care. GAO found that VAMCs and TPAs do not always categorize Choice Program referrals and authorizations in accordance with the contractual definition for urgent care. According to the contracts, a referral is to be marked as \u201curgent,\u201d and an appointment is to take place within 2 days of the TPA accepting it, when a VHA clinician has determined that the needed care is (1) essential to evaluate and stabilize the veteran\u2019s condition, and (2) if delayed would likely result in unacceptable morbidity or pain. GAO reviewed a sample of 53 urgent care authorizations and determined that about 28 percent of the authorizations were originally marked as routine care authorizations but were changed to urgent by VAMC or TPA staff, in an effort to administratively expedite appointment scheduling.", "Without complete, reliable data, VHA cannot determine whether the Choice Program has helped to achieve the goal of alleviating veterans\u2019 wait times for care.", "GAO found that numerous factors adversely affected veterans\u2019 access to care through the Choice Program. These factors include: (1) administrative burden caused by complexities of referral and appointment scheduling processes, (2) poor communication between VHA and its VAMCs, and (3) inadequacies in the networks of community providers established by the TPAs, including an insufficient number, mix, or geographic distribution of community providers. VA and VHA have taken numerous actions throughout the Choice Program\u2019s operation that were intended to help address these factors, though not all access factors have been fully resolved. For example, to help address administrative burden and improve the process of coordinating veterans\u2019 Choice Program care, VA established a secure e-mail system and a mechanism for TPAs and community providers to remotely access veterans\u2019 VA electronic health records. However, these mechanisms only facilitate a one-way transfer of necessary information. They do not provide a means by which VAMCs or veterans can view the TPAs\u2019 step-by-step progress in scheduling appointments or electronically receive medical documentation associated with Choice Program appointments.", "While the Choice Program will soon end, VA anticipates that veterans will continue to receive community care under a similar program that VA plans to implement, which will consolidate the Choice Program and other VA community care programs. Incorporating lessons learned from the Choice Program into the implementation and administration of the new program could help VHA avoid similar challenges."]}, {"section_title": "What GAO Recommends", "paragraphs": ["For VA's future consolidated community care program, GAO is making 10 recommendations, which include:", "establishing an achieveable wait-time goal for the community care program that will permit VHA to monitor whether veterans are receiving care within time frames that are comparable to the amout of time they would otherwise wait for care at VHA medical facilities;", "designing an appointment scheduling process that (1) is consistent with the wait-time goal and (2) sets forth time frames within which veterans' referrals must be processed, appointments must be scheduled, and appointments must occur;", "allow VHA to systematically monitor the amount of time taken to prepare referrals, schedule appointments, and complete appointments;", "prevent veterans' clinically indicated dates from being modified by individuals other than VHA clinicians; and", "separate clinically urgent referrals and authorizations from those for which the VAMC or the TPA has decided to expedite appointment scheduling for administrative reasons; and", "establishing a system that will help facilitate seamless, efficient care coordination and exchanges of information among VAMCs, VHA clinicians, TPAs, community providers, and veterans.", "VA generally agreed with all but one of GAO's recommendations, which was to separate clinically urgent referrals from those that are administratively expedited. GAO maintains that implementing this recommendation will help improve future monitoring of urgent care timeliness for reasons explained in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The majority of veterans utilizing health care services delivered by the  Veterans Health Administration (VHA) of the Department of Veterans  Affairs (VA) receive care in VHA-operated medical facilities, including 170  VA medical centers (VAMC) and more than 1,000 outpatient facilities. In  recent years, we and others have expressed concerns about the ability of  VHA\u2019s medical facilities to provide health care services in a timely  manner. Serious and long-standing problems with veterans\u2019 access to  care were also highlighted in a series of congressional hearings in the  spring and summer of 2014, after several well-publicized events raised  additional concerns about wait times for appointments at VHA medical  facilities. In some cases, delays in care or VHA\u2019s failure to provide care  reportedly have resulted in harm to veterans. Due to these and other  concerns, we concluded that VA health care is a high-risk area and added  it to our High Risk List in 2015.", "In response to the problems with veterans\u2019 access to care at VHA medical  facilities that were highlighted during the 2014 congressional hearings,  Congress enacted the Veterans Access, Choice, and Accountability Act  of 2014 (Choice Act) on August 7, 2014. Among other things, the law  established a temporary program\u2014called the Veterans Choice Program  (Choice Program)\u2014and provided up to $10 billion in funding for veterans  to obtain health care services from non-VA community providers when  they faced long wait times, lengthy travel distances, or other challenges  accessing care at VHA medical facilities. The temporary authority and  funding for the Choice Program was separate from that of other  previously existing programs through which VA has the option to  purchase care from community providers. Legislation enacted in August  and December of 2017 provided an additional $4.2 billion for the Veterans  Choice Fund. VA may continue to authorize Choice Program care until  all amounts in the Choice Fund are exhausted. Currently, VA is in the  process of planning its future community care program, which (as  described in an October 2015 plan VA submitted to Congress) will  consolidate the Choice Program and six other VA community care  programs into one program.", "In accordance with the Choice Act, VA and VHA had up to 90 days to  prepare for Choice Program implementation from the time the Choice Act  was enacted. To cope with the compressed implementation time frame,  VA modified contracts it had previously established with Health Net  Federal Services (Health Net) and TriWest Healthcare Alliance (TriWest)  to administer a different VA community care program and gave them certain responsibilities related to Choice Program administration,  including the scheduling of routine and urgent care appointments for  veterans needing care in the community. VA and VHA refer to Health  Net and TriWest as third-party administrators (TPA). The Choice Program  implementation tasks included designing a framework to administer the  program (which involved dividing responsibilities between VAMCs and  TPAs), negotiating contract modifications to add Choice Program  administration responsibilities to the TPAs\u2019 existing contracts with VA,  designing referral and appointment scheduling processes for VAMCs and  the TPAs, strengthening the community provider networks the TPAs had  established under their existing VA contracts, creating TPA call centers,  training VAMC and TPA staff, producing and distributing Veterans Choice  Cards to veterans, and educating veterans and community providers  about the new program.", "External reviews, media reports, and congressional hearings held over  the course of the Choice Program\u2019s implementation and operation have  highlighted programmatic weaknesses, such as insufficient provider  networks, significant delays in scheduling appointments, and a lack of  timely payments to network providers. The Joint Explanatory Statement  for the Consolidated Appropriations Act, 2016 included two provisions for  us to review veterans\u2019 access to care and the delivery of health care services through the Choice Program, with a focus on rural areas. In  addition, you asked us to conduct a comprehensive review of the Choice  Program, focusing on (among other things) the effect the Choice Program  has had on reducing veterans\u2019 wait times for care. In March 2017, we  presented preliminary observations from this work at a hearing of the  House Committee on Veterans\u2019 Affairs. This report updates our  preliminary findings and examines:  1.  the potential wait times for veterans to receive routine care through  the Choice Program, according to VA\u2019s appointment scheduling  process;  2.  selected veterans\u2019 actual wait times to receive routine care and urgent  care through the Choice Program and the information VHA uses to  monitor access to care under the program; and  3.  the factors, if any, that have adversely affected veterans\u2019 access to  care under the Choice Program and the actions, if any, that VA and  VHA have taken to address them for VA\u2019s future community care  program.", "To examine the potential wait times for veterans to receive routine care  through the Choice Program according to VA\u2019s appointment scheduling  process, we reviewed applicable laws and regulations; VA\u2019s contracts  with the TPAs; and relevant VA and VHA policy directives, guidance, and  training materials for VAMCs. In addition, we exchanged written  correspondence with VA\u2019s Office of General Counsel about the  application of VHA\u2019s wait time goals to the Choice Program. We also  interviewed a VA contracting official and officials from VHA\u2019s Office of  Community Care (the office responsible for implementing and overseeing  the Choice Program), as well as officials from the two Choice Program  TPAs, Health Net and TriWest. We analyzed this evidence in the  context of the federal internal control standard for control activities, which  includes the design of policies and procedures that will help an entity  achieve its objectives and respond to risks.", "To examine selected veterans\u2019 actual wait times to receive routine care  and urgent care through the Choice Program and the information VHA  uses to monitor access to care under the program, we took five key steps.  We (1) analyzed Choice Program appointment wait times for selected  veterans using a sample of 196 Choice Program authorizations for routine  and urgent care; (2) reviewed VHA\u2019s analysis of appointment wait times  for a sample of about 5,000 Choice Program authorizations; (3) reviewed  data VHA uses to monitor the timeliness of Choice Program care and  reasons that the TPAs have returned Choice Program referrals without  making appointments; (4) interviewed VA, VHA, and TPA officials; and (5)  reviewed federal internal control standards. See Appendix I for more  information on these methodological steps.", "To examine the factors, if any, that have adversely affected veterans\u2019  access to care under the Choice Program and the actions, if any, that VA  and VHA have taken to address them for VA\u2019s future community care  program, we reviewed documentation and interviewed officials from VA,  VHA, and the TPAs; as well as leadership officials and community care  managers and staff from six selected VAMCs. (See Appendix I for  information about how we selected the six VAMCs.) In cases where we  identified actions VA and VHA had taken to address factors that  adversely affected veterans\u2019 access, we interviewed VA and VHA officials  and reviewed documentation they provided to gain a better understanding  of their rationale for taking those actions and the extent to which they had  evaluated the outcomes or effectiveness of selected actions. Between  May and September of 2016, we interviewed community care managers  and staff at the six selected VAMCs, and we followed up with the  managers in June and July of 2017. During these interviews, we  discussed certain actions VA and VHA had taken and obtained their  perspectives on implementation of the actions and the extent to which  these actions improved veterans\u2019 access to Choice Program care. We  examined the actions VA and VHA took in the context of federal  standards for internal control.", "We conducted this performance audit from April 2016 through May 2018  in accordance with generally accepted government accounting 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Responsibilities of the Choice Program TPAs", "paragraphs": ["In October 2014, VA modified its existing contracts with two TPAs that  were administering another VA community care program to add certain  administrative responsibilities associated with the Choice Program. For  the Choice Program, each of the two TPAs\u2014Health Net and TriWest\u2014is  responsible for delivering care in a specific multi-state region (See figure  1.). Specifically, the TPAs are responsible for establishing networks of  community providers, scheduling appointments with community providers  for eligible veterans, and paying community providers for their services."], "subsections": []}, {"section_title": "Choice Program Eligibility Criteria", "paragraphs": ["As stated in VA\u2019s December 2015 guidance, the Choice Program allows  eligible veterans to opt to obtain health care services from the TPAs\u2019  network providers rather than from VHA medical facilities when the  veterans are enrolled in the VA health care system and meet any of the  following criteria:  the next available medical appointment with a VHA clinician is more  than 30 days from the veteran\u2019s preferred date or the date the  veteran\u2019s physician determines he or she should be seen;  the veteran lives more than 40 miles driving distance from the nearest  VHA facility with a full-time primary care physician;  the veteran needs to travel by air, boat, or ferry to the VHA facility that  is closest to his or her home;  the veteran faces an unusual or excessive burden in traveling to a  VHA facility based on geographic challenges, environmental factors,  or a medical condition;  the veteran\u2019s specific health care needs, including the nature and  frequency of care needed, warrants participation in the program; or  the veteran lives in a state or territory without a full-service VHA  medical facility.", "Over the life of the Choice Program, VA has taken various approaches to  care for veterans for whom services are not available at a particular VHA  medical facility. In May and October of 2015, VHA issued policy  memoranda to its VAMCs that required them to offer veterans referrals to  the Choice Program before they authorized care through one of VA\u2019s  other community care programs, which existed prior to the creation of the  Choice Program. Before May 2015, VA provided VAMCs the flexibility to  decide on a case-by-case basis whether to refer veterans to the Choice  Program or one of VA\u2019s other community care programs when services  were not available. In June 2017, VHA issued another policy  memorandum that rescinded the referral hierarchy that required VAMCs  to refer to the Choice Program first. It directed VAMCs to refer veterans to  the Choice Program only if they met the Choice Act\u2019s wait-time, distance,  and geographic eligibility criteria, and to instead use other VHA medical  facilities, facilities with which VA has sharing agreements, and other VA  community care programs to deliver care to veterans when services were  not available at a VHA medical facility and veterans did not qualify under  the Choice Act\u2019s eligibility criteria. In August 2017, after Congress  provided an additional $2.1 billion for the Choice Program, VHA again  changed its guidance on referral patterns for the Choice Program and  VA\u2019s other community care programs. Specifically, VA issued a fact  sheet saying that the new funding will allow VAMCs to refer veterans to  the Choice Program to the maximum extent possible. This allowed  VAMCs to again offer veterans Choice Program referrals when services  are unavailable at VHA medical facilities (until available funds have been  exhausted), and also permitted VAMCs to refer veterans to other VA  community care programs when services are unavailable."], "subsections": []}, {"section_title": "Process for Choice Program Appointment Scheduling", "paragraphs": ["Through policies and standard operating procedures for VAMCs and  contracts with the TPAs, VA and VHA have established two separate  processes for Choice Program routine and urgent appointment  scheduling: one process for time-eligible veterans and another for  distance-eligible veterans.", "Table 1 provides an overview of the appointment scheduling process that  applies when a veteran is referred to the Choice Program because the  veteran is time-eligible. (Appendix II contains additional detail about the  Choice Program appointment scheduling process for time-eligible  veterans\u2014including differences between the routine and urgent care  appointment scheduling process.)", "When veterans reside more than 40 miles from a VHA medical facility or  meet other travel-related criteria, VHA uses the appointment scheduling  process it developed for distance-eligible veterans. The process for  distance-eligible veterans differs from that for time-eligible veterans in that  VAMCs do not prepare a referral and send it to the TPA. Instead,  distance-eligible veterans contact the TPA directly to request Choice  Program care. See table 2 for an overview of the Choice Program  appointment scheduling process that applies for distance-eligible  veterans. (See appendix III for additional detail about the Choice Program  appointment scheduling process for distance-eligible veterans\u2014including  differences between the routine and urgent care appointment scheduling  process.)"], "subsections": []}, {"section_title": "Choice Program Utilization from Fiscal Year 2015 through Fiscal Year 2016", "paragraphs": ["Data we obtained from the TPAs indicate that VHA and the TPAs used  the time-eligible appointment scheduling process about 90 percent of the  time from fiscal year 2015 through fiscal year 2016 (the first 2 years of the  Choice Program\u2019s implementation). More than half of the veterans who  were referred to the Choice Program and for whom the TPAs scheduled  appointments were referred because the services they needed were not  available at a VHA medical facility. The second-most-common reason  for referral was that the wait time for an appointment at a VHA medical  facility exceeded 30 days. (See figure 2.) The distance-eligible  appointment scheduling process was used for about 10 percent of the  veterans who used the Choice Program between fiscal year 2015 through  fiscal year 2016."], "subsections": []}, {"section_title": "Choice Act Wait-Time Requirements for Care Furnished Under the Program", "paragraphs": ["In coordinating the furnishing of care to eligible veterans under the Choice  Program, VA is required to ensure that veterans receive appointments for  Choice Program care within the wait-time goals of VHA for the furnishing  of hospital care and medical services. Although the Choice Act defined  VHA\u2019s wait-time goals as not more than 30 days from the date a veteran  requests an appointment from the Department, the Choice Act gave VA  the authority to change this definition if it did not reflect VHA\u2019s actual wait- time goals. If VA wanted to exercise this authority, it was required to notify  Congress of VHA\u2019s actual wait-time goals within 60 days of the law\u2019s  enactment (i.e., by October 6, 2014). VA did so in an October 3, 2014,  report to Congress. To \u201censure that care provided through the Veterans  Choice Program is delivered within clinically appropriate timeframes,\u201d VA  notified Congress that VHA\u2019s wait-time goals were \u201cnot more than 30  days from either the date that an appointment is deemed clinically  appropriate by a VA health care provider, or if no such clinical  determination has been made, the date a Veteran prefers to be seen for  hospital care or medical services.\u201d By incorporating VHA\u2019s reported wait- time goal, the Choice Act required VA to ensure the furnishing of care to  eligible veterans within 30 days of the clinically indicated date or, if none  existed, within 30 days of the veteran\u2019s preferred date."], "subsections": []}, {"section_title": "VA\u2019s Other Community Care Programs and Planned Consolidation", "paragraphs": ["VA has purchased health care services from community providers  through various programs since as early as 1945. Currently, there are six  community care programs other than the Choice Program through which  VA purchases hospital care and medical services for veterans. These six  community care programs offer different types of services and have  varying eligibility criteria for veterans and community providers. VA\u2019s six  non-Choice community care programs include:  Individually authorized VA community care. The primary means by  which VHA has traditionally purchased community care is through  individual authorizations, where local VAMC staff determine veteran  eligibility, create authorizations, and assist veterans in arranging care  with community providers that are willing to accept VA payment.  Traditionally, VAMCs have approved the use of individually authorized  community care when a veteran cannot access a particular specialty  care service from a VHA medical facility because the service is not  offered or the veteran would have to travel a long distance to obtain it  from a VHA medical facility. (See appendix IV for an illustration of how  appointment scheduling and care coordination processes for the  Choice Program compare to those for individually authorized VA  community care.)", "Two emergency care programs. When VA community care is not  preauthorized, VA may reimburse community providers for emergency  care under two different community care programs: 1) emergency  care for a condition related to a veteran\u2019s service-connected disability  and 2) emergency care for a condition not related to a veteran\u2019s  service-connected disability, commonly referred to as Millennium Act  emergency care. For emergency care to be covered through these  two programs, a number of criteria must be met, including (1)  community providers must file claims in a timely manner (within 2  years of the date services were rendered for service-connected  emergency care and within 90 days for Millennium Act emergency  care); (2) the veteran\u2019s condition must meet the prudent layperson  standard of an emergency; and (3) a VA or other federal medical  facility must not have been feasibly available to provide the needed  care, and an attempt to use either would not have been considered  reasonable by a prudent layperson.", "Patient-Centered Community Care (PC3). In September 2013, VA  awarded contracts to Health Net and TriWest to develop regional  networks of community providers to deliver specialty care, mental  health care, limited emergency care, and maternity and limited  newborn care when such care is not feasibly available from a VHA  medical facility. VA and the TPAs began implementing the PC3  program in October 2013, and it was fully implemented nationwide as  of April 2014\u2014prior to the creation of the Choice Program. In August  2014, VA expanded the PC3 program to allow community providers of  primary care to join the PC3 networks. PC3 is a program VA created  under existing statutory authorities, not a program specifically  designed by law. To be eligible to obtain care from PC3 providers,  veterans must meet the same criteria that are required for individually  authorized VA care in the community services.", "Agreements with federal partners and academic affiliates. When  services are not available at VHA medical facilities, VA may also  obtain specialty, inpatient, and outpatient health care services for  veterans through two types of sharing agreements\u2014those with other  federal facilities (such as those operated by the Department of  Defense and the Indian Health Service), and those with university- affiliated hospitals, medical schools, and practice groups (known as  academic affiliates).", "Dialysis contracts. In June 2013, VA awarded contracts to numerous  community providers nationwide to deliver dialysis\u2014a life-saving  medical procedure for patients with end-stage renal disease  (permanent kidney failure). When dialysis services are not feasibly  available at VHA medical facilities, veterans may be referred to one of  VA\u2019s contracted dialysis providers, and veterans may receive dialysis  at local clinics on an outpatient basis, or at home (if the contractors  offer home-based dialysis services).", "The VA Budget and Choice Improvement Act, which was enacted on July  31, 2015, required VA to develop a plan for consolidating all of its  community care programs into a new, single program to be known as the  \u201cVeterans Choice Program.\u201d VHA submitted this plan, including  proposed legislative changes, to Congress on October 30, 2015. VA has  moved forward with some aspects of the planned community care  program consolidation that it believes can be accomplished without  statutory changes. In December 2016, VA issued a request for proposals  (RFP) for contractors to help administer the consolidated community care  program, through \u201ccommunity care network\u201d contracts. The consolidated  community care program VA described in the October 2015 plan it  submitted to Congress and the December 2016 RFP, as amended, would  be similar to the current Choice Program in certain respects. For  example, VA is planning to award community care network contracts to  TPAs, which would establish regional networks of community providers  and process payments to those providers. In contrast, other aspects of  the consolidated community care program VA has planned may differ  from the existing Choice Program. For example, VA\u2019s RFP for the  community care network contracts, as amended, requires VAMCs\u2014rather  than TPAs\u2014to carry out appointment scheduling, unless they exercise a  contract option for the TPAs to provide such services."], "subsections": []}, {"section_title": "Annual Obligations for the Choice Program and Other VA Community Care Programs", "paragraphs": ["In fiscal year 2015, the first year of the Choice Program\u2019s implementation,  total obligations for Choice Program health care services accounted for  about 4.7 percent of the $8.7 billion VA obligated for all community care  services that year.  However, as more care was provided through the  Choice Program in fiscal years 2016 and 2017, obligations for Choice  Program care grew steadily, while obligations for care delivered through  other VA community care programs decreased. In fiscal year 2017, total  obligations for Choice Program health care services accounted for about  39 percent of the $11.16 billion VA obligated for all community care  services that year. See table 3.", "As shown in Table 4, below, of the $10.37 billion in Choice Program funds  that were obligated between fiscal year 2015 and fiscal year 2017, $6.28  billion (or about 61 percent) of the funds were obligated for Choice Program health care services. About $1.76 billion (or 17 percent) of total  Choice Program funds obligated between fiscal year 2015 and fiscal year  2017 were obligated for administrative costs. The remaining $2.33 billion  (about 22 percent) were obligated for medical services other than those  authorized under the Choice Program. As we previously reported, VHA  experienced a projected funding gap in its medical services appropriation  account in fiscal year 2015, largely due to lower-than-expected  obligations for the Choice Program, higher-than-expected obligations for  other VA community care programs, and unanticipated obligations for  hepatitis C drugs. To address the projected funding gap, on July 31,  2015, VA obtained temporary authority to use Choice Program funds  between July 31, 2015 and September 30, 2015 for amounts obligated on  or after May 1, 2015 to furnish medical services other than those that it  authorized under the Choice Program. Later, in fiscal year 2016 and fiscal  year 2017, VA de-obligated about $420 million of the Choice Program  funds it had obligated for other VA community care programs and  hepatitis C drugs in fiscal year 2015 because they were never expended."], "subsections": []}]}, {"section_title": "Time Allowed to Complete VA\u2019s Choice Program Appointment Scheduling Process Significantly Exceeds the Choice Act\u2019s Required 30-Day Time Frame for Routine Care", "paragraphs": ["Our analysis of VA\u2019s scheduling process indicates that veterans who are  referred to the Choice Program for routine care because they are time- eligible could potentially wait up to 70 calendar days to obtain care, if  VAMCs and TPAs take the maximum amount of time allowed by VA\u2019s  process. About 90 percent of Choice Program referrals in fiscal years  2015 and 2016 were scheduled under the time-eligibility process, which  means that the majority of veterans referred to the program would have  been subject to this potential wait time for an appointment for routine  care. This 70-day potential wait time is in contrast to the Choice Act\u2019s  required time frame, which is that eligible veterans receive Choice  Program care no more than 30 days from the date an appointment is  deemed clinically appropriate by a VHA clinician (referred to as the  clinically indicated date), or if no such determination has been made, 30  days from the date the veteran prefers to receive care. According to VHA  policy, a VHA clinician\u2019s clinically indicated date determination must be  based upon the needs of the patient, and it should be the earliest date  that it would be clinically appropriate for the veteran to receive care.  Therefore, if there is no clinical reason that care should be delayed, a  veteran\u2019s clinically indicated date could be the same date that the VHA  clinician determined the veteran needed care.", "The potential wait time of about 70 calendar days for time-eligible  veterans to receive routine care through the Choice Program  encompasses 18 or more calendar days for VAMCs to prepare veterans\u2019  Choice Program referrals and potentially another 52 calendar days for  appointments to occur through the TPAs\u2019 scheduling process, as follows:", "VAMCs\u2019 process for preparing routine Choice Program referrals.  According to VHA policies and guidance, VAMC staff have at least 18  calendar days to confirm that veterans want to be referred to the  Choice Program and to send veterans\u2019 referrals to the TPAs:", "They have 2 business days (or up to 4 calendar days) after a VHA  clinician has determined the veteran needs care to begin  contacting an eligible veteran by telephone to offer them a referral  to the Choice Program.", "They have up to 14 calendar days after initiating contact to reach  the veteran by telephone or letter and confirm that the veteran  wants to be referred to the Choice Program.", "After confirming that a veteran wants to be referred to the Choice  Program, however, VA has not set a limit on the number of days  VAMCs should take to compile relevant clinical information and  send referrals to the TPAs.", "TPAs\u2019 process for scheduling routine Choice Program  appointments. Through its contracts with the TPAs, VA has  established a process under which a veteran could potentially wait  another 52 calendar days from the date the TPA receives the VAMC\u2019s  Choice Program referral for a routine care appointment to take place.  This includes up to 16 business days (or 22 calendar days) after  receiving a referral to confirm the veteran\u2019s decision to opt in to the  Choice Program and create an authorization. The contracts further  state that, for time-eligible veterans, an appointment shall take place  within 30 calendar days of the clinically indicated date, the  authorization creation date, or the veteran\u2019s preferred date, whichever  occurs later:", "The TPA has 2 business days to review the VAMC\u2019s referral and  accept it if it contains sufficient information to proceed with  appointment scheduling.", "The TPA has 4 business days to contact the veteran by telephone  and confirm they want to opt in to the Choice Program (which  means that the veteran wants to receive care through the Choice  Program and have the TPA proceed with appointment  scheduling).", "If the veteran is not reached by telephone, the TPA has 10  business days for the veteran to respond to a letter confirming that  they want to opt in, at which point the TPA creates the Choice  Program authorization.", "If the authorization is created after the veteran\u2019s preferred date or  after the clinically indicated date on the VAMC\u2019s referral has  already passed, the TPA has 30 calendar days from the  authorization creation date for an appointment for routine care to  take place. The TPA can use up to 15 business days of this 30- calendar-day time frame to contact providers and successfully  schedule the veteran\u2019s Choice Program appointment.", "See figure 3 for an illustration of the potential wait time of approximately  70 calendar days for time-eligible veterans to receive routine care through  the Choice Program.", "The process VA established for time-eligible veterans to receive routine  care through the Choice Program\u2014which could potentially take 70 days  to complete\u2014is not consistent with the requirement that veterans receive  care within 30 days of their clinically indicated dates (where available) as  applicable under the Choice Act. Furthermore, according to the federal  internal control standard for control activities, agencies should design  control activities\u2014such as through policies and procedures\u2014that will help  ensure federal programs meet their objectives and respond to any risks to  meeting those objectives.", "A key reason that veterans\u2019 overall wait times for Choice Program care  could potentially exceed the Choice Act\u2019s 30-day wait-time requirement is  that the process VA and VHA designed did not include a limit on the  number of days VAMCs have to complete a key step of the process\u2014 compiling relevant clinical information and sending referrals to the TPAs  after veterans have agreed to be referred to the Choice Program. While  the process sets forth time frames for the other steps VAMCs and TPAs  must complete to process referrals and schedule appointments, VA and  VHA have not specified how many days VAMCs have to send veterans\u2019  Choice Program referrals to the TPAs. VHA has no comprehensive policy  directive for the Choice Program, and neither its consult management  directive nor its outpatient appointment scheduling directive specifies an  amount of time within which VAMCs should prepare Choice Program  referrals.", "Another reason that veterans\u2019 overall wait times for Choice Program care  could potentially exceed the Choice Act\u2019s 30-day wait-time requirement is  that after VA and VHA implemented their policies, they did not review and  address risks that were identified through their actual experience in  operating the program. In response to a letter we sent in March 2017,  VA\u2019s Deputy General Counsel for Legal Policy said that, based on VA\u2019s  and VHA\u2019s experiences with actual operation of the Choice Program  since November 2014, \u201cthe practical reality\u201d has been that the 30-day  wait-time goal VA established just prior to the program\u2019s implementation  cannot always be met.", "VA has not disclosed what timeliness goals it would apply under a future  consolidated community care program. We note, however, that VA  currently has no timeliness goals for its existing individually authorized  community care program and cannot determine the amount of time  veterans wait, on average, to receive care through that program, which  has accounted for a significant portion of veterans\u2019 community care  utilization. We recommended in May 2013 that VA analyze the amount of  time veterans wait to see providers in its individually authorized  community care program and apply the same wait-time goals to that care  that it uses to monitor wait times at VHA medical facilities. VA concurred  with the recommendation to conduct an analysis and reported that it was  in the process of building wait-time indicators to measure wait-time  performance for individually authorized VA community care. VHA has  since updated its wait-time goal for care delivered within VHA medical  facilities\u2014which is that care must be delivered within 30 days of veterans\u2019  clinically indicated dates (where available). However, VA has not applied  that same goal to its individually authorized VA community care program  nor begun measuring wait-time performance for that program.", "Timeliness of appointments is an essential component of quality health  care; delays in care have been shown to negatively affect patients\u2019  morbidity, mortality, and quality of life. Without specifying wait-time goals  that are achievable, and without designing appointment scheduling  processes that are consistent with those goals, VA lacks assurance that  veterans are receiving care from community providers in a timely manner.  It also lacks a means for comparing the timeliness of veterans\u2019 community  care with that of care delivered within VHA medical facilities."], "subsections": []}, {"section_title": "Actual Wait Times for Choice Program Care Have Been Lengthy for Selected Veterans, and VHA\u2019s Monitoring of Veterans\u2019 Access Is Limited by Incomplete and Unreliable Data", "paragraphs": [], "subsections": [{"section_title": "In 2016, Selected Veterans Experienced Lengthy Overall Wait Times to Receive Routine Care and Urgent Care through the Choice Program", "paragraphs": ["To examine selected veterans\u2019 actual wait times to receive routine care  and urgent care through the Choice Program, we conducted a manual  review of a random, non-generalizable sample of 196 Choice Program  authorizations. The TPAs created these authorizations between January  2016 and April 2016 in response to referrals sent by six selected  VAMCs. Our manual review of veterans\u2019 VA electronic health records  and the TPAs\u2019 records for our non-generalizable sample of 55 routine  care authorizations and 53 urgent care authorizations for which the TPAs  succeeded in scheduling appointments identified the following review  times:", "For the 55 routine care authorizations in our sample, it took VAMC  staff an average of 24 calendar days after the veterans\u2019 need for  routine care was identified to contact the veterans and confirm that  they wanted to be referred to the Choice Program, compile relevant  clinical information, and send veterans\u2019 referrals to the TPAs. It took  an average of 27 calendar days for the VAMCs to complete these  actions for the 53 urgent care authorizations in our sample.", "For these routine care authorizations, it took the TPAs an average of  14 calendar days to accept referrals and reach veterans by telephone  or letter for the veterans to opt in to the Choice Program. It took the  TPAs an average of 18 calendar days to complete these actions for  the urgent care authorizations in our sample.", "After the TPAs succeeded in scheduling veterans\u2019 appointments for  routine care, an average of 26 calendar days elapsed before veterans  in our sample completed their initial appointments with Choice  Program providers. For urgent care authorizations in our sample, it  took an average of 18 days for the veterans to complete their initial  appointments after the TPAs scheduled them.", "See the following text box for specific examples of the overall wait times  experienced by some veterans in the samples of routine and urgent  Choice Program authorizations we reviewed.", "Examples of Delays Experienced by Veterans for Whom the Choice Program  Third Party Administrators (TPA) Scheduled Appointments", "One veteran was referred to the Choice Program for magnetic resonance imaging  (MRI) of the neck and lower back because these services were unavailable at a  Veterans Health Administration (VHA) medical facility. It took almost 3 weeks for  Department of Veterans Affairs (VA) medical center (VAMC) staff to prepare his  Choice Program referral for routine care and send it to the TPA, and then it took  an additional 2 months after the VAMC sent the referral for the veteran to receive  care. Notes in the veteran\u2019s VA electronic health record indicated that his follow- up appointment with a VHA neurosurgeon was at risk of being rescheduled  because the VAMC had not received the results of the MRI after the appointment  with the Choice Program provider occurred. Ultimately, the veteran\u2019s appointment  with the VHA neurosurgeon\u2014where the imaging results and treatment options  were discussed\u2014did not occur until almost 6 months after the VHA clinician  originally identified the need for the MRI.", "One veteran was referred to the Choice Program because she needed maternity  care, which is generally not available at VHA medical facilities. Almost a month  and a half elapsed from the time VAMC staff confirmed her pregnancy (when she  was 6 weeks pregnant) to when the VAMC sent the Choice Program referral for  urgent care to the TPA. It then took 2 additional weeks for the TPA to make an  unsuccessful attempt to contact the veteran to schedule a prenatal appointment;  by that point, she was almost 15 weeks pregnant. The veteran called the TPA  back, but when the TPA had yet to schedule an appointment by the time she was  18 weeks pregnant, the veteran finally scheduled her initial prenatal appointment  herself, almost 3 months after her pregnancy was confirmed by VAMC staff.", "One veteran was referred to the Choice Program for thoracic surgery to address a  growth on his lung because there was a wait for care at a VHA medical facility.  TPA documentation we reviewed indicated that VAMC staff contacted the TPA  four times to inquire about the status of the veteran\u2019s appointment, and the TPA  contacted five Choice Program providers in its unsuccessful attempts to schedule  the urgent appointment for the veteran. Ultimately, the veteran scheduled his own  initial appointment with a thoracic surgeon in the community and informed the  TPA that he had done so. The veteran\u2019s initial appointment occurred 3 weeks  after the VAMC sent his referral to the TPA.", "We also found that veterans in our sample experienced lengthy overall  wait times to receive care when the TPAs returned their authorizations to  the VAMC without scheduling appointments. When veterans\u2019 Choice  Program authorizations are returned, VAMCs must attempt to arrange  care through other means\u2014such as through another VA community care  program, a new Choice Program referral, or at another VHA medical  facility. Among the 88 returned authorizations in our sample, we  determined that 53 veterans eventually received care through other  means after their authorizations were returned. These 53 veterans  ended up waiting an average of 111 days after the VHA clinician originally  determined they needed care until their first appointment with a VHA  clinician or with a community provider occurred. See the text box below  for some examples of delays experienced by veterans in the sample of 88  returned Choice Program authorizations we reviewed.", "Examples of Delays Experienced by Veterans Whose Authorizations Were  Returned to Department of Veterans Affairs Medical Centers (VAMC) by the  Choice Program Third Party Administrators (TPA)", "The VAMC took almost 3 \u00bd months to refer one veteran to a physical therapist to  address her pelvic floor prolapse. When the preferred provider listed in the  VAMC\u2019s referral was outside the TPA\u2019s network, the TPA sent a message to the  VAMC via its web-based portal to ask if it should try scheduling the appointment  with a different provider. By the time VAMC staff responded to the message in the  TPA\u2019s portal, the TPA had already returned the authorization\u2014almost 2 weeks  after accepting it. Two months later, the VAMC realized that the veteran still  needed this care and sent a new Choice Program referral to the TPA. It then took  the veteran another 2 \u00bd months to attend her first appointment. Overall, this  veteran waited more than 8 months to receive physical therapy.", "One veteran who was eligible for the Choice Program because he resided more  than 40 miles from a VHA medical facility contacted the TPA to request an  appointment with a urologist. More than a month later, the TPA contacted the  VAMC via its web-based portal to request a referral for the veteran. VAMC staff  responded to the TPA two days later and stated (correctly) that because the  veteran was distance-eligible, no referral was required. Four days after receiving  the VAMC\u2019s response, the TPA succeeded in scheduling an appointment.  However, the veteran declined it because the TPA had scheduled the  appointment with a neurologist (a specialist who treats conditions affecting the  brain, spinal cord, and nerves) rather than a urologist (a specialist who treats  conditions affecting the urinary tract and male reproductive organs). Ultimately,  the veteran ended up seeing a urologist at a VAMC nearly 5 months after he  originally contacted the TPA to request care.", "It took about 2 \u00bd weeks for the VAMC to send one veteran\u2019s referral for pain  management to the TPA after a VHA clinician originally determined he needed  these services. However, information the TPA needed for scheduling the Choice  Program appointment was missing from the VAMC\u2019s referral. The TPA requested  the information from the VAMC twice using its web-based portal, but VAMC staff  did not reply, and the TPA returned the authorization 2 weeks after receiving it. It  then took another month before the veteran ended up receiving pain management  services at a VAMC. Overall, this veteran waited almost 2 \u00bd months for pain  management services.", "After we shared the results of our preliminary analysis with VHA officials  in December 2016, VHA required its medical facilities to manually review  a sample of about 5,000 Choice Program authorizations that were  created in July, August, and September of 2016 for four types of Choice  Program care\u2014mammography, gastroenterology, cardiology, and  neurology. The purpose of this review was to analyze (1) the timeliness  with which VAMCs sent referrals to the TPAs, and (2) veterans\u2019 overall  wait times for Choice Program care. VHA calculated the average wait  times across these four types of care for each of its 18 Veterans  Integrated Service Networks (VISN).", "VHA\u2019s analysis of data collected by VAMCs identified the following  average review times when veterans were referred to the Choice  Program because there was a greater-than-30-day wait time for an  appointment at a VHA medical facility.", "Referral wait times. VISN-level averages ranged from 6 to 53 days  for VAMC staff to contact veterans and confirm that they wanted to be  referred to the Choice Program, compile relevant clinical information,  and send veterans\u2019 referrals to the TPAs. The national average was  19 days.", "Overall wait times. From the time veterans\u2019 need for care was  identified until they attended initial Choice Program appointments,  average overall wait times ranged from 34 to 91 days across VHA\u2019s  18 VISNs. The national average was 51 days.", "When veterans were referred to the Choice Program because services  were unavailable at a VHA medical facility, VHA\u2019s analysis of VAMCs\u2019  self-reported data identified the following average review times:", "Referral wait times. VISN-level averages ranged from 6 to 21 days  for VAMC staff to contact veterans and confirm that they wanted to be  referred to the Choice Program, compile relevant clinical information,  and send veterans\u2019 referrals to the TPAs. The national average was  15 days.", "Overall wait times. From the time veterans\u2019 need for care was  identified until they attended initial Choice Program appointments,  average overall wait times ranged from 39 to 56 days across VHA\u2019s  18 VISNs. The national average was 47 days."], "subsections": []}, {"section_title": "VHA\u2019s Monitoring of Veterans\u2019 Access to Choice Program Care Is Limited by a Lack of Complete, Reliable Data", "paragraphs": ["Our analysis indicates that VHA\u2019s ability to monitor Choice Program  access is limited because the data VHA uses are not always accurate  and reliable, and VHA lacks certain data that are needed to effectively  monitor the program. As discussed below, multiple factors contribute to  these data limitations. According to federal internal control standards for  information and communication and for monitoring, agencies should use  quality information to achieve the entity\u2019s objectives, internally and  externally communicate quality information, and establish activities to  monitor the quality of performance over time and evaluate the results.  Without complete, reliable Choice Program data, VHA cannot determine  whether the Choice Program has achieved the goals of (1) alleviating the  wait times veterans have experienced when seeking care at VHA medical  facilities, and (2) easing geographic burdens veterans may face to access  care at VHA medical facilities."], "subsections": [{"section_title": "VHA Cannot Systematically Calculate the Average Number of Days VAMCs Take to Prepare Choice Program Referrals", "paragraphs": ["The data VHA currently uses to monitor the timeliness of Choice Program  appointment scheduling and completion do not capture the days it takes  for VAMCs to prepare veterans\u2019 referrals and send them to the TPAs.  This is because VHA has not standardized the manner in which VHA  clinicians and VAMC staff categorize consults that lead to Choice  Program referrals.", "We observed inconsistency in the titles of consults that were associated  with the non-generalizable sample of Choice Program authorizations we  reviewed. For example,  consult titles sometimes included the word \u201cChoice,\u201d but in other  cases they included the words \u201cnon-VA care.\u201d", "Some of the consult titles indicated the criterion under which the  veteran was eligible for the Choice Program and the type of care the  veteran needed (for example, \u201cChoice-First Physical Therapy\u201d), while  other consult titles only indicated the type of care the veteran needed  (for example, \u201cpain management\u201d).", "We observed this variability among consult titles both within single  VAMCs and across all six of the VAMCs we selected for review.", "According to documentation VHA officials provided to us in December  2016, they planned on implementing a process for standardizing the  consult titles associated with Choice Program referrals over the course of  calendar year 2017. Originally, they planned on piloting the process at  four VAMCs beginning in February 2017 and expected to gradually roll  out standardized consult titles across all other VAMCs over the remainder  of calendar year 2017. However, in late June and early July 2017, we  followed up with the six VAMCs in our sample, and at that time, managers  from only one of the VAMCs said that they had implemented the new  process for standardizing consult titles associated with Choice Program  referrals. When we interviewed VHA officials again in September 2017,  they acknowledged that they had been delayed in implementing  standardized consult titles, and they provided documentation indicating  that they were just beginning to roll out the new process nationwide.", "In the absence of standardized consult titles for the Choice Program, VHA  has no automated way to electronically extract data from VA\u2019s electronic  health record and calculate the average number of days it takes for  VAMC staff to prepare veterans\u2019 Choice Program referrals after veterans  have agreed to be referred to the program. Further, without standardized  consult titles, VHA cannot monitor veterans\u2019 overall wait times\u2014from the  time VHA clinicians determine veterans need care until the veterans  attend their first appointments with Choice Program providers. The lack of  standardized consult titles also prevents VHA from tracking average  overall wait times and monitoring the timeliness of care for veterans  whose Choice Program authorizations are returned by the TPAs without  scheduled appointments."], "subsections": []}, {"section_title": "Available VHA Data Do Not Capture the Time Spent By TPAs in Accepting VAMCs\u2019 Referrals and Opting Veterans in to the Choice Program", "paragraphs": ["The data VHA currently uses to monitor the timeliness of Choice Program  appointments capture only a portion of the process that the TPAs carry  out to schedule veterans\u2019 appointments after they receive referrals from  VAMCs. Specifically, VHA\u2019s data reflect the timeliness of appointment  scheduling and completion after the TPAs create authorizations in their  appointment scheduling systems, which (according to VA\u2019s contracts, as  of June 1, 2016) the TPAs must do only after they have received all  necessary information from VA and the veteran has opted in to the  Choice Program. Therefore, VHA\u2019s timeliness data do not capture the  time TPAs spend (1) reviewing and accepting VAMCs\u2019 referrals, and (2)  contacting veterans to confirm that they want to opt in to the Choice  Program.", "Data related to the timeliness of Choice Program appointment  scheduling. When we asked how they monitor the timeliness of  Choice Program appointment scheduling, VHA officials provided us  the following types of data, all of which reflect the time that elapses  only after veterans have opted in to the Choice Program and the  TPAs have created authorizations:  the average number of business days the TPAs take after creating  authorizations to schedule appointments for routine and urgent  care,  the percentage of appointments for routine care that the TPAs  schedule within 5 business days after they create authorizations,  and  the percentage of appointments for urgent care that the TPAs  schedule within 2 business days after they create authorizations.", "Data related to the timeliness with which initial Choice Program  appointments occur. VHA officials provided us data on the  timeliness with which initial Choice Program appointments have  occurred; however, as shown below, almost all of these data reflect  the timeliness with which appointments occur only after veterans have  opted in to the Choice Program and the TPAs have either created  authorizations or successfully scheduled veterans\u2019 appointments:  the average number of business days after the TPAs create  authorizations in which appointments for routine and urgent care  occur;  the percentage of appointments for routine care that are  completed within 30, 60, 90, and 120 business days or more after  the TPAs create an authorization;  the percentage of appointments for routine care that are  completed within 30 calendar days of either (1) the TPA\u2019s  scheduling of the appointment, (2) the clinically indicated date on  the VAMC\u2019s referral, or (3) the veteran\u2019s preferred date; and  the percentage of appointments for urgent care that are completed  within 2 calendar days of the TPAs creating the authorizations.", "See figure 4 for an illustration of how VHA\u2019s data capture only a portion of  the Choice Program process to obtain care.", "In September 2017, VHA officials told us that they recently began  implementing an interim solution that would allow them to track veterans\u2019  overall wait times for Choice Program and other VA community care\u2014 from the time VHA clinicians determine veterans need the care until the  veterans attend their first appointments with community providers.  Specifically, this interim solution requires VAMC staff to enter unique  identification numbers on VHA clinicians\u2019 requests for care and on the  Choice Program referrals they send to the TPAs. This unique  identification number is then carried over to the Choice Program  authorizations that are created in the TPAs\u2019 systems. According to VHA  officials, the unique identification number creates a link between VHA\u2019s  data and the TPAs\u2019 data, so that VHA can monitor the timeliness of each  step of the Choice Program referral and appointment scheduling process.  However, the success of VHA\u2019s interim solution relies on VAMC staff  consistently and accurately entering the unique identification numbers on  both the VHA clinicians\u2019 requests for care and on Choice Program  referrals, a process that is prone to error. VHA officials said it is their long- term goal to automate the process by which VHA\u2019s data are linked with  TPAs\u2019 data in the consolidated community care program they are  planning to implement.", "Because, as previously explained, VHA lacks data on the average  timeliness with which VAMCs prepare Choice Program referrals, and  VHA also lacks data on the average amount of time that elapses between  when the TPAs receive VAMCs\u2019 referrals and when veterans opt in with  the TPAs, VHA cannot track veterans\u2019 overall wait times for Choice  Program care\u2014from the time VHA clinicians determine that veterans  need care until the veterans attend their first appointments with Choice  Program providers. In addition, the lack of data on the timeliness with  which the TPAs have (1) accepted VAMCs\u2019 referrals and (2) determined  that veterans wish to opt in to the program also prevents VHA from  assessing whether the TPAs\u2019 average timeliness in completing these  actions has improved over time."], "subsections": []}, {"section_title": "Clinically Indicated Dates Are Sometimes Changed by VAMC Staff Before They Send Choice Program Referrals to the TPAs", "paragraphs": ["Our analysis of a sample of 196 Choice Program authorizations shows  that another way in which VHA\u2019s monitoring of veterans\u2019 access to care is  limited by available data is that the clinically indicated dates included on  referrals that VAMCs send to the TPAs may not be accurate. We found  that the clinically indicated dates on VAMCs\u2019 referrals were not always  identical to the clinically indicated dates that were originally entered into  VA\u2019s electronic health record by the VHA clinicians who treated the  veterans.", "VHA\u2019s policy directive on consult management and its Choice Program  standard operating procedure for VAMCs state that the clinically indicated  date is to be determined by the VHA clinician who is treating the veteran.  However, in reviewing VA\u2019s electronic health records for our sample of  196 Choice Program authorizations, we identified 60 cases where the  clinically indicated dates VAMC staff entered on Choice Program referrals  they sent to the TPAs differed from the clinically indicated dates that were  originally entered by VHA clinicians. In 46 of these 60 cases, VAMC  staff entered clinically indicated dates on the Choice Program referrals  that were later than the dates originally determined by the VHA clinicians,  which would make the veterans\u2019 wait times appear to be shorter than they  actually were.", "VHA could not explain why the dates differed. Clinically indicated dates  are manually entered on VAMCs\u2019 electronic referrals to the TPAs, a  practice that is subject to error or manipulation. It is unclear if VAMC staff  mistakenly entered incorrect dates, or if they inappropriately entered later  dates when the VAMC was delayed in contacting the veteran, compiling  relevant clinical information, and sending the referral to the TPA. If  VAMCs\u2019 Choice Program referrals have clinically indicated dates that are  different from the ones VHA clinicians originally entered without additional  supporting documentation, there is a risk that VHA\u2019s data will not  accurately reflect veterans\u2019 actual wait times. Specifically, VHA will not be  able to determine how often veterans receive Choice Program care within  the Choice Act\u2019s required 30-day time frame."], "subsections": []}, {"section_title": "VAMCs and TPAs Frequently Re-Categorize Routine Choice Program Referrals as Urgent Referrals, Sometimes Inappropriately", "paragraphs": ["Another limitation of VHA\u2019s monitoring of veterans\u2019 access to Choice  Program care is that VAMCs and TPAs do not always categorize referrals  in accordance with the contractual definition for urgent care when they  are processing referrals and scheduling appointments for veterans.  According to VA\u2019s contracts with the TPAs, Choice Program referrals are  to be marked as \u201curgent\u201d when a VHA clinician has determined that the  veteran needs care that (1) is considered essential to evaluate and  stabilize conditions and (2) if not provided would likely result in  unacceptable morbidity or pain when there is a significant delay in  evaluation or treatment. It is VA\u2019s goal that the TPAs schedule  appointments for urgent care and ensure that they take place within 2  business days of accepting the referrals from VA.", "Among the sample of 53 Choice Program authorizations for urgent care  we reviewed, VHA and TPA documentation showed that in 35 cases  (about 66 percent), VHA clinicians originally determined that veterans  needed routine care, but VAMC or TPA staff later re-categorized the  referrals or authorizations as urgent. In 4 of these 35 cases, we found  documentation showing that VHA clinicians had reviewed the pending  referrals and determined that the veterans\u2019 clinical conditions or  diagnoses warranted re-categorizing the veterans\u2019 routine care referrals  or authorizations as urgent. In 31 other cases we reviewed, however,  we found no documentation indicating that a VHA clinician had identified  a clinical reason for the veteran to receive care faster. In at least 15 of  these 31 cases, it appeared that the VAMC or TPA staff changed the  status of the referral or authorization in an effort to administratively  expedite appointment scheduling when they were delayed in sending  referrals and scheduling veterans\u2019 Choice Program appointments.", "According to the VA contracting officer who is responsible for the Choice  Program contracts, VA\u2019s contracts with the TPAs do not include  provisions for separating clinically urgent Choice Program referrals and  authorizations from those that the VAMC or the TPA has decided to  expedite for administrative reasons (such as when the veteran or VAMC  staff has expressed frustration with a delay in the referral or appointment  scheduling process). If Choice Program referrals for routine care are  inappropriately categorized as urgent care referrals under the Choice  Program, VHA\u2019s data on the timeliness of urgent appointment scheduling  and completion will not accurately reflect the extent to which veterans  who have a clinical need for urgent care are receiving it within the time  frames required by the TPAs\u2019 contracts."], "subsections": []}, {"section_title": "The TPAs\u2019 Choice Program Performance Data Did Not Become Comparable until 18 Months After the Program Began, Which Limits VA\u2019s Ability to Monitor Whether Access Has Improved", "paragraphs": ["The authorization creation date is the primary starting point from which  VHA monitors the TPAs\u2019 timeliness in appointment scheduling and the  extent to which veterans\u2019 initial Choice Program appointments occur in a  timely manner. However, when initially implementing the Choice  Program\u2014beginning in November 2014\u2014the two TPAs had differing  interpretations of contractual requirements relating to when they should  create authorizations in their appointment scheduling systems. According  to VA contracting officials and VHA community care officials we  interviewed, at the start of the program, one of the TPAs was creating  authorizations as soon as it accepted referrals from VAMCs, but the other  was waiting until after veterans opted in to the Choice Program to create  authorizations. It was not until May 2016 (about 18 months into the  Choice Program\u2019s implementation) that VA modified its contracts to clarify  that the TPAs are to create Choice Program authorizations only after they  have contacted the veterans and confirmed that they want to opt in to the  program.", "Due to these differing interpretations, VA lacked comparable performance  data for the two TPAs for the first 18 months of the Choice Program\u2019s  expected three-year implementation. Therefore, it could not compare the  timeliness of access nationwide. In addition, since VA modified the TPAs\u2019  contracts midway through the Choice Program\u2019s implementation, officials  can only comparatively examine whether the timeliness of both TPAs\u2019  appointment scheduling and completion has improved since June 2016,  which is when the relevant contract modification took effect."], "subsections": []}, {"section_title": "TPAs Sometimes Select Incorrect Return Reasons or Inappropriately Return Choice Program Authorizations without Making Appointments", "paragraphs": ["VHA collects data and monitors various reasons the TPAs return Choice  Program authorizations to VAMCs without making appointments. Each  month, VA monitors how each TPA performs on Choice Program  performance measures related to the timeliness of appointment  scheduling. Authorizations that are returned for reasons that are  attributable to the TPA\u2014such as a lack of network providers in close  proximity to the veteran\u2019s residence\u2014negatively impact the TPAs\u2019  monthly performance measures.", "In our sample, we found that VHA\u2019s data on the TPAs\u2019 reasons for  returning Choice Program authorizations are not reliable. Specifically, we  questioned the validity of the TPAs\u2019 return of 20 out of the 88  authorizations in our sample, for the following reasons:  In 11 of the 20 cases, we found VHA or TPA documentation that  substantiated the return, but the TPAs selected the incorrect return  reasons when they sent the authorizations back to VA. For example,  in one case, the TPA was unable to schedule an appointment with a  primary care provider\u2014even after contacting 11 different network  providers\u2014but the TPA staff returned the authorization to the VAMC  indicating that the veteran had declined care. TPA officials who  reviewed this authorization with us agreed that it was inappropriate to  mark this authorization as having been returned because the veteran  declined care and that their staff instead should have indicated that  they had been unable to schedule an appointment with a network  provider.", "In the remaining 9 of the 20 cases, we could find no VHA or TPA  documentation to substantiate the reasons the TPAs selected when  they returned the authorizations to VA, nor any other reasons for  return. For example, the TPAs incorrectly selected \u201cmissing VA data\u201d  as the reason they returned 5 of these 9 authorizations. Based on  VHA and TPA documentation we reviewed, the VAMCs\u2019 referrals  were complete and not missing any of the information the TPAs  needed to proceed with appointment scheduling.", "TPA officials could not explain why their staff selected incorrect return  reasons or inappropriately returned authorizations for which they should  have kept attempting to schedule appointments. However, TPA staff must  manually select return reasons when they send authorizations back to  VAMCs, a process that is subject to error or manipulation. There is a  process by which VA\u2019s contracting officer\u2019s representatives validate the  monthly data submitted by the TPAs, but it cannot identify the data  reliability issues we found when manually reviewing VHA and TPA  documentation associated with a sample of returned Choice Program  authorizations. VHA officials told us that VA\u2019s contracting officer\u2019s  representatives do not have access to veterans\u2019 electronic health records,  which means that they cannot check whether VHA documentation  substantiates the return reasons selected by the TPAs.", "Without reliable data on reasons that veterans have been unable to  obtain appointments through the Choice Program, VHA cannot properly  target its efforts to address challenges\u2014such as network inadequacy\u2014 that may be causing the TPAs to return authorizations without making  appointments. In addition, the lack of reliable data makes it difficult for  VA to monitor whether the TPAs are meeting their contractual obligations,  such as establishing adequate networks of community providers."], "subsections": []}, {"section_title": "VHA Does Not Have Performance Measures for Monitoring Average Driving Times between Veterans\u2019 Homes and the TPAs\u2019 Choice Program Network Providers", "paragraphs": ["Another way in which VHA\u2019s monitoring of veterans\u2019 access is limited is  that VA lacks contract performance measures that would provide VA and  VHA with data related to veterans\u2019 driving times to access care from the  TPAs\u2019 Choice Program network providers. Such performance measures  would help VA monitor the TPAs\u2019 network adequacy. In contrast, for PC3,  VA does collect data from the TPAs to monitor urban, rural, and highly  rural veterans\u2019 maximum commute times to specialty care providers,  providers of higher level care, primary care providers, and mammography  and maternity care providers.", "When we asked why VA had not established driving time performance  measures for the Choice Program, a VHA official responsible for  monitoring the Choice Program contracts told us he thought that these  performance measures had simply been overlooked in the haste to  implement the Choice Program. VA concurred with a recommendation we  made in our December 2016 report about VA health care for women  veterans, in which (among other things) we stated that the department  should monitor women veterans\u2019 driving times to access sex-specific care  through the Choice Program and VA\u2019s future community care contracts.  However, VA stated in its June and October 2017 written updates on  actions it has taken to address this recommendation that it does not  intend to modify the current Choice Program contracts to address our  recommendation because the contracts will be ending soon and it would  be too costly to do so. Without driving time performance measures for the  Choice Program, VHA lacks assurance that the TPAs\u2019 networks include a  sufficient number of community providers in close proximity to where  veterans live, and it cannot monitor the extent to which veterans\u2019  geographic access to care has improved or diminished."], "subsections": []}]}]}, {"section_title": "Multiple Factors Have Adversely Affected Veterans\u2019 Access to Care under the Choice Program, Providing Potential Lessons Learned for VA\u2019s Future Community Care Program", "paragraphs": ["Officials we interviewed from VA\u2019s contracting office, VHA\u2019s Office of  Community Care, and both of the TPAs, along with leadership officials,  managers, and staff from the six selected VAMCs told us about various  factors that have directly or indirectly affected veterans\u2019 access to care  throughout the Choice Program\u2019s implementation. Chief among these are  (1) administrative burden associated with the Choice Program\u2019s complex  referral and appointment scheduling processes; (2) inadequate VAMC  staffing and poor communication between VHA and the VAMCs; and (3)  the TPAs\u2019 slow development of a robust provider network. We also  identified actions VA and VHA have taken to address these factors. (See  appendix VI for additional information about actions that VA and VHA  took to address these three access-related issues for the Choice  Program.) To the extent that these factors persist under the consolidated  community care program that VA plans to establish, they will continue to  adversely affect veterans\u2019 access to care."], "subsections": [{"section_title": "VA and VHA Took Several Actions to Address Administrative Burden Caused by Complex Choice Program Processes, but Opportunities Still Exist to Improve Care Coordination", "paragraphs": ["VHA and TPA officials, as well as managers and staff from the six  selected VAMCs, told us they encountered administrative burden  associated with the complexities of the Choice Program\u2019s referral and  appointment scheduling processes. Further, they lacked care  coordination tools throughout the time they were operating the Choice  Program, which affected their ability to provide timely care to veterans.  Among the main issues cited were the following:", "Manual referral processes and lack of TPA access to veterans\u2019  records. To prepare veterans\u2019 Choice Program referrals, VAMC staff  had to follow a manual, time-consuming process to retrieve and  collate key contact and clinical information from veterans\u2019 VA  electronic health records. This was because\u2014throughout most of the  Choice Program\u2019s implementation\u2014VA had no system for  automatically generating referral packages that contained all of this  information; nor did TPA staff have access to veterans\u2019 VA electronic  health records. If VAMC staff made mistakes (such as mistyping or  inadvertently omitting veterans\u2019 telephone numbers or addresses) or if  the referrals were missing clinical information that the TPAs needed  for appointment scheduling purposes, the TPAs had to either contact  the VAMC to correct or obtain the missing information or return the  referrals to VA without attempting to schedule appointments. These  manual processes impeded the VAMCs\u2019 progress in preparing  referrals and the TPAs\u2019 progress in scheduling veterans\u2019 Choice  Program appointments.", "Limited availability of care coordination tools and dependence  on telephone-based customer service for appointment  scheduling. A lack of care coordination tools and near-constant  telephone calls also delayed VAMC and TPA staff from efficiently  processing veterans\u2019 referrals for appointments. For example, the  Choice Program had no web-based portal through which VAMC staff  and veterans could view the TPAs\u2019 step-by-step progress in  scheduling appointments. While both of the TPAs had portals that  allowed VAMC staff (but not veterans) to obtain certain information\u2014 such as whether the TPA had already scheduled an appointment\u2014the  portals did not show if, or when, veterans\u2019 referrals had been  accepted, the dates and times of the TPAs\u2019 attempts to contact  veterans, or the number of community providers the TPA had  contacted in its attempts to schedule an appointment. VAMC staff we  interviewed said that while they could submit written messages to the  TPAs through the portals, TPA staff did not always answer these  messages in a timely manner. This, in turn, made telephone calls  between veterans, the VAMCs, and the TPAs the most effective form  of follow-up regarding veterans\u2019 Choice Program referrals, according  to VAMC managers and staff. Officials from one selected VAMC  estimated that their community care staff (which included about 30  employees) was answering approximately 10,000 calls per month,  and another VAMC had hired a full-time staff person just to answer  telephone calls.", "Workload associated with re-authorizing veterans\u2019 care. VAMC  and TPA staff also told us they faced a lengthy administrative process  to re-authorize care if veterans\u2019 Choice Program authorizations  expired before veterans received care or if veterans needed services  that were outside the scope of their original authorizations. The TPAs  referred to these as \u201csecondary authorization requests\u201d or \u201crequests  for additional services.\u201d Without these re-authorizations, veterans\u2019  care from community providers could be delayed or interrupted.  VAMC and TPA staff had to process a high volume of these requests  for two main reasons. First, the Choice Program originally had a 60- day limit on episodes of care, which meant that all appointments  within the episode of care had to be completed within 60 days of the  initial date of service. Even if the veteran needed care that could  routinely be expected to outlast this 60-day time frame (such as  maternity care or cancer treatment), community providers and the  TPAs would still have to request additional referrals from the VAMCs  to authorize the remaining care. Second, TPAs would have to request  additional referrals if an episode of Choice Program care was already  in progress and the veteran needed services that were not specifically  authorized in the VAMC\u2019s original referral. According to some VAMC  managers and staff, this generated significant workload for the  VAMCs. Officials from one of the selected VAMCs said it had to hire a  full-time nurse just to process secondary authorization requests.", "Manual post-appointment follow-up processes. According to  VAMC managers and staff we interviewed, the manual processes  used for post-appointment follow-up also added to delays for veterans  seeking care through the Choice Program. After an episode of care is  complete\u2014whether services are delivered at a VHA medical facility or  in the community\u2014VHA\u2019s policy requires VAMC staff to document  that care was provided and make the results of encounters available  to VHA clinicians by entering medical records or other clinical  information into the veteran\u2019s VA electronic health record. When  medical records from the community provider became available,  VAMC staff had to retrieve copies from the TPAs\u2019 portals and scan  them into veterans\u2019 VA electronic health records. (See appendix V for  an illustration of this process.) VAMC staff described this as a very  time-consuming process because it could take months for claims or  medical records from Choice Program appointments to appear in the  TPAs\u2019 portals. At the time of our interviews in the summer of 2016,  managers from two of the VAMCs in our sample said they each had  backlogs of more than 6,000 Choice Program and other community  care consults to complete. These backlogs adversely affected  veterans\u2019 access to Choice Program care because the time VAMC  staff spent attempting to complete some veterans\u2019 consults could not  be spent on preparing other veterans\u2019 Choice Program referrals.", "Over the course of the Choice Program\u2019s implementation, VA and VHA  took multiple actions to address administrative burden, including the  following. Opportunities exist to improve or build on these actions as VA  moves forward with the consolidated community care program it plans to  implement.", "Implementation of a web-based tool to automate Choice Program  referral preparation. In early 2016, to improve the process of  gathering information from veterans\u2019 VA electronic health records to  prepare Choice Program referrals, staff from two VAMCs developed a  web-based tool\u2014called the \u201creferral documentation\u201d (REFDOC) tool.  According to VHA documentation, the REFDOC tool automates the  process of gathering necessary information and assembling it in a  standardized format for veterans\u2019 Choice Program referrals. VHA\u2019s  initial analyses of the REFDOC tool\u2019s effectiveness found that it sped  up the process of preparing Choice Program referrals by about 20  minutes per referral, which helped reduce the administrative burden  associated with preparing referrals. However, VHA\u2019s nationwide  dissemination of the tool to all of the VAMCs was slowed by  limitations of VA\u2019s information technology systems. As of November  2016 (about 9 months after the tool was created), it had only been  implemented at 18 of VHA\u2019s 170 VAMCs. VHA gradually made the  tool available at the remaining VAMCs between November 2016 and  May 2017.", "Standardized episodes of care. In April 2017, VHA approved  standardized episodes of care\u2014or \u201cbundles\u201d of clinically necessary  medical services and procedures\u2014that are to be authorized whenever  veterans are referred to community providers for specified types of  care. This was intended to help address administrative burden  associated with clinical review processes and improve veterans\u2019  access to care. To start, VHA approved standardized episodes of care  for 15 different types of care, including physical therapy, maternity  care, and optometry. VA and VHA documentation indicate that they  intend to roll out additional standardized episodes of care over time  and continue using them once VA transitions to the consolidated  community care program it is planning to implement.", "Acquisition of a secure e-mail system and a mechanism for TPAs  and community providers to remotely access veterans\u2019 VA  electronic health records. VA recently established two different care  coordination tools that were intended to make the process of providing  veterans\u2019 medical records to Choice Program and other VA  community care providers more efficient.", "Secure e-mail system. In the spring of 2017, VA acquired software  that allows VAMC managers and staff to e-mail encrypted files  containing veterans\u2019 medical records to the TPAs and community  providers. Only the intended recipient can decrypt and respond to  messages containing the files. According to VHA documentation,  this secure e-mail system was intended to improve the efficiency  of coordinating veterans\u2019 Choice Program care and address  potential security risks associated with printing paper copies of  veterans\u2019 medical records and sending them to the TPAs or  community providers via fax or U.S. mail.", "Remote access to veterans\u2019 VA electronic health records. In May  2017, VHA began offering a secure, web-based application called  the Community Viewer as a tool for community providers  nationwide to have access to assigned veterans\u2019 VA electronic  health records. Like the secure e-mail system, this tool is intended  to improve the efficiency of coordinating veterans\u2019 Choice  Program care.", "However, VHA\u2019s ability to seamlessly coordinate care with community  providers remains limited\u2014even with the secure e-mail system and the  Community Viewer\u2014because these tools only facilitate a one-way  transfer of the information needed to coordinate the care veterans receive  at VHA medical facilities and in the community. For the purposes of care  coordination, it is important that information sharing among all participants  concerned with a veteran\u2019s Choice Program or other VA community  care\u2014including VHA clinicians, the TPAs, community providers, and the  veteran\u2014is as seamless as possible. According to the federal internal  control standard for information and communication, agencies should  internally and externally communicate the necessary information to  achieve their objectives. While the secure e-mail system and  Community Viewer tool provide an interim solution for VAMCs to transfer  information from veterans\u2019 VA electronic health records to the TPAs and  community providers, they do not provide a means by which VAMCs or  veterans can (1) view step-by-step progress in scheduling appointments,  or (2) electronically receive the clinical results of Choice Program or other  VA community care encounters. Building such a capability into the future  consolidated community care program that VA plans to implement would  allow VHA to improve the care coordination processes that exist in the  Choice Program.", "Pilot programs for VAMC staff to schedule Choice Program  appointments. In July 2016 and October 2016, VHA began  implementing pilot projects, whereby staff at two VAMCs took over  from the TPAs the responsibility of scheduling veterans\u2019 Choice  Program appointments. Specifically, VA modified its contracts with  TriWest and Health Net to implement the two VAMC scheduling pilots  at the Alaska VA Health Care System and the Fargo VA Health Care  System, respectively. In these two locations, VAMC staff schedule  veterans\u2019 appointments and send relevant clinical documentation to  the Choice Program providers. According to VHA officials, this had  the potential to improve veterans\u2019 access to care by improving the  efficiency of the Choice Program appointment scheduling process.", "The results of these two VAMC scheduling pilots are particularly  relevant, given that VA\u2019s RFP, as amended, for its planned  consolidated community care program indicates that VAMCs\u2014rather  than TPAs\u2014will carry out community care appointment scheduling,  unless VA exercises a contract option for the TPAs to provide such  services for VAMCs that request them. However, while VHA officials  told us that while they have taken some steps to begin evaluating the  effectiveness of the pilots in improving appointment scheduling, these  efforts have not been completed. The lack of an evaluation of the two  VAMC scheduling pilots is inconsistent with the federal internal control  standard for risk assessment, which stipulates that an agency should  identify, analyze, and respond to risks related to achieving defined  objectives. In addition, the federal internal control standard for  monitoring calls for ongoing monitoring to assess the effectiveness of  management strategies, make needed corrections if shortcomings are  identified, and determine if corrective actions are achieving desired  outcomes. Without evaluating the results of the scheduling pilots at  the Alaska and Fargo VA Health Care Systems, VA lacks assurance  that VAMC staff have the potential to schedule veterans\u2019 community  care appointments in a more timely manner than TPA staff otherwise  would schedule them. Furthermore, VA is missing an opportunity to  inform its planning and decisions for scheduling under its planned  consolidated community care program."], "subsections": []}, {"section_title": "Inadequate Staffing and Ad Hoc Communication Contributed to Choice Program Access Delays, and Actions Taken Have Been Focused on the Staffing Concerns", "paragraphs": ["TPA officials and managers and staff from the six selected VAMCs  frequently discussed staffing- and communication-related factors that  adversely affected the timeliness of veterans\u2019 Choice Program care.  During the course of our review, they cited the following factors that  delayed VAMCs\u2019 processing of veterans\u2019 referrals and TPAs\u2019 scheduling  of appointments:", "Staff vacancies and turnover. TPA officials and managers and staff  at selected VAMCs said that VAMCs and TPAs were initially  understaffed as Choice Program implementation began.", "VAMCs. Managers at the six selected VAMCs told us that after  implementing the Choice Program, they hired additional  community care staff, with one of them increasing its community  care staffing level almost five-fold by July 2016. Some VAMC  managers told us in 2016 and again in 2017 that they still  struggled with staff retention and vacancies\u2014among both  managers and staff. Five of the VAMCs said they relied on  overtime for their existing staff to keep up with the Choice  Program workload. According to community care managers from  four of the selected VAMCs, it takes about 6 months to recruit,  hire, and train new community care staff, and this process could  take more time if the VAMC\u2019s human resources office is also  understaffed, which was the case for at least one of the six  VAMCs. That VAMC had not had a permanent community care  manager for more than 2 years as of July 2017\u2014which covered  the majority of the Choice Program\u2019s original 3-year  implementation.", "TPAs. Officials from both TPAs also told us that they initially  underestimated the workload associated with scheduling Choice  Program appointments, and they brought on additional staff,  including sub-contractors, to better manage their workloads as  utilization of the program increased. One TPA opened eight  operations centers in addition to the two it already had when the  Choice Program was initially implemented.", "Ineffective mechanisms for VAMCs to resolve problems. VAMC  managers and staff we interviewed also said they lacked useful  mechanisms and points-of-contact when they needed to resolve  issues and problems they were having with referral and appointment  scheduling processes. VHA established a web-based Choice Program  \u201cissue tracker\u201d system for VAMCs to report problems to VHA\u2019s Office  of Community Care. However, staff at four of the selected VAMCs told  us they rarely used the tracker and some had stopped using the  tracker altogether because it took too long for VHA\u2019s Office of  Community Care or the TPAs to respond and resolve the issues (if  they responded at all), and they did not see the value in taking the  time to report them via this mechanism. Managers at one of the  VAMCs also told us about a phone line that their TPA had established  to escalate and resolve urgent issues, but the TPA told the VAMC  only to use it for emergencies.", "VHA\u2019s untimely communication of Choice Program policy and  process changes. According to managers and staff at the six  selected VAMCs, VA and VHA have issued numerous contract  modifications and policy changes with little advanced notice  throughout the Choice Program\u2019s implementation. According to these  VAMC managers and staff, the untimely communication of changes  created confusion at the VAMC level that affected veterans\u2019 access to  Choice Program care. We reviewed documentation showing that from  October 2014 (when it modified the TPAs\u2019 contracts to add  responsibilities related to Choice Program administration) until July  2017, VA modified each TPA\u2019s contract about 40 times. Many of these  contract modifications\u2014along with other legislative and regulatory  changes that VA implemented during this period\u2014changed VAMC or  TPA processes related to Choice Program referrals and appointment  scheduling. Many of the VAMC managers and staff we interviewed  said they struggled to keep up with the contract modifications and  policy changes, that VHA\u2019s Office of Community Care did not always  leave adequate time to prepare for them, and they felt they were  never really able to become proficient at new processes before  additional changes occurred. This meant that training sometimes  happened after the contract modifications or VHA policy changes had  already gone into effect. For example, managers and staff at three of  the selected VAMCs told us that they were not informed in advance  about a June 2016 contract modification that required the TPAs to  return Choice Program authorizations to VAMCs if they failed to  schedule appointments within required time frames. This contract  modification had the potential to significantly increase VAMCs\u2019  workloads, because they would have to arrange veterans\u2019 care  through other means once the authorizations were returned.  According to individuals at two of these three VAMCs, they first heard  about this change from TPA staff, rather than from VHA.", "VHA took the following two actions intended to help address staffing- related factors that adversely affected the timeliness of veterans\u2019 Choice  Program care.", "Staffing tool for VAMCs to estimate needs. In the spring of 2017,  VHA developed a tool that is intended to help VAMCs project their  staffing needs for the consolidated community care program VA plans  to implement. VHA used workload data and site visit observations to  develop the tool. Among the six selected VAMC managers we  interviewed, impressions about the reasonableness of the staffing  estimates generated by the community care staffing tool were mixed.  For example, managers at two of the VAMCs said that the tool likely  underestimated the number of staff they would need to handle  referrals and appointment scheduling once VA transitions to the  consolidated community care program. In contrast, managers from  two other VAMCs thought that the tool\u2019s staffing estimates seemed  about right.", "Co-locating TPA staff at selected VAMCs to assist with  resolution of problems. To help facilitate problem resolution  between VAMCs and the TPAs as they work to schedule veterans\u2019  Choice Program appointments, VA modified the TPAs\u2019 contracts in  November 2015 to allow for TPA staff to be co-located at selected  VAMCs. VHA officials expected that one potential benefit of co- locating TPA staff would be that fewer veterans\u2019 Choice Program  referrals would be returned to VAMCs because of missing clinical  information because TPA staff could help resolve such problems  locally before the TPA returned referrals. As of May 2017, TPA staff  were working at 70 of VHA\u2019s 170 VAMCs\u2014or about 40 percent of all  VAMCs. Similar care coordination arrangements may exist under the  consolidated community care program VA is planning to implement, if  VA exercises a contract option for the TPAs to provide such services  at VAMCs that request them.", "However, the communication-related factors that VHA and TPA officials  identified as affecting the timeliness of veterans\u2019 Choice Program care  remain. VHA relied on ad hoc communications such as memoranda, fact  sheets, e-mails, national conference calls, and occasional web-based  trainings to communicate policy and process changes to VAMCs  throughout the Choice Program\u2019s implementation. Our interviews with  VAMC managers and staff suggest that these were not the most effective  methods of communication because messages about key changes  sometimes lacked sufficient detail or failed to reach the VAMC staff  responsible for implementing them in a timely manner. According to the  federal internal control standard for control activities, agencies should  implement control activities through their policies and procedures, which  document the responsibilities of managers and staff who are responsible  for implementing a program. Among other things, this may include  management reviewing and updating policies and day-to-day procedures  in a timely manner after a significant change in the program has occurred.  VHA has no comprehensive policy directive or operations manual for the  Choice Program, and its broader policy directive for VA community care  programs has not been updated since January 2013. As a result, VAMC  staff have operated in an environment that is frequently changing with no  definitive reference source or sources of up-to-date policy and processes  to consult, such as a comprehensive policy directive or operations  manual. Instead, VAMC staff have had to keep track of the Choice  Program\u2019s policy and process changes through VHA\u2019s various ad hoc  communications. This poses a risk to VHA, as it increases the likelihood  that VAMCs will implement new policies and processes inconsistently. In  addition, there is risk that VAMC managers and staff will not always be  aware of the most current policies and processes. Unless a  comprehensive policy directive or operations manual is created, those  risks could remain for the consolidated community care program VA is  planning to establish."], "subsections": []}, {"section_title": "Inadequate Provider Networks Affected Timely Access, but VHA Plans to Improve Available Information Related to Provider Capacity and Veteran Demand for Future TPAs", "paragraphs": ["According to VAMC managers and TPA officials we interviewed, the  TPAs\u2019 inadequate networks of community providers affected both the  timeliness with which veterans received Choice Program care and the  extent to which veterans were able to access community providers  located close to their homes. In September 2015, about 11 months after  the Choice Program was implemented, VA contracting officials sent  corrective action letters to both TPAs, citing network adequacy (i.e., the  number, mix and geographic distribution of network providers) as a  concern. TPA officials we interviewed acknowledged that their networks  initially were not adequate to meet demand for Choice Program care.  From the TPAs\u2019 perspective, the brief transition period before the Choice  Program began operations in November 2014 was not enough time to  strengthen the community provider networks they had previously  established under PC3, another VHA community care program.  Furthermore, the TPAs told us that VA had not provided them with  sufficient data on the expected demand for Choice Program care\u2014by  clinical specialty and zip code\u2014prior to or after the Choice Program\u2019s  implementation.", "The overall number of community providers participating in the TPAs\u2019  Choice Program networks nationwide grew dramatically over the following  year\u2014from almost 39,000 providers in September 2015 to more than  161,000 providers as of September 2016. However, at the time of our  review, managers at five of the six selected VAMCs told us that they still  observed TPA network inadequacies that impeded veterans\u2019 access to  Choice Program care. Similarly, managers at three VAMCs in our sample  said that key community providers\u2014including large academic medical  centers\u2014have refused to join the TPAs\u2019 networks or dropped out of the  networks after joining them, often because the TPAs had not paid them in  a timely manner for the services they provided.", "Establishing adequate networks of Choice Program providers in rural  areas has been particularly difficult. Officials at two of the three of the  rural VAMCs in our sample pointed to general health care workforce  shortages in rural areas as one cause for the TPAs\u2019 network  inadequacy\u2014a challenge that is not limited to the Choice Program or  VA\u2019s health care system. According to a December 2015 analysis by VHA  researchers, the majority of network providers in two of the three VISNs  examined were located within 40 miles of VAMCs, leaving large  geographic areas of these VISNs (particularly rural areas) outside the 40- mile radius with few network providers. For example, only 3.8 percent of  primary care providers and 3.2 percent of behavioral health providers in  VISN 20 (which covers Alaska, Idaho, Oregon, and Washington) were  located more than 40 miles from VAMCs within that VISN. While the  areas lacking network providers generally have fewer veterans relative to  other areas within these VISNs, the analysis by VHA researchers  suggests that veterans living in these areas are likely to have difficulty  accessing Choice Program network providers that are located closer to  their homes than the nearest VAMC, which is over 40 miles away.", "VA and VHA have tried to address network inadequacy that existed under  the Choice Program and either have taken or plan to take additional  actions to address this issue for the community care program VA plans to  implement, including the following.", "Establishment of Choice Program provider agreement process.", "To help address inadequacies in the TPAs\u2019 provider networks and  improve veterans\u2019 access to care under the Choice Program, VHA  established the Choice Program provider agreement process in  February 2016. This process allowed VAMCs to establish agreements  with community providers, schedule veterans\u2019 appointments, and  reimburse the providers directly (using Choice Program funds) when  the TPAs failed to schedule veterans\u2019 appointments for reasons  relating to network inadequacy, among others. Originally, the  VAMCs were required to send veterans\u2019 referrals to the TPAs and  wait for them to be returned before they could proceed with arranging  care through a Choice Program provider agreement. While this  process had the potential to increase the availability of providers for  the Choice Program, it did not immediately improve the timeliness of  veterans\u2019 Choice Program care because veterans still had to wait for  as long as it took the VAMCs to send their referrals to the TPAs and  for TPAs to return them before the VAMCs could proceed with  arranging care through Choice Program provider agreements.  According to the policies and contractual requirements that were in  effect at the time, it could have taken up to 40 calendar days after a  VHA clinician first identified the veteran\u2019s need for care until the TPA  returned the referral and the VAMC could proceed with arranging care  through a Choice Program provider agreement. However, in March  2017, VHA updated the Choice Program provider agreement process  so that\u2014if the TPAs were returning a high volume of a VAMC\u2019s  referrals for one or more types of care\u2014the VAMC could seek  approval from its VISN and VHA\u2019s Office of Community Care to  bypass the TPA and proceed directly to arranging that type of care  through Choice Program provider agreements. This had the potential  to improve the timeliness of veterans\u2019 access to Choice Program care  because it eliminated the steps of sending referrals to the TPAs and  waiting for them to be returned.", "Improving quality of information given to future TPAs. To help  inform the recruitment of network providers for the consolidated  community care program VA plans to establish, VA plans to provide  future TPAs more robust data than they provided the current TPAs at  the start of the Choice Program. In particular, VA\u2019s RFP for the  consolidated community care program, as amended, indicates that VA  will provide (1) zip-code-level data on the number of authorizations  that were issued in fiscal year 2015 for specific types of care (e.g.,  chemotherapy and obstetrics) and (2) VAMC-level data on the clinical  specialties with the greatest wait times for appointments at VAMCs.  These local-level data could help TPAs estimate the number of  network providers of various specialties they will need to recruit in  specific localities if awarded a contract for the consolidated  community care program that VA is planning to implement.", "Performing market assessments. In preparation for the  consolidated community care program VA plans to establish, VA and  VHA officials are planning to conduct market assessments in 96  markets nationwide. Through these market assessments, officials told  us, VA will (1) examine the clinical capacity that currently exists within  VHA medical facilities and among community providers, (2) assess  veterans\u2019 current and future demand for health care services, and (3)  develop long-term plans for ensuring that veterans will have access to  high-quality health care services\u2014whether they receive care from  VHA clinicians or from community providers. According to VHA  officials, the market assessments will help inform network provider  recruitment efforts for the consolidated community care program VA is  planning to implement. In addition, VHA officials told us that the  market assessments will help VISN- and VAMC-level leaders make  more informed, strategic decisions about whether it is more efficient to  maintain or build capacity for delivering particular types of care within  VHA medical facilities, or if they should routinely purchase certain  types of care in the community. In November 2017, VHA officials told  us that they expect to begin conducting the market assessments early  in calendar year 2018, and the officials estimate that it will take about  18 months to complete assessments for all 96 markets."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Choice Program is approaching the end of its life, and with plans to  consolidate it with VA\u2019s other community care programs, opportunities to  improve the program are diminishing. Congress created the Choice  Program in 2014 in response to longstanding challenges in veterans\u2019  access to care delivered within VHA medical facilities. However, we found  numerous operational and oversight weaknesses with VHA\u2019s  management of scheduling veterans\u2019 medical appointments through the  Choice Program. While it may not be feasible for VA and VHA to  implement corrective actions to address all of our findings before the  Choice Program ends, it is imperative that VA incorporate lessons  learned from the Choice Program when it implements the consolidated  community care program it has planned.", "First, we found VHA\u2019s process for scheduling appointments for veterans  through the Choice Program was not consistent with statutory  requirements. The Choice Act requires veterans to receive care no more  than 30 days from the date an appointment is deemed clinically  appropriate or from the date the veteran prefers to receive care; however,  we found that veterans could potentially wait up to 70 calendar days to  receive routine care through the Choice Program. In effect, we found that  in 2016, some veterans\u2019 actual wait times far exceeded 30 days. Although  VA has made some relevant contract modifications and issued guidance  to address Choice Program wait times, VHA has not adjusted the Choice  Program\u2019s appointment scheduling process or established timeliness  standards for all steps of the process. In addition, VHA\u2019s monitoring of  access to Choice Program care has been limited by incomplete and  unreliable data. In particular, the data VHA uses preclude it from  accurately identifying the number of days that occur within each phase of  the process, from initial referral to the actual appointment. Furthermore, a  lack of controls has allowed for inappropriate changes to be made in  veterans\u2019 clinically indicated dates and routine versus urgent care  categorizations, affecting VA\u2019s ability to monitor whether veterans are  receiving Choice Program care in a timely manner. The lack of reliable  data and performance measures also hinders VHA\u2019s ability to oversee the  program and identify problems and corrective actions. Further, we found  that VHA is missing out on opportunities to enhance its design of the  planned consolidated community care program. For example, VHA has  not fully evaluated its pilot programs for scheduling appointments nor  developed tools such as a mechanism that would allow the seamless  sharing of information between VHA and the TPAs. Lastly, we found that  VHA often relied on inefficient, ad hoc methods of sharing information  (such as memoranda, fact sheets and emails), which often failed to reach  the VAMC managers and staff responsible for implementing the program.", "After the Choice Program ends, VA anticipates that veterans will continue  to receive care from non-VHA providers under the consolidated  community care program that it is planning to implement. VA\u2019s and VHA\u2019s  design of the future program can benefit from the lessons learned under  the Choice Program. Ignoring these lessons learned and the challenges  that have arisen under the Choice Program as VA and VHA design the  future consolidated program would only increase VA\u2019s risk for not being  able to ensure that all veterans will receive timely access to care in the  community."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["To ensure that VA and VHA incorporate lessons learned from the Choice  Program as they develop and implement a consolidated VA community  care program, we are making the following 10 recommendations:", "The Under Secretary for Health should establish an achievable wait- time goal for the consolidated community care program that VA plans  to implement that will permit VHA to monitor whether veterans are  receiving VA community care within time frames that are comparable  to the amount of time they would otherwise wait to receive care at  VHA medical facilities. (Recommendation 1)", "The Under Secretary for Health should design an appointment  scheduling process for the consolidated community care program that  VA plans to implement that sets forth time frames within which (1)  veterans\u2019 referrals must be processed, (2) veterans\u2019 appointments  must be scheduled, and (3) veterans\u2019 appointments must occur, which  are consistent with the wait-time goal VHA has established for the  program. (Recommendation 2)", "The Under Secretary for Health should establish a mechanism that  will allow VHA to systematically monitor the average number of days it  takes for VAMCs to prepare referrals, for VAMCs or TPAs to schedule  veterans\u2019 appointments, and for veterans\u2019 appointments to occur,  under the consolidated community care program that VA plans to  implement. (Recommendation 3)", "The Under Secretary for Health should implement a mechanism to  prevent veterans\u2019 clinically indicated dates from being modified by  individuals other than VHA clinicians when veterans are referred to  the consolidated community care program that VA plans to  implement. (Recommendation 4)", "The Under Secretary for Health should implement a mechanism to  separate clinically urgent referrals and authorizations from those for  which the VAMC or the TPA has decided to expedite appointment  scheduling for administrative reasons. (Recommendation 5)", "The Under Secretary for Health should (1) establish oversight  mechanisms to ensure that VHA is collecting reliable data on the  reasons that VAMC or TPA staff are unsuccessful in scheduling  veterans\u2019 appointments through the consolidated community care  program VA plans to implement, and (2) demonstrate that it has  corrected any identified deficiencies. (Recommendation 6)", "The Secretary of Veterans Affairs should ensure that the contracts for  the consolidated community care program VA plans to implement  include performance metrics that will allow VHA to monitor average  driving times between veterans\u2019 homes and the practice locations of  community providers that participate in the TPAs\u2019 networks.  (Recommendation 7)", "The Secretary of Veterans Affairs should establish a system for the  consolidated community care program VA plans to implement to help  facilitate seamless, efficient information sharing among VAMCs, VHA  clinicians, TPAs, community providers, and veterans. Specifically, this  system should allow all of these entities to electronically exchange  information for the purposes of care coordination. (Recommendation  8)", "The Under Secretary for Health should conduct a comprehensive  evaluation of the outcomes of the two appointment scheduling pilots it  established at the Alaska and Fargo VA Health Care Systems (where  VAMC staff, rather than TPA staff, are responsible for scheduling  veterans\u2019 Choice Program appointments), which should include a  comparison of the timeliness with which VAMC staff and TPA staff  completed each step of the Choice Program appointment scheduling  process, as well as the overall timeliness with which veterans  received appointments. (Recommendation 9)", "The Under Secretary for Health should issue a comprehensive policy  directive and operations manual for the consolidated community care  program VA plans to implement and ensure that these documents are  reviewed and updated in a timely manner after any significant  changes to the program occur. (Recommendation 10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["VA provided written comments on a draft of this report, which are  reprinted in Appendix VII. In its comments, VA concurred with 8 of our 10  recommendations and described its plans for implementing them. VA  stated that VHA\u2019s Office of Community Care will work collaboratively with  other VA and VHA offices to evaluate modifications to the current wait- time goals and measurement processes so that wait times for VA  community care can be compared to wait times for care delivered at VHA  medical facilities.", "VA did not concur with our recommendation to implement a mechanism  to separate clinically urgent referrals and authorizations from those that  are designated as urgent for administrative reasons. VA stated that  because VAMC staff (rather than TPA staff) will be responsible for  scheduling veterans\u2019 appointments under the consolidated community  care program it plans to implement, there would no longer be a need to  separate clinically urgent referrals from those that need to be  administratively expedited. However, we maintain that our  recommendation is warranted. In particular, we found that VA\u2019s data did  not always accurately reflect the timeliness of urgent care because both  VAMC and TPA staff inappropriately re-categorized some routine care  referrals and authorizations as urgent ones for reasons unrelated to the  veterans\u2019 health conditions. Regardless of whether VAMC staff or TPA  staff are responsible for appointment scheduling, VA will need to ensure  that it uses reliable data to monitor the extent to which veterans receive  urgent care within required time frames. Without a means of separating  clinically urgent referrals and authorizations from ones for which the  scheduling process must be administratively expedited, VA\u2019s data on the  timeliness of urgent care will continue to be unreliable.", "VA agreed in principle with our recommendation to issue a  comprehensive policy directive and operations manual, but stated in its  comments that it would wait to determine whether a comprehensive policy  directive is needed until after the consolidated community care program  has been fully implemented and any interim implementation challenges  have been resolved. However, when implementing a new program, it is  important that agencies establish the program\u2019s structure, responsibilities,  and authorities at the beginning to help ensure that the new program\u2019s  objectives are met. Relying on outdated policies and unreliable  communication methods increases VA\u2019s risk of encountering foreseeable  challenges. Without issuing a comprehensive policy directive and  operations manual before the start of the new program, VA risks  experiencing untimely communication issues similar to those that affected  veterans\u2019 access to care throughout the Choice Program\u2019s  implementation. A comprehensive policy directive and operations manual  that could be updated as changes occur would give VAMCs a definitive  source of real-time, up-to-date information and reduce the likelihood that  VAMCs will implement new policies and processes inconsistently under  the future program.", "We are sending copies of this report to the Secretary of Veterans Affairs,  the Under Secretary for Health, appropriate congressional committees,  and other interested parties. This report is also available at no charge on  the GAO Web site at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@gao.gov or A. Nicole  Clowers at (202) 512-7114 or clowersa@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VIII."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology for Examining Choice Program Wait Times and the Data VHA Uses to Monitor Access", "paragraphs": ["To examine selected veterans\u2019 actual wait times to receive routine care  and urgent care through the Choice Program and the information VHA  uses to monitor access to care under the program, we took five key steps.  We (1) analyzed Choice Program appointment wait times for selected  veterans using a sample of 196 Choice Program authorizations for routine  and urgent care; (2) reviewed VHA\u2019s analysis of Choice Program  appointment wait times for a sample of about 5,000 Choice Program  authorizations; (3) reviewed data VHA uses to monitor the timeliness of  Choice Program care and reasons that the TPAs have returned Choice  Program referrals without making appointments; (4) interviewed VA, VHA,  and TPA officials; and (5) reviewed federal internal control standards, as  follows.  1.  Our analysis of Choice Program wait times for a sample of 196  authorizations. To analyze the timeliness of Choice Program  appointment scheduling and completion for a sample of veterans, we  selected six VAMCs and a random, non-generalizable sample of 196  authorizations for veterans who were referred to the Choice Program  by those six VAMCs between January 2016 and April 2016. We  judgmentally selected the six VAMCs to include variation in  geographic location, with three VAMCs that serve rural veteran  populations and three VAMCs that serve urban veteran populations.  In addition, three of the VAMCs were served by Health Net, and three  were served by TriWest. (See table 5.)", "To select our random, non-generalizable sample of 196 Choice  Program authorizations, we obtained VA data on all authorizations  created by the TPAs between January and April 2016 for veterans  who were referred to the program by the six VAMCs we selected\u2014a  universe of about 55,000 authorizations. From these 55,000  authorizations, we randomly selected:", "55 routine care authorizations (about 10 authorizations per VAMC)  for which the TPAs scheduled appointments for veterans,", "53 urgent care authorizations (about 10 authorizations per VAMC)  for which the TPAs scheduled appointments for veterans, and", "88 routine and urgent care authorizations (about 15 authorizations  per VAMC) that the TPAs returned to VA without scheduling  appointments for any one of the following three reasons\u2014(1) VA  requested the authorization be returned, (2) VA data were missing  from the referral, and (3) the veteran declined or did not want  Choice Program care.", "For all 196 Choice Program authorizations in our sample, we  manually reviewed VHA documentation (specifically, the veterans\u2019 VA  electronic health records) and TPA documentation to track the  number of calendar days that elapsed at each step of the Choice  Program appointment scheduling process. For the authorizations that  the TPAs returned to the VAMCs without making appointments, we  examined VHA and TPA documentation to determine whether the  veterans eventually obtained care through other means\u2014such as  through another VA community care program, a different Choice  Program referral, or at a VHA medical facility\u2014and how long it took to  receive that care. Determining whether veterans in our sample  experienced clinical harm or adverse clinical outcomes because of  delays in the VAMCs\u2019 or TPAs\u2019 processing of their referrals and  authorizations was outside the scope of our review.", "We selected our sample of 55 routine care and 53 urgent care  authorizations for which the TPAs succeeded in scheduling  appointments to include only authorizations for which the TPAs did  not meet VA\u2019s appointment scheduling goals at one phase of the  appointment scheduling process: when the TPAs attempt to schedule  appointments after the veterans have opted in to the program. This  was to ensure that our sample included only authorizations for which  scheduling was delayed, so that we could examine the potential  causes of appointment scheduling delays and whether delays also  occurred at other phases of the process (such as when VAMCs were  preparing the veterans\u2019 referrals or when the TPAs were attempting to  reach the veterans for them to opt in to the program). We omitted this  phase of the appointment scheduling process when calculating the  timeliness of appointment completion for the 55 routine care  authorizations and 53 urgent care authorizations in our sample.  Rather than reporting veterans\u2019 overall wait times for these  authorizations, we report the average number of calendar days that  elapsed (1) while VAMCs were preparing veterans\u2019 Choice Program  referrals, (2) while the TPAs were attempting to reach veterans for  them to opt in to the program, and (3) while veterans waited to attend  their appointments after the TPAs succeeded in scheduling them. To  assess the reliability of the authorization data we used, we  interviewed knowledgeable agency officials, manually reviewed the  content of the data, and electronically tested it for missing values. We  concluded that these data were sufficiently reliable for the purposes of  our reporting objectives. The findings from our review of Choice  Program authorizations cannot be generalized beyond the VAMCs  and the veterans\u2019 Choice Program authorizations we reviewed.  2.  VHA\u2019s analysis of Choice Program wait times for a sample of  about 5,000 authorizations. We obtained from VHA\u2019s Office of  Community Care the results of a nationwide analysis of Choice  Program appointment timeliness it conducted in February 2017.  Specifically, VHA directed its VAMCs to manually review veterans\u2019  health records and TPA documentation and report observations for a  non-generalizable sample of about 5,000 randomly selected Choice  Program authorizations that were created between July and  September of 2016. The sample was limited to authorizations for  Choice Program appointments that had been scheduled for time- eligible veterans who needed four types of specialty care\u2014 mammography, gastroenterology, cardiology, and neurology.  According to VHA officials, they limited their analysis to these four  types of care because delayed treatment for any of these specialties  could cause adverse health outcomes for patients. To assess the  reliability of VHA\u2019s data, we manually reviewed the results of its  analysis and interviewed knowledgeable agency officials about  potential outliers. We concluded that VHA\u2019s data were sufficiently  reliable for the purposes of our reporting objective. The results of  VHA\u2019s analysis cannot be generalized beyond the sample of Choice  Program authorizations that it reviewed.  3.  VHA data on timeliness of Choice Program appointments and the  reasons TPAs return referrals without making appointments. To  evaluate the information VHA uses to monitor access to care under  the Choice Program, we reviewed data that VHA collects to monitor  the timeliness with which the TPAs schedule appointments and the  timeliness with which appointments occur after the TPAs have  scheduled them. We also reviewed and tested the reliability of VHA  data on the reasons the TPAs have returned Choice Program  referrals to VAMCs without scheduling appointments, which may offer  insights about access to care (e.g., the percentage of referrals that  are returned due to a lack of providers in the TPAs\u2019 networks).  4.  Interviews with officials. We interviewed VA, VHA, and TPA officials  responsible for administering the Choice Program contracts and  overseeing implementation of the program. We interviewed these  officials to gain an understanding of the processes they followed and  the information they used to monitor veterans\u2019 access to Choice  Program care.  5.  Federal internal control standards. We examined the results of our  and VHA\u2019s analyses and the information VHA uses to monitor  veterans\u2019 access to care under the program in the context of federal  standards for internal control for (1) information and communication  and (2) monitoring. The internal control standard for information and  communication relates to management\u2019s ability to use quality  information to achieve the entity\u2019s objectives. The internal control  standard for monitoring relates to establishing activities to monitor the  quality of performance over time and evaluating the results."], "subsections": []}, {"section_title": "Appendix II: Process for Veterans to Obtain Department of Veterans Affairs (VA) Choice Program Care if They Are Time-Eligiblea", "paragraphs": ["Appendix II: Process for Veterans to Obtain  Department of Veterans Affairs (VA) Choice  Program Care if They Are Time-Eligiblea If the veteran does not respond to the letter within 14 calendar days, a notification is sent to the  veteran\u2019s VA clinician so that they can determine if additional action should be taken."], "subsections": []}, {"section_title": "Appendix III: Process for Veterans to Obtain Department of Veterans Affairs (VA) Choice Program Care if They Are Distance-Eligiblea", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comparison of Processes for Arranging Choice Program and Individually Authorized Community Care", "paragraphs": ["Appendix IV: Comparison of Processes for  Arranging Choice Program and Individually  Authorized Community Care The Veterans Health Administration (VHA) uses the time-eligible appointment scheduling process  when the services needed are not available at a VHA medical facility or are not available within  allowable wait times."], "subsections": []}, {"section_title": "Appendix V: Process for Obtaining the Clinical Results of Choice Program Appointments", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Selected Actions Taken by VA and VHA to Address Choice Program Access Issues", "paragraphs": ["We found 21 actions that the Department of Veterans Affairs (VA) and the  Veterans Health Administration (VHA) took after the Choice Program\u2019s  November 2014 implementation that were intended to help address  issues related to veterans\u2019 access to care. Table 6, below, provides a  chronological summary of the actions VA and VHA had taken as of  August 2017 and the issues they were intended to address."], "subsections": []}, {"section_title": "Appendix VIII: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Marcia A. Mann (Assistant  Director), Alexis C. MacDonald (Analyst-in-Charge), Daniel Powers, and  Michael Zose made major contributions to this report. Also contributing  were Muriel Brown, Christine Davis, Helen Desaulniers, Krister Friday,  Sandra George, Jacquelyn Hamilton, and Vikki Porter."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Veterans\u2019 Health Care: Preliminary Observations on Veterans\u2019 Access to  Choice Program Care, GAO-17-397T (Washington, D.C.: March 7, 2017).", "VA Health Care: Improved Monitoring Needed for Effective Oversight of  Care for Women Veterans, GAO-17-52 (Washington, D.C.: December 2,  2016).", "VA\u2019S Health Care Budget: In Response to a Projected Funding Gap in  Fiscal Year 2015, VA Has Made Efforts to Better Manage Future  Budgets, GAO-16-584 (Washington, D.C.: June 3, 2016).", "Veterans\u2019 Health Care: Proper Plan Needed to Modernize System for  Paying Community Providers, GAO-16-353 (Washington, D.C.: May 11,  2016).", "VA Health Care: Actions Needed to Improve Monitoring and Oversight of  Non-VA and Contract Care. GAO-15-654T (Washington, D.C.: June 1,  2015).", "VA Health Care: Further Action Needed to Address Weaknesses in  Management and Oversight of Non-VA Medical Care, GAO-14-696T  (Washington, D.C.: June 18, 2014).", "VA Health Care: Actions Needed to Improve Administration and Oversight  of VA\u2019s Millennium Act Emergency Care Benefit, GAO-14-175  (Washington, D.C.: March 6, 2014).", "VA Health Care: Management and Oversight of Fee Basis Care Need  Improvement, GAO-13-441 (Washington, D.C.: May 31, 2013)."], "subsections": []}], "fastfact": ["If services are not readily accessible at VA medical facilities, the Veterans Choice Program allows eligible veterans to receive care from non-VA providers. Congress created the temporary program in 2014, aiming to alleviate the excessive wait times some veterans faced at VA.", "However, we found that it\u2019s unclear if the Choice Program improved the timeliness of veterans\u2019 care because VA\u2019s data are incomplete and unreliable.", "When the Choice Program ends, veterans will still receive care from non-VA providers through a new program. We made recommendations related to improving VA\u2019s ability to monitor veterans\u2019 access to care through the new program."]}
{"id": "GAO-19-64", "url": "https://www.gao.gov/products/GAO-19-64", "title": "Defense Science and Technology: Actions Needed to Enhance Use of Laboratory Initiated Research Authority", "published_date": "2018-12-20T00:00:00", "released_date": "2018-12-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Congress created several authorities that provide DOD research labs with ways to increase efficiency and foster innovation.", "Senate report 114-255 contained a provision for GAO to study governance models used by federal labs. This report evaluates DOD labs' use of authorities to foster innovation and efficiency.", "GAO selected four authorities that recent work on best practices for science and technology management and expedited defense lab hiring have shown to be the most crucial for supporting innovation; administered a survey to 44 lab directors to gain insight into their use of the authorities; interviewed key lab officials and contractors; and reviewed relevant policies and guidance."]}, {"section_title": "What GAO Found", "paragraphs": ["Congress has provided the Department of Defense's (DOD) research labs with several authorities to enhance management and operations. Four authorities that GAO examined provide lab directors with greater ability to make their own decisions regarding the funding of projects, hiring, lab management, and purchasing of equipment or services.", "1. Laboratory initiated research authority. This authority, as implemented, provides labs with a means to fund new science and technology projects that they consider a priority. Labs may use a percentage of all funds available to the lab and are permitted to charge customers of the lab a percentage fee of the costs for activities performed by the lab for the customer.", "2. Direct hire authority. This authority enables labs to compete with private industry for high-quality talent. For example, it provides for streamlined hiring of applicants with relevant advanced degrees, or students enrolled in science, technology, engineering, and mathematics programs.", "3. Laboratory enhancement pilot program authority. This authority generally allows lab directors to propose alternative methods that might lead to more effective lab management, and waive certain policies or procedures that might affect implementation of these methods.", "4. Micro-purchase authority. This authority raises the threshold for small purchases for DOD research lab activities from $3,500 to $10,000 to facilitate acquisitions.", "While labs have used these authorities, their use has sometimes been limited, particularly with the laboratory initiated research authority. DOD lab directors at Air Force, Navy, and Army cited several obstacles that impede wider use of that authority, specifically:", "Air Force: Financial management officials at the Air Force stated that the service's accounting system does not currently have an automated capability to transfer the allowable percentage fee of costs to a central account at the Air Force Research Laboratory. This lack of capability, officials noted, creates a significant administrative burden related to charging these fees.", "Navy: In fiscal year 2017, Navy labs invested $7.3 million in lab infrastructure projects, compared to $32.9 million and $53.7 million at the Air Force and Army, respectively. Navy lab officials told us that they were restricted in their use of infrastructure funds available under the laboratory initiated research authority due to a lack of clear guidance as to whether and how to use this authority within the Capital Investment Program of the Navy Working Capital Fund.", "Army: The Army requires its labs to use a similar percentage of funds from two sources: (1) what it refers to as directly appropriated funds and (2) funds labs charge for customer activities. Some Army lab directors reported assessing a lower rate on customer funds than allowed so as not to drive customers away. The labs then generally charge a lower than desired rate on their directly appropriated funds, which further constrains the total funding available to them."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations to enhance DOD's use of laboratory initiated research authority, including that the Air Force assess potential accounting system improvements, the Navy clarify how labs can use the authority for infrastructure improvements, and the Army assess its policy to determine whether changes are needed to remove disincentives for labs to use the authority. DOD concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["For more than 90 years, the Department of Defense (DOD) has relied on  its science and technology reinvention laboratories (lab) to develop  technologies intended to maintain U.S. superiority on the battlefield. The  defense lab enterprise\u2014consisting of 63 military service labs, warfare  centers, and engineering centers\u2014is critical to strengthening the military  services\u2019 competitive edge and offsetting technological advances of  potential adversaries. These labs develop innovations to counter existing  and emerging threats, and accelerate the delivery of technical capabilities  to the warfighter. Beyond its labs, DOD sponsors federally funded  research and development centers (FFRDC) and university affiliated  research centers (UARC) that provide additional technology development  activities integral to the department\u2019s needs.", "We have previously reported that defense labs have struggled to  consistently identify, develop, and deliver innovative technologies  quickly. Moreover, these defense labs have encountered problems with  recruiting and retaining a high-quality workforce and maintaining their  facilities, according to the Defense Science Board. Congress has  provided DOD with several tools and mechanisms, which we refer to in  this report as authorities. The various authorities have provided laboratory  directors with greater ability to make their own decisions regarding  laboratory administration and management, funding allocations and  personnel. One of these authorities also provides for labs to seek waivers  to existing DOD policies that are believed to stifle innovation and  flexibility. Senate report 114-255 accompanying the National Defense  Authorization Act for Fiscal Year 2017 noted the importance of these  authorities as a step toward accelerated innovation and flexibility. It  included a provision for us to study the lab governance used by DOD and  other agencies. In this report, we (1) evaluate how defense labs have  used selected legislative authorities to foster innovation and efficiency  and identify what barriers, if any, impede their use; (2) identify and  describe governance models used by selected DOD-sponsored FFRDCs  and UARCs; and (3) identify and describe governance models used by  selected non-defense labs, specifically at the Department of Energy  (Energy) and National Aeronautics and Space Administration (NASA).", "For each of our three objectives, we interviewed key agency and lab  officials as well as contractor representatives. To evaluate how defense  labs have used selected legislative authorities and identify any barriers  that have impeded their use, we took inventory of the over 20 lab-related  authorities that have been enacted since 1994. From that list, we selected  for review four specific authorities that our recent work on best practices  for science and technology management and expedited defense lab  hiring have shown are, or have the potential to be, the most crucial for  supporting DOD labs\u2019 innovation missions. We then reviewed DOD-wide  and military service-specific policies as well as documents and reports  that detailed implementation of the selected authorities. We also  administered a survey to 44 lab directors (or their equivalents) to collect  information on their use of the four authorities, their perceptions about  each authority\u2019s effectiveness, and any perceived barriers to each  authority\u2019s use. A total of 31 lab directors completed and returned surveys  to us, which constituted a response rate of 71 percent. For the two  authorities in our review that have been in place the longest, we analyzed  relevant DOD data on lab personnel hiring and infrastructure investments.  Based on our reviews of supplementary documentation and interviews  with agency officials, we determined that these survey data were  sufficiently reliable for the purposes of our analysis.", "To identify and describe governance models used by DOD-sponsored  research centers, we focused our review on the three FFRDCs  designated as research and development labs as well as all 13 UARCS  sponsored by DOD entities. We reviewed relevant sections of the Federal  Acquisition Regulation (FAR) that cover FFRDCs as well as DOD policies  and guidance for working with FFRDCs and UARCs. Further, we  reviewed selected FFRDC and UARC contracts and performance  assessments to gain additional visibility on how these entities operate.", "To identify and describe governance models by selected research entities  at Energy and NASA, we identified 17 Energy labs and 4 NASA research  centers conducting basic and applied research similar to defense labs.  We chose to focus on Energy and NASA because in our August 2016  GAO Technology Readiness Assessment Guide, we drew heavily from  DOD, Energy, and NASA for best practices, terminology, and examples.  Further, DOD, Energy, and NASA represented three of the top four  agencies with the highest federal research and development spending on  average from fiscal years 2015 to 2017. We did not include the fourth  agency\u2014the National Institutes of Health\u2014in our review because it is not  as similar to DOD. We reviewed relevant sections of the FAR that cover  these research entities, along with key agency policies and guidance on  how these entities operate. More information about our objectives, scope,  and methodology can be found in appendix I.", "We conducted this performance audit from July 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The defense lab enterprise consists of 63 labs, warfare centers, and  engineering centers across the Departments of the Army, Navy, and Air  Force, as shown in Figure 1 below. About 50,000 federally employed  scientists and engineers work at these defense labs to support warfighter  needs and develop transformative capabilities. Defense labs are  managed and operated within the military service chain of command."], "subsections": [{"section_title": "Defense Lab Funding Models", "paragraphs": ["DOD budgets for technology and product development activities under its  research, development, test, and evaluation budget, which DOD groups  into seven budget activity categories for its annual budget estimates. Air  Force and Army labs rely on appropriated funding provided from the  service\u2014often referred to as mission funding\u2014or from customers (or  some combination thereof). Customers, such as program offices, provide  funding to defense labs for technology development activities and related  research. The Air Force and Army funding structure is in contrast to Navy  research and development activities, which operate under the Navy  Working Capital Fund\u2014a revolving fund that finances Department of the  Navy activities on a reimbursable basis. Under this funding model, the  Navy employs a Capital Investment Program to obtain capital assets,  including minor military construction projects for labs. The program  provides the framework for planning, coordinating, and controlling Navy  working capital funds and expenditures to obtain capital assets. Figure 2  illustrates the varying funding models used by the military service labs."], "subsections": []}, {"section_title": "Other DOD-Sponsored Science and Technology Entities", "paragraphs": ["In addition to its labs, DOD sponsors other entities to provide for its  technology development needs. Specifically, these include:", "FFRDCs are operated by universities, other not-for-profit or nonprofit  organizations, or private firms under long-term contracts and provide  special research and development services that generally cannot be  readily satisfied by government personnel or private contractors. For  example, the Massachusetts Institute of Technology Lincoln  Laboratory develops key radar and electronic warfare technologies for  integrated air and missile defense systems. In addition, the Software  Engineering Institute operated by Carnegie Mellon University provides  cybersecurity solutions for defense entities. While DOD sponsors 10  FFRDCs in total, it designates 3 FFRDCs as research and  development labs, which maintain long-term competencies in key  technology areas. In addition to these, DOD sponsors 2 systems  engineering and integration FFRDCs and 5 studies and analysis  FFRDCs.", "UARCs provide specialized research and development services  similar to FFRDCs and also operate under long-term contracts.", "However, unlike FFRDCs, DOD requires that UARCs be affiliated with  a university. Generally, UARCs may not compete against industry in  response to a competitive Request for Proposals for development or  production that involves engineering expertise. DOD currently  sponsors 13 UARCs."], "subsections": []}, {"section_title": "Key Offices Responsible for Oversight of Defense Labs", "paragraphs": ["Key DOD offices provide oversight to the defense labs:", "The Under Secretary of Defense for Research and Engineering  (USD(R&E))\u2014the principal advisor to the Secretary of Defense for  research, engineering, and technology development activities and  programs\u2014serves as DOD\u2019s chief technology officer. The powers and  duties of this office include establishing policies and providing  oversight for DOD\u2019s research, engineering, and technology  development activities.", "The Defense Laboratories Office\u2014within the Office of the  USD(R&E)\u2014supports DOD\u2019s research and engineering mission by  helping to ensure comprehensive department-level insight into the  activities and capabilities of the defense labs. This office carries out a  range of core functions related to the defense labs, including analysis  of capabilities, alignment of activities, and advocacy."], "subsections": []}, {"section_title": "Defense Lab Authorities", "paragraphs": ["Congress has granted authorities that address hiring, infrastructure, and  technology transition challenges to defense labs since 1995. These  authorities provide defense lab directors with certain flexibilities within the  established legal framework to manage their operations. While Congress  has provided a number of authorities, in this report we focus on four  authorities that our prior work on best practices in science and technology  management and expedited lab hiring has shown are, or have the  potential to be, the most crucial for supporting innovation within DOD  labs.", "Laboratory Initiated Research Authority. This authority provides lab  directors with the means to fund some of the research projects that  the lab will pursue. The authority provided in Section 219 of the  Duncan Hunter National Defense Authorization Act for Fiscal Year  2009, as implemented, provides lab directors with a means to fund  projects they consider to be a priority in four allowable categories: (1)  basic and applied research, (2) technology transition, (3) workforce  development, and (4) revitalization, recapitalization, or repair or minor  construction of lab infrastructure. These projects include those not  specifically tied to defined requirements, outside of the normal 2-year  budget planning process. The authority directs the Secretary of  Defense to establish mechanisms under which lab directors may use  an amount of funds equal to not less than 2 percent and not more  than 4 percent of all funds available to the defense lab for projects  under the four allowable categories. Further, lab directors are  permitted to obtain additional funding by charging customers a fixed  percentage fee that may not exceed 4 percent of costs.", "Direct Hire Authorities. These authorities provide lab directors with a  streamlined and accelerated hiring process. Congress has enacted  four types of direct hire authorities since 2008, which help labs  compete with private industry and academia for high-quality scientific,  engineering, and technical talent. Specific types of direct hire  authorities include hiring: (1) candidates with advanced degrees; (2)  candidates with bachelor\u2019s degrees; (3) veterans; and (4) students  currently enrolled in graduate or undergraduate science, technology,  engineering, and mathematics (STEM) programs.,", "Laboratory Enhancement Pilot Program. This authority provides  methods for effective lab management operations. Section 233 of the  National Defense Authorization Act for Fiscal Year 2017 established a  pilot program for lab directors to propose alternative and innovative  methods that might lead to more effectively managing labs, and  authorized lab directors to waive any regulation, restriction,  requirement, guidance, policy, procedure, or departmental instruction  that would affect implementation of these methods, unless such  implementation would be prohibited by a provision of an existing  statute or common law.", "Micro-purchase Authority. This authority facilitates the purchasing  process for labs. The FAR states a preference for government  agencies to purchase and pay for micro-purchases of supplies or  services using the government-wide commercial purchase card up to  and at the micro-purchase threshold, but micro-purchases may be  conducted using any of the simplified acquisition methods. This  facilitates the ability of lab officials to quickly and easily acquire  needed items for their activities and reduce the administrative costs  associated with such small purchases. While the FAR micro-purchase  was generally $3,500 during our review, Congress increased it to  $10,000 for activities of the science and technology reinvention labs in  Section 217 of the National Defense Authorization Act for Fiscal Year  2017."], "subsections": []}, {"section_title": "Major Federal Research Agency Investments", "paragraphs": ["As we found in June 2018, the federal government spends approximately  $137 billion annually government-wide on research and development  (R&D) to help further agencies\u2019 missions, including at federal labs. From  fiscal years 2015 to 2017, DOD, Energy, and NASA represented three of  the top four federal agencies with the highest annual federal R&D  spending, accounting for about 66 percent of total federal R&D spending  on average, as shown in Figure 3.", "While the labs primarily support the agencies that directly fund them,  DOD, Energy, and NASA research entities also collaborate extensively to  support activities of shared interest. For example, DOD and NASA  research centers have collaborated to develop hypersonic vehicle  capabilities. Further, Energy\u2019s national labs help provide critical national  security capabilities for DOD and support NASA\u2019s deep space mission  radioisotope requirements. In 2017, Energy reported performing about  $2.6 billion of work per year from fiscal years 2011 through 2015 for other  federal agencies and other customers, including DOD."], "subsections": []}]}, {"section_title": "Defense Labs Have Used Selected Authorities, but Their Use Has Been Offset by Other Military Service Policies and Interests", "paragraphs": ["Most defense labs have used the selected authorities since 2008, but  their use has sometimes been limited for a variety of reasons. According  to lab directors, this is because of DOD legal and policy restrictions and  stakeholder concerns. For example:", "Use of the laboratory initiated research authority was limited by DOD\u2019s  military construction funding and financial management policies.", "Use of the direct hire authority was limited, in part, by personnel- related delays, security clearance challenges, and military hiring  restrictions.", "Use of the laboratory enhancement pilot program was limited by  stakeholder uncertainty about how to use this authority effectively.", "Use of the increased micro-purchase authority was limited by  stakeholder concerns about the authority\u2019s potential effect on small  businesses."], "subsections": [{"section_title": "Most Defense Labs Have Used the Laboratory Initiated Research Authority, but Less than the Maximum Allowed", "paragraphs": ["We found that most defense labs have used the laboratory initiated  research authority. Twenty-three of 31 of respondents to our survey\u2014 about 74 percent\u2014reported obligating funds under this authority.  However, we found that most labs are not using the full 4 percent of all  funds available to each lab, or charging customers the full fixed  percentage fee of 4 percent of costs, as allowed by law. Specifically, we  found that, as of September 2018:", "Navy labs reported charging customers a percentage fee of about 2  percent of costs as of fiscal year 2018. Prior to this, Navy labs only  charged a 1 percent fixed fee on these costs. Because Navy labs are  working capital funded organizations, they can use payments from  customers for goods delivered or services performed.", "Army labs reported using between 2 and 3 percent of all funds  available to the lab for projects under the four allowable categories  and charging customers a fixed fee of between zero and 3 percent of  costs to fund such activities.", "Only the Air Force Research Laboratory reported using the full 4  percent of all funds available to the lab. According to agency officials,  the lab is using 3 percent of all funds available to the lab and is  allowing individual technology directorates the option to use the  additional 1 percent of funds available. In fiscal year 2018, three of the  lab\u2019s nine technology directorates chose to use this additional 1  percent. However, the lab has not charged customers a fixed  percentage fee on their costs at all.", "As figure 4 shows, in fiscal year 2017, the aggregate fixed percentage fee  charged by labs in each of the military departments totaled under the full  4 percent allowed by law for each funding source. Decisions to charge  lower percentages are decisions to forego additional potential funding,  although agencies have various reasons why this can happen, as we will  discuss later.", "In total, DOD reported that this authority provided almost $300 million to  labs in fiscal year 2017 and funded more than 1,750 projects across the  four allowable categories, as Figure 5 illustrates.", "We previously found, in June 2017, that the laboratory initiated research  authority provides defense lab directors with limited flexibility to initiate  science and technology projects. These projects include those that are  not road mapped or tied to defined requirements outside of the normal 2- year budget planning process, and are focused on both near- and long- term needs.", "For this review, defense lab officials we interviewed stated that the  laboratory initiated research authority enables their scientists and  researchers to pursue projects not necessarily tied to requirements and  provides necessary funds for workforce development and lab  infrastructure projects. Further, as shown in Figure 6, lab directors we  surveyed generally view the authority as both fostering innovation and  increasing efficiency across the four allowable categories on which funds  can be used.", "In accordance with the one of the statutory purposes for the use of the  funds, lab directors have developed new, innovative technologies using  this authority. For example, DOD reported that:  In fiscal year 2017, the Naval Surface Warfare Center, Crane Division,  developed and fielded a solution to an urgent requirement for  defeating small unmanned aerial vehicles that attack Navy assets or  surveil naval activities. The center delivered this technology to the  warfighter in May 2017 just 7 weeks after the Navy submitted the  requirement.", "The Army Research Laboratory used the authority to fund a project  that eventually developed a material that could increase the speed  and lower the power needs of future generations of computer chips,  thereby supporting Army networks.", "The Navy invested more than $700 thousand  in laboratory initiated research authority funds  to commission a Ballast Water Research Lab  at Naval Surface Warfare Center, Carderock  Division. Through the use of this new facility,  engineers will be able to study ways to treat  ballast water to prevent introduction of non- native aquatic species into a new environment  that can be disastrous for the marine life that  already inhabit that environment, and ensure  that the Navy is able to meet various port  regulations around the world for its ships.", "The Air Force Research Laboratory invested funds in fiscal year 2017  to renovate an existing facility to provide high performance computing  capability to aid the rapid development of \u201cgame-changing\u201d  technologies and weapon systems.", "Officials at the Army\u2019s Space and Missile Defense Command Technical  Center noted they used the laboratory initiated research authority for the  first time in fiscal year 2018 because the current executive director, who  assumed the position in 2017, prioritized implementing this authority.  Most of the Center\u2019s planned investments are focused on workforce  development and laboratory infrastructure projects; officials cited a high  energy laser technology lab as one of the projects being supported by the  revitalization, recapitalization, or minor military construction portion of this  authority.", "Although the majority of defense labs reported using the laboratory  initiated research authority, interviews we conducted throughout our  review, along with other DOD reports, identified certain obstacles that  have, at times, impeded wider usage.", "DOD-wide military construction funding restrictions. DOD  restrictions limit the amount of laboratory initiated research authority  funds that labs can spend on lab infrastructure. DOD\u2019s limit is $6  million for the revitalization and recapitalization projects that can be  funded under the laboratory initiated research authority. Lab officials  stated that this amount is often insufficient to construct advanced lab  facilities. Air Force Research Laboratory officials indicated that it is  nearly impossible to construct lab facilities for less than $6 million.  Officials at the Army\u2019s Aviation and Missile Research, Development  and Engineering Center echoed this sentiment and noted that they  have primarily used funds to renovate existing buildings rather than  fund new lab facility construction. In January 2017, the Defense  Science Board identified lab infrastructure challenges, including that  the average age of research and development facilities was nearly 50  years. Further, the Board reported that the labs are usually not  successful in competing against broader service needs for military  construction funds.", "Air Force does not charge customers a fixed percentage fee of  costs. The Air Force Research Laboratory reported that it is not  charging customers the allowable fixed percentage fee of costs to  fund science and technology activities because it does not have a  mechanism in place to do so. Air Force Research Laboratory officials  estimated the lab would collect approximately $3 million a year if the  lab charged customer activities the maximum allowable fee (4  percent). Air Force financial management officials stated that the  service\u2019s accounting system does not currently have an automated  capability to transfer the allowable percentage fee of costs to a central  account at the Air Force Research Laboratory. This lack of capability,  officials noted, creates a significant administrative burden for charging  these fees. The officials stated that they have not yet estimated the  cost to add an automated capability.", "Although it is possible for the Air Force Research Laboratory to  charge customer work orders manually\u2014outside of the Air Force\u2019s  accounting system\u2014officials with the Office of the Assistant Secretary  of the Air Force for Financial Management and Comptroller perceive  that the resources (time and people) required to manage such a  process would be cost prohibitive. However, according to these  officials, the Air Force has not assessed the costs required to improve  the accounting system to do so, nor has it identified the potential  benefits any improvements would provide. Federal internal control  standards state that changes in condition affecting an entity and its  environment often require changes to the entity\u2019s internal control  system, as existing controls may not be effective for meeting  objectives (or addressing risks) under changed conditions. Further,  these standards state that any internal control deficiencies require  further evaluation and remediation by management. By not  assessing the potential costs and benefits related to the options for  collecting these allowable fees, the Air Force could be missing out on  a potential source of funding to support its needs.", "DOD lacks clear guidance on how the Navy should use the  initiated research authority for some infrastructure investments  within the Capital Investment Program. In our review of DOD  documentation, we found that, among the military departments, Navy  labs funded recapitalization and revitalization projects using the  laboratory initiated research authority the least. As recently as early  2017, a DOD-commissioned study found that defense labs face  substantial infrastructure deficiencies that it has not yet identified  funding to address. In fiscal year 2017, Navy labs invested $7.3  million in lab recapitalization projects, compared to $32.9 million and  $53.7 million at the Air Force and Army, respectively. Navy lab  officials told us that their ability to fund lab recapitalization and  revitalization projects using funds available under the laboratory  initiated research authority is limited because they have not been  provided with clear guidance as to whether and how to use the  laboratory initiated research authority within the Capital Investment  Program of the Navy Working Capital Fund.", "Some Navy lab officials stated that they have found ways to use the  initiated research authority for certain infrastructure investments.  These officials stated that they used authority outside of the Capital  Investment Program of the Navy Working Capital Fund, for instance,  for projects below applicable thresholds because using the authority  within the Program creates a bureaucratic and financial burden for  them. For example, officials at two separate warfare centers\u2014Naval  Surface Warfare Center, Crane Division, and the Naval Air Warfare  Center, Aircraft Division, noted that they did not expend funds in either  fiscal year 2016 or fiscal year 2017 for recapitalization and  revitalization projects. Both cited the Capital Investment Program as a  significant barrier to their desired use of the laboratory initiated  research authority.", "Officials from the Office of Budget, within the Office of the Assistant  Secretary of the Navy for Financial Management and Comptroller  agreed that, to date, clarifying guidance on the use of the laboratory  initiated research authority within the Capital Investment Program has  not been issued, effectively limiting the extent to which the labs can  use it for infrastructure needs. According to these officials, the Office  of the Secretary of Defense (OSD) Comptroller\u2014in coordination with  the Office of Financial Policy and Systems within the Office of the  Assistant Secretary of the Navy for Financial Management and  Comptroller\u2014is responsible for developing the clarifying guidance  their office has sought. This persistent lack of guidance on whether or  how Navy labs should use the laboratory initiated research authority  within the context of the Capital Investment Program presents an  opportunity cost. Namely, the Navy\u2019s labs have missed out on, and  continue to miss, opportunities to invest in needed improvements to  its aging lab infrastructure.", "The Army requires its laboratories to apply similar percentages   to what is refers to as \u201cArmy direct appropriations\u201d and  \u201ccustomer funds.\u201d The Army requires that the percentage fee  applied to direct appropriations not vary from the percentage fee  applied to customer funds by more than 1 percent. The Army  implemented this policy to maximize the laboratory initiated research  authority\u2019s effect on its 17 laboratories. However, the Office of the  USD(R&E) reported in March 2018 that the policy was having a  significant limiting effect on the breadth and scope of activities  executed under this authority. Similarly, we found that the policy  may, in practice, create a disincentive for Army lab directors to use  the authority. In their responses to our survey, Army lab directors,  representing key capability areas, acknowledged their concern about  the percentage fee they assessed on customer funds affecting their  ability to increase or maintain their customer bases. Further, some  Army lab directors reported assessing a lower percentage fee on  customer funds than allowed, which could help retain customers that  might otherwise be driven away with higher assessed fees to carry out  activities. As a result, these labs generally are setting a lower  percentage fee on their directly appropriated funds, thereby lowering  the overall laboratory initiated research funding available to them.  Nonetheless, the Army has not assessed its policy to determine  whether changes are needed to eliminate these disincentives.  Continuing to operate without such an assessment could result in  Army labs using the laboratory initiated research authority to fund  fewer self-initiated projects\u2014with the downstream effect that fewer  new technologies for warfighters are available.", "The Navy applies a consistent fixed percentage fee of costs  across its labs. Within the Navy, senior leadership has set the fixed  percentage fee of costs the labs charge on customer funds at 2  percent. A senior Navy science and technology official stated that  Navy leadership set a uniform fixed percentage fee to charge to  customer activities across the Navy lab enterprise, in part, to ensure  the labs were not inadvertently competing against one another for  customer funds. For example, without a uniform rate, a Navy warfare  center could offer a lower fee to entice a customer to use it rather than  another center. The use of a fixed percentage fee facilitates program  offices selecting warfare centers on the basis of best available match  in capabilities. On the other hand, the Navy\u2019s fixed 2 percentage fee  of costs does limit\u2014by half, as compared to the maximum 4 percent  allowable\u2014the amount of fees that Navy labs can collect.  Consequently, several Navy lab directors told us that they would like  to have the ability to increase the fixed percentage fee of costs above  the Navy\u2019s 2 percent to provide their labs with additional resources  they said they need for innovation-related investments."], "subsections": []}, {"section_title": "DOD Labs Have Used Direct Hire Authorities to Hire Qualified Candidates for Key Scientific Positions but Experienced Delays", "paragraphs": ["Among the lab directors that responded to our survey, 30 of 31 replied  that their lab had used at least one of the four types of direct hire  authorities previously discussed since fiscal year 2014. Officials view  direct hire authority as allowing the labs to compete with private industry  for qualified applicants. Lab directors reported they generally believe that  each type of direct hire is extremely or very useful for fostering innovation  and increasing efficiency, as shown in Figure 7.", "Selected Officials\u2019 Testimony on the Value  of Direct Hire Authority:  The U.S. Army Engineer Research and  Development Center \u201cwas able to meet this  important goal [of annually hiring more than  160 new researchers] in large part because of  its direct hiring authorities, which save time,  effort, and costs, and allow the organization to  more effectively hire the best and brightest  minds available.\u201d \u2013 Dr. Jeffrey P. Holland,  Past Director, U.S. Army Engineer Research  and Development Center, in testimony before  the Senate Committee on Armed Services  (Emerging Threats and Capabilities  Subcommittee), May 3, 2017.  \u201cThe Air Force\u2019s ability to recruit, retain, and  develop the STEM workforce is vital toward  building the future Air Force; Congress has  been greatly supportive of these efforts\u2026the  addition of direct hire for candidates has been  extremely useful in hiring qualified scientists  and engineers in less than half the time of  traditional hiring methods.\u201d \u2013 Jeffrey Stanley,  Air Force Deputy Assistant Secretary\u2014 Science, Technology and Engineering in  testimony before the House Committee on  Armed Services (Emerging Threats and  Capabilities Subcommittee), March 14, 2018.", "Although participation in the laboratory enhancement pilot program is  open to the DOD labs\u2014and 19 of the 31 lab directors, or 61 percent, that  responded to our survey reported they were participating\u2014to date, only  the Navy has formally established a pilot program for its labs. The Army  and Air Force have not yet used this relatively new authority. A senior  Navy science and technology official told us the Navy took important  steps to facilitate the implementation of that service\u2019s pilot program.  According to the Navy official:", "The Office of the Deputy Assistant Secretary of the Navy for  Research, Development, Test and Evaluation led the effort across the  Navy labs, compiling\u2014from each lab\u2019s submission\u2014a single list of  proposals to forward to Navy leadership that would apply to all  participating Navy labs.", "The Navy pursued a three-phased approach with its pilot program,  with Phase 1 primarily focused on contracting and acquisition policy- related matters. Senior Navy research and development officials  perceived these matters as being the easiest from which to obtain  buy-in from Navy policy officials and attorneys, as well as Navy  leadership. Phase 2 will include proposals related to Information  Technology systems for research and development networks, while  Phase 3 will most likely address personnel issues.", "Navy research and development officials deferred proposals\u2014 including information technology network enhancements\u2014that might  require extensive discussions with policy officials and attorneys  stakeholders across the Navy. These proposals were pushed back to  allow time for those stakeholders to see how the pilot program was  being implemented and executed by the labs.", "None of the Army and Air Force labs has yet established a laboratory  enhancement pilot program. Consistent with Army policy, the Medical  Research and Materiel Command and the Space and Missile Defense  Command Technical Center submitted proposals; however, they have yet  to establish a pilot program. The Army\u2019s Research, Development and  Engineering Command, with input from its subordinate labs and  engineering centers, developed a list of lab enhancement proposals but,  as of September 2018, had yet to formally submit these final proposals to  Army leadership for approval. These include initiatives in business  operations, contracting, finance, information technology, and personnel  management. A senior Army science and technology acknowledged that  organizations across the military department have concerns about  providing the labs with too much autonomy to use this new authority.", "Air Force Research Laboratory officials said they previously submitted a  list of approximately 30 proposals to the Defense Laboratories Office in  September 2017, but ultimately pulled back those requests because of  stakeholder concerns within the Air Force. Specifically, officials with the  Office of the Deputy Assistant Secretary of the Air Force for Science,  Technology, and Engineering stated that the Air Force Materiel  Command, to which the lab is a subordinate organization, had not seen  the proposals before they were submitted. In addition, these officials  identified concerns about how various stakeholders throughout the Air  Force\u2014such as those from financial management and personnel\u2014would  react to these proposals. These proposals could potentially sidestep the  stakeholders\u2019 oversight function of related lab activities. A senior Air  Force Research Laboratory official stated that the lab re-submitted its  proposals to the Air Force Materiel Command and that Air Force  leadership was still reviewing them at the time of this report."], "subsections": []}, {"section_title": "Defense Labs Have Widely Implemented Micro-Purchase Authority", "paragraphs": ["Twenty-six of 31 labs directors\u201484 percent\u2014reported having used the  $10,000 micro-purchase threshold authority granted by Congress in 2016.  However, we found that contracting and small business management  officials\u2019 concerns with this authority have created implementation challenges at some defense labs. For instance, a senior Navy official  indicated that multiple stakeholders from across the Navy\u2014including its  Office of Small Business Programs\u2014raised concerns about the  authority\u2019s potential impact on small businesses as micro-purchasing  allows defense labs to bypass small business set asides. Several labs  reported similar stakeholder concerns that prevented implementation of  the micro-purchase threshold increase.", "At the same time, however, lab officials we interviewed expressed the  view that the increased threshold will be beneficial, consistent with their  opinions about the laboratory enhancement pilot program. For example,  officials at the Naval Research Laboratory stated that increasing the  threshold to $10,000 allows their scientists and engineers to directly  purchase necessary equipment and materials through simplified  procedures. They identified examples of projects that had been delayed  by as much as several months because scientists and engineers used  other than simplified acquisition procedures to purchase a relatively  inexpensive piece of equipment, such as a specialized microscope,  because the cost was above the previous threshold of $3,500.", "Similarly, the Army\u2019s Armament Research, Development and Engineering  Center reported that the micro-purchase threshold increase enables the  lab to use simplified acquisition procedures for more items. As a result,  they noted that the new authority increases efficiency by reducing  contracting time and cost for those additional items. The Navy\u2019s Space  and Naval Warfare Systems Center Atlantic similarly reported that  requirements, which were previously procured using other than simplified  acquisition procedures, took up to 60 to 90 days to procure, while it took  as little as 3 to 4 days under this new authority, which enabled its  scientists and engineers to purchase materials needed for critical, time  sensitive projects. However, lab officials acknowledged that the $10,000  micro-purchase threshold authority\u2014like the laboratory enhancement  pilot program\u2014is too new to fully understand how it will increase  efficiency and foster innovation over the long term."], "subsections": []}]}, {"section_title": "DOD Gains Scientific Expertise from Research Centers Governed through Noncompetitive Contracts", "paragraphs": ["DOD sponsors several research centers, which are governed through  noncompetitive agreements, including contracts. These centers provide  the department with access to scientific experts employed by universities  and other non-profit organizations. Scientists employed by these external  to DOD research centers\u2014specifically, three lab FFRDCs and 13  UARCs\u2014execute DOD-funded science and technology development  projects in emerging technical areas. DOD staff oversee these centers  using routine oversight of funded research tasks and comprehensive  reviews, which help DOD determine whether the centers\u2019 funding should  continue. DOD and research center officials told us that their ability to  authorize work at the FFRDCs that DOD sponsors is limited by legislative  restrictions on the staffing levels at these centers, as well as by  infrastructure modernization challenges they face."], "subsections": [{"section_title": "External DOD Research Centers Are Funded by the Government Established under Noncompetitive Procedures", "paragraphs": ["DOD sponsors three research and development FFRDC labs that were  established under noncompetitive procedures. Two of the three lab  FFRDCs are operated by universities and one is operated by a nonprofit  company. DOD also has contracts with 13 UARCs that fulfill a similar  scientific role as the lab FFRDCs, while also differing from them in other  respects. These differences are described in more detail in table 1.", "DOD\u2019s contractor-operated research centers received about $1.3 billion  annually in DOD funding in fiscal year 2016 and fiscal year 2017,  according to DOD data. The two largest research and development  FFRDCs, the Lincoln Laboratory and the Software Engineering Institute,  received about 67 percent of total research center funding from DOD in  2017. UARCs received an average of $27 million in DOD funding, which  was a 15 percent decrease from 2016. Research centers may also  receive work and funding from other federal departments and private  companies after obtaining DOD sponsor approval. Appendix II provides  an overview of DOD FFRDC and UARC funding in fiscal years 2016 and  2017.", "DOD Sponsorship and Contract Awards: We reported in 2014 that  FFRDCs in the federal government are defined through the sponsoring  agreement between the agency and the contractor retained to operate the  FFRDC. A written agreement of sponsorship between the government  and the FFRDC must be prepared when the FFRDC is established, which  may be included in a contract between the government and the FFRDC,  or in another legal instrument under which an FFRDC accomplishes  effort, or it may be in a separate written agreement. Historically, DOD  sponsors retain contractors for many years or decades as FFRDC  operators. We found that research centers undertake DOD-sponsored  projects and, in some limited instances, scientific projects initiated by  centers that are overseen by DOD staff. Individual sponsors enter into  noncompetitive contracts with FFRDCs and UARCs. DOD uses  noncompetitive contracts to establish or maintain an essential  engineering, research, or development capability to be provided by an  educational or other nonprofit institution or a federally funded research  and development center.", "Scientific Project Funding: We found that project sponsors provide  funding to existing contracts. For example, the government issues orders  for requirements under Lincoln Laboratory\u2019s indefinite delivery indefinite  quantity base contract as funding sponsors approve new projects.  Individual project sponsors, along with the primary sponsor, oversee how  project funds are spent by the centers. Project sponsors decide whether  they will continue to work with these entities based on perceived  performance success. This effectively provides an incentive for FFRDCs  and UARCS to perform successfully. This work and review cycle is  described in Figure 9 below.", "FFRDCs and UARCs also partner with DOD government-operated labs to  plan and execute technology development projects. For example,  according to Navy officials, Naval Surface Warfare Center, Carderock  Division collaborated with Navy-sponsored UARCs, such as Penn State\u2019s  Applied Research Laboratory, to help develop Navy submarine propeller  and propulsion designs.", "Self-initiated Projects: Research center officials said that DOD provides  some research centers with limited funds to self-initiate innovative  projects. This funding helps the centers ensure that development projects  are not limited to just satisfying near-term DOD requirements. Instead,  future generations of DOD technologies can be funded. For example,  officials at Johns Hopkins University Applied Physics Laboratory  proactively conducted work on advanced naval defense technologies in  response to similar technology development in adversary countries.  Although Navy sponsors did not fund this initial work, they subsequently  provided funding in this area after Hopkins\u2019 research identified a risk  reduction strategy for the Navy, according to the Johns Hopkins officials.  This allowed the UARC to move relatively quickly on a new science and  technology project idea."], "subsections": []}, {"section_title": "Research Centers Provide DOD with Access to Scientific Expertise", "paragraphs": ["DOD uses 13 UARCs and three lab FFRDCs to obtain direct access to  scientific expertise in emerging technical areas, supplementing research  conducted at DOD\u2019s government-owned and operated labs. These  research centers provide DOD with additional scientific capabilities and  the ability to expand quickly into new technical fields.", "Hiring Scientific Personnel: Although FFRDCs are largely federally  funded, they are generally operated, managed, and administered by  either a university or consortium of universities, other not-for-profit or  nonprofit organization, or an industrial firm, as an autonomous  organization or as an identifiable separate operating unit of a parent  organization. The contractor operating the FFRDC exercises primary  control over its FFRDC\u2019s business concerns, such as personnel policies  and compensation. DOD-funded research centers have flexibility in  hiring scientists that leverage a parent institution\u2019s expertise in emerging  scientific fields. For example, leadership officials at the Army Institute for  Soldier Nanotechnologies UARC at MIT and the Software Engineering  Institute FFRDC at Carnegie-Melon University noted that projects they  have conducted for DOD have benefitted from university experts in fields  such as dark matter physics and artificial intelligence.", "Personnel Compensation: Research center officials we spoke with  noted that their workforce policies permit them to flexibly hire, fire, and  compensate staff as needed. Although employee salaries are established  separately from the government schedule, they are approved by the  government. Further, officials noted that university centers typically offer  salaries in line with the labor market, but do not attempt to compete on a  salary basis with relatively high, unaffordable private sector company  salaries. Instead, they compete on the basis of other factors, such as  offering scientists the opportunity to work for a prestigious university  conducting science and technology research.", "Research Center Infrastructure: As with personnel matters, research  centers have discretion to manage infrastructure in accordance with the  policies and procedures of their parent institutions. While one center,  Lincoln Laboratory, is located on government property, others primarily  reside on property owned or leased by their parent institutions. According  to agency officials, DOD contributes funding for the use and repair of  these facilities through their contracts with research centers. Officials  noted that Lincoln Laboratory uses military construction funding to pay for  new buildings as it is located on government property.", "Trusted Advisor Role: FFRDCs and UARCs function as trusted advisors  for the government and operate in the public interest with objectivity and  independence. FFRDCs are independent, private-sector, non-profit  organization units required to be free from personal or organizational  conflicts of interest, as the FFRDCs answer to the government customer.  As a result, DOD\u2019s lab FFRDCs perform tasks that are closely associated  with the performance of inherently governmental functions and have  access to sensitive and proprietary data."], "subsections": []}, {"section_title": "DOD-Sponsored Research Centers Are Limited in the Amount of Work They Can Perform for DOD, According to Research Center Officials", "paragraphs": ["Research center officials noted challenges limiting their work providing  scientific expertise to DOD. FFRDCs are also limited in executing  infrastructure investments.", "Limitation on Available Work Hours: DOD FFRDCs are limited by an  annual ceiling set by Congress on the amount of staff years of technical  effort (STE) that may be funded for defense FFRDCs. We previously  found in October 2008 these limits were imposed in response to concerns  that DOD was inefficiently using its FFRDCs. We found that the STE  workload limitation aimed to ensure that FFRDC work was appropriate  and limited resources were being used for DOD\u2019s highest priorities. As a  result, Software Engineering Institute officials said they decline many  DOD programs\u2019 requests for assistance due to the annual work hour  limitation. Further, officials at the Office of the Secretary of Defense\u2019s  Studies and FFRDC Management Office reported that this limit  significantly constrains the use of DOD\u2019s FFRDCs and that DOD  customer demand for their services is significantly greater than the annual  STE limit. OSD officials indicated that FFRDC related work must be  deferred to later years when these limits are reached, since there are no  other legally compliant alternatives capable of fulfilling these  requirements.", "Infrastructure: FFRDC officials we interviewed identified infrastructure  challenges\u2014including aging facilities and equipment\u2014as hindering their  research and development efforts. For example, many buildings at the  Massachusetts Institute of Technology (MIT) Lincoln Laboratory are over  60 years old; MIT considers over half of them to be in substandard  condition. According to an MIT official, these facilities, located on  government property, were not structurally designed for modern research  and have relatively poor vibration isolation, resulting in inefficient  workarounds or work that could not be performed. Officials from the  Defense Laboratories Office noted that the MIT Lincoln Laboratory is  unique among DOD\u2019s FFRDCs in that it is operated on government- owned property.", "A 2013 study, conducted on behalf of the White House Office of Science  and Technology Policy, found that lab infrastructure project funding  proposals must compete with hospitals, barracks, runways, and roads  and, therefore, tend to be lower on the priority list for military construction  funding. A 2017 Defense Science Board report and DOD officials we  spoke with indicated this continues to be true. While contract research  centers have significant flexibility to execute infrastructure work, they are  still affected by limited availability of military construction funding. Officials  at another center noted that in some instances, DOD sponsors have been  unable or slow to provide required secure facilities and equipment within  needed time frames. Delays of this nature can affect the research  centers\u2019 ability to deliver the technologies or related services needed by  DOD."], "subsections": []}]}, {"section_title": "Energy and Space Research Centers Follow Different Governance Approaches, but Exhibit Similar Benefits and Challenges", "paragraphs": ["The Department of Energy (Energy) primarily relies on contractor- operated FFRDCs to operate its labs, while the majority of NASA labs  and centers are government-operated. Energy\u2019s national labs form the  core of the agency\u2019s scientific work and mission. This is in contrast to  DOD-funded labs, which constitute a relatively small aspect of DOD\u2019s  overall mission. We have previously found that Energy\u2019s labs can use  funding for minor infrastructure improvements. NASA centers can also  approve and fund certain facility projects, in accordance with NASA  policies, and they have encountered significant challenges with aging  infrastructure. Also, in some cases, energy and space research centers  have significant challenges with hiring replacement staff and competing  with private sector employers for staff. Energy\u2019s labs can hire scientific  personnel with the flexibility of private companies, while NASA centers  were previously provided hiring flexibilities by Congress in 2004 to  facilitate staff hiring.", "While Energy and NASA\u2019s research entities follow their specific  governance models, there are broad characteristics common across  these agencies as well as DOD. Table 2 illustrates that while research  centers are largely government-owned, the government is not always the  operator."], "subsections": [{"section_title": "Department of Energy Primarily Uses Contractors to Operate National Labs and Manage Scientific Expertise", "paragraphs": ["As we have reported, Department of Energy national labs are primarily  operated by for-profit, non-profit and university FFRDC contractors using  management and operating contracts, which are competed on a limited  basis. Energy\u2019s funding sponsors and headquarters officials are  required to reevaluate FFRDC performance in increments not to exceed 5  years by federal acquisition regulations, which inform future decisions to  renew the agreement. In 1990, we designated Energy\u2019s contract  management\u2014including both contract administration and project  management\u2014a high-risk area because of Energy\u2019s inadequate  management and oversight of contractors, leaving the department  vulnerable to fraud, waste, abuse, and mismanagement. In 2009, we  subsequently narrowed the focus of Energy\u2019s high-risk designation to the  National Nuclear Security Administration and Office of Environmental  Management, which together oversee four national labs. Further, in our  2017 High Risk report, we found that these two agencies had made  progress in addressing our contract management concerns, but we  identified continued problems with the agencies having sufficient capacity  to mitigate contract and project management risks. Also, we found that  they had demonstrated little progress in addressing contract management  challenges, particularly in the area of financial management."], "subsections": [{"section_title": "Energy\u2019s Lab Contractors Manage Nearly All the Agency\u2019s Scientific Expertise", "paragraphs": ["The Department of Energy uses performance-based management and  operating contracts, which have been subject to limited competition, with  universities, non-profit companies and for-profit companies to operate the  national labs on government-owned property. These contractor-operated  FFRDCs provide the vast majority of Energy\u2019s science and technology  capacity, rather than supplementing the work of government-operated  labs like DOD\u2019s FFRDCs. Energy has depended on the expertise of  private organizations to execute its science and technology work since  the Manhattan Project produced the first atomic bomb during World War  II.", "The Spallation Neutron Source is an  experimental research facility at Oak Ridge  National Laboratory\u2014a government-owned  contractor-operated laboratory. The Spallation  Neutron Source includes the world\u2019s most  powerful pulsed-neutron sources and provides  information about the structure and properties  of materials that cannot be obtained by other  means. The Spallation Neutron Source is a  user facility whereby researchers from  universities, national laboratories, and  industry submit proposals, which are peer- reviewed and must compete for time at the  user facility.", "The primary focus of each lab varies based on its expertise and facilities.  Energy largely oversees its lab contractors through its headquarters  program offices, which include the National Nuclear Security  Administration, Office of Science, the Office of Fossil Energy, as well as  co-located government field offices. Office of Science-sponsored labs  primarily support scientific research for energy and physical sciences,  while the National Nuclear Security Administration-sponsored (NNSA)  labs primarily focus on nuclear weapons and related science and  technologies. Energy also oversees its lab contractors\u2019 activities through  on-site Energy oversight offices that work alongside lab management at  each FFRDC. Some labs specialize in earlier-phase science, while other  labs work on later-phase nuclear weapons technologies in addition to  earlier-phase science. As Figure 10 shows, these labs are spread across  the United States.", "Energy has only one government-operated and government-owned lab,  the National Energy Technology Laboratory. Key differences between  Energy\u2019s contractor-operated and government-operated governance  models are described in table 3.", "Energy\u2019s FFRDCs use their own personnel systems, which Energy  officials stated provide more flexibility for hiring and retaining qualified  staff. Management within these FFRDCs can move staff in or out of  scientific areas more quickly than government labs can, thereby providing  greater agility to meet Energy\u2019s needs in emerging science areas. For  example, Energy\u2019s lab oversight staff at Oak Ridge National Laboratory  told us that use of lab contractors\u2019 human resources management  systems allows for workforce flexibilities to meet Energy\u2019s needs. While  these contractors have leeway in managing their human resources  systems, Energy\u2019s headquarters maintains oversight\u2014through its  contracting officers\u2014over employee compensation."], "subsections": []}, {"section_title": "FFRDC Contractors Manage Most Energy Labs\u2019 Infrastructure", "paragraphs": ["Energy\u2019s FFRDC contractors manage and operate nearly all of the  department\u2019s government-owned national lab facilities\u2014including day-to- day management of government-controlled facilities and real property.  Lab operators used funding to complete minor construction projects,  which cost $10 million or less. This funding comes from a percentage of science and technology projects\u2019 funding, requires local Energy oversight  office approval, and has streamlined project management requirements.  In contrast, major infrastructure upgrades are funded through relatively  long and complex line-item funding processes, and projects over $50  million are subject to more rigorous project management requirements."], "subsections": []}, {"section_title": "Energy\u2019s Lab Contractors Have Limited Discretion to Initiate Scientific Projects", "paragraphs": ["Energy\u2019s labs use a small portion of their funding to initiate discretionary  projects for science and technologies that will benefit sponsors in the  long-term by maintaining the scientific and technical vitality of the  laboratories. To maintain and enhance lab expertise, the National  Defense Authorization Act for Fiscal Year 1991 authorized Energy\u2019s  contractor-operated labs receiving funding for national security programs  to use a percentage of lab funds to perform lab-directed R&D of a  creative and innovative nature. The actual percentages allowed to be  used for lab-directed R&D are subject to Energy\u2019s approval.", "Energy\u2019s entities sponsor most national lab projects based on their needs  and lab expertise. Typically, earlier foundational science projects are  funded through a process whereby funding sponsors issue calls for  proposals to Energy\u2019s national labs. Interested scientific teams at labs  provide proposals to conduct these projects for sponsor consideration.  Sponsors then assess proposals for scientific merit and decide which  teams receive funding to execute their projects. NNSA provides funding  for later-phase nuclear technology development projects to its labs after  agreement is made regarding objectives and deliverables for specific  projects, according to Lawrence Livermore National Laboratory officials."], "subsections": []}, {"section_title": "Energy\u2019s Lab Officials Identified Challenges Despite Management Flexibilities", "paragraphs": ["Despite their flexibilities with regard to hiring and infrastructure decisions  compared to government operated labs, Energy\u2019s lab leadership and  government oversight officials noted human resource and facilities related  challenges, such as:", "Sufficiently compensating staff located in high-cost of living  areas. For example, the labor market of the San Francisco area,  where several Department of Energy national labs are located, is  highly competitive for employers. Commercial firms offer salaries and  compensation that typically exceed those of government-funded,  contractor-operated labs, although Energy\u2019s contractors have more  pay flexibility than is allowed for Energy\u2019s government employees.", "Obtaining government clearances in a timely manner. Energy\u2019s  NNSA oversight officials and lab management staff, in particular, cited  this challenge, which they stated has led to a backlog of people  needing clearances.", "Government hiring freeze constraining overall hiring. Officials at  Energy\u2019s government-operated National Energy Technology  Laboratory reported that as a result of a government hiring freeze, the  lab has increasingly hired private contractor staff to the point that  more than half of the total lab staff is now comprised of contractor  employees.", "Major infrastructure challenges at Energy labs. Energy reported in  July 2018 that over half of all national lab buildings are in either  substandard or inadequate condition. The Energy Inspector General  also identified infrastructure modernization as one of Energy\u2019s top  management challenges. This finding followed a mandated  commission\u2019s report in 2015 that facilities and infrastructure across  Energy\u2019s national lab network were hampered by high levels of  deferred maintenance and excess facilities."], "subsections": []}]}, {"section_title": "NASA Research Centers Are Primarily Governed as Government-Operated Entities", "paragraphs": ["The majority of NASA\u2019s science and technology facilities are operated  within the governance framework of government-operated research  centers, similarly to most DOD labs. While government-operated, they  have been granted additional legislative flexibilities for hiring employees  beyond those normally available to government entities.", "NASA locates its science and technology staff at four government- operated research centers, one contractor-operated FFRDC, and at  five NASA centers assisting space and space flight development.  These centers and the Jet Propulsion Laboratory\u2014NASA\u2019s sole  sponsored FFRDC\u2014execute NASA\u2019s research missions including  technology development in exploration and aeronautics. The  differences between these two governance approaches are described  in Table 4. NASA also works with Johns Hopkins University Applied  Physics Lab, a UARC, to develop major space flight missions.", "The NASA Glenn Research Center\u2014a government- operated laboratory\u2014is currently developing solar  electric propulsion technologies intended to allow  manned and unmanned spacecraft to be propelled  far beyond earth orbit using solar power. This project  is developing large, flexible, radiation-resistant solar  arrays that can be unfurled to capture solar energy  powering fuel-efficient electrostatic thrusters.  Scientists expect a system-level flight test within the  next decade to demonstrate key technologies  supporting NASA\u2019s Lunar Orbital Platform-Gateway  project, a platform to mature necessary short- and  long-duration deep space exploration capabilities.", "Headquarters,  including funding  sponsors providing  oversight for their  individual projects.", "Title 51, Chapters  201 and 203 of  U.S. Code  and technology efforts  with DOD and other  organizations, including  use of NASA lab and test  facilities.", "Operated by university  contractor having sole  source contract.", "Not permitted to compete  against industry, except  for operation of an  FFRDC. property (originally part  of DOD). 5-year  contract renewable to  10 years total.", "Headquarters,  including funding  sponsors providing  oversight for their  individual projects.", "Title 51, Chapters  201 and 203 of  U.S. Code; 10  U.S.C. \u00a7 2304 (c)  (3)(B) ; Federal  Acquisition  Regulation \u00a7  35.017  based NASA  oversight staff. sponsors seeking FFRDC  assistance with NASA  approval.  \u201cLab\u201d as used in this context refers to science and technology organizations equivalent to NASA  Research Centers, DOD UARCs and FFRDCs.", "Mission leadership officials at NASA Headquarters\u2014including the  Associate Administrators for Aeronautics Research, Human Exploration,  Science and Space Technology\u2014oversee NASA\u2019s research centers as  well as the Jet Propulsion Laboratory. These officials are responsible for  technology programs providing funds to research centers and the Jet  Propulsion Laboratory to support their specific mission areas. NASA\u2019s  science and technology project portfolios are based on the requirements  and priorities established by NASA\u2019s leaders in collaboration with key  stakeholders in academia and industry among others. In planning their  science and technology work, NASA\u2019s Glenn Research Center officials  noted that NASA research center directors consider the capabilities and  resources\u2014including staff and facilities\u2014of other research centers to  minimize redundant work."], "subsections": [{"section_title": "NASA Has Flexibilities for Managing Its Scientist Workforce", "paragraphs": ["NASA depends on a highly skilled civil servant and contractor workforce  to plan and execute its missions. Congress provided NASA with  additional human resource authorities beyond those otherwise allowed for  federal government personnel through the NASA Flexibility Act of 2004.  We found in September 2008 that NASA sought this flexibility to ensure  that it could hire and retain the workforce it desired. This law consisted  of multiple provisions to address a range of human capital challenges and  to strengthen all levels of the workforce. The provisions included  incentives\u2014including compensation\u2014to allow NASA to compete  successfully in the labor market with the private sector and reshape its  workforce more effectively to support the Agency\u2019s mission. NASA also  employs a significant contractor workforce across its different centers."], "subsections": []}, {"section_title": "NASA Scientific Projects Are Mostly Funded According to NASA\u2019s Priorities", "paragraphs": ["Glenn Research Center officials we interviewed stated their portfolio of  science and technology projects\u2014and funding\u2014mostly aligns with  NASA\u2019s top requirements and priorities. They, along with NASA sponsors,  create technology roadmaps and investment plans to determine their  future projects. NASA policy requires that NASA\u2019s scientific teams offer  proposals for potential research and science and technology projects.  This is similar in some ways to how many DOD and Energy centers must  find sponsors willing to fund specific technology development projects,  rather than receiving technology development funding for a given year.  These proposals are reviewed by peer review teams, who identify for  selecting officials those proposals they believe have the most scientific  merit. Ames Research Center officials said they believe this process can  foster innovation, encourage employees to keep skills honed, and  mitigate complacency.", "Glenn Research Center officials said that while most of the work they  conduct is for sponsored applied research or advanced technology  development, about 2 percent of their science and technology budget is  spent on early-stage scientific innovation. Recommended projects of this  nature proposed by the research center are typically approved by  headquarters officials, according to these Glenn officials. NASA provides  technical grants for basic research and applied science to university  scientists nationwide on a competitive basis, and also funds similar  research done internally at research centers."], "subsections": []}, {"section_title": "NASA Officials Identified Workforce and Infrastructure Challenges", "paragraphs": ["As with DOD and Energy\u2019s research centers, NASA officials have  identified some key operating challenges, including:", "Aging infrastructure and facilities. The NASA Inspector General  listed infrastructure area as one of the top five management and  performance challenges facing NASA. Further, the Inspector General  identified deficiencies with facilities planning and reported that about  80 percent of facilities at three of four NASA research centers are  over 50 years old, while about half of the facilities at the Jet  Propulsion Laboratory and the fourth research center are that old.  Infrastructure projects and upgrades of $1 million or less are  undertaken by research center management instead of at the NASA  headquarters level. Construction above this threshold has significantly  more requirements and is approved by NASA headquarters. Glenn  Research Center officials indicated it is difficult to obtain funding for  projects that exceed the minor infrastructure threshold, in part, due  competition with major construction of facilities proposals from across  the agency for limited funds. As a result, they put most of their efforts  into sustaining existing infrastructure.", "Workforce shortages in key technical areas. As we found in May  2018, NASA has experienced workforce challenges on several major  projects such as the Mars 2020 and Europa Clipper projects. Also,  over 40 percent of NASA\u2019s workforce is either eligible to retire now or  will be eligible in the next 5 years. NASA headquarters officials noted  that NASA\u2019s workforce is aging because NASA has a low attrition  rate\u2014about 4 percent annually\u2014and high numbers of staff stay  several years beyond retirement. Further, in 2017, the NASA  Inspector General found gaps in NASA\u2019s workforce planning for  specific capability areas and how workforce plans would meet future  needs, and recommended that NASA establish standardized  guidance defining the data and analyses for these planning efforts.  NASA concurred with and identified its plan to implement this  recommendation. However, NASA has not implemented this  recommendation, according to the NASA Inspector General\u2019s latest  semiannual report to Congress."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Congress provided DOD lab directors with key authorities to foster  targeted, timely investments in the most pressing technology areas. Lab  directors have used these authorities\u2014such as laboratory initiated  research and direct hire authorities\u2014to varying degrees, but more needs  to be done to facilitate innovation and efficiency. Specifically, service  specific obstacles in the Air Force, Navy, and Army impede lab directors  from capitalizing on laboratory initiated research authority to a greater  extent. Service leadership can take actions to better understand and  potentially remove barriers to more fully use laboratory initiated research  tools."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DOD:  The Secretary of the Air Force should assess the potential costs and  benefits of implementing accounting system improvements that would  allow the Air Force Research Laboratory to charge customers a fixed  percentage fee on provided science and technology activities to the  extent allowed under the laboratory initiated research authority.  (Recommendation 1)", "The Secretary of the Navy should clarify whether and how to use the  laboratory initiated research authority within the Capital Investment  Program. (Recommendation 2)", "The Secretary of the Army should assess existing Army policy for  laboratory initiated research authority and determine whether to  implement changes to eliminate disincentives for lab usage of the  authority. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOD, Energy, and NASA for review  and comment. Energy and NASA did not provide any comments on the  draft report. In DOD\u2019s written comments, reproduced in appendix III, DOD  concurred with our three recommendations. Further, in its response to our  third recommendation, DOD stated that the Army plans to initiate a study  by January 2, 2019, regarding its use of the laboratory initiated research  authority. According to DOD, the Army\u2019s study will identify potential  opportunities for policy improvements.", "We are sending copies of this report to the appropriate congressional  committees and offices; the Secretary of Defense; the Secretaries of the  Army, Navy, and Air Force; the Secretary of Energy; and the NASA  Administrator. In addition, the report will be made available at no charge  on the GAO website at http://www.gao.gov.", "If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841. Contact points for our offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Staff members making key contributions to the report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) how the Department of Defense (DOD) labs  have used selected legislative authorities to foster innovation and  efficiency and identify what barriers impede their use; (2) identifies and  describes governance models used by selected DOD-sponsored federally  funded research centers and university affiliated research centers; and (3)  identifies and describes governance models used non-defense labs,  specifically at the Department of Energy (Energy) and National  Aeronautics and Space Administration (NASA).", "To address the first objective, we selected four specific authorities for our  review based on previous work identifying science and technology best  practices and expedited lab hiring:", "Laboratory Initiated Research Authority. The authority provided in  Section 219 of the Duncan Hunter National Defense Authorization Act  for Fiscal Year 2009, as implemented, provides lab directors with  flexibility to fund projects in four allowable categories: basic and  applied research; technology transition; workforce development; and  revitalization, recapitalization, or repair or minor military construction  of lab infrastructure.", "Laboratory Enhancement Pilot Program. Section 233 of the  National Defense Authorization Act for Fiscal Year 2017 established a  pilot program for lab directors to propose alternative and innovative  methods that might lead to more effectively managing and operating  labs and authorized lab directors to waive any regulation, restriction,  requirement, guidance, policy, procedure, or departmental instruction  that would affect implementation of these methods unless such  implementation would be prohibited by a provision of an existing  statute or common law.", "Direct Hire Authority. Four types of direct hire authorities authorized  by Congress since 2008 are intended to provide a streamlined and  accelerated hiring process to allow the labs to successfully compete  with private industry and academia for high-quality scientific,  engineering, and technician talent.", "Micro-purchase Authority. The Federal Acquisition Regulation  states a preference for government agencies, to purchase and pay for  micro-purchases of supplies or services using the government-wide  commercial purchase card up to and at the micro-purchase threshold,  but micro-purchases may be conducted using any of the simplified  acquisition methods. While the FAR micro-purchase threshold was  generally  $3,500 at the time of our review, Congress increased this  threshold to $10,000 for activities of DOD science and technology  reinvention laboratories in Section 217 the National Defense  Authorization Act for Fiscal Year 2017.", "Although Congress has provided additional legislative authorities to  defense lab directors to address hiring, infrastructure, and technology  transition challenges, the authorities that we covered in our review are the  ones that our prior and current work have shown are currently, or have  the potential to be, the most critical for supporting science and technology  reinvention laboratories\u2019 innovation mission within DOD labs. DOD lab  leaders use these authorities to flexibly fund projects intended to facilitate  research and development; propose alternative and innovative methods  that might lead to more effective lab management; directly hire personnel  at DOD labs including students currently enrolled in science, technology,  engineering, and mathematics (STEM) programs; and expand critical  science and technology purchases using simplified acquisition methods.", "To identify the extent to which DOD laboratories have used these  authorities as well as to identify what potential barriers existed to using  these authorities, we administered a survey to 44 STRL directors (or their  equivalent) to collect information on the use of these specific authorities,  their perceptions about the effectiveness of those authorities, and their  perceptions about any barriers to using these authorities. The members  of the population surveyed were the 44 defense laboratories defined as  science and technology reinvention laboratories. For the purposes of our  review, we defined laboratories as inclusive of Air Force technical  directorates (10), Army warfare centers (17), and Navy warfare centers  (17). We emailed questionnaires to the laboratories beginning in late  March 2018, and survey data collection ended in early May 2018, with 31  labs returning completed questionnaires, for an overall response rate of  71 percent at the laboratory level.", "We took steps to minimize the potential errors that the practical difficulties  of conducting any survey may introduce. Nonresponse error can result  when a survey fails to capture information from all population members  selected into a survey sample. Of the 13 questionnaires not returned, 4  were Army warfare centers, and 9 were Air Force research directorates.  Throughout the data collection period, we made multiple follow-up  attempts by email and phone to those labs not yet responding. The Air  Force Research Laboratory (AFRL) provided a single survey response for  the entire laboratory enterprise. Not all returned questionnaires may have  answers to every question applicable to a respondent. However, this  question-level nonresponse did not exceed one for any of the questions  applicable to all 31 labs. Because we selected the entire population of  laboratories for our survey, our estimates are not subject to sampling  error. We developed our list of the 44 labs in our population in  consultation with DOD, and are confident that none were left out, so our  or survey has no known sources of coverage error. We conducted  pretests of the draft questionnaire with 3 laboratories in the population  and made revisions to reduce the possibility of measurement error from  differences in how questions were interpreted and the sources of  information available to respondents. After reviewing the answers  received, we also followed up as necessary with respondents to clarify  apparent inconsistencies or other possible misreports, and made changes  to responses where corrections were needed. A second, independent  analyst checked the accuracy of all computer analyses to minimize the  likelihood of errors in data processing.", "To obtain additional information on this objective, we reviewed relevant  legislation which established or amended these authorities and reviewed  applicable DOD and service policy documentation. Further, we collected  military service related information on the usage of two authorities, such  as:", "Spending data on the use of the laboratory initiated research  authority. We gathered this information from DOD-mandated reports  to Congress on the use of this authority and military service officials.  We determined these data to be reliable based on reviews of agency  documentation collected and interviews with agency officials.", "Data on the usage of direct hire authorities by the service laboratories.", "We collected direct hire data from each of the military services  including the number of direct hire authority candidates hired as well  as the number of direct hire positions the laboratories were authorized  to hire. We determined these data to be reliable based on reviews of  agency documentation collected and interviews with agency officials.  We also used select findings from our May 2018 report where we  evaluated DOD\u2019s use of hiring authorities, including direct hire  authority. More information about the scope and methodology of our  prior work can be found in that report.", "In addition, we also collected information on military service proposals to  utilize the laboratory enhancement pilot program authority.", "To obtain further information on department- and service-level  involvement in and perspectives of defense laboratory authorities and  challenges, we interviewed officials responsible for the management,  execution, and oversight of DOD\u2019s science and technology enterprise,  including military service labs. At the Office of the Secretary of Defense  and military department headquarters level, those responsible for the  management and oversight of science and technology activities, we met  with officials from the:", "Office of the Assistant Secretary of Defense for Research and", "DOD Defense Laboratories Office;", "Office of the Deputy Assistant Secretary of the Army for Research and", "Office of the Deputy Assistant Secretary of the Air Force for Science,  Technology, and Engineering;", "Office of the Assistant Secretary of the Air Force for Financial", "Office of the Deputy Assistant Secretary of the Navy for Research,  Development, Test, and Evaluation; and", "Office of the Budget, within the Office of the Assistant Secretary of the  Navy for Financial Management and Comptroller  We also met with military department lab officials responsible for the  management and execution of science and technology activities from the:", "Army Research, Development and Engineering Command;", "Army Research Laboratory;", "Army Aviation and Missile Research, Development, and Engineering", "Air Force Research Laboratory;", "Naval Research Laboratory;", "Naval Surface Warfare Center, Headquarters; and", "Naval Surface Warfare Center, Carderock Division  To identify and describe governance models used by selected DOD- sponsored federally funded research centers (FFRDCs) and university  affiliated research centers (UARCs), we focused our review on the 3  FFRDCs designated as research and development labs as well as all 13  UARCS sponsored by DOD entities. We reviewed appropriate sections  of the FAR language related to FFRDCs and UARCs, DOD guidance for  working with FFRDCs and UARCs, relevant contracts, and performance  assessments. Further, we met with officials from the office of the Deputy  Director, OSD Studies and Federally Funded Research & Development  Centers Management and Office to discuss overall FFRDC and UARC  management, policies, and challenges facing FFRDCs and UARCs. We  interviewed officials at selected research and development FFRDCs and  UARCS to discuss their experience conducting DOD research and  interactions with their customers, such as defense program executive  offices. We met with officials at the two major research and development  lab FFRDCs\u2014The Lincoln Laboratory at the Massachusetts Institute of  Technology (MIT) and the Software Engineering Institute at Carnegie  Mellon University. We also selected a university affiliated research  center sponsored by the Army and Navy: The Applied Physics Laboratory  at Johns Hopkins University and the Institute for Soldier  Nanotechnologies also at the MIT.", "To identify and describe governance models by non-defense labs, we  selected Energy and NASA to focus our efforts. We identified 17 Energy  national labs and 4 NASA research centers conducting basic and applied  research similar to DOD labs. These agencies, along with DOD,  represent 3 of the top 4 agencies in terms of average federal research  and development spending from fiscal years 2015 to 2017. In our August  2016 GAO Technology Readiness Assessment Guide, we drew heavily  from DOD, NASA, and Energy for best practices, terminology, and  examples. This contributed to our decision to focus on Energy and  NASA\u2019s research entities in this laboratory governance review. We did not  include the fourth agency\u2014the National Institutes of Health\u2014in our  review because it is not as similar to DOD. We also reviewed relevant  Energy and NASA guidance as well as relevant FAR sections.", "At Energy, we met with officials from the National Nuclear Security  Administration which is semi-autonomous entity within Energy  responsible for managing the nation\u2019s nuclear weapons and nuclear  security. We also met with Officials from the Office of Science, a program  office responsible for supporting energy related fundamental science and  research. To gain further insights on operating structures, funding  arrangements, and their overall experience we met with lab leadership at  selected Energy labs which were chosen based on initial discussions with  agency officials and our review of past GAO work:", "Oak Ridge National Laboratory,", "Lawrence Berkeley National Laboratory,", "Lawrence Livermore National Laboratory, and", "National Energy Technology Laboratory (the sole Energy government  owned and operated laboratory)", "We also met with leadership from Battelle Memorial Institute, which is the  sole or joint contract manager for five Energy national labs including Oak Ridge National Laboratory. In addition, Battelle is an integrated  subcontractor at Lawrence Livermore National Laboratory.", "At NASA, we met with officials with NASA\u2019s Science Mission Directorate  and Mission Support Directorate to discuss overall research center  management and operations. We also leveraged ongoing and recently  completed work at GAO to gain additional insight on NASA\u2019s operations  such as human capital management. Almost all of NASA\u2019s research,  space, and space flight centers conduct research and development  activities. However, we focused our review on four research centers  where NASA primarily conducts its aeronautics research, which has  substantial overlap with DOD activities. To gain additional insight into the  experience of lab leaders at NASA research centers, we met with officials  at NASA\u2019s Glenn Research Center and Ames Research Center. In  addition, we also met with officials at the NASA Jet Propulsion Center,  which is the only NASA-sponsored FFRDC.", "We conducted this performance audit from July 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Funding for Selected External DOD Sponsored Research Centers", "paragraphs": ["Office of the Secretary of  Defense (OSD)"], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Christopher R. Durbin (Assistant  Director); Charlie Shivers, III (Analyst-in-Charge); Emily Bond; Lorraine  Ettaro; Carl Ramirez; Sylvia Schatz; Sean Seales; Brian Smith; and Robin  Wilson made significant contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Defense relies on its laboratories to help keep the military on the cutting edge of technology. Congress has given DOD's labs special \"authorities\"\u2014flexibilities that lab directors can use to foster innovation and improve efficiency.", "We looked at how DOD labs use authorities to:", "fund high priority research projects", "speed up lab hiring processes", "manage labs with greater efficiency and less red tape", "make small purchases to support lab activities more quickly", "While labs have taken advantage of most of these authorities, we recommended that they find ways to maximize their use."]}
{"id": "GAO-18-661T", "url": "https://www.gao.gov/products/GAO-18-661T", "title": "VA Disability Benefits: Some Progress, but Further Steps Needed to Improve Appeals Reform Planning", "published_date": "2018-07-24T00:00:00", "released_date": "2018-07-24T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["VA's disability compensation program pays cash benefits to veterans with disabilities connected to their military service. In recent years, the time needed to complete appeals of VA's decisions on claims has increased. For appeals resolved in fiscal year 2017, veterans waited an average of 3 years. The subset of appeals resolved by the Board of Veterans Appeals\u2014a separate VA agency that provides a higher level of appeals review\u2014took on average 7 years to resolve.", "The Veterans Appeals Improvement and Modernization Act of 2017 makes changes to VA's current (legacy) process, giving veterans options to have their claims further reviewed by VA or appeal directly to the Board. The Act requires VA to submit a plan to Congress and GAO for implementing a new appeals process (which VA submitted in November 2017) and periodic updates (which VA submitted in February and May 2018). The Act also includes a provision for GAO to assess VA's original plan.", "In March 2018, GAO found that VA could help ensure successful implementation of appeals reform by addressing gaps in planning and made four recommendations, with which VA agreed. This testimony focuses on the steps VA has taken to address GAO's recommendations and what aspects remain unaddressed.", "For this statement, GAO reviewed VA's May 2018 updated plan, and interviewed VA officials and reviewed information they provided about steps taken to implement GAO's recommendations."]}, {"section_title": "What GAO Found", "paragraphs": ["In a March 2018 report, GAO assessed the Department of Veterans Affairs' (VA) November 2017 plan for changing how veterans appeal disability claim decisions and found that VA could do more to successfully implement these reforms. The March 2018 report made four recommendations to address planning gaps. Since then, VA has updated its plan and taken some steps to address aspects of these recommendations, but further steps are needed:", "Address all legally required elements . GAO reported that VA's plan did not address one and partially addressed four of 22 elements required by the Veterans Appeals Improvement and Modernization Act of 2017 (Act), and recommended VA fully address them all. In a May 2018 update to its plan, VA took steps to address the five elements, such as developing productivity projections and a model to forecast resource needs for processing appeals. These steps address one element related to projecting productivity, and partially address the four remaining elements.", "Articulate performance measurement . GAO also recommended VA clearly articulate how it will monitor and assess the new appeals process relative to the legacy process. This recommendation includes specifying timeliness goals for five new appeals options to be made available to veterans, and additional goals or measures of performance, such as accuracy in processing appeals. VA's updated plan states that the agency will develop goals and measures for all appeals options after fully implementing appeals reform. Contrary to sound planning practices, it does not articulate these performance goals and measures now, which would provide a vision for what successful implementation would look like. Lacking this vision, VA does not have an \u201cend state\u201d to guide its implementation and help establish accountability.", "Augment project plan . GAO recommended VA augment its master schedule for implementing appeals reform to include all key activities and reflect other sound practices for guiding implementation and establishing accountability. Although VA's May 2018 updated master schedule added activities, it omitted a pilot test of the new Board of Veterans' Appeals (Board) options. More generally, the plan does not reflect interdependencies among activities. Until all key activities are accounted for and the master schedule reflects sound practices, VA cannot provide reasonable assurance that it has the essential information needed to manage its appeals reform implementation.", "Address risk fully . GAO recommended that VA's appeals plan more fully address risks in implementing a new process by, for example, testing all appeals options prior to full implementation. In its updated plan, VA stated it will pilot all five new appeals options. By taking these steps, VA should be better positioned to assess implementation risks. However, the updated plan does not have well-defined, measurable criteria for assessing lessons learned from these pilots and does not articulate how well these lessons translate to a broader context. Taking these steps would improve VA's ability to assess and mitigate risks as it implements its reforms."]}], "report": [{"section_title": "Letter", "paragraphs": ["I appreciate the opportunity today to provide an update on the  Department of Veterans Affairs\u2019 (VA) plans for implementing a new  disability appeals process while still attending to appeals under the  current, or legacy, process.", "VA provides cash benefits to veterans for disabling conditions incurred in  or aggravated by military service, paying about $72 billion to about 4.5  million veterans in fiscal year 2017. If veterans are dissatisfied with VA\u2019s  initial decision they can appeal\u2014first to the Veterans Benefits  Administration (VBA) and then, if not satisfied there, to the Board of  Veterans\u2019 Appeals (Board), a separate agency within VA. For appeals  resolved in fiscal year 2017, veterans waited an average of approximately  3 years from the date they initiated their appeal to resolution by either  VBA or the Board\u2014and an average of 7 years for appeals resolved by the  Board. Due in part to the challenges VA faces managing large workloads  and deciding disability claims and appeals in a timely manner, GAO in  2003 designated VA disability compensation, along with other federal  disability programs, as one of the government\u2019s highest risk areas.", "The Veterans Appeals Improvement and Modernization Act of 2017 (Act)  makes changes to VA\u2019s disability appeals process by replacing the  current appeals process with one that gives veterans various options for  further review by VBA or to bypass VBA and appeal directly to the  Board. The Act further requires VA to submit a comprehensive plan for  implementing the new appeals process to the appropriate committees of  Congress and GAO. (VA submitted its plan to GAO on November 22,  2017.) The Act delineates 22 legally required elements of this plan. In  addition, the Act requires VA to provide progress reports to the  appropriate committees of Congress and GAO at least every 90 days,  until the Act\u2019s changes to the appeals process generally go into effect and  then at least every 180 days after this date for 7 years. VA submitted  progress reports in February and May 2018, and its next progress report  is due in August 2018.", "The Act also includes a provision for GAO to assess whether VA\u2019s  appeals plan comports with sound planning practices and identify any  gaps in the plan. In our March 2018 report assessing VA\u2019s plan, we  concluded that while VA\u2019s November 2017 plan reflected aspects of  sound planning, improvements in planning are still needed to ensure  successful appeals reform. We recommended VA\u2019s plan (1) address all  legally required elements in the Act; (2) articulate how it will monitor and  assess the performance of appeals processes; (3) augment its project  plan for implementation; and (4) address risk more fully. VA agreed with  our recommendations. Subsequently, in April 2018 we designated two of  our four recommendations\u2014monitoring and assessing performance as  well as addressing risks\u2014as \u201cpriority recommendations\u201d for VA to  implement.", "My statement today addresses VA\u2019s progress in implementing the four  recommendations. Specifically, it summarizes steps VA has taken to  address GAO\u2019s recommendations identified in our March 2018 report,  and what aspects of our recommendations that VA has yet to address.", "For this statement, we reviewed VA\u2019s May 2018 updated appeals reform  plan and information we received from VA officials about any significant  steps taken to implement our March 2018 recommendations. We also  interviewed relevant VA officials and reviewed information related to VA\u2019s  progress in addressing four related recommendations from work that we  conducted prior to enactment of the Act. The work upon which this  statement is based was conducted 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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "VA\u2019s Current Disability Compensation Appeals Process", "paragraphs": ["VA\u2019s process for deciding veterans\u2019 eligibility for disability compensation  begins when a veteran submits a claim to VA. Staff in one of VBA\u2019s 56  regional offices assist the veteran by gathering additional evidence, such  as military and medical records, that is needed to evaluate the claim.  Based on this evidence, VBA decides whether the veteran is entitled to  compensation and, if so, how much. A veteran dissatisfied with the initial  claim decision can generally appeal within 1 year from the date of the  notification letter sent by VBA.", "Under the current appeals process (now referred to by VA as the legacy  process), an appeal begins with the veteran filing a Notice of  Disagreement. VBA then re-examines the case and generally issues a  Statement of the Case that represents its decision. A veteran dissatisfied  with VBA\u2019s decision can file an appeal with the Board. In filing that  appeal, the veteran can indicate whether a Board hearing is desired.", "Before the Board reviews the appeal, VBA prepares the file and certifies it  as ready for Board review. If the veteran requests a hearing to present  new evidence or arguments, the Board will hold a hearing by  videoconference or at a local VBA regional office. The Board reviews the  evidence and either issues a decision to grant or deny the veteran\u2019s  appeal or refers (or remands) the appeal back to VBA for further work."], "subsections": []}, {"section_title": "VA\u2019s New Appeals Process", "paragraphs": ["The Act made changes to VA\u2019s appeals process that will generally take  effect no earlier than February 2019, which is approximately 18 months  after enactment. According to its appeals plan, VA intends to implement  the Act by February 2019, by replacing the current appeals process with a  process offering veterans who are dissatisfied with VBA\u2019s decision on  their claim five options: two of those options afford the veteran an  opportunity for an additional review of VBA\u2019s decision within VBA, and the  other three options afford them the opportunity to bypass additional VBA  review and appeal directly to the Board.", "Under the new appeals process, the two VBA options will be:  1. Request higher-level review: The veteran asks VBA to review its initial decision based on the same evidence but with a higher-level official reviewing and issuing a new decision. 2. File supplemental claim: The veteran provides additional evidence and files a supplemental claim with VBA for a new decision on the claim. The veteran could also request a VBA hearing.", "The three Board options will be:  3. Request Board review of existing record: The veteran appeals to the Board and asks it to review only the existing record without a hearing. 4. Request Board review of additional evidence, without a hearing. 5. Request Board review of additional evidence, with a hearing.", "In November 2017, VA initiated a pilot test of the new VBA higher-level  review and supplemental claim options. According to VA\u2019s appeals plan, a  purpose of this pilot\u2014the Rapid Appeals Modernization Program  (RAMP)\u2014is to reduce legacy appeals by providing veterans with a  chance for early resolution of their claims within VBA\u2019s new process.", "Participation in RAMP is voluntary, but veterans must withdraw their  pending legacy appeal to participate, according to VA\u2019s appeals plan."], "subsections": []}]}, {"section_title": "VA Has Addressed Some Aspects of GAO\u2019s Recommendations on Appeals Reform Planning", "paragraphs": ["In our March 2018 report, we found that VA could help ensure successful  implementation of appeals reform by addressing gaps in its planning. We  recommended four actions that VA should take: (1) address all legally  required elements required by the Act; (2) articulate how it will monitor  and assess the performance of the new appeals process compared to the  legacy process, (3) augment its master schedule to manage the project,  and (4) address risk more fully. VA has taken steps in response to all  four, but has not fully addressed our recommendations."], "subsections": [{"section_title": "VA Has Yet to Provide Complete Information on GAO\u2019s Recommendation to Address the Act\u2019s Required Elements", "paragraphs": ["In our March 2018 report, we found that VA\u2019s November 2017 plan for  implementing a new disability appeals process while attending to appeals  under way in the current (legacy) process, addressed most, but not all,  elements required by the Veterans Appeals Improvement and  Modernization Act of 2017. Specifically, we found that VA\u2019s appeals  plan addressed 17 of 22 elements required by the Act. For the five  remaining elements, it partially addressed 4 elements related to  monitoring implementation, projecting productivity, and workforce  planning, and did not address 1 element related to identifying total  resources. This element called for delineating the resources needed by  VBA and the Board to implement the new appeals process and address  legacy appeals.", "We recommended in March 2018 that the Secretary of Veterans Affairs  address all 22 required elements in the Act in VA\u2019s appeals plan to  Congress. This included delineating resources required for all VBA and  Board appeals options using sensitivity analyses and results from the  RAMP test where appropriate and needed.", "Since our 2018 report, VA has taken some action on the five elements  that were not fully addressed. For example, VA\u2019s updated plan added  details related to projecting staff productivity, identifying total resources,  as well as about personnel requirements and projections for processing  legacy appeals. For identifying total resources, VA added FTE information  for other offices that help implement the appeals process and prepared a  model to project resource needs.", "VA\u2019s updated plan, however, continues to only partially address 3  elements related to monitoring implementation and workforce planning,  and now addresses the 1 element related to projecting productivity and  partially addresses the 1 element related to delineating the total  resources. For total resources, VA\u2019s updated plan does not delineate the  total resources required by VBA and the Board. Until VA\u2019s appeals plan  provides complete information on all required elements, Congress may  not have the information needed to conduct oversight of the agency\u2019s  efforts to implement and administer the new process while addressing  legacy appeals."], "subsections": []}, {"section_title": "VA Has Partially Addressed GAO\u2019s Recommendation to Measure, Monitor, and Assess Performance", "paragraphs": ["In our 2018 report, we found that VA could improve its planning practices  related to monitoring and assessing performance on a range of key  dimensions of success. Specifically, the plan had not (1) established  timeliness goals for two of the three Board options (i.e., Board review of  additional evidence without a hearing and Board review of additional  evidence with a hearing); (2) articulated additional aspects of  performance important for managing appeals, such as accuracy of  decisions, veteran satisfaction with the process, or cost; (3) provided  important details about what aspects of the new appeals\u2019 performance  would be compared to what aspects of the legacy process\u2019 performance;  or (4) explained how the agency would monitor whether resources are  being appropriately devoted to both the new and legacy appeals  processes and how it will track both sets of workloads.", "To address these gaps, we recommended that the Secretary of Veterans  Affairs clearly articulate in VA\u2019s appeals plan how VA will monitor and  assess the new appeals process compared to the legacy process. These  include specifying a balanced set of goals and measures with related  baseline data, such as timeliness goals for all VBA appeals options and  Board dockets, and measures of accuracy, veteran satisfaction, and cost.", "In its May 2018 updated plan, VA addressed some but not all aspects of  this recommendation. Specifically:  Timeliness goals and balanced measures. VA\u2019s updated plan states  that the agency is collecting data to inform its development of a complete  and balanced set of measures for all new appeals options (e.g., timely  and accurate processing of appeals while ensuring veteran satisfaction).  VA\u2019s original plan had outlined timeliness goals for the two VBA options  and for the Board option that does not include new evidence or a hearing.  However, VA does not intend to establish timeliness goals or balanced  measures for all options until after fully implementing the new appeals  process. Further, VA officials told us they are working to produce metrics  required under the Act, but have yet to fully articulate a plan for  monitoring. For example, there is not a specific plan to monitor the  accuracy of decisions under or veteran satisfaction with the new  process. Until VA identifies a complete set of timeliness goals and  balanced measures, the agency will not have a way to determine how  well the new process is performing.", "Comparison of new and legacy processes. VA\u2019s updated plan states  that VA is working toward capturing the metrics listed in section 5 of the  Act, which could help VA measure relative performance of the new and  legacy processes. However, VA\u2019s updated plan does not state how VA  will assess whether the new process addresses problems in the legacy  process. For example, according to VA\u2019s updated plan and agency  officials we interviewed, VA believes it cannot measure the timeliness of  legacy appeals processing from when an appeal is filed to its resolution.  According to VA, developing this measure is not feasible because the  legacy process has no defined endpoint. Submission of additional  evidence by veterans can, at any point, cause additional cycles of re- adjudication. However, VA has not articulated other options for comparing  the timeliness of the new and legacy processes in its May 2018 update to  its plan. Without this assessment, VA cannot determine the extent to  which the new process, which also allows for multiple appeal  opportunities, will achieve final resolution of veterans\u2019 appeals sooner, on  average, than the legacy process. Moreover, VA\u2019s updated plan does not  fully explain how the agency will use the Act\u2019s metrics to assess relative  performance of the new and legacy appeals processes on issues like  accuracy, veteran satisfaction, or cost.", "Monitoring processing of legacy versus new appeals. VA\u2019s updated  plan articulates VA\u2019s intention to use sensitivity and other analyses to  monitor and address workload changes in its legacy and new appeals  processes. These analyses could better position VA to manage the two  parallel processes.", "Nevertheless, VA has not established complete and balanced goals and  measures or developed a plan for comparing the new and legacy  processes. In recent communications on the status of implementing our  recommendations, VA officials indicated they plan to address some of  these monitoring and performance issues in the next update. Until VA  does so, the agency risks not fully understanding whether the new  process is an improvement, or whether veterans with appeals in the  legacy process are experiencing poor results."], "subsections": []}, {"section_title": "VA Has Made Little Progress in Addressing GAO\u2019s Recommendation to Augment Its Master Schedule for Implementation", "paragraphs": ["Our March 2018 report also identified elements of a high-quality and  reliable implementation schedule that were missing from VA\u2019s master  schedule for appeals reform. Specifically, we reported that VA\u2019s master  schedule\u2014which the agency included with its November 2017 plan\u2014did  not (1) include all key activities; (2) show which activities must finish prior  to the start of other activities, or the amount of time an activity could be  delayed before the delay affects VA\u2019s estimated implementation date; (3)  reflect interim goals and milestones for monitoring implementation; or (4)  assign resources for activities.", "We recommended that the Secretary of Veterans Affairs augment the  master schedule for VA\u2019s appeals plan to reflect all activities\u2014such as  modifications to IT systems\u2014as well as assigned responsibilities,  interdependencies, start and end dates for key activities for each  workgroup, and resources. These steps establish accountability and  reduce overall risk of implementation failures.", "In its updated plans, VA took steps to develop interim goals and  milestones for monitoring implementation, among other positive actions,  but the master schedule still included gaps in sound practices for project  management. Specifically:  Key activities and their duration. The updated master schedule VA  provided in its May 2018 plan added activities, but VA continues to  exclude some major activities\u2014including those beyond the planned  February 2019 implementation date\u2014and their duration. For example:  The updated master schedule does not include a small-scale pilot of the new Board options, even though this pilot is occurring at the same time VA is preparing for full implementation. In response to our questions about this issue, as of July 2018, VA officials said they are adding related pilot test activities to the master schedule.", "Many activities in the master schedule have the same label or description, such as \u201ccommunications,\u201d \u201cchange management,\u201d \u201cimplementation,\u201d \u201ctraining,\u201d and \u201chosting,\u201d that do not clearly identify their associated end product without the need to review high-level summary or predecessor activity names.", "The updated master schedule lacks details and transparency regarding Caseflow, the new information technology system for VA\u2019s appeals process. While VA identified the overall functionality and general timing needed for Caseflow, the steps to accomplish them lack specificity. Further, VA\u2019s updated plan indicates Caseflow will be \u201cminimally ready\u201d by the end of calendar year 2018. At a June 2018 meeting with VA, we asked officials to define the term \u201cminimally ready\u201d and what additional activities or functionality, if any, they planned after reaching this milestone. In response, VA officials pointed us to another source that they said outlined the remaining functionality to complete Caseflow. However, when we consulted this source, we could not determine what functionality listed was to be implemented before or after October 2018.", "The updated master schedule also lacks start and finish dates as well as status information (e.g., not started, in planning, in progress, complete, etc.) for many of the activities.", "Sequencing and linkages among activities. VA\u2019s updated plan  provided new details about some sub-activities related to processing  legacy appeals, monitoring implementation, drafting Board policies, and  training. Moreover, the May 2018 updated master schedule was  reorganized to improve its flow and alignment, according to VA officials.  However, the overall updated master schedule generally does not  indicate logical relationships regarding the sequence in which activities  should occur, and whether any delays in one activity will dynamically  affect other activities linked to it. This type of logic is necessary to define  both when an activity may start and finish and when an activity must start  and finish for meeting a specified program completion date. These are  known as early and late dates, respectively. For example, the plan does  not indicate the latest date regulations can fall behind schedule before the  planned February 2019 implementation date is impacted, or related  activities such as training. This sound planning practice is especially  important because VA officials said the agency is concurrently executing  many of the activities. Without logical relationships, the master schedule  is less effective for modeling the impact of delayed or accelerated  activities on related activities, and ultimately for estimating the final  implementation date.", "Interim goals and milestones for monitoring implementation. VA has  taken steps to address this aspect of the recommendation. In addition to  reiterating the use of an agency-wide governance structure to coordinate  implementation of its new appeals process, VA in its updated May 2018  plan added indicators to monitor and assess its readiness for full  implementation. Indicators include monitoring the status of implementing  regulations and information technology as well as considering any  lessons learned through its piloting of the new process. These \u201creadiness  indicators\u201d could help VA better identify potential issues related to  implementation of the new appeals process. However, the master  schedule does not show sequencing and linkages for these indicators.", "Establishing resources. VA\u2019s updated plan states the agency will use  existing resources to implement the new appeals process. Moreover, the  master schedule identifies the \u201cowners\u201d or parts of the organization that  are playing a role in appeals reform, such as the Veterans Health  Administration (VHA). However, other than identifying the \u201cowners\u201d for the  activities, resources needed are not identified for the groups of related  activities identified in the master schedule or for processing legacy and  new appeals processes once implemented in February 2019. By not  estimating these resources, VA\u2019s plan does not illuminate resource  constraints and indicate whether other parts of the organization or  workgroups are dedicated full-time to the tasks or activities for which they  are responsible, or whether other constraints exist on funding or time. In  general, neither the plan nor the master schedule refers to underlying  budget or cost documents or information.", "In recent discussions on the status of implementing our  recommendations, VA officials indicated they plan to address some of  these issues in the August 2018 update. Until all necessary activities are  accounted for, VA cannot be certain whether key activities are scheduled  in the correct order, resources are properly allocated, and key risks have  been identified, among other sound practices for guiding implementation  and accountability. Furthermore, to the extent that the master schedule is  used for internal coordination, the absence of necessary elements could  hinder coordination, increasing the likelihood of disruption or delay."], "subsections": []}, {"section_title": "VA Has Addressed Many, but Not All Aspects of GAO\u2019s Recommendation to More Fully Assess Risk", "paragraphs": ["In our 2018 report, we found that VA\u2019s November 2017 appeals plan  could more fully assess key risks related to implementing the new  appeals process. In particular, we found that VA\u2019s plan did not include  testing of new Board options or clearly define how it would assess the  RAMP pilot test of the VBA-only options before implementing the process  more broadly. Further, we reported that VA\u2019s plan had not  comprehensively reflected key risks because the agency had not  established a complete and balanced set of goals and measures, which  are a necessary pre-condition to effectively assessing risk.", "We recommended the Secretary of Veterans Affairs ensure that the  appeals plan more fully addresses risk associated with appeals reform by,  for example, assessing risks against a balanced set of goals and  measures, articulating an assessment plan for RAMP, and testing or  conducting sensitivity analyses of all appeals options\u2014prior to fully  implementing the new appeals process.", "In its updated May 2018 plan, VA took many steps to address our  recommendation, although opportunities exist to better assess risks  associated with implementing appeals reform and managing appeals  workloads in the legacy process. Specifically:  Testing all aspects of the new appeals process. Since our March 2018  report, VA has taken steps to pilot test the three new Board appeals  options. In its May 2018 updated plan, VA describes a small-scale test  program\u2014the Board\u2019s Early Applicability of Appeals Modernization  (BEAAM)\u2014to collect information about what options veterans choose and  their experiences using the new appeals options. For BEAAM, the Board  is partnering with veterans service organizations to identify 50 veterans  who are dissatisfied with a recent claim decision, and allowing these  veterans to appeal directly to the Board. Participating veterans have  begun opting in, and VA plans to collect information on adjudication of  these appeals. In addition, for veterans dissatisfied with their RAMP  decisions, as of October 2018 the Board will begin adjudicating their  appeals to further test new Board processes and technology.", "VA officials also reported progress with developing new sensitivity  analyses that will allow the agency to change assumptions related to key  variables\u2014both individually and in conjunction with one another. VA  anticipates these analyses will allow the agency to project potential  budget needs and staffing requirements and more accurately predict  resolution of legacy appeals given certain assumptions. Further, VA  anticipates using the analyses to determine distribution of resources, and  quickly react to changes in its pending legacy and new appeals  processes, and other trends. By taking these steps, VA may be better  positioned to estimate future disability appeals inventories, timeliness,  and resource needs as well as assess risks associated with implementing  a new appeals process.", "Defining success criteria and articulating how to assess RAMP and  BEAAM. In its updated plan, VA broadly defines what it hopes to achieve  with the RAMP and BEAAM pilots, such as providing information on  veterans\u2019 choices in the new process, testing new technology and  procedures, and estimating workloads. It also states that VA will use the  results to inform the assumptions in its sensitivity analyses. In addition,  the updated plan states that VBA is refining the methods to evaluate  RAMP.", "The applicability of BEAAM results to a fully implemented appeals  process may be limited. For example, the BEAAM pilot and the Board\u2019s  implementation of RAMP provide limited time in which to conduct and  assess the results. Moreover, because VA\u2019s test is very small in scale (up  to 50 veterans), it will be important for VA to consider, for example,  whether these appeals reflect the complexity of cases and the range of  circumstances expected in a fully implemented new appeals process. In a  mid-May 2018 meeting with VA officials, we raised these and similar  concerns. VA officials said they would consider these concerns.", "Finally, although VA\u2019s updated plan includes a timeline for testing and  assessing the new processes, VA\u2019s updated schedule indicates that VA is  planning to assess RAMP results between February 15, 2019 and May  10, 2019. These dates occur after VA intends to fully implement its new  process. Our recommendation specifies that testing and assessment of  pilot results should occur prior to full implementation.", "Comprehensively assess risks. Within VA\u2019s updated plan, VA has  added to its \u201crisk register,\u201d which describes risks associated with many  elements of its plan and related mitigation strategies. However, VA\u2019s  updated plan has not established a complete and balanced set of goals  and measures as discussed above, which are a necessary pre-condition  to effectively assessing risk. Having a complete set of goals and  measures would allow VA to better identify and target risks associated  with reaching these goals while concurrently managing two processes.  Thus, VA may not have comprehensively reflected key risks in its updated  plan.", "In conclusion, although VA intends to fully implement the new disability  appeals process in about 6 months (February 2019), VA still has an  opportunity to create a stronger foundation of sound planning practices.  To its credit, VA has taken a number of positive steps toward  implementing our prior recommendations to improve its planning for  disability appeals reform while it attends to legacy appeals. Efforts such  as testing Board appeals options and resuming sensitivity analysis will  provide useful information to guide VA through the uncertainty often  associated with process change. However, VA needs to fully address our  four recommendations to reasonably assure smooth implementation of  appeals reform. As we noted in our prior work, VA is undertaking a  complex endeavor that involves updating and creating new processes  while on-boarding hundreds of new staff and implementing new  technology\u2014an endeavor that will affect the lives of hundreds of  thousands of veterans with disabilities. Such an undertaking requires an  appropriate level of planning to improve VA\u2019s chance of success. VA\u2019s  continued efforts to address our recommendations will better position the  agency in its implementation of new appeals processes.", "Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes my prepared statement. I would be pleased to respond to  any questions you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["For further information about this testimony, please contact Elizabeth H.  Curda at (202) 512-7215 or curdae@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this testimony. Other key contributors to this testimony  include James Whitcomb (Assistant Director), Daniel Concepcion  (Analyst in Charge), and Michele Grgich. In addition, key support was  provided by Susan Aschoff, Mark Bird, Grace Cho, Alex Galuten, Joel  Green, Sheila R. McCoy, Karen Richey, Almeta Spencer, and Walter  Vance.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-291", "url": "https://www.gao.gov/products/GAO-18-291", "title": "Medicaid: CMS Should Take Steps to Mitigate Program Risks in Managed Care", "published_date": "2018-05-07T00:00:00", "released_date": "2018-06-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The improper payment rate is a sentinel measure of program integrity risks for the Medicaid program. CMS and the states oversee Medicaid, whose size, structure, and diversity make it vulnerable to improper payments. CMS estimates the Medicaid improper payment rate annually through its PERM, which includes an estimate for Medicaid managed care, in which states contract with MCOs to provide services to Medicaid enrollees.", "GAO was asked to study the PERM methodology for managed care. In this report, GAO examined the extent to which the PERM accounts for program integrity risks in Medicaid managed care, including CMS's and states' oversight. GAO identified program integrity risks reported in 27 federal and state audits and investigations issued between January 2012 and September 2017; reviewed federal regulations and guidance on the PERM and CMS's Focused Program Integrity Reviews; and contacted program integrity officials in the 16 states with a majority of 2016 Medicaid spending for managed care, as well as CMS officials and program integrity experts."]}, {"section_title": "What GAO Found", "paragraphs": ["The Centers for Medicare & Medicaid Services' (CMS) estimate of improper payments for Medicaid managed care has limitations that are not mitigated by the agency's and states' current oversight efforts. One component of the Payment Error Rate Measurement (PERM) measures the accuracy of capitated payments, which are periodic payments that state Medicaid agencies make to managed care organizations (MCO) to provide services to enrollees and to cover other allowable costs, such as administrative expenses. However, the managed care component of the PERM neither includes a medical review of services delivered to enrollees, nor reviews of MCO records or data. Further, GAO's review of the 27 federal and state audits and investigations identified key program risks.", "Ten of the 27 federal and state audits and investigations identified about $68 million in overpayments and unallowable MCO costs that were not accounted for by PERM estimates; another of these investigations resulted in a $137.5 million settlement.", "These audits and investigations were conducted over more than 5 years and involved a small fraction of the more than 270 MCOs operating nationwide as of September 2017.", "To the extent that overpayments and unallowable costs are unidentified and not removed from the cost data used to set capitation rates, they may allow inflated MCO payments and minimize the appearance of program risks in Medicaid managed care.", "CMS and states have taken steps to improve oversight of Medicaid managed care through updated regulations, focused reviews of states' managed care programs, and federal program integrity contractors' audits of managed care services.", "However, some of these efforts went into effect only recently, and others are unlikely to address the risks in managed care across all states.", "Furthermore, these efforts do not ensure the identification and reporting of overpayments to providers and unallowable costs by MCOs.", "Federal internal control standards call for agency management to identify and respond to risks. Without addressing key risks, such as the extent of overpayments and unallowable costs, CMS cannot be certain that its estimated improper payment rate for managed care (0.3 percent compared with 12.9 percent in Medicaid fee-for-service) accurately reflects program risks."]}, {"section_title": "What GAO Recommends", "paragraphs": ["The Administrator of CMS should consider and take steps to mitigate the program risks that are not measured in the PERM, such as overpayments and unallowable costs; such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care. HHS concurred with this recommendation. HHS also provided technical comments, which were incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The improper payment rate is a sentinel measure of program integrity  risks for Medicaid\u2014a federal-state health financing program for low  income and medically needy individuals. The federal government and  states play key roles in oversight of the Medicaid program\u2014with the  Centers for Medicare & Medicaid Services (CMS) providing broad federal  oversight, and states administering day-to-day operations, including  ensuring the integrity of the program by preventing, identifying, and  recouping improper payments. The size, structure, and diversity of  Medicaid make it particularly vulnerable to improper payments, and our  work has identified Medicaid as a high-risk program since 2003 due to  concerns about the adequacy of fiscal oversight.", "To develop the Medicaid improper payment rate, CMS uses the Payment  Error Rate Measurement (PERM)\u2014a methodology that is reviewed and  approved by the Office of Management and Budget (OMB). The PERM  computes the rate as the weighted average of states\u2019 improper payment  rate estimates for three key components of the Medicaid program\u2014fee- for-service (FFS), managed care, and eligibility determinations.", "Medicaid managed care expenditures have grown significantly; in fiscal  year 2017, they were $171 billion, almost 50 percent of total federal  Medicaid expenditures. This growth makes ensuring the accuracy of  managed care improper payment estimates increasingly important. In  fiscal year 2017, using the PERM, CMS estimated the Medicaid managed  care improper payment rate at 0.3 percent, or about $500 million of  federal expenditures. This is a small portion of overall estimated Medicaid  improper payments, which CMS estimated at about $37 billion, or 10.1  percent of $364 billion in federal spending on Medicaid in fiscal year  2017. At the same time, however, the FFS estimated improper payment  rate was 12.9 percent or about $25 billion in federal expenditures. Due,  in part, to this disparity in the estimated improper payment rates, we have  questioned whether the managed care estimate fully reflects the program  integrity risks that exist in Medicaid managed care.", "You asked us to provide information on CMS\u2019s PERM methodology for  Medicaid managed care. In this report, we examine the extent to which  the PERM accounts for program integrity risks in Medicaid managed care,  including CMS\u2019s and states\u2019 oversight.", "To examine the extent to which the PERM accounts for program integrity  risks in Medicaid managed care, we reviewed publications from the  Department of Health and Human Services\u2019 Office of Inspector General  (HHS-OIG) and our prior work; conducted literature searches and key  word searches of online databases; and obtained input from the National  State Auditor\u2019s Association and the National Association of State  Auditors, Comptrollers, and Treasurers. Through these reviews, we found  27 audits and investigations that identified program integrity risks related  to Medicaid managed care\u201416 federal and state audits, and 11 notices  of investigations issued between January 2012 and September 2017.  These audits and investigations were conducted by (1) HHS-OIG, (2) a  CMS federal contractor that performs claims reviews in Medicaid to  identify overpayments, (3) the Department of Justice, (4) state auditors,  (5) state Offices of Attorney General, (6) other state agencies, and (7)  GAO. (See app. I for a complete list of the audits and investigations we  identified.) Of the 27 audits and investigations, 24 found program integrity  risks in a single state or with a single provider, covering a total of 10  states, and 3 found program integrity risks across multiple states. We  also reviewed CMS regulations on the PERM, the most recent PERM  Manual, Medicaid managed care regulations, applicable improper  payment laws, 2016 and 2017 PERM estimates of improper payments,  and other related OMB and CMS guidance. We then compared the  program integrity risks reported in the 27 audits and investigations with  the steps taken to estimate improper payments for the PERM\u2019s managed  care component. In addition, we reviewed all the published reports of  CMS\u2019s Focused Program Integrity Reviews on managed care in 27  states, other CMS documents related to oversight of states\u2019 Medicaid  managed care programs, and federal internal control standards\u2014 specifically those related to identifying, analyzing, and responding to  risks. Also, we contacted program integrity officials in the16 states for  which more than half of their 2016 Medicaid expenditures were for  services delivered under managed care, and analyzed responses from  the 13 states that replied; the information from these states is not  generalizable. Lastly, we interviewed CMS officials and experts on  program integrity in Medicaid managed care, including one state auditor.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["In accordance with the Improper Payments Information Act of 2002  (IPIA), as amended, and OMB guidance, CMS developed the PERM to  estimate the national Medicaid improper payment rate. CMS has other  mechanisms to review and assess program integrity risks in state  Medicaid managed care programs, and it uses information from the  PERM to target its program integrity activities and oversight of states\u2019  Medicaid programs."], "subsections": [{"section_title": "IPIA and OMB Guidance for Estimating Improper Payments", "paragraphs": ["IPIA requires federal executive branch agencies to, among other things,  (1) identify programs and activities that may be susceptible to significant  improper payments; and (2), on an annual basis, estimate the amount of  improper payments for susceptible programs and activities. Agency  heads must produce a statistically valid estimate or an estimate that is  otherwise appropriate, using an OMB-approved alternate methodology.  Those agencies with programs identified by OMB as being high priority  for additional oversight and review are required to submit annual reports  to their Inspectors General detailing the actions the agency plans to take  to recover improper payments and prevent future improper payments.  The Inspector General of each agency submitting such a report is  required to review the quality of the improper payment estimates and  methodology, among other things. OMB designated Medicaid as a high  priority program. In addition, the Improper Payments Elimination and  Recovery Act of 2010 requires the Inspector General of each agency to  conduct a compliance review to report on the agency\u2019s compliance with  several criteria, one of which is that an agency has reported an improper  payment rate of less than 10 percent for each program and activity. IPIA  also directed OMB to issue guidance for agencies in implementing the  IPIA improper payments requirements. Among other things, the OMB  guidance requires that agencies review payments made at the point that  federal funds are transferred to nonfederal entities and report on the root  causes of identified improper payments."], "subsections": []}, {"section_title": "Payment Error Rate Measurement", "paragraphs": ["To calculate the Medicaid improper payment rate through the PERM,  CMS computes an annual rolling average of improper payment rates  across all states based on a 17-state, 3-year rotation cycle. In accordance  with IPIA, as amended, OMB approved CMS\u2019s PERM methodology, and  the HHS-OIG conducts annual compliance reviews. Beginning with its  annual improper payment compliance review for fiscal year 2014, the  HHS-OIG established a rotating approach to reviewing the estimation  methodology for high-priority programs, including Medicaid, that OMB  deemed susceptible to improper payments. Due to the number and  complexity of the programs, the HHS-OIG methodology reviews are  scheduled to be performed over a 4-year period; the PERM estimation  methodology will be reviewed as a part of its fiscal year 2017 compliance  review.", "Each of the three components of the Medicaid PERM\u2014FFS, managed  care, and eligibility\u2014is estimated differently:", "The FFS component of the PERM measures errors in a sample of  FFS claims, which are records of services provided and the amount  the Medicaid program paid for these services. For the majority of  sampled FFS claims, the PERM review contractor performs a medical  review, which includes a review of the medical documentation to  determine errors that do not meet federal and state policies, such as  medically unnecessary services, diagnosis coding errors, and policy  violations. Any FFS claims that were paid for services that should  have been covered under a managed care plan\u2019s capitated payment  are also considered errors.", "The managed care component of the PERM measures errors that  occur in the capitated payments that state Medicaid agencies make to  managed care organizations (MCO) on behalf of enrollees. Capitated  payments are periodic payments approved by CMS that state  Medicaid agencies make to contracted MCOs to cover the provision of  medical services to enrollees, as well as the MCOs\u2019 administrative  expenses and their profits or earnings. The PERM assesses whether  any payments made to the MCOs were in amounts different than  those the state agency is contractually required to pay, which are  approved by CMS. In contrast to the FFS component, the managed  care component of the PERM neither includes a medical review of  services delivered to enrollees, nor reviews of MCO records or data.", "The eligibility component of the PERM measures errors in state  determinations of whether enrollees meet categorical and financial  criteria for receipt of benefits under the Medicaid program. The  eligibility component assesses determinations for both FFS and  managed care enrollees. This component has not been calculated  since 2014; instead, CMS piloted different approaches to update the  methodologies used to assess enrollee eligibility, as the Patient  Protection and Affordable Care Act changed income eligibility  requirements for nonelderly, nonpregnant individuals who qualify for  Medicaid. Beginning in the 2019 reporting year, eligibility reviews  under the PERM will resume and will be conducted by a federal  contractor."], "subsections": []}, {"section_title": "Medicaid Program Integrity and Oversight in Managed Care", "paragraphs": ["Medicaid program integrity consists of efforts to ensure that federal and  state expenditures are used to deliver quality, necessary care to eligible  enrollees, and efforts to prevent fraud, waste, and abuse. We have found  in prior work that CMS\u2019s and states\u2019 program integrity efforts focused  primarily on payments and services delivered under FFS and did not  closely examine program integrity in Medicaid managed care. For  Medicaid managed care, CMS has largely delegated program integrity  oversight of MCOs to the states. States, in turn, generally oversee MCOs  and the providers under contract to MCOs through their contracts with the  MCOs and reporting requirements.", "Some program integrity risks for managed care are similar to those in  FFS, including payments made for nonenrolled, ineligible, or deceased  individuals; payments to ineligible, excluded, or deceased providers; and payments to providers for improper or false claims, such as payments for  services that are not medically necessary. Other program integrity risks  are more unique to managed care. For example, capitated payments  generally reflect the average cost to provide covered services to  enrollees, rather than a specific service. Federal law requires capitation  rates to be actuarially sound, meaning that, among other things, they  must be reasonably calculated for the populations expected to be covered  and for the services expected to be furnished under contract. In order to  receive federal funds for its managed care program, a state is required to  submit the rates it pays MCOs and the methodology it uses to set those  rates to CMS for review and approval. Additionally, federal and state  oversight of Medicaid managed care can include ensuring that MCOs  fulfill contractual provisions within their managed care contracts. In some  cases, these provisions relate directly to program integrity activities,  including plans and procedures for identifying, recovering, and reporting  on overpayments made to providers."], "subsections": []}]}, {"section_title": "Payment Error Rate Measurement for Managed Care Has Limitations, Which Are Not Mitigated by Current CMS and State Oversight", "paragraphs": ["The managed care component of the PERM measures the accuracy of  the capitated payments state Medicaid agencies make to MCOs.  Specifically, a CMS contractor examines whether the state agency made  capitated payments only for eligible enrollees, made capitated payments  for the correct amount based on the contract and coverage requirements  (time period and geographic location), made capitated payments based  on the correct rate for enrollees, and did not make any duplicate  payments for enrollees."], "subsections": [{"section_title": "CMS\u2019s Payment Error Rate Measurement Measures the Accuracy of Medicaid Managed Care Payments, but Does Not Account for Overpayments and Unallowable Costs", "paragraphs": ["CMS officials noted that the agency established capitated payments as  the level of review, because the capitation rate is the transaction used to  determine the federal match in managed care. In general, the federal  government matches most state expenditures for Medicaid services on  the basis of a statutory formula. In FFS, the federal match is provided  for the amount the state pays a health care provider for delivering  services to enrollees. With managed care, the federal match is provided  for the amount of the capitation rate the state pays the MCO. Capitated  payments do not directly relate to the provision of a specific service, but  reflect the average cost to provide covered services to enrollees. As a  result, CMS officials maintain that the capitated payment is the lowest  transaction level at which the agency can clearly identify federal funds  without making significant assumptions.", "Because the managed care component of the PERM review is limited to  measuring capitated payments, it does not account for other program  integrity risks\u2014such as overpayments to providers and unallowable MCO  costs.", "In addition to errors in capitated payments included in PERM reviews,  CMS regulations state that overpayments in managed care include  any payment made to an MCO or provider under contract to an MCO  to which the MCO or provider is not entitled under Medicaid. Such  overpayments included payments for services that were not provided  or medically necessary; or to ineligible, excluded, or deceased  providers, which are not measured by the PERM.", "Unallowable MCO costs refers to operating costs that MCOs cannot  claim under their managed care contracts, such as certain marketing  costs, or that the MCO reported incorrectly.", "Among the 27 audits and investigations of Medicaid managed care  programs we reviewed, 10 identified about $68 million in MCO  overpayments to providers and unallowable MCO costs that were not  accounted for in PERM estimates. In addition, one investigation of an  MCO operating in nine states resulted in a $137.5 million settlement to  resolve allegations of false claims. (See app. I for a complete list of the  audits and investigations we identified.) However, the full extent of these  overpayments and unallowable costs is unknown, because these audits  and investigations were conducted over more than 5 years and involved a  small fraction of the more than 270 MCOs operating nationwide as of  September 2017. Specifically, 24 of the audits and investigations  represented reviews in 10 states and, in many cases, focused on  individual providers or MCOs; there were about 90 MCOs operating in the  10 states as of September 2017, according to the Kaiser Family  Foundation. Some examples of the audits and investigations that  identified overpayments and unallowable costs include the following:", "The Washington State Auditor\u2019s Office found that two MCOs made  $17.5 million in overpayments to providers in 2010, which may have  increased the state\u2019s 2013 capitation rates.", "The New York State Comptroller found that two MCOs paid over $6.6  million to excluded and deceased providers from 2011 through  2014.", "The Massachusetts State Auditor found that one MCO paid $420,000  for health care services and unauthorized prescriptions from excluded  providers in 2013 and 2014.", "The Department of Justice alleged that an MCO operating in several  states submitted inflated expenditure information to the state Medicaid  agencies, falsified encounter data, and manipulated claims costs and  service provision costs in nine states. The MCO agreed to pay over  $137.5 million to resolve these claims.", "The Texas State Auditor\u2019s Office found that an MCO reported $3.8  million in unallowable costs for advertising, company events, gifts, and  stock options, along with $34 million in other questionable costs in  2015.", "The New York State Comptroller also found that an MCO claimed  over $260,000 in unallowable administrative expenses, which  contributed to an increase in capitation rates across the state.", "To the extent that the state does not identify or know of MCO  overpayments to providers or unallowable MCO costs, the overpayments  and unallowable costs could inflate future capitation rates, as the  Washington State Auditor and New York State Comptroller noted in their  findings. The PERM assesses the accuracy of capitated payments that  states make to MCOs. States set capitation rates based on cost data\u2014 historical utilization and spending\u2014that MCOs submit to the state  Medicaid agencies, but the PERM does not consider these data. Unless  removed from these cost data, unidentified overpayments and  unallowable costs would likely inflate the MCO cost data that states use  to set capitation rates. (See fig. 1.) As a result, future capitation rates  would also be inflated, resulting in higher state and federal spending.", "In fiscal year 2017, the Medicaid managed care improper payment rate  was 0.3 percent, while the FFS improper payment rate was 12.9 percent,  leading to an assumption that the estimated risks in managed care are  less significant than those estimated in FFS. However, the managed care  component of the PERM does not determine whether MCO payments to  providers were for services that were medically necessary, actually  provided, accurately billed and delivered by eligible providers, or whether  the MCO costs were allowable and appropriate. As a result, the PERM  improper payment estimate potentially understates the extent of program  integrity risks in Medicaid managed care.", "Moreover, this potential understatement in the PERM\u2019s improper payment  rate estimate may curtail investigations into the appropriateness of MCO  spending. We previously reported that CMS and state program integrity  efforts did not closely examine program integrity in Medicaid managed  care, focusing primarily on payments and services delivered under FFS.", "Our current review of the 27 audits we identified encompassed a 5-year  period, suggesting that reviews of managed care continue to be limited.  An official from a state auditor\u2019s office we spoke with suggested that  some states may not audit services delivered under managed care,  because of a low improper payment rate. In addition, he noted that his  state Medicaid agency used the relatively low payment error rate in  managed care as an indicator of few program integrity problems."], "subsections": []}, {"section_title": "CMS and State Oversight of Managed Care Do Not Ensure the Identification and Reporting of Overpayments and Unallowable Costs", "paragraphs": ["As noted, CMS has increased its focus on and worked with states to  improve oversight of Medicaid managed care; however, these efforts and  the oversight efforts of states do not ensure the identification and  reporting of overpayments and unallowable costs. In recent years, the  agency has sought to strengthen oversight of managed care programs  through updated regulations; reviews of states\u2019 managed care programs  (Focused Program Integrity Reviews) and collaborative audits, which are  conducted jointly by federal program integrity contractors and states; and  state monitoring of overpayments.", "Regulations. In May 2016, CMS updated its regulations for managed  care programs in order to strengthen oversight. The updated regulations  require a number of additional program integrity activities, such as those  listed below. If fully implemented, these updated regulations may help  with the identification and removal of overpayments and unallowable  costs from data used to set future capitation rates. Under these  regulations", "States must arrange for an independent audit of the accuracy,  truthfulness, and completeness of the encounter and financial data  submitted by MCOs, at least once every 3 years.", "Through contracts with MCOs, states must require MCOs to have a  mechanism through which providers report and return overpayments  to the MCOs. States must also require MCOs to promptly report any  identified or recovered overpayments\u2014specifying those that are  potentially fraudulent\u2014and submit an annual report on recovered  overpayments to their state. States must use this information when  setting actuarially sound capitation rates.", "Through contracts with MCOs, states must also require MCOs to  report specific data, information, and documentation. In addition, the  MCO\u2019s chief executive officer or authorized representative must certify  the accuracy and completeness of the reported data, information, and  documentation.", "States must enroll MCO providers that are not otherwise enrolled with  the state to provide services to enrollees in Medicaid FFS, and  revalidate the enrollment at least once every 5 years. Initially this  requirement was to start for MCO contracts beginning on July 1, 2018.  Subsequently enacted legislation codified this requirement in statute  and moved the implementation to January 1, 2018.", "It is too early to know if these regulations will assure better oversight of  MCO payments to providers and the data used to set future capitation  rates. The above program integrity requirements only went into effect  recently\u2014for contracts starting on or after July 1, 2017, and January 1,  2018. In addition, CMS issued a notice in June 2017 stating that the  agency will use its enforcement discretion to assist states that are unable  to implement new requirements by the required compliance date. Also,  CMS has delayed issuance of implementing guidance for certain  provisions until the agency completes its review, a step that may further  delay states\u2019 implementation. The agency has designated Medicaid  managed care for \u201cderegulatory action\u201d and plans to propose a new rule,  but has not indicated which of these provisions, if any, would be revised.", "Focused Program Integrity Reviews. In fiscal year 2014, CMS  implemented its Focused Program Integrity Reviews in order to target  high-risk program integrity areas in each state, including managed care.  As we previously reported, these focused reviews are narrower in scope  than the prior reviews conducted by CMS, but they still involve on-site  visits to states.", "In its focused reviews of managed care, CMS found that several states  had incomplete oversight of MCO payments to providers, even though the  agency relies on states to verify reported MCO overpayments and to  ensure the overpayments are excluded from the data used to set  capitation rates. In the 27 focused reviews of managed care from 2014 to  2017, CMS found that MCOs in 17 states reported fewer overpayments to  their state Medicaid agencies than CMS would expect. For example,  MCOs in at least 5 states reported that overpayments were less than 0.1  percent of their total managed care expenditures; while CMS noted in 1  focused review that overpayments typically equal 1 to 10 percent of total  expenditures in managed care. CMS also found that 5 of the 27 states did  not verify that MCOs excluded overpayments from these data, and 1 state  did not exclude overpayments from the capitation rate setting. This is  consistent with our March 2017 report in which we noted that CMS  commonly found that MCOs reported low amounts of recovered  overpayments and conducted few reviews to identify overpayments.  Also, officials from three of the five states we interviewed for that report  said the focused reviews gave them leverage in dealing with MCOs or led  MCOs to focus more on program integrity. We also reported that CMS  officials recommended states take steps to improve their oversight of  MCOs, based on the focused review findings.", "The findings from CMS\u2019s focused reviews of managed care also highlight  the need for greater federal oversight of states. Without these reviews, it  is unclear if states would independently identify MCOs\u2019 reporting of  overpayments or work to strengthen MCO reporting. Yet, CMS has not  yet published the focused reviews of managed care in 13 states, and it  may only conduct a focused review in a state once every three or more  years. Given CMS\u2019s timeline for the focused reviews, it may take years to  determine if corrective actions result in improved program integrity in  services delivered through managed care.", "Collaborative audits. CMS has expanded the federal-state collaborative  audits beyond FFS, and has begun to engage states to participate in  collaborative audits of MCOs and providers under contract to MCOs. As a  part of the collaborative audit process, the state volunteers to jointly  develop the audit processes the federal contractors follow. CMS officials  told us that federal contractors have completed 14 collaborative audits of  providers under contract to MCOs in three states\u2014Arizona, the District of  Columbia, and Tennessee. Only the audit of Trusted Healthcare, an MCO  in the District of Columbia, has been published. That audit identified  $129,000 in overpayments in a sample of MCO payments to providers,  which, if generalized to all of the MCO\u2019s payments over 6 months, would  equate to over $4 million in overpayments. According to CMS, three  additional states\u2014Louisiana, Nebraska, and New Hampshire\u2014have  shown interest in collaborative audits of their MCOs, although such audits  require states to prepare data files for the federal contractor and commit  staff time. In our March 2017 report, we found that states\u2019 participation in  FFS collaborative audits varied and some states reported barriers to their  participation. Expanding collaborative audits in managed care will  require commitment from and coordination with states.", "State monitoring of overpayments in managed care. States are  required to report overpayments they have identified and recouped along  with state expenditures on a quarterly basis. However, based on the  responses of the program integrity officials in 13 of the 16 states we  contacted, most officials were unable to define the magnitude of  overpayments in their managed care programs, which may signify a need  for greater federal oversight or coordination. Specifically, officials in 7 of  the 13 states could not or did not identify the share of total reported  Medicaid overpayments that occurred in managed care. In 11 of the 13  states, officials responded that they did not directly monitor MCO  payments to providers. Of those 11 states, officials in 4 said they depend  on MCOs to report overpayments and exclude the overpayments from the  data used to set capitation rates. As long as states are not taking action  to identify overpayments in managed care, they cannot be assured that  they are accurately paying MCOs for medically necessary services  provided to enrollees.", "Federal internal control standards call for agency management to identify,  analyze, and respond to risks. CMS has taken some steps to identify,  analyze, and respond to risks through its regulations, Focused Program  Integrity Reviews, and collaborative audits. However, key CMS and state  oversight efforts fall short of mitigating the limitations of the PERM  estimates of improper payments for managed care, because they do not  ensure the identification and reporting of overpayments to providers and  unallowable MCO costs. Without addressing these key risks, CMS and  states cannot ensure the integrity of Medicaid managed care programs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The 0.3 percent improper payment rate for Medicaid managed care, as  measured by the PERM, is significantly lower than the improper payment  rate of 12.9 percent for Medicaid FFS. However, this difference does not  signal better oversight; rather, it represents differences in the review  criteria between FFS and managed care, which result in a less complete  accounting for the program integrity risks in managed care. The PERM  does not account for key program integrity risks in Medicaid managed  care: specifically, unidentified overpayments and unallowable costs. One  federal investigation of an MCO operating in nine states resulted in a  settlement of $137.5 million to resolve allegations of false claims that  were not captured in the national Medicaid improper payment rate  estimate. Further, CMS found that MCOs and states do not provide  sufficient oversight in Medicaid managed care to address the risks that  are not accounted for in the PERM, findings that are reinforced by our  reports on Medicaid managed care program integrity. CMS has taken  steps to improve its oversight of Medicaid managed care, yet these efforts  fall short of ensuring that the agency and states will be able to identify  and address overpayments to providers and unallowable MCO costs.  Without better measurement of program risks\u2014particularly as  expenditures for Medicaid managed care continue to grow\u2014CMS cannot  be certain that the low improper payment rate for managed care, as  measured by the PERM, accurately reflects lower risks in managed care."], "subsections": []}, {"section_title": "Recommendation", "paragraphs": ["The Administrator of CMS should consider and take steps to mitigate the  program risks that are not measured in the PERM, such as overpayments  and unallowable costs; such an effort could include actions such as  revising the PERM methodology or focusing additional audit resources on  managed care. (Recommendation 1)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Health and Human  Services (HHS) for comment. In its written comments, HHS concurred  with our recommendation, and indicated that it will review regulatory  authority and audit resources to determine the best way to account for  Medicaid program risks that are not accounted for in the PERM.   However, HHS stated that the PERM is not intended to measure all  Medicaid program integrity risks, and utilizing the PERM measurement in  that way would be a misunderstanding and misuse of the reported rate.  HHS also commented that a review of payments from MCOs to providers  is outside the scope of IPIA. In addition, HHS asserted that including such  a review would diminish the value of PERM reporting\u2014because it would  require significant assumptions about the amount of federal share in MCO  payments to providers. Further, HHS maintained that such a review also  would result in a measurement that was not comparable to other  programs or agencies, which would diminish the value of government- wide improper payment rate reporting. We acknowledge that the current  PERM methodology has been approved by OMB. However, we maintain  that the PERM likely underestimates program integrity risks in Medicaid  managed care. To ensure the appropriate targeting of program integrity  activities, CMS needs better information about these risks. Given the size  of the Medicaid program, its vulnerability to improper payments, and the  growth in managed care, it is critical to have a full accounting of program  integrity risks in managed care in order to best ensure the integrity of the  whole Medicaid program.", "In its written comments, HHS also summarized several activities it uses to  oversee and support states\u2019 Medicaid program integrity efforts, including  state program integrity reviews; collaborative audits conducted by federal  contractors; Medicaid Integrity Institute training for state employees; and  the Medicaid Provider Enrollment Compendium.  HHS also provided  technical comments, which we incorporated as appropriate. HHS\u2019s  comments are reprinted in appendix II.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, the Administrator of CMS, appropriate  congressional committees, and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7114 or at yocomc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff that made key contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Federal and State Audits and Investigations of Medicaid Managed Care", "paragraphs": ["We reviewed 16 federal and state audits and 11 notices of investigations  of Medicaid managed care organizations (MCO) and providers issued  from January 2012 to September 2017. As the findings below show, the  audits and investigations represent a limited number of reviews that, in  many cases, focused on individual states and individual providers or  MCOs within that state. Given the limited scope and number of states  reviewed, the amount of the overpayments and unallowable costs  occurring nationwide is unknown.", "These audits and investigations show  cases of MCO overpayments to providers or unallowable costs, which  are not accounted for by the Centers for Medicare & Medicaid  Services\u2019 Payment Error Rate Measurement (PERM) ; errors in capitated payments (e.g., capitated payments made for  deceased individuals), which are accounted for in the PERM; and gaps in managed care oversight.", "When reporting overpayments and unallowable costs identified in the  audits and investigations, we only include amounts specifically attributed  to MCOs in our total. This total does not include the following: overpayments and unallowable costs identified in those audits and  investigations that did not distinguish between the amounts  attributable to MCOs, Medicaid fee-for-service, or Medicare; overpayments and unallowable costs identified in criminal  proceedings that are not yet resolved; and errors in capitated payments, as those payments would be reviewed  by the PERM.", "As a result, the total amount of overpayments and unallowable costs and  capitated payment errors in this appendix exceed what we report."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Leslie V. Gordon (Assistant  Director), Pauline Adams (Analyst-in-Charge), Erika Huber, and Drew  Long made key contributions to this report. Also contributing were Muriel  Brown and Jennifer Whitworth."], "subsections": []}]}], "fastfact": ["Medicaid paid $171 billion\u2014about half its total 2017 federal expenditures\u2014to managed care organizations. The Centers for Medicare & Medicaid Services estimated that about 0.3% of that amount were improper payments.", "For the entire Medicaid program, CMS estimated about 10% of payments were improper, which led us to question the managed care rate.", "We examined state and federal reviews of managed care and the estimating method. We found that the estimation does not fully account for key risks such as overpayments and unallowable costs.", "We recommended that CMS take steps to mitigate such risks."]}
{"id": "GAO-19-197", "url": "https://www.gao.gov/products/GAO-19-197", "title": "Health Information Technology: Approaches and Challenges to Electronically Matching Patients' Records across Providers", "published_date": "2019-01-15T00:00:00", "released_date": "2019-01-15T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Health care providers are increasingly sharing patients' health records electronically. When a patient's records are shared with another provider, it is important to accurately match them to the correct patient. GAO and others have reported that accurately matching patient health records is a barrier to health information exchange and that inaccurately matched records can adversely affect patient safety or privacy. At the federal level, ONC is charged with coordinating nationwide efforts to implement and use health IT.", "The 21st Century Cures Act included a provision for GAO to study patient record matching. In this report, GAO describes (1) stakeholders' patient record matching approaches and related challenges; and (2) efforts to improve patient record matching identified by stakeholders.", "To do its work, GAO reviewed reports by ONC and others about patient record matching. GAO also interviewed various stakeholders that play a role in exchanging health records, including representatives from physician practices, hospitals, health systems, health information exchange organizations, and health IT vendors. GAO also interviewed other stakeholders, such as ONC officials, provider and industry associations, and researchers. GAO selected stakeholders based on background research and input from other stakeholders, and interviewed 37 stakeholders in total. The information from stakeholders is not generalizable. HHS provided technical comments on a draft of this report, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Stakeholders GAO interviewed, including representatives from physician practices and hospitals, described their approaches for matching patients' records\u2014that is, comparing patient information in different health records to determine if the records refer to the same patient. Stakeholders explained that when exchanging health information with other providers, they match patients' medical records using demographic information, such as the patient's name, date of birth, or sex. This record matching can be done manually or automatically. For example, several provider representatives said that they rely on software that automatically matches records based on the records' demographic information when receiving medical records electronically. Stakeholders said that software can also identify potential matches, which staff then manually review to determine whether the records correspond to the same patient. Stakeholders also said that inaccurate, incomplete, or inconsistently formatted demographic information in patients' records can pose challenges to accurate matching. They noted, for example, that records don't always contain correct information (e.g., a patient may provide a nickname rather than a legal name) and that health information technology (IT) systems and providers use different formats for key information such as names that contain hyphens.", "Stakeholders GAO interviewed identified recent or ongoing efforts to improve the data and methods used in patient record matching, such as the following:", "Several stakeholders told GAO they worked to improve the consistency with which they format demographic data in their electronic health records (EHR). In 2017, 23 providers in Texas implemented standards for how staff record patients' names, addresses, and other data. Representatives from three hospitals said this increased their ability to match patients' medical records automatically. For example, one hospital's representatives said they had seen a significant decrease in the need to manually review records that do not match automatically.", "Stakeholders also described efforts to assess and improve the effectiveness of methods used to match patient records. For example, in 2017 the Office of the National Coordinator for Health Information Technology (ONC) hosted a competition for participants to create an algorithm that most accurately matched patient records. ONC selected six winning submissions and plans to report on their analysis of the competition's data.", "Stakeholders said more could be done to improve patient record matching, and identified several efforts that could improve matching. For example, some said that implementing common standards for recording demographic data; sharing best practices and other resources; and developing a public-private collaboration effort could each improve matching. Stakeholders' views varied on the roles ONC and others should play in these efforts and the extent to which the efforts would improve matching. For example, some said that ONC could require demographic data standards as part of its responsibility for certifying EHR systems, while other stakeholders said that ONC could facilitate the voluntary adoption of such standards. Multiple stakeholders emphasized that no single effort would solve the challenge of patient record matching."]}], "report": [{"section_title": "Letter", "paragraphs": ["As health care providers increasingly use electronic health records  (EHR), a greater share of patients\u2019 medical records are stored and  exchanged electronically. This exchange can occur among various types  of providers\u2014including hospitals, primary care physicians, specialty  physicians, pharmacies, and laboratories\u2014and has increased in recent  years. An American Hospital Association (AHA) survey found that in  2017, 74 percent of hospitals reported sharing clinical or summary of care  records electronically with other hospitals, whereas in 2012 only 30  percent of hospitals reported doing so. The 2017 survey also found that  58 percent of hospitals indicated physicians at their facilities \u201calways or  sometimes\u201d used patient health information received electronically from  outside sources while treating a patient.", "When a patient\u2019s medical records from one health care provider are  shared with another provider, it is important that those records belonging  to the same individual are accurately matched. Patient record matching is  the process of comparing patient information in different health records to  determine if the records refer to the same patient. Inaccurate patient  record matching can adversely affect the care patients receive as well as  their privacy. For example, inaccurately matched records can adversely  affect patients\u2019 safety if incorrect patient data are used to make medical  decisions; the ECRI Institute reported the case of a patient in cardiac  arrest who was mistakenly not resuscitated because the care team  adhered to the wrong patient\u2019s do-not-resuscitate order. We and others  have reported that patient record matching has caused difficulties for  providers. A 2014 study found that as few as 50 percent of records are  accurately matched when organizations exchange information. In AHA\u2019s  2017 survey, 45 percent of large hospitals reported that difficulties in  accurately identifying patients across health information technology (IT)  systems limited health information exchange.", "1. the patient record matching approaches used by selected  stakeholders and related challenges they identified, and  2.  efforts to improve patient record matching identified by ONC and  selected stakeholders.", "To describe the patient record matching approaches used by selected  stakeholders and related challenges they identified, we reviewed  published reports (including our own past reports) and other  documentation about patient record matching, such as ONC\u2019s 2014  Patient Identification and Matching Final Report. We conducted  interviews with relevant stakeholders that we identified through this  background research and from input from other stakeholders. Specifically,  we interviewed representatives from organizations involved in exchanging  health information, including providers such as physician practices and  hospitals; health information exchange (HIE) organizations, which  facilitate the exchange of health information among providers and other  types of organizations, often at a regional level; and health IT vendors.  We also interviewed representatives from organizations that represent  providers (AHA, the American Medical Association, and the Medical  Group Management Association); health information management  professionals (the American Health Information Management Association  and the College of Health Information Management Executives (CHIME)  ); HIE organizations (the Strategic Health Information Exchange  Collaboration); and health IT vendors (the Electronic Health Records  Association), as well as individuals or entities with expertise or experience  with patient record matching issues. In addition, we interviewed officials  from ONC and HHS\u2019s Agency for Healthcare Research and Quality. In  total, we conducted 35 interviews with stakeholders. The information we  obtained from these stakeholders is not generalizable to the experiences  of other health providers, organizations, vendors, and other stakeholders  regarding patient matching approaches.", "To describe efforts to improve patient record matching identified by ONC  and selected stakeholders, we reviewed ONC documents and reports that  describe the agency\u2019s efforts related to patient record matching. For  example, we reviewed ONC\u2019s 2014 Patient Identification and Matching  Final Report, ONC\u2019s Interoperability Roadmap, as well as documentation  of recent ONC studies related to patient record matching. In addition, we  discussed patient record matching efforts with the stakeholders  mentioned previously. We supplemented those discussions by conducting  two additional interviews with stakeholders about their efforts to improve  patient record matching; we identified these stakeholders through  background research and input from other stakeholders. In addition, we  reviewed documentation related to those stakeholders\u2019 efforts. The  information we obtained from stakeholders is not generalizable to the  experiences or views of other stakeholders regarding efforts to improve  patient record matching.", "We conducted this performance audit from November 2017 to January  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."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Patient Record Matching", "paragraphs": ["Patient record matching is the process of comparing patient information in  different health records to determine if the records refer to the same  patient. This matching generally relies on the use of demographic  information such as a patient\u2019s name, date of birth (DOB), sex, Social  Security number (SSN), or address, among other information.", "Many types of stakeholders can be involved in patient record matching.  Examples of stakeholders include the following:", "Health care providers, such as physicians, hospitals, and their staffs  may receive records from another provider that need to be matched to  existing patient records. When treating a new patient, for example, a  provider might obtain records from other providers that previously  cared for the patient. Similarly, a provider caring for a patient with  multiple chronic conditions (e.g., heart disease, diabetes) might obtain  information from other providers that are also caring for the patient.  The providers must ensure that the records they obtain from other  providers are matched to the correct patient and therefore properly  linked with the patient\u2019s existing records.", "HIE organizations match patient records as part of their role in  facilitating the electronic exchange of health information among  hospitals, physicians, and other organizations. They can offer a range  of services, such as allowing providers to access the medical records  for a patient who has received care from other providers in the HIE  organization\u2019s network. They may also obtain information from  hospitals when a patient is admitted or discharged, and they then  notify the patient\u2019s other providers when those events occur. In these  cases, HIE organizations must accurately match records from multiple  organizations to the correct patient. HIE organizations generally serve  a specific state or region and match records among a network of local  or state-wide providers and other entities; some, however, operate  nationally.", "Health IT vendors also play a role in matching patient records. Some  IT vendors, for example, provide record matching tools as part of their  EHR systems; these tools allow providers to electronically search for  patient records that are available from other providers that use the  same IT vendor. Other IT vendors offer tools that allow providers or  HIE organizations to leverage third-party data, such as credit-bureau  data, when matching patients\u2019 medical records."], "subsections": []}, {"section_title": "Importance of Accurate Patient Record Matching", "paragraphs": ["ONC and others have reported that the ability to accurately match patient  medical records across different providers is a critical part of effective  health information exchange, which can benefit patient care. For  example, accurate record matching can help ensure that providers have  current information about patients\u2019 laboratory or other diagnostic test  results; their medications; their diagnosed medical conditions, such as  allergies; and their family medical histories.", "In contrast, when a patient\u2019s records are not accurately matched, it can  adversely affect the patient\u2019s care. There are two ways in which records  can fail to be accurately matched.", "Records for different patients are mistakenly matched. When  medical records for different patients are mistakenly matched (known  as a \u201cfalse positive\u201d), it can present safety and privacy concerns for  patients. For example, a provider may inadvertently use information  about the wrong patient, such as diagnoses or medication lists, to  make clinical decisions. In addition, if the wrong patient\u2019s medical  information is added to a patient\u2019s record, it could result in disclosure  of that information to a provider or patient who is not authorized to  view it.", "Records for the same patient are not matched. When medical  records for the same patient are not matched (known as a \u201cfalse  negative\u201d), it can affect patient care. For example, providers may not  have access to a relevant part of the patient\u2019s medical history\u2014such  as current allergies or prior diagnostic test results\u2014which could help  them avoid adverse events and also provide more efficient care, such  as by not repeating laboratory tests already conducted."], "subsections": []}, {"section_title": "ONC Responsibilities and Patient Record Matching", "paragraphs": ["ONC leads federal efforts to promote interoperability, including setting  requirements for the information that EHRs and other health IT systems  should collect. ONC developed certification criteria for EHRs and other  health IT systems that include the ability for health IT systems to capture  and exchange various types of information, including clinical data such as  information on patients\u2019 allergies, as well as the patient\u2019s name, sex, and  date of birth. ONC also compiles an Interoperability Standards Advisory,  which suggests certain standards that developers should incorporate into  their products."], "subsections": []}]}, {"section_title": "Stakeholders Described Patient Record Matching Approaches and Associated Challenges", "paragraphs": [], "subsections": [{"section_title": "Providers and HIE Organizations Described Using Both Manual and Automated Approaches to Patient Record Matching", "paragraphs": ["All seven provider representatives we interviewed described manual  matching as one of the ways that they match patient records when  exchanging health information with other providers. With manual  matching, an individual reviews a medical record in order to match it to  the correct patient. For example, an outpatient practice representative  said that to match records that the practice receives by fax, a staff  member must manually review information such as name and DOB to  identify the correct patient and add the new information to the correct  patient\u2019s electronic record. All of the provider representatives we  interviewed told us that they receive health records from other providers  by fax.", "Six provider representatives told us they also use health IT tools to help  automatically identify and match patients\u2019 records stored in other data  systems. These tools generally use algorithms that compare  demographic data in a patient\u2019s separate electronic records. For  example, representatives from four of the six providers told us they used  a module offered by their EHR system vendor to match records and  exchange information with other providers that use the same vendor\u2019s  EHR systems. The module includes an algorithm that compares  patients\u2019 demographic information and, if the information in two or more  records is identical or very similar, can automatically link the records.  Automated matching can also involve some degree of manual review, as  algorithms can identify potential matches by providing information about  the likelihood that two records with similar information refer to the same  individual. Afterwards, provider staff manually review the demographic  information in the records and assess whether these potentially matching  records should be linked as belonging to the same patient.", "Representatives from the five HIE organizations we spoke with said they  use a range of automated and manual approaches to match patients\u2019  records when exchanging information. Representatives from all five of  the HIE organizations said that they use software with algorithms to  locate and match records using demographic information provided by the  providers in their networks. Though these HIE organizations\u2019 algorithms  vary, they all use name, sex, DOB, and address to match patients\u2019  records. Representatives said that when the patients\u2019 records contain  similar but not identical demographic information, the HIE organizations  rely on staff or additional software to review potential matches and  determine whether the records belong to the same patient. For example,  one HIE organization representative said that his organization leverages  third-party data, such as credit databases that store past names or  addresses, to update demographic information for records that cannot be  matched automatically.", "When describing their approaches to patient record matching when  exchanging information, six of the seven provider representatives said  that they sometimes used HIE organizations to exchange and match  records. However, none of them relied on HIE organizations as their  primary way to match records and exchange health information. Five of  the provider representatives we spoke with, including one provider that  does not participate in an HIE organization, noted that they only  exchange health information with a few providers. They explained that  they were able to connect to these providers in ways other than through  an HIE organization.", "According to stakeholders we interviewed, it is difficult to determine the  accuracy of the health IT tools used to match patients\u2019 medical records  automatically. While the algorithms typically match records belonging to a  patient and identify potential matches that need to be manually reviewed,  users of these algorithms do not know how many matches the algorithm  may have failed to make. These stakeholders expressed concern that it  is not possible to assess the accuracy of algorithms without independent  testing to identify matches that the algorithm may have missed. HHS  stated that the proprietary nature of many patient matching algorithms  makes it difficult to assess their effectiveness."], "subsections": []}, {"section_title": "Stakeholders Said That Inaccurate, Incomplete, and Inconsistently Formatted Data Can Pose Challenges for Patient Record Matching", "paragraphs": ["Representatives from providers, HIE organizations, and the other  stakeholders we interviewed emphasized the importance of using quality  patient demographic data when matching patients\u2019 medical records.  These stakeholders noted that inaccurate, incomplete, or inconsistently  formatted demographic information in patients\u2019 medical records can make  it challenging to identify and match all the records belonging to a single  patient. Figure 1 illustrates how the demographic information for a  hypothetical patient can be recorded inaccurately, incompletely, and  inconsistently across the patient\u2019s providers.", "Stakeholders described the ways in which providers or their staff can  collect inaccurate demographic information from patients. According to  stakeholders, provider staff sometimes make transcription errors when entering  information into electronic records, patients do not always provide correct information (e.g., they register  with a nickname rather than a legal name), and patient demographic information can change, such as when a patient  moves to a new address or changes her last name, but this  information is not consistently updated in all of the patient\u2019s medical  records.", "Provider representatives identified several reasons that patients\u2019  demographic information can be incomplete or contain different data  elements across the medical records maintained by multiple providers. In  particular, provider representatives explained that providers collect  different information from their patients, and health IT systems can collect  demographic data differently. Examples include the following:", "Two provider representatives said that their organizations do not  collect patients\u2019 SSN because many patients choose not to provide  that information or the information is not available. However, other  provider representatives said they do collect SSNs. A health IT vendor  said that the algorithms in its software do not rely on SSN as a key  factor for matching records because SSN is not consistently available.", "One provider representative explained that the IT system used by the  provider\u2019s laboratory does not contain fields for the same  demographic information that the provider\u2019s EHR system contains. As  a result, laboratory results often contain too little information to reliably  match records, even if the tests were ordered using complete  information.", "One provider representative explained that they do not collect  patients\u2019 mothers\u2019 maiden names, though other organizations collect  and use this information for patient matching.", "According to stakeholders, the inconsistencies in formatting across  medical records can reflect differences in health IT systems or the  policies of the health care organization creating the records:", "A 2014 ONC report noted that one health IT system may list  addresses in a single field, while another may separate street names  from the city and state.", "A 2018 report noted that providers use different standards for  recording names with spaces, hyphens, or apostrophes, and that  some health IT systems include special characters in phone numbers  (i.e., (123) 456-7890), whereas others only allow for numbers (i.e.,  1234567890).", "Representatives from one HIE organization explained that providers  handle missing data for fields differently; for example, one provider  may enter all 9s into an SSN field when it is not available for a patient  and another will enter all 0s.", "Provider representatives and other stakeholders identified some patient  populations for which matching is particularly challenging, due in part to  data issues. Three provider representatives said that medical records for  newborns often contain temporary names that are not updated with the  child\u2019s legal name after it is determined, which makes it difficult to locate  these records. Further, provider representatives and other stakeholders  said that multiple births (e.g., twins) result in record matching challenges,  as these children can have the same DOB and address, and may be  named similarly. A few provider representatives said that records can be  inaccurate across providers for patients from certain nationalities. For  example, according to stakeholders, some east-Asian cultures use the  \u201cfamily name\u201d as the first name, and some Hispanic cultures use multiple  last names. Another provider representative said that a few times a  month, a transgender patient\u2019s photo ID lists the wrong gender, yet the  organizational policy is to record the gender exactly as it appears on a  state-issued photo ID."], "subsections": []}]}, {"section_title": "Stakeholders Identified Efforts Underway to Improve Patient Record Matching as Well as Additional Efforts ONC and Others Could Undertake", "paragraphs": [], "subsections": [{"section_title": "Stakeholders Have Undertaken Efforts to Improve the Demographic Data and Methods Used to Match Records", "paragraphs": ["Officials from ONC, selected provider representatives, and other  stakeholders we interviewed described a variety of efforts they have  undertaken or are currently undertaking to improve the ability to match  patients\u2019 medical records accurately. In general, these efforts focus on  improving demographic data and improving the methods used for  matching. These efforts are discussed in more detail below."], "subsections": [{"section_title": "Efforts to Improve Demographic Data Used for Matching", "paragraphs": ["ONC has reported that quality demographic data is important for  effectively matching patients\u2019 medical records, and in 2017 the agency  published the Patient Demographic Data Quality Framework. The  Framework is a tool to help providers and other organizations assess  their processes for managing data quality and improve the quality of the  demographic data they use in matching. It includes, for example,  questions that providers can use to identify any gaps in how they manage  their demographic data. In 2016, before ONC published the Framework,  the agency began a pilot study to assess how the Framework could work  in a clinical setting. As part of this pilot study, ONC provided training on  demographic data quality to staff from two community health centers,  during which it shared best practices for collecting these data. After the training, researchers who collaborated on the pilot with ONC found that  there were improvements at the community health centers in indicators of  how they managed data quality. According to ONC officials, this pilot  highlighted the effect that data quality and training have on effective  patient record matching. In addition, officials said it underscored  difficulties in implementing data quality improvement efforts when health  care organizations have limited resources and high staff turnover. ONC  officials plan to issue a final report on the pilot study; however, they said  ONC is not currently planning to assess the impact of the Framework or  to conduct future studies on how it works in clinical settings.", "Several stakeholders told us they have worked to improve the  consistency with which they record and format demographic data in their  EHRs. According to ONC officials and hospital representatives, as well as  other stakeholders with whom we spoke, implementing common  standards for how certain demographic data should be formatted\u2014such  as names and addresses\u2014could improve the consistency of data across  providers and thus make it easier to match records. Representatives from  four hospitals told us that they collaborated with other providers in their  regions to implement common standards for recording patients\u2019  demographic data. They told us the following:  In 2017, 23 providers in Texas reached agreement on, and then  implemented, standards for how staff should record patients\u2019 names,  addresses, and other data in order to improve record matching and  facilitate health information exchange. We spoke with  representatives from three hospitals that were part of this effort, who  all told us that the effort resulted in an increased ability to accurately  match patients\u2019 medical records automatically without the need to  manually review the records. (See text box.) For example,  representatives from one hospital said that when patient records are  not matched automatically or when there are questions about the  accuracy of record matching, staff must then conduct a manual review  to resolve the issue. They said that they have seen a significant  decrease in the need for those manual reviews since implementing  the data standards. Representatives from all three hospitals estimated  that the amount of manual review to resolve matching issues and  match incoming records to the right patient had decreased by about  90 percent. Representatives from one hospital added that they are  now better able to prevent records from being matched to the wrong  patient.", "One children\u2019s hospital in California worked with other local hospitals  in recent years to implement a standard for how staff should record a  temporary name for newborns who do not have their own name at  birth. According to representatives from this hospital, after  implementing this standard, clinical staff are able to more easily match  patients\u2019 records and therefore have access to real-time information  on the care newborns received in other hospitals.", "Lessons Learned from One Regional Effort to Standardize Patient Demographic  Data across Multiple Providers  In 2017, 23 providers in Texas implemented agreed-upon standards for capturing patient  name, address, and other data. Representatives from three participating hospitals shared  with us lessons for others interested in standardizing data, such as:", "Allow sufficient time to get buy-in from staff and test for any downstream effects on", "Communicate the benefits of standardizing data to clinical and administrative staff; and", "Train staff on how to enter data, and then assess compliance to identify any  opportunities for improvement.", "In a related 2017 effort, Pew Charitable Trusts sponsored a study to  measure how standardizing specific types of patient demographic data  could improve patient record matching. As part of this study, researchers  used four data sets to test the effect that standardizing patient names,  addresses, DOBs, telephone numbers, and SSNs had on record  matching accuracy. As of September 2018, the full findings from this  study had not been published; however, according to Pew, the findings  indicated that standardizing some demographic data, such as address,  shows promise for increasing the likelihood that patients\u2019 records will be  matched.", "Two stakeholders we spoke with have examined ways to boost patients\u2019  ability to electronically share data with their providers using smartphone  applications or other tools. According to these stakeholders, these types  of tools could improve the accuracy of the demographic data providers  receive from patients, reduce manual data entry errors by providers\u2019 staff,  and allow patients to update their information as changes occur, such as  if they move.", "In 2015, the Workgroup for Electronic Data Interchange (WEDI)  initiated a \u201cVirtual Clipboard\u201d project to explore the development of a  mobile tool to automate the transmission of demographic, insurance,  and clinical information to providers. WEDI representatives told us  that they had engaged with stakeholders such as providers, vendors,  patient advocates, and health plans about the potential benefits of  such a tool, but had not yet identified organizations prepared to move  forward with developing specific applications.", "In 2017, Pew Charitable Trusts funded a RAND study on \u201cpatient- empowered\u201d patient record matching approaches\u2014specifically, to  identify ways that patients could play an additional role in patient  record matching and to select a promising solution for further  development. In its August 2018 report, RAND proposed a solution in  which patients could verify their mobile phone number and other  identifying information with providers and then use a smartphone  application to share this information with providers.", "Representatives from both WEDI and Pew told us that, when developing  these types of tools, it is important to consider the practical implications  for the providers that would need to be able to accept data in this way.  For example, Pew representatives said that it would be important to  understand whether these tools present any workflow challenges in  provider settings, such as with any IT tools that providers would need to  access the data stored via smartphone applications, or with the steps  needed to incorporate that data into their EHR systems. Representatives  from both organizations also noted that not all patients would be willing or  able to use these types of tools to share data with providers. In addition,  RAND reported on a range of security considerations for these types of  tools. For example, RAND noted that a smartphone app that gathers  health data\u2014like its proposed patient matching solution\u2014would introduce  risk because it would contain private demographic and health information  and would therefore be a target for individuals looking to steal data."], "subsections": []}, {"section_title": "Assessing and Improving Matching Methods", "paragraphs": ["Officials from ONC and other stakeholders described various efforts to  assess and improve the effectiveness of the methods used in matching  patients\u2019 medical records. These efforts include hosting competitions,  conducting studies, and issuing guidance. For example, ONC officials  described the following two efforts to improve patient record matching  methods:  In 2017, ONC held a Patient Matching Algorithm Challenge in which  participants competed to develop an algorithm that most accurately  matched patient records in a test data set. According to ONC officials,  the goals of the exercise were to bring about greater transparency on  the performance of existing patient record matching algorithms, spur  the adoption of performance metrics for algorithm developers, and  improve other aspects of patient record matching, such as resolving  duplicate patient records. Over 140 teams used varying methods to  match patient records using an ONC-provided test data set, and ONC  selected six winning submissions based on various measures of  matching accuracy. As of July 2018, ONC was analyzing data from  the challenge to learn more about algorithm performance. Officials  told us that the challenge highlighted limitations of commonly used  matching algorithms and demonstrated that extensive manual review  is often needed to accurately match patients\u2019 medical records. ONC  officials told also us they plan to publish a report on their analysis of  the challenge data.", "In 2017, ONC also conducted a patient record matching Gold  Standard and Algorithm Testing pilot study. According to ONC  officials, there is no widely used standard for assessing the accuracy  of patient record matching algorithms, so the pilot was intended to  create a data set with known duplicate records (that is, multiple  records for the same individual) and then use it to evaluate how well a  commonly-used algorithm matched those records. ONC officials told  us that the pilot demonstrated how much effort is needed to evaluate  the matching algorithms providers and others use, as well as the  importance of using standard metrics to assess matching accuracy.  ONC expects to issue a final report on the results of the study.", "Among the examples other stakeholders described were the following  efforts to improve patient record matching methods:  In 2018, the Sequoia Project published A Framework for Cross- Organizational Patient Identity Management to provide guidance to  help providers and other types of health care entities improve patient  record matching across organizations. The report, for example,  suggests ways organizations can improve their matching algorithms,  and it identifies practices that organizations can use to improve how  they use patient demographic data and other information when  matching records. Representatives from the Sequoia Project told us  they plan to speak with organizations that have voluntarily adopted  this guidance to learn how doing so affects record matching. These  representatives also said they are looking into how ONC\u2019s Patient  Demographic Data Quality Framework relates to their own framework,  as it may be beneficial if there were a way to link these two efforts.", "HHS\u2019s Agency for Healthcare Research and Quality funded a study  that began in 2017 to evaluate patient record matching approaches,  with the goal of identifying different approaches to improving the  accuracy of patient record matching algorithms. As part of this  ongoing study, researchers are measuring how different changes to  matching methods\u2014including changes that have and have not been  recommended or evaluated previously\u2014improve matching  accuracy. The study is expected to run through 2022. According to  researchers, their initial work tested the use of different combinations  of demographic data elements, among other things. They identified a  modest improvement in the accuracy of matching algorithms, and  determined that further research was needed.", "In 2016, CHIME sponsored a National Patient ID Challenge that  offered a monetary award for the development of a tool that matched  patients\u2019 medical records with 100 percent accuracy. Although the  challenge was not specific to matching patient records across  providers, several CHIME members who were involved with the  challenge told us that they hoped to identify a patient record matching  approach that could be widely adopted and easily integrated into  existing EHR and HIE platforms without significant cost. They noted  the challenge also was an opportunity to encourage organizations to  develop effective matching methods, and to identify a matching  method that did not rely solely on demographic patient information.  CHIME assessed submissions from a range of organizations, but  suspended the challenge in November 2017, reporting that the effort  did not achieve the results it had sought. CHIME members said that  the challenge nonetheless helped draw attention to patient record  matching issues.", "In addition, several stakeholders have worked to improve the matching of  medical records specifically for newborns and multiple-birth siblings such  as twins, for whom matching can be particularly challenging:", "Representatives we spoke with from one children\u2019s hospital told us  they have implemented indicators in their EHR to highlight when a  child has a twin or other multiple-birth sibling, so that staff know that  another child has similar demographic information. Representatives  said that this helps prevent medical records from one child being  incorrectly matched with the medical records of a sibling. In 2017,  this hospital began working with its health IT vendor to explore the  broader use of a multiple birth indicator to improve the probability of  accurate matching for the multiple birth population between different  vendors\u2019 EHRs. The representatives said that while there is a  standard indicator that can be used for multiple births, many  organizations are not aware of it.", "In addition, one researcher we spoke with is studying how using  information such as physicians\u2019 names and parents\u2019 demographic  data could help address record matching challenges for newborns. As  noted earlier, one children\u2019s hospital worked with other local hospitals  to implement a standard for how staff record a temporary name for  newborns."], "subsections": []}]}, {"section_title": "Stakeholders Identified Additional Efforts That ONC or Others Could Undertake to Improve Patient Record Matching", "paragraphs": ["Stakeholders we spoke with said more could be done to improve the  ability to accurately match patients\u2019 medical records. The stakeholders  identified several efforts that could improve matching, and had varying  views on the roles ONC and others should play in these efforts. Among  the examples of efforts stakeholders identified that could improve  matching were implementing common standards for demographic data;  developing a data set to test the accuracy of matching methods; sharing  best practices and other resources; implementing a national unique  patient identifier; and developing a public-private collaboration effort to  improve patient record matching. Multiple stakeholders noted that no  single effort would be sufficient to improve matching, given the factors  that contribute to matching challenges. These potential additional efforts  are described below."], "subsections": [{"section_title": "Implementing Common Standards for Recording Patients\u2019 Demographic Data in Health IT Systems", "paragraphs": ["Several stakeholders told us that implementing common standards for  recording patients\u2019 demographic data in health IT systems could improve  the ability of providers to match patients\u2019 medical records. Stakeholders  said that if providers implemented such standards, it could increase the  extent to which they collect the same types of demographic data or use  the same format for names and addresses as other providers, for  example. However, stakeholders had differing views on how to reach  agreement on and implement common standards among providers, as  well as how feasible it would be to do so. Some said it would be helpful if  ONC established requirements regarding demographic data\u2014such as the  types of data collected, and how it is formatted\u2014potentially through the  EHR certification process. In contrast, other stakeholders saw an  opportunity for industry organizations to voluntarily agree to implement  standards for demographic data. Some stakeholders advocated for EHR  vendors to take steps to standardize the data their products allow  providers to collect. A representative with one hospital said that having  demographic data standards built into EHRs could minimize the amount  of time needed to train staff on how to format the data they collect\u2014and  then to monitor whether they format the data correctly. A number of  stakeholders said that ONC could play a role in getting industry groups to  agree on and implement common data standards. ONC officials noted  that as part of their role in coordinating health IT efforts, they have worked  with industry groups in a number of ways and expect to continue their  coordination efforts.", "Some stakeholders we spoke with told us that efforts to implement  common demographic standards could face challenges, such as the  following:", "Several said it could be difficult to reach consensus across various  industry organizations on what standards to adopt and implement.", "Multiple stakeholders noted that patient preferences could affect the  effectiveness of efforts to standardize data. Patients might not always  be willing to provide some types of data even if providers wanted to  collect it. For example, one provider noted that patients may want to  use their middle name instead of their legal name.", "Some stakeholders said it could be time-intensive for providers to  train their staff on how to collect data in accordance with standards, or  that staff might not always follow the standards. For example, a  representative from one hospital that implemented demographic  standards told us that they continuously train staff and perform audits  to ensure that staff follow those standards.", "Some said that EHR systems differ in how they allow staff to record  demographic data, which can affect providers\u2019 ability to implement  standards. Some stakeholders said it can be costly for providers to  update or upgrade their EHRs.", "Stakeholders cited other potential limitations of data standardization  efforts. Several, for example, said that standardizing data would not  prevent inaccurate or outdated data. In addition, some stakeholders  did not think that data standardization would yield significant  improvements."], "subsections": []}, {"section_title": "Developing a Data Set to Test the Accuracy of Methods Used to Match Patients\u2019 Medical Records", "paragraphs": ["Several stakeholders told us that developing a standard data set that  organizations could use to evaluate matching methods would be helpful.  Stakeholders noted that such a data set would allow health IT vendors,  providers, or others to assess matching methods independently (instead  of relying on vendors\u2019 reported accuracy rates, for example) and in a  standardized way (by using the same data source). While stakeholders  did not always specify who should develop such a data set, an official  from one stakeholder involved with patient record matching and data  sharing efforts said that the most useful thing ONC could do to address  patient record matching would be to develop a master data set to allow  testing in a uniform way. This official added that without a way to  accurately and uniformly test patient record matching methods, efforts to  improve patient record matching are hindered. A number of stakeholders  did not specifically mention the utility of a data set, but nonetheless  highlighted the importance of testing how well matching methods work.", "For its part, ONC officials said that the lack of a data set for evaluating  matching methods is a challenge to efforts to improve matching, and that  developing such a data set would be difficult. They noted that the  agency\u2019s 2017 Patient Matching Algorithm Challenge had highlighted the  difficulties of creating a test data set that closely mimics real world patient  data and that could be used to assess the accuracy of matching  algorithms. ONC officials cited a number of challenges to developing one  test data set for assessing a range of patient matching algorithms. For  example, they said the data set would need to be very large; would  require an extensive and expensive effort to develop; could be difficult to  implement from a practical perspective; and that, because data varies  widely across patient populations and organizations, might have limited  application for assessing algorithms that are designed to match specific  data sets. HHS also stated that the development of a data set would  need to include a \u201ckey\u201d of known duplicate patient records\u2014that is, an  indicator of which records in the data set should be matched to the same  individual."], "subsections": []}, {"section_title": "Sharing Best Practices and Other Resources Used in Matching Patients\u2019 Medical Records", "paragraphs": ["According to a number of stakeholders we spoke with, more could be  done to encourage the sharing of best practices and other patient record  matching resources. For example, representatives from some HIEs said it  would be beneficial to bring organizations together to share lessons  learned and collaborate on best practices for using patient data to match  records. Representatives from one industry association noted that  disseminating information on patient matching errors could help  organizations better understand the extent of matching errors and what  causes them; for example, if information were shared about whether  certain data elements are more likely to cause matching errors or  problems, then organizations could work to prevent the errors or  problems related to those data elements. A few stakeholders said that  efforts to identify and share effective matching algorithms could expand  resources to a broader range of providers. While stakeholders did not  always specify who they thought should identify and share matching  resources, several stakeholders saw the potential for ONC to play a role  in these types of efforts. For example, representatives from one industry  association said that ONC could provide information about the types of  identifiers that could be used to facilitate matching, such as cell phone  numbers or driver\u2019s license numbers. These representatives also said  that ONC could provide information on how to address matching patient  records for children and other individuals who might not have those types  of identifiers. ONC officials noted that they have shared information and  resources about patient matching in a number of ways, such as through  the agency\u2019s Patient Demographic Data Quality Framework. They added  that other organizations, such as the Sequoia Project and Pew Charitable  Trusts, have worked to communicate best practices in this area."], "subsections": []}, {"section_title": "Implementing a National Unique Patient Identifier", "paragraphs": ["A number of stakeholders noted that implementing a new national, unique  patient identifier specifically for use in health care settings could improve  the ability to match patients\u2019 medical records. For example, having a new  unique number assigned to an individual would reduce the reliance on  demographic data for record matching, according to several stakeholders.", "However, stakeholders had differing views on the potential benefits and  feasibility of implementing a new unique patient identifier for health care:", "Some stakeholders said that it is unlikely that any new identifier could  be implemented nationwide; they cited reasons such as the  prohibition on federal funds being used to develop a national unique  health care identifier, as well as potential privacy concerns.", "Multiple stakeholders cited potential limitations to using a national  patient identifier, noting for example that\u2014as with SSNs\u2014patients  may not be willing to share their identifier, and identifiers could still be  subject to manual data entry errors, data breaches, or fraud.", "Some stakeholders said that a unique identifier would be the most  effective way to improve matching. However, others said they did not  believe a new identifier was needed, or did not think a new identifier  would significantly improve matching, given the potential limitations.", "HHS stated that health care systems currently rely on a number of  identifiers to match patient records and that a new government- generated identifier would improve matching only if other technical  and non-technical challenges were solved before it was implemented.  The creation, transmission, and capture of a single national patient  identifier across many systems could take decades and would  encounter implementation difficulties, according to HHS.", "In addition, a few stakeholders said that patients might be willing to  voluntarily obtain a unique identifier to use across health care settings if  one were available. A representative from one provider association, for  example, said that people with chronic conditions who obtain care from  multiple providers might opt to obtain a unique identifier, if available, to  help match their records. In its 2018 report on patient-empowered  approaches to matching, RAND described various considerations for  implementing a voluntary unique identifier issued by a non-federal entity.  The report cited, for example, one organization\u2019s work to develop a tool to  allow health care providers to offer patients a unique identifier. RAND  stated that although this solution would greatly improve matching if  adopted, there is uncertainty that providers or patients would adopt it.  Representatives from the organization that developed this tool told us that  they had tested it in one location, but that it had not yet been adopted by  providers."], "subsections": []}, {"section_title": "Developing a Public-Private Collaboration Effort to Improve Patient Record Matching", "paragraphs": ["Multiple stakeholders we spoke with saw a need for a collaborative  public-private effort to help identify and implement efforts to improve  patient record matching. For example, several stakeholders saw a  specific need for a national strategy or approach for addressing patient  record matching issues. Representatives from the Pew Charitable Trusts,  for example, stated that a national strategy\u2014led by the private sector,  with the federal government providing support\u2014could help reach  consensus on ways to improve matching. In addition, one researcher  said that ONC should help facilitate a strategy for addressing patient  record matching at the provider, vendor, and national levels\u2014and that it  would be beneficial for ONC to foster collaboration among private sector  organizations to address matching issues. More generally,  representatives from several provider associations stated that ONC could  play an important role by convening stakeholders to identify ways to  improve patient record matching. As noted earlier, some stakeholders  said that ONC could help industry groups agree on common data  standards for EHRs. While some stakeholders we spoke with said that  ONC should collaborate by supporting private-sector efforts to improve  matching instead of directing those efforts, others said that ONC could  potentially play more of a leadership role. Representatives from one HIE,  for example, said that ONC could lead an overall effort to improve patient  record matching and that private-sector organizations could lead specific  actions within that larger effort.", "For their part, ONC officials said that public and private stakeholders  should play a role in efforts to improve patient record matching. According  to ONC officials, while the agency does not have sufficient resources to  support broad implementation of efforts to improve patient record  matching, ONC has collaborated with other stakeholders on various  patient record matching issues.", "ONC\u2019s August 2018 Interoperability Forum included a \u201cpatient  matching track\u201d where industry stakeholders, such as providers,  health IT vendors, and researchers, discussed matching challenges  and potential solutions. According to ONC officials, this track  covered topics such as patient-empowered solutions to matching,  including smartphone applications; issues when matching patient  medical records across organizations; the development of consensus  on patient matching definitions and metrics; and issues when  matching records for pediatric patients. The outcomes of this track,  according to ONC officials, were increased awareness of a range of  patient matching issues; information sharing among speakers and  participants; and an opportunity to network and potentially collaborate  with individuals on patient matching issues. ONC officials told us that  a takeaway for them was that while various approaches to patient  matching\u2014including technical approaches such as biometrics and  referential matching; efforts regarding unique identifiers; and non- technical approaches such as data quality improvement efforts\u2014may  enhance the capacity for matching, additional research is needed.", "ONC participated in the Sequoia Project\u2019s development of that  organization\u2019s Framework for Cross-Organizational Patient Identity  Management. During the 2018 Interoperability Forum, ONC officials  and Sequoia Project representatives presented together about  developing consensus on patient record matching definitions and  metrics. They discussed definitions outlined in the Framework and  encouraged participants to work toward consensus and transparency  when measuring and reporting matching metrics, such as by forming  local and national workgroups, ONC officials said.", "Looking forward, ONC and some stakeholders said that the agency\u2019s  current effort to establish a national framework for exchanging health  information electronically is an opportunity for the agency to address  patient record matching challenges. As required by the 21st Century  Cures Act, ONC is taking steps to develop or support a framework for  ensuring the full exchange of health information among health information  networks. ONC has referred to this effort as establishing a \u201cnetwork of  networks,\u201d and it includes the development of a common agreement  among health information networks nationally, which providers and others  can use to facilitate the exchange of electronic health information,  including patients\u2019 health records. As part of this effort, in January 2018,  ONC issued a draft Trusted Exchange Framework that included principles  for the trusted exchange of information, as well as minimum required  terms and conditions for the Common Agreement. ONC plans to provide  funding for an industry entity to incorporate these terms and conditions  into a single Common Agreement that participating Qualified Health  Information Networks (QHIN) and their participants voluntarily agree to  adopt.", "While it is too soon to tell how this ONC effort will be implemented,  several stakeholders said that it could potentially improve patient record  matching if, for example, it results in new guidance or standards about  demographic data elements. One HIE organization, for example, said that  it would be beneficial if this effort leverages non-governmental work on  matching and synthesizes this work into guidance for the industry.  According to ONC officials, the framework is expected to affect patient  record matching by requiring participating QHINs to use ONC\u2019s Patient  Demographic Data Quality Framework to evaluate their data practices.  The agency plans to release a second draft Trusted Exchange  Framework and then release a draft Common Agreement and an updated  Trusted Exchange Framework for public comment."], "subsections": []}]}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHS  provided technical comments, which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.", "If you or your staff members have any questions about this report, please  contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report."], "subsections": []}]}, {"section_title": "Appendix I: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Jessica Farb, (202) 512-7114 or farbj@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals making key  contributions to this report include Thomas Conahan (Assistant Director),  Robin Burke (Analyst-in-Charge), A. Elizabeth Dobrenz, Krister Friday,  Monica Perez-Nelson, Vikki Porter, and Andrea Richardson."], "subsections": []}]}], "fastfact": ["Health care providers increasingly share records electronically. It can be hard to match records to the right patient, and mistakes can have consequences. For example, a doctor might use information from the wrong record when treating a patient.", "Inaccurate, incomplete, or inconsistently formatted data can make record-matching difficult. These data problems can happen for many reasons, e.g., a patient can go by a full name in one record and a nickname in another.", "We explored possible solutions, such as requiring a specific format for recording a patient\u2019s name and address, and sharing best practices for record-matching."]}
{"id": "GAO-19-48", "url": "https://www.gao.gov/products/GAO-19-48", "title": "Critical Infrastructure Protection: Actions Needed to Address Significant Weaknesses in TSA's Pipeline Security Program Management", "published_date": "2018-12-18T00:00:00", "released_date": "2018-12-19T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["More than 2.7 million miles of pipeline transport and distribute oil, natural gas, and other hazardous products throughout the United States. Interstate pipelines run through remote areas and highly populated urban areas, and are vulnerable to accidents, operating errors, and malicious physical and cyber-based attack or intrusion. The energy sector accounted for 35 percent of the 796 critical infrastructure cyber incidents reported to DHS from 2013 to 2015. Several federal and private entities have roles in pipeline security. TSA is primarily responsible for the oversight of pipeline physical security and cybersecurity.", "GAO was asked to review TSA's efforts to assess and enhance pipeline security and cybersecurity. This report examines, among other objectives: (1) the guidance pipeline operators reported using to address security risks and the extent that TSA ensures its guidelines reflect the current threat environment; (2) the extent that TSA has assessed pipeline systems' security risks; and (3) the extent TSA has assessed its effectiveness in reducing pipeline security risks.", "GAO analyzed TSA documents, such as its Pipeline Security Guidelines ; evaluated TSA pipeline risk assessment efforts; and interviewed TSA officials, 10 U.S. pipeline operators\u2014selected based on volume, geography, and material transported\u2014and representatives from five industry associations."]}, {"section_title": "What GAO Found", "paragraphs": ["Pipeline operators reported using a range of guidelines and standards to address physical and cybersecurity risks, including the Department of Homeland Security's (DHS) Transportation Security Administration's (TSA) Pipeline Security Guidelines , initially issued in 2011. TSA issued revised guidelines in March 2018 to reflect changes in the threat environment and incorporate most of the principles and practices from the National Institute of Standards and Technology's Framework for Improving Critical Infrastructure Cybersecurity . However, TSA's revisions do not include all elements of the current framework and TSA does not have a documented process for reviewing and revising its guidelines on a regular basis. Without such a documented process, TSA cannot ensure that its guidelines reflect the latest known standards and best practices for physical security and cybersecurity, or address the dynamic security threat environment that pipelines face. Further, GAO found that the guidelines lack clear definitions to ensure that pipeline operators identify their critical facilities. GAO's analysis showed that operators of at least 34 of the nation's top 100 critical pipeline systems (determined by volume of product transported) deemed highest risk had identified no critical facilities. This may be due, in part, to the guidelines not clearly defining the criteria to determine facilities' criticality.", "To assess pipeline security risks, TSA conducts pipeline security reviews\u2014Corporate Security Reviews and Critical Facility Security Reviews\u2014to assess pipeline systems' vulnerabilities. However, GAO found that the number of TSA security reviews has varied considerably over the last several years, as shown in the table on the following page.", "TSA officials stated that staffing limitations have prevented TSA from conducting more reviews. Staffing levels for TSA's Pipeline Security Branch have varied significantly since fiscal year 2010 with the number of staff ranging from 14 full-time equivalents in fiscal years 2012 and 2013 to 1 in 2014. Further, TSA does not have a strategic workforce plan to help ensure it identifies the skills and competencies\u2014such as the required level of cybersecurity expertise\u2014necessary to carry out its pipeline security responsibilities. By establishing a strategic workforce plan, TSA can help ensure that it has identified the necessary skills, competencies, and staffing.", "GAO also identified factors that likely limit the usefulness of TSA's risk assessment methodology for prioritizing pipeline system reviews. Specifically, TSA has not updated its risk assessment methodology since 2014 to reflect current threats to the pipeline industry. Further, its sources of data and underlying assumptions and judgments regarding certain threat and vulnerability inputs are not fully documented. In addition, the risk assessment has not been peer reviewed since its inception in 2007. Taking steps to strengthen its risk assessment, and initiating an independent, external peer review would provide greater assurance that TSA ranks relative risk among pipeline systems using comprehensive and accurate data and methods.", "TSA has established performance measures to monitor pipeline security review recommendations, analyze their results, and assess effectiveness in reducing risks. However, these measures do not possess key attributes\u2014such as clarity, and having measurable targets\u2014that GAO has found are key to successful performance measures. By taking steps to ensure that its pipeline security program performance measures exhibit these key attributes, TSA could better assess its effectiveness at reducing pipeline systems' security risks. Pipeline Security Branch officials also reported conducting security reviews as the primary means for assessing the effectiveness of TSA's efforts to reduce pipeline security risks. However, TSA has not tracked the status of Corporate Security Review recommendations for the past 5 years. Until TSA monitors and records the status of these reviews' recommendations, it will be hindered in its efforts to determine whether its recommendations are leading to significant reduction in risk."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO makes 10 recommendations to TSA to improve its pipeline security program management (many are listed on the next page), and DHS concurred.", "GAO recommends, among other things, that the TSA Administrator take the following actions:", "implement a documented process for reviewing, and if deemed necessary, for revising TSA's Pipeline Security Guidelines at defined intervals;", "clarify TSA's Pipeline Security Guidelines by defining key terms within its criteria for determining critical facilities;", "develop a strategic workforce plan for TSA's Security Policy and Industry Engagement\u2018s Surface Division;", "update TSA's pipeline risk assessment methodology to include current data to ensure it reflects industry conditions and threats;", "fully document the data sources, underlying assumptions and judgments that form the basis of TSA's pipeline risk assessment methodology;", "take steps to coordinate an independent, external peer review of TSA's pipeline risk assessment methodology;", "ensure the Security Policy and Industry Engagement\u2018s Surface Division has a suite of performance measures which exhibit key attributes of successful performance measures; and", "enter information on Corporate Security Review recommendations and monitor and record their status."]}], "report": [{"section_title": "Letter", "paragraphs": ["The security of the nation\u2019s pipeline systems is vital to public confidence  and the nation\u2019s safety, prosperity, and well-being. More than 2.7 million  miles of pipeline transport and distribute the oil, natural gas, and other  hazardous liquids that U.S. citizens and businesses depend on to operate  vehicles and machinery, heat homes, generate electricity, and  manufacture products. The interstate pipeline system runs through  remote, as well as highly populated urban areas, and is vulnerable to  accidents, operating errors, and malicious attacks. In addition, pipelines  increasingly rely on sophisticated networked computerized systems and  electronic data, which are vulnerable to cyber attack or intrusion.", "Given that many pipelines transport volatile, flammable, or toxic oil and  liquids, and given the potential consequences of a successful physical or  cyber attack on life, property, the economy, and the environment, pipeline  systems are attractive targets for terrorists, hackers, foreign nations,  criminal groups, and others with malicious intent. For example, according  to the Transportation Security Administration (TSA)\u2014the federal agency  with responsibility for security in all modes of transportation, which  includes the oversight of pipeline physical security and cybersecurity\u2014a  minor pipeline system disruption could result in commodity price  increases while prolonged pipeline disruptions could lead to widespread  energy shortages. Further, disruption of any magnitude may affect other  domestic critical infrastructure and industries that are dependent on  pipeline system commodities.", "Since the September 11, 2001, terrorist attacks, new threats to the  nation\u2019s pipeline systems have evolved to include sabotage by  environmental activists and cyber attack or intrusion by nations. In  October 2016, environmental activists forced the shutdown of five crude  oil pipelines in four states. In addition, the U.S. energy sector has  experienced cyber intrusions by nation-state actors into their networks.  For example, in March 2018, the Federal Bureau of Investigation and the  National Cybersecurity and Communications Integration Center (NCCIC)  reported that a nation-state had targeted organizations within multiple  U.S. critical infrastructure sectors, including the energy sector, and  collected information pertaining to Industrial Control Systems (ICS). Also,  in April 2012, the Industrial Control Systems Cyber Emergency Response  Team reported that an unidentified cyber attacker had conducted a series  of cyber intrusions into U.S. natural gas pipeline systems beginning in  December 2011.", "The security of federal cyber assets has been on our High Risk list since  1997 and was expanded to include the protection of critical cyber  infrastructure in 2003. In September 2018, we issued an update to the  information security high-risk area that identified actions needed to  address cybersecurity challenges facing the nation. We last reported on  pipeline security in 2010 and made eight recommendations to TSA to  develop outcome-based performance measures for assessing TSA\u2019s  pipeline security efforts, and to track its corporate security reviews and  critical facility inspections\u2019 recommendations, among others. We  discuss some of these recommendations in more detail later in this report.  In 2012, we reviewed information provided by TSA and closed the  recommendations as implemented.", "You requested that we review TSA\u2019s efforts to enhance pipeline physical  security and cybersecurity. This report examines the following objectives:  1.  how do pipeline sector stakeholders share security-related  2.  what guidance do pipeline operators report using to address security  risks and to what extent does TSA ensure its guidelines reflect the  current threat environment;  3.  to what extent has TSA assessed security risks to pipeline systems;  4.  to what extent has TSA assessed its effectiveness in reducing  pipeline security risks.", "For each objective, we interviewed representatives of the five major  associations with ties to the pipeline industry: the American Petroleum  Institute (API), the Association of Oil Pipe Lines, the American Gas  Association (AGA), the Interstate Natural Gas Association of America  (INGAA), and the American Public Gas Association. We also interviewed  a nonprobability sample of security personnel from 10 pipeline operators.  We selected the 10 pipeline operators from TSA\u2019s list of the top 100  critical pipeline systems. We chose operators to ensure a mixture of the  following characteristics: (a) type of pipeline commodity transported (i.e.,  natural gas or hazardous oil and liquids); (b) volume of product  transported; and (c) whether or not the pipeline operators\u2019 critical facilities  had been the subject of a TSA security review. We also considered the  location of selected operators\u2019 pipeline systems to ensure that a single  state or region was not overrepresented in our sample. We then  conducted semistructured interviews to obtain operators\u2019 perspectives on  pipeline security and the role of federal agencies in assisting operators  with security activities. While the information gathered during operator  interviews cannot be generalized to all pipeline operators, it provides a  range of perspectives on a variety of topics relevant to pipeline security.", "To identify how pipeline sector stakeholders share security-related  information, we reviewed documents describing federal agencies\u2019  processes for sharing security-related information with federal partners  and private industry. In addition, we reviewed relevant documents from  TSA and other federal entities, including the Department of  Transportation (DOT), DOT\u2019s Pipeline and Hazardous Materials Safety  Administration (PHMSA), the Department of Energy (DOE), and the  Federal Energy Regulatory Commission (FERC). We also interviewed  agency and industry officials to gather their perspectives on how security  information is shared among pipeline sector stakeholders.", "To identify the guidance pipeline operators report using to address  security risks and the extent to which TSA ensures its guidelines reflect  the current threat environment, we reviewed TSA\u2019s 2018 Pipeline Security  Guidelines and compared the cybersecurity-related sections to  applicable standards of the National Institute of Standards and  Technology\u2019s (NIST) Framework for Improving Critical Infrastructure  Cybersecurity. We also interviewed federal officials to identify security- related standards and guidance issued. In addition, we obtained from  industry officials the security-related standards and guidance they use  and asked them about any challenges they experienced in implementing TSA\u2019s Pipeline Security Guidelines. Based on the results of our operator  interviews, we analyzed TSA data on critical facility identification. Further,  to assess TSA\u2019s process for updating the guidelines, we compared the  process with TSA\u2019s Pipeline Security Smart Practice Observations for  pipeline operators and our Standards for Internal Control in the Federal  Government.", "To determine the extent TSA has assessed security risks to pipelines, we  reviewed key threat assessments from TSA, such as its Pipeline Modal  and Cyber Modal Threat Assessments and Transportation Sector  Security Risk Assessments that it issued during calendar years 2011  through 2017. We also evaluated TSA\u2019s identification of the 100 most  critical pipeline systems, its methods for assessing relative risk among  those systems, and its prioritization of its pipeline reviews. As part of that  evaluation, we assessed the reliability of the data within TSA\u2019s pipeline  relative risk ranking tool by performing electronic and manual checks for  such things as logic errors and missing data. Additionally, we  interviewed TSA officials about how the risk tool is updated and  maintained to ensure data reliability. We determined the data were  sufficiently reliable for the purpose of our review. We also interviewed  TSA officials about the methods they used to rank relative risk among  pipeline systems and the extent to which those methods aligned with the  National Infrastructure Protection Plan 2013: Partnering for Critical  Infrastructure Security and Resilience (NIPP), other Department of  Homeland Security (DHS) priorities, and previously identified best  practices for program management and risk assessment. We also  analyzed information on the number of pipeline security reviews\u2014 Corporate Security Reviews (CSR) and Critical Facility Security Reviews  (CFSR)\u2014that TSA conducted by fiscal year, as well as TSA staffing  levels and contractor support. Further, we interviewed TSA officials about  their staffing allocation and workforce planning process and compared  TSA\u2019s process to our previous work which identified principles that a  strategic workforce planning process should follow.", "To further our understanding of TSA\u2019s pipeline security review processes,  we observed TSA officials and contractors conduct one CSR of one  pipeline system, and three CFSRs at three critical facilities in the Houston  and Beaumont, Texas, areas. While the results of our observations  cannot be generalized to all CSRs and CFSRs or all pipeline systems and  critical facilities, they provided us with an understanding of how TSA  conducts these reviews and inspections. We also interviewed  representatives of Secure Solutions International\u2014a security and risk  management consulting firm that assists TSA in conducting CSRs and  CFSRs\u2014about critical facilities and the inspection process.", "To determine the extent TSA has assessed its effectiveness in reducing  pipeline security risks, we assessed key strategic documents, such as  TSA\u2019s performance report, against our key characteristics of effective  performance measures. We also reviewed TSA guidance, such as the  standard operating procedures outlining how TSA staff are to conduct  pipeline security reviews and monitor operators\u2019 implementation of their  recommendations. We then compared TSA\u2019s assessment efforts to our  Standards for Internal Control in the Federal Government. In addition, we  evaluated the databases TSA officials reported using to analyze and  record the results and recommendations of pipeline security reviews. We  reviewed each database to determine what information was stored in  them, such as the number of observations, what fields were present, and  typical entries within each field. We then reviewed and conducted  electronic testing on the universe of fields and observations. Although we  identified limitations, which we discuss later in the report, we found that  the data was sufficiently reliable to provide general information such as  summary figures describing pipeline security reviews completed. We also  interviewed TSA officials to understand TSA\u2019s efforts to assess its overall  effectiveness in reducing pipeline security risks and related data  collection efforts.", "We conducted this performance audit from June 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Overview of the U.S. Pipeline System", "paragraphs": ["The national pipeline system consists of more than 2.7 million miles of  networked pipelines transporting oil, natural gas, and other hazardous  liquids. Hazardous liquid and natural gas pipelines\u2014primarily buried  underground in the continental United States\u2014run under remote and  open terrain, as well as densely populated areas. These pipelines are of  three main types:", "Hazardous liquid: About 216,000 miles of hazardous liquid pipeline  transport crude oil, diesel fuel, gasoline, jet fuel, anhydrous ammonia,  and carbon dioxide.", "Natural gas transmission and storage: About 319,000 miles of  pipeline\u2014mostly interstate\u2014transport natural gas from sources to  communities.", "Natural gas distribution: About 2.2 million miles of pipeline\u2014mostly  intrastate\u2014transport natural gas from transmission sites to  consumers.", "Figure 1 depicts the network of hazardous liquid and natural gas  transmission pipelines in the United States.", "More than 3,000 pipeline companies operate the nation\u2019s pipeline  systems, which can traverse multiple states and the U.S. borders with  Canada and Mexico. Many pipeline systems are comprised of the  pipelines themselves, as well as a variety of facilities, such as storage  tanks, compressor stations, and control centers. Most pipeline systems  are monitored and moderated through automated ICS or Supervisory  Control and Data Acquisition (SCADA) systems using remote sensors,  signals, and preprogramed parameters to activate and deactivate valves  and pumps to maintain flows within tolerances.", "Federal agencies and pipeline operators determine the criticality of  pipeline systems and their facilities based on their importance to the  nation\u2019s energy infrastructure; service to installations critical to national  defense; or, if attacked, have the potential to cause mass casualties and  significant impact on public drinking water affecting major population  centers. Accordingly, those determined to be critical merit increased  attention to security. However, as we previously reported, the inherent  design and operation of U.S. pipeline systems may reduce some potential  impacts of lost service. The pipeline sector is generally considered to be  resilient and versatile. Historically, pipeline operators have been able to  quickly respond to the adverse consequences of an incident\u2014whether it  is damage from a major hurricane or a backhoe\u2014and quickly restore  pipeline service. Pipeline infrastructure also includes redundancies such  as parallel pipelines or interconnections that enable operators to reroute  material through the network. Figure 2 depicts the U.S. pipeline system,  its basic components, examples of vulnerabilities, and the entities to  which it supplies energy and raw materials. These entities include utility  companies, airports, military sites, and industrial and manufacturing  facilities."], "subsections": []}, {"section_title": "Physical and Cyber Threats to Pipeline Systems", "paragraphs": ["According to TSA, pipelines are vulnerable to physical attacks\u2014including  the use of firearms or explosives\u2014largely due to their stationary nature,  the volatility of transported products, and the dispersed nature of pipeline  networks spanning urban and outlying areas. The nature of the  transported commodity and the potential effect of an attack on national  security, commerce, and public health make some pipelines and their  assets more attractive targets for attack. Oil and gas pipelines have  been and continue to be targeted by terrorists and other malicious groups  globally. Terrorists have also targeted U.S. pipelines, but have not  succeeded in attacking them. Further, environmental activists and lone  actors seeking to halt the construction of new pipelines through sabotage  have recently emerged as a new threat to pipelines. For example, in  March 2017, activists used blowtorches to cut holes in empty portions of  the Dakota Access Pipeline in two states. In February 2017, local law  enforcement officers fatally shot a man who used an assault rifle to  damage the Sabal Trail Pipeline, a natural gas pipeline under  construction in Florida.", "The sophisticated computer systems that pipeline operations rely on are  also vulnerable to various cyber threats. According to DOE, the  frequency, scale, and sophistication of cyber threats have increased, and  attacks have become easier to launch. NCCIC reported that the energy  sector, which includes pipelines, experienced more cyber incidents than  any sector from 2013 to 2015, accounting for 35 percent of the 796  incidents reported by all critical infrastructure sectors. In 2016, NCCIC  reported that the energy sector was the third most frequently attacked  sector. Further, according to DOE, the cost of preventing and  responding to cyber incidents in the energy sector is straining the ability  of companies to adequately protect their critical cyber systems. For  example, a 2015 study by the Ponemon Institute estimated the  annualized cost of cyber crime for an average energy company to be  about $28 million.", "Ineffective protection of cyber assets from these threats can increase the  likelihood of security incidents and cyber attacks that disrupt critical  operations; lead to inappropriate access to and disclosure, modification,  or destruction of sensitive information; and threaten national security,  economic well-being, and public health and safety. Unintentional or  nonadversarial threat sources may include failures in equipment or  software due to aging, resource depletion, and errors made by end users.  They also include natural disasters and failures of critical infrastructure on  which the organization depends, but that are outside of the control of the  organization.", "Intentional or adversarial threats may include corrupt employees, criminal  groups, terrorists, and nations that seek to leverage the organization\u2019s  dependence on cyber resources (i.e., information in electronic form,  information and communications technologies, and the communications  and information-handling capabilities provided by those technologies).  These threat adversaries vary in terms of their capabilities, their  willingness to act, and their motives, which can include seeking monetary  gain or seeking an economic, political, or military advantage.", "Cyber threat adversaries make use of various techniques, tactics,  practices, and exploits to adversely affect an organization\u2019s computers,  software, or networks, or to intercept or steal valuable or sensitive  information. For example, an attacker could infiltrate a pipeline\u2019s  operational systems via the internet or other communication pathways to  potentially disrupt its service and cause spills, releases, explosions, or  fires. Moreover, ICS, which were once largely isolated from the Internet  and the company\u2019s information technology systems, are increasingly  connected in modern energy systems, allowing cyber attacks to originate  in business systems and migrate to operational systems. For example,  malicious nation-state actors used spear-phishing and other similar  approaches in 2018 against energy sector organizations to gain access to  their business systems, conduct reconnaissance, and collect information  about their ICS. Similarly, in April 2012, the Industrial Control Systems  Cyber Emergency Response Team reported that an unidentified cyber  attacker had conducted a series of cyber intrusions into U.S. natural gas  pipeline systems beginning in December 2011."], "subsections": []}, {"section_title": "Key Critical Infrastructure Protection Guidance and Presidential Directives", "paragraphs": ["Federal policy and public-private plans establish roles and responsibilities  for the protection of critical infrastructure, including pipelines. These  include Presidential Policy Directive 21 (PPD-21), the NIPP, and  Executive Order 13636. PPD-21, issued in February 2013, reflects an all- hazards approach to protecting critical infrastructure, including natural  disasters, terrorism, and cyber incidents. The directive also identifies the  16 critical infrastructure sectors and assigns roles and responsibilities  for each critical infrastructure sector among nine designated federal  sector-specific agencies.", "While PPD-21 identified the critical infrastructure sectors and assigned  responsibility for each sector\u2019s sector-specific agency, the NIPP outlines  critical infrastructure stakeholder roles and responsibilities regarding  critical security and resilience. It describes a voluntary partnership model  as the primary means of coordinating government and private sector  efforts to protect critical infrastructure. As part of the partnership structure,  the designated sector-specific agencies serve as the lead coordinators for  security programs of their respective sector. As sector-specific agencies,  federal departments or agencies lead, facilitate, or support the security  and resilience programs and associated activities of their designated  critical infrastructure sector. For example, DHS and DOT are both  designated as sector-specific agencies for the transportation systems  sector, which includes pipelines. Each sector also has a government  coordinating council, consisting of representatives from various levels of  government, and many have a sector coordinating council (SCC)  consisting of owner-operators of these critical assets or members of their  respective trade associations. For example, the Transportation  Government Coordinating Council has been established, and the Pipeline  Modal SCC has been established to represent pipeline operators.", "The NIPP also outlines a risk management framework for critical  infrastructure protection. As shown in Figure 3, the NIPP uses a risk  management framework as a planning methodology intended to inform  how decision makers take actions to manage risk. The risk management  framework calls for public and private critical infrastructure partners to  conduct risk assessments to understand the most likely and severe  incidents that could affect their operations and communities, and use this  information to support planning and resource allocation.", "According to DHS, the risk management framework is influenced by the  nature and magnitude of a threat, the vulnerabilities to that threat, and the  consequences that could result, as shown in Figure 4.", "Federal policy has encouraged voluntary information-sharing  mechanisms between the federal government and critical infrastructure  owners and operators. For example, Information Sharing and Analysis  Centers (ISAC) are formed by critical infrastructure owners and operators  to gather, analyze, appropriately sanitize, and disseminate intelligence  and information related to critical infrastructure. They typically collect,  analyze and disseminate actionable threat information to their members  and provide members with tools to mitigate risks and enhance resiliency.  ISACs in which pipeline operators may participate have been formed  including the Oil and Natural Gas ISAC, Downstream Natural Gas ISAC,  and Electricity ISAC.", "Finally, in February 2013, the president issued Executive Order 13636,  Improving Critical Infrastructure Cybersecurity, which cited repeated  cyber intrusions into critical infrastructure as demonstrating the need for  improved cybersecurity. Executive Order 13636 outlined actions for  improving critical infrastructure cybersecurity, including direction for the  National Institute of Standards and Technology (NIST) to lead the  development of a voluntary risk-based cybersecurity framework that  would comprise a set of industry standards and best practices to help  organizations manage cybersecurity risks. NIST issued the framework  in 2014 and updated it in April 2018. The order also addressed the need to improve cybersecurity information sharing and collaboratively develop  risk-based standards and stated that U.S. policy was to increase the  volume, timeliness, and quality of cyber threat information shared with  private sector entities so that these entities may better protect and defend  themselves against cyber threats."], "subsections": []}, {"section_title": "Pipeline Stakeholders\u2019 Security Roles and Responsibilities", "paragraphs": ["Protecting the nation\u2019s pipeline systems is a responsibility shared by both  the federal government and private industry. As a result, several federal  departments, agencies, and the private sector have significant roles in  pipeline physical and cyber-related security. These entities include the  following:  Transportation Security Administration (TSA). TSA, within DHS, has  primary oversight responsibility for the physical security and cybersecurity  of transmission and distribution pipeline systems. Within TSA, the  Security Policy and Industry Engagement\u2019s Pipeline Security Branch is  charged with overseeing its pipeline security program. Pursuant to its  authority, TSA\u2019s Pipeline Security Branch first issued its voluntary  Pipeline Security Guidelines in 2011, and released revised guidelines in  March 2018. In accordance with the 9/11 Commission Act, TSA\u2019s  Pipeline Security Branch identifies the top 100 critical pipeline systems in  the nation. To do so, it uses system annual throughput, which is based  on the amount of hazardous liquid or natural gas product transported  through a pipeline in 1 year (i.e., annual throughput). TSA also ranks the  relative risk among the top 100 critical pipeline systems, discussed later  in the report. Additionally, TSA\u2019s Pipeline Security Branch is responsible  for conducting voluntary Corporate Security Reviews (CSR) and Critical  Facility Security Reviews (CFSR), which assess the extent to which the  100 most critical pipeline systems are following the intent of TSA\u2019s  Pipeline Security Guidelines. See figure 5 below for an overview of the  CSR and CFSR processes.", "In addition, TSA Intelligence and Analysis is responsible for collecting and  analyzing threat information related to the transportation network, and  sharing relevant threat information to pipeline stakeholders.", "National Cybersecurity and Communications Integration Center  (NCCIC). Within DHS, NCCIC assists critical infrastructure owners in  addressing cyber incidents and attacks, including those targeting  industrial control systems. The NCCIC\u2019s mission is to reduce the  likelihood and severity of incidents that may significantly compromise the  security and resilience of the nation\u2019s critical information technology and  communications networks. NCCIC\u2019s role is to serve as the federal  civilian interface for sharing information related to cybersecurity risks,  incidents, analysis, and warnings with federal and nonfederal entities, and  to provide shared situational awareness to enable real-time actions to  address cybersecurity risks and incidents to federal and nonfederal  entities.", "Pipeline and Hazardous Materials Safety Administration (PHMSA).  PHMSA, within DOT, is responsible for regulating the safety of hazardous  materials transportation and the safety of pipeline systems, some aspects  of which can be related to pipeline security. In 2004, PHMSA and TSA  entered into a memorandum of understanding regarding their respective  roles in all modes of transportation. In 2006, they signed an annex to the  memorandum of understanding that further delineates lines of authority  and responsibility between TSA and PHMSA on pipeline and hazardous  materials transportation security. The annex identifies TSA as the lead  federal entity for transportation security, including hazardous materials  and pipeline security, and PHMSA as responsible for administering a  national program of safety in natural gas and hazardous liquid pipeline  transportation, including identifying pipeline safety concerns and  developing uniform safety standards.", "Department of Energy (DOE). DOE is responsible for protecting electric  power, oil, and natural gas delivery infrastructure and, in December 2015,  was identified in statute as the sector-specific agency for cybersecurity for  the energy sector. The Office of Cybersecurity, Energy Security, and  Emergency Response is the lead for DOE\u2019s cybersecurity efforts. In  addition, DOE operates the National SCADA Test Bed Program, a  partnership with Idaho National Laboratory, Sandia National Laboratories,  and other national laboratories which addresses control system security  challenges in the energy sector. Among its key functions, the program  performs control systems testing, research, and development; control  systems requirements development; and industry outreach.", "Federal Energy Regulatory Commission (FERC). FERC regulates the  U.S. bulk electric power system, which is increasingly powered by natural  gas pipeline systems. FERC has regulatory authority over interstate  natural gas pipelines under the Natural Gas Act. However, its role is  limited to natural gas pipeline siting and rate regulation. The North  American Electric Reliability Corporation is the federally designated U.S.  Electric Reliability Organization, and is overseen by FERC. The North  American Electric Reliability Corporation, with approval from FERC, has  developed mandatory critical infrastructure protection standards for  protecting electric utility\u2013critical and cyber-critical assets.", "Private sector. Although TSA has primary federal responsibility for  overseeing interstate pipeline security, private sector pipeline operators  are responsible for implementing asset-specific protective security  measures. As we previously reported, operators have increased their  attention on security by incorporating security practices and programs into  their overall business operations. Pipeline operators\u2019 interests and  concerns are primarily represented by five major trade associations with  ties to the pipeline industry\u2014the Interstate Natural Gas Association of  America (INGAA), American Gas Association (AGA), American Public  Gas Association, American Petroleum Institute (API), and Association of  Oil Pipe Lines. According to TSA officials, pipeline operators, and  association representatives, these associations have worked closely with  the federal government on a variety of pipeline security-related issues,  including collaborating on TSA\u2019s voluntary standards and information  sharing."], "subsections": []}]}, {"section_title": "Federal and Nonfederal Pipeline Stakeholders Exchange Risk- Related Security Information", "paragraphs": ["All of the pipeline operators and pipeline association representatives we  interviewed reported receiving security information from federal and  nonfederal entities. Pipeline operators also reported providing security- related information to federal agencies, including TSA, as incidents occur.  Multiple federal entities exchange alerts of physical and cybersecurity  incidents and other risk-related information with critical infrastructure  partners, including pipeline operators. For example, DHS components  including TSA\u2019s Intelligence and Analysis and NCCIC share security- related information on physical and cyber threats and incidents with  sector stakeholders. Specifically, Intelligence and Analysis provides  quarterly intelligence briefings to pipeline operators. NCCIC also issues  indicator bulletins, which can contain information related to cyber threat  indicators, defensive measures, and cybersecurity risks and incidents.", "In addition, TSA and other federal entities have coordinated to address  specific pipeline-related security incidents. For example, TSA officials  coordinated with DOT, DOE, the Department of Justice, and FERC  through the Oil and Natural Gas subsector SCC to address ongoing  incidents of vandalism and sabotage of critical pipeline assets by  environmental activists in 2016. In July 2017, according to DOT officials,  PHMSA and TSA collaborated on a web-based portal to facilitate sharing  sensitive but unclassified incident information among federal agencies  with pipeline-related responsibilities. See table 1 for the key federal  information sharing entities and programs that exchange security-related  or incident information with critical infrastructure stakeholders, including  the pipeline sector.", "Pipeline operators also share security-related information with TSA and  the NCCIC. In its Pipeline Security Guidelines, TSA requests that pipeline  operators report by telephone or email to its Transportation Security  Operations Center (TSOC) any physical security incidents that are  indicative of a deliberate attempt to disrupt pipeline operations or  activities that could be considered precursors to such an attempt. TSA\u2019s  Pipeline Security Guidelines also request that operators report any actual  or suspected cyber attacks that could impact pipeline industrial control  systems or other information technology-based systems to the NCCIC.  According to the TSOC\u2019s operating procedures, if a reported incident  meets certain criteria, such as the incident was intended to or resulted in  damage or requires a general evacuation of a facility, the TSOC watch  officer is then to contact Office of Security and Industry Engagement  officials. According to TSA officials, the TSOC does not conduct  investigations of the specific security incidents that pipeline operators  report. However, TSOC staff do analyze the incident information they  receive for national trends and common threats. TSA officials stated that  they share their observations with pipeline operators and other critical  infrastructure asset owners during monthly and quarterly conference calls  that TSA holds with pipeline operators.", "All the pipeline operators and association representatives we interviewed  identified other nonfederal information sharing entities, including ISACs,  fusion centers, industry associations, and SCCs, which provide forums for  exchanging information about physical and cyber incidents throughout the  pipeline sector. See table 2 for nonfederal information sharing entities  identified as available to pipeline operators.", "Operators and TSA officials reported that the current backlog in granting  security clearances for some key pipeline operator employees was a  significant factor affecting information sharing between TSA and pipeline  operators. TSA officials acknowledged that some pipeline operators have  had difficulty obtaining security clearances for key employees due to  ongoing backlogs in processing requests by the Office of Personnel  Management National Background Investigation Bureau, and that TSA\u2019s  ability to share timely information with operators whose staff do not have  a clearance may be hindered. Three of the 10 pipeline operators we  interviewed identified receiving timely classified security information as a  specific challenge due, in part, to difficulties staff have had obtaining  security clearances. Further, 7 of the 10 pipeline operators that we  interviewed reported experiencing delays in obtaining a security  clearance or were aware of others who had experienced this issue.  However, according to three operators we interviewed, TSA was helpful  in facilitating approval of security clearances for the operators\u2019 personnel  to access classified information when necessary.", "This security clearance challenge is not faced by pipeline operators  alone. In January 2018, we designated the backlog of investigations for  the clearance process and the government-wide personnel security  clearance process as a high-risk area. We will continue to monitor  agencies\u2019 progress in reducing the backlog and improving the security  clearance process."], "subsections": []}, {"section_title": "Pipeline Operators Use a Range of Guidelines and Standards to Address Risks, but TSA\u2019s Guidelines Lack Clear Definitions and a Process for Updating Them", "paragraphs": ["Pipeline operators that we interviewed reported using a range of  guidelines and standards to address their physical and cybersecurity  risks, and all of them reported implementing TSA\u2019s voluntary Pipeline  Security Guidelines that were applicable to their operations. TSA revised  and issued its Pipeline Security Guidelines in March 2018, but the revised  guidelines lack a defined process to consider updates to supporting  guidance such as to the NIST Framework for Improving Critical  Infrastructure Cybersecurity (Cybersecurity Framework). Furthermore,  TSA has not clearly defined the terms within the criteria that pipeline  operators are to use to determine the criticality of their facilities."], "subsections": [{"section_title": "Pipeline Operators Use a Range of Guidelines and Standards to Address Security", "paragraphs": ["Pipeline operators that we interviewed reported using a range of  guidelines and standards to address their physical and cybersecurity  risks. For example, all 10 of the pipeline operators we interviewed stated  they had implemented the voluntary 2011 TSA Pipeline Security  Guidelines the operators determined to be applicable to their  operations. The guidelines provide TSA\u2019s recommendations for pipeline  industry security practices such as establishing a corporate security  program and identifying critical facilities among others (see sidebar).  Five of the 10 pipeline operators we interviewed characterized the  guidelines as generally or somewhat effective in helping to secure their  operations, 1 was neutral on their effectiveness, and 4 did not provide an  assessment of the guidelines\u2019 effectiveness. However, one operator  pointed out that they had not adopted the guidelines\u2019 recommended  interval of 36 months or less for conducting security vulnerability  assessments due to staffing limitations. Also, another pipeline operator  noted that they were working to implement the guidelines in the  operations of a newly acquired asset that they determined was not using  the guidelines in the same manner as their company.", "All of the pipeline operators we interviewed reported using other  guidelines or standards to address pipeline systems\u2019 security risks. For  example, pipeline operators reported using and industry association  representatives reported that their members use INGAA\u2019s Control  Systems Cyber Security Guidelines for the Natural Gas Pipeline  Industry, API\u2019s Pipeline SCADA Security standard, and the NIST  Cybersecurity Framework as sources of cybersecurity standards,  guidelines, and practices that may be scaled and applied to address a  pipeline operator\u2019s cybersecurity risks.", "Further, pipeline operators are required to adhere to regulations related to  pipeline safety and, depending upon their assets, operations, and  location, may be required to adhere to regulations for electrical utilities,  chemical storage facilities, and locations near waterways. For example,  all pipeline operators must adhere to DOT\u2019s PHMSA safety regulations.  In addition, pipeline operators whose systems include chemical facilities  may be required to comply with DHS\u2019s Chemical Facility Anti-Terrorism  Standards (CFATS). Pipeline operators whose systems include a  terminal located on a U.S. port may be required to comply with Maritime  Transportation Security Act regulations. For a listing of federal and  industry guidelines identified as applicable to security by the pipeline  operators, see appendix I."], "subsections": []}, {"section_title": "TSA Does Not Have a Documented Process for Updating Its Pipeline Security Guidelines to Reflect Revisions to Supporting Standards", "paragraphs": ["TSA\u2019s Pipeline Security Branch issued its revised Pipeline Security  Guidelines in March 2018, but TSA has not established a documented  process to ensure that revisions occur and fully capture updates to  supporting standards and guidance. The guidelines were revised to,  among other things, reflect the dynamic threat environment and to  incorporate cybersecurity principles and practices from the NIST  Cybersecurity Framework, which were initially issued in February 2014.  To revise the guidelines and incorporate feedback, according to Pipeline  Security Branch officials, they incorporated outcomes from pipeline modal  threat assessments and best practices from security reviews, and  collaborated with pipeline sector stakeholders\u2014including industry  associations and other federal agencies with a role in pipeline security.  Officials from the industry associations we interviewed confirmed that  they provided input to the revised pipeline guidelines, including meeting  with and consolidating comments from member pipeline operators. See  figure 6 for a timeline of events pertinent to federal pipeline security  guidelines.", "TSA\u2019s Pipeline Security Smart Practice Observations for pipeline  operators states that security plans should have a documented process to  include security plan reviews and updates on a periodic and an as- needed basis. Standards for Internal Control in the Federal Government  states that periodic review of policies, procedures, and related control  activities should occur to determine their continued relevance and  effectiveness in achieving identified objectives or addressing related  risks. The NIPP and NIST also emphasize the need to provide updates  on incident response guidance and security procedures, respectively.  Moreover, other pipeline industry guidance cited by TSA\u2019s guidelines also  has a prescribed interval for review and revision. For example, API  reviews its standards at least every 5 years.", "However, TSA has not instituted a documented process to consider the  need to update the Pipeline Security Guidelines on a regular basis.  Pipeline Security Branch officials acknowledged the value of having a  defined process for reviewing and, if necessary, revising TSA\u2019s Pipeline  Security Guidelines at regular defined intervals to ensure it includes,  among other things, newly identified best practices and updated industry  guidance that are relevant to pipeline operators, such as the elements of  the latest version of NIST\u2019s Cybersecurity Framework. For example,  TSA\u2019s revisions to its guidelines incorporated some, but not all of the  elements of the NIST Cybersecurity Framework version 1. Specifically, to  improve incident response, the NIST framework recommends  implementing an incident response analysis and feedback function to a  security program. However, TSA\u2019s Pipeline Security Guidelines do not  include similar steps for pipelines operators to include in their pipeline  security programs. Further, because NIST released version 1.1 of the  Cybersecurity Framework in April 2018, the guidelines that TSA released  in March 2018 do not incorporate cybersecurity elements that NIST  added to the latest Cybersecurity Framework such as the Supply Chain  Risk Management category.", "Pipeline Security Branch officials said that they have not instituted a  review process on a regular basis because they intended to review and  revise TSA\u2019s guidelines on an as-needed basis in response to updated  supporting guidance, but could provide no timeline for doing so. Without a  documented process defining how frequently Pipeline Security Branch  staff are to review and revise its guidelines, TSA cannot ensure that its  guidelines reflect the latest known standards and best practices for  physical and cybersecurity, or address the persistent and dynamic  security threat environment currently facing the nation\u2019s pipeline system."], "subsections": []}, {"section_title": "Pipeline Security Guidelines Lack Clear Definitions to Ensure Pipeline Operators Consistently Apply TSA\u2019s Criteria for Identifying Critical Facilities", "paragraphs": ["Under TSA\u2019s Pipeline Security Guidelines, pipeline operators are to self- identify the critical facilities within their system and report their critical  facilities to TSA. TSA\u2019s Pipeline Security Branch conducts CFSRs at the  critical facilities that pipeline operators have identified.", "However, our analysis of TSA\u2019s data found that at least 34 of the top 100  critical pipeline systems deemed highest risk indicated that they had no  critical facilities. Accordingly, TSA would not conduct a CFSR at any of  these systems\u2019 facilities because their operators identified none of them  as critical.", "The fact that pipeline operators of about one third of the highest risk  systems identified no critical facilities may be due, in part, to the Pipeline  Security Branch not clearly defining the criteria outlined in the Pipeline  Security Guidelines that pipeline operators are to use to determine the  criticality of their facilities. Three of the 10 operators we interviewed  stated that some companies reported to TSA that they had no critical  facilities, and may possibly be taking advantage of the guidelines\u2019 lack of  clarity. Accordingly, operators that report no critical facilities would avoid  TSA\u2019s reviews of their facilities. service or deliverability resulting in a state  or local government's inability to provide  essential public services and emergency  response for an extended period of time;", "Significantly damage or destroy national  intended use of major rivers, lakes, or  waterways (e.g., public drinking water for  large populations or disruption of major  commerce or public transportation  routes);  service or deliverability to a significant  number of customers or individuals for an  extended period of time;   operations for an extended period of time  (i.e., business critical facilities).", "Our review of the eight criteria included in TSA\u2019s Pipeline Security  Guidelines (see sidebar) found that no additional examples or clarification  are provided to help operators determine criticality. Although we  previously noted that 5 of the 10 operators we interviewed generally  found TSA\u2019s Guidelines as a whole helpful in addressing pipeline security,  more than half of the operators we interviewed identified TSA\u2019s criticality  criteria as a specific area for improvement. Specifically, 3 of the 10  pipeline operators that we interviewed stated that TSA had not clearly  defined certain terms within the criteria, and 3 additional operators of the  10 reported that additional consultation with TSA was necessary to  appropriately apply the criteria and determine their facilities\u2019 criticality. For  example, 2 operators told us that individual operators may interpret TSA\u2019s  criterion, \u201ccause mass casualties or significant health effect,\u201d differently.  One of these operators that we interviewed stated that this criterion could  be interpreted either as a specific number of people affected or a  sufficient volume to overwhelm a local health department, which could  vary depending on the locality. Another operator reported that because  TSA\u2019s criteria were not clear, they created their own criteria which helped  the operator identify two additional critical facilities.", "Pipeline Security Branch officials acknowledged there are companies that  report having no critical facilities in their pipeline systems. According to  Pipeline Security Branch officials, pipeline operators are in the best  position to determine which of their facilities are critical, and the  companies that have determined that their pipeline systems have no  critical facilities also have reported sufficient redundancies to make none  of their facilities critical to the continuity of their operations. According to  these officials, they have had extensive discussions with pipeline  company officials to assess the validity of their criticality determinations,  and have closely questioned companies to ensure they have properly  applied TSA\u2019s criteria.", "However, according to TSA\u2019s Pipeline Security Guidelines, operators  should use a consistent set of criteria for determining the criticality of their  facilities. In addition, Standards for Internal Control in the Federal  Government states that management should define objectives clearly to  enable the identification of risks. To achieve this, management generally  defines objectives in specific and measurable terms and ensures the  terms are fully and clearly set forth so they can be easily understood.", "Pipeline Security Branch officials acknowledged that the criticality  definitions in the Pipeline Security Guidelines could be clarified to be  more specific. Additionally, an industry association representative  reported that the association, in consultation with TSA, has been  developing supplementary guidance for its members to clarify certain  terms in TSA\u2019s critical facility criteria. As of October 2018 this guidance is  still under review at the association and has not been made available to  the association\u2019s members. Pipeline Security Branch officials confirmed  they worked with the industry association on its supplementary guidance,  but also acknowledged that the supplementary guidance may only be  distributed to the association\u2019s membership.", "Without clearly defined criteria for determining pipeline facilities\u2019 criticality,  TSA cannot ensure that pipeline operators are applying its guidance  uniformly. Further, because TSA selects the pipeline facilities on which to  conduct CFSRs based on operators\u2019 determinations, TSA cannot fully  ensure that all of the critical facilities across the pipeline sector have been  identified using the same criteria, or that their vulnerabilities have been  identified and addressed."], "subsections": []}]}, {"section_title": "TSA Assesses Pipeline Risk and Conducts Security Reviews, but Limited Workforce Planning and Shortfalls in Assessing Risk Present Challenges", "paragraphs": ["TSA\u2019s Intelligence and Analysis identifies security risks to pipeline  systems through various assessments. Additionally, TSA\u2019s Pipeline  Security Branch conducts security reviews to assess pipeline operators\u2019  implementation of TSA\u2019s Pipeline Security Guidelines, but gaps in staffing  and lack of a workforce plan may affect its ability to carry out effective  reviews. The Pipeline Security Branch also developed a pipeline risk  assessment to rank relative risk of the top 100 critical pipeline systems  and to prioritize its security reviews of pipeline companies, but shortfalls  in its calculations of threat, vulnerability, and consequence may limit its  ability to accurately identify pipeline systems with the highest risk. Finally,  the pipeline risk assessment has not been peer reviewed to validate the  assessment\u2019s data and methodology, which we previously reported as a  best practice in risk management."], "subsections": [{"section_title": "TSA Conducts Assessments of Pipeline Security Risks", "paragraphs": ["TSA\u2019s Intelligence and Analysis produces assessments related to pipeline  security risks, including Pipeline Modal and Cyber Modal Threat  Assessments and the Transportation Sector Security Risk Assessment.  The Pipeline and Cyber Modal Threat Assessments are issued on a  semiannual basis; TSA Intelligence and Analysis may also issue  additional situation-based products on emerging threats. The Pipeline  Modal and Cyber Modal Threat Assessments evaluate, respectively,  physical and cyber threats to pipelines. The pipeline modal threat  assessment evaluates terrorist threats to hazardous liquid and natural  gas pipelines, and the cyber modal threat assessment evaluates cyber  threats to transportation, including pipelines. Both assessments  specifically analyze the primary threat actors, their capabilities, and  activities\u2014including attacks occurring internationally\u2014as well as other  characteristics of threat.", "The Transportation Sector Security Risk Assessment assesses threat,  vulnerability, and consequence for various attack scenarios across the  five transportation modes for which TSA is responsible. The scenarios  define a type of threat actor\u2014including homegrown violent extremists and  transnational extremists, such as al Qaeda and its affiliates\u2014a target, and  an attack mode. For example, a scenario might assess the risk of attacks  using varying sizes of improvised explosive devices on pipeline system  assets. As part of the assessment process, TSA engages with subject  matter experts from TSA and industry stakeholder representatives to  compile vulnerabilities for each mode, and TSA analyzes both direct and  indirect consequences of the various attack scenarios. According to  Pipeline Security Branch officials, the assessments produced by TSA\u2019s  Intelligence and Analysis provide key information to inform the pipeline  security program\u2019s efforts."], "subsections": []}, {"section_title": "TSA Conducts Pipeline Security Reviews to Assess Implementation of Pipeline Guidelines, but Does Not Have a Strategic Workforce Plan to Address Staffing Challenges", "paragraphs": ["According to TSA officials, TSA conducts pipeline security reviews\u2014 Corporate Security Reviews (CSRs) and Critical Facility Security Reviews  (CFSRs)\u2014to assess pipeline vulnerabilities and industry implementation  of TSA\u2019s Pipeline Security Guidelines. However, as shown by Figure 7  below, the number of CSRs and CFSRs completed by TSA has varied  during the last five fiscal years, ranging from zero CSRs conducted in  fiscal year 2014 to 23 CSRs conducted in fiscal year 2018, as of July 31,  2018.", "TSA officials reported that staffing limitations have prevented TSA from  conducting more reviews. As shown in table 3, TSA Pipeline Security  Branch staffing levels (excluding contractor support) have varied  significantly over the past 9 years ranging from 14 full-time equivalents  (FTEs) in fiscal years 2012 and 2013 to one FTE in fiscal year 2014. They  stated that, while contractor support has assisted with conducting CFSRs,  there were no contractor personnel providing CSR support from fiscal  years 2010 through 2017, but that has now increased to two personnel in  fiscal year 2018.", "TSA prioritizes reviewing and collecting information on the nation\u2019s top  100 critical pipeline systems. According to TSA officials, they would need  to conduct 46 CSRs in order to review the top 100 critical pipeline  systems. In July 2018, TSA officials stated that TSA\u2019s current target was  to assess each pipeline company every 2 to 3 years; this would equate to  about 15 to 23 CSRs per year. TSA officials stated that they expect to  complete 20 CSRs and 60 CFSRs per fiscal year with Pipeline Security  Branch employees and contract support, and have completed 23 CSRs  through July 2018 for fiscal year 2018.", "Given the ever-increasing cybersecurity risks to pipeline systems,  ensuring that the Pipeline Security Branch has the required cybersecurity  skills to effectively evaluate pipeline systems\u2019 cybersecurity is essential.  Pipeline operators we interviewed emphasized the importance of  cybersecurity skills among TSA staff. Specifically, 6 of the 10 pipeline  operators and 3 of the 5 industry representatives we interviewed reported  that the level of cybersecurity expertise among TSA staff and contractors  may challenge the Pipeline Security Branch\u2019s ability to fully assess the  cybersecurity portions of its security reviews. TSA officials stated that  Security Policy and Industry Engagement staff are working with DHS\u2019s  National Protection and Programs Directorate to help address cyber- related needs, including identifying specific cybersecurity skills and  competencies required for the pipeline security program. The officials  were uncertain, however, whether TSA would use contractor support or  support from the National Protection and Programs Directorate to provide  identified skills and competencies. TSA officials also stated that Security  Policy and Industry Engagement staff work with TSA\u2019s human resource  professionals to identify critical skills and competencies needed for  Pipeline Security Branch personnel, and helps its workforce maintain  professional expertise by providing training and education for any  identified skill or competency gaps.", "Our previous work has identified principles that a strategic workforce  planning process should follow including developing strategies tailored to  address gaps in number, deployment, and alignment of human capital  approaches for enabling and sustaining the contributions of all critical  skills and competencies. Workforce planning efforts, linked to an  agency\u2019s strategic goals and objectives, can enable it to remain aware of  and be prepared for its needs, including the size of its workforce, its  deployment across the organization, and the knowledge, skills, and  abilities needed for it to pursue its mission. Agencies should consider how  hiring, training, staff development, performance management, and other  human capital strategies can be aligned to eliminate gaps and improve  the long-term contribution of skills and competencies identified as  important for mission success.", "TSA has not established a workforce plan for its Security Policy and  Industry Engagement or its Pipeline Security Branch that identifies  staffing needs and skill sets such as the required level of cybersecurity  expertise among TSA staff and contractors. When asked for TSA  strategic workforce planning documents used to inform staffing  allocations related to the pipeline security program, TSA officials  acknowledged they do not have a strategic workforce plan. Rather,  according to these officials, TSA determines agency-level staffing  allocations through the Planning, Programming, Budgeting and Execution  process, which is used to decide policy, strategy, and the development of  personnel and capabilities to accomplish anticipated missions. According  to TSA officials, when they use this process they look at existing  resources and then set priorities based on the TSA Administrator\u2019s needs.  However, a strategic workforce plan allows an agency to identify and  prepare for its needs, such as the size of its workforce, its deployment  across the organization, and the knowledge, skills, and abilities needed to  pursue its mission. TSA officials stated that the agency has a detailed  allocation plan for strategically aligning resources to screen passengers  at TSA-regulated airports, but not for the entire agency.", "By establishing a strategic workforce plan, TSA can help ensure it has  identified the knowledge, skills, and abilities that the future workforce of  TSA\u2019s Pipeline Security Branch may need in order to meet its mission of  reducing pipeline systems\u2019 vulnerabilities to physical and cybersecurity  risks, especially in a dynamic and evolving threat environment. Further,  as greater emphasis is placed on cybersecurity, determining the long- term staffing needs of the Pipeline Security Branch will be essential.  Furthermore, a workforce plan could enable TSA to determine the  number of personnel it needs to meet its stated goals for conducting  CSRs and CFSRs."], "subsections": []}, {"section_title": "TSA Calculates Relative Risk of Pipeline Systems, but Its Ranking Tool Does Not Include Current Data or Align with DHS Priorities to Help Prioritize Security Reviews", "paragraphs": ["After TSA identifies the top 100 critical pipeline systems based on  throughput, the Pipeline Security Branch uses the Pipeline Relative Risk  Ranking Tool (risk assessment), which it developed in 2007, to assess  various security risks of those systems. We previously reported, in  2010, that the Pipeline Security Branch was the first of TSA\u2019s surface  transportation modes to develop a risk assessment model that combined  all three components of risk\u2014threat, vulnerability, and consequence\u2014to  generate a risk score. The risk assessment generates a risk score for  each of the 100 most critical pipeline systems and ranks them according  to risk. The risk assessment calculates threat, vulnerability, and  consequence for each pipeline system on variables such as the amount  of throughput in the pipeline system and the number critical facilities. The  risk assessment combines data collected from pipeline operators, as well  as other federal agencies, such as the Departments of Transportation and  Defense, to generate the risk score.", "However, the last time the Pipeline Security Branch calculated relative  risk among the top 100 critical pipeline systems using the risk  assessment was in 2014. Pipeline Security Branch officials told us that  they use the pipeline risk assessment to rank relative risk of the top 100  critical pipeline systems, and the standard operating procedures for  conducting CSRs state the results of the risk ranking are the primary  factor considered when prioritizing corporate security reviews of pipeline  companies. According to Pipeline Security Branch officials, the risk  assessment has not changed since 2014 because the Pipeline Security  Branch is still conducting CSRs based on the 2014 ranking of pipeline  systems.", "As outlined in table 4 below, we identified several factors that likely limit  the usefulness of the current risk assessment in calculating threat,  vulnerability, and consequence to allow the Pipeline Security Branch to  effectively prioritize reviews of pipeline systems. For example, because  the risk assessment has not changed since 2014, information on threat  may be outdated. Additionally, sources of data and underlying  assumption and judgments regarding certain threat and vulnerability  inputs to the assessment are not fully documented. For example, threats  to cybersecurity are not specifically accounted for in the description of the  risk assessment methodology, making it unclear if cybersecurity is part of  the assessment\u2019s threat factor. Further, the risk assessment does not  include information that is consistent with the NIPP and other DHS  priorities for critical infrastructure risk mitigation, such as information on  natural hazards and the ability to measure risk reduction (feedback data).", "According to Pipeline Security Branch officials, the risk ranking  assessment is not intended to be a fully developed risk model detailing all  pipeline factors influencing risk. Rather, officials said they are primarily  interested in assessing risk data that impacts security. However, because  TSA\u2019s Pipeline Security Program is designed to enhance the security  preparedness of the pipeline systems, incorporating additional factors that  enhance security into their risk calculation would better align their efforts  with PPD-21. For example, PPD-21 calls for agencies to integrate and  analyze information to prioritize assets and manage risks to critical  infrastructure, as well as anticipate interdependencies and cascading  impacts. For a more detailed discussion of the shortfalls we identified,  refer to appendix II."], "subsections": []}, {"section_title": "TSA\u2019s Pipeline Risk Assessment Has Not Been Peer Reviewed to Help Validate the Data and Methodology", "paragraphs": ["In addition to the shortfalls identified above, the risk assessment has not  been peer reviewed since its conception in 2007. In our past work, we  reported that independent, external peer reviews are a best practice in  risk management and that independent expert review panels can provide  objective reviews of complex issues. According to the National  Research Council of the National Academies, external peer reviews  should, among other things, address the structure of the assessment, the  types and certainty of the data, and how the assessment is intended to be  used. The National Research Council has also recommended that DHS  improve its risk analyses for infrastructure protection by validating the  assessments and submitting them to independent, external peer review.", "Other DHS components have implemented our prior recommendations to  conduct peer reviews of their risk assessments. For example, in April  2013, we reported on DHS\u2019s management of its Chemical Facility Anti- Terrorism Standards (CFATS) program and found that the approach used  to assess risk did not consider all of the elements of consequence, threat,  and vulnerability associated with a terrorist attack involving certain  chemicals. The Infrastructure Security Compliance Division, which  manages the CFATS program conducted a multiyear effort to improve  their risk assessment methodology and included commissioning a peer  review by the Homeland Security Studies and Analysis Institute, which  resulted in multiple recommendations. As part of the implementation of  some of the peer review\u2019s recommendations, DHS conducted peer  reviews and technical reviews with government organizations and facility  owners and operators, and worked with Sandia National Laboratories to  verify and validate the CFATS program\u2019s revised risk assessment  methodology, which was completed in January 2017.", "According to Pipeline Security Branch officials, they are considering  updates to the risk assessment methodology including changes to the  vulnerability and consequence factors. These officials said the risk  assessment was previously reviewed within the past 18 months by  industry experts and they consider input from several federal partners  including DHS, DOT, and the Department of Defense. Officials also said  they will consider input from industry experts and federal partners while  working on updating the risk assessment. However, most of the proposed  changes to the risk assessment methodology officials described are ones  that have been deliberated since our last review in 2010. Therefore, an  independent, external peer review would provide the opportunity for  integration and analysis of additional outside expertise across the critical  infrastructure community.", "While independent, external peer reviews cannot ensure the success of a  risk assessment approach, they can increase the probability of success  by improving the technical quality of projects and the credibility of the  decision-making process. According to the National Research Council of  the National Academies, independent, external peer reviews should  include validation and verification to ensure that the structure of the risk  assessment is both accurate and reliable. Thus, an independent, external  peer review would provide better assurance that the Pipeline Security  Branch can rank relative risk among pipeline systems using the most  comprehensive and accurate threat, vulnerability, and consequence  information."], "subsections": []}]}, {"section_title": "TSA Has Established Performance Measures, but Limitations Hinder TSA\u2019s Ability to Determine Pipeline Security Program Effectiveness", "paragraphs": ["TSA has established performance measures, as well as databases to  monitor pipeline security reviews and analyze their results. However,  weaknesses in its performance measures and its efforts to record pipeline  security review recommendations limit its ability to determine the extent  that its pipeline security program has reduced pipeline sector risks.  Furthermore, we identified data reliability issues in the information that  TSA collects to track the status of pipeline security review  recommendations, such as missing data, inconsistent data entry formats,  and data entry errors."], "subsections": [{"section_title": "TSA Has Established Performance Measures but Faces Challenges in Assessing the Effectiveness of Its Efforts to Reduce Pipeline Security Risks", "paragraphs": ["TSA has three sets of performance measures for its pipeline efforts: the  Pipeline Security Plan in the 2018 Biennial National Strategy for  Transportation Security (NSTS), a management measure in the DHS  fiscal year 2019 congressional budget justification, and summary figures  in their CSR and CFSR databases. As a result of our 2010 work, TSA  established performance measures and linked them to Pipeline Security  Plan goals within the Surface Security Plan of the 2018 NSTS. See  table 5 below for the 2018 NSTS Pipeline Security Plan performance  measures.", "As shown in table 6 below, DHS also included a management measure in  its fiscal year 2019 congressional budget justification to track the annual  number of completed pipeline security reviews.", "Finally, TSA Pipeline Security Branch officials said they use summary  figures in the CFSR status database and the CSR goals and priorities  database as performance measures. For example, these include the  percentage of CFSR recommendations implemented and the average  percentage compliance with the guidelines by fiscal year.", "We previously found that results-oriented organizations set performance  goals to clearly define desired program outcomes and develop  performance measures that are clearly linked to the performance goals.  Performance measures should focus on whether a program has achieved  measurable standards toward achieving program goals, and allow  agencies to monitor and report program accomplishments on an ongoing  basis. Our previous work on performance metrics identified 10 attributes  of effective performance. Table 7 identifies each key attribute of  effective performance measures along with its definition.", "We evaluated the current performance measures included in the 2018  NSTS, the DHS fiscal year 2019 congressional budget justification, the  CSR goals and priorities database, and the CFSR status database  related to TSA\u2019s Pipeline Security Branch.", "We primarily focused on key attributes which could be applied to  individual measures. These include clarity, linkage, measurable targets,  objectivity, reliability, and baseline and trend data. Our prior work on  performance measurement found that all performance measure attributes  are not equal and failure to have a particular attribute does not  necessarily indicate that there is a weakness in that area or that the  measure is not useful; rather, it may indicate an opportunity for further  refinement.", "Based on our evaluation, the TSA-identified measures do not possess  attributes that we have identified as being key to successful performance  measures. As a result, TSA cannot fully determine the extent to which the  Pipeline Security Branch has achieved desired outcomes, including the  effectiveness of its efforts to reduce risks to pipelines. Specifically, many  of TSA\u2019s measures cover agency goals and mission, but they generally  lack clarity and measurable targets, provide significantly overlapping  information, and do not include baseline and trend data.", "Clarity. The pipeline-related measures in the 2018 NSTS are not  clear because they do not describe the methodology used to calculate  them, and the names and definitions are not clearly described. For  example, NSTS goal 1 includes an objective to conduct training of  employees responding to terrorist attacks. The desired outcome is to  improve the capability of industry employees to respond and recover  from terrorist attacks. However, the performance measure is the  percentage of critical pipeline systems implementing the TSA Pipeline  Security Guidelines. It is not clear if this measure is specific to the  sections of the guidelines related to employee training or overall  implementation of the guidelines. The CFSR status database  measures include the percentage of recommendations implemented  by topic, such as \u201cSite Specific Security Measures,\u201d \u201cSignage,\u201d or  \u201cMiscellaneous.\u201d However, the database does not specifically define  these topics or explain the methodology for calculating the  measures. Unclear measures could be confusing and misleading to  users.", "Core program activities. The pipeline-related measures in the 2018  NSTS cover some of the agency\u2019s core program activities, such as  conducting security exercises with the pipeline industry and providing  intelligence and information products to the industry. However, the  NSTS Pipeline Security Plan measures do not specifically include  some core program activities, such as updating the TSA Pipeline  Security Guidelines or the results of conducting CSRs and CFSRs in  order to collect the information necessary for the existing performance  measures. The CSR goals and priorities database and the CFSR  status database include measures intended to track some of the  results of pipeline security reviews, such as the average percentage  compliance with the guidelines by fiscal year and the percentage of  CFSR recommendations implemented. If core program activities are  not covered, there may not be enough information available in those  areas to managers and stakeholders.", "Limited overlap. The pipeline-related measures in the 2018 NSTS do  not have limited overlap. As discussed previously, four of the five  NSTS measures are based on the percentage of critical pipeline  systems implementing TSA\u2019s Pipeline Security Guidelines. The  management measure is based on the number of complete pipeline  security reviews. The CFSR status database measures are based on  the percentage of recommendations implemented overall and by  groups. Finally, the CSR goals and priorities database measures are  based on the average compliance percentage of companies that had  CSRs conducted in fiscal years 2016 and 2017. This is similar to four  of the five NSTS measures. Significantly overlapping measures may  lead to redundant, costly information that does not add value for TSA  management.", "Linkage. The pipeline-related measures in the 2018 NSTS generally  exhibited this key attribute. For example, all of the NSTS measures  were arranged by agency strategic goals and risk-based priorities.  However, the management measure in DHS\u2019s fiscal year 2019  congressional budget justification and the CFSR status database  measures did not specify the TSA goals and priorities to which they  were aligned. If measures are not aligned with division and agency- wide goals and mission, the behaviors and incentives created by  these measures do not support achieving those goals or mission.", "Measurable target. TSA\u2019s measures generally did not include  measurable targets in the form of a numerical goal and none of the  NSTS measures had measurable targets. For example, the NSTS  measure under the Security Planning priority, which tracks the  percentage of critical pipeline systems implementing TSA\u2019s Pipeline  Security Guidelines, does not state what specific percentages would  be considered an improvement in industry security plans. However,  the management measure did include target numbers of pipeline  security reviews by fiscal year. Both the CFSR status database  measures and CSR goals and priorities database measures did not  include measurable targets. Without measurable targets, TSA cannot  tell if performance is meeting expectations.", "Objectivity. Because the pipeline-related measures in the 2018  NSTS, the CFSR status database, and the CSR goals and priorities  database generally lack clarity and measurable targets, TSA cannot  ensure its measures are free from bias or manipulation, and therefore,  are not objective. If measures are not objective, the results of  performance assessments may be systematically overstated or  understated.", "Reliability. Because the pipeline-related measures in the 2018 NSTS,  the CFSR status database, and the CSR goals and priorities database  generally lack clarity, measurable targets, and baseline and trend  data, it is not clear if TSA\u2019s measures produce the same result under  similar conditions; therefore, the pipeline-related measures are  unreliable. If measures are not reliable, reported performance data  may be inconsistent and add uncertainty.", "Baseline and trend data. TSA\u2019s measures generally did not include  baseline and trend data. For example, none of the NSTS measures  included past results and compared them to measurable targets. TSA  officials were unable to identify measures or goals to assess the  extent to which pipeline operators have fully implemented the  guidelines or increased pipeline security, but did say developing a  feedback mechanism to measure progress in closing vulnerability  gaps was important. However, the management measure did include  the number of completed pipeline security reviews for each fiscal year  from 2014 through 2017, as well as numerical goals. The CFSR  status database includes information on CFSRs conducted from May  22, 2012, through June 29, 2017, but the measures are calculated for  the entire time period rather than year-by-year. The CSR goals and  priorities database measures include percentage compliance with the  guidelines for CSRs conducted in fiscal years 2016 and 2017, as well  as a combined measure. However, baseline and trend data are not  tracked or reported in either database. Collecting, tracking,  developing, and reporting baseline and trend data allows agencies to  better evaluate progress being made and whether or not goals are  being achieved.", "Pipeline Security Branch officials explained that in addition to the  measures reported in the 2018 NSTS Pipeline Security Plan, they  primarily rely on measures assessing CSR and CFSR implementation for  assessing the value of its pipeline security program. TSA officials  reported that they collect and analyze data and information collected from  CSRs and CFSRs to, among other things, determine strengths and  weaknesses at critical pipeline facilities, areas to target for risk reduction  strategies, and pipeline industry implementation of the voluntary Pipeline  Security Guidelines. For example, TSA officials reported that they  analyzed information from approximately 734 CFSR recommendations  that were made during fiscal years 2012 through 2016. They found that  pipeline operators had made the strongest improvements in security  training, public awareness outreach and law enforcement coordination,  and site specific security measures. The most common areas in need of  improvement were 24x7 monitoring, frequency of security vulnerability  assessments, and proper signage.", "However, as described above, we found those measures also did not  comport with key attributes for successful measures and we report below  on reliability concerns for underlying data supporting those measures. In  addition, while the Pipeline Security Branch may not rely on the measures  included in the 2018 NSTS Pipeline Security Plan and the fiscal year  2019 congressional budget justification, they are important for reporting  the status of pipeline security efforts to TSA as a whole and to external  stakeholders such as Congress.", "Taking steps to ensure that the pipeline security program performance  measures exhibit key attributes of successful performance measures  could allow TSA to better assess the program\u2019s effectiveness at reducing  pipeline physical and cybersecurity risks. This could include steps such  as modifying its suite of measures so they are clear, have measurable  targets, and add baseline and trend data. Further examples include the  following:", "Adding measurable targets consisting of numerical goals could allow  TSA to better determine if the pipeline security program is meeting  expectations. For example, measurable targets could be added to  TSA\u2019s existing measures by developing annual goals for the  percentage of recommendations implemented to the CFSR status  database and then reporting annual results.", "To make measures clearer, TSA could verify that each measure has a  clearly stated name, definition, and methodology for how the measure  is calculated. For example, the NSTS objective for security training  mentioned above could have more specific language explaining how  the measure is calculated and whether it applies to pipeline operators\u2019  implementation of the training-related portions of the TSA Pipeline  Security Guidelines or overall implementation.", "Finally, adding baseline and trend data could allow TSA to identify,  monitor, and report changes in performance and help ensure that  performance is viewed in context. For example, the NSTS measures,  CFSR status database measures, and CSR goals and priorities  database measures could have annual results from prior years. This  could help TSA and external stakeholders evaluate the effectiveness  of the pipeline security program and whether it is making progress  toward its goals."], "subsections": []}, {"section_title": "TSA Does Not Track the Implementation Status of Past CSR Recommendations, and Supporting Data Are Not Sufficiently Reliable", "paragraphs": ["According to TSA officials, the primary means for assessing the  effectiveness of the agency\u2019s efforts to reduce pipeline security risks is  through conducting pipeline security reviews\u2014 Corporate Security  Reviews (CSRs) and Critical Facility Security Reviews (CFSRs).  However, TSA has not tracked the status of CSR recommendations for  over 5 years and related security review data are not sufficiently reliable.", "When conducting CSRs and CFSRs, TSA staff makes recommendations  to operators, if appropriate. For example, a CSR recommendation might  include a suggestion to conduct annual security-related drills and  exercises, and a CFSR recommendation might include a suggestion to  install barbed wire on the main gate of a pipeline facility. In response to  recommendations that we made in our 2010 report, TSA developed three  databases to track CSR and CFSR recommendations and their  implementation status by pipeline facility, system, operator, and product  type. In addition, the agency recently developed a fourth database to  collect and analyze information gathered from pipeline operators\u2019  responses to CSR questions. TSA officials reported that they use this  database to assess the extent that TSA\u2019s pipeline security program has  met NSTS goals and Pipeline Security Branch priorities. TSA officials  stated that they use the CSR goals and priorities database for follow-up  on recommendations, indications of improvement in pipeline security, and  as an input into TSA performance goals and measures, including the  performance measures for the 2018 NSTS Pipeline Security Plan.", "We found several problems with the databases that indicate that the  pipeline security program data are not sufficiently reliable and do not  provide quality information that is current, complete, and accurate. First,  the CSR recommendations database only included information for  reviews conducted from November 2010 through February 2013. TSA  officials stated that the agency stopped capturing CSR recommendations  and status information in 2014. A TSA official stated that one factor was  that the pipeline staffing level was one FTE in fiscal year 2014. However,  the Pipeline Security Branch did not resume entering CSR  recommendation-related information when staffing levels rose to 6 FTEs  in the following year and beyond. As a result, TSA is missing over 5 years  of data for the recommendations it made to pipeline operators when  conducting CSRs.", "The agency collected some information from CSRs conducted in fiscal  years 2016 and 2017 in the separate CSR goals and priorities database.  However, this database does not include all of the information that TSA  collects when conducting CSRs. Specifically, the CSR goals and priorities  database does not state which companies were reviewed, what specific  recommendations were made, or the current status of those  recommendations, and only records operators\u2019 responses to 79 of the  222 CSR questions.", "Second, our review identified instances of missing data, inconsistent data  entry formats, and data entry errors in the four databases. For example:", "The CSR recommendations database had missing data in all 13 of the  included fields and a data entry error shifted 50 observations into the  wrong fields, impacting both the Status Date and Completion Code  fields.", "The CSR goals and priorities database had seven entries with  inconsistent data formatting and five of those entries were not taken  into account when calculating summary figures.", "The CFSR recommendations database had missing data in 3 of 9  fields. There was also inconsistent data entry formats in 3 fields.", "The CFSR status database had missing data in 7 of 29 fields and  inconsistent data entry formats in 4 fields.", "Finally, TSA has not documented its data entry and verification  procedures, such as in a data dictionary or user manual, and does not  have electronic safeguards for out-of-range or inconsistent entries for any  of the databases it uses to track the status of CSR or CFSR  recommendations and analyze operator responses to the CSR. TSA  Pipeline Security Branch officials told us that they had not documented  data entry and verification procedures and did not have electronic  safeguards. This was for two reasons. First, the officials stated that the  databases are small and maintained in a commercial spreadsheet  program that does not allow for electronic safeguards. However, based  on our review of the databases, the spreadsheet program does allow for a  variety of electronic safeguards. For example, entries can be restricted to  only allow selections from a drop-down list or only allow dates to be  entered. Second, only a small number of TSA employees enter  information into these databases. TSA officials explained that typically  one TSA employee is responsible for entering information from pipeline  security reviews, and another individual, usually whoever conducted the  review, is tasked to verify the accuracy of the data entered. As a result,  according to the officials, any errors would be self-evident and caught  during these TSA employees\u2019 reviews.", "Our work has emphasized the importance of quality information for  management to make informed decisions and evaluate agencies\u2019  performance in achieving key objectives and addressing risks. The  Standards for Internal Control in the Federal Government states that  management should use quality information to achieve agency objectives,  where \u201cquality\u201d means, among other characteristics, current, complete,  and accurate. In addition, DHS\u2019s Information Quality Guidelines state  that all DHS component agencies should treat information quality as  integral to every step of the development of information, including  creation, collection, maintenance, and dissemination. The guidelines also  state that agencies should substantiate the quality of the information  disseminated through documentation or other appropriate means.", "Without current, complete, and accurate information, it is difficult for TSA  to evaluate the performance of the pipeline security program. Until TSA  monitors and records the status of these reviews\u2019 recommendations, it will  be hindered in its efforts to determine whether its recommendations are  leading to significant reduction in risk. By entering information on CSR  recommendations and monitoring and recording their status, developing  written documentation of its data entry and verification procedures and  electronic safeguards, and improving the quality of its pipeline security  program data, TSA could better ensure it has the information necessary  to effectively monitor pipeline operators\u2019 progress in improving their  security posture, and evaluate its pipeline security program\u2019s   effectiveness in reducing security risks to pipelines."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["A successful pipeline attack could have dire consequences on public  health and safety, as well as the U.S. economy. Recent coordinated  campaigns by environmental activists to disrupt pipeline operations, and  the successful attempts by nation-state actors to infiltrate and obtain  sensitive information from pipeline operators\u2019 business and operating  systems, demonstrate the dynamic and continuous threat to the security  of our nation\u2019s pipeline network.", "To help ensure the safety of our pipelines throughout the nation, it is  important for TSA to address weaknesses in the management of its  pipeline security program. TSA\u2019s Pipeline Security Branch revised its  security guidelines in March 2018 to, among other things, reflect the  dynamic threat environment and incorporate NIST\u2019s Cybersecurity  Framework cybersecurity principles and practices. However, without a  documented process defining how frequently TSA is to review and, if  deemed necessary, revise its guidelines, TSA cannot ensure that its  guidelines reflect the latest known standards and best practices for  physical and cybersecurity, or address the persistent and dynamic  security threat environment currently facing the nation\u2019s pipeline system.  Further, without clearly defined criteria for determining pipeline facilities\u2019  criticality, TSA cannot ensure that pipeline operators are applying  guidance uniformly and that all of the critical facilities across the pipeline  sector have been identified; or that their vulnerabilities have been  identified and addressed.", "TSA could improve its ability to conduct pipeline security reviews and the  means that it uses to prioritize which pipeline systems to review based on  their relative risk ranking. Establishing a strategic workforce plan could  help TSA ensure that it has identified the necessary skills, competencies,  and staffing allocations that the Pipeline Security Branch needs to carry  out its responsibilities, including conducting security reviews of critical  pipeline companies and facilities, as well as their cybersecurity posture.  Better considering threat, vulnerability, and consequence elements in its  risk assessment and incorporating an independent, external peer review  in its process would provide more assurance that the Pipeline Security  Branch ranks relative risk among pipeline systems using comprehensive  and accurate data and methods."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making 10 recommendations to TSA:", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to implement a documented process  for reviewing, and if deemed necessary, for revising TSA\u2019s Pipeline  Security Guidelines at regular defined intervals. (Recommendation 1)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to clarify TSA\u2019s Pipeline Security  Guidelines by defining key terms within its criteria for determining  critical facilities. (Recommendation 2)", "The TSA Administrator should develop a strategic workforce plan for  its Security Policy and Industry Engagement\u2019s Surface Division, which  could include determining the number of personnel necessary to meet  the goals set for its Pipeline Security Branch, as well as the  knowledge, skills, and abilities, including cybersecurity, that are  needed to effectively conduct CSRs and CFSRs. (Recommendation  3)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to update the Pipeline Relative Risk  Ranking Tool to include up-to-date data to ensure it reflects industry  conditions, including throughput and threat data. (Recommendation 4)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to fully document the data sources,  underlying assumptions and judgments that form the basis of the  Pipeline Relative Risk Ranking Tool, including sources of uncertainty  and any implications for interpreting the results from the assessment.  (Recommendation 5)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to identify or develop other data  sources relevant to threat, vulnerability, and consequence consistent  with the NIPP and DHS critical infrastructure risk mitigation priorities  and incorporate that data into the Pipeline Relative Risk Ranking Tool  to assess relative risk of critical pipeline systems, which could include  data on prior attacks, natural hazards, feedback data on pipeline  system performance, physical pipeline condition, and cross-sector  interdependencies. (Recommendation 6)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to take steps to coordinate an  independent, external peer review of its Pipeline Relative Risk  Ranking Tool, after the Pipeline Security Branch completes  enhancements to its risk assessment approach. (Recommendation 7)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to ensure that it has a suite of  performance measures which exhibit key attributes of successful  performance measures, including measurable targets, clarity, and  baseline and trend data. (Recommendation 8)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to take steps to enter information on  CSR recommendations and monitor and record their status.  (Recommendation 9)", "The TSA Administrator should direct the Security Policy and Industry  Engagement\u2019s Surface Division to improve the quality of its pipeline  security program data by developing written documentation of its data  entry and verification procedures, implementing standardized data  entry formats, and correcting existing data entry errors.  (Recommendation 10)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DHS, DOE, DOT, and FERC.  DHS  provided written comments which are reproduced in appendix III. In its  comments, DHS concurred with our recommendations and described  actions planned to address them. DHS, DOE, DOT, FERC, also provided  technical comments, which we incorporated as appropriate. We also  provided draft excerpts of this product to the American Petroleum Institute  (API), the Association of Oil Pipe Lines, the American Gas Association  (AGA), the Interstate Natural Gas Association of America (INGAA), the  American Public Gas Association, and the selected pipeline operators  that we interviewed. For those who provided technical comments, we  incorporated them as appropriate.", "With regard to our first recommendation, that TSA implement a  documented process for reviewing, and if deemed necessary, for revising  its Pipeline Security Guidelines at regular defined intervals, DHS stated  that TSA will implement a documented process for reviewing and revising  its Pipeline Security Guidelines at regular defined intervals, as  appropriate. DHS estimated that this effort would be completed by March  31, 2019. This action, if fully implemented, should address the intent of  the recommendation.", "With regard to our second recommendation, that TSA clarify its Pipeline  Security Guidelines by defining key terms within its criteria for determining  critical facilities, DHS stated that TSA will clarify its Pipeline Security  Guidelines by defining key terms within its criteria for determining critical  facilities. DHS estimated that this effort would be completed by May 31,  2019. This action, if fully implemented, should address the intent of the  recommendation.", "With regard to our third recommendation, that TSA develop a strategic  workforce plan for its Security Policy and Industry Engagement's Surface  Division,  DHS stated that TSA will develop a strategic workforce plan for  the division, which includes determining the number of personnel  necessary to meet the goals set for the Pipeline Security Branch, as well  as the knowledge, skills, and abilities, including cybersecurity, that are  needed to effectively conduct CSRs and CFSRs. DHS estimated that this  effort would be completed by June 30, 2019. This action, if fully  implemented, should address the intent of the recommendation.", "With regard to our fourth recommendation, that TSA update the Pipeline  Relative Risk Ranking Tool to include up-to-date data in order to ensure it  reflects industry conditions, including throughput and threat data, DHS  stated that TSA will update the Pipeline Relative Risk Ranking Tool to  include up-to-date data in order to ensure it reflects industry conditions,  including throughput and threat data. DHS estimated that this effort would  be completed by February 28, 2019. This action, if fully implemented,  should address the intent of the recommendation.", "With regard to our fifth recommendation, that TSA fully document the data  sources, underlying assumptions, and judgements that form the basis of  the Pipeline Relative Risk Ranking Tool, including sources of uncertainty  and any implications for interpreting the results from the assessment,  DHS stated that TSA will fully document the data sources, underlying  assumptions, and judgements that form the basis of the Pipeline Relative  Risk Ranking Tool. According to DHS, this will include sources of  uncertainty and any implications for interpreting the results from the  assessment. DHS estimated that this effort would be completed by  February 28, 2019. This action, if fully implemented, should address the  intent of the recommendation.", "With regard to our sixth recommendation, that TSA identify or develop  other data sources relevant to threat, vulnerability, and consequence  consistent with the NIPP and DHS critical infrastructure risk mitigation  priorities and incorporate that data into the Pipeline Relative Risk Ranking  Tool to assess relative risk of critical pipeline systems, DHS stated that  TSA will identify and/or develop other sources relevant to threat,  vulnerability, and consequence consistent with the NIPP and DHS critical  infrastructure risk mitigation priorities. DHS also stated that TSA will  incorporate that data into the Pipeline Risk Ranking Tool to assess  relative risk of critical pipeline systems, which could include data on prior  attacks, natural hazards, feedback data on pipeline system performance,  physical pipeline condition, and cross-sector interdependencies. DHS  estimated that this effort would be completed by June 30, 2019. This  action, if fully implemented, should address the intent of the  recommendation.", "With regard to our seventh recommendation, that TSA take steps to  coordinate an independent, external peer review of its Pipeline Relative  Risk Ranking Tool, after the Pipeline Security Branch completes  enhancements to its risk assessment approach, DHS stated that, after  completing enhancements to its risk assessment approach, TSA will take  steps to coordinate an independent, external peer review of its Pipeline  Relative Risk Ranking Tool. DHS estimated that this effort would be  completed by November 30, 2019. This action, if fully implemented,  should address the intent of the recommendation.", "With regard to our eighth recommendation, that TSA ensure that the  Security Policy and Industry Engagement's Surface Division has a suite of  performance measures which exhibit key attributes of successful  performance measures, including measurable targets, clarity, baseline,  and trend data, DHS stated that TSA\u2019s Surface Division\u2019s Pipeline Section  will develop both physical and cyber security performance measures, in  consultation with pipeline stakeholders, to ensure that it has a suite of  performance measures which exhibit key attributes of successful  performance measures, including measurable targets, clarity, baseline,  and trend data. DHS estimated that this effort would be completed by  November 30, 2019. This action, if fully implemented, should address the  intent of the recommendation.", "With regard to our ninth recommendation, that TSA take steps to enter  information on CSR recommendations and monitor and record their  status, DHS stated that TSA will enter information on CSR  recommendations and monitor and record their status. DHS estimated  that this effort would be completed by October 31, 2019. This action, if  fully implemented, should address the intent of the recommendation.", "With regard to our tenth recommendation, that TSA take steps to improve  the quality of its pipeline security program data by developing written  documentation of its data entry and verification procedures, implementing  standardized data entry formats, and correcting existing data entry errors,  DHS stated that TSA will develop written documentation of its data entry  and verification procedures, implementing standardized data entry  formats, and correcting existing data entry errors. DHS estimated that this  effort would be completed by July 31, 2019. This action, if fully  implemented, should address the intent of the recommendation.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until one day from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Secretaries of Energy, Homeland Security,  and Transportation; the Executive Director of the Federal Energy  Regulatory Committee; 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  Chris Currie at (404) 679-1875 or curriec@gao.gov, and Nick Marinos at  (202) 512-9342 or marinosn@gao.gov. Key contributors to this report are  listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Federal and Industry Security Guidelines and Standards for the Pipeline Sector", "paragraphs": ["This appendix lists security guidance and guidance-related tools that the  pipeline operators and industry association officials we interviewed  identified as adopted or available in order to secure their physical and  cyber operations. This list should not be considered to include all physical  and cybersecurity guidance that may be available or used by all pipeline  operators nor do all operators use all guidance listed."], "subsections": []}, {"section_title": "Appendix II: Description of Areas for Improvement in the Pipeline Security Branch\u2019s Pipeline Relative Risk Ranking Tool", "paragraphs": ["The Transportation Security Administration\u2019s (TSA) Pipeline Security  Branch developed the Pipeline Relative Risk Ranking Tool (risk  assessment) in 2007. The risk assessment calculates threat,  vulnerability, and consequence on variables such as the amount of  throughput in the pipeline system (consequence input). Pipeline Security  Branch officials told us that they use the pipeline risk assessment to rank  relative risk of the top 100 critical pipeline systems, and the standard  operating procedures for conducting Corporate Security Reviews (CSR)  state the results of the risk ranking are the primary factor considered  when prioritizing CSRs of pipeline companies.", "However, we identified several factors that likely limit the usefulness of  the current assessment in calculating threat, vulnerability, and  consequence to allow the Pipeline Security Branch to effectively prioritize  reviews of pipeline systems. For example, because the risk assessment  has not changed since 2014, information on threat may be outdated.  Additionally, sources of data and underlying assumption and judgments  regarding certain threat and vulnerability inputs to the assessment are not  fully documented. For example, threats to cybersecurity are not  specifically accounted for in the description of the risk assessment  methodology, making it unclear if cybersecurity is part of the  assessment\u2019s threat factor. Further, the risk assessment does not include  information that is consistent with the National Infrastructure Protection  Plan (NIPP) and other Department of Homeland Security (DHS) priorities  for critical infrastructure risk mitigation, such as information on natural  hazards and the ability to measure risk reduction (feedback data).", "According to Pipeline Security Branch officials, the risk ranking  assessment is not intended to be a fully developed risk model detailing all pipeline factors influencing risk. Rather, officials said they are primarily  interested in assessing risk data that impacts security. However, because  TSA\u2019s Pipeline Security Program is designed to enhance the security  preparedness of the pipeline systems, incorporating additional factors that  enhance security into their risk calculation of the most critical pipeline  systems would better align their efforts with Presidential Policy Directive  21 (PPD-21). For example, PPD-21 calls for agencies to integrate and  analyze information to prioritize assets and manage risks to critical  infrastructure, as well as anticipate interdependencies and cascading  impacts.", "Below we present the various shortfalls in the risk assessment\u2014outdated  data, limited description of sources and methodology, and opportunities to  better align with the NIPP and other DHS priorities for critical  infrastructure risk mitigation\u2014in the context of the components that  comprise a risk assessment: threat, vulnerability, and consequence.  Whereas in 2010 we made recommendations to improve the  consequence component in the pipeline relative risk ranking tool, we have  currently identified shortfalls that cut across all risk components: threat,  vulnerability, and consequence."], "subsections": [{"section_title": "Threat", "paragraphs": ["We identified several shortfalls in the pipeline risk assessment\u2019s  calculation of threat. First, while the risk assessment assesses  consequence and vulnerability by pipeline system through use of multiple  variables, it currently ranks threat for pipeline systems equally. Second,  the evolving nature of threats to pipelines may not be reflected, since the  risk assessment was last updated in 2014. Third, the threat calculation  does not take into account natural hazards.", "Pipeline Security Branch officials said they currently rank threat equally  across pipeline systems because they do not have granular enough  threat information to distinguish threat by pipeline. However, ranking  threat equally effectively has no effect on the risk calculation for pipeline  systems. Further, this judgment is not documented in the risk  assessment\u2019s methodology. According to the NIPP, a risk assessment\u2019s  methodology must clearly document what information is used and how it  is synthesized to generate a risk estimate, including any assumptions and  judgments. Additionally, our analysis of the pipeline risk assessment  found that it includes at least one field that TSA could use to differentiate  threat by pipeline. Specifically, the risk assessment includes a field that  accounts for whether a pipeline experienced a previous security threat  (including failed attacks), and information provided by Pipeline Security  Branch suggests some pipeline systems have experienced such threats.", "However, the Pipeline Security Branch did not capture these events in the  risk assessment\u2019s calculation, which Pipeline Security Branch officials  said should be part of the threat calculation, but could not account for why  they were not calculated for the systems in the risk assessment. These  officials also clarified that incidents such as suspicious photography or  vandalism do not constitute an attack to be accounted for in the threat  calculation. Documenting such assumptions, judgments, or decisions to  exclude information could provide increased transparency to those  expected to interpret or use the results.", "Pipeline Security Branch officials also said that they ranked threat equally  because TSA Intelligence and Analysis data show that threats to the oil  and natural gas sector have been historically low, and Intelligence and  Analysis does not conduct specific threat analysis against individual  pipeline systems. However, the Pipeline Security Branch has not updated  the risk assessment since June 2014; therefore, the threat information it  used to determine threat calculations\u2014and decide to rank threat  equally\u2014may be outdated and not reflect the threats to the industry that  have emerged in recent years. In fact, pipeline operators we interviewed  indicated that the types of threats that concern pipeline operators have  evolved. For example, 5 of the 10 operators we interviewed indicated that  environmental activists were an increased threat to the pipeline industry  because they use sabotage techniques, such as valve turning and cutting  in service pipelines with blow torches, against pipelines. Additionally, 6 of  10 pipeline operators we interviewed said cyber attacks from nation-state  actors were a primary threat to their industry. Further, when TSA issued  its revised Pipeline Security Guidelines in March 2018, it stated that its  revisions to the guidelines were made to reflect the ever-changing threat  environment in both the physical and cybersecurity realms. However,  threats to cybersecurity are not specifically accounted for in the  description of the risk assessment methodology. Recent Pipeline Modal  and Cyber Modal Threat Assessments include cyber threats to the  pipeline industry, but the description of the pipeline risk assessment\u2019s  methodology does not specify what types of threat assessments  (sources) are used to calculate its threat score. To better align with the  guidance in the NIPP for documenting sources of information when  conducting risk assessments, the Pipeline Security Branch should  document the information used. Keeping the risk assessment updated  with current information, as well as documenting those data sources,  could help the Pipeline Security Branch ensure it is using its limited  resources to review the pipeline systems with greater risk.", "Natural Hazard Threats to Pipelines  The Transportation Systems Sector, of which  pipelines are a part, is critical to the Pacific  Northwest, but also at risk from natural  hazards, like earthquakes. For example,  according to the Department of Homeland  Security, an earthquake in the Puget Sound  region\u2014which relies on the transportation of  crude oil from Alaska\u2014could cripple the ports  of Seattle and Tacoma, as well as the  Olympic and Williams Pipelines greatly  impacting the Pacific Northwest Economic  Region.  Hurricanes are the most frequent disruptive  natural hazard for the oil and natural gas  subsector and can cause the shutdown of  facilities in an area, even when the facilities  themselves are not directly affected by the  storms. For example, according to the U.S.  Energy Information Administration, the flow of  petroleum into the New York area via pipeline  from the Gulf Coast relies on the ability to  move it through major terminals. In August  2017, Hurricane Harvey caused major  disruptions to crude oil and petroleum product  supply chains, including those to New York  Harbor from Houston, Texas via the Colonial  Pipeline. Due to the hurricane, decreased  supplies of petroleum products available for  the pipeline in Houston forced Colonial  Pipeline to limit operations temporarily.", "Finally, another shortfall in the current pipeline risk assessment  methodology is that it does not account for natural hazards in its threat  calculation, even though DHS\u2019s definition of threat includes natural  hazards, and security and resilience of critical infrastructure are often  presented in the context of natural hazards. According to the NIPP,  threat is a natural or manmade occurrence, individual, entity, or action  that has or indicates the potential to harm life, information, operations, the  environment, and/or property. As such, along with terrorism, criminal  activity and cybersecurity, natural disasters are a key element of DHS\u2019s  critical infrastructure security and resilience mission.", "According to Pipeline Security Branch officials, there is not sufficient  historical data available that would indicate a significant impact from  natural disasters on specific pipeline systems. However, we identified  possible sources of data for the Pipeline Security Branch to consider. For  example, a 2016 RAND Corporation study examined national  infrastructure systems\u2019 exposure to natural hazards, including pipelines.  Additionally, the Federal Emergency Management Agency (FEMA) has  collaborated with stakeholders to develop the National Risk Index to,  among other things, establish a baseline of natural hazards risk for the  United States While there may not be historical data of natural hazard  impact for every pipeline system, consulting other sources or experts  could provide regional data or analysis to build a more comprehensive  threat picture to help distinguish threats by pipeline system. According to  the NIPP, hazard assessments should rely not only on historical  information, but also future predictions about natural hazards to assess  the likelihood or frequency of various hazards."], "subsections": []}, {"section_title": "Vulnerability", "paragraphs": ["We also identified multiple shortfalls in the vulnerability factors used in the  risk assessment methodology, such as the potential uncertainty of the  number of critical facilities and incorporating a feedback mechanism to  calculate overall risk reduction. Other considerations for vulnerability  calculations include physical condition of the pipeline system,  cybersecurity activities, and interdependencies among sectors.", "The number of critical facilities a pipeline system has identified is used as  an input for its vulnerability calculation in the Pipeline Security Branch\u2019s  risk assessment methodology. As discussed earlier, we identified  deficiencies in TSA\u2019s criteria for identifying critical facilities, and found that  well-defined criteria and consistent application of the criteria for identifying  critical facilities could improve the results of the Pipeline Security  Branch\u2019s risk assessment. Nevertheless, communicating in the risk  assessment the uncertainty that may be inherent in this self-reported  information would better align the risk assessment with the NIPP.", "Measuring Effectiveness in a Voluntary  Environment  According to the National Infrastructure  Protection Plan, the use of performance  metrics is an important step in the critical  infrastructure risk management process to  enable assessment of improvements in critical  infrastructure security and resilience. The  metrics provide a basis for the critical  infrastructure community to establish  accountability, document actual performance,  promote effective management, and provide a  feedback mechanism to inform decision  making.  By using metrics to evaluate the effectiveness  of voluntary partnership efforts to achieve  national and sector priorities, critical  infrastructure partners can adjust and adapt  their security and resilience approaches to  account for progress achieved, as well as  changes in the threat and other relevant  environments. Metrics are used to focus  attention on areas of security and resilience  that warrant additional resources or other  changes through an analysis of challenges  and priorities at the national, sector, and  owner/operator levels.  Metrics also serve as a feedback mechanism  for other aspects of the critical infrastructure  risk management approach.", "Another shortfall in the risk assessment is its inability to reliably measure  the progress a pipeline system made in addressing vulnerability gaps  between security reviews. The current risk assessment includes a CSR  score as part of its vulnerability calculation, which was developed in part  in response to our 2010 recommendation to use more reliable data to  measure a pipeline system\u2019s vulnerability gap. However, during our  review, Pipeline Security Branch officials said they plan to remove  pipeline companies\u2019 CSR scores from the risk assessment calculations,  because they and industry partners do not have confidence that the score  appropriately measures a pipeline system\u2019s vulnerability. For example,  Pipeline Security Branch officials explained that pipeline companies  consider security factors differently, which can lead to variation in  implementing risk reduction activities and by extension lead to different  CSR scores. However, removing the CSR score eliminates the only  feedback mechanism in the risk assessment from a pipeline company\u2019s  actual security review conducted by the Pipeline Security Branch. The  NIPP and DHS\u2019s Risk Management fundamentals emphasize the  important role that such feedback mechanisms play in risk management.  Officials from the Pipeline Security Branch agree on the importance of a  feedback mechanism tying results of reviews to a revised vulnerability  metric, but said they need a better measure than the current CSR score  which is unreliable for comparative and analytic purposes. Developing a  feedback mechanism based on implementation of TSA\u2019s Pipeline Security  Guidelines could be an important input to the risk assessment\u2019s  vulnerability calculation. This information would also inform the amount of  risk pipeline companies are reducing by implementing the guidelines and  could be used to inform overall risk reduction.", "The physical and cyber environments in which the pipeline sector  operates also present vulnerabilities not accounted for in the pipeline risk  assessment. In recent years, DHS has listed the potential for catastrophic  losses to dramatically increase the overall risk associated with failing  infrastructure and highlighted risks due to climate change and natural  hazards to pipelines. For example, DHS reported extreme  temperatures\u2014such as higher and lower temperatures over prolonged  periods of time\u2014increase vulnerability to the critical infrastructure by  causing elements to break and cease to function. Pipelines that freeze  and then rupture can affect the energy and transportation systems  sectors. As noted above, according to the NIPP, a natural or man-made  occurrence or action with the potential to harm life is considered a threat,  whereas vulnerability is defined as a physical feature or operational  attribute that renders an entity open to exploitation or susceptible to a  given threat or hazard. While pipeline physical condition is typically  thought of in context of safety, pipeline condition or location (such as  above or below ground) could touch upon pipeline security as it relates to  system vulnerability. For example, a pipeline system or segment of a  system with a compromised physical condition due to corrosion or age  could affect the system\u2019s vulnerability to threats and affect its ability to  recover from such threats by potentially increasing the time a system is  offline.", "According to the Transportation Systems Sector-Specific Plan,  vulnerabilities to damage in aging transportation infrastructure\u2014of which  pipelines are a part\u2014are projected to increase with the continued effects  of climate change. Further, according to TSA\u2019s Pipeline Security and  Incident Recovery Protocol Plan, pipeline integrity efforts\u2014including the  design, construction, operation, and maintenance of pipelines\u2014are  important to pipeline security because well-maintained, safe pipelines are  more likely to tolerate a physical attack. The Pipeline Security Branch  already collects information from the Pipeline and Hazardous Materials  Safety Administration (PHMSA) for its risk assessment, specifically  information on High Consequence Area and High Threat Urban Area  mileage. By considering additional information PHMSA collects on  pipeline integrity, the Pipeline Security Branch could also use the  information to help pipeline operators identify security measures to help  reduce the consequences related to the comparatively higher vulnerability  of an aging or compromised system. This would align with the Pipeline  Security Branch\u2019s efforts to improve security preparedness of pipeline  systems and could better inform its vulnerability calculations for relative  risk ranking of pipeline systems.", "Capturing cybersecurity in the risk assessment is also an area for  improvement. Pipeline Security Branch officials told us they consulted  with the National Cybersecurity and Communications Integration Center  to revise TSA\u2019s Pipeline Security Guidelines to align with the National  Institute of Standards and Technology (NIST) Cybersecurity Framework  and that absent data specific to pipelines on their cybersecurity  vulnerabilities, they are unable to include a pipelines\u2019 vulnerability to  cyber attack in the risk assessment. However, the Pipeline Security  Branch recently updated the security review questions asked of pipeline  operators during corporate and critical facility reviews based on the  recently updated Pipeline Security Guidelines. Using these updated  questions related to companies\u2019 cybersecurity posture, the Pipeline  Security Branch could collect additional information on cybersecurity  vulnerabilities which could inform the risk assessment. This could be an  element of the feedback mechanism described above and emphasized in  the NIPP. Additionally, NIST identified several supply chain vulnerabilities  associated with cybersecurity, which are not currently accounted for in  TSA\u2019s Pipeline Security Guidelines. As pipeline operators implement increasing levels of network technologies to control their systems, the  Pipeline Security Branch may not be fully accounting for pipeline systems\u2019  cybersecurity posture by not including the cybersecurity-related  vulnerabilities in its risk assessment inputs.", "Finally, we identified shortfalls in cross-sector interdependencies, which  could affect vulnerability calculations. According to the NIPP,  understanding and addressing risks from cross-sector dependencies and  interdependencies is essential to enhancing critical infrastructure security  and resilience. The Pipeline Security Branch\u2019s pipeline risk assessment  currently considers the effects of a pipeline system\u2019s ability to service  assets such as major airports, the electric grid, and military bases.  However, consequence is calculated on the loss or disruption of the  pipeline system to these other assets and does not capture the  dependency of the pipeline system on other energy sources, such as  electricity. Weather events such as Gulf of Mexico hurricanes and  Superstorm Sandy highlighted the interdependencies between the  pipeline and electrical sectors. Specifically, according to a 2015 DHS  annual report on critical infrastructure, power failures during Superstorm  Sandy in 2012 closed major pipelines for 4 days, reducing regional oil  supplies by 35 to 40 percent. The report goes on to say that the  interconnected nature of infrastructure systems can lead to cascading  impacts and are increasing in frequency. Pipeline Security Branch  officials are considering cross-sector interdependencies and said they  discuss these factors with operators as they relate to system resiliency.  Considering interdependencies of sectors in both directions\u2014such as  calculating the likelihood that an input like electricity could fail and cause  disruptions to critical pipelines\u2014could improve the calculations in the  pipeline risk assessment."], "subsections": []}, {"section_title": "Consequence", "paragraphs": ["As previously discussed, the Pipeline Security Branch last calculated  relative risk among the top 100 pipeline systems in 2014. When doing so,  it used pipeline systems\u2019 throughput data from 2010 to assess relative  risk. According to Pipeline Security Branch officials, the amount of  throughput in pipeline systems does not change substantially year to  year. However, Standards for Internal Control in the Federal Government  calls for management to use quality information to achieve the entity\u2019s  objectives, including using relevant data from reliable sources obtained in  a timely manner. The Pipeline Security Branch uses throughput data as a  consequence factor in the risk assessment to determine a pipeline  system\u2019s relative risk score. Throughput changes could affect relative  risk ranking and the Pipeline Security Branch\u2019s ability to accurately  prioritize reviews based on relative risk."], "subsections": []}]}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Chris P. Currie at (404) 679-1875 or curriec@gao.gov    Nick Marinos at (202) 512-9342 or marinosn@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contacts named above, Ben Atwater, Assistant Director;  Michael W. Gilmore, Assistant Director; and Michael C. Lenington,  Analyst-in-Charge, managed this assignment. Chuck Bausell, David  Blanding, Dominick Dale, Eric Hauswirth, Kenneth A. Johnson, Steve  Komadina, Susanna Kuebler, Thomas Lombardi, David Plocher, and  Janay Sam made significant contributions to this report."], "subsections": []}]}], "fastfact": ["The nation depends on the interstate pipeline system to deliver oil, natural gas, and more. This increasingly computerized system is an attractive target for hackers and terrorists. (Protection of cyber critical infrastructure is on our High Risk List.)", "We found weaknesses in how TSA manages its pipeline security efforts. For example, it has no process for determining when to update its guidelines for pipeline operators. Also, its method for assessing risks needs updating.", "We made 10 recommendations, including establishing better processes for updating guidelines and assessing risks."]}
{"id": "GAO-19-132", "url": "https://www.gao.gov/products/GAO-19-132", "title": "Army Modernization: Steps Needed to Ensure Army Futures Command Fully Applies Leading Practices", "published_date": "2019-01-23T00:00:00", "released_date": "2019-01-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In order for the Army to maintain its technological edge over potential adversaries, it plans to invest in near- and long-term modernization efforts. However, the Army has struggled with modernization initiatives in the past. For example, the Future Combat System was canceled after a cost of $21 billion and delivery of few new capabilities.", "The National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the Army's modernization strategy. This report assesses (1) the status of the Army's near- and long-term modernization efforts; and (2) the extent to which the Army has applied leading practices to these efforts. GAO reviewed Army directives, procedures, and policies; and compared the Army's efforts with leading practices for requirements and technology development, effective cross-functional teams, and mergers and organizational transformations."]}, {"section_title": "What GAO Found", "paragraphs": ["Since 2017, when the Army announced its initiative to update its forces and equipment with improved capabilities\u2014known as modernization\u2014it has", "established and assigned eight cross-functional teams to pilot how to address these needs;", "established the Army Futures Command as the focal point for modernization efforts, with a four-star general to oversee it; and", "realigned over $1 billion in science and technology funding to support modernization efforts within the $7.5 billion expected to be spent over the next 5 years.", "To date, the Army has generally applied leading practices identified by GAO to its modernization efforts. For example, the cross-functional team pilots generally applied leading practices for determining requirements and technology development and for establishing effective teams. Similarly, as the Army began the process of establishing the Army Futures Command, it has started to apply the leading practices for mergers and organizational transformations by establishing a clearly defined mission and providing a clear consistent rationale for the command. However, GAO identified other areas where the Army has not fully applied leading practices to its modernization efforts including the following:", "Under the modernization effort, the Army plans to begin weapon systems development at a lower level of maturity than what is recommended by leading practices. GAO has raised concerns about this type of practice for almost two decades for other Army acquisitions, because proceeding into weapon systems development at earlier stages of technology maturity raises the risk that the resulting systems could experience cost increases, delivery delays, or failure to deliver desired capabilities. Taking this approach for acquisitions under the modernization effort raises similar concerns for the Army's six prioritized capability needs.", "The Army has not developed a plan for capturing the lessons learned from the cross-functional team pilots, and therefore may miss an opportunity to leverage the experience of these teams in applying leading practices."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations, including that the Army follow leading practices for maturing technologies to a higher level than currently planned and develop a plan to capture lessons learned from the cross-functional teams. DOD concurred with all the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Army has determined that in order for it to maintain its technological  edge over potential adversaries, it must update or upgrade multiple  weapon systems\u2014a broad-based effort it refers to as modernization. This  modernization effort hinges upon the development of new capabilities  through the Department of Defense (DOD) acquisition process. GAO has  found that this acquisition process includes developing a clear description  of the specific capabilities and characteristics of the system\u2014referred to  as requirements. Another key component of the acquisition process is the  identification of technologies capable of meeting those requirements and  developing them to a level of maturity sufficient for integration into a  system in a cost-effective and timely way. Our past work has found that a  formal weapons system acquisition program\u2014with dedicated funding and  specific timelines for completing system development\u2014should be initiated  only after requirements are well-defined and technologies are  demonstrated as sufficiently mature.", "The Army\u2019s past efforts at modernization have included several weapon  system acquisition programs that were ultimately cancelled\u2014after years  of development and billions of dollars spent. The cancellation of these  programs was due to, among other things, problems with the  development of requirements for these systems and the integration of  new technologies into acquisition programs before they reached a  sufficiently high-level of maturity. The failure to deliver these new weapon  systems resulted in a continued reliance on the aging systems that had  been targeted for replacement. Army officials have acknowledged that  improvements to the processes used to develop requirements and mature  technologies are critical if the Army is to achieve the goals it has set for its  new modernization efforts.", "Section 1061 of the National Defense Authorization Act for Fiscal Year  2018 included a provision for GAO to report on the Army\u2019s modernization  strategy. This report is the second that we have issued in response to  this mandate and assesses (1) the status of the Army\u2019s efforts to  establish new acquisition organizations while balancing near- and long- term modernization; and (2) the extent to which the Army has applied  leading practices to do so.", "To assess the Army\u2019s efforts to establish new acquisition organizations  and to balance near- and long-term modernization, we reviewed orders  and directives the Army used to establish new acquisition organizations\u2014 such as the Army Futures Command\u2014geared toward modernization  efforts. We also reviewed Army directives, procedures, and policies to  understand changes in Army acquisition practices since 2016. We  reviewed the Army\u2019s 2018 Modernization Strategy report and other  documents, such as strategic portfolio reviews and budgets, to identify  the steps the Army is taking to balance its modernization efforts in the  near- and long-term. We also discussed these topics with relevant Army  officials to get their perspectives on Army modernization efforts.", "To assess the extent to which Army has applied leading practices, we  reviewed our prior work on requirements and technology development,  effective cross-functional teams, and mergers and organizational  transformations that have identified relevant leading practices that might  apply to the Army\u2019s modernization efforts. To assess the extent to which  the Army has applied these practices as part of its modernization efforts,  we analyzed Army documentation and spoke with cognizant Army  officials. See appendix I for more information on our objectives, scope  and methodology.", "We conducted this performance audit from January 2018 to January 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."], "subsections": [{"section_title": "Background", "paragraphs": ["Senior Army leadership has acknowledged that the service must change  how it develops requirements and acquires weapon systems in order to  be successful in future wars. However, the Army\u2019s history of failed, costly  weapon system procurements to replace aging weaponry is due, in part,  to requirements that could not be met and the immaturity of key  technologies. Many of these programs failed to provide any capability to  the warfighter despite the time and funding expended. Some examples of  these cancelled programs are listed in table 1 below."], "subsections": [{"section_title": "Army Modernization Efforts Since 2017", "paragraphs": ["In the fall of 2017, the Army began a new modernization effort to rapidly  develop and field new capabilities. As a part of this effort, the Army\u2019s  then-Acting Secretary and the Chief of Staff in an October 3, 2017  memorandum identified six priorities to guide Army modernization: next generation combat vehicle, air and missile defense, and  soldier lethality.", "Given that modernization is an ongoing process, and with Army  expectations that some capabilities will be delivered sooner than others,  we have divided Army modernization into two timeframes for the  purposes of this report:", "Near-term modernization: from fiscal years 2019 to 2023, including  buying existing systems and technologies to fill the Army\u2019s urgent  needs.", "Long-term modernization: fiscal year 2024 and beyond, including  the development of new systems and technologies to meet  anticipated needs and maintain superiority over major adversaries.", "In September 2018, we addressed the Army\u2019s efforts for near-term  modernization. We found that the Army had set decisively defeating  near-peer adversaries as an overarching objective, but had not  established processes for evaluating its modernization efforts against this  objective. We also found that the Army had not yet completed a cost  analysis of its near-term modernization efforts. To address these issues,  we recommended that the Army develop a plan to finalize processes for  evaluating the contributions of its near-term investments to the ability to  decisively defeat a near-peer adversary; and finalize and report to  Congress its cost analysis of near-term investments. DOD concurred with  both of these recommendations.", "As we have previously reported, the Army\u2019s long-term modernization  efforts as well as those of the other DOD military services will depend  upon adequate and effective investments in science and technology.  These are investments that focus on increasing fundamental knowledge  of new capabilities, applying that knowledge, and demonstrating the  technological feasibility of capabilities."], "subsections": []}, {"section_title": "Army Acquisition Process", "paragraphs": ["As with all the military services in DOD, the Army\u2019s acquisition process  generally includes a number of phases including: (1) the materiel solution  analysis phase, (2) the technology maturation and risk reduction phase,  (3) the engineering and manufacturing development phase, and (4) the  production and deployment phase. In this report we refer to these phases  more simply as materiel solution analysis, technology development,  system development, and production.", "Before these phases begin, the Army must establish requirements to  guide the acquisition process. Requirements describe the capability  desired to be achieved through the use of operational performance  attributes\u2014the testable and measurable characteristics\u2014necessary to  the design of a proposed system and for establishing a program\u2019s cost,  schedule, and performance baselines. These requirements include the  key performance parameters and system attributes that guide a  program\u2019s development, demonstration, and testing. The Army approval  authority for all Army warfighting capability requirements is the Army  Chief of Staff.", "At the end of the initial three phases, the Army holds a milestone review,  as shown in figure 1 below, to assess an acquisition program\u2019s readiness  to proceed to the next phase, consistent with relevant DOD policies and  federal statutes.", "The Assistant Secretary of the Army for Acquisition, Logistics, and  Technology is generally the Army\u2019s milestone decision authority. The  process is also subject to intermediate reviews by senior Army staff."], "subsections": []}, {"section_title": "Prior GAO Work", "paragraphs": ["We have issued several reports related to the Army\u2019s modernization  efforts that assess areas regarding requirements and technology  development, effective cross-functional teams, and mergers and  organizational transformations:", "Requirements and Technology Development. In our extensive  work issued over two decades on requirements and technology  development, we have emphasized the importance of promoting  leading practices such as communication between end-users and  requirements developers; prototyping capabilities as part of  technology and product development; and maturing technology to a  certain threshold before approving product development.", "Cross-Functional Teams. In February 2018, we identified eight  leading practices that effective cross-functional teams should have: effective communication mechanisms; well-defined goals common to the team, team leader, and an inclusive team environment where all team members have  collective responsibility and individual accountability for the team\u2019s  work; a well-defined team structure with project-specific rules and autonomy to make decisions rapidly;  senior managers who view their teams as a priority;  commitment to the team\u2019s goals; and  leaders empowered to make decisions and provide feedback and  developmental opportunities.", "Mergers and Organizational Transformations. In July 2003, we  found that the key to successful mergers and organizational  transformations is to recognize the \u201cpeople\u201d element and implement  strategies to help individuals maximize their full potential while  simultaneously managing the risk of reduced productivity and  effectiveness that often occurs as a result of changes. We identified  nine leading practices new organizations should follow including  ensuring top leadership drives the transformation and establishing a  communication strategy, among others."], "subsections": []}]}, {"section_title": "Army Is Establishing New Organizations to Lead Modernization Efforts and Prioritizing Solutions to Address Near-term Capability Gaps while Identifying Long-term Needs", "paragraphs": ["The Army\u2019s cross-functional team pilots and early efforts by the Army  Futures Command have prioritized closing near-term capability gaps, and  have begun planning the transition to long-term capabilities. The cross- functional teams were pilot programs to improve the quality and  timeliness of requirements and technology development. These cross- functional teams are transitioning from independent organizations to  organizations within the Army Futures Command, which will also  subsume other existing Army organizations tasked with modernization.  Army Futures Command is in the process of establishing its policies,  processes, and functions as well as its relationships with other Army  organizations. It plans to reach full capability by July 2019. The Army has  already identified near-term priorities and realigned over $1 billion in  science and technology funding for long-term modernization. Army  Futures Command will be responsible for continuing this prioritization."], "subsections": [{"section_title": "Army Established Cross- Functional Teams to Pilot Its Modernization Efforts", "paragraphs": ["In an attempt to increase the efficiency of its requirements and technology  development efforts, the Army established cross-functional team pilots for  modernization. A directive from the then-acting Secretary of the Army on  October 6, 2017, established eight multi-disciplinary cross-functional  teams on a pilot basis. The eight cross-functional team pilots were  assigned to address the six priority areas, as outlined in table 2.", "These cross-functional team pilots were intended to:  take steps toward achieving the six modernization priorities;  leverage expertise from industry and academia;  identify ways to use experimentation, prototyping, and  demonstrations; and  identify opportunities to improve the efficiency of requirements  development and the overall defense systems acquisition process.", "Cross-functional team pilots were structured to help achieve these goals.  Each cross-functional team pilot consisted of core staff and subject matter  experts from across the Army. To facilitate the rapid approval of  requirements, each cross-functional team pilot was led by a general  officer or a senior civilian official who could communicate directly with the  highest levels of the Army. The goal of staffing these teams was to  ensure that each team had individuals who specialized in acquisition,  requirements, science and technology, test and evaluation, resourcing,  contracting, cost analysis, sustainment, and military operations. The goal  of bringing different experts together was to facilitate collaboration and  immediate opportunities for stakeholders to provide input as opposed to  the more traditional requirements development process, in which input  has typically been provided separately. Officials told us that, while all of  these subject matter experts may have provided input on the  requirements development process in the past, placing them on a single  team offered the promise of streamlining those efforts and could eliminate  the need for multiple reviews. Figure 2 below compares the requirements  development process under cross-functional teams to how the Army has  traditionally developed requirements.", "The cross-functional team locations chosen by senior Army leadership  coincide with the locations of related Army organizations or industry hubs,  which could help to facilitate this exchange of ideas among technical  experts, and inform prototyping and experimentation. For example, the  cross-functional team pilot for the Future Vertical Lift was stationed at  Redstone Arsenal where the Army\u2019s existing research, development, and  engineering center for aviation is located.", "In congressional testimony, the Commander of Army Futures Command  stated that in order to achieve their near- and long-term modernization  objectives, they will have to reduce their requirements development  timelines from 3 to 5 years to less than 1 year. According to cross- functional team members we spoke with, the cross-functional team pilots  were able to demonstrate progress toward achieving the goals set out for  them. Specifically, cross-functional team pilots  completed requirements documentation for one of the Mounted  Assured Positioning, Navigation and Timing System\u2019s capabilities in  less than a year;  replaced small airborne radio with completion of directed requirement  for the Integrated Tactical Network in less than 60 days; and  completed requirements documentation for a soldier lethality  capability in 15 days as opposed to the expected 4 months."], "subsections": []}, {"section_title": "Army Futures Command Scheduled to Become Fully Operational by July 2019", "paragraphs": ["The Army has taken initial steps to consolidate all its modernization  efforts under one authority, in addition to its initiation of the cross- functional team pilots. In particular, the Secretary of the Army established  the Army Futures Command through the issuance of a general order on  June 4, 2018. According to Army documentation, the intent of the new  command is to provide unity of command, accountability, and  modernization at the speed and scale required to prevail in future  conflicts. This organization is led by a four-star general like its  organizational peers: Army Materiel Command, Training and Doctrine  Command, and Forces Command. Establishing Army Futures Command  is the most significant institutional change to the Army since it  reorganized in 1973 in the wake of the Vietnam War.", "The Army is in the process of establishing the new command, but has just  begun to define its organizational structures. According to the 2018 Army  general order, Army Futures Command reached initial operating  capability in July 2018. According to Army Futures Command officials and  documentation, the new organization is charged with integrating several  existing requirements and technology development organizations\u2014such  as Army Capabilities Integration Center in Fort Eustis, Virginia and  Research, Development, and Engineering Command headquartered in  Aberdeen, Maryland\u2014as well as the cross-functional team pilots. The  cross-functional team pilots are in the process of being integrated into the  new command and, according to Army officials, will continue to be  responsible for managing the Army\u2019s six modernization priorities. In  addition, Army Futures Command will be supported by a number of  operational and administrative offices to assist the components with  executing their missions. According to Army officials and documentation,  the new command will be organized around three major components:", "Futures and Concepts: responsible for identifying and prioritizing  capability and development needs and opportunities. This  organization subsumed the Army Capabilities Integration Center on  December 7, 2018\u2014formerly part of Army Training and Doctrine  Command, which focuses primarily on the education and training of  soldiers.", "Combat Development: responsible for conceptualizing and  developing solutions for identified needs and opportunities. This  organization will subsume Research, Development and Engineering  Command\u2014currently a part of Army Materiel Command, which  focuses primarily on sustainment.", "Combat Systems: responsible for refining, engineering, and  producing new capabilities. The acquisition program offices will  communicate with the new command through this organization to  ensure integration of acquisition functions. However, the program  offices will continue to report to the Assistant Secretary of the Army  for Acquisition, Logistics and Technology.", "Army Futures Command will be headquartered in Austin, Texas, and  existing organizations are not expected to change their locations.  According to Army officials and documentation, the Army chose Austin  because of its proximity to science, technology, engineering, and  mathematics talent, as well as private sector innovators that officials  believe will assist the command in achieving its modernization goals.  According to senior Army leadership we spoke with, the new command  headquarters will have around 300 staff in place by July 2019, a  workforce that may grow to 500 employees\u2014100 military and 400  civilians. Our analysis of Army\u2019s plans for initial staffing at the Army  Futures Command headquarters, based on data from July 1, 2018, found  that about one-third of headquarters staff would be involved directly in  modernization efforts, such as engineers and operations specialists, and  the remainder would consist of support staff, including legal counsel and  contracting professionals. Figure 3 shows the locations of the known  major Army Futures Command components, the 8 cross-functional teams  being integrated under Army Futures Command, and its new  headquarters.", "Although initial steps have been taken to establish the new command,  key steps have not yet been completed. The Army stated in the executive  order establishing the command that it will consider Army Futures  Command fully operational once it is sufficiently staffed with operational  facilities, secure funding, and the ability to execute its assigned mission,  roles, and responsibilities. At full operating capability, officials told us  Army Futures Command will also have finalized the organizational  structure and the reporting responsibilities of its various components.  However, Army Futures Command has not yet established policies and  procedures detailing how it will execute its assigned mission, roles, and  responsibilities. For example, we found that it is not yet clear how Army  Futures Command will coordinate its responsibilities with existing  acquisition organizations within the Army that do not directly report to it.  One such organization is the Office of the Assistant Secretary of the Army  for Acquisition, Logistics and Technology\u2014the civilian authority  responsible for the overall supervision of acquisition matters for the  Army\u2014and the acquisition offices it oversees. To mitigate concerns about  coordination, in August 2018, the Army issued a directive signed by the  Secretary of the Army designating the military deputy of this office as an  advisor to Army Futures Command, a designation aimed at establishing a  means of coordination. Army Futures Command officials have also stated  that the Assistant Secretary of the Army for Acquisition, Logistics and  Technology will retain full acquisition authorities as required by law. Army  documentation shows that further policies and procedures are expected  to be issued in 2019."], "subsections": []}, {"section_title": "The Army\u2019s Efforts Have Balanced Modernization by Prioritizing Mitigation of Near-term Capability Gaps while Identifying Long- term Needs", "paragraphs": ["The Army recognizes the need to balance near-term and long-term  modernization over time. To do so, the Army has balanced its  modernization efforts by funding the closure of near-term capability gaps,  and identifying long-term needs to be funded. Since announcing the  modernization efforts in 2017, the Army has directed more funding toward  closing near-term capability gaps. For example, as part of the planning for  the fiscal year 2019 budget process, the Army identified 67 high-priority  programs, such as the M-1 Abrams tank and the AH-64 Apache  helicopter, with capability gaps in need of further investment. To support  these priorities, the Army identified a need for $16 billion in increased  funding in fiscal years 2019 through 2023. The 2018 Army Modernization  Strategy report identified the need for additional resources for near-term  efforts, including plans to spend billions of dollars for acquisition of  maneuverable short range air defense capabilities in fiscal years 2020  through 2024. The same report described plans to spend hundreds of  millions of dollars over the same period for prototyping technologies for  the Next-Generation Combat Vehicle, a longer-term capability.", "The Army has also begun to plan research and development efforts for its  long-term modernization needs. The Army identified long-term capabilities  for all of the modernization priorities, as well as dates that science and  technology efforts should transition to programs of record. Army officials  stated that, ultimately, multiple programs of record may be considered for  each capability area. For example, the Army identified science and  technology efforts to develop an advanced powertrain for the Next  Generation Combat Vehicle and identified planned transition dates to the  program in fiscal years 2020 and 2023. The 2018 Army Modernization  Strategy report provides additional details on long-term modernization  efforts for three of its six priorities: Future Vertical Lift, Soldier Lethality,  and Next-Generation Combat Vehicle. Figure 4 below presents a timeline  for some of the proposed capabilities within each of the six priorities.", "The Army has realigned some resources to support its long-term  modernization priorities. In identifying long-term capabilities, we found  that the Army has evaluated its science and technology portfolio to  determine alignment with the six modernization priorities. For example, as  part of an October 2017 review for the office of the Deputy Under  Secretary of the Army, the eight cross-functional team pilots examined  science and technology investments to identify which efforts contributed  to the priorities and which efforts did not contribute to them. According to  this review and Army officials, the Army realigned over $1 billion in  funding toward the priorities for fiscal years 2019 through 2023, for a total  of $7.5 billion directed at these priorities. The review preserved $2.3  billion in funding for basic research for the same time period. According to  Army officials, similar science and technology reviews will be conducted  annually to help cross-functional teams manage their respective  programs\u2019 progress and identify further opportunities for investment.", "To fund future modernization efforts, both the science and technology  review and the review for the fiscal year 2020 budget process also  identified opportunities to reduce funding for, or eliminate, some existing  programs. For example, plans for the air and missile defense portfolio  include an option to divest from legacy short range air defense programs  in fiscal year 2029 if its Indirect Fires Protection Capability program  becomes fully operational. This aligns with statements from Army officials  that program decisions will be driven not by specific schedules but by the  maturity of replacement capabilities."], "subsections": []}]}, {"section_title": "New Organizations Have Generally Applied Leading Practices but the Army Futures Command Has Taken Limited Steps to Fully Apply These Practices", "paragraphs": ["The Army has generally applied leading practices for technology  development and establishing effective cross-functional teams, and has  begun to apply leading practices for mergers and organizational  transformations for the Army Futures Command. During the Army\u2019s pilot  phase for its eight cross-functional teams, the teams took actions  consistent with leading practices for technology development, such as  bringing together requirements developers and warfighters, planning  prototype demonstrations, and maturing technology prior to beginning an  acquisition program. The Army\u2019s pilot teams also applied eight leading  practices we have identified for establishing effective cross-functional  teams to varying degrees. In addition, senior Army leadership has been  clear in its support for the new command and has clearly outlined a  timeframe for its establishment, actions that are in line with the leading  practices for mergers and organizational transformations we have  identified in prior work. Whether further application of these leading  practices will continue under the new command is unclear as the role of  the cross-functional teams has not yet been formalized and Army Futures  Command has not yet taken all the steps needed to reach full operational  capability."], "subsections": [{"section_title": "Cross-Functional Team Pilots Generally Applied Leading Practices for Technology Development, but Plan to Move into System Development Early", "paragraphs": ["We found that the Army\u2019s eight cross-functional team pilots generally  applied leading practices identified in our prior work when it came to their  requirements and technology development efforts. As we found in April  2018, positive outcomes result from taking a knowledge-based approach  to product development that demonstrates high levels of knowledge  before making significant resource commitments. Our review of the  Army\u2019s cross-functional team pilots found that they have generally applied  leading practices to the following two areas:", "Promoted communication between end-users and requirements  developers. The Army directive that established the cross-functional  team pilots as well as these teams\u2019 charters state that teams will  follow a methodology of collaboration between warfighters and  developers to prepare capability documents. An official from the  Synthetic Training Environment cross-functional team told us that  involving industry representatives and warfighters helps the cross- functional team get \u201ccloser to what \u2018right\u2019 looks like\u201d early in the  requirements development process. By promoting communication  between industry representatives and warfighters, the cross-functional  teams helped ensure that developer resources better matched end- user needs.", "Planned to prototype capabilities as part of technology and  product development. The Army directive establishing the cross- functional team pilots states that cross-functional teams should  incorporate iterative experimentation and technical demonstrations to  inform capability requirements. As an illustration of this practice,  officials from the Future Vertical Lift cross-functional team told us that  they will hold a \u201cfly off\u201d between two competitive prototypes of the  Future Attack Reconnaissance Aircraft in fiscal year 2023 before  choosing a design for follow-on testing and integration in fiscal year  2024.", "However, we are concerned that the Army has plans to mature  technology to a level lower than the threshold recommended by leading  practices before beginning system development. Specifically, we found  that the Army\u2019s October 2017 science and technology review identified a  goal of demonstrating new technologies in a relevant environment, such  as a highly realistic laboratory setting, before transitioning them to specific  platforms or programs. As an example, the Soldier Lethality cross- functional team began maturing technology for the next generation squad  automatic rifle to this level of maturity to prepare it for the transition to  product development, scheduled for the end of fiscal year 2019. Under  leading practices that we identified, prototypes should be demonstrated in  an operational or realistic environment\u2014not simply in a relevant  environment\u2014prior to starting system development to ensure that they  work as intended for the end-user.", "The Army\u2019s choice to start a formal acquisition program at lower levels of  technology maturity raises concerns that are consistent with those we  have raised in the past. Our past work indicates that by demonstrating  technologies only in a relevant rather than an operational environment,  the Army increases the risk that new capabilities will not perform as  intended and require further technological maturation while in system  development. This could raise costs and extend timelines for delivery of  equipment to the warfighter. For example, almost two decades ago in a  1999 report, we recommended demonstrating technologies in an  operational environment prior to system development and DOD  concurred with that recommendation. We have also reported the  importance of achieving this level of maturity on an annual basis since  2003, most recently in 2018, in our assessment of DOD\u2019s major weapon  system acquisition programs. In addition, we again reiterated this leading  practice in 2016 in our technology readiness assessment guide.", "While DOD has a policy, based in statute, that generally requires major  defense acquisition programs to, at a minimum, demonstrate  technologies in a relevant environment before system development, that  policy does not preclude the cross-functional teams from pursuing a  higher level of maturity. Such an approach would be consistent with  leading practices that recommend maturing technologies to a higher  level. By applying these leading practices, the cross-functional teams  could better ensure that prototypes are demonstrated in an operational or  realistic environment prior to starting system development to ensure that  they work as intended for the end-user."], "subsections": []}, {"section_title": "Cross-Functional Team Pilots Demonstrated Some Leading Practices for Effective Teams, but Few Steps Taken to Incorporate these Practices in New Command", "paragraphs": ["Our prior work has identified eight leading practices that organizations  should use for establishing effective cross-functional teams. In  reviewing the Army\u2019s eight cross-functional team pilots, we found that  they have applied these practices to varying degrees. Table 3 describes  these leading practices.", "All eight Army cross-functional team pilots fully applied four of these  leading practices.", "Well-defined team goals. We found that each cross-functional team  pilot charter clearly defined its team\u2019s goals. For example, the Long- Range Precision Fires cross-functional team charter states that it will  rapidly integrate and synchronize the requirements development  process to deliver cutting edge capabilities to the operating force as  the best possible return on investment for warfighters. In addition,  senior Army leadership approved the charters containing each team\u2019s  goals, ensuring that the goals defined for the teams were linked to the  Army\u2019s larger goal of modernization.", "Open and regular communication. Members of all eight cross- functional team pilots shared information with each other, sought  feedback, and communicated with team leaders and senior Army  leadership. For example, officials from the Next Generation Combat  Vehicle cross-functional team told us that ongoing dialogue with  senior Army leadership resulted in numerous rounds of refined  guidance. The cross-functional team took that guidance, reconvened,  assessed options, and then presented another round of updates to  Army senior leadership. Moreover, the directive establishing the  cross-functional team pilots requires that they develop capability  documents, informed by experimentation and technical  demonstrations, to ensure that planned capabilities are  technologically feasible, affordable, and therefore can eventually be  provided to soldiers. According to Army officials, developing such  documents requires open and regular communication between team  members who have expertise in diverse fields such as contracting,  cost analysis, and testing.", "Autonomy. The eight cross-functional team pilots\u2019 charters show, and  interviews with members confirm, that teams are granted substantial  autonomy by senior Army leadership. The cross-functional team  charters give teams the authority to solve internal problems through  market research, prototyping, technical demonstrations, and user  assessments. For example, the Synthetic Training Environment cross- functional team and senior Army leadership stressed to us the  importance of experimentation as an opportunity to \u201cfail early and fail  cheap.\u201d According to cross-functional team members, this allows  cross-functional teams to move on and avoid expensive and time- consuming failures later in the acquisition process, as has happened  with Army in the past. Furthermore, cross-functional teams can reach  out to subject matter experts needed to develop requirements without  having to obtain permission from senior Army leadership.", "Committed team members. All eight cross-functional team pilots  include members with expertise in diverse fields who are committed to  achieving team goals. For example, the Network cross-functional  team charter states that the team should consist of experienced and  committed subject matter experts executing disciplined initiatives and  willing to take prudent risks. In addition, the directive establishing the  cross-functional teams states that they should leverage industry and  academia where appropriate to increase knowledge and expertise.  Staffing information provided by multiple cross-functional teams  demonstrates the diversity of expertise the Army has applied to these  efforts. Cross-functional team members also provided us with multiple  examples of how their teams have leveraged outreach with industry  and academia to improve their understanding of requirements and  technology.", "Additionally, we found that the eight cross-functional team pilots have at  least partially applied the following four leading practices.", "Senior management support. Senior Army leaders, including the  Secretary and the Chief of Staff, have championed the cross- functional team pilots in public statements. Although an Army official  told us that he was aware of a member of a cross-functional team  (who left the team) receiving a civilian achievement award, we did not  find any documentary evidence of senior Army leaders providing  incentives or recognition to members of the eight cross-functional  team pilots. Because many members of cross-functional teams,  including some leaders of these teams, work in a number of different  roles, they do not have a consistent chain of command that can  provide incentives or recognition across all of their activities. The  \u201cdual-hatted\u201d nature of team members\u2014in which they work for their  parent organization as well as the cross-functional team pilot\u2014may  further complicate full application of this leading practice.", "Empowered team leaders. The team leaders of all eight cross- functional team pilots are empowered to make decisions and regularly  interact with senior Army leaders. While an Army official stated that  team leaders and Army leadership provide guidance to cross- functional team members, we did not find any documentary evidence  of these leaders providing feedback to members of those teams.  However, many members of the cross-functional teams, including  directors, are only temporarily assigned to cross-functional team pilots  because they work in other functions simultaneously.", "Well-defined team structure. While most cross-functional team pilots  have established operating procedures and organizational structures,  we found that some have not provided training to their members on  the operations of cross-functional teams and how they relate to other  organizations. Our previous work identified appropriate training as a  key characteristic of a well-defined team structure. Most cross- functional team charters do not address the issue of training. Through  our discussions with the cross-functional teams, we found the  following with respect to training:", "An official from the Soldier Lethality cross-functional team told us  that team members received training and planned to attend further  training to enhance creative and \u201coutside-the-box\u201d thinking.", "The director of the Network cross-functional team told us that,  even though he did not receive training, he was able to leverage  his previous experience leading matrixed organizations.", "The Long-Range Precision Fires cross-functional team told us that  members started their work without any training and this posed a  challenge as they were unfamiliar with each other\u2019s roles and  work.", "Inclusive team environment. The founding documents for the cross- functional team pilots themselves generally did not address attributes  of this leading practice, such as having team members that support  and trust one another. However, discussions with team members  indicate some teams have invested in creating such an environment.  The Soldier Lethality cross-functional team members stated that  working in a cross-functional team as opposed to working as separate  individuals in disparate offices, allowed them write requirements  faster. It also created an atmosphere in which members got to know  each other\u2019s experiences and trust each other\u2019s views. Officials from  the Synthetic Training Environment cross-functional team told us they  spent their first week gaining an understanding of each team  member\u2019s role on the team to foster such inclusivity.", "As previously described, the cross-functional team pilots were an effort to  achieve several goals including to identify ways the Army could increase  efficiency in requirements and technology development. According to  Army officials, the teams have shown initial progress in doing so,  delivering requirements\u2014and in some cases developing capabilities for  delivery in the next two years\u2014to the warfighter in shorter than  anticipated timeframes. However, the Army has not yet definitively  established the cross-functional teams\u2019 roles, responsibilities, and how  they will operate within Army Futures Command. As a result, it is unclear  if the Army will benefit from the experience and expertise of these teams  applying leading practices as they transition into Army Futures Command.", "Until the Army takes formal steps to institutionalize the beneficial  practices used by the cross-functional teams during the pilot phase such  as autonomy, proactive decision making, and access to senior leadership  it will be missing a valuable opportunity to integrate these practices into  the new command."], "subsections": []}, {"section_title": "Army Futures Command Does Not Have a Formal Plan to Identify and Share Lessons Learned from Cross-Functional Team Pilots", "paragraphs": ["The Army directive that established the cross-functional teams directed  each team pilot to capture best practices and lessons learned and report  them to the Army office that oversaw their efforts. Officials from the  cross-functional teams described to us lessons they learned and planned  to pass on to their oversight office for the benefit of Army Futures  Command. For example, officials from the Air and Missile Defense cross- functional team stated that having direct access to the Under Secretary  and the Vice Chief of Staff of the Army is important for obtaining quick  decisions, which save time and money in getting capabilities to the  warfighter.", "While officials from Army Futures Command told us that they intend to  collect lessons learned from the cross-functional team pilots, they do not  yet have a formal plan to identify and incorporate lessons learned. Since  the cross-functional team pilots were established to experiment with new  approaches, it is important that they take steps to capture the lessons  they have learned\u2014positive and negative\u2014so they can be shared as  these teams are integrated into Army Futures Command. If the Army fails  to institutionalize these lessons learned in the new command, it risks  losing the benefits from the experiences of these pilots thereby either  repeating past mistakes or failing to benefit from past practices that  worked well. If it can capture the lessons learned, it has an opportunity to  accelerate the progress these teams made during their pilot phase and  spread the benefits across all the cross-functional teams and across a  wider range of specific military capabilities they are pursuing. In our  discussions with Army Futures Command officials they agreed that  formalizing and implementing a plan to collect and incorporate lessons  learned would be beneficial."], "subsections": []}, {"section_title": "Incorporating Leading Practices for Organizational Transformations Could Benefit Army Futures Command", "paragraphs": ["Army officials told us that the establishment of Army Futures Command  represents a dramatic organizational transformation in how the Army will  develop weapon systems and platforms. In our previous work on mergers  and organizational transformations in federal agencies, we have identified  several leading practices, as shown in table 4 below, that can help  agencies undertaking such transformational efforts.", "As the Army is standing up Army Futures Command, it has begun to  apply some of the leading practices for mergers and organizational  transformations. For example, senior Army officials have provided a clear  and consistent rationale for establishing the new command in official  directives and in public appearances. They have also clearly described  the mission of the Army Futures Command and established a timeline for  its implementation. However, the command has not yet formalized and  institutionalized its authorities, responsibilities, policies and procedures  nor taken steps to apply these or other leading practices.", "While we observed a strong organizational unity of purpose and  collaboration from the current senior leadership in the Army for the Army  Futures Command, this could change as the Army\u2019s leadership changes.  For example, according to law, the tenure of the Chief of Staff of the Army  is generally limited to 4 years and the current Chief of Staff has already  served 3 years. Furthermore, the Secretary of the Army is appointed by  the President, subject to the advice and consent of the Senate, and  therefore may change with new presidential administrations and during  administrations. For example, the past 6 people, prior to the current  secretary, confirmed as the Secretary of the Army served an average of  959 days\u2014about 2 and one-half years. The current secretary has already  served about 1 year. Further, senior Army officials told us that they expect  changes at both top and mid-tier leadership within the new command will  periodically occur as a result of the Army\u2019s normal system of rotations for  officers. For example, a senior military official in Army Futures Command  told us that they expect commanders of components will rotate every 4  years. Therefore, because this modernization effort is expected to span a  decade or longer, continued support from current and future senior Army  officials, such as the Chief of Staff and the Secretary of the Army, will be  essential to ensure the success of the new command into the future.", "We have previously reported in our work on internal controls that it is  important to establish the organizational structure necessary to enable an  entity to plan, execute, control, and assess the organization in achieving  its objectives as well as respond to potential changes in, among other  things, personnel. By fully applying key principles of major mergers and  organizational transformations as the Army completes the process of  establishing the Army Futures Command, the Army can better ensure the  new command realizes its goals for modernization through development  of well-defined requirements, incorporation of mature technologies, and  development of systems that provide the warfighter with the capabilities  needed for future conflicts."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The Army has made substantial changes to how it intends to coordinate  and oversee modernization efforts, due at least in part to the lost years  and billions of dollars from past efforts to modernize. The Army has taken  positive steps to improve its current modernization efforts and has already  seen some initial successes. The creation of the new command, the  integration of the cross-functional teams to better refine requirements and  cultivate technologies, the realignment of several existing organizations,  and the shifting of personnel gives the Army a unique opportunity to take  advantage of leading practices and its own lessons learned.", "The Army, however, faces some key challenges. In particular, the Army\u2019s  intent to transition technologies to weapon systems before technologies  are matured is inconsistent with leading practices, risks delays in  equipping the warfighter, and can potentially lead to cost overruns. In  addition, the cross-functional team pilots have demonstrated some initial  successes in shortening the requirements development process\u2014and,  more generally, in collaborating across the Army\u2014but it is not clear what  steps the Army Futures Command plans to take to incorporate the  experience and expertise of these teams in applying leading practices  and thereby sustain these benefits. Further, the Army lacks a formal plan  to identify and incorporate lessons learned from the cross-functional  teams as Army Futures Command becomes fully operational and could  thereby miss an opportunity to leverage the experience of these teams on  past practices that worked well and those that did not. Finally, as the  Army finalizes the roles, authorities, and responsibilities for the Army  Futures Command it can benefit from applying leading practices related  to mergers and organizational transformations. This can help ensure that  Army Futures Command realizes its goals for modernization including  unity of command, accountability, and modernization at the speed and  scale required to prevail in future conflicts."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations to the Secretary of the Army:", "The Secretary of the Army should ensure that the Commanding  General of Army Futures Command applies leading practices as they  relate to technology development, particularly that of demonstrating  technology in an operational environment prior to starting system  development. (Recommendation 1)", "The Secretary of the Army should ensure that the Commanding  General of Army Futures Command takes steps to incorporate the  experiences of the cross-functional teams in applying leading  practices for effective cross-functional teams. (Recommendation 2)", "The Secretary of the Army should ensure that the Commanding  General of Army Futures Command executes a process for identifying  and incorporating lessons learned from cross-functional team pilots  into the new command. (Recommendation 3)", "The Secretary of the Army should ensure that the Commanding  General of Army Futures Command fully applies leading practices for  mergers and organizational transformations as roles, responsibilities,  policies and procedures are finalized for the new command.  (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Defense for review  and comment. In its written comments, reproduced in appendix II, the  Department concurred with all four of our recommendations and made  certain technical comments which we incorporated as appropriate.", "In concurring with our recommendation on demonstrating technology in  an operational environment, the Department of Defense requested that  we reword the recommendation to reflect that technology maturity be  considered with other factors, such as risk assessment and troop  availability. We understand the Department\u2019s desire for flexibility, but  continue to believe that reaching higher levels of technological maturity,  through demonstrating technologies in an operational environment prior  to beginning system development adds significant value by reducing risk;  something that could help the Army deliver capabilities it believes are  urgently needed. As such, we made no change to the recommendation.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Army, the  Commander of Army Futures Command, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff that made significant contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope and Methodology", "paragraphs": ["Section 1061 of the National Defense Authorization Act for Fiscal Year  2018 included a provision for GAO to report on the Army\u2019s modernization  strategy. This report assesses (1) the status of the Army\u2019s efforts to  establish new acquisition organizations while balancing near- and long- term modernization; and (2) the extent to which the Army has applied  leading practices to do so.", "To assess the status of the Army\u2019s efforts to establish new acquisition  organizations we reviewed the Army general orders and directives that  established these organizations. This review included documentation  such as:", "Army General Order 2018-10 that established the Army Futures  Command, as well as reassigned existing organizations, such as the  Army Capabilities Integration Center from the Training and Doctrine  Command and the eight cross-functional team pilots to the new  command.", "Army Directive 2017-24 that established the cross-functional team  pilots and provided guidance on how they should operate to improve  the quality and speed of materiel development activities.", "Army Directive 2017-22 that provided guidance for implementation of  acquisition reform policy/initiatives to reflect modernization such as  directive 2017-29 to improve the integration of science and technology  into concept, capability, and materiel development.", "Army Regulation 73-1 (Test and Evaluation Policy)", "Army Regulation 70-1 (Army Acquisition Policy)", "Army Regulation 71-9 (Warfighting Capabilities Determination)", "Training and Doctrine Command Regulation 71-20 (Concept  Development, Capabilities Determination, and Capabilities  Integration)", "Headquarters, Department of the Army Executive Order 176-18  (Establishment of Army Futures Command)", "We also interviewed the Under Secretary of the Army, officials from Army  Futures Command and related organizations like the Office of Process  Innovation and Integration, members of the eight cross-functional teams,  the Army Capabilities Integration Center, and the Army Research,  Development, and Engineering Command.", "To assess the balance of modernization priorities between near-term and  long-term, we reviewed documentation related to those lines of effort  including:  the 2018 Army Modernization Strategy report\u2014which describes the  rationale behind modernization and the efforts for each priority,  the Strategic Portfolio Analysis Review for Fiscal Year 2020\u2014which is  a part of the budget process to determine priorities, align science and  technology efforts to capabilities, and plan milestones,  the Deputy Under Secretary of the Army and Research and  Development Command Science and Technology Review of October  2017\u2014which describes the science and technology priorities for each  cross-functional team and realigns funding through identifying  opportunities to divest, and", "Strategic Capability Roadmaps\u2014which provide a timeline for the  development and fielding of the capabilities being developed by some  of the cross-functional teams.", "To review these documents, we created a data collection instrument to  capture the efforts as they related to each of the eight cross-functional  teams and consolidate the different sources of information. We first  collected information about the capabilities in which cross-functional team  officials indicated their involvement. For these capabilities, we recorded  planned milestones and the date that the capability would first be  operational. We also recorded whether or not the capability was new or  an incremental upgrade, the science and technology efforts to develop  that capability, and whether or not those efforts contributed to other  capabilities. We then collected data related to the general efforts of the  cross-functional teams. These efforts included divestment opportunities,  and the amounts of funding aligned to the associated modernization  priority. We also interviewed officials from the cross-functional teams, the  office of Army G-8, and other Army offices.", "To address the extent to which the Army\u2019s cross-functional team pilots  applied leading practices for technology development, we", "Reviewed cross-functional team charters, the 2018 Army  Modernization Strategy report, Fiscal Years 2019 and 2020 Strategic  Portfolio Analysis, the Army\u2019s Fiscal Year 2019 President\u2019s Budget,  and the Army\u2019s October 2017 Science and Technology Review to  identify actions related to the development of near- and long-term  capabilities for the Army\u2019s six modernization priorities that align with  the eight cross-functional teams.", "Interviewed cross-functional team officials to learn about technology  development activities they conducted or planned to conduct  regarding these priorities.", "Selected leading practices from our body of work on weapons  systems acquisitions based on which ones are most relevant to where  the cross-functional teams\u2019 activities fit within the broader weapons  systems acquisition process.", "Consolidated relevant data from Army documentation and statements  from Army officials regarding their technology development efforts in a  record of analysis containing a description of leading practices for  technology development identified in our prior work.", "Compared Army documentation and cross-functional team officials\u2019  statements against leading practices for technology development  identified in our prior work, specifically promoting communication  between requirement developers\u2019 and end-users, prototyping  technologies, and maturing technology to a specific threshold.", "To address the extent to which cross-functional team pilots applied  leading practices for establishing effective cross-functional teams, we", "Reviewed Army Directive 2017-24, which established the cross- functional teams, as well as each team\u2019s charter.", "Interviewed officials from each cross-functional team and other Army  offices regarding the collaborative, communicative, and technology  development efforts of these teams.", "Consolidated and analyzed data from Army documentation and  statements from Army officials related to leading practices for  establishing effective cross-functional teams, identified in our prior  work.", "Compared the content of the Army documents and statements from  cross-functional team officials against leading practices identified in  our prior work to determine whether cross-functional teams had  demonstrated actions consistent with these practices. We then had a  second analyst check the same documents and statements to verify  our initial result.", "To address the extent to which Army Futures Command applied leading  practices for mergers and organizational transformations and  incorporated lessons learned from the cross-functional team pilots, we", "Reviewed Headquarters Department of the Army Executive Order  176-18, which established the Army Futures Command, and Army  Directive 2017-33, which established the Modernization Task Force.", "Interviewed senior Army officials involved in the establishment of the  new command and cross-functional team officials.", "We selected leading practices identified by GAO for mergers and  organizational transformations in our prior work because the  establishment of Army Futures Command represents the largest  organizational transformation the Army has undertaken since 1973  and includes merging existing Army organizations into a new  command.", "Although Army Futures Command is not yet fully operational, we  analyzed Army documentation and officials\u2019 statements regarding the  new command against leading practices identified in our prior work  and the lessons learned from the cross-functional teams to assess  whether it had applied these leading practices."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, J. Kristopher Keener (Assistant  Director), Joe E. Hunter (Analyst-in-Charge), Jenna Blair, Emily Bond,  Matthew T. Crosby, Cale Jones, Kevin O\u2019Neill, John Pendleton, John  Rastler, A. Maurice Robinson, and Roxanna Sun made significant  contributions to this review."], "subsections": []}]}], "fastfact": ["To keep its technological edge, the Army has started to modernize its equipment, such as long-range precision weapons and next-generation combat vehicles. It created the Army Futures Command to improve the process.", "Historically, the Army has struggled to get new equipment on time and on budget. While the Army is following many of our leading practices, one exception is that it intends to move new technologies into weapons systems before testing in a realistic environment. Moving forward without this testing can delay delivery and increase costs as development continues.", "We made recommendations to help the Army realize its modernization goals."]}
{"id": "GAO-18-114", "url": "https://www.gao.gov/products/GAO-18-114", "title": "Sales Taxes: States Could Gain Revenue from Expanded Authority, but Businesses Are Likely to Experience Compliance Costs", "published_date": "2017-11-16T00:00:00", "released_date": "2017-12-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Over the past two decades, e-commerce sales have grown rapidly, greatly expanding a category of sales known as remote sales. Under current law, states cannot require all businesses to collect taxes on remote sales. Congress has been considering proposals to change this. Little current, nationwide information exists to inform the debate.", "In this report, GAO (1) estimated revenue states and localities could gain by being able to require businesses to collect taxes on all remote sales, and (2) described what is known about the related compliance costs and challenges to businesses, and administrative costs and challenges to states.", "GAO estimated 2017 revenue gains to state and local governments based on actual and estimated sales data for remote sellers, excluding certain sales that were exempt from taxation or already collected by remote sellers with a substantial presence in a state. Ranges for GAO's estimates were based on a number of key assumptions that were varied based on available data. To describe related costs and challenges to businesses and states, GAO interviewed officials from state revenue agencies, subject matter specialists, and a wide variety of retailers with remote sales and the organizations that represent them.", "GAO provided a draft of this report to subject matter specialists who agreed with the general approach that GAO followed in making its estimates."]}, {"section_title": "What GAO Found", "paragraphs": ["Forty-five states and the District of Columbia levy taxes on the sale of goods and certain services, including those sold remotely, such as over the Internet. In 1992, the Supreme Court ruled in Quill v. North Dakota that a state can only require a business to collect and remit sales tax if the business has substantial presence, referred to as nexus, in that state. However, the decision stated that Congress could pass legislation to overrule this limitation. In general, under present law, if a seller does not have nexus in a state, and therefore does not collect tax, then a purchaser is required to pay a use tax in the same amount to his or her state government.", "GAO estimated that state and local governments can, under current law, require remote sellers to collect about 75 to 80 percent of the taxes that would be owed if all sellers were required to collect tax on all remote sales at current rates. GAO found that the extent to which state and local governments can require businesses to collect taxes varies with the type of remote seller and by state.", "GAO estimated that state and local governments could gain from about $8 billion to about $13 billion in 2017 if states were given authority to require sales tax collection from all remote sellers. This is about 2 to 4 percent of total 2016 state and local government general sales and gross receipts tax revenues.", "Some businesses would likely see increases in several types of costs if required to collect taxes on all remote sales. These costs would be higher for businesses not currently experienced in multistate tax collection. Officials from state revenue departments told us that they generally do not anticipate major administrative costs or challenges if given the authority to require businesses to collect tax on all remote sales."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Over the past two decades, electronic commerce (e-commerce) sales  have grown rapidly, but, under current law, states cannot require all   e-commerce businesses to collect taxes on sales to residents of their  states. Congress has been considering proposals that would allow this.  In 2000, when we last looked at remote sales, we found that the data  available at the time were not well suited to track rapidly evolving Internet  activity.", "Today, even with better information on the potential revenue losses,  debate still exists over both estimates of lost revenue to states and on the  ability of all businesses\u2014particularly small businesses and businesses in  states that do not have sales taxes\u2014to collect and remit taxes to  jurisdictions across the country in a cost-effective way. There is also  uncertainty about the costs and other challenges of expanded collection  that could be incurred by state revenue agencies.", "You asked us to review the effects on businesses and state revenue  agencies of legislation that would grant states the authority to require  businesses to collect and remit taxes on all remote sales. This report (1)  estimates how much revenue state and local governments could gain by  being able to collect taxes on sales made by all remote sellers, (2)  describes what is known about the costs and challenges remote sellers  experience in trying to comply with current state tax laws, and how those  costs and challenges might change if states were given the authority to  require businesses to collect on all remote sales, and (3) describes what  is known about costs and challenges states face in requiring remote  sellers to collect taxes.", "To estimate the revenue that state and local governments could gain by  being able to collect taxes on all remote sales, we updated a model we  originally developed in 2000 to perform similar analyses. We used data\u2014 that we determined to be reliable\u2014on the volume and composition of  Internet and other remote sales, the taxability of remote sales, and the  extent to which sellers already collect and purchasers already pay tax on  remote sales. Detailed information about our methodology, including the  data sources we used, is provided in appendix I.", "To identify the types of costs and challenges that businesses will likely  face if required to collect and remit taxes on all remote sales, we  reviewed literature, conducted market research on software used by  businesses to facilitate tax collection, and identified knowledgeable  parties from whom we could solicit information. We interviewed  representatives from 12 legal, advocacy, or accounting groups and we  solicited them for contacts in the remote sellers\u2019 business community  whom we could interview. We reviewed witness testimony before  congressional committees on the subject of remote sales to understand  the costs associated with sales and use tax collection as well as to  identify groups and individuals to interview. We interviewed a non- generalizable sample of more than 20 businesses or their  representatives. This includes businesses of different sizes, from different  industries, and included businesses with and without sales tax  obligations. We also attended conferences of the American Bar  Association and the American Catalog Mailers Association where the  topic of remote sales tax collection was discussed.", "To describe what is known about costs and challenges that state revenue  agencies might face in requiring all remote sellers to collect taxes, we  interviewed representatives from the National Conference of State  Legislatures, the Federation of Tax Administrators, the Multistate Tax  Commission, and the Streamlined Sales Tax Governing Board. Between  February and October 2017, we monitored tax industry publications to  identify state actions to increase tax collections on remote sales, like bills  debated in state legislatures or administrative rules promulgated by state  revenue agencies. As state legislatures debated, and in some cases,  enacted these proposals, we reviewed revenue and cost estimates  developed by legislative budget offices or state revenue agencies to help  us identify the types of potential costs and challenges associated with  these new actions. For additional data and insights, we interviewed  officials from five state revenue agencies including three states that had  recent experience with changing their laws or regulations related to  remote sales tax collection.", "We subjected our work to third-party review by noted specialists in the  field of tax policy. These experts agreed with the general approach that  we followed in making our estimates. The experts confirmed that  uncertainty surrounds many of these factors incorporated into the model.", "We conducted this performance audit from September 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Forty-five states and the District of Columbia levy sales taxes on the sale  of goods and services. Of these, thirty-seven states also have local sales  taxes at the county or municipal level. Five states do not have statewide  sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon.  Tax policy specialists have cited figures as high as 12,000 and as low as  10,000 for the number of tax jurisdictions in the United States\u2014each with  potentially different tax rates, different rules governing tax-exempt goods  and services, different product category definitions, and different  standards for determining whether an out-of-state seller has a substantial  presence (referred to as nexus) in a state.", "On average, states receive about one-third of their total tax collections  from general sales taxes. However, reliance on sales taxes varies  considerably across states. Five states that do not have a broad-based  individual income tax\u2014Florida, Nevada, South Dakota, Tennessee, and  Texas\u2014collect more than half their tax revenue from general sales  taxes. As of January 1, 2017, most state sales tax rates were about 6  percent, although analysis prepared by the Tax Foundation shows that  five states\u2014Alabama, Arkansas, Louisiana, Tennessee, and  Washington\u2014had average combined state and local tax rates close to or  above 9 percent.", "Generally, businesses are required to collect sales taxes on goods and  services sold to in-state consumers at the time of the purchase, and remit  those taxes to the state, and sometimes local government, revenue  office. The growth of e-commerce has greatly increased the likelihood of  businesses selling to out-of-state customers. In 1992, the U.S. Supreme  Court ruled in Quill v. North Dakota that a state can only require a  business to collect and remit sales tax if the business has substantial  presence, referred to as nexus, in that state. However, the decision  stated that Congress could pass legislation to overrule the Quill decision.  Legislation has been proposed to expand states\u2019 tax collection authority  to all remote sales, but no bill has received enough support to pass both  the Senate and the House of Representatives. Some of the legislation  has included provisions for small seller exemptions, free software, liability  protection, and transition periods.", "In general, under present law in states with sales taxes, if the seller does  not have nexus in a state, and is therefore not required to collect tax, then  the consumer is required to pay a use tax in the same amount. Although  functionally similar to a sales tax, the use tax is a tax levied on the  consumer for the privilege of use, ownership, or possession of taxable  goods and services. However, consumer compliance rates for use tax  remittance are estimated to be very low."], "subsections": [{"section_title": "State Activity", "paragraphs": ["With the growth in e-commerce, states have increased their enforcement  activities to collect sales tax from residents who make purchases from  out-of-state businesses. A few states have passed laws or changed  regulations that directly challenge or test the limits of the 1992 Quill v.  North Dakota decision\u2014most notably, Alabama, Colorado, and South  Dakota\u2014to increase tax collections on remote sales. In reviewing  testimony and tax industry publications, we found that states have also  sought additional revenue through more indirect approaches, such as  asserting jurisdiction on the basis of nexus to include \u201caffiliate nexus\u201d and  \u201cclick-through nexus.\u201d", "Colorado for instance enacted a law requiring retailers who do not collect  taxes on sales to Colorado customers to notify those customers of their  use tax obligations and send an annual report on customers\u2019 purchases  to the state revenue agency. The revenue agency could then use this  information to identify which purchasers have a use tax obligation.", "South Dakota took a different approach aimed at overturning the Quill  decision. In 2016, the legislature passed a law requiring out-of-state  businesses meeting certain criteria to collect and remit sales tax on  purchases made by South Dakota residents. The state supreme court  ruled on September 13, 2017, that the law violated Quill. On October 2,  2017, South Dakota filed a petition for a writ of certiorari with the U.S.  Supreme Court.", "Alabama promulgated a regulation in September 2015 requiring out-of- state retailers who made $250,000 or more in sales to Alabama residents  annually, or who conducted one or more statutorily defined activities, to  collect and remit sales tax. A suit was filed with the Alabama Tax  Tribunal, but no decision has been made.", "New York took a different route passing a \u201cclick-through\u201d nexus law in  2008. Some out-of-state retailers enter into agreements with local online  retailers to advertise the local retailer\u2019s merchandise on the out-of-state  retailer\u2019s website. Because the agreement was with an in-state vendor,  the law defined that to be a sufficient nexus to impose sales tax on the  out-of-state-vendor. Several companies unsuccessfully challenged the  statute.", "A few state governments have taken action to increase tax collection from  e-marketplace sellers. As of October 2017, two states (Minnesota and  Washington) had passed laws imposing new requirements on   e-marketplace companies to collect sales taxes on behalf of the sellers  using their e-marketplace platforms. Some states have asserted that the  warehousing of goods and fulfillment of orders from within a state is  enough to create nexus, and therefore a requirement to collect taxes on  sales to customers in that state. To enforce compliance, we found that  at least three state revenue agencies have been seeking sales, shipping  or location data about goods sold through e-marketplaces."], "subsections": []}]}, {"section_title": "Taxes are Collected on Most Remote Sales, but States Could Gain Additional Revenue with the Authority to Require All Businesses to Collect Taxes", "paragraphs": [], "subsections": [{"section_title": "State and Local Governments Are Able to Collect Taxes on More Than Half of Sales", "paragraphs": ["We estimate that state and local governments can, under current law,  require remote sellers to collect about 75 to 80 percent of the taxes that  would be owed if all remote sellers were required to collect tax on all  remote sales at current rates. We found that the extent to which state  and local governments can, under current law, require businesses to  collect taxes on remote sales varies with the type of remote seller (as  shown in table 1). For business-to-consumer (B2C) remote sales, we  found that the percentage of taxes already being collected by sellers  (which we call the \u201cseller collection rate\u201d) was generally higher for Internet  retailers than for other types of remote sellers like catalog retailers or   e-marketplaces.", "Based on our analysis of nearly 1,000 Internet retail companies, we  estimate that about 80 percent of the potential revenue from requiring all  Internet retailers to collect is already collectible. Many of the largest  Internet sellers are established retail chains or consumer brands with a  physical presence, such as retail stores, in all, or nearly all, of the 45  states (plus the District of Columbia) that have a statewide sales tax. As  noted earlier, under current law, if a remote seller has a substantial  presence (referred to as nexus) in a state, the seller is required to collect  taxes on remote sales into that state. In addition, even without being  required to, some large Internet retailers have entered into agreements  with states to collect applicable taxes on all their Internet sales,  regardless of physical presence.", "The rise of e-marketplaces, such as eBay, Etsy, and Amazon  Marketplace, has complicated nexus determinations. At these  marketplaces, sellers can access large customer bases and utilize the  marketing and distribution services of the marketplace platform, often for  a fee. Certain states can rely on inventory stored within their borders as  sufficient nexus to impose taxes. This has included sellers using a large  marketplace\u2019s fulfillment services. As a result, to properly collect and  remit taxes, sellers using marketplace fulfillment services need  information on where their inventory is stored.", "While we estimated the seller collection rate to be relatively high for the  category of Internet retailers (about 80 percent), we found it to be lower  for other types of B2C remote sellers. For example, we estimate that   e-marketplace sellers are currently collecting 14 percent of the taxes on  their sales, in our highest potential revenue gain estimate, to up to 33  percent, in our lowest potential revenue gain estimate. For other types of  remote retailers, such as mail-order companies, we estimate that they are  currently collecting tax on 58 percent of their sales in our highest potential  revenue gain estimate and up to 64 percent of their sales in our lowest  potential revenue gain estimate (as shown in table 1).", "Although business-to-business (B2B) sales account for a larger share of  total e-commerce than B2C sales, potential state and local government  revenue gains from taxing all of these sales is less because fewer B2B  sales are taxable, and seller collection rates are higher (as shown in table  1). We estimate that about half of all wholesale e-commerce purchases  involve businesses purchasing raw materials or other intermediate goods  that are then manufactured or incorporated into a final product. These  purchases of intermediate goods are generally exempt from state and  local government taxes because only the final sale to the end consumer  would be taxable. For the remaining taxable B2B purchases, we  estimate that the seller collection rates are between 85 percent for those  sales in our highest potential revenue gain estimate and 94 percent in our  lowest potential revenue gain estimate."], "subsections": []}, {"section_title": "Potential Revenue Gain across All States for 2017 is about $8 billion to $13 billion Based on our Low and High Scenario Estimates", "paragraphs": ["Based on the seller collection rates we estimated using high and low  scenarios to illustrate the effect of underlying uncertainties, we  determined that state and local governments could potentially gain about  $8 billion based on our low scenario to about $13 billion, based on our  high scenario, in 2017 if they were given expanded authority to require  sales tax collection from all remote sellers. Table 2 presents our range of  estimates. Appendix II presents our range of estimates for each of the 45  states plus the District of Columbia that have a statewide sales tax. Our  estimates range from more than $1 billion for more populated states like  California and Texas to about $20 million for less populated states like  Vermont and Wyoming. The average gain is about $200 million.", "In aggregate, our national estimate of about $8 billion (low scenario) to  about $13 billion (high scenario) represents about 2 to 4 percent of total  state and local government general sales tax revenues. According to data  from the U.S. Census Bureau, state and local governments in 2016  collected about $377 billion in general sales and gross receipts taxes."], "subsections": [{"section_title": "Larger States Collect Taxes on a Greater Share of Remote Sales than Smaller States", "paragraphs": ["We found that the extent to which state and local governments can  require remote sellers to collect taxes varies by state. Based on analyses  of remote sellers\u2019 nexus locations, we estimate that some of the largest  states (in terms of population) can currently require sellers to collect  about 80 to 90 percent of the taxes these states could collect with  expanded authority on all remote sales. In contrast, we estimate that  some smaller states can only require sellers to collect and remit about 60  to 70 percent of the taxes they could collect on all remote sales. The  difference is based on the greater likelihood of Internet retailers having a  physical presence in larger states.", "We researched store locations and sales tax policies for the largest 100  Internet retailers identified by researchers at Internet Retailer. We found  that about 85 percent of these Internet retailers had store locations in, or  stated on their websites that they were collecting sales taxes for,  California and New York. By contrast, about 55 percent of these large  Internet retailers had stores or were collecting in less populated states  like North Dakota and Wyoming.", "For smaller Internet retailers with only one location, we also found that a  disproportionate share of them were located in larger states. Based on  our analysis of more than 400 Internet retailers with only one location, we  found that 19 percent were located in California and 12 percent in New  York. With Internet retailers and other remote sellers less likely to have a  physical presence in less populated states, smaller states are at a  disadvantage compared to larger states in their ability to require remote  sellers to collect taxes on all sales into their states."], "subsections": []}, {"section_title": "About Half of Potential Revenue Gains Could Come from Tax Collections on E-Marketplace Sales", "paragraphs": ["We estimate that nearly half of potential revenue gains to state and local  governments would result from collecting sales taxes on all e-marketplace  sales. To date, e-marketplaces have not been obligated to collect state  sales taxes on behalf of sellers. Instead, like with all remote sellers,  individual sellers who have title to the goods being sold through an   e-marketplace are required to collect tax on sales to states in which they  have nexus. However, we identified two states that have recently taken  action to attribute a collection obligation to the e-marketplace.", "Through our review of tax industry publications and interviews with tax  practitioners, we learned that some individual sellers have difficulty  obtaining information from the e-marketplace companies on where their  goods might be stored. While the three large e-marketplaces that we  interviewed offer their sellers additional services that help sellers  calculate and collect sales taxes, not all sellers take advantage of this  service. None of the e-marketplaces that we interviewed could provide us  data on the extent to which their sellers currently collect sales tax. Given  the lack of available data, we made a conservative estimate of potential  revenue gains to states if given the authority to require all e-marketplace  sellers to taxes on all their sales. If e-marketplace sellers are currently  collecting less tax than we assume in our model, the actual potential  revenue gain to states would be higher than the estimate we provide in  this report."], "subsections": []}, {"section_title": "Compliance with Use Tax on Most Remote Purchases is Low for Individual Taxpayers, but High for Businesses", "paragraphs": ["Because state and local governments currently do not have the authority  to require businesses to collect tax on all remote sales, states generally  require taxpayers who were not charged a tax on their purchases from  out-of-state vendors to pay a use tax on those purchases. However,  with the exception of purchases that are required to be registered with the  state, such as vehicles, voluntary compliance is generally thought to be  extremely low. For those states that permit taxpayers to report use taxes  on their income tax returns, it is estimated that only about 1 to 2 percent  of returns include use tax payments. Unlike estimates for individual  compliance with use tax, estimates for business compliance are high,  ranging from 70 to 90 percent. Some tax practitioners we interviewed  told us that businesses routinely retain records of their taxable and tax- exempt purchases, including remote purchases, and are more likely to be  compliant with any use taxes.", "We identified at least four states that have begun implementing new laws  intended to increase consumer use tax compliance. Under these \u201cnotice  and reporting\u201d laws, remote sellers not collecting taxes on out-of-state  sales are required to notify customers that they may be liable for use  taxes to their home state. The states are also requiring remote sellers to  send their out-of-state customers an annual summary of all purchases for  which sales tax was not collected. Data from these annual summaries are  shared with state revenue agencies that can use this information for  enforcement purposes. Data were not yet available to estimate the  revenue effects of these new programs. As we have previously reported,  tax compliance is generally much higher when there is third-party  reporting of information to the revenue agency. We expect that state  collection of third-party information will achieve similar results."], "subsections": []}]}]}, {"section_title": "Some Businesses Would Likely Incur Several Types of Costs If Required to Collect Taxes on All Remote Sales", "paragraphs": ["We identified various costs associated with typical steps involved in  multistate sales tax collection. We group these costs into three broad  categories: software related costs, audit and assessment compliance  costs, and costs associated with research and liability. We found that  businesses with limited experience in multistate tax collection and those  that lack software systems designed to facilitate multistate tax collection  would incur the highest costs under such a scenario.", "Representatives from a large national chain and a trade group  representing retailers told us that, generally speaking, larger retailers and  those that primarily engage in brick-and-mortar retailing believe that  expanded state authority would end the unfair advantage that remote  retailers gain by not collecting sales tax on their out-of-state sales. Those  familiar with multistate collection explained that because the software  used for multistate collection is easily scaled up, retailers already using  such systems, would incur few challenges to adapt to this expanded  authority. Further, larger retailers that already collect in many states  would already have the systems in place for collection under expanded  authority. We also identified state and national efforts for simplifying tax  collection for businesses. These efforts show potential for mitigating the  expected costs, but much depends on the specifics of any legal changes.", "Our research found that a number of commercial software offerings are  available to assist businesses with collecting sales taxes in multiple  states. Two people familiar with the use of tax software told us that  although many standard business software products generally include  some sales tax functionality, these systems do not always fully support  businesses selling in multiple tax jurisdictions. As a result, sellers with  more widespread collection obligations typically use specialized multistate  sales tax software. A representative from a Certified Public Accounting  (CPA) firm explained that costs are incurred both when businesses collect  sales tax from customers, and when they remit the tax to the appropriate  state revenue department. In some instances, there are also start-up  costs that businesses incur prior to tax collection, as well as audit or  assessment costs that occur after tax collection. Figure 1 summarizes  these steps and can help inform the discussion of the specific costs."], "subsections": [{"section_title": "Businesses Selling Remotely May Incur High Upfront Costs to Establish Software for Multistate Tax Collection", "paragraphs": ["The cost of both collecting and remitting sales tax rises with increased  exposure to tax jurisdictions. As the number of jurisdictions for which a  business collects taxes increases, the amount of administrative work also  increases. Businesses will have to prepare and file a greater number of  returns, license more functionality from the collection software they use,  and collect tax on a greater number of sales. All of these actions add  additional costs to a business\u2019s operations.", "While all sellers would incur these additional costs, costs will be highest  for those that do not already use software for multistate tax collection.  This is especially true for those selling goods treated differently by  different states and those that do not use easily-integrated software.  Costs for collection software include, start-up costs, licensing fees,  administrative costs, and options for premium services, such as preparing  or automatically filing sales tax returns. Start-up costs are the costs  associated with setting up the software for first use.", "Tax practitioners told us that software is necessary for multistate  collection because of the complexity created by unstandardized  requirements across jurisdictions. As we note above, tax policy specialists  have cited figures as high as 12,000 and as low as 10,000 for the number  of tax jurisdictions in the United States. In addition to differences that exist  among the tax codes of the 45 states and the District of Columbia with  statewide sales taxes, many local bodies have the power to impose  additional sales taxes on purchases within their jurisdictions.", "Some tax practitioners that we interviewed said that mapping and system  integration related to the necessary software for multistate collection are  the most costly of the start-up activities. Mapping requires coding all of a  business\u2019s product offerings to the taxation categories used by the  software. One software provider told us that generally, these software  products do not require businesses to research the legal categorization in  each state\u2019s laws; however, it does require businesses to categorize  products with sufficient precision for the software to assign its tax status  based on state laws. For example, apparel is treated differently across  states. Pennsylvania exempts clothing, except for formal apparel; items  made of real, imitation, or synthetic fur; and athletic apparel. Across the  border, New York State exempts clothing sold for less than $110;  however, some jurisdictions do not apply these exemptions and charge a  local sales tax on these items.", "The initial product mapping required before using multistate tax software  can be labor intensive. As such, we expect that businesses setting up  software for the first time, and selling goods which states treat differently  will have more labor-intensive product-mapping work. Some software  providers offer consulting services to assist businesses with mapping  their offerings. Software providers, however, treat these services as a  premium option so businesses will generally incur extra costs for using  these services.", "Several people familiar with the use of sales tax software said that errors  in mapping products can expose businesses to liability in the form of  uncollected taxes. Recognizing the wide variations in sales tax laws, a  group of states launched the Streamlined Sales Tax Initiative in 1999.  The initiative was designed to standardize these variations and provide  software assistance to make it easier for businesses to comply with state  and local sales and use tax laws. This initiative sought to shield  businesses from liability by directing software providers participating in  the effort to complete mapping for businesses and assume liability for  errors. However, more recent changes allow software providers to  negotiate these issues directly with their business clients. According to a  representative of the Streamlined Sales Tax Governing Board, 24 states  have passed legislation to conform to the Streamlined Sales and Use Tax  Agreement. These states account for a third of the United States  population, but many of the largest states (in terms of population) are not  fully participating.", "Software integration, or establishing a connection between existing  business software and the new multistate tax software, will be required for  businesses that begin to use multistate tax software. Two software  providers we spoke with said that they have already created integration  modules for the most common business software packages in use today.  One explained that integration with these common business systems is  generally the least expensive and may come at no cost to the business.  However, businesses using customized software or software that is not in  common use may see higher costs to integrate these systems. Some  businesses may need to integrate several systems with the collection  software. This integration may be required for transactions such as  processing sales through different retail channels or ensuring that  merchandise returns are removed from existing collections.", "Businesses will also face additional costs to license the necessary  software functionality from the provider. A public accounting firm told us  that these on-going licensing fees are generally lower in the first year,  than the one-time costs associated with mapping and integration.  Licensing costs generally are a function of the volume of information  requests sent to the tax database maintained by the software provider.", "In estimating costs to license multistate collection software, online  businesses must consider both the number of completed transactions  they anticipate as well as the browsing behavior of those using their  websites. A CPA firm we interviewed explained how these software  packages work. Whenever a business website calculates a sales tax  amount, it does so by sending an information request to a rate and  address database maintained by the software provider. Importantly, this  process is often an automated function of the \u201cshopping cart\u201d system,  which may calculate a sales tax amount whenever a customer changes  the goods in the shopping cart, even in the absence of a completed sale.  As such, businesses must account for both completed transactions as  well as how often customers change the bundle of goods in the online  shopping cart. For example, customers may use shopping carts while  comparison shopping on different websites. Our market research found  licensing costs as low as $12 per month for up to 30 information requests  each month, and as high as $200,000 per year for unlimited information  requests.", "Businesses and others familiar with sales tax software told us that  licensing fees are only one of multiple costs required to collect sales  taxes in multiple states. As such, simplification proposals that include  provisions for states to pay these licensing fees may not mitigate  significant costs to businesses transitioning to software assisted  multistate collection. Businesses will still incur start-up costs and  additional administrative costs, even when states pay the licensing fees  on the use of the software. Even under such proposals when software  comes with no licensing fees, mapping can be labor intensive for  businesses selling products that state tax laws treat differently, and  integration can create costs for businesses using custom software or  software that is not widely used. Further, for software to reduce  administrative costs, it must be integrated with more than just a  business\u2019s shopping cart system. However, simplification proposals that  only cover software licensing costs and integration with the shopping cart  system may leave businesses with the costs of a more extensive  integration. Businesses would either have to incur additional costs to  better integrate sales tax software with existing business information  systems (such as a general ledger accounting system), or regularly  reconcile receipts and records manually to prepare sales tax returns for  all states where it makes sales.", "Additional costs for software include administrative costs associated with  use of the software. These costs are incurred because even automated  software requires some administrative work by staff. The use of optional  premium services offered by software providers may further reduce these  administrative costs, but increase software costs in the process.  Administrative costs tend to be highest, as a proportion of taxes collected,  for the smallest sellers. Some businesses told us that collecting sales tax  in all jurisdictions where they have customers would increase staffing  costs, even when collection is facilitated by software. Premium services  commonly offered by software providers assist businesses with preparing  and filing tax returns. While electing to use these services may save  businesses labor costs, they incur additional fees to use these premium  services.", "We interviewed several businesses based in states that do not collect a  sales tax. They told us that they are already researching software options  should the need to collect sales tax on all remote sales arise. These  businesses told us that they have little experience with collecting sales  tax. As reported above, in the first year, start-up costs for the software are  much higher than the on-going licensing fees. Businesses that do not  need to collect sales tax in their own state may be less likely to already  have multistate tax collection software or in-house expertise."], "subsections": []}, {"section_title": "Businesses May Incur Increased Audit and Assessment Costs as Exposure to Collecting Jurisdictions Grows", "paragraphs": ["If states are allowed to require businesses to collect tax on all remote  sales, businesses we spoke with expect audit and assessment related  costs to rise because of increased exposure to more tax jurisdictions.  Attorneys told us that state revenue departments also employ other low- cost enforcement tools that create compliance costs. Officials from three  state revenue departments that we spoke with said that they primarily  focus their audits on large businesses because audits are resource  intensive. Officials from one agency acknowledged that other  enforcement tools, such as a letter audit, require fewer resources to use.", "Some businesses told us that they already expend significant resources  responding to audits on sales tax collection and remittance. These costs  include making staff available, developing justification for tax claims, and  complying with document or information requests. A representative from  the tax department of one company with nexus in most states said that  auditors return every few years to audit the company and that they are  currently contending with 8 to 10 audits from different tax authorities.  They expect audit related costs to grow with exposure to more  jurisdictions and that will require hiring additional staff. Another business  we spoke with said they had just dealt with an expensive audit that lasted  3 years. They reported that they do not have the resources to comply with  similar audits from other jurisdictions.", "We interviewed 11 businesses, attorneys, or representatives from the  business community who said that fear of increased audits, should states  gain expanded authority to tax remote sales, is a legitimate concern for  businesses. Attorneys we spoke with offered several reasons that small-  and medium-sized businesses will be audited should states gain the  authority to tax remote sales. One explained that sales tax audits of small  businesses often identify non-compliance and produce revenue. Another  said that assessments prepared by revenue offices generally carry a  presumption of accuracy. In practice, this places the burden of proof on  the retailer to rebut claims made by revenue offices. However, some state  revenue departments we spoke with said that they do not expect their  audit resources to increase and therefore would be spread more thinly if  states are allowed to require businesses to collect tax on remote sales.  Two state revenue offices explained that this change would mean they  have a much larger universe of businesses from which to select. As such,  it is unknown how frequently businesses might have to contend with  concurrent audits in different states.", "Travel to, and securing counsel in, remote jurisdictions would create  additional costs for audited businesses that would not occur in the current  environment. A business representative explained that the CPAs and  attorneys they employ, or have on retainer, may not be able to represent  the business in an out-of-state venue. As such, businesses would need to  retain counsel qualified to practice in the assessing jurisdiction.", "Two business representatives also told us that businesses may be less  successful at challenging tax assessments in out-of-state courts. This  may prompt them to settle claims in an out-of-state court that they might  litigate in their home state. Further, the federal Tax Injunction Act restricts  businesses\u2019 ability to seek relief in federal court for matters related to  state taxes.", "In addition to audits, state revenue departments have many low-cost  enforcement tools at their disposal. One example is the letter audit. An  attorney we spoke with explained that in this process, a revenue office  sends a letter to a business stating that the office suspects they owe  sales taxes. The business incurs costs to prove the state wrong to avoid  the assessment. In some cases, states bypass the assessment process  and sue the business\u2014arguing that the business has nexus in the state  and owes tax. In conducting interviews, we found that states also send  information requests and questionnaires to businesses designed to  uncover whether they have nexus obligations. One representative from a  trade group we spoke with said that a business will normally be  responsive in order to remain in compliance with the law, despite potential  uncertainty about the state\u2019s authority to collect.", "Businesses we spoke with in states that do not collect a sales tax  generally were not collecting sales taxes for other states, so they had little  experience with a sales tax audit. Further, some businesses in these  states were not tracking the legal requirements on businesses imposed  by out-of-state jurisdictions. Businesses located in states without a sales  tax also may incur costs to alter business practices after initial exposure  to sales tax audits. This might happen because the procedures they  currently use may not withstand the taxing states\u2019 scrutiny."], "subsections": []}, {"section_title": "Businesses Incur Costs to Stay Current with Legal Requirements in Multiple Jurisdictions, but are Still Exposed to Risk", "paragraphs": ["If states gain the authority to require businesses to collect tax on remote  sales, businesses will have to incur costs to understand their new  compliance obligations, which can differ by state or tax jurisdiction. The  related liability cost increases along with an increase in exposure to more  tax jurisdictions. These costs will likely increase the most for businesses  that do not have established legal teams, software systems, or outside  counsel to assist with compliance related questions. We identified three  areas, based on interviews with businesses, where these costs are most  likely to occur. First, businesses expressed concern that changes in legal  precedent could expose businesses to liability for past sales. Second,  some businesses reported paying assessments based on contestable  laws. Third, some businesses reported instances where businesses\u2019  actions created nexus that led to an unforeseen liability."], "subsections": [{"section_title": "Retroactive Enforcement", "paragraphs": ["The U.S. Supreme Court\u2019s 1992 decision in Quill Corp. v. North Dakota  constrained states\u2019 ability to tax sales originating from outside the state.  We identified four states that recently changed their laws in an attempt to  re-litigate this decision. A representative from the business community  told us that the effect of the U.S. Supreme Court potentially overturning  the Quill decision may allow laws that are on the books in many states to  be enforced. For example, Alabama\u2019s Department of Revenue told us that  they have asserted jurisdiction over remote sellers under a previously  unenforced law to further litigation challenging the Quill decision. They  acknowledged that this action has the potential to allow retroactive  enforcement, should the challenge succeed. However, they said the state  was most interested in prospective compliance. Some businesses worry  that, if legal arguments like these prevail, states will not confine  themselves to prospective enforcement efforts. They fear that states  could decide that businesses owe taxes from years when enforcement of  the law did not impose collection obligations on out-of-state businesses."], "subsections": []}, {"section_title": "Risk of Overpayment Due to Compliance Culture", "paragraphs": ["State revenue departments mail assessments, questionnaires, and other  correspondence to out-of-state businesses. These may direct businesses  to provide information, pay taxes, or register to collect sales taxes. In  some cases, the Quill decision protects businesses from obligations to  comply with these directives. Nevertheless, some businesses have  complied. One representative from a trade organization representing  remote businesses said that the natural tendency for a business is toward  compliance. This may lead them to pay or comply without thoroughly  examining the strength of their legal position. He cited a state that mailed  around two hundred demand notices to out-of-state businesses for  unremitted sales tax. Even though he said that these businesses did not  have nexus in the state, more than half of businesses remitted payment.  Another business told us that they registered to collect in a state that was  attempting to challenge the Quill decision because they judged that the  cost of challenging the state\u2019s new law was likely to exceed any increased  compliance costs. This business said that collecting the tax, but waiting to  remit it pending the results of a legal challenge, would expose the  business to penalties and interest."], "subsections": []}, {"section_title": "Risk of Unknown Nexus Obligations", "paragraphs": ["Because state tax laws are complex and subject to change, businesses  may not always be aware of their obligations under state law. Our  research revealed cases where businesses incurred collection obligations  unknowingly. One lawyer, whose practice represents several businesses  in sales tax related issues, described a business that was contacted by a  nearby state\u2019s revenue office and asked to provide information on its use  of fulfillment services from a popular marketplace provider. The business  downloaded a report from the marketplace provider and sent it to the  revenue office. The business said that the marketplace provider had  formatted the information in a way that made it uninterpretable without  knowledge of the location codes it contained. The state revenue office  was able to use the report to show that the marketplace\u2019s fulfillment  services stored the business\u2019s property in the state. Stored property  suffices to create a nexus obligation and the business received an  assessment for back taxes, interest, and penalties dating back to when  the property was first stored in the state. The lawyer we spoke with has  seen six similar cases since that one and said that the addition of interest  and penalties often doubles the amount of taxes owed.", "Active monitoring of sales tax laws across the country can help  businesses ensure they are compliant with all of their legal obligations.  Businesses we spoke with differed in the way they conducted this  research. Some undertook the research in-house. Others used software  that provides updates when laws change. Some said that they require  outside legal counsel to resolve difficult questions. In all cases, this  research imposed additional costs on businesses.", "Four businesses in states without sales taxes told us that they have  incomplete research or a lack of familiarity with recent changes to state  laws that impose obligations on out-of-state businesses. Businesses like  these may encounter additional costs in the form of unforeseen liabilities  or costs to conduct research."], "subsections": []}, {"section_title": "Strategies Show Some Potential for Containing Risks", "paragraphs": ["In the course of our research, we identified strategies with the potential to  mitigate the concerns laid out above. However, much would depend on  the specifics of any legal changes. These strategies include: simplification  rules for collection and remittance in multiple states, small business  exemptions for businesses under a certain size, transition periods for  businesses to come into compliance, and limitations on lookback periods.", "Simplification Rules May Help Businesses Understand Collection  Obligations  Simplification rules for remote sellers could provide businesses with a  single compliance requirement instead of varied requirements from the  jurisdictions with the authority to assess sales tax. These rules could  lower research and compliance costs, and leave businesses less  exposed to hidden liabilities. One multistate effort has created a set of  simplified rules for collection and remittance. However, one attorney we  spoke with said that the rationale for including and excluding certain items  in the classification is unclear, and this leaves room for states to interpret  the taxability in different ways. Further, some of the simplifications  proposals we analyzed do not apply to state definitions of nexus. As such,  it is possible that businesses might be aware of and compliant with the  simplification rules, but unclear on how to structure their operations to  avoid the less simple rules that come from acquiring nexus. These cases  might require additional research costs and legal services to resolve and  may expose a business to unforeseen liability.", "Small Business Exemptions May Help Small Businesses Avoid  Additional Costs  Small business exemptions would ensure that businesses with sales  below a specified threshold would not be liable for taxes to remote  jurisdictions. This could reduce research and liability costs for small  businesses because these businesses would only have to verify that their  sales were below the threshold that requires collection. However, some  business representatives we spoke with said that the thresholds  contained in many proposals were too low.", "The Small Business Administration defines a small business as one with  $32.5 million in annual sales for electronic shopping retailers, and $38.5  million for mail-order houses. Federal legislation allowing states to tax  remote sales have included a variety of small business exemptions. For  example, one proposal would initially exempt small business with annual  sales below $10 million, but that exemption would decline and eventually  expire after 3 years. Another proposal would set a permanent exemption  of $1 million in annual sales. New state laws and administrative  regulations require out-of-state sellers to collect taxes. We identified small  seller exemptions in some of these laws and regulations as low as  $10,000 and as high as $500,000 in annual sales into the state.  However, one business owner said that $25 million in annual sales is still  a small business. The owner explained that such businesses can quickly  go bankrupt and have little capital to survive downturns in the business  cycle. Business representatives said that business models which  emphasize low margins and high sales volume are common in remote  sales. These businesses may have limited resources for additional  compliance obligations.", "Transition Periods Can Help Businesses Prepare for Collection  Obligations  Transition periods may give businesses time to examine their legal  obligations and secure tools, such as software or legal counsel, to  facilitate compliance but can prompt increased demand for assistance  and services. Our work has shown that sometimes tax system transition  deadlines are likely to prompt a large volume of requests from taxpayers  for compliance assistance from taxing authorities. Because businesses  reported that additional software or legal services would be required to  transition to new collection obligations, we expect demand for such  services to increase before transition deadlines.", "Limits to Lookback Periods May Protect Newly Registered  Businesses  Limited lookback periods restrict how far back a state revenue agency  can examine a business\u2019s records after that business registers to collect  taxes. Attorneys that we interviewed said that registering to collect with a  state can trigger an examination of that business\u2019s records with an eye to  discovering if the business owes taxes for sales prior to the registration.  They explained that if businesses are not protected by limitations to  lookback periods upon registration, this may inhibit registering to collect in  new states. One business owner told us that the risks of additional  scrutiny and unforeseen liability have prevented him from registering to  collect in a nearby state where he would like to do more business.  Limitations to lookback periods would give businesses more confidence in  registering to collect because they would be less likely to incur additional  scrutiny or an unforeseen liability as a result of the registration."], "subsections": []}]}]}, {"section_title": "States Generally Do Not Anticipate Major Administrative Costs or Challenges If Given the Authority to Require Businesses to Collect Tax on All Remote Sales", "paragraphs": ["Actions by state and local governments to increase tax collections on  remote sales could require additional government resources to administer  sales taxes. State revenue agency officials, as well as representatives  from the Federation of Tax Administrators and other state government  organizations we interviewed, did not identify any major increases in  administrative costs or significant administrative challenges if states were  given the authority to require businesses to collect taxes on all remote  sales.", "In the absence of congressional action to grant states expanded tax  collection authority on all remote sales, state legislatures have recently  considered, and in some cases enacted, new laws designed to increase  tax collections on remote sales. As these proposals were being  considered, we identified five revenue agencies or legislative budget  offices that had estimated the costs to implement and administer these  new programs. For example, one state\u2019s analysis concluded that  current state revenue agency resources were sufficient to implement and  administer the new program, and another state\u2019s analysis determined that  the program would have only a moderate effect on the state revenue  agency.", "Other state analyses that estimated additional annual costs varied widely,  from a few hundred dollars to up to $4 million. While these estimates  varied widely, we found that this information helped to illustrate potential  challenges and costs state and local governments could face in trying to  collect taxes from all remote sellers. Interviews with three state revenue  agency officials who had already implemented, or were beginning to  implement, new programs also provided us further information on  potential administrative costs and challenges.", "Sales Tax Administration Activities  Registration of vendors. States need to  process registration forms from new vendors,  including out-of-state vendors. States also  need information to help identify unregistered  vendors.  Returns processing. States require  resources to process sales tax returns,  including returns from out-of-state vendors.  States typically capture data in information  systems, and identify and process over- or  underpayments.  Enforcement efforts. Audit resources are  needed to verify vendors\u2019 total taxable sales.  When auditing out-of-state vendors, state  revenue departments may face higher travel  costs.  Collections. States send delinquency notices  to vendors for late, miscalculated, or  underpaid collections.  Taxpayer services. States provide education  efforts and taxpayer assistance to improve  voluntary compliance.", "We previously reported that the following state functions are typically  associated with administering sales taxes: identifying and registering  vendors; returns processing; enforcement; collections; and taxpayer  services (see sidebar titled \u201cSales Tax Administration Activities\u201d).", "If remote sellers were required to collect state taxes regardless of nexus,  states may need to process an influx of new registration forms from out- of-state vendors. State revenue agency officials as well as  representatives from the Federation of Tax Administrators told us,  however, that they did not anticipate that registering new out-of-state  vendors and processing additional returns would pose major challenges  to state agencies. They explained that state revenue agencies already  process a large volume of registration changes annually as new  businesses are created or existing businesses fail. As a result, they  expected that new registrations from out-of-state sellers would not  represent a significant strain on current resources.", "Potential increases in new out-of-state vendor registrations could be  lessened by states\u2019 small seller exemptions. Some state proposals for  increasing tax collections on remote sales have exempted smaller out-of- state sellers with annual sales less than a certain dollar amount, or  annual transactions less than a certain number, into a state. Recent small  seller exemptions have set annual sales exemption thresholds ranging  from $10,000 in Washington State to $500,000 in Massachusetts. One  revenue agency official from Alabama, which began enforcing a new  remote-seller regulation in 2016 that has a $250,000 small seller  exemption, told us that the approximately 100 newly registered out-of- state sellers is an extremely small share of the state\u2019s total 40,000  registered sellers.", "States may need additional resources to process new tax returns from  out-of-state vendors and to verify out-of-state vendors\u2019 total taxable  remote sales into a state. However, as tax administrators noted above  with regard to new vendor registrations, any increase in out-of-state  returns processing may be minimal when compared to the volume of  routine in-state returns. When processing new out-of-state returns, states  may need to decide whether to capture the same amount of data from  out-of-state filers as they currently do for in-state filers in order to limit  errors and required resources for follow-up.", "Depending on whether and how some states choose to centralize  registration and reporting for out-of-state vendors, some administrative  costs and burdens associated with these functions might be reduced or  mitigated. For example, a revenue agency official from Alabama told us  that implementation of its new administrative rule (requiring out-of-state  vendors to collect taxes on sales to Alabama customers) has been  facilitated by having its state revenue department serve as a centralized  collection point on behalf of local tax authorities.", "Thirty-seven states, like Alabama, have local sales taxes in addition to  statewide sales taxes. Some of these local taxes are already centrally  collected by a state revenue agency, but in some states, local authorities  collect them. States that are members of the Streamlined Sales and Use  Tax Agreement have agreed to allow centralized state registration and  reporting for out-of-state vendors. Louisiana, another state with many  local sales tax jurisdictions, recently enacted a new law creating a sales  tax board for promoting \u201cuniformity and efficiency\u201d of local sales and use  tax administration. The law also created an independent agency within  the state\u2019s Department of Revenue for administering and collecting state  and local taxes related to remote sales.", "When allocating enforcement and collections resources, state  administrators may need to weigh trade-offs between pursuing incidences  of noncompliance (typically higher among small filers) against potential  revenue effects (greatest among large filers). Representatives from the  Federation of Tax Administrators did not anticipate significant increases in  enforcement costs because they said most sales tax noncompliance is  detected not through intensive audits but through less costly automated  matching of electronic data such as credit card sales receipts with  business-reported sales. They also said that most noncompliance issues  are resolved via automatically-generated correspondence with taxpayers.  That is, most taxpayers resolve additional amounts owed or other  noncompliance matters after receiving notification letters from state  revenue agencies.", "One state revenue agency official told us that his agency may experience  higher travel costs associated with audits of out-of-state vendors. The  same official believed, however, that this might merely require re- allocating current travel expenses from in-state audits to out-of-state  audits rather than requiring an increase in travel budgets. The Oklahoma  legislature recently authorized the state revenue agency to create an out- of-state sales tax enforcement division. While the final bill provided the  state agency with flexibility to staff this division using existing resources,  the original proposal would have mandated opening a new office outside  the state and staffing it with a minimum of five employees at an estimated  annual cost of $450,000.", "Finally, state revenue agency officials and representatives from the  Federation of Tax Administrators told us that they anticipated some  additional resources may be needed for taxpayer assistance such as  providing increased telephone assistance or publishing guidance for new  out-of-state vendors. Demand for taxpayer assistance is likely to be  higher from smaller out-of-state vendors with less experience in collecting  and remitting taxes to other states. The complexity of a state\u2019s sales tax  laws, such as rules for when to exempt a certain type of product based on  how it is used, are also likely to affect levels of taxpayer service  requested by new out-of-state vendors."], "subsections": [{"section_title": "States Implementing Notice and Reporting Requirements May Experience Difficulties Matching Sales Data to Taxpayer Information", "paragraphs": ["We identified at least four states that have enacted new \u201cnotice and  reporting\u201d laws in attempts to increase tax collections from remote sales.  Under these laws, if an out-of-state seller chooses not to collect taxes on  sales into a state, then the seller is required to notify its customers of  state use tax obligations, send customers annual summaries of their  purchases, and share that information with state revenue agencies. One  state\u2019s fiscal analysis of its new notice and reporting law estimated that  out-of-state retailers will decide to collect the tax rather than comply with  notice and reporting requirements. The handful of new notice and  reporting laws that we identified have only recently become effective, so it  is unclear to what extent this has or will occur.", "We found two recent estimates of costs to implement and administer  these new notice and reporting laws. The Louisiana Legislative Fiscal  Office estimated that the state revenue agency would incur costs of  $90,000 annually to administer a new notice and reporting law. By  contrast, the Washington Department of Revenue estimated that it would  cost about $4 million annually to administer the state\u2019s new notice and  reporting law. Washington revenue officials told us that most of these  costs come from hiring new staff. They explained that increased costs are  common when they must enforce new provisions of the tax code because  it is not easy to reassign tax staff.", "State revenue agencies implementing new notice and reporting laws may  experience difficulty matching sales information from out-of-state retailers  with taxpayer data. Revenue officials from Colorado told us that the  annual sales reports remote sellers are required to send to their  customers and share with state revenue agencies, will not contain unique  taxpayer identification data like Social Security numbers. Without these  data, these officials explained that revenue agencies will need to use  customers\u2019 names and addresses to match with taxpayer returns. If  buyers with similar names make use of the same delivery address, this  may complicate efforts to identify a taxpayer\u2019s use tax obligation.", "Colorado and Washington officials also told us that once their revenue  agencies begin sending letters to taxpayers with estimated use tax  obligations, they anticipate significant increases in phone calls and other  requests for taxpayer assistance. In order to manage expected increases  in call volumes and control costs, Colorado officials said they plan to be  selective about sending notices in the first years.", "Officials from Washington\u2019s Department of Revenue told us that one part  of their new notice and reporting law applied to e-marketplaces rather  than sellers. Officials told us that it is easier for states to enforce  compliance against one large entity (the e-marketplace company) instead  of the thousands of smaller sellers that sell through the e-marketplace\u2019s  platform. Washington\u2019s notice and reporting law requires e-marketplace  companies to comply with the notice and reporting requirements if the   e-marketplaces choose not to collect and remit taxes on behalf of their  individual sellers.", "In August 2017, the Multistate Tax Commission began offering a general  sales tax amnesty program for e-marketplace sellers. During the amnesty  period, the commission would accept applications from qualifying remote  sellers. The sellers would affirm in their applications that their only  connection with the participating state or states is through inventory  housed in an e-marketplace\u2019s warehouse or fulfillment center. In  exchange, one group of participating states would agree to waive back  tax liabilities for sales and use taxes, as well as for income and franchise  taxes, including penalties and interest, without regard to any lookback  period. At the time of our report, 24 states and the District of Columbia  were participating. The program was set to end in November 2017.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate Senate  and House committees. We will also send copies of the report to the  Secretary of the Treasury and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made contributions to this  report are listed in appendix III."], "subsections": []}]}]}, {"section_title": "Appendix I: Methodology for Revenue Gain Estimates", "paragraphs": ["To address our objective on estimating how much revenue state and local  governments could gain by being able to collect taxes on sales made by  all remote sellers, we updated a model we used to prepare similar  estimates in 2000. The sidebar titled \u201cSteps Involved in Estimating  Potential Revenue Gains\u201d summarizes the steps in our methodology.", "Compared to when we did similar analysis in 2000, there are some areas  where we have better data, but a single point estimate is still not possible  because of uncertainty surrounding estimates of several key inputs to our  model. In our 2000 report, there were few reliable data sources on which  to base our calculations and adjustments. We noted then that projections  of sales were particularly difficult to make given the rapidly changing   e-commerce environment. Today, there are more data sources available  on current and future e-commerce sales.", "In addition to the past uncertainty regarding the magnitude of remote  sales, we reported in 2000 that there was considerable uncertainty about  the amount of tax that state and local governments were already  collecting from these remote sales. Today, data are more easily available  on where e-commerce companies have a substantial presence (referred  to as nexus) in states. Some research companies track this information,  and more companies are explicitly stating on their websites in which  states they collect sales tax. Still, we had to make several broad  assumptions about the volume of e-marketplace sales, including the  extent to which e-marketplace sellers were already collecting sales taxes.", "As states continue to research tax losses associated with e-marketplace  sales and pursue increased enforcement actions, we believe that more  data could help improve the accuracy of our estimates. Additional data  from e-marketplace companies about the extent to which their sellers are  collecting sales taxes through the e-marketplace optional tax services  would also help improve further analysis in this area."], "subsections": [{"section_title": "The Volume and Composition of Internet and Other Remote Sales", "paragraphs": ["To obtain sales estimates, we reviewed academic, government, and  private-sector studies. We also contacted these authors and other  specialists in this field to identify other potential sources of sales  estimates. Some state revenue agencies and other researchers who have  estimated tax revenue losses from remote sales have used data from the  U.S. Census Bureau to derive their base estimates of total Internet and  other remote sales. While we did use some Census data in our analyses,  we primarily relied upon data from Forrester Research (a research  company whose data we had used in our 2000 report) to arrive at low and  high scenario estimates for total sales volumes for different types of  remote sales as shown in table 3. We chose not to provide a single point  estimate, because the low and high scenarios illustrate how the numbers  can vary\u2014sometimes non-trivially\u2014depending on reasonable  assumptions about the underlying uncertainties.", "Forrester Research\u2019s estimates of business-to-consumer (B2C)   e-commerce sales for the years 2016 to 2021 presented data on 31  different product categories to which we could then apply specific state  sales tax rates and exemptions. By contrast, similar Census data were  more limited in that: the data contained fewer categories (13 merchandise  lines plus non-merchandise receipts); the most recent data were for the  year 2015; and the data did not include e-marketplace sales. Forrester  Research\u2019s total online retail forecast for 2016 was about $400 billion and  nearly $450 billion for 2017. We reduced this total by about $20 billion by  removing sales for two product categories (movie tickets and event  tickets) that were more akin to services industry (rather than retail)  activities."], "subsections": [{"section_title": "Business-to-Consumer E-Marketplace Sales", "paragraphs": ["Unlike Census data, Forrester Research included sales from   e-marketplaces in its e-commerce forecasts. Sales tax losses associated  with e-marketplace sales have become an increasing area of focus for  state revenue agencies, and so it was important to include in our analysis.  To separate e-marketplace sales from the sales of other Internet retailers,  we analyzed data from the annual reports of three leading e-marketplace  companies and data we obtained from Internet Retailer. We estimated  the value of merchandise being sold on these three leading   e-marketplaces to be about $110 billion in 2016. However, some of  these are sales by other Internet retailers using the e-marketplaces to sell  their goods. That is, some retailers operate stores and their own websites  but also sell their goods through \u201cstorefronts\u201d on the e-marketplaces. We  adjusted our total e-marketplace sales estimate to avoid double-counting  retailers\u2019 Internet sales in our analysis. In the end, we estimated that   e-marketplace sales (excluding the sales of Internet retailers using   e-marketplaces) accounted for 20-25 percent of total 2017 online retail  sales ($85 billion to $106 billion)."], "subsections": []}, {"section_title": "Business-to-Consumer Other Remote Sales", "paragraphs": ["Data sources on other remote sales like mail-order catalogs or television  shopping channels are more limited, compared to available data on   e-commerce sales. A representative of catalog companies we interviewed  told us that it is becoming increasingly difficult to attribute retail sales to  particular sales channels. For example, many catalog retailers also have  websites or sell their goods in retail stores or via e-marketplaces. We  decided the best available estimates could be derived by separating out  aggregate Census data on Electronic Shopping and Mail-Order Houses  into separate e-commerce and mail-order components. We first  estimated that the mail-order portion of the top-line Census category to be  about $150 billion in 2016, but then removed about $95 billion in  estimated mail-order prescription drug sales because nearly all states  exempt prescription drugs from sales taxes. Using data on historical  growth rates for the mail-order catalog industry, we then estimated the  range of other remote sales for 2017 to be from $58 billion to $61 billion."], "subsections": []}, {"section_title": "Business-to-Business Internet Sales", "paragraphs": ["Forrester Research\u2019s estimates of business-to-business (B2B)   e-commerce wholesale trade for the years 2016 to 2021 presented data  on 11 different product categories to which we could then apply specific  state sales tax rates and exemptions. While similar Census data  included 19 different product categories, the most recent Census data  was only for year 2015. Forrester\u2019s estimates exclude sales via  electronic data interchange networks which accounts for some of the  difference with Census\u2019 larger e-commerce estimate. Forrester  Research\u2019s total B2B forecast was about $825 billion for 2016 and about  $885 billion for 2017. We removed about $125 billion in petroleum and  petroleum products sales because these sales would generally be subject to excise (not sales) taxes and, furthermore, these sales would be taxed  on volume (not dollar value) and we lacked volume data, such as gallons  sold. We also lowered the value of the motor vehicles and parts  category by 40 to 60 percent under the assumption that most vehicles are  taxed when registered with state motor vehicle agencies and sales and  use tax compliance is considered generally high."], "subsections": []}]}, {"section_title": "The Taxability of Remote Sales", "paragraphs": ["To estimate the amount of tax due on remote sales, we apportioned a  share of total e-commerce and other remote sales to each state (and the  District of Columbia) and then applied each state\u2019s tax exemptions and  rates to those sales. We allocated sales across states by assuming that  each state\u2019s share of sales to individual consumers is proportionate to the  state\u2019s share of U.S. disposable personal income, and that each state\u2019s  share of sales to businesses is proportionate to the state\u2019s share of U.S.  gross domestic product. We made this allocation for each of the B2C  and B2B product categories. We then determined which categories of  products and services are taxed by state and local governments and at  what rates.", "Our main sources for state and local rates and exemptions were CCH\u2019s  State Tax Guides and Multistate Quick Answer Charts, Federation of Tax  Administrators\u2019 summary tables, and the Tax Foundation\u2019s 2017 State  Business Tax Climate Index. Eight states plus the District of Columbia  do not have additional local sales tax rates levied by cities, counties, or  other special taxing districts. For the other 37 states with both statewide  and local tax rates, we used weighted average local rates as estimated by  the Tax Foundation after first comparing and testing these rates with  similar data published by the Washington State Department of  Revenue.", "For B2B e-commerce wholesales, we made additional adjustments to  reflect the fact that many B2B sales are exempt from tax based on the  type of purchaser or the type of use. These purchaser and use  exemptions are important for estimating the proportion of B2B sales that  are exempted as raw materials or as inputs incorporated into a final  product. Our sources of sales estimates did not disaggregate them by  type of purchaser or types of use. In order to estimate the percentage of  business-to-business sales that would be exempt, we used input-output  account tables prepared by the Department of Commerce\u2019s Bureau of  Economic Affairs. These tables show the inter-industry transactions of  the U.S. economy for 2015 and provide detailed information on the  composition of inputs and the distribution of outputs of all major U.S.  industries. On the basis of our analysis of the input-output data, we  excluded a range from 50 to 60 percent of all B2B e-commerce  wholesales from our model (see row titled \u201cless exempt intermediate  goods\u201d in table 3)."], "subsections": []}, {"section_title": "The Extent to Which Remote Sellers Already Collect Taxes", "paragraphs": ["Seller collection rates represent the share of taxes on remote sales that  state and local governments can currently require remote sellers to collect  due to remote sellers\u2019 substantial presence (referred to as nexus) in a  state. To estimate seller collection rates for selected categories of e- commerce and other remote sales, we followed an approach similar to  that in our 2000 study. We made separate estimates for Internet retailers,  e-marketplaces, other remote retailers, and merchant wholesale e- commerce sales because a different population of firms dominates in  each group. Again, we chose not to use a single point estimate, because  the low and high alternatives illustrate how assumptions made about  collection rates can vary our model output\u2014sometimes non-trivially. The  ranges of our estimates are shown in table 4.", "To make our estimate for Internet retailers, we analyzed data from  Internet Retailer\u2019s 2017 list of the leading 1,000 U.S. companies to  determine the states in which they collect sales taxes. We first used data  from company financial reports to adjust Internet Retailer\u2019s 2016 global  sales figures for the top 100 companies to reflect only U.S. Internet  sales. We also used company annual reports and a smaller list of  leading Internet retailers from eMarketer to test the accuracy and reliability of Internet Retailer\u2019s data, which we found to be sufficiently  reliable for our purposes.", "We then verified Internet Retailer\u2019s data on the states where each of the  top 100 companies were collecting sales taxes by comparing it to sales  tax collection policies published on companies\u2019 websites or lists of  companies\u2019 physical locations (such as retail stores, warehouses, or  company headquarters). We performed our research on companies\u2019  collection policies and nexus from May to June 2017. During this period  some companies\u2019 collection policies or nexus changed from the date  when Internet Retailer published its Top 1000 list in April. For example,  the largest Internet retailer completed agreements with the remaining few  states where it was not previously collecting sales tax. As of September  2017, the company stated on its website that it collects taxes on sales of  all its products sold to customers in the 45 states (plus the District of  Columbia) with statewide sales taxes.", "For 27 of the top 100 companies, Internet Retailer did not report any data  on states where the companies were collecting sales taxes, so we used  the results of our own nexus research. For the remaining states where we  could do comparisons, we found Internet Retailer\u2019s data on companies\u2019  nexus to be sufficiently reliable for our purposes. On the basis of our  nexus research, we found that about 40 percent of the top 100 companies  were collecting in all 45 states (plus the District of Columbia) with  statewide sales taxes, and three-quarters were collecting in at least half  the states. Only 2 of the top 100 companies were only collecting in, or  only had nexus, in one state.", "To estimate the percent of sales on which Internet retailers were currently  collecting taxes, we first allocated each company\u2019s total sales to states  based on each state\u2019s share of national disposable personal income. We  then multiplied each state\u2019s share of sales by the combined state and  local government weighted average tax rate to estimate the total tax  dollars that could be collected on all sales regardless of nexus. We then  used our nexus data for each company to estimate the tax dollars  companies were already collecting. The ratio of these two estimates (total  taxes collectible under current law, divided by total taxes that could be  collected if states had expanded authority) is our estimated \u201cseller  collection rate.\u201d For the top 100 companies on Internet Retailer\u2019s list, we  estimated this seller collection rate to be from 87 to 96 percent.", "We then extended our research of companies\u2019 nexus to the remaining  900 companies on Internet Retailer\u2019s top 1000 list. These remaining 900  companies accounted for about 20 percent of the total dollar sales  volume for all 1,000 companies on Internet Retailer\u2019s list (after we had  adjusted global sales to U.S.-only sales for the top 100). For about one- third of these 900 companies, Internet Retailer did not report any nexus  data so we did our own research. For the other two-thirds, we relied on  Internet Retailer\u2019s nexus data because we found it sufficiently reliable  based on our analysis of first 100 companies listed. Compared to the top  100 companies, these remaining 900 companies were far less likely to  have nexus (or said they were collecting) in all or most states. About half  the remaining 900 companies only had nexus (or said they were  collecting) in one state. In terms of tax dollars, we estimated that these  900 Internet retailers were already collecting from 44 to 49 percent of the  potential taxes that states and local governments could require to be  collected if given expanded authority on all remote sales. For all 1000  Internet retailers, we adjusted our estimates of dollars currently being  collected by plus (+) and minus (-) 5 percent, which gave us a range of  overall estimated collection rates from 78 to 86 percent for the category."], "subsections": [{"section_title": "E-Marketplace Sellers Collection Rates", "paragraphs": ["The wider range of our estimates on seller collection rates for   e-marketplace sales is because less data were available on the extent to  which these types of sellers already collect sales taxes. We could not find  sufficiently reliable data on the physical locations of sellers who use   e-marketplaces. The three major e-marketplaces (that we analyzed to  estimate total e-marketplace sales) offer their sellers additional services  that help sellers calculate and collect sales taxes, but not all sellers take  advantage of this service. None of the e-marketplaces that we  interviewed were able to provide us data on the extent to which their  sellers currently collect sales tax. We found limited data on the extent to  which e-marketplace sales include sales taxes. Two studies estimated  that sales taxes were more likely to be collected by larger sellers like  other retailers using e-marketplaces to sell some of their products. As we  noted above when describing our methods for estimating total e- marketplace sales, we estimated that about 40 percent of Internet  retailers sell their products not only via their own stores and websites, but  also offer their products for sale on e-marketplace sites.", "In our calculations, we assumed that from 10 to 30 percent of   e-marketplace sales were made by large sellers that collected taxes in  most states (either due to nexus or collection agreements with states).  After allocating those sales to states based on share of disposable  personal income, we assumed that these large sellers collected taxes at  the same rates we had estimated for the top 100 Internet retail  companies. We assumed that the remaining e-marketplace sales (from  70 to 90 percent) were made by smaller sellers with only one nexus, and  that these small sellers were geographically located similar to other  Internet retailers with only one nexus. After allocating those sales to  states, we assumed that these small sellers collected taxes only in their  home state. Our resulting seller collection rates for all e-marketplace  sellers ranged from 14 to 33 percent.", "Due to a lack of sufficiently reliable data, we did not consider what  percentage of e-marketplace sales are used items. According to one   e-marketplace company, about 20 percent of items listed on their site are  used. According to information from one tax software company, the  taxability of used items for sale varies by state."], "subsections": []}, {"section_title": "Other Remote Retailers Collection Rates", "paragraphs": ["We could not find data that listed the leading mail-order catalog  companies, and in which states they have nexus and are collecting taxes.  However, 116 of the companies in Internet Retailer\u2019s 2017 Top 1000 list  were classified by Internet Retailer as \u201cCatalog/Call Center\u201d companies.  These companies had from $5 million to $5 billion in 2016 Internet sales  to U.S. customers and were distributed similarly to the full population of  all 1000 companies. Since we had already estimated their collection rates  as part of our analysis on Internet retailers, we re-calculated an aggregate  collection rate for these 116 companies. We adjusted our estimates of  dollars currently being collected by plus (+) and minus (-) 5 percent, which  gave us a range of overall estimated collection rates from 58 to 64  percent."], "subsections": []}, {"section_title": "B2B E-Commerce Wholesalers Collection Rates", "paragraphs": ["We followed a similar approach for estimating seller collection rates for  business-to-business e-commerce wholesalers. We identified 106  companies on the Internet Retailer\u2019s 2017 Top 1000 list with significant  B2B sales. Some of the companies appeared to sell exclusively to  businesses whereas others had both significant consumer and business  sales. These companies had 2016 Internet sales to U.S. customers  ranging from $5 million to $10 billion, and the subpopulation was  distributed similar to the overall Top 1000 population. The 106 companies  were more likely to come from Internet Retailer\u2019s categories of:  automobile parts, computers/electronics, hardware/home improvement,  and office supplies. Comparatively fewer were in Internet Retailer\u2019s  categories of apparel/accessories, food/drug, health/beauty, or  housewares/home furnishings. Because we had already estimated their  collection rates as part of our analysis on Internet retailers, we   re-calculated an aggregate collection rate for these 106 companies. We  adjusted our estimates of dollars currently being collected by plus (+) and  minus (-) 5 percent, which gave us a range of overall estimated collection  rates from 85 to 94 percent."], "subsections": []}]}, {"section_title": "The Extent to Which Purchasers Already Pay Tax", "paragraphs": ["According to data we found, consumer and business use tax compliance  rates have not changed significantly since we did similar analyses in  2000. As we reported then, consumer use tax rates are estimated to be  very low whereas business use tax compliance rates are estimated to be  very high. The most widely-cited study we found on consumer use tax  compliance was prepared by the Minnesota legislature in 2015. The  study reported that for those states that allowed taxpayers to report use  taxes on their state income tax returns, the percentage of returns  including use taxes ranged from a low of 0.2 percent in Rhode Island to a  high of 10.2 percent in Maine. We used the various rates from the study  in our calculations. For those states not listed in the Minnesota legislature  study, we used a default median rate of 1.2 percent. We had more to up- to-date data for California, Mississippi, and Vermont, which we used in  our calculations. We then adjusted the total dollar amount of use taxes  paid by consumers from 0 to 10 percent to provide us a range of inputs  for our model. Making these adjustments had little to no effect on the final  results. For business use tax compliance rates, we found data from five  states that estimated business use tax compliance to be from 70 percent  to 90 percent. In our model, we applied both these figures to give us a  range of estimated use tax dollars paid by businesses."], "subsections": []}, {"section_title": "Ranges of Potential Revenue Gains", "paragraphs": ["Table 5 shows the potential revenue gains for 2017 that we calculated  using various combinations of low and high estimates for sales and  sellers collections rates described above. Here too, we chose to not  provide a single point estimate because the low and high scenarios for  potential revenue gains illustrate how the many underlying uncertainties  affect potential revenue gains.", "By adjusting various model inputs we produced some lower estimates  resulting from the following assumptions and adjustments: (1) decreasing  our estimated e-marketplace and other remote retailer sales; (2)  increasing our estimated seller collection rate for all types of remote  sellers; (3) increasing our estimated consumer and business use tax  compliance; and (4) increasing our estimates of tax-exempt business  inputs (intermediate goods). The higher estimate results from: (1)  increasing our estimated e-marketplace and other remote retailer sales;  (2) decreasing our estimated seller collection rates for all types of remote  sellers; (3) decreasing our estimated consumer and business use tax  compliance rates; and (4) decreasing our estimates of tax-exempt  business purchases (intermediate goods)."], "subsections": [{"section_title": "Including Additional Factors in Our Model Would Likely Lower Our Overall Estimates of Potential Revenue Gains", "paragraphs": ["We lacked sufficient data on four additional factors that, if we had  included in our model, would likely reduce our estimates of state and local  government revenue gains.", "We lacked sufficient data on the extent to which requiring all remote  sellers to collect sales taxes on all sales (regardless of a sellers\u2019 nexus)  would raise final prices to consumers and thus lower demand for goods  sold remotely. Facing higher final prices, some online or other remote  shoppers might shop instead at traditional brick and mortar retailers, or  place orders with non-U.S. remote sellers. A representative from one  major Internet retailer we interviewed believed that its customers placed  higher value on the convenience of shopping online and were less likely  to change their shopping behavior if previously untaxed sales now  included sales taxes. Some economists have concluded that consumers  alter buying decisions when remote retailers begin to collect sales  taxes. However, one of the tax policy specialists who reviewed our  report noted a lack of consensus on this topic.", "We lacked sufficient data on what portion of e-commerce sales included  in our model might be tax exempt digital downloads of software, music,  books, and games. Some states consider digital downloads to be a  service (not a physical good) and therefore exempt from sales taxes. The  variations in state laws governing the taxability of digital downloads were  too numerous for us to reliably include in our model. Assuming that states  do not change their laws to make these purchases taxable, it is likely that  our estimates of potential revenue gains would be lower.", "We were unable to factor in the extent to which some small remote sellers  might be exempt from sales tax collection requirements even if states had  expanded authority over all remote sales. Recent state laws and  regulations regarding taxes on remote sales have included small seller  provisions that exempt sellers who make less than a specified dollar  amount of sales or a number of transactions annually into a state.  Proposed federal legislation granting states expanded taxing authority on  all remote sales also includes different nationwide dollar amount  exemptions for small sellers. We could not find sufficiently reliable data  to estimate how many businesses or what dollar volume of sales might be  exempt either at the state or federal level. As a result, our final estimates  most likely overstate the total potential revenue gains for some, or all,  states depending on what types of small seller exemptions might be  enacted at either the state or federal level, or both.", "Sales to Tax Exempt Entities  We lacked sufficient data on what share of remote sales are made to tax  exempt entities. In our 2000 report, we were also unable to identify any  estimates of sales by taxable versus tax-exempt purchaser. Officials from  one state revenue agency we interviewed estimated that the percent of  purchases made by tax-exempt entities or persons to be extremely low.  Our final estimates of potential tax gains would be lower for states if we  had included an estimate in our model."], "subsections": []}]}]}, {"section_title": "Appendix II: State and Local Government Potential Revenue Gains", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["James R. McTigue, Jr. (202) 512-9110 or mctiguej@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tara Carter (Assistant Director),  Mark Kehoe (Analyst in Charge), Brett Caloia, and Christine N. Dickason  made key contributions to this report. Anne Stevens, A.J. Stephens,  Cynthia Saunders, JoAnna Berry, Stewart W. Small, Donna Miller,  Andrew Emmons and Andrew Howard also provided key assistance."], "subsections": []}]}], "fastfact": ["When consumers order goods remotely, such as from a website or mail-order catalog, states have limited ability to collect taxes on the sale. Under current law, a state cannot require a remote seller to charge sales taxes unless the seller has a substantial presence, such as a store or warehouse, in the state.", "Congress has been considering legislation to expand states' authority to collect taxes from remote sellers. We found that state and local governments could gain billions of dollars in additional revenue if given this authority, but some businesses would likely see increased costs to comply with the tax laws of multiple states."]}
{"id": "GAO-19-217", "url": "https://www.gao.gov/products/GAO-19-217", "title": "Federal Retirement: OPM Actions Needed to Improve Application Processing Times", "published_date": "2019-05-15T00:00:00", "released_date": "2019-06-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to OPM, it receives more than 100,000 retirement applications each fiscal year. Between 2014 to 2017, OPM did not meet its goal of processing most retirement applications within 60 days. GAO was asked to review potential improvements in federal retirement processing at OPM. This report (1) describes the root causes of retirement application processing delays, as determined by OPM; and (2) examines what strategies, if any, OPM has taken to address those root causes, and how OPM has evaluated the effectiveness of the strategies.", "GAO reviewed OPM data and documents, and interviewed OPM officials. GAO also interviewed officials from DOD, HHS, NASA, and USPS about their experiences with processing retirement applications. GAO selected these agencies because they represent a variety of application error rates and relatively high application volume."]}, {"section_title": "What GAO Found", "paragraphs": ["The Office of Personnel Management (OPM), which administers the federal retirement program, identified three root causes for retirement processing delays:", "1. the continuing reliance on paper-based applications and manual processing;", "2. insufficient staffing capacity, particularly during peak workload season; and", "3. incomplete applications.", "OPM has taken various actions to address these root causes and thereby reduce delays.", "Vision for modernizing retirement processing. OPM's strategic vision consists of five key initiatives for modernizing the application process, including developing an electronic application form and an electronic system to store retirement information. However, OPM was unable to provide estimated time frames or costs for the initiatives. OPM officials said that additional information technology (IT) modernization work is dependent on sufficient funding, among other factors. These factors are important but do not preclude OPM from establishing estimated cost ranges and time frames\u2014practices consistent with industry best practices and IT project management principles.", "Actions to increase staffing capacity. OPM's actions have included using overtime pay and hiring additional staff. However, OPM generally does not assess the effectiveness of these actions or whether they reduce delays. For example, OPM does not measure overtime productivity or correlate overtime data with application processing data. Federal internal control standards state that management should review its performance compared to its goals. OPM officials stated that they have limited resources for assessments. However, without assessments, OPM is less able to make informed decisions on how to best use staffing practices to improve processing times.", "Actions to reduce missing information in applications. OPM provides assistance to agencies through guidance, training, communication through liaisons and email, and error reports. OPM's monthly error reports to agencies include information on the type of error found and the volume of applications with the same error, according to OPM. The four agencies GAO interviewed\u2014Department of Defense (DOD), Department of Health and Human Services (HHS), National Aeronautics and Space Administration (NASA), and U.S. Postal Service (USPS)\u2014reported that aspects of the error reports were not user-friendly. OPM stated that its assistance is intended to help agencies submit complete and accurate retirement packages for quicker processing. Federal internal control standards state that management should communicate quality information externally and periodically reevaluate its communication methods. OPM officials stated that the error report is intended to capture the overarching errors many agencies face and that revising the error report would not be cost-effective. However, the current format of the error report may limit its usefulness to agencies in improving their retirement applications."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 6 recommendations. These recommendations include that OPM should develop a retirement services IT modernization plan for initial project phases; develop and implement policies for assessing staffing strategies intended to improve processing times; and determine if there are cost-effective ways to make the retirement application error report more user-friendly. OPM concurred with 1 recommendation and partially concurred with 5 recommendations. GAO continues to believe all aspects of the recommendations are valid, as discussed in the report. GAO also incorporated technical comments."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Office of Personnel Management (OPM) manages and administers  the federal retirement program, which includes processing the retirement  applications that federal employees must submit through their agencies  as paper applications. The federal retirement program covers more than  2.4 million active employees and OPM receives more than 100,000  retirement applications each fiscal year, according to OPM. Between  2014 and 2017, OPM reported that it did not meet its goal of processing  90 percent of retirement applications within 60 days. During this time  period, OPM processed from 57 to 79 percent of retirement claims within  60 days each fiscal year. OPM\u2019s new goal as of April 2018 is to process  all applications within an average of 60 days, which OPM reported that it  achieved for 5 of the 9 months from April to December 2018.", "You asked us to review potential improvements in federal retirement  processing at OPM. For this report, we (1) describe the root causes of  retirement application processing delays, as determined by OPM; (2)  examine what strategies, if any, OPM has developed and implemented to  address those root causes, and how OPM has evaluated the  effectiveness of the strategies; and (3) identify strategies selected  agencies use to help them compile accurate retirement applications.", "To address our first and second objectives, we reviewed OPM documents  and interviewed OPM officials in both the headquarters and in the  Retirement Operations Center in Boyers, Pennsylvania. We toured the  Boyers facility and interviewed staff on the retirement application process.  For our second objective, we also assessed OPM\u2019s strategies against  criteria that included federal standards for internal control and using data  to manage performance. In addition, to provide background and context  about OPM\u2019s actions to identify root causes, we analyzed OPM data on  processing volume for retirement applications. To determine the reliability  of the data, we reviewed relevant OPM documents and consulted OPM  officials about data collection methods. We found the data to be reliable  for our purposes of reporting on processing volume for fiscal years 2016  through 2018.", "To address our third objective, we selected four agencies as case  illustrations\u2014the Department of Defense (DOD), the Department of  Health and Human Services (HHS), the National Aeronautics and Space  Administration (NASA), and the U.S. Postal Service (USPS). Our  selection of agencies was based on analysis of several characteristics of  OPM\u2019s data on agency errors for fiscal years 2014 to 2016 across 97  agencies. We narrowed our scope to 17 agencies that we categorized as  having a relatively high number of applications\u2014more than 1,000 for  fiscal years 2014 through 2016 combined. Within that scope, we selected  four agencies that represented a variety of error rates and levels of  application volume to provide a range of agency experiences.", "The four agencies represent 56 percent of all applications audited by  OPM for agency errors in fiscal years 2014 to 2016. These agencies also  represent 46 percent of all audited applications that OPM identified as  having errors in fiscal years 2014 to 2016. Although these agencies do  not represent the experiences of all agencies government-wide, they  provide illustrative examples of experiences that agencies have with  retirement applications. To determine the reliability of the agency error  data, we reviewed relevant OPM documents and consulted OPM officials  about OPM\u2019s data collection methods. We found the data to be reliable  for our purpose of selecting agencies. We also reviewed agency  documentation related to the selected agencies\u2019 retirement application  operations and conducted semi-structured interviews with agency staff.", "We conducted this performance audit from October 2017 to May 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."], "subsections": [{"section_title": "Background", "paragraphs": ["OPM administers two defined-benefit retirement plans that provide  retirement, disability, and survivor benefits to federal employees. The  Civil Service Retirement System (CSRS) provides retirement benefits for  most federal employees hired before 1984. The Federal Employees  Retirement System (FERS) covers most employees hired in or after 1984,  and provides benefits that include Social Security and a defined  contribution system. If a federal employee becomes disabled while  employed in a position subject to the retirement system, and the  employee meets the disability eligibility requirements, the employee may  apply for a disability retirement.", "Agencies\u2019 human resources offices, payroll offices, and OPM are  responsible for compiling and processing federal employees\u2019 retirement  applications. The process begins when an employee submits a paper  retirement application to his or her agency\u2019s human resources office.  OPM\u2019s guidance states that both agencies and payroll offices must certify  that specific portions of the application are accurate.", "OPM employees then ensure that the package includes all the necessary  information. An OPM adjudicator processes the retirement package,  which contains the application documents from human resources and  payroll. For example, the package includes the separation form, which  finalizes the date that the employee will retire. The adjudicator determines  if the eligibility requirements are met for an annuity as well as health and  life insurance into retirement, and calculates the annuity. The process is  completed when the individual begins receiving regular monthly benefit  payments, as illustrated in figure 1. According to OPM officials, OPM then  stores the paper retirement file until (1) all benefits have been applied for  and paid to all eligible heirs, and (2) a specified amount of time has  passed.", "Over several decades, OPM has attempted to modernize the retirement  application process by automating paper-based functions and replacing  antiquated information systems. However, as we have highlighted in our  past work, the agency has experienced numerous challenges and has a  history of undertaking modernization projects that did not yield the  intended outcomes. Specifically, we found that OPM\u2019s efforts over 2  decades to modernize its processing of federal employee retirement  applications were fraught with (information technology) IT management  weaknesses. In 2005, we made recommendations to address  weaknesses in project, risk, and organizational change management. In  2008, as OPM was on the verge of deploying an automated retirement  processing system, we reported deficiencies in, and made  recommendations to address, additional weaknesses in system testing,  cost estimating, and progress reporting. In 2009, we reported that OPM  continued to have deficiencies and made recommendations to address  these and other weaknesses in the planning and oversight of the  agency\u2019s modernization effort. OPM began to address these  recommendations; however, in February 2011, it terminated the  modernization effort.", "As figure 2 shows, 31.6 percent of federal employees who were on board  as of September 30, 2017, will be eligible to retire in the next 5 years.  Some agencies have particularly high levels of employees eligible to  retire in the next 5 years.", "OPM\u2019s reporting on its application processing timeliness also shows  longer processing times or occasional improved processing times that  were not sustained from fiscal year 2006 to 2017. We found it difficult to  compare OPM\u2019s performance across years because the performance  measures have changed over time. For example, in 2009 through 2011,  OPM\u2019s performance measure was the average number of days to  process applications. During this time period, OPM met its target except  for 1 year when OPM reported 108 days and the target was 45 days. In  contrast, in 2014 through 2017, OPM\u2019s performance measure was the  percentage of applications processed in 60 days. During this time  period, OPM did not meets its target of processing 90 percent of  applications in 60 days as the percentage ranged from 57 to 79 percent  each fiscal year."], "subsections": []}, {"section_title": "OPM Attributes Processing Delays to Paper-Based Applications, Staffing, and Missing Information in Applications", "paragraphs": ["Paper-based applications. Despite past attempts to modernize its  retirement applications processing operation, OPM currently requires  federal employees to submit their retirement application on paper.  According to OPM officials, OPM has automated some front-end  processing steps, despite various challenges, such as OPM\u2019s and  agencies\u2019 legacy systems lacking functionality or integration, inaccurate  data due to manual data-entry errors, and lack of real-time data because  data are stored in inconsistent formats at multiple locations. OPM  officials reported that payroll providers can electronically send OPM 59  data elements, which allows OPM to authorize interim annuity payments  to 50 percent of new applicants, as well as initiates other processing  functions. However, as shown in figure 3, subsequent processing steps  still require manual intervention, including assembling paper documents  into folders, ensuring documents are in proper order, and addressing  missing or incomplete information.", "Staffing capacity. OPM attributed delays to not having enough staff to  address its peak workload season, called the surge period. According to  OPM, it hired additional staff in 2017 and 2018 to process applications  throughout the year, but overtime pay was needed to increase staffing  capacity during surge periods. Also, officials reported that hiring freezes,  continuing resolutions, and other budget constraints affected hiring  numbers and created hiring delays over the past 5 fiscal years.", "During the surge, OPM officials said they receive the bulk of applications  starting in mid-January continuing through February (6 weeks). However,  the effect of the surge workload lasts until mid-April because OPM takes  about 60 days on average to process an application. Figure 4 illustrates  the flow of applications OPM received and processed in fiscal years 2016  to 2018. During the months of January and February in this time period,  OPM received an average of about 13,200 applications per month, a  considerable increase over its average of about 7,200 per month at other  times of the year. Despite the increase in applications, OPM\u2019s application  processing numbers remained essentially the same in January and  February (8,200 per month) compared to other months of the year (8,100  per month), thus increasing OPM\u2019s inventory of unprocessed applications,  which ranged from approximately 11,400 to 24,200 for the time period  shown.", "The increase in inventory was partly mitigated in March of each year,  when OPM processed an average of about 11,000 applications. OPM  officials reported that they processed more applications in March because  they used overtime pay and flexible staffing across work units, such as  temporarily shifting staff to a different unit to expedite workflow; screened  for complete applications; and received fewer applications as surge  periods ended. We discuss these and other actions OPM has taken to  increase staffing capacity during surge periods later in the report.", "Incomplete applications. According to OPM officials, in up to 40 percent  of applications, OPM is missing information needed to finalize processing,  which increases processing time. Incomplete applications generally fall  into two categories:", "Missing information. OPM estimates about 10 percent of  applications are missing information, such as a form or signature. For  example, OPM officials said that documentation for the applicant\u2019s  preceding 5 years of health insurance coverage, which is necessary  to continue health insurance into retirement, was often missing.", "Waiting for applicant decisions. OPM estimates about 30 percent of  applications are delayed while waiting for applicant decisions. For  example, OPM stated that it must wait 30 days for the applicant to  select an annuity option if deposits or redeposits are made.", "In addition to these three root causes, OPM officials reported that other  factors, such as legislative changes, can also cause processing delays.  For example, changes in the law may require OPM to revise its processes  and train its staff, taking away time from core processing activities."], "subsections": []}, {"section_title": "OPM Conducts Limited Assessments of Its Processing Operation and Assistance to Agencies", "paragraphs": [], "subsections": [{"section_title": "IT Modernization Plan Remains Unclear", "paragraphs": ["Subsequent to terminating its retirement modernization effort in February  2011, OPM refocused its retirement modernization efforts and in 2013  developed a new strategic vision for modernizing retirement applications  processing. OPM\u2019s 2013 strategic vision for modernizing retirement  applications processing envisioned a paperless system that would timely  authorize accurate retirement benefit payments, answer customers\u2019  questions, and promote self-service account maintenance. According to  OPM officials, the strategic vision consists of five key initiatives which are  in varying stages of development and implementation, as shown in table  1.", "Partly in response to cancelling its third attempt to automate the  processing of federal retirement applications in February 2011, OPM is  now taking an incremental approach towards modernizing its retirement  IT systems. According to OPM officials, they also recognize the need to  improve OPM\u2019s enterprise architecture before implementing significant  modernization efforts. As we have previously reported, these steps can  help agencies successfully modernize and maintain IT environments.", "OPM\u2019s current approach provides a framework to help the agency  achieve its overall IT modernization strategic vision. However, OPM  officials provided no further explanation about how retirement IT  modernization activities would proceed, such as describing proposed time  frames and estimated cost ranges, even for initial project phases.  Likewise, OPM\u2019s Inspector General recently reported that the agency\u2019s  fiscal year 2018 IT modernization expenditure plan did not account for  total costs nor identify the full scope of OPM\u2019s modernization effort for the  agency.", "Industry best practices and IT project management principles stress the  importance of sound planning for system modernization projects. These  plans should identify key aspects of a project, such as scope, responsible  organizations, costs, schedules, and risks. Additionally, planning should  begin early in the project\u2019s life cycle and be updated as the project  progresses. Further, according to federal internal control standards,  management should define objectives in specific and measurable terms,  such as defining what is to be achieved, who is to achieve it, how it will be  achieved, and time frames for achievement.", "OPM officials said that additional IT modernization work is dependent on  sufficient funding, support from the Office of the Chief Information Officer,  and development of a technical enterprise architecture roadmap. These  components are important. However, they do not preclude OPM from  establishing a basic project management plan that includes objectives,  estimated cost ranges, and proposed time frames for its initial project  phases. Without a plan that is consistent with IT project management  principles, OPM is less able to articulate a path forward in measurable  terms and assess performance towards achieving its objectives. Similarly,  without an electronic application system, OPM is less able to  automatically verify information upfront when the application is submitted  and notify applicants of any discrepancies prior to accepting the  application.", "The administration\u2019s proposal to move the retirement application  processing operation to the General Services Administration (to be  renamed as the Government Services Agency) has created additional  uncertainty for OPM. Potential changes in organizational affiliation,  policy, budget, and staff may make it difficult for OPM to plan for large- scale changes in its operations. Nevertheless, continuing to develop  plans to modernize retirement IT systems seems prudent, given that the  details of the reorganization are still unknown and that the move to the  General Services Administration may not occur in the near term, or at all.  Further, IT modernization is a key theme in the March 2018 President\u2019s  Management Agenda and will likely be a key driver in changing agency  operations for years to come."], "subsections": []}, {"section_title": "OPM Lacks Performance Information That Could Improve Processing Timeliness and Staffing Capacity", "paragraphs": ["We have previously reported that to successfully implement reforms and  improve their operations and results, agencies need to robustly manage  their performance. This involves not only measuring progress toward  goals, but also using performance information (i.e., data collected to  measure progress towards agency goals) to identify and correct  problems, improve program implementation, and make other important  management and resource allocation decisions. However, we found that OPM does not use performance information on processing timeliness to  manage for results. In addition, we found that OPM conducted limited  assessments of its processing data and did not assess the effectiveness  of its staffing actions."], "subsections": [{"section_title": "Performance Goals and Measures", "paragraphs": ["OPM\u2019s fiscal year 2019 processing timeliness goal is to process all  retirement applications in an average of 60 days or less. The related  performance measure is the average number of days to process  retirement applications. However, we found that OPM did not use its  timeliness performance measure to manage for results or provide  external stakeholders and applicants a clearer picture of processing  time.", "Performance measures not used to manage. Based on our 2017  survey of federal managers, we found that OPM managers agency-wide  reported a statistically significant decrease in using performance  information to develop program strategy, allocate resources, and take  corrective actions since 2013. Similarly, for this review, we found that  OPM could enhance its use of performance information to manage for  results in retirement applications processing. OPM has not established  additional performance measures for the various parts of the application  review and processing operation that would contribute towards achieving  its overall processing timeliness goal. For example, OPM does not  measure timeliness or have related performance goals for its various  work units that process applications.", "OPM officials do not use such performance goals and measures to  manage for results in part because they do not perceive the information to  be relevant to reducing processing delays. For example, OPM officials  said that the new timeliness performance goal facilitates planning but  does not improve processing time or otherwise provide better service to  retirees. According to these officials, OPM does not have a requirement for completing its various processing steps within a certain amount of time  because each application is different, and they do not want staff to rush  and potentially make mistakes, thereby causing rework. In comparison,  agencies and payroll centers that submit these applications to OPM are  required to do so within a certain time frame.", "Similarly, OPM has not established a timeliness performance goal or  measure for completing its review of applicants\u2019 eligibility for disability  retirement. OPM officials said that OPM does not have a performance  goal or measure for the review for disability retirement eligibility because  it has not reached a steady processing level for these applications.  However, OPM did not provide a time frame for when it expects to reach  a steady processing level, nor did officials explain why OPM has not  established performance goals and measures based on past performance  or other benchmarks. In comparison, the Social Security Administration,  through partnerships with state agencies, also reviews applications for  disability benefits eligibility and has established performance goals for  both the accuracy and processing time for this review process. As of  November 2018, OPM officials reported that they are collecting data to  develop a separate performance goal for measuring the timeliness of  reviewing disability retirement eligibility and expect to establish a  performance baseline within the next 3 to 6 months.", "The lack of management practices to encourage and enhance the use of  performance measures at the operational level can make it challenging  for OPM to use performance information to manage operations, such as  identifying problem areas that cause delays and implementing corrective  actions, and to make decisions, such as better targeting limited resources  based on risk or other priorities.", "Unclear performance measures. OPM officials reported that the new  processing timeliness goal also provides agencies and applicants a  clearer, more realistic expectation of processing time. However, none of  the four agencies we interviewed considered the new goal to be clearer or  more helpful than past goals. The Departments of Defense and Health  and Human Services, and the U.S. Postal Service were unaware that any  such goal was ever established, prior to our discussions.", "We found that this performance goal was unclear because it lacked  explanatory information that would make it more meaningful for applicants  and external stakeholders, such as agency benefit officers and  congressional oversight committees. Specifically, the new performance  goal and related measure are expressed as an average, which allows for  potentially wide variation in processing times while still meeting OPM\u2019s  goal. In past work, we have reported that including explanatory  information on goals and measures helps improve the usefulness of  performance information. Without explanatory information, reporting an  average can obscure aspects of OPM\u2019s processing timeliness, such as  the number and types of applications OPM processes faster or slower  than 60 days and the range of processing times.", "Also, OPM\u2019s processing timeliness goal and measure do not include all  phases of the application review process, specifically the time OPM takes  to determine eligibility for disability retirements, which can be lengthy.  We have previously reported that performance information could be more  useful if it identified significant data limitations and their implications for  assessing performance. OPM officials reported that the processing  timeliness goal and measure exclude data on disability retirement  applications pending approval because OPM does not consider reviewing  disability retirement eligibility as part of processing. OPM includes  disability applications in its processing timeliness goal after these  applications have been approved. Not providing explanatory information  about what the processing goal includes or excludes can lead to  agencies\u2019 and applicants\u2019 false expectations and confusion about the  amount of time OPM is taking to review applications."], "subsections": []}, {"section_title": "Limited Assessments of Processing and Staffing Strategies", "paragraphs": ["OPM has implemented various strategies for improving processing  timeliness, as discussed below. However, we found multiple examples  where OPM did not assess whether the strategies were effective.", "Assessment of processing applications. According to OPM officials,  senior and frontline managers review processing data, such as age of  pending applications, weekly to identify potential concerns, and adjust  staffing and workload if necessary. However, we found that OPM\u2019s  performance information may be of limited use for assessing processing  delays because the data lacked elements that would provide a more  complete measure of performance.", "For example, we found that OPM did not review about half of applications  government-wide for errors in fiscal years 2014 to 2016 combined,  including all disability retirement applications. Likewise, OPM officials  said that the number of unprocessed applications in inventory does not  include disability retirement applications still pending approval. As a  result, OPM\u2019s performance information for both application errors and  inventory does not reflect the full extent of processing delays because  various applications have been excluded. OPM officials were unable to  explain to us why or how they decided to exclude certain applications.", "Also, OPM generally does not assess the accuracy of the data it collects  on application errors. OPM most recently reviewed the accuracy of the  error data in 2014, despite additional feedback from agencies that some errors charged to them were incorrect. We also found outliers in the  data that OPM officials were unable to explain.", "Assessment of staffing actions. OPM has taken actions to increase  staffing capacity in retirement operations throughout the year, as well as  during surge periods, as shown in table 2.", "However, we also found that OPM does not assess the effectiveness of  its staffing actions, even though OPM officials reported that they are  consistently looking for opportunities to improve OPM\u2019s current  processes. For example, OPM officials said that staffing actions improved  efficiency but were unable to provide supporting data or documentation of  their assessments, such as how often cross-functionally trained staff  worked in other units and resulting improvements in output or quality.", "Likewise, OPM has not assessed the results of using overtime pay. As  shown in table 3, any increased use of overtime pay during fiscal years  2013 to 2017 did not increase the number of applications processed.", "OPM officials said that overtime pay does not necessarily translate into  increased output because some actions performed during overtime, such  as quality review, do not contribute towards finalizing additional  applications. They added that other factors can decrease production,  such as reduced staff. Reduced staffing from fiscal years 2013 and 2016  may have contributed to decreased output, even with the use of overtime.  However, OPM officials were unable to provide the number or types of  positions that were reduced. Likewise, OPM does not measure how and  to what extent the various factors affect output.", "OPM officials also said that they use overtime pay during surge periods to  move applications through processing during its busiest time of the year,  thereby decreasing an otherwise longer waiting time for applicants.  However, OPM does not measure overtime productivity, or productivity in  general, nor are they able to correlate overtime data with applications  processing data or outcomes. OPM officials explained that they expect  staff to be equally productive during overtime as they are during regular  work time. Although OPM officials may set these productivity  expectations, they do not collect productivity data to measure whether  and to what extent staff meet these expectations.", "Further, OPM officials could not provide basic staffing data, such as the  number of staff who have processed retirement applications for the past 5  years or number of processing staff paid overtime. Such information is  valuable because it provides the basis for assessing whether OPM\u2019s  staffing actions are improving performance and meeting their intended  purpose.", "We have previously reported that to be useful, performance information  must meet users\u2019 needs for completeness, accuracy, consistency,  timeliness, validity, and ease of use. Other attributes that affect the  usefulness of information include, but are not limited to, relevance,  credibility, and accessibility. Further, federal internal control standards  state that management should use quality information and design control  activities to achieve the agency\u2019s objectives. Examples of control  activities include top-level reviews of performance compared to plans,  goals, and objectives; management reviews at the functional or activity  level; comparing and assessing related data sets so that relationships can  be analyzed and appropriate actions taken; and clearly documenting  control activities, transactions, and other significant events so that the  documentation is readily available for examination. Federal internal  control standards also state that management should implement control  activities through policies.", "OPM officials reported that OPM\u2019s systems were not robust enough to  produce better performance information beyond basic processing data.  OPM officials added that they have limited resources to assess data on  strategies intended to improve processing timeliness. As such, OPM  could consider a risk-based approach to collecting data and conducting  assessments. For example, OPM could prioritize assessments of more  resource-intensive activities over less resource-intensive activities. OPM  could also focus its assessments on situations that could potentially  introduce processing errors or data inconsistencies, such as when  regulatory or process changes are implemented, or when staff are newly  employed or are taking on new responsibilities. OPM officials also said  that processing time is one of multiple factors they use to determine the  effectiveness of staffing actions. However, as noted earlier, processing  times have not consistently improved, further underscoring the need for  better data and assessments of strategies intended to improve  processing timeliness. Lack of useful performance information and  policies and procedures to conduct assessments can hinder managers  from identifying causes and corrective actions to problems in existing  programs, as well as developing and prioritizing strategies and related  resources for future programs."], "subsections": []}]}, {"section_title": "OPM Provides Assistance to Agencies, but Lacks a Robust Process for Assessing That Assistance", "paragraphs": ["To obtain agencies\u2019 perspectives on the retirement application process  and better understand their coordination and collaboration with OPM, we  interviewed four selected agencies using a standardized set of questions  in a semi-structured interview format. After we met with the agencies, we  discussed the agencies\u2019 perspectives on OPM\u2019s assistance with OPM  officials and incorporated their comments, as appropriate."], "subsections": [{"section_title": "Selected Agencies Have Mixed Perspectives on OPM Assistance", "paragraphs": ["OPM provides four main types of assistance to agencies: written  guidance, training, communication through assigned liaisons and email,  and monthly error reports.", "Guidance. OPM provides written guidance to agencies on submitting  retirement applications through the Civil Service Retirement System  and Federal Employees Retirement System Handbook for Personnel  and Payroll Offices and Benefit Administration Letters. The letters  provide guidance to agencies on various topics, such as on retirement  policy and process issues. The most recent version of the handbook  posted on OPM\u2019s website is from 1998. OPM officials reported that  the handbook is updated on an ongoing basis and as resources  permit. Of the 47 chapters on OPM\u2019s website, five had been updated  between 2013 and 2017. NASA reported that OPM\u2019s handbook is out  of date and found it unreliable because some of the information is no  longer accurate. All of the four selected agencies reported that the  Benefit Administration Letters were very important. The Department of  Defense (DOD), the Department of Health and Human Services  (HHS), and the U.S. Postal Service (USPS) reported that the Benefit  Administration Letters were issued at about the right frequency. In  addition, DOD, the National Aeronautics and Space Administration  (NASA), and USPS also stated that the Benefit Administration Letters  were helpful or very helpful.", "Training. OPM officials reported that OPM provides training  opportunities to agencies which include semi-annual multi agency  conferences, training for benefit officers, webcasts, self-paced online  training, and onsite training if requested. DOD and HHS reported that  they were satisfied with the training, and NASA and USPS reported  that they were dissatisfied. For example, NASA reported that OPM\u2019s  training would be improved with more virtual trainings that are shorter.  NASA also reported that cost constraints prohibited sending all  retirement staff to in-person training while virtual training is accessible  to more staff.", "Liaisons and emails. OPM officials stated that it communicates with  agencies by assigning all agencies a liaison to contact for technical  assistance and communicating directly via email. For example, HHS  reported that its previous liaison had helped locate missing records,  such as a federal employee\u2019s federal service history. All of the four  selected agencies reported that the interaction with the liaisons was  very important, and DOD, NASA, and USPS reported that the  interactions were very helpful and about the right frequency. OPM  also stated that it communicates with benefit officers and other  interested parties through emails. USPS reported that the emails from  OPM included Benefit Administration Letters and announcements  about meetings and upcoming trainings. DOD, NASA, and USPS  reported that emails were the most helpful form of communication with  OPM.", "Error reports. OPM provides agencies with a monthly error report  after it analyzes each agency\u2019s batch of applications. This report  includes information on the type of error found and the volume of  applications with the same error, according to OPM. The error report  includes retirement applications for those who retired while working  for the federal government, which, for example, does not include  disability retirement applications, according to OPM officials. OPM  officials reported that the intent of the error reports is to educate the  agencies. DOD and USPS reported that the error reports were helpful  for identifying application errors. However, all four selected agencies  reported that aspects of the error reports were not user-friendly. For  example, the error reports are in a format that cannot be manipulated,  thereby requiring agencies to manually enter data to track the type of  errors found, and analyze the data and share the information  internally. Such manual entry increases the risk of data entry errors  that could compromise the accuracy of the original data. The four  selected agencies also reported that the error reports lack some types  of information, such as clear descriptions of errors, data on trends,  and information on disability retirement applications."], "subsections": []}, {"section_title": "OPM Conducts Limited Reviews of Its Assistance to Agencies", "paragraphs": ["OPM officials reported they review two of the four types of assistance  (guidance and training) and also conducted a review of error reports in  2014. They also stated that they had taken some actions in response to  agency feedback. However, OPM did not provide documentation of their  assessments of guidance or training.", "Guidance. OPM officials reported that they continue to evaluate their  guidance and had taken some actions in response to agency  feedback. For example, in response to agencies\u2019 feedback that they  experienced difficulty obtaining paper documentation of 5 years of  health insurance, OPM officials reported that they developed a new  form that agencies could use to certify that employees had the  required coverage, which has resulted in decreased errors. However,  OPM could not provide us with documentation of its reviews of its  guidance. In addition, OPM had no schedule for updating guidance to  agencies, according to OPM officials.", "Training. OPM officials reported that they receive agency feedback  on training in multiple ways and had taken some actions in response.  For example, OPM officials said that agencies provide feedback on  trainings informally during conversations with liaisons and at in-person  trainings. OPM officials also said they read training evaluation forms,  which include multiple choice questions on the value of the different  aspects of the training and an area to write any comments or  suggestions. In addition, OPM periodically surveys benefit officers on  their training, including open-ended questions about how and on what  topics the respondent would prefer to receive training. However, the  benefit officer survey does not include broader questions about how  the training or other types of assistance could better meet the needs  of agencies.", "In addition, OPM officials reported that in response to agency feedback,  they made improvements to the class offerings, such as enhancing  training on military discharges. OPM officials also reported that one of the  actions they take in response to the most common errors that agencies  make in retirement applications is to provide training on these topics. For  example, OPM officials reported that they identified common errors on  federal health benefits and military service documentation and  subsequently provided training on both topics. OPM officials did not  provide us with documentation of their reviews of agency feedback on  training.", "Error reports. In 2014, OPM conducted a review of the errors that 12  agencies disputed in the agencies\u2019 error reports. OPM officials  reported that the review concluded that less than 1 percent of OPM\u2019s  incorrectly identified errors would have affected the annuitant.  According to OPM officials, the cost of reviewing and adjusting the  error rate for accuracy outweighs the benefits. In addition, the four  selected agencies reported that they had shared information with  OPM on errors that the agencies thought were erroneously identified  as errors. The four selected agencies reported that OPM had not  changed the error rates in response. In addition, HHS and USPS  reported that OPM did not share the information on disputed errors  with its staff who audit the applications for errors. USPS officials also  stated that OPM had not used this information to train its staff.", "OPM\u2019s fiscal year 2018 budget justification cited partnering with agencies  to help them submit complete and accurate retirement packages for  quicker processing. While OPM officials reported that they have  reviewed certain types of assistance, they have limited or no  documentation on the analysis or the results of these reviews. Federal  internal control standards state that management should compare actual  performance to expected results and evaluate and document monitoring  results. The standards also state that management should complete and  document corrective actions to remediate control deficiencies in a timely  manner. In relation to training, which is one of the types of assistance  OPM provides to agencies, we have also reported that a leading training  investment practice is to evaluate the benefits achieved through training,  such as having a formal process for evaluating improvement in  performance and tracking the impact of training on the agency\u2019s  performance goals. Another leading practice is to compare the merits of  different delivery mechanisms (such as classroom or computer-based  training) and determine what mix of mechanisms to use to ensure efficient  and cost-effective delivery.", "OPM officials reported that effectiveness of their assistance to agencies is  a contributing factor to decreased errors in retirement applications. For  example, according to OPM, the percentage of complete applications  submitted government-wide improved from 77 percent in fiscal year 2010  to about 92 percent in fiscal year 2017. OPM officials also noted that they  assessed the effectiveness of their guidance and trainings and any  modifications by observing if particular types of errors decrease overall.", "OPM officials provided us a list of the most common errors for fiscal year  2017, such as a missing marriage certificate.", "Although OPM officials have stated that they review two of the four types  of assistance (guidance and training), OPM lacks a robust process for  assessing and documenting its analysis and findings regarding all forms  of the assistance it provides to agencies. This makes it more difficult for  OPM to clearly demonstrate the effectiveness of its assistance. Thus, for  example, there is limited understanding as to whether OPM\u2019s training is  being delivered through the most efficient and cost-effective mix of  mechanisms. OPM may be missing opportunities to better partner with  agencies by tailoring its assistance to help agencies improve their own  processes and training. Assessments that result in enhancing OPM\u2019s  assistance to agencies could improve the completeness of applications  submitted, which could in turn improve OPM\u2019s application processing  time.", "With respect to the agency error report, federal internal control standards  state that management should communicate quality information externally  so that external parties can help the entity achieve its objectives, and  periodically evaluate its methods of communication so that it  communicates quality information. OPM officials reported that the  current structure of the agency error reports was designed to capture the  large overarching error-based issues many agencies face, such as  applicants electing more life insurance coverage than permitted. OPM  officials reported that they have not solicited input from agencies about  the usefulness of the monthly error reports, but agencies regularly provide  feedback to their OPM liaisons. OPM officials reported that they are  evaluating the trends in the feedback. However, revising the structure of  the current error reports would not be cost-effective, according to OPM  officials. They also reported that they are considering including disability  applications in future error reports.", "The current format of the agency error report may limit its usefulness to  agencies in improving their retirement applications and educating staff on  how to address or minimize errors. Without user-friendly error reports,  such as one that could be manipulated in Excel, agencies could find it  more challenging to efficiently share the data among agency divisions  and for the divisions to further sort the data. This challenge may be  particularly burdensome at agencies comprised of numerous sub- agencies that share responsibility for preparing higher volumes of  retirement applications."], "subsections": []}]}]}, {"section_title": "Selected Agencies Have Developed Strategies for Compiling Accurate Applications", "paragraphs": ["We found that the four selected agencies we interviewed used three  strategies to compile accurate retirement applications, as shown in figure  5 below. Some agencies also had additional strategies, such as tracking  identified issues in applicant\u2019s retirement applications.", "Preparing employees for retirement. The four selected agencies  provide retirement counseling and had an agenda or a checklist to guide  the discussion. Some of the topics included designating beneficiaries and  eligibility to continue health insurance into retirement. DOD, HHS, USPS,  and NASA also reported providing additional assistance to prepare  employees for retirement. DOD\u2019s website had calculators that could be  used for estimating a Thrift Savings Plan annuity and survivor benefits.  HHS stated that its employees have access to online pre-retirement  seminars and financial planning resources. In addition, USPS has an  employee retirement kit for that includes health insurance information,  general retirement information, and retirement forms, such as for  documenting life insurance and retirement effective date.", "NASA also prepares employees for retirement in two additional ways.  First, NASA reviews new employees\u2019 electronic Official Personnel  Folders, which contain their federal employment history, and makes  corrections as needed. NASA officials stated it tries to resolve any issues  in an employee\u2019s electronic Official Personnel Folder rather than waiting  until an employee retires. Samples of these files are then audited.  Second, NASA stated that it encourages employees to ask for an annuity  estimate every year for the 7 years prior to planned retirement. NASA  reported that each annuity estimate generated includes a review of an  employee\u2019s files, and enables the agency to identify and address any  errors.", "Educating and training staff that compile retirement applications.  The four selected agencies hold periodic staff meetings that include  discussions of retirement applications. For example, NASA\u2019s meeting  includes a discussion of common errors to avoid, unique or complex  retirement cases, process improvements, and lessons learned. The four  selected agencies also conduct retirement application training. For  example, DOD provided a multiday training that included topics such as  creditable service, annuity computation, and retirement eligibility. HHS  also stated that it partnered with its payroll provider to present the payroll  side of retirement processing, including retirement application processing  and disability retirement processing. DOD, HHS, NASA, and USPS also  reported that new staff is mentored by experienced staff.", "Procedures for compiling applications. The four selected agencies  have procedures for compiling applications. For example, the four  selected agencies have checklists to help staff compile the required  documents. DOD\u2019s checklist includes a list of more than 30 documents in  sequential order with instructions on which documents to include for each  of the two retirement plans. In addition, the four selected agencies  reported having a system to track the process of compiling applications.  DOD\u2019s, NASA\u2019s, and USPS\u2019 respective systems also include tracking  identified issues. For example, USPS\u2019 system monitors the overall  progress of each application, as well as tracks the status of each  identified issue, such as missing documents, and whether the issue had  been resolved.", "The four selected agencies also conduct audits on some or all of the  applications before submitting applications to OPM. The agencies  reported that the audits are used to increase accuracy of submitted  applications and provide feedback to staff on any identified errors. For  example, DOD has an audit checklist with more than 30 items to review,  such as whether a marriage certificate is included if applicable and if the  application is signed."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["Delays in processing retirement applications for federal employees have  been a longstanding problem. According to OPM, it has identified root  causes for the delays and has developed and implemented strategies to  improve its processing operation. For example, the agency has  developed a strategic vision for modernizing the current paper-based  application, and employed strategies to address staffing capacity and  minimize the number of incomplete applications. However, without  improving its data collection and assessments of its strategies, OPM  cannot know whether its strategies are effective at reducing the delays, or  could be modified to yield better results. Furthermore, OPM\u2019s plan for  modernizing its information technology (IT) retirement processing lacks  cost estimates and timelines, which means there are no measurable  results with which to evaluate resource needs or interim progress.", "In addition, although OPM has established a performance goal on  processing timeliness, its related performance measure does not include  explanatory information that could make it more meaningful. OPM also  has not set performance measures for various parts of the application  review and processing operation that could provide clearer insights into  where improvements may be needed. Lack of quality performance  information hinders applicants and external stakeholders from  understanding OPM\u2019s timeliness in processing applications, and limits  OPM from better managing and monitoring program performance.  Furthermore, OPM lacks a robust process for assessing its assistance to  agencies, which makes it difficult for OPM to demonstrate the  effectiveness of its assistance.", "Potential organizational changes and other external factors have created  additional uncertainty for OPM. These challenges notwithstanding,  approximately 100,000 federal employees depend on OPM each year to  process retirement benefits, such as life and health insurance, in a timely  manner. As such, OPM should endeavor to reduce processing delays,  monitor and report on its progress through better performance  information, and effectively partner across the federal government to  improve processing timeliness."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following six recommendations to OPM:  The Associate Director of OPM\u2019s Retirement Services, working in  coordination with the Chief Information Officer, should develop,  document, and implement a Retirement Services IT modernization plan  for initial project phases that is consistent with key aspects of IT project  management, such as determining objectives, costs, and time frames for  each initial phase. (Recommendation 1)", "The Associate Director of OPM\u2019s Retirement Services should adopt  management practices to enhance the use of performance information on  processing timeliness to inform how OPM manages operations, identifies  problem areas, and allocates resources. For example, OPM could  enhance use of performance measures at the operational level or  establish a timeliness performance goal for reviewing disability retirement  eligibility. (Recommendation 2)", "The Associate Director of OPM\u2019s Retirement Services should provide  explanatory information, such as the range of processing times and the  exclusion of disability retirement eligibility determinations, as part of the  performance measure on processing timeliness. (Recommendation 3)", "The Associate Director of OPM\u2019s Retirement Services should develop  and implement policies and procedures for assessing strategies intended  to improve processing times, including collecting and improving data  needed to support those strategies, such as collecting better productivity  data or staffing data and linking them to processing outcomes.  (Recommendation 4)", "The Associate Director of OPM\u2019s Retirement Services should examine its  process for assessing its assistance to agencies on retirement  applications. For example, OPM could incorporate into its assessment  process more agency feedback or documentation of assessment results,  which could improve its partnership with agencies to strengthen the  assistance provided. (Recommendation 5)", "The Associate Director of OPM\u2019s Retirement Services should work with  agencies to determine if there are cost-effective ways to make the  retirement application error report that it sends to agencies more user- friendly. For example, explore whether there are cost-effective ways to  provide the error report in a format that could be manipulated (e.g., Excel  spreadsheet), or to include additional information, such as incorporating  disability retirement applications or providing clearer descriptions of errors  or trend data, some of which OPM already collects. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of the report to OPM, DOD, HHS, NASA, and USPS  for review and comment.  In its comments, reproduced in appendix I,  OPM concurred with 1 recommendation and partially concurred with the  remaining 5 recommendations. HHS and NASA provided technical  comments, which we incorporated as appropriate. DOD and USPS had  no comments on the draft.", "OPM partially concurred with our first recommendation to develop,  document, and implement a Retirement Services IT modernization plan  that includes costs and time frames for initial project phases. OPM stated  that it has established initial high-level funding estimates for each of its  five key IT initiatives, but OPM did not provide any documentation or  further details. OPM cited that its ability to implement the modernization  plan depends on the availability of funding and coordination with the  agency\u2019s top leadership. We agree these are important elements, which  further underscore our recommendation.  An IT modernization plan with  objectives, cost estimates, and time frames could help support funding  requests, as well as measure progress in implementing the initiatives.", "OPM partially concurred with our second recommendation to enhance the  use of performance information on processing timeliness to make more  informed management decisions. OPM responded that it measures  overtime spending, reviews daily work level in each work unit, and  assesses employee productivity in these units. Collecting and reviewing  such operational-level data contributes to monitoring efforts; however our  recommendation emphasizes the importance of using performance  information to better manage operations to align with organizational  goals.", "OPM partially concurred with our third recommendation to provide  explanatory information as part of its reporting of processing timeliness.   OPM agreed to add an explanation about disability retirement eligibility  determinations to its public reports. OPM disagreed that reporting data on  the range of processing times would be beneficial because, according to  OPM, it provides processing information through other means, such as  through applicants\u2019 online accounts and agency benefit officers. While  providing this information is beneficial, publically reporting data on the  range of processing times helps improve the usefulness of performance  information for applicants and external stakeholders, such as  congressional oversight committees. Further, OPM acknowledged that it  already collects and shares such data, which confirms it has the  information and ability to implement this recommendation by adding  appropriate summary notes to its public reporting. This action coupled  with adding an explanation about disability retirement eligibility  determinations should address the recommendation.", "OPM partially concurred with our fourth recommendation to develop and  implement policies and procedures for assessing strategies intended to  improve processing times, including collecting data needed to support  those strategies. OPM stated that a new case management system could  provide better productivity and staffing data with which to assess  effectiveness, but is dependent on funding and IT support.  However,  developing policies and procedures to manage and monitor its  assessment process\u2014such as determining when, how, and how often to  conduct assessments and what data to collect\u2014is not dependent on  having a new case management system. In fact, establishing such  policies and procedures could help inform system requirements in terms  of data and reporting needs.", "OPM concurred with our fifth recommendation to examine its process for  assessing its assistance to agencies on retirement applications, and  stated that it will incorporate more agency feedback into its assessment  results on non-disability immediate retirement applications.", "OPM partially concurred with our sixth recommendation to work with  agencies to determine if there are cost-effective ways to make the error  report more user-friendly. OPM stated that it will explore using MS Excel  spreadsheets and incorporating clearer descriptions of errors and data  trends. OPM asserted that our report incorrectly states that the data sent  to agencies cannot be manipulated as agencies receive the data in  MSWord documents from which they can create MS Excel spreadsheets.   However, as OPM acknowledges, agencies have to create their own  spreadsheets. Doing so requires agencies to manually enter the data to  track and analyze errors, which increases the risk of data entry mistakes  that could compromise the accuracy of original data, as we reported.   OPM also stated that collecting disability application error information is  not an inexpensive or simple process change. While we recognize OPM\u2019s  audit efforts may need to be modified to capture this type of error  information, it would provide agencies with more comprehensive error  data that could be used to improve the agencies\u2019 application processes.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Acting Director of OPM, the  Secretary of DOD, the Secretary of HHS, the Administrator of NASA, and  the Postmaster General and Chief Executive Officer of USPS. 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) 512-6806 or Jonesy@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."], "subsections": []}]}, {"section_title": "Appendix I: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix II: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Leah Querimit Nash (Assistant  Director), Maya Chakko (Analyst in Charge), Mark Bird, Jackie Chapin,  Jeff DeMarco, Elizabeth Fan, Gina Hoover, Ted Hu, Ben Licht, Meredith  Moles, Robert Robinson, and Kayla Robinson made key contributions to  this report."], "subsections": []}]}], "fastfact": ["The Office of Personnel Management receives over 100,000 federal retirement applications each year. Between 2014 and 2017, OPM did not meet its goal of processing most applications within 60 days.", "OPM identified 3 main reasons for delays:", "Continued reliance on paper applications and manual processing", "Insufficient staffing, particularly during peak season", "Incomplete applications", "OPM has taken steps toward modernizing the process, such as planning for an electronic application, but it lacks a timetable and cost estimates for IT modernization.", "We made 6 recommendations, including that OPM develop an IT modernization plan."]}
{"id": "GAO-18-317T", "url": "https://www.gao.gov/products/GAO-18-317T", "title": "NASA Commercial Crew Program: Continued Delays Pose Risks for Uninterrupted Access to the International Space Station", "published_date": "2018-01-17T00:00:00", "released_date": "2018-01-17T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since the Space Shuttle was retired in 2011, the United States has been relying on Russia to carry astronauts to and from the space station. NASA's Commercial Crew Program is facilitating private development of a domestic system to meet that need safely, reliably, and cost-effectively before the seats it has contracted for on a Russian spacecraft run out in 2019.", "In 2014, NASA awarded two firm-fixed-price contracts to Boeing and SpaceX worth a combined total of up to $6.8 billion to develop crew transportation systems and conduct initial missions to the space station. In February 2017, GAO found that both contractors had made progress, but their schedules were under mounting pressure.", "This statement provides preliminary observations on the extent to which the contractors and the program are making progress toward meeting NASA's standards for human spaceflight, a process called certification.", "This statement is based on ongoing work and information contained in GAO's February 2017 report on this program ( GAO-17-137 ). To do this work, GAO analyzed contracts, schedules, and other documentation."]}, {"section_title": "What GAO Found", "paragraphs": ["Both Boeing and Space Exploration Technologies (SpaceX) are making progress toward their goal of being able to transport American astronauts to and from the International Space Station (ISS). However, both continue to experience schedule delays. Such delays could jeopardize the ability of the National Aeronautics and Space Administration's (NASA) Commercial Crew Program to certify either company's option\u2014that is, to ensure that either option meets NASA standards for human spaceflight\u2014before the seats the agency has contracted for on Russia's Soyuz spacecraft run out in 2019. (See figure.)", "GAO's ongoing work has identified three key risks, which are consistent with challenges reported in February 2017 that could further delay certification of each contractor's crew transportation system:", "Aggressive schedules \u2014NASA, Boeing, SpaceX, and independent review bodies have all noted that the contractors' schedule plans are aggressive. The anticipated schedule risks have since materialized.", "Programmatic and safety risks \u2014SpaceX and Boeing are addressing technical risks, which is not uncommon for NASA projects as they often push the state of the art in space technology. In addition, the contractors' systems must meet a standard for crew safety. Additional work remains to determine whether the contractors will meet this requirement.", "Program office workload \u2014Program officials told GAO that one of their greatest upcoming challenges will be to complete two oversight activities\u2014conducting phased safety reviews and verifying that contractors meet requirements\u2014concurrently. The program's ability to smooth its workload is limited, as the contractors generally control their development schedules. In February 2017, GAO found that proposed schedule changes could alleviate some overlap.", "Delays and uncertain final certification dates raise questions about whether the United States will have uninterrupted access to the ISS after 2019, and may lessen NASA's return on investment with the contractors. GAO will continue to assess the contractors' and program's progress."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any new recommendations. In February 2017, GAO recommended that NASA develop a contingency plan to maintain access to the ISS beyond 2018, when its contract with Russia for seats on the Soyuz was scheduled to end. NASA agreed with this recommendation and purchased Soyuz seats through 2019."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss the status of the National  Aeronautics and Space Administration\u2019s (NASA) Commercial Crew  Program. As you know, following the retirement of the Space Shuttle in  2011, the United States was left with no domestic ability to provide crew  access to the International Space Station (ISS). Since then, NASA has  relied on purchasing seats from Russia on its Soyuz spacecraft to  maintain a U.S. presence on the station. NASA\u2019s Commercial Crew  Program is intended to end this dependency by facilitating the commercial  development of a crew transportation system that can provide safe,  reliable, and cost-effective transportation to and from low earth orbit,  including the ISS. NASA\u2019s goal is to have one or more contractors that  can provide crew transportation services to the ISS, which NASA expects  will be operational until at least 2024.", "NASA\u2019s acquisition strategy on the Commercial Crew Program is similar  to the one it used on the Commercial Cargo program, but different than  every other spacecraft it has built for humans, from Mercury to Gemini  and Apollo to the Space Shuttle. For the Commercial Crew Program,  each contractor designs, develops, builds, owns, and operates its  spaceflight system and infrastructure. The contractors have access to  NASA\u2019s expertise and resources throughout the development process,  but NASA engineers are not making design decisions, and NASA  personnel are less involved in processing, testing, launching, and  operating the crew transportation system. In the end, NASA will buy a  crew transportation service\u2014a ride for its astronauts to and from the  ISS\u2014much like it does for ISS cargo.", "In the most recent phase of the Commercial Crew Program, NASA  awarded firm-fixed-price contracts in 2014 to Boeing and Space  Exploration Technologies Corporation (SpaceX), valued at up to $4.2  billion and $2.6 billion, respectively, for the development of crew  transportation systems that meet NASA requirements and for flying initial  missions to the ISS. According to the contracts, the companies were  supposed to provide NASA all the evidence the agency needed to certify  that their systems met its performance and safety requirements by 2017.", "We have reviewed the Commercial Crew Program for the last two years  as part of our annual assessment of all NASA\u2019s major projects. We also  issued a report on the program in February 2017 in response to a  provision in the House Committee on Appropriations report  accompanying H.R. 2578. Prior to this, we issued a report in December  2011 that assessed NASA\u2019s acquisition approach for acquiring  commercial crew transportation. Over this time, we have reported that  the program made progress as both contractors make progress finalizing  their designs and building hardware, but we also found that schedule  pressure has increased as contractors delay key events.", "My statement today provides our preliminary observations on the extent  to which the contractors and the Commercial Crew Program are making  progress in developing crew transportation systems that meet NASA\u2019s  standards for human spaceflight, a process called certification. This  statement today is based upon our most recent report issued in February  2017 and some updated information since that report was published,  which is based on ongoing work. Our ongoing work is in response to a  provision included in the house report accompanying H.R. 5393 for GAO  to review the progress of NASA\u2019s human exploration programs.", "For our ongoing work, to assess the extent to which the contractors are  making progress toward certification, we obtained and reviewed program  and contractor documents, including quarterly updates as well as monthly  schedule summaries, from April 2017 through November 2017. We  interviewed contractor officials to discuss the contractors\u2019 recent progress  as well as their upcoming events and any expected delays. To identify  total delays to date, we compared original contract schedules to Boeing\u2019s  October 2017 working schedule and SpaceX\u2019s November 2017 working  schedule, which identify their most recent proposed delays to some  milestones. We also identified key risks facing the contractors and  program by obtaining and reviewing monthly and quarterly reports, as  well as the risks tracked in the program\u2019s risk management system, from  April 2017 through November 2017. We interviewed program and  contractor officials with knowledge of the technical risks to understand the  risks and potential impacts and how they are planning to mitigate those  risks.", "The work upon which this statement is based is being conducted in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. More information about the  scope and methodology for our February 2017 report can be found in that  report.", "We plan to issue a final report on the Commercial Crew Program in spring  2018. NASA provided us technical comments on information that is  included in this statement, which we incorporated as appropriate."], "subsections": [{"section_title": "Background", "paragraphs": ["NASA\u2019s Commercial Crew Program is a multi-phased effort that began in  2010. Across the five phases, NASA has engaged several companies  using both agreements and contract vehicles to develop and demonstrate  crew transportation capabilities. As the program has passed through  these phases, NASA has generally narrowed down the number of  participants. The early phases of the program were under Space Act  agreements, which is NASA\u2019s other transaction authority. These types of  agreements are generally not subject to the Federal Acquisition  Regulation (FAR) and allow the government and its contractors greater  flexibility in many areas. Under these Space Act agreements, NASA  relied on the commercial companies to propose specifics related to their  crew transportation systems, including their design, the capabilities they  would provide, and the level of private investment. In these phases,  NASA provided technical support and determined if the contractors met  certain technical milestones. In most cases, NASA also provided funding.", "For the final two phases of the program, NASA awarded FAR-based  contracts. By using FAR-based contracts, NASA gained the ability to levy  specific requirements on the contractors and procure missions to the ISS,  while continuing to provide technical expertise and funding to the  contractors. Under these contracts, NASA will also evaluate whether  contractors have met its requirements and certify their final systems for  use.", "In September 2014, NASA awarded firm-fixed-price contracts to Boeing  and SpaceX, valued at up to $4.2 billion and $2.6 billion, respectively, for  the Commercial Crew Transportation Capability phase. Under a firm- fixed-price contract, the contractor must perform a specified amount of  work for the price negotiated by the contractor and government. This is in  contrast to a cost-reimbursement contract, in which the government  agrees to pay the contractor\u2019s reasonable costs regardless of whether  work is completed. Thus, under the fixed-price contracts, the contractors  must generally bear the risk of cost overruns or schedule delays.", "During this phase, the contractors will complete development of crew  transportation systems that meet NASA requirements, provide NASA with  the evidence it needs to certify that those systems meet its requirements,  and fly initial crewed missions to the ISS. Under the contracts, NASA and  the companies originally planned to complete the certification review for  each system by 2017. Figure 1 shows the spacecraft and launch vehicles  for Boeing and SpaceX\u2019s crew transportation systems.", "The Commercial Crew Transportation Capability phase contracts include  three types of services:", "Contract Line Item 001 encompasses the firm-fixed-price design,  development, test, and evaluation work needed to support NASA\u2019s  final certification of the contractor\u2019s spacecraft, launch vehicle, and  ground support systems.", "Contract Line Item 002 covers any service missions that NASA  orders to transport astronauts to and from the ISS. Under this  indefinite-delivery, indefinite-quantity line item, NASA has ordered six  missions from each contractor. Each service mission is its own firm- fixed-price task order. NASA must certify the contractors\u2019 systems  before they can fly these missions.", "Contract Line Item 003 is an indefinite-delivery, indefinite-quantity  line item for any special studies, tests, and analyses that NASA may  request. These tasks do not include any work necessary to  accomplish the requirements under contract line item 001 and 002. As  of July 2017, NASA had issued four orders under this contract line  item to Boeing, worth approximately $1.8 million, including an  approximately $180,000 study of the spacecraft\u2019s seat incline. NASA  has issued one order under this contract line item to SpaceX, which  did not affect the value of this line item. The maximum value of this  contract line item is $150 million.", "NASA divided the certification work under contract line item 001 into two  acceptance events: the design certification review and the certification  review. An acceptance event occurs when NASA approves a contractor\u2019s  designs and acknowledges that the contractor\u2019s work is complete and  meets the requirements of the contract. The design certification review  verifies the contractor\u2019s crew transportation system\u2019s capability to safely  approach, dock, mate, and depart from the ISS, among other  requirements. After the contractor has successfully completed all of its  flight tests, as well as various other activities, the certification review  determines whether the crew transportation system meets the  Commercial Crew Program\u2019s requirements. The contractors must  complete both acceptance events to receive NASA certification.", "NASA and the contractors also identified discrete performance-based  events, called interim milestones, which occur as the contractors progress  toward the two acceptance events. Each interim milestone has pre- determined entrance and exit criteria that establish the work that must be  completed in order for the contractor to receive payment. The interim  milestones serve several functions, allowing the government to finance  work from development to completion, review the contractors\u2019 progress,  and provide approval to proceed with key demonstrations and tests. The  program also uses these milestones to inform its annual budget request.  Since the contracts were awarded, the Commercial Crew Program and  the contractors have agreed to split several of the interim milestones. The  contractors have also added new milestones, in part to capture changes  in their development plans.", "NASA has also made changes to the contracts that have increased their  value. While the contracts are fixed-price, their values can increase if  NASA adds to the scope of the work or otherwise changes requirements.  As of July 2017, NASA had increased the value of contract line item 001  for Boeing by approximately $48 million for hardware and software  requirement changes, and contract line item 001 for SpaceX by  approximately $91 million for a hardware requirement change and the  addition of cargo during an ISS test flight.", "In our February 2017 report, we found the following:", "Both of the Commercial Crew Program\u2019s contractors have made  progress developing their crew transportation systems, but both also  have aggressive development schedules that are increasingly under  pressure. Both Boeing and SpaceX had determined that they would  not be able to meet their original 2017 certification dates, and both  expected certification to be delayed until 2018. We found that the  schedule pressures were amplified by NASA\u2019s need to provide a  viable crew transportation option to the ISS before its current contract  with Russia\u2019s space agency runs out in 2019. If NASA needs to  purchase additional seats from Russia, the contracting process  typically takes 3 years. Without a viable contingency option for  ensuring uninterrupted access to the ISS in the event of further  Commercial Crew delays, we found that NASA was at risk of not  being able to maximize the return on its multibillion dollar investment  in the space station.", "The Commercial Crew Program was using mechanisms laid out in its  contracts to gain a high level of visibility into the contractors\u2019 crew  transportation systems, but maintaining the current level of visibility  through certification could add schedule pressures. For example, due  to NASA\u2019s acquisition strategy for this program, its personnel are less  involved in the testing, launching, and operation of the crew  transportation system. And while the program has developed  productive working relationships with both contractors, the level of  visibility that the program had required thus far had also taken more  time than the program or contractors anticipated. Ultimately, the  program has the responsibility for ensuring the safety of U.S.  astronauts, and its contracts give it deference to determine the level of  visibility required to do so. Moving forward though, we found that the  program office could face difficult choices about how to maintain the  level of visibility it feels it needs without adding to the program\u2019s  schedule pressures.", "In order to ensure that the United States had continued access to the ISS  if the Commercial Crew Program\u2019s contractors experienced additional  schedule delays, we recommended that the NASA Administrator develop  a contingency plan for maintaining a presence on the ISS beyond 2018,  including options to purchase additional Russian Soyuz seats, and report  to Congress on the results. NASA concurred with this recommendation,  and in February 2017, NASA executed a contract modification to procure  an option for three crewmember seats from Boeing on the Russian Soyuz  vehicle. Our analysis found that these seats represented a contingency  plan for U.S. access to the ISS through 2019. In April 2017, NASA  informed the Congress of this action."], "subsections": []}, {"section_title": "Both Contractors Have Made Progress but Continue to Experience Schedule Delays", "paragraphs": [], "subsections": [{"section_title": "Contractors Continue to Advance Development of Their Crew Transportation Systems", "paragraphs": ["Both Boeing and SpaceX have continued to make progress finalizing their  designs and building hardware as they work toward final certification of  their crew transportation systems, since we last reported in February  2017. Each contractor\u2019s system includes a spacecraft and a launch  vehicle with supporting ground systems. The contractors are also  manufacturing test articles and flight spacecraft to support the uncrewed  and crewed flight tests. The contractors plan to use the test articles to  demonstrate system performance and the flight spacecraft to  demonstrate their ability to meet contract requirements.", "As table 1 shows, these test articles and flight spacecraft are currently in  varying stages of completion\u2014some are completed and in testing while  others are still early in the manufacturing phase. Should any issues arise  during integration and test or the flight tests planned for 2018, the  contractors may have to complete rework on the spacecraft already under  construction."], "subsections": []}, {"section_title": "Schedule Delays Continue, and Risks Remain to Final Certification Dates", "paragraphs": ["The contractors have notified NASA that final certification dates have  slipped to the first quarter of calendar year 2019 and, through our ongoing  work, we have identified three key risk areas that could further delay  certification of each contractor\u2019s crew transportation system. These areas  are (1) the contractors\u2019 aggressive schedules, (2) programmatic and  safety risks, and (3) Commercial Crew Program\u2019s workload. These are  consistent with the challenges we found facing the contractors and  program in our February 2017 report.", "Aggressive schedules. Since the award of the current Commercial Crew  contracts in September 2014, the program, Boeing, and SpaceX have all  identified the contractors\u2019 delivery schedules as aggressive. Program  officials told us that, from the outset, they knew delays were likely due to  the developmental nature of the program. Multiple independent review  bodies\u2014including the program\u2019s standing review board, the Aerospace  Safety Advisory Panel, and the NASA Advisory Council-Human  Exploration and Operations committee\u2014also noted the aggressiveness of  the contractors\u2019 schedules as they move toward certification.", "In February 2017, we found that both contractors had notified NASA that  they would not be able to meet the 2017 final certification dates originally  established in their contracts and expected final certification to be delayed  until 2018. Based on our ongoing work, we found that the contractors  have notified NASA that these dates have slipped further to the first  quarter of calendar year 2019. Figure 2 shows the original Boeing and  SpaceX contract schedule and the current proposed schedule for each  contractor.", "However, the extent to which these schedules represent an accurate  estimate of each contractor\u2019s final certification date is unclear for the  following two reasons:  1.  Each contractor provides schedule updates to the Commercial Crew  Program at quarterly status reviews, and the dates frequently change.  The program has held 12 quarterly reviews since each contract was  awarded. Boeing has reported a delay six times and SpaceX has  reported a delay nine times that included at least one key event  identified in the timeline above at these quarterly reviews.  2.  The Commercial Crew Program is tracking risks that both contractors  could experience additional schedule delays and, based on our  ongoing work, we found that the program\u2019s own analysis indicates that  certification is likely to slip into December 2019 for SpaceX and  February 2020 for Boeing. Each month, the program updates its  schedule risk analysis, based on the contractors\u2019 internal schedules  as well as the program\u2019s perspectives and insight into specific  technical risks. The Commercial Crew Program manager stated that  differences between the contractors\u2019 proposed schedules and the  program\u2019s schedule risk analysis include the following:", "The contractors are aggressive and use their schedule dates to  motivate their teams, while NASA adds additional schedule  margin for testing.", "Both contractors assume an efficiency factor in getting to the  crewed flight test that NASA does not factor into its analysis.", "The program manager explained further that the program meets with  each contractor monthly to discuss schedules and everyone agrees to  the relationships between events in the schedule even if they disagree  on the length of time required to complete events. The program  manager added, however, that she relies on her prior experience for a  better sense of schedule timeframes as opposed to relying on the  contractors\u2019 schedules.", "While NASA has a fixed-price contract with both SpaceX and Boeing,  there are consequences to the delays to date and the lack of certainty  surrounding the final certification date. The United States has spent tens  of billions of dollars to develop, assemble, and operate the ISS over the  past two decades, and NASA relies on uninterrupted crew access to help  maintain and operate the station itself and conduct the research required  to enable human exploration in deep space and eventually Mars, among  other science and research goals. To ensure uninterrupted access to the  ISS through 2019, which includes launch and return of the astronauts,  NASA purchased five seats on the Soyuz spacecraft through Boeing for  an undisclosed value. Boeing obtained these seats though a legal  settlement with the Russian firm, RSC Energia, which manufactures the  Soyuz. The NASA Office of Inspector General found in its annual report  on NASA\u2019s top management and performance challenges that if the  Commercial Crew Program experiences additional delays, NASA may  need to buy additional seats from Russia to ensure a continued U.S.  presence on the ISS. Further, the ISS is planned to be operational  through 2024. Unless there is a decision to extend the ISS\u2019s operational  life, additional delays by Boeing and SpaceX may lessen NASA\u2019s return  on investment with the contractors. We will continue to monitor this as  part of our ongoing work.", "Programmatic and safety risks. In addition to challenges facing Boeing  and SpaceX\u2019s aggressive schedules, both contractors face other risks  that will need to be addressed to support their certification. This includes  the contractors\u2019 ability to meet the agency\u2019s requirements related to the  safety of their systems. These risks are not unusual; there are inherent  technical, design, and integration risks in all NASA\u2019s major acquisitions,  as these projects are highly complex and specialized and often push the  state of the art in space technology. The Commercial Crew Program  monitors risks through two lenses\u2014programmatic risks potentially affect  the program\u2019s cost and schedule or the performance of the crew  transportation system, and safety risks could elevate the potential for the  loss of crew."], "subsections": [{"section_title": "SpaceX Risks", "paragraphs": ["Similar to our findings in February 2017, our ongoing work indicates that  the Commercial Crew Program\u2019s top programmatic and safety risks for  SpaceX, are in part, related to ongoing launch vehicle design and  development efforts.", "SpaceX must close several of the program\u2019s top risks related to its  upgraded launch vehicle design, the Falcon 9 Block 5, before it can be  certified for human spaceflight. Included in this Block 5 design is  SpaceX\u2019s redesign of the composite overwrap pressure vessel. SpaceX  officials stated the new design aims to eliminate risks identified in the  older design, which was involved in an anomaly that caused a mishap in  September 2016. Separately, SpaceX officials told us that the Block 5  design also includes design changes to address cracks in the turbine of  its engine identified during development testing.", "NASA program officials told us that they had informed SpaceX that the  cracks were an unacceptable risk for human spaceflight. SpaceX officials  told us that they have made design changes, captured in this Block 5  upgrade, that did not result in any cracking during initial life testing.  However, this risk will not be closed until SpaceX successfully completes  qualification testing in accordance with NASA\u2019s standards without any  cracks. SpaceX officials stated they expect this testing to be completed in  first quarter calendar year 2018.", "Finally, both the program and a NASA advisory group consider SpaceX\u2019s  plan to fuel the launch vehicle after the astronauts are on board the  spacecraft to be a potential safety risk. SpaceX\u2019s perspective is that this  operation may be a lower risk to the crew. To better understand the  propellant loading procedures, the program and SpaceX agreed to  demonstrate the loading process five times from the launch site in the  final crew configuration prior to the crewed flight test."], "subsections": []}, {"section_title": "Boeing Risks", "paragraphs": ["Our ongoing work indicates that Boeing is mitigating several risks in order  to certify its crew transportation system, including challenges related to its  abort system performance, parachutes, and its launch vehicle.", "Boeing is addressing a risk that its abort system, which it needs for  human spaceflight certification, may not meet the program\u2019s requirement  to have sufficient control of the vehicle through an abort. In some abort  scenarios, Boeing has found that the spacecraft may tumble and that  could pose a threat to the crew\u2019s safety. To validate the effectiveness of  its abort system, Boeing has conducted extensive wind tunnel testing and  plans to complete a pad abort test in April 2018.", "Boeing is also addressing a risk that during re-entry to the Earth\u2019s  atmosphere, a portion of the spacecraft\u2019s forward heat shield may  reconnect and damage the parachute system. NASA\u2019s independent analysis indicates that this may occur if both parachutes that pull the  forward heat shield away from the spacecraft deploy as expected.  Boeing\u2019s analysis indicates the risk exists only if one of two parachutes  does not deploy as expected. If the program determines this risk is  unacceptable, Boeing would need to redesign the parachute system,  which the program estimates could result in at least a 6-month delay.  Finally, one of the program\u2019s top programmatic and safety concerns is  that it may not have enough information from Boeing\u2019s launch vehicle  provider, United Launch Alliance, to assess if the launch vehicle prevents  or controls cracking that could lead to catastrophic failures. The program  and Boeing are in the process of negotiating next steps."], "subsections": []}, {"section_title": "Program Safety Risk", "paragraphs": ["The Commercial Crew Program has identified the ability of it and its  contractors to meet a crew safety requirement as one of its top risks.  NASA established the \u201closs of crew\u201d metric as a way to measure the  safety of a crew transportation system. The metric captures the  probability of death or permanent disability to one or more crew members.  Under each contract, the current loss of crew requirement is 1 in 270,  meaning that the contractors\u2019 systems must carry no more than a 1 in 270  probability of incurring loss of crew. Near the end of the Space Shuttle  program, the probability of loss of crew was approximately 1 in 90. As  part of our ongoing work, we continue to work with NASA to understand  how the loss of crew requirement was established for the Commercial  Crew Program.", "Program officials told us that Commercial Crew is the first NASA program  that the agency will evaluate against a probabilistic loss of crew  requirement. They said that if the contractors cannot meet the loss of  crew requirement at 1 in 270, NASA could still certify their systems by  employing operational mitigations. They said this would entail a  potentially increased level of risk or uncertainty related to the level of risk  for the crew.", "Program officials told us their main focus is to work with the contractors to  ensure that the spacecraft designs are robust from a safety perspective.  The loss of crew metric and the associated models used to measure it are  tools that help achieve that goal. For example, Boeing told us that in early  2016, it needed to identify ways to reduce the mass of its spacecraft. As  Boeing found opportunities to reduce the spacecraft mass, the program  stated that it had to consider how implementing those design changes  would affect its loss of crew analysis in addition to compliance with other  performance and safety requirements. According to the program, it is  working with both contractors to address the factors that drive loss of  crew risk through design changes or additional testing to gain more  information on the performance and reliability of systems. As part of our  ongoing work, we will continue to assess the extent to which the  contractors are meeting this requirement and what tools the program and  NASA will use to determine if the contractors meet the requirement.", "Program office workload. In February 2017, we found that the  Commercial Crew Program was using contractually defined mechanisms  to gain a high level of visibility into the contractors\u2019 crew transportation  systems, but also found that the Commercial Crew Program\u2019s workload  was an emerging schedule risk. At that time, program officials told us  that one of their greatest upcoming challenges will be to keep pace with  the contractors\u2019 schedules so that the program does not delay  certification. Specifically, they told us they are concerned about an  upcoming \u201cbow wave\u201d of work because the program must complete two  oversight activities\u2014phased safety reviews and verification closure  notices\u2014concurrently in order to support the contractors\u2019 design  certification reviews, uncrewed and crewed flight test missions, and final  certification.", "The Commercial Crew Program is working to complete its three-phased  safety review, which will ensure that the contractors have identified all  safety-critical hazards and implemented associated controls, but it is  behind schedule. Both the contractors and the program have contributed  to these delays.", "In phase one, Boeing and SpaceX identified risks in their designs and  developed reports on potential hazards, the controls they put in place  to mitigate them, and explanations for how the controls will mitigate  the hazards.", "In phase two, which is ongoing, the program reviews and approves  the contractors\u2019 hazard reports, and develops strategies to verify and  validate that the controls are effective.", "In phase three, the contractors plan to conduct the verification  activities and incrementally close the reports.", "The Commercial Crew Program\u2019s review and approval of the contractors\u2019  hazard reports have taken longer than planned. The program originally  planned to complete phase two in early 2016, but through our ongoing  work, we have found that as of October 2017, neither contractor had  completed this phase. At that time, Boeing had completed 90 percent and  SpaceX had completed 70 percent of the Phase 2 reports.", "The Commercial Crew Program\u2019s verification closure notice process,  which is used to verify that the contractors have met all requirements, is  one of the other key oversight activities and potential workload challenges  for the program. The program is completing that process concurrently  with the phased safety reviews. The verification closure process is  initiated by the contractor when it provides the program with data and  evidence to substantiate that it has met each requirement, and is  completed when the program has reviewed and approved the contractor\u2019s  evidence to verify that each requirement has been met. The Commercial  Crew Program must also approve a subset of verification closure notices  before key tests or milestones can occur. For example, the ISS  requirements and a portion of the Commercial Crew Program  requirements must be met before Boeing and SpaceX\u2019s uncrewed flights  to the ISS, which are currently planned for the third quarter of 2018. The  program\u2019s ability to smooth its workload is limited because the contractors  generally control their development schedules. In February 2017, we  found, however, that proposed changes to the Boeing and SpaceX  schedules could help alleviate some of the concurrency between the  program\u2019s phased safety reviews and verification closure process. We  will continue to monitor the efforts as part of our ongoing work.", "In conclusion, Boeing and SpaceX continue to make progress developing  crew transportation systems to help the United States re-establish its  domestic ability to provide crew access to the ISS. But, when the current  phase of the Commercial Crew Program began, there was widespread  acknowledgment that the contractors\u2019 development and certification  schedules were aggressive and the anticipated schedule risks have now  materialized. Further, programmatic and safety risks remain with  schedules that frequently change making a final certification date  uncertain. Delays and uncertain final certification dates raise questions  about whether the United States will have uninterrupted access to the  International Space Station beyond 2019, and may lessen NASA\u2019s return  on investment with the contractors. We look forward to continuing to work  with NASA and this subcommittee as we assess the contractors\u2019 and  program\u2019s progress to final certification.", "Chairman Babin, Ranking Member Bera, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}]}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Cristina T. Chaplain, Director, Acquisition and Sourcing  Management at (202) 512-4841 or chaplainc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this statement include Molly Traci, Assistant Director; Susan Ditto; Lisa  Fisher; Laura Greifner; Juli Steinhouse; Roxanna Sun; and Kristin Van  Wychen.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Boeing and SpaceX, the companies NASA contracted with to develop and produce vehicles to transport astronauts to the International Space Station, have set aggressive schedules and experienced continually shifting dates.", "In this testimony, we noted that while both contractors have made progress developing their vehicles, both have also experienced delays. With safety and programmatic risks to address, further delays are likely. This could ultimately jeopardize the U.S.'s uninterrupted access to the space station and may lessen NASA\u2019s return on investment with the contractors."]}
{"id": "GAO-18-64", "url": "https://www.gao.gov/products/GAO-18-64", "title": "Financial Services Industry: Trends in Management Representation of Minorities and Women and Diversity Practices, 2007-2015", "published_date": "2017-11-08T00:00:00", "released_date": "2017-12-08T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The U.S. workforce force has become increasingly diverse and is projected to become even more diverse in the coming decades. As a result, many private sector organizations have recognized the importance of recruiting and retaining minorities and women for key positions to improve their business or organizational performance and help them better meet the needs of a diverse customer base. The financial services industry is a major source of employment in the United States and affects the economic well-being of its customers. However, questions remain about diversity in the financial services industry, which provides services that help families build wealth and are essential to economic growth.", "GAO was asked to analyze diversity trends in the financial services industry, particularly in management positions. This report examines (1) trends in management-level diversity in the financial services industry from 2007 through 2015, (2) trends in diversity among potential talent pools, and (3) challenges financial services firms identified in trying to increase workforce diversity and practices firms used to address them.", "GAO analyzed data from the Equal Employment Opportunity Commission (EEOC) and the Department of Education. The most recent available data were from 2015. GAO also reviewed studies on workforce diversity and interviewed representatives from financial services firms and organizations that advocate for the financial services industry, women, or minorities. EEOC provided technical comments on a draft of this report that GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["Overall representation of minorities in first-, mid-, and senior-level management positions in the financial services industry increased from about 17 percent to 21 percent from 2007 through 2015. However, as shown in the figure below representation varied by race/ethnicity group and management level. Specifically, representation of African-Americans at various management levels decreased while representation of other minorities increased during this period. Overall representation of women was generally unchanged during this period. Representation of women among first- and mid-level managers remained around 48 percent and senior-level managers remained about 29 percent from 2007 through 2015.", "Potential employees for the financial services industry, including those that could become managers, come from external and internal pools. For example, the external pool includes those with undergraduate or graduate degrees, such as a Master of Business Administration. In 2015, about 33 percent of the external pool included minorities and around 60 percent were women. The internal talent pool for potential managers in financial services includes those already in professional positions. In 2015, nearly 28 percent of professional positions in financial services were held by minorities and just over 51 percent were held by women.", "Research, financial services firm representatives, and financial industry stakeholders described challenges to recruiting and retaining members of racial/ethnic minority groups and women and practices that could help address these challenges, including recruiting from a wider variety of schools. Firm representatives said that it is important for firms to assess firm-level data on diversity and inclusiveness. However, firm representatives and other stakeholders differed in their views on whether firm-level diversity data should be made public. For example, one stakeholder stated that sharing diversity data publicly would create incentives for improvement. However, a firm representative said that for firms that are not diverse, making employee diversity data public could make improvement of workforce diversity more difficult for them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Total U.S. employment is projected to reach 160.3 million in 2024 and  from 2014 through 2024\u2014an increase of almost 9.8 million jobs is  expected. The population of people working or looking for work has  become increasingly diverse, and is projected to be even more diverse in  the coming decades. Also, racial/ethnic minority groups are projected to  have different workforce growth rates due to their divergent rates of  population growth. Hispanics and Asians, for example, are projected to  make up a rapidly growing proportion of the population that is working or  looking for work. As the makeup of the U.S. workforce continues to  change, many private sector organizations have recognized the  importance of recruiting and retaining minorities and women for key  positions to improve their business or organizational performance and  help them better meet the needs of a diverse customer base. Questions  remain about diversity in the financial services industry workforce, which  provides services that help families build wealth and is essential to the  continued economic growth of the country.", "In light of the role financial services firms have in serving consumers and  growing the economy, you asked us to update our previous work on  changes in management-level diversity and diversity practices used in the  industry. This report also updates previous work on diversity in the  potential external pools of candidates for financial services firms and the  potential internal pools of candidates for management positions in  financial services firms. Specifically, this report examines (1) trends in  management-level diversity in the financial services industry, (2) trends in  diversity among potential talent pools, and (3) challenges financial  services firms identified in trying to increase workforce diversity and  practices they have used to increase workforce diversity.", "To describe trends in management-level diversity in the financial services  industry, we analyzed 2007\u20132015 workforce data from the Equal  Employment Opportunity Commission\u2019s (EEOC) Employer Information  Report (EEO-1). Data for 2015 were the most current data available at  the time of our review. EEO-1 data were obtained for each job category in  the finance and insurance industry by gender, race/ethnicity, firm size,  and industry sectors. Management job categories include two groupings,  (1) senior-level managers and (2) first- and mid-level managers. We use  the term \u201coverall management\u201d to refer to both first- and mid-level  managers and senior-level managers. We compared diversity trends in  the financial services industry to diversity trends in the overall private  sector (excluding financial services). We also compared the trends  identified in our analysis to 1993\u20132006 workforce diversity trends  described in prior GAO reports. Through electronic testing, a review of  documentation, and interviews with knowledgeable officials, we found  EEO-1 data sufficiently reliable for our description of trends in workforce  diversity.", "To describe recent trends in diversity among potential external pools of  workforce candidates for the financial services industry, we interviewed  representatives from three financial services firms about the preferred  educational requirements needed to enter the field. We then analyzed the  race/ethnicity and gender characteristics of individuals receiving  bachelor\u2019s degrees, masters degrees (all subjects), and Master of  Business Administration (MBA) degrees for the school years ending 2011  through 2015. Data for 2015 were the most current data available at the  time of our review. We analyzed educational attainment data available  from the Department of Education\u2019s Integrated Postsecondary Education  Data System (IPEDS). Through a review of documentation and electronic  testing, we found the IPEDS data to be sufficiently reliable for our use in  describing trends in educational attainment. To describe recent trends in  diversity among potential internal talent pools for management positions, we first identified the nonmanagement positions that were most likely to  feed into management by reviewing an EEOC report on diversity in  financial services. We then analyzed EEO-1 data for NAICS code 52 to  identify trends in the representation of women and racial/ethnic minorities  in relevant nonmanagement positions from 2007 through 2015.", "To identify challenges financial services firms face in trying to increase  workforce diversity as well as practices firms use to improve workforce  diversity, we conducted a literature search; interviewed representatives  from 13 financial services firms that were actively involved in workforce  diversity; interviewed representatives of organizations that advocate for  the financial services industry, women or racial/ethnic minorities, or both;  and attended a conference on diversity in the financial services sector.  We identified the firms based on their participation at a conference on  improving diversity in the financial services industry, their participation in  our previous work, and suggestions from organizations that represent the  financial services industry. We summarized challenges they identified and  compared them to challenges identified in prior GAO work. To determine  how firms assess their diversity policies and practices, we interviewed  representatives of financial services firms as well as financial industry  trade groups.", "We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "EEOC Data", "paragraphs": ["EEOC data we obtained and analyzed showed that financial services  firms employed more than 3.2 million people in 2015. EEOC requires  employers to use the North American Industry Classification System  (NAICS) to classify their industry. Under this system, the financial  services industry includes the following five sectors: credit intermediation and related activities (banks and other  credit institutions), which include depository credit institutions\u2014 commercial banks, thrifts (savings and loan associations and savings  banks), and credit unions; and nondepository credit institutions, which  extend credit in the form of loans and include federally sponsored  credit agencies, personal credit institutions, and mortgage bankers  and brokers;  funds, trusts, and other financial vehicles (funds and trusts),  which include investment trusts, investment companies, and holding  companies; securities, commodity contracts, and other financial investments  and related activities (securities and other activities), which is  composed of a variety of firms and organizations that bring together  buyers and sellers of securities and commodities, manage  investments, and offer financial advice;  insurance carriers and related activities (insurance), which include  carriers and insurance agents that provide protection against financial  risks to policyholders in exchange for the payment of premiums; and monetary authorities, which include central banks.", "EEOC requires private employers subject to Title VII of the Civil Rights  Act of 1964 with 100 or more employees and all federal contractors who  have 50 or more employees and meet certain other requirements to  annually submit data on the racial/ethnic and gender characteristics of  employees by various occupations for a broad range of industries,  including financial services. Employers are required to submit these data  to EEOC by submitting an EEO-1 report. In addition to providing EEOC  with data on the demographic characteristics of employees as of a  specific point in time, employers must also report the number of  employees working at headquarters and any additional offices, the  primary industry type of the organization, and the numbers of employees  in two different categories of management positions.", "Beginning in 2007, EEOC changed its requirements on the reporting of  data on managers. More specifically, employers were required to report  data for senior-level management positions rather than combining data on  senior-level managers with data for first- and mid-level management  positions as had been the practice prior to 2007. Since 2007, employers  are to review EEOC guidance describing the two management positions  and determine how their firm\u2019s job positions fit into these classifications.  Senior-level managers include, for example, chief executive officers, chief  financial officers, and managing partners. The first- and mid-level  management category includes (1) middle managers that report to senior  managers and typically lead major business units and (2) managers who  report to middle managers and oversee day-to-day operations, such as  team or branch managers.", "Additionally, EEOC changed its practices for collecting certain  racial/ethnicity information. The EEO-1 form was changed in 2007 to  divide \u201cAsian or Pacific Islander\u201d into two separate categories, \u201cAsian\u201d  and \u201cNative Hawaiian or other Pacific Islander.\u201d Also, EEOC adopted a  two-question format for collecting ethnicity data. Under this format,  employers should first ask employees their Hispanic or Latino status, and  then ask those employees who do not identify as Hispanic or Latino for  their race.", "EEOC proposed revisions to the EEO-1 form in 2016, which would have  required employers with 100 or more employees to report summary pay  data in their EEO-1 report. The Office of Management and Budget  (OMB) approved the revision in September 2016. In August 2017, OMB  issued a memorandum suspending the pay-related data collection  aspects of the EEO-1 form. According to the memorandum, since  approving the revised EEO-1 form, the relevant circumstances related to  the data collection had changed and the burden estimates provided by  EEOC in the original filing were materially in error. As a result, the  previously approved EEO-1 form without the pay-related data  requirements will remain in effect."], "subsections": []}, {"section_title": "Financial Services Industry and Diversity Practices", "paragraphs": ["We previously reported on the challenges faced by the financial services  industry in promoting and retaining a diverse workforce. In 2010, we  reported that diversity in management in the financial services industry  did not change substantially from 1993 through 2008 and that diversity in  senior positions was limited. We also found that without a sustained  commitment among financial services firms to overcoming challenges to  recruiting and retaining minority candidates, limited progress would be  possible in fostering a more diverse workplace. Subsequently, in 2013,  we found that following the 2007\u20132009 financial crisis, diversity in  management in the financial services industry did not change  substantially from 2007 through 2011 and that diversity in senior positions  remained limited. We also found that women generally represented 45  percent of management-level positions each year, from 2007 through  2011. Additionally, our 2013 report noted that practices that can support  diversity include sponsorships (where an executive acts as a guide to  help an employee navigate the organization) and efforts to address  unconscious bias in promotions.", "In a January 2005 report, we defined diversity management as a process  intended to create and maintain a positive work environment that values  individuals\u2019 similarities and differences, so that all can reach their  potential and maximize their contributions to an organization\u2019s strategic  goals and objectives. We also identified a set of nine leading diversity  management practices that should be considered when an organization is  developing and implementing diversity management. They are (1)  commitment to diversity as demonstrated and communicated by an  organization\u2019s top leadership; (2) the inclusion of diversity management in  an organization\u2019s strategic plan; (3) diversity linked to performance,  making the case that a more diverse and inclusive work environment  could help improve productivity and individual and organizational  performance; (4) measurement of the impact of various aspects of a  diversity program; (5) management accountability for the progress of  diversity initiatives; (6) succession planning; (7) recruitment; (8) employee  involvement in an organization\u2019s diversity management; and (9) training  for management and staff about diversity management. In 2013, we  reported that industry representatives confirmed that these nine practices  are still relevant.", "Since our 2005 report, researchers and the federal government have  recognized that a focus on inclusion in the workplace is an important  component of creating and sustaining a diverse workforce. For example,  the Office of Personnel Management notes that optimal performance is  based on both diversity and inclusion, which it defines as a set of  behaviors (culture) that encourages employees to feel valued for their  unique qualities and experience a sense of belonging."], "subsections": []}, {"section_title": "Research on Potential Benefits of Workforce Diversity", "paragraphs": ["Research discusses a number of reasons why workforce diversity may be  beneficial to businesses. For example, two studies summarized other  research that found that diversity can bring new voices and perspectives  into conversations about business strategies, such as developing  opportunities in unserved markets. Also, a diverse workforce can help  managers understand and address the needs of a demographically  diverse customer base. That is, employees who are demographically  similar to customers are likely to have an easier time understanding  customer preferences and how they change over time. Additionally, a  diverse workforce can stimulate a wider range of creative decisions.  Researchers have noted that minority opinions stimulate creativity and  divergent thought, and that creativity and innovation are enhanced when  a diverse workforce is employed.", "Research on the effects of workforce diversity on financial performance  has been mixed. For example, a 2003 report summarized the results and  conclusions reached in four separate studies of the relationships between  race and gender diversity and financial performance. The report  concluded that race and gender diversity had no direct positive or  negative influence on financial performance. A 2011 report that  summarized this and other research found that researchers continue to  put forth conflicting results regarding the business benefits of workforce  diversity. In the authors\u2019 opinion, the goals of workforce diversity  programs should be broad, and not just focused on the organization\u2019s  financial performance."], "subsections": []}]}, {"section_title": "Management-Level Diversity Trends Showed Marginal or No Increase from 2007 through 2015", "paragraphs": ["Representation of minorities at the overall management level increased  by 3.7 percentage points from 2007 through 2015 and their  representation among senior-level managers increased by 1.7  percentage points during this time. Women\u2019s representation at the overall  management level has remained at about 45 percent from 2007 through  2015. Among the various sectors of the financial services industry, the  insurance sector has consistently had the highest proportion of women in  management positions while the banks and other credit institutions sector  has consistently had the highest proportion of racial/ethnic minorities in  management. As the size of financial services firms increase (by number  of employees), the representation of minorities in overall management  increased and the representation of women in overall management was  generally the same. Additionally, management-level diversity in the  financial services sector has similarities and differences compared to  other sectors."], "subsections": [{"section_title": "Management-Level Representation of Minorities Increased Marginally since 2007, but Representation Varied by Minority Group", "paragraphs": [], "subsections": [{"section_title": "Trends in Overall Management", "paragraphs": ["At the overall management level, minority representation increased in the  financial services sector, though representation varied by individual  minority groups. More specifically, the representation of minorities in  management increased by 3.7 percentage points from 2007 through 2015  according to EEOC data, (see fig. 1). This increase shows a continued  upward trend from our 2006 report\u2014the first of a series of reports we  have issued on trends in the financial services industry\u2014in which data  showed that management-level representation by minorities increased  from 11.1 percent to 15.5 percent from 1993 through 2004. Since 2007,  Asians had the largest gains, increasing their representation among  managers from 5.4 percent to 7.7 percent. Hispanics made smaller gains.  In contrast, the proportion of African-Americans in management positions  decreased from 6.5 percent to 6.3 percent.", "From 2007 through 2015, minorities\u2019 representation among first- and mid- level managers increased by 3.7 percentage points (see fig. 2).  Minorities\u2019 representation among senior-level managers increased by 1.7  percentage points during this time. As previously noted, EEOC splits  management into two categories: (1) first- and mid-level officials and  managers and (2) executive and senior-level officials and managers.  First- and mid-level management positions may serve as an internal  pipeline in an organization through which minority candidates could move  into senior-level management positions. In 2015, representation of  minorities in first- and mid-level management positions was 22.4 percent  compared to 12.3 percent of minorities in senior-level management  positions.", "Among first- and mid-level managers, the representation of Asians  increased by 2.6 percentage points from 2007 through 2015, while  representation changed by less than 1 percentage point each for  Hispanics and African-Americans (see fig. 3). Among senior-level  managers, the representation of each racial/ethnic group changed by less  than 1 percentage point during this time. As previously mentioned, racial  and ethnic groups\u2019 workforce participation is projected to grow at varying  rates. For example, from 2014 through 2024 labor force participation is  expected to increase by 10.1 percent for African-Americans, 23.2 percent  for Asians and 28 percent for Hispanics, according to the Bureau of Labor  Statistics. In contrast, labor force participation among white persons is  expected to increase by 2 percent."], "subsections": []}]}, {"section_title": "Management-Level Representation of Women and Men Has Been Unchanged since 2007, with Representation of Minority Women and Men Increasing Marginally", "paragraphs": [], "subsections": [{"section_title": "Trends in Overall Management", "paragraphs": ["Representation of women and men at the overall management level in  the financial services industry has remained unchanged from 2007  through 2015, with women representing about 45 percent of managers  and men representing about 55 percent over time. In 2006, we similarly  reported that from 1993 through 2004, women represented from about 43  percent to 46 percent of managers. The proportion of minority women in  overall management increased by 1.5 percentage points from 2007  through 2015 while decreasing by 1.5 percentage points among white  women (see fig. 4). During the same time period, representation of  minority men in overall management increased by 2.2 percentage points  while decreasing by 2.3 percentage points for white men. However,  representation of white men remained significantly higher at 44.5 percent  in 2015 compared to white women at 34.4 percent, minority women at  10.7 percent, and minority men at 10.3 percent.", "Representation of specific racial/ethnic groups in the financial services  sector from 2007 through 2015 varied by gender (see fig. 5). For  example, among minority women, African-American women consistently  had the highest representation in management, representing from 4.1  percent to 4.0 percent of managers. Hispanic and Asian women had  similar representation in management positions over time. More  specifically, Hispanic women represented from 2.5 percent to 2.9 percent  of managers and Asian women represented from 2.3 percent to 3.1  percent of managers. In contrast, among minority men, Asian men  consistently had the highest representation in management, representing  from 3.1 percent to 4.6 percent of all managers from 2007 through 2015.  African-American and Hispanic men had similar representation in  management positions during this time period. More specifically, African- American men represented from 2.3 percent to 2.4 percent of managers  and Hispanic men represented from 2.3 percent to 2.6 percent of  managers.", "Representation of women among first- and mid-level managers and  senior-level managers was around 48 percent and about 29 percent,  respectively, from 2007 through 2015. Among first- and mid-level  management positions, the representation of white women decreased by  2 percentage points from 2007 through 2015 (see fig. 6). Also during this  time, the representation of white women in senior-level management  positions decreased by 0.9 percentage points. For minority women,  representation in first- and mid-level management positions increased by  1.6 percentage points and representation in senior-level management  positions increased by 0.3 percentage points from 2007 through 2015.", "For men, the largest changes over time were in the first- and mid-level  management positions. More specifically, from 2007 through 2015,  representation of white men in first- and mid-level management  decreased by 1.8 percentage points and representation of minority men in  first- and mid-level management increased by 2.2 percentage points.  Among senior-level managers, representation of white men decreased by  0.9 percentage points and increased by 1.5 percentage points among  minority men from 2007 through 2015. For additional information on the  representation of minority women and men in each management position  by race/ethnicity, see appendix II."], "subsections": []}]}, {"section_title": "Certain Financial Sectors Are More Diverse Than Others and Representation of Minorities Increased with Firm Size", "paragraphs": [], "subsections": [{"section_title": "Trends by Financial Sectors", "paragraphs": ["The representation of minorities in overall management positions varied  by sector (see fig. 7). EEO-1 data for the financial services industry  include the following four sectors: banks and other credit institutions,  funds and trusts, securities and other activities, and insurance. For  example, the representation of minorities in overall management positions  was consistently the greatest in the banks and other credit institutions  sector and lowest in the insurance sector. Minorities\u2019 representation in  overall management increased in four sectors of the financial services  industry from 2007 through 2015. For example, the representation of  minorities in the banks and other credit institutions sector increased by  3.1 percentage points and the representation of minorities in the  insurance sector increased by 4.2 percentage points.", "The representation of women in overall management also varied by  sector. As shown in figure 8, the insurance sector consistently had the  highest proportion of women in management positions, followed by banks  and other credit institutions, funds and trusts, and securities and other  activities. From 2007 through 2015, the proportion of women in  management positions decreased in each sector except for the insurance  sector where it increased by 1.9 percentage points.", "The proportions of Hispanics, Asians, and Other in overall management  increased from 2007 through 2015 in each of the four financial sectors we  reviewed, and decreased for African-Americans in all but the insurance  sector (see fig. 9). Among racial/ethnic groups, Asians generally  experienced the greatest increases in management-level representation.  For example, from 2007 through 2015, management-level representation  of Asians in the securities and other activities sector increased by 3.5  percentage points while it increased by 0.8 percentage points for  Hispanics, increased by 0.6 percentage points for Other, and decreased  by 0.8 percentage points for African-Americans. However, in the  insurance sector, African-Americans had the highest percentage  representation compared to other minority groups and increased from 6.7  percent in 2007 to 7.2 percent in 2015.", "The representation of minorities in overall management increased as firm  size (by number of employees) increased (see fig. 10). In 2007, the  representation of minorities in management was nearly 5 percentage  points greater in firms with 5,000 or more employees compared to firms  with 100\u2013249 employees. In 2015, by comparison, the representation of  minorities in overall management was about 6 percentage points greater  in the largest category of firms (5,000 or more employees) compared to  the smallest (100\u2013249 employees). Research suggests that larger  organizations may have greater capacity to address workforce diversity.  Researchers also note that large organizations tend to make greater  efforts to prevent workplace discrimination against women and  racial/ethnic minorities because they have direct legal obligations.  Additional information on representation of specific racial/ethnic groups in  management positions across firm size can be found in appendix II.", "As shown in figure 11, the representation of women in management  positions was generally the same across firm size in 2007 and 2015. For  example, in 2007 women represented from nearly 45 percent to nearly 46  percent of the managers in financial services firms of varying sizes.  Similarly, in 2015 women represented from nearly 44 percent to almost  47 percent of the managers in financial services firms of varying sizes."], "subsections": []}]}, {"section_title": "Financial Services Sector Trends Have Similarities and Differences Compared to Other Sectors", "paragraphs": ["Representation of minorities increased from 2007 through 2015 in the  financial services sector, the professional services sector, and the overall  private sector at both the senior-level and the first- and mid-level of  management, as shown in figure 12. The professional services sector  includes jobs in legal services, accounting, consulting, and advertising,  among other services. Among first- and mid-level managers, however,  the representation of minorities increased at a higher rate for the  professional services sector. More specifically, from 2007 through 2015,  minorities\u2019 representation among first- and mid-level managers increased  by 7.5 percentage points in the professional services sector. In  comparison, minorities\u2019 representation among first- and mid-level  managers in the financial services sector and the overall private sector  increased by 3.7 and 3.8 percentage points, respectively, during this time.  Among senior-level managers, representation of minorities fluctuated  from 2007 through 2015 in all three sectors. However, minorities\u2019  representation increased the most\u2014by 2.5 percentage points\u2014in the  professional services sector, compared to the financial services and  overall private sector, which increased by 1.7 and 1.4 percentage points,  respectively.", "The financial services sector has generally had a greater proportion of  women in various management positions compared to the overall private  sector (excluding the financial services sector) and the professional  services sector. As shown in figure 13, from 2007 through 2015 women  represented about 48 percent of the first- and mid-level management  positions in the financial services sector. In comparison, women\u2019s  representation among first- and mid-level managers in other sectors was  smaller. For example, women represented 36.7 percent of the first- and  mid-level managers in the professional services sector in 2015. Among  senior-level managers, the representation of women in financial services  was slightly higher than their representation in the overall private sector  from 2007\u20132010, after which time their representation in each sector was  generally within 1 percentage point. From 2007 through 2015, women\u2019s  representation among senior-level managers in financial services was  generally greater than their representation among senior-level managers  in the professional services sector."], "subsections": []}]}, {"section_title": "Potential Talent Pools for Financial Services Positions, Including Management, Are Diverse", "paragraphs": ["Potential employees for the financial services industry who could be an  external pool for becoming managers can come from a wide range of  academic and professional backgrounds. Undergraduate or graduate  degrees are an important consideration for employment according to staff  we spoke with at financial services firms. Representatives from three  financial services firms told us that while graduates with Master of  Business Administration (MBA) degrees are still an important external  talent pool, firms have broadened their recruitment efforts and seek  students with a variety of degrees.", "About one-third of the external pool of potential talent for financial  services, that is, those obtaining undergraduate or graduate degrees,  were racial/ethnic minorities from 2011 through 2015 (see fig.14). Rates  of bachelor\u2019s degree attainment by racial/ethnic minorities increased from  29.4 percent in 2011 to 33.9 percent in 2015. During the same time  period, rates of master\u2019s degree attainment increased by similar amounts,  from 28.8 percent to 33 percent, and MBA attainment increased from 35.6  percent to 39.2 percent. As previously noted, the proportion of managers  in the financial services industry who were racial or ethnic minorities  increased from 17.3 percent in 2007 to 21 percent in 2015, which is lower  than the rates of bachelor\u2019s, master\u2019s, and MBA degree attainment for  these groups across all years.", "Among the potential external talent pool of minority women and minority  men, educational attainment has consistently increased over time, and  women have generally obtained a higher percentage of undergraduate or  graduate degrees compared to men. For example, from 2011 through  2015, rates of bachelor\u2019s degree attainment increased by at least 2  percentage points each for minority women and minority men, and  minority women consistently earned a greater proportion of bachelors\u2019  degrees (see fig. 15). Similarly, the proportions of masters and MBA  degrees earned from 2011 through 2015 increased for minority women  and minority men. During this time frame, minority women consistently  earned a greater proportion of master\u2019s and MBA degrees compared to  minority men. Additional information about educational attainment among  the potential external talent pool of women and men can be found in  appendix IV.", "A majority of the external pool of potential talent for the financial services  industry, that is, those obtaining undergraduate or graduate degrees,  have been women in recent years (see fig. 16). From 2011 through 2015,  women consistently earned about 58 percent of bachelors\u2019 degrees, just  over 60 percent of masters\u2019 degrees, and about 45 percent of the MBA  degrees. As we previously discussed, women have generally represented  about 45 percent of overall management in the financial services industry.", "Two of the nonmanagement job categories in the financial services  sector\u2014professional and sales positions\u2014are considered to be the  industry\u2019s potential \u201cinternal pipeline,\u201d which comprise staff that could  potentially move into management positions. Professional positions can  include credit and financial analysts, personal financial advisors, financial  examiners, and loan officers; sales positions can include those in  securities, commodities, financial services, and insurance sales agents.  EEOC data are derived from annual reports that show firms\u2019 workforce  composition in a single point of time and therefore do not allow for  analysis of the extent to which firms promote staff internally. However, the  data do provide some insights into the potential internal pipeline.", "Representation of racial/ethnic minorities in professional and sales  positions has changed over time, but has generally been greater than  their representation in overall management positions (see fig. 17). More  specifically, EEOC data show that racial/ethnic minorities generally  comprised about 25 percent of the professional positions from 2007  through 2011, and then increased to nearly 28 percent in 2015. In  contrast, the representation of racial/ethnic minorities in sales positions  decreased during the 2007\u20132009 financial crisis, and then increased from  nearly 23 percent in 2011 to nearly 26 percent in 2015. As previously  noted, minorities have represented from 17 percent to 21 percent of  overall management in the financial services industry from 2007 through  2015. See appendix IV for additional information on the potential internal  pool for management positions in the financial services industry.", "Representation of women in professional positions in the financial  services industry has generally been greater than women\u2019s  representation in overall management (see fig. 18). For example, from  2007 through 2015, the proportion of women in professional positions has  generally been just over 50 percent. As previously noted, during this time  frame women consistently represented about 45 percent of overall  management. The percentage of women in sales positions within the  financial services industry has generally been lower, at about 40 percent."], "subsections": []}, {"section_title": "Industry and Other Sources Describe Ongoing Workforce Diversity Challenges and Practices to Address Them", "paragraphs": ["Representatives from financial services firms and other stakeholders  described many of the same challenges in recruiting and retaining women  and racial/ethnic minorities as we have previously reported, including  negative perceptions of the financial services industry that might  discourage potential candidates. Practices that financial services firms  use to address these challenges include broadening recruitment efforts,  establishing relationships with student groups and professional  organizations, and providing training on unconscious bias.  Representatives from all of the financial services firms we met with  agreed on the importance of analyzing data on the demographic  characteristics of their employees. Some firm representatives noted that  by assessing employee data they can identify trends that may need to be  addressed. However, representatives and other stakeholders differed on  the benefits of making firm-level information on employee diversity  publicly available."], "subsections": [{"section_title": "Firms and Other Sources Cite a Variety of Recruiting Challenges and Practices That May Help Address Them", "paragraphs": ["Representatives from financial services firms and organizations that  advocate for women or racial/ethnic minorities described a variety of  challenges to recruiting a diverse workforce for the financial services  sector, many of which we have described in previous reports on the  topic. For example, representatives from several financial services firms  stated that negative perceptions of the industry could limit potential  candidates\u2019 interest in the field. Additionally, representatives of an  organization that advocates for workforce diversity stated that women and  minorities may not seek employment in the financial sector due to  concerns about the industry\u2019s reputation or a lack of awareness of career  paths in the industry.", "Representatives from some financial services firms told us that it is  challenging to get firm leadership on board with recruiting at a broad  group of schools, rather than a small number of elite universities.  Representatives from three organizations that advocate for women or  minorities similarly observed that some financial services firms focus on  elite universities. Also, some financial services firm representatives told  us that there is a great deal of competition for diverse talent and that  financial services firms are increasingly competing with technology firms  for talent. Representatives from two firms also stated that it is challenging  to recruit diverse staff to work in some geographic locations.", "Reports on workforce diversity echo some of the recruiting challenges  that we heard from financial firm representatives. For example, a 2012  consulting firm report on women in senior management notes that at the  entry-level businesses viewed as male-dominated tend to attract fewer  women. This report also states that sometimes companies have a view that positions requiring long hours will not suit women. A 2012 study on  women\u2019s job choices found that in financial services, women are  significantly less likely than men to apply for financial advisory and trading  jobs and more likely to apply for jobs in general management\u2014most  notably internal finance and marketing. A 2014 consulting firm report on  diversity in the leadership of companies in the United Kingdom, Canada,  Latin America, and the United States found a number of barriers to the  recruitment of all diversity groups (including women as well as  racial/ethnic groups). These barriers include the lack of visible support  from leadership and inadequate collection and use of data on the  advantages of more diverse organizations. Additionally, a 2016 consulting  firm report on women in financial services in 32 countries noted that a  majority of asset managers who were interviewed held the view that  certain jobs in financial services, such as asset management, may deter  qualified women from applying, as may a lack of knowledge about the  industry among graduate students.", "Financial firm representatives and other stakeholders we spoke with, and  research we reviewed described a variety of practices that they believe or  have found to be effective for recruiting women and racial/ethnic  minorities. These practices include the following.", "Engaging in broad-based recruiting. Representatives from three  firms stated that they are increasingly hiring and interested in  recruiting students from a variety of academic disciplines, such as  liberal arts or science and technology. For example, representatives  from one firm explained that they are interested in candidates with  critical thinking skills, and that technical skills can be taught to new  employees. Additionally, representatives from several firms noted the  importance of recruiting at a broad group of schools, not just a small  number of elite universities.", "Establishing relationships with student and professional  organizations. Most financial firm representatives told us that an  effective strategy for recruiting diverse students is to establish  relationships with student organizations representing diverse groups.  Representatives from one firm explained that working with student  groups helps expose diverse students to careers in financial services.  Additionally, to help recruit women and minorities who may already  have graduated from college or graduate school, representatives of  most financial firms and two trade groups described establishing  relationships with professional organizations that represent women  and minorities.", "Intentionally recruiting diverse candidates. Representatives from  two financial services firms and two organizations that advocate for  the financial services industry noted that firms should intentionally  seek out diverse candidates. For example, representatives from one  firm discussed the importance of including diversity in a firm\u2019s  recruiting strategy and establishing relationships with schools and  organizations that can increase women\u2019s and minorities\u2019 exposure to  financial services.", "Offering programs to increase awareness of financial services.", "Several financial firm representatives told us that they establish  relationships with high school students to expose diverse students to  the financial services field. For example, representatives from one firm  described a program that pairs high school students with a mentor  from the firm. Two organizations that advocate for the financial  services industry also noted that it is helpful for financial services firms  to establish relationships with high schools to educate young students  about the field. A 2016 consulting firm report on women in financial  services organizations in 32 countries found that a majority of asset  managers who were interviewed thought it was important for financial  services firms to educate students about careers available in financial  services. The report noted that more on-campus education and  public relations work could help attract women to the field."], "subsections": []}, {"section_title": "Firms and Other Sources Note Retention Challenges and Practices That May Help Retain and Promote Diverse Employees", "paragraphs": ["Reports on workforce diversity, representatives from financial services  firms, and other stakeholders discussed several challenges to retaining  women and racial/ethnic minorities, several of which we have previously  reported. Representatives of three financial services firms and two  organizations that advocate for the financial services industry told us that  it is challenging to retain women and minorities at organizations that lack  women and minorities in management positions. Additionally, two former  employees of large financial services firms, both racial/ethnic minorities,  told us that there are fewer mentors or role models for women and  racial/ethnic minorities in firms that have fewer women and minorities in  leadership positions. A 2012 consulting firm report on women in senior  management reported that women can lack a network or sponsor to help  them advance. Some financial firm representatives noted that employee  resistance, particularly from middle-managers, poses a challenge to  diversity and inclusion efforts.", "Additionally, some organizations that advocate for women and minorities  noted that unconscious bias is an issue that can negatively affect women  and minorities. As an example, managers may give hiring or promotion  preferences to persons who have hobbies or educational backgrounds  similar to theirs. Also, the authors of a 2014 report on women in senior  management at financial and nonfinancial organizations across 40  countries suggested that unconscious bias against women can result in a  reluctance to promote women in the expectation that they will eventually  put family first. The report stated that this bias can trigger a self-fulfilling  prophecy, as lack of promotion is one of the top reasons cited by women  for leaving their jobs.", "Reports on diversity, representatives from financial services firms, and  other stakeholders described a variety of practices that may be helpful in  retaining women and racial/ethnic minorities. These practices include the  following.", "Establishing affinity groups. Representatives from four financial  services firms stated that having affinity groups helps promote both  diversity and inclusion. Affinity groups\u2014sometimes referred to as  employee resource groups or networking programs\u2014provide forums  for employees to gather socially and share ideas outside of their  particular work unit. Representatives from two firms emphasized  that it is important for affinity groups to have meetings with firm  leadership. A 2007 study reported that networking programs have  stronger effects on some demographic groups than others.", "Training managers and employees on inclusion and  unconscious bias. Several financial firm representatives emphasized  the importance of offering training to foster an inclusive work  environment. As previously noted, an inclusive work environment is  one that encourages employees to feel valued for their unique  qualities and experience a sense of belonging. Training on  inclusiveness, emotional intelligence, and unconscious bias were  specifically noted by two financial firm representatives as being helpful  for both managers and staff.", "Establishing management-level accountability. Representatives  from three financial firms told us that firm management should be held  accountable for the firm\u2019s workforce diversity goals. Managers\u2019  performance in maintaining a diverse workforce can be evaluated a  variety of ways. For example, two firm representatives discussed the  use of \u201cdiversity scorecards.\u201d A diversity scorecard is a set of  objectives and measures derived from an organization\u2019s overall  business strategy and linked to its diversity strategy. Additionally, one  firm representative noted that tying senior managers\u2019 compensation to  diversity goals has been an effective practice for retaining women and  minorities. Researchers have noted that efforts to establish  organizational responsibility for diversity lead to the broadest  increases in managerial diversity.", "Offering staff mentors and sponsors. Representatives from three  financial firms and two organizations that advocate for the financial  services industry told us that providing staff with mentors or sponsors  helps retain and promote women and racial/ethnic minorities. In  general, a mentor provides advice and guidance to more junior staff  (prot\u00e9g\u00e9s) and a sponsor nominates or supports a prot\u00e9g\u00e9\u2019s  promotion. Research and reports discuss the benefits of mentors  and sponsors.", "Implementing family-friendly policies. Some of the financial  services firm representatives and three of the four individuals with  whom we met (members of racial minority groups who had worked in  large financial services firms) noted the importance of work-life  balance to help retain women. A 2011 paper on the Canadian  financial sector described selected banks\u2019 family-friendly policies,  such as flexible work schedules, that facilitate work-life balance.", "As previously noted, in 2005 we identified a set of nine leading diversity  management practices that should be considered when an organization is  developing and implementing diversity management. These practices  include measuring the impact of diversity programs and providing training  for management and staff on diversity. Financial firm representatives and  other stakeholders with whom we met agreed that these practices are still  relevant.", "However, researchers have found that practices related to diversity may  not benefit all genders and racial/ethnic groups evenly. For example, a  2015 consulting firm report found that the approach of many companies  to cover all groups (racial/ethnic, gender, and sexual orientation) using a  single diversity program is insufficient. The report found that diversity- related practices should be tailored to specific groups. Earlier empirical  research similarly found that the effects of various diversity-related  initiatives varied across gender and race/ethnicity groups."], "subsections": []}, {"section_title": "Firms and Stakeholders Generally Agree on the Value of Assessing Workforce Diversity and Inclusion, but Differ on Benefits of Making Data Public", "paragraphs": ["Representatives of financial services firms told us that it is useful for  financial services firms to analyze demographic data to assess diversity  of their workforce and identify trends that may need to be addressed. All  of the financial services firms with whom we met agreed on the  importance of analyzing employee data. Some firm representatives noted  that by assessing employee data they can analyze the gender and  racial/ethnic diversity of new hires, employees leaving the organization,  and newly promoted staff and managers. Representatives from several  firms stated that it is important for organizations to be self-aware of how  they are doing with workforce diversity. Also, representatives from an  investment bank told us that they analyze employee data over time to  determine whether certain demographic groups tend to leave the firm  after a certain number of years. With this information, the representatives  told us, the organization can proactively take steps to help retain these  staff, such as providing staff with mentors. Additionally, representatives  from a large bank explained that by analyzing demographic data of  employees, the organization can identify \u201cleaks\u201d in their internal pipeline.  That is, they can determine when and potentially why women and  racial/ethnic minorities leave before progressing into management  positions. Several financial firm representatives told us that when they  identify data trends that indicate problems, such as retention issues, they  then take steps to address them.", "Several financial firm representatives stated it is important to know the  demographic make-up of employees, because firms should look like their  customers. As an example, a representative of an investment banking  institution told us that over half of the firm\u2019s customers were women;  therefore it was a priority for the organization to know how to serve them  as well as other diverse groups. Also, a firm representative told us that  some potential clients call inquiring about racial and gender diversity  before doing business. The representative added that clients are  interested in receiving advice and information from advisors to whom they  can relate. Additionally, representatives from a large financial services  firm stated workforce diversity helps the firm better understand its diverse  customers.", "Representatives of three financial services firms with whom we met also  described the importance of obtaining employees\u2019 views about the  organization, including employees\u2019 feelings about diversity and inclusion.  For example, a financial services firm representative told us that in order  to be successful at fostering workforce diversity firms must obtain  employees\u2019 views on work/life balance, opportunities for advancement,  and inclusiveness. He noted that while quantitative data on employees\u2019  demographic characteristics may indicate that the workforce has become  more diverse, employees may not feel like the workplace has become  more diverse. Three of the organizations with whom we met (two that  advocate for the financial services industry and one that advocates for  diversity) agreed on the importance of surveying employees about  diversity and inclusion. For example, representatives from a financial  services industry trade group told us that employee surveys can be used  to detect issues that minority employees face. Research points out that  having diversity management practices alone is insufficient for improving  workplace performance. This research finds that productive workplaces  exist when inclusion is promoted and employees are encouraged to  express their opinions and their input is sought before making important  organizational decisions.", "Representatives of financial services firms and organizations that  advocate for diversity varied in their views on whether data on the  demographic characteristics of employees at specific financial services  firms should be shared publicly, for example through diversity indexes or  on the company\u2019s website. Representatives from two financial firms told  us that publicly disclosing firm-level employee characteristics would not  benefit the company. More specifically, representatives from two financial  services firms indicated that diversity indexes are of limited value  because they do not indicate whether a firm has made progress on  diversity. One representative noted the reputation of firms that are not  diverse could be damaged, which could make improvement of workforce  diversity more difficult. As discussed earlier, potential candidates\u2019  negative perceptions of the financial services industry\u2019s reputation can  make it difficult for firms to recruit diverse employees.", "In contrast, representatives from one of the financial services firms and  two organizations that advocate for diversity told us that making data on  the diversity of firms\u2019 workforce publicly available was beneficial because  it highlighted firms\u2019 diversity efforts. As an example, representatives from  a large financial services firm told us that the firm regularly participates in  a number of surveys on diversity, which third-parties use to create various  diversity indexes. The indexes highlight this firm\u2019s progress on employee  diversity. Additionally, several of the firms with whom we met post data on  their websites indicating demographic information about their employees,  such as the proportion of women in management and employees\u2019 country  of origin.", "Representatives of organizations that advocate for diversity in the  workplace cited the benefits of diversity indexes and the publication of  workforce diversity information on specific financial services companies.", "For example, one representative stated that requiring businesses to be  transparent about their workforce diversity data creates incentives to  improve the diversity of their workforce. A representative from an  organization that advocates for women noted that diversity indexes or  other public information can be helpful for investors, who want to know  about the workforce composition of the businesses that they may invest  in. This representative stated that institutional investors have been  leading the charge for more transparency and diversity among  companies. We have previously reported on large investors\u2019 interest in  having more public disclosure about the diversity of corporate board  directors."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to EEOC. We received technical  comments, which we addressed as appropriate.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution of this report until 30  days from the report date. At that time, we will send copies of this report  to the appropriate congressional committees and the Acting Chair of the  Equal Employment Opportunity Commission. We will make copies  available to others upon request. The report will also be available at no  charge on our website at http://www.gao.gov.", "If you or your staffs have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are listed on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report were to examine (1) trends in management- level diversity in the financial services industry, (2) trends in diversity  among potential talent pools, and (3) challenges financial services firms  identified in trying to increase workforce diversity and practices firms used  to increase workforce diversity."], "subsections": [{"section_title": "Trends in Management- Level Diversity", "paragraphs": ["To describe management-level diversity in the financial services industry,  we obtained 2007\u20132015 workforce data from the Equal Employment  Opportunity Commission\u2019s (EEOC) Employer Information Report (EEO- 1). EEO-1 data are annually submitted to EEOC by most private-sector  firms with more than 100 employees. Most federal contractors with 50 or  more employees are also required to submit to EEOC annual reports  showing the composition of their workforce; however, consistent with our  2006 and 2013 reports, we did not include these contractors in our  analysis. Accordingly, the EEO-1 data presented in this report do not  exactly match the EEO-1 data on EEOC\u2019s website. We found that these  differences were small and did not materially change the trends in the  representation of various demographic groups.", "We obtained EEO-1 data in February 2017 for the finance and insurance  industry categorized under the North American Industry Classification  System (NAICS) code 52 from 2007 through 2015, the most recent year  of data available. EEO-1 data were specifically obtained for each job  category by gender, race/ethnicity, firm size, and industry sectors. We  used the race/ethnicity categories used by EEOC: African-American,  Asian, Hispanic, and Other. The \u201cOther\u201d category, which represents less  than 3 percent of the financial services workforce, includes Native  Hawaiian or Pacific Islander, Native American or Alaska Native, and \u201ctwo  or more races.\u201d Job categories include: senior-level managers, first- and  mid-level managers, professionals, technicians, sales workers,  administrative support workers, craft workers, operatives, laborers and helpers, and service workers. We defined \u201coverall management\u201d as  senior-level managers and first- and mid-level managers. We compared  2007 through 2015 EEO-1 data on the financial services industry to  comparable information we previously published using EEO-1 data on  diversity trends in the financial services industry from 1993\u20132006.  Because the EEOC data do not come from a sample, but are collected  from all businesses, we did not calculate standard errors or confidence  intervals on our estimates.", "To compare diversity trends in the financial services industry with the  overall private sector and the \u201cprofessional and technical services sector,\u201d  we downloaded 2007 through 2015 EEO-1 data on the overall private  sector and the professional and technical services sector from the EEOC  website. We excluded data for the financial services industry from the  data representing the \u201coverall private sector.\u201d The professional and  technical services sector is categorized under the NAICS code 54, and  includes establishments that specialize in performing professional,  scientific, and technical activities for others, such as accounting,  bookkeeping, payroll services, and consulting services. For the financial  services industry, we used the data provided to us by EEOC, which, as  discussed earlier, does not include federal contractors with fewer than  100 employees and therefore does not precisely match data on EEOC\u2019s  website. We chose not to rely on data from the EEOC website for this  comparison so that data on the financial services sector would be from a  consistent source throughout the report. We compared the representation  of racial/ethnic minorities and women in management positions across all  three sectors from 2007 through 2015.", "To determine the reliability of the EEO-1 data from EEOC that we used  throughout this report, we interviewed knowledgeable EEOC officials and  reviewed relevant documents provided by agency officials and obtained  on its website. We also conducted electronic testing of the data. We  determined that the EEO-1 data were sufficiently reliable for describing  workforce diversity trends."], "subsections": []}, {"section_title": "Trends in Potential Talent Pools", "paragraphs": ["To describe recent trends in diversity among potential external talent  pools (potential source of future managers outside the firms) for positions  in the financial services sector, we interviewed representatives from three  financial services firms about the preferred educational requirements  needed to enter the field. We then used educational attainment data  available from the Department of Education\u2019s Integrated Postsecondary  Education Data System (IPEDS) to analyze the race/ethnicity and gender  characteristics of individuals receiving undergraduate degrees, master\u2019s  degrees (of all subjects), and Master of Business Administration (MBA)  degrees for the school years ending 2011 through 2015. At the time of  our review, data for the school year ending in 2015 were the most recent  data available. Through a review of documentation and electronic testing,  we found the IPEDS data to be sufficiently reliable for describing trends in  educational attainment.", "To describe recent trends in diversity among potential internal talent pools  for management positions, we first identified the nonmanagement  positions that were most likely to feed into management by reviewing an  EEOC report on diversity in financial services and analyzing job  descriptions and education requirements for nonmanagement positions in  the financial services sector. Based on this information, we determined  that the professional and sales job categories best represent the primary  internal talent pool for management positions in the financial services  industry. We then analyzed EEO-1 data for NAICS code 52 to identify  trends in the representation of women and racial/ethnic minorities in  professional and sales positions from 2007 through 2015. We compared  these trends to trends in the representation of women and racial/ethnic  minorities in overall management positions in the financial services  industry."], "subsections": []}, {"section_title": "Challenges and Practices Related to Increasing Workforce Diversity", "paragraphs": ["To identify challenges financial services firms face in trying to increase  workforce diversity as well as practices financial services firms use to  improve workforce diversity, we conducted a literature review. We used  research databases such as ProQuest and SCOPUS to search for  scholarly or peer-reviewed material, government reports, conference  papers, trade and industry articles, and association or nonprofit  publications published from 2006 through 2016. Also, we used Internet  search techniques and keyword search terms to identify publicly available  information about workforce diversity in the financial services sector as of  August 2017. In cases where the studies or articles referenced older  materials that focused on workforce diversity practices, we reviewed  those as well.", "In addition, we interviewed: representatives from 13 financial services  firms that were actively involved in workforce diversity efforts,  representatives of 11 organizations that advocate for the financial  services industry, women or racial/ethnic minorities, or both. We also  interviewed a selection of two male and two female members of racial  minorities who formerly worked for large financial services firms. We  interviewed representatives from 9 of the 13 financial services firms in a  group setting. Based on the group-discussion format, we did not collect  precise counts of the participants who agreed or disagreed with specific  practices or challenges. Financial services firms were selected based on  their participation at a conference on improving diversity in the financial  services industry, their participation in our previous work, and suggestions  from organizations that represent the financial services industry. Former  employees were selected based on their participation in a conference on  diversity in financial services or their experience in the financial services  industry. We also attended a conference on diversity in the financial  services sector. To determine how financial services firms assess their  diversity policies and practices, we interviewed representatives of  financial services firms as well financial services industry trade groups.  The views expressed by firms, trade organizations, and former  employees may not be representative of all entities involved in workforce  diversity efforts. We used certain qualifiers when collectively describing  responses from financial services firms and trade groups, such as  \u201csome,\u201d \u201cseveral,\u201d and \u201cmost.\u201d We define some as four, several as at least  five but less than most, and most as more than half relative to the total  number possible. We also reviewed academic and other research studies  on the effect of specific workforce diversity policies.", "We conducted this performance audit from August 2016 through  November 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: Additional Analysis of Diversity Trends in the Financial Services Industry", "paragraphs": ["This appendix provides additional detailed analysis of EEOC data on the  financial services industry from 2007 through 2015."], "subsections": [{"section_title": "Analysis by Gender, Race/Ethnicity, and Management Level", "paragraphs": ["The representation of minority women in first- and mid-level management  increased by 1.6 percentage points from 2007 through 2015 while their  representation in senior-level management increased by 0.3 percentage  points during this time (see fig. 19). Women\u2019s representation among  specific racial/ethnic groups did not change by more than 1 percentage  point for any specific group at either management level from 2007  through 2015.", "The representation of minority men in first- and mid-level management  increased by 2.2 percentage points from 2007 through 2015 and their  representation in senior-level management increased by 1.5 percentage  points (see fig. 20). Men\u2019s representation among specific racial/ethnic  groups did not change by more than 1 percentage point at the senior  management level. In contrast, at the first- and mid-level management  position, Asian men experienced an increase in their management  representation of 1.7 percentage points. Men of other races/ethnicities did  not experience changes in their representation at the first- and mid-level  management position of more than 1 percentage point."], "subsections": []}, {"section_title": "Analysis by Firm Size", "paragraphs": ["Representation of minorities in overall management increased from 2007  through 2015 in firms of all sizes, with the greatest increases occurring in  firms with over 1,000 employees (see fig. 21). Representation of Asians,  Hispanics, and Other in management positions increased over time in  firms of all sizes while representation of African-Americans in  management decreased by less than 1 percentage point or stayed the  same from 2007 through 2015 in firms of all sizes. In 2015, Asians and  African-Americans had the largest percentage of minority representation,  8.7 percent and 7.1 percent respectively, in firms with over 5,000  employees."], "subsections": []}]}, {"section_title": "Appendix III: Diversity in the Financial Services Industry by State, 2015", "paragraphs": ["This appendix provides information on management representation in the  financial services industry by state in 2015."], "subsections": []}, {"section_title": "Appendix IV: Diversity Trends in Degrees Earned and Nonmanagement Job Categories", "paragraphs": ["This appendix provides additional information about the potential external  and internal talent pools for the financial services sector. Table 2 includes  information on the demographic characteristics of persons obtaining  undergraduate-level and graduate-level degrees for the school years  ending from 2011 through 2015. Tables 3 through 7 show the  representation of various demographic groups working in the Professional  and Sales job categories of the financial services sector from 2007  through 2015."], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Kay Kuhlman, Assistant  Director; Lisa Moore, Analyst in Charge; Rachel Batkins; Ben Bolitzer;  Mitch Karpman; Jill Lacey; May Lee; John Mingus; Tovah Rom; Kelsey  Sagawa; Jena Sinkfield; and Tyler Spunaugle made major contributions  to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-427", "url": "https://www.gao.gov/products/GAO-18-427", "title": "Government Reorganization: Key Questions to Assess Agency Reform Efforts", "published_date": "2018-06-13T00:00:00", "released_date": "2018-07-13T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["On March 13, 2017, the President issued an executive order requiring a comprehensive reorganization of executive branch agencies. In April 2017, the Office of Management and Budget (OMB) provided guidance to federal agencies for developing their reform and workforce reduction proposals. Past proposals to reform and reorganize government have not always come to fruition and can take years to implement fully. GAO's prior work has shown that successful reforms or transformations depend upon following change management practices, such as agreement on reform goals, and the involvement of the Congress, federal employees, and other key stakeholders.", "This report identifies the key questions that Congress, OMB, and agencies can use to assess the development and implementation of agency reforms. To meet this objective, GAO reviewed its prior work and leading practices on organizational transformations; collaboration; government streamlining and efficiency; fragmentation, overlap, and duplication; high-risk; and on other agency longstanding management challenges. GAO also identified subject matter specialists knowledgeable about issues related to government reform and strategic human capital management who reviewed and commented on GAO's draft questions.", "GAO is not making recommendations to OMB in this report. OMB staff provided technical comments, which we incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The nation is on a long-term, unsustainable fiscal path because it is  spending far more money than it is collecting and projected to do so going  forward. While addressing this issue will require changes to both federal  spending and revenue policies, Congress and federal agencies can act  now to strengthen the efficiency and effectiveness of federal agencies  and programs, as well as address federal activities that are high-risk or  fragmented, overlapping, or duplicative\u2014and save billions of dollars in the  process. For more than a decade, we have highlighted the need to re- evaluate and reprioritize what the federal government does, how it does  business, and as appropriate, who conducts its business. Although these  actions alone cannot put the U.S. government on a sustainable fiscal  path, they would improve the fiscal situation and help ensure agencies  have the capacity to address ongoing and newly emerging challenges  within available resources.", "The organizational transformation needed to improve the performance of  federal agencies is no easy task, however, and can take years to fully  implement. Reforming and reorganizing the federal government is a major  endeavor that can include refocusing, realigning, or enhancing agency  missions, as well as taking steps to improve services by identifying and  eliminating inefficiencies. Equally important is maintaining or improving  effectiveness and examining the impact of such proposed changes on  employees, stakeholders, and program customers. Our earlier work has  shown that effective government transformation initiatives: (1) require a  combination of people, processes, technologies, and other critical  success factors to achieve results; and (2) are dependent upon following  essential change management practices, such as the involvement of the  Congress, federal employees, and other key stakeholders.", "In March 2017, the President issued an executive order requiring a  comprehensive reorganization of executive branch agencies. In April  2017, the Office of Management and Budget (OMB) provided guidance to  federal agencies for developing their reform and workforce reduction  plans, as required by the President\u2019s executive order.", "In this report, we identify key questions that Congress, OMB, and  agencies should consider for the development and implementation of  agency reforms, based on our prior work. In this report, we use the term  \u201creforms\u201d to broadly include any organizational changes\u2014such as major  transformations, mergers, consolidations, and other reorganizations\u2014and  efforts to streamline and improve the efficiency and effectiveness of  government operations.", "To identify the key questions, we reviewed our prior work, including  leading practices on organizational mergers and transformations,  collaboration, government streamlining and efficiency. We also reviewed  our prior work on fragmentation, overlap, and duplication; high-risk; and  other agency longstanding management challenges. We selected those  questions that were most relevant to the agency reform efforts outlined in  OMB\u2019s guidance. A list of these related products are in appendix I.  Additionally, we met with OMB staff to discuss their role in working with  agencies on reform efforts.", "Because we drew the material in this report from prior work, we contacted  a selection of nine subject matter specialists to review the major  categories that were covered by our questions to assess that there were  no major gaps in our categories or questions and that they were  presented in the appropriate context. To identify these specialists, we considered individuals who had previously assisted us in developing key  leading practices in our work that we used to draw our questions, as well  as those that are knowledgeable in government reform, management,  and strategic human capital management issues. We shared our draft  questions with these specialists for their technical comments and views,  and incorporated their comments as appropriate. A list of these  specialists is found in appendix II.", "We conducted this performance audit from August 2017 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Prior to the President\u2019s March 2017 executive order for comprehensive  government reorganization, in January 2017, the President ordered a  federal hiring freeze\u2014providing exemptions for federal employees with  national security or public safety responsibilities. The January 2017  presidential memo also directed OMB, in consultation with the Office of  Personnel Management (OPM), to recommend a long-term plan to  reduce the size of the federal workforce through attrition. OMB\u2019s April  2017 guidance to agencies on their reform plans lifted the federal hiring  freeze. Below is a timeline for proposed reform development and  implementation as shown in figure 1.", "According to OMB\u2019s April 2017 guidance, the agency reform plans were  intended to accomplish several objectives, including creating a lean,  accountable, more efficient government, focusing on efficiency and  effectiveness and delivering programs of highest needs to citizens, and  aligning the federal workforce to meet the needs of today and the future,  among other things.", "Each agency\u2019s proposed reform plan was to include proposals to improve  efficiency, effectiveness, and accountability in four categories: (1)  eliminate activities; (2) restructure and merge activities; (3) improve  organizational efficiency and effectiveness; and (4) workforce  management. To support these proposed reforms, OMB asked agencies  to conduct an analysis, among other things, to consider if there was a  unique federal role or whether some or all services, activities, or functions  could be better performed by another entity, such as a state, local or tribal  government or the private sector. Additionally, according to OMB\u2019s April  2017 guidance, the draft agency proposed reform plan should be aligned  with the agency strategic plan. Agency strategic plans were to be  released with the President\u2019s fiscal year 2019 budget.", "The final reforms included in the fiscal year 2019 budget also were to be  reflected in the agencies\u2019 human capital operating plans and information  technology strategic plans, based on OMB guidance we reviewed. In  March 2018, OMB released the President\u2019s Management Agenda (PMA),  which provided updated information on the status of government  reorganization efforts and is connected with these reform efforts. The  PMA also identified a set of cross-agency priority (CAP) goals, required  under the GPRA Modernization Act of 2010 (GPRAMA), to target those  areas where multiple agencies must collaborate to effect change and  report progress in a manner the public can easily track.", "In addition to the agency reform proposals, OMB was also required by the  March 2017 executive order to develop a comprehensive government- wide reform plan, including both legislative proposals and administrative  actions based on agency reform plans, OMB-coordinated crosscutting  proposals, and public input. According to a document provided by OMB  staff, OMB solicited public comments beginning in April 2017 through  June 2017 to inform the development of the government-wide reform  plan. OMB staff told us they provided these comments to the appropriate  agencies.", "The March 2018 PMA stated that, in the months ahead, the  administration plans to share additional reorganization proposals  designed to refocus programs around current and future needs.  According to OMB guidance, once the government-wide reform proposals  are finalized, it will, in coordination with the President\u2019s Management  Council, establish a way to track the progress of the reforms. To track  progress of the reforms, OMB\u2019s guidance stated that it will leverage the  federal performance planning and reporting framework originally put into  place by the Government Performance Results Act of 1993 (GPRA) and  significantly enhanced by GPRAMA, through the use of CAP goals,  agency priority goals, and Performance.gov."], "subsections": []}, {"section_title": "Key Questions to Assess Agency Reforms", "paragraphs": ["Given the potential benefits and challenges developing and implementing  agency reform efforts, Congress and the executive branch need the tools  and information to help evaluate agencies\u2019 reform proposals and ensure  they are effectively implemented. Congress\u2019s role in reviewing agency  proposed reforms will be critical to the success of making significant  changes in how the government operates.", "To assist Congress in its oversight role, we organized our prior work and  leading practices into the following four broad categories that can help the  Congress assess proposed reforms. Figure 2 describes the four broad  categories, relevant sub-categories of questions, and selected key  questions in more detail below."], "subsections": [{"section_title": "Goals and Outcomes of Reforms", "paragraphs": ["Lessons learned from prior federal reform and reorganization efforts  suggest that reforming government is an immensely complex activity that  requires agreement on both the goals to be achieved and the means for  achieving them. Because many current federal programs and policies  were designed decades ago to respond to trends and challenges that  existed at the time of their creation, it makes sense to periodically conduct  fundamental reviews of major programs and policy areas to ensure they  continue to meet current goals and emerging trends. It is also important to  determine the appropriate level of government, or the roles of the non- profit or private sectors, in achieving these goals. Our prior work shows  that establishing a mission-driven strategy and identifying specific desired  outcomes to guide that strategy are critical to achieving intended  results. In other words, what is the agency trying to achieve with its  reforms?"], "subsections": [{"section_title": "Determining the Appropriate Role of the Federal Government", "paragraphs": ["It is important for agencies 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. Another key aspect of shifting federal activities to other levels  of government is how well the federal government fully considered the  potential effects reforms might have on state and local governments,  especially from a budgetary and fiscal standpoint. For example, how  should the federal government act directly, or in partnership with another  level of government or a non-profit organization, to achieve the identified  outcomes? Defining the appropriate federal role also involves examining  the federal government\u2019s relationships with key state, local, non-profit,  and private sector partners. For example, agencies should assess  whether there are alternatives for managing their programs effectively  across intergovernmental and organizational boundaries, as well as which  level of government has the capacity to deliver on the nation\u2019s needs and  priorities today and in the future.", "How well have the proposed reforms indicated the likely result of the  elimination, merging, or restructuring of activities with other levels of  government or sectors?", "To what extent have the proposed reforms included consideration for  other levels\u2019 of government or sectors\u2019 ability or likelihood to invest  their own resources to address the underlying challenges?", "To what extent have the proposed reforms included goals to transfer a  particular responsibility to another level of government\u2014such as state  or local government\u2014or sector, and has the agency made the case  that such a transfer could improve the overall accomplishment of  public purpose?", "To what extent have the proposed reforms considered if a new  mechanism is needed to integrate and coordinate programs between  levels of government? If so, what statutory or regulatory changes  would be needed to support such a transfer in responsibilities and to  address concerns such as cost-sharing or funding?", "To what extent has the agency identified any risks of using  contractors to perform agency activities, and if so, has it developed  appropriate risk mitigating strategies?"], "subsections": []}, {"section_title": "Establishing Goals and Outcomes", "paragraphs": ["When considering government reforms, our prior work has identified  useful principles, such as designing proposed reforms to achieve specific,  identifiable goals that encourage decision makers to reach a shared  understanding of the purpose of the reforms. Agreement on specific goals  can help decision makers determine what problems genuinely need to be  fixed, how to balance differing objectives, and what steps need to be  taken to create, not just short-term advantages but long-term gains. Part  of determining if agencies have successfully identified the goals of their  proposed reforms is to determine whether the agency has built a  business case analysis that presents facts and supporting details among  competing alternatives.", "To what extent has the agency established clear outcome-oriented  goals and performance measures for the proposed reforms?", "To what extent has the agency shown that the proposed reforms align  with the agency\u2019s mission and strategic plan?", "To what extent has the agency considered and resolved any agency  crosscutting or government-wide issues in developing their proposed  reforms? For example, what are the implications of proposed reforms  on other agencies?", "To what extent has the agency considered the likely costs and  benefits of the proposed reforms? If so, what are they?", "To what extent has the agency considered how the upfront costs of  the proposed reforms would be funded?", "To what extent has the agency included both short-term and long- term efficiency initiatives in the proposed reforms?"], "subsections": []}]}, {"section_title": "Process for Developing Reforms", "paragraphs": ["Successful reforms require an integrated approach that involves  employees and key stakeholders and is built on the use of data and  evidence. Reforms should also address agency management challenges,  such as those we have identified as fragmented, duplicative, or  overlapping, or in our high-risk program, or by agency Inspectors  General."], "subsections": [{"section_title": "Involving Employees and Key Stakeholders", "paragraphs": ["Our prior work has shown that it is important for agencies to directly and  continuously involve their employees, the Congress, other key  stakeholders\u2014such as other federal partners, state and local  governments, and members of the public\u2014in the development of any  major reforms. Involving employees, customers, and other stakeholders  helps facilitate the development of reform goals and objectives, as well as  incorporating insights from a frontline perspective and increases customer  acceptance of any changes. We have also identified leading practices for  open innovation strategies, defined as the use of activities and  technologies to harness ideas, expertise, and resources of those outside  an organization to address an issue or achieve specific goals.", "How and to what extent has the agency consulted with the Congress,  and other key stakeholders, to develop its proposed reforms?", "How and to what extent has the agency engaged employees and  employee unions in developing the reforms (e.g., through surveys,  focus groups) to gain their ownership for the proposed changes?", "How and to what extent has the agency involved other stakeholders,  as well as its customers and other agencies serving similar customers  or supporting similar goals, in the development of the proposed  reforms to ensure the reflection of their views?", "How and to what extent has the agency considered the views of state  and local governments that would be affected by the proposed  reforms?", "How and to what extent have agencies gathered the views of the  public and incorporate these views in the proposed reforms?", "Is there a two-way continuing communications strategy that listens  and responds to concerns of employees regarding the effects of  potential reforms?", "How will the agency publicize its reform goals and timeline, and report  on its related progress?"], "subsections": []}, {"section_title": "Using Data and Evidence", "paragraphs": ["We have reported 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. When reforming a given program, the use  of data and evidence is critical from setting program priorities and  allocating resources to taking corrective action to solve performance  problems and ultimately improve results. We have also stated that full  and effective implementation of GPRAMA could facilitate efforts to reform  the federal government and make it more efficient, effective, and  accountable. GPRAMA also provides important tools that can help  decision makers address challenges facing the federal government.", "What data and evidence has the agency used to develop and justify  its proposed reforms?", "How has the agency determined that the evidence contained  sufficiently reliable data to support a business case or cost-benefit  analysis of the reforms?", "How, if at all, were the results of the agency\u2019s strategic review process  used to help guide the proposed reforms?", "How, if at all, were the results of the agency\u2019s enterprise risk  management process used to help guide the proposed reforms?"], "subsections": []}, {"section_title": "Addressing Fragmentation, Overlap, and Duplication", "paragraphs": ["In our prior work, we have identified areas where agencies may be able to  achieve greater efficiency or effectiveness by reducing or better  managing programmatic fragmentation, overlap, and duplication. For  additional details on assessing areas of fragmentation, overlap, and  duplication, see our evaluation and management guide.", "To what extent has the agency addressed areas of fragmentation,  overlap, and duplication\u2014including the ones we identified\u2014in  developing its reform proposals?", "To what extent have the agency reform proposals helped to reduce or  better manage the identified areas of fragmentation, overlap, or  duplication?", "To what extent has the agency identified cost savings or efficiencies  that could result from reducing or better managing areas of  fragmentation, overlap, and duplication?"], "subsections": []}, {"section_title": "Addressing High Risk Areas and Longstanding Management Challenges", "paragraphs": ["Reforms improving the effectiveness and responsiveness of the federal  government often require addressing longstanding 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 we have called attention to that are  vulnerable to fraud, waste, abuse, and mismanagement, or are in need of  transformation.", "What management challenges and weaknesses are the reform efforts  designed to address?", "How specifically has the agency considered high-risk issues, agency  Inspector General\u2019s major management challenges, and other  external and internal reviews in developing its reform efforts?", "Have the agency\u2019s efforts to address those challenges been  consistent with the proven approach GAO has found to resolve high  risk issues? Agencies can show progress by addressing GAO\u2019s five  criteria for removal from the High-Risk List: leadership commitment,  capacity, action plan, monitoring, and demonstrated progress. The  five criteria form a road map for efforts to improve and ultimately  address high-risk issues.", "How has the agency identified and addressed critical management  challenges in areas such as information technology, cybersecurity,  acquisition management, and financial management that can assist in  the reform process?", "How does the agency plan to monitor the effects proposed reforms  will have on high risk areas?", "Has the agency addressed ways to decrease the risk of fraud, waste,  and abuse of programs as part of its proposed reforms?", "In addition, agencies should also draw upon our past recommendations,  including GAO priority open recommendations and those from their own  Inspectors General, to address management challenges.", "How have findings and open recommendations from GAO and the  agency Inspectors General been addressed in the proposed reforms?", "How has the agency addressed GAO\u2019s priority open  recommendations, which are those that warrant priority attention from  heads of key departments and agencies?"], "subsections": []}]}, {"section_title": "Implementing the Reforms", "paragraphs": ["Our prior work on organizational transformations show that incorporating  change management practices improves the likelihood of successful  reforms. Moreover, it is also important to recognize agency cultural  factors that can either help or inhibit reform efforts and how change  management strategies may address these potential issues. We have  also reported that organizational transformations, such as reforms, should  be led by a dedicated team of high-performing leaders within the agency.  Finally, our prior work also shows that fully implementing major  transformations can span several years and must be carefully and closely  managed."], "subsections": [{"section_title": "Leadership Focus and Attention", "paragraphs": ["Has the agency designated a leader or leaders to be responsible for  the implementation of the proposed reforms?", "Has agency leadership defined and articulated a succinct and  compelling reason for the reforms (i.e., a case for change)?", "How will the agency hold the leader or leaders accountable for  successful implementation of the reforms?", "Has the agency established a dedicated implementation team that  has the capacity, including staffing, resources, and change  management, to manage the reform process?"], "subsections": []}, {"section_title": "Managing and Monitoring", "paragraphs": ["How has the agency ensured their continued delivery of services  during reform implementation?", "What implementation goals and a timeline have been set to build  momentum and show progress for the reforms? In other words, has  the agency developed an implementation plan with key milestones  and deliverables to track implementation progress?", "Has the agency ensured transparency over the progress of its reform  efforts through web-based reporting on key milestones?", "Has the agency put processes in place to collect the needed data and  evidence that will effectively measure the reforms\u2019 outcome-oriented  goals?", "How is the agency planning to measure customer satisfaction with the  changes resulting from its reforms?"], "subsections": []}]}, {"section_title": "Strategically Managing the Federal Workforce", "paragraphs": ["As part of its reform effort, OMB also required agencies to develop a long- term workforce reduction plan and a plan to maximize employee  performance as part of the April 2017 reform guidance. Specifically, OMB  required agencies to develop proposals intended to improve performance,  increase accountability, and reduce the size and costs of the federal  workforce. Our prior work has found that at the heart of any serious  change management initiative are the people\u2014because people define the  organization\u2019s culture, drive its performance, and embody its knowledge  base. Experience shows that failure to adequately address\u2014or often  even consider\u2014a wide variety of people and cultural issues can lead to  unsuccessful change."], "subsections": [{"section_title": "Employee Engagement", "paragraphs": ["Research on both private- and public-sector organizations has found that  increased levels of engagement\u2014generally defined as the sense of  purpose and commitment employees feel toward their employer and its  mission\u2014can lead to better organizational performance. Additionally, we  found that agencies can sustain or increase their levels of employee  engagement and morale, even as employees weather difficult external  circumstances. In a previous review of trends in federal employee  engagement, as seen in figure 2 below, we identified six key drivers of  engagement based on our analysis of selected questions in the Federal  Employee Viewpoint Survey (FEVS).", "What do FEVS results show for the agency\u2019s current employee  engagement status both overall and disaggregated to lower  organizational levels?", "How does the agency plan to sustain and strengthen employee  engagement during and after the reforms?", "How specifically is the agency planning to manage diversity and  ensure an inclusive work environment in its reforms, or as it considers  workforce reductions?"], "subsections": []}, {"section_title": "Strategic Workforce Planning", "paragraphs": ["Strategic workforce planning should precede any staff realignments or  downsizing, so that changed staff levels do not inadvertently produce  skills gaps or other adverse effects that could result in increased use of  overtime and contracting.", "To what extent has the agency conducted strategic workforce  planning to determine whether it will have the needed resources and  capacity, including the skills and competencies, in place for the  proposed reforms or reorganization?", "How has the agency assessed the effects of the proposed agency  reforms on the current and future workforce and what does that  assessment show?", "To what extent does the agency track the number and cost of  contractors supporting its agency mission and the functions those  contractors are performing?", "How has the agency ensured that actions planned to maintain  productivity and service levels do not cost more than the savings  generated by reducing the workforce?", "What succession planning has the agency developed and  implemented for leadership and other key positions in areas critical to  reforms and mission accomplishment?", "To what extent have the reforms included important practices for  effective recruitment and hiring such as customized strategies to  recruit highly specialized and hard-to-fill positions?", "What employment- and mission-related data has the agency identified  to monitor progress of reform efforts and to ensure no adverse impact  on agency mission, and how is it using that data?"], "subsections": []}, {"section_title": "Workforce Reduction Strategies", "paragraphs": ["Before implementing workforce reduction strategies, it is critical that  agencies carefully consider how to strategically downsize the workforce  and maintain the staff resources to carry out its mission. Agencies should  consider long-term staffing plans and associated personnel costs,  organizational design and position structures and the appropriateness of  backfilling positions as they become vacant.", "To what extent has the agency considered skills gaps, mission  shortfalls, increased contracting and spending, and challenges in  aligning workforce with agency needs prior to implementing workforce  reduction strategies?", "In situations when \u201cearly outs\u201d and \u201cbuyouts\u201d are proposed, to what  extent has the agency linked proposed early outs and buyouts to  specific organizational objectives, including the agency\u2019s future  operational, restructuring, downsizing, or other reform goals?"], "subsections": []}, {"section_title": "Employee Performance Management", "paragraphs": ["Performance management systems are used to plan work and set  individual employee performance expectations, monitor performance,  develop capacities to perform, and rate and incentivize individual  performance. In addition, performance management systems can help  the organization manage employees on a daily basis and help to ensure  that individual employees understand the \u201cline of sight\u201d between their  performance and organizational results.  Effective performance  management systems provide supervisors and employees with the tools  they need to improve performance.", "To what extent has the agency aligned its employee performance  management system with its planned reform goals?", "How has the agency included accountability for proposed change  implementation in the performance expectations and assessments of  leadership and staff at all levels?", "As part of the proposed reform development process, to what extent  has the agency assessed its performance management to ensure it  creates incentives for and rewards top performers, while ensuring it  deals with poor performers?", "To what extent has the agency taken action to address employees  with unacceptable performance and increase the use of alternative  dispute resolution to address workplace disputes that involve  disciplinary or adverse actions?"], "subsections": []}]}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Director of the Office of  Management and Budget for review and comment. OMB staff provided  technical comments, which we incorporated as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Director of the Office of Management and  Budget, and other interested parties. This report will also be available at  no charge on the GAO website at http://www.gao.gov. If you or your staff  have any questions about this report, please contact J. Christopher Mihm  at (202) 512-6806 or mihmj@gao.gov or Robert Goldenkoff at   (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of our report. Key contributors to this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix 1: Related GAO Products", "paragraphs": ["Organizational Transformation and Streamlining Government   GAO, Managing for Results: Key Considerations for Implementing  Interagency Collaborative Mechanisms, GAO-12-1022 (Washington,  D.C.: Sep. 27, 2012).", "GAO, Streamlining Government: Questions to Consider When Evaluating  Proposals to Consolidate Physical Infrastructure and Management  Functions, GAO-12-542 (Washington, D.C.: May 23, 2012).", "GAO, Government Efficiency and Effectiveness: Opportunities for  Improvement and Considerations for Restructuring, GAO-12-454T  (Washington, D.C.: Mar. 21, 2012).", "GAO, Streamlining Government: Key Practices from Select Efficiency  Initiatives Should Be Shared Governmentwide, GAO-11-908  (Washington, D.C.: Sep 30, 2011).", "GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers  and Organizational Transformations, GAO-03-669 (Washington, D.C.: Jul.  2, 2003).", "GAO, A Call For Stewardship: Enhancing the Federal Government's  Ability to Address Key Fiscal and Other 21st Century Challenges,  GAO-08-93SP (Washington, D.C.:  Dec. 17, 2007).", "GAO, 21st Century Challenges: Reexamining the Base of the Federal  Government, GAO-05-325SP (Washington, D.C.:  Feb. 1, 2005).", "GAO, Regulatory Programs: Balancing Federal and State Responsibilities  for Standard Setting and Implementation, GAO-02-495 (Washington,  D.C.: Mar. 20, 2002).", "Fragmentation, Duplication, and Overlap  GAO, 2018 Annual Report: Additional Opportunities to Reduce  Fragmentation, Overlap, and Duplication and Achieve Other Financial  Benefits, GAO-18-371SP (Washington, D.C.:  Apr. 26, 2018).", "GAO, Fragmentation, Overlap, and Duplication: An Evaluation and  Management Guide, GAO-15-49SP (Washington, D.C.:  Apr. 14, 2015).", "High-Risk and Major Management Challenges  GAO, High-Risk Series: Progress on Many High-Risk Areas, While  Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.:  Feb. 15, 2017).", "GAO, Managing for Results: Selected Agencies\u2019 Experiences in  Implementing Strategic Reviews, GAO-17-740R (Washington, D.C.: Sep.  7, 2017).", "GAO, Enterprise Risk Management: Selected Agencies' Experiences  Illustrate Good Practices in Managing Risk, GAO-17-63 (Washington,  D.C.: Dec. 1, 2016).", "GAO, Managing for Results: Practices for Effective Agency Strategic  Reviews, GAO-15-602 (Washington, D.C.: Jul. 29, 2015).", "Contracting and National Security Acquisitions   GAO, Federal Procurement: Smarter Buying Initiatives Can Achieve  Additional Savings, but Improved Oversight and Accountability Needed,  GAO-17-164 (Washington, D.C.:  Oct. 26, 2016).", "GAO, Framework for Assessing the Acquisition Function At Federal  Agencies, GAO-05-218 (Washington, D.C.:  Sep. 1, 2005).", "GAO, Improper Payments: Strategy and Additional Actions Needed to  Help Ensure Agencies Use the Do Not Pay Working System as Intended,  GAO-17-15 (Washington, D.C.:  Oct. 14, 2016).", "GAO, Financial Management Systems: Experience with Prior Migration  and Modernization Efforts Provides Lessons Learned for New Approach,  GAO-10-808 (Washington, D.C.: Sep. 8, 2010)", "GAO, Financial Management Systems: Additional Efforts Needed to  Address Key Causes of Modernization Failures, GAO-06-184  (Washington, D.C.:  Mar.15, 2006).", "GAO, Executive Guide: Creating Value Through World-class Financial  Management (Supersedes AIMD-99-45), AIMD-00-134 (Washington,  D.C.:  Apr.1, 2000).", "GAO, Information Technology: Further Implementation of FITARA  Related Recommendations Is Needed to Better Manage Acquisitions and  Operations, GAO-18-234T (Washington, D.C.: Nov. 15, 2017).", "GAO, Information Technology: Opportunities for Improving Acquisitions  and Operations, Highlights of a Forum Convened by the Comptroller  General of the United States, GAO-17-251SP (Washington, D.C.: Apr. 11,  2017).", "GAO, Cybersecurity: Federal Efforts Are Under Way That May Address  Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017).", "GAO, IT Workforce: Key Practices Help Ensure Strong Integrated  Program Teams; Selected Departments Need to Assess Skill Gaps,  GAO-17-8 (Washington, D.C.: Nov. 30, 2016).", "GAO, Federal Chief Information Security Officers: Opportunities Exist to  Improve Roles and Address Challenges to Authority, GAO-16-686  (Washington, D.C.: Aug. 26, 2016).", "GAO, Digital Service Programs: Assessing Results and Coordinating with  Chief Information Officers Can Improve Delivery of Federal Projects,  GAO-16-602 (Washington, D.C.: Aug. 15, 2016).", "GAO, Information Technology Reform: Billions of Dollars in Savings Have  Been Realized, but Agencies Need to Complete Reinvestment Plans,  GAO-15-617 (Washington, D.C.: Sept. 15, 2015).", "Strategically Managing the Federal Workforce  GAO, Federal Workforce: Additional Analysis and Sharing of Promising  Practices Could Improve Employee Engagement and Performance,  GAO-15-585 (Washington, D.C.: Jul. 14, 2015).", "GAO, Federal Workforce: OPM and Agencies Need to Strengthen Efforts  to Identify and Close Mission-Critical Skills Gaps, GAO-15-223  (Washington, D.C.: Jan. 30, 2015).", "GAO, Federal Workforce: Improved Supervision and Better Use of  Probationary Periods Are Needed to Address Substandard Employee  Performance, GAO-15-191 (Washington, D.C.: Feb. 6, 2015).", "GAO, Results-Oriented Management: OPM Needs to Do More to Ensure  Meaningful Distinctions Are Made in SES Ratings and Performance  Awards, GAO-15-189 (Washington, D.C.:  Jan. 22, 2015)", "GAO, Human Capital: Strategies to Help Agencies Meet Their Missions in  an Era of Highly Constrained Resources, GAO-14-168  (Washington, D.C.:   May 7, 2014).", "GAO, Human Capital: Agencies Are Using Buyouts and Early Outs with  Increasing Frequency to Help Reshape Their Workforces, GAO-06-324  (Washington, D.C.: Mar. 31, 2006).", "GAO, Issues Related to Poor Performers in the Federal Workplace,  GAO-05-812R (Washington, D.C.: June 29, 2005).", "GAO, Human Capital: A Guide for Assessing Strategic Training and  Development Efforts in the Federal Government (Supersedes  GAO-03-893G), GAO-04-546G (Washington, D.C.: Mar. 1, 2004).", "GAO, Human Capital: Key Principles for Effective Strategic Workforce  Planning, GAO-04-39 (Washington, D.C.: Dec. 11, 2003).", "GAO, Results-Oriented Culture: Creating a Clear Linkage between  Individual Performance and Organizational Success, GAO-03-488  (Washington, D.C.: Mar. 14, 2003).", "GAO, Federal Downsizing: Effective Buyout Practices and Their Use in  FY 1997, GGD-97-124 (Washington, D.C.: Jun. 30, 1997).", "GAO, Performance Management: How Well Is the Government Dealing  With Poor Performers?, GGD-91-7(Washington, D.C.: Oct. 2, 1990).", "GAO, Recent Government-Wide Hiring Freezes Prove Ineffective in  Managing Federal Employment, FPCD-82-21 (Washington, D.C: Mar. 10,  1982).", "GAO, Key Issues: Ensuring the Security of Federal Information Systems  and Cyber Critical Infrastructure and Protecting the Privacy of Personally  Identifiable Information - High Risk Issue, accessed April 24, 2018,  https://www.gao.gov/key_issues/ensuring_security_federal_information_s ystems/issue_summay  GAO, Key Issues, Duplication and Cost Savings, Action Tracker,  https://www.gao.gov/duplication/overview#t=1, accessed April 24,  2018,an online tool for monitoring the progress federal agencies and  Congress have made in addressing the actions identified in GAO's annual  Duplication and Cost Savings reports."], "subsections": []}, {"section_title": "Appendix II: Subject Matter Specialists", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the above contact, Sarah E. Veale, Assistant Director,  Thomas Gilbert, Assistant Director, and Carole J. Cimitile, Analyst-in- Charge, supervised the development of this report. Layla Y. Moughari,  Steven Putansu, and Robert Robinson made significant contributions to  this report. Kayla Robinson provided legal counsel."], "subsections": []}]}], "fastfact": ["A March 2017 executive order requiring executive branch agency reorganization is intended to improve efficiency and effectiveness. If it works, it could save billions of dollars\u2014but similar reform efforts in the past have not always come to fruition.", "Our prior work on government reform indicates that agencies can change if they", "follow an effective process", "allocate sufficient implementation resources", "consider workforce needs during and after the reform", "In this report, we provide questions that Congress can ask in its critical oversight role to determine whether agencies are on track for effective change."]}
{"id": "GAO-19-211", "url": "https://www.gao.gov/products/GAO-19-211", "title": "Overseas Contingency Operations: Alternatives Identified to the Approach to Fund War- Related Activities", "published_date": "2019-01-28T00:00:00", "released_date": "2019-01-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since 2001, DOD has received more than $1.8 trillion in OCO funds. DOD defines \u201ccontingency operations\u201d as small, medium, or large-scale military operations, while \u201cbase\u201d activities include operating support for installations, civilian pay, and other costs that would be incurred, regardless of contingency operations. Congress separately appropriates amounts for base and OCO activities into the same appropriation accounts and directs how funds are to be spent by designating amounts in conference reports or explanatory statements accompanying the annual appropriations acts.", "The National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the feasibility of separating OCO expenditures from other DOD expenditures. This report (1) describes internal controls that selected DOD components use to separately account for OCO and base amounts during budget execution and (2) identifies and examines alternatives that Congress or DOD could use to separate funding for OCO and base activities.", "GAO reviewed documentation of DOD internal controls for separating OCO and base amounts in the O&M account, interviewed financial management officials, and, among other things, conducted a literature review to identify alternatives that Congress or DOD could use to separate funding for OCO and base activities. Also, GAO administered a questionnaire to DOD and non-DOD officials to identify positive and negative aspects of these alternatives."]}, {"section_title": "What GAO Found", "paragraphs": ["Selected Department of Defense (DOD) components use coding and other internal control activities to separately account for overseas contingency operations (OCO) and base amounts in their operation and maintenance (O&M) accounts during budget execution. To record and track OCO and base amounts separately, the military services, U.S. Special Operations Command, and the Defense Security Cooperation Agency use coding in their financial systems. These DOD components also have instituted some internal control activities to help ensure separation of OCO amounts. For example, Army and Defense Security Cooperation Agency officials stated that the financial systems they use incorporate system controls that automatically maintain the categories of funding, such as OCO, designated during allotment through subsequent actions to ensure the OCO coding remains throughout budget execution.", "GAO identified at least four alternatives to the processes used to separate funding for DOD's OCO and base activities:", "Move enduring costs to the base budget . DOD could request funding for enduring costs\u2014costs that would continue in the absence of contingency operations\u2014through its base budget rather than its OCO budget.", "Use specific purpose language . Congress could use legally binding language in the annual DOD appropriations acts to specify the purposes\u2014programs, projects and activities\u2014for which OCO amounts may be obligated.", "Create separate appropriation accounts . Congress could create separate appropriation accounts for OCO and base funding.", "Use a transfer account . Congress could appropriate funds for OCO into a non-expiring transfer account. DOD would fund OCO with its base budget and later reimburse its base accounts using funds from a transfer account.", "Implementing these alternatives would require Congress and DOD to take action in different phases of the budget process (see figure).", "Each alternative includes tradeoffs that Congress and DOD would have to consider to strike the desired balance between agency flexibility and congressional control. The alternatives, and GAO's summary of their positive and negative aspects identified by questionnaire respondents, could be a reference for Congress and DOD as they consider potential changes to processes for separating the funding of amounts for OCO and base activities."]}], "report": [{"section_title": "Letter", "paragraphs": ["Since September 2001, the Department of Defense (DOD) has received  more than $1.8 trillion in funds designated for Overseas Contingency  Operations (OCO), primarily in Iraq and Afghanistan. DOD defines  \u201ccontingency operations\u201d as small, medium, or large-scale campaign-level  military operations, including but not limited to support for peacekeeping  operations, foreign disaster relief efforts, and noncombatant evacuation  operations, and international disaster relief efforts. In contrast, regular or  \u201cbase\u201d activities include, for example, operating support for installations,  training and education, and civilian personnel pay, which are costs that  would be incurred, regardless of contingency operations. Since fiscal year  2010, DOD has submitted separate requests for both base and OCO  funding as part of its annual budget request to Congress. Congress  separately appropriates amounts for base and OCO activities into the  same appropriation accounts and directs how funds are to be spent by  designating specific amounts at the activity level in conference reports or  explanatory statements accompanying annual appropriations acts.  However, congressionally designated amounts are not binding unless  they are also incorporated by reference into an appropriations act or other  statute. In addition, DOD\u2019s OCO budget request now includes some  funding for enduring activities\u2014activities that would continue in the  absence of contingency operations that could be transitioned to DOD\u2019s  base budget. According to the Congressional Budget Office, for each year  since 2006, about $53 billion of the total funding designated for OCO has  been used to pay for enduring costs. It further estimates that about 70  percent of all OCO funding in DOD\u2019s Fiscal Year 2019 OCO budget is  expected to be used for enduring costs.", "We have reported on multiple issues associated with OCO funds since  2007, including efforts to transition enduring costs to DOD\u2019s base budget.  In June 2014, we reported that DOD recognized that the U.S. Central  Command and its service components have enduring headquarters costs,  but the majority of the costs to operate and support U.S. Central  Command, two of its service component commands, and its theater  special operations command headquarters were funded with OCO  appropriations. We recommended that DOD develop guidance to  transition enduring costs funded with OCO appropriations to DOD\u2019s base  budget. DOD partially concurred with this recommendation, stating that  the transition\u2019s time frame depends on the evolution of threats in U.S.  Central Command\u2019s area of responsibility and the impact of the caps  enacted in the Budget Control Act of 2011, as amended, on the  department\u2019s ability to migrate additional requirements to the base  budget. In January 2017, we reported that DOD had developed an initial  estimate of costs being funded with OCO appropriations that are likely to  endure beyond current operations, but had not finalized or reported its  estimate outside of the department. We recommended that DOD  develop a complete and reliable estimate of enduring costs to report in  future budget requests. DOD also partially concurred with this  recommendation, stating that until there is relief from the budgetary caps  established by the Budget Control Act of 2011, as amended, DOD would  need OCO to finance counterterrorism operations.", "In May 2018, DOD officials indicated that the department was taking  steps to implement our January 2017 recommendation. According to  these officials, they received direction from the Office of Management and  Budget (OMB) to develop a plan for the fiscal year 2020 President\u2019s  Budget to shift the enduring costs in the OCO budget to the base budget,  reducing the size of the OCO budget. According to DOD, the  department\u2019s guidance for the fiscal year 2020 budget directs the  movement of enduring costs to the base budget, and the remaining OCO  budget funds only those costs directly associated with combat operations.  DOD officials told us that this plan is still under consideration. The step  DOD has taken also addresses our 2014 recommendation for DOD to  develop guidance to transition enduring costs funded with OCO  appropriations to DOD\u2019s base budget. Further, based in part on our work,  Congress, in the John S. McCain National Defense Authorization Act for  Fiscal Year 2019, required the Under Secretary of Defense (Comptroller)  to submit an annual report for fiscal years 2020 through 2024 that  includes, among other elements, an estimate of the costs of operations  that are likely to continue beyond such operations and that are currently  supported in part or in whole by requested funding for OCO.", "Another issue we have previously highlighted relates to criteria for  determining which activities belong in DOD\u2019s annual base and OCO  funding requests to Congress. We reported in January 2017 that OMB  collaborated with DOD in 2010 to issue these criteria. However, we  found that the criteria were outdated and did not address the full scope of  activities included in DOD\u2019s fiscal year 2017 OCO budget request. We  recommended that DOD collaborate with OMB to revise the criteria, and  DOD concurred. In October 2017, a DOD official stated that the  department had discussed modifications to the criteria with the military  departments and combatant commands, but that it had not made  recommendations to OMB to revise the criteria. The National Defense  Authorization Act for Fiscal Year 2018 included a provision requiring DOD  and OMB to update their OCO criteria by September 2018. However, in  January 2019, a DOD official confirmed that neither OMB nor DOD had  released updated criteria.", "Section 1523 of the National Defense Authorization Act for Fiscal Year  2018 included a provision for us to report on the feasibility of separating  DOD\u2019s OCO expenditures from its other expenditures. In this report we  (1) describe internal controls that selected DOD components use to  separately account for OCO and base amounts during budget execution,  and (2) identify and examine alternatives that Congress or DOD could  use to separate funding for DOD\u2019s OCO and base activities.", "For our first objective, we reviewed documentation of the internal control  activities that DOD organizations in our review have designed to account  for OCO amounts separately from base amounts in their operation and  maintenance (O&M) appropriation accounts during budget execution. We  focused our review on O&M accounts because Congress appropriates  the majority of OCO amounts to DOD\u2019s multiple O&M accounts. In  addition, we focused our review on the military services and two non- service DOD components (U.S. Special Operations Command and the  Defense Security Cooperation Agency) that are allotted the most OCO  funding to the O&M Defense-wide account. We collected information for  this objective through interviews and written requests for information from  financial management officials in the Office of the Secretary of Defense  (Comptroller), the offices of the military services, U. S. Special Operations  Command, the Defense Security Cooperation Agency, and the Defense  Finance and Accounting Service. Our review focused on the design of the  internal control systems and did not assess the effectiveness of these  internal controls.", "For our second objective, we searched for relevant literature from 2001  through July 2018. Specifically, we searched for alternative processes  that (1) DOD could use to separately account for OCO funding or (2)  Congress could use to provide separate OCO funding to DOD because  both DOD and Congress could be involved in implementing alternatives  to separate funding for OCO and base activities. We did not identify any  alternatives for DOD to separately account for OCO funding; therefore we  do not address this in our report. We did identify alternatives related to  how Congress provides OCO funding to DOD and how DOD requests  OCO funding from Congress. We identified and summarized four  alternatives related to this in our report based on the literature search and  review by our internal subject matter experts.", "We developed and administered a questionnaire to solicit opinions from  knowledgeable individuals (\u201crespondents\u201d) regarding Congress\u2019 and  DOD\u2019s current processes and the four alternatives. We included the  summaries of all processes in the questionnaire. We asked respondents  to identify positive and negative aspects of Congress\u2019 and DOD\u2019s current  processes and of the alternatives, as well as the costs and requirements  associated with each. We also asked respondents to describe any  additional alternatives. We identified questionnaire respondents within  and outside DOD, and we included questions in our questionnaire to help  us determine whether the respondents were sufficiently knowledgeable  about Congress\u2019 and DOD\u2019s current processes. The respondents were  predominantly current officials in DOD financial management offices,  former DOD officials, and defense budget analysts from think tanks. We  received 17 usable questionnaires, which is a response rate of 81  percent. Fifteen of the 17 respondents to our questionnaire were current  or former DOD officials. Results of this questionnaire are not  generalizable beyond our respondents. We conducted a content analysis  of the responses received to identify similarities, defined for our purposes  as when two or more respondents gave the same or very similar answers  to a particular question. More detailed information on our scope and  methodology can be found in appendix I of this report.", "We conducted this performance audit from March 2018 to January 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 the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The appropriation and execution of DOD\u2019s base and OCO amounts is  part of the broader federal budget process. In this process, Congress, the  President, and federal agencies take a number of steps to formulate a  budget, enact appropriation acts, and execute the federal budget for each  fiscal year. A summary of the budget process is depicted in figure 1  below.", "In DOD\u2019s budget process, the military services and defense agencies  submit a budget request\u2014known as the Budget Estimate Submission\u2014 that addresses their estimated annual funding requirements for both base  and OCO activities. In building their OCO budget requests, the military  services and defense agencies use criteria that OMB developed in  collaboration with DOD, for deciding whether items belong in the base  budget or in OCO funding requests. The services also use guidance  issued within their own organizations, as well as utilize OCO-specific  budget guidance included in DOD\u2019s Financial Management Regulation.", "Congress then takes action on the budget request and appropriates  funding for both base and OCO activities into the same appropriation  accounts, such as service-specific O&M accounts. Explanatory  statements or conference committee reports accompanying annual  appropriations acts provide congressional direction on how OCO and  base funding amounts should be obligated. However, the congressional  direction for funding is generally not legally binding. Congress also has  the discretion to make available amounts for base activities or enduring  costs through OCO appropriations, even if DOD considers such costs to  be part of the base budget. The Budget Control Act of 2011, amending  the Balanced Budget and Emergency Deficit Control Act of 1985,  imposes government-wide discretionary spending limits for fiscal years  2012 through 2021 to reduce projected spending by about $1 trillion. All  amounts appropriated to DOD are subject to limitations on discretionary  spending. Appropriated amounts designated by Congress for OCO that  would otherwise exceed the annual limits established for discretionary  spending will instead result in an adjustment to the overall spending limit  established for a particular fiscal year, and will not trigger a sequestration,  which is an automatic cancellation of budgetary resources provided by  discretionary appropriations or direct spending laws.", "Upon enactment of an appropriation, the Secretary of the Treasury issues  a warrant to federal agencies, which is an official document that  establishes the amount of moneys authorized to be withdrawn from the  central accounts that the Department of Treasury maintains. The  Treasury does not employ a process to separate OCO funding from base  funding in its role in warranting funds to federal agencies, including DOD.  After receiving budget authority, agencies make allotments, delegating  budget authority to various agency officials allowing them to incur  obligations. Agencies then disburse amounts by cash or cash equivalents  to liquidate obligations."], "subsections": []}, {"section_title": "DOD Components We Reviewed Use Coding and Other Control Activities to Separately Account for OCO and Base Amounts during Budget Execution", "paragraphs": ["The DOD components in our review use coding and other internal control  activities to separately account for OCO and base amounts in their O&M  accounts during budget execution. To record and track OCO and base  amounts separately, the DOD components use coding in their financial  systems during the allotment, obligation, and disbursement of funds. For  example, during the allotment phase, the Army and the Defense Security  Cooperation Agency use codes in their financial systems to divide,  distribute, and track their appropriated funds into separate categories\u2014 including one for OCO and one for base. Army and Defense Security  Cooperation Agency officials stated that the separate categories are  maintained through the obligation phase. The Air Force, the Marine  Corps, and the Navy use specific codes to track OCO transactions within  multiple systems they use to allot and obligate OCO and base amounts.  For example, the Air Force uses an Emergency and Special Program  code to track and record allotments and obligations of OCO amounts within its budgeting and accounting systems. The Marine Corps uses  three-digit, alphanumeric codes called Special Interest Codes to track and  record costs associated with high-interest activities, such as OCO, during  obligation. Figure 2 describes the steps that DOD takes to separate OCO  and base amounts.", "We identified some internal control activities that the DOD components in  our review have put into place to ensure separate accounting of OCO and  base amounts, such as controls over information processing. A variety  of control activities can be used in information processing, including  controls incorporated directly into computer applications to ensure  accuracy, as well as policies and procedures that apply to information  systems. For example, Army and Defense Security Cooperation Agency  officials stated that the financial systems they use incorporate system  controls that automatically maintain the categories of funding designated  during allotment through subsequent actions, including obligation, which  ensures an amount in the OCO category maintains its OCO-specific  coding throughout the budget execution process. Also, the Army restricts  the number of personnel who are able to reassign the coding of funding  from one category to another. Navy officials explained that two of three  financial accounting systems used by the Navy receive OCO allotments  automatically from the Navy\u2019s budgeting information system, which  eliminates the need for manual entry of allotment amounts. Also, Marine  Corps guidance requires entry of an identifying OCO code in the Marine  Corps\u2019 financial system when recording an OCO-related transaction,  which can prevent data reporting errors.", "In addition to controls over information processing, each DOD component  in our review incorporates reviews of their OCO execution as one of their  internal control activities. Internal control activities also include reviews,  such as reviews of data or expected results, by management throughout  an organization. The financial management offices of these components  periodically review the OCO-related allotments they make within their  components to confirm the amounts are properly recorded. For example,  the Air Force, the Army, the Marine Corps, the Navy, the Defense  Security Cooperation Agency, and U.S. Special Operations Command  review OCO-related execution amounts at least monthly to determine if  amounts are within their established spending plans and that OCO coding  is recorded correctly, among other things. In addition, officials from each  service and the Defense Security Cooperation Agency stated that officials  review OCO-related obligations and verify they are legitimate OCO  expenses.", "The DOD Inspector General and the services\u2019 audit agencies have found  weaknesses in the services\u2019 processes of accounting for OCO costs or in  other related internal control activities. For example, in March 2018, the  US Army Audit Agency found that while the Army had a strategy and  processes to capture and report its financial data for Operation Inherent  Resolve for fiscal year 2016, processes to account for some obligation  data needed improvement. Moreover, an official from the Office of the  Secretary of Defense (Comptroller) stated that, while the DOD  components included in our review have processes to separate OCO and  base amounts, other DOD components may not have similar processes,  and not all components have auditable financial systems."], "subsections": []}, {"section_title": "Four Alternatives to the Current Processes That Congress and DOD Use to Separate Funding for OCO and Base Activities Would Entail Tradeoffs", "paragraphs": ["We identified at least four alternatives to the processes Congress and  DOD use to separate funding for DOD\u2019s OCO and base activities. Each  alternative would require action at different phases of DOD\u2019s budget  process and entail tradeoffs. Appendix II provides additional information  on requirements and costs to implement the alternatives reported by  respondents that we summarize, as well as other alternatives to provide  funding to DOD that respondents independently identified. In addition,  appendix II provides summary information on the positive and negative  aspects of Congress\u2019 current process for providing funding for OCO and  base activities, as described by respondents."], "subsections": [{"section_title": "Alternative #1: DOD Could Request Funding for Enduring Costs through Its Base Budget Rather Than Its OCO Budget", "paragraphs": ["The first alternative to the current process would be for DOD to request all  funding for enduring costs through its base budget rather than its OCO  budget. DOD is considering a plan to move enduring costs associated  with OCO activities from its OCO budget request into its base budget  request for fiscal year 2020. In its budget justification materials for fiscal  year 2019, DOD estimated that it would shift between $45.8 billion and  $53.0 billion from its OCO request to its base budget request from fiscal  years 2020 through 2023. However, moving DOD\u2019s enduring costs to its  base budget request may require increased base O&M appropriations  provided in annual DOD appropriations acts. Appropriations that are not  designated as OCO, such as base O&M amounts, and that exceed  annual discretionary spending limits established by the Budget Control  Act of 2011, as amended, would trigger a sequestration. Respondents  to our questionnaire identified several positive and negative aspects of  this alternative, which we summarize in table 1."], "subsections": []}, {"section_title": "Alternative #2: Congress Could Add Specific Purpose Language to Annual DOD Appropriations Acts Concerning OCO Amounts", "paragraphs": ["The second alternative would be for Congress to specify in annual DOD  appropriations acts the purposes\u2014programs, projects and activities\u2014for  which OCO amounts may be obligated. As we noted above, DOD  currently determines what constitutes OCO activities based on criteria  developed in 2010 in coordination with OMB and DOD 7000.14-R,  Financial Management Regulation. Explanatory statements and  conference committee reports accompanying annual appropriations acts  include direction on how OCO amounts should be allocated for specific  activities; however, explanatory statements and committee reports are not  legally binding unless incorporated by reference into the appropriations  act. Either specific purpose language or language incorporating  explanatory statement or committee report language could be included in  DOD\u2019s annual appropriations. Respondents to our questionnaire identified  several positive and negative aspects of this alternative, which we  summarize in table 2."], "subsections": []}, {"section_title": "Alternative #3: Congress Could Create Separate Appropriation Accounts for OCO and Base Funding", "paragraphs": ["The third alternative entails Congress creating separate appropriation  accounts for OCO and base funding. Under the current approach, both  OCO and base amounts are appropriated into and executed out of the  same appropriation accounts. By contrast, under this alternative,  Congress would create separate Treasury-level appropriation accounts  for funding for OCO and base activities. For example, there could be an  O&M appropriation account for the Army\u2019s base activities and an O&M  appropriation account for the Army\u2019s OCO activities. Funding for OCO  and base activities would no longer be comingled, but could be  transferred between accounts with statutory authority. Respondents to  our questionnaire identified several positive and negative aspects of this  alternative, which we summarize in table 3."], "subsections": []}, {"section_title": "Alternative #4: Congress and DOD Could Use a Transfer Account to Fund Contingency Operations", "paragraphs": ["Under the fourth alternative, Congress would appropriate funds into a  non-expiring transfer account for contingency operations. These funds  would be available for DOD\u2019s use during multiple fiscal years. DOD would  use its base appropriations to initially fund OCO activities and later use  funds from the transfer account, as needed, to reimburse its base  appropriation accounts. One example is the Overseas Contingency  Operations Transfer Fund, which was originally established by Congress  in fiscal year 1997 to meet small-scale, recurring operational demands of  the department by transferring amounts to the military services and  agencies based on execution needs as the year progresses.  Respondents to our questionnaire identified several positive and negative  aspects of this alternative, which we summarize in table 4."], "subsections": []}, {"section_title": "Each Alternative Would Require Action at Different Phases in the Budget Process and Entail Tradeoffs", "paragraphs": ["The four alternatives we identified would require Congress and DOD to  take action at different phases within DOD\u2019s budget process. In the first  alternative, DOD would move enduring costs to the base budget request  during the budget formulation phase. In the second alternative, Congress  would specify the activities to be funded by OCO amounts in the annual  appropriations acts during the congressional appropriation phase.  Similarly, in the third alternative, Congress would create separate  appropriation accounts for OCO and base activities during the  congressional appropriation phase. In the fourth alternative, using transfer  accounts would require actions during two phases\u2014the congressional  appropriations phase and the budget execution phase. Congress would  appropriate funds into a transfer account during the congressional  appropriation phase, and DOD would later use funds from the transfer  account, as needed, to reimburse its base appropriation accounts during  budget execution. In figure 3, we depict the phase of the budget process  in which these alternatives would take place.", "Each alternative includes tradeoffs that Congress and DOD would have to  consider to strike the desired balance between agency flexibility and  congressional control. For example, adding specific purpose language  would better align obligation of OCO amounts with congressional intent;  however, doing so could also reduce DOD\u2019s financial flexibility and  responsiveness to changes in operations. Understanding the implications  of each alternative is important to avoid unintended consequences. Our  summary of the positive and negative aspects of the alternatives reported  by respondents could be a reference for Congress and DOD as they  consider potential changes to processes for separating the funding of  amounts for OCO and base activities."], "subsections": []}]}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We requested comments from DOD, the Department of the Treasury, and  provided an informational copy of the draft report to OMB. DOD provided  technical comments on the draft report, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretary of the Treasury, the  Director of OMB; the Under Secretary of Defense for the Comptroller; the  Secretaries of the Air Force, the Army, and the Navy; the Commandant of  the Marine Corps; the Commanding General of U.S. Special Operations  Command, and the Director of the Defense Security Cooperation Agency.  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) 512-2775 or fielde1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff members who made key contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To describe selected Department of Defense (DOD) components\u2019 use of  internal controls to separately account for overseas contingency  operations (OCO) and base amounts, we reviewed documentation of the  internal controls that DOD organizations in our review have designed to  separate these amounts in their operation and maintenance (O&M)  account. We focused on the O&M account because Congress provides  most of the OCO amounts for DOD in O&M. In addition, we focused on  the military services that receive service-specific OCO appropriations,  and the two non-service DOD components (U.S. Special Operations  Command and the Defense Security Cooperation Agency) that are  allotted the most OCO funding appropriated to the O&M Defense-wide  account. We collected information for this objective through interviews  and written requests for information from financial management officials in  the Office of the Secretary of Defense (Comptroller), the offices of the  military services, U.S. Special Operations Command, the Defense  Security Cooperation Agency, and the Defense Finance and Accounting  Service. Our review focused on the design of the internal control systems  and did not assess the effectiveness of these internal controls.", "To identify alternatives to separate funding for DOD\u2019s OCO and base  activities, we searched for relevant literature from 2001 through July  2018. Specifically, we searched for alternative processes that (1) DOD  could use to separately account for OCO funding or (2) Congress could  use to provide separate OCO funding to DOD because both DOD and  Congress could be involved in implementing alternatives to separate  funding for OCO and base activities. We started with 2001, because this  was the first year that funds were appropriated for the Global War on  Terror (GWOT), now known as OCO. We conducted searches of various  databases and websites, such as ProQuest and the National Academy of  Sciences website. Our literature search identified 235 sources, which  primarily consisted of journal articles, reports, and news articles. Two  analysts independently reviewed the full text of the literature sources to  determine which were relevant. When they disagreed, a third analyst  independently reviewed the full text of a source to make the final  determination. We determined that 22 sources were relevant. We did not  identify any sources that described alternative processes for DOD to  separately account for OCO funding; therefore, we do not address this in  our report. We did identify three alternatives related to how Congress  provides OCO funding to DOD and how DOD requests OCO funding from  Congress. We summarized these alternatives and obtained feedback  from our internal subject matter experts familiar with Congress\u2019 process  for providing funding for OCO and DOD\u2019s process for separating OCO  and base funds. We revised the wording of the alternatives based on their  feedback to ensure that we described them accurately. Our internal  subject matter experts suggested a fourth congressional alternative. We  summarized all four alternatives in our report.", "In collaboration with a survey specialist, we developed a questionnaire to  solicit opinions from knowledgeable individuals (\u201crespondents\u201d) regarding  Congress\u2019 and DOD\u2019s current processes and the four alternatives. Our  internal subject matter experts also provided feedback on the draft  questionnaire. We included the summaries of all processes and asked  respondents to identify the positive and negative aspects, as well as the  costs and requirements, associated with each. We also asked  respondents to describe any additional alternatives apart from the four we  described in the questionnaire.", "We identified questionnaire respondents within and outside DOD who  were sufficiently knowledgeable about Congress\u2019 and DOD\u2019s current  processes in several ways. We identified respondents within DOD by  emailing the engagement points of contact, who were budget and  financial management officials in the headquarters for the military  services and other DOD components included in our review. To identify  respondents outside of DOD, we contacted individuals identified by an  internal subject matter expert and contacted additional individuals  identified in our literature review. We provided respondents with a brief  summary of the questionnaire and asked them if they would be able and  willing to respond to questions on these topics. We also asked  respondents to recommend additional knowledgeable individuals at the  end of the questionnaire. Respondents identified were current officials in  DOD financial management offices, former DOD officials, and defense  budget analysts from think tanks. In addition, we contacted officials from  the Congressional Research Service and the Congressional Budget  Office, whom we identified as assigned to analyze defense budget issues  related to OCO. We included questions at the start of the questionnaire to  determine if respondents were sufficiently knowledgeable about either the  current congressional process, the current DOD process\u2014or both\u2014to  offer perspectives on the alternatives presented.", "We sent the questionnaire as a Microsoft Word form via email to 23  respondents, including 10 within DOD and 13 outside DOD. We began  sending the questionnaires on August 1, 2018, and continued as we  identified more respondents. We sent up to two reminder emails with a  copy of the questionnaire to anyone who had not yet responded. We  received the last questionnaire on September 10, 2018. We received a  total of 19 questionnaires back from respondents. We excluded two  completed questionnaires from our analysis based on our screening  criteria for determining if respondents were sufficiently knowledgeable  about Congress\u2019 and DOD\u2019s current processes. Therefore, we included  17 questionnaires in our analysis\u201410 from DOD officials and 7 from  respondents outside DOD\u2014for a response rate of 81 percent. We  calculated the response rate using a total possible number of 21  questionnaires instead of 23 to account for the two questionnaires we  excluded from the analysis. Fifteen of the 17 respondents to our  questionnaire were current or former DOD officials. Results of this  questionnaire are not generalizable beyond our respondents.", "To enable us to provide the information to Congress within the time  frames required by the mandate, we did not pretest the questionnaire.  However, we believe that the questionnaire was a sufficiently valid data  collection tool for reporting positive and negative aspects identified by  respondents. We developed the questionnaire with assistance from a  survey specialist, and we revised the questionnaire content based on  feedback from our internal subject matter experts. Most respondents  provided answers that indicated they correctly interpreted the questions  as stated in the questionnaire. In addition, we took steps to provide  clarification to the few respondents who misunderstood questions and  excluded responses we could not reasonably assure were understood.  Four of the 23 original recipients of the questionnaire requested  clarification or misunderstood two questions in our questionnaire. We  provided clarification to those respondents via email and requested that  they update their questionnaire responses based on this new information.  Two did so. The other two respondents did not reply to our clarification  email, and we excluded their responses to the misunderstood questions.  Not all respondents provided answers to all questions in our  questionnaire. We extracted the data from the Word questionnaires and  imported them into Excel for qualitative analyses. We inspected the Excel  files to ensure that data were not missing or were not imported incorrectly  and made iterative corrections to the process to ensure accurate data  were analyzed. Because we did not pretest the questionnaire, we do not  report the number of respondents who provided any answers but rather  we present qualitative positive and negative aspects based on the  responses.", "We conducted a content analysis in which two analysts independently  categorized each response from each questionnaire to identify  similarities. For our purposes, similarities existed when two or more  respondents gave the same or very similar answers to a particular  question. The summaries of the responses we developed were based on  comments from two to nine respondents. The analysts discussed any  discrepancies in their categorizations until they reached agreement.  Subsequently, an internal subject matter expert provided feedback on the  summary. Using that feedback, the analysts consolidated summaries that  were related and clarified the wording of all the summarized responses.  We identified positive and negative aspects for questions regarding the  current processes and the four alternatives presented in the  questionnaire. We did not summarize positive and negative aspects for  questions regarding the additional alternatives described by respondents.  We did not include this information because although two respondents  described similar alternatives, they did not identify similar positive and  negative aspects about this alternative. In addition, none of the remaining  questionnaires included similar responses. We list any additional  alternatives identified by respondents in appendix II. The verbatim  wording from key sections of the questionnaire we administered is  presented in appendix III.", "In addition, section 1523 of the National Defense Authorization Act for  Fiscal Year 2018 contained additional provisions for us to review other  processes related to the execution of OCO funds. In particular, section  1523 contained a provision for us to review the processes the Department  of the Treasury employs to separate expenditures of amounts  appropriated for OCO from expenditures of all other amounts  appropriated for DOD. We assessed the steps that the Department of the  Treasury takes in the execution of the federal budget after funds have  been appropriated and determined that the Department of the Treasury  does not employ a process to separate OCO funding from base funding in  its role in making appropriations available to DOD. In addition, section  1523 of the act included another provision for us to compare the  processes DOD and the Department of Treasury use to separate  expenditures of OCO amounts to the generally accepted accounting  principles. The Federal Accounting Standards Advisory Board issues  federal financial accounting standards and provides guidance on federal  generally accepted accounting principles. The Federal Accounting  Standards Advisory Board\u2019s Handbook of Federal Accounting Standards  and Other Pronouncements, as Amended (Current Handbook) is the most  up-to-date, authoritative source of generally accepted accounting  principles developed for federal entities. However, the Current Handbook  does not address the separation of OCO from non-OCO appropriations,  obligations, and disbursements. Therefore, it is not possible to compare  the processes DOD and the Department of the Treasury use to the  generally accepted accounting principles based on existing standards and  guidance.", "We conducted this performance audit from March 2018 to January 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 the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Additional Information on the Current Process and Alternatives to Provide OCO Funding", "paragraphs": ["Additional information from our questionnaire is provided below, including  information about (1) the positive and negative aspects of Congress\u2019  current process for providing funding for the Department of Defense\u2019s  (DOD) overseas contingency operation (OCO) and base activities, (2) the  requirements and costs to implement the four alternatives we discussed  earlier, and (3) other alternatives for providing funding to DOD."], "subsections": [{"section_title": "Positive and Negative Aspects of Congress\u2019 Current Process to Provide Funding for OCO and Base Activities", "paragraphs": ["We asked respondents to report on the positive and negative aspects of  Congress\u2019 current process for providing funding for DOD\u2019s OCO and base  activities. We summarize those aspects in table 5."], "subsections": []}, {"section_title": "Requirements and Costs to Implement the Four Alternatives", "paragraphs": ["Respondents reported on the requirements and costs to implement the  four alternatives in our questionnaire. The requirements respondents  identified to implement the four alternatives are summarized in table 6.", "Regarding the costs, respondents reported that two alternatives would  require minimal or no additional costs, while the other two alternatives  would involve higher costs to DOD. The costs respondents identified to  implement the four alternatives are summarized in table 7."], "subsections": []}, {"section_title": "Alternatives for Providing Funding to DOD that Respondents Independently Identified", "paragraphs": ["We also asked respondents to describe any other alternatives for  separating funding for DOD\u2019s OCO and base activities, apart from the  four alternatives described above. Respondents identified several  alternatives for providing funding to DOD, including alternatives that  would not provide separation of OCO and base funding. The other  alternatives that respondents described are shown in table 8."], "subsections": []}]}, {"section_title": "Appendix III: Key Questions from GAO\u2019s Questionnaire on Separation of OCO and Base Amounts", "paragraphs": ["Below we show the verbatim wording of the descriptions of the  alternatives to separate amounts for DOD\u2019s OCO and base activities as  summarized in the questionnaire. Each description was presented  separately in the questionnaire followed by a standard set of questions  that are all presented below these descriptions. We also show the  verbatim wording of any clarification text sent via email to respondents  who misunderstood the description of the alternative.", "DOD could move requests for funding of enduring activities from its  OCO budget to its base budget request. Enduring activities are those  that began in response to contingency operations but have continued  after these operations ended. An example of an enduring cost would be  maintaining residual headquarters staff at U.S. Central Command in  Qatar to train, advise, and assist as missions have evolved from  contingency to ongoing activities. We understand that in the in FY 2020,  the Department plans to move funding for enduring activities from its  OCO budget to its base budget request. DOD\u2019s OCO funding request  would then reflect only the incremental costs of existing contingency  operations.", "The Congress could specify activities for which DOD should use  OCO amounts within the annual appropriations acts. Currently, DOD  determines what activities constitute OCO activities based on criteria  developed in 2010 in coordination with OMB. Under this alternative,  explicit purpose language designating specific funds for specific activities  would be added directly into the appropriations acts or the explanatory  statement, then incorporated into the appropriations act by reference. \u201cUnder the current approach, funds are designated for specific sub-activities in the  explanatory statement. However, these designations are generally not legally binding  unless incorporated by reference into the appropriations act itself. Under this alternative  approach , specific purpose language or language of incorporation would  be included in the appropriations act. The distinction between the current approach and  the alternative presented here is that legally binding language concerning specific  amounts for specific OCO activities would appear in the appropriation act.\u201d", "The Congress could create separate appropriation accounts for  amounts designated for OCO and amounts designated for base  activities. \u201cIn the current approach, amounts are designated for OCO and base activities within a  single appropriation account. In the alternative proposed in Question 5, the Congress  would create two separate appropriation accounts for OCO and base activities amounts.  For example, there would be one appropriation account for OCO amounts for O&M, and  another appropriation account for base activity amounts for O&M.\u201d", "DOD could use a transfer account (such as the Overseas  Contingency Operations Transfer Fund, or OCOTF) through which  the Department could meet operational demands by transferring  funds to the military services and agencies based on execution  needs as the year progresses. The Congress would appropriate funds  into a transfer account. These funds would not expire and be available for  DOD\u2019s use during multiple fiscal years. DOD would use its base activities  appropriations to fund OCO activities and later draw from the transfer  account as needed to reimburse its base appropriation accounts.", "Below we show the verbatim wording from key sections of the  questionnaire we administered. We used Questions 2 and 3 as screening  questions to help determine if respondents were sufficiently  knowledgeable about the current congressional or DOD processes.  Question 4 and its sub-questions below were repeated for each  alternative presented above (i.e., as Questions 4 through 7 in the  questionnaire). We also asked sub-questions \u201cb\u201d through \u201ce\u201d in Question  4 for the current approaches Congress and DOD use (presented in  Questions 2 and 3). Finally, we asked respondents to identify up to five  additional alternatives in Questions 8 through 12.  2.  Are you familiar with any of the current approaches that the  military services or DOD organizations use to separate operation  and maintenance (O&M) amounts designated for Overseas  Contingency Operations (OCO) from amounts designated for  base activities during the allotment, obligation, and/or  disbursement phases? Please check one box.  \uf0e8 Please continue to \u201ca\u201d through \u201ce\u201d  \uf0e8 Please skip to Question 3  \uf0e8 Please skip to Question 3  3.  Are you familiar with the current approach that Congress uses to  designate amounts for OCO in the appropriations process for  DOD? Please check one box.  \uf0e8 Please continue to \u201ca\u201d through \u201ce\u201d  \uf0e8 Please skip to Question 4  \uf0e8 Please skip to Question 4  4.  GAO has identified the following as a possible alternative to the  current approach for separating amounts designated for OCO  from amounts designated for base activities in the  appropriations process:  a.   Were you aware of this alternative before completing this   questionnaire? Please check one box.", "Please continue to \u201cb\u201d through \u201ce\u201d  b.  What are the positive aspects associated with this alternative,  if any? Please consider factors impacting both taxpayers and  the DOD. The box will expand as you type.   c.  What are the negative aspects associated with this  alternative, if  any? Please consider factors impacting both  taxpayers and the DOD. The box will expand as you type.   d.  What are the costs associated with this alternative, if any? Please  consider costs impacting both taxpayers and the DOD. The box  will expand as you type.   e.  What are the requirements associated with implementing this  alternative? Consider factors such as: changes to existing  systems, policies, or processes; new systems, policies, or  processes; new budget estimations; required training; etc.  These could be requirements for DOD or the Congress. The  box will expand as you type.   8.  Are you aware of any alternative approaches for separating  amounts designated for OCO from amounts designated for base  activities other than the ones listed above? Please consider both  approaches DOD could implement on its own (such as  approaches to separating OCO from base in the O&M account or  changes that make that unnecessary) and legislative approaches  the Congress could take. We are aware of the Enterprise Resource  Planning (ERP) systems listed above. For this question, we are  interested in the implementation of new potential alternatives other  than the ERP system. Please check one box.  \uf0e8  Please continue to \u201ca\u201d through \u201ce\u201d to tell us about  one alternative. If you are aware of more than one,  you will be able to tell us about others in Questions   9-12.  \uf0e8   Please skip to Question 13   Please skip to Question 13  a.   If yes, please briefly describe the first alternative approach.", "The box will expand as you type."], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Elizabeth Field, (202) 512-2775 or fielde1@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Richard K. Geiger, Assistant  Director; Arkelga Braxton, Assistant Director; Rebekah Boone; Amie  Lesser; Felicia Lopez; James P. Klein (Analyst-in-Charge); Shylene Mata;  Sheila Miller; Richard Powelson; and Michael Silver made key  contributions to this report."], "subsections": []}]}], "fastfact": ["The Department of Defense has received more than $1.8 trillion for war-related activities since 2001. Currently, Congress provides funds for both war-related activities and regular activities. DOD tracks the funds separately by using codes in its financial system.", "We identified more ways to separate these funds:", "Move costs that will endure beyond current war operations to the regular budget", "Use language in the appropriations acts to specify the purpose of funds for war-related activities", "Create separate appropriations accounts", "Fund everything from the regular budget and reimburse for war-related activities from a transfer account"]}
{"id": "GAO-18-377", "url": "https://www.gao.gov/products/GAO-18-377", "title": "Improper Payments: Actions and Guidance Could Help Address Issues and Inconsistencies in Estimation Processes", "published_date": "2018-05-31T00:00:00", "released_date": "2018-05-31T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Improper payments\u2014which include payments that should not have been made or were made in an incorrect amount\u2014are a long-standing, significant problem in the federal government, estimated at almost $141 billion for fiscal year 2017. Executive branch agencies are required to annually estimate improper payments for certain programs. Estimation of improper payments is key to understanding the extent of the problem and to developing effective corrective actions. Relevant laws and guidance provide agencies flexibility in developing estimates.", "This report describes agencies' processes to estimate improper payments in selected programs for fiscal year 2017 and the extent to which certain differences in these processes can affect the usefulness of the resulting estimates. GAO selected 10 programs across six agencies with the largest reported program outlays in fiscal years 2015 and 2016. For these programs, GAO reviewed relevant laws and guidance, analyzed agencies' policies and procedures, and interviewed officials at relevant agencies and OMB staff."]}, {"section_title": "What GAO Found", "paragraphs": ["The six agencies GAO reviewed reported taking various approaches related to key components of estimating improper payments\u2014shown in the figure below\u2014for 10 selected programs, which collectively reported outlays of over $2.5 trillion for fiscal year 2017.", "Sample selection. Eight of the 10 programs GAO reviewed reported using statistically valid approaches, and the remaining 2 reported using alternative methodologies approved by the Office of Management and Budget (OMB). The sampled data elements varied, including payments, medical claims, and tax returns. The age of the data used to develop fiscal year 2017 improper payment estimates also varied, ranging from calendar year 2013 to fiscal year 2017.", "Identification of improper payments. Some of the six agencies reported using processes designed specifically to estimate improper payments, whereas others reported leveraging existing reviews. These agencies' policies and procedures include a review of aspects of eligibility, except for those related to the Department of Defense's (DOD) Military Pay and the Office of Personnel Management's (OPM) Retirement overpayments. DOD and OPM have not fully assessed whether their estimation processes effectively consider key program risks. OMB guidance does not specifically address how agencies are to test to identify improper payments, such as using a risk-based approach to help ensure that key risks of improper payments are addressed.", "The six agencies also varied in the treatment of insufficient documentation, both in identifying and in reporting the root causes of improper payments. For the agencies that contact entities outside the agency to estimate improper payments, the treatment of nonresponse differed, with one agency including nonresponses as improper payments and another generally excluding the nonresponse cases from review. Although OMB guidance states that agencies should treat cases of insufficient documentation as improper payments, it does not specifically address the treatment of nonresponse cases.", "Calculation of the improper payment estimate. The six agencies generally reported using law and OMB guidance to calculate improper payment estimates for the selected programs, except for the Earned Income Tax Credit (EITC). The Internal Revenue Service (IRS) removed overpayments that were recovered when developing its estimate. OMB guidance requires agencies to include recovered amounts in their estimates. Removing these overpayments understates the EITC improper payment estimate and may limit IRS's ability to develop corrective actions to prevent improper payments."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that OMB develop guidance on treatment of nonresponse cases and testing to identify improper payments, that DOD and OPM assess their estimation processes, and that IRS revise its methodology to not exclude recovered payments from its estimate. All of the agencies either agreed or partially agreed with the specific recommendations to them. GAO believes that the actions are warranted, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["Improper payments are a long-standing, significant problem in the federal  government. In fiscal year 2017 alone, estimates of improper payments  totaled almost $141 billion government-wide. The Improper Payments  Information Act of 2002 (IPIA), as amended by the Improper Payments  Elimination and Recovery Act of 2010 (IPERA) and the Improper  Payments Elimination and Recovery Improvement Act of 2012 (IPERIA),  requires executive branch agencies to annually estimate improper  payments for programs they determine to be susceptible to significant  improper payments, among other things.", "Although agencies report improper payment estimates annually, in our  report on the Fiscal Year 2017 Financial Report of the U.S. Government  we continued to report a material weakness in internal control related to  improper payments because the federal government is unable to determine the full extent to which improper payments occur and  reasonably assure that appropriate actions are taken to reduce them. In  addition, some inspectors general have reported issues related to  agencies\u2019 improper payment estimates, including methodologies that may  not produce reliable estimates.", "Estimation of improper payments is key to understanding the extent of the  problem and to developing effective corrective actions to address it.  Relevant laws and guidance provide agencies flexibility in developing  improper payment estimates, and agencies use a variety of processes to  develop their improper payment estimates.", "We prepared this report under the authority of the Comptroller General to  conduct evaluations on his own initiative and support congressional  oversight of issues of national importance. This report describes  agencies\u2019 processes to estimate improper payments in selected programs  for fiscal year 2017 and the extent to which certain differences in these  processes can affect the usefulness of the resulting estimates.", "To select programs for review, we first identified those programs that  reported improper payment estimates and had the largest program  outlays for either fiscal year 2015 or 2016. This yielded a  nongeneralizable sample of 11 programs at seven agencies. For these  programs, we reviewed the processes to estimate improper payments for  fiscal year 2017 (i.e., the improper payment estimates reported in  agencies\u2019 fiscal year 2017 agency financial reports). Although the  Department of Agriculture\u2019s (USDA) Supplemental Nutrition Assistance  Program (SNAP) met the criteria to be included in our review (based on  program outlays in fiscal year 2015 and reporting an improper payment  estimate in fiscal year 2015), the agency ultimately did not report an  improper payment estimate for the program in its fiscal year 2017 agency  financial report (AFR). According to its fiscal year 2017 AFR, the state- reported data for SNAP did not allow for a determination of state error  rates, which have been used in prior years to calculate a national SNAP  improper payment estimate. Therefore, we did not include SNAP in our  review of improper payment estimation methodologies. Consequently, we  reviewed the 10 programs at six agencies listed in table 1. Collectively,  reported program outlays for these programs totaled over $2.5 trillion for  fiscal year 2017.", "To address our objective, we reviewed agencies\u2019 policies and procedures  for estimating improper payments for these 10 programs, as well as the  information reported in agencies\u2019 fiscal years 2016 and 2017 AFRs  regarding improper payments and their reported root causes. Further, we  interviewed relevant agency officials to obtain additional information about  the processes agencies use to estimate improper payments, as well as  Office of Management and Budget (OMB) staff to understand OMB\u2019s role  in providing guidance and oversight to the agencies. We analyzed  similarities and differences between agencies\u2019 processes and also  reviewed relevant laws, guidance, and internal control standards. We  focused our review on gaining an understanding of the processes  agencies use to estimate improper payments, and not on evaluating  whether these processes were properly designed or the extent to which  they were properly implemented.", "We conducted this performance audit from November 2016 to May 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Estimation of Improper Payments", "paragraphs": ["Executive branch agencies are required to take various steps regarding  improper payments under IPIA, as amended by IPERA and IPERIA, and  related OMB guidance. The steps include the following:  1.  reviewing all programs and activities and identifying those that may be  susceptible to significant improper payments (commonly referred to as  a risk assessment),  2.  developing improper payment estimates for those programs and  activities that the agency identified as being susceptible to significant  improper payments,  3.  analyzing the root causes of improper payments and developing  corrective actions to reduce them for those programs and activities  that the agency identified as being susceptible to significant improper  payments, and  4.  reporting on the results of addressing the foregoing requirements.", "Figure 1 lays out these steps, as well as the major components of  developing an improper payment estimate. IPERA also directs executive  branch agencies\u2019 inspectors general to annually determine and report on  whether their respective agencies complied with six criteria listed in the  law.", "On an annual basis, agencies are required to develop improper payment  estimates for programs that they consider susceptible to significant  improper payments. This generally involves selecting a sample of  program payments (or other items, such as invoices) and reviewing them in order to determine whether the relevant payments were proper. OMB  guidance for developing improper payment estimates focuses on the  statistical nature of the estimates and provides agencies with flexibility in  developing their estimates. IPIA, as amended, provides the definition of  \u201cimproper payment\u201d with IPERIA further instructing OMB to issue  guidance requiring agencies to include in the estimate all improper  payments, regardless of whether those payments have been or are being  recovered. OMB incorporated this requirement into Appendix C to  Circular No. A-123, Requirements for Effective Estimation and  Remediation of Improper Payments. In accordance with these relevant  laws and OMB guidance, agencies must apply \u201cimproper payment\u201d in the  context of their programs when developing improper payment estimates."], "subsections": []}, {"section_title": "Characteristics of Programs Reviewed", "paragraphs": ["The 10 programs we reviewed serve a variety of purposes and are  administered by various agencies across the federal government. Table 2  summarizes each of these programs."], "subsections": []}]}, {"section_title": "Agency Processes to Estimate Improper Payments Varied, and Some Differences May Hinder the Usefulness of the Resulting Estimates", "paragraphs": [], "subsections": [{"section_title": "Aspects of Sample Selection, Including Sampling Approach and Age of Data, Varied", "paragraphs": [], "subsections": [{"section_title": "Sampling Approach", "paragraphs": ["IPIA, as amended, requires agencies to develop statistically valid  improper payment estimates or estimates that are otherwise appropriate  using a methodology approved by the Director of OMB. The six agencies  we reviewed reported using either statistically valid or alternative  sampling approaches for the 10 selected programs, and some agencies  reported additionally incorporating actual improper payment amounts into  their estimates, as shown in table 3.", "If an agency is unable to produce a statistically valid improper payment  estimate, it can use an alternative approach if approved by OMB. For  example, the Department of Education (Education) reported using an  alternative methodology for the Direct Loan program after conducting a  cost-benefit analysis comparing use of a statistical and an alternative  methodology. Similarly, the Department of Health and Human Services  (HHS) reported using an alternative methodology for Medicaid to better  manage resources needed to conduct the required reviews.", "In addition to their statistical approaches, two agencies reported  incorporating actual improper payment amounts into the estimates for 2 of  the programs we reviewed. Officials at the Department of Defense (DOD)  stated that the agency calculates its Military Pay improper payment  estimate by adding the amount of debts due to DOD entered into its  financial system based on overpayments (i.e., debts due to DOD by a  recipient of an overpayment) identified during the fiscal year to a  projected estimate of improper payments. Officials at the Office of  Personnel Management (OPM) stated that the agency calculates its  Retirement program improper payment estimate by adding the amount of  debts due to OPM entered into its financial system based on  overpayments (i.e., debts due to OPM by a recipient of an overpayment)  identified during the fiscal year to a projected estimate of  underpayments."], "subsections": []}, {"section_title": "Data Subject to Sampling", "paragraphs": ["To implement their sampling approaches, agencies select a sample of  data to test from a larger, specified population of data. For the six  agencies we reviewed, data sampled varied by program and include  payments, claims, tax returns, and pay accounts. For example, according  to their policies and procedures", "DOD samples invoices related to payments made from 12 financial  systems for Defense Finance and Accounting Service Commercial  Pay,", "HHS samples medical claims for Medicare Fee-for-Service, and", "DOD samples pay accounts for Military Pay.", "Agencies subject specific data populations to sampling, which may not  include all payments made for a program. Reasons for sampling  exclusions varied across programs, as shown by the examples in table 4.", "Some of the selected agencies reported sampling multiple sets of data.  For example, for its Direct Loan improper payment estimate, Education  officials stated that the agency reviews Program Review Reports to  identify improper payments in originations and also samples loan  consolidation and refund payments. According to agency officials, Direct  Loan origination, consolidation, and refund transactions carry different  risks of improper payment."], "subsections": []}, {"section_title": "Age of Data", "paragraphs": ["To estimate improper payments for fiscal year 2017, the six agencies we  reviewed reported sampling and testing data that varied in age from  calendar year 2013 to fiscal year 2017. Figure 2 shows the range of data  used.", "OMB guidance states that to the extent possible, data used for estimating  improper payments should coincide with the fiscal year being reported,  but agencies may use a different 12-month reporting period with approval  from OMB. OMB staff acknowledged there are costs and benefits to  sampling newer or older data. OMB staff stated that although they review  agencies\u2019 sampling and estimation plans, they defer to the agencies  regarding the appropriateness of the age of data used to estimate  improper payments. OMB staff stated that they approve the timeframe of  the data used in alternative methodologies as part of the approval of the  methodology overall, whereas OMB silence provides tacit approval (i.e.,  no communication to the agency) for statistically valid methodologies."], "subsections": []}]}, {"section_title": "Processes for Identifying Improper Payments Varied by Program, Including Consideration of Eligibility and Treatment of Nonresponses", "paragraphs": [], "subsections": [{"section_title": "Testing Processes", "paragraphs": ["After agencies determine what subsets of data and types of transactions  to review, they generally test the data and calculate their improper  payment estimates. Testing processes varied among the 10 programs,  with some of the six agencies using processes designed specifically to  estimate improper payments and others leveraging existing processes  designed for other purposes.", "Some of the selected agencies reported using multiple testing processes  and combining the results to develop a program\u2019s improper payment  estimate. For example, according to their policies and procedures  the Direct Loan estimate comprises three component estimates for  loan originations, consolidations, and refunds and  the Medicaid estimate includes fee-for-service, managed care, and  eligibility components.", "Table 5 summarizes the processes used by the six agencies we  reviewed.", "Although agencies\u2019 testing processes varied, most included steps to  address aspects of eligibility of beneficiaries, goods, or services\u2014a key  component of determining the appropriateness of a payment\u2014in their  programs. For example, according to their policies and procedures  for Medicare Fee-for-Service, reviewers examine the medical  necessity, compliance with documentation requirements, and coding  of services provided, among other things;  for the Earned Income Tax Credit (EITC), auditors examine whether  the taxpayer properly reported income and whether the taxpayer  meets eligibility criteria, including income and qualifying child  requirements, and auditors examine, among other things, whether the  taxpayer is subject to a disallowance period on receiving EITC;  for Medicaid, reviewers examine fee-for-service claims and managed  care payments to determine the eligibility status of the beneficiary and  the provider, as well as support for the medical necessity of fee-for- service claims, among other things;  for Old-Age, Survivors, and Disability Insurance (OASDI), reviewers  examine factors to support the beneficiary\u2019s eligibility, including,  among other things, citizenship, relationship (in the case of survivor  benefits), and receipt of other government benefits; and although Education\u2019s Direct Loan program reviews can vary in scope,  they may include, among other things, steps to verify educational  institution eligibility (such as licensing and accreditation) and student  eligibility (such as enrollment status and satisfactory academic  progress).", "In contrast, per their policies and procedures, eligibility is not tested for  DOD\u2019s Military Pay or the overpayment component of OPM\u2019s Retirement  estimate.", "DOD Military Pay. DOD reported using the results of monthly payment  reviews to calculate a projected improper payment amount for Military  Pay. However, DOD\u2019s policies and procedures do not require a review of  servicemember eligibility for special pay or allowances as part of these  monthly reviews. DOD\u2019s Standard Operating Procedures (SOP) direct  reviewers to recalculate payments to servicemembers solely based on  the pay account data included in DOD systems (i.e., to verify that  components of servicemember pay were calculated appropriately).", "DOD\u2019s SOP does not direct reviewers to verify that servicemembers were  eligible for special pay or allowances by verifying the information included  in the pay account (such as pay grade) with supporting documentation.  According to DOD officials, reviewers may investigate potential  inconsistencies in pay account data identified during their reviews\u2014which  may include eligibility issues\u2014but this process is not consistently  performed or documented. According to DOD officials, an example of a  potential inconsistency is when a servicemember receives jump pay (a  hazard pay for parachute jumps) but is located at a site where no jump  activity occurred.", "According to DOD officials, to help compensate for the limitations of its  monthly reviews, DOD calculates the final reported Military Pay improper  payment estimate by adding actual debts due to DOD (related to  overpayments) identified during the year to the projected estimate of the  monthly reviews. DOD identifies the actual overpayments through various  methods, including other postpayment reviews and servicemember self- reporting.", "Standards for Internal Control in the Federal Government states that  management should identify, analyze, and respond to risks related to  achieving the defined objectives. DOD has acknowledged internal  control deficiencies related to the Military Pay program, which\u2014if  addressed in improper payment testing\u2014could have an impact on the  program\u2019s improper payment rate. However, these deficiencies were  identified through other internal control reviews not related to estimating  improper payments. For the purposes of estimating improper payments,  DOD has not fully assessed the risks in its Military Pay program and  evaluated whether its approach for estimating improper payments  effectively addresses these risks. As a result, DOD\u2019s process for  estimating Military Pay improper payments may not reflect significant  risks of improper payment in the program, specifically whether  servicemembers are eligible for the special pay or allowances they  receive, calling into question the improper payment estimate and its  usefulness for developing effective corrective actions.", "OPM Retirement. OPM relies on its existing Quality Assurance (QA)  process to estimate Retirement underpayments. The QA process is  designed to determine whether new Retirement claims (i.e., claims paid  for the first time) have been adjudicated correctly. Therefore, only new  Retirement claims are sampled and tested for accuracy. OPM applies  historical results of QA testing to older claims; however, these historical  results do not reflect any different risks of underpayment that the older  claims may face.", "Although OPM\u2019s QA process also produces an estimate of overpayments,  the agency\u2019s policies and procedures instead use actual debts due to  OPM (related to overpayments) that were identified during the fiscal year  as its overpayment amount (i.e., the overpayment amount does not reflect  any testing of Retirement payments to verify eligibility or accuracy). These  actual overpayments represent amounts that have been identified through  various means, such as inspector general fraud referrals. OPM officials  stated that the agency uses actual amounts because the QA estimate  may overstate overpayments. However, the fiscal year 2016 QA  overpayment estimate was lower than the actual amount of debts  identified as due to OPM.", "Standards for Internal Control in the Federal Government states that  management should identify, analyze, and respond to risks related to  achieving the defined objectives. OPM has not fully assessed the risks  of improper payments in its Retirement program\u2014particularly related to  the risk of underpayments in older claims and the risk of overpayments\u2014 and evaluated whether its approach for estimating improper payments  effectively addresses these risks. As a result, OPM\u2019s processes for  estimating Retirement improper payments may not reflect significant risks  of improper payment in the program, calling into question the improper  payment estimate and its usefulness for developing effective corrective  actions.", "OMB guidance. OMB issues guidance for agencies to implement various  requirements of the improper payment laws. Specifically, OMB is required  by IPERIA to issue guidance to set standards for agencies to follow in  determining the underlying validity of sampled payments to ensure that  amounts being billed, paid, or obligated for payment are proper. Although  existing OMB guidance addresses requirements for sampling, it does not  address how agencies test to identify improper payments, such as using  a risk-based approach to help ensure that key risks of improper  payments, like eligibility, are addressed through testing processes.  Without such guidance, there is increased risk that agencies\u2019 processes  may not address key risks of improper payments in their programs\u2014for  example, the cases of DOD Military Pay and OPM Retirement described  above\u2014calling into question the improper payment estimates for such  programs and their usefulness for developing effective corrective actions."], "subsections": []}, {"section_title": "Treatment of Insufficient Documentation", "paragraphs": ["According to OMB guidance, when an agency\u2019s review is unable to  determine whether a payment was proper because of insufficient or lack  of documentation, the payment must be considered an improper  payment. Among the six agencies and 10 programs we reviewed,  treatment of insufficient documentation varied by program, as did the  classification of these issues for root cause reporting in the AFRs.", "HHS\u2019s programs were the only ones we reviewed that reported improper  payments in the insufficient documentation root cause category for fiscal  years 2016 or 2017, as shown in table 6.", "Some agencies stated that they report insufficient documentation in other  root cause categories that they consider more appropriate. For example,  Education officials stated that for the Direct Loan program, payments that  lack sufficient supporting documentation may be placed in the  \u201cAdministrative or Process Error Made by Other Party\u201d root cause  category. In these cases, a third party\u2014such as a loan servicer\u2014is  unable to provide sufficient documentation supporting that the sampled  payment was proper. OMB guidance states that in cases where the  agency believes that more than one root cause category might be  suitable, the agency should determine which category it believes to be the  most appropriate.", "Additionally, some agencies stated that the \u201cinsufficient documentation\u201d  category was not always relevant when they recreated sampled cases to  estimate a program\u2019s improper payments. For example, according to  officials, to complete an OASDI stewardship review of a sampled case, a  Social Security Administration (SSA) quality reviewer reviews the  documentation related to the original determination and then  independently re-develops all factors of the payment and interviews the  associated beneficiary. According to agency officials, insufficient  documentation would not apply as all improper payments identified in the  stewardship sample are supported by documentation and payment has  been verified in all reviewed cases.", "As noted previously, the processes for estimating DOD Military Pay and  OPM Retirement improper payments were limited, and these limitations  may have an impact on the agencies\u2019 ability to identify improper  payments related to insufficient documentation.", "Treatment of cases of nonresponse. Some agencies contact outside  entities\u2014such as payees or beneficiaries\u2014as part of their improper  payment testing processes. Among the six agencies we reviewed,  treatment of cases of nonresponse differed. For example:", "SSA officials stated that in cases where quality reviewers do not  receive responses from OASDI beneficiaries they contact, they  exclude the cases from review (unless the reviewer identifies an  improper payment in the initial review that is completed prior to  reaching out to the beneficiary).", "For EITC improper payment estimation purposes, the Internal  Revenue Service (IRS) stated that the agency does not consider the  sampled payment associated with a nonresponse case to be proper  or improper. It sets the sampling weight of nonresponse cases to zero  and adjusts the sampling weights of respondents upward to account  for the nonresponse cases. IRS\u2019s methodology assumes  nonresponse and response cases have an equal likelihood of  improper payment.", "For Medicare Fee-for-Service and Medicaid, HHS\u2019s policies and  procedures consider payments associated with nonresponse cases to  be improper.", "OMB guidance states that when an agency\u2019s review is unable to discern  whether a payment was proper as a result of insufficient or lack of  documentation, this payment must be considered an improper payment.  However, it does not specifically address the appropriate treatment of  nonresponse cases for improper payment estimation purposes. As a  result, without clearer guidance there is increased risk that agencies\u2019  improper payment estimates may be understated and that estimates for  similar programs may not be comparable."], "subsections": []}]}, {"section_title": "Except for IRS, Selected Agencies Generally Reported Using Law and OMB Guidance to Calculate Improper Payment Estimates", "paragraphs": [], "subsections": [{"section_title": "Calculation of Improper Payment Estimates", "paragraphs": ["When agencies identify improper payments, they must determine the  amount of the payment that was improperly made. The six agencies we  reviewed generally reported using the definition of improper payment in  relevant laws and OMB guidance to determine the amount of improper  payments identified. OMB guidance provides agencies with instructions  on how to calculate the amount of improper payments.", "However, when developing its improper payment estimate for EITC, IRS  subtracted overpayments that were paid out and later recovered. By  subtracting recovered overpayments, IRS excluded them from the EITC  improper payment estimate. For 2013\u2014the tax year used to produce the  fiscal year 2017 improper payment estimate\u2014IRS estimated that   $1.2 billion in EITC overpayments would be recovered.", "IPERIA directed OMB to provide guidance that requires agencies to  include all improper payments in their improper payment estimates,  regardless of whether they have been or are being recovered. Although  the OMB guidance was revised in October 2014 to implement this  requirement, IRS has not updated its estimation methodology for EITC.  By not updating its guidance and continuing to remove EITC  overpayments that may be subsequently recovered, IRS is understating  its improper payment estimate and potentially limits its ability to address  these types of improper payments before they occur."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Improper payments are a long-standing, significant problem in the federal  government. Estimation of improper payments is key to understanding the  extent of the problem and to developing effective corrective actions to  address it. Among the six agencies we reviewed, processes to estimate  improper payments in their programs varied, and certain differences in  these processes may affect the quality of the resulting estimates and  consequently these agencies\u2019 efforts to reduce improper payments.  Specifically, policies and procedures for DOD\u2019s Military Pay and OPM\u2019s  Retirement programs\u2019 improper payment estimation methodologies do not  address certain key risks, like eligibility, in part because these agencies  have not fully assessed their processes. Further, although OMB guidance  addresses requirements for sampling, it does not address how agencies  test to identify improper payments. Without such assessments and  guidance, there is increased risk that agencies\u2019 processes may not  address key risks of improper payments in their programs, calling into  question the improper payment estimates for such programs and their  usefulness for developing effective corrective actions.", "Additionally, for agencies we reviewed that contact outside entities as part  of their improper payment estimation processes, the treatment of cases of  nonresponse varied. OMB guidance does not specifically address the  appropriate treatment of nonresponse cases for improper payment  estimation purposes. Without clearer guidance there is increased risk that  agencies\u2019 improper payment estimates may be understated and that  estimates for similar programs may not be comparable.", "Finally, although IPERIA directed OMB to provide guidance that requires  agencies to include all improper payments in their improper payment  estimates, regardless of whether they have been or are being recovered,  IRS has not updated its processes to reflect the change. By not updating  its guidance and continuing to remove EITC overpayments that may be  subsequently recovered, IRS is understating its improper payment  estimate and potentially limits its ability to address these types of  improper payments before they occur."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making two recommendations to the Director of OMB that have  government-wide implications and specific recommendations to DOD,  OPM, and IRS regarding their programs included in this review.", "The Director of OMB should develop guidance on how agencies test to  identify improper payments, such as using a risk-based approach to help  ensure that key risks of improper payments, such as eligibility, are  addressed through testing processes. (Recommendation 1)", "The Director of OMB should develop guidance clarifying the appropriate  treatment of nonresponse cases during improper payment testing.  (Recommendation 2)", "The Under Secretary of Defense (Comptroller) should assess the  processes for estimating Military Pay improper payments to determine  whether they effectively address key risks of improper payments\u2014 including eligibility for different types of pay and allowances\u2014and take  steps to update the processes to incorporate key risks that are not  currently addressed. (Recommendation 3)", "The Director of OPM should assess the processes to estimate Retirement  improper payments to determine whether they effectively address key  risks of improper payments\u2014including eligibility and whether older claims  face different risks of improper payments than new claims\u2014and take  steps to update the processes to incorporate key risks that are not  currently addressed. (Recommendation 4)", "The Commissioner of IRS should update IRS\u2019s improper payment  estimation methodology to not exclude recovered overpayments from its  EITC improper payment estimate. (Recommendation 5)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for comment to OMB, DOD, Education,  HHS, Treasury, OPM, SSA, and USDA. OMB provided oral comments,  which are summarized below. OPM, DOD, and IRS provided written  comments, which are reproduced in appendixes II through IV,  respectively. Education, HHS, SSA, and USDA did not provide written  comments on the draft report. In addition, HHS, IRS, OMB, OPM, and  SSA provided technical comments, which we have incorporated, as  appropriate.", "In oral comments provided on April 30, 2018, a Senior Policy Advisor in  OMB\u2019s Office of Federal Financial Management stated that OMB partially  agreed with our first recommendation and agreed with our second  recommendation.", "Regarding the first recommendation, the Senior Policy Advisor stated  that OMB should not have to develop more specific guidance as each  program and activity has its own risks. Instead, inspectors general are  better equipped and positioned to review the sampling and estimation  plans as part of their annual IPERA compliance audits and that  agencies, their statisticians, and inspectors general should work out  the best testing procedures for their agencies. OMB could provide  suggestions during OMB\u2019s annual town hall meeting related to  improper payments for areas that inspectors general may consider.  Although we agree that programs and activities may face different  risks of improper payment, we continue to believe that guidance from  OMB on how agencies test to identify improper payments\u2014such as  directing agencies to take a risk-based approach in developing their  testing procedures\u2014could help ensure that agencies address the  specific risks they identify when developing improper payment  estimates. Further, such guidance could also help ensure that testing  processes are designed to address an agency\u2019s identified risks before  the estimate is developed, whereas an inspector general\u2019s review\u2014as  well as related recommendations for improvement\u2014would generally  occur after the agency\u2019s improper payment estimate had been  developed and reported.", "Regarding the second recommendation, the Senior Policy Advisor  noted that OMB plans to update its guidance to direct agencies to  treat nonresponse cases as improper payments and to include a new  category for tracking such cases.", "In its written comments, OPM partially concurred with our  recommendation to assess the processes to estimate Retirement  improper payments to determine whether they effectively address the key  risks of improper payments. OPM agreed to conduct an audit of older  claims to determine if they face different risks than new claims. However,  OPM did not agree with the part of the recommendation to assess the risk  of improper payments related to eligibility in the estimation process. OPM  stated that eligibility is determined before annuity or survivor benefits are  fully adjudicated. However, the objective of an improper payment  estimate is to determine whether payments were made properly. To do  so, an agency should determine whether the payee was eligible for the  payment that was made, among other things. As such, we continue to  believe that the recommendation\u2014including the assessment of the risk of  improper payments related to eligibility\u2014is warranted.", "In their written comments, DOD and IRS both agreed with our  recommendations directed to them and described the steps they plan to  take to implement them.", "We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Agriculture, Defense, Education, Health  and Human Services, and the Treasury; the Director of the Office of  Personnel Management; the Administrator of the Social Security  Administration; the Director of the Office of Management and Budget; and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Reported Improper Payment Estimates by Agency and Program for Fiscal Year 2017", "paragraphs": ["Table 7 lists the fiscal year 2017 improper payment estimates by agency  and program, as reported by agencies in their fiscal year 2017 agency  financial reports and compiled on the Office of Management and Budget\u2019s  payment integrity website, paymentaccuracy.gov."], "subsections": []}, {"section_title": "Appendix II: Comments from the Office of Personnel Management", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Phillip McIntyre (Assistant  Director), James M. Healy (Auditor in Charge), Daniel Flavin, and Fabiola  Torres made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-401", "url": "https://www.gao.gov/products/GAO-18-401", "title": "Foreign Military Sales: Controls Should Be Strengthened to Address Substantial Growth in Overhead Account Balances", "published_date": "2018-05-10T00:00:00", "released_date": "2018-05-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The FMS program is one of the primary ways the U.S. government supports its foreign partners, by providing them with defense equipment and services. The program charges FMS customers overhead fees to cover the U.S. government's operating costs. They include the administrative fee for costs such as civilian employee salaries and facilities, and the CAS fee for the cost of contract quality assurance, management, and audits. In 1989, Congress excluded from administrative expenses certain costs associated with military personnel who work on the FMS program as well as unfunded civilian retirement and other benefits. As of May 2018, the administrative fee rate is 3.5 percent, and the CAS fee rate is 1.2 percent.", "House Report 114-537 and Senate Report 114-255 included provisions that GAO review DSCA's collection and management of these fees. This report examines, for fiscal years 2007 to 2017, the balance of and controls over (1) the administrative account and (2) the CAS account. GAO analyzed Department of Defense (DOD) data and documents, modeled projections for the administrative account, and interviewed DOD officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Foreign Military Sales (FMS) administrative account balance grew by over 950 percent from fiscal years 2007 to 2017\u2014from $391 million to $4.1 billion\u2014due in part to insufficient management controls, including the lack of timely rate reviews. The Defense Security Cooperation Agency (DSCA) has some controls to manage the account balance. For example, DSCA has established a method for calculating a minimum desired balance to ensure it has sufficient funds to complete FMS cases despite uncertain future sales. At the end of fiscal year 2017, the account balance was $2.7 billion above this minimum. DSCA, however, has completed rate reviews less frequently than directed by its policy. Moreover, DSCA has not adopted the best practice of setting an upper bound for the account that would, along with the minimum level, provide a target range for the account balance. By not performing timely rate reviews or setting an upper bound, DSCA has limited its ability to prevent excessive balance growth. GAO modeling indicates that, even with a planned fee rate reduction to 3.2 percent, the account balance would likely remain above its minimum level through fiscal year 2024, including if annual expenditures increased by 15 percent more than expected. As such, the account has the potential to pay for additional expenses. These could include expenses first excluded by statute in 1989 at a time when the account balance was negative and which have since been paid from other appropriated funds. DOD told GAO it is willing to revisit these exclusions.", "The FMS contract administration services (CAS) account grew from fiscal years 2007 to 2015 from $69 million to $981 million, due in part to insufficient management controls, including not setting an upper bound. The balances for fiscal years 2016 and 2017 overstated the amount of funds available due to a systems issue and limited related oversight. Since 2014, DSCA has implemented some controls for the CAS account, such as regular reviews of the account balance, but weaknesses remain. In particular, DSCA does not plan to follow its internal guidance to conduct the next CAS fee rate review within 5 years. DSCA also has inconsistently calculated the desired minimum level for the account. Finally, DSCA has not set an upper bound for the account to help officials follow internal guidance that directs them to determine when the balance is excessive and a fee rate reduction should be considered. As a result, DSCA is limited in its ability to make timely, appropriate decisions on the fee rate."]}, {"section_title": "What GAO Recommends", "paragraphs": ["Congress should consider redefining what it considers an allowable expense to be charged from the administrative account. GAO is making six recommendations to help DSCA improve its controls over both accounts, including completing more timely reviews and establishing a desired range for balance levels. DOD generally concurred."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. government provides tens of billions of dollars a year of defense  equipment and services to support our foreign partners through the  Foreign Military Sales (FMS) program. The Department of State (State)  and several components of the Department of Defense (DOD) share  responsibility for the program, including the Defense Security Cooperation  Agency (DSCA) that administers the program. DSCA charges purchasers  certain overhead fees to cover the U.S. government\u2019s costs for operating  the FMS program. These fees include the administrative fee, which  covers costs such as civilian employee salaries, facilities, and information  systems, and the contract administration services (CAS) fee, which  covers the costs of quality assurance and inspection, contract  management, and contract audits. These fees are collected in separate  accounts in the FMS trust fund, which is used for payments received from  purchasers and disbursements made to implement FMS.", "In discussing charges for administrative services, the International  Security Assistance and Arms Export Control Act of 1976 (the act) states,  in part, that the charge should be calculated on an average percentage  basis to recover the full estimated costs of the administration of sales, as  specified in the act. DSCA refers to this provision as the \u201cno loss\u201d  principle. In fiscal year 2013, DSCA reduced the administrative fee rate  from 3.8 percent to 3.5 percent of the FMS agreement value, or case  value, in an attempt to reduce growth in the administrative account  balance, which DSCA considered high after it exceeded $2 billion.  Similarly, in fiscal year 2015, DSCA reduced the CAS fee rate from 1.5  percent to 1.2 percent of the value of certain items sold, in an attempt to  lower the CAS account balance as it approached $1 billion.", "House Report number 114-537 and Senate Report 114-255 include  provisions for GAO to, among other things, review DSCA\u2019s management  and use of these fees and to determine whether the fees are generating  excess funds. This report examines (1) the balance maintained in the  administrative account in fiscal years 2007 to 2017, the controls used to  manage this balance, and the extent to which DOD has the ability to pay  for FMS administrative expenses under different scenarios; and (2) the  balance maintained in the CAS account in fiscal years 2007 to 2017 and  the controls used to manage this balance.", "To assess the balances of the administrative and CAS accounts, we  analyzed FMS trust fund overhead account collections, expenditures, and  balance data for fiscal years 2007 to 2017 maintained by the Defense  Finance and Accounting Service (DFAS) that show the amounts paid into  and out of the account during that time period. We did not conduct any  independent testing of these data to determine whether these amounts  were based on correct payments having been made based on accurate  billings. We reviewed the data and related documentation and interviewed  DFAS and DSCA officials and determined the administrative account data  to be reliable for assessing the balances and related trends in each year,  and for projecting future trends in the account balances, under a variety of  assumptions, using statistical modeling. We determined the CAS account  data to be reliable for assessing the balances and related trends for fiscal  years 2007 to 2015, but not for fiscal years 2016 and 2017 due to  significant billing errors in fiscal years 2016 through 2017. Thus, we did  not assess the CAS account balance for fiscal years 2016 and 2017.", "To assess DSCA controls to manage the administrative and CAS account  balances, we reviewed relevant statutes and DOD financial management  regulations, DOD guidance, and DOD documentation of such controls,  and interviewed DSCA officials regarding their implementation of these  processes.", "To assess the extent to which DOD has the ability to pay for FMS  administrative expenses from the administrative account under different  conditions, we modeled eight scenarios to determine the projected  account balance while varying the administrative fee rate and annual  expenditures from the account between fiscal years 2018 and 2024. We  were unable to perform similar modeling for the CAS account due to  weaknesses in the CAS account balance data. Appendix I contains  additional details about our overall scope and methodology; appendix II  contains additional technical details regarding the modeling we performed  and its results.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "FMS Program Size and Benefits", "paragraphs": ["The FMS program provides support to over 150 foreign partners, with  sales totaling $416 billion between fiscal years 2007 and 2017. Annual  sales were over $30 billion in each of these years except two, and grew  80 percent over the period to $42 billion in fiscal year 2017 (see fig. 1).  The types of equipment and services sold to foreign partners ranged from  fighter jets and integrated air and missile defense systems to combat  helmets and training on the use of equipment. According to DSCA  officials, fluctuations in annual sales are driven by changes in individual  foreign partners\u2019 needs for equipment and other goods and services from  year to year. For example, the fiscal year 2012 annual sales of $69 billion  were substantially driven by one sale to Saudi Arabia that was valued at  $29 billion.", "According to DOD and State officials, FMS provides multiple benefits to  foreign governments and the U.S. government. Foreign governments that  choose to use FMS rather than direct commercial sales receive greater  assurances of a reliable product, benefit from DOD\u2019s economies of scale,  improve interoperability with the U.S. military, and build a stronger  relationship with the U.S. government. DSCA anticipates strong annual  sales to continue, although using FMS is generally not the quickest or  least expensive option for foreign governments. From the U.S.  perspective, FMS expands the market for U.S. businesses and  contributes to foreign policy and national security objectives."], "subsections": []}, {"section_title": "Process of Administrative and CAS Fee Collections and Expenditures", "paragraphs": ["The administrative and CAS fee rates have varied over time, as seen in  figure 2. The administrative fee was first implemented in 1970 and was  originally set at 2 percent. Since 1970, the administrative fee rate has  been changed four times, staying within the range of 2.0 to 3.8 percent.  Since November 2012, the rate has been set at 3.5 percent. The CAS fee  was first implemented in 1981 and was originally set at 1.5 percent. In  2002, a supplementary CAS fee was created for cases managed outside  the United States (and set at an additional 0.2 percent), and in 2014 the  base CAS fee rate for all cases was decreased to 1.2 percent.", "Administrative and CAS fee collections are held in the FMS trust fund,  which is comprised of separate accounts for each country and several  distinct accounts for fees. Each country\u2019s individual account, referred to  as a country account, holds funds that country has paid for FMS  purchases of equipment and services until the funds are expended. The  fee accounts, including the administrative and the CAS accounts, do not  separate funds by country and instead comingle funds paid for fees by all  purchasers. These accounts hold their deposits without accruing interest.  According to DOD officials, once fees are deposited into one of the fee  accounts, they are considered U.S. government funds and do not  expire. Expenses related to administrative and CAS services are paid  respectively from the related fee account.", "The timing and calculation of collections differs between the  administrative and CAS fees, as shown in the example case of a $10  million equipment sale in figure 3. In particular, for the administrative fee,  half of the amount owed is collected with the first payment made on most  cases. The remaining administrative fees owed are timed with deliveries  on the case. For the CAS fee, nothing is collected upfront. Instead,  whenever the contractor providing goods or services on the case bills for  work on the contract, a corresponding payment of the CAS fee is moved  from the country account to the CAS account.", "According to DSCA data, the average length of a standard FMS case  closed in fiscal year 2017 was 9 years. The administrative and CAS  accounts need to maintain sufficient balances to pay for related  operational expenses over that time period. DOD does not track  administrative or CAS costs by case. Instead, collected funds are  comingled and expenditures from the administrative and CAS accounts  are made to DOD implementing agencies to pay for their overall FMS  work. We have previously found that DOD does not have sufficient  information on program costs to determine the amount needed to support  the FMS program."], "subsections": []}, {"section_title": "Related Roles and Responsibilities", "paragraphs": ["While State reviews and approves FMS purchases, DSCA is responsible  for administering the FMS program for DOD, including managing the  administrative and CAS accounts and coordinating with other DOD  components. In this role, DSCA sets policies for the FMS process,  including for how implementing agencies can use administrative and CAS  account funds; monitors the administrative and CAS account balances;  and sets the administrative and CAS fee rates. DFAS provides DSCA\u2019s  accounting services for FMS and in this role is responsible for accounting,  billing, disbursing, and collecting funds for the FMS program. DFAS\u2019  accounting duties also include reconciliation and correction of errors  related to collection of fees from foreign customers and disbursement of  funds out of the administrative and CAS accounts, as governed by an  agreement with DSCA.", "Congress and DSCA both have roles in defining what expenses are  covered by the administrative fee. Congress defines in the act what  administrative expenses DSCA can charge to FMS purchasers.  Congress amended the act in 1989 to exclude salaries of the Armed  Forces of the United States and estimated costs of unfunded civilian  retirement and other benefits from the expenses that shall be recovered  by the administrative fee. Since that change, the Armed Forces salaries  and the estimated costs of unfunded civilian retirement and other benefits  are paid instead from other appropriated funds.", "Within the parameters specified in the act, DSCA is responsible for  defining whether administrative expenses should be paid from funds  charged to the foreign partner, either from funds collected into the  administrative account or from case-specific funds held in the related  country account, or from other DOD annual appropriations. DSCA does  this by outlining the expected funding source for specific types of  administrative tasks carried out for FMS cases. For example, DSCA has  determined that functions that are a normal part of all FMS cases\u2014such  as identifying defense requirements to help write an offer letter\u2014should  be paid from the administrative account. Conversely, functions that are  requested to provide supplementary support on a case\u2014such as  conducting a site survey\u2014should be paid with case fees from the  partner\u2019s country account."], "subsections": []}]}, {"section_title": "The FMS Administrative Account Balance Has Grown Steadily Due in Part to Insufficient Management Controls and Should Be Adequate to Pay for Additional Expenditures through 2024", "paragraphs": ["The administrative account balance grew steadily over the last decade  due in part to the insufficient controls DSCA has in place to manage the  account balance. Although DSCA has set a minimum desired level for the  account and a process for regular monitoring, it has not completed timely  comprehensive reviews of the administrative fee rate. In addition, DSCA  has not adopted the best practice of establishing a method to calculate an  upper bound of a target range for the account balance. As a result,  DSCA\u2019s monitoring and rate review practices are limited in their ability to  prevent excessive growth in the account balance. Our analysis indicates  that even if the administrative fee rate were reduced to as low as 2.9  percent and administrative expenditures were to increase 15 percent  above expected growth, the administrative account balance would likely  remain sufficient to pay for projected expenditures while maintaining a  reserve balance through at least fiscal year 2024."], "subsections": [{"section_title": "The Administrative Account Grew about 950 Percent between Fiscal Years 2007 and 2017", "paragraphs": ["The administrative account balance grew each year from the beginning of  fiscal year 2007 through the end of fiscal year 2017\u2014from $391 million to  $4.1 billion, or 953 percent (see fig. 4). According to DSCA officials, the  account balance has grown in part due to the fact that 50 percent of the  administrative fee is usually paid when the first payment is made on a  case while funds need to be available to pay for administrative work on  the case as long as it remains open. Thus, as sales have grown on  average over recent years, the amount of these upfront collections made  on cases and the amount of expenditures that would be needed to work  on these cases have also grown. However, administrative account  collections and expenditures grew at slower rates than the overall  account balance growth. Specifically, administrative account collections  and expenditures grew 86 percent and 149 percent, respectively.", "Administrative account collections exceeded expenditures in each fiscal  year between 2007 and 2017, contributing to the growing account  balance. As shown in figure 5, collections were at least 1.5 times  expenditures in 6 of these years, and the difference between collections  and expenditures was $324 million in fiscal year 2017. At the end of each  fiscal year, the value of collections that exceeds expenditures remains in  the administrative account and is carried over to the next fiscal year\u2019s  beginning balance, which compounds the growth from year to year.  Administrative fees are transferred from the foreign partner\u2019s country  account to the administrative account when agreements for new sales are  signed and when deliveries are made on cases. Fluctuations in  collections from year to year are due to the variations in the timing of  these events and the value of the related cases. Despite these year-to- year fluctuations, expenditures from the administrative account to pay  implementing agencies to work on FMS cases have generally increased  more steadily over time.", "Annual growth in the administrative account balance has slowed in recent  years; however, the overall balance has continued to grow. DSCA  reduced the administrative fee rate in November 2012 from 3.8 to 3.5  percent following a review prompted by concerns that the balance  appeared excessive as it neared $2 billion. Growth in the account balance  from fiscal years 2007 to 2012 averaged $412 million a year compared  with $273 million a year in fiscal years 2013 to 2017. Therefore, the rate  reduction may have helped to decrease the annual growth in the account  balance, yet the account balance itself has continued to grow."], "subsections": []}, {"section_title": "DSCA\u2019s Management Controls for the Administrative Account Provide Some Assurance of Maintaining Sufficient Funds but Do Not Guard Against an Excessive Balance", "paragraphs": ["DSCA has established a minimum desired level for the administrative  account and has processes for regularly monitoring the account\u2019s  balance. DSCA also has a process for reviewing the fee rate, called a  comprehensive review, although it has not completed its most recent  comprehensive reviews as frequently as required by DSCA policy. In  addition, DSCA has not set an upper bound of a target range for the  account balance. As a result, DSCA cannot provide adequate assurance  that the account maintains an appropriate balance that is both sufficient  but not excessive."], "subsections": [{"section_title": "DSCA Has Established a Desired Minimum Level for the Administrative Account", "paragraphs": ["Best practices in managing federal user fees suggest that federal  agencies use a risk-based strategy to establish a target range for fee  account balances so that there are reserves sufficient to cover varying or  unpredictable revenues or expenses. This risk-based strategy should  match the level of risk identified for the program, based on past  experience and realistic risks.", "DSCA has set a minimum desired level for the administrative account,  which it calls the safety level. It considers the safety level the minimum  balance required to allow sufficient time to respond to volatility in the FMS  business environment and to complete ongoing FMS cases. Prior to fiscal  year 2013, the safety level was determined based on the assumption that  FMS business might cease and 2 years of administrative expenses would  be needed to wind down operations. An estimate of such shut-down  expenses was difficult to calculate, according to DSCA officials. DSCA  and the DOD Comptroller determined that the initial assumption for  calculating the safety level was not valid because FMS would not likely  cease operations given its integral role in U.S. government and DOD  strategies. They therefore decided to change the calculation, and in so  doing to increase the safety level to further mitigate risk and provide more  flexibility. Specifically, starting in fiscal year 2013, the safety level has  instead been defined as 18 months of funding, a period of time  considered sufficient to respond to volatility in the FMS business  environment and to complete ongoing FMS cases. According to DSCA  officials, maintaining the safety level helps to ensure that there are  sufficient funds in the account to pay for expenses throughout the life- cycle of individual cases.", "Since fiscal year 2007, the administrative account balance has been  above this safety level every year, with the balance $2.7 billion above the  safety level (of $1.4 billion) at the close of fiscal year 2017. Since the  safety level calculation was modified for fiscal year 2013, the account  balance has been between 2.4 and 3.2 times the safety level, and was 3  times the safety level at the close of fiscal year 2017 (see fig. 6).", "DSCA policy describes certain processes for account monitoring to occur  on a monthly, quarterly, and annual basis:", "Monthly reviews: On a monthly basis, DSCA officials are to review a  report from DFAS on the status of the administrative account. These  reviews focus on whether: an expected amount of expenditures were  made from the account, collections into the account are  commensurate with past and current sales, the account balance is  trending up or down, and the balance is near the safety level.  According to DSCA officials, the results of these reviews are provided  to DSCA leadership through monthly oral briefings from October  through August, and the same information is reviewed and briefed  weekly during September as the end of the fiscal year approaches.", "Quarterly reviews: On a quarterly basis, DSCA officials supplement  their monthly briefings to DSCA leadership with other information on  the FMS business environment, according to DSCA officials. Such  information could, for example, focus on changes in bilateral  relationships with key FMS customers, regional conflicts, changes in  the global economy, or the status of annual sales.", "Annual assessments: DSCA has completed annual assessments of  the administrative account since 2006, according to DSCA officials.  These assessments involve a review of the previous year\u2019s sales,  administrative fee collections, expenditures from the administrative  account, and the administrative account balance. The health of the  account is determined by comparing the current and projected  account balances with the account\u2019s safety level, which is also  recalculated for the new fiscal year as part of the annual assessment  process. To assess the health of the account over the next year,  DSCA officials use DSCA\u2019s sales forecast and budgeted  expenditures. These assessments are based on the current fee rate  and do not include testing of any alternative fee rates. These  assessments result in a report that is shared with DSCA leadership  and the implementing agencies to keep them informed of the  account\u2019s health at a more detailed level."], "subsections": []}, {"section_title": "DSCA Has Not Completed Timely Comprehensive Reviews of the Administrative Fee Rate", "paragraphs": ["DSCA policy requires that a comprehensive review of the administrative  fee rate be completed at least every 5 years. In addition, DSCA policy  encourages more frequent comprehensive reviews in the case of certain  events, such as a period of sales consistently below the forecasted level,  which may put the account balance at risk of dropping below the safety  level. However, DSCA has completed its three most recent  comprehensive reviews of the administrative fee rate more than 6 years  apart, which is less frequently than required by DSCA policy. Specifically:", "Fiscal year 2005: DSCA decided to conduct a comprehensive review  of the administrative fee rate because the account balance ($260  million) was approaching the account\u2019s safety level ($250 million). For  this review, DSCA conducted an internal study that concluded that,  with no changes to the fee rate, the administrative account would  have a negative balance in fiscal year 2009. To perform this study,  DSCA officials projected what would happen to the administrative  account balance given different administrative fee rates, while  estimating annual sales between $12.5 billion and $14.5 billion for  future years. As a result of this study, DSCA decided to increase the  fee rate from 2.5 to 3.8 percent. According to independent analysis  undertaken by the Naval Postgraduate School (NPS) in 2011 for the  next rate review, this decision addressed short-term concerns about a  possible negative account balance but did not account for the  projected long-term growth of the balance at the new fee rate.", "Fiscal years 2011 to 2012: DSCA enlisted NPS to perform a  comprehensive review of the administrative fee rate in fiscal year  2011. NPS built a model to assess how various administrative fee  rates would affect the administrative account balance through fiscal  year 2015, using multiple methodologies to project future annual sales  based on historical sales data. The model was also used to estimate  what the administrative account balance would have been if various  fee rates had been in effect since fiscal year 1999. Based on this  analysis, NPS recommended that the fee rate be lowered to within the  range of 3.0 to 3.4 percent, stating that 3.0 percent would be ideal for  minimizing large variations in the account balance from year to year  while mitigating the risk of falling below the safety level or accruing an  excessive balance. However, following a 2012 internal DSCA review  of this report, DSCA leadership decided to decrease the fee rate from  3.8 percent to 3.5 percent. According to DSCA officials, this decision  was made due to uncertainty regarding future annual sales and  because DSCA officials had learned to avoid making significant rate  changes that can make foreign partners\u2019 budgeting more difficult.", "Fiscal year 2018: According to DSCA officials, after performing some  preparatory work during the prior fiscal year, DSCA began another  comprehensive review of the administrative fee rate in fiscal year  2018. According to DSCA officials, this review was to be conducted  internally and involve modeling various scenarios for the  administrative account, making projections based on DSCA\u2019s fiscal  year 2018 sales forecast, recent sales data, expenditure trends, and  historical collection rates on ongoing cases. In addition to using  historical sales data to project future sales, DSCA planned to model  alternate scenarios to account for the possibility of certain high or low  sales years. In April 2018, DSCA announced that, as a result of this  review, the administrative fee will be reduced to 3.2 percent as of  June 1, 2018.", "DSCA established the policy of a 5-year period between comprehensive  rate reviews because, according to DSCA officials, foreign partners prefer  stability in the administrative fee rate to facilitate their budgeting. In  addition, 5 years between rate reviews would allow DSCA to identify  sales and expenditure patterns that could determine whether a rate  change would be needed. According to DSCA officials, the most recent  rate review was originally scheduled to be completed on time but was  delayed due to competing priorities and limited resources. However,  without timely comprehensive reviews, there is greater likelihood that  large changes would be needed in the administrative fee rate to correct  for large variations in the administrative account balance, thus hindering  DSCA\u2019s ability to provide stability in the administrative fee rate."], "subsections": []}, {"section_title": "DSCA Has Not Set an Upper Bound of a Target Range for the Administrative Account", "paragraphs": ["DSCA has not established a method to calculate an upper bound of a  target range for the administrative account balance as suggested by best  practices. Setting an upper bound could help DSCA determine when the  balance is excessive and an out-of-cycle comprehensive review of the fee  rate might be warranted. An upper bound could be based on a certain  number of months or years in expenditures and would thereby change  over time to reflect the size and needs of the FMS program. DSCA could  thus use the upper bound of a target range as another management tool  to help more closely monitor the account during its periodic reviews.  Given the lack of data on actual FMS costs per case and uncertainty  about future annual sales, such a management tool could usefully inform  future DSCA decisions based on its comprehensive rate reviews."], "subsections": []}]}, {"section_title": "GAO Analysis Indicates the Administrative Account Is Likely to Have Sufficient Funds for at Least 7 Years and Could Pay for Additional Expenditures", "paragraphs": ["We developed a model to understand potential changes in the  administrative account balance for fiscal years 2018 through 2024 given a  range of annual sales, administrative fee rates, and annual administrative  expenditures. We found that, if no changes were made to the fee rate or  expected expenditure levels, the administrative account balance would  likely be above the projected safety level by at least $1.6 billion in fiscal  year 2024. If DSCA were to reduce the administrative fee rate as low as  2.9 percent and annual expenditures were to increase as much as 15  percent, the administrative account balance would also likely be above  the projected safety level in fiscal year 2024 by at least $25 million."], "subsections": [{"section_title": "The Projection Model", "paragraphs": ["We used cautious assumptions to model eight scenarios to assess the  likelihood of the administrative account balance remaining above a  projected safety level in fiscal years 2018 through 2024. The projected  safety level reflects DSCA\u2019s definition of the minimum balance required  for the administrative account to allow sufficient time to respond to  volatility in the FMS business environment and to complete ongoing FMS  cases. We consider our assumptions cautious because they are more  likely to lead us to underestimate the administrative account balance and  to inflate the risk of it dropping below the projected safety level (see text  box).", "Cautious Assumptions Used in GAO Modeling of the Administrative Account  Balance in Future Years  Sales: We assumed a minimum of $15 billion and a maximum of $47 billion in sales  each year, using a uniform distribution that assumes an equal likelihood of any sales  value within that range each year. In reality, annual sales have increased overall  since fiscal year 2000 and have remained above $20 billion since fiscal year 2006  and above $33 billion since fiscal year 2014. Higher annual sales lead to larger  administrative fee collections. This sales range likely leads to underestimating  collections in some years.  Expenditures: We assume expenditure levels that reflect both fluctuations in sales  and overall steady annual growth in expenditures even when our annual sales  values do not increase on average. Therefore, we likely overestimate expenditures in  some years.  Safety level: We assume steady annual growth in the safety level, even though we  would expect the safety level to be lower when collections and expenditures are  lower. Since our safety level projections do not take this into account, we likely  overestimate the safety level, and therefore inflate the risk of dropping below it.", "We developed our baseline scenario, in which we maintain the current 3.5  percent administrative fee rate and typical growth based on current trends  in expenditures. In additional scenarios, we adjusted the baseline  projections with two key levers affecting the administrative account  balance: (1) the fee rate and (2) the amount of expenditures out of the  account. Given that the administrative account balance was $2.7 billion  above the safety level as of the end of fiscal year 2017, we made  adjustments to these levers in ways that could lead to a decline in the  account balance by decreasing the fee rate, increasing expenditures, or  through a combination of the two. Below, we describe the results of the  baseline scenario and where we adjust either or both levers to the  maximum extent we considered. See appendix II for a full description of  our modeling methodology and results from four additional scenarios.", "For each scenario, we estimated the expected range of the administrative  account balance and then assessed the likelihood of the account balance  remaining above the projected safety level. We consider 10 percent as an  acceptable risk threshold and therefore consider any outcome as  favorable if it involves a 90 percent or greater likelihood of the balance  remaining above the projected safety level."], "subsections": []}, {"section_title": "Model Outcomes", "paragraphs": ["As shown in figure 7, our projections indicate that the administrative  account balance will remain sufficient to maintain operations through  fiscal year 2024 in all scenarios. Specifically:  In the baseline scenario, if no changes were made to the fee rate or to  annual expenditures, the estimated administrative account balance  would be between $2.5 billion and $5.7 billion in fiscal year 2024, with  a 90 percent likelihood that the balance would be above the projected  safety level by at least $1.6 billion.", "If DSCA were to reduce the fee rate to 2.9 percent, we estimate the  administrative account balance would be between $2.1 billion and  $4.7 billion, with a 90 percent likelihood that the balance would be  above the projected safety level in fiscal year 2024 by at least $1.0  billion.", "If annual expenditures from the administrative account were to  increase 15 percent above expected levels, we estimate the  administrative account balance would be between $1.5 billion and  $4.6 billion, with a 90 percent likelihood the balance would be above  the projected safety level in fiscal year 2024 by at least $622 million.", "If this increase in annual expenditures were coupled with a reduction  in the administrative fee rate to 2.9 percent, we estimate the account  balance would be between $1.1 billion and $3.6 billion in fiscal year  2024, with a 90 percent likelihood the balance would be above the  projected safety level in fiscal year 2024 by at least $25 million.", "The range of the estimated balance in each scenario gets larger from  year to year due to increasing uncertainty for longer-term projections.", "Our modeling shows that, even with a substantially reduced  administrative fee rate, the estimated administrative account balance  would likely well exceed the account\u2019s projected safety level through at  least fiscal year 2024. Even if DSCA reduced the fee rate an additional  0.3 percent lower than it plans to as of June 2018, we project the  estimated balance of the administrative account would be over $1 billion  above the account\u2019s safety level in fiscal year 2024."], "subsections": []}, {"section_title": "GAO Modeling Indicates the Administrative Account Balance Could Likely Be Used to Pay for Additional Expenses, Such As Those Excluded by Statute", "paragraphs": ["In addition, our modeling demonstrates that administrative funds are  sufficient to cover a higher amount of expenditures for the work the U.S.  government performs for the benefit of its foreign partners, and could be  used in place of the other appropriated funds used to support some of the  associated expenses today. As enacted in 1976, the provision of the act  that authorized the collection of administrative fees required that sales  contracts include appropriate fees for administrative services to recover  the full estimated costs of the administration of sales made under the  act. Subsequently, Congress amended the act to exclude some  expenses from the administrative fee. In particular, according to a House  report and DOD testimony, to avoid raising the administrative fee at a  time when annual sales were low and the account was insolvent,  Congress, at DOD\u2019s request, amended the act in 1989 to exclude from  the administrative fee certain expenses associated with military personnel  who work on the FMS program as well as the estimated costs of  unfunded civilian retirement and other benefits.", "Since then, these expenses\u2014with one exception for fiscal year 2000\u2014 have been funded with other appropriated funds rather than with foreign  partners\u2019 administrative fees. For fiscal year 2000, Congress required  DOD to recover expenses attributable to salaries of members of the  Armed Forces and the unfunded estimated costs of civilian retirement and  other benefits by including them in the administrative fee, resulting in  $52 million in additional FMS administrative expenses, or 13.5 percent of  total FMS administrative expenses, for that year. Applying the same  percentage, these costs would approximate $119 million in fiscal year  2017; however, DOD does not track the costs of military pay or unfunded  civilian retirement and other benefits for FMS, so the current value of  these costs is unknown. Our modeling shows that, even if DSCA were to  decrease the administrative fee rate an additional 0.3 percent lower than  it plans to effective June 2018 and annual expenditures increased as high  as 15 percent above expected levels, the account balance would likely  remain sufficient through at least fiscal year 2024. By then, DSCA would  have had an opportunity to reassess the fee rate through another  comprehensive rate review. The circumstances of the administrative  account balance have changed substantially since the 1980s. Revisiting  the provisions in the act authorizing and defining the collection of  administrative expenses could allow other appropriated funds currently  used to pay for some of these expenses to be used for other authorized  purposes. Officials within DSCA and DOD\u2019s Comptroller Office have  stated they are receptive to revisiting these provisions."], "subsections": []}]}]}, {"section_title": "The FMS CAS Account Balance Has Grown Substantially; Management Controls over the Balance Remain Insufficient", "paragraphs": ["The CAS account balance grew substantially between fiscal years 2007  and 2015 because CAS collections exceeded expenditures in each year  and insufficient controls were in place to manage the balance. The  account balances for fiscal years 2016 and 2017 overstate available CAS  funds due to a systems issue and limited related oversight. Since fiscal  year 2014, DSCA has created some controls to help better manage this  account; however, DSCA does not plan to conduct timely comprehensive  reviews of the CAS fee rate, has inconsistently implemented internal  guidance related to calculating the minimum desired level for the account,  and has not established a method to calculate an upper bound of a target  range for the account, thus allowing the account to continue to grow."], "subsections": [{"section_title": "The CAS Account Balance Grew Substantially between Fiscal Years 2007 and 2015; the Fiscal Years 2016 and 2017 Account Balances Overstate Available Funds", "paragraphs": ["The CAS account balance grew every fiscal year, from $69 million at the  beginning of 2007 to $981 million at the end of 2015, or 1,329 percent  over the period (see fig. 8). As annual sales grew during this period, CAS  collections and expenditures also grew, but at slower rates than the  account balance growth\u2014at 133 percent and 187 percent, respectively.", "CAS account collections exceeded expenditures each fiscal year from  2007 through 2015, contributing to the growing account balance. As  shown in figure 9, collections were at least double expenditures in five of  these years, with a $49 million difference between collections and  expenditures in fiscal year 2015. DSCA reduced the CAS fee rate from  1.5 to 1.2 percent in 2014 due to concerns over growth in the CAS  account balance, according to DSCA officials. After the rate reduction, the  account balance continued to grow but at a slower rate. The account  balance increased 5 percent during fiscal year 2015 compared with an  average of 38 percent from fiscal years 2006 through 2014. The balance  would continue to grow if this trend continues.", "The CAS account balance data that DFAS provided to DSCA overstated  the amount of CAS funds available by about $187 million for fiscal year  2016 and continued to be overstated for fiscal year 2017 due to a  systems issue and limited related oversight. According to Defense  Contract Management Agency (DCMA) officials, in October 2015, DCMA,  the largest recipient of CAS funds, began using a new accounting system  called the Defense Agencies Initiative. According to DCMA officials and  internal data, DCMA submitted bills for about $187 million of CAS work  for fiscal year 2016. To process its requests for this CAS funding in its  new system, DCMA used an incorrect accounting code, according to  DFAS officials. As a result, DCMA was paid for some of its fiscal year  2016 CAS bills, totaling about $89 million, from a different account,  according to DFAS officials. Consequently, this amount paid to DCMA  was not reflected in the CAS account expenditures or balance for fiscal  year 2016. Further, DCMA and DFAS data differ regarding what  additional amounts have been reimbursed to DCMA for its remaining  fiscal year 2016 and its fiscal year 2017 CAS funding and suggest that  DFAS underreported CAS expenditures to DSCA for both years.", "Although DSCA has financial management responsibility for the FMS  trust fund, DSCA has played a minimal role in correcting DCMA\u2019s  incorrect billings or low reimbursement levels. After DSCA officials  noticed low fiscal year 2016 CAS disbursements in December 2016,  DSCA officials asked DFAS and DCMA officials to look into the cause  and to resolve the issue. However, as of January 2018, DSCA had not  provided any specific directions to DFAS or DCMA on a process or  timeline for fixing it. DCMA began to submit vouchers totaling  approximately $89 million in November 2017 for DFAS to process to be  correctly paid out of the CAS account. According to DFAS officials, DFAS  processed corrections related to these vouchers by January 2018 so that  the approximately $89 million would be taken from the CAS account and  returned to the other account. DFAS officials believe that these  transactions resolved DCMA\u2019s billing issues since they have not received  any additional vouchers from DCMA or direction from DSCA. However,  according to DCMA officials, they continue to have difficulty getting  reimbursed for CAS work dating back to FY2016 and discrepancies  remain between related DCMA and DFAS data.", "Federal standards for internal control state that management should use  quality information that is current, complete, accurate, and provided on a  timely basis to achieve the agency\u2019s objectives and make informed  decisions. However, as a result of DCMA\u2019s difficulties in getting  reimbursed from the CAS account, the CAS account balance remains  overstated as of January 2018, hampering DSCA\u2019s ability to perform  oversight of the account."], "subsections": []}, {"section_title": "DSCA\u2019s Management Controls over the CAS Account Balance Have Been Strengthened in Recent Years but Remain Insufficient", "paragraphs": ["Since 2014, DSCA has put in place various management controls for the  CAS account. Nevertheless, these remain insufficient due to inconsistent  implementation of internal guidance and lack of a key control."], "subsections": [{"section_title": "DSCA Established Some Controls for Managing the CAS Account Balance", "paragraphs": ["From June to August 2013, DSCA conducted its first comprehensive  review of the CAS fee rate since the early 2000s, according to DSCA  officials. This comprehensive fee rate review was called for in DSCA\u2019s  strategic plan and was also prompted by substantial growth of the CAS  account, according to DSCA officials. To conduct this review, DSCA  officials worked with an internal support contractor to develop a model to  project future CAS account balances based on historical data on CAS  expenditures and collections, historical data and future projections for  annual sales, and future budget estimates made by CAS implementing  agencies. In this model, DSCA varied future annual sales projections and  the CAS fee rate within the range of 1.0 to 1.5 percent to determine if the  CAS account could maintain a healthy balance over the next 10 years  under different conditions. As a result, in November 2014, DSCA issued a  policy memo that specified a reduction in the CAS fee base rate from 1.5  to 1.2 percent for all cases starting after December 1, 2014. The decision  to reduce the rate to 1.2 percent was supported by their modeling  outcomes that showed that the CAS account balance would be above a  safety level set for the account even if annual sales were as low as $12  billion in each of the following 10 years.", "The November 2014 policy memo that resulted from the 2013  comprehensive fee rate review specified three new controls for managing  the CAS account:", "Periodic comprehensive fee rate reviews: DSCA determined that it  would conduct comprehensive rate reviews of the CAS account every  5 years.", "A safety level for the CAS account: DSCA established a safety  level, or minimum desired balance, for the CAS account at 3 years of  average annual expenses. According to DSCA officials, the basis for  the calculation of the safety level was rooted in a Federal Acquisition  Regulation requirement to complete contract closeout within 3 years  of final delivery for some types of contracts. As a result, even if no  new sales were made, the CAS account would have sufficient funds  to pay for contract management on existing cases. The CAS account  balance was 1.7 times or $371 million above the safety level in fiscal  year 2014 and 1.8 times or $420 million above the safety level in fiscal  year 2015.", "Annual reviews of the health of the CAS account: For each year  since fiscal year 2014, DSCA has conducted an annual assessment  of the health of the CAS account. To perform this assessment, a  DSCA official reviews information such as the CAS account balance  from the end of the prior fiscal year against the account\u2019s safety level,  prior year account expenditures and collections, and information that  may be relevant to the account moving forward, such as budget  requests submitted by implementing agencies. This annual  assessment culminates in a report that is provided to and signed off  by DSCA\u2019s Director of Business Operations.", "These practices were formalized by incorporating them into DSCA\u2019s  Manager\u2019s Internal Control Program (MICP). In addition to these  practices, MICP documentation for the CAS account also lays out a fourth  management control: monthly reviews, which are meant to ensure that  the account stays above its safety level throughout the year and that any  large variances in expected expenditures or collections are reported to  DFAS so that errors can be identified and corrected as needed.  According to DSCA\u2019s MICP Handbook, all MICP documentation should  be reviewed at least annually to ensure it is kept up to date."], "subsections": []}, {"section_title": "DSCA Does Not Plan to Conduct a Timely Comprehensive Review of the CAS Account Fee Rate", "paragraphs": ["As mentioned above, DSCA\u2019s internal guidance indicates DSCA should  conduct comprehensive reviews of the CAS fee rate every 5 years, which  would make the next review in the summer of 2018. However, DSCA  officials do not expect to begin their next comprehensive rate review until  fiscal year 2019. DSCA officials stated that they intend to complete the  review sometime by the beginning of fiscal year 2020, to complete it  within 5 years of when the last CAS rate reduction took effect. However,  this plan extends the time between reviews by a year and a half due to  the amount of time it took for DSCA to decide on and implement the rate  reduction after the last review. More frequent comprehensive reviews  would provide timely in-depth information to decision makers to ensure  that the CAS fee rate is set appropriately. In addition, more frequent fee  rate changes would allow for smaller corrections when needed, limiting  the impact that large fee rate changes would have on customers\u2019 ability to  budget."], "subsections": []}, {"section_title": "DSCA Inconsistently Implemented Guidance Concerning Safety Level Calculations", "paragraphs": ["The guidance in the MICP procedures specifying how to calculate the  safety level has not been consistently implemented and has not been  updated to align with current practices. Federal internal control standards  indicate that management should document the organization\u2019s internal  control responsibilities in its policies at the appropriate level of detail to  allow management to monitor the control activity effectively. These  standards also state that if there is a significant change in an entity\u2019s  process, management should review this process in a timely manner after  the change to determine that the control activities are designed and  implemented appropriately.", "Figure 10 outlines the guidance in the MICP procedures with regard to  the safety level and how this guidance was implemented from fiscal years  2014 through 2017. In particular, the MICP procedures indicate that the  safety level should be calculated based on a 3-year average of  disbursements. The procedures also allow DSCA officials to determine  whether to update the safety level in each year without providing specific  criteria for making this determination. As a result, no change to the safety  level was made in fiscal year 2015 or 2016 despite increases in CAS  expenditures. However, for the years when the safety level was  calculated, the calculation was performed differently than what is  prescribed in the MICP guidance. For example, for fiscal year 2017, the  DSCA official in charge of managing the CAS account stated the method  was modified to be based on the amount of obligation authority (or total  CAS budget) instead of the amount of disbursements. This approach was  taken because of the incomplete fiscal year 2016 disbursement data.  However, the method used was not consistent with the guidance.  Accordingly, for future years it is not clear how the safety level should be  calculated.", "As previously stated, best practices in managing federal user fees  indicate that it is advisable for federal agencies to use a risk-based  strategy to establish a target range for fee accounts. Although DSCA  has followed this best practice and set a safety level, or minimum desired  balance for the CAS account, DSCA has not established a method to  calculate an upper bound of a target range for the CAS account balance,  which would help officials identify when the account balance becomes  excessive. DSCA\u2019s MICP procedures indicate that, as part of the annual  assessment process, DSCA officials should review account activity to  determine if an out-of-cycle comprehensive review of the CAS fee rate is  needed, specifying that this should be done either because the CAS  account balance should be higher to cover expenses or lower because  too many fees are being collected. However, in the absence of an upper  bound for the account, it is up to the judgment of DSCA officials to  determine when the account is excessive. DSCA officials told us that they  were reluctant to set an upper bound for the account due to uncertainty  regarding future sales and future CAS expenditures. Nevertheless, as  with the safety level, an upper bound could be based on a certain number  of months or years in expenditures and could be flexible and adjusted  over time. Without establishing a target range for the account balance,  DSCA officials lack a key tool to help determine the appropriate CAS fee  rate."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["From fiscal years 2007 to 2017, the balance of the Foreign Military Sales  administrative account grew dramatically to $4.1 billion. DSCA has set a  minimum desired level for the account balance and designed various  account monitoring practices to ensure the minimum level is not reached.  However, DSCA has not performed comprehensive reviews of the  administrative fee rate at least every five years, consistent with DSCA  policy, and has not set an upper bound that would provide a target range  for the account. These conditions limit DSCA\u2019s ability to appropriately  target the fee rate and to protect against excessive growth in the account  balance. Our analysis demonstrates that the administrative account is  likely to stay above its safety level even if the rate were reduced to as low  as 2.9 percent and expenditures from the account were raised by 15  percent, signifying there should be even more room for the account to  absorb increased expenditures now that DSCA has announced that the  rate will be reduced to 3.2 percent as of June 1, 2018. Thus, this account  should now have sufficient funds to pay for additional expenses that are  currently paid from appropriated funds, such as those excluded by  statute. Thereby, more of the costs for the work performed for the benefit  of our foreign partners could be paid through the administrative fee, rather  than having those some of those expenses paid through other  appropriated funds.", "The CAS account has also experienced significant growth since fiscal  year 2007, although the current account balance is unknown because of  an accounting error and difficulty using a new accounting system.  Specifically, in fiscal year 2016, a different account was charged about  $89 million in DCMA\u2019s CAS billings and DCMA has had continuing  difficulty getting reimbursed for its CAS bills for fiscal years 2016 and  2017. DSCA did not become aware of this issue for over a year after it  began, and DSCA has played a minimal role in coordinating DCMA and  DFAS to fix it. Since 2014, DSCA has strengthened some management  controls over the CAS account, but they could be further enhanced if  DSCA conducted more timely comprehensive reviews, provided more  clarity on the expected calculation of the account\u2019s minimum level, and  set an upper bound of a target range for the account. In particular, such  an upper bound could allow DSCA officials to identify when the CAS  balance is excessive, as directed by DSCA\u2019s internal guidance. Adopting  such controls would enhance DSCA leadership\u2019s ability to monitor the  account\u2019s balance and make timely decisions to ensure the rate is set to  cover DOD costs but not overcharge foreign partners."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["Congress should consider redefining what can be considered an  allowable expense to be charged from the administrative account. (Matter  for Consideration 1)"], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We propose making the following six recommendations to DSCA:  The Director of DSCA should take steps to ensure that comprehensive  reviews of the administrative fee rate are completed at least every 5  years. (Recommendation 1)", "The Director of DSCA should define a method for calculating an upper  bound of a target range for the administrative account that could be used  to guide the agency\u2019s reviews of administrative account balances and  decision making in setting the fee rate. (Recommendation 2)", "The Director of DSCA should direct DCMA and DFAS to work together to  ensure timely correction of the fiscal years 2016 and 2017 DCMA CAS  reimbursement issues. (Recommendation 3)", "The Director of DSCA should take steps to ensure that comprehensive  reviews of the CAS fee rate are completed at least every 5 years.  (Recommendation 4)", "The Director of DSCA should clarify internal guidance to ensure  consistency in the calculation of the CAS account\u2019s minimum (safety)  level. (Recommendation 5)", "The Director of DSCA should define a method for calculating an upper  bound of a target range for the CAS account that could be used to guide  the agency\u2019s reviews of CAS account balances and decision making in  setting the fee rate. (Recommendation 6)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report for review and comment to DOD and  State. DSCA provided written comments on behalf of DOD, which we  reproduce in appendix III. In its comments, DSCA concurred with five of  our recommendations and partially concurred with one.", "In commenting on our first recommendation for DSCA to take steps to  ensure that it completes timely comprehensive reviews of the  administrative fee rate, DSCA asserted that its last two reviews were  conducted in time to meet its 5-year requirement. However, as we outline  in this report, these reviews were conducted about 6 to 7 years apart.  These included a fiscal year 2005 review that led to an August 2006 rate  change, a review that began in fiscal year 2011 that led to a November  2012 rate change, and a fiscal year 2018 review that led to a June 2018  rate change. By following its own policy to complete the reviews every 5  years instead, DSCA would better be able to keep the administrative fee  rate up-to-date with program changes.", "In partially concurring with our fourth recommendation for DSCA to take  steps to ensure that it completes timely comprehensive reviews of the  CAS fee rate, DSCA asserts that it plans to begin its next review later  than 5 years after the last one to provide more time for DCMA\u2019s billing  issues to be resolved and to inform the review with 5 years of data since  the December 2014 rate reduction. Implementing this recommendation,  including for its next review, would allow DSCA to meet its own guidance.  In addition, the process of performing a comprehensive review of the fee  rate could further provide impetus for addressing DCMA\u2019s billing issues  that have led to inaccuracies in the account balance and expenditure  information since fiscal year 2016. Finally, if DSCA were to delay data  collection until more than 5 years after the last rate reduction, that would  cause the reviews to start more than 6-1/2 years apart. Given how long  the review process has taken in the past, an earlier start will help ensure  completion within 5 years.", "In commenting on our fifth recommendation, DSCA noted that it updated  its internal guidance for calculating the CAS safety level in March 2018.  We plan to verify full implementation of this recommendation as part of  our routine follow up process.", "DOD also provided technical comments, which we incorporated as  appropriate.", "State did not provide any written or technical comments.", "We are sending copies of this report to the appropriate congressional  committees, and the Secretaries of Defense and State. 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  Thomas Melito at (202) 512-9601 or MelitoT@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The Defense Security Cooperation Agency (DSCA) manages fees  collected on transfers of defense articles and services to foreign countries  that occur through the Foreign Military Sales (FMS) program. These fees  are collected into separate accounts in the FMS trust fund. This report  examines (1) the balance maintained in the administrative account in  fiscal years 2007 to 2017, the controls used to manage it, and the extent  to which the Department of Defense (DOD) has the ability to pay for FMS  administrative expenses under different scenarios; and (2) the balance  maintained in the contract administration services (CAS) account in fiscal  years 2007 to 2017 and the controls used to manage it.", "To determine which fees to include in our review, we reviewed the  International Security Assistance and Arms Export Control Act of 1976  (the act), which is the authorizing legislation for FMS, and DOD  documents and data. We also interviewed DOD officials. We determined  that there are three primary fees charged on FMS cases: (1) the  administrative fee, (2) the CAS fee, and (3) the transportation fee. These  three fees represented 99 percent of the amount of funding held in FMS  trust fund overhead accounts as of the beginning of fiscal year 2016. We  will review the transportation account in a separate report because of the  different ways in which the collections and expenditures from the account  operate.", "To assess the balance of the administrative account, we analyzed  administrative account collections, expenditures, and balance data for  fiscal years 2007 to 2017 maintained in the Defense Integrated Financial  System by the Defense Finance and Accounting Service (DFAS), the  DOD component that acts as the accounting service for the FMS  program. According to DFAS, the Defense Integrated Financial System  was implemented in 1980, and is used for FMS case management,  financial reporting, and customer billing. We chose to review this number  of fiscal years of data based on data availability. To understand the  structure and functioning of the administrative account and to determine  the reliability of these data, we reviewed relevant DOD documents,  including explanations of changes to the administrative fee rate over time,  and we interviewed DFAS and DSCA officials in various policy, financial,  or technical roles. We asked knowledgeable agency officials a set of  standard questions on this system, data entry procedures and checks,  and other relevant aspects of data reliability. We reviewed their  responses, examined the data ourselves, and conducted basic logic  checks. Where questions arose, we followed up with agency officials for  explanation and clarification. We did not conduct any independent testing  of these data to determine whether these were the amounts that should  have been paid into and out of the account during that period, such as  through correct payments having been made based on accurate billings.  We determined the administrative account data to be sufficiently reliable  for assessing the account balance and related trends over the period, and  for projecting future trends in the account balances, under a variety of  assumptions, using statistical modeling.", "To assess the controls DSCA uses to manage the administrative account  balance, we reviewed relevant documents and interviewed DOD officials.  To determine what controls DSCA should be using to manage the  account, we reviewed DOD\u2019s Financial Management Regulations,  DSCA\u2019s Security Assistance Management Manual, DSCA\u2019s Managers\u2019  Internal Control Program procedures, and other internal DSCA guidance.  We also reviewed reports resulting from DSCA\u2019s implementation of its  account monitoring and comprehensive rate review processes, including  annual administrative account assessments from fiscal years 2012 to  2016, quarterly administrative account assessments from fiscal years  2015 and 2016, and reports resulting from the 2005 and 2011-2012  comprehensive fee rate reviews. We chose to review the annual and  quarterly assessments for different periods of time to review manageable  numbers of the most recent assessments conducted. We also interviewed  DSCA policy officials regarding their implementation of these processes.", "To assess the extent to which DOD has the ability to pay for FMS  administrative expenses from the administrative account under different  conditions, we modeled eight scenarios to determine the projected  account balance in fiscal years 2018 to 2024 across a range of potential  annual sales values in each year while varying the administrative fee rate  and expenditures from the account. Appendix II provides a complete  description of our modeling methodology and the results of our analysis.", "In addition to the modeling, we also performed legal research to  determine the extent to which Congress and DOD have a role in defining  what can be paid from the administrative account. In particular, we  reviewed sections 2761 and 2792 of the act regarding DOD\u2019s authority to  charge fees. We also reviewed DOD documentation and legislative  history to determine the conditions that led to the 1989 amendments to  the act that excluded certain costs associated with military personnel who  work on the FMS program as well as unfunded civilian retirement and  other benefits from administrative expenses. Additionally, we reviewed  DSCA\u2019s definitions of which FMS administrative services should be paid  from different funding sources, as specified in DSCA\u2019s Security  Assistance Management Manual. We also interviewed DOD officials  about the agency\u2019s role in defining administrative expenses.", "Similar to the administrative account, to assess the balance of the CAS  account, we initially attempted to analyze CAS account collections,  expenditures, and balance data for fiscal years 2007 to 2017 maintained  by DFAS in the Defense Integrated Financial System. We chose to review  this number of fiscal years of data based on data availability. To  understand the structure and functioning of the CAS account and to  determine the reliability of these data, we reviewed relevant documents  from DOD, including those explaining changes to the CAS account fee  rate over time, and interviewed DFAS and DSCA officials in various  policy, financial, or technical roles. We asked knowledgeable agency  officials a set of standard questions on this system, data entry procedures  and checks, and other relevant aspects of data reliability. We reviewed  their responses, examined the data, and conducted logic checks. Where  questions arose, we asked agency officials to explain and clarify. We  performed additional cross-checks that compared CAS expenditures data  provided by DFAS with disbursement data from the implementing  agencies that used the CAS funds in fiscal years 2012 to 2017. We found  some discrepancies in these data that we were subsequently able to  reconcile with agency officials for fiscal years 2007 through 2015 for the  purposes of reporting overall annual expenditures from the account. We  did not conduct any independent testing of these data to determine  whether these were the amounts that should have been paid into and out  of the account during that period, such as through correct payments  having been made based on accurate billings. We determined the CAS  account data for fiscal years 2007 to 2015 to be sufficiently reliable for  assessing the account balance and related trends over the period. We did  not determine the CAS account data to be sufficiently reliable for these  purposes for fiscal years 2016 and 2017 due to a large share of CAS  billings for those fiscal years that either had been disbursed from the  incorrect account or were delayed, and were therefore not reflected in the  CAS expenditures and balance data. Accordingly, the CAS data for fiscal  years 2016 and 2017 were excluded from our analysis.", "To assess the controls DSCA uses to manage the CAS account balance,  we reviewed relevant statutes, DOD financial management regulations,  DOD guidance, and DOD documentation of such controls, and  interviewed DSCA officials. To determine what controls DSCA should be  following to manage the account, we reviewed DSCA\u2019s Managers\u2019  Internal Control Program procedures and a related DSCA policy memo,  and interviewed DSCA policy officials. We also reviewed reports resulting  from DSCA\u2019s implementation of its account monitoring and  comprehensive rate review processes, including all of DSCA\u2019s annual  CAS account assessments completed to date (covering fiscal years 2014  to 2016) and reports showing the process used and results of the fiscal  year 2013 comprehensive review of the CAS fee rate. We also  interviewed DSCA officials regarding their implementation of these  processes.", "We were unable to perform modeling to assess the extent to which DOD  has the ability to pay for CAS expenses from the CAS account under  different conditions due to the limited data available at the time of our  review and data reliability concerns for fiscal years 2016 and 2017.", "We conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Methodology Used to Model Possible Changes to the Administrative Account Balance and Model Results", "paragraphs": [], "subsections": [{"section_title": "Methodology", "paragraphs": ["To determine whether the administrative account balance would be  sufficient to maintain Foreign Military Sales (FMS) operations if there  were a reduction in the administrative fee rate or an increase in annual  expenditures, we used a Monte Carlo simulation methodology to project  the account balance across a range of annual sales values for fiscal  years 2018 through 2024. This technique approximates the likelihood of  certain outcomes by performing multiple trial runs, called simulations,  using random variables within a specified range. The simulations capture  the volatility of sales in the projection of the future balance of the  administrative account. We determined to report projections through fiscal  year 2024 for two main reasons. First, there is increasing uncertainty for  longer-term projections. Second, by then, DSCA should have had an  opportunity to reassess the fee rate through another comprehensive rate  review, given that the current review is to be completed in fiscal year  2018 and DSCA policy requires such reviews every 5 years.", "To construct our baseline model, we used the 3.5 percent administrative  fee rate, which was current during the period of our review. We also used  historical annual sales and appropriations data provided by the Defense  Security Cooperation Agency (DSCA) and annual administrative account  collections, expenditures, and balance data provided by the Defense  Finance and Accounting Service (DFAS). To assess the reliability of the  data provided by both DSCA and DFAS, we interviewed officials from  both agencies, performed manual error checks on the data, and reviewed  relevant documents from DOD and other sources, including DSCA\u2019s  annual assessments of the administrative account and congressional  appropriations laws dating back to fiscal year 2000. In addition, for  collections data, we cross-checked the data provided by DFAS with  reports the agency provided to DSCA on administrative fees owed on  cases implemented since fiscal year 2000 as well as checked for any  anomalies in the data. Through this process, we found errors in the way a  key variable in these reports was pulled for data on cases prior to March  2013. We did not find such errors in the data for fiscal years 2014 to  2017, which led us to only using data on the status of cases in fiscal  years 2014 to 2017 in our modeling. We did not conduct independent  testing or an audit of DSCA or DFAS data. We found these specific data  to be sufficiently reliable for use in our modeling.", "We conducted 10,000 simulations for each year using the following  parameters:", "Sales: We used annual sales data from fiscal years 2000 to 2017 and  the Monte Carlo methodology to build an annual sales distribution for  fiscal years 2018 to 2024. We chose to review this number of fiscal  years of data based on availability of reliable data. For that  distribution, we assumed a uniform distribution with a minimum  possible sales value of $15 billion and a maximum of $47 billion,  which has an equal probability of annual sales values falling anywhere  within that range. A uniform distribution was selected because, as  compared to other potential distributions (e.g., normal, triangular), it  more accurately reflected the current reality of annual sales, including  the increasing trend seen since fiscal year 2000 and the jump in sales  seen in fiscal year 2006. Although annual sales have grown steadily  over time with values of at least $27.8 billion since fiscal year 2008,  DSCA officials explained that the FMS market could shrink at any time  based on global geopolitical and economic factors. As a result, we  took a cautious approach to determining the minimum level of our  sales projections by allowing for the possibility of annual sales  dropping to $15 billion in each year. We set our maximum possible  sales value at $47 billion to reflect the second highest sales value  between fiscal years 2000 and 2017. Sales in fiscal year 2012 were  $69 billion due in large part to one large purchase made by Saudi  Arabia. We excluded this as a possible maximum value in future years  due to DSCA officials\u2019 explanation that this high value of sales was  considered an exception. We also do not take into account any time  trend effects such as inflation, technological advances, or new product  development that could increase the value of future annual sales. The  uniform distribution used in the model produces average sales of  $30.8 billion, with a standard deviation of $9.2 billion, while the  average sales from fiscal years 2006 through 2017 were $36.4 billion,  with a standard deviation of $12.1 billion.", "Collections: First, to calculate collections on ongoing cases for fiscal  years 2018 to 2024, we used administrative account collections data  from fiscal years 2010 to 2017, a schedule of the average percentage  of administrative fee collections for each year in the life of an FMS  case, and administrative fee rates from fiscal years 2010 to 2017. To  develop an average collection schedule for cases, we used a DFAS  report that shows the percentage of the administrative fee that should  have been collected in each year on each case implemented in fiscal  years 2008 to 2017. To address the inaccuracies in the data in this  report prior to March 2013, we developed a schedule of the average  rate of collections in each of the first 9 years of case implementation  by summing the pertinent amounts of the administrative fee that  should have been paid on cases divided by the total amounts of the  administrative fee owed on cases implemented in fiscal years 2008 to  2017 as of fiscal years 2014 to 2017. We excluded from the  collections schedule the large sale made to Saudi Arabia in fiscal year  2012 because that case had a reduced first-year collection rate that  skewed the first-year average. This 9-year collection schedule  accounts for about 91 percent of total expected collections on cases.", "We then calculated expected collections for new cases in a given year  by multiplying the dollar value of sales in that year by the average  collection rate for the first year of a case and the applicable fee rate.  Finally, we added new and ongoing collections to arrive at total  collections projected for each year.", "Expenditures: We used administrative account expenditure and  collection data from fiscal years 2006 to 2017 to develop a regression  model to project administrative account collections in fiscal years  2018 to 2024. We used available data from fiscal years 2006 to 2017  to produce an estimate of the relationship between collections and  expenditures, employing a simple linear regression model where the  dependent variable was expenditures against collections, a linear time  trend, and a constant. We chose to review this number of fiscal years  of data based on availability of reliable data. We then used the  coefficients from the regression model to estimate future expenditures  against simulated collections and a time trend. As designed, to  provide a cautious estimate of future expenditures, this model  reflected an overall increasing trend in expenditures even when  annual sales simulated in future years did not increase on average.", "Safety level: The administrative account safety level is established  each year by DSCA as the minimum balance required to continue  operations and respond to potential volatility in the FMS market.  DSCA calculates the account\u2019s annual safety level as 18 months of  operational funding, as determined by the congressional obligation  limit, which has been annually set in the foreign operations  appropriation since 1992. To project the administrative account  safety level for fiscal years 2018 to 2024, we used the congressional  obligation limit for the administrative account from fiscal years 2000 to  2017, as reported by DSCA, to develop a simple regression model  where the dependent variable was the obligation limit against a linear  time trend and a constant. We chose to review this number of fiscal  years of data based on availability of reliable data. Then, based on  DOD guidance, we divided the projected obligation limit by 12 and  multiplied it by 18 to calculate the projected safety level. This  regression model projects steady growth in the obligation limit and  therefore steady growth in the safety level every year. The same  projected safety level applies to all simulations for each year so that  we can apply a consistent threshold against which to compare the  account balance, although some simulations involved lower future  sales, which could lead to lower future expenditures and hence lower  safety levels.", "Finally, using these parameters, we calculated the administrative account  balance for each year by adding the net income projected for that year  (that year\u2019s projected collections minus that year\u2019s projected  expenditures) to the previous year\u2019s account balance. All of our estimated  projections are in nominal dollars.", "Building upon the baseline projection, we conducted 10,000 simulations  for each year for seven additional scenarios: three in which the  administrative fee rate is reduced from the current 3.5 percent to as low  as 2.9 percent, three in which annual expenditures are increased as high  as 15 percent above expected levels, and one in which both changes  occur (see table 1). We modeled decreases of the fee rate to as low as  2.9 percent to look at the effect of a wide range of possibilities lower than  the current rate. We modeled increases in annual expenditures of up to  15 percent above typical growth because this amount is a little higher  than 1.5 times the average annual growth in expenditures between fiscal  years 2007 and 2017 (9.3 percent). As such, our model accounted for the  potential of large sustained expenditure growth. Finally, we modeled the  effects of adjusting both levers to the maximum extent through a scenario  with a 2.9 percent fee rate and a 15 percent increase above expected  annual expenditures. Using the account balance and safety level  projections for each scenario, we assessed the likelihood of the balance  dropping below the safety level in each year through fiscal year 2024."], "subsections": []}, {"section_title": "Summary of Results", "paragraphs": [], "subsections": [{"section_title": "Baseline Scenario", "paragraphs": ["In the baseline scenario, we projected what would happen to the  administrative account balance if the fee rate were to remain 3.5 percent  and expenditures were to remain stable based on historical data. There is  a 100 percent likelihood of the account balance remaining above the  safety level in each year in this scenario. There is a 90 percent likelihood  that the account balance would remain above the projected safety level in  fiscal year 2024 by at least $1.6 billion (see fig. 11).", "We used the model to determine what would happen to the account  balance if the administrative fee rate were decreased to 3.3, 3.1, and 2.9  percent. We projected a 100 percent likelihood that the account balance  would remain above the projected safety level in fiscal year 2024 in each  of these scenarios. There is a 90 percent likelihood that the account  balance would remain above the projected safety level in fiscal year 2024  by at least $1.4 billion if the fee rate is decreased to 3.3 percent, by at  least $1.2 billion if decreased to 3.1 percent, and by at least $1.0 billion if  decreased to 2.9 percent (see fig. 12).", "We used the model to determine what would happen to the account  balance if annual expenditures were to increase 5, 10, and 15 percent  above levels expected in the baseline scenario. There is more than a 99  percent likelihood that the account balance would remain above the  projected safety level in fiscal year 2024 in each of these scenarios.  There is a 90 percent likelihood that the account balance would remain  above the projected safety level by at least $1.3 billion if annual  expenditures increased 5 percent, by at least $974 million if annual  expenditures increased 10 percent, and by at least $622 million if annual  expenditures increased 15 percent (see fig. 13).", "We used the model to determine what would happen to the account  balance if both the fee rate were decreased to 2.9 percent and annual  expenditures were to increase 15 percent above expected levels. There is  at least a 91 percent likelihood that the account balance would remain  above the projected safety level in fiscal year 2024 in this scenario. There  is a 90 percent likelihood the account balance would remain above the  projected safety level in fiscal year 2024 by at least $25 million (see fig.  14)."], "subsections": []}]}]}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Hynek Kalkus (Assistant  Director), Heather Latta (Analyst-in-charge), Lynn Cothern, Elisabeth  Helmer, Jessica Mausner, and Moon Parks made key contributions to this  report. Martin De Alteriis, Jeff Isaacs, Christopher Keblitis, Grace Lui,  Susan Murphy, Laurel Plume, Heather Rasmussen, Chanetta Reed, and  Aldo Salerno provided technical assistance."], "subsections": []}]}], "fastfact": ["U.S. foreign partners buy billions of dollars of defense equipment and services each year through the U.S. Foreign Military Sales program. The program charges fees to purchasers to cover the U.S. government's cost of operating the program.", "As the value of these sales has increased, the balances in the 2 main fee accounts have grown in excess of 950% and now top $5 billion. We found that the substantial growth in these accounts was due to insufficient management controls.", "We made 6 recommendations to DOD to help improve controls, and suggest that Congress consider allowing the FMS program to use these funds to pay for more program expenses."]}
{"id": "GAO-18-443", "url": "https://www.gao.gov/products/GAO-18-443", "title": "Emergency Management: Implementation of the Major Disaster Declaration Process for Federally Recognized Tribes", "published_date": "2018-05-23T00:00:00", "released_date": "2018-05-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Since the Sandy Recovery Improvement Act (SRIA) of 2013, federally recognized Indian tribes affected by major disasters have had the option to make disaster declaration requests directly to the President of the United States or join a state's request for federal disaster assistance. Prior to this, tribes had to receive assistance through a state.", "GAO was asked to assess the implementation of this new authority. This report addresses (1) the factors that influenced selected tribes' decisions about how to seek federal disaster assistance, and (2) the actions FEMA has taken to help tribes exercise the new authority.", "GAO analyzed FEMA's pilot guidance for tribal declarations and interviewed FEMA and tribal emergency management experts. GAO also surveyed the 36 tribes who made requests for disaster assistance in fiscal years 2013-2016 about the factors that influenced their decision making. Twenty three tribes responded. GAO visited seven tribes selected from among the survey respondents to represent different FEMA regions and disaster types. The site visits cannot be generalized but provided valuable insights into the opportunities and challenges of exercising this new authority."]}, {"section_title": "What GAO Found", "paragraphs": ["According to tribal officials GAO surveyed and interviewed, there are several factors they considered when deciding whether to make a direct request or to join a state's request for a major disaster declaration. Key factors that tribes reported considering were the (1) importance of tribal sovereignty, (2) financial matters such as the timeliness with which they receive funds, (3) the level of support they anticipated receiving from the Federal Emergency Management Agency (FEMA), and (4) their own emergency management capacity. For example, survey results showed that tribal officials' confidence in their capacity to manage the declaration was a key factor in determining whether to make a request directly. Specifically, various elements of emergency management capacity, as illustrated below, could affect tribes' ability to manage a declaration.", "FEMA has developed pilot guidance for tribal declarations and solicited comments from tribes, as part of its effort to consider the needs of tribes and develop regulations. According to FEMA officials, they are currently assessing the effectiveness of policies and procedures based on data collected from tribal declarations since the passage of SRIA. These officials said they intend to begin the rulemaking process as soon as 2 years into the pilot, but may delay if they cannot collect enough data about different disaster situations during that time to conduct a complete analysis. Until the regulations are final, officials say they will exercise flexibility whenever possible. In addition, the agency offers training on the tribal declaration process and has dedicated staff who act as primary points of contact for tribal governments that require technical assistance."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is not making any recommendations in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Sandy Recovery Improvement Act (SRIA) of 2013, which amended  the Stafford Act, gave federally recognized tribes the authority to make  direct requests for major disaster declarations. Prior to 2013, to receive  disaster assistance, tribes had to join a major disaster request made by  the governor of the state in which the tribe is geographically located. The  2013 amendments to the Stafford Act allow the chief executive of an  affected tribal government to make a direct request for a major disaster  declaration or join a state\u2019s request for a major disaster declaration. When  making this decision, tribal officials have to consider whether they have  the ability to meet the federal requirements for managing the disaster  assistance independent of the state, if approved. The 2013 amendments  also direct the Federal Emergency Management Agency (FEMA) to issue  regulations to carry out these changes and, as part of this process, to  consider the unique conditions that affect the general welfare of tribal  governments.", "A major disaster declaration activates numerous assistance programs  from FEMA to assist a state or tribal government in its response and  recovery efforts. FEMA is responsible for processing the requests for  emergency and major disaster declarations and making  recommendations to the President whether to declare a disaster. FEMA is  also the primary federal agency responsible for administering assistance  to aid recovery efforts after a disaster has been declared.", "This report examines (1) the factors that influence selected tribes\u2019  decisions about how to seek federal assistance through a major disaster  declaration, and (2) the actions FEMA has taken to help tribes exercise  the new authority.", "To address the first objective, we reviewed FEMA\u2019s pilot guidance for  tribal disaster declarations that was published in January 2017, as well as  federal regulations and statutes governing the major disaster declaration  process. We also reviewed emergency management-related documents  provided by tribal governments. We interviewed experts from tribal  emergency management organizations and officials from FEMA to  compile a list of factors that may have influenced a tribe\u2019s decision to  make a direct request or join a state\u2019s request as a sub-recipient. We  used that list to form the basis of a survey designed to collect information  about the factors that influenced whether a tribe used the new authority or  pursued disaster assistance under a state declaration. The survey  questions asked tribal officials to identify whether a particular factor was a  major factor, a minor factor, or not a factor at all in their decisions to make  a direct request or to join a state\u2019s request. We sent our survey to all 36  tribal governments that either (1) received disaster relief funds through a  direct request, (2) received disaster relief funds as a sub-recipient of a  state\u2019s request, or (3) made a direct request that was denied from  January 2013 through December 2016. This time period coincides with  the first year after SRIA was enacted to the most recently completed  calendar year in which full data on declarations were available at the time  we were planning our survey and site visit administration. Officials from  23 of the 36 tribes responded to our survey.", "To report on FEMA pre-disaster grant funds select tribes received during  this period, we collected grant data from FEMA Grants Program Division.  To assess the reliability of these data, we performed electronic data  testing for obvious errors in accuracy and completeness, and interviewed  agency officials knowledgeable about the collection and processing of  these data. We determined these data to be sufficiently reliable for the  purpose of reporting the grant funds obligated from 2013 through 2016.", "In addition, we conducted site visits to 7 tribes selected from the 23 tribes  that responded to our survey in order to obtain tribal officials\u2019 views on  factors influencing their disaster declaration decisions during this period  and to observe recent disaster damages, ongoing recovery projects, and  aspects of each tribe\u2019s emergency management capability. We selected  these sites so that as a set they included tribes that made a direct request  whether granted or denied, joined a state declaration, and were located in  a variety of FEMA regions. Although the information gathered from our  survey and site visits cannot be generalized across all tribes, it added  context to the survey responses, underscored the uniqueness of each  tribe, and offered important details regarding the opportunities and  challenges for tribes under this new authority.", "To address the second objective, we reviewed relevant documentation,  such as the Tribal Declarations Pilot Guidance, and federal regulations  and statutes governing the major disaster declaration process. We  interviewed representatives from two national tribal organizations to  discuss any successes and issues with the new authority that had been  reported by their constituents. In addition, during our seven site visits, we  gathered testimonial evidence of successes and challenges each tribe  faced in implementing the new authority and carrying out the various  requirements associated with requesting and managing a major disaster  declaration directly or as a sub-recipient to a state declaration. We also  interviewed FEMA officials about the actions they had taken to help  position tribes to determine whether to exercise the new authority and  how to do so, if desired. Further details on our objectives, scope, and  methodology are contained in appendix I.", "In addition, appendix II contains information on major disaster  declarations and pre-disaster grant funds allocated to the 36 tribes  described above as our target population. We analyzed data from  FEMA\u2019s National Emergency Management Information System to  determine what tribes received major disaster declarations from 2013  through 2016 and the specific amount of pre-disaster grant funds they  received. We discussed, with FEMA personnel who have knowledge of  the data collection and maintenance, the controls used to help ensure the  accuracy and reliability of these data. We determined the data to be  sufficiently reliable for identifying which tribes received what types and  amounts of post-disaster assistance and for reporting the pre-disaster  grants that tribes received.", "We conducted this performance audit from October 2016 through May  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Federally Recognized Indian Tribes", "paragraphs": ["The federal government has consistently recognized Indian tribes as  distinct, independent political communities with inherent powers of limited  sovereignty. The 2013 amendments in SRIA allow tribes to decide how to  request federal disaster assistance, thereby allowing tribes to exercise  their sovereignty.", "As of April 2018, there were 573 federally recognized Indian tribes,  residing on more than 56 million acres. Thirty-six states have at least  parts of a tribe within their borders, with fewer tribes located on the East  Coast of the United States and over 300 tribes are located in Alaska and  California. These tribes are each sovereign governments and vary in size,  demographics, and location. For instance, Navajo Nation has the largest  reservation covering over 17.5 million acres, stretching across New  Mexico, Arizona and Utah, and is home to approximately 174,000  residents, while the Mashantucket Pequot Reservation in Connecticut  covers over 2,000 acres and is home to about 350 residents.", "Only tribes that are federally recognized can make disaster declaration  requests. The 10 FEMA Regions and the location of each regional office,  along with the number of federally recognized tribes in each region, are  illustrated in figure 1."], "subsections": []}, {"section_title": "Pre-Disaster Emergency Management Grants for Tribes", "paragraphs": ["Before a disaster occurs, tribes may need certain resources to assist in  the development of their local emergency management capacity. In  addition to offering technical assistance for certain administrative  requirements, such as developing a hazard mitigation plan, FEMA  administers four pre-disaster grant programs that tribes may access.", "These grant programs could provide tribes, either directly or as a sub- grantee through a state, with funds that would help support aspects of  their emergency management capability. They are:  Emergency Management Performance Grant (EMPG). The purpose of  EMPG is to help build and sustain core emergency management  capabilities. EMPG is particularly important for building the capacity to  declare and manage a disaster, because it is the primary federal program  for which salaries and training for emergency management personnel is  an allowable expense. Only states and U.S. territories are eligible to  receive EMPG funds directly. According to FEMA officials, after states  receive EMPG funds, they make determinations about whether and under  what conditions to provide the funds to tribes and local governments  within their geographical boundaries. However, according to officials, not  all states will distribute EMPG funds to tribes.", "State Homeland Security Program (SHSP). The purpose of SHSP is to  help states and U.S. territories prevent, prepare for, protect against, and  respond to acts of terrorism and otherwise reduce overall risk. Allowable  expenses include, but are not limited to, equipment, training, and  exercises. As with EMPG, states and territories receive SHSP funds and  subsequently decide how to distribute them.", "Tribal Homeland Security Grant Program (THSGP). THSGP is a tribal- specific grant program intended to serve the same general purpose as  SHSP. THSGP is available to tribes that meet one or more specific  criteria, including comprising at least 1,000 square miles of Indian country  or being near an international border, near prioritized critical  infrastructure, or within or adjacent to one of the 50 most populous  regions in the United States.", "Pre-Disaster Mitigation (PDM). A PDM grant primarily funds  development and upkeep of hazard mitigation plans, but can be used for  hazard mitigation projects as well. All nonfederal governments\u2014including  tribal governments\u2014must have an up-to-date, FEMA-approved hazard mitigation plan in place before receiving disaster assistance following a  major disaster declaration."], "subsections": []}, {"section_title": "Declaration Process for Major Disaster Declarations", "paragraphs": ["After a disaster, tribal chief executives may request federal assistance, if  the disaster is of such severity and magnitude that effective response is  beyond the capabilities of the affected tribal government and federal  assistance is necessary. Tribes may make a request for assistance as a  direct recipient, or they may join a state\u2019s request as a sub-recipient.", "Similar to the state request process, FEMA Regional Administrators  evaluate the tribe\u2019s request and make a recommendation to FEMA  headquarters. The FEMA Administrator then sends the recommendation  to the President for a final decision as to whether the tribe\u2019s, or a state\u2019s,  request for a major disaster declaration should be approved or denied.  Figure 2 illustrates the process tribes follow to make a direct request or  join a state\u2019s request."], "subsections": []}, {"section_title": "Federal Disaster Assistance Available to Tribes Following a Major Disaster Declaration", "paragraphs": ["When a major disaster is declared, FEMA provides disaster assistance  for eligible disaster recovery projects through the Disaster Relief Fund  (DRF). The three types of post-disaster grants, through the DRF, that  state governors or tribal chief executives may request are:  (1) Public Assistance (PA), which provides grants for eligible emergency  work and repairs or restoration to infrastructure.  (2) Individual Assistance (IA), which provides assistance to individuals  and households to meet their sustenance, shelter, and medical needs.  (3) Hazard Mitigation Grant Program (HMGP), which provides grants for  eligible projects to reduce the potential for future damage."], "subsections": []}, {"section_title": "Tribal Requests for Major Disaster Declarations from 2013 through 2016", "paragraphs": ["According to FEMA data, between 2013 and 2016, 36 tribes made  requests for disaster assistance as a direct recipient or by joining a state\u2019s  request. Of those 36 tribes:", "Fifteen tribes made a total of 17 direct requests to the U.S. President  through FEMA for major disaster declarations.", "Eight of these requests were approved across 7 tribes. From 2013  through 2016, the Pueblo of Santa Clara, New Mexico was the  only tribe approved for two major disaster declarations for severe  storms and flooding in 2013.", "The remaining 9 direct requests were denied across 9 tribes.", "Twenty-nine tribes were sub-recipients under 36 state major disaster  declaration requests.", "Eight tribes made a direct request and also joined at least one state  request for a major disaster declaration.", "Figure 3 below shows the types of state requests tribes joined as well as  the direct tribal requests that were approved and denied between 2013  and 2016. See appendix II for background information on the 36 tribes  that made requests for disaster assistance and those that received pre- disaster grants during the study period."], "subsections": []}]}, {"section_title": "Tribes Considered Sovereignty, Finances, FEMA Support, and Emergency Management Capacity When Deciding How to Request a Disaster Declaration", "paragraphs": ["Officials from the tribes that responded to our survey and those we  interviewed reported that there are several factors they took into  consideration when deciding whether to make a direct request or to join a  state\u2019s request for a disaster declaration, during the 2013 to 2016 period.  On the basis of the cumulative responses from these officials, we found  that tribal sovereignty, financial matters, FEMA support, and the tribe\u2019s  emergency management capacity were key factors in their decision- making process. As shown in figure 4, the 23 survey respondents fall into  three subsets, which totals 29 direct and state requests made by the  survey respondents."], "subsections": [{"section_title": "Tribal Sovereignty and Government-to- Government Relationship", "paragraphs": ["Nine of 10 survey respondents that made at least one direct request  during the 2013 to 2016 period reported that tribal sovereignty was a  major factor they considered when making a direct request. Two survey  respondents reported that the new authority is of strategic importance for  tribal sovereignty because they are no longer required to join a state\u2019s  request when seeking a major disaster declaration. For example, in  instances where the state\u2019s request for a major disaster declaration has  been denied, tribes now have the option to request disaster assistance  directly as a result of this new authority.", "This factor was also of practical importance for tribes with reservations  located in more than one state or county. During our site visit interviews,  officials from one tribe said it was a challenge to manage multiple state  bureaucracies when the reservation spans multiple states. In some  cases, portions of a reservation may not receive disaster assistance if  one state\u2014or county\u2014did not request or receive a major disaster  declaration. Officials from 5 tribes we visited said they prefer making  direct requests because of the government-to-government relationship  with the United States, and because working through the state as an  intermediary impinged on their sovereignty. An official from one small  rural tribe said that the tribe currently does not have the capacity to make  a direct request but is taking the steps to do so in the future because it is  important to their tribal sovereignty."], "subsections": []}, {"section_title": "Financial Considerations", "paragraphs": ["Tribal officials responding to our survey and interview questions reported  that the potential to receive additional assistance from states to pay the  non-federal cost share might influence them to join a state\u2019s request.  Conversely, the timeliness of reimbursement and the potential to receive  administrative costs and HMGP grants might be factors in deciding to  make a direct request.", "Eight out of 13 respondents that received disaster assistance only as a  sub-recipient of a state reported that they had concerns about paying the  required nonfederal cost-share. When managing disaster assistance  grants as a direct recipient, a tribal government is solely responsible for  the entire nonfederal cost share. On the other hand, if the tribe is a sub- recipient to a state request, the tribe may have a lighter financial burden  since several states offer partial or full nonfederal cost share assistance  to their local and tribal sub-recipients. For example, officials from one  tribe said that there is a strong financial incentive to join a state\u2019s request  because the state reimburses the tribal government\u2019s half of the cost  share.", "In addition, some tribes may face financial hardship with the startup cost  for recovery projects because PA and HMGP are reimbursement  programs. For example, one tribal official said that it is especially  difficult for small, rural, non-gaming tribes to find the financial capital to  initiate recovery and hazard mitigation projects. While some tribes may  have the money set aside for this purpose or may be able to secure loans  to begin projects like the one illustrated in figure 5, other tribes are unable  to start certain internal processes until the FEMA funds have been  obligated. At a minimum, recipients have to present a scope of work before they can receive funds, the preparation of which usually requires  the services of engineers or other technical experts. Therefore, the  timeliness of the reimbursements, especially when the tribe is a sub- recipient under a state request, can result in financial challenges. For  example, one tribal official we interviewed said that it takes much longer,  on average, to request and receive reimbursement for recovery projects  when the tribe has to submit the request through the state. Conversely,  the official noted that reimbursement processes are typically much  quicker when working directly with FEMA.", "During our site visit interviews, officials from one tribe told us that they  prefer to make direct requests so they could receive HMGP funds to  make decisions about the hazard mitigation projects on their reservation.  Generally, as a direct recipient, a state or tribe will receive HMGP funding  based on a percentage, usually 15 percent, of the total amount of PA and  IA funds received for the disaster recovery. HMGP funds can be used for  eligible hazard mitigation projects or to create or renew hazard mitigation  plans. Under a state declaration, the state receives these funds and can,  at its discretion, use them anywhere within its boundaries for eligible  projects. According to officials from one tribe, they can ensure they  receive the total amount of HMGP funds to use on hazard mitigation  projects within their own jurisdiction when they are a direct recipient."], "subsections": []}, {"section_title": "FEMA\u2019s Policies, Guidance, and Technical Assistance", "paragraphs": ["Tribal officials\u2019 confidence in the level of support they expected to receive  from FEMA influenced their decision whether to make a direct request or  to join a state. Specifically, in response to our survey, tribes that made  direct requests largely reported that they believed FEMA\u2019s policies and  requirements would be clear enough for them to effectively navigate the  processes and that timely and accurate information would be available. In  contrast, multiple tribes that decided to join a state\u2019s request reported that  their concerns in those areas influenced their decisions to join a state\u2019s  request."], "subsections": [{"section_title": "FEMA Policies and Guidance", "paragraphs": ["Eight of the 10 tribes responding to our survey that requested a direct  disaster declaration during the 2013 to 2016 period stated that the clarity  of policy and guidance was a factor (five called it a major factor and three  deemed it minor) in their decision making. Conversely, eight of the 13  tribes that only joined a state request reported that concern about FEMA\u2019s  policies and requirements being clear enough to seek a direct request  was a factor in their decision to join a state request.", "During our site visit interviews, officials from 2 tribes discussed  challenges they have experienced with FEMA\u2019s policies and requirements  for estimating IA-related damages. Applicants for IA, including owners  and renters, must be able to prove they occupied the damaged dwelling,  pre-disaster, as their primary residence before receiving assistance.  However, according to tribal officials, many homeowners on reservations  do not possess formal deeds to their home or do not carry insurance,  making it difficult for FEMA to ensure that potential recipients of the IA  funds meet the requirements of the program. According to FEMA officials,  the agency has attempted to be flexible during the pilot phase of the tribal  declarations program. For example, FEMA officials in one region told us  that they would accept a tribal government\u2019s declaration of home  ownership in lieu of a formal deed. FEMA officials told us they will  continue to evaluate how issues of homeownership will be adjudicated.", "In addition, during our site visit interviews, officials from 3 tribes discussed  various types of difficulty with completing and maintaining the paperwork  associated with recovery projects. For example, officials from a tribe  stated that they are not equipped to manage and comply with processes  such as permit requirements or federal procurement procedures and as a  result are currently seeking to hire a full time emergency manager.  Throughout the life of a major disaster declaration, tribal officials are  required to maintain paperwork to document the recovery projects, which  can require both physical and electronic recordkeeping systems, space,  time, and expertise. For example, figure 6 below shows an example of the  volume of paperwork needed to support and close out the recovery  projects associated with a landslide in Washington State, according to the  tribal and state officials involved.", "Nine of 10 tribes responding to our survey that were awarded a direct  disaster declaration reported that a factor (six major and three minor) in  their decision making was their determination that the availability of timely  and accurate assistance from FEMA would help them successfully  manage the request process. For tribes that only joined state requests,  fewer tribes reported that concerns about receiving timely and accurate  technical assistance affected their decisions than those that had concerns  about the clarity of FEMA\u2019s policy and guidance. Four of the 13 total  tribes that only joined a state declaration cited concerns about having  access to technical assistance as a factor (one called it a major and three  deemed it minor).", "Damage Assessments  After a disaster occurs, the first step in the  declaration process is for the tribe to conduct  an assessment of the impacts of the disaster  to determine if there are needs that cannot be  addressed with tribal resources or through  insurance. Using this assessment\u2014known as  an initial damage assessment\u2013-a tribal  government can determine what, if any, needs  or damages are eligible for FEMA disaster  assistance. If a tribe determines that such  needs or damages are beyond its capabilities  to address with its own resources or  insurance, the next step is to request a Joint  Preliminary Damage Assessment (Joint PDA)  from their FEMA Regional Administrator so  that FEMA and the tribe can go through a  process of reaching agreement about what  damages and needs are eligible.", "According to FEMA officials, the agency has assigned staff as dedicated  Regional Tribal Liaisons (RTL) in all FEMA regional offices. RTLs help  tribes maintain awareness of various program requirements, including  those for conducting damage assessments and submitting requests for  major disaster declarations. RTLs accomplish this role by connecting  tribes with FEMA subject matter experts, who help tribes navigate the  major disaster declaration processes and programs. During our site visit  interviews, officials from 5 tribes we interviewed discussed the  importance of having a good working relationship with FEMA regional  officials. Some of the steps FEMA has taken to provide technical  assistance to tribes are discussed further below."], "subsections": []}]}, {"section_title": "Tribes\u2019 Emergency Management Capacity", "paragraphs": ["Tribal officials\u2019 confidence in the tribe\u2019s capacity to manage the major  disaster declaration process and subsequently administer the recovery  without assistance from a state was a key factor in determining whether  or not to seek a request directly or join a state request.", "Tribes, like states, have to carry out specific tasks and meet eligibility  requirements to be able to make a direct request and manage the  recovery processes for a major disaster declaration, as shown in figure 7.  While states have had decades to develop the emergency management  capacity needed to request and administer federal disaster assistance,  tribes have had the opportunity to apply directly for federal disaster  assistance since the passage of SRIA in 2013. Developing and  maintaining such a capacity requires, among other things, having in- house knowledge or the ability to contract for (or otherwise access)  specialized expertise to navigate through complex planning and  processes.", "Multiple officials from tribes we interviewed and surveyed reported  challenges building and maintaining emergency management capacity  that affected their ability to make direct requests for, and manage the  recovery effort associated with, a major disaster declaration.", "Specifically, 9 of 10 tribes responding to our survey that made a direct  request said determining that their tribes had the emergency  management capacity to successfully manage the major disaster  declaration request process was a factor (6 identified it as minor, 3 as  major). Conversely, 7 of the 13 tribes responding to our survey that only  joined a state request said determining that they did not have the  emergency management capacity to successfully manage the major  disaster declaration request process was a factor in their decisions (4  identified as major, 3 as minor). As with the capacity to handle the  declaration process, determining whether the tribe had the capacity to  manage the recovery process, as illustrated in figure 7, also affected  decision making. Officials from one tribe we interviewed who had not  made direct requests told us that unless they have the emergency  management capacity to manage both the request and the recovery  process, they plan to continue joining states\u2019 requests whenever possible.", "Tribal Hazard Mitigation Plan  A Tribal Hazard Mitigation Plan describes  sustained actions that may be taken by the  tribal government to reduce or eliminate the  long-term risk of future damage to human life  and property from hazards. When making a  direct request for a major disaster declaration,  a tribal government must have a Federal  Emergency Management Agency (FEMA)- approved Tribal Mitigation Plan that meets the  requirements in 44 C.F.R. \u00a7 201.7 before  receiving FEMA disaster assistance funds  under certain programs. If electing to be a  sub-recipient under a state\u2019s major disaster  declaration request, the tribal government  may be eligible to receive disaster assistance  funds through the state without having a Tribal  Mitigation Plan.", "A tribal emergency management consultant who works with several tribes  in one of the areas where we conducted site visits told us that the lack of  a FEMA-approved tribal hazard mitigation plan limits the ability of many of  these tribes to receive disaster funding. A hazard mitigation plan is  required prior to a recipient being able to receive PA permanent work or  HMGP. As of December 2017, 143 out of 567 tribes had a FEMA- approved Tribal Mitigation Plan, according to FEMA. In addition, the  consultant reported that some tribes also lacked a designated emergency  manager and hiring one may be unaffordable or in some cases, the  applicants lack qualifications. For another tribe, the designated  emergency manager had several job titles, including the tribe\u2019s first  responder and fire chief, which the official said makes it difficult to  dedicate the time required to hone the skills necessary to manage the  FEMA declaration processes. The official recounted an attempt to  develop a hazard mitigation plan that at the time of our interview was still  incomplete due, in part, to the complexity of the FEMA guidelines. In such  cases, tribes may need to hire a specialist to assist with this  administrative requirement, but may not have the budget to do so.", "Another challenge tribal officials identified is that tribes face barriers to  accessing federal pre-disaster funding that could help them build capacity  to manage post-disaster grants following a successful declaration  request. During our site visit interviews, officials from two tribes told us  they have considered seeking federal grant opportunities to help enhance  emergency management capacity, but the eligibility requirements, such  as the requirement to be near designated critical infrastructure or within  100 miles of the border, for the tribal homeland security grants program  precluded them from applying. They also said that they have received  few, if any, state homeland security grant funds from states.", "EMPG pays for salaries and is the primary source of support for  developing and maintaining the requisite emergency management expertise. According to the FEMA and tribal officials we spoke with, as  well as grant data provided by FEMA, tribes receive relatively low  amounts of EMPG funding (see table 1 below) through the states. Tribes  are not eligible to apply directly to FEMA for EMPG funds. In addition,  according to tribal officials, when tribes apply to states for EMPG funds,  the states can impose conditions that impinge on tribal sovereignty. For  example, one state requires tribes to waive their legal immunity and agree  to follow state laws, which some tribal officials viewed as contradictory to  their sovereignty. As a result, these officials said they choose not to apply  for these grants through the states and have never received EMPG funds.", "FEMA officials acknowledged that tribes face challenges getting federal  grant funds to help them enhance their emergency management capacity.  According to the officials there are statutory, policy, and budget  considerations that limit their ability to make significant changes in the  way such grant funds are distributed. However, they told us that they  continue to work under their current authorities to assist tribes that seek  to develop and maintain their emergency management capacity, primarily  through training and technical assistance, as described later in this report."], "subsections": []}]}, {"section_title": "FEMA Has Created Pilot Guidance for Tribes and Offers Training and Technical Assistance on Directly Requesting Disaster Declarations", "paragraphs": ["Since the passage of SRIA in 2013, FEMA has implemented various  policies tailored to tribes that wish to make a direct request to the  President, through FEMA, for federal disaster assistance. In December  2013, FEMA issued a policy regarding coordination with tribal  governments. As part of this policy, FEMA committed to consulting tribal  governments before taking proposed actions that would have a  substantial direct effect on tribes. In addition, the policy recognized the  tribes\u2019 rights to self-governance and tribal sovereignty.", "Since 2013, according to FEMA officials, the agency has provided  multiple opportunities through Federal Register notices and ongoing  consultations for input into the development of the guidance that currently  governs the tribal request process for major disaster declarations.  Specifically, FEMA reported that it is implementing this authority in three  phases: (1) use of existing regulations, (2) pilot period, and (3)  rulemaking. During phase 1, from 2013-2016, FEMA processed tribal  declaration requests using existing state declaration regulations in order  to allow tribal governments the choice to use the new authority  immediately and to provide time for consultation on drafts of the Tribal  Declarations Pilot Guidance.", "In January 2016, FEMA published a draft of the Tribal Declarations Pilot  Guidance and requested comments on the draft guidance through April  2016. Based on feedback received, FEMA issued a final version of the  guidance, with which it will manage tribal declaration requests during the  pilot phase, in January 2017. The publication of this guidance in  January 2017 officially started phase 2, the pilot phase, of the tribal  declarations implementation.", "FEMA officials told us that, before beginning the development of  regulations on tribal disaster declarations, they intend to operate under  the pilot guidance for at least 2 years. They noted that they cannot specify  an exact date on which they expect to finalize the guidance because  there is uncertainty about what kind of disasters will strike and where.", "According to officials, they have identified data they would like to collect  to assess the guidance before finalizing it. Among other things, they said  they plan to do economic analyses using quantitative data such as the  types of disaster assistance requests from tribes (PA, IA, and HMGP) and  the amount of funding allocated to tribes. In addition, these officials said  they plan to conduct focus groups with tribal officials to learn more about  how the disaster declaration policies and guidance have worked for tribal  governments that used them. In the meantime, according to these  officials, their aim is to be as flexible as possible while maintaining  consistency with other relevant disaster regulations, so that they can  respond to any unique challenges that arise in implementing this new  authority.", "In addition to assessing how the pilot is working for tribes, FEMA has  developed and implemented training to help tribes understand the  disaster declaration process and provided technical assistance to tribes  as needed, prior to, during, and after disasters. FEMA has offered  training opportunities at the Emergency Management Institute in  Emmitsburg, Maryland, and has hosted regional training workshops and  consultations throughout the country. According to tribal officials, these  training courses have helped increase tribes\u2019 emergency management  expertise. One of the offerings, Tribal Declarations Pilot Guidance, was a  1-hour briefing offered in multiple locations and provided to dozens of  tribes and other government agencies. In addition, FEMA has RTLs in  each regional office that are a primary point of contact for tribal  governments that have questions or require technical assistance on  FEMA programs. Officials from one tribe we visited told us they believe  the technical assistance they received from a FEMA RTL was timely and  thorough. These officials said the tribe contacted FEMA for assistance  following the Tribal Council\u2019s decision to declare a state of emergency on  the reservation. According to the tribal officials, a fire had started on a  Sunday and the FEMA team was on-site at the reservation by  Wednesday to conduct a joint preliminary damage assessment with tribal  officials. The officials also said they were impressed with FEMA\u2019s quick  response on the damage assessment results, which they received within  a week. The tribe did not ultimately request a major disaster declaration  because the damage assessment fell short of the minimum damage  amount at that time. However, officials from the tribe said the experience  they gained was helpful for the tribe\u2019s emergency management staff and  that they are now confident they will be able to conduct an initial damage  assessment should a future disaster occur."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Department of Homeland Security  and FEMA for review and comment. They provided technical comments,  which we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Secretary of Homeland Security. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (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 V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this study were to examine (1) the factors that influence  selected tribes\u2019 decisions about how to seek federal assistance through a  major disaster declaration and (2) the actions the Federal Emergency  Management Agency (FEMA) is taking to assist tribal efforts to request  and manage disaster declarations.", "To report on the factors that tribes consider when seeking federal disaster  assistance, we reviewed FEMA\u2019s pilot guidance for tribal disaster  declarations that was published in January 2017 and discussed the  program\u2019s pilot plans with key agency officials. We also interviewed  officials from two national tribal organizations (the National Congress of  American Indians and the National Tribal Emergency Management  Council) and FEMA to develop a preliminary list of potential factors that  may influence a tribe\u2019s decision to make a direct request or to join a  state\u2019s request as a sub-recipient. Using these factors, we developed a  survey with both closed and open-ended questions. To minimize non- response error, we pre-tested the survey instrument with officials from  two tribes in FEMA Regions VI and X (see figure 1) to ensure the  questions were clear and unbiased and that the survey questions were  culturally appropriate. We also consulted tribal officials during a FEMA  training course and held additional interviews with officials from tribal  organizations to ensure that the questions were clear, understandable,  and appropriate. An independent reviewer within our agency also  reviewed a draft of the survey prior to the pre-tests. We made appropriate  revisions to the content and format of the questionnaire based on the  pretests and independent review.", "We sent our survey to the 36 tribal governments that either (1) received  declaration funds through a direct request,  (2) received declaration  funds as a sub-recipient of a state\u2019s request, or (3) made a direct request  that was denied between January 2013 and December 2016.The time  period we chose coincides with the year SRIA was enacted to the most  recent calendar year in which a full year of data on major disaster  declarations was available when we began this work. Using e-mail  addresses provided by FEMA Regional offices, we emailed the survey in  an attached document that respondents could complete electronically or  by hand and return via email or mail. We sent an invitation letter to the  tribes on July 12, 2017, informing them of the purpose of the survey and  the date it would be sent. We then sent the survey on July 18, 2017 and  began soliciting survey responses from August 7, 2017 until January 12,  2018, by phone and email. We received completed surveys from 23 of the  36 tribes in the target population. We compared selected characteristics  of the tribes responding to the survey with the same characteristics of the  36 tribes in the target population, as well as the completion of individual  questions, and did not find a nonresponse bias. The final survey  questionnaire is in appendix III.", "To complement the survey responses, we conducted site visits to 7 tribes  selected from among the 23 tribes that responded to our survey. The  objectives of these site visits were to obtain added information from the  tribal officials regarding the factors influencing their disaster declaration  decisions during this period. We also observed recent disaster damage;  ongoing recovery projects; and aspects of each tribe\u2019s emergency  management capability. We selected these various sites so that, as a set,  they included a mixture of tribes that had participated in direct  declarations; in state declarations as a sub-recipient; participated in  declarations that were granted and denied; and were located in different  FEMA regions. The selected tribes are located in Arizona, New Mexico,  Washington, and Idaho, representing FEMA Regions VI, VIII, IX, and X.  During our site visits, we interviewed tribal executives and emergency  management officials and toured completed projects. Although the  information gathered from our survey and site visits cannot be  generalized across the tribes, our observations and the tribal officials\u2019  responses underscored the uniqueness of each tribe and each disaster,  as well as offering important details regarding the opportunities and  challenges for tribes under this new authority.", "To report on related FEMA grant funds obligated from 2013 through 2016,  we collected data regarding the Homeland Security Grant Program, Tribal  Homeland Security Grant Program, Emergency Management  Performance Grant, and the Pre Disaster Mitigation grant data from  FEMA Grants Program Division officials. We selected these programs  because they provide pre-disaster grant funds to states and tribes that  are, in part, intended to enhance grantees emergency management  capacity. To assess the reliability of these data, we performed electronic  data testing for obvious errors in accuracy and completeness, and  interviewed agency officials knowledgeable about the collection and  processing of these data. We determined these data to be sufficiently  reliable for the purposes of reporting FEMA\u2019s awards of these grant  funds.", "To address the second objective, we reviewed federal documentation\u2014 such as FEMA\u2019s Tribal Declarations Pilot Guidance, federal regulations  and statutes governing the major disaster declaration process to see what  actions FEMA has taken specifically related to tribe\u2019s requesting and  managing major disaster declarations. We also reviewed disaster-related  documentation provided by tribal governments and available on-line,  including correspondence between tribes and FEMA, testimony  statements, and additional documents that provided details of tribes\u2019  experiences requesting and managing major disaster declarations. In  addition, we interviewed officials from the two aforementioned national  tribal organizations to discuss any successes or challenges they were  familiar with related to the new authority that allows tribes to request a  major disaster declaration directly from the President of the United States.  During our interviews with tribal organizations and tribal officials, we  examined challenges related to implementing the new authority and  carrying out the various requirements associated with requesting and  managing a major disaster declaration.", "We also interviewed FEMA officials about the actions they had taken to  help tribes make informed decisions about whether they would prefer to  exercise the new authority. In addition, we interviewed FEMA officials  about how they assisted tribes that were considering whether to exercise  the new authority and how to do so, if desired, as well as what, if any,  steps they had taken to address the challenges identified by tribes. For  example, we discussed what actions FEMA has taken to assess the pilot  program, offer training opportunities, and provide technical assistance to  tribes that seek to enhance their emergency management capacity. We  also attended a tribal emergency management conference in June 2017,  attended a FEMA tribal emergency management training session in  person in March 2017, and attended two FEMA-sponsored webinars  designed specifically for tribal participants.", "We conducted this performance audit from October 2016 through May  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Grant Funds Received by Tribes that Requested or Joined a State\u2019s Major Disaster Declaration, 2013-2016", "paragraphs": [], "subsections": [{"section_title": "Pre-Disaster Grant Programs", "paragraphs": ["State Homeland Security Program (SHSP) provides funding to support  states\u2019 implementation of homeland security strategies to address the  identified planning, organization, equipment, training, and exercise  needs at the state and local levels to prevent, protect against, respond             to, and recover from acts of terrorism and other catastrophic events.", "Tribal Homeland Security Grant Program (THSGP) provides funding  to eligible tribes to strengthen their capacity to prevent, protect  against, mitigate, respond to, and recover from potential terrorist  attacks and other hazards.", "Emergency Management Performance Grant (EMPG) program  provides funding to assist local, tribal, territorial, and state  governments in enhancing and sustaining all-hazards emergency  management capabilities.", "Pre-Disaster Mitigation (PDM) grant program provides funds to  communities for hazard mitigation planning and the implementation of  mitigation projects prior to a disaster event. Funding these plans and  projects reduces overall risks to life and property and the future cost  of recovering from a disaster event. The goal of the program is to  reduce overall risk to the population and structures, while at the same  time also reducing reliance on Federal funding from actual disaster  declarations."], "subsections": []}, {"section_title": "Post-Disaster Grant Programs through a Major Disaster Declaration", "paragraphs": ["Individual Assistance (IA) provides financial assistance to individuals.", "Public Assistance (PA) provides financial assistance to jurisdictions for  debris removal, emergency protective measures, and the restoration of  disaster-damaged, publicly-owned facilities and the facilities of certain                   private nonprofit organizations, such as utilities.", "Hazard Mitigation Grant Program (HMGP) provides additional funds to  assist communities in implementing long-term measures to help  reduce the potential risk of future damages to facilities."], "subsections": []}]}, {"section_title": "Appendix III: GAO Survey to Tribes that Requested or Joined a State\u2019s Major Disaster Declaration, 2013-2016", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Kathryn Godfrey (Assistant  Director), R. Denton Herring (Analyst-In-Charge), Pat Donahue, Dainia  Lawes, and Claudia Rodriguez made key contributions to this report. In  addition, Eric Hauswirth, Susan Hsu, Tracey King, Gary Malavenda, Jeff  Malcolm, and Heidi Nielson also provided assistance."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-591", "url": "https://www.gao.gov/products/GAO-18-591", "title": "Native American Youth: Involvement in Justice Systems and Information on Grants to Help Address Juvenile Delinquency", "published_date": "2018-09-05T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Native American youth face unique challenges when it comes to their contact with justice systems. Research shows that risk factors such as high rates of poverty and substance abuse make them susceptible to being involved with justice systems at the federal, state and local, and tribal levels. GAO was asked to examine the extent of Native American youth involvement in justice systems, and federal grant programs that may help address Native American youth delinquency.", "This report examines (1) what available data show about the number and characteristics of Native American youth in federal, state and local, and tribal justice systems; and (2) federal discretionary grant programs that could help prevent or address delinquency among Native American youth, and tribal government and Native American organizations' access to those grants. GAO analyzed federal, state and local, and tribal arrest, adjudication, and confinement data from 2010 through 2016 (the most recent available) from DOJ and the Department of the Interior. GAO also analyzed DOJ and HHS grant program award documentation from fiscal years 2015 through 2017, and application information for a sample of the grant programs chosen based on the amount of funding awarded and other factors. GAO also interviewed officials from DOJ, HHS, and 10 tribal governments or Native American organizations chosen to include successful and unsuccessful applicants to the grant programs, among other things."]}, {"section_title": "What GAO Found", "paragraphs": ["GAO's analysis of available data found that the number of American Indian and Alaska Native (Native American) youth in federal and state and local justice systems declined across all phases of the justice process\u2014arrest, adjudication, and confinement\u2014from 2010 through 2016. During this period, state and local arrests of Native American youth declined by almost 40 percent from 18,295 in 2010 to 11,002 in 2016. The vast majority of Native American youth came into contact with state and local justice systems rather than the federal system.", "However, more Native American youth were involved in the federal system than their percentage in the nationwide population (1.6 percent). For example, of all youth arrested by federal entities during the period, 18 percent were Native American. According to Department of Justice (DOJ) officials, this is due to federal jurisdiction over certain crimes involving Native Americans. Comprehensive data on Native American youth involvement in tribal justice systems were not available for analysis. GAO's analysis showed several differences between Native American and non-Native American youth in the federal justice system. For example, the majority of Native American youths' involvement was for offenses against a person, such as assault and sex offenses. In contrast, the majority of non-Native American youths' involvement was for public order offenses (e.g., immigration violations) or drug or alcohol offenses. On the other hand, in state and local justice systems, the involvement of Native American and non-Native American youth showed many similarities, such as similar offenses for each group.", "DOJ and the Department of Health and Human Services (HHS) offered at least 122 discretionary grants and cooperative agreements (grant programs) from fiscal years 2015 through 2017 that could be used to address juvenile delinquency among Native American youth. DOJ and HHS made approximately $1.2 billion in first-year awards to grantees during the period, of which the agencies awarded approximately $207.7 million to tribal governments or Native American organizations. Officials from the agencies, tribal governments, and Native American organizations identified factors they believe affect success in applying for grant programs. For example, some tribal governments and Native American organizations found being able to call or meet with federal officials during the application process helpful but found that short application deadlines are a challenge."]}], "report": [{"section_title": "Letter", "paragraphs": ["American Indian and Alaska Native (Native American) youth face unique  challenges when it comes to their contact with justice systems. According  to recent reports and agency research, several risk factors make Native  American youth susceptible to becoming involved with justice systems at  the federal, state and local, and tribal levels. These risk factors include  exposure to violence; substance abuse; poverty; limited job market skills;  and tribal communities\u2019 limited funding for mental health, education,  housing, and other services. Further, these reports and research note that  tribal justice systems often lack resources and programming compared  with federal and state and local justice systems, which may not have  culturally appropriate programming to meet the needs of Native American  youth.", "When a Native American youth enters the federal criminal justice system,  the Department of Justice (DOJ) and Department of the Interior (DOI),  among others, have responsibility for investigating and prosecuting his or  her act of delinquency or crime. Additionally, federal agencies including  DOJ and the Department of Health and Human Services (HHS) provide  funding through grant programs that could be used to help prevent or  address juvenile delinquency.", "Given the severity of the issues Native American youth face, there are  questions about the percent of these youth in the justice systems,  particularly at the federal level, and about the sufficiency of resources to  address the risk factors that contribute to them becoming involved in the  justice systems.", "You asked us to review information about Native American youth in the  justice systems, including demographic information about these youth;  federal grant programs that address Native American juvenile  delinquency; and tribal access to these grant programs. This report  addresses the following questions:  1.  What do available data show about the number and characteristics of  Native American youth in the federal, state and local, and tribal justice  systems?  2.  What discretionary grant programs do federal agencies fund that  could help prevent or address delinquency among Native American  youth, and to what extent do tribal governments and Native American  organizations have access to them?", "For the purposes of this review, our discussion of Native American youth  in federal, state and local, and tribal justice systems generally includes  persons who (a) were under 18 years of age at the time of arrest,  adjudication, or confinement; and (b) who were identified as Native  American based on descriptions and definitions of the agency data sets  we reviewed. As described in the report, each agency data set we  reviewed used a different definition of Native American and agencies  used different methods to identify youth as Native American for those  data sets. Throughout the report, we use the term \u201cjuvenile\u201d when  referencing justice systems and \u201cyouth\u201d in referring more generally to  individuals under the age of 18 at the time of arrest or confinement. In  addition, we use the term \u201cNative American\u201d to indicate both Alaska  Native and American Indian individuals, including the youth in the data we  reviewed. However, we use the term \u201cIndian\u201d in reference to definitions  established by statute or law.", "To address the first objective, we obtained and analyzed record-level and  summary data from federal agencies about federal, state and local, and  tribal justice systems. Specifically, we obtained and analyzed data from  five DOJ agencies and DOI\u2019s Bureau of Indian Affairs (BIA) for youth  arrested, adjudicated, or admitted to a facility (confined) during calendar  and fiscal years 2010 through 2016. The data described characteristics  such as race, age, gender, type of offense, and the year the youth came  into contact with the justice system. For purposes of our analysis, we  included Native American youth as defined by each data source and  identified by the agencies providing the data we reviewed. These data  included some youth who may have been prosecuted as adults. In regard  to type of offense, unless otherwise noted, we obtained and analyzed  information about the lead or most serious offense associated with the  youth who came into contact with the justice system, which was generally  identified in the data we obtained. We then grouped the offenses into five  broad categories\u2014drug and alcohol, person, property, public order, and  other. We assessed the reliability of the record-level and summary data  by electronically testing the data and interviewing knowledgeable DOJ  officials and determined that the data included in this report were  sufficiently reliable for the purposes of our reporting objectives. We  determined that some data related to arrests and sentencing either were  not reliable for our purposes, contained information already provided by  other data sources, or contained too few Native American youth  observations to provide reliable, reportable information. These data are  not included in our report.", "Additionally, we reviewed summary data in DOJ\u2019s Bureau of Justice  Statistics (BJS) reports, such as the Jails in Indian Country report from  2016, to describe the number of Native American youth confined in tribal  facilities. We assessed the reliability of the data we used from these  reports by reviewing related documentation and interviewing  knowledgeable BJS officials and determined that the data were  sufficiently reliable for the purposes of our reporting objectives.", "We also analyzed the representation of Native American youth involved  with the federal justice system by comparing federal arrest, adjudication,  and confinement data to information provided in response to the 2010  Decennial U.S. Census, and in U.S. Census estimates from 2011 through  2016. Similarly, we analyzed the representation of Native American youth  involved with state and local justice systems by comparing state and local  arrest and confinement data to U.S. Census information.", "Because there is no single, centralized data source that contains data for  youth involved in all justice systems (federal, state and local, and tribal)  and across all phases of the justice process (arrest, adjudication, and  confinement), it is not possible to track individuals through all phases of  the justice process or identify the number of unique youth who have come  into contact with the justice system. In addition, record-level data were not  available for all phases of the justice process and for all justice systems.  Further, data are not comparable across databases because databases  vary in how they define Native American and how they determine whether  youth are Native American.", "In addition, we collected perspectives from agency officials and officials  from five selected Native American organizations regarding factors that  might contribute to the data characteristics we observed. We selected  these Native American organizations to include organizations whose  mission and scope of work focus on Native American juvenile justice  issues and that have a national or geographically-specific perspective.  The views of these Native American organizations are not generalizable  to all Native American organizations, but provide valuable insights.", "To address our second objective on federal discretionary grant programs  that could help prevent and address delinquency among Native American  youth, and tribal governments and Native American organizations\u2019 access  to those programs, we analyzed relevant programs available for funding  from fiscal years 2015 through 2017. For the purposes of the review, we  define \u201ctribal governments\u201d as the governing bodies of federally  recognized tribes. We define \u201cNative American organizations\u201d as  organizations affiliated with federally recognized tribes, such as tribal  colleges and universities, as well as non-tribal organizations that focus on  serving American Indian and Alaska Native populations, such as urban  Indian organizations. To identify these grant programs, we conducted a  keyword search of \u201cyouth or juvenile\u201d in Grants.gov\u2014an online repository  that houses information on over 1,000 different grant programs across  federal grant-making agencies. We focused on discretionary grants and  cooperative agreements (collectively referred to as grant programs  throughout our report) in this review because federal agencies generally  award discretionary grants and cooperative agreements based on a  competitive review process, whereas agencies are generally required by  statute to award other types of grants to specific entities, typically U.S.  state, local, and territorial governments. We did not include other  programs or sources of funding that could help prevent and address  delinquency among Native American youth in our review.", "We reviewed the search results of the three agencies with the highest  number of grant program matches\u2014DOI, DOJ, and HHS. We selected  programs whose activities related to the risk or protective factors  discussed in the Office of Juvenile Justice and Delinquency Prevention\u2019s  (OJJDP) Tribal Youth in the Juvenile Justice System literature review.  We also worked with DOI, DOJ, and HHS officials to identify any  additional relevant grant programs and confirmed our final list of grant  programs with agency officials. Despite these steps, it is possible that our  analysis did not identify all relevant grant programs.", "We next reviewed the funding opportunity announcements of our selected  grant programs to determine which ones specified tribes or Native  Americans as a primary beneficiary and which did not. We also  categorized each program into one or more issue areas (e.g., violence or  trauma, substance abuse, mentoring) using the risk and protective factors  discussed in the OJJDP Tribal Youth in the Juvenile Justice System  literature review as the basis for our issue area determinations.", "To determine the extent to which tribal governments and Native American  organizations had access to the grant programs we identified, we  reviewed the eligibility factors and award data. Specifically, we reviewed  the grant program funding opportunity announcements to determine  whether tribal governments or Native American organizations were  eligible to apply. We also analyzed fiscal year 2015 through 2017 award  data for every grant program we identified to determine the extent to  which tribal governments and Native American organizations received  funding. We also reviewed a non-generalizable sample of applications  selected to include applications to grant programs that funded a relatively  high estimated amount of awards or that specified tribes or Native  Americans as a primary beneficiary to determine the extent to which tribal  governments or Native American organizations applied for grant  programs we identified. We assessed the reliability of the data we used  by questioning knowledgeable officials and determined that the data were  sufficiently reliable for the purposes of our reporting.", "To understand factors that affect the ability of tribal governments and  Native American organizations to apply successfully for the grant  programs we identified, we interviewed DOJ and HHS officials, as well as  officials from a nongeneralizable sample of 10 tribal governments and  Native American organizations that applied for or received funding from  these grant programs and analyzed their responses to identify common  themes. We selected our sample to include tribal governments and  Native American organizations that received multiple awards for grant  programs we identified, and that applied unsuccessfully multiple times to  grant programs we reviewed, among other characteristics. We also  analyzed a nongeneralizable sample of peer review statements from  unsuccessful applications to understand why tribal governments and  Native American organizations were unsuccessful in applying for some of  the grant programs we identified. The information we obtained from the  officials and peer review statements cannot be generalized more broadly  to tribal governments and Native American organizations or the  applications they submit unsuccessfully for federal funding. However, the  information provides insights into the challenges these entities face in  applying for federal funding that could help prevent or address  delinquency among Native American youth, as well as some of the  common weaknesses identified in unsuccessful applications from these  entities. For further information on our scope and methodology, see  appendix I.", "We conducted this performance audit from November 2016 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Native American Population and Indian Country", "paragraphs": ["Over 4 million people in the United States identified as Native American  based on 2016 United States Census estimates, of which 29 percent  were youth. As of June 2018, there were 573 federally recognized Indian  tribes. According to BIA, as of June 2018, there were approximately 497  Indian land areas in the United States administered as federal Indian  reservations or other tribal lands (e.g., pueblos, villages, and  communities). These land areas, which span more than 56 million acres  and 37 states, and vary in size, can generally be referred to as Indian  country. Indian country is in remote, rural locations, and also near urban  areas. Native Americans live both inside and outside of these land areas,  and Indian country may have a mixture of Native American and non- Native American residents. Jurisdiction over crime in Indian country  differs according to several factors and affects how Native American  youth become involved with justice systems, as discussed further below."], "subsections": []}, {"section_title": "Youth in State and Local, Federal, and Tribal Justice Systems", "paragraphs": ["Youth who commit offenses can enter one or more justice systems at the  state and local, federal, and tribal levels. Although state and local, federal,  and tribal justice systems have unique characteristics, they all generally  proceed through certain phases, including arrest, prosecution and  adjudication, and in some instances, placement and confinement in a  detention facility.", "State and local. State and local justice systems have specific courts\u2013  often at the county or city level\u2013with jurisdiction over youth alleged to  have committed an act of juvenile delinquency or a crime. This  jurisdiction can be conferred by the state\u2019s laws and exercised by courts  at the city, county, or municipal levels, and each state and local entity\u2019s  processing of youth is unique. There are more than 2,400 courts across  the country with juvenile jurisdiction, and a majority of these are at the  city, county, or municipal, i.e., local, level. Generally, a youth is either  referred to juvenile court or released. Juvenile courts handle two types of  petitions: delinquency or waiver. A delinquency petition is the official  charging document filed in juvenile court by the state. A juvenile\u2019s case  may be dismissed, handled informally (without filing a petition for  adjudication), or handled through adjudication by the court. In some more  serious situations, the case can be handled by a criminal court. Juvenile  cases that are handled informally or through adjudication can result in  various outcomes, including probation, commitment to an institution or  other residential facility, another sanction (e.g., community service), or  dismissal.", "Federal. Unlike state systems, the federal justice system does not have a  separate court with jurisdiction over juvenile cases. Youth that are  proceeded against in federal court are generally adjudicated in a closed  hearing before a U.S. district or magistrate judge and their cases are  either declined or they can be adjudicated delinquent. Delinquent  adjudications can result in outcomes such as probation, commitment to a  correctional facility, or the requirement to pay restitution. Youth under  the age of 18 who are confined in federal facilities, including Native  American youth, are housed in juvenile facilities overseen by the Federal  Bureau of Prisons (BOP), which contracts with other entities to manage  those facilities.", "Tribal. Tribal justice systems vary. A number of tribes have tribal judicial  systems, some with separate juvenile courts, and others rely on state  courts or the federal system. As of April 2018, there were approximately  89 adult and juvenile jail facilities and detention centers in Indian country,  according to BIA officials. In addition, DOI\u2019s BIA directly manages some  facilities, called juvenile detention centers, on tribal lands."], "subsections": []}, {"section_title": "Jurisdiction of Federal, State, and Tribal Justice Entities Outside and Inside Indian Country", "paragraphs": ["Outside Indian country. A state generally has jurisdiction to proceed  against a youth who has committed a crime or act of juvenile delinquency  outside of Indian country. This jurisdiction is generally exercised in each  state by local courts (e.g., at the county and city levels). Federal law limits  federal jurisdiction over youth if a state has jurisdiction over the youth and  has a system of programs and services adequate for their needs. Since  the passage of the Juvenile Justice and Delinquency Prevention Act in  1974, federal law has reflected an intent to support state and local  community-level programs for the prevention and treatment of juvenile  delinquency, and to avoid referral of juvenile cases out of the state and  local systems while balancing against the need to protect the public from  violent offenders. Consistent with this, the Federal Juvenile Delinquency  Code provides that a youth alleged to have committed an act of juvenile  delinquency, with certain exceptions, will not fall under federal jurisdiction  unless (1) the juvenile court or other appropriate court of a state does not  have jurisdiction over the youth, (2) the state does not have available  programs and services adequate for the needs of the youth, or (3) the  offense charged is a violent felony or an enumerated offense involving  controlled substances and there is a substantial federal interest in the  case or the offense to warrant the exercise of federal jurisdiction.", "Inside Indian country. For both youth and adults, the exercise of  criminal jurisdiction in Indian country depends on several factors. These  factors include the nature of the crime, the status of the alleged offender  and victim\u2014that is, whether they are Indian or not\u2014and whether  jurisdiction has been conferred on a particular entity by statute.  Additionally, the Federal Juvenile Delinquency Code generally applies to  all juveniles alleged to have committed an act of juvenile delinquency,  whether inside or outside Indian country. As a general principle, the  federal government recognizes Indian tribes as \u201cdistinct, independent  political communities\u201d that possess powers of self-government to regulate  their \u201cinternal and social relations,\u201d which includes enacting substantive  law over internal matters and enforcing that law in their own forums. The  federal government, however, has authority to regulate or modify the  powers of self-government that tribes otherwise possess, and has  exercised this authority to establish jurisdiction over certain crimes in  Indian country. For example, the Major Crimes Act, as amended,  provides the federal government with criminal jurisdiction over Indians in  Indian Country charged with serious, felony-level offenses enumerated in  the statute, such as murder, manslaughter, kidnapping, burglary, and  robbery. The General Crimes Act, the Major Crimes Act, and Public Law 280, which are broadly summarized in table 1, are the three federal laws  central to the exercise of criminal jurisdiction in Indian country.", "The exercise of criminal jurisdiction by state governments in Indian  country is generally limited to two instances: when both the alleged  offender and victim are non-Indian, or when a federal statute confers, or  authorizes, a state to assume criminal jurisdiction over Indians in Indian  country. Otherwise, only the federal and tribal governments have  jurisdiction in Indian country. Table 2 summarizes aspects of federal,  state, and tribal jurisdiction over crimes committed in Indian country."], "subsections": []}, {"section_title": "Federal Agencies Responsible for Investigation, Prosecution, and Confinement of Youth within the Federal Justice System", "paragraphs": ["Federal agencies that come into contact with youth alleged to have  committed an act of juvenile delinquency are to do so in accordance with  the Federal Juvenile Delinquency Code. When a youth enters the  federal justice system, several components within DOJ and DOI, among  others, have responsibility for investigating and prosecuting his or her  crimes. DOJ\u2019s Federal Bureau of Investigation (FBI) has investigative  responsibilities, including in Indian country, where it works with tribes to  investigate crime. The FBI refers criminal investigations to a United  States Attorney\u2019s Office for prosecution. In the course of the federal  criminal justice process, a U.S. attorney is involved in the process of  investigating, charging, and prosecuting an offender, among other  responsibilities. Under the direction of the Attorney General, the United  States Attorney\u2019s Office may prosecute crimes committed in Indian  country where federal jurisdiction exists, as discussed above.", "DOJ\u2019s U.S. Marshals Service (USMS) also has a role in the federal  criminal justice process. Its mission areas include fugitive apprehension  and federal prisoner security and transportation, among other  responsibilities. USMS has arrest jurisdiction for enforcing the federal  process anywhere in the United States, including Indian country.", "DOJ\u2019s BOP is responsible for the custody and care of federal inmates and  offenders, including youth. BOP works in coordination with the federal  courts to assist in locating a detention facility within the youth\u2019s  jurisdiction, where possible. Figure 1 describes the key DOJ entities and  their respective responsibilities related to the federal criminal justice  process.", "Within DOI, BIA is statutorily responsible for enforcing not only federal law  in Indian country but also tribal law, with the consent of the tribe.  However, in certain situations, a tribe may assume this function from DOI  pursuant to a self-determination contract or self-governance compact. BIA  supports tribes in their efforts to ensure public safety and administer  justice within Indian country through, for example, providing uniformed  police and criminal investigative services for a number of tribes.", "Other agencies and departments with roles in the federal criminal justice  process for youth include federal courts, the Administrative Office of the  U.S. Courts, and the U.S. Sentencing Commission. Federal courts have  the authority to decide cases and sentence offenders, among other  things. The Administrative Office of the U.S. Courts provides a broad  range of support services to the federal courts, which are responsible for  adjudicating the cases of youth in the federal justice system. The U.S.  Sentencing Commission is an independent judicial branch agency  responsible for, among other things, collection, preparation, and  dissemination of information on sentences imposed across federal courts."], "subsections": []}, {"section_title": "Data on Youth Involvement in Justice Systems", "paragraphs": ["There is no single, centralized data source that contains data for youth  involved in all justice systems and across all phases of the justice  process. Rather, there are several disparate data sources at each level  (federal, state and local, or tribal) and phase (arrest, prosecution, and  confinement). Further, while some agencies, such as USMS and BOP,  share a unique identifier for an individual within the federal data sources,  there is no unique identifier across all federal and state and local data  sources. For purposes of this review, and given privacy concerns related  to juvenile data, we were unable to track individuals across all phases of  the federal justice system or identify the number of unique youth who  came into contact with federal, state and local, or tribal justice systems.", "In addition to there being no single database that houses all relevant data  on youth in the tribal, state and local, and federal justice systems, each  database also varies in how it defines Native American, as well as how it  determines whether youth are Native American for purposes of the data  source. For example, some agencies define Native American broadly, as  an individual having origins in any of the indigenous peoples of North  America, including Alaska Natives. In contrast, DOJ\u2019s Executive Office for  United States Attorneys (EOUSA), in its prosecution data, defines the  term Indian based on statute and case law, which generally considers an  Indian to have both a significant degree of Indian blood and a connection  to a federally recognized tribe. In addition, BOP determines that a youth  is Native American for purposes of its data by reviewing documentation  including charging documents, while USMS relies on individuals self- reporting their race upon being taken into custody. See appendix II for  additional information and descriptions of these differences."], "subsections": []}, {"section_title": "Federal Grant Programs That May Address Juvenile Delinquency", "paragraphs": ["Federal departments and agencies, including DOJ and HHS, provide  funding through several types of mechanisms for Native American  populations and tribal lands, including mandatory grant programs,  compacts and contracts, discretionary grants, and cooperative  agreements. As discussed above, our analysis focused on discretionary  grants and cooperative agreements.", "Discretionary grants are competitive in nature, whereby the granting  agency has discretion to choose one applicant over another. DOJ\u2019s Office  of Justice Programs (OJP) awards discretionary grants to states, tribal  organizations, territories, localities, and organizations to address a variety  of issues, including to help prevent and reduce juvenile delinquency and  victimization and improve their youth justice systems. DOJ also provides  grant funding for training and technical assistance to enhance and  support tribal governments\u2019 efforts to reduce crime and improve the  function of criminal justice in Indian country. Cooperative agreements are  similar to discretionary grants in that federal agencies generally award  them to grantees based on merit and eligibility. However, in contrast to a  discretionary grant, federal agencies generally use cooperative  agreements when they anticipate that there will be substantial federal,  programmatic involvement with the recipient during the performance of  the financially-assisted activities, such as agency collaboration or  participation in program activities."], "subsections": []}, {"section_title": "Task Force and Commission Reports Related to Native American Youth and Juvenile Justice", "paragraphs": ["Two reports focused on Native American youth exposure to violence and  ways to address and mitigate the negative impact of this exposure when it  occurs, as well as ways to develop knowledge and spread awareness  about children\u2019s exposure to violence. In addition, both reports  discussed factors that indicate Native American youth are uniquely  positioned in regards to their contact with the justice systems, and  included recommendations specific to Native American youth interaction  with justice systems at the federal, state, and tribal levels. Appendix III  describes actions agencies reported taking related to selected  recommendations from these reports."], "subsections": []}]}, {"section_title": "Available Data Indicate Native American Youth Involvement in Justice Systems Declined from 2010 through 2016 and Differed in Some Ways from That of Non-Native American Youth", "paragraphs": ["From 2010 through 2016, the number of Native American youth involved  with state and local and federal justice systems declined, according to our  analysis of available data. This decline occurred across all phases of  the justice process: arrest, adjudication, and confinement in facilities. The  involvement of these Native American youth in the state and local and  federal justice systems was also concentrated in certain geographic  areas. Further, the vast majority of these Native American youth came  into contact with state and local justice systems, not the federal system.  Analysis of available data also indicates that the percent of Native  American youth involved in the federal justice system during the period  reviewed was greater than their representation in the nationwide youth  population. In contrast, the percent of Native American youth involved in  most state and local justice systems was similar to their representation in  youth populations in those states. Moreover, the involvement of Native  American and non-Native American youth in the federal justice system  showed several differences (in types of offenses, for example), while their  involvement in state and local justice systems showed several similarities.", "DOJ officials and representatives of Native American organizations we  interviewed attributed the greater percent of Native American youth  involved in the federal justice system and the differences shown by our  analysis to federal government jurisdiction over crimes in Indian country,  as well as the absence of general federal government jurisdiction over  non-Native American youth."], "subsections": [{"section_title": "Involvement of Native American Youth in the Justice Systems Declined from 2010 through 2016", "paragraphs": ["The number of Native American youth involved with state and local and  federal justice systems declined from 2010 through 2016 across all  phases of the justice process\u2014arrest, adjudication, and confinement in  facilities, according to our analysis of available data. The majority of  Native American youth involved with state and local justice systems were  located in 11 of the 50 states, and all Native American youth involved with  the federal justice system were located in 5 of the 12 federal circuits.  Further, most Native American youth were involved in state and local  justice systems rather than in the federal system. Comprehensive data  from tribal justice systems on the involvement of Native American youth  were not available. However, we identified and reviewed a few data  sources that provided certain insights about the arrest, adjudication, and  confinement of Native American youth by tribal justice systems. See  appendix IV for a summary of our analysis of data from these sources."], "subsections": [{"section_title": "Arrests", "paragraphs": ["State and local and federal. Analysis of available data indicates that  from calendar years 2010 through 2016, there were 105,487 arrests of  Native American youth by state and local law enforcement agencies  (LEAs), and over this period, arrests generally declined by 40 percent. As  shown in table 3, arrests declined from 18,295 in 2010 to 11,002 in 2016.  During the same period, there were 246 federal custodies of Native  American youth due to arrest by federal LEAs; the number of federal  custodies also generally declined during the period\u2014from 60 in 2010 to  20 in 2016.", "According to available data, the majority (about 75 percent) of Native  American youth arrested by state and local LEAs from calendar years  2010 through 2016 were located in 10 states: Alaska, Arizona, Minnesota,  Montana, New Mexico, North Dakota, Oklahoma, South Dakota,  Washington, and Wisconsin. All of these ten states had a higher than  average percentage of Native Americans among the states\u2019 overall youth  populations, according to 2016 U.S. Census estimates we reviewed. For  example, of all the states Alaska had the largest percentage of Native  Americans among its youth population, at 19 percent in 2016. In contrast,  the percent of Native American youth in the youth population in many (26)  states was less than 1 percent. In 2016, the largest number of arrests by  state and local LEAs occurred in Arizona and South Dakota, as shown in  figure 2.", "All Native American youth in federal custody with USMS due to a federal  LEA arrest from fiscal years 2010 through 2016 were located in 4 of the  12 federal circuits\u2014the 2nd, 8th, 9th, and 10th circuits (see figure 3),  according to our analysis of available data. These four circuits include 25  states.", "State and local. Available data show that from calendar year 2010  through calendar year 2014, state and local courts processed fewer  cases involving Native American youth. For example, during the period,  state and local courts received about 86,400 delinquency cases involving  Native American youth, and the number of cases declined by about 19  percent from 19,200 in 2010 to 15,600 in 2014, as shown in table 4. The  number of cases petitioned, or requested that a court adjudicate, and the  number of cases adjudicated delinquent also declined, by about 20  percent and 26 percent, respectively. Among delinquency cases received  during the period, state and local courts petitioned about half (49,000  cases, or 57 percent). Among all petitioned cases, about two-thirds  (32,900 cases, or 67 percent) were adjudicated delinquent. Among youth  found delinquent during the period, more than half\u201465 percent  (21,300)\u2014received probation, 24 percent (7,800) were placed in an  institution or other residential facility, and 12 percent (3,800) received  some other sanction, such as community service.", "Federal. Available data show that federal courts received 349 Native  American youth suspects from fiscal years 2010 through 2014 (see table  4, above), and the annual number fluctuated over the period but declined  slightly overall (59 in 2010 compared to 57 in 2014). Of the suspects  received, federal courts declined to adjudicate 138 and adjudicated 167  youth as delinquent or guilty. The number of delinquent or guilty  outcomes declined overall from 37 in 2010 to 20 in 2014.", "According to analysis of available data, all Native American youth referred  to a United States Attorney from fiscal years 2010 through 2014 were  located in 4 of the 12 federal circuits\u2014the 6th, 8th, 9th, and 10th circuits,  as shown in figure 4. These four circuits include 26 states. Annually, the  number of referrals to each circuit was similar throughout the period.", "State and local. The number of Native American youth confined in state  and local residential facilities declined by about 37 percent between 2011  and 2015, from at least 861 in 2011 to at least 544 in 2015, according to  our analysis of data from the biennial Census of Juveniles in Residential  Placement survey.", "The majority of Native American youth (approximately 65 percent) were  confined in 9 states when the biennial survey was taken in 2011, 2013,  and 2015. Generally, these states included Alaska, Arizona, Minnesota,  Montana, North Dakota, Oklahoma, Oregon, South Dakota, and  Washington (see figure 5 for 2015 census results). All of these states had  a higher than average percentage of Native Americans among the states\u2019  overall youth population in 2015.", "Federal. From fiscal years 2010 through 2016, a total of 138 Native  American youth who had been sentenced were admitted to juvenile  facilities overseen by BOP; this number declined over the period from 37  in 2010 to 6 in 2016, according to our analysis of available data. Court  proceedings for these individuals had been finalized and the individuals  were sentenced to a juvenile facility overseen by BOP."], "subsections": []}, {"section_title": "Agency and Organization Perspectives", "paragraphs": ["DOJ officials and representatives from five Native American organizations  we interviewed provided various perspectives on the decline and  geographic distribution of Native American youth in justice systems that  our analysis showed. Specifically, DOJ officials noted that the number of  youth involved in state and local, federal, and tribal systems has been  declining for several years across all races, not just Native American  youth.", "However, when asked about this decline, representatives from three of  the five Native American organizations we interviewed stated that data on  the number of Native American youth in justice systems, especially at the  state level, is underreported and often inconsistent. Representatives from  two of those organizations noted that when a youth comes into contact  with state juvenile justice systems, states are not required to ask about  Native American status, which results in inconsistent tracking and  underreporting of Native American youth involved with state systems.  Representatives from one of these organizations, which provides  assistance in national policy areas, noted that states are not required to  contact a youth\u2019s identified tribe to confirm the youth\u2019s tribal affiliation.  These representatives also noted that some states may inquire about  tribal affiliation when youth come into contact with the state\u2019s justice  system, but the states do not have a reliable process to identify Native  American youth. In addition, these same representatives noted that  Native American youth are often unlikely to share their ethnicity with state  officials, or anyone outside of their community. Representatives from  another organization noted that state court judges are not required to ask  about Native American status, which could also potentially result in  undercounting of Native American youth in state systems.  Representatives from another organization which commented on the  decline stated that because state and federal data only capture more  serious offenses, lesser crimes handled at the tribal level often go  unreported.", "Representatives from two of the organizations we interviewed did not  question the decline in the number of Native American youth involved in  federal and state and local systems, but noted that there has been a  movement away from criminalizing youth in general. Rather, these  representatives explained that there is more of a focus on restorative  justice, diversion, and alternatives to incarceration, as well as a  movement toward more trauma-informed care. Representatives from one  of these two organizations noted that a number of states have worked out  civil diversion agreements with local tribes, which provide opportunities  for the tribe to practice restorative justice with delinquent youth instead of  confining them.", "Regarding the distribution of Native American youth by state,  representatives from four of the five organizations we interviewed noted  that the number of youth involved with state justice systems is higher in  those states with a larger Native American population, and thus were not  surprised by the states our analysis showed to have the highest numbers  of Native American youth involved in their state and local justice systems.  These representatives also provided additional perspectives on why  some states might have higher numbers of youth involved with their  justice systems. For example, representatives from one organization  noted that in certain states, not all tribes have tribal law enforcement,  which could potentially lead to higher state involvement in Native  American juvenile cases that might otherwise be handled by tribes.  Representatives from another organization noted that some states have a  reputation for more aggressively adjudicating delinquent Native American  youth."], "subsections": []}]}, {"section_title": "Data Show that Representation of Native American Youth in the Federal Justice System Was Greater Than Their Representation in the Youth Population, but Their Representation in Most State and Local Justice Systems Was Comparable", "paragraphs": ["The percentage of youth who were Native American among those  involved with the federal justice system from 2010 through 2016 was  greater than the percent of Native American youth in the nationwide youth  population, according to analysis of available data. In contrast, state-by- state analysis showed that the percent of youth who were Native  American among those involved with state and local justice systems  during the period was similar to many states\u2019 Native American youth  population.", "Federal justice system. The percent of youth arrested, referred for  adjudication, and confined at the federal level from 2010 through 2016  who were Native American (13 to 19 percent) was greater than the  percent of Native Americans in the nationwide youth population during the  same period (1.6 percent). For example, the percent of youth in USMS  custody and arrested by federal LEAs during the period who were Native  American was 18 percent (246 Native American youth out of 1,358 total  youth arrested from fiscal years 2010 through 2016), as shown in table 5.", "According to DOJ officials, the federal juvenile population of Native  Americans has historically been higher than their representation in the  nationwide population due to federal government jurisdiction over certain  crimes in Indian country, which requires the federal government to  prosecute offenses that would commonly be prosecuted by states if  committed outside of Indian country. According to DOJ officials, a small  handful of federal criminal statutes apply to all juveniles, such as  immigration and drug statutes, but the federal government has been  granted greater jurisdiction over Native American youth than non-Native  American youth by federal laws that apply to crimes committed in Indian  Country, such as the Major Crimes Act. For example, one DOJ official  noted that the Major Crimes Act gives the federal government exclusive  jurisdiction over crimes such as burglary and sex offenses committed in  Indian country. This differs from the treatment of non-Native American  youth, who are not prosecuted in the federal system for the same types of  offenses, because the federal government does not have jurisdiction over  those youth for such offenses. Non-Native American youth are instead  subject to the general juvenile delinquency jurisdiction of state and local  courts. Further, DOJ officials stated that a significant portion of Indian  country is in states where Public Law 280 does not apply, and thus the  federal government generally has criminal jurisdiction for major crimes in  Indian Country. Additionally, DOJ officials stated that tribal justice  systems are often underfunded and do not have the capacity to handle  Native American youths\u2019 cases. Therefore, when both federal and tribal  justice systems have jurisdiction, they said that the federal system may  be the only system in which the youth\u2019s case may be adjudicated. For  these reasons, the number of Native American youth offenders in the  federal justice system is disproportionate to non-Native American  juveniles in accordance with population size, according to DOJ officials.", "State and local justice systems. State-by-state analysis of arrest data  showed some variation in the percentage of Native Americans among  youth arrested by state and local LEAs from calendar years 2010 through  2016. For example, as figure 6 illustrates, in most states, the percentage  of youth arrested by state and local LEAs in 2016 who were Native  American was similar to the percent of Native American youth in the  states\u2019 population. However, in four states\u2014Alaska, Montana, North  Dakota, and South Dakota\u2014the percentage of Native Americans among  the youth arrested by state and local LEAs was at least 5 percentage  points higher. In two states\u2014New Mexico and Oklahoma\u2014it was at  least 4 percentage points lower.", "State-by-state analysis of state and local confinement data for 2015  showed a similar pattern. As figure 7 illustrates, in most states, the  percent of youth confined at state and local facilities in 2015 who were  Native American was similar to the percent of Native American youth in  the states\u2019 population. However, six states\u2014Alaska, Minnesota, Montana,  North Dakota, South Dakota, and Wyoming\u2014the percentage of Native  Americans among the youth confined in state and local facilities was at  least 5 percentage points higher. In one state\u2014New Mexico\u2014it was 11  percentage points lower.", "Agency and organization perspectives. According to DOJ officials, as  noted above, federal jurisdiction over crimes in Indian country results in a  higher percentage of Native American youth (compared to non-Native  American youth) involved with the federal justice system. In addition, a  DOJ official noted that that certain states may have a higher percentage  of Native Americans among youth confined in that state\u2019s facilities if those  Native American youth reside more in urban or other areas that are not  Indian country, and are thus more likely subject to state and local  jurisdiction. Conversely, the official said that for those states with lower  Native American youth confined in state facilities compared to the Native  American youth population in the state overall, the youth may reside more  in Indian country, resulting in their contact with the federal judicial system  more than the state or local justice systems.", "Representatives from four of the five Native American organizations we  interviewed noted that federal jurisdiction is a key contributor to the higher  percentage of Native American youth involved at the federal justice level."], "subsections": []}, {"section_title": "While Involvement Declined, Available Data Indicate Several Differences between Native American and Non- Native American Youth in the Federal Justice System", "paragraphs": ["Although the involvement of youth in the federal justice systems declined  for both Native Americans and non-Native Americans from 2010 through  2016, analysis of available data indicates that there were several  differences between the two groups in characteristics such as types of  offenses charged. According to DOJ officials, some of these differences  were due to federal jurisdiction over Indians for major crimes (such as  person offenses) in Indian country as well as the absence of general  federal government jurisdiction over non-Native American youth."], "subsections": [{"section_title": "Involvement in the Federal Justice System Declined for Both Groups", "paragraphs": ["Available data indicate that the involvement of youth in the different  stages of the federal justice system declined for both Native Americans  and non-Native Americans from fiscal years 2010 through 2016. For  example, federal custodies due to arrests by federal LEAs declined for  both groups, as shown in table 6; the number of suspects referred to  federal courts declined for both groups (table 7); and BOP confinements  declined for both groups (table 8).", "Native American and non-Native American youth were involved with the  federal justice system for different offenses from fiscal years 2010  through 2016. We analyzed the types of offenses for all youth and  grouped them into five broad categories\u2014drug and alcohol, person,  property, public order, and other. Analysis of available data indicates  that the majority of Native American youth were involved with the federal  justice system for offenses against a person. In contrast, the majority of  involvement of non-Native American youth was due to public order or  drug and alcohol offenses.", "Arrests. As figure 8 illustrates, out of the broad offense categories, 49  percent of Native American youth were arrested by a federal LEA and in  USMS custody due to an offense against a person. In contrast, 5 percent  of non-Native American youth were arrested by a federal LEA for person  offenses during the period. Instead, most non-Native American youth  were arrested by a federal LEA for public order or drug and alcohol  offenses (70 percent total for both). The top two specific offenses among  Native American youth were assault and sex offenses; the top two  specific offenses among non-Native Americans were drug-related and  immigration violations, according to analysis of available data.", "Federal data include youth in USMS custody after a federal arrest but  may not capture all arrests by federal law enforcement agencies. USMS  uses the race category \u201cAmerican Indian or Alaskan Native\u201d and includes  persons having origins in any of the indigenous peoples of North America,  including Alaskan Natives. According to USMS officials, race is self- reported by the individual at the time of the custody intake. Non-Native  American categories in USMS data are Asian, Black, and White.", "Referrals for adjudication. As figure 9 illustrates, most Native American  youth referred to federal courts were referred for the broad category of  offenses against a person (67 percent). However, most non-Native  American youth were referred to federal courts for the broad categories of  public order offenses or drug and alcohol offenses (44 and 31 percent,  respectively). Among Native American youth, the top two specific  offenses were sex offenses and assault. Among non-Native Americans,  the top two specific offenses were drug-related and immigration  violations.", "EOUSA defines the term Indian based on statute and case law, which  generally considers an Indian to have both a significant degree of Indian  blood and a connection to a federally recognized tribe. According to  EOUSA officials, race is identified by the U.S. Attorney when reviewing  documentation associated with the individual, such as tribal enrollment  certifications.", "Confinement. As figure 10 illustrates, out of the five broad offense  categories, 67 percent of Native American youth were sentenced and  confined by the federal justice system from fiscal years 2010 through  2016 for an offense against a person; most non-Native American youth  were confined by the federal justice system for drug and alcohol offenses  (about 39 percent) or public order offenses (also 30 percent). The top two  specific offenses among Native American youth were sex offenses and  assault. The top two specific offenses among non-Native American youth  were for drug-related and immigration violations.", "Agency and organization perspectives on variations in offenses.  According to DOJ officials, the reason most Native American youth were  arrested, adjudicated, and confined for person offenses was due to  federal jurisdiction over Indians for major crimes (such as person offenses  like burglary and sex offenses) in Indian country. Specifically, officials  noted that Native American youth are arrested and confined in the federal  system for more serious offenses because the Major Crimes Act confers  jurisdiction on the federal government for person offenses. In contrast,  agency officials also noted that the federal government does not have  jurisdiction over the same types of offenses committed by non-Indian  youth and therefore those youth cannot be arrested by federal agencies  for person offenses. Rather, according to one DOJ official, the federal  government only has general jurisdiction applying to both Native  American and non-Native American youth in limited instances, such as for  certain immigration and drug offenses. The jurisdictional structure present  in Indian country requires the federal government to prosecute offenses  that would otherwise be handled in state court outside of Indian country,  according to DOJ officials.", "Representatives from all of the five Native American organizations we  interviewed noted, similarly to DOJ officials, that federal jurisdiction over  crimes in Indian country is typically for more serious offenses (specifically  under the Major Crimes Act), such as person offenses. In contrast, as  noted by one organization, youth engaged in property and substance  abuse offenses are more typically brought into state custody. Two of the  organizations\u2019 representatives we met with noted in addition that alcohol  abuse plays a role in person offenses, often co-occurring with these  offenses."], "subsections": []}, {"section_title": "Outcomes Varied among Youth Referred for Federal Adjudication", "paragraphs": ["The distribution of outcomes among youth who were referred to federal  prosecutors for adjudication in federal courts between fiscal years 2010  and 2016 was different for Native American and non-Native American  youth. For example, as figure 11 shows, a larger percentage of referrals  for adjudication involving Native American youth were declined by federal  prosecutors compared to non-Native American cases\u201436 percent among  Native American youth compared to 12 percent among non-Native  American. Further, a smaller percentage of Native American than non- Native American referrals resulted in delinquent or guilty outcomes\u201442  percent among Native American youth compared to 63 percent among  non-Native American.", "Length of sentence. Native American youth who were sentenced and  confined by the federal justice system\u2014in BOP\u2019s custody\u2014had longer  sentences compared to non-Native American youth from fiscal years  2010 through 2016, according to analysis of available data.  About half  (52 percent) of the Native American youth confined during the period  were sentenced for 13 to 36 months. Most non-Native American youth  (62 percent) had shorter sentences of up to 12 months. According to  DOJ officials, Native American youth had longer sentences due to federal  government jurisdiction over major crimes in Indian country. As a result of  its jurisdiction, officials said that the federal government arrests and  incarcerates Native American youth for more serious crimes, such as sex  offenses, which carry longer sentences. In contrast, non-Native American  youth served sentences for crimes which carried shorter sentences, such  as immigration and drug offenses, as noted above. The difference in  sentence length may also be attributed to a number of additional  variables that can affect the length of sentence, such as prior delinquent  or criminal history and the nature and circumstances of the offense.", "Distance from residence. Among youth admitted and confined in the  federal justice system from fiscal years 2010 through 2016, data show  that Native American youth were in facilities closer to their residences or  homes compared to non-Native American youth (see table 9). For  example, on average, Native American youth who were under the  supervision of the United States Probation Office were 296 miles closer to  their residence or home compared to non-Native Americans. In addition,  on average, Native American youth who were in BOP\u2019s custody were 175  miles closer to their residence compared to non-Native Americans.  Further, among both groups and on average, youth under the supervision  of the United States Probation Office were closer to their residence or  home compared to youth who were in BOP\u2019s custody.", "Age category and gender of youth involved in the federal justice system  from fiscal years 2010 through 2016 were similar among Native American  and non-Native American youth. Specifically:", "Most youth arrested by federal LEAs and in USMS custody were male  (89 and 91 percent, respectively) and 15 to 17 years old (86 and 92  percent, respectively).", "Most youth who came into contact with federal courts were 15 to 17  years old (80 and 88 percent, respectively).", "Most youth confined at federal facilities were male (89 and 96 percent,  respectively) and 15 to 17 years old (93 and 99 percent, respectively)."], "subsections": []}]}, {"section_title": "Available Data Indicate That There Were Several Similarities between Native American and Non- Native American Youth in State and Local Justice Systems", "paragraphs": ["Analysis of available data indicates that there were several similarities  between Native American and non-Native American youth involvement  with state and local justice systems over the period analyzed."], "subsections": [{"section_title": "Involvement in State and Local Justice Systems Declined for Both Groups, but Extent of Decline Varied", "paragraphs": ["The involvement of both Native American and non-Native American youth  in state and local justice systems declined for arrests, referrals for  adjudication, and confinements in recent years (see tables 10 through  12). However, the extent of the decline varied between the two groups.  For example, as the tables show, the declines in arrests and referrals for  adjudication were greater for Native American youth, while the decline in  confinements was greater for non-Native American youth.", "The distribution of offenses for youth involved in state and local justice  systems in recent years was similar among Native American and non- Native American youth. As noted above, we analyzed the types of  offenses for all youth and grouped them into five broad categories\u2014drug  and alcohol, person, property, public order, and other.", "Arrests. Available data show that among youth arrested by state and  local LEAs between calendar years 2010 through 2016, a similar  percentage of Native American and non-Native American youth were  arrested for the five broad offense category types. For example, as figure  12 illustrates, the largest percent of offenses among both groups during  the period were in the broad category of offenses against property\u2014with  25 percent among Native American youth and 28 percent among non- Native American youth. The next most common broad category of  offense for Native Americans arrested by state and local LEAs was drug  and alcohol offenses (23 percent); a smaller percent of non-Native  Americans were arrested for drug and alcohol offenses (16 percent). The  top four specific offenses among Native American youth arrested by state  and local LEAs during the period were larceny/theft, alcohol, assault, and  status offenses. Similarly, the top four specific offenses among non- Native American youth during the period were larceny/theft, assault,  status offenses, and drugs.", "Adjudication. Generally, the offenses associated with delinquency cases  received by state and local courts between calendar years 2010 and 2014  were similar for both Native American and non-Native American youth,  according to analysis of available data. The largest percentage of  offenses among delinquency cases for both groups was for the broad  offense category of property offenses (38 and 36 percent).", "Confinement. Generally, Native American and non-Native American  youth adjudicated and confined at state and local facilities were admitted  for similar offenses, according to our analysis of DOJ biennial census  data from 2011, 2013, and 2015. As figure 13 illustrates, in 2015, a  similar percentage of youth, for both groups, were confined due to three  broad categories of offenses\u2014public order, person, and property. At least  29 percent and at most 32 percent of youth were confined for each  category of offense. A much smaller percentage of youth, for both groups,  were confined for the broad category of drug and alcohol offenses.  Some of the most common specific offenses among both Native  American and non-Native American youth in 2015 were assault, probation  or parole violation, sex offenses, and burglary.", "The majority of Native American and non-Native American youth referred  to state and local courts and confined at state and local facilities were  male and 15 to 17 years old during the periods for which we obtained  data. For example, table 13 illustrates the demographics of youth  adjudicated and confined in state and local facilities.", "Outcomes of delinquency cases in state and local courts were generally  similar for Native American youth and non-Native American youth  between 2010 and 2014, according to analysis of available data. For  example, more than half of all cases received by the courts for both  groups were petitioned\u2014formally processed\u2014as table 14 illustrates.", "Facility types. Native American and non-Native American youth confined  at state and local facilities were placed in similar types of facilities. As  table 15 illustrates, the majority of youth for both groups were in private  facilities at the time of DOJ\u2019s 2015 biennial census.", "Time of confinement. Native American and non-Native American youth  at state and local facilities had similar characteristics for the length of time  they had been confined at the time of the 2015 biennial census. As table  16 illustrates, the majority of youth, for both groups, had been confined for  more than 120 days."], "subsections": []}]}]}, {"section_title": "DOJ and HHS Offered at Least 122 Grant Programs; Tribal Governments or Native American Organizations Were Eligible for Almost All but in a Sample of Applications We Reviewed, Applied Primarily for Programs Specifying Native Americans", "paragraphs": ["We identified 122 discretionary grant programs across several issue  areas such as violence or trauma, justice system reform, and alcohol and  substance abuse that DOJ and HHS offered from fiscal years 2015  through 2017 that grantees could use to help prevent or address  delinquency among Native American youth. DOJ and HHS awarded  approximately $1.2 billion in first year awards during this period, about  $207.7 million of which they collectively awarded to tribal governments  and Native American organizations. Tribal governments and Native  American organizations were eligible for almost all of these grant  programs, but we found in a sample we reviewed that they primarily  applied for those that specified tribes or Native Americans as a primary  beneficiary. Additionally, officials from selected tribal governments, Native  American organizations, DOJ, and HHS stated that certain factors affect  tribal governments and Native American organizations\u2019 ability to apply  successfully for grant programs that awardees could use to help prevent  or address delinquency among Native American youth."], "subsections": [{"section_title": "DOJ and HHS Offered at Least 122 Grant Programs That Could Be Used to Help Prevent or Address Delinquency among Native American Youth", "paragraphs": ["We identified 122 discretionary grants and cooperative agreements (grant  programs) for which DOJ and HHS offered funding from fiscal years 2015  through 2017 that grantees could use to help prevent or address  delinquency among Native American youth. See appendix V for a list of  these programs. DOJ and HHS awarded approximately $1.2 billion in  first-year awards to grantees through the 122 programs over the period,  as shown in figure 14.", "Of the $1.2 billion, HHS and DOJ collectively awarded $207.7 million to  tribal governments and Native American organizations. HHS awarded  $106.5 million and DOJ awarded $101.2 million. As previously discussed,  tribal governments and Native American organizations also received  other federal funding that could help prevent or address delinquency  among Native American youth.", "The DOJ and HHS grant programs we identified included 27 programs  that specified tribes or Native Americans as a primary beneficiary and 95  programs that did not specify this but that could include tribes or Native  Americans as beneficiaries. For example, the Cooperative Agreements  for Tribal Behavioral Health, which HHS\u2019s Substance Abuse and Mental  Health Services Administration (SAMHSA) offered in fiscal years 2016  and 2017, is a grant program that specified tribes or Native Americans as  a primary beneficiary. Its purpose is to prevent and reduce suicidal  behavior and substance use, reduce the impact of trauma, and promote  mental health among Native American youth. On the other hand, the  Sober Truth on Preventing Underage Drinking Act grant program, which  SAMHSA offered in fiscal year 2016 to prevent and reduce alcohol use  among youth and young adults, is an example of a program that did not  specify tribes or Native Americans as a primary beneficiary but could  nonetheless benefit them. As previously discussed, available data  indicate that alcohol offenses constitute the second-highest specific  offense for which Native American youth were arrested by state and local  LEAs from calendar years 2010 through 2016.", "Within DOJ\u2019s OJP, an example of a grant program that specified tribes or  Native Americans as a primary beneficiary is the Defending Childhood  American Indian/Alaska Native Policy Initiative: Supporting Trauma- Informed Juvenile Justice Systems for Tribes program. This grant  program was offered by OJP\u2019s Office of Juvenile Justice and Delinquency  Prevention (OJJDP) for funding in fiscal year 2016. The goal of the grant  program is to increase the capacity of federally recognized tribes\u2019 juvenile  justice and related systems to improve the life outcomes of youth who are  at risk or who are involved in the justice system and to reduce youth  exposure to violence. Another grant program, the Youth with Sexual  Behavior Problems Program, which OJJDP offered from fiscal years 2015  through 2017, is an example of a grant program that did not specify tribes  or Native Americans as a primary beneficiary but that could nonetheless  benefit them. As previously discussed, available data indicate that the  second-highest specific offense for which Native American youth were  arrested by federal LEAs from 2010 through 2016 was sex offenses. This  grant program provided services for youth sexual offenders, their victims,  and the parents and caregivers of the offending youth and victims.", "The 27 grant programs that specified tribes or Native Americans as a  primary beneficiary awarded a total of $250.2 million over the fiscal year  2015 through 2017 period, while the 95 programs that did not were  awarded $944.4 million (see fig.15).", "Of the 122 grant programs we identified, tribal governments and Native  American organizations received funding primarily from the 27 grant  programs that specified tribes or Native Americans as a primary  beneficiary. Of the $250.2 million in awards from these 27 grant  programs, tribal governments and Native American organizations  received $193.2 million, or about 77 percent of the total. Alternatively, of  the $944.4 million in awards from the 95 grant programs that did not  specify tribes or Native Americans as a primary beneficiary, tribal  governments and Native American organizations received $14.5 million,  or 1.5 percent of the total.", "The 122 grant programs focused on one or more issue areas in their  funding opportunity announcements relevant to helping prevent or  address delinquency among Native American youth. The most common  issue areas were violence or trauma (34 programs), justice system reform  (25 programs), and alcohol and substance abuse (22 programs). Table  17 lists the issue areas and the number of DOJ and HHS grant programs  that focus on each issue area.", "Violence or trauma. Thirty-four of the 122 grant programs supported  activities such as researching, preventing, addressing, or providing  services related to youth violence or trauma. For example, the purpose of  the Communities Addressing Childhood Trauma grant program,  administered by HHS\u2019s Office of Minority Health, is to test the  effectiveness of activities that seek to promote healthy behaviors among  minority or disadvantaged youth who have experienced childhood trauma  and are thus at risk for poor health and life outcomes. Another example is  DOJ\u2019s Coordinated Tribal Assistance Solicitation\u2019s (CTAS) Tribal Youth  Program. One of the priority areas of this grant program is preventing,  intervening, and treating children exposed to violence through the  development and implementation of trauma-informed practices in  pertinent programs and services. DOJ\u2019s Comprehensive Anti-gang  Strategies and Programs grant supports evidence-based strategies in  communities trying to reduce and control gang-related crime and violence  through coordinating prevention, intervention, enforcement, and reentry  programs. As mentioned earlier in the report, available data indicate the  top specific offense for which Native American youth were arrested by  federal LEAs from 2010 through 2016 was assault.", "Justice system reform. Twenty-five of the 122 grant programs  supported activities such as researching and analyzing the effectiveness  of efforts to reform the youth justice system and enhancing the capacity of  justice system institutions with which youth could come into contact. For  example, one goal of the Tribal Civil and Criminal Legal Assistance  Grants, Training, and Technical Assistance grant program, administered  by DOJ\u2019s Bureau of Justice Assistance, is to enhance tribal court systems  and improve access to them, as well as to provide training and technical  assistance related to tribal justice systems. Another example is DOJ\u2019s  National Girls Initiative grant program. The goal of this program is to  support the engagement of stakeholders such as youth justice specialists,  law enforcement officers, advocates, and youth defenders to improve the  justice system and its responses to girls and young women.", "Alcohol and substance abuse. Twenty-two of the 122 grant programs  supported activities such as preventing or reducing youth consumption of  alcohol and drugs. For example, the stated purpose of DOJ\u2019s CTAS  Juvenile Healing to Wellness Courts grant program is to support tribes  seeking to establish new courts within their existing judicial institutions to  respond to alcohol and substance use issues among youth and young  adults. (See text box below for an example of the activities a grantee  planned to implement with this grant program.) As previously discussed,  one of the top offenses we observed of Native American youth arrested  by state and local LEAs is drug and alcohol offenses.", "Department of Justice (DOJ) Coordinated Tribal Assistance Solicitation (CTAS)  Juvenile Healing to Wellness Court Grantee: Confederated Tribes of Coos, Lower  Umpqua and Siuslaw Indians   In fiscal year 2015, the Confederated Tribes of Coos, Lower Umpqua and Siuslaw  Indians, a federally recognized tribe located within the state of Oregon, received  funding from the DOJ CTAS Juvenile Healing to Wellness Court grant program. Tribal  officials told GAO that they are in the process of growing their healing to wellness court  and aim to use this grant program to reduce the criminal penalties for substance abuse  in their community. Moreover, they said that the \u201cpeace-giving court\u201d would look at  solutions such as treatment and restorative justice rather than focus on criminal fines  and incarceration. As of October 2017, tribal officials said they had three court  employees and were planning to use some of the program funding to hire a liaison  between other court systems to refer tribal members to their tribal court.", "Mental and emotional health. Sixteen of the 122 grant programs  supported activities such as improving the mental health and wellness of  youth. For example, HHS\u2019s Planning and Developing Infrastructure to  Improve the Mental Health and Wellness of Children, Youth and Families  in American Indian/Alaska Natives Communities grant program focuses  on increasing the capacity and effectiveness of mental health systems  serving tribal and urban Indian communities by designing a coordinated  network of community-based services and supports that address the  needs of Native American youth and their families. (See text box below  for an example of the activities a grantee planned to implement with this  grant program.)", "Department of Health and Human Services (HHS) Planning and Developing  Infrastructure to Improve the Mental Health and Wellness of Children, Youth and  Families in American Indian/Alaska Natives Communities Grantee: Native Health  of Phoenix  In fiscal year 2017, Native Health of Phoenix\u2014an urban Indian community health center  with a mission to increase the health and well-being of Native American and other  residents in the Phoenix, Arizona metropolitan area\u2014received funding from the HHS  Planning and Developing Infrastructure to Improve the Mental Health and Wellness of  Children, Youth and Families in American Indian/Alaska Natives Communities grant  program. Native Health of Phoenix explained that the grant program would allow the  organization to work on trauma-informed care, provide counseling services through role  models (with a particular interest in using Native American veterans as mentors), and  possibly expand the age group served by an existing program, Wellness Warriors,  which currently focuses on promoting healthy living for 7- to 12-year-old youth and their  families.", "Reentry and recidivism. Twelve of the 122 grant programs supported  activities such as facilitating youths\u2019 successful reintegration into their  communities and reducing the likelihood of subsequent contact with the  criminal justice system. For example, the objective of the Second Chance  Act Technology-Based Career Training Program for Incarcerated Adults  and Juveniles, administered by DOJ\u2019s Bureau of Justice Assistance, is to  provide career training programs for incarcerated adults and youth in the  6 to 36 months before their release and to connect them with follow-up  services after their release. Another example is DOJ\u2019s Second Chance  Act Strengthening Relationships Between Young Fathers, Young  Mothers, and Their Children grant program offered funding in fiscal year  2016. The goal of this grant program is to reduce recidivism and support  responsible parenting practices of young fathers and mothers who were  transitioning from detention, out-of-home placement, or incarceration  back to their families and communities.", "Mentoring. Eleven of the 122 grant programs supported activities such  as providing mentoring services to at-risk or high-risk youth and  researching or evaluating the impact of various mentoring programs and  practices on youth outcomes. For example, DOJ\u2019s Mentoring for Youth:  Underserved Populations grant program supports the implementation and  delivery of various mentoring services for youth with disabilities, youth in  foster care, and lesbian, gay, bisexual, transgender, and questioning  youth. Another example is HHS\u2019s Native Youth Initiative for Leadership,  Empowerment, and Development grant program. One area of interest in  the program includes peer role model development where young Native  American adults (18 to 24 years old) serve as role models for mid- adolescents (15 to 17 years old), who in turn serve as role models for  even younger members (younger than 15 years old) in their communities.", "Suicide prevention. Seven of the 122 grant programs supported  activities such as preventing or reducing the risk of suicidal thoughts or  behavior and self-harm among youth. For example, one purpose of the  Substance Abuse and Suicide Prevention Program, formerly known as  the Methamphetamine and Suicide Prevention Initiative grant program,  administered by HHS\u2019s Indian Health Service, is to support early  intervention strategies and positive youth development to reduce the risk  for suicidal behavior and substance abuse among Native American youth.  (See text box below for an example of the activities a grantee planned to  implement with this grant program.)", "Department of Health and Human Services (HHS) Substance Abuse and Suicide  Prevention Program Grantee: Fairbanks Native Association  In fiscal year 2016, the Fairbanks Native Association, whose officials describe it as a  Native American non-profit organization that provides social services, education, and  behavioral health services to residents of the Fairbanks and North Pole communities as  well as other residents of Alaska, received funding from HHS\u2019s Indian Health Service\u2019s  Substance Abuse and Suicide Prevention Program (formerly known as the  Methamphetamine and Suicide Prevention Initiative grant program). According to  Fairbanks Native Association officials, one of the evidence-based practices they  implemented for the Substance Abuse and Suicide Prevention Program was Coping  and Support Training (CAST). CAST is a 12-lesson skills training program used by  schools, community centers, and other organizations for middle and high school-aged  youth whose program features include building self-esteem and creating a crisis  response plan for responding to a range of suicide-risk behavior, among other activities.", "Justice system data and analysis. Seven of the 122 grant programs  supported activities such as collecting, improving the collection of, or  analyzing data related to the youth or tribal justice systems. For example,  DOJ\u2019s Annual Survey of Jails in Indian country, 2016-2019 grant program  funded the collection of information from all known correctional facilities  operated by tribal governments or the Bureau of Indian Affairs. Some of  the information the program sought to collect included the number of  adults and youth held, the gender of the inmates, and average daily  population, among other data.", "Runaway and homeless youth. Six of the 122 grant programs  supported activities such as providing services to youth who have run  away from home or who are experiencing homelessness. For example,  the primary goal of HHS\u2019s Transitional Living Program and Maternity  Group Homes grant program is to help runaway and homeless youth  establish sustainable living and well-being for them and, if applicable,  their dependent children through the provision of shelter and other  services.", "Cultural identity. Four of the 122 grant programs supported activities  such as promoting and preserving Native American cultural traditions to  and for tribal youth. For example, the purpose of HHS\u2019s Native American Language Preservation and Maintenance grant program is to  ensure the survival and vitality of Native American languages.", "Other. Six of the 122 grant programs supported activities in other issue  areas above such as school safety, tribal justice infrastructure, and social  and economic development."], "subsections": []}, {"section_title": "Tribal Governments and Native American Organizations Were Eligible for Almost All Grant Programs We Identified, But in a Sample We Reviewed, Applied Primarily for Those Specifying Native Americans", "paragraphs": [], "subsections": [{"section_title": "Tribal Governments or Native American Organizations Were Eligible for Almost All Grant Programs We Identified", "paragraphs": ["Tribal governments or Native American organizations were eligible for  almost all of the 122 DOJ and HHS grant programs we identified from  fiscal years 2015 through 2017 that grantees could use to prevent or  address delinquency among Native American youth: they were eligible for  70 of 73 DOJ programs and 48 of 49 HHS programs.", "For the 3 DOJ grant programs for which these entities were not eligible to  apply, DOJ officials explained that tribal governments or Native American  organizations were not eligible for the Smart on Juvenile Justice:  Reducing Out-of-Home Placement grant program because the funding  stream that supports the program\u2014unallocated funds from Title II of the  Juvenile Justice and Delinquency Prevention Act\u2014can only be awarded  to states that are in compliance with the four core requirements of the  act. For the other 2 grant programs, DOJ OJP officials explained that  because the focus of these programs is statewide or countywide,  eligibility under this program was limited to states and local units of  government that have developed a statewide or countywide plan to  reduce recidivism and improve outcomes for youth in contact with the  juvenile justice system. These officials added that tribal governments  would not have the capacity to respond to the requirements of these  programs as designed since tribal juvenile justice systems operate  differently than states and counties.", "The one HHS program that neither tribal governments nor Native  American organizations were eligible to apply for was the Preventing  Teen Dating and Youth Violence by Addressing Shared Risk and  Protective Factors program, administered by the Centers for Disease  Control and Prevention (CDC). CDC officials explained that this grant  program was limited to funding to local, city, and county public health  departments with a demonstrated high burden of violence and the highest  capacity to prevent teen dating violence and youth violence based on  research findings on teen dating violence and youth violence prevention,  as well as lessons learned from their previous investments in these areas.  These officials also said that CDC encourages local, city, and county  public health departments to work with tribal populations in the area."], "subsections": []}, {"section_title": "Tribal Governments and Native American Organizations Generally Applied for Grant Programs that Specified Tribes or Native Americans as a Primary Beneficiary in Sample We Reviewed", "paragraphs": ["Although tribal governments and Native American organizations were  eligible for almost all of the DOJ and HHS grant programs we identified,  we found in a non-generalizable sample of applications we reviewed that  these organizations applied primarily for grant programs that specified  tribes or Native Americans as a primary beneficiary. Specifically, for the  applications we reviewed for 18 DOJ grant programs, tribal governments  and Native American organizations accounted for over 99 percent of the  applications for the 5 grant programs within the sample that specified  tribes or Native Americans as a primary beneficiary and approximately 1 percent of the applications in the 13 DOJ grant programs that did not  specify them as a primary beneficiary. See figure 16.", "In our review of applications for 19 HHS grant programs, tribal  governments and Native American organizations accounted for 90  percent of the applications for the 6 grant programs in the sample that  specified tribes or Native Americans as a primary beneficiary. However,  they accounted for only 2 percent of the applications for the 13 HHS grant  programs in our sample that did not specify tribes or Native Americans as  a primary beneficiary. See figure 17.", "DOJ and HHS officials identified various reasons why tribal governments  and Native American organizations might not apply for grant programs  that do not specify tribes or Native Americans as a primary beneficiary:", "Tribal governments and Native American organizations might not be  aware that they are eligible to apply for certain grant programs.", "Tribal governments and Native American organizations might believe  that that their applications to a grant program that do not specify tribes  or Native Americans as a primary beneficiary will not be competitive  with other applications. For example, DOJ OJP officials told us that  tribes may have concerns about devoting resources to preparing  applications for such grant programs because they may not end up  being successful.", "Tribal governments and Native American organizations might prefer to  apply for those grant programs that specify tribes or Native Americans  as a primary beneficiary. For example, DOJ OJP officials stated that  tribes might be familiar and comfortable with applying for the CTAS, a  single application for the majority of DOJ\u2019s tribal grant programs. In  addition, HHS CDC officials stated that more tribes apply and  successfully compete for grant programs that specify tribes or Native  Americans as a primary beneficiary because they are designed  specifically for tribal populations, thus allowing for \u201cculturally- appropriate activities,\u201d which may include healing and religious  practices that promote wellness, language integration that promote  cultural sustainability and identity, and traditional storytelling that  promotes life lessons and teachings.", "Officials from 10 tribal governments and Native American organizations  also provided perspectives on whether or not a grant program\u2019s focus on  tribes or Native Americans as a primary beneficiary affected their decision  to apply for the program. Officials from 6 of 10 of the tribal governments  and Native American organizations indicated that they would consider  any grant program that met the needs of their communities, although  officials from 3 of these 6 indicated a preference in some instances for  grant programs that focused on tribes or Native Americans. Officials from  the remaining 4 of 10 tribal governments and Native American  organizations indicated that a grant program\u2019s focus or lack thereof on  tribes or Native Americans could affect their ability to apply for it.", "For example, officials from one federally recognized Oregon tribe  explained that their tribe does not apply for grant programs that do not  specify tribes or Native Americans as a primary beneficiary because their  applications are not typically competitive in a state or nationwide applicant  pool. Instead, they said that their tribe applies for funding specific to their  community because they are more likely to succeed with those  applications. These officials also said that a benefit of applying for grant  programs that specify tribes or Native Americans as a primary beneficiary  is that technical assistance provided to grant recipients is tailored to  tribes. Officials from another federally recognized tribe in Oklahoma noted  that their tribe prefers to apply for grant programs that specify tribes or  Native Americans as primary beneficiaries due to the limited resources  they have available to prepare grant applications, as well as the high level  of competition for nationwide federal grant programs. Finally, officials  from a tribal nonprofit corporation in Alaska that represents several  federally recognized tribes explained that although their decision to apply  for any federal grant program depends on the needs of their community,  grant programs that specify tribes or Native Americans as a primary  beneficiary understand the challenges of tribal communities, particularly  living in rural environments and having to travel vast distances to  implement grant program funding."], "subsections": []}]}, {"section_title": "Officials from Tribal Governments, Native American Organizations, and Agencies Noted Factors that Affect Successful Application for Grant Programs", "paragraphs": ["Officials from tribal governments and Native American organizations that  applied for federal grant programs that could help prevent or address  delinquency among Native American youth, as well as DOJ and HHS  officials, identified various factors they believe affect the ability of tribal  governments and Native American organizations to successfully apply for  federal grant programs. For example, some tribal governments and  Native American organizations found being able to call or meet with  federal officials during the application process to be helpful but that short  application deadlines are a challenge. Additionally, a non-generalizable  sample of DOJ and HHS summary statements that provide peer review  comments for unsuccessful applications that tribal governments and  Native American organizations submitted for these grant programs noted  various weaknesses within these unsuccessful applications.", "Perspectives from tribal governments and Native American  organizations. We collected perspectives from a non-generalizable  sample of 10 tribal governments and Native American organizations on  what federal practices they find helpful or challenging when applying for  grant programs related to preventing or addressing delinquency among  Native American youth. Regarding helpful federal practices during the  application process, the tribal governments and Native American  organizations most frequently responded that they found being able to  call or meet with federal officials if they had questions about or need help  on their application particularly helpful. For example, representatives from one federally recognized tribe in Nevada explained some agencies have  help desks that provide a systematic walkthrough of technical issues  applicants might encounter when applying for grant programs. In addition,  officials from a tribal nonprofit corporation in Alaska that represents  several federally recognized tribes stated attending grantee meetings and  having face-to-face contact with agency officials to ask questions was  very useful when applying for a particular HHS award.", "Officials from 9 of the 10 tribal governments and Native American  organizations provided the following perspectives on the biggest  challenges they have faced when applying to receive federal grant  program funding.", "The window available for applying for federal grant programs is too  short. Six of 9 tribal governments and Native American organizations  noted this as a challenge. For example, officials from a federally  recognized tribe based in the Southwest said that the tribe\u2019s biggest  challenge is a short turnaround, usually 4 to 8 weeks, from a grant  program\u2019s funding opportunity announcement to its deadline.  Similarly, officials from a federally recognized tribe in Oklahoma  suggested that federal agencies provide longer application periods for  grant programs. These officials added that more time would allow the  tribes to coordinate amongst themselves better, prepare stronger  applications, and obtain the necessary tribal approvals for a grant  program.", "Collecting data for grant program applications is difficult. Four of 9  tribal governments and Native American organizations we spoke with  noted this as a challenge. For example, a representative from a  federally recognized tribe in Nevada stated that the tribe needs  accurate data for its grant applications to describe the tribe and its  needs, yet the tribe does not currently have quality data on issues  such as substance abuse or youth employment. In addition, officials  from a tribal nonprofit corporation in Alaska that represents several  federally recognized tribal governments told us that the biggest  challenge in preparing a CTAS application is collecting data specific to  their tribes\u2019 region. These officials explained that for reports on  juvenile justice, their tribes\u2019 region is sometimes grouped with another  area, which makes it difficult to extrapolate data specific to their tribes.  According to these officials, due to the challenges in obtaining these  data, preparing grant applications to address gaps and for services  needed is difficult.", "Scarcity of grant writers and other personnel makes it difficult to  complete a quality application. Four of 9 tribal governments and  Native American organizations noted this as a challenge. For  example, officials from a federally recognized tribe in Oklahoma said  that not having a grant writer is a significant challenge for the tribe  when applying for federal grant programs. These officials mentioned  that additional training sessions on grant writing and feedback from  grant reviewers would help the tribe prepare stronger applications. In  addition, representatives from a federally recognized tribe in Oregon  stated that they encounter challenges with the research and  evaluation requirements of some grant programs because hiring  someone to fulfill this role can take 2 to 3 months and the number of  qualified individuals in their service area is limited.", "Perspectives from DOJ and HHS officials. We also obtained  perspectives from officials from DOJ OJP and seven HHS operating  divisions on reasons why some tribal governments and Native American  organizations might be more successful than others in applying for federal  funding, as well as the challenges these entities face when applying for  federal funding. According to DOJ and HHS officials, some of the  reasons why some tribal governments and Native American organizations  might be more successful than others are in applying for federal funding  include the following:", "Larger and better-resourced tribal governments and Native American  organizations are more successful at applying for federal funding. For  example, DOJ OJP officials explained that larger tribes with more  resources are more successful at applying successfully for grant  programs because they are able to hire grant writers to assist with  applications. In addition, officials from HHS\u2019s SAMHSA noted that  successful applicants are usually larger tribes that have ample  resources and experienced staff to write proposals for federal funding.  HHS Centers for Disease Control officials stated that larger and  better-resourced tribes with sufficient public health infrastructure and  capacity tend to apply more and to be more competitive when they do.", "Tribal governments and Native American organizations that have  received federal funding before are more likely to be successful again.  Specifically regarding the CTAS program, DOJ OJP officials explained  that once tribes are successful at one CTAS application, they are  typically successful on subsequent CTAS submissions because they  use the successful application as a template. In addition, officials from  the HHS\u2019s Indian Health Service explained that tribes that are repeat  grantees might be more likely to submit applications to even more  grants because they are well-versed in the process. Moreover,  officials from SAMHSA explained that tribes that have previously  received federal funding might be better equipped to document their  experience in a specific area in subsequent grant applications.", "According to agency officials, one of the biggest organizational  challenges that tribal governments and Native American organizations  encounter when applying to receive federal grant program funding is  obtaining and retaining staff. For example, officials from HHS\u2019s National  Institutes of Health stated that the limited scientific and grant writing staff,  as well as high staff turnover within tribes pose the biggest challenges  they face when applying for federal funding. Officials from HHS\u2019s CDC  and Administration for Children and Families operating divisions also  identified limited grant writing staff as one of the biggest challenges that  tribal governments and Native American organizations face when  applying to receive federal funding from grant programs. Moreover,  officials from HHS\u2019s SAMHSA explained that tribes have difficulty finding  qualified staff to live and work in the remote areas where many tribes are  located. Finally, DOJ OJP officials explained that some tribes might not  have sufficient resources more generally to put together a competitive  application due to specific tribal government structures and justice  systems being relatively new compared to state and local governments.", "Review of summary statements on unsuccessful applications. We  reviewed a sample of 29 DOJ summary statements from fiscal years  2015 through 2017 that provided peer review comments for unsuccessful  applications that tribal governments and Native American organizations  submitted for the grant programs we identified. These summary  statements most frequently cited the following overall weaknesses within  the unsuccessful applications from tribal governments and Native  American organizations:", "Application contained unclear or insufficient details on how the  applicant would implement or achieve outcomes of the proposed  program (19 of 29 peer review summary statements);", "Application contained unclear or insufficient details on how the  applicant would measure the success or ensure the sustainability of  the proposed program (15 of 29 peer review summary statements);", "Application contained unclear or insufficient details on the budget of  the proposed program (14 of 29 peer review summary statements);", "Applicant submitted a poorly written or organized application (12 of 29  peer review summary statements);", "Application contained unclear or insufficient data/statistical information  to support the proposed program (12 of 29 peer review summary  statements); and", "Application contained unclear or insufficient details on the goals and  objectives of the proposed program (11 of 29 peer review summary  statements).", "We also reviewed a sample of 30 HHS peer review summary statements  from fiscal years 2015 through 2017 provided to tribal governments and  Native American organizations that unsuccessfully submitted applications  for the grant programs we identified. Specifically, all of these statements  contained a section that evaluated the strengths and weaknesses of the  applicant\u2019s proposed approach or plan for implementing the grant  program funding. These 30 statements most frequently cited the following  weaknesses in that section:  Insufficient details regarding activities or strategies of proposed  approach or plan (24 of 30 peer review summary statements);  Insufficient details on the goals or objectives of the proposed  approach or plan (12 of 30 peer review summary statements);  Insufficient details on the potential partners or stakeholders involved  in the proposed approach or plan (12 of 30 peer review summary  statements);  Insufficient linkages between various elements in proposal or plan (11  of 30 peer review summary statements);  Insufficient details on the project timeline presented within the  proposed approach or plan (9 of 30 peer review summary  statements); and  Insufficient details on how the applicant organization would staff the  proposed approach or plan (8 of 30 peer review summary  statements).", "We asked officials from the tribal governments and Native American  organizations from which we collected perspectives how useful they  found the feedback federal agencies provided through peer review  comments or other means on unsuccessful grant program applications  since fiscal year 2015. Some tribal governments and Native American  organizations found the feedback useful while others noted that feedback  was sometimes not particularly helpful. For example, officials from a tribal  university affiliated with a federally recognized tribe based in the  Southwest noted that they have received helpful feedback on  unsuccessful applications through e-mail correspondence. However,  officials from a tribal nonprofit corporation in Alaska that represents  several federally recognized tribes noted that the peer review feedback  they received was inconsistent year to year. Meanwhile, officials from a  federally recognized tribe in Oklahoma noted that they have found the  peer review feedback to be helpful overall and that they use the feedback  to improve their weaknesses and reinforce their strengths when  submitting future applications."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to DOJ, HHS, DOI, the Administrative  Office of the United States Courts, the U.S. Sentencing Commission, and  the Department of Education for review and comment. DOJ, DOI, and the  Administrative Office of the United States Courts provided technical  comments that we incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Attorney General, Secretary of Health and Human  Services, Secretary of the Interior, 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  Gretta L. Goodwin at (202) 512-8777 or GoodwinG@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made significant  contributions to this report are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report addresses (1) what available data show about the number and  characteristics of Native American youth in the federal, state and local,  and tribal justice systems; and (2) what discretionary grant programs  federal agencies fund that could help prevent or address delinquency  among Native American youth, and the extent to which tribal  governments and Native American organizations have access to them.", "To address the first objective, we obtained and analyzed record-level and  summary data from federal, state and local, and tribal justice systems  from 2010 through 2016. Figure 18 illustrates the data sources we  included in our report for each phase of the justice process (arrest,  adjudication, and confinement) in each justice system (federal, state and  local, and tribal). Generally, state and local entities include those  managed by states, counties, or municipalities.", "As figure 18 illustrates, we utilized a number of data sources. When  analyzing the data, certain characteristics and a number of  methodological decisions were applicable to multiple data sources:", "Generally, state and local data we obtained were maintained by  calendar year. In contrast, federal data were maintained by fiscal  year. For purposes of this report, we refer where appropriate to  calendar years or fiscal years in presenting the results of our analysis.", "Generally, the record-level and summary data we analyzed included  information about youth who had come into contact with the justice  systems, such as their age, race, gender, type of offense, and the  year they came into contact with the justice system.", "For purposes of our analysis, we defined youth to include persons  who were under 18 years of age at the time of arrest, adjudication, or  confinement, unless otherwise noted. In many instances, the  agencies calculated the youth\u2019s age for us and placed the record in  one of the following age categories: under 13, 13-14, and 15-17.", "For purposes of our analysis, we identified Native American youth as  defined by each data source and identified by the agencies providing  the data. For example, the Department of Justice (DOJ) Federal  Bureau of Investigation\u2019s (FBI) Uniform Crime Reporting (UCR)  Summary Reporting System (SRS) data uses the race category  \u201cAmerican Indian or Alaska Native\u201d and includes persons having  origins in any of the original peoples of North and South America  (including Central America) and who maintain tribal affiliation or  community attachment. In comparison, the Executive Office for United  States Attorneys (EOUSA), in its prosecution data, defines the term  Indian based on statute and case law, which generally considers an  Indian to have both a significant degree of Indian blood and a  connection to a federally recognized tribe. If a record did not contain  race information we did not include the record in any our analysis.", "In regard to type of offense, unless otherwise noted, we obtained and  analyzed information about the lead or most serious offense  associated with the youth who came into contact with the federal or  state and local justice systems. The data sources contained hundreds  of specific offenses, such as simple assault, illegal entry, and rape. To  assist our analysis of the data, we took the following steps:  1.  We categorized specific offenses for all data sources into 1 of 22  offense categories, such as assault, immigration, and sex offense.  To determine the 22 categories we considered categories used in  our prior work and consulted FBI\u2019s UCR offense codes. The  placement of specific offenses into offense categories was carried  out by an analyst, reviewed by additional analysts, and confirmed  by an attorney.  2.  We grouped the offense categories into five broad categories\u2014 drug and alcohol, person, property, public order, and other. To  determine the five broad categories we considered categories  presented in National Center for Juvenile Justice\u2019s (NCJJ) annual  Juvenile Court Statistics reports. The placement of offense  categories into a broad category was carried out by an analyst  and confirmed by an attorney.", "Table 18 describes the five broad categories and 22 offense categories.", "Some data sources contained additional information about youth, such as  the youths\u2019 geographic location (i.e., state or U.S. Circuit), outcome of the  youths\u2019 involvement with the justice system (e.g., adjudicated delinquent;  placed in a facility or on probation), type of facility where the youth was  placed (e.g., private, state, tribal), length of sentence, distance between  youth\u2019s residence and facility, and time in confinement.", "Generally, record-level information contained in these data systems are  collected when the youth comes into contact with the justice system. In  some instances, youth provide certain information (e.g., gender and race)  to justice system officials. In other cases, justice officials obtain  information from documentation associated with the youth, such as  identification documents (e.g., tribal enrollment certifications) or pre- sentence investigation reports. Several of the record-level data sets we  obtained were administrative data maintained by agencies. These data  generally included information generated as cases are handled and are  used to help the agency manage its operations.", "In particular, we obtained and analyzed record-level and summary data  from the following federal, state and local, and tribal data sources:", "Record-level data from four DOJ agencies:  1.  The United States Marshals Service\u2019s (USMS) Justice Detainee  Information System. This data system is USMS\u2019s case  management system for prisoners in custody, among other things.  USMS provided us a data set with 1,589 records for youth  admitted into USMS custody after being arrested by a law  enforcement agency (LEA). Our analysis focused on the following  key variables: fiscal year of custody start date, race, gender, age  category, original offense description, arresting agency, and  circuit. USMS collects information about individuals admitted into  custody. USMS receives youth from various LEAs and collects  information on the LEA that arrests the individual. We limited our  analysis to youth arrested by federal agencies (e.g. FBI) and did  not include youth who had been arrested by non-federal LEAs  (e.g., municipalities). USMS custody data may not represent all  individuals arrested by federal agencies, but identifies a minimum  number of arrests for a given period. We used USMS custody  data because we did not identify a data source for all federal  arrests. The data USMS provided us was limited to individuals  who were under 18 when they were admitted to USMS custody  and USMS determined the age category for each record.  2.  EOUSA\u2019s Legal Information Office Network System. This data  system was the EOUSA\u2019s case management system for tracking  declinations and litigation in criminal matters and cases, among  other things. EOUSA provided us a data set with 2,361 records  for suspects received. Our analysis of EOUSA data focused on  the following key variables: fiscal year suspect was received,  Native American status, age category, lead charge, circuit, and  disposition.", "EOUSA used multiple variables from its Legal Information  Office Network System to confirm that the individual was  under 18. However, for 25 percent of the records (583 of  2,361), EOUSA could not provide an age category for the  juvenile because the age was either unknown or EOUSA  officials questioned the age information. When we analyzed  the data by age categories, we excluded records with  unknown or unreliable age categories. However, we included  all EOUSA records when we analyzed other variables  contained in the EOUSA data (e.g., offense).", "To analyze the offense associated with the individual, we  used EOUSA\u2019s \u201clead charge\u201d variable which consists of  statutory citations. To identify the offense, we researched  each statutory citation.  3.  The Office of Justice Programs\u2019 (OJP) Census of Juveniles in  Residential Placement (CJRP). This data source contains data  collected through a biennial census of state and local (not federal)  residential facilities housing youth in 2011, 2013 and 2015 that  was administered by the United States Census Bureau on behalf  of OJP. OJP provided us a data set with 165,141 records. Our  analysis of CJRP data focused on the following key variables:  calendar year, age group, race, facility state, gender, most serious  offense, agency type (who placed the individual), facility type, and  time in placement.", "State and local facilities include those managed by states,  counties, municipalities, and tribal governments as well as  private facilities, among others. CJRP has historically achieved  response rates near or above 90 percent. However,  participation in the CJRP is voluntary and response rates from  tribal facilities have been lower. The source for the information  collected by the census, such as age, were administrative  records maintained by individual residential facilities. These  data include youth who were in custody on the day of the  census.", "We limited our analysis of the CJRP data to (1) individuals  who were under the age of 18 on the date of the census and  (2) youth who had been adjudicated\u2014we did not include youth  who were awaiting a trial or whose adjudication was  pending. Finally, we excluded youth who were located in the  Virgin Islands and Puerto Rico because no other data set  appeared to include data for these geographic areas. The data  set we analyzed contained 98,830 records.  4.  Federal Bureau of Prisons\u2019 (BOP) SENTRY data system. This  system is BOP\u2019s case management system for tracking  information (e.g., admission type and sentencing) about prisoners  in BOP\u2019s custody. For this review, BOP provided two data sets.", "One data set was limited to youth who were adjudicated and  sentenced to a facility overseen by BOP and contained 1,324  records. Our analysis of these BOP data was focused on the  following key variables: fiscal year sentenced, age category,  race, offense, and sentence length. BOP determined the age  category for each record and the data were limited to  individuals who were under 18.", "The second data set included youth who were admitted into a  facility overseen by BOP but were not necessarily adjudicated  and contained 925 records. Our analysis of these BOP data  was focused on the following key variables: fiscal year  admitted, race, distance, and admission assignment. BOP  ensured the data were limited to individuals who were under  18. BOP provided the distance information by calculating the  distance between a juvenile\u2019s residence and the facility where  a juvenile was placed. To analyze the distance information we  created two categories of admission types: juveniles under the  supervision of the United States Probation Office and juveniles  in custody of BOP.", "Our analysis of these four DOJ data sources was limited through 2016  because when we initiated our analysis in April 2017 it was the most  current data available.", "Record-level data from the Department of the Interior\u2019s (DOI) Bureau  of Indian Affairs (BIA) for youth arrested and admitted to three BIA- operated juvenile detention centers. We reviewed juvenile detention  documents maintained by the three centers: Northern Cheyenne,  Standing Rock, and Ute Mountain Ute. The types of documents  included admission sheets and arrestee custody receipts, among  others. We created a data set of admissions to the three centers using  information contained in the documents provided. Our data set  contained 956 records and included the following variables: unique ID,  admission date, and charges (offense). Documents contained  information about multiple offenses for individual admissions and did  not identify the most serious or lead offense. As such, we included all  offenses in our analysis of the centers\u2019 information. Our analysis of  this information was limited to 2012 through 2016 because records  prior to 2012 were not available for any center when we initiated our  analysis in April 2017. However, our data set does not contain records  for 2012 for the Ute Mountain Ute center because that center did not  have any of the source documents before 2013. Also, our data set did  not contain records for 2012 through 2015 for the Standing Rock  Youth Services Center because that center opened in May 2016.", "Summary data from DOJ\u2019s FBI UCR SRS. The FBI\u2019s primary objective  is to generate a reliable set of crime statistics for use in law  enforcement administration, operation, and management. FBI  provided us with 7 years of data in separate annual files, which initially  contained 1,529,736 gender-specific records. To analyze race, we  summarized the data across gender. In addition, the records included  summary records for drug and gambling offenses as well as records  for specific drug offenses (e.g., sale, possession) and gambling  offenses (e.g., bookmaking, lottery). To prevent over-counting, we  excluded records with specific information from our analysis. These  steps reduced our data set to 582,089 records with which we  performed our analysis of UCR SRS data, which focused on the  following key variables: calendar year, race, state, and offense.", "The majority of law enforcement agencies submit arrest data to the  FBI through the UCR program. In 2016, about 90 percent of city,  county, university and college, state, tribal, and federal agencies  eligible to participate in the UCR Program submitted data (16,782 of  18,481). Although UCR SRS predominantly contains data from state  and local LEAs, some federal and tribal LEAs report data into SRS.  Agencies submit data monthly that must meet UCR\u2019s data quality  guidelines, such as using uniform definitions. There is no available  data for the state of Florida because, according to DOJ officials,  Florida does not follow UCR guidelines and reports only arrest totals  which cannot be housed in the UCR SRS database. Further, a few  states reported limited arrest data during the scope of our review  (e.g., Illinois). Our analysis of these data was limited through 2016  because when we initiated our analysis in April 2017 it was the most  current data available.", "Summary data from the NCJJ Easy Access to Juvenile Court  Statistics (NCJJ\u2019s juvenile court data) which is supported through  funding from DOJ\u2019s OJP. NCJJ obtains case-level and court-level  data from state and local juvenile courts. This online juvenile court  data is an interactive web-based application that allows users to  analyze the actual databases that NCJJ uses to produce its annual  Juvenile Court Statistics reports. The summary data available  represents national estimates of delinquency cases handled by U.S.  courts with juvenile jurisdiction. Our analysis of these data was limited  to 2010 through 2014 because this was the most current data  available when we conducted our analysis. The summary data we  downloaded contained 86,400 cases spanning calendar years 2010  through 2014. Our analysis of NCJJ\u2019s juvenile court data online  focused on the following key variables: calendar year, race, offense,  gender, and age.", "Summary data included in DOJ\u2019s Bureau of Justice Statistics reports,  such as the Jails in Indian Country report from 2016. This report  provides information gathered from Bureau of Justice Statistics\u2019  annual survey of Indian country jails, and includes all Indian country  correctional facilities operated by tribal authorities or BIA. Our analysis  of these data was limited to the survey reports covering years 2014,  2015, and 2016, and contained the number of Native American youth  confined in tribal operated jails in Indian country as of June each year.", "We assessed the reliability of the record-level and some of the summary  data by conducting electronic testing of the data and interviewing  knowledgeable agency officials about the data systems. We assessed the  reliability of the remaining summary data by interviewing knowledgeable  agency officials about the summary data. We determined that the record-level and summary data sources included in this report were sufficiently  reliable for the purposes of our reporting objectives. We determined that  some record-level and summary data sources, such as certain data  related to arrests and sentencing information, contained information  already provided by other data sources or contained too few Native  American youth observations to provide reliable, reportable information.  We did not include these data sources in our report. We also determined  that some data variables in certain data sources were not reliable for our  purposes. For example, two data sources did not contain reliable  information for the race of individuals. We did not include these data  sources in our report.", "For each data source, we calculated the number and percent of Native  American and non-Native American youth involved at each phase of the  justice process (arrest, referral for adjudication, and confinement) for all  three justice systems (federal, state and local, and tribal), where data  were available. Generally, non-Native American records included Asian,  Black, and White. Some data sources included other race categories\u2014 such as Pacific Islander and Hispanic. We then analyzed the  characteristics of youth involvement with the justice system, such as the  youths\u2019 race, age category, gender, type of offense, geographic location,  outcome of the youths\u2019 involvement with the justice system, type of facility  where the youth was placed (e.g., private, state, tribal), length of  sentence, distance between youth\u2019s residence and facility, and time in  confinement, where data were available. If a record was missing a value  for the characteristic we were analyzing (e.g., race, offense, gender, or  age)\u2014for example, the value was either blank or was \u201cunknown\u201d\u2014we did  not include the record in the analysis of that characteristic.", "We also analyzed the representation of Native American youth involved  with the federal and state and local justice systems by comparing justice  system data to 2010 U.S. Decennial Census information and U.S. Census  estimates from 2011 to 2016. Specifically, for the federal system, we  identified the representation of Native American youth in USMS\u2019s custody  data, EOUSA\u2019s adjudication data, and BOP\u2019s confinement data for fiscal  years 2010 through 2016. We then identified the representation of Native  American youth among the total youth population for the United States  from the 2010 U.S. Decennial Census (as of April 1, 2010) and its  updated estimates from 2011 through 2016 (as of July 1 for each year).  Using these data, we compared the representation of Native American  youth among each component of the federal justice system (i.e., USMS  custody, EOUSA adjudication, and BOP confinement) to the total youth  population for the United States.", "Similarly, we also compared the representation of Native American youth  by individual states. To do this, we identified the representation of Native  American youth in FBI\u2019s UCR SRS arrest data as well as CJRP\u2019s  confinement data for individual states. We then identified the  representation of Native American youth among the youth population for  individual states from the U.S. Census\u2019s 2010 decennial data and its  updated estimates from 2011 through 2016. Using these data, we  compared the representation of Native American youth among state and  local justice systems (i.e., FBI\u2019s UCR SRS arrest and CJRP\u2019s  confinement data) to the representation of Native Americans among the  youth population for individual states.", "Because there is no single, centralized data source that contains data for  youth involved in all justice systems (federal, state and local, tribal) and  across all phases of the justice process (arrest, adjudication,  confinement), it is not possible to track individuals through all phases of  the justice system or identify the number of unique youth who have come  into contact with the justice systems. Further, data are not comparable  across data sources because data sources vary in how they define Native  American and how they determine whether youth are Native American.  Some federal agencies, such as USMS and BOP, share a unique  identifier for an individual within the federal data sources. However, for  purposes of this review and given privacy concerns related to juvenile  data, we were unable to track individuals across phases of the federal  justice system.", "We also collected perspectives from agency officials and five Native  American organizations regarding factors that might contribute to the data  characteristics we observed. We selected the five Native American  organizations to include organizations whose mission and scope focuses  in whole or in part on Native American juvenile justice issues and that  have a national or geographically-specific perspective. The views of these  organizations are not generalizable to all Native American organizations  but provide valuable insights.", "To address our second objective on discretionary grant programs that  federal agencies fund that could help prevent or address delinquency  among Native American youth, we analyzed discretionary grants and  cooperative agreements available for funding from fiscal years 2015  through 2017. To identify the discretionary grants and cooperative  agreements, we conducted a keyword search of \u201cyouth or juvenile\u201d in  Grants.gov\u2014an online repository that houses information on over 1,000  different grants across federal grant-making agencies. For the purposes  of this review, we define \u201cdiscretionary grant programs\u201d to include both  discretionary grants and cooperative agreements. We focused on  discretionary grants and cooperative agreements because federal  agencies generally award them to an array of entities based on a  competitive review process, whereas federal agencies are generally  required by statute to limit awards from the other types of grants to  specific entities, typically U.S. state, local, and territorial governments. We  then reviewed the search results of the three agencies with the highest  number of grant program matches\u2014DOI, DOJ, and the Department of  Health and Human Services (HHS). Two analysts independently read  the Grants.gov summary descriptions of the programs included in these  search results and selected programs for which the description related to  risk or protective factors discussed in the DOJ Office of Juvenile  Justice and Delinquency Prevention (OJJDP) Tribal Youth in the  Juvenile Justice System literature review;  risk or protective factors identified in the July 2015 Technical  Assistance Network for Children\u2019s Behavioral Health brief on  American Indian and Alaska Native Youth in the Juvenile Justice  System;  juvenile justice system reform principles, findings, or  recommendations identified in Chapter 4 of the November 2014  Attorney General\u2019s Advisory Committee on American Indian/Alaska  Native Children Exposed to Violence report, Ending Violence so  Children Can Thrive;or proposals to reform the juvenile justice system identified in Chapter 6  of the November 2013 Indian Law and Order Commission Report to  the President and Congress of the United States, A Roadmap for  Making Native America Safer.", "We also used the following principles to identify and select relevant grant  programs:", "We excluded grant programs that focused specifically on victims as  opposed to at risk youth or offenders.", "We included grant programs that specify tribes or Native Americans if  the program\u2019s funding opportunity announcement mentioned youth  explicitly.", "We included grant programs that do not specify tribes or Native  Americans as a primary beneficiary if the program\u2019s funding  opportunity announcement mentioned youth explicitly and if the  program focused primarily on serving youth populations.", "After two analysts independently completed their initial determinations of  which grant programs they considered relevant, they either confirmed  their agreement or discussed any differences of opinion until they reached a consensus. If they could not reach agreement on whether a  given program was relevant, a third, supervisory analyst made the final  determination.", "We also reviewed the grant program funding opportunity announcements  on HHS and DOJ\u2019s websites and worked with officials from these  agencies to identify any additional grant programs that could be relevant  for the purposes for our review. We provided a list of the grant programs  that we identified to DOJ and HHS for confirmation both during and after  fiscal year 2017. Our final list of grant programs includes 122 programs.  Despite these steps, it is possible that our analysis did not identify all  relevant grant programs.", "We next determined which of 122 grant programs we identified specified  tribes or Native Americans as a primary beneficiary and which did not by  reviewing funding opportunity announcements for the programs to  determine if the funding opportunity announcement\u2019s title, executive  summary, overview, or purpose specifically referenced tribes or Native  Americans as the main or one of few beneficiaries of the proposed grant  program funding. After a first analyst completed initial determinations of  which of the grant programs specified tribes or Native Americans as a  primary beneficiary, a second analyst reviewed those determinations and  either confirmed agreement or discussed any differences of opinion until  both analysts reached a consensus. We categorized each program into  one or more issue areas (e.g., violence or trauma, substance abuse,  mentoring, etc.). We used the risk and protective factors discussed in the  OJJDP Tribal Youth in the Juvenile Justice System literature review as  initial issue areas and added additional areas, as needed, for programs  that did not fit within the initial areas.", "To determine the extent to which tribal governments or Native American  organizations had access to the 122 grant programs, we reviewed both  the eligibility of those organizations to apply for the grant programs and  their level of success in applying for the grant programs. We defined  \u201ctribal governments\u201d as the governing bodies of federally recognized  tribes. We defined \u201cNative American organizations\u201d as organizations  affiliated with federally recognized tribes, such as tribal colleges and  universities, as well as non-tribal organizations that focus on serving  Native American populations, such as urban Indian organizations.", "To determine whether tribal governments or Native American  organizations were eligible to apply for the grant programs we identified,  an analyst first reviewed the eligibility information within each of the grant  program\u2019s funding opportunity announcements. In instances where the  analyst could not definitively determine whether tribal government or  Native American organizations were eligible to apply for a given grant  program, the analyst reviewed the program\u2019s Grants.gov synopsis or  followed up with agency officials. After the analyst made an initial  determination of eligibility, a second analyst reviewed those  determinations and either confirmed agreement or discussed any  differences of opinion until both analysts reached a consensus. We also  consulted with DOJ and HHS officials regarding those grant programs for  which tribal governments or Native American organizations were ineligible  to apply to determine the reasons why.", "To determine tribal governments and Native American organizations\u2019  level of success in applying for the grant programs, we analyzed fiscal  year 2015 through 2017 award data for the programs to determine the  extent to which tribal governments and Native American organizations  received funding from them. We also reviewed a non-generalizable  sample of applications from 37 grant programs to determine the extent to  which tribal governments and Native American organizations applied for  these grant programs. Specifically, we requested the sample of  applications from each of the five DOJ OJP offices and bureaus and  seven HHS operating divisions from which we identified the 122 grant  programs that either had a relatively larger estimated total program  funding amount on Grants.gov for fiscal years 2015, 2016, or 2017 than  other grant programs within the same OJP offices or HHS operating  divisions or had specified tribes or Native Americans as a primary  beneficiary. We assessed the reliability of the data we used by  questioning knowledgeable officials. We determined that the data were  sufficiently reliable for the purposes of this report.", "To determine some of the factors that affected the ability of tribal  governments and Native American organizations to apply successfully for  grant programs that could help prevent or address delinquency among  Native American youth, we:  interviewed or received written responses from DOJ and HHS officials  to obtain their perspectives,  interviewed or received written responses from representatives from a  non-generalizable sample of 10 tribal governments and Native  American organizations that applied for or received funding from one  or more of the 122 grant programs, and  reviewed a non-generalizable sample of 29 DOJ and 30 HHS peer  review summary statements from unsuccessful applications that tribal  governments and Native American organizations submitted for  selected grant programs that we identified as relevant for the  purposes of this review.", "We selected our non-generalizable sample of tribal governments and  Native American organizations to include those that received multiple  awards from relevant grant programs; tribal governments and Native  American organizations that applied unsuccessfully for more than one  relevant grant program; tribal governments with juvenile detention centers  with the highest average daily populations in 2016; and tribal  governments located in the states with the largest number of juvenile  offenders in residential placement per 100,000 juveniles for American  Indians according to the 2015 Easy Access to the Census of Juvenile  Residential Placement. We analyzed the results of our interviews with  representatives of the tribal governments and Native American  organizations as well as with agency officials to discern possible themes  regarding factors that affect tribal governments and Native American  organizations\u2019 ability to apply successfully for the relevant grant programs  we identified.", "We selected the non-generalizable sample of peer review summary  statements from grant programs that had a larger estimated total program  funding amount on Grants.gov for fiscal years 2015, 2016, or 2017 than  other grant programs within the same OJP offices or HHS operating  divisions or had specified tribes or Native Americans as a primary  beneficiary. However, if we could not identify an application from a tribal  government or Native American organization from a given grant program  from which we requested applications, we did not request peer review  summary statements from that program. We then conducted a content  analysis of the weaknesses noted in the statements submitted by tribal  governments or Native American organizations in order to discern  common themes.", "The information we obtained from the agency officials as well as  representatives of the tribal governments and Native American  organizations cannot be generalized more broadly to all tribal  governments and Native American organizations or the applications they  submitted for federal funding from fiscal year 2015 through 2017.  However, the information provides important context and insights into the  challenges tribal governments and Native American organizations face in  applying for federal funding that could help prevent or address  delinquency among Native American youth, as well as some of the common weaknesses that DOJ and HHS peer reviewers identified in  unsuccessful applications from tribal governments and Native American  organizations.", "We conducted this performance audit from November 2016 through  September 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Definitions and Agency Determinations of Native American Status in Data Sources", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Actions Agencies Reported Taking Related to Selected Task Force and Commission Recommendations", "paragraphs": ["The 2014 Attorney General Task Force report, Ending Violence so  Children Can Thrive and the 2013 Indian Law and Order Commission  report, A Roadmap for Making Native America Safer, both recommended  actions related to Native American youth and youth justice issues. These  recommendations included actions federal agencies could take to  address some of the challenges noted in the reports, such as exposure to  violence, abuse and neglect, and poverty. Table 20 provides examples of  actions relevant federal agencies reported taking related to these  recommendations."], "subsections": []}, {"section_title": "Appendix IV: Native American Youth Involvement with Tribal Justice Systems", "paragraphs": ["Comprehensive data from tribal justice systems on the involvement of  Native American youth were not available. However, we identified and  reviewed a few data sources that provided certain insights about the  arrest, adjudication, and confinement of Native American youth by tribal  justice systems. Following is a summary of our analysis of data from  these sources.", "Arrests. Although comprehensive data on the number of tribal law  enforcement agency (LEA) arrests were not available, we obtained and  reviewed admission records from three juvenile detention centers in  Indian country managed by the Department of the Interior\u2019s Bureau of  Indian Affairs (BIA). Based on those records, at least 388 Native  American tribal youth were admitted to these three facilities in 2016, as  shown in table 21. In the Northern Cheyenne facility for which we  obtained records for 5 years, the number of youth admitted increased  yearly between 2012 and 2016, from 14 to 204.", "According to BIA officials, this growth in the number of youth admitted to  the Northern Cheyenne facility likely reflects an increase in admissions of  Native American youth from surrounding tribes. Specifically, because the  Northern Cheyenne facility is centrally located, they said it admits youth  from other tribes which have grown accustomed to sending their youth to  the facility. BIA officials also noted that the Northern Cheyenne facility  services an area where there is a high rate of delinquency among youth,  and because the facility works well with Native American youth struggling  with delinquency issues, many tribes elect to send their delinquent youth  to the facility. Further, since 2012, the Northern Cheyenne facility  increased its bed space and staff, thus increasing its capacity to admit  more youth, according to BIA officials.", "Even though comprehensive tribal arrest data are not available, DOJ\u2019s  Bureau of Justice Statistics (BJS) is currently undertaking an effort to  increase collection of arrest data from tribal LEAs. Specifically, this data  collection activity is the Census of Tribal Law Enforcement Agencies.  This collection activity, which BJS plans to conduct in 2019, is to capture  information including tribal LEA workloads and arrests, tribal LEA access  to and participation in regional and national justice database systems,  and tribal LEA reporting of crime data into FBI databases.", "Adjudication. Comprehensive data were not available to describe the  extent to which tribal courts processed Native American youth, or  adjudicated them delinquent or found them guilty. However, BJS  concluded a tribal court data collection effort\u2014the National Survey of  Tribal Court Systems\u2014in 2015. Through this survey, BJS gathered  information from more than 300 tribal courts and other tribal judicial  entities on their criminal, civil, domestic violence and juvenile caseloads,  and pretrial and probation programs, among other things. DOJ officials  told us that BJS has analyzed the data, and plans to release results in the  future.", "Confinement. According to data published by DOJ\u2019s Bureau of Justice  Statistics, the number of youth in Indian country jails declined from 190 in  2014 to 170 in 2016 (about an 11 percent decrease)."], "subsections": []}, {"section_title": "Appendix V: Selected Grant Programs That Could Help Prevent or Address Delinquency among Native American Youth", "paragraphs": ["Appendix V: Selected Grant Programs That  Could Help Prevent or Address Delinquency  among Native American Youth Department of Justice (73 grant programs)", "Office of Juvenile Justice  and Delinquency  Prevention (OJJDP)"], "subsections": [{"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?", "Tribal government  or Native American  organizations  eligible to apply  (Yes/No)?"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?", "Tribal government  or Native American  organizations  eligible to apply  (Yes/No)?"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Tribal government  or Native American  organizations  eligible to apply  (Yes/No)?", "Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?", "Bureau of Justice  Statistics (BJS)", "Office of Sex Offender  Sentencing, Monitoring,  Apprehending,  Registering, and Tracking  Department of Health and Human Services (49 grant programs)", "Substance Abuse and  Mental Health Services  Administration  (SAMHSA)"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?", "Tribal government  or Native American  organizations  eligible to apply  (Yes/No)?"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?", "Administration for  Children and Families  Administration for  Children and Families  Office of Minority Health  Yes  Office of Minority Health  Yes  Office of Minority Health  Yes  Office of Minority Health  Yes  Centers for Disease  Control and Prevention  (CDC)"], "subsections": []}, {"section_title": "Grant program", "paragraphs": ["Tribal government  or Native American  organizations  eligible to apply  (Yes/No)?", "Grant program specified  tribes or Native  Americans as a primary  beneficiary (Yes/No)?", "For the purposes of the review, we define \u201ctribal governments\u201d as the governing bodies of federally  recognized tribes and \u201cNative American organizations\u201d as organizations affiliated with federally  recognized tribes, such as tribal colleges and universities, as well as non-tribal organizations that  focus on serving Native American populations, such as urban Indian organizations.  According to DOJ officials, the National Intertribal Youth Leadership Development Initiative grant  program had no successful applicants in fiscal year 2017.  grantees. Tribal governments and Native American organizations are eligible to apply for the Drug- Free Communities Support Program, thus making them potentially eligible for the Sober Truth on  Preventing Underage Drinking Act Grants program.  Health Resources Services Administration issued a fiscal year 2017 Behavioral Health Workforce  Education and Training for Paraprofessionals and Professionals funding opportunity announcement,  but according an agency official the fiscal year 2017 funding opportunity announcement does not  focus on professionals who provide services to youth, whereas the fiscal year 2016 funding  opportunity does."], "subsections": []}]}, {"section_title": "Appendix VI: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact name above, Taylor Matheson, Assistant  Director; Tonnye\u2019 Conner-White, Analyst-in-Charge; Anne Akin; Steven  Rocker; and Emily Flores made key contributions to this report. Also  contributing were Jessica Ard; Melinda Cordero; Elizabeth Dretsch; Eric  Hauswirth; Kristy Love; Grant Mallie; Amanda Miller; Heidi Nielson; and  Claire Peachey."], "subsections": []}]}], "fastfact": ["Federal reports on Native American youth found challenges\u2014such as poverty and exposure to violence\u2014that can make them susceptible to being arrested, charged, or sentenced in the justice system.", "Among other things, we found:", "Overall rates of Native American juvenile delinquency declined 2010-2016.", "While most of the Native American youth in the system were at the state or local level, they were overrepresented in the federal system\u2014likely due to federal jurisdiction on tribal lands.", "We also found 122 federal grant programs to help address underlying challenges. Many factors affect grant application success, such as short deadlines."]}
{"id": "GAO-18-156T", "url": "https://www.gao.gov/products/GAO-18-156T", "title": "Refugees: Federal Agencies and Their Partners Have Implemented Certain Measures, but Need to Further Strengthen Applicant Screening and Assess Fraud Risks", "published_date": "2017-10-26T00:00:00", "released_date": "2017-10-26T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["According to UNHCR, as of June 2017, more than 21 million people were refugees worldwide. State manages the U.S. Refugee Admissions Program (USRAP) and coordinates with UNHCR, which refers the most applicants to USRAP, and USCIS, which adjudicates refugee applications. Deterring and detecting fraud is essential to ensuring the integrity of USRAP and an increase in the number of applicants approved for resettlement in the United States from countries where terrorists operate has raised questions about the adequacy of applicant screening.", "This statement addresses (1) how State works with UNHCR to ensure program integrity in the UNHCR resettlement referral process; (2) the extent to which State and RSCs have policies and procedures on refugee case processing and State has overseen RSC activities; (3) the extent to which USCIS has policies and procedures for adjudicating refugee applications; and (4) the extent to which State, USCIS, and their partners follow leading practices to reduce the risk of staff and applicant fraud in USRAP. This statement is based on GAO's July 2017 reports regarding USRAP. To conduct that work, GAO analyzed State, USCIS, and UNHCR policies; interviewed relevant officials; conducted fieldwork in 2016 at selected UNHCR offices, as well as at RSCs in Austria, Jordan, Kenya, and El Salvador, where GAO observed a nongeneralizable sample of refugee screening interviews (selected based on application data and other factors)."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of State (State) and the United Nations High Commissioner for Refugees (UNHCR) have worked together on measures designed to ensure integrity in the refugee resettlement referral process and have established a framework to guide their partnership. Working with State, UNHCR has implemented standard operating procedures and other guidance that, according to UNHCR officials, provides baseline requirements throughout the referral process. UNHCR also uses databases to help verify the identities of, and manage information about, refugees.", "State and the nine worldwide Resettlement Support Centers (RSC) have policies and procedures for processing refugee applications. Overseen by State, the organizations that operate RSCs hire staff to process and prescreen applicants who have been referred for resettlement consideration. GAO observed 27 prescreening interviews conducted by RSC caseworkers in four countries and found that, for example, RSCs generally recorded key information and submitted any required security checks. However, State has not established outcome-based performance indicators to evaluate whether RSCs were consistently and effectively prescreening applicants and preparing case files\u2014key RSC activities that have important implications for timely and effective adjudication and security checks. Developing outcome-based performance indicators would better position State to determine whether RSCs are meeting their responsibilities.", "The Department of Homeland Security's U.S. Citizenship and Immigration Services (USCIS) has policies and procedures for adjudicating refugee applications for resettlement in the United States, including how officers are to conduct interviews and adjudicate applications. GAO observed 29 USCIS interviews and found that officers completed all parts of the required assessment. USCIS also provides guidance to help officers identify national security concerns in applications, which can be challenging to identify as country conditions evolve. In 2016, USCIS determined that its pilot to send officers with national security expertise overseas to support interviewing officers was successful. USCIS has taken steps to fill these positions, but it has not yet developed a plan for deploying these additional officers, whose expertise could help improve the effectiveness of the adjudication process.", "State, USCIS, and their partners have implemented antifraud measures to reduce the risk of staff and applicant fraud\u2014both of which have occurred\u2014but could further assess fraud risks. Officials from all nine RSCs stated that they assign staff fraud risk management responsibilities to designated individuals. However, not all RSCs reported complying with all required program integrity measures\u2014reported compliance at individual RSCs ranged from 86 to 100 percent. State has also not required RSCs to conduct regular staff fraud risk assessments tailored to each RSC or examined the suitability of related controls. Without taking additional steps to address these issues, State and RSCs may face challenges in identifying new staff fraud risks or gaps in the program's internal control system and implementing new control activities to mitigate them. Further, State and USCIS have not jointly assessed applicant fraud risk program-wide. Doing so could help them ensure that fraud detection and prevention efforts across USRAP are targeted to those areas that are of highest risk."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO made recommendations to State and USCIS to strengthen the implementation of USRAP. State and USCIS agreed with GAO's recommendations and have begun taking actions to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our July 2017 reports on the U.S.  Refugee Admissions Program (USRAP)\u2014the process by which refugees  seek to be resettled in the United States. Millions of people worldwide  have fled their home countries to seek asylum because of persecution. In  general, individuals determined to have a well-founded fear of  persecution on account of their race, religion, nationality, political opinion,  or their membership in a particular social group can be registered as  refugees with the governments of the countries to which they have fled or  with the United Nations High Commissioner for Refugees (UNHCR). As of  June 2017, UNHCR reported there were approximately 22.5 million  refugees worldwide.", "In fiscal year 2016, the United States admitted nearly 85,000 refugees for  resettlement, the largest yearly number in more than 15 years, and  admitted about 52,000 refugees in fiscal year 2017. Increases in the  number of USRAP applicants approved for resettlement in the United  States\u2014particularly from countries in the Middle East where terrorist  groups such as the Islamic State in Iraq and Syria (ISIS) operate\u2014have  raised questions about the adequacy of screening for refugee applicants  to prevent access by persons who may be threats to national security.", "There are also questions as to whether USRAP is vulnerable to fraud  because there have been past cases of fraud committed by both staff  involved in the processing of refugee applications (referred to hereafter as  staff fraud) and by refugee applicants. Given the potential consequences  that the outcomes of decisions on refugee applications can have on the  safety and security of both vulnerable refugee populations and the United  States, it is important that there is integrity in the resettlement process  and that the U.S. government has an effective refugee screening process  to allow for resettlement of qualified applicants while preventing persons  with malicious intent from using USRAP to gain entry into the country.", "The Department of State\u2019s (State) Bureau of Population, Refugees, and  Migration (PRM) manages USRAP. State works with the Department of  Homeland Security\u2019s (DHS) U.S. Citizenship and Immigration Services  (USCIS), which has responsibility for adjudicating applications for  resettlement in the United States as refugees. USCIS officers, in  adjudicating applications for resettlement, are to conduct individual, in- person interviews with applicants overseas and use the results of these  interviews in coordination with other relevant information, such as the  results of applicants\u2019 security checks, to determine whether USCIS will  approve the applicants for resettlement in the United States as refugees.  State receives applications and referrals for refugee resettlement from a  variety of sources, with most coming from UNHCR. UNHCR is mandated  to work with governments to provide \u201cdurable solutions\u201d to refugees so  that they may transition out of refugee status and rebuild their lives. This  may include their consideration to submit a refugee\u2019s case to the United  States or other country for resettlement. Both State and USCIS  coordinate with nine Resettlement Support Centers (RSC) worldwide to  manage applications and referrals to USRAP, interview applicants to  collect their information (referred to as prescreening), and prepare  approved refugee applicants for resettlement to the United States. State  oversees these RSCs, four of which are operated by the International  Organization for Migration (IOM), and four of which are operated by  nongovernmental organizations (NGO). The ninth RSC, in Havana, Cuba,  is operated directly by State.", "This statement summarizes our July 2017 reports. Specifically, this  statement addresses (1) how State works with UNHCR to ensure  program integrity in the UNHCR resettlement referral process; (2) the  extent to which State and RSCs have policies and procedures on refugee  case processing and State has overseen RSC activities; (3) the extent to  which USCIS has policies and procedures for adjudicating refugee  applications; and (4) the extent to which State, USCIS, and their partners  follow leading practices to reduce the risk of staff and applicant fraud in  USRAP. For those reports, we reviewed State, DHS, RSC, and UNHCR  policies and documents and interviewed relevant officials\u2014including  officials at all 9 RSCs. In addition, we conducted fieldwork at selected  UNHCR offices, as well as at RSCs in Austria, Jordan, Kenya, and El  Salvador. At the RSCs, we observed two nongeneralizable samples of  refugee screening interviews in 2016 (selected based on application data  and other factors). More detailed information on our objectives, scope,  and methodology for that work can be found in the issued reports. We  conducted the work upon which this statement is based in accordance  with generally accepted government auditing standards."], "subsections": [{"section_title": "State Has Worked with UNHCR on Various Measures Designed to Ensure the Integrity of the Resettlement Referral Process", "paragraphs": ["In July 2017, we found that State and UNHCR have worked together on  several measures designed to ensure integrity in the process through  which UNHCR refers refugees to USRAP for potential resettlement in the  United States (or, the resettlement referral process). Since 2000, State  and UNHCR have outlined their formal partnership using a Framework for  Cooperation. State and UNHCR signed the most recent framework  document in 2016, covering the period of March 14, 2016 to December  31, 2017. The organizations developed the framework to guide their  partnership, emphasizing measures such as oversight activities and risk  management. Among other things, the framework emphasizes improved  accountability at UNHCR through effective oversight measures, close  cooperation with State, and organization-wide risk management. In  addition, the framework notes that State will work to ensure that UNHCR  allocates sufficient resources to fully implement measures to provide  oversight and accountability. For instance, UNHCR has several offices  that are responsible for overseeing antifraud activities, in addition to  providing audit services, investigating instances of fraud, and conducting  broad reviews of country-level operations such as the United Nations  Office of Internal Oversight Services and the Board of Auditors. The  framework also describes regular coordination and communication  between State and UNHCR as an important principle in the relationship  between the two organizations. Specifically, at the headquarters level, the  U.S. Mission in Geneva, Switzerland, has a humanitarian affairs office  that, according to State officials, coordinates with UNHCR on a regular  basis.", "Additionally, UNHCR has developed standard operating procedures  (SOPs) and identity management systems to combat the risk of fraud and  worked with State to implement these activities in the resettlement  process. Despite the complexity and regional variations in its refugee  registration, refugee status determination, and resettlement referral  processes, UNHCR officials said that standardizing procedures ensures  that the organization has established basic antifraud practices worldwide.  These officials added that they believe that the SOPs are among the most  important tools with which they ensure the integrity of the resettlement  referral process. UNHCR officials also collect biometric information on  refugees, such as iris scans and fingerprints. State and UNHCR  developed a Memorandum of Understanding (MOU) regarding the  sharing of some biometric information. According to a Letter of  Understanding that accompanies the MOU, it provides a framework  whereby data from UNHCR is shared with State, which allows for  increased efficiency and accuracy in processing resettlement referrals to  the United States. See figure 2 for photographs of technology that  UNHCR uses to register and verify refugee identities."], "subsections": []}, {"section_title": "State and RSCs Have Policies and Procedures for Processing Refugees, but State Could Improve Efforts to Monitor RSC Performance", "paragraphs": ["State and RSCs have policies and procedures for processing refugee  applications, but, as we found in July 2017, State has not established  outcome-based performance measures to assess whether RSCs are  meeting their objectives under USRAP. State\u2019s USRAP Overseas  Processing Manual includes requirements for information RSCs should  collect when prescreening applicants and initiating national security  checks, among other things. RSCs communicate directly with USRAP  applicants and prepare their case files. For example, RSCs are to  conduct prescreening interviews to record key information, such as  applicants\u2019 persecution stories and information about their extended  family, and submit certain security checks based on the information  collected during the interview to U.S. agencies. In addition, State  developed SOPs for processing and prescreening refugee applications at RSCs, which State officials indicated provide baseline standards for RSC  operations. Further, all four of the RSCs we visited provided us with their  own local SOPs that incorporated the topics covered in State\u2019s SOPs.  Directors at the remaining five RSCs also told us that they had developed  local SOPs that covered the overarching USRAP requirements. We  observed how RSC staff implemented State\u2019s case processing and  prescreening policies and procedures during our site visits to four RSCs  from June 2016 to September 2016. Specifically, we observed 27  prescreening interviews conducted by RSC caseworkers at the four RSCs  we visited and found that these caseworkers generally adhered to State  requirements during these interviews. In addition, we observed how RSC  staff in all four locations implemented additional required procedures  during our site visits, such as initiating required security checks and  compiling case file information for USCIS interviewing officers, and found  that these RSC staff were generally complying with SOPs.", "State has control activities in place to monitor how RSCs implement  policies and procedures for USRAP, but it does not have outcome-based  performance indicators to assess whether RSCs are meeting their  objectives under USRAP. Consistent with State\u2019s January 2016 Federal  Assistance Policy Directive, and according to State officials, State is  required to monitor the RSCs it funds, whether through cooperative  agreements or voluntary contributions. On the basis of our interviews  with State officials and as reflected in documentation from all nine RSCs,  including quarterly reports to State, all RSCs have generally undergone  the same monitoring regime regardless of funding mechanism. Further,  according to State officials, the department has dedicated Program  Officers located in Washington, D.C., and Refugee Coordinators based in  U.S. embassies worldwide, who are responsible for providing support to  RSCs and monitoring their activities\u2014including conducting annual  monitoring visits. Further, State has established objectives for RSCs,  which include interviewing applicants to obtain relevant information for the  adjudication and ensuring the accuracy of information in State\u2019s database  and the case files. State also establishes annual targets for the number of  refugees who depart for the United States from each RSC.", "Although State has established objectives and monitors several  quantitative goals for RSCs, it has not established outcome-based  performance indicators for key RSC activities such as prescreening  applicants or accurate case file preparation, or monitored RSC  performance consistently across such indicators. Specifically, neither the  quarterly reports nor other monitoring reports we examined have or use  consistent outcome-based performance indicators from which State could  evaluate whether RSCs were consistently and effectively prescreening  applicants and preparing case files\u2014key RSC activities that have  important implications for timely and effective USCIS interviews and  security checks. Developing outcome-based performance indicators, as  required by State policy and performance management guidance, and  monitoring RSC performance against such indicators on a regular basis,  would better position State to determine whether all RSCs are processing  refugee applications in accordance with their responsibilities under  USRAP."], "subsections": []}, {"section_title": "USCIS Has Policies and Procedures for Adjudicating Refugee Applications, but Could Improve Training and Quality Assurance", "paragraphs": [], "subsections": [{"section_title": "USCIS Has Policies and Procedures to Adjudicate Refugee Applications, but Could Improve Training for Temporary Officers", "paragraphs": ["USCIS has developed policies and procedures for adjudicating refugee  applications. In July 2017, we found that these policies and procedures  apply to all USCIS officers who adjudicate refugee applications\u2014those  from USCIS\u2019s Refugee Affairs Division (RAD), International Operations  Division (IO), and temporary officers from offices throughout USCIS\u2014and  include those for how officers are to review the case file before the  interview and conduct the interview, as well as how supervisors are to  review applications to ensure they are legally sufficient. We observed 29  USCIS refugee interviews at the four RSCs that we visited from June  2016 to September 2016 and found that the interviewing officers  completed all parts of the assessment tool and followed other required  policies. We also observed that the USCIS officers documented the  questions they asked and the answers the applicants provided. We also  observed USCIS supervisors while they reviewed officers\u2019 initial  decisions, interview transcripts, and case file documentation, consistent  with USCIS policy, at two of the sites we visited. Further, all six of the  officers that we met with stated that supervisors conducted the required  supervisory case file review during their circuit rides and the four  supervisory officers we met with were aware of the requirements and  stated that they conducted the supervisory reviews.", "USCIS also provides specialized training to all officers who adjudicate  applications abroad, but we found that USCIS could provide additional  training for officers who work on a temporary basis. According to USCIS  policy, all USCIS officers who adjudicate refugee applications must  complete specialized training, and the training varies based on the USCIS  division of the officer. However, temporary officers receive a condensed  (or shortened) version of the trainings received by full time refugee  officers and do not receive infield training. Although temporary officers  receive training prior to conducting in-person interviews with refugee  applicants, we found that they sometimes face challenges adjudicating  refugee applications. Specifically, we reviewed 44 summary trip reports  USCIS supervisors completed following officers\u2019 trips overseas to  interview USRAP applicants from the fourth quarter of 2014 through the  third quarter of 2016 that included adjudications by temporary officers.", "In 15 of the 44 reports, the supervisors noted that temporary officers  faced challenges adjudicating refugee applications. Standards for Internal  Control in the Federal Government state that management should  demonstrate a commitment to recruit, develop, and retain competent  individuals. The standards also note that competence is the qualification  to carry out assigned responsibilities, and requires relevant knowledge,  skills, and abilities, which are gained largely from professional  experience, training, and certifications. To the extent that USCIS uses  temporary officers on future circuit rides, providing them with additional  training, such as in-field training, would help better prepare them to  interview refugees and adjudicate their applications, increase the quality  and efficiency of their work, and potentially reduce the supervisory burden  on those who oversee temporary officers."], "subsections": []}, {"section_title": "USCIS Has Resources to Help Officers Identify Applicants with National Security Concerns, but Has Not Documented Plans for Deploying Officers with National Security Expertise Overseas", "paragraphs": ["In addition to training, USCIS has developed guidance documents and  tools to help officers identify USRAP applicants with potential national  security concerns. However, we found that USCIS could strengthen its  efforts by developing and implementing a plan for deploying officers with  national security expertise on selected circuit rides. USCIS provides a  number of resources to officers to help them identify and address  potential national security-related concerns in USRAP applications. In  addition, USCIS\u2019s national security policies and operating procedures  require that cases with national security concerns be placed on hold by  interviewing officers. These cases are then reviewed by USCIS  headquarters staff who have additional specialized training and expertise  in vetting national security issues. While USCIS has training and  guidance to adjudicate cases with national security-related concerns,  USCIS trip reports we analyzed and officers we interviewed indicated that  it can be challenging to adjudicate such applications. USCIS officials  identified several reasons why it is challenging to provide training and  guidance on how to adjudicate cases with potential national security  concerns. For example, according to RAD and IO headquarters officials,  indicators of national security concerns and the country conditions that  give rise to them evolve and change; as a result, USCIS guidance on how  to address those concerns also changes over time.", "To further help interviewing officers adjudicate cases with national  security concerns, in 2016, USCIS completed a pilot program that  included sending officers with national security expertise overseas to  support interviewing officers in some locations. USCIS determined the  pilot was successful and has taken steps to formalize it; however, USCIS  has not developed and implemented a plan for deploying these additional  officers, whose expertise could help improve the efficiency and  effectiveness of the adjudication process. In light of the evolving and  significant nature of national security concerns, developing and  implementing a plan to deploy additional USCIS officers with national  security expertise on circuit rides\u2014including timeframes for deployment  and how USCIS will select circuit rides for deployment\u2014would better  ensure that USCIS provides interviewing officers with the resources  needed to efficiently and effectively adjudicate cases with national  security concerns."], "subsections": []}, {"section_title": "USCIS Does Not Conduct Regular Quality Assurance Assessments of Refugee Adjudications", "paragraphs": ["We also found that USCIS has not regularly assessed the quality of  refugee adjudications, which help ensure that case files are completed  accurately and that decisions by USCIS officers are well-documented and  legally sufficient. USCIS conducted a quality assurance review of  refugee adjudications in fiscal year 2015, which included a sample of  applications adjudicated by RAD and IO during one quarter of the fiscal  year. The 2015 quality assurance review found that most cases in the  sample were legally sufficient. However, the review indicated that there  were differences between RAD and IO adjudications. Specifically, the  review rated 69 of 80 RAD case files (86 percent) as good or excellent,  and rated 36 of 73 IO case files (49 percent) as good or excellent. Two of  80 RAD case files (less than 3 percent) in the review and 17 of 73 IO  case files (23 percent) were rated as not legally sufficient. USCIS  developed action items to address identified deficiencies and has taken  steps to implement them. Among cases rated not legally sufficient, the  most common deficiency identified was that interviewing officers did not  fully develop the interview record with respect to possible  inadmissibilities. Other deficiencies reported included interview records  not being fully developed with respect to well-founded fear of persecution,  improper documentation and analysis of terrorism-related inadmissibility  concerns, incorrect hold determination, and required sections of the  assessment leading to the adjudication decision that were incomplete.", "Although there have been major changes in the refugee caseload in the  past 2 years (such as an increase in Syrian refugees), an increased use  of temporary staff to conduct refugee adjudications in fiscal year 2016,  and the difference in quality between RAD and IO adjudications noted in  the 2015 quality assurance review, USCIS did not conduct quality reviews  in 2016 and had no plans to conduct them in 2017. Standards for Internal  Control in the Federal Government states that management should  establish and operate monitoring activities to monitor the internal control  system and evaluate the results. In addition, standard practices for  program management state that program quality should be monitored on  a regular basis to provide confidence that the program will comply with  the relevant quality policies and standards. USCIS officials stated that  supervisors continue to review each refugee case file for legal sufficiency  and completeness at the time of the interview. While supervisory review is  an important quality control step, it does not position USCIS to identify  systematic quality concerns, such as those identified in the fiscal year  2015 quality assessment results. Conducting such reviews would help  ensure that case files are completed accurately and that decisions by  USCIS officers are well-documented and legally sufficient."], "subsections": []}]}, {"section_title": "State, USCIS, and Their Partners Have Implemented Antifraud Measures but Could Further Assess Staff and Applicant Fraud Risks", "paragraphs": [], "subsections": [{"section_title": "To Address Fraud Risks, State and RSCs Have Taken Steps to Follow Many Leading Antifraud Practices but Could Improve Implementation of Controls and Assessment of Risk", "paragraphs": ["According to State officials we interviewed for our July 2017 report, staff  fraud at RSCs occurs infrequently, but instances of staff fraud have taken  place in recent years, such as RSC staff soliciting bribes from applicants  in exchange for promises of expediting applicants through RSC  processing. State and RSCs reported instituting a number of activities to  combat the risk of fraud committed by RSC staff. Many of these activities  correspond with leading practices identified in GAO\u2019s Fraud Risk  Framework which identifies leading antifraud practices to aid program  managers in managing fraud risks that affect their program. For  instance, State and RSCs reported that they have taken steps to commit  to an organizational culture and structure to help manage staff fraud risks  and established collaborative relationships with both internal and external  partners to share information. Officials from all nine RSCs stated that they  assign staff fraud risk management responsibilities to designated  individuals. In addition, State and RSCs reported that RSCs have  designed control activities to address staff fraud risk. State officials  identified two key guidance documents containing control activities: RSC  SOPs and the Program Integrity Guidelines. The Program Integrity  Guidelines are a list of 87 measures designed to prevent and mitigate  staff fraud at RSCs. The measures were developed by State and  provided to RSCs in response to a staff fraud incident in 2013 that  resulted in the termination of two RSC staff. These measures include  control activities addressing issues such as background checks,  interpreter assignment, antifraud training, office layout, case file reviews,  electronic data management, and reporting and responding to instances  of suspected fraud.", "State required RSCs to comply with the original Program Integrity  Guidelines by October 2014; however, our review of RSC documents  found that RSCs reported complying with most, but not all, of the required  measures applicable to their operations. Reported compliance with  required, applicable measures at individual RSCs ranged from 86 percent  to 100 percent. For 53 of the 72 measures, compliance was reported by  all RSCs for which the measure was applicable. Some RSCs have  reported that they face challenges in fully implementing certain controls.  State officials told us that they work to ensure that each RSC complies  with all required controls in the Program Integrity Guidelines. If an RSC  reports that it does not yet fully comply with a measure listed in the  Program Integrity Guidelines, State expects the RSC to report its  progress toward compliance to State. While this reporting assists State in  its implementation efforts, we found that gaps remain. Full compliance  with these measures could help RSCs ensure the integrity of their  operations and guard against staff fraud.", "In addition, State has taken some steps to assess the risks posed by staff  fraud to RSC operations; however, we found that not all RSCs have  conducted staff fraud risk assessments that follow leading practices  identified in the Fraud Risk Framework, including (1) conducting  assessments at regular intervals or when the program experiences  changes, (2) tailoring assessments to the program and its operations, and  (3) examining the suitability of existing fraud controls. State officials told  us that not all RSCs had conducted staff fraud risk assessments because  State\u2019s Program Integrity Guidelines recommend but do not require these  assessments. Without State requiring RSCs to conduct regular staff fraud  risk assessments tailored to their specific operations, staff fraud risk  assessments conducted by individual RSCs have varied. Further, we  found that State and most RSCs have not examined the suitability of  existing fraud controls. For example, while one RSC has regularly  assessed the suitability of its existing staff fraud controls by conducting  regular staff fraud risk assessments that examine the likelihood and  impact of potential fraudulent activity and related fraud controls, the  remaining eight RSCs have not done so. State officials told us that  because State does not require RSCs to conduct risk assessments,  information needed to assess the suitability of existing controls is not  available from all RSCs. As the number of refugees accepted varies each  year by RSC, internal control systems may need to be changed to  respond to the potential increased fraud risk. Without requiring RSCs to  conduct regular staff fraud risk assessments that are tailored to their  specific operating environments and reviewing these assessments to  examine the suitability of existing fraud controls, State may lack  necessary information about staff fraud risks and therefore not have  reasonable assurance that existing controls effectively reduce these risks.  Information from such risk assessments could help State and RSCs  revise existing controls or develop new controls to mitigate the staff fraud  risks faced by the program, if necessary."], "subsections": []}, {"section_title": "State and USCIS Have Mechanisms to Help Detect and Prevent Applicant Fraud, but Could Jointly Assess Applicant Fraud Risks", "paragraphs": ["Fraud can occur in the refugee process in a number of ways, and State,  RSCs, and USCIS have implemented certain mechanisms to help detect  and prevent fraud by USRAP applicants. USCIS officers can encounter  indicators of fraud while adjudicating refugee applications, and State has  suspended USRAP programs in the past because of fraud. To detect and  prevent applicant fraud in USRAP, State, RSCs, and USCIS have put  mechanisms in place such as DNA testing for certain applicants; training  on applicant fraud trends for USCIS officers; and procedures at RSCs to  require, where possible, that different interpreters be involved in different  stages of the USRAP application process to decrease the likelihood that  applicants collude with interpreters. However, State and USCIS have not  jointly assessed applicant fraud risks program-wide. The Fraud Risk  Framework calls for program managers to plan and conduct regular fraud  risk assessments. In addition, Standards for Internal Control in the  Federal Government states that management should consider the  potential for fraud when identifying, analyzing, and responding to risks,  and analyze and respond to identified fraud risks, through a risk analysis  process, so that they are effectively mitigated.", "Although State and USCIS perform a number of fraud risk management  activities and have responded to individual instances of applicant fraud,  we found that these efforts do not position the agencies to assess fraud  risks program-wide for USRAP or know if their controls are appropriately  targeted to the areas of highest risk in the program. State and USCIS  officials told us that each agency has discrete areas of responsibility in  the refugee admissions process, and each agency\u2019s antifraud activities  are largely directed at their portions of the process. Because the  management of USRAP involves several agencies, without jointly and  regularly assessing applicant fraud risks and determining the fraud risk  tolerance of the entirety of USRAP, in accordance with leading practices,  State and USCIS do not have comprehensive information on the inherent  fraud risks that may affect the integrity of the refugee application process  and therefore do not have reasonable assurance that State, USCIS, and  other program partners have implemented controls to mitigate those risks.  Moreover, regularly assessing applicant fraud risks program-wide could  help State and USCIS ensure that fraud prevention and detection efforts  across USRAP are targeted to those areas that are of highest risk, in  accordance with the program\u2019s fraud risk tolerance."], "subsections": []}]}, {"section_title": "Our Recommendations and Agencies\u2019 Responses", "paragraphs": ["In our July reports, we made several recommendations to State and DHS.  Specifically, we recommended that State take the following actions in  GAO-17-706: develop outcome-based indicators for RSC, as required by State monitor RSC performance against such indicators on a regular basis;  And we recommended that State take the following actions in  GAO-17-737: actively pursue efforts to ensure that RSCs comply with required,  applicable measures in the Program Integrity Guidelines; update guidance, such as the Program Integrity Guidelines, to require  each RSC to conduct regular staff fraud risk assessments that are  tailored to each RSC\u2019s specific operations; and  regularly review RSC staff fraud risk assessments and use them to  examine the suitability of existing staff fraud controls and revise  controls as appropriate.", "We recommended that USCIS take the following actions in GAO-17-706: provide additional training for any temporary officers who adjudicate develop and implement a plan to deploy officers with national security  conduct regular quality assurance assessments of refugee application  adjudications across RAD and IO.", "We also recommended that State and USCIS conduct regular joint risk  assessments of applicant fraud risk across USRAP.", "State and USCIS concurred with all of our recommendations and have  actions underway to address them. For example, State noted that it has  developed new guidance to enhance the monitoring of RSCs, which  outlines roles, responsibilities, and tools for program officers and refugee  coordinators. In addition, USCIS provided documentation that USCIS  officials conducted a quality assurance assessment of refugee  adjudications in July 2017. Moreover, in July 2017, USCIS provided  documentation indicating that it instituted additional headquarters and  overseas training for temporary officers consistent with our  recommendation. Therefore, we closed this recommendation as  implemented.", "Chairman Labrador, Ranking Member Lofgren, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["For further information regarding this testimony, please contact Rebecca  Gambler, Director, Homeland Security and Justice at (202) 512-8777 or  gamblerr@gao.gov, or Thomas Melito, Director, International Affairs and  Trade at (202) 512-9601 or melitot@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this testimony are David Alexander, Ashley Alley, Kathryn Bernet,  Anthony Costulas, Martin De Alteriis, Brian Hackney, Paul Hobart,  Thomas Lombardi, and Elizabeth Repko.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-39", "url": "https://www.gao.gov/products/GAO-18-39", "title": "Tax Gap: IRS Needs Specific Goals and Strategies for Improving Compliance", "published_date": "2017-10-31T00:00:00", "released_date": "2017-11-30T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The tax gap\u2014the difference between tax amounts that taxpayers should have paid and what they actually paid\u2014has been a persistent problem for decades. The tax gap estimate is an aggregate estimate of the five types of taxes that IRS administers\u2014individual income, corporation income, employment, estate, and excise taxes. For each tax type, IRS attempts to estimate the tax gap based on three types of noncompliance: (1) underreporting of tax liabilities on timely filed tax returns; (2) underpayment of taxes due from timely filed returns; and (3) nonfiling, when a taxpayer fails to file a required tax return altogether or on time.", "GAO was asked to review IRS's tax gap estimate for tax years 2008 to 2010. This report provides information on (1) the main drivers of the tax gap; (2) IRS's confidence in the tax gap estimates; (3) IRS's goals, if any, for reducing the tax gap; and (4) the extent to which IRS uses tax gap estimates and underlying data to develop strategies to reduce the tax gap. GAO reviewed IRS tax gap data and reports and interviewed IRS officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Internal Revenue Service's (IRS) latest tax gap estimate found that taxpayers voluntarily and timely paid about 81.7 percent of the taxes they should have paid for tax years 2008-2010.", "As with past estimates, underreporting of individual income taxes accounted for the largest portion of the 2008-2010 tax gap. IRS believes the tax gap estimates are sufficiently reliable to provide a snapshot of tax compliance as a whole because much of the estimates are based on the most current data available, such as from IRS's National Research Program (NRP).", "IRS previously set or acknowledged goals to improve voluntary compliance. However, IRS has since moved away from that approach. IRS officials now believe there are limited benefits to establishing goals because IRS cannot control all aspects of compliance and updated methodologies may cause fluctuations in the estimates. IRS does, however, have an impact on taxpayers' compliance through its service and enforcement programs. Without long-term, quantitative goals for improving voluntary compliance, it will be difficult for IRS to determine the success of its compliance efforts and adjust its approaches.", "The Internal Revenue Manual states IRS needs to measure taxpayer compliance and other factors so compliance information and tools can be improved. IRS uses tax gap data to study compliance behaviors and update computer formulas designed to identify tax returns with a high likelihood of noncompliance. Yet IRS has not documented a comprehensive strategy that shows how it intends to use NRP data to update compliance strategies. Officials said the uses of NRP are widely known from general documentation about NRP. Without developing and documenting a strategy for using the NRP data to update compliance strategies, IRS may not fully leverage the compliance data or allocate enforcement resources in the most cost-effective manner, and it may be difficult for Congress and others to understand the merits of what they are being asked to fund."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that IRS re-establish goals for improving voluntary compliance and develop and document a strategy that outlines how it will use its data to update compliance strategies to address the tax gap. IRS disagreed with GAO's recommendation on establishing goals and agreed with the recommendation on compliance strategies. GAO continues to believe that goals are essential for results-oriented management."]}], "report": [{"section_title": "Letter", "paragraphs": ["Every year, taxpayers fail to pay hundreds of billions of dollars in taxes.  This tax gap\u2014the difference between tax amounts that taxpayers should  pay and what they actually pay voluntarily and on time\u2014has been a  persistent problem for decades. In 2016, the Internal Revenue Service  (IRS) estimated that taxpayers voluntarily and timely paid about 81.7  percent of the taxes they should have for tax years 2008 to 2010. The  average annual gross tax gap was $458 billion for those years. IRS  estimated that through late payments and enforcement actions it will  collect an additional $52 billion annually for tax years 2008 to 2010. The  average net tax gap of $406 billion for those years results in 83.7 percent  of taxes that should have been paid ultimately being paid.", "You asked us to review IRS\u2019s latest tax gap estimate for tax years 2008 to  2010. This report provides information on (1) the main drivers of the tax  gap; (2) IRS\u2019s confidence in the tax gap estimates; (3) IRS\u2019s goals for  reducing the tax gap; and (4) the extent to which IRS uses tax gap  estimates and underlying data to develop strategies and actions to reduce  the tax gap.", "To address these objectives, we reviewed IRS\u2019s tax gap estimates; IRS  documents on estimating compliance, estimating the tax gap, and  ensuring taxpayer compliance; and past GAO and Treasury Inspector  General for Tax Administration reports on the 2001 and 2006 tax gap  estimates. We also interviewed IRS officials responsible for estimating the  tax gap and those responsible for establishing goals and developing  strategies for improving voluntary compliance. We also examined data  from IRS\u2019s National Research Program (NRP) study of individual tax  returns from 2008 to 2010, which IRS based part of its individual  underreporting tax gap estimates, to show additional detail on aspects of  compliance.", "We determined that IRS\u2019s tax gap and associated compliance rate  estimates were sufficiently reliable for the purposes of our reporting  objectives based on reliability tests we conducted. See appendix I for  more information on scope and methodology.", "We conducted this performance audit from July 2016 through October  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["We have consistently stressed the importance of IRS conducting tax  compliance research. Likewise, analyzing compliance data can help IRS  identify ways to enhance taxpayer compliance. Without such data, it is  more difficult for IRS to decide whether its efforts to address specific  areas of noncompliance should focus on non-enforcement activities, such  as improved forms or publications, or enforcement activities. Analyzing  the data can also help identify changes that could be made to tax laws  and regulations that may improve compliance.", "In April 2016, IRS released its most recent tax gap estimate. IRS  estimated that taxpayers should have paid an average of about $2.5  trillion dollars per year in federal taxes for tax years 2008 to 2010. IRS  also estimated that taxpayers paid approximately $2.04 trillion voluntarily  and on time for those years, on average, leaving $458 billion in unpaid  taxes per year. However, IRS estimates that through late payments and  enforcement actions it eventually will collect an additional $52 billion on  average for those years, leaving the average net tax gap at $406 billion  for 2008 to 2010, as shown in figure 1.", "The tax gap estimate is an aggregate estimate of the five types of taxes  that IRS administers\u2014individual income, corporation income,  employment, estate, and excise taxes. For each tax type, IRS attempts  to estimate the tax gap based on three types of noncompliance: (1)  underreporting of tax liabilities on timely filed tax returns; (2)  underpayment of taxes due from timely filed returns; and (3) nonfiling,  when a taxpayer fails to file a required tax return altogether or on time.", "IRS has not developed specific estimates for the tax gap related to  income earned from illegal activities (e.g., prostitution) or certain forms of  fraud. However, if IRS discovers these types of income over the course of  an audit, it could be included in the tax gap estimates. In general, refund  fraud related to identity theft would not be included in the tax gap estimate  because it does not involve evading a tax liability. The tax gap includes  unintentional errors as well as intentional evasion, such as intentionally  underreporting income, intentionally overreporting expenses, and  engaging in abusive tax shelters or frivolous tax schemes.", "There is no single approach to estimating all of the components of the tax  gap. IRS uses NRP examinations of a stratified, random sample of tax  returns along with statistical modeling to produce estimates of  noncompliance for the population of individual income tax return filers.  Other areas of the tax gap are estimated using payment data or other  statistical models. Each approach IRS uses is subject to non-sampling  error and the areas of the estimate that are samples are subject to  additional sampling errors. The uncertainty of the estimates is not readily  captured by standard errors that typically accompany estimates based on  sample data. For that reason, IRS does not report standard errors,  confidence intervals, and statistical comparisons across years.", "Prior to the 2008\u20132010 estimate, IRS had released two other tax gap  estimates that used data from NRP examinations: (1) a tax year 2001 tax  gap estimate that was released in February 2007 and (2) a tax year 2006  tax gap estimate that was released in December 2011. As shown in  figure 2, the gross tax gap estimate has increased, in nominal terms, from  $345 billion for 2001 to $458 billion, on average, for 2008\u20132010, an  increase of $113 billion or about 33 percent. However, when we adjusted  for inflation (using fiscal year 2016 dollars), the gross tax gap estimates  amount to $460 billion in 2001, $530 billion in 2006, and $509 billion in  2008\u20132010. The inflation-adjusted gross tax gap increased by about 11  percent from 2001 to 2008\u20132010; however, the 2008\u20132010 estimate is  slightly lower, by about 4 percent, than the 2006 estimate.", "Over the three estimates, the voluntary compliance rate (VCR)\u2014the  percentage of owed tax for a given year that is paid voluntarily and  timely\u2014has decreased slightly from 83.1 percent for 2006 to 81.7, on  average, for 2008\u20132010. IRS also estimated the VCR and distribution of  tax liability for each component of the tax gap. Generally, employment  taxes have the highest estimated compliance rates while individual  income and estate taxes have the lowest estimated compliance rates.  There was a decrease in the VCR for individual income tax from 79  percent for tax year 2001 to 74 percent in the recent 2008\u20132010 estimate.  According to IRS, this decline, along with the individual income tax\u2019s  increase in the share of liability, contributes to the slight decline in the  overall VCR.", "The amount of the tax gap that IRS estimated it would collect through  enforcement efforts and late payments varied across the three estimates.  In 2001, IRS estimated it would collect $55 billion and that figure would  increase by $10 billion, to $65 billion in 2006. However, for the 2008\u2013 2010 tax gap estimate, the enforced collections or late payments  decreased by $13 billion per year, on average, from the 2006 estimate, to  $52 billion. According to IRS, the methodology used to calculate prior  estimates may have been too optimistic, resulting in an overstatement of  as much as 25 percent. Additionally, IRS stated that the economic  downturn in 2008 reduced the total tax liability from which IRS could  collect revenue over this period.", "However, differences in the tax gap estimates across years may not all be  attributed to changes in taxpayer behavior (voluntary compliance) or IRS  enforcement activities. According to IRS, the tax gap estimates have  increased in part because IRS included some new tax gap components  and updated some methods, which it believes increased the  comprehensiveness and accuracy of the estimates. IRS reported that  changes in economic activity and changes in tax law and administration  also contribute to differences in tax gap estimates over time."], "subsections": [{"section_title": "Enforcement of Tax Laws and GAO\u2019s High-Risk List", "paragraphs": ["In our 2017 High-Risk Report we continued to include Enforcement of Tax  Laws as a high-risk area. Key components of this high-risk area include  both addressing the tax gap and improving tax compliance. IRS  enforcement of the tax laws helps fund the U.S. government by collecting  revenue from noncompliant taxpayers and, perhaps more importantly,  promoting voluntary compliance by giving taxpayers confidence that  others are paying their fair share. However, IRS still faces challenges to  its capacity for implementing new initiatives and carrying out ongoing  enforcement and taxpayer service programs under an uncertain  budgetary environment.", "Given the estimated size of the tax gap, even modest reductions would  yield significant financial benefits for the country. We have made  numerous recommendations over time to help IRS, the Department of the  Treasury (Treasury), and Congress address tax noncompliance.  Nonetheless, as we have reported in the past, closing the entire gap is  not feasible since it could entail more burdensome record keeping or  reporting than the public is willing to accept or more resources than IRS is  able to commit. For example, third-party information reporting has  shown to improve accuracy of income reporting by individual taxpayers;  however, it requires increased record keeping and reporting by the third  party and requires IRS resources to properly match the third-party  information to individual tax returns."], "subsections": []}]}, {"section_title": "Underreporting by Individual Taxpayers Accounts for the Largest Portion of the Tax Gap", "paragraphs": ["Underreporting of tax liabilities accounted for most of the tax gap estimate  for tax years 2008\u20132010, making up 84 percent of the entire estimated  gross tax gap, as shown in figure 3. Individual income taxes made up the  largest portion of underreporting, followed by employment taxes and  corporation income taxes."], "subsections": [{"section_title": "Individual Income Tax Underreporting", "paragraphs": ["Underreporting of business income accounted for nearly half of the  individual income tax underreporting gap. This includes income from sole  proprietors, which accounted for the largest share of individual income  tax underreporting, as shown in table 1. Most business related income tax  return items also had high net misreporting percentages, which is the sum  of the net misreported amount divided by the sum of the absolute values of the amounts that should have been reported, as a percentage. To  show additional detail on aspects of the tax gap, we conducted some  additional analysis on selected line items of the individual NRP data,  which is presented in appendix II.", "As we have previously reported, the extent to which individual income tax  taxpayers accurately report their income is closely aligned to the amount  of income that is reported to them and to IRS by third parties. For  example, according to 2008\u20132010 IRS data, taxpayers misreported over  half of the types of income for which there is little or no third-party  information reporting, such as business income. In contrast, when  employers withhold taxes and report the wages and salaries to  employees and IRS through Form W-2, Wage and Tax Statement (W-2),  there is better compliance. As shown in figure 4, 1 percent of these types  of income were misreported while nearly 99 percent were accurately  reported on individual income tax returns. Similarly, taxpayers  misreported less than 10 percent of income for which banks and other  financial institutions provided information returns (Forms 1099) to account  holders and IRS that show taxpayers\u2019 annual income from some types of  investments.", "Generally, new requirements on third parties to submit information returns  would require statutory changes. We have previously identified additional  information reporting opportunities as well as improvements that IRS  could make on its own to existing forms and how it uses them. For  example, we suggested in August 2008 that Congress may wish to make  all taxpayers with rental real estate activity subject to the same  information reporting requirements as other taxpayers operating a trade  or business; however, no legislative action has been taken on this  suggestion. We recommended in August 2010 that IRS require  mortgage-secured property addresses to be reported on other forms  (Forms 982 and 1099-C) to help IRS detect taxpayers who fail to pay  taxes on certain forgiven mortgage debts. Legislative and executive  actions have been taken consistent with our recommendation. However,  IRS has not revised two forms to collect specific information from  taxpayers and lenders concerning the amount of forgiven debt attributable  to a principle residence and the locations of a taxpayer\u2019s principle  residence.", "For items subject to substantial third-party information reporting, IRS is  able to use automated processes to address noncompliance. The  automated underreporter program, through which IRS matches amounts  reported on returns with amounts reported on information returns  submitted by third parties, is one such process. This computer matching  program allows IRS to identify discrepancies between tax returns and  information returns and propose automatic changes to taxpayers.", "For items with little to no third-party information reporting, IRS has to rely  on more resource-intensive methods, such as correspondence or face-to- face examinations, to address noncompliance. While these examinations  may be started by reviewing specific line items, they may also be  expanded to cover other areas of the tax returns if there are indications of  misreporting in areas of the return not previously identified. However, it is  harder for IRS to detect noncompliance in areas with little third-party  information reporting."], "subsections": []}, {"section_title": "Employment Tax Underreporting", "paragraphs": ["The second largest part of the underreporting tax gap is made up of  employment taxes, which are comprised of three main components: self- employment tax, Federal Insurance Contribution Act (FICA) Social  Security and Medicare withholding, and Federal Unemployment Tax Act  (FUTA) taxes, as shown in table 2. The self-employment component is  estimated from IRS\u2019s NRP individual income tax data. However, IRS  lacks NRP data for other components of employment tax. Therefore, it  estimates both FICA and FUTA by applying the estimated compliance  rates from a 1993 employment tax gap report, which used tax year 1984  employment tax return data, to the current reported taxes.", "IRS recently completed an NRP study of employment tax returns that  reviewed federal income tax withholding and FICA, the first such study  IRS had conducted in over 30 years. We reported that although the  examinations for the study were completed, IRS had not developed  formal plans to analyze the results to (1) identify areas of noncompliance,  (2) address such noncompliance, or (3) update its employment tax gap  estimate. According to IRS officials, they had not developed formal  plans due to competing research priorities and limited resources and  because the NRP results had not yet been finalized. We recommended  that IRS develop plans to analyze the NRP results in 2017 to address  areas of noncompliance identified and update its employment tax gap  estimates. IRS agreed with our recommendations and stated that it will be  determining how to use the data from this new study to update the  employment tax gap estimate."], "subsections": []}, {"section_title": "Corporation Income Tax Underreporting", "paragraphs": ["As shown in table 3, IRS developed corporation income tax  underreporting estimates for two types of corporations: small corporations  (those without a balance sheet or with assets less than $10 million) and  large corporations (those with assets of $10 million or more). IRS  estimated the voluntary compliance rate for all corporations to be 83  percent for tax years 2008\u20132010. The estimates are based on adjusted  data from operational examinations, which focus on the tax returns most  likely to have substantive noncompliance rather than examinations of a  statistically representative sample of corporation tax returns. IRS does not  have a program comparable to NRP for corporation income tax because  of the difficulty of constructing a representative sample for a small group  of highly diverse large corporations, among other reasons.", "The limited scope and selection criteria for non-NRP examinations  introduce statistical bias, meaning that the examination issues and results  from examinations of corporation tax returns are not necessarily  representative of the overall corporation population. However, IRS has  developed some methods to project the results of the examinations to the  larger population of corporations, and, despite these limitations, IRS  considers the corporation estimates to provide a rough gauge of  corporation income tax noncompliance.", "IRS\u2019s divisions responsible for large and small corporation examinations  each have management systems in place to track issues identified from  corporation examinations. While this information is not derived from the  tax gap estimates, IRS has identified several common examination issues  for both large and small corporations, as shown in table 4."], "subsections": []}, {"section_title": "Net Tax Gap", "paragraphs": ["For the 2008\u20132010 tax gap estimate, IRS for the first time estimated the  net tax gap by each type of tax, as shown in table 5. Unlike most of the  tax gap, IRS can tabulate late payments. Since enforcement and other  late payments often happen many years after a given tax year has ended,  IRS must project into the future to estimate how much tax it will eventually  collect for that tax year. IRS expects to recoup the smallest percentage of  taxes from the gross individual income tax estimate."], "subsections": []}]}, {"section_title": "IRS Has Confidence in Most Aspects of the Tax Gap Estimate and Is Taking Steps to Improve It", "paragraphs": ["IRS officials stated IRS believes the tax gap estimates are sufficiently  reliable for the intended purpose of providing a snapshot of tax  compliance as a whole. The tax gap estimate is actually many estimates  used together to develop one overall picture of tax compliance. IRS has  more certainty in some areas of the estimate than others. Generally, IRS  officials consider those components of the tax gap estimate that are  based on the most current data (2008\u20132010 data) to be more robust.  However, as shown in table 6, IRS recognizes that some component  estimates of the tax gap estimate are more uncertain than others, in part  because some component estimates rely on older data and it is inherently  difficult to estimate some types of noncompliance. IRS has no estimates  for some areas of the tax gap.", "According to IRS officials, IRS has higher amounts of confidence in all of the underpayment components, because they are based on data  from systems that can distinguish enforcement and late payments  from other payments (IRS has the most confidence in these  components);  the individual income nonfiling component, because it is based on a  new methodology combining two methods that incorporate  improvements to the methods used in prior estimates;  the individual income underreporting component, because it is  primarily based on adjusted NPR examination data, which is a  statistically representative sample of individual tax returns; and  the corporation underreporting component, because it is based on  operational examination data, adjusted for selection bias.", "IRS has a lesser amount of confidence in  the estate nonfiling and underreporting data, because they are  forecasts updating estimates based on assumptions made in studies  completed in 2000; and  the withholding taxes (FICA and FUCA) part of the employment  underreporting data, because the data are partially a forecast based  on data from an older compliance study.", "The methodologies used to develop the component estimates differ by  component, resulting in a mix of statistical sample and operational-based  data being used, as well as forecasts from earlier estimates. IRS is  therefore unable to calculate confidence intervals for any of the tax gap  estimates. IRS officials stated that that they continue to try to identify a  value for those components without estimates, such as corporation  income, excise tax nonfiling, and excise tax underreporting, but have not  yet found a sufficiently reliable data source nor method upon which to  base estimates.", "To increase its confidence in the estimates of underreported individual  income, IRS uses an econometric technique called detection controlled  estimation (DCE). This regression-based model controls for variables that  could affect the amount of underreporting IRS examiners detected. IRS  uses this adjustment because it knows its examiners do not detect all  underreported income during examinations, and therefore it adjusts the  NRP data to account for such undetected income when estimating the tax  gap. The statistical technique estimates the noncompliance detected by a  hypothetical \u201cbest practices\u201d examiner\u2014an ideal that is unattainable\u2014and  then statistically estimates the noncompliance detected by the  hypothetical examiner to adjust upward the findings from research  examinations conducted by actual examiners.", "The DCE adjustment accounts for more than half (about $150 billion) of  the total individual income tax underreporting estimate. IRS also used the  DCE adjustment for the self-employment tax estimates used in the  employment tax underreporting estimate. Appendix III provides more  information on the extent to which DCE adjustments contributed to the  2008\u20132010 tax gap estimate.", "IRS has taken steps to improve the tax gap estimate. For example, IRS  used an updated methodology to calculate the estimated nonfiling amount  for the 2008\u20132010 estimate that combined two prior methodologies.  Specifically, IRS expanded how it matches information between the U.S.  Census Bureau\u2019s annual Current Population Survey and IRS data to  estimate the amount of taxes that were not filed. IRS believes this  updated methodology allows it to create a better matched dataset and  identify nonfilers more accurately. See appendix IV for details on changes  to IRS\u2019s tax gap methodology.", "IRS plans to release its next tax gap estimate in 2019 to cover tax years  2011 to 2013. IRS is also undertaking several additional studies that may  offer data IRS can use to improve the tax gap estimate, including these  examples:", "Taxpayers\u2019 tipping behavior: IRS is surveying taxpayers to help  estimate total tip income and tipping rates by industry/occupation and  by major method of payment (e.g., credit card, debit card, and cash).", "Limited studies on C corporations and other midsize  corporations: IRS studied compliance of C corporations with assets  less than $250,000 and with a balance sheet, and corporations with  assets of $10 to $50 million for tax year 2010. These studies plan to  identify potential areas of noncompliance.", "Partnership misreporting pilot: In 2016, IRS initiated this study to  measure reporting compliance for certain partnerships, as well as to  estimate tax misreported at the taxable partner level as a result of  partnership misreporting. This study was initiated in response to a  recommendation from a prior report.", "NRP employment tax estimates: As previously mentioned, IRS is  determining how it will use the NRP employment tax study it  concluded in 2017 to improve the tax gap estimates."], "subsections": []}, {"section_title": "IRS Has Broad Compliance Goals but Lacks Specific Quantitative Goals for Increasing Voluntary Compliance", "paragraphs": ["IRS\u2019s current strategic plan (2014\u20132017) discusses general approaches  to make voluntary compliance easier for taxpayers and to ensure taxes  owed are paid. However, in some areas, the plan does not include  specific tactics for improving compliance strategies. Rather, it addresses  the elements of voluntary compliance and enforcement actions through  two of its goals:", "Delivering high-quality and timely service to reduce taxpayer burden  and encourage voluntary compliance.", "Effectively enforcing the law to ensure compliance with tax  responsibilities and combat fraud.", "IRS officials stated the strategic plan goals are a component of IRS\u2019s  Future State\u2014which is a vision for agency-wide operations that aims to  improve services across different taxpayer interactions such as individual  account assistance, exams, and collections\u2014and are directly reflected in  three of its six themes:  facilitate voluntary compliance by empowering taxpayers with secure  innovative services, tools, and support; understand noncompliant taxpayer behavior, and develop approaches  to deter and change it; and  select highest value work using data analytics and a robust feedback  loop.", "According to IRS officials, the remaining themes support these goals  indirectly by seeking to improve IRS\u2019s effectiveness. IRS officials noted  the IRS Future State vision has outlined two measures that will support  the overall goal of increased compliance. The first will be the percentage  of compliance issues resolved within 1 year of filing. The second is the  percentage of taxpayers with recurring compliance issues. However, IRS  has not yet determined the target levels for these goals. According to  officials, the levels for these goals will be published with the next IRS  strategic plan (2018\u20132022), which IRS is scheduled to release in mid- 2018."], "subsections": [{"section_title": "IRS Lacks Specific Quantitative Goals to Improve Voluntary Compliance", "paragraphs": ["IRS previously set or acknowledged quantitative goals to improve  voluntary compliance. However, IRS has since moved away from that  approach. In 2005, we recommended that IRS establish a long-term  quantitative voluntary compliance goal for individual income tax  underreporting and for tax underpayment, as well as for other areas of  noncompliance. IRS agreed with the concept of our recommendation  and, in response, established a voluntary compliance rate goal of 85  percent by 2009, which was published in IRS\u2019s fiscal year 2007 budget  request.", "In 2006, Treasury issued its Comprehensive Strategy for Reducing the  Tax Gap, with a seven-component strategy for reducing the tax gap: (1)  reduce opportunities for evasion, (2) make a multiyear commitment to  research, (3) continue improvements in information technology, (4)  improve compliance activities, (5) enhance taxpayer service, (6) reform  and simplify the tax law, and (7) coordinate with partners and  stakeholders. In 2007, IRS developed a more detailed report that  emphasized the same seven components outlined in the Treasury report  and also outlined projects, initiatives, legislative proposals, and other  actions designed to combat the sources of noncompliance.", "In the 2007 report, IRS acknowledged the goal set by the then Chairman  of the Senate Finance Committee for IRS to meet a 90 percent voluntary  compliance rate by tax year 2017 and the goal set by the IRS Oversight  Board of 86 percent by tax year 2009. In 2009, IRS published another  report that followed up on the efforts discussed in the 2006 and 2007  Treasury and IRS reports. However, IRS has not published any reports  since that time that focus on goals for reducing the tax gap.", "In 2012, Treasury, along with IRS, set an agency priority goal to increase  voluntary tax compliance from 83.1 to 86 percent by September 30,  2013. However, Treasury and IRS decided not to renew the agency  priority goal because they said the measure did not satisfy the criteria of  having indicators and quarterly milestones against which to track process  or being able to determine whether the goal has been achieved by the  end of a 2-year period, as established by the Office of Management and  Budget. Since the tax gap estimates are only updated every few years,  Treasury and IRS officials said there was no way for Treasury or IRS to  show improvements or declines in meeting the goal on a quarterly basis  or over the 2-year goal term. More recently, IRS officials told us that  while they want to achieve a high level of voluntary compliance, neither  IRS nor Treasury has set a recent high level department- or agency-wide  quantitative goal aimed at reducing the tax gap or increasing voluntary  compliance.", "Establishing clear compliance goals and measuring progress toward them  benefit both IRS and external stakeholders and are consistent with the  results-oriented performance management principles set forth in the  Government Performance and Results Act of 1993 and the GPRA  Modernization Act of 2010. As we have previously reported, setting  long-term strategic goals is essential for results-oriented management,  because such goals explain in greater specificity the results an agency is intending to achieve. The goals form a basis for an organization to  identify potential strategies for fulfilling its mission and for improving its  operations to support achievement of that mission. Directly aligning  strategic goals and strategies for achieving those goals is important for  assessing an agency\u2019s ability to achieve those goals. Further, when  program results could be influenced by external factors, agencies can use  intermediate goals and measure to identify the program\u2019s discrete  contribution to a specific result.", "IRS has moved away from specific numeric goals to improve compliance  because it now believes there are limited benefits to them. According to  IRS officials, IRS actions alone do not determine the level of taxpayer  compliance and there are also several challenges associated with  establishing meaningful and useful compliance goals. IRS officials  reported that many of these challenges are due to the tax gap only being  estimated every few years. As a result, fluctuations in the estimate over  time may not be generally attributed to changes in compliance behavior  but the fluctuations might instead result from the imprecision of the  estimates or updated methodologies.", "According to IRS, changes in the economy may also have an effect on  tax compliance rates. For example, a downturn in the economy would  likely result in less tax needing to be paid, but it might also cause some  taxpayers to comply less than they otherwise would. Further, separating  those two effects would be difficult, particularly given the unobserved  nature of most noncompliance. Finally, IRS officials stated other factors,  such as IRS services, enforcement efforts, evolving social norms, or  changes in legislation, may affect the overall compliance rate.", "Although IRS may not have full control over all of the factors that affect  voluntary compliance, it does have an impact on taxpayer\u2019s compliance  through its service and enforcement programs. Furthermore, IRS is not  alone in not having full control over the results it seeks to achieve. A  number of methods can be used to map or model the causal relationships  among the inputs, processes, and outputs produced by various strategies  and the forces that influence achievement of outcomes, such as results  mapping and logic modeling. Recognizing that outside influences may  present risks or challenges to achieving outcomes, OMB Circular Number  A-11 states that while agencies cannot mitigate all risks related to  achieving strategic objectives and performance goals, they should  identify, measure, and assess challenges related to mission delivery, to  the extent possible.", "We have previously reported that setting long-term quantitative goals for  IRS offers several benefits. First, compliance goals coupled with  periodic measurements of compliance levels would provide IRS with a  better basis for determining to what extent its various service and  enforcement efforts contribute to compliance. Second, long-term,  quantitative goals would help IRS consider new strategies to improve  compliance, especially since these strategies could take several years to  implement. Third, focusing on intended results can promote strategic and  disciplined management decisions that are more likely to be effective  because managers who use fact-based performance analysis are better  able to target areas most in need of improvement and to select  appropriate interventions. Fourth, agency accountability can be enhanced  when both agency management and external stakeholders\u2014such as  Congress\u2014can assess an agency\u2019s progress toward meeting its goals.", "Likewise, a survey of the Organization for Economic Cooperation and  Development countries and other advanced economies found that some  governments are paying increased attention to estimating tax gaps for  their major types of taxes. Several countries shared their quantitative  goals for reducing the tax gap or increasing their tax revenue with the  survey. For example, Denmark set a target to ensure that the tax gap  does not exceed 2 percent of estimated total tax liability.", "Without long-term, quantitative voluntary compliance goals and related  performance measures, it will be more difficult for IRS to determine the  success of its strategies, adjust its approach when necessary, and remain  focused on results, especially since factors that affect compliance change  over time. Having compliance goals as IRS has had in the past, coupled  with data, would provide a solid base upon which IRS could develop a  more strategic, results-oriented approach to improving compliance."], "subsections": []}]}, {"section_title": "IRS Uses National Research Program Data to Guide Compliance Efforts but Has Not Documented a Long- Term Strategy", "paragraphs": ["IRS officials told us tax gap data are used as a high-level overview of tax  compliance. IRS officials also stated they use the underlying tax gap data  (i.e., NRP data and other data) in several ways to update compliance  efforts. However, IRS has not documented a comprehensive strategy that  shows, for example, how it intends to analyze and use the tax gap data,  particularly from the NRP, to develop or improve compliance programs.", "IRS officials told us they use the NRP data to study specific compliance  behaviors. For example, IRS has studied taxpayer behavior in claiming  the Earned Income Tax Credit (EITC), the child tax credit, and the  additional child tax credit. Sometimes these studies are used to develop  legislative proposals that are included as part of the annual budget  process and outlined in Treasury\u2019s annual revenue proposals. Officials  stated the legislative proposals are based on the knowledge of  compliance derived from analysis of NRP data and they are organized  into themes, such as reducing the tax gap, improving voluntary  compliance, or improving tax administration. However, these revenue  proposals are requests for changes to the tax laws and, ultimately, it is at  Congress\u2019s discretion whether to enact them. IRS officials reported that  other times NRP data are used to compute the annual improper payment  rate for the EITC. According to officials, IRS also uses these data to  annually categorize the root causes of EITC noncompliance.", "IRS uses the NRP data to update compliance plans by updating the  Discriminate Function (DIF) formulas. DIF formulas are designed to score  returns for the likelihood that the tax reported on the return is significantly  underreported. DIF scores help IRS ensure that noncompliant taxpayers  are more likely to be selected for examination and compliant taxpayers  are less likely to be unnecessarily examined. IRS determines DIF scores  for individual income, small corporation income, partnership, and S  corporation returns.", "IRS officials described high-level concepts of how the various NRP and  other studies contribute to compliance and enforcement strategies.", "Officials from IRS\u2019s Office of Research, Applied Analytics, and Statistics  (RAAS) said they think the various uses of the NRP are widely known  from general documentation about the NRP and its study design. RAAS  officials also noted the fiscal year 2009 budget justification that led to  special funding for the NRP still reflects IRS\u2019s current strategy for  undertaking various NRP studies. Further, IRS officials pointed us to  documentation from the 2000s that discussed a need for a multiyear  research commitment and IRS\u2019s goal to move NRP studies beyond the  individual income tax to include other taxes. We previously recognized  IRS\u2019s commitment to multiyear research and have noted the gains it has  made in regularly estimating compliance. Our analysis of the decade-old  documents found evidence of a commitment to research that generally  seemed sufficient for that period.", "However, IRS officials did not provide us more recent documents that  describe its current efforts to study compliance or show how it plans to  use NRP data to update compliance strategies. IRS officials also provided  us with business plans for some of their other business units and  divisions. The plans we reviewed noted, at a high level, that data and  analysis will be used to improve workload selection but did not discuss  how specific research efforts or the results of those efforts would be  integrated into the missions.", "The Internal Revenue Manual section on the NRP states that IRS needs  to measure taxpayer compliance with federal income tax laws along with  contributing factors so that customer-focused programs and services can  be enhanced or developed and so that compliance information and tools  can be improved. A 2001 NRP prospectus states the NRP will help to  increase public confidence in the fairness of our tax system by helping  IRS identify where compliance problems occur and focus its resources  accordingly. Further, it states that for strategic planning and budget  purposes, IRS requires regular estimates of compliance. The NRP  research efforts support this critical need. According to IRS, the NRP will  also improve IRS\u2019s ability to detect noncompliance; reduce the burden of  unnecessary IRS contacts on compliant taxpayers; and support the  strategic goals, program development, and resource allocation of IRS  operating divisions.", "Using quality information, such as NRP data, to achieve the agency\u2019s  objectives is one of the 17 principles for internal controls. Further, the  standards for internal controls also recognize documentation is a  necessary part of an effective system, but the level and nature of  documentation vary based on the size of an entity and the complexity of  the operational process. Documentation is required to demonstrate the  design, implementation, and operating effectiveness of a system.  Considering the size and relative importance of the tax gap, documenting  a strategy for how IRS plans to use NRP data to reduce the tax gap  would be consistent with internal controls. However, without a strategy  that provides an overall picture of how NRP data are used, it may be  difficult for Congress and other decision makers to understand the merits  of what they are being asked to fund. Further, without developing and  documenting a strategy for incorporating the results of NRP data, IRS  risks not fully leveraging the compliance data it collects or not allocating  enforcement resources in the most cost-effective manner.", "We have a long-standing history of reporting on the need for IRS to  develop a comprehensive compliance strategy:  In 1994, we concluded that until IRS produces a comprehensive  compliance strategy, existing data could be used as part of an interim  compliance strategy that directs resources at the most noncompliant  taxpayers. We found that using such a starting point, IRS could  focus more of its efforts on highly noncompliant areas, such as small  corporation income and sole proprietorship income that made up  almost a third of the tax gap.", "In 2005, we concluded that reducing the tax gap will be a challenging  task given persistent levels of noncompliance and will not likely be  achieved through a single solution. Rather, the tax gap must be  attacked on multiple fronts and with multiple strategies over a  sustained period, thus building a foundation to help taxpayers  voluntarily comply.", "Between 2005 and 2007, we testified six times on the need for IRS to  develop a strategy to attack the tax gap on multiple fronts with  multiple approaches.", "In 2007, we reported on the need for IRS to develop a strategy to  address noncompliant sole proprietor income, which accounts for a  significant share of the tax gap.", "Further, documenting a strategy for using NRP data to guide compliance  efforts would be consistent with two key criteria for removal from the  High-Risk List:", "Action plan: A corrective action plan exists that defines the root  cause and solutions and that provides for substantially completing  corrective measures, including steps necessary to implement  solutions we recommended.", "Demonstrated progress: Ability to demonstrate progress in  implementing corrective measures and resolving the high-risk area."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["The nation\u2019s long-term fiscal projections show that the federal  government is on an unsustainable fiscal path. One way to help improve  the nation\u2019s fiscal position would be to reduce the tax gap. Reducing the  tax gap will be a challenging task given persistent levels of taxpayer  noncompliance. However, even modest reductions would yield significant  financial benefits and help improve the government\u2019s fiscal position.", "IRS has shown a continued commitment to study sources of  noncompliance and has made strides in improving NRP and other tax gap  data. However, additional efforts could further assist IRS in addressing  the tax gap. A long-term, quantitative goal for improving voluntary  compliance may provide IRS with a concrete target the agency can use in  fulfilling its mission. Without a quantitative goal, it will be more difficult for  IRS to determine the success of its strategies, adjust its approach when  necessary, and remain focused on results, especially since factors that  affect compliance change over time. Likewise, a strategy that outlines  how IRS plans to use NRP data to update compliance strategies would  help IRS determine resource tradeoffs and more fully leverage the  investment it makes in compliance research, while providing Congress  with a better understanding of the merits of the research it is being asked  to fund."], "subsections": []}, {"section_title": "Recommendations", "paragraphs": ["We are making the following two recommendations to IRS:  The Commissioner of Internal Revenue should re-establish long-term,  quantitative goals for improving voluntary compliance. (Recommendation  1)", "The Commissioner of Internal Revenue should instruct the appropriate  officials to develop and document a strategy that outlines how IRS will  use National Research Program data to update compliance strategies  that could help address the tax gap. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Commissioner of Internal  Revenue. IRS provided written comments, which are summarized below  and reprinted in appendix V. IRS also provided technical comments,  which we incorporated where appropriate.", "IRS disagreed with our recommendation that it re-establish long-term,  quantitative goals for improving voluntary compliance. In its letter, IRS  stated that the voluntary compliance rate is ill-suited as a strategic or  performance metric for IRS for various reasons. For example, IRS stated  that improving voluntary compliance, determining the success of its  strategies, and adjusting its approach could be accomplished in the  absence of a quantitative goal. However, as we note in the report, setting  long-term strategic goals is essential for results-oriented management,  because such goals explain in greater specificity the results an agency is  intending to achieve. Further, focusing on intended results can promote  strategic and disciplined management decisions that are more likely to be  effective because managers who use fact-based performance analysis  are better able to target areas most in need of improvement and to select  appropriate interventions.", "IRS also stated that its actions alone do not determine the level of  voluntary compliance, which is determined by the interaction of many  factors, such as taxpayer behavior, tax law complexity, and IRS  resources. We agree that IRS may not control all factors that affect  voluntary compliance. However, IRS does influence taxpayer compliance  through its service and enforcement programs. Furthermore, as we point  out in the report, while agencies cannot mitigate all outside influences that  may present risks or challenges to achieving outcomes, they should  identify, measure, and assess such challenges to the extent possible.  Given the benefits of setting long-term quantitative goals\u2014as discussed  in this report\u2014we continue to believe it is prudent for IRS to establish  such goals.", "IRS agreed with our recommendation that it develop and document a  strategy that outlines how IRS will use National Research Program data  to update compliance strategies that could help address the tax gap.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Chairmen and  Ranking Members of other Senate and House committees and  subcommittees that have appropriation, authorization, and oversight  responsibilities for IRS. We will also send copies of the report to the  Commissioner of Internal Revenue and other interested parties. In  addition, this report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff has any questions about this report, please contact me  at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of  Congressional Relations and Public Affairs are on the last page of this  report. GAO staff members who made major contributions to this report  are listed in appendix VI."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine (1) the main drivers of the tax gap; (2)  the Internal Revenue Service\u2019s (IRS) confidence in the tax gap estimates;  (3) IRS goals, if any, for reducing the tax gap; and (4) the extent to which  IRS uses tax gap estimates and underlying data to develop strategies and  actions to reduce the tax gap.", "To determine the main drivers of the tax gap and IRS\u2019s confidence in the  estimates, we reviewed IRS\u2019s tax gap estimates and underlying data; IRS  technical papers and reports; third-party reviews of the data; and past  GAO and Treasury Inspector General for Tax Administration reports on  the 2001, 2006, and 2008\u20132010 tax gap estimates. We also interviewed  officials from IRS\u2019s Office of Research, Applied Analytics, and Statistics  (RAAS) who are responsible for estimating the tax gap. We determined  that IRS\u2019s tax gap and compliance estimates were sufficiently reliable for  the purposes of this report, particularly since IRS already has publicly  released its tax gap estimates and disclosed their limitations. These  purposes include discussing the major tax gap components, the orders of  magnitude for various components, and IRS\u2019s opinions about the  certainty of its estimates.", "To determine IRS\u2019s goals for increasing voluntary compliance, we  reviewed IRS\u2019s and the Department of the Treasury\u2019s (Treasury) strategic  plans and Treasury\u2019s General Explanations of the Administrations Fiscal  Year Revenue Proposals (commonly referred to as the Green Book) from  2011 to 2017. We also reviewed other IRS and Treasury documentation,  such as the strategies for improving voluntary compliance that were  developed in the mid-2000s. Additionally, we reviewed Treasury\u2019s agency  priority goals, including the goal it set in 2012 to increase voluntary  compliance. We also reviewed the statutory requirements for agency  performance goals under GPRAMA. We interviewed Treasury officials in  the Office of Tax Analysis and the Office of Strategic Planning and  Performance Improvement about prior goals that were set and the goal- setting process. We interviewed IRS officials responsible for developing  strategies and establishing goals to reduce the tax gap, specifically  officials in the Deputy Commissioner\u2019s Office for Service and  Enforcement and the Small Business/Self-Employed, Large Business and  International, and Wage and Investment divisions.", "To determine the extent to which IRS uses the tax gap and other  underlying data to update compliance efforts, we requested  documentation on any plans or strategies that show how the various tax  gap and other compliance studies work together toward a larger  compliance strategy. We found that the agency had not developed these  documents. We interviewed staff from the Deputy Commissioner\u2019s Office  for Service and Enforcement and RAAS about the agency\u2019s plans to use  tax gap data and other compliance studies when developing compliance  strategies.", "To show additional detail on aspects of compliance using the same data  upon which the individual income tax underreporting tax gap estimates  are based, we examined IRS\u2019s tax gap estimates for tax years 2008\u2013 2010 and the underlying data from its National Research Program (NRP)  study of individual income tax returns. This information is presented in  appendix II. Unlike other IRS examinations, NRP examinations can be  used to estimate taxpayer reporting compliance because they are drawn  from a stratified, statistically representative sample of the population of  individual income tax returns. We interviewed IRS officials from RAAS  about their research and analysis of the NRP data, and we gathered  related documentation where available. IRS officials described the quality  review and data reliability processes they used to collect data from the  NRP examinations.", "Because the NRP sample was based on random selections, the sample  was only one of a large number of samples that IRS could have drawn.  Since each sample could have provided different estimates, we express  our confidence in the precision of our estimates based on the sample as a  95 percent confidence interval plus or minus a margin of error. This is the  interval that would contain the actual population value for 95 percent of  the samples that could have been drawn. The estimates presented in  appendix II have margins of error of less than 10 percent or 10  percentage points. In analyzing the NRP data, we conducted several  reliability tests to ensure the data we used were sufficiently complete. For  example, we electronically tested the data for obvious errors. We  concluded that the data were sufficiently reliable for the purposes of this  report based on these steps and on our previous reviews of tax gap  estimates and NRP data.", "We conducted this performance audit from July 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Additional Analyses of National Research Program Individual Data", "paragraphs": ["We analyzed the raw National Research Program (NRP) data for  individual income tax returns, including itemized deductions, for tax years  2008\u20132010. These data do not account for the undetected income that  the Internal Revenue Service (IRS) adjusts for when developing tax gap  estimates. Therefore these data are not comparable to the tax gap data  presented elsewhere in this report, but they allow additional analysis of  areas of misreporting.", "Table 7 provides greater details on certain line items from the individual  income tax return that align with various third-party information reporting  levels determined by IRS. Line items with substantial or some information  reporting tended to have lower overall misreporting percentages. Line  items that had the largest percentage of taxpayers with misreported  income were those for sole proprietor and farming income, both of which  are subject to little to no information reporting.", "Based on the analysis of these data, we also estimate that  line items with the largest mean amounts of underreporting are  business sale and supplemental income or loss;  the business sale line item also has the largest mean amount of  overreporting, averaging $21,000 per return; and  sole proprietor income and farm income have very similar  misreporting data; over 75 percent of the income is misreported and,  of that, over 80 percent is under reported while under 20 percent is  overreported.", "We also analyzed selected credits and deductions to determine the  average noncompliance rates of these line items, as shown in table 8.  Because credits and deductions offset taxpayers\u2019 income or tax owed,  taxpayers who underreported a credit or deduction overreport their tax  liability or tax owed; taxpayers who overreport a credit or deduction  underreport their tax liability or tax owed. However, we did not determine  the extent to which misreporting was because of issues specific to how  taxpayers claimed the credits and deductions or because taxpayers  misreported their income, which could affect eligibility for certain credits  and deductions. For example, the 2016 income limit to claim the Earned  Income Tax Credit (EITC) is $39,296 for single, surviving spouse, or head  of household taxpayers with one qualifying child. If IRS determined that  such taxpayers who claimed the EITC and reported less than $39,296 in  income on their tax returns had underreported their income in order to  stay under the threshold, those taxpayers would no longer be eligible for  the credit and would have overreported the credit.", "Based on the analysis of these data, we estimate that of the selected credits, EITC is the most claimed credit and about half  of the time it is misreported;  thirty-five percent of the time the child tax credit was misreported with  about two- thirds of that being underreported, which is inconsistent  with filing patterns for most of the other credits and deductions; of the selected deductions, the deduction for real estate taxes is most  often claimed and about a quarter of the time it is misreported;  the medical expenses line item has the highest percentage of  misreporting; 80 percent of the time the deduction is overreported;  and  the mortgage interest deduction has the highest average overreported  amount, over $4,000 per return."], "subsections": []}, {"section_title": "Appendix III: Detection Correction Factor\u2019s Effect on Tax Gap Estimation", "paragraphs": ["In estimating the individual income tax gap, the Internal Revenue Service  (IRS) applies an econometric technique called detection controlled  estimation (DCE), which is a regression-based model that controls for  variables that could affect the amount of underreporting detected. The  statistical technique first produces a hypothetical \u2018\u2018best practices\u2019\u2019  examiner\u2014an ideal which is unattainable\u2014based on who conducted the  examinations and the observed examination results. It then statistically  estimates the noncompliance detected by the hypothetical examiner to  adjust upward the findings from research examinations conducted by  actual examiners. The technique estimates total undetected  underreporting by imputing the average underreporting undetected by  IRS\u2019s National Research Program (NRP) examination to the detected  underreporting, controlling for certain return line item characteristics.  According to IRS officials, this approach is reasonable and the best  currently available to attempt to estimate the full amount of underreported  individual income. As shown in table 9, more than half of the  underreporting component of the tax gap consists of income that IRS did  not detect during examinations. DCE is not applicable to the  underpayment and nonfiling components of the tax gap."], "subsections": []}, {"section_title": "Appendix IV: Additional Information on IRS\u2019s Tax Gap Methodology Changes", "paragraphs": ["In efforts to improve the tax gap estimates, the Internal Revenue Service  (IRS) updated two areas of the 2008\u20132010 tax gap estimate by  developing updated methodologies.", "Nonfiling individual income tax: IRS summed together the total of  taxpayers who do not file tax returns and those who filed late. The  2008\u20132010 estimate of taxpayers not filing a return was made by  combining the two methods used to estimate the 2006 and 2001 tax  gap estimates. In 2006, IRS used a sample of individuals not  appearing on filed tax returns. In 2001, IRS conducted an \u201cexact  match\u201d between the Census Bureau\u2019s annual Current Population  Survey and IRS data. The 2008\u20132010 estimate of late filers was  based on the total balance due from late filed tax returns, adjusted for  income reported to IRS on information returns. IRS believes its  current methodology is an improvement over the 2006 estimate as it  uses the population data rather than a sample, avoiding  disadvantages resulting from sampling. IRS reported improvements in  the Census and IRS information associated with nonfilers allowed  them to create a better matched dataset and identify nonfilers more  accurately.", "Nonfiling self-employment data: The methodology IRS used to  calculate self-employment tax nonfiling is the same that it used for  individual income tax. However, for the 2008\u20132010 estimate, IRS  changed where it reports self-employment tax nonfiling within the tax  gap estimate. For the 2008\u20132010 estimate, this tax is now reported in  the employment tax category, whereas for the 2001 and 2006  estimates it was reported in the individual income tax category. IRS  officials stated that for the 2006-2010 estimate IRS decided to break  self-employment out separately and report it with the employment tax  because they believe it allows a more comprehensive view of  employment taxes.", "IRS also updated how the underlying data supporting the tax gap are  organized in two ways:", "Changes in net tax gap estimates: As previously mentioned, IRS  published net tax gap estimates by each tax type (individual income,  corporation income, employment, and estate tax) for the first time in  the 2008\u20132010 estimate. IRS officials stated that they made progress  by providing this data. However, IRS is unable to break out the net tax  gap further by tax component because during examinations,  adjustments are not categorized by component (i.e., underreporting,  underpayment, and nonfiling).", "Changes in individual income underreporting: Starting in 2008\u2013 2010, IRS modified the categories it uses to break down the individual  income underreporting component. These changes affect how IRS  calculates the net misreporting percentage (NMP) for individual  income tax, but not how it calculates the tax gap. IRS uses the NMP  to show the relationship between third-party information reporting and  individual income tax reporting compliance. IRS reported the changes  reflect an improvement in methodology. IRS cautions that any  comparison of the 2008\u20132010 NMP to the 2006 NMP estimates  should consider those improvements. The prior calculation method  involved adding offsets to income, such as deductions, exemptions,  and adjustments, which distorted the comparison across categories.  IRS determined a better approach was to combine income items into  categories and to report offsets to income as a separate category.  (See figure 5.)"], "subsections": []}, {"section_title": "Appendix VI: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact:", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments:", "paragraphs": ["In addition to the contact named above, Jeff Arkin (Assistant Director),  James Ashley, Jehan Chase, Charles Fox, John Hussey, Donna Miller,  John Mingus, Edward Nannenhorn, Cynthia Saunders, Robyn Trotter,  and Elwood White made significant contributions to this report."], "subsections": []}]}], "fastfact": ["According to IRS estimates, taxpayers collectively pay a bit more than 80% of the taxes they owe. This difference between the taxes people and businesses owe and what they pay on time is known as the tax gap, which IRS estimated to be $458 billion, on average, for 2008-2010.", "IRS used to set specific, numeric goals for improving taxpayer compliance, but has moved away from that approach. Officials told us that there are too many factors outside of IRS's control for such goals to be useful.", "We recommended that the IRS re-establish quantitative goals for improving voluntary compliance and develop a strategy for using data to close the tax gap."]}
{"id": "GAO-19-135T", "url": "https://www.gao.gov/products/GAO-19-135T", "title": "Positive Train Control: Most Passenger Railroads Expect to Request an Extension and Substantial Work Remains Beyond 2018", "published_date": "2018-10-03T00:00:00", "released_date": "2018-10-03T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Forty railroads are currently required by statute to implement PTC, a communications-based system designed to slow or stop a train that is not being operated safely. Of these, 29 passenger railroads collectively provide over 500 million passenger trips annually. Although the deadline for PTC implementation is December 31, 2018, railroads may receive a maximum 2-year extension to December 31, 2020, if they meet certain statutory criteria.", "GAO was asked to review passenger railroads' progress toward PTC implementation. This statement discusses (1) passenger railroads' PTC progress and FRA's steps to assist them, and (2) how passenger railroads and FRA plan to approach the 2018 and 2020 deadlines. GAO analyzed railroads' most recent quarterly reports covering activities through June 30, 2018; sent a brief questionnaire to all 40 railroads; and interviewed officials from FRA and 16 railroads, selected in part based on those identified as at-risk by FRA."]}, {"section_title": "What GAO Found", "paragraphs": ["As of June 30, 2018, passenger railroads (28 commuter railroads and Amtrak) generally remained in the early stages of positive train control (PTC) implementation\u2014including equipment installation and early field testing. However, many passenger railroads are nearing completion of the equipment installation stage. For example, two-thirds of passenger railroads reported being more than 90 percent complete with equipment installation. With regard to testing, Amtrak has reported that it has initiated both field testing and revenue service demonstration (RSD), an advanced form of field testing that is required to fully implement PTC. However, most commuter railroads reported slower progress with testing. Of the 28 commuter railroads required to implement PTC, 19 reported initiating field testing, but only eight reported initiating RSD. The Federal Railroad Administration (FRA) recently clarified the criteria railroads must meet to qualify for a 2-year extension past the December 31, 2018, PTC implementation deadline. To receive an extension, railroads must meet six statutory criteria. For the sixth criterion, commuter railroads are authorized to either initiate RSD on at least one track segment or use FRA-approved substitute criteria. FRA clarified these and other requirements at three PTC symposiums hosted for railroads in summer 2018. For example, FRA officials said that initiating field testing instead of RSD was one approach that commuter railroads could potentially take to receive FRA's approval of substitute criteria. FRA's actions are consistent with GAO's March 2018 recommendation that the agency communicate to railroads the requirements and process for an extension.", "Challenges related to PTC implementation and FRA's resources raise questions as to the extent FRA and the passenger railroad industry are poised for full PTC implementation by December 31, 2020. Most passenger railroads anticipate needing an extension, leaving substantial work for both railroads and FRA to complete before the end of 2020. Almost three-quarters of passenger railroads (21 of 29) reported that they, or the railroad which owns the track on which they operate, will apply for an extension. More than half of these railroads reported planning to apply for an extension using substitute criteria, and of these, eight intend to apply for substitute criteria based on field testing. Though use of substitute criteria is authorized in law, this approach defers time-intensive RSD testing into 2019 and beyond. In addition, passenger railroads reported that they continue to face many of the same challenges GAO previously identified, such as software defects and limited industry-wide availability of vendors. Further, passenger railroads expressed concern that FRA's workload will markedly increase as railroads submit requests for extension approvals. FRA has acknowledged concerns about the pending surge of submissions and agency officials said they have taken recent steps to help manage the forthcoming influx of documentation, such as reallocating resources. However, as of September 21, 2018, only one passenger railroad had applied for an extension. It remains unclear how many extension requests FRA will receive or what FRA's enforcement strategy will be for noncompliance with the statute, such as for railroads that fail to apply for an extension by the deadline."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In March 2018, GAO recommended FRA take steps to systematically communicate extension information to railroads and to use a risk-based approach to prioritize agency resources and workload. FRA has taken some steps to address these recommendations, such as recently communicating and clarifying extension requirements to all railroads during three symposiums. GAO will continue to monitor FRA's progress."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our work in reviewing efforts by  passenger railroads and the Federal Railroad Administration (FRA) to  implement positive train control (PTC). In September 2008\u201410 years ago  last month\u2014a commuter train and freight train collided in the Chatsworth  neighborhood of Los Angeles, California, resulting in 25 deaths and over  100 injuries. In the wake of this accident, legislation was enacted  requiring certain railroads to implement PTC\u2014a communications-based  system designed to slow or stop a train that is not being operated safely.  Forty railroads are required to implement PTC. These railroads include  28 commuter railroads and Amtrak, which collectively provide over 500-  million passenger trips annually. Railroads that play a key role in our  nation\u2019s freight network must also implement PTC, including the seven  largest Class I and four Class II and III freight railroads.", "As we have previously reported, PTC implementation is a complex and  lengthy process, which touches almost every part of major rail lines and  almost every aspect of railroads\u2019 train operations. Each implementing  railroad must install more than 20 major components that will ultimately  communicate trains\u2019 locations, movements, and speed, and then slow or  stop a train that is not being operated safely. Full implementation of PTC  involves a number of steps, including but not limited to: planning and  system development, equipment installation, testing, system certification,  and achieving interoperability. Since U.S. railroads often operate some or  all of their trains as \u201ctenants\u201d on the track of another railroad, known as  the \u201chost,\u201d interoperability is intended to enable trains that operate on the  same track to be governed by the PTC system and to move seamlessly  across track owned by different railroads.", "When PTC implementation was mandated in 2008, the statutory deadline  for railroads\u2019 implementation was December 31, 2015. We reported in  September 2015 that nearly all railroads did not expect to meet this  deadline. In October 2015, Congress extended the deadline to  December 31, 2018, and established criteria that would enable FRA, the  agency responsible for overseeing PTC implementation, to grant railroads  meeting certain requirements an alternative schedule up to year-end  2020. Throughout this statement we refer to the alternative schedule as  the \u201cextension.\u201d My testimony today discusses the efforts of FRA and  passenger railroads\u2014which include commuter railroads and Amtrak, an  intercity passenger railroad\u2014to implement PTC as the December 31,  2018, deadline approaches and since we testified on PTC in March  2018. My statement today will address (1) passenger railroads\u2019  implementation progress and the steps that FRA has taken to assist  these railroads and (2) how passenger railroads and FRA plan to  approach PTC implementation to meet the December 2018 and  December 2020 deadlines.", "To describe passenger railroads\u2019 progress, we analyzed the most recent  available quarterly PTC implementation reports that railroads submitted to  FRA, reports that reflected the progress as of June 30, 2018. We  analyzed the reports to determine the extent that each railroad has  installed PTC hardware and initiated testing. Based on our review of  these data for anomalies, outliers, or missing information and our  previous assessment of such quarterly reports for our March 2018  testimony, we determined that these data were sufficiently reliable for our  purposes of describing railroads\u2019 progress in PTC implementation. To  describe passenger railroads\u2019 and FRA\u2019s progress and approaches, we  interviewed representatives from 16 railroads, including the 12 railroads  (11 commuter railroads and one Class III freight railroad) that FRA  identified in June 2018 as at risk of not having implemented PTC or  qualifying for an extension by December 31, 2018. The remaining four  railroads we interviewed were: Amtrak, which provides intercity passenger rail service; two Class I freight railroads, which were selected  based on their relationships with tenant railroads and substantial progress  toward PTC implementation; and a commuter railroad that received  approval from FRA in March 2018 for an exception from PTC system  implementation. To describe how railroads and FRA plan to approach  PTC implementation for the December 2018 and 2020 deadlines, we sent  41 railroads a semi-structured questionnaire. The questions we asked  were based on the data collection efforts from our March 2018 testimony.  We analyzed railroads\u2019 responses and summarized their plans and  challenges into common categories. To determine the stage of PTC  implementation railroads expected to reach by December 31, 2018, we  considered railroads\u2019 responses to our questionnaire, information  provided in interviews, and documents submitted to FRA regarding  railroads\u2019 planned implementation approaches, among other information.  To describe railroads\u2019 progress and FRA\u2019s actions to assist railroads, we  interviewed the industry associations for commuter (American Public  Transportation Association) and freight (Association of American  Railroads) railroads, and two PTC vendors. We also reviewed applicable  laws and FRA regulations, presentations, reports, and guidance and  interviewed FRA officials. While our audit work included Class I, II, and III  freight railroads, commuter railroads, and intercity passenger rail, this  statement is focused on passenger railroads\u2019\u2014commuter and intercity\u2014 progress and approaches to meet the December 2018 and December  2020 deadlines.", "We conducted this performance audit from June 2018 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["PTC systems are required by law to prevent certain types of accidents or  incidents. In particular, a PTC system must be designed to prevent train- to-train collisions, derailments due to excessive speed, incursions into  work zone limits, and the movement of a train through a switch left in the  wrong position. While railroads may implement any PTC system that  meets these requirements, the majority of passenger railroads are  implementing one of four types of systems. PTC\u2019s intended safety  benefits can be fully achieved nationwide when all required railroads have  successfully installed PTC components, tested that these components  work together and the systems function as designed, and are  interoperable with other host and tenant railroads\u2019 PTC systems that  share track. Interoperability means the locomotives of any host railroad  and tenant railroad operating over the same track segment will  communicate with and respond to the PTC system, allowing uninterrupted  movements over property boundaries. Interoperability is critical to PTC  functioning properly given the complexity of the rail network in the United  States. In much of the country, Class I freight railroads function as hosts  for Amtrak and commuter railroads. For example, one of the seven major  Class I freight railroads reports that 24 tenant railroads operate over its  PTC-equipped tracks, including freight, Amtrak, and commuter railroads.  A notable exception to this is the Northeast Corridor, which runs from  Washington, D.C., to Boston, Massachusetts, which Amtrak  predominantly owns and over which six freight and seven commuter  railroads operate as tenants.", "PTC implementation involves multiple stages to achieve full  implementation, including planning and system development, equipment  installation and testing, system certification, and full deployment, including  interoperability. Each railroad must develop an FRA-approved PTC  implementation plan that includes project schedules and milestones for  certain activities, such as equipment installation. The equipment  installation stage involves many components, including communication  systems; hardware on locomotives and along the side of the track (called  \u201cwayside equipment\u201d); and software in centralized office locations as well  as onboard the train and along the track. Each railroad is required to  report quarterly and annually to FRA on its PTC implementation status  relative to its implementation plan. A railroad can also revise its  implementation plan to reflect changes to the project, which then must be  reviewed and approved by FRA.", "In addition, railroads must demonstrate that the PTC systems are  deployed safely and meet functional requirements through multiple stages  of testing. Before initiating testing on the general rail system, railroads  must submit a formal test request for FRA approval that includes, among  other things, the specific test procedures, dates and locations for testing,  and the effect the tests will have on current operations. The multiple  stages of PTC testing include:", "Laboratory testing: locomotive and wayside equipment testing in a  lab environment to verify that individual components function as  designed.", "Field testing: includes several different tests of individual  components and the overall system, such as testing of each  locomotive type to verify that it meets functional requirements and  field integration testing\u2014a key implementation milestone to verify that  each PTC component is integrated and functioning safely as  designed.", "Revenue service demonstration (RSD): an advanced form of field  testing in which the railroad operates PTC-equipped trains in regular  service under specific conditions. RSD is intended to validate the  performance of the PTC system as a whole and to test the system  under normal, real-world operations.", "Interoperability testing: host and tenant railroads that operate on the  same track must work together to test interoperability to ensure each  railroad can operate seamlessly across property boundaries. Almost  all of the 40 railroads currently required to implement PTC must  demonstrate interoperability with at least one other railroad\u2019s PTC  system.", "Using results from field and RSD testing, combined with other  information, host railroads must then submit a safety plan to FRA for  approval. We have previously reported that these safety plans are about  5,000 pages in length. Once FRA approves a safety plan, the railroad  receives PTC system certification, which is required for full  implementation, and is authorized to operate the PTC system in revenue  service. According to FRA officials, the FRA may impose conditions to the  PTC safety plan approval as necessary to ensure safety, resulting in a  conditional certification.", "Railroads may receive a maximum 2-year extension from FRA past the  December 31, 2018, deadline if they meet six criteria set forth in statute.  Specifically, railroads must demonstrate, to the satisfaction of FRA, that  they have: (1) installed all PTC system hardware consistent with the total  amounts identified in the railroad\u2019s implementation plan; (2) acquired all  necessary spectrum consistent with the implementation plan; (3)  completed required employee training; (4) included in a revised  implementation plan an alternative schedule and sequence for  implementing the PTC system as soon as practicable but no later than  December 31, 2020; (5) certified to FRA that they will be in full  compliance with PTC statutory requirements by the date provided in the  alternative schedule and sequence; and (6) for Class I railroads and  Amtrak, initiated RSD or implemented a PTC system on more than 50  percent of the track they own or control that is required to have PTC. For  commuter and Class II and III railroads, the sixth statutory criterion is to  have either initiated RSD on at least one territory required to have  operations governed by a PTC system or \u201cmet any other criteria  established by the Secretary,\u201d which FRA refers to as \u201csubstitute\u201d  criteria.", "FRA is responsible for overseeing railroads\u2019 implementation of PTC, and  the agency monitors progress and provides direct assistance to railroads  implementing PTC. For example, FRA officials provide technical  assistance to railroads, address questions, and review railroad-submitted  documentation. FRA has a PTC Staff Director, designated PTC  specialists in the eight FRA regions, and additional engineers and test  monitors responsible for overseeing technical and engineering aspects of  implementation and reviewing railroads\u2019 submissions and requests, as  well as programmatic support staff. In anticipation of the upcoming  implementation deadline, in May 2017, FRA began to send notification  letters to railroads it determined were at risk of both not meeting the  December 31, 2018, implementation deadline and not completing the  requirements necessary to qualify for an extension. FRA identified \u201cat- risk\u201d railroads by comparing a railroad\u2019s hardware installation status to the  total hardware required for PTC implementation, according to the  railroad\u2019s implementation plan. FRA has increased the \u201cat-risk\u201d threshold  percentage over time as the deadline approaches. (See Table 1).", "FRA has additional oversight tools, which include use of its general civil  penalty enforcement authority for failure to meet certain statutory PTC  requirements. FRA has used this authority in 2017 and 2018 to assess  civil penalties, primarily against passenger railroads that failed to comply  with the equipment installation milestones, the spectrum acquisition  milestones, or both, that the railroads had established in their  implementation plans for the end of 2016 and 2017.", "As part of our body of work on PTC, we found that railroads face  numerous PTC implementation challenges and made recommendations  to FRA to improve its oversight of implementation. Specifically, in 2013  and 2015 we found that many railroads were struggling to make progress  due to a number of complex and interrelated challenges, such as  developing system components and identifying and correcting issues  discovered during testing. For example, we found in March 2018 that FRA  had not systematically communicated information or used a risk-based  approach to help commuter railroads prepare for the 2018 deadline or to  qualify for an extension. We also found that many railroads were  concerned about FRA\u2019s ability to review submitted documentation in a  timely manner, particularly given the length of some required  documentation such as safety plans and FRA\u2019s limited resources for  document review. In March 2018, we recommended FRA identify and  adopt a method for systematically communicating information to railroads  and use a risk-based approach to prioritize its resources and workload.", "FRA agreed with our recommendations. Most recently, in September  2018, we testified on the status of railroads\u2019 implementation of PTC."], "subsections": [{"section_title": "Many Passenger Railroads Remain in Early Stages of PTC Implementation and FRA Has Clarified Extension Requirements Passenger Railroads Continue to Install and to Test PTC Systems, and Report Previously Identified Implementation Challenges", "paragraphs": ["As of June 30, 2018, many passenger railroads reported that they remain  in the equipment installation and field-testing stages, which are early  stages of PTC implementation. However, since we testified in March  2018, railroads have made progress on equipment installation. Based on  our analysis of the 40 railroads\u2019 reported status as of June 30, 2018,  about half of the railroads have completed equipment installation, and  many others are nearing completion of this stage. Specifically, 20 of the  29 passenger railroads reported being more than 90 percent complete  with locomotive equipment installation. Nearly two-thirds of passenger  railroads that must install wayside equipment reported being more than  90 percent complete. One-third of passenger railroads are among those  designated by FRA as at-risk of both not meeting the end of 2018  implementation deadline and not completing the requirements necessary  to qualify for an extension. Specifically, in August 2018, FRA identified  nine railroads\u2014all commuter railroads\u2014as at-risk, fewer than the 12  railroads FRA had previously designated as at-risk in its June 2018 letters  to railroads.", "Since we reported in March 2018, Amtrak reported that it has initiated  both field testing and RSD, but most commuter railroads reported slower  progress with testing, especially with RSD. For example:", "Laboratory and initial field testing: 19 of 28 commuter railroads  reported having initiated this testing as of June 30, 2018; this number  represents six more commuter railroads than the 13 we previously  reported as having initiated field testing as of September 30, 2017.", "RSD testing: Eight of 28 commuter railroads reported initiating RSD  testing as of June 30, 2018; this number represents two more  commuter railroads than the six we previously reported as having  entered RSD testing as of September 30, 2017. As noted earlier,  unless a commuter railroad receives approval for using substitute  criteria, the railroad must initiate RSD, a final stage of PTC testing, on  at least one territory by December 31, 2018, to qualify for an  extension.", "Passenger railroad representatives reported that they continued to face  many of the same challenges we have previously identified, including  limited industry-wide availability of vendors and expertise and software  defects. For example, in response to our questionnaire, 12 of 29  passenger railroads reported challenges with PTC vendors and  contractors. One passenger railroad noted that because its contractor  manages PTC projects across the country with the same deadline and  requirements, it can be difficult for all railroads to get the resources they  need from their contractor. We previously reported that there are a limited  number of vendors available to design PTC systems, provide software  and hardware, and conduct testing. For example, we reported in 2015  that, according to railroad industry representatives, there were two  vendors for the onboard train management computer and three vendors  for the wayside equipment. One small passenger railroad recently  testified that, because a single manufacturer was providing PTC  equipment and software to many railroads across the country, it had to  wait over a year for PTC equipment to be delivered and installed. We also previously reported that railroads face software challenges, and noted  that railroads had concerns with the number of defects identified during  software testing, since these take time to address. In response to our  questionnaire, nine passenger railroads reported encountering challenges  related to maturity of the PTC software systems, such as working through  software bugs or defects during testing.", "As passenger railroads work to complete PTC implementation activities,  some have made service or schedule adjustments to accommodate the  need to install equipment or perform testing. Moreover, several  passenger railroads told us that as PTC implementation schedules  become more compressed, avoiding effects on passengers becomes  more difficult. We identified 10 passenger railroads that have made  changes to their operations due, in part, to PTC implementation, including  the six largest commuter railroads in the country, which collectively  reported over 400 million passenger trips in 2017. These changes had  effects such as reduced service or longer travel times. For example, one  of the largest passenger railroads in the country reduced service on  certain routes and eliminated some express trains to accommodate  schedules enabling them to complete PTC equipment installation prior to  the December 2018 deadline. Another large passenger railroad has  shutdown weekend service\u2014providing bus service to transport  passengers between stations\u2014for PTC testing. Several passenger  railroads had to reduce service for equipment or track installation or  testing, resulting in fewer locomotives or less track available for service."], "subsections": []}, {"section_title": "FRA Has Recently Clarified Extension Requirements", "paragraphs": ["In June, July, and August 2018, FRA held three PTC symposiums that  were attended by representatives from all 40 railroads and that focused  on the extension process and substitute criteria, PTC testing, and safety  plans, respectively. FRA\u2019s June 2018 symposium covered information  consistent with our March 2018 recommendation that the agency adopt a  method for systematically communicating information related to the  requirements and process for an extension to railroads. Specifically,  FRA presented information on the procedures for requesting and  obtaining FRA\u2019s approval for an extension to implement PTC beyond the  December 2018 deadline including FRA\u2019s review process. FRA also  clarified that for commuter railroads, initiating field testing was one  approach that could potentially qualify as substitute criteria, rather than  initiating RSD.", "Representatives we interviewed from the passenger railroads that  participated in the symposiums found them to be helpful, and some  passenger railroads reported that the information presented led them to  adjust their approach to meeting the December 2018 deadline. For  example, one passenger railroad representative we spoke to said that  until the symposium, he was unaware that using field testing as substitute  criteria was a potential option. Some passenger railroads we met with  also told us they are re-evaluating what activities and documentation  need to be revised and submitted to FRA before the December 2018  deadline based on the information presented at the symposiums. For  example, representatives from one passenger railroad we met with said  that FRA officials encouraged them to update their PTC implementation  plan right away with current equipment installation totals, to ensure  consistency across all required documentation by the end of 2018. A  couple of passenger railroads noted that the information presented at the  symposiums clarified many questions and would have been beneficial to  know a year or two earlier in the implementation process.", "In addition, in recent months FRA has continued to provide assistance to  railroads and has taken a series of steps to better prepare railroads for  the 2018 deadline. These steps include meeting regularly with individual  railroads and developing approaches intended to help many railroads  meet the requirements necessary for a deadline extension. For example,  representatives from one commuter railroad said agency officials have  been willing to share lessons learned, clarify requirements, and review  draft documentation to provide informal feedback."], "subsections": []}]}, {"section_title": "Passenger Railroads and FRA Are Working toward Extensions, Leaving Substantial Work to Be Completed Beyond 2018 Most Passenger Railroads Anticipate Needing an Extension, and Many Plan to Start RSD Testing Beyond 2018", "paragraphs": ["Almost three-quarters of passenger railroads (21 of 29) reported to us  that they plan to apply for an extension. Five passenger railroads  reported to us that they planned to submit their extension request by the  end of September 2018, but as of September 21, 2018, only one had  submitted the request and required documentation. However, FRA  officials noted that with the exception of possibly one or two railroads,  they anticipate that all passenger and freight railroads will likely need an  extension, and that railroads must submit their requests by the end of the  year to be considered in compliance with PTC requirements. A railroad  must demonstrate that it has met all of the statutory criteria necessary to  qualify before, or when, it formally requests an extension. And as  previously discussed, many railroads remain in the early stages of PTC  implementation. Of the eight passenger railroads that anticipate reaching  full implementation by December 31, 2018, six are already operating  under conditionally certified safety plans; one has submitted its safety  plan for review; one plans to submit its safety plan to FRA in fall 2018 for  certification. FRA officials stated that it is unclear whether the passenger  railroads that have obtained conditional PTC System Certification will  have achieved full implementation on all route miles by December 31,  2018.", "Of the 21 passenger railroads that intend to apply for an extension, more  than half\u2014all commuters\u2014reported that they plan to use substitute  criteria to qualify. Moreover, two-thirds of the commuter railroads (8 of  12) that plan to use substitute criteria intend to apply to use their initiation  of field integration or functional testing as substitute criteria, and many of  these will apply to begin field testing on only a portion of their track.", "Figure 1 depicts the stage of PTC implementation that passenger  railroads at least expect to reach by December 31, 2018, in order to be in  compliance with the deadline, based on railroads\u2019 responses to our July- August 2018 questionnaire.", "Although FRA has recently made clear that it is authorized to grant  extensions based on initiating field testing or other FRA-approved  substitute criteria, this approach defers time-intensive RSD testing into  2019 and beyond. For example, one commuter railroad we met with has  applied for, and was granted approval by FRA to use, the initiation of field  testing on a 16.5-mile segment of track as substitute criteria to qualify for  an extension. That railroad must ultimately implement PTC over 321  miles of track that it owns and operates over, meaning that it will need to  complete field testing, RSD, and interoperability testing on the remaining  95 percent of its track and achieve system certification prior to the 2020  deadline. In March 2018, we testified that FRA officials told us that  moving from the start of field testing to the start of RSD can take between  1 and 3 years, and has averaged about 2 years for those railroads that  have completed that stage. We also reported that FRA officials believe  that most railroads underestimate the amount of time needed for testing.  FRA officials told us that they do not consider railroads that are approved  for an extension under substitute criteria to be necessarily at a higher risk  of not completing PTC implementation by 2020. However, in light of these  time estimates and the unknown challenges that railroads may face  during testing, railroads that are in the early field-testing stage moving  into 2019 could face challenges completing PTC implementation by the  extended December 2020 deadline.", "Railroads further behind in PTC implementation may need to apply for an  extension due to factors such as compressed implementation schedules,  as well as the time needed for FRA approvals. For example,  representatives from one commuter railroad said that they hope to reach  RSD before the December 31, 2018, deadline, but that it would be difficult  to meet the extension requirements, apply for, and receive an extension  given the volume of paperwork FRA will be receiving at the end of the  year. Instead, the railroad plans to submit an extension request using  substitute criteria consisting of field testing in order to be in compliance at  the end of the year. Such an approach involves first applying for and  receiving approval for substitute criteria and then formally requesting an  extension and submitting supporting documentation to FRA before the  end of the year. Entering RSD prior to the deadline could be difficult given  that FRA officials told us they have advised railroads to allow at least a  month for FRA\u2019s review of test requests, which must be approved prior to  initiating field testing and RSD.", "Some passenger railroads also reported challenges regarding host and  tenant responsibilities, including coordination and interoperability\u2014which  are likely to continue beyond 2018. Some passenger railroads told us that  coordinating with host or tenant railroads that are in different  implementation stages as the 2018 deadline approaches poses several  challenges. For example, a few passenger railroads told us that they are  unable to conduct interoperability testing because their host or tenant  railroad has not yet reached that stage of implementation. Additionally,  officials from Amtrak\u2014which interoperates with 21 other railroads\u2014noted  that the host-tenant relationship can be complicated and requires a high  level of coordination to resolve issues between railroads. Amtrak officials  also told us they were conducting risk assessments to determine whether  and how to continue service in situations where their host or tenant  railroad has not completed PTC implementation or met the requirements  necessary for an extension. While few passenger railroads have reached  the interoperability stage, one railroad association stated that  interoperability is, and will continue to be, a substantial challenge for  metropolitan areas with dense and complex rail networks with several  host-tenant relationships. For example, according to one passenger  railroad, 14 different freight and passenger railroads will need to  interoperate in the Chicago area."], "subsections": [{"section_title": "FRA\u2019s Substantial Workload Remains a Concern", "paragraphs": ["FRA\u2019s already substantial workload is expected to increase as railroads  continue to submit documentation necessary for extensions and continue  PTC implementation activities. FRA is focused on ensuring railroads are  in compliance by the December 2018 deadline\u2014whether via an extension  or by completing implementation. While FRA officials report that they  anticipate almost all railroads will likely request an extension, only one  passenger railroad had submitted an application for an extension as of  September 21, 2018. FRA will need to review and approve all related  documentation associated with each extension request and make a  determination within 90 days, meaning if a railroad were to submit its  extension request on December 31, 2018, FRA would have until the end  of March 2019 to approve or deny the railroad\u2019s extension request. In  addition to extension requests and supporting documentation, many  passenger railroads will also be submitting to FRA: requests for substitute  criteria, test requests to initiate field testing or RSD, revisions to PTC  implementation plans, and PTC safety plans. Some of these documents  can be lengthy and require back and forth between FRA and railroads  before approval. For example, we previously reported that PTC safety  plans are about 5,000 pages in length and take between 6 and 12 months  for FRA to review.", "To help manage the forthcoming influx of documentation, FRA officials  have offered to review draft documentation, such as substitute criteria  requests and test requests, and have advised railroads to take FRA\u2019s  review times into account prior to submitting required documentation.  FRA officials told us that in trying to manage their workload, they initially  told railroads they did not have time to review draft submittals. However,  they found that taking the time to conduct draft reviews ultimately led to  higher quality formal submittals and accelerated the overall review  process. In addition, FRA officials said that their goal is to not delay any  railroad that is ready to move into testing, and that they advised railroads  to build 30 to 45 days for test request reviews into their project schedules.", "Despite these efforts, some passenger railroads remain concerned about  the agency\u2019s ability to manage the PTC workload in the coming months  and beyond 2018. For example, seven of 29 passenger railroads  identified FRA\u2019s resources and review times as a challenge leading up to  the December 2018 deadline. In addition, three passenger railroads  reported that they would complete all the requirements for full PTC  implementation by the December 31, 2018, deadline, but planned to  apply for an extension due to concerns that FRA would not be able to  review and certify their safety plans to enable them to reach full  implementation prior to the deadline. Based on similar concerns, in March  2018, we recommended FRA develop an approach to prioritize the  allocation of resources to address areas of greatest risk as railroads work  to complete PTC implementation. FRA has acknowledged the railroads\u2019 concern given the surge of submissions requiring FRA approval in 2018  and has reported the agency is reallocating existing expertise and  expanding the PTC workforce through training, expanding contracts with  existing support contractors, and initiating one additional contract to  provide technical support. For example, FRA officials told us that they  reallocated resources to shift PTC specialists\u2019 responsibilities to focus  exclusively on testing-related activities because their involvement is  critical for the testing stage. Taking steps to prioritize limited resources  will only increase in importance as the amount of documentation needing  FRA review continues to grow in 2019 and 2020, as railroads move  through testing and submit complex and lengthy safety plans.", "Although FRA has taken steps to provide key extension information to  railroads and to help ensure railroads\u2019 compliance with PTC deadlines,  uncertainty remains, particularly in regard to FRA\u2019s enforcement strategy  if railroads are noncompliant with the PTC implementation requirements,  such as if railroads were to fail to apply for an extension by the deadline.  Representatives from all railroads implementing PTC with whom we met  told us that FRA\u2019s planned enforcement approach for any railroad that  fails to meet the requirements for an extension beyond 2018 is unclear.  FRA officials told us they have shared the range of applicable civil  penalties with railroads for years, but that any policy decision about how  potential fines will be levied for non-compliant railroads has not yet been  made. In addition, it is also unclear how the agency would approach  enforcement for railroads that have a host or tenant operating on their  tracks that has not completed implementation or met the requirements  necessary for an extension. Ten of the 13 passenger railroads we met  with told us they do not currently have or see a need to develop  contingency plans. For example, representatives from one passenger  railroad said they did not have a contingency plan because FRA has  made clear they are committed to helping railroads comply with the 2018  deadline. FRA officials said that the goal of enforcement is to help bring  all railroads into compliance and that they would look at the specific  circumstances for any host-tenant issues before assessing a fine.", "In conclusion, almost all passenger railroads will likely request an  extension beyond 2018, which will require FRA approval. Many commuter  railroads plan to request substitute criteria which may result in those  railroads remaining in the early stages of PTC implementation at the start  of 2019. However, given that only one passenger railroad has submitted  an extension request, it is unlikely we will know how many railroads will  be granted an extension by the December 31, 2018 deadline. While few  passenger railroads had developed contingency plans when we met with  them, as December nears and schedules become further compressed,  additional railroads may have to make service or schedule adjustments to  help them reach compliance with the deadline. Although FRA has  reported taking some actions in response to our March 2018  recommendation that they better prioritize resources, FRA resources and  review times remain a significant concern\u2014both for near-term efforts  such as extension requests and for the safety plans that need to be  reviewed and certified prior to the end of 2020. These issues\u2014combined  with the ongoing implementation, testing, and interoperability challenges  that a number of railroads reported to us\u2014raise questions as to the extent  FRA and the nation's passenger railroads are poised for full PTC  implementation by December 31, 2020.", "Chairman Thune, Ranking Member Nelson, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions that you may have at this time."], "subsections": []}]}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Susan Fleming, Director, Physical Infrastructure at (202) 512- 2834 or FlemingS@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Susan Zimmerman (Assistant Director); Katherine Blair; Greg Hanna;  Delwen Jones; Emily Larson; Joanie Lofgren; SaraAnn Moessbauer;  Maria Wallace; and Crystal Wesco.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["Forty railroads, including Amtrak, commuter, and freight railroads, are required to implement positive train control (PTC)\u2014a communications-based system designed to slow or stop a train that is not being operated safely. Although the deadline for PTC implementation is December 31, 2018, railroads that meet certain criteria may receive a maximum 2-year extension.", "We testified that, as of June 30, 2018, many passenger railroads remain in the early stages of PTC implementation, such as equipment installation and early testing. Most passenger railroads anticipate needing an extension."]}
{"id": "GAO-18-515", "url": "https://www.gao.gov/products/GAO-18-515", "title": "U.S. Postal Service: Projected Capital Spending and Processes for Addressing Uncertainties and Risks", "published_date": "2018-06-28T00:00:00", "released_date": "2018-06-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["USPS faces significant financial challenges as it continues to experience declining mail volumes and revenues. Capital spending is needed to support USPS's operations, but can be affected by various uncertainties and risks, such as those related to future business activities and revenues. In the past, USPS has reduced its capital spending in response to declining revenues.", "GAO was asked to review USPS's capital-spending plans and examine how its capital-spending processes address uncertainties and risks. This report: (1) describes USPS's projected capital spending over the next 10 years and (2) assesses whether USPS's processes support its ability to address uncertainties and risks that affect its capital spending.", "GAO reviewed USPS data and information on actual capital spending from fiscal years 2007 to 2017 and projected capital spending for fiscal years 2018 through 2028. GAO also reviewed USPS reports on 14 approved capital projects in fiscal years 2017 and 2018, selected to provide a mix of project type and value; examined documentation related to USPS's processes that affect capital spending and compared USPS's processes to internal control standards adopted by USPS; and interviewed USPS officials.", "On a draft of this report, USPS provided technical comments, which GAO incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["The United States Postal Service (USPS) projects increased capital spending over the next 10 years. According to USPS, this spending will support its mission and improve its financial position. USPS projects average annual capital cash outlays of $2.4 billion from fiscal years 2018\u20132028\u2014about 70 percent more than the $1.4 billion average from fiscal years 2007\u20132017 (see figure). For example, USPS plans to acquire a new fleet of delivery vehicles starting in 2019 to replace its aging existing fleet and plans to purchase new mail-processing equipment to increase efficiency. However, USPS faces a serious financial situation with insufficient revenues to cover expenses. This uncertainty may result in USPS's making capital-spending prioritization decisions that can lead to tradeoffs across planned capital projects and potentially between capital spending and other organizational needs such as operational expenses. Such prioritization could lead to USPS's undertaking less capital spending than currently projected in the absence of increased revenues or decreased expenses.", "USPS has processes that help it identify the uncertainties and risks that may affect its capital spending and adjusts its capital spending accordingly, in line with internal control standards adopted by USPS. For example, USPS identifies organizational uncertainties, such as mail volumes and revenues, as part of its strategic planning process and considers them when creating its capital spending budget. It also identifies individual project risks through a project review process, and considers tradeoffs inherent in different project scenarios. USPS's processes also allow it to respond to these uncertainties and risks. Specifically, USPS sets a capital-spending budget in its overall financial plan, to help ensure that spending is in line with expected resources. USPS's process also allows it to shift funds if needed, such as to repair a facility damaged during a natural disaster. USPS also reviews individual capital projects during implementation and can change specifications or time frames based on changing circumstances."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. Postal Service (USPS) provides crucial support for the nation\u2019s  communications and commerce. According to USPS, in fiscal year 2017,  USPS delivered 149-billion pieces of mail, generating about $70 billion in  revenues. However, USPS\u2014which is structured to be financially self- supporting\u2014is facing unsustainable financial challenges as First-Class  Mail volume continues to decline. Although USPS has restructured its  services and network in various ways to try to improve its financial  position, total mail volume fell 3.1 percent in fiscal year 2017, resulting in  an operating loss of $2.6 billion. Fiscal year 2017 marked USPS\u2019s 11th  straight year of operating at a loss.", "Capital spending supports USPS\u2019s ability to meet its organizational  objectives. For USPS, capital spending includes spending on delivery  vehicles, mail-processing equipment, post offices and other buildings, and  other items USPS uses to support operations and meet its universal  service obligation. However, given its challenging financial situation,  starting in fiscal year 2009, USPS dramatically reduced its capital  spending and for a number of years, according to USPS, restricted its  spending to projects it deemed necessary to ensure the health and safety  of employees and customers or to those projects that could produce a  large and rapid return on investment. More recently, USPS began  increasing its capital spending, but its challenging financial situation and  future uncertainties remain. In addition, individual capital projects can  face their own project-specific risks. USPS\u2019s continuing financial losses  and business uncertainties create challenges in its ability to undertake the  capital-spending needs it has identified.", "You asked us to review USPS\u2019s capital spending plans and how its  capital-spending processes address uncertainties and risks. This report:  (1) describes USPS\u2019s projected capital spending over the next 10 years  and (2) assesses whether USPS\u2019s processes support its ability to address  uncertainties and risks that affect its capital spending.", "To describe USPS\u2019s projected capital spending over the next 10 years,  we reviewed USPS data on actual capital spending from fiscal years 2007  through 2017 and USPS documentation on projected capital spending  from fiscal years 2018 through 2028. In both cases, we focused on fiscal  year actual or projected capital-spending cash outlays\u2014or the amount of  cash spent on capital projects\u2014as opposed to capital-spending  commitments made in that specific fiscal year. For historical data, we  used data from USPS\u2019s annual budgets for fiscal years 2008 through  2018, which contain data from prior fiscal years. For information on  USPS\u2019s projected capital spending for fiscal years 2018 through 2028, we  reviewed USPS\u2019s 10-year capital-spending projection for those years,  which USPS created in 2017. To determine the reliability of these data,  we interviewed USPS officials, reviewed data for any obvious errors, and  reviewed relevant documentation. We determined that these data were sufficiently reliable for the purposes of reporting on USPS\u2019s past and  projected capital spending. We also selected and reviewed a non- generalizable sample of 14 of USPS\u2019s 66 approved fiscal year 2017 and  2018 Decision Analysis Reports (DAR)\u2014internal USPS documents used  to justify and obtain approval for some proposed capital spending  projects. We selected DARs to provide a mix of types of capital spending  projects and total project value. We reviewed the DARs to obtain  descriptive information about the projects. While information presented  from our reviews of the DARs cannot be generalized to all DARs, the  information provides insights into USPS\u2019s reasons for undertaking capital  spending projects. In addition, we interviewed USPS officials about the  organization\u2019s historic and projected capital spending.", "To assess whether USPS\u2019s processes support its ability to address  uncertainties and risks that affect its capital spending, we reviewed  documentation from USPS, including USPS\u2019s policies and procedures for  capital spending and internal guidance documents, and interviewed  USPS officials. We then compared that information against criteria for  addressing uncertainties and risks. Specifically, we identified criteria from  the Office of Management and Budget\u2019s (OMB) Capital Programming  Guide and the Committee of Sponsoring Organizations of the Treadway  Commission\u2019s (COSO) Internal Control-Integrated Framework\u2014internal  control standards adopted by USPS. We evaluated how USPS\u2019s  processes that affect capital spending are designed to address  uncertainties and risks. For more details regarding our scope and  methodology, see appendix I.", "We conducted this performance audit from September 2017 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["USPS undertakes capital-spending projects for a number of reasons and  more than one reason may apply to a single project. According to USPS  documentation on its capital spending processes, these reasons include:  to support USPS\u2019s organizational objectives and strategic plan,  to help sustain existing operations and meet USPS\u2019s universal service  obligation,  to protect the health and safety of employees and customers or meet  legal requirements, or  to generate a positive return-on-investment\u2014such as by increasing  revenues or decreasing costs\u2014thus improving USPS\u2019s finances.", "USPS generally categorizes its capital spending in four broad categories:  vehicles, facilities, information technology and other, and mail processing  equipment, as shown in figure 1.", "USPS has processes for setting an annual capital-spending budget and  approving specific capital projects. USPS prepares an annual capital- spending budget as part of its annual organization-wide budget.  According to USPS documentation on its capital spending process, and  USPS officials the process includes the following steps:  In advance of each fiscal year, USPS\u2019s Finance and Planning  Department reviews estimated revenues and expenses to determine  an appropriate total capital-spending budget.", "Next, USPS\u2019s Executive Leadership Team and the leadership of  relevant departments develop requests for each department\u2019s  estimated capital-spending needs for the upcoming year, including a  ranking of desired projects. These lists provide information on  projects\u2019 purposes, estimated capital and operating expenses,  potential return-on-investment, and relationship to USPS\u2019s strategic  initiatives.", "The Finance and Planning Department then reviews these lists in light  of the previously determined total capital-spending budget and sets a  capital spending budget for each of the broad categories of capital  spending.", "The Executive Leadership Team votes on this preliminary capital  spending budget, which, if approved, is included in the organization- wide budget that is subject to approval by USPS\u2019s Board of  Governors. The budget approved by the Board of Governors  includes the total and categorical capital-spending budget, but does  not include approvals for specific projects.", "According to USPS officials, USPS also uses these capital-spending  requests, along with other information, such as historical capital-spending  data and information on already identified specific future capital-spending  projects, to annually update a 10-year projection of capital spending.  USPS uses this 10-year projection to estimate USPS\u2019s potential future  capital spending and requirements for capital project cash outlays.", "USPS also has processes for approving specific capital projects. Project  sponsors\u2014those departments that wish to undertake a capital-spending  project\u2014must obtain approval from different groups within USPS to  initiate capital projects. According to USPS documentation, the level of  approval required depends on the estimated total cost of the project:", "Total costs over $5 million: The project sponsor must submit a DAR  to USPS\u2019s Investment Review Committee for review. DARs contain  estimated project cost, return-on-investment, and other information  used to justify the project. If the committee approves, it makes a  recommendation to the Postmaster General for final approval. USPS\u2019s  Office of Inspector General also reviews and assesses the adequacy  and the depth of the information in the DAR, assesses whether the  project is in USPS\u2019s best business interest, and may provide input to  the Investment Review Committee, which may take that information  into consideration when reviewing projects.", "Total costs from $1 million to $5 million: The project sponsor must  submit a DAR to USPS\u2019s Technical Review Committee for review and  approval.", "Total costs under $1 million: The project is reviewed by USPS\u2019s  Finance and Planning department, and approval is subject to the level  of budgetary resources available. USPS does not require a DAR for  these projects, although the process involves other documents, such  as a one-page \u201cJustification of Expense\u201d that is required for many of  the projects.", "USPS faces organization-wide uncertainty that may affect its capital  spending. We define \u201corganizational uncertainty\u201d as those uncertainties\u2014 such as business, budgetary, legislative or regulatory, or other  conditions\u2014that may affect USPS\u2019s ability to remain competitive and  achieve its mission. For example, in the absence of adequate revenues  that would cover all of USPS\u2019 expenses, these uncertainties may affect  the extent to which USPS can undertake its identified capital-spending  plans. According to USPS, organizational uncertainties include the  following:", "Business uncertainty includes potential changes to USPS\u2019s business  and the market for its products and services. Such uncertainty may be  affected by changing customer preferences\u2014such as continuing  diversion of First Class Mail to electronic alternatives (e.g., e-mail or  online banking)\u2014and increased competition for package shipments.", "Budgetary uncertainty includes potential uncertainty and changes to  revenues and expenses that affect USPS\u2019s finances.", "Legislative or regulatory uncertainty includes potential actions  intended to address some of USPS\u2019s financial challenges. For  example, postal reform legislation has been introduced that, if  enacted, could improve USPS\u2019s financial position. Both H.R. 756 and  S. 2629 propose to relieve USPS of some of its retiree health and  pension obligations and provide a reinstatement of a partial rate  surcharge. Similarly, the Postal Regulatory Commission\u2014an  independent establishment of the executive branch that regulates  USPS\u2014 is considering providing USPS with additional flexibility on  pricing, which could also improve USPS\u2019s finances.", "According to USPS documentation on capital-spending processes as well  as DARs for individual capital-spending projects, capital-spending  projects also can face project-specific risks, such as the following:", "Technological risks, which include complexity, quality, and  security concerns: For example, capital projects deploying new  technology intended to increase operational efficiency may face the  risk that the new technology could become obsolete given future  technological advances.", "Operational risks, which include maintenance and performance  of projects: For example, equipment purchased as part of a capital  project could involve the risk that it may not perform as expected.", "Integration risks, which include network and system integration  and user acceptance of projects: For example, a project involving  new retail technology may face the risk that USPS\u2019s customers will  not accept the new technology, and, as a result, the project does not  meet its target for customer use."], "subsections": []}, {"section_title": "USPS Plans to Increase Capital Spending, but Business Uncertainties Will Likely Involve Prioritization against Other Business Needs and among Capital Projects", "paragraphs": ["According to USPS, the organization has critical capital-spending needs  after years of reduced capital spending. Starting in fiscal year 2009,  USPS sharply decreased its capital spending for several years, in  response to decreased volume and revenues; however, USPS now plans  to increase its spending. Specifically, USPS projects average annual  capital-spending cash outlays of $2.4 billion from fiscal years 2018  through 2028\u2014about 70 percent more than the average of $1.4 billion  from fiscal years 2007 through 2017. (See fig. 2.) While this projected  spending is largely driven by plans to acquire a new fleet of delivery  vehicles, USPS also projects increased spending in the other categories  of facilities, information technology, and mail-processing equipment. In  addition, while some of USPS\u2019s planned capital spending is intended  specifically to generate a return-on-investment\u2014such as by increasing  revenues or decreasing costs\u2014much of USPS\u2019s planned capital spending  is to help sustain operations. Specifically, according to our analysis of  USPS data, roughly 80 percent of USPS\u2019s projected capital spending for  fiscal year 2018 is for projects intended to help sustain operations."], "subsections": [{"section_title": "Vehicles: Spending Planned to Replace Aging Fleet", "paragraphs": ["In its latest projection of capital spending, covering fiscal years 2018  through 2028, USPS projects an annual average of roughly $821 million  on capital spending for vehicles, primarily driven by a multi-year  acquisition of new delivery vehicles starting in fiscal year 2019. According  to USPS officials, USPS decided a number of years ago to defer  purchasing new delivery vehicles and instead continued using and  maintaining its existing fleet. Because USPS started acquiring most of its  existing delivery fleet in 1987, the majority of its delivery vehicles are  several decades old. USPS officials said these vehicles incur high  maintenance costs, averaging about $4,500 per vehicle annually.", "In acquiring new vehicles, USPS plans to take a number of steps to  ensure that the vehicles best meet the organization\u2019s needs. According to  USPS officials, it will spread the acquisition over multiple years to avoid a  large cash outlay in any given year and to enable USPS to modify the  vehicle purchases over time to take advantage of any technological  changes, such as advances in alternative fuel technologies. Officials  added that USPS is considering vehicles that will encourage operational  efficiencies. For example, USPS is considering taller vehicles that will  better allow carriers to handle trays of mail and packages. The officials  also noted that USPS may consider different vehicle designs for different  market needs. The officials said that USPS is currently testing various  vehicle prototypes and has not decided on any one vehicle design at this  time. In total, USPS projects that its acquisition of new delivery vehicles  will require about $5.7 billion in capital-spending cash outlays distributed  over a number of years.", "In addition to its planned future acquisition of delivery vehicles, USPS has  also conducted smaller acquisitions of vehicles in recent years. According  to USPS officials, in the past few years USPS has been replacing most of  its non-delivery vehicles and will have done so by 2019, while also  purchasing a small number of delivery vehicles to replace ones that have  exceeded their useful life or will serve route growth. For example, in  April 2017 USPS approved a capital spending project to purchase more  than 2,000 cargo vans used to transport large volumes of mail from postal  plants to post offices and other facilities, and about 375 spotter vehicles  used to move trailers among docks at processing facilities. In May 2017  USPS approved a capital spending project to purchase approximately  8,000 off-the-shelf delivery vehicles needed to serve route growth and  replace existing high-maintenance-cost vehicles. (See fig. 3.)"], "subsections": []}, {"section_title": "Facilities: Spending Primarily Intended for Repairs of Existing Facilities", "paragraphs": ["USPS projects an annual average of about $607 million in capital  spending for facilities from fiscal years 2018 through 2028. According to  USPS officials, USPS faces little need for capital spending on new facility  construction given changes to USPS\u2019s business such as decreasing mail  volumes. As a result, most of USPS\u2019s projected capital spending is for  rehabilitation and repair of existing facilities, such as the replacement of  roofs or heating, ventilation, and air-conditioning systems needed to  sustain operations. For example, in December 2016, USPS approved ca  capital spending project to replace the roof at a mail processing facility in  Tulsa, Oklahoma. USPS had concluded that the roof was in a state of  failure, and there were no economically feasible repair options. In  addition, in 2017 USPS approved about a capital spending project to  repair facilities in the U.S. Virgin Islands damaged during Hurricane  Maria.", "Although most facilities spending is related to rehabilitation and repair,  some USPS capital spending is on new facilities. According to USPS  officials, new facilities projects are generally approved because of the  need to completely replace an existing facility that is beyond repair or to  construct a new facility that will replace multiple existing facilities. For  example, in May 2017 USPS approved a capital spending project to  construct a mail-processing facility in Nashville, Tennessee. The facility is  intended to replace and close four existing facilities which will eliminate  space deficiencies, reduce transportation costs, and improve operating  efficiencies. In addition, according to USPS officials, USPS may need to  make capital spending investments to facilities to accommodate growth in  package volume, should that growth continue."], "subsections": []}, {"section_title": "Information Technology and Other: Spending Intended to Support USPS\u2019s Network and Cybersecurity Efforts", "paragraphs": ["USPS projects an annual average of about $541 million in capital  spending for information technology and other capital projects, such as  customer support equipment, from fiscal years 2018 through 2028.  Information technology spending, which makes up an average of 98  percent of the projected spending in this category from fiscal years 2018  through 2028, is intended to maintain the infrastructure used to support  USPS and provide security from cyber-threats, among other things.", "According to USPS officials, while it is difficult to project capital spending  on information technology because future needs are uncertain, they can  more accurately predict some future needs, such as hardware  replacement. For example, there is a baseline of projected costs to  replace servers because USPS knows the length of the technologies\u2019  useful lives and when they will need to be replaced. According to USPS  officials, while much of its capital spending on information technology is  intended to replace outdated servers and other hardware, some spending  is for developing new information technology systems. For example, in  March 2017 USPS approved a capital spending project to purchase 67  video conferencing systems intended to increase productivity and  encourage collaboration among USPS offices. In addition, USPS officials  told us that in recent years USPS has undertaken more capital spending  than expected on cybersecurity, a trend that will likely continue for the  next few years. According to a DAR for cybersecurity investments, USPS  is undertaking such investments to proactively identify and respond to  security threats that have the potential to cause financial or other damage  to the organization\u2019s assets or employees, including threats that could  disrupt or destroy information.", "Capital spending on information technology can also support USPS  strategic goals and provide a positive return-on-investment. For example,  in January 2017 USPS approved an additional capital spending to  support development of its Informed Visibility program, which is a system  that provides tracking and reporting of mail shipments for commercial  mailers. According to the Informed Visibility DAR, these capabilities will  provide users with access to valuable business information, helping  improve operational efficiencies and marketing, among other things.  According to the DAR, Informed Visibility will also provide a positive  return-on-investment by eliminating some redundant costs and programs."], "subsections": []}, {"section_title": "Mail-Processing Equipment: Projected Spending Intended to Increase Automation and Efficiency", "paragraphs": ["USPS projects an annual average of about $464 million on capital  spending for mail-processing equipment from fiscal years 2018 through  2028. USPS intends to maintain or replace existing aging equipment  used to process mail and purchase new equipment that USPS expects  will increase efficiency and provide other business benefits. According to  USPS officials, equipment projects can also generate a positive return- on-investment in a number of ways, such as by increasing automation to  reduce costs or by improving customer service. For example, in August  2017 USPS approved a capital spending project to provide new control  systems for about 1,000 bar code sorter machines that USPS expects will  decrease mail-processing costs.", "Some of USPS\u2019s mail-processing equipment investments may also  specifically address the growing market for package shipments. For  example, in July 2017 USPS approved a capital spending project for  upgrades to automated package-processing machines\u2014upgrades  intended to reduce package-handling costs and improve collection of data  on when and where packages are processed. USPS first deployed these  machines in 2004. According to the DAR, by 2017, the machines were  nearing the end of their useful life, resulting in reduced reliability."], "subsections": []}, {"section_title": "USPS\u2019s Projected Capital Spending Will Likely Involve Prioritization Decisions", "paragraphs": ["Although USPS is projecting increased capital spending over the next 10  years, it has reported that it faces uncertainties, such as the level of future  revenues, that could affect its ability to undertake planned and projected  spending. USPS faces continuing declines in First Class Mail volume, and  while it has experienced increased volume in packages, future increases  in package volume are uncertain. Specifically, according to USPS,  some of its major shipping customers are now building their own delivery  capability that may enable them to divert some package shipments away  from USPS. USPS has also stated that it faces challenges in ensuring  that future operations generate sufficient revenues to support planned  capital spending and that it is constrained in its ability to reduce costs.", "We have previously testified that USPS continues to face a serious  financial situation with insufficient revenues to cover its expenses.", "This uncertain financial outlook may result in USPS changing its current  capital-spending plans, including setting new priorities across its planned  projects and other business needs. These prioritization decisions can  involve tradeoffs among projects and between capital and operations  spending. USPS has already faced these types of tradeoffs, as in fiscal  year 2017, when it did not make $6.9 billion in required prefunding  payments for retiree health and pension benefits, stating that it lacked  sufficient cash to make those payments while ensuring it could continue  to provide service, and stating that it required sufficient cash reserves for  capital spending. While USPS officials noted that USPS must always  make prioritization decisions regarding capital spending, its financial  future may make such decisions more critical given its currently projected  increased capital spending. For example, unless USPS increases its  revenues or decreases other expenses, such prioritization decisions may  involve USPS undertaking less future capital spending than it currently  projects over the next 10 years. Further, even if USPS\u2019s financial situation  were to dramatically improve, USPS may not necessarily undertake more  capital spending than currently projected, because of significant other  business needs, such as funding operating expenses. Should USPS  have more resources than expected in the coming years, though, USPS  may be able to make fewer tradeoffs regarding capital spending."], "subsections": []}]}, {"section_title": "Various Processes Support USPS\u2019s Ability to Address Uncertainties and Risks That Affect Capital Spending", "paragraphs": [], "subsections": [{"section_title": "USPS Has Processes Designed to Identify Uncertainties and Risks That Affect Capital Spending", "paragraphs": ["USPS has processes that can help it to identify uncertainties and risks  that could affect its capital spending and adjust its spending to changing  circumstances. USPS has adopted the Committee of Sponsoring  Organizations of the Treadway Commission\u2019s (COSO) internal control  framework, which includes how organizations should address  uncertainties and risks. Specifically, this framework states that  organizations should identify uncertainties and risks to the achievement of  their objectives and analyze these uncertainties and risks to determine  how they should be managed. Additionally, COSO\u2019s internal control  framework asserts that organizations should not only identify and analyze  uncertainties and risks but also assess any changes in conditions that  could affect the organization including its capital spending."], "subsections": [{"section_title": "Identifying and Analyzing Organizational Uncertainties", "paragraphs": ["USPS has processes for identifying and analyzing organizational  uncertainties, such as business and budgetary uncertainties, which can  affect capital spending. These processes align with aspects of COSO\u2019s  internal control framework. For example, according to USPS  documentation on its strategic-planning process, USPS conducts a  business environment assessment and an enterprise risk assessment  every 3 years to identify its organizational uncertainties, such as the effect  of changes in the number of delivery points or mail volume. Additionally,  USPS has processes to analyze the effects of its organizational  uncertainties. For example, some department managers analyze the  potential effects of organizational uncertainty by modeling different  scenarios to help inform their department\u2019s capital-spending decisions.  For example, USPS officials stated that the vehicles department models  the interactions among key variables\u2014such as stabilizing or declining  mail volume, route structures, and vehicle cargo sizes\u2014as it considers  various vehicle acquisition options. In addition, USPS facilities  department officials told us that they plan to develop on a model to  consider how key variables, such as mail volume, affect USPS\u2019s facility  needs.", "In addition to identifying and analyzing the potential effects of  organizational uncertainties, USPS also has processes for assessing  changes in these organizational uncertainties. For example, USPS  documentation shows that USPS leadership holds a monthly business  review meeting in which officials discuss any changes in internal  conditions, such as labor costs, or external conditions, such as mail  volume, that could affect the organization and, when applicable, how  these conditions could affect capital spending. Officials told us that USPS  also distributes a survey every 18 months to internal and external  stakeholders to obtain perspectives on changes, if any, in some of the  conditions addressed by USPS\u2019s strategic plan. The survey also covers  other conditions such as uncertainty about the extent to which USPS will  have funds to maintain, repair, and replace infrastructure."], "subsections": []}, {"section_title": "Identifying and Analyzing Project Risks", "paragraphs": ["Individual capital projects face inherent risks\u2014such as technological,  operational, and integration risks. We found that USPS\u2019s capital-spending  processes align with aspects of COSO\u2019s internal control framework by  incorporating processes to identify and analyze project-specific risks  through the use of DARs. As discussed earlier, USPS\u2019s capital spending  processes require DARs to justify proposed capital projects with total  costs of $1 million or more. Specifically, internal USPS guidelines state  that DARs should identify the technological, operational, and integration  risks that could affect capital projects and any tradeoffs related to  potential alternatives to the proposed capital project. For example, we  reviewed one DAR for mail-processing equipment that explained that the  project has a low level of operational risk noting that the new equipment  will not require training for operators, thus avoiding potential costs and  delays associated with training. Another DAR we reviewed for a project  intending to improve the customer experience and reduce costs through  more efficient staffing at retail locations identified integration risks and  noted that the project's proposed deployment schedule might not allow  time for delays. USPS leadership may also request additional analyses to  verify, or support, information in a DAR before deciding whether to  approve a project. For example, according to documentation we  reviewed, USPS leadership recently requested that its Finance and  Planning division review economic data, such as population growth rates,  to confirm the economic growth projections used in support of a DAR for  a new facility in Bismarck, North Dakota."], "subsections": []}]}, {"section_title": "USPS Has Processes Designed to Respond to Identified Uncertainties and Risks That Affect Capital Spending", "paragraphs": ["We found that USPS has processes that are designed to help it respond  to identified organizational uncertainties, specifically future budgetary  uncertainty. According to OMB\u2019s Capital Programming Guide, capital  spending \u201c...should be consistent with the level of future budgetary  resources that will be available.\u201d USPS officials said USPS seeks to  minimize the budgetary uncertainty that capital spending will outpace  available resources by developing its annual capital-spending budget as  part of USPS\u2019s overall annual budget. As a result, USPS can determine  an annual capital spending budget based on the most recent conditions,  including the most recent revenue forecasts, and consider possible  tradeoffs\u2014such as those between capital spending and other spending  needs such as operating expenses. Further, while the creation of a  capital-spending budget establishes capital-spending levels, the process  does not commit capital spending on any particular project. Instead,  USPS reviews and approves new capital projects throughout the fiscal  year, allowing USPS to make capital spending-decisions based on its  most current financial condition, which may have evolved during the fiscal  year.", "After USPS has set the annual capital spending budget, USPS\u2019s capital- spending process also allows the organization to respond to any changes  in its financial outlook, business environment, or other organizational  uncertainties that might occur during the fiscal year. As stated previously,  USPS\u2019s capital spending budget establishes capital spending levels for  the fiscal year and does not include approvals for specific projects.  Project sponsors must obtain approval from different groups within USPS  to initiate capital projects. USPS may approve less capital spending for  capital projects than budgeted for at the start of the year. Our analysis of  capital-spending cash outlays from fiscal year 2007 through 2017 shows  that on average, USPS spent about 18 percent less than was budgeted  for at the start of each year. According to USPS officials, capital  spending can be below budgeted levels for a variety of reasons. USPS  may shift strategic priorities based on business conditions and cancel or  delay some planned projects that it determines are no longer aligned with  its priorities. For example, USPS canceled a previously approved  centralized distribution facility project in Brooklyn, New York, and decided  to look for less costly alternatives to support the area\u2019s increased  package processing needs. Also, officials stated that projects could come  in below budget because of a reduction in project scope or because a  multi-year project falls behind schedule and has less cash outlays in a  given year than were planned.", "In other instances, USPS\u2019s capital-spending approval process provides  flexibility to re-allocate capital funds as USPS identifies and assesses  changing conditions that affect the organization, or when contingencies or  emergencies arise. For example, according to USPS officials, as USPS  monitors the economic indicators that affect its business, the indicators  may signal an increase in package volume. USPS might respond by  allocating more capital toward additional purchases of package-sorting  equipment. According to USPS officials, USPS\u2019s capital-spending  process also allows USPS to respond to contingencies. In fiscal year  2017, USPS approved capital spending to repair facilities in the U.S.  Virgin Islands damaged during Hurricane Maria. (See fig. 4.) In the event  that such unplanned projects arise to repair damages or are required for  safety, project sponsors can expedite the capital spending approval  process, such as by submitting an advance funding request to USPS.", "In addition to having processes to respond to organizational uncertainties,  we also found that USPS has processes for responding to the risks  affecting individual capital projects. According to USPS documentation,  capital projects with total costs of over $5 million are reviewed at certain  stages in their implementation to assess any changes, including changes  in the return-on-investment, timeline, and performance of the projects.  USPS may alter project specifications or time frames to respond to these  changes. During the implementation stage of some major capital projects,  such as the installation of mail-processing equipment, departments may  initially test a limited number of units with the option to request the  purchase of additional units if the tests are successful. Additionally, some  major capital projects, such as the replacement of USPS\u2019s delivery  vehicles, require acquisitions over multiple years, which, USPS officials  told us, can be used to limit risk. As mentioned earlier, USPS is planning  to replace its fleet by purchasing vehicles over a number of years,  potentially allowing it to capitalize on technological advances that may  develop over the time period.", "After a capital project is complete, USPS has a process for reviewing the  results as a way to inform and improve future capital-spending decisions,  including better addressing project risks. USPS\u2019s capital-spending  process requires USPS to evaluate capital projects with total costs over  $25 million after project completion, reviewing the cost, schedule, and  performance results of these projects. For example, in November 2017,  USPS discussed the results of two package processing and sorting  projects that experienced delays associated with accommodating new  equipment at the facilities due to design issues. As a result, USPS  recommended that project sponsors conduct more research about any  site-specific risks before submitting a DAR for future package processing  and sorting projects. In addition, USPS\u2019s Office of Inspector General  prepares an annual capital-project-compliance report that evaluates the  soundness of USPS\u2019s capital spending. According to USPS officials, the  organization considers the results of these reports and seeks to address  any resulting recommendations. For example, we reviewed  documentation explaining that, in response to one recent Office of  Inspector General recommendation, USPS stated it would revise its  capital spending guidance to define review and approval procedures,  validation, and compliance report requirements for all investments."], "subsections": []}]}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to USPS for review and comment.  USPS provided a written letter (see appendix II) in which USPS provided  no comments. Via email, USPS also provided technical comments, which  we incorporated as appropriate.", "We are sending copies of this report to interested congressional  committees and the Postmaster General. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff that made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives for this report were to (1) describe the U.S. Postal  Service\u2019s (USPS) projected capital spending over the next 10 years and  (2) assess whether USPS\u2019s processes support its ability to address  uncertainties and risks that affect its capital spending. For our second  objective, our scope was limited to assessing whether USPS had  designed processes; that is, we did not assess the quality of any analyses  that USPS conducted regarding risks or any determinations that USPS  made regarding capital-spending projects as this was beyond the scope  of our review. Such assessments are routinely conducted by the USPS  Office of Inspector General.", "To address USPS\u2019s planned capital spending over the next 10 years, we  reviewed USPS data on capital spending from fiscal years 2007 through  2017 and USPS documentation on projected capital spending from fiscal  years 2018 through 2028. In both cases, we focused on a fiscal year\u2019s  actual or projected capital-spending cash outlays\u2014or the amount of cash  spent on capital projects\u2014as opposed to capital-spending commitments  made in that fiscal year. For historical data, we used data from USPS\u2019s  annual budgets, known as Integrated Financial Plans, for fiscal years  2008 through 2018. Each annual budget contains data on actual capital  spending levels from prior fiscal years. The annual budgets generally  report capital spending in four broad categories: vehicles, facilities,  information technology and other, and mail-processing equipment.  Because the categories used in past annual budgets were not consistent,  we recategorized some years\u2019 spending to be consistent. Specifically, we  considered \u201cmail-processing equipment\u201d or \u201cequipment\u201d as part of \u201cmail- processing equipment.\u201d We considered \u201cinfrastructure and support,\u201d  \u201cinformation technology and other,\u201d and \u201ccustomer service and support  equipment\u201d as part of the \u201cinformation technology and other\u201d category.  The past budgets consistently used \u201cfacilities\u201d and \u201cvehicles\u201d categories.  We obtained input from USPS officials on our recategorizations. To  determine the reliability of these data, we reviewed the data for any  obvious errors, reviewed relevant documentation, and interviewed  officials. We determined that these data were sufficiently reliable for the  purposes of reporting on USPS\u2019s past capital spending.", "For information on USPS\u2019s projected capital spending from fiscal years  2018 through 2028 we reviewed USPS\u2019s 10-year capital-spending  forecast for those years, which USPS created in 2017. This 10-year  forecast is a projection of capital spending, but is not a commitment for  any level of investment. The 10-year forecast categorizes capital  spending projects into the following categories: construction and building  purchases, building improvements, mail processing equipment, vehicles,  capitalized software, customer service equipment, and postal support  equipment. For our analysis, we combined \u201cpostal support equipment,\u201d  \u201cinformation technology,\u201d and \u201ccustomer service equipment\u201d into one  overall \u201cinformation technology and other\u201d category, and \u201cconstruction  and building purchases\u201d and \u201cbuilding improvements\u201d into one overall  \u201cfacilities\u201d category. USPS officials agreed with this approach. To  determine the reliability of these data, we interviewed USPS officials,  reviewed data for any obvious errors, and reviewed relevant  documentation. We determined that these data were sufficiently reliable  for the purposes of providing information on USPS\u2019s projected capital  spending. In addition, we interviewed four USPS vice presidents in  charge of the departments that correspond with the four broad categories  of capital-spending investments about historic, ongoing, and projected  capital spending.", "We also selected and reviewed a non-generalizable sample of 14  Decision Analysis Reports (DAR)\u2014internal USPS documents used to  justify and obtain approval for some proposed capital-spending projects\u2014 of the 66 approved by USPS for fiscal year 2017 and part of fiscal year  2018. USPS requires DARs for all proposed capital spending projects  with a total project cost of at least $1 million. The DARs contain  information on, among other things, project specifications, purpose, risks  and tradeoffs, and timeframes. We reviewed the DARs for this and other  information; we did not review the quality of the analyses contained in the  DARs. We obtained a list of all approved DARs for fiscal years 2017 and  2018 and selected DARs of the two largest and two smallest capital  projects by total value in each of the four categories (i.e., vehicles,  facilities, information technology and other, and mail processing  equipment). Because the vehicles category had only two approved  DARs at the time we received the list of approved DARs from USPS, we  reviewed 14 DARs instead of 16. While the information from our reviews  cannot be generalized to all DARs, the information provides insights into  USPS\u2019s reasons for undertaking capital spending projects.", "To assess whether USPS has processes that support its ability to  address uncertainties and risks that affect its capital spending, we  reviewed USPS documentation, including USPS\u2019s policies and  procedures for capital spending, internal guidance documents, and others  related to processes that affect its capital spending. We identified criteria  for addressing uncertainties and risks, including those specific to capital  spending. Specifically, we identified criteria from the Committee of  Sponsoring Organizations of the Treadway Commission\u2019s (COSO)  Internal Control-Integrated Framework (the internal control standards  adopted by USPS) and the Office of Management and Budget\u2019s Capital  Programming Guide. COSO Principle 7 states, \u201cThe organization  identifies risks to the achievement of its objectives across the entity and  analyzes risks as a basis for determining how the risks should be  managed.\u201d Further, COSO Principle 9 states, \u201cThe organization identifies  and assesses changes that could significantly affect the system of  control.\u201d The Office of Management and Budget\u2019s Capital Programming  Guide element I.1.1 states, \u201cThe plan should also be consistent with the  level of future budgetary resources that will be available.\u201d We evaluated  USPS\u2019s processes that affect capital spending against these criteria to  determine whether USPS had designed processes to address  uncertainties and risks related to capital spending. We did not review the  capital spending projects USPS has undertaken to determine, for  example, if USPS made appropriate decisions regarding selected  projects. We also interviewed USPS officials regarding USPS\u2019s capital- spending processes. Specifically, we interviewed officials with USPS\u2019s  Capital Investment and Business Analysis Department; Finance and  Planning Department; Technical Analysis, Accounting, and Finance  Department; and the four vice presidents mentioned above about how  they address uncertainties and risks related to capital spending within  their departments.", "We conducted this performance audit from September 2017 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the U.S. Postal Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact above, Kyle Browning and Faye Morrison  (Assistant Directors); Matthew Rosenberg (Analyst in Charge); Amy  Abramowitz; Sara Ann Moessbauer; Josh Ormond; Joshua Parr; Amy  Rosewarne; and Crystal Wesco made key contributions to this report.  Also contributing to this report were Carol Henn, Sabine Paul, and  Carolyn Voltz."], "subsections": []}]}], "fastfact": ["USPS faces unsustainable financial challenges. It was structured to be self-supporting but First-Class Mail volume continues to drop and it has seen operating losses for 11 straight years.", "After years of reduced capital spending, USPS says it has critical capital spending needs. For example, to help it meet its statutory obligation for prompt, efficient and reliable services, it plans to replace delivery vehicles\u2014most of which are decades old.", "We found that USPS has processes in place to help it identify the uncertainties that may affect its capital spending plan, and flexibilities that allow it to adjust the plan accordingly."]}
{"id": "GAO-18-81", "url": "https://www.gao.gov/products/GAO-18-81", "title": "Military Readiness: Actions Are Needed to Enhance Readiness of Global Response Force to Support Contingency Operations", "published_date": "2017-10-27T00:00:00", "released_date": "2017-10-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD must be able to rapidly deploy forces to respond to a range of worldwide contingencies, and in 2007 it established the GRF to enhance that capability. The GRF is a set, or \u201cmenu,\u201d of forces from the military services, each of which possesses unique capabilities, and which the Secretary of Defense can deploy rapidly anywhere in the world.", "House Report 114-537, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to evaluate challenges DOD may be facing regarding the GRF. GAO reviewed the extent to which (1) DOD has used the GRF, and assessed any risks associated with its use of the GRF; and (2) GRF-assigned units are trained to meet GRF missions individually and as a joint force. GAO reviewed GRF deployment information from 2010 to 2017 and the GRF Execute Order, observed a training exercise, and interviewed knowledgeable officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) Global Response Force (GRF) has two distinct uses: one is to enhance DOD's ability to rapidly deploy forces in response to a range of worldwide contingencies with a tailorable joint force; and the other is to provide a set, or \u201cmenu,\u201d of units that combatant commands can request to augment their capabilities in light of unexpected challenges when requirements exceed their capabilities. Since 2010, according to officials, DOD has used the GRF 35 times in support of worldwide contingencies, with 32 of those times involving deployment of individual GRF units to augment combatant commander needs, and 3 times involving their use as part of a joint task force. This predominant use of individual GRF units to augment combatant commanders' needs has diminished the set of units available for mission scenarios related to the GRF's use as a tailorable joint force. For example, when DOD deployed a ballistic missile defense unit as a part of the GRF to augment a combatant command's missile defense capabilities, the particular capability it supplied to the GRF was not available for participation in a tailorable joint force to respond quickly to a potential worldwide contingency, if such an event occurred. DOD does not know what risks it assumes to readiness for GRF mission scenarios due to its general reliance upon the GRF as an augmentation capability available to individual geographic combatant commands, because DOD has not assessed those risks. Without conducting a risk assessment and taking steps to address any identified risk to accomplishing the GRF's intended uses, DOD's attempt to satisfy one of the uses (that is, individual GRF-assigned units assisting combatant commands) may hamper the other use (that is, deployment of a joint task force for a contingency).", "GRF units train individually to meet GRF missions, but DOD does not conduct any GRF-specific joint training exercises, and the individual GRF units have limited opportunities to train as part of an integrated joint force, according to DOD officials. While the GRF Execute Order calls for integrating elements of the GRF into existing joint training, the military services lack the authority to direct other services to supply forces for joint training exercises, even when those forces are currently on a GRF rotation. Moreover, since the disestablishment in 2011 of U.S. Joint Forces Command\u2014which, among other things, was the lead agent for joint force training\u2014and because units designated for the GRF mission may be assigned to different combatant commands or may be service-retained, no single commander has the authority to require joint force training of GRF units. As a result, no joint training exercises are specifically designed to exercise GRF units as a joint task force. Army officials told GAO that joint exercises are important because they give individual units from different services the opportunity to identify challenges and develop solutions, thereby enhancing the GRF's joint task force capability. Without an entity having the responsibility and authority to plan, direct, and conduct joint training exercises focused on GRF-assigned units deploying as a joint task force as appropriate, DOD risks undermining the effectiveness of the rapid deployment of a GRF joint task force in response to unforeseen worldwide contingencies."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD (1) assess the risks assumed in its reliance upon the GRF as both an augmentation capability and a tailorable joint force; (2) design appropriate responses following the risk assessment; and (3) designate an authority to establish and enforce integrated joint training as appropriate for GRF-assigned units. DOD concurred with GAO's three recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["According to the 2012 Capstone Concept for Joint Operations: Joint  Force 2020, after more than a decade of war, our nation and armed  forces are transitioning to a future in which the world is trending toward  greater stability overall, but is also potentially more dangerous than ever  before due to destructive technologies available to a disparate range of  adversaries. Consequently, the Department of Defense (DOD) needs the  ability to rapidly deploy forces to respond to a range of worldwide  contingencies. In 2007, DOD established the Global Response Force  (GRF) with the objective of providing the Secretary of Defense with an  array, or \u201cmenu,\u201d of rapidly deployable forces, and thereby enhancing  DOD\u2019s ability to respond quickly to worldwide contingencies or augment  the geographic combatant commands\u2019 capability to respond to  unforeseen challenges.", "House Report 114-537, accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2017, included a provision for us to  evaluate challenges that DOD may be facing regarding the GRF. This  report reviewed the extent to which (1) DOD has used the GRF and  assessed any risks associated with its use, and (2) GRF-assigned units  are trained to meet GRF missions, both individually and as a joint force.", "For objective one, we reviewed the Chairman of the Joint Chiefs of Staff  GRF Execute Order (EXORD) to identify the GRF\u2019s documented global  missions, forces, and timelines. We reviewed the Joint Staff\u2019s GRF  deployment information from 2010 to 2017 to understand the frequency of  GRF deployments and identify specific instances in which the GRF\u2019s  ability to accomplish its missions was affected. To identify the extent to  which DOD has assessed any risks to mission readiness based on its  reliance on the GRF to serve its two identified uses, we also interviewed  senior officials from the Office of the Under Secretary of Defense for  Personnel and Readiness; Joint Staff; and Army, Marine Corps, Navy,  and Air Force headquarters; as well as conducted site visits to force  providers at Army Forces Command, Marine Forces Command, Navy  Fleet Forces Command, Air Force Air Combat Command, and U.S.  Transportation Command. We also interviewed U.S. Africa Command,  U.S. European Command, and U.S. Pacific Command officials, as well as  visited U.S. Central Command and U.S. Southern Command. We  compared DOD\u2019s effort to assess risks against criteria in the Standards  for Internal Control in the Federal Government, which states that entities  should identify and analyze risk and define objectives.", "For objective two, we reviewed the Chairman of the Joint Chiefs of Staff  GRF EXORD and DOD\u2019s Guidance for the Defense Readiness Reporting  System to understand how GRF readiness is developed, reported, and  evaluated. We reviewed Standards for Internal Control in the Federal  Government to identify criteria for how agencies should develop an  organizational structure and assign responsibilities. We observed a  Deployment Readiness Exercise at Fort Bragg, North Carolina, that  demonstrated some potential benefits of training exercises for GRF units.  We also interviewed senior officials from the Joint Staff, military service  force providers, and geographic combatant commands to better  understand training practices for the GRF and its assigned units. See  appendix I for more details on our objectives, scope, and methodology.", "We conducted this performance audit from May 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The GRF EXORD generally establishes the GRF as a set, or \u201cmenu,\u201d of  forces from the military services\u2014each of which possesses unique  capabilities\u2014that the Secretary of Defense can deploy rapidly anywhere  in the world. According to Joint Staff officials, deployment is for a duration  that can range from a few weeks to several months. The GRF EXORD  was first issued in 2007 and, according to DOD officials, has been revised  several times to modify the number or types of assigned units. The  current version, which was issued in 2015, continues to identify two uses  for the GRF, described as follows:", "One is to enhance DOD\u2019s ability to respond quickly to a range of  worldwide contingencies. In this scenario, the GRF would generally be  used as a tailorable joint force. For example, in the event of a  humanitarian crisis such as an earthquake, GRF units possessing the  capabilities needed to meet the crisis can be combined into a joint  force and rapidly deployed to the affected area. In this scenario, the  GRF units selected would act together as a joint force under the GRF- supplied Joint Task Force headquarters or a preexisting one.", "The other identified use of the GRF is to augment the capabilities of  geographic combatant commands in light of unexpected challenges.  In this scenario, GRF units would generally be deployed as individual  units or in groups. For example, a combatant command may on  occasion require additional intelligence, surveillance, and  reconnaissance capability, and accordingly a GRF unit possessing  that requisite capability can be taken from the GRF and temporarily  allocated to the combatant command for a certain period of time.", "Although the GRF EXORD identifies these two intended uses, the  document does not prioritize one use over the other.", "To meet the range of capabilities delineated in the GRF EXORD, the  services nominate and assign units to the GRF on a rotating basis for a  certain period of time. Each nominated and assigned unit possesses a  specific capability outlined in the GRF EXORD. These specific  capabilities correspond to the operational requirements of eight global  mission scenarios listed in the GRF EXORD. For example, the GRF  includes a Marine Expeditionary Unit and an Airborne Brigade Combat  Team because of the unique capabilities of those units. According to  DOD officials, once a force is assigned to the GRF, it is on alert status for  a period of typically 6 to 9 months, with a potential to be deployed.  Accordingly, services rotate units onto and off of the GRF in order to  maintain a high state of readiness, which, in turn, allows them to meet the  rapid response timeframes required by the GRF EXORD.", "To gain access to units assigned to the GRF, according to Joint Staff  officials, combatant commanders submit an emergent request for forces  to the Joint Staff. Generally as part of the global force management  process, when a combatant command identifies an emergent requirement  for a force that cannot be met using units already assigned or allocated to  the combatant command, the combatant command then submits a  request for forces. If the Joint Staff, joint force providers, and military  services determine that a GRF-assigned unit is the most appropriate  solution for the combatant command\u2019s requirement, the Joint Staff will  recommend it as the sourcing solution to the Secretary of Defense. Once  approved, the GRF-assigned unit will be allocated to the combatant  commander."], "subsections": []}, {"section_title": "DOD Has Generally Used the GRF to Augment Combatant Command Capabilities and Has Not Assessed the Risk on Its Ability to Respond as a Joint Force", "paragraphs": ["According to an official from the Joint Staff office responsible for  managing the GRF across DOD, since 2010 DOD has used the GRF 35  times in support of worldwide contingencies\u2014with 32 of those uses  involving individual GRF units being deployed in support of or to augment  combatant commander needs. However, according to Joint Staff officials  overseeing the management of the GRF, DOD has not assessed the  extent to which it assumes risk associated with the potential unavailability  of GRF units for a short-notice deployment as a joint force in response to  a contingency, given the predominant use of the GRF as a resource for  combatant commands to obtain individual units. According to an official  from the Joint Staff, deployment of select GRF units as part of a joint task  force has occurred three times: once to Haiti in support of an earthquake  humanitarian response, and twice to Afghanistan in July 2010 and June  2011 in support of Operation Enduring Freedom. According to these  officials, GRF capabilities in support of Haiti included command and  control, security, and transportation and distribution of humanitarian  supplies. GRF units in support of Operation Enduring Freedom provided  force protection to coalition forces as well as train, advise, and assist  capabilities.", "The predominant use\u201432 of 35 deployments\u2014of individual GRF units to  augment a combatant commander\u2019s needs has, in turn, diminished the  set of units available for mission scenarios related to the GRF\u2019s use as a  tailorable joint force, and accordingly the capabilities available for  inclusion under a GRF joint task force. For example, Joint Staff officials  stated that DOD deployed a ballistic missile defense unit designated for  the GRF to a geographic combatant commander\u2019s area of responsibility  to augment that combatant command\u2019s missile defense capabilities.  According to Joint Staff officials, the deployment of individual GRF- assigned units is intended to be a temporary solution for a specified  period of time. According to these officials, the ballistic missile defense  unit\u2019s deployment was extended beyond its original timeframe and it was  not replaced on the GRF menu of forces with another such unit because  there are not enough of these particular types of units to meet the  requirements across the combatant commands. Therefore, during the  ballistic missile defense unit\u2019s deployment, the particular capability that  unit supplied to the GRF was not available as part of a tailorable joint  force to respond quickly to a potential worldwide contingency\u2014the other  broad intended use of the GRF. Given that DOD has not defined an  acceptable level of risk\u2014relative to the length of time during which units  remain committed to augmenting combatant commanders\u2019 needs\u2014DOD  lacked reasonable assurance that extending the ballistic missile defense  unit\u2019s deployment would not surpass an acceptable level of risk to mission  for either of the GRF\u2019s uses.", "Two other units with capabilities particularly suited for use as part of a  joint force have also been deployed individually to augment combatant  command capabilities. One is U.S. Transportation Command\u2019s Joint  Enabling Capabilities Command, which provides joint communications,  planning, and public affairs support to a joint force or joint task force  headquarters. A second is U.S. Transportation Command\u2019s Joint Task  Force \u2013 Port Opening, which provides capabilities able to deploy within 12  to 36 hours to support the opening of a port, including the capability to  rapidly establish and initially operate an aerial or sea port of debarkation,  conduct cargo handling and movement operations to a forward  distribution node, and facilitate port throughput in support of contingency  operations. Like ballistic missile defense units, these two units are limited  in number. According to officials from U.S. Transportation Command,  because the units have been used primarily to augment geographic  combatant command capabilities, they are at times unavailable for use as  part of a tailorable joint force that can be used to respond quickly to  unforeseen worldwide contingencies. Because DOD has not defined the  risk it assumes in its use of GRF units, it cannot determine the likelihood  that units used to augment combatant commanders\u2019 needs might be  required to constitute a joint force composed of GRF units, nor has DOD  defined the significance of the risk it incurs by not having a given  capability available to the GRF. Further, although DOD has used the GRF  primarily to augment combatant commanders\u2019 needs, risks for both uses  should be identified and analyzed appropriately since neither use is  prioritized over the other. While DOD did not encounter issues accessing  GRF units that it required during any of the three instances in which the  GRF was deployed as part of a joint force, Joint Staff officials have  nonetheless raised an issue concerning the degree of risk that DOD  continues to assume by using GRF capabilities to augment combatant  commander needs that may be needed by the GRF to constitute a joint  force.", "DOD officials stated that using GRF units to augment geographic  combatant command requirements leaves them unavailable for use as  part of a joint force ready to respond to an unforeseen worldwide  contingency. They stated that this is largely due to the fact that some  GRF units are limited in quantity but in high demand worldwide. For  example, according to DOD officials, while intelligence, surveillance, and  reconnaissance systems are in such high demand that they are  consistently used to augment combatant commanders\u2019 requirements,  they are also typically used as an essential part of a joint force. As such,  there is a likelihood that a GRF joint force might require, but not have  access to these capabilities, thus potentially increasing the risk of not  accomplishing a given mission. DOD officials stated that in the event of a  crisis requiring the employment of GRF units as part of a joint task force,  GRF units currently employed elsewhere could be reassigned. It is  uncertain, however, whether such reassignment would enable a GRF  joint task force to meet its timeframes for deployment given that GRF  units are expected to be ready for deployment on very short notice.  Moreover, the potential effect of and risks associated with such an  occurrence\u2014specifically, the unavailability of required forces to assemble  GRF units as part of a joint force\u2014has not been assessed. The  identification and analysis of risks provides the basis for developing  appropriate risk responses, such as, in this case, further defining and  prioritizing the GRF\u2019s intended uses and missions. Because DOD has not  identified or analyzed risks associated with the uses of the GRF, it may  lack reasonable assurance that this response will be sufficient to mitigate  the risks. Further, without identifying risk, DOD is not well positioned to  develop other risk-mitigating strategies, and to know when to activate  them.", "Standards for Internal Control in the Federal Government establish that  management should assess risks related to achieving defined  objectives. Specifically, the standards state that management should  analyze the identified risks to estimate their significance and define  tolerances for levels of risk assumed, thereby providing a basis for  responding to the risks. The standards also call for management to  design responses such that risks are contained within the defined risk  tolerance for the identified objective. DOD has not assessed the risks to  readiness for mission scenarios that it might assume for both uses of the  GRF because of its general reliance upon the GRF as an augmentation  capability available to individual geographic combatant commands for  response to unforeseen challenges or opportunities.", "Furthermore, we found that there are varying perspectives within DOD  concerning the intended uses of the GRF, although the GRF EXORD  generally identifies two overarching uses, as previously discussed.  Specifically, officials from the Office of the Under Secretary of Defense for  Personnel and Readiness and the Joint Staff stated the view that the  GRF is a menu of forces, each unit possessing unique capabilities that  can be used either individually to address geographic combatant  command-identified capability gaps or collectively as a joint force to react  to unforeseen worldwide contingencies. However, officials from U.S.  Africa Command and U.S. Central Command view the GRF primarily as a  pool from which they can draw forces, and it is these geographic  combatant commands that have most often requested those capabilities  provided by individual GRF units. Officials from the Army expressed  another perspective, based in large part on the requirement for the Army  to provide a joint task force headquarters for the GRF. Army officials said  that, in their view, the GRF serves primarily as a pool of forces from which  a joint task force can be created to meet unforeseen worldwide  contingencies.", "Although the GRF EXORD generally identifies the two uses, it does not  prioritize the use of GRF assets to meet either. Additionally, DOD has not  defined the risk to meeting the objectives of either of the two uses, and,  thus does not have the necessary knowledge to determine when to  deploy units for one use or the other. As previously stated, DOD has used  the GRF to augment combatant commanders\u2019 forces more frequently\u201432  out of 35 deployments\u2014rather than retaining the units assigned to the  GRF to support a rapidly deploying joint force.", "Conducting a risk assessment that identifies any risks associated with the  use of the GRF could help DOD to design responses, such as further  defining and prioritizing the GRF\u2019s intended uses and missions in an effort  to mitigate any identified risks. Without conducting a risk assessment and  taking steps to address any identified risk to accomplishing either of the  GRF\u2019s uses, DOD\u2019s attempt to satisfy one of the two intended uses of the  GRF may inadvertently hamper the other intended use."], "subsections": []}, {"section_title": "GRF Units Have Trained Individually to Meet GRF Missions, but They Have Not Trained as Part of an Integrated Joint Force", "paragraphs": ["GRF units train individually to meet GRF missions, but there are no GRF- specific joint training exercises, and the individual GRF units have limited  opportunities to train as part of an integrated joint force, according to  DOD officials. Specifically, according to service officials, GRF readiness,  and that of assigned units, is based on the assigned force\u2019s participation  in their respective service training exercises and are generally focused on  the respective units\u2019 core missions or functions. In addition to service- level training, GRF units can also participate in joint training exercises  sponsored by one of the geographic combatant commands. These  commands can give authoritative direction to subordinate commands and  forces necessary to carry out missions assigned to the command,  including over all aspects of joint training. However, if GRF units are  service retained or assigned to different combatant commands, they  would not all fall under the authority of a single commander that could  direct joint training. According to military service officials, there are no  GRF-specific joint training exercises. However, according to some  combatant command officials, some joint training exercises have included  units currently assigned to the GRF. Few, if any of these exercises,  however, provide opportunities to conduct training for the GRF\u2019s joint task  force headquarters in conjunction with GRF-assigned units. For example,  according to U.S. Southern Command officials, the Joint Staff\u2019s 2017  Joint Task Force Forming Exercises will be held in U.S. Southern  Command\u2019s area of responsibility, and will include the unit currently  assigned as the GRF\u2019s Joint Task Force headquarters. However, the  exercise will not include any other GRF-assigned units. Therefore, the  training will not provide an opportunity for the GRF to demonstrate  readiness, gain efficiencies, or identify deficiencies associated with  deploying elements of the GRF as a tailorable joint task force.", "Chairman of the Joint Chiefs of Staff Instruction 3500.01H, Joint Training  Policy for the Armed Forces of the United States, notes that U.S. forces  may be employed across the range of military operations, and that DOD  must support national security requirements with joint military capabilities  designed to adapt and succeed in any operational environment. It further  states that the department and its mission partners must prepare to  operate in a joint, interagency, intergovernmental, and multinational  environment. Finally, it notes that the joint training challenge is to be  responsive to all emerging and extant mission requirements of the  combatant commanders.", "The need for interoperability is especially important for units assigned to  the GRF not only because the GRF EXORD requires that they be ready  for eight global mission scenarios, but because the overall GRF concept  suggests they need to be capable of integration into a tailorable joint  force. Underscoring this need for interoperability and jointness, the GRF  EXORD outlines that combatant commanders should integrate elements  of the GRF into Joint Exercise Program events to help sustain the  readiness and capabilities of those units to execute various mission  capability requirements. It also notes that combatant commanders  should conduct a training event with the GRF\u2019s Joint Task Force-capable  headquarters at least once every 30 months in order to maintain the  headquarters\u2019 readiness to support each geographic combatant  command. While these requirements are important to ensure the GRF  units receive the proper training and are integrated into combatant  command joint exercises, there are no specific GRF joint training  exercises that provide opportunities for individual units assigned to the  GRF to train as a tailorable joint task force.", "Joint Staff and service officials told us that the GRF\u2019s assigned forces do  not require additional or special training because they will perform the  core missions for which they train regardless of whether they are  deployed individually or as part of the GRF joint task force. These officials  stated, therefore, that existing training is sufficient to develop and  determine readiness of the GRF. However, the importance of exercising  the GRF Joint Task Force headquarters and associated GRF-assigned  units was demonstrated to us when we observed an Army-sponsored  joint training event involving GRF-assigned forces during a January 2017  Deployment Readiness Exercise at Fort Bragg, North Carolina, during  which several interoperability challenges arose. For example, the Army  and Air Force faced a challenge in calculating the weight of Army heavy  equipment being loaded onto Air Force aircraft preparatory to a simulated  airdrop mission. Based on the Army\u2019s calculations, the equipment load  was well under the specified weight limit for the aircraft, but the Air  Force\u2019s onboard computers showed the load as being over the limit.  While the cause of the difference in the two figures was not identified to  us at the time, Army officials suspected that it could be attributed to a  double-counting of the weight of the parachute. In another example,  inclement weather at Fort Bragg during the exercise caused ice build-up  on participating aircraft. This showed that the Air Force\u2019s de-icing  capability was limited to a few aircraft at a time, which caused delays in  loading and preparing the aircraft for take-off. According to Army officials,  had the mission required more personnel, equipment, and aircraft, this  issue would have created a risk to meeting the GRF\u2019s mission timelines.", "Despite the challenges encountered during the exercise, Army officials  told us that exercises, such as the Deployment Readiness Exercise  conducted at Fort Bragg, are important because they give units from  different services the opportunity to identify challenges and develop  solutions. As a result, these exercises can enhance the GRF\u2019s joint task  force capability. Additionally, a senior official from the Office of the Under  Secretary of Defense for Personnel and Readiness\u2019 Force Training  Directorate told us that the ability to act jointly was very important in  military operations and noted the need for joint training.", "Two studies conducted on behalf of DOD further underscore the  importance of joint exercises for developing GRF force readiness. The  first study, released by the Institute for Defense Analysis in 2015,  reported that the current joint exercise program did not ensure a proficient  and ready GRF. Specifically, the study identified three key issues  associated with GRF training. First, realistic interoperability training of  individual units assigned to the GRF was not sufficient to ensure overall  GRF readiness. Second, while the then-current version of the GRF  EXORD assigned joint training responsibilities to the services, according  to the study, the service responsible for the Joint Task Force-capable  headquarters element lacked the authority to direct the required level of  joint training for GRF elements provided by other services. Third, the  GRF, in its entirety, had not been exercised or deployed as a joint force  since its inception and thus had not demonstrated the ability to rapidly  deploy as an operationally coherent joint task force. The report  recommended that DOD designate a single commander with authority to  establish and enforce joint integrated training at the tactical level, make  changes to improve training for the GRF\u2019s Joint Task Force headquarters,  and implement a joint demonstration campaign for the GRF. According to  Joint Staff officials, they are not aware of any actions taken in response to  these recommendations. The second study, released by RAND in 2016,  also emphasized that realistic exercises were key to ensuring and  validating the GRF\u2019s readiness. The report added that current exercises  rarely included full and realistic force packages and recommended that  joint airborne exercises be designed explicitly to identify and assess the  implications of possible challenges and validate planning assumptions  about a GRF joint task force.", "According to Army officials, a major factor inhibiting joint training  exercises focused at GRF-assigned units as a joint task force is the fact  that it can be difficult to get other services to agree to participate in  service-sponsored events because\u2014as the Institute for Defense Analysis  study pointed out\u2014services lack the authority to direct other services to  supply forces for joint training exercises, even when those forces are  currently on a GRF rotation. Moreover, since the disestablishment of U.S.  Joint Forces Command in 2011, which was responsible, among other  things, for being the lead agent for joint force training, there is no single  commander with the authority to require joint force training. As noted  above, although geographic combatant commanders may direct joint  training of forces under their command, units designated for the GRF  mission may come from forces assigned to different geographic  combatant commands or service-retained forces, according to officials.", "According to a senior Office of the Under Secretary of Defense for  Personnel and Readiness\u2019 Force Training Directorate official, the  challenge to conducting joint GRF training is that there is no entity having  authority and responsibility for such training. He noted that because the  GRF is department-wide and is not assigned to a single service or  geographic combatant command, there is no single advocate for the GRF  mission and training with the authority to direct the services and  geographic combatant commands with GRF-dedicated units to prepare  for the joint requirements inherent in the GRF mission. As a result, there  are no joint training exercises specifically designed to exercise GRF units  as a joint force. According to Standards for Internal Control in the Federal  Government, management should develop an organizational structure  with an understanding of the overall responsibilities, and assign these  responsibilities to enable the organization to operate in an efficient and  effective manner, comply with applicable laws and regulations, and  reliably report quality information. To achieve this, management should  assign responsibility and delegate authority to key roles throughout the  entity.", "Without an entity having the responsibility and authority to plan, direct,  and conduct joint training exercises focused on GRF-assigned units  deploying as a joint task force as appropriate, DOD risks undermining the  effectiveness of the rapid deployment of a GRF joint task force in  response to unforeseen worldwide contingencies."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["DOD has developed the GRF as a rapid response force available to react  to unforeseen contingencies or crises. While the GRF has responded to  worldwide contingencies, GRF units have been primarily used to augment  existing geographic combatant command capabilities. DOD has not  assessed the risks it assumes by its reliance upon the GRF for  augmenting combatant commanders\u2019 forces as opposed to having the  GRF-assigned units available for allocation to a joint task force in  response to a contingency. Without performing a risk assessment and, as  appropriate, designing responses to mitigate any identified unacceptable  risks to accomplishing either of the two GRF uses, DOD cannot ensure  that the GRF is able to meet its mission. Additionally, without a  designated authority to establish and enforce integrated joint training for  GRF-assigned units as appropriate, DOD has not developed GRF- specific joint training exercises or fully integrated the GRF into existing  joint exercises. Without making improvements in these areas, DOD risks  the ability of the GRF to respond to unforeseen, worldwide contingencies  as an integrated joint force in a timely fashion with all the resources it  needs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to DOD:", "The Secretary of Defense, in conjunction with the Chairman of the  Joint Chiefs of Staff, should assess the risks to accomplishing both of  the GRF\u2019s uses: that is, its use as an augmentation capability  available as needed to individual geographic combatant commands;  and its use as a tailorable joint force available for rapid response to a  specific threat. (Recommendation 1)", "The Secretary of Defense, in conjunction with the Chairman of the  Joint Chiefs of Staff, should, as appropriate following the assessment  of risk, design responses, such as further defining and prioritizing the  GRF\u2019s intended uses and missions, to mitigate any identified risks.  (Recommendation 2)", "The Secretary of Defense, in conjunction with the Chairman of the  Joint Chiefs of Staff, should designate an authority to establish and  enforce integrated joint training for GRF-assigned units, as  appropriate. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In its  written comments, DOD concurred with our three recommendations and  noted planned actions to address them. DOD\u2019s comments are reprinted in  their entirety in appendix II.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Under Secretary for Personnel  and Readiness, the Chairman of the Joint Chiefs of Staff; the Secretaries  of the Army, the Navy and the Air Force; and the Commandant of the  Marine Corps. In addition, the report will be available at no charge on the  GAO Web site at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-5431, or russellc@gao.gov. Contact points for our  Offices of Congressional Relations and of Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of our review were to examine the extent to which (1)  Department of Defense (DOD) has used the Global Response Force  (GRF) and assessed any risks associated with its use; and (2) GRF- assigned units are trained to meet GRF missions, both individually and as  a joint force.", "For our objective of determining the extent to which DOD has used the  GRF and assessed any risks associated with its use, we reviewed the  Chairman of the Joint Chiefs of Staff GRF Execute Order (EXORD) to  identify the GRF\u2019s overall uses and the global mission scenarios it is  intended to meet, as well as the operational requirements and forces  assigned to meet the requirements. We also interviewed the responsible  DOD officials to understand how DOD selects, designates, and validates  forces on the GRF, and the processes for making changes to the GRF  EXORD, as well as how DOD decides when to use GRF forces for either  of the two intended uses of the GRF. Also, we reviewed Standards for  Internal Control in the Federal Government to identify relevant internal  controls\u2014specifically, that management should assess risks related to  achieving defined objectives, analyze the identified risks to estimate their  significance, define tolerances for levels of risk assumed, and design  responses such that risks are within the defined risk tolerance\u2014and  compare them with DOD\u2019s risk assessment efforts for the GRF. Also, we  reviewed the Joint Staff\u2019s GRF deployment information from 2010 to 2017  to understand the frequency of GRF deployments and identify specific  instances in which the GRF\u2019s ability to accomplish its missions was  affected\u2014specifically, instances in which GRF capabilities were  unavailable for use during a GRF operation.", "For our objective of determining the extent to which GRF-assigned units  are trained to meet GRF missions, both individually and as a joint force,  we reviewed the Chairman of the Joint Chiefs of Staff GRF EXORD and  DOD\u2019s Guidance for the Defense Readiness Reporting System to  understand how GRF readiness is developed, reported, and evaluated.  We also reviewed DOD\u2019s Joint Training Policy for the Armed Forces of  the United States to identify existing requirements related to joint training,  and documents related to GRF training to determine the extent to which  the frequency and types of GRF training meet overall joint training  requirements as well as training requirements established in the GRF  EXORD. We observed a Deployment Readiness Exercise at Fort Bragg,  North Carolina, to learn about the types of GRF training, as well as  challenges and potential benefits of training exercises for GRF units. We  also interviewed senior officials from the Joint Staff, military service force  providers, and geographic combatant commands to better understand  training practices for the GRF and its assigned units, as well as varying  perspectives regarding the challenges and potential benefits of GRF  training exercises for accomplishing GRF missions.", "We interviewed senior officials from the Office of the Under Secretary of  Defense for Personnel and Readiness; Joint Staff; and Army, Marine  Corps, Navy, and Air Force headquarters, and conducted site visits to  force providers at Army Forces Command, Marine Forces Command,  Navy Fleet Forces Command, Air Force Air Combat Command, and U.S.  Transportation Command. We also interviewed officials from U.S. Africa  Command, U.S. European Command, and U.S. Pacific Command, and  visited U.S. Central Command and U.S. Southern Command. Our  interviews focused on understanding the degree to which DOD  organizations assess and maintain a consistent understanding of the risks  entailed in using GRF forces and gaining an understanding of the  challenges encountered in identifying, designating, and employing forces  on the GRF, as well as the extent to which the GRF\u2019s ability to  accomplish its intended missions has been affected.", "We conducted this performance audit from May 2016 to October 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals who made key  contributions to this report include Guy LoFaro, Assistant Director; Adam  Anguiano; Alberto Leff; Michael Shaughnessy; Michael Silver; Yong  Song; and Cheryl Weissman."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-214", "url": "https://www.gao.gov/products/GAO-19-214", "title": "Foreign Military Sales: Observations on DOD's Approach to Developing Price and Availability Estimates for Foreign Customers", "published_date": "2019-02-06T00:00:00", "released_date": "2019-02-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD manages the procurement of billions of dollars in defense items and services on behalf of foreign customers through the FMS program. These sales help support the defense industrial base and are vital to U.S. foreign policy and national security interests.", "The FMS process generally begins with a request by a foreign government for information about a U.S. defense item or service. Requests for price and availability data are an optional step in the process. DOD guidance is to generally respond to such requests within 45 days.", "The fiscal year 2018 National Defense Authorization Act included a provision for GAO to review DOD's process for developing price and availability data for foreign customers. This report addresses, among other objectives, (1) price and availability requests DOD received from fiscal years 2014 through 2018, (2) how DOD develops price and availability data, and (3) the factors that can influence the timeliness of DOD's responses to foreign customers with price and availability data.", "GAO analyzed DOD price and availability data for fiscal years 2014 through 2018, the latest data available; and reviewed documents for a non-generalizable sample of five price and availability responses\u2014varying by estimate value\u2014provided to foreign customers by the Army, Navy, and Air Force. GAO also interviewed defense contractors and DOD officials.", "GAO is not making any recommendations at this time."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) reported receiving 3,038 requests for Foreign Military Sales (FMS) price and availability data in fiscal years 2014 through 2018 from 93 countries across six geographic regions, as shown in the figure. Foreign customer requests included services and items such as training and support services for weapon systems, missiles, aircraft, and communication equipment.", "Not all countries in each region submitted a price and availability request.", "DOD officials indicated they generally strove to offer price and availability data that reflected rough order of magnitude estimates of total anticipated costs for a complete and sustainable capability. Contractors often provide input to DOD for these cost and schedule estimates. In the five examples GAO reviewed, DOD officials considered factors such as possible production delays and included anticipated costs for support services, operations, and sustainment, when needed. DOD officials also included FMS administrative charges and, as applicable, nonrecurring and transportation costs. GAO found that when DOD considered these factors in developing the response to the customer, at times, they made adjustments to the estimates provided by contractors to more fully reflect expected costs if the items are purchased.", "Among the five examples, GAO found that response times ranged from 45 to 320 days and that a number of factors can affect timeliness. For example, the complexity of the system or capability the customer is interested in acquiring may require involvement from multiple program offices and defense contractors, requiring more time than the 45 days suggested by DOD's guidance."]}], "report": [{"section_title": "Letter", "paragraphs": ["Each year, the United States reports billions of dollars in sales of defense  items and services to foreign governments or international organizations.  Sales like these can occur through the Foreign Military Sales (FMS)  program, wherein the Department of Defense (DOD) manages the  procurement process on behalf of the foreign customer. Sales under FMS  are vital to U.S. foreign policy and national security interests, and these  types of sales also support U.S. defense contractors and suppliers. DOD  reported sales totaling over $55 billion under the FMS program for fiscal  year 2018. Further, according to DOD, the U.S. defense industry faces  increasing competition from other countries that also produce and sell  defense articles and services. U.S. defense contractors have also stated  that maintaining a competitive edge even from the outset when foreign  customers first request information to gauge the feasibility of a potential  purchase of defense items and services is important. DOD is responsible  for developing and providing responses to foreign customer requests for  price and availability data, which DOD describes as rough order of  magnitude estimates. When developing these data, DOD incorporates  input from U.S. defense contractors that provide the defense items and  services, as needed. However, questions have been raised about DOD\u2019s  approach for providing estimates during the early stages of the FMS  process.", "The fiscal year 2018 National Defense Authorization Act includes a  provision for GAO to review DOD\u2019s process for developing price and  availability data. This report (1) describes FMS price and availability  requests DOD received from fiscal years 2014 through 2018, (2)  assesses DOD\u2019s guidance on developing price and availability data, (3)  describes how DOD develops price and availability data for the requested  capability, and (4) identifies the factors that can influence the timeliness  for DOD to provide price and availability data to the customer.", "To describe price and availability data requests DOD received, we  collected and analyzed data from the Defense Security Assistance  Management System for fiscal years 2014 through 2018, the latest data  available. In addition, we obtained information from officials in the  Defense Security Cooperation Agency (DSCA), responsible for managing  the system and administering the FMS program. To gain insights about  the system and the data produced, we also obtained information from  security assistance offices in the three military departments\u2014Army, Navy,  and Air Force, which account for the majority of FMS acquisitions. We  assessed the reliability of FMS price and availability data by reviewing the  data for issues such as missing data elements and duplicates, among  other steps. We determined these data were sufficiently reliable for the  purposes of reporting information about price and availability requests.", "To assess available guidance, we reviewed DSCA and Army, Navy, and  Air Force guidance for developing preliminary estimates in response to  requests for price and availability data. We compared the guidance to the  Standards for Internal Control in the Federal Government, which call for  agencies to use quality information to achieve their objectives.  Specifically, we reviewed the guidance to determine if it contained  attributes that contribute to quality information such as identifying the  information requirements and relevant data sources needed to develop  the price and availability data.", "To describe how DOD develops price and availability data and illustrate  how these factors influence the process, we selected a non-generalizable  sample of five responses using fiscal year 2017 data provided by the  military departments. We generally selected the five responses to include  a mix of dollar values. The sample includes price and availability data  prepared by five offices\u2014referred to as program offices\u2014from the Army,  Navy, and Air Force. Because the sample is not generalizable, we  cannot report whether the five program offices\u2019 practices are consistently  used across DOD for all price and availability responses. However, these  examples provide useful insights about the process and the assumptions  program offices considered when developing price and availability data.  For each example, we collected and analyzed the letter of request from  foreign customers, price and availability data, DOD\u2019s response to the  customer, and available supporting documentation such as clarification of  the customer\u2019s request, and data collected from defense contractors or other DOD program offices. We reviewed this information for the  assumptions and factors used in developing the data and the various  elements that make up the estimates, such as administrative charges and  costs for training and spare parts. We interviewed cognizant DOD  security assistance and program officials and defense contractor  representatives to understand the context and decisions made in  developing the price and availability data.", "To identify factors that can influence the timeliness of responses, we  obtained information from security assistance and program offices within  the military departments and DSCA on their approach to develop price  and availability responses. We also obtained information from defense  contractors and foreign customers who, as stakeholders in the FMS price  and availability process, have broad insights and perspectives on the  process. To gather input from foreign customers, we interviewed  representatives from the Foreign Procurement Group who also solicited  information from its members on our behalf. We received responses  from 12 countries. To obtain contractor\u2019s perspectives, we gathered  information from five companies through interviews and attended a  meeting hosted by the National Defense Industrial Association. Three of  the companies we obtained information from also provided cost and  schedule data for four of the examples in our sample. The information we  obtained from these foreign customers and defense contractors are not  generalizable to all foreign customers and defense contractors but,  nonetheless, provided insightful views on the FMS price and availability  process. We did not assess the timeliness of when DOD provided  responses to foreign customers because DOD does not consistently track  information regarding when price and availability data responses are  provided to customers, as discussed later in the report. However,  information we gathered for the five examples in our sample provided  some insight about how long it took DOD to provide a response to the  customer. Appendix I contains additional detail on our objectives, scope,  and methodology.", "We conducted this performance audit from June 2018 to February 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."], "subsections": [{"section_title": "Background", "paragraphs": ["The FMS program, which transfers defense articles and services to  international partners and organizations, is essentially an acquisition  process through which the U.S. government procures military equipment,  training, and other services on behalf of foreign customers. Multiple  organizations have a role in the FMS program. The Department of State  has overall responsibility for the program, including approving what  defense items and services can be sold to specific countries. DOD  administers the FMS program and manages the procurements executed  within the military departments on behalf of foreign governments. Within  DOD, DSCA carries out key functions such as supporting development of  policy for FMS. The military departments carry out the day-to-day  implementation of FMS procurements which can include providing price  and availability data at the customer\u2019s request.", "Typically, defense items\u2014such as weapon systems\u2014made available for  transfer or sale to foreign customers are systems that have completed  operational testing and are entering or have entered full rate production.  In addition, DOD also sells non-standard items, which are defined as  items that DOD does not currently manage and may include items that (1)  are commercially available, (2) DOD previously purchased and have  since been retired, or (3) were purchased in a different configuration for  DOD components. For example, a customer may express interest in  buying tanks that DOD no longer buys for its own needs. A customer may  also express interest in buying a tank that DOD currently procures but  with a radio communications configuration that is different from what DOD  uses."], "subsections": [{"section_title": "FMS Price and Availability Process", "paragraphs": ["A single DOD entity may not have full responsibility for all aspects of  responding to a foreign customer\u2019s request to purchase U.S. defense  items and services. Under DSCA policy, FMS procurements must  generally be managed at \u201cno cost\u201d or \u201cno profit\u201d to the U.S. government.  DOD\u2019s work related to developing price and availability data and other  FMS operations is generally paid for through the administrative charges  collected from foreign customers. Depending on the complexity of the  customer\u2019s request, coordination within and across DOD components  may be necessary to obtain complete information on pricing and  availability. DOD may also need to coordinate with defense contractors  who ultimately develop and provide the equipment or services.", "The FMS process generally begins when a foreign government submits a  letter of request to the Department of State or DOD to purchase defense  articles or services. In the letter of request, the foreign customer may  express interest in obtaining preliminary price and availability data for the  capabilities it seeks. While DOD describes price and availability data as  rough order of magnitude estimates, DSCA\u2019s guidance does not define  the precision of these estimates. According to DOD, FMS price and  availability data are non-binding estimates for the defense items and  services and are not intended to be budget-quality estimates. Requests  for price and availability data can signal to DOD and defense contractors  the potential for future sales. DOD and contractors may also draw upon  these requests to forecast staffing needs and production line availability.", "DOD security cooperation organizations working in U.S. embassies  around the world can assist potential customers with defining and refining  their requirements prior to submitting a request for price and availability  data. The security cooperation organizations engage in this early  coordination to help customers articulate their capability needs. This early  coordination also gives DOD components advance notice of upcoming  requests so they can initiate technology security and foreign disclosure  processes for the timely release of information.", "Requests for price and availability data represent an optional step in the  process. Customers may forgo the price and availability process and  instead submit a formal assistance request for a letter of offer and  acceptance, which when signed by the customer and U.S. government  becomes an executable FMS case. Figure 1 illustrates where the option  to request price and availability occurs in the overall FMS process."], "subsections": []}, {"section_title": "DOD Is Reconsidering Options to Implement Recent Legislative Change for FMS Price and Availability Process", "paragraphs": ["The National Defense Authorization Act for Fiscal Year 2017 required  DOD to establish a process for defense contractors to provide input on  any differences regarding the appropriateness of government price and  availability data prior to delivery of formal responses to customers. In  response, DSCA issued a policy memorandum in October 2018 that was  rescinded 2 months later due to concerns about the sensitivity of  information to be shared with contractors. The policy memorandum had  instructed DOD components to formally request rough order of magnitude  estimates from the prime defense contractor if (1) the total value of the  primary article or service requested exceeds $50 million, and (2) the  customer has a preference for a non-competitive sole source acquisition  or only a single source exists for the primary defense item. Additionally,  the memorandum stated that DOD components will allow the prime  contractor 5 business days to provide feedback on the appropriateness of  the estimate for its items that is included in the price and availability  response prior to the customer receiving this response. The  memorandum had established a formal process to obtain contractor  feedback and resolve issues that may occur, such as differences between  the program office\u2019s and prime contractors\u2019 estimates, and emphasized  the importance of being aware of program deadlines when following the  process to coordinate with contractors. According to a DSCA official, this  new policy would have helped alleviate industry concerns about how  DOD incorporates estimates provided by industry to develop price and  availability responses provided to foreign customers. However, according  to DSCA officials, when implementing the process, DOD found that the  potential level of detail and precision in price and availability estimates  could provide an unfair competitive advantage to contractors coordinating  with DOD on price and availability responses to foreign customers. As  discussed in further detail later in the report, in some instances we found  price and availability estimates DOD offered included more precise  information than rough order of magnitude estimates. According to DSCA  officials, such information could offer the contractor insight into the  government\u2019s pricing methodologies. DSCA subsequently rescinded the  October 2018 policy memorandum. DSCA plans to conduct a 120-day  review to reassess options to find a solution, if any, on what information  can be shared with contractors to satisfy the legal requirement to obtain  contractor input and feedback on price and availability estimates before  DOD responds to customers."], "subsections": []}]}, {"section_title": "DOD Received about 3,000 Requests for Price and Availability Data over the Past 5 Years", "paragraphs": ["From fiscal years 2014 through 2018, DOD reported receiving 3,038  requests for price and availability data from foreign customers from 93  countries and the North Atlantic Treaty Organization. Foreign customer  requests included services and items such as training and support  services for weapon systems, missiles and ammunition, aircraft, and  communication equipment. We found that most requests came from the  same foreign customers. Specifically, 10 customers accounted for 56  percent of requests, with one customer accounting for 28 percent of all  requests during the 5-year period within our review. Customers in the  Indo-Pacific region accounted for the largest share of requests, as shown  in figure 2.", "Among DOD components, the military departments\u2014Army, Navy, and Air  Force\u2014received almost all price and availability requests, as shown in  figure 3. The Army received slightly more requests over the 5-year period,  closely followed by the Navy.", "Foreign customers we obtained information from noted that they request  price and availability data to inform their acquisition strategy, obtain a  sense of affordability, and for budget planning. For example, when  considering potential acquisition strategies, some customers may request  data for different options, variants, or quantities of similar items or  services, resulting in multiple requests for price and availability data to  inform a potential purchase. In cases when a customer is interested in  procuring a specific item, the customer may request data to obtain  information about prices and lead times to determine affordability. The  customer may also request the data when considering whether to  purchase from the United States or from foreign countries.", "Requesting price and availability data can also provide foreign customers  with information on whether the U.S. government will make the requested  defense item or service available for sale. While preliminary estimates are  not an official acknowledgement that the item or service will be made  available to the customer, the request can trigger a U.S. government  review that includes application of policies that govern the release of  certain technologies or systems and a discussion with the customer about  the item or service. In some cases, customers can receive responses with  partial information if some requested items are not available for release.", "DOD does not collect data on which customers\u2019 requests for price and  availability data resulted in a formal request to purchase defense items or  services under FMS. Army security assistance officials told us it can take  years between when price and availability data are provided and when a  customer submits a request for a letter of offer and acceptance, if at all.  For their part, customers we obtained information from noted that there  may be numerous reasons for why they might choose not to pursue a  potential sale. For example, the item or service could not be made  available within a timeframe to meet their needs; the overall capability  was not affordable; or price and availability estimates were higher than  estimates from other foreign sources.", "The military departments do not consistently track information on the  status of responses sent to foreign customers. We found the Navy and  Army generally captured the status of a response in the system,  identifying when a response is in development, has been sent to the  customer, or has been canceled but, according to security assistance  officials, this information may not be entered consistently. In addition, the  Air Force does not generally update the status of a response in the  system. Further, Air Force security assistance officials told us the  department does not update data in the system to reflect that the Air  Force provided price and availability data to the customer. According to  DSCA and military department officials, there is no requirement that DOD  components record when a response is sent to a customer. A DSCA  official told us that DSCA does not have a specific need to monitor the  status of price and availability responses, in part because these are not  formal offers, and DOD prioritizes data collection for formal FMS cases\u2014 cases for which a signed agreement between the U.S. government and  foreign customer is in place."], "subsections": []}, {"section_title": "DOD\u2019s Guidance Allows for Flexibility in Developing Price and Availability Data and Reflects Leading Practices for Using Quality Information", "paragraphs": ["DSCA has established DOD-wide guidance\u2014the Security Assistance  Management Manual\u2014for responding to foreign customers\u2019 requests for  information on defense items and services available for purchase through  the FMS program. The manual includes some guidance on developing,  documenting, and communicating price and availability data to foreign  customers, but largely pertains to a customer\u2019s request for a letter of offer  and acceptance with the intent to buy. Security assistance officials from  across the military departments told us they rely on the manual to guide  their efforts throughout the price and availability process, and that  DSCA\u2019s guidance provides a framework for the process and is not always  prescriptive, allowing military departments latitude in how they implement  it. DSCA and military department officials we spoke with said that a  flexible process is needed to account for various circumstances specific  to each request. The price and availability process outlined in guidance  and described by DSCA and military department officials involves input  from numerous organizations within and external to DOD, as shown in  figure 4. The guidance states the process should be completed within 45  days.", "Generally, we found that DSCA\u2019s guidance reflected attributes conducive  to using quality information as called for by federal internal control  standards. For example, the standards call for agencies to define  information requirements and obtain relevant data from reliable sources.  DOD\u2019s guidance reflects this, stating that price and availability data  should serve as rough order of magnitude estimates of the cost and  availability of defense items or services and are for rough-order planning  purposes. The guidance also  instructs officials to assess whether a foreign customer\u2019s request  contains the necessary information to develop price and availability  data, such as the major item or service, quantity, anticipated delivery  schedule, and other specifications;  suggests that price and availability data also provide customers with  information about costs for not only buying equipment but also the  related operation and sustainment costs; assumes responses will include standard items\u2014nonstandard items  identifies relevant data sources that the military departments can  consult to develop price and availability data, such as last contract  award, stock price, or information from defense contractors;  states that military departments and DSCA should use the Defense  Security Assistance Management System to prepare responses to  price and availability requests;  suggests that data should be itemized by separating main equipment  from training, technical publication, transportation costs, and other  elements, as applicable; and  states that responses should be developed and communicated to  customers within 45 days from when DOD receives the request."], "subsections": []}, {"section_title": "In Selected Examples, DOD Included Comprehensive Data on Ownership Costs When Developing Price and Availability Responses", "paragraphs": ["When selling defense items and services to foreign customers, military  department officials indicated that they strive to offer a complete and  sustainable capability, referred to as the total package approach. Using  this approach, DOD takes into account the related support, such as  training, logistics, spare parts, warranties, contractor support, and other  considerations necessary for operating and sustaining the defense items  or services being purchased. The total package approach represents the  initial and follow-on cost of owning and supporting the capability. For  example, a DOD program official may develop a cost estimate for the  capability, including several years of technical support for maintaining it.  DOD may also provide a customer with cost estimates for maintaining the  capability over the course of its expected lifetime.", "Specifically, in the five examples we reviewed, we found that DOD  officials generally used a total package approach when developing price  and availability data. For example, military department officials developed  price and availability data that not only included the items and services  requested by the customer, but also included rough order of magnitude  estimates for additional costs to reflect the expected ownership costs.  Ownership costs may include development, procurement, operation, and  sustainment costs for the defense item, as part of a total package  approach. The timeframe of ownership costs provided may vary.  According to a DSCA official, ownership costs generally cover the first 2  years. In four of the five cases we reviewed, the customer requested a  capability and, in response, the program office provided estimates for not  only the equipment but also the support needed to achieve the desired  capability ranging from one week of training to five years of technical  support. For example, in one case, a customer requested data for a  complex naval weapon system that they had not previously used. Navy  program officials provided estimates for the system, spare parts, training,  and other items as requested by the customer. Program officials also  included estimates on radio navigation equipment and software that are  essential for the system to function as intended, but were not part of the  customer\u2019s initial request. Officials stated that they included these  additional costs to give the customer a comprehensive view of the costs  to acquire, operate, and maintain the weapon system. In the fifth case,  program officials told us they did not have to include training or support as  this customer was replacing missiles in their inventory, previously  purchased through FMS. However, in considering the foreign customer\u2019s  ownership costs, the officials said they included costs for containers for  storing the missiles.", "For the selected examples, program officials obtained data from defense  contractors and previous sales, adjusting estimates from data sources to  ensure the price and availability estimate reflected what the customer  could expect to pay for the item or service\u2014initial and follow-on cost of  owning and supporting the capability\u2014if the customer decided to proceed  with the purchase. Defense contractors responsible for providing data for  four of the five examples told us they consider the quantity and specific  requirements of the request, such as training, spares, and support; as  well as inflation and anticipated production and delivery schedules in  some cases. We found that for the selected examples program officials  adjusted estimates from contractors and other data sources for a number  of reasons, such as to account for potential changes in production  schedules and adding program management support provided by the  U.S. government to administer system upgrades. By accounting for these  likely costs, program officials stated that they were providing the customer  with estimates that would more closely reflect expected costs if the  customer proceeded with the sale. For example:  In two of the responses we reviewed for missiles and communication  systems, Navy and Air Force officials increased contractors\u2019  estimates, in part, to account for possible changes to production  plans. In the Navy response, for example, program officials increased  the contractor\u2019s estimate for the missiles by approximately 14 percent.  Officials told us this was to account for possible changes in the  production schedule and quantity. Contractor representatives told us  that their estimate was based on a specific number of missiles being  produced in a certain production lot. Program officials told us that the  customer would not likely have a signed agreement in place to receive  missiles from that specific production lot. According to program  officials, this means the price per missile could be higher than  forecasted in the contractor\u2019s initial estimate because there may be  fewer quantities in production, resulting in fixed production costs  spread among fewer missiles.", "In an Army response we reviewed for non-standard upgrades to  several hundred tanks, the program official used estimates provided  by the contractor to develop the price and availability data. These tank  upgrades are considered non-standard because the U.S. government  no longer uses these tanks. In light of this, the program official  included costs for program management support provided by the U.S.  government because he said the magnitude of the program would  likely require an Army office to execute and manage the upgrades,  which is projected to last up to 10 years.", "In an Air Force response we reviewed for a warning system, program  officials considered historical data from similar DOD contracts. The  program officials increased the price by $2.4 million dollars from past  procurements based on the customer\u2019s request to add a new full-time  onsite engineer to support the warning system. This price also  included costs for housing, living allowance, and travel expenses.", "Further, in our review of selected cases, we found that program officials  may include other charges in price and availability data, such as nonrecurring costs that are unique one-time program-wide  expenditures for certain major defense equipment sold under the FMS  program; a contract administration charge\u2014generally, 1.2 percent of the value  of procured items\u2014for services such as quality assurance and  inspection;  transportation costs for delivery of the item, which are generally  calculated based on rates established by DSCA; and an administrative charge\u2014currently set at 3.2 percent of the total  value of the sale to recover civilian employee salaries and operational  costs for administering the FMS acquisition."], "subsections": []}, {"section_title": "Various Factors Can Influence DOD\u2019s Approach and the Timeliness of DOD\u2019s Responses", "paragraphs": ["Military department officials told us that various factors influence the level  of effort and information involved in developing price and availability data,  some of which may also affect how long a response takes and whether  the 45-day timeframe suggested by DSCA\u2019s guidance is achieved. When  a foreign customer requests price and availability data, DOD and defense  contractors, if involved, expend time and resources to provide a  response, all without any certainty that a sale will materialize. As such,  DOD officials and defense contractors determine what level of response  is appropriate, given the nature of the customer\u2019s request and whether it  includes non-standard items or items that require customization, among  other things. DSCA and Navy program officials said customers are  interested in receiving price and availability responses quickly and  recognize that timeliness is an area of concern with the FMS process, in  general. Over half of the 12 foreign customers we obtained information  from noted that they are concerned with the length of time DOD\u2019s  responses can take. Lengthy response times could result in customers  missing opportunities to consider potential requests in upcoming budget  cycles. Several customers communicated that some responses took  considerably longer than 45 days, with some taking anywhere from 6 to  12 months. Among the five examples we reviewed, responses took from  45 to 320 days, as shown in table 1.", "Program and security assistance officials we interviewed told us they  consider the following factors:", "Customer interest and commitment. Insight into the degree of  customer commitment to purchase through FMS may influence the  time and resources military departments expend on developing a  price and availability response. For example, Air Force security  assistance officials told us that they may develop a more detailed  response if advised by in-country personnel that a request for price  and availability data will likely become a request for an actual  purchase.", "Clarity and completeness of customer\u2019s request. Customers may  submit requests that lack the clarity and details needed to develop  accurate data and estimate delivery timeframes. Several military  department officials told us that when reviewing the customer\u2019s  requests for price and availability data, they often have discussions  with customers to clarify requirements and in some cases estimated  delivery schedules before developing a response. Defining the  customer\u2019s requirement\u2014even at this early stage\u2014can be an iterative  process that requires multiple interactions between the foreign  customer and DOD officials. In one of the examples we reviewed, the  defense contractor was also involved. These discussions to clarify the  customer\u2019s requirements can prolong the process, according to  several program officials.", "Existing policy to release price and availability data. The U.S.  government\u2019s relationship with the foreign customer and the type of  defense item or service being requested\u2014such as a weapon system  with protected critical technologies versus medical evacuation  equipment\u2014can influence the length of time to obtain necessary  approvals for the release of price and availability data, according to  Navy program and Air Force security assistance officials. Requests  for price and availability data may spur the U.S. government to review  the current list of countries that have access to particular critical  technologies, as shown in one Navy response to a request for a  ballistic missile defense system. Initially, the Navy\u2019s Foreign  Disclosure Office determined the system would not be available for  potential release and the Navy program office excluded it from the  price and availability data. About a year later, according to Navy  officials, following a change in U.S. policy, the Foreign Disclosure  Office approved the release of price and availability data for the  system and the Navy included it in a subsequent price and availability  response.", "Complexity of the request. Requests for a non-standard system,  integration with foreign components, or a complex system may cause  program offices to spend additional resources and time to develop  price and availability data. For example, in response to a request for a  complex weapon system to be integrated into a foreign customer\u2019s  ship, Navy program officials said that they needed several months to  develop price and availability data due to the complexity of this  request, which required program officials to work with multiple  contractors and DOD entities to develop price and availability data. In  contrast, Army security assistance officials said that they generally  aim to conserve resources and time by developing price and  availability data based on standard items, even in instances when  customers may request non-standard or complex systems.", "Existing workload. The volume of requests and competing priorities  can also affect the timeliness and the level of effort applied to the  response. For example, Army security assistance officials stated that  they may prioritize a customer\u2019s request for a letter of offer and  acceptance, which initiates an executable FMS case, over a request  for price and availability data because there are not resources  available to do both at the same time.", "Availability of requested item or service. When obtaining the items  from defense contractors, for example, military department officials  consider production schedule and quantity\u2014both of which require  additional assumptions to estimate unknown costs. For items that are  in DOD\u2019s inventory and will not be replaced, officials are to take into  account the item\u2019s actual value when developing price and availability  data, according to a DSCA publication.", "External factors. In cases where a customer is requesting price and  availability data to decide whether to purchase defense items or  services from the United States or another foreign government,  military departments may expend additional resources to develop  detailed price and availability data. For example, a Navy security  assistance official stated that when officials are aware the customer  plans to hold competitions between U.S. and foreign defense  contractors, they solicit more detailed technical and cost information  from defense contractors to present a competitive estimate.", "Individually and combined, these factors, as well as the overall process,  can influence response times."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Defense (DOD) for  comment. DOD\u2019s response letter is reproduced in appendix II. DOD  separately provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees and the Acting Secretary of Defense. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["In this report, we (1) described foreign military sales (FMS) price and  availability requests Department of Defense (DOD) received from fiscal  years 2014 through 2018, (2) assessed DOD\u2019s guidance on developing  price and availability data, (3) described how DOD develops price and  availability data for the requested capability, and (4) identified factors that  can influence the timeliness for DOD to provide price and availability data  to the customer.", "To describe requests for price and availability data DOD received from  foreign customers, we analyzed data from the Defense Security  Cooperation Agency (DSCA). We reviewed data for fiscal years 2014  through 2018, the most recent 5-year period available. DSCA and other  DOD components, including the military departments, use the Defense  Security Assistance Management System as a workflow resource to  process price and availability data requests, among other things. The  system does not track which of the estimates result in a letter of offer and  acceptance. To assess the reliability of Defense Security Assistance  Management System data, we tested for missing data, duplicates,  inconsistent coding, and compared data for five examples to price and  availability documentation we received from the Army, Navy, and Air  Force. We interviewed DSCA officials responsible for the data system to  identify the quality controls in place to help ensure the data are accurate  and reliable and discussed military department practices for using the  system with security assistance officials. We found that generally the  documentation for the five selected preliminary estimates matched the  data DSCA provided and requests matched across multiple datasets we  received from DSCA. Based on these steps, we determined the data  were sufficiently reliable to report examples of the types of items and  services requested and the number of requests DOD received by region,  DOD component, and foreign customer. We did not report the number of  responses DOD provided for these requests or how long it took DOD to  provide a response to foreign customers using this data because military  departments do not consistently update information in the Defense  Security Assistance Management System to track the status of responses  or dates when a response is provided to the customer.", "To assess available guidance, we reviewed DSCA and Army, Navy, and  Air Force guidance for developing preliminary estimates in response to  requests for price and availability data. We compared the DOD-wide  guidance\u2014the Security Assistance Management Manual\u2014to the  Standards for Internal Control in the Federal Government, which call for  agencies to use quality information collected from relevant and reliable  sources. Specifically, we reviewed the guidance to determine if it  contained attributes that contribute to quality information such as  identifying the information requirements and relevant data sources  needed to develop the price and availability data.", "To describe factors that DOD considers when developing price and  availability data and illustrate how these factors influence the process, we  selected a non-generalizable sample of five responses from fiscal year  2017 data provided by the military departments. Fiscal year 2017  represented the last complete year of data available when we selected  this sample. Because the sample is not generalizable, we cannot report  whether practices used among the responses are used across DOD for  all price and availability responses. However, these examples provide  useful insight into the process and the assumptions used when  developing price and availability data. We selected the five examples\u2014 one from Army, two from Navy, two from Air Force\u2014to obtain a variety of  responses, including median and large case values and a median  response time. We determined there were inconsistencies in the data  provided, but that the data were sufficient for our purposes of selecting a  non-generalizable sample from across the military departments.", "For each selected example, we collected and analyzed the letter of  request, price and availability data, DOD\u2019s response to the customer,  supporting documentation if provided such as clarification of the  customer\u2019s request, and data collected from defense contractors or  program offices. We reviewed the assumptions and factors used in  developing the data and the various elements that make up the data,  such as administrative charges and costs for training and spares. We  interviewed relevant DOD security assistance and program officials, and  defense contractor representatives to understand the context and  decisions made in developing, documenting, and communicating the  price and availability data.", "To identify the factors that can influence the timeliness of responses, we  interviewed officials from DSCA and the Army, Navy, and Air Force. We  also obtained information from defense contractors and foreign customers  who, as stakeholders in the FMS price and availability process, have  broad insights and perspectives on the process. To gather input from  foreign customers, we interviewed representatives from the Foreign  Procurement Group who also solicited information from its consortium of  46 member countries on our behalf. We received responses from 12  countries\u2014one of which was also a customer for one of the examples  included in our review. To obtain contractor\u2019s perspectives, we gathered  information from five companies through interviews and attended a  meeting hosted by the National Defense Industrial Association. Three of  the companies we obtained information from were involved in providing  cost and schedule data for four of the examples in our sample. The  information we obtained from these foreign customers and defense  contractors is not generalizable to all foreign customers and defense  contractors. As mentioned previously, we did not assess the timeliness of  DOD\u2019s responses because DOD does not consistently track when price  and availability data responses are provided to customers in the Defense  Security Assistance Management System. However, the information we  gathered for the five examples in our sample provided some insight about  how long it took DOD to provide a response to the customer.", "We conducted this performance audit from June 2018 to February 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."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Candice Wright (Assistant  Director) and Leslie Ashton (Analyst-in-Charge) managed this review.  Bruna Oliveira, Carmen Yeung, Kurt Gurka, Robin Wilson, and Emily  Bond made significant contributions to the work."], "subsections": []}]}], "fastfact": ["Foreign governments buy billions of dollars of defense equipment and services through the U.S. Defense Department's foreign military sales program. These sales can bolster U.S. national security interests.", "This report takes a look at one of the first steps in the sales process\u2014when a government asks about the price and availability of equipment or a service.", "From 2014 to 2018, DOD received about 3,000 such requests. Among other things, we looked at the timeliness of DOD's response process. In 5 cases we examined, responses took from 45 to 320 days. Sometimes responses can involve many contractors and DOD offices."]}
{"id": "GAO-19-70", "url": "https://www.gao.gov/products/GAO-19-70", "title": "Information Security: Significant Progress Made, but CDC Needs to Take Further Action to Resolve Control Deficiencies and Improve Its Program", "published_date": "2018-12-20T00:00:00", "released_date": "2018-12-20T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["CDC is responsible for detecting and responding to emerging health threats and controlling dangerous substances. In carrying out its mission, CDC relies on information technology systems to receive, process, and maintain sensitive data. Accordingly, effective information security controls are essential to ensure that the agency's systems and information are protected from misuse and modification.", "GAO was asked to examine information security at CDC. In June 2018, GAO issued a limited official use only report on the extent to which CDC had effectively implemented technical controls and an information security program to protect the confidentiality, integrity, and availability of its information on selected information systems.", "This current report is a public version of the June 2018 report. In addition, for this public report, GAO determined the extent to which CDC has taken corrective actions to address the previously identified security program and technical control deficiencies and related recommendations for improvement. For this report, GAO reviewed supporting documents regarding CDC's actions on previously identified recommendations and interviewed personnel at CDC."]}, {"section_title": "What GAO Found", "paragraphs": ["As GAO reported in June 2018, the Centers for Disease Control and Prevention (CDC) implemented technical controls and an information security program that were intended to safeguard the confidentiality, integrity, and availability of its information systems and information. However, GAO identified control and program deficiencies in the core security functions related to identifying risk, protecting systems from threats and vulnerabilities, detecting and responding to cyber security events, and recovering system operations (see table below). GAO made 195 recommendations to address these deficiencies.", "As of August 2018, CDC had made significant progress in resolving many of the security deficiencies by implementing 102 of 184 (about 55 percent) technical control recommendations, and partially implementing 1 of 11 information security program recommendations made in the June 2018 report. The figure shows the status of CDC's efforts to implement the 195 recommendations.", "Additionally, CDC has created remedial action plans to implement the majority of the remaining open recommendations by September 2019. Until CDC implements these recommendations and resolves the associated deficiencies, its information systems and information will remain at increased risk of misuse, improper disclosure or modification, and destruction."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Centers for Disease Control and Prevention (CDC) is responsible for  protecting America from both foreign and domestic health, safety, and  security threats. Its roles include detecting and responding to new and  emerging health threats, tackling the biggest health problems causing  death and disability for Americans, putting science and advanced  technology into action to prevent disease, and controlling dangerous and  exotic substances that can cause incurable and deadly diseases.  Performing these roles may involve tracking diseases and finding out  what is making people sick and the most effective ways to prevent  diseases.", "CDC confronts global disease threats through advanced computing and  laboratory analysis of large amounts of data to find solutions, making use  of computer systems critical to the process. However, cyber incidents at  federal agencies demonstrate the damage that increasingly sophisticated  threats can cause and underscore the importance of effectively protecting  federal systems, including those used by CDC to achieve its mission.", "Since 1997, we have designated the security of information on federal  systems (i.e., information security) to be a government-wide high-risk  area. In 2003, we expanded the area to include securing the  computerized systems supporting the nation\u2019s critical infrastructure and,  in 2015, we included protecting the privacy of personally identifiable  information.", "Given the critical role that CDC performs and concerns over the security  of federal information systems, you requested that we examine the  security controls over key CDC systems. Accordingly, our specific  objective was to assess the extent to which CDC had effectively  implemented an information security program and controls to protect the  confidentiality, integrity, and availability of its information on selected  information systems.", "In June 2018, we issued a report that addressed the extent to which CDC  had effectively implemented an information security program and controls  to protect the confidentiality, integrity, and availability of its information on  selected information systems. In the report, we made 184  recommendations to CDC to resolve the technical security control  deficiencies in the information systems we reviewed and 11 additional  recommendations to improve its information security program. We  designated that report as \u201climited official use only\u201d (LOUO) and did not  release it to the general public because of the sensitive information it  contained.", "This subsequent report publishes the findings discussed in our June 2018  report, but we have removed all references to the sensitive information.  Specifically, we deleted the names of the information systems and  computer networks that we examined, disassociated identified control  deficiencies from named systems, deleted certain details about  information security controls and control deficiencies, and omitted an  appendix that was contained in the LOUO report. The appendix contained  sensitive details about the technical security control deficiencies in CDC\u2019s  information systems and computer networks that we reviewed, and the  184 recommendations we made to mitigate those deficiencies. We also  provided a draft of this report to CDC officials to review and comment on  the sensitivity of the information contained herein and to affirm that the  report can be made available to the public without jeopardizing the  security of CDC\u2019s information systems and networks.", "In addition, this report addresses a second objective that was not  included in the June 2018 report. Specifically, this objective was to  determine the extent to which CDC has taken corrective actions to  address the previously identified security program and technical control  deficiencies and related recommendations for improvement that we  identified in the earlier report.", "As noted in our LOUO report, to accomplish the first objective\u2014to  determine the extent to which CDC had effectively implemented an  information security program and controls\u2014we had examined the  agency\u2019s security policies, procedures, and practices, and evaluated the  technical security controls over 24 CDC systems. These included 10 key  systems, 8 of which were mission-essential, that (1) collect, process, and  maintain private or potentially sensitive proprietary business, medical, and  personally identifiable information; (2) are essential to CDC\u2019s mission; (3)  could have a catastrophic or severe impact on operations if compromised;  or (4) could be of particular interest to potential adversaries. We also  selected 14 general support systems that were part of the network  infrastructure supporting the 10 systems.", "To review CDC\u2019s information security program, we had examined security  policies, procedures, and other documents; analyzed risk assessments,  security plans, security control assessments, remedial action plans, and  contingency plans for 8 selected mission-essential systems; and  interviewed personnel at CDC headquarters. To review controls over the  10 key systems and 14 general support systems, we had examined the  agency\u2019s network infrastructure and assessed the controls associated  with system access, encryption, configuration management, and logging  and monitoring. We conducted site visits to two CDC facilities located in  Atlanta, Georgia.", "To accomplish our second objective\u2014on CDC\u2019s actions to address the  previously identified security program and technical control deficiencies  and related recommendations\u2014we requested that the agency provide a  status report of its actions to implement each recommendation we made  in the June 2018 report. For each recommendation that CDC indicated it  had implemented as of August 3, 2018, we examined supporting  documents, observed or tested the associated security control or  procedure, and/or interviewed the responsible agency officials to assess  the effectiveness of the actions taken to implement the recommendation  or otherwise resolve the underlying control deficiency. Based on this  assessment and CDC status reports, we categorized the status of each  recommendation as being closed-implemented, open-partially  implemented, or open-not implemented. Additional details on our  objectives, scope, and methodology are provided in appendix I.", "We conducted this performance audit from December 2016 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["CDC\u2014an operating division of the Department of Health and Human  Services (HHS)\u2014serves as the national focal point for disease prevention  and control, environmental health, and promotion and education activities  designed to improve the health of Americans. The agency is also  responsible for leading national efforts to detect, respond to, and prevent  illnesses and injuries that result from natural causes or the release of  biological, chemical, or radiological agents.", "To achieve its mission and goals, the agency relies on an array of  partners, including public health associations and state and local public  health agencies. It collaborates with these partners on initiatives such as  monitoring the public\u2019s health, investigating disease outbreaks, and  implementing prevention strategies. The agency also uses its staff  located in foreign countries to aid in international efforts, such as guarding  against global diseases. Table 1 describes the organization of CDC.", "CDC is staffed by approximately 20,000 employees across the United  States and around the world. For fiscal year 2017, according to agency  officials, the agency\u2019s total appropriation was approximately $12 billion, of  which it reported spending approximately $424 million on information  technology. In addition, the officials stated that approximately $31 million  (or about 7.3 percent of the amount spent on information technology) was  for information security across all CDC information technology  investments."], "subsections": [{"section_title": "CDC Relies on Information Systems to Help Achieve Its Mission", "paragraphs": ["CDC relies extensively on information technology to fulfill its mission and  support related administrative needs. Among the approximately 750  systems reported in its inventory, the agency has systems dedicated to  supporting public health science, practice, and administration. All of these  systems rely on an information technology infrastructure that includes  network components, critical servers, and data centers."], "subsections": []}, {"section_title": "CDC Has Defined Organizational Security Roles and Responsibilities", "paragraphs": ["At CDC, the chief information officer (CIO) is responsible for establishing  and enforcing policies and procedures protecting information resources.  The CIO is to lead the efforts to protect the confidentiality, integrity, and  availability of the information and systems that support the agency and its  operations, and is to report quarterly to the HHS CIO on the overall  effectiveness of CDC\u2019s information security and privacy program,  including the progress of remedial actions.", "The CIO designated a chief information security officer (CISO), who is to  oversee compliance with applicable information security and privacy  requirements of the agency. The CISO, among other things, is  responsible for providing information security protections commensurate  with the risk and magnitude of the harm resulting from unauthorized  access, use, disclosure, and disruption of information and information  systems that support the operations and assets of the agency.", "To further ensure information security compliance, information systems  security officers (ISSO) are responsible for managing the information  security program within their respective organizations and report on  security program matters to the CISO, including computer security-related  incidents. ISSO responsibilities include ensuring that vendor-issued  security patches are expeditiously installed and that system owners  establish processes for timely removal of access privileges when a user\u2019s  system access is no longer necessary. In addition, security stewards are  to perform operational security analyses supporting the efforts of the  ISSO. Further, business stewards serve as program managers, accepting  full accountability for the operations of the systems and ensuring that  security is planned, documented, and properly resourced for each aspect  of the information security program."], "subsections": []}, {"section_title": "Federal Laws and Guidance Establish Security Requirements to Protect Federal Information and Systems", "paragraphs": ["The Federal Information Security Modernization Act (FISMA) of 2014  provides a comprehensive framework for ensuring the effectiveness of  information security controls over information resources that support  federal operations and assets. FISMA assigns responsibility to the head  of each agency for providing information security protections  commensurate with the risk and magnitude of the harm resulting from  unauthorized access, use, disclosure, disruption, modification, or  destruction of information systems used or operated by an agency or by a  contractor of an agency or other organization on behalf of an agency. The  law also delegates to the agency CIO (or comparable official) the  authority to ensure compliance with FISMA requirements. The CIO is  responsible for designating a senior agency information security officer  whose primary duty is information security.", "The law also requires each agency to develop, document, and implement  an agency-wide information security program to provide risk-based  protections for the information and information systems that support the  operations and assets of the agency. In addition, FISMA requires  agencies to comply with National Institute of Standards and Technology  (NIST) standards, and the Office of Management and Budget (OMB)  requires agencies to comply with NIST guidelines.", "NIST Federal Information Processing Standards (FIPS) Publication 199  requires agencies to categorize systems based on an assessment of the  potential impact that a loss of confidentiality, integrity, or availability of  such information or information system would have on organizational  operations, organizational assets, individuals, other organizations, and  the nation. NIST FIPS 200 requires agencies to meet minimum security  requirements by selecting the appropriate security controls, as described  in NIST Special Publication (SP) 800-53. This NIST publication provides  a catalog of security and privacy controls for federal information systems  and a process for selecting controls to protect organizational operations  and assets. The publication provides baseline security controls for low-,  moderate-, and high-impact systems, and agencies have the ability to  tailor or supplement their security requirements and policies based on  agency mission, business requirements, and operating environment.", "Further, in May 2017, the President issued an executive order requiring  agencies to immediately begin using NIST\u2019s Cybersecurity Framework  for managing their cybersecurity risks. The framework, which provides  guidance for cybersecurity activities, is based on five core security  functions:  Identify: Develop the organizational understanding to manage  cybersecurity risk to systems, assets, data, and capabilities.", "Protect: Develop and implement the appropriate safeguards to  ensure delivery of critical infrastructure services.", "Detect: Develop and implement the appropriate activities to identify  the occurrence of a cybersecurity event.", "Respond: Develop and implement the appropriate activities to take  action regarding a detected cybersecurity event.", "Recover: Develop and implement the appropriate activities to  maintain plans for resilience and to restore any capabilities or services  that were impaired due to a cybersecurity event.", "According to NIST, these 5 functions occur concurrently and  continuously, and provide a strategic view of the life cycle of an  organization\u2019s management of cybersecurity risk. Within the 5 functions  are 23 categories and 108 subcategories that include controls for  achieving the intent of each function. Appendix II provides a description  of the framework categories and subcategories of controls."], "subsections": []}]}, {"section_title": "Security Control Deficiencies Placed Selected CDC Systems at Risk", "paragraphs": ["We reported in June 2018 that CDC had implemented numerous controls  over the 24 systems we reviewed, but had not always effectively  implemented controls to protect the confidentiality, integrity, and  availability of these systems and the information maintained on them.  Deficiencies existed in the technical controls and agency-wide  information security program that were intended to (1) identify risk, (2)  protect systems from threats and vulnerabilities, (3) detect cybersecurity  events, (4) respond to these events, and (5) recover system operations.", "These deficiencies increased the risk that sensitive personally identifiable  and health-related information, including information regarding the  transfer of biological agents and toxins dangerous to public health, could  be disclosed or modified without authorization. As shown in table 2,  deficiencies existed in all 5 core security function areas for the selected  systems we reviewed."], "subsections": [{"section_title": "CDC Had Identified Risk and Developed Policies and Plans, but Shortcomings Existed", "paragraphs": ["Controls associated with the identify core security function are intended to  help an agency develop an understanding of its resources and related  cybersecurity risks to its systems, assets, data, and capabilities. These  controls include identifying and assessing cybersecurity risk and  establishing information security policies, procedures, and plans. We  reported in June 2018 that, although CDC had taken steps to implement  these controls, it had not (1) categorized the risk-related impact of a key  system, identified threats, or reassessed risk for systems or facilities  when needed; (2) sufficiently documented technical requirements in  policies, procedures, and standards; and (3) described intended controls  in facility security plans."], "subsections": [{"section_title": "CDC Did Not Appropriately Categorize at Least One Key System, but Assessed Risk to Some Extent at System and Entity-wide Levels", "paragraphs": ["CDC Categorized Systems Based on Potential Impact of  Compromise, but Did Not Appropriately Categorize a Key General  Support System  As discussed earlier, FIPS Publication 199 requires agencies to  categorize systems based on an assessment of the potential impact that  a loss of confidentiality, integrity, or availability of such information or  information system would have on organizational operations,  organizational assets, individuals, other organizations, and the nation. For  networks and other general support systems, NIST SP 800-60 notes  that the categorization should be based on the high water mark of  supported information systems, and on the information types processed,  transmitted across the network, or stored on the network or support  system. Further, CDC\u2019s architecture design principles state that high- impact systems are to be maintained on dedicated machinery and be  physically and logically secured from lower-risk systems.", "CDC had categorized the 24 systems we reviewed, but the assigned  impact level was not always appropriate. In this regard, the agency did  not ensure that high-impact systems were logically secured from a lower- risk system. Specifically, seven selected high-impact systems relied on a  general support system that the agency had categorized as a moderate- impact system (i.e., a lower-risk system). As a result, the high-impact  systems were relying on controls in a less secure environment. Officials  from the Office of the Chief Information Officer (OCIO) explained that the  categorization of the supporting system was outdated based on changes  to the agency\u2019s operating environment and that they planned to re- evaluate the assigned impact level.", "CDC Assessed Risk at the System Level, but Did Not Assess  Threats, Document Risk-based Decisions, or Reassess Risk When  Needed  According to NIST SP 800-30, risk is determined by identifying potential  threats to an organization and vulnerabilities in its systems, determining  the likelihood that a particular threat may exploit vulnerabilities, and  assessing the resulting impact on the organization\u2019s mission, including  the effect on sensitive and critical systems and data. NIST also states that  assessments should be monitored on an ongoing basis to keep current  on risk-impacting changes to the operating environment.", "CDC had developed system-level risk assessments for the 8 selected  mission-essential systems, and had summarized its risks in a risk  assessment report. However, only two of the eight risk assessments had  identified potential threats, and only one of these assessments  determined the likelihood and impact of threats to that system.", "Further, CDC had not always documented risks associated with less  secure configuration settings or monitored its assessments to address  changes to the operating environment. For example, among the 94  technical control deficiencies that we identified for the 24 systems we  reviewed, OCIO officials stated that the agency had not implemented  controls for 20 deficiencies due to technical constraints. However, CDC  did not address risks associated with decisions not to implement controls  for these reasons in the system risk assessments.", "OCIO officials also partially attributed 5 of the 94 technical control  deficiencies to new cybersecurity threats and to threat vectors that turned  initially sound architecture decisions into vulnerabilities. However, CDC  had not addressed such changes in the risk assessments for the affected  systems. By not assessing threats or the likelihood of their occurrence  and impact and by not documenting the risks, CDC cannot have  assurance that appropriate controls are in place commensurate with the  level of risk.", "CDC Had a Process in Place to Assess Risk to Systems from an  Entity-wide Perspective  Beyond the system level, newly discovered threats or vulnerabilities may  require an agency to make risk decisions from an entity-wide perspective.  An entity-wide perspective is needed because the threats and  vulnerabilities may affect more than specific systems.", "CDC had a process in place to assess risk from an entity-wide  perspective. This process included regular meetings among OCIO and  program office staff to discuss policy, threats, and incidents. Specifically,  ISSOs held monthly meetings as a continuous monitoring working group  to discuss policy updates. In addition, an OCIO official held quarterly  briefings that included presentations on incident response tools, incident  statistics, and potential threats. OCIO officials also held ad hoc meetings,  as necessary, regarding vulnerability and threat concerns when the  agency received email alerts from the Federal Bureau of Investigation,  the Department of Homeland Security (DHS), or HHS.", "CDC Had Not Updated Facility Risk Assessments  In addition to assessing risks for systems, agencies are to assess the risk  to their facilities. The Interagency Security Committee (ISC) requires  agencies to determine the security level for federal facilities, and to  conduct risk assessments at least once every 5 years for Level I and  Level II facilities and at least once every 3 years for Level III, Level IV,  and Level V facilities.", "However, the two facility risk assessments that we reviewed had not been  updated in a timely manner. Specifically, the risk assessments, covering  Level III and Level IV facilities that house the 24 reviewed systems, had  been last updated in January 2009 and March 2014\u20148 years earlier and  just over 3 years earlier, at the time of our review in July 2017.", "According to a CDC physical security official, the agency had previously  relied on a third-party assessor to perform the assessments. The official  also said that the agency planned to conduct its own facility risk  assessments and had recently developed procedures for conducting  these assessments. Until it performs these assessments, CDC may not  be aware of new risks to its facilities or the controls needed to mitigate the  risks."], "subsections": []}]}, {"section_title": "CDC Had Documented Controls in Policies, Procedures, and Standards, but Had Not Included Certain Technical Requirements", "paragraphs": ["FISMA requires each agency to develop, document, and implement an  information security program that, among other things, includes policies  and procedures that (1) are based on a risk assessment, (2) cost- effectively reduce information security risks to an acceptable level, (3)  ensure that information security is addressed throughout the life cycle of  each system, and (4) ensure compliance with applicable requirements.  According to NIST SP 800-53, an agency should develop policies and  procedures for each of the 18 NIST families of security controls to  facilitate the implementation of the controls.", "CDC had documented numerous policies, procedures, and standards that  addressed each of the 18 control families identified in NIST SP 800-53.  For example, the agency had developed policies and procedures  governing physical access to CDC facilities, role-based training of  personnel with significant security responsibilities, security assessment  and authorization of systems, and continuity of operations, in addition to  standard operating procedures that covered numerous other controls.", "The agency had also developed the CDC IT Security Program  Implementation Standards, which describes the agency\u2019s security  program requirements and minimum mandatory standards for the  implementation of information security and privacy controls. In addition,  the agency had documented configuration standards, which specified  minimum configuration settings, for devices such as firewalls, routers,  switches, as well as Unix and Windows servers.", "However, these policies and standards sometimes lacked the technical  specificity needed to ensure controls were in place. To illustrate, the  agency had not sufficiently documented detailed guidance or instructions  to address numerous technical control deficiencies we identified, such as  insecure network devices, insecure database configurations, not blocking  certain email attachments, and not deploying a data loss prevention  capability.", "According to OCIO officials, the agency\u2019s periodic reviews and updates to  existing cybersecurity policies and standards did not reveal and address  these issues. Nevertheless, without clear and specific guidance or  instructions for implementing technical controls, the agency had less  assurance that controls were in place and operating as intended."], "subsections": []}, {"section_title": "CDC Had Identified and Updated Controls in System Security Plans Annually, but Had Not Developed Facility Security Plans", "paragraphs": ["FISMA requires each agency to develop, document, and implement an  information security program that, among other things, includes  subordinate plans for providing adequate information security for  networks, facilities, and systems or a group of information systems, as  appropriate. NIST states that plans should be reviewed and updated to  ensure that they continue to reflect the correct information about the  systems, such as changes in system owners, interconnections, and  authorization status, among other things.", "HHS and CDC policies require that such plans be reviewed annually. In  addition, the ISC requires that agencies develop and implement an  operable and effective facility security plan. CDC standards require the  organization to prepare a facility security plan (or similar document).", "CDC had developed security plans for the 8 selected mission-essential  systems. With a few exceptions, the plans addressed the applicable  security controls for those systems. The agency also had reviewed and  updated the plans annually.", "However, CDC had not developed security plans for the facilities housing  resources for the selected systems. Physical security officials stated that  they had not developed security plans because they did not have a  sufficient number of staff to develop them. Without comprehensive  security plans for the facilities, CDC\u2019s information and systems would be  at an increased risk that controls to address emergency situations would  not be in place and personnel at the facilities would not be aware of their  roles and responsibilities for implementing sound security practices to  protect systems housed at these CDC locations."], "subsections": []}, {"section_title": "CDC Had Implemented Controls Intended to Protect Its Systems, but Deficiencies Existed", "paragraphs": ["The protect core security function is intended to help agencies develop  and implement the appropriate safeguards for their systems to ensure  achieving the agency\u2019s mission and to support the ability to limit or  contain the impact of a potential cybersecurity event. Controls associated  with this function include implementing controls to limit access to  authorized users, processes or devices; encrypting data to protect its  confidentiality and integrity; configuring devices securely and updating  software to protect systems from known vulnerabilities; and providing  training for cybersecurity awareness and performing security-related  duties. Although CDC had implemented controls that were intended to  protect its operating environment, we reported in June 2018 that the  agency did not consistently (1) implement access controls effectively, (2)  encrypt sensitive data, (3) configure devices securely or apply patches in  a timely manner, or (4) ensure staff with significant security  responsibilities received role-based training."], "subsections": [{"section_title": "CDC Did Not Consistently Implement Effective Access Controls", "paragraphs": ["A basic management objective for any agency is to protect the resources  that support its critical operations from unauthorized access. Agencies  accomplish this objective by designing and implementing controls that are  intended to prevent, limit, and detect unauthorized access to computing  resources, programs, information, and facilities. Access controls include  those related to identifying and authenticating users, authorizing access  needed to perform job duties, protecting system boundaries, and  physically protecting information system assets. However, CDC had not  consistently implemented these controls.", "CDC Implemented Enterprise-wide Identification and Authentication  Controls, but Did Not Consistently and Securely Configure  Password Controls for Certain Accounts on Devices and Systems  NIST SP 800-53 states that agencies should implement multi-factor  authentication for their users of information systems. Multi-factor  authentication involves using two or more factors to achieve  authentication. A factor is something you know (password or personal  identification number), something you have (token and personal identity  verification (PIV) card), or something you are (biometric). Also, NIST and  CDC policy state that information systems shall have password  management controls established to include minimum password  complexity requirements, password lifetime restrictions, prohibitions on  password reuse, and user accounts temporarily locked out after a certain  number of failed login attempts during a specified period of time.", "CDC had applied enterprise-wide solutions to ensure appropriate  identification and multi-factor authentication of its general user community  through, for example, the use of PIV cards. However, instances of weak  password management controls existed for certain accounts on network  devices, servers, and database systems. According to OCIO officials,  password control deficiencies existed primarily due to technical  constraints, administrators not being aware of technical requirements, or  administrators not adequately monitoring configuration settings. Without  more secure password settings, CDC\u2019s information and systems are at an  increased risk that unauthorized individuals could have guessed  passwords and used them to obtain unauthorized access to agency  systems and databases.", "CDC Authorized Users More Access than Needed to Perform Their  Jobs  NIST SP 800-53 states that agencies should employ the principle of least  privilege, allowing only authorized access for users (or processes acting  on behalf of users) that are necessary to accomplish assigned tasks. It  also states that privileged accounts\u2014those with elevated access  permissions\u2014should be strictly controlled and used only for their intended  administrative purposes.", "CDC had implemented controls intended to ensure that users were  granted the minimum level of access permissions necessary to perform  their legitimate job-related functions. However, the agency had granted  certain users more access than needed for their job functions, including  excessive access permissions on a key server.", "According to OCIO officials, CDC systems had deficiencies related to  restricting access primarily due to technical constraints or administrators  not adequately monitoring configuration settings. By not appropriately  restricting access, CDC\u2019s information and systems are at an increased  risk that individuals could deliberately or inadvertently compromise  database systems or gain inappropriate access to information resources.", "CDC Did Not Effectively Implement Boundary Controls to Ensure  Network Integrity  NIST SP 800-53 states that agencies should control communications at  information systems\u2019 external boundaries. It states that, to manage risks,  agencies should use boundary protection mechanisms to separate or  partition computing systems and network infrastructures containing  higher-risk systems from lower-risk systems.", "Although CDC had implemented multiple controls that were designed to  protect system boundaries, the agency had not sufficiently separated  higher-risk systems from lower-risk systems. According to OCIO officials,  deficiencies in boundary protection controls existed due to new  cybersecurity threats turning initially sound architecture decisions into  vulnerabilities, technical constraints, and administrators not being aware  of technical requirements or adequately monitoring configuration settings.  Without stronger boundary controls, CDC\u2019s information and systems are  at an increased risk that an attacker could have exploited these boundary  deficiencies and leveraged them to compromise CDC\u2019s internal network.", "CDC Physically Protected Information System Assets, but Did Not  Consistently Ensure Access Remained Appropriate  NIST SP 800-53 states that agencies should implement physical access  controls to protect employees and visitors, information systems, and the  facilities in which they are located. In addition, NIST states that agencies  should review access lists detailing authorized facility access by  individuals at the agency-defined frequency. In its standards, CDC  requires implementation of the NIST special publication and requires that  access lists detailing authorized facility access by individuals be reviewed  at least every 365 days.", "CDC had implemented physical security controls. The agency had  implemented physical security measures to control access to certain  areas and to ensure the safety and security of its employees, contractors,  and visitors to CDC facilities. For example, CDC had issued PIV cards  and Cardkey Proximity Cards to its employees and contractors, and had  limited physical access to restricted areas based on the permissions it  granted via these cards.", "However, the agency had not consistently reviewed authorized access  lists. In this regard, CDC did not have a process in place for periodically  reviewing the lists of individuals with access to rooms containing sensitive  resources to ensure that such access remained appropriate. Without  reviewing authorized access lists, CDC has reduced assurance that  individual access to its computing resources and sensitive information is  appropriate."], "subsections": []}, {"section_title": "CDC Had Not Consistently Encrypted Sensitive Authentication Data", "paragraphs": ["NIST SP 800-53 states that agencies should encrypt passwords both  while stored and transmitted, and configure information systems to  establish a trusted communication path between the user and the system.  Additionally, NIST requires that, when agencies use encryption, they use  an encryption algorithm that complies with FIPS 140-2.", "CDC had used FIPS-compliant encryption for its PIV card  implementation, but had not effectively implemented encryption controls  in other areas. According to OCIO officials, encryption control deficiencies  existed primarily due to technical constraints, administrators not being  aware of a technical solution, or configuration settings not being  adequately monitored. By not using encryption effectively, CDC limits its  ability to protect the confidentiality of sensitive information, such as  passwords."], "subsections": []}, {"section_title": "CDC Had Not Consistently Configured Servers Securely or Applied Patches in a Timely Manner", "paragraphs": ["NIST SP 800-53 states that agencies should disable certain services with  known security vulnerabilities. This includes configuring security control  settings on operating systems in accordance with publicly available  security checklists (or benchmarks) promulgated by NIST\u2019s National  Checklist Program repository. This repository contains, for example, the  security configuration benchmarks established by the Center for Internet  Security (CIS) for Windows servers.", "NIST also states that agencies should test and install newly-released  security patches, service packs, and hot fixes in a timely manner. In  addition, CDC policy required that software patches for remediating  vulnerabilities designated as critical or high risk be applied to servers  within 45 days of being notified that a patch is available or within 7 days  of when an exploit is known to exist. Further, agency policy specified that  administrators configure Windows servers in accordance with the CDC- approved security benchmarks.", "CDC had documented security configuration baselines, but had not  always securely configured its systems or applied patches. In addition,  the agency had not consistently configured security settings in  accordance with prescribed security benchmarks or applied patches in a  timely manner. For example:", "CDC had configured Windows servers to run unnecessary services.", "CDC had configured only about 62 percent of the security settings in  accordance with prescribed benchmark criteria on the Windows and  infrastructure servers supporting five systems that we reviewed.", "During our site visit in April 2017, CDC had not installed 21 updates  on about 20 percent of the network devices, including 17 updates that  the vendor considered to be critical or high-risk. The oldest of the  missing updates dated back to January 2015.", "CDC had not updated database software supporting two selected  systems to a more recent version that addressed vulnerabilities with a  medium severity rating.", "According to OCIO officials, CDC had deficiencies in configuration and  patching primarily due to administrators not being aware that there was a  technical solution or did not adequately monitor configuration settings. By  not securely configuring devices and installing updates and patches in a  timely manner, the agency is at increased risk that individuals could have  exploited known vulnerabilities to gain unauthorized access to agency  computing resources."], "subsections": []}, {"section_title": "Staff Received Security Awareness Training, but At Least 15 Percent of Those with Significant Security Responsibilities Did Not Receive Role-Based Training", "paragraphs": ["According to NIST SP 800-53, agencies should provide adequate security  training to individuals in a role such as system/network administrator and  to personnel conducting configuration management and auditing  activities, tailoring the training to their specific roles. In addition, one of the  cybersecurity cross-agency priority goals requires that agencies  implement training that reduces the risk that individuals will introduce  malware through email and malicious or compromised web sites.", "Consistent with NIST SP 800-53, CDC policy required network users to  receive annual security awareness training. Accordingly, for fiscal year  2017, all CDC staff completed the required annual security awareness  training.", "CDC policy also required that those staff identified as having significant  security responsibilities receive role-based training every 3 years.  However, not all staff with significant security responsibilities received  role-based training within the defined time frames. The agency used a  tracking system to monitor the status of role-based training for 377  individuals who had been identified as having significant security  responsibilities. As of May 2017, 56 (about 15 percent) of the 377  individuals had not completed the training within the last 3 years, and 246  (about 65 percent) of them had not taken training within the last year.", "In addition, CDC had not identified at least 30 other staff with significant  security responsibilities who required role-based training. Specifically,  none of the 18 security and database administrators for four selected  systems were included among the individuals being tracked, although  these administrators had significant security responsibilities. Further, the  agency provided us with a list of 42 individuals whose job series indicated  that they required role-based training. However, 12 of the 42 were not  included among the tracked individuals. Furthermore, given the number of  deficiencies identified and the rapidly evolving nature of cyber threats,  CDC\u2019s requirement that staff take role-based training only once every 3  years is not sufficient for individuals with significant cybersecurity  responsibilities.", "According to OCIO officials, managers are responsible for identifying  those individuals with significant security responsibilities. The process  used to track training was manual and required an individual\u2019s manager to  specify training requirements. The officials noted that the agency plans to  implement a new HHS annual role-based training requirement in fiscal  year 2018 and that they intend to work to enhance oversight as the new  requirement is implemented.", "The officials also stated that at least 10 of the 94 technical control-related  deficiencies identified in our June 2018 report had resulted, at least in  part, from staff not being aware of control requirements or solutions to  address the deficiencies. As a result, CDC\u2019s information and systems are  at increased risk that staff may not have the knowledge or skills needed  to appropriately protect them."], "subsections": []}]}, {"section_title": "CDC Had Not Effectively Implemented Controls Intended to Detect Incidents or Deficiencies", "paragraphs": ["The detect core security function is intended to allow for the timely  discovery of cybersecurity events. Controls associated with this function  include logging and monitoring system activities and configurations,  assessing security controls in place, and implementing continuous  monitoring. In June 2018, we reported that, although CDC had  implemented controls intended to detect the occurrence of a  cybersecurity event, it had not sufficiently implemented logging and  monitoring capabilities or effectively assessed security controls."], "subsections": [{"section_title": "CDC Had Implemented Limited Logging and Monitoring Capabilities", "paragraphs": ["NIST SP 800-53 states that agencies should enable system logging  features and retain sufficient audit logs to support the investigations of  security incidents and the monitoring of select activities for significant  security-related events. In addition, National Archives and Records  Administration records retention guidance states that system files  containing information requiring special accountability that may be  needed for audit or investigative purposes should be retained for 6 years  after user accounts have been terminated or passwords altered, or when  an account is no longer needed for investigative or security purposes,  whichever is later. NIST also states that agencies should monitor  physical access to facilities where their information systems reside to  detect physical security incidents. Further, NIST SP 800-53 states that  agencies should monitor and control changes to configuration settings.", "Although CDC had implemented centralized logging and network traffic  monitoring capabilities, the capabilities were limited. For example, the  agency\u2019s centralized logging system used for security monitoring had a  limited storage capacity and did not meet the National Archives and  Records Administration requirements. In addition, CDC had not centrally  collected and monitored security event data for many key assets  connected to the network. As a result, increased risk existed that CDC  would not have been able to detect anomalous activities that may have  occurred from malware attacks over time. OCIO officials stated that, as a  compensating measure, the agency prevents direct communications  between workstations. However, such a measure does not allow the  agency to detect potentially inconsistent activities that may have occurred  from malware attacks within the same data center.", "CDC also had not consistently reviewed physical access logs to detect  suspicious physical access activities, such as access outside of normal  work hours and repeated access to areas not normally accessed.  Program offices responsible for 7 of the 8 selected mission-essential  systems did not conduct such a review. According to OCIO officials, the  offices were not aware of the need for a review. However, without  reviewing physical access logs, CDC has reduced assurance that the  agency would detect suspicious physical access activities.", "Further, CDC had not routinely monitored the configuration settings of its  systems to ensure that the configurations were securely set. For example,  for at least 41 of 94 technical control deficiencies we identified, OCIO  officials cited quality control gaps where the change management  process or system administrators had not discovered deficiencies  resulting from insecure configuration settings. Without an effective  monitoring process in place for system configurations, the agency was  not aware of insecure system configurations."], "subsections": []}, {"section_title": "CDC Did Not Effectively Test or Assess Controls to Detect Deficiencies", "paragraphs": ["FISMA requires each agency to periodically test and evaluate the  effectiveness of its information security policies, procedures, and  practices. The law also requires agencies to test the management,  operational, and technical controls for every system identified in the  agency\u2019s required inventory of major information systems at a frequency  depending on risk, but no less than annually. In addition, NIST SP 800- 53A identifies three assessment methods\u2014interview, examine, and test\u2014 and describes the potential depth and coverage for each. Assessing a  control\u2019s effectiveness based on an interview is likely less rigorous than  examining a control; similarly, examining a control is likely less rigorous  than testing the control\u2019s functionality.", "CDC had not sufficiently tested or assessed the effectiveness of the  security controls for the 8 mission-essential systems that we reviewed.  Although CDC annually assessed security controls of selected systems,  the agency had only examined control descriptions in security plans to  ensure accuracy. At least once every 3 years, the agency selected  controls for a more in-depth assessment of the 8 mission-essential  systems we reviewed. However, CDC had assessed only 191 (about 7  percent) of 2,818 controls described in the security plans for the selected  systems. In addition, the agency used methods for assessing controls  that were often not rigorous enough to identify the control deficiencies  that we identified. For example, as depicted in figure 1, CDC relied  exclusively on interviews\u2014a less rigorous method\u2014to assess 20 percent  of the 191 controls it assessed for the selected systems.", "The security control tests and assessments were insufficient in part  because CDC had not developed comprehensive security assessment  plans or had not consistently implemented the plans for the 8 selected  mission-essential systems we reviewed. For example, one system\u2019s  assessment plan indicated that five controls should be assessed using a  testing methodology; instead, however, the assessor conducted  interviews to determine whether controls were effective or not.", "OCIO officials stated that the security control test and assessment  process is manual and staffing is limited. They stated that the agency  intends to rely increasingly on automated tools\u2014such as the tools  implemented by the Continuous Diagnostics and Mitigation program\u2014for  performing the assessments. Nevertheless, by not assessing controls in  an in-depth and comprehensive manner, CDC has limited assurance that  the security controls are in place and operating as intended. Further,  without developing and implementing comprehensive assessment plans,  assessments may not be performed with sufficient rigor to identify control  deficiencies."], "subsections": []}]}, {"section_title": "CDC Had Implemented Processes for Responding to Incidents or Identified Deficiencies, but Did Not Always Take Timely Corrective Actions", "paragraphs": ["The respond core security function is intended to support the ability to  contain the impact of a potential cybersecurity event. Controls associated  with this function include implementing an incident response capability  and remediating newly-identified deficiencies. Although CDC had  implemented controls for incident response to detect cybersecurity  events, we reported in June 2018 that the agency had not maintained  adequate information to support its incident response capability or taken  timely corrective actions to remediate identified control deficiencies."], "subsections": [{"section_title": "CDC Had Implemented Incident Response Capabilities, but Did Not Maintain Adequate Information", "paragraphs": ["NIST SP 800-53 and SP 800-61 state that agencies should develop and  document an incident response policy with corresponding implementation  procedures and an incident response plan, and keep them updated  according to agency requirements. NIST also states that agencies should  implement an incident handling capability, including an incident response  team that consists of forensic/malicious code analysts. In addition,  agencies are to provide incident response training for the team and test  the incident response capability to determine the effectiveness of the  response.", "Further, NIST states that agencies are to monitor incidents by tracking  and documenting them and maintain records about each incident,  including forensic analysis. Finally, National Archives and Records  Administration guidance states that records and data relevant to security  incident investigations should be retained for 3 years.", "CDC had implemented an incident response capability. The agency had  developed policy, procedures, and a plan that addressed incident  response, and updated them annually. CDC had an incident response  team that managed all of the incident handling and response efforts for  the agency, and conducted forensic analyses for reported security  incidents. Team members had undergone training, such as an advanced  network forensic and analysis course offered by a private firm. In addition,  the agency had periodically tested its incident handling capability by  conducting penetration testing exercises. These exercises allowed the  team to test its real-time response capabilities.", "CDC\u2019s incident response procedures state that incident tickets should  include a description of actions taken, response time, and whether  actions have been completed or not. The agency\u2019s procedures also  require that computers affected by an incident be removed from the  network immediately.", "Nevertheless, CDC had shortcomings in implementing its incident  response capability and monitoring procedures. For the 11 security  incidents CDC considered most significant over a 19-month period ending  in March 2017, the agency had not consistently described the actions  taken, the response times, or whether remedial actions had been  completed. The agency also had not maintained audit log records for its  security incidents. For example, the agency described recommended  actions for 10 of the 11 incidents, but did not describe the actions that had  been taken.", "In addition, although incident response team officials told us that all  incident ticket records had been saved, CDC had not retained system log  data that supported incident resolution for at least five of the incidents.  The agency\u2019s policy did not address record retention in accordance with  National Archives and Records Administration guidance. Further, for two  of the security incidents, the security incident tickets did not clearly  indicate when two compromised workstations had been removed from the  network. According to OCIO officials, shortcomings in fully documenting  incidents resulted from the organization being understaffed, primarily due  to budget limitations and the inability to hire qualified personnel. Without  effectively tracking and documenting information system security  incidents, CDC\u2019s systems are at increased risk that the impact of security  incidents would not be fully addressed."], "subsections": []}, {"section_title": "CDC Had Remedial Action Plans to Address Identified Deficiencies for Selected Systems, but Did Not Always Take Timely Corrective Actions or Have Plans for Other Needed Corrective Actions", "paragraphs": ["FISMA requires each agency to develop, document, and implement an  information security program that, among other things, includes a process  for planning, implementing, evaluating, and documenting remedial actions  to address any deficiencies in information security policies, procedures, or  practices. NIST SP 800-53 states that agencies are to develop a plan of  action and milestones (POA&M) for an information system to document  the agency\u2019s planned remedial actions to correct identified deficiencies.  CDC policy was consistent with the NIST guidelines.", "CDC had developed POA&Ms for deficiencies identified by its security  control assessments, but had not remediated the deficiencies in a timely  manner. For each of the 8 selected mission-essential systems, the  agency had created plans for correcting control deficiencies. However,  the agency did not implement several remedial actions by their due date.  For example, expected completion dates had passed for correcting  deficiencies associated with 4 of the 8 selected mission-essential  systems. For these 4 systems, the completion dates were 1 to 8 months  beyond the due dates at the time of our review in September 2017.", "According to Office of the Chief Information Security Officer officials,  program offices that own the systems did not always communicate  updates on the status of remedial actions for their respective systems,  noting that deficiencies may have been corrected. Without effective  communication to update its POA&Ms, CDC was not in a position to  effectively manage its remedial actions and correct known deficiencies in  a timely manner."], "subsections": []}]}, {"section_title": "CDC Had Developed and Tested Plans for System Recovery, but Had Not Assessed the Risk Associated with the Close Proximity of an Alternate Processing Site", "paragraphs": ["The recover core security function is intended to support timely recovery  of normal operations to reduce the impact from a cybersecurity event.  Controls associated with this function include developing and testing  contingency plans to ensure that, when unexpected events occur, critical  operations can continue without interruption or can be promptly resumed,  and that information resources are protected. Losing the capability to  process, retrieve, and protect electronically maintained information can  significantly affect an agency\u2019s ability to accomplish its mission. If  contingency planning is inadequate, even relatively minor interruptions  can result in lost or incorrectly processed data, which can cause financial  losses, expensive recovery efforts, and inaccurate or incomplete  information.", "NIST SP 800-53 states that agency systems should have a contingency  plan that includes the identification of key personnel and the systems\u2019  essential mission functions and addresses full information system  restoration. For high-impact systems, NIST specifies that agencies test  contingency plans at an alternate processing site that is separated from  the primary processing site to reduce susceptibility to the same threats. In  addition, NIST states that organizations should initiate corrective actions  based on testing if they are needed.", "As we reported in June 2018, CDC had developed and fully tested  contingency plans for each of the 8 selected mission-essential systems  that we reviewed. Each plan identified key personnel and their contact  information, essential mission functions of the systems, and instructions  on how to fully restore the systems in the event of a disruption.  Additionally, between January 2015 and May 2017, CDC had tested  whether the 8 systems could be recovered at their respective alternate  sites, and had initiated corrective actions based on the results of the  tests.", "However, the alternate site for 6 of the 8 selected mission-essential  systems was located in relatively close proximity to the main processing  site. Although 2 systems had alternate sites located in another state, the  alternate site for the other 6 systems was within the same metropolitan  area. As a result, an event such as a natural disaster or substantial power  outage could affect both the main and alternate sites for these systems,  potentially rendering CDC unable to complete functions associated with  its mission. Prompt restoration of service is necessary because the  required recovery time for these systems ranged from 4 to 24 hours.", "Security plans for 3 of the systems recognized the hazards of having the  sites within the same geographical region, but stated that CDC had  accepted this risk. According to OCIO officials, having a site further away  was cost prohibitive; however, the officials had not documented this  analysis or the associated risk of having the agency\u2019s processing sites  located within the same geographical area. Without documenting the  analysis and associated risk, CDC had less assurance that senior  leadership was aware of the risk of agency systems being unavailable. As  a consequence, senior leadership may not agree whether acceptance of  the risk was warranted."], "subsections": []}, {"section_title": "CDC Had Not Consistently or Effectively Implemented Elements of Its Information Security Program", "paragraphs": ["An underlying reason for the information security deficiencies in selected  systems was that, although the agency had developed and documented  an agency-wide information security program, it had not consistently or  effectively implemented elements of the program. FISMA requires each  agency to develop, document, and implement an information security  program that, among other things, includes the following elements: periodic assessments of the risk and magnitude of the harm that could  result from the unauthorized access, use, disclosure, disruption,  modification, or destruction of information and information systems  that support the operations and assets of the agency; policies and procedures that (1) are based on risk assessments, (2)  cost-effectively reduce information security risks to an acceptable  level, (3) ensure that information security is addressed throughout the  life cycle of each system, and (4) ensure compliance with applicable  requirements; plans for providing adequate information security for networks,  facilities, and systems or group of information systems, as  appropriate;  security awareness training to inform personnel of information security  risks and of their responsibilities in complying with agency policies  and procedures, as well as training personnel with significant security  responsibilities for information security; periodic testing and evaluation of the effectiveness of information  security policies, procedures, and practices, to be performed with a  frequency depending on risk, but no less than annually, and that  includes testing of management, operational, and technical controls  for every system identified in the agency\u2019s required inventory of major  information systems; a process for planning, implementing, evaluating, and documenting  remedial actions to address any deficiencies in the information  security policies, procedures, or practices of the agency; and plans and procedures to ensure continuity of operations for  information systems.", "As discussed previously in this report, CDC had implemented aspects of  each of these elements. For example, the agency had conducted risk  assessments, developed security plans, assessed security controls,  developed remedial action plans, and developed and tested contingency  plans for each of the 8 selected mission-essential systems. In addition,  the agency had documented numerous policies and procedures and  ensured that staff had completed annual security awareness training.", "However, CDC\u2019s program had shortcomings. For example, as discussed  earlier in this report, CDC had not consistently or effectively: addressed threats, technical constraints, and the changing threat  environment in its system risk assessments, or assessed the risk of  having alternate processing sites within close proximity to each other; documented detailed technical requirements in policies and  procedures, or facility controls in facility security plans;  tracked and trained staff with significant security responsibilities; monitored configuration settings and comprehensively assessed  remediated deficiencies in a timely manner; or documented its cost analysis and associated risk of having an  alternate processing site within the same geographical region as its  primary processing site.", "Until CDC addresses these shortcomings and consistently and effectively  implements all elements of its information security program, the agency  will lack reasonable assurance that its computing resources are protected  from inadvertent or deliberate misuse."], "subsections": []}]}, {"section_title": "CDC Has Implemented Many of the Recommendations in Our June 2018 Report and Plans to Implement the Rest", "paragraphs": ["In our June 2018 report, we made 195 recommendations to CDC to  strengthen its technical security controls and bolster its agency-wide  information security program. Specifically, we recommended that the  agency take 184 actions to resolve technical control deficiencies by  implementing stronger access controls, encrypting sensitive data,  configuring devices securely, applying patches in a timely manner,  strengthening firewall rules, and implementing logging and monitoring  controls more effectively, among other actions. We also made 11  recommendations for CDC to improve its information security program by,  among other things, assessing risks as needed, documenting more  detailed technical requirements, monitoring and assessing controls more  comprehensively, and remediating deficiencies in a timely manner.", "Since the issuance of our June 2018 report, CDC has made significant  progress in implementing the recommendations we made to resolve the  technical security control deficiencies in the information systems we  reviewed and to improve its information security program. In this regard,  the agency has implemented many of the recommendations for improving  technical security controls for the systems we reviewed and has  developed plans to implement recommendations for enhancing its  information security program.", "Specifically, as of August 3, 2018, CDC had fully implemented 102 (55  percent) of the 184 recommendations we made to fortify the technical  security controls over the systems we reviewed. In addition, the agency  had partially implemented 20 (11 percent) of the 184 recommendations.  In these instances, CDC had made progress toward implementing the  recommendations, but had not completed all of the necessary corrective  actions for us to close the recommendations. Therefore, these  recommendations remain open. Further, CDC did not provide any  evidence that it had implemented the remaining 62 technical control- related recommendations.", "Table 3 summarizes the status of CDC\u2019s efforts to implement the 184  recommendations that we made to resolve the technical control  deficiencies, as of August 3, 2018.", "By implementing 102 recommendations, CDC (as of August 3, 2018)  reduced some of the risks associated with certain key activities.  Specifically, these efforts included protecting network boundaries and  logging and monitoring security events for indications of inappropriate or  unusual activity on systems\u2014that we highlighted in our June 2018 report  as being particularly vulnerable and requiring the agency\u2019s greater priority  and attention. In addition, the agency had implemented several of our  recommendations to rectify a number of the security control deficiencies.  These efforts included strengthening firewall rules, implementing stronger  access controls, configuring devices securely, and expanding its audit  monitoring capabilities.", "In addition, CDC had developed a plan of action and milestones  (POA&M) for each of the identified technical control deficiencies and  related recommendations that remained open as of August 3, 2018. The  POA&Ms assigned organization responsibilities, identified estimated  costs, identified points of contact, and established time frames for  resolving the deficiencies and closing the related recommendations. The  agency\u2019s plans called for it to implement the majority of the remaining  open technical control-related recommendations by September 2019, and  all recommendations by September 2020, as shown in figure 2.", "Our June 2018 report also included 11 recommendations to CDC to  improve its information security program. In particular, we recommended  that the agency, among other things, evaluate system impact level  categorizations to ensure they reflect the current operating environment;  update risk assessments to identify threats and the likelihood of impact of  the threat on the environment; and update the facility risk assessments. In  addition, we recommended that the agency take the necessary steps to  make sure staff with significant security roles and responsibilities are  appropriately identified and receive role-based training; monitor the  configuration settings of agency systems to ensure the settings are set as  intended; update security control assessments to include an assessment  of controls using an appropriate level of rigor; and remediate POA&Ms in  a timely manner. Further, we recommended that the agency document  the cost-benefit analysis with associated risk of having an alternate site  within the same geographical region as the main site.", "As of August 3, 2018, the agency had partially implemented 1 of the 11  information security program-related recommendations, but had not  provided any evidence that it had implemented the remaining 10  recommendations. Regarding the partially implemented recommendation,  CDC had provided role-based training to all personnel performing  significant security responsibilities. However, the agency still needed to  establish and automate the identification process and the tracking of  training records for individuals needing specialized security role-based  training. CDC had developed plans to fully implement this  recommendation and each of the remaining 10 information security  program-related recommendations by July 2019. Fully implementing the  open recommendations is essential to ensuring that the agency\u2019s systems  and sensitive information are not at increased and unnecessary risk of  unauthorized use, disclosure, modification, or disruption."], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We received written comments on a draft of this report from CDC. In its  comments, which are reprinted in appendix III, the agency stated that it  recognizes the risks associated with operating a large, global information  technology enterprise and has implemented processes, procedures, and  tools to better ensure the prevention, detection, and correction of potential  incidents. CDC also said cybersecurity remains a high priority and that it  takes the responsibilities for protecting public health information and data  entrusted to it seriously. To strengthen its cybersecurity program, the  agency stated that it is restructuring and streamlining the cyber program  and IT infrastructure of its Office of the Chief Information Officer.", "Further, CDC stated that it has leveraged GAO\u2019s limited official use only  report, issued in June 2018, to accelerate its implementation,  infrastructure, and software deployments to complete phrases one and  two of DHS\u2019s Continuous Diagnostics and Mitigation program. The  agency also said it concurred with, and highlighted a number of actions  that it had planned or begun taking to remediate, the 11 security program  recommendations that we made to CDC in our June 2018 report.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, and the  department\u2019s Office of the Inspector General, the Director of CDC, and  interested congressional parties. In addition, the report will be available at  no charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov, or Dr.  Nabajyoti Barkakati at (202) 512-4499 or barkakatin@gao.gov. GAO staff  who made key contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objective was to assess the extent to which CDC had effectively  implemented an information security program and controls to protect the  confidentiality, integrity, and availability of its information on selected  information systems. In June 2018, we issued a report which detailed the  findings from our work in response to this objective. In the report, we  made 184 recommendations to CDC to resolve the technical security  control deficiencies in the information systems we reviewed and 11  additional recommendations to improve its information security program.  We designated that report as \u201climited official use only\u201d (LOUO) and did  not release it to the general public because of the sensitive information it  contained.", "This report publishes the findings discussed in our June 2018 report, but  we have removed all references to the sensitive information. Specifically,  we deleted the names of the information systems and computer networks  that we examined, disassociated identified control deficiencies from  named systems, deleted certain details about information security  controls and control deficiencies, and omitted an appendix that was  contained in the LOUO report. The appendix contained sensitive details  about the technical security control deficiencies in the CDC\u2019s information  systems and computer networks that we reviewed, and the 184  recommendations we made to mitigate those deficiencies. We also  provided a draft of this report to CDC officials to review and comment on  the sensitivity of the information contained herein and to affirm that the  report can be made available to the public without jeopardizing the  security of CDC\u2019s information systems and networks.", "In addition, this report addresses a second objective that was not  included in the June 2018 report. Specifically, this objective was to  determine the extent to which CDC had taken corrective actions to  address the previously identified security program and technical control  deficiencies and related recommendations for improvement that we  identified in the earlier report.", "As noted in our June 2018 report, we determined the extent to which  CDC had effectively implemented an information security program and  controls to protect the confidentiality, integrity, and availability of its  information on selected information systems. To do this, we initially  gained an understanding of the overall network environment, identified  interconnectivity and control points, and examined controls for the  agency\u2019s networks and facilities. We conducted site visits at two CDC  facilities in Atlanta, Georgia.", "To evaluate CDC\u2019s controls over its information systems, we used our  Federal Information System Controls Audit Manual, which contains  guidance for reviewing information system controls that affect the  confidentiality, integrity, and availability of computerized information. We  based our assessment of controls on requirements identified by the  Federal Information Security Modernization Act of 2014 (FISMA), which  establishes key elements for an effective agency-wide information  security program; NIST guidelines and standards; Department of Health  and Human Services and CDC policies, procedures, and standards; and  standards and guidelines from relevant security organizations, such as  the National Security Agency, the Center for Internet Security, and the  Interagency Security Committee.", "We had reviewed a non-generalizable sample of the agency\u2019s information  systems, focusing on those systems that (1) collect, process, and  maintain private or potentially-sensitive proprietary business, medical,  and personally identifiable information; (2) are essential to CDC\u2019s  mission; and (3) were assigned a Federal Information Processing  Standard rating of moderate or high impact. Based on these criteria, we  had selected eight mission-essential systems for our review.", "Of these systems, the agency had categorized 7 as high-impact systems  and 1 as a moderate-impact system. For these 8 selected mission- essential systems, we had reviewed information security program-related  controls associated with risk assessments, security plans, security control  assessments, remedial action plans, and contingency plans.", "To assess the safeguards CDC implemented for its systems, we had  examined technical security controls for 24 CDC systems, including  systems the agency designated as high-value assets. These included 10  key systems, 8 of which were high- and moderate-impact mission- essential systems just described, 1 additional high-impact system, 1  additional moderate-impact system, and 14 general support systems. We  selected the additional high-impact system because the agency re- categorized it as a high-impact system during our review. We selected the  additional moderate-impact system because the agency used it to control  physical access to highly sensitive CDC biologic lab facilities, including  facilities that handle dangerous and exotic substances that cause  incurable and deadly diseases.", "We selected 10 key systems, 8 of which were mission-essential systems,  for review that (1) collect, process, and maintain private or potentially  sensitive proprietary business, medical, and personally identifiable  information; (2) are essential to CDC\u2019s mission; (3) could have a  catastrophic or severe impact on operations if compromised; or (4) could  be of particular interest to potential adversaries. We also selected 14  general support systems that were part of the agency\u2019s network  infrastructure supporting the 10 key systems.", "To review controls over the 10 key systems and 14 general support  systems, we had examined the agency\u2019s network infrastructure and  assessed the controls associated with system access, encryption,  configuration management, and logging and monitoring. For reporting  purposes, we had categorized the security controls that we assessed into  the five core security functions described in the National Institute of  Standards and Technology\u2019s (NIST) cybersecurity framework. The five  core security functions are:  Identify: Develop the organizational understanding to manage  cybersecurity risk to systems, assets, data, and capabilities.", "Protect: Develop and implement the appropriate safeguards to  ensure delivery of critical infrastructure services.", "Detect: Develop and implement the appropriate activities to identify  the occurrence of a cybersecurity event.", "Respond: Develop and implement the appropriate activities to take  action regarding a detected cybersecurity event.", "Recover: Develop and implement the appropriate activities to  maintain plans for resilience and to restore any capabilities or services  that were impaired due to a cybersecurity event.", "These core security functions are described in more detail in appendix II.", "For the identify core security function, we had examined CDC\u2019s reporting  for its hardware and software assets; analyzed risk assessments for the  eight selected mission-essential systems to determine whether threats  and vulnerabilities were being identified; reviewed risk assessments for  two facilities; analyzed CDC policies, procedures, and practices to  determine their effectiveness in providing guidance to personnel  responsible for securing information and information systems; and  analyzed security plans for the eight selected systems to determine if  those plans had been documented and updated according to federal  guidance. We also evaluated the risk assessments for two facilities that  housed the 8 mission-essential selected systems.", "For the protect core security function, we had examined access controls  for the 24 systems. These controls included the complexity and expiration  of password settings to determine if password management was being  enforced; administrative users\u2019 system access permissions to determine  whether their authorizations exceeded the access necessary to perform  their assigned duties; firewall configurations, among other things, to  determine whether system boundaries had been adequately protected;  and physical security controls to determine if computer facilities and  resources were being protected from espionage, sabotage, damage, and  theft.", "We also had examined configurations for providing secure data  transmissions across the network to determine whether sensitive data  were being encrypted. In addition, we had examined configuration  settings for routers, network management servers, switches, firewalls,  and workstations to determine if settings adhered to configuration  standards, and inspected key servers and workstations to determine if  critical patches had been installed and/or were up-to-date. Further, we  had examined training records to determine if employees and contractors  had received security awareness training according to federal  requirements, and whether personnel who have significant security  responsibilities had received training commensurate with those  responsibilities.", "For the detect core security function, we had analyzed centralized logging  and network traffic monitoring capabilities for key assets connected to the  network; analyzed CDC\u2019s procedures and results for assessing security  controls to determine whether controls for the eight selected mission- essential systems had been sufficiently tested at least annually and  based on risk. We also had reviewed the agency\u2019s implementation of  continuous monitoring practices to determine whether the agency had  developed and implemented a continuous monitoring strategy to manage  its information technology assets and monitor the security configurations  and vulnerabilities for those assets.", "For the respond core security function, we had reviewed CDC\u2019s  implementation of incident response practices, including an examination  of incident tickets for 11 incidents; and had examined the agency\u2019s  process for correcting identified deficiencies for the eight selected  mission-essential systems.", "For the recover core security function, we had examined contingency  plans for eight selected mission-essential systems to determine whether  those plans had been developed and tested. In assessing CDC\u2019s controls  associated with this function, as well as the other four core functions, we  had interviewed Office of the Chief Information Officer officials, as  needed.", "Within the core security functions, as appropriate, we had evaluated the  elements of CDC\u2019s information security program based on elements  required by FISMA. For example, we analyzed risk assessments, security  plans, security control assessments, and remedial action plans for each  of the 8 selected mission-essential systems. In addition, we had assessed  whether the agency had ensured staff had completed security awareness  training and whether those with significant security responsibilities  received commensurate training. We also had evaluated CDC\u2019s security  policies and procedures.", "To determine the reliability of CDC\u2019s computer-processed data for training  and incident response records, we had evaluated the materiality of the  data to our audit objective and assessed the data by various means,  including reviewing related documents, interviewing knowledgeable  agency officials, and reviewing internal controls. Through a combination  of methods, we concluded that the data were sufficiently reliable for the  purposes of our work.", "To accomplish our second objective\u2014on CDC\u2019s actions to address the  previously identified security program and technical control deficiencies  and related recommendations\u2014we requested that the agency provide a status report of its actions to implement each of the recommendations.  For each recommendation that CDC indicated it had implemented as of  August 3, 2018, we examined supporting documents, observed or tested  the associated security control or procedure, and/or interviewed the  responsible agency officials to assess the effectiveness of the actions  taken to implement the recommendation or otherwise resolve the  underlying control deficiency. Based on this assessment and CDC status  reports, we defined the status of each recommendation into the following  3 categories: closed-implemented\u2014CDC had implemented the recommendation; open-partially implemented\u2014CDC had made progress toward, but  had not completed, implementing the recommendation; and open-not implemented\u2014CDC had not provided evidence that it had  acted to implement the recommendation.", "We conducted this performance audit from December 2016 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: The National Institute of Standards and Technology Cybersecurity Framework", "paragraphs": ["The National Institute of Standards and Technology\u2019s cybersecurity  framework consists of five core functions: identify, protect, detect,  respond, and recover. Within the five functions are 23 categories and  108 subcategories, as described in the table."], "subsections": []}, {"section_title": "Appendix III: Comments from Department of Health and Human Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contacts and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contacts", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individuals named above, Gary Austin, Jennifer R.  Franks, Jeffrey Knott, and Chris Warweg (assistant directors); Chibuikem  Ajulu-Okeke, Angela Bell, Sa\u2019ar Dagani, Nancy Glover, Chaz Hubbard,  George Kovachick, Sean Mays, Kevin Metcalf, Brandon Sanders, Michael  Stevens, Daniel Swartz, and Angela Watson made key contributions to  this report. Edward Alexander, Jr. and Duc Ngo (assistant directors);  David Blanding, and Christopher Businsky also provided assistance."], "subsections": []}]}], "fastfact": ["IT systems at the Centers for Disease Control and Prevention are critical to securing sensitive data about the nation's health.", "In June 2018, we reported numerous deficiencies in CDC's information security program and controls that CDC used to identify risk, protect systems, detect and respond to cybersecurity events, and recover operations after such events. These deficiencies place sensitive information at higher risk of unauthorized disclosure, modification, or interruption.", "Since then, CDC has made significant progress bolstering its security by implementing 102 of our 195 recommendations and plans to address many more by September 2019."]}
{"id": "GAO-18-389", "url": "https://www.gao.gov/products/GAO-18-389", "title": "Zika Supplemental Funding: Status of HHS Agencies' Obligations, Disbursements, and the Activities Funded", "published_date": "2018-05-14T00:00:00", "released_date": "2018-05-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Zika\u2014a virus primarily transmitted through mosquito bites\u2014can cause symptoms that include fever, rash, and joint and muscle pain. In pregnant women, the Zika virus can be passed to the fetus and cause severe brain defects. In response to an outbreak in the United States and its territories, Congress appropriated $932 million in September 2016 through the Zika Response and Preparedness Act to HHS and its agencies to prevent, prepare for, and respond to the Zika virus and its related health conditions, and conduct related research.", "The act also included a provision that GAO study the activities supported with the appropriated funds. This report describes (1) the status of funds obligated and disbursed from the Zika supplemental funding appropriated to HHS and its agencies; and (2) how selected awardees used their Zika supplemental funding, and their experiences with applying for and managing the funding. To do this work, GAO reviewed agency documents on Zika supplemental funding and activities, and interviewed officials from the HHS agencies and selected awardees. To select awardees, GAO identified states based on the amount of initial Zika supplemental funding they received from CDC, the Centers for Medicare & Medicaid Services, and the Health Resources and Services Administration; and selected states with the highest and lowest funding. In total, GAO selected 12 awardees: 10 states, as well as one county and one city from 2 of the 10 states.", "GAO provided a draft of this report to HHS. In response, HHS provided technical comments, which were incorporated as appropriate."]}, {"section_title": "What GAO Found", "paragraphs": ["As of September 30, 2017, Department of Health and Human Services\u2019 (HHS) agencies had obligated nearly all of the $932 million of Zika supplemental funding Congress appropriated in 2016 through the use of multiple funding mechanisms, including cooperative agreements, grants, and contracts. Four HHS agencies had small unobligated balances as of the September 30, 2017, obligation deadline; these balances cannot be used to incur new obligations, but may be used to adjust award amounts in future years. Disbursement of the obligated funds was ongoing, with about 21 percent of the Zika supplemental funding (approximately $195.5 million) disbursed as of December 31, 2017. The agencies have until September 30, 2022, to disburse the remainder.", "The 12 awardees GAO interviewed\u2014officials from 10 states and two local entities\u2014funded multiple activities with their Zika supplemental funding, and had varying experiences applying for and managing the funds.", "Awardees told GAO that they used their funding to support such activities as collection of information about individuals affected by the Zika virus (human surveillance), mosquito control activities, laboratory capacity building, public outreach, and health care services. For example, Florida used Zika supplemental funding in its state-run laboratories to purchase materials for testing Zika virus-related specimens.", "A majority of the awardees GAO spoke with reported positive experiences applying for and managing the Zika supplemental funding, including good communication with agency officials and awardees\u2019 familiarity with the mechanisms used to make the awards. However, some awardees noted challenges, such as time frames to use the funding that varied among multiple awards and identifying the activities that could be funded. These challenges added administrative burdens to applying for and managing the Zika supplemental funding while officials were responding to the outbreak, according to the awardees. In October 2017, the Centers for Disease Control and Prevention (CDC) issued a new notice of funding opportunity that agency officials said is intended to help minimize the administrative burden on states and certain localities during emergencies\u2014such as preparing applications\u2014by pre-approving public health departments in these jurisdictions to be eligible to rapidly receive future awards."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Zika virus outbreak in 2015 affected individuals infected with the virus  in ways that had not been seen with other infectious disease outbreaks.  Zika\u2014a virus primarily transmitted through mosquito bites\u2014can cause  symptoms that include fever, rash, conjunctivitis (red eyes), and joint and  muscle pain, though many infected individuals do not have symptoms or  will only experience mild symptoms. However, in this outbreak, the Zika  infection in pregnant women has been linked to adverse pregnancy and  birth outcomes: the virus can be passed to the fetus and cause a birth  defect of the brain called microcephaly and other severe brain defects,  according to the Centers for Disease Control and Prevention (CDC).  CDC officials note that this is the first time in more than 50 years that an  infectious pathogen has been identified as the cause of birth defects. The  virus is also linked to other problems, such as miscarriage, stillbirth, and  other birth defects, as well as Guillain-Barr\u00e9 syndrome, an uncommon  sickness of the nervous system. In the western hemisphere, the first  cases of locally transmitted Zika virus disease were confirmed in Brazil in  May 2015; in the continental United States, the first locally transmitted  cases were confirmed in Florida during June to August 2016. The World  Health Organization declared the Zika virus a Public Health Emergency of  International Concern from February to November 2016, and maintains  that it is a significant, enduring public health challenge.", "As of January 24, 2018, about 5,600 cases involving Zika virus disease  have been reported in the United States and about 37,000 cases have  been reported in the U.S. territories, primarily in Puerto Rico. In response  to the outbreak, Congress appropriated $932 million in September 2016  through the Zika Response and Preparedness Act to the Department of  Health and Human Services (HHS) and its agencies for activities such as  responding to the Zika virus, developing vaccines, and reimbursement for  health care costs related to the Zika virus. Specifically, the act  appropriated $394 million to CDC, $152 million to the National Institutes  of Health (NIH), and $387 million to HHS\u2019s Public Health and Social  Services Emergency Fund (PHSSEF), of which $386 million was  allocated to additional HHS agencies\u2014the Biomedical Advanced  Research and Development Authority (BARDA) within the Office of the  Assistant Secretary for Preparedness and Response, the Centers for  Medicare & Medicaid Services (CMS), and the Health Resources and  Services Administration (HRSA). The agencies had until September 30,  2017, to obligate the funding, for example, by awarding a contract or a  grant to an entity (awardee). Agencies have until September 30, 2022, to  disburse, or spend, the funding.", "The Zika Response and Preparedness Act included a provision that we  study activities supported with funds appropriated by the act. In this  report, we describe  1.  the status of obligations and disbursements of Zika supplemental  funding by HHS agencies; and  2.  how selected awardees used their Zika supplemental funding, and  their experiences with applying for and managing the funding.", "To describe the status of obligations and disbursements of Zika  supplemental funding by HHS agencies, we analyzed BARDA, CDC,  CMS, HRSA, and NIH obligation data as of September 30, 2017\u2014the  date funding had to be obligated\u2014and disbursement data as of  December 31, 2017\u2014the first full quarter of data available at the time of  our review. Each agency provided tabulated data that included  information such as the award title, awardee name and location, award  amount, award time frame, and the funding mechanism the agency used  to award the funding. We interviewed officials from each agency to  discuss the status of the agencies\u2019 obligations and disbursements of the  Zika supplemental funding, the different mechanisms used to award the  funding, and the various factors that influenced the obligation and  disbursement of the funding to awardees. We also reviewed  documentation of the funding opportunity announcements to obtain  information such as the activities allowed under each type of award. To  determine the reliability of the data provided, we compared the tabulated  award amounts received from CDC and HRSA to the actual notices of  award provided by both agencies, and compared NIH award data to the  amounts reported in NIH\u2019s online database. We also obtained information  from BARDA, CMS, and NIH officials regarding the underlying financial  data systems used to compile the data and the controls in place for  recording and maintaining the data. We reviewed the data from each  agency for data discrepancies and obtained the information necessary to  resolve the discrepancies from relevant agency officials. Furthermore, we  interviewed officials from HHS\u2019s Office of the Assistant Secretary for  Financial Resources on the accuracy of the data and the steps the office  takes to verify agencies\u2019 obligation and disbursement data. On this basis,  we determined that the data were sufficiently reliable for the purposes of  our reporting objectives.", "Additionally, to describe the various factors that can affect the  disbursement of funding after obligation, we interviewed officials  representing selected awardees. To select awardees, we first identified  states that were awarded Zika supplemental funding from HHS agencies  (45 states) based on our review of the amount of initial Zika supplemental  funding they received from CDC, CMS, and HRSA. From those 45 states,  we judgmentally selected 10 states\u20145 states with the highest funding  and 5 states with the lowest funding\u2014which included the 2 states that  experienced local Zika virus transmissions (Florida and Texas). Our  selected states with the highest funding were Arizona, California, Florida,  Louisiana, and Texas. Our selected states with the lowest funding were  Alaska, Colorado, Iowa, Kansas, and Oklahoma. To obtain perspectives  of awardees at the local level, we judgmentally selected two local  awardees within 2 of the selected states\u2014Houston, Texas, and Los  Angeles County, California. For each selected state or jurisdiction, we  interviewed state, county, or city officials who could provide information  about their Zika supplemental funding. The perspectives of the 12  awardees we interviewed cannot be generalized to other awardees.", "To describe how selected awardees used their Zika supplemental funding  and gain their perspectives on applying for and managing this funding, we  reviewed documentation from the 12 selected awardees to identify the  activities they funded. We also interviewed officials from the selected  awardees (state officials and officials from one county and one city) about  their experiences with using the Zika supplemental funding and to obtain  examples of awardees\u2019 Zika activities. We conducted site visits to Florida  and Texas, because at the time of our work, they alone had reported local  Zika virus transmissions. Additionally, we reviewed CDC and CMS  documents to determine the amount of funding received and the purpose  of the funding for each of the selected awardees. We also interviewed  CDC officials regarding any changes the agency has made to its plans for  awarding funding in the future.", "We conducted this performance audit from April 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["During a disease outbreak, including the Zika virus, HHS is the lead  federal agency for public health and medical response, and it leverages  national public health and medical resources to prepare for and respond  to the outbreak."], "subsections": [{"section_title": "Zika Virus Transmission and Prevention", "paragraphs": ["The Zika virus is primarily transmitted to humans by infected mosquitoes,  but can also be transmitted from mother to child during pregnancy or  around the time of birth, or from person-to-person through sexual contact  or blood transfusion. According to CDC, once an individual has been  infected with the Zika virus, they are likely to be protected from future  infections. The Aedes aegypti mosquitoes are reportedly the primary  mosquito spreading the Zika virus, while the Aedes albopictus  mosquitoes, which share many of the same traits as Aedes aegypti, also  have the ability to spread the virus. Local transmission of the virus has  occurred in American Samoa, Florida, Puerto Rico, Texas, and the U.S.", "Virgin Islands. Travel-associated cases of Zika virus infection have been  reported in every state, with the largest numbers of cases reported in  California, Florida, New York, and Texas.", "There is no vaccine to prevent the Zika virus, so CDC guidance  recommends preventing the spread of the virus by protecting against  mosquito bites by wearing protective clothing, using insect repellant, and  staying in places with air conditioning and window and door screens to  keep mosquitoes outside, among other actions. Mosquito control in the  United States is implemented and overseen at the state and local levels  by entities such as mosquito control districts and health agencies. Federal  agencies support such control entities with funding and subject matter  experts, and may regulate some control methods such as pesticides."], "subsections": []}, {"section_title": "Zika Funding Prior to September 2016", "paragraphs": ["In April 2016, the Office of Management and Budget and the Secretary of  Health and Human Services announced that they had identified $589  million\u2014$510 million of it from existing Ebola virus disease resources  within HHS, the Department of State, and the U.S. Agency for  International Development\u2014that could quickly be redirected and spent on  immediate efforts to control and respond to the spread of the Zika virus.  According to HHS, out of the $589 million, $374 million was redirected to  domestic Zika virus control activities. HHS reports that almost all of this  funding ($354 million) was distributed to three HHS agencies, as follows:", "CDC received $222 million for various activities including field staff,  state response teams, Zika virus testing, tracking of pregnant women  who were infected with the Zika virus, and grants for mosquito control  and other Zika prevention activities;", "BARDA received $85 million for private sector development of Zika  vaccines, treatments, and technologies to protect the blood supply,  and other countermeasures; and", "NIH received $47 million for Zika medical countermeasure  development, including clinical trials on the leading Zika vaccine  candidate.", "Additionally, according to HHS officials, in August 2016, the Secretary of  Health and Human Services notified Congress of the department\u2019s intent  to redirect an additional $81 million in unobligated HHS funds for Zika  vaccine development activities. Of this amount, $34 million was drawn  from accounts at NIH and $47 million was drawn from funds transferred  from other HHS agencies and reprogrammed from within PHSSEF.  From these redirected funds, $34 million (i.e., the amount drawn from  other NIH accounts) was to be used by NIH to continue clinical trials on  its lead Zika vaccine candidate. The remaining $47 million was to be used  by BARDA for continued private sector Zika vaccine development."], "subsections": []}, {"section_title": "September 2016 Zika Supplemental Funding", "paragraphs": ["In September 2016, Congress appropriated $932 million to HHS and its  agencies in the Zika Response and Preparedness Act. Of that amount,  $394 million was appropriated directly to CDC and $152 million was  appropriated directly to NIH. The remainder was appropriated to HHS\u2019s  PHSSEF, from which HHS allocated $245 million to BARDA within the  Office of the Assistant Secretary for Preparedness and Response, $75  million to CMS, and $66 million to HRSA. (See fig. 1.)", "The Zika supplemental funding remained available for obligation until  September 30, 2017, for the following purposes:", "CDC: to prevent, prepare for, and respond to the Zika virus, health  conditions related to the virus, and other vector-borne diseases,  domestically and internationally.", "NIH: for research on the virology, natural history, and pathogenesis of  the Zika virus infection, and preclinical and clinical development of  vaccines and other medical countermeasures for the Zika virus and  other vector-borne diseases, domestically and internationally.", "PHSSEF: for various activities, including to prevent, prepare for, and  respond to the Zika virus, health conditions related to the virus and  other vector-borne diseases, domestically and internationally; and to  develop necessary countermeasures and vaccines, including the  development and purchase of vaccines, therapeutics, diagnostics,  necessary medical supplies, and administrative activities.", "BARDA: HHS allocated funding to BARDA to support further  development of Zika vaccine candidates, diagnostics, and  pathogen reduction technologies initiated in fiscal year 2016 to  advance these projects toward licensure or approval by the Food  and Drug Administration.", "CMS: HHS allocated funding to CMS for expenses to support  states, territories, tribes, or tribal organizations with active or local  transmission cases of the Zika virus, as confirmed by CDC. The  funding was allocated to reimburse the costs of health care for  health conditions related to the Zika virus, other than costs that  are covered by private health insurance, of which not less than  $60 million were for territories with the highest rates of Zika virus  transmission.", "HRSA: HHS allocated $20 million for projects of regional and  national significance in Puerto Rico and other U.S. territories, $40  million to expand the delivery of primary health services in Puerto  Rico and the other territories, and $6 million to be used to assign  National Health Service Corps members to Puerto Rico and the  other territories to provide primary health services in areas  affected by the Zika virus or other vector-borne diseases through  the National Health Service Corps Loan Repayment Program.", "Agencies have until September 30, 2022, to disburse the Zika  supplemental funding appropriated by the Zika Response and  Preparedness Act."], "subsections": []}]}, {"section_title": "HHS Agencies Have Obligated Nearly All of the Zika Supplemental Funding; Disbursements Are Ongoing", "paragraphs": [], "subsections": [{"section_title": "Agencies Obligated Nearly All of Their Zika Supplemental Funding as of September 30, 2017, Primarily Through Cooperative Agreements, Grants, and Contracts", "paragraphs": ["We found that as of September 30, 2017\u2014the end of the Zika  supplemental appropriation\u2019s period of availability\u2014nearly all Zika  supplemental funding had been obligated, primarily through cooperative  agreements, grants, and contracts. BARDA obligated 100 percent of its  Zika supplemental funding, while CDC, CMS, HRSA, and NIH obligated  over 99 percent of their funding. (See table 1.)", "Three of the five agencies had obligated over half of their Zika  supplemental funding by January 31, 2017, 4 months after enactment of  the appropriation. For example, according to CDC officials, using  cooperative agreements with application processes familiar to the  awardees helped enable the agency to obligate its funding soon after  receiving the appropriation. Some agencies began obligating later in the  one-year obligation time frame based on their approach to obligating the  Zika supplemental funding. For example, CMS withheld a portion of its  supplemental funds in the event additional awardees became eligible for  funding within the obligation time frame\u2014eligibility included having active  or local transmission of the Zika virus.", "Agency officials told us that they used cooperative agreements, grants,  and contracts to award Zika supplemental funding to existing and new  awardees. The agencies also used other mechanisms to obligate the Zika  supplemental funding, such as interagency agreements, intramural  research awards, and funding used within the agency for travel and other  expenses. According to officials, agencies used these mechanisms to  award Zika supplemental funding in the following ways.", "BARDA executed new contracts and modified existing contracts  through the agency\u2019s typical contracting process, officials said, for  research in the areas of Zika clinical diagnostics and vaccine  development. BARDA did not use any Zika supplemental funding to  support internal administrative or personnel costs. (See app. I for the  contracts BARDA awarded with its Zika supplemental funding.)", "CDC generally obligated Zika supplemental funding to current  awardees through existing cooperative agreements, according to  agency officials. (See app. II through VII for the cooperative  agreements CDC used to award Zika supplemental funding to existing  awardees.) CDC also awarded funding through contracts and  interagency agreements, and obligated about $24 million for internal  CDC expenses, such as salaries and benefits, travel, supplies, and  equipment. (See app. VIII for the contracts and interagency  agreements CDC awarded with its Zika supplemental funding.)", "CMS created a new program\u2014the Zika Health Care Services  Program\u2014to award its Zika supplemental funding through cooperative  agreements, according to agency officials. The purpose of the 3-year  program is to support prevention activities and treatment services for  women (including pregnant women), children, and men adversely or  potentially affected by the Zika virus. CMS awarded funding through  the Zika Health Care Services Program to those states, territories,  tribes, or tribal organizations with active or local transmission of the  Zika virus, as confirmed by CDC. CMS awarded funding to the health  departments in American Samoa, Florida, Puerto Rico, and the U.S.  Virgin Islands in January 2017. In June 2017, CMS awarded funding  to the health department in Texas, the only new state or territory with  local transmission of the Zika virus. In both CMS award rounds, only  states and territories received awards, because they were the only  areas with active or local transmission of the Zika virus. CMS retained  about $3.6 million of the Zika supplemental funding to use for  administrative support services, as well as for travel for monitoring  and oversight. (See app. IX for the awards CMS made with its Zika  supplemental funding.)", "HRSA generally obligated Zika supplemental funding through grants  to existing awardees, according to agency officials. HRSA did not  retain any Zika supplemental funding for internal activities. (See app.  X for the grants HRSA awarded.)", "NIH used grants and contracts to award its Zika supplemental funding  to new and existing awardees. NIH also used about $95 million of the  Zika supplemental funding for internal activities\u2014studies conducted  by NIH researchers. According to NIH officials, the somewhat unique  aspects of the Zika virus as an arbovirus infectious disease led NIH to  focus on vaccines as a priority, along with development of  diagnostics, therapeutics, vector control, and surveillance. (See app.  XI for NIH\u2019s Zika supplemental awards.)", "For more information on the funding provided by CDC, CMS, and  HRSA\u2014the only agencies that provided funding for states and  territories\u2014and the number of reported Zika cases by state or territory,  see an interactive graphic at https://www.gao.gov/products/GAO-18-389.", "Officials from all five agencies cited coordination initiatives through  regular interagency or organizational teleconferences and participation in  working groups. According to CMS officials, during the Zika virus  response, CDC, CMS, HRSA, and other federal partners held interagency  Zika coordination calls to discuss ongoing developments related to the  Zika virus. Additionally, because CMS and HRSA were both awarding  funding for perinatal health care services, officials said they collaborated  to ensure that activities available through the CMS grants complemented  the activities available through HRSA\u2019s Special Projects of Regional and  National Significance. In addition, HRSA officials reported conducting joint  site visits with CDC and CMS, as well as streamlining reporting  requirements to reduce grantee reporting burden. Furthermore, BARDA  officials said that they awarded and administered a contract for CDC on  the development of a vector control product. CDC provided the funding  and topical subject matter expertise for the award, and BARDA provided  management services for the contract, because of BARDA\u2019s experience  with these types of contracts. BARDA and NIH officials also reported  collaborating on vaccine development. BARDA officials explained that  while the vaccine development process requires that different agencies  support multiple vaccine development candidates, the two agencies  coordinated to avoid redundancy."], "subsections": []}, {"section_title": "Agencies Had Disbursed About 21 Percent of the Zika Supplemental Funding as of December 31, 2017", "paragraphs": ["We found that as of December 31, 2017, the HHS agencies had  disbursed about 21 percent (approximately $195.5 million of $932 million)  of the Zika supplemental funding. According to agency officials and  selected awardees we spoke with, various factors can affect the  disbursement of funding after obligation. These factors include time to  draw down funding from the federal agencies, allowing for program  implementation and a planning period, and awardees\u2019 internal  administrative processes and unique characteristics, as described below.", "Drawdown procedures. CDC officials said that awardees draw down  federal funding on their individual schedules based upon how they  manage their federal funding. Some awardees draw down on a daily  basis, as needed, while others draw down on a biweekly or monthly  basis. Additionally, drawdowns for personnel costs coincide with payroll  schedules, which could be biweekly or monthly. For example, in the case  of monthly payroll, two awardees told us that the federal funding for a  particular month\u2019s expenses would be drawn down the following month.  Furthermore, selected awardees we spoke with said that they draw down  federal funding after they have incurred an expense, such as when they  receive an invoice. For example, Los Angeles County officials reported  that in order to draw down the funds for the organization that is  responsible for servicing their vector control activities, they have to first  receive an invoice from the organization, which the county pays with its  own funds. Only then can the county draw down the federal funding. This  process usually results in at least a 3-month period between receiving the  invoice and drawing down the federal funding, officials said.", "Program implementation and planning period. According to CMS  officials, the agency awarded funding to health departments in American  Samoa, Florida, Puerto Rico, Texas, and the U.S. Virgin Islands from the  Zika Health Care Services Program, which was a new collaboration  between CMS and these specific awardees. The officials said that the  steps awardees needed to take to stand-up new programs\u2014such as  budget review and approval processes, selection of key personnel to  administer the grant, grant activities related to contracting, and hiring and  procurement\u2014can delay start-up and implementation of the grant  programs.", "Additionally, CMS gave awardees in the Zika Health Care Services  Program a 3-month planning period after they received their notices of  award to amend their activities. For example, Texas officials reported  that they used the 3-month planning period to work on executing  contracts with the local health departments in three counties bordering  Mexico. Texas officials explained that collaborating with the local health  departments entailed determining the greatest potential benefit of the use  of the funds, because the award itself was not enough to cover all of the  costs of direct health care services associated with the Zika virus.", "Awardees\u2019 processes and characteristics. Local administrative  processes for spending federal supplemental funds can result in varied  disbursement time frames. For example, California received Zika  supplemental funding for an award that required an amendment to an  administrative contract, which state officials said takes about 7 to 8  months for internal state approval. Additionally, certain awardees\u2019  characteristics affect disbursements. For example, Houston officials said  the city was eligible for and was directly awarded a CDC cooperative  agreement, but because it does not conduct vector control activities itself,  the city had to negotiate a contract with the surrounding county to conduct  these activities, adding additional time before it could begin  disbursements.", "Officials also noted that awardees\u2019 personnel hiring issues can affect  disbursement time frames. For example, CMS officials said that some  territories experienced delays in carrying out activities due to provider  shortages, particularly among specialists needed to care for children with  developmental delays and birth defects caused by the Zika virus. CMS  officials noted that island jurisdictions, such as the U.S. territories, can  find hiring more difficult due to a shortage of health care professionals  available within the territory, thus requiring individuals to be recruited from  outside the territory, which adds time to the process and raises costs. In  addition, Florida officials in Miami-Dade County reported that the  necessary staff surge during the Zika response was challenging to fill,  noting that it was particularly difficult to find phlebotomists and nurses,  because they were in high demand.", "Standard vaccine development processes also influenced the rate of  disbursement. Due to the long duration of the vaccine development  process, BARDA officials said, disbursements to certain awardees have  occurred at varying intervals. For example, some contract invoices are  received on a monthly basis, or twice a month if the company is a small  business. The invoices are then reviewed and if deemed acceptable, they  are processed for payment.", "The 2017 hurricane season may have affected certain awardees\u2019 use of  their Zika supplemental funding, which prompted agencies to respond by  approving various types of short-term relief for administrative, financial  management, and audit requirements for awardees affected by the  hurricanes. Three agencies\u2014CDC, CMS, and HRSA\u2014awarded Zika  supplemental funding to areas affected by hurricanes Harvey, Irma, and  Maria in 2017: Florida, Puerto Rico, Texas, and the U.S. Virgin Islands.  CDC officials told us, for example, that because of the hurricanes they  granted extensions at the request of the awardees for submitting financial  and progress reports, and continuation of activities. Similarly, CMS  offered hurricane-affected awardees of the Zika Health Care Services  Program the option to extend the deadline for deliverables, if necessary.  CMS officials told us that grant activities had been affected by the  hurricanes, and all grantees had communicated the intent to fully resume  activities as soon as they are able to do so. Due to the 3-year project  period for grantees, CMS officials said that the affected entities can still  accomplish programmatic responsibilities, even if there is a temporary  halt in project activities. Furthermore, HRSA officials said that they  provided Puerto Rico and the U.S. Virgin Islands with extensions on  required program, financial, and audit reports."], "subsections": []}]}, {"section_title": "Selected Awardees Undertook Multiple Activities with Zika Supplemental Funding, and Had Varying Experiences Applying for and Managing Funds", "paragraphs": [], "subsections": [{"section_title": "Selected Awardees Used Zika Supplemental Funding for Activities Including Surveillance, Vector Control, Laboratory Capacity, and Health Care Services", "paragraphs": ["Selected awardees we spoke with used Zika supplemental funding for a  variety of activities. Collectively, the activities included four primary types:  medical surveillance, vector control, laboratory capacity building, and  providing health care services, as described below.", "Medical surveillance activities include identifying and reporting Zika  virus disease cases to CDC, as well as reporting Zika virus infections  in pregnant women and infants to the U.S. Zika Pregnancy Registry.", "Vector control activities include detecting and monitoring Aedes  aegypti and Aedes albopictus mosquito distribution and mosquito  control, and monitoring of insecticide resistance and management.", "Laboratory capacity building activities include developing laboratory  capacity to perform Zika virus testing.", "Health care service activities for those selected awardees that  received funding from CMS (Florida and Texas) included increasing  access to contraceptive services for men and women; increasing  access to and reducing barriers to diagnostic testing, screening, and  counseling for pregnant women and newborns; and increasing access  to appropriate specialized health care services for pregnant women,  children born to mothers with maternal Zika virus infection, and their  families.", "Table 2 provides examples of the types of activities funded by the  selected awardees we interviewed. This table does not include a  comprehensive list of all of the awardees\u2019 Zika activities\u2014see appendixes  II through VI, and appendix IX for more information on the Zika  supplemental funding CDC and CMS awarded to states, territories, and  local jurisdictions.", "Of the awardees we spoke with, Florida and Texas were the only states  that had experienced local mosquito-borne transmission of the Zika virus.  Other selected awardees\u2014which included Arizona, Los Angeles County,  and Louisiana\u2014were primarily responding to travel-related cases of Zika  virus disease. The following are additional examples of activities funded  using Zika supplemental funding. For more information on the types of  activities authorized under each award, see appendixes II-VI and IX.", "Florida. Florida, which has a centralized health department with county- based offices, used Zika supplemental funding for laboratory capacity and  vector control activities, among other activities. According to state  officials, funding for state-run laboratories was used for purchasing  materials, such as those used for testing urine for the Zika virus, and  funding staff located in counties to assist with handling Zika samples and  testing, data entry, and result reporting to surveillance networks.  Additionally, Florida used Zika supplemental funding for local vector  control activities. For example, Miami-Dade County officials said that they  purchased mosquito traps and removed mosquito breeding grounds,  including plants, tires, and other objects that can hold standing water.  (See fig. 2 for examples of the mosquito control activities in Miami-Dade  County.)", "Through CMS\u2019s Zika Health Care Services Program, Florida received  funding for, among other things, two part-time advanced registered nurse  practitioners to provide consultation and technical assistance in family  planning clinics, and assist in the prescribing and management of various  birth control methods. Florida also funded a health educator for Zika  prevention and response duties, which included assisting local health  care organizations in the development of educational programming to  ensure that health care services are provided in accordance with CDC  guidelines. The health educator\u2019s duties also included ensuring that  pregnant women with the Zika virus and infants with congenital Zika  infection are referred to proper care and other available programs and  resources.", "Texas. Texas officials said that the state used a CDC award to rapidly  identify cases and conduct data analysis of Zika-related birth defects, to  enhance surveillance of Zika virus-related birth defects by improving the  Texas Birth Defects Registry database, and to facilitate remote access to  electronic records. Texas also disseminated prevention materials and  interviewed mothers of children with Zika-related birth defects about their  experience in dealing with the health system in order to help identify  developmental outcomes of the children.", "Texas intends to use its CMS Zika Health Care Services Program  funding\u2014awarded on June 30, 2017\u2014to increase clients\u2019 access to  contraceptives; for care management, including counseling on Zika virus  testing for pregnant women and their families; and for counseling to refer  clients for services and support. State officials provided the following  information on some of the activities intended for the program.  1.  Increasing clients\u2019 access to contraceptives: Community health  workers and case management staff will assist clinic providers with  informing women and their partners about contraceptive availability  and about the potential Zika virus risks during pregnancy. They will  also work with the women to determine what messages work best  with their partners regarding contraceptives.  2.  Care management that includes pre- and post-test counseling on Zika  virus testing for pregnant women and their families: Officials said that  this activity is important because the CDC testing algorithm is  complex, the results from various tests can be confusing, and there  can be false positives from the tests. Generally, doctors do not have  the time to go through the complexities of these issues with clients,  such as how to understand the laboratory tests and results.  3.  Counseling to refer clients for services and supports: This can include  counseling about various types of resources to support clients pre- delivery, after delivery, and during the infant\u2019s first year of life.", "Arizona. According to state officials, Zika supplemental funding was used  to create an action plan with counties, and increase the state\u2019s ability to  raise public awareness about the threat of the Zika virus, its transmission  routes, and prevention measures. Officials stated that Arizona\u2019s border  with Mexico makes communicating about Zika more complex, because  individuals frequently cross the border for a variety of reasons including  work, school, and to visit family, and do not necessarily consider  themselves to be travelers. Additionally, the state used funding to  increase the amount of personal protective equipment for the vector  surveillance staff, and set up vector control contracts that could be  accessed if the Zika virus spread locally, and in the event that vector  control could not be handled at the local level. However, this contracting  mechanism was not used, because there was no local transmission of the  Zika virus in Arizona. According to state officials, Arizona plans to ask for  an extension to use the funding in the next mosquito season. The state  health department also sponsored training on mosquito identification.", "Los Angeles County. County officials said that some funding was used  to support personnel involved with Zika surveillance, testing, and case  management. This included the detection of cases\u2014individuals  diagnosed with Zika infection\u2014and also the dissemination of information  to Los Angeles County\u2019s Maternal and Child Health group, which follows  pregnant women through delivery and then transfers the cases to the  county\u2019s Children\u2019s Medical Services group. For example, according to  officials, once a case is identified, information is shared with the relevant  vector control district about the location of the case, and the vector control  district can then conduct inspection and abatement activities to reduce  the risk of a local outbreak. Los Angeles County officials found that this  process takes about one week from finding out about a case to  completion of inspection and abatement. This included 1 day to get  information to the vector control district and 1 to 5 days for completing  inspection and abatement. The funding was also used to provide funds to  the vector control districts to augment Aedes mosquito detection efforts  and support outreach activities, according to county officials.", "Louisiana. Louisiana officials said they used a CDC award, in part, to  provide equipment and mileage reimbursement for nurses, who served as  clinical liaisons between the birth defects surveillance program and  hospitals and physicians statewide, to help enable rapid surveillance  activities.", "Awardees also funded other activities, such as outreach campaigns. See  figure 3 for examples of outreach funded with Zika supplemental funding."], "subsections": []}, {"section_title": "Selected Awardees Had Mixed Experiences Applying for and Managing the Zika Supplemental Funding", "paragraphs": ["While a majority of the 12 selected awardees we spoke with reported  positive experiences with the process of applying for and managing the  Zika supplemental funding, some awardees cited aspects of the process  that were challenging. The awardees we spoke with received much of  their supplemental funding from CDC and noted that the process went  well: there was good communication with CDC officials; CDC\u2019s  Epidemiology and Laboratory Capacity for Infectious Diseases  cooperative agreement process to apply for Zika supplemental funds was  more streamlined than the regular application process; and awardees  said they were familiar with the mechanisms, which helped them navigate  the process.", "Awardees we spoke to also cited some challenges to applying for and  managing the Zika supplemental funding. These awardees noted that  various time frames among multiple awards and restrictions on authorized  activities under the awards added administrative burdens that officials  had to deal with while responding to the outbreak. Florida officials said  that the state received funding from different federal agencies, from  different cooperative agreement awards, with different deadlines, and  different rules on what the funding could be used for. For example, CDC  distributed Zika supplemental funds to states and certain localities and  territories through five cooperative agreements\u2014some of which had  multiple application rounds. Florida officials said that they had to track  funding separately and identify the activities that could be funded under  each award\u2014administrative requirements that were burdensome during  an emergency response. Figure 4 presents the period of time Florida had  to use the Zika supplemental funding from multiple awards received from  CDC.", "In addition, awardees we spoke with cited challenges with adjusting their  plans when federal funding was more or less than anticipated. For  example, CDC officials said that they provided average award amount  ranges as guidance for awardees as part of the application process for  one of CDC\u2019s cooperative agreements. Los Angeles County officials  said that they applied for an amount that was near the limit, and county  officials said that they had to adjust the activities they planned to fund  when they received less than what they applied for. Iowa officials said  that without knowing exactly how much funding would be available it was  difficult to know what to apply for and made staffing changes difficult.  Iowa officials had to adjust their initial plan when they later received  additional unexpected funding.", "In October 2017, CDC issued a new notice of funding opportunity that,  according to agency officials, was intended to help minimize the  administrative burden on these awardees (e.g., preparing applications  and other paperwork) during significant public health emergencies by pre- approving public health departments in these jurisdictions to rapidly  receive future awards. This new notice of funding opportunity will be  used to establish a list of awardees, with existing emergency  preparedness and response capacity, that would be pre-approved for  funding by CDC when a public health threat occurs, including infectious  disease threats. It requires that awardees have structures and plans in  place to receive funding, as well as plans to respond to a public health  threat. According to CDC officials, awards could potentially be provided  within 2 weeks to pre-approved awardees after supplemental  appropriations are enacted. According to CDC officials, as of February  2018, the agency had approved all 64 applicants for the notice of funding  opportunity. This means that CDC will consider these approved  applicants for future funding if an emergency occurs and funding  becomes available."], "subsections": []}]}, {"section_title": "Agency and Third- Party Comments", "paragraphs": ["We provided a draft of this report to HHS for review and comment. HHS  provided technical comments, which we incorporated as appropriate.", "We also provided relevant draft portions of this report to the Zika  supplemental funding awardees we interviewed. Specifically, we provided  the excerpts to officials in Alaska; Arizona; California; Colorado; Florida;  Houston, Texas; Iowa; Kansas; Los Angeles County, California;  Louisiana; Oklahoma; and Texas. All but one awardee responded.  Awardees provided technical comments, which we incorporated as  appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, and to 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) 512-7114 or crossem@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 XII."], "subsections": []}]}, {"section_title": "Appendix I: Biomedical Advanced Research and Development Authority\u2019s Zika Supplemental Awards", "paragraphs": ["The Biomedical Advanced Research and Development Authority  (BARDA), within the Department of Health and Human Services\u2019 Office of  the Assistant Secretary for Preparedness and Response, executed  contracts to obligate its Zika supplemental funding for research in the  areas of (1) vaccine development, (2) diagnostic development, and (3)  pathogen reduction systems.", "Table 3 presents information for each award as it was provided to us by  BARDA."], "subsections": []}, {"section_title": "Appendix II: Centers for Disease Control and Prevention\u2014Epidemiology and Laboratory Capacity for Infectious Diseases Awardees", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)  cooperative agreement. CDC awarded Zika supplemental funding for the  ELC cooperative agreement for the following activities:", "Zika vector surveillance and control,", "Zika epidemiology and laboratory surveillance, and", "U.S. Zika Pregnancy Registry.", "The Zika supplemental funding awarded through the ELC cooperative  agreement was to further support and strengthen activities to protect the  public\u2019s health, especially pregnant women, through epidemiologic  surveillance and investigation, improving mosquito control and  monitoring, and strengthening laboratory capacity. The funding will also  support participation in the U.S. Zika Pregnancy Registry to monitor  pregnant women with the Zika virus disease and their infants.", "For each award, we present information as it was provided to us by CDC,  as well as the activities funded. Table 4 provides information on ELC Zika  supplemental funding awarded to states and territories, and table 5  presents information on awards to local health departments.", "In addition to states and territories, six large city and county local health  departments\u2014Chicago, the District of Columbia, Houston, Los Angeles  County, New York City, and Philadelphia\u2014received ELC Zika  supplemental awards."], "subsections": []}, {"section_title": "Appendix III: Centers for Disease Control and Prevention\u2014Birth Defects Awardees", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  the Surveillance, Intervention, and Referral to Services Activities for  Infants with Microcephaly or other Adverse Outcomes Linked with the  Zika Virus (birth defects) cooperative agreement.", "The Zika supplemental funding awarded through the birth defects  cooperative agreement was to provide additional resources to better  establish, enhance, and maintain rapid population-based surveillance of  microcephaly and other adverse outcomes (especially central nervous  system defects) possibly linked to Zika virus infection during pregnancy  using an active case-finding methodology; participation in centralized  pooled clinical and surveillance data projects; ensuring affected infants  and families are referred to services; and assessing health and  developmental outcomes of these children.", "Table 6 presents information for each award as it was provided to us by  CDC."], "subsections": []}, {"section_title": "Appendix IV: Centers for Disease Control and Prevention\u2014Behavioral Risk Factor Surveillance System Awardees", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  the Behavioral Risk Factor Surveillance System (BRFSS) cooperative  agreement.", "The Zika supplemental funding awarded through the BRFSS cooperative  agreement was to conduct a rapid population-based assessment of  women and couples using or in need of contraceptives in order to provide  comprehensive contraceptive services related to Zika virus exposure.", "Table 7 presents information for each award as it was provided to us by  CDC."], "subsections": []}, {"section_title": "Appendix V: Centers for Disease Control and Prevention\u2014Pregnancy Risk Assessment Monitoring System Awardees", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  the Pregnancy Risk Assessment Monitoring System (PRAMS)  cooperative agreement.", "The Zika supplemental funding awarded through the PRAMS cooperative  agreement was to assess maternal behaviors and experiences related to  Zika virus exposure among recently pregnant women who deliver a live- born infant in the United States.", "Table 8 presents information for each award as it was provided to us by  CDC."], "subsections": []}, {"section_title": "Appendix VI: Centers for Disease Control and Prevention\u2014Public Health Preparedness and Response Awardees", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  the Public Health Preparedness and Response (PHPR) Cooperative  Agreement for All-Hazards Public Health Emergencies.", "According to CDC officials, the Zika supplemental funding awarded  through the PHPR cooperative agreement was to enable identified state,  territorial, and local jurisdictions to address Zika virus disease planning  and operational response gaps.", "Table 9 presents information for each award as it was provided to us by  CDC."], "subsections": []}, {"section_title": "Appendix VII: Centers for Disease Control and Prevention\u2014Other Cooperative Agreements\u2019 Awardees", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  additional cooperative agreements.", "Tables 10-17 present information for each award as it was provided to us  by CDC."], "subsections": [{"section_title": "Administrative Support for the Zika Supplemental for Sentinel Enhanced Dengue Surveillance System Project", "paragraphs": ["The Zika supplemental funding awarded through the Sentinel Enhanced  Dengue Surveillance System Project cooperative agreement was to  support sites working to provide new information on dengue and other  acute febrile illnesses in Puerto Rico, which is located in the subtropics  and where dengue epidemiology is similar to dengue endemic areas  worldwide. The Zika supplemental funding was for two studies: (1)  pregnant women with Zika infection, and (2) postnatal Zika infection by  following 0-5 year old children."], "subsections": []}, {"section_title": "Vector-Borne Disease Regional Centers of Excellence", "paragraphs": ["The Zika supplemental funding awarded through the Vector-Borne  Disease Regional Centers of Excellence cooperative agreement is to  establish regional centers of excellence aimed at building the capacity to  address the problem of emerging and exotic vector-borne diseases in the  United States, including Zika virus infection."], "subsections": []}, {"section_title": "Enhancing Capacity for Vector Surveillance and Control to Prevent Zika, Dengue and Chikungunya Infection in Puerto Rico", "paragraphs": ["The Zika supplemental funding awarded through the Enhancing Capacity  for Vector Surveillance and Control to Prevent Zika, Dengue and  Chikungunya Infection in Puerto Rico cooperative agreement is to fund  activities to increase the surveillance and control of vectors, specifically  Aedes aegypti mosquitoes (the vector of dengue, chikungunya, and Zika).  The purpose of the program is to establish a vector control unit to oversee  and implement comprehensive vector control activities in Puerto Rico."], "subsections": []}, {"section_title": "Immunization Grants-CDC Partnership: Strengthening Public Health Laboratories", "paragraphs": ["The Zika supplemental funding awarded through the Immunization  Grants-CDC Partnership: Strengthening Public Health Laboratories  cooperative agreement is to promote quality and safe public health  laboratory practice, improve public health laboratory infrastructure,  strengthen the public health laboratory system, and develop a well-trained  public health laboratory workforce."], "subsections": []}, {"section_title": "Building Capacity of the Public Health System to Improve Population Health through National, Nonprofit Organizations", "paragraphs": ["According to CDC officials, the Zika supplemental funding awarded  through the Building Capacity of the Public Health System to Improve  Population Health through National, Nonprofit Organizations cooperative  agreement is to ensure national capacity for responding to the Zika  outbreak and meeting the needs of those affected, such as by reaching  out to specialized constituents to ensure they were informed on  epidemiology and practice guidelines."], "subsections": []}, {"section_title": "Strengthening the Public Health System in the U.S.- Affiliated Pacific Islands", "paragraphs": ["The Zika supplemental funding awarded through the Strengthening the  Public Health System in the U.S.-Affiliated Pacific Islands cooperative  agreement is to provide capacity building assistance through a regional,  nonprofit organization to strengthen the U.S.-Affiliated Pacific Islands\u2019  public health leadership, workforce, and public health systems and  infrastructure in response to Zika virus within the U.S. Pacific territories."], "subsections": []}, {"section_title": "Pan American Health Organization: Building Capacity and Networks to Address Emerging Infectious Diseases in the Americas", "paragraphs": ["The Zika supplemental funding awarded through the Pan American  Health Organization: Building Capacity and Networks to Address  Emerging Infectious Diseases in the Americas cooperative agreement is  for various activities including technical assistance, such as to develop  standard operating procedures for diagnostic and integrated surveillance  activities, as well as to support the development, implementation, and  evaluation of diagnostic and surveillance guidelines."], "subsections": []}, {"section_title": "Global Health Security Partner Engagement: Expanding Efforts and Strategies to Protect and Improve Public Health Globally", "paragraphs": ["According to CDC officials, the Zika supplemental funding awarded  through the Global Health Security Partner Engagement: Expanding  Efforts and Strategies to Protect and Improve Public Health Globally  cooperative agreement is for enhanced surveillance for pregnant women  in Colombia, including laboratory testing and case investigations."], "subsections": []}]}, {"section_title": "Appendix VIII: Centers for Disease Control and Prevention\u2014Contracts and Interagency Agreements", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Disease Control and Prevention (CDC) through  additional contracts and interagency agreements.", "Tables 18 and 19 present information for each award as it was provided  to us by CDC, as well as the activity funded."], "subsections": []}, {"section_title": "Appendix IX: Centers for Medicare & Medicaid Services\u2014Zika Health Care Services Program Awards", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Centers for Medicare & Medicaid Services (CMS) through  the Zika Health Care Services Program. The Zika Health Care Services  Program is aimed at supporting prevention activities and treatment  services for women (including pregnant women), children, and men  adversely or potentially affected by the Zika virus. According to CMS  documentation, the Zika Health Care Service Program is intended to  address four critical components of a comprehensive response to Zika:  1.  Increase access to contraceptive services for women and men.  2.  Increase access to and reduce barriers to diagnostic testing,  screening, and counseling for pregnant women and newborns.  3.  Increase access to appropriate specialized health care services for  pregnant women, children born to mothers with maternal Zika virus  infection, and their families.  4.  Improve provider capacity and capability.", "CMS awarded funding through the Zika Health Care Services Program, in  two award rounds, to states, territories, tribes, or tribal organizations with  active or local transmission of the Zika virus, as confirmed by the Centers  for Disease Control and Prevention. In January 2017, CMS awarded  funding to American Samoa, Florida, Puerto Rico, and the U.S. Virgin  Islands. In June 2017, CMS awarded funding to Texas, the only new area  with local transmission of the Zika virus. Table 20 presents the awards  CMS made through its Zika Health Care Services Program."], "subsections": []}, {"section_title": "Appendix X: Health Resources and Services Administration\u2019s Zika Supplemental Awards", "paragraphs": ["This appendix presents information on Zika supplemental funding awards  made by the Health Resources and Services Administration (HRSA) to  health centers and for Special Projects of Regional and National  Significance.", "Health centers: HRSA provided awards to health centers through  supplemental grant awards to support existing health centers in  Puerto Rico and other territories in their efforts to expand the delivery  of health care services, including the prevention of Zika and  prevention and treatment of Zika-related illness. HRSA also provided  supplemental grant awards to existing Health Center Program  cooperative agreement awardees for efforts to provide training and  technical assistance for Zika-related health center expansion  activities.", "Special Projects of Regional and National Significance: HRSA  provided awards for Special Projects of Regional and National  Significance to support public health departments and other entities in  Puerto Rico and other territories in efforts to ensure access to  recommended services for pregnant women, infants, and children  infected by the Zika virus in the prenatal, perinatal, and neonatal  period. Activities include early identification through developmental  screening, regular assessments and monitoring, telemedicine, care  coordination, enabling services, family engagement and family-to- family support; purchasing of diagnostic equipment and health  information technology; and the training of health care providers, care  coordinators, and other health care and public health professionals to  ensure delivery of comprehensive, interdisciplinary health and social  services for this population.", "Tables 21 and 22 present information for each award as it was provided  to us by HRSA."], "subsections": []}, {"section_title": "Appendix XI: National Institutes of Health Zika Supplemental Awards", "paragraphs": ["The National Institutes of Health (NIH) awarded Zika supplemental  funding to support research to better understand Zika and its  complications, and inform the development of new interventions. The  three primary activities of funding include (1) vaccine development; (2)  Zika in Infants and Pregnancy study; and (3) diagnostics, therapeutics,  vector control, and other interventions. NIH used contracts, grants,  intramural research awards, and other awards to provide funding for  research on the Zika virus and its complications.", "Tables 23-26 present information for each award as it was provided to us  by NIH."], "subsections": []}, {"section_title": "Appendix XII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Karen Doran (Assistant Director),  Sarah Resavy (Analyst-in-Charge), and Hannah Grow made key  contributions to this report. Also contributing were Muriel Brown, Christine  Davis, and Drew Long."], "subsections": []}]}], "fastfact": ["The Zika virus outbreak that began in 2015 sickened adults, but also had another particularly tragic result\u2014brain defects and other problems in infected fetuses. It represented the first time in more than 50 years that an infectious pathogen had been found to cause birth defects. As the virus spread into the United States, Congress appropriated $932 million to address the growing threat.", "We reviewed how agencies have used this money. We found that they attacked the problem on a variety of fronts, including researching the virus, controlling mosquito populations, and raising public awareness about Zika and its prevention."]}
{"id": "GAO-18-216", "url": "https://www.gao.gov/products/GAO-18-216", "title": "Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market", "published_date": "2018-01-30T00:00:00", "released_date": "2018-02-27T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Infringement of IPR through the illegal importation and distribution of counterfeit goods harms the U.S. economy and can threaten the health and safety of U.S. consumers. CBP leads IPR enforcement at U.S. ports of entry by detecting and seizing counterfeit goods that enter the United States. CBP works with ICE, which investigates IPR violations and builds cases for prosecution.", "GAO was asked to review CBP's and ICE's IPR enforcement at U.S. borders. In this report, GAO examines (1) what is known about counterfeit goods entering the United States and the challenges they present, (2) efforts CBP and ICE have undertaken to enhance IPR enforcement and the extent to which they have assessed the results, and (3) the extent of CBP's and ICE's collaboration on IPR enforcement and ways they coordinate with the private sector. GAO reviewed agency data and documents, interviewed agency officials, and conducted field work at port locations selected on the basis of factors such as the volume of IPR seizures and variety of modes of transportation at each location. GAO also conducted undercover purchases of commonly counterfeited consumer goods on popular consumer websites, using investigative tools and techniques."]}, {"section_title": "What GAO Found", "paragraphs": ["Changes in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights (IPR). Specifically, growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products. For example, 20 of 47 items GAO purchased from third-party sellers on popular consumer websites were counterfeit, according to testing by the products' rights holders (see table), highlighting potential risks to consumers. The changes in the market for counterfeit goods can also pose challenges to the private sector\u2014for example, the challenge of distinguishing counterfeit from authentic goods listed for sale online\u2014and complicate the enforcement efforts of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE).", "CBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so. CBP's and ICE's IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U.S. ports, engaging with international partners, and undertaking localized pilot programs or port-led initiatives. CBP and ICE have collected some performance data for each of the eight activities GAO reviewed, and ICE has taken some steps to understand the impact of its efforts. However, CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities.", "CBP and ICE generally collaborate on IPR enforcement, but according to private sector representatives, restrictions on CBP's information sharing limit private sector enforcement efforts. GAO found that CBP and ICE have undertaken efforts that align with selected key practices for interagency collaboration, such as participating in developing a national IPR enforcement strategy and agreeing on roles and responsibilities. However, sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives. CBP officials said they share information to the extent allowed under current regulations, but CBP has not completed an assessment of what, if any, additional information would be beneficial to share with private sector entities. Without such an assessment, CBP will not know if sharing additional information requires regulatory or legal changes."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making two recommendations to CBP, recommending that it (1) evaluate its efforts to enhance IPR enforcement and (2) assess potential additional information sharing with the private sector. CBP agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Intellectual property (IP) is an important component of the U.S. economy,  and the United States is an acknowledged global leader in its creation.  Infringement of intellectual property rights (IPR) through the illegal  importation and distribution of counterfeit goods harms the U.S. economy  by stifling innovation, slowing economic growth, weakening the  competitiveness of U.S. employers, and threatening American jobs. IPR  infringement can also threaten the health and safety of American  consumers. U.S. agencies and businesses have cited an expansion of IP  crimes and an increasing use of Internet websites to facilitate the sale of  counterfeit goods imported from overseas in recent years.", "The Department of Homeland Security\u2019s U.S. Customs and Border  Protection (CBP) and U.S. Immigration and Customs Enforcement  (ICE)\u2014two of the many U.S. agencies involved in IPR enforcement\u2014are  responsible for IPR enforcement at U.S. borders. CBP leads  enforcement activity at the border by detecting and seizing counterfeit  goods that enter the United States through its more than 300 ports of  entry and by assessing penalties against IPR offenders. In fiscal year  2016, CBP processed over 32 million shipments and seized 31,560  shipments of IPR-infringing goods worth an estimated $1.38 billion.  Sixteen percent of those seizures contained potential threats to consumer  health and safety, according to CBP\u2019s analysis of its seizure data. CBP  coordinates its efforts with ICE, which investigates IPR violations and  builds cases for federal prosecution. In fiscal year 2016, ICE arrested 458  individuals, obtained 328 indictments, and received 276 convictions  related to intellectual property crimes, according to ICE data.", "You asked us to review CBP\u2019s and ICE\u2019s IPR enforcement at U.S.  borders. This report examines (1) what is known about counterfeit goods  entering the United States and the challenges they present, (2) efforts  CBP and ICE have undertaken to enhance IPR enforcement and the  extent to which they have assessed the results of these efforts, and (3)  the extent to which CBP and ICE collaborate on IPR enforcement as well  as ways in which they coordinate with the private sector in enforcing IPR.", "To obtain information about IPR-infringing goods that enter the United  States and the challenges they present, we analyzed CBP seizure data  for fiscal years 2012 through 2016 and reviewed CBP and ICE  documents and reports as well as reports from other U.S government  entities and international organizations. We reviewed CBP\u2019s seizure  data, conducted electronic tests of the data, and interviewed  knowledgeable agency officials to determine that these data were  sufficiently reliable for our purposes. We interviewed CBP and ICE  officials in Washington, D.C., and at selected port locations in Chicago,  Illinois; Los Angeles, California; Miami, Florida; and New York, New York.  We also interviewed representatives of IP rights\u2013holding companies  (rights holders) and popular consumer websites that offer platforms for  third-party sellers. We used undercover identities to purchase selected  products from third-party sellers on popular consumer websites and  subsequently asked the rights holders for the selected products to test  their authenticity. To examine the extent to which CBP and ICE have  undertaken efforts to improve enforcement at the border and assessed  the results of those efforts, we reviewed agency plans and documents  and interviewed agency officials. To examine the extent to which CBP  and ICE collaborate on IPR enforcement, we assessed their collaboration  against selected interagency collaboration practices, reviewed agency  documentation, and analyzed the results of our interviews with CBP and  ICE officials in field and headquarters locations. To identify ways in  which CBP and ICE collaborate with the private sector, we spoke with  representatives of rights holders and popular consumer websites that  offer platforms for third-party sellers, interviewed CBP and ICE officials,  and reviewed agency documentation. (See app. I for more information  about our objectives, scope, and methodology.)", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. We conducted our related  investigative work in accordance with investigation standards prescribed  by the Council of the Inspectors General on Integrity and Efficiency."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Recent Legislation Related to IPR Enforcement", "paragraphs": ["The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA)  includes provisions related to IPR enforcement, among other things.  According to CBP, the act codified existing CBP activities and supports  CBP\u2019s efforts to protect U.S. economic security through trade  enforcement, to collaborate with the private sector, and to streamline and  modernize business processes to meet the demands and complexities of  a changing global supply chain. The act defines trade enforcement as  the enforcement of the customs and trade laws of the United States.  TFTEA requires the development and implementation of Centers of  Excellence and Expertise (Centers), which CBP began piloting in 2010,  and centralizes CBP\u2019s trade enforcement and trade facilitation efforts.  Among other things, TFTEA directs the CBP Commissioner to establish IPR as a priority trade provides CBP with explicit authority to share certain information with  trademark and copyright owners prior to completing a seizure; directs the Secretary of the Department of Homeland Security to  establish the government-wide National Intellectual Property Rights  Coordination Center (IPR Center) within ICE;  requires the Assistant Director of the IPR Center to coordinate with  CBP and ICE, along with other agencies; and  requires the Assistant Director of the IPR Center to work with CBP  and other federal agencies to conduct outreach to the private sector.", "TFTEA also includes reporting requirements for CBP and ICE.  Specifically, TFTEA requires CBP and ICE to submit a joint strategic plan  every 2 years that, among other things, describes their efforts to enforce  IPR and makes recommendations for the optimal allocation of resources  to ensure adequate enforcement. TFTEA also requires the agencies to  submit a joint report annually that includes specific IPR criminal and  border enforcement metrics, a summary of outreach efforts, and a  summary of efforts to address the challenges presented by Internet  commerce and the transit of small packages."], "subsections": []}, {"section_title": "Roles of CBP and ICE in IPR Enforcement", "paragraphs": ["CBP and ICE both play critical roles in IPR enforcement. CBP\u2019s  responsibilities include identifying and seizing IPR-infringing goods at the  U.S. border, a function that also includes assessing penalties and  denying entry to certain types of IPR-infringing goods. ICE\u2019s  responsibilities include investigating IPR violations, building cases for  federal prosecution, and serving as the lead agency for the IPR Center.  CBP employs a risk-based approach that uses targeting and other tools  to identify for further examination a selection of imported goods that have  arrived at U.S. ports; when violations are found, CBP seizes infringing  goods and may refer cases to ICE for criminal investigation. Figure 1  shows CBP\u2019s and ICE\u2019s roles in IPR enforcement at the U.S. border.", "CBP. CBP\u2019s trade policy, processing, and enforcement operations,  including those related to IPR, are primarily carried out by two offices\u2014 the Office of Trade and the Office of Field Operations.", "The Office of Trade develops policies to guide trade enforcement  efforts. The Office of Field Operations conducts a range of trade  processing and enforcement activities at more than 300 ports, where  people and goods enter the country by land, air, or sea. At these  ports, CBP officers and import specialists target potentially IPR- infringing goods, conduct examinations, and detain items if officers  suspect they are counterfeit.", "Import specialists working for the Office of Field Operations\u2019 10  Centers appraise and evaluate detained goods to identify any IPR  violation. As we reported in June 2017, the creation of the Centers  represented a shift in CBP\u2019s approach to trade operations, centralizing  the processing of imported goods on a national scale through  industry-focused Centers rather than individual ports of entry.", "In determining goods\u2019 authenticity, CBP relies on product information  supplied by rights holders and prioritizes enforcement of IPR that rights  holders have recorded with CBP, using the Intellectual Property Rights e- Recordation database. CBP also uses product identification manuals that  are prepared by rights holders and linked to the database. In addition,  CBP may consult with rights holders as part of the examination process. If  CBP determines that a good is counterfeit, it seizes and destroys the  good and may assess penalties if warranted.", "IPR enforcement is one of seven priority trade issues around which CBP  focuses its activities and resources for trade facilitation and  enforcement. Priority trade issues represent high-risk areas that can  cause significant revenue loss, harm the U.S. economy, or threaten the  health and safety of the American people, according to CBP. In 2017, we  evaluated CBP\u2019s trade enforcement efforts and found that CBP\u2019s plans for  its priority trade issues generally lacked performance targets that would  enable it to assess the effectiveness of its enforcement activities. We  recommended that CBP include performance targets in its plans for  priority trade issues; CBP concurred with this recommendation.", "ICE. ICE\u2019s Homeland Security Investigations is responsible for a wide  range of domestic and international criminal investigations arising from  the illegal movement of people and goods into, within, and out of the  United States, including the importation and exportation of counterfeit  goods. ICE field agents work with CBP and various partners in their  investigations of identified cases of IP crime. In addition, the ICE-led,  multi-agency IPR Center coordinates with other federal agencies on IPR  infringement investigations, law enforcement training, and private sector  and public outreach. The IPR Center brings together many of the key  domestic and foreign investigative agencies to leverage resources and  promote a comprehensive response to IP crime."], "subsections": []}, {"section_title": "Risks Associated with the Counterfeit Goods Market", "paragraphs": ["Counterfeit goods may pose risks to the health and safety of consumers.  CBP and ICE have seized and investigated counterfeit goods, such as  health and personal care products and consumer electronics, that carried  a number of health and safety risks. For example, CBP has seized  counterfeit versions of personal care products such as contact lenses,  perfume, hair removal devices, hair curlers and straighteners, skin  cleansing devices, and condoms, which pose risks to the consumer that  include damage to skin or eyes caused by dangerous chemicals and  bacteria, burning or electrocution due to nonstandardized wiring, or  ineffectual family planning protection. ICE has also investigated IP crimes  involving counterfeit airbags, phone accessories, pharmaceuticals, and  other items that present risks to the health and safety of consumers.  Counterfeit electronics and batteries can also pose significant risks,  including the risk of injury or death, according to CBP. For instance, in  December 2015, CBP seized 1,378 hoverboards with counterfeit batteries  that carried a risk of causing fires.", "In addition, the sale of counterfeit goods can pose a threat to national  security. For example, CBP and ICE have seized and investigated  counterfeit goods, such as integrated circuits, destined for Department of  Defense supply chains. Additionally, counterfeiting has been linked to  transnational organized crime and terrorist organizations. According to  the United Nations Office of Drugs and Crime, the illicit trafficking of  counterfeit goods is an increasingly attractive avenue for criminal  organizations to diversify their product range. Criminal networks use  similar routes and methods to move counterfeit goods as they use to  smuggle drugs, firearms, and people, according to reports from U.S. law  enforcement and international organizations. The high rate of return on  investment and perceived low risk of prosecution associated with IP  crimes make counterfeiting attractive to criminal organizations as a  lucrative source of revenue, according to the IPR Center.", "In 2010, we reported that counterfeiting also posed a wide range of  economic risks to consumers, industry, government, and the economy as  a whole. Counterfeiting\u2019s economic effects on consumers include, for  example, financial losses resulting from counterfeit products that fail due  to inferior quality. In addition, counterfeiting may pose risks to industry  and government by increasing IPR protection and enforcement costs, by  affecting sales and brand value for the businesses whose products are  counterfeited, and by potentially reducing tax revenue collected by the  government. Finally, counterfeiting may harm the U.S. economy as a  whole by slowing economic growth, resulting in the loss of jobs in IP- intensive industries, according to the Congressional Research Service."], "subsections": []}]}, {"section_title": "Accelerated by E- Commerce, Changes in the Counterfeits Market Present Challenges to U.S. Agencies, Consumers, and the Private Sector", "paragraphs": ["Driven in part by the rise of e-commerce, the market for counterfeit goods  in the United States has shifted in recent years from one in which  consumers often knowingly purchased counterfeits to one in which  counterfeiters try to deceive consumers into buying goods they believe  are authentic. According to CBP officials and seizure data, the volume,  value, and variety of counterfeit goods entering the United States  increased in fiscal years 2012 through 2016, and counterfeit goods were  increasingly imported in smaller express-carrier or mail packages. The  results of our undercover purchases from third-party sellers indicate that  counterfeit goods are available on a variety of popular e-commerce  websites frequented by U.S. consumers. These changes in the  marketplace present a number of challenges for U.S. agencies, the  private sector, and consumers."], "subsections": [{"section_title": "E-Commerce Has Contributed to a Shift in the Market for Counterfeit Goods", "paragraphs": ["The rise of e-commerce has contributed to a fundamental change in the  market for counterfeit goods, according to our analysis of documents from  CBP, ICE, and international organizations and our interviews with CBP  and ICE officials. U.S. agencies and international organizations have  observed a shift in the sale of counterfeit goods from \u201cunderground\u201d or  secondary markets, such as flea markets or sidewalk vendors, to primary  markets, including e-commerce websites, corporate and government  supply chains, and traditional retail stores, where consumers typically  believe they are purchasing authentic goods. This shift has been  accompanied by changes in the ways in which counterfeit goods are sold,  as shown in table 1.", "In the past, consumers could often rely on indicators such as appearance,  price, or location of sale to identify counterfeit goods in the marketplace,  but counterfeiters have adopted new ways to deceive consumers.  Consumers may have difficulty differentiating between counterfeit and  authentic goods in the primary market for several reasons:", "The physical appearance of counterfeit goods may no longer serve as  a \u201cred flag\u201d for consumers that the good they are considering  purchasing is not genuine. Counterfeit goods and their packaging are  becoming more sophisticated and closely resemble genuine goods,  making it difficult for consumers, law enforcement, and sometimes  even manufacturers to identify counterfeit goods, according to CBP  and ICE officials.", "When selling online, counterfeiters may post pictures of authentic  goods on the websites where they are selling counterfeits and may  post pseudonymous reviews of their products or businesses in order  to appear legitimate.", "By setting the price of a counterfeit at, or close to, the retail price of a  genuine good, counterfeiters are able to deceive consumers, who will  pay the higher price because they believe the goods are real or who  believe that they are getting a slight bargain on genuine goods.", "Counterfeiters exploit third-party online marketplaces to gain an  appearance of legitimacy and access to consumers, according to the  Federal Bureau of Investigation.", "The growth of e-commerce has provided additional opportunities for  counterfeiters to deceive consumers, according to U.S. agencies and  international organizations. In June 2000, approximately 22 percent of  Americans reported having made a purchase online, but by December  2016 that portion of the population had risen to 79 percent, according to a  study by Pew Research Center. Worldwide e-commerce sales are  expected to reach over $4 trillion by 2020, and e-commerce retail sales  are expected to reach nearly 15 percent of overall global retail spending  in 2020, according to CBP\u2019s E-Commerce and Small Business Branch.  CBP also has reported that e-commerce is increasing and altering global  trade, as consumers import and export goods and services when they  make purchases over the Internet, allowing for more cross-border  transactions and giving counterfeiters direct access to consumers through  the Internet."], "subsections": []}, {"section_title": "CBP Data Indicate Changes in Several Key Characteristics of Counterfeit Goods Seized", "paragraphs": ["According to CBP seizure data and CBP officials, the volume, value, and  variety of counterfeit goods seized by CBP and ICE have increased.  CBP reports indicate the number of IPR seizures increased by 38 percent  in fiscal years 2012 through 2016, from approximately 22,850 seizures in  fiscal year 2012 to an estimated 31,560 seizures in fiscal year 2016. The  total estimated value of the seized goods, had they been genuine,  increased by 10 percent, from about $1.26 billion in fiscal year 2012 to an  estimated value of over $1.38 billion in fiscal year 2016. According to  CBP data, most of the goods seized during this period were shipped from  China and Hong Kong. Counterfeit goods originating in China accounted  for approximately half of all IPR seizures in fiscal years 2012 through  2016, and counterfeit goods shipped from Hong Kong represented over  one-third of all IPR seizures over the same time frame. As the number of  IPR seizures increased from 2012 to 2016, the proportion of seizures  shipped from China and Hong Kong remained fairly stable, ranging from  83 percent of all IPR seizures in 2014 and 2015 to 94 percent in 2013, as  shown in figure 2.", "The variety of products being counterfeited has also increased, according  to CBP officials. CBP and ICE noted that, while many consumers typically  think of luxury handbags or watches as the most commonly counterfeited  goods, counterfeiting occurs in nearly every industry and across a broad  range of products. According to CBP officials we interviewed in  headquarters and CBP and ICE port officials, almost any product can be  counterfeited. For example, major seizure operations in fiscal year 2016  resulted in the confiscation of automobile parts, consumer electronics,  pharmaceuticals, sports-related merchandise, semiconductor devices,  furniture, and hoverboards. In fiscal year 2016, the commodity types with  the highest number of seizures were apparel, consumer electronics,  footwear, watches, and jewelry.", "In addition, according to CBP data and officials, the ways in which  counterfeit goods are imported into the United States have changed in  recent years. Specifically, express carriers and international mail have  become the predominant forms of transportation for IPR-infringing goods  entering the United States, constituting approximately 90 percent of all  IPR seizures in fiscal years 2015 and 2016, according to CBP data and  officials. The number of IPR seizures from express carrier shipments  increased by 105 percent from fiscal year 2012 through fiscal year 2016,  while the number of IPR seizures shipped by cargo increased by 6  percent over the same period. Similarly, the total value of express carrier  seizures increased by 337 percent from fiscal year 2012 through fiscal  year 2016, while the total value of cargo seizures decreased by 34  percent over the same period.", "CBP and ICE have attributed the increase in seizures of mail and express  carrier shipments to three factors:  continued growth of online counterfeit merchandise sales, which  facilitate direct-to-consumer shipments of infringing goods;  training by rights holders and coordination between CBP and ICE,  which have helped CBP and ICE to focus more enforcement efforts  on express carrier operations; and  counterfeiters\u2019 response to enforcement efforts.", "According to an IPR Center report, counterfeiters may assume that  multiple, smaller packages are more likely to elude seizure than a single  large shipment and may view the seizure of a few packages as the cost of  doing business."], "subsections": []}, {"section_title": "Twenty of 47 Items Purchased from Third- Party Sellers on Popular E-Commerce Websites Were Counterfeits, Highlighting Potential Risks to Consumers", "paragraphs": ["In an attempt to understand the frequency with which consumers may  unknowingly encounter counterfeit products online, we purchased a  nongeneralizable sample of four types of consumer products\u2014shoes,  travel mugs, cosmetics, and phone chargers\u2014from third-party sellers on  five popular e-commerce websites. According to CBP data and officials,  CBP often seizes IPR-infringing counterfeits of these types of products.  As table 2 shows, the rights holders for the four selected products  determined 20 of the 47 items we purchased to be counterfeit.", "We did not identify any clear reasons for the variation among the  counterfeit and authentic that we purchased based on the products they  represented, the e-commerce websites from which they were purchased,  or the third-party sellers from whom they were purchased. For three of the  four product types, at least one item we purchased was determined to be  counterfeit, with results varying considerably by product. Representatives  of the rights holders could not provide a specific explanation for the  variation among authentic and counterfeit goods that we received. They  noted that the results of undercover purchases can fluctuate depending  on enforcement activities and the variety of goods and sellers on a  particular website on a given day. Rights-holder testing also showed that  we purchased at least one counterfeit item and one authentic item from  each of the five e-commerce websites. In addition, our analysis of the  customer ratings of third-party sellers from whom we made purchases did  not provide any clear indications that could warn consumers that a  product marketed online may be counterfeit. For example, we received  both counterfeit and authentic items from third-party sellers with ratings  that were less than 70 percent positive as well as sellers with ratings that  were up to 100 percent positive.", "Some counterfeit items we purchased were easily identifiable as likely  counterfeit once we received them. Rights holders were able to determine  that they were not authentic on the basis of inferior quality, incorrect  markings or construction, and incorrect labeling. For example, one item  contained misspellings of \u201cAustin, TX\u201d and \u201cMade in China,\u201d as figure 3  shows.", "Other items could be more difficult for a typical consumer to identify as  counterfeit. For example, the rights holder for a cosmetic product we  purchased identified one counterfeit item on the basis of discrepancies in  the color, composition, and design of the authentic and counterfeit items\u2019  packaging, as figure 4 shows.", "Counterfeit goods may also lack key elements of certification markings  and other identifiers. For example, on a counterfeit phone charger we  purchased, the UL certification mark did not include all components of the  authentic mark, as shown in figure 5.", "The risks associated with the types of counterfeit goods we purchased  can extend beyond the infringement of a company\u2019s IPR. For example, a  UL investigation of counterfeit iPhone adapters found a 99 percent failure  rate in 400 counterfeit adapters tested for safety, fire, and shock hazards  and found that 12 of the adapters posed a risk of lethal electrocution to  the user. Similarly, counterfeits of common consumer goods, such as  Yeti travel mugs, may contain higher-than-approved concentrations of  dangerous chemicals such as lead, posing health risks to consumers.  According to ICE, seized counterfeit cosmetics have been found to  contain hazardous substances, including cyanide, arsenic, mercury, lead,  urine, and rat droppings.", "Representatives of rights holders and e-commerce websites whom we  interviewed reported taking independent action to try to protect IPR within  their areas of responsibility. Both rights holders and e-commerce  websites maintain IPR protection teams that work with one another and  with law enforcement to address infringement issues. These teams may  include global networks of investigators and contracted brand-protection  companies. E-commerce websites may also take a variety of steps to  block and remove counterfeit items listed by third-party sellers. These  efforts rely on data collected through a variety of means, including  consumer reporting of counterfeits, notification by rights holders of IPR  infringement, and corporate efforts to vet potential third-party sellers,  according to private sector representatives. According to these  representatives, both rights holders and e-commerce websites have  utilized technology to aid their efforts. For example, one rights holder  uses search-engine \u201ccrawlers\u201d to find terms commonly associated with  counterfeit sales, in an effort to identify illicit sites and the individuals  behind them, while one e-commerce website maintains a large database  of information on the history and activity of its sellers.", "According to representatives of rights holders, consumers can best  protect themselves by buying directly from the manufacturer or its  authorized retailers online, avoiding prices that look \u201ctoo good to be true,\u201d  and reporting counterfeit purchases. For additional actions that consumer  protection organizations, government agencies, and private companies  have recommended consumers take to limit the risk of purchasing  counterfeits online, see appendix II."], "subsections": []}, {"section_title": "Changes in the Marketplace Can Pose Challenges to U.S. Agencies and the Private Sector", "paragraphs": ["We identified a number of key challenges that the changes in the market  for counterfeit goods can pose to CBP and ICE as well as to the private  sector. First, the increasing sophistication of counterfeits can make it  difficult for law enforcement officers to distinguish between legitimate and  counterfeit goods. According to CBP officers, because the quality of  counterfeits is improving, inspecting and processing a seizure can be time  consuming and often requires working with private industry to test  potential counterfeits.", "Second, the increased variety and quantity of counterfeit goods crossing  the border complicate CBP and ICE enforcement efforts. As the range of  counterfeit goods expands, CBP has a wider variety of goods to screen,  which requires CBP officials to have in-depth knowledge of a broad range  of products and of how to identify counterfeits. The overall volume of  goods entering the country\u2014including more than 11 million maritime  containers; 13 million containers carried over land borders by truck or rail;  and 250 million cargo, mail, and express carrier packages annually\u2014can  also be difficult to manage, according to CBP officials. CBP has  responsibility for facilitating trade as well as preventing the importation of  illicit goods\u2014missions that can conflict when attempts to identify illicit  goods threaten to slow the movement of legitimate trade. Additionally, the  increased volume of imports at specific locations can strain CBP  resources. For example, CBP officials at one international mail facility  noted that the volume of both incoming mail and counterfeit goods  increased exponentially when some international mail shipments from  China were rerouted to enter the United States through that port.", "Third, shifts in the mode of transportation of counterfeit goods to the  United States pose additional challenges to CBP and ICE. According to  CBP officials, seizure processing takes roughly the same amount of time  and costs the same regardless of shipment size or value, which means  that CBP must expend the same resources to seize an express carrier  shipment that contains a few infringing goods as it would to seize a large  cargo container with hundreds of infringing goods. Another effect of the  shift in transportation mode is that seizures have become less of a  deterrent for counterfeiters who break up large shipments into multiple  smaller express carrier or mail packages. Each of these smaller packages  includes fewer goods than a single large shipment, decreasing the  counterfeiter\u2019s risk of losing significant quantities of merchandise to a  single seizure. Furthermore, the shift in mode of transportation affects  CBP\u2019s ability to target shipments in advance. For example, as we have  previously reported, the mail environment generally does not provide CBP  with access to advance information that can be used for targeting or  package retrieval. In other shipping environments, CBP officials may  have access to advance information that they can use to target potentially  counterfeit goods.", "Fourth, counterfeiters may use a variety of methods to try to deceive law  enforcement or evade detection. A large majority of infringing products  are produced overseas and shipped to the United States, according to the  Intellectual Property Enforcement Coordinator. According to CBP  officials and CBP, IPR Center, and Intellectual Property Enforcement  Coordinator reports, counterfeiters may try to evade detection in a  number of ways. For example, counterfeiters sometimes separate IPR- infringing labels from counterfeit goods during the transportation process  and then complete the labeling and packaging of the goods in the United  States (see fig. 6). In fiscal year 2016, CBP seized 572 shipments  containing counterfeit labels and tags intended to be applied to articles  after importation to create non-genuine products, which CBP estimated  would be worth more than $17 million if they were genuine.", "Finally, CBP and ICE officials noted that targeting the root causes of IPR  infringement requires international cooperation to disrupt the networks  that produce, sell, and ship counterfeit goods. IPR enforcement is a  global issue, as counterfeit operations may cross several borders;  however, officials said some countries are more receptive to working with  U.S. agencies than others. For example, ICE officials noted that some  countries, such as China, do not have stringent IP laws in place or do not  enforce existing laws. Officials added that it can be difficult to convince  some countries to take IP theft seriously when it constitutes a large part of  their economy.", "The changing marketplace also presents challenges to the private sector,  according to representatives from rights holders and e-commerce  websites:  It is more difficult for rights holders and e-commerce websites to  identify and investigate individual counterfeit cases, as e-commerce  websites face growing inventory from a larger registry of sellers.  Tracking goods from known counterfeiters through various website  fulfillment and delivery mechanisms is also a significant challenge for  the private sector.", "The growth of e-commerce has accelerated the pace at which  counterfeiters can gain access to consumers or reinvent themselves if  shut down. E-commerce platforms on mobile devices, for example,  represent the newest space in which counterfeiters can operate."], "subsections": []}]}, {"section_title": "CBP and ICE Engage in Activities to Enhance IPR Enforcement, but CBP Has Not Fully Evaluated the Results of Its Activities", "paragraphs": ["CBP and ICE engage in a number of activities to enhance IPR  enforcement and have collected performance data on the activities we  reviewed. However, CBP has conducted limited evaluation of its IPR  enforcement, while ICE has taken some steps to evaluate the impact of  its efforts."], "subsections": [{"section_title": "CBP and ICE Undertake Several Types of Activities to Enhance IPR Enforcement", "paragraphs": ["According to our analysis of CBP and ICE documents and interviews with  CBP and ICE officials, CBP and ICE undertake a variety of activities to  enforce IPR, including (1) detecting potentially infringing goods, (2)  conducting special operations, (3) engaging with international partners,  and (4) undertaking localized pilot programs or port-led initiatives.", "Detecting potentially IPR-infringing goods. CBP and ICE engage  in a number of activities to detect imports of potentially IPR-infringing  goods. For example, CBP officers at each port have responsibilities  for targeting such goods, and CBP conducts targeting and trend  analysis at the national level. As we observed during our port visits,  CBP also uses its Automated Targeting System to review data on  inbound and outbound shipments and to identify shipments of  potential concern. CBP has created two IPR targeting models for the  system. In addition, CBP and ICE both maintain online systems for  reporting allegations of counterfeiting and other IPR infringements.", "Conducting special operations. CBP and ICE periodically conduct  special operations\u2014such as operations focused on particular  products or surge operations that provide additional manpower to  examine a larger number of shipments\u2014at U.S. ports of entry. CBP\u2019s  Mobile Intellectual Property Enforcement Team (MIPET) and ICE\u2019s  national operations are examples of activities in this area of effort.", "Engaging with international partners. IPR enforcement requires  coordination with international partners. The IPR Center includes  representatives of the governments of Canada and Mexico, as well as  international law enforcement entities like Interpol and Europol. CBP  and ICE also work with the customs and law enforcement agencies in  other countries to share information, provide training, and conduct  joint operations.", "Undertaking localized pilots and port-led initiatives. CBP and ICE  delegate much of the responsibility for day-to-day enforcement to  ports, Centers, and field offices. This allows CBP\u2019s headquarters  offices to test pilot programs in a small number of ports and allows  ports and Centers to initiate their own activities to enhance IPR  enforcement. CBP engaged in localized pilots or port-led initiatives to  enhance IPR enforcement at each of the locations we visited.", "Within these areas of effort, CBP and ICE have undertaken activities to  enhance their IPR enforcement. We selected and reviewed eight activities  in these four categories, as shown in table 3."], "subsections": []}, {"section_title": "CBP and ICE Have Collected Some Performance Data on IPR Enforcement Activities", "paragraphs": ["Consistent with federal internal control standards, CBP and ICE have  collected some data on the results of each of the eight activities we  reviewed. Generally, the agencies collected information on the outputs  of the selected activities, such as the number and value of seizures  resulting from these activities (see table 4)."], "subsections": []}, {"section_title": "CBP Has Conducted Limited Evaluation of Its IPR Enforcement", "paragraphs": ["We found that CBP has conducted limited evaluation of the impact of its  efforts to enhance IPR enforcement. In particular, (1) CBP\u2019s metrics for  tracking the overall effectiveness of its IPR enforcement have limitations,  (2) CBP has not systematically evaluated individual IPR enforcement  activities, and (3) CBP lacks a defined process for assessing port-led  initiatives and sharing information about effective practices.", "First, CBP\u2019s metrics for tracking the overall effectiveness of its IPR  enforcement have limitations. When asked how they assess effectiveness  of CBP\u2019s IPR enforcement, CBP officials in headquarters cited an  increase in the number and value of IPR seizures as an indication of the  effectiveness of CBP\u2019s IPR enforcement efforts. However, while seizure  statistics provide important information about CBP activities, using  seizure data to measure the effectiveness of CBP\u2019s IPR enforcement has  limitations. For example, according to the U.S. Joint Strategic Plan on  Intellectual Property Enforcement for fiscal years 2017 through 2019, it is  difficult to determine whether an increase in the number of IPR seizures  represents a result of more-effective IPR enforcement or reflects a higher  volume of trade in counterfeits. Also, according to CBP officials, the  increasing shift from seizures of large cargo shipments to seizures of  smaller express carrier and mail shipments may partially explain the  growth in the number of reported seizures. Further, while CBP officials in  headquarters noted that the overall value of IPR seizures has increased,  CBP officials in the field observed that presenting CBP seizure statistics  in relation to the overall volume of trade could provide additional context  on whether CBP is seizing a larger portion of overall shipments or  whether increased seizures might be partially attributable to an increase  in the volume of trade. Other CBP officials noted that, in theory, effective  enforcement could cause the number of seizures to decrease as the  number of counterfeits entering the country also decreases. Finally, given  the volume of trade in counterfeits, CBP officials commented that CBP  cannot \u201cseize its way out of\u201d the problem of IP theft.", "Second, CBP has not systematically evaluated its individual IPR  enforcement activities and has not followed through on previous plans to  conduct such evaluations. We identified one instance in which CBP  evaluated an IPR enforcement activity. Specifically, CBP officials  conducted an analysis of the fiscal year 2016 expedited seizure  processing pilot and identified several benefits, including savings of  frontline officer hours and time and cost savings, associated with seizure  processing. While CBP has acknowledged the need to evaluate other IPR  enforcement activities, it has not followed through on previous plans to  conduct evaluations. For example, CBP\u2019s 2010 IPR Enforcement  Strategy: 5-Year Plan laid out goals and corresponding activities that it  planned to pursue. CBP outlined specific plans to evaluate all but one of  these goals at least once over the course of the 5-year period covered by  the strategy. In response to our questions about what activities had been  undertaken and how they had been evaluated, CBP could not provide  evidence that it had conducted evaluations of any of these activities as  planned.", "CBP has more recently said that it plans to evaluate other IPR  enforcement efforts to better understand their impact. For example, one  goal of MIPET and other surge operations is to build the capacity of  officers at participating ports. The U.S. Joint Strategic Plan on Intellectual  Property Enforcement for fiscal years 2017 through 2019 notes that CBP  intends to assess ports after surge operations to determine their effect on  long-term interdiction rates. Additionally, although CBP tracks the  accuracy of its Automated Targeting System\u2019s IPR targeting models, a  CBP official stated that CBP has not evaluated the extent to which its  officers use these models at ports of entry. Officials said that such  evaluation would be beneficial for determining whether to continue using  the models and, if so, whether policy changes are needed to improve  their use. The U.S. Joint Strategic Plan on Intellectual Property  Enforcement also states that CBP plans to evaluate the voluntary  abandonments pilot, and CBP officials noted their intention to evaluate  compliance rates in various e-commerce environments to inform future  enforcement efforts.", "Finally, CBP does not have a standard process for collecting information  about the results of port-led initiatives to enhance IPR enforcement and  for sharing this information internally. We have previously noted that  agencies can use pilots and demonstration projects to identify innovative  ways to improve performance, because pilots and demonstration projects  allow for experiences to be evaluated, shared systematically with others,  and adjusted as appropriate. CBP\u2019s decentralized structure allows it to  pilot new activities at individual ports. CBP officials stated that they  currently collect information on special operations conducted at ports but  that they do not have a standardized process for assessing port-led  efforts and sharing information on process improvements. Officials also  noted that they sometimes share information about port-led efforts during  quarterly phone calls and stated that they had shared information about  the expedited seizure processing initiative and the Special Operations  Team in such calls. However, they were unable to provide examples of  information about other port-led initiatives that had been shared through  this process. Officials we interviewed in the field and in headquarters  indicated that sharing of such information could be useful.", "Federal internal control standards state that agency management should  use data it collects to make informed decisions and evaluate the agency\u2019s  performance in achieving key objectives. According to federal program  evaluation guidance, which articulates best practices for program  evaluation, a program evaluation is a systematic study using research  methods to collect and analyze data to assess how well a program is  working and why. Program evaluation is closely related to performance  measurement and reporting. Evaluations answer specific questions about  program performance; may focus on assessing program operations or  results; and can play a key role in strategic planning and program  management, providing feedback on both program design and execution.  CBP officials acknowledged that further steps to evaluate their IPR  enforcement efforts would be useful. Without evaluations of, or more  complete information about, the results of its efforts, CBP may not have  the information it needs to direct its resources to the most effective  enforcement activities."], "subsections": []}, {"section_title": "ICE Has Taken Some Steps to Assess Its Efforts", "paragraphs": ["While ICE officials identified a number of challenges that affect their  ability to track the effectiveness of IPR enforcement activities, the agency  has taken steps to understand the impacts of some of its efforts. ICE officials noted that evaluating the impacts of specific IPR enforcement  activities, including those we reviewed, can be difficult, because these  impacts ultimately rely on prosecutors\u2019 decisions to pursue criminal  charges\u2014that is, decisions over which ICE has no control. ICE officials  also noted factors that limit the usefulness of enforcement statistics, such  as arrests or convictions for IPR-related offenses, as measures of the  effectiveness of ICE\u2019s IPR enforcement activities. First, according to ICE  officials, prosecutors for some cases that start as IPR investigations  ultimately pursue money laundering or other, related charges, because  they carry harsher penalties. Second, while ICE collects data on  enforcement outcomes by fiscal year, the complicated nature of some  investigations often causes a significant amount of time to elapse  between an investigation\u2019s start and any results. Thus, various IPR  enforcement statistics reported for a single fiscal year, such as the  number of cases initiated, arrests made, or convictions secured, may be  unrelated, making it sometimes difficult to link enforcement outcomes to  ICE investigations.", "To address some of these challenges, ICE has created a process to track  cases it deems significant, which, according to ICE officials, will allow it to  better understand the impact of its efforts. ICE officials told us that ICE  had developed a set of criteria for what constitutes a significant case and  that a panel reviews proposals from the field to determine whether an  investigation meets the criteria for a significant case. If a case is deemed  significant, ICE tracks it until (1) the criminal activity is disrupted (i.e.,  actions taken as part of the investigation impede the operations of the  target organization) or (2) a criminal organization is dismantled (i.e., the  leadership, network, and financial base of the target organization are  impeded to the point where it is unable to reconstitute itself). According to  ICE, of the 115 IPR-related investigations that were deemed significant  cases in fiscal years 2012 through 2016, 59 cases, or about 51 percent,  had resulted in a disruption of criminal activity or dismantlement of a  criminal organization as of January 2017."], "subsections": []}]}, {"section_title": "CBP and ICE Generally Collaborate on IPR Enforcement, but CBP Is Restricted in Sharing Information with the Private Sector", "paragraphs": ["Our analysis showed that CBP and ICE collaboration on IPR enforcement  is generally consistent with selected key practices for interagency  collaboration and that the agencies collaborated to address some  challenges they have faced with the creation of the Centers. CBP and  ICE also coordinate with the private sector in a variety of ways. However,  according to private sector representatives we spoke to, restrictions on  CBP\u2019s information sharing limit the ability of rights holders and e- commerce websites to protect IPR."], "subsections": [{"section_title": "Collaboration between CBP and ICE on IPR Enforcement Is Generally Consistent with Selected Key Practices", "paragraphs": ["CBP and ICE collaborate on IPR enforcement in ways that are generally  consistent with the following selected key practices that we have  previously identified as important for enhancing and sustaining  collaboration among federal agencies: (1) define and articulate a common  outcome; (2) establish mutually reinforcing or joint strategies; (3) identify  and address needs by leveraging resources; (4) agree on roles and  responsibilities; and (5) establish compatible policies, procedures, and  other means to operate across agency boundaries."], "subsections": [{"section_title": "Define and Articulate a Common Outcome", "paragraphs": ["In developing the U.S. Joint Strategic Plan on Intellectual Property  Enforcement, CBP and ICE, among other agencies, defined and  articulated common IPR enforcement outcomes, and they continue to  define common outcomes through interagency efforts. The plan\u2019s seven  objectives, mandated by the Prioritizing Resources and Organization for  Intellectual Property Act of 2008, include reducing counterfeit and  infringing goods in domestic and international supply chains, among  others. For example, through the IPR Center, CBP and ICE coordinate  special interagency operations that target IPR violations for specific  industries or product types, such as beauty products, pharmaceuticals, or  automotive parts (e.g., airbags)."], "subsections": []}, {"section_title": "Establish Mutually Reinforcing or Joint Strategies", "paragraphs": ["CBP and ICE, among other agencies, participated in the development of  the U.S. Joint Strategic Plan on Intellectual Property Enforcement for  fiscal years 2017 through 2019 and completed a TFTEA-required joint  strategic plan. The Prioritizing Resources and Organization for Intellectual  Property Act of 2008 requires the U.S. Intellectual Property Enforcement  Coordinator to coordinate the development of the Joint Strategic Plan on  Intellectual Property Enforcement. This plan serves as a blueprint for  the work CBP, ICE, and other federal agencies are to carry out in support  of IPR enforcement. The joint strategic plan for fiscal years 2017 through  2019 notes that CBP and ICE will, among other things, engage in joint  efforts, such as meeting at least annually with industry stakeholders to  discuss potential new opportunities for employing technology to enhance  identification and investigation of illicit trade. In addition, TFTEA required  CBP and ICE to develop, by February 2017 and every 2 years thereafter,  an interagency strategic plan for trade enforcement that includes  information related to IPR enforcement. The agencies finalized this  strategy in October 2017 and provided us with a copy after we had sent  them our draft report for comment."], "subsections": []}, {"section_title": "Identify and Address Needs by Leveraging Resources", "paragraphs": ["CBP and ICE have leveraged IPR enforcement resources in a variety of  ways. For example, according to a strategy issued by the IPR Center,  ports and field offices may establish Trade Enforcement Coordination  Centers and colocate CBP and ICE personnel to enhance information  sharing and foster collaboration on enforcement actions. Officials in three  of the locations we visited told us that colocating CBP and ICE staff or  temporarily assigning some agency staff to the other agency improves the  two agencies\u2019 ability to work together. In addition, ICE officials at two of  the locations we visited said that CBP officers share their expertise in  operating the Automated Targeting System, which CBP officers use more  frequently. ICE officials in one location also told us that CBP officers  sometimes accompany ICE agents on investigative operations and that  the ICE agents without IPR backgrounds find the CBP officers\u2019 expertise  helpful.", "Internally, CBP also has taken steps to leverage resources. For example,  CBP conducts surge operations, such as MIPET operations, to  temporarily focus resources on specific IPR violations. In addition,  according to CBP, the agency created the Centers to increase CBP\u2019s  industry knowledge."], "subsections": []}, {"section_title": "Agree on Roles and Responsibilities", "paragraphs": ["CBP and ICE have defined roles and responsibilities for a variety of  interagency IPR enforcement efforts. For example, after CBP established  the Centers, CBP and ICE jointly issued guidance that explained the  Centers\u2019 role in CBP and clarified CBP\u2019s and ICE\u2019s roles and  responsibilities in the case-referral process. This guidance describes the  process by which CBP may refer IPR-infringement cases to ICE, which is  then responsible for determining whether to initiate an investigation. CBP  defines intra-agency roles and responsibilities in its Trade Special  Operations Standard Operating Procedures, which provide CBP  personnel with direction for initiating, developing, and executing national- level trade targeting operations. For example, the standard operating  procedures define the targeting roles for three CBP targeting groups\u2014the  National Targeting and Analysis Group, the Commercial Targeting and  Analysis Center, and the Tactical Trade Targeting Unit\u2014as well as for the  Centers."], "subsections": []}, {"section_title": "Establish Compatible Policies, Procedures, and Other Means to Operate across Agency Boundaries", "paragraphs": ["CBP and ICE have established compatible policies, procedures, and  other means to operate across agency boundaries. For example, CBP  and ICE developed standard operating procedures for the Commercial  Enforcement Analysis Response (CEAR) process\u2014a process to ensure  coordination between the agencies when violations are detected, agree  on a response best suited to remedy the problem, and follow up on  actions taken.", "CBP and ICE have also taken steps to address some challenges they  encountered following the creation of the Centers. Both CBP and ICE  officials noted that the creation of the Centers has posed communication  challenges, but the agencies have taken steps to address some of the  challenges posed by the new organizational structure. Officials at ports  we visited and Centers we interviewed noted that there were challenges  associated with integrating the Centers, which operate nationally, into  local efforts, like the CEAR process. This is consistent with our June 2017  report, in which we noted that ICE officials have had to adjust to working  in the new, nationwide environment of the Centers. For example, ICE  officials in one city may be working on a case with an import specialist  located in another city. This has diminished cooperation and  communication between CBP and ICE and resulted in fewer  investigations, according to ICE officials. CBP and ICE have initiated  steps to address some of the challenges posed by the new organizational  structure. For example, CBP and ICE issued joint guidance in December  2016 outlining how the two agencies would coordinate with one another in  light of the creation of the Centers. Additionally, according to CBP  officials, the CEAR process was revised in September 2017 with the  Centers in a lead role.", "CBP officials also noted they have had to adapt to new ways of sharing  information within the agency between officers and import specialists at  Centers when processing a seizure. Officials at port locations we visited  and at the Centers where we conducted interviews noted that the creation  of the Centers has enhanced IPR enforcement. However, officials at the  Centers and ports also noted challenges related to the sharing of  information. For example, Center and port officials stated that sharing  information about seizures via email and coordinating remotely\u2014often  across time zones\u2014can extend the amount of time needed to process a  seizure. Center officials also stated that ports may use different  procedures for processing seizures, which can be challenging for the  Centers because they operate on a national level and therefore may  interact with a number of ports. CBP has initiated steps to address some  challenges related to sharing information about seizures. For example,  CBP is adding a function to upload photos and forms to its seizures  database, allowing for enhanced information sharing across locations,  according to CBP officials."], "subsections": []}]}, {"section_title": "CBP and ICE Coordinate with the Private Sector in Several Ways, but Restrictions on CBP Information Sharing Limit Private Sector IPR Enforcement", "paragraphs": [], "subsections": [{"section_title": "CBP and ICE Work with Various Private Sector Entities to Enforce IPR", "paragraphs": ["CBP and ICE work with a variety of private sector entities\u2014including  rights holders, industry groups, importers, and e-commerce websites,  among others\u2014to enforce IPR and prevent the sale of counterfeit goods  on e-commerce websites, according to CBP and ICE documents and our  interviews with CBP and ICE officials and private sector representatives.  In particular, CBP and ICE work with the private sector to encourage  rights holders to record trademarks and copyrights, make determinations  on the authenticity of goods, conduct training, and collaborate with e- commerce websites.", "Recording trademarks and copyrights. CBP and ICE conduct  outreach with rights holders to ensure recordation of trademarks and  copyrights in CBP\u2019s online recordation system. According to CBP  officials, business owners are often unaware of CBP\u2019s recordation  process, and many may not recognize that CBP prioritizes  enforcement of IP that has been recorded with CBP after it has been  registered with the U.S. Patent and Trademark Office or the U.S.  Copyright Office. CBP engages in efforts to enhance awareness of  this process, such as meeting with industry groups, according to CBP.  Representatives of one rights holder told us that increasing the  number of trademarks recorded with CBP was an important  component of the company\u2019s enhanced IPR enforcement efforts.", "Determining goods\u2019 authenticity. CBP officials noted that they often  coordinate with rights holders to determine whether a detained item is  counterfeit. ICE also works with rights holders during criminal  investigations, according to ICE officials. When CBP officers and  import specialists are uncertain about the authenticity of a particular  item, they work with rights holders to evaluate the item, because  rights holders have the most detailed knowledge of how a product is  made and packaged and therefore can determine whether seemingly  authentic goods are in fact counterfeit. Representatives of all of the  rights holders we spoke with noted that this was an important part of  their interaction with CBP. In addition, representatives of rights  holders and e-commerce websites stated that they share information  to assist with law enforcement and with potential criminal prosecution.", "Conducting training. CBP and ICE coordinate with rights holders,  industry groups, and other private sector entities to receive training on  topics like detection, supply chains, and packaging. For example,  CBP officials said they work with rights holders to arrange trainings  about specific products to help officers identify potentially counterfeit  goods. CBP reported that in fiscal year 2016, rights holders conducted  11 \u201cwebinars\u201d and over 50 trainings for agency personnel to increase  CBP expertise regarding their products. CBP also conducted three  industry roundtables on IPR enforcement. In addition, to combat the  illegal importation and distribution of counterfeit goods, the IPR Center  engages in training and outreach to rights holders, manufacturers,  importers, and others through its Operation Joint Venture initiative.  The IPR Center reported that it reached out to more than 14,000  people at over 300 outreach and training events in fiscal year 2016  through Operation Joint Venture. Representatives of one rights holder  we spoke with noted that the company hosts two large conferences  every year to discuss issues in IPR enforcement with other private  sector entities and U.S. and international law enforcement.", "Working with e-commerce websites. CBP and ICE officials noted  that their agencies collaborate with e-commerce companies in a  number of national and international working groups to better  understand the challenges associated with IPR enforcement in e- commerce. In 2016, CBP created an E-Commerce and Small  Business Branch within its Office of Trade, which, among other things,  is charged with helping CBP understand the complexities resulting  from the increasing volume of online trade. Representatives of one e- commerce website stated that the IPR Center, in particular, has been  effective in private sector outreach. ICE officials noted that in  November 2017, the IPR Center hosted a symposium on e-commerce  with over 150 attendees from the private sector and government.", "Representatives from most rights holders and websites we spoke with  stated that coordination with U.S. agencies is effective and that CBP and  ICE work well with the private sector. Rights holders told us they are  aware that, due to competing priorities, CBP and ICE are unable to focus  as extensively on IPR enforcement as rights-holding companies would  like, but they noted that the agencies are willing partners in enforcement  as resources permit."], "subsections": []}, {"section_title": "Restrictions on CBP Information Sharing Reportedly Limit Private Sector IPR Enforcement", "paragraphs": ["Private sector representatives of rights holders and e-commerce websites  stated that restrictions on the amount and type of information that CBP  shares about seized goods impede their ability to protect IPR. CBP  officials stated that they share information about identified counterfeits  with e-commerce websites and rights holders to the extent possible under  current regulations. However, the officials noted that there are legal  limitations to the amount and type of information they can share,  particularly if the e-commerce website is not listed as the importer on  forms submitted to CBP. One rights holder representative stated that the  information CBP provides, such as importer names from bills of lading, is  sometimes not useful, because counterfeiters use fake identities or  otherwise mask their identities.", "Several private sector representatives stated that receiving additional  information from CBP would enhance their ability to protect IPR. Rights  holders noted that additional identifying information about the  counterfeiter would aid rights-holding companies in their own  investigations and enforcement activities. One rights holder said that  some European customs agencies are able to share more information  than CBP, better enabling rights holders to take action following a  seizure. Representatives of one website noted that information on the  exterior of seized packages, such as business identifiers on packages  destined for distribution centers, would be helpful for identifying groups of  counterfeit merchandise from the same seller.", "However, according to CBP officials, CBP cannot provide such  information to e-commerce websites. Without this information, websites  may be unable to identify additional counterfeit goods from the same  seller in their distribution centers. Representatives of one e-commerce  website noted that ICE sometimes shares information when it relates to  an investigation, but ICE\u2019s involvement in the enforcement process  begins only after CBP has identified and seized counterfeit items.  Representatives of two e-commerce websites stated that, because of the  limited information shared by CBP, they may not be aware of IPR- infringing goods offered for sale on their website even if CBP has seized  related items from the same seller. CBP officials stated that they have not  yet determined whether changes to the amount and type of information  provided to e-commerce websites would require regulatory changes or  additional legal authorities. These officials noted that CBP is reviewing  options for sharing additional information with rights holders and e- commerce websites and is assessing what, if any, additional information  would be beneficial to share with private sector entities. They also said  that they have discussed differences in CBP\u2019s and ICE\u2019s information  sharing with ICE officials.", "Representatives of rights holders and e-commerce websites noted that  information shared by law enforcement is critical to private sector IPR  enforcement, such as pursuing civil action against a counterfeiter or  removing counterfeit items from websites. Congress has also  demonstrated an interest in CBP\u2019s sharing information with the private  sector in certain instances. Specifically, in TFTEA, Congress provided  CBP with explicit authority to share certain information with trademark  and copyright owners prior to completing a seizure. However, CBP has  not yet completed an assessment of additional information that would be  beneficial to share with the private sector or determined whether it can  share such information under current regulations and statutes. As a  result, CBP does not know whether it needs to revise its regulations or  seek additional authorities."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["Counterfeit goods provide a lucrative market for criminal activity and can  pose serious risks to consumers. Growth in e-commerce has changed the  way counterfeiters interact with consumers, and the accompanying  increase in the volume and sophistication of counterfeit goods has  created challenges for CBP and ICE enforcement. While CBP and ICE  have undertaken activities to enhance IPR enforcement and collected  some performance data on their activities, CBP has conducted limited  evaluation of its efforts. Managing the huge volume of both legitimate and  counterfeit goods entering the country requires efficient use of resources.  Without better information on the effectiveness of its activities, CBP may  not be able to focus its resources on the most efficient or effective efforts.  Additionally, without collecting and disseminating effective practices  resulting from port-led initiatives, CBP may be missing an opportunity to  scale up or improve on existing efforts.", "With the growth of e-commerce, the private sector\u2014including rights  holders and e-commerce websites\u2014can play an important role in helping  to enforce IPR and protect consumers. Information shared by CBP plays  an important role in facilitating private sector enforcement, but CBP has  not determined what, if any, additional information would be beneficial to  share with private sector entities. Until it completes an assessment of  information sharing, CBP will not know whether sharing additional  information requires regulatory or legal changes."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following two recommendations to CBP:  The Commissioner of CBP should take steps to evaluate the  effectiveness of CBP\u2019s IPR enforcement efforts, such as by improving its  metrics to track the overall effectiveness of its IPR enforcement efforts,  evaluating selected activities to enhance IPR enforcement, and  developing a process to assess and share information on port-led  initiatives to enhance IPR enforcement (Recommendation 1)", "The Commissioner of CBP, in consultation with ICE, should assess what,  if any, additional information would be beneficial to share with the private  sector and, as appropriate, take action to enhance information sharing,  where possible, such as by proposing regulatory revisions or requesting  additional legal authorities from Congress. (Recommendation 2)"], "subsections": []}, {"section_title": "Agency Comments", "paragraphs": ["We provided a draft of this report to the Department of Homeland Security  for comment. In its comments, reproduced in appendix III, the department  concurred with our recommendations to (1) take steps to evaluate the  effectiveness of CBP\u2019s IPR enforcement efforts and (2) assess what, if  any, additional information would be beneficial to share with the private  sector. The department also described actions that CBP plans to take to  implement our recommendations. CBP and ICE also provided technical  comments, which we incorporated as appropriate. Our draft report also  included recommendations to CBP and to ICE to complete a joint  strategic plan, as required by TFTEA. After the agencies received our  draft report, they notified us that this plan had been completed in October  2017, and they provided us with a copy of the plan. As a result, we  removed these recommendations from the final report. We also provided  relevant excerpts of the draft report to the private sector companies  mentioned in it and incorporated their technical comments as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of Homeland Security. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov. If you or your staff has any questions about this  report please contact me at (202) 512-8612 or gianopoulosk@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["We examined (1) what is known about counterfeit goods entering the  United States and the challenges they present, (2) efforts U.S. Customs  and Border Protection (CBP) and U.S. Immigration and Customs  Enforcement (ICE) have undertaken to enhance intellectual property  rights (IPR) enforcement and the extent to which they have assessed the  results of these efforts, and (3) the extent to which CBP and ICE  collaborate on IPR enforcement as well as ways in which they coordinate  with the private sector in enforcing IPR.", "To examine what is known about counterfeit goods that enter the United  States and the challenges they present, we reviewed U.S. government  reports and strategic plans, including those produced by CBP, ICE, the  National Intellectual Property Rights Coordination Center (IPR Center),  and the Office of the U.S. Intellectual Property Rights Enforcement  Coordinator. We also reviewed reports on the counterfeits market and  illicit trafficking from international organizations, including the  Organisation for Economic Cooperation and Development and the United  Nations Office on Drugs and Crime. In addition, we analyzed data from  annual CBP public reports on IPR seizures from fiscal years 2012 through  2016 to identify the types of goods seized, the goods\u2019 countries\u2019 of origin,  the modes of transportation used to import the goods, and the value of  the goods. We analyzed data from CBP\u2019s public IPR reports because,  according to CBP officials, those data are refined prior to the issuance of  the reports and therefore are more accurate than data extracted directly  from CBP\u2019s seizure database. We reviewed the data, conducted  electronic tests of the data, and interviewed knowledgeable agency  officials to determine that these data were sufficiently reliable for our  purposes. We interviewed CBP and ICE officials in Washington, D.C.,  and in field locations in Chicago, Illinois; Los Angeles, California; Miami,  Florida; and New York, New York, to discuss the composition of IPR- infringing goods and challenges the agencies face in enforcing IPR. We  selected these locations on the basis of the number and composition of IP  seizures in each location, the availability of multiple ports of entry  covering different modes of transportation, and geographic diversity. We  also interviewed representatives of IP rights\u2013holding companies and e- commerce websites to discuss the challenges counterfeit goods pose in  online marketplaces.", "In addition, in an attempt to understand the frequency with which  consumers may unknowingly encounter counterfeit products online, we  used investigative tools and techniques to conduct nongeneralizable,  undercover purchases of consumer goods from third-party sellers on  popular consumer websites and asked the rights holders to test the goods  to determine whether they were authentic or counterfeit.", "We selected four trademarked consumer products of which CBP often  seizes counterfeits, according to CBP seizure data and CBP officials,  and that represented a range of consumer goods: Nike Air Jordan  shoes, Yeti travel mugs, Urban Decay cosmetics, and UL\u2013certified  phone chargers.", "We selected five popular e-commerce websites that (1) were among  the top 50 consumer shopping websites as of March 2017, according  to Alexa, a data analytics company, and (2) received a rating of \u201cB\u201d or  better from the Better Business Bureau. From the top 50 consumer  shopping websites, we chose those that (1) offered platforms for third- party sales, (2) sold a variety of trademarked products to the public,  and (3) offered a minimum of two items from at least two different  third-party sellers.", "We purchased, and had rights holders test, a total of 47 items from  third-party sellers on the five e-commerce websites. We selected  items that were advertised as new, brand-name items, and we  generally selected the lowest-priced items, factoring in both purchase  price and shipping while also targeting a variety of sellers and product  options. We did not select items whose cost exceeded the  manufacturer\u2019s suggested retail price or exceeded that of an identical  item sold and fulfilled by the host website. Where seller ratings were  available, we selected items from third-party sellers with ratings of 60  percent (or the equivalent, such as 3 of 5 stars) or higher; on average,  the sellers of the items we selected had customer ratings above 90  percent as of August 2017.", "For each selected product, we purchased a minimum of two items and  a maximum of five items from different third-party sellers on any of the  five e-commerce websites that listed the product. Across all the  websites, we purchased a minimum of eight items for each product.  On each website, we purchased a maximum of one item from any  third-party seller.", "We contacted the companies that held the trademark or copyright for  each of the four products, asking for their assistance in reviewing the  items we purchased to determine whether they were authentic or  counterfeit. These companies made their assessments with no  knowledge of the websites or sellers from which we purchased the  items. We discussed the results of these tests with representatives of  the rights-holding companies and the e-commerce websites where we  purchased the items.", "To examine the efforts CBP and ICE have undertaken to improve IPR  enforcement and the extent to which they have assessed the results of  those efforts, we reviewed agency and government-wide strategic plans  for IPR enforcement, and we spoke with agency officials in headquarters  and selected field locations. We reviewed a selection of eight CBP and  ICE activities, which we grouped under four major areas of effort on the  basis of the activities highlighted in these strategic plans and agency  interviews. The list of activities we reviewed does not constitute the  entirety of activities undertaken by CBP and ICE to enhance IPR  enforcement and is intended to highlight significant efforts. We did not  review activities that officials told us were in early stages, because it  would not be reasonable to expect the agencies to have assessed the  results of those activities. Our discussion of activities does not include  activities related to private sector engagement, which we discuss  elsewhere in the report. We reviewed documentation pertaining to the  eight activities we reviewed, and we interviewed CBP and ICE officials  about the activities and any efforts to assess their results. We reviewed  federal internal control standards and prior GAO reports to identify good  practices for assessing the results of activities, and we determined the  extent to which CBP and ICE had followed those practices.", "To examine the extent to which CBP and ICE follow selected practices for  effective interagency collaboration, we reviewed agency documentation  and spoke with CBP and ICE officials in headquarters and in selected  field locations. We reviewed prior GAO reports to identify effective  practices for interagency collaboration and selected five of eight practices  that we had identified in a fiscal year 2006 report. The five practices we  selected as most relevant to the ways in which CBP and ICE coordinate  with one another are (1) establish mutually reinforcing or joint strategies;  (2) define and articulate a common outcome; (3) agree on roles and  responsibilities; (4) identify and address needs by leveraging resources;  and (5) establish compatible policies, procedures, and other means to  operate across agency boundaries. We did not evaluate CBP and ICE\u2019s  interagency collaboration against the remaining three practices identified  in our fiscal year 2006 report. We also assessed CBP\u2019s intra-agency  collaboration against three of the five selected practices on the basis of  interviews with CBP officials in headquarters and selected field locations  and reviews of CBP documentation. We did not evaluate internal CBP  collaboration against the other two practices\u2014establish mutually reinforcing or joint strategies and define and articulate a common  outcome\u2014because we determined that such practices were not  applicable to intra-CBP collaboration. To determine the ways in which  CBP and ICE collaborate with the private sector, we interviewed CBP and  ICE officials in headquarters and selected field locations, reviewed CBP  and ICE documentation, and interviewed representatives of rights-holding  companies and e-commerce websites.", "We conducted this performance audit from September 2016 to January  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. We conducted our related  investigative work in accordance with investigation standards prescribed  by the Council of the Inspectors General on Integrity and Efficiency."], "subsections": []}, {"section_title": "Appendix II: Consumer Information and Advice for Avoiding Counterfeits Online", "paragraphs": ["According to consumer protection organizations and government  agencies, consumers can take the following steps to try to limit the risks  of buying counterfeit goods online.  1.  Locate the listed retailer on the product page and determine whether it  is a third party. \u201cFulfilled by\u201d does not mean \u201cSold by.\u201d  2.  Look for external consumer trust\u2013building features, such as a mailing  address or telephone number, real-time customer service, customer  reviews, or third-party accreditation that can be verified through the  accreditor.  3.  Buy products only from authorized retailers, such as official brand  stores. If uncertain whether a retailer acquired its product from a  legitimate distributor, ask for verifiable information from the retailer  about the source of the goods.  4.  Be aware of pricing. While some counterfeiters may try to legitimize  their merchandise with realistic prices, others may attract buyers with  low prices. If a price seems too good to be true, it probably is.  5.  During checkout, ensure your payments are submitted via a website  beginning with https:// and look for a lock symbol in your web browser.  6.  After receiving an item, look for signs that it may be counterfeit, such  as irregular brand markings; missing \u201cuse by\u201d dates, safety seals, or  markings; and missing warranty information. Verify the item\u2019s serial  number by checking the manufacturer\u2019s website.  7.  If you suspect that you have purchased a counterfeit product, notify  the brand owner and contact the place of purchase. Also, report the  counterfeit at http://www.iprcenter.gov/referral. To report an unsafe  consumer product, visit http://www.SaferProducts.gov.", "According to the National Intellectual Property Rights Coordination  Center, word-of-mouth is the best way to spread information about  illegitimate products as well as sources of safe, affordable, and legal  alternatives. For further information, consult http://www.stopfakes.gov."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Kimberly Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgements", "paragraphs": ["In addition to the contact named above, Joyee Dasgupta (Assistant  Director), Kara Marshall (Analyst-in-Charge), Kristen Timko, Katie  Bassion, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez,  Helina Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James  Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale  made key contributions to this report."], "subsections": []}]}], "fastfact": ["From travel mugs to cosmetics, counterfeit goods harm the U.S. economy and can pose a threat to consumers.", "These products can be hard to spot and may be offered online next to authentic goods. For example, manufacturers determined 20 of 47 items we purchased from third-party sellers on popular sites were counterfeit.", "Customs and Border Protection leads efforts to stop imported counterfeit goods at the border, and Immigration and Customs Enforcement conducts investigations.", "We recommended that CBP improve evaluations of the effectiveness of its efforts and assess opportunities to enhance information sharing with the private sector."]}
{"id": "GAO-18-194", "url": "https://www.gao.gov/products/GAO-18-194", "title": "Defense Management: DOD Needs to Take Additional Actions to Promote Department-Wide Collaboration", "published_date": "2018-02-28T00:00:00", "released_date": "2018-02-28T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for Fiscal Year 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives which span multiple functional boundaries and that would benefit from the use of cross-functional teams. Additionally, DOD is to establish cross-functional teams to support this strategy.", "The NDAA also included a provision for GAO to assess DOD's actions in response to section 911. This report evaluates the extent to which DOD, in accordance with statutory requirements and leading practices, has (1) developed and issued an organizational strategy, (2) established Secretary of Defense-empowered cross-functional teams, and (3) provided associated training for Office of the Secretary of Defense leaders. GAO analyzed DOD's draft organizational strategy, draft guidance on establishing cross-functional teams, and draft training curriculum. GAO also interviewed DOD officials and subject-matter experts and identified leading practices for effective cross-functional teams."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense (DOD) has implemented some of the statutory requirements outlined in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 to address organizational challenges, but could do more to promote department-wide collaboration, as required under the NDAA. Specifically, DOD:", "Drafted an organizational strategy that includes the two required statutory elements, but does not outline how DOD will advance a more collaborative culture, as required by statute. Incorporating GAO's leading practices on mergers and organizational transformations, such as setting goals, would help DOD better advance a collaborative culture.", "Plans to coordinate review of the organizational strategy with some DOD offices, but has not followed GAO's leading practices for collaboration\u2014to coordinate with key stakeholders, such as the Secretary of Defense and the military departments\u2014in drafting the strategy. Without obtaining key stakeholder input, DOD may not be well positioned to improve collaboration across the department.", "Established one cross-functional team to address the backlog on security clearances and developed draft guidance for cross-functional teams that addresses six of seven required statutory elements and incorporates five of eight leading practices that GAO has identified for effective cross-functional teams (see figure). Fully incorporating all statutory elements and leading practices will help the teams consistently and effectively address DOD's strategic objectives.", "Developed a draft training curriculum for Presidential appointees in the Office of the Secretary of Defense. However, the curriculum addresses only one of four required statutory elements, and has not been provided to appointees. In addition, although the statute allows a waiver for this training, DOD has not developed criteria for such a waiver. Providing training for these officials or ensuring that appropriate criteria are used to waive training will improve DOD's ability to implement its new organizational strategy."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making four recommendations to DOD, including revising its organizational strategy, collaborating with key stakeholders on the development of its organizational strategy, revising cross-functional team guidance, and providing training. DOD concurred with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Although the Department of Defense (DOD) maintains military forces with  unparalleled capabilities, it continues to confront organizational and  management challenges that hinder collaboration and integration across  the department. In particular, DOD\u2019s military departments and functional  organizations have not always worked well together to accomplish  departmental objectives. For example, in August 2017, we found that  DOD\u2019s efforts to implement a hierarchical, portfolio-based approach to  strategically acquire contracted services had not been successful. In part,  we found that cultural barriers and military commanders\u2019 reluctance to  give up certain responsibilities for determining how and which services  were needed to meet their missions hindered DOD\u2019s efforts. We have  highlighted these challenges in numerous additional products, including  our High-Risk List, which calls attention to agencies and program areas  that are high risk because of their vulnerabilities to fraud, waste, abuse,  and mismanagement or are most in need of transformation. In an  October 2017 memorandum, Secretary of Defense Mattis emphasized  the need for DOD personnel to collaborate across components in order to  maintain the department\u2019s capabilities.", "Section 911 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 directed the Secretary of Defense to, among other things,  formulate and issue an organizational strategy for DOD. The  organizational strategy should identify the critical objectives and other  outputs that span multiple functional boundaries and would benefit from  the use of cross-functional teams to ensure collaboration and integration  across the department. The act also required DOD to establish cross- functional teams whose leaders report directly to the Secretary of  Defense and that, among other things, address the critical objectives and  outputs outlined in the department\u2019s organizational strategy. DOD refers  to these teams as \u201cSecretary of Defense-empowered cross-functional  teams.\u201d The act further required DOD to provide training on (1)  leadership, modern organizational practice, collaboration, and the  operation of cross-functional teams to individuals who have been  appointed by the President and confirmed by the Senate to a position  within the Office of the Secretary of Defense within 3 months of their  appointment, and (2) elements of successful cross-functional teams to  members of those established teams and their supervisors.", "Prior to February 2018, the Deputy Chief Management Officer (DCMO)  led the department\u2019s efforts to implement section 911 of the NDAA for  Fiscal Year 2017. However, section 910 of the NDAA for Fiscal Year  2018 disestablished the position of DCMO on February 1, 2018 and  established the position of Chief Management Officer (CMO). The CMO  will lead the department\u2019s future efforts to implement section 911.  Because we conducted this work prior to February 2018, we primarily  refer throughout this report to Office of the DCMO (ODCMO) officials.  However, as of February 1, 2018, the ODCMO became the Office of the  CMO (OCMO).", "Section 911 of the NDAA for Fiscal Year 2017 also included a provision  for us, not later than 6 months after the date of enactment on December  23, 2016, and every 6 months thereafter through December 31, 2019, to  submit to the Committees on Armed Services of the Senate and the  House of Representatives a report setting forth a comprehensive  assessment of the actions that DOD has taken pursuant to section 911  during each 6-month period and cumulatively since the NDAA\u2019s  enactment. In June 2017, we issued our first report and found that DOD  had taken steps in several areas to begin implementing the requirements  of section 911 of the NDAA for Fiscal Year 2017. In this report, we  evaluate the extent to which DOD has (1) developed and issued an  organizational strategy in collaboration with relevant stakeholders that  addresses required statutory elements and advances a collaborative  culture; (2) established Secretary of Defense-empowered cross-functional  teams and guidance for those teams that addresses required statutory  elements and leading practices for effective cross-functional teams; and  (3) provided training that addresses required statutory elements on cross- functional teams and related concepts for leaders in the Office of the  Secretary of Defense and members of cross-functional teams. Appendix I  lists the requirements of section 911 of the NDAA for Fiscal Year 2017,  the corresponding due date, and the date completed for each  requirement.", "For objective one, we reviewed the most recent version of DOD\u2019s draft  organizational strategy, dated August 2017. In addition, we interviewed  ODCMO officials on their efforts to collaborate with key stakeholders,  such as the Secretary of Defense, military departments, and defense  agencies, during the development of the organizational strategy. We  evaluated DOD\u2019s efforts to develop and issue an organizational strategy  against the required elements in section 911 of the NDAA for Fiscal Year  2017. Further, we reviewed leading practices from our prior work on  mergers and organizational transformations and on collaboration to  identify practices and implementation steps DOD could incorporate as it  develops and issues its final organizational strategy.", "For objective two, we reviewed documentation, including DOD\u2019s internal  and external studies on cross-functional teams, and interviewed ODCMO  officials on DOD\u2019s steps to establish cross-functional teams. To identify  leading practices for effective cross-functional teams, we reviewed  literature from January 1990 through September 2017 that covered the  use of these teams in both the private and public sectors as well as five  case studies of cross-functional teams. In addition, we selected six  academic and practitioner experts to interview based on their publications  or research, prior testimony before the Senate Armed Services  Committee on the implementation of cross-functional teams at DOD, and  recommendations from DOD officials. Through this research, we  identified eight broad categories of leading practices associated with  effective cross-functional teams: (1) open and regular communication, (2)  well-defined team goals, (3) inclusive team environment, (4) senior  management support, (5) well-defined team structure, (6) autonomy, (7)  committed cross-functional team members, and (8) an empowered cross- functional team leader. In appendix II, we describe in more detail how we  identified these leading practices for effective cross-functional teams.", "For objective three, we reviewed documentation on the number of  individuals appointed by the President and confirmed by the Senate to a  position within the Office of the Secretary of Defense as of February 2018  (the latest month available at the time of our review). We also reviewed  documentation from and interviewed ODCMO officials on DOD\u2019s efforts to provide training for these officials as well as cross-functional team  members. We compared DOD\u2019s efforts against the requirements in  section 911 of the NDAA for Fiscal Year 2017 and the attributes of a well- designed training program.", "We conducted this performance audit from June 2017 to February 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Congressional Actions Related to DOD\u2019s Organizational and Management Challenges", "paragraphs": ["DOD has historically faced organizational and management challenges  that can limit effective and efficient coordination across the department to  fulfill its mission, and Congress has taken steps to address these  challenges through, among other things, legislation. For example, in the  early 1980s, Congress expressed concern that DOD\u2019s structure primarily  served the needs of the services and encouraged interservice rivalries  that led to operational failures. In response, Congress passed the  Goldwater-Nichols Department of Defense Reorganization Act of 1986 to  improve the management and administration of the department, among  other purposes. One of the changes emanating from this act included  specifying the military department secretaries\u2019 responsibility for training  and equipping forces, while making clear that the military service chiefs  were not in the chain of command for military operations. The act also  required that military personnel selected for promotion to brigadier  general or rear admiral (lower half) to have joint duty experience unless  waived by the Secretary of Defense or an authorized official. However,  shortfalls in strategic integration at DOD\u2014how DOD and the military  services align their efforts and resources across different regions,  functions, and domains\u2014continue. Congress intended that section 911 of  the NDAA for Fiscal Year 2017 improve strategic integration across the  organizational and functional boundaries of DOD by, among other things,  requiring the Secretary of Defense to develop an organizational strategy  to advance a collaborative culture across DOD and create cross- functional teams to address critical objectives and outputs."], "subsections": []}, {"section_title": "DOD\u2019s External and Internal Cross-Functional Team Studies", "paragraphs": ["As required by section 911 of the NDAA for Fiscal Year 2017, DOD  awarded a contract to study how best to implement effective cross- functional teams in DOD. The study, conducted by McKinsey & Company  and completed in August 2017, presented findings on leading practices  for implementing cross-functional teams that were drawn from a literature  review, DOD and non-DOD case studies, and interviews. It identified  seven critical factors for cross-functional team success: (1) mission; (2)  objective; (3) delegated authorities; (4) team membership; (5) ways of  working; (6) collaborative environment; and (7) an implementation plan.  While not required by the contract, the study also contained a checklist for  implementing cross-functional teams, which includes recommendations to  assist DOD in assembling, initiating, and operating a team. The checklist  distinguished action items by implementation phases: prelaunch, at  launch, throughout the project, and at the project\u2019s close. For example,  the checklist suggested that, at launch, DOD should onboard the team  and tailor training to the team experience and timeframe. DOD  transmitted the report to Congress in September 2017.", "ODCMO officials also began collecting information in March 2017 to  conduct their own internal study of cross-functional teams within DOD to  help inform their implementation of section 911. This internal study,  completed in August 2017, evaluated four case studies of prior DOD  cross-functional teams, including their structure, returns, and  implementation costs. From the case studies, ODCMO officials  identified lessons learned to inform establishing and monitoring cross- functional teams. The ODCMO\u2019s internal study found that cross-functional  teams require significant senior leader attention. For example, the  Secretary of Defense was directly involved in the sampled cross- functional teams, and he publicly stated his support for the teams, gave  the teams precedence over other programs, and endorsed non-standard  funding practices to accelerate their work. Further, the Secretary of  Defense regularly engaged with teams. The study also found that DOD  should provide team members with background information and the  context behind the team\u2019s mission and goals. Finally, the internal study  found that cross-functional teams had the most robust decision-making  authority when it came to integration and implementation of the Secretary  of Defense\u2019s priority initiatives."], "subsections": []}, {"section_title": "Leading Practices for Effective Cross-Functional Teams", "paragraphs": ["Through a review of literature and case studies as well as interviews with  subject-matter experts, we identified eight leading practices for effective  cross-functional teams, as shown in figure 1. These leading practices are  similar to those identified by the McKinsey & Company contracted study  and the ODCMO\u2019s internal study as well as leading practices for  interagency collaboration that we previously identified.", "Further, we found that leading practices for implementing effective cross- functional teams include the key characteristics shown in table 1."], "subsections": []}]}, {"section_title": "DOD\u2019s Draft Organizational Strategy Addresses Statutory Elements, but DOD Has Not Outlined How It Will Advance a Collaborative Culture or Collaborated with Stakeholders", "paragraphs": ["The ODCMO developed a draft organizational strategy that addresses the  two statutory elements required under section 911 of the NDAA for Fiscal  Year 2017\u2014identifying critical objectives and outputs that would benefit  from the use of cross-functional teams, and providing for the appropriate  use of these teams\u2014but DOD has not issued that strategy as required by  September 1, 2017. In addition, while the draft strategy contains the two  required elements, it does not outline how DOD will achieve several  future outcomes required under section 911 of the NDAA for Fiscal Year  2017 that are designed to advance a collaborative culture within the  department. Further, ODCMO officials did not coordinate with key  stakeholders, such as the Secretary of Defense, military departments,  and defense agencies, in developing the organizational strategy. Our  leading practices for collaboration highlight the value of agencies  including stakeholders when defining and articulating a common  outcome."], "subsections": [{"section_title": "DOD Has Developed, but Not Issued, a Draft Organizational Strategy That Includes Required Statutory Elements, but Has Not Outlined Its Approach for Advancing a Collaborative Culture", "paragraphs": ["The ODCMO developed a draft organizational strategy, but DOD did not  issue the organizational strategy as required by September 1, 2017, and  as of February 2018 has not issued the strategy. The August 2017 draft  organizational strategy we reviewed is intended to be an organizational  design that focuses on the responsibilities, functions, and authorities of\u2014 and relationships between\u2014the leaders of DOD components and those of  cross-functional teams. It describes DOD\u2019s current organizational  structure and processes and how they will change as a result of recent  legislation and reform initiatives, and it describes best practices and  lessons learned for implementing cross-functional teams, as well as areas  that may benefit from the use of such teams. Although the act required  the Secretary of Defense to issue the strategy by September 1, 2017, the  Acting DCMO told us that other reform initiatives and organizational  changes have a higher priority and that therefore he did not take steps to  finalize the strategy. ODCMO officials told us that they plan to align the  strategy with the revised National Defense Strategy, which was released  in January 2018, and the Agency Strategic Plan, which was expected to  be issued in February 2018.", "We found that DOD\u2019s draft organizational strategy contains the two  elements required under section 911 of the NDAA for Fiscal Year 2017.  According to the act, among other things, the organizational strategy must  (1) identify the critical objectives and other organizational outputs for the  department that span multiple functional boundaries and would benefit  from the use of cross-functional teams to ensure collaboration and  integration across organizations within the department; and (2) provide for  the appropriate use of cross-functional teams to manage such objectives  and outputs. To address the first statutory element, the draft  organizational strategy identifies several mission-focused and business- operations areas that would benefit from the use of cross-functional  teams. For example, the strategy identifies three primary candidates for  business operations, including Military Health Systems reforms, financial  auditability, and security clearance backlog mitigation. To address the  second statutory element, the draft organizational strategy identifies  considerations for the appropriate use of cross-functional teams. For  example, the strategy states that cross-functional teams should be used  only for the Secretary of Defense\u2019s highest-priority issues and that cross- functional teams require significant engagement with the Secretary of  Defense and other top leadership.", "Section 911 of the NDAA for Fiscal Year 2017 also identifies several  outcomes that DOD should achieve to advance a collaborative culture  within the department; however, we found that DOD\u2019s draft organizational  strategy does not clearly articulate how the department will achieve these  outcomes. The act states that DOD\u2019s organizational strategy should,  among other things: provide for the furtherance and advancement of a collaborative, team- oriented, results-driven, and innovative culture within the department  that fosters an open debate of ideas and alternative courses of action,  and supports cross-functional teaming and integration;  improve the manner in which the department integrates the expertise  and capacities of the functional components of the department for  effective and efficient achievement of critical objectives and other  organizational outputs that span multiple functional boundaries and  would benefit from the use of cross-functional teams;  improve the management of relationships and processes involving the  Office of the Secretary of Defense, the Joint Staff, the combatant  commands, the military departments, and the defense agencies with  regard to such objectives and outputs;  improve the ability of the department to work effectively in interagency  processes with regard to such objectives and outputs in order to  better serve the President; and achieve an organizational structure that enhances performance with  regard to such objectives and outputs.", "We found that the draft strategy does not outline how the department will  achieve these outcomes. For example, the draft organizational strategy  notes that DOD leaders recognize the department must fully embrace and  operationalize the cultural attributes set forth in section 911, including a  more collaborative, team-oriented, results-driven, and innovative culture;  however, it does not identify actions the department will take to help  ensure that leaders embrace these attributes, such as through guidance  or training. When we asked how the draft organizational strategy will help  achieve these outcomes, ODCMO officials stated that the strategy  contains references to cultural attributes for the department. For example,  the draft organizational strategy describes cultural attributes of the  department\u2019s management and business operations, such as visibility  across components and collaboration. However, ODCMO officials stated  that they agree that the strategy could do more to address collaboration.  The ODCMO officials said they originally interpreted section 911 to mean  that the organizational strategy should focus on DOD\u2019s organizational  structure, processes, and leading practices for implementing cross- functional teams, rather than on how to transform the department\u2019s  culture more broadly. Nonetheless, the outcomes called for under the act  refer to the need to advance a collaborative culture across the  department. These officials also stated that they plan to revise the draft  organizational strategy to include additional information on collaboration  and information-sharing processes and systems, among other things.", "While not required to do so, OCMO, which will now lead the department\u2019s  efforts to implement section 911, could utilize our leading practices for  mergers and organizational transformations to revise the organizational  strategy to address how the department will advance a culture that is  collaborative, team-oriented, results-driven, and innovative. We  previously reported on leading practices and implementation steps for  mergers and organizational transformations that can help agencies  transform their cultures so that they are more results-oriented, customer- focused, and collaborative. The leading practices and implementation  steps listed in table 2 were built on the lessons learned from large private  and public sector organizational mergers, acquisitions, and  transformations.", "These leading practices state that organizations should ensure that top  leadership drives the transformation by defining and articulating a  succinct and compelling reason for change. Doing so helps employees  and stakeholders understand the expected outcomes of the  transformation and engender not only their cooperation, but also their  ownership of the outcomes. In addition, our leading practices state that  organizations should establish a coherent mission and integrated  strategic goals by adopting our leading practices for results-oriented  strategic planning. Lastly, our leading practices state the organizations  should include implementation goals and a timeline for achieving the  transformation. By demonstrating progress toward these goals, the  organization builds momentum and keeps employees excited about the  opportunities change brings and helps to ensure the transformation\u2019s  successful completion. The incorporation of these leading practices in its  organizational strategy to better articulate how the department will  achieve the outcomes that generally advance a collaborative culture  across DOD\u2014as section 911 of the NDAA required\u2014would better  position DOD to transform and meet its mission."], "subsections": []}, {"section_title": "ODCMO Did Not Collaborate with Key Stakeholders, Including the Secretary of Defense, on Its Organizational Strategy", "paragraphs": ["ODCMO did not collaborate with key stakeholders on the development of  the organizational strategy. Specifically, as of November 2017, ODCMO  officials had not collaborated with or obtained input from the Secretary of  Defense on the development of DOD\u2019s organizational strategy. The  Acting DCMO noted that the Secretary of Defense has multiple competing  priorities related to reorganizing the department, such as creating a  separate CMO position required in the NDAA for Fiscal Year 2017, as  well as other reform initiatives.", "In addition, ODCMO officials told us that they did not collaborate with  other stakeholders, such as the military departments and defense  agencies, on the development of the organizational strategy. According to  a draft memorandum from the Acting DCMO to the Deputy Secretary of  Defense, the Acting DCMO plans to recommend that the Deputy  Secretary of Defense coordinate the review and approval of the  organizational strategy with stakeholders such as the Chairman of the  Joint Chiefs of Staff, the Director of Cost Assessment and Program  Evaluation, and DOD\u2019s General Counsel. However, the memorandum did  not specify other stakeholders, such as the military departments, the  combatant commands, and defense agencies. ODCMO officials stated  that their office plans to coordinate the review and approval of the  strategy with other stakeholders, such as the military departments and  defense agencies. However, as of November 2017, the officials had not  provided documentation, such as a revised memorandum, showing  specific plans to do so.", "Section 911 of the NDAA for Fiscal Year 2017 states that the Secretary of  Defense should formulate and issue an organizational strategy that  identifies the critical objectives and other organizational outputs for the  department that span multiple functional boundaries and would benefit  from the use of cross-functional teams. In addition, the act states that the  organizational strategy should, among other things, improve the  management of relationships and processes involving the Office of the  Secretary of Defense, the Joint Staff, the combatant commands, the  military departments, and the defense agencies with regard to such  objectives and outputs. Our leading practices for collaboration state that  when defining and articulating a common outcome, where appropriate,  agencies should include stakeholders. In doing so, agencies can better  address their interests and expectations and gain their support in  achieving the objectives of the collaboration. Without obtaining key  stakeholder input on the development of the organizational strategy, such  as from the Secretary of Defense, military departments, the combatant  commands, and defense agencies, DOD may not be well positioned to  issue an organizational strategy that reflects the Secretary of Defense\u2019s  objectives and improves collaboration across the department."], "subsections": []}]}, {"section_title": "DOD Has Established One Secretary of Defense-Empowered Cross-Functional Team, and Draft Team Guidance Addresses Most Statutory Elements and Leading Practices", "paragraphs": [], "subsections": [{"section_title": "DOD Established One Secretary of Defense- Empowered Cross- Functional Team", "paragraphs": ["In August 2017, the Secretary of Defense issued a memorandum  authorizing a cross-functional team to address challenges with personnel  vetting and background investigation programs within DOD. Although  the memorandum refers to section 951 of the NDAA for Fiscal Year 2017,  which requires DOD to develop a plan to transfer responsibility for  conducting DOD personnel background investigations to the Defense  Security Service, ODCMO officials told us that the cross-functional team  reviewing personnel vetting was established pursuant to section 911  requirements, as the team will report directly to the Secretary\u2019s office,  among other things. Therefore, this team is considered a Secretary of  Defense-empowered cross-functional team. The memorandum notes that  a backlog of background investigations affects DOD\u2019s mission readiness,  critical programs, and operations. According to the memorandum, this  cross-functional team will conduct a full review of current personnel  vetting processes to identify a redesigned process for DOD\u2019s security,  suitability and fitness, and credential vetting. The cross-functional team\u2019s  objectives are to develop options and recommendations to mitigate  shortcomings, ensure necessary resourcing, and transform the personnel  vetting enterprise. An ODCMO official told us that DOD had selected an  interim leader for the team."], "subsections": []}, {"section_title": "DOD\u2019s Draft Guidance for Cross-Functional Teams Addresses Most Required Statutory Elements, but Could More Fully Incorporate Leading Practices", "paragraphs": ["ODCMO officials developed draft guidance for Secretary of Defense- empowered cross-functional teams. The draft guidance fully addresses  six and partially addresses one of the section 911 required statutory  elements. We also found that the draft guidance fully addresses five  leading practices, partially addresses two leading practices, and does not  address one leading practice for effective cross-functional teams.", "Table 3 shows our assessment of the extent to which DOD\u2019s draft  guidance meets required statutory elements.", "The draft cross-functional team guidance briefly describes the  characteristics of a cross-functional team and highlights the team\u2019s direct  reporting line to the Secretary of Defense, the team\u2019s delegated  authorities, and team leader and member selection. The guidance also  states expectations for cross-functional team members\u2019 dedication to the  team and for leaders of functional components to support their  participating staff. Further, DOD\u2019s draft guidance discusses the role of the  teams in addressing complex, enterprise-wide issues, and discusses  training for and operations of the cross-functional teams. The guidance  additionally describes DOD\u2019s commitment to collaboration and integration  across the department. Finally, we found that the draft guidance partially  addresses the required statutory element of identifying key practices on  leadership, organizational practice, collaboration or functioning of cross- functional teams. The draft guidance discusses key practices for senior  leaders on the functioning of cross-functional teams, but we found that it  does not identify any practices on leadership, organizational practice, or  collaboration.", "We also found that DOD\u2019s draft guidance for cross-functional teams could  more fully incorporate leading practices for cross-functional teams, which  are similar to those identified by the McKinsey & Company contracted  study and the ODCMO\u2019s internal study as well as leading practices for  interagency collaboration that we previously identified. Figure 2 shows  our assessment of the extent to which DOD\u2019s draft cross-functional team  guidance incorporates our leading practices for effective cross-functional  teams.", "We found that the draft guidance fully incorporates five of the leading  practices for effective cross-functional teams: well-defined team structure,  autonomy, senior management support, committed cross-functional team  members, and well-defined team goals. In addition, the draft guidance  partially addresses the leading practice for open and regular  communication, as it discusses that teams will update the Secretary of  Defense and senior staff at regular staff meetings to reflect on progress  and seek feedback. The draft guidance, however, does not address  information sharing and communication within the cross-functional team.  Also, the draft guidance partially addresses the leading practice for  empowered cross-functional team leaders by indicating that team leaders  should report directly to the Secretary of Defense, select team members,  and seek feedback from other federal agencies. Further, the guidance  states that cross-functional team leaders will contribute to the  performance evaluations of their team members. The guidance states  that the Secretary of Defense will select the team leaders, but does not  elaborate on what qualities the team leader should possess. Finally, the  draft guidance does not address the leading practice for an inclusive team  environment. For example, the draft guidance does not contain any  reference to developing a unified team culture and trust among team  members.", "ODCMO officials told us that they anticipate the Secretary of Defense  reviewing and approving this guidance, including a detailed terms of  reference that addresses information on mechanics of team operations  and guidance for each team. However, without initial guidance that fully  addresses the required statutory elements in section 911 of the NDAA for  Fiscal Year 2017 and incorporates leading practices, DOD\u2019s cross- functional teams may not be able to consistently and effectively approach  the Secretary of Defense\u2019s strategic objectives or further promote a  collaborative culture within the department."], "subsections": []}]}, {"section_title": "DOD Has Developed, but Not Provided, Training for Its Presidential Appointees and Cross-Functional Team Members, and It Does Not Address All Statutory Requirements", "paragraphs": [], "subsections": [{"section_title": "DOD Developed a Draft Training Curriculum for Presidential Appointees, but It Does Not Address All Required Statutory Elements and Has Not Been Provided to Appointees", "paragraphs": ["As of October 2017, the ODCMO developed a draft training curriculum on  cross-functional teams for presidential appointees, but this curriculum  does not address all statutory requirements. Furthermore, as of February  2018, 22 individuals have been nominated by the President, confirmed by  the Senate, and appointed to positions within the Office of the Secretary  of Defense, but none have received training required by section 911.  Section 911 of the NDAA for Fiscal Year 2017 requires that, within 3  months of the appointment of an individual to a position in the Office of  the Secretary of Defense appointable by and with the advice and consent  of the Senate, the individual complete a course of instruction in  leadership, modern organizational practice, collaboration, and the  operation of cross-functional teams. The training requirement may be  waived by the President upon a request by the Secretary of Defense if the  Secretary of Defense determines in writing that the individual possesses,  through training and experience, the skill and knowledge otherwise to be  provided through a course of instruction. ODCMO officials stated that they  intend to recommend that the Secretary of Defense seek such a waiver;  however, this requirement had not been waived for any appointees as of  November 2017. In addition, according to an ODCMO official, DOD has  not developed criteria for determining who would be eligible for such a  waiver and on what basis.", "We found that the draft curriculum addresses only one of four required  elements in section 911 of the NDAA for Fiscal Year 2017. Specifically,  the draft curriculum addresses the required statutory element for training  on the operation of cross-functional teams by including information on  elements of successful teams and when to use them. It does not,  however, incorporate the required statutory elements for leadership,  modern organizational practice, or collaboration. According to the Acting  DCMO, these appointees do not need this type of training because they  are already experts in their field, have considerable leadership  experience, and have likely already received this type of training.  However, our leading practices of a well-designed training program note  that it is important for agencies to consider the need for continuous and  lifelong learning, recognizing that learning is an investment in success  rather than a cost to be minimized. In addition, our leading practices state  that a core characteristic of a strategic training and development process  is leadership commitment, meaning that agency leaders consistently  demonstrate that they support and value continuous learning and set the  expectation that effective training and development will improve individual  and organizational performance. Further, as organizations are typically  resistant to change and need top leadership to drive a successful  organizational transformation, ensuring that senior officials receive this  training will be important for DOD\u2019s overall organizational transformation  to succeed in driving a more collaborative culture.", "Without the provision of training for top leadership within the Office of the  Secretary of Defense that includes the required elements in section 911  of the NDAA for Fiscal Year 2017 or developing criteria for obtaining a  waiver from providing the training, DOD may have difficulty implementing  its new organizational strategy as top leadership commitment is a key  element of an organizational transformation."], "subsections": []}, {"section_title": "DOD Developed Training for Team Members That Addresses Statutory Requirements and Plans to Provide the Training Once Team Members Are Announced", "paragraphs": ["We found that DOD has developed a draft training curriculum for cross- functional team members and their supervisors that addresses required  statutory elements, including the element focused on collaboration. This  training has not been provided since no team members have been named  for the one Secretary of Defense-empowered cross-functional team to  address challenges with personnel vetting and background investigation  programs within DOD. Section 911 of the NDAA for Fiscal Year 2017  requires that team members and their supervisors of Secretary- empowered cross-functional teams receive training in elements of  successful cross-functional teams, including teamwork, collaboration,  conflict resolution, and in appropriately representing the views and  expertise of their functional components. Table 4 summarizes the  requirements of section 911 of the NDAA for Fiscal Year 2017 and shows  our assessment of the draft training curriculum against these required  statutory elements.", "According to ODCMO officials, this training should take place soon after  team members have been announced. In addition, ODCMO officials  stated that they considered having an expert from another federal agency  lead the training, but were prepared to conduct the training themselves if  that expert was unavailable."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Congress has been encouraging DOD to undertake transformative  organizational change and improve collaboration and more effectively  accomplish its missions across its military departments and functional  organizations. While ODCMO officials drafted an organizational strategy  that includes the two required statutory elements, the strategy does not  address how the department will achieve several outcomes that advance  a collaborative culture in the department, as required under section 911 of  the NDAA for Fiscal Year 2017. A revised strategy that addresses how  the department will achieve these outcomes and is consistent with our  leading practices for mergers and organizational transformations would  better position DOD to further a culture within the department that is  collaborative, team oriented, results driven, and innovative.", "DOD could also address three other areas to improve the department\u2019s  collaborative efforts. First, OCMO officials need to collaborate with key  stakeholders across the department\u2014such as the Secretary of Defense,  military departments, the combatant commands, and defense agencies\u2014 to strengthen the organizational strategy and ensure a more successful  implementation. Without this stakeholder input, the organizational  strategy may meet resistance and not result in the desired organizational  change. Second, DOD\u2019s guidance for cross-functional teams is critical to  their consistent and effective implementation across the department. This  guidance would also help ensure that such teams are provided with the  leadership support and resources, among other things, to address the  Secretary of Defense\u2019s strategic objectives and further promote  collaboration across the department. Third, without training for  presidential appointees to positions within the Office of the Secretary of  Defense that includes leadership, modern organizational practice,  collaboration, and the operation of cross-functional teams or developing  criteria for who could receive a waiver for this training and on what basis,  DOD may have difficulty aligning the perspective of these leaders to most  effectively bring about change when implementing its new organizational  strategy."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of four recommendations to the Secretary of  Defense and the Chief Management Officer (CMO).", "The Secretary of Defense should ensure that:  The CMO, in its revisions to the draft organizational strategy, address  how the department will promote and achieve a collaborative culture, as  required under section 911 of the NDAA for Fiscal Year 2017. The CMO  could accomplish this by incorporating our leading practices on mergers  and organizational transformations. (Recommendation 1)", "The CMO obtain stakeholder input on the development of the  organizational strategy from key stakeholders, including the Secretary of  Defense, the military departments, the combatant commands, and  defense agencies. (Recommendation 2)", "The CMO fully address all requirements in section 911 of the NDAA for  Fiscal Year 2017 and incorporate leading practices for effective cross- functional teams in guidance on Secretary of Defense-empowered cross- functional teams. (Recommendation 3)", "The CMO either: (a) provide training for presidentially-appointed, Senate- confirmed individuals in the Office of the Secretary of Defense that  includes the required elements\u2014leadership, modern organizational  practice, and collaboration\u2014in section 911 of the NDAA for Fiscal Year  2017, or (b) develop criteria for obtaining a waiver and have the Secretary  of Defense request such a waiver from the President for these required  elements if the individual possesses\u2014through training and experience\u2014 the skill and knowledge otherwise to be provided through a course of  instruction. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for review and comment. In  written comments, DOD concurred with our recommendations. DOD also  provided technical comments, which we incorporated where appropriate.  DOD\u2019s comments are reprinted in their entirety in appendix III.", "We initially made our recommendations to the DCMO; however, because  section 910 of the NDAA for Fiscal Year 2018 disestablished the position  of DCMO on February 1, 2018 and established the position of CMO, we  have updated our recommendations to be directed to the CMO.", "In response to our first recommendation, DOD emphasized the  importance of collaboration across the department in pursuing DOD\u2019s  goals. In response to our second recommendation, DOD stated that  finalizing the organizational strategy has been dependent on finalizing the  National Defense Strategy and the Agency Strategic Plan. DOD also  mentioned the reform teams established by the Deputy Secretary of  Defense being aligned with strategic guidance. While DOD\u2019s efforts to  establish these reform teams are notable, as we discussed in our report,  these reform teams do not meet the requirements for cross-functional  teams established pursuant to section 911 of the NDAA for Fiscal Year  2017.  Finally, DOD concurred with our third and fourth recommendations  and stated that criteria for waiving training for presidentially-appointed,  Senate-confirmed individuals will be completed and appropriate waivers  submitted to the President for key personnel by March 30, 2018.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and DOD\u2019s Chief Management  Officer. In addition, the report is available at no charge on our website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Summary of Requirements in Section 911 of the National Defense Authorization Act for Fiscal Year 2017", "paragraphs": ["Section 911 of the National Defense Authorization Act for Fiscal Year  2017 requires the Secretary of Defense to take several actions. Table 5  below summarizes some of these requirements, the due date, and the  date completed."], "subsections": []}, {"section_title": "Appendix II: Identification of Leading Practices for Effective Cross-Functional Teams", "paragraphs": ["We identified leading practices for effective cross-functional teams and  compared the Department of Defense\u2019s (DOD) steps to establish cross- functional teams against these leading practices. To identify the leading  practices, we reviewed literature as well as five case studies of cross- functional teams. In addition, we selected six academic and practitioner  experts to interview based on their publications or research, prior  testimony before the Senate Armed Services Committee on the  implementation of cross-functional teams at DOD, and recommendations  from DOD officials. We identified eight broad categories of leading  practices associated with effective cross-functional teams: (1) open and  regular communication, (2) well-defined team goals, (3) inclusive team  environment, (4) senior management support, (5) well-defined team  structure, (6) autonomy, (7) committed cross-functional team members,  and (8) an empowered cross-functional team leader.", "To identify what is known from published research about factors  contributing to effective cross-functional teams, we conducted a literature  search among relevant articles published from January 1990 through  September 2017. We conducted a search for relevant peer-reviewed  articles in 19 databases, including JSTOR, Academic OneFile, and  ProQuest. Key terms included various combinations of \u201ccross-functional  team,\u201d \u201cbest practice,\u201d \u201ccharacteristics,\u201d \u201ceffective,\u201d and \u201csuccess.\u201d From  all database sources, we identified 46 relevant articles. We first reviewed  the abstracts for each of these articles for relevancy in identifying  contributing factors related to effective cross-functional teams. For the 17  articles that we found relevant and based on empirical research, we  reviewed the full article for methodological rigor. GAO social scientists  read and assessed each study, using a standardized data collection  instrument. The assessment focused on information such as the  population examined, the research design and data sources used, and  methods of data analysis. The assessment also focused on the quality of  the data used in the studies as reported by the researchers, any  limitations of data sources for the purposes for which they were used, and  inconsistencies in reporting study results. A second GAO social scientist  reviewed each completed data collection instrument to verify the accuracy  of the information included. We determined that the studies were  sufficiently sound to support their results and conclusions. We excluded  articles that lacked enough information about their methodologies for us  to evaluate them. We then reviewed the citations and literature reviews of  the relevant articles for additional sources. After including these articles  and excluding others, 14 articles remained, covering cross-functional  teams in both the private and public sectors.", "We took several additional steps to identify leading practices. First, we  reviewed five case studies developed by subject-matter experts on cross- functional teams and interagency task forces employing similar  collaboration tactics for national security issues. We reviewed these  studies for academic rigor and determined that we could use them to  inform our leading practice development. Second, we reviewed three  relevant congressional testimonies from a Senate Armed Services  Committee hearing in June 2016 about the use of cross-functional teams  for improving strategic integration within DOD and incorporated them as  well into the identification of leading practices. Third, we interviewed six  subject-matter experts on cross-functional teams, utilizing a semi- structured set of questions, and used their responses to inform our cross- functional team leading practices. These experts include current and  former government officials involved with cross-functional teams and  academic researchers, who are listed below.", "Honorable Michael B. Donley\u2014Former Secretary of the Air Force from  2008 to 2013,  Dr. Amy Edmondson\u2014Novartis Professor of Leadership and  Management, Harvard Business School,  Chris Fussell\u2014Managing Partner at the McChrystal Group, former Navy  SEAL and aide-de-camp to General Stanley McChrystal,  Dr. Christopher J. Lamb\u2014Distinguished Research Fellow, Center for  Strategic Research in the Institute of National Strategic Studies, National  Defense University,  Honorable James R. Locher III\u2014Former President and CEO, Project on  National Security Reform, and  Dr. Jeffrey Polzer\u2014UPS Foundation Professor of Human Resource  Administration, Harvard Business School.", "We documented our interviews with the selected subject-matter experts in  a record of interview. To determine appropriate subject-matter experts to  interview, we received recommendations from the Senate Armed  Services committee and DOD officials, and identified subject-matter  experts who testified before Congress on the topic of cross-functional  teams. We also solicited names of other cross-functional team experts  during our initial subject-matter expert interviews. Additionally, we  examined the top business programs and research institutes at  universities in the country identified in the top five rankings by U.S. News  & World Report and identified researchers with expertise in cross- functional teams. Finally, we identified subject-matter experts through  reviewing the Academy of Management\u2019s Annual Meeting program from  2014 to 2016. The experts identified from this search were based in the  United States and had papers in the program relating to cross-functional  teams.", "We conducted a content analysis of cross-functional team practices  identified in our literature review, the case studies, the congressional  testimonies, and the subject-matter expert interviews. To do so, team  members first reviewed: the results sections from the scholarly articles,  the texts of the case studies, the transcripts of the testimonies, and the  records of interview from the subject-matter interviews in order to identify  characteristics of effective cross-functional teams. Then the team  members independently reviewed the characteristics to identify themes.  They subsequently compared the themes and developed a series of  conceptual categories to be used as a coding structure for the content  analysis. To conduct the content analysis of all identified characteristics,  two analysts independently assigned each identified characteristic from  the sources to one or more categories and sub-categories. Then, the  team members met to compare their categorization decisions and to  discuss the differences. Any disagreements regarding the categorizations  of the characteristics were discussed and reconciled. The team members  then tabulated the number of characteristics in each category and sub- category and reached agreement on the final set of categories and sub- categories. We assessed the outcome of our content analysis by  comparing leading practices we identified to the contractor and internal  DOD studies, as well as to our key considerations for implementing  interagency collaborative mechanisms."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Tina Won Sherman (Assistant  Director), Tracy Barnes, Leslie Bharadwaja, Arkelga Braxton, Adelle  Dantzler, David Dornisch, Jessica Du, Michael Holland, Amie Lesser, Ned  Malone, Judy McCloskey, Sheila Miller, Richard Powelson, Terry  Richardson, Ron Schwenn, Jared Sippel, Pam Snedden, Sarah Veale,  and Richard Zarrella made key contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-140", "url": "https://www.gao.gov/products/GAO-19-140", "title": "2020 Census: Additional Steps Needed to Finalize Readiness for Peak Field Operations", "published_date": "2018-12-10T00:00:00", "released_date": "2018-12-10T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The cost of the decennial census has steadily increased over the past several decades, with self-response rates declining over the same period. The largest and costliest operation that the Bureau undertakes, NRFU is the Bureau's attempt to enumerate households not initially self-responding to the census.", "GAO was asked to review NRFU implementation during the 2018 Census Test as well as the Bureau's overall readiness for peak field operations, which cover the actual enumeration of residents. This report examines (1) how peak field operations, including NRFU, were implemented during the test; and (2) the extent to which prior test implementation issues have been addressed. GAO reviewed test planning and training documentation, as well as production and payroll data. At the test site, GAO observed and interviewed enumerators, field supervisors, and managers conducting peak operations."]}, {"section_title": "What GAO Found", "paragraphs": ["In preparation for the 2020 census, the Census Bureau (Bureau) set out to enumerate over 140,000 housing units during the 2018 Census Test at a site in Providence County, Rhode Island. The 2018 Census Test marked the Bureau's last chance to test enumeration procedures for peak field operations under census-like conditions before 2020. Implementation of this test identified the following concerns:", "The Bureau experienced operational issues during implementation of the Non-Response Follow-Up (NRFU) as part of the 2018 Census Test. For example, the Bureau had not finalized procedures for data collection during late phases of NRFU (e.g., after multiple attempts to interview had been made) until after the work had already started. As a result, enumerators and their supervisors did not have standardized procedures during the test, which made it difficult to evaluate the effectiveness of the test procedures. GAO also observed a range of other NRFU implementation issues during the test, such as the Bureau's use of progress reporting that overstates the number of NRFU cases not needing any additional fieldwork and the Bureau having fewer of its enumerators work Saturdays, which can be among the most productive interview days. The Bureau is taking steps to assess and mitigate these and other issues that GAO identified.", "The Bureau's field workforce was not fully prepared to face all of the enumeration challenges that arose during the test. For instance, the Bureau expects census field supervisors to provide front-line coaching to enumerators but did not screen these employees to ensure they had the needed skills. Moreover, it did not provide them with the authorities and information that would have helped them serve that role. As a result, we believe that supervisors did not have the casework expertise, information, or authority to help enumerators with procedural questions, and higher-level census field managers ended up providing direct support to enumerators.", "While the Bureau provided extensive online and in-person training to enumerators prior to NRFU fieldwork for the 2018 Census Test, the Bureau lacked any standardized form of mid-operation training or guidance as new procedures were implemented. GAO observed that during the test some enumerators continued to have questions and were uncertain about procedures. Developing targeted, location-specific training could help ensure that, in 2020, enumerators receive the guidance they need to collect census data consistently and in accordance with NRFU procedures.", "The Bureau has made progress addressing prior test implementation issues but still faces challenges. For example, the Bureau improved its collection of enumerator case notes, which reflect real-time knowledge gained during enumeration. However, enumerators did not always report cases using flags built in to their interviewing device that would benefit from supervisory review, such as for language barriers. Moreover, supervisors were not systematically analyzing case notes to identify cases not flagged properly. As a result, critical data on fieldwork challenges were not being communicated effectively to those who could analyze and use them."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that the Bureau (1) determine procedures for late-NRFU data collection; (2) align census field supervisor screening, authorities, and information flows; (3) prepare for targeted mid-operation training or guidance as needed; and (4) improve training on reporting cases that need supervisory attention and alternative ways to communicate these cases.", "The Department of Commerce agreed with GAO's findings and recommendations, and the Bureau provided technical comments that were incorporated as appropriate."]}], "report": [{"section_title": "Letter", "paragraphs": ["The cost of the decennial census has steadily increased over the past  several decades, with enumeration costs rising from about $16 per  household in 1970 to around $92 in 2010 (all in constant 2020 dollars).  The Census Bureau (Bureau) estimates that overall decennial costs will  increase by over $3 billion from the 2010 Census to $15.6 billion in 2020  (in current decennial time frame costs). During this period of increasing  costs, the percentage of households self-responding to mailed census  questionnaires has declined from 78 percent in 1970 to 63 percent in  2010. The Bureau anticipates that the self-response rate will further  decline to roughly 60 percent in 2020, in part because, as the Bureau has  noted, the population is overloaded with requests for information and has  become increasingly concerned about sharing information.", "When a household does not initially respond to the census, the Bureau  attempts to enumerate the residents through Non-Response Follow-Up  (NRFU), an operation where enumerators personally visit to count the  household. NRFU is labor intensive and is the largest and costliest  operation that the Bureau undertakes. Another enumeration operation  happening at about the same time is Group Quarters, when the Bureau  counts residents of group facilities (such as skilled nursing facilities and  correctional facilities).", "The Bureau planned its 2018 Census Test in Providence County, Rhode  Island, to rehearse most of the operations, systems, and procedures that  it will implement during the 2020 Census. Previously, the Bureau  conducted operational tests from 2013 through 2017, as well as multiple  small-scale tests designed to demonstrate specific functionalities (such as  submitting census data over the Internet). The 2018 test is the last  opportunity for the Bureau to demonstrate readiness for its major  operations in 2020 and to apply lessons learned from prior tests.", "You asked us to review implementation of NRFU testing during the 2018  Census Test as well as the Bureau\u2019s overall readiness for peak  operations, which cover the actual enumeration of residents. This report  examines (1) the implementation of peak operations during the 2018  Census Test at the Providence County, Rhode Island, site; and (2) the  extent to which implementation issues raised in prior 2020 Census tests  have been addressed and what actions the Bureau could take to address  these issues.", "To address both of these research objectives, we visited the test site in  Rhode Island to observe implementation of the peak operations being  tested between May and August 2018. These visits included  nongeneralizable observations of door-to-door field enumeration and  office clerical work, as well as interviews with local managers. We also  observed debrief sessions held with multiple levels of the census field  workforce after the operations. From each of these visits, we documented  observations and provided feedback to Bureau managers in near real  time so that the Bureau could mitigate and adapt to issues raised by the  test\u2019s implementation in a timely manner. Implementation issues are a  natural part of the testing environment and are what testing is intended to  uncover. We also discussed any mitigation or evaluation strategies  developed in response to our observations with the cognizant Bureau  headquarters officials.", "In addition to our fieldwork, we collected real-time production data on the  tested operations. These data included tallies of case outcomes,  transactional case activity by enumerators, and hours worked by Bureau  employees. After testing the case tallies and distributions and interviewing  cognizant officials, we determined that these data were sufficiently  reliable for our reporting purposes. We also received daily progress  reports from the Bureau throughout the test, and we reviewed Bureau  test-planning documentation and our work from prior tests to examine  how, if at all, the Bureau planned to address prior implementation issues.", "We conducted this performance audit from April 2018 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["NRFU is a field-based operation that the Bureau administers following the  self-response period so that it can (1) determine the occupancy status of  individual non-responsive housing units and (2) enumerate them. In most  instances, the Bureau typically allows up to six enumeration attempts for  each nonresponsive housing unit, or case. If the Bureau is unable to  enumerate the housing unit in the field, it may have to impute attributes of  the household based on the demographic characteristics of surrounding  housing units as well as administrative records.", "Within the test site in Providence County, Rhode Island, the Bureau set  up an area census office to administer field operations. Figure 1 provides  an overview of the managerial hierarchy of the area census office. The  area census office manager oversees day-to-day operations within the  office and acts as a liaison with the Bureau\u2019s New York Regional Census  Center, which is a Bureau regional office with jurisdiction over the  Providence area census office. Census field managers are to monitor  operational progress and performance indicators to understand any areas  of concern and shift resources as needed within the test site. Census  field supervisors are to act as front-line supervisors for individual  performance and payroll processes and receive procedural questions  from enumerators, who conduct the count.", "The Bureau has another operation\u2014Group Quarters\u2014to enumerate  those living or staying in a group facility that provides housing or services.  Such facilities can include skilled nursing facilities, college and university  student housing, and correctional facilities. Within the Group Quarters  enumeration, the Bureau also enumerates places such as soup kitchens,  homeless shelters, and other service-based enumeration facilities.", "Prior to Group Quarters enumeration in the field, the Bureau attempts to  establish the facilities\u2019 approximate population count and preferred  enumeration method through the Advance Contact operation. These  facilities can choose among methods including paper listing, where the  facility provides a roster of residents as of census day to the Bureau, and  in-person enumeration, where a team of enumerators count residents.  For the 2020 cycle, the Bureau is also adding an \u201ceResponse\u201d option,  tested on a small scale in 2016, whereby facility administrators can  electronically submit enumeration data at a date of their choosing within  operational time frames.", "The Bureau\u2019s testing of the peak operations that we observed during the  2018 Census Test was intended to test collection of census data from  those either not responding themselves via paper, telephone, or over the  Internet or those living in group quarters. Prior to the start of NRFU during  the 2018 test, roughly 45 percent of anticipated housing units in the test  area of Providence County, Rhode Island, self-responded, leaving more  than 140,000 remaining housing units to be attempted by NRFU itself,  which took place between May 9 and July 31, 2018. The Bureau  conducted a test of its Group Quarters enumeration from July 25 through  August 24, 2018, including service-based enumeration. Both portions of  Group Quarters fieldwork were preceded by the Advance Contact activity.  Dates for the peak operations we observed during the 2018 test are listed  in table 1.", "The Bureau\u2019s operational plans for this phase of the fieldwork for the  2018 test incorporated two innovation areas that the Bureau hopes will  produce savings for 2020.", "Reengineered field operations. For most of NRFU during the 2018  test, the Bureau relied on automated data collection methods,  including a system-based, automated process for assigning work to  enumerators, a smartphone-based application for collecting  enumeration data in the field, and system-generated supervisory  alerts.", "Use of administrative records. To help reduce costly NRFU visits  during the 2018 test, the Bureau reviewed and, where appropriate,  applied administrative records\u2014information already provided to the  government as it administers other programs, such as Social Security,  the Selective Service, or the Special Supplemental Nutrition Program  for Women, Infants, and Children\u2014to determine the occupancy status  of housing units and thus remove vacant housing units from the  NRFU workload, as well as to provide population counts of  households not responding.", "The Bureau also tested multiple operational features for the first time this  decennial cycle under full census-like production conditions in 2018:", "NRFU Closeout. During the 2018 test, the Bureau tested how best to  relax certain business rules and enumeration procedures late in the  NRFU operation so that it can enumerate persistently non-responsive  housing units. Examples of procedural modifications include  increasing the maximum allowable number of enumeration attempts  for each housing unit and manually assigning cases to the highest- performing enumerators.", "Office-Based Group Quarters Advance Contact. In the 2010  Census, the Bureau sent enumerator crews in person to each facility  in advance of enumeration to establish the facility\u2019s preferred method  of enumeration and to obtain an approximate population count. In the  2018 Census Test, the Bureau implemented a new method for 2020  that instead involved clerical staff contacting facilities by telephone  and updating the group quarters address list and enumeration  information remotely to reduce expenses associated with field visits  for its enumerator crews."], "subsections": []}, {"section_title": "The Bureau Experienced Operational Planning, Workforce Management, and Other Issues during Its 2018 Test of Peak Operations", "paragraphs": [], "subsections": [{"section_title": "The Bureau Did Not Determine Procedures for Late-NRFU Data Collection until after It Started the Work", "paragraphs": ["The Bureau began the last phase of NRFU data collection in the 2018  test without having yet determined the procedures it would use for that  critical phase. Bureau planning documentation from February 2018  described a late-operation \u201ccloseout\u201d phase of NRFU that would attempt  to resolve cases that had not yet responded. However, we found that the  Bureau had not determined the procedural modifications this phase would  involve, either in terms of rules enumerators followed or business rules for  how cases were to be assigned. By late May, nearly 3 weeks into the  operation, the Bureau issued a set of closeout procedures to census  areas where most cases had either been completed or where at least four  of the six allowable enumeration attempt day assignments had been  made. The Bureau also placed a priority on having high-performing  enumerators\u2014in terms of their ability to complete cases\u2014available to  work these cases during this phase of the NRFU testing.", "Table 2 summarizes the chronology for when the Bureau implemented  and documented procedural changes governing the transition from early  to late-NRFU data collection, as well as the nature of those changes.", "In late June 2018, the Bureau began testing the third phase of NRFU data  collection, what it referred to as the \u201cfinal attempt\u201d phase, with officials  citing a high incidence of non-interviews during prior phases as the  reason. However, the Bureau had also begun this phase\u2019s data collection  before it had established the procedural modifications it would be using.  The modifications were intended to further increase the chances of  enumerators completing cases in the field, such as by removing the limit  on the number of attempts enumerators could make at each remaining  case before NRFU ended.", "Standards for Internal Control in the Federal Government states that  agencies should implement control activities by, for example,  documenting policies. However, the Bureau did not determine  procedures for the final attempt phase until after testing for this phase of  NRFU had begun. Enumerators and census field supervisors thus began  working closeout and final attempt cases without a standardized set of  test procedures.", "Without determining the procedural changes the Bureau would be  testing\u2014or the business rules guiding when to make those changes\u2014the  Bureau was not well positioned to collect data to assess the alternatives it  used during the test to inform planning for 2020. Bureau officials shared  with us that they believed their automated case assignment approach is  most effective during initial data collection but that it is less effective at  targeting the toughest cases to resolve late in NRFU data collection. Yet,  in part because the Bureau had not established when the transition from  automated to manual case management would occur\u2014or the business  rules for determining when\u2014some of the highest-performing enumerators  were unavailable to receive assignments when the Bureau needed to  begin the final attempt phase, according to the area census office  manager. By not establishing the scope and timing of procedural changes  for late-NRFU data collection in 2020, the Bureau may not be in a position  to efficiently shift from its automated assignment approach to a manual  one at the right time and position its most effective enumerators to  receive assignments when needed.", "In November 2018, the Bureau provided a draft contact strategy for  NRFU in 2020 that included an outline of a multi-phase strategy for late- NRFU data collection. By including multiple phases of (1) shifting away  from a fully-automated case assignment process and (2) relaxing  management controls to complete as much casework as possible in  areas with continued high non-response rates, this strategy appears to  follow what the Bureau ultimately implemented during the 2018 test. It will  be important, however, for the Bureau to determine the business rules for  procedural changes and their timing in advance so that it can maximize  the value of NRFU in reducing the number of housing units that have to  be imputed for the 2020 Census."], "subsections": []}, {"section_title": "The Bureau Did Not Fully Ready Its Field Workforce for Enumeration Challenges", "paragraphs": ["Census field supervisors were not integrated into casework  management. As described in the Bureau\u2019s training and operational  planning documents, census field supervisors were to be the primary  points of contact in fielding and addressing enumerator questions.  Census field managers\u2014the next step above census field supervisors\u2014 were to focus their efforts on monitoring progress in completing the  caseload, reviewing cases flagged by enumerators as problematic in one  of a small number of pre-defined ways (e.g., dangerous addresses), and  resolving significant performance issues. Among field supervisors\u2019 key  responsibilities, according to the Bureau\u2019s plan for NRFU, were providing  guidance to help enumerators understand procedural matters and to offer  coaching and problem-solving support to enumerators who may need it.  They also led enumerator training prior to the beginning of NRFU and  generally were to train their specific team of enumerators.", "However, census field managers and enumerators indicated that census  field supervisors were often not the primary actors involved in fielding and  addressing enumerator questions. Instead, enumerators and census field  managers reported having direct contact with each other over procedural  questions. Moreover, seven of the nine enumerators participating in the  Bureau\u2019s operational debrief focus group who responded said they  thought finding someone who could answer their questions was either  difficult or very difficult.", "We found that census field supervisors went underutilized in part because  the Bureau did not recruit and position them to assume front-line  supervising and coaching responsibilities. As outlined in training  documentation, the Bureau vested supervisory review authority (for  special cases, such as resident refusals and language barrier issues)  within census field managers, the area census office manager, clerks,  and office operations supervisors instead of census field supervisors.  Additionally, as part of the Bureau\u2019s reengineered field operations for  2020, census field supervisors are given automated tools to monitor  enumerators, and enumerators we observed told us that they generally  did not interact in person with their supervisors apart from training. We  believe that the combination of these factors resulted in census field  supervisors having limited exposure to NRFU casework and any  problematic situations enumerators might encounter. Officials also told us  that the Bureau did not screen census field supervisors for their  supervisory or coaching skillsets, though officials noted that this has been  the practice in prior censuses, too. Rather, they hired census field  supervisors based on their scores on the online enumerator training and  because they reported an interest in supervising.", "Additionally, census field supervisors lacked access to certain data  streams from the test that could have helped them answer or troubleshoot  enumerator questions. According to two census field managers, the  Bureau did not regularly share consolidated records of procedural  changes with census field supervisors. Information technology (IT) and  census field managers also noted that the Bureau did not share or  compare observations between the census field supervisor hotline and  the decennial IT hotline, even though enumerators could potentially call  either or both with technical or procedural questions. As a result, without  sharing how best to respond to similar questions across support lines,  enumerators could receive different answers for related questions  depending on which hotline they contacted.", "Standards for Internal Control in the Federal Government states that  agency management should demonstrate a commitment to recruit,  develop, and retain competent individuals. Management should establish  expectations for competence in key roles and should consider the level of  assigned responsibility and delegated authority when establishing  expectations. Yet, the role the Bureau envisioned census field  supervisors having was not aligned with the authority supervisors were  given, the skills for which the Bureau hired them, or the access to  information that they had for the 2018 test.", "When we raised this issue related to using census field supervisors,  Bureau officials agreed and cited feedback they had received that census  field managers felt inundated with the combination of the volume of  supervisory review cases that flowed to them and with troubleshooting  day-to-day enumerator questions. In October 2018, the Bureau provided  documentation to us proposing a set of questions that they could use in  screening applicants for the census field supervisor position to identify  supervisory skills. Officials also said they were still evaluating options for  granting census field supervisors more supervisory review authority. As  the Bureau continues to learn from the 2018 test as part of its planning for  2020, it will be important to align census field supervisor roles with their  authorities, skills, and information flows so that the Bureau does not  underutilize a key portion of its field management chain. Doing so could  also lessen the operational burden on higher-level census field managers.", "Enumerators did not receive training to address mid-operation  issues. Prior to the start of 2018 NRFU testing, the Bureau trained  enumerators with a series of online training modules and assessments  and one full day of in-person training facilitated by census field  supervisors. The training included modules on data stewardship  requirements, payroll responsibilities, and procedural directions for  conducting respondent interviews. However, officials acknowledged that  when the Bureau implemented its closeout and final attempt phases of  NRFU, it did not provide standardized training to enumerators on the  rollout of procedural changes. Five enumerators we observed during  these stages said they relied on informal communications from their  census field supervisors or census field managers for guidance. The  initial practice had been for enumerators to receive daily assignments and  follow pre-specified case sequencing and routing based on the Bureau\u2019s  automated system. During the final attempt phase, enumerators were  given discretion over the sequencing, routing, and number of attempts to  make for cases that could be manually assigned, yet they were not given  standardized training on how to handle this shift.", "During our field observations, some enumerators we spoke with said they  were uncertain about core procedures. For example, enumerators were  not consistently aware that they had some discretion in large multi-unit  settings to deviate from the assigned sequence of their cases provided by  the automated system. Enumerators we observed and spoke to were also  not always clear on how to flag within their field enumeration application  the commonly occurring cases with confusing address markings and  numberings. For example, enumerators had the option of selecting a case  outcome of \u201cmissing unit designation,\u201d but they were not always sure  whether this selection would capture the nuances of what they were  seeing on the ground or how it differed from other selection options.", "Standards for Control in the Federal Government states that agencies  should demonstrate a commitment to competence by, for example,  tailoring training based on employee needs and helping personnel adapt  to an evolving environment. Targeted informational training would help  the Bureau ensure that staff understand mid-operation procedural  changes, and the training could be an opportunity for the Bureau to  address commonly-observed and persistent implementation issues that  may be arising. By developing brief, targeted mid-operation training,  either as formal modules, guidance, or other standardized job aids, such  as \u201cfrequently asked questions\u201d worksheets, the Bureau could better  position itself to react nimbly to enumerator feedback.", "We have previously reported challenges the Bureau faces with its field  work in other locations, such as connecting to the Internet during testing  of address canvassing in rural West Virginia in 2017 and dealing with  language barriers and other circumstances in unincorporated  communities in southern Texas or with migrant and seasonal farmworkers  in southern California during the 2000 Census. All challenges are not  universal to all locations. Given that some of the enumeration challenges  enumerators encountered in 2018 NRFU testing might not occur  everywhere, and that some other areas of the country will have their own  types of challenges, locally- or regionally-specific training or guidance  may better address some needs. By relying solely on pre-NRFU training,  the Bureau risks having little opportunity to course-correct with  enumerators who may not have absorbed all of the training and are  experiencing difficulty completing interviews or not collecting quality data."], "subsections": []}, {"section_title": "The Bureau Is Assessing Other Implementation Issues That Arose during the 2018 Test", "paragraphs": ["We observed and discussed with Bureau officials in real time several  other implementation issues that occurred during the 2018 test. Bureau  officials acknowledged these issues and, as of September 2018, were  assessing them and developing mitigation strategies as part of their test  evaluation process. These issues include:  Training certification. Census field managers estimated that roughly  100 enumerators were unable to transmit their final test scores because  the Bureau\u2019s online learning management system had an erroneous  setting. According to Bureau officials, this problem delayed the start of  unsupervised work for these otherwise-qualified enumerators by an  average of 2 days per enumerator and resulted in the attrition of some  who were able to quickly find other work. Bureau officials told us they  have fixed the system setting and are considering an alternative means to  certify training, such as by having the option of trainees taking and  verifying their final assessment as part of their final capstone day of  classroom training. According to Bureau officials, development of this  backup strategy will begin in December 2018.", "Assigning cases manually in batches. During the 2018 test, the  Bureau\u2019s automated case management system was not configured for  non-Headquarters staff to manually assign multiple cases to an  enumerator at once. Rather, according to officials, census field managers  were faced with having to manually assign thousands of cases  individually during latter stages of NRFU. According to field management,  this problem presented an unexpected burden on them, delayed  assignments of the hardest-to-count cases, and contributed to high- performing enumerators not receiving work timely and in some cases for  days in a row. Officials told us that, as a work-around, the Bureau shifted  responsibility for assigning cases to a headquarters official with access  rights in the system to assign large numbers of cases at once. Bureau  officials acknowledge the unsustainability of this work-around if needed at  a national level and the importance of resolving this before the 2020  Census. As of October 2018, Bureau officials showed us system  screenshots of how census field managers would be able to manually  assign batches of cases and indicated that this functionality would be  ready for the 2020 Census.", "Monitoring operational progress. The Bureau\u2019s reporting on its  progress in completing the NRFU casework for the 2018 test emphasized  a process-oriented measure that overstated the extent to which the NRFU  efforts were resulting in completed workload. In planning documentation,  the Bureau listed the outcomes of interview attempts that it considered  complete and thus not in need of further enumeration assignments.  These outcomes\u2014such as a full interview of the household or  confirmation of a housing unit being vacant or nonexistent\u2014would also  result directly in reduction in the number of incomplete cases needing to  have some of their missing data imputed by the Bureau later.", "Yet the daily Bureau progress report and \u201cdashboard\u201d the Bureau  provided us for the 2018 test, which decennial leadership also identified  as their primary monitoring report, did not reflect these pre-planned  definitions of completed workload. Rather, as officials acknowledged, it  included cases that the Bureau had unsuccessfully attempted to  enumerate the maximum number of allowable times for the initial phase  of NRFU being tested, even though those cases could still\u2014and did\u2014 receive additional attempts during later phases of NRFU. Officials noted  that the measure reported could be helpful during early stages of the  operation in determining whether enough employees had been hired, or  whether case assignments were being worked quickly enough.", "Figure 2 demonstrates the gap that arose during 2018 NRFU test  implementation between the reported progress measure and the number  of cases actually being completed. The totals reflected in the Bureau\u2019s  reported measure include those that either have to be re-worked in the  field during the final attempt phase as discussed or have their data  imputed after fieldwork had ended. By contrast, an outcome-based  measure of operational progress, like the one the Bureau designed,  would capture only those cases where the Bureau had completed  enumeration of the nonresponding housing units and thus be a more  accurate representation of the operation\u2019s status.", "Bureau officials acknowledged the need to maintain measures that focus  on process as well as outcomes\u2014such as avoiding having to impute data  for cases after field work\u2014when measuring progress completing NRFU.  They said that managers in the field and in Bureau headquarters had  access to alternative measures and reports that more closely identified  outcomes. The officials noted that the reporting mechanism expected to  be used in 2020 was not fully available in time for the beginning of NRFU  testing in 2018, so the reporting format and measures will likely differ. In  addition, in October 2018, the Bureau provided a draft dashboard for  2020 that included greater detail on the number of cases that could still  require work to enumerate. Such detail could help assist with determining  when to transition to the final-attempt phase of the operation to address  cases without sufficient information yet collected.", "Integrating key systems settings. At the beginning of NRFU test  implementation, the Bureau\u2019s case assignment and case sequencing  systems were operating as if they were on time zones 4 hours apart.  Bureau officials said that this resulted in enumerators receiving  mismatched case assignment times, which hampered early NRFU  production, and census field supervisors having to process erroneous  \u201cwork not started\u201d supervisory alerts. Bureau officials said they addressed  the problem within the first week of the operation and that they would  ensure that future updates and key settings would be coordinated across  systems.", "Tracking employees and equipment. The Bureau used two different  sets of employee identification numbers to track their payroll status and  use of Bureau-issued equipment (e.g., smart phones), respectively,  without cross-walking them. According to census field managers, this  resulted in extra work when trying to monitor changes in enumerators\u2019  employment statuses and whether enumerators had returned their  equipment to the Bureau. The managers noted that office staff had to  spend extra time comparing different lists of staff, while one manager  developed a spreadsheet listing all staff by their two different identification  numbers. Bureau officials said they considered this a priority issue to be  resolved during final systems development for 2020 and had already  developed a fix within their case management system so that the cross- walk between the two systems would be integrated within their  management system. This would eliminate the need for manually  reconciling the differing identification numbers.", "Having more enumerators work weekends. Until the latter stages of  2018 NRFU testing, the Bureau assigned cases to enumerators based on  the alignment of the Bureau\u2019s estimated probability of finding respondents  at home at certain times and enumerator-reported work availability.  Bureau officials told us that Saturdays are generally one of the best days  to find a household member home to respond to the census. However,  during the test, our analysis showed that Saturdays had the second- fewest number of enumerators assigned to cases of any day of the week.  Bureau officials said that they would review whether the incentive  structure for working on Saturdays should be altered and that they would  examine ways to ensure that more enumerators are working on those  days. This includes exploring the feasibility of hiring and assigning work to  applicants who may only want to work weekends and being clearer with  enumerators about what the expected peak enumeration hours are.", "Increasing electronic completion rates for Group Quarters. The  Bureau hopes to reduce field costs for Group Quarters (such as skilled  nursing homes, college and university student housing, and correctional  facilities) by, for the first time, encouraging facilities to self-enumerate  electronically, when possible. As previously discussed, clerical staff first  establish facility enumeration preferences during Group Quarters  Advance Contact, and enumeration (either in person or otherwise) takes  place afterward. During the 2018 test, the Bureau reported that only 25 of  the 75 facilities that selected the \u201ceResponse\u201d enumeration option during  Advance Contact submitted responses by the enumeration deadline. As  of September 2018, Bureau officials said they were still evaluating  potential causes of the low response rate by Group Quarters facilities but  noted that issues with the required format for the submission of response  files may have prevented some submissions. Bureau officials also  acknowledged the need to conduct more active follow-up with these  facilities during the eResponse period to ensure a full and accurate count  of Group Quarters facilities."], "subsections": []}]}, {"section_title": "The Bureau Has Made Progress but Continues to Face Challenges Addressing Implementation Issues Identified in Prior Tests", "paragraphs": [], "subsections": [{"section_title": "The Bureau Has Improved Its Collection of Case Notes, but Enumerators Remain Unclear on How to Report Fieldwork Issues", "paragraphs": ["We reported to the Bureau during the 2015 Census Test that information  enumerators were typing into their case notes did not appear to be  systematically used by their managers. We also reported that, during  the 2016 Census Test, the Bureau was not reviewing case notes written  by enumerators providing respondent information on better times-of-day  for future NRFU visits to their housing unit, and enumerators did not  always have this note-taking feature available. During the 2018 test,  enumerators were trained to take notes and, when appropriate, identify  special cases that would later require supervisory review. We also  observed that enumerators appeared to be consulting case notes from  prior enumerator visits when planning NRFU visits to the same housing  unit. Enumerators can use markings within their automated interview  instrument to describe certain types of cases (e.g., hearing barriers and  dangerous situations), which the automated system would then route to  receive supervisory review. Enumerators could select other case  outcomes that the automated system would apply predetermined  business rules to either reassign the cases (e.g., refusal, no one home) or  treat them as completed (verified vacant or not a housing unit).", "However, we identified multiple scenarios in which enumerators had  described cases in their case notes but for which the enumerators had  not selected the corresponding case flag for the situation that would have  resulted automatically in a supervisory review. One census field manager  described discovering several dozen cases that had been inactive where  enumerators had written case notes describing language barriers  encountered but had not specifically marked the flag within the device for  \u201clanguage barrier.\u201d Because these cases thus were not triggered for  supervisory review, they were eligible to be reassigned by the Bureau\u2019s  standard automated system. As a result, the Bureau was not controlling  for the requisite language skills in assigning the cases for subsequent  enumeration attempts.", "The Bureau\u2019s use of automated systems to apply business rules to  efficiently manage field casework for 2020\u2014including identifying which  cases receive supervisory review\u2014relies critically on field staff  understanding how to reflect what they are seeing on the ground within  the choices provided to them with which to flag cases in their interview  device. The Bureau\u2019s use of remote management as part of reengineered  field operations also relies on enumerators knowing when and how to  report issues to their supervisors.", "We observed multiple field scenarios that called these conditions into  question, however. For example, enumerators we observed during NRFU  told us that they indicated address listing issues in their case notes, such  as if the unit designation was missing or incorrectly marked. Yet, these  enumerators did not know how to flag such cases in their interview  instrument to trigger supervisory review. According to Bureau officials,  this type of address listing issue turned out to be a broadly experienced  challenge within the test area. Additionally, during Group Quarters, an  enumerator we observed received supplemental information about the  number of residents at a neighboring facility after that facility had been  enumerated. The enumerator made note of this discrepancy and included  the original facility\u2019s identifying information but was uncertain about how,  if at all, to alert the supervisor about the discrepancy.", "Moreover, we saw little evidence that census field supervisors or  managers were systematically reviewing case notes for the purpose of  identifying either cases not being marked properly or for which the  selected flags may not have been fully describing the case  characteristics. For example, a census field manager confirmed that case  notes recorded at Group Quarters facilities that were enumerated would  not be reviewed during clerical processing, leaving the possibility\u2014such  as we observed\u2014that if enumerators relied on case notes to  communicate information about the accuracy of data collected, it would  not be acted on. Bureau officials told us that reviewing all case notes  could require more staff time than budgeted for, and changing the  automation process to selectively present unflagged cases for  supervisory review could necessitate requirements changes to systems  whose development is already pressed for time.", "Standards for Internal Control in the Federal Government states that  agencies should use quality information by, for example, processing  reliable information to help it make informed decisions. Bureau  enumerators can record useful local knowledge about their cases with  their choice of case type flags and within their descriptive case notes.  While the Bureau has anticipated a broad range of types of cases for  enumerators to select from when documenting their casework,  enumerators we observed did not uniformly understand those options,  and the descriptors did not fully anticipate what enumerators were  encountering. Improving training and guidance to field staff on the  intended use of case notes and on alternative ways to communicate their  concerns about cases, such as flags for different types of cases, can help  ensure the Bureau has reliable data on the cases during its field  operations relying on automated interviewing instruments."], "subsections": []}, {"section_title": "Leveraging Information on Enumerator-Reported Technical and Procedural Issues Remains a Challenge", "paragraphs": ["During the 2015 Census Test, we reported that certain technical and  procedural problems that enumerators were encountering in the field  were going unreported and that enumerators did not always know who to  contact for assistance. We further noted that the Bureau was not  systematically assessing or tracking the extent of these issues during  testing, and we recommended that it enable such capture of information  by training enumerators on where to record issues and whom to  contact. The Bureau agreed with our recommendation.", "During the 2018 test, the Bureau had both an information technology (IT)  hotline and a census-field-supervisor hotline established for technical and  procedural questions, respectively. Yet, enumerators we observed told us  they did not always report to their support lines the technical issues that  they were easily able to resolve by, for example, turning their devices on  and off to reset. This lack of reporting kept the Bureau from getting  information on commonly-occurring challenges that might be useful real- time feedback in the testing environment. Moreover, a Bureau IT  manager noted that the Bureau does not formally review and share  observations and troubleshooting notes from IT hotline and census field  supervisor hotline calls. Because enumerators may call either or both  hotlines when having difficulty operating their Bureau-issued smart  phone, operators of these hotlines could be unaware of the prevalence of  or solutions to a given problem if the Bureau does not monitor  troubleshooting information across the two operational silos. For the  Bureau to be informed on any additional training needs or other  operational decisions for 2020, it will need to continue to expand its  efforts in collecting information on enumerator-reported problems per our  2015 recommendation."], "subsections": []}, {"section_title": "The Bureau Continues to Assess How to Ensure Efficient Staffing Levels for Group Quarters", "paragraphs": ["Depending on the size of a Group Quarters facility (e.g., skilled nursing  facility, college and university student housing), the Bureau can use  varying sizes of enumerator crews to conduct an onsite count. During the  2010 Census, we observed overstaffing during the service-based  enumeration (e.g., homeless shelters and soup kitchens) portion of Group  Quarters. While determining staffing levels at these facilities can be  challenging, such overstaffing can lead to poor productivity and  unnecessarily high labor costs. We recommended that the Bureau  determine and address the factors that led to this overstaffing prior to  2020. The Bureau agreed with our recommendation.", "However, the Bureau has faced challenges determining the right staffing  ratios in light of complications with the Advance Contact phase of Group  Quarters. As previously noted, the Bureau used this phase to establish  facilities\u2019 enumeration method preferences. For the 2018 test, most Group  Quarters facilities selected the facility-provided paper listing and the  eResponse enumeration options. Therefore, the Bureau allocated a large  share of its enumerator and census field supervisor workforce in the test  area to the 44 known service-based enumeration facilities, which were  restricted in terms of the enumeration options they could select and  tended to select in-person enumeration. However, only 11 of these  facilities responded to initial inquiries, so the Bureau had less work than  anticipated for its enumerator crews. At multiple sites we observed in the  test area, enumerators appeared either idle or underutilized. Moreover,  several of the Group Quarters facilities we observed had changed their  initial choice of enumeration method on the day of enumeration.", "Enumerator crews thus ran the risk of either being overstaffed (in the  case of switching to a facility-provided paper listing) or understaffed (in  the case of switching to an in-person enumeration).", "The Bureau\u2019s Advance Contact activities have a potential benefit\u2014if the  Bureau can get accurate information on the method of enumeration and  approximate population within a facility ahead of time, Bureau managers  and enumerator crews can more proactively allocate resources and  prepare for the count. Bureau officials said they are still assessing  outcomes of Advance Contact to see if these gains were realized and  may have completed the assessment by as early as January 2019. Doing  so will help the Bureau determine appropriate staffing sizes and thus  address our prior recommendation."], "subsections": []}, {"section_title": "The Bureau Is Working to Determine the Causes of Elevated Non-Interview Rates", "paragraphs": ["According to preliminary data from the 2018 Census Test, the Bureau  experienced similarly high rates of cases coded as non-interviews as it  did during its last major field test of NRFU in 2016. Non-interviews are  cases where enumerators collect no data or insufficient data from  households either because enumerators made the maximum number of  visits without a successful interview, or because of special circumstances  like language barriers or dangerous situations. When this happens, the  Bureau may have to impute the census data for the case, such as  whether the housing unit is vacant or not, the population counts of the  households, or demographic characteristics of their residents. In January  2017, we reported that, during the 2016 Census Test, the Bureau  incurred what it considered high non-interview rates (31 and 22 percent  across the two test sites, respectively, as the Bureau preliminarily  reported at the time), and we recommended that the Bureau determine  the causes of these rates.", "Using the same method to calculate the rate of non-interviews for the test  as in 2016, the 2018 Census Test had similarly high non-interview rates\u2014 33 percent of all NRFU cases. Bureau officials said they are still  examining causes of these elevated non-interview rates and whether final  attempts helped to mitigate the non-interview rate and will report out on  what they learn as part of their comprehensive assessment of the test,  planned for December 2018. A draft of the Bureau\u2019s revised contact  strategy for NRFU, provided in November 2018, indicates that as part of  enumerator training in 2020 the Bureau will need to incorporate  messaging that emphasizes the importance of obtaining sufficient data  from interview attempts. Officials noted that any interim lessons learned  from this assessment process would inform updates to the field  enumeration contact strategies for 2020."], "subsections": []}, {"section_title": "The Bureau Experienced a Programming Error While Implementing Procedures for Proxy Interviews", "paragraphs": ["Enumerators are directed to try and complete a NRFU case by  interviewing a proxy for a household respondent, like a neighbor, after  multiple failed attempts have been made to contact someone in the  household for that case. We previously observed in the 2016 Census  Test that enumerators did not seem to understand the procedures for  conducting these interviews and, as a result, underutilized the  interviewing method. In our January 2017 report, we therefore  recommended that, as part of determining the causes of its non-interview  rate, the Bureau revise and test any needed changes to proxy procedures  and associated training. The Bureau agreed with our recommendation  and subsequently developed automated supervisory performance alerts  for census field supervisors and census field managers that would inform  them when an enumerator was not following prompts to conduct proxy  interviews for eligible cases.", "However, in implementing proxy interview procedures for the 2018  Census Test, the Bureau experienced a technical glitch resulting in some  confusion among some enumerators and their supervisors about related  procedures. Early in NRFU data collection for the test, a programming  error within the field enumeration application was prompting enumerators  to make more than the allowable three attempts to interview a proxy  respondent. The Bureau reported promptly implementing a technical fix  to this issue; yet, enumerators we observed reported receiving varying  guidance from their supervisors on whether to abide by the erroneous  prompts. While some of these enumerators appeared to understand the  importance of attempting proxy interviews, some did not appear to  understand Bureau guidance that enumerators should make no more than three attempts to interview a proxy respondent, and some appeared  conditioned to follow the erroneous prompts.", "Proxy interviews can be a substantial portion of completed interviews  during the census. In 2018 NRFU testing, interviews of proxy respondents  accounted for 27 percent of all successful interview-based enumerations  of occupied housing units\u2014compared to 24 percent during the 2010  Census and 9 percent during the 2016 Census Test. Given the role that  proxy interviews play in completing census data collection, it will be  important for the Bureau to fully implement our recommendation so that  enumerators are properly pursuing and conducting these interviews."], "subsections": []}, {"section_title": "Enumerators We Observed Were Uncertain of How to Proceed When Property Managers Were Unavailable", "paragraphs": ["Initial visits to property managers of multi-unit residences can help the  Bureau identify vacant and occupied housing units before sending  enumerators to individual units within the facilities. We have previously  reported that property managers can also be a helpful source of  information on respondents who are not at home, thereby making  subsequent follow-up visits to individual units more productive. During  the 2016 Census Test, we observed that enumerators were uncertain of  how to handle individual cases within a multi-unit once they were  unsuccessful in contacting a property manager initially. As a result, we  recommended in January 2017 that the Bureau revise and test procedural  and training modifications as needed to aid enumerators and their  supervisors in these cases. The Bureau agreed with this  recommendation and indicated that the evaluations of the 2018 test would  inform its strategies for 2020.", "However, we observed a similar issue during the 2018 Census Test in  that enumerators were unclear on what, if any, proxies to attempt if they  were unsuccessful in finding the listed property manager. Additionally, we  observed multiple enumerators leave voicemails with their contact  information\u2014not a central number\u2014for the listed property manager, but it  was unclear how these voicemails would produce a successful interview  because, later, the automated system could reassign other enumerators  to visit the manager. When we raised this concern with Bureau officials,  they acknowledged that they need to continue to refine procedures for  handling initial property manager visits for 2020."], "subsections": []}, {"section_title": "The Bureau Provided Enumerators Access to Incomplete Closed Cases, but Enumerators Were Not Consistently Aware They Had Access", "paragraphs": ["Previously, during the 2016 Census Test, we observed that enumerators  were unable to re-open closed non-interview cases even if they happened  upon the respondent in question soon after and nearby. We noted this  inefficiency, since these cases would get re-assigned later, and in  January 2017, we recommended that the Bureau revise and test  procedures that would grant flexibility to enumerators to access cases in  these circumstances. The Bureau agreed with our recommendation.", "For the 2018 Census Test, the Bureau provided a list in the field  enumeration application of the cases that had been worked by the  enumerator that day but that had not been submitted for processing or  reassignment. Training for enumerators described this enumeration  option, and enumerators were authorized to access these cases when  needed, but not all enumerators we observed were consistently aware of  how to do so. Enumerators we spoke with cited uncertainty over how to  access these cases and whether enumerators were allowed to do so as  considerations. Continuing to review the procedures and guidance to  enumerators on this flexibility for completing interviews, consistent with  our prior recommendation, will help the Bureau make better use of it in  2020."], "subsections": []}, {"section_title": "The Bureau May Add an Extra Check on NRFU Addresses Identified by Administrative Records as Vacant or Nonexistent", "paragraphs": ["As we reported in 2017, the Bureau previously modified how it would treat  some of the households that did not respond to the 2020 Census and that  the Bureau\u2019s use of administrative records had determined to be not  occupied. The Bureau\u2019s earlier testing had determined that the Bureau  should require two\u2014instead of just one\u2014notices from the United States  Postal Service that mail could not be delivered to these households  before removing their addresses from the NRFU workload. After we  provided a draft of this report to the Department of Commerce to obtain  agency comments, Bureau officials provided us with findings from an  evaluation of the 2018 Census Test. In the evaluation, Bureau officials  observed that there were households for which they had received multiple  notices from the United States Postal Service that mail was undeliverable  but that Bureau enumerators recorded as occupied. While Bureau  officials believe, based on their follow-up research, that these addresses  may likely be vacant or not housing units, they are concerned about  possible undercounting from not enumerating people who may be at  these addresses. As of November 2018, the Bureau was considering  adding one physical visit for each of these cases. Bureau officials said  they are continuing to analyze these evaluation results and expect to  document and include changes within its final operational plan for the  2020 Census due in January 2019."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["The 2018 Census Test offered the Bureau its last opportunity to test key  procedures, management approaches, and systems under decennial-like  conditions prior to the 2020 Census. As the Bureau studies the results of  its NRFU and Group Quarters testing to inform 2020, it will be important  that it address key program management issues that arose during  implementation of the test. Namely, by not establishing the intended  procedural changes for late-NRFU data collection ahead of time, the  Bureau risked not getting the most out of NRFU to minimize the number  of housing units having to have their information imputed by the Bureau  later. Additionally, by not aligning the skills, responsibilities, and  information flows for census field supervisors, the Bureau limited their role  in support of enumerators within the reengineered field operation. The  Bureau also lacks mid-operation training or guidance, which, if  implemented in a targeted, localized manner, could further help  enumerators navigate procedural modifications and any commonly- encountered problems when enumerating. Finally, without enumerators  understanding how to use case notes and flags for various types of cases  in their enumeration device and to report enumeration challenges to  supervisors and managers, the Bureau may be unaware of field work  issues that could affect the efficiency of its operations and the quality of  its data.", "We provided near real-time feedback to the Bureau across a range of test  implementation issues. Some, such as those related to staffing ratios for  the Group Quarters operation, build on long-standing implementation  issues that, if addressed, can contribute to the efficiency and  effectiveness of 2020 field operations. Others, like not having NRFU  progress measures that provide true indications of completed workload,  are issues specific to this test that the Bureau is assessing as part of its  2018 Census Test evaluations. It will be important for the Bureau to  prioritize its mitigation strategies for these implementation issues so that it  can maximize readiness for the 2020 Census."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making four recommendations to the Department of Commerce  and the Census Bureau:  The Secretary of Commerce should ensure that the Director of the  Census Bureau determines in advance of Non-Response Follow-Up what  the procedural changes will be for the last phases of its data collection  and what the business rules will be for determining when to begin those  phases, which cases to assign, and how to assign them.  (Recommendation 1)", "The Secretary of Commerce should ensure that the Director of the  Census Bureau identifies and implements changes to align census field  supervisor screening, authorities, and information flows to allow greater  use of the census field supervisor position to provide supervisory support  to enumerators. (Recommendation 2)", "The Secretary of Commerce should ensure that the Director of the  Census Bureau enables area census offices to prepare targeted, mid- operation training or guidance as needed to address procedural changes  or implementation issues encountered locally during Non-Response  Follow-Up. (Recommendation 3)", "The Secretary of Commerce should ensure that the Director of the  Census Bureau improves training and guidance to field staff on the  intended use of case notes and flags, as well as on alternative ways to  alert supervisors and managers when case characteristics are not readily  captured by those flags. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretary of Commerce. In its  written comments, reproduced in appendix II, the Department of  Commerce agreed with our findings and recommendations and said it  would develop an action plan to address them. The Census Bureau also  provided technical comments and an update on their evaluation of the  test, which we incorporated as appropriate.", "We are sending copies of this report to the Secretary of Commerce, the  Undersecretary of Economic Affairs, the Acting Director of the U.S.  Census Bureau, and the appropriate congressional committees. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report please contact  me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Objectives Scope & Methodology", "paragraphs": ["This report examines (1) how peak field operations were implemented  during the 2018 Census Test; and (2) the extent to which implementation  issues raised in prior 2020 Census tests have been addressed, and what  actions the Census Bureau (Bureau) is taking to address them.", "To address these objectives, we reviewed 2018 Census Test and 2020  Census operational planning and training documentation. We also  reviewed our prior reports and documentation on prior census testing  operations. Non-Response Follow-Up (NRFU) operations took place from  May 8 through July 31, 2018, while Group Quarters took place from July  25, 2018 through August 24, 2018, with the service-based enumeration  portion taking place July 25, 2018 through July 27, 2018.", "To review the Bureau\u2019s test implementation and mitigation strategies for  previously-identified implementation issues for peak operations, we  visited Providence, Rhode Island, multiple times between May and  August 2018 to observe enumerators, census field supervisors, and  management operations. NRFU visits took place between mid-May and  late-July 2018, while we also conducted two iterations of visits of Group  Quarters in late July and early-August 2018. These multiple iterations  both across and within operations enabled us to see how, if at all,  implementation of procedures varied over time. It also enabled us to get  direct feedback from Bureau field managers on how various phases of  test operations were proceeding. These visits consisted of non- generalizable observations of field enumeration and office clerical work,  as well as interviews with local managers. For each of these visits, we  developed data collection instruments to structure our interviews and to  cover topics that were pertinent to the given phase of the operation we  were observing. We also observed debrief sessions with multiple levels of  the Bureau\u2019s field workforce following the field work.", "To translate our observations into actionable feedback for the Bureau, we  shared high-level observations in near real-time to Bureau headquarters  management overseeing the operations so that the Bureau could mitigate  and adapt to known issues in a timely manner. We also discussed any  mitigation or evaluation strategies developed in response to our  observations with the cognizant Bureau headquarters officials. For  objective two specifically, we reviewed Bureau test planning  documentation and our work from prior tests to examine how, if at all, the  Bureau planned to address known implementation issues.", "To gain insight into how implementation was proceeding when we were  not directly observing test implementation, we received daily  management progress reports from the Bureau throughout the NRFU  operation testing that included information on the total number of NRFU  cases, the final outcomes of each case, and the number of cases that the  Bureau reported as completed for each day of the NRFU operation. We  also received Periodic Management Reports that summarized high level  outcomes of both the NRFU and Group Quarters workload.", "To fully understand the source of the Bureau\u2019s daily progress reports, we  requested and received all transactional data collected during NRFU  production. We reconciled case totals and outcomes with the final  numbers in the NRFU progress reports and then used these data to  analyze the Bureau\u2019s progress during NRFU production. We also  received and analyzed Bureau payroll data on enumerator hours worked  during NRFU operations. Specifically, we assessed the number of  enumerators working each day, the number of enumerator\u2019 hours paid  each day, and the days of the week that were worked the most by  enumerators. We found the Bureau\u2019s transactional and payroll data  sources to be sufficiently reliable for our reporting purposes.", "We conducted this performance audit from April to December of 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Ty Mitchell (Assistant Director),   Devin Braun, Karen Cassidy, Joseph Fread, Robert Gebhart, Krista  Loose, Kathleen Padulchick, Lisa Pearson, Kayla Robinson, Robert  Robinson, and Cynthia Saunders made significant contributions to this       report."], "subsections": []}]}], "fastfact": ["In 2010, less than 2/3 of households responded to the U.S. Census Bureau's mailed questionnaire. When there's no response, a census worker follows up with a visit\u2014a time-consuming and costly operation.", "The Bureau recently ran a full Census test, which included the operations, systems, and procedures needed to count households that didn't respond. Workers followed up with more than 140,000 households in Rhode Island.", "After reviewing plans, training, and part of the actual test, we recommended steps including making sure that field supervisors had the information and authority needed to help census workers with procedural questions."]}
{"id": "GAO-18-502", "url": "https://www.gao.gov/products/GAO-18-502", "title": "Students with Disabilities: Additional Information from Education Could Help States Provide Pre-Employment Transition Services", "published_date": "2018-09-06T00:00:00", "released_date": "2018-10-09T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["WIOA requires states to reserve at least 15 percent of their total State Vocational Rehabilitation Services program funds to provide pre-employment transition services to help students with disabilities transition from school to work. GAO was asked to review how states were implementing these services.", "This report examines (1) steps states reported taking to implement pre-employment transition services, and (2) implementation challenges states reported and how Education has addressed them. GAO reviewed documents and funding data from Education, and federal laws and regulations; surveyed all 79 state VR agencies (74 responded); held discussion groups with representatives of 29 state VR agencies; and interviewed officials from Education and three states (Idaho, Illinois, and Maryland) GAO selected for variety in size and type of agencies, among other factors."]}, {"section_title": "What GAO Found", "paragraphs": ["Of the 74 state vocational rehabilitation (VR) agencies that responded to GAO's survey, most reported expanding services to help students with disabilities transition from school to work as required under the Workforce Innovation and Opportunity Act (WIOA), enacted in July 2014. Most state agencies reported serving more students and providing work-based learning experiences and other activities, referred to as pre-employment transition services (see figure).", "State VR agencies reported two key challenges with implementing pre-employment transition services for students as required by WIOA.", "Spending reserved funds : States reported spending about $357 million out of the $465 million reserved for these services in fiscal year 2016. Education officials said that states had difficulty determining what expenditures were allowable, and some state officials said they would like more detailed information from Education. Education officials said they plan to clarify guidance but have no timeframe for providing further information, which would help states to better plan their use of reserved funds.", "Finalizing interagency agreements : Fewer than half the state VR agencies that responded to GAO's survey (34 of 74) reported updating their interagency agreement with their state's educational agency. Interagency agreements can help promote collaboration by, for example, establishing roles and responsibilities of each agency. Although Education offers technical assistance on interagency agreements, without increased efforts to raise awareness about the importance of these agreements and provide assistance to states where needed, Education may miss opportunities to help state VR and educational agencies efficiently and effectively coordinate services.", "In addition, WIOA requires Education to highlight best state practices, and most VR agencies responding to GAO's survey (63 of 74) reported this would be useful. Education does not have a written plan or timeframe for identifying and disseminating best practices. As a result, Education may miss opportunities to help more students with disabilities successfully transition from school to work."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is recommending that Education (1) establish timeframes for providing additional information on allowable expenditures, (2) take additional steps to assist states that have not updated and finalized their interagency agreements, and (3) develop a written plan with specific timeframes and activities for identifying and disseminating best practices. Education agreed with the first recommendation and disagreed with the other two. GAO revised the second recommendation and maintains that specific information is needed for the third, as discussed in the report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The transition from high school to postsecondary education or the  workforce can be a challenging time for students, and particularly for  those with disabilities who may need additional services or guidance to  achieve their goals. We have reported that students with disabilities are  less likely than their peers to transition successfully. In addition, people  with disabilities have historically experienced higher unemployment and  poverty rates than those without disabilities. Students with disabilities  who do not successfully transition from school to the workforce may face  a lifetime of reliance on public assistance, potentially leading to  substantial costs to the government and society. While states provide  transition services through special education in schools and to some  students who apply and are determined eligible for the State Vocational  Rehabilitation Services program, the Workforce Innovation and  Opportunity Act (WIOA) amended the Rehabilitation Act of 1973  (Rehabilitation Act) in 2014 to require states to additionally provide a  defined set of activities called pre-employment transition services. These  services are to be provided both to students who are eligible for the  program as well as to those who are potentially eligible, greatly expanding  the number of students who can be served. Pre-employment transition  services are offered as an early start on job exploration and are designed  to help these students identify their career interests. Specifically, states  are required to offer job exploration counseling and work-based learning  experiences, which may include internships, exposures to local  employment, and other activities.", "In fiscal year 2017, the Department of Education (Education) awarded  about $3.1 billion in grants to states for the State Vocational  Rehabilitation Services program. WIOA requires states to reserve at least  15 percent of their vocational rehabilitation (VR) grants to provide pre- employment transition services to all eligible or potentially eligible  students with disabilities who need them. That reserve amounted to  about $468 million across all states in fiscal year 2017.", "You asked us to provide information on how states are implementing pre- employment transition services. This report examines (1) the steps states  have reported taking to implement pre-employment transition services,  and (2) the implementation challenges, if any, states have reported  facing, and how Education has addressed them.", "To obtain information on both of these objectives, we used the following  methodologies. We reviewed Education\u2019s guidance and technical  assistance documents as well as federal laws and regulations. We  reviewed expenditure data reported by state VR agencies to Education  for fiscal years 2015 and 2016, the most recent full years of data  available, and determined they were reliable for the purposes of this  review by interviewing Education officials about the data\u2019s quality and by  electronically testing the data for any obvious errors. We administered a  web-based survey to all 79 state VR agencies from October through  December 2017, with 74 agencies (94 percent) responding. We  conducted interviews with state VR and educational officials in Idaho,  Illinois, and Maryland. We selected these states based on variety in the  size of the special education population, state agency organization, and  whether the state had a separate agency for serving individuals who are  blind or visually impaired. The information from these interviews is not  generalizable. We interviewed representatives of other relevant  organizations, including the Council of State Administrators of Vocational  Rehabilitation (CSAVR) and the National Council of State Agencies for  the Blind. In addition, we interviewed officials from Education\u2019s Office of  Special Education and Rehabilitation Services, Rehabilitation Services  Administration, Office of Special Education Programs, and the Workforce  Innovation Technical Assistance Center and National Technical  Assistance Center on Transition\u2014two technical assistance centers  funded by Education. We also convened three discussion groups with  state VR agency directors or their designated representatives, with a total  of 39 participants from 29 separate agencies (10 to 12 agencies  represented per discussion group). We invited all state VR agencies to  participate through our survey and through the conference organizer  (CSAVR). To assess how Education addressed challenges reported by  state VR agencies, we compared actions taken by Education to standards  for internal control in the federal government. For further details on our  objectives, scope, and methodology, see appendix I.", "We conducted this performance audit from February 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["The Rehabilitation Act of 1973 (Rehabilitation Act), as amended by  WIOA, authorizes a number of grant programs to support employment  and independent living for persons with disabilities, including the State  Vocational Rehabilitation Services program. This program is the primary  federal government effort to help individuals with disabilities prepare for  and obtain employment. An individual who is deemed eligible works with  state VR agency staff to prepare an individualized plan for employment,  which describes the employment goal and the specific services needed to  achieve that goal. Education\u2019s Rehabilitation Services Administration  (RSA) awards funds to state VR agencies through the program to help  individuals with disabilities engage in gainful employment. States must  provide a 21.3 percent nonfederal match of these funds. In fiscal year  2016, total program funds for VR\u2014including state match funds\u2014were  $3.81 billion.", "States, territories, and the District of Columbia generally designate a  single agency to administer the program, although, depending on state  law, states may designate more than one agency. Twenty-three states  have two separate agencies, one that exclusively serves blind and  visually impaired individuals (known as agencies for the blind) and  another that serves individuals who are not blind or visually impaired  (known as general agencies). Twenty-seven states, the District of  Columbia, and the five territories have a single combined agency that  serves both blind and visually impaired individuals and individuals with  other types of impairments (known as combined agencies). In total, there  are 79 state VR agencies."], "subsections": [{"section_title": "Pre-employment Transition Services", "paragraphs": ["In 2014, WIOA amended the Rehabilitation Act to require state VR  agencies to provide students with disabilities with pre-employment  transition services. According to information Education provided with its  regulations, WIOA emphasized the provision of services to students with  disabilities to ensure that they have meaningful opportunities to receive  training and other supports and services they need to achieve  employment outcomes. WIOA requires states to make pre-employment  transition services available statewide to all students with disabilities in  need of such services, who are eligible or potentially eligible, regardless  of whether a student has submitted an application for services from a  state VR agency. In this context, students with disabilities include those  with an individualized education program (IEP) for special education  services through the school system, those receiving an accommodation  for their disability, and others. In information provided with the  regulations, Education stated that state VR agencies should work closely  with school systems and others to identify these students.", "WIOA requires each state to reserve at least 15 percent of a state\u2019s VR  allotment for a fiscal year for pre-employment transition services for  students with disabilities. If a state cannot use or match all of its VR  funding, it relinquishes funds to the federal government and the state\u2019s  total award amount is then reduced. However, the state must still  reserve 15 percent of what it did not relinquish for the provision of pre- employment transition services.", "WIOA established required activities under pre-employment transition  services that states must make available to students with disabilities.", "Education has provided states with additional information about each of  the activities (see table 1).", "After making the required pre-employment transition services available, if  a state has funding remaining, WIOA lists nine other \u201cauthorized\u201d  activities that a state may implement. For example, in providing the  authorized activities, states may, among other things, provide training to  local VR and educational service providers; coordinate transition services  with local educational agencies; and disseminate information about  innovative, effective, and efficient approaches to achieve the goals (see  appendix II for a full listing of authorized activities). Education\u2019s guidance  indicates that such authorized activities should improve the transition of  students with disabilities from school to postsecondary education or an  employment outcome and support the arrangement or provision of the  required activities.", "WIOA also requires local offices of state VR agencies to conduct  coordination responsibilities, which includes coordinating with state and  local educational agencies to ensure the provision of pre-employment  transition services. These can be conducted concurrently with the  \u201crequired\u201d activities, and states can use the reserved funds for them.  Examples of coordination responsibilities that local offices of state VR  agencies must undertake are attending meetings, when invited, about  IEPs; and working with the local public workforce system and employers  to develop work opportunities for students with disabilities.", "In support of this coordination and in recognition that VR and educational  agencies both offer transition services to students, WIOA requires that VR  agencies establish or update their interagency agreements with states  educational agencies. Interagency agreements between the state VR  and educational agencies are intended to describe the steps each agency  will take to implement pre-employment transition services and determine  the roles and responsibilities of each agency, including financial  responsibilities and procedures for identifying students in need of pre- employment transition services."], "subsections": []}, {"section_title": "Federal Guidance, Assistance, and Monitoring", "paragraphs": ["Following the passage of WIOA, Education, through its Rehabilitation  Services Administration (RSA), issued regulations and guidance to  implement pre-employment transition services requirements (see fig. 1).", "Education also provided technical assistance to state VR agencies  through webinars, conference calls, and presentations at conferences.  For example, Education presented information to state officials in a series  of webinars about the new programmatic and financial processes and  procedures related to pre-employment transition services just after the  final regulations were issued in 2016. In addition, Education funded  technical assistance centers to help state VR agencies and their partners  answer questions and provide training about WIOA. Two of these centers  are the Workforce Innovation Technical Assistance Center (WINTAC) and  the National Technical Assistance Center on Transition (NTACT). Each  center focuses its efforts on a specific set of issues: WINTAC on helping  state VR agencies implement WIOA requirements, including pre- employment transition services; and NTACT on helping state VR and  educational agencies improve outcomes for students receiving transition  services.", "RSA is to conduct periodic monitoring visits to assess state VR agencies\u2019  implementation of the VR program, including pre-employment transition  services. RSA is to monitor states for compliance with the  administrative, financial, and performance requirements of the program,  as well as identify technical assistance needs at individual state VR  agencies. According to Education officials, RSA plans to follow a 5-year  monitoring cycle that began in fiscal year 2017 and will generally include  monitoring visits to 10 states per year through fiscal year 2021. In fiscal  year 2017, Education visited 14 VR agencies in 10 states, and in fiscal  year 2018, Education plans to visit 15 VR agencies in 12 states."], "subsections": []}]}, {"section_title": "Most States Reported Expanding Their Transition Services to Students and Developing Their Administrative Capacity to Provide These Services", "paragraphs": [], "subsections": [{"section_title": "Most State Vocational Rehabilitation Agencies Reported Expanding Their Services for Students with Disabilities", "paragraphs": ["Most state VR agencies that responded to our survey reported expanding  services for students with disabilities since WIOA\u2019s enactment in July  2014 by either serving more students through pre-employment transition  services or by initiating new or additional services. Most state VR  agencies that responded to our survey reported that they provided the  five required activities to more students with disabilities since WIOA\u2019s  enactment (see fig. 2).", "State VR agencies indicated in their survey responses that they had  previously provided and continue to provide transition services to  students who apply and are eligible for the VR program, and many of the  activities were not entirely new to state VR agencies. Most agencies that  responded to our survey reported providing each of the required activities  to students with disabilities before the enactment of WIOA, while fewer  reported initiating these services since enactment (see fig. 3).", "Of the five required activities, instruction in self-advocacy saw the biggest  expansion during this time. In information provided with the regulations,  Education described instruction in self-advocacy as, for example,  classroom lessons in which students learn about their rights,  responsibilities, and how to request accommodations or services and  supports needed during transition. In written comments on our survey, 10  state VR agencies reported partnering with other organizations, such as  universities or centers for independent living, to provide instruction in self- advocacy. One agency reported on our survey that it offers peer  mentoring as an additional component of self-advocacy services, and  another reported providing self-advocacy and mentoring for deaf-blind  students by deaf-blind adults. In October 2016, based on views of an  expert panel that we convened on autism spectrum disorders and  transitioning youth, we reported that it is critically important that all  transitioning youth, regardless of their level of disability, be given the  opportunity to state their own preferences to the extent of their  capabilities to reach their maximum independence.", "State VR agencies reported developing additional programming as a  result of WIOA\u2019s enactment, including expanding programs for more  students, adding new opportunities and experiences, and creating new  partnerships. Officials from all four of the state VR agencies we  interviewed said they had programs in place prior to WIOA that offered  activities similar to pre-employment transition services, but they have  since expanded these services or created additional programs for  students with disabilities. For example, an official we interviewed from the  Idaho Division of Vocational Rehabilitation said the agency had previously  worked to enroll students in the VR program prior to graduation, but has  since begun developing new programming and instruction aimed at  serving larger groups and providing other services, such as a paid work  experience. An official from Maryland\u2019s Division of Rehabilitation Services  said many of the services they previously offered were during school  hours, and students had limited access to these services if they wanted to  stay in class. The agency has since added services after school and  during the summer, such as opportunities for students to meet with  employers, according to Maryland officials. Officials from the Illinois  Department of Human Services, Division of Rehabilitation Services, said  that while the agency had previously provided work-based learning  experiences, it has since expanded the number of spots available for  students in an existing program and created a new work-based learning  program that is a collaboration between school districts, a community  rehabilitation partner, and businesses.", "Providing new services with specific requirements to an expanded  population has been a significant change, according to officials in one of  the state VR agencies we interviewed and in all three of our discussion  groups. For example, officials from Maryland\u2019s Division of Rehabilitation  Services said that, while they provided all five required activities before  WIOA, they now provide the activities to a younger population and make  the activities available statewide. State VR officials in all three of our  discussion groups said that providing pre-employment transition services  allows them to provide these services to more students with disabilities or  at an earlier age, which will likely have positive effects on students\u2019  transition from school to work. For example, officials in one discussion  group noted that the provision of pre-employment transition services is  increasing awareness, enhancing services, and increasing the likelihood  that VR program outcomes will improve. In another discussion group,  officials said their agencies had already seen benefits from pre- employment transition services and the services have raised students\u2019  expectations for the types of jobs they might obtain.", "While 32 of the state VR agencies responding to our survey reported that  they had identified all potentially eligible students, another 37 reported  that they were currently in the process of identifying these students.  State VR officials in all three of our discussion groups and who we  interviewed in two of four state VR agencies said they have had  challenges finding the population eligible for services. In written  comments on our survey, one agency reported that while statewide  information on students was not readily available, officials worked with the  state educational agency to identify potentially eligible students, including  more than 137,000 students with an IEP and an estimated 13,000  additional students that do not have an IEP. We previously reported on  the difficulties state VR officials faced in obtaining data they could use to  identify other youth with disabilities.", "Compared to combined and general agencies, more agencies for the  blind reported in our survey that they did not provide the five required  activities to more students with disabilities, and officials in some of these  agencies said they can serve a much smaller population. For example, 57  percent (12 of 21) of agencies for the blind reported providing job  exploration counseling to more students, compared to 83 percent (25 of  30) of combined agencies and 91 percent (20 of 22) of general agencies  since WIOA enactment. Similarly, 67 percent (14 of 21) of agencies for  the blind reported providing work-based learning experiences to more  students, compared to 83 percent (25 of 30) for combined agencies and  86 percent (19 of 22) for general agencies. Officials in some of these  agencies for the blind and from the National Council of State Agencies for  the Blind (NCSAB) told us in interviews that agencies for the blind have  far fewer potentially eligible students they could serve compared to other  types of agencies. For example, officials we interviewed with Idaho\u2019s  Commission for the Blind and Visually Impaired said that Idaho has only  40 students being provided pre-employment transition services. In  contrast, the Idaho Division of Vocational Rehabilitation reportedly  provided at least one pre-employment transition service to approximately  700 students in a one-year period.", "The ability of agencies for the blind to serve more students may also be  restricted because they are not able to provide pre-employment transition  services to younger students in some cases, according to officials with  NCSAB and Idaho\u2019s Commission for the Blind and Visually Impaired.  NCSAB officials told us that state VR agencies have traditionally provided  VR services to youth who are blind or visually impaired at younger ages  compared to general agencies that serve youth with other types of  disabilities. The ages at which students may be provided pre-employment  transition services varied by agency, based on responses to our survey,  but the most common age range reported across all types of agencies  was 14 to 21 years old. According to Education officials, as a result of  WIOA, two agencies in the same state must agree on a common age  range during which students can be provided pre-employment transition  services. Most agencies in states with two VR agencies responding to our  survey (35 of 44) reported agreeing on an age range for receiving pre- employment transition services. NCSAB officials said that in some  cases agencies for the blind have had to raise the minimum age at which  they would begin providing services to students. Officials with Idaho\u2019s  Commission for the Blind and Visually Impaired, for example, said they  would prefer to begin services at younger ages because their agency has  the resources to do so. However, officials with Idaho\u2019s Division of  Vocational Rehabilitation said they do not have the resources to provide  pre-employment transition services to the relatively large number of  students with disabilities at a younger age."], "subsections": []}, {"section_title": "Most State Vocational Rehabilitation Agencies Reported Building Administrative Capacity", "paragraphs": ["State VR agencies reported taking a range of actions to build their  administrative capacity to implement pre-employment transition services.  These actions included building staff capacity and expanding contracts  with services providers.", "Building staff capacity. Most state VR agencies reported building  staff capacity to facilitate and carry out the requirements of pre- employment transition services by:", "Establishing a new specialist position. More than half (45 of 74) of  VR agencies reported in our survey establishing at least one new  transition specialist position specifically for pre-employment  transition services. For example, the Idaho Division of Vocational  Rehabilitation reported establishing this position and officials told  us that they hired a specialist who was previously the transition  coordinator for the state\u2019s educational agency. In written  comments on our survey, a respondent from another state  commented that their agency has hired 20 pre-employment  transition services specialists to provide the five required activities.  Officials we interviewed from Maryland\u2019s Division of Rehabilitation  Services said they added six salaried positions dedicated to  providing pre-employment transition services. Another agency  responding to our survey reported dedicating a supervisor and 15  percent of their counselors exclusively to this purpose.", "Training staff. All 74 state VR agencies reported providing training  on pre-employment transition services to their staff. For example,  in written comments, one agency reported developing training  tools for its counselors, such as answers to frequently asked  questions, posting guidance on its intranet, and having WINTAC  provide training.", "Expanding contracts and agreements with service providers. In  addition to being provided by state VR agency staff, pre-employment  services can be offered through a variety of methods and service  providers, and many state VR agencies reported entering into new or  additional contracts with service providers or expanding contracts with  existing providers. Pre-employment transition services can be  provided directly by state VR agency staff or through agreements with  third parties, such as community rehabilitation programs, independent  living agencies, public colleges and universities, and school districts.  In our survey, 62 of 74 agencies reported entering into new or  additional contracts with third-party providers to provide pre- employment transition services. Officials we interviewed from three of  four state VR agencies said they either established or expanded  existing contracts and agreements. For example, officials from the  Illinois Department of Human Service, Division of Rehabilitation  Services told us that after the enactment of WIOA, they expanded  arrangements with independent living centers and initiated a new  program that provides students with work experiences.", "Agencies reported several examples of approaches using third  parties: establishing contracts with community rehabilitation programs to partnering with independent living agencies to work with youth on entering into provider agreements with local workforce centers to  assist with providing job preparation and a paid work experience, developing programs with public colleges and universities focused  on financial literacy and self-advocacy, and  contracting with individual school districts to deliver services in the  school environment."], "subsections": []}]}, {"section_title": "States Reported Challenges Using Reserved Funds, Updating Interagency Agreements, Among Others, and Reported Needing More Assistance from Education", "paragraphs": [], "subsections": [{"section_title": "Fewer Than Half of States Reported Using All Reserved Funds, and Some Reported a Need for More Information on Allowable Costs", "paragraphs": ["Twenty-one of 56 states (50 states, 5 territories, and the District of  Columbia) reported using the full amount of grant funds they reserved for  pre-employment transition services for students with disabilities for fiscal  year 2016, according to the most recent full year of data available from  Education (see fig. 4).", "In aggregate, states reportedly expended approximately $357 million out  of the approximately $465 million reserved (about $108 million less than  the target) for fiscal year 2016. For fiscal year 2015, states reportedly  expended approximately $324 million on pre-employment transition  services out of the approximately $453 million reserved for that purpose  (about $130 million less than the target).", "Results from our 2017 survey of state VR agencies revealed similar  trends: Fewer than half the 74 agencies reported that they used at least  15 percent of their VR grant allotment each year. Thirty-two of the 74  agencies responding to our survey reported using the minimum required  15 percent of federal VR grant funds reserved for the provision of pre- employment transition services for fiscal years 2016 and 2017. For  fiscal year 2015, 25 agencies reported using the required 15 percent  minimum reserved funds.", "Officials we interviewed in two of four state VR agencies and officials in  all three discussion groups explained that some of the services they  generally provided to participants in the VR program are not allowable for  the funds reserved for pre-employment transition services. These  expenditures included transportation, tuition, and others associated with  individualized services. For example, officials in Maryland\u2019s Division of  Rehabilitation Services told us that transportation costs for students to get  to the place where the services are provided are not covered. VR agency  officials in two of our discussion groups told us that assistive technology,  such as hearing aids, could not be paid for with the 15 percent of funds  reserved for pre-employment transition services. In another group,  participants said that some expenditures, such as tuition or for the  services of a job coach to help students with the most significant  disabilities, could not be paid with reserved funds. In information provided  with the regulations, Education stated that it does not have the statutory  authority to allow these expenditures to be paid for with the funds  reserved for pre-employment transition services and these services must  be paid with other VR funds.", "When it promulgated its final regulations, Education noted that state VR  agencies would experience challenges in using their funds because many  of the services provided to students with disabilities prior to WIOA\u2019s  enactment would not qualify as pre-employment transition services.  Education reviewed past expenditures for a subset of students and  estimated that 82 percent of state VR agencies\u2019 reported purchases for  those students would not meet the statutory definition of pre-employment  services under WIOA. Education concluded that states would have to  reach a larger number of students with disabilities in order to meet the  spending requirement and that state VR agencies would need to develop  and implement aggressive strategies to expend these funds in these  initial years of implementation.", "According to WINTAC officials, state VR agency officials are commonly  unclear about what kinds of activities they can provide using the funds  reserved for pre-employment transition services. For instance, they said  that states must make required activities (e.g. work-based learning  experiences and self-advocacy) available to all students with disabilities  before providing authorized activities (e.g. model projects, partnerships),  in accordance with WIOA. However, state officials have commonly  interpreted that to mean that all students must actually receive the  required activities before the agency can begin providing other activities,  according to WINTAC officials. WINTAC officials explained that states  may have been conducting authorized or coordination activities without  knowing these activities could be paid for with the reserved funds.", "None of the state VR agency officials we interviewed said they had yet  moved beyond providing required activities to providing authorized  activities. Officials from two of the agencies we interviewed told us they  were in the process of planning authorized activities. For example,  officials with the Idaho Division of Vocational Rehabilitation said they  were completing an assessment of their needs, which would help them  plan authorized activities. Officials we interviewed from the other two  agencies\u2014the Idaho Commission for the Blind and Visually Impaired and  the Illinois Division of Rehabilitation Services\u2014said they did not have the  resources to provide authorized activities or were unsure about how to  properly transition from required to authorized activities under the current  guidance.", "Education communicated with states on broad requirements but provided  little detailed information directly to states on the allowable use of funds  reserved for pre-employment transition services. Education provided  information when it promulgated final regulations, in grant award  notifications, on its website, and in presentations at conferences. In each  of these formats, Education described activities on which states could not  spend funds, but provided little detailed information on what expenditures  are allowed.", "Regulations: Education\u2019s final regulations restate many provisions in  WIOA, including the prohibition on using any of the reserved funds for  administrative costs. In responding to comments it received on its  proposed regulations, Education provided examples of services that  commenters requested would be considered pre-employment  transition services, such as, postsecondary education, on-the-job  supports, job coaching, travel expenses, and uniforms. In information  provided with the regulations, Education explained that it had no  statutory authority to expand or limit the pre-employment transition  services listed in WIOA. Education stated that a state VR agency can  allocate costs associated with staff time spent providing pre- employment transition services, including an employee\u2019s salary and  fringe benefits, to the funds reserved for pre-employment transition  services. However, Education did not provide additional information  on what specific types of expenditures states were permitted to spend  funds on in providing pre-employment transition services as required  by WIOA.", "Grant award notification: The notification that accompanies each  state\u2019s VR grant award lists the three sets of activities for which the  reserved money can be used: required, authorized, and coordination;  it lists each of the activities as they are listed in WIOA. It also  discusses the prohibition on using any of the reserved funds for  administrative costs. It does not list or describe what specific  expenditures the reserved funds can be used for to undertake each of  the listed activities.", "Education\u2019s website: A list of frequently asked questions on  Education\u2019s website outlines the requirements of WIOA and explains  that the reserved funds must only be used to provide pre-employment  transition services as listed in WIOA. Similar to the regulations, the  website explains that the total costs of an employee\u2019s salary and  fringe benefits may be allocated to the reserved funds if that  employee is providing only pre-employment transition services to  students with disabilities but does not include additional detail for any  other expenditures.", "Presentation materials: In one set of presentation materials,  Education provided an example of a potential allowable expenditure  for one of the required activities, work-based learning. It did not  include information on allowable expenditures for the other four  required activities, or any of the nine authorized activities. In another  set of presentation materials, Education provided examples of  services for each of the five required pre-employment transition  services activities. According to Education officials, these examples  would be allowable expenditures.", "Education, however, provided the most detailed information through  WINTAC. WINTAC\u2019s website provided answers to some specific  questions on the use of funds reserved for pre-employment transition  services. In one set of frequently asked questions, WINTAC included a  list of 28 questions with detailed answers, including what specific  expenditures may be charged to the reserved funds. For example, based  upon guidance issued by RSA, the website explains that reserved funds  may be used to pay for auxiliary aids and services, such as interpreters, if  they are directly related to one of the five required pre-employment  transition services activities. However, the reserved funds may not be  used to pay for the costs of foreign language interpreters because they  are not an auxiliary aid or serve that is required due to the individual\u2019s  disability. WINTAC\u2019s website also included answers provided by  Education on 13 other frequently asked questions. Information included  that reserved funds cannot be used to pay for the cost of an assessment  to determine whether a student met the definition of a student with a  disability; they can be used to pay for items required by an employer for  work-based learning activities.", "Some state VR agencies we surveyed and those that participated in one  of our three discussion groups said they would like more detailed  information directly from Education. Seven survey respondents reported  that they would like Education to provide answers to their specific  questions. In one discussion group, participants noted that when states  approach WINTAC with a new question, the technical assistance center  sometimes needs to obtain the answer from Education. This process can  be inefficient at times. In addition, the answer may not be broadly shared  with all the states, limiting its benefit, whereas information issued directly  from Education could help communicate the answer more efficiently and  broadly. One survey respondent reported, for example, that guidance  varied by source\u2014training, Education\u2019s RSA staff, or technical assistance  center websites\u2014and said that Education should provide all state VR  agencies with the same information at the same time.", "According to standards for federal internal control, management should  communicate externally through reporting lines so that external parties  can help the entity achieve its objectives and address related risks.  Management should also periodically evaluate its methods of  communication so it has the appropriate tools to communicate quality  information throughout and outside of the entity on a timely basis.  Education officials said that during fiscal years 2015 and 2016, states  were unclear about allowable expenditures using reserved funds, and that  they plan to clarify guidance as they learn about the issues from states  during their monitoring. According to Education officials, they respond to  issues that need clarification and provide answers to questions as part of  formal monitoring visits or through other communications with state  agencies. Education officials said they expect to complete a round of  monitoring visits to all states by the end of fiscal year 2021. However, an  Education official said they have no timeframe for providing further  information on allowable costs to states. With better information on  timeframes for when this information will be provided, states would be  able to better plan their use of the remaining funds reserved for pre- employment transition services."], "subsections": []}, {"section_title": "State VR and Educational Agencies Have Begun Collaborating through Joint Training and Guidance, But Fewer Than Half Have Updated Their Interagency Agreements", "paragraphs": ["Most state VR agencies (61 of 74) that responded to our survey reported  providing training on pre-employment transition services along with their  state\u2019s educational agency since WIOA\u2019s enactment in 2014. Joint  training may help coordination between state VR and educational  agencies, as state VR officials participating in our discussion groups said  that some educators were not familiar with pre-employment transition  services. Similarly, an official we interviewed from Idaho\u2019s state  educational agency said it was common in the past for teachers and VR  counselors not to know one another. Joint trainings provided to VR staff  and teachers have improved these relationships, and teachers can invite  VR counselors to students\u2019 IEP meetings, the official said.", "Joint training includes staff presentations at conferences and participation  in other training sessions. For example, officials we interviewed from the  Idaho Division of Vocational Rehabilitation said their transition coordinator  has given presentations to education directors around the state about  changes resulting from WIOA and how the inclusion of pre-employment  transition services can affect special education for the school districts. In  written comments on our survey, one agency reported that it co-sponsors  an annual conference with VR, special education, developmental  services, and other public and private entities. During this conference,  they plan how to improve services for students with disabilities.", "About one-third of state VR agencies (23 of 74) reported issuing joint  guidance with their state\u2019s educational agency, a recommended practice  according to WINTAC. The other two-thirds of survey respondents  reported that joint guidance was either in progress (27 of 74) or that they  had not issued such guidance (23 of 74). Joint guidance can include  written policies and procedures that are created by and provided to state  VR and educational agency staff. For example, in written comments on  our survey, one agency reported developing written policies and guidance  for transition counselors that the state educational agency endorses and  provides to special education staff. In Maryland, VR and special  education officials told us that they issued guidance through jointly  created materials on pre-employment transition services.", "Less than half the state VR agencies that responded to our survey (34 of  74) reported updating their interagency agreement with their state\u2019s  educational agency, which is intended to facilitate collaboration and  coordination on delivery of pre-employment transition services. The  majority of agencies reported that their agreement is either in progress  (37 of 74) or not yet updated (3 of 74). These required agreements outline  how VR agencies and schools will plan and coordinate service provision,  provide for each agency\u2019s responsibilities, including financial  responsibilities, and provide for student outreach procedures, among  other things.", "Discussion group participants and CSAVR representatives emphasized  the value of completing their interagency agreements with the state  educational agency. In one group, officials whose agencies had  completed their agreements said they are essential for state VR agencies  to provide services in schools. Participants in another discussion group  explained that once they have a state-level agreement in place, they can  discuss what services school districts need for students and then  determine how to provide those services. According to state educational  agency officials we interviewed, Individuals with Disabilities Education Act  (IDEA) requirements are similar to requirements for pre-employment  transition services, and they need to coordinate with VR officials at both  the state and local levels to agree on each agency\u2019s assigned tasks and  expectations. These officials said state VR and educational agencies  should coordinate funding to make services available where they are  needed and to complement each other\u2019s transition efforts. Illinois\u2019s  agreement, for example, specifies that the state educational agency is  responsible for providing outreach, guidance, and coordination to local  educational agencies regarding the provision of pre-employment  transition services. According to the agreement, Illinois\u2019s VR agency is  responsible for providing pre-employment transition services, both directly  and through cooperative agreements with local educational agencies, and  for providing written information to the state educational agency regarding  services available to students with disabilities. Officials we interviewed  with CSAVR said state VR agencies that have made progress in  developing their interagency agreements with state educational agencies  tend to be more successful in implementing pre-employment transition  services.", "According to Education officials, Education provides guidance and  technical assistance on interagency agreements to states as part of  Education\u2019s monitoring or when asked by states. Education officials said  they provide technical assistance during periodic monitoring visits, which  are currently limited to about 10 states per year from fiscal years 2017- 2021; by helping state VR agencies develop policies and procedures; and  by making sure pre-employment transition services are coordinated with  the state educational agency and through interagency agreements.  According to Education officials, there is no statutory provision authorizing  Education to identify states that have not updated their interagency  agreement. Education officials said they do not collect information from  state VR agencies on the status of these agreements except when they  conduct monitoring visits in specific states. In addition, Education officials  said that when monitoring, they may meet with state educational agency  partners to help them understand the new components of pre- employment transition services in an agreement, or they may refer the  state agencies to WINTAC or NTACT resources. Providing assistance  during monitoring may be helpful for some states. However, given that  less than half of state VR agencies we surveyed reported updating and  finalizing their agreements and Education officials say they will take  another three years to complete this round of monitoring, additional action  by Education may be needed to raise awareness among the remaining  states about the importance of these agreements to help states  coordinate services to students with disabilities. Additional action could  include, for example, conducting earlier state outreach or monitoring to  assess state progress on finalizing the interagency agreements and  offering technical assistance when appropriate.", "However, Education officials said there is no requirement that state  educational agencies provide pre-employment transition services to meet  their obligations to IDEA-eligible students with disabilities under part B of  the Individuals with Disabilities Education Act. As a result, WINTAC and  participants in our discussion groups explained that it can be difficult to  get state educational agencies to work with state VR agencies to update  interagency agreements. Education officials said that WIOA requires state  VR agencies to update these interagency agreements to include pre- employment transition services but they do not track their completion  because states are not required to report when the agreements are  finalized. Moreover, Education officials said they have heard from states  that some reasons that interagency agreements are not specifically  updated are that the agreements are written broadly enough so that they  can remain in effect when there are additional changes to the law, the  details of actual practices are rarely reflected in the high level of an  interagency agreement, and that modifications to agreements are time- consuming and would not result in changes to the interagency  coordination practice.", "Without an updated agreement between the state VR and educational  agencies, efforts to collaborate on pre-employment transition services  may be hindered. Officials with the National Technical Assistance Center  on Transition (NTACT) told us that some of the state agencies for which  they provided in-depth technical assistance were not working closely  together. Officials from two of the three state educational agencies we  interviewed said they viewed pre-employment transition services as  primarily the responsibility of the VR agency. State VR officials in all three  of our discussion groups said they have experienced coordination  challenges, including difficulty determining each agency\u2019s responsibilities  for providing pre-employment transition services, obtaining data needed  to identify and provide services to students, and determining which  agency will pay for which services, among other challenges. Interagency  agreements can help to address these types of issues.", "Federal internal controls recommend that management communicate with  and obtain information to identify, analyze, and respond to risks related to  achieving defined objectives, such as those that can arise from new laws  and regulations. Moreover, we found in prior work that it is important to  establish ways to operate across agency boundaries, with measures such  as developing common terminology and fostering open lines of  communication. A lack of collaboration between state VR and  educational agencies increases the risk that some students will not  successfully transition from school to post-school activities. In addition,  our prior work has identified lack of collaboration among and between  federal agencies and state and local governments as a challenge to  effective grant implementation. Interagency agreements are intended to  serve as a mechanism related to collaboration practices, which include  defining a common outcome, establishing joint strategies, and agreeing  on roles and responsibilities of each agency. By taking additional steps,  such as discussing the benefits of finalizing interagency agreements, and  reminding states of existing technical assistance resources pertaining to  updating and finalizing interagency agreements, Education would help  raise awareness about the importance of the agreements and be better  positioned to help states efficiently and effectively coordinate services to  students with disabilities."], "subsections": []}, {"section_title": "States Reported That Best Practices Would Be Useful to Them in Implementing Services and Could Help Them Address Challenges", "paragraphs": ["Most state VR agencies (63 of 74) that responded to our survey reported  that additional assistance with identifying best practices would be useful  to their agencies. Similarly, state VR officials in all three of our  discussion groups spoke to the need for Education to develop and  disseminate best practices to help states, for example, comply with  program requirements. WIOA requires Education to highlight best state  practices on pre-employment transition services. Best practices may  also help states address the challenges they reported facing in  implementing and administering pre-employment transition services for  students with disabilities, such as (1) coordinating with state educational  agencies, (2) using VR resources more efficiently and effectively to help  states balance providing pre-employment services with the full VR  program, and (3) collecting data on services provided, and (4) updating  data tracking systems.", "Coordinating service delivery with state educational agencies.", "Over half (41 of 74) of state VR agencies reported in our survey that  additional assistance on coordinating with state educational agencies  would be useful for them. Similarly, officials from all three state  educational agencies we interviewed said they would like additional  assistance on interagency collaboration. Officials with NTACT told us  that some of the state agencies for which they provided in-depth  technical assistance were not working closely together. Officials from  two of the three state educational agencies we interviewed said they  viewed pre-employment transition services as primarily the  responsibility of the VR agency. State VR officials in all three of our  discussion groups said they have experienced coordination  challenges, including difficulty determining each agency\u2019s  responsibilities for providing pre-employment transition services,  obtaining data needed to identify and provide services to students,  and determining which agency will pay for which services, among  other challenges. An official we interviewed from the Idaho  Department of Education said it would be helpful to have more clearly  defined roles, obligations, and means of sharing data between the  state-level agencies. In written responses to our survey, one  respondent said having examples of highly successful collaborations  between a state educational agency and state VR agencies would be  helpful. According to Education\u2019s guidance, a student\u2019s transition from  school to post-school activities is a shared responsibility and  coordination and collaboration between the state VR and educational  agencies is essential. However, according to information Education  provided with the regulations, while some have sought clarification  and additional guidance in this area, Education determined that  decisions on agencies\u2019 responsibilities must be made at the state level  to allow states maximum flexibility allowed under the law. In the  absence of more specific guidelines for how state agencies should  collaborate, best practices from other states could provide helpful  examples.", "Balancing pre-employment transition services with VR services.", "Several state VR agencies in both our written survey responses and  in discussion groups noted that by increasing services mandated for  pre-employment transition services for students, they have had to  reduce VR services to adults, which has made it difficult to balance  the two programs. In issuing its final regulations, Education  acknowledged that reserving funds would decrease amounts available  for the full VR program, resulting in a transfer of benefits from  individuals historically served by VR to students with disabilities in  need of transition services. According to state VR directors with the  National Council of State Agencies for the Blind (NCSAB), agencies  for the blind have had to restrict VR services while also not being able  to use all of the funds reserved for pre-employment transition services  for students with disabilities because VR services cannot be paid with  reserved funds. Most state VR agencies that completed our survey  (50 of 74) reported that balancing pre-employment transition services  with other vocational rehabilitation services was moderately difficult,  very difficult, or extremely difficult during federal fiscal year 2017.", "Collecting data. Data collection was one of the top challenges  identified by state VR agencies in our survey, with 48 of 74 reporting  that collecting data on the provision of pre-employment transition  services was moderately difficult, very difficult, or extremely difficult  during fiscal year 2017. Prior to WIOA, agencies collected and  reported data only on individuals who had applied and enrolled in the  VR program. For pre-employment transition services, agencies now  collect data on who provided and received each of the five required  activities, including for individuals who have not submitted a VR  application. State VR officials in two of our three discussion groups  said that they have experienced challenges collecting sensitive  information (such as social security numbers) for minors and  collecting data on individuals for group services. Officials in one of the  three discussion groups also said that these problems are particularly  significant when trying to collect information on potentially eligible  students for whom they do not have open VR cases. These students  could include all those with an IEP and those that receive  accommodations in school based on their disability, among others.", "Updating data tracking systems. Updating data systems was also  one of the top challenges reported in our survey, and was cited as an  additional administrative burden by state VR officials in our discussion  groups. Specifically, 53 of 74 state VR agencies reported that it was  moderately difficult, very difficult, or extremely difficult to update  tracking systems to collect and report financial and service data on  pre-employment transition services during fiscal year 2017. According  to a state VR agency official we interviewed, updating that state\u2019s  tracking system is difficult because data collected on pre-employment  transition services\u2014such as the type of service provider and how the  service was provided\u2014do not fit well into a case management system  designed for the full VR program. Updating these tracking systems  also created an additional administrative burden for VR agency staff,  according to officials from all three discussion groups and three of the  four state agencies that we interviewed. Officials in two of our three  discussion groups said that they have one or more full-time staff  members doing only administrative tasks or that they have had to hire  additional staff to handle data tracking.", "Education officials said that they plan to document and share best  practices with states; however, they said the agency does not have a final  written plan for managing these efforts because plans are still under  discussion in light of inquiries received. Education officials said they are  collecting information on state VR agencies\u2019 practices through monitoring  and they are sharing this information with WINTAC\u2014information that  could be useful for sharing best practices across states\u2014but a  comprehensive summary of states\u2019 efforts will not be available until after  Education officials conduct monitoring visits of all states by the end of  fiscal year 2021. In addition, in a 2015 technical assistance circular,  Education recommended that state VR agencies consult with other  federal, state, and local agencies to identify best practices for providing  pre-employment transition services to students and youth with a variety of  disabilities. Education officials also said that they are looking for  opportunities, such as webinars and conferences, to share information  with states. However, Education does not have set timeframes and has  not detailed the specific steps and activities for fully leveraging knowledge  to address common challenges, or for finalizing and disseminating best  practices. By doing so, Education would be better positioned to provide  best practices information to state VR agencies to better serve students  with disabilities who are transitioning from high school."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Pre-employment transition services are designed to help students with  disabilities begin to identify career interests and move from high school to  post-secondary education or employment. Using federal funding, state  VR agencies reported that they have generally enhanced their services  and staff capacity and begun to coordinate with state educational  agencies. As a result, state VR agencies generally reported serving an  increased number of students. However, most states reported they have  not used all the funds reserved for pre-employment transition services or  updated interagency agreements between state VR and educational  agencies. Education has developed multiple forms of guidance and made  presentations, either directly or through its technical assistance centers.  Education officials said they plan to issue additional guidance as needed.  However, without clear timeframes for the issuance of this guidance,  states do not know when information will become available to help them  make decisions on allowable expenditures for pre-employment transition  services. As a result, opportunities may be missed to identify and serve  all students who might be eligible, and unserved students could continue  to face difficulties preparing for a future of meaningful post-secondary  education or employment. In addition, agreements between state VR and  educational agencies can help facilitate the effective coordination of and  financial responsibility for services. Finally, WIOA requires Education to  highlight best state practices for implementing pre-employment transition  services. Developing a written plan with specific timeframes would help  Education provide states with information on best practices, such as  balancing service delivery between pre-employment transition services  and other VR services and collecting data that other states may have  successfully addressed."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to Education:  The Secretary of Education should establish timeframes for providing  states with additional information on allowable expenditures of funds  reserved for pre-employment transition services. (Recommendation 1)", "The Secretary of Education should take additional steps to provide states  assistance on updating and finalizing their interagency agreements with  state educational agencies to include pre-employment transition services.  These steps could include, for example, accelerating their efforts to  discuss the benefits of finalizing interagency agreements, and reminding  states of existing technical assistance resources pertaining to updating  and finalizing interagency agreements. (Recommendation 2)", "The Secretary of Education should develop a written plan with specific  timeframes and activities for identifying and disseminating best practices  that address, as appropriate, implementation challenges for pre- employment transition services, such as those identified in this report.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to Education for review and comment.  Education\u2019s written comments are reproduced in appendix III. Education  also provided technical comments, which we incorporated into our report  where appropriate.", "Education concurred with recommendation 1 and disagreed with  recommendations 2 and 3 in the draft report.", "With regard to recommendation 1, Education stated that it agreed and will  establish projected timeframes for providing states with additional  information on allowable expenditures for the provision of pre- employment transition services. Education also stated that it intends to  provide states with additional information in at least two forums before the  end of calendar year 2018 and to review and analyze previous guidance  provided to states on allowable expenditures.", "With regard to the draft report\u2019s recommendation 2, which called for  Education to identify states that have not updated and finalized their  interagency agreements to include pre-employment transition services,  Education stated that it disagreed, in large part, because there is no  statutory provision authorizing the agency to identify such states.  However, Education is taking some steps as part of its ongoing  monitoring of the VR program to provide assistance to states that have  not updated their interagency agreements, which is consistent with the  intention of our recommendation, but more could be done. Education  stated that it will continue to offer and provide technical assistance if it  becomes known through the onsite monitoring of the VR program or  through other means that states have not updated their interagency  agreements between VR agencies and state educational agencies. It also  noted that the Rehabilitation Services Administration (RSA) and its Office  of Special Education Programs will provide information related to sources  of technical assistance, as appropriate, to VR agencies and state  educational agencies. While these steps may be helpful, given the  number of states that have not updated and finalized their agreements  and the length of time Education officials say they will take to complete  this round of monitoring where Education asks state VR agencies about  these agreements, additional action by Education may be needed to help  states more efficiently and effectively coordinate services to students with  disabilities.", "Education also wrote that while the Rehabilitation Act requires an  interagency agreement, the Individuals with Disabilities Education Act  does not contain a parallel requirement for state and local educational  agencies with respect to the provision of pre-employment transition  services or the incorporation of such discussion into the interagency  agreement. In light of these differing requirements, as we state in our  report, stakeholders with whom we spoke indicated it can be difficult to  get state educational agencies to work with state VR agencies to update  interagency agreements. Therefore, it is all the more important for  Education to take additional action to engage with VR agencies regarding  interagency agreements and to work closely with VR agencies as  Education becomes aware of states that have not updated their  agreements.", "Education suggested a modified recommendation that removed reference  to Education identifying states that have not updated and finalized their  agreements. We modified the recommendation and the report to address  Education\u2019s concerns about its authority to identify states. By taking  additional steps, such as discussing the benefits of finalizing interagency  agreements, and reminding states of existing technical assistance  resources pertaining to updating and finalizing interagency agreements,  Education would help raise awareness about the importance of the  interagency agreements and be better positioned to help states efficiently  and effectively coordinate services to students with disabilities.", "With regard to recommendation 3, Education stated that it disagreed  because it is premature to develop a timeline for the dissemination of best  practices. Education stated that the identification of \u201cbest\u201d practices,  meaning those that are clearly supported by a body of evidence derived  from valid and reliable research findings, is still emerging as states  implement the requirements. Education suggested a modified  recommendation that included planning for the dissemination of best  practices identified by states as they become available. Education stated  in its comments that as RSA identifies best practices through its  monitoring and technical assistance activities, it will, in collaboration with  its Office of Special Education Programs, consider when and how best to  disseminate this information to state VR and educational agencies. With  regard to including specific timeframes and activities in a written plan, by  detailing the specific steps Education is taking and plans to take along  with the amount of time it expects them to take, Education would be  better positioned to complete those steps in a timely manner and meet  the statutory requirement that Education highlight best state practices and  support state agencies.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of Education. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  Elizabeth H. Curda at (202) 512-7215 or curdae@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report are to examine (1) the steps states have  reported taking to implement pre-employment transition services, and (2)  the implementation challenges, if any, states reported facing, and how the  Department of Education (Education) has addressed them.", "To address these objectives, we reviewed federal laws and regulations,  and Education\u2019s guidance and technical assistance documents, including  circulars, policy directives, and transition guides. We also reviewed  expenditure data reported by state vocational rehabilitation (VR) agencies  to Education for fiscal years 2015 and 2016, the most recent full years of  data available. To assess the reliability of the data, we interviewed  Education officials about their collection of the data and their opinion of  the data\u2019s quality, completeness, and accuracy. We also electronically  tested the data for any obvious errors. We determined that the data were  reliable for the purposes of our review. We interviewed representatives  from the Council of State Administrators of Vocational Rehabilitation  (CSAVR) and the National Council of State Agencies for the Blind. In  addition, we interviewed officials from Education\u2019s Office of Special  Education and Rehabilitation Services, Rehabilitation Services  Administration, Office of Special Education Programs, and the Workforce  Innovation Technical Assistance Center and National Technical  Assistance Center on Transition\u2014two technical assistance centers  funded by Education."], "subsections": [{"section_title": "Survey of State Vocational Rehabilitation (VR) Agencies", "paragraphs": ["To address both of the objectives, we conducted a survey of all 79 state  VR agencies from October through December 2017. Seventy-four of the  79 agencies (94 percent) responded. The survey questionnaire included  open-ended and closed-ended questions about agencies\u2019 efforts to train  staff, update interagency agreements, expand services to students with  disabilities, and other issues. We took steps to minimize the potential  errors that may be introduced by the practical difficulties of conducting  any survey. Because we selected the entire population of VR agencies for  our survey, our estimates are not subject to sampling error. We  conducted pretests of the draft questionnaire with three agencies in the  population and made revisions to reduce the possibility of measurement  error from differences in how questions were interpreted and the sources  of information available to respondents.", "We reviewed state officials\u2019 submitted survey responses and conducted  follow-up, as necessary, to determine that their responses were complete,  reasonable, and sufficiently reliable for the purposes of this report. A  second independent analyst checked the accuracy of all computer  analyses we performed to minimize the likelihood of errors in data  processing. We made multiple follow-up attempts during the survey with  agencies that had not yet responded. The five agencies that did not  respond had smaller values, on average, on three characteristics related  to size, than those that did respond. The nonrespondents tended to be  smaller than respondent agencies. The sums totals for each of these  three characteristics across the five nonresponding agencies comprised  less than 1 percent of the totals for the population, suggesting a lower  possibility of material error in our results from nonresponse."], "subsections": []}, {"section_title": "Interviews and Discussion Groups with State VR Agencies", "paragraphs": ["For more in-depth information on both of the objectives, we conducted  interviews and held discussion groups. We conducted interviews with  officials in Idaho, Illinois, and Maryland. For each state, we interviewed  state VR officials and state educational agency officials. We selected  these states for variety using the following criteria: size of the special  education population (large, medium, and small); state agency  organization, for example, whether the VR agency was organized under  the state\u2019s educational or other department; and whether the state had a  second agency for serving individuals who are blind or visually impaired.", "We convened three discussion groups with state VR agency directors or  their designated officials, with a total of 39 participants from 29 separate  agencies (10 to 12 agencies represented per discussion group). These  discussion groups took place during a conference of state VR directors in  November 2017 in Greenville, South Carolina. To select participants, we  worked with the conference organizer, CSAVR, to send invitations for our  discussion groups to all conference attendees. We additionally included a  question in our survey asking respondents whether they would like to  participate in discussion groups at the conference, and contacted those  who responded affirmatively via phone and email. We moderated each  discussion to keep participants focused on the specified issues within  discussion timeframes."], "subsections": []}, {"section_title": "Criteria Applied", "paragraphs": ["To assess Education\u2019s efforts to address state VR agencies\u2019 challenges  in providing pre-employment transition services, we applied standards for  internal control in the federal government. Specifically, we applied  principle 15 related to communicating with external parties. In addition,  regarding Education\u2019s assistance to state VR agencies\u2019 efforts to update  interagency agreements with state educational agencies, we also applied  key considerations for implementing interagency collaborative  mechanisms that we have previously identified.", "We conducted this performance audit from February 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}]}, {"section_title": "Appendix II: WIOA Authorized Activities for Pre-employment Transition Services", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the United States Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["Elizabeth H. Curda, (202) 512-7215 or curdae@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Sara Schibanoff Kelly (Assistant  Director), Paul Schearf (Analyst-In-Charge), Matthew Rabe, and Paul  Wright made key contributions to this report. Also contributing to this  report were James Bennett, Kristy Kennedy, Sheila R. McCoy, Thomas  James, Jessica Orr, Sam Portnow, Carl Ramirez, Monica Savoy, Kate  Van Gelder, Adam Wendel, and James Whitcomb."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Workforce Innovation and Opportunity Act: States and Local Areas  Report Progress in Meeting Youth Program Requirements. GAO-18-475.  Washington, D.C.: June 15, 2018.", "Supplemental Security Income: SSA Could Strengthen Its Efforts to  Encourage Employment for Transition-Age Youth. GAO-17-485.  Washington, D.C.: May 17, 2017.", "Youth with Autism: Federal Agencies Should Take Additional Action to  Support Transition-Age Youth. GAO-17-352. Washington, D.C.: May 4,  2017.", "Youth with Autism: Roundtable Views of Services Needed During the  Transition into Adulthood. GAO-17-109. Washington, D.C.: October 18,  2016.", "Students with Disabilities: Better Federal Coordination Could Lessen  Challenges in the Transition from High School. GAO-12-594. Washington,  D.C.: July 12, 2012."], "subsections": []}], "fastfact": []}
{"id": "GAO-19-93", "url": "https://www.gao.gov/products/GAO-19-93", "title": "2017 Disaster Contracting: Action Needed to Better Ensure More Effective Use and Management of Advance Contracts", "published_date": "2018-12-06T00:00:00", "released_date": "2018-12-06T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Following Hurricane Katrina, Congress required FEMA to establish advance contracts for goods and services to enable the government to quickly and effectively mobilize resources in the aftermath of a disaster, like those that affected the United States in 2017.", "GAO was asked to review the federal government's response to the three 2017 hurricanes and California wildfires. This report assesses, among other things, (1) FEMA and USACE's use of advance contracts, (2) FEMA's planning and reporting of selected advance contracts, and (3) challenges, if any, with FEMA's use of these contracts.", "GAO analyzed data from the Federal Procurement Data System-Next Generation through May 31, 2018; selected a non-generalizable sample of 14 FEMA and USACE advance contracts that were competed and obligated over $50 million, or non-competed and obligated over $10 million, in response to the 2017 disasters; and interviewed FEMA and USACE officials."]}, {"section_title": "What GAO Found", "paragraphs": ["In response to Hurricanes Harvey, Irma, and Maria, as well as the 2017 California wildfires, the Federal Emergency Management Agency (FEMA) and U.S. Army Corps of Engineers (USACE) relied heavily on advance contracts. As of May 31, 2018, FEMA and USACE obligated about $4.5 billion for various goods and services through these contracts, see figure below.", "GAO found limitations in FEMA's use of some advance contracts that provided critical goods and services to survivors, including", "an outdated strategy and unclear guidance on how contracting officers should use advance contracts during a disaster, and", "challenges performing acquisition planning.", "FEMA also did not always provide complete information in its reports to congressional committees. Specifically, GAO found 29 advance contract actions that were not included in recent reports due to shortcomings in FEMA's reporting methodology, limiting visibility into its disaster contract spending.", "FEMA identified challenges with advance contracts in 2017, including federal coordination with states and localities on their use. FEMA is required to coordinate with states and localities and encourage them to establish their own advance contracts with vendors. However, GAO found inconsistencies in that coordination and the information FEMA uses to coordinate with states and localities on advance contracts. Without consistent information and coordination with FEMA, states and localities may not have the tools needed to establish their own advance contracts for critical goods and services and quickly respond to future disasters."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making nine recommendations to FEMA, including that it update its strategy and guidance to clarify the use of advance contracts, improve the timeliness of its acquisition planning activities, revise its methodology for reporting disaster contracting actions to congressional committees, and provide more consistent guidance and information to contracting officers to coordinate with and encourage states and localities to establish advance contracts. FEMA concurred with our recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Post-Katrina Emergency Management Reform Act of 2006  (PKEMRA) required the Federal Emergency Management Agency  (FEMA) to establish advance contracts\u2014those that are established prior  to disasters and that are typically needed to quickly provide life-sustaining  goods and services in the immediate aftermath of disasters. FEMA and  the U.S. Army Corps of Engineers (USACE)\u2014components of the  Department of Homeland Security (DHS) and the Department of Defense  (DOD), respectively\u2014used advance contracts to procure goods and  services provided in response to the catastrophic disasters the United  States experienced in 2017: Hurricanes Harvey, Irma, and Maria; and the  California wildfires.", "Contracts play a key role in immediate disaster response and longer-term  community recovery. In February 2018, we found that early estimates for  Hurricanes Harvey, Irma, and Maria placed them among the costliest  hurricanes in terms of federal contract obligations since 2005, when  tracking this information by hurricane began. We also found that DHS  and DOD accounted for about 97 percent of those obligations. In  September 2015, we found issues related to the use of advance  contracts, specifically that FEMA\u2019s contracting officers had limited  awareness about advance contract requirements and how to coordinate  advance contracting efforts with state and local governments. We made  several recommendations, including that FEMA provide guidance to  contracting officers to make them aware of current information on the  availability and use of advance contracts and the need to conduct  outreach to state and local governments to support their use of advance  contracts. FEMA agreed with our recommendations and has taken action  to address them.", "You asked us to review the federal government\u2019s contracting efforts for  preparedness, response, and recovery efforts related to the three 2017  hurricanes and California wildfires. This report specifically addresses the  use of advance contracts, assessing the extent to which (1) FEMA and  USACE used advance contracts, (2) the planning, management, and  reporting of selected FEMA and USACE advance contracts met certain  contracting requirements, and (3) FEMA and USACE identified any  lessons learned and challenges with their use of these contracts. We also  have an ongoing review on post-disaster contracting that is expected to  be completed in early 2019.", "To identify the extent to which FEMA and USACE used advance  contracts, we reviewed data on contract obligations for the 2017 disasters  from the Federal Procurement Data System-Next Generation (FPDS-NG)  through May 31, 2018. Data on obligations for the California wildfires are  limited to contracts that FEMA and USACE identified as being used to  respond to the events because some of this information was not able to  be identified in FPDS-NG. To determine which obligations were made  through the use of advance contracts, we reviewed documentation  provided by FEMA and USACE identifying the advance contracts they  have in place and that were used in support of the 2017 disasters. We  assessed the reliability of FPDS-NG data by reviewing existing  information about the FPDS-NG system and the data it collects\u2014 specifically, the data dictionary and data validation rules\u2014and performing  electronic testing. We determined the FPDS-NG data were sufficiently  reliable for the purposes of this report. We also reviewed FEMA  contracting policies and guidance, to identify available guidance on the  use and intent of advance contracts, and federal internal control  standards. We identified examples of goods that FEMA had advance  contracts in place for but experienced challenges using in response to the  2017 disasters, reviewed advance and post-disaster contract  documentation and FPDS-NG data related to these examples, and  interviewed contracting officials involved in the award and use of the  contracts in 2017.", "To assess the extent to which the planning, management, and reporting  of advance contracts used in response to the three hurricanes and  California wildfires in 2017 met selected applicable contracting  requirements, we reviewed relevant documentation, including PKEMRA,  the Federal Acquisition Regulation (FAR), DHS, FEMA, and USACE  contracting policies. We identified a non-generalizable sample of advance  contracts to serve as case studies based on obligation data from FPDS- NG as of March 31, 2018. We analyzed the data to identify 10 competed  and 4 non-competed contracts\u2014valued at above $50 million and above  $10 million, respectively\u2014including 10 contracts from FEMA and 4 from  USACE. For additional details on the contracts we selected, see  appendix I. Findings based on information collected from the 14 contracts  cannot be generalized to all advance contracts. To review our selected  FEMA and USACE advance contracts, we developed a data collection  instrument to gather selected contract information, such as period of  performance, contract type, estimated contract value, and the presence of  key contract documents, among others. To assess planning we reviewed  our selected advance contracts, and determined that six of FEMA\u2019s  contracts met GAO\u2019s definition of a bridge contract. We interviewed  FEMA officials associated with these contracts on acquisition planning  efforts and factors that affected their ability to award new contracts. To  assess FEMA and USACE\u2019s management of selected advance contracts,  we reviewed information gathered from our data collection instrument to  confirm the contract files contained required acquisition documents, such  as acquisition strategies and contract modifications, which typically  provide the history of a contract file, and interviewed officials at FEMA  and USACE headquarters on their record keeping policies, practices, and  challenges. To assess the reporting of selected advance contracts, we  compared advance contract action data identified in FPDS-NG in the  fourth quarter of fiscal year 2017 and first quarter of fiscal year 2018 to  data reported for the same time period in FEMA\u2019s mandated reports to  congressional committees on disaster contracting to identify any  unreported actions. We interviewed FEMA officials to discuss the  methodology and data sources for the congressional committee reports  and any limitations to the accuracy of the data reported.", "To assess what lessons learned and challenges FEMA and USACE  identified with the use of advance contracts in 2017, we interviewed  FEMA and USACE officials on what they identified as lessons learned  and challenges specific to advance contracts, and any recommendations  or actions planned by the agencies to address them. We reviewed  PKEMRA advance contract requirements, including requirements that  FEMA coordinate with state and local governments on the use of advance  contracts, FEMA and USACE documentation on the use of advance  contracts, after-action reports from 2017 and prior years, and federal  internal control standards for information and communications. To identify  challenges related to coordination with state and local officials on the use  of advance contracts, we reviewed after action reports from 2017, and  interviewed FEMA and USACE regional staff and state and local  government officials on advance contracting efforts. We also analyzed  information on available advance contracts from FEMA\u2019s June 2018  Prepositioned Contract List and FEMA\u2019s May 2018 training  documentation identifying advance contracts to identify any differences in  the information available to FEMA contracting officers, and their state and  local contracting counterparts. Appendix I provides more information  about our overall scope and methodology.", "We conducted this performance audit from March 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "The 2017 Hurricanes and California Wildfires", "paragraphs": ["In 2017, three major hurricanes made landfall in the United States and  historic wildfires struck California. According to FEMA, the 2017  hurricanes and wildfires collectively affected 47 million people\u2014nearly 15  percent of the nation\u2019s population. See figure 1 for a timeline of these  major disasters."], "subsections": []}, {"section_title": "Overview of Federal Disaster Response and Recovery", "paragraphs": ["When disasters hit, state and local entities are typically responsible for  disaster response efforts. The Robert T. Stafford Disaster Relief and  Emergency Assistance Act established a process by which a state may  request a presidential disaster declaration to obtain federal assistance.  According to the DHS National Response Framework\u2014a guide to how  the federal government, states and localities, and other public and private  sector institutions should respond to disasters and emergencies\u2014the  Secretary of Homeland Security is responsible for ensuring that federal  preparedness actions are coordinated to prevent gaps in the federal  government\u2019s efforts to respond to all major disasters, among other  emergencies. The framework also designates FEMA to lead the  coordination of the federal disaster response efforts across federal  agencies.", "The National Response Framework identifies 14 emergency support  functions that serve as the federal government\u2019s primary coordinating  structure for building, sustaining, and delivering disaster response efforts  across more than 30 federal agencies. Each function addresses a specific  need\u2014such as communication, transportation, and energy\u2014and  designates a federal department or agency as the coordinating agency.  For example, the emergency support function for public works and  engineering assists DHS by coordinating engineering and construction  services, such as temporary roofing or power, and USACE is the primary  agency responsible for these functions during disaster response activities.", "FEMA coordinates disaster response efforts through mission  assignments\u2014work orders that FEMA issues to direct other federal  agencies to utilize the authorities and the resources granted to it under  federal law. Mission assignments are authorized by the Robert T. Stafford  Disaster Relief and Emergency Assistance Act and can consist of federal  operations support or direct federal assistance, which includes federal  contracts.", "FEMA\u2019s contracting efforts are supported by its Office of the Chief  Procurement Officer and its contracting workforce. While the majority of  FEMA\u2019s contracting workforce is located in headquarters, contracting  officers are also located in each of FEMA\u2019s 10 regional offices. See  appendix II for the location of FEMA\u2019s 10 regional offices as well as the  states each one is responsible for coordinating with to address National  Response Framework responsibilities."], "subsections": []}, {"section_title": "PKEMRA Requirements and the Use of Advance Contracts", "paragraphs": ["Congress enacted PKEMRA in 2006, which addressed various  shortcomings identified in preparation for and response to Hurricane  Katrina, which hit the Gulf Coast in 2005 and was one of the largest, most  destructive natural disasters in U.S. history. Among the provisions  included were requirements for FEMA to identify and establish advance  contracts to ensure that goods and services are in place to help FEMA  rapidly mobilize resources in immediate response to disasters. Examples  of these goods and services are:", "Goods: construction supplies and tarps; food and water; cleaning and  hygiene supplies; and power equipment and generators.", "Services: engineering; information technology and communication  support; transportation of goods; and housing and lodging assistance.", "As of June 2018, FEMA reported having advance contracts in place for  56 different types of goods and services.", "Among other contracting requirements, PKEMRA requires FEMA to develop a contracting strategy that maximizes the use of advance  contracts to the extent practical and cost effective;  coordinate advance contracts with state and local governments; encourage state and local governments to engage in similar pre- planning and contracting; and  submit quarterly reports to the appropriate committees of Congress on  each disaster contract entered into by the agency using non- competitive procedures.", "According to FEMA\u2019s advance contracting strategy, the agency will  maximize the use of advance contracts to the extent they are practical  and cost-effective, which will help preclude the need to procure goods  and services under unusual and compelling urgency. When disasters  strike, contracting officers may use the unusual and compelling urgency  exception to full and open competition to support non-competitive contract  awards. FEMA\u2019s strategy also states that advance contracts will help to  ensure that goods and services are in place to help FEMA rapidly  mobilize resources in immediate response to disasters.", "USACE also has its own advance contracts in place as a preparedness  measure. According to USACE officials, they established advance  contract initiatives in 2003, two years prior to Hurricane Katrina, to help  facilitate their emergency support function under the National Response  Framework\u2014public works and engineering. As of September 2018,  USACE reported having advance contracts in place for three services\u2014 debris removal, temporary roofing, and temporary power. Appendix III  provides details on specific advance contracts established by FEMA and  USACE.", "According to FEMA documentation, most of its advance contracts are  indefinite delivery contracts, which can facilitate the goal of having  contracts available if there is a disaster. One type of indefinite delivery  contract\u2014an indefinite delivery, indefinite quantity contract\u2014can be  awarded to single or multiple vendors and provides for an indefinite  quantity, within stated limits, of supplies or services during a fixed period.  Under these contracts, the government places orders for individual  requirements. These contracts also require the government to order and  the contractor to provide at least a stated minimum quantity of supplies  and services. Additionally, the contracting officer should also establish a  reasonable maximum quantity for the contract based on market research,  trends in similar recent contracts, or any other rational basis. Minimum  and maximum quantity limits can be stated as the number of units or as  dollar values, and may also be referred to by contracting officers as  minimum guarantees or contract ceilings, respectively.", "As part of its overall acquisition strategy, FEMA officials identified other  vehicles aside from its own advance contracts through which they obtain  goods and services.", "DHS strategic sourcing vehicles: When a disaster occurs, FEMA  contracting officers are first required to use any available DHS  strategic sourcing vehicles\u2014a broader, aggregate approach for  procuring goods and services\u2014with limited exceptions.", "Blanket purchase agreements: FEMA also relies on blanket  purchase agreements, such as those established through the General  Service Administration Federal Supply Schedule program, to provide  some commercial goods and services needed for disaster response.", "Interagency Agreements: FEMA may also leverage interagency  agreements, by which it obtains needed supplies or services from  another agency by an assisted or direct acquisition.", "FEMA and other agencies may also award new contracts to support  disaster response efforts following a disaster declaration. According to  FEMA officials, these post-disaster contract awards may be required, for  example, if advance contracts reach their ceilings, or if goods and  services that are not suitable for advance contracts are needed."], "subsections": []}, {"section_title": "FAR Requirements", "paragraphs": ["The FAR requires agencies to perform acquisition planning activities for  all acquisitions to ensure that the government meets its needs in the most  effective, economical, and timely manner possible. Generally, program and contracting officials share responsibility for the majority of acquisition  planning activities, which include the following:", "Pre-Solicitation: The program office identifies a need, and develops  key acquisition documents to summarize that need, such as market  research, a statement of work defining requirements, cost estimates,  and a written acquisition plan. The pre-solicitation process ends  when the program office submits these documents, typically referred  to as an acquisition package, to the contracting officer to determine  what type of contract is appropriate to fulfill the requirements.", "Solicitation: The contracting officer develops a solicitation, in  consultation with other agency stakeholders, to request bids or  proposals from contractors. The acquisition planning process ends  once a solicitation is issued.", "Contracting for disaster relief and recovery efforts can also present  unique circumstances in which to solicit, award, and administer contracts.  Under the FAR, agencies are generally required to use full and open  competition when soliciting offers and awarding contracts. However, an  agency may award contracts noncompetitively when the need for goods  or services is of such unusual and compelling urgency that the federal  government faces the risk of serious financial or other type of injury.", "When it becomes evident that a base contract period and any option  periods will expire before a subsequent contract to meet the same need  can be awarded, contracting officers may, for example, extend the existing contract, or award a short-term stand-alone contract to the incumbent contractor  on a non-competitive basis to avoid a lapse in services, along with  sufficient justification and approval.", "These extensions and new sole source contracts are informally referred  to as bridge contracts by some in the acquisition community, and we use  that terminology in this report. In October 2015, we established the  following definitions related to bridge contracts:", "Bridge contract: An extension to an existing contract beyond the  period of performance (including base and option years), and a new,  short-term contract awarded on a sole-source basis to an incumbent  contractor to avoid a lapse in service caused by a delay in awarding a  follow-on contract.", "Predecessor contract: The contract that was in place prior to the  award of a bridge contract.", "Follow-on contract: A longer-term contract that follows a bridge  contract for the same or similar services. This contract can be  competitively awarded or awarded on a sole-source basis.", "Contracts, orders, and extensions (both competitive and non-competitive)  are included in our definition of a \u201cbridge contract\u201d because the focus of  the definition is on the intent of the contract, order, or extension.", "However, the FAR does not formally define bridge contracts or require  that they be tracked. We recommended that the Office of Federal  Procurement Policy amend the FAR to incorporate a definition of bridge  contracts. The Office of Federal Procurement Policy agreed with our  recommendation to provide guidance to agencies on bridge contracts and  has taken steps to develop that guidance, but has not yet implemented  our recommendations.", "If a contracting officer opts to extend the existing contract in place\u2014often  referred to as a predecessor contract\u2014the contracting officer may use a  number of different mechanisms to do this. One of these is the \u201coption to  extend services\u201d clause. If the contract includes this clause, the  contracting officer may use it to extend the contract for up to six months.  While this option may be exercised more than once, the total extension of  performance shall not exceed 6 months."], "subsections": []}]}, {"section_title": "FEMA and USACE Relied on Advance Contracts to Respond to the 2017 Disasters, but FEMA Lacks an Updated Advance Contracting Strategy and Guidance", "paragraphs": ["FEMA and USACE obligations on advance contracts\u2014as of May 31,  2018\u2014accounted for about half of total federal contract obligations for the  three hurricanes, and more than three quarters of the contract obligations  identified by those agencies for the California wildfires. However, an  outdated strategy and lack of guidance to contracting officers resulted in  confusion about whether and how to prioritize and use advance contracts  to quickly mobilize resources in response to the three 2017 hurricanes  and the California wildfires."], "subsections": [{"section_title": "Advance Contracts Accounted for about Half of Government-wide Contract Obligations for the 2017 Hurricanes, and over Three-Quarters of FEMA and USACE\u2019s Obligations for the California Wildfires", "paragraphs": ["Government-wide contract obligations for the three hurricanes were about  $8.2 billion as of May 31, 2018. FEMA and USACE obligated 46  percent, or about $3.8 billion, of the $8.2 billion spent government-wide  on the three hurricanes through advance contracts. Data on government- wide contract obligations for the California wildfires were not able to be  identified because national interest action codes were not established for  them in FPDS-NG. However, FEMA and USACE provided information  on their contracting activities related to the wildfires. Their use of advance  contracts accounted for 86 percent, or about $667 million, of the contract  obligations they identified. FEMA and USACE advance contract  obligations for the three hurricanes and California wildfires totaled about  $4.5 billion, about 56 percent of the total contract obligations made by  these agencies for these disasters. See figure 2 for details on FEMA and  USACE\u2019s advance and post-disaster contract obligations by event.", "The greatest proportion of FEMA and USACE\u2019s obligations on advance  contracts supported Hurricane Maria disaster relief efforts\u201441 percent  and 59 percent, respectively. About 39 percent of USACE\u2019s obligations on  advance contracts were used in support of the California wildfires,  compared to less than 1 percent of FEMA\u2019s obligations. FEMA awarded  orders against 72 base advance contracts in response to the three 2017  hurricanes and California wildfires, and USACE awarded orders against  15 of its advance contracts. See figure 3 for FEMA and USACE\u2019s  obligations on advance contracts by event."], "subsections": []}, {"section_title": "Advance Contracts Were Used Primarily for Services", "paragraphs": ["FEMA and USACE procured a variety of goods and services through  advance contracts in response to the three hurricanes and wildfires, but  about 86 percent of obligations, or $3.8 billion, were used to procure  services. For example, all of USACE\u2019s $1.7 billion in advance contract  obligations were for services, such as debris removal. FEMA obligated  about $2.2 billion on services, such as architect and engineering services  to rebuild roads and bridges. FEMA\u2019s obligations on goods totaled $624  million and included prefabricated buildings, such as manufactured  housing units to provide lodging, and food and water. See figure 4 for  examples of obligations on goods or services by event."], "subsections": []}, {"section_title": "FEMA Lacks an Updated Strategy and Guidance on the Use of Advance Contracts", "paragraphs": ["FEMA lacks an updated strategy and guidance on advance contract use,  despite the PKEMRA requirement to develop a contracting strategy that  maximizes their use to the extent practical and cost effective. As we  found in May 2006 following Hurricane Katrina, and reiterated in our  September 2015 report, agencies need to have competitively awarded  contracts in place before a disaster to be effective in their response. Our  current review found that FEMA has established advance contracts for  goods and services to enable it to respond following a disaster. However,  FEMA\u2019s lack of an updated strategy and guidance on advance contract  use resulted in confusion about whether and how to maximize their use to  the extent cost-effective and practical to facilitate a faster response when  providing goods and services to survivors.", "PKEMRA required the FEMA Administrator to identify specific goods and  services that the agency could contract for in advance of a natural  disaster in a cost-effective manner. PKEMRA also required the FEMA  Administrator to develop a contracting strategy that maximizes the use of  advance contracts to the extent practical and cost-effective. Following the  enactment of PKEMRA, in 2007 FEMA issued the Advance Contracting of  Goods and Services Report to Congress, in part to address the  requirement for an advance contracting strategy. In addition to the  strategy, FEMA provides information on advance contracts in its Disaster  Contracting Officer Desk Guide.", "The 2007 strategy notes that advance contracts will help to preclude the  need to procure goods and services for disaster response under the  unusual and compelling urgency exception to full and open competition,  and allow FEMA to rapidly mobilize resources in immediate response to  disasters. Several contracting officials we spoke with said that it is a  requirement to use advance contracts before awarding new contracts.  Moreover, a senior FEMA contracting official told us that advance  contracts are intended to be used before awarding post-disaster  contracts, even if the advance contract is not capable of fulfilling all of the  requirements for a needed good or service. However, our review of the  strategy found that it does not provide any specific direction on how  contracting officers should award or use advance contracts to meet  PKEMRA\u2019s objectives, or how they should be prioritized in relation to  post-disaster contracts. Further, there is no mention in FEMA\u2019s 2017  Disaster Contracting Officer Desk Guide that advance contracts should  be considered prior to the award of post-disaster contracts.", "In September 2015, we found shortfalls with the information available to  contracting officers about advance contracts and recommended that  FEMA provide new or updated guidance with information on how advance  contracts should be used. FEMA agreed with this recommendation and  stated that in 2015 it included information on advance contracts and their  use in training documentation. However, our review of semi-annual  training documentation provided in May 2018 found that it only lists some  of the advance contracts that are available, and not guidance on their  use.", "A report by the Senate Committee on Homeland Security and  Governmental Affairs identified concerns about FEMA\u2019s use of advance  contracts for self-help tarps in response to the 2017 hurricanes.  Specifically, the report found that while FEMA ordered some tarps  through one of its existing advance contracts, that order was placed after  a post-disaster contract for tarps was signed, raising questions about  whether FEMA\u2019s actions were informed by an overall strategy for using its  advance contracts, in this case, for tarps. Our current review identified  similar concerns, and found that the lack of an updated strategy and  guidance on the use of advance contracts contributed to challenges in  using these contracts to respond to the 2017 disasters.", "In our review of advance contracts for meals and tarps, we found the  following:", "Meals: Prior to the 2017 disasters, FEMA had advance contracts in  place to provide meals with specific nutritional requirements.  According to FEMA contracting officials, the advance contract vendors  were at capacity for these specific meals following the response to  Hurricane Harvey, requiring FEMA to issue a new post-disaster  competitive solicitation and award new contracts with less specific  nutritional requirements following Hurricane Maria. Based on our  review of contract documentation, two of the existing advance  contract vendors were awarded these new post-disaster contracts, but  at different prices than those negotiated through their advance  contracts. FEMA officials told us that contracting officers will negotiate  to ensure the price of the contract is fair and reasonable and may  utilize historical information or current contract prices to inform this  determination. Normally, adequate price competition establishes a fair  and reasonable price. According to a contracting officer involved with  the award, FEMA relied on competition and historical prices, but not  the existing advance contract prices, to determine that the new post- disaster contract meal prices were fair and reasonable. Guidance on  the extent to which advance contract prices should be considered  when comparing proposed prices to historical prices paid could help  to further inform contracting officers\u2019 decision-making during a  disaster.", "Tarps: Our review of FEMA\u2019s use of contracts for tarps is another  example of how FEMA lacked an updated advance contracting  strategy and guidance to provide goods and services to facilitate a  faster response to the 2017 disasters. For example, in September  2014, FEMA awarded multiple award indefinite delivery, indefinite  quantity advance contracts to three small businesses for self-help  tarps, which are used to cover small areas of roof damage. In  November 2014, these contracts were modified by the contracting  officer to include delivery requirements for providing tarps to replenish  FEMA\u2019s stock during steady state operations or during emergency  response operations, such as a natural disaster. The contract  modification added that during an emergency response, vendors  would be expected to deliver up to 150,000 tarps within 96 hours of  being issued a task order. However, these small businesses were not  required to meet the emergency response delivery time frames and  amounts since they would not be expected to store tarps on FEMA\u2019s  behalf, limiting the use of FEMA\u2019s advance tarp contracts for  immediate disaster response needs. According to a contracting officer  involved with these contracts, the tarp advance contracts are typically  used only to replenish tarp stockpiles in FEMA\u2019s distribution centers.  However, the contracting officer also noted that not being able to fully  use the existing advance contracts for tarps to respond to the three  2017 hurricanes was a challenge and required FEMA to award post- disaster contracts to meet tarp requirements.", "Furthermore, we found that FEMA awarded post-disaster contracts for  tarps before utilizing its advance contracts with the small businesses.  Contract file documentation for the post-disaster contracts stated that  FEMA\u2019s advance contract holders for tarps had reached their  capacity, and that market research had confirmed that it would be  difficult for small businesses to meet the urgent delivery timeframes  for tarps. Yet, after the award of the post-disaster tarp contracts,  FEMA awarded task orders to one of the advance contractors to  provide tarps in response to Hurricane Maria. Another small business  advance contractor, which according to FEMA\u2019s post-disaster contract  documentation had reached its capacity, also submitted a proposal as  part of the post-disaster contract solicitation. According to FEMA,  neither of the post-disaster contract holders ultimately provided the  required tarps. The timing and use of the existing tarp advance  contracts raises questions about their ability to provide tarps  immediately following a disaster, and whether an updated advance  contracting strategy would have enabled FEMA to more quickly  provide the needed tarps to survivors, considering the additional time  and staff resources needed to award new post-disaster contracts.", "FEMA established advance contracts to provide critical goods, like meals  and tarps, following a disaster; however FEMA\u2019s 2007 contracting  strategy does not provide direction on the objectives of advance contracts  or how to maximize their use to the extent practical and cost-effective, as  required by PKEMRA. According to FEMA officials, they had not  considered updating the 2007 advance contracting strategy because they  believed the use of advance contracts following PKEMRA had been  incorporated into their disaster contracting practices. FEMA has also not  communicated specific guidance to program and contracting officials on  whether and how advance contracts should be prioritized before issuing  new post-disaster solicitations and awarding contracts for the same or  similar requirements, or how to maximize their use to the extent practical  and cost-effective following a disaster, as required by PKEMRA. FEMA  officials also acknowledged that additional guidance regarding advance  contracts, including their availability and use during a disaster, could be  useful. Without an updated strategy\u2014and clear guidance that is  incorporated into training\u2014on the use of advance contracts and how they  should be prioritized and used in relation to new post-disaster contract  awards, FEMA lacks reasonable assurance that it is maximizing the use  of advance contracts  to quickly and cost-effectively provide goods and  services following a disaster. This places FEMA at risk of continued  challenges in quickly responding to subsequent disasters."], "subsections": []}]}, {"section_title": "Improvements Needed in FEMA\u2019s Planning, Management, and Reporting of Advance Contracts", "paragraphs": ["While FEMA used a variety of advance contracts to respond to the 2017  disasters, we found weaknesses in the process of awarding and  overseeing selected advance contracts in our review. These weaknesses  were: (1) challenges in FEMA\u2019s acquisition planning; (2) limited record  keeping or management of certain FEMA contracts; and (3) incomplete  reporting on FEMA\u2019s advance contract actions to certain congressional  committees. Related to USACE, we did not identify any planning or  management challenges based on our review of its four selected  contracts, and USACE is not required to report on its advance contract  actions to the congressional committees."], "subsections": [{"section_title": "Challenges in FEMA\u2019s Acquisition Planning Resulted in Bridge Contracts", "paragraphs": ["FEMA has taken some steps since 2016 to improve competition and  develop processes and guidance on the acquisition process for advance  contracts, but shortfalls in acquisition planning have resulted in a number  of bridge contracts. Bridge contracts can be a useful tool in certain  circumstances to avoid a gap in providing products and services. We  have previously reported that when non-competitive bridge contracts are  used frequently or for prolonged periods, the government is at risk of  paying more than it should for products and services.", "Based on our analysis, 63 of FEMA\u2019s 72 advance contracts used in  response to the 2017 disasters were initially competed. All 15 of USACE\u2019s  advance contracts used in responding to the three hurricanes and  California wildfires in 2017 were initially competed. We found that at least  10 of FEMA\u2019s advance contracts used in 2017 were bridge contracts.  Within the 10 FEMA advance contracts we identified as bridge contracts,  6 were part of our selected case studies. The six advance contracts with  subsequent bridges in our review obligated roughly $778 million in  response to the three hurricanes and California wildfires in 2017. These  bridge contracts included five that are associated with two of FEMA\u2019s  largest programs used in 2017\u2014the Individual Assistance Program and  Public Assistance Program\u2014and one that is associated with a  telecommunications program.", "Three of the six bridge advance contracts we reviewed were awarded to  support FEMA\u2019s Individual Assistance Program, which provides mass  care services such as food and water as well as financial and direct  assistance, among other services, to survivors whose property has been  damaged or destroyed and whose losses are not covered by insurance.  In 2017, this assistance was supported through the Individual Assistance- Technical Assistance Contract (IA-TAC), known as IA-TAC III. The IA- TAC III predecessor contracts had an original period of performance from  a base year starting in May 2009 with four 1-year options that ended in  May 2014. However, FEMA program and contracting officials were unable  to implement changes to the requirements\u2014recommended by FEMA  senior leadership in 2010\u2014prior to expiration. According to FEMA  officials, staffing shortfalls, operational tempo, and unrealistic contract  requirements led to acquisition planning delays. These challenges, in  turn, led to a series of extensions from May 2014 to November 2016 and  a new non-competitive bridge contract (base with options) from  November 2016 to May 2018. At that point new, competitive follow-on  indefinite delivery indefinite quantity contracts\u2014the Individual Assistance  Support Contract (IASC) and Logistics Housing Operations Unit  Installation, Maintenance, and Deactivation (LOGHOUSE)\u2014were  awarded. See figure 5.", "Two of our six selected advance contracts that were bridge contracts  were awarded to support FEMA\u2019s Public Assistance Program, which  provides supplemental federal assistance to state, tribal, territorial, and  local governments for debris removal, life-saving emergency protective  measures, and the repair, replacement, or restoration of damaged  facilities. The predecessor Public Assistance-Technical Assistance  Contract (PA-TAC) used in 2017, known as PA-TAC III, was awarded  with an original period of performance from a base year in February 2012  with four 1-year options that ended in February 2017. FEMA officials  noted that changes to the PA-TAC III contract requirements and  acquisition strategy were identified in 2015. Yet due to the time needed to  incorporate these changes, FEMA was unable to complete required  acquisition planning activities, such as finalizing the acquisition plan, prior  to the expiration of PA-TAC III. Following 11 months of extensions to  complete these activities, FEMA competitively awarded new contracts in  December 2017. These awards were protested to the GAO and the  protests were denied and are currently under review at the Court of  Federal Claims. According to FEMA officials, these events required PA- TAC III to be extended until January 2019, as shown in figure 6.", "The remaining bridge contract in our sample is associated with the  Wireline Services Program, a telecommunication program that provides  FEMA employees deployed to respond to a disaster with local and long- distance telephone, high-speed data, and cable television services. The 5  year wireline predecessor contract was awarded in 2003 and again in  2008, but FEMA was unable to award a competed contract when the  2008 contract expired in December 2013 due to the time it took to update  program requirements. FEMA contracting officials extended the contract  for 6 months before letting it expire altogether. Due to high staff turnover  and inconsistent record keeping, at the time of our review FEMA officials  were unable to determine the cause for this lapse of service, which  occurred after the contract\u2019s expiration in June 2014. Starting in January  2015, FEMA contracting officials used a series of bridge contracts over  more than three years to address changing contract requirements and  delays in completing acquisition planning documentation, as shown in  figure 7. FEMA contracting officials anticipated awarding a competitive  contract by the end of fiscal year 2018, but the award has been delayed  and the existing contract extended through January 2019.", "In one of the bridge contracts included in our review, FEMA improperly  used FAR clause 52.217-8. According to that clause, an agency may  extend a contract\u2019s period of performance for up to 6 months and is  generally used in the event of circumstances outside of the contracting  officer\u2019s control that prevent the new contract award, such as a bid  protest. This clause may be used multiple times to extend the contract so  long as the total extension of performance does not exceed 6 months.  Our analysis found that FEMA used the clause for a total of 14 months to  justify two 6-month extensions and one 2-month extension to the second  bridge contract. The FEMA contracting official associated with the  advance contract reported uncertainty over the proper use of this clause  and what other authorities should have been used instead to extend the  contract. FEMA\u2019s Office of Chief Counsel and contracting officials  acknowledged this error.", "While not all bridge contracts that we identified during our review were  non-competitive, FEMA officials acknowledged that the use of non- competitive bridge contracts is not an ideal practice as they cannot  ensure the government is paying what it should for products and services.  In October 2015 we identified delays in the completion of acquisition  planning documentation as one of the leading causes of awarding bridge  contracts. In an effort to decrease the need for non-competitive bridge  contracts and provide ample time for acquisition planning, FEMA began  implementing a 5-Year Master Acquisition Planning Schedule (MAPS) in  2016. MAPS is a tracking tool that monitors the status of and provides  acquisition planning timeframes for certain FEMA acquisitions over $5  million, as well as for all advance contracts and any acquisition deemed  by the agency to be mission critical, regardless of dollar value.", "As we previously noted, acquisition planning includes both the pre- solicitation and solicitation phases. Based on our review of MAPS  documentation, the tool generates a timeline of discretionary acquisition  milestones across these two phases, based on certain considerations like  the type of acquisition and whether it will be competed. Using this  timeline, MAPS sends email alerts to program and contracting staff when  certain acquisition milestones should occur.", "Specific to the solicitation phase, FEMA\u2019s Office of the Chief Procurement  Officer has developed annual lead time guidance for how long contracting  officers should be given to award new contracts following the completion  of the acquisition package, which is then conveyed through MAPS. For  example, for acquisitions $150,000 and under, FEMA\u2019s 2018 lead time  guidance states contracting officers should be given 60 days to award the  contract following completion of the acquisition package. FEMA officials  we spoke with acknowledged that these discretionary timeframes are  frequently shortened when program office officials are delayed in  completing acquisition packages. While FEMA has lead time guidance to  establish timeframes for completing the solicitation phase, FEMA  currently has no guidance establishing timeframes for the pre-solicitation  phase, when program offices complete the acquisition packages. Figure 8  provides an example timeline of the major milestones tracked in MAPS.", "In its analysis of 12 fiscal year 2017 contracts tracked in MAPS that were  awarded late, FEMA found that half were late because contracting  officials were not given enough lead time to award a new contract  following the program office\u2019s completion of the acquisition package. Not  adhering to suggested timeframes can place a burden on contracting  officers and increase the likelihood of not awarding the contract on  schedule, requiring FEMA to non-competitively extend the existing  contract. According to FEMA\u2019s lead time guidance, based on the contract  values for the bridge contracts in our review contracting officers should  have been given between 240 and 300 days to award a new contract  once the acquisition package was completed. However, as we mention  earlier, due to delays from changing program requirements and  acquisition strategies we found that the acquisition plans for the follow-on  contracts related to these bridge contracts were not completed until after  the predecessor contract had already expired, as shown in figure 9 below.", "Timely completion of the acquisition package was a key challenge  identified in the contracts we reviewed. However, according to officials  from the Office of the Chief Procurement Officer, they do not have the  authority to establish guidance for FEMA program officials on completing  pre-solicitation phase activities. In August 2011, we identified challenges  with acquisition planning across DHS. Specifically, we found that DHS  and other agencies did not measure or incorporate into guidance the  amount of time it takes to develop and obtain approvals of the acquisition  planning documents required during the pre-solicitation phase. We  recommended that DHS procurement offices collect information about the  timeframes needed for the acquisition planning process to establish  timeframes for when program officials should begin acquisition planning.  DHS did not concur with this recommendation, stating that its acquisition  manual already encourages early planning, and has not implemented the  recommendation. At the time, we maintained that program officials  needed more guidance to have a better understanding of how much time  to allow for completing acquisition planning steps, and that the  component procurement offices are best positioned to provide guidance  on how long these planning processes may take. Given the current  challenges we identified with FEMA\u2019s ability to complete acquisition  planning activities in a timely manner and the resulting delays in awarding  new contracts for critical advance contract goods and services, additional  information and guidance on acquisition planning timeframes remains  important.", "Additionally, while MAPS has been in place since 2016 and FEMA  officials have instituted training to communicate the system\u2019s intent,  program and contracting officials we spoke with varied in their familiarity  with it. For example, officials responsible for MAPS stated that by March  2016, 90 percent of FEMA\u2019s contracting staff had attended an hour long  training session and additional training sessions were held for all program  office staff at various points in 2016 and 2017. However, most of the  program office and contracting officials responsible for the bridge  contracts in our review reported limited familiarity with MAPS.", "While FEMA has taken some positive steps to institute training and has  guidance on timeframes for part of the acquisition planning process,  program and contracting staff we spoke with were still uncertain how best  to utilize MAPS to identify the time needed to effectively complete  acquisition planning activities. According to federal internal control  standards, agency management should internally communicate the  necessary quality information to achieve their objectives. Given FEMA\u2019s  emphasis on planning before a disaster and using advance contracts to  help reduce the need to award non-competitive contracts during a  disaster, establishing clear guidance on the factors that can affect  acquisition planning activities, and requiring officials to follow the  timeframes needed to complete them to meet the goal of awarding  competitive contracts, is essential. Until FEMA provides detailed guidance  about timeframes and considerations that affect the entire acquisition  planning process\u2014both the pre-solicitation and solicitation phases\u2014to all  officials responsible for acquisition planning, and clearly communicates  the intent of MAPS, it cannot ensure that MAPS will be effective at  reducing the number of non-competitively awarded bridge contracts, as is  FEMA\u2019s intent."], "subsections": []}, {"section_title": "Current Record-Keeping Practices Limit Visibility into Advance Contract Management", "paragraphs": ["While FEMA has procedures regarding the documentation required for its  contract files, current practices limited visibility into the advance contracts  in our review. Specifically we found that acquisition plans and some other  contract documents were unable to be located in certain cases.  Acquisition plans provide the program and contract history as well as  other information on which acquisition decisions, such as the type of  contract required, are based.", "FEMA contracting officials were unable to locate acquisition plans for 4 of  our 10 FEMA selected advance contracts despite FAR and DHS  acquisition guidance requiring plans for these particular contracts to be  completed and stored in the contract file. Three of these acquisition  plans are associated with the IA-TAC bridge contract which, as previously  noted, was associated with one of FEMA\u2019s largest programs used in  2017. FEMA contracting officials were also unable to locate the  acquisition plans completed for the prior iteration of IA-TAC because they  were not in the hard copy contract file or contract writing system, meaning  that no acquisition plan guiding the IA-TACs since before its 2009 award  could be found. In 2011, the DHS Office of the Inspector General  conducted a review of FEMA\u2019s IA-TAC and identified, among other things,  incomplete contract files as a problem. Not being able to locate  acquisition plans can result in the loss of contract knowledge and lessons  learned from prior awards.", "Additionally, we found instances of contract documentation for advance  contracts related to our case studies that contract officials could not  locate. For instance, FEMA was unable to confirm whether or not an  option year for the last competed Wireline contract included in the  contract was exercised due to a lack of documentation. In order to obtain  this answer, FEMA officials had to reach out to the vendor for their  records. Moreover, the modification exercising the first option year for one  of the IA-TAC III predecessor contracts was missing, as were the  determination and findings documents exercising the first option year for  all three of the predecessor IA-TAC III contracts that were associated with  the advance contracts in our review. After we made FEMA officials aware  of the missing documentation, they subsequently added clarifying memos  to the contract files.", "FEMA standard operating procedures state that the acquisition  documents in the official contract file will be sufficient to constitute a  complete history of the entire transaction for the purpose of providing a  complete background, and as a basis for informed decisions at each step  in the acquisition process. Additionally, these procedures require  headquarters staff to place modifications to contracts and orders and  associated supporting documentation in the contract file within 5 business  days of awarding a contract or issuing an order. FEMA officials stated  they are required to follow these procedures until DHS has fully  transitioned to an electronic filing system. According to DHS officials, that  system is currently in the testing phase and a timeframe for  implementation has not yet been finalized. Furthermore, according to  these officials, DHS has not yet decided which, if any, existing contracts  will be required to be retroactively entered into the system. Until this  decision has been made and implementation occurs, FEMA\u2019s official file  of record for its advance contracts consists of a hardcopy file, which  contracting officers at FEMA headquarters are required to add completed  contract documentation to, per the standard operating procedures. A  FEMA official told us that some documentation, including some of the  missing documentation we identified, has been lost due to staff turnover  and an office move in 2016.", "FEMA officials anticipate some of the challenges associated with  managing the hard copy advance contract files will be alleviated after  implementation of the Electronic Contract File System. However, DHS  officials have not decided whether components will be required to  retroactively enter contract information for any contract awarded prior to  the implementation date. This would require FEMA and other DHS  components to continue to maintain hardcopy files for some contracts\u2014 including large strategic sourcing vehicles and advance contracts\u2014for the  foreseeable future. For example, FEMA\u2019s $2.7 billion LOGHOUSE, and  $14 million IASC advance contracts were awarded in 2018 and have a  period of performance lasting until 2023. Until FEMA adheres to existing  contract file management requirements, whether the contract files will be  transferred into the electronic system or remain in hard copy format, it is  at continued risk of having incomplete contract files and a loss of  institutional knowledge regarding these advance contracts."], "subsections": []}, {"section_title": "Information on Advance Contracts in FEMA\u2019s Disaster Contract Quarterly Reports to Congressional Committees Is Incomplete", "paragraphs": ["Since December 2007, FEMA has submitted quarterly reports to  congressional committees that list all disaster contracting actions in the  preceding three months. These quarterly reports also include details on  contracts awarded by non-competitive means, as required by PKEMRA.  However, our analysis shows that some reports from fiscal year 2017 and  2018 have been incomplete. In September 2015, we found that FEMA\u2019s  quarterly reports to congressional committees in fiscal years 2013 and  2014 did not capture all of FEMA\u2019s noncompetitive orders. At that time,  FEMA attributed this to an error in data compilation prior to mid-2013 and  explained that it had updated its process for collecting these data and  strengthened the review process, resulting in accurate reports starting in  the fourth quarter of fiscal year 2013. Despite this change in the data collection process, our current analysis found that 29 contract actions  associated with the 10 selected advance contracts in our review were not  reported across FEMA\u2019s fourth quarter fiscal year 2017 and first quarter  fiscal year 2018 reports. For example, FEMA\u2019s fourth quarter fiscal year  2017 report did not include 13 contract actions equaling about $83 million,  or 15 percent, of the $558 million in total obligations associated with the  10 selected advance contracts in our review. Similarly, FEMA\u2019s first  quarter fiscal year 2018 report did not include 16 contract actions  equaling about $122 million, or 23 percent, of the $532 million in total  obligations associated with the 10 selected advance contracts in our  review. Figure 10 provides a breakdown of the total contract action  obligations by extent of competition.", "To compile the quarterly reports, FEMA officials told us that their  methodology is to pull contract action data that is documented in their  contract writing system and FPDS-NG roughly one week after the end of  each fiscal quarter. Once the data are pulled from these two sources,  officials said they compare the data to ensure all reported actions are  captured. However, according to officials, the data may not include all  contract actions. Specifically, during disaster response efforts like those in  2017, FEMA policy allows contracting officers to execute what it refers to  as \u201cnotice to proceed\u201d, which is a notice to a construction contractor to  begin work under certain circumstances. FEMA officials responsible for  the quarterly reports stated that if notice to proceed documentation is  used, information on some contract actions that were issued during the  fiscal quarter, but not entered into the systems until after the quarter  ended, may be missed during the data compilation process.", "FEMA policy requires that contracting officers who execute the notice to  proceed documentation complete the contract award documentation in  the contract writing system within three days of when the contracting  officer receivers the contractor\u2019s acceptance of the notice. However, a  FEMA policy official acknowledged that during disaster response, this  does not always occur. Further, FEMA officials responsible for compiling  the reports stated that it is not part of their methodology to review data  from prior fiscal quarters to see whether any contract actions have been  entered that were not previously reported. By not adhering to FEMA  policy that establishes timeframes for entering data in a disaster response  scenario, FEMA risks reporting incomplete information. Moreover, without  taking steps to ensure its reporting methodology provides complete  information on all competed and not competed disaster contract actions,  FEMA cannot be certain it is providing the congressional committees with  visibility into all of its overall disaster contract awards or the extent of non- competitive contract obligations over time."], "subsections": [{"section_title": "No Challenges Identified with the Planning and Management of Selected USACE Advance Contracts", "paragraphs": ["The four selected USACE advance contracts in our review\u2014one  supporting USACE\u2019s temporary power mission and three supporting its  debris removal mission\u2014were awarded in 2014 with a period of  performance lasting until 2019. Since these contracts have not reached  the end of their period of performance, we were unable to assess the  effectiveness of USACE planning activities. According to contracting  officials, USACE is performing acquisition planning activities for both the  temporary power and debris removal advance contracts and anticipates  awarding the new contracts prior to the current contracts\u2019 expiration.", "Additionally, USACE was able to provide the acquisition plans for each of  the four advance contracts in our review. Unlike FEMA, which retains  hard copy files of its contract documentation, USACE uses three official  systems of record to store contract file documentation electronically.  Officials acknowledged that while moving between the three official  systems to find documents may be time consuming, contract documents  are typically able to be located."], "subsections": []}]}]}, {"section_title": "FEMA and USACE Identified Lessons Learned from the Use of Advance Contracts in 2017, but Reported Challenges with State and Local Coordination Remain", "paragraphs": ["Both FEMA and USACE have processes for identifying and assessing  lessons learned following a disaster. Contracting officials from these  agencies identified several lessons learned from the 2017 major  hurricanes and the California wildfires that directly affected their use of  advance contracts. These include the need for: (1) additional advance  contracts for certain goods and services; (2) flexibility to increase contract  ceilings; (3) use of USACE\u2019s debris removal advance contracts to  respond to the California wildfires; and (4) federal coordination and  information sharing with state and local governments on advance  contracts. While officials identified some lessons learned, they also  identified challenges related to FEMA\u2019s outreach with state and local  governments on advance contracting efforts."], "subsections": [{"section_title": "FEMA and USACE Have Identified Lessons Learned and Actions to Address Them", "paragraphs": ["FEMA and USACE have processes for identifying and assessing lessons  learned through after-action reviews and reports following major  disasters. According to FEMA and USACE officials, they routinely perform  these reviews and then compile after-action reports to identify lessons  learned and proposed actions to address them. Due to the concurrent  nature of hurricanes Harvey, Irma, and Maria, FEMA headquarters  completed one combined after-action review for all three hurricanes in  July 2018. The resulting report identified 18 strategic-level key findings  across five focus areas, and recommendations for improvement. These  recommendations included some that were specific to advance contracts,  such as the need for additional advance contracts to support future  disaster response efforts, and improved state and local coordination to  support state and local contracting and logistics operations. In addition,  USACE officials performed after-action reviews following disasters, and  have a process in place to discuss challenges and recommendations for  improvement on their use of advance contracts for temporary power,  temporary roofing, and debris removal.", "While the scope of FEMA\u2019s and USACE\u2019s after-action reports are broader  than just advance contracts, we identified, based on our review of reports  and interviews with FEMA and USACE officials, several lessons learned  related to advance contracts following the 2017 hurricanes and California  wildfires, as shown in table 1."], "subsections": []}, {"section_title": "Challenges in Coordinating with and Providing Information to State and Local Governments on the Use of Advance Contracts Continued", "paragraphs": ["We also found that while FEMA has updated its guidance to reflect some  requirements for state and local coordination over the use of advance  contracts, inconsistencies in FEMA\u2019s outreach and information on the use  of advance contracts remains a challenge. PKEMRA required that FEMA  encourage state and local governments to establish their own advance  contracts with vendors for goods and services in advance of natural  disasters. In September 2015, we found that FEMA\u2019s outreach with  state and local governments to encourage the establishment of advance  contracts can result in more efficient contracting after a disaster.  PKEMRA also required that FEMA establish a process to ensure that  federal advance contracts are coordinated with state and local  governments, as appropriate. In our September 2015 report, we also  found that these efforts can ensure that states are aware of and can  access certain federal advance contracts, such as General Services  Administration schedule contracts.", "However, in the same report, we found that inconsistencies in whether  and how the regions perform state and local outreach limited FEMA\u2019s  ability to support advance contracting efforts. We recommended that  FEMA provide new or updated guidance to ensure that all contracting  officers are aware of requirements concerning the need to conduct  outreach to state and local governments to support their use of advance  contracts. DHS concurred with this recommendation and in 2017 FEMA  updated its Disaster Contracting Desk Guide to state that contracting  officers should inform their state and local counterparts of the availability  and use of federal advance contracts established by FEMA. Our review  of the guide found that it does remind contracting officers to coordinate  with states and localities over the use of federal advance contracts, but  does not provide any details on how often or what types of advance  contract information should be shared with states and localities, or  provide any instructions to contracting officers on PKEMRA\u2019s requirement  to encourage states and localities to establish their own advance  contracts for the types of goods and services needed during a disaster.", "Our current review also found inconsistencies with FEMA\u2019s efforts to  encourage states and localities to establish their own advance contracts  with vendors and ensure coordination with them on their use of federal  advance contracts. For example, some regional FEMA officials explained  that they regularly perform outreach, which can assist states and localities  with establishing advance contracts for goods and services commonly  needed during a disaster, like security, transportation, and office supplies.  Regional officials we spoke with said more frequent coordination allows  them to avoid overlap across state and federal contracting efforts, and  know what resources the states have in place and how long states are  capable of providing these resources following a disaster. However, other  regional officials reported having less frequent coordination with state and  local governments. For example, a FEMA official stated that one of the  regions has less frequent meetings with state and local governments  because the region is geographically dispersed and has fewer disasters.  According to another regional official, coordination between some  regional offices and state and local officials over advance contracting was  minimal prior to Hurricane Harvey, and in some cases only occurred  when FEMA and state and local officials were co-located during a  disaster.", "Officials from some state and local governments and USACE reported  examples where increased coordination between FEMA, states, and  localities could have improved the use of advance contracts in 2017. For  example, in September 2018 we found that some localities were relying  on the same contractors to perform debris removal activities following  Hurricanes Harvey in Texas and Irma in Florida. As a result, we reported that some contractors that were removing debris in Texas did  not honor existing contracts in Florida, leading to delays in debris  removal. Additional communication and coordination between FEMA and  contracting officials in these states and localities about which contractors  they had established advance contracts with could have helped to  prevent this overlap and subsequent delay in removing debris. During our  current review, USACE and California officials also reported  miscommunications about state and local expectations for USACE\u2019s  debris removal contracts following the wildfires. Specifically, USACE and  state and local officials reported differing expectations about the work to  be performed under USACE\u2019s debris removal contracts, such as what  structures would be removed from private property and acceptable soil  contamination levels. According to USACE officials, they relied on FEMA,  as the lead for coordinating federal disaster response, to manage  communication with states and localities and to identify and manage  expectations about the scope of work to be performed using their  advance debris removal contracts. While state and local officials we met  with in California reported working closely with some FEMA officials not  responsible for regional contracting during the response to the wildfires,  FEMA regional contracting officials said that they had no direct  coordination with California officials.", "We also identified inconsistencies in the information available to FEMA\u2019s  contracting officials on existing advance contracts, which can be used to  facilitate coordination with states and localities on the establishment and  use of advance contracts. Our review of FEMA\u2019s advance contract list  found that it does not include all of the advance contracts that FEMA has  in place, and contracting officers we spoke with cited other resources they  also use to identify advance contracts, like biannual training  documentation provided to contracting staff. For example, while FEMA  officials told us the advance contract list is updated on a monthly basis,  our analysis found that 58 advance contracts identified on the June 2018  advance contract list were not included in the May 2018 biannual training  documentation, including contracts for telecommunications services,  generators, and manufactured housing units. Further, 26 of the contracts  included in the May training documentation were not included on the June  advance contract list, including contracts for foreign language  interpretation services, hygiene items, and short-shelf life meals. Some  contracting officers we spoke with said they referred to the advance  contract list as the primary resource for identifying advance contracts,  while others referenced the biannual training as their primary resource.", "FEMA has recognized some shortcomings in how it coordinated and  communicated with state and local governments over the use of advance  contracts following the 2017 disasters, and identified some action to  address these issues moving forward. In the 2017 Hurricane Season  FEMA After-Action Report, FEMA identified the need to expand its  capabilities to support state, local, tribal, and territorial governments in  improving their capabilities for advance contracting, among other  issues. The report recommends that FEMA should continue efforts to  develop a toolkit that will provide state and local governments with  recommendations for advance contracts, emergency acquisition  guidance, and solicitation templates.", "According to FEMA contracting officials, the development of the toolkit  has been prioritized by FEMA\u2019s Administrator to help better prepare the  states and localities and decrease their reliance on FEMA for assistance  following a disaster. However, as of August 2018 the specific contents of  the toolkit were still being decided. For example, officials familiar with the  development of the toolkit originally said they intended for it to include  FEMA\u2019s advance contract list, to provide states with recommendations on  the types of advance contracts that may be useful. But in subsequent  discussions these officials told us they did not plan to provide states and  localities with a full list of advance contracts to avoid being overly  prescriptive, and because not all of the contracts on the list are relevant  for the types of disasters some states experience. Officials further stated  that since it is the responsibility of the federal coordinator in each region  to communicate available federal advance contracts to states and  localities, providing a full list of advance contracts is unnecessary.", "Federal internal control standards state that agency management should  use quality information to achieve their objectives. Agency management  should also internally and externally communicate that information to  achieve their objective. However, FEMA\u2019s guidance does not clearly  communicate its objectives and requirements for contracting officers to  encourage states and localities to enter into their own advance contracts,  nor is there a consolidated resource listing available advance contracts  that states and localities can use to inform their advance contracting  efforts. According to FEMA officials, information on advance contracts is  fluid, as new contracts are established or old contracts expire. Officials also told us that the advance contract list is updated monthly, yet as  mentioned earlier, contracts identified in the May training documentation  were not reflected in the list that was updated as of June. Ensuring that  advance contract information is complete and updated regularly is  important, because differences across FEMA\u2019s resources listing advance  contracts could result in FEMA\u2019s contracting officers not being aware of  the availability of certain contracts during a disaster, and states not  receiving recommendations on what advance contracts may be helpful for  them to establish. Without clear guidance on FEMA\u2019s expectations for  coordination with states and localities on advance contracting efforts, and  a centralized resource listing up to date information on FEMA\u2019s advance  contracts, FEMA contracting officers and their state and local  counterparts lack reasonable assurance they will have the tools needed  to effectively communicate about advance contracts, and use them to  respond to future disasters. Moreover, given FEMA\u2019s recent emphasis on  the importance of states and localities having the capability to provide  their own life-saving goods and services in the immediate aftermath of a  disaster, clearly communicating consistent and up to date information on  the availability and limitations of federal advance contracts through the  toolkit, or other means, is critical to informing state and local disaster  response efforts."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Contracting during a disaster can pose a unique set of challenges as  officials face a significant amount of pressure to provide life-sustaining  goods and services to survivors as quickly as possible. Advance  contracts are a tool that FEMA and others within the federal government  can leverage to rapidly and cost-effectively mobilize resources, while also  helping to preclude the need to procure critical goods and services non- competitively after a disaster. Given the circumstances surrounding the  2017 disasters and the importance of preparedness for future disasters, it  is critical to ensure that the federal government is positioned to maximize  its advance contracts to the extent practical and cost-effective to provide  immediate disaster response.", "Although FEMA has identified advance contracts for use during a  disaster, without an updated strategy\u2014and guidance that is incorporated  into training\u2014on how to maximize their use during a disaster, as well as  the development of clear guidance on acquisition planning timeframes,  FEMA is at risk of these contracts not being effectively planned and  used. Furthermore, FEMA officials have not always maintained complete  information on the advance contracts available for them to quickly  respond to disasters, or completely reported competitively and non- competitively awarded advance contract information to better help  congressional committees evaluate spending over time. Finally, without  continued efforts to improve outreach with states and localities and  centralize information on available advance contracts, FEMA\u2019s  contracting officers and their state and local counterparts may not have  the information needed to efficiently respond to a disaster."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making nine recommendations to FEMA.", "FEMA\u2019s Administrator should update the strategy identified in its 2007  Advance Contracting of Goods and Services Report to Congress to  clearly define the objectives of advance contracts, how they contribute to  FEMA\u2019s disaster response operations, and whether and how they should  be prioritized in relation to new post-disaster contract awards.  (Recommendation 1)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  updates the Disaster Contracting Desk Guide to include guidance for  whether and under what circumstances contracting officers should  consider using existing advance contracts prior to making new post- disaster contract awards, and include this guidance in existing semi- annual training given to contracting officers. (Recommendation 2)", "FEMA\u2019s Administrator should update and implement existing guidance for  program office and contracting officer personnel to identify acquisition  planning timeframes and considerations across the entire acquisition  planning process, and clearly communicate the purpose and use of  MAPS. (Recommendation 3)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  adheres to current hard copy contract file management requirements to  ensure advance contract files are complete and up to date, whether they  will be transferred into the new Electronic Contract Filing System or  remain in hard copy format. (Recommendation 4)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  reminds contracting officers of the three day timeframe for entering  completed award documentation into the contract writing system when  executing notice to proceed documentation. (Recommendation 5)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  revises its reporting methodology to ensure that all disaster contracts are  included in its quarterly reports to congressional committees on disaster  contract actions. (Recommendation 6)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  revises the Disaster Contracting Officer Desk guide to provide specific  guidance for contracting officers to perform outreach to state and local  governments on the use and establishment of advance contracts.  (Recommendation 7)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  identifies a single centralized resource listing its advance contracts and  ensure that source is updated regularly to include all available advance  contracts. (Recommendation 8)", "FEMA\u2019s Administrator should ensure the Head of the Contracting Activity  communicates information on available advance contracts through the  centralized resource to states and localities to inform their advance  contracting efforts. (Recommendation 9)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD, DHS, and FEMA for review and  comment. DOD did not provide any comments on the draft report. In its  comments, reprinted in appendix IV, DHS and FEMA concurred with our  nine recommendations. DHS and FEMA also provided technical  comments, which we incorporated as appropriate.", "In its written comments, FEMA agreed to take actions to address our  recommendations, such as updating guidance on advance contract use  and management, adding an addendum to its quarterly report that  captures the contract actions that were previously unreported, and better  communicating information on advance contracts to states and localities.  In its concurrence with two of our recommendations, FEMA requested  that we consider these recommendations resolved and close as  implemented based on our actions it had previously taken.", "For example, in its response to our third recommendation, FEMA agreed  to update and implement existing guidance to identify acquisition  timeframes and the purpose and use of its 5-Year MAPS program. In its  response, FEMA reiterated that it has conducted training sessions for its  contracting and program staff on the 5-Year MAPS program and provides  notice to program managers when acquisition planning is set to begin,  which the agency believes satisfies this recommendation. We  acknowledge FEMA\u2019s training in this report; however, we noted that not  all program and contracting staff we spoke with were familiar with 5-Year  MAPS, and there is no formal guidance on timeframes for the entire  acquisition planning process. We continue to believe this  recommendation remains open and encourage FEMA to formalize  guidance on the timeframes and considerations for planning various types  of acquisitions across the entire acquisition planning process, and to  document the purpose and use of the 5-Year MAPS program to ensure a  uniform understanding of the program.", "Further, in its concurrence with our eighth recommendation, FEMA stated  that it believes its current advance contract list satisfies our  recommendation for internally communicating available advance  contracts. We acknowledge in this report that the advance contract list is  updated monthly; however, we found inconsistencies in the advance  contract list and other documentation identifying advance contracts, which  could result in FEMA\u2019s contracting officers not having full visibility into  available advance contracts. We continue to believe the recommendation  remains open and encourage FEMA to identify a centralized resource  with all available advance contracts and ensure that it is regularly updated  for contracting staff.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the U.S. Army Corps of Engineers  Director of Contracting, the Secretary of Homeland Security, the  Administrator of the Federal Emergency Management Agency, and the  Federal Emergency Management Agency\u2019s Chief Procurement Officer. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report reviews the federal government\u2019s contracting efforts for  preparedness, response, and recovery efforts related to the three 2017  hurricanes and California wildfires. This report specifically addresses the  use of advance contracts, assessing the extent to which (1) the Federal  Emergency Management Agency (FEMA) and the U.S. Army Corps of  Engineers (USACE) used advance contracts, (2) the planning,  management, and reporting of selected FEMA and USACE advance  contracts met certain contracting requirements, and (3) FEMA and  USACE identified any lessons learned and challenges with their use of  these contracts. We also have an ongoing review on post-disaster  contracting that is expected to be completed in early 2019.", "To identify the extent to which FEMA and USACE used advance  contracts, we reviewed data on contract obligations for the 2017 disasters  from the Federal Procurement Data System-Next Generation (FPDS-NG)  through May 31, 2018. We identified hurricane obligations using the  national interest code, as well as the contract description. Data on  obligations for the California wildfires is limited to those contracts that  FEMA and USACE identified as being used to respond to those events  because no national interest code was established in FPDS-NG. To  determine which obligations were made through the use of advance  contracts, we reviewed documentation provided by FEMA and USACE  identifying the advance contracts they have in place and that were used  in support of the 2017 disasters. We analyzed the FPDS-NG data to  identify FEMA and USACE advance contract obligations compared to  overall contract obligations by disaster, competition procedures used, and the types of goods and services procured. We assessed the reliability of  FPDS-NG data by reviewing existing information about the FPDS-NG  system and the data it collects\u2014specifically, the data dictionary and data  validation rules\u2014and performing electronic testing. We determined the  FPDS-NG data were sufficiently reliable for the purposes of this report.", "To assess the extent to which FEMA used its advance contracts, we  reviewed FEMA contracting policies and guidance, such as FEMA\u2019s 2017  Disaster Contracting Desk Guide and FEMA\u2019s Advance Contracting of  Goods and Services Report to Congress to identify available guidance on  the use and intent of advance contracts. Based on our review of  documentation, we identified examples of goods\u2014tarps and meals\u2014that  FEMA had advance contracts in place for, but experienced challenges  using in response the 2017 disasters. We reviewed FPDS-NG data to  determine whether these goods were procured through post-disaster  contracts rather than advance contracts, and selected advance and post- disaster contracts for further review. To identify limitations that affected  the use of tarp and meal advance contracts, we gathered and reviewed  advance and post-disaster contract documentation and interviewed  contracting officials involved in the award and use of the contracts in  2017.", "To assess the extent to which the planning, management, and reporting  of advance contracts used in response to the three hurricanes and  California wildfires in 2017 met selected applicable contracting  requirements, we reviewed relevant documentation, including the Post- Katrina Emergency Management Reform Act (PKEMRA), the Federal  Acquisition Regulation (FAR), and Department of Homeland Security  (DHS, FEMA, and USACE contracting policies. We identified a non- generalizable sample of advance contracts based on advance contract  obligation data from FPDS-NG as of March 31, 2018. We analyzed the  data to identify 10 competed and four h non-competed contracts. To  obtain a range of competed contracts, we identified contracts used for  goods and services with obligations above $50 million. All of the non- competed contracts used were for FEMA services; to obtain a range of  non-competed contracts we identified contracts with obligations above  $10 million. Our selected advance contracts included 10 from FEMA and  four from USACE. Findings based on information collected from the 14  contracts cannot be generalized to all advance contracts. Additional  details on our selected contracts can be found in table 2.", "To review our selected FEMA and USACE advance contracts, we  developed a data collection instrument to gather selected contract  information, such as period of performance, contract type, estimated  contract value, and the presence of key contract documents, among  others. To assess FEMA and USACE\u2019s planning of selected advance  contracts, we reviewed information from our data collection instrument on  advance contract award date and period of performance, and determined  that six of FEMA\u2019s contracts met GAO\u2019s definition of a bridge contract. To  identify any planning challenges that contributed to these extensions, we  reviewed FEMA acquisition planning policies, timeframes and relevant  contract file documentation, such as written acquisition strategies and  justification and approval documents, to determine whether acquisition  planning activities for the selected advance contracts were completed  according to guidance. We interviewed FEMA officials associated with  these contracts on acquisition planning efforts, and factors that affected  their ability to award new contracts. We also reviewed documentation and  interviewed officials on FEMA\u2019s acquisition planning system\u2014the 5 Year  Master Acquisition Planning Schedule (MAPS).", "To assess FEMA and USACE\u2019s management of selected advance  contracts, we reviewed information gathered from our data collection  instrument on the presence of selected acquisition documents, such as  acquisition strategies and contract modifications in the contract file, that  typically provide the history of a contract. We reviewed relevant  procurement regulations, the DHS Acquisition Manual, and other FEMA  and USACE policies, to identify acquisition documentation requirements  and record keeping processes. For contracts where documentation was  not found in the contract file or system of record, we requested the  missing documentation from FEMA and USACE officials to determine  whether it had been completed. We also interviewed FEMA and USACE  headquarters officials to supplement our understanding of FEMA and  USACE\u2019s record keeping policies, practices, and challenges.", "To assess the reporting of selected advance contracts, we compared  advance contract action data identified in FPDS-NG to data reported in  FEMA\u2019s Disaster Contracts Quarterly Report Fourth Quarter, Fiscal Year  2017 and Disaster Contracts Quarterly Report First Quarter, Fiscal Year  2018 to congressional committees on disaster contracting to identify any  unreported actions. We interviewed FEMA officials to discuss the  methodology and data sources for the congressional committee reports,  and any limitations to the accuracy of the data reported.", "To assess what challenges and lessons learned FEMA and USACE  identified with the use of advance contracts in 2017, we reviewed  PKEMRA advance contract requirements, FEMA and USACE  documentation on the use of advance contracts, and after-action reports  from 2017 and prior years, including the Hurricane Sandy FEMA After- Action Report, and the 2017 Hurricane Season FEMA After-Action  Report, and federal internal control standards for information and  communications. As part of our review, we identified FEMA and USACE\u2019s  processes for documenting lessons learned following a disaster, lessons  learned specific to advance contracts, and any recommendations or  actions planned by the agencies to address them. We interviewed FEMA  and USACE headquarters officials on reported lessons learned, any other  challenges related to the use of advance contracts, and ongoing or  completed actions to address them. To describe challenges related to  coordination with state and local officials on the use of advance contracts,  we interviewed FEMA and USACE regional staff. To obtain perspectives  and examples from state and local government officials involved in  disaster response efforts we interviewed officials in California on advance  contracting efforts. The information gathered from these officials is not  generalizable to all officials. We also analyzed information on available  advance contracts from FEMA\u2019s June 2018 advance contract list and  FEMA\u2019s May 2018 training documentation identifying advance contracts  to identify any differences in the information available to FEMA regional  contracting officers, and their state and local contracting counterparts.", "We conducted this performance audit from March 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Federal Emergency Management Agency (FEMA) Regional Offices", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Federal Emergency Management Agency (FEMA) and U.S. Army Corps of Engineers (USACE)-Identified Advance Contracts", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Katherine Trimble (Assistant  Director), Meghan Perez (Analyst in Charge), Erin Butkowski, and  Suzanne Sterling were principal contributors. In addition, the following  people made contributions to this report: Sonja Bensen, Emily Bond,  Lorraine Ettaro, Suellen Foth, Julia Kennon, Elisha Matvay, Carol  Petersen, Sylvia Schatz, Alyssa Weir, and Robin Wilson."], "subsections": []}]}], "fastfact": ["Following Hurricane Katrina, Congress required FEMA to establish contracts for goods and services in advance to enable quick and effective mobilization of resources in the aftermath of a disaster. FEMA and the Army Corps of Engineers used \"advance contracts\" for $4.5 billion in goods and services after Hurricanes Harvey, Irma, and Maria, and the California fires of 2017.", "We found FEMA's guidance on the use of these types of contracts was unclear, and that inconsistent information from FEMA could impair its efforts to help state and local governments use advance contracts.", "We made 9 recommendations, including that FEMA clarify its guidance."]}
{"id": "GAO-19-124", "url": "https://www.gao.gov/products/GAO-19-124", "title": "Tobacco Exports: Agencies Have Implemented Restrictions on Promoting Tobacco Overseas but Additional Actions Could Strengthen Their Efforts", "published_date": "2018-12-06T00:00:00", "released_date": "2019-01-04T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The World Health Organization estimates that tobacco use kills over 7 million people each year, more than tuberculosis, HIV/AIDS, and malaria combined. Since the 1990s, Congress has enacted restrictions regarding the use of certain appropriated funds to promote U.S. tobacco exports.", "GAO was asked to review the implementation of these restrictions. This report examines (1) guidance select U.S. agencies have issued to implement these restrictions, (2) whether overseas officials from select U.S. agencies were aware of the restrictions and guidance, and (3) select U.S. agencies' implementation of the guidance overseas. GAO reviewed U.S. laws, agency guidance, and internal communications; analyzed Commerce data; and interviewed agency officials in Washington, D.C. and in 24 offices across 11 overseas posts in 9 countries. GAO selected these countries based on criteria that included U.S. tobacco export totals, smoking rates, and geographic dispersion."]}, {"section_title": "What GAO Found", "paragraphs": ["Congress has restricted the use of certain appropriated funding to promote tobacco exports and the Departments of State (State), Commerce (Commerce), and Agriculture (USDA) have issued interagency guidance through the cable system that they rely on to implement these restrictions. State collaborates with these and other agencies to periodically update this cable. The cable informs officials about the types of actions they should take\u2014such as providing routine business facilitation services to all U.S. companies\u2014and the types of actions they should not take\u2014such as attending events sponsored by tobacco companies.", "Most, but not all, officials overseas that GAO interviewed were aware of the restrictions and received some guidance concerning the restrictions. However, GAO found that some officials did not recall receiving the interagency guidance cable. In addition, State and USDA's current training materials do not address the restrictions. Federal internal control standards state that appropriate training is essential to an organization's operational success. Thus, providing officials overseas with training about the funding restrictions and related guidance would help to ensure that officials are aware of the restrictions.", "U.S. officials overseas have implemented restrictions on promoting tobacco, but some officials said that the interagency guidance lacks clarity. Officials said that they have not promoted tobacco by, for example, attending events sponsored solely by tobacco companies. However, officials identified three areas of the guidance that are unclear: (1) attendance at events not sponsored by U.S. tobacco companies but attended by representatives of these companies; (2) the types of services officials can provide tobacco companies; and (3) the description of tobacco products, such as whether component parts for electronic cigarettes are included. Federal standards for internal control state that management should clearly document internal controls in policies and guidance to prevent officials from failing to achieve an objective or address a risk. By providing more specific guidance, the agencies would help ensure that officials consistently implement the funding restrictions on promoting tobacco."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that (1) State and USDA include information about the funding restrictions and guidance in training materials for relevant employees and (2) State, in consultation with Commerce and USDA, assess and update the interagency guidance cable, as needed, on promoting tobacco in light of questions raised by officials at posts overseas. State and USDA concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The World Health Organization (WHO) estimates that tobacco use kills  over 7 million people each year, more than tuberculosis, HIV/AIDS, and  malaria combined. The U.S. National Cancer Institute and the WHO  reported in 2016 that tobacco-related deaths are projected to increase to  over 8 million by 2030, with the majority of those deaths occurring in low-  and middle-income countries. As smoking rates have declined in  developed markets, the global tobacco industry has shifted sales to  emerging markets in Asia and Africa.", "Since the 1990s, Congress has annually enacted appropriation acts with  restrictions on the use of certain appropriated funds to promote the sale  or export of U.S. tobacco or tobacco products. Current law prohibits  appropriated funds from being made available to the Secretary of  Agriculture acting through the Foreign Agricultural Service to promote the  sale or export of tobacco or tobacco products. Similarly, the acts  annually appropriating funds for the Departments of State (State) and  Commerce (Commerce) from fiscal year 1998 through fiscal year 2017  have prohibited the funds appropriated therein from being used to  promote the sale or export of tobacco or tobacco products and to seek  the reduction or removal by any foreign country of restrictions on the  marketing of tobacco or tobacco products.", "You asked us to review the implementation of these restrictions at  overseas posts. This report examines (1) the guidance select U.S.  agencies have issued to implement funding restrictions on promoting  tobacco overseas, (2) to what extent overseas officials from select U.S.  agencies were aware of the restrictions and guidance, and (3) to what  extent select U.S. agencies have implemented this guidance overseas.", "To address these objectives, we reviewed U.S. laws and guidance on  tobacco promotion issued by State and Commerce. We also interviewed  officials in headquarters from State, Commerce, the U.S. Department of  Agriculture (USDA), and the Office of the U.S. Trade Representative  (USTR) about the development of guidance on tobacco promotion and its  implementation. In addition, we held structured interviews with 45 State,  Commerce, and USDA officials overseas who were conducting  promotion-related activities in 24 offices across 11 posts and in 9  countries, about tobacco promotion guidance, training, and their activities.  When multiple officials from one agency attended a meeting, we reported  their combined responses as one \u201coffice\u201d response. Thus, we are  reporting the results from the 24 offices we interviewed\u20149 State, 8  Commerce, and 7 USDA offices. We selected this non-generalizable  sample of countries based on criteria that included the countries\u2019 large or  increasing amounts of U.S. tobacco imports, relatively high tobacco  smoking prevalence rates, and geographic dispersion.", "We also analyzed Commerce\u2019s fee-based services data, reviewed State  cables from six countries sent between January 2013 and December  2017 that named a tobacco company, and conducted a literature search  to identify instances in which U.S. government officials may have  conducted activities addressed by the interagency tobacco guidance  cable. We determined that Commerce\u2019s fee-based services data were  sufficiently reliable for the purposes of our reporting objectives. In  addition, we analyzed Commerce email communications concerning  tobacco-related issues sent between January 2015 and February 2018 to  identify commonly asked questions or concerns about the existing  guidance and actions the agencies should or should not take to support  U.S. tobacco companies or the tobacco industry. We also interviewed  representatives from the World Health Organization, the tobacco control  community, and business associations. Our scope and methodology are  described in detail in appendix I.", "We conducted this performance audit from November 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Roles and Responsibilities", "paragraphs": ["U.S. agencies perform a wide variety of activities that contribute to export  promotion, and responsibility for these activities is widely dispersed.  Some of the services these agencies provide are intended, at least in  part, to assist U.S. companies in entering foreign markets or expanding  their presence abroad. For example, the U.S. government distributes  trade-related information to exporters, conducts foreign country market  research, and provides counseling to U.S. companies throughout the  export process. U.S. agencies may also use diplomatic tools to advocate  on behalf of U.S. companies to help ensure they can compete on a level  playing field in export markets.", "Three of these agencies\u2014State, Commerce, and USDA\u2014receive  appropriations that are restricted from being used to promote the sale or  export of U.S. tobacco or tobacco products. These agencies promote the  growth of other U.S. exports through various activities, as discussed in  table 1."], "subsections": []}, {"section_title": "Funding Restrictions on Promoting Tobacco", "paragraphs": ["Congress has restricted the use of funds that are generally appropriated  for State, Commerce, and USDA from being used to promote the sale or  export of U.S. tobacco and tobacco products since the 1990s. In 1990,  we reported that U.S. policy and programs for assisting the export of  tobacco and tobacco products worked at cross purposes to U.S. health  policy and initiatives, both domestically and internationally. Congress  later restricted the use of funds that are generally appropriated to State,  Commerce, and USDA from being used to promote the sale or export of  U.S. tobacco and tobacco products.", "During fiscal years 1994 through 2003, Congress prohibited funds  generally appropriated for USDA through annual appropriations acts from  being used to promote the sale or export of tobacco or tobacco products.  In fiscal year 2004, Congress permanently prohibited funds appropriated  for USDA from being used to promote the sale or export of tobacco or  tobacco products. According to USDA officials, USDA stopped its efforts  to gather and disseminate tobacco-related production and consumption  information overseas in the early 2000s.", "Congress restricted the use of certain appropriated funds, including  appropriations for Commerce and State, from being used to promote the  sale or export of U.S. tobacco and tobacco products from fiscal years  1998 through 2017. Congress passed the Departments of Commerce,  Justice, State, the Judiciary and Related Agencies Appropriations Act,  1998, which prohibited the funds provided by the act from being used to  promote the sale or export of tobacco or tobacco products. This act also  prohibited the funds provided by the act from being used to seek the  reduction or removal of foreign country restrictions on the marketing of  tobacco or tobacco products. The act provided an exception for the funds  to be used to address foreign-country restrictions on tobacco marketing  that are not applied equally to all tobacco or tobacco products of the  same type. These restrictions have been enacted through annual  appropriations acts through fiscal year 2018.", "In fiscal year 2018, Congress altered the restriction language on tobacco  promotion in the act making appropriations for State, which, according  to State, makes promotion activities permissive with respect to the use of  State appropriations. Congress used the term \u201cshould\u201d in the Department  of State, Foreign Operations, and Related Programs Appropriations Act,  2018 (2018 State Appropriations Act) instead of the term \u201cshall\u201d as in prior  acts making appropriations for State. Specifically, the 2018 State  Appropriations Act states that \u201cNone of the funds made available by this  Act should be available to promote the sale or export of tobacco or  tobacco products. . . .\u201d In contrast, prior acts making appropriations for  State stated \u201cNone of the funds made available by this Act shall be  available to promote the sale or export of tobacco or tobacco  products. . . .\u201d According to State officials, they interpreted the term  \u201cshall\u201d in prior appropriations acts as a mandatory action, whereas the  use of the term \u201cshould\u201d gives the agency more discretion in how it  addresses the restrictions. However, State has not changed how it  addresses the restrictions and does not plan to promote the sale or export  of U.S. tobacco, according to State officials.", "The legislation restricting fiscal year 2018 appropriations provided to  Commerce and USDA from being used to promote tobacco retains the  mandatory \u201cshall\u201d language. According to Commerce and USDA  officials, the change to State\u2019s restriction language does not affect the  agencies\u2019 activities because Commerce and USDA are still subject to the  mandatory restrictions outlined in their agencies\u2019 appropriations language."], "subsections": []}]}, {"section_title": "U.S. Agencies Have Issued Guidance to Implement Funding Restrictions on Promoting Tobacco", "paragraphs": ["State collaborates with Commerce, USDA, and other agencies to develop  and periodically issue an interagency guidance cable to implement  funding restrictions on promoting tobacco. According to officials, this  cable serves as the primary source of guidance for implementing the  restrictions on promoting tobacco for their officials at all posts overseas."], "subsections": [{"section_title": "State Periodically Issues an Interagency Guidance Cable to Implement Funding Restrictions", "paragraphs": ["State collaborates with Commerce, USDA, and other agencies to develop  and periodically issue an interagency guidance cable to all posts  overseas to facilitate their implementation of funding restrictions on  promoting tobacco. State officials draft the updated cable and  Commerce, USDA, and other agency officials have the opportunity to  review and comment on it before State issues it through its cable system.  This cable serves as the primary source of guidance for implementing the  restrictions, according to officials at these agencies (see table 2).", "State has updated and issued the interagency guidance cable four times  since 2013 to address changes in tobacco technology and other  emerging issues, according to State officials. We identified two significant  changes to the cable over the past 5 years.", "Addition of information concerning attendance at corporate  social responsibility events: In May 2013, State added a provision  that post officials should consult with headquarters before attending  corporate social responsibility events involving U.S. tobacco  companies. State officials in headquarters acknowledged that post  officials may not link some activities, such as participating in corporate  social responsibility events, to the promotion of or selling of products.  They noted that this is why it is important to make post officials aware  of the actions they should or should not take through the interagency  guidance cable.", "Changes to the scope of tobacco products: In recent updates to  the cable, State expanded the description of \u201ctobacco and tobacco  products\u201d to address the emergence of new delivery systems for  tobacco. Specifically, in 2014 State added the language \u201ctobacco  delivering products, such as electronic cigarettes\u201d to provide an  example of a tobacco product. In 2016, State changed the description  to \u201celectronic nicotine delivery systems such as e-cigarettes.\u201d Then in  2018, State added \u201cnon-combustible products such as smokeless  tobacco\u201d to the description of tobacco products.", "In response to the revised funding restriction language in the 2018 State  Appropriations Act, State modified the 2018 cable stating that the  changes make promotion activities permissive with respect to the use of  State appropriations. However, State decided not to change the portion of  the cable describing specific actions officials should or should not take in  the version it issued in April 2018, because according to State officials,  they do not plan to promote tobacco. In addition, Commerce and USDA  officials said that the change to State\u2019s restriction language has not  changed how they interpret the guidance."], "subsections": []}, {"section_title": "Commerce\u2019s Policy on Client Eligibility Implements Funding Restrictions", "paragraphs": ["Commerce relies on both the interagency guidance cable as well as its  client eligibility policy to implement restrictions on promoting tobacco.  Commerce\u2019s client eligibility policy applies to all export promotion services  that Commerce provides and educates officials on how to effectively  manage U.S. company requests for commercial assistance. The policy\u2019s  section on exceptions and other bases for declining services to  companies states that Commerce is prohibited by law from promoting the  export of tobacco or tobacco-related products. Commerce issued its  updated client eligibility policy in October 2018."], "subsections": []}, {"section_title": "USDA Relies on the Interagency Guidance Cable to Implement Funding Restrictions", "paragraphs": ["USDA relies on the interagency guidance cable to provide direction to its  officials overseas, and does not have agency-specific guidance for  implementing its permanent funding restrictions on promoting tobacco.  USDA officials said that the cable sufficiently addresses the funding  restrictions on the agency\u2019s promotion activities and helps to ensure that  all officials serving at posts overseas conduct activities in a consistent  manner."], "subsections": []}]}, {"section_title": "Most Post Officials Interviewed Were Aware of the Restrictions and Received Guidance but Many Did Not Receive Training", "paragraphs": ["Most State, Commerce, and USDA officials overseas we interviewed  were aware of the restrictions on promoting tobacco. Most officials we  interviewed had received some guidance concerning the restrictions, but  several officials did not recall receiving the interagency guidance cable.  Moreover, two of the agencies\u2019 current training courses do not address  the restrictions."], "subsections": [{"section_title": "Most Post Officials Were Aware of the Restrictions", "paragraphs": ["Officials in 21 of the 24 offices overseas we interviewed were aware of  the restrictions. The three offices that were not aware of the restrictions  were from State. Although these officials were not aware of the  restrictions, they said they had never provided services to U.S. tobacco  companies.", "Commerce and USDA headquarters officials said that it is widely known  within their agencies that staff should not promote tobacco. Commerce  and USDA officials said the guidance concerning these restrictions has  been consistent for many years and that staff in the field and in  headquarters are very aware of the restrictions."], "subsections": []}, {"section_title": "Most Post Officials Received Some Guidance Concerning the Restrictions", "paragraphs": ["Most officials overseas had received some guidance concerning the  restrictions on promoting tobacco. Officials in 21 of the 24 offices  overseas we interviewed had received written or verbal guidance  concerning the restrictions on promoting tobacco at some point in their  career. For example, officials in 15 offices mentioned receiving the State-issued interagency guidance cable when we asked them what type of  tobacco-related guidance they had received. In addition, officials in four of  the eight Commerce offices recalled receiving agency-specific guidance.  Some officials said that their supervisors had informed them they are not  allowed to promote tobacco exports.", "Some officials did not recall receiving the interagency guidance cable,  which agency officials said serves as the primary source of guidance for  implementing the restrictions, and some were not aware that State  periodically issues the cable. For example, one USDA official stated that  he could not recall the last time he received guidance and noted that  cables can easily be overlooked. He recommended that USDA improve  its efforts to distribute the cable and have supervisors maintain an annual  checklist to ensure staff have read and understand it or incorporate it into  annual training. A State official told us that he was in Washington, D.C.  when State issued the prior cable and he did not learn about it until he  had been stationed at his next overseas post for several months. A  Commerce official noted that some officials new to post may not receive  the interagency guidance cable for several months.", "All officials working overseas can access the interagency guidance cable  through the State cable database or access other resources if a tobacco- related issue arises. For example, the Commerce client eligibility policy  and the interagency guidance cable are available on an internal  Commerce website. USDA officials in headquarters stated that they do  not remind officials overseas about the restrictions or available guidance,  but that, in response to our audit work, they plan to send an annual  reminder. Finally, many post officials we interviewed said that they are  aware of the activities their colleagues are undertaking and would have  the opportunity to educate their colleagues before they provided any  services to a tobacco company."], "subsections": []}, {"section_title": "Many Post Officials Did Not Receive Training Concerning the Restrictions", "paragraphs": ["Officials in 15 of the 24 offices overseas we interviewed said they did not  receive any training concerning restrictions on promoting tobacco. In the  past, State, Commerce, and USDA did not include information about the  funding restrictions or related guidance in training materials. State and  USDA officials in headquarters confirmed that training materials for  officials conducting export promotion activities overseas do not address  funding restrictions on promoting tobacco. According to an official at  State\u2019s Foreign Service Institute, tobacco products may be discussed in  a trade-related course when describing those products officials should not  advocate for, or in the 6-month economic studies course when examining  the nexus between trade issues and public policy. However, State could  not provide documentation of where this is specifically addressed in its  curriculum. A USDA official stated that none of the Foreign Agricultural  Service training courses explicitly discuss restrictions on promoting  tobacco. According to Commerce officials, the training for new trade  specialists did not include information about the restrictions on promoting  tobacco when Commerce last provided the training in 2014. However, in  response to our audit work, Commerce added this information into its  training materials for new trade specialists in September 2018.", "Officials who do not receive training on the restrictions early in their  careers may not be aware that they are prohibited from promoting  tobacco. For example, one Commerce official told us he did not know  about the restrictions while serving at his first post when he attended a  meeting that involved representatives from the tobacco industry. He noted  that he now questions whether he would have attended the meeting if he  had known about the restrictions. Federal internal control standards state  that appropriate training, aimed at developing employee knowledge,  skills, and abilities, is essential to an organization\u2019s operational success.  If agencies do not explicitly include information about the restrictions and  related guidance in training materials for officials conducting export  promotion activities overseas, officials may work at a post for several  months, or longer, before learning about the restrictions."], "subsections": []}]}, {"section_title": "Post Officials Have Implemented Restrictions on Promoting Tobacco but Guidance Lacks Clarity", "paragraphs": ["The State, Commerce, and USDA officials we interviewed said they have  implemented the funding restrictions on tobacco as outlined in the  interagency guidance cable issued by State. For example, post officials  said they have not promoted the sale or export of tobacco or tobacco  products or attended events solely sponsored by tobacco companies,  though many officials said they attended events at which officials from  tobacco companies were present. Post officials identified three areas of  the guidance that may benefit from additional clarification, according to  interviews with agency officials and our review of agency emails."], "subsections": [{"section_title": "Post Officials Have Implemented Funding Restrictions on Promoting Tobacco", "paragraphs": ["Our interviews with State, Commerce, and USDA officials in 24 offices in  nine countries and our review of agency documents, showed that posts  have implemented the interagency guidance outlining actions they should  not take (see table 3.)"], "subsections": []}, {"section_title": "Some Sections of the Interagency Guidance Cable Lack Clarity", "paragraphs": ["Post officials identified three areas of the guidance that may benefit from  additional clarification, according to our interviews with agency officials  and our review of agency emails: attendance at events, the types of  permitted services, and the description of tobacco products."], "subsections": [{"section_title": "Officials Questioned When It is Permissible to Attend Certain Events", "paragraphs": ["Officials from all three agencies raised questions about whether and  when it is permissible to attend events at which tobacco company  representatives are present. The guidance does not specifically address  attendance at events also attended by representatives of tobacco  companies. State headquarters officials said the vast majority of  questions received from posts concern whether personnel at a post may  participate in an event when representatives from a company engaged in  the tobacco industry are also expected to participate in that event. We  also reviewed emails in which Commerce officials asked for additional  guidance about attending events or meetings with tobacco companies.  For example, one post official asked whether the embassy could invite a  tobacco company to participate in an embassy-organized trade mission  that would include meetings with the local governor and mayor. In this  case, Commerce headquarters officials advised that the tobacco  company\u2019s participation could be construed as U.S. government support  for the company\u2019s commercial activities and recommended against  including the tobacco company. A USDA official in headquarters also  noted that attending events could, in some cases, be construed as  supporting tobacco companies, and noted that this is an area where staff  could use more guidance.", "Representatives from several tobacco control organizations expressed  concern that interactions between U.S. government officials and  representatives from tobacco companies at events organized by business  associations created a perception that the U.S. government supported  tobacco company sales in the country. For example, in 2017 a business  association hosted a trade mission to one Southeast Asian country that  included representatives from 30 U.S. companies, including a U.S.  tobacco company. In response, two tobacco control organizations wrote  to the U.S. ambassador in that country voicing their concern that U.S.  government officials\u2019 attendance at meetings that included the tobacco  company representatives violated the spirit of the interagency guidance  cable and gave the appearance that the U.S. government supports the  tobacco company. Subsequently, the Deputy Chief of Mission distributed  guidance specific to that post stating that officials were not allowed to  attend a trade mission\u2019s events or meetings if representatives from a  tobacco company were scheduled to give a presentation.", "Several post officials said that attending events organized by business  associations is a key function of their job. They attend these events to,  among other things, exchange information about the local business  climate and learn about the concerns of American companies."], "subsections": []}, {"section_title": "Officials Questioned the Types of Services They Can Provide", "paragraphs": ["Commerce and USDA officials identified ambiguities in the guidance  concerning the types of services they are allowed to provide to tobacco  companies or the tobacco industry. In 14 of the 21 Commerce emails we  reviewed, officials at posts asked for additional guidance about the types  of services they are permitted to provide to tobacco companies or the  types of companies or products they can support. For example, some  post officials asked whether they could engage with the host country  government to obtain information about pending tobacco-related  legislation at the request of a tobacco company. In one case, Commerce  headquarters advised post officials that the restrictions did not prohibit  them from raising concerns on a legislative proposal that would  discriminate against foreign tobacco companies. They further noted that  because of the sensitive nature of tobacco-related issues, any policy  decision to engage should be weighed carefully. Commerce\u2019s client  eligibility policy does not provide a description of the types of actions  Commerce officials should and should not take with regards to tobacco  companies and products. The interagency guidance cable also does not  provide information about some types of services, such as whether  officials should engage with host country government officials to learn  about pending tobacco-related legislation. According to a USDA official,  some officials overseas interpret \u201cpromotional\u201d activities differently and  did not agree on whether both marketing and trade-related activities, such  as enforcing trade agreements, are promotional activities."], "subsections": []}, {"section_title": "Officials Questioned the Description of Tobacco Products", "paragraphs": ["Commerce officials at post asked for additional guidance about whether  they could provide export promotion services to companies exporting  certain tobacco-related products in 3 of the 21 emails we reviewed. For  example, some Commerce officials asked whether they could provide  services to companies selling component parts for electronic nicotine  delivery systems, such as e-liquids. Commerce\u2019s prior client eligibility  policy, issued in May 2017, did not include a list of tobacco products  covered by the policy; whereas, the interagency guidance cable issued  in 2014 states that tobacco products include tobacco delivery systems,  such as electronic cigarettes, and the updated version issued in 2018  added non-combustible products, such as smokeless tobacco, to this  description. However, neither the interagency guidance cable nor  Commerce\u2019s updated client eligibility policy specifically states whether the  description includes component parts for electronic cigarettes and other  tobacco products. GAO previously reported that electronic cigarettes  include a wide range of products that share the same basic design and  generally consist of three main parts: a power source, a heating element,  and a cartridge or tank containing liquid solution, which is often sold  separately.", "According to State officials in headquarters, the guidance on promoting  tobacco was written for a broad audience and to make post officials  mindful of the restrictions. They said they trust that officials overseas will  use their professional judgment and in-country expertise to determine if  post\u2019s support for an event or a company will be construed as promotion  of a tobacco product. Moreover, State and Commerce officials said that  they expect officials overseas to ask headquarters questions to clarify the interagency guidance cable. While federal standards for internal control  state that management should clearly document internal controls in  policies and guidance to prevent officials from failing to achieve an  objective or address a risk, we found that the interagency guidance  does not provide examples of the factors post officials should consider  when attending business association events. The guidance also lacks  sufficient examples of the types of services officials are allowed to provide  to tobacco companies and a clear description of tobacco products. More  specific guidance would help ensure that State, Commerce, and USDA  officials consistently implement their agency-specific funding restrictions  on promoting tobacco exports."], "subsections": []}]}]}, {"section_title": "Conclusions", "paragraphs": ["The United States exported over $2 billion in tobacco and tobacco-related  products in 2017. Congress has enacted restrictions on the use of certain  appropriated funds to promote the sale or export of U.S. tobacco or  tobacco products since the 1990s, and State, Commerce, and USDA  have developed and updated guidance to implement these restrictions.  However, not all officials were aware of the restrictions and more than  half had not received training about the restrictions. Including information  about the restrictions in training materials would help make officials aware  of the restrictions early in their careers and prompt them to seek guidance  if a tobacco-related issue arises. If officials conducting export promotion  activities are unaware of the funding restrictions on promoting tobacco  sales and exports, they may also be unaware of the activities they should  and should not undertake. Moreover, some officials said that the  guidance is unclear in some areas. Although officials said they need to  attend business association events to support all U.S. companies  conducting business in a country, they were unsure whether they can  attend events where representatives from U.S. tobacco companies may  be present. In addition, some officials also indicated that the current  guidance lacks clarity on the types of services officials are allowed to  provide to tobacco interests and what constitutes a tobacco product.  Although we did not identify any instances in which a State, Commerce,  or USDA official directly promoted U.S. tobacco products, clearer  guidance would help to ensure that officials will consistently implement  their agency-specific funding restrictions."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making three recommendations, including two to State and one to  USDA. Specifically:  The Secretary of State should work with the Foreign Service Institute to  include information about the funding restrictions and relevant guidance  on promoting the sale or export of tobacco or tobacco products in its  training materials for employees conducting export promotion activities  overseas. (Recommendation 1)", "The Secretary of Agriculture should include information about the funding  restrictions and relevant guidance on promoting the sale or export of  tobacco or tobacco products in training materials for employees  conducting export promotion activities overseas. (Recommendation 2)", "The Secretary of State, in consultation with the Secretary of Commerce  and the Secretary of Agriculture, should assess the interagency guidance  cable on promoting tobacco in light of questions raised by officials at  posts overseas and update it to address ambiguities, as needed.  (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to State, Commerce, USDA, and USTR  for review and comment. In their comments, reproduced in appendix III,  State concurred with our recommendations and described planned  actions to address them. USDA concurred with the recommendation and  told us that they had no comments on the draft report. Commerce and  USTR told us that they had no comments on the draft report.", "As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Department of State, the  Secretary of the Department of Commerce, the Secretary of the U.S.  Department of Agriculture, the U.S. Trade Representative, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["This report examines (1) the guidance select U.S. agencies have issued  to implement funding restrictions on promoting tobacco exports overseas,  (2) to what extent overseas officials from select U.S. agencies were  aware of the restrictions and guidance, and (3) to what extent select U.S.  agencies have implemented this guidance overseas.", "To address our first objective, we reviewed U.S. appropriations laws that  prohibited the funds appropriated therein from being used to promote the  sale or export of tobacco or tobacco products. We also reviewed  guidance issued by the Departments of State (State) and Commerce  (Commerce) concerning the promotion of tobacco exports overseas. We  also interviewed officials in headquarters from State, Commerce, the U.S.  Department of Agriculture (USDA), and the Office of the U.S. Trade  Representative (USTR) about the funding restrictions on promoting  tobacco exports overseas and the development and revision of guidance  on tobacco promotion.", "To address our second objective, we interviewed officials in headquarters  from State, Commerce, and USDA about any training officials posted  overseas receive concerning the funding restrictions on promoting  tobacco exports. In addition, we held structured interviews with 35 State,  Commerce, and USDA officials overseas conducting export promotion  activities and reached out to an additional 10 officials to ask about  activities associated with the solicitation of gifts and attendance at  corporate social responsibility events. These officials were located across  11 posts and in 9 countries. We interviewed officials in Cambodia,  Croatia, Dominican Republic, Honduras, Indonesia, Philippines, South  Africa, Thailand, and Vietnam. Because multiple officials from one agency  attended a meeting in some cases, we are reporting their combined  responses as one \u201coffice\u201d response. Thus, we are reporting the results  from the 24 offices we interviewed\u20149 State, 8 Commerce, and 7 USDA  offices. We selected this non-generalizable sample of countries based  on criteria that included the countries\u2019 large or increasing amounts of U.S.  tobacco imports, relatively high tobacco smoking prevalence rates, and  geographic dispersion. The information obtained from these interviews is  neither generalizable nor reflects the experiences of all State, Commerce,  and USDA officials serving at posts overseas, but it does provide insights  into officials\u2019 experiences at post and illustrative examples across our  sample on the topics discussed.", "To address our third objective, we interviewed officials in headquarters  from State, Commerce, and USDA about post officials\u2019 implementation of  guidance regarding the promotion of tobacco exports, the types of  questions they receive from post officials about the funding restrictions  and guidance, and the additional advice they provide to post officials  overseas. We asked post officials about the clarity of guidance, whether  they attended events sponsored or attended by representatives of U.S.  tobacco companies, and whether they discussed tobacco-related issues  with host country government officials during our structured interviews  with the 24 State, Commerce, and USDA offices overseas.", "We also analyzed a Commerce database, agency emails, and State  cables and conducted a literature search. Commerce documents all the  fee-based services it provides to companies in a database. We obtained  a list of approximately 30,000 fee-based services Commerce provided in  fiscal years 2013 through 2017, which included the name of the  companies to which Commerce provided these services. We then  downloaded a list of 763 U.S. tobacco companies from Nexus using  criteria such as industry classification codes related to tobacco and  tobacco products and the location of company headquarters. We limited  the list of U.S. tobacco companies to those with revenues greater than $5  million. We then compared the two lists to determine if Commerce  provided any fee-based services to U.S. tobacco companies. To assess  the reliability of the Commerce fee-based services data, we reviewed  relevant documentation and interviewed knowledgeable officials about  system controls. We determined that Commerce\u2019s fee-based services  data were sufficiently reliable for the purposes of our reporting objectives.", "In addition, we requested State, Commerce, and USDA email  communications concerning tobacco-related issues sent between  January 2015 and February 2018 from post officials to headquarters.  State was only able to provide one such email. USDA provided several  emails, but the emails were not from USDA post officials to USDA officials  in headquarters. Commerce provided us 21 emails that matched our  request and an additional 20 emails from officials working throughout the  United States. We analyzed the Commerce email communications to  identify commonly asked questions or concerns about the existing  guidance and actions the agencies should take to support U.S. tobacco  companies or the tobacco industry. We also requested State cables from  the eight countries in our sample sent between January 2013 and  December 2017 that referenced at least 1 of the 10 U.S. tobacco  companies with the highest revenues. We received and reviewed cables  from six of these countries. We also conducted a literature search to  identify instances in which U.S. government officials may have conducted  activities addressed by the interagency tobacco guidance cable. To  identify relevant articles, such as trade or industry articles, we searched  various databases, including ProQuest and Nexus. From these sources,  we identified one article relevant to our research objective. We performed  these searches in December 2017 and searched for articles published  from January 2013 to December 2017.", "We also interviewed representatives of the tobacco control community  and business associations to obtain their perspectives concerning U.S.  government support for tobacco exports and U.S. government  interactions with U.S. tobacco companies. Specifically, we interviewed the  World Health Organization (WHO), four global or regional tobacco control  nongovernmental organizations, and several local nongovernmental  organizations in two countries in our scope. In addition, we interviewed  officials from the local American Chamber of Commerce and the U.S.- Association of Southeast Asian Nations Business Council in two  countries. The information obtained from these interviews is neither  generalizable nor reflects the experiences of all tobacco control  organizations or business associations, but it does provide insights into  these officials\u2019 experiences.", "We conducted this performance audit from November 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Trends in U.S. Tobacco Exports", "paragraphs": ["The United States exported over $2.1 billion in tobacco and tobacco  products in 2017. Figure 1 shows how tobacco exports fluctuated from  2007 to 2017. Specifically, total tobacco exports have ranged from a high  of approximately $2.4 billion in 2007 to a low of about $1.7 billion in  2012.", "U.S. tobacco exports to Asia have decreased by 68 percent over the past  11 years, whereas exports to North America have increased 10-fold (see  fig. 2). Most of the decrease in exports to Asia is attributable to reduced  exports to Japan, which fell 95 percent from 2007 to 2017. Most of the  increases in exports to North America are attributable to Canada, which  accounted for approximately 40 percent of total U.S. tobacco exports in  2017."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgements", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": ["David B. Gootnick, (202) 512-3149 or gootnickd@gao.gov."], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Cheryl Goodman (Assistant  Director), Celia Thomas (Assistant Director), Amanda Bartine, Leah  DeWolf, Jewel Conrad, Aldo Salerno, and Neil Doherty made key  contributions to this report. Grace Lui, Justin Fisher, and Ming Chen  provided technical assistance."], "subsections": []}]}], "fastfact": ["Worldwide, tobacco use kills more people annually than tuberculosis, malaria, and HIV/AIDS combined.", "Congress restricts the Departments of State, Commerce, and Agriculture's promotion of tobacco exports. We found that most, but not all, officials overseas were aware of the restrictions and didn't promote tobacco.", "However, officials told us that some of the guidance around the restrictions was unclear. For example, descriptions of restricted tobacco products didn't indicate whether the component parts of e-cigarettes were included.", "We made 3 recommendations to improve training and guidance."]}
{"id": "GAO-19-180", "url": "https://www.gao.gov/products/GAO-19-180", "title": "Foreign Asset Reporting: Actions Needed to Enhance Compliance Efforts, Eliminate Overlapping Requirements, and Mitigate Burdens on U.S. Persons Abroad", "published_date": "2019-04-01T00:00:00", "released_date": "2019-04-01T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Concerns over efforts by U.S. taxpayers to use offshore accounts to hide income or evade taxes contributed to the passage of FATCA in 2010, which sought to create greater transparency and accountability over offshore assets held by U.S. taxpayers.", "House Report 114-624 included a provision for GAO to evaluate FATCA implementation and determine the effects of FATCA on U.S. citizens living abroad. GAO\u2014among other things\u2014(1) assessed IRS's efforts to use FATCA-related information to improve taxpayer compliance; (2) examined the extent to which Treasury administers overlapping reporting requirements on financial assets held overseas; and (3) examined the effects of FATCA implementation unique to U.S. persons living abroad.", "GAO reviewed applicable documentation; analyzed tax data; and interviewed officials from IRS, other federal agencies and organizations, selected tax practitioners, and more than 20 U.S. persons living overseas."]}, {"section_title": "What GAO Found", "paragraphs": ["Data quality and management issues have limited the effectiveness of the Internal Revenue Service's (IRS) efforts to improve taxpayer compliance using foreign financial asset data collected under the Foreign Account Tax Compliance Act (FATCA). Specifically, IRS has had difficulties matching the information reported by foreign financial institutions (FFI) with U.S. taxpayers' tax filings due to missing or inaccurate Taxpayer Identification Numbers provided by FFIs. Further, IRS lacks access to consistent and complete data on foreign financial assets and other data reported in tax filings by U.S. persons, in part, because some IRS databases do not store foreign asset data reported from paper filings. IRS has also stopped pursuing a comprehensive plan to leverage FATCA data to improve taxpayer compliance because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns. Ensuring access to consistent and complete data collected from U.S. persons\u2014and employing a plan to leverage such data\u2014would help IRS better leverage such campaigns and increase taxpayer compliance.", "Due to overlapping statutory reporting requirements, IRS and the Financial Crimes Enforcement Network (FinCEN)\u2014both within the Department of the Treasury (Treasury)\u2014collect duplicative foreign financial account and other asset information from U.S. persons. Consequently, in tax years 2015 and 2016, close to 75 percent of U.S. persons who reported information on foreign accounts and other assets on their tax returns also filed a separate form with FinCEN. The overlapping requirements increase the compliance burden on U.S. persons and add complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting. Modifying the statutes governing the requirements to allow for the sharing of FATCA information for the prevention and detection of financial crimes would eliminate the need for duplicative reporting. This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding.", "According to documents GAO reviewed, and focus groups and interviews GAO conducted, FFIs closed some U.S. persons' existing accounts or denied them opportunities to open new accounts after FATCA was enacted due to increased costs, and risks they pose under FATCA reporting requirements. According to Department of State (State) data, annual approvals of renunciations of U.S. citizenship increased from 1,601 to 4,449\u2014or nearly 178 percent\u2014from 2011 through 2016, attributable in part to the difficulties cited above.", "Treasury previously established joint strategies with State to address challenges U.S. persons faced in accessing foreign financial services. However, it lacks a collaborative mechanism to coordinate efforts with other agencies to address ongoing challenges in accessing such services or obtaining Social Security Numbers. Implementation of a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help federal agencies develop more effective solutions to mitigate such burdens by monitoring and sharing information on such issues, and jointly developing and implementing steps to address them."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making one matter for congressional consideration to address overlap in foreign asset reporting requirements. GAO is making seven recommendations to IRS and other agencies to enhance IRS's ability to leverage FATCA data to enforce compliance, address unnecessary reporting, and better collaborate to mitigate burdens on U.S. persons living abroad. State and Social Security Administration agreed with GAO's recommendations. Treasury and IRS neither agreed nor disagreed with GAO's recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["By law, U.S. individuals\u2014regardless of whether they live in the United  States or abroad\u2014are required to report and pay applicable taxes on  worldwide income to the Internal Revenue Service (IRS), including  income from offshore accounts and other assets. While taxpayers can  hold offshore accounts for a number of legitimate reasons, some  taxpayers have also used such accounts to hide income and evade taxes.  IRS does not have an estimate of the revenue loss due to offshore  noncompliance. However, international tax policy experts believe that the  losses are in the billions of dollars annually. These losses contribute to  the tax gap\u2014the difference between tax amounts that taxpayers should  pay and what they actually pay voluntarily and on time\u2014that has been a  problem for decades. In 2016, IRS estimated that the average annual  gross tax gap for tax years 2008 to 2010 was $458 billion, of which $319  billion was from individual taxpayers.", "The passage of the Foreign Account Tax Compliance Act (FATCA)  sought to reduce tax evasion by creating greater transparency and  accountability with respect to offshore accounts and other assets held by  U.S. taxpayers. However, since FATCA\u2019s enactment in 2010, we and  others have identified compliance burdens and other challenges FATCA  has created for U.S. persons living abroad, foreign financial institutions,  and other stakeholders. For example, in our past work, we highlighted  that some of the information reporting requirements for taxpayers subject  to FATCA result in duplicative reporting to the Department of the Treasury  (Treasury). This increases complexity and creates confusion for  taxpayers.", "House Report 114-624 included a provision for us to evaluate IRS\u2019s  implementation of FATCA and determine the effects of FATCA on U.S.  citizens living abroad. To address House Report 114-624, this report (1)  assesses IRS\u2019s efforts to use information collected under FATCA to  improve taxpayer compliance; (2) examines available foreign financial  asset reports submitted by U.S. persons, including submissions that were  below required filing thresholds; (3) examines the extent to which  Treasury administers overlapping reporting requirements on foreign  financial assets; (4) describes similarities and differences between  FATCA and Common Reporting Standard (CRS) reporting requirements;  and (5) examines the effects of FATCA implementation that are unique to  U.S. persons living abroad.", "For our first objective, we identified criteria from our prior work identifying  key practices for risk management. We applied these criteria to assess steps IRS has taken to manage risks in not receiving complete and valid  Taxpayer Identification Numbers (TIN) from foreign financial institutions  (FFI). We also applied criteria from our prior work on use of documented  frameworks to IRS documentation on FATCA compliance activities to  determine the extent to which IRS implemented a comprehensive plan to  maximize the use of collected data to enforce compliance with FATCA.", "For our second objective, we identified total maximum account values  reported by individual filers of the Financial Crimes Enforcement Network  (FinCEN) Form 114s (commonly known as the Report of Foreign Bank  and Financial Accounts, or FBAR) in calendar year 2015 and 2016, using  lower and upper bounds of foreign financial accounts reported for each  year. See appendix III for more details on our methodology to evaluate  these data. We summarized the numbers of IRS Forms 8938, Statement  of Specified Foreign Financial Assets (Form 8938) filed in tax year  2016\u2014the most recent year for which data were available\u2014accounting  for data limitations described in appendix I. We also identified Forms  8938 filed in tax year 2016 with available residency and asset information  that reported specified foreign financial assets with aggregate values at or  below end-of-year tax thresholds, which vary depending on the location of  residence and filing status of such filers.", "For our third objective, we reviewed IRS and FinCEN documentation, and  applied criteria from Fragmentation, Overlap, and Duplication: An  Evaluation and Management Guide to identify the extent to which IRS  and FinCEN were engaged in overlapping activities, and collecting  duplicative foreign financial asset information held by U.S. persons. We  assessed the extent to which individual filers who submitted a Form 8938  in 2015 and 2016 also submitted an FBAR for the same year.", "For the three objectives described above, we assessed the reliability of  data submitted on Forms 8938 filed by individuals for tax years 2015 and  2016, and FBARs for calendar years 2015 and 2016.", "For our fourth objective, we reviewed documentation and interviewed  officials from Treasury, IRS, and the Organisation for Economic Co- operation and Development (OECD) to compare and contrast FATCA and  CRS reporting requirements.", "For our fifth objective, we collected documentation and conducted focus  groups and semi-structured interviews with Treasury, IRS, Department of  State (State), and Social Security Administration (SSA) officials, and more  than 20 U.S. persons subject to FATCA requirements, tax practitioners  and various organizations in the United States and five other countries  (Canada, Japan, Singapore, Switzerland, and the United Kingdom). We  selected these countries based on geography, relatively high numbers of  U.S. expatriates and Form 8938 filers, and tax information sharing  agreements and other tax treaties with the United States. The findings  from the focus groups and interviews are not generalizable to other U.S.  persons, tax practitioners, or organizations.", "We collected documentation from and interviewed Treasury, IRS, State,  and SSA officials on steps to monitor and mitigate the effects of FATCA  on U.S. persons living abroad. We also identified criteria from our prior  work on key practices to enhance and sustain interagency collaboration  and mechanisms to facilitate coordination. We applied the criteria to  agencies\u2019 collaborative efforts addressing issues U.S. persons living  abroad faced from FATCA\u2019s implementation, and identified the extent to  which agencies established effective collaborative mechanisms to  identify, assess, and implement cross-agency solutions to such issues.", "We conducted this performance audit from August 2017 to April 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. See appendix I for more  detailed information on our objectives, scope, and methodology."], "subsections": [{"section_title": "Background", "paragraphs": ["The United States has many international agreements that require treaty  partners to provide certain information to IRS, which can help prevent the  use of foreign bank accounts to facilitate tax evasion. FATCA goes much  further, requiring FFIs to report more detailed information to IRS about  their U.S. customers annually. These provisions are important  developments in efforts to combat tax evasion by U.S. persons holding  investments in offshore accounts. FATCA generally requires certain  taxpayers to report foreign financial accounts and other specified foreign  financial assets whose aggregate value exceeds specified thresholds to  IRS on Form 8938. These taxpayers must report these assets and  income generated from such assets to IRS with their tax return on Form  8938. These thresholds vary by filing status\u2014such as single or married  filing jointly\u2014and by domestic or foreign residency.", "FATCA also promotes third-party reporting of foreign financial assets by  requiring a withholding agent to withhold 30 percent on certain payments  to an FFI unless the FFI or the jurisdiction in which the FFI is located has  entered into an agreement with the United States to report certain  account information of their U.S. customers. Under such an agreement,  participating FFIs report detailed information to IRS annually about  accounts held by their U.S. customers using an IRS Form 8966, FATCA  Report (Form 8966). According to IRS, FATCA improves visibility into  taxable income from foreign sources, and enhances the agency\u2019s ability  to identify and pursue taxpayer noncompliance. For example, FATCA  allows IRS to compare information reported by FFIs on Forms 8966 to  information reported by U.S. persons on Forms 8938. According to IRS,  this comparison can be used to ensure taxpayers and FFIs are properly  reporting foreign financial assets and income from international  investments. This type of comparison is a common IRS enforcement  technique. For example, IRS can directly compare information it receives  from financial institutions\u2019 IRS Form 1099-INT, Interest Income, against a  tax return to determine if the taxpayer reported income generated from  interest earned.", "To facilitate FATCA implementation for FFIs operating in jurisdictions with  laws that would prohibit FFIs from complying with the terms of the FFI  agreement, Treasury developed two alternative intergovernmental  agreements (IGA)\u2014Model 1 and Model 2\u2014to facilitate the effective and  efficient implementation of FATCA by removing partner jurisdictions\u2019 legal  impediments to comply with FATCA reporting requirements, and reducing  burdens on FFIs located in partner jurisdictions. FFIs from countries with  Model 1 IGAs report information on U.S. persons\u2019 accounts to their  respective host country tax authorities (HCTAs). The HCTAs, in turn,  compile the information from FFIs and transmit it to IRS. In contrast, FFIs  from countries with Model 2 IGAs, or countries treated as not having an  IGA in effect, directly report information on U.S. persons\u2019 accounts to IRS.", "Separate from the FATCA requirements, regulations implementing the  Bank Secrecy Act of 1970 (BSA) also impose a separate self-reporting  requirement for foreign accounts. Specifically, certain taxpayers and  residents are required to file an FBAR with FinCEN annually if they have  financial interest or signature or other authority over one or more foreign  financial accounts with a total of more than $10,000, regardless of  whether they reside within or outside the United States. Federal, state,  and local law enforcement agencies can use information from these  reports to combat financial crimes, including terrorist financing and tax  evasion. Appendix IV provides a comparison of Form 8938 and FBAR  reporting requirements.", "Figure 1 depicts the flow of foreign financial account information from  U.S. persons and FFIs to IRS and FinCEN through the FATCA and FBAR  reporting processes."], "subsections": []}, {"section_title": "FATCA Data Limitations and Lack of a Comprehensive Strategy Have Hampered IRS Efforts to Increase Compliance", "paragraphs": [], "subsections": [{"section_title": "Incomplete and Inaccurate Reporting of Taxpayer Identification Numbers by FFIs Has Limited IRS\u2019s Efforts to Match Account Information for Compliance Purposes", "paragraphs": ["As part of the FATCA reporting requirements, IRS collects information on  financial accounts through forms and reports submitted by both taxpayers  and FFIs. As part of this effort, IRS requires taxpayers to identify their  TINs on Forms 8938 they submit. IRS also requires participating FFIs to  report the TINs of each account holder who is a specified U.S. person on  Forms 8966. IRS intends to use reported TINs to link Form 8938 data  filed by taxpayers to Form 8966 data filed by the FFIs to ensure that  taxpayers and FFIs are properly reporting foreign financial assets.", "However, IRS often could not link account information collected from FFIs  to the account\u2019s owner because of incorrect or missing TINs. In July  2018, the Treasury Inspector General for Tax Administration (TIGTA)  found that almost half of new Forms 8966 filed by FFIs did not include a  TIN or included an invalid TIN. A consulting firm working with FFIs to  implement FATCA reporting requirements told us that FFIs encountered  significant challenges obtaining accurate TINs from U.S. persons as part  of the self-certification process. For instance, FFIs encountered situations  where U.S. persons provided incomplete or inaccurate TINs\u2014such as  Social Security Numbers (SSN) with less than nine digits\u2014on forms used  to self-certify their status as U.S. persons. FFIs also encountered  situations where U.S. persons may not have obtained TINs or were  unwilling to provide them to FFIs.", "Additionally, banking associations told us that it has taken time, effort,  and expense for FFIs to report TINs, as they had to upgrade computer  systems to collect and record TINs from U.S. customers. Finally, Treasury  told us that jurisdictions that have an IGA with the United States but no  legal requirement to collect TINs are not in compliance with the  requirements of the IGA.", "Treasury and IRS determined that some FFIs reporting from countries  with Model 1 IGAs needed additional time to implement procedures to  obtain and report required U.S. TINs for preexisting accounts that are  U.S. reportable accounts. Consequently, IRS provided a transition period,  through the end of 2019, for compliance with the TIN requirements for  FFIs under Model 1 IGAs. Specifically, in September 2017, IRS issued a  notice modifying procedures for FFIs reporting from countries with Model  1 IGAs to become compliant with TIN reporting requirements for  preexisting accounts. For calendar years 2017-2019, IRS will not  determine that certain FFIs in countries with Model 1 IGAs are  significantly noncompliant with their obligations under the IGA solely as a  result of a failure to report U.S. TINs associated with the FFI\u2019s U.S.  reportable accounts, providing they (1) obtain and report the date of birth  of each account holder and controlling person whose TIN is not reported,  (2) make annual requests for missing TINs from each account holder, and  (3) search electronically searchable data maintained by such FFIs for  missing required U.S. TINs before reporting information that relates to  calendar year 2017 to a partner jurisdiction. As a result, even without  any further extensions, calendar year 2020 is the earliest IRS will be enforcing requirements for FFIs from countries with Model 1 IGAs to  provide accurate and complete information on U.S. account holders\u2019 TINs  to IRS.", "Without valid TINs on Forms 8966 submitted by FFIs, according to IRS  officials, IRS faces significant hurdles in matching accounts reported by  FFIs to those reported by individual tax filers on their Forms 8938. As a  result, IRS must rely on information such as names, dates of birth, and  addresses that the filers and/or FFIs may not consistently report. Without  data that can be reliably matched between Forms 8938 and 8966, IRS\u2019s  ability to identify taxpayers not reporting accurate or complete information  on specified foreign financial assets is hindered, interfering with its ability  to enforce compliance with FATCA reporting requirements, and ensure  taxpayers are paying taxes on income generated from such assets.", "In July 2018, TIGTA reported that IRS lacked success in matching FFI  and individual taxpayer data because reports FFIs filed did not include or  included invalid TINs. This, in turn, affected IRS\u2019s ability to identify and  enforce requirements for individual taxpayers. TIGTA recommended,  among other things, that IRS initiate compliance efforts to address and  correct missing or invalid TINs on Form 8966 filings from FFIs from  countries with Model 2 IGAs or without any IGAs with the United States.  IRS management said it disagreed with this recommendation because a  system to ensure validation of every TIN upon submission of a Form 8966  would be cost prohibitive. However, IRS management said that IRS would  address invalid TINs as they are uncovered on other compliance efforts,  such as initiating development of a data product to automate risk  assessments across the FATCA filing population. IRS also said it  continues efforts to systematically match Form 8966 and Form 8938 data  to identify nonfilers and underreporting related to U.S. holders of foreign  accounts. However, IRS management told us they are waiting until they  have a full set of data, including TINs, before doing analysis to develop a  compliance strategy. According to TIGTA, IRS management believed that  having the FFI\u2019s Global Intermediary Identification Number (GIIN) on  Form 8938, which is filed by the taxpayer, would help with matching  records. However, Form 8938 instructions identify that the field is optional  for taxpayers to complete. TIGTA recommended that to reduce taxpayer  burden in obtaining GIINs from FFIs, IRS add guidance to Form 8938  instructions to inform taxpayers on how to use the FFI List Search and  Download Tool on the IRS\u2019s website to obtain an FFI\u2019s GIIN. IRS  agreed with this recommendation. However, even if an individual taxpayer  provided GIINs, IRS may continue to have difficulty matching accounts  with U.S. taxpayers if the TIN and name of the account holder reported on  the Form 8966 do not match the TIN and name of the taxpayer on the  Form 8938.", "IRS officials said they are aware of these difficulties and have attempted  to match Forms 8938 and 8966 based on other criteria such as dates of  birth. In its response to our draft report, IRS said that all financial  institutions and foreign tax authorities that file required account  information receive a notification listing administrative and other minor  errors contained in their reporting. According to IRS, its Large Business  and International division follows up with foreign tax authorities regarding  these errors to ensure the tax authorities are working with financial  institutions to correct these errors in compliance with the countries\u2019 IGAs.  IRS added it has initiated a campaign addressing FFIs that do not meet  their compliance responsibilities with respect to account opening  requirements. Additionally, IRS drafted a risk acceptance form and tool  addressing risks in implementing FATCA compliance and business  process capabilities. This risk assessment focused on the limitations IRS  faces due to budget constraints, but did not address the specific risks it  faces from not receiving complete and valid TINs on U.S. account  holders. We previously reported that risk management could help  stakeholders make decisions about assessing risk, allocating resources,  and taking actions under conditions of uncertainty. Key management  practices for risk management we identified from our prior work include  identifying, analyzing, and prioritizing risks; developing a mitigation plan  to address identified risks; implementing the plan; and monitoring,  reporting, and controlling risks. Without developing a risk mitigation plan  to address risks IRS faces from not receiving complete and valid TINs  moving forward, IRS may lose opportunities to adjust its compliance  programs to better identify U.S. persons who are not fully reporting  specified foreign financial assets as required under FATCA."], "subsections": []}, {"section_title": "IRS Databases Lack Consistent and Complete FATCA and Taxpayer Data Useful for Compliance Enforcement and Research", "paragraphs": ["Several IRS databases store data collected from individuals\u2019 electronic  and paper filings of Form 8938 and/or elements of parent individual tax  returns to which the Form 8938 is attached\u2014the filer\u2019s country of  residence and filing status\u2014used to determine specified reporting  thresholds for Form 8938 filers. Additionally, data from these databases  and other sources are transferred downstream to IRS\u2019s Compliance Data  Warehouse (CDW)\u2014a database used for research and analytical  purposes.", "We extracted data from copies of Individual Return Transaction File  (IRTF) and Modernized Tax Return Database (MTRDB) data copied into  CDW to obtain information reported on Forms 8938 and relevant  information from parent tax returns, such as filing status and filers\u2019  country of residence. We found that IRTF and MTRDB had inconsistent  and incomplete data. For example, neither database had consistent and  complete information on foreign financial account and other asset  information submitted by Form 8938 filers. While IRS officials told us that  IRTF is the authoritative source for filers of Form 8938, it does not store  account and other asset information submitted on Forms 8938.", "Additionally, IRS officials said MTRDB is not designed to store  information submitted on paper filings of Forms 8938 and parent tax  returns. Officials from IRS\u2019s Research, Applied Analytics and Statistics  (RAAS) division also noted that CDW did not have reliable information  from Form 8938 paper filings. Because of the lack of foreign financial  asset information from such filings, we could not report complete  information on assets reported by Form 8938 filers.", "Further, IRS does not provide instructions to CDW users on how to  extract appropriate data from CDW\u2014such as data copied from IRTF and  MTRDB\u2014leading to confusion on which databases to use for extracting  Form 8938 and relevant parent tax return data. For example, five distinct  tables within CDW are required to identify the TIN, parent form, filing  status, country of residence, and amount of foreign assets accurately.  Without clear explanations of how data in each of these tables relate to  each other and to the underlying filings, errors could be introduced into  CDW users\u2019 analyses of foreign asset information.", "Standards for Internal Control in the Federal Government notes that  management should use quality information to achieve the entity\u2019s  objectives. One attribute of this principle includes processing data into  quality information that is appropriate, current, complete, accurate,  accessible, and provided on a timely basis. Additionally, the Internal  Revenue Manual states that IRS needs to measure taxpayer compliance  so that customer-focused programs and services can be enhanced or  developed so that compliance information and tools can be improved.", "According to IRS officials, IRS researchers have been taking additional  steps to obtain and review Form 8938 and parent tax return data stored in  the Integrated Production Model (IPM) database. They said IPM is the  only database that contains complete data from individuals\u2019 electronic and  paper filings of Forms 8938 and relevant elements of parent tax returns.  IRS officials said that RAAS has been working with IRS\u2019s information  technology (IT) division to obtain read-only access to IPM, and import  Forms 8938 and 8966 data from IPM into CDW for analysis. However, as  of February 2019, this effort has been delayed due to budget constraints.  In its response to our draft report, IRS said that obtaining read-only  access would require a new technical process and plans to continue  working with IT on the feasibility and timeframe for enabling this access.  Enabling access to consistent and complete Form 8938 and parent tax  return data for compliance staff and researchers from RAAS and other  IRS business units would help IRS strengthen its efforts to enforce  compliance with FATCA reporting requirements and conduct research to  bolster enforcement efforts. However, such efforts may be hampered until  IRS can ensure readily available access to such data."], "subsections": []}, {"section_title": "IRS Stopped Pursuing a Comprehensive Plan to Leverage FATCA Data to Improve Taxpayer Compliance", "paragraphs": ["We previously recommended that IRS develop a broad strategy, including  a timeline and performance measures, for how IRS intends to use FATCA  information to improve tax compliance. IRS agreed with this  recommendation and developed a strategy for FATCA in July 2013. IRS  updated the strategy in 2016 by creating the FATCA Compliance  Roadmap as a comprehensive plan to articulate IRS\u2019s priorities to  facilitate compliance with FATCA reporting requirements. The roadmap  also provided an overview of compliance activities used solely for  enforcing FATCA reporting requirements or enhancing existing  compliance efforts. However, in July 2018, TIGTA reported that IRS had  not updated the FATCA Compliance Roadmap since 2016, and had taken  limited or no action on a majority of the planned activities outlined in it.", "We also found that IRS had not yet evaluated the effects of FATCA,  including the effects on voluntary tax compliance. IRS documentation  states that only 7 of 31 capabilities outlined in the FATCA Compliance  Roadmap were delivered due to funding constraints. As of October 2018,  IRS has stopped using the FATCA Compliance Roadmap and has not  developed a revised comprehensive plan to manage efforts to leverage  FATCA data to improve taxpayer compliance. According to IRS officials,  IRS moved away from updating broad strategy documents, such as the  FATCA Compliance Roadmap, to focus on individual compliance  campaigns. These include a campaign to match individual tax filers to the  reports from FFIs, and another campaign to identify FFIs with FATCA  reporting requirements who are not meeting all of their obligations.", "According to what IRS told us, with the passage of time and as FATCA is  becoming more integrated into agency operations, it has moved from  updating the broad strategy documents focused on FATCA to working on  compliance campaigns that incorporate FATCA into overall tax  administration. Additionally, IRS and outside researchers plan to study  the role of enforcement in driving overall patterns in reporting offshore  assets and income generated from such assets. Though IRS maintains  that FATCA is more integrated into its operations, TIGTA\u2019s 2018 report  concluded that IRS was still unprepared to enforce compliance with  FATCA in part because it took limited or no action on the majority of  planned activities outlined in the FATCA Compliance Roadmap.", "Documenting a framework for using FATCA reporting requirements to  improve taxpayer compliance and measure their effect is consistent with  three steps we found leading public sector organizations take to increase  the accountability of their initiatives: (1) define clear missions and desired  outcomes; (2) measure performance to gauge progress; and (3) use  performance information as a basis for decision-making. We also  previously reported that it is important for IRS to use a documented  framework that defines a clear strategy, timeline, and plans for  assessment. Having such a framework in place can help IRS better  allocate resources and avoid unnecessary costs resulting from not having  the necessary or appropriate data available to execute its objectives. In  light of the challenges IRS faces to collect, manage, and use FATCA data  to improve compliance in a resource-constrained environment, employing  a comprehensive plan would help IRS maximize the use of collected data  and better leverage individual campaigns to increase taxpayer  compliance. Without such a plan, IRS\u2019s ability to collect and leverage data  collected under FATCA for compliance enforcement and other purposes  is constrained."], "subsections": []}]}, {"section_title": "Analysis of FBAR and FATCA Data Provide Insights, Including the Possibility that Tens of Thousands of Forms 8938 May Have Been Filed Unnecessarily", "paragraphs": [], "subsections": [{"section_title": "More than 900,000 Individual FBAR Filers Reported about $1.5 Trillion or More in Foreign Accounts in Both Calendar Years 2015 and 2016", "paragraphs": ["We could not report on total values of foreign financial assets on Forms  8938 in tax years 2015 and 2016. However, we could provide a range of  total maximum account values reported on FBARs during the same  period. Specifically, we determined that more than 900,000 individuals  filed FBARs in calendar years 2015 and 2016, and declared total  maximum values of accounts ranging from about $1.5 trillion to more than  $2 trillion each year.", "A little more than one in five\u2014or about 21.7 percent\u2014of the  approximately 404,800 Forms 8938 filed with IRS in tax year 2016 were  done so from U.S. persons living abroad, with the other 78.3 percent  living in the United States. Table 1 shows that a higher proportion of Form  8938 filings from U.S. persons living abroad for tax year 2016 were filed  on paper (43.3 percent) than Form 8938 filings from U.S. persons living in  the United States during the same period (14.7 percent). We extracted  these data from IRTF, which IRS officials said is the authoritative source  for filers of Form 8938. However, we could not report complete  information on foreign financial assets reported by Form 8938 filers  because such data are incomplete; as noted above, IRS databases we  used to extract Form 8938 data\u2014IRTF and MTRDB\u2014do not include  asset information reported on paper filings of Forms 8938."], "subsections": []}, {"section_title": "Tens of Thousands of Forms 8938 May Have Been Filed Unnecessarily in Tax Year 2016", "paragraphs": ["Of the approximately 404,800 Forms 8938 filed by individuals for tax year  2016\u2014the most recent data available\u2014we could access information on  residency of filers and reported foreign financial assets from about  277,600 Forms 8938 that did not indicate that foreign financial assets and  values were declared on other forms besides the Form 8938. Of the  subset of these Forms 8938, more than one quarter\u2014or about 73,500\u2014 reported foreign financial assets in amounts that indicate the Form 8938  may have been filed unnecessarily, since they reported specified foreign  financial assets with aggregate values at or below reporting thresholds as  of the last day of the tax year. Based on available Form 8938 data from  tax year 2016, table 2 shows that about 61,900 filings from U.S. persons  living in the United States and about 11,600 filings from U.S. persons  living abroad during the same tax year reported specified foreign financial  assets with aggregate values at or below end of tax year thresholds.", "These totals likely understate the total number of Forms 8938 that U.S.  persons may have filed unnecessarily in tax year 2016; due to data  limitations, these totals exclude Forms 8938 without asset information  stored in IRS\u2019s databases, including most Forms 8938 filed on paper and  Forms 8938 where filers identified that they declared foreign financial  assets on other forms besides the Form 8938.", "There is no clear explanation as to why some U.S. persons may have  filed Forms 8938 unnecessarily. However, we identified a number of  potential reasons from focus groups and other interviews with stakeholder  groups. In focus groups we conducted, participants expressed confusion  about IRS\u2019s instructions for completing the Form 8938 and information  provided on IRS\u2019s website. In the instructions for completing Form 8938,  IRS described the specific types of foreign financial assets that are to be  reported on Form 8938, and the asset value thresholds that must be met  for required reporting, depending on the location of residence and filing  status of the taxpayer. IRS also posted responses to frequently asked  questions on meeting FATCA reporting requirements on its website, and  established a separate page on its website comparing foreign financial  assets that must be reported on Form 8938 and/or FBAR.", "Nonetheless, focus group participants reported confusion on whether and  how to report investment and retirement accounts and compulsory  savings plans managed by their country of residence. In a meeting we  convened with an organization representing tax attorneys, they told us  taxpayers are unsure about what account values to report on the Form  8938. Tax practitioners participating in another focus group added that  they filed Forms 8938 regardless of the aggregate value of the assets  because it was too cumbersome for them to identify whether the assets  exceeded reporting thresholds as of the end of the year or at any time  during the year.", "IRS officials also cited a number of possible reasons why U.S. persons  may be filing Forms 8938 unnecessarily. For example, it may be easier  for U.S. persons to report all specified foreign financial assets they hold  on the Form 8938, rather than determine whether the value of such  assets met applicable thresholds. IRS officials also said that U.S. persons  might complete a Form 8938 for reasons besides meeting tax-filing  requirements, such as providing evidence of assets for a loan application.", "IRS\u2019s Taxpayer Bill of Rights states that taxpayers are entitled to clear  explanations of the laws and IRS procedures in all tax forms, instructions,  publications, notices, and correspondence. Furthermore, one of IRS\u2019s  strategic goals is to empower taxpayers by making it easier for them to  understand and meet their filing, reporting, and payment obligations.  IRS officials said they hosted sessions for tax practitioners at IRS  Nationwide Tax Forums to address FATCA reporting requirements.  However, they said IRS has not taken direct steps to identify or  implement actions to further clarify instructions and related guidance on  IRS\u2019s website for completing Form 8938, such as information on which  foreign financial assets to report, how to calculate asset values, and  determine whether such values exceed required reporting thresholds.  Additionally, IRS officials said they have not conducted additional  outreach to educate taxpayers on required reporting thresholds under  FATCA, or notify Form 8938 filers of instances where aggregate values of  specified foreign financial assets reported on Forms 8938 were below  reporting thresholds.", "IRS officials said they have not made efforts to determine whether there  is a pattern of unnecessary Form 8938 filings that they could address.  Rather, they said they believed resources should be devoted to FATCA  implementation in general. However, as shown above, we have identified  many tens of thousands of instances where U.S. persons may have filed  Forms 8938 unnecessarily. Without assessing factors contributing to  unnecessary Form 8938 reporting\u2014and identifying or implementing  actions to further clarify and educate taxpayers on FATCA reporting  requirements\u2014IRS is missing opportunities to help taxpayers understand  their filing and reporting obligations and minimize their compliance  burdens while properly meeting their tax obligations. Additionally, IRS  may be missing opportunities to reduce costs in processing forms that  taxpayers did not need to file."], "subsections": []}]}, {"section_title": "Different Laws Established Overlapping Foreign Financial Asset Reporting Requirements and Compounded Taxpayer Compliance Burden", "paragraphs": ["Because of overlapping statutory reporting requirements, IRS and  FinCEN\u2014both bureaus within Treasury\u2014collect duplicative foreign  financial asset data using two different forms (Form 8938 and FBAR). Our  evaluation and management guide for fragmentation, overlap, and  duplication states that overlap occurs when multiple agencies or  programs have similar goals, engage in similar activities or strategies to  achieve them, or target similar beneficiaries. Table 3 shows that  individuals required to report foreign financial assets on Form 8938, in  many cases, also must meet FBAR reporting requirements. For example,  specified individuals with foreign financial accounts exceeding $50,000 in  aggregate value on the last day of the tax year must file both Form 8938  and FBAR if such values exceed the minimum Form 8938 thresholds;  these thresholds depend on the filing status and address of specified  individuals. Table 3 also shows that, in many cases, specified interests  in foreign financial assets as defined in Form 8938 instructions are the  same as the financial interest in such assets under FBAR. Further, as  noted in table 3, the overlapping requirements lead to IRS and FinCEN  collecting the same information on certain types of foreign financial  assets. For example, both Form 8938 and FBAR collect information on  foreign financial accounts for which a person has signature authority and  a financial interest in the account. Form 8938 and FBAR also both collect  duplicative information on several other types of foreign financial assets,  such as foreign mutual funds and accounts at a foreign financial  institution that include foreign stock or securities.", "Overlapping reporting requirements result in most Form 8938 filers also  filing an FBAR during the same reporting year. Table 4 shows that close  to 75 percent of Form 8938 filers in tax years 2015 and 2016 percent also  filed an FBAR for the same year using the same TIN.", "Overlapping requirements to file both Form 8938 and FBAR increases the  compliance burden on U.S. persons and adds complexity that can create  confusion, potentially resulting in inaccurate or unnecessary reporting.  Focus group participants in all five countries included in our study  affirmed that U.S. persons experienced confusion and frustration with  having to report duplicative foreign financial asset information on both  forms. Focus group participants and others we interviewed also noted  that U.S. persons incurred additional financial costs to complete and file  both Form 8938 and FBAR. For instance, one tax practitioner in Canada  said the charge was about $190 to report four-to-five accounts on an  FBAR in addition to charging about $540 for basic tax return packages.  An accounting firm based in Japan typically charged between $300 and  $800 to complete a Form 8938 and between $150 and $500 to complete  an FBAR, depending on the number of accounts reported on the forms.  Proposed revisions to regulations implementing BSA proposed by  FinCEN may also increase the number of duplicative foreign financial  accounts reported on Form 8938 and FBAR. Currently, U.S. persons  must report detailed information on all foreign financial accounts on Form  8938 if the value of such accounts and other specified foreign financial  assets reaches applicable reporting thresholds. In contrast, U.S.  persons are generally exempted from reporting detailed account  information on FBARs if they report having signature or other authority  over 25 or more foreign financial accounts. FinCEN\u2019s proposed revisions  to BSA regulations would eliminate the exemption, requiring U.S. persons  to report detailed information on all foreign financial accounts in which he  or she has a financial interest if the value of such accounts exceed  FBAR\u2019s $10,000 reporting threshold. FinCEN estimated that it will receive  account information for the first time on about 5.4 million foreign financial  accounts if it finalizes the proposed revisions. In turn, these revisions  may lead to increased filings of duplicative asset data on both Form 8938  and FBAR, as U.S. persons may have to report detailed information on all  foreign financial accounts using both forms.", "U.S. persons also face exposure to two different penalty regimes for any  failures in accurately and completely reporting foreign financial asset  information to two bureaus within Treasury\u2014IRS and FinCEN. Officials  from one organization representing U.S. persons living abroad said  penalties due to failure to report certain accounts on one or both forms  can be significant, even if little or no taxes are owed on those accounts.  The duplicative reporting of foreign financial asset data on two different  forms also creates additional costs to the government to process and  store the same or similar information twice, and enforce reporting  compliance with both requirements.", "In 2012, we recommended that Treasury direct the Office of Tax Policy,  IRS, and FinCEN to determine whether the benefits of implementing a  less duplicative reporting process exceed the costs and, if so, implement  that process. Treasury did not implement our recommendation. While  we continue to believe that the agencies should have considered whether  less duplicative reporting could have been implemented, we do recognize  that FATCA and FBAR were enacted under two different statutes to serve  different purposes. As mentioned above, according to IRS, FATCA  improves visibility into taxable income from foreign sources and enhances  the agency\u2019s ability to identify and pursue taxpayer noncompliance. In  contrast, the information reported on the FBAR is collected to identify  money laundering and other financial crimes; law enforcement agencies  can use BSA information\u2014including information collected from FBARs\u2014 to aid regulatory and criminal investigations. Additionally, data collected  from Form 8938 and FBAR are used in different systems for use by  different bureaus within Treasury. Fully addressing issues stemming from  overlapping reporting requirements and the resulting collection of  duplicative information\u2014while at the same time ensuring that such  information can be used for tax compliance and law enforcement  purposes\u2014can only be done by modifying the statutes governing the  requirements.", "Further, IRS and FinCEN have varying degrees of access to foreign  financial asset information collected from Form 8938 and FBAR to  enforce tax compliance and financial crime laws. FATCA was enacted, in  part, to improve visibility into taxable income from foreign sources.  However, information provided on Forms 8938 is taxpayer return  information protected by section 6103 of the Internal Revenue Code  (IRC), which generally prohibits IRS from disclosing information provided  on Forms 8938. IRS can share return information with other government  agencies and others when it is allowed by statute. For example, under  section 6103, IRS may disclose return information related to taxes  imposed under the IRC\u2014such as self-employment income tax, Social  Security and Medicare tax and income tax withholding\u2014to the Social  Security Administration (SSA) as needed to carry out its responsibilities  under the Social Security Act. However, according to FinCEN officials,  FinCEN, law enforcement, and regulators often cannot access  information submitted on Forms 8938. While section 6103 provides other  exceptions to disclosure prohibitions\u2014such as allowing IRS to share  return information with law enforcement agencies for investigation and  prosecution of nontax criminal laws\u2014such information is generally only  accessible pursuant to a court order.", "As noted above, information reported on the FBAR can be used by law  enforcement agencies to aid regulatory and criminal investigations. This  includes IRS, which has been delegated responsibility from FinCEN to  enforce compliance with FBAR reporting requirements. IRS has used  FBAR information in addressing taxpayer noncompliance with reporting  and paying taxes on foreign assets and income. For example, taxpayers  accepted into one of IRS\u2019s offshore voluntary disclosure programs must  have filed amended or late FBARs as part of their program applications.  Investigators from IRS\u2019s Criminal Investigation division generally reviewed  applications to determine if the taxpayer has made a complete and  truthful disclosure. IRS examiners can also use information from case  files of program participants\u2014such as information disclosed on FBARs\u2014 to identify new groups of taxpayers suspected of hiding income offshore.  IRS can then choose to continue offering offshore programs and  encourage these newly identified groups of taxpayers, as well as all  taxpayers with unreported offshore accounts, to disclose their accounts  voluntarily.", "In addition to eliminating overlapping reporting requirements, harmonizing  statutes governing foreign financial asset reporting and use of information  collected on such assets to make such statutes fully consistent could  yield additional benefits to both IRS and the law enforcement community.  Specifically, and as shown in appendix IV, there are specified foreign  financial assets reported on Form 8938\u2014such as foreign hedge funds  and foreign private equity funds\u2014that are not required to be reported on  an FBAR. In contrast, there are other specified foreign financial assets  reported on an FBAR\u2014such as indirect interests in foreign financial  assets through an entity\u2014that are not required to be reported on Form  8938. Without congressional action to address overlap in foreign financial  asset reporting requirements, IRS and FinCEN will neither be able to  coordinate efforts to collect and use foreign financial asset information,  nor reduce unnecessary burdens faced by U.S. persons in reporting  duplicative foreign financial asset information."], "subsections": []}, {"section_title": "FFIs Face Overlapping Foreign Account Reporting Systems, but Alignment Would Entail Significant Changes in Law", "paragraphs": ["Two reporting systems for sharing foreign account information from  foreign financial institutions are in operation globally\u2014FATCA and the  Common Reporting Standard (CRS). According to officials from banking  associations and a consulting firm, FFIs in the countries where we  examined FATCA implementation encountered challenges implementing  and now maintaining two overlapping reporting systems for collecting and  transmitting account information to other countries for a seemingly similar  purpose, and collecting sufficient information from customers to ensure  they meet the requirements of both systems. As noted above, we  previously identified overlap as occurring when multiple agencies or  programs have similar goals, engage in similar activities or strategies to  achieve them, or target similar beneficiaries.", "According to an IRS official, collecting account information under FATCA  ushered in an era of greater transparency; as noted above, FATCA\u2019s  passage sought to reduce tax evasion by creating greater transparency  and accountability with respect to offshore accounts and other assets  held by U.S. taxpayers. When FATCA was first introduced, there was no  international platform to share account information between countries.  The United States and other countries worked together to reach an  agreement on the electronic formatting that would be used to share the  information.", "Other countries tax authorities\u2019 became more interested in understanding  the financial assets held abroad by their residents through an exchange  of account information among themselves. In response, the Organisation  for Economic Co-operation and Development (OECD) established the  CRS reporting system for automatic exchange of information among  member countries. According to the OECD, CRS was developed with a  view to maximize efficiency and reduce cost for financial institutions.  Thus, CRS drew extensively on the intergovernmental approach used to  implement FATCA reporting requirements for FFIs. Countries  participating in CRS exchange account information with each other using  OECD\u2019s Common Transmission System, which was modeled on  FATCA\u2019s International Data Exchange System. Figure 2 depicts the flow  of account information between countries under FATCA and CRS.", "CRS reporting requirements are in many ways similar to FATCA,  including required reporting of the account holders\u2019 name and address,  taxpayer identification number, account number, account balance, and  income and sales proceeds. However, the requirements differ in  significant ways. The biggest differences in requirements are driven by  the nature of the U.S. tax system. The United States, like many countries,  generally taxes citizens and resident aliens on their worldwide income  regardless of where that income is earned. However, the United States  differs from other countries because it generally subjects U.S. citizens  who reside abroad to U.S. taxation in the same manner as U.S. residents.  In contrast to U.S. policy, most other countries do not tax their citizens if  they reside in a country other than their country of citizenship. Further,  IGAs implementing FATCA require FFIs to report the foreign-held  accounts of U.S. citizens and residents\u2014including resident aliens\u2014while  CRS requires financial institutions in jurisdictions participating in CRS to  report on almost all accounts held by nonresidents of the reporting  country. Appendix V provides more detailed information on differences in  reporting requirements, due diligence requirements, and definitions under  FATCA and CRS.", "These differences in tax systems drive variations in due diligence  procedures between FATCA and CRS. For example, FATCA aims to  identify whether an account holder at a foreign institution is a U.S. person  based on citizenship and tax residency information. In contrast, CRS  aims to identify the tax residency of all account holders of a financial  institution, and does not consider citizenship. Due to the multilateral  nature of CRS, if an account holder is determined on the basis of the due  diligence procedures to have residency in two or more countries,  information would be exchanged with all jurisdictions in which the account  holder is determined a resident for tax purposes. Under CRS rules,  information about foreign accounts held by a U.S. citizen with a tax  residence abroad would not be reported to IRS, but rather to the  jurisdiction in which they were a resident for tax purposes. Because the  United States taxes the worldwide income of U.S. citizens, CRS rules  would need to require identification of account holders\u2019 citizenship in  member countries where they are residents if FATCA were to be aligned  with CRS. Table 5 shows a comparison of individuals reported to IRS  under FATCA and hypothetically under CRS.", "Treasury and IRS, as part of its 2017-2018 Priority Guidance Plan, are  considering modifying certain elements of the existing FATCA  regulations. For instance, Treasury and IRS are considering coordinating  certain documentation requirements for participating FFIs with the  requirements under IGAs. In December 2018, Treasury and IRS also  proposed regulations intended, in part, to reduce the burdens of  FATCA. The proposed regulations included a clarification of the  definition of an investment entity that is similar to the guidance published  by OECD interpreting the definition of a \u201cmanaged by\u201d investment entity  under CRS.", "If the United States wanted to adopt CRS, some of the key differences  between FATCA and CRS\u2014as outlined above and in appendix V\u2014could  be aligned through regulation while others would require legislation.  According to Treasury officials, to align FATCA and CRS, Congress  would need to revise statutes to: provide for the collection of information for accounts that residents of  partner jurisdictions maintain at U.S. financial institutions;  require certain U.S. financial institutions to report the account balance  (including, in the case of a cash value insurance contract or annuity  contract, the cash value or surrender value) for all financial accounts  maintained at a U.S. office and held by foreign residents; expand the current reporting required with respect to U.S. source  income paid to accounts held by foreign residents to include similar  non-U.S. source payments;  require financial institutions to report the gross proceeds from the sale  or redemption of property held in, or with respect to, a financial  account; and  require financial institutions to report information with respect to  financial accounts held by certain passive entities with substantial  foreign owners.", "While better aligning FATCA and CRS to some extent is possible,  anything short of the United States fully adopting CRS would not fully  eliminate the burdens of overlapping requirements that FFIs must  currently meet under the two different systems. While having the United  States adopt the CRS reporting system in lieu of FATCA could benefit  FFIs that may otherwise have to operate two overlapping reporting  systems, it would result in no additional benefit to IRS in terms of  obtaining information on U.S. accounts. Additionally, it could generate  additional costs and reporting burdens to U.S. financial institutions that  would need to implement systems to meet CRS requirements. The extent  of these costs is unknown. Further, adoption of CRS would create the  circumstance where foreign accounts held by U.S. citizens with a tax  residence in partner jurisdiction\u2014including U.S. citizens who have a U.S.  tax obligation\u2014would not be reported to IRS."], "subsections": []}, {"section_title": "Agencies Coordinated Efforts to Address Challenges U.S. Persons Living Abroad Encountered from FATCA Implementation, but Opportunities Exist to Enhance Collaboration", "paragraphs": [], "subsections": [{"section_title": "Some U.S. Persons Living Abroad Encountered Reduced Access to Financial Services Due in Part to Costs and Risks FFIs Faced from Implementing FATCA", "paragraphs": ["Tax practitioners and others we interviewed said that U.S. persons living  abroad\u2014whether or not they are required to complete a Form 8938\u2014risk  being denied access to foreign financial services. U.S. persons and tax  practitioners located in four of the five countries where we conducted  focus groups and interviews reported that some U.S. persons and U.S.- owned businesses encountered difficulties opening bank accounts with  FFIs after FATCA was enacted, with some FFIs closing U.S. persons\u2019  existing accounts or denying them opportunities to open new accounts.  One focus group participant, for example, said that the financial institution  closed down all accounts including business checking, savings, and  money market accounts after FATCA was implemented, requiring this  individual to find a local resident who could co-sign on a new account.", "Costs FFIs would incur from implementing FATCA were cited as a  significant factor in increasing barriers faced by U.S. persons in accessing  foreign financial services. Officials from one organization representing tax  attorneys said that as a result of costs associated with FATCA  implementation, FFIs have found it less burdensome to close accounts of  U.S. persons or require the accounts to be moved to a Securities and  Exchange Commission registered affiliate than comply with FATCA. Tax  practitioners and an official from a bankers association added that  because FFIs may gain only small margins of profit from U.S. persons,  FFIs may believe it is too troublesome to do business with them.  Additionally, officials from a foreign government agency told us that  because FATCA is expensive for FFIs to continue implementing, banks in  their country might charge U.S. persons seeking access to financial  services additional fees to account for FATCA implementation costs. Tax  practitioners, consultants working with FFIs to implement FATCA  reporting requirements, and the National Taxpayer Advocate told us that  FFIs with smaller asset sizes such as smaller trust companies were more  prone to decline business with U.S persons. Officials from an advocacy  group representing U.S. persons living abroad told the National Taxpayer  Advocate that some smaller banks declined U.S. persons as customers  as a business decision, believing it would cost more for them to comply  with FATCA reporting requirements than maintain U.S. expatriates\u2019  accounts.", "Banking associations we interviewed said that decisions made by FFIs on  whether to accept U.S. persons as customers also depends on the overall  risks and benefits of taking on individual U.S. persons, shaped in part  from risks in not meeting FATCA reporting requirements. Representatives  of a banking association and an advocacy group told us that some FFIs  decided to avoid doing business with U.S. persons after they became  concerned about potential penalties for failure to comply\u2014either willfully  or in error\u2014with FATCA reporting requirements. One banking association  added that such errors could affect other aspects of FFIs\u2019 relationships  with the U.S. government, such as nonprosecution agreements made  with the U.S. Department of Justice.", "Officials from one consulting firm that helped FFIs meet FATCA reporting  requirements added that FFIs\u2019 determination of risk depends on many  layers, such as the value of clients\u2019 assets or the country in which clients  reside or possess citizenship. After FATCA\u2019s implementation, according  to officials from the consulting firm, FFIs decided to turn away U.S.  persons in some cases because the benefits of doing business with U.S.  persons were less than the potential risks. For example, if a U.S. person  only maintained a payroll account, the FFI may determine it would not  make enough money to account for risks in incorrectly identifying the  status of the customer as a U.S. or non-U.S. person. However, focus  group participants from two countries said that FFIs may agree to accept  U.S persons as customers if they have higher account balances that  offset risks from FATCA reporting requirements. One focus group  participant, for instance, said banks in his country will do business with a  U.S. person if he or she has more than $500,000 in assets. Additionally,  U.S. persons and tax practitioners we interviewed said that other factors  such as language barriers and U.S. regulations designed to prevent  money laundering may also inhibit U.S. persons\u2019 access to brokerage  accounts while overseas."], "subsections": []}, {"section_title": "Form 8938 Reporting Requirements for Individuals with Signature Authority on and Financial Interest in Accounts May Have Contributed to Employment and Promotion Denials Overseas", "paragraphs": ["Focus group participants and others we interviewed said that Form 8938  reporting requirements contributed to denials of employment and  promotion opportunities for U.S. persons living abroad. Treasury officials  noted that requirements imposed by FATCA do not directly hinder U.S.  persons from gaining employment or promotion opportunities overseas.  However, focus group participants, a consulting firm, and a foreign  government agency noted that foreign-owned companies and nonprofit  organizations such as churches did not want to hire or promote U.S.  persons because they wanted to avoid exposing information to the U.S.  government on their organizations\u2019 accounts and client trust accounts  where the U.S. person would have signature authority. As noted above, a  U.S. person is generally required to report on the Form 8938 foreign  financial accounts for which the person has signature authority if he or  she has a financial interest in the account.", "Focus group participants and others noted that such requirements have  adversely affected the ability of U.S. persons to serve on a corporate  board or in a nonprofit organization, or maintain business relationships.  Treasury and Department of Commerce officials stationed in one country  included in our review added that FATCA implementation has played a  role in dissuading foreign-owned corporations in some Asian countries  from considering U.S. persons for corporate leadership positions such as  directorships. This is in part because FATCA has triggered additional  paperwork burden and operating costs for onboarding U.S. employees  since they have had to help them meet Form 8938 reporting  requirements. Two advocacy groups representing U.S. persons living  abroad added that it is also harder for U.S.-based companies to justify  relocating U.S. persons overseas and paying for such relocations since  they also have had to help their U.S. employees meet Form 8938  reporting requirements in addition to meeting other tax filing  requirements."], "subsections": []}, {"section_title": "U.S. Persons Living Abroad Encounter Challenges Obtaining Social Security Numbers Necessary to Meet U.S. Tax Obligations and Obtain Financial Services", "paragraphs": ["U.S. embassy documents indicate there was increased demand for Social  Security Numbers (SSN) since FATCA\u2019s passage in 2010, driven in part  by U.S. citizens applying for an SSN to gain access to foreign financial  services or resolve outstanding U.S. tax obligations before completing  renunciation. However, officials from two organizations representing  Americans living abroad cited significant challenges faced by some U.S.  persons living abroad in obtaining SSNs required to meet their U.S. tax  obligations or obtain financial services. U.S. persons living abroad might  not possess an SSN because their parents did not obtain one for them as  a minor. Often, this may have been due to the parents leaving the United  States when the child was young. State officials also said that U.S.  citizens applying for U.S. passports while overseas frequently forget their  SSNs or do not know if their parents ever applied for an SSN on their  behalf. Officials from organizations representing U.S. persons living  abroad added that without an SSN, these persons are unable to claim  refunds or other tax benefits when filing their tax returns, or participate in  IRS programs to voluntarily disclose previously unreported tax liabilities  and assets. Additionally, some might be unable to gain or maintain  access to financial accounts or other assets in their countries of residence  without an SSN. According to these officials and tax practitioners we  interviewed, U.S. persons living abroad face greater challenges in  obtaining SSNs than those living in the United States. For instance, they  faced difficulties obtaining documentation from the United States that the  Social Security Administration (SSA) requires with SSN applications;  traveling to Social Security offices and U.S. embassies or consulates to  certify documents or submit applications in person; and receiving valid  SSNs from SSA in a timely manner to file tax returns or participate in  offshore disclosure programs.", "SSA officials also identified several challenges U.S. persons experience  when applying for an SSN from abroad. For instance, SSA officials said  that efforts to authenticate documents submitted with SSN applications  can cause delays for U.S. persons living abroad in obtaining an SSN.  Additionally, SSN applicants living abroad face significantly longer wait  times than applicants living in the United States once their applications  are processed. According to SSA officials, after an application is  processed, it can take 3 to 6 months\u2013-depending on the country\u2019s mail  service\u2013-for an individual to receive a Social Security Card. This is  significantly longer than the 2-week period it takes SSN applicants to  receive a card after mailing in their applications from within the United  States."], "subsections": []}, {"section_title": "FATCA Implementation Contributed to Increased Renunciations of U.S. Citizenship, but the Extent of the Effect is Unclear", "paragraphs": ["According to Department of State (State) data, the annual number of  approvals of requests for renunciations of U.S. citizenships increased  nearly 178 percent during a 6-year period, from 1,601 in 2011\u2014the year  after FATCA was enacted\u2014to 4,449 in 2016, the most recent year to  which full data on renunciations were available. According to U.S.  embassy documents and information provided by focus group participants  and interviewees across all the countries we examined, FATCA was the  reason or a contributing factor in some of these decisions and the  resulting increase in total renunciations. Specific effects of FATCA  implementation contributing to decisions to renounce U.S. citizenship  included reduced access to foreign financial services and employment or  promotion opportunities in a foreign-owned company\u2014as identified above  from our document reviews, focus groups, and interviews\u2014and burdens  in meeting FATCA reporting requirements. However, the extent to which  FATCA implementation contributed to increased renunciations is unclear.  State officials said that data are unavailable to determine the extent to  which these renunciation decisions were the direct result of FATCA  because State has no legal obligation to collect information on the  motivation behind renunciation of citizenship."], "subsections": []}, {"section_title": "Treasury, State, and SSA Initially Collaborated to Remedy FATCA-Related Issues for U.S. Persons Abroad, but Problems Persist without Cross- Agency Efforts to Address Them", "paragraphs": ["In response to concerns about the availability of foreign financial services,  Treasury implemented regulations that allow certain low-risk local FFIs to  be deemed compliant with FATCA, but only if the FFIs do not implement  policies or practices that discriminate against opening or maintaining  accounts for specified U.S. persons. Treasury and State also previously  established joint strategies to address these challenges. For instance,  Treasury and State developed guidance on FATCA that was posted on  embassy websites to educate U.S. persons and others. Additionally,  Treasury and State officials conducted outreach events and workshops  through U.S. embassies and American chambers of commerce worldwide  to provide information on FATCA and other tax filing requirements,  According to State officials, the U.S. embassies in at least two  countries\u2014Switzerland and France\u2014also worked with foreign officials  and/or FFIs to increase access to financial services for U.S. citizens  residing in those countries. For instance, Treasury and State officials  reached agreements with FFIs in Switzerland to provide a wider range of  financial services to U.S. persons. Similarly, in 2017, SSA and State  implemented an interagency agreement to streamline processes for  providing SSNs to U.S. persons living abroad after FATCA\u2019s  implementation in 2010. SSA officials said they are also in discussions  with State on improving SSA\u2019s website to include more transparent,  specific information for SSN overseas applicants about SSA  documentation requirements.", "Tax practitioners, advocacy groups, and Treasury officials we interviewed  said FFIs have become more willing to accept U.S. persons as customers  compared to when FATCA was enacted in 2010. However, U.S. persons  living abroad continue to face issues gaining access to foreign financial  services. For example, in a September 2018 letter sent by the Chair of  the Finance Committee of the Netherlands House of Representatives to a  member of Congress, U.S. citizens born outside the United States and  who have never lived, studied, or worked in the United States are  effectively being denied access to financial services in the Netherlands.  Focus group participants added that some banks will reject U.S. clients or  charge heavy fees for them to open an account.", "Agencies have ongoing efforts to address FATCA-related issues, as listed  below, but some are ad hoc, fragmented, or otherwise not part of a  broader effort between Treasury and other agencies such as State or  SSA to use ongoing collaborative mechanisms to monitor and share  information on such issues, and jointly develop and implement steps to  address them:", "Treasury officials said they are participating in discussions with FFIs  to address residual issues with access to foreign financial services.  However, they said they have not involved other agencies in these  discussions.", "IRS officials, in response to concerns from the French government,  said they are developing a program to help streamline foreign asset- related tax compliance requirements for a small group of U.S. born  citizens that have been French residents most of their lives without an  SSN, and\u2014according to State officials\u2014did not wish to take the  necessary steps to renounce their citizenship. However, no effort has  been made to address these issues more broadly.", "State encouraged U.S. citizens to alert the nearest U.S. embassy of  any practices they encounter with regard to the provision of financial  services. State documents noted that some Americans have been  turned away by banks or required to meet a higher deposit threshold  in part because of FATCA reporting requirements. State  documentation also noted that there have been cases of U.S. citizens  with existing bank accounts who have been asked to close them.  However, State documentation we reviewed does not highlight  collaborative efforts currently underway with Treasury or other  agencies to address banking access issues U.S. persons living  abroad are presently encountering worldwide.", "As described above, SSA and State streamlined processes and  policies for U.S. persons abroad seeking to obtain SSNs. However,  SSA officials said they have not been involved in any ongoing efforts  involving Treasury to identify systemic issues and related solutions  involving SSNs for the purposes of tax compliance and citizenship  renunciations. Treasury officials said they spoke with SSA officials  about problems U.S. persons living abroad face in obtaining SSNs,  but SSA believed that cycle times for processing SSN applications  submitted by U.S. persons living abroad were not significantly greater  than for applications submitted by U.S. persons living in the United  States, although mailing times could vary significantly and take up to 3  to 6 months.", "We have previously identified key practices to enhance and sustain  interagency collaboration, including defining and articulating a common outcome, establishing mutually reinforcing or joint strategies, and developing mechanisms to monitor, evaluate, and report on results.", "One goal in IRS\u2019s strategic plan is to collaborate with external partners  proactively to improve tax administration, while objectives in SSA\u2019s  strategic plan include improving service delivery and expanding service  delivery options. Additionally, according to State\u2019s Bureau of Consular  Affairs website, one of State\u2019s key priorities is to protect the interests of  U.S. citizens overseas, such as through ensuring responsive and efficient  provision of consular services overseas. As noted above, there are a host  of ongoing issues and challenges for U.S. persons living abroad from  implementation of FATCA, such as loss of access to foreign financial  services, denial of employment and promotion opportunities overseas,  and difficulty obtaining SSNs from abroad. However, Treasury currently  lacks a collaborative mechanism to coordinate efforts with other agencies  to address these issues, and Treasury officials said they do not plan to  establish them. Without effective collaborative mechanisms to monitor  and share information and implement cross-agency solutions, future  efforts to address such issues will continue to be fragmented and less  effective than they otherwise could be."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["In enacting FATCA, Congress sought to reduce tax evasion by creating  greater transparency and accountability over offshore assets held by U.S.  taxpayers. Because of FATCA, IRS receives information on foreign  financial assets from hundreds of thousands of filers annually. IRS could  use this information to help ensure taxpayers holding offshore assets  report and pay taxes owed on income generated from such assets.  However, to take full advantage of the information, IRS must address key  challenges. Specifically, Taxpayer Identification Numbers (TIN) reported  by FFIs are often inaccurate or incomplete, which makes it difficult for IRS  to match information reported by FFIs to individual taxpayers. As such,  IRS must develop a plan to mitigate the risks that these data issues pose  to agency efforts to identify and combat taxpayer noncompliance.", "Lack of consistent, complete, and readily available Form 8938 and related  parent individual tax return data also affects IRS\u2019s compliance activities,  making it more difficult for IRS business units to extract and analyze  FATCA data to improve tax compliance efforts and reduce tax revenue  loss from income generated from offshore assets. At the same time, IRS  has stopped following its FATCA Compliance Roadmap it developed in  2016 because, according to IRS officials, IRS moved away from updating  broad strategy documents to focus on individual compliance campaigns.  However, in light of the challenges IRS continues to face in fully  integrating FATCA information into its compliance programs, it will not  maximize use of such information and effectively leverage individual  compliance campaigns unless it employs a comprehensive plan that  enables IRS to better leverage such campaigns to improve taxpayer  compliance.", "Our analysis of available data indicates that many of the Forms 8938 filed  in tax year 2016 may have been filed unnecessarily. Factors that are  contributing to this unnecessary reporting are unclear. While IRS has  provided instructions and guidance on its website for completing Form  8938, focus group participants and tax practitioners reported confusion on  whether and how to report investments in foreign accounts. Taking steps  to identify and address factors contributing to unnecessary Form 8938  reporting would help reduce taxpayer burden and reduce processing  costs for IRS.", "Reporting requirements for foreign financial assets under FATCA overlap  with reporting requirements under FBAR. These overlapping  requirements\u2014implemented under two different statutes\u2014have resulted  in most taxpayers filing Forms 8938 also filing FBARs with FinCEN.  Duplicative filings on foreign financial assets cause confusion, frustration,  and compliance burdens for taxpayers. Duplicative filings also increased  costs to the government to process and store the same or similar  information. Modifying the statutes governing the requirements can fully  address the issues outlined above, and can allow for the use of FATCA  information for prevention and detection of financial crimes. This is similar  to other statutory allowances for IRS to disclose return information for  other purposes, such as for determining Social Security income tax  withholding.", "Lastly, FATCA has created challenges for some U.S. persons living  abroad that go beyond increasing their tax compliance burdens. Some  U.S. persons living abroad are still facing issues accessing financial  services and employment and obtaining SSNs. Treasury, State, and SSA  have taken some steps to address these issues both separately and in  coordination with each other. However, Treasury, as the agency  ultimately responsible for effective administration of FATCA, currently  lacks a collaborative mechanism with State and SSA to address ongoing  issues. Establishing a formal means to collaboratively address burdens  faced by Americans abroad from FATCA can help agencies develop  effective solutions to mitigate such burdens."], "subsections": []}, {"section_title": "Matter for Congressional Consideration", "paragraphs": ["We are making the following matter for congressional consideration:", "Congress should consider amending the Internal Revenue Code,  Bank Secrecy Act of 1970, and other statutes, as needed, to address  overlap in foreign financial asset reporting requirements for the  purposes of tax compliance and detection, and prevention of financial  crimes, such as by aligning the types of assets to be reported and  asset reporting thresholds, and ensuring appropriate access to the  reported information."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to IRS:", "The Commissioner of Internal Revenue should develop a plan to  mitigate risks with compliance activities due to the lack of accurate  and complete TINs of U.S. account holders collected from FFIs.  (Recommendation 1)", "The Commissioner of Internal Revenue should ensure that  appropriate business units conducting compliance enforcement and  research have access to consistent and complete data collected from  individuals\u2019 electronic and paper filings of Form 8938 and elements of  parent individual tax returns. As part of this effort, the Commissioner  should ensure that IRS provides clear guidance to the business units  for accessing such data in IRS\u2019s Compliance Data Warehouse.  (Recommendation 2)", "The Commissioner of Internal Revenue should employ a  comprehensive plan for managing efforts to leverage FATCA data in  agency compliance efforts. The plan should document and track  activities over time to ensure individuals and FFIs comply with FATCA reporting assess and mitigate data quality risks from FFIs;  improve the quality, management, and accessibility of FATCA  data for compliance, research, and other purposes; and establish, monitor, and evaluate compliance efforts involving  FATCA data intended to improve voluntary compliance and  address noncompliance with FATCA reporting requirements.  (Recommendation 3)", "The Commissioner of Internal Revenue should assess factors  contributing to unnecessary Form 8938 reporting and take steps, as  appropriate, to address the issue. Depending on the results of the  assessment, potential options may include:  identifying and implementing steps to further clarify IRS Form  8938 instructions and related guidance on IRS\u2019s website on  determining what foreign financial assets to report, and how to  calculate and report asset values subject to reporting thresholds;  and  conducting additional outreach to educate taxpayers on required  reporting thresholds, including notifying taxpayers that may have  unnecessarily filed an IRS Form 8938 to reduce such filings.  (Recommendation 4)", "We are also making the following recommendation to Treasury:  The Secretary of the Treasury should lead efforts, in coordination with  the Secretary of State and Commissioner of Social Security, to  establish a formal means to collaboratively address ongoing issues\u2014 including issues accessing financial services and employment and  obtaining SSNs\u2014that U.S. persons living abroad encounter from  implementation of FATCA reporting requirements. (Recommendation  5)", "We are also making the following recommendation to State:", "The Secretary of State, in coordination with the Secretary of the  Treasury and Commissioner of Social Security, should establish a  formal means to collaboratively address ongoing issues\u2014including  issues accessing financial services and employment and obtaining  SSNs\u2014that U.S. persons living abroad encounter from  implementation of FATCA reporting requirements. (Recommendation  6)", "We are also making the following recommendation to SSA:", "The Commissioner of Social Security, in coordination with the  Secretaries of State and Treasury, should establish a formal means to  collaboratively address ongoing issues\u2014including issues accessing  financial services and employment and obtaining SSNs\u2014that U.S.  persons living abroad encounter from implementation of FATCA  reporting requirements. (Recommendation 7)"], "subsections": []}, {"section_title": "Agency Comments and our Evaluation", "paragraphs": ["We provided a draft of this report to the Secretaries of State and the  Treasury, Commissioner of Internal Revenue, and Acting Commissioner  of Social Security.", "IRS provided written comments that are summarized below and reprinted  in appendix VI. IRS did not state whether it agreed or disagreed with our  four recommendations but otherwise provided responses.", "Regarding our recommendation to develop a plan to mitigate risks with  compliance activities due to the lack of accurate and complete TINs of  U.S. account holders collected from FFIs (recommendation 1), IRS  reiterated that it provided a transition period, through the end of 2019, for  compliance with the TIN requirements for FFIs in countries with Model 1  IGAs with the United States. IRS also said that it continued to make  progress on improving FATCA filing compliance, citing efforts such as  initiating a campaign addressing FFIs that do not meet their compliance  responsibilities. While these efforts may help IRS obtain more accurate  and complete information from financial accounts, IRS did not specify  how it will mitigate the ongoing hurdles it faces in matching accounts  reported by FFIs without valid TINs to accounts reported by individual tax  filers and ensure compliance.", "Regarding our recommendation that appropriate business units have  access to consistent and complete data collected from Forms 8938 and  tax returns filed by individuals (recommendation 2), IRS reiterated that  RAAS has been working to obtain read-only access to the IPM database  but that limited budgetary resources are delaying implementation.  Enabling access to consistent and complete Form 8938 and tax return  data would help IRS better target compliance initiatives and leverage  limited available enforcement resources. While IRS continues to work on  enabling access to IPM, it could still provide clear guidance to its  business units for accessing Form 8938 and tax return data in IRS\u2019s  Compliance Data Warehouse, as we recommended.", "Regarding our recommendation to employ a comprehensive plan for  managing efforts to leverage FATCA data in agency compliance efforts  (recommendation 3), IRS said the resources that would be required to  develop a comprehensive plan would be better spent on enforcement  activities. While implementing enforcement activities could increase  compliance with FATCA reporting requirements, it risks not maximizing  the value of such efforts without a comprehensive plan to manage and  address the myriad of challenges discussed in this report. Further, it is  our belief that IRS\u2019s failure to execute the FATCA roadmap is not  justification for abandoning a strategic approach going forward.", "Regarding our recommendation to assess factors contributing to  unnecessary Form 8938 reporting and take appropriate steps to address  the issue (recommendation 4), IRS said it will continue to observe filings  of Form 8938 and, to the extent that there are unnecessary filings, assess  options to inform account holders to reduce reporting and filing burdens  followed by appropriate steps to implement any selected options. Our  analysis of available data indicates that many Forms 8938 may have  been filed unnecessarily. Implementing our recommendation reduces the  risk that taxpayers file\u2014and IRS processes\u2014forms unnecessarily.", "Treasury provided written comments but did not state whether it agreed  or disagreed with our recommendation that it lead efforts, in coordination  with State and SSA, to establish a formal means to collaboratively  address ongoing issues that U.S. persons living abroad encounter from  implementation of FATCA reporting requirements (recommendation 5).  Treasury said it will work collaboratively with State and SSA to answer  questions that Americans abroad have regarding their tax obligations and,  where appropriate, to direct U.S. citizens to resources that will help them  understand the procedures applied by SSA to apply for an SSN.", "However, Treasury said it is not the appropriate agency to lead  coordination efforts involving foreign employment issues and issues  regarding access to foreign financial services and obtaining SSNs. As we  noted above, Treasury is ultimately responsible for effective  administration of FATCA. As such, it is in a better position than State or  SSA to adjust regulations and guidance implementing FATCA to address  burdens FFIs and foreign employers face from FATCA implementation  while ensuring tax compliance. Additionally, Treasury has an interest in  helping U.S. persons receive valid SSNs from SSA in a timely manner to  meet their tax obligations. Treasury\u2019s written response is reprinted in  appendix VII.", "State and SSA also provided written comments in which they concurred  with our recommendations to establish a formal means to address  collaboratively together with Treasury ongoing issues that U.S. persons  living abroad encounter with FATCA (recommendations 6 and 7). State  and SSA\u2019s written comments are reprinted in appendices VIII and IX,  respectively.", "Treasury, State, and SSA provided technical comments, which we  incorporated as appropriate.", "We are sending copies of this report to the appropriate congressional  committees, the Secretaries of State and the Treasury, Commissioner of  Internal Revenue, Acting Commissioner of Social Security, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices  of Congressional Relations and Public Affairs are on the last page of this  report. GAO staff who contributed to this report are listed in appendix X."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["The objectives of this report are to (1) assess the Internal Revenue  Service\u2019s (IRS) efforts to use information collected under the Foreign  Account Tax Compliance Act (FATCA) to improve taxpayer compliance;  (2) examine available foreign financial asset reports submitted by U.S.  persons, including submissions that were below required filing thresholds;  (3) examine the extent to which the Department of the Treasury  (Treasury) administers overlapping reporting requirements on foreign  financial assets; (4) describe similarities and differences between FATCA  and Common Reporting Standard (CRS) reporting requirements; and (5)  examine the effects of FATCA implementation that are unique to U.S.  persons living abroad.", "For our first objective, we reviewed Treasury Inspector General for Tax  Administration reports and collected information from Treasury and IRS to  summarize efforts to collect complete and valid Taxpayer Identification  Numbers (TIN) from foreign financial institutions (FFI). We identified  criteria from our prior work identifying key practices for risk management.  The key practices are derived from the Software Engineering Institute\u2019s  Capability Maturity Model\u00ae Integration for Development and Office of  Management and Budget guidance. We applied these criteria to assess  steps IRS has taken to manage risks in not receiving complete and valid  TIN information from FFIs. We also applied criteria from our prior work on  use of documented frameworks to IRS documentation on FATCA  compliance activities to determine the extent to which IRS implemented a  comprehensive plan to maximize use of collected data to enforce  compliance with FATCA.", "For our second objective, we identified total maximum account values  reported by individual filers of Financial Crimes Enforcement Network  (FinCEN) Form 114s (commonly known as the Report of Foreign Bank  and Financial Accounts, or FBAR) in calendar years 2015 and 2016. See  appendix III for more details on our methodology to evaluate these data.  We also summarized the numbers of IRS Forms 8938, Statement of  Specified Foreign Financial Assets (Form 8938) filed in tax year 2016,  accounting for the data limitations described below. We also identified  Forms 8938 filed in tax year 2016\u2014the most recent year for which data  were available\u2014with available residency and asset information that  reported specified foreign financial assets with aggregate values at or  below end-of-year tax thresholds, which vary depending on the location of  residence and filing status of such filers.", "For our third objective, we reviewed IRS and FinCEN documentation, and  applied criteria from Fragmentation, Overlap, and Duplication: An  Evaluation and Management Guide to identify the extent to which IRS  and FinCEN were engaged in overlapping activities, and collecting  duplicative information on foreign financial assets held by U.S. persons.  We assessed the extent to which individual filers who submitted a Form  8938 in 2015 and 2016 also submitted an FBAR for the same year by  determining the number and percentage of Forms 8938 with TINs that  also match the TIN listed on the corresponding FBAR for the same year.", "For the three objectives described above, we assessed the reliability of  data submitted on Forms 8938 filed by individuals for tax years 2015 and  2016, the most recent data available. These data were extracted from  IRS\u2019s Individual Return Transaction File (IRTF) and Modernized Tax  Return Database (MTRDB) through IRS\u2019s Compliance Data Warehouse  (CDW). We also assessed the reliability of data from FBARs for calendar  years 2015 and 2016 by (1) reviewing documentation about the data and  the systems that produced them; (2) conducting electronic tests, such as  identifying data with significant numbers of missing Form 8938 or FBAR  records, or values of foreign financial assets reported outside an  expected range; (3) tracing selections or random samples of data to  source documents; and (4) interviewing IRS and FinCEN officials  knowledgeable about the data. We also reviewed Form 8938 and relevant  parent tax return data stored in IRS databases to determine whether IRS  management is using quality information collected from Forms 8938 to  achieve its objectives, as defined in our Standards for Internal Control in  the Federal Government. We determined that data extracted from IRTF  on characteristics of Form 8938 filers and from FBAR filings was  sufficiently reliable for our purposes, subject to caveats identified in this  report. However, we determined we could not obtain complete data on  foreign financial assets reported on Forms 8938 filed on paper.", "For our fourth objective, we reviewed model international agreements and  other documentation, and interviewed officials from Treasury, IRS, and  the Organisation for Economic Co-operation and Development to  compare and contrast FATCA and CRS reporting requirements. We also  used the collected information to identify what changes, if any, the United  States and other countries could implement to align FATCA and CRS  reporting requirements.", "For our fifth objective, we collected documentation and conducted focus  groups and semi-structured interviews with 21 U.S. persons living abroad  that were subject to FATCA reporting requirements. We also conducted  focus groups and interviews with tax practitioners, banking and CPA  organizations, government agencies, advocacy groups representing  Americans living abroad, and other organizations from the United States  and five other countries (Canada, Japan, Singapore, Switzerland, and the  United Kingdom). We selected these countries based on geography,  relatively high numbers of U.S. expatriates and Form 8938 filers, tax  information sharing agreements, and other tax treaties with the United  States. The findings from the focus groups and interviews are not  generalizable to other U.S. persons, tax practitioners or organizations, but  were selected to represent the viewpoints of U.S. persons, FFIs, and host  country tax authorities required to transmit information on foreign  accounts and other specified foreign financial assets to IRS. We  conducted a thematic analysis of the focus groups and interviews, and  reviewed cables from U.S. embassies to identify the unique effects of  FATCA implementation on U.S. persons living abroad. We collected  documentation from and interviewed Treasury, IRS, Department of State,  and Social Security Administration officials on steps to monitor and  mitigate such effects. We also identified criteria from our prior work on  key practices to enhance and sustain interagency collaboration and  mechanisms to facilitate coordination. We applied the criteria to  agencies\u2019 collaborative efforts addressing issues U.S. persons living  abroad faced from FATCA\u2019s implementation, and identified the extent to  which agencies established effective collaborative mechanisms to  identify, assess, and implement cross-agency solutions to such issues.", "We conducted this performance audit from August 2017 to April 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."], "subsections": []}, {"section_title": "Appendix II: IRS Data Management Systems Storing Data from IRS Forms 8938 and Related Elements of Individual Tax Returns", "paragraphs": ["The following IRS databases store data collected from individuals\u2019  electronic and paper filings of Forms 8938 and/or elements of individual  parent tax returns\u2014the filer\u2019s address and filing status\u2014used to  determine specified reporting thresholds for Form 8938 filers:  Individual Master File (IMF), which serves as IRS\u2019s system for  processing individual taxpayer account data. Using this system,  accounts are updated, taxes are assessed, and refunds are  generated as required during each tax-filing period.", "Individual Returns Transaction File (IRTF), which stores edited,  transcribed, and error-corrected data from the Form 1040 series and  related forms for the current processing year and two prior years.", "Modernized Tax Return Database (MTRDB), which serves as the  official repository of all electronic returns processed through IRS\u2019s  Modernized e-File system. Tax return data is stored immediately after  returns are processed.", "International Compliance Management Model (ICMM)-FATCA  International Returns (ICMM-FIR), which collects, parses, and  stores data from incoming form reports\u2013such as Forms 8938 and  8966\u2013into the FATCA Database (FDB), which serves as the  repository where ICMM-FIR stores data and from which downstream  applications can pull data.", "Integrated Production Model (IPM), which is a downstream data  repository that houses IMF data, information returns, and other data.  According to IRS officials, data from IPM are consolidated and made  available to a variety of downstream, security certified, systems for  use in conducive analysis, case selection, and report preparation.", "Additionally, data from these and other IRS databases are copied to IRS\u2019s  Compliance Data Warehouse (CDW) periodically, which captures data  from multiple production systems and organizes the data in a way that is  conductive to analysis.", "Table 6 highlights several problems with the consistency and  completeness of Form 8938 and relevant parent tax return data stored  across the listed databases.", "Inconsistent and incomplete data on address and filing status of  Form 8938 filers: As noted above, elements of parent tax returns\u2014 specifically the filer\u2019s country of residence and filing status\u2014are used  to determine specified reporting thresholds for Form 8938 filers.  However, IRTF and MTRDB have inconsistent and incomplete data  on addresses linked to Form 8938 filers, and report inconsistent  numbers of Forms 8938 filed from a U.S. residence. For example, the  variable identified as containing data on foreign countries of residence  in IRTF shows approximately 8,100 foreign filers in tax years 2015  and 2016, whereas a similar variable in MTRDB shows approximately  89,000 foreign filers for those same years. Additionally, FDB does not  contain country codes from paper filings of Form 8938. ICCM-FIR  stores information from some elements from parent tax returns\u2014such  as TINs and document locator numbers. According to IRS officials,  however, ICMM-FIR lacks data on country codes and filing status of  Form 8938 filers. IRS officials said that ICMM-FIR was not designed  or intended to store data on Form 8938 filers; rather, it was designed  to be a database for use in comparing Form 8938 and 8966 data. In  general, IRS officials indicated that they would like to adjust the way  ICMM-FIR stores data, but that would require modifying the way the  database was established.", "Incomplete data on assets reported on Forms 8938: MTRDB  contains detailed information on specified foreign financial assets  submitted on electronic filings of Form 8938 and the country code  from which the Form 8938 was filed. IRS officials said it is not  designed to store information submitted on paper filings of Forms  8938 and parent tax returns. IRS officials said that while IMF  processes information transcribed from individual income tax returns,  there is no requirement to cross-reference information from the tax  return with information submitted with an accompanying Form 8938.  Additionally, while IRS officials told us that IRTF is the authoritative  source for filers of Form 8938, it does not store account and other  asset information submitted from Forms 8938. When asked whether  there is any move to store account and other asset information  collected from Forms 8938 into IRTF, IRS officials said that the  decision on what returns or portions of returns are transcribed are  subject to resource constraints and are prioritized from year to year."], "subsections": []}, {"section_title": "Appendix III: Methodology and Detailed Information on 2015 and 2016 Individual FBAR Filings", "paragraphs": ["Table 7 shows that more than 900,000 individuals filed Financial Crimes  Enforcement Network (FinCEN) Form 114s (commonly known as the  Report of Foreign Bank and Financial Accounts, or FBAR) in calendar  years 2015 and 2016, and declared total maximum values of accounts  ranging from about $1.5 trillion to more than $2 trillion each year. We are  providing a range of estimates because we found a large number of  filings made potentially in error. In some cases, for instance, FBAR filers  reported more than $100 trillion in foreign financial accounts. We assume  many of these filings are likely made in error, but have only limited means  to determine which filings have errors, and which filings have accurate  information. Because we cannot independently verify the accuracy of all  self-reported FBAR data, we decided to present a range of data with (1) a  lower bound discarding all FBAR filings reporting total values of reported  foreign financial accounts at or above $1 billion; and (2) an upper bound  discarding all filings reporting total values of such accounts at or above $5  billion. Table 2 excludes amended and duplicated FBAR filings. This  table also excludes FBAR filings that reported a financial interest in 25 or  more financial accounts, but reported total maximum account values of $0  from parts II and III of the FBAR. Although we identified problems with  the data, we determined they were reliable enough to provide an  estimated range of asset values to report the scale of foreign financial  accounts held by U.S. persons.", "Table 8 shows a detailed breakdown of 2015 and 2016 FBAR filings by  residence and categories of total maximum account values reported on  the FBARs."], "subsections": []}, {"section_title": "Appendix IV: Detailed Comparison of Individual Foreign Financial Asset Reporting Requirements", "paragraphs": ["Appendix IV: Detailed Comparison of  Individual Foreign Financial Asset Reporting  Requirements 26 U.S.C. \u00a7 6038D; 26 C.F.R. \u00a7\u00a7 1.6038D-1 to 1.6038D-8.  26 C.F.R. \u00a7 1.6038D-2. Filers in this category include those who identify as single, married filing  separately, \u201chead of household,\u201d or \u201cqualifying widow(er).\u201d  Includes maximum value of specified foreign financial assets (Form 8938) or maximum value of  financial accounts maintained by a financial institution physically located in a foreign country (FBAR).", "Under FATCA, any income, gains, losses, deductions, credits, gross proceeds, or distributions from  holding or disposing of the account are or would be required to be reported, included, or otherwise  reflected on a person\u2019s income tax return. Under FBAR reporting requirements, a person has  signature or other authority if he or she has the authority (alone or in conjunction with another) to  control the disposition of money, funds or other assets held in a financial account by direct  communication (whether in writing or otherwise) to the person with whom the financial account is  maintained.  The account itself is subject to reporting, but the contents of the account do not have to be  separately reported."], "subsections": []}, {"section_title": "Appendix V: Key Differences between FATCA Intergovernmental Agreements and CRS", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Internal Revenue Service", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Department of the Treasury", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from the Department of State", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: GAO Contact and Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Brian James (Assistant Director),  Mark Ryan (Analyst-in-Charge), Ariana Graham, George Guttman, Krista  Loose, Daniel Mahoney, Cynthia Saunders, A.J. Stephens, and Elwood  White made key contributions to this report. Michael John Bechetti, Ted  Burik, and Jacqueline Chapin also provided assistance."], "subsections": []}]}], "fastfact": ["How does the government prevent tax dodgers from hiding income in offshore accounts?", "A 2010 law requires Americans and foreign banks to report more information to IRS about Americans' foreign assets. Implementing the law, however, has raised some concerns.", "For example, close to 75% of taxpayers reporting foreign assets to IRS also reported them separately to Treasury\u2014indicating potential unnecessary duplication.", "Also, some Americans living abroad can't get services from foreign banks that find the law too burdensome.", "Our recommendations to Congress, Treasury, and other agencies address challenges related to foreign asset reporting."]}
{"id": "GAO-18-466", "url": "https://www.gao.gov/products/GAO-18-466", "title": "Cybersecurity Workforce: Agencies Need to Improve Baseline Assessments and Procedures for Coding Positions", "published_date": "2018-06-14T00:00:00", "released_date": "2018-06-14T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["A key component of mitigating and responding to cyber threats is having a qualified, well-trained cybersecurity workforce. The Federal Cybersecurity Workforce Assessment Act of 2015 requires OPM and federal agencies to take several actions related to cybersecurity workforce planning.", "GAO is to monitor agencies' progress in implementing the act's requirements. For this report, GAO assessed whether: (1) OPM developed a coding structure and procedures for assigning codes to cybersecurity positions and submitted a progress report to Congress; (2) CFO Act agencies submitted complete, reliable baseline assessments of their cybersecurity workforces; and (3) CFO Act agencies established procedures to assign codes to cybersecurity positions. GAO examined OPM's coding procedures and progress report on the act's implementation, and baseline assessments and coding procedures from the 24 CFO Act agencies. GAO also interviewed relevant OPM and agency officials about efforts to address the act's requirements."]}, {"section_title": "What GAO Found", "paragraphs": ["As required by the Federal Cybersecurity Workforce Assessment Act of 2015 (act), the Office of Personnel Management (OPM) developed a cybersecurity coding structure under the National Initiative for Cybersecurity Education (NICE) as well as procedures for assigning codes to federal civilian cybersecurity positions. However, OPM issued the coding structure and procedures 5 and 4 months later than the act's deadlines because OPM was working with the National Institute of Standards and Technology (NIST) to align the structure and procedures with the draft NICE Cybersecurity Workforce Framework , which NIST issued later than planned. OPM also submitted a progress report to Congress on the implementation of the act 1 month after it was due. The delays in issuing the coding structure and procedures have extended the expected time frames for implementing subsequent provisions of the act.", "Most of the 24 agencies covered by the Chief Financial Officers (CFO) Act submitted baseline assessment reports to Congress but the results may not be reliable. As of March 2018, 21 of the 24 CFO Act agencies had conducted baseline assessments identifying the extent to which their cybersecurity employees held professional certifications and had submitted the assessment reports to Congress as required by the act. Three agencies had not conducted the assessments for various reasons, such as a lack of resources and tools to do so. Of the 21 agencies that did, 4 did not address all of the reportable information, such as the extent to which personnel without professional certifications were ready to obtain them or strategies for mitigating any gaps. Additionally, agencies were limited in their ability to obtain complete or consistent information about their cybersecurity employees and the certifications they held. This was because agencies had not yet fully identified all members of their cybersecurity workforces or did not have a consistent list of appropriate certifications for cybersecurity positions. As a result, the agencies had limited assurance that their assessment results accurately reflected all relevant employees or the extent to which those employees held appropriate certifications. This diminishes the usefulness of the assessments in determining the certification and training needs of these agencies' cybersecurity employees.", "Most of the 24 CFO Act agencies established coding procedures, but 6 agencies only partially addressed certain activities required by OPM in their procedures. Of the 24 agencies reviewed, 23 had established procedures to identify their civilian cybersecurity positions and assign the appropriate employment codes to the positions as called for by the act. However, 6 of the 23 agencies did not address one or more of 7 activities required by OPM in their procedures, such as the activities to review all filled and vacant positions and annotate reviewed position descriptions with the appropriate employment code. These 6 agencies cited a variety of reasons for not addressing all of the required activities in their coding procedures. For example, these agencies stated that they addressed the activities in existing guidance or did not include activities that their components did not have the responsibility to perform. By not addressing all of the required activities in their coding procedures, the 6 agencies lack assurance that the activities will be performed or performed consistently throughout their agency."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making 30 recommendations to 13 agencies to fully implement two of the act's requirements on baseline assessments and coding procedures. Of the 12 agencies to which we made recommendations that provided comments on the report, 7 agreed with the recommendations made to them, 4 did not state whether they agreed or disagreed, and 1 did not agree with one of two recommendations made to it. GAO continues to believe that the recommendation is valid as discussed in this report."]}], "report": [{"section_title": "Letter", "paragraphs": ["The security of federal information systems and data is vital to public  confidence and the nation\u2019s safety, prosperity, and well-being. However,  the federal government faces an ever-evolving array of cyber-based  threats to its systems and information. Further, federal systems and  networks are inherently at risk because of their complexity, technological  diversity, and geographic dispersion, among other reasons.", "A key component of the government\u2019s ability to mitigate and respond to  cyber threats is having a qualified, well-trained cybersecurity workforce.  Cybersecurity professionals can help to prevent or mitigate the  vulnerabilities that could allow malicious individuals and groups access to  federal information technology (IT) systems. The ability to secure federal  IT systems depends on the knowledge, skills, and abilities of the federal  workforce that uses, implements, secures, and maintains these systems.  This includes federal employees who use the systems in the course of  their work, as well as the designers, developers, programmers, and  administrators of the programs and systems.", "We and other organizations previously have reported that agencies faced  challenges in ensuring that they have an effective cybersecurity  workforce. In 1997, we designated the security of federal information  systems as a government-wide high-risk area and cited the shortage of  information security personnel with technical expertise required to  manage controls in these systems. In 2001, we added strategic human  capital management to our high-risk list. In our 2017 update to the high- risk list, we reported that the federal government continues to be  challenged in addressing mission critical skills gaps, including  cybersecurity skills gaps.", "To address these and other challenges, the Federal Cybersecurity  Workforce Assessment Act of 2015 requires the Office of Personnel Management (OPM), the National Institute of Standards and Technology  (NIST), and other federal agencies to take several actions related to  cybersecurity workforce planning. Among other things, the act requires:", "OPM, in coordination with NIST, to develop an employment coding  structure for cybersecurity positions.", "OPM, in coordination with NIST, the Department of Homeland  Security (DHS), and the Office of the Director of National Intelligence  (ODNI), to establish procedures to implement the coding structure for  civilian cybersecurity positions.", "OPM to submit a progress report on the implementation of the act to  the appropriate congressional committees.", "Agencies to report on the baseline assessments of their existing  cybersecurity workforces and establish procedures for identifying  cybersecurity positions and assigning codes to such positions.", "The Federal Cybersecurity Workforce Assessment Act of 2015 also  includes a provision calling for us to analyze and monitor agencies\u2019  implementation of the act\u2019s requirements and report on this assessment  to Congress no later than December 2018. Our objectives for this first  report were to determine whether (1) OPM developed a coding structure  and procedures for assigning codes to cybersecurity positions and  submitted a progress report to Congress, (2) Chief Financial Officers  (CFO) Act agencies submitted complete and reliable baseline  assessment reports of their cybersecurity workforces, and (3) CFO Act  agencies established procedures to identify and assign codes to  cybersecurity positions.", "To address the first objective, we examined OPM guidance,  memorandums, and reports to assess whether OPM had developed a  coding structure and procedures for assigning codes to all federal civilian  cybersecurity positions and submitted a progress report to Congress on  the implementation of the act. We also interviewed OPM and NIST  officials about their efforts to develop these documents and the reasons  for any delays.", "To address the second objective, we reviewed and compared the  contents of the 24 CFO Act agencies\u2019 baseline assessment reports to the  reporting requirements defined in the act. We also interviewed cognizant  officials at the 24 agencies to (1) identify the process by which agencies  collected and reported baseline assessment information on the  certifications held by their cybersecurity personnel and (2) obtain their  views on the reliability of the information reported in their agency\u2019s  baseline assessment.", "To address the third objective, we assessed the completeness of the 24  agencies\u2019 procedures for identifying and assigning codes to cybersecurity  positions by determining whether the procedures addressed the required  coding activities defined in OPM guidance. We also compared the  issuance date of the procedures to the deadline established in OPM\u2019s  coding guidance for agencies to issue the procedures, and interviewed  agency officials about their efforts to complete the procedures by the  required deadline and the reasons for any delays. A more complete  description of our objectives, scope, and methodology is provided in  appendix I.", "We conducted this performance audit from October 2016 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Federal agencies and our nation\u2019s critical infrastructures\u2014such as  energy, transportation systems, communications, and financial services\u2014  are dependent on computerized (cyber) information systems and  electronic data to carry out operations and to process, maintain, and  report essential information. The information systems and networks that  support federal operations are highly complex and dynamic,  technologically diverse, and often geographically dispersed. This  complexity increases the difficulty in identifying, managing, and protecting  the myriad of operating systems, applications, and devices comprising the  systems and networks.", "Cybersecurity professionals can help to prevent or mitigate the  vulnerabilities that could allow malicious individuals and groups access to  federal IT systems. The ability to secure federal systems depends on the  knowledge, skills, and abilities of the federal and contractor workforce that  uses, implements, secures, and maintains these systems.", "Nevertheless, the Office of Management and Budget (OMB) has noted  that the federal government and private industry face a persistent  shortage of cybersecurity and IT talent to implement and oversee  information security protections to combat cyber threats. In addition, the  RAND Corporation and the Partnership for Public Service have reported  that there is a nationwide shortage of cybersecurity experts, in particular,  in the federal government. According to these reports, this shortage of  cybersecurity professionals makes securing the nation\u2019s networks more  challenging and may leave federal IT systems vulnerable to malicious  attacks. The persistent shortage of cyber-related talent has given rise to  efforts to identify and assess the federal cybersecurity workforce."], "subsections": [{"section_title": "The National Initiative for Cybersecurity Education (NICE) Created a Framework for Defining Cybersecurity Workforce Positions", "paragraphs": ["NICE, led by NIST, is a partnership among government, academia, and  the private sector focused on cybersecurity education, training, and  workforce development. The mission of NICE is to energize and promote  a robust network and an ecosystem of cybersecurity education, training,  and workforce development. NICE fulfills this mission by coordinating with  government, academic, and industry partners to build on existing  successful programs, facilitate change and innovation, and bring  leadership and vision to increase the number of skilled cybersecurity  professionals that are helping to keep our nation secure. NICE issued an  initial draft of the National Cybersecurity Workforce Framework (National  Framework) for public comment in September 2011 and the final version  1.0 in April 2013. The National Framework was intended to help identify,  describe, and assess all cybersecurity roles within an organization. The  National Framework organized cybersecurity job functions into 7  categories and 31 specialty areas:", "Category: a high-level grouping of common cybersecurity functions.", "Categories group together work and workers that share common  major functions, regardless of job titles or other occupational terms.", "Specialty area: an area of concentrated work, or function, within  cybersecurity and related work. Related specialty areas are grouped  together into categories. In version 1.0 of the National Framework,  each specialty area was also associated with a distinct set of  cybersecurity related tasks and knowledges, skills, and abilities.", "In November 2016, NIST issued draft special publication 800-181 which  revised and replaced earlier versions of the National Framework. The  draft was co-authored by NIST, DOD, and DHS and was renamed the  NICE Cybersecurity Workforce Framework (NICE Framework). In August  2017, NIST published the final version of the special publication.", "The NICE Framework is intended to help the federal government better  identify cybersecurity workforce needs by enabling agencies to examine  specific cybersecurity work roles, and identify personnel skills gaps,  rather than merely examine the number of vacancies by job series. The  NICE Framework added 2 additional specialty areas within the 7  categories. Figure 1 identifies the 7 categories and the 33 specialty areas  in the NICE Framework.", "The NICE Framework also introduced the concept of work roles as the  third component of cybersecurity job functions. Work roles provide a more  detailed description of the roles and responsibilities of cybersecurity job  functions than do the category and specialty area components of the  NICE Framework. The NICE Framework defines one or more work roles  within each specialty area. For example, as depicted in figure 2, the  NICE Framework defined 11 work roles within the 7 specialty areas in the  \u201cSecurely Provision\u201d category."], "subsections": []}, {"section_title": "OPM Has Led Several Efforts to Assess the Federal Cybersecurity Workforce", "paragraphs": ["In October 2012, in coordination with a NICE interagency working group,  OPM published a cybersecurity employment coding structure that aligned  with the initial draft version of the National Cybersecurity Workforce  Framework. The coding structure assigned a unique 2-digit cybersecurity  employment code to each category and specialty area in the NICE  Framework. According to OPM, the coding of federal positions with  cybersecurity functions was intended to enhance agencies\u2019 ability to  identify critical cybersecurity workforce needs, recruit and hire employees  with needed skills, and provide appropriate training and development  opportunities to cybersecurity employees.", "In July 2013, OPM initiated the Special Cybersecurity Workforce Project  to support federal efforts to reduce the cybersecurity workforce skills gaps  across agencies. Agencies were to use the definitions of cybersecurity  work, as described in the National Cybersecurity Workforce Framework,  along with OPM\u2019s cybersecurity coding structure, to code positions  performing cybersecurity work by the end of fiscal year 2014. The project  was intended to enable agencies to identify and address their needs for  cybersecurity skill sets to meet their missions.", "In July 2016, OPM and the Office of Management and Budget (OMB)  issued the Federal Cybersecurity Workforce Strategy. The strategy  details government-wide actions to identify, expand, recruit, develop,  retain, and sustain a capable and competent workforce in key functional  areas to address complex and ever-evolving cyber threats. The strategy  identifies a number of actions intended to address cybersecurity  workforce challenges in: (1) identifying cybersecurity workforce needs, (2)  expanding the cybersecurity workforce through education and training, (3)  recruiting and hiring highly skilled talent, and (4) retaining and developing  highly skilled talent.", "The strategy states that OPM is to expand cybersecurity position coding  and agencies are to conduct strategic workforce planning. These actions  are related to the requirements of the Federal Cybersecurity Workforce  Assessment Act of 2015, under which OPM is to establish an  employment coding structure and agencies are to identify and report on  cybersecurity workforce critical needs.", "Figure 3 depicts a timeline of recent efforts to assess the federal  cybersecurity workforce."], "subsections": []}]}, {"section_title": "OPM Issued a Cybersecurity Position Coding Structure, Procedures, and Progress Report Later Than the Deadlines Established in the Act OPM Developed a 3-digit Cybersecurity Coding Structure", "paragraphs": ["As required by the Federal Cybersecurity Workforce Assessment Act of  2015, OPM developed a cybersecurity coding structure under NICE,  issued guidance to implement the coding structure to identify all federal  civilian cybersecurity positions, and provided a progress report to  Congress on the implementation of the act. However, the coding structure  and procedures were issued later than the act\u2019s deadlines because OPM  was working with the National Institute of Standards and Technology  (NIST) to align the structure and procedures with the draft version of the  NICE Cybersecurity Workforce Framework, which NIST issued later than  planned. The delays in issuing the coding structure and procedures have  extended the expected time frames for implementing subsequent  provisions of the act.", "The Federal Cybersecurity Workforce Assessment Act of 2015 (the act)  required OPM, in coordination with NIST, to develop a cybersecurity  coding structure by June 15, 2016.", "OPM addressed this requirement by developing a 3-digit cybersecurity  employment coding structure that fully aligns with the NICE Cybersecurity  Workforce Framework. OPM issued version 1 of the coding structure on  November 15, 2016, 5 months after the deadline established in the act.", "The coding structure assigns a unique 3-digit cybersecurity employment  code to each work role outlined in the draft version of the NICE  Cybersecurity Workforce Framework. Table 1 presents an example of the  3-digit employment codes associated with one category\u2014\u201dSecurely  Provision\u201d\u2014and its component specialty areas and work roles.", "Although the act had called for the coding structure to be established by  June 15, 2016, OPM officials explained that the coding structure was  issued 5 months later than the established deadline because the structure  was to be aligned with the NICE Cybersecurity Workforce Framework.  However, the draft version of the NICE Framework was not issued until  November 2, 2016.", "According to NIST officials, the issuance of the draft NICE Framework  was delayed because some of the knowledge, skills, and abilities (KSA)  and task statements that had been originally developed by the  intelligence community were marked as sensitive. NIST delayed  publication of the draft NICE Framework until officials in the intelligence  community had removed any sensitivity designations on the KSAs and  task statements."], "subsections": [{"section_title": "OPM Developed Government-wide Procedures for Assigning Codes to Civilian Cybersecurity Positions", "paragraphs": ["The act required OPM, in coordination with NIST, DHS, and ODNI to  establish procedures to assist agencies in implementing the cybersecurity  coding structure. OPM was to develop the procedures no later than  September 18, 2016.", "In accordance with this requirement, OPM coordinated with NIST, DHS,  and ODNI to develop its Guidance for Assigning New Cybersecurity  Codes to Positions with Information Technology, Cybersecurity, and  Cyber-Related Functions. The guidance provides instructions on how  agencies are to assign the 3-digit cybersecurity employment codes to  filled and vacant positions, including required activities for identifying and  assigning codes to cybersecurity positions. The guidance also referenced  additional updates and guidance that were to be posted on OMB\u2019s MAX  website.", "OPM posted the guidance on the Chief Human Capital Officers Council  website on January 4, 2017, 4 months after the deadline established in  the act. OPM officials said they delayed issuance of the guidance so that  it could be released in coordination with the cybersecurity coding  structure, which was dependent on the release of the draft NICE  Framework."], "subsections": []}, {"section_title": "OPM Submitted a Progress Report to Congress", "paragraphs": ["The act required OPM to report on the progress of agencies\u2019  implementation of the act\u2019s requirements, as well as OPM\u2019s efforts to  develop a coding structure and government-wide coding procedures.  OPM was to submit the progress report to the appropriate congressional  committees no later than June 15, 2016.", "OPM prepared and submitted its progress report to the congressional  committees identified in the act on July 12, 2016, about 1 month after the  act\u2019s deadline. Among other things, the report stated the following:", "OPM was coordinating closely with NICE to revise the cybersecurity  coding structure to align with the latest version of the NICE  Framework, which was scheduled to be finalized in September 2016.", "OPM had begun an education campaign to inform the federal  community of the act and its requirements and was collaborating with  stakeholders and interagency partners on ideas for how to implement  the requirements of the act.", "An official in OPM\u2019s Employee Services division stated that OPM was  delayed in completing and submitting the report to congressional  committees due to the agency\u2019s internal review process."], "subsections": []}, {"section_title": "OPM\u2019s Delays in Completing Required Activities Have Resulted in Later Implementation of Other Provisions of the Act", "paragraphs": ["Because the deadlines for agencies to implement certain provisions of the  act are contingent on the completion of earlier activities, delays by OPM  in issuing the revised cybersecurity coding structure and the government- wide coding procedures have extended the due dates for agencies to  implement other provisions of the act by about 4 months. Specifically:", "The act required agencies to establish procedures for identifying all IT  or cybersecurity positions and for assigning the appropriate  employment code to each position no later than 3 months after OPM  issued the government-wide coding procedures. If OPM had issued  the coding procedures by September 2016 as the act required,  agencies would have been required to establish their coding  procedures by December 2016. However, because OPM did not issue  the government-wide procedures until January 2017, agencies did not  have to develop their coding procedures until April 2017.", "Similarly, agencies were to assign employment codes to all of their  cybersecurity positions no later than 1 year after establishing their  coding procedures. Had agencies been required to establish their  procedures by December 2016, they would have been required to  assign the employment codes by December 2017. However, because  they did not have to develop coding procedures until April 2017, they  were therefore required to complete the assignment of employment  codes by April 2018.", "Further, agencies are required to identify and report on cybersecurity  work roles of critical need beginning 1 year after the employment  codes are assigned. If agencies had been required to assign  employment codes by December 2017, they would have to begin  reporting on their critical needs by December 2018. However,  because they did not have to complete the assignment of employment  codes until April 2018, they are therefore required to identify and  begin reporting on critical needs by April 2019.", "Figure 4 depicts the delays in earlier activities which can result or have  resulted in later implementation of subsequent provisions of the act."], "subsections": []}]}, {"section_title": "Most CFO Act Agencies Submitted Baseline Assessments, but the Results May Not Be Reliable", "paragraphs": ["Most of the 24 CFO Act agencies conducted baseline assessments  identifying the extent to which their cybersecurity employees held  certifications and submitted them to Congress as required by the act.  However, 3 agencies did not complete the assessments for various  reasons, such as a lack of resources and tools to do so. Further, of the 21  agencies that did complete the assessments, 4 agencies did not address  all of the reportable information, such as the extent to which personnel  without certifications were ready to obtain them or strategies for mitigating  any gaps. In addition, the assessments conducted by the 21 agencies did  not contain complete, comprehensive, or consistent information on the  certifications held by agencies\u2019 cybersecurity employees due to limitations  in the ability of the agencies to collect the needed information. As a result,  the information collected and reported by most agencies about the  certifications held by agency cybersecurity personnel may be of limited  value for assessing the credentials and qualifications of their  cybersecurity workforces."], "subsections": [{"section_title": "Most CFO Agencies Conducted Baseline Assessments but Several Agencies Did Not Include All Reportable Information", "paragraphs": ["The Federal Cybersecurity Workforce Assessment Act of 2015 required  agencies to prepare baseline assessment reports identifying the extent to  which their cybersecurity workforces held industry-recognized  certifications as identified under NICE. OPM\u2019s August 2016  memorandum on the requirements and time frames of the act further  stated that agencies were to report the results of the assessments to the  appropriate congressional committees of jurisdiction by December  2016.", "In the absence of a NICE-defined list of appropriate industry-recognized  certifications, 21 of the 24 agencies covered by the CFO Act had  conducted baseline assessments of the certifications held by their  cybersecurity workforces and submitted the baseline assessment reports  to Congress as of March 2018. Table 2 shows the status of the  agencies\u2019 submissions of the baseline assessments as of March 2018.", "Three agencies did not conduct baseline assessments:  Instead of conducting a baseline assessment as called for by the act,  DHS submitted its 2016 Comprehensive Cybersecurity Workforce  Update to Congress in March 2017. However, this report did not  include a baseline assessment of the department\u2019s workforce as  called for by the act. The report noted that DHS\u2019s Office of the Chief  Human Capital Officer lacked the ability to view or easily produce  consolidated reports on employee certifications from all DHS  components, and lacked consistent and detailed information about the  readiness of additional employees to complete certification exams and  specific certifications identified by components as being required for  success in their positions. The report further noted that the  department was working with cybersecurity subject matter experts  from each component to revalidate the certifications most important to  the work of their organizations and to organize the information  according to the NICE Framework.", "The Department of Housing and Urban Development (HUD) prepared  an assessment of IT specialist skills, but did not conduct a baseline  assessment that identified the extent to which its cybersecurity  workforce held industry-recognized certifications. Officials in HUD\u2019s  Office of the Chief Information Officer (CIO) and Office of the Chief  Human Capital Officer stated that the department intends to conduct a  workforce assessment of its cybersecurity employees. The officials  did not provide a time frame for when the assessment would be  conducted.", "The CIO and Chief Human Capital Officer of the Small Business  Administration (SBA) stated that the agency has been unable to  complete a baseline assessment due to resource constraints. The  officials added that the agency intends to conduct workforce planning  efforts in the future. However, they did not provide a time frame for  when the assessment would be conducted.", "By not conducting baseline assessments, DHS, HUD, and SBA lack  valuable information about the knowledge and skills of their cybersecurity  employees. This lack of information limits the agencies\u2019 ability to  effectively gauge the competency of individuals who are charged with  ensuring the confidentiality, integrity, and availability of federal information  and information systems. Additionally, by not conducting or reporting on  the assessment, the agencies have not provided Congress the  information it required in the act regarding existing credentials and  certifications of personnel with information technology, cybersecurity, or  other cyber-related job functions."], "subsections": [{"section_title": "Not All Agencies That Prepared Baseline Assessment Reports Addressed Reportable Information", "paragraphs": ["The act required agencies\u2019 baseline assessment reports to identify the  following:  the percentage of personnel with cybersecurity job functions who held  the appropriate industry-recognized certifications as identified under  NICE;  the level of preparedness of cybersecurity personnel without existing  credentials to take certification exams; and a strategy for mitigating any gaps in (1) personnel holding industry- recognized certifications and (2) the preparedness of personnel  without existing credentials to take certification exams.", "In September 2016, OPM provided a template that agencies could use in  reporting on their baseline assessments. Using the template, agencies  could report on the number and percentage of surveyed staff with current  certifications and the number and percentage of staff without such  certifications that were planning to obtain them within the next year.  Human resource strategists and program management officials in OPM\u2019s  Employee Services division stated that the template was a guide to help  agencies with the reporting process; however, agencies were not required  to use the template or report their results in the format described in the  template.", "The 21 CFO agencies that prepared baseline assessment reports did not  always address the reportable information in their baseline assessments.  Specifically, of the 21 assessments that the CFO agencies had prepared,  all of the assessments included information on the percentage of  cybersecurity personnel holding certifications; 17 assessments discussed  the level of preparedness for personnel without certifications to take  certification exams; and 20 included strategies for mitigating certification  gaps. Table 3 shows the extent to which the 21 agencies\u2019 assessments  reported this information.", "Moreover, 4 of the 21 agencies did not address all reportable information  in their baseline assessments. Specifically:", "The Department of Commerce did not assess and did not report  information on (1) the level of preparedness for personnel who did not  hold certifications to take certification exams or (2) strategies for  mitigating gaps. Officials in Commerce\u2019s Office of Human Resources  Management and Office of the CIO stated that information on the level  of preparedness and gaps was not readily available because they  have not fully identified and coded the department\u2019s cybersecurity  workforce, and there is no federal requirement for cybersecurity  personnel to hold certifications. The officials stated that they did not  have the time or resources to assess these reporting requirements.", "Officials in the Department of Energy\u2019s Office of the Chief Human  Capital Officer stated that they did not assess the level of  preparedness for personnel without certifications to take certification  exams because the department does not require its cybersecurity  personnel to hold certifications. As a result, they did not have criteria  for identifying personnel who are prepared to take certification exams.", "According to the Department of the Interior\u2019s Principal Deputy  Assistant Secretary for Policy, Management, and Budget, the  department did not assess the level of preparedness for personnel  without certifications to take certification exams because neither OPM  nor the department currently requires certifications for these  cybersecurity positions. However, the department's Office of Human  Resources and Office of the Chief Information Officer are exploring  options to determine the level of preparedness across its IT  workforce.", "According to the National Aeronautics and Space Administration\u2019s  (NASA) baseline assessment report, the agency did not assess the  level of preparedness for personnel without certifications to take  certification exams because the agency does not require its  cybersecurity personnel to maintain certifications. The agency did not  know how many of its personnel were planning to seek certifications  on their own.", "Data regarding the number of cybersecurity employees that hold  certifications and the level of preparedness of personnel without  certifications can be a useful indicator of the skills and knowledge of an  agency\u2019s cybersecurity workforce. In addition, strategies for addressing  gaps can help an agency increase the skills and knowledge of its  cybersecurity workforce. By not including all reportable information in the  assessments, these four agencies may lack valuable information that  could help them identify and meet the certification and training needs of  their cybersecurity employees who are charged with protecting federal  information and information systems from cyberattacks. However, as  discussed later in this report, the absence of NICE identified appropriate  industry-recognized certifications may have also contributed to  uncertainty for agencies in their efforts to comply with the requirements of  the act."], "subsections": []}]}, {"section_title": "Limitations in Agency Baseline Assessments Raise Concerns About the Reliability of Information about Certifications Held by Agencies\u2019 Cybersecurity Employees", "paragraphs": ["Limitations in the 21 agencies\u2019 baseline assessments raise concerns  about the reliability of the assessments, thus constraining the conclusions  that can be drawn from their results about the federal cybersecurity  workforce\u2019s certifications. The 21 agencies in our review that conducted  assessments were not able to collect complete, comprehensive, or  consistent information about the certifications held by their cybersecurity  workforces for various reasons. As a result, these agencies had limited  assurance that the certification information contained in their baseline  assessment reports was reliable, thereby diminishing the usefulness of  the assessments in determining the certification and training needs of  their cybersecurity employees."], "subsections": [{"section_title": "Agencies Were Required to Assess Cyber Employees\u2019 Certifications before They Had Fully Defined Their Cybersecurity Workforces", "paragraphs": ["As previously noted, OPM\u2019s August 2016 memorandum on the  requirements of the act stated that, agencies were to report their baseline  assessments to Congress by December 2016. However, according to  OPM\u2019s January 2017 coding guidance, agencies were not required to  complete the assignment of the appropriate 3-digit employment codes to  each position until April 2018. Consequently, agencies were required to  submit their reports on the percentage of personnel performing  cybersecurity functions who possessed certifications before the agencies  had identified all members of their cybersecurity workforce and assigned  the 3-digit cybersecurity employment codes to each position.", "Because the agencies had not yet fully defined their cybersecurity  workforces using the NICE Framework and the 3-digit coding structure,  the 21 agencies in our review that prepared assessments did not use  consistent criteria to define the population of personnel with cybersecurity  job functions that were included in their baseline assessments. Examples  of the criteria that these agencies used to define the target populations for  their assessments included:  cybersecurity employees who had been coded with the 2-digit  cybersecurity employment codes during the 2013 Special  Cybersecurity Workforce Project; employees within certain occupational series, such as the 2210  Information Technology Management series; personnel within certain roles or organizations, such as the Office of  Information Security or the Office of the CIO; or personnel who performed cybersecurity duties for a defined  percentage of the time.", "As a result of not having fully defined their cybersecurity workforces prior  to conducting their baseline assessments, the agencies have limited  assurance that their baseline assessments reflected all relevant agency  positions or personnel performing cybersecurity functions as defined by  the NICE Framework."], "subsections": []}, {"section_title": "Agencies Were Not Always Able to Obtain Certification Information from All Relevant Employees", "paragraphs": ["Several agencies reported that they were not able to obtain information  on certifications from all of the employees they surveyed when conducting  their baseline assessments. Specifically, 6 of the 21 agencies that  prepared assessments reported response rates of between 15 and 42  percent to their surveys or data calls to employees for such information.  Also, officials from two agencies told us that employees\u2019 responses to  their information requests were voluntary due to union and legal  concerns. As a result, these agencies have limited assurance that their  baseline assessment reports conveyed comprehensive information about  all agency cybersecurity personnel and the certifications that they held  because of the limited response from employees."], "subsections": []}, {"section_title": "NICE Had Not Defined Appropriate Industry- Recognized Certifications", "paragraphs": ["Although the act required agencies to report on the percentage of  personnel who held appropriate industry-recognized certifications as  identified under NICE, NICE had not defined such a list of certifications as  of the agencies\u2019 reporting deadline of December 2016. In August 2017, a  NICE official told us that the organization did not believe it was  appropriate for NICE, which is led by NIST, to identify industry  appropriate certifications because doing so may be perceived as  endorsing certain private certifications over other certifications. Currently,  the NICE website describes an effort under a NICE working group\u2014which  includes representatives from government, academia, and the private  sector\u2014to map industry-recognized certifications to work roles based on  the updated NICE Framework. However, this effort has not yet been  completed. According to NICE officials, the mapping of certifications to  the NICE Framework is expected to be completed by November 2018.", "In the absence of a defined list of industry-recognized certifications, the  agencies in our review developed their own approaches for determining  the certifications on which they based their assessments. Examples of  agencies\u2019 approaches included: asking that cybersecurity staff provide input on any or all certifications using a list of certifications developed by the DHS National Initiative  for Cybersecurity Careers and Studies, which was referenced in  OPM\u2019s reporting template; using certifications identified in the Department of Defense\u2019s (DOD)", "Information Assurance Workforce Improvement Program; or having the agency Office of the CIO or cybersecurity workforce- planning workgroup identify certifications to include in the  assessment.", "Because the baseline assessments were not based on a defined list of  certifications, there is limited assurance that the assessments consistently  or accurately conveyed the extent to which federal cybersecurity  professionals held industry-recognized certifications that are appropriate  for their job functions."], "subsections": []}, {"section_title": "Most Agencies Did Not Require Cybersecurity Personnel to Hold Certifications", "paragraphs": ["In addition, no government-wide requirement exists for cybersecurity  personnel to hold certifications, and most of the agencies in our review  did not require certifications. Specifically:", "Although OPM guidance states that agencies may use certifications  as a selective factor for some positions where specific qualifications  are required, no government-wide requirement exists for positions  performing cybersecurity related functions to hold certifications.", "Most agencies did not require IT or cybersecurity personnel to hold  certifications. Only 6 of the 24 agencies reported that they had  requirements for personnel to hold an industry-recognized  certification, while only one agency\u2014DOD\u2014required certifications for  all cybersecurity positions.", "As a result, the information collected by most agencies about the  certifications held by agency cybersecurity personnel may be of limited  value for assessing the qualifications and skills of their cybersecurity  workforces."], "subsections": []}]}]}, {"section_title": "Most CFO Act Agencies Established Coding Procedures, but Six Agencies\u2019 Procedures Only Partially Addressed Activities Required by OPM", "paragraphs": ["Almost all of the CFO Act agencies established procedures to identify all  of their civilian positions and assign the appropriate cybersecurity  employment codes to the positions as called for by the act. However, 6  agencies\u2019 procedures did not fully address 1 or more of 7 activities  required by OPM, such as the activities to review all encumbered and  vacant positions and annotate reviewed position descriptions with the  appropriate employment code. Additionally, DOD did not establish  procedures for coding noncivilian cybersecurity positions. By not  developing coding procedures that address all of the required activities in  their procedures, these agencies may not have reasonable assurance  that they will fully realize the benefits of (1) comprehensively identifying  the cybersecurity workforce, and (2) applying the employment codes to  meet the intended goal of defining the workforce and helping to address  critical mission needs."], "subsections": [{"section_title": "Most Agencies Established Coding Procedures as Required by the Act", "paragraphs": ["The act required agencies to establish procedures for identifying  cybersecurity positions and assigning employment codes to each  position. In January 2017, OPM issued a memorandum that required  agencies to establish their coding procedures by April 2017. The  memorandum also required agencies to perform a number of activities to  identify and assign codes to cybersecurity positions. Among others, the  memorandum stated that agencies were to: use the updated cybersecurity coding structure to find the appropriate  cybersecurity employment code(s);  identify encumbered and vacant positions with cybersecurity  functions; have their CIO staff, managers, and human resources (HR) and  classification staff work together to identify cybersecurity positions; annotate reviewed position descriptions with the appropriate  employment code(s); account for the fact that cybersecurity positions will extend beyond the  Information Technology Management 2210 (GS-2210) occupational  series; assign code \u201c000\u201d to positions that do not perform cybersecurity assign up to three employment codes to each position, in the order of  the level of criticality.", "Most of the agencies in our review had established coding procedures.  Specifically, of the 24 CFO Act agencies, 23 had established procedures.  Fourteen of these 23 agencies established their procedures by April 2017  as OPM required, while the remaining 9 agencies established their  procedures by March 2018.", "Officials from the 9 agencies that did not complete their procedures by  April 2017 gave several reasons for their late development or completion  of the procedures. For example:", "General Services Administration officials said that the procedures  were delayed due to their internal review processes.", "DOD officials said that the procedures were delayed because of the  size and complexity of the processes required to identify and code the  large number of civilian cybersecurity positions across the  department, and because of the length and complexity of the  department\u2019s policy review processes.", "In October 2017, an official in DHS\u2019s Office of the Chief Human  Capital Officer stated that the department did not plan to develop  procedures until the National Finance Center (NFC) payroll systems  were updated to accept the 3-digit cybersecurity codes. The NFC  systems were updated to accept the new codes in December 2017,  and DHS issued its procedures in March 2018.", "One agency\u2014the Department of Energy\u2014had not established coding  procedures:", "An official in the Department of Energy\u2019s Office of the Chief Human  Capital Officer stated that, because responsibility for IT is not  centralized under the department-level CIO organization (but rather, is  distributed throughout the component agencies), the official had not  determined who had the authority to issue coding procedures for the  entire department. By not establishing coding procedures, the  Department of Energy faces increased risk that it will not fully identify  its cybersecurity workforce or assign the appropriate employment  codes to each position, limiting its ability to identify cybersecurity skills  gaps or work roles of critical need."], "subsections": []}, {"section_title": "Agency Procedures Did Not Always Address Required Coding Activities", "paragraphs": ["The agencies that developed coding procedures generally, but did not  always, address the seven required activities that we reviewed in their  procedures. Specifically, 17 of the 23 agencies that developed  procedures addressed all 7 activities in their procedures, while the  remaining 6 agencies partially addressed or did not address 1 or more of  the 7 activities. Table 4 describes the extent to which agency procedures  addressed the activities required by OPM.", "The six agencies that did not address all activities required by OPM cited  a variety of reasons for not including them in their coding procedures. For  example:", "An official in the Department of Education\u2019s Office of Human  Resources explained that it was not necessary for the coding  procedures that were provided to each component to address  assigning code \u201c000\u201d to noncybersecurity positions because the Office  of Human Resources would assign the \u201c000\u201d code to any position that  did not have an assigned code.", "An official from the National Science Foundation\u2019s Division of Human  Resources Management stated that not addressing all activities may  have been an oversight by the agency.", "Officials in NASA\u2019s Office of Human Capital Management and its  Office of the CIO said they felt that it was unnecessary to address  assigning code \u201c000\u201d to noncybersecurity positions in the agency\u2019s  coding procedures because the agencies\u2019 existing guidance for  assigning the old 2-digit codes specified that such positions should be  coded with \u201c00.\u201d", "By not addressing all of the activities required by OPM in their  procedures, these 6 agencies lack assurance that the activities will be  performed or performed consistently throughout their organizations."], "subsections": []}, {"section_title": "DOD Did Not Establish Coding Procedures for Noncivilian Cybersecurity Positions", "paragraphs": ["In addition to developing procedures for civilian positions, the act required  DOD to establish government-wide procedures for identifying and  assigning employment codes to noncivilian (i.e., military) positions with  cybersecurity job functions by June 2017. The act also required DOD to  establish its internal departmental procedures for military positions by  September 30, 2017.", "According to officials in the department\u2019s Office of the CIO and Office of  the Chief Human Capital Officer, the only military personnel not currently  within DOD are in the Coast Guard (which resides within DHS).  Therefore, the department planned to fulfill its requirements to establish  government-wide procedures and internal departmental procedures for  identifying and coding military positions by establishing a single  consolidated procedure. The officials added that the consolidated  procedure is to include procedures for DHS to implement the coding  structure for uniformed Coast Guard personnel along with the internal  DOD procedures.", "However, as of February 2018, DOD had not finalized its consolidated  coding procedures. An official in the department\u2019s Office of the CIO in  February 2018 stated that, because the military services use multiple  Human Resources systems that all have to be updated to accommodate  the cybersecurity employment codes, the office was working with each of  the military services on guidance to meet the act\u2019s deadlines while the  services develop implementation plans for updating their human  resources systems. Until DOD establishes both government-wide and  DOD-specific procedures for identifying and coding noncivilian  cybersecurity positions, increased risk exists that DOD and DHS will not  be able to identify and code all positions in their noncivilian cybersecurity  workforce, limiting the departments\u2019 ability to identify cybersecurity skills  gaps or work roles of critical need in their noncivilian cybersecurity  workforce."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["To implement the objectives of the Federal Cybersecurity Workforce  Assessment Act of 2015, OPM and NIST, although delayed, have revised  the coding structure and cybersecurity workforce framework, and  developed coding procedures to support the identification and assignment  of codes to federal cybersecurity positions. In addition, most CFO Act  agencies have developed baseline assessments to identify cybersecurity  personnel within their agencies that held certifications. Having information  on the certifications held by cybersecurity employees can be a useful  indicator of the skills and knowledge of an agency\u2019s cybersecurity  workforce. However, because agencies have not consistently defined the  workforce and NICE had not developed a list of appropriate certifications,  efforts such as conducting the baseline assessment to determine the  percentage of cybersecurity personnel that hold appropriate certifications  have yielded inconsistent and potentially unreliable results. By not  conducting assessments or including all required information in the  assessments, some of these agencies may lack valuable information that  could help them identify the certification and training needs of their  cybersecurity employees that are charged with protecting federal  information and information systems from cyberattacks.", "Lastly, while most CFO agencies have developed procedures for  assigning cybersecurity codes to positions, several agencies did not  address activities required by OPM. Unless those agencies address all of  the activities, they may not have reasonable assurance that they are  comprehensively identifying the cybersecurity workforce and applying the  correct employment codes. As such, increased risk exists that the federal  government will not meet its intended goal to define the cybersecurity  workforce and address the critical mission needs for a qualified  cybersecurity workforce."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making a total of 30 recommendations to 13 agencies in our  review to develop and submit their baseline assessments and to fully  address the required activities in OPM\u2019s guidance in their procedures for  assigning employment codes to cybersecurity positions. Specifically:  The Secretary of Commerce should evaluate the level of preparedness  for cybersecurity personnel not currently holding certifications to take  certification exams, identify strategies for mitigating any gaps identified,  and report this information to Congress. (Recommendation 1)", "The Secretary of Defense should develop, document, and implement  government-wide procedures for identifying IT, cybersecurity, and cyber- related noncivilian positions and assigning employment codes to those  positions. (Recommendation 2)", "The Secretary of Defense should develop, document, and implement  internal departmental procedures for identifying IT, cybersecurity, and  cyber-related noncivilian positions and assigning employment codes to  those positions. (Recommendation 3)", "The Secretary of Education should include requirements to assign code  \u201c000\u201d to positions that do not perform IT, cybersecurity, and cyber-related  functions in departmental procedures. (Recommendation 4)", "The Secretary of Energy should evaluate the level of preparedness for  cybersecurity personnel not currently holding certifications to take  certification exams and report this information to Congress.  (Recommendation 5)", "The Secretary of Energy should develop, document, and implement  departmental procedures for identifying IT, cybersecurity, and cyber- related positions and assigning employment codes to those positions,  taking into account the key elements described in OPM\u2019s instructions for  agencies\u2019 procedures. (Recommendation 6)", "The Secretary of Homeland Security should conduct a baseline  assessment of the department\u2019s cybersecurity workforce that includes (1)  the percentage of personnel with IT, cybersecurity, or other cyber-related  job functions who hold certifications; (2) the level of preparedness of other  cyber personnel without existing credentials to take certification exams;  and (3) a strategy for mitigating any gaps identified with appropriate  training and certification for existing personnel. (Recommendation 7)", "The Secretary of Homeland Security should submit a report of the  department\u2019s baseline assessment of its existing cybersecurity workforce  to the appropriate congressional committees of jurisdiction.  (Recommendation 8)", "The Secretary of Housing and Urban Development should conduct a  baseline assessment of the department\u2019s cybersecurity workforce that  includes (1) the percentage of personnel with IT, cybersecurity, or other  cyber-related job functions who hold certifications; (2) the level of  preparedness of other cyber personnel without existing credentials to take  certification exams; and (3) a strategy for mitigating any gaps identified  with appropriate training and certification for existing personnel.  (Recommendation 9)", "The Secretary of Housing and Urban Development should submit a report  of the department\u2019s baseline assessment of its existing cybersecurity  workforce to the appropriate congressional committees of jurisdiction.  (Recommendation 10)", "The Secretary of the Interior should evaluate the level of preparedness for  cybersecurity personnel not currently holding certifications to take  certification exams and report this information to Congress.  (Recommendation 11)", "The Secretary of Labor should include requirements to annotate reviewed  position descriptions with the appropriate cybersecurity data standard  code(s) in departmental procedures. (Recommendation 12)", "The Secretary of Labor should ensure that departmental procedures fully  account for the fact that IT, cybersecurity, and cyber-related positions will  extend beyond the Information Technology Management 2210  occupational series. (Recommendation 13)", "The Secretary of Labor should fully clarify requirements to assign code  \u201c000\u201d to positions that do not perform IT, cybersecurity, and cyber-related  functions in departmental procedures. (Recommendation 14)", "The Secretary of Labor should include requirements to assign up to three  employment codes per position in order of their criticality in departmental  procedures. (Recommendation 15)", "The Administrator of the National Aeronautics and Space Administration  should evaluate the level of preparedness for cybersecurity personnel not  currently holding certifications to take certification exams and report this  information to Congress. (Recommendation 16)", "The Administrator of the National Aeronautics and Space Administration  should include requirements to assign code \u201c000\u201d to positions that do not  perform IT, cybersecurity, and cyber-related functions in agency  procedures. (Recommendation 17)", "The Director of the National Science Foundation should fully clarify  requirements to review all encumbered and vacant positions performing  IT, cybersecurity, and cyber-related functions in agency procedures.  (Recommendation 18)", "The Director of the National Science Foundation should include  requirements to annotate reviewed position descriptions with the  appropriate cybersecurity data standard code(s) in agency procedures.  (Recommendation 19)", "The Director of the National Science Foundation should ensure that  agency procedures account for the fact that IT, cybersecurity, and cyber- related positions will extend beyond the Information Technology  Management 2210 occupational series. (Recommendation 20)", "The Director of the National Science Foundation should include  requirements to assign code \u201c000\u201d to positions that do not perform IT,  cybersecurity, and cyber-related functions in agency procedures.  (Recommendation 21)", "The Director of the National Science Foundation should include  requirements to assign up to three employment codes per position in  order of their criticality in agency procedures. (Recommendation 22)", "The Chairman of the Nuclear Regulatory Commission should ensure that  agency procedures account for the fact that IT, cybersecurity, and cyber- related positions will extend beyond the Information Technology  Management 2210 occupational series. (Recommendation 23)", "The Chairman of the Nuclear Regulatory Commission should fully clarify  requirements to assign up to three employment codes per position in  order of their criticality in agency procedures. (Recommendation 24)", "The Administrator of the Small Business Administration should conduct a  baseline assessment of the department\u2019s cybersecurity workforce that  includes (1) the percentage of personnel with IT, cybersecurity, or other  cyber-related job functions who hold certifications; (2) the level of  preparedness of other cyber personnel without existing credentials to take  certification exams; and (3) a strategy for mitigating any gaps identified  with appropriate training and certification for existing personnel.  (Recommendation 25)", "The Administrator of the Small Business Administration should submit a  report of its baseline assessment of its existing cybersecurity workforce to  the appropriate congressional committees of jurisdiction.  (Recommendation 26)", "The Administrator of the U.S. Agency for International Development  should fully clarify requirements to review all encumbered and vacant  positions performing IT, cybersecurity, and cyber-related functions in  agency procedures. (Recommendation 27)", "The Administrator of the U.S. Agency for International Development  should fully clarify requirements to annotate reviewed position  descriptions with the appropriate cybersecurity data standard code(s) in  agency procedures. (Recommendation 28)", "The Administrator of the U.S. Agency for International Development  should include requirements to assign code \u201c000\u201d to positions that do not  perform IT, cybersecurity, and cyber-related functions in agency  procedures. (Recommendation 29)", "The Administrator of the U.S. Agency for International Development  should include requirements to assign up to three employment codes per  position in order of their criticality in agency procedures.  (Recommendation 30)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to the 24 CFO Act agencies for their  review and comment. Of the 13 agencies to which we made  recommendations, 7 agencies stated that they agreed with all of the  recommendations directed to them; 1 agency agreed with one and did not  agree with one recommendation; 2 agencies provided comments but did  not state whether they agreed or disagreed with the recommendations; 2  agencies stated that they had no comments; and 1 agency\u2014DOD\u2014did  not respond to our request for comments on the report.", "In addition, of the 11 agencies to which we did not make  recommendations, 2 provided comments on the report and 9 responded  that they had no comments on the report. We also received technical  comments from 2 agencies, which we have incorporated into the report  as appropriate.", "The following seven agencies agreed with our recommendations:  In its written comments (reprinted in appendix II), the Department of  Commerce agreed with our recommendation. The department stated  that it will evaluate the level of preparedness for cybersecurity  personnel who do not hold certifications to take certification exams,  identify strategies for mitigating any gaps identified, and report this  information to Congress.", "In its written comments (reprinted in appendix III), the Department of  Education agreed with our recommendation. The department stated  that it had updated its coding guidance to require that positions that  do not perform substantial work in information technology,  cybersecurity, or cyber-related functions be assigned a code of \u201c000.\u201d", "In its written comments (reprinted in appendix IV), the Department of  Energy agreed with our recommendations and stated that it has  planned, or taken steps to address them. Specifically, with regard to  our recommendation concerning cybersecurity certification, the  department stated that it plans to conduct a department-wide  evaluation of the level of preparedness for its cybersecurity personnel  without existing credentials to take certification exams and will report  the information to Congress.", "In addition, the department stated that it had developed and issued  procedures for identifying and coding IT, cybersecurity, and cyber- related positions, as we recommended, and that it had since  completed its coding of applicable positions across the department.  The department also provided us its updated coding procedures,  along with its written comments.", "In its written comments (reprinted in appendix V), the Department of  Homeland Security agreed with our recommendations. Regarding the  recommendation to conduct a baseline assessment of its  cybersecurity workforce, the department stated that it is taking steps  to collect data about certifications relevant to DHS cybersecurity work.  The department also stated that it plans to identify the percentage of  its cybersecurity workforce that holds certifications, the percentage  prepared to take a relevant certification exam, and strategies for  mitigating any gaps. The department added that it plans to provide  this information to Congress, as we recommended. The department  also provided technical comments, which we have incorporated into  this report as appropriate.", "In its written comments (reprinted in appendix VI), the Department of  the Interior stated that it agreed with our recommendation. The  department also indicated that it is exploring options to determine the  extent to which its cybersecurity employees who currently do not hold  certifications are prepared to take certification exams.", "In its written comments (reprinted in appendix VII), the Small Business  Administration agreed with our recommendations. The agency also  stated that it had recently completed an assessment of its IT  workforce and reported on existing skills gaps, and that it plans to  execute its IT workforce plan to address the requirements of the  Federal Cybersecurity Workforce Assessment Act of 2015.", "In comments on a draft of this report provided via email on May 15,  2018, a Program Analyst in the National Science Foundation\u2019s Office  of Integrative Activities stated that the agency concurred with our  recommendations.", "One agency did not agree with one of the two recommendations directed  to it:  In its written comments (reprinted in appendix VIII), the National  Aeronautics and Space Administration did not agree with our first  recommendation and agreed with the second. Specifically:", "NASA did not concur with our recommendation to evaluate the  level of preparedness for cybersecurity personnel not currently  holding certifications to take certification exams and report this  information to Congress. The agency stated that there is no  federal or NASA requirement for employees in cybersecurity  positions to hold and/or maintain a certification, and therefore the  agency has no plans to assess the readiness of its cybersecurity  personnel to take certification exams.", "Nonetheless, we continue to believe our recommendation remains  valid because the level of preparedness of personnel without  certifications to take certification examinations can be a useful  indicator of the skills and knowledge of an agency\u2019s cybersecurity  workforce. In addition, this information could help the agency  identify and meet the certification and training needs of its  cybersecurity employees who are charged with protecting NASA\u2019s  information and information systems from cyberattacks. Moreover,  the act contains provisions that demonstrate congressional  interest in assessing agency use of professional certifications.", "NASA concurred with our recommendation to include in the  agency\u2019s coding procedures, requirements to assign code \u201c000\u201d to  positions that do not perform IT, cybersecurity, and cyber-related  functions. The agency stated that it planned to update its  procedures to include this requirement, and indicated that  supervisors and human resource specialists had been trained to  assign cybersecurity codes to all positions, including code \u201c000.\u201d", "The following two agencies provided comments, but did not state whether  they agreed or disagreed with our recommendations:  In its written comments (reprinted in appendix IX), the Nuclear  Regulatory Commission stated that it was in general agreement with  the overall content of the draft report. However, the agency asked that  we revise the final report to reflect that the Nuclear Regulatory  Commission had updated its cybersecurity coding procedures to  include language explaining that IT, cybersecurity, and cyber-related  positions will extend beyond the GS-2210 occupational series, and to  outline the requirement that positions can be assigned up to three  different employment codes in order of criticality. The agency provided  its updated coding procedures along with its written comments.", "In its written comments (reprinted in appendix X), the U.S. Agency for  International Development stated that it had completed various  actions related to coding its cybersecurity positions which addressed  our four recommendations. For example, among other actions, the  agency said it had updated its plan for coding cybersecurity positions  to include procedures for assigning codes for multiple functional  areas, with the predominant functional area being coded first.", "In addition, two agencies to which we made recommendations---the  Departments of Housing and Urban Development and Labor\u2014stated via  email that they did not have comments on the report. The agencies did  not state whether they agreed or disagreed with our recommendations.", "Of the agencies to which we did not make recommendations, the Social  Security Administration also provided a letter acknowledging its review of  the report. The agency\u2019s letter is reprinted in appendix XI.", "The remaining nine agencies to which we did not make  recommendations\u2014the Departments of Agriculture, Health and Human  Services, Justice, State, Transportation, and Treasury; the Environmental  Protection Agency; the General Services Administration; and the Office of  Personnel Management\u2014stated that they did not have any comments on  our report.", "We are sending copies of this report to interested congressional  committees, the Director of the Office of Management and Budget, the  secretaries and agency heads of the departments and agencies  addressed in this report, and other interested parties. In addition, this  report will be available at no charge on the GAO website at  http://www.gao.gov.", "If you have any questions regarding this report, please contact me at  (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix XII."], "subsections": []}]}, {"section_title": "Appendix I: Objectives, Scope, and Methodology", "paragraphs": ["Our objectives were to determine whether (1) OPM developed a coding  structure and procedures for assigning codes to cybersecurity positions  and submitted a progress report to Congress, (2) Chief Financial Officers  (CFO) Act agencies submitted complete and reliable baseline  assessment reports of their cybersecurity workforces, and (3) CFO Act  agencies established procedures to identify and assign codes to  cybersecurity positions.", "The scope of our review included the 24 departments and agencies  (hereafter referred to as agencies) covered by the Chief Financial Officers  Act of 1990. It also included OPM, DOD, DHS, and NIST in their roles  related to the development of a cybersecurity coding structure and related  guidance. Our work focused on the agencies\u2019 cybersecurity positions and  on workforce planning actions that the act required the agencies to  complete by November 2017.", "To address the first objective, we obtained and compared OPM\u2019s federal  cybersecurity employment coding structure, issued in November 2016, to  the work roles described in the National Initiative for Cybersecurity  Education (NICE) Cybersecurity Workforce Framework, issued in draft  form by NIST in November 2016. We also examined OPM  memorandums to identify if and when OPM had issued procedures to  agencies for identifying cybersecurity positions and assigning  employment codes. Additionally, we reviewed any progress reports  submitted by OPM to Congress on the implementation of the act. We  compared the issuance date of each of these documents to the deadlines  by which OPM was to issue them, as established in the act. Also, we  interviewed OPM and NIST officials about their efforts to develop these  documents and the reasons for any delays.", "To address the second objective, we obtained available baseline  assessments from each of the 24 CFO Act agencies and evaluated them  against the act\u2019s requirements to include information on (1) cybersecurity  personnel holding certifications, (2) the level of preparedness of other  personnel to take certification exams, and (3) strategies for mitigating any  gaps identified. We also obtained agencies\u2019 letters transmitting their  assessments to the relevant congressional committees and evaluated  them against the reporting deadline established in OPM guidance. In  addition, we analyzed other relevant agency documentation and  interviewed cognizant agency officials about their efforts to identify the  appropriate certifications, identify relevant personnel, and collect  information on employee certifications. We obtained the officials\u2019 views on  the reasons for any delays in agencies\u2019 submissions of the assessments  and the reliability of assessment results.", "To address the third objective, we obtained and analyzed available  cybersecurity coding procedures established by each of the 24 CFO Act  agencies. We reviewed the required coding activities described in OPM\u2019s  Guidance for Assigning New Cybersecurity Codes to Positions with  Information Technology, Cybersecurity, and Cyber-Related Functions.  We judgementally selected seven of the activities that we determined to  be particularly important for effectively identifying and coding all relevant  encumbered and vacant cybersecurity positions. We then evaluated each  agency\u2019s procedures against these seven required coding activities. We  also compared the issuance date of the procedures to the deadline  established in OPM\u2019s coding guidance for agencies to issue the  procedures. In addition, we interviewed agency officials about their efforts  to complete the procedures by the required deadline and the reasons for  any delays.", "Further, the Federal Cybersecurity Workforce Assessment Act of 2015  established a separate requirement and deadline for DOD to develop  government-wide procedures for implementing the coding structure for  federal noncivilian cyber positions. As such, we reviewed relevant  documentation and interviewed cognizant officials from the Department of  Defense\u2019s Office of the Chief Information Officer and Office of the Under  Secretary for Personnel and Readiness about their efforts to establish  coding procedures for both civilian and noncivilian positions by the  deadlines set forth in the act.", "We conducted this performance audit from October 2016 to June 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Commerce", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Education", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: Comments from the Department of Energy", "paragraphs": [], "subsections": []}, {"section_title": "Appendix V: Comments from the Department of Homeland Security", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VI: Comments from the Department of the Interior", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VII: Comments from the Small Business Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix VIII: Comments from National Aeronautics and Space Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IX: Comments from the Nuclear Regulatory Commission", "paragraphs": [], "subsections": []}, {"section_title": "Appendix X: Comments from the United States Agency for International Development", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XI: Comments from the Social Security Administration", "paragraphs": [], "subsections": []}, {"section_title": "Appendix XII: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the individual named above, Nick Marinos (director), Tammi  Kalugdan (assistant director), William Cook (analyst in charge), Chris  Businsky, Virginia Chanley, Wayne Emilien, Lisa Maine, David Plocher,  Priscilla Smith, Dwayne Staten, Daniel Wexler, and Merry Woo made  significant contributions to this report."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-19-4", "url": "https://www.gao.gov/products/GAO-19-4", "title": "DOD Installation Services: Use of Intergovernmental Support Agreements Has Had Benefits, but Additional Information Would Inform Expansion", "published_date": "2018-10-23T00:00:00", "released_date": "2018-10-23T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The Department of Defense (DOD) budgets about $25 billion annually to operate and support its installations. GAO has designated DOD support infrastructure management as a high-risk area since 1997, in part because DOD has needed to reduce its installation support costs. In 2013, Congress authorized the military services to enter into IGSAs with local and state governments to receive installation services, if an agreement will provide financial benefits or enhance mission effectiveness. As of July 2018, the military services had approved 45 IGSAs at 33 installations.", "In this report, GAO, among other objectives, evaluated the extent to which the military services have (1) realized and monitored the benefits from IGSAs and (2) supported the use of IGSAs and monitored whether installations are evaluating opportunities to use IGSAs.", "GAO reviewed the IGSA statute and policies and procedures; evaluated a nongeneralizable sample of 8 IGSAs, selected based on factors including the military service involved, the amount of expected financial benefits, and the length of time in place; compared the services' processes and actions against standards for internal control; and interviewed service, installation, and local government officials."]}, {"section_title": "What GAO Found", "paragraphs": ["Based on analysis of 8 selected intergovernmental support agreements (IGSAs) and interviews with officials, GAO found that the military services have realized financial and nonfinancial benefits from using IGSAs with local or state governments to obtain installation services such as waste removal, grounds maintenance, and stray animal control.", "Financial benefits. Of the 8 selected IGSAs, 5 resulted in cost savings, in which the actual cost of each IGSA during its first year was lower than the expected cost of a contract the installation had previously used to obtain the installation service. For example, Moody Air Force Base realized an estimated cost savings of $270,000 by using an IGSA for water and wastewater treatment services, versus continuing to obtain this service via contract. Installation officials stated that the other 3 selected IGSAs resulted in cost avoidances, in which the installations used the IGSAs to obtain a service they were not previously paying for at a lower cost than other alternatives.", "Nonfinancial benefits. According to officials from all four services, IGSAs have provided nonfinancial benefits such as enhanced mission effectiveness and readiness, reduced administrative time, and improved relationships with local communities.", "However, the military services are not fully monitoring benefits being realized from implemented IGSAs because they have not established formal processes to do so. For example, Navy and Marine Corps officials stated that they are not monitoring the financial and nonfinancial performance of implemented IGSAs in part because they are in the early stages of using IGSAs. The Air Force monitors some information on realized IGSA financial benefits, but this information is not complete because reporting by installations is voluntary. Developing and documenting processes to monitor any realized benefits of implemented IGSAs would provide the services with useful information on IGSA performance as they make decisions on devoting resources to developing and implementing these agreements in other locations.", "The military services have developed various approaches for supporting the use of IGSAs to reduce costs or enhance mission effectiveness. For example, the services have issued policies and procedures for their installations to follow in order to develop, obtain approval for, and implement IGSAs. However, officials from each of the military services told us they are not fully monitoring whether installations are evaluating opportunities to use IGSAs. For example, Army policy states that installations are to review current, soon-to-expire contracts for possible transition to an IGSA, but Army officials said they are not yet monitoring whether installations are doing so. Without a process in place to monitor whether installations are evaluating opportunities to use IGSAs, the military services do not know the extent to which this is occurring and thus may be missing opportunities to further reduce costs or enhance mission effectiveness."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making eight recommendations to monitor both the benefits realized from implemented IGSAs and whether installations are evaluating IGSA opportunities. DOD concurred with six recommendations and non-concurred with two, but plans to implement them all."]}], "report": [{"section_title": "Letter", "paragraphs": ["The Department of Defense (DOD) budgets about $25 billion annually to  operate and support its installations, which include over 160 active-duty  installations in the United States. To operate and support their respective  installations, the military services arrange for the provision of essential  services that support the mission and preserve quality of life for  installation personnel and their families\u2014for example, utility system  operations, custodial services, waste management, equipment  maintenance, and snow removal. Since 1997, we have designated DOD\u2019s  support infrastructure management as a high-risk area. In our 2017  update to our High-Risk Series, we reported that DOD needed to show  measurable and sustained progress in reducing installation support costs  and achieving efficiencies in installation support.", "In 2013, Congress authorized the military services to enter into  intergovernmental support agreements (IGSAs) with local and state  governments to receive, provide, or share installation support services.  According to the IGSA statute (10 U.S.C. \u00a7 2679), the military services  may enter into an IGSA, on a sole source basis, for installation services if  they determine that the agreement will serve the best interests of the  department by enhancing mission effectiveness or by creating efficiencies  or economies of scale, including by reducing costs.", "As of July 2018, the military services had approved 45 IGSAs at 33  installations in which local and state governments provide a variety of  installation services, including waste removal, grounds maintenance,  stray animal control, water treatment and testing, and road maintenance.  The military services estimate that these IGSAs will lead to approximately  $9 million in annual financial benefits, including cost savings or cost  avoidances. A cost savings can occur when an installation uses an IGSA  to obtain a needed service it was already paying for at a higher price  through another means. A cost avoidance can occur when an installation,  due to a change in circumstances, uses an IGSA to obtain a service it  was not previously paying for at a lower cost than other alternatives.", "We performed our work under the authority of the Comptroller General to  conduct evaluations in light of congressional interest in GAO\u2019s high-risk  areas, including in DOD support infrastructure management. In this  report, we (1) evaluate the extent to which the military services have  realized and monitored the benefits from IGSAs; (2) evaluate the extent to  which the military services have supported the use of IGSAs and  monitored whether installations are evaluating opportunities to use  IGSAs; and (3) describe any challenges the military services have  identified to using IGSAs.", "For all three of our objectives in this report, we included the Army, the  Navy, the Air Force, and the Marine Corps in our review and all 45 IGSAs  that had been approved as of July 2018. For our first objective, we  selected a nongeneralizable sample of 8 IGSAs chosen in rough  proportion to the number of IGSAs implemented by each military service  (see app. I for further details on the selected IGSAs). We chose IGSAs  from among those the military services estimated would have the largest  financial benefits, that had been in place long enough to provide  information about actual costs and implementation, and that reflected a  range of installation services. We reviewed the business case analysis  and supporting documents for each IGSA in our sample, and included  both cost savings and cost avoidances in our evaluation of financial  benefits.", "For IGSAs in our sample that the military services expected would result  in cost savings, we assessed the reliability of the installation\u2019s cost  savings estimates by comparing the estimated cost of the least expensive  non-IGSA alternative identified as feasible in the business case analysis  with the prior contract or historical cost data upon which the estimate was  based. We found the estimated cost of these non-IGSA alternatives to be  sufficiently reliable to estimate realized financial benefits. For IGSAs  expecting cost savings, we estimated the realized financial benefits of  each by comparing the installation\u2019s estimated cost of the non-IGSA  alternative with the actual first-year (or as many months as available) cost  of the implemented IGSA, derived from our analysis of the local  government\u2019s monthly IGSA invoices. For IGSAs in our sample that the  military services expected to result in cost avoidance, we found that the  installations\u2019 estimates included costs that we could not verify\u2014such as  the cost of repairing or replacing facilities\u2014and thus we could not  estimate total realized financial benefits for these agreements. Finally, we  reviewed IGSA documentation and interviewed installation and local  government officials about any nonfinancial benefits realized from  implemented IGSAs, including those in our sample and other  implemented IGSAs. We also evaluated the services\u2019 IGSA policies and  guidance to identify any documented processes the services have for  monitoring the benefits, if any, realized from implemented IGSAs. We  assessed these policies and processes against federal internal control  standards related to documenting policies used to collect and utilize  quality information for evaluating program performance.", "For our second objective, to identify military service support to  installations on implementing IGSAs and any actions taken to monitor  whether installations have evaluated opportunities to use IGSAs, we  reviewed military services\u2019 IGSA policies and procedures and interviewed headquarters and installation officials. We evaluated the services\u2019 actions  against the services\u2019 IGSA policies and federal internal control standards.  Those standards state that management should design control activities  to achieve objectives, including monitoring actual performance and  comparing it with established goals and objectives, and implement those  control activities through policies.", "For our third objective, we interviewed officials from the military services,  the installations and local governments for our 8 selected IGSAs, and  installations that developed IGSA proposals that were not approved, to  obtain information on any challenges related to using IGSAs and any  actions to address them. Based on that information, we also reviewed  statutory requirements for IGSAs to identify any restrictions or limitations  on the military services\u2019 use of IGSAs and analyzed IGSA proposals that  were not approved. We provide a list of organizations we met with during  this review in appendix II.", "We conducted this performance audit from September 2017 to October  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "Statutory Provisions for Entering into IGSAs", "paragraphs": ["The IGSA statute (10 U.S.C. \u00a7 2679) authorizes such agreements based  on a determination that the agreement will serve the best interests of the  department by creating efficiencies or economies of scale, including by  reducing costs, or by enhancing mission effectiveness. The law also  states that IGSAs are not subject to other provisions of law governing the  award of federal government contracts for goods and services. In  addition, IGSAs may be entered into on a sole source basis with a state  or local government and may use wage rates normally paid by that state  or local government.", "At the same time, there are limitations on the use of IGSAs. Specifically,  any installation services obtained through an IGSA must already be  provided by the state or local government for its own use, and any  contract awarded by the federal government or by a state or local  government pursuant to an IGSA must be awarded competitively. In  addition, IGSAs cannot be used to circumvent the requirements of Office  of Management and Budget Circular A-76, which governs competitions to  determine whether commercial activities should be performed by  government employees or by private contractors. Finally, IGSAs are  statutorily limited to a term of no more than 10 years, but the statute does  not preclude their renewal after the initial agreement period ends."], "subsections": []}, {"section_title": "Process for Developing, Approving, and Implementing IGSAs", "paragraphs": ["The military services each have a process for developing, approving, and  implementing IGSAs. These processes generally begin with meetings  between installation and state or local government officials to discuss  services the installation requires that the state or local government could  provide. If there is agreement that an IGSA could be beneficial to both  parties, installation officials put together an IGSA proposal for obtaining  the service from the state or local government.", "Proposals are required to include a business case analysis showing the  proposed IGSA is expected to provide a financial or nonfinancial benefit.  For example, Army Regulation 5-9, Installation Agreements, states that  an Army installation must submit a proposal and a cost benefit analysis  that demonstrates the IGSA will bring financial benefits. Similarly, a  memorandum from the Assistant Secretary of the Navy for Energy,  Installations, and Environment requires that Navy and Marine Corps  installations include material describing the IGSA\u2019s risks and benefits,  including financial benefits and enhanced mission effectiveness. Air  Force guidance requires that IGSA proposals include a business case  analysis and meet the purpose of 10 U.S.C. \u00a7 2679 by either bringing  financial benefits or enhancing mission effectiveness.", "Once an IGSA proposal is complete, installation commanders either  approve it or submit it to a higher command for review and approval,  according to certain dollar thresholds. Figure 1 shows the office within  each military service that reviews the proposed IGSA for approval, based  on the dollar thresholds.", "Once a proposed IGSA is approved, installation officials draft the  agreement in coordination with state or local government officials. When  finalized, representatives of the military service and the state or local  government sign the agreement. For Army, Navy, and Marine Corps  IGSAs, the installation commander has authority to sign the IGSA, while  Air Force IGSAs must be signed by an installation contracting officer. The  IGSA is then implemented."], "subsections": []}]}, {"section_title": "Military Services Have Benefitted from Selected IGSAs but Are Not Fully Monitoring the Benefits of Implemented IGSAs", "paragraphs": [], "subsections": [{"section_title": "Military Services Have Realized Financial and Nonfinancial Benefits from Selected IGSAs", "paragraphs": ["Our analysis of a sample of 8 implemented IGSAs, and interviews with  officials about these and other IGSAs, found that the military services  have realized financial (i.e., cost savings and cost avoidances) and  nonfinancial (e.g., enhanced mission effectiveness) benefits from these  agreements."], "subsections": [{"section_title": "Cost Savings", "paragraphs": ["In 5 of the 8 IGSAs in our sample, we found that the actual cost of each  IGSA during its first year of implementation was lower than the expected  cost of obtaining the installation service through an alternative contract,  as shown in the respective business case analysis for each IGSA. Table  1 provides each installation\u2019s estimated cost for obtaining the installation  service through an alternative contract and the estimated cost for  obtaining the installation service through an IGSA; the actual cost paid by  the installation to the local government for the first year of each IGSA,  based on our analysis of monthly invoices; and our calculation of the  estimated realized cost savings achieved from using the IGSA, relative to  the alternative.", "Overall, we found that the estimated cost savings realized by these 5  IGSAs totaled about $2.4 million during the first year of implementation.  For example:", "Fort Polk realized an estimated $1.9 million in cost savings by  implementing an IGSA for waste removal with its local government.  Specifically, installation officials estimated that a private contract  would have cost the installation about $4.5 million from June 2017  through May 2018, while we found that the implemented IGSA cost  about $2.6 million for the same period.", "Moody Air Force Base realized an estimated $270,000 in savings in  fiscal year 2017 by implementing an IGSA for water and wastewater  treatment. In the IGSA\u2019s business case analysis, officials estimated  that continuing to obtain this service from their existing contractor  would have cost about $642,000, while the implemented IGSA cost  was about $372,000, according to our analysis.", "Marine Corps Logistics Base Barstow realized an estimated $68,000  in cost savings during the first 9 months of its IGSA for water testing  and analysis with the local government. Specifically, installation  officials estimated that renewing the previous contract would have  cost about $153,000 for 1 year, or about $115,000 for 9 months, while  we found that the actual cost under the implemented IGSA was about  $47,000 for 9 months."], "subsections": []}, {"section_title": "Cost Avoidances", "paragraphs": ["The other 3 IGSAs in our sample resulted in cost avoidances, according  to installation officials. First, officials at Fort Sill, Oklahoma, told us that  the Army Medical Command and the Army Public Health Command had  previously provided stray animal control without cost to the installation.  When this arrangement ended, Fort Sill had to find an alternative.  Officials stated that implementing an IGSA with the city of Lawton,  Oklahoma, allowed the installation to avoid the higher costs of a private  contractor or of renovating facilities and hiring civilians to perform these  duties. Second, Fort Bragg, North Carolina, implemented an IGSA for  stray animal control with Cumberland County, North Carolina, that,  according to its proposal documentation, allowed the installation to avoid  the cost of replacing its stray animal control facility, which was inadequate  and sub-standard. Finally, after 2 years with no contract in place, Fort  Bragg implemented an IGSA with the city of Fayetteville, North Carolina,  for maintenance services at the Airborne and Special Operations  Museum that allowed the installation to avoid the overhead costs and fee  involved in securing the services through a contract with the Army Corps  of Engineers."], "subsections": []}, {"section_title": "Nonfinancial Benefits", "paragraphs": ["According to officials from all four services, achieving financial benefits  has been a primary purpose for utilizing IGSAs, but IGSAs can also  provide nonfinancial benefits\u2014such as enhanced mission effectiveness  and readiness, reduced administrative time, and greater flexibility.", "Enhanced mission effectiveness and readiness. Military service  officials cited examples of IGSAs that led to enhanced mission  effectiveness and readiness. For example, according to its IGSA  proposal package, Fort Polk was using military personnel to conduct  grounds maintenance, which was contrary to the Army\u2019s guidance that  military personnel, while at Fort Polk, should be training for their  mission. Officials told us that once the IGSA was implemented  military personnel were no longer assigned to grounds maintenance  duty, thus potentially enhancing mission effectiveness. In addition, an  official in the Army Partnerships Office told us that the IGSA at the  Presidio of Monterey, California, for various installation services  enabled the installation to obtain a work order for flood damage to a  satellite component within a matter of minutes. Direct contact between  installation officials and the local government, he stated, provides a  quicker response time and has a significant impact on installation  readiness.", "Reduced administrative time and greater flexibility. Installation  officials stated that IGSAs had reduced the time personnel spent on  managing the services being provided. For example, Marine Corps  Logistics Base Barstow officials stated that the installation\u2019s IGSA with  the city of Barstow, California, for water testing and analysis had  eliminated the time that installation personnel had to use to manage  the previous contract. At the time of our review, they were considering  further IGSAs, such as one for tree-trimming, that they said would  likely not bring cost savings, but that would provide flexibility and ease  of managing due to reduced administrative time and regular  communication with city officials. Similarly, officials at Fort Polk and  Fort Bragg stated that managing their IGSAs is easier than managing  other contracts for services, as they can make any needed changes to  the IGSA by working directly with the local government.", "Other benefits. Installation officials also cited benefits such as  improved relations with the local government, better quality of service,  and the local community\u2019s stronger commitment to working with the  installation, compared with contractors. For example, Moody Air Force  Base officials noted that the installation\u2019s IGSA for water and  wastewater treatment has been positive because the local  government cares about the overall good of the installation, due to its  importance to the community."], "subsections": []}]}, {"section_title": "Military Services Are Not Fully Monitoring the Benefits of Implemented IGSAs", "paragraphs": ["As part of the approval process for IGSAs, the military services collect  information on IGSAs\u2019 potential expected benefits, which are estimated  prior to IGSA implementation. However, once IGSAs are implemented,  the services do not fully monitor whether these IGSAs are resulting in  actual financial and nonfinancial benefits. Standards for Internal Control in  the Federal Government states that management should design  processes, and document them in policy, to obtain relevant, accurate  information that it can use to evaluate the entity\u2019s performance in  achieving key objectives and make informed decisions about any needed  changes. The standards also state that management communicates  such information throughout the entity to support achieving those key  objectives.", "Following are descriptions of the status of each military service\u2019s  approach and plans for monitoring the benefits of implemented IGSAs.", "Army headquarters collects data on the expected financial benefits of  IGSAs, based on information provided in the IGSAs\u2019 business case  analyses. These data reflect the financial benefits that the installations  expect to achieve by using IGSAs, which are estimated prior to IGSA  implementation. Army headquarters does not, however, currently  monitor whether financial or nonfinancial benefits are actually realized  from IGSAs after implementation. Army officials told us in May 2018  that they were drafting guidance that likely will assign responsibility for  tracking both the realized financial and nonfinancial benefits of IGSAs,  on an annual basis, to the Army\u2019s four land-holding commands.  They noted, however, that they have not yet decided what specifically  to track or finalized a process for monitoring IGSA benefits and  evaluating program performance, but stated that their goal was to  have a process in place by the end of 2018.", "Navy headquarters collected information on the expected benefits of  the IGSAs it has thus far approved. In addition, in May 2018, the Navy  Installations Command chose 12 high-priority IGSA opportunities  identified by its regional commands to focus on for implementation  and monitoring. According to the Navy Installations Command  official who oversees the Navy\u2019s IGSA efforts, this effort is in the very  early stages. The official also stated that the expected financial  benefits for these 12 will likely be tracked by the Navy Installations  Command, but any monitoring of realized financial benefits after the  IGSAs are implemented would be left to the regional commands. On  the other hand, the official stated that nonfinancial benefits are very  subjective and the Navy has not yet determined what information will  be collected.", "Marine Corps headquarters officials stated that they collect  information on the expected benefits of IGSAs, but they are not  currently monitoring the actual performance of implemented IGSAs  because few are in place and existing IGSAs are less than 2 years  old. They added that the Marine Corps plans to establish a process  to track and analyze the realized financial benefits of IGSAs, but the  headquarters official with lead responsibility for IGSAs did not provide  a timeline for doing so. He added that the process will likely task the  regional installation commands with tracking cost savings, with  headquarters officials collecting and maintaining consolidated regional  data. In addition, he did not indicate that the Marine Corps plans to  monitor whether nonfinancial benefits are realized by implemented  IGSAs.", "In addition to collecting data on the expected benefits of IGSAs prior  to their implementation, Air Force headquarters has taken some steps  to monitor the benefits realized by the 8 implemented IGSAs it had in  place as of July 2018. Specifically, Air Force Community Partnership  Program officials have taken the initiative to request information at the  beginning of each fiscal year from Air Force installations on any actual  financial benefits realized from their implemented IGSAs, including  cost savings and cost avoidance. However, officials stated that  submitting information is voluntary for installations, and some  installations do not always provide timely information. For example,  two installations with IGSAs in place beginning in fiscal year 2015 did  not provide information in response to the fiscal years 2016 and 2017  data requests. Officials with the partnerships office also noted that  they plan to monitor nonfinancial benefits to use for lessons learned  and program talking points, but that information on any nonfinancial  benefits from implemented IGSAs was currently being collected  anecdotally.", "The military services generally are not monitoring whether all of their  IGSAs are bringing financial and nonfinancial benefits because they have  not established formal processes to obtain this information and  documented them in their policies or procedures, as called for in  Standards for Internal Control in the Federal Government. Specifically,  the Army, Navy, and Marine Corps IGSA policies do not include  processes for monitoring the degree to which expected benefits from  IGSAs were actually realized after implementation. The military services  also differ in regard to the types of benefits they plan to monitor in the  future. In addition, the informal process used by the Air Force to collect  some data on realized IGSA benefits is not documented in Air Force  policy or procedures.", "Officials from all four services stated that they are still in the early stages  of developing their IGSA processes. In addition, officials from the Army  and the Air Force told us that they believed that it may be premature to  monitor IGSA performance because the authorization to use IGSAs has  only been in use for 3 years and only a limited number of IGSAs have  been approved. We recognize the use of IGSAs is relatively new, but  developing and documenting formal processes to collect and monitor  information on the benefits realized through implemented IGSAs now, as  the services continue to refine their IGSA programs, could assist the  services in at least two ways. First, it would provide the services with  information they could use to assess the performance of IGSAs in  comparison with the expected benefits outlined in the IGSAs\u2019 business  case analyses. An accurate assessment of actual performance would  provide decision makers with important context when reviewing individual  IGSAs for possible renewal, and could inform the services\u2019 decisions on  developing and implementing similar agreements in other locations.  Second, developing formal processes to monitor the performance of  implemented IGSAs would provide information that the military services  could communicate internally to their installations as part of their outreach  efforts to increase awareness of and, when beneficial, expand the use of  IGSAs as a means of achieving financial benefits or enhancing mission  effectiveness."], "subsections": []}]}, {"section_title": "Military Services Have Supported IGSA Use but Not Fully Monitored Whether Installations Are Evaluating IGSA Opportunities", "paragraphs": [], "subsections": [{"section_title": "Military Services Have Developed Approaches for Supporting Installations\u2019 Use of IGSAs", "paragraphs": ["The military services have developed various approaches for supporting  their installations\u2019 use of IGSAs. These include issuing policies on the use  of IGSAs; issuing procedures and templates for IGSA development and  approval; and providing headquarters-level support, such as facilitating  meetings between installation and state and local government officials.  The following are descriptions of these approaches for supporting  installations\u2019 use of IGSAs.", "Policies. The services have issued IGSA policies that, among other  things, either direct their installations to evaluate opportunities for  using IGSAs to obtain installation services or to implement mutually  beneficial partnerships that include IGSAs. Army Installation  Management Command policy states that installations are to explore  opportunities to enter into IGSAs with state or local governments, and  it directs installations to review current, soon-to-expire installation  support contracts for possible transition to an IGSA. Similarly, Navy  Installations Command and Marine Corps Installations Command  policies direct regional commands and installations to investigate and  identify existing and potential services that could be provided by the  state or local governments surrounding their installations. While Air  Force policy does not specifically direct its installations to evaluate  opportunities for using IGSAs, it does direct Air Force installations to  implement mutually beneficial partnerships with their local  communities.", "Procedures and templates. Each of the military services has issued  procedures for its installations to follow in order to develop, obtain  approval for, and implement IGSAs. For example, the Marine Corps  has issued an IGSA handbook that provides information on the roles  and responsibilities of installation and headquarters officials in the  IGSA process. The handbook also outlines a process installations can  follow to develop an IGSA, which includes identifying a need that an  IGSA could address, meeting with potential state and local partners,  developing a draft and final IGSA, and signing and implementing the  IGSA.", "Additionally, the Army and the Air Force have provided templates of  required documents to help installations through the IGSA approval  process. For example, Army Installation Management Command\u2019s  IGSA procedures include templates and examples of documents  installations are to develop, such as a memorandum from the  installation commander describing the IGSA proposal; a business  case analysis that demonstrates the benefits of the proposed IGSA;  and the IGSA document to be signed by the installation and the state  or local government. Similar to the Army and the Air Force, one of the  Navy\u2019s regional commands has included templates along with their  region-specific IGSA procedures, and a Navy Installation Command  official told us that the Navy may adapt those procedures and  templates for Navy-wide use.", "Headquarters support. The Army and the Air Force have established  partnership offices within their headquarters that serve as resources  to support installations interested in using IGSAs. Support includes  facilitating meetings between installation and state and local  government officials to identify IGSA opportunities. For example, the  Army facilitated such meetings at Fort Polk in late 2016, during which  officials identified the IGSA opportunity between Fort Polk and Vernon  Parish, Louisiana, for waste removal that was implemented in June  2017. The Air Force partnership office also provides periodic training  on IGSAs and other topics, as well as a website with various  resources for installations to use in developing IGSAs. Marine Corps  Installations Command officials stated that they provide headquarters  support to installations for developing IGSAs\u2014to include facilitating  meetings between installation and local and state officials\u2014but as a  collateral duty to other responsibilities. Navy Installation Command  officials said that their regions and installations are to take the lead on  IGSA development but that they have offered assistance to regions,  as needed. Service officials added that representatives from each  military service meet quarterly to discuss their IGSA programs,  including best practices and lessons learned."], "subsections": []}, {"section_title": "Military Services Have Not Fully Monitored Whether Installations Are Evaluating Opportunities to Use IGSAs", "paragraphs": ["Officials from all four military services told us that they are not fully  monitoring whether all of the services\u2019 installations are complying with  their respective service policies to evaluate opportunities to use IGSAs to  reduce costs or enhance mission effectiveness.", "Army headquarters officials told us that their efforts to date have been  focused on raising awareness of IGSAs at installations and removing  any obstacles that prevent IGSAs from being approved. However,  Army officials stated that they currently do not monitor whether Army  installations are evaluating opportunities to use IGSAs, but they said  that installations may need greater encouragement from higher  headquarters to use IGSAs. Thus, Army officials said they are  planning to revise Army IGSA policy to include a process for obtaining  information from installation officials on whether they evaluated  expiring contracts for transition to IGSAs, as well as any reasons for  not doing so, and expect it to be complete by the end of 2018.  Additionally, Army officials said they plan to review installation  contracts for waste removal services to determine whether IGSAs can  be used instead, and that additional installation services will be  identified for review in the future.", "The Navy Installations Command has, as discussed previously,  collected a list of IGSA opportunities from the Navy\u2019s regional  commands and plans to focus on implementing 12 of them, according  to the Navy Installation Command official who oversees the Navy\u2019s  IGSA efforts. However, the official said that the Navy Installations  Command does not know how the regions identified these IGSA  opportunities, and it has not directed the Navy regions to monitor  whether each of their installations are evaluating opportunities to use  IGSAs going forward. The Navy official said that asking each  installation whether it identified any IGSA opportunities would be a fair  question in order to avoid missing any potential IGSA opportunities.", "Marine Corps Installation Command officials said they monitor the  efforts of installations that are already in the process of developing an  IGSA or that have already implemented an IGSA, but they do not  monitor the efforts of other installations in the Marine Corps to identify  IGSA opportunities. However, a Marine Corps Installation Command  official said that such monitoring could help expand the use of IGSAs  in the Marine Corps.", "Officials in the Air Force partnerships office told us that beginning in  fiscal year 2018 they had begun to monitor whether some of their  installations are evaluating IGSA opportunities for certain installation  services that are needed at all Air Force installations\u2014specifically,  waste management, grounds maintenance, and pavement  maintenance. Air Force officials stated that they are in the process of  contacting installations that have volunteered for the Air Force\u2019s  community partnership program\u2014which includes most, but not all,  installations for active-duty personnel\u2014to determine whether they  have evaluated IGSAs as a means to obtain these services.", "As of July 2018, the military services had approved 45 IGSAs at 33  installations (see app. I). Opportunities for more IGSAs\u2014and thus  opportunities to achieve more financial and nonfinancial benefits similar to  those we found in our analysis of 8 selected IGSAs\u2014may exist at the  services\u2019 installations, including their more than 160 active-duty  installations. Recognizing this potential, the services have directed their  installations to evaluate IGSA opportunities or to implement mutually  beneficial partnerships with local communities, which can include IGSAs.", "However, the military services do not know the extent to which their  installations are evaluating opportunities for IGSAs because service IGSA  policies and procedures do not include a process for monitoring whether  these evaluations are occurring or for obtaining information on the  outcome of any such evaluations. Standards for Internal Control in the  Federal Government states that management should design control  activities to achieve objectives, such as monitoring actual performance  and comparing it with established goals and objectives. Additionally,  those standards state that management should implement those control  activities by, for example, documenting responsibilities in policies.", "Army, Navy, and Marine Corps IGSA policies and procedures do not  include a process for monitoring whether installations are complying with  service directives to evaluate IGSA opportunities, or for obtaining  information on the outcome of those evaluations. Additionally, the process  that the Air Force is currently using to monitor whether some of its  installations are evaluating opportunities to use IGSAs for specific types  of installation services is not documented in Air Force policy or  procedures. As a result, it is uncertain whether these and any other  monitoring efforts will continue beyond the current leadership of the Air  Force partnerships office.", "Without establishing, implementing, and documenting a process to  monitor whether installations are evaluating opportunities to use IGSAs  and obtain information on the outcome of those evaluations, which may  also identify challenges that could hamper the ability to use IGSAs, the  military services do not fully know whether their installations are  conducting these evaluations, and thus may be missing opportunities to  reduce costs or enhance mission effectiveness."], "subsections": []}]}, {"section_title": "Military Services Have Identified Statutory, Review Time, and Financial Incentive Challenges to Using IGSAs", "paragraphs": [], "subsections": [{"section_title": "Statutory-Related Challenges to Using IGSAs", "paragraphs": ["Air Force and Army officials identified instances in which they did not  implement an IGSA because of provisions in the IGSA statute on the term  limit for IGSAs\u2014which was originally 5 years and is currently 10 years\u2014 and on the prohibition against contracting for services that are designated  for federal civilians to provide.", "Term limits. Buckley Air Force Base, Colorado, and Fairchild Air  Force Base, Washington, did not use IGSAs to obtain firing range  services because of the IGSA term limit, according to Air Force  headquarters and installation officials. In both cases, the  installations were considering using IGSAs in which local  governments would construct new firing ranges that would be shared  by the installation and those local governments. Air Force officials told  us that in each case the local governments planned to fund the new  construction costs with municipal bonds; however, the repayment  periods for those bonds would have been longer than the IGSA term  limit, and thus the Air Force would not have been able to sign an  IGSA that would have covered the entire term of the repayment  periods. For example, an official at Fairchild Air Force Base told us  that the local government would not sign an IGSA with a term limit of  fewer than 20 years because the local government wants to ensure  they receive sufficient funding to repay their bond.", "As a result, that official from Fairchild Air Force Base told us that the  Air Force has continued to use its existing firing range for training, but  it needs to be replaced because of ventilation problems and  limitations on the types of weapons that can be fired at the range. At  Buckley Air Force Base, an official told us that the installation received  military construction appropriation funding in fiscal year 2017 to build  a new firing range at a cost of $10.5 million\u2014approximately $2 million  more than the estimated cost of the IGSA. Air Force officials added  that they had discussed increasing the IGSA term limit with Members  of Congress.", "Prohibition against contracting for services designated for  federal civilians. According to Army officials, two Army installations\u2014 Aberdeen Proving Ground, Maryland, and Fort Leonard Wood,  Missouri\u2014decided not to use IGSAs for grounds maintenance  because of legal concerns regarding the IGSA statute\u2019s prohibition on  using IGSAs to circumvent the requirements of Office of Management  and Budget Circular A-76 regarding public-private competitions.  According to those requirements, public-private competitions must be  performed to determine if government personnel should perform  commercial activities that are required by an agency. Further, 10  U.S.C. \u00a7 2461 states that no function of DOD that is performed by  civilian employees may be converted to performance by a contractor  unless based on a public-private competition that follows a detailed  list of requirements under that statute. Currently, however, DOD is  prohibited from conducting such competitions.", "Army officials told us that Aberdeen Proving Ground submitted an  IGSA proposal in 2016 for grounds maintenance that they expected to  result in a cost savings of approximately $1 million annually. However,  those services had previously been provided by temporary Army  civilian employees. Because of this and based on the Army\u2019s  interpretation of the IGSA statute, Army officials said the IGSA  proposal was not approved. Additionally, Army officials told us that  Fort Leonard Wood also considered using an IGSA for grounds  maintenance services in 2017 because it had unfilled civilian positions  and was using military personnel instead, which took those personnel  away from their primary mission. However, officials said that the  installation did not submit an IGSA proposal because officials did not  think it would be approved, due to the existing civilian positions.", "Army officials told us they worked with the Office of the Secretary  Defense to try to address some of the legal concerns within the Army  regarding these types of IGSA proposals. Specifically, language was  included in a May 2018 memorandum from the Assistant Secretary of  Defense for Manpower and Reserve Affairs stating that even though  DOD is prohibited from conducting Circular A-76 public-private  competitions, this does not preclude the use of an IGSA as long as  the IGSA is not used to circumvent Circular A-76 requirements.  Although the memorandum does not provide any further details, an  official with the Army Partnerships Office stated that the memorandum  may provide more support for the use of IGSAs during internal legal  reviews of IGSA proposals and could result in additional IGSAs being  approved. If not, Army officials plan to communicate to Congress the  effects of the current language in the IGSA statute and make any  appropriate recommendations to address those effects."], "subsections": []}, {"section_title": "Review Time-Related Challenges to Using IGSAs", "paragraphs": ["Officials from each of the 6 installations we met with during our review  told us that the length of time to review and approve IGSAs was a  challenge, in part due to the multiple levels of review required before an  IGSA is approved. For example:", "Marine Corps Logistics Base Barstow officials told us that their IGSA  proposal for water testing and analysis took approximately 1 year to  be reviewed and approved\u2014first at the installation level, then at  Marine Corps Installation Command-West (a regional command), and  finally at Marine Corps Installation Command headquarters. As a  result, officials said they had to continue to pay their contractor for an  additional year to perform those services, which they estimate cost  them approximately $80,000 more than if the IGSA had been  approved and in place. The officials added that IGSAs are a new way  to obtain installation services within the Marine Corps, and this IGSA  was the Marine Corps\u2019 first, which likely contributed to the long review  time.", "In July 2017, Fort Polk submitted an IGSA proposal for both facility  maintenance and repair services and also grounds maintenance  services, which would be provided by a local government. However,  Fort Polk officials said that approval of the proposal was delayed at  Army headquarters because there was concern by those  headquarters officials about replacing the existing AbilityOne  contractor at Fort Polk, which was providing facility maintenance and  repair services for the installation. As a result, Fort Polk re-submitted  an IGSA proposal only for the grounds maintenance services, and this  narrower IGSA was approved in March 2018\u20148 months after the  original IGSA proposal was submitted.", "The military services have delegated responsibility to approve IGSAs to  lower levels, which could decrease the review and approval time for  IGSAs. For example, in January 2018 the Air Force delegated approval  authority to installation commanders for IGSAs that cost less than $15  million over a 10-year time frame\u2014with the exception of any IGSAs that  obtain installation services currently obtained from an AbilityOne  contractor."], "subsections": []}, {"section_title": "Financial Incentive- Related Challenges to Using IGSAs", "paragraphs": ["An installation may lack a financial incentive to use IGSAs because that  installation\u2019s military service may choose to use any realized cost savings  for service-level priorities elsewhere. As discussed earlier, we found that  5 installations in our sample realized cost savings from their implemented  IGSAs. Three of those installations\u2014Fort Polk, Luke Air Force Base, and  Marine Corps Logistics Base Barstow\u2014were able to retain those savings  to apply to other installation needs that were not funded, according to  installation officials. For example, Fort Polk officials stated that they were  able to reallocate savings from the waste removal IGSA to repair landing  strips at the installation, and Luke Air Force Base officials told us that the  ability to retain IGSA cost savings was an incentive for them to put in the  effort to implement an IGSA. Officials at the other 2 installations with  IGSA cost savings\u2014Moody Air Force Base and Fort Bragg\u2014told us that  those savings were retained by the installations\u2019 higher headquarters.", "The military services are at various stages in deciding how IGSA cost  savings are to be used, according to service officials. Air Force officials  said they are considering letting their installations retain IGSA cost  savings to incentivize the use of IGSAs. Army officials stated that they do  not yet have a policy on using IGSA savings, but their commands are  responsible for contributing resources to supporting readiness, which may  include the use of IGSA cost savings. Marine Corps officials similarly told  us that they have not yet developed a policy, but added that IGSA cost  savings will be retained within Marine Corps Installation Command.  Finally, Navy officials told us that they have not yet considered a policy  that would allow installations to retain any cost savings, although they  added that Navy Installations Command does not intend to recoup any  IGSA cost savings achieved by an installation or a region."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["DOD budgets about $25 billion annually to operate and support its  installations, and our analysis shows that IGSAs have provided  opportunities for the military services to reduce some of those costs.  However, the services could improve the visibility they have over the  performance of IGSAs after implementation. Specifically, developing  processes to monitor any benefits being realized from implemented  IGSAs and documenting these processes in policies or procedures would  enhance the military services\u2019 ability to evaluate the performance of these  agreements and provide lessons learned that could inform their efforts to  encourage greater use of IGSAs. In addition, the military services have  already taken steps to direct and facilitate the use of IGSAs. However,  without a process to monitor whether their installations are evaluating  opportunities to use IGSAs and obtain explanations of the outcomes of  such evaluations, the military services do not have visibility over whether  their installations are considering the use of IGSAs, as directed in  guidance. Consequently, the services may be missing opportunities to  reduce costs or enhance mission effectiveness. Furthermore, by  documenting their processes in policies or procedures, the military  services will increase the likelihood that such oversight will endure  beyond the initiatives of current leadership and officials. Taking these  actions would support the military services\u2019 oversight of IGSAs and could  potentially expand interest in and the use of IGSAs."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following eight recommendations to DOD:  The Secretary of the Army should (a) finalize and implement a process to  collect and monitor information on the extent to which all implemented  IGSAs have resulted in financial and nonfinancial benefits and (b)  complete documentation of that process in Army IGSA policy or  procedures. (Recommendation 1)", "The Secretary of the Navy should (a) establish and implement a process  to collect and monitor information on the extent to which all implemented  IGSAs have resulted in financial and nonfinancial benefits and (b)  document that process in Navy IGSA policy or procedures.  (Recommendation 2)", "The Commandant of the Marine Corps should (a) establish and  implement a process to collect and monitor information on the extent to  which all implemented IGSAs have resulted in financial and nonfinancial  benefits and (b) document that process in Marine Corps IGSA policy or  procedures. (Recommendation 3)", "The Secretary of the Air Force should (a) establish and implement a  formal process to collect and monitor information on the extent to which  all implemented IGSAs have resulted in financial and nonfinancial  benefits and (b) document that process in Air Force IGSA policy or  procedures. (Recommendation 4)", "The Secretary of the Army should (a) finalize and implement a process to  monitor whether Army installations are evaluating opportunities for using  IGSAs and to obtain explanations from installations on the outcome of  their evaluations and (b) complete documentation of that process in Army  IGSA policy or procedures. (Recommendation 5)", "The Secretary of the Navy should (a) establish and implement a process  to monitor whether Navy installations are evaluating opportunities for  using IGSAs and to obtain explanations from installations on the outcome  of their evaluations and (b) document that process in Navy IGSA policy or  procedures. (Recommendation 6)", "The Commandant of the Marine Corps should (a) establish and  implement a process to monitor whether Marine Corps installations are  evaluating opportunities for using IGSAs and to obtain explanations from  installations on the outcome of their evaluations and (b) document that  process in Marine Corps IGSA policy or procedures. (Recommendation 7)", "The Secretary of the Air Force should document in Air Force IGSA policy  or procedures its process for monitoring whether Air Force installations  are evaluating opportunities for using IGSAs. (Recommendation 8)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD for comment. DOD provided  written comments, which are reproduced in appendix III.", "DOD concurred with six recommendations and non-concurred with two  recommendations, but DOD\u2019s response indicates that the department  plans to implement all of the actions we recommend.", "DOD concurred with our six recommendations to the Army, the Navy, and  the Air Force. DOD did not concur with our two recommendations to the  Marine Corps, stating that the Marine Corps is one of two military services  within the Department of the Navy and that the recommendations are  unnecessary. While we understand that the Marine Corps is within the  Department of the Navy, we made recommendations to the Marine Corps  because we learned during the course of our review that the Marine  Corps had developed service-specific IGSA processes. For our two  recommendations to the Navy, DOD stated that the Deputy Assistant  Secretary of the Navy (Installations and Facilities) will issue policy by  November 30, 2018, directing the Chief of Naval Operations and the  Commandant of the Marine Corps to implement our recommendations.  We believe that implementing these actions will meet the intent of our  recommendations to the Marine Corps.", "We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, the  Navy, and the Air Force; and the Commandant of the Marine Corps. 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) 512-4523 or leporeb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  IV."], "subsections": []}]}, {"section_title": "Appendix I: Military Services\u2019 Intergovernmental Support Agreements Approved as of July 2018", "paragraphs": ["Table 2 shows the military service, installation, state or local government,  and type of installation service for each of the 45 intergovernmental  support agreements that have been approved within the military services  as of July 25, 2018."], "subsections": []}, {"section_title": "Appendix II: Organizations We Met with During This Review", "paragraphs": ["We met with officials from the following offices, installations, and local  governments during this review. Unless otherwise specified, these  organizations are located in or near Washington, D.C."], "subsections": []}, {"section_title": "Appendix III: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix IV: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, individuals who made key  contributions to this report include Maria Storts (Assistant Director),  Whitney Allen, Vincent Buquicchio, Michele Fejfar, Mae Jones, Amie  Lesser, Geoffrey Peck, Ophelia Robinson, Jack Wang, and Erik Wilkins- McKee."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-633", "url": "https://www.gao.gov/products/GAO-18-633", "title": "Reemployment Services: DOL Could Better Support States in Targeting Unemployment Insurance Claimants for Services", "published_date": "2018-09-04T00:00:00", "released_date": "2018-09-05T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["In 2017, the UI program provided about $30 billion in temporary income support to 5.7 million claimants who became unemployed through no fault of their own. The federal government provides various resources states can use to help UI claimants achieve reemployment. GAO was asked to review how states identify and serve claimants who need such assistance.", "This report examines, among other things, (1) what key federal programs and approaches states used to help UI claimants return to work, and (2) how states used profiling systems to identify claimants who are most likely to exhaust their benefits and need assistance returning to work. GAO reviewed relevant federal laws and guidance; analyzed the most recent available national data on UI claimant participation in key workforce programs, from July 2015 through June 2016; interviewed officials from DOL, six states with key reemployment practices, and three additional states with a variety of profiling practices; and reviewed national studies examining state profiling systems."]}, {"section_title": "What GAO Found", "paragraphs": ["Nationwide, four key federally funded workforce programs helped states provide reemployment services, such as career counseling and job search assistance, to millions of unemployment insurance (UI) claimants, according to data from July 2015 through June 2016, the most recent period available (see table). The six selected states GAO reviewed in-depth reported using these key programs to support their efforts to help claimants return to work. Selected state officials described skills assessments, job search assistance, and interview and resume workshops as the types of services they use to connect UI claimants to jobs quickly. Officials also described varying service delivery approaches, with some of the selected states emphasizing the use of online services, while others relied to a greater extent on in-person services.", "According to a 2014 national questionnaire to states, most states used a statistical system to identify UI claimants who are most likely to exhaust their benefits and need assistance returning to work (known as profiling). Six of the nine states GAO reviewed used statistical systems and three used non-statistical approaches. GAO identified several concerns with the Department of Labor's (DOL) oversight and support of state UI profiling systems:", "Although a 2007 DOL-commissioned study found that some statistical systems may not perform well, DOL has not collected the information needed to identify states at risk of poor profiling system performance.", "Some selected states have faced technical challenges in implementing and updating their statistical systems. However, DOL does not have a process for identifying and providing technical assistance to states at risk of poor system performance or those facing technical challenges. Instead, it only provides assistance to those states that request it.", "While states have latitude to choose their preferred profiling approach, DOL's 1994 guidance encourages all states to use statistical systems. Because DOL has not updated this guidance to ensure that it clearly communicates all available profiling system options, some states may not be aware that they have greater flexibility in choosing an option that best suits their needs."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOL (1) systematically collect sufficient information to identify states at risk of poor profiling system performance, (2) develop a process for providing risk-based technical assistance to such states, and (3) update guidance to clarify state profiling options. DOL agreed with these recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["The federal-state unemployment insurance (UI) program provides  temporary income support to eligible workers who lose their jobs through  no fault of their own. Overseen by the Department of Labor (DOL) and  administered by states, the UI program paid approximately $30 billion in  benefits to 5.7 million claimants in 2017. To receive benefits, UI claimants  generally must be able to work, be available to work, and seek work  actively. Claimants may access reemployment services from the public  workforce system\u2014a network of federal, state, and local partners that  administer and carry out an array of federal employment and training  programs\u2014to help them return to work. These reemployment services,  such as job search assistance and career counseling, are available at  one-stop centers, also known as American Job Centers. However,  technology has changed how UI claimants interact with the public  workforce system. Many claimants now apply for UI benefits remotely,  and may not visit one-stop centers to obtain reemployment services.", "Policymakers have encouraged states to strengthen the connection  between the UI program and the public workforce system in a number of  ways. For instance, the Workforce Innovation and Opportunity Act  (WIOA) requires local workforce development boards to include in their  plans strategies for strengthening linkages between the UI program and  one-stop centers. In 2018, Congress also authorized up to approximately  $3.9 billion in funding over the next 10 years for the Reemployment  Services and Eligibility Assessment (RESEA) grant program.  Participating states use a profiling system to identify UI claimants who are  most likely to exhaust their benefits, meaning that they receive benefits  for the maximum time period for which the state pays benefits. The state  then selects these claimants, as well as certain military veterans, to  receive services offered through the program. These services include a  one-stop center orientation and meeting with a caseworker, who  assesses each claimant\u2019s eligibility for UI benefits and helps the claimant  develop an individualized reemployment plan, among other things.", "You asked us to review how states leverage resources from the public  workforce system to meet UI claimants\u2019 reemployment needs. This report  (1) describes some key approaches selected states use to support UI  claimants who need assistance returning to work, (2) describes what is  known about how often UI claimants receive services through key  federally funded workforce programs and how states fund reemployment  services for UI claimants, and (3) examines what is known about how  states use profiling systems to identify UI claimants who are most likely to  exhaust their benefits and need assistance returning to work, and how  DOL supports and monitors these efforts.", "First, to identify some key approaches states use to support UI claimants  who need assistance returning to work, we reviewed relevant reports and  program evaluations, and interviewed officials from DOL, DOL\u2019s Office of  Inspector General, and the National Association of State Workforce  Agencies (NASWA). Using information from these sources, we selected  six states cited in research or by stakeholders as having at least one  noteworthy reemployment practice, such as an effective or well-designed  reemployment program or commitment to using technology to improve  service delivery, as well as other features of interest, such as use of state  funds to help provide reemployment services. We visited four states  (Massachusetts, Nebraska, Nevada, and Utah), where we interviewed  state and local workforce officials, and had phone interviews with state  workforce agency officials in two states (Texas and Wisconsin). Our  selected states provided illustrative examples of the approaches they take  to meet the reemployment needs of UI claimants; these examples are not  representative of state practices nationwide.", "Second, to describe how often UI claimants receive services through key  federally funded workforce programs, we interviewed DOL officials to  identify which programs states typically use to serve UI claimants, and  analyzed national data on UI claimant participation in those programs\u2014 the DOL-administered Wagner-Peyser Employment Service, RESEA, the  WIOA Adult program, and the WIOA Dislocated Worker program\u2014for  program year 2015 (July 2015 through June 2016), the most recent year  available at the time of our review. We assessed the reliability of these  data by reviewing data system documentation, conducting data checks,  and interviewing knowledgeable DOL and selected state officials. We  found the data sufficiently reliable to describe how many UI claimants  states report serving through key federally funded workforce programs,  and have included caveats regarding differences in state reporting  practices and other limitations, as appropriate. To describe how states  fund reemployment services for UI claimants, we analyzed summary  reemployment program expenditure data provided by five of the six  selected states for state fiscal year 2017, the most recent year available  at the time of our review. We assessed the reliability of these data by  interviewing knowledgeable state officials, and found them reliable for our  purposes.", "Third, to obtain national information on how states use profiling systems  to identify UI claimants who are most likely to exhaust their benefits and  need assistance returning to work, we reviewed a 2007 national study of  state profiling systems and analyzed state responses to a 2014 follow-up  profiling system questionnaire. To obtain more in-depth information on  the practices of individual states, we interviewed officials from our six  selected states and three additional states (Connecticut, Kentucky, and  Maryland), selected because they worked with external partners to  develop their profiling systems or had systems DOL officials identified as  innovative. Where available, we also reviewed documentation related to  selected states\u2019 profiling systems. To obtain information about how DOL  supports and monitors states\u2019 use of profiling systems, we interviewed  DOL officials and reviewed DOL guidance and technical assistance  materials. Lastly, we reviewed relevant federal laws and DOL guidance,  and assessed DOL\u2019s efforts against standards for internal control in the  federal government.", "We conducted this performance audit from December 2016 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Enacted in July 2014, WIOA emphasizes the alignment and integration of  workforce programs, primarily administered by the departments of Labor  and Education, that provide education and training services to help job  seekers obtain employment and advance in the labor market. WIOA also  provides for state workforce development boards to help oversee a  system of local workforce development boards that, in turn, deliver  services through a network of one-stop centers. In its guidance on  implementing WIOA, DOL states that this network is a shared  responsibility of states, local boards, and other partners, including one- stop programs. It also encourages integration of services across one-stop  programs to promote seamless service delivery.", "The public workforce system is available to all job seekers, including UI  claimants, and through it claimants may access reemployment services  from a variety of federally funded workforce programs. At one-stop  centers, states make services such as job search assistance and career  counseling available to UI claimants and other job seekers using  programs including the DOL-administered Wagner-Peyser Employment  Service, the WIOA Adult program, and the WIOA Dislocated Worker  program. The WIOA Adult program and WIOA Dislocated Worker  program may also be used to provide training (see table 1).", "UI claimants may also access services from other programs offered  through the public workforce system. One such program, RESEA, is  designated for the provision of reemployment services to UI claimants  specifically. Established as a discretionary grant program in 2015,  RESEA makes funding available to states for reemployment services to  UI claimants identified by their state as most likely to exhaust their  benefits, as well as veterans who receive UI benefits through the  Unemployment Compensation for Ex-Servicemembers (UCX) program.  During fiscal year 2017, 49 states and the District of Columbia  participated in RESEA, and DOL made $115 million in grant funds  available through the program. In February 2018, legislation was  enacted that established RESEA as a formula grant program with  incentive payments for states meeting or exceeding outcome goals, and  authorized up to approximately $3.9 billion in funding for the program  through fiscal year 2027. In July 2018, DOL announced that it was  developing an implementation plan for the new RESEA program  provisions, and would provide details on this plan in the coming months.", "RESEA aims to link UI claimants to the public workforce system, address  their individual reemployment needs, and help states prevent and detect  improper payments by conducting UI eligibility reviews. Once a UI  claimant is selected for RESEA, the claimant is required to attend a one- stop orientation and meet one-on-one with a caseworker, who conducts a UI eligibility assessment, helps the claimant develop an individualized  reemployment plan, and provides or refers the claimant to other  reemployment services, as appropriate (see fig. 1). In some states,  claimants participate in a second caseworker meeting to receive follow-up  services, either in person or by phone."], "subsections": [{"section_title": "UI Claimant Profiling Requirements", "paragraphs": ["Since 1994, states have been required by law to develop and use  profiling systems to identify UI claimants who are likely to exhaust their  benefits, and to refer such claimants to reemployment services. In  response to this legislation, DOL launched a Worker Profiling and  Reemployment Services (WPRS) initiative in 1994. Currently, most states  provide services to such claimants through their RESEA programs, using  the profiling systems they developed under the WPRS initiative.", "DOL issued WPRS guidance in 1994 describing minimum profiling  requirements for all states and listing two profiling options:", "Statistical profiling systems predict each UI claimant\u2019s  likelihood of exhausting benefits based on claimant characteristics  (such as education level, prior claims history, and industry or  occupation) and other factors. The system produces a ranked list,  and claimants with the highest predicted likelihood of exhausting  benefits are selected for reemployment services.", "Non-statistical characteristic screens sort claimants into two  groups, based on the presence of certain characteristics.  Claimants with one or more of these characteristics are  considered not likely to exhaust their benefits, and are excluded  from selection for services. Remaining claimants are considered  likely to exhaust their benefits, and a subset is randomly selected  for reemployment services.", "This guidance also specifies characteristics that states must, may, and  are forbidden to use in their profiling systems. Specifically, states are  required to include certain characteristics to identify UI claimants who are  permanently laid off and unlikely to return to their previous industry or  occupation. States may also use a claimant\u2019s education, tenure at a previous job, and the state unemployment rate. States are prohibited from  using claimant age, race or ethnic group, sex, disability, religion, political  affiliation, and citizenship, among others. DOL determined that use of  these characteristics could produce discriminatory effects, as UI  claimants selected for reemployment services through the profiling  process are required to attend services, or may lose their eligibility to  receive UI benefits."], "subsections": []}, {"section_title": "Research on Effectiveness of Reemployment Services", "paragraphs": ["DOL-commissioned research suggests that reemployment services may  help UI claimants find work more quickly and reduce UI program  expenditures, though results have differed across states reviewed. A  2008 study found that the Reemployment and Eligibility Assessment  (REA) program, the predecessor to RESEA, was effective in reducing the  average duration of UI benefits in one of two states reviewed. Specifically,  this study found that the REA program led to a statistically significant  reduction in the duration of UI benefit claims of about a week for  claimants with multiple caseworker meetings in Minnesota, but did not  find statistically significant effects for claimants in North Dakota. A  subsequent 2011 study found significant reductions in UI benefit duration  and amount of benefits received among REA participants in three of four  states reviewed, with the largest effects exhibited in Nevada. A more in- depth 2012 evaluation of Nevada\u2019s REA program during the 2007 to 2009  Great Recession found that, on average, REA participants exited the UI  program about three weeks sooner and used $873 less in benefits than  non-participants as a result. This impact on UI benefit duration and  benefit amounts includes both reductions in regular UI benefits and in  Emergency Unemployment Compensation (EUC) benefits. Additionally,  REA participants were nearly 20 percent more likely to obtain  employment in the first two quarters after entering the program."], "subsections": []}]}, {"section_title": "Selected States Provide Services to Help UI Claimants Find Work Using a Variety of Key Approaches Selected States All Provide Reemployment Services to Connect UI Claimants to Jobs Quickly", "paragraphs": ["Officials from all six of our selected states said they provide  reemployment services designed to help UI claimants get back to work  quickly. These services include assessing claimant skills and service  needs, providing job search assistance and referrals, and conducting  interviewing and resume workshops, among others. State officials said  they may also refer claimants with more extensive needs to additional  services, such as longer-term case management or retraining."], "subsections": [{"section_title": "Selected States Vary in How They Deliver Services through their Primary Reemployment Programs for UI Claimants", "paragraphs": ["Officials from all six of our selected states described operating  reemployment programs that connect many UI claimants to the state\u2019s  public workforce system; we refer to these as primary reemployment  programs. While the services available through these programs are  similar, state approaches to selecting participants for and delivering  services through these programs vary. According to information from  state officials, these selected states\u2019 primary reemployment programs  generally follow the RESEA model of a one-stop center orientation and  one-on-one meeting with a caseworker.", "Officials in all six of our selected states said they served UI claimants  identified as most likely to exhaust their benefits, as required by law,  through their primary reemployment programs, but some select additional  claimants for these programs as well. Officials in two states,  Massachusetts and Nebraska, said they believe it is important for all  claimants to have access to reemployment services and that they require  all claimants to report to a one-stop center for an orientation and meeting  with a caseworker. (See text box.)", "State Spotlight: Service Goals  In 2015, Nebraska expanded its primary reemployment program, called NEres, to all  unemployment insurance claimants, with state officials noting that all claimants can  benefit from the high-quality services it offers.", "In contrast, officials from three selected states said they prioritize  claimants who are most likely to exhaust their benefits for reemployment  services, and noted that these claimants have the greatest service needs.  Officials from Wisconsin, for example, said claimants who are not  selected for the state\u2019s RESEA program are considered job ready and  typically do not need in-person services. In addition to prioritizing  claimants who are most likely to exhaust their benefits, our sixth selected  state, Nevada, randomly selects additional claimants to participate in a  state-funded reemployment program that is similar to the state\u2019s RESEA  program. Officials in Nevada said they believe their state-funded program  allows them to serve claimants with less intensive needs more efficiently  and builds upon the success of the state\u2019s prior REA program.", "Officials in the six selected states described varying approaches to  providing reemployment services online versus in person. Officials in two  states said their state strongly encourages the use of online services. For  example, officials in Utah said all UI claimants are required to fill out an  online needs assessment when filing a claim, and based on their  responses, are required to complete up to five additional online  workshops. These officials said leveraging online self-service options  helps UI claimants adapt to using technology in the workplace and helps  the state preserve limited financial resources (see text box). Similarly,  officials in Wisconsin said claimants are required to complete an online  needs assessment and orientation, and claimants can access various  online workshops to address identified service needs. These officials  believe this emphasis on online services will help claimants become more  self-sufficient and in control of their job search.", "State Spotlight: Online Services  Officials in Utah described the one-stop center\u2019s motto as \u201cself-directed.\u201d One-stop  center staff encourage customers to access services independently through the  state\u2019s online portal in the computer lab so that they feel empowered to use online  services at home.", "In contrast, officials in three other selected states emphasized the  benefits of in-person service provision. In Nebraska, officials said in- person meetings help one-stop center staff observe a claimant\u2019s potential  employment barriers that might otherwise be hard to identify. Officials  provided an example of a claimant who seemed well-positioned on paper  to obtain employment, but in person clearly lacked good interviewing  skills, prompting the caseworker to refer the claimant to additional  interviewing support. In Texas, officials said in-person service provision,  where possible, also helps promote program integrity as it enables  caseworkers to more easily set the expectation that claimants must  search for work to qualify for UI benefits. Additionally, officials in Nevada  said establishing a personal connection with claimants can help one-stop  staff encourage those struggling with the experience of applying for  dozens of jobs online without receiving any feedback from prospective  employers (see text box).", "Officials in the six selected states also described varying approaches in  the extent to which they provide reemployment services in group settings  or on an individual basis. In RESEA guidance, DOL has encouraged the  use of group services as a way to enhance efficiency, and officials in four  selected states said they conduct group orientations through their primary  reemployment programs. For example, in Massachusetts, officials said  that all UI claimants attend a group Career Center Seminar, where one- stop center staff provide an overview of available reemployment services  and local labor market conditions, and UI claimants complete a needs  assessment and career action plan. In Nebraska, a caseworker said the  use of group orientations is a strength of the state\u2019s program because it  provides an opportunity for claimants to discuss shared challenges and  network with each other. In contrast, Nevada provides all services  through its primary reemployment program individually, which officials  said they believe is more effective than group service provision. Officials  said that during these individual meetings, caseworkers identify each  claimant\u2019s barriers to employment and assess whether the claimant  needs ongoing individual case management or if additional service  referrals would be appropriate."], "subsections": []}, {"section_title": "Selected States Leverage Technology and Integrate Program Resources to Help Improve Services", "paragraphs": ["Officials from all six selected states said they use technology and  integrate resources from across federally funded workforce programs as  strategies that help enhance efficiency and improve UI claimant customer  experiences."], "subsections": [{"section_title": "Leveraging Technology", "paragraphs": ["To help provide services more cost-effectively and enhance service  delivery capacity, officials in two selected states, Utah and Wisconsin,  said they invested resources into expanding the array of online self- service options available to UI claimants. Utah officials said the state  increased its use of technology to meet heightened service demand  during the Great Recession, and continues to encourage online self- services as a cost-effective, fiscally sustainable means of maintaining  service levels with fewer staff. Similarly, officials in Wisconsin said the  state\u2019s enhanced self-service options are central to its strategy for  meeting current UI claimant needs and prepare the state for potential  increases in UI claimant demand in an economic downturn.", "Officials in five selected states said they have also used technology to  help make services more customer-friendly, including the four selected  states in which officials described improvements to their online job banks.", "One of these states, Nebraska, added a mobile job bank application that,  according to officials, has made it easier for UI claimants to use job bank  features on their mobile devices and allows them to search for postings  within a certain radius of their physical location. Nevada and Wisconsin  officials also described other investments in mobile technology. Nevada,  for instance, plans to implement a tool that will allow UI claimants to  communicate with caseworkers via text message, such as by sending a  picture of their first paystub to document that they found a job.  Additionally, Wisconsin implemented a self-scheduling feature for initial  RESEA meetings as part of broader upgrades to the state\u2019s UI and  workforce data systems.", "Officials in all six selected states said they use technology to help  caseworkers maximize their time. For example, officials in four states said  integrating their state UI and workforce data systems has enabled them to  automate some caseworker responsibilities. In Massachusetts and  Wisconsin, officials said data system integration allows caseworkers to  instantly transfer relevant information from the workforce data system to  the UI data system, enabling them, for instance, to automatically trigger  UI adjudication proceedings after a UI claimant fails to meet RESEA  requirements. Officials from Wisconsin, Massachusetts, and Utah said  their online self-scheduling features help save time that caseworkers  would otherwise spend scheduling and rescheduling missed  appointments. (See text box.) Officials in four selected states said they  also use technological tools to help caseworkers focus their time on  providing individualized services. For example, Nebraska developed a  series of orientation videos designed to deliver clear, standardized  information on job search requirements and available resources for  claimants. As a result, caseworkers who manage in-person orientation  sessions are able to focus on answering participant questions and  emphasizing key information.", "State Spotlight: Self-Scheduling Tool  Wisconsin officials said their online self-scheduling tool for participants in the  Reemployment Services and Eligibility Assessment (RESEA) program has both  freed up staff time and increased RESEA attendance rates. According to data  provided by state officials, the percentage of scheduled RESEA meetings attended  by claimants increased from about 69 percent in 2014 to 87 percent in 2016.  Officials attributed this increase to the implementation of the self-scheduling tool in  March 2015."], "subsections": []}, {"section_title": "Program Integration", "paragraphs": ["Officials from all six selected states cited the benefits, such as improving  UI claimant access to services, of enhancing program integration.  Officials from four selected states said they aim to improve UI claimants\u2019  customer experience using a \u201cno wrong door\u201d service delivery framework  in which one-stop center staff guide claimants and other job seekers to  the services they need without requiring them to approach different siloed  programs for services (see text box). Additionally, officials from three  selected states said state workforce agencies work behind the scenes  using integrated budgeting, or \u201cbraided funding,\u201d to align the appropriate  federal resources so one-stop center staff can focus on service provision  rather than funding source constraints. Officials in Utah and Wisconsin  said integrated budgeting helped them support system-wide  improvements, such as IT updates. For example, Wisconsin state officials  said they strategically set aside funding from multiple programs to support  the technology upgrades needed for a redesign of their reemployment  program.", "State Spotlight: Program Integration  Massachusetts cross-trains one-stop center staff on available workforce programs to  increase collaboration and make the experiences of \u201cshared\u201d customers\u2014those who  receive services from more than one program\u2014more seamless.", "Finally, officials from all six of our selected states said that the Wagner- Peyser Employment Service\u2014a federally funded workforce program that  can be used to support any job seeker\u2014is a critical federal resource that  they use in conjunction with other workforce programs to meet the needs  of UI claimants specifically. These six selected states described using the  Wagner-Peyser Employment Service for a wide range of functions,  including expanding reemployment service provision to claimants,  supporting one-stop center staff or computer labs, and maintaining  continuity of RESEA operations in periods of funding uncertainty."], "subsections": []}]}]}, {"section_title": "States Served UI Claimants through Four Key Federally Funded Workforce Programs, but Data on Reemployment Service Expenditures Are Not Available States Report that They Most Often Served UI Claimants through the Wagner-Peyser Employment Service", "paragraphs": ["In program year 2015 (July 2015 through June 2016), states reported  providing services to UI claimants through four key federally funded  workforce programs, most often the Wagner-Peyser Employment Service,  followed by RESEA, the WIOA Dislocated Worker program, and the  WIOA Adult program (see fig. 2). (See appendix I for selected state  participation data.)", "States likewise served the largest number of all job seekers through the  federally funded Wagner-Peyser Employment Service in program year  2015, followed by RESEA, the WIOA Adult program, and the WIOA  Dislocated Worker program. The proportion of service recipients who  were UI claimants, and the amount of DOL funding provided to states  under these programs, also varied (see fig. 3).", "The following sections discuss these programs in more detail."], "subsections": [{"section_title": "Selected States Do Not Track All Reemployment Service Spending on UI Claimants, and DOL Officials Said Such Tracking Would Be Burdensome", "paragraphs": ["Officials from all six of our selected states said their accounting systems  did not generally track expenses by the UI claimant status of jobseekers  served, and as a result, they could not isolate all reemployment service  spending on UI claimants specifically. For instance, Utah officials said  they allocated workforce system costs across multiple funding streams by  surveying staff members about their activities at random moments in time.  Officials said that while a jobseeker\u2019s UI claimant status may be relevant  to some staff time charges (such as helping a jobseeker apply for UI  benefits), it would not be relevant, or even known, in other cases (such as  providing computer lab assistance).", "Officials from DOL said it would be burdensome for states to track and  report workforce program expenditures on reemployment services  provided to UI claimants specifically, as states have flexibility to use funds  from multiple federal sources on services to both claimants and other  jobseekers. DOL officials said they believe states mainly rely on RESEA,  Wagner-Peyser, WIOA Dislocated Worker, and WIOA Adult funds to  support UI claimant reemployment services. DOL has also reported that  some states, including one of our selected states (Nevada), collect taxes  designated for purposes that may include reemployment services.", "Our six selected states also provided some UI claimant reemployment  services through their primary reemployment programs, and five of these  states were able to provide us with summary expenditure data from these  programs. These five states chiefly leveraged RESEA funds to support  these programs in state fiscal year 2017, and three states supplemented  RESEA funds with funds from other sources (see fig. 8).", "Of the three states that supplement RESEA funds with other sources, two  (Nebraska and Wisconsin) used Wagner-Peyser funds, and one (Nevada)  used state funds. Nebraska officials said they leveraged flexible Wagner- Peyser funds to enable the state to serve all UI claimants through its  primary reemployment program. Wisconsin officials said that they, too,  used Wagner-Peyser funds to expand the capacity of their state\u2019s primary  reemployment program, but did not aim to serve all UI claimants.  Nevada officials said they used state funds from an employer payroll tax  to provide reemployment services to randomly selected UI claimants not  already selected for RESEA."], "subsections": []}]}, {"section_title": "States Use Different Profiling Systems to Target UI Claimants for Services, but DOL Has Not Collected Needed Information or Fully Advised States about Profiling Options States Use a Range of Practices to Profile UI Claimants for Reemployment Services", "paragraphs": ["Past national studies and our review of information from nine selected  states indicate that the practices used by states to profile, or identify, UI  claimants who are most likely to exhaust their benefits and need  assistance returning to work differ. A 2007 DOL-sponsored study and a  2014 follow-up questionnaire to states found that, nationally, a large  majority of states reported using statistical profiling systems, while a few  states used a type of non-statistical profiling system known as a  characteristic screen. (See text boxes.) The 2007 study also found that  the performance of states\u2019 profiling systems varied widely. Specifically,  while some systems predicted claimants\u2019 likelihood of benefit exhaustion  relatively well, others did not perform much better than random chance.  Accepted statistical practices recommend that profiling systems be  updated regularly, and DOL has recommended that states update their  profiling systems every 2 to 4 years. However, more than half of states  that responded to the 2014 questionnaire reported that they had not  updated their systems since before 2008.", "Statistical Profiling Systems  Statistical profiling systems predict each unemployment insurance (UI) claimant\u2019s  likelihood of exhausting benefits based on claimant characteristics (see examples  below), which are each assigned weights through a statistical process. The system  produces a ranked list, and claimants with the highest predicted likelihood of  exhausting benefits are selected for reemployment services.", "Sample Characteristics Used to Predict Benefit Exhaustion", "Weeks of UI benefits used in the past 3 years  Non-Statistical Profiling Systems (example: Characteristic Screen)  Non-statistical profiling systems select claimants for services using a process that does  not rely on statistical analysis. One example of these, characteristic screens, sort  unemployment insurance (UI) claimants into two groups, based on the presence of  certain characteristics (see examples below). Claimants with one or more of these  characteristics are considered not likely to exhaust their benefits, and are excluded  from service requirements. Remaining claimants are considered likely to exhaust their  benefits, and a subset is randomly selected for reemployment services.", "Of the nine selected states whose profiling systems we reviewed, six use  statistical systems and three use non-statistical systems, and profiling  practices vary widely, even among states using the same type of  system. The six states with statistical systems have varying levels of  system sophistication, and different system assessment and updating  practices. For example, officials in one state said they invested  substantial time and resources in building a sophisticated statistical  profiling system and assessing its performance. To maintain the system,  officials said they update it biannually through a yearlong, resource- intensive process. Officials described this process as important, noting  that employer needs and the economy change over time, as do other  factors that influence UI claimants\u2019 likelihood of exhausting their benefits.  State officials further said that as part of a large umbrella agency with  oversight of numerous federal workforce programs, they have the  resources needed to sustain a centralized data office with the capacity to  build and maintain a sophisticated statistical system.", "Officials in another state told us they had recently replaced their  sophisticated statistical profiling system, which was based on the  principles of machine learning, with a new, more straightforward,  statistical system. While DOL officials said the state\u2019s prior system was  innovative, state officials said that after the person who developed it left  the agency, they did not know how to update it. The official charged with  developing the state\u2019s new profiling system said he had to re-familiarize  himself with statistical modeling practices in order to build it, and that it  took months to complete. State officials said they had not yet established  a performance assessment and updating process for the new system,  and that they would need to gather additional data and determine how to  address certain analytical challenges before doing so.", "Officials from a third state agency said they were using a statistical  profiling system that had not been updated in over 25 years, and had  asked DOL to help them develop a new statistical profiling system  because they lacked the expertise to do so themselves. In March 2017,  DOL provided the new system to the contractor that maintains the state\u2019s  UI data system and will be responsible for running the new system.  However, in June 2018, state officials told us they had delayed  implementing the new system until the state completed a UI  modernization project. Further, while state officials said they plan to keep  the system up-to-date once implemented, they acknowledged that they  do not have staff with the skills to do so, and will likely need continued  DOL support.", "For the three selected states that use non-statistical profiling systems,  state officials said that these systems generally require little effort to  maintain. Officials in two of these states reported using characteristic  screens, which sort claimants into two groups to identify and exempt from  service requirements those claimants who meet certain conditions, such  as being only temporarily unemployed or in an approved training  program. An official from each state said they aim to serve all non-exempt  claimants through their reemployment programs.", "The third state recently implemented a non-statistical claimant needs  assessment that replaced the state\u2019s outdated statistical profiling system,  which officials said had never been updated and was only used to comply  with the federal profiling requirement. With the new needs assessment,  claimant responses to questions such as, \u201cDo you have a resume?\u201d and  \u201cHow many job interviews have you had in the last month?\u201d are scored to  determine whether the claimant is job-ready or needs reemployment  services. (See text box.) Caseworkers can also use these responses to  make more effective service referrals during their appointments with  claimants. For instance, if a claimant reported not having a current  resume, a caseworker might refer the claimant to a resume workshop. In  addition, officials said that program administrators can easily adjust the  scoring and weights used in the assessment, and that they review it each  year for potential updates.", "Sample Alternative Non-Statistical Profiling System (Needs Assessment)  One selected state\u2019s claimant needs assessment scores claimant responses to a  questionnaire about job readiness to determine if claimants need reemployment  services. Those responses also provide caseworkers with direct information about  claimant needs.", "How long have you been looking for work?", "Do you have a cover letter?", "Do you need help preparing for an interview?", "Do you have the computer skills needed to complete online job applications?"], "subsections": [{"section_title": "DOL Has Not Systematically Collected Information on State Profiling Systems that Could Inform Its Oversight and Technical Assistance Efforts", "paragraphs": ["Despite past research identifying weaknesses in state profiling systems,  DOL has not systematically collected information on these systems,  which limits its ability to oversee their performance. DOL officials said that  they communicate with states about their profiling practices and gather  some profiling system information in the course of their periodic UI and  RESEA reviews. However, DOL technical staff do not review or  maintain this profiling system information for oversight purposes, and  DOL does not have a systematic method of tracking state profiling  practices across states. DOL officials said that they view their primary  role, related to profiling systems, as providing technical assistance;  however, by law, DOL is also responsible for ensuring that states\u2019  profiling systems meet federal requirements. Further, GAO  recommended in a 2007 report that DOL take a more active role in  ensuring profiling system accuracy, and federal internal control  standards state that agencies should obtain timely and relevant data to  conduct effective monitoring. Without such data, DOL\u2019s ability to  effectively oversee state profiling practices is limited.", "In addition, DOL provides technical assistance\u2014which can range from  answering specific questions to developing a new statistical profiling  system on a state\u2019s behalf\u2014to individual states only upon request, rather  than identifying and providing assistance to states at higher risk of poor  profiling system performance. This approach necessitates that states  recognize when they need technical assistance and request it. However,  states may not know that their profiling systems are performing poorly  and may not request needed technical assistance as a result. For  example, officials from four of our six selected states with statistical  systems told us that they do not currently have a process to assess their  systems\u2019 performance. As a result, these states may not be aware of  potential issues they may need to address to improve their system  performance. Additionally, officials responsible for maintaining another  selected state\u2019s profiling system had incorrectly identified the system  type. As a result, officials may have difficulty identifying problems and  seeking support.", "DOL has an opportunity to use its new UI state self-assessment to  systematically collect information that could inform its oversight of state  profiling practices and technical assistance efforts. This questionnaire,  which DOL designed to help states self-identify and correct UI system  weaknesses, covers 15 functional areas. Self-assessment questions in  one of these areas will collect some information on state profiling  systems, such as system type and date of last update. However, as  currently designed, the self-assessment will not solicit other information  that could help DOL identify states at risk of poor system performance.  For example, it does not ask whether states have experienced challenges  maintaining their systems (for instance, due to staff turnover), or how  states have assessed system performance. DOL officials told us regional  staff will review state responses to the self-assessment, the first of which  are due in March 2019, and which will be one piece of information used to  identify states that DOL might prioritize for general UI program oversight.", "While DOL officials said it would make sense to use the information  gathered to inform oversight of profiling systems as well, they did not  have specific plans about how they would do so. Federal internal control  standards state that agencies should identify, analyze, and respond to  risks. Without collecting more detailed and consistent profiling system  information and having a clearer plan for how to use it, DOL\u2019s ability to  conduct effective monitoring and respond to risks will continue to be  limited. More specifically, DOL may miss opportunities to help states at  risk of poor profiling system performance better identify UI claimants most  in need of reemployment services."], "subsections": []}, {"section_title": "DOL Guidance Does Not Fully Address State Options for Meeting Profiling System Requirements", "paragraphs": ["DOL\u2019s current profiling guidance does not clearly and comprehensively  communicate the profiling system options available to states, which may  prevent states from using the profiling systems that best suit their needs.  While the law does not specify a particular type of profiling system states  must use, DOL\u2019s only formal profiling guidance, issued in 1994, describes  only two state options: statistical systems and characteristic screens, a  type of non-statistical system. Further the guidance encourages states to  use statistical systems, which it asserts are more efficient and precise,  and easier to manage and adapt, than non-statistical systems. DOL  officials who provide technical assistance to states told us they also  encourage all states to use statistical profiling systems for the same  reasons. However, DOL officials acknowledged that, in practice, not all  statistical profiling systems predict benefits exhaustion well, particularly  outdated systems. The 2007 DOL-sponsored study similarly found that  some state profiling systems did not predict benefit exhaustion much  more accurately than random chance.", "Additionally, statistical profiling systems may be more difficult for some  states to develop and maintain than non-statistical systems. DOL officials  acknowledged that states with technical capacity issues, such as staffing  and data system limitations, may experience particular challenges.  Officials we spoke to in four of our six selected states with statistical  profiling systems told us that they have faced these challenges. In contrast, officials from all of our selected states with non-statistical  profiling systems said their systems are easy to maintain. Officials from  one state that uses a claimant needs assessment said this system also  provides useful information that caseworkers can review prior to one-on- one meetings with claimants.", "DOL officials told us they are supportive of state experimentation with  alternative profiling approaches. However, officials in our selected states  had differing perspectives on DOL\u2019s views on state flexibility and options  for pursuing experimentation. For example, an official in one state was  interested in making a change to the outcome variable that the state\u2019s  statistical system predicted, believing it could reduce UI program  expenditures. As a result, the state consulted with regional DOL staff  about the possible revision and made the change with DOL\u2019s support. In  contrast, an official in another state who wanted to make a similar change  to its statistical profiling system has not pursued the change or discussed  it with DOL officials because he believes such a change would not be  allowed.", "Further, some of our selected states differed in their understanding of  state flexibility to use the type of profiling system that works best for them.  For example, officials in one of our selected states said they are switching  to a statistical system after longstanding encouragement by DOL to do  so, even though a key official expressed concern that a statistical system  may not be useful, given the state\u2019s goal of providing services to all UI  claimants. In contrast, officials in another state said they had recently  replaced their outdated statistical profiling system with a claimant needs  assessment that differs from the options described in DOL\u2019s 1994  guidance, after requesting DOL review of their revised approach.", "The differences in states\u2019 perspectives on allowable options for profiling  systems may in part be due to the fact that DOL\u2019s current profiling  guidance is limited and outdated. The guidance was issued in 1994, and  it does not clearly reflect all of the options available to states, such as  using a different outcome variable in a statistical system, or implementing  an alternative type of non-statistical system to meet worker profiling  requirements. Further, while a key DOL official said they are open to  reviewing alternative state profiling approaches, they do not have a formal  process for doing so, nor does guidance address the option for DOL to  review alternative approaches. DOL officials said they believe the existing  guidance provides states relatively wide latitude in designing their  profiling systems and, as a result, they have not found the need to  change those guidelines. However, federal internal control standards  emphasize the importance of periodically reviewing policy for continued  relevance and effectiveness in achieving objectives. Without clearer,  more current policy information from DOL on profiling requirements and  available options, state officials may continue to have differing  understandings of what they can do, and states may not pursue  innovations that could improve their profiling systems, better suit their  technical capacity, and, ultimately, better target claimants for  reemployment services."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["With 5.7 million UI claimants receiving nearly $30 billion in unemployment  benefits in 2017, reemployment services have the potential to  substantially improve employment outcomes and conserve resources by  shortening UI claimants\u2019 periods of unemployment. Earlier this year,  Congress authorized up to approximately $3.9 billion in funding over the  next decade for the RESEA program, which states use to provide  services to UI claimants most likely to exhaust their benefits. However,  DOL has not taken key steps to help states effectively identify and select  such claimants for the program. DOL has the opportunity to collect more  systematic information on state practices for profiling UI claimants  through its new UI state self-assessment, but the information it is planning  to collect is limited and may not enable DOL to identify states that are  having trouble identifying claimants in need of services. Further, DOL  does not have a process for how it can use information on state risks of  poor profiling system performance to guide its oversight and technical  assistance efforts, choosing largely to assist individual states only when  asked. Some states may not be equipped to identify weaknesses in their  profiling systems, and as a result may not request the assistance they  need. In addition, DOL encourages all states to use statistical profiling  systems despite acknowledging that some states\u2019 statistical systems,  particularly outdated ones, may not perform well in practice. Moreover, its  profiling guidance to states has not been updated since 1994, and may  not reflect the flexibility afforded states to pursue alternative profiling  options. Without clearer, more current information from DOL, states may  not pursue innovations that could help them better identify the UI  claimants who need reemployment services most."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following three recommendations to the Department  of Labor:", "The Secretary of Labor should systematically collect sufficient  information on state profiling systems, possibly through DOL\u2019s  new UI state self-assessment process, to identify states at risk of  poor profiling system performance. For instance, DOL could  collect information on challenges states have experienced using  and maintaining their profiling systems, planned changes to the  systems, or state processes for assessing the systems\u2019  performance. (Recommendation 1)", "The Secretary of Labor should develop a process to use  information on state risks of poor profiling system performance to  provide technical assistance to states that need to improve their  systems. DOL may also wish to tailor its technical assistance  based on state service delivery goals and technical capacity.  (Recommendation 2)", "The Secretary of Labor should update agency guidance to ensure  that it clearly informs states about the range of allowable profiling  approaches. (Recommendation 3)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this product to the Department of Labor for  comment. In its comments, reproduced in appendix II, DOL agreed with  our recommendations and stated that it would take action to address  them. DOL reiterated its commitment to providing technical assistance to  states and strengthening the connection between the UI program and the  public workforce system. DOL also provided technical comments, which  we incorporated as appropriate. Additionally, we provided relevant  excerpts of the draft report to officials in the selected states we included  in our review. We incorporated their technical comments as appropriate.", "As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Department of Labor, and  other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at 202-512-7215 or brownbarnesc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Selected State Program Participation Data", "paragraphs": ["We selected six states\u2014Massachusetts, Nebraska, Nevada, Texas, Utah,  and Wisconsin\u2014for in-depth review. These six selected states all served  unemployment insurance (UI) claimants through several key federally  funded workforce programs in program year 2015 (July 2015 through  June 2016). For the five states that confirmed the reliability of the data  they reported to the Department of Labor (DOL) over this time period, the  numbers of UI claimants served through each program and percent of all  service recipients who were UI claimants varied. Summary data from  each of these five states are presented in figures 9 through 13."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Labor", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Rebecca Woiwode (Assistant  Director), Ellen Phelps Ranen (Analyst-In-Charge), Caitlin Croake,  Margaret Hettinger, Efrain Magallan, and Amrita Sen made key  contributions to this report. Also contributing to this report were Lilia  Chaidez, Alex Galuten, Thomas James, Nicole Jarvis, Serena Lo, Mimi  Nguyen, Jessica Orr, Karissa Robie, Almeta Spencer, and Jeff Tessin."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-646T", "url": "https://www.gao.gov/products/GAO-18-646T", "title": "Drug Discount Program: Improvements Needed in Federal Oversight of Compliance at 340B Contract Pharmacies", "published_date": "2018-07-11T00:00:00", "released_date": "2018-07-11T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["This testimony summarizes the information contained in GAO's June 2018 report, entitled Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement ( GAO-18-480 )."]}, {"section_title": "What GAO Found", "paragraphs": ["The 340B Drug Pricing Program (340B Program), which is administered by the U.S. Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA), requires drug manufacturers to sell outpatient drugs at a discount to covered entities so that their drugs can be covered by Medicaid. Covered entities include certain hospitals and federal grantees (such as federally qualified health centers). About one-third of the more than 12,000 covered entities contract with outside pharmacies--contract pharmacies--to dispense drugs on their behalf. GAO's review of 30 contracts found that all but one contract included provisions for the covered entity to pay the contract pharmacy a flat fee for each eligible prescription. The flat fees generally ranged from $6 to $15 per prescription, but varied by several factors, including the type of drug or patient's insurance status. Some covered entities also agreed to pay pharmacies a percentage of revenue generated by each prescription.", "Thirty of the 55 covered entities GAO reviewed reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies. Of the 30 covered entities that provided discounts, 23 indicated that they pass on the full 340B discount to patients, resulting in patients paying the 340B price or less for drugs. Additionally, 14 of the 30 covered entities said they determined patients' eligibility for discounts based on whether their income was below a specified level, 11 reported providing discounts to all patients, and 5 determined eligibility for discounts on a case-by-case basis.", "GAO found weaknesses in HRSA's oversight that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies, such as:", "HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care.", "HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance.", "HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements.", "Given these weaknesses, HRSA does not have a reasonable assurance that covered entities have adequately identified and addressed noncompliance with 340B Program requirements."]}], "report": [{"section_title": "Letter", "paragraphs": ["I am pleased to be here today to discuss our June 2018 report on  contract pharmacies in the 340B Drug Pricing Program (340B Program).  As you know, the 340B Program, named for the statutory provision  authorizing it in the Public Health Service Act, requires drug  manufacturers to sell outpatient drugs at discounted prices to covered  entities in order to have their drugs covered by Medicaid. Covered  entities include 6 types of hospitals and 10 types of federal grantees,  such as federally qualified health centers. A covered entity typically  purchases and dispenses 340B drugs either through an in-house  pharmacy; through the use of a contract pharmacy arrangement, in which  the entity contracts with an outside pharmacy and pays it to dispense  drugs on its behalf; or both.", "According to the Health Resources and Services Administration (HRSA),  the agency within the Department of Health and Human Services (HHS)  responsible for administering and overseeing the 340B Program, the  purpose of the program is to enable covered entities to stretch scarce  federal resources to reach more eligible patients and provide more  comprehensive services. Participation in the 340B Program is voluntary  for both covered entities and drug manufacturers, but there are strong  incentives to do so. Covered entities can realize substantial savings  through 340B price discounts\u2014an estimated 20 to 50 percent of the cost  of the drugs, according to HRSA. In addition, covered entities can  generate revenue when they purchase 340B drugs for eligible patients  whose insurance reimbursement exceeds the 340B price paid for the  drugs. The statute authorizing the 340B Program does not dictate how  covered entities should use this revenue or require discounts received on  the drugs to be passed along to patients. The ability to have their drugs  covered by Medicaid provides incentives for manufacturers to participate  in the 340B Program.", "Covered entities are required to meet certain conditions set forth both in  law and interpretive agency guidance. For example, they are prohibited  from diverting 340B drugs\u2014that is, transferring 340B drugs to individuals  who are not eligible patients of the covered entities. They are also  prohibited from subjecting manufacturers to \u201cduplicate discounts\u201d in which  drugs prescribed to Medicaid beneficiaries are subject to both the 340B  price and a rebate through the Medicaid Drug Rebate Program. Covered  entities that use contract pharmacies are responsible for overseeing  those pharmacies to ensure compliance with these 340B Program  requirements. Some covered entities hire and pay private companies,  referred to as third-party administrators (TPA), to help determine patient  eligibility and ensure compliance at contract pharmacies.", "HRSA\u2019s original guidance permitting the use of contract pharmacies  limited their use to entities that did not have in-house pharmacies and  allowed each entity to contract with only one outside pharmacy. However,  March 2010 guidance lifted these restrictions, thus allowing covered  entities to have an unlimited number of contract pharmacies. Since that  time, the number of contract pharmacies has increased significantly, from  about 1,300 to around 20,000. Given the growth in the 340B Program,  there has been interest in obtaining a better understanding of program  oversight, and the impact of contract pharmacies on the integrity of the  program.", "My testimony today summarizes the findings from our June 2018 report.  Accordingly, this testimony addresses: 1) the extent to which covered  entities contract with pharmacies to distribute 340B drugs, and  characteristics of these pharmacies; 2) the financial arrangements  selected covered entities have with contract pharmacies and TPAs  related to the administration and dispensing of 340B drugs; 3) the extent  to which selected covered entities provide discounts on 340B drugs  dispensed by contract pharmacies to low-income, uninsured patients; and  4) HRSA\u2019s efforts to ensure compliance with 340B Program requirements  at contract pharmacies.", "To conduct the work for our report, we analyzed HRSA\u2019s 340B Program  database of covered entities and contract pharmacies; selected and  reviewed a nongeneralizable sample of 30 contracts between covered  entities and contract pharmacies; and received completed questionnaires  from 55 of 60 covered entities about the discounts provided to patients on  340B drugs dispensed by contract pharmacies and how the entities  reimburse TPAs. Additionally, we reviewed relevant program policies,  procedures, and guidance; analyzed summaries of HRSA\u2019s audits of  covered entities; and conducted an in-depth review of a nongeneralizable  sample of 20 HRSA audits. We also interviewed officials from HRSA, two  TPAs, and 10 of the covered entities that responded to our questionnaire.  As part of our work, we assessed HRSA\u2019s guidance and oversight of  covered entities against federal internal control standards related to  control activities, information and communication, and monitoring.  Additional information on our scope and methodology is included in our  report. The work this statement is based on was performed in  accordance with generally accepted government auditing standards."], "subsections": [{"section_title": "About One-Third of Covered Entities Had One or More Contract Pharmacies, and Pharmacy Characteristics Varied", "paragraphs": ["We found that as of July 1, 2017, about one-third of the more than 12,000  covered entities in the 340B Program had contract pharmacies. A higher  percentage of hospitals (69.3 percent) had at least one contract  pharmacy compared to federal grantees (22.8 percent). Among covered  entities that had at least one contract pharmacy, the number of contract  pharmacies ranged from 1 to 439, with an average of 12 contract  pharmacies per entity. The number of contract pharmacies varied by  covered entity type, with disproportionate share hospitals having the most  on average (25 contract pharmacies), and critical access hospitals having  the least (4 contract pharmacies).", "Across all covered entities, the distance between the entities and their  contract pharmacies ranged from 0 miles (meaning that the contract  pharmacy and entity were co-located) to more than 5,000 miles; the  median distance was 4.2 miles. About half of the entities had all their  contract pharmacies located within 30 miles, but this varied by entity type.  Specifically, more than 60 percent of critical access hospitals and  federally qualified health centers, a type of federal grantee, had all of their  contract pharmacies within 30 miles. In contrast, 45 percent of  disproportionate share hospitals had at least one pharmacy that was  more than 1,000 miles away compared to 11 percent or less for critical  access hospitals and grantees."], "subsections": []}, {"section_title": "Selected Covered Entities Used Various Methods to Pay Contract Pharmacies and TPAs", "paragraphs": ["Contracts we reviewed between selected covered entities and contract  pharmacies showed that entities generally agreed to pay their contract  pharmacies a flat fee per 340B prescription, with some entities also  paying additional fees based on a percentage of revenue. The flat fees  generally ranged from $6 to $15 per prescription, but varied by several  factors, including the type of covered entity and drug, as well as the  patient\u2019s insurance status. In addition to flat fees, many of the contracts  we reviewed included provisions for the covered entity to pay the  pharmacy a fee based on the percentage of revenue generated by each  prescription. These percentage fees only applied to prescriptions  provided to patients with insurance, and ranged from 12 to 20 percent of  the revenue generated by the prescriptions.", "Selected covered entities and TPAs included in our review indicated two  main methods entities use to pay for TPA services: 1) per prescription  processed, or 2) per contract pharmacy. Officials with the two TPAs we  interviewed and the covered entities that responded to our questionnaire  reported that agreements between the parties most frequently involved  covered entities compensating their TPAs with a fee for each prescription  processed on behalf of the entity, but the exact method and the amount of  the fee varied. For example, some covered entities reported paying their  TPAs for each prescription regardless of whether it was determined to be  340B eligible, others limited the fees to prescriptions that were 340B  eligible, and some reported paying TPAs for 340B-eligible prescriptions  dispensed to an insured patient."], "subsections": []}, {"section_title": "About Half of the Covered Entities GAO Reviewed Provided Low- Income, Uninsured Patients Discounts on 340B Drugs at Some or All of Their Contract Pharmacies", "paragraphs": ["Thirty of the 55 covered entities responding to our questionnaire reported  providing low-income, uninsured patients discounts on 340B drugs at  some or all of their contract pharmacies. Federal grantees were more  likely than hospitals to provide patients with discounts on the price of  drugs and to provide them at all contract pharmacies. Of the 30 covered  entities that provided discounts, 23 indicated that they pass on the full  340B discount to patients, resulting in patients paying the 340B price or  less for drugs. In many cases, these covered entities indicated that  patients received drugs at no cost.", "The 30 covered entities providing 340B discounts to low-income,  uninsured patients, reported using a variety of methods to determine  whether patients were eligible for these discounts. Fourteen of the  covered entities said they determined eligibility for discounts based on  whether a patient\u2019s income was below certain thresholds as a percentage  of the federal poverty level, 11 reported providing discounts to all patients,  and 5 said they determined eligibility for discounts on a case-by-case  basis.", "Some covered entities that did not provide discounts on 340B drugs at  their contract pharmacies reported assisting patients with drug costs  through other mechanisms. For example, some covered entities reported  providing charity care to low-income patients, including free or discounted  prescriptions; and some reported providing discounts on drugs dispensed  by their in-house pharmacies."], "subsections": []}, {"section_title": "Oversight Weaknesses Impede HRSA\u2019s Ability to Ensure Compliance at 340B Contract Pharmacies", "paragraphs": ["We found weaknesses in HRSA\u2019s oversight that impede its ability to  ensure compliance with 340B Program requirements at contract  pharmacies. Specifically:  Incomplete Data. We found that HRSA does not have complete data  on all contract pharmacy arrangements in the 340B Program to inform  its oversight efforts, including its audits of covered entities\u2014the  agency\u2019s primary method for assessing entity compliance with  program requirements. Although HRSA requires covered entities to  register their contract pharmacies with the agency, it does not require  covered entities to separately register contract pharmacies to each  site of the covered entity with which a contractual relationship exists.  HRSA officials told us that the number of registered contract  pharmacy arrangements increases a covered entity\u2019s chance of being  randomly selected for a risk-based audit. Our analysis of HRSA data  showed that the registration of contract pharmacies for 57 percent of  covered entities with multiple sites only specified relationships  between contract pharmacies and each entity\u2019s main site, as opposed  to all sites contracted to distribute drugs on that entity\u2019s behalf. Thus,  the likelihood of an entity being selected for an audit is dependent, at  least in part, on how an entity registers its pharmacies as opposed to  the entity\u2019s actual number of pharmacy arrangements. We concluded  that without more complete information on covered entities\u2019 contract  pharmacy arrangements, HRSA cannot ensure that it is optimally  targeting the limited number of risk-based audits done each year to  entities that are at a higher risk for compliance issues because they  have more contract pharmacy arrangements.", "Limited Oversight of Duplicate Discounts. We found that HRSA  audits do not fully assess compliance with the 340B Program  prohibition on duplicate discounts for drugs prescribed to Medicaid  beneficiaries. Specifically, covered entities are prohibited from  subjecting manufacturers to \u201cduplicate discounts\u201d in which drugs  prescribed to Medicaid beneficiaries are subject to both the 340B  price and a rebate through the Medicaid Drug Rebate Program.  However, HRSA only assesses the potential for duplicate discounts in  Medicaid fee-for-service and not Medicaid managed care, despite the  fact that the majority of Medicaid enrollees, prescriptions and  spending for drugs were in managed care. HRSA officials told us that  they do not assess the potential for duplicate discounts in Medicaid  managed care as part of their audits because they have yet to issue  guidance as to how covered entities should prevent these duplicate  discounts. We concluded that until HRSA develops guidance and  includes an assessment of the potential for duplicate discounts in  Medicaid managed care as part of its audits, the agency does not  have assurance that covered entities\u2019 efforts are effectively preventing  noncompliance, and manufacturers are at risk of being required to  erroneously provide duplicate discounts for Medicaid prescriptions.", "Lack of Information on Full Scope of Noncompliance. We found  that HRSA requires covered entities for which it identifies issues of  noncompliance during audits to assess the full extent of the  noncompliance, but it does not provide guidance as to how entities  should make these assessments. Specifically, HRSA does not specify  the time period covered entities must review to see if any related  noncompliance occurred and instead, relies on each entity to make  this determination. Additionally, HRSA does not require most covered  entities that were audited to communicate the methodology used to  assess the full scope of noncompliance, or the findings of their  assessments, including how many or which manufacturers were due  repayment. As a result, we concluded that HRSA does not know the  scope of covered entities\u2019 assessments and whether they were  effective at identifying the full extent of the noncompliance identified in  the audit.", "Lack of Evidence of Corrective Actions. We found that prior to  closing an audit, HRSA\u2019s audit procedures do not require all covered  entities to provide evidence that they have taken corrective action and  are in compliance with program requirements. Instead, HRSA relies  on the 90 percent of covered entities subject to risk-based audits to  self-attest that all audit findings have been addressed and that the  entity has come into compliance with 340B Program requirements.  We concluded that HRSA, therefore, does not have reasonable  assurance that the majority of covered entities audited have corrected  the issues identified in the audit, and are not continuing practices that  could lead to noncompliance, thus increasing the risk of diversions,  duplicate discounts, and other violations of 340B Program  requirements.", "Limited Guidance on Contract Pharmacy Oversight. We found that  HRSA\u2019s contract pharmacy oversight guidance for covered entities  lacks specificity and thus, provides entities with considerable  discretion on the scope and frequency of their oversight practices.  Specifically, HRSA\u2019s 2010 guidance on contract pharmacy services  specifies that covered entities are responsible for overseeing their  contract pharmacies to ensure that the drugs entities distribute  through them comply with 340B Program requirements, but states  that, \u201cthe exact method of ensuring compliance is left up to the  covered entity.\u201d According to HRSA officials, if a covered entity  indicates that it has performed oversight in the 12 months prior to a  HRSA audit, then HRSA considers the entity to have met its  standards for conducting contract pharmacy oversight, regardless of  what the oversight encompassed. However, due, at least in part, to a  lack of specific guidance, we found that some covered entities  performed minimal contract pharmacy oversight. Additionally, the  identified noncompliance at contract pharmacies raises questions  about the effectiveness of covered entities\u2019 current oversight  practices. For example, 66 percent of the 380 diversion findings in  HRSA audits since 2012 involved drugs distributed at contract  pharmacies, and 33 of the 813 audits for which results were available  had findings for lack of contract pharmacy oversight. We concluded  that as a result of the lack of specific guidance and the numerous  HRSA audit findings of noncompliance occurring at contract  pharmacies, HRSA does not have assurance that covered entities\u2019  contract pharmacy oversight practices are sufficiently identifying 340B  noncompliance.", "Our June 2018 report contained seven recommendations to HRSA to  strengthen its oversight of the 340B Program. HHS concurred with our  four recommendations that HRSA should 1) issue guidance to covered  entities on the prevention of duplicate discounts under Medicaid managed  care; 2) incorporate an assessment of covered entities\u2019 compliance with  the prohibition on duplicate discounts, as it relates to Medicaid managed  care claims, into its audit process once the guidance is issued; 3) issue  guidance on the length of time covered entities must look back following  audits to identify the full scope of noncompliance identified during audits;  and 4) provide more specific guidance to covered entities regarding  contract pharmacy oversight, including the scope and frequency of such  oversight.", "HHS did not concur with our three recommendations that HRSA should 1)  require covered entities to register contract pharmacies for each site of  the entity for which a contract exists; 2) require all covered entities to  specify their methodology for determining the full scope of noncompliance  identified during the audit as part of their corrective action plans, and  incorporate reviews of covered entities\u2019 methodology into their audit  process to ensure that entities are adequately assessing the full scope of  noncompliance; and 3) require all covered entities to provide evidence  that their corrective action plans have been successfully implemented  prior to closing audits, including documentation of the results of the  entities\u2019 assessments of the full scope of noncompliance identified during  each audit. HHS cited concerns that implementing these  recommendations would be burdensome on covered entities and HRSA.  However, as explained in our report, we believe that these  recommendations would only create limited additional burden on covered  entities and the agency and are warranted to improve HRSA\u2019s oversight  of the 340B Program.", "Chairman Burgess, Ranking Member Green, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to answer any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contacts and Staff Acknowledgments", "paragraphs": ["If you or your staff members have any questions concerning this  testimony, please contact Debra A. Draper at (202) 512-7114 or  draper@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. In addition to the contact named above, Michelle Rosenberg  (Assistant Director), Amanda Cherrin (Analyst in Charge), Jennie Apter,  George Bogart, and David Lichtenfeld made key contributions to this  statement.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": ["To have their drugs covered under Medicaid, the \"340B\" program requires drug manufacturers to sell outpatient drugs to covered entities\u2014certain hospitals and clinics\u2014at a discount. These entities are increasingly contracting with pharmacies to dispense 340B drugs. Doing so can make it harder to ensure compliance with 340B rules. For example, contract pharmacies may also fill prescriptions for the general public, increasing the risk of dispensing 340B drugs to ineligible patients.", "We testified on our report's recommendations to improve federal oversight of covered entities to help ensure compliance with 340B requirements."]}
{"id": "GAO-18-272", "url": "https://www.gao.gov/products/GAO-18-272", "title": "Food Safety: USDA Should Take Further Action to Reduce Pathogens in Meat and Poultry Products", "published_date": "2018-03-19T00:00:00", "released_date": "2018-04-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["The U.S. food supply is generally considered safe, but the Centers for Disease Control and Prevention (CDC) estimate that Salmonella and Campylobacter in food cause about 2 million human illnesses per year in the United States. In 2014, GAO identified challenges USDA faced in reducing pathogens in poultry products, including standards that were outdated or nonexistent and limited control over factors that affect pathogen contamination outside of meat and poultry slaughter and processing plants, such as practices on the farm.", "GAO was asked to review USDA's approach to reducing pathogens in meat and poultry products. This report examines (1) the extent to which USDA has developed standards for meat and poultry products and (2) any additional steps USDA has taken to address challenges GAO identified in 2014. GAO reviewed relevant regulations, documents, and data and interviewed officials from USDA and CDC, as well as 17 stakeholders representing industry, consumer groups, and researchers selected based on their knowledge of USDA's meat and poultry slaughter inspections and food safety."]}, {"section_title": "What GAO Found", "paragraphs": ["To help ensure the safety of our nation's food supply, the U.S. Department of Agriculture (USDA) has developed standards limiting the amount of Salmonella and Campylobacter \u2014pathogens that can cause foodborne illness in humans\u2014permitted in certain meat (beef and pork) and poultry (chicken and turkey) products, such as ground beef, pork carcasses, and chicken breasts. However, the agency has not developed standards for other products that are widely available, such as turkey breasts and pork chops. Further, its process for deciding which products to consider for new standards is unclear because it is not fully documented, which is not consistent with federal standards for internal control. For example, USDA has informed stakeholders that it will take into account factors including consumption and illness data, but the agency has not documented this process going forward. Previously, USDA had developed new standards after widespread outbreaks indicated the need. For example, in 2016, USDA concluded that new standards were needed for certain poultry products to reduce Salmonella after reviewing outbreaks from these products in 2011, 2013, and 2015\u2014outbreaks in which 794 people were sickened and 1 died. By documenting the agency's process for deciding which products to consider for new standards, USDA could better ensure that such decisions will be risk-based.", "USDA is taking steps to address challenges GAO identified in 2014 for reducing pathogens in poultry products, but these challenges are ongoing and could affect USDA's ability to reduce pathogens in meat as well. For example, one challenge GAO identified is that the level of pathogens in poultry products can be affected by practices on farms where poultry are raised. GAO recommended in 2014 that to help overcome this challenge, USDA guidelines on practices for controlling Salmonella and Campylobacter on farms include information on the effectiveness of each of the practices, consistent with a recommendation from a USDA advisory committee. Since GAO's 2014 report, USDA drafted revised guidelines to include information on the effectiveness of on-farm practices for controlling pathogens in poultry and beef cattle, in 2015 and 2017, respectively. However, USDA's draft guidelines for controlling Salmonella in hogs do not contain such information. By including such information as it finalizes its draft guidelines, USDA could better inform industry of the potential benefits of adopting on-farm practices included in the guidelines and encourage implementation of such practices."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO is making three recommendations, including that USDA document its process for deciding which products to consider for new standards and that it include information on the effectiveness of on-farm practices in its guidelines for Salmonella control in hogs. USDA agreed with GAO's recommendations and described actions it will take to implement them."]}], "report": [{"section_title": "Letter", "paragraphs": ["The U.S. food supply is generally considered safe, but foodborne illness  remains a common, costly, yet largely preventable public health problem.  The Centers for Disease Control and Prevention (CDC) estimated in  2011\u2014its most recent estimate\u2014that each year, one in six people in the  United States gets sick from eating contaminated food. According to  CDC, while the source of foodborne outbreaks is often unknown, certain  pathogens in food cause more than 9 million human illnesses per year in  the United States, 2 million of which are caused by Salmonella and  Campylobacter. For example, according to a CDC outbreak investigation  report, in 2015, 192 people in five states became ill from eating pork  contaminated with Salmonella.", "The U.S. Department of Agriculture (USDA) is responsible for ensuring  the safety and wholesomeness of meat and poultry products that enter  commerce, as provided by the Federal Meat Inspection Act and the  Poultry Products Inspection Act. Accordingly, USDA\u2019s Food Safety and  Inspection Service (FSIS) inspects and regulates the production of  domestic meat and poultry products sold for human consumption. For  meat and poultry processing and slaughter plants (hereafter referred to as  plants) under its jurisdiction, FSIS sets pathogen reduction performance  standards (hereafter referred to as pathogen standards) limiting the  allowable levels of Salmonella or Campylobacter. FSIS personnel  perform inspection activities at nearly 6,500 plants nationwide, including  testing samples of meat and poultry products to assess compliance with  the pathogen standards, which vary by product. For fiscal year 2016,  Congress appropriated more than $1 billion to FSIS for its activities,  including its food safety inspection program, through the annual  appropriations process.", "In September 2014, we found that USDA had taken a number of actions  to reduce the levels of Salmonella and Campylobacter in poultry (chicken  and turkey) products but that the agency needed to do more to assess  the effects of these actions on the incidence of foodborne illnesses. As a  result, we recommended that USDA develop performance measures to  monitor whether its activities to reduce the levels of Salmonella and  Campylobacter in domestic poultry products are meeting agency goals.  USDA agreed with and implemented this recommendation. We also  identified several challenges that could hinder USDA\u2019s ability to reduce  levels of pathogens in poultry products; in particular, we found that  pathogen standards for poultry products were outdated or nonexistent.  Other challenges we identified included limited USDA control over factors  that affect pathogen contamination outside of plants, plants not  designating pathogens as hazards, and the complex nature of pathogens,  among others. We recommended that FSIS include in its guidelines  information on the effectiveness of on-farm practices to reduce the level  of pathogens in live poultry. USDA agreed with and is taking steps to  implement this recommendation.", "However, according to CDC data, consumption of poultry products  continues to be associated with foodborne illness in the United States, as  does the consumption of meat (such as beef and pork). Further,  according to a 2016 CDC report, the United States is not on track to  reach its public health goals for reducing foodborne illnesses caused by  Salmonella and Campylobacter.", "You asked us to review USDA\u2019s approach to reducing the level of  pathogens in domestic meat and poultry products, including its use of  pathogen standards. This report examines (1) the extent to which USDA  has developed pathogen standards for meat and poultry products and (2)  any additional steps that USDA has taken to address challenges we  identified in 2014 in reducing the level of pathogens.", "To examine the extent to which USDA has developed pathogen  standards for meat and poultry products, we reviewed our prior findings  and recommendations from September 2014 on pathogen standards for  poultry products. We also reviewed relevant laws and regulations, FSIS  strategic plans covering the period from 2011 through 2021, and FSIS  annual performance plans from 2014 through 2018. We reviewed relevant  Federal Register notices on specific pathogen standards for meat and  poultry from 1996, when FSIS first established the standards, through  2016, when the agency set or revised the most recent pathogen  standards. We identified relevant performance goals and measures in  FSIS annual performance plans from 2012 through 2017. We reviewed  FSIS reports on pathogens in meat and poultry products and annual  sampling plans\u2014estimates of the type and number of products the  agency will test for certain pathogens\u2014to understand the range of meat  and poultry products FSIS monitors for pathogens. In addition, we  interviewed current and former FSIS officials on the history of the 1996  Pathogen Reduction; Hazard Analysis and Critical Control Point (HACCP)  regulations, related pathogen standards, and the process and criteria for  developing new pathogen standards and revising existing ones. We  reviewed documents and interviewed staff from USDA\u2019s Agricultural  Marketing Service\u2014which purchases commodities, including meat and  poultry products, for federal nutrition assistance programs such as the  National School Lunch Program\u2014to determine any additional steps  USDA takes to prevent pathogens in meat and poultry products used for  school meals. We reviewed data FSIS collected on compliance rates for  meat and poultry plants from 2014 through 2017 and data on foodborne  illness rates from CDC from 1998 through 2016, the most recent data  available. To assess the reliability of the data, we interviewed CDC  officials about the steps they took to ensure the reliability of the data and  determined that these data were sufficiently reliable for viewing trends in  compliance rates and trends in foodborne illness rates.", "We identified an initial group of stakeholders from our prior work,  specifically from those we interviewed in our 2013 report on USDA\u2019s  changes to poultry and hog inspections and our 2014 report on poultry  pathogens. In addition, we asked these groups for recommendations on  other stakeholders we should consider contacting and expanded the list,  as needed. We selected these stakeholders because they are  knowledgeable about FSIS\u2019s food safety programs and provide a range of  views on the topic. In the end, we identified a nongeneralizable sample of  17 stakeholders: 7 representatives from industry, 4 representatives from  consumer advocacy groups, 4 food safety researchers, and 2 former  federal food safety experts. Views from those we selected based on their  knowledge cannot be generalized to all stakeholders who have  knowledge about FSIS\u2019s food safety programs (i.e., those we did not  interview), but they provide illustrative examples. We obtained information  from agency documentation and interviews with FSIS officials regarding  the process for developing new pathogen standards and compared this  process with federal standards for internal control. We also obtained  information from FSIS documentation and interviews with agency officials  on the agency\u2019s plans to review or revise pathogen standards. We  compared these plans with the Project Management Institute\u2019s standards  and leading practices for project management.", "To examine any additional steps that USDA has taken to address the  challenges we identified in 2014 that it faces in reducing the level of  pathogens in meat and poultry, we reviewed agency documentation on  the steps it has taken to address these challenges since 2014, including  documentation on relevant laws and regulations; Federal Register  notices; FSIS\u2019s 2017-2021 strategic plan, annual performance plans and  related performance reports from 2015 through 2017, and 2016  Establishment-Specific Data Release Strategic Plan; and USDA and  FSIS websites. We reviewed FSIS guidance regarding on-farm practices  for reducing the level of pathogens in live animals before they enter plants  and compared this information with recommendations on such practices  made in 2011 by the USDA National Advisory Committee on Meat and  Poultry Inspection. We also reviewed reports from the Interagency Food  Safety Analytics Collaboration, USDA\u2019s Office of Inspector General, and  the National Academy of Sciences.", "We obtained testing data from FSIS for the period from May 2016 through  August 2017, the most recent data available, to determine the number of  plants that did not meet the chicken carcass Salmonella and  Campylobacter standards. To assess the reliability of FSIS\u2019s data, we  interviewed FSIS officials about the steps they took to ensure the  reliability of the data and determined that the data were sufficiently  reliable for analyzing the number of plants that did not meet the pathogen  standards during the reporting period. We reviewed CDC data on  foodborne illness outbreaks from beef and pork from 2006 through 2016  and obtained recall documents from FSIS on plants that produced  products involved in those outbreaks. We interviewed FSIS officials about  any challenges the agency faces in reducing pathogens in meat and  poultry and steps the agency has taken since 2014 to address previously  identified challenges. Additionally, we interviewed FSIS and CDC officials  on steps the agencies have taken to improve the methods used to  estimate the burden of foodborne illness in the United States and the use  of emerging technologies to detect the pathogen strains most harmful to  human health. Further, we interviewed the stakeholder groups we  identified for our first objective about USDA\u2019s efforts to address the  challenges we identified in 2014.", "We conducted this performance audit from June 2016 to January 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives."], "subsections": [{"section_title": "Background", "paragraphs": ["Contact with infected animals or consumption of contaminated water and  food\u2014including produce, meat, poultry, and processed products\u2014can  cause foodborne illness. Many different pathogens can contaminate food,  including harmful bacteria such as Salmonella and Campylobacter. CDC  reported that in 2015 there were 902 foodborne disease outbreaks  reported in the United States that resulted in 15,202 illnesses, 950  hospitalizations, 15 deaths, and 20 food product recalls. According to  CDC, fish, chicken, and pork were the most common single food  categories implicated in these outbreaks. More recently, in 2016, there  were 233 foodborne illnesses from 10 outbreaks linked to beef, 426  foodborne illnesses from 17 outbreaks linked to pork, and 417 foodborne  illnesses from 20 outbreaks linked to poultry, according to CDC\u2019s National  Outbreak Reporting System (see fig. 1). Common symptoms of  foodborne diseases include nausea, vomiting, stomach cramps, and  diarrhea. Symptoms can sometimes be severe, and some foodborne  illnesses can be life-threatening. Although anyone can get a foodborne  illness, some people are more likely to have one. Those groups include  young children, older adults, pregnant women, and people with immune  systems weakened from medical conditions, such as diabetes, liver, and  kidney disease. Patients receiving chemotherapy or radiation treatment  are also more susceptible.", "We have previously reported that to improve its food safety approach,  FSIS moved to an increasingly science-based, data-driven, risk-based  approach by adopting the Pathogen Reduction; HACCP regulations in  1996. Under the HACCP approach, each plant is responsible for (1)  identifying food safety hazards, such as fecal material, that are  reasonably likely to occur and (2) establishing controls that prevent or  reduce these hazards in its processes. As part of this approach, plants  must develop plans that identify the point (known as the critical control  point) where they will take steps to prevent, eliminate, or reduce each  hazard identified. FSIS inspectors at slaughter and processing plants  routinely check records to verify a plant\u2019s compliance with those plans.  FSIS inspectors also observe operations at plants as part of their  inspection activities. Under the 1996 HACCP regulations, the agency also  established Salmonella pathogen standards used to assess the  effectiveness of plants\u2019 controls in reducing levels of pathogens in meat  and poultry products. According to the regulations, FSIS selected  Salmonella for pathogen standards because, among other things, it was  the most common bacterial cause of foodborne illness, and they believed  that intervention strategies aimed at reducing fecal contamination and  other sources of Salmonella on raw product should be effective against  other pathogens. FSIS has a verification-testing program in which FSIS  inspectors at plants collect samples of certain products and test them to  determine whether plants meet the pathogen standards. Test results from  this program help FSIS inspectors verify that plant HACCP plans are  working and identify and assist plants whose process controls may be  underperforming. FSIS also requires products to be labeled with  instructions for safe handling.", "In contrast to Salmonella and Campylobacter, which are subject to  pathogen standards, FSIS considers certain serotypes of Escherichia coli  (E. coli),  another type of disease-causing pathogen, adulterants under  the definition of \u201cadulterated\u201d in the Meat Inspection Act and the Poultry  Inspection Act. The acts define an adulterant in meat and poultry  products to include, among other things, \u201cany poisonous or deleterious  substance which may render it injurious to health.\u201d Meat and poultry  products contaminated with any level of adulterants are not permitted to  enter commerce\u2014a stricter standard than the pathogen standards, which  allow certain levels of contamination. FSIS initially declared E. coli  O157:H7 as an adulterant in ground beef following an outbreak from 1992  to 1993 that involved Jack-in-the-Box hamburgers and, in 2011, declared  an additional six non-O157 Shiga-toxin-forming E. coli in certain raw beef  products as adulterants.", "In the early 1990s, a strain of Escherichia coli  (E. coli) bacteria linked to hamburger resulted  in a deadly foodborne outbreak and led to  changes in food regulations. E. coli are  bacteria found in the environment, food, and  intestines of people and animals. E. coli are a  large and diverse group of bacteria. Most  strains of E. coli are generally harmless, but  others can cause diarrhea, urinary tract  infections, respiratory illness and pneumonia,  other illnesses, and death.  From November 1992 through February 1993,  more than 500 laboratory-confirmed infections  with E. coli O157:H7 and four associated  deaths occurred in four states\u2014Washington,  Idaho, California, and Nevada. During the  outbreak, contaminated hamburger patties  were traced to a fast food restaurant chain  and then ultimately to five slaughter plants in  the United States and one in Canada as likely  sources of carcasses used to produce the  contaminated ground beef. No one slaughter  plant or farm was identified as the source. In  1994, USDA\u2019s Food Safety and Inspection  Service declared that any raw ground beef  found contaminated with E. coli O157:H7  would be adulterated under the Federal Meat  Inspection Act\u2014rendering the meat unlawful  to sell in commerce.", "Meat and Poultry in the United States  Beef: According to the U.S. Department of  Agriculture (USDA), beef is a highly consumed  meat in the United States, averaging 56  pounds per person per year. Beef comes from  full-grown cattle that are about 2 years old and  weigh about 1,000 pounds. There are at least  50 breeds of beef cattle, but fewer than 10  make up most cattle produced. Veal is meat  from a calf (young cattle) that weighs about  150 pounds. Calves that are mainly milk-fed  usually are less than 3 months old.  Pork: According to the USDA, the United  States is the world\u2019s third-largest producer and  consumer of pork and pork products. Pork is  meat from hogs, or domestic swine, and is  from young animals (6 to 7 months old) that  weigh from 175 to 240 pounds.", "FSIS coordinates with numerous federal agencies, state agencies, and  local entities to help ensure the safety of meat and poultry products from  the farm to the consumer (known as the farm-to-table continuum). FSIS  coordinates with USDA\u2019s Animal and Plant Health Inspection Service  (APHIS) to share information when investigating foodborne illnesses.  FSIS also coordinates with the Department of Health and Human  Services\u2019 Food and Drug Administration (FDA) and with CDC on a  number of activities. For example, FSIS works collaboratively with FDA  and CDC through the Interagency Food Safety Analytics Collaboration to,  among other things, estimate foodborne illness source attribution.  Attribution entails identifying which foods are the most important sources  of selected major foodborne illnesses. According to FSIS officials,  determining the sources of illness is an important part of identifying  opportunities to improve food safety. FSIS also coordinates with CDC and  state health departments to respond to foodborne illness outbreaks,  including identifying the pathogen, the product, and where the product  became contaminated along the farm-to-table continuum (see fig. 2).", "Poultry: According to USDA, consumption of  poultry (chicken and turkey) in the United  States is higher than beef or pork. Chicken  includes broiler-fryer chickens and roaster  chickens. Broiler-fryer chickens are young,  tender chickens about 7 weeks old that weigh  from 2 \u00bd to 4 \u00bd pounds. Roaster chickens are  young chickens from 8 to 12 weeks old with a  ready-to-cook carcass weight of 5 pounds or  more. Turkey is a large, widely domesticated  North American bird. They grow to full maturity  in about 4 to 5 months, depending on the  desired market weight.", "USDA\u2019s FSIS has developed or revised pathogen standards for  assessing the effectiveness of plants\u2019 controls in reducing the level of  pathogens in certain meat and poultry products. More specifically, the  agency has developed pathogen standards for some beef, pork, chicken,  and turkey products but not for other products that are widely available,  and its basis for deciding which products to consider for new pathogen  standards is unclear. In addition, as of 2011, the agency has revised  pathogen standards for chicken and turkey products, but standards for  other products are outdated, with no time frames for revision.", "FSIS has developed pathogen standards for beef, pork, chicken, and  turkey carcasses; specific chicken parts (i.e., breasts, thighs, and legs);  and ground beef, chicken, and turkey (see Figure 3). The initial pathogen  standards FSIS developed in 1996 were all for Salmonella because,  among other things, it was the most common bacterial cause of  foodborne illness and intervention strategies aimed at reducing  Salmonella in raw products might be effective against other pathogens,  according to agency documents. Subsequently, in 2011, FSIS developed  Campylobacter standards for chicken and turkey carcasses and in 2016  developed Salmonella and Campylobacter standards for chicken parts.", "FSIS has not developed pathogen standards for other widely available  products, such as pork cuts (e.g., pork chops), turkey parts (e.g., turkey  breasts), and ground pork. The agency is taking steps that may lead to  the development of new pathogen standards for additional products. For  example, according to FSIS documents, the agency is collecting  information on the presence of Salmonella and other pathogens in pork  cuts and ground pork, among other pork products. According to FSIS  officials, this could lead to the development of new standards.", "However, the agency\u2019s process for deciding which products to consider  for new pathogen standards is unclear because it is not fully documented.  In December 2016, the agency documented a part of its process: who will  make the decisions about which products to consider. According to the  December 2016 document, certain agency officials are to meet as  needed to discuss emerging food safety risks and propose related data  collection efforts to senior management, who will decide which products  to consider for new standards. However, the document does not explain  the basis for management\u2019s decisions. FSIS has informed stakeholders  that it will take into account factors including consumption and foodborne- illness data, as it did when setting standards for chicken parts, but the  agency has not documented this process going forward. Several  researchers and consumer advocacy representatives we interviewed  questioned whether the agency\u2019s process proactively addresses food  safety risks.", "Previously, FSIS developed new pathogen standards after the agency  was directed to do so or after widespread outbreaks indicated the need.  For example, in 2011, FSIS revised Salmonella standards for chicken and  turkey carcasses and developed new standards for Campylobacter in  these same products after being charged with doing so by the  Presidential Food Safety Working Group. Additionally, in a 2016 Federal  Register notice, FSIS, after reviewing outbreaks from these products in  2011, 2013, and 2015\u2014outbreaks in which 794 people were sickened  and 1 died\u2014concluded that new pathogen standards were needed for  comminuted (including ground and other mechanically separated) poultry  and chicken parts.", "Under federal standards for internal control, federal entities are to design  control activities to achieve objectives and respond to risks, including  appropriate documentation of transactions and internal control. With  appropriate documentation of internal control, management clearly  documents internal control and allows the documentation to be readily  available for examination; the documentation may appear in management  directives, administrative policies, or operating manuals. Until FSIS  clearly documents its process for deciding which products to consider for  new pathogen standards, including the basis on which such decisions  should be made, FSIS will not have assurance that its decisions are risk- based and that agency personnel will know the process when making  such decisions."], "subsections": [{"section_title": "USDA Has Revised Some Existing Pathogen Standards but Has Not Revised Others in Decades and Has No Time Frames for Revision", "paragraphs": ["USDA\u2019s FSIS has revised Salmonella standards for chicken and turkey  carcasses and for comminuted chicken and turkey but has not revised  other Salmonella standards since 1996, and the agency has not set time  frames for determining whether revisions are needed. Specifically, as  noted above, FSIS revised Salmonella standards for chicken and turkey  carcasses in 2011 in response to a charge from the President\u2019s Food  Safety Working Group that the agency develop new or revised standards  to reduce the prevalence of Salmonella in poultry products. The agency  revised the pathogen standards for comminuted chicken and turkey in  2016 to help achieve public health goals for reducing human illness from  Salmonella, among other things. The revisions have generally involved  reductions in the maximum allowable percentage of products that test  positive for this pathogen. For example, in 2016, when the agency revised  the Salmonella standards for comminuted chicken, the allowable  percentage changed from 44.6 to 25.0. (See table 1.)", "However, FSIS has not revised the Salmonella standards for beef and  pork carcasses and ground beef since they were first developed in 1996.  Although USDA announced in a 2014 Federal Register notice that it  intended to propose new pathogen standards for ground beef, FSIS has  not done so. Furthermore, FSIS set the pathogen standards for beef and  pork carcasses and ground beef at industry-wide prevalence levels found  at that time, not at levels intended to be protective of human health. In  2017, FSIS reviewed data on Salmonella in beef carcasses and ground  beef and determined that the agency will not reach public health goals for  reducing foodborne illness from Salmonella without further reduction in  Salmonella contamination in beef. FSIS officials said that the agency is  developing options for how it might move forward and could determine  that revised or new standards are not needed and that other policies  could suffice in addressing pathogens in beef. In the meantime, however,  the agency in 2014 suspended monitoring against the existing Salmonella  standards for ground beef until the agency develops a revised standard.  The agency also suspended monitoring whether plants were meeting the  pathogen standard for Salmonella on pork carcasses because, according  to agency officials, the percentage of pork carcass samples that tested  positive for Salmonella was consistently low. FSIS officials said that the  agency is collecting data on pathogens in pork that could lead to new  standards for pork products. In the absence of testing against the  standards, the agency has other tools to ensure plants are controlling  pathogens. For example, the agency continues to test beef for levels of E.  coli, and FSIS inspectors at plants are to routinely check records to verify  a plant\u2019s compliance with its HACCP plans. FSIS officials told us that they  would begin monitoring against the Salmonella standards for these  products if the standards are revised or determined to be sufficient (in the  case of beef and pork carcasses and ground beef) or if the agency  develops new standards (in the case of pork cuts and ground pork).  Generally, FSIS begins monitoring against a standard once the agency announces a standard and after a phase-in period has ended. For  example, when FSIS developed new Campylobacter and Salmonella  standards for chicken parts in 2016, the agency began monitoring  whether plants met the standard 5 months after the standards were  announced in the Federal Register.", "Monitoring for compliance with pathogen standards is a key tool as  envisioned by the 1996 Pathogen Reduction; HACCP Systems final rule  for verifying the effectiveness of a plant\u2019s processing controls to prevent,  eliminate, or reduce food safety hazards. It is unclear when FSIS plans to  resume the use of this tool and complete the revisions of the Salmonella  standards for beef carcasses or ground beef or develop new standards  for additional pork products because the agency has not set time frames  for doing so. According to FSIS officials, developing or revising pathogen  standards takes time and resources, in part because the agency must  first collect and analyze data to estimate the prevalence of pathogens in  FSIS-regulated products, notify the public of proposed standards, and  open a comment period, all of which can take years. However, according  to FSIS officials, the agency has no time frames for determining what  actions to take. Program schedule planning is recognized as a leading  practice to ensure organizational activities are completed as planned,  according to the Project Management Institute\u2019s Standard for Program  Management. Such planning includes setting time frames for completing  a project. By setting time frames for determining what pathogen  standards or additional policies are needed to address pathogen levels in  beef carcasses, ground beef, and pork products, FSIS could better  ensure it completes these activities in a timely manner to protect human  health."], "subsections": []}]}, {"section_title": "USDA Is Taking Additional Steps to Address Pathogen Reduction Challenges That We Identified in 2014, but These Challenges Are Ongoing", "paragraphs": ["In addition to taking steps to develop or revise pathogen standards,  USDA\u2019s FSIS is addressing other challenges we identified in September  2014 with respect to poultry pathogens, but these challenges are ongoing  and also apply to meat products. These challenges include FSIS\u2019s limited  control over factors that affect the level of pathogens outside of plants,  pathogens not designated as hazards, the complex nature of Salmonella,  limited Campylobacter research and testing, limited enforcement  authority, absence of mandatory recall authority, and insufficient  prevalence estimates.", "Limited Control Outside of Plants  In September 2014, we found that the U.S. Department of Agriculture\u2019s (USDA) Food  Safety and Inspection Service (FSIS) faced a challenge in reducing levels of Salmonella  and Campylobacter in poultry products in part because the agency did not have  regulatory jurisdiction over farm practices to reduce contamination in poultry before they  reach a plant for slaughter and processing. At the time, we noted that FSIS had worked  to address the on-farm limitation by issuing guidelines that detailed, among other things,  several on-farm practices to reduce Salmonella and Campylobacter in live poultry. We  recommended that in future revisions of the guidelines, FSIS include information on the  effectiveness of on-farm practices to explain the potential benefits of adopting such  practices on poultry farms. USDA concurred with our recommendation. In addition, we  found that once poultry products leave a plant, factors beyond FSIS\u2019s control may affect  contamination of poultry products, such as cross-contamination from poultry products  (i.e., when bacteria spread from a food to a surface, from a surface to another food, or  from one food to another) that can occur at retail establishments, in restaurants, and in  consumers\u2019 homes, according to a food safety researcher we interviewed.", "Pathogen Contamination after Products  Leave the Plant  According to the Centers for Disease Control  and Prevention (CDC), even if meat and  poultry products leave the processing or  slaughter plant with no detectable pathogen, it  does not ensure that the products are safe, as  opportunities exist for them to become  contaminated at any point along the farm-to- table continuum.  To illustrate, frozen hamburger patties might  be trucked from a plant to a supplier, stored in  the supplier\u2019s warehouse for a few days,  trucked again to a local distribution facility, and  then delivered to a restaurant. According to  CDC, if refrigerated food is left on a loading  dock during transportation for an extended  time in warm weather, the food could reach  temperatures that allow pathogens to grow. among other things, on-farm practices to reduce levels of Salmonella  contamination in hogs. The draft Salmonella guidelines are available  on the agency\u2019s website. Even though the guidelines are not yet  finalized, FSIS encourages producers to use them, according to  agency officials we interviewed. However, unlike the poultry and beef  cattle guidelines, the draft Salmonella guidelines do not contain  information on the effectiveness of on-farm practices, as  recommended in 2011 by USDA\u2019s National Advisory Committee on  Meat and Poultry Inspection. According to the draft guidelines, when  a plant makes changes at the appropriate processing location,  process control should result in raw pork products that have less  contamination with pathogens, including Salmonella. FSIS officials we  interviewed told us that there is not as much research available for  such practices for hogs as there is for beef cattle and poultry.  However, the officials agreed that including available information  would be beneficial. By including available information on the  effectiveness of these practices to reduce the level of pathogens as it  finalizes its guidelines for controlling Salmonella in hogs, FSIS would  have better assurance that it is keeping industry informed of the  potential benefits of adopting on-farm practices and encourage their  implementation.", "Contamination can also occur during  preparation in consumers\u2019 homes if food is not  properly stored, prepared, heated, or served.  For example, according to CDC, once  contamination occurs, if meat and poultry are  stored or cooked at unsafe temperatures,  pathogens will grow quickly, which may lead to  foodborne illness.", "With respect to reducing pathogens after slaughter, FSIS continues to  update its guidance to consumers and work with federal partners to  ensure the safety of meat and poultry products after they leave the plant.  For example:  In 2015, the agency developed the FoodKeeper mobile application to  educate consumers on how to use food while at peak quality and  store food properly. It updated the application in 2017 so users  could receive automatic notifications when FDA or FSIS announces  food safety recalls.", "In 2016, FSIS and FDA announced that they would work together to  revise the FDA Food Code\u2014a model that local, state, tribal, and  federal regulators use to ensure food safety at retail stores,  restaurants, and institutions such as nursing homes, among others\u2014 to ensure consistency with FSIS regulations and guidance.", "In 2017, FSIS expanded the operating hours for its Meat and Poultry  Hotline, through which consumers could speak with an agency  representative or listen to recorded messages regarding food safety,  such as the proper storage, handling, and preparation of meat and  poultry products.", "Pathogens Not Designated as Hazards  In September 2014, we found that the U.S. Department of Agriculture\u2019s Food Safety and  Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter  contamination in poultry products when plants do not designate these pathogens as  hazards. Under the Hazard Analysis and Critical Control Point (HACCP) approach, plants  have discretion about whether to include Salmonella or Campylobacter as a hazard  \u201creasonably likely to occur\u201d in their HACCP plans and develop mitigation strategies to  reduce these pathogens. FSIS\u2019s 2014 final rule for modernizing poultry slaughter  inspection requires plants to develop, implement, and maintain written procedures to  prevent contamination of carcasses and parts by enteric pathogens\u2014bacteria that  normally reside in the intestines of many animals, including humans, such as Salmonella  and Campylobacter\u2014as well as fecal material. Plants must incorporate these  procedures into their HACCP plans, sanitation procedures, and other programs.", "Since our September 2014 report, FSIS has not required hog and beef  plants to designate Salmonella or Campylobacter as hazards likely to  occur, but it has taken other steps to reduce Salmonella and  Campylobacter contamination when plants do not designate these  pathogens as hazards. More specifically, in February 2018, FSIS  proposed a rule to modernize hog slaughter inspections. The proposed  rule would require plants to develop, implement, and maintain written  procedures to prevent contamination by enteric pathogens in pork.", "Stakeholders we interviewed representing industry and consumer  advocacy groups disagreed on whether plants should be required to  designate specific pathogens as a hazard reasonably likely to occur.  However, in response to instances in which inadequate validation of  HACCP plans led to the production of adulterated food, and in some  cases illnesses, FSIS released compliance guidance outlining best  practices for designing and implementing adequate HACCP plans for all  plants in 2015. According to FSIS, plants can use the guidance to  properly design and execute HACCP plans and reduce the likelihood of  contamination of the products they produce. Specifically, the guidance  outlines, among other things, best practices for gathering scientific and  technical support, as part of the HACCP plan validation process, to  demonstrate that the plants\u2019 processes prevent, reduce, or eliminate the  hazards identified.", "Complex Nature of Salmonella  In September 2014, we found that the U.S. Department of Agriculture\u2019s Food Safety and  Inspection Service (FSIS) faced a challenge in reducing Salmonella contamination in  poultry products because of the complex nature of this pathogen. The majority of the  representatives from industry and consumer groups we interviewed at the time, as well  as FSIS officials, agreed that Salmonella is difficult to control in poultry products because  it is widespread in the natural environment. According to Centers for Disease Control and  Prevention officials we interviewed for our past work, there are more than 2,500  serotypes of Salmonella (with different strains), some of which pose greater risk to  human health than others. Therefore, it is important to understand the genetic makeup of  each to determine which ones are more or less likely to cause human illness.", "FSIS officials said that, in the future, there may be opportunities to  improve how the agency protects human health by focusing inspections  on plants and products that have tested positive for the more dangerous  strains of Salmonella in meat and poultry products. To this end, FSIS  collaborates with USDA\u2019s Agricultural Research Service and APHIS, CDC, FDA, and local and state public health partners to develop new  technologies that can more precisely determine if a strain of Salmonella  detected is particularly dangerous to people. One such technology is  whole genome sequencing, which allows the agency to determine the  complete set of genes, or strain, within a Salmonella serotype.", "According to FSIS officials, it is more challenging to link the strain  associated with an illness to a specific meat or poultry product that has  sickened consumers; whole genome sequencing technology can more  definitively identify the strain involved in an outbreak and help reduce  incidents of illness or death due to foodborne pathogens. FSIS is  currently planning how to integrate this technology into its food safety  program. For example, current pathogen standards are based on the  presence or absence of generic Salmonella, not on specific strains. FSIS  held a public meeting in October 2017 to get input from state, federal, and  international public health partners and other stakeholders on the use of  this technology in a regulatory setting to improve food safety and public  health.", "Limited Campylobacter Research and Testing  In September 2014, we found that the U.S. Department of Agriculture\u2019s Food Safety and  Inspection Service faced a challenge in reducing levels of Campylobacter in poultry  products in part because less was known about Campylobacter than about Salmonella.  Specifically, technologies, such as clinical diagnostics, used to detect Campylobacter  may have underdiagnosed cases of illness from this pathogen, and the methods used by  many diagnostic laboratories to isolate Campylobacter from samples were not  standardized, according to a 2012 World Health Organization report on illnesses from the  pathogen. Additionally, the agency\u2019s ability to measure a reduction in Campylobacter  illnesses depended on its ability to attribute Campylobacter illnesses to poultry and other  food types, according to agency officials, and attribution analyses needed improvement.", "Since our report in September 2014, FSIS has had efforts under way  with other agencies to improve foodborne illness source attribution to  meat and poultry products and has independent data collection efforts  under way to determine the presence of Campylobacter on these  products. More specifically, in collaboration with CDC and FDA through  the Interagency Food Safety Analytics Collaboration, FSIS has taken  steps to improve and standardize methods to estimate the source  attribution for Campylobacter foodborne illness. In 2015, this interagency  collaboration improved the method for estimating the number of  Campylobacter illnesses from meat and poultry products by standardizing  the approach used by all three food safety agencies. The interagency  collaboration\u2019s new estimates for the proportion of Campylobacter  illnesses included all food products\u2014including beef, pork, and poultry.  The interagency collaboration also released updated foodborne illness  source attribution estimates in December 2017. According to FSIS  officials, the three agencies are collaborating on multiple analytic projects,  in line with the interagency collaboration\u2019s 2017\u20132021 strategic plan, to  improve models to estimate foodborne illnesses from Campylobacter and  other pathogens. These projects involve using new methods and whole  genome sequencing and other data sources.", "In addition to this interagency effort, in 2015, FSIS tested about 200  samples of pork products for Campylobacter as part of an exploratory  sampling effort, according to agency documents summarizing the efforts.  FSIS found that about 1 percent of products tested were positive for  Campylobacter and, therefore, chose not to continue testing pork  products for this pathogen. For poultry, in 2016, FSIS revised a  laboratory guidebook describing standard protocols for isolating and  analyzing Campylobacter in raw products. In 2017, the agency concluded  a literature review of Campylobacter contamination in beef and, as of  October 2017, is discussing the development of an exploratory sampling  project to test for Campylobacter in beef products, according to agency  officials.", "Limited Enforcement Authority  In September 2014, we found that the U.S. Department of Agriculture\u2019s Food Safety and  Inspection Service (FSIS) faced a potential challenge in reducing Salmonella  contamination in poultry products, according to agency officials and representatives of  some stakeholder groups we interviewed, because (1) a 2000 federal court ruling stated  that FSIS could not withdraw inspectors, effectively shutting down the plant, solely  because a plant did not meet Salmonella pathogen standards, and (2) FSIS has not  classified Salmonella as an adulterant in raw poultry products, so products contaminated  with this pathogen generally may be permitted to enter commerce.", "FSIS adopted the position that the court ruling did not affect its ability to use the  Salmonella pathogen standards as part of verifying a plant\u2019s sanitation and Hazard  Analysis and Critical Control Point plans and that it had tools, such as food safety  assessments (an evaluation of a plant\u2019s food safety system), to prevent  contaminated products from entering the market. Representatives from consumer  groups we interviewed at the time said that even with these tools, the agency does  not have sufficient authority to ensure plants comply with the standards because  FSIS cannot shut down plants when they fail the Salmonella standards alone.  Representatives from industry groups we interviewed at the time disagreed and  stated that FSIS has sufficient authority to ensure plants comply with standards  because the agency has broad statutory authority and oversight.", "Regarding FSIS not classifying Salmonella as an adulterant, representatives from  consumer groups we interviewed for our previous work said that the agency should  declare some serotypes of Salmonella as adulterants, such as those with specific  antibiotic-resistant patterns. FSIS officials we interviewed for our previous work said  they found no conclusive evidence that antibiotic-resistant strains of Salmonella or  Campylobacter have a greater resistance to the interventions used in plants but that  the agency would continue to review relevant scientific evidence to identify any  potential challenges these serotypes may present to public health.", "Since our report in September 2014, FSIS continues to stand by the  position that the 2000 court ruling does not affect its ability to use  pathogen standards as a tool to prevent contaminated products from  entering the market. FSIS reaffirmed its position in a 2016 Federal  Register notice. Our review of FSIS data from 2016 through 2017 for poultry plants shows that some plants are still not meeting pathogen  standards\u2014in some cases repeatedly not meeting the standards\u2014and  are allowed to operate. We were unable to review similar data for beef  or hog plants since, as noted above, FSIS suspended monitoring these  plants against pathogen standards. FSIS stands by its assessment that  its enforcement tools are sufficient. Moreover, in 2015, FSIS announced  an additional tool to help FSIS identify and assess problems or trends that  may be of concern. Specifically, FSIS investigators must now conduct a  public health risk evaluation at every plant that does not meet a pathogen  standard. This is a positive step for those products that have pathogen  standards, such as chicken parts. However, as previously stated, FSIS  does not test for whether plants producing beef carcasses, ground beef,  and pork carcasses meet the pathogen standards for those products, and  other products such as ground pork do not have pathogen standards.  Representatives from consumer groups and industry we interviewed  continue to disagree on whether FSIS\u2019 existing enforcement tools are  sufficient to ensure that meat and poultry plants meet pathogen  standards.", "Regarding antibiotic-resistant strains of Salmonella, FSIS officials  continue to state that the pathogen does not meet the criteria for  classifying it as an adulterant and that the agency will continue to  examine options for regulating the presence of antibiotic-resistant strains  of Salmonella in raw meat and poultry products. Agency officials told us  that to classify a pathogen as an adulterant in raw meat and poultry  products, FSIS must determine that the pathogen meets certain criteria  established both in its authorizing statutes and by case law. Specifically,  in American Public Health Association v. Butz, a federal appeals court in  1974 held that Salmonella did not adulterate raw poultry because ordinary  consumer methods of preparing and cooking the product would eliminate  the pathogen. In contrast, FSIS declared certain types of E. coli as  adulterants in beef, as discussed above, because ordinary consumer  cooking does not eliminate the pathogen. According to FSIS officials, the  available data do not appear to indicate that Salmonella presents the  same issues as E. coli or meets the necessary criteria, regardless of  whether it is resistant or susceptible to antibiotics. This issue continues to  be contentious among the stakeholders we interviewed. Six of the seven  industry stakeholders we interviewed stated that FSIS\u2019s current  enforcement authority is sufficient. Two of four food safety researchers  we interviewed stated that the agency does not need additional authority  to label Salmonella as an adulterant because FSIS has labeled other  pathogens as adulterants when it made sense to do so, such as E. coli\u00b8  and there is no need to label naturally occurring bacteria as adulterants  on raw product. In contrast, all four of the consumer advocacy groups and  two of the four food safety researchers we interviewed stated that FSIS  needs more authority to label Salmonella as an adulterant.", "No Mandatory Recall Authority  In September 2014, we found that the U.S. Department of Agriculture\u2019s Food Safety and  Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter  contamination in poultry products because it did not have mandatory food recall authority  similar to that of the Food and Drug Administration (FDA) for the food products FDA  regulates, such as milk, seafood, fruits, and vegetables. In 2011, Congress passed the  FDA Food Safety Modernization Act, giving FDA mandatory recall authority. We  recommended in October 2004 that Congress consider legislation to increase FSIS\u2019s  authority to include mandatory recalls, but the agency continues to not have such  authority. Instead, to protect human health from potentially contaminated meat and  poultry products, FSIS can issue public health alerts, which notify the public on specific  actions to take to avoid illness, or request voluntary recalls, which are voluntary actions  taken by plants, among other actions. Before requesting a voluntary recall, FSIS must  gather sufficient evidence through its investigation and determine that a product is  adulterated and mislabeled, among other things. In September 2014, we reported that  this can be challenging to do. FSIS officials told us at the time that rather than focusing  on the lack of mandatory recall authority, it was more productive to work aggressively  with the tools they had, such as withdrawing inspectors, thus preventing products from  entering commerce. According to FSIS officials, this can be as effective for keeping  unsafe food from the marketplace as FDA\u2019s recall authority.", "To encourage poultry slaughter and  processing plants to control for Salmonella and  Campylobacter\u2014disease-causing pathogens  that can sicken consumers\u2014USDA publicly  releases information on individual plant  performance for reducing these pathogens.  According to the agency\u2019s 2017 annual plan,  publishing plant-specific data allows  consumers to make more informed choices,  motivates individual plants to improve  performance, and leads to industry-wide  improvements in food safety. USDA\u2019s  Economic Research Service found that  publicly releasing the identities of plants with  poor or mediocre performance on tests for  Salmonella is strongly correlated with about a  60 percent decline of chicken carcass samples  testing positive for Salmonella from 2006 to  2010.  In 2016, USDA temporarily replaced posting  information on individual plants\u2019 performance  for chicken and turkey carcasses, chicken  parts, and comminuted poultry (e.g., ground),  with information on aggregate results to allow  time for plants to update their food safety  systems. In January 2018, FSIS began  reposting individual plants\u2019 category status for  poultry carcasses on a monthly basis.  According to the agency\u2019s annual plan for  fiscal year 2017, USDA intends to resume  publicly releasing individual plant performance  information for turkey carcasses and to add  data for plants producing chicken parts and  comminuted chicken and turkey. The agency  also intends to release data for plants  producing some beef products, according to its  2016 strategic plan on publicly releasing data.", "Since our September 2014 report, FSIS officials said that they continue to  believe that mandatory recall authority is not necessary for the reasons  previously mentioned. According to FSIS officials, the agency continues  to refine and improve its procedures for requesting voluntary recalls of  adulterated and misbranded meat and poultry products, confirming the  effectiveness of these recalls, and alerting the public about adulterated  and misbranded products that may remain in commerce. Therefore,  FSIS officials stated that the agency does not see the lack of mandatory  recall authority as an obstacle or hindrance to its efforts to protect public  health and ensure that meat and poultry products are safe, wholesome,  and properly labeled. In contrast, FDA officials told us that having  mandatory recall authority protects human health from foodborne illness  because the agency does not have to rely upon manufacturers\u2019 voluntary  recall efforts or obtain a court order to remove contaminated or  misbranded food, other than infant formula, from the food supply. In our  review of FDA\u2019s annual reports to Congress on the use of mandatory  recall authority from 2013 to 2016, the most recent available, the agency  has used its mandatory recall authority twice. The majority (12 of 17) of  the stakeholders we interviewed stated that the absence of mandatory  recall authority is not a challenge for FSIS in reducing pathogen  contamination of meat and poultry products. However, according to 3 of 4  stakeholders from consumer groups and 1 of 4 food safety researchers  we interviewed, acquiring mandatory recall authority would enable FSIS  to better protect human health because the agency would then have an  additional tool to stop an outbreak of foodborne illness and address the  level of pathogens in products once they leave the plant.", "Insufficient Prevalence Estimates  In September 2014, we found that the U.S. Department of Agriculture\u2019s (USDA) Food  Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and  Campylobacter contamination in poultry products as a result of not having sufficient  prevalence estimates. Prevalence is the proportion of a product that would test positive  for a pathogen if the entire population of that product was sampled and analyzed during a  specific period of time. FSIS collects and analyzes data to estimate the prevalence of  pathogens when the agency develops or revises pathogen standards for products it  regulates. However, we reported that there were numerous problems with the data FSIS  used to estimate prevalence. For example, assessing levels of poultry pathogens across  the entire industry was difficult using data from FSIS\u2019s verification-testing program  because the program was not designed to assess prevalence of pathogens industry-wide  and the agency does not randomly select plants for inspection. According to USDA\u2019s  National Advisory Committee on Microbiological Criteria for Food, estimating the  prevalence of pathogens in food is critical to understanding and addressing the public  health risk of foodborne illness, and these estimates provide a mechanism for measuring  performance against public health goals, among other things. FSIS officials told us at that  time that the agency had plans to propose a new testing approach for all of its poultry  products, which would allow for more frequent data collection and improve prevalence  estimates, among other things.", "In 2016, FSIS implemented this new testing approach for all poultry  products for which there are pathogen standards and for some meat  products, but according to officials, the agency did not do so for all  products that it regulates because of resource constraints. Specifically,  according to a 2016 Federal Register notice, FSIS now routinely samples  chicken and turkey carcasses, chicken parts (legs, wings, and breasts),  and comminuted chicken and turkey for Salmonella and Campylobacter  pathogens over an entire year\u2014rather than a set period of time\u2014based  on the volume of poultry products produced in plants.  It also uses this  approach to test for Salmonella in ground beef, beef manufacturing  trimmings, and other ground beef components, according to a 2014  Federal Register notice. This new approach allows for better prevalence  estimates and for monitoring changes in prevalence over time, according  to agency officials. As discussed earlier, FSIS began exploratory  sampling of pork products, including pork cuts and comminuted (including  ground) pork, in 2015. According to a 2017 agency notice describing the  sampling, FSIS collects and analyzes samples of pork products in a way  that allows for prevalence estimates. FSIS does not use the same  approach to sample other products, such as raw components used in  ground beef (e.g., esophagus, head meat, cheek meat, and hearts),  chicken half carcasses, and chicken necks, because of limited resources,  according to agency officials. These officials stated that the agency first  conducts exploratory sampling\u2014such as its current program for pork  products\u2014to determine if FSIS should allocate resources for routine  sampling of these products that would allow for prevalence estimates."], "subsections": []}, {"section_title": "Conclusions", "paragraphs": ["To help ensure the safety of meat and poultry products and protect  against foodborne illness, USDA\u2019s FSIS has transitioned to an  increasingly science-based, data-driven, risk-based approach. As part of  this approach, FSIS has taken several actions to reduce levels of  Salmonella and Campylobacter in poultry products, including  strengthening existing pathogen standards for Salmonella in poultry  carcasses and developing new Salmonella and Campylobacter standards  for certain chicken parts. However, the agency has not set pathogen  standards for many widely available products, such as pork cuts and  ground pork, and the agency\u2019s process for deciding which products to  consider for new pathogen standards is not fully documented. Previously,  FSIS has developed new pathogen standards after the agency has been  directed to do so or after widespread outbreaks indicated the need. Until  FSIS clearly documents its process for deciding which products to  consider for new pathogen standards, including the basis on which such  decisions should be made, FSIS will not have assurance that its decisions  will be risk-based and that agency personnel will know the process when  making such decisions.", "As part of its new approach, FSIS is collecting data that could enable it to  set new pathogen standards for pork cuts and ground pork, and the  agency is analyzing data that could lead to revising the Salmonella  standards for beef carcasses and ground beef\u2014which are decades old  and not set at levels that are health protective. However, the agency has  not set time frames for completing these efforts. In the absence of  pathogen standards against which the agency tests, the agency is not  using a valuable tool that could be used to help verify that plants\u2019  processing controls to prevent, eliminate, or reduce food safety hazards  are working. By setting time frames for determining what pathogen  standards or additional policies are needed to address pathogens in  these products, FSIS could better ensure it completes these activities in a  timely manner to better protect human health.", "In addition, FSIS continues to face several challenges that hinder its  ability to reduce the level of pathogens in meat and poultry products. For  example, practices outside the slaughter plant, such as conditions on  cattle, hog, and poultry farms, can affect levels of pathogens on meat and  poultry products. To help overcome this challenge, the agency has  developed draft guidance on practices for controlling levels of Salmonella  and Campylobacter on beef cattle, hog, and poultry farms, but the draft  guidance for hogs does not include available information on the  effectiveness for each practice, as an internal agency committee  recommended. As FSIS finalizes this guidance, FSIS could better inform  industry of the potential benefits of adopting on-farm practices and  encourage implementation of these practices by including available  information on their effectiveness."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making three recommendations to FSIS. Specifically:  The Administrator of FSIS should document the agency\u2019s process for  deciding which products to consider for new pathogen standards,  including the basis on which such decisions should be made.  (Recommendation 1).", "The Administrator of FSIS should set time frames for determining what  pathogen standards or additional policies are needed to address  pathogens in beef carcasses, ground beef, pork cuts, and ground pork.  (Recommendation 2).", "The Administrator of FSIS should include available information on the  effectiveness of on-farm practices to reduce the level of pathogens as it  finalizes its guidelines for controlling Salmonella in hogs.  (Recommendation 3)."], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to USDA and the Department of Health  and Human Services. In written comments, reproduced in appendix II,  USDA agreed with our three recommendations and described actions it  will take to implement them.", "In particular, with respect to our first recommendation, USDA stated that  FSIS will complete an internal document that delineates the agency\u2019s  process for creating or updating pathogen standards. However, USDA  stated that although it agrees it can take additional steps to document its  process, it does not agree that FSIS does not have assurance its  decisions are risk based. In particular, it cited a Federal Register notice  indicating that it designed its pathogen standards for chicken parts and  comminuted chicken and turkey to achieve certain reductions in illnesses  from Salmonella and Campylobacter. USDA also stated that FSIS has  consistently documented and published its process in the Federal  Register, and it noted that agency personnel use these Federal Register  notices as guidance and historical reference. While these notices can be  a useful historical record and document the steps FSIS took to ensure  that agency decisions were risk-based, we continue to believe that, until  FSIS clearly documents its process for deciding which products to  consider for new pathogen standards going forward\u2014including the basis  on which such decisions should be made\u2014FSIS will not have assurance  that its decisions will be risk-based and that agency personnel know the  process when making such decisions in the future. Completing  documentation of the agency\u2019s process would address our  recommendation.", "Concerning our second recommendation, USDA stated that in 2018 FSIS  will continue to assess data from sampling projects, along with baseline  data and outbreak/illness data, to determine whether new or revised  standards or additional policies are needed to address Salmonella in beef  products. USDA further stated that in 2019, it will use data collected  during its raw pork exploratory study to determine whether standards or  additional policies (e.g., training, guidance to industry, or instructions to  field personnel) are needed to address Salmonella in pork products.  Finalizing analysis of these data and determining if additional standards  or policies are needed to address Salmonella in beef in 2018 or pork in  2019 would address our recommendation.", "In response to our third recommendation, USDA stated that FSIS will  include available scientific information on the effectiveness of each  recommended farm practice in the guidelines for reducing Salmonella in  market hogs. Doing so would address our recommendation.", "USDA also provided technical comments. We incorporated these  comments as appropriate. The Department of Health and Human  Services did not have any comments.", "As agreed with your offices, unless you publicly announce the contents  earlier, we plan no further distribution of this report until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Agriculture, the  Administrator of the Food Safety and Inspection Service, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Salmonella Testing for Beef Purchased for the National School Lunch Program", "paragraphs": ["In addition to regulating meat and poultry sold in commerce, the U.S.  Department of Agriculture (USDA) also purchases food and, in some  cases, has additional food safety requirements for food it purchases.", "USDA\u2019s Agricultural Marketing Service (AMS) purchases beef and other  food for various federal nutrition assistance programs, including the  National School Lunch Program. USDA provides this food to states in  support of about 100,000 public and private nonprofit schools that provide  lunches to about 30 million children. Ground beef is a staple of school  menus. For example, according to AMS officials, during fiscal year 2016,  the agency purchased more than 110 million pounds of raw beef, over 90  percent of which was delivered to the National School Lunch Program.  Further, according to AMS officials, about 41 million pounds (37 percent)  were delivered raw while the rest was delivered to a federally inspected  processing facility for cooking prior to delivery to school lunch program  agencies.", "Beef to be delivered raw to the National School Lunch program is tested  for pathogens (Salmonella and Shiga-toxin-producing E. coli, two  pathogens that can cause foodborne illness in humans) and certain  microorganisms such as aerobic plate count bacteria, coliform bacteria,  and generic E. coli that serve as indicators of the effectiveness of  slaughter and processing plants\u2019 process controls to limit pathogens.", "National School Lunch Program  According to USDA, the National School  Lunch Program is a federally assisted meal  program operating in public and nonprofit  private schools and residential childcare  institutions. It provides nutritionally balanced,  low-cost or free lunches to children each  school day. The program was established  under the National School Lunch Act, signed  by President Harry Truman in 1946.  USDA\u2019s Food and Nutrition Service  administers the program at the federal level. At  the state level, the program is administered by  state agencies, operating through agreements  with school food authorities. Participating  school districts and independent schools  receive cash subsidies and food. In exchange,  participating institutions must serve lunches  that meet federal nutrition requirements and  offer the lunches at a free or reduced price to  eligible children. USDA\u2019s Agricultural  Marketing Service purchases beef and other  food for various federal nutrition assistance  programs, including the National School Lunch  Program.", "According to AMS officials, these indicator microorganisms indicate the  quality of the food safety controls at the plant. For raw beef products that  AMS considers for purchase for its programs, the agency rejects any beef  that tests positive for Salmonella, a pathogen that can cause foodborne  illness in humans. According to AMS officials, this requirement that beef  purchased for these programs not test positive for Salmonella differs from  the regulatory standard for beef inspected by USDA\u2019s Food Safety and  Inspection Service (FSIS). Further, according to AMS officials, AMS set  this requirement because raw beef was considered the product with the  most risk for recipients and enough plants were able to meet the  requirement. AMS officials said that as a purchaser for various federal  nutrition assistance programs, the agency has discretion to set  requirements for qualified suppliers, and plants can choose whether to  become qualified suppliers."], "subsections": []}, {"section_title": "Appendix II: Comments from the U.S. Department of Agriculture", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the contact named above, Mary Denigan-Macauley  (Assistant Director); Thomas Cook (Assistant Director); James R. Jones,  Jr. (Assistant Director); David Bennett (Analyst in Charge); Kevin Bray;  Cindy Gilbert; Cynthia Norris; Gloria Ross; and Kiki Theodoropoulos  made key contributions to this report."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Foot-and-Mouth Disease: USDA\u2019s Evaluations of Foreign Animal Health  Systems Could Benefit from Better Guidance and Greater Transparency.  GAO-17-373. Washington, D.C.: April 28, 2017.", "Antibiotic Resistance: More Information Needed to Oversee Use of  Medically Important Drugs in Food Animals. GAO-17-192. Washington,  D.C.: March 2, 2017.", "Food Safety: A National Strategy Is Needed to Address Fragmentation in  Federal Oversight. GAO-17-74. Washington, D.C.: January 13, 2017.", "Seafood Safety: Status of Issues Related to Catfish Inspection.  GAO-17-289T. Washington, D.C.: December 7, 2016.", "Imported Food Safety: FDA\u2019s Targeting Tool Has Enhanced Screening,  but Further Improvements Are Possible. GAO-16-399. Washington, D.C.:  May 26, 2016.", "Food Safety: FDA Coordinating with Stakeholders on New Rules but  Challenges Remain and Greater Tribal Consultation Needed. GAO 16- 425. Washington, D.C.: May 19, 2016.", "Federal Food Safety Oversight: Additional Actions Needed to Improve  Planning and Collaboration. GAO-15-180. Washington, D.C.: December  18, 2014.", "Food Safety: USDA Needs to Strengthen Its Approach to Protecting  Human Health from Pathogens in Poultry Products. GAO-14-744.  Washington, D.C.: September 30, 2014.", "Food Safety: More Disclosure and Data Needed to Clarify Impact of  Changes to Poultry and Hog Inspections. GAO-13-775. Washington,  D.C.: August 22, 2013."], "subsections": []}], "fastfact": ["The U.S. food supply is generally considered safe, but foodborne illness\u2014such as salmonella poisoning\u2014remains a common problem.", "For some meat and poultry products such as ground beef, there are standards for how much harmful bacteria USDA can find when testing. However, some common products such as turkey breasts and pork chops don't have such standards. It's unclear how USDA decides which products to consider for new standards.", "Also, we found that some of USDA's food safety standards are outdated, with no time frames for revision.", "We made recommendations to help USDA improve its standards in a timely manner to protect public health.", "(This page was changed for accuracy on the issue of time frames.)"]}
{"id": "GAO-18-187T", "url": "https://www.gao.gov/products/GAO-18-187T", "title": "Firstnet: Efforts to Establish the Public-Safety Broadband Network", "published_date": "2017-10-12T00:00:00", "released_date": "2017-10-12T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["FirstNet is charged with establishing a nationwide public-safety broadband network that is reliable, secure, and interoperable. To inform this work, FirstNet is consulting with a variety of stakeholders. In March 2017, FirstNet awarded a 25-year contract to AT&T to build, operate, and maintain the network. FirstNet's oversight of AT&T's performance is important given the scope of the network and the duration of the contract.", "This testimony provides information on (1) FirstNet's efforts to establish the network; (2) stakeholder views on network reliability, security, and interoperability challenges FirstNet faces and its efforts to address them; and (3) FirstNet's plans to oversee its network contractor. This statement is based on GAO's June 2017 report ( GAO-17-569 ). For this report, GAO reviewed FirstNet documentation, key contract oversight practices identified in federal regulations and other sources, tribal communication practices identified by federal agencies, and assessed FirstNet's efforts and plans against these practices. GAO also interviewed FirstNet officials and a nongeneralizable selection of public safety, tribal, and other stakeholders selected to obtain a variety of viewpoints."]}, {"section_title": "What GAO Found", "paragraphs": ["In June 2017, GAO reported that the First Responder Network Authority (FirstNet) had conducted key efforts to establish the network, namely releasing the request for proposal (RFP) for the network and awarding the network contract to AT&T. As the contractor, AT&T will be responsible for the overall design, development, production, operation, and evolution of the network. Additionally, FirstNet consulted with state and local, federal, and tribal stakeholders. State officials GAO contacted were generally satisfied with FirstNet's efforts to engage them. However, tribal stakeholders GAO contacted expressed concern that FirstNet has not fully engaged in effective communication with tribes. FirstNet engaged tribes through a variety of mechanisms, such as through state points of contact and a working group, but tribes noted that individuals with first-hand knowledge of tribes' experiences are unable to represent tribal views directly among FirstNet's key decision makers. Although FirstNet is required to consult with tribes through state points of contact, a key principle of effective tribal communication is to seek full understanding of tribal concerns and reach consensus where possible. By fully exploring and proposing actions to address tribal stakeholders' concerns, FirstNet could help improve its relations with tribes and better meet stakeholders' needs.", "According to stakeholders GAO contacted, FirstNet faces various challenges to ensure the network's reliability, security, and interoperability. For example, stakeholders raised concerns related to:", "providing coverage to rural areas, in buildings, or underground;", "ensuring the network's overall resiliency and cybersecurity; and", "managing frameworks for user identity, credentialing of users, access management, and prioritization of users on the network.", "FirstNet has taken action to address these challenges, such as by opening a test lab to test public safety devices and applications before deploying them on the network. The majority of stakeholders GAO contacted were satisfied with FirstNet's efforts but many noted that much uncertainty remains about how the network will be implemented.", "FirstNet established offices to oversee its network contractor, developed policies and procedures to guide contract administration\u2014including management and oversight\u2014and is receiving assistance from another federal agency with contract administration experience, although FirstNet plans to assume full responsibility in the future. For example, FirstNet established the Network Program Office to oversee the contractor's performance and facilitate quality assurance of contract deliverables, among other things. Although this office will perform essential contract-administration functions, FirstNet had not conducted long-term projections of staffing needs for the office as of April 2017. As a result, FirstNet lacks reasonable assurance that it will have sufficient resources to handle increases in its responsibilities over time. Planning for and assigning adequate resources, including people, and assessing resource needs is a key practice for planning and executing effective contract oversight. By performing a long-term staffing assessment for the Network Program Office, FirstNet would be in a better position to fully understand its staffing needs and respond to staffing changes and risks as it assumes full responsibility of contract administration in the future."]}, {"section_title": "What GAO Recommends", "paragraphs": ["In June 2017, GAO recommended that FirstNet fully explore tribal stakeholders' concerns and assess its long-term staffing needs. FirstNet agreed with GAO's recommendations and described actions to address them."]}], "report": [{"section_title": "Letter", "paragraphs": ["Thank you for the opportunity to discuss our June 2017 report on the First  Responder Network Authority (FirstNet). We have previously reported  and testified on FirstNet, including most recently in a July 2017 hearing  held by the Senate Committee on Commerce, Science, and  Transportation\u2019s Subcommittee on Communications, Technology,  Innovation, and the Internet. Whether conducting daily operations,  overseeing planned events, or responding to emergencies, public safety  officials\u2014especially first responders such as police officers and  firefighters\u2014rely on communications systems to gather and share  information and coordinate their efforts. However, first responders often  have difficulty communicating with their counterparts in other agencies  and jurisdictions because existing systems lack interoperability.", "The Middle Class Tax Relief and Job Creation Act of 2012 (the 2012 Act)  created FirstNet and required it to establish a nationwide, interoperable  public-safety broadband network (hereafter, the network)\u2014setting aside  spectrum for the network to operate on and providing FirstNet with $7  billion to fund the network\u2019s initial build-out. FirstNet must be self-funding  beyond this initial $7 billion. Key to the network\u2019s success, given its  purpose, is its reliability, security, and interoperability. To inform its work,  FirstNet must consult with state and local, federal, and tribal  stakeholders. Since 2012, FirstNet has completed a number of tasks to  plan for the build-out of the network, the most significant of which was the  issuance of a request for proposal to solicit proposals from private  companies to build, operate, and maintain the network. From these  proposals, FirstNet selected AT&T as its network contractor and awarded  it a multi-billion dollar, 25-year contract. Due to the size of the project and  duration of the contract, the oversight mechanisms that FirstNet plans to  use to monitor AT&T\u2019s progress and performance in building, operating,  and maintaining the network are important.", "My remarks today are based on our June 2017 report and like the report,  addresses (1) FirstNet\u2019s efforts to establish and finance the network; (2)  stakeholder views on network reliability, security, and interoperability  challenges FirstNet faces and its research and other efforts to address  them; and (3) FirstNet\u2019s plans to oversee the deployment of the network  by its network contractor. In our report, we recommended that FirstNet  fully explore tribal stakeholders\u2019 concerns and assess its long-term  staffing needs. FirstNet agreed with these recommendations and, in  September 2017, reported to us on the actions it has taken to implement  them.", "For our report, we reviewed the 2012 Act, FirstNet documentation, and  documentation from other federal entities involved in FirstNet\u2019s efforts,  such as FirstNet\u2019s key research partner, the Public Safety  Communications Research (PSCR) program. We compared FirstNet\u2019s  efforts to respond to tribal stakeholders\u2019 concerns with the applicable key  principle of effective tribal communication on federal infrastructure  decisions developed by several federal agencies. We assessed the  PSCR\u2019s and FirstNet\u2019s research activities against our previously identified  criteria on key phases of sound research programs. We assessed  FirstNet\u2019s contract oversight plans against key acquisition and contract  oversight practices and actions established in federal acquisition  regulations, the Department of Commerce\u2019s (Commerce) acquisition  manual, prior GAO reports, and other academic and industry sources.  We also interviewed FirstNet and Commerce officials. To obtain  stakeholder views on all our objectives\u2014particularly the challenges  FirstNet faces\u2014we selected and contacted 33 stakeholders, including  public safety, state and local government, and tribal associations and  organizations; the Department of Homeland Security, the Federal  Communications Commission, and the National Institute of Standards  and Technology (NIST) and the National Telecommunications and  Information Administration; and state government and public safety  officials. We selected these stakeholders to obtain a variety of viewpoints  from a cross section of interests and geographic locations; their views are  not generalizable. Further details on our scope and methodology are  included in our report. The work on which this statement is based was  conducted 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."], "subsections": [{"section_title": "FirstNet\u2019s Progress Establishing and Financing the Network and Consulting Stakeholders", "paragraphs": ["In our June 2017 report, we found that FirstNet has conducted key efforts  to establish the network, namely releasing the request for proposal for the  network in January 2016 and awarding the network contract to AT&T in  March 2017. As the contractor, AT&T will be responsible for the overall  design, development, production, operation, and evolution of the network,  as well as the marketing, product management, sales, distribution, and  customer care. Further, we found that FirstNet has established a  framework to meet the financial requirements established in the 2012 Act,  as depicted in figure 1. This framework focuses on leveraging FirstNet\u2019s  spectrum through the use of payments and fees with the aim of ensuring  that the network is financially sustainable over the life of the contract and  that FirstNet sustains self-funding operations.", "By establishing a single, dedicated network for public safety use,  FirstNet\u2019s network is expected to foster greater interoperability and meet  public safety officials\u2019 reliability and other needs. However, the actual use  (or \u201cadoption\u201d) of the network by public safety users will be voluntary.  Thus, even with the establishment of this framework, substantial  unknowns remain regarding how many public safety users will adopt the  network, the extent to which AT&T will be successful in monetizing the  spectrum to retain revenue from commercial users, and the extent to  which this revenue will be sufficient or appropriate in relation to the capital  needed to build, operate, and maintain the network. Therefore, we noted  that, at the time of our report, we could not assess the viability of this  framework and whether FirstNet\u2019s structures for overseeing the  contractor\u2019s use of the spectrum for commercial users will be appropriate.", "We also found that FirstNet has made progress consulting with state and  local, federal, and tribal stakeholders through a variety of mechanisms.  State officials we contacted were generally satisfied with FirstNet\u2019s efforts  to engage them. However, tribal stakeholders we contacted expressed  concern with FirstNet\u2019s efforts to consult with tribes per the 2012 Act\u2019s  requirements. In particular, four of the five tribal organizations we  contacted said that FirstNet has not fully engaged in effective  communication or has relied on state points of contact too much as  opposed to engaging directly with tribes; the other tribal organization was  not aware of FirstNet or its mission at all. Further, tribes noted that  individuals with first-hand knowledge of tribes\u2019 experiences are not able to  represent tribal views directly among FirstNet\u2019s key decision makers.  FirstNet has stated that, indeed, the 2012 Act requires that it consult with  tribes through state points of contact. Nevertheless, several federal  agencies have identified seeking a full understanding of tribal concerns\u2014 and reaching consensus where possible\u2014as a key principle of effective  tribal communication, noting that agencies should adapt to changing  circumstances, contemplate creative problem solving, identify options for  addressing concerns, and exhaust alternatives to achieve mutually  agreeable solutions.", "We concluded that, by fully exploring and proposing actions to address  tribal stakeholders\u2019 concerns, FirstNet could help improve its relations  with tribes and better meet stakeholders\u2019 needs. As such, we  recommended in our report that FirstNet fully explore tribal concerns and  propose actions, as needed, to address those concerns. FirstNet agreed  with this recommendation and, in September 2017, described to us the  actions it has taken to implement it. For example, according to FirstNet, in  September 2017 it began a process to formally explore the tribal outreach  concerns raised in our report and expects to propose improvements by  the end of this year. FirstNet has also said that it adopted an  organization-wide tribal consultation policy which it expects to take effect  towards the end of this year. If implemented as planned, these actions  should address the intent of the recommendation."], "subsections": []}, {"section_title": "FirstNet\u2019s Network Reliability, Security, and Interoperability Challenges and Efforts to Address Them", "paragraphs": ["In our report, we found that\u2014according to stakeholders we contacted\u2014 FirstNet faces various challenges to ensure the network\u2019s reliability,  security, and interoperability. For example, stakeholders raised concerns  related to: providing network coverage to rural areas, in buildings, or ensuring the network\u2019s overall resiliency and cybersecurity; and managing frameworks for user identity, credentialing of users, access  management, and prioritization of users on the network.", "However, we also found that both FirstNet and the PSCR have begun  research and other efforts to help ensure the reliability, security, and  interoperability of the network and address the challenges raised by  stakeholders. For example, in November 2016, FirstNet opened an  Innovation and Test Lab at its technical headquarters in Boulder,  Colorado. According to FirstNet documentation, FirstNet plans to use\u2014 and allow AT&T to use\u2014the lab to test public safety devices and  applications before deploying them on the network. Additionally, the  PSCR has conducted research on behalf of FirstNet and, using $300  million in funds provided to NIST by the 2012 Act, is also planning for and  implementing other research activities to support FirstNet. For instance, in  January 2016, PSCR launched its Public Safety Innovation Accelerator  Program to support these research activities, and in December 2016,  NIST issued a funding announcement to fund research in several areas.", "At the time of our report, we found that PSCR\u2019s research process  generally aligned with key phases of sound research programs identified  by leading national organizations, including the American Evaluation  Association and the National Academy of Sciences. For example,  PSCR has established a structured process for developing research  priorities that includes both internal and external stakeholders, and has  identified criteria it uses to help it select the research areas to fund and  procedures to help it guide and monitor its research. Similarly, FirstNet  has determined its research priorities to date based on its network- planning needs and in consultation with internal and external  stakeholders, and worked with the PSCR to define criteria to help it select  research areas.", "Further, we found that the majority of stakeholders we contacted were  satisfied with the planning efforts to ensure the reliability, security, and  interoperability of the network. However, many stakeholders also said that  there is much remaining uncertainty about how this will be implemented in  practice. Additionally, one public safety official we contacted told us that  FirstNet and its contractor will have to balance the costs associated with  implementing features that make the network reliable and secure with the  need to establish compelling and competitively priced service packages  and fees that will encourage user adoption of the network. Indeed,  numerous stakeholders we contacted cited the cost of subscribing to the  network as a key factor affecting user adoption, noting that the pricing  must be comparable to what they pay for commercial service now, that  budgets are constrained in the public safety community, or that local  governments do not want costs to increase. Further, commercial carriers  could choose to compete with FirstNet. FirstNet has stated that it expects  AT&T to provide services at a competitive price and deliver affordable,  high-quality services that will encourage public safety users to adopt the  network. Ultimately\u2014because the network must be self-funding and  FirstNet has stated that revenue from network users will be critical to this  funding\u2014the success of the network depends on whether FirstNet and  AT&T generate enough revenue to operate it over the long term and  whether public safety users adopt it, no matter how reliable and secure it  is."], "subsections": []}, {"section_title": "FirstNet\u2019s Contract Oversight Mechanisms", "paragraphs": ["FirstNet must manage and oversee the implementation of the network  contract to build, operate, and maintain the network. Federal internal- control standards also state that an entity\u2019s management retains  responsibility for the performance of processes assigned to service  organizations (such as contractors) and that management should hold  these organizations accountable for their performance.", "In our report, we found that FirstNet has taken a number of steps to  establish contract oversight mechanisms, but has not fully assessed the  staffing needs of its oversight workforce. FirstNet\u2019s oversight mechanisms  include developing policies and procedures to guide contract  administration and establishing offices to oversee its network contractor.  In particular, FirstNet established the Network Program Office to oversee  the contractor\u2019s performance and facilitate quality assurance of contract  deliverables, among other things. FirstNet is also receiving assistance  from the Department of the Interior, which has experience with contract  administration, although FirstNet plans to assume full responsibility for  contract administration in the future. We also found that FirstNet\u2019s efforts  to develop contract oversight mechanisms aligned with several key  actions that we identified as contributing to effective contract oversight.  However, although FirstNet\u2019s Network Program Office will perform  essential contract administration functions, FirstNet had not conducted  long-term projections of staffing needs for the office as of April 2017.  Planning for and assigning adequate resources, including people, and  performing an assessment of the resources needed to oversee projects is  one of the key actions we identified for planning and executing effective  contract oversight.", "We concluded that FirstNet lacks reasonable assurance that it will have  sufficient resources to handle increases in its responsibilities over time  and that, by performing a long-term staffing assessment for the Network  Program Office, FirstNet would be in a better position to fully understand  its staffing needs and respond to staffing changes and risks as it assumes  full responsibility of contract administration in the future. As such, we  recommended in our report that FirstNet assess the long-term staffing  needs in the Network Program Office prior to assuming full responsibility  for administering the network contract. FirstNet agreed with this  recommendation and, in September 2017, described the actions it has  taken to implement it. According to FirstNet, in August 2017 the Network  Program Office adopted a strategic workforce plan for fiscal years 2018 to  2022, which it expects to update annually. According to FirstNet, this plan  provides a comprehensive view of current and future human capital  needs required to support the implementation of the network and  identifies strategies the office will employ to fill gaps between current and  future needs, among other things. If implemented as planned, this action  should address the intent of the recommendation.", "Chairman Donovan, Ranking Member Payne, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time."], "subsections": []}, {"section_title": "GAO Contact and Staff Acknowledgments", "paragraphs": ["If you or your staff have any questions about this testimony, please  contact Mark L. Goldstein, Director, Physical Infrastructure Issues at  (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Sally Moino and Nalylee Padilla. Other staff who made contributions  to the report cited in this testimony are identified in the source product.", "This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately."], "subsections": []}]}], "fastfact": []}
{"id": "GAO-18-33", "url": "https://www.gao.gov/products/GAO-18-33", "title": "Sexual Violence: Actions Needed to Improve DOD's Efforts to Address the Continuum of Unwanted Sexual Behaviors", "published_date": "2017-12-18T00:00:00", "released_date": "2017-12-18T00:00:00", "highlight": [{"section_title": "Why GAO Did This Study", "paragraphs": ["Unwanted sexual behaviors in the military\u2014including sexual harassment, sexual assault, and domestic violence involving sexual assault\u2014undermine core values, unit cohesion, combat readiness, and public goodwill. Recent studies suggest that these behaviors are part of a \u201ccontinuum of harm,\u201d which DOD defines as a range of interconnected, inappropriate behaviors that are connected to the occurrence of sexual assault and that support an environment that tolerates these behaviors.", "Senate Report 114-255 included a provision for GAO to review efforts by DOD to prevent unwanted sexual behaviors in the military. GAO assessed the extent to which DOD has (1) policies on sexual harassment that include CDC principles and relevant legislative elements; (2) processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors; and (3) overarching efforts, including a prevention strategy, to address unwanted sexual behaviors across the continuum of harm. GAO reviewed DOD policies and pertinent databases, and interviewed agency officials."]}, {"section_title": "What GAO Found", "paragraphs": ["The Department of Defense's (DOD) policies on sexual harassment include some but not all of the Centers for Disease Control's (CDC) principles for preventing sexual violence and include most relevant legislative elements. GAO identified six principles from CDC's framework for preventing sexual violence, which CDC defines as including sexual harassment. GAO found that Office of the Secretary of Defense (OSD) and military service policies generally include CDC's principles regarding prevention strategies, but none address risk and protective factors, which identify conditions or behaviors that might heighten or lower the risk of sexual harassment victimization or perpetration, respectively. Additionally, a statutory provision in fiscal year 2013 mandated that DOD, among other things, develop a comprehensive sexual harassment policy that includes prevention training, mechanisms for anonymous reporting, and mechanisms for resolving incidents of sexual harassment. OSD and service policies are generally consistent with those required elements except for the inclusion of anonymous reporting. DOD is developing a new department-wide policy that will address sexual harassment, but it is too early to determine how the policy will address these issues. Without policies that include CDC's principles and mechanisms for anonymous reporting, DOD may miss opportunities to address and potentially reduce incidents of unwanted sexual behaviors. Finally, a statutory change in fiscal year 2017 redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault. While officials indicated a need to update policies, they were unclear on the full implications, if any, of this change.", "DOD has processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors including sexual assault and incidents of domestic violence that involve sexual assault, but does not have similar processes for maintaining and reporting data on incidents of sexual harassment. Specifically, DOD uses centralized databases to maintain and report data on incidents of sexual assault and domestic violence that involve sexual assault, but relies on military service-specific databases for information on incidents of sexual harassment. DOD has not established standard data elements and definitions to guide the services in maintaining and reporting data on sexual harassment. Inconsistencies in data elements and definitions generally mean that one service may be maintaining data that is more or less detailed than, or that differs from, the data maintained by other services. Such inconsistencies may create difficulties in reporting department-wide sexual harassment data, since the individual service data must be adapted to fit reporting requirements.", "DOD has several overarching efforts to address unwanted sexual behaviors across the continuum of harm, including developing an overarching prevention strategy. However, it is unclear whether the strategy under development will contain key elements for long-term and results-oriented strategic planning such as long-term goals, strategies to achieve goals, and metrics to gauge progress. Without incorporating these elements into its overarching prevention strategy, DOD may not be in a position to effectively coordinate and integrate prevention activities and reduce instances of unwanted sexual behaviors."]}, {"section_title": "What GAO Recommends", "paragraphs": ["GAO recommends that DOD fully include in its new policy on sexual harassment CDC's principles for sexual violence prevention and mechanisms for anonymous reporting, develop standard data elements and definitions for reporting sexual harassment incidents, and incorporate in its overarching prevention strategy elements key for a long-term, results-oriented strategy. DOD generally concurred with the recommendations."]}], "report": [{"section_title": "Letter", "paragraphs": ["Unwanted sexual behaviors in the military\u2014including sexual harassment,  sexual assault, and domestic violence involving sexual assault\u2014 undermine core values, unit cohesion, combat readiness, and public  goodwill. Recent studies by the Department of Defense (DOD) and the  RAND Corporation suggest that unwanted sexual behaviors do not exist  in isolation but are part of a \u201ccontinuum of harm.\u201d DOD defines this  continuum of harm as a range of interconnected, inappropriate behaviors  that are connected to the occurrence of sexual assault and support an  environment that tolerates these behaviors. According to RAND,  servicemembers who experienced sexual harassment or gender  discrimination also experienced higher rates of sexual assault, and  approximately one-third of servicemembers who are sexually assaulted  stated that the offender sexually harassed them before the assault.", "Concerned about the prevalence of unwanted sexual behaviors,  Congress has taken a number of legislative actions. Among other  provisions, Congress in 2008 mandated that DOD implement a  centralized, case-level database for the collection and maintenance of  information regarding sexual assaults. In 2011, Congress mandated that  DOD publish annual reports on all sexual assaults involving  servicemembers. In 2013, Congress mandated that DOD develop a  comprehensive sexual harassment policy and a plan for data collection.  Most recently, in 2016, Congress changed the definition of sexual  harassment for purposes of investigations by commanding officers into  complaints of harassment, and also mandated that DOD report on the  annual number of incidents of domestic violence, including those  involving sexual assault, whether substantiated or unsubstantiated. In  2016, Congress also took actions regarding hazing in the military\u2014 another problem behavior that may or may not have a sexual  component\u2014by mandating that DOD establish a data collection system  for hazing, improve hazing training, and issue annual reports on hazing.", "We have reported previously on DOD\u2019s efforts to prevent and respond to  unwanted sexual behaviors in the military, as well as on other problem  behaviors such as hazing. In 2016, we reported on DOD and Coast  Guard efforts to prevent and track incidents of hazing in the military and  recommended, among other things, that DOD and the Coast Guard issue  guidance on the collection and tracking of hazing incident data and  evaluate the prevalence of hazing. DOD and the Department of  Homeland Security, which oversees the Coast Guard, concurred with all  of our recommendations and have begun taking actions to address  them. In 2015, we reported on our evaluation of DOD\u2019s sexual assault  prevention strategy\u2014based Centers for Disease Control\u2019s (CDC) sexual  violence framework\u2014and made five recommendations to improve upon  and implement that strategy. DOD concurred with those five  recommendations and is currently in the process of implementing them.  This is one of several reviews we have conducted on sexual assaults in  the military. We last reviewed DOD\u2019s sexual harassment program in 2011  and made five recommendations, including that DOD establish an  oversight framework to help guide the department\u2019s efforts to prevent and  address sexual harassment incidents and that DOD specify uniform data  elements that the military services should use when collecting and  reporting information on formal sexual harassment complaints. DOD  concurred with our recommendations but did not implement them. In  2010, we reported on domestic abuse at DOD and recommended that  DOD establish an oversight framework to guide its efforts in preventing  and treating domestic abuse. DOD concurred and implemented this  recommendation. Additional information on our prior related work is  provided at the end of this report.", "Senate Report 114-255, accompanying a bill for the National Defense  Authorization Act (NDAA) for Fiscal Year (FY) 2017, included a provision  that we review efforts by DOD to prevent unwanted sexual behaviors in  the military. We assessed the extent to which DOD has (1) policies on  sexual harassment that include CDC principles and relevant legislative  elements; (2) processes for maintaining and reporting consistent data on  incidents of unwanted sexual behaviors; and (3) overarching efforts,  including a prevention strategy, to address unwanted sexual behaviors  across the continuum of harm.", "For our first objective, we obtained and reviewed Office of the Secretary  of Defense (OSD) and service-level sexual harassment policies. We  compared the policies with a framework developed by CDC for preventing  sexual violence, which CDC defines as including non-contact unwanted  sexual behaviors, sexual harassment, and physical sexual assault. We  reviewed CDC\u2019s framework for preventing sexual violence as well as our  report on DOD\u2019s sexual assault prevention strategy to identify six  principles that an organization can include in a sexual violence prevention  strategy or policy. DOD previously used this framework to guide its  strategy for preventing sexual assault. The socioecological model that  underpins and informs CDC\u2019s prevention framework is based on the  concept of addressing the health of a given population by identifying  common risk and protective factors and applying effective, tested  strategies. In addition, we reviewed DOD\u2019s sexual harassment policies  to determine the extent to which they included three elements identified in  section 579 of the NDAA for FY 2013, which directed, among other  things, that DOD develop a comprehensive policy on sexual  harassment. The three elements are (1) prevention training for  members of the armed forces; (2) mechanisms for reporting sexual  harassment, including mechanisms for anonymous reporting; and (3)  mechanisms for resolving sexual harassment that include the prosecution  of perpetrators. Two of our analysts independently reviewed the policies  and determined the degree to which each element was included.", "For our second objective, we reviewed DOD reports to Congress that  provide incident data regarding unwanted sexual behaviors, including  DOD\u2019s most recent annual report on sexual assault in the military. We  identified the databases that generate the reported data and reviewed the  processes for assuring the consistency of data in those databases. In  evaluating the reported data, we reviewed pertinent statutory provisions  and DOD guidance. We also reviewed Standards for Internal Control in  the Federal Government that address agencies\u2019 use of quality data and  our prior reports evaluating sexual assault data.", "For our third objective, we obtained information on current efforts within  OSD to develop an overarching strategy across the continuum of harm.  We reviewed our prior work to identify key elements of strategic plans,  which include (1) a mission statement, (2) long-term goals, (3) strategies  to achieve goals, (4) external factors that could affect goals, (5) use of  metrics to gauge progress, and (6) evaluations of the plan to monitor  goals and objectives. We also identified collaborative efforts by OSD  offices that guide and oversee programs for addressing unwanted sexual  behaviors. We obtained information on the purpose and scope of each  effort, as well as on the participating offices. We interviewed DOD officials  in positions designed to integrate activities across the continuum of harm  to determine current activities and initiatives that the department is  undertaking to address coordination. In identifying DOD\u2019s collaborative  efforts, we reviewed our prior work on collaboration among federal  agencies but we did not assess the effectiveness of the department\u2019s  collaborative efforts.", "We conducted this performance audit from August 2016 to December  2017, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Further details on our  scope and methodology are presented in appendix I."], "subsections": [{"section_title": "Background", "paragraphs": [], "subsections": [{"section_title": "DOD Definitions of Unwanted Sexual Behaviors", "paragraphs": ["DOD has defined various types of unwanted sexual behaviors, including  sexual assault, sexual harassment, and domestic violence.", "Sexual assault: DOD defines sexual assault as intentional sexual  contact, characterized by use of force, threats, intimidation, abuse of  authority, or when the victim does not or cannot consent. The term  includes a broad category of sexual offenses consisting of the  following specific Uniform Code of Military Justice offenses: rape,  sexual assault, aggravated sexual contact, abusive sexual contact,  forcible sodomy (forced oral or anal sex), or attempts to commit these  acts.", "Sexual harassment: DOD defines sexual harassment as a form of sex  discrimination that involves unwelcome sexual advances, requests for  sexual favors, and other verbal or physical conduct of a sexual nature  when (1) submission to such conduct is made either explicitly or  implicitly a term or condition of a person\u2019s job, pay, or career; (2)  submission to or rejection of such conduct by a person is used as a  basis for career or employment decisions affecting that person; or (3)  such conduct has the purpose or effect of unreasonably interfering  with an individual\u2019s work performance or creates an intimidating,  hostile, or offensive working environment. However, as noted  earlier, a provision of the NDAA for FY 2017 changed the definition of  sexual harassment for the military for purposes of investigations by  commanding officers so that it is no longer defined solely as a form of  sex discrimination, but is recognized as an adverse behavior on the  spectrum of behavior that can contribute to an increase in the  incidence of sexual assault. We discuss this changed definition of  sexual harassment later in this report.", "Domestic violence: DOD defines domestic violence as an offense  under the United States Code, the Uniform Code of Military Justice, or  state law involving the use, attempted use, or threatened use of force  or violence against a person, or a violation of a lawful order issued for  the protection of a person who is a current or former spouse, a person  with whom the abuser shares a child in common or a current or former  intimate partner with whom the abuser shares or has shared a  common domicile. Sexual assault of spouses and intimate partners  is a subset of domestic violence."], "subsections": []}, {"section_title": "DOD Entities with Key Roles and Responsibilities in Addressing Unwanted Sexual Behaviors", "paragraphs": ["Various offices and organizations within DOD play a role in addressing  unwanted sexual behaviors in the military. The Under Secretary of  Defense for Personnel and Readiness is responsible for developing the  overall policy and guidance for the department\u2019s efforts to prevent and  respond to instances of sexual assault, except for criminal investigative  policy matters assigned to the DOD Inspector General and legal  processes in the Uniform Code of Military Justice."], "subsections": [{"section_title": "DOD\u2019s Sexual Assault Prevention and Response Program", "paragraphs": ["The Under Secretary of Defense for Personnel and Readiness oversees  the Sexual Assault Prevention and Response Office (SAPRO), which  serves as the department\u2019s single point of authority, accountability, and  oversight for its sexual assault prevention and response program. The  responsibilities of the Under Secretary of Defense for Personnel and  Readiness and SAPRO with regard to sexual assault prevention and  response include providing the military services with guidance and  technical support and facilitating the identification and resolution of  issues; developing programs, policies, and training standards for the  prevention of, reporting of, and response to sexual assault; developing  strategic program guidance and joint planning objectives; overseeing the  department\u2019s collection and maintenance of data on reported alleged  sexual assaults involving servicemembers; establishing mechanisms to  measure the effectiveness of the department\u2019s sexual assault prevention  and response program; and preparing the department\u2019s mandated annual  reports to Congress on sexual assaults involving servicemembers.", "The Secretaries of the military departments are responsible for  establishing policies for preventing and responding to sexual assault  within their respective military service, and for ensuring compliance with  DOD\u2019s policy. Further, they are responsible for establishing policies that  ensure commander accountability for program implementation and  execution. Each military service has established an office that is  responsible for overseeing and managing the military service\u2019s sexual  assault prevention and response program. Each military service also  maintains a primary policy document on its sexual assault prevention and  response program. Much like DOD\u2019s directive and instruction on sexual  assault prevention and response, the military service policies outline  responsibilities of relevant stakeholders, including commanders, sexual  assault response coordinators, and victim advocates and training  requirements for all personnel."], "subsections": []}, {"section_title": "DOD\u2019s Military Equal Opportunity Program", "paragraphs": ["The Under Secretary of Defense for Personnel and Readiness has  responsibility for developing the overall policy for DOD\u2019s military equal  opportunity program and monitoring compliance with the department\u2019s  policy.  According to the policy, all servicemembers are afforded equal  opportunity in an environment free from harassment, including sexual  harassment, and unlawful discrimination on the basis of race, color,  national origin, religion, sex (including gender), and sexual orientation.  The chain of command is used as the primary and preferred channel to  (1) identify and correct unlawful discrimination practices, (2) process and  resolve complaints of unlawful discrimination or harassment, to include  sexual, and (3) ensure that military equal opportunity matters are taken  seriously and acted on as necessary. The Office of Diversity  Management and Equal Opportunity (ODMEO) oversees the  department\u2019s efforts to promote equal opportunity, diversity, and inclusion  management, and to help prevent unlawful discrimination and  harassment throughout DOD. The Defense Equal Opportunity  Management Institute develops training and studies on equal opportunity.  Behaviors under the purview of the military equal opportunity program  include unlawful discrimination on the basis of color, national origin, race,  religion, or sex.", "The Secretaries of the military departments are responsible for  developing policies to prevent unlawful discrimination and harassment,  (including sexual harassment), ensuring compliance with DOD\u2019s policy,  and establishing both formal and informal means of resolving complaints.  The chain of command is the primary and preferred channel for  identifying and correcting discriminatory practices and resolving  servicemembers\u2019 complaints of sexual harassment. The military  services encourage servicemembers to resolve any complaints of sexual  harassment they may have at the lowest possible level first.", "For servicemembers who wish to report a complaint of sexual  harassment, DOD provides two complaint options\u2014formal and informal.", "A formal complaint is an allegation of sexual harassment that a  complainant submits in writing to the authority designated for the receipt  of such complaints in military service implementing guidance. Formal  complaints require specific actions to be taken, are subject to timelines,  and require documentation of the actions taken, in accordance with  federal law. In contrast, an informal complaint is an allegation of sexual  harassment, made either orally or in writing, which is not submitted as a  formal complaint. Informal complaints may be resolved directly by the  complainant, such as by confronting the individual or by involving another  individual or the chain of command. Servicemembers who elect to resolve  their complaints informally may submit a formal complaint if they are  dissatisfied with the outcome of the informal process. In 2014, DOD  directed the military services to develop implementing instructions and  mechanisms for reporting instances of sexual harassment  anonymously."], "subsections": []}, {"section_title": "DOD\u2019s Family Advocacy Program", "paragraphs": ["The Deputy Assistant Secretary of Defense for Military Community and  Family Policy under the Under Secretary of Defense for Personnel and  Readiness is responsible for the development and oversight of policy for  the military departments to implement a coordinated community response  approach to addressing domestic abuse. The DOD Family Advocacy  Program (FAP) office provides guidance and technical assistance to the  military departments and DOD components to support their efforts to  address, among other things, domestic abuse.", "The Secretaries of the military departments are responsible for  developing military service-wide policies, supplementary standards, and  instructions to provide for the requirements within their respective  installations FAPs. Each military service has established a FAP that is  responsible for overseeing and managing, among other things, the  installation-level FAPs and the military service\u2019s domestic violence and  domestic abuse prevention and response programs. When domestic  abuse does occur, the military service installation FAP conducts a risk  assessment and works to ensure the safety of the victims and help  military families overcome the effects as well as change destructive  patterns."], "subsections": []}]}, {"section_title": "CDC and Its Sexual Violence Prevention Efforts", "paragraphs": ["CDC is one of the major operating components of the Department of  Health and Human Services, which serves as the federal government\u2019s  principal agency for protecting the health of U.S. citizens. As part of its  health-related mission, CDC serves as the national focal point for  developing and applying disease prevention and control, environmental  health, and health promotion and education activities. CDC, among other  things, conducts research to enhance prevention, develops and  advocates public health policies, implements prevention strategies,  promotes healthy behaviors, fosters safe and healthful environments, and  provides associated training.", "In 1992, CDC established the National Center for Injury Prevention and  Control as the lead federal organization for violence prevention. The  center\u2019s Division of Violence Prevention focuses on stopping violence,  including sexual violence, before it begins and works to achieve this by  conducting research on the factors that put people at risk for violence,  examining the effective adoption and dissemination of prevention  strategies, and evaluating the effectiveness of violence prevention  programs. In 2004, CDC published a framework for effective sexual  violence prevention strategies. This framework includes prevention  concepts and strategies, such as identifying risk and protective factors  (i.e., factors that may put a person at risk for committing sexual assault or  that, alternatively, may prevent harm). CDC\u2019s framework defines sexual  violence as including non-contact unwanted sexual behaviors, sexual  harassment, and physical sexual assault."], "subsections": []}, {"section_title": "Continuum of Harm", "paragraphs": ["DOD has acknowledged that connections exist across the continuum of  unwanted sexual behaviors including sexual harassment and sexual  assault and that this continuum of harm is reflected in key documents that  guide prevention and response activities. For example, SAPRO has also  reported that certain behavior and activities, such as hazing, can lead to  sexual assault. Additionally, DOD\u2019s Prevention Roundtable and 2014- 2016 Sexual Assault Prevention Strategy have both adopted CDC\u2019s  definition of \u201cprevention\u201d as it applies to sexual violence. CDC defines  sexual violence to include sexual harassment and sexual assault.", "In 2014 and 2017, DOD contracted with RAND to conduct independent  assessments of behaviors across the continuum of harm, including sexual  assault and sexual harassment. In its 2014 report, RAND found that (1)  34 percent of male servicemembers who were surveyed reported that the  sexual assault was part of a hazing incident, (2) servicemembers who  experienced sexual harassment or gender discrimination in the past year  also experienced higher rates of sexual assault, and (3) approximately  one-third of servicemembers who are sexually assaulted stated the  offender sexually harassed them before the assault. In its 2017 report,  RAND found that (1) people are more likely to engage in problematic  behaviors, such as sexual harassment, if that person perceives that peers  and leaders condone those actions and (2) some organizations  responsible for addressing unlawful discrimination and sexual harassment  lack adequate policies, plans, information systems, and resources  needed to establish a departmental approach to certain behavioral  issues, inform senior leadership about these problems, and ensure that  leadership\u2019s decisions about problematic behaviors are uniformly  enforced.", "CDC research revealed that behaviors such as bullying and homophobic  teasing in early adolescence are significant predictors of sexual  harassment over time. According to the CDC, these youth are at an  increased potential to perpetrate sexual violence and engage in sexually  harassing behavior. In response, CDC recommends that communities  work to prevent all types of violence from occurring and coordinate and  integrate responses to violence in a way that recognizes these  connections. CDC\u2019s research has also established that survivors of one  form of violence are more likely to be victims of other forms of violence,  that survivors of violence are at higher risk for behaving violently, and that  people who behave violently are more likely to commit other forms of  violence. Further, CDC states that violence prevention and intervention  efforts that focus on only one form of violence can be broadened to  address multiple, connected forms of violence to increase the public  health impact."], "subsections": []}]}, {"section_title": "DOD\u2019s Policies on Sexual Harassment Include Some but Not All of CDC\u2019s Principles and Most Relevant Legislative Elements", "paragraphs": ["DOD\u2019s policies on sexual harassment include some but not all of CDC\u2019s  principles and most relevant legislative elements. OSD and military  service-specific sexual harassment policies generally include prevention  strategies that CDC has identified in its principles for sexual violence  prevention but leave out risk and protective factors, as well as risk  domains. Additionally, DOD\u2019s sexual harassment policies include most  elements identified in section 579 of the NDAA for FY 2013, but do not  consistently include mechanisms for anonymous reporting. ODMEO  officials stated that they plan to issue a new policy that is intended to  focus on sexual harassment and other forms of harassment, but it is too  early to know whether that policy will include all the CDC principles or  mechanisms for anonymous reporting. We also noted during our review  that most existing policies have not yet been updated to reflect a  provision in the fiscal year 2017 NDAA that redefined sexual harassment  for certain purposes so it is no longer defined solely as a form of sex  discrimination but is recognized also as an adverse behavior on the  spectrum of behaviors that can contribute to an increase in the incidence  of sexual assault."], "subsections": [{"section_title": "DOD\u2019s Sexual Harassment Policies Include Some of CDC\u2019s Principles for Preventing Sexual Violence but Not Others", "paragraphs": ["DOD\u2019s sexual harassment policies include some of the principles that  have been developed by CDC as part of a framework for preventing  sexual violence, but other principles are not included. OSD includes  sexual harassment as part of its broader military equal opportunity  policy. It addresses, among other things, processes for preventing and  responding to cases of discrimination, including sexual harassment;  education and training in equal opportunity; and complaints processing.  The military services\u2019 policies on sexual harassment cover similar topics,  such as chain of command responsibilities, complaint processing, and  definitions for sexual harassment; however, they have some  differences. For example, while all policies include provisions on sexual  harassment prevention training, the Army\u2019s and the Navy\u2019s policies  include specific characteristics of effective training. Both policies also  specify what should be included in trainings for different levels of the  chain of command. The Marine Corps and Air Force policies simply state  that commanders must conduct sexual harassment prevention training.", "CDC\u2019s framework defines sexual violence as including non-contact  unwanted sexual behaviors, sexual harassment, and physical sexual  assault. We applied six principles for sexual violence prevention from  CDC\u2019s framework to DOD\u2019s sexual harassment policies. These principles  are:", "Risk factors: Factors that may put people at risk for sexual violence  perpetration or victimization, such as an organizational climate that  either explicitly or implicitly condones sexual harassment.", "Protective factors: Factors that may protect high-risk people from  harm, such as an organizational climate that promotes respect  amongst personnel at all levels.", "Primary strategies for prevention: Strategies that occur before sexual  violence takes place to prevent initial perpetration, such as sexual  harassment prevention training.", "Secondary strategies for prevention: Immediate responses after  sexual violence has occurred to address the early identification of  victims and the short-term consequences of violence, such as  mechanisms for reporting instances of sexual harassment and  immediate interventions.", "Tertiary strategies for prevention: Long-term responses after sexual  violence has occurred to address the lasting consequences of  violence and sex-offender treatment interventions, such as long-term  treatment of the victim and perpetrator.", "Risk domains: Levels at which risk and protective factors should be  categorized, including: individual, relationship, community, and  societal. In its sexual assault prevention strategy, DOD adapted risk  domains to the military population, using the levels of: individual,  relationship, leaders at all levels, military community, and society.", "Our comparison of DOD sexual harassment policies with CDC\u2019s  framework for preventing sexual violence showed that the policies include  some of the principles in the framework but not others (see table 1.)", "Our analysis showed that the OSD and the Air Force policies each  include two of the six principles in CDC\u2019s framework, and the Army, the  Navy, and the Marine Corps policies include three principles. Specifically,  the policies generally identify sexual harassment prevention training for  the armed forces, a primary strategy for prevention. In addition, the  policies generally outline mechanisms for reporting and responding to  sexual harassment, considered a secondary strategy for prevention. The  Army, the Navy, and the Marine Corps policies outline counseling support  and referral services, as well as specifying the options available for  administrative or judicial punishment, including discharge from service for  perpetrators, which can be considered to be tertiary strategies for  prevention.", "Common elements missing from DOD\u2019s sexual harassment policies are  risk factors and protective factors, which identify conditions or behaviors  that might heighten or lower the risk of sexual harassment victimization or  perpetration, respectively. Examples of risk factors for sexual violence  identified by the CDC include, but are not limited to, alcohol and drug use,  hypermasculinity, emotionally unsupportive family environments, general  tolerance of sexual violence within the community, and societal norms  that support male superiority and sexual entitlement. Examples of  protective factors from the CDC include emotional health and  connectedness, and empathy and concern for how one\u2019s actions affect  others. Additionally, RAND identified an organizational climate that is  oppositional to sexual violence as a protective factor. The policies also  did not include risk domains, which would categorize risk and protective  factors at the individual, relationship, community, and society levels.  ODMEO officials told us that they are familiar with the CDC framework  and are considering using it as a source of best practices for a new  sexual harassment prevention strategy. DOD has previously used  CDC\u2019s sexual violence prevention framework to guide its sexual assault  prevention strategy.", "In the absence of more comprehensive policies on sexual harassment  that fully include principles in the CDC framework for sexual violence  prevention, DOD may be missing opportunities to address and potentially  reduce incidents of sexual harassment in the military population based on  risk and protective factors and effective, tested strategies. Specifically,  DOD may be missing the opportunity to identify risk factors, which would  help to recognize situations where individuals and populations may be at  a higher risk of sexual harassment perpetration or victimization; identify  protective factors to lower the risk of sexual harassment; develop  mechanisms to address sexual harassment across risk domains\u2014at the  individual, relationship, community, and society levels; and develop  tertiary strategies, or long-term responses after sexual violence has  occurred to address the lasting consequences of violence and sex- offender treatment interventions."], "subsections": []}, {"section_title": "DOD\u2019s Sexual Harassment Policies Include Most Elements Mandated in the NDAA for FY 2013, but Some Do Not Include Mechanisms for Anonymous Reporting", "paragraphs": ["DOD\u2019s sexual harassment policies include three elements required by  section 579 of the NDAA for FY 2013 but some do not include one  element involving the anonymous reporting of incidents. Section 579  mandated that DOD, among other things, develop a comprehensive  sexual harassment policy that includes the following elements: (1)  prevention training for members of the armed forces; (2) mechanisms for  reporting sexual harassment, including mechanisms for anonymous  reporting; and (3) mechanisms for resolving sexual harassment that  include the prosecution of perpetrators. In 2014, the Office of the  Undersecretary of Defense for Personnel and Readiness issued a policy  memorandum addressing the provisions of Section 579 and directed the  military services to develop implementing instructions that include  mechanisms for anonymous reporting.", "We compared DOD\u2019s policies with the required elements in section 579  and found that OSD and military service policies generally include  required elements except for the element focused on DOD including  anonymous reporting in its policies for sexual harassment. The OSD,  Army, and Marine Corps policies do not include anonymous reporting, while the Air Force policy and a new Navy policy do. Officials from  ODMEO said that providing an option for anonymous reporting is  important because it increases the odds that incidents will be reported.  ODMEO officials also told us that the services have hotlines that  servicemembers can use to anonymously report complaints of sexual  harassment, and the Air Force and Navy policies note that their  respective military servicemembers have options for anonymous  reporting. While the military services may have mechanisms in place for  anonymous reporting of sexual harassment, these mechanisms are not  included in OSD\u2019s policy\u2014as required by section 579\u2014or the policies of  two of the Services, those of the Army and the Marine Corps.  Without  including anonymous reporting of sexual harassment complaints in  DOD\u2019s sexual harassment policies, the statutory requirement for  anonymous reporting may be interpreted and applied inconsistently  throughout the military services, or left unmet."], "subsections": []}, {"section_title": "Development of New OSD Harassment Policy May Provide Opportunities for Enhanced Oversight and More Consistent Approaches", "paragraphs": ["OSD is developing a new policy\u2014planned to be issued in fiscal year  2018\u2014that will specifically focus on various forms of harassment,  including sexual harassment, hazing, and bullying. ODMEO officials who  are developing the new policy stated that it is intended, among other  things, to enhance oversight of sexual harassment prevention and  response within the department. However, because the policy is under  development, it is too early to determine how the policy will address the  CDC principles and anonymous reporting, as discussed earlier. Further, it  is unclear how OSD plans to improve oversight and whether it intends to  include performance goals, objectives, milestones, and metrics as we  previously recommended in 2011.", "Although OSD in 2014 directed the military services to improve their  oversight of sexual harassment, none of the military services were able to  demonstrate that they had implemented all the required elements.", "Specifically, DOD\u2019s 2014 policy memorandum addressing the provisions  of section 579 also directs the military services to develop a sexual  harassment oversight framework to be reviewed quarterly by a senior  leadership forum that includes long-term goals, objectives, and  milestones; criteria for measuring progress; results-oriented performance  measures to assess effectiveness of service sexual harassment policies  and programs; standards for holding leaders accountable for promoting,  supporting, and enforcing policies, plans and programs; and strategies to  implement the oversight framework.", "While some of the military services have included elements of the  oversight framework directive from the 2014 policy memorandum, none of  them were able to provide information that demonstrated that they had  fulfilled all requirements set forth by that policy memorandum. For  instance, when asked, none of the military services were able to provide  details that they have senior leader forums that review their oversight  efforts on a quarterly basis. Officials from the Air Force told us that they  were waiting for ODMEO to release a new sexual harassment policy  before establishing the oversight framework. Officials from the Navy  referred us to their July 2017 sexual harassment policy, which instructs  the Navy Sexual Harassment Prevention and Equal Opportunity Office to  develop and implement standards for holding leaders accountable for  promoting, supporting, and enforcing sexual harassment prevention and  response policies, plans, and programs, and to develop results-oriented  performance measures to assess the effectiveness of sexual harassment  prevention and response policies and programs. Officials from the Army  referred us to their SHARP Campaign Plan, which outlines methods to  hold leaders accountable for taking appropriate action to address sexual  harassment; goals and objectives for the program; and ways to measure  program effectiveness. The Marine Corps did not respond to our request  for information regarding an oversight framework for sexual harassment.", "A new department-wide policy on sexual harassment could be helpful to  the military services as they review and update their respective policies.  As noted earlier, military service policies have some differences in how  they address aspects of sexual harassment. The Marine Corps told us  that they have been waiting for additional guidance from OSD before  updating their sexual harassment policies. However, following publicized  incidents of Marines posting inappropriate photos on line of female  servicemembers without their consent, the Marine Corps updated its  guidance in May 2017 adding \u201cthe distribution or broadcasting of an  intimate image, without consent\u201d to its list of sexual harassment incidents  that mandate separation processing. Additionally, in May 2017, a  Marine Corps official said the service was revising its sexual harassment  policy. The Navy updated its sexual harassment policy in July 2017  without additional guidance from OSD.", "We also noted during our review that most existing policies have not yet  been updated to reflect a provision in the fiscal year 2017 NDAA that  redefined sexual harassment for certain purposes so it is no longer  defined solely as a form of sex discrimination but is recognized also as an  adverse behavior on the spectrum of behavior that can contribute to an  increase in the incidence of sexual assault. We asked DOD officials from  several offices about the implications of this change. They identified some  actions they will take, but the full implications, if any, of the change are  unclear. Officials from the Assistant Secretary of Defense for Readiness  said that there are no significant implications of the sexual harassment  definition change beyond making conforming revisions to policy  documents and guidance. ODMEO officials said that adjusting to the new  definition of sexual harassment would not significantly affect their work at  the OSD level, since they are already updating their sexual harassment  policy to reflect this change and since sexual harassment is expected to  remain within the responsibilities of ODMEO. They added that the military  services will likely have to adjust to the new definition of sexual  harassment, but did not offer details in how they would have to adjust.", "The Navy\u2019s new policy dated July 2017 reflects the new definition, but the  other military services have yet to incorporate the change. Officials from  SAPRO said that they are working with ODMEO to revise surveys on  unwanted sexual behaviors to reflect the new definition. SAPRO officials  further stated that sexual harassment should remain under ODMEO\u2019s  purview since ODMEO personnel are trained specifically in sexual  harassment response. Officials from the Army\u2019s SHARP program said  that the new definition means that sexual harassment will more often be  considered misconduct, and taken more seriously.", "Since OSD is in the process of updating its policy, we are not making any  recommendations. However, it will be important for OSD and the military  services to address our prior recommendation regarding improving the  oversight framework as well as incorporating the new definition of sexual  harassment required by the fiscal year 2017 NDAA while updating their  policies."], "subsections": []}]}, {"section_title": "DOD Has Processes for Maintaining and Reporting Consistent Data on Incidents of Sexual Assault and Domestic Abuse That Involves Sexual Assault, but Does Not Have Reasonable Assurance of Consistent Data on Sexual Harassment", "paragraphs": ["DOD has processes for maintaining and reporting consistent data on  sexual assault incidents and domestic violence incidents that involve  sexual assault, but the department does not have similar assurance of  consistent data on incidents of sexual harassment. SAPRO and FAP  each use centralized databases that enable them to maintain and report  consistent data on those incidents that fall under their purview. In  contrast, DOD relies on military service-specific databases on sexual  harassment incidents and does not have assurance of consistent data  from these databases because it has not established standard data  elements and definitions to guide the military services in maintaining and  reporting these data."], "subsections": [{"section_title": "DOD Has Developed and Plans to Further Improve Centralized Databases That Enable It to Maintain and Report Consistent Data on Sexual Assault Incidents and Domestic Violence Incidents That Involve Sexual Assault", "paragraphs": ["DOD uses centralized databases to maintain and report data on sexual  assault incidents in the military and domestic violence incidents involving  sexual assault. Specifically, SAPRO and the military services use the  Defense Sexual Assault Incident Database (DSAID), and FAP uses the  DOD Central Registry. These databases maintain data on incidents that  are included in statutorily required annual reports to Congress on sexual  assaults in the military. In 2011, Congress mandated that DOD provide  annual reports that include:  the number of sexual assaults committed against and by members of  the armed forces that were reported to military officials, including  unsubstantiated and substantiated reports with a synopsis of each  substantiated case organized by offense and the action taken,  including disciplinary actions;  the policies, processes, and procedures implemented by the  Secretary concerned during the year covered by the report in  response to incidents of sexual assaults;  the number of substantiated sexual assault cases in which the victim  is deployed where the assailant is a foreign national; and a description of the implementation of the accessibility plan, including  a description of the steps taken to ensure that trained personnel,  appropriate supplies, and transportation resources are available to  deployed units.", "The most recent DOD annual report on sexual assault was issued in May  2017 and covered fiscal year 2016. The report includes data on the  number of both restricted and unrestricted reports of sexual assault  involving servicemembers. The report also contains separate  enclosures for the Army, the Navy (including the Marine Corps), the Air  Force, and the National Guard, as well as annexes on the Workplace and  Gender Relations Survey of Active Duty Members (WGRA) and the  Military Investigation and Justice Experience Survey (MIJES). The  WGRA annex discusses topics including the continuum of harm and the  MIJES annex contains information on closed cases of sexual assault.", "SAPRO and FAP both contributed sexual assault incident data to the  fiscal year 2016 report, and our review of the underlying databases found  that data elements and definitions were defined and management was  able to process the data into consistent information. Specifically, the two  databases used are the:", "DSAID Data on Sexual Assault Incidents: DSAID captures DOD-wide  data on certain incidents of sexual assault that involve a  servicemember or in some cases, when a sexual assault involves a  servicemember\u2019s spouse or adult family member or a DOD civilian or  contractor. However, FAP-related sexual assault incidents are not  captured in DSAID.  Using information generated by DSAID, SAPRO  includes both substantiated and unsubstantiated reports of sexual  assault in its annual report.", "In 2017, we reviewed DSAID and found that DOD had taken steps to  ensure the quality and consistency of data in DSAID as well as to  monitor the data entered into the system. In addition, OSD had  provided the military services with definitions for required data  elements in the database, which include details on the incident, victim,  and alleged offender. In addition, we identified several technical  challenges with the system, including issues with the system\u2019s speed  and ease of use; interfaces with other external DOD databases; and  users\u2019 ability to query data and generate reports. At the time of the  report\u2019s release, DOD had plans to modify DSAID. As of July 2017,  DOD officials told us that they are still in the process of making  modifications to DSAID to resolve or alleviate the technical challenges  for users.", "DOD Central Registry Data on Domestic Abuse Incidents Involving  Sexual Assault: The DOD Central Registry captures DOD-wide data  on reports of domestic abuse on populations within FAP\u2019s purview,  including on family members of servicemembers as well as on their  intimate partners. The DOD Central Registry includes details of  each case such as the status of cases, the demographics of the  perpetrator and victim, the specific type of abuse, and other details  surrounding the incident. FAP officials explained that they do not use  the \u201csubstantiated\u201d and \u201cunsubstantiated\u201d terminology like SAPRO  does. Rather, FAP, which is not responsible for determining criminal  or legal disposition, uses the terms \u201cmet criteria\u201d and \u201cnot met criteria\u201d  for maltreatment. This difference in terminology has to do with FAP\u2019s  process for determining if an incident meets the clinical criteria to be  classified as abuse for the purpose of developing an  intervention/treatment plan for both the victim and the offenders  involved in the allegations of domestic violence.", "Incidents that are determined as having met criteria are entered into  the DOD Central Registry. We reviewed the DOD Central Registry  and found that it includes well defined data elements and descriptions  for collecting data on cases of domestic violence including those that  involve sexual assault. The data in the DOD Central Registry includes  46 discrete data elements, including the relationship between the  victim and perpetrator, the timeline of the case, and actions taken and  treatments administered in response to the incident. The elements are  defined and described in an OSD policy.", "In its annual reporting to Congress, FAP provides the number of domestic  violence incidents involving sexual assault that met criteria and the total  number of instances of domestic violence that did not meet criteria.  However, FAP does not maintain or report data on the total number of  reported domestic violence incidents that specifically involve sexual  assault. That is because only the details of cases that meet criteria are  recorded in the DOD Central Registry. A FAP official said that the military  services likely have more detailed information about cases that did not  meet the criteria, but it does not collect these data in the DOD Central  Registry. A provision in the NDAA for FY 2017 requires DOD to submit an  annual report on child abuse and domestic abuse incident data, including  the number of incidents reported during the year involving the physical or  sexual abuse of a spouse, intimate partner, or child. This report is to be  submitted simultaneously with submission of DOD\u2019s annual sexual  assault report to Congress. FAP officials told us that they are currently  working with SAPRO to ensure that all reported incidents of domestic  violence involving sexual assault, including those that did not meet the  criteria, are included in the annual sexual assault report."], "subsections": []}, {"section_title": "DOD Reports Annually on Sexual Harassment, but Does Not Have Reasonable Assurance That the Military Services Maintain Consistent Data on Sexual Harassment Incidents", "paragraphs": ["Though not required to do so, DOD has included sexual harassment  incident data in an appendix of its annual report on sexual assault in the  military. The appendix provides information on the total number of  sexual harassment reports over the fiscal year and the total number of  substantiated sexual harassment reports. It also breaks down complaints  by sex, service, and pay grade. ODMEO generates the reported data  through annual data calls to each military service; however, it does not  have assurance that the services maintain consistent data on sexual  harassment incidents consistent with federal standards of internal control.", "The military services maintain sexual harassment incident data in military  service-specific databases, and there is no centralized database similar to  DSAID or the Central Registry. The military service databases are  intended to collect data on formal complaints. According to the military  services, the Army, the Air Force, and the Marine Corps use web-based  systems, and the Navy tracks data using an Excel spreadsheet. Each  service has a discrete process for entering and performing quality checks  on sexual harassment incident data in its respective database, as shown  in table 2.", "Although the military services perform some data quality checks as  shown in table 2, ODMEO does not have assurance the military services  are maintaining consistent data because it has not defined standard data  elements and definitions for the information in their databases. Rather,  the individual military services have established their own data elements  and definitions. We compared data elements and definitions from each of  the military services and found that there are several data elements that  remain consistent throughout the services. For example, each military  service records whether the complainant and offender are in the same  unit, what their relationship is to each other, and the disposition of cases.", "However, we also found inconsistencies in data fields and their definitions  across the military services, and some of the military services have data  fields and definitions that do not exist in other databases. For example,  the Marine Corps records whether or not the incident involves alcohol or  drug use, which the rest of the military services do not record, and the  military services record dates differently between their respective  databases. For example, the Air Force records an initial date, the date the  complaint form was signed, the date the general court martial was sent,  the date the legal review was completed, and the final review date. The  Marine Corps records the date the incident was reported, the date the  incident occurred and whether the incident occurred over multiple dates;  the dates associated with notifications and status updates to general  courts martial proceedings; the dates associated with steps in the  investigation, including any extensions; the dates associated with  dispositions; and the dates associated with appeals. Additionally, the  military services have different ways of categorizing sexual harassment  incidents, as shown in table 3.", "As shown in table 3, while some data descriptions are similar\u2014for  instance, each of the military services include crude/offensive behavior,  unwanted sexual attention, and sexual coercion\u2014there are differences as  well. The Air Force also categorizes sexual harassment into verbal,  nonverbal, physical, and other, for example, whereas the other military  services\u2019 top-level categories are different. The Navy has a \u201cnot  applicable\u201d category that it describes as sexual harassment complaints  that do not fall under sexual harassment, and only the Air Force has an  \u201cother\u201d category. Because the military services have different descriptors  for similar data fields, DOD cannot ensure that the services are  categorizing similar types of sexual harassment in the same way.", "In addition, we found that the Army is more detailed in characterizing  different types of sexual harassment. Specifically, as shown in table 4, the  Army has an additional data field that provides more detailed descriptions  of three types of sexual harassment; the other military services\u2019  respective databases do not have this level of detail.", "Because the Army has this additional data field, it can capture information  on multiple types of harassment that may occur in a single incident. The  other military services, in contrast, do not have this capability in their  respective databases. To illustrate, if one case of sexual harassment  involved both verbal and nonverbal forms of sexual harassment, the Army  could choose a more specific characterization to describe the incident,  while the other military services would characterize the incident in more  general terms.", "ODMEO officials are considering adapting an existing system to track  instances of sexual harassment department-wide. That system, called  Force Risk Reduction (FR2), is currently used to track safety issues like  military injuries, civilian workers\u2019 compensation claims, and casualty  notifications at DOD. ODMEO recently completed a pilot of the system  with the Marine Corps, the Navy, and the Army to test whether it would be  useable for adaptation for sexual harassment data, and is planning a  second pilot to include the Air Force and the National Guard Bureau.", "According to ODMEO officials, their adaptation of FR2 is intended to  collect aggregate-level sexual harassment data from the military services,  and the military services will continue to operate and rely on their  individual databases to maintain more detailed case-level information on  incidents. For example, ODMEO\u2019s adaptation of FR2 would not have  details such as descriptions of specific incidents, or information on dates  associated with investigations or appeals. These types of data will  continue to be maintained in the service systems. ODMEO officials told  us that their new data system, if implemented, is not designed to collect  case-level details in order to avoid personally identifiable information.", "Federal internal control standards state that management should define  the identified information requirements at the relevant level and requisite  specificity for appropriate personnel. Management should also process  the obtained data into quality information. Consistency of information  meets the identified information requirements when relevant data from  reliable sources are used. While DOD is exploring implementing a  system to track instances of sexual harassment department-wide, as  currently planned this system will not collect case-level details and  individual military service systems will continue to be relied upon for this  type of information.", "Inconsistencies in data elements and definitions among the military  services generally mean that one military service may be maintaining  sexual harassment data that are more or less detailed than sexual  harassment data maintained by other military services, or that is simply  different from the data maintained by other military services. Additionally,  inconsistent data elements and definitions may create difficulties in  reporting sexual harassment data from the military services to OSD for a  department-wide report, since ODMEO has to adapt data from the  services to fit reporting requirements. Without standard data elements  and definitions for sexual harassment data, DOD will continue to lack  assurance about the consistency of these data across the military  services."], "subsections": []}]}, {"section_title": "DOD Has Several Overarching Efforts to Address Unwanted Sexual Behaviors across the Continuum of Harm", "paragraphs": ["DOD has several overarching efforts to address unwanted sexual  behaviors across the continuum of harm. Specifically, the department  established an office to oversee the integration and coordination of  unwanted sexual behaviors in 2015 and is in the process of developing  an overarching prevention strategy. However, because the strategy is  under development, it is unclear whether it will contain key elements for  long-term and results-oriented strategic planning. DOD also has ongoing  collaborative efforts to address unwanted sexual behaviors along the  continuum of harm. Specifically, we identified 15 collaborative efforts,  including regular meetings, Integrated Product Teams, and working  groups that involve multiple entities that address unwanted sexual  behaviors."], "subsections": [{"section_title": "DOD Is Developing an Overarching Prevention Strategy to Address the Continuum of Harm, but It Is Unclear Whether DOD Will Include Key Elements of a Long-Term, Results- Oriented Strategy", "paragraphs": ["DOD has taken steps to integrate activities related to the continuum of  harm and is in the process of developing an overarching prevention  strategy. Based on its research, DOD has sought to understand and  define the continuum of harm, including the shared characteristics that  contribute to increased unwanted sexual behaviors along the continuum  and implications for prevention and response efforts. Also, in November  2015, DOD established a new entity\u2014the Office of the Executive Director  for Force Resiliency, within the Office of the Assistant Secretary of  Defense for Readiness\u2014to oversee policies and initiatives related to the  continuum of harm. Specifically, the Executive Director for Force  Resiliency was expected to provide senior leader policy guidance and  oversight on high visibility departments that include SAPRO and ODMEO.  In November 2016, the Office of the Executive Director for Force  Resiliency was absorbed under the Assistant Secretary of Defense for  Readiness. According to the Assistant Secretary of Defense for  Readiness, the functions of the Office of the Executive Director for Force  Resiliency remain and coordination of the efforts of several offices that  address the continuum of harm continues.", "Officials from the Assistant Secretary of Defense for Readiness and  SAPRO told us that they are drafting an overarching prevention strategy  to encompass behaviors along the continuum of harm. However, because  the strategy is still under development, its contents and timelines are  unclear. We have previously identified six elements of strategic  management planning that are key for establishing a long-term, results- oriented strategic planning framework: (1) a mission statement, (2) long- term goals, (3) strategies to achieve goals, (4) external factors that could  affect goals, (5) the use of metrics to gauge progress, and (6) evaluations  of the plan to monitor goals and objectives.", "By incorporating the elements of a comprehensive and results-oriented  strategy into its overarching prevention strategy, the department will be  better positioned to effectively coordinate and integrate prevention  activities and reduce unwanted sexual behaviors. A mission statement,  along with long-term goals and strategies to achieve those goals, should  help to focus efforts in integrating prevention activities, and metrics and  evaluations will allow the department to gauge progress and make  changes as necessary, while also accounting for external factors that may  impact progress towards goals."], "subsections": []}, {"section_title": "DOD Has Ongoing Collaborative Efforts to Address Behaviors along the Continuum of Harm", "paragraphs": ["Our review identified 15 collaborative efforts that DOD has used to  address behaviors along the continuum of harm, including sexual  harassment, sexual assault, and domestic violence involving sexual  assault. Three of these efforts are cross-cutting between all three of the  key OSD stakeholders\u2014ODMEO, FAP, and SAPRO\u2014and five involve  cross-cutting efforts by at least two of the key stakeholders. Figure 1  lists DOD\u2019s 15 collaborative efforts.", "Regarding the three cross-cutting efforts involving all three of the key  stakeholders,", "The Sexual Assault Prevention and Response Integrated Product  Team provides a forum for OSD, the military departments, and the  National Guard Bureau to address sexual assault prevention efforts.  The team meets bimonthly and serves as the implementation and  oversight arm for DOD\u2019s Sexual Assault Prevention and Response  (SAPR) program. The team also coordinates new policies; reviews  existing SAPR policies and programs to ensure they are consistent  with applicable instructions; and monitors the progress of program  elements including DOD\u2019s SAPR strategic plan tasks, DOD\u2019s sexual  assault prevention strategy tasks, and implementation of NDAA- related sexual assault issues. SAPRO leads this effort.", "The Prevention Collaboration Forum and working group develops  coordinated prevention approaches that address factors impacting  personnel readiness such as sexual harassment, sexual assault, and  domestic violence involving sexual assault. According to its proposed  charter, the focus of the forum is on enhancing the health of military  unit and family climates as well as strengthening and promoting the  resiliency and readiness of the total force through a coordinated effort  around integrated policies, collaborative direction of research,  alignment of resources, analysis of gaps, and synchronization of  activities. The Assistant Secretary of Defense for Readiness leads this  effort with SAPRO providing administrative and facilitation support.", "The Victim Assistance Leadership Council advises the Under  Secretary of Defense for Personnel and Readiness on policies and  practices related to victim assistance across DOD. According to its  charter, the council provides a forum for senior leaders to exchange  information and collaborate on issues affecting victims of all forms of  crime and harassment within DOD, including but not limited to victims  of sexual harassment, sexual assault, and domestic violence involving  sexual abuse. Leadership rotates between SAPRO, FAP, and  ODMEO and other offices.", "Regarding the cross-cutting efforts involving two of the three key  stakeholders, the Sexual Harassment Prevention and Response Working  Group is led by ODMEO and includes SAPRO. The group was  established to evaluate how to best position sexual harassment  prevention and response policy and oversight and to leverage technology  to automate annual reporting requirements. The four other cross-cutting  efforts are (1) the hazing and bullying working group, (2) retaliation  working groups created under the SAPR Integrated Process Team, (3)  domestic abuse rapid improvement events, and (4) ODMEO and SHARP  meetings.", "The remaining collaborative efforts we identified are specific to FAP,  SAPRO, and ODMEO. For example, the Sexual Assault Prevention  Roundtable is a forum for representatives from OSD, the military  departments, and the National Guard Bureau to share information on  sexual assault prevention efforts and requirements. According to its  charter, the roundtable\u2019s activities include, among other things, sharing  promising practices and prevention updates; discussing challenges in  prevention program implementation, including servicemember training,  and identifying approaches to address them; identifying metrics to assess  the impact and effectiveness of prevention efforts, and opportunities to  collaborate on research projects; and tracking the implementation of  prevention tasks identified in the DOD SAPR strategy. SAPRO leads this  effort. The Defense Diversity Working Group is an ODMEO-specific group  that collaborates with various OSD and military service offices on military  and civilian diversity and inclusion issues and implements mandated  diversity plans and programs."], "subsections": []}]}, {"section_title": "Conclusions", "paragraphs": ["Studies by DOD and others have shown that unwanted sexual behaviors  do not exist in isolation but are part of a range of interconnected,  inappropriate behaviors that are connected to the occurrence of a sexual  assault. While DOD has policies and procedures to prevent and respond  to these types of unwanted behaviors, some of the policies do not include  key elements like anonymous reporting of sexual harassment and  principles in the CDC framework for sexual violence prevention. Fully  including these elements in the department\u2019s policies can help ensure  that the military services are interpreting and applying prevention and  response efforts consistently and may also decrease the risk of  perpetration or victimization related to instances on unwanted sexual  behaviors. Further, DOD has developed reliable data systems for  collecting and reporting data on some of the unwanted sexual behaviors  including sexual assault and instances of domestic violence with sexual  assault. However, inconsistencies in sexual harassment data elements  and definitions may be creating difficulties in developing department-wide  reports on unwanted sexual behaviors. Improving and standardizing data  collection efforts will not only improve the quality of data that DOD and  the military services collect but may also increase the ability for DOD to  further develop its understanding of the connection between unwanted  sexual behaviors. Finally, DOD officials have stated that they are in the  early stages of developing an overarching strategy to address the  interconnected nature of the range of unwanted sexual behaviors. To  ensure that the department is appropriately concentrating its efforts to  prevent and respond to the full range of unwanted behaviors, it is  important that DOD include elements of a long-term, results-oriented  strategy into its overarching prevention strategy. In doing so, DOD will be  in a better position to effectively coordinate and integrate prevention  activities and ultimately reduce instances of unwanted sexual behaviors."], "subsections": []}, {"section_title": "Recommendations for Executive Action", "paragraphs": ["We are making the following four recommendations to DOD:  The Under Secretary of Defense for Personnel and Readiness should  fully include in the new policy for sexual harassment the principles in the  Centers for Disease Control\u2019s framework for sexual violence prevention,  including risk and protective factors, risk domains, and tertiary strategies.  (Recommendation 1)", "The Under Secretary of Defense for Personnel and Readiness should  include in the new policy for sexual harassment mechanisms for  anonymous reporting of incidents consistent with section 579 of the  National Defense Authorization Act for FY 2013. (Recommendation 2)", "The Under Secretary of Defense for Personnel and Readiness should (1)  direct the Office of Diversity Management and Equal Opportunity to  develop standard data elements and definitions for maintaining and  reporting information on sexual harassment incidents at the military  service level, and (2) direct the military services to incorporate these data  elements and definitions into their military service-specific databases.  (Recommendation 3)", "The Under Secretary of Defense for Personnel and Readiness should  direct the Assistant Secretary of Defense for Readiness to incorporate in  its continuum of harm prevention strategy all the elements that are key for  establishing a long-term, results-oriented strategic planning framework.  The elements are (1) a mission statement, (2) long-term goals, (3)  strategies to achieve goals, (4) external factors that could affect goals, (5)  use of metrics to gauge progress, and (6) evaluations of the plan to  monitor goals and objectives. (Recommendation 4)"], "subsections": []}, {"section_title": "Agency Comments and Our Evaluation", "paragraphs": ["We provided a draft of this report to DOD and CDC for review and  comment. In its written comments, DOD concurred with three  recommendations and partially concurred with one, noting planned  actions to address this recommendation. DOD\u2019s comments are reprinted  in their entirety in appendix II. DOD and CDC also provided technical  comments, which we incorporated into the report as appropriate.", "DOD concurred with our three recommendations that DOD fully include in  the new policy for sexual harassment the principles in the CDC's  framework for sexual violence prevention, that DOD also include in the  new sexual harassment policy mechanisms for anonymous reporting, and  that DOD incorporate in its continuum of harm strategy all the elements  that are key for establishing a long-term, results-oriented strategic  planning framework.", "With regard to our recommendation that DOD develop standard data  elements and definitions for maintaining and reporting information on  sexual harassment incidents and direct the military services to  incorporate these into their databases, DOD partially concurred and  stated that while a 2013 policy memorandum provides standard data  elements and definitions, the services collect other data elements based  on their unique needs.  DOD stated that ODMEO will conduct a review to  determine compliance with DOD reporting requirements and identify  emerging policy modifications or changes/additions to standard  definitions.", "We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Personnel and Readiness, and the Director, Centers for Disease  Control and Prevention. In addition, the report is available at no charge on  the GAO website http://www.gao.gov.", "If you or your staff have any questions about this report, please contact  me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III."], "subsections": []}]}, {"section_title": "Appendix I: Scope and Methodology", "paragraphs": ["To determine the extent to which the Department of Defense (DOD) has  policies on sexual harassment that include Centers for Disease Control  and Prevention (CDC) principles and relevant legislative elements, we  obtained and reviewed Office of the Secretary of Defense (OSD) and  service-level sexual harassment policies. We compared the policies with  a framework developed by the CDC for preventing sexual violence, which  CDC defines as including non-contact unwanted sexual behaviors, sexual  harassment, and physical sexual assault. CDC\u2019s model is based on the  concept of addressing the health of a given population based on common  risk and protective factors and effective, tested strategies. We reviewed  CDC\u2019s framework for preventing sexual violence as well as our report on  DOD\u2019s sexual assault prevention strategy to identify six principles that an  organization can include in a sexual violence prevention strategy or  policy:", "Risk factors: Factors that may put people at risk for sexual violence  perpetration or victimization, such as an organizational climate that  either explicitly or implicitly condones sexual harassment;", "Protective factors: Factors that may protect high-risk people from  harm, such as an organizational climate that promotes respect among  personnel at all levels;", "Primary strategies for prevention: Strategies that occur before sexual  violence takes place to prevent initial perpetration, such as sexual  harassment prevention training;", "Secondary strategies for prevention: Immediate responses after  sexual violence has occurred to address the early identification of  victims and the short-term consequences of violence, such as  reporting mechanisms and immediate interventions;", "Tertiary strategies for prevention: Long-term responses after sexual  violence has occurred to address the lasting consequences of  violence and sex-offender treatment interventions, such as the long- term treatment of the victim and perpetrator; and", "Risk domains: Levels at which risk and protective factors should be  categorized, including: individual, relationship, community, and  society. DOD has previously adapted risk domains to the military  population, using the levels of: individual, relationship, leaders at all  levels, military community, and society.", "DOD previously used CDC\u2019s framework for preventing sexual violence in  the department\u2019s 2014-2016 Sexual Assault Prevention Strategy. In  addition, we reviewed the OSD and service-level sexual harassment  policies to determine the extent to which they included three elements  identified in the National Defense Authorization Act (NDAA) for FY 2013,  which directed DOD to develop a comprehensive policy that includes  sexual harassment prevention training for the armed forces; mechanisms  for reporting incidents, including mechanisms for anonymous reporting;  and mechanisms for responding to and resolving instances of sexual  harassment, including for the prosecution of perpetrators. Two GAO  analysts independently reviewed the policies and determined whether or  not each element was included. Any discrepancies were resolved through  discussion and consultation with a third analyst. We interviewed officials  in the Under Secretary of Defense for Personnel and Readiness\u2019 Office of  Diversity Management and Equal Opportunity, who oversee department- wide policy on sexual harassment, to obtain an understanding of their  roles and processes regarding sexual harassment as well as the status of  policy development in that area. We also interviewed officials from military  equal opportunity offices in the Air Force, the Navy, and the Marine  Corps, as well as officials from the Army\u2019s Sexual Harassment/Assault  Response and Prevention Office to obtain an understanding of the  service sexual harassment offices and roles, as well as the status of  updates to their respective policies.", "To determine the extent to which DOD has processes for maintaining and  reporting consistent data on incidents of unwanted sexual behaviors, we  reviewed DOD reports to Congress that provide incident data regarding  unwanted sexual behaviors, including DOD\u2019s most recent annual report  on sexual assault in the military. We identified the databases that  generate the reported data and evaluated the processes for assuring the  quality and consistency of data in those databases\u2014including the  Defense Sexual Assault Incident Database, which maintains sexual  assault data; the Central Registry database, which maintains data on  domestic violence involving sexual assault; and various military service- level databases that maintain sexual harassment data. To evaluate  DOD\u2019s reported data we reviewed pertinent statutory provisions, DOD  guidance, and the Standards for Internal Control in the Federal  Government that address agencies\u2019 use of quality data and our prior  reports evaluating sexual assault data. In evaluating the reported data,  we obtained and reviewed statutory provisions with reporting  requirements, as well as DOD guidance on data collection for sexual  harassment, sexual assault, and domestic violence involving sexual  abuse. With regard to DOD efforts to collect and maintain sexual assault  data, we met with OSD, Navy, Air Force, and Marine Corps officials in  their respective Sexual Assault Prevention and Response offices as well  as officials in the Army\u2019s Sexual Harassment/Assault Response and  Prevention office. We also reviewed our prior report on DOD\u2019s Defense  Sexual Assault Incident Database and our prior report that evaluated  sexual assault data across agencies. To determine whether DOD has  processes for collecting and maintaining consistent data for domestic  violence with sexual assault, we obtained and compared data elements  and processes from DOD\u2019s Central Registry database, which contains  data for domestic violence throughout the department. We also obtained  and reviewed policies that outline processes for collecting and reporting  domestic violence involving sexual abuse data, and interviewed officials  from Family Advocacy Program offices in OSD and the Army, Navy,  Marine Corps, and Air Force to determine data reliability and  comprehensiveness. To determine the extent to which reports of sexual  assault, including reports of sexual assault among servicemembers and  reports of domestic abuse involving sexual assault, meet statutory  requirements for reporting, we reviewed DOD reports to Congress that  provide sexual assault incident data, including DOD\u2019s most recent annual  report on sexual assault in the military and compared those reports with  requirements in the NDAA for FY 2011, which directs DOD to report the  total number of substantiated and unsubstantiated sexual assault  incidents, among other things. With regard to sexual harassment data,  we interviewed officials in the Under Secretary of Defense for Personnel  and Readiness\u2019 Office of Diversity Management and Equal Opportunity,  as well as officials from the Military Equal Opportunity offices in the Air  Force, Marine Corps, and Navy, and officials from the Army Sexual  Harassment/Assault Response and Prevention office. We collected and  compared data fields and data definitions from the Army, Navy, Marine  Corps, and Air Force offices that address sexual harassment. We  compared the data elements to determine whether the data elements and  definitions across the services are consistent.", "To identify the extent to which DOD has overarching efforts, including a  prevention strategy, to address unwanted sexual behaviors across the  continuum of harm, we met with officials in the Office of the Assistant  Secretary of Defense for Readiness and DOD\u2019s Sexual Assault  Prevention and Response office. We reviewed our prior work and  provisions from the Government Performance and Results Act to identify  key elements that should be included in strategic plans as well as  standards for coordinating within agencies. Key elements include (1)  mission statement, (2) long-term goals, (3) strategies to achieve goals, (4)  external factors that could affect goals, (5) use of metrics to gauge  progress, and (6) evaluations of the plan to monitor goals and objectives.  We identified and reviewed coordinating mechanisms used by OSD and  the service offices that guide and oversee efforts to address unwanted  sexual behaviors. We reviewed DOD, RAND Corporation, and CDC  reports that addressed the continuum of harm and the relationship  between the various forms of unwanted sexual behaviors. We  interviewed officials from OSD and service-level Sexual Assault  Prevention and Response, Family Advocacy, and Military Equal  Opportunity offices and the Army\u2019s Sexual Harassment/Assault Response  and Prevention to identify the various efforts in which they participate. We  also collected and reviewed charters and meeting notes for integrated  product teams and working groups to identify their intended purposes,  their activities, their membership, and whether they involved multiple  offices addressing unwanted sexual behaviors. In identifying DOD\u2019s  collaborative efforts, we also reviewed our prior work on collaboration  among federal agencies but we did not assess the effectiveness of  department\u2019s collaborative efforts.", "We conducted this performance audit from August 2016 to December  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives."], "subsections": []}, {"section_title": "Appendix II: Comments from the Department of Defense", "paragraphs": [], "subsections": []}, {"section_title": "Appendix III: GAO Contact and Staff Acknowledgments", "paragraphs": [], "subsections": [{"section_title": "GAO Contact", "paragraphs": [], "subsections": []}, {"section_title": "Staff Acknowledgments", "paragraphs": ["In addition to the staff named above, key contributors to this report  include Thomas Gosling (Assistant Director); Isabel Band; Matthew Bond;  Vincent Buquicchio; Caroline DeCelles; Mae Jones; Kirsten Lauber; and  Brian Pegram."], "subsections": []}]}, {"section_title": "Related GAO Products", "paragraphs": ["Sexual Assault: Better Resource Management Needed to Improve  Prevention and Response in the Army National Guard and Army Reserve.  GAO-17-217. Washington, D.C.: February 27, 2017.", "Military Personnel: DOD Has Processes for Operating and Managing Its  Sexual Assault Incident Database. GAO-17-99. Washington, D.C.:  January 10, 2017.", "Sexual Violence Data: Actions Needed to Improve Clarity and Address  Differences Across Federal Data Collection Efforts. GAO-16-546.  Washington, D.C.: July 19, 2016.", "DOD and Coast Guard: Actions Needed to Increase Oversight and  Management Information on Hazing Incidents Involving Servicemembers.  GAO-16-226. Washington, D.C.: February 9, 2016.", "Sexual Assault: Actions Needed to Improve DOD\u2019s Prevention Strategy  and to Help Ensure It Is Effectively Implemented. GAO-16-61.  Washington, D.C.: November 4, 2015.", "Military Personnel: Actions Needed to Address Sexual Assaults of Male  Servicemembers. GAO-15-284. Washington, D.C.: March 19, 2015.", "Military Personnel: DOD Needs to Take Further Actions to Prevent  Sexual Assault during Initial Military Training. GAO-14-806. Washington,  D.C.: September 9, 2014.", "Military Personnel: DOD Has Taken Steps to Meet the Health Needs of  Deployed Servicewomen, but Actions Are Needed to Enhance Care for  Sexual Assault Victims. GAO-13-182. Washington, D.C.: January 29,  2013.", "Preventing Sexual Harassment: DOD Needs Greater Leadership  Commitment and an Oversight Framework. GAO-11-809. Washington,  D.C.: September 21, 2011.", "Military Justice: Oversight and Better Collaboration Needed for Sexual  Assault Investigations and Adjudications. GAO-11-579. Washington,  D.C.: June 22, 2011.", "Military Personnel: DOD\u2019s and the Coast Guard\u2019s Sexual Assault  Prevention and Response Programs Need to Be Further Strengthened.  GAO-10-405T. Washington, D.C.: February 24, 2010.", "Military Personnel: Additional Actions Are Needed to Strengthen DOD\u2019s  and the Coast Guard\u2019s Sexual Assault Prevention and Response  Programs. GAO-10-215. Washington, D.C.: February 3, 2010.", "Military Personnel: DOD\u2019s and the Coast Guard\u2019s Sexual Assault  Prevention and Response Programs Face Implementation and Oversight  Challenges. GAO-08-924. Washington, D.C.: August 29, 2008.", "Military Personnel: The DOD and Coast Guard Academies Have Taken  Steps to Address Incidents of Sexual Harassment and Assault, but  Greater Federal Oversight Is Needed. GAO-08-296. Washington, D.C.:  January 17, 2008."], "subsections": []}], "fastfact": []}